COST 10-K & 10-Q changes, risk factors and insider trading

Our financial and operational performance is highly dependent on our U.S. and Canadian operations, which comprised 86% and 84%83% of net sales and operating income in 2025.2026. Within the U.S., we are highly dependent on our California operations, which comprised 26% of U.S. net sales in 2025.2026. Our California market, in general, has a larger percentage of higher volume warehouses as compared to our other domestic markets. Any substantial slowing or sustained decline in these operations could materially adversely affect our business and financial results. Declines in financial performance of our U.S. operations, particularly in California, and our Canadian operations could arise from, among other things: slow growth or declines in comparable warehouse sales (comparable sales); negative trends in operating expenses, including increased labor, healthcarehealthcare, and energy costs; failing to meet targets for warehouse openings; cannibalizing existing locations with new warehouses; shifts in sales mix toward lower gross margin products; changes or uncertainties in economic conditions in our markets, including higher levels of unemployment and depressed home values; and failing to consistently provide high quality and innovative new products.

Our failure to maintain membership growth, loyaltyloyalty, brand recognition, and brandour recognitionculture could adversely affect our results of operations.

Membership loyalty and growth are essential to our business. The extent to which we achieve growth in our membership base, increase the penetration of Executive membership, and sustain high renewal rates materially influences our profitability. Achieving these metrics relies heavily on member trust and our long-standing culture focused on value, integrity, member service, and always striving to do what is right. Damage to our brandsbrands, reputation, or reputationculture may negatively impact comparable sales, diminish member trust, and reduce renewal rates and, accordingly, net sales and membership fee revenue, negatively impacting our results of operations.

IT systems play a crucial role in conducting our business. These systems are utilized to, among other things, process a very high volume of transactions, conduct payment transactions, track and value our inventoryinventory, and produce reports critical for making business decisions. Failure or disruption of these systems could have an adverse impact on our ability to buy products and services from our suppliers, produce goods in our manufacturing plants, move products in an efficient manner to our warehouses, and sell products to our members. Given the high volume of transactions we process, it is important that we build strong resiliency to lessen disruption from events such as power outages, computer and telecommunications failures, viruses, internal or external security breaches and other cybersecurity incidents, errors by employees, extreme weather, and catastrophic events. Any debilitating failure of our critical IT systems, data centerscenters, and backup systems would require significant investments in resources to restore services and may cause serious impairment in our business operations, including loss of business services, increased cost of moving merchandise and failure to provide service to our members. We are currently making substantial investments in technology and IT projects, including maintaining and enhancing our digital resiliency, and failure or delay in these projects could be costly and harmful to our business. We must also effectively monitor competitive technology trends, including the evolution of artificial intelligence (AI). Any failure to effectively incorporate these technologies could adversely affect our ability to compete. Additionally, the autonomous nature of AI presents unique challenges, particularly regarding third-party systems which may operate in ways that are difficult to monitor. There is a risk that these autonomous systems could bypass internal controls, lack adequate third-party governance, or result in unauthorized access to data, data leakage, and non-compliance with applicable data privacy laws. These systems may also produce inaccurate outputs, leading to unintended operational decisions. Failure to deliver IT projects efficiently and effectively could result in the loss of our competitive position and adversely impact our financial condition and results of operations. Insufficient IT capacity could also impact our capacity for timely, complete and accurate financial and non-financial reporting required by law.

Increased security threats and more sophisticated cyber misconduct pose a risk to our systems, networks, products and services. We rely upon IT systems and networks, some of which are managed by or belong to third parties, including suppliers, partners, vendors, and service providers. Additionally, we collect, storestore, and process sensitive information relating to our business, members, employees, and other third parties. Operating these IT systems and networks and processing and maintaining this data in a secure manner,manner are critical to our business operations and strategy. Remote work has also expanded possible attack surfaces. Attempts to gain unauthorized access to systems, networksnetworks, and data, both ours and third parties with whom we work, are increasing in frequency and sophistication, and in some cases, these attempts are successful. Cybersecurity attacks may range from random attempts to coordinated and targeted attacks, including sophisticated computer crimes and advanced persistent threats. Phishing attacks have emerged asare particularly prominent, including as vectors for ransomware attacks, which have increased in breadth and frequency. While we train our employees as part of our security efforts, that training cannot be completely effective. The rapid evolution of AI has automated and accelerated the scale of cybersecurity threats, potentially reducing the time for us to detect and mitigate potential information security incidents. If our security infrastructure fails to keep pace with these evolving threats, it could lead to more frequent or sophisticated compromises of our systems, networks, or data, adversely affecting our operations and member confidence. These threats pose a risk to the security of our systems and networks and the confidentiality, integrity, and availability of our data. Our IT systems and networks, or those managed by third parties such as cloud providers or suppliers that otherwise host or have access to confidential information, periodically have vulnerabilities, which may go unnoticed for a period of time. Our logging capabilities, or the logging capabilities of third parties, are also not always complete or sufficiently detailed, affecting our ability to fully investigate and understand the scope of security events. While our cybersecurity and compliance efforts seek to mitigate such risks, there can be no guarantee that the actions and controls we and our third-party service providers have implemented and are implementing, will be sufficient to protect our systems, information or other property.

The potential impacts of a cybersecurity attack include reputational damage, litigation, government enforcement actions, penalties, disruption to systems and operations, unauthorized release of confidential or otherwise protected information, corruption of data, diminution in the value of our investment in IT systemssystems, and increased cybersecurity protection and remediation costs. This could adversely affect our competitiveness, results of operations and financial condition and, critically in light of our business model, loss of member confidence. Further, the insurance coverage we maintain and indemnification arrangements with third parties may be inadequate to cover claims, costs, and liabilities relating to cybersecurity incidents. In addition, data we collect, store, and process is subject to a variety of U.S. and international laws and regulations (such as the European Union General Data Protection Regulation, California Consumer Privacy Act, Health Insurance Portability and Accountability Act, and China's Personal Information Protection Act), evolving rules concerning AI, and other privacy and cybersecurity laws. The use of AI carries risks related to the accuracy and reliability of its outputs. If these tools provide incorrect information to our members or our employees, or if the content generated inadvertently infringes upon the intellectual property rights of third parties, it could lead to reputational damage, legal claims, and increased regulatory scrutiny. Laws and restrictions on use of member information may also impair our ability to utilize data, consistent with member consents and preferences, which may carry significant potential penalties for noncompliance.

We accept payments using a variety of methods, including select credit and debit cards, cash and checks, co-brand cardholder rebates, Executive member 2% reward certificates, and our shop card. As we offer new payment options to our members, we may be subject to additional rules, regulations, compliance requirements, and higher fraud losses. For certain payment methods, we pay interchange and other related acceptance fees, along with additional transaction processing fees. We rely on third parties to provide payment transaction processing services for credit and debit cards and our shop card. It could disrupt our business if these parties become unwilling or unable to provide these services to us. We are also subject to fee increases by these service providers.

