Costco FY 3Q16 Earnings Call Notes

Richard Galanti

Customers are pretty healthy

“Okay. Well, in terms of the customer, so far so good. We don’t see any dramatic change. Many of you have asked questions or have had some concern about traffic coming down from this 4% plus number over seven years. We feel pretty good about where our numbers are. We don’t really see a lot of different changes.

Interestingly, when you look at nondiscretionary items like food and sundries versus discretionary items across the nonfoods categories, including big-ticket items like furniture, electronics and the like, we’ve actually had, relatively speaking, a little more strength in some of those nonfood categories. So that I think allays some of any concerns that some people have had.

But generally speaking, I’d have to say our customers are still pretty healthy and we are still getting good renewal rates notwithstanding a very small impact from some of the credit card transitions and so we feel pretty good at this point about that.”

Any weakness more deflation than dot com

“By the way, one of the other data points I’ve been asked several times in the last few weeks each time we’ve reported sales in the last couple of months is is it deflation, is it weakness, is it dotcom, whatever.

The fact of the matter is, if you like at during the 12-week quarter on a year-over-year basis, if we just take the average items per unit in the basket going through the front end, US only, so US only, it was up 1.4%. So we are getting people to buy more items, if you will.

The average basket value is up 0.4%. The simple implication there is you’ve got deflation presumably — deflationary pressures of about 1%. Now that’s a good educated guess. There could be other impacts of sizes, but typically we go into bigger sizes, not smaller sizes and bigger pack sizes.

So I think overall there’s probably still a little bit more deflation that we’ve seen over the last couple of quarters spread to other items in the nonfood category as well as we’ve seen.”

There’s no giant surprises either way in May

“Well, we really can’t talk to anything about May yet. There’s no giant surprises in either direction. But, at the end of the day — and again, the comfort level — I think I was — earlier in the call, I was responding to many calls that I received from both institutional investors and analysts out there about the concern.”

Walmart FY 1Q17 Earnings Call Notes

Doug McMillon

Comp sales +1% in US believe its because of improvement in in store experience

“We’re encouraged by the Walmart U.S. comp and believe it is attributable to real improvement in our store experience. Our customers are giving us positive feedback and I’m seeing it myself on store visits and you can see it in the traffic numbers. We delivered comp sales of 1% in Walmart U.S. due to continuing traffic increases which improved 1.5% this quarter.”

Brett Biggs

E-commerce added 20 bps

“E-commerce contributed approximately 20 basis points to the overall comp. In addition, our Neighborhood Market format also delivered a comp sales increase of approximately 7%. We have good momentum in the business as on a two-year stack basis comp sales for Walmart U.S. were up 2.1%. ”

Saw strength in home. Some improvement in consumer electronics

“We saw strength in general merchandise driven by solid sales growth in hardlines, home and seasonal and apparel. While entertainment continues to be a sales headwind, we did see some improving trends in electronics. Branded drug inflation and script growth drove pharmacy sales while better in-stock levels and a focus on the right assortment drove sales growth in both consumables and OTC.”

Positive comps in China despite challenging macro environment

” Despite a challenging macroeconomic environment, strong performance during Chinese New Year, double-digit growth in gift card loading and continued strengthening of fresh categories led to good sales growth and positive comps. In Brazil, despite ongoing economic challenges, our team is making the right decisions to better position the business for both short- and long term success.”

Target 1Q16 Earnings Call Notes

Brian Cornell

Saw a decline in smaller convenience trips

“Sales in the quarter came in lighter than expected and daily and regional shopping patterns were more volatile than the entire periods. While guests generally maintain their pattern of larger, pantry stocking visits, we thought slowdown in growth of smaller convenient strips.”

Seen a significant geographic variance

” as we looked at business in April, and again in the start of May, we’ve seen a significant performance difference between our West Coast markets and particularly our Northeast markets, and significant variability, where we’ve seen some very positive growth performance across our entire portfolio, in Los Angeles, in San Francisco and many of our core West Coast markets, offset by significant slowness in the Northeast, in Boston, in New York, in Philadelphia, in D.C.”

Consumers are spending on home improvement

“We recognized the year-on-year fuel prices have increase and our guest and the consumer spending than they did a year ago at the pump. And we’re certainly recognized that within overall categories today’s consumer, our guest is reinvesting in their homes. They’re spending money on home improvement.”

Majority of retail still done in stores but starts online

” we recognize that even as we look at the start of 2016, the majority of the retail business in United States continues to be done in stores, but it starts online, so we better have great digital capabilities to make sure when our guest is shopping target, no matter how they shop, we make it a convenient, easy experience.”

Consumers are paying more at the pump again, that’s having an impact

“certainly it was earlier Easter. We recognize the impact of that. Certainly weather in many major markets has been a factor. It’s not an excuse. We’ve got to figure out how we perform under any circumstances. We know as the guest and our consumer has moved through the course of 2016, prices of the pump, fuel prices have resin and that certainly an impact. And then when we look at macro basis on overall spending, we certainly recognize that consumers are spending more on travel, on leisure activities, they been investing in their homes as I mentioned before. ”

Catherine Smith

Post Easter sales softened noticeably

” Within the quarter, we experienced solid results through the Easter holiday; post Easter sales and traffic trends softened noticeably consistent with what you’ve heard from many of our competitors. Also notable in the first quarter we saw a meaningful increase in the volatility of our weekly sales performance compared with last year.”

Planning to manage inventory more carefully given slowdown in sales

“Quarter end inventory was up a little bit more than 4% rising faster than sales [ph]. As John mentioned, some of this growth reflected intentional inventory investment in to support in-stock in essential categories. However, given the recent slowdown in our sales and our caution regarding the second quarter, we are planning to manage inventory carefully throughout this quarter and beyond.”