Ladies and gentlemen, thank you for standing by, welcome to the Costco Q4 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question- and- answer session. To ask a question during the session, you will need to press star one on your telephone. If you require any further assistance, please press star zero. I would now like to hand the conference over to Richard Galanti. Please go ahead.
Thank you, Laurie, and good afternoon to everyone. I will start by stating that these discussions will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that may cause actual events, results, and/or performance to differ materially from those indicated by such statements. The risks and uncertainties include, but are not limited to, those outlined in today's call, as well as other risks identified from time to time in the company's public statements and reports filed with the SEC. Forward-looking statements speak only as of the date they are made, and the company does not undertake to update these statements except as required by law. In today's press release, we reported operating results for the Q4 and fiscal year 2020, the 16 and 52 weeks ended August 30th.
Reported net income for the Q4 came in at $1.389 billion, or $3.13 per diluted share, compared to $1.097 billion, or $2.47 per diluted share last year in the Q4 . This year's Q4 was negatively impacted by incremental expense related to COVID-19 premium wages and sanitation costs totaling $281 million pre-tax, or $0.47 a share, as well as a $36 million pre-tax charge, or $0.06 per share, related to early payment of $1.5 billion of debt. These items were partially offset by an $84 million pre-tax benefit, or $0.15 a share, for the partial reversal of a reserve of $123 million pre-tax, $0.22 per diluted share, related to a product tax assessment taken in the Q4 of last year. Net sales for the quarter increased 12.5% to $52.28 billion, up from $46.45 billion in the Q4 a year earlier.
For the fiscal year in its entirety, fiscal 2020 came in at $163.22 billion, a 9.3% increase over the $149.35 billion in fiscal 2019. Comparable sales for the Q4 fiscal 2020 were as follows. On a reported basis for the 16 weeks, U.S. was 11%, excluding gas deflation and FX, U.S. was 13.6%. Canada reported 9.1% up. Again, ex-gas deflation and FX, 12.6% up. Other International reported 16.1%, ex-gas deflation and FX, 18.8%, bringing the total company to a reported number of 11.4% comp, and again, ex-gas deflation and FX, up 14.1%. For the company, e-commerce reported was 90.6% up and ex-gas and FX, 91.3% up. In terms of the Q4 comp sales metrics, foreign currencies relative to the U.S. dollar negatively impact sales by about 50- basis points, and gasoline price deflation negatively impacted sales by approximately 220 basis points.
Traffic or shopping frequency on a worldwide basis was down 1.2% during the Q4 and showed an increase of 1.2% in the U.S. Our average transaction or average basket size was up 12.7% during the Q4 , notwithstanding the negative impacts from gas deflation and FX, which were included in that number. We've kept you up to date in our monthly sales calls on the impacts from the pandemic as we've been able to identify those. Overall merchandise sales in the core being food and sundries, hard lines, soft lines, and fresh, as well as pharmacy, have all been strong. While sales in our other ancillary and travel businesses, though now open, have been soft. Next, moving down the income statement, membership fee income. We reported Q4 membership fee income of $1.106 billion, up $56 million from $1.05 billion in the Q4 of 2019.
The $56 million increase, ex FX, would've been $60 million up. During the quarter, we opened eight net new units and 13 for the entire fiscal year. In terms of renewal rates at Q4 end, our U.S. and Canada renewal rate remained at 91.0%, and worldwide rate also remained at its similar number from a quarter ago at 88.4%. In terms of the number of members at Q4 end, both member households and cardholders, total paid households at Q4 end came in at 58.1 million, and cardholders, 105.5 million. In the Q4 , we standardized the membership count methodology globally, which we had apparently done differently in different markets, North America versus others. That increase includes that slight adjustment. The change resulted in adding approximately 1.3 million paid members and 2.0 million cardholders to our member base.
As an example, from Q3 - Q4, when we showed going from $55.8 - $58.1 million, or up $2.3 million, that $2.3 million increase includes the $1.3 million adjustment upwards. Similarly, the $3.7 million increase from the end of Q3- Q4 , that $3.7 million increase includes $2.0 million of an adjustment. I'd like to note, however, that neither the membership fee income dollars nor the renewal rate calculations were affected by this adjustment. At Q4 end, paid executive memberships totaled $22.6 million, an increase of 765,000 during the 16 weeks since Q3 end. Going down to the gross margin line, our reported gross margin came in at 11.24%, up 18 basis points from last year's Q4 gross margin of 11.06%.
That 18- basis point increase, excluding gas deflation, came in what would have been minus four basis points, and excluding a portion of the direct COVID expenses, would have been up eight. I will show you that in the numbers that I ask you to jot down here. If you jot down the following numbers, two columns. First column will be Q4 as reported. Second column will be Q4 ex-gas deflation. The first line item would be core merchandise. Year over year on a reported basis, core merchandise was up 101 basis points, ex-gas deflation up 82- basis points, so plus 101 and plus 82 in the first line item. Ancillary businesses being the second line item, reported minus 66 basis points, and without gas deflation, minus 71. 2% reward, minus four and minus two basis points. Other, minus 13 and minus 13- basis points.
That would give you totals on a reported basis of plus 18- basis points, which I mentioned, and ex-gas deflation to minus 4- basis points. The core merchandise component of gross margin, again, was higher by 101- basis points year-over-year, and 82- basis points higher ex-gas -deflation. Similar to last quarter, and even more dramatic of an impact during this quarter, we had a significant sales shift from ancillary and other businesses to the core. This resulted in a higher contribution of our total gross margin dollars coming from the core operations versus last year. Looking at the core merchandise categories in relation only to their own sales, so core on core, if you will, margins year-over-year were up by 70- basis points. Fresh foods were the biggest driver here.
With the strong sales in fresh, we benefited from efficiency gains in both labor productivity and significantly lower, what we call D&D, or damage and destroy, to product spoilage. Food and sundries, soft lines, hard lines, as I mentioned fresh foods already, but in addition, food and sundries, soft lines, and hard lines all had higher margins year over year in the quarter as well. Ancillary and other businesses gross margin, again, was lower by 66- basis points and 71- basis points ex-gas deflation. Most of our ancillary businesses were lower year over year, with the most significant negative impact coming from gasoline and travel, which accounted for about three-quarters of the decline. Costco Logistics, which was primarily our acquisition this past March of the big and bulky or last-mile carrier called Innovel. That was our newly acquired business.
