Costco Wholesale Corporation (COST)
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Monthly Sales Update July 2019

Aug 7, 2019

David Sherwood
AVP of Finance and Investor Relations, Costco Wholesale

Hello, 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 July, which started on Monday, July 8th, and ended on Sunday, August 4th. This period is compared to the four weeks beginning on Monday, July 9th, and ending on Sunday, August 5th, 2018. 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. Now with regards to sales. As reported in our release, net sales for the four-week month of July came in at $11.43 billion, an increase of 7.9% from $10.59 billion last year. For the 48 weeks ending August 4th, net sales came in at $137.56 billion, an increase of 8.0% from $127.40 billion last year. Comparable sales were as follows. On a reported basis in the U.S., the four weeks is a 6.5%, 48 weeks, 7.9%. Canada, the four weeks is a 4.8%, 48 weeks, 1.5%.

Other international, four weeks is a 1.3%, 48 weeks, 2.0%. Total company, the four weeks is a 5.6%, 48 weeks, 6.2%. E-commerce, the four weeks is a 21.3%, 48 weeks, 23.1%. Comparable sales excluding impacts from changes in gasoline prices, foreign exchange, and revenue recognition were as follows. In the U.S., the four weeks was a 5.3%, 48 weeks, 6.4%. Canada, the four weeks was a 5.4%, 48 weeks, 5.2%. Other international, four weeks was a 4.0%, 48 weeks, 5.6%. Total company, the four weeks was a 5.1%, 48 weeks, 6.1%.

E-commerce, the four weeks was a 23.8%, and the 48 weeks was a 23.2%. In terms of regional and merchandise categories, the general highlights were as follows. The U.S. regions with the strongest results were the Midwest, San Diego, and L.A. Other international and local currencies, we saw the strongest results in Taiwan, Japan, and Mexico. Foreign currencies year-over-year relative to the U.S. dollar hurt July comp sales as follows. Canada by approximately 10 basis points, other international by approximately 240 basis points, and total company by approximately 30 basis points. The negative impact of cannibalization was approximately 50 basis points in the U.S., 110 basis points in Canada, 150 basis points in other international, and 70 basis points for the total company.

Moving to 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. Hardlines were positive mid-single digits. Better-performing departments were garden, toys and seasonal, and majors. Softlines were up low single digits. Better-performing departments included kiosks, housewares, and small appliances. Fresh foods were also up mid-single digits. Better-performing departments included service deli and produce. Within the ancillary businesses, hearing aids, Optical, and gas had the best comp sales increases. Gasoline price deflation negatively impacted total reported comp sales by approximately 50 basis points. The average selling price was lower year-over-year at $2.93 per gallon this year compared to $3.03 a year earlier.

Our comp traffic or frequency for July was up 3.5% worldwide and in the U.S. The average transaction was up 2.0% for the month, which includes the negative impacts from foreign exchange and gasoline deflation and the positive impact from revenue recognition. Looking ahead, the August reporting period will include the four weeks beginning August 5th and ending September 1st, compared to the four weeks beginning August 6th, ending September 2nd, 2018. August sales will be released at 1:15 P.M. Pacific Time on September 5th. Costco currently operates 778 warehouses, including 540 in the U.S. and Puerto Rico, 100 in Canada, 39 in Mexico, 29 in the United Kingdom, 26 in Japan, 16 in Korea, 13 in Taiwan, 11 in Australia, two in Spain, and one each in Iceland and France. Costco also operates e-commerce websites in the U.S., Canada, U.K., Mexico, Korea, and Taiwan.

If you have any questions regarding our July 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, August 14th. Thanks for calling, and have a great day.