We must comply with evolving payment card association and network operating rules, including data security rules, certification requirementsrequirements, and rules governing electronic funds transfers. For example, we are subject to Payment Card Industry Data Security Standards, which contain compliance guidelines and standards with regard to our security surrounding the physical and electronic storage, processingprocessing, and transmission of individual cardholder data. If our internal systems are breached or compromised, we may be liable for card re-issuance costs, subject to fines and higher transaction feesfees, and lose our ability to accept card payments from our members, and our business and operating results could be adversely affected. Our failure to offer payment methods desired by our members could create a competitive disadvantage.

If our merchandise, including food and prepared food products for human consumption, drugs, children's products, pet products and durable goods, do not meet or are perceived not to meet applicable safety or labeling standards or our members' expectations, we could experience lost sales, increased costs, litigation or reputational harm. The sale of these items involves the risk of illness or injury to our members. Such illnesses or injuries could result from tampering by unauthorized third parties, product contamination or spoilage, including the presence of foreign objects, substances, chemicals, other agents, or residues introduced during the growing, manufacturing, storage, handlinghandling, and transportation phases, or faulty design. Our suppliers are generally contractually required to comply with product safety laws, and we are dependent on them to ensure that the products we buy comply with safety and other standards. While we are subject to governmental inspection and regulations and work to comply in all material respects with applicable laws and regulations, we cannot be sure that consumption or use of our products will not cause illness or injury or that we will not be subject to claims, lawsuits, or government investigations relating to such matters, resulting in costly product recalls and other liabilities that could adversely affect our business and results of operations. Even if a product liability claim is unsuccessful or is not fully pursued, negative publicity could adversely affect our reputation with existing and potential members and our corporate and brand image, and these effects could be long-term.

We must keep pace with changing member expectations and new developments by our competitors. Our members are increasingly using mobile phones, tablets, computers, and other devices to shop and otherwise interact with us. We are making investments in our websites and mobile applications. If we are unable to make, improve, or develop relevant member-facing technology in a timely manner, our ability to compete and our results of operations could be adversely affected.

Our success depends on the continued contributions of our employees, including members of our senior management and other key operations, IT, merchandisingmerchandising, and administrative personnel. Failure to identify and implement a succession plan for senior management could negatively impact our business. We must attract, traintrain, and retain a large and growing number of qualified employees, while controlling related labor costscosts, preserving our culture, and maintaining our core values. Our ability to control labor and benefit costs is subject to numerous internal and external factors, including regulatory changes, prevailing wage rates, union relationsrelations, and healthcare and other insurance costs. We compete with other retail and non-retail businesses for these employees and invest significant resources in training and motivating them. There is no assurance that we will be able to attract or retain highly qualified employees in the future, which could have a material adverse effect on our business, financial condition and results of operations.

The retail business is highly competitive. We compete for members, employees, sites, products and servicesservices, and in other important respects with a wide range of local, regional and national wholesalers and retailers, both in the United States and in foreign countries, including other warehouse-club operators, supermarkets, supercenters, online retailers, gasoline stations, pharmacies, hard discounters, department and specialty stores and operators selling a single category or narrow range of merchandise or services. Such retailers and warehouse club operators compete vigorously and in a variety of ways, including pricing, selection and availability, services, location, convenience, store hours, and the attractivenessattractiveness, and ease of use of websites and mobile applications. The evolution of retailing in online and mobile channels has improved the ability of customers to comparison shop, which has enhanced competition. Additionally, the emergence of AI tools may change consumer shopping habits and increase the competition we face. AI may also present inaccurate pricing or product data, or fail to capture the full value of our membership offering, impacting member purchasing decisions by prioritizing immediate or inaccurate price comparison or logistics over member loyalty. Some competitors have greater financial resources and technology capabilities, including the faster adoption of artificialAI intelligence, better access to merchandise,technologies, and greater market penetration than we do. Our inability to respond effectively to competitive pressures, changes in the retail markets or customer expectations could result in lost market share and negatively affect our financial results.

Higher energy and gasoline costs, inflation, levels of unemployment, healthcare costs, consumer debt levels, foreign-currency exchange rates, unsettled financial markets, weaknesses in housing and real estate markets, reduced consumer confidence, changes and uncertainties related to government fiscal, monetarymonetary, and tax policies including changes in interest rates, tax rates, duties, tariffs, or other restrictions, sovereign debt crises, pandemics and other health crises, and other economic factors could adversely affect demand for our products and services, require a change in product mix, or impact the cost of or ability to purchase inventory. Additionally, trade-related actions in various countries have adversely affected the costs of some of our merchandise. The degree of our exposure is dependent on (among other things) the type of goods, rates imposed, and timing of the tariffs and policy changes. The impact to our net sales and gross margin is influenced in part by our merchandising and pricing strategies in response to potential cost increases. Higher tariffs could adversely impact our results.

Prices of certain commodities, including gasoline and consumable goods used in manufacturing and our warehouse retail operations, are historically volatile and are subject to fluctuations arising from changes in domestic and international supply and demand, inflationary pressures, labor costs, competition, market speculation, government regulations, taxestaxes, and periodic delays in delivery. Rapid and significant changes in commodity prices and our ability and desire to pass them through to our members may affect our sales and profit margins. These factors could also increase our merchandise costs and selling, general and administrative expenses, and otherwise adversely affect our operations and financial results. General economic conditions can also be affected by events like the outbreak of hostilities or acts of terrorism.

Inflationary factorsfactors, such as increases in merchandise costscosts, may adversely affect our business, financial condition and results of operations. We may not be able to adjust prices to sufficiently offset the effect of cost increases without negatively impacting consumer demand.

Suppliers may be unable to timely supplyprovide us with quality merchandise at competitive prices or may fail to adhere to our high standards, resulting in adverse effects on our business, merchandise inventories, sales, and profit margins.profits.

Our suppliers (and those they depend upon for materials and services) are subject to risks, including labor disputes, union organizing activities, human andrights violations, animal rightswelfare violations, financial liquidity, climate change, natural disasters, extreme weather conditions, environmental degradation, public health emergencies, supply constraintsconstraints, and general economic and political conditions and other risks similar to those we face that could limit their ability to timely provide us with acceptable merchandise. One or more of our suppliers might not adhere to our quality control, packaging, legal, regulatory, labor, human rights, environmentalenvironmental, or animal welfare standards. These deficiencies may delay or preclude delivery of merchandise to us and might not be identified before we sell such merchandise to our members. This failure could lead to recalls and litigation and otherwise damage our reputation and our brands, increase costs, and otherwise adversely impact our business.

