COST - Earnings call 4 2023 | Costco Wholesale Corporation

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Operator

Good day, everyone, and welcome to the Costco Wholesale Corporation Fourth Quarter and Fiscal Year 2023 Operating Results Call. Today's call is being recorded. [Operator Instructions] I would now like to turn the conference over to Richard Galanti, CFO. Please go ahead, sir.

Richard Galanti

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

date required the does of are as made, update company only speak statements the they not these and Forward-looking statements, by to undertake except as law.

press last net share fourth the results $X.XXX for XX fiscal year's today's fourth compared the presented share results the 'XX, in September we for ended quarter figures fiscal per These XX-week or X. diluted Reported fourth to of quarter billion In reported year. income XX-week weeks per came and in release, $X.XX to fourth $X.XX compare operating the $X.XX the at diluted quarter last XX-week billion today or quarter.

the last the Comparable the terms billion, of U.S., in fourth net X.X% quarter sales, a XX-week sales comp. XX-week of In quarter fourth billion figures increase these are for $XX.XX like-for-like fourth of quarter an were for X.X% In sales and weeks. from the $XX.XX year. number reported was

deflation reported the and in X.X% and told, been X.X% gas have reported X.X% company would and and excluding at reported it Other deflation FX. gas deflation gas a X.X%. excluding X.X% deflation U.S., and was again, comp All ex Canada gas, a FX, FX, total and Excluding and FX, International X.X%. X.X%.

excluding reported minus categories. relatively behind strong of -- the some that at and right came e-commerce, nonfoods quarter, on a with once food X.X% minus of were and X.X% Overall, in with the again, foods sundries fourth fiscal terms fresh offsets for and was a FX. some In

X.X% metrics, worldwide the sales frequency traffic States. and comp or increased in United shopping QX of terms In X.X%

impacted or part price and down weakness items bigger average U.S., in deflation. X.X% large in gas ticket the as discretionary in Our from worldwide the well nonfoods transaction was as down X.X% ticket

Foreign impacted price approximately dollar U.S. by sales X.X%. and negatively the deflation relative negatively by approximately sales gasoline X.X%, currencies to impact

Next, reported compared statement, billion or in or quarter membership billion fee fiscal QX income on the to this the a fourth $X.XX or year the of of in quarter income $XXX XX.X%. X.XX% of X.XX% increase $X.XXX million year, fourth so last in sales

ex for adjust you extra X% XX.X% week. extra the a the If be that week, roughly would

extra have the the Excluding around would FX increase been X.X%. week, and

memberships paid QX our worldwide up paid X.X% million executive cardholders, that's under end, the of a end. XXX,XXX the penetration internationally. Membership with We renewal of as terms of paid growth the and from of In XX% rates, fourth quarter of reflecting at our QX. which sales. rate members, we and an The million at just the up from of is large paid X.X%, because year up weeks represent past XX% end figure part membership the over lower during rates and new U.S. and came quarter of at XX members At XX.X in a continues. memberships, million ago; which increase of XX.X%, since -- XX.X Members increase renewal and of little openings ended household XX.X%, year X.X% new of approximately fourth impact at a locations. XXX.X X.X% had Executive end, renew down worldwide in rate now versus increasing international, approximately new QX openings Canada in stood XX.X% the over X%

statement. Moving down the income

is our margin. gross Next

and basis points at quarter in XX basis at year Our points ago, up deflation. XX.XX%, basis fourth -- higher XX.XX% in reported the XX came is gas gross margin up points, came a XX in excluding from

and gas you you numbers and up XX X basis, with up, again, and up margin ask XX, points. Starting plus a XX XX down always XX reported would with up in points a columns, and points; minus fourth on minus deflation, the both points deflation, deflation, few and to gross XX. and gas basis a Reward, XX minus merchandise, I year-over-year the XX XX the a X gas and plus and basis be was up XX; businesses, basis basis, ex X% deflation, X; first year-over-year a LIFO quarter and minus that reported excluding other ex reported year-over-year core up As on ancillary jot ex core, line up total item basis

lower sales, In other gas. core This down points by points, almost own being XX their by points decrease lower our and margin basis of and nonfoods by and margins XX gross was ex by higher fresh basis sundries business on with entirely and being gas. core-on-core a Ancillary basis was XX food were up and driven little. margin foods terms

higher e-com, if million our a points, include represents a of at minus year-over-year by centers, you Executive the $XXX a which basis by a higher from charge. so X couple in plus a were food relative LIFO, recall X and of we year basis sales ancillary basis higher pretax look and penetration If from optical, gas those coming points other LIFO all of business negative pharmacy, court, X earlier. X% excluding other, in had or components year would things Reward, you QX, course, Members. And last That basis deflation. points, on

basis, on basis improvement year the margin. this a in While point of there showed million was year-over-year small that $XX of course, a charge

a year. in relative sequential We amount I'll QX. little of improvement later. in a had year-over-year the small continue to talk still see the day we That's about charge inflation, first small While to the that fiscal

A final couple on margins. of comments

has answer inventory a is the couple and The to due points, whether are believe, years, shrink results. no. the we past about increased of in versus it our recently by historical increased often has basis in results of we In several First, rollout shrink asked part, shrinkage our inventory the year past dramatically self-checkout.

less by it X year, past more. point than basis increased the has Over

big a not issue thankfully, no, us. for So

margin And positions second, than to year inventory this due improvement the markdowns fewer last. due in has been part to year-over-year better

inventories overall good in Our are shape.

