Costco Wholesale Corporation (COST)
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Monthly Sales Update August 2020

Sep 2, 2020

David Sherwood
AVP of Finance and Investor Relations, Costco Wholesale Corporation

Hello, and thank you for calling Costco Wholesale Corporation. I'm David Sherwood, AVP of Finance and Investor Relations, and I will review our sales results for the four-week retail month of August, which started on Monday, August 3rd and ended on Sunday, August 30th. This period is compared to the four weeks that began on Monday, August 5th and ended on Sunday, September 1st, 2019. This call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that may cause actual events, results and/or performance to differ materially from those indicated by such statements. Risks and uncertainties include, but are not limited to, those outlined in today's call and sales release, as well as other risks identified from time to time in the company's public statements and reports filed with the SEC.

Forward-looking statements speak only as of the date they are made, and the company does not undertake to update them except as required by law. As reported in our release, net sales for the four-week month of August came in at $13.56 billion, an increase of 15.0% from $11.79 billion last year. For the 16 weeks ended August 30th, net sales came in at $52.3 billion, an increase of 12.7% from $46.4 billion last year. For the 52 weeks ended August 30th, net sales came in at $163.2 billion, an increase of 9.2% from $149.4 billion last year. Comparable sales were as follows. On a reported basis, in the U.S., the four weeks was at 12.5%, 16 weeks 11.0%, 52 weeks 8.1%. In Canada, the four weeks was at 14.6%, 16 weeks 9.1%, 52 weeks 5.0%. Other international, the four weeks was at 16.1%, 16 weeks 16.1%, 52 weeks 8.9%.

For the total company, the four weeks was at 13.2%, 16 weeks 11.4%, and the 52 weeks 7.7%. E-commerce for the four weeks was at 101.9%, 16 weeks 90.6%, 52 weeks 49.5%. Comparable sales excluding the impacts from changes in gas prices and foreign exchange were as follows. The U.S. with the four weeks was at 14.3%, 16 weeks 13.6%, 52 weeks 9.2%. Canada, four weeks was at 15.0%, 16 weeks 12.6%, 52 weeks 7.4%. Other international, four weeks was at 15.4%, 16 weeks 18.8%, 52 weeks 11.2%. Total company, the four weeks was at 14.5%, 16 weeks 14.1%, 52 weeks 9.2%. E-commerce, four weeks 101.6%, 16 weeks 91.3%, and 52 weeks 50.1%. August sales were negatively impacted by the shift of Labor Day. The estimated negative impact on August sales and traffic was approximately 75 basis points in the U.S. and a little more than 50 basis points worldwide.

Including the negative impact from the holiday shift, our comp traffic or frequency for August was up 0.8% worldwide and 3.1% in the U.S. Worldwide, the average transaction was up 12.4%, which includes the impacts from foreign exchange and gasoline deflation. In terms of regional and merchandise categories, the general highlights were as follows. The U.S. regions with the strongest results were the Northeast, Southeast, and Texas. Other international and local currencies, we saw the strongest results in the U.K., Japan, and Korea. Foreign currency year-over-year relative to the U.S. dollar impacted August comp sales as follows. In Canada, positively by approximately 40 basis points. Other international, positively by approximately 150 basis points. Total company, positively by approximately 25 basis points. Moving to the merchandise highlights, the following comparable sales results by category for the month exclude the impact of foreign exchange. Food and sundries were positive mid-teens.

Departments with the strongest results were frozen foods, liquor, and cooler. Fresh foods were up low 20s. Better performing departments included meat and produce. Hard lines were positive high 20s. Better performing departments included major appliances, which include consumer electronics, garden, and sporting goods. Soft lines were positive mid-teens. Small appliances, jewelry, and apparel were strong in the month. Ancillary businesses were down low double digits. This was primarily as a result of lower gasoline, photo, and food court sales. Optical and hearing aids were lower single digits year-over-year. Gasoline price deflation negatively impacted total reported comp sales by approximately 150 basis points. The average selling price was lower year-over-year at $2.39 / gal compared to $2.80. Looking ahead to the September reporting period will include the five weeks beginning August 31st and ending October 4th, compared to the five weeks beginning September 2nd and ending October 6th, 2019.

September sales will be announced Wednesday, October 7th at 1:15 P.M. Pacific Time. Prior to September sales, we will be releasing our Q4 and total year fiscal 2020 earnings on September 24th. Earnings will be announced after market close with a conference call to follow at 2:00 P.M. Pacific Time. The call can be streamed live via our investor relations website. Costco currently operates 795 warehouses, including 552 in the United States and Puerto Rico, 101 in Canada, 39 in Mexico, 29 in the United Kingdom, 27 in Japan, 16 in Korea, 13 in Taiwan, 12 in Australia, three in Spain, and one each in Iceland, France, and China. Costco also operates e-commerce websites in the United States, Canada, U.K., Mexico, Korea, Taiwan, Japan, and Australia.

If you have any questions regarding our August sales results or any other investor relations questions, please do not hesitate to call Bob Nelson at 425/313-8255, Josh Dahmen at 425/313-8254, or myself, David Sherwood, at 425/313-8239. This recording will be available until 5:00 P.M. Pacific Time, Wednesday, September 9th. Thanks for calling, and have a great day.