Costco Wholesale Corporation (COST) Earnings Call Transcript & Summary

Hello. I'm Andrew Yoon, Director of Finance and Investor Relations, and I'll review our sales results for the 5-week retail month of September, which started on Monday, September 1 and ended on Sunday, October 5. This period is compared to the 5 weeks that began last year on Monday, September 2 and ended on Sunday, October 6. 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. Comparable sales and comparable sales, excluding impacts from changes in gasoline prices and foreign exchange are intended as supplemental information and are not a substitute for net sales presented in accordance with U.S. GAAP. As reported in our release, net sales for the month came in at $26.58 billion, an increase of 8% from $24.62 billion last year. Reported comparable sales for the month were as follows: U.S., 5.1%; Canada, 6.3%; Other International, 8.5%; total company, 5.7%; digitally-enabled, 26.1%. Starting with this sales release, we changed our e-commerce comparable sales metric to digitally-enabled comparable sales. This metric now includes all sales delivered to members that are initiated through a digital device, whether fulfilled through a warehouse or a distribution center and Costco-Travel. Comparable sales for the month, excluding the impacts from changes in gasoline prices and foreign exchange were as follows: U.S., 5.0%; Canada, 9.3%; Other International, 7.5%; total company, 6.0%; digitally-enabled, 26.3%. Last year's total and comparable sales benefited by approximately 2% in the U.S. and 1.5% worldwide as a result of increased sales due to abnormal consumer activity associated with Hurricane Helen and port strikes. Our comp traffic or frequency for the month was up 2.1% worldwide and 1.4% in the U.S. Foreign currencies year-over-year relative to the U.S. dollar impacted total and comparable sales as follows: Canada negatively by approximately minus 2.5%; Other International positively by approximately 1%; and total company negatively by approximately minus 0.2%. Gas price deflation remained relatively flat and negatively impacted total reported comp sales by less than 10 bps. The average worldwide selling price per gallon was down less than $0.01. Worldwide, the average transaction was up about 3.5%, which includes impacts from gas deflation and FX. Excluding gas deflation and FX, average transaction was up about 3.8%. In terms of regional and merchandising categories, the general highlights were as follows: U.S. regions with the strongest comparable sales were the Northwest, Midwest and Los Angeles. Other International and local currencies, we saw the strongest results in Korea, Australia, China and Taiwan. In Korea, Taiwan and China, we saw a lift in comparable sales due to the holiday shift of the Moon Festival and Chuseok helping drive the strong results in those markets this month. The negative impact of cannibalization was approximately minus 60 bps for the total company. Moving to merchandising highlights. The following comparable sales results by category for the month exclude the impact of foreign exchange. Food and sundries were positive mid-single digits. Better-performing departments include candy, cooler and deli. Fresh foods were up mid- to high single digits. Better-performing departments included meat and bakery. Nonfoods were positive high single digits. Better-performing departments included jewelry, majors and health and beauty. Ancillary business sales were up mid-single digits. Pharmacy, hearing aid and optical were the top performers. Gas was up low single digits, driven by volume increases year-over-year. Looking ahead, the October reporting period will include 4 weeks beginning October 6 and ending November 2 compared to the 4 weeks beginning October 7 and ending November 3, 2024. If you have any Investor Relations questions, please call Josh Dahmen at (425) 313-8254 or me at (425) 313-6305. This recording will be available until 4:00 p.m. Pacific Time, Wednesday, October 15.