$COST Costco Q4 2024 Earnings Conference Call

00:58:33
https://www.youtube.com/watch?v=aGXtU3E8aLY

Resumen

TLDRDuring Costco's Q4 2024 earnings call, the company reported a net income of $2.35 billion, reflecting a 9% year-over-year increase. The call highlighted the opening of 14 new warehouses, with a focus on expanding both domestically and internationally. E-commerce sales saw significant growth, particularly in appliances and furniture, with an 18.9% increase. Membership fee income rose slightly, and the renewal rate remained stable at 92.9%. Costco emphasized its commitment to employee wages, with an average wage of over $30 per hour, and discussed challenges such as inflation and supply chain issues. The company plans to continue investing in technology to enhance the member experience and drive growth.

Para llevar

  • 📈 Net income rose to $2.35 billion in Q4 2024.
  • 🏢 Opened 14 new warehouses, expanding footprint.
  • 🛒 E-commerce sales grew by 18.9%, led by appliances.
  • 💳 Membership fee income increased slightly by $3 million.
  • 👥 Renewal rate stable at 92.9% in the US and Canada.
  • 💰 Average wage for employees is over $30 per hour.
  • 📉 Gas sales were negative low single digits due to price drops.
  • 📊 Focus on technology investments to improve member experience.
  • 🌍 Continued commitment to employee wages and member value.
  • 📅 Plans for future growth include expanding warehouse and e-commerce capabilities.

Cronología

  • 00:00:00 - 00:05:00

    The Costco fourth quarter 2024 earnings call begins with a reminder about forward-looking statements and the associated risks. The management emphasizes their commitment to delivering high-quality goods at low prices and highlights the importance of employee culture and succession planning.

  • 00:05:00 - 00:10:00

    Ron Vakis discusses Costco's progress in fiscal year 2024, including the promotion of 95 new warehouse managers and the opening of 30 new warehouses. The company is also expanding its e-commerce business and improving technology to enhance member experience.

  • 00:10:00 - 00:15:00

    Gary provides an overview of the fourth quarter financial results, noting a net income increase to $2.35 billion and a 1% rise in net sales. Comparable sales metrics show positive growth in the U.S. and Canada, with e-commerce sales up significantly.

  • 00:15:00 - 00:20:00

    Membership fee income increased slightly, with a renewal rate of 92.9% in the U.S. and Canada. The company ended the quarter with 76.2 million paid household members, reflecting a 7.3% year-over-year growth.

  • 00:20:00 - 00:25:00

    Costco's gross margin improved by 40 basis points, driven by e-commerce growth and better gas margins. The company continues to focus on lowering prices while maintaining profitability through operational efficiencies.

  • 00:25:00 - 00:30:00

    SG&A expenses increased slightly, attributed to higher wages and investments in employees. Costco remains committed to driving sales growth while managing costs effectively.

  • 00:30:00 - 00:35:00

    Interest expense decreased due to debt paydown, while interest income rose significantly. The company also reported a lower tax rate compared to the previous year, benefiting from discrete tax items.

  • 00:35:00 - 00:40:00

    In the fourth quarter, Costco opened 14 new warehouses, with capital expenditures totaling approximately $1.58 billion. Non-food categories led sales growth, with strong performance in health and beauty, seasonal items, and fresh food departments.

  • 00:40:00 - 00:45:00

    The company is focused on sustainability and cost reduction, with initiatives to localize production and reduce packaging waste. This has resulted in lower prices for members and significant savings.

  • 00:45:00 - 00:50:00

    Costco's digital business continues to grow, with improvements in app functionality and e-commerce traffic. The company is testing new programs to enhance member experience and drive sales.

  • 00:50:00 - 00:58:33

    The Q&A session addresses various topics, including membership fee increases, consumer behavior, and the impact of gas prices on traffic. Costco remains optimistic about its growth opportunities and commitment to delivering value to members.

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Mapa mental

Vídeo de preguntas y respuestas

  • What was Costco's net income for Q4 2024?

    Costco's net income for Q4 2024 was $2.35 billion.

  • How many new warehouses did Costco open in Q4 2024?

    Costco opened 14 new warehouses in Q4 2024.

  • What was the growth rate of Costco's e-commerce sales?

    Costco's e-commerce sales grew by 18.9% in Q4 2024.

  • What is the current membership renewal rate for Costco?

    The membership renewal rate for Costco was 92.9% in the US and Canada.

  • How much did Costco's membership fee income increase?

    Costco's membership fee income increased by $3 million or 0.2% year-over-year.

  • What is the average wage for Costco employees in the US?

    The average wage for Costco employees in the US is just over $30 an hour.

  • What challenges did Costco face in Q4 2024?

    Costco faced challenges such as inflation and supply chain issues.

  • What is Costco's strategy for future growth?

    Costco's strategy for future growth includes expanding its warehouse footprint, enhancing e-commerce capabilities, and investing in employee wages.

  • How did Costco's gas sales perform in Q4 2024?

    Gas sales were negative low single digits due to lower average prices per gallon.

  • What is the focus of Costco's technology investments?

    Costco's technology investments focus on improving member experience and operational efficiency.