That impact, we anticipated losses in this business as it ramps up. Note that these losses do not take into account any added sales from expanded product offerings, lower delivery prices, and improved member satisfaction. Next, 2% reward. Nothing really to say there. Minus two basis points ex-gas deflation. Other, the minus 13- basis points, nearly all of this is attributable to the cost from COVID, $64 million of the $281 million previously mentioned. These are direct costs for incremental wages and sanitation allocated to our Costco departments and to our merchandise fulfillment operations, so it impacts cost of sales. Moving to SG&A. Our reported SG&A percentage year-over-year was lower or better by 47 basis points, coming in at 9.62% of sales this year in the Q4 versus 10.09% last year in the Q4 . Ex-gas deflation, SG&A was lower or better by 66- basis points.
Again, if you jot down the following two columns of numbers, first column is reported year-over-year SG&A change, the second column would be ex-gas deflation. Core operations, as reported, were better or lower by 42 basis points, and ex-gas deflation, lower or better by 57 basis points, so +42 and +57. Central, +1 and +3. Stock compensation, +3 and +4. Other, +1 and +2. That gives you the total on a reported basis, SG&A being better by 47- basis points and ex-gas deflation being better by 66. SG&A in the core, excluding COVID-related expenses, which I'll discuss in a moment, was significantly leveraged, of course, with the strong core merchandise sales increases. As I mentioned, central stock compensation showing small improvements year-over-year as a % of sales.
Now the other, a +1- basis point reported and a +2 ex-gas deflation. As I discussed earlier in the call, the quarter was positively impacted by an $84 million reversal of last year's Q4 $123 million pre-tax reserve related to a product tax assessment taken a year ago in the Q4 . The net impact from this item was +43- basis points. That +43- basis points is in this +1 and +2- basis point number. Also included in other are the incremental COVID costs or $217 million of the $281 million total amount. That equates to 42 or 41- basis points without gas deflation offsetting it the other way. That's why you have that very small number on that line. Again, these are the costs for incremental wages and safety and sanitation. Next on the income statement, pre-opening expense.
Pre-opening expense last year in the Q4 was $41 million. This year in the Q4 , it was $15 million less, coming in at $26 million. Last year in the Q4 , we had 12 gross openings, 10 net, and two reloads. That compares to 10 openings gross, or eight net, in the Q4 this year. The big difference in those two numbers, this year's Q4 relates primarily to warehouses opened during the quarter, as well as warehouses scheduled to open in the Q1 . Last year's pre-opening included $12 million in pre-opening expenses related to our then new poultry complex. All told, reported operating income in Q4 increased 32%, coming in at $1,929,000,000 this year compared to $1,463,000,000 last year. It would be a slightly higher percent increase if you excluded the items that I'd mentioned earlier.
Below the operating income line, interest expense was higher year-over-year by $6 million, coming in at $51 million this year compared to $45 million last year. Interest income and other for the quarter was lower by $83 million year-over-year. As discussed earlier, following the completion of the debt offering, we prepaid $1.5 billion of debt during the quarter. There was a pre-tax expense of what's known as a make-whole payment of $36 million related to the early retirement of that debt. That's in this interest income and other line. Actual interest income was actually lower by $28 million year-over-year in the quarter, due principally to lower interest rates being realized. Lastly, FX and other was lower by $19 million.
Overall, reported pre-tax income in the Q4 came in higher by 25%, coming in at $1.869 billion this year compared to $1.492 billion last year. Again, that's including those items I pointed out earlier. In terms of the income tax rate, our tax rate in Q4 of 2020 was 24.9%, a little lower than a year ago when it was at 25.7% in the Q4 a year ago. A little benefit there. A few other items of note. In terms of warehouse expansion, with COVID, we had some delays in some of the planned openings for the fiscal year that just ended this past August 30th, and a few of those have been pushed into this year that we're in now. For the year, we opened 16 total units, including three reloads. Last year, we opened a net increase of 13 locations.
Our plan for this year is to open about 20 net, 23 including three reloads. That's our best guess and plan at this point. As of Q4 in, our total warehouse square footage stood at 116 million sq ft. In terms of capital expenditures for the 16-week Q4 , we spent approximately $852 million, the full year, we spent $2.8 billion. Our estimated CapEx for all of fiscal 2021 is in the $3 -$3.2 billion range. E-commerce. Overall, our e-commerce sales, as you've seen each month, have increased nicely. For the Q4 , on a reported basis, up 90.6%, FX, 91.3% increase during the Q4 . A few of the stronger departments, there are several, health and beauty aids, food and sundries, appliances, TVs, computers and tablets, housewares, and small electrics. Total online grocery grew at a very strong rate in Q4, several hundred percent.
This e-commerce comp, if you will, the e-commerce numbers I just mentioned above follow our usual convention, which we exclude the third-party same-day grocery program. If we included that third-party same day, our e-commerce comps result would have been approximately 120% up during the quarter. Overall, our e-comm sites worked relatively smoothly during the quarter, despite the dramatic volume increases, and we were able to improve our delivery times throughout the quarter as we adjusted to the ramped- up order volumes. Quickly turning to COVID and the coronavirus and some of the issues and impacts surrounding it. From a sales perspective, as indicated by our past three- monthly sales releases, we've enjoyed strong sales results during the June, July, and August timeframe.
Certainly, the sales strength starts with our being deemed essential, resulting in strong sales of fresh foods and foods and sundries and health and beauty aids and the like. We've also benefited from the much-improved sales in products and items for the home outside of the food area. As people are spending less on travel, air and hotel, and dining out, they seem to have redirected at least some of those dollars to categories like lawn and garden, furniture and mattresses, exercise equipment, bicycles, housewares, cookware, domestics, and the like. Lastly, a few of our ancillary businesses, notably our optical and hearing aid operations, were closed for 12 - 16 weeks and reopened during the midsummer. From a supply chain perspective, kind of a 40,000-foot view, in terms of China, at least judging by the shipments to us, most of the factories are up and running.
There are still some production challenges due to certain components downstream in the supply chain in areas like electronics, computer, and certain white goods. It is getting better and improving each week. Like us, we feel that our suppliers' factories have gotten a bit better over the last several months of instituting safety protocols. That's our best guess. India, in terms of getting back to normal, each week is showing improvement and catching up. Still a little behind. Food and sundries, some limits on paper goods, but getting better. Toughest area overall is still sanitizing wipes as well as latex gloves. In terms of other PPE, we're in pretty good shape, selling quite a bit of masks and the like. Milk and butter, things like that, are generally okay. In terms of fresh foods, proteins are currently all pretty good.
