At a Glance

  • Costco Wholesale stores using pre-scanning technology have seen checkout speeds increase by 20%, CEO Ron Vachris said on Thursday's earnings call. He also mentioned the company's upcoming digital initiatives, including using AI to compare prescription drug prices across different suppliers and enabling automatic inventory replenishment.
  • "Scanning membership IDs at warehouse entrances, the Costco digital wallet, and pre-scanning of small and medium-sized shopping carts are delivering better member experiences and higher productivity," Vachris said. He emphasized that the company's approach is not "technology for technology's sake," but rather using technology to improve operational efficiency.
  • Discussing selling, general, and administrative expenses (SG&A), CFO Gary Millerchip said that the productivity and efficiency gains from the technology investments Vachris described "fully offset the impact of wage investments and extended operating hours, and would have resulted in positive operating leverage this quarter were it not for higher medical costs."

Deeper Dive

The retail giant, headquartered in Issaquah, Washington, reported that net sales for the first quarter of fiscal 2026, which ended November 23, increased 8.2% year-over-year to $65.98 billion; SG&A expenses rose from $5.84 billion to $6.3 billion during the same period.

"Our reported SG&A rate increased 1 basis point year-over-year to 9.6%, compared to 9.59% in the prior year," Millerchip said in the call transcript. "The operating component of SG&A increased 1 basis point year-over-year. Our operations teams have done an excellent job driving productivity and capturing efficiency gains from the technology investments that Ron mentioned earlier."

Although Costco has faced some criticism for long checkout lines, according to Food & Wine, the company has been testing a "scan-and-go" system similar to that of its competitor Sam's Club, allowing customers to scan items with their phones and pay through an app.

In terms of AI applications, Vachris said the company is also deploying AI for inventory management in its gas station operations. During the call, one analyst noted that the market has observed the company's increased willingness to embrace technology under Vachris's leadership and asked Vachris whether he agreed with that observation.

Vachris did not directly answer the question, instead pointing out that technology has been a focus for the company for years.

"So, we're now at a stage where the results are showing—we're beginning to see the benefits of all the hard work on backend systems, which are now gradually being showcased to members. We feel that technology will be part of our future—a big part of our future," Vachris said.