COSTCO WHOLESALE CORP /NEW Q4 FY2024 earnings call

• Executed strategy of growing top-line by delivering high-quality goods at low prices. - Promoted 95 new warehouse managers, 85% starting as hourly employees. - Opened 30 new warehouses in fiscal 2024, including first in Maine and 600th US building; fiscal 2025 plan has 12 openings outside US. - E-commerce growth: Logistics delivered over 4.5 million items (+29% year-over-year), app downloaded 3.5 million times, search function on US app doubled click-through rate. - Technology: Warehouse inventory check via app, front door card scanners improved checkout efficiency. - Merchandising: Non-foods led comp sales, Kirkland Signature products saw price reductions and new introductions, fresh departments had high single-digit growth, ancillary businesses like pharmacy and optical performed well.

For the fourth quarter of 2024, net sales were $78.2 billion, an increase of 1% from the prior year. Comparable sales: US comp sales were up 5.3% (6.3% excluding gas deflation), Canada comp sales up 5.5% (7.9% excluding gas deflation and FX), other international comp sales up 5.7% (9.3% adjusted), total company comp sales up 5.4% (6.9% adjusted for gas deflation and FX), and e-commerce comp sales up 18.9% (19.5% adjusted for FX). Membership fee income was $1.512 billion, up 0.2% year-over-year. Gross margin reported rate was 11% in Q4 2024, up 40 basis points from last year, driven by e-commerce, gas margins, and Kirkland Signature sales penetration.

• Fiscal 2025 plan: 26 net new buildings, 12 outside US. - Membership fee increase impact deferred, majority benefit in back half of fiscal 2025 and 2026. - Continued growth in e-commerce and warehouse expansions planned.

• Red Sea shipping delays causing minor shipping disruptions. - Port strike risk affecting holiday goods importation, with contingency plans in place. - Ocean freight rate volatility, though a significant portion of freight is under contract.

Q: On SG&A leverage and wage investments, how does Costco balance driving leverage while investing in employees?

A: Gary discussed balancing investments in employees and driving productivity through sales leverage, noting that they've offset cost increases by driving productivity.

Q: What's the impact of card readers at stores?

A: Ron said card readers provide real-time traffic counts, improved front-end productivity, and members are aware of renewal status before reaching registers.

Q: What's the risk around the port strike?

A: Ron mentioned contingency plans, pre-shipping goods, and alternate port plans, with buyers monitoring the situation closely.

Q: What's the penetration of Kirkland Signature products?

A: Ron stated Kirkland Signature penetration is in the high 20s and continuing to grow, with new products enhancing the value proposition.