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 4, and ended on Sunday, January 31. This period is compared to the 4 weeks began on Monday, January 6, and ended on Sunday, February 2, 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 January came in at $13.64 billion, an increase of 17.9% from $11.57 billion last year. Comparable sales were as follows: on a reported basis in the U.S., the 4 weeks was at 15.4%; for the 22 weeks, 12.8%. In Canada, the 4 weeks was at 15.2%; 22 weeks, 13.9%. Other international, the 4 weeks was at 19.0%; 22 weeks was at 19.0%. Total company, the 4 weeks was at 15.9%; 22 weeks, 13.8%. And e-commerce for the 4 weeks was at 106.7%; and for 22 weeks, 79.5%. Comparable sales, excluding the impacts from changes in gasoline prices and foreign exchange were as follows: in the U.S., the 4 weeks was at 16.4%; 22 weeks, 14.7%. In Canada, the 4 weeks was at 12.2%; 22 weeks, 13.1%. Other international, the 4 weeks was at 15.3%; 22 weeks, 16.7%. And total company, the 4 weeks was at 15.7%; 22 weeks, 14.7%. And e-commerce, the 4 weeks was at 105.4% and the 22 weeks was at 78.9%. Our comp traffic or frequency for January was up 2.6% worldwide and up 5.1% in the U.S. Worldwide, the average transaction was up 12.9%, which included the negative impact of 90 basis points from gasoline deflation and a positive 110 basis points of benefit from FX. Foreign currencies year-over-year relative to the U.S. dollar impacted January comp sales as follows: Canada positively by approximately 325 basis points; other international positively by approximately 470 basis points and total company positively by approximately 110 basis points. Gasoline price deflation negatively impacted total reported comp sales by approximately 90 basis points. The average selling price was 9% lower year-over-year at $2.51 per gallon this year compared to $2.75 last year. Total gallons sold also continued to be lower year-over-year, down approximately 10%. In terms of regional and merchandising categories, the general highlights were as follows: U.S. regions with the strongest sales increases were Texas, Midwest and Southeast; other international and local currencies, we saw the strongest results in Japan, Mexico and Korea. Moving to the merchandise highlights, the following comparable sales results by category for the month exclude the positive impact of foreign exchange. Food and sundries were positive high teens, departments with the strongest results were frozen foods, liquor, cooler and foods. Fresh foods were up low 20s, better-performing departments included meat and produce. Hardlines were positive 30%, better-performing departments included seasonal, sporting goods, garden and majors, which includes consumer electronics. Softlines were positive 20%. Jewelry, domestics and small appliances were strong in the month. Ancillary business sales were down high single digits, primarily due to lower year-over-year sales in food court, hearing aids and gasoline. Looking ahead, the February reporting period will include 4 weeks beginning February 1 and ending February 28 compared to 4 weeks beginning February 3 and ending March 1, 2020. Remember that February sales last year benefited from an uptick in consumer demand in the 4th week of the reporting period attributed to the beginning of stockpiling related to COVID-19. February sales will be announced in conjunction with our Q2 quarterly results, Thursday, March 4, at 1:15 p.m. Pacific Time. A discussion on both Q2 earnings and February sales will occur at 2:00 p.m. Pacific Time on the 4th. If you have any questions regarding our January 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 5:00 p.m. Pacific Time, Wednesday, February 10. Thanks for calling, and have a great day.