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Desplazamiento automático:
  • 00:00:00
    good afternoon everyone and thank you
  • 00:00:02
    for joining Costco's fourth quarter 2024
  • 00:00:05
    earnings call I'd like to start by
  • 00:00:08
    reminding you that these discussions
  • 00:00:09
    will include forward-looking statements
  • 00:00:11
    within the meaning of the private
  • 00:00:13
    Securities litigation Reform Act of
  • 00:00:15
    1995 these statements involve risks and
  • 00:00:18
    uncertainties that may cause actual
  • 00:00:20
    events results and or performance to
  • 00:00:22
    differ materially from those indicated
  • 00:00:25
    by such statements the risks and
  • 00:00:27
    uncertainties include but are not
  • 00:00:29
    limited to those outlin in today's call
  • 00:00:32
    as well as other risks identified from
  • 00:00:34
    time to time in the company's public
  • 00:00:36
    statements and reports far with the
  • 00:00:39
    SEC forward-looking statements speak
  • 00:00:41
    only as of the date they are made and
  • 00:00:43
    the company does not undertake to update
  • 00:00:45
    these statements except as required by
  • 00:00:48
    law comparable sales and comparable
  • 00:00:50
    sales excluding impacts from changes in
  • 00:00:53
    gasoline prices and foreign exchange are
  • 00:00:55
    intended as supplemental information and
  • 00:00:57
    are not a substitute for net sales
  • 00:00:59
    presented in accordance with
  • 00:01:01
    gap now before we dive into our
  • 00:01:03
    financial results for the quarter I'm
  • 00:01:05
    delighted to say that Ron vakis is
  • 00:01:07
    joining us for the call today I'll now
  • 00:01:10
    hand over to Ron for some opening
  • 00:01:12
    comments thank you Gary and good
  • 00:01:14
    afternoon everyone thank you for joining
  • 00:01:16
    us today as we turn the page on fiscal
  • 00:01:19
    year 2024 let me make a few comments on
  • 00:01:22
    our progress during the year as a whole
  • 00:01:25
    throughout the fiscal year 2024 we were
  • 00:01:27
    continue to execute on our strategy of
  • 00:01:30
    growing the top line through delivering
  • 00:01:32
    the highest quality Goods at the lowest
  • 00:01:34
    possible price to our members as a
  • 00:01:36
    management team we continue to be
  • 00:01:38
    incredibly proud of our 333,000
  • 00:01:41
    employees worldwide and the culture that
  • 00:01:44
    they Foster the consistency of our
  • 00:01:46
    financial results is a reflection of the
  • 00:01:49
    commitment of our entire team to member
  • 00:01:51
    service and the Costco
  • 00:01:53
    experience most of these employees are
  • 00:01:56
    led by our fantastic Warehouse managers
  • 00:01:58
    who we view as Executives in our company
  • 00:02:01
    succession planning continues to be a
  • 00:02:02
    key focal point for us as we're
  • 00:02:04
    continually working on identifying the
  • 00:02:06
    Future Leaders of our
  • 00:02:08
    company in fiscal year 24 we promoted 95
  • 00:02:12
    new Warehouse managers 85% of those
  • 00:02:16
    promoted started at Costco as an hourly
  • 00:02:18
    employee this promote from within
  • 00:02:21
    culture and the long-term career it
  • 00:02:23
    helps to build is core to who we are as
  • 00:02:26
    a company Community member and retailer
  • 00:02:31
    a few other highlights I'd like to
  • 00:02:33
    mention in fiscal 2024 we hit our Target
  • 00:02:36
    of 30 new Warehouse openings this
  • 00:02:38
    included one relocation and resulted in
  • 00:02:41
    29 net new buildings highlights included
  • 00:02:44
    our first ever building in Maine
  • 00:02:46
    bringing us to 47 States and our 600th
  • 00:02:49
    us building in new Clair
  • 00:02:51
    Wisconsin we also continue to see
  • 00:02:53
    significant opportunities worldwide and
  • 00:02:56
    our fiscal 2025 plan has 12 of our
  • 00:02:59
    planned 29 openings coming outside of
  • 00:03:02
    the us including our fifth building in
  • 00:03:04
    Spain which opened in Zaragoza two weeks
  • 00:03:08
    ago with three of these warehouses being
  • 00:03:10
    relocations we expect to add 26 net new
  • 00:03:14
    buildings in fiscal
  • 00:03:16
    25 we continue to grow our e-commerce
  • 00:03:19
    business and Costco Logistics has had a
  • 00:03:21
    remarkable year appliances and furniture
  • 00:03:24
    and big and bulky has led the way and
  • 00:03:27
    Logistics delivered over 4.5 million
  • 00:03:29
    items this last year up 29% over the
  • 00:03:33
    year
  • 00:03:33
    prior improvements in our item sortment
  • 00:03:36
    delivery times and scheduling
  • 00:03:38
    functionality all enhance the member
  • 00:03:41
    experience we have great momentum with
  • 00:03:43
    this business and expect big and bulky
  • 00:03:45
    items will be a key part of our
  • 00:03:47
    continued progress with e-commerce in
  • 00:03:49
    the coming
  • 00:03:51
    year turning to technology we're
  • 00:03:54
    starting to realize the benefits from
  • 00:03:55
    the work that was done this past year
  • 00:03:58
    members are very excited about able to
  • 00:04:00
    check Warehouse inventory via the Costco
  • 00:04:02
    app and the membership card scanners
  • 00:04:05
    installed at the front doors have
  • 00:04:06
    delivered on the goal of speeding up the
  • 00:04:08
    checkout process this has been very well
  • 00:04:11
    received by our
  • 00:04:13
    members more improvements are currently
  • 00:04:15
    under way which should further benefit
  • 00:04:17
    our business both online and in our
  • 00:04:20
    warehouses with that I'll turn it back
  • 00:04:22
    over to Gary to discuss the results for
  • 00:04:24
    the quarter and I'll jump back on during
  • 00:04:26
    Q&A to field some questions
  • 00:04:29
    thanks Ron in today's press release we
  • 00:04:32
    reported operating results for the
  • 00:04:34
    fourth quarter of fiscal 2024 the 16
  • 00:04:37
    weeks ended September 1st as we did last
  • 00:04:40
    quarter we published a slide deck on our
  • 00:04:42
    investor site under events and
  • 00:04:44
    presentations with supplemental
  • 00:04:46
    information to support today's press
  • 00:04:48
    release you might find it helpful to
  • 00:04:50
    have this presentation in front of you
  • 00:04:51
    as I walk through our
  • 00:04:53
    results throughout this discussion when
  • 00:04:55
    we're comparing to last year's fourth
  • 00:04:57
    quarter the best way to normalize for
  • 00:04:59
    the extra week is to multiply last
  • 00:05:01
    year's results by
  • 00:05:04
    1617 net income for the 16 we fourth
  • 00:05:07
    quarter came in at $2.35 4 billion or
  • 00:05:12
    $5.29 per diluted share up from $2.16
  • 00:05:16
    billion and
  • 00:05:17
    $486 per diluted share in the 17we
  • 00:05:21
    fourth quarter last year this year's
  • 00:05:23
    results included a non-recurring net tax
  • 00:05:26
    benefit of $63 million or 14 cents
  • 00:05:29
    diluted share related to a transfer
  • 00:05:32
    pricing settlement and true Ops of
  • 00:05:34
    various tax
  • 00:05:35
    reserves reported net income was up 9%
  • 00:05:38
    year-over-year
  • 00:05:39
    excluding this year's non-recurring tax
  • 00:05:42
    benefit and normalized for the extra
  • 00:05:44
    week last year net income and earnings
  • 00:05:47
    per diluted share were up 12.7% and
  • 00:05:50
    12.6%
  • 00:05:52
    respectively net sales for the fourth
  • 00:05:54
    quarter were $ 78.2 billion an increase
  • 00:05:58
    of 1% from 7 $7.4 billion in the fourth
  • 00:06:01
    quarter last year adjusting for the
  • 00:06:04
    extra week last year net sales would
  • 00:06:06
    have been up
  • 00:06:08
    7.3% the following comparable sales
  • 00:06:11
    reflect comparable locations
  • 00:06:13
    year-over-year and 16 comparable retail
  • 00:06:16
    weeks us comp sales were up 5.3% or 6.3%
  • 00:06:21
    excluding gas
  • 00:06:23
    deflation Canada comp sales were up 5.5%
  • 00:06:26
    while 7.9% excluding gas deflation and
  • 00:06:30
    FX and other International comp sales
  • 00:06:33
    were up 5.7% or 99.3%
  • 00:06:36
    adjusted this all led to Total company
  • 00:06:39
    comp sales of Plus 5.4% or plus 6.9%
  • 00:06:44
    adjusted for gas deflation and
  • 00:06:46
    FX finally e-commerce comp sales were up
  • 00:06:50
    18.9% or 19.5% adjusted for
  • 00:06:54
    FX in terms of Q4 comp sales metrics
  • 00:06:58
    foreign currencies relative to the US
  • 00:07:00
    dollar negatively impacted sales by
  • 00:07:02
    approximately
  • 00:07:04
    .9% while gasoline price deflation
  • 00:07:06
    negatively impacted sales by
  • 00:07:08
    approximately
  • 00:07:10
    6% traffic or shopping frequency
  • 00:07:12
    increased 6.4% worldwide and 5.6% in the
  • 00:07:17
    US our average transaction or ticket was
  • 00:07:21
    negative .9% worldwide and negative. 3%
  • 00:07:24
    in the
  • 00:07:25
    US this includes the headwinds from gas
  • 00:07:28
    deflation and FX
  • 00:07:30
    adjusted for those items ticket would
  • 00:07:32
    have been positive. 5% worldwide and
  • 00:07:34
    positive. 6% in the
  • 00:07:37
    US moving down the income statement to
  • 00:07:39
    membership fee income we reported
  • 00:07:42
    membership fee income of $1.51 two
  • 00:07:44
    billion an increase of $3 million or .2%
  • 00:07:48
    on one less week year-over-year
  • 00:07:51
    FX negatively impacted membership fee
  • 00:07:53
    income by
  • 00:07:55
    0.9% excluding the impacts from the
  • 00:07:57
    extra week last year and FX normalized
  • 00:08:00
    membership fee income was up
  • 00:08:03
    7.4% in terms of renewal rates at Q4 end
  • 00:08:06
    our US and Canada renewal rate was
  • 00:08:09
    92.9% down 1 to the per from Q3 end this
  • 00:08:14
    slight decrease related to an online
  • 00:08:16
    membership promotion that we ran for a
  • 00:08:18
    short period in fiscal year 2023 which
  • 00:08:21
    resulted in over 200,000 new
  • 00:08:24
    signups as those members entered the
  • 00:08:26
    renewal rate calculation during Q4
  • 00:08:28
    fiscal year before the lower renewal
  • 00:08:31
    rates for that cohort which is typical
  • 00:08:33
    for digital promotions had a negative
  • 00:08:35
    impact on the overall us renewal
  • 00:08:37
    rate outside of those signups there were
  • 00:08:40
    no meaningful changes in the US renewal
  • 00:08:43
    rate the worldwide rate came in at 90.5%
  • 00:08:47
    the same as Q3 with Improvement
  • 00:08:49
    internationally offsetting the slight
  • 00:08:51
    negative in the
  • 00:08:53
    US we ended Q4 with 76.2 million paid
  • 00:08:57
    household members up 7 .3% versus last
  • 00:09:00
    year and 136.8888855
  • 00:09:29
    now represent 46.5% of paid members and
  • 00:09:33
    73.5% of worldwide
  • 00:09:36
    sales turning to gross margin our
  • 00:09:39
    reported rate in the fourth quarter was
  • 00:09:41
    higher year-over-year by 40 basis points
  • 00:09:43
    coming in at 11% compared to 10.6% last
  • 00:09:47
