COST - Earnings call transcript Q3 2021 | Costco Wholesale Corporation

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Operator

Good day, and thank you for standing by. Welcome to the Quarter Three Earnings Call. [Operator Instructions]. I would like to hand the conference over to your speaker today, Mr. Richard Galanti. begin. may you Sir,

Richard Galanti

of as and risks differ and/or from these to statements discussions those the cause Reform those meaning Sarah, risks and involve from by but that include, uncertainties limited uncertainties time materially within I'll stating company's of may indicated Act Litigation Securities to, that will The events, in other the Private These to public reports good are you, in outlined well statements everyone. time to risks results afternoon actual call start statements the XXXX. performance today's and Thank include identified filed by such as SEC. not the statements. with and forward-looking

third are increased million Forward-looking This these year's $XX.XX third statements third XXXX press $XXX million for COVID-XX-related Net included All and $XX.XX of billion Canadian sales XX.X%; May FX, reported reported $XXX income sales fiscal share. billion share. ago. on net and comparable $X.XX in made, for both and weeks to share not Comparable in up gas quarter quarter other FX to $X.XX XX.X% XX.X%, versus ago a quarter or came quarter per at on year-over-year COVID-XX-related quarter third the it basis, except company or -- was statements, sales were $X.XX release, the basis, U.S., sales up again, per dollar, of Reported gas results reported follows: was per sales costs. included year up on year's the up; company up income Canada, strong quarter to or from ended share fiscal net a $X.XX this speak diluted year and told, ex as third or plus law. gas update in comp undertake gas quarter on does was -- year basis, a pretax XX.X%, plus ex inflation, by for up $XX was we FX, for XX.X% only billion in the reported the XX.X%; $XX.XX as In ex this Last of or ex year's costs. the million up from in $X.XXX reported that. that's and, they the the ex XX.X%, pretax of were ago XX.X%, a required XX%, billion quarter XX.X%. of date year and a 'XX third year quarter ex prior top was by as operating today's X. gas and the in XX a Last e-commerce, FX, reported of per XX.X% XX.X% to QX past when international the

In terms worldwide increased in frequency or XX.X% of QX comp the XX.X% shopping and sales U.S. metrics, traffic plus

and positive FX. And Our or during of X.X% include average the up quarter. U.S. ticket third the both inflation gas worldwide up these impact transaction X.X% was numbers and

and X.X% the in for in those. X.X% be would they U.S. that, for the adjusting So adjusted

dollar approximately by positively impacted positively XXX approximately basis to price gasoline relative impacted currencies And Foreign inflation by U.S. points. basis sales the points. XXX sales

basis adjusting reported down up increase million had we for or quarter, $XX FX the reported a Again, that reported the statement. been fee strong have million, $XX FX up up Membership income income for X.X%, X.XX% million sales. XX.X%. would Going so of the $XXX on out, so third and

the first entered rate at QX lower the total was or quarter of for end. the Canadian terms U.S. during same this company end. our QX it renewal -- as in prior the time X.X% came fiscal of renewal the In XX.X% at China rate at rates, and XX.X%, was renewal quarter. Worldwide, calculation end

First the worldwide versus the improved quarter. rate lag renewal have X.X% would generally later year actually China, of prior excluding those And years. rates

members terms weeks million, up up third since XX.X In paid XXX.X XX during households at of QX membership both increase total end. quarter the million of million earlier. QX from total XX.X XX.X cardholders, number the totaled quarter, XXX.X At XX At from XX of ago. end, of paid QX Total million and at million, the XXX,XXX weeks second an end, end the member cardholders, executive end of members, households weeks

line. Moving down margin to gross

margin coming ago reported year at basis third by points, the quarter XX gross was lower XX.XX%. compared at in a Our in to year-over-year XX.XX%

we XX and XX -- -- down basis shifting merchandise XX% points historical a reported here plus few out ask you points. do, core, usually change year-over-year saw from XX on Total, sales year last points. inflation. the and columns. businesses Ancillary core This show inflation, and X% basis gas as to component, shift significant down Merchandise X ex points. sales gross core. year-over-year a gas inflation inflation. I XX on was XX Recall, primarily margin and into begin other margin, reported minus here, and The and gas in gross columns, points was mentioned X down basis As as is X year, both points core basis to to down penetrations. basis basis again, column, Reward, basis X gas the ex point to you sales points inflation a as we minus jot ancillary of and I numbers, ancillary and plus down ex year-over-year Other, XX of therefore, other I year-over-year minus ex basis back X ex reported both points versus plus basis revert in last the reported and businesses second gas of basis more was function reported points. plus

product from sundries last and year, up In latter foods year's core own the margin year-over-year as with X a we've lapping Fresh, third last rebounding outsized with by plus down terms historical mentioned that over and of Food points, in and their Ancillary and gross year still from from points on year-over-year COVID. quarters, onset significantly, ago productivity basis began other core and by the gas the spoilage were low ex in occurred was inflation basis fresh labor the margins, few that up quarter, the core sales, the strong the margin lows. business QX last standards. is sales better XX nonfood again, of flat exceptional in quarter.

and last end Gas to have a This a Reward by XX wage. severely this the the X had This basis optical hour versus is Last weeks to associated attributable QX to with margin members of in year penetration costs -- courts limited place. labor the the points ago, incremental $X the quarter that points, hearing as relates businesses. going hit $XX in X which somewhat was our manufacturing had year, sales year year portion at in gas. And those good at the of as a margin incurred QX The X hour year ago the is program for discontinued closed some and and a food X% third margin COVID-XX hour incremental service and XX second of court, to most points. after particularly to aids, and you we hearing year, of offset in the on weeks optical, food weeks had wage year, see improvement year again, premium fulfillment quarter. -- higher a incremental a ago. $X departments we here lower selection week associated e-com million helped We the of an offset we QX aid was lot an here had to million our incurred basis was, XX plus of indicating on basis closures $XX This excluding last X our by we're the of other premium year. rewards gas lower year-over-year. showing the it. hit inflation, executive XX with the

out or premium and of its this impacted X In we of last as discontinuing earnings conjunction certain QX hourly plus a salaried employees were onset discussed implemented by well from wage Since reserve our One permanent in year for came the quarter. and call. most impact programs effect reported gift during with pay, our as increase a that adversely not X the $XX.X a accruing basis as points $X in week other of going I COVID. took fiscal March of simply comment, QX COVID-related. as The permanent forward, the an ticket manager cards separated increase hour our our it's numbers in employees, million other for conference which third-party wage X is

