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 5-week retail month of December, which started on Monday, November 30 and ended Sunday, January 3. This period is compared to the 5 weeks that began on Monday, December 2, and ended on Sunday, January 5, 2020. 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 December came in at $19.14 billion, an increase of 12.3% from $17.04 billion last year. Comparable sales were as follows. On a reported basis, in the U.S., the 5 weeks was at 9.6%; 18 weeks, 12.2%. For Canada, the 5 weeks was at 8.0%; 18 weeks, 13.7%. Other International, the 5 weeks was at 19.4%; 18 weeks, 18.9%. Total company, the 5 weeks was at 10.7%; 18 weeks, 13.3%. And for e-commerce, the 5 weeks was at 62.5%; 18 weeks, 75.2%. Comparable sales, excluding impacts from changes in gasoline prices and foreign exchange were as follows. In the U.S., the 5 weeks was at 11.0%; 18 weeks, 14.3%. And in Canada, the 5 weeks was at 5.7%; 18 weeks, 13.3%. Other International, the 5 weeks was at 15.8%; 18 weeks, 16.9%. Total company, the 5 weeks was at 10.9%; 18 weeks, 14.5%. For e-commerce, the 5 weeks was at 61.6%; and 18 weeks was at 74.8%. Our comp traffic or frequency for December was down 0.6% worldwide. Traffic was negative in Canada, Mexico and the U.K. related to the tougher restrictions due to COVID spikes, and we were up 1.3% in the U.S. Worldwide, the average transaction was up 11.4%, which included a negative impact of 120 basis points from gasoline deflation and 100 basis points of benefit from FX. Foreign currencies year-over-year relative to the U.S. dollar impacted December comp sales as follows: Canada, positively by approximately 290 basis points; Other International, positively by approximately 440 basis points; and total company, positively by approximately 100 basis points. Gasoline price deflation negatively impacted total reported comp sales by approximately 120 basis points. The average selling price was 14% lower year-over-year at $2.37 per gallon this year compared to $2.77 last year. Total gallons sold also continued to be lower year-over-year, lower by approximately 10% versus last year. In terms of regional and merchandising categories, the general highlights were as follows: U.S. regions where the strongest sales increases were Southeast Texas and Northeast; Other International, in local currencies, we saw the strongest results in Korea, U.K. and Japan. Moving into merchandise highlights, the following comparable sales results by category for the month exclude the positive impact of foreign exchange. Food and sundries were positive low double digits. Departments with the strongest results were frozen foods, cooler, sundries and liquor. Fresh foods were up high teens. Better-performing departments included meat and produce. Hardlines were positive high teens, better performing departments including sporting goods, majors, including consumer electronics, garden and hardware. Softlines were positive mid-teens. Home furnishings, housewares and small appliances were strong in the month. Ancillary business sales were down low double digits, primarily due to lower year-over-year sales in gasoline, food court, photo and hearing aid. Looking ahead, the January reporting period will include the 4 weeks beginning January 4 and ending January 31 compared to the 4 weeks beginning January 6 and ending February 2, 2020. January sales will be announced Wednesday, February 3, at 1:15 p.m. Pacific Time. If you have any questions regarding our December 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, January 13. Thanks for calling. Have a great day.