Costco Wholesale (COST) – A Tax-Refund Tailwind Could Drive the Next Leg Higher
As tax filing season gets underway, we see a clear setup forming for Costco that goes beyond the usual retail story. Recent tax law changes passed last July are starting to show up in consumer refunds, and because withholding tables were left unchanged in 2025, many households are now poised to receive larger-than-expected checks during the 2026 refund season. That timing matters, and Costco appears especially well positioned to capture this wave of discretionary spending.
What stands out is the profile of Costco’s customer base. Compared with other warehouse clubs, its membership skews more toward mid- to higher-income households, which tend to channel tax refunds into larger-ticket discretionary purchases rather than just necessities. That aligns well with Costco’s merchandising mix, particularly in general merchandise categories that typically see a lift when consumers feel flush. Geography also plays a role, as Costco’s footprint overlaps heavily with regions likely to benefit from the tax changes tied to overtime and tip income.
Zooming out, the broader retail backdrop is improving. The tax adjustments are expected to lift core retail sales by more than 1% in 2026, with a disproportionate impact during the spring refund window. Costco has already started the year strong, with shares up about 15% in 2026 after a modest pullback in 2025. That pause followed massive gains of 45% in 2023 and 39% in 2024, suggesting this is a high-quality compounder that tends to digest gains before moving higher again.
The stock trades around $1,000, and while expectations are no longer low, the near-term catalyst of tax refunds creates a clear runway for continued momentum. JPMorgan recently highlighted Costco as its top retail beneficiary of the tax changes, assigning a Buy rating and a $1,205 price target, underscoring the upside if consumer spending surprises to the upside this spring.
For investors looking for a durable retail name with a timely macro tailwind, Costco looks like a smart way to play a stronger consumer without taking outsized risk.
