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 July, which started on Monday, July 6 and ended on Sunday, August 2. This period is compared to the 4 weeks that began on Monday, July 8 and ended on Sunday, August 4, 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 and sales release 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 July came in at $13.04 billion, an increase of 14.1% from the $11.43 billion last year. Comparable sales were as follows: on a reported basis, the U.S. for the 4 weeks was at 13.3%; 48 weeks, 7.7%. Canada, the 4 weeks was at 10.4%; 48 weeks, 4.2%. Other International, the 4 weeks was at 15.9%; 48 weeks, 8.3%. Total company, the 4 weeks was at 13.2%; 48 weeks, 7.3%. And e-commerce for the 4 weeks was at 75.3%; and for the 48 weeks, 45.4%. Comparable sales, excluding impacts from changing gasoline prices and foreign exchange were as follows: in the U.S., for the 4 weeks was at 15.7%; 48 weeks, 8.8%. Canada, the 4 weeks was at 14.8%; 48 weeks, 6.8%. Other International, the 4 weeks was at 18.2%; and the 48 weeks was at 10.8%. And total company in the 4-week was at 15.8%; 48 weeks, 8.8%. So e-commerce for the 4 weeks was 76.1%; the 48 weeks was 46.1%. Our comp traffic or frequency for July was up 1.6% worldwide and 4.5% in the U.S., down 8.1% in Canada and Other International traffic was flat for the month. Worldwide, the average transaction was up 11.4%, which includes the negative impacts from foreign exchange and gasoline deflation. In terms of regional and merchandising categories, the general highlights were as follows: U.S. regions with the strongest results were the Southeast, Northeast and Texas. Other International in local currencies, we saw the strongest results in Japan, U.K. and Mexico. Foreign currencies year-over-year relative to the U.S. dollar impacted July comp sales as follows: Canada, negatively by approximately 320 basis points; Other International, negatively by approximately 140 basis points; and total company, negatively by approximately 60 basis points. Moving to merchandise highlights, the following comparable sales results by category for the month exclude the impact of foreign exchange. Foods and sundries were positive low-20s. Departments with the strongest results were frozen food, liquor and food. Fresh foods were up mid-20s. Better-performing departments included meat and produce. Hardlines were positive mid-20s. Better-performing departments included major appliances, which include consumer electronics, garden, automotive, hardware and health and beauty. Softlines were positive low teens. Home furnishings, women's apparel and small appliances were strong in the month. Ancillary businesses were down mid-teens. This was primarily as a result of lower gasoline, photo and food court sales. Optical and hearing aids were lower single digits year-over-year. Gasoline price deflation negatively impacted total reported comp sales by a little less than 2%. The average selling price was lower year-over-year at $2.40 per gallon compared to $2.93. Looking ahead, the August reporting period will include the 4 weeks beginning August 3 and ending August 30 compared to the 4 weeks beginning August 5 and ending September 1, 2019. August sales will be announced Wednesday, September 2 at 1:15 p.m. Pacific Time. Costco currently operates 790 warehouses, including 548 in the United States and Puerto Rico, 100 in Canada, 39 in Mexico, 29 in the United Kingdom, 27 in Japan, 16 in Korea, 13 in Taiwan, 12 in Australia, 3 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, Japan and Australia. If you have any questions regarding our July 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 5:00 p.m. Pacific Time, Wednesday, August 12. Thanks for calling, and have a great day.