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Item 2. Management’s Discussion and Analysis

2025-12-17 compared with 2025-06-05 · 98 added, 117 removed, 145 unchanged (60% of the section changed)

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Certain statements contained in this document constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

For these purposes, forward-looking statements are statements that address activities, events, conditions or developments that the Company expects or anticipates may occur in the future and may relate to such matters as net sales growth, changes in comparable sales, cannibalization of existing locations by new openings, price or fee changes, earnings performance, earnings per share, stock-based compensation expense, warehouse openings and closures, capital spending, the effect of adopting certain accounting standards, future financial reporting, financing, margins, return on invested capital, investments in technology, strategic direction, expense controls, membership renewal rates, shopping frequency, litigation, attainment of sustainability goals, and the demand for our products and services.

For these purposes, forward-looking statements are statements that address activities, events, conditions or developments that the Company expects or anticipates may occur in the future and may relate to such matters as net sales growth, changes in comparable sales, cannibalization of existing locations by new openings, price or fee changes, earnings performance, earnings per share, stock-based compensation expense, warehouse openings and closures, capital spending, the effect of adopting certain accounting standards, future financial reporting, financing, margins, return on invested capital, investments in technology, strategic direction, expense controls, membership fee changes, signups, and renewal rates, shopping frequency, litigation, attainment of sustainability goals, and the demand for our products and services.

In some cases, forward-looking statements can be identified because they contain words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or similar expressions and the negatives of those terms.

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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, our condensed consolidated financial statements and the accompanying Notes to Financial Statements (Part I, Item 1 of this Form 10-Q), as well as our consolidated financial statements, the accompanying Notes to Financial Statements, and the related MD&A in our fiscal year 2024 Form 10-K, filed with the Securities and Exchange Commission on October 9, 2024.

We operate membership warehouses and e-commerce sites based on the concept that offering our members low prices on a limited selection of nationally-branded and private-label products in a wide range of categories will produce high sales volumes and rapid inventory turnover.

MD&A is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and the accompanying Notes to Financial Statements (Part I, Item 1 of this Form 10-Q), as well as our consolidated financial statements, the accompanying Notes to Financial Statements, and the related MD&A in our fiscal year 2025 Form 10-K, which was filed with the Securities and Exchange Commission on October 8, 2025.

We operate membership warehouses and e-commerce sites based on the concept that offering low prices on a limited selection of nationally-branded and private-label products in a wide range of categories will produce high sales volumes and rapid inventory turnover.

When combined with the operating efficiencies achieved by volume purchasing, efficient distribution and reduced handling of merchandise in no-frills, self-service warehouse facilities, these volumes and turnover enable us to operate profitably at significantly lower gross margins (net sales less merchandise costs) than most other retailers.

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Net sales includes our core merchandise categories (foods and sundries, non-foods, and fresh foods), warehouse ancillary (gasoline, pharmacy, optical, food court, 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

The 2% reward associated with Executive membership 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 open for more than one year, including remodels, relocations and expansions, and sales related to e-commerce sites operating for more than one year.

E-commerce and business center sales are allocated to the appropriate merchandise categories in the Net Sales discussion.

The 2% reward associated with Executive membership 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 open for more than one year, including remodels, relocations and expansions, and digitally-enabled businesses operating for more than one year.

Starting this quarter, we changed our e-commerce comparable sales metric to digitally-enabled comparable sales.

This metric represents sales delivered to members that are initiated through a digital device, whether fulfilled through a warehouse or a distribution center, as well as Costco Travel.

The measure is intended as supplemental information and is not a substitute for net sales presented in accordance with U.S.

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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 our competition, which is vigorous and widespread, across a wide range of global, national and regional wholesalers and retailers, including those with e-commerce operations.

Net sales growth and gross margins are also impacted by competition, which is vigorous and widespread, across a wide range of global, national 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 successful historically 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.

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We also achieve net sales growth by opening new warehouses.

As our warehouse base grows, available and desirable sites become more difficult to secure, and square footage growth becomes a comparatively less substantial component of growth.

