Costco Wholesale Corporation (COST)
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Monthly Sales Update March 2019

Apr 10, 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 five-week retail month of March, which started on Monday, March 4th and ended on Sunday, April 7th. This period is compared to the five weeks beginning on Monday, March 5th and ending on Sunday, April 8th, 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 or 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. Now with regards to sales. As reported in our release, net sales for the five-week month of March came in at $13.87 billion, an increase of 7.4% from $12.92 billion last year. For the 31 weeks ended April 7th, net sales came in at $88.29 billion, an increase of 8.4% from $81.43 billion last year. This year's five-week March retail month had one extra shopping day versus last year due to the calendar shift of Easter. This positively impacted total and Comparable sales by approximately 1%-1.5%. Comparable sales were as follows. On a reported basis in the U.S., the five weeks was a 6.9%, 31 weeks, 8.7%. In Canada, the five weeks was a 3.8%, 31 weeks, 1.5%.

Other international, five weeks, 1.2%, 31 weeks, 2.2%. For the total company, five weeks was a 5.7%, 31 weeks, 6.8%. E-commerce for the five weeks was a 20.6%, and 31 weeks was a 25.4%. Comparable sales excluding impacts from changes in Gasoline prices, foreign exchange, and revenue recognition were as follows. In the U.S., the five weeks was a 5.5%, 31 weeks, 7.2%. Canada, the five weeks is a 6.7%, 31 weeks, 5.8%. Other international, the five weeks is a 7.4%, 31 weeks, 5.8%. Total company, five weeks is a 5.9%, 31 weeks, 6.7%. E-commerce, five weeks, 20.1%, 31 weeks, 24.4%. In terms of regional and merchandising categories, the general highlights for the month were as follows. U.S. regions with the strongest results were the Midwest, Northeast, and San Diego. Internationally, in local currencies, we saw the strongest results in Spain, Mexico, and Taiwan.

Foreign currency year-over-year relative to the U.S. dollar hurt March Comparable sales as follows. Canada by approximately 380 basis points, other international by approximately 590 basis points, and total company by approximately 130 basis points. The impact from revenue recognition standard ASC 606 was a benefit of approximately 150 basis points for the U.S. and 120 basis points for total company. The negative impact of cannibalization was approximately 60 basis points in the U.S., 100 basis points in Canada, 50 basis points in other international, and 60 basis points for the total company. Moving to merchandise highlights. The following comparable sales results by category for March exclude the impact of foreign exchange. Food and sundries were positive mid-single digits. Departments with the strongest results were candy, sundries, and frozen foods. Hard lines were positive mid-single digits. Better performing departments were automotive, seasonal, health and beauty, and majors.

Soft lines were up mid to high single digits. Better performing departments included home furnishings, apparel, and domestics. Fresh foods were up mid-single digits. Better performing departments included service deli and produce. Within the ancillary businesses, hearing aids, Gasoline, and Optical had the best Comparable sales increases. Gasoline price deflation had a very slight negative impact on the total reported Comparable sales. The average selling price was lower 0.4% year-over-year at $2.80 per gallon this year compared to $2.81 a year earlier. Our comp traffic or frequency for March was up 4.2% worldwide and 3.8% in the U.S., which includes the benefit from the Easter shift. The average transaction was up 1.5% for the month, which includes the negative impacts from foreign exchange and Gasoline deflation and a positive impact from revenue recognition.

Looking ahead, the April reporting period will include the four weeks beginning April 8th and ending on May 5th, compared to the four weeks beginning April 9th, ending May 6th, 2018. April will have 27 selling days this year versus 28 last year due to the calendar shift of Easter. We estimate that the shift will negatively affect total and Comparable sales by approximately 1.5%-2%. April sales will be released at 1:15 P.M. Pacific Time on May 8th. Costco currently operates 770 warehouses, including 535 in the United States and Puerto Rico, 100 in Canada, 39 in Mexico, 28 in the United Kingdom, 26 in Japan, 15 in Korea, 13 in Taiwan, 10 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 March 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, April 17th. Thanks for calling Costco and have a great day.