Costco Wholesale Corporation (COST)
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Monthly Sales Update December 2019

Jan 8, 2020

David Sherwood
VP of Finance and Investor Relations, Costco Wholesale

Hello, thank you for calling Costco Wholesale Corporation. I'm David Sherwood, a VP of Finance and Investor Relations, and I will review our sales results for the five-week retail month of December, which started on Monday, December 2nd, and ended on Sunday, January 5th. This period is compared to the five weeks beginning on Monday, December 3rd, and ending on Sunday, January 6th, 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. 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 them except as required by law. As reported in our release, net sales for the five-week month of December came in at $17.04 billion, an increase of 10.5% from $15.42 billion last year. December sales were positively impacted due to the timing of Thanksgiving, Black Friday, and Cyber Monday by approximately 1%, two-thirds traffic, one-third basket. While our online sales were positively impacted approximately 20% in the month. Comparable sales were as follows. On a reported basis in the U.S., the five weeks was a 9.4%, 18 weeks, 6.7%. Canada, five weeks was a 9.0%, 18 weeks, 5.2%.

Other international, the five weeks was a 7.5%, 18 weeks, 5.2%. Total company, the five weeks was a 9.0%, 18 weeks, 6.3%. E-commerce, the five weeks was a 43.1%, 18 weeks, 17.1%. Comparable sales excluding the impacts from changes in Gasoline prices and foreign exchange are as follows. In the U.S., the five weeks was at 8.4%, 18 weeks, 6.5%. In Canada, the five weeks was a 6.0%, 18 weeks, 5.8%. Other international, the five weeks is a 5.9%, 18 weeks, 5.5%. Total company, the five weeks was a 7.8%, 18 weeks, 6.3%.

E-commerce for the five weeks is a 42.6%, 18 weeks, 17.1%. In terms of regional and merchandising categories, the general highlights were as follows. The U.S. regions with the strongest results were the Texas, Midwest, and San Diego regions. Other international and local currencies, we saw the strongest results in Mexico, Taiwan, and Australia. Foreign currencies year-over-year relative to the U.S. dollar impacted December comp sales as follows. Canada, positively by approximately 230 basis points. Other international, positively by approximately 140 basis points. Total company, positively by approximately 50 basis points. The negative impact of cannibalization was approximately 20 basis points in the U.S., 130 basis points in other international, and 30 basis points for total company.

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-single digits. Departments with the strongest results were candy, liquor, and sundries. Hard lines were positive mid-teens, benefited by a positive impact from the holiday shift previously discussed. Better performing departments were toys and seasonal, majors, garden, and sporting goods. Soft lines were up mid-single digits. Better performing departments included housewares, domestics, jewelry, and apparel. Finally, fresh foods were up mid-single digits. Better performing departments included service deli and meat. Within the ancillary businesses, gas, hearing aids, and Pharmacy had the best comp sales increases. Gasoline price inflation positively impacted total reported comp sales by approximately 80 basis points.

The average selling price was higher year-over-year at $2.76 per gallon this year compared to $2.55 a year earlier. Our comp traffic or frequency for December was up 5.4% worldwide and 6.2% in the U.S., including a positive impact from the timing of Thanksgiving and Cyber Monday. The average transaction was up 3.4% for the month, which includes the benefits from foreign exchange and Gasoline inflation and a positive impact from the timing of the holiday. Looking ahead, the January reporting period will include the four weeks beginning January 6th and ending on February 2nd, compared to the four weeks beginning January 7th and ending February 3rd, 2019. January sales will be released at 1:15 P.M. Pacific Time on February 5th.

Costco currently operates 785 warehouses, including 546 in the U.S. and Puerto Rico, 100 in Canada, 39 in Mexico, 29 in the U.K., 26 in Japan, 16 in Korea, 13 in Taiwan, 11 in Australia, two in Spain, and one each in Iceland, France, and China. Costco also operates e-commerce websites in the U.S., Canada, U.K., Mexico, Korea, Taiwan, and Japan. If you have any questions regarding our December 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, January 15th.

Thanks for calling, and have a great day.