There had been some slowdowns over the past few months and some allocations and some limits that we had to put on some sales of those items, but that's gotten back to normal at this point. Seafood and produce, all good as it has generally been throughout. In terms of holiday merchandise planning, Halloween, a small reduction in the number of costumes, some more basic candy items, as well as for Christmas, going a little more basic in some areas, and as well as looking at things and needs and uses for the house. Viewing it, given our strength of late, relatively optimistically. Costco Travel has shown some very modest improvement, but still significantly impacted during the quarter due to reduced demand. We do see our members starting to book travel again, although generally further out than we have historically seen.
Our warehouses overall have remained open and are back to regular hours with an additional hour on certain weekday mornings in many markets for seniors and persons with disabilities. The warehouses are still, of course, following the social distancing and sanitization guidelines. Since May 4th, as you know, we've required all members and employees in the warehouse to wear masks. In terms of upcoming releases, we will announce our September sales results, which is for the five weeks ending Sunday, October 4th, on that following Wednesday, October 7th, after market close. I will open it up to Q&A and give it back to Lori. Thank you.
Yes, ladies and gentlemen, as a reminder to ask a question, please press star one on your telephone keypad. Again, in order to ask a question, please press star one. Your first question is from Simeon Gutman from Morgan Stanley. Your line is open.
Hi, everyone. Hey, Richard. My first question is, how should we think about or how are you planning COVID costs for Q1 of the next fiscal year? If I'm not mistaken, I thought that for this Q4 , there was a range, or I don't know if there was a range, but we were expecting them to be lower sequentially, and I think they were pretty similar. You mentioned the basics, what it constituted, but can you talk about why?
Sure. As you may recall on our Q3 conference call, we indicated that such types of costs in the Q4 would be at least $100 million or over $100 million. Of course, 281 is over $100, but quite a bit larger. The reality is, the biggest factor is we chose to continue, at least for the time being, the $2 an hour premium. That represents about $14 million a week. To date, we're doing that, and we've committed to doing that at least through, I believe, the first eight weeks of this fiscal quarter. Again, we'll take that time again. Our numbers have been very good. Our employees are on the front line. Mind you, the Q4 was a 16-week- quarter versus Q3, which is a 12-week- quarter. On a per week basis, it's come down.
There are other things that won't be repeated in the Q1 , at least. If you go back to the very beginning of time, for the first four to five weeks, when we stopped doing food samples, we employed those third-party employees ourselves. We paid our third party to have them help us in the warehouse. That was during those three to four weeks of craziness in late February through mid to late March, when people were coming in and hoarding and what have you. That helped quite a bit. There are some costs that I don't expect to be continued. The biggest component, of course, would be the $2 premium, and we'll see. At this juncture, we've committed to it, to our employees for the first eight weeks of this quarter.
Okay, thanks for that. My follow-up, as you mentioned the holiday, and I think you said you're looking at it optimistically or favorable for now. Can you talk about maybe a little more detail why? It seems like the results speak for themselves for now, but there could be a lot of change over the next couple of months. Has your customer diversified their basket with you, and you think you'll be able to retain them across more categories and keep trips as more retail gets their traffic back? Thanks.
Sure. Well, look, the main data points that we look at is how strong things have been in the last three and a half, four months. June, July, and August sales results, which we've all shared with you guys. The trend in traffic has improved, so it's been positive the last couple of months instead of slightly or even more than slightly negative going back to April and May. While the average ticket or average basket sizes continue to be relatively strong.
Probably if you ask what's some of the biggest surprises that we had looking at the last three months of sales results compared to what we had expected a few months before that, the big surprise is, we expected fresh and food and sundries and paper goods and the like, and health and beauty aids to be strong, particularly food because of the weakness, people dining out. I think we were a little surprised by the strength in many of these discretionary non-food categories, things for the house and big- ticket items. Again, not only furniture for inside the house, but patio furniture. Live goods were particularly strong, where in some instances, we had tried to cut back a few orders back in March and April for seasonal summer goods like patio furniture. Very quickly, we were having to scramble for more of those.
So far so good. We recognize that people are coming into Costco. We believe they feel safe given the safety protocols, the mask requirements, the sheer size of the building itself and the width of the aisles. All those things have helped us in that regard. We're also back to, after a couple of months of not having our traditional multi-vendor mailer coupon type of offerings, because but we're limited on allocation. We've gotten back to that. I think at least our most recent three-plus month history has given us some comfort at this point. Now, as soon as I say that things may change, but at this juncture, we feel very good about what it looks like going forward. Recognizing, looking at some of these things with a more basic, in terms of Halloween and Christmas and the like.
Your next question is from Christopher Horvers from JPMorgan. Your line is open.
Thanks. Good evening, guys. My first question is, what's driving that strong core on core margin outside of the fresh category, which clearly would benefit from a shrink perspective? Is it sell-through and low clearance? Is it mix within the categories, or is it something else?
On fresh, it's all the above. It's strong sales on a relatively higher initial margin business within our small confines of margin range. Two components of cost of sales in fresh is labor productivity and spoilage. We don't have spoilage. We sell out, not literally, but almost literally to the piece on these end things. You're not throwing stuff away. It's a great business from a gross margin dollar perspective, given the sales strength in it. That's clearly the biggest thing. Again, if you look at the other three core areas, core on core food, sundries, hard lines, soft lines, they're all up, but up a nice amount, but nothing like fresh foods. That's helped. Now, mind you, other things have offset that, and the sum of all those things is still a positive.
The things that have offset it would be things like the fact that certain ancillary businesses, which are higher margin businesses, were closed for a 12 - 16-week period. Our food court, of course, has been limited of what we do there. We took out all the tables. We've limited the product offerings. Travel, while a small business, is an extreme example of high margin. Many items in Travel is just a brokerage fee, almost sales minus no cost of sales equal gross margin, if you will. It's the markup or the commission on some of that stuff, a portion of that. Those things have come down, but the sum of all those negatives is outweighed by the overall strength in core merchandise sales and pharmacy. Pharmacy's been relatively strong, too. Within that, fresh has been the biggest driver of it.
