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Sadie
Operator
Good day and thank you for standing by and welcome to the Q1 earnings call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. I would like to hand the conference over to your speaker today, Richard Galanti. Thank you. Please go ahead.
Richard Galanti
Chief Financial Officer
Thank you, Sadie, and good afternoon to everyone. I'll 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 first quarter of fiscal 22. The 12 weeks ended November 21st. Net income for the quarter came in at $1.324 billion, or $2.98 per diluted share, compared to $1.166 billion, or $2.62 per diluted share, last year. This year included a tax benefit of $91 million, or 21 cents this year, related to stock-based compensation, and a write-off of certain IT assets of $118 million pre-tax, or 20 cents per share. Last year included tax benefits of $145 million, or 33 cents per diluted share, 16 cents of which was due to the deductibility of the $10 per share special cash dividend received by the company's 401 plan participants. and 17 cents related to stock-based compensation, as well as incremental expenses for COVID-19 premium wages of $212 million pre-tax, which was a hit last year in the quarter of 35 cents per share. Net sales for the quarter increased 16.7% to $49.42 billion, up from $42.35 billion a year earlier in the first quarter. Same-store sales for the first quarter were as follows. In the U.S., on a reported basis for the 12 weeks, up 14.9%, and excluding gas inflation and the impacts of FX, up 9.9%. Canada reported 17.2%, ex-gas and FX plus 8.3%. Other international reported 13.4%, ex-gas and inflation and FX up 10.9%. All told, the company reported a 15% increase on a comp basis, and 9.8% up X gas and FX. And e-commerce, which was reported at a 14.3, FX was 13.3. In terms of Q1 comp sales metrics, traffic or shopping frequency increased 6.8% worldwide and up 5.9% in the U.S. during the quarter. Our average transaction or ticket was up 7.7% worldwide and 8.5% in the U.S. during the quarter. Excluding the positive impact from gas inflation and FX, The average ticket was up X that plus 2.5% worldwide and plus 3.5% in the U.S. Foreign currencies relative to the U.S. dollar positively impact sales by about 90 basis points. And gasoline price inflation positively impacted sales by approximately 430 basis points. Next on the income statement, membership fee income reported in the quarter, $946 million, up $85 million, or 9.9% from last year's $861 million figure. FX, the $85 million increase would have been $80 million, and the 9.9% increase would be 9.3%. In terms of renewal rates at first quarter end, our U.S. and Canada renewal rate came in at 91.6%. up three-tenths of a percent from the 12-week earlier figure at Q4 end. As well, the worldwide rate came in at 89.0%, also up three-tenths of a percent from 12 weeks ago at Q4 end. The renewal rates are continuing to benefit from more members auto-renewing, as well as increased penetration of executive members who, on average, renew at a higher rate than the non-executive members, and first-year renewal rates, which have improved a little. In terms of number of members at the end of first quarter, in terms of member households as well as total cardholders. At Q1 end, total paid households was 62.5 million, up 800,000 from 61.7 a quarter ago. And total cardholders, 113.1 million, up a million and a half from the 111.6 million 12 weeks ago. At Q1 end, paid executive members totaled 26.5 million, an increase of 836,000 during the 12 weeks since Q4 end. Executive members represent 42% of our members and a little over 70% of our sales. Moving down to the gross margin line, our reported gross margin for the first quarter was lower year-over-year by 49 basis points and excluding gas inflation, lower year-over-year by six basis points. As I normally do, I ask you to jot down a few numbers. There are two columns, both reported year-over-year in Q1 and then without gas inflation year-over-year in Q1. First line item would be core merchandise, minus 63 basis points year over year on a reported basis, and minus 26 basis points without gas inflation. Ancillary and other businesses, plus 2 on a reported basis and plus 12 ex-gas inflation. 