Costco FY 3Q17 Earnings Call Notes

Richard Galanti

8% sales increase

“Turning to our third quarter sales, reported sales were up 8% and our 12 week total company reported comparable sales figure was up 5%. For the quarter, the plus five comp sales figure was helped by gasoline price inflation to the tune of about 140 basis points and offset or hurt from FX by about minus 60 basis points.”

A little inflation is good

“Well I think for low margin retailers and certainly we are at the low end and the lowest end of margins, but super market is well on the food side, a little inflation is good, a little deflation hurts you a little bit it still has the D in front of it, not the IN and so it’s still impacting some. it hurts you most in items like I think the example I gave last quarter was of fresh meats where year-over-year, second quarter or first quarter year-over-year per pound beef was down by 10% and we were selling more than 10% more tonnage and certainly we are having lower gross margin dollars because of that and so as that changes that will help us a little bit.”

*Being the low cost operator means not advertising

“Sure. And I think first if the advertise is good, we don’t advertise we don’t spend on that and we would love seeing add TV and the print adds still from both other competitors. And we are not concerned about it. We think that the value of the Costco is still as significantly higher price or without the free three months is a much better value. And we think that’s evidence by our success of what we have done overtime and the fact that even what we have done in the past renewal rates have not really been impacted by it.”