Moving on SG&A. to

by, deflation: quarter, down minus only the up gas reported the a earlier and basis XX from SG&A X X gas basis being and X.XX% columns basis ex excluding really X be operations, deflation, those minus in and XX; without or points, up central, are reported X.XX%, minus and fourth and items. minus would core jot X, higher XX deflation, minus year Our numbers, up of points. XX Again, points both the

compensation, were others stock and preopening X The other. all

margins and XX deflation, up ex total XX basis So reported up were points. points basis year-over-year gas

by midway lot gas so by line, full as gas not deflation, out the flat, weeks million the XX of ago, X income $XX QX higher deflation of this year-over-year, other was this the normal $XXX and so interest both well of sales quarter top-of-scale XXXX, of in at deflation, by higher reported million and expense was mentioned, by went as cash operating year, the income this weeks typically past this points impact increase included an than X This income year being And year. higher negative million read last lower is both through a year as again, large year interest XX higher July versus $XXX course. basis, again, a week. a part higher terms leverage other gas being due line of and the rates a without X there. items the in top-scale and extra basis well sales core million of in on ex as extra that as and were March In last of higher for week Central million higher $XX with growth operating versus the year-over-year X, change. Below came XX, balances increases effect wage ex operations additional I interest $XX to I X by increase. impact Interest that into driven

favorable In addition, was FX slightly year-over-year.

first fiscal in relocating That net X of so rate, tax as quarter X unit. incurs XX -- international buildings U.S. year in year, are of rate as income year-over-year an X quarter, fourth tax to In is income up increased was the higher first the did new as each earnings, attributable QX tax than as extra we new net Japan opened weeks on in net the year-over-year. XX.X% last. A XX.X% X fourth the our and reported rate points in well in with new plan This year, a Australia. other quarter, All Overall, this X overall higher well the in of relocations. items the or in full which XX percentage the compared fiscal And few warehouses, in XX% In U.S. for full penetration Canada. of X% locations, -- of and last week in year the rate fourth X quarter note. 'XX, XX XX new primarily adjust units in and a finished versus increase terms China to in in our X for opening U.S., QX 'XX units the income including X for net are quarter net came and this we are new we you the X.X we if

we've included cash the fiscal but quarterly for CapEx QX billion. of in $X.XX totaled all expenditures, actually billion. report, And was flow capital spend it $X.XX approximately Regarding the in 'XX,

FX, e-commerce. fourth to the as E-commerce quarter Turning sales year-over-year. decreased ex I mentioned, X.X% in

up furnishings, our the improvement quarter QX of -- electrics, e-commerce note. speaking, and year-over-year quarter, X% improvement relatively were In versus ticket big down quarters, other couple items half X of and fiscal the just sales. A previous home year-over-year, XX% e-commerce discretionary, our and showed ticket in good hardware good jewelry departments results XX% respectively, over majors, results year-over-year big with negative, still making While fourth in and those showed down this small QX. our

were big quarter. Within up ticket in appliance sales of the XX% the over discretionary,

calls I'll people gold bars. on Next. that hours, member. And a load Yes, selling out a few we point them we I've lastly, limit but of Costco gotten Second, been gone couple site, seen within online that they're the have X-ounce when X typically we've per and

product apparel continuing and ones kitchen and to bicycles to areas many XX currently We and and suppliers onboard on pet and to from we're to improvement continue toys additional in home home to accessories to that. the costconext.com, like. electronics to sports We grow and have

comments few Now we're digital always a efforts, e-com on which about. mobile asked

As during that I made. of were when last the our early said is call, progress mobile transformation digital innings in we being I efforts, quarter earnings discussed the

page recent account terms the redesigned digital In the in membership we of recently card. additions and upgrades,

for order box then redesigned and also messages for a in the customers the We app improvement glasses. And a managing prices there recently, shopping viewing larger are space. ago, where our glasses ongoing you shopping in there. and bar such extent membership optical expanded added search prescription We've with months seeing try We've on can warehouse Costco store savings, there's pickup, our a app, digital as app. lists, few a to lastly, opened header gas offering advertisements selling and tools an card, right digital an them to virtually in-warehouse the gas station

from soon, able inventory and barcodes search you'll the And warehouse app. be to scan

are the With far Store are a the Costco stars. up X.X from and App XX% to the installs gone year, XX% year-over-year, X.X thus dismal past in our has stars app site the made year-over-year. visitors improvements Unique currently up over rating

So is all made. all, progress in being

in of 'XX, was couple regarding range. a in year-over-year X% we had recently, estimated inflation inflation. that X% QX to Most Lastly, comments the

in range, during to QX the for X% X% inflation the downward and it's estimate trended Our actually quarter. was

trends these will inflation see. continue. have hopefully, So We'll to

we'll will weeks I Finally, closes. With Q&A of Wednesday, October announce open up it market sales X the upcoming October terms for September to Thank after X; results for it in Lisa. ending Sunday, and releases, turn the our on you. X over back that,