Got it. A final question. You were surprised by the negative gas impact and ancillary. Your peers will not the same quarter saw tailwinds for the periods that crossed over. Can you talk about how much of that 66-basis point is specifically gas versus the other businesses? As you look forward, considering that optical's open and food courts, at least with a smaller menu, open and starting to see some traction around travel and gas prices being stable, do you expect that at this point that ancillary headwind could abate?
I think it'll be less negative, but I think it's going to be around for a while. If you look at gas is more profitable per dollar, per gallon of sales than it was a couple of years ago. I think as prices have come down, traditional retail has not been as competitive, which allows us to be more competitive but still make a little more. At our trough, at the lowest point, I'm guessing back in April or May, there was a week where our gallons were down close to half. Today, they're down closer to maybe down 10%, maybe 5%-15%, depending on the day or the week.
In normal times for the last few years, pre-COVID, when the U.S. gasoline industry had comps in the very low single digits, we'd be in the very high single digits or close to 10 or 11 even sometimes. Things have changed there. It's still a profitable business, but when your price per gallon goes down 20%-30% and your gallons are down even some small amounts, and it's a 10-plus% of sales of our business, it has that effect on it. At the end of the day, the sum of all this has still been quite good for us.
Could you break out the $66 that's specifically related to gas?
No. Well, we said three-quarters of it.
Gas and travel.
gas and travel. That's as good as we get here. I don't have the detail in front of me, but my guess is gas is more of it than travel, but they're both impactful.
Your guess is better than mine. Thanks very much.
Your next question is from Chuck Grom from Gordon Haskett. Your line is open.
Hey, good afternoon. Curious, Richard, how you're thinking about the recovery of your gasoline business, particularly from a gallon's perspective, and I guess how this interplay is holding back foot traffic into your stores. Clearly, it's getting better, but it's being impacted a little bit by the gas business.
Well, I don't know exactly. I haven't seen numbers in the last week or two, but I believe our, call it, 10% negative gallon comp is still way better than the U.S. gasoline industry as a whole. We'd rather have +10 than -10. The fact is that people are coming in less, but they're buying more each time. The sum of those two things, as we've shown, we used to enjoy 5%-8% comps pre-COVID on a regular basis, and the last three months, we've enjoyed 14s, if you will. Overall, we'll take that. It's got to be a small impact still.
Okay. Just, it's been a while since I asked this, but the crossover between customers that purchase gas and then shop in the store on like times, hours, do you have that number handy?
I haven't seen it lately, but historically it had been, during the hours that the warehouse itself is open, because the gas station is open a couple of hours perhaps on either side of that, it's in the low 50s.
Low 50s. Okay, great. Then just switching gears a little bit on capital allocation, the end of the year with over $30 per share in cash and cash equivalents, you obviously remain significantly under-levered. Curious how you and the board are approaching this high-cost problem.
Well, we have our regular quarterly board meeting in a couple of weeks. We'll see. At the end of the day, we talk about at every board meeting all the different alternatives. Certainly, when we went out to borrow the $4 billion, which was really a net increase of $2.5 billion because we used a billion and a half to pay off existing debt, the fact was that we were planning for a worst case scenario where there'd be a slew of seasonal summer merchandise that we might have to hold for a year, as well as there'd be a lower inventory turn, particularly on discretionary non-food categories. Up until June, when we've seen the numbers really go in the northern way, June, July and August, much of that need has not occurred. Yes, we are in a good position right now. We'll continue to look at it.
You'll know us after we know.
Got it. Thanks a lot.
Your next question is from Karen Short of Barclays. Your line is open.
Hi. Thanks very much. I guess this question just on the $2 premium. I guess the real question is, I know you called out the eight weeks, but would it be more prudent as we model this to just think that's more or less the new norm, meaning $14 million a week is what we should add on an ongoing basis? It just seems that it's hard to take something like that away once you've offered it. Just thoughts on that.
I don't think it's completely hard to take away. We communicate via our CEO and our head of HR to our employees. We've done that and we've continued to extend it by saying this will be it, and then we've added a little more. I think we'll see. I think it may be hard, but not impossible, and we want to make sure we communicate to our employees of why we're doing it, and we'll just have to wait and see, Karen.
Okay. I wanted to just... Yeah?
I wouldn't necessarily budget it in for the full fiscal year, but we don't know at this point.
Okay.
We know it's at least eight of the 12 weeks in Q1; it may be more.
Okay. Just back to traffic for a second. Within your reported traffic numbers is obviously e-com, right? I wanted to just ask a little about what your physical in-store traffic looks like. I think on the last call, you were asked on color on traffic with your more loyal executive members versus the lower- level members. Do you have any color on both of those?
I'm looking really quick. I don't have color in terms of Generally, executive members do everything, spend more, come in more frequently, buy more each time, and renew at a higher rate. I'm looking really quick here. Hold on.
Traffic. That's the comp.
I don't have traffic. Within our comp number, e-commerce benefits it by a little over 3%. Of the comp.
Not the traffic.
Yeah, not the traffic number.
The average ring is double the warehouse.
The average ring has more than doubled.
The average ring on e-com.
Oh, I'm sorry. The average ring on e-com. Versus the warehouse, is about twice. That's because even though we've expanded on food and sundries and apparel, you still have got big ticket items like electronics and furniture, exercise equipment and the like.
The traffic is something like one to two.
Bob here is saying he's guessing that the traffic impact would be one to two, but we don't have that broken out.
Your next question is from Michael Lasser from UBS. Your line is open.
Thanks for the opportunity for my question. Richard, now that we're six months into the pandemic, does Costco come out of this situation in better position to experience incremental margin expansion over time? Is there any factor that you've learned that would allow the company to generate more margin expansion than it would have otherwise?
The more margin we can generate, the more likely we're going to give some of it back. In this case, arguably, given our strength, we've certainly given it back, but we remain very competitive, but we've also maintained that $2 premium to our employees, which we appreciate. The first part of your question, when you started asking about how we feel if we're going to come out of the pandemic and as things change. Look, there's factors as people eat out more and go out more or travel more, there's less for the home. That's on a macro basis.
We have to believe here, and we do believe, that we have picked up new members, we've picked up sales from existing members from categories that they are buying more at Costco now, relatively speaking, in part because certain other venues or traditional venues are either closed or not frequented as often. Again, we've been blessed in that regard. I think the other thing that I've witnessed over the last several months is our merchants' ability to pivot and to add houseware items, additional items. I think net of all those things, I still think on a macro basis, when people start eating out more and start flying more and attending, going on vacations, some of these monies that are now being used for purchasing things for the home is going to move that way.
