Costco's Single-Quarter Net Profit Exceeds $2 Billion, China Market Localization Faces Major Test

21st Century Business Herald Reporter Tang Weike

Global membership-based warehouse retail leader Costco (Costco Wholesale) reports solid financial results.

Recently, the company announced its Q2 FY2026 (November 24, 2025, to February 15, 2026) earnings, with total revenue of $69.597 billion, up 9.22% year-over-year; net profit of $2.035 billion, up 13.8%, both surpassing market expectations.

In a generally weak global retail environment, Costco relies on its classic model of “low margins + membership fees” to achieve steady growth. Its global paid membership has increased to 82.1 million, with membership fee income of $1.355 billion, up 13.6%, becoming a core profit pillar.

However, behind this impressive financial report is its relative lag in the Chinese market. Compared to global growth, Costco’s expansion in China has been slow, with fewer stores, weaker online capabilities, and less localization than major competitors. Currently, China’s membership-based supermarkets are in a deep competitive stage, with foreign brands differentiating and local players focusing on breakthroughs. In the current industry reshaping through instant retail and supply chain efficiency, the integration of international models with local needs will determine the next market hierarchy.

Expansion and Localization in China Still Lag Behind

This quarter, several key indicators for Costco improved: excluding oil prices and exchange rates, same-store sales grew by 6.7%, foot traffic increased by 3.1%, and average transaction value rose by 4.2%; digital channel sales increased by 21.7% year-over-year, showing a clear acceleration in online transformation. North America remains the core market, with steady same-store growth in the US and Canada, and international business maintaining growth. The Chinese New Year factors also provided some boost to overseas markets.

Membership and profit models remain solid. Costco’s global renewal rate stays high, with 92.2% renewal in the US and Canada, and membership fees nearly cover all company profits, forming a closed loop of “low-price goods attracting customers and stable membership fee profits.” The company’s gross profit margin is about 11.02%, with expenses reduced to 9.19%, supporting profit growth faster than revenue growth.

However, China is a clear weak point. As of early 2026, Costco has only 7 stores in mainland China, mainly in the Yangtze River Delta and Pearl River Delta regions, and has not entered northern markets. Meanwhile, its direct competitor Sam’s China has over 60 stores, with 2025 sales exceeding 140 billion yuan and over 10.7 million paid members. The gap in expansion speed is due to insufficient localization: fewer online SKUs, high delivery thresholds, subpar delivery times, and lower member renewal rates compared to global averages.

Several retail analysts told 21st Century Business Herald that Costco’s global success relies on large store models, meticulous selection, and a strong supply chain. However, China’s market has been redefined by instant retail, front warehouses, and multi-time delivery, making simple replication of the American big-box model insufficient to meet the high-frequency, fast-delivery needs of urban families. Its Chinese headquarters and regional supply chain layout are still in progress, making it difficult to catch up in the short term.

Foreign and Local Players Seek Different Paths

According to the China Chain Store & Franchise Association, paid membership has become a certain growth track for supermarkets. The current market landscape is clearly divided, shifting competition from “store opening” to comprehensive competition in product strength, fulfillment, and membership operations.

Foreign membership stores are diverging. Costco adheres to a global unified model, attracting loyal customers through imports and private brands, following a “small but refined, slow expansion” approach; Metro’s Metro Plus relies on shareholder and B2B resources, focusing on urban families and corporate clients; discount stores like Ole’ focus on community stores for differentiated competition, avoiding direct head-to-head with large stores.

Local players are shifting from scale to refinement. After restructuring, Hema X Membership Store emphasizes profitability per store and product differentiation; regional brands like Fudi and Pang Donglai leverage local supply chains and user operations to form regional barriers; traditional supermarkets like Yonghui and B&Q use membership systems as a transformation tool to increase customer spend and repurchase rates.

Industry consensus is that the core of membership-based supermarkets is no longer just “collecting membership fees,” but continuously providing differentiated value. Chinese consumers are price-sensitive, demand high delivery speed, and have diverse preferences for flavors and scenarios. Those who can combine global supply chains with local capabilities, and integrate large store experiences with instant delivery, will gain the advantage.

The Second Half: Supply Chain and Digitalization Will Decide Success in Localization

The contrast between Costco’s financial results and its Chinese market performance reflects a common theme in international retail entering China: while successful models can be replicated, success requires localization.

For Costco, global same-store growth, membership expansion, and online acceleration prove its model remains effective; but in China, it faces fiercer local competition, more mature local supply chains, and more extreme delivery times. Whether it can accelerate store openings, improve regional warehousing and distribution, and optimize online thresholds and SKU structures will determine its growth potential.

For the industry, by 2026, three major trends will emerge in membership-based supermarkets: first, concentration among leading players, with second- and third-tier cities becoming new battlegrounds; second, increasing divergence among foreign brands, with those accelerating localization likely to grow faster; third, a return to core product value, with popular products, private brands, fresh produce, and pre-made dishes becoming key to retaining members.

Peng Jianzhen, Secretary-General of the China Chain Store & Franchise Association, previously told 21st Century Business Herald that the second half of membership retail is no longer about single store numbers but about comprehensive capabilities in “products + services + digitalization.” While global supply chain capabilities are a long-term barrier for foreign membership stores, whether they can translate this into cost-effectiveness and convenience recognized by Chinese consumers will determine their final market share.

As more urban middle-class families accept paid memberships and retail supply chains continue to improve, the Chinese membership store market still has considerable growth potential. Costco’s steady global performance, China’s rapid catch-up, Sam’s fast expansion and refined operations, and local brands’ close competition will jointly drive the industry from “membership fees” to a new stage of “membership value.”