    year and up 33 basis points excluding
  • 00:09:50
    gas
  • 00:09:51
    deflation coil was lower by five basis
  • 00:09:54
    points and lower by 11 basis points
  • 00:09:56
    without gas
  • 00:09:57
    deflation in terms of core margins on
  • 00:10:00
    their own sales our core on core margins
  • 00:10:02
    were higher by nine basis
  • 00:10:05
    points ancillary and other business's
  • 00:10:07
    gross margin was higher 44 basis points
  • 00:10:10
    and higher 42 basis points excluding gas
  • 00:10:14
    deflation this increase year-over-year
  • 00:10:16
    was driven by gas and
  • 00:10:18
    e-commerce e-commerce benefited from
  • 00:10:21
    strong sales growth item mix and
  • 00:10:23
    fulfillment productivity and gas margins
  • 00:10:27
    benefited from some moderate Tailwinds
  • 00:10:29
    and lapping a slightly weaker quarter
  • 00:10:31
    last year but nothing as significant as
  • 00:10:33
    the benefit in q1 2024 as a result of
  • 00:10:36
    the volatility from world events in that
  • 00:10:39
    quarter 2% rewards was HED by four basis
  • 00:10:42
    points or three basis points without gas
  • 00:10:45
    deflation reflecting higher sales
  • 00:10:47
    penetration from our executive members
  • 00:10:50
    and lifo was a benefit of five basis
  • 00:10:52
    points we had an $8 million lifeo Credit
  • 00:10:55
    in Q4 this year compared to a $30
  • 00:10:57
    million charge in Q4 last year
  • 00:11:01
    moving to sgna our reported sgna rate in
  • 00:11:05
    the fourth quarter was higher
  • 00:11:06
    year-over-year by eight basis points
  • 00:11:08
    coming in at
  • 00:11:10
    99.04% compared to last year's
  • 00:11:13
    8.96% sgna was higher by two basis
  • 00:11:16
    points adjusted for gas
  • 00:11:18
    deflation the operations component of
  • 00:11:20
    sgna was higher four basis points but
  • 00:11:23
    was flat excluding gas
  • 00:11:25
    deflation higher wages went into effect
  • 00:11:27
    for the last 6 weeks of the quarter in
  • 00:11:29
    the US and Canada which was a headwind
  • 00:11:32
    for the quarter of approximately four
  • 00:11:33
    basis
  • 00:11:34
    points investing in our employees
  • 00:11:37
    remains a key part of our strategy and
  • 00:11:39
    we will continue to focus on driving
  • 00:11:41
    Topline sales and improving productivity
  • 00:11:44
    to mitigate the incremental
  • 00:11:46
    costs Central was higher by three basis
  • 00:11:49
    points and two basis points without gas
  • 00:11:51
    deflation stock compensation was flat
  • 00:11:53
    year-over-year and pre-opening was e one
  • 00:11:56
    basis point but flat without gas
  • 00:11:58
    deflation
  • 00:12:01
    below the operating income line interest
  • 00:12:03
    expense was $49 million versus $56
  • 00:12:06
    Million last year reflecting $1 billion
  • 00:12:09
    of Debt Pay down in the second week of
  • 00:12:11
    Q4 this
  • 00:12:12
    year interest income for the quarter was
  • 00:12:15
    $138 Million versus $21 Million last
  • 00:12:18
    year primarily due to the 6.7 billion
  • 00:12:22
    special dividend paid in January
  • 00:12:25
    2024 interest income will continue to be
  • 00:12:28
    a headwind in the first half of this
  • 00:12:29
    year due to lower year-over-year cash
  • 00:12:32
    balances and lower interest
  • 00:12:34
    rates FX and other was an $18 million
  • 00:12:38
    loss this year versus a $37 million gain
  • 00:12:40
    last year this was primarily due to
  • 00:12:43
    Foreign
  • 00:12:44
    Exchange in terms of income taxes our
  • 00:12:47
    tax rate in Q4 was
  • 00:12:49
    24.4% compared to 27.1% in Q4 last year
  • 00:12:54
    as mentioned earlier this year's rate
  • 00:12:57
    benefited from $63 million of net tax
  • 00:12:59
    discrete items adjusted for this benefit
  • 00:13:02
    the tax rate for the quarter would have
  • 00:13:04
    been
  • 00:13:07
    26.4% turning now to some key items of
  • 00:13:09
    note in the quarter we opened 14 new
  • 00:13:12
    warehouses in the fourth quarter 10 in
  • 00:13:15
    the US two in Japan and one each in
  • 00:13:17
    Korea and China capital expenditure in
  • 00:13:20
    Q4 was approximately 1.58 billion
  • 00:13:24
    bringing the total year spend to $ 4.71
  • 00:13:27
    billion taking a deeper look into core
  • 00:13:30
    merchandising sales once again non Foods
  • 00:13:33
    led the way with the highest comparable
  • 00:13:34
    sales in
  • 00:13:35
    Q4 our buyers have done a fantastic job
  • 00:13:38
    finding new and exciting items of great
  • 00:13:40
    values gold and jewelry gift cards toys
  • 00:13:43
    and seasonal Home Furnishings tires and
  • 00:13:47
    housewares all were up double digits in
  • 00:13:49
    the
  • 00:13:50
    quarter Health and Beauty AIDS also
  • 00:13:52
    performed well as we have expanded and
  • 00:13:54
    elevated that category with new high-end
  • 00:13:57
    SKS both online and inware house
  • 00:13:59
    including assorted luxury fragrances at
  • 00:14:02
    a 30 to 70% value to
  • 00:14:05
    retail across the fresh departments we
  • 00:14:07
    saw High single digigit growth as our
  • 00:14:10
    continued focus on value is resonating
  • 00:14:12
    with our
  • 00:14:13
    members an example of this in the meat
  • 00:14:15
    department is our Kirkland Signature
  • 00:14:17
    boneless chicken tenderloins where we
  • 00:14:19
    lowered the price 13% and saw a 21% lift
  • 00:14:22
    in pound
  • 00:14:23
    sold in food and sues the introduction
  • 00:14:26
    of more International food products such
  • 00:14:28
    as pania cheese Punjabi cookies and
  • 00:14:31
    fried tofu kimbap are resonating
  • 00:14:34
    extremely well with our members we're
  • 00:14:36
    also delivering greater value by adding
  • 00:14:38
    some new Kirkland Signature items such
  • 00:14:41
    as our KS organic golden maple syrup and
  • 00:14:44
    KS aerosol whipped
  • 00:14:46
    cream Kirkland Signature offers
  • 00:14:48
    significant member value compared to the
  • 00:14:50
    National Brands and continues to grow at
  • 00:14:52
    a faster Pace than our business as a
  • 00:14:55
    whole our goal is always to be the first
  • 00:14:57
    to lower prices where we see the
  • 00:14:59
    opportunities to do so and just a few
  • 00:15:01
    examples this quarter include KS
  • 00:15:04
    standard foil reduced from 3199 to
  • 00:15:08
    29.99 KS macadamia nuts reduced from
  • 00:15:11
    $18.99 to
  • 00:15:13
    13.99 ks Spanish olive oil 3 liter
  • 00:15:16
    reduced from $38.99 to$
  • 00:15:19
    34.99 and KS baguette two pack reduced
  • 00:15:22
    from 599 to
  • 00:15:25
    4.99 our commitment to sustainability
  • 00:15:28
    and achieving emissions is also
  • 00:15:30
    presenting opportunities to lower our
  • 00:15:32
    costs a great example of this is our KS
  • 00:15:35
    laundry packs which we recently
  • 00:15:37
    converted from a rigid plastic tub to a
  • 00:15:39
    pouch this allowed us to reduce the
  • 00:15:42
    plastic packaging by 80% and pass these
  • 00:15:44
    cost savings onto the member lowering
  • 00:15:46
    the price by $1 from1 1999 to1
  • 00:15:51
    18.99 we've also found success working
  • 00:15:53
    with suppliers to localize production of
  • 00:15:55
    bulky items such as water paper and
  • 00:15:59
    laundry
  • 00:15:59
    detergents by manufacturing these Goods
  • 00:16:02
    closer to the countries in which they're
  • 00:16:03
    sold both costs and Emissions associated
  • 00:16:06
    with the shipment of these goods are
  • 00:16:08
    greatly
  • 00:16:09
    reduced this quarter we introduced our
  • 00:16:11
    new Japan produced Kirkland Signature
  • 00:16:13
    paper towels in addition to the
  • 00:16:16
    emissions benefits from no longer
  • 00:16:17
    shipping millions of units of paper
  • 00:16:19
    towels from the US to Asia the reduced
  • 00:16:22
    Freight allowed us to lower the price by
  • 00:16:24
    approximately 30% or $8 per unit in that
  • 00:16:27
    market
  • 00:16:29
    as production ramps up we are in the
  • 00:16:31
    process of transitioning our other Asian
  • 00:16:33
    markets to locally produced
  • 00:16:35
    SKS Shifting the production country of
  • 00:16:38
    this one product will result in annual
  • 00:16:40
    member Savings of $30
  • 00:16:43
    million within ancillary businesses
  • 00:16:45
    Pharmacy had the strongest sales
  • 00:16:47
    percentage increase driven by double-
  • 00:16:49
    digigit growth in script counts our
  • 00:16:52
    optical department also perform well as
  • 00:16:54
    more members have taken advantage of the
  • 00:16:56
    exceptional values in brand name frames
  • 00:16:58
    and sun
  • 00:16:59
    glasses on a like for like 16we basis
  • 00:17:03
    gas sales were negative low single
  • 00:17:05
    digits in the quarter as a result of the
  • 00:17:07
    average price per gallon being 5% lower
  • 00:17:10
    this was partially offset by gallon
  • 00:17:12
    growth of
  • 00:17:13
    3% inflation was once again effectively
  • 00:17:16
    flat in the quarter across all core
  • 00:17:18
    merchandise food and sundies and Fresh
  • 00:17:20
    Foods were slightly inflationary and
  • 00:17:22
    this was offset by deflation in non-
  • 00:17:25
    Foods in the supply chain we are seeing
  • 00:17:28
    good flow of product through Panama and
  • 00:17:30
    Baltimore the Red Sea is a remaining
  • 00:17:32
    pain point and is causing some
  • 00:17:34
    relatively minor shipping delays product
  • 00:17:37
    availability has generally been good
  • 00:17:39
    with a few exceptions egg supplies are
  • 00:17:42
    still being negatively impacted by Aven
  • 00:17:44
    influenza and Prime Beef and a handful
  • 00:17:46
    of vegetable skews have been
  • 00:17:49
    tight as Ron shared earlier we are
  • 00:17:52
    pleased with the momentum in our digital
  • 00:17:54
    business and continue to make good
  • 00:17:55
    progress with our technology priorities
  • 00:17:59
    our app was downloaded 3.5 million times
  • 00:18:01
    in the quarter bringing total downloads
  • 00:18:04
    to approximately 39 million and we
  • 00:18:06
    recently upgraded the native search
  • 00:18:08
    function on our US Mobile app leading to
  • 00:18:11
    a doubling of the click-through rate on
  • 00:18:12
    search
  • 00:18:14
    results e-commerce traffic conversion
  • 00:18:16
    rates and average order value were all
  • 00:18:19
    up year-over-year helping to drive
  • 00:18:21
    another strong quarter of comparable
  • 00:18:23
    sales
  • 00:18:24
    growth while continued strength in
  • 00:18:26
    bullan was a meaningful Tailwind to
  • 00:18:28
    e-commerce compy PS appliances Health
  • 00:18:30
    and Beauty AIDS tires toys gift cards
  • 00:18:34
    Hardware housewares Home Furnishings
  • 00:18:37
    Optical and Pharmacy all grew double
  • 00:18:39
    digits year-over-year
  • 00:18:41
    the roll out of buy online pickup in
  • 00:18:43
    warehouse for TVs in the US market was
  • 00:18:46
    also completed in Q4 this allows same
  • 00:18:49
    day pickup of a new TV for members who
  • 00:18:51
