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 March, which started on Monday, March 1 and ended on Sunday, April 4. This period is compared to the 5 weeks that began on Monday, March 2 and ended on Sunday, April 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 March came in at $18.21 billion, an increase of 17.6% from $15.49 billion last year. Comparable sales were as follows: on a reported basis, the U.S. for the 5 weeks, 13.9%; 31 weeks, 12.6%. In Canada, the 5 weeks was at 28.3%; 31 weeks, 17.0%. Other international, 5 weeks was at 16.4%; 31 weeks, 19.4%. Total company, the 5 weeks was at 16.0%. The 31 weeks was at 14.1%. And e-commerce for the 5 weeks was at 57.7% and the 31 weeks, 77.0%. Comparable sales, excluding impacts from changes in gasoline prices and foreign exchange were as follows: in the U.S., the 5 weeks was at 11.3%; 31 weeks, 13.7%. In Canada, the 5 weeks was at 13.0%; 31 weeks, 13.5%. Other international, the 5 weeks was at 7.7%; 31 weeks, 15.7%. Total company, the 5 weeks was at 11.1% and 31 weeks, 13.9%. E-commerce, the 5 weeks was at 54.5%, and the 31 weeks was at 75.9%. Our comp traffic or frequency for March was up 3.3% worldwide and up 3.0% in the U.S. This year's 5-week retail month of March had one fewer shopping day versus last year due to the calendar shift of Easter. This negatively impacted total and comparable sales as well as traffic by approximately 1.5% to 2%. Worldwide, the average transaction was up 12.3%, which included positive impacts of 220 basis points from gasoline inflation and 270 basis points from FX. Foreign currencies year-over-year relative to the U.S. dollar impacted March comp sales as follows: Canada, positively by approximately 1,275 basis points; other international, positively by approximately 840 basis points; and total company, positively by approximately 270 basis points. Gasoline price inflation positively impacted total reported comp sales by approximately 220 basis points. The average selling price was 25% higher year-over-year at $2.96 per gallon this year compared to $2.37 per gallon last year. Comp gasoline volume was up relative to last year and slightly up relative to 2019. In terms of regional and merchandising categories, the general highlights were as follows: U.S. regions with the strongest sales increases were the Southeast, Texas and Midwest. 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 positive impact of foreign exchange. The merchandise sales comparison also reflects significant impact from the onset of COVID a year ago. Food and sundries were negative high single digits. Fresh foods were up mid-single digits. Better-performing departments included service deli and bakery. Nonfoods were positive in the mid-50s. Better-performing departments included sporting goods, garden, toys and seasonal, jewelry, home furnishing and domestics. Ancillary businesses were up mid-30s. Gasoline, hearing aids and optical were the primary drivers. Looking ahead, the April reporting period will include the 4 weeks beginning April 5 and ending May 2 compared to the 4 weeks beginning April 6 and ending May 3, 2020. April will have one additional shopping day versus last year due to the calendar shift of Easter. April sales will be announced on Wednesday, May 5 at 1:15 p.m. Pacific Time. If you have any questions regarding our March 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, April 14. Thanks for calling. Have a great day.