Operator

We'll Instructions] take Gutman with Morgan Stanley. question our [Operator first from Simeon

Simeon Gutman

And it? is increase membership words, this without I without don't point -- then another of part a weight is question, against I hedge other at it? question guess, go membership there mean In feels a of point but part first year the which at you fiscal price tongue-in-cheek is there is inflation? part increase of, plan? is, guess, the a guess can which Is a I I it model my more

Richard Galanti

provide plans this you or my really time it's is tell not. We a It's And our June not good, attributes terms when when in amount of to X member question we members, frankly, longer it member and years looking you'll a that know. if more some we growth. And about when, greater of Well, into increase -- answer, it's and if the -- certainly our pat even the loyalty know say, since values We course, at it. We'll but occurs. so can't we're happen It's little those. of of if. at in around you a see feel continue an all increase of point. than we to 'XX, than let

tuned. We'll whole about lot tell not a you can But stay you there's So that. keep posted. I

Simeon Gutman

ultra have moved as And seen enough. or have prices Fair then short impact the term, on effect gas you at any spending up, store?

Richard Galanti

the items items, over improved with heck the mean, the the call, that you like mentioned to in quarterly, lot a or and of -- think that consciously seen just a as added to we few relatively whether think ticket indulgent last we in been up the discretionary, consciously call, and if the -- I months, has Big I do we there's of what items, months I in numbers items. last it's report little No. I'll mentioned impulse I those tick smaller few number at online items a the but look snack the ticket XX fact added online more we've while basket change. that I last not monthly XX,

haven't any what have that's big overall, to seen prices. with as But we happened gas to correlate we what's big or so change And change been merchants. do any able

Operator

next our from take Michael UBS. We'll Lasser question with

Michael Lasser

pace month, to to X% saying that. it ended than you may be and quarter on be inflation this that Richard, is remarks suggested prepared X%, even lower you this or your

volumes, Costco So of way that's a will continue Or of because been so the prospect for should when expanding has reverse, are invest as Costco happening with nicely? margins outside time a the price that experiencing? drive to at to prepared look underlying be deflation either to what's costs some core-on-core especially in

Richard Galanti

but the the the is And the saw big beginning of way trending we little some downward, of that looked level And we merchants, Well, of the little, stuff. a some end a on a first on come because flat I if little. primarily when the of side, which nonfoods, end CPG it as the if months, the that up you is on those in of or the to and in I'm steel the we it's then year-over-year the talk look down. and -- was not ticket were that big at and X% of nice down fresh to the of that's commodity will, to year food we side. It's partly a the all, on comment ticket on the right now to down on the the if cases, some at the but like, costs each -- to weeks, freight, sundries or of quarter. -- from beginning X% the X -- quarter, roughly, months -- you X% X XX at of But X% during end saw sorry, we saw internally

So change, to lower those it it's Who trending that big that happen but we sales. We fast us, to prices and as to being always brings? And knows way. the pushing not what a at least as drive as we're tomorrow things can. when them relates want be first said,

that seen with we've our think traffic. I

Michael Lasser

food are on are is saying is up to clarify, down you're and So merch year-over-year. average down. Shelf-stable what products just sundries, Gen prices year-over-year.

And you mentioned? driven in deflating. Or So continue driving that are to traffic? the at -- it factors be increase box -- Does that way by to from see drive deflation that to seem the you as would rate just you like expect store a you this it totality, the here? would get the does which is

Richard Galanti

I I Well, first or of one misstated maybe all, you want correct misunderstood. to that thing

like Food is envelope In And little everything pushing the and terms we're to that come I'd our CPG of and a from recognizing goods that which up $XXX fresh, fresh barrel. with certain bit. is to as approaching flat. suppliers, and packaged freight the the have think is a pretty we in much is as headline oil goods, tends sundries, as can sundries that paper costs today much down, be

heck the knows who So tomorrow? happen what will

Michael Lasser

to that items, store? going is as long question this delever see influence come to which influences in as under your pressure, long labor follow-up SG&A member think is labor or ticket your to how going big managing market because just other you sales My discretionary about under is, Okay. big anticipate for you under as the the pressure? it's these pressure and as buy Should total big ticket's in ticket important and

Richard Galanti

'XX seen we've the operating of spring a call we that when of over couple over it of had to outside frankly, would we XX%, was now of was below year, COVID ever still spring X%. such years kind the the and the Well, the And of that. over I to able below XXXX. before years it our COVID, it SG&A over It's we leverage be during get when think last had X sales XX%, said slightly

fact, we we ways last of in to number But -- SG&A. all leverage inflation no the to question somewhere the X there in X.X knows say somewhere X on comp looked used particularly the notwithstanding of several need who -- quarters -- that. And to we was but positive the couple year-over-year or recognize to at to time, then. basis, so with you range. used little quarters, we used do very seen have get I've the want what in do negative drive Recognizing back to we when deleverage the when best the last we'll can, that some and sales, we So we've look, a but -- again,

change the we it wage do. know we're terms going we to where don't that increases done not have. to time. we're with That's respect And of certainly in what exactly service level but our employees is, certainly going of we've we So what over