    prefer not to wait for delivery while
  • 00:18:54
    buy online pickup in Warehouse isn't
  • 00:18:56
    cost effective for us on lower priced
  • 00:18:58
    items
  • 00:18:59
    for high value items with high shipping
  • 00:19:01
    costs like TVs the freight savings more
  • 00:19:04
    than offset the added labor required in
  • 00:19:06
    warehouses to fulfill those orders we're
  • 00:19:09
    now testing a similar program on
  • 00:19:12
    laptops Costco next accurated
  • 00:19:14
    Marketplace while still small continued
  • 00:19:17
    to grow nicely in the quarter we added
  • 00:19:20
    11 new vendors bringing the total to 866
  • 00:19:23
    and adjusting for the extra week grow
  • 00:19:25
    sales grew nearly 40% year-over-year
  • 00:19:30
    a brief comment on the membership fee
  • 00:19:31
    increase that went into effect on
  • 00:19:33
    September the 1st due to deferred
  • 00:19:36
    accounting this will have minimal impact
  • 00:19:38
    early in the year the vast majority of
  • 00:19:40
    the benefit will come in the back half
  • 00:19:42
    of fiscal year 2025 and into fiscal year
  • 00:19:46
    2026 with that being said our commitment
  • 00:19:49
    to invest in our employees and members
  • 00:19:51
    is continuous as evidence by the July
  • 00:19:53
    wage increase and lower prices such as
  • 00:19:56
    the example shared on today's call
  • 00:20:00
    in closing we are encouraged by our
  • 00:20:02
    momentum exiting fiscal year 2024 and
  • 00:20:05
    are excited about the growth
  • 00:20:06
    opportunities ahead as we continue to
  • 00:20:08
    execute our strategy of delivering
  • 00:20:10
    exciting new items and greater value for
  • 00:20:13
    members innovating with copon signature
  • 00:20:16
    and growing our warehouse footprint and
  • 00:20:17
    digital capabilities
  • 00:20:19
    globally in terms of upcoming releases
  • 00:20:22
    we will announce our September sales
  • 00:20:24
    results for the five weeks ending Sunday
  • 00:20:26
    October the 6th on Wednesday October the
  • 00:20:29
    9th after market
  • 00:20:31
    close that concludes our prepared
  • 00:20:33
    remarks we'll now open the lineup for
  • 00:20:37
    Q&A thank you we will now begin the
  • 00:20:40
    question and answer session if you'd
  • 00:20:42
    like to ask a question please press star
  • 00:20:44
    one on your telephone keypad to raise
  • 00:20:47
    your hand and join the queue and if
  • 00:20:49
    you'd like to withdraw your question
  • 00:20:51
    again press star one and please limit
  • 00:20:53
    yourself to one question your first
  • 00:20:56
    question comes from Simeon Gutman with
  • 00:20:59
    Morgan Stanley please go
  • 00:21:04
    [Music]
  • 00:21:06
    ahead Simeon Gutman please press star
  • 00:21:14
    one our questions on the previous
  • 00:21:17
    earnings call there was a discussion
  • 00:21:19
    about the possibility of Greater sgna
  • 00:21:22
    leverage in the future as a lot of
  • 00:21:24
    foundational Investments have already
  • 00:21:26
    been made shortly after Costco announced
  • 00:21:30
    a membership fee increase and
  • 00:21:31
    reinvestment into uh employee wages as
  • 00:21:34
    well while wage Investments are are
  • 00:21:37
    clearly the right thing for the business
  • 00:21:38
    and instrumental for Costco's culture
  • 00:21:40
    and success how should we reconcile this
  • 00:21:43
    potential posture of driving more
  • 00:21:45
    leverage but also adopting uh the same
  • 00:21:48
    prior approach of putting upside back
  • 00:21:49
    into
  • 00:21:51
    wages hi yes good afternoon thanks for
  • 00:21:53
    the question um you know as we think
  • 00:21:56
    about our overall model for the company
  • 00:21:59
    our focus is on really achieving a
  • 00:22:00
    balance across the business and as you
  • 00:22:02
    know over the years what we've done
  • 00:22:04
    successfully at Costco is continue to
  • 00:22:06
    invest in members continue to invest in
  • 00:22:09
    in lowering prices and value for our
  • 00:22:10
    members and continue to invest in our
  • 00:22:12
    employees and we believe that's going to
  • 00:22:14
    be a critical part of our overall
  • 00:22:16
    strategy going forward to make sure that
  • 00:22:18
    we keep driving our Topline sales growth
  • 00:22:20
    uh you you're absolutely right join the
  • 00:22:22
    quarter and in fact I think three times
  • 00:22:24
    during the year we share we made various
  • 00:22:25
    investments in our employees back in
  • 00:22:28
    September 2023 we announced an increase
  • 00:22:30
    in the starting wage and then in March
  • 00:22:33
    this year we announced uh that we were
  • 00:22:36
    increasing uh wages for a number of our
  • 00:22:38
    managerial roles in the warehouses and
  • 00:22:40
    as you mentioned we recently announced a
  • 00:22:42
    further increase for all of our uh
  • 00:22:44
    hourly employees uh in the warehouses
  • 00:22:47
    and across our distribution Network and
  • 00:22:49
    and so from our perspective we think
  • 00:22:51
    that's an important part of continuing
  • 00:22:52
    to support the Topline growth in the
  • 00:22:54
    company as you saw in the uh the quarter
  • 00:22:57
    when you ad just s GNA for gas deflation
  • 00:23:01
    and for uh looking particularly at the
  • 00:23:03
    operational part of the business the
  • 00:23:05
    good news was we were able to
  • 00:23:06
    effectively offset that cost those cost
  • 00:23:09
    increases by driving productivity and
  • 00:23:11
    driving sales leverage and I think we've
  • 00:23:13
    done that pretty consistently over time
  • 00:23:14
    and our expectation of ourselves is that
  • 00:23:17
    we'll continue to to do that so I think
  • 00:23:19
    for us it's it's less about giving
  • 00:23:22
    specific guidance on you know a
  • 00:23:23
    particular measure but more look looking
  • 00:23:25
    over the long term of how we expect to
  • 00:23:27
    be able to keep making those Investments
  • 00:23:29
    but also driving leverage in our in our
  • 00:23:31
    model to ensure we're sustainably
  • 00:23:33
    driving Top Line and driving profitable
  • 00:23:35
    growth R anything you'd like that no I
  • 00:23:37
    have to agree with you
  • 00:23:40
    g got it that's really helpful and just
  • 00:23:43
    as a quick followup can you speak to the
  • 00:23:45
    impact of the the card readers at the
  • 00:23:47
    different stores you've rolled out so
  • 00:23:49
    far should should we be modeling
  • 00:23:51
    potentially a a lift in member counts or
  • 00:23:54
    or growth in addition to the uh mfi uh
  • 00:23:58
    bump from the fee increase as
  • 00:24:01
    well this is Ron you know the purpose uh
  • 00:24:04
    of the card readers at the front door
  • 00:24:06
    this is a system we've been using for
  • 00:24:08
    over two years now in Europe in
  • 00:24:09
    especially in the UK and we piloted here
  • 00:24:12
    in the US for about 6 months several
  • 00:24:14
    different benefits for it it gives our
  • 00:24:16
    operators realtime traffic counts
  • 00:24:18
    throughout the day so we're able to
  • 00:24:20
    adjust frontend lines that we need to
  • 00:24:22
    open and closed lines based on the
  • 00:24:24
    fluctuations of business we can monitor
  • 00:24:26
    our Fresh Foods a little better because
  • 00:24:28
    we know what the traffic counts look
  • 00:24:29
    like and so forth and it has also taken
  • 00:24:32
    the friction of membership verification
  • 00:24:35
    away from the front-end registers and
  • 00:24:37
    move that to the front door where we're
  • 00:24:38
    able to look at people's membership
  • 00:24:40
    status we let them know if their renewal
  • 00:24:42
    is due before they get to the front end
  • 00:24:44
    so we've re we've realized some very
  • 00:24:46
    nice healthy front-end improvements in
  • 00:24:49
    productivity and and it's allowed our
  • 00:24:51
    operators to manage the business much
  • 00:24:52
    better throughout the
  • 00:24:56
    day your next question comes from Chris
  • 00:24:59
    horvers with JP Morgan please go
  • 00:25:03
    ahead thank you good evening I'm GNA
  • 00:25:06
    train hopefully you can hear
  • 00:25:08
    me question is is can you talk about the
  • 00:25:11
    risk around the Port strike that's
  • 00:25:14
    emerging here you know what percentage
  • 00:25:16
    of the product do you comes through
  • 00:25:19
    those affected ports any description on
  • 00:25:21
    maybe the categories that are more
  • 00:25:24
    exposed versus the others and to what
  • 00:25:26
    extent have you tried to bring in
  • 00:25:27
    product early for the holidays uh to try
  • 00:25:30
    to to manage that
  • 00:25:33
    risk yeah this is Ron again yes I I'll
  • 00:25:35
    take that question um you know the Port
  • 00:25:37
    strike is something we've been watching
  • 00:25:39
    very closely for some time we knew about
  • 00:25:41
    the timing of this as well when you
  • 00:25:42
    think about the impact to our business
  • 00:25:44
    we import primarily non foods and some
  • 00:25:47
    limited food incendies come in but non
  • 00:25:49
    Foods is less than about 25% of our
  • 00:25:52
    total business and only a subset of that
  • 00:25:54
    is imported there's some domestic Goods
  • 00:25:56
    in there as well that are not import in
  • 00:25:58
    in non Foods um we have done a little
  • 00:26:00
    bit of everything that you spoke about
  • 00:26:02
    we've got contingency plans um we've
  • 00:26:04
    cleared the ports we've pre- shipped um
  • 00:26:08
    we've done several different things that
  • 00:26:09
    we could to get holiday Goods in um
  • 00:26:12
    ahead of this time frame and looked at
  • 00:26:14
    alternate plans that we could execute
  • 00:26:16
    with moving Goods to different ports and
  • 00:26:18
    coming across the country if needed um
  • 00:26:20
    it could be disruptive based on how
  • 00:26:22
    impactful I can't tell you until we know
  • 00:26:24
    length and and what could happen out
  • 00:26:26
    there but it is in our
  • 00:26:28
    our buyers are all over it they're
  • 00:26:30
    watching it closely and we've taken as
  • 00:26:32
    many preemptive measures as we could to
  • 00:26:34
    prepare for
  • 00:26:36
    this and then just as a quick followup
  • 00:26:38
    as you think about the risk around ocean
  • 00:26:40
    Freight rates is your expectation that
  • 00:26:43
    Freight Freight rates are maybe elevated
  • 00:26:45
    right now because of all this and and
  • 00:26:47
    perhaps come down into next year as we
  • 00:26:50
    think about contract renewal periods
  • 00:26:52
    thank
  • 00:26:53
    you you know I I I'm not good at
  • 00:26:55
    predicting the future but I can tell you
  • 00:26:57
    that from what we're seeing a big chunk
  • 00:26:59
    of of our freight comes in under
  • 00:27:02
    contract so we've been insulated from
  • 00:27:03
    that um the spot Market has peaked in
  • 00:27:06
    the last quarter um we see that coming
  • 00:27:08
    off now if a port disruption um could