During 2025,2026, our international operations, including Canada, generated 27% and 34%35% of our net sales and operating income. Our international operations have accounted for an increasing portion of our warehouses, and we plan to continue international growth. To prepare our consolidated financial statements, we translate the financial statements of our international operations from local currencies into U.S. dollars using current exchange rates. Future fluctuations in exchange rates that are unfavorable to us may adversely affect the financial performance of our Canadian and Other International operations and have a corresponding adverse period-over-period effect on our results of operations. As we continue to expand internationally, our exposure to fluctuations in foreign-exchange rates may increase.

Natural disasters, extreme weather conditions, and other catastrophic events, including those impacted by climate change, such as extreme temperatures, hurricanes, typhoons, floods, earthquakes, wildfires, droughts; acts of terrorism or violence, including active shooter situations; and energy shortages; particularly in California or Washington state, where our centralized operating systems and administrative personnel are located, could negatively affect our operations and financial performance. Such events could result in physical damage to our properties or inventory, additional heating, cooling, and refrigeration costs, limitations on store operating hours, less frequent visits by members to physical locations, the temporary closure of warehouses, depots, manufacturingmanufacturing, or home office facilities, the temporary lack of an adequate work force, disruptions to our IT systems, the temporary or long-term disruption in the supply of products from some local or overseas suppliers, the temporary disruption in the transport of goods to or from overseas, delays in the delivery of goods to our warehouses or depots, delays in online merchandise delivery, the temporary reduction in the availability of products in our warehouses, and long-term disruption or threats to the habitability of key markets in which we operate. These events could also reduce demand for our products or make it difficult or impossible to procure products. We may be required to suspend operations in some or all of our locations, which could have a material adverse effect on our business, financial condition and results of operations.

The emergence, severity, magnitudemagnitude, and duration of global or regional health crises are uncertain and difficult to predict. A pandemic could affect certain business operations, demand for our products and services, in-stock positions, costs of doing business, availability of labor, access to inventory, supply chain operations, our ability to predict future performance, exposure to litigation, and our financial performance, among other things. Other factors and uncertainties include, but are not limited to: the severity and duration of pandemics; evolving macroeconomic factors including general economic uncertainty, unemployment rates, and recessionary pressures; changes in labor markets affecting us and our suppliers; unknown consequences on our business performance and initiatives stemming from the substantial investment of time and other resources to the pandemic response; the pace of post-pandemic recovery; the long-term impact of the pandemic on our business, including consumer behaviors; and disruption and volatility within the financial and credit markets.

We are subject to a wide and growing array of federal, state, locallocal, and international laws and regulations relating to (among other things), product and food safety, marketing, information security and privacy, pricing, AI, labor and employment, imports and customs, transportation, intellectual property, anti-corruption, and environmental or social matters. These laws and regulations may expand mandatory reporting, increase the scope and complexity of matters that we are required to regulate, assess, and disclose, potentially limit our sourcing flexibilityflexibility, or require extensive system or other changes that could increase the cost of doing business. Failure to comply could result in harm to our members, employees, workers in the value chainchain, or others, significant costs to satisfy environmental compliance, remediation or compensatory requirements, or the imposition of severe penalties or restrictions on operations by governmental agencies or courts that could adversely affect our business, financial condition and results of operations.

The impact of changes to or the introduction of new laws, regulationsregulations, and policies and enforcement practices, can be unpredictable. These may require extensive system and operational changes, be difficult to implement, increase the cost of doing business, require significant capital expenditures, adversely impact the products or services we offer, or result in adverse publicity and harm to our reputation. If we fail to comply or respond adequately to changes in laws and regulations, our business, operations and financial performance may be adversely affected.

We are subject to risks associated with the legislative, judicial, accounting, regulatory, political and economic factors specific to the countriesplaces or regions in whichwhere we operate, which could adversely affect our business, financial condition and results of operations.

At the end of 2025,2026, we operated 285292 warehouses outside of the U.S. (31% of all warehouse locations), and we plan to continue expanding our international operations. Future operating results internationally could be negatively affected by a variety of factors, many similar to those we face in the U.S., certain of which are beyond our control. These factors include political and economic conditions, regulatory constraints, currency regulations, policy changes, and other matters in any of the countries or regions in whichwhere we operate, now or in the future. Other factors that may impact international operations include foreign trade (including tariffs and trade sanctions), monetary and fiscal policiespolicies, and the laws and regulations of the U.S. and foreign governments, agencies and similar organizations, international conflicts, and risks associated with having major facilities in locations which have been historically less stable than the U.S. Risks inherent in international operations also include, among others, the costs and difficulties of managing international operations, adverse tax consequences, and difficulty in enforcing intellectual property rights. New reporting obligations globally are increasing the cost and complexity of doing business.

Accounting principles and related pronouncements, implementation guidelines, and interpretations we apply to a wide range of matters that are relevant to our business, including self-insurance liabilities, are highly complex and involve subjective assumptions, estimatesestimates, and judgments by our management. Changes in rules or interpretation or changes in underlying assumptions, estimates, or judgments by our management could significantly change our reported or expected financial performance and have a material impact on our consolidated financial statements.

Section 404 of the Sarbanes-Oxley Act of 2002 requires management assessments of the effectiveness of internal control over financial reporting and disclosure controls and procedures. If we are unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, processprocess, and report financial information accurately and to prepare financial statements within required time periods could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statementsstatements, and adversely impact our stock price. Uncertainties around our developing systems concerning controls for non-financial reporting also create risks.

We are subject to a variety of taxes and tax collection and remittance obligations related to federal, statestate, and foreign jurisdictions. Additionally, atAt any point in time, we mayare begenerally under examination for value added, sales-based, payroll, product, importimport, or other non-income taxes. We may recognize additional tax expense, be subject to additional tax liabilities, or incur losses and penalties, due to changes in laws, regulations, administrative practices, principles, assessments by authoritiesauthorities, and interpretations related to tax, including tax rules in various jurisdictions. We compute our income taxincome-tax provision based on enacted tax rates in the countries in which we operate. As tax rates vary among countries, a change in earnings attributable to the various jurisdictions in which we operate could result in an unfavorable change in our overall tax provision. Additionally, changes in the enacted tax rates or adverse outcomes in tax audits, including transfer pricing disputes, could have a material adverse effect on our financial condition and results of operations.