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 foreign markets, due to the smaller base in those markets, and we expect that to continue.

The membership format is an integral part of our business and profitability.

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.

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 may be adversely impacted by memberships in newer international markets and a higher penetration of memberships sold online, including digital promotions, which typically renew at a lower rate.

Our worldwide renewal rate is adversely impacted by membership growth in newer 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.

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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 model is generally the same across our U.S., Canadian, and Other International operating segments (see Note 9 to the consolidated financial statements included in Part I, Item 1, of this Report).

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 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-commerce or business delivery.

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Our fiscal year ends on the Sunday closest to August 31.

References to the third quarter of 2025 and 2024 relate to the 12-week fiscal quarters ended May 11, 2025, and May 12, 2024.

References to the first thirty-six weeks of 2025 and 2024 relate to the 36 weeks ended May 11, 2025, and May 12, 2024.

References to the first quarter of 2026 and 2025 relate to the 12-week fiscal quarters ended November 23, 2025, and November 24, 2024.

Certain percentages presented are calculated using actual results prior to rounding.

Highlights for the third quarter of 2025 versus 2024 include:

• Net sales increased 8% to $61,965, driven by an increase in comparable sales and sales at 29 net new warehouses opened since the end of the third quarter of 2024;

• Membership fee revenue increased 10% to $1,240, primarily driven by new member sign-ups and membership fee increases;

• Gross margin percentage increased 41 basis points;

29 basis points excluding the impact of gasoline price deflation on net sales;

• SG&A expenses as a percentage of net sales increased 20 basis points;

11 basis points excluding the impact of gasoline price deflation;

• Net income increased to $1,903, $4.28 per diluted share, compared to $1,681, $3.78 per diluted share in 2024.

Foreign-exchange rates had a negative impact on net income of $35, $0.08 per diluted share;

• A quarterly cash dividend of $1.30 per share, a 12% increase, was declared on April 16, 2025, and paid on May 16, 2025.

Highlights for the first quarter of 2026 versus 2025 include:

• We opened eight new warehouses, including one relocation, for a total of seven net new warehouses:

four in the U.S., two in our Canadian segment, and one in our Other International segment, compared to seven new warehouses, including one relocation;

• Net sales increased 8% to $65,978, driven by an increase in comparable sales and sales at 25 net new warehouses opened since the end of the first quarter of 2025;

• Membership fee revenue increased 14% to $1,329, primarily driven by membership fee increases and new member sign-ups;

• Gross margin as a percentage of net sales and excluding the impact of gasoline price deflation increased four basis points;

• SG&A expenses as a percentage of net sales and excluding the impact of gasoline price deflation increased one basis point;

• The effective tax rate was 22.5%, compared to 22.0%;

• Net income increased to $2,001, $4.50 per diluted share, compared to $1,798, $4.04 per diluted share;

• A quarterly cash dividend of $1.30 per share was declared on October 15, 2025, and paid on November 14, 2025.

RESULTS OF OPERATIONS

12 Weeks Ended 36 Weeks Ended

12 Weeks Ended

2025 November 24,

$ 65,978 $ 60,985

Increases in net sales:

9 % 9 % 9 % 6 %

Canada 8 % 6 %

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Increases in comparable sales:

7 % 6 % 7 % 4 %

Canada 7 % 6 %

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Total Company 6 % 5 %

E-commerce 15 % 21 % 16 % 15 %

Increases in comparable sales excluding the impact of changes in foreign-currency and gasoline prices:

8 % 6 % 8 % 4 %

Canada 9 % 7 %

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Total Company 6 % 7 %

E-commerce 16 % 21 % 17 % 15 %

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(1) Comparable sales for the third quarter and first thirty-six weeks of 2024 were calculated using comparable retail weeks.

Net sales increased $4,573 or 8%, and $14,040 or 8% during the third quarter and first thirty-six weeks of 2025.

The improvement was primarily attributable to an increase in comparable sales of $3,266 or 6% and $10,309 or 6% during the third quarter and first thirty-six weeks of 2025.

