Good morning. My name is Kayla, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q4 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, please press the pound key. I will now hand today's call over to Richard Galanti. Please go ahead, sir.
Thank you, Kayla. Good morning to everyone. Last night, we reported operating results for the 16-week fourth quarter and 52-week fiscal year that ended August 30th. These results are compared to the similar 16 and 52-week periods of fiscal 2014, which ended last year on August 31st. Please note that these discussions will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements address risks and uncertainties that may cause actual events, results, and/or performance to differ materially from those indicated by such statements. These 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, we do not undertake to update these statements except as required by law. To begin with, our fourth quarter fiscal 2015 operating results. Net sales for the fourth quarter came in at $35 billion, up 1% overall from a year ago. Comp sales were down 1% on a reported basis, but were up 6% including the negative gas and FX impacts. Gas prices for the quarter were down 21% year-over-year, negatively impacting U.S. comp figures by a little more than three percentage points, so a plus six U.S. comp excluding gas price deflation. Foreign currencies overall were weaker relative to the dollar year-over-year in the fourth quarter, such that our reported international comps, on a reported basis of minus 10% in Canada and a minus seven other international.
Assuming flat year-over-year FX rates and excluding gas price deflation would have been plus seven in Canada and plus 6% elsewhere internationally. For the quarter, earnings per share came in at $1.73, up $0.15 or 10% from last year's $1.58 figure. In terms of a year-over-year EPS comparison, a few items of note. The biggest item of note, FX. In Q4 year-over-year, the foreign currencies where we operate were weaker versus the U.S. dollar, resulting in our reported foreign earnings this year in Q4 being lower by about $53 million after tax, or $0.12 a share than these earnings would have been had FX exchange rates been flat year-over-year. Number 2, income taxes.
Our income taxes this year in Q4 included several discrete items that, in the aggregate, decreased our income tax line by $23 million, or about $0.05 a share. The largest component of the $23 million figure was a $17 million, or almost $0.04 a share, income tax benefit that resulted from our decision to repatriate in the near future from Canada back to the U.S. CAD 750 million, or about $560 million U.S. of cash balances. Third item of note, IT modernization. As discussed in the past several quarters, our major IT modernization efforts are ongoing and will continue to negatively impact our SG&A expense percentages through the next fiscal year and possibly beyond, especially as new major systems are placed into service and depreciation begins.
In the fourth quarter, on an incremental year-over-year basis, these costs impacted SG&A by an estimated $22 million or six basis points, four basis points without deflation and FX, or about $0.03 a share. Lastly, LIFO. Last year in the fourth quarter, we recorded a pre-tax LIFO charge of $11 million pre-tax or $0.02 a share. This year, we actually had a LIFO credit or a bring back of $14 million pre-tax or $0.02 a share. A lot of that had to do with gas deflation. In terms of new openings for all of fiscal 2015, we opened 25 new locations, which included two reloads, so a net of 23.
12 new in the U.S., three each in Mexico and Japan, and one each in Canada, U.K., Taiwan, Korea, and Australia, which therefore ended fiscal 2015 a few weeks back with 23 net new warehouses and a total of 686 locations operating worldwide. For the current fiscal year 2016, our plans are to add up to 32 net new warehouses, including a few business centers in the U.S. 18-20 of the planned new locations will be in the United States, with the remaining in international markets, including our second opening in Seville and our first opening planned for France. During the first four months of 2016 through calendar year-end, we plan to open 13 of those up to 32 warehouses, including two reloads, so net of 11. 9 in the U.S., one each in Canada, Australia, Japan, and Seville.
The two U.S. reloads for a net 11 figure. Net 9 figure, sorry. Also this morning, I'll review with you our membership trends and related activities, our e-commerce activities, plenty of discussion on margins and SG&A, and recent stock repurchase activities. Okay. For our fourth quarter results, sales again for the fourth quarter, the 16 weeks ended August 30th, were $35 billion, up 1% from last year's $34.8 billion. On a reported basis, again, comps were down -1%. For the quarter, this -1% reported comp figure was a combination of an average transaction decrease of about 4.5% for the quarter. Again, this included the detriment from FX of a little over 4% and gasoline price deflation of a little over 2.5% impact.
As you can see, excluding these negative factors, comps overall were up 6% and the transaction actually on an ex gas and FX would have been slightly positive. An average frequency increase of just under 4%, about 3.75%. In terms of sales by geographic region, most U.S. regions registered low single-digit comp increases. Again, these numbers include the impact of gas deflation of a little over 3% in the U.S., with the Midwest, Texas, and California being the strongest. Internationally, in local currencies, the strongest results were in Australia, Mexico, Taiwan, and Spain, recognizing Spain only has one unit. In terms of comp sales by merchandise categories for the quarter, for food and sundries, comps were mostly flat for the quarter. Again, all these figures include about a 4% detriment from FX. The better performing departments were deli, sundries, and candy.
Within hardlines, in the low single digit range, better performing departments were sporting goods, hardware, and automotive. Consumer electronics were negative low single digit year-over-year, positive low single digit ex FX. For softlines, comps were in the low single digit range. Better performing departments included home furnishings and domestics. Within fresh foods, comps were in the low single digit range as well, with the best results in deli, produce, and meat. Moving on down the income statement to membership fees. On a reported basis, membership fees came in at $785 million, or 2.24% of sales. That's up $17 million or 2% in dollars and up three basis points. Again, FX has a big impact on these dollar figures. Assuming flat year-over-year FX, the 2% dollar increase would've been up 6%.
In terms of membership, we continue to enjoy strong renewal rates, 91% in the U.S. and Canada and 88% worldwide. Also, we're enjoying strong sign-ups, both new and existing warehouses, and continued strength in our Executive Member program. In terms of members at fiscal year-end, we had 34.0 million Gold Star members, up from the most recent quarter of 33.2 million. Primary business, 7.1 million, up from 7.0 million. Continue to have business add-on members of three and a half million. All told, member households, 44.6 million at fiscal year-end, which is up from 43.7 million 16 weeks earlier. Including additional cards, total cardholders out there stood at 81.3 million at fiscal year-end, up from 79.6 million fiscal quarter ago. At fiscal year-end, Executive Memberships were 16.1 million, which was an increase of about 400,000 members since Q3 end, so about 25,000 a week increase in the quarter.
