Costco Wholesale Corp (COST)

“we are anticipating further inflation in a number of nonfood categories as higher resin costs start to flow into cost of goods.”

“We estimate CapEx for the full year will be approximately $6.5 billion as we continue to invest in building a larger pipeline of new warehouses, remodeling our existing warehouses to drive continued growth in high volume buildings, expanding our depot network to support operational efficiency, and in enhancing the member digital experience.”

“We currently expect to have 26 net new openings in fiscal year 20 down 2 buildings from the prior call with those 2 buildings now set to open in fiscal year 27.”

“In Canada, yes, we have a lot of upside potential. We have got some clubs. We have got the next 3 to 5 years charted out. So we see consistent strong growth in Canada for at least the next 5 years, and then we will have to come back and evaluate where we are going.”

“As you mentioned, we have seen some slowing in the year over year membership growth in recent quarters... So we think the sort of the 4% to 5% is a more normal rate of growth when you do not have the benefit of a large increased that is linked to some kind of special event like COVID or a new market entry.”

“As we target 30+ net new openings per year in the coming years.”

“These submissions will go in over what may be the next few months and based on what other claimants have experienced, should start receiving refunds on approved claims on a rolling basis over the following 2 to 3 months.”

“As far as the new openings coming up, it won't have a negative effect on our membership.”

“We have a clear road map for future digital enhancements and believe these will allow us to continue to grow digitally-enabled sales at a faster pace than overall sales.”

“I would say we will have a small impact as a result of the change with Medicare and the pricing of the drugs involved there, but nothing that I would call out to think about as a material headwind for us in terms of our top line sales results as we see it today.”

“But we do think through some of the efficiencies that we create, we can -- we are slightly expanding margin, but it's only slightly because, as Ron mentioned, really where we see meaningful benefit.”

“We estimate CapEx for the full year will be approximately $6.5 billion as we continue to invest in building a larger pipeline of new warehouses, remodeling our existing warehouses to drive continued growth in high-volume buildings, expanding our depot network to support operations and enhancing the member digital experience.”

“We currently expect to have 28 net new openings in fiscal year '26 and are targeting 30-plus new openings per year in the coming years.”

“But generally speaking, if gas prices start to increase, then we tend to see our value position resonates better with members just because, obviously, we want to be the pricing authority on gas.”

“And Kate, I think that's kind of allowing us to be able to have more confidence in that plan to achieve that 30 warehouse a year goal that we talked about in the last couple of earnings calls.”

“So we feel that we've got a very good path of expansion in Canada over the next 5 years, and we feel good that we'll be able to maintain a good, high average volume per location and continue to infill with some great incremental sales there as well.”

“As we called out before, we may slow a few more quarters where it's kind of reaching that maturation point, but we are very focused on those retention programs and have been pleased with the way that's adjusted the trajectory, and we'll be targeting for that to continue.”

“When we called that out 2 or 3 quarters ago, we said we probably have a few more quarters where we'd expect to see a continuation of a slight decline in the renewal rate because there is that sort of math where those numbers are feeding into the overall renewal calculation.”

“And roughly just over half of those, we think, would be in the U.S. and just under half would be in the rest of the world, if you include Mexico, Canada, Asia, Europe, Australia and New Zealand in that broader Rest of the World category.”

“We estimate capital expenditure for the full year will be approximately $6.5 billion.”

“While delays with a couple of our buildings in Spain resulted in us revising our planned net new openings for fiscal year 2026 down to 28, we continue to plan for 30 plus net openings per year in future years.”

“So think of that being Canada, Mexico, Europe, Asia, Australia. Across those different markets. And and I wouldn't say it's you know, one specific geography. It's really fairly well spread across those markets continue to build our presence in each of those different geographies.”

“and, our expectation would be that digital sales as we define it would continue to grow at a fast pace over the longer term. Than our average sales overall as as more members engage digitally,”

“So we continue to we see some upside to the continued growth and the digital value of having the app and using the digital membership card, the Costco wallet, those things have all got a very nice road map the next twelve months. We see that number is gonna hopefully continue to outpace the growth of the warehouse.”