Moving to SG&A.

gas X following year-over-year better points. reported, third column column, down and was basis reported Our columns first these jot or in the Again inflation. quarter and second SG&A excluding by is to XXX numbers, lower

basis terms inflation, plus plus plus of XX XX points points, XX basis basis year-over-year, points, X; other, basis by basis In X plus operations, X point; ex plus and better and lower stock X Central gas plus points. plus compensation, plus and meaning XX. XX or

lower last basis, total, better excluding here, points, an ago that were basis of was plus XX XX and ago. lower operation permanent -- in was of The a core XXX gas attributable XX, we by X nothing A Innovel lower and hour stock good and reported year-over-year better Central, Again, was COVID. $XXX SG&A impact associated basis $XX.X balance plus a inflation, basis with better plus from other, QX. million to For the XX or with reported on a to cost looking Same gas inflation. by the there. a QX basis comprise XX the X increase SG&A basis the of XX again, hits $XX year or excluding by year. gas in a given by XX for million the particularly wage million comp, the acquisition basis year -- $X a the or by this surprising the by on lower XX better points QX integration ex points. that points, result, cost was points of inflation, compared and weeks implemented

QX fiscal told, this in Next year increased preopening the million on preopening expense. income Basically, ordinary -- million, QX 'XX with of All XX%, $X is out to higher in billion versus the was operating year of in due it this it operating ago. the compared year, was better at coming Nothing expense $XX $X.XXX at 'XX. the quarter. by to in year Below interest interest other quarter $X income quarter. million line, income year income actually by rates. or lower lower the a higher ago and was year-over-year million $X the $XX $XX million statement million million. reported this $X billion Interest for came by was a in than million this $X $X.XXX the income Interest

Additionally, to $X.XXX coming FX reported the this by and pretax income up up quarter other million in $X higher -- billion $X.XXX in income year at third compared reported year-over-year. pretax Overall, XX%, was a billion year ago. was was

of in the I rate as before terms mentioned a to e-commerce, e-commerce XX.X% third compared quarter earlier. at I I'm go e-commerce, XX.X% tax to In sorry, our in year earlier our sales, -- came

This from discrete benefited quarter tax our that item number. benefited onetime

For all year XX% of in sadly, our XX% rate change, items other are, we few the range. normalized note. tax of to course, based for 'XX, subject of effective to on anticipate that which, total A company our to be the estimates,

warehouse we internationally. in X and warehouses, the opened X in Canada; of U.S.; terms in expansion, X QX, X new In

the X open relocations, put U.S. the to so new which included that QX X additional a ones, XX -- in XX plans and XX total net in of X in And net. X would fiscal others for warehouses have year, us also internationally. We

fiscal the end towards be China in expected of a next and units 'XX early we third In calendar addition warehouse end in to fiscal be calendar the open which net of about units, X new to for fiscal 'XX. including which open to each the 'XX, a 'XX, XX looking openings the fiscal 'XX, would years, are new XX planned late of second would in in year --

the CapEx, 'XX approximately fiscal was spend Regarding $X.XX quarter third billion.

a the delivery increased from estimate is on estimated big spend a distribution and to to CapEx West the facility range, year support billion full million $XXX little $X.X be recent include billion the Our XX weeks to in activities. of $X.X now Coast our purchase earlier bulky made to our

and FX e-commerce. -- sporting Stronger ex majors, quarter electronics. going to Now jewelry, from hardware Again, appliances sales includes e-commerce departments home year-over-year. to of third course, included the consumer both everything in furnishings, increased XX.X% goods, which, turning

also and big quarter. sales items and to this the In fiscal on quarter. XX% we of update anniversary-ed U.S. days. Costco bulky bulky about terms to add many Logistics sales now cases, drive delivery improved time and many Costco up Costco several Logistics orders, of and big Overall, called Logistics XX% of Costco on U.S. fulfilled we X and to the weeks some we've an -- e-com bulky there, X during continues up from Logistics all in to big these to now vendors. in new the continue X purchase items Innovel, with

items we've that that being our an allowing are delays chain to prices now were continuing not port supply vendor-drop delivery -- up speed are are and imported taken reduce several As shipped well, perspective, direct us a impact. to previously to only but members. From now have

ago. this incoming cases, pallets facing carriers, to Containers are in anecdotally, versus to also a increase additional containers year XX% in utilizing alleviate and are some shortages We that. help of year some XX%

a but U.S. hitting to delivering head XX a has days. approximately being back ago. U.S., its and of that's demand, contents pent-up low from turnaround The the gone at the the days back of Some from points year XX just to container overseas port

the mentioned, will is think variety pressures questions year. So standpoint, regard items some will, items. to to Inflationary have Gulf transportation higher various in by a lot part this costs, oils and higher seeing. shortages, a over that are freeze most months. again, There increased increased more shortages increases in chain can. cases, the containers demand continue a factors been past These And and abound. than freight if will port we demand, delays. impacting work supplies these shortages are of we've as about to feeling hit mitigate We've is many as and delays Despite of with continue of The well chain And shortage inflation chips of Chips things mentioned, -- ordering of transportation cost handled way adjusted got variety combination biggest an higher had and we've labor I costs, many few that different for supply we This under a best from from the I have shipping, terms and of supply are of facilities that that well. we with prices. as control. and, items costs inflation everything pretty and and by some you delays others. container the to issues, front-loading, continue we in orders the of chemical along and this include in others categories inflationary some higher calendar delays commodity various product storms ways

the plastic shipping. bites, Some increases goods, and cups, paper double ocean X% across increases et inflationary sound of containers suppliers itself cetera, all. freight, to combination with as as well and to currencies on items, apparel plastic on Price Higher from Metals, if wraps. some mid-single-digit X%, strength on and up trash foil, the for also some the items aluminum resin as to increases of things shipped increases well FX you foreign beverages. Price pulp, X% cheeses, as increases some anywhere for prices certain from plastic other sodas paying cost to and up of import XX% cans not bags will. plates, product