2% reward, plus 3 and minus 1 basis point. LIFO, minus 3 in both columns. Other, plus 12 basis points in both columns. Total then, on a reported basis, margins were down 49 basis points year-over-year and ex-gas inflation down six basis points. In terms of the core merchandise component of gross margin being lower by 63 year-over-year and 26 basis points ex-gas inflation, recall last year in Q1, the core reported was up 83 basis points and ex-gas up 66 basis points. So we retained a good portion of the improvement from two years ago in the core. In terms of the core margin on their own sales, in the first quarter, our core and core margins were lower by 18 basis points, with non-foods slightly up and food and sundries slightly lower year over year. Also, lower year over year, fresh foods was the primary driver of the core and core being lower in the quarter. Fresh continues to lap exceptional labor productivity and low product spoilage that occurred from the outsized sales that happened a year ago in the quarter. Ancillary and other business gross margin was higher by two basis points on a reported basis, and again, plus 12 basis points ex-gas inflation. Gas and travel were better year over year as the anniversary of softer quarter a year ago, offset by e-comm, which was particularly strong a year ago and also related to the pandemic. LIFO, we had a three basis point or $14 million LIFO charge in the quarter. 2% reward, higher by three on a reported basis and lower by one, excluding gas inflation, a reflection of slightly higher sales penetration going to the increased number of executive members. And other was up 12 basis points. This is related to COVID-related costs from a year ago. That portion of the COVID-related wages that go into the cost of sales, like many of our manufacturing businesses and our meat and bakery departments. Given the inflationary pressures and our ongoing efforts to mitigate price increases to our members in the face of inflation as best we can, our Q1 gross margins results, all in all, I think we're pretty good. Moving to SG&A, our reported SG&A in the first quarter was lower or better year over year by 66 basis points and 29 basis points excluding gas inflation. Again, jotting down two columns of numbers, first column being reported, and the second column being X gas inflation. Operations was better or lower by 40 basis points, and X gas inflation better or lower by 11 basis points. Central reported better by 10, without inflation, gas inflation better by 6, stock compensation better by 2 and worse by 1 in the two columns, and other better by 14 and better by 13 year over year. Total then, again, on a reported basis, our SG&A was better or lower by 66 basis points and X gas inflation lower or better by 29 basis points. Keep in mind, in terms of the core, again, better by 40 or better by 11 X gas inflation. Keep in mind this result includes the permanent dollar an hour wage increase that began in March of 2021 and four weeks of additional starting wage increases that we just took this past October. going from $16 to $17 and from $16.50 to $18 for our two main categories of hourly employees. These latest changes in the starting wages went into effect October 25th, just six weeks ago, and four weeks of those six weeks were included in Q1. Central, no surprises there. Again, on an ex-gas inflation basis, better by six. Stock comp, as I mentioned, a little better, a little worse by one, ex-gas inflation. and other, the 14 and the 13 basis points numbers. This consisted of the COVID expense of $159 million last year and the $118 million write-off of the impacted IT assets that I mentioned earlier. Next on the income statement is pre-opening expense. This year in the quarter, $28 million. Last year in the quarter, $22 million or $6 million higher. All told, reporting operating income in the first quarter increased 18%. coming in at $1.693 billion this year in the quarter compared to $1.43 billion last year. Below the operating income line, interest expense was $39 million each of the first quarters of fiscal 21 and 22. Interest income, interest expense rather, interest income and other for the quarter was higher by $13 million year over year, primarily due to favorable FX. Overall reported pre-tax income in the first quarter was up 19%, coming in at $1.696 billion this year compared in the first quarter last year of $1.42 billion. In terms of income taxes, our tax rate in the first quarter of 22 was 20.7% compared to 16.8% in Q1 last year. Again, both years' tax rates benefited from the tax treatment of stock-based compensation as mentioned earlier, $91 million this year and $75 million last year in the quarter. Additionally, last year's tax rate benefited from the tax deductibility of the special dividend, that portion payable to the company's 401k plan participants. The fiscal 22 effective tax rate, excluding these discrete items, is currently projected to be between 26% and 27%. A few other items of note in terms of warehouse expansion. As you know, for fiscal 21, we opened 22 units, including two reloads, so a net increase of 20 units during fiscal 21. In this quarter that ended a couple of weeks ago, we opened nine units, including one reload, so a net openings of eight. For the remainder of the year, we plan to open 23 new units and also plan to open 23 units, four