In terms of membership renewal rates, as I mentioned, they continue strong. Total came in at, rounds up to a 91 for U.S. and Canada, and total worldwide rounds up to an 88. Getting back to the income statement, our gross margin in the fourth quarter on a reported basis was higher year-over-year by 44 basis points, coming in at 11.14% this year versus a year ago fourth quarter at 10.70. Without the impact of gas price deflation, that increase would be up 15 basis points. I ask you to jot down just two columns of numbers, looking just at the fourth quarter here. Both the column 1 would be reported basis and column 2 would be without gas deflation. First line item would be core merchandise. On a reported basis, year-over-year up 17 basis points. Ex gas deflation, down eight basis points.
Ancillary businesses, reported +25, without gas +18. The 2% reward, increasing sales penetration related to Executive Member sales and the 2% reward, -5 reported and -2 ex gas. LIFO, +7 and a +7. Total, the reported basis, as I mentioned, +44 basis points and ex gas +15. In reviewing these figures, again, the core merchandise component was up 17, but -8 without gas, primarily a function of improved year-over-year gross margins within our gasoline and several other ancillary and warehouse businesses. The core merchandise gross margin, which I define as the main four departments, merchandise departments, food and sundries, hardlines, softlines, and fresh foods, as a percentage of their own sales were actually up 13 basis points year-over-year. Food and sundries, hardlines and softlines were up year-over-year, while fresh foods was a little lower.
Ancillary and other business gross margins were up, as I mentioned in the chart there, up 25 basis points, +18 without gas. We enjoyed broad-based strength across most of our ancillary businesses with year-over-year gross margin improvements in gas, optical, hearing aids, as well as solid operating results in e-commerce, business centers, travel, and Executive Member services. LIFO in the fourth quarter, as I mentioned, year-over-year was a 4 basis point benefit or $14 million, compared to a 3 basis point detriment a year ago of $11 million. Our year-end inventory shrink results were in line with our all-time best results, and our inventory positions are in great shape. All in all, gross margin inventory's in good shape. Moving on to the SG&A.
Our SG&A percentages year-over-year in the fourth quarter were higher or worse by 27 basis points, coming in right at 10.00% of sales this year compared to 9.73% last year. Again, taking out gas deflation, essentially flat year-over-year, higher or worse by 1 basis point. Again, I'll ask you to jot down the two columns, Q4 reported and Q4 ex gas deflation. In terms of operations, reported -15 or higher by 15 basis points. Without gas deflation, +8 basis points or lower, better by 8. Central, a -7 and a -5. Stock compensation, a -5 and a -4. All told, we came in on a reported basis higher by 27 basis points than SG&A, and again, ex gas deflation, -1 basis point. In looking at these figures, the operations component of SG&A was higher again, or worse by 15.
Again, excluding gas, lower or better by 8. Within operations, ex gas deflation, core warehouse payroll and other operating expenses were better by 10 basis points, and half of which was improvement in payroll %. Central expense was higher or worse by 7 basis points year-over-year, 5 without gas, with nearly all of that variance coming from our IT modernization efforts, 6 and 5 basis points respectively, with and without gas deflation. Lastly, stock compensation expense represented again a -5, -4 without gas. We have over 4,000 people in our plan, and that's done well as a compensation tool. Next on the income statement is pre-opening, higher by $12 million, coming in at $27 million this year versus $15 million a year ago. Last year in the fourth quarter, we had 10 openings. This year we had 13.
Of the $12 million year-over-year incremental expense, which is about $0.02 a share, a little under half of it is due to incremental units, 13 versus 10. The rest, about $7 million of variance, is simply an increase in pre-opening expense associated with upcoming openings in the first several months of our new fiscal year versus a similar period a year earlier. All told, reported operating income in the quarter increased $65 million, or 6% year-over-year, to $1.156 billion this year. Below the operating income line, reported interest expense was higher year-over-year, coming in at $40 million this year, up from $35 million a year ago. This is mostly due to the interest expense on the billion-dollar debt offering that was completed earlier this calendar year to fund a portion of the special dividend.
Interest income and other was higher or better year-over-year by $10 million, coming in at $40 million this year in the fourth quarter versus $30 million a year ago. Actual interest income for the quarter came in at $12 million compared to $17 million a year ago, so actually lower by $5 million. The other component of interest income and other was higher or better by $15 million, primarily related to various FX-related items. A lot with the foreign countries when they're locking in some of their FX needs. Overall, pre-tax income was up 6%, or $70 million this year versus last year. In terms of our tax rate, our company tax rate for the quarter came in lower than last year, 32.7% this year versus 35.1% last year in the quarter. Again, we benefited from several discrete items in Q4, as I explained and discussed earlier in the call.
Such that overall net income was up 10%, or $70 million, coming in at $767 million this year in the fourth quarter versus last year's fourth quarter net earnings of $697 million. For a quick rundown of other items, while the balance sheet is included in this morning's press release, a couple of quick balance sheet info items. Depreciation and amortization for the fourth quarter came in at $351 million, and for the year, $1.127 billion. Our accounts payable as a percent of inventories on a reported basis was essentially 100%, 101%, both at last year and into this year, fiscal year end. Ex non-merchandise payables, mostly construction related, would be that both last year at fourth quarter end and this year at fourth quarter end came in at 89%.
In terms of inventory per warehouse, average inventory per warehouse was up 200,000 or 2% to $13 million at Q4 end this year, up from $12.8 million. The actual number, again, assuming FX was flat year-over-year, would've been $535,000 or up about 4.2%. The increase pretty much spread across many departments. No real surprises there. Overall, inventories are in good shape, as I mentioned earlier. In terms of CapEx, in the fourth quarter, we spent $805 million, and for all of 2015, capital expenditures total $2.4 billion. Our estimate for fiscal 2016 CapEx is an increase from that $2.4 billion level, somewhere in the high twos, somewhere between $2.8 billion-$3 billion range.
This year-over-year increase in CapEx represents our plans for more openings this year versus last year, increased spending for remodeling and expanding ancillary business operations, planned expansion of our cross-dock and distribution operations, and expenditures related to our ongoing IT spending for our modernization efforts. In terms of Costco Online, we're still operating Costco Online in four countries, U.S., Canada, U.K., and Mexico. For the fiscal year, total e-commerce sales came in just under $3.5 billion, up a little over 20% for the year. Comp sales in e-commerce were also up 20% for both the fourth quarter and the fiscal year. In terms of expansion, I talked earlier about up to 32 units. Net of reloads, we'd expect 11 in Q1, 3 in Q2, 7 in Q3, and 11 in Q4. Q4 being a little longer fiscal period of 16 weeks versus 12 weeks in the others.