The remaining increase was driven by sales at the 29 net new warehouses opened since the end of the third quarter of 2024.

Sales increased $4,543 or 10% and $13,662 or 10% in core merchandise categories during the third quarter and first thirty-six weeks of 2025, increasing in all categories.

Sales in warehouse ancillary and other businesses were up slightly during the third quarter of 2025, and increased $378 or 1% during the first thirty-six weeks of 2025.

Lower gasoline prices negatively impacted net sales by $642, or 112 basis points, and $1,606, or 94 basis points, during the third quarter and first thirty-six weeks of 2025.

The average price per gallon decreased 9% and 8% during the third quarter and first thirty-six weeks of 2025.

The volume of gasoline sold increased approximately 1%, positively impacting net sales by $59, or ten basis points and $191, or 11 basis points during the third quarter and first thirty-six weeks of 2025.

Net sales increased $4,993 or 8% during the first quarter of 2026.

The improvement was primarily attributable to an increase in comparable sales of $3,879 or 6%.

Comparable sales were positively impacted by increases of approximately 3% in shopping frequency and average ticket.

The remaining increase was driven by sales at the 25 net new warehouses opened since the end of the first quarter of 2025.

Digitally-enabled comparable sales increased 21% with and without the impact of changes in foreign-currencies.

Sales increased $3,948 or 8% in core merchandise categories, increasing in all categories.

Sales increased $1,045 or 9% in warehouse ancillary and other businesses.

The volume of gasoline sold increased approximately 4%, positively impacting net sales by $234, or 38 basis points.

Lower gasoline prices negatively impacted net sales by five basis points.

Changes in foreign-currencies relative to the U.S.

dollar attributable to our Other International and Canadian operations negatively impacted net sales by approximately $699, or 122 basis points, and approximately $2,107, or 123 basis points, during the third quarter and first thirty-six weeks of 2025.

Comparable Sales

Comparable sales increased 6% in the third quarter and first thirty-six weeks of 2025 and were positively impacted by increased shopping frequency of 5% and an average ticket increase of less than 1%.

dollar attributable to our Other International operations, partially offset by our Canadian operations, positively impacted net sales by six basis points.

Membership Fees

12 Weeks Ended 36 Weeks Ended

12 Weeks Ended

2025 November 24,

Membership fees $ 1,329 $ 1,166

Membership fees increase 10 % 8 % 9 % 8 %

Total paid members (000s) 81,400 77,400

Total cardholders (000s) 145,900 138,800

Membership fee revenue increased 10% and 9% in the third quarter and first thirty-six weeks of 2025, primarily driven by new member sign-ups and membership fee increases.

At the end of the third quarter of 2025, our renewal rates were 92.7% in the U.S.

Membership fee revenue increased 14%, driven by membership fee increases and new member sign-ups.

At the end of the first quarter of 2026, our renewal rates were 92.2% in the U.S.

and Canada and 89.7% worldwide.

Our renewal rates were negatively impacted by sign-ups from a digital promotion in the fall of 2023 entering the renewal calculation this quarter and higher penetration of online sign-ups in recent years.

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.

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.

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We account for membership fee revenue on a deferred basis, recognized ratably over the one-year membership period.

The fee increase contributed approximately 4% of membership fee revenue during the third quarter of 2025.

12 Weeks Ended 36 Weeks Ended

The fee income increase accounted for slightly less than half of membership income growth during the first quarter of 2026.

12 Weeks Ended

2025 November 24,

Net sales $ 65,978 $ 60,985

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Quarterly Results

Gross margin percentage increased 41 basis points.

Excluding the impact of gasoline price deflation on net sales, gross margin percentage increased to 11.13%, 29 basis points.

This increase was positively impacted by 27 basis points in our core merchandise categories, primarily in fresh foods and foods and sundries and 27 basis points in warehouse ancillary and other businesses, primarily gasoline and e-commerce.

Gross margin was negatively impacted by 23 basis points due to a LIFO charge for higher merchandise costs and two basis points for a one-time expense for increased employee vacation .