of which would be relocations, so a net of 19 if all goes as planned. It's been a busy past seven days. We opened our second Costco in France last Saturday on December 4th. followed by our second building in China, which opened yesterday, as well as two buildings opening this morning, opening today, one in the U.S. in Florida, and our fourth unit in Spain. Regarding CapEx, our first quarter fiscal 22 spend was approximately $1.05 billion. Our full year CapEx spend is estimated to be just about $4 billion. This would represent an increase of more than $400 million over last year's entire CapEx figure of $3.6 billion. the largest areas of increase coming from international spending for new warehouse expansion and increased investment in our logistics and e-com fulfillment operations. In terms of e-commerce, sales in the quarter, XFX, increased 13.3% year-over-year. That's, of course, on top of an 86%-plus increase a year ago in the first quarter. Stronger apartments in terms of year-over-percentages include jewelry, tires, and home furnishings. Our largest merchandise department in terms of sales majors, which is everything from consumer electronics and TVs to appliances, et cetera, was up in the high single digits, also on a very strong sales increase a year earlier. In terms of an update on Costco logistics, it continues to drive our big and bulky sales. For the quarter, Costco logistics deliveries were up over 50% and now represent about 70% of our U.S. e-com big and bulky shipments. Average sales. We've averaged during the quarter more than 50,000 stops per week. And for the year, we project more than 3 million stops, which would be anything from dropping something off to installing and taking away the old appliance for logistics in the full year. Our e-comm mobile app, we continue to improve the site with additional features. Thus far, as I've talked about in the last few quarters, quarterly calls, we've redesigned the app header and footer. We've updated and improved the menu layout. Our members now have the ability to view warehouse receipts online via both the app and desktop. Our co-brand city visa card can now be linked to the digital membership card and can be used for payment. Members are now able to much more easily reschedule e-comm deliveries in the U.S. and Canada. The same goes for rescheduling returns pickups. And delivering in the first half of the upcoming new calendar year, a better labeling of fulfillment methods, members will be able to easily see fulfillment options, be it e-comm, same day, and even nearby warehouse availability of a particular item at a particular item level. We're rolling out new e-comm kiosks in the warehouse with video signage and easy touchscreen ordering. As well, we're rolling out e-commerce lockers. Currently in the U.S., we have 112 locations, and we plan to more than double that number during calendar year 2022. In terms of e-commerce, there's a program that received some press just yesterday called Costco Next. In a way, it's like our warehouse roadshows, but online. Currently, there are 34 suppliers and growing, but it's still quite small, offering just under 1,000 items, curated items with Costco values, so please check it out when you have a chance. From a supply chain perspective, similar issues that we outlined 12 weeks ago on the last quarterly call. Each issue ebbs and flows a little bit, but overall, the factors pressuring supply chains and inflation include port delays, container challenges, COVID disruptions, shortages of various components, raw materials, ingredients, and even packaging supplies, labor cost pressures, and truck and driver challenges. Overall, we feel we've dealt pretty well with the supply chain challenges in terms of delayed container arrivals on the Pacific Coast, about 79% of our import containers are late by an average of 51 days. A few percentage of those are actually a few days early, and many of them are a few days more than 51 late. Virtually all departments are impacted. We've ordered early in many cases, as I mentioned, I think, earlier calls, given the longer lead times. Less product and packaging challenges, but still quite a bit. Still some limitations on key items, but improving. Again, it ebbs and flows. Chip shortages are still impacting many items, some more than others. In some instances, delayed inventory simply extends the season. An example might be lawn and garden and patio. As soon as a product arrives, it sells pretty quickly, but it may extend beyond the normal seasonal time. Toys and seasonal, in fact, same thing. Some inventory, in fact, won't make it before Christmas, but we've mitigated that as best as possible and feel pretty good about it. In terms of moving on to – oh, despite all the supply chain issues, again, I feel pretty good about staying in