Operator

next Grom from with Chuck Haskett. our take question Gordon We'll

Charles Grom

Just on particularly actually units, any examples if or could in if sticking unit in to compress. on the seeing inflation you declines, to you're on you're Curious either talk seeing or improve price there's GM fall elasticity, in that topic prices start seeing all offset categories those about. where here you're them at what food

Richard Galanti

prices, with we Well, would call we But on we put economy items, we to there's the we as the thought the as in in bit quarters buys and discretionary. a that When talked predictable, the concerns slowness know of much big not we about when on have medium-sized few but TBDs, yes, discounts, see some start used else. on going was not hot everything I what's that increase, but did ticket remember temporary as price hotter to We would a ago got the little perhaps again, do -- it's I it impact as of even what items, units in be. it ticket when say, with.

Charles Grom

Great. I go Okay. think -- but I guidance, ahead. you provide And don't

Richard Galanti

little down. on item of price sometimes see taking a It's meat to when food the easier the we're side that a

Charles Grom

Okay.

you parts starting to are as So certain see some business drop in then. increase prices the of units

Richard Galanti

that. nothing of nonfood by there's costs when even items, some guaranteed. see way, raw material back -- we've the up and of ticket price declines because But seen And $XXX ticket, freight the Sure. $XXX big picking on it's sales some on we'll big and on

Charles Grom

obvious remember know about you And be when day. give but put help are takes puts that X the perspective? right. the thinking SG&A should back should about actually Clearly, I modeling there that we curious, be tailwind. did that on out a don't big some and All in I about? the any will line things be Okay. gross the LIFO directional over other lap do But be should But we just you next any thinking guidance, margin and thinking quarters an from we

Richard Galanti

certainly No, down. -- year an LIFO started to impact slow not over one starting the really. is to was I and mean, last that

but won't right continues, Assuming now, there forward see. we'll going trend much that be LIFO for

to this that, the and pretty we'll at do on, going that's -- this that including no, what year. that if see it's to move had XX she or goes. everything than being net well they to in mid- on We But that margins new that's opened leverage year the say to of doing some year. been there. enough standpoint something Beyond We're well in still given a do steady hikes we've wage a needle little high the ago, overall, anything, as doing look optimistic happens. think pretty but not well. the XXs competition I onboard anything. No, future And we're opening. our terms about past continued we're with I'd I as sales weaker We're of We we're units

Operator

next our We'll Baird. take with Benedict question from Peter

Peter Benedict

Richard, mean I $XX you but us just give curious the LIFO. even they I'm were last as first to why is charge one a color what the million Can one I just just small, [ on drove? more maybe just was curious. ]. little

Richard Galanti

think food on products, like some Well, and even was like I fresh things deflation eggs inflationary in though then beef. things in it was one. trends some And the there was -- some dairy -- gas there there Yes. of well, items, was in was

do you have Beyond -- handy? that that

Unknown Executive

[indiscernible]

Richard Galanti

it's million. I'm lot. but a Yes. but on... a $XX inventory, $XX -- small still of It's number, really not billion small, I on it's mean

Unknown Executive

[indiscernible]

Richard Galanti

don't I -- the that. all have That's beyond details

Peter Benedict

No, fine. That's that's fine. Yes.

have see, say, X, the would there? to kind renewal in we up. tend so what that or rates year stuff, around reference framework you context the to to open U.S.? remind X, open what all Can the you to the outside let's renewal a us turning international of that. in rates see year about on just When membership members many And it's club then give you does you the to club trends? broader some some next stuff, you benchmarks new maybe how new us see in the international tend Just compare frame just sign interesting And then How of the a impact. you really the maybe and disinflation U.S., up talked of

Richard Galanti

new Taiwan, me, or have in the of the weeks in XX or it's speaking, Japan XX including open a exact new numbers generally Korea, whether of of anywhere XX,XXX sign-ups but over we'll well Shanghai in front Asia, members. of from unit, first had China, don't I couple XXX,XXX a XXX,XXX. We prior when we to and extremes Minhang to opening, like went opened

that first in the Now renewal renew. And year is and increase we we to as that don't years numbers, don't usually see to and of continue year. And many low -- U.S. overall every I those of as go high of our even some in those don't it I -- -- it I news to looky-loos to But with I a events XX but and that guess, mid- XX-year -- probably opened. the -- have years takes get national we the that's it back we types day be outsized local wasn't we few extreme, history can't -- what of as XXs wasn't might first it to the should My mid-XXs. and didn't the even was numbers

come these some that You live had a lot or not in, too in away people are of to maybe far choose coming of markets that back. up signing

that we're to grow. So continuing seeing

that simple, of more first it's area units up increases number. that the year were sense that the opened a even just for if X.X% renewing So ago, that decline, the around time, that they you that a in couple slight

Peter Benedict

No, understood. Last Yes. question.

