JEFF ELLIOTT, ASSISTANT VP – FINANCIAL PLANNING & IR , COSTCO WHOLESALE CORPORATION: Good morning, and thank you for calling Costco Wholesale Corporation. I’m Jeff Elliott, AVP of Finance and Investor Relations. And this morning, I will review with you our sales results for the five-week retail tiffany on sale of December, which for us started on Monday, November 30 and ended on Sunday, January 3. For comparable sales results, this five-week period is compared to the same five-week period last year, specifically, Monday, December 1, 2008 through Sunday, January 4, 2009.
Before I begin, let me start by stating that the following discussions will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For these purposes, forward-looking statements are statements that address activities, events, conditions, or developments that the Company expects or anticipates may occur in the future. Such forward-looking statements involve risks and uncertainties that may cause actual events, results or performance to differ materially from those indicated by such statements. These risks and uncertainties include but are not limited to domestic and international economic conditions, including exchange rates, the effects of competition and regulation, uncertainties in the financial markets, consumer and small-business spending patterns and debt levels, conditions affecting the acquisition, development, ownership or use of real estate, actions of vendors, rising costs associated with employees, including health-care costs, geopolitical conditions and other risks identified from time to time in the Company’s public statements and reports filed with the SEC.
The Company does not undertake any obligation to update any discussions due to subsequent events or tiffany sale.
Now with regard to sales, as reported today in our press release, December net sales came in at $8.26 billion for the five weeks ended January 3, 2010, up 11% compared to the $7.41 billion reported for the same five-week period of the prior fiscal year. The five-week period for both years included 33 days of sales, reflecting the closure of two business days for the Christmas and New Year holidays.
For the 18 weeks of the reporting period ended January 3, 2010, sales were $26.83 billion, up 8% from the $24.93 billion reported during the similar period last year.
Comparable sales results for the five-week retail reporting month of December and the 18-week reporting period ended January 3, were as follows — US, five weeks, plus 5%; US 18 weeks, plus 2%. International, five weeks plus 25%; international, 18 weeks plus 17%. Total Company, five weeks plus 9%. Total Company, 18 weeks plus 5%.
Inflation and gasoline prices relative to the prior year and the strengthening of foreign currencies relative to the US dollar had a positive impact on December’s comparable sales.
Comparable sales results for the five-week period and 18-week year-to-date periods, including the positive impact from gasoline price inflation and foreign exchange were as follows — US, five weeks, plus 2%. US, 18 weeks plus 2%. International, five weeks plus 10%; international, 18 weeks plus 8%. Total Company, five weeks plus 4%. Total Company, 18 weeks plus 3%.
In terms of regional and merchandising categories, the general highlights are as follows. On a regional and country basis, the US regions with the strongest results were the Midwest, Southeast, Northeast, and Texas. On an international basis, in local currencies, we saw the strongest results in Korea, Canada, and Taiwan.
Moving on to merchandising categories, within food and sundries, the specific categories of strength were in candy, cooler, and deli. Overall food and sundries unit sales continued to be strong, but experienced softer sales increases in dollars as we continue to be impacted by lower commodity prices and overall food deflation year over year.
Comparable sales for December continued to show improving results in the majority of non-food departments, consistent with results reported in the recent months. The strongest comp sales results within hard lines were toys and seasonal, sporting goods, and hardware. Majors, our largest category within hardlines, experienced a mid-single positive comp for December despite continued price deflation within the TV category.
As unit sales continued to be strong, up over 15% compared to last year, the negative in comp sales mid-single digit negative due to the lower average selling price of TVs versus last year. In addition, in the majors category, in department, we saw positive comp sales in computers and audio.
Better-performing departments within soft lines include small appliances, domestics, home furnishings and apparel. Jewelry showed positive mid-single-digit comps for the month.
Our fresh foods business has also posted mid-single digit positive comp for the month with deli, produce, and bakery showing the best results.
Within the ancillary businesses, gasoline, hearing aids, optical, and photo showed the best sales results. Comparable sales for gasoline business were very strong, largely due to the year-over-year price inflation of gasoline. The average sale price per gallon was up 60% compared to last year, $2.56 this year compared to $1.60 last year. Hence, gasoline inflation positively impacted total Company reported comp sales by approximately [265] basis points and positively impacted US reported comp sales by approximately 325 basis points.
Strengthening foreign currencies relative to the US dollar resulted in an overall benefit in our reported December comp sales of approximately plus 3%. Essentially, all international currencies strengthened relative to last year. Total international comps for the five-week period came in at plus 10% in local currencies, but resulted in a reported comp of plus 25% when converted to US dollars.
The average transaction in December was up plus 4%. That includes a lift from foreign exchange and gasoline. And traffic counts for December came in higher year over year by a little over 5%.
Cannibalization within existing markets negatively impacted their overall comp number by approximately minus 60 basis points.
Weather conditions in the Midwest and Northeast were difficult during the month, resulting in several partial sales days due to early closings. The estimated negative impact to comparable sales results from poor weather conditions is approximately minus 50 basis points.
To recap, our reported December comp sales results of plus 9% were positively impacted by a strengthening in foreign currencies by approximately 300 basis points and by gasoline inflation by approximately [265] basis points in total and approximately 325 basis points specific to the US.
Negatively impacting December comp sales were cannibalization, minus 60 basis points and poor weather conditions, approximately minus 50 basis points.
January sales, a four-week reporting month, will include 20 selling days, the same number of days of the prior year. The January reporting period will end Sunday, January 31 this year, which compares to Sunday, February 1 last year.
Costco currently operates 566 warehouses worldwide, including 413 in the US and Puerto Rico, 77 in Canada, 21 in the UK, seven in Korea, 9 in Japan, 6 in Taiwan, 32 in Mexico, and 1 in Australia.
(technical difficulty). If you have any questions regarding our December sales results or any other Investor Relations question, please do not hesitate to call Richard Galanti at 425-313-8203; Bob Nelson at 425-313-8255; or you can call me, Jeff Elliott, at 425-313-8264.
This recording will be available until 5 PM Pacific Time Friday, January 8. Thanks for calling Costco Wholesale Corporation, and make it a great day.
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In the conference calls upon which Event Transcripts are based, companies may make projections or other tiffany jewelry on sale-looking statements regarding a variety of items. Such forward-looking statements are based upon current expectations and involve risks and uncertainties. Actual results may differ materially from those stated in any forward-looking statement based on a number of important factors and risks, which are more specifically identified in the companies’ most recent SEC filings. Although the companies may indicate and believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate or incorrect and, therefore, there can be no assurance that the results contemplated in the forward-looking statements will be realized.