  • 00:27:11
    happen or something else could happen in
  • 00:27:13
    the Red Sea could that go up absolutely
  • 00:27:15
    it could go up but from what we're
  • 00:27:16
    seeing now the spot Market did increase
  • 00:27:19
    is coming off at this point and uh again
  • 00:27:22
    our team did a great job by insulating
  • 00:27:24
    us with good solid contracts for this
  • 00:27:26
    year thanks
  • 00:27:29
    your next question comes from the line
  • 00:27:31
    of Chuck Grom with Gordon hasket please
  • 00:27:33
    go
  • 00:27:34
    ahead thanks good afternoon Gary and Ron
  • 00:27:37
    just to go back to the membership card
  • 00:27:39
    scanners um can you just uh speak to
  • 00:27:41
    where you are in the on the roll out of
  • 00:27:43
    that across the US and any positive
  • 00:27:46
    reactions you've seen so far our checks
  • 00:27:48
    have shown that in some locations you
  • 00:27:49
    guys are actually seeing a double digit
  • 00:27:51
    increase in new
  • 00:27:53
    signups um yeah we we have about 350
  • 00:27:58
    um us warehouses rolled out at this
  • 00:28:01
    point um and through the process uh you
  • 00:28:04
    know reaction has been very positive
  • 00:28:06
    myself all our operators and we really
  • 00:28:08
    rely on feedback of our warehouse
  • 00:28:10
    managers and what's been done and our
  • 00:28:12
    our head operator Russ Miller and myself
  • 00:28:14
    have been met with great um positive
  • 00:28:17
    reactions both from the members and from
  • 00:28:21
    The Operators as well um we have seen
  • 00:28:23
    some some lift in in member signups from
  • 00:28:26
    that we've also seen a lift in renewals
  • 00:28:29
    because before people get to the front
  • 00:28:30
    end now they're aware that my renewal is
  • 00:28:33
    going to be due when I get to the
  • 00:28:34
    registers so um members are very
  • 00:28:36
    appreciative of that they know that and
  • 00:28:38
    they get up to the front and they're not
  • 00:28:39
    shocked by that process as well so
  • 00:28:42
    improve improv productivity um improved
  • 00:28:45
    interaction and as we know as our
  • 00:28:47
    volumes grow we're looking for
  • 00:28:48
    everything we can find to use technology
  • 00:28:50
    to help get our members through the
  • 00:28:52
    front ends in a good smooth
  • 00:28:55
    manner that's very helpful and then my
  • 00:28:57
    father just area on on the other
  • 00:28:59
    business line within the the margin
  • 00:29:01
    build up 42 basis points that cast can
  • 00:29:04
    you add a little bit of color on on the
  • 00:29:06
    sequential change how much came from
  • 00:29:08
    e-commerce how much came from the
  • 00:29:10
    Improvement in gas margins thank you
  • 00:29:13
    sure yeah we called those to out because
  • 00:29:14
    they were the the two biggest factor in
  • 00:29:16
    the results so i' think of them as being
  • 00:29:17
    you know relatively similar similar in
  • 00:29:19
    terms of the impact um e-commerce
  • 00:29:21
    actually has been a a nice Trend that
  • 00:29:23
    we've seen for the last couple of
  • 00:29:24
    quarters we've been really pleased with
  • 00:29:25
    the momentum in e-commerce of course the
  • 00:29:27
    headline sales growth has been very
  • 00:29:29
    positive which is a great starting point
  • 00:29:31
    but then the team's done a really nice
  • 00:29:33
    job of improving fulfillment efficiency
  • 00:29:35
    and driving um better sell through in
  • 00:29:38
    terms of the product and the inventory
  • 00:29:40
    management as well and the mix has
  • 00:29:41
    improved as I mentioned on the prepared
  • 00:29:43
    remarks we've seen really good growth
  • 00:29:45
    really balance across across the board
  • 00:29:47
    around uh e-commerce growth so
  • 00:29:50
    e-commerce was has been a a sort of a
  • 00:29:51
    sustained Trend that we've been pleased
  • 00:29:53
    with the last couple of quarters on the
  • 00:29:55
    the gas side of things it was really I
  • 00:29:57
    wouldn't say there was anything usual
  • 00:29:58
    during the quarter it was really more a
  • 00:29:59
    case of that we had uh a little bit of
  • 00:30:01
    Tailwind in margin and and as I
  • 00:30:03
    mentioned earlier we were cycling uh
  • 00:30:05
    some some lighter margin in the the same
  • 00:30:08
    quarter in
  • 00:30:11
    2023 thank
  • 00:30:13
    you your next question comes from the
  • 00:30:15
    line of Paul lios with City Group please
  • 00:30:18
    go
  • 00:30:20
    ahead hey everyone this brand sh on for
  • 00:30:22
    Paul hey Gary and Ron I want to talk
  • 00:30:25
    about um new store growth you know you
  • 00:30:27
    mentioned 6 net in
  • 00:30:30
    2025 um with I guess an increasing on
  • 00:30:34
    focus on International um anything you
  • 00:30:37
    can share on why the US would step down
  • 00:30:39
    from 24 levels should we think about
  • 00:30:42
    Internationals you know being a more
  • 00:30:44
    important growth vertical for you and
  • 00:30:47
    then on the US side you know how many of
  • 00:30:49
    those are new markets versus infill
  • 00:30:51
    where you're trying to alleviate traffic
  • 00:30:53
    congestion from a nearby
  • 00:30:56
    store you know on on the international
  • 00:30:59
    to domestic um new openings it it really
  • 00:31:02
    is based on timing through the system I
  • 00:31:05
    mean you know it in in larger markets we
  • 00:31:08
    may have a building that's taken us
  • 00:31:09
    three years to get to fruition where
  • 00:31:11
    some markets move quite quickly so um
  • 00:31:14
    you know there's no specific plan that
  • 00:31:16
    we have we put we put the buildings in
  • 00:31:18
    queue we agree that we're going to go
  • 00:31:20
    there and then it's following the
  • 00:31:22
    process all the way through to how
  • 00:31:24
    utilities come along infrastructure
  • 00:31:26
    those type of things um as far as the
  • 00:31:29
    the outlook on International versus um
  • 00:31:33
    domestic growth it's pretty balanced
  • 00:31:35
    again more of a timing thing than
  • 00:31:37
    anything you know I think we've got 12
  • 00:31:39
    next year that will be outside of the US
  • 00:31:41
    um and we've got some you could imagine
  • 00:31:44
    in some countries it takes us a few more
  • 00:31:45
    years to get a building opened up so it
  • 00:31:48
    really is about the Cadence of them
  • 00:31:49
    opening but we we continue to look
  • 00:31:52
    forward that we feel pretty good
  • 00:31:53
    balanced um growth um we we see infields
  • 00:31:57
    as being very positive for us both in US
  • 00:32:00
    Canada and all of North America that we
  • 00:32:02
    have plenty of opportunities for infills
  • 00:32:04
    in North America for the next several
  • 00:32:06
    years ahead and then a good a good
  • 00:32:09
    Market of you know new new regions of
  • 00:32:12
    the world I don't think we have anything
  • 00:32:14
    lined up for next year but new markets
  • 00:32:15
    I'd say that we're probably looking at
  • 00:32:17
    five to six new markets that uh we'll be
  • 00:32:20
    expanding into next
  • 00:32:22
    year got it okay thanks and just one
  • 00:32:25
    follow up on the mfi P Incas
  • 00:32:28
    I know you all typically reinvest in the
  • 00:32:30
    member experience and and price and we
  • 00:32:32
    already talked about wages you know how
  • 00:32:34
    should we think about the timing of that
  • 00:32:36
    because you realize you know the mfi
  • 00:32:39
    increase over a longer period is there
  • 00:32:41
    any near-term pressure that might um
  • 00:32:44
    flow through the p&l as you do kind of
  • 00:32:47
    focus on delivering that value to the
  • 00:32:49
    member after you've increased that Fe
  • 00:32:52
    thanks
  • 00:32:53
    guys sure yeah thanks for the question
  • 00:32:56
    you know we mentioned a couple of the
  • 00:32:57
    these things in the prepared comments
  • 00:32:59
    too but we certainly think about uh as
  • 00:33:01
    we increase the membership fee our goal
  • 00:33:03
    is always to find ways to deliver more
  • 00:33:06
    value for the member and we think that
  • 00:33:07
    about that pretty holistically it can be
  • 00:33:10
    uh lowering prices it can be launching
  • 00:33:12
    new Kirkland Signature products it's
  • 00:33:14
    also investing in ways that we can
  • 00:33:15
    improve the member experience and some
  • 00:33:17
    of the things that Ron mentioned earlier
  • 00:33:19
    and and we believe a critical part of
  • 00:33:21
    delivering a better experience for our
  • 00:33:22
    members is also in employee wages so we
  • 00:33:25
    we very much look at it holistically and
  • 00:33:27
    how do we make sure sure we feel
  • 00:33:28
    confident that we're delivering more
  • 00:33:30
    value to our members over time and some
  • 00:33:32
    of those things as you heard in Q4 we've
  • 00:33:34
    already started that Journey with some
  • 00:33:36
    of the wage increases and some of the
  • 00:33:38
    ways in which we've been able to lower
  • 00:33:40
    prices and deliver more value through
  • 00:33:41
    new Kirkland Signature products in the
  • 00:33:43
    quarter um to answer maybe the the
  • 00:33:45
    broader question that you mentioned as
  • 00:33:47
    as you know we generally don't provide
  • 00:33:49
    guidance um as part of our updates to
  • 00:33:51
    for for the results of the company you
  • 00:33:53
    know that being said I would say overall
  • 00:33:55
    we feel very good about our momentum
  • 00:33:57
    ending fiscal year 24 and as we head
  • 00:34:00
    into the new fiscal year we feel very
  • 00:34:02
    good about the uh the opportunity ahead
  • 00:34:04
    of us as always we've set ourselves High
  • 00:34:07
    internal expectations for how we expect
  • 00:34:09
    to grow the top line and to do so
  • 00:34:11
    profitably and we'll be doing that by
  • 00:34:13
    continuing to invest in member value and
  • 00:34:15
    employees while driving efficiencies and
  • 00:34:18
    leverage and we still see many
  • 00:34:19
    opportunities to find ways to uh improve
  • 00:34:22
    gross margin and OG sgna in terms of
  • 00:34:25
    opportunities to fund those Investments
  • 00:34:27
    um we wouldn't normally comment on
  • 00:34:29
    Cadence for the year ahead either um but
  • 00:34:31
    as I mentioned in my prepared remarks
  • 00:34:32
    you know there are a few unusual items
  • 00:34:35
    this year with the Deferred accounting
  • 00:34:36
    for the membership fee increase as you
  • 00:34:38
    mentioned uh and that will generally
  • 00:34:41
    sort of really the most part of that
  • 00:34:42
    will come in in the second half of
  • 00:34:44
    2025 and the first half of 2026 and then
  • 00:34:48
    there are also a couple of um specific
  • 00:34:50
    factors to q1 namely the interest income
  • 00:34:53
    where we'll be cycling higher cash
  • 00:34:55
    balances and higher interest rates from
  • 00:34:56
    last year and uh gas profit while it's
  • 00:34:59