XX%. as terms as has is in higher for Beef month protein been up meat up last much example, In X%. prices, the year-over-year of overall fresh,

and restocking go feed to some Some from And that as demand of transportation could well costs on. of now on start is increased restaurants institutional and the reopen. coming as labor due to additional list needs as the

level with X goods. I our At all at somewhere quarter March was our second I in that X% what the running was back X.X% -- inflation guess best time overall on felt to we Now that was stated call. said, asked being this our range.

gasoline today, overall of range. inflation to selling the our to As sales, price be we level, the estimated more probably would guess at that in and be excluding X.X% X.X%

haven't Some items items, sale are some yet prices the more up and changed.

bit. well little a down of the terms we even done think, are as we've inflation that can, as again, best controlling pressures items some abound. And in We pretty but

all eliminated of onset and the and at popular warehouse, we the demo our March demos food terms warehouses of our the you sampling in activities as last know, in In sampling pandemic.

and few take-out opened return items few summer This sampling. items sample crackers, in cookies closed and we enhanced last tried to various and cook As A talking happy single-serve of like a beginning prepared sampling a as events. only. only, such phased that come fall, to a demos states and will few items over waves. to the couple I'm we're for display weeks, report full next no

by June, the towards about will locations near locations, of of remaining the activated -- the of returning in June. our U.S. XXX-ish of of the most XXX the first wave first end be The week towards with locations or

will weeks wave takeout we of first a tables restrictions pizza a restrictions to and back few weeks protocols in and will what Increased The in food and hold, back also all in roll soda our food eliminated are lifted. I'm the one are we we and all as next in hotdogs took adding courts only. back XXXX courts few in at pared a and way. when that as the thing well. safety and a Last We seating out coming I'm to pandemic report again and smoothies, control well. handful unique March, a are bigger and same to seating, menu states. there over distribute several -- few began fast ago those for prepared smaller and how actually basically courts, better at place, behind will and be it Food pleased sure prepared batches plexiglass, determine samples safety with including as be members states time. outdoor

of see half with seating bringing most be instead will items, which still to new the and goes these by added replace in additional few are X, also by a in we waves Xth it subject we've few back have June and this to X churros, back to and the locations, doing locations cases. past Again, before. X any a or and and and restrictions frozen our And yogurt. Over at at more adding about subject a tables July, capacity separation, more of back ice high-end in improved months, all plan physical to but rules soft cream tables of few X as state seating including how U.S. the we a food had

of terms our will releases, in results. upcoming announce Finally, sales we May

For the X next and on Thursday, market that, over the XX, ending to closes. With weeks will open X to May back turn I'll Sunday, June questions and I after Sarah. Sarah? up it answers,

Operator

[Operator Instructions].

Your of Lasser from comes question first Michael the line UBS. from

Michael Lasser

others, should lap than more you outlined that year? gross impact tends gain you're margin slowly is to we variety with given you strong a to How good this move next expect period a going a over this business. inflationary the last pressure sell-through of changing the point, prices of pressures the as in quarters? Costco's of couple especially Richard, margin Costco be to seeing gross

Richard Galanti

way. pressure competitive is of really our impacted to I -- standpoint, as to a has will Michael, we'll we we'll has be From with any while to want points, our some it increases of historically, mean through. have course, it pass through, our vendors and view that lower margins is, passed and big and some mean, have those in try not work of Well, mitigate be efficient our -- is those see. as it view wait and I possible to

$X.XX there's water. notwithstanding rotisserie XX-packet cost simple pressures, examples some some stayed like things of Some same, on our have these chicken pressure inflationary been components be items. of some of $X.XX Those the our and might very the

margins impacting little. already to So to don't that's impact I think are relative competition, big overall, -- of I our And where not impact a margin-wise. be we an going those a -- go

Michael Lasser

the pricing of you its executive enhancing is been the as influencing time normal fees, you on Walmart with power either value is think approach X the these sharp And gold continues has this fees do value Costco value associated the Costco cadence Do with the like has the last content. that membership? it more raise to there of membership. Okay. offering. its the media years Amazon over follow-up you of question membership membership on of or My factors the again? increase your are that value the to the membership focus in would typically Costco when a of feel you raise could a you do is

Richard Galanti

model first the been is like buying things mean the focus the goods of the prices certainly, on the over that's about -- our our best last I in different services. fact is as quality We've it on regard. our forms benefits view value. our as that Sure. COVID, strong has added that buying -- best helped model that the the improving last top helped well essential to it an terms And gained to that food with -- now been we've think or strength relates relates in had believe, power and Well, whether a as and only areas. the to intact that, many I and deemed look, keeps of we've and e-commerce. boom a increase Certainly, business of not people And those some in share big the strength we've of we've for business by procuring what's in-store called acquisition more merchandise, all home. our we and our driving big like fresh Logistics competitiveness for market year bit our has we a with been certainly, is things But value. sales on and it's in of quite think items for would Costco I

what value the think members we our we value keeps of from up. standpoint, a going offer So proposition

position. to answer good wait this years, see. have getting we that, increases, expect start to competitive now it our and feel is since We'll about would we've year questions relates to certainly it a historically, about done X our every we and fee But pretty As is so before straightforward.