many are give then the heard think us and how a terms planned sense of many you XXs Can unit in how to U.S. you would for be of say high those 'XX. in I of I international? mid- fiscal opening

Richard Galanti

mostly XX-plus over we've course, in opportunities the volumes, high going we're and percent U.S. U.S. plenty openings overseas. to more given finding in the my Canada, which, our the in more view, got U.S. -- on and of years infill

Operator

Rupesh from Oppenheimer. question next with our take We'll Parikh

Erica Eiler

on Erica Rupesh. actually is for Eiler This

I quick guess, now. obviously, those first, health out I mean roll give the restart. impact I of here was on in maybe there as to about student this on a feeling right loan your some starting you how consumer could So concerns hoping maybe download you're

thinking front here, out on on some private of in on about maybe you're Anything can note color So of from of as maybe behavior any concerns terms how label? you those discretionary Anything trade-down well? consumer provide that there? or

Richard Galanti

do renewal look, well. continue great. and And -- to to is year-over-year first very Being all first X% rates of up and on X% Right. very be traffic basis continues Well, a our our strong. foremost, continually

So see some every that We When numbers overall, makes better. you'd to versus compared on to going that our sense we the back. not we competitors, some that's our weakness. of we a us to areas overall look tend big-ticket in do discretionary, category starting but in point. It tells biggest where at that's MBD where are see us --

a number negative a even lower so number And here negative is elsewhere. than

everybody's and we -- impulse So in some partial again, what brought do get basket. that are smaller items in extra ticket item to an do? We items snack

but the price come our -- TVs in are been good, yes items. average bringing newness, So unit and point has new those And in television. Again, pretty down. there's not a whole sales lot

always technology don't As new there. you they yet that's haven't seen there's just yet, a when new do stuff anyway, lot whole and we of have -- deflationary

Unknown Executive

good. is Gaming

Richard Galanti

the from starting that's good. but to of weeks. few off I good toys, only that items bringing the right seasonal is so far. in mean But is Gaming now. early. it's Everything to decor in And of one -- few one last not the new. are we're Christmas well trees the It's one

Erica Eiler

-- helpful. Okay, really And oh, that's no, go ahead. then just

Richard Galanti

else sorry, you ask? did I'm what

Erica Eiler

gears. shifting just then And Yes.

wanted just driving media, retail of on so your media to a I touch peers. focus significant retail on So at some obviously,

what is doing this and bit your if maybe little that here. So talk the bigger area opportunities in sees about team a you curious could just Costco

Richard Galanti

competitors app. mobile Well, not part of doubling But the our of the some digital is these we're giving some certainly, and of And that in out with talking and about quantifiable the things we're doing with couple numbers numbers. that come. X or my working well, on people we're of and some to X are out that next there's actively as us In more fruit We've it. a helping low-hanging hired there, and years. are view,

Operator

We'll take with Citigroup. our next question from Paul Lejuez

Brandon Cheatham

to This your us wage landscape, anything inflation wanted look next -- And to was Paul. similar I you wondering, do when quarters? what you the are on trends I at the competition? wages plans seeing couple your that of Brandon you pressure in for on how the can compare help is front? over Cheatham retail just your Are with

Richard Galanti

around all, retailers, top high our I'm $XXs. employees, of the of contributions package first average of it, contribute only there, on -- irrespective average wage a on we've very XX% hourly -- out on hourly. that, wage top a Well, always And her service. to wages, in his using here in I numbers X% our $XX, our based years that. And from of an to the top rich of health to on prided but XX% of X% like ourselves That's is contributes big many or or care of best what less is -- XXX(k), believe, U.S. we providing plan pays XX% the where approaching we XXX(k). benefits and U.S. employee anywhere are little hourly employee than

on plan rich you've full-time got contributed basis, with care XXX(k) in XX-year So very making, his with or cashier a a mid-XXs to $X,XXX a $X,XXX plan. the health or being another her

compared So to anybody. apart we view stand in our

of it a most we, had the years, frontline been anybody on Our we year. like or increases for rather. pressure, then, In the kept as had than with to our normal premium have premium we generally have that we've from in wage many beginnings there added workers there. kept And since every the X% we done the X do starting -- -- a during at the ourselves. retailers, $X least end, full of every We every top pressure year, top-of-scale COVID, comes year. at increase last knowledge, X done $X few longer, And

feel us, that So and we're view, in from pressure the our we'll we of competition way that regard. -- our comes ahead in

Brandon Cheatham

on think Got iteration next it. mentioned the you I And helpful. That's the app.

able customer if You're going your the how to in barcodes. could is be idea be to stores go? and that to And that flow Is help the going case? scan scan the able that eventually operations is to

Richard Galanti

that store get location." the you and and scan, for on a going can think scan can't out, go this to scan We'll -- order end item at where and able the they is "Hey, on we're to of day, I numbers merchandise there be don't start say, the big your I the And that's as No, well. currently go information to even more somebody getting to but the member yet. is of go. a to first of business positive come have prepared product online with. goes local when the also what's get So wants be knowing to at part think in just