    really been pretty stable over the years
  • 00:35:01
    there was certainly some volatility due
  • 00:35:03
    to world events in q1 last year so the
  • 00:35:06
    one thing I think I would say is that as
  • 00:35:07
    you think about our Cadence of our
  • 00:35:09
    earnings growth across 25 it's likely to
  • 00:35:11
    be less linear than you you would
  • 00:35:12
    probably typically
  • 00:35:15
    expect your next question comes from the
  • 00:35:18
    line of John hinacle with googleheim
  • 00:35:21
    Securities please go
  • 00:35:23
    ahead hey Gary I wanted to start with I
  • 00:35:25
    think I think you said right core on
  • 00:35:26
    core was up nine n bips um what what was
  • 00:35:29
    the color uh byproduct category U you
  • 00:35:33
    know fresh food suies and non food yeah
  • 00:35:37
    food and suies were slightly negative uh
  • 00:35:39
    fresh was uh slightly positive and non
  • 00:35:42
    Foods was the the strongest of the three
  • 00:35:44
    which was really again I think from the
  • 00:35:46
    from the mix perspective and the strong
  • 00:35:48
    sell through in the year but that was
  • 00:35:49
    sort of the breakout of it
  • 00:35:51
    John and then maybe for both of you guys
  • 00:35:54
    how do when you think about Kirkland
  • 00:35:56
    Signature right you talked about you
  • 00:35:58
    gave some price decreases that you've
  • 00:36:00
    taken and all of those that you cited
  • 00:36:02
    anyway were Kirkland Signature you so
  • 00:36:05
    maybe you know talk about that um those
  • 00:36:07
    price decreases maybe versus uh brand
  • 00:36:10
    name product where Kirkland's signature
  • 00:36:12
    penetration is now and is is that
  • 00:36:15
    business because you're getting scale is
  • 00:36:17
    is that just becoming a lot more
  • 00:36:18
    profitable than it used to be or uh or
  • 00:36:22
    you're trying to you're trying to manage
  • 00:36:24
    to a a flatter an unchanged margin on
  • 00:36:26
    Kirkland Signature
  • 00:36:29
    you know um I guess I'll take that one
  • 00:36:31
    we we you know we continue to see the
  • 00:36:33
    penetration grow and and it's in the in
  • 00:36:35
    the high 20s now um as it continues to
  • 00:36:38
    grow as our as our penetration across
  • 00:36:40
    the board goes we are not only seeing
  • 00:36:42
    investment in price in Kirk and
  • 00:36:44
    signature but with Claudine and her team
  • 00:36:47
    they they have a commitment that if
  • 00:36:48
    we're going to expect that of our
  • 00:36:49
    suppliers we're going to start with
  • 00:36:51
    setting that example and and showing the
  • 00:36:53
    the benefits of investing in price and
  • 00:36:55
    driving unit volume so we are doing that
  • 00:36:58
    but we're also seeing great support from
  • 00:37:00
    our suppliers and our partners around
  • 00:37:02
    the world that are also interested in
  • 00:37:04
    driving their business and using Costco
  • 00:37:06
    as that partner to get that done so you
  • 00:37:09
    know we continue I think we've got some
  • 00:37:10
    great items coming up this next year in
  • 00:37:12
    Kirkland Signature that will continue to
  • 00:37:14
    enhance that uh that value proposition
  • 00:37:17
    to our members and continues to build
  • 00:37:19
    the Loyalty with our members because um
  • 00:37:21
    this is this is a place you come to get
  • 00:37:23
    Kirk and signature so we see good things
  • 00:37:26
    coming we see the penetration continue
  • 00:37:28
    to grow and we can continue to see the
  • 00:37:31
    the value and the benefits to the
  • 00:37:32
    members improving over time Gary if
  • 00:37:35
    you're yeah maybe Ron just to add um to
  • 00:37:37
    to the comment also uh John you were
  • 00:37:39
    asking around um the margin opportunity
  • 00:37:41
    obviously we we stay very disciplined
  • 00:37:43
    about we have a cap on the margin that
  • 00:37:45
    we expect to to make on a Kirkland
  • 00:37:47
    Signature product but as that mix
  • 00:37:49
    continues to grow it definitely creates
  • 00:37:50
    some overall Tailwind in our in our
  • 00:37:53
    margin overall and uh you know I
  • 00:37:55
    mentioned a couple of examples in the
  • 00:37:56
    prepared comments where all also seeing
  • 00:37:58
    some some really great opportunities as
  • 00:37:59
    we're thinking more globally across our
  • 00:38:02
    merchandising teams really working
  • 00:38:03
    together and finding ways to buy more
  • 00:38:05
    efficiently and um in country production
  • 00:38:07
    that we mentioned so when you take all
  • 00:38:09
    those combined I think that's creating
  • 00:38:11
    opportunity for us to win-win in the
  • 00:38:13
    sense that we can create more value for
  • 00:38:14
    the member stick within our our
  • 00:38:16
    commitments around uh the you know the
  • 00:38:18
    margins that we work within but I do
  • 00:38:20
    think it creates Tailwinds and ways to
  • 00:38:22
    balance the investment in the member
  • 00:38:23
    while continuing to grow long
  • 00:38:25
    term thank you
  • 00:38:29
    your next question comes from the line
  • 00:38:30
    of Scott Cully
  • 00:38:32
    with yes SEC Carelli my apologies but
  • 00:38:36
    Tris Securities please go ahead hey guys
  • 00:38:39
    Scott
  • 00:38:40
    chiarelli um another question on the ID
  • 00:38:43
    scanning any feel for how often
  • 00:38:46
    non-members were shopping at Costco and
  • 00:38:49
    then secondly just given some of the
  • 00:38:50
    price reductions that you highlighted
  • 00:38:52
    earlier can you comment on your broader
  • 00:38:54
    inflation and deflation expectations for
  • 00:38:56
    fiscal
  • 00:38:59
    thanks as as far as the scanning I
  • 00:39:01
    really couldn't give you a number I mean
  • 00:39:03
    we've we've been exclusive for since the
  • 00:39:06
    Inception of the company that that uh
  • 00:39:07
    we're exclusive to members um you know
  • 00:39:10
    there there are shop cards and those
  • 00:39:12
    type of things that people come in with
  • 00:39:13
    but I really couldn't give you a set
  • 00:39:16
    number of what percent of people coming
  • 00:39:18
    in are non-members um and as far as
  • 00:39:20
    inflation I think Gary's Gary's signing
  • 00:39:22
    that he'd like to take that one yeah
  • 00:39:24
    happy to probably similar to Ron's
  • 00:39:26
    comment earlier I don't know we would be
  • 00:39:27
    particularly good at telling you what we
  • 00:39:29
    forecast for the market overall but what
  • 00:39:31
    I what I can me to give you some a
  • 00:39:32
    little bit more color from what we're
  • 00:39:33
    seeing um Scott from our perspective we
  • 00:39:35
    you know we shared for the quarter
  • 00:39:37
    overall inflation was essentially flat
  • 00:39:39
    we saw a little bit of inflation in
  • 00:39:41
    fresh that was mainly driven by produce
  • 00:39:43
    right now that was sort of the the key
  • 00:39:44
    category there that drove but again very
  • 00:39:46
    low inflation nothing meaningful to talk
  • 00:39:49
    about we're still seeing it very uh very
  • 00:39:51
    quiet in terms of the inflationary
  • 00:39:53
    impact on prices and and on the business
  • 00:39:56
    uh food would have been slightly
  • 00:39:57
    inflationary as well but it's a it's
  • 00:39:59
    remarkable actually how the small range
  • 00:40:01
    now between the different categories
  • 00:40:02
    really nothing between positive2 and
  • 00:40:04
    negative2 and sort of all coming back
  • 00:40:07
    out to even just very slightly
  • 00:40:08
    inflationary but nothing much there
  • 00:40:11
    either that we're seeing um we are
  • 00:40:13
    seeing more of a mix view on Commodities
  • 00:40:15
    things like corn and flour and sugar are
  • 00:40:16
    all deflationary which is causing the
  • 00:40:18
    bakery category as a whole to be
  • 00:40:20
    deflationary uh but then on things like
  • 00:40:22
    butter and cocoa and eggs as I mentioned
  • 00:40:24
    earlier on the call and cheese we're
  • 00:40:26
    seeing more inflation so I don't know
  • 00:40:28
    that we're seeing anything today that's
  • 00:40:30
    causing us to believe that you know
  • 00:40:32
    where we are today is is what the world
  • 00:40:34
    looks like and our goal of course is
  • 00:40:35
    always to find ways to lower our costs
  • 00:40:38
    and therefore hold prices down for our
  • 00:40:40
    members so I wouldn't say that we're
  • 00:40:41
    seeing anything dramatically different
  • 00:40:44
    from how our quarter looked for this
  • 00:40:46
    quarter but of course we're you know
  • 00:40:48
    we're like everybody we're susceptible
  • 00:40:49
    to shocks and changes that can happen in
  • 00:40:51
    the
  • 00:40:51
    market helpful thanks a lot
  • 00:40:55
    guys your next question comes from the
  • 00:40:58
    line of Michael Lasser with UPS please
  • 00:41:01
    go
  • 00:41:04
    ahead hi this is Zan Barac on from
  • 00:41:06
    Michael Lasser thanks very much for
  • 00:41:08
    taking our question while it's early
  • 00:41:11
    what has been the customer response to
  • 00:41:13
    the mfi increase and do you expect to
  • 00:41:16
    see a rise in customer attrition why or
  • 00:41:19
    why not thank
  • 00:41:22
    you yeah uh thanks for the question um
  • 00:41:25
    you know as you as you were familiar
  • 00:41:27
    with the membership fee increase we uh
  • 00:41:29
    we were very deliberate about the timing
  • 00:41:31
    in fact we we really delayed by two
  • 00:41:33
    years from when we've TR traditionally
  • 00:41:35
    increase the fee every five years and
  • 00:41:37
    that was initially because of what we
  • 00:41:39
    thought our members were experiencing
  • 00:41:41
    with covid and then we saw higher
  • 00:41:42
    inflation so we were very deliberate in
  • 00:41:44
    delaying the increase until we felt that
  • 00:41:47
    we started to see inflation dissipate
  • 00:41:49
    and our members were uh spending more in
  • 00:41:51
    non-f food categories seeing that they
  • 00:41:53
    were were coming through the
  • 00:41:54
    inflationary period um from a member
  • 00:41:56
    reaction perspective you know I'd say we
  • 00:41:58
    haven't really uh heard a significant
  • 00:42:00
    member reaction our membership renewal
  • 00:42:02
    rates there's no real change in Trend as
  • 00:42:04
    I mentioned in some of my rep prepared
  • 00:42:06
    remarks um you know I think the fact
  • 00:42:08
    that we've been able to Stave off
  • 00:42:11
    inflation on things like the uh the hot
  • 00:42:13
    dog price staying at $150 and the
  • 00:42:15
    rotisserie chicken at $499 and generally
  • 00:42:18
    demonstrating the way that we're
  • 00:42:19
    lowering prices for members whever we
  • 00:42:21
    can I think there's been a a recognition
  • 00:42:23
    that in the context of what's happened
  • 00:42:24
    more broadly over the last seven years
  • 00:42:26
    that we've stay true to our principles
  • 00:42:28
    of of really trying to help the member
  • 00:42:30
    and deliver the value and and as we