We are committed to doing what is right for the business, our members, employeesemployees, and shareholders over the long-term. Costco has set public targets and disclosed intentions for future action regarding sustainability. There are dependencies outside of our control impacting our ability to meet our goals, including but not limited to: economic conditions, ability to access technology at an appropriate cost or scale, the ability to procure sufficient clean energy at competitive market rates to meet future operational and supplier needs, unforeseen operational and implementation challenges, termination or contraction of policies or systems which support our capital investments, and collaboration with third parties. For example, multiple states are implementing extended producer responsibility laws that will require us to enact policies and processes and will increase expenses in the form of fees paid to the state governments, else be subject to fines and penalties, among other effects. We may not make adequate and timely investments or successfully implement strategies that will effectively achieve our sustainability-related goals. Furthermore, international, federal, statestate, and local regulatory authorities, private organizations and individuals may challenge our approach to ESG issues, including allegations that we failed in our efforts, should not have undertaken such effortsefforts, or that we improperly engaged other entities in our approach to ESG issues. A failure or perceived failure to meet our goals or otherwise meet evolving and diverse stakeholder expectations could lead to reputational harm. Multiple states have enacted or proposed extended producer responsibility laws requiring us to enact policies and processes and will increase expenses in the form of fees paid to the state governments, or subject us to fines and penalties, among other effects.

Our operations require the treatment and disposal of wastewater, stormwater, and agricultural and food processing wastes, the use and maintenance of refrigeration systems, noise, odor, and dust management, the operation of mechanized processing equipment, and other operations that potentially could affect the environment and public health and safety. Failure to comply with current and future environmental, health and safety standards could result in the imposition of fines and penalties, illness or injury of our employees, and claims or lawsuits related to such illnesses or injuries, and temporary closures or limits on the operations of facilities.

Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to promote understanding of the results of operations and financial condition. MD&A is provided as a supplement to, and should be read in conjunction with,with our consolidated financial statements and the accompanying Notes to Financial Statements (Part II, Item 8 of this Form 10-K). This section generally discusses the results of operations for 20252026 compared to 2024.2025. For discussion related to the results of operations and changes in financial condition for 20242025 compared to 20232024 refer to Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our fiscal year 20242025 Form 10-K, which was filed with the Securities and Exchange Commission (SEC) on October 9,8, 2024.2025.

We believe that the most important driver of our profitability is increasing net sales, particularly comparable sales. Net sales includes our core merchandise categories (foods and sundries, non-foods, and fresh foods), warehouse ancillary (gasoline, pharmacy, optical, food court, optical, hearing aids, and tire installation), and other businesses (e-commerce, business centers, travel, and other). E-commerce and business center sales are allocated to the appropriate merchandise categories in the Net Sales discussion. The 2%Executive reward associatedearned withby our Executive membershipmembers reduces net sales and is allocated to the category in which the reward is generated (core merchandise categories, warehouse ancillary, and other businesses). Comparable sales is defined as net sales from warehouses openoperating for more than one year, including remodels, relocationsrelocations, and expansions,expansions. andDigitally-enabled comparable sales relatedis todefined e-commerceas sitessales initiated through a digital device, whether fulfilled through a warehouse, distribution center, or Costco Travel, operating for more than one year. TheComparable measuresales ismetrics are intended as supplemental information and isare not a substitute for net sales presented in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and should be reviewed in conjunction with results reported in accordance with U.S. GAAP. Comparable sales growth is achieved through increasing shopping frequency from new and existing members and the amount they spend on each visit (average ticket). Sales comparisons can also be particularly influenced by certain factors that are beyond our control: fluctuations in currency exchange rates (with respect to our international operations) and inflation or deflation in the cost of gasoline and associated competitive conditions. The higher our comparable sales exclusive of these items, the more we can leverage our selling, general and administrative (SG&A) expenses, reducing them as a percentage of sales and enhancing profitability. Generating comparable sales growth is foremost a question of making available the right merchandise at the right prices, a skill that we believe we have repeatedly demonstrated over the long-term. Another substantial factor in net sales growth is the health of the economies in which we do business, including the effects of inflation or deflation, especially the United States. Net sales growth and gross margins are also impacted by competition, which is vigorous and widespread, across a wide range of global, nationalnational, and regional wholesalers and retailers, including those with e-commerce operations. While we cannot control or reliably predict general economic health or changes in competition, we believe that we have been successfulsuccessful, historicallyhistorically, in adapting our business to these changes, such as through adjustments to our pricing and merchandise mix, including increasing the penetration of our private-label items, and through online offerings.

net sales (gross margin percentage) in the near term. OurGross e-commercemargin business,is also impacted by our digitally-enabled businesses, domestically and internationally, hassome of which have a lower gross-margin percentage than our warehouse operations.

We also achieve net sales growth by opening new warehouses. As our warehouse base grows and available and desirable sites become more difficult to secure, square footage growth becomes a comparatively less substantial component of growth. Negative aspects of such growth include lower initial operating profitability relative to existing warehouses and cannibalization of sales at existing warehouses when openings occur in existing markets. Our rate of square footage growth is generally higher in many of our foreigninternational markets, due to the smaller base in those markets, and we expect that to continue.

The membership format is integral to our business and profitability. This format is designed to reinforce member loyalty and provide continuing fee revenue. The extent to which we achieve growth in our membership base, increase the penetration of Executive memberships, and sustain high renewal rates materially influences our profitability. Our renewal rate, which excludes affiliates of Business members, is a trailing calculation that captures renewals during the period seven to eighteen months prior to the reporting date. Our paid-membership growth rate may be adversely impacted when warehouse openings occur in existing markets as compared to new markets. Our worldwide renewal rate is adversely impacted by membership growth in newercertain international markets and a higher penetration of memberships sold online, including through digital membership promotions, which renew at a slightly lower rate on average.

Our financial performance depends heavily on controlling costs. While we believe that we have achieved successes in this area, some significant costs are partially outside our control, particularly health care and utility expenses. With respect to the compensation of our employees, our philosophy is not to seek to minimize their wages and benefits. Rather, we believe that achieving our longer-term objectives of reducing employee turnover, increasing productivityproductivity, and enhancing employee satisfaction requires maintaining compensation levels that are better than the industry average for much of our workforce. This may cause us, for example, to absorb costs that other employers might seek to pass through to their workforces. Because our business operates on very low margins, modest changes in various items in the consolidated statements of income, particularly merchandise costs and SG&A expenses, can have substantial impacts on net income.

Our operating models are generally the same across our U.S., Canadian, and Other International operating segments (see Note 11 to the consolidated financial statements included in Item 8 of this Report). Certain operations in the Other International segment have relatively higher rates of square footage growth, lower wage and benefit costs as a percentage of sales, less or no direct membership warehouse competition, or lack e-commercebusiness delivery or businessCostco delivery.operated e-commerce sites.