Operator

from Melich We'll take next question our Evercore. with Greg

Gregory Melich

Richard. X had I questions,

stabilized profit. I came that given years, we it higher prices improved lot, as the if or First, love back that curious sort on months last X.X update, level. the I'd down of in volatility I'm to know it penny the at an it last but a if where are gas in XX

Richard Galanti

all last Well, and us we don't stronger for we few Gas been give specific retailers believe numbers. in has the years.

weekly a strong. was earlier year a In last I think it's fourth This quite strong, on recognizing its quarter, from was strongest our which fact, it quarter, but QX quarter. XX-week down year, basis still it was nonetheless strongest

the it's profit currently the so the all part of supermarkets, picture And the that retailers world. big of the Costcos Walmarts, gas, sell of

the literally business. -- daily, so prices that it's who's X be paying when turning going or a profitable our days of turn It's given down view less -- has when when every X and going a used almost is I'm it So the are up profits we been gas X price ago. little it the sorry, is still up, days guy fast, to it street --

went less when we little gallon more. and a the We make a sales little down made we down. per price -- so -- gallons went And --

it's be $X.XX. from at gallon, per it profitable. the mid-XXs position. our It's make average, ago want the driver still to more a in little we last equation, average, be but that more gas, little allows make our a about bit seen at quite direct say, which wanting be is $X.XX day, the quite to good bottom competitors we're think But feel seems of it profitable, end of to I our is still our to years average increased up. in nonetheless, over gas. Everybody which view, the the, to true, $X.XX now a on spread us, line to still in the and down range not more couple can year of is I of and It's competitive even and the range from location, an the profitable. improve We've versus every competitive while

Gregory Melich

And then That's helpful. on my cash. is follow-up

$XX.X it finished you think billion. with I

on or last the think and more you you more I but time What about... holding is keeping in cash you how XXXX. had positive then want you how interest $XX now got are Does make on that it, a thoughts cash? much when Just billion tax? dividend was you especially to you think rate interested a that pay there special your need in do

Richard Galanti

question of it's we've to think dividends question DNA. we somewhat the past. end that membership I again. on -- some if, It's day, instead to like little done a multiple. does at look, special at make selling the in you our point, kind of X know. Certainly, answer At on part not earnings Again, that the money do of the not it harder it's let that may we'll fees. but of a X%-ish Well, about probably other the we're the It's XX%-ish with do. when, ] of earning [ But a money

to on are earn assets. our We X%

something, and and point, at we'll wait have some do see. So we'll to

Operator

with take We'll next Markets. BMO Bania question Capital our from Kelly

Kelly Bania

that's year years? any that compared quarter. more first changes times, another member could Richard, you in starting either customer? growth, this think of or just many, Membership out Member spend Executive million that for about almost the profile to I talk quarter their wanted how today -- huge like in ask in upgrading I've X curious the And as of asked to Executive. I the if that this many that upgrade it prior just What's characteristics seems was but And Executive

Richard Galanti

when I people in up more way every Executive advance. higher more the from be a we sign An years, few I at buy year we level. that get and Executive Member, the to of first Look, joking time, to job clearly that over was the they're of higher an every regular a a And I better over we will say, buy will year. think time, the -- lever done we've value all, communicating see so first Executive Member member, over more starts very of Member. smart that,

the or really customer millennials older going everybody on of when new any members, still that have have member that all we or seen. I like that. ago -- doing those did age with how things to years specifics of are We're are when at Z how the next I we've getting we that's look average we the We're is, concerned we still old -- our with new used whatever And now. we to know when So things it's our be XX share the getting the with gen members. get Gen items, organic. and A Gen whether an is. don't profile profile we thing at characteristics same we're our -- look numbers of

Kelly Bania

might Richard, did or I of And in EPS for EBIT terms impact us? extra But you have missed anything the this. quantify week or

Richard Galanti

XX, whatever just percent usually is But it something, simple just I case math math. -- that's equal say that do. That's it's [ good the or income, XX quarter. down could of as X would our It's in on takes or number a -- quarter the mean, net to about simple a we XX-week as No. and XX to ]

Operator

with next take We'll TD Cowen. our question from Oliver Chen

Oliver Chen

now What we being look will about And negative, then where them ticket at forward trends well starts going ease. to are positioned. also seemed that are thoughts and model to compare how overall as inventory relative we your Richard, sales? they

overall. The nature for So e-commerce. does on inflect question that imply partly the the that will comparisons ticket same of

some well? can the help expect of we As you the headwinds, to anniversary comparison as

Richard Galanti

levels our few [ about that they want, are feel than higher little There bit the a But now. merchants as few we Sure. sure I a a good. a ]. mentioned, they're right Inventories, departments overall, little feel very did more inventory very good

at year-end just payables billion. stood you inventory and under at fact, look In $XX.X $XX.X -- stood our at fiscal billion

running So now. they overall, -- is that to to we used are inventories XX%. new. on fluctuates. be used I We our this XX% simple where feel -- the we think It good about above running to ratio is enjoy But something XXX%

things well. And coming in chain, time, of terms we feel on supply about that in as good

anniversary relates as least help big more the well, some it mentioned what weakness, -- to of weakness. ticket sales. this at I a we'll a of few I will anniversary as inflection ago, -- Now in quarters well, we that, when think couple your I we said, several saw months,

bright with we're, I delivery in just also done help. not great -- all not e-commerce, appliances not there. to of virtually that's all and this of e-commerce. we've warranty but that's the value one that and that thing better items value mean online, like -- of showing these price and our which, think like the competitors job it's help, the going showing I spot So certainly, would that think same I to some -- in and that just again, nearly includes than to the e-commerce was a the more things so our of case, item, and going