  • 00:42:31
    mentioned earlier on the call we've been
  • 00:42:33
    making Investments whether it be in
  • 00:42:35
    wages for our employees or in lowering
  • 00:42:37
    cost to show our members that we want to
  • 00:42:40
    make sure that the increase is
  • 00:42:41
    delivering value to
  • 00:42:47
    them your next question comes from the
  • 00:42:50
    line of rupesh perish with Oppenheimer
  • 00:42:54
    please go ahead good evening and thanks
  • 00:42:57
    for taking my question so just on the
  • 00:42:58
    consumer front just curious how you guys
  • 00:43:00
    are feeling about the health of your
  • 00:43:01
    consumer and then any changes in
  • 00:43:03
    consumer behavior of notor in the
  • 00:43:05
    quarter sure thanks repes um you know I
  • 00:43:09
    think um we see the that the consumer
  • 00:43:11
    our member through through of course
  • 00:43:12
    through our lens and what I would say is
  • 00:43:14
    that it's very clear that quality and
  • 00:43:16
    value have never been more important
  • 00:43:18
    that's something that is very clearly
  • 00:43:20
    coming through in our insights and how
  • 00:43:21
    we're seeing our members shop I think
  • 00:43:23
    the encouraging thing for us is as you
  • 00:43:25
    as you know as you look at our Trends in
  • 00:43:26
    the year today um we have seen that as
  • 00:43:28
    inflation has dissipated our members
  • 00:43:31
    have have started to spend more on non-
  • 00:43:33
    food items which is really encouraging
  • 00:43:35
    in our mind and what we're really
  • 00:43:37
    pleased about is the the widespread
  • 00:43:39
    nature of that across the different
  • 00:43:40
    categories that we've seen in non Foods
  • 00:43:43
    um I would say that on on some
  • 00:43:45
    categories like appliances and
  • 00:43:46
    electronics definitely they've become uh
  • 00:43:49
    more promotional over time that would be
  • 00:43:51
    uh you know a factor I think that
  • 00:43:52
    members are looking for more deals and
  • 00:43:55
    for us of course we're always going to
  • 00:43:56
    be there on price but we also uh include
  • 00:43:59
    within uh what we're offering to our
  • 00:44:01
    members the the installation and the
  • 00:44:02
    removal of of the old product if that's
  • 00:44:04
    necessary in the the delivery so we kind
  • 00:44:07
    of tend to try and differentiate there
  • 00:44:08
    on the overall experience as well as
  • 00:44:10
    being a great everyday low value um I
  • 00:44:13
    think they're the kind of key trends in
  • 00:44:14
    non Foods on the food side of things uh
  • 00:44:17
    We've we've definitely seen um some
  • 00:44:19
    signals that would suggest that members
  • 00:44:21
    and consumers in general are maybe
  • 00:44:23
    shifting a little bit of spend from food
  • 00:44:25
    away from home to food at home on the
  • 00:44:27
    the food and Sury side of our business
  • 00:44:30
    uh alcohol would still be relatively
  • 00:44:32
    soft um but as I mentioned in my
  • 00:44:33
    prepared remarks we're seeing really
  • 00:44:35
    strong growth in our ethnic food
  • 00:44:37
    categories and also in the Kirkland
  • 00:44:38
    Signature products particularly in the
  • 00:44:39
    new ones that we've been introducing and
  • 00:44:42
    then on the Fresh side of things um
  • 00:44:44
    really strong growth across um meat
  • 00:44:47
    produce and bakery um I would say we
  • 00:44:50
    we've certainly seen a a continued
  • 00:44:52
    acceleration in some of those lower cost
  • 00:44:54
    protein items like poultry uh cheaper
  • 00:44:57
    cuts of beef like ground beef and pork
  • 00:44:59
    um so so you know there's definitely
  • 00:45:01
    some signs that the the the consumer is
  • 00:45:04
    being very choiceful in how they're
  • 00:45:05
    spending their dollars but thankfully
  • 00:45:07
    with the quality and value that we're
  • 00:45:08
    offering it's definitely resonating with
  • 00:45:10
    our
  • 00:45:11
    members great and then maybe just one
  • 00:45:13
    follow question you know big Focus out
  • 00:45:15
    there on alter revenue streams including
  • 00:45:16
    media just curious on the latest on the
  • 00:45:18
    effort from Costco and you know is there
  • 00:45:20
    more is there maybe a more aggressive
  • 00:45:21
    push in you know growing that that
  • 00:45:24
    area yeah I I think we still see it as a
  • 00:45:27
    a significant opportunity it's
  • 00:45:28
    definitely a journey for us it's you
  • 00:45:29
    know the foundations of that Journey are
  • 00:45:31
    getting our technology infrastructure in
  • 00:45:33
    a position where we feel uh really good
  • 00:45:35
    about the capabilities that will allow
  • 00:45:37
    us to deliver to the member in terms of
  • 00:45:38
    the offers that we can give to them and
  • 00:45:40
    the level of targeting and personalized
  • 00:45:43
    uh capabilities that creates um we've
  • 00:45:45
    already started to build out those plans
  • 00:45:48
    and and starting to identify how we can
  • 00:45:50
    capture the lwh hanging fruit where
  • 00:45:52
    there are opportunities uh but we we
  • 00:45:54
    would see it as a significant
  • 00:45:55
    opportunity over the long term to to
  • 00:45:57
    drive new Revenue uh we will approach
  • 00:46:00
    this probably a little bit differently
  • 00:46:01
    than many others in that you know we'll
  • 00:46:03
    be reinvesting uh the vast majority of
  • 00:46:05
    those dollars as we always do to drive
  • 00:46:07
    Topline growth and we think that'll be a
  • 00:46:09
    competitive Advantage with our cpg
  • 00:46:10
    partners because it will show them that
  • 00:46:12
    every dollar they spending is really
  • 00:46:14
    intended to drive overall uh growth of
  • 00:46:17
    the company um that being said I do
  • 00:46:19
    think it will help also with you know
  • 00:46:21
    e-commerce business is typically less
  • 00:46:23
    profitable and this Cates a way to
  • 00:46:24
    offset some of those costs in delivery
  • 00:46:26
    in fulfillment as
  • 00:46:28
    well great thank you
  • 00:46:30
    for your next question comes from the
  • 00:46:33
    line of Kelly B with Capital markets
  • 00:46:36
    please go
  • 00:46:38
    ahead hi good evening uh Gary and Ron um
  • 00:46:42
    just wanted to ask about e-commerce um
  • 00:46:46
    obviously continued strength there just
  • 00:46:48
    can you just give us a broad update on
  • 00:46:50
    the penetration the profitability and
  • 00:46:54
    and how that is impacting margins at
  • 00:46:56
    this growth uh level and just an update
  • 00:46:59
    on what the penetration would be if you
  • 00:47:01
    included instacart um like others do in
  • 00:47:04
    that
  • 00:47:07
    penetration yeah thanks Kelly as we we
  • 00:47:09
    look at the progress we're really
  • 00:47:11
    pleased with the momentum that we've
  • 00:47:12
    seen in digital actually we were looking
  • 00:47:13
    at the uh the data recently over a
  • 00:47:15
    10-year period and we've grown our comp
  • 00:47:17
    compounded annual growth rate in in
  • 00:47:19
    e-commerce has been over 20% for that
  • 00:47:21
    10-year period so it's been a
  • 00:47:23
    significant growth story for us and uh
  • 00:47:25
    members clearly have in the the the
  • 00:47:28
    additional uh ways in which we're giving
  • 00:47:30
    them opportunities to to find new New
  • 00:47:32
    Deals and uh and and and value for the
  • 00:47:34
    member um overall um it would be the
  • 00:47:37
    penetration would be in the sort of high
  • 00:47:39
    single digigit range based on how we
  • 00:47:40
    report e-commerce today um if you kind
  • 00:47:43
    of to your point earlier we we don't
  • 00:47:45
    include some of those um digitally
  • 00:47:48
    started sales transactions if I could
  • 00:47:50
    say it that way so instacart Uber the
  • 00:47:52
    ways in which uh members might be buying
  • 00:47:54
    uh groceries and food and sundies uh if
  • 00:47:56
    you you added those in and and and of
  • 00:47:58
    course we also include gas in our our
  • 00:48:00
    total sales we we'd be into the double
  • 00:48:02
    digit penetration when you include all
  • 00:48:04
    those elements in in the
  • 00:48:08
    number okay and any comments on on
  • 00:48:11
    profitability and how that's how how
  • 00:48:13
    e-commerce is impacting
  • 00:48:15
    profitability yeah I would still say
  • 00:48:17
    it's uh you know it's marginally um it's
  • 00:48:19
    lower than the traditional shopping in
  • 00:48:21
    the warehouse and and that's obviously
  • 00:48:23
    intuitively makes sense given that we're
  • 00:48:25
    doing more of the picking and and
  • 00:48:27
    shopping for the member um as I
  • 00:48:29
    mentioned in the prepared remarks though
  • 00:48:30
    we have seen some good improvements as
  • 00:48:32
    we've grown our sales numbers that's
  • 00:48:34
    created some leverage in the model we're
  • 00:48:36
    improving the efficiency of our
  • 00:48:38
    fulfillment cost so it is it is
  • 00:48:40
    continuing on an improving Trend over
  • 00:48:42
    time because of the sales growth and The
  • 00:48:44
    Leverage that's creating but also some
  • 00:48:45
    of the improvements the team are making
  • 00:48:47
    in the business to drive more efficiency
  • 00:48:48
    as
  • 00:48:53
    well your next question comes from the
  • 00:48:56
    line of Michael Baker with da Davidson
  • 00:48:59
    please go
  • 00:49:00
    ahead uh great thanks uh two questions
  • 00:49:03
    one can you talk about competitive
  • 00:49:05
    pricing particularly in grocery there's
  • 00:49:07
    been a lot of talk about some grocery
  • 00:49:09
    chains investing in price Etc what are
  • 00:49:11
    you seeing how are your price gaps uh
  • 00:49:14
    and then I'll have a followup after that
  • 00:49:18
    thanks yeah yeah thanks for the question
  • 00:49:21
    um you know I think that the key thing
  • 00:49:22
    for us is we're our own biggest
  • 00:49:24
    competitor you know we as you heard us
  • 00:49:26
    mention earlier we want to be the first
  • 00:49:27
    to lower prices and the last to raise
  • 00:49:30
    prices and at every one of our regular
  • 00:49:32
    budget meetings we're talking about how
  • 00:49:33
    can we find ways to do that and the
  • 00:49:35
    majority of our Price investments are
  • 00:49:37
    proactive not that we're reacting but of
  • 00:49:39
    course we're always watching and staying
  • 00:49:41
    very close to competition I would say
  • 00:49:43
    that the promotional environment has
  • 00:49:45
    been increasing that would be with us as
  • 00:49:46
    Ron mentioned earlier that our cpg
  • 00:49:49
    partners are investing to find ways to
  • 00:49:51
    drive units and that would certainly be
  • 00:49:53
    the case uh you know across some of the
  • 00:49:55
    competition as well I mentioned earlier
  • 00:49:57
    appliances and and and consumer
  • 00:49:59
    electronics would be an area where we've
  • 00:50:00
    seen more of that activity but I think
