Costco Wholesale Corporation (COST)
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Monthly Sales Update January 2019

Feb 6, 2019

Speaker 1

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 4 week retail month of January, which started on Monday, January 7 and ended on Sunday, February 3. This period is compared to the 4 weeks beginning on Monday, January 8, and ending on Sunday, February 4, 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 these statements except as required by law. Now with regard to the sales. As reported in our release, net sales for the 4 week month of January came in at $10,710,000,000 an increase of 8.0 percent from $9,920,000,000 last year. For the 22 weeks ended February 3, net sales came in at $63,701,000,000 an increase of 9.3% from $58,300,000,000 last year.

Comparable sales results were as follows. On a reported basis, the U. S. For the 4 weeks was at 6.6% 22 weeks, 9.4%. For Canada, 4 weeks was a minus 2.9%, 22 weeks, 1.2 percent.

Other international, the 4 weeks was a 6.5% 22 weeks, 3.8%. Total company, the 4 weeks is at 5.2% and 22 weeks, 7.4 percent e commerce, 4 weeks, 22.1 percent 22 weeks, 27.1%. As discussed in previous months, the company adopted revenue recognition standard ASC 606 for fiscal 2019. The impact on the total company in January was a benefit of approximately 30 basis points for both U. S.

And the total company. Additionally, Lunar New Year, Chinese New Year occurred on February 5, 11 days earlier than last year. The holiday shift favorably impacted January's other international sales by approximately 4.5% and total company sales by approximately 0.5%. February sales will be adversely impacted accordingly. Comparable sales excluding the impacts from changes in gasoline prices, foreign exchange and revenue recognition were as follows: in the U.

S, the 4 weeks was a 7.3% 22 weeks, 8.0 percent Canada, the 4 weeks is a 4.6 percent 22 weeks, 5.8 percent Other international, the 4 weeks is 11.2%, 22 weeks, 6.7%. Total company in the 4 weeks is a 7.4%, 22 weeks, 7.5%. And lastly, e comm, 4 weeks is at 24.0 percent and the 22 weeks is at 26.6%. In terms of regional and merchandising categories, the general highlights for the month were as follows. The U.

S. Regions with the strongest results were the Bay Area, San Diego and the Northwest the Northeast, Southeast and Midwest experienced significant weather in the 4th week, which adversely impacted sales in the month for those regions. Impact to the total company was approximately 50 basis points. Internationally and local currencies, we saw the strongest results in Taiwan, Spain and Korea. Taiwan and Korea benefited from the timing of Chinese New Year, which as mentioned, will negatively impact their February sales results.

Foreign currencies year over year relative to the U. S. Dollar hurt January comp sales as follows: Canada by approximately 660 basis points other international by approximately 450 basis points and total company by approximately 160 basis points. The negative impact of cannibalization was approximately 50 basis points in the U. S, 50 basis points in Canada, 90 basis points in other international and 60 basis points for the total company.

Moving to our merchandise highlights. The following comparable sales results by category for January exclude the impact of foreign exchange. Food and sundries were positive mid to high single digits. Departments with the strongest results were tobacco, candy and liquor. Hardlines were positive high single digits.

Better performing departments were postage, tires and majors. Softlines were up high single digits. Better performing departments included special order kiosks, small appliances, housewares and apparel. Fresh foods were up high single digits. Better performing departments included meat and service deli.

Within the ancillary businesses, hearing aids, optical and food court had the best comp sales increases. Gasoline price deflation negatively impacted total reported comp sales by approximately minus 100 basis points. The average selling price was down 8.4% year over year with an average selling price of $2.49 per gallon this year compared to $2.72 a year earlier. Our comp traffic or frequency for January was up plus 5.1% worldwide and 4.9% in the U. S.

The average transaction was up 0.1% for the month, which includes the negative impacts from foreign exchange and gasoline deflation and the positive impact from revenue recognition. Looking ahead, the February reporting period will include the 4 weeks beginning at February 4 and ending March 3 compared to the 4 weeks beginning February 5 and ending March 4, 2018. Sales and second quarter earnings will be announced Thursday, March 7, after market close at 1:15 Pacific Time. A conference call will be held on March 7 at 2 p. M.

Pacific Time to discuss the results and can be accessed live via our Investor Relations website. Costco currently operates 768 warehouses, including 533 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, 2 in Spain, 1 each in Iceland and France. Costco also operates e commerce websites in the United States, Canada, U. K, Mexico, Korea and Taiwan. If you have any questions regarding our January sales results or any other Investor Relations questions, please do not hesitate to call Bob Nelson at 425-313-8255, Josh Damon at 425-313-8254, or myself, David Sherwood at 425-313-8239.

This recording will be available until 5 p. M. Pacific Time, Wednesday, February 13th. Thanks for calling Costco, and have a great day.

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