Costco Wholesale Corporation (NASDAQ:COST) Q2 2019 Earnings Conference Call Transcript

Mar 07, 2019 • 05:00 pm ET


Costco Wholesale Corporation (NASDAQ:COST) Q2 2019 Earnings Conference Call Transcript


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Good afternoon. My name is Vincent and I'll be your conference operator today. At this time, I would like to welcome everyone to the Q2 Earnings Call and February Sales. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will a question-and-answer session. (Operator Instructions)

Thank you. I'll now turn the call over to your speaker today, Mr. Richard Galanti, CFO. Sir, you may begin.

Richard A. Galanti

Thank you, Vincent, and good afternoon to everyone. I'll start by stating that these discussions will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that may cause actual events, results and/or performance to differ materially from those indicated by such statements. The risks and uncertainties include, but are not limited to, those outlined in today's call as well as other risks identified from time to time in the Company's public statements and reports filed with the SEC. Forward-looking statements speak only as of the date they are made and the Company does not undertake to update these statements, except as required by law.

In today's press release, we reported operating results for the second quarter of fiscal 2019, the 12 weeks ended February 17th as well as February retail sales for the four weeks ended this past Sunday, March 3rd. Now to the first two weeks of February fell into this second fiscal quarter with weeks three and four of February are the first two weeks of our fiscal third quarter.

The reported net income for the quarter came in at $889 million or $2.01 per share, a 27% increase compared to the $701 million or $1.59 per share last year in the quarter. In terms of sales, net sales for the quarter came in at $34.63 billion, a 7.3% increase over the $32.28 billion reported last year in the second quarter. Comparable sales for the second quarter, as shown in the press release for the 12 weeks on a reported basis, US was 7.4%, Canada was minus 0.3%, other international 0.7%, for the total Company of 5.4%. As well e-commerce for the 12 weeks on a reported basis was 20.2%. Excluding gas deflation, the impact of FX and some weakening foreign currencies relative to the dollar as well as revenue recognition, which has impacted this year, the 7.4% reported in US would have been a 7.2%. The minus 0.3% in Canada would have been a plus 6.0%. Other international instead of being 0.7% reported would be plus 4.8%, with total Company, the 5.4% reported would become a 6.7%. And again, e-commerce reported at 20.2%, ex gas, FX and rev rec, 25.5% plus.

In terms of Q2 comp sales metrics, second quarter traffic or shopping frequency increased 4.9% worldwide and 5.2% in the United States. Weakening foreign currencies relative to the US dollar negatively impacted sales by approximately 140 basis points and gasoline price deflation was another minus 50 basis points of impact. Rev rec