Costco Wholesale Corporation (COST) Earnings Call Transcript & Summary

Hello, and thank you for calling Costco Wholesale Corporation. I'm David Sherwood, AVP of Finance and Investor Relations, and I will review our sales results for the 4-week retail month of January, which started on Monday, January 6 and ended on Sunday, February 2. This period is compared to the 4 weeks beginning on Monday, January 7 and ended on Sunday, February 3, 2019. This call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that may cause actual events, results and/or performance to differ materially from those indicated by such statements. The risks and uncertainties include, but are not limited to, those outlined in today's call as well as other risks identified from time to time in the company's public statements and reports filed with the SEC. Forward-looking statements speak only as of the date they are made and the company does not undertake to update them, except as required by law. As reported in our release, net sales for the 4-week month of January came in at $11.57 billion, an increase of 8.0% from $10.71 billion last year. Comparable sales were as follows: On a reported basis, the U.S. for the 4 weeks was at 6.9%; 22 weeks, 6.7%. In Canada, the 4 weeks is at 7.1%; 22 weeks, 5.5%. Other International, 4 weeks was a 4.5%; 22 weeks, 5.0%. Total company, the 4 weeks was a 6.6%; 22 weeks, 6.3%. E-commerce, 4 weeks, 17.6%; and 22 weeks, 17.2%. Comparable sales, excluding the impacts from changes in gasoline prices and foreign exchange, were as follows: in the U.S., the 4 weeks was a 5.6%; 22 weeks, 6.3%. Canada, 4 weeks was a 4.8%; 22 weeks, 5.6%. Other International, the 4 weeks was a 4.5%; 22 weeks, 5.3%. Total company, 4 weeks is a 5.3%; 22 weeks, 6.1%. And E-commerce is a 17.2% for the 4 weeks; and for the 22 weeks, 17.1%. In terms of regional and merchandising categories, the general highlights were as follows: The U.S. regions with the strongest results were the Midwest, Texas and San Diego regions. Other International, in local currencies, we saw the strongest results in Japan, Mexico and Australia. Foreign currencies year-over-year relative to the U.S. dollar impacted January comp sales as follows: Canada positively by approximately 130 basis points; Other International negatively by approximately 30 basis points; and total company positively by approximately 10 basis points. The negative impact of cannibalization was approximately 20 basis points in the U.S., 150 basis points in other international and 30 basis points for the total company. Moving to the merchandise highlights. The following comparable sales results by category for the month exclude the impact of foreign exchange. Food and sundries were positive mid-single digits. Departments with the strongest results were sundries, deli and candy. Our lines were positive low to mid-single digits. Better-performing departments were automotive, health and beauty aids and garden. Softlines were up low to mid-single digits. Better-performing departments included jewelry, special order kiosks and housewares. And finally, fresh foods were up mid-single digits. Better-performing departments included service deli and produce. Within the ancillary businesses, gas, hearing aids and pharmacy had the best comp sales increases. Gasoline price inflation positively impacted total reported comp sales by approximately 120 basis points. The average selling price was higher year-over-year at $2.74 per gallon this year compared to $2.47 a year earlier. Our comp traffic or frequency for January was up 4.9% worldwide and 5.0% in the U.S. The average transaction was up 1.6% for the month which includes the benefits from foreign exchange and gasoline inflation. Looking ahead, the February reporting period will include the 4 weeks beginning February 3 and ending March 1 compared to the 4 weeks beginning February 4 and ending March 3, 2019. February sales and second quarter earnings will be announced Thursday, March 5 at 1:15 p.m. Pacific Time. A conference call will be held on March 5 at 2:00 p.m. Pacific Time to discuss the results and can be accessed live via our Investor Relations website. Costco currently operates 785 warehouses including 546 in the United States and Puerto Rico; 100 in Canada; 39 in Mexico; 29 in the United Kingdom; 26 in Japan; 16 in Korea; 13 in Taiwan; 11 in Australia; 2 in Spain; and 1 each in Iceland, France and China. Costco also operates e-commerce websites in the U.S., Canada, U.K., Mexico, Korea, Taiwan and Japan. If you have any questions regarding our January sales results or any other Investor Relations questions, please do not hesitate to call Bob Nelson at (425) 313-8255, Josh Dahmen at (425) 313-8254 or myself, David Sherwood, at (425) 313-8239. This recording will be available until 5 p.m. Pacific Time, Wednesday, February 12. Thanks for calling, and have a great day.