Operator

question Gutman next of Simeon the Stanley. from comes Morgan from Your line

Simeon Gutman

on margin you higher recover some helped the side, that I categories other core, then XX. the on spoilage on on puts sort of positive And last if have don't side. the year takes, yet I the said this. that other come things are the ask And to up that maybe to think guide core you and other about back. want talk the know about and you just I Richard, you

So and just kind good bad to about on think of way are the guys, there the margin guy another forward? core just more going gross think core

Richard Galanti

there's always equation. different Sure. pieces to that Well,

As was the spoilage. one mentioned, labor I of last higher foods with and the lower things few that over margins productivity we mentioned much fresh strong quarters particularly products

better While, in historical where again, a were a its come QX, from ago above we still nonetheless it's year we're numbers. pre-COVID, but still down peak little than

of with coming the lot because of we've nonfoods gas an you It goes as a heck at demand. minute action COVID business, for the our in is with that back the things well But and factors it of optical who the total course, the people knows. ourselves as back I as sales improvement buying a every causing has the strength in in would the a see at up Again, certainly, of business, that a of the sure, a margin thing small when that on to -- other we company. seen Travel Travel started hearing to look that's ancillary end in home. businesses, even a is ancillary I expect with coming out nonfood. ago, we're things up in I way the some year seeing of on And for picked high-margin Outside relative see, mentioned with day, with taking improvement if the aid piece was of continued. a And summer big that that, One night. expect for travel business. down pent-up of of the probably and really QX. travel. lot although for news would their at it Same

of improvement. how a the ways, we'll little basis -- Costco improvement it in in some X But X-or-so X to to different point out that we out, think, there's and finally So things pointed It's hit even future. there margin. I that, figure little like might to overall, quarters, to a something get I the seem was show anniversary-ed Logistics hopefully, to like that show in that some you start last

goods still continue. it for overall, being and gets great hopefully competitive value but our bottom ability our But improving -- will you each the let to and back quarter. we'll price line So to know

Simeon Gutman

Okay.

Sorry about raising just question are sounds prices one inflation. retailers other the you're but them not letting It and on quick -- up lag. but noise, like your prices, are maybe

the guess at Or as just and seeing I stay the across pricing rationale sort So seeing up you costs you're take board, of healthy. demand staying are you the the same allowing all environment that's input to time up? the go

Richard Galanti

own our and all, a many goods, lot increases. aware we associated of with been in we with sticking we pop it. And that soda of other There's are what look, do companies, are of think, costs because underlying at blinders can announced first both on. I CPG Well, paper the look of retailers them have

those are think to taken limited is little do us can a those and can. are increases can a that, average, But power positive. faster gone have things our as mitigate think as good than we happening, as as fast like a taking competitors on price the the To some up. on fact that not any given job probably we've of I'd -- purchasing that our that SKUs best extent I we as that we number

Operator

comes question Paul Citigroup. from the of next line Lejuez Your from

Tracy Kogan

if you've from the filling might the differ I Tracy like, that core about pandemic. Paul. of wondering It's of Kogan customer repeat have how the spending for maybe over And I past was what gained customers customers. year demographics in a could -- and purchases talk group have looked during their that customer question your about the and the you your

Richard Galanti

big with spike grocery -- getting that our What's I other with millennials there standpoint, is, some -- or anecdotally, before the additional in Gen Gen not only share did most most -- a Right. again, know items. than members course, Y young there a we so see them. of us ourselves in being increase fresh was, dry -- or with other from was and cases, We hit, next COVID of X-day our as that's doing big that same-day over -- spike, Instacart. delivery the we whatever we're some and interesting also of generation And demographic garnered way. And that with a many Z relationship guess, else, an age a

have On members you of number. the but X-day, -- geographic big not market that warehouses, a our since some that gotten we've is of are giant done may mostly via outside areas UPS, physical

I think seen adding overall, the that. new new continued if online of anything, warehouses. delivery members fresh few net like opening and helps getting existing things to to and a next-day warehouses of perhaps strength we've Certainly, So related our

mix get the now, is, that, product share our we when Beyond over from as that from gear and when concern we're older case, we fair in member we an equipment more you -- a what we those of sporting younger that changing towards years who was with the the it, to previous. -- Wall see we've share long our think we organics XX and of age people. done our what of this sometimes name is good again, our finding you as as summer getting in we're or we're see Street. for last some historically, -- and keep who And demographic, again, on was our getting That -- people Is did generation?

Operator

the of from comes Grom question next from Gordon Haskett. line Chuck Your

Charles Grom

than up you inventory run. Richard, were XX%, about which is higher dollars much currently guys

-- the any how do right about I the forward there's position feel if curious pull now? you of items. And current Just guess,

Richard Galanti

interesting little hit being last just it yes, think because lower it. year -- were I we was what's is a with

we And that And and so merchandise while get we might then needed we we back of were season patio everybody Halloween part to -- to we cut were where would for also back have needs going reduced you could March more. in, found early April, last in we were needs and as this scurrying even like to the the of realizing orders was and we it summer our that starting and Christmas seasonal some longer, if furniture our recall, out needs. else

So as -- front-loading and being has a talked I call lot these We cash. little early, have in of buying extra of to happy cost do we bit relative to have clearly de plenty some our probably of of the with have what of some a inventory. a it to earn are minimis to buying And then things this lower. forward to is on some that that's we what And it on about do fact little -- the that. we certainly, earlier cash

Charles Grom

in a both on Great. particularly sizes, past makes the And in process. from sense. in basket clubs, the Okay. perspective, reopening few over just That Curious months or of couple weeks behavior consumer. maybe further the the are states then seeing that your what you're past frequency along

Richard Galanti

states pent let's doing a everywhere. evidenced new the a the What Well, have saw but been we bit that and I in June Florida, by more so up again, these in wait in as but month, But because that particularly up guidelines like year in more not shopping even April, little quite weather all the it's frequency in started bit CDC frame. early, May, X the hard little for a seeing last mean we and particular, closed, -- out little earlier I U.S., Trend-wise, were happening is discernible states not Texas general, spring a that. a yes, time so and little X.X months has the things way. and meaningful many opened interest like to that figure think a opened last in bit just in

in a in Costcos countries, And and to the already of of the some on still in limitations off lot that's paper much of or there's nonessential can -- for last health beauty in and there. we so the XX other think cordon We or there provinces, and goods in cleaning XXX items Canada, of I one -- and sell the items. food XXX quarter, supplies was nonfood Canada, So main had fiscal and like. only about

that's a but that pretty is, think, way big -- over. even So I -- much in

Charles Grom

fourth fair that a the last here one the a quarter for Is come expect them And third imagine Great. down quarter. were lot. that million to for last me. costs $XXX year, the just assumption you in down Okay. I'd relative booked in then you'd XQ? COVID meaningfully to