  • 00:50:02
    if you took it all on balance we
  • 00:50:04
    wouldn't say that we're seeing the
  • 00:50:05
    activity is sort of outside of of normal
  • 00:50:07
    in the in the food space and we feel
  • 00:50:10
    very good about our position uh relative
  • 00:50:12
    to the market and uh continue to be
  • 00:50:14
    proactive in finding ways to uh you know
  • 00:50:17
    provide the best quality best value for
  • 00:50:19
    our
  • 00:50:20
    members excellent thank you that makes
  • 00:50:23
    sense um follow up uh when gas prices
  • 00:50:27
    fall I think gas prices are down now 15
  • 00:50:29
    16% year-over-year
  • 00:50:31
    um broadly speaking at least in the
  • 00:50:34
    latest data do does that hurt your
  • 00:50:37
    traffic at all because I think you guys
  • 00:50:39
    say 50% of people who come to get gas
  • 00:50:42
    come into the club and buy something um
  • 00:50:45
    I think the unit growth the gallons
  • 00:50:47
    growth did decelerate a little bit this
  • 00:50:49
    quarter uh you know is that something
  • 00:50:51
    that you guys look at or have any
  • 00:50:52
    concern
  • 00:50:53
    over yeah this is Ron I don't see it as
  • 00:50:56
    a concern uh you know gallons were up 3%
  • 00:51:00
    um which was a little bit softer than
  • 00:51:01
    the prior quarter so when you do hit
  • 00:51:03
    those Peaks and prices we will see a
  • 00:51:05
    greater attraction to the Costco gas
  • 00:51:08
    stations but uh you know our balance of
  • 00:51:10
    of transactions dual transactions that
  • 00:51:13
    we have looks very positive and uh so
  • 00:51:16
    we're not seeing traffic dropping off at
  • 00:51:17
    all in the warehouse based on the
  • 00:51:20
    slightly softer gallon growth that we're
  • 00:51:22
    seeing out in the gas
  • 00:51:23
    [Music]
  • 00:51:25
    stations excellent thank
  • 00:51:28
    you here our next question comes from
  • 00:51:30
    the line of Karen short with Malia
  • 00:51:33
    research please go
  • 00:51:35
    ahead hey thanks a lot and good to talk
  • 00:51:38
    to you again um so thanks for taking my
  • 00:51:41
    question uh so my question is when you
  • 00:51:46
    look at your pre-tax margin um I know
  • 00:51:50
    you don't manage to that in any way
  • 00:51:52
    shape or form but it obviously has been
  • 00:51:56
    creeping up
  • 00:51:58
    so you know when you look at the actual
  • 00:52:02
    Delta on you know a 10 basis point
  • 00:52:05
    increase in that
  • 00:52:07
    margin um it's not immaterial
  • 00:52:11
    to you know to earnings and or valuation
  • 00:52:16
    obviously so wondering how you think
  • 00:52:19
    about
  • 00:52:20
    that hi Karen yeah I think the way we
  • 00:52:23
    think about it is really back to some of
  • 00:52:25
    the the comments that we were referring
  • 00:52:26
    to earlier is that you know our goal is
  • 00:52:28
    always to drive Top Line That's the top
  • 00:52:30
    priority for the company and we're
  • 00:52:32
    focused on investing and delivering
  • 00:52:33
    value for the member and delivering uh
  • 00:52:36
    improved investments in our employees as
  • 00:52:38
    well to make sure that we're an employer
  • 00:52:39
    of choice I think you appreciate the
  • 00:52:42
    comment because I think we have been
  • 00:52:43
    successful over the years in doing that
  • 00:52:45
    uh because there are ways for us to
  • 00:52:47
    continue to lower our costs in our gross
  • 00:52:50
    margin part of our business and and
  • 00:52:51
    drive more value for the member some of
  • 00:52:53
    the things that we've been focused on
  • 00:52:55
    like Global buying and the Kirland
  • 00:52:57
    signature growth that we've seen
  • 00:52:59
    e-commerce growth as we mentioned
  • 00:53:00
    earlier and there'll be opportunities of
  • 00:53:02
    things like Redal media in the future so
  • 00:53:03
    I think there are a number of uh ways in
  • 00:53:06
    in gross margin and also a number of
  • 00:53:08
    ways in sgna where we can continue to be
  • 00:53:11
    more efficient um to drive that
  • 00:53:13
    investment our focus is always to drive
  • 00:53:16
    as I mentioned the top line and and if
  • 00:53:17
    that over time allows us to continue to
  • 00:53:20
    to grow uh the margins then obviously
  • 00:53:22
    that's something that we're we're we're
  • 00:53:24
    pleased with and it's a it's a good
  • 00:53:25
    outcome for investors but I wouldn't say
  • 00:53:27
    as you mentioned it's a it's a targeted
  • 00:53:29
    outcome it's really about making sure
  • 00:53:31
    that we're driving that Topline growth
  • 00:53:33
    and and the history as you've mentioned
  • 00:53:35
    would suggest that when we've done that
  • 00:53:37
    well as we continue to look for
  • 00:53:38
    opportunities it has allowed us to
  • 00:53:40
    expand margin slightly as well you know
  • 00:53:43
    I would add I agree with Gary I would I
  • 00:53:45
    would add to that there's several
  • 00:53:46
    several lovers that our our operators
  • 00:53:48
    and our buyers have to improve margin
  • 00:53:51
    and and our buyers speak often about the
  • 00:53:53
    fact that we can lower prices while
  • 00:53:55
    improving margin as well and that comes
  • 00:53:58
    with the efficiencies that we're seeing
  • 00:54:00
    comes with very good sell throughs that
  • 00:54:01
    we're realizing and the goods that we're
  • 00:54:03
    buying um you know newness and bringing
  • 00:54:05
    in new items to the market that that
  • 00:54:07
    could have a little bit better margins
  • 00:54:09
    and our our operating shrinkage has been
  • 00:54:11
    um improving and we saw a nice solid
  • 00:54:14
    year this year and picked up some margin
  • 00:54:16
    on improving shrink results in in the
  • 00:54:18
    business as well so those are some
  • 00:54:20
    different levers that that will augment
  • 00:54:22
    lowering prices and continue to improve
  • 00:54:24
    margins
  • 00:54:26
    but but is it fair to think that 4% is
  • 00:54:30
    and maybe going up from there is
  • 00:54:36
    realistic yeah I think we wouldn't get
  • 00:54:39
    into as you know into sort of guidance
  • 00:54:41
    of of what we're expecting in the future
  • 00:54:43
    I I do think as Ron shared that we we
  • 00:54:45
    don't see it as a if feel like a zero
  • 00:54:47
    sum game I think we believe there's an
  • 00:54:49
    opportunity to continue to find ways to
  • 00:54:52
    invest in our members and our employees
  • 00:54:53
    and we do believe you can do that
  • 00:54:55
    through uh
  • 00:54:56
    what the way that we manage the business
  • 00:54:58
    to continue to improve profitability
  • 00:55:00
    over time but I wouldn't want to really
  • 00:55:01
    provide any specific guidance related to
  • 00:55:04
    that great thank you thanks
  • 00:55:19
    Ken CHR are you there is that all that
  • 00:55:21
    questions
  • 00:55:24
    Christa hello
  • 00:55:28
    Laura champagne from loop capital your
  • 00:55:30
    line is
  • 00:55:33
    open
  • 00:55:35
    great your next question comes from Greg
  • 00:55:39
    Mich with evercore isi please go
  • 00:55:43
    ahead hi thanks um I want to go back to
  • 00:55:47
    uh the profitability and and gross
  • 00:55:49
    margin particularly gasoline the
  • 00:55:51
    Tailwind um what are we now back at 20
  • 00:55:55
    cents Penny profit per gallon or or what
  • 00:55:58
    should we think of that as sort of a
  • 00:56:00
    normalized range um going
  • 00:56:03
    forward yeah I think Greg we we uh we we
  • 00:56:06
    generally aren't sharing specific
  • 00:56:08
    breakdown of of profitability and that
  • 00:56:10
    would be true obviously across um a
  • 00:56:11
    number of are of the business but on on
  • 00:56:13
    gas as I mentioned earlier I would think
  • 00:56:14
    of gas as being sort of Fairly stable in
  • 00:56:17
    general for us you know there are Peaks
  • 00:56:19
    and troughs because of volatility uh in
  • 00:56:22
    the market in the short term sometimes I
  • 00:56:23
    wouldn't think of this quarter uh while
  • 00:56:25
    it showed up in a in a as part of the
  • 00:56:27
    overall Improvement in other businesses
  • 00:56:30
    I wouldn't call it out as being like
  • 00:56:31
    anything that was particularly changing
  • 00:56:34
    the trajectory of of gas or um or that
  • 00:56:37
    would cause us to be wanting to share
  • 00:56:39
    any more sort of detailed color because
  • 00:56:41
    generally we're expecting the gas side
  • 00:56:43
    of the business to be relatively stable
  • 00:56:45
    as I mentioned you know next quarter
  • 00:56:47
    this quarter I should say uh there that
  • 00:56:49
    was an example of where there was some
  • 00:56:51
    really uh very unusual volatility
  • 00:56:54
    because of world events but in the main
  • 00:56:56
    I would think of gas as not being you
  • 00:56:58
    know a major sort of uh underlying
  • 00:57:00
    change in trajectory or or something to
  • 00:57:02
    look at differently in our model um
  • 00:57:04
    obviously we do provide color where
  • 00:57:05
    there's something unusual that pops up
  • 00:57:08
    but I wouldn't I wouldn't think of that
  • 00:57:09
    as being a directional
  • 00:57:11
    change got it and and given the recent
  • 00:57:13
    wage increase um could you help level
  • 00:57:16
    set us on maybe on what your average
  • 00:57:17
    wages are now in the US or globally I
  • 00:57:19
    think think in the past the number was
  • 00:57:21
    something like $26 an
  • 00:57:23
    hour no currently the the average wage
  • 00:57:27
    um is just North of $30 an hour just
  • 00:57:30
    north of 30 great and that's for the
  • 00:57:32
    US
  • 00:57:34
    yes US and Canada it equivalized in
  • 00:57:38
    Canada got it no I'm last
  • 00:57:41
    but go ahead go ah so my last question
  • 00:57:45
    was just given the the nonf food the
  • 00:57:48
    success there uh you called out the Gold
  • 00:57:50
    bowling again I'm just curious are there
  • 00:57:52
    any plans to maybe bring Kirkland
  • 00:57:54
    Signature into the gold bulling Market
  • 00:57:59
    um no plans at this
  • 00:58:01
    time all right thanks a lot and good
  • 00:58:03
    luck guys thank you thank
  • 00:58:06
    you and ladies and gentlemen that's all
  • 00:58:08
    the time we have for questions today I
  • 00:58:10
    will now turn the conference back over
  • 00:58:12
    to grie for closing
  • 00:58:15
    comments thank you uh Christa thank you
  • 00:58:17
    all for joining the call today um we
  • 00:58:19
    look forward to talking to you at the
  • 00:58:21
    the next quarterly earnings call that
  • 00:58:23
    will conclude our call thank you ladies
  • 00:58:25
    and and gentlemen this does conclude
  • 00:58:27
    today's conference call thank you for
  • 00:58:29
    your participation and you may now
  • 00:58:31
    disconnect
Etiquetas
  • Costco
  • earnings call
  • Q4 2024
  • net income
  • e-commerce
  • warehouse openings
  • membership fees
  • employee wages
  • inflation
  • supply chain