That being said, I think there's several areas where we're retaining more of their dollars and some portion of that we'll continue to retain when it gets back to normal.
Okay. On an unrelated note, with commerce growth, what percentage of your membership base is currently buying from you online? What's the profile of the member who's driving the growth? Presumably a lot of the spend is incremental because the spend of those members is going up. Does that change how you are thinking about emphasizing or investing behind your e-commerce business?
Yeah, I don't have all those specifics. What I know is what was happening even before COVID and has been exacerbated in a positive way since COVID, is some members have signed up to utilize those services. More members are utilizing those services and spending more on it. If you think about the one-day fresh, it is up several 100%-fold , recognizing it was a smaller base. Even as it's gone down from its peak a couple or three months ago, it's still a lot higher than it was before. My guess is, even as people get used to wanting to go out, there's some people right now that aren't going to the supermarket or aren't going out to shop or to Costco to shop. They love this service. There's going to be some group of people who are going to like that.
Given our quality and value, we and the supermarket are not mutually exclusive of one another, and we think we'll keep some of that. We are certainly doing more to market to members, not only in store promotions, but online promotions as well. I feel better about our offerings today, certainly than a year ago or than two years ago, recognizing there's a lot of low-hanging fruit because of some of the things we hadn't done historically. We know that on the, I'll hate to use the phrase again, but on the big and bulky side, a lot of those things, for four years we had talked, which is pre-COVID, we had talked about going from $50 million in white goods sales in-store in the U.S. with a limited sales penetration, if you will, to fiscal 2019 doing almost $700 million. I think just under $700 million.
That business has increased at a more rapid pace in the last year for two reasons, COVID and people buying things for the home, as well as, in our view, the original things we're seeing trends wise in terms of how to better utilize our big and bulky Innovel acquisition, what we now call Costco Logistics for big ticket furniture items, lawn and garden items, exercise equipment, and the like.
Okay. Thank you very much. End of book.
Thanks.
Again, to ask a question, please press star one on your telephone keypad. Your next question is from Paul Lejuez of Citi. Your line is open.
Hey, guys. Paul Lejuez. Richard, can you maybe talk about what you're seeing in terms of spending by new customers relative to existing customers, but also relative to what you would typically see from a new customer? Then, second, I guess I'm curious if you have looked at club usage by members at all. What percent of your members use the club this quarter versus last quarter? Any way to frame that? Thanks.
I don't know if I can answer all those specifically, but keep in mind, some of our new members signed up simply for same day fresh or two-day dry. Same day fresh, you have to be within a market, a trade area where there's a Costco. Two-day dry, you can be anywhere, I think almost anywhere in the U.S. With Instacart, it's both U.S. and a good part of Canada now. We have some members, if they weren't a member, but they're signing up just to get two-day dry and they're not near a Costco, needless to say, they're just buying those types of basic dry grocery items, and that's it. Generally speaking, what we've seen in any given member, whatever type of member, they buy more each year over the first few years of their membership. There's the age thing as well.
The sweet spot for us is still 40 - 55-year-olds, as they've grown economically, grown familywise, and are not on the downside of that curve in terms of empty nesting and what have you. I don't have any specifics beyond that to give you.
How about club usage?
Club usage? Same thing. I can tell you, I don't have anything specific right in the last few months. Club, other than traffic, has improved greatly from its trough five months ago, not back to where it was pre-COVID. One of the things that we see is that the typical member over the first three to five years is growing their total purchases, which is a combination of their basket and their frequency. Clearly, when we can convert somebody to an executive member, they are buying more and shopping more frequently than that.
Got it. Thank you. Good luck.
Your next question is from Oliver Chen of Cowen. Your line is open.
Hi, thank you. Richard, on the e-commerce frontier, it's been really impressive what you've done. What is some of the lower hanging fruit that you see ahead there? Also, if you could brief us on the penetration now and how you might see that step change and where that will head in the future.
The main lower penetration things are, if you go back three or four years ago, I don't think we had good email addresses for much more than a third of our member base, and we didn't focus on that kind of stuff. Today, we have well over 60% and growing. We now require you when you sign up, and more members are signing up online than in store in general anyway. When you sign up, you sign up with an email address. We're doing a lot more to collect and gather those email addresses and then communicating with them more often. That's probably the single biggest low-hanging fruit. The other thing is we feel that we've been able to use emails, if you will, not only to drive e-commerce special promotions, but also in-store special promotions.
As well, the COVID, we were pleasantly surprised by just the sheer increase in people using same day fresh. Anecdotally, I can't tell you how many people have mentioned to me how they love it. They may very well be shopping same day fresh or same day whatever from their local supermarket as well. We've got a lot of great items on there, and it's hitting a chord.
Richard, as we look to this holiday season, which is definitely like no other, what factors would you prioritize as how you're planning it as best you can differently this year versus others? Is the multi-vendor mailer in good shape, and are you going to leverage that a lot for holiday as well? Would love thoughts around dynamics of supply chain and marketing for holiday.
Well, the multi-vendor mailer is back, and there may be a few items that we don't have because of certain supply limitations, but for the most part, it's completely back after, I think, two or three of those six or nine weeks of multi-vendor mailers, if you will, that we didn't do. I think the biggest difference is, again, for the Christmas holidays, is getting back to basics. You're still going to see some hot, exciting items at Costco. Again, as I mentioned, even on Halloween, we still have costumes. I think we brought in something like 80% of what we would have normally brought in, 80% or 90%, and we're actually selling them. We added some vendors over the last several months given certain shortages.
One of the challenges is right now we've had great numbers in electronics and white goods, notwithstanding the fact that the numbers would be better if there was greater supply. We all read about there's certain supply issues on laptops and computers and things like that, on some of the gaming things. On some of the white goods, where there might be downstream a shortage or at least some allocation of compressors. We're doing very well on that. We've added some different vendors in some cases. I think the fact that we did so well this summer relative to what we had anticipated has given us the confidence to be still pretty aggressive going into the fall.
Our last question on same day fresh and the momentum there, what are the margins like, and what are your thoughts about that margin and the take rate and also taking some of those capabilities in-house versus using the white label?
Well, at this juncture, we have a very good relationship with other competitors, I'm sure, having a good relationship also with Instacart. There are a few other smaller ones that we're using. We're not necessarily looking to take that in-house at this juncture. We are always looking at various third parties, and we have good existing relationships, and we want to keep growing those as well.
