Costco earnings this week to gauge US consumer strength

Costco is set to announce its fiscal fourth-quarter earnings after the market closes Thursday. Wall Street anticipates earnings per share in the range of $6.53 to $6.55, with revenue coming in at approximately $94.9 billion.

While those figures are important, a more intriguing question lies beneath them:

Is the US consumer genuinely beginning to falter, or are households just growing far more discerning about their spending habits?

As the earnings call approaches, the latest US retail sales figures suggest no outright consumer collapse. August retail sales climbed 1.2%, easily outpacing forecasts, and spending excluding gasoline remained robust. However, that resilience faces headwinds from a less forgiving inflation environment, with headline CPI at 3.4% and gasoline prices surging 27.4% year-over-year.

That is where Costco becomes a valuable real-time barometer of consumer behavior.

Early sales numbers already appear strong. Costco has already disclosed fourth-quarter net sales of $93.9 billion, an 11.3% increase year-on-year. The more telling insights on Thursday will come from metrics such as traffic, basket size, memberships, and management's commentary on discretionary spending.

In the prior quarter, shopping frequency rose 2.4% and the average transaction size increased by 7.3%. Paid memberships totaled 82.9 million, with renewal rates in the US and Canada holding steady at a robust 92.2%.

That does not paint a picture of a consumer in retreat. If anything, the pattern suggests a shift toward value-driven behavior.

Costco has noted that members are responding to higher fuel prices by visiting its gas stations more often, and the company has lowered prices on select everyday items to strengthen its value appeal.

That strategy came with a cost: reported gross margin contracted by 21 basis points last quarter, though it was roughly flat when excluding gasoline effects.

As a result, the focus should be less on whether Costco beats earnings estimates by a few cents and more on the composition of spending.

If traffic, renewals, and demand for essential categories remain solid while discretionary purchases soften, the takeaway may not be that the US consumer is cracking.

Instead, it could simply be that households are still spending, but they are demanding far greater value for every dollar they part with.