Costco Wholesale Corp Q4 2024 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Simeon Gutman - Morgan Stanley - Analyst : (technical difficulty) our question. On the previous earnings call, there was a discussion about possibility of greater SG&A leverage in the future as a lot of foundational investments have already been made shortly after Costco announced a membership fee increase and reinvestment into employee wages as well. While wage investments are clearly the right thing for the business and instrumental for Costco's culture and success, how should we reconcile this potential posture of driving more leverage but also adopting the same prior approach of putting upside back into wages?

Question: Simeon Gutman - Morgan Stanley - Analyst : Got it. That's really helpful. And just a quick follow-up. Can you speak to the impact of the card readers at the different stores you rolled out so far? Should we be modeling potentially a lift in member counts or growth in addition to the MFI bump from the fee increase as well?

Question: Christopher Horvers - JPMorgan - Analyst : Thank you. Good evening. I'm on a train, so hopefully you can hear me.

Question: Christopher Horvers - JPMorgan - Analyst : The question is can you talk about the risk around the port strike that's emerging here. What percentage of the product do you -- comes through those defected ports. Any description on maybe the categories that are more exposed versus the others? And to what extent have you tried to bring in product early for the holidays to try to manage that risk?

Question: Christopher Horvers - JPMorgan - Analyst : And then just as a quick follow-up. As you think about the risk around ocean freight rates, is your expectation that freight rates are maybe elevated right now because of all this and perhaps come down into next year as we think about contract renewal periods? Thank you.

Question: Christopher Horvers - JPMorgan - Analyst : Thanks so much.

Question: Chuck Grom - Gordon Haskett - Analyst : Thanks. Good afternoon, Gary and Ron. Just to go back to the membership card scanners, can you just speak to where you are on the rollout of that across the US and any positive reactions you've seen so far? Our checks have shown that in some locations, you

Question: Chuck Grom - Gordon Haskett - Analyst : That's very helpful. And my follow-up just, Gary, on the other business line within the margin [build], 42 basis points ex-gas. Can you talk a little bit of color on the sequential change? How much came from e-commerce? How much came from the improvement in gas margins? Thank you.

Question: Brandon Cheatham - Citi - Analyst : Hey, everyone. This is Brandon Cheatham on for Paul. Hey, Gary and Ron. I want to talk about new store growth. You mentioned 26 net in 2025, with, I guess, an increasing focus on international. Anything you can share on why the US would step down from 24 levels? Should we think about international as being a more important growth vertical for you? And then on the US side, how many of those are new markets versus infill where you're trying to alleviate traffic congestion from a nearby store? .

Question: Brandon Cheatham - Citi - Analyst : Got it. Okay, thanks. And just one follow-up on the MFI fee increase. I know you all typically reinvest in the member experience and price. And I think we already talked about wages. How should we think about the timing of that because you realize the MFI fee increase over a longer period? Is there any near-term pressure that might flow through the P&L as you do kind of focus on delivering that value to the member after you've increased that fee? Thanks, guys.

Question: John Heinbockel - Guggenheim Securities LLC - Analyst : Hey, Gary, I wanted to start with -- I think you said core-on-core was up 9 bps. What was the color by product category of fresh foods, sundries, and non-food?

Question: John Heinbockel - Guggenheim Securities LLC - Analyst : And then maybe second for both of you guys. When you think about Kirkland Signature, you talked about -- you gave some price decreases that you've taken, and all of those that you cited anyway were Kirkland Signature. So maybe talk about that, those price decreases maybe versus brand-name product, where Kirkland signature penetration is now. Is that business because you're getting scale? Is that just becoming a lot more profitable than it used to be? Or you're trying to manage a flatter and unchanged margin on Kirkland Signature?

Question: John Heinbockel - Guggenheim Securities LLC - Analyst : Thank you.

Question: Scot Ciccarelli - Truist Securities - Analyst : Hey, guys. Scot Ciccarelli. Another question on the ID scanning. Any feel for how often non-members were shopping at Costco? And then secondly, just given some of the price reductions that you highlighted earlier, can you comment on your broader inflation and deflation expectations for fiscal '25? Thanks.