Oliver Chen

great future services how love in a while. role a EV ones. that another it's thinking had question Instacart. for It really Also you're is about short on Would of couple like any thoughts seems play will partnership a a charging Just customers. had you've for we

percentage happening a the total, Finally, geopolitics? proposition China, but of market or the -- changed any Has important there? for What's anything value long an it's it's smaller term. the

Richard Galanti

question? Okay. the was What first Yes, had and I third. second the

Unknown Executive

Instacart.

Richard Galanti

public, that them now. added in during Instacart. the we nonfood last the good will. We've And -- with a I know and they for with the lot of I of still just throughout we're And be if carried some prescriptions a are U.S. you car Canada. them -- items can sales COVID, the we've think, day, over growing. partner added doing, At We use a good gotten they're we're questions. They're partner us. end went the so them. good

customer. sales, so it add, though, good the a no, to in we our I while. Yes. to Costco into those regard purchase relationship their employee to because sales e-commerce then take register a the at for and And it's might include our it's shop, to coming that not been with that has warehouse and sales,

or mobile our in not sales. e-commerce that's So

charge As less it, and a locations. And to going If for wait there's Not it charging, be whole it said. be of testing to number EV relates at in lot we're to a see. we'll a it's Costco.

opened China, we our to no, ago just location. as it a few And weeks then relates fifth

in think X -- the years I calendar so X before X X ago. fiscal we'll locations August, X Shenzhen both more X.X have We year, X other in have and of in planned 'XX end from early this up the

And have well overall. our treated there so far, openings us

Operator

Truist. with We'll take question Ciccarelli from our Scot next

Scot Ciccarelli

and us mean understand essentially to drop-shipped is I your where do Can you if process? you case, delivery a how Because that you business e-com. bit work issue over help of own Costco before Next product products took the became the were control their your Richard, that's thought vendors? from you quality And the to used works? it similar distribution how the better e-commerce guys I how an for process for

Richard Galanti

most Yes. part, pretty Costco with well-known these the items brands. the they're, for Next is curate drop-shipped. We And suppliers.

well. an recognizing the all home. had tend doing items issue we And that be are Yes, we so to -- tracking information they not shipped far, have we're that, have to and a easily on as

customer that. can you or few was issues is to a ago I difference. good relates purchased costconext.com. this, so far, We've worked items there about you're Years That's costco.com us. when we a it's But right on well point. very all as quite did tell So had it for

Scot Ciccarelli

if or deflation, margin? inflation Okay. seems getting Understood. wind the like do If me there. in there a could up And velocity, we we're to it outside deflationary to of being up ways traffic environment outright then deflator question. Because margin improved protect unit another wind are a to that

Richard Galanti

still pack if business at best make day, what the pack, a best our But the But the a I us. again, we'll with I little we'll guess. is that's out look, it'll We're value disinflation, and XX a there's of XX of -- the it it about. show show take end all be favorable we'll us -- should there. impact because think Well,

Operator

next our take We'll question...

Richard Galanti

on deflation that Before reserve million, at a the million disinflation, be -- got table LIFO $XXX that of reported comment disinflation. a is made of or part tailwind if another be basis, you here will a was that $XXX do, there we've will

Operator

RX Scott Mushkin take we'll next And with from our question Capital.

Scott Mushkin

what's negative? it out if inflation we've for -- particularly that wondering what volumes, think some But Just seeing guys there. about in we're now on a looks you don't down talked come competition I out are like it. there like

Richard Galanti

while -- as seen as other really I think, they parts and see items. over now, years have And lot direct, particularly warehouse on are we've but sure and and different slightly club, pricing, don't to we competing of do, what a like competitors with time we few making we've we're of whole I tough that, we. in a a for their so they things. BJ's, sharp this get in -- what They're we're improve respect said we to are model, our certainly most supermarket membership there's improvements -- from there's competition Sam's look, it's think perspective. and the and when is model we. do fresh -- things as -- I they've a our continued so don't directly not much

of piece a, some see growing view We're NPD $XX like that appliances results called our in we're we yes, appliances evidenced that, still side, as nonfood I a these on share, thing by numbers recognizing of the and small whatever, that, a business. but Beyond rapidly. gaining is the on is things the and just out billion it

Scott Mushkin

then recession, membership but this economy not fast? factor Does earlier fee philosophical, there membership be And like recession, if does it How Does matter? came maybe raising company will in? slow kind is know look the rates I it the and the of at one. about raising it up

Richard Galanti

matters every -- it of mattered -- 'XX, it And were economy. we and think kind inflation years post think day June headline high I as in really does approached it X.X we I the the was matter. the

we If a longer, kind be it. little And so And of doing feel loyalty. so now. got that's we how great. we're We've right great wait

