Costco Wholesale Corporation (COST)
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Monthly Sales Update November 2018

Dec 6, 2018

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 November, which started on Monday, November 5th, and ended on Sunday, December 2nd. This period is compared to the four weeks beginning on Monday, November 6th, and ending on Sunday, December 3rd, 2017. 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 regards to sales. As reported in our release, net sales for the four-week month of November came in at $12.77 billion, an increase of 9.8% from $11.63 billion last year. For the 12-week first quarter ended November 25th, 2018, net sales came in at $34.31 billion, an increase of 10.3% from $31.12 billion last year. For the 13 weeks ended December 2nd, 2018, net sales came in at $37.57 billion, an increase of 10.2% from $34.09 billion last year. Comparable sales were as follows. The U.S., the four weeks was at 12.2%, 12 weeks 11.0%, 13 weeks 11.1%. Canada, the four weeks was at 1.8%, the 12 weeks was at 2.4%, 13 weeks 2.2%.

Other international, four weeks 0.7%, 12 weeks 4.0%, 13 weeks 3.4%. Total company, the four weeks is at 9.2%, 12 weeks 8.8%, 13 weeks 8.7%. E-commerce, four weeks was at 46.1%, the 12 weeks was at 32.3%, and the 13 weeks was at 34.5%. As discussed in previous months, the company adopted revenue recognition standard ASC 606 for FY 2019. The impact on the total company in November was a benefit of a little more than 1%. For e-com, the impact resulted in a benefit of approximately 13%, which is due to timing and will be a detriment in December and January. Comparable sales excluding the impacts from changes in gasoline prices, foreign exchange, and revenue recognition ASC 606 were as follows. The U.S., four weeks 10.1%, 12 weeks 8.3%, 13 weeks 8.4%. Canada, four weeks 5.0%, 12 weeks 5.5%, 13 weeks 5.3%.

Other international, four weeks 3.7%, 12 weeks 5.8%, 13 weeks 5.5%. Total company, four weeks 8.5%, 12 weeks 7.5%, 13 weeks 7.5%. E-commerce, the four weeks was at 34.0%, 12 weeks 26.2%, and 13 weeks 27.9%. In terms of regional and merchandising categories, the general highlights for the month of November were as follows. The U.S. regions with the strongest results were the Midwest, San Diego, and the Bay Area. Internationally, in local currencies, we saw the strongest results in Spain, Mexico, and Japan. Foreign currencies year-over-year relative to the U.S. dollar impacted November comp sales as follows. Canada and other international were each hurt by a little less than 375 basis points, and total company was hurt by approximately 100 basis points.

The negative impact of cannibalization was approximately 60 basis points in the U.S., a little less than 75 basis points in Canada and in other international, and approximately 70 basis points for the total company. Moving to our merchandise highlights, the following comparable sales results by category for November exclude the impact of foreign exchange. Food and sundries were positive mid to high single digits. Departments with the strongest results were candy, tobacco, sundries, and frozen. Hard lines were positive in the mid-teens. Better-performing departments were automotive, sporting goods, and majors. Soft lines were up low double digits. Better-performing departments included small appliances, home furnishings, apparel, and special order kiosks. Fresh foods were up mid-single digits. Better-performing departments included meat, deli, and bakery. Within the ancillary businesses, gasoline, optical, and food court had the best comp sales increases.

Gasoline price inflation added a little less than 50 basis points to total reported comp sales. The average selling price was up 5% at $2.81 this year compared to $2.68 last year. Our comp traffic or frequency for November was up 5.9% worldwide and 6.8% in the U.S. The average transaction was up 3.1% for the month, which includes the negative impact from foreign exchange and positive impact from both gasoline price inflation and revenue recognition. We will announce our Q1 FY 2019 earnings after market close on Thursday, December 13th, 2018, at 1:15 P.M. Pacific Time. A call to discuss these results will be held at 2:00 P.M. Pacific Time and can be streamed live via our investor relations website.

Looking ahead, the December reporting period will include the five weeks beginning December 3rd and ending January 6th, compared to the five weeks beginning December 4th ending January 7th, 2018. Sales will be announced Wednesday, January 9th, after market close at 1:15 P.M. Pacific Time. Costco currently operates 768 warehouses, including 533 in the U.S. and Puerto Rico, 100 in Canada, 39 in Mexico, 28 in the U.K., 26 in Japan, 15 in Korea, 13 in Taiwan, 10 in Australia, two in Spain, one in Iceland, and one in 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 November 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, Thursday, December 13th. Thanks for calling Costco, and have a great day.