Costco Wholesale Corporation (COST)
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Monthly Sales Update August 2018

Sep 6, 2018

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 with you our sales results for the 4 week retail month of August, which started on Monday, August 6 and ended on Sunday, September 2. This period is compared to the 4 weeks beginning on Monday, August 7 and ending on Sunday, September 3, 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 4 week month of August came in at $11,000,000,000 an increase of 12.2 percent from $9,800,000,000 last year. For the 16 week Q4, net sales were $43,400,000,000 an increase of 5.0 percent compared to the net sales of $41,400,000,000 in the 17 week Q4 of fiscal year 2017.

For the 52 week fiscal year, net sales were 138,400,000,000 an increase of 9.7 percent compared to net sales of $126,200,000,000 reported in the 53 week fiscal year 2017. Comparable sales were as follows. On a reported basis, the U. S. For 4 weeks was 11.3 percent, the 16 weeks 10.8%, 52 weeks 9.4% in Canada, the 4 weeks was a 2.7 percent the 16 weeks, 5.7 percent 52 weeks, 8.9 percent other international, 4 weeks, 5.3 percent 16 weeks, 6.7 percent and 52 weeks, 10.8%.

Total company, the 4 weeks is a 9.2%, 16 weeks, 9.5 percent and the 52 weeks, 9.5%. E commerce, 4 weeks, 23.8% 16 weeks, 26.2% and 52 weeks, 32.2%. Comparable retail sales, excluding the impacts from changes in gasoline prices and foreign exchange, were as follows: In the U. S, the 4 weeks was 8.9 percent 16 weeks, 7.8 percent and 52 weeks, 7.4%. For Canada, the 4 weeks was 4.8%, 16 weeks, 4.6% and the 52 weeks, 4.1%.

Other international, 4 weeks, 6.8 percent 16 weeks, 6.9 percent and 52 weeks, 7.1 percent. Total company, 4 weeks, 8.0 percent 16 weeks, 7.2 percent 52 weeks, 6.8 percent for e commerce, 4 weeks, 24.5 percent, 16 weeks, 26.3 percent and the 52 weeks was 31.3%. In terms of regional and merchandising categories, the general highlights for the month of August were as follows: U. S. Regions with the strongest results were the Midwest, San Diego and Bay Area.

Internationally, in local currency, we saw the strongest results in Spain, Mexico, Japan and Taiwan. Foreign currencies year over year relative to the U. S. Dollar impacted August comp sales as follows. The total company was hurt by a little less than 100 basis points Canada was hurt by a little less than 400 basis points while other international was hurt by a little less than 2 50 basis points.

The negative impact of cannibalization was approximately fifty basis points on each of the U. S, Canada, other international and total company segments. Moving to the merchandise highlights, the following comparable sales results by category for August exclude the impact of foreign exchange. Food and sundries were positive mid to high single digits. Departments with the strongest results were tobacco, sundries and frozen foods.

Hardlines were positive low double digits. Better performing departments were toys and seasonal, hardware, health and beauty and office. Softlines were up high single digits. Better performing departments included housewares, home furnishings, small appliances and special order kiosks. Fresh foods were up mid single digits.

The better performing departments were meat and bakery. The comp growth in fresh is primarily a function of volume as pricing was essentially flat year over year. Within the ancillary businesses, gasoline, hearing aids and pharmacy had the best comp sales increases in August. Gasoline price inflation added a little more than 200 basis points to total reported comp sales. The average selling price was up 20% at $2.96 this year compared to $2.47 last year.

Our comp traffic or frequency for August was up 5.3% worldwide and 5.5% in the U. S. The average transaction was up 3.8% for the month, which includes the negative impact from foreign exchange and positive impact from gasoline price inflation. Looking ahead, the September reporting period will include the 5 weeks beginning September 3 and ending Sunday, October 7, compared to the 5 weeks beginning September 4 and ending Sunday, October 8, 2017. Sales will be announced Wednesday, October 10th, after market close at 1:15 Pacific Time.

On September 2, we completed our 16 week 4th quarter and 52 week fiscal year 2018. A conference call to discuss our Q4 and year to date results will take place October 4 at 2 p. M. Pacific Time and will be streamed live via our IR website. Costco currently operates 7 62 warehouses, including 527 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 in Iceland and 1 in France.

Costco also operates e commerce websites in the United States, Canada, UK, Mexico, Korea and Taiwan. If you have any questions regarding our August 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, September 12.

Thanks for calling and have a great day.

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