In discussions of our consolidated operating results, we refer to the impact of changes in foreign currencies relative to the U.S. dollar, which are differences between the foreign-exchange rates we use to convert the financial results of our international operations from local currencies into U.S. dollars. This impact is calculated based on the difference between the current and prior period's exchange rates. The impact of changes in gasoline prices on net sales is calculated based on the difference between the current and prior period's average price per gallon. Results expressed excluding the impacts of foreign-exchange and gasoline prices are intended as supplemental information and are not a substitute for netforeign-

exchange and gasoline prices are intended as supplemental information and are not a substitute for net sales presented in accordance with U.S. GAAP and should be reviewed in conjunction with results reported in accordance with U.S. GAAP.

Our fiscal year ends on the Sunday closest to August 31. References to 20252026, 2025, and 2024 relate to the 52-week fiscal years ended August 30, 2026, August 31, 2025, and September 1, 2024. References to 2023 relate to the 53-week fiscal year ended September 3, 2023. Certain percentages presented are calculated using actual results prior to rounding.

•We opened 2728 new warehouses, including three relocations, for a total of 2425 net new warehouses: 1518 in the U.S., twofive in our Canadian segment, and seventwo in our Other International segment, compared to 3027 new warehouses, including onethree relocation,relocations, in 20242025;

•Membership fee revenue increased 10%11% to $5,323,$5,907, driven by new member sign-ups andsign-ups, membership fee increasesincreases, and upgrades to Executive membership;

•Gross margin percentage increaseddecreased 20three basis points; 11it increased 10 basis points excluding the impact of gasoline price deflation on net salesinflation;

•SG&A expenses as a percentage of net sales increaseddecreased 1110 basis points; threeit increased one basis pointspoint excluding the impact of gasoline price deflationinflation;

Net sales increased $20,287$27,335 or 8%10% during 2025.2026. The improvement was primarily attributable to an increase in comparable sales of $14,788$22,457 or 6%.8%. Comparable sales were positively impacted by increases of 5% in shoppingaverage frequencyticket and approximately 1%3% in averageshopping ticket.frequency. The remaining increase in net sales was driven by sales at the 2425 net new warehouses opened since the end of 2024.2025.

Sales increased $19,086$17,136 or 10%8% in core merchandise categories, increasing in all categories. Sales in warehouse ancillary and other businesses increased $1,201,$10,199, or 2%.20%, led by gasoline and pharmacy.

LowerHigher gasoline prices negativelypositively impacted net sales by $2,329,$3,501, or 93130 basis points, with ana 8%12% decreaseincrease in the average price per gallon. The volume of gasoline sold increased approximately 2%,7%, positively impacting net sales by $440,$1,913, or 1871 basis points.

Changes in foreign currencies relative to the U.S. dollar negativelypositively impacted net sales by approximately $1,943,$1,332, or 7849 basis points, attributable to our Other International and Canadian operations.

Membership fee revenue increased 10%11% in 2025,2026, driven by new member sign-ups andsign-ups, membership fee increases.increases, and upgrades to Executive memberships. At the end of 2025, our2026, member renewal rates were 92.3% in the U.S. and Canada and 89.8% worldwide. Renewal rates were negatively impacted by a higher number of memberships sold online,

As previously reported, we increased our annual membership fees in the U.S. and Canada, effective September 1, 2024. We account for membership fee revenue on a deferred basis, recognized ratably over the one-year membership period. The fee income increase accounted for approximately 30% and 40% of membership income growth during 2026 and 2025.

The gross margin in core merchandise categories,categories when expressed as a percentage of coretheir merchandiseown sales (rather than total net sales), increased 1615 basis points. The increase was primarilyacross dueall tocategories. fresh foods and foods and sundries, partially offset by non-foods. This measure eliminates the impact of changes in sales penetration and grossGross margin from ourin warehouse ancillary and other businesses.businesses when expressed as a percentage of their own sales decreased 14 basis points, primarily due to gasoline and pharmacy.

SG&A expenses as a percentage of net sales increaseddecreased 1110 basis points.points compared to 2025. SG&A expenses as a percentage of net sales excluding the impact of gasoline price deflationinflation was 9.17%,9.26%, an increase of threeone basis points. The comparison to last year was negatively impacted by three basis points due to warehouse operations and other businesses.point. Changes in foreign currencies relative to the U.S. dollar decreasedincreased SG&A expenses by approximately $127,$126, attributable to our Other International and Canadian operations. SG&A expenses as a percentage of net sales increased in our Canadian and Other International operations.segments and were flat in our U.S. segment compared to 2025.

Interest expense is primarily related to Senior Notes and financing leases. The decrease was primarily due to repayment of the 2.750% Senior Notes in May 2024. For more information on our debt arrangements, refer to the consolidated financial statements included in Item 8 of this Report.

The decreaseincrease in interest income in 20252026 was due to lowerhigher interestcash rates,balances, partially offset by higherlower cashinterest balances.rates. Foreign-currency transaction gains, net, include revaluation or settlement of monetary assets and liabilities,liabilities by our Canadian and Other International operations and mark-to-market adjustments for forward foreign-exchange contracts. See Derivatives and Foreign-Currency sections in Note 1 to the consolidated financial statements included in Item 8 of this Report.

The effective tax rate for 2026 was favorably impacted by net discrete tax benefits of $83 and $72 related to research and development credits and stock compensation. The effective tax rate for 2025 was favorably impacted by discrete tax benefits of $100 related to stock compensation.compensation

The Organization of Economic Cooperation and Development (OECD) introduced a framework to implement a global minimum corporate tax of 15% (referred to as Pillar 2), which was effective for fiscal 2025. The impacts of Pillar 2 did not have a material impact on our consolidated financial statements.

Our primary sources of liquidity are cash flows from operations, cash and cash equivalents, and short-term investments. Cash and cash equivalents and short-term investments were $15,284$21,301 and $11,144$15,284 at August 31,30, 2025,2026, and SeptemberAugust 1,31, 2024.2025. Of these balances, unsettled credit and debit card receivables represented approximately $2,670$2,842 and $2,519.$2,670. These receivables generally settle within four days.

Net cash provided by operating activities totaled $13,335 in 2025, compared to $11,339 in 2024. Our cash flow provided by operations is primarily from net sales and membership fees. Cash flow used in operations generally consists of payments to merchandise suppliers, warehouse operating costs, including wages and employee benefits, utilities, credit and debit card processing fees, and operating leases. Cash used in operations also includes payments for income taxes. Changes in our net investment in merchandise inventories (the difference between merchandise inventories and accounts payable) is impacted by several factors, including inventory levels and turnover, payment terms with suppliers, and early payments to obtain discounts. Net cash provided by operating activities totaled $15,817 in 2026, compared to $13,335 in 2025. The increase was primarily due to higher operating income, as well as reduced net investment in merchandise inventories. The latter was a result of faster inventory turns and improved payment terms with suppliers.

