Costco Wholesale (COST) This fall 2024 Earnings Name Transcript

Costco Wholesale (COST -0.77%)
This fall 2024 Earnings Name
Sep 26, 2024, 5:00 p.m. ET

Contents:

• Ready Remarks
• Questions and Solutions
• Name Members

Ready Remarks:

Operator

Women and gents, thanks for standing by. My identify is Krista, and I will probably be your convention operator at this time. At the moment, I wish to welcome everybody to the Costco Wholesale Company fourth quarter 2024 convention name. All traces have been positioned on mute to stop any background noise.

After the audio system’ remarks, there will probably be a question-and-answer session. [Operator instructions] I’ll now flip the convention over to Gary Millerchip, chief monetary officer. Gary, the ground is yours.

Gary Millerchip — Govt Vice President, Chief Monetary Officer

Good afternoon, everybody, and thanks for becoming a member of Cosco’s fourth quarter 2024 earnings name. I would like to begin by reminding you that these discussions will embrace forward-looking statements throughout the which means of the Non-public Securities Litigation Reform Act of 1995. These statements contain dangers and uncertainties that will trigger precise occasions, outcomes, and/or efficiency to vary materially from these indicated by such statements. The dangers and uncertainties embrace, however usually are not restricted to, these outlined in at this time’s name in addition to different dangers recognized every so often within the firm’s public statements and experiences filed with the SEC.

Ahead-looking statements converse solely as of the date they’re made, and the corporate doesn’t undertake to replace these statements, besides as required by regulation. Comparable gross sales and comparable gross sales excluding impacts from modifications in gasoline costs and international change are meant as supplemental data and usually are not an alternative choice to internet gross sales offered in accordance with GAAP. Now earlier than we dive into our monetary outcomes for the quarter, I am delighted to say that Ron Vachris is becoming a member of us for the decision at this time. I am going to now hand over to Ron for some opening feedback.

Ron Vachris — President and Chief Govt Officer

Thanks, Gary, and good afternoon, everybody. Thanks for becoming a member of us at this time. As we flip the web page on fiscal yr 2024, let me make a couple of feedback on our progress throughout the yr as an entire. All through the fiscal yr 2024, we are going to proceed to execute on our technique of rising the highest line by way of delivering the very best high quality items on the lowest doable worth to our members.

As a administration workforce, we proceed to be extremely pleased with our 333,000 staff worldwide and the tradition that they foster. The consistency of our monetary outcomes is a mirrored image of the dedication of our whole workforce to member service and the Costco expertise. Most of those staff are led by our implausible warehouse managers who we view as executives in our firm. Succession planning continues to be a key point of interest for us as we’re frequently engaged on figuring out the longer term leaders of our firm.

In fiscal yr ’24, we promoted 95 new warehouse managers. 85% of these promoted began at Costco as an hourly worker. This promotes from throughout the tradition and the long-term profession it helps to construct is core to who we’re as an organization, neighborhood member, and retailer. Just a few different highlights, I would like to say, in fiscal 2024, we hit our goal of 30 new warehouse openings.

This included one relocation and resulted in 29 internet new buildings. Highlights included our first-ever constructing in Maine, bringing us to 47 states, and our 600th U.S. constructing in Eau Claire, Wisconsin. We additionally proceed to see important alternatives worldwide.

And our fiscal 2025 plan has 12 of our deliberate 29 openings coming exterior of the U.S., together with our fifth constructing in Spain, which we have opened in Zaragoza two weeks in the past. With three of those warehouses being relocations, we anticipate so as to add 26 internet new buildings in fiscal ’25. We proceed to develop our e-commerce enterprise and Costco Logistics has had a exceptional yr. Home equipment and Furnishings and large and ponderous has led the way in which, and logistics delivered over 4.5 million objects this final yr, up 29% over the yr prior.

Enhancements in our merchandise assortment, supply instances, and scheduling performance, all improve the member expertise. We’ve nice momentum with this enterprise and anticipate massive and ponderous objects will probably be a key a part of our continued progress with e-commerce within the coming yr. Turning to expertise. We’re beginning to notice the advantages from the work that was executed this previous yr.

Members are very enthusiastic about with the ability to verify warehouse stock by way of the Costco app. And the membership card scanners put in on the entrance doorways have delivered on the objective of dashing up the checkout course of. This has been very properly acquired by our members. Extra enhancements are at present underway, which ought to additional profit our enterprise, each on-line and in our warehouses.

With that, I am going to flip it again over to Gary to debate the outcomes for the quarter, and I am going to soar again on throughout Q&A to subject some questions.

Gary Millerchip — Govt Vice President, Chief Monetary Officer

Thanks, Ron. In at this time’s press launch, we reported working outcomes for the fourth quarter of fiscal 2024 for 16 weeks ended September 1. As we did final quarter, we printed a slide deck on our investor website underneath Occasions and Shows with supplemental data to help at this time’s press launch. You may discover it useful to have this presentation in entrance of you as I stroll by way of our outcomes.

All through this dialogue, once we’re evaluating to final yr’s fourth quarter, one of the best ways to normalize for the additional week is to multiply final yr’s outcomes by 16, 17s. Internet revenue for the 16-week fourth quarter got here in at $2.354 billion or $5.29 per diluted share, up from $2.16 billion and $4.86 per diluted share within the 17-week fourth quarter final yr. This yr’s outcomes included a nonrecurring internet tax good thing about $63 million or $0.14 per diluted share associated to a switch pricing settlement and true-ups of assorted tax reserves. Reported internet revenue was up 9% yr over yr.

Excluding this yr’s nonrecurring tax profit and normalized for the additional week, final yr, internet revenue and earnings per diluted share had been up 12.7% and 12.6%, respectively. Internet gross sales for the fourth quarter had been $78.2 billion, a rise of 1% from $77.4 billion within the fourth quarter final yr. Adjusting for the additional week final yr, internet gross sales would have been up 7.3%. The next comparable gross sales replicate comparable places yr over yr and 16 comparable retail weeks.

U.S. comp gross sales had been up 5.3% or 6.3% excluding fuel deflation. Canada comp gross sales had been up 5.5% or 7.9% excluding fuel deflation and FX. And different worldwide comp gross sales had been up 5.7% or 9.3% adjusted.

This all led to complete firm comp gross sales of plus 5.4% or plus 6.9% adjusted for fuel deflation and FX. Lastly, e-commerce comp gross sales had been up 18.9% or 19.5% adjusted for FX. By way of This fall comp gross sales metrics, foreign currency echange relative to the U.S. greenback negatively impacted gross sales by roughly 0.9%, whereas gasoline worth deflation negatively impacted gross sales by roughly 0.6%.