Changes in foreign currencies relative to the U.S.

dollar negatively impacted gross margin by approximately $80, compared to the third quarter of 2024, attributable to our Other International and Canadian operations.

Gross margin as a percentage of net sales increased by four basis points, and increased by the same amount when excluding the impact of gasoline price deflation.

This increase was positively impacted by seven basis points in our warehouse ancillary and other businesses, primarily due to pharmacy and hearing aids.

Gross margin percentage was negatively impacted by three basis points due to a smaller LIFO benefit in the first quarter of 2026 compared to the first quarter of 2025.

Margin in our core merchandise categories was flat.

The gross margin in core merchandise categories, when expressed as a percentage of core merchandise sales (rather than total net sales), increased 30 basis points.

The increase was across all categories, most significantly fresh foods which benefited from sales leverage, higher productivity, and lower prices for certain commodities.

The increase was across all categories.

This measure eliminates the impact of changes in sales penetration and 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), increased in our U.S.

segment, which performed similarly to the consolidated results above.

Our Canadian segment gross margin percentage increased, primarily due to increases in core merchandise categories and warehouse ancillary and other businesses.

Gross margin increased in our Other International segment, primarily due to increases in warehouse ancillary and other businesses.

Year-to-date Results

Gross margin percentage increased 23 basis points.

Excluding the impact of gasoline price deflation on net sales, gross margin percentage increased to 11.03%, 14 basis points.

This increase was positively impacted by 18 basis points in our core merchandise categories, primarily due to increases in our co-branded credit card program and fresh foods, and four basis points in warehouse ancillary and other businesses, primarily e-commerce, partially offset by gasoline.

Gross margin percentage was negatively impacted by eight basis points due to a LIFO charge.

Changes in foreign currencies relative to the U.S.

dollar negatively impacted gross margin by approximately $238, compared to the first thirty-six weeks of 2024, 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 ten basis points.

The increase was primarily due to fresh foods and foods and sundries, partially offset by non-foods.

Segment gross margin percentage increased in all segments.

segment performed similarly to the consolidated results above.

Our Canadian and Other International segments gross margin increased, primarily due to increases in core merchandise categories.

segment due to a smaller LIFO benefit and core merchandise categories, partially offset by warehouse ancillary and other businesses.

Our Canadian segment gross margin percentage increased, primarily due to increases in warehouse ancillary and other businesses.

Gross margin increased in our Other International segment, primarily due to increases in warehouse ancillary and other businesses and core merchandise categories.

Selling, General and Administrative Expenses

12 Weeks Ended 36 Weeks Ended

12 Weeks Ended

2025 November 24,

SG&A expenses $ 6,334 $ 5,846

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Quarterly Results

SG&A expenses as a percentage of net sales increased 20 basis points.

SG&A expenses as a percentage of net sales excluding the impact of gasoline price deflation was 9.07%, an increase of 11 basis points.

The comparison to last year was negatively impacted by five basis points due to warehouse operations and other businesses, which included our investment in employee wages.

A one-time expense for increased employee vacation negatively impacted SG&A by five basis points.

Preopening and central operating costs were both higher by one basis point.

Stock compensation decreased by one basis point.

Year-to-date Results

SG&A expenses as a percentage of net sales increased nine basis points.

SG&A expenses as a percentage of net sales excluding the impact of gasoline price deflation was 9.19%, an increase of one basis point.

Changes in foreign currencies relative to the U.S.

dollar decreased SG&A expenses by approximately $142 compared to the first thirty-six weeks of 2024, attributable to our Other International and Canadian operations.

SG&A expenses as a percentage of net sales increased by one basis point, and increased by the same amount when excluding the impact of gasoline price deflation.

Compared to last year, results were negatively impacted by four basis points attributable to a charge related to a tax assessment for prior

years, and one basis point from warehouse operations and other businesses.

Preopening costs were also higher by one basis point.

Central operating costs and stock compensation had favorable impacts of three and two basis points, respectively.

SG&A expenses as a percentage of net sales were higher in our U.S.

segment and lower in our Canadian and Other International segments.

