Costco Wholesale Corporation (NASDAQ:COST) Q1 2020 Earnings Conference Call - Final Transcript

Dec 12, 2019 • 05:00 pm ET

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Costco Wholesale Corporation (NASDAQ:COST) Q1 2020 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions] Your first question comes from the line of Christopher Horvers from JPMorgan. Please ask your question.

Analyst
Christopher Horvers

Thanks. Good evening. So I just want to step back and get your thoughts in terms of how you plan the holiday season this year, given that there are six fewer days, it seems like a lot of retailers are expecting a big surge at the end, bigger than normal into Christmas, given the short season. Is that something -- I'm not asking about December just how you plan to, is it something you saw in 2013? Is it something you're planning for in 2019 and maybe any comment through what you've reported so far?

Executive
Richard A. Galanti

Well, I think we planned it and with some historical knowledge of what's happened in the past when you've got the shortest period of time between Thanksgiving and Christmas. And we plan, assuming that we're going to continue to have the types of levels of comps that we have in general recognizing sometimes there's a switch between months as example, being the switching -- Thanksgiving being in November versus -- Q1 rather versus Q2 for us in our example. But so yes, we do expect to ramp up on a per day basis, we'll have to wait and see where it goes. But we went into the planning, I think with the confidence that we've had good shopping frequency increases and good renewal rates and pretty good comps.

Analyst
Christopher Horvers

Understood. And then on the pricing environment, it seems like Sam's has been taking some bigger hits to the gross margin line and it seems to be benefiting comps. So are you seeing a step-up in terms of in that core club channel? Are you seeing a step-up in price investment from your peers?

Executive
Richard A. Galanti

In a word, no.

Analyst
Christopher Horvers

Got it. Fair enough. And then my last question is, in 2Q you're going to lap, I think a pretty big benefit on -- in the ancillary line last year, I think it was up 33 basis points, big part of that being gas, so you're going to have gas prices -- do we have to give that all back. I mean gas prices look like they will be up year-over-year at this point, but certainly down a bit sequentially and I know there is a interplay between those two dynamics. So any thoughts you could give us around lapping that 33 basis points given those dynamics would be super helpful?

Executive
Richard A. Galanti

Well, I think profitably for gas for us and as we've read from other retailers, big retailers that have gas stations as part of their retail concept. It's the new normal over the last few years is, it's been a more profitable business. We, I think, benefit from the fact that we've seen our gallon increases on a comp basis in the very high single digits compare -- so we know we're taking market share, despite increased profitability in that business, our savings, in our view, when we can do price