Will Costco report healthcare costs exceeding sales growth for 3+ consecutive quarters by Q4 FY2026?

Resolution date is 2026-06-15. Costco's fiscal Q3 FY2026 ends ~May 11, 2026, so the only quarterly observation between now and resolution is Q3. The streak resolution requires 3+ CONSECUTIVE quarters of healthcare costs exceeding sales growth by the resolution date. With Q2 having broken the streak, the count effectively reset. To hit YES by 2026-06-15 would require an interpretation where healthcare resumes outpacing sales in Q3 AND the resolution is read against the Q1+Q3+(somehow Q4 not yet reported). Reading the criteria strictly: 3 consecutive quarters by Q4 FY2026 — but resolution date is 2026-06-15, before Q4 FY2026 is filed. The market resolves based on what is known by 2026-06-15: Q1 (yes), Q2 (no), Q3 (TBD). At most we have a single quarter observed, breaking the consecutive run. The probability of YES therefore approaches zero unless resolution rules are reinterpreted. 10% reflects: (a) interpretive ambiguity about the resolution date vs. resolution window, and (b) tail risk from a 10-Q footnote-level disclosure I haven't seen.

Going slightly below the prior March 5 batch median of 0.18. Two factors warrant the move: (1) the 10-Q filing on Mar 11 quantified operations SG&A ex-gas at 9.14% (+8bps YoY) but did not call out healthcare as a line-item headwind — a meaningful absence given Q1 had dedicated commentary; (2) the consecutive-quarter resolution structure means even if Q3 healthcare reaccelerates, we'd have a discontinuous Q1-yes/Q2-no/Q3-yes pattern that doesn't satisfy '3+ consecutive.' The 18% prior batch retained residual probability for ambiguity in resolution mechanics; with the 10-Q now public and lacking healthcare-specific framing, that residual is lower.

Aligning with the new median in the lower 8-12% range. The Q2 break is now confirmed by both the earnings call AND the 10-Q. The path to YES requires either (a) a reinterpretation of 'consecutive' that allows Q1 alone to count toward future consecutive runs, or (b) the resolution panel accepting Q1 + Q3 + (a hypothetical Q4 not-yet-reported by 2026-06-15) — which doesn't fit. The market is effectively pre-resolved NO, with residual probability solely for adjudication ambiguity.

Slightly higher than other runs to reflect a residual concern: management's silence on healthcare in Q2 is consistent with the headwind moderating, but the underlying BLS healthcare inflation index continues running at 7-9% annually. Costco's Q2 sales grew 9.1% — barely above healthcare inflation. If Q3 sales decelerate to ~7-8% (plausible given normalizing inflation environment), healthcare could technically tick above sales growth again. That alone wouldn't trigger YES under consecutive criteria, but it would push the bear case back into play. The 0.12 captures this measurement-volatility risk plus general disclosure ambiguity.

Q2 broke the streak. 10-Q confirmed. Only Q3 remains before June 15 resolution. Cannot get to 3 consecutive from a single Q3 observation. Probability ~10% for residual interpretation risk.