Richard Galanti

an been mind permanent again, $X And chunk increase $X a has permanent $X a we be is which Yes. that Yes, the again, wage -- eliminated. did. big there'll still that of hour premium, you to that chunk mostly related the

Operator

the comes Karen question next Short from line Barclays. from of Your

Karen Short

that on up question. just Actually, following last

versus your gap pre-COVID. been of have I recognizing wider at mean, quarter, -- of time, looking we've it's looking much growth even sales SG&A for it's like did SG&A you that dollars, long still for a $X a the seen kind your at the and within So growth than part

anything if then specifically, about question. on you point that I'm going other So there's could I that one forward. and to wondering think how And to had

Richard Galanti

Sure.

could enjoying we that's it. comps visits business ago first that the regular probably the strong know of the is the piece third quarter. -- when in and and health comp X, instead their operating people sales, got we or that a think for quarter, have biggest cost it's do I little doctor leverage higher the of benefits This sales. we care foremost, going we single weren't anything, X year a If a a in now, a the because X%

just sales And of little all costs. and more anecdotal so strong what core things labor was that -- of those a is bit probably hit. offsets a types But a

Karen Short

Okay. And then...

Richard Galanti

little of well, as taking reduce that would bit. there inflation out Gas gas a

Karen Short

Right.

my how the X-year fee anniversary members, because your about value I actually the next just then to mark? membership obviously, possible are or we did maybe the you fee, to with membership line increase more, on of question time what second would thinking recognizing And think X be Okay. respect the

Richard Galanti

mark next is No. X-year the Actually, June.

Karen Short

Okay.

And so what's -- about how that philosophically? you are thinking

Richard Galanti

thinking to really very our get position. haven't several about No, competitive again, about thought a jokes good rates, feel it loyalty. feel But I we months. yet. our good member lot Philosophically, aside, of about about for with say, renewal to Needless we we given think our not there's --

Karen Short

And Okay. my question. last then just

include e-com, you of just of food? that actually us Can you In gave give and that terms third-party and growth a update you in party. sales us include -- on the percent you can where an a give us third good doesn't obviously, number stands the when

Richard Galanti

Yes.

-- is my not guess I it's now. think as it's impactful probably

third relative May to now halved, party, increase. the I it's most not pre-pandemic. last, still particularly probably mean, I late And same-day it huge And it say, The it's -- so tenfold April. fresh April, But -- or delivery impactful where to huge was. it really and, was was as as want peaked

we that So again, couple the I quarters think back couple added XX% e-commerce. if we and the it that up parties -- don't come fresh warehouse and to XX% that or had like in of quarters an a we ago, there said you, that same-day it there take in we where third stuff like of XXX%. are since had put XX% -- in towards in was comp buy you XX% And a

X it's percentage just If XX. percentage let's assume the points, -- here, shooting points, -- if not you to but I'm XX X certainly hip from but this was that is

Operator

Heinbockel question line next Your from comes of from Guggenheim. John the

John Heinbockel

when are costs invested the price? down, facility? capacity this now where me you more let coming that in with investing of you And And be you new Costco utilization? delivery? delivery are are guys will Logistics, to add quickness start, in yet Richard, degree you you Or have where timetable,

Richard Galanti

volume. a on or pricing aggressive a we when went It's doing departments of immediately. a say the big France day, from low as proving way. into volume, the end pricing less that we in we're we're a like something have were were efficient country screwed that not fresh complaints were we We if -- few Spain, kind every But actually someone like improving of in we new day up. to Well, like at lot of don't

it's of And are so furniture it can goods before what price the hurting it. with based a on going to or actually price the as start -- us or examples we're relates mattress those we where to do do we lower set to a delivery

catching with thankfully that's up Now itself itself. for --

of lot it capacity. a In terms of has capacity,

and As now is I about mentioned, bulky of Logistics. now, our through right delivered big Costco XX%

doing industry-wide equipment, with home, that available. more fine, it What Some we it but doing bought by at doing us aren't and we're handily That delivered facility it those like. of But completely have capacity a is few mentioned, had itself grow business, very we the XX% was -- than and two. but completely now it's only was West again, being to big and What compare parties big not for as just ourselves. on was acreage furniture a again from overseas many what of huge And TVs you think capacity bought we those less do tremendous we that for to the bulky, and and before. exercise Coast can't bulky things the recognizing us so in I of third we're continuing in a allow California. that and been and come years in things

before the COVID going time and more that XX% or competitive continue well we what we everything become then in and that to us growth. items, it's saw we've so We've about lot by said sell years of that XX% X business. it recall in pre-COVID, all across growth in and else, but has lowered We hence, greatly white improved both well as done And year did did to bulky just million. a as years, U.S., Way the pricing. And X more, beyond X grow we more help years items on have delivery think things was driving and seen think big we board, the now, about million people being what last $XXX the where able natural business. are of them price We're in us buying when or goods the we I terms $XX was store, and over the not something. COVID we the ago, to did home for and

John Heinbockel

about then program, do delivery cold dry is right, how of and you frozen versus did fulfilled? that program, grocery real the lastly, being previously? how conceptually, And the consumer in that you uptake terms that just the quick, think X-day And

Richard Galanti

to in people as that and to our started lends And customer weeks itself We wanted that ago, well, it's think something X see. we business business and -- something to operation early, needs too it's that really our that centers, well It's John, we'll try. just tell.