Our primary requirements for capital are acquiring land, buildings, and equipment for new and remodeled warehouses, information systems, and manufacturing and distribution facilities. In 2025,2026, we spent $5,498$6,435 on capital expenditures, and it is our current intention to spend $6,000approximately to $6,500$7,500 during fiscal 2026.2027. These expenditures are expected to be financed with cash from operations, cash and cash equivalents, and short-term investments. We opened 2728 new warehouses, including three relocations, in 2025,2026, and plan to open up to 3533 new warehouses, including five relocations, in 2026.2027. There can be no assurance that current expectations will be realized, and plans are subject to change upon further review of our capital expenditure needs and the economic environment.

Net cash used in financing activities totaled $3,775$3,355 in 2025,2026, compared to $10,764$3,775 in 2024.2025. Cash flow used in financing activities primarily related to the payment of dividends, repayments of long-term debt and short-term borrowings, repurchases of common stock, repayments of short-term borrowings and long-term debt, and withholding taxes on stock-based awards. Cash flow provided by financing activities included proceeds from short-term borrowings and issuance of long-term debt.

approximatelyCash $6,655.dividends declared in 2026 totaled $2,458, $5.54 per share, as compared to $2,183, $4.92 per share, in 2025. In April 2025,2026, the Board of Directors increased our quarterly cash dividend from $1.16$1.30 to $1.30$1.47 per share.

On January 19, 2023, the Board of Directors authorized a share repurchase program in the amount of $4,000, which expires in January 2027. During 20252026 and 2024,2025, we repurchased 943,000891,000 and 1,004,000943,000 shares of common stock, at an average price per share of $957.66$950.90 and $695.29,$957.66, totaling approximately $903$847 and $698.$903. These amounts may differ from the accompanying consolidated statements of cash flows due to changes in unsettled repurchases at the end of each fiscal year. Purchases are made from time to time, as conditions warrant, in the open market or in block purchases, pursuant to plans under SEC Rule 10b5-1. Repurchased shares are retired, in accordance with the Washington Business Corporation Act. The remaining amount available to be purchased under our approved plan was $1,962$1,115 at the end of 2025.2026.

We maintain bank credit facilities for working capital and general corporate purposes. At August 31,30, 2025,2026, we had borrowing capacity under these facilities of $1,220.$2,118, compared to $1,220 at the end of 2025. This increase was primarily driven by the renewal and expansion of our U.S. revolving credit facility in August 2026, which increased total borrowing capacity from $400 to $1,000 and extended the maturity date to August 2027, as well as credit facility expansions in our Japan and Mexico subsidiaries. Our internationalCanadian and Other International operations maintain $721$1,012 of this capacity under bank credit facilities, of which $199$333 is guaranteed by the Company. Short-termThere were no short-term borrowings outstanding under the bank credit facilities,facilities whichat arethe end of 2026. Short-term borrowings were immaterial at the end of 2025 and were included in other current liabilities on the consolidated balance sheets, were immaterial at the end of 2025 and 2024.sheets.

Claims for employee health-care benefits, workers’ compensation, general liability, property damage, directors’ and officers’ liability, vehicle liability, inventory loss, and other exposures are funded predominantly through self-insurance. Insurance coverage is maintained for certain risks to limit exposures to very large losses. We use various risk management mechanisms, including a wholly-owned captive insurance subsidiary,subsidiary and participate in a reinsurance program. Liabilities associated with the risks that we retain are not discounted and are estimated using historical claims experience, demographic factors, severity factors, and other actuarial assumptions. The costs of claims are highly unpredictable and can fluctuate as a result of inflation rates, regulatory or legal changes, and unforeseendevelopments developmentsin claim frequency

in claim frequency and amounts. While we believe our estimates are reasonable, actual claims and costs could differ significantly from recorded liabilities. Historically, adjustments to our estimates have been immaterial.

Our operating models are generally the same across our U.S., Canadian, and Other International operating segments (see Note 9 to the condensed consolidated financial statements included in Part I, Item 1, of this Report). Certain operations in theour Other International segment have relatively higher rates of square footage growth, lower wage and benefit costs as a percentage of sales, less or no direct membership warehouse competition, or lack e-commerce or business delivery.

Our fiscal year ends on the Sunday closest to August 31. References to the secondthird quarter of 2026 and 2025 relate to the 12-week fiscal quarters ended FebruaryMay 15,10, 2026, and FebruaryMay 16,11, 2025. References to the first halfthirty-six weeks of 2026 and 2025 relate to the 2436 weeks ended FebruaryMay 15,10, 2026, and FebruaryMay 16,11, 2025. Certain percentages presented are calculated using actual results prior to rounding.

Highlights for the secondthird quarter of 2026 versus 2025 include:

•Net sales increased 9%12% to $68,242,$69,154, driven by an increase in comparable sales and sales at 2723 net new warehouses opened since the end of the secondthird quarter of 2025;

•Membership fee revenue increased 14%11% to $1,355,$1,373, primarily driven by new member sign-ups andsign-ups, membership fee increasesincreases, and upgrades to Executive Membership;

•Gross margin as a percentage of net sales and excluding the impact of gasoline price deflationinflation increased 11one basis pointspoint;

•SG&A expenses as a percentage of net sales and excluding the impact of gasoline price deflationinflation increaseddecreased eighttwo basis points;

•A quarterly cash dividend of $1.30$1.47 per share was declared on JanuaryApril 15, 2026, and paid on FebruaryMay 13,15, 2026.

Net sales increased $5,712$7,189 or 9%,12%, and $10,705$17,894 or 9%10% during the secondthird quarter and first halfthirty-six weeks of 2026. The improvement was primarily attributable to an increase in comparable sales of $4,618$6,055 or 7%10% and $8,497$14,553 or 7%8% during the secondthird quarter and firstthirty-six halfweeks of 2026. Comparable sales were positively impacted by increases of approximately 4%7% and 5% in average ticket and 2% and 3% in shopping frequency in both the secondthird quarter and first halfthirty-six weeks of 2026. The remaining increase was driven by sales at the 2723 net new warehouses opened since the end of the secondthird quarter of 2025.

Digitally-enabled comparable sales increased 23%21% and 22% during the secondthird quarter and first halfthirty-six weeks of 2026 and increased 22%21% andfor 21%each period excluding the impact of changes in foreign-currencies.foreign currencies.

Sales increased $4,715$3,721 or 9%7% and $8,663$12,384 or 9%8% in core merchandise categories during the secondthird quarter and first halfthirty-six weeks of 2026, increasing in all categories. Sales increased $997$3,468 or 9%29% and $2,042$5,510 or 9%16% in warehouse ancillary and other businesses during the secondthird quarter and first halfthirty-six weeks of 2026.2026, led by gasoline and pharmacy.

