Costco Wholesale Corporation (COST)
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Monthly Sales Update June 2018

Jul 11, 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 with you our sales results for the five-week retail month of June, which started on Monday, June 4th, and ended on Sunday, July 8th. This period is compared to the five weeks beginning on Monday, June 5th, ending on Sunday, July 9th, 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 five-week month of June came in at $13.55 billion, an increase of 11.7% from the $12.13 billion last year. For the first 44 weeks of fiscal 2018, net sales were $116.81 billion, an increase of 12.0% from the $104.28 billion last year. Comparable sales were as follows. On a reported basis, the U.S. for the five-week retail month was at 10.8%, the 44-week fiscal year, 9.1%. Canada, the five-week retail month was at 6.0%, and the 44-week fiscal year, 10.1%. Other international, the five-week retail month is at 7.3%, and the 44-week fiscal year was at 11.8%.

Total company, five-week retail month was at 9.7%, and the 44-week fiscal year, 9.6%. E-commerce, five-week retail month, 27.9%, and the 44-week fiscal year, 34.8%. Comparable sales excluding the impacts from changes in gasoline prices and foreign exchange were as follows. In the U.S., the five-week retail month was at 7.7%, 44-week fiscal year, 7.2%. In Canada, the five-week retail month was at 3.4%, and 44-week fiscal year, 4.0%. Other international, the five-week retail month was at 6.9%, and the 44-week fiscal year, 7.2%. Total company, the five-week retail month is at 6.9%, and the 44-week fiscal year, 6.7%. E-commerce, the five-week retail month was at 27.7%, and the 44-week fiscal year, 33.6%. In terms of regional and merchandising categories, the general highlights for the month of June were as follows. The U.S. regions with the strongest results were the Southeast, Midwest, and Texas.

Internationally, in local currencies, we saw the strongest results in Mexico, Japan, and the U.K. Foreign currencies year-over-year relative to the U.S. dollar impacted June comp sales as follows. Total company had no impact. Canada was helped approximately 50 basis points, while other international was hurt by approximately 50 basis points. The negative impact of cannibalization on total company sales in June was slightly over 50 basis points. The impact in the U.S. was slightly less than 50 basis points. Canada was impacted slightly more than 100 basis points, and our other international, slightly less than 100 basis points. Moving to our merchandise highlights, the following comparable sales results by category for June exclude the impact of foreign exchange. Food and sundries were positive mid-single digits. Departments with the strongest results were tobacco, liquor, and frozen foods. Hard lines were up low double digits.

Better-performing departments were majors, garden, and tires. Sales in majors were up high teens, led by tablets, appliances, and computers. Soft lines were up mid to high single digits. Better-performing departments include apparel, housewares, and jewelry. Fresh foods were up mid-single digits. The better-performing departments were bakery and service deli. Within the ancillary businesses, gasoline, hearing aids, and food court had the best comp sales increases in June. Gasoline price inflation added approximately 275 basis points to the total reported comp sales. The average selling price was up 27% at $3.02 this year, compared to $2.38 last year. Our comp traffic or frequency for June was up 4.4% worldwide and 4.6% in the U.S. The average transaction was up 5.0% for the month, which includes the combined impacts from foreign exchange and gasoline price inflation.

Looking ahead, the July reporting period will include four weeks beginning July 9th and ending Sunday, August 5th, compared to the four weeks beginning July 10th, ending Sunday, August 6th, 2017. Costco currently operates 752 warehouses, including 522 in the United States and Puerto Rico, 98 in Canada, 38 in Mexico, 28 in the U.K., 26 in Japan, 14 in Korea, 13 in Taiwan, nine 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 June sales results or any other investor relations questions, please do not hesitate to call 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, July 18th. Thanks for calling. Have a great day.