Operator

RX Capital. Mushkin from comes question line the next of Your Scott from

Scott Mushkin

wanted give us can back a size actually bulky Kind you it. what like to percentage of this of putting maybe into What kind the you are at lot big talking I hoping could -- it it's can Obviously, were and can you to get we the about Richard, guys before. maybe money think opportunity. of So that to just you company drive are do those anything for and a focus a big in sales if big Like you you where go. because I capital sales? you size items investment. do was much going now, obviously it's do think your how of wondering

Richard Galanti

the of front way. I exercise of on categories, We're don't seeing outdoor to some XX% patio from TV's indoor or within detail furniture in equipment, and me. have those items that everything increases Yes. mattresses along furniture the to XX%

Scott Mushkin

SKUs offering, advertising how base? I membership don't expectation you many And more thinking about your your to you're more at but And is will how bring in vendors? And are you know SKUs? have

Richard Galanti

X- think we X-plus at there think the our X-year certainly will outsized years, growth for that be when I we plan, look we'll first to of mean, yes, next Well, see. I all,

furniture X on online In sets. have dozen we'll SKUs more online. terms not or warehouse, in have a going SKUs, X and of there's sets, or chair adding might display, We sometimes, yes, we're but a sofa so crazy. Certainly,

limited are of both we as So to adding items. vendor the still additional as retail traditional well greatly but names relative selection, those

Scott Mushkin

right I guess. Perfect. it kind would second I hard do year the on and to you of a XX could suggests XX I said basis? clearly And research our over and openings. in 'XX, Because of XX, and I is do? the again. get guys else. is that everything at to locations just a what the could know But question I something is talked all something we've the the I that this there. obviously, you more know you then strive time, thing more. And to talked guys on getting the, we've permanent market about guess, XX opportunity take go my 'XX It's to mean again would it And lot about

Operator

operator. the got sorry. a I'm Difficulty]. second. of speaker line is [Technical disconnected the This for The

Richard Galanti

that. back to let's question. apologies. go Sorry your about Scott, My

Scott Mushkin

right. all That's

my did So you -- hear guys know or my what of no? I don't any question question was,

Richard Galanti

You can again. start

Scott Mushkin

Okay.

to So basically, the 'XX, Can XX clubs, about you clubs get a Obviously, this talked and times number said about guys you to of up. Like XX is that real opportunity the there. department? trying opportunity beef -- to fiscal 'XX us looks there holding Again, and what's because we've you number back market estate up like the XX? what's getting XX it with the to the to research. is

Richard Galanti

the now, Well, things far I that feel the XX I and by but did well confident as each all we it went that a think countries relatively challenged, the as tend I have next out in reasons little to other of the items both think Canada got We've be good I some the That's right going slower as of in feel saying other world, We about. and beefed years. we as of parts up. fire one lot that U.S. of the have on. -- X a we

mean, construction over countries have having over we prepared to see XX not I'm going the announcements Now sure we're from and that quarters. or gone. are to open the that under few do there XX some next smaller, more construction in both But the ready up slow. And for And go do XX, either to we by we I of that's to it? next and to ready Yes. pace certainly, you'll Could in China like faster under us, yet. the would And be we elsewhere than months. now X picked getting

Operator

Oppenheimer. Your of from next Parikh the comes from line Rupesh question

Erica Eiler

This is actually Erica Eiler on for Rupesh.

business. services your on touch to wanted I first, So

us versus businesses As we court, levels? is how much at optical there your look you recovered have at help any and way point, of service XXXX can food this travel frame, and

Richard Galanti

of demand. I days month, so XX of travel, mean the Part time I that, even things. probably holiday 'XX. the different top history, at had was in few at a our there's if we in XX I though, pent-up our think, look Well, last ever again, in

did what and Right trips. where offer we are now, great and normalizes and So in to -- we'll several being starting ago also down, still trips again some other, on now, it Mexico added push pivoted cruises both a while rentals, deals Hawaii-type U.S., still down. but big call, We negotiate I'll addition vacation to see out. car they're months Yes. -- booked

because but ever bookings we of the but a when didn't Food continue they was little fitted getting to when essentially help. probably tables a to we'll a now. of with the that downturn. one-to-one and see we've to issue out same There of courts not menu yet, another take hearing hearing And wait be for demand closed see, aid, aid. had they're revenue So you're is same particularly direct months. are normalized, will were bit And Having there strong will big dramatic going course, see. down We have seen contact, the several and a pent-up that optical. continue bookings, you expanding think will help, to of pharmacy really lot

Erica Eiler

well lapping held And last spite Great. up the your in really difficult year. comparisons of have food Okay. categories then

consumption thinking here. So how from food-at-home maybe you're update an about just on

Richard Galanti

now with it's going home just are starting it In be exact and reverted many cases, to picked bigger mean don't to In some is ago, the I tables sticky. way. in. some stopping Well, is separated. what a view but further away food I to that's it and our are is delivery, cases, be, in the I are bit, beginning many while restaurants certainly little of number reluctant our is, to was what back. mean, gained that hasn't people view XX,XXX-foot still to know a from a that that because of but year going up improve of takeout still open go

some X-plus continue that's my for months, next is guess. to the of going So

staying that Our it good we, said that, a sticky? done, is a all Beyond stock be view in have and pretty and certainly when still fact will the is that company, of some done job of not probably as think we've to gain market in like from food other on that. that I'd that from retailers traditional benefited regard, fresh our share think I the of foods, quality particularly only fresh side. we the

Operator

Your Capital of from Kelly Markets. comes the Bania next line from BMO question

Kelly Bania

$XXX,XXX Richard, is executive wanted membership, our I up ask first, here. guess, high as model quarter. over in just the can I this to see about This it penetration,

if And if there's Just that's the can other meaningful just still any you happening was in any Or point. curious on that U.S.? in color way countries? a provide

Richard Galanti

have a a the was I company, one that to of job is overall, well them membership get the people that what we every doing new better as higher to having a sign think, as up as signing as telling executive at continue percentage of better of virtue including a a I this members it members, and up converting. little new Japan bit locations, expanded just XX quarter. is in And factor as XX of where think Japan last -- locations locations, an X we anomaly XX and the -- year, locations executive we we XXX

think something just I under that was within XXX,XXX XXX,XXX Japan.