Operator

next question with our Horvers JPMorgan. Chris We'll take from

Christopher Horvers

in Can about forward? that Is nature shouldn't up were promotions? extrapolate this mentioned successful that in there you gain margins I that? about lot vendor-funded think sundries. we core-on-core onetime a anything that what talk your drove So you Is quarter. food and

Richard Galanti

-- Well, markdowns LIFO, less, lot I were quarter-on-quarter. think Yes. from aside a

down. of a our on all for no of piece Particularly Costco, the that a side, had I markdowns So have basis course, was on quarters in including all nonfood a us, Last year big of were it think was those a helped. it. year-over-year -- And row. inventories XX% year, X we ago that up come

out back the probably was the single in made And on dates. on we're comment here, A was track those thing numbers. Yes. in and at that biggest seasonal that so table

So certain but store where late. out, items move thought a the a it X.X to as some to it, came we're to them -- them -- markdowns. we year, to store years in where have having not was was not seasonal do And to year them ago out did best we we just way took -- much move extra

helped. that So

Christopher Horvers

follow-up a around then question consumer. And the

you you the seeing of notebooks, through season? a basket iPads you came it positive about just become how big year big the holiday some important that during You a categories unit the holiday. of feel part also of back-to-school upcoming make time around that season. trends? part And basket There are are Are seeing does electronics the PCs the and that are and

Richard Galanti

Gaming is up.

price average up little. some. Some down Apple have are of Tablets again, and up but is the audio the units are a up. TV products come up points are

Christopher Horvers

and notebooks computers? not But

Richard Galanti

yes. answer, the was down Less No.

Operator

next John our from Guggenheim. take question with We'll Heinbockel

John Heinbockel

the total, guys U.S., expanding possible you looks number, locations And thing, market you about density? at how at talk right? you given you with of right, like, that in When what cannibalization in maybe first if have U.S. now put, kind doing is closer -- in can a Richard, look now that's the you So together. it just look the obviously, there mind versus you're

Unknown Executive

We another XXX. could add

Richard Galanti

Yes. Yes.

could the And XXX, easily centers, changing. top view next and U.S. many on the years another we just XX business in however that Our add call but keeps it, that's over that is of number

XX. now X, we're And at would the -- we'd then, today, will XX be asked U.S. be X if years were today, had XX, the XX-XX be in If U.S. I ago by you still. me back where of we'd we outside say XX-XX

ago. volumes higher It's more here. And of we the much evidenced ago. sheer units it's would So have years or today just that opportunities the our X years X X by X we're are than units versus expected doing finding or

that still that of we runway So regard. lot there's think in a

John Heinbockel

And I it's assume I it interested I case. a know still argument particularly cost then for just -- it, make in haven't quick that to a And been There's you think hard consumer reasons. your side the right, still work. follow-up. guys BOPIS, that's but cost view? The Is for the of

Richard Galanti

our is That still overall. view

a bit we mentioned on and TVs items for to Instacart basis are little with big-ticket but up as see we're like the to store. on addition happens buy well, in-store testing In nonfood some thing some limited a pick online in items doing I with what what

Operator

question Feldman last take with We'll our from Group. Advisory Joe Telsey

Joseph Feldman

clever seemed that about, I know you P&G I'm with like are across vendors. more the I other seeing wanted something, CPG I card guys, a with get little what a wondering them, to promotions guys? ask think, And just it regularly funding from they back you're the seemed. you promotion, a gift did

Richard Galanti

we a Yes. that couple year we did for as we will last it We've if Well, growing. the say done again. CGP, years, of and did actually, it well. It's

drive we that do what excitement share types we So to others other yes. And we once with with to way. that one, that can of things see want

of short sales time. a say yes, can items probably in for because drive we I'd things bit those and really period increase those little promotional of on things So available more of that inventory a there's type

Joseph Feldman

that season. And like this are good you're a than I thoughts are I That the but to Right. guys makes normal? you sense, is that the maybe different goods know about the mentioned Christmas same year? on you guys you do. off share timing, any holiday start. you yes, earlier approach the But to then volume feel approaching holiday could

Richard Galanti

week a came it's X things earlier, earlier or some early and... it's and in If

Unknown Executive

[indiscernible]

Richard Galanti

back we Yes, dramatically we're to before which earlier. disruptions where member. we we're in COVID, approaching compared of a it screwed in probably early were terms to at things. couple yes. go Christmas, nothing at through, things different before don't a unique the to a talk toys, And if some But we that or it, having want we're sell to the Even on soon. we're we'll lot weeks just stuff We're around up holiday, slightly questions. thank of having is a you good answer to in chain It's But mark we'll how here. aggressively too. Typically, have risk them bring Christmas. Well, to to this And things last of you, like if had, in little of not of sell down because out, few very the they're and terms they to everyone. of not supply to be approaching you

Operator

That does conclude Thank for today's and you may participation, presentation. you now your disconnect.

Costco Wholesale (COST) 26 Sep 232023 Q4 Earnings call transcript