Question: Scot Ciccarelli - Truist Securities - Analyst : Helpful. Thanks a lot, guys.

Question: Zane Burak - UBS Equities - Analyst : Hi. This is [Zane Burak] on for Michael Lasser. Thanks very much for taking my question. While it's early, what has been the customer response to the MFI increase? And do you expect to see a rise in customer attrition? Why or why not? Thank you.

Question: Rupesh Parikh - Oppenheimer & Co., Inc. - Analyst : Good evening. Thanks for taking my question. So just on the consumer front, just curious how you guys are feeling about the health of your consumer? And then any changes in consumer behavior of note during the quarter?

Question: Rupesh Parikh - Oppenheimer & Co., Inc. - Analyst : Great. And then maybe just one follow-up question. Big focus out there on alternative revenue streams, including media. Just curious on the latest on the efforts from Costco. Is there maybe a more aggressive push in growing that area?

Question: Rupesh Parikh - Oppenheimer & Co., Inc. - Analyst : Great. Thank you.

Question: Kelly Bania - BMO Capital Markets - Analyst : Hi. Good evening, Gary and Ron. Just wanted to ask about e-commerce, obviously, continued strength there. Can you just give us a broad update on the penetration, the profitability, and how that is impacting margins at this growth level? And just an update on what the penetration would be if you included Instacart like others do in that penetration.

Question: Kelly Bania - BMO Capital Markets - Analyst : Okay. And any comments on profitability and how e-commerce is impacting profitability?

Question: Michael Baker - D.A. Davidson & Company - Analyst : Great. Thanks. Two questions. One, can you talk about competitive pricing? Particularly in grocer, there's been a lot of talk about some grocery chains investing in price, et cetera. What are you seeing -- how your price gaps? And then I'll have a follow-up after that. Thanks.

Question: Michael Baker - D.A. Davidson & Company - Analyst : Excellent. Thank you. That makes sense. Follow-up, when gas prices fall -- I think gas prices are down now 15%, 16% year over year, broadly speaking, at least in the latest data. Does that hurt your traffic at all? Because I think you guys, say, 50% of people will come to get gas -- come into the [closet] and buy something, I think the unit growth -- the gallons growth did decelerate a little bit this quarter. Is that something that you guys look at or have any concern over?

Question: Michael Baker - D.A. Davidson & Company - Analyst : Excellent. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 26, 2024 / 9:00PM, COST.OQ - Q4 2024 Costco Wholesale Corp Earnings Call

Question: Karen Short - Melius Research - Analyst : Hey, thanks a lot, and good to talk to you again. So thanks for taking my questions. So my question is, when you look at your pre-tax margin, I know you don't manage to that in any way, shape or form. But it obviously has been creeping up. So when you look at the actual delta on a 10-basis-point increase in that margin, it's not immaterial to get to earnings and/or valuation, obviously. So wondering how you think about that.

Question: Karen Short - Melius Research - Analyst : But is it fair to think that 4%-ish maybe going up from there is realistic? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 26, 2024 / 9:00PM, COST.OQ - Q4 2024 Costco Wholesale Corp Earnings Call

Question: Karen Short - Melius Research - Analyst : Great. Thank you.

Question: Gregory Melich - Evercore ISI - Analyst : Hi, thanks. I want to go back to the profitability and gross margin, particularly gasoline, the tailwind. Are we now back at $0.20 of penny profit per gallon? Or what should we think of that as sort of a normalized range going forward?

Question: Gregory Melich - Evercore ISI - Analyst : Got it. And given the recent wage increase, could you help level set us, so maybe on what your average wages are now in the US or globally? I think in the past, the number was something like $26 an hour.

Question: Gregory Melich - Evercore ISI - Analyst : Just north of 30%. Great. And that's for the US?

Question: Gregory Melich - Evercore ISI - Analyst : Got it. And then perhaps on the --

Question: Gregory Melich - Evercore ISI - Analyst : So my last question was just given the non-food, the success there, you called out the gold bullion again. I'm just curious, are there any plans to maybe bring Kirkland Signature into the gold bullion market?

Question: Gregory Melich - Evercore ISI - Analyst : All right. Thanks a lot and good luck as saying.