Visitors or procuring frequency elevated 6.4% worldwide and 5.6% within the U.S. Our common transaction or ticket was destructive 0.9% worldwide and destructive 0.3% within the U.S. This consists of the headwinds from fuel deflation and FX. Adjusted for these objects, ticket would have been optimistic 0.5% worldwide and optimistic 0.6% within the U.S.

Shifting down the revenue assertion to membership price revenue. We reported membership price revenue of $1.512 billion, a rise of $3 million or 0.2% on one much less week yr over yr. FX negatively impacted membership price revenue by 0.9%. Excluding the impacts from the additional week final yr and FX, normalized membership price revenue was up 7.4%.

By way of renewal charges, at This fall finish, our U.S. and Canada renewal charge was 92.9%, down 0.1% from Q3 finish. This slight lower is said to a web based membership promotion that we ran for a brief interval in fiscal yr 2023, which resulted in over 200,000 new signups. As these members entered the renewal charge calculation throughout This fall fiscal yr ’24, the decrease renewal charges for that cohort, which is typical for digital promotions, had a destructive influence on the general U.S.

renewal charge. Outdoors of these signups, there have been no significant modifications within the U.S. renewal charge. The worldwide charge got here in at 90.5%, the identical as Q3, with enchancment internationally offsetting the slight destructive within the U.S.

We ended This fall with 76.2 million paid family members, up 7.3% versus final yr and 136.8 million cardholders, up 7% yr over yr. About half of latest member signups in fiscal yr 2024 had been underneath 40 years of age. This share has been rising since COVID and has lowered the common age of our members over the previous couple of years. At This fall finish, we had 35.4 million paid govt memberships, up 9.6% versus final yr.

Govt members now symbolize 46.5% of paid members and 73.5% of worldwide gross sales. Turning to gross margin. Our reported charge within the fourth quarter was greater yr over yr by 40 foundation factors, coming in at 11% in comparison with 10.6% final yr and up 33 foundation factors, excluding fuel deflation. Core was decrease by 5 foundation factors and decrease by 11 foundation factors with out fuel deflation.

By way of core margins on their very own gross sales, our core-on-core margins had been greater by 9 foundation factors. Ancillary and different companies’ gross margin was greater 44 foundation factors and better 42 foundation factors, excluding fuel deflation. This enhance yr over yr was pushed by fuel and e-commerce. E-commerce benefited from sturdy gross sales progress, merchandise combine, and success productiveness.

And fuel margins benefited from some reasonable tailwinds and lapping a barely weaker quarter final yr, however nothing as important because the profit in Q1 2024 because of the volatility from world occasions in that quarter, 2% rewards was greater by 4 foundation factors or 3 foundation factors with out fuel deflation, reflecting greater gross sales penetration from our govt members. And LIFO was a good thing about 5 foundation factors. We had an $8 million LIFO credit score in This fall this yr in comparison with a $30 million cost in This fall final yr. Shifting to SG&A.

Our reported SG&A charge within the fourth quarter was greater yr over yr by 8 foundation factors, coming in at 9.04% in comparison with final yr’s 8.96%. SG&A was greater by 2 foundation factors adjusted for fuel deflation. The operations element of SG&A was greater 4 foundation factors however was flat excluding fuel deflation. Greater wages went into impact for the final six weeks of the quarter within the U.S.

and Canada, which was a headwind for the quarter of roughly 4 foundation factors. Investing in our staff stays a key a part of our technique, and we are going to proceed to give attention to driving top-line gross sales and enhancing productiveness to mitigate the incremental prices. Central was greater by 3 foundation factors and a couple of foundation factors with out fuel deflation. Inventory compensation was flat yr over yr and preopening was greater 1 foundation level however flat with out fuel deflation.

Beneath the working revenue line, curiosity expense was $49 million versus $56 million final yr, reflecting $1 billion of debt paydown within the second week of This fall this yr. Curiosity revenue for the quarter was $138 million versus $201 million final yr, primarily as a result of $6.7 billion particular dividend paid in January 2024. Curiosity revenue will proceed to be a headwind within the first half of this yr attributable to decrease year-over-year money balances and decrease rates of interest. FX and different was an $18 million loss this yr versus a $37 million acquire final yr.

This was primarily attributable to international change. By way of revenue taxes, our tax charge in This fall was 24.4% in comparison with 27.1% in This fall final yr. As talked about earlier, this yr’s charge benefited from $63 million of internet tax discrete objects. Adjusted for this profit, the tax charge for the quarter would have been 26.4%.

Turning now to some key objects of be aware within the quarter. We opened 14 new warehouses within the fourth quarter, 10 within the U.S., two in Japan and one every in Korea and China. Capital expenditure in This fall was roughly $1.58 billion, bringing the full yr spend to $4.71 billion. Taking a deeper look into core merchandising gross sales, as soon as once more, nonfoods led the way in which with the very best comparable gross sales in This fall.

Our consumers have executed a implausible job discovering new and thrilling objects at nice values. Gold and jewellery, reward playing cards, toys and seasonal, residence furnishings, tires, and housewares, all had been up double digits within the quarter. Well being and wonder aids additionally carried out properly as we’ve got expanded and elevated that class with new high-end SKUs, each on-line and in warehouse, together with assorted luxurious fragrances at a 30% to 70% worth to retail. Throughout the contemporary departments, we noticed excessive single-digit progress as our continued give attention to worth is resonating with our members.

An instance of this within the meat division is our Kirkland Signature Boneless Hen Tender traces, the place we lowered the worth 13% and noticed a 21% raise in kilos offered. In meals and sundries, the introduction of extra worldwide meals merchandise reminiscent of paneer cheese, Punjabi cookies, and Fried Tofu Kimbap are resonating extraordinarily properly with our members. We’re additionally delivering higher worth by including some new Kirkland Signature objects reminiscent of our KS Natural Golden Maple Syrup and KS Aerosol Whipped Cream. Kirkland Signature presents important member worth in comparison with the nationwide manufacturers and continues to develop at a sooner tempo than our enterprise as an entire.

Our objective is all the time to be the primary to decrease costs the place we see the alternatives to take action. And only a few examples this quarter embrace KS Commonplace Foil decreased from $31.99 to $29.99. KS Macadamia nuts decreased from $18.99 to $13.99. KS Spanish Olive Oil 3-liter decreased from $38.99 to $34.99 and KS Baguette 2 pack decreased from $5.99 to $4.99.

Our dedication to sustainability and attaining decrease emissions can also be presenting alternatives to decrease our prices. An important instance of that is our KS laundry packs, which we just lately transformed from a inflexible plastic tub to a pouch. This allowed us to scale back the plastic packaging by 80% and cross these price financial savings on to the member, reducing the worth by $1 from $19.99 to $18.99. We have additionally discovered success working with suppliers to localize the manufacturing of cumbersome objects reminiscent of water, paper, and laundry detergents.

By manufacturing these items nearer to the international locations wherein they’re offered, each prices and emissions related to the cargo of those items are drastically decreased. This quarter, we launched our new Japan-produced Kirkland Signature Paper Towels. Along with the emissions advantages from now not delivery hundreds of thousands of models of paper towels from the U.S. to Asia, the decreased freight allowed us to decrease the worth by roughly 30% or $8 per unit in that market.

As manufacturing ramps up, we’re within the means of transitioning our different Asian markets to domestically produced SKUs. Shifting the manufacturing nation of this one product will lead to annual member financial savings of $30 million. Inside ancillary companies, pharmacy had the strongest gross sales share enhance pushed by double-digit progress in script counts. Our optical division additionally carried out properly as extra members have taken benefit of the distinctive values in model identify frames and sun shades.

On a like-for-like 16-week foundation, fuel gross sales had been destructive low single digits within the quarter because of the common worth per gallon being 5% decrease. This was partially offset by gallon progress of three%. The Inflation was as soon as once more successfully flat within the quarter throughout all core merchandise. Meals and sundries and contemporary meals had been barely inflationary and this was offset by deflation in non-foods.

Within the provide chain, we’re seeing good circulation of merchandise by way of Panama and Baltimore. The Pink Sea is a remaining ache level and is inflicting some comparatively minor delivery delays. Product availability has usually been good with a couple of exceptions. Egg provides are nonetheless being negatively impacted by avian influenza and prime beef and a handful of vegetable SKUs have been tight.

As Ron shared earlier, we’re happy with the momentum in our digital enterprise and proceed to make good progress with our expertise priorities. Our app was downloaded 3.5 million instances within the quarter, bringing complete downloads to roughly 39 million, and we just lately upgraded the native search perform on our U.S. cell app, resulting in a doubling of the click-through charge on search outcomes. E-commerce visitors, conversion charges, and common order worth had been all up yr over yr, serving to to drive one other sturdy quarter of comparable gross sales progress.

Whereas continued power in bullion was a significant tailwind to e-commerce comps, home equipment, well being and wonder aids, tires, toys, reward playing cards, {hardware}, housewares, residence furnishings, optical, and pharmacy all grew double digits yr over yr. The rollout of purchase on-line and pickup in warehouse for TVs within the U.S. market was additionally accomplished in This fall. This permits same-day pickup of a brand new TV for members preferring to not await supply.

Whereas purchase on-line pickup in warehouse is not cost-effective for us on lower-priced objects, for high-value objects with excessive delivery prices like TVs, the freight financial savings greater than offset the added labor required in warehouses to satisfy these orders. We’re now testing the same program on laptops. Costco Subsequent, our curated market, whereas nonetheless small, continued to develop properly within the quarter. We added 11 new distributors, bringing the full to 86, and adjusting for the additional week, product sales grew practically 40% yr over yr.

A quick touch upon the membership price enhance that went into impact on September 1st. On account of deferred accounting, this can have minimal influence early within the yr. The overwhelming majority of the profit will come within the again half of fiscal yr 2025 and into fiscal yr 2026. with that being mentioned, our dedication to spend money on our staff and members is steady as evidenced by the July wage enhance and decrease costs reminiscent of the instance shared on at this time’s name.

In closing, we’re inspired by our momentum exiting fiscal yr 2024 and are excited concerning the progress alternatives forward as we proceed to execute our technique of delivering thrilling new objects and higher worth for members, innovating with Kirkland Signature, and rising our warehouse footprint and digital capabilities globally. By way of upcoming releases, we are going to announce our September gross sales outcomes for the 5 weeks ending Sunday, October sixth on Wednesday, October ninth after market shut. That concludes our ready remarks. We’ll now open the road up for Q&A.

Questions & Solutions:

Operator

Thanks. We are going to now start the question-and-answer session. [Operator instructions] Please restrict your self to 1 query Your first query comes from Simeon Gutman with Morgan Stanley. Please go forward.

Simeon Gutman — Analyst

On the earlier earnings name, there was a dialogue about the potential for higher SG&A leverage sooner or later as loads of foundational investments have already been made shortly after Costco introduced a membership price enhance and reinvestment into worker wages as properly. Whereas wage investments are clearly the best factor for the enterprise and instrumental for Costco’s tradition and success, how ought to we reconcile this potential posture of driving extra leverage but additionally adopting the identical prior method of placing upside again into wages?

Gary Millerchip — Govt Vice President, Chief Monetary Officer

Hello, sure, good afternoon. Thanks for the query. As we take into consideration our total mannequin for the corporate. Our focus is on actually attaining a stability throughout the enterprise.

And as , over time, what we have executed efficiently at Costco is proceed to spend money on members, proceed to spend money on reducing costs and worth for our members, and persevering with to spend money on our staff. And we imagine that is going to be a essential a part of our total technique going ahead to guarantee that we preserve driving our top-line gross sales progress. You are completely proper, throughout the quarter. And actually, I believe 3 times throughout the yr, we made varied investments in our staff again in September 2023, we introduced a rise within the beginning wage.

After which in March this yr, we introduced that we had been growing wages for various our managerial roles within the warehouses. And as you talked about, we just lately introduced an extra enhance for all of our hourly staff within the warehouses and throughout our distribution community. And so, from our perspective, we predict that is an necessary a part of persevering with to help the top-line progress within the firm. As You noticed within the quarter, while you modify SG&A for fuel deflation and for wanting notably on the operational a part of the enterprise, the excellent news was we had been in a position to successfully offset these price will increase by driving productiveness and driving gross sales leverage.

And I believe we have executed that fairly persistently over time. And our expectation of ourselves is that we’ll proceed to do this. So, I believe for us, it is much less about giving particular steering on a specific measure however extra wanting over the long run of how we anticipate to have the ability to preserve making these investments, but additionally driving leverage in our mannequin to make sure we’re sustainably driving high line and driving worthwhile progress. Ron, something you need so as to add?

Ron Vachris — President and Chief Govt Officer

No, I’ve to agree with you, Gary.

Simeon Gutman — Analyst

Received it. That is actually useful. And simply as a fast follow-up, are you able to converse to the influence of the cardboard readers on the completely different shops you’ve got rolled out thus far? Ought to we be modeling probably a raise in member counts or progress along with the MFI bump from the price enhance as properly?

Ron Vachris — President and Chief Govt Officer

Yeah, that is Ron. The aim of the cardboard readers on the entrance door, this can be a system we have been utilizing for over two years now in Europe and particularly within the U.Ok. and we have piloted right here within the U.S. for about six months.

A number of completely different advantages for it. It provides our operators real-time visitors counts all through the day. So, we’re in a position to modify front-end traces that we have to open and shut traces primarily based on the fluctuations of enterprise. We are able to monitor our contemporary meals slightly higher as a result of we all know what the visitors counts seem like and so forth.

And it has additionally taken the friction of membership verification away from the front-end registers and moved that to the entrance door, the place we’re in a position to take a look at individuals’s membership standing. We allow them to know if their renewals is due earlier than they get to the entrance finish. So, we have realized some very good, wholesome front-end enhancements in productiveness, and it is allowed our operators to handle the enterprise a lot better all through the day.

Operator

Your subsequent query comes from Chris Horvers with JPMorgan. Please go forward.

Christopher Horvers — Analyst

Thanks. Good night. The query is are you able to speak concerning the danger across the port strike that is rising right here? What share of the product comes by way of these faulty ports? Any description of perhaps the classes which can be extra uncovered versus the others? And to what extent have you ever tried to herald product early for the vacations to attempt to handle that danger?

Ron Vachris — President and Chief Govt Officer

Yeah. That is Ron once more. Sure, I am going to take that query. The port strike is one thing we have been watching very intently for a while.

We knew concerning the timing of this as properly. When you concentrate on the influence to our enterprise, we import primarily nonfoods and a few restricted meals and sundries are available in, however nonfoods is lower than — about 25% of our complete enterprise and solely a subset of that’s imported. There’s some home items in there as properly that aren’t imported in nonfood. We’ve executed slightly little bit of all the things that you just spoke about.

We have contingency plans, we have cleared the ports, we have preshipped. We have executed a number of various things that we might to get vacation items in forward of this time-frame and checked out alternate plans that we might execute with transferring items to completely different ports and coming throughout the nation if wanted. It could possibly be disruptive primarily based on how impactful, I can not let you know till we all know the size and what might occur on the market. However it’s in our sights.

Our consumers are throughout it. They’re watching it intently, and we have taken as many pre-emptive measures as we might to organize for this.

Christopher Horvers — Analyst

After which simply as a fast follow-up. As you concentrate on the danger round ocean freight charges, is your expectation that freight charges are perhaps elevated proper now due to all this and maybe come down into subsequent yr as we take into consideration contract renewal intervals? Thanks.

Ron Vachris — President and Chief Govt Officer

I am not good at predicting the longer term, however I can let you know that from what we’re seeing an enormous chunk of our freight is available in underneath contract. So, we have been insulated from that. The spot market has peaked within the final quarter. We see that coming off now.

if a port disruption might occur or one thing else might occur within the Pink Sea, might that go up? Completely, it might go up. However from what we’re seeing now, the spot market did enhance is coming off at this level. And once more, our workforce did an excellent job by insulating us with good strong contracts for this yr.

Christopher Horvers — Analyst

Thanks a lot.

Operator

Your subsequent query comes from the road of Chuck Grom with Gordon Haskett. Please go forward.

Chuck Grom — Analyst

Thanks. Good afternoon, Gary and Ron, simply to return to the membership card scanners. Are you able to simply converse to the place you might be on the rollout of that throughout the U.S.? And any optimistic reactions you’ve got seen thus far? Our checks have proven that in some places you guys are literally seeing a double-digit enhance in new signups.

Ron Vachris — President and Chief Govt Officer

Yeah. We’ve about 350 U.S. warehouses rolled out at this level and thru the method, the response has been very optimistic. Myself, all our operators, and we actually depend on the suggestions of our warehouse managers and what’s been executed.

And our head operator, Russ Miller, and myself have been met with nice optimistic reactions each from the members and from the operators as properly. We’ve seen some raise in member signups from that. We have additionally seen a raise in renewals as a result of earlier than individuals get to the entrance finish, now they’re conscious that my renewal goes to be due after I get to the registers, so members are very appreciative about that. They know that and so they rise up to the entrance, and so they’re not shocked by that course of as properly.

So, improved productiveness, improved interplay. And as we all know, as our volumes develop, we’re on the lookout for all the things we are able to discover to make use of expertise to assist get our members by way of the entrance ends in a great, easy method.

Chuck Grom — Analyst

That is very useful. After which my follow-up, simply, Gary, on the opposite enterprise line and throughout the margin construct up 42 foundation factors ex fuel. Are you able to add slightly little bit of colour on the sequential change? How a lot got here from e-comm or how a lot got here from the advance in fuel margins? Thanks.

Gary Millerchip — Govt Vice President, Chief Monetary Officer

Positive. Sure, we referred to as these two out as a result of they had been the 2 greatest components within the outcomes. I consider them as being comparatively comparable when it comes to the influence. E-commerce truly has been a pleasant pattern that we have seen for the final couple of quarters.

We have been actually happy with the momentum in e-commerce. After all, the headline gross sales progress has been very optimistic, which is a good place to begin. However then the workforce’s executed a very nice job of enhancing success, and effectivity and driving higher sell-through when it comes to the product and the stock administration as properly. And the combo has improved.

As I discussed, on the ready remarks, we have seen actually good progress, actually a stability throughout the board round e-commerce progress. So, e-commerce has been a type of sustained pattern that we have been happy with the final couple of quarters. On the fuel facet of issues, it was actually — I would not say there was something uncommon throughout the quarter. It was actually extra a case that we had slightly little bit of tailwind within the margin.

And as I discussed earlier, we’re biking some lighter margin in the identical quarter in 2023.

Chuck Grom — Analyst

Thanks.

Operator

Your subsequent query comes from the road of Paul Lejuez with Citigroup. Please go forward.

Brandon Cheatham — Citi — Analyst

That is Brandon Cheatham on for Paul. Hey, Gary and Ron, I need to speak about new retailer progress. You talked about 26 internet in 2025, with, I assume, an growing give attention to worldwide. Something you may share on why the U.S.

would step down from 24 ranges? Ought to we take into consideration worldwide as being a extra necessary progress vertical for you? After which on the U.S. facet, what number of of these are new markets versus infill the place you are attempting to alleviate visitors congestion from a close-by retailer?

Ron Vachris — President and Chief Govt Officer

On the worldwide to home new openings, it actually relies on timing by way of the system. I imply, in bigger markets, we could have a constructing that is taken us three years to get to fruition, the place some markets transfer fairly shortly. So, there is no such thing as a particular plan that we’ve got. We put the buildings in queue.

We agree that we’ll go there. After which it is following the method during to how utilities come alongside, infrastructure, these sorts of issues. So far as the outlook on worldwide versus home progress, it is fairly balanced, once more, extra of a timing factor than something. I believe we have got 12 subsequent yr that will probably be exterior of the U.S.

And we have got some — you may think about in some international locations, it takes us a couple of extra years to get a constructing opened up. So, it truly is concerning the cadence of them opening. However we proceed to look ahead that we really feel fairly good, balanced progress. We see infills as being very optimistic for us, each in U.S., Canada, and all of North America that we’ve got loads of alternatives for infills in North America for the subsequent a number of years forward.

After which a great market of latest areas of the world. I do not assume we’ve got something lined up for subsequent yr however new markets. I would say that we’re in all probability 5 to 6 new markets that we’ll be increasing into subsequent yr.

Brandon Cheatham — Citi — Analyst

Received it. OK. And only one follow-up on the MFI price enhance. I do know you all usually reinvest within the member expertise and worth.

And I believe we already talked about wages. How ought to we take into consideration the timing of that? Since you notice the MFI price enhance over an extended interval? Is there any near-term strain that may circulation by way of the P&L as you do type of give attention to delivering that worth to the member after you’ve got elevated that price? Thanks, guys.

Gary Millerchip — Govt Vice President, Chief Monetary Officer

Positive. Yeah, thanks for the query. We talked about a few this stuff within the ready feedback, too, however we actually take into consideration as we enhance the membership price, our objective is all the time to search out methods to ship extra worth for the member. And we take into consideration that fairly holistically.

It may be reducing costs. It may be launching new Kirkland Signature merchandise. It is also investing in ways in which we are able to enhance member expertise and among the issues that Ron talked about earlier. And we imagine a essential a part of delivering a greater expertise for our members can also be in worker wages.

So, we very a lot take a look at it holistically and the way can we be certain we really feel assured that we’re delivering extra worth to our members over time? And a few of these issues that you just heard in This fall, we have already began that journey with among the wage will increase and among the methods wherein we have been in a position to decrease costs and ship extra worth by way of new Kirkland Signature merchandise within the quarter. To reply perhaps the broader query that you just talked about, as , we usually do not present steering as a part of our updates for the outcomes of the corporate. That being mentioned, I might say, total, we really feel excellent about our momentum ending fiscal yr ’24. And as we head into the brand new fiscal yr, we really feel excellent concerning the alternative forward of us.

As all the time, we have set ourselves excessive inside expectations for a way we anticipate to develop the highest line and to take action profitably. And we’ll be doing that by persevering with to spend money on member worth and staff whereas driving efficiencies and leverage. And we nonetheless see many alternatives to search out methods to enhance gross margin and SG&A when it comes to alternatives to fund these investments. We would not usually touch upon cadence for the yr forward both.

However as I discussed in my ready remarks, there are a couple of uncommon objects this yr with the deferred accounting for the membership price enhance, as you talked about. And that may usually type of actually probably the most a part of that may are available in, within the second half of 2025 and the primary half of 2026. After which there have been additionally a few particular components to Q1, specifically the curiosity revenue, the place we’ll be biking greater money balances and better rates of interest from final yr and fuel revenue, whereas it is actually been fairly secure over time, there was actually some volatility attributable to world occasions in Q1 final yr. So, the one factor I believe I might say is that as you concentrate on our cadence of our earnings progress throughout ’25, it is more likely to be much less linear than you’d in all probability usually anticipate.

Operator

Your subsequent query comes from the road of John Heinbockel with Guggenheim Securities. Please go forward.

John Heinbockel — Analyst

Hey. And Gary, I needed to begin with — I believe you mentioned proper, core on core was up 9 bps. What was the color-by-product class of contemporary meals, sundries, and nonfood?

Gary Millerchip — Govt Vice President, Chief Monetary Officer

Sure. Meals and sundries had been barely destructive. Recent was barely optimistic and nonfood was the strongest of the three, which was actually, once more, I believe, from the combo perspective and the sturdy sell-through within the yr, however that was type of the breakout of it, John.

John Heinbockel — Analyst

After which perhaps second for each of you guys. When you concentrate on Kirkland Signature, you talked about — you gave some worth decreases that you have taken and all of those who you cited anyway had been Kirkland Signature. So, perhaps speak about that, these worth decreases perhaps versus model identify product. The place Kirkland signature penetration is now? And is that enterprise since you’re getting scale — is that simply changing into much more worthwhile than it was otherwise you’re attempting to handle to a flatter — an unchanged margin on Kirkland Signature?

Ron Vachris — President and Chief Govt Officer

I assume I am going to take that one. We proceed to see the penetration develop. And it is within the excessive 20s now because it continues to develop as our penetration throughout the board goes. We aren’t solely seeing funding in worth in Kirkland Signature.

However with Claudine and her workforce, they’ve a dedication that if we’ll anticipate that of our suppliers, we’ll begin setting that instance and displaying the advantages of investing in worth and driving unit quantity. So, we’re doing that, however we’re additionally seeing nice help from our suppliers and our companions all over the world. Which can be additionally fascinated by driving their enterprise and utilizing Costco as that associate to get that executed. So, we proceed — I believe we have got some nice objects arising this subsequent yr in Kirkland Signature that may proceed to reinforce that worth proposition to our members and proceed to construct the loyalty with our members as a result of this can be a place you come to get Kirkland Signature.

So, we see good issues coming. We see the penetration proceed to develop, and we proceed to see the worth and the advantages to the members enhancing over time. Gary, for those who would —

Gary Millerchip — Govt Vice President, Chief Monetary Officer

Yeah, perhaps, Ron, simply so as to add to the remark additionally, John, you had been asking across the margin alternative. Clearly, we keep very disciplined about — we’ve got a cap on the margin that we anticipate to make on a Kirkland Signature product. However as that blend continues to develop, it undoubtedly creates some total tailwind in our margin total. And I discussed a few examples within the ready feedback.

We’re additionally seeing some actually nice alternatives as we’re pondering extra globally throughout our merchandising workforce is actually working collectively and discovering methods to purchase extra effectively and in-country manufacturing that we talked about. So, while you take all these mixed, I believe that is creating alternative for us to win-win within the sense that we are able to create extra worth for the member, stick inside our commitments across the margins that we work inside, however I do assume it creates tailwinds and methods to stability the funding within the member whereas persevering with to develop long run.

John Heinbockel — Analyst

Thanks.

Operator

Your subsequent query comes from the road of Scot Ciccarelli with Truist Securities. Please go forward.

Scot Ciccarelli — Analyst

Hey, guys. Scot Ciccarelli. One other query on the ID scanning. Any really feel for a way usually nonmembers had been procuring at Costco? After which secondly, simply given among the worth reductions that you just highlighted earlier, are you able to remark in your broader inflation and deflation expectations for fiscal ’25? Thanks.

Ron Vachris — President and Chief Govt Officer

So far as the scanning, I actually could not provide you with a quantity. I imply, we have been unique for — for the reason that inception of the corporate that we’re unique to members. There are store playing cards and people kind of issues that individuals are available in with. However I actually could not provide you with a set variety of what p.c of individuals coming in are nonmembers.

And so far as inflation, I believe Gary’s signing that he’d wish to take that one.

Gary Millerchip — Govt Vice President, Chief Monetary Officer

Sure, comfortable to. In all probability much like Ron’s remark earlier, I do not know we’d be notably good at telling you what we forecast for the market total, however what I can perhaps provide you with some slightly bit extra colour from what we’re seeing, Scott, from our perspective, we shared for the quarter total inflation was primarily flat. We noticed slightly little bit of inflation in contemporary. That was primarily pushed by produce proper now.

That was type of the important thing class there that drove — however once more, very low inflation, nothing significant to speak about. We’re nonetheless seeing it very quiet when it comes to the inflationary influence on costs and on the enterprise. Meals would have been barely inflationary as properly, however it’s a exceptional truly how a small vary now between the completely different classes, actually nothing between optimistic 2% and destructive 2% and type of all coming again out to even simply very barely inflationary. However nothing a lot there both that we’re seeing.

We’re seeing extra of a combined view on commodities. Issues like corn and flour and sugar are all deflationary, which is inflicting the bakery class as an entire to be deflationary. However then on issues like butter and cocoa and eggs, as I discussed earlier on the decision, and cheese, we’re seeing extra inflation. So, I do not know that we’re seeing something at this time that is inflicting us to imagine that the place we’re at this time is what the world appears like.

And our objective, after all, is all the time to search out methods to decrease our prices and due to this fact, maintain costs down for our members. So, I would not say that we’re seeing something dramatically completely different from how our quarter appeared for this quarter. However after all, like all people, we’re inclined to shocks and modifications that may occur out there.

Scot Ciccarelli — Analyst

Useful. Thanks rather a lot, guys.

Operator

Your subsequent query comes from the road of Michael Lasser with UBS. Please go forward.

Unknown speaker — — Analyst

That is Zain Barak on for Michael Lasser. Thanks very a lot for taking our query. Whereas it is early, what has been the shopper response to the MFI enhance? And do you anticipate to see an increase in buyer attrition? Why or why not? Thanks.

Gary Millerchip — Govt Vice President, Chief Monetary Officer

Yeah. Thanks for the query. As you might be aware of the membership price enhance, we had been very deliberate concerning the timing. The truth is, we’re actually delayed by two years from once we’ve historically elevated the price each 5 years and that was initially due to what we thought our members had been experiencing with COVID after which we noticed greater inflation.

So, we had been very deliberate in delaying the rise till we felt that we began to see inflation dissipate and our members had been spending extra in nonfood classes seeing that they had been coming by way of the inflationary interval. From a member response perspective, I would say, we have not actually heard a major member response. Our membership renewal charges. There is no actual change in pattern, as I discussed in a few of my ready remarks.

I believe the truth that we have been in a position to stave off inflation on issues like the recent canine pricing at $1.50 and the rotisserie rooster at $4.99. And customarily, demonstrating the way in which that we’re reducing costs for members wherever we are able to. I believe there’s been a recognition that within the context of what is occurred extra broadly over the past seven years we stayed true to our rules of actually attempting to assist the member and ship the worth. And as we talked about earlier on the decision, we have been making investments, whether or not or not it’s in wages for our staff in reducing price to indicate our members that we need to guarantee that the rise is delivering worth to them.

Operator

Your subsequent query comes from the road of Rupesh Parikh with Oppenheimer. Please go forward.

Rupesh Parikh — Analyst

Good night and thanks for taking my query. So, simply on the buyer entrance, simply curious the way you guys are feeling concerning the well being of your client. After which any modifications in client conduct of be aware throughout the quarter?

Gary Millerchip — Govt Vice President, Chief Monetary Officer

Positive. Thanks, Rupesh. I believe we see the buyer or member by way of a course by way of our lens. And what I might say is that it’s extremely clear that high quality and worth have by no means been extra necessary.

That is one thing that has very clearly coming by way of in our insights and the way we’re seeing our members store. I believe the encouraging factor for us is, as , as you take a look at our tendencies within the yr so far, we’ve got seen that as inflation has dissipated, our members have began to spend extra on nonfood objects, which is actually encouraging in our thoughts. And what we’re actually happy about is the widespread nature of that throughout the completely different classes that we have seen in non-foods. I might say that on some classes like home equipment and electronics, undoubtedly, they’ve turn into extra promotional over time.

That might be an element, I believe, that members are on the lookout for extra offers. And for us, after all, we’re all the time going to be there on worth, however we additionally embrace inside what we’re providing to our members, the set up and the elimination of the outdated product, if that is mandatory within the supply. So, we type of are likely to attempt to differentiate there on the general expertise in addition to being an excellent on a regular basis low worth. I believe they’re the type of key tendencies in nonfoods.

On the meals facet of issues, we have undoubtedly seen some alerts that will counsel that members and customers, on the whole, are perhaps shifting slightly little bit of spend from meals away from residence to meals at residence. Below the meals and the sundry facet of our enterprise, alcohol would nonetheless be comparatively gentle. However as I discussed in my ready remarks, we’re seeing actually sturdy progress in our ethnic meals classes and likewise in Kirkland Signature merchandise, notably within the new ones that we have been introducing. After which on the contemporary facet of issues, actually sturdy progress throughout meat, produce, and bakery.

I might say we have actually seen a continued acceleration in a few of these lower-cost protein objects like poultry, and cheaper cuts of beef like floor beef and pork. So, there’s undoubtedly some indicators that the buyer is being very choiceful in how they’re spending their {dollars}. However fortunately, with the standard and worth that we’re providing, it is undoubtedly resonating with our members.

Rupesh Parikh — Analyst

Nice. After which perhaps only one follow-up query. Huge focus on the market on various income streams, together with media. Simply curious concerning the newest on the efforts from Costco.

And is there perhaps a extra aggressive push in rising that space?

Gary Millerchip — Govt Vice President, Chief Monetary Officer

Yeah. I believe we nonetheless see it as a major alternative. It is undoubtedly a journey for us. It is the foundations of that journey are getting our expertise infrastructure able the place we really feel actually good concerning the capabilities that may permit us to ship to the member when it comes to the presents that we may give to them and the extent of focusing on and customized capabilities that creates.

We have already began to construct out these plans and beginning to determine how we are able to seize low-hanging fruit the place there are alternatives. However we’d see it as a major alternative over the long run, to drive new income. We are going to method this in all probability slightly bit otherwise than many others — we’ll be reinvesting the overwhelming majority of these {dollars} as we all the time do to drive top-line progress. And we predict that will probably be a aggressive benefit with our CPG companions as a result of it is going to present them that each greenback they’re spending is actually meant to drive total progress for the corporate.

That being mentioned, I do assume it is going to assist additionally with e-commerce enterprise is often much less worthwhile, on this case, a strategy to offset a few of these prices in supply and success as properly.

Rupesh Parikh — Analyst

Nice, thanks for that.

Operator

Your subsequent query comes from the road of Kelly Bania with BMO Capital Markets. Please go forward.

Kelly Bania — Analyst

Hello. Good night, Gary and Ron. Simply needed to ask about e-commerce, clearly, continued power there. Simply are you able to simply give us a broad replace on the penetration, the profitability, and the way that’s impacting margins at this progress stage? And simply an replace on what the penetration could be for those who included Instacart, like others do in that penetration?

Gary Millerchip — Govt Vice President, Chief Monetary Officer

Yeah. Thanks, Kelly. As we take a look at the progress, we’re actually happy with the momentum that we have seen in digital. Truly, we had been wanting on the information just lately over a 10-year interval, and we have grown our compounded annual progress charge in e-commerce has been over 20% for that 10-year interval.

So, it has been a major progress story for us and members clearly are valuing the extra methods wherein we’re giving them alternatives to search out new offers and worth for the member. Total, it might be — the penetration will probably be within the type of excessive single-digit vary primarily based on how we report e-commerce at this time. When you type of — to your level earlier, we do not embrace a few of these digitally began gross sales transactions, if I might say it that approach. So, Instacart, Uber, the methods wherein members is perhaps shopping for groceries and meals and sundries.

When you added these in, and naturally, we additionally embrace fuel in our complete gross sales, we might be into the double-digit penetration while you embrace all these components within the quantity.

Kelly Bania — Analyst

OK. And any feedback on profitability and the way e-commerce is impacting profitability?

Gary Millerchip — Govt Vice President, Chief Monetary Officer

Yeah. I might nonetheless say it is marginally, it is decrease than the normal procuring within the warehouse, and that clearly intuitively is sensible provided that we’re doing extra of the choosing and purchasing for the member. As I discussed within the ready remarks we’ve got seen some good enhancements as we have grown our gross sales numbers, that is created some leverage within the mannequin. We’re enhancing the effectivity of our success prices.

So, it’s persevering with on an enhancing pattern over time due to the gross sales progress and the leverage that is creating, but additionally among the enhancements the workforce are making within the enterprise to drive extra effectivity as properly.

Operator

Your subsequent query comes from the road of Michael Baker with D.A. Davidson. Please go forward.

Michael Baker — Analyst

Nice. Thanks. Two questions. One, are you able to speak about aggressive pricing, notably in grocery? There’s been loads of speak about some grocery chains investing in worth, and so on.

What are you seeing how your worth gaps? After which I am going to have a follow-up after that. Thanks.

Gary Millerchip — Govt Vice President, Chief Monetary Officer

Yeah, thanks for the query. I believe the important thing factor for us is we’re our personal greatest competitor. As you heard us point out earlier, we need to be the primary to decrease costs and the final to boost costs. And at each certainly one of our common finances conferences, we’re speaking about how can we discover methods to do this.

And the vast majority of our worth investments are proactive, not that we’re reacting. However after all, we’re all the time watching and staying very near competitors. I might say that the promotional setting has been growing. That might be with us, as Ron talked about earlier, that our CPG companions are investing to search out methods to drive models, and that would definitely be the case throughout among the competitors as properly.

I discussed earlier, home equipment and client electronics could be an space the place we have seen extra of that exercise. However I believe for those who took all of it on stability, we would not say that we’re seeing the exercise type of exterior of regular within the meals area. And we really feel excellent about our place relative to the market and proceed to be proactive find methods to supply the highest quality, greatest worth for our members.

Michael Baker — Analyst

Glorious. That is sensible. Observe-up when fuel costs fall, I believe fuel costs are down now 15%, 16% yr over yr, broadly talking, no less than within the newest information. Does that harm your visitors in any respect? As a result of I believe you guys say 50% of individuals will come to get fuel — come into the membership and purchase one thing, I believe the unit progress — the gallons progress did decelerate slightly bit this quarter.

Is that one thing that you just guys take a look at or have any concern over?

Ron Vachris — President and Chief Govt Officer

Yeah. That is Ron. I do not see it as a priority. Gallons had been up 3%, which was slightly bit softer than the prior quarter.

So, while you do hit these peaks in costs, we are going to see a higher attraction to the Costco fuel stations. However our stability of transactions, twin transactions that we’ve got appears very optimistic. And so, we’re not seeing visitors dropping off in any respect within the warehouse primarily based on the marginally softer gallon progress that we’re seeing out within the fuel stations.

Michael Baker — Analyst

Glorious. Thanks.

Operator

Your subsequent query comes from the road of Karen Brief with Melius Analysis. Please go forward.

Karen Brief — Analyst

Hey, thanks rather a lot, and good to speak to you once more. Thanks for taking my query. So, my query is, while you take a look at your pre-tax margin, I do know you do not handle to do this in any approach, form, or kind. Nevertheless it clearly has been creeping up.

So, while you take a look at the precise delta on a 10-basis-point enhance in that margin, it isn’t immaterial to get to earnings and/or valuation, clearly. So, questioning how you concentrate on that.

Gary Millerchip — Govt Vice President, Chief Monetary Officer

Hello, Karen, I believe the way in which we give it some thought is actually again to among the feedback that we had been referring to earlier is that our objective is all the time to drive high line. That is the highest precedence for the corporate, and we’re centered on investing and delivering worth for the member and delivering improved investments in our staff as properly to guarantee that we’re an employer of alternative. I believe I respect the remark as a result of I believe we’ve got been profitable over time in doing that as a result of there are methods for us to proceed to decrease our prices within the gross margin a part of our enterprise and drive extra worth for the member. A number of the issues that we have been centered on, like international shopping for and the Kirkland Signature progress that we have seen, e-commerce progress, as we talked about earlier.

And there will probably be alternatives for issues like retail media sooner or later. So, I believe there are a variety of how in gross margin and likewise various methods in SG&A the place we are able to proceed to be extra environment friendly to drive that funding. Our focus is all the time to drive, as I discussed, the highest line, and if that, over time, permits us to proceed to develop the margins, then clearly, that is one thing that we’re happy with, and it is a good end result for our traders. However I would not say, as you talked about, it is a focused end result.

It is actually about ensuring that we’re driving that top-line progress and the historical past, as you’ve got talked about, would counsel that once we’ve executed that properly as we proceed to search for alternatives, it has allowed us to develop margins barely as properly.

Ron Vachris — President and Chief Govt Officer

I agree with Gary. I might add to that, there are a number of levers that our operators and our consumers have to enhance margins. And our consumers converse usually about the truth that we are able to decrease costs whereas enhancing margin as properly. And that comes with the efficiencies that we’re seeing, comes with excellent sell-throughs that we’re realizing within the items that we’re shopping for, newness and bringing in new objects to the market that that might have slightly bit higher margins.

And our working shrinkage has been enhancing. And we noticed a pleasant strong yr this yr and picked up some margin on enhancing shrink leads to the enterprise as properly. So, these are some completely different levers that may increase reducing costs and proceed to enhance margins.

Karen Brief — Analyst

However is it truthful to assume that 4%-ish perhaps going up from there’s life like?

Ron Vachris — President and Chief Govt Officer

Yeah, Karen, I believe we would not get into it, as , into type of steering of what we’re anticipating sooner or later. I do assume, as Ron shared, that we do not see it as, for those who like, a zero-sum recreation. I believe we imagine there’s a chance to proceed to search out methods to spend money on our members and our staff, and we do imagine you are able to do that by way of the way in which that we handle the enterprise to proceed to enhance profitability over time, however I would not need to actually present any particular steering associated to that.

Karen Brief — Analyst

Nice. Thanks.

Gary Millerchip — Govt Vice President, Chief Monetary Officer

Thanks, Karen. Krista, are you there?

Operator

Laura Champine from Loop Capital, your line is open. Your subsequent query comes from Greg Melich with Evercore ISI. Please go forward.

Greg Melich — Analyst

Hello, thanks. I need to return to the profitability and gross margin, notably gasoline, the tailwind. Are we now again at $0.20 of a penny revenue per gallon? Or what ought to we consider that as type of a normalized vary going ahead?

Gary Millerchip — Govt Vice President, Chief Monetary Officer

Yeah. I believe, Greg, we usually aren’t sharing particular breakdown of profitability, and that will be true clearly throughout various areas of the enterprise. However on fuel, as I discussed earlier, I might consider fuel as being type of pretty secure on the whole for us. There are peaks and troughs due to volatility out there within the brief time period generally.

I would not consider this quarter, whereas it confirmed up in — as a part of the general enchancment in different companies, I would not name it out as being like something that was notably altering the trajectory of fuel or that will trigger us to be eager to share any extra type of detailed colour as a result of usually, we’re anticipating the fuel facet of the enterprise to be comparatively secure. As I discussed, subsequent quarter — this quarter, I ought to say, that was an instance of the place there was some actually very uncommon volatility due to world occasions. However in the primary, I might consider fuel as not being a significant type of underlying change in trajectory or one thing to take a look at otherwise in our mannequin. Clearly, we do present colour the place there’s one thing uncommon that pops up, however I would not consider that as being a directional change.

Greg Melich — Analyst

Received it. And given the latest wage enhance, might you assist stage set us, so perhaps on what your common wages at the moment are within the U.S. or globally? I believe previously, the quantity was one thing like $26 an hour.

Ron Vachris — President and Chief Govt Officer

No. Presently, the common wage is simply north of $30 an hour.

Greg Melich — Analyst

Simply north of 30%. Nice. And that is for the U.S.?

Ron Vachris — President and Chief Govt Officer

Sure. U.S. and Canada, equal in Canada.

Greg Melich — Analyst

So, my final query was simply given the nonfood, the success there. You referred to as out the gold bullion once more. I am simply curious, are there any plans to perhaps deliver Kirkland Signature into the gold bullion market?

Ron Vachris — President and Chief Govt Officer

No plans at the moment.

Greg Melich — Analyst

All proper. Thanks rather a lot, and good luck, guys.

Ron Vachris — President and Chief Govt Officer

Thanks.

Gary Millerchip — Govt Vice President, Chief Monetary Officer

Thanks.

Operator

And girls and gents, that is on a regular basis we’ve got for questions at this time. I’ll now flip the convention again over to Gary for closing feedback.

Gary Millerchip — Govt Vice President, Chief Monetary Officer

Thanks, Krista. Thanks all for becoming a member of the decision at this time, and we look ahead to speaking to you on the subsequent quarterly earnings name. That may conclude our name. Thanks.

Operator

[Operator signoff]

Period: 0 minutes

Name individuals:

Gary Millerchip — Govt Vice President, Chief Monetary Officer

Ron Vachris — President and Chief Govt Officer

Simeon Gutman — Analyst

Christopher Horvers — Analyst

Chris Horvers — Analyst

Chuck Grom — Analyst

Brandon Cheatham — Citi — Analyst

John Heinbockel — Analyst

Scot Ciccarelli — Analyst

Unknown speaker — — Analyst

Rupesh Parikh — Analyst

Kelly Bania — Analyst

Michael Baker — Analyst

Karen Brief — Analyst

Greg Melich — Analyst

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