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 April, which started on Monday, April 5, and ended on Sunday, May 2. This period is compared to the 4 weeks that began on Monday, April 6, and ended on Sunday, May 3, 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 April came in at $15.21 billion, an increase of 33.5% from $11.39 billion last year. Comparable sales were as follows: on a reported basis, in the U.S., the 4 weeks is at 30.4%, the 35 weeks, 14.5%; in Canada, the 4 weeks was 44.0%, 35 weeks, 19.7%; Other International, the 4 weeks was at 33.5%, 35 weeks, 20.8%; total company, the 4 weeks was at 32.5% and the 35 weeks, 16.1%; for e-commerce, the 4 weeks is at 20.5% and the 35 weeks was at 67.7%. Comparable sales, excluding impacts from changes in gasoline prices and foreign exchange were as follows: in the U.S., the 4 weeks was at 24.9%, 35 weeks, 15.0%; in Canada, the 4 weeks was at 23.8%, 35 weeks, 14.7%; Other International, the 4 weeks was at 20.3%, 35 weeks, 16.2%; total company, the 4 weeks was 24.2% and the 35 weeks was at 15.1%; e-commerce, the 4 weeks, 17.3% and the 35 weeks, 66.2%. Our comp traffic, or frequency for April, was up 34.0% worldwide and up 33.3% in the U.S. This year's 4-week April retail month had one additional shopping day versus last year due to the calendar shift of Easter. This positively impacted total and comparable sales as well as traffic by approximately 2.5%. Comparable sales for the 9 weeks of March and April combined to eliminate the Easter shift were as follows: in the U.S., the 9 weeks was at 20.9%, excluding gas and FX, 17.2%; in Canada, 9 weeks was at 35.0%, excluding gas and FX, 17.8%; Other International, the 9 weeks was at 23.5%, excluding gas and FX, 13.0%; and total company, the 9 weeks was at 23.0%, excluding gas and FX, 16.8%; e-commerce, the 9 weeks was a 37.8% and excluding gas and FX, 34.6%. Worldwide, the average transaction for April was down 1.1%, which included positive impacts of 480 basis points from gasoline inflation and 350 basis points from FX. Foreign currencies year-over-year, relative to the U.S. dollar, impacted April comp sales as follows: Canada positively by approximately 16%; other international, positively by approximately 11.5%; and total company, positively by approximately 3.5%. Gasoline price inflation positively impacted total reported comp sales by approximately 4.8%. The average selling price was 57% higher year-over-year at $3.02 per gallon this year compared to $1.92 last year. Comp gasoline volume was up significantly relative to last year. In terms of regional and merchandising categories, the general highlights were as follows: the U.S. regions with the strongest results were the Southeast, L.A. and Midwest. Other international and local currencies, we saw the strongest results in Mexico, Japan and U.K. 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 single digits. Tobacco, sundries and candy were the strongest departments. Fresh foods were up high single digits. Better-performing departments included service deli and bakery. Nonfoods were positive in the high 40s. Better-performing departments included jewelry, apparel and home furnishings. Ancillary business sales were up more than 100%. Gas, hearing aids and optical were all significant drivers. Looking ahead, the May reporting period will include the 4 weeks beginning May 3 and ending May 30, compared to the 4 weeks beginning May 4 and ending May 31, 2020. May will have one additional shopping day versus last year due to the calendar shift of Memorial Day. May sales will be announced on Wednesday, June 2 at 1:15 p.m. Pacific Time. Q3 earnings will be released at May 27 after market close, a week prior to May sales. A conference call to discuss the results will occur at 2:00 p.m. Pacific Time on the 27th and will be available live on our Investor Relations website. If you have any questions regarding our April 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, May 12. Thanks for calling. Have a great day.