Thank you. Best regards.
Thanks.
Your next question is from John Heinbockel of Guggenheim Securities. Your line is open.
Hey, Richard. There's a couple of things on gross. Even if you take out fresh food, it looks like the other three were up quite a bit. Maybe dive into a little bit similarity driving those three big categories versus what might be unique to each. How sustainable is that? Because this obviously is one of the better core o x ores we've seen in a while.
Sure. Look, first and foremost, I guess two things. There's a little bit less promotional activity going on, and you think about TVs and electronics. Those have been such a strong category, not just for Costco, but in general. The manufacturers haven't been doing as many promotional things. The other thing is, given just the sheer sales strength, if we comped at whatever it was in August 2014, I don't have it in front of me, whatever, but in some of these categories that we talked about what was stronger, you're talking comps in the low to high 20s. When you've got that kind of sales strength, on a much smaller scale, you have less markdowns.
you've got whatever your regular margin is on those categories, without a little bit of an offset from end of cycle or, and some of those cycles are 60 and 90 days, by the way, on some of those SKUs. that's helped you a little bit.
on ancillary, you said 75% was gas and travel. Was gas the bulk of that? if so, was gas more the compare last year versus any decision you made to take less margin? I imagine it's not that, to take less margin and try to drive traffic because market's just not there, right?
I think in terms of less margin, that's more of our DNA. When things are really good, we're going to drive sales even further and do that. When things are good, we feel a little more comfortable doing the $2 an hour for another month, whatever it might be. At the end of the day, there's probably less price competition out there today than there was a year ago. We're able to maintain our fair margins.
All right, lastly, what's the current thought process on two things, expanded BOPUS, which you haven't wanted to do for cost reasons, and a third tier of membership? I don't know if it'd be a higher tier or a middle tier, but sort of segmenting that a little more.
Yeah. Well, on buy online and pick up in store, we continue to look at what others do. We continue to scratch our head a little bit. It's not that we'll never do it, but it's not on the agenda for this week. as it relates to an additional tier of membership, again, I don't think that's on the top of the priority plate at this juncture, given everything else that's going on.
Okay, thanks.
Your next question is from Scott Mushkin of R5 Capital. Your line is open.
Hey, guys. Thanks for taking my question. I guess what I want to get back, Richard, to the e-commerce to traffic mix and the comments that you've made prior about really wanting to get people into the club. If the pandemic shifts that, where you're going to see permanently traffic being an issue there, how are we thinking about impulse purchases and just the Costco model once we exit the pandemic, if this kind of sticks with omnichannel just being a much bigger piece of the pie overall?
Well, first of all, keep in mind, if our online business was 5% a year ago and now it's 8%, that's a big delta in one year, and it will probably continue to increase as a percentage from there. That excludes the third party Instacart type business, the one-day grocery. Look, we've been pretty good at pivoting along the way, and we recognize there's lots of attributes to value. The first and foremost is the lowest price on the greatest quality or quantity of goods, services, and the trust that we've endeared with our members. I think that we'll figure that out as we go along. We may be occasionally stubborn on something, but we're not completely intransigent if we see we need to do something.
We figure out how to do things in a little different way than others, and we'll continue to do that.
as far as the pickup, I know, I think you were quoted in a recent article on this. How are you thinking about pickup over time? is there a way to bring that arrow into what you guys are doing at better economics? I know you've always been cautious about those economics.
Well, keep in mind, when third parties do it, their costs for picking, we believe, we don't know exactly what they are, but we believe based on our wages and benefits, is less. They've created a model that works with their density and everything else. They're not just buying and delivering from Costco. They're buying and delivering to others. There's some economics in that model that makes sense. Our view also is there's some retailers that are doing it because they feel they have to. One of the things, the article you're talking about is the article today. The one, in my view, thing I would disagree in the article is that we should be concerned because our sales have started slowing, which is the contrary. They're stronger than they've ever been in the last three months. We don't have our head in the sand on it.
We look at it. We have people here that study it, and maybe we'll surprise you one day, but at this juncture, we're not prepared to do that.
All right. Hey, thanks for taking my questions. Appreciate it.
Your next question is from Rupesh Parikh of Oppenheimer. Your line is open.
Good evening. Thanks for taking my question. I guess, just two related questions on real estate. As you look at your store growth for this year, what's the split between international and domestic? Also, just given some of the challenges of brick-and-mortar, I'm also just curious if you're starting to see more opportunities on the real estate front.
Yeah. I think our general view is that we still feel that we want to, looking at this year and the next five years, open somewhere between 20 and 25 a year net new units. About half of those, a little more than half, will start by coming in the United States, and that'll trend over the five years to maybe being slightly over 50-50 in the U.S. to slightly under 50-50 in the U.S. We still think we have plenty of opportunities in the U.S. It does take longer in certain other countries. I think we're just about ready to do a second unit in France. We had just opened our third unit in Spain after having opened our first unit in Spain, gosh, five years ago. We have one unit in China with two planned for fiscal 2022. We're now in fiscal 2021.
some of these countries do take longer. We are also putting a little bit more emphasis on that, where we've been successful, and we think we can be successful. I think, again, at the 40,000-foot level, if we did 20 to 25, a little more than half in the first couple of years is U.S. By year four or five or six, it'll probably be, instead of 60-40 or 55-45 U.S., it'll turn to be just the opposite.
Great. Thank you.
Your next question is from Scot Ciccarelli of RBC Capital. Your line is open.
Thank you. Hi, guys. Actually, another store growth question. What is the limiting factor for you in terms of accelerating your store growth further? You've got a grand total of one in France and a grand total of one in Spain, and you've been there for five years. It just seems to me like there could be a lot more store expansion if you really wanted to push it, and I guess what I'm wondering is, what keeps you from accelerating that further?
I think there are a couple things. First of all, I've always said that we're a very hands-on company. One of the things we've learned when we've gone a little too fast, not to suggest one in five years is too fast. I remember in Japan, we got up to 10 or 12 locations, and then in about an 18-month period, we opened eight or nine, and we had a little bit of operating indigestion. As it relates to France, it took us close to 10 years to get our first open. The level of people and entities that can appeal that process and fight you to keep you out is unbelievable. Again, in Spain, we actually have three, and a fourth this year. Generally speaking, if I look at various countries, we'd open five in the first five years. That would be relatively fast for us.
