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 May, which started on Monday, May 3, and ended on Sunday, May 30. This period is compared to the 4 weeks that began on Monday, May 4, and ended on Sunday, May 31, 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 today, our net sales for May came in at $15.59 billion, an increase of 24.2% from $12.55 billion last year. Comparable sales were as follows. On a reported basis, in the U.S., the 4 weeks was at 21.9%; 39 weeks, 15.3%. In Canada, the 4 weeks is at 28.8%; 39 weeks, 20.7%. Other international, for 4 weeks, 21.5%; 39 weeks, 20.9%. And total company, the 4 weeks was at 22.8%, and the 39 weeks is at 16.8%. E-commerce for the 4 weeks is at 12.1%; 39 weeks, 58.9%. 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 16.7%; 39 weeks, 15.3%. In Canada, the 4 weeks was at 8.9%; 39 weeks, 14.1%. Other international, 4 weeks, 9.6%; 39 weeks, 15.6%. Total company, the 4 weeks was at 14.7%; and the 39 weeks, 15.2%. E-commerce, 4 weeks, 8.7%; and 39 weeks, 57.1%. Our comp traffic or frequency for May was up 18.8% worldwide and up 18.3% in the U.S. This year's 4-week May retail month had 1 additional shopping day versus last year due to the calendar shift of Memorial Day. This positively impacted total and comparable sales as well as traffic by approximately 2% to 2.5%. Foreign currencies year-over-year relative to the U.S. dollar impacted May comp sales as follows. Canada, positively by approximately 17%; other international, positively by approximately 10.5%; and total company, positively by approximately 3.7%. Gasoline price inflation positively impacted total reported comp sales by approximately 4.4%. The average selling price was 53% higher year-over-year at $3.13 per gallon this year compared to $2.05 last year. Comp gasoline volume was also up significantly relative to last year. Worldwide, the average transaction for May was up 3.4%, which included the positive impacts from gasoline inflation and FX. In terms of regional and merchandising categories, the general highlights were as follows. U.S. regions with the strongest sales increases were Texas, Southeast and Midwest; other international, in local currencies, we saw the strongest results in Spain, 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 mid- to high single digits. Candy, sundries and liquor were the strongest departments. Fresh foods were up low double digits. Better-performing departments included service deli and bakery. Nonfoods were positive in the mid- to high teens. Better-performing departments included home furnishings, jewelry and apparel. Ancillary business sales were up more than 80%. Gas, hearing aids, optical and food court were all significant drivers. Looking ahead, the June reporting period will include the 5 weeks beginning May 31 and ending July 4 compared to the 5 weeks beginning June 1 and ending July 5, 2020. June will have 1 fewer shopping day versus last year due to the calendar shift of Memorial Day. June sales will be announced on Thursday, July 8 at 1:15 p.m. Pacific Time. If you have any questions regarding our May 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, Thursday, June 10. Thanks for calling and have a great day.