Interest Expense

12 Weeks Ended 36 Weeks Ended

12 Weeks Ended

2025 November 24,

Interest expense $ 35 $ 37

Interest expense is primarily related to Senior Notes and financing leases.

The decrease in interest expense for the third quarter and first thirty-six weeks of 2025 was primarily due to repayment of the 2.750% Senior Notes in May 2024.

Interest Income and Other, Net

12 Weeks Ended 36 Weeks Ended

12 Weeks Ended

2025 November 24,

Interest income $ 122 $ 96

Foreign-currency transaction gains (losses), net (17) 20 49 54

Foreign-currency transaction gains, net 25 43

Other, net 8 8

Interest income and other, net $ 155 $ 147

The decrease in interest income in the first thirty-six weeks of 2025 was due to lower interest rates, partially offset by higher cash balances.

Foreign-currency transaction gains (losses), net, include mark-to-market adjustments for forward foreign-exchange contracts and revaluation or settlement of monetary assets and liabilities by our Canadian and Other International operations.

See Derivatives and Foreign Currency sections in Item 8, Note 1 of our Annual Report on Form 10-K, for the fiscal year ended September 1, 2024.

The increase in interest income in the first quarter of 2026 was due to higher cash balances, partially offset by lower interest rates.

Foreign-currency transaction gains, net, include mark-to-market adjustments for forward foreign-exchange contracts and revaluation or settlement of monetary assets and liabilities by our Canadian and Other International operations.

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.

Provision for Income Taxes

12 Weeks Ended 36 Weeks Ended

12 Weeks Ended

2025 November 24,

Provision for income taxes $ 582 $ 508

Effective tax rate 22.5 % 22.0 %

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

The effective tax rate for the first thirty-six weeks of 2024 was favorably impacted by discrete tax benefits of $94 related to the portion of the special cash dividend payable through our 401(k) plan and $44 related to stock compensation.

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

LIQUIDITY AND CAPITAL RESOURCES

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12 Weeks Ended

2025 November 24,

Net cash provided by operating activities $ 4,688 $ 3,260

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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 $14,850 and $11,144 at

May 11, 2025, and September 1, 2024.

Of these balances, unsettled credit and debit card receivables represented approximately $2,587 and $2,519 at May 11, 2025, and September 1, 2024.

Cash and cash equivalents and short-term investments were $17,183 and $15,284 at November 23, 2025, and August 31, 2025.

Of these balances, unsettled credit and debit card receivables

represented approximately $3,095 and $2,670 at November 23, 2025, and August 31, 2025.

These receivables generally settle within four days.

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Construction and land-purchase obligations consist of contracts primarily related to the development and opening of new and relocated warehouses, the majority of which (other than leases) are due in the next 12 months.

We believe that our cash and investment position and operating cash flow, with capacity under existing and available credit agreements, will be sufficient to meet our liquidity and capital requirements for the foreseeable future and that our U.S.

We believe that our cash and investment positions and operating cash flow, with capacity under existing and available credit agreements, will be sufficient to meet our liquidity and capital requirements for the foreseeable future and that our U.S.

current and projected asset position is sufficient to meet our U.S.

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Cash Flows from Operating Activities

Net cash provided by operating activities totaled $9,468 in the first thirty-six weeks of 2025, compared to $8,381 in the first thirty-six weeks of 2024.

Net cash provided by operating activities totaled $4,688 in the first quarter of 2026, compared to $3,260 in the first quarter of 2025.

Our cash flow provided by operations is primarily fr om net sales and membership fees.

Cash flow used in operations generally consists of payments to mercha ndise suppliers, warehouse operating costs, including wages and employee benefits, utilities, credit and debit card processing fees, and operating leases.

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.

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Cash Flows from Investing Activities

Net cash used in investing activities totaled $3,343 in the first thirty-six weeks of 2025, compared to $2,706 in the first thirty-six weeks of 2024, and is primarily related to capital expenditures.

Net cash used in investing activities totaled $1,398 in the first quarter of 2026, compared to $985 in the first quarter of 2025, and is primarily related to capital expenditures.