Again, it gets back to I think to getting that hands-on and make sure that we feel comfortable how the market is doing. We're probably a little slower than we could be, but we feel good about it. It's worked for us, and we'll, I think, continue to do that.
Richard, that's on the international front. That makes sense. You've got to get comfortable with the market and supply chain, of course. What about just in the U.S.? You're obviously comfortable with how to navigate store openings and what kind of restrictions you might have.
Sure. Okay.
It just seems to me like you've got a decent amount of white space.
Fair enough. Well, I think some of the white space gets better each year. If I look at even the Seattle market, there was a multiyear period where we didn't open any additional units, and then we opened on the east side here, Redmond, and a couple of others. Part of it is cannibalizing nearby units. No, we try to be relatively methodical and disciplined of the returns that a new unit can generate net of cannibalization. Could we open 20 instead of 12 or 13 in the U.S.? Absolutely. It's how fast the real estate people and the regional operations people get with our CEO to go through that process. Finding the right properties. Finding the right properties, yeah.
Got it. Okay. Thanks a lot, guys.
Your next question is from Michael Baker of D.A. Davidson. Your line is open.
Hi. Thanks, guys. it's getting late, so I'll be quick. I wanted to ask you about the membership fee income up about five and change, I think, this quarter, which has been pretty consistent throughout the year. I guess, how much of that do you think is from new members that you're picking up because of the pandemic? Some of your competitors are seeing big increases in new members from the pandemic. It's hard to tease that out from your numbers. We can compare it to past MFI numbers, but it's a little lumpy because of the fee increases. any idea of what you're picking up in terms of new members because of the pandemic?
We don't disclose that. It's still a smaller percentage of the total. It's not a majority of the total.
Does it surprise you that those membership numbers aren't accelerating more as you might see from some of your competitors?
Our view when we've looked at some of our competitors' numbers is partly because they have a much lower number of members per location than we do. That's our view. The fact is when we look at how penetrated we are in so many of our markets, even in California, where we have 120, 130 units, I forget how many units we have there, I believe we're slightly north of 60% member household market share. In states like Oregon and Washington, we're well in excess of that. I think that's part of the issue in our view. We've got a lot of people already.
Right. Yeah. Makes sense. All right. If I could ask one follow-up on gas gallons sold, you said you're at 10% today. That's not 10% for the quarter, down 10%, that is, I believe, right? That sort of a point in time. Did you mention how your gas gallons sold were as we go through the whole quarter?
We did not. That's a more recent number in the last month, let's say. I mentioned that it may have been even in the end of Q3, which ended like May 10th or May whatever, around then, where we were like a minus 50. My guess is we're somewhere in the low to mid teens for the last month.
For the last quarter or for the last month?
The last month, low teens.
Okay. The total quarter is somewhere in between those two numbers, presumably.
Yes.
Got it. Great. Got it. Understood. Thank you.
Your next question is from Peter Benedict of Baird. Your line is open.
Two more questions.
Yeah. Hey, Richard. Just a question on how the product shortages issues that you guys have seen around COVID might be influencing your view on where you might go next, in terms of vertical sourcing. I don't assume there's anything electronics or white goods, but has the experience the last four or five months maybe bent the curve in terms of when certain initiatives might be pulled forward?
Well, in terms of vertical initiatives, the last two or three years have been quite a bit, not only a bakery commissary that serves U.S. and Canada, just across the Canadian border. Not only a second meat plant in Illinois versus the one we've had for many years in California. Not only the poultry complex, and not only a couple of smaller produce initiatives we've got going on right now. Last, but not even expected, but the acquisition of Innovel, or what we now call Costco Logistics. We've got our hands full with a lot of things right now. I think one of the things that we've learned from COVID, we have great relationships with large companies, both consumer product name companies and private label name companies, doing literally multi-hundreds of millions of dollars of one item.
When there has been some shortage of supply, we've had to expand that vendor network a little bit. There are some instances where, given our sheer volume in Asia now, can we find a comparable manufacturer or an existing supplier that wants to do something over there? I think there'll be some ways to continue to reduce costs on key items. In terms of what's the next big vertical, I don't know if we know at this point.
Okay. No, that's fair. Just thoughts on the travel bookings. You had mentioned that you're starting to see a pickup there, but it's further out than normal. Can you frame maybe what's normal and what you're kind of seeing right now? I thought that was interesting.
This is my definition of what I have understood previously as normal is if you go back pre-COVID, the majority of your bookings each day related to stuff in the next few months. Maybe a little further out, five months before Christmas or five months before the beginning of summer. Today, you've got people booking things out five and nine months in some cases. Now, there's two reasons. One, there's some great deals out there, and two, in many instances, there's no cancellation charges. we'll have to wait and see, and part of that will be dictated by. We've actually sold and have had some members go on some cruises of late. Still a very small number. The car rental business has picked up a little bit better than the other, but still down relative to what it had been pre-COVID.
Okay. Great. Thanks a lot.
Yeah. mind you, if we book something out nine months, we don't take it into revenue until the trip is taken. even though business has improved, in terms of what we show in our numbers, there's very little. First of all, it's not negative right now. There are a few months there in April, May, June, or April, May, certainly, where cancellation costs were greater than trips being taken.
Yeah. That makes sense. All right. Thanks, Richard.
Your next question is from Kelly Bania of BMO Capital. Your line is open.
Hi, Richard. Thanks for taking our question. Just wanted to ask maybe a two-part question here. More and more retailers are talking a little bit about advertising maybe as a way to offset their lower margin e-commerce business. I was curious, one, if you could talk about where e-com margins are just with all the acceleration and maybe just also remind us of what bucket
that is in your table. Also just philosophically, how do you think about that, maybe taking on any more ad revenue to your dot-com business? Thank you.
Well, we're taking on more ad revenue. We keep learning more about that as well as we drive that business. Overall, the margins, it's lower gross margins. Part of that is category specific. Electronics, which is by far the largest single component of e-commerce, is a high single-digit margin. If you think about it, in a Costco warehouse, you've got fresh that's in the low double digits. Sometimes a pre-teen or an early teen. You've got, again, conversely, electronics, which is mid to high. You also, as we try to drive the business in certain new categories like apparel, where you buy two items and get $5 off or whatever their marketing or promotional item is, there's a lower realized margin on a given category in some of those categories versus in store. Overall, you also have less SG&A.