stock and continuing to work to mitigate cost and price increases as best we can. Moving on to inflation, again, it's pretty much the same story that we told during each of the last two quarters. There have been in our variety of inflationary pressures that we and others are seeing from labor costs to freight costs to higher demand. to container shortages and port delays, to increased demand on certain product categories, much of what you see and read out there. Various shortages on everything from chips to oils and chemicals supplied by facilities hit by the Gulf storms a while back. Higher commodities prices. For Q122, in talking with our merchants, senior merchants, we estimate that overall year-over-year price inflation to be in the 4.5% to 5% range. That's a little bit higher of an estimated inflation rate that I discussed a quarter ago, but I think pretty consistent with what you read out there. All of this said, much kudos to the job that our merchants and our traffic department and our operators have all been able to do in order to get the products that we need, pivot when and where necessary, and keep our warehouses full while keeping prices low for our members and continuing to show value versus our competitors. Look, I think overall this is best reflected in the operating results that we continue to achieve despite these many challenges. Anecdotally on merchandising, holiday stuff has been strong. Again, sometimes it depends on when the merchandise gets in. Baking items, more people seem to be getting together are strong. Gift cards are up dramatically from a year ago, but it was weak a year ago. Pet products, as you might expect, are strong with the benefit of increasing pet population over the past couple of years. Alcohol and spirits are strong, including gift boxes of various items. And, of course, continued strength in consumer electronics, appliances, furniture, and mattresses and the like. Apparel actually has enjoyed much stronger sales growth this year, albeit compared to relatively flat apparel sales a year ago. One last comment. Our sustainability commitment website received a major refresh this week. So please feel free to visit the site. It's linked directly from our homepage. under the column About Us, and then click on Sustainability Commitment. Finally, in terms of upcoming releases, we will announce our December sales results for the five weeks ending Sunday, January 2nd, on Wednesday, January 5th, after market close. With that, I will open it up to questions and turn it back over to Sadie. Thank you.
Sadie
Operator
And ladies and gentlemen, if you would like to ask questions, please press star and the number one on your telephone. For our first question, we have Michael Laser from UBS. Michael, your line is open.
Michael Laser
Analyst, UBS
Good evening. Thanks a lot for taking my question. Richard, your point about the 4% to 5% inflationary increase across the assortment, typically Costco has been slower to raise prices than everyone else. That seems to be a number that's in line with others across the retail sector. So has the posture changed? with respect to passing along price increases. Why is that the case? And does Costco have more pricing power today than it ever has in the past, given the pricing gaps between you and others in the market?
Richard Galanti
Chief Financial Officer
Well, I think as it relates to passing on, we've always said we want to be the last to raise the price and the first to lower the price. recognizing there's a limit to what you can do based on these cost increases. First and foremost, I think because of our relative purchasing power and our relationships with our vendors, we with our suppliers work to mitigate those increases in any way, shape, or form we can. ultimately, that may include us taking a little less markup and maybe them taking a little less markup. There's no complete consistent answer throughout, as you might expect. But overall, I think we've done a relatively good job of that. And there is inflation in those numbers. Those numbers are kind of a combination of our cost increases as well as some price increases. And again, it fluctuates. There are you know, for every few examples of something going up, there may be an example of something flatter going down a little bit for unrelated reasons. And so, again, it's a best guess. It's fluid. You know, we saw inflation starting several months ago in a bigger way, I think, in our fiscal Q4 this summer and continuing into this fiscal year. And as we all have read articles, general articles out there about certain different major consumer product manufacturers announcing increases and continuing to do so. So I think it's going to continue. Hopefully we're getting towards the top and it'll start flattening out and subsiding, but we'll see.
