👉 Mortgage Rates Just Jumped to 7.45%

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Costco reported another strong quarter as continued membership engagement, higher traffic and rapidly growing digital sales helped push quarterly revenue above $95.0 billion. Comparable sales increased 9.4% YoY while shopping frequency increased 3.3% worldwide.

The strength was broad across geographies. U.S. comparable sales increased 10.7%, Canada grew 5.0% and Other International increased 7.0%. Digitally-enabled comparable sales climbed 19.5%, with total site and app traffic increasing 30%. Management also highlighted strong demand across non-foods, meat and bakery, while ancillary businesses including gasoline, pharmacy and travel all grew faster than Costco overall.

Membership continued to strengthen as well. Costco ended the quarter with 84.1 million paid members, while paid Executive Memberships increased 9.4% YoY to a record 42.3 million. Membership fee revenue increased 7.3% to $1.85 billion, while U.S. and Canada renewal rates improved to 92.3%. Management also noted that more than one-quarter of Costco's membership base is now under 40, with that younger cohort growing nearly 60% since the pandemic.

Profitability benefited modestly from tariff refunds. Costco received $184.0 million during the quarter and reinvested a portion of those proceeds into lower member prices, ultimately producing a $0.15 benefit to diluted EPS. Excluding the non-recurring benefit, net income still increased more than 12% YoY. Management said it intends to reinvest the majority of future tariff refunds back into member value rather than allowing them to flow entirely through earnings.

Looking ahead, Costco does not provide traditional quarterly revenue or earnings guidance. Management plans to open 33 warehouses during fiscal 2027, including five relocations, as it works toward a long-term pace of 30 net new locations annually. The company also expects approximately $7.5 billion in capital expenditures as it expands warehouses, supply-chain capacity and its digital infrastructure.

Long COST.

General Mills reported an encouraging start to its fiscal year as underlying sales stabilized and recent product innovation began improving consumer demand. Reported revenue declined primarily because of last year's U.S. yogurt divestiture, while organic net sales were flat and improved by roughly two percentage points from the company's fiscal 2026 performance. The sharp decline in GAAP profits largely reflects a $1.05 billion gain from the yogurt divestiture recorded in the year-ago quarter.

North America Retail revenue declined 7% to $2.45 billion, including a four-point headwind from the yogurt divestiture, while organic sales declined 3%. Management highlighted improving retail trends across brands including Cheerios and Pillsbury, with North America Retail sales trends improving roughly two points and Pillsbury retail sales stabilizing after eight consecutive quarters of declines.

North America Pet revenue was roughly flat at $612.8 million as double-digit growth in cat food and low-single-digit growth in treats were offset by a high-single-digit decline in dog food. Foodservice organic sales increased 4%, led by cereal and frozen meals, while International organic sales also grew 4%, supported by distributor markets, India and China. Operating profit increased 12% in Foodservice and 14% in International, contrasting with declines in Retail and Pet.

Management focused heavily on using innovation and cost savings to rebuild growth while protecting profitability. General Mills is targeting $750.0 million of savings this year across its Holistic Margin Management and transformation programs as it contends with input-cost inflation expected near the high end of its 4% to 5% range. The company is also increasing innovation around protein, fiber, bold flavors and pet humanization while investing more heavily behind marketing and brand communication.

Looking ahead, management reaffirmed its full-year outlook, expecting organic net sales between -1.5% and +0.5%, adjusted operating profit to decline between 8% and 13% in constant currency, and adjusted EPS between $3.00 and $3.20.

No position.

Darden Restaurants reported a solid start to its fiscal year as every operating segment delivered positive same-restaurant sales. GAAP operating income and profits declined from last year, although the prior-year quarter benefited from a $42.0 million pre-tax gain related to the sale of Olive Garden Canada.

Olive Garden generated $1.33 billion in revenue, an increase of 2% YoY, while comparable-calendar same-restaurant sales increased 1%. LongHorn Steakhouse remained the standout, with revenue climbing 11% to $860.9 million and same-restaurant sales increasing 6.8%, marking its 22nd consecutive quarter of positive comparable sales growth. Fine Dining same-restaurant sales increased 1%, while Other Business grew 4.5%, led by a 10% increase at Yard House.

Management noted that Olive Garden guest traffic faced roughly 150 to 200 basis points of pressure from the World Cup and heightened consumer concerns surrounding lettuce. The company sees weekday lunch as a meaningful opportunity and plans to increase marketing around Olive Garden's unlimited soup, salad and breadsticks offering while testing a new lunch platform designed to improve value, variety and traffic. Early second-quarter trends have been encouraging, with management noting that positive traffic accelerated further into September.

The executive team also emphasized its disciplined approach to pricing. Darden carried approximately 3.7% pricing during the quarter against 3.5% commodity inflation, while restaurant labor expenses improved by 30 basis points through productivity gains. Management said it has not seen meaningful resistance to recent price increases and continues to see a resilient consumer across its casual-dining brands.

Looking ahead, management reaffirmed its full-year fiscal 2027 outlook, expecting total sales between $13.60 billion and $13.75 billion, same-restaurant sales growth between 2.5% and 3.5%, and diluted EPS between $11.10 and $11.35. Darden also plans to open between 75 and 80 new restaurants this year.

No position.

“In daily terms, 7% was first broken back on September 10th following inflation reports that raised the risk of the Fed rate hike seen last week. A combination of Fed comments, higher oil prices, and stronger economic data have added to the pain since then.”