I get back to what Costco has always been a top-line company. We're looking to grow at top line. Certainly, the profitability of e-commerce has improved dramatically in the last year with these strong sales. It's part of the ecosystem.
Ancillary, but I don't know where it is.
Oh, where is it in the matrix? It's in ancillary.
It is in ancillary. Okay.
Yeah.
Thank you.
You're welcome.
Your next question is from Laura Champine of Loop Capital. Your line is open.
Just a quick one, Richard. You've managed to improve inventory turns or grow inventory slower than sales since the onset of COVID. I know that some of this has been supply chain issues or issues with certain SKUs sourcing, but that seems to be clearing up. How long can you keep improving inventory turns at this pace?
Well, if we keep doing 14% sales, for a while, but I say that tongue in cheek because if you go back to April and May, the inventory turn had come down, and one of the reasons we were planning for additional working capital needs. Yeah. Look, I think we've gotten to a point when we've enjoyed a turn based on how you calculate it in the 12 - 13 range. When you get up to that range, it's difficult to some extent as well. Gas helps it because we turn gas every day. Fresh foods help it because we turn fresh foods every week or less. I think about every week, maybe a little better than that. The fact that we didn't have a big degradation on non-food items, which we had thought would be an offset to that. it's helped a little bit right now.
If you ask me if I could just keep where we are right now, I'd say sure.
Got it. Thank you.
Your next question is from Christopher Mandeville of Jefferies. Your line is open.
Hi, this is Blake on for Chris. Thanks so much for letting us in here. I was wondering if you'd comment at all on the extent to how much have existing customers you had before the pandemic that historically didn't buy general merchandise that are now shopping that category. How much of that example have you seen?
I don't know off the top of my head that. Sorry.
Okay. just lastly, can we talk about renewal rates and your expectations on those? Should we expect them to maybe creep higher given all the comp strength you're seeing now?
Yeah. Sorry, you're O for two. We don't guide. No, we don't guide. There are things that help the renewal rate, getting people to executive, getting people to do our credit card. Some of the things we do now when you sign up online.
Auto bill.
Auto bill. those are things that help push it upward a little bit or-
Delivery.
Yeah. To the extent, but conversely, if we ramped up internationally, and not that we were going to do that overnight, but if we ramped up internationally, in any new market or the first few warehouses in a new country, you work on a much lower renewal rate to start with, but a much higher number of initial signups because there's a lot of looky-loos. All those things weigh in. We feel so far that I know as soon as we show a minus tenth of a percent in a quarter, which, knock on wood, we haven't of late, people will worry what's going on. Our view is that we're hanging on to our members. In most countries, even in new countries, we've seen the trend to more often improve than not. I think we feel pretty good about that.
Got it. Thanks so much.
Why don't we take two more questions?
Yes. Your next question is from Greg Melich of Evercore ISI. Your line is open.
Hi. Thanks. Richard, just one clarification and one question. Did you say e-commerce was 8% and then over 10%, including Instacart? Was that for the year or the quarter?
Quarter.
Quarter.
Roughly.
Quarter and roughly, yes.
Roughly.
Eight and 10 Got it.
Yeah
On traffic, I guess that was my follow-up. You talked a lot about, and it's nice to see the U.S. traffic come back through the quarter. Could you help us understand why international traffic remains negative? If there's any outlier countries driving that, or is really the U.S. the outlier with traffic coming back? If you're concerned that that could influence the renewal rates in those international markets. Thanks.
Well, no, Canada is the outlier internationally. Mind you, if U.S. is a little over 70% of our company's sales, Canada is around 10, maybe 15. I'm sorry, 15. You've got other international being less than. It's been dry. There's been a lot more restrictions over there. Yeah, there have been more restrictions in Canada. Australia, also, there have been more lockdowns of late. Canada, and we have no direct warehouse club competition in Canada. We've seen their traffic more negative and the basket is even bigger. Yeah, more negative with the basket even bigger than the U.S. We still got them buying, and we've seen that improve also. That negative has been reduced. Hopefully that'll continue as well. Trend-wise, the last four months have been on the up and up.
Got it. The trend is the right direction. It's just taken longer for those country-specific reasons.
It went further down to start with, too. Right. I think even, I'm shooting from the hip here, but even several months ago, if the U.S. was a minus five traffic, Canada was a minus double-digit traffic. Right.
Got it. Great. Thanks a lot. Good luck.
We have Robert Moskow of Credit Suisse. Please ask your question. Your line is open.
Hi. Thanks for having me on the call. I wanted to know if you're noticing any regional differences in terms of how consumers are behaving during the pandemic. With infection rates rising in certain states, there's threat of more, I don't know if it'll fully go to lockdowns or not, but do you see any differences in terms of how they're getting ready for Halloween or worried about trick or treating or anything like that? How are you responding to that?
I can't tell you specifically about Halloween. If I look back over the last several months, the only thing that we saw was is when certain states unlocked more quickly, we saw a little pickup there faster, earlier because people were getting out faster. Some of those states that did that. Other than that, we haven't seen anything dramatic. I would say honestly, too, that. Hold on. As the pandemic has progressed, people are just more comfortable just going out more. Right. Yeah. Bob makes a good point here. I think, and we're all a little guilty of it, as the pandemic has progressed, we're all hopefully Hello? Goddammit. Hello?
Yeah, we hear you.
Oh, you can hear me now. I thought I hung up on you. Sorry.
Oh, no.
I think as the pandemic has continued, people have gotten a little more comfortable, hopefully still maintaining the safety protocols, but going out more often, and that's helped the numbers pick up a little bit as well. Overall, again, anecdotally, we feel that people feel more comfortable coming into a place where masks are required, where the physical spaces are larger with more cubic feet of open air, if you will. I think those things have probably helped us. The only real difference we saw was during those couple of months where some states opened up a little faster than others.
Okay. Does that mean that, as reopenings eventually improve, that's a net positive for your business in 2021?
Well, it's a net positive, but we don't know, does that also mean that as people eat out more frequently, they're going to buy less fresh food or food items at supermarkets and Costco? There are probably some different offsets there. Again, we believe that some of the things that we've picked up through this pandemic, in part because a lot of these non-food discretionary categories and big-ticket categories, some of that's going to be sticky. Once they've shopped and had a good experience at Costco at a great value, they'll hopefully continue that.
Okay. Hey, thanks so much.
Okay. Well, thank you everyone. Have a good day, and we're around. Have a good day.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.