Michael Laser
Analyst, UBS
My follow-up question is with the core merchandise margin ex-fuel and the core-on-core gross margin getting less bad or declining at a lesser rate this quarter than last, is this a sign that the margin here is stabilizing? And do you think the Costco exits the pandemic with a structurally higher gross margin than it's had in the past? Or are all these dynamics simply a function of what you've often said, which is when overall retail margins go up, so do Costco's, but just a little less than others?
Richard Galanti
Chief Financial Officer
Thank you. I think on the last comment, yes, in terms of that last comment you made. Look, I think at the end of the day, I think we in many ways have benefited from market share gains, hopefully some or most of which will be sticky. The biggest thing that impacts margins many often is not only on the buying power side, and arguably I can't think of any company that has the buying power per item that we do because we do our roughly $200 billion in sales with 4,000-ish items. versus anybody else that's doing it with hundreds of thousands of items or 50,000 items. But I think that having higher levels of sales productivity, particularly in things like fresh foods, helps your margin. We'll keep some of that and we'll use some of it to be even more competitive and hopefully build a bigger moat a little bit. But I think that some of it is probably structurally there. But as some famous TV actress said once, it's always going to be something, and we'll keep fighting that battle out there. But we feel pretty good about some of the structural things that have occurred that hopefully will help us in the future, but we'll have to wait and see.
Michael Laser
Analyst, UBS
Thank you very much, and have a good holiday. Thank you.
Sadie
Operator
For our next question, we have Simon Gutman from Morgan Stanley. Simon, your line is open.
Simon Gutman
Analyst, Morgan Stanley
Hey, everyone. I'll be Simeon for this call. My first question is actually a follow-up to Michael's second question. Maybe I'll ask it a different way, Richard. The two-year core-on-core looks like it's actually getting better, and you said it yourself. You thought you did a pretty good job on it, and it looks like you are. So if we're kind of getting – it feels like you're managing through the worst of it, and the environment may be getting better at the margin – I don't want to go too far – and say that. Why shouldn't this be the worst for the core-on-core, notwithstanding, you know, comparisons, but they get harder, but then they start to get easier?
Richard Galanti
Chief Financial Officer
Yeah, look, I think that's hopefully how the storybook goes. It's always going to be something, but no, look, jokes aside, we feel pretty good about structurally what we've been able to accomplish, and part of that's market share with higher sales levels. And, you know, We've not stopped what I'll call the buyer creativity of working with suppliers to figure out how to continue to drive greater value. I can think of 50 examples, but at the end of the day, we're continuing to drive value in lots of ways, whether it's changing packaging or using our volume, moving certain production to different parts of the world. and to take – again, to make that moat even a little bigger. So I agree with you that so far the story that you suggested is playing out, and hopefully it will continue to play out.
Simon Gutman
Analyst, Morgan Stanley
Fair enough. My second question is more on SG&A and the business's leverage point. We used to chat about Costco always doing mid-single-digit comps, and that's good enough to cover the SG&A dollar growth. I think this quarter, the business did about six and a half percent dollar growth adjusted. And you're going to have some of these wage investments that it will annualize. Well, maybe not to the middle or to closer to the end of the year. So I'm trying to get at what a normal post-COVID SG&A rate may look like. And then, you know, does that mean it's sort of that mid single digit comp rate that leverages those expenses?
Richard Galanti
Chief Financial Officer
I think as it relates to the, probably the best guesstimate, and I say guesstimate, not estimate, on where do you start, where's the inflection point of leveraging SG&A, probably still is in that mid-single digit range. Beyond that, who the heck knows? I mean, we've been able, you know, notwithstanding some of these increases, we've been able, particularly in wages, We've been able – again, strong comps have helped these numbers. But I think we feel pretty good about having the sales volumes that continue to be able to leverage those expenses. So as soon as we find out, we'll let you know. But, again, we're feeling pretty good about things at this juncture. And at some point, I would assume comps have to come back to hopefully better than pure average, but something back to where they had been pre-COVID. but on a higher base, and even that helps you a little bit.