“And I wouldn't see any reason why that would change dramatically in the future because that's working for us well in terms of continuing to grow our overall sales and grow our overall profitability in the markets in which we operate.”

“So we'd expect 2026 to have capital expenditure that would grow over 2025 and probably a little bit higher than sales again for the same reasons in '26 or '25.”

“We would therefore expect to continue to see a small decline in our renewal rate as this change in membership mix gets fully reflected in our renewal rate calculation.”

“We plan to open another 35 warehouses in fiscal year 2026, of which five are relocations.”

“But I wouldn't say that we're seeing anything in our plans that would cause that to change significantly.”

“But we are going to continue to invest in price. It is what we do. It is how we grow our business, and we are going to continue to try and mitigate as much of this impact on tariffs as we can for our members.”

“We do think over time, we can still be increasing our margin a little bit as part of that plan.”

“I do think you should expect that to continue for for the foreseeable future.”

“It really depend on there would not be a carryover from current inflation into 2026. But if inflation was to rise again, that could create a higher life LIFO charge in '26 or a lower LIFO charge if if tariffs reduced.”

“You probably see a little bit of relief in some of those areas flowing through in the next couple of months.”

“As we look at our long-term plan, we would think just over half of those would likely be in the US, but just under half would be in our international markets, including Canada, Mexico, Asia, and Europe.”

“This year, we'll open 15 locations in the US, three in Canada, and we'll have seven in the other international countries that will open up.”

“we estimate CapEx for the full year will be approximately $5 billion.”

“While we expect interest rates will continue to be a year-over-year headwind for the remainder of the year, we have now lapped the lower year-over-year cash balances following the special dividend.”

“Due to the effects of deferred accounting, the majority of the benefit from the membership fee increase will come over the next four fiscal quarters, with the largest impact in Q4 fiscal year 2025 and Q1 fiscal year 2026.”

“As we look ahead to the remainder of this fiscal year, headwinds from foreign exchange look likely to continue.”

“We're projecting 28 new openings during fiscal year 2025, of which three will be relocations, for 25 net new buildings.”

“That's something that we've done for the history of the company. We're going to continue to invest in price and some of it may come in holding certain prices as some commodities are starting to increase.”

“We believe by doing that work, we can continue growing our digital business even more effectively.”

“I think we're gonna start seeing some more forward-facing improvements in the next twelve months as we sort of start putting our logistics sides behind us, and we get those things taken care of.”

“As you know, it continues to outpace our overall growth, and we expect that trend to continue.”

“I wouldn't indicate at this point that there's any major change in trajectory. It's more just continuation of the growth strategy that we've had and executing on that strategy.”

“This will continue to negatively impact year-over-year comparisons in Q2.”

“We continue to project 29 openings during fiscal year 2025, of which three will be relocations, and so 26 net new buildings.”

“But I think the outline of thirty a year seems very realistic. And a good portion of those not quite half to be outside of the US.”

“I think you'll continue to see an equal amount of thirty warehouses opening up over the next few years for sure.”

“I would still say it's marginally, it's lower than the traditional shopping in the warehouse... it is continuing on an improving trend over time because of the sales growth and the leverage that's creating, but also some of the improvements the team are making in the business to drive more efficiency as well.”

“That will generally sort of really the most part of that will come in, in the second half of 2025 and the first half of 2026.”

“The one thing I think I would say is that as you think about our cadence of our earnings growth across '25, it's likely to be less linear than you would probably typically expect.”

“We still see many opportunities to find ways to improve gross margin and SG&A in terms of opportunities to fund those investments.”

“I'd say that we're probably looking at 5 to 6 new markets that we'll be expanding into next year.”

“As production ramps up, we are in the process of transitioning our other Asian markets to locally produce skews.”

“Interest income will continue to be a headwind in the first half of this year due to lower year-over-year cash balances and lower interest rates.”

“More improvements are currently underway, which should further benefit our business both online and in our warehouses.”

“We have great momentum with this business and expect big and bulky items will be a key part of our continued progress with e-commerce in the coming year.”

“With three of these warehouses being relocations, we expect to add 26 net new buildings in fiscal 2025.”

“It continues to be talked about as it's something that is still a case of when we increase the fee rather than if we increase the fee.”

“That number 25 to 29 or 25 to 30 is a good number for us.”

“As far as IT spend, yeah, there will be some IT spend. We don't see as we look in the future, we don't see that to be anything that will really change our trajectory of our cap investments.”

“I'd be surprised if at least half of those weren't in the -- continue to be in the U.S. because we still see significant growth when we open those new warehouses.”

“I think that sort of 25 to 30 new warehouse count is a reasonable proxy for what we think the runway is for the foreseeable future for new warehouses.”

“I'm feeling pretty good that we're going to open 25-plus for the next couple of years, and then probably 28-plus, and go on from there.”

“In addition, we recently opened our first fully operated sushi offering in Issaquah, Washington, across the street from our headquarters, with two more planned to open in the very near future.”

“We will likely end this calendar year with about 90 sites and continue to grow from there.”

“We plan to launch it in the other four Shanghai area locations by month-end, as well as in Shenzhen sometime the following month.”

“Regarding CapEx, fiscal second quarter spend was approximately $1.03 billion. And for the year, it remains in the north of $4.4 billion to $4.6 billion, in that range.”

“For the full year 2024, we estimate 30 total openings, including two relo's, so for a net increase of 28 new units.”

“The fiscal 2024 effective tax rate including discrete items is currently projected to be in the 26% to 27% range.”

“We'll see less benefit from interest income going forward following the January payment of the $6.7 billion special dividend.”

“International will be 6 or 7 units this year.”

“70% plus in the U.S. and Canada, mostly U.S., of course.”

“We're on board to do something in the mid-to-high 20s this year.”

“Assuming that trend continues, there won't be much LIFO going forward for right now what we see.”

“And so, if nothing else, we'll be having an easier compare five months, hence.”

“As it relates to membership fees, nice try, Michael. But at the end of the day, with the headline being inflation, we feel very good about if we want to do it, can we do it without impacting, in any meaningful way, renewal rates or sign-ups or anything. And at some point, we will.”

“The fiscal '23 effective rate, excluding discrete items, is currently projected to be in the 26% to 27% range.”

“And we feel pretty comfortable we've got a good pipeline of pending openings, for sure, over the next three or four years and with an equal level of comfort that we feel that we'll continue to have plenty of opportunities to open units.”

“We think we can certainly do more online. We don't have some strategic goal to go from 8%, which is still a $20 billion business, but to go from 8% of sales to 16%. But let's go from 8% to 9% to 10%, 10% to 11% over a certain period of time.”

“But I see that, over the next five years, going from 65-35 or 60-40 to at least 50-50, if not trending a little bit toward outside the U.S. and Canada.”

“And again, it's about seven or eight months ago, seven-ish months ago, when we started seeing the decline. And so, if nothing else, we'll be having an easier compare five months, hence. But certainly, we've seen a little bit of improvement in the negatives.”

“And what we said over the last few quarters is that, in our view, it's a question of when, not if.”

“In fiscal '23, we expect to open a total of 27 warehouses, including 3 relocations, so a net increase of 24 new warehouses.”

“The effective rate for the year, excluding discrete items, continues to be projected in the 26% to 27% range.”

“If the lapping stays at 0, yes, there would be no new charge, so it would be comparing to a charge last year. To the extent that, yes, prices were to go down relative to a year ago, you'd actually have a LIFO credit, which would be even a bigger year-over-year delta.”

“We can't predict what's going to happen, at least the trends yesterday were that we're starting to see some improvement in inflation. To the extent that continues, we're comparing to LIFO charges in excess of $100 million and $200 million in each of Q3 and Q4.”

“Beyond that, as rates come down, you'll see our prices on items come down, too.”

“The view is always you need something -- our best guess view is somewhere in the 4% to 5% comp range. If it falls below that, that will make SG&A a little bit of a challenge.”

“And our estimate for the entire fiscal year is CapEx of somewhere in the $3.8 billion to $4.0 billion range.”

“The fiscal '23 effective tax rate, excluding these discrete items -- this discrete item, is currently projected to be between 26% and 27%.”

“Well, I think, yes, LIFO was a slight pickup just because the dollar amount was less than the $14 million last year in the quarter. It's very slight. So if that continues, that would be good, and that would bode well.”

“Not at all. I mean, it’s steady as she goes in terms of CapEx and what we want to do, and what we want to do with pricing and competitive pricing.”

“But the view from our buyers is that this should be eliminated for the most part towards the end of this week.”

“And while we continue to mitigate the impact of price increases as best as we can, we remain comfortable in our ability to pass through higher costs while providing great value to our members.”

“In addition, given the current macro environment, the historically high inflation and the burden it is having on our members and all consumers in general, we think increasing our membership fee today ahead of our typical timing is not the right time.”

“For the full year, we estimate total deliveries will be up 23% and will exceed $3 million.”

“Our full year CapEx spend is estimated for the year to be just shy of about $4 billion.”

“All four of these buildings are now scheduled to open by the end of calendar November this fall.”

“Overall, for the year, our effective tax rate is currently projected to be between 26% and 27%.”

“I think it's -- if I had to kind of -- it will be -- it looked much like what you're looking at this quarter. Maybe a little less, maybe a little more.”

“We've, obviously, seen more inflation as years progressed. If we stay at this level, there will continue to be some impacts to our P&L.”

“I believe we have -- of those four, one is in fiscal 2023 and three in fiscal 2024.”

“And we would certainly be comfortable at 30.”

“As it relates to if prices come down, if our costs come down, we want to be the first to lower the price, period.”

“Later this month, we'll have our warehouse inventory along with the Instacart inventory online, and be able to see all the detail of our in-line in-store merchandise as well.”

“So I would still say our rounded pat answer right now is 25% to 30%, and we'd like it to be more to 30 than 25 right now.”

“Regarding capital expenditures, our Q2 spend for CapEx was approximately $723 million, and our full year CapEx spend is still estimated to be approximately $4.0 billion.”

“Our effective tax rate is currently -- it continues to be projected to be in the 26% to 27% range for the fiscal year.”

“And here we are 5 years into that incorrect answer, and we're pretty 65, 35 U.S. Canada for 2 reasons... So if you ask me today, I look 5 years from now, we'll go from 65-35 or whatever excess today, probably down to 50-50”

“Currently in the U.S., we have 112 locations with more and --- we plan to more than double that number during calendar year 2022.”

“For fiscal '22, effective tax rate excluding these discrete items is currently projected to be between 26% and 27%.”

“And so it's over two or three year period, but our assumption is, is it'll take less than that time to start to normalize somewhat.”

“To the extent that there are permanent inflationary items, like freight costs, or even somewhat permanent for the next year, we can't hold on to all those, some of that has to be passed on and it is being passed on.”

“As of today, in talking with our senior merchants, we would estimate the overall price inflation of the products we're selling to be in the 3.5% to 4.5% range.”

“And by October end, we -- an improved mobile site, improved look and feel, a new landing page, and expanded information both for dot-com use and for enhanced warehouse information.”

“The ability to view warehouse receipts online, also next month.”

“For Fiscal '22, based on our current estimates, which of course can always change, we anticipate that our effective normalized total Company tax rate to be similar to Fiscal '21, somewhere in the 26% to 27% range.”

“It really depends. And mind you, when you have -- again, we've enjoyed a number of years of effectively very little, if any, or no LIFO or eating into our previous LIFO credit 5 and 6 years ago. But what -- if there was consistent inflation going forward for the next 2, 3, 4 quarters, you're going to also see some price increases to those customers.”

“To the extent that we can generate greater than industry average comps. I think - and there - they don't have to be in the low-to-mid teens, they could still be in the mid-to-high singles that we could -- should continue to improve.”