The volume of gasoline sold increased approximately 4%,10% and 6%, positively impacting net sales by $209,$662, or 33107 basis points and $443$1,105 or 3660 basis points during the secondthird quarter and first halfthirty-six weeks of 2026. LowerHigher gasoline prices negativelypositively impacted net sales by $402,$1,367, or 64221 basis points, and $431,$936, or 3550 basis points during the secondthird quarter and first halfthirty-six weeks of 2026, with a 5%20% and 3%5% decreaseincrease in the average price per gallon.

Changes in foreign-currenciesforeign currencies relative to the U.S. dollar attributable to our Other International and Canadian operations positively impacted net sales by approximately $899,$643, or 144104 basis points, and approximately $935,$1,578, or 7685 basis points, during the secondthird quarter and first halfthirty-six weeks of 2026.

Membership fee revenue increased 14%11% and 13% in the secondthird quarter and first halfthirty-six weeks of 2026, driven by new member sign-ups andsign-ups, membership fee increases.increases and upgrades to Executive Membership. At the end of the secondthird quarter of 2026, our renewal rates were 92.1%92.2% in the U.S. and Canada and 89.7% worldwide. Renewal rates were negatively impacted by a higher number of memberships sold online, including through digital promotions, entering the renewal rate calculation. These memberships renew at a slightly lower rate on average.

As previously reported, we increased our annual membership fees in the U.S. and Canada, effective September 1, 2024. We account for membership fee revenue on a deferred basis, recognized ratably over the one-year membership period. The fee income increase accounted for approximately 35%25% and 40%35% of membership income growth during the secondthird quarter and first halfthirty-six weeks of 2026.

Gross margin as a percentage of net sales increaseddecreased by 1721 basis points. Excluding the impact of gasoline price deflationinflation on net sales, gross margin percentage was 10.96%,11.26%, an increase of 11one basis points.point. The increase was positively impacted by 1714 basis points in our warehouse ancillary and other businesses, primarily gasolinepharmacy and pharmacy,e-commerce. andA fivesmaller LIFO charge in the third quarter of 2026 compared to the third quarter of 2025 positively impacted gross margin by 14 basis pointspoints. fromThe absence of a non-recurringcharge legalthis settlement.quarter related to a one-time expense for increased employee vacation positively impacted gross margin by two basis points. Gross margin percentage was negatively impacted by seven29 basis points in our core merchandise categories, primarily due to 2% rewardsfoods and sundries and fresh foods, partially offset by our co-branded credit card program, partially offset by an increase in non-foodsprogram and fresh foods. A LIFO charge in the second quarter of 2026 compared to a benefit in the second quarter of 2025 also negatively impacted gross margin by four basis points.non-foods. Changes in foreign currencies relative to the U.S. dollar positively impacted gross margin by approximately $97,$69, compared to the secondthird quarter of 2025, attributable to our Other International and Canadian operations.

The gross margin in core merchandise categories, when expressed as a percentage of core merchandise sales (rather than total net sales), increaseddecreased 22nine basis points,points. withThe increasesdecrease was primarily due to fresh foods and foods and sundries, partially offset by non-foods. This measure eliminates the impact of changes in allsales categories.penetration Thisand gross margin from our warehouse ancillary and other businesses.

Gross margin percentage on a segment basis, when expressed as a percentage of the segment's own sales and excluding the impact of changes in gasoline prices on net sales (segment gross margin percentage), increaseddecreased in our U.S. segment,segment. whichThe performeddecrease similarlywas primarily due to a negative impact from core merchandise categories, partially offset by increases in warehouse ancillary and other businesses, a smaller LIFO charge and the consolidatedabsence resultsof above.a charge related to a one-time expense for increased employee vacation. Our Canadian segment gross margin percentage increased, primarily due to increases in warehouse ancillary and other businesses, partially offset by decreases in core merchandise categories. Gross margin increased in our Other International segment, primarily due to increases in warehouse ancillary and other businesses and core merchandise categories.

Gross margin as a percentage of net sales increased by 11one basis points.point. Excluding the impact of gasoline price deflationinflation on net sales, gross margin percentage was 11.13%,11.18%, an increase of sevensix basis points. The increase was positively impacted by 1213 basis points in our warehouse ancillary and other businesses, primarily gasolinepharmacy and pharmacy,gasoline, and twothree basis points from a smaller LIFO charge in the first thirty-six weeks of 2026 compared to the first thirty-six weeks of 2025. A non-recurring legal settlement.settlement also positively impacted gross margin by two basis points. Gross margin percentage was negatively impacted by four12 basis points in our core merchandise categories, primarily due to our co-branded credit card programprogram, foods and sundries, and 2% rewards, partially offset by increases in non-foods, fresh foods, and foods and sundries. A LIFO charge in the first half of 2026 compared to a benefit in the first half of 2025 also negatively impacted gross margin by three basis points.non-foods. Changes in foreign currencies relative to the U.S. dollar positively impacted gross margin by approximately $101,$170, compared to the first halfthirty-six weeks of 2025, attributable to our Other International and Canadian operations.

The gross margin in core merchandise categories, when expressed as a percentage of core merchandise sales (rather than total net sales), increased 2614 basis points. The increase was acrossprimarily alldue categories.to non-foods and foods and sundries, partially offset by fresh foods.

Segment gross margin percentage increased in all segments. Our U.S. segment performed similarly to the consolidated results above. Our Canadian segment gross margin percentage increased, primarily due to increases in warehouse ancillary and other businesses, partially offset by decreases in core merchandise categories. Gross margin increased in our Other International segment, primarily due to increases in core merchandise categories and warehouse ancillary and other businesses and core merchandise categories.businesses.

SG&A expenses as a percentage of net sales increaseddecreased by 1320 basis points. SG&A expenses as a percentage of net sales excluding the impact of gasoline price deflationinflation was 9.14%, ana increasedecrease of eighttwo basis points. Compared to last year, results were negativelyfavorably impacted by sixfive basis points attributable to self-insuredthe generalabsence liabilityof claimsa charge related to a one-time expense for increased employee vacation and threeone basis pointspoint from central operating costs. Preopening costs were higher by one basis point. SG&A was favorablynegatively impacted by twothree basis points attributable to warehouse operations and other businesses. Stock compensation was higher by one basis point. Changes in foreign currencies relative to the U.S. dollar increased SG&A expenses by approximately $65 compared to the second quarter of 2025, attributable to our Other International and Canadian operations. SG&A expenses as a percentage of net sales were higher in all segments.$48

SG&A expenses as a percentage of net sales increaseddecreased by seventhree basis points. SG&A expenses as a percentage of net sales excluding the impact of gasoline price deflationinflation was 9.36%,9.29%, an increase of fourtwo basis points. Compared to last year, results were negatively impacted by threetwo basis points attributable to self-insured general liability claims expenseexpense. and two basis points due to aA charge related to a tax assessment for prior years.years Preopeningand costs were higher by one basis point. Warehousewarehouse operations and other businesses andalso stock compensation favorablynegatively impacted resultsSG&A by one basis point each. The absence of a charge related to a one-time expense for increased employee vacation favorably impacted SG&A by two basis points. Changes in foreign currencies relative to the U.S. dollar increased SG&A expenses by approximately $65$113 compared to the first halfthirty-six weeks of 2025, attributable to our Other International and Canadian operations. SG&A expenses as a percentage of net sales were higher in our U.S. segment, flat in ourand Canadian segment,segments and lower in our Other International segment.