Simon Gutman
Analyst, Morgan Stanley
Okay, great. Thanks. Happy holidays, everyone.
Richard Galanti
Chief Financial Officer
You too.
Sadie
Operator
For the next question, we have Christopher Hovers from JP Morgan. Christopher, your line's open.
Christopher Hovers
Analyst, JP Morgan
Thanks. Good evening, everybody. So I wanted to ask a little bit about your thoughts on holiday pull forward. Obviously, you saw an acceleration and trend on a two-year basis. in October and then November, things obviously still an amazing comp and gaining share, but trends decelerated and it was sort of against what was a weaker, I think, end of the month last year. So can you talk about what do you think is driving that? How do you think about the rest of the holiday season? And as you think about a consumer that's going to lap a bunch of stimulus in the first half of next year, What are your initial thoughts on how that all could play out?
Richard Galanti
Chief Financial Officer
Well, I think, again, as you just mentioned, November's comps were a shade under outside expectations, still very good, a couple percentage points different than what we had been enjoying a couple of months prior to that. Probably the view is a little bit of that was pulling forward, but even within last month's number, The weeks varied, and overall we're good. But, you know, just when it's reduced a little the next day, it's better than you expected. So I think the one thing that I feel good about is our in-stocks. You know, our senior merchant the other day had indicated his view is that his feeling is that we're better in stock than anybody out there. And I think part of that is the fact of limited selection. We are an item business. We could put something else in place or something, but we've done a pretty good job. I mean, I had a, you know, with a little bit of a chuckle at a call just yesterday from a reporter asking about how are we doing on cream cheese? And so I checked and we're actually, there's a cream cheese shortage out there and bagel shops are being challenged. We actually have got it as, as, the buyer said it took a little extra work, but we've got all the cream cheese we need. So I think we've done a good job in merchandising.
Christopher Hovers
Analyst, JP Morgan
Got it. And so I guess as you, you know, as you think about last year and the stimulus, I mean, do you think that, I mean, actually I think the consumer, as you get closer to Christmas and new year's probably comes back if people are, are entertaining more, like you said, in the baking side, but as you get into, you know, January and stimulus and stimulus in the spring, um, Do you think your business lifted off of stimulus last year?
Richard Galanti
Chief Financial Officer
Look, it couldn't hurt. It probably helped a little bit. I know historically when there's been some stimulus items out there, factors, our view is that we have not been impacted as much as others, but directionally we've been impacted the same. Look, if next year there's a reduction in stimulus, Lord knows what's going to happen with the stock market in general and how people feel about how they feel financially. That may all change a little bit, but we feel pretty good around here. One of the things that we've shown over the years is that both in good and bad times, we tend to do well in good times because people want to spend more, and even in less good times, people want to save more. So I think from a merchandising standpoint and in tougher times, there's additional products and services that might be willing to sell us for the first time. So in our own perverse way, we sometimes benefit from good and bad, and right now we're feeling pretty good about what the future looks like. Oh, by the way, the other thing that Bob just mentioned, that even if certain things head south in some way, shape, or form, like reduction or elimination of certain stimulus items, the supply chain at some point is going to get better. as good as our numbers are, we could do better if we had more supply of certain of those items. Even in some categories in non-food that are up 20 and 30 plus percent, the buyer's view, we're still running out of stuff that could do better if we had more. And that's not just us. I mean, it rains on everybody. But I think some improvement in supply chain will be an offset to any other things that are detrimental to that thought.
Christopher Hovers
Analyst, JP Morgan
Got it. Thanks very much, and enjoy the run on cream cheese at the clubs this weekend. Take care.