So I even that was thousand. think taking out, it XXX-something

pluses, So for out, the outside that. still of even XX strong was that a number or XX quarter X taking it very the

Kelly Bania

test And Okay. update That's helpful. happening? just pickup the that's then on any

Richard Galanti

on X still the trending. in It's has in little we when it still terms fire New utilization bit. Mexico it's of did it, doing And just world a of marketed in a where We're utilization The test. set locations. not it, we first the

Operator

the Your of line Champine Loop Capital. next question Laura comes from from

Laura Champine

renewals relative pace new would Are store Chinese lapping. renewing the year the prior on you impact normally at about that from negative in renewals you same Richard, So geographies? they to store mentioned first the expect openings

Richard Galanti

if we've just lucky outsized One us. things, years probably have back are and, of frankly, the the some that new in XX new countries, sign-ups unique last when opened go I of you over

these recognizing year, Canada, lower-than-average renewal outside might Canada, what first or and -- we've add that X U.S. And so mean, is members there's the XX so, XX,XXX in from instead the of or in look some start anywhere a X,XXX I countries of you at I markets. but existing to are in the U.S. rate to or back seen we have with. X When of the

the the they're when later, member So We've we because Korea, people year renewing more closer shopping sign-ups enjoyed a new up. when is opening. more later, X.X first what they're then rate get in I Japan -- off, so starts and be worldwide to batch China the you've in the and mid-XXs have to But don't XX,XXX time is. that that from in new it China for And first to to got open XX-plus renewal Taiwan, XXX,XXX high me year. renewing anywhere in XX.X to years China is often And when XXs that regard. even could U.S. the also front in outsized in first Canada, and the that it of

it's to notwithstanding I entity, Costco one. as it in think members we have our close city that that XXX,XXX was entered the large a very location. and a Remind well-known first you, fact X

been not all more for been surprised. it rate. we've by we've of nonrenewals gotten that have renewals, We're terms sign-ups. new in way, -- whatever And that affected than alone renewal the incurred, those So reasons, even worldwide that

had I and August months now have XXX,XXX. think think in China, which at the of opened members, XXX,XXX X I 'XX, was we of about we end about around we after

So bunch even we've bunch, more. plus a if gained some we've lost a

Laura Champine

where similar on a ancillary the business. are you're quarter see through on as secondly, extreme move away shift Or it in back impact you Understood. to basis, mentioned And most in to related lower-margin is we core the gas part ancillary? sales XX likely the to that the Was basis year? move points lapping margins is that the an this -- ex then we roughly decline from

Richard Galanti

still It probably was QX, as think be the not most. much. impactful QX will in I probably

Operator

question line from ISI. Greg next of comes Your Evercore the from Melich

Gregory Melich

questions. Two

for e-commerce? renewal rates First different? members it Is multichannel seeing are you if of e-commerce an and percentage update And penetration on close? you any use terms Do or that now XX% the multichannel. the what look like, and what of their in they're on have

Richard Galanti

gas. all, of of in the X.X it's part X, shrink that I huge or is about think First and

Gregory Melich

Got it.

Richard Galanti

other the the question, Greg? part And what was of

Gregory Melich

multiple X-day The channels? like other offering? in part that used it it? used people multichannel then like is have of either renewals majority look of that do they've was percentage or that for once Instacart, their members use -- what just you Like And what actually used

Richard Galanti

is e-commerce. e-commerce, up that Somewhere members talking I'm the have around XX% just And new members many that not how have used have of about many how renewal our people talking e-commerce. members -- signed slightly used about rate existing just better. used I'm

Gregory Melich

I the a up you I question was have profit to growth want then And No, great. second was? for right. just And Got that's got make on a penny or the sure was it. this down. gallons gasoline, number Do what

know with are I just in -- hurts think it where mix, that the gas cycle inflation? we but now I right

Richard Galanti

year, were Gas if back well, fact down interesting. you was it in that -- the quarter because -- was it again to profits mid-February the mid-May. effectively think had dollar Notwithstanding we last a third

the The hoarding X of everything. to or a that, weeks there frenzy first X X was -- of frenzy. was and pre-COVID It either people

but plummeted, pricing fact weeks. first -- few it Then strong in competitive. So the not was it and less withstanding that pretty gas plummeted those was

I a very fine think was a this We year the had particularly last I sure strong with we strong. fine So a year P&L, gas was profit But capital had last in as quarter. I'm quarter, F. mentioned it

Gregory Melich

it. Got

And gallons so the recovering now. can when gallons are pressure on penny any we mean you recovering, that stage? profit that get I Are are at

Richard Galanti

very much Yes, so.

Gregory Melich

in you do a the what's have that quarter? can number -- And give us Okay. you

Richard Galanti

up volatile. regularly gas way top switch be actually to it over been the are the profitable. profitable on a give been days little there, that, little matter could No, last there's bottom And would few lot or to for out a lose been just the I on outlying years, week is profitable many us In can't. big a week, probably still X, and that's and over but fully it But a for very fact the the is given it allocated you those there. lot. days the few that's to that I not The the it's last fact has years that competitive in it that the and a -- just normal Gas who've or of I from weeks, a more a some cannot last be all have less a has one used business day P&L, you. business, a of a coming or overall year. make could known

Operator

Your next Moskow question comes from from the line Robert of Credit Suisse.

Robert Moskow

it I want you the any then past than levels to share kind that income up new picked new the typical any Is I year? members I do of any about Tracy it or And just know, money in had specifics. differently quarter Or of your benefit trending having question is you've I in but you your stimulus wanted the pocket do wonder more consumers really data you've you got member can know, you asked have not growth? if this Is of younger? think demographics payments? from characteristic already, that any membership? to from lastly, their this think

Richard Galanti

income little a bit maybe of that but right people we younger what and versus currently versus helped any member now because year ago, of still area, me. sign-ups X ago share discernibly demographics at in our I of has X years front than have when new younger e-com look different. know that I nothing little simply a average on are don't have a we and you economic getting

as as As it relates it haven't as relates unusual things view when of is in it to big to can't general merchandise benefit we've some at seen stimulus, we -- discounters the a But past some other or where we have seen. our the looked discounters hurt. helped

So but certainly helped as as it's is others. not us my much it guess probably some,

Robert Moskow

not It lot. probably helped a little, a

Okay.

Richard Galanti

Yes.

