Costco Wholesale Corporation (COST) Earnings Call Transcript & Summary

Hello, and thank you for calling Costco Wholesale Corporation. And I'm David Sherwood, AVP of Finance and Investor Relations, and I will review our sales results for the 4-week retail month of October, which started on Monday, October 5; and ended on Sunday, November 1. This period is compared to the 4 weeks that began on Monday, October 7; and ended on Sunday, November 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 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 October came in at $13.82 billion, an increase of 15.9% from $11.92 billion last year. Comparable sales were as follows: On a reported basis, in the U.S., the 4 weeks was at 13.6%; for the 9 weeks, it's 14.1%. Canada for the 4 weeks is at 13.9%; for the 9 weeks, 15.9%. Other international for the 4 weeks, 19.6%; 9 weeks, 19.0%. Total company, the 4 weeks is at 14.4%; 9 weeks, 15.0%. And e-commerce for the 4 weeks was at 91.1%; and for the 9 weeks, 90.6%. Comparable sales, excluding the impacts from changes in gasoline prices and foreign exchange were as follows: In the U.S., the 4 weeks is at 16.4%; 9 weeks, 16.6%. In Canada, the 4 weeks was at 15.2%; 9 weeks, 16.7%. Other international, the 4 weeks is at 19.0%; 9 weeks, 18.2%. Total company in the 4 weeks was at 16.5% and the 9 weeks is at 16.8%. E-commerce for the 4 weeks was at 91.0%; and for the 9 weeks, 90.5%. Our comp traffic or frequency for October was up 4.6% worldwide and 6.2% in the U.S. Worldwide, the average transaction was up 9.4%, which included a net negative impact of 210 basis points from gasoline deflation and FX. Foreign currencies year-over-year relative to the U.S. dollar impacted October comp sales as follows: Canada negatively by approximately 30 basis points; other international, positively by approximately 140 basis points; and total company, positively by approximately 15 basis points. Gasoline price deflation negatively impacted total reported comp sales by approximately 225 basis points. The average selling price was 21% lower year-over-year at $2.35 per gallon this year compared to $2.96 per gallon last year. Total gallons sold also continue to be lower year-over-year. In terms of regional and merchandising categories, the general highlights were as follows: U.S. regions with the strongest results were the Northeast, Southeast and Texas. Other international and local currencies, we saw the strongest results in Japan, Korea and U.K. Moving to merchandise highlights, the following comparable sales results by category for the month exclude the impact of foreign exchange. Food and sundries were positive low 20s. Departments with the strongest results were frozen foods, liquor and Foods. Fresh foods were up mid-20s. Better-performing departments included meat and produce. Hardlines were positive mid-20s. Better-performing departments included garden, major appliances, which includes consumer electronics and sporting goods. Softlines were positive mid-teens. Home furnishings, housewares and small appliances were strong in the month. Ancillary business sales were down mid-teens. This was primarily a result of lower gasoline, food court and photo sales. Optical was up slightly and hearing aids were flat. Looking ahead, the November reporting period will include the 4 weeks beginning November 2 and ending November 29 compared to the 4 weeks beginning November 4 and ending December 1, 2019. November sales will be announced Wednesday, December 2, at 1:15 p.m. Pacific Time. If you have any questions regarding our October sales results or any other Investor Relations questions, please 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, November 11. Thanks for calling. Have a great day. Thanks for calling, and have a great day.