Costco Wholesale Corporation (NASDAQ:COST) Q4 2020 Earnings Conference Call - Final Transcript

Ladies and gentlemen, thank you for standing by, and welcome to the Costco Q4 Earnings Call. [Operator Instructions]

I would now like to hand the conference over to Richard Galanti. Please go ahead.

Thank you, Laurie, and good afternoon to everyone.

I will 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 2020, the 16 week and 52 weeks ended August 30. Reported net income for the fourth quarter came in at $1.389 billion, or $3.13 per diluted share, compared to $1.097 billion, or $2.47 per diluted share last year in the fourth quarter. This year's fourth quarter was negatively impacted by incremental expense related to COVID-19 premium wages and sanitation costs totaling $281 million pre-tax, or $0.47 a share, as well as a $36 million pre-tax charge or $0.06 per share related to early payment of $1.5 billion of debt. These items were partially offset by an $84 million pre-tax benefit or $0.15 a share for the partial reversal of a reserve of $123 million pre-tax, $0.22 per diluted share, related to a product tax assessment taken in the fourth quarter of last year.

Net sales for the quarter increased 12.5% to $52.28 billion, up from $46.45 billion in the fourth quarter a year earlier. For the fiscal year and its entirety, the fiscal 2020 came in at $163.22 billion, a 9.3% increase over the $149.35 billion in fiscal 2019.

Comparable sales for the fourth quarter fiscal 2020 were as follows. On a reported basis for the 16 weeks, US was 11%. Excluding gas deflation and FX, US was 13.6%. Canada reported 9.1% up. Again, ex-gas deflation and FX, 12.6% up. Other International reported 16.1%. Ex-gas deflation and FX, 18.8%, bringing the total company to a reported number of 11.4% comp. And again, ex-gas deflation and FX, up 14.1%.

For the company, e-commerce reported was 90.6% up and ex gas and FX, 91.3% up. In terms of the fourth quarter comp sales metrics, foreign currencies relative to the US dollar negatively impacted sales by about 50 basis points and gasoline price deflation negatively impacted sales by approximately 220 basis points. Traffic or shopping frequency on a worldwide basis was down 1.2% during the fourth quarter and showed an increase of 1.2% in the US.

Our average transaction or average basket size was up 12.7% during the fourth