In fiscal 2015, I mentioned on a net basis, we added 23 units on a base of 653, so about 3.5% square footage growth. This year, assuming the 32 units on a base of 686, that would be just under 5% square footage growth. In terms of new locations by country, assuming that 30, 32 figure, about 18 in the U.S. Canada up 3, 2 each in Japan and Australia, and 1 each in U.K., Taiwan, Korea, Mexico, Spain, and France. As of fourth quarter end, total square footage stood at 98.7 million square feet. In terms of common stock repurchases, buybacks For the fourth quarter, we spent $260 million on 1.836 million shares at an average price of just under $142. On an annualized basis, that would be about $850 million as an annualized run rate during the quarter.
For the year, we spent $494 million at an average price of $142.87. In terms of dividends, our current quarterly dividend stands at $0.40 a share or $1.60 a share annualized. That was up 12.5% from the prior quarterly rate paid in the first two quarters of fiscal 2015. This year's $1.60 per share dividend represents an annual cost to the company of about $700 million. As you know, back in February, we did a special dividend of $5 per share, which was a total of a $2.2 billion special dividend paid out to shareholders. Lastly, before I turn it over to Kayla for Q&A, our fiscal 2016 first quarter scheduled earnings release date for the 12-week first quarter ending on November 22nd, will be after market close on Tuesday, December 8th, with the earnings call the following morning on the 8th of December.
With that, I'll open it up for questions and turn it back to Kayla.
As a reminder, if you would like to ask a question, please press star one. We will pause for just a moment to compile the Q&A roster. Our first question comes from Charles Grom from Sterne Agee CRT.
Hey, good morning, Richard.
Hi.
Just on the core margin performance in the quarter, I think you said it was up 13 basis points. Could you delve into the performance by the 4 subcategories? I know you said that food, hard lines, and soft lines were all up. Just curious-
Yeah. They all-
Why the pressure on the fresh food side?
Well, I think the pressure on the fresh food side is us. When you've got some inflation on some of the commodity items like eggs or nuts, we're not changing the price of a 16-pack of muffins or a slice of pizza or a hot dog. It has more to do with that. Nothing really surprising there. If you look at each of those four categories, again, overall, the gross margin as a percent of sale with their own sales year-over-year in the quarter was up 13. I think the range was in the low 20s on the high side and the mid-teens on that negative downside. Pretty much similar, slightly above last year. No real big changes there.
Okay, good. When you look to next year, just switching gears a little bit, when you switch the Visa from Amex, can you shape out for us how the switch is going to work and be handled and what you're planning to do with the interchange savings that you're going to generate? Just looking back, how you handled it in Canada, any surprises on that front?
No. Visa Canada, first of all, has done fine. A little different in Canada because of certain Canadian issues. We had to essentially have people apply for it. That being said, they shop at Costco, they want that co-branded card, it's done just fine. You see a little bit of change in renewal rate when that happens because of auto renewals. You've got to re-sign people up and everything. From an improvement in terms of additional monies, be it for us in terms of lower merchant fees or our members in terms of better rewards on the co-brand, that's all that is planned. In the U.S., we're working through everything right now. The plan is for, again, the current contract ends the end of March next year.
That could be in and around a month or two from there. The two parties, Amex and Citi, continue to work towards that end, and we would expect to tell you more when we can. In terms of how it's going to be split between merchant fees and rewards, I think I've stated in the past, our philosophy is when we save money on product purchases, we want to give most of it back to the consumer, to the customer. We're looking at all kinds of opportunities to do that. Stay tuned.
Okay, fair enough then. Just last question, August comps were obviously pretty good. Just wondering, with September almost closed here, any surprises on September sales for you guys?
If I could tell you, I would. We'll wait until next week.
All right. Fair enough. Thanks.
Our next question comes from Simeon Gutman from Morgan Stanley.
Thanks. Good morning, Richard. Quick question. I think you telegraphed this on the sales side, Labor Day, realizing it was in September both years, this year, the quarter may not have caught, I guess, the lead up to it. I don't know if that's a big deal from a sales or earnings perspective, just quickly on that.
More of just a sales perspective, given you're talking mid-single, low single-digit numbers normalized and reported. We basically, in August, we feel a negative impact of about one percentage point, there'll be a corresponding improvement in September reported for the same reason. It's four weeks versus five, it's a little less of a positive, maybe seven or eight tenths of a percent if our crystal ball is correct. Yes, the August numbers were impacted negatively a little, and the September number will show a little positive of that, and we'll point that out in the release.
Okay. The second question on membership fees and potential increases. Just a question on the thought process, I think in the past, largely, you've done them to cover inflation I'm sure there's been inflation over the past five years in many areas. Can you talk about considerations and how you think about it? Are you surveying? Are you probing customers ahead of time to understand what's tolerable? Taking into account that the landscape is evolving a little, you have some non-traditional online model, membership models. How do you think about the right range to raise that?
I think we've done six $5 increases over roughly 30 years, generally about every five or so years. We don't do a lot of polling. We look at it internally of, have we improved the value of that membership to our member? In terms of the tolerability of it to the member, I know our historical five, and in the case of the Executive Member last time, five years ago, a $10 increase is a heck of a lot less than we see in other types of fees out there, be it fees for your television or your phones or other services out there. I personally don't think that's going to ever be an issue. We really haven't talked about it a lot. It's something that we'll probably do at some point, but stay tuned.
Okay, thanks.
Our next question comes from Paul Trussell from Deutsche Bank.
Good morning, Richard. Wanted to just discuss assortment and fulfillment online. Certainly, across the industry, there's been a lot of competition and investments being made in fulfillment, whether it's Amazon or Jet.com or some of the newer initiatives from Sam's Club. Could you just discuss some of your recent online sales trends and any updates that you can provide for us on upcoming enhancements around assortment or fulfillment online?
There are a few things I've mentioned over the last few quarters on a topical basis. We certainly expanded, to some extent, the SKU selection and added what I'd call more frequently purchased items, be it food and sundries or a few office needs. Everything from, again, sundry items to health and beauty aids, K-Cups, a few apparel items. So we've expanded that. We took certain key departments and brought them in line. We're not competing with each other and providing, I think, a little more excitement to that. We ship out of more than one depot. When we first started this for the first several years in the U.S., everything was shipped out of one depot in Southern California, which meant that it might take a little longer to get to you, and it cost us a little more in terms of delivery or the member.
As we've expanded, we've improved that quite a bit as well. Quite a bit for us. We're pleased with the fact that sales for the last, gosh, the last two, three years at least, have been on a year-over-year comp basis around 20%. We're doing it methodically. We're not going to go crazy out there. I think our mobile apps have improved and will continue to improve. We like the value proposition we have. We're recognizing that we can't be everything to everybody. That's not what we do for a living. We have great value. We also like the fact that some of these other services are buying from us. Some of our top customers are some of those guys. If we can't deliver that single unit of milk or cereal to your doorstep, someone that is may want to buy from us.
Got it. That's helpful. You spoke about the impact to margins from an IT modernization standpoint. Could you just give us a little bit more detail about what some of the latest focus points have been in terms of system upgrades and what we should be looking forward to you all tackling over the fiscal 2016 period?
Going back again, three-ish years ago, we embarked on a pretty significant effort to really upgrade and modernize all our systems. Our systems were, for the most part, legacy systems. Many of them written in-house, many of them, what I'll say, were band-aided over the years and worked fine but were arguably strained. Some of the systems that were included in there that were not legacy were from outside suppliers that were not going to be supported going forward or had not been supported. So we probably started a little later than we should have a few years ago, and we got a lot going on. As I've indicated over each quarter, frankly, what we try to do is just show you really what the expense associated with those incremental efforts are. We've installed a new membership system a little under a year ago, I think.
We installed a new point-of-sale system, which is another deliverable, if you will. There's a lot of small deliverables that I won't go into. We've got several more that are heavy into the expense side and should be forthcoming over the next year to two years. The other thing I mentioned in terms of where I talk where it's hitting SG&A. On an incremental basis over the last few years, I think we're now up to something in the low teens, 12, 13 basis points. Those twos, threes, and fives that have added each year. Recognizing your denominator, your sales, expense over sales keep increasing. We're seeing all the costs associated with it. I think we'll start to see benefits. When we look out beyond 2016, it doesn't mean that this SG&A line will not go up a fewer basis points. We'll see.
There's a light at the end of the tunnel. Some days it's a longer tunnel than others. We're starting to see some deliverables from it. It's not a lot I can tell you about where the benefits are. There are clearly some benefits that we're going to see on the transportation side, in some of the ancillary businesses like travel and other things. The big switchover will be when buyers are buying on a new system a year or so down the road, as well as the benefits in transportation and other. We don't want to put any dollars or basis points on those improvements.
We had to do this if we want to double our size over a 10 or so year period, starting a couple of years ago with these expenses, because we had a lot of systems that were really strained, and this is going to set us up for the years to come.
Much appreciated. Good luck.
Our next question comes from Oliver Chen from Cowen and Company.
Hi. Thanks a lot. Good morning, Richard. Regarding a bigger picture question, I was curious about your thoughts on what really sets you apart from other internet pure plays in terms of your supply chain and vertical integration and kind of this buying scale and scale you have there. Also, international is a nice piece of the business, just as we look at our models and talk to this part of the story, which countries do you have the most opportunity to increase your store base versus maximum potential? Thank you.
Sure. Well, in terms of e-commerce, first we're different because for us, we have a lot more items. We have 8,000 or 10,000 or so instead of 3,700 in store. That's a nit compared to everybody else out there that has hundreds of thousands, if not millions of items. I think what separates us is we've got, certainly we and others will have great quality merchandise, but we've got the best pricing overall. We work on margins that are at or slightly below our reported total company margins. Up there in the high singles, very low double digits. We'll compare that to anybody out there. Again, we recognize we're not going to be selling single items delivered within an hour or 4 hours or overnight necessarily. In a methodical way, we think we're doing just fine, and we think we'll have additional opportunities.
As I mentioned earlier, we're selling to a lot of these other guys that are wanting to deliver in certain unique ways. There's room for all of us. It's a big pie out there in terms of market share, and we think that we'll be able to take our share of that. Some little sub-departments, you lose a little, others, you make a little. Certainly, we want people to still come into our warehouses. In terms of warehouse club growth opportunities, I think the first comment, for those of you on the call who have known us for a long time, the market potential keeps improving. I don't think we ever would've thought when we had 60 or so locations in Canada, we never thought we'd have more than 80.
We now have more than that, we will certainly be over 100 at some point in the next several years. In the U.S., we're expanding. If you'd asked me five years ago when we were 80 U.S., 20 international, I'd say five years hence or now, it's probably 50/50 and going further south in terms of the percentage of openings in the U.S. We keep finding more opportunities here, so that's good news. In terms of other countries, we think we've certainly got a lot of potential in the three countries in Asia we're currently at. Bigger market, of course, is Japan, much bigger than Korea and Taiwan. We think we could go from the low teens in each of Taiwan and Korea, double over the next 10 years, we'll see. It's one at a time.
Australia, we only have seven units in a country that's, what, two-thirds or a little more of that than the population of Canada, which has 80 or 90. I'm not suggesting we're going to have two-thirds of that anytime soon, we certainly can add a few there. Western Europe, we'll see. It's been tough getting in with all the rules, regulations, and permitting process, we're pretty interested to continue that process. Again, we'll open our second unit in Spain next month in Madrid, in Getafe, a third unit, second in the Madrid area next calendar year, and hopefully our first in France towards the end of the next fiscal year. We think there's plenty of opportunities. I think we feel comfortable that over the next five years, we'll continue to open 30-ish plus units a year.
We thought we would do that this year that just ended up, certainly in the high 20s, a few of those got delayed, that's life. We've got a pipeline that's full. The international generally takes a lot longer, for a variety of reasons by country. We think that we'll continue to grow and do just fine in terms of that.
Okay. Richard, just a quick follow-up. There has been talk in terms of competitors in relation to how competitors are dealing with vendors. Could you just update us on your thoughts on your vendor relationships and any catalyst there? Given your buying scale and your leverage and your heritage, I'm just curious on your thoughts. Thanks.
Well, I'd like to think that the comment that we share internally and we talked to you guys about is that we're tough but fair. We are tough. We fight for our member every day, and I'd like to think that we do that as much, if not more than anybody else. The good news about us in terms of our view of our competitiveness is we give the vast majority of any improvement back to the member. That, in our view, creates that moat that hopefully continues to get bigger. One of the challenges and opportunities we have is just the sheer size of our needs of various commodities, organics, nuts, long staple cotton, you name it.
We've got a lot of efforts in that area that I think many of our competitors don't necessarily go to that level because they're dealing with vendors and lots of more items. I think we have some opportunities and challenges, but opportunities and challenges that I think create something special about us. I don't think anything has changed. As we get bigger, we can be tougher but still fair. We work with our vendors. We think we have good relationships with them. I would assume that most of them would agree. Probably a few don't, but we'll continue to be very transparent in how we deal with our vendors, and we have very good relationships with many of them.
Best regards. Thank you.
Our next question comes from Dan Binder from Jefferies.
Hi, good morning. It's Dan Binder. My question had to do with ancillary margins. The last 5 quarters, you've had 3 quarters where ancillary margins were up about 15 basis points, ex gas deflation, and then 2 quarters where they were up substantially more than that. It happens to coincide with the decline in gas prices. What I'm trying to understand is how much of that gross margin improvement in ancillary is sustainable versus just being a function of the way gas was fluctuating during the quarter.
Gas for, I think most of the last 5 fiscal quarters on a year-over-year basis has helped a lot. The other ancillary business continue to grow, and whether it's optical or hearing aid or some of the other warehouse club businesses, all those things add up. Travel, you name it. I hope it's sustainable. Other than, clearly gas, we have no illusion that at some point in life, gas prices go up and margins are marginally more normal relative to our history. Right now it's good for our member in terms of low gas prices and good for us in terms of, albeit a lower top-line sales. It's been more profitable on a year-over-year basis.
Okay. The other item I wanted to talk about was other income, which I realize is a function of these FX contracts you talked about earlier in the call. Always a challenge to model. I'm just curious if FX rates were to stay roughly where they are today, how do you think that line item would look in Q1?
I don't know. All I can tell you is that we look at it that way, too. I mean, we manage it in the sense that if you've got a foreign country where some of their inventory purchases are paid for in dollars or euros sometimes, but use dollars as the bigger example. They will choose, once they're comfortable with a price point that they're gonna be able to convert at that level and sell goods in their local currency in their local country, they're gonna choose to figure out how much of that they want to lock in. Recognizing, locking in just makes it that they're comfortable with that price. If the local currency continues to weaken, that was good. If the local currency then strengthens relative to the U.S. dollar, shouldn't have done as much. We don't try to be completely right either way.
I think over the years, in the last four or five years, that's a number that has probably ranged from plus or minus $15 million pre-tax. Usually a little less than the number that we had this period where it was up about 15 or so. I'd say, we just want to point it out because that it's the component of the income statement. It's very hard to predict. I think by doing it the way we do it, we're not gonna ever have any giant surprise either way, because of some drastic change in FX prices.
The last item, the share repurchase picked up a bit this quarter. How are you thinking about it for this coming year?
Well, we'll tell you at each quarter end. It's part of what we do with our cash. As long as we feel good about our future, we're gonna buy on a regular basis, not try to pick the market. I think the fact that we bought a little more this quarter as the stock has come down a little bit, but as I've said in the past, we buy a little more when it goes down. I certainly feel comfortable about our future prospects as a company. Don't expect giant changes in how we've done it in the past. Certainly, we've trended each quarter this year on an annualized basis upward, and we're certainly comfortable at the current level.
Great. Thanks.
Our next question comes from John Heinbockel from Guggenheim Securities.
Richard, if you look at the three categories or the three broad departments, we saw some margin improvement. Two things, was there any common themes there in terms of maybe cogs, doing a better job on your cost or KS mix? Any commonality there? Then if we reached a point here, because I assume the KS mix will continue to get better and how you buy that'll continue to get better, where there should be an upward drift in gross, just secularly, because the elasticity of what you would choose to invest in doesn't merit putting all of that back into the market price-wise.
I'd like to think that we were that smart. Overall, we try to improve margins a little while lowering prices, and I mean that sincerely. We're going to give most of it back to the customer, to our member. As you know, we're pretty stubborn and intent on maintaining, in a rising commodity standpoint, prices on certain fresh foods. We've seen some impact there to the negative. I think you're right, though, as we continue to improve increased penetration of KS, that helps a little. Certainly, as we've had relative strength in departments over the last couple of years, like soft lines and domestics and housewares and some of those items, we can improve that a little bit.
That's of course, outside of the ancillary and other businesses, which in some cases work on higher margins as a starting point, be it pharmacy or photo center or optometry or whatever else.
Organics.
Organics helps, in a small way. I've mentioned in the past, not only organics relative to their substitute, the non-organic same products. Organics sell at a higher price point, our view is that others, while it may be competitive, we show a more competitive framework and a little bit higher margin than on the underlying non-organic items. It's really, in our view, a win-win for us. Challenge being getting more organic, and that's not a challenge. That's a challenge for us, of course. It's a challenge for everybody out there. All those things help. I don't think we started the fiscal quarter and said, "Let's see how we can get an extra 10 or 15 or 20 basis points higher than year-over-year." We're always trying to improve a little, as we know we have challenges elsewhere.
Do you think, at least I've noticed this particularly, I think more with soft lines, do you think the quality of KS, it seems to continue to get better, maybe at a faster pace even than it has in the recent past. Do you think that's fair? That the quality is getting better, that's the investment, not price point so much.
Well, I think two things. On the soft line side, like apparel and everything, over the last few years, we've made a bigger effort in that area. We took what sometimes would be a retail branded item at $200 to $300 for a pair of slacks that were at $49.99. When you go out and buy the same fabric and make, hopefully, a very good quality item, and commit to a half a million or 1 million units of something, that helps. We're always pushing the quality and the quantity and buying power of that, and that quality-value relationship continues to, I think, improve.
Okay. Just lastly, I don't think you guys have done a whole lot of data mining, right, with your membership base. Do you see that, does IT modernization allow you to do that? I'm wondering, when you think about sales, sort of comp sales by comparable member, I'm just curious, when you look going forward, do you guys see a bigger opportunity to get, and I'm not saying the most loyal members, maybe somebody a little bit below the top, to come in more frequently, and that's a fresh food driver, or more of an opportunity to get product and more items in the basket per trip? When you think about sustainability of comps by somebody who's been a member for whatever, three, five, six years, where do you see the bigger opportunity?
Well, first and foremost, we've gone from doing virtually nothing to being a little more open-minded about it. I think there's a lot of low-hanging fruit that we haven't done. Certainly, there's more efforts in these areas in our membership marketing team, on .com a little bit. We don't do a lot with it. We're doing a little more than we used to. I mean, I must get a call a week from some analytics company that wants to film stuff, to do A/B testing, the ketchup left or right of the mustard. We've done, I think, a better job on our multi-vendor mailer in terms of that. I think we have more opportunities than we've even touched the surface on, but I'm not suggesting that's going to be tomorrow afternoon.
Marketing has definitely been told to try some new things, and we have, and they generally work. I view that more as something, if things start to slow a little bit, we have some opportunities there. We're first and foremost focused on just constantly driving quality and value on the products and services we sell. We seem to have not figured out where the bottom of that is.
Okay. Thank you.
Our next question comes from Bob Drbul from Nomura Securities.
Hi, Richard. Good morning. I guess I just have 2 questions. I think last quarter you had quantified the impact on the gas profit. I think you said it benefited by $0.01. I was wondering if you could give us that same metric this quarter. The second question that I have is, I think with some of the remodels that are going on, can you just talk a little bit about category focus in the remodels and your expectation on what the returns and the comp uplifts we might see?
Yeah. What was the first question? I lost you.
Gas profit impact on EPS.
Yeah, I think last quarter there was not a big impact. It was a wash year-over-year. It's more than a few cents, but not a heck of a lot. No, we really don't talk about it other than directionally, which ways it helped us. Certainly, I think at least four of the last five fiscal quarters on a year-over-year basis, it's been up.
More outsides than normal up. The second question?
Remodels, like trends in remodels. What would be the expectation that you see, category focuses and how that might impact comp store sales as we sort of go through this?
Sure. Keep in mind, remodels, I think of traditional retail stores remodel. They're doing a whole new front, new top, new flooring, and new lighting fixtures. Our remodels are everything. We spend a lot of money on increasing refrigeration and frozen in the fresh foods area. As somebody mentioned earlier, that continues to be a driver of our business and certainly something we're pretty good at. We constantly try to figure out what locations that we don't have where we can put gas stations, although we're saturating that. There's certain existing locations that are never gonna have a gas station, but we still have a few left there. We of course, have added some gas stations in a few other countries beyond just the U.S. and Canada. There's little things like that.
There's typically half a dozen or so units a year where we're breaking out a wall, buying some extra land perhaps, adding 10,000 or 20,000 feet. Where it makes sense. Many times it makes sense economically when there's some government incentives on solar. That's small dollar-wise. Just throwing out some examples. Remodeling for us is just constantly, sometimes improving and updating something. A lot of times just adding some more stuff. More linear feet of refrigeration is something that comes to mind in a bigger way over the last few years.
Just one question on the ancillary businesses. Can you just talk a little bit about what's happening in the photo business and trends in the quarter and sort of, what the expectations are there?
Look, you probably are processing less photos than you used to. The business itself, profitability-wise, is about flat year-over-year. Actual photos processed is down. We've enhanced the business on a few other things with everything from canvas pictures to photo books, to ink refill cartridges, toner cartridges. It's not a business that's going to come back tomorrow either. Of all the ancillary businesses, that's the one that's big, it's profitable. It's not as profitable as it used to be. We'll continue to look at that space and see what we want to do. We still have it, and we still try to figure out how to improve it.
Thank you, Richard.
Our next question comes from Meredith Adler from Barclays.
Hey, Richard. This is Meredith Adler. I was wondering if you could just talk a little bit about what happened with the store openings this year, which I think missed your expectations. I know some slipped into next year, were there any common themes in that? When you look out, because you've got a nice number of openings for next year, do you think that there's any risk based on what happened in FY 2015?
Sure. There's going to always be risk. I think, prior to the FY 2015, for the few years leading up to that, we actually got better on track of getting closer to what we think is going to actually open. This is our original budget. If everything generally goes right and it's been green inked, if you will, it's been approved internally. Based on whatever permits and zoning issues and whatever all the issues are out there, we think we have a decent chance of opening it. We're going to put it in there. Recognizing inevitably there's always 5 or 8 of those units that are budgeted for months 11 and 12, if not a few more of that fiscal year, maybe 10 units a year in that last month or two. Inevitably, a few of those fall out.
I think that we'll get closer than we did this year relative to our budget. Generally speaking, it's not because we decided not to do a unit that we weren't going to do it. The only time that happens, or virtually every time that happens, it's simply because something became a big surprise. Doing additional drilling, we found something on the site that was a bigger issue. That, by the way, is generally not a risk because when we do a site, for virtually all of them, nearly all of them, we have to feel comfortable we're going to be able to do it before we commit to it.
Okay, there wasn't any.
I think we'll get closer.
There wasn't any common theme to the ones that didn't open this year or got delayed?
No, every one's a unique story, but it's just typical delays, weather, zoning, other surprises that are unrelated to competition or anything else out there.
Okay, great. Thank you. Our next question comes from Michael Lasser from UBS.
Good morning. Thanks a lot for taking my question. Can you give us a little more detail on the traffic trends, not only this quarter, but over the last maybe few years? Are you seeing more of the growth come from the middle tier of the membership base? Presumably, the most frequent members are tapped out. They cannot grow the number of times they're going to Costco. Is it more so coming from the mid-tier of the membership population, or is it more like the least attached members are getting a little bit more attached?
Maybe people in our membership and operations know a little more than I do here. Maybe there's some more opportunity. Overall, over time, shops go up as people are making more each year, as they're having family, whatever those issues are. Certainly, an older member, in terms of how long they've been a member, that increases over time. It's a lot of things. It's the merchandising, it's the frequency. Drivers like fresh foods and gas. It's that incremental shop because somebody all of a sudden needs a maintenance prescription. They've gotten to the age where they're going to come in one extra time a year because of their timing of their need for a cholesterol-reducing drug or whatever. It's a lot of little things, plus a few of those things, notable things like fresh foods and gas. It's also Executive membership.
It's also the co-branded card and rewards. It really is all of the above. There's different reasons. Clearly, when we have new members, whether it was new millennial members or 20 years ago, new gen whatever members, they buy less when they start, they buy more over time. I can't tell you what millennials are going to do relative to their predecessor age groups overall, not just at Costco, but overall buying. If they have smaller houses and they drive a little less and they buy fewer sofas, that is not good for anybody. At the end of the day, we think we're getting our share.
Okay. My follow-up question is, how have you noticed, or how have you observed your membership population respond to different types of promotions? When I say promotions, I'm talking about price investments, rewards through your card, maybe new merchandise offers. Can you give us a sense of what's been most impactful, and how the response has been? Has it been to drive up basket? Has it been to allow you to sign up more members? Thank you so much.
Well, first of all, we're not going to share all the specifics, but at the end of the day, it's a little bit of all of the above. We work every day to try to improve the value proposition to the member. We work every day to try to upsize an item where it makes sense, because we do want more things and more dollars in that basket. Maybe something like the multi-vendor mailer with the couponing, that grew dramatically from what was originally a six or eight-week summer item, summer couponing booklet, to 11 or so times a year for three plus weeks each. Over time, we and our vendors figure out what works best and what starts to slow down. Those things keep getting tweaked. Again, we focus on trying to improve the value.
If we could sell you a bigger pack size at a greater value, we're going to do that. I think that's a catch, too. We don't just want to increase the size of something 50% and sell it at the same price per ounce or price per number of units. For the most part, we try to raise it only the quantity when we can lower the price per unit to the member. That serves us well, and it serves them well. That's our religion.
Sure. I'm thinking more about the card. Does that have as much influence in the member's purchase decision or frequency as pricing or coupons, for example?
Well, I don't know if one has more or the other. We know that Executive Members shop a lot. Take a group of 100,000 members that are similar in terms of shopping patterns and age groups and tenure as a member, both of those groups are growing at roughly the same rate each year. Get half of them to convert to an Executive Member, and you see a dramatic change in their buying habits. That's no change that we've seen over the years. I think what surprises me personally is the continued increased penetration of that area. Maybe we've got a little better in store of doing that. Clearly, loyalty program's worth, whether it's our Executive Member program or a reward-based co-branded credit card.
One of the things that's long-term exciting for us is we feel that we can continue, even on our co-brand card, continue to improve the value proposition to our member, which hopefully gets them in here more often. That's what we do every day.
Sure. All right. Good luck with the upcoming year. Thank you so much.
Thank you.
Our next question comes from Peter Benedict from Robert Baird.
Hey, Richard. Thanks for taking the question. A couple here. First of all, can you talk about the new member signup trends in the fourth quarter? I didn't hear if you did mention that, I apologize. I know they were down slightly in the third quarter.
They're actually up in the fourth quarter, year-over-year. A combination of decent member signups at existing warehouses, probably a few more international units in the quarter on a comparable year-over-year basis in the quarter. I think we're up a little over 2 million members in the quarter, from a year ago in terms of new signups.
Okay, great. Then, you mentioned when you gave the regional color, you said that Texas was good, can you talk about maybe trends in some of the specific energy markets, thinking like Houston, maybe somewheres up in Alberta. Have you seen any kind of moderation in traffic or ticket or what have you?
I just don't have that amount of granularity in front of me.
Okay. The thought process behind repatriating the cash from Canada, why now? You've got a $1.2 billion note that comes due in December. Are your thoughts here to refinance that or pay it off?
At this point, we'll probably pay it off. Part of the repatriation is Canada's a very profitable country, so we've built up cash balances. At some point, on an ongoing basis, we will determine whether we feel it needs to be permanently invested up there or not, and at such time, we'll make that decision. I think we've done that twice. About a year ago, we brought back a little over $1 billion. In this case, it was small favorable from a tax perspective. A year ago, I think it was the third or fourth quarter a year ago, it was slightly unfavorable. Again, we determined, but small, and we determined it was the right time to bring it back from a permanent reinvestment standpoint.
Okay, fair enough. Last question, just on CapEx, on the $2.8 billion-$3 billion this year. It's almost double what you did maybe a few years ago. I understand you've got some of the investments you're doing, the higher store growth. Is that a level you think is one that we should assume kind of holds for several years, assuming you can open 30 plus stores per year? Or are some of the investments you're doing in IT and systems and distribution, do those kind of taper off a bit maybe in the out years? Just how are you thinking about that?
I hope IT tapers off a little, that's not the biggest piece of it. I'm certainly comfortable saying it's going to be in the two and a half to three range. Is the 2.8 to 3.0 this year likely to be 100 or 200 higher than the following year? Maybe. I don't see the 2.8 to 3 going to 3.5 next year. Yeah, something in the high twos is probably a good guesstimate for the next few years.
Yeah. Okay. That makes sense. Thank you.
Thank you.
Our next question comes from Scott Mushkin from Wolfe Research.
Hey, guys. Thanks for taking the questions. I actually just had some follow-ups from some of the questions that have already been asked, but I wanted to get some clarity. I think when Michael Lasser was asking about the Visa card, and I guess real specifically, do you anticipate that that card will actually drive membership growth, Richard?
When we get there, we'll let you know.
Okay. Following up a little bit on John Heinbockel, and he's kind of the technology. When you're looking at your Executive Members, do you guys have clarity into the data to say, okay, how many are these Executive Members using our ancillary services? What are they using, and kind of what the penetration rates are?
Yes, absolutely. We're not going to share what those are. Each ancillary business is a little different. Some of them take a decade to really get some good footing. They're all great values and yet another reason why somebody wants to be a member, and we'll keep improving those values. Those are, whether it's KS or organic or commodities or these items, those are all things I think that gives us a good competitive position.
Do you think there's an opportunity to drive additional ancillary business growth with your core members?
Absolutely.
Okay.
I would recommend that you try Costco Travel. You'll be amazed.
I'm looking right now at a Costco car buying program, so I hear that's wonderful as well.
That as well. I think we're approaching a half a billion new cars a year on that, there's a reason we use our buying power to get our members great savings on cars.
When you think about getting a little bit more involved in technology and the relationship with your customers, is one area that you would think could be a lever that could be thrown?
I'm sorry, say that again.
When you're looking at data mining, knowing your customers a little bit better, marketing a little bit more aggressively, I think you mentioned at the beginning. Is this an area that would get a focus, do you think?
At some point, we kind of a little self-deprecating when we talked about that. At the end of the day, there's a lot of opportunities to do a lot of that stuff. We kind of look at it the 80/20 rule. We're doing a little of it, which we're getting some benefits. There'll be plenty of opportunities to do some of that in the future, but our main focus is on driving value and a lot of those other things take care of themselves. Certainly Craig Jelinek, as our CEO, has told people in e-commerce, people in membership marketing, try some things, and they're trying some things, and we'll keep going in that direction.
Perfect. I had just one last kind of follow-up. This is when Bob was talking about the remodels. I'm just trying to understand, our local Costco is under remodel in the fresh department. I mean, as you look at 2016 and 2017, is that the focus of the remodels? Are you expecting to do more of them? Is it focused on fresh? It seemed like that's where the focus was. I just want to get clarity. Is it going up year-over-year?
I think as a general rule, it has been going up, but it's up. It's a big number. I don't know if it keeps going up from there. I know with the one across the street here, we again added 10,000 or 15,000 feet. We expanded greatly the walk-in coolers for customers and produce and dairy. When you're doing, in some of these units, $200 million, $250 million, $300 million, you can drive some truly incremental good sales by not only expanding everything in terms of the traffic patterns and the ingress and egress in and outside of the warehouse, but adding some of these things like refrigeration, fresh foods. It'll still continue to be a big number.
All right. You're doing more fresh remodels, fresh drives traffic. Is the focus in that fresh area on organics or just general, or is it weighted towards organics? Do you know?
Well, I think in terms of CapEx related, it's everything. Organics is just a piece of that.
All right. Perfect. Thank you so much. I really enjoyed the answers. Thanks.
Our next question comes from Greg Melich from Evercore ISI.
Hi, thanks. You're going over an hour, and I still have a couple questions. Wanted to follow up on gas. What was the average gas price in the quarter versus last? If you give us the gallons as well, that'd be great.
The average price in Q4 was $3.65 a year ago and $2.88 this current fourth quarter, down 21.2%.
Great. If that's the case, I guess, going back to gas profitability, I understand it's been a tailwind. I guess it's that incremental drop, even from last quarter, that's really allowed the profitability to boost up again. Are we thinking about that right?
Actually, from a quarter ago, the price was up about $0.20 a gallon. I think there's a little bit of a new normal. It's not just how it is year-over-year.
Okay.
It's when it's low, it's better from a profitability standpoint, it's relative to competition. GasBuddy has continued to state that we're the lowest price out there nationally, I think we're still pretty good at being very competitive, we get a lot of good kudos for that.
Basically, you can keep your competitive advantage, but the penny profit might be better than it used to be the way the market.
Yes. I think when prices are low, we make more than we used to on average per gallon or per gas station, and that's good.
Great. The second question was going back to membership fee income. I think you said it was 6% if you exclude FX.
Yes.
I believe that's 100 or maybe 200 basis points below the trend the last year or two. Is that just fewer openings last year? Or I think last quarter you mentioned sign-ups per club was actually negative, but it was a comparison issue. Could you just help us understand?
I think overall it's just fine. There's a little bit in Canada of the auto renewal issue when we switch over, and we'll see that again a year hence over the next year, starting next year. That's a small piece of it. I don't think beyond that, there's a whole lot there in that regard. There's always going to be the timing because membership fee dollar increases, we use deferred accounting for it. That makes it a little more squishy number. Overall, the number was in line with what we felt was pretty good.
With the auto renewal effect, I'll just sneak a third one in. If I remember correctly, Amex is roughly 40% of the tender in the stores. To think of the magnitude that it had in Canada when you did the changeover, what was Amex share?
Well, there's one big difference. In Canada, the portfolio was not purchased. While I can't guarantee it'll be purchased, the contract states that it should be, and we're working towards that, or Citi and Amex are working towards that end. That's a different scenario in terms of auto renewal. Up there, you basically have to re-sign people up. They have to apply for credit. They get authorized. They have to re-sign up, opt in for auto renewal. I don't expect that to be an issue in the U.S. at this point.
Got it. The tender there is roughly the same as here, at 40%?
I think it was a little less, mind you, the market share of our provider up there historically had a lower market share there relative to other Canada than they do in the U.S. They have a stronger market share down here.
Okay. Got it. Great. Thank you.
Yeah. Why don't we take one more question?
Our final question comes from Matthew Fassler from Goldman Sachs.
Thank you so much for keeping the flame burning just for another moment. First question relates to Spain, just curious on your learnings from your first Spain opening and how you expect your continental European stores to differ from your other international markets based on what you saw from that first unit.
Well, like any first unit, with maybe the exception of Australia, which was off the charts high to start with. You learn a lot. You learn what sells and doesn't sell. I think if I recall from when we first opened in Seville a year and a half, two years ago, we had stronger non-food than we would've expected, and not as strong fresh food. Usually, in a new market, you've got stronger fresh food. Given our great success in countries like Korea and Taiwan and Japan, we have to remind ourselves that Korea and Taiwan, they were not very good for several years. You start off with slower sales in most countries other than Australia, when we first entered the market, and that was consistent. Probably the worst economy we started was in Spain. We're seeing some traction.
Membership sign-ups are just fine, membership renewals have been just fine. One data point does not a story make here. Madrid certainly is a much bigger market than Seville, we've got, again, one unit coming next month and a second one in and around Madrid coming, I believe, next spring. Certainly sometime in the middle of the calendar year. That'll be more telling in our view than anything we've seen so far.
Great.
We continue to be very confident that we've got a good model and that it works, and we're patient as well.
A quick second question. On the online and e-commerce piece, Instacart I know is a particularly prominent partnership among the ones that you've got, and it's a concept that from a, in terms of the number of retailers you're doing business with and how long that's hung in, seems to be gaining some traction. Any sense as to how that relationship has evolved, in particular, how the economics look for you relative to some of the alternatives?
Well, again, we're not going to disclose any specifics. We have a good working relationship with Instacart, certainly with Google Shopping Express as well. Instacart's in more cities. Anybody you know out there that wants to buy from us, you call us.
Fair enough. Finally, I think one element of Greg's question might not have gotten answered was gallon comps. You talked a bit about the gas prices, but I remember when gas prices first started coming under pressure, gallon comps surged into double digits. Are you still seeing that with the prices down here today?
I'm not sure if it's double digits, but it's certainly positive.
Got it. Okay.
We generally haven't given that out. Sometimes in a moment of weakness, I share it with you guys. The comps have continued to go in the right direction in terms of gallons.
Thank you so much.
Yeah.