Costco Wholesale Corporation (NASDAQ:COST) Q4 2019 Earnings Conference Call - Final Transcript

Oct 03, 2019 • 04:15 pm ET


Costco Wholesale Corporation (NASDAQ:COST) Q4 2019 Earnings Conference Call - Final Transcript


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Ladies and gentlemen, thank you for standing by. Welcome to the Q4 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session [Operator Instructions] Thank you. I would now like to hand the conference over to our respected host, Mr. Richard Galanti, CFO, Sir, you may begin.

Richard A. Galanti

Thank you, 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 fourth quarter and fiscal year 2019, the 16 and 52 weeks ended September 1. Reported net income for the quarter was $1.097 billion or $2.47 a share. That compared to $1 billion -- $1.043 billion a year ago or $2.36 a share. This year's fourth quarter was negatively impacted by $123 million pre-tax reserve to SG&A or $96 million after tax or $0.22 per share related to a product tax assessment.

In terms of this $123 million pre-tax reserve or charge to SG&A, last week we received an assessment related to certain product taxes that covered a 7.5-year period from January of 2009 through July 2016, while we will be filing a protest to this, a reserve for this assessment was recorded in the fourth quarter in accordance with US GAAP. Excluding this reserve Q4 '19 net income would have been $1.19 billion or $2.69 a share, a 14% increase over last year's fourth quarter.

Our net sales for the quarter came in at $46.45 billion, a 7% increase over the $43.41 billion last year, and for the entire fiscal year net sales in fiscal '19 came in at $149.35 billion, a 7.9% increase over last year's $138.43 billion.

In terms of comp sales as as reported in the release, for the 16-week fourth quarter, reported US was 6.2%, excluding gas deflation FX and revenue recognition, it was 5.2%; Canada reported 2.6% ex deflation FX and rev rec 4.7%; other international reported 1.9%, ex those items 5.0%. So total Company, both for the 16 weeks with and without those items was a 5.1%. E-commerce was 19.8% reported comp and 21.9% ex FX and rev rec.

In terms of the Q4 comp sales metrics, fourth quarter traffic or shopping frequency increased 3.7% worldwide, and 3.6% in the US. Weakening foreign currencies relative to the US dollar negatively impacted sales by about 60 basis points. Gas price deflation was