Net cash from investing activities also includes purchases and maturities of short-term investments.

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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 thirty-six weeks of 2025, we spent $3,532 on capital expenditures, and it is our current intention to spend slightly over $5,000 during fiscal 2025.

In the first quarter of 2026, we spent $1,526 on capital expenditures, and it is our current intention to spend approximately $6,500 during fiscal 2026.

These expenditures are expected to be financed with cash from operations, cash and cash equivalents, and short-term investments.

We opened 17 new warehouses, includ ing two relocations, in the first thirty-six weeks of 2025 and plan to open ten additional new warehouses, including one relocation, in the remainder of fiscal 2025.

We opened eight new warehouses, includ ing one relocation, in the first quarter of 2026, and plan to open 25 additional new warehouses, including four relocations, 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.

Cash Flows from Financing Activities

Net cash used in financing activities totaled $2,182 in the first thirty-six weeks of 2025, compared to $8,948 in the first thirty-six weeks of 2024.

Cash flow used in financing activities during the first thirty-six weeks of 2025 was primarily related to the payment of dividends, repayments of short-term borrowings, repurchases of common stock, and withholding taxes on stock-based awards.

Cash flow provided by financing activities included proceeds from short-term borrowings .

In the first thirty-six weeks of 2024, cash flow used in financing was primarily due to the payment of a special dividend.

A quarterly cash dividend of $1.30 per share was declared on April 16, 2025, and paid on May 16, 2025.

Net cash used in financing activities totaled $1,167 in the first quarter of 2026, compared to $1,193 in the first quarter of 2025.

Cash flow used in financing activities during the first quarter of 2026 was primarily related to the payment of dividends, withholding taxes on stock-based awards, and repurchases of common stock.

A quarterly cash dividend of $1.30 per share was declared on October 15, 2025, and paid on November 14, 2025.

Share Repurchase Program

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 thirty-six weeks of 2025 and 2024, we repurchased 658,000 and 749,000 shares of common stock, at an average price per share of $946.64 and $646.07, totaling approximately $623 and $484.

During the first quarter of 2026 and 2025, we repurchased 225,000 and 230,000 shares of common stock, at an average price per share of $932.02 and $899.23, totaling approximately $210 and $206.

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.

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Repurchased shares are retired, in accordance with the Washington Business Corporation Act.

The remaining amount available to be purchased under our approved plan was $2,242 at the end of the third quarter.

The remaining amount available to be purchased under our approved plan was $1,752 at the end of the first quarter.

Bank Credit Facilities and Commercial Paper Programs

We maintain bank credit facilities for working capital and general corporate purposes.

At May 11, 2025, we had borrowing capacity under these facilities of $1,176.

At November 23, 2025, we had borrowing capacity under these facilities of $1,320.

Our international operations maintain $821 of this capacity under bank credit facilities, of which $188 is guaranteed by the Company.

Short-term borrowings outstanding under the bank credit facilities, which are included in other current liabilities on the consolidated balance sheets, were immaterial at the end of the third quarter of 2025 and at the end of 2024.

Short-term borrowings outstanding under the bank credit facilities, which are included in other current liabilities on the condensed consolidated balance sheets, were immaterial at the end of the first quarter of 2026 and at the end of 2025.

We have letter of credit facilities, for commercial and standby letters of credit, totaling $227.

The outstanding commitments under these facilities at the end of the third quarter of 2025 totaled $205, most of which were standby letters of credit that do not expire or have expiration dates within one year.

The outstanding commitments under these facilities at the end of the first quarter of 2026 totaled $193, 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.

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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 September 1, 2024.

There have been no material changes to the critical accounting estimates previously disclosed in that Report.

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Our direct exposure to financial market risk results from fluctuations in foreign-currency exchange rates and interest rates.

There have been no material changes to our market risks as disclosed in our Annual Report on Form 10-K, for the fiscal year ended September 1, 2024.

There have been no material changes to our market risks as disclosed in our Annual Report on Form 10-K, for the fiscal year ended August 31, 2025.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis