Costco Wholesale (COST) 25 May 232023 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to Costco Wholesale Corporation's Fiscal Q3 2023 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you.

Richard Galanti, CFO, you may begin your conference.

good everyone. and Josh, you, afternoon to Thank I include of forward-looking by stating the discussions will that these XXXX. statements of Securities Reform will Litigation start Private Act within the meaning to that involve statements actual and/or those statements. risks by uncertainties differ These may from materially and events, cause results, such indicated performance statements as with but time risks other identified SEC. time to The include limited those as are risks and filed outlined well to the and company's public in not the uncertainties in reports today's call, from

Forward-looking to the and statements by date they the company only as speak of statements required are does update as made, not except undertake law. these

net This In costs $X.XX or billion results discontinuation or benefits. non-recurring charter results share share share quarter. the income for non-recurring quarter to for today's was fiscal per a the activities. $X.XX year's operating a diluted as year of included million this XXXX, third pretax compared we XX of press reported the million $XX weeks employee per a per third primarily Reported past for diluted $X.XX for or $X.XX year's Last $X.XX $XXX release, in or the shipping billion per quarter ended $X.XX X. of incremental ago share, results merchandise included our to charge charge May pretax

cost these overseas with to and As additional X,XXX added many reevaluate position. those markets since us significant several of able that to experiencing. us then to us of for at that challenges to freight commitments containers thousands initially members which ships additional for in help Procuring you made up ago, to that some a in additional so initially four also to have our allowed the containers three years and market Later, lower improved at know, It the years. and time, time. freight three two our times. we rates leased led vessels stay ships mitigate and of Shipping containers -- integral we we challenging stock do being were was during dramatically

second shipping activities. be in took fiscal by then completely our recall, activities. quarter the to quarter, continued a in shipping to -- container Since would downsize third third discontinue appropriate that and have of remainder charter rates you then two this we As year, charter and first vessels, shipping -- charge of we fall fiscal to concluded our the this quarter

rates advantage merchandising us impairment assets. allows As a take to all remaining full result rates, in members. of teams an lower recorded this we of for for prices contracted to and allows decision current charge the what we shipping this decision, our do our best charter turn, much This market higher do charter opposed to as

quarter other and X.X% FX, $XX.XX the for quarter net reported ex-gas excluding our International, plus X.X% plus FX, and total and a XX.X% deflation plus X.X% FX. so reported FX, reported And X.X%, basis, and on X.X%; and on minus was sales ex-gas and X.X%, reported plus e-commerce comp X.X%. X.X% and a minus In excluding for terms minus FX, increased ex-gas plus billion $XX.X company third basis, of were versus last sales, in reported billion gas follows; third year U.S. X.X%, and reported Canada reported minus on Comparable in the the as a sales the deflation X.X%; sales and to quarter. basis

remains sales X.X% third quarter. U.S. shopping the metrics, good, traffic frequency in pretty and worldwide of during terms comp quarter or In the increasing X.X%

items. was and in down X.X% ticket in ticket U.S., in Our worldwide transaction down average impacted X.X% bigger the weakness large discretionary part or daily from non-foods

X.X% negatively by dollar negatively -- approximately X.X%. relative impacted impacted to and sales price approximately currencies sales deflation by gas gasoline Foreign U.S. the price

income Next is the fee income. statement membership on

compared sales of billion $X.XX X.XX% in of or X.XX% $XXX the to third reported we quarter, year the quarter. fee or million For ago a membership income

increase So, X.X% million in $XX or fees. membership a

been million would the $XX increase million by higher the $XX FX, or headwinds adjusted up in Excluding have for year-over-year FX. X%

renewal and with renewal in and paid same ended rate had are X% XX% growth quarter. XX.X% million at was paid terms or were XX,XXX members, rates Executive paid our increase executive U.S. approximately a At XX members worldwide end, during These that quarter, XX-week in the sales. XX.X%. of the over XXX.X Canada approximately continues. fiscal a year rates, earlier. third up now achieved represent high worldwide week both our our we quarter rate household In third of members XX.X and third figures XX% just came quarter at renewal second per of Membership little We all-time weeks an versus of cardholders, ago. XX.X XXX,XXX and end, million the members QX

the Moving statement, next margin. gross down income is our

point to on gross year-over-year high minus of ex-gas the Our basis positive X XX.XX% release. numbers, to The XX than year basis reported impairment a points, includes more both point XX.XX% these plus of margin margin was reported at was coming basis in quarter XX in charge a compared in XX mentioned was basis deflation third number as little by earlier. earnings -- course, points, basis today's

excluding few numbers, columns normally then reported columns, deflation. and to I I'll down do, ask two As jot you gas column the a

on XX. deflation X% for year-over-year third and and up be LIFO was minus core merchandise reward, The and minus Ancillary basis, XX plus points basis XX, X. XX. X. quarter plus margin, up XX other 'XX XX and and plus reported plus it XX and XX first minus a and minus item the of would ex-gas other

two If to gross deflation was points ex-gas margin you of basis up XX basis again basis number X reported and a columns, year-over-year points. in -- the reported on up quarter the down you get the add

starting core XX up basis XX So reported deflation. with ex-gas again basis year-over-year the was on points core, and a

sundries and margins businesses, other foods a was of gross non-foods and Ancillary on food higher sales higher XX%, being core fresh and X% basis by down core-on-core little. higher terms -- ex-gas deflation. up points they own margin were and In core and their with by or again XX by being margins,

and food offset by is from were X% deflation. X basis gas, our executive court by part ex-gas coming Within part members of business Higher XX higher the year-over-year, higher e-com. travel ancillary businesses, penetration sales points again reward certainly and by centers, better lean that. in

LIFO plus and XX deflation. basis year-over-year, both without with gas points

million recall, a a fourth year, year $XXX on so you Note year-over-year quarter, As had that charge, $XXX ago, third we fiscal billion In LIFO $XXX charge. this we had item. charge in for had a improvement quarter in year ago LIFO. no the the line million we that also LIFO a a

see quarter this of in fourth goes So the year. how that we'll

XX $XX a reported lower basis the of partially $XX items activities. our by from was basis margin. SG&A. to offset to negative about of million impact This and years. last year's charge, Other million million, I'll there was net This terminating million points it was basis year basis pretax lapping again related point XX $XX points which both by charge points shipping in $XXX employee The XX related ex-gas primarily deflation. from This incremental charter was a benefits, under remaining talk gross for or X minute

Moving onto SG&A.

X.XX% reported this X.XX% ago. Our a compared was to year year SG&A

higher higher basis basis, by by So points. on reported XX XX points ex-gas a and basis deflation,

excluding ask two one to margin, gas numbers, jot gross reported you with I'll deflation. of down columns As with both and

higher Central, and XX and XX first minus is compensation minus basis XX. by points. or Stock basis item X X. and both XX plus XX basis points minus zero Other, columns. points The and XX minus minus in X. Preopening operations, minus plus

a reported again on you all ex-gas add and year-over-year higher basis up, those XX. If basis points XX deflation

year always benefits scale include, of the year-over-year, last negative Despite as normal of effect that's out continued sales increase priority increases March. top of of the core cycle slowing growth the Now past the of weeks and of increases course, wage that a of we growth, higher wage did that slower the our a sales few over this went employees in is The into of the the scale than implemented as of weeks four impact operations, impact top included and eight well us. of over typically increase. been the to that this last X normal March and impact we've -- July the for invest additional and

that $XX five charge, XX in the by no the impact. was openings ex-gas quarter item sales earlier employee deflation, discussed other, outlier Again without that And the deflation. charge $XX point no the is an big higher benefits, might in year, this year growth, points. lapping comp overall impact a for X by higher and but was single basis We both both X be and and last gas growth Stock basis Preopening SG&A, higher and this with deflations, three positive, by X gas basis lapping had delta million again there, but Central, without flat of with release. but XX sales and million year-over-year. $XX the within point of again incremental result million in again there.

in income million quarter interest million the operating $XX $XX number. other and year-over-year. higher balances increase interest was last line, versus and less year. And at favorable the $XX interest interest by million and interest in came over year's million, income expense partially $X This was Below to rates for in income was FX higher driven by by cash last offset income increase due an

last non-recurring at the would Overall, X% XX.X% rate rate. tax have fiscal The higher percentage in to was X being that of reflective income currently 'XX range. tax that the of year. two rate discrete with net came of in income both in been XX% quarters, by in our to compared excluding quarter taxes, items XX% XX.X% be terms year-over-year to QX income third points. projected In is years' third in effective down up income reported even net Net the items

at again that new openings being first-three new. In year. have with date, we warehouse of XX locations we relocations, opened so also be net so us at put relos relos, net In this -- no quarter, of five openings, terms in for the QX, the new we've expansion, including net that to with net with nine and nine, new less to XX the XX will quarters, three four XX of opened three net In locations. one

In open each building opened addition to in additional we U.S. and in the new China. Canada, -- had one in and the buildings two of Japan Japan relocation in

XX, These the of will that planned quarter, year and that for our opening the June QX have, fourth our includes less made it's buildings full in openings to are net in planned and of this fiscal our XX We our nine new opened of U.S. bring Oklahoma three outside Tulsa, fifth fourth North and XX up morning again the U.S. August. for and and accounts buildings China, planned XX

in of approximately spent quarter of expenditures capital $XXX we QX the million. year, -- Regarding fiscal the

billion. $X approximately Our estimate fiscal is for of all CapEx 'XX

Moving hardware saw on in departments you make the and onto of In e-commerce e-comm ex-FX XX% sales XX% on recordings. a e-com E-com big small furnishings, XX% decline QX were I as XX% of more discussed sales These our sales. home sales in made at sales terms release warehouse jewelry, discretionary our monthly were that down basis only notably up about of in about ticket minus down same and X%. e-commerce, they warehouse comp sales. quarter same to warehouse up the electrics, X% majors, and departments second in and but in call in and was story minus the

continues few A inflation, comments abate inflation somewhat. to on

time X% that last year-over-year and that quarter, range. the time and to X% a and by to back estimated then QX, in it up ago inflation X% inflation go was down estimating year-over-year 'XX had QX this we're quarter fourth X% and was of You summer, X% the year the the X% to at in we and X%

like see well of many continue nuts, -- We meat, items on to components as improvements steel items resins include food non-food and their as side. the commodities notably and as like that items, in eggs, part

to over in pretty inventory Inventories Switching are shape. levels. overall good

end they our As year. of of year-over-year had the been X%. of that of some quarter up challenges supply end, during down last chain third as Recall inventories the of the were quarter

so announce for XX, this Thursday, weeks will the fourth the year, will we remember our Sunday, close, September in this sales also X four May of of XX XX quarter weeks XXXX fiscal has May terms Finally, and -- week releases, June X versus ending Sunday quarter. results ending that our fourth upcoming quarter fiscal extra after-market in on an have weeks next our

turn and up I'll that, and over Josh. Thank it With to open for answers questions it you. back

question Your Instructions] UBS. first comes Michael line Lasser the from [Operator of with

open. Your line is

digit to your roll morning in the growth? portfolio? order comp deflation Thank traffic drive How the thinking Costco good about prospect you. broadly widely Good entire or and sustain afternoon, across and of is mid-single willing you Richard. How back prices to are

look, on our at much every remember with and as basis the much as line, the we doing week. day, -- item there job points good suppliers, increase, back work a and that, to we're X% basis of prices that, members that hold our day X% out would out something or down instead when was business literally a of of for was, and given year-over-year how for the Well, or an that will our nature our the drive every they say we X% or that of (ph) at hopefully points felt our how term will that and were seeing to end margins sales. in eat or that merchants trying some anyone there work XXX Whenever if eat lower peaking I XX% that's were inflation increase. it, known of we some X% then implies maybe members X% portion were of XX

getting we've arguably right been Certainly, more indexed now than a items ticket that's to hit others bit in over compared little bigger discretionary others. always

foods look in are and they and you sundries, our mid mid-high singles. the at If to fresh food

of You negative. the look and the gas in notably, mid-single at year-over-year some the deflation which that's prices, gasoline, is in XX% non-foods ancillaries,

it is. drive it up So day, sales. all to adds we Every to look where

are and usually that the it buyers take how to I any and can and use Head that just our day the pushing of whatever business. they out What our and drive can merchants heck vendors, of Claudine, monies Merchandising get, get that we to Greg will each from do knows? know who excess, the the take figure to type Ron we monies

was One -- to to containers contract us sense now made looking allows good that relative out is of now. these and our back, it higher the and shipping We higher a buyers year competitive get the more rates it well. be and seeing to to vessels the were smart of for reasons to discontinue cost that us that for are much reduce as it

as we're a comp side, that. good to home warehouse we we think direct When whether our on competitors, of feel food shops components, I different very against and what job doing great do or our competitive. being well So, very competitive improvement about it's the do general club merchandise as doing -- retail buildings position we're

to Richard? are to they you value would sense been providing because so more my difficult rates And be, make deflation, members, So, expecting amount going wouldn't of question fees not to follow-up have renewal economic and any raise the be is broad-base high so right given your this value you you your now, churn. in it give --

at and Well, hope first first of the all, view. let's of on is, the deflation, there see that you'll to it question in be my Costco

we'll not right enough a now. our terms we if and do now feel to incumbent we want but fees, membership of inflation, without them that to as that meaningful being drive or a do there with of day we relates or we headline nice right is light And but renewal out feel will, any sign-ups point, of good it beacon It's that levers try, let in at some we anything. very in it, soon impacting view to to time, for know rates upon our we way we've of it to business at holding but us As big the the the got know. members end Michael, about as be it's matter you

Thank you.

of from with Your Simeon Stanley. Gutman Morgan next comes line the question

Your line open. is

you stacks. comps slowing and been merchandising, happening? probably the of do you My macro, question it, obviously know It's fair than three is first Richard. options, you're more those what's took and around, diagnose the last on I gas how how attachment, it's sit if over you your whether share don't years, when the diagnosing Hey, curious any

Yeah. sundries, door food apparel buying in they're they're people they're know look and the way, foods, non-discretionary all, at buying Well, and we and they're what we buying. first weather a patio down buying know big fresh buying buying all in getting they're They're a traffic there, we're all of ours way, down. are industry-wide out that much. indoor members now consumer while turned as a the little what's electronics has are in We big going on furniture, not down, the with less, they're but items, furniture

that we So side business, but overall, to bring more when can we there, the we can else look few the same at know $XX. simple food non-food and a in sundries we traffic items impulse items time, to drive do because sulfur is on more good what $XX at

we and and Claudine what and doing. are that's day that's So her do merchants what every staff

And us is trending, color obviously, information some the then, gallons my year-over-year, profit on follow-up, can inclusive that gasoline you of gross both or how pool give and profit? profit penny

close are to point Year-over-year of was so down was which -- you XX% price sales, XX%, was gallon gasoline per XX%, was the I XX%. XX% price that's for during gallons our the nicely. yeah, if don't number, Well, the flat. have in down units profitable quarters average quarter both The will cell average

and this be helped year, to not gasoline and a with in lot. I it year year-over-year, little it Last I'm but that As year us. was strong how QX, year I we'll it profitable continues now little it -- think right it see said, last extra quite a number, week, a for help I've but didn't in helped sure goes QX a -- said this

Okay. Thanks, Richard.

Christopher line J.P. with Morgan. from comes of question Horvers next Your the

open. is line Your

Thanks very good much, morning. and

in on things see price that ahead side, I to perspective, just of pricing are retailer if heard doing from that. the about more dis-inflating currently? the question, back price the market vendors? we've is between you're talk I the the the of a So promotions. to commodity take versus jump you investment deflating guess, or the are of funding the that promotion, thinking about the lot vendors you typically How And more funding wanted balance you strategy a what

suppliers a that in do fewer in there. sell, with steel managing volume partnership day -- couple of we easier a Again, seasonal Well, we buyers barbecue managing we it's on be dozen five first, I certain and years one commodity look, lot items We're here a of that think resins have every like we're months out not work we're committing of what us going from and to hand the like merchants literally our items. meeting months, I it's up XXX six furniture, the ago. And when items. monthly remember going budget were prices patio items our grills, for for couple

as think getting to to major why it with to think company it the then costs is I'd commodities pressure, was is exactly the of consumer that a drop. -- the non-food much as like -- price on manufacturer -- how whether when is -- the wage were costs how phone coming much know saw prices of want and and our down, We transportation increasing the or was wanting first suppliers, like the vendor know commodity and whenever, items of whatever. I why, price we going we when And that, it is how much labor, to products

worked some them cases, And to so of there. delay understandably, three and had or in season four committed the some with we there months, was in and a supplier

how a more are we to $XXX basis. in partnership. by willing much on item-by-item lot skews, as I better or skew our if in price, because we're addition, it's on billion simply think positioned sales an it divide you little you a $XXX and power are in a billion going to invest more so a In lot price, X,XXX do pricing per focused And to and said, we that a it's take invest

So we do. that's what

cost, as from to $X.XX around with And this remember of co-op there as spent wanted to goes own their our promotional money the advertising back I beginning supplier to is we still there's you $X.XX us cost to of the time product. and their $X.XX out dollars, suppliers, that's traditional the the do. here. money what $X.XX say, and will give do and add advertising base we $X.XX we And just of it dollar not of

money online monies think, we what there, every it's out our I whether bucket is with ad or money do ad be now, and so And about have promotional or that. knowing suppliers of work is to monies to smart

multi-vendor XX discounts and but price we the case we our in MVM, And we what times out not the that temporary what And drive bookers coupon could call what we do only sales. the call in-store also mailers, and a send year. buys hard

how categories, of appetite more value is driving ticket we monies so -- some item elasticity what The there by the how particularly now, to not all there's is in it's an and of the we for some drive consumer much price. categories right get business other that lowering some bigger part the when above. In by things the necessary add or to the do that, business, do cases,

double-digit, you forward, quarter. inflation that. the And talked said, as that low sort the I I right, or so, think Walmart of data about in X% look Look mean Nielsen X% was you at

two-part So, so fresh mix months ability sort of think overall? just one to is then, more is, exposure? inflation difference have continue commodity do your you you'll comp project about And how that eight no have potentially you you out, six, to forward the if that question,

X%. when concern we seemed years world at to be and when an a ago comping over-arching five, Well, about six there were inflation was not X% four, the recession to to low was three, X%, and X%

got difference, is loyalty best buying we view and because Our members more prices, quality. -- major with great great great the and a

we've so, under And succeeded those.

weakness which in it not most those MBV right we're of everything, more categories. big-ticket doing better at my discretionary look when it -- think, I again we in relates and view, dealing that of fact now, to like the with only items we're of more

as as not Our negative others negative there. out is

furniture We as ticket saw sales we're recession, two so, against indoor growth this some of about equipment last those only strength comparing against of comparing over outdoor big not people electronics outsized two years things are and the and our that. from buying we're exercise but outsized their items addition, years in and concern to comparing and Uber In prior home. and is TVs against and things

think we'll other I to X% not but items X%, out how we do do do So out exciting we figuring new in at we pretty how focused of and on stuff or fine. drive good sales this new and We're sales by and we're continue do come new things drive bringing and that. just

some very but what is up. year, I'll conscious little unique what success over those overseas. of and products This we're anecdotal, including exciting figure bring at always been on we've We're last a a small things good out here the half, a and huge including These in lot taking world and but overseas year call add items having Canada U.S. basis big good American with Costco we chaos lots things, elsewhere are now small all and things. there's around can having experience the the that of of

you much. Got it. so Thank

the from Truist. of Ciccarelli comes question Scot next Your with line

open. is line Your

were the guys. Richard, COVID-driven discretionary of the your a due talking just of foods expensive function afternoon, Ciccarelli. like is package at data, on that goods is to look side? just the moving I bit or Good softer kind that the more comparisons members on Scot were mentioned you a you think about fresh you less to when side

Again, you when but high mid-singles, reported, total company talking were and was at non-foods is way, Sales reported by was earlier food look fresh. sales the the quarter. margins have was down weaker a in that when or singles, X.X% fresh little I over ex-gas and been fine FX, X.X% about number negative. Yeah, within little a mid in mid-single X.X% to the of sundries

Got it. to that. referring I’m

kinds it trade that label down can cetera., question private let's call more are second other sales, it's Thanks. activity, you identify from any though that members? your the type whether to trade, So seeing related of you et

'XX, to always the 'XX fresh see not by was 'XX, recession. shift penetration -- we've for sales someone in it like recession, whether we within seen No, or from when we've concern 'XX, to there's recession this beef seen always current just protein, would poultry -- Yeah. a some Historically, import. way,

that now. of some seen have We

I even that think and anecdotally, to like things canned switch tuna our that. some months Head buyer products, ago a from Sundries and canned saw of heard Food chicken I and canned some few we

(ph) penetration, end-of-the I But in a and on that, basis think so on still quarter, this a was penetration. mentioned year, quarter KS XXX sales it's point increase seen points, XXX also delta the point year-over-year basis, last side, basis that the full in at sales we've a private-label, over whether I percentage

If or XX%, the my that XX% or back basis, over a years, I'm you XX%, it go guess gone from, maybe on guessing, XX% is last call year-over-year we've XX the in XXX basis years, basis XX points last XXX you points couple over years XX quarters. the basis XX to points so basis and basis XXX points or eight of versus points so

to it argue correct when upgrade an we've downgrading they seen for it better Kirkland is try yeah, said they was people and to bargains. So, that suggest when people would again and Signature. anecdotally We that looking least went at a

Got it. very Thank you much.

Karen comes line Short Credit Your the with next of from question Suisse.

Your line is open.

highest Good model, to I to one even One the much. think when in talk was sure go as like seen I the Thanks Two is margin Hey. pretax your of it is, not to could I've as questions. high back I'm it very you. was.

I'm deleverage see make would environment on that. deflationary we're what on the that that EBIT the would curious front? you on but second necessarily environment into And going line go in was, to we you color or food, not I had the So commentary some food, question be if in into if could were then just deflationary

with our of we we like all, revise, it. to drive deflation first head can business prices Well, will will even here. out there configure lowering view, In a top off first be my and of that I'd number the think with it

something other gasoline. is, at like look The thing even

years last there higher few I gasoline out operations in the retailers from gas. think all reflected have have that profitability

higher most we versus view, In still have extreme everybody the we profitability have we -- and our savings else.

thing like So against our the key supermarkets, I to holds true strong and competitors look our decided that direct others the than a those a shouldn't against fresh again per make be. price us club more. we gallon they because little feel same still changed. little on items others There have shops make more have as as between think not whole competition is we've more our and with been When at gaps price And to elsewhere. we competitive able –

And of of year-over-year to what hard it's up remember comment like pretax say some SG&A, highest -- which say, looking let's your so about at margins, I course. even again, the was

XX% I a like front pre-COVID in even think view you two COVID had with in XX.X% XX.X% we of back, for XX our down our below years, of below If or and was of get could benefit, go it. we increasing is detrimental more SG&A reported COVID our than basis X%. It on were we a was and by sales categories course, got and many

than it's they better than still And still normalize of course, better were. are was it and margins

as in mostly shown we've even the to to sales, look, bottom sales and little if we'll levers we So, ahead wanting But go is affect we're is some thing Karen, some I let's continue anything, of to continue of way that pressure. care to wait will terms it, But bit, big but pragmatic with we make the top-line of of lesser assume go us, to wage less a I pull can down. us inflation have that be still that too see to been know, of a subsides going able The Again, a sure will overall think wages with about think that up? a employees. be and think take going we've see. sustainable. little in are you I topline to is, biggest our not chunk allows line we'll it's -- it Wage question and they that to drive

Sorry, just to follow-up on that.

there what frame ex-fuel like any any So, in is there sales ex-gas what way would to is margins, to... prices way in result delta in EBIT, a delta

SG&A collective goes years, an several based not that as It's expenses warehouse. the to plus view back that comp in like need but to things now four it, was X.X%, Y really, and of model, percentage we view, weakness a what's our this in mean, equals or deflation, the of variable around items, taking almost somewhere used expenses anything. look impact then SG&A warehouse. X taking the that's at five, more at the to rate incremental big you the on Certainly, I hard weakness number flat gas ticket flat a right say our In -- than it but whether or collective -- B those have sales was

pounds of we've beef When meetings still processing look budget or ancillary and X% labor report every but our when through pork, labor and sample labor labor When labor -- month hours, foods warehouse the operators at poultry or productivity fresh, meat system. look productivity. we labor, I in fresh the protein, on improving anything, X% to the and shown or through front-end productivity, the at business not the we're

things. is which item, Now, percent the of to and our the increases, in But go like the other bigger now things. all something still last higher and let's line sales X% year, additional or a X% SG&A we'll percent the at sales, a view, In from that range. wage get But I'm going back are see of a with to slower little see company. we're day, we sure unusual amend like where to still to as from there. pre-inflation -- We'd single slower a that's in we'd X% look, with end -- will X% and our of top three number show to than biggest labor X%,

Okay, understood.

-- if the look the big it to is, quarter, a we've of I bit started in news just not second quarter items, discussion also prior in there. lower last sales well, that, of the discretionary think bit the that entire I little actually that quarter the ticket a Now, little back is seen good this

So if six them months from we but as we'll -- on being can hopefully, you if will, there's and all things easier compares -- be now our comparing well. own do against equal,

makes much. sense. so No, that Thanks

Your next John with Heinbockel Guggenheim question comes Securities. from the of line

Your line is open.

pretty right, were sundries, right? and two-part One, food then was the those to right, drove predominantly and food versus it's kind we're on going that are kind is core non-food because to core mix? Richard, secondly, And what stop, on So was a of up, core, -- getting So that, 'XX? that erosion And on core. close fresh Where point to of is down. 'XX? food fresh where we

foods 'XX, foods to Yeah. back on minute. back the of points. year-over-year I percentage up hold basis mean, this Look, Fresh if -- margins is look couple was a little or end of down crazy XXX up. are quarters points 'XX, just think is of XXX the margins we went -- near where the on we 'XX. up goodness, right. up -- year-over-year and margins had XXX foods, fresh of that were cheat By quarter. fresh I XXX 'XX, I craziness, versus way fresh kind versus were still It -- XXX basis a that go at the lapping foods in had I I Yeah, sheet. a if end --

year, compared last This XX 'XX, of on versus we're basis down, down food increase points look to that versus and XXX versus margin points still at of numbers. down fiscal giant a in where pre-COVID, point XXX basis QX up. When all I some and basis anywhere for And to in today again, year-over-year basis -- were but from that we our basis, XXX is gross points those 'XX. plus we're year down

Okay. that other brand, Is that right? categories less and But up, mix, the predominantly private big-ticket? were

Yeah.

a Apparel of apparel and of I penetration them. departments course, and relative margin apparel I our the has anyway, throughout, margin. then, has strength, And weak of margin one lower a as think of Like generally it's all mix. of some that. to was anyway, has non-food majors strong a mentioned strong

right. All

white that. by particularly has the freight the helped big-ticket freight -- like equipment, furniture, way, items, too, exercise on goods, has the things Well,

then Because more are data journey, years. done on know the And where you've personalization of I the secondly, right? we couple last in analytics

So a Where So about [Technical promotions share and that? we e-mails looks you wallet on program, it and when so targeting think huge opportunity. are Difficulty] like and loyalty forth, right?

we've shrink. question one higher of times much a of the way, other gotten the that couple By out Sure. of some there late reported companies of because

shrink Our is intact.

rolled in then, little shrinkage. bit. back since any haven't X major out a couple We self-checkout, as up really down fluctuated we and It of it's a COVID before points come basis seen change

terms been in fortunate we've And in it's tight regard. been a range of so where so very in personalization. And we and are that

forever, and sometime of in about, on you targeting still early have those probably me the after Well, that was it For do but the be that we'll we're we that personalization. soon call innings. known four talked years ago do

one mentioned sites like think in last call, this and the Digital But e-comm new you, tell That -- applications. Transformation, will, and complemented mobile to and on a under just a VP data I three to and and Digital of I'd we've the our VPs the other we for And site. began and improve which area. website, roadmap goes re-platform over nine last same hired, in to analytics primary outside six apps a e-commerce I if guess we quarter's I ago, what year hired of our the mobile months, really, mobile was both you two-year

the that business in of way. the currently analytics and we're we're building innings. the we But engineering and number early users, again, have, say, on architect people increasing I'd the data with people, course, our dramatically as Working, well as we're of capabilities

now and gotten going data able to pertain that that order at have, sending to quarterly I'll changes, much see you too do. feel you I on clean specifically But report many to a incremental still week be we've we We're better business call. hopefully to we what to more the don't site. e-mails which next a First you're think

last forward. in small to of we've have that mobile the we're to going months had app And an improvements small three in the app months plans as our and it, example, month that just several are each now on for releases three improvements

say I'll in past you've the you of heard repeat we're so And really years, the innings. early couple know, that. -- for that me as you

we got see that think on actually game to stuff, think way to good a hoped but our A more I some that than regard. over do plan little but you'll this future. are, longer the We I had and we're in we of

Okay. Thank you.

the Oliver Your TD next of Cowen. question Chen comes with from line

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large? are the kind Costco, are of seeing -- Do inventory on proceed planning your Hi, at trends that within what -- big think ticket and terms Richard. And of color expect then you're you in the big your When the of thoughts ticket, and you, household do terms income, item Do what's you customers sequentially? what about people And trading are in you any may improvement? how compares your question, ease? how there?

Sure.

Thanks.

Yeah.

end gone a I anything. higher there. We with that's increases still actually but little, that's than to end has so wage people over-indexed people, Our annual household think – higher and more to do still up income income

do in As ago, the challenges were we it big one, lot supply our some months inventories, I -- if it relates inventories you QX was that think that again, was to as -- was all just me QX, enough also six fact, chain and up when ticket XX%, had. our to where had A items, terrible competitors, year-over-year -- our with, QX it has QX and asked else. everybody but had of people

And good. pretty where since good now. right that's then, stand a We and we that like dramatically feel others, we've about reduction in shown

going noted things six, lot -- we you promotional and five, some on back called months us again, If of of on. three ago, have had you a four,

these dollars If patio or of different thousand were you furniture they all or more different three bought like and items, XX items items. in-store

If our to a in delays. of money, particularly you great And promotional on did of that card $X,XXX markdown line, got cash $XXX a already chain pricing. money supply we back lot were where on or more, things you because over-inventory was our inventories get

but need because those no that's through And them, got plan of are it conditioners and of air let's summer, we to fans chains but be of an not easily Because an summer get we're -- exact all. mark and then air There now, the say, the supply conditioners in try example. to down in and might September, million sell think did these chain them them challenges. held great is here selling we XX% it, to on last at I numbers, issue some and we the October, through of not selling rid after XX%, examples, $XXX of supply to

have feel back-to-school notably of going good Head as her there in we've are forward Merchandising Adamo, things we Christmas non-food and where Claudine and existing and people, to inventory of to well what about So on what levels our that. upcoming in committed talking as both and seasons, pretty for we we like

other China Richard, Asia in and just half of what's in lot there. back Are regions. want in connected second great evolved curbside you've terms And Okay. question a of and your and terms delivering strides and And highlights Thanks. experience the and members I'd made some for in love there a what physical. between convenience? the digital of and that thoughts BOPUS consumer ultimate ahead

it out United all, if in of XX. outside just the even look I States, Sure. expansion at this year, was, 'XX, of think first of of what, you and terms Well, XX

a combine XX%, because So XX-ish, of opening XX% which our one as the Canada, -- in well but in we're still and it's bunch it's I outside units there, a oldest at areas. towards U.S., from XX% the U.S. and least XX%, little not But going XX%, XX%, years, XX%, I see that next over five the trending to Canada. or XX%, XX% saturated, the bit if

I that's, years function forward one, day had every of think Now, there's elsewhere. have than given for a the of, seven and more opportunities opportunities and you I we answer that's before ago thought having six, Canada, same now, we is U.S. going in again, would and plenty the

a unit there year now just But got we've in one in A We've others. I Spain, exactly our each a we've XXs. few more and or believe. two where a And our to think Europe, unit and are we're Iceland somewhere us in maybe a year see Korea, the then high-teens. it's we've base Japan, still in I a a opened got two. or units unit-ish dominantly one, each we mid going base Sweden. on in and we of to Australia, year in and Australia, opened on a XXs. of year, none, year We're where open most a but one -- to in In the UK, the And -- France fourth in going still one have than in low to in low Taiwan a -- two open XX, a not got probably. you're You're the one going in year a year,

there. growth little a So

China this But mean, at and our this calendar fiscal of in half to sorry, at as stories calendar is a four -- and three end certainly, more in year ago, this I'm four us the one be of our big ago, year for December, second story first in years is I that X.X, a year. this this more yeah, the one unit – opened fall. our year year Two last going China, -- six year. more a and We're by and this year third the then we China

that So there's you how good we that, if of companies a that be think at that comfortable closer that but six to at XX, something. can there, some certainly But on XX a we feel lot year a or us have little somewhere there's -- we to growth and we XX year more And year, feel growth not line, five feel do to we make plenty and opening years that's if this a look good. we'd in quite XX-plus through to the XX do juncture. open somewhere relative about would for a like year but the to bottom next tried go very and XX we're

it about when like it. don't stubborn In successfully to terms it of and ago about we little locations maybe few and it, curbside, a or ourselves thrilled we're them in year we not a and And proved tried very location. a We over the come to now come people they in from they big-ticket Interestingly, -- you items. do that, in they're while of half shop have lockers non-food we want in. do

we had of challenges, year, which grow our we had good And way XXX volume few ago. million. quality $XXX is over a one thought last more to we have, locations to has our doing continued warehouse per average over years is have So -- problem than a

and or -- over $XXX million I XX think over XX. XX or doing

the units, in lot open to a don't get to at lot so even we've look of ask of a we're for places more so had continuing honestly. it, and And we U.S. and

a asking but of don't not about either, we ask for lot lot Now, get it. a we're it

don't a big I see So that as thing. being

the when things where doing, -- we the [indiscernible] though, you've with selling of fingers, yeah. people at based in several my will the warehouse in we be say, we of two-day an it online U.S. partnered months, which the it also grocery, well, look both we're with in a ahead near at we that store go if in you'll get the even is, product, and do to you shopped delivery mostly yeah, you we -- of Canada. cases Kirkland One with and location, in the go And [indiscernible] within day course, cross can stock online, be next on you at in as the some And [indiscernible] have -- right already but dry has -- there, big same other do second couple they're now. able

And in, not employee by shops, brings that to comes reporting to the income which way, continuing that case, number, numbers. it is in is up contract it employee In you. their grow and our or face

sale. warehouse a consider we that So

Got Very Thanks, it. helpful. Richard.

with Your question RX the comes Mushkin of from Scott Capital. line next

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the Hey. taking Thank Thanks, question. Richard. for

they missed what of to competition now, But said about up. I of well? -- So maybe your or as little the are someone I Is that and one you're answer competitors wanted kind bit. activities asked. ramped shorter-term, first was to if this a they it talk Promotional seeing

higher was. it it's Yes, than

Okay.

the MVM a could we've good shortages, of promote on we particularly could you, sundry -- challenges. -- per I could all, lot there sell, paper customer. chain mean, because, it lower the sell, mind whatever of when, side got Now, the of the not one, out every sell, was we actually first we were supply we like non-food, could it one couple of some TV years every goods, why limit paper items on and a every for to took we because like mailers

more there those we more if And now. But of for lot comparisons less a as more yes, -- years is so some of a couple well. there's are seeing versus

you're is seeing from the or some that retailers themselves? is activities from purely And that vendors

sometimes, that mean mean, when see are want us. can we see pressure know well, following we're behold to Yeah. unusual sure maybe us, make putting that I day retailers deals on some the can't we're speak we things Well, other there. they certainly, doing, our to something tell the better -- we you but us. to for And seeing we ask out supplier, I

stay think got helped earlier, Certainly, now as in -- got to has just I continued with a I little to of said a we be terms of But lot we've to on top that all levers think So that. gas have I of that. retailers right pull.

things relatively Things been that. feel billion for Unusual an even which has so about us strong, like business business fresh worldwide, -- to $X billion is like $X close we good plus and for been like that's apparel, strong. worldwide,

margins that's just So that's cases. better some promotional, not in

Okay.

I long seeing as So then more about I we've where openings been from little people. a bit long-term wanted to non-Costco talk competition. It's a time think many

or two, over next year the that see to going are three. You

The tout it. also, they technology omnichannel competitors about just other their and going and scanning their it

competitive and some view the competing three stuff give of how the that fits an Costco Just one those technologies people think advantages overall us to over and of competitive or and that environment your you? e-comm you are next for against whether years

the Well, best on mark-up average everybody I value that, our in price, XX%. first the foremost, at in quality lowest goods I goods think we the double-digits, or is and in attribute we're and the way that customer low attribute attraction is regard. biggest mean, one dwarf fortunate XX%,

XXX%. they XX% to traditional to retailers, know other are You at what anywhere from XX%

in So arrogant somewhat start with. we over to simple been benefit own have our extreme that we've the years. way Arguably,

things it even the on about over fruit of I the think, had marketing. on years. -- question One I around low-hanging couple finally next I to target John, of personalization, and earlier we're do mentioned even as as forget now that view done, that we've the get some

that be others. So to relative a us to positive will

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X% can to have still to do certainly We So billion which We business. do more business. a to don't some go think period X% strategic of XX%, on let's X% pretty XX%, XX% But from things doing we And feel good goal certain from can some about of side, from $XX we think a we with We X%, of more. that to X%, time. driving go we're sales to can. the online. but to over that go is we XX%

about I and think including with bringing and something head. that we've I on exciting every and senior an Greg job also and incredible in more out meeting our in that's done budget merchandising colleagues, of every Monday is and merchandising that a focused Ron side day morning hear other on day few the at meeting items,

keep what's think our going that's to driving So business. I

are dollars. and that from a advertising can think those grabbing of do some that getting we better playing that, lot technology we marketing those a from out advantage think finally a ourselves, both areas despite pretty some we've people I a bit behind I dollars side, of we've up helping plan on got advertising know game in and build done are there but that the standpoint, the we are on but better taking well little

drive will and for it So to sales. we what -- is use

the don't club touched you. I And you thank that. And openings, on think then,

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the like get of the XX We'd -- the year through over because net fiscal five and years -- we around -- 'XX of But year the I game down closer above the units XX. if COVID. think six of and there 'XX, you next to last year year big new and year XX a that's think first the XX of three I years, XX, XX, was kind plan. to each averaged a 'XX, next

region the we each our regions of continue approach estate to U.S. of opportunities bottom-up sure ones And are of pending next equal our a pretty two or the and with -- that which Canadian kind plenty years level four country comfortable. a that in units. that pipeline have we eight other over really and feel good comfort feel of for department is got We've and an we'll openings the of priority, to three open with working by every likely real what's operations and geographic regions, other

Thanks.

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for Hey, Richard. with might Cheatham kind working making. warehouse on your like view It with you This of to what that are is the the sounds you something you on Paul. balance monetize How you do see you partnering Brandon your want and your about members up over all long-term? it's that want I in mentioned digital eventually follow vendors. you that how your that do really investments that

prices a the green needle, of you the first strip as beginning been with will, items. hot on steaks if warehouse. monetizing with Well, the that all, part with at digital holiday in of season or We've at on season of weekend is of very a successful moving planting

and we And we're so people of better bringing that a before, have I around just in done -- think it's we're that job getting it, doing frankly. it and

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are some a a we there do you to five key doing we e-mails little some learned specifically get is lot years to I tried last low there again, word of few we've things. we're a to -- effort, none on little things and I And strategic slow use but stay do there's that a you. what hate week not so know and because technology which the company subject over of how the to relates new have everybody think is of a this I the this -- today, been that Not even basic to opportunity

might it items you a could them. If you had be just purchased was you a in on based rate of banner that interested e-mail, that the in, an even couple of items store literally click on double

four, of So analytics bringing that built hires years. kind we're in two what is catalyst digital. -- -- things just have teams VP department IT the one it's -- we in those of and And few One are and that the it's our order. the not individuals, that's call, short they is in last over data the

to continue we as we'll along. more that So tell do and you go

mentioned marketing. any membership you that what the side, their there competitors has And any promotions could you I difference membership And Are are follow competitors? informed How on on from seeing Got change up it. on is doing? promotions if major your from you memberships? membership your all for in

do there's for biggest we mean, change. in discount membership. a us, way, each any year. the thing really we is, I Well, no do few But our big promotional don't things

-- competitors X% promotional that promotional warehouses. and of more as but new call, you the elsewhere. may in getting, about lot mentioned but on for related want membership number you on X% still and of X% new year-over-year I increase sign increase up that, a a there's our going stuff, memberships the a of don't a And certain look I number in to at just you under what things a we're go activity do, see coupons can they with to into get Some

So we're still getting people indoor.

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things less we each done and We really, have a side not if the little lot. membership. but on -- -- done but promotional a do So not a few we've promotional anything, year,

you. Got luck. it. Thank Good

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of line with Your comes from & Oppenheimer the Co. next Rupesh question Parikh

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Thanks afternoon. my question. for taking Good

I expectations? are versus China, with was your locations performing on there, reopening how the curious So those

been our only any not we best that members, first by doing shutdown were for like They're story. we they during video here those of of neighborhoods to were there create we clips did and over great. our care impacted, you. what have everybody budget over big for And showing And blessed there. the End we of of retailers. we what had to say, but some were great We've around openings Needless have the care meetings the us. told packages, packages the

feel us made that So good.

question. follow-up And maybe then just one Great.

any have point or look ticket this you trends et just So at as consumer categories, electronics, ticket sense of or these your bottomed whether in bigger areas? whether curious further trends some bigger bottomed if you could we see at cetera., think have softening

we I I have she on merchandising ago, one and seven was saying to me or my decline. of seven-ish months earlier, eight colleagues about months And again, side here softly, started as better. are when mentioned it's negatives ago the the getting the seeing

else, easier if more, hence. I we'll certainly, be Well, nothing so questions a afternoon. to you and negatives. I'm the having sure But in five David, everyone. a seen will. answer are little around we've thank which bit And an if Have Josh And you months good compare you, improvement have any of

Well, if I questions any will. answer a Josh good everyone. sure David, more, you, around have which thank Have to afternoon. are and I'm you you

This concludes today's conference you. call. Thank