The increase in interest income in the secondthird quarter and first halfthirty-six weeks of 2026 was due to higher cash balances, partially offset by lower interest rates. Foreign-currency transaction gains (losses), net, include revaluation or settlement of monetary assets and liabilities by our Canadian and Other International operations and mark-to-market adjustments for forward foreign-exchange contracts. See Derivatives and Foreign Currency sections in Item 8, Note 1 of our Annual Report on Form 10-K, for the fiscal year ended August 31, 2025.

The effective tax rate for the first halfthirty-six weeks of 2026 and 2025 was favorably impacted by discrete tax benefits of $72 and $100 related to stock compensation.

Our primary sources of liquidity are cash flows from operations, cash and cash equivalents, and short-term investments. Cash and cash equivalents and short-term investments were $18,240$19,996 and $15,284 at FebruaryMay 15,10, 2026, and August 31, 2025. Of these balances, unsettled credit and debit card receivables represented approximately $2,872$3,078 and $2,670 at FebruaryMay 15,10, 2026, and August 31, 2025. These receivables generally settle within four days.

Net cash provided by operating activities totaled $7,684 in the first half of 2026, compared to $6,008 in the first half of 2025. Our cash flow provided by operations is primarily from net sales and membership fees. Cash flow used in operations generally consists of payments to suppliers, warehouse operating costs, including wages and employee benefits, utilities, credit and debit card processing fees, and operating leases. Cash used in operations also includes payments for income taxes. Changes in our net investment in merchandise inventories (the difference between merchandise inventories and accounts payable) is impacted by several factors, including inventory levels and turnover, payment terms with suppliers, and early payments to obtain discounts. Net cash provided by operating activities totaled $11,133 in the first thirty-six weeks of 2026, compared to $9,468 in the first thirty-six weeks of 2025. The increase was primarily due to higher cash flow provided from operating income, as well as reduced net investment in merchandise inventories. The latter was a result of faster inventory turns and improved payment terms with suppliers.

Net cash used in investing activities totaled $2,568$4,160 in the first halfthirty-six weeks of 2026, compared to $2,007$3,343 in the first halfthirty-six weeks of 2025, and is primarily related to capital expenditures. Net cash from investing activities also includes purchases and maturities of short-term investments.

Our primary requirements for capital are acquiring land, buildings, and equipment for new and remodeled warehouses, information systems, and manufacturing and distribution facilities. In the first halfthirty-six weeks of 2026, we spent $2,815$4,228 on capital expenditures, and it is our current intention to spend approximately $6,500 during fiscal 2026, as we continue to invest in new warehouse openings, remodel existing locations, expand our depot network, and further develop our digitally-enabled businesses. These expenditures are expected to be financed with cash from operations, cash and cash equivalents, and short-term investments. We opened 12 new warehouses, including two relocations, in the first half of 2026, and plan to open 21 additional new warehouses, including three relocations, in the remainder of fiscal 2026. There

short-term investments. We opened 16 new warehouses, including two relocations, in the first thirty-six weeks of 2026, and plan to open 13 additional new warehouses, including one relocation, in the remainder of fiscal 2026. There can be no assurance that current expectations will be realized, and plans are subject to change upon further review of our capital expenditure needs and the economic environment.

Net cash used in financing activities totaled $1,897$2,175 in the first halfthirty-six weeks of 2026, compared to $1,434$2,182 in the first halfthirty-six weeks of 2025. Cash flow used in financing activities during the first halfthirty-six weeks of 2026 was primarily related to the payment of dividends, repurchases of common stock, andrepayments of short-term borrowings, withholding taxes on stock-based awards.awards, and repayments of long-term debt. Cash flow provided by financing activities included proceeds from short-term borrowings.

A quarterly cash dividend of $1.30$1.47 per share was declared on JanuaryApril 15, 2026, and paid on FebruaryMay 13,15, 2026.

On January 19, 2023, the Board of Directors authorized a share repurchase program in the amount of $4,000, which expires in January 2027. During the first halfthirty-six weeks of 2026 and 2025, we repurchased 454,000638,000 and 443,000658,000 shares of common stock, at an average price per share of $924.46$945.46 and $932.03,$946.64, totaling approximately $420$603 and $413.$623. These amounts may differ from the accompanying condensed consolidated statements of cash flows due to changes in unsettled repurchases at the end of a quarter. Purchases are made from time to time, as conditions warrant, potentially including the open market, block purchases and pursuant to plans under SEC Rule 10b5-1. Repurchased shares are retired, in accordance with the Washington Business Corporation Act. The remaining amount available to be purchased under our approved plan was $1,542$1,359 at the end of the secondthird quarter.

We maintain bank credit facilities for working capital and general corporate purposes. At FebruaryMay 15,10, 2026, we had borrowing capacity under these facilities of $1,447.$1,531. Our Canadian and Other International operations maintain $946$1,028 of this capacity under bank credit facilities, of which $293$338 is guaranteed by the Company. Short-term borrowings outstanding under the bank credit facilities, which are included in other current liabilities on the condensed consolidated balance sheets, were $98$96 at the end of the secondthird quarter of 2026 and immaterial at the end of 2025.

We have letter of credit facilities, for commercial and standby letters of credit, totaling $236.$242. The outstanding commitments under these facilities at the end of the secondthird quarter of 2026 totaled $204,$205, most of which were standby letters of credit that do not expire or have expiration dates within one year. The bank credit facilities have various expiration dates, most within one year, and we generally intend to renew these facilities. The amount of borrowings available at any time under our bank credit facilities is reduced by the amount of standby and commercial letters of credit outstanding.

The preparation of our consolidated financial statements in accordance with U.S. GAAP requires that we make estimates and judgments. We base these on historical experience and on assumptions that we believe to be reasonable. Our critical accounting policies are discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K, for the fiscal year ended August 31, 2025. There have been no material changes to the critical accounting estimates previously disclosed in that Report.