Costco 4Q15 Earnings Call Notes

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Comp sales -1%,, but +6 excluding gas price deflation and FX

“fourth quarter fiscal 2015 operating results, net sales for the fourth quarter came in at $35 billion, up 1% overall a year ago. Comp sales were down 1% on a reported basis, but were up 6% including the negative gas and FX impacts. Gas prices for the quarter were down 21% year-over-year, negatively impacting U.S. comp figures by little more than 3 percentage points, so a plus 6 U.S. comp, excluding gas price deflation.”

Growing ecommerce methodically

“we’re doing it methodically. We’re not going to go crazy out there. I think our mobile apps have improved and will continue to improve. And we like the value proposition we have. We’re recognizing that we can’t be everything to everybody, that’s not what we do for a living, and but we have great value. We also like the fact that some of these other services are buying from us. Some of our top customers are some of those guys. So if we can’t deliver that single unit of milk or cereal to your doorstep, someone that is may want to buy from us.”

We’re not going to have the most items online, we’re not going to be the fastest to deliver, but we will compete on price. Our margins online are slightly lower.

“In terms of e-commerce, first we definitely chose – for us, we have a lot more items. We have 8,000 or 10,000 or so instead of 3,700 in store. That’s a nit compared to everybody else out there that has hundreds of thousands, if not millions of items. I think what separates us is we’ve got certainly we and others will have great quality merchandise. We’ve got the best pricing overall. We work on margins that are at/or slightly below our reported total company margins but up there high singles, very low double digits. We will compare that to anybody out there. Again, we recognize we’re not going to be selling single items to govern within an hour or four hours or overnight necessarily.”

There is room for all of us online. We still want people to come into our warehouses though

“There is room for all of us. We’ve got to keep, it’s a big play out there in terms of market share and we think that we’ll be able to take our share of that. Some little departments you lose a little, others you make a little, certainly we want people to still come into our warehouses.”

Give pricing back to the customer

“Overall, we try to improve margins a little by lowering prices and I mean that sincerely and we’re going to give most of that back to the customer to our member. As you know, we are pretty stubborn and intent on maintaining in a rising commodity standpoint prices on certain fresh food so we’ve seen some impact there to the negative.”

Trying to be more open minded in marketing

“Well, first and foremost we’ve learned from doing virtually nothing to be a little more open minded about it I think there’s a lot of low hanging fruit that we haven’t done certainly there’s more efforts in these areas in our membership marketing team on dotcom a little bit.”

Make more per gallon on gas at lower prices

“when prices are low, we make more than we used on average per gallon or per gas station, and that’s good.”