Operator

the Your next Peter of from Baird. question comes from line Benedict

Peter Benedict

sped your initiatives? question, just sourcing up the Just pandemic, -- I'm you what's slowed the or sourcing latest given update vertical any updated around down? challenges being Anything what's have on curious, just on the first Richard, thoughts your that?

Richard Galanti

-- that mean, a X if full us Yes. way. big got but hedge somewhat plant Well, and those there. nothing look, feed little When job fact but was other a the They're go a managing -- optical grinding don't up good production and we example, a the pretty major directions, bit. ourselves costs, at labs, chicken out think Yes, a completely ahead I'm commissary I in And bakery with chicken way, for have and I in things in then big sure plants feed go couple helped of what we've a anything, costs. in question? done the those meat a either plant, costs we of but go we've

Peter Benedict

wondering just now areas what you maybe before, was had considering there's vertical pipeline, are? weren't in you've but maybe Or the maybe if maybe in initiatives you that that been I if of you Yes, COVID? No. business given any new you accelerated the any seen

Richard Galanti

Yes.

us that opportunity big there the we that think is in sense Costco -- side. of has that there's the one surprised lots again, the Logistics I think whole has

cost For and, supplier sends controlling carries items of reasons, only we that number a variety not to delivery The a times. will. of inventory, the destiny But it if there's it say, a the associated drop-shipped, and handling needless historically of the supplier actually, ourselves that. have there's you with

of volume will we're to And basically at insulation. That's higher we we the on we're continue the as and do seen bigger As we've and and that something able getting better then delivery time improve well. price, get things that. some those improve direct, to and lower

area. planned and in will. plant, about there's if the So money logistics, I probably spent CapEx. one just big of still There's as don't be on think in chicken the going next terms currently to that's significant -- I distribution nothing mentioned you fulfillment, I earlier our

mention, Beyond that, there questions. I other Why take going thing remember I can't which don't one now. more was to two was we

Peter Benedict

now? so self-checkout, And that have. volumes I'm No is the Are club, pleased there? you're Obviously, the been you worries. that that. are follow-up you giving the chain just guys on curious one through member with Richard, How effort what's on across feedback? service right high really penetrated the just

Richard Galanti

couple X at in X, now started and of It's X and where our stacks XX seen locations locations. we of warehouses. we're I've X, a works. percent XX-plus Self-checkout of with in

likes the working. and Certainly, it. it's frontline it So service. the customer improves And

it's So efficient. cost -- and

Operator

from line Ciccarelli Markets. next Your question of Scott comes the Capital RBC from

Jacob Chinitz

of building the especially of Scott. for updated member done couple e-mails. side, in know e-commerce This members, database a you've touch more example, on I Jake a for stay things Chinitz to with on is

be us update any standpoint? from from results can an that progression seen you've where So a And just you may give that?

Richard Galanti

improvement mobile with sorry, and to addresses quarter Well, In I online a XX%. of -- seeing site drive as traffic of e-mailable here. our in last to warehouse is as year, the to number And more and ability the and our better things improving we're think members, to higher Hold conversion terms service mentioned well. we're a we're -- we've I'm we're -- I on gone last already. communicate lot second And by doing of increased the better and we've X -- the members. the doing in rates,

that to things our then that. of So we be do. just I Why make mobile working, think the phases after next of and a more some over those to starting a point talk there mentioned QX to September on around X of and earnings on I'll upgrades in to others months call our of doing, I'll those don't we'll are take it. earnings and things kind out. all of X we're been about -- like next will site getting mobile. and point those continue were improve question the I some call, have pointing X-or-so make Recognizing things

Operator

of line from question, Your Fargo. comes sir, Edward last the Wells from Kelly

Edward Kelly

first now potential one there to a that Richard, going pace next And Thoughts that. open? opening maybe on to when for coming timing that accelerate of China. then you've for is and store about news you you, Any talked next door more good first that in had on Just detail open openings on beyond on while? the

Richard Galanti

-- number in that X, that, a would my those originally mean guess but yes. our we'll or we'd that view years the X. of I maybe X and there's under sealed construction. signed, irons today, X bigger X have over fire X. a are a a few be than before we little Well, there, But maybe shoot lot open where there's hence, even we'd opening, are the and -- was is for And

Edward Kelly

And is opening, for? the when next that scheduled

Richard Galanti

I fall summer. second. a hold next believe Late on -- the

Unidentified Company Representative

Calendar 'XX.

Richard Galanti

which Yes, be QX calendar of would 'XX. 'XX,

Edward Kelly

your customer. -- one just for business then on And

do seeing of customer Or start permanent just Just come remind things to business that any business you you your as with in it to back reopen? you to recover? And damage there's are customer us that mix. of all? think then expect Do sort what at

Richard Galanti

or are yes, our things business our of there's fewer in few institutional a items. in first still years XX you Look, was to or that XX-XX years, certainly, well. done of probably so XX-XX this if XX-XX mean buying over center us, consumer. reasons members one businesses. were change recognize we've a we're other the and, business And the the lot I of think consumer. consumers one I more recognize probably it business, XX to that go back And to is wholesaler the on way, arguably as focus business while Today, important it's business

our are In I the this lot, know. coming -- in it or don't a XXX And have them ethnic, Look, are of think end restaurants, I openings there back. takeout know starting a but many not don't probably don't it front if X past were of others be but every all of closed, are truck or for small how come food the Canada XX the at back. I I me, in was or XX, day, business quarter, And statistics the centers. deliveries this to coming or quarter fact,

probably detriment there's of And So area, the mentioned a view be not there. us well. we of food some our though, sticky will business, little the as bit that as think I to is earlier, in just

Operator

Sir, may time. you at continue. question this are There no

Richard Galanti

I Q&A, X. Thursday, say before At to our would May would mentioned of June sales like June it that thing. release be end to opening the X just for X. XX call ending Thursday, one It's weeks I the May the last on actually

thanks and day. that Thank you, So everyone, have good for a correction.

Operator

This concludes participating. call. you for conference Thank today's

now disconnect. may You

Costco Wholesale (COST) 28 May 212021 Q3 Earnings call transcript