Sadie
Operator
For our next question, we have Chuck Broome from Gordon Hasek. Chuck, your line's open.
Chuck Broome
Analyst, Gordon Hasek
Hey, Richard, Bob team. Hope you guys are doing well. Just a question on leverage. If we back up the one-time charges quarter, it looks like you enjoyed over 100 basis points of improvement year-over-year at 65 basis points last quarter. not fully realizing the comps on a stack basis were better, but wondering if some investments or other costs may have rolled off. Just some thoughts on that front.
Richard Galanti
Chief Financial Officer
I think more of it is just the leverage of sales growth, frankly. Again, taking out the specific COVID-related charges that we talked about and the fact that what we didn't talk about in terms of separating in the press release was that dollar an hour increase we did in March and the new one that had a small impact in Q1 because it started six weeks ago. But in that regard, there's nothing that stands out in my view, in my estimate. I'm looking at my guys here. Do you? No, no. It was strong. Strong sales would be the number one factor.
Chuck Broome
Analyst, Gordon Hasek
Okay. Okay. Fair enough. And then just on the storefront, you know, 14 opened thus far in 22. so you're more than halfway to the goal, which is great. I'm just wondering, you know, bigger picture, has there been any more discussions to backfill some of your existing markets, you know, your higher density areas where perhaps some stores, you know, just can't handle any more productivity, any more throughput just because of the volumes?
Richard Galanti
Chief Financial Officer
I think that's – the answer is yes, and I think that'll be – you know, small methodical increases in that thought, uh, over the next several years. I mean, it used to be that we talk about when we had 400 warehouses and the average, I'm making those numbers up. So the average was, you know, 180. And, and now the, uh, you know, I think we have an average several years later in the high two hundreds in the U S at least. What? And, uh, And we have a number of units in the 300 to 400 range. I mean, not hundreds, but, you know, tens of. And so we are looking for more infill. But we've been doing that. And, you know, if it was three to five a year or three to seven, three to five a year in the last five years, is it going to be five to eight a year? Could be. I don't have that kind of detail in front of me.
Chuck Broome
Analyst, Gordon Hasek
Okay, great. My last one is just to follow up on Chris's on November. I believe you guys did call out that there was some moderation in retail inflation, you know, maybe 150 basis points or so. I'm just wondering if you could provide any color on where that retail inflation came in and I guess why that happened. Was it self-inflicted? Just wanted to give some color there.
Richard Galanti
Chief Financial Officer
One thing that was a little lower was from the increases in food and sundries and some food and sundries items and fresh. that had spiked even more. It's still up year over year, but it came down a little bit from where it had been. And we haven't quantified anything specific beyond that. Okay.
Unknown
Unknown
All right.
Richard Galanti
Chief Financial Officer
And by the way, as you might expect, there are suppliers out there that are saying, hey, you know, come January, February, you'll see some more increases. And, again, this is not inconsistent with what I've read in general articles in the various business periodicals.
Chuck Broome
Analyst, Gordon Hasek
Okay, so just a lot of timing differences. Okay.
Richard Galanti
Chief Financial Officer
Yeah.
Chuck Broome
Analyst, Gordon Hasek
Great. Thanks a lot.
Sadie
Operator
For the next question, we have John Heibenbockel from Guggenheim. John, your line is open.
John Heibenbockel
Analyst, Guggenheim
So, Richard, how is KS performing, and what happens or how do you think about it in an inflationary environment in terms of how you take price versus like items on the national brand side? And does KS do better in an inflationary environment?
Richard Galanti
Chief Financial Officer
Look, many of our KS items are of such large volumes, it's not unlike dealing with the comparable large volumes we do in a branded CPG item. And so we're out there, you know, fighting with both of them to try to mitigate those cost increases. KS still grows at a little faster rate than others, but nothing discernible. I think we keep finding new items to do KS with and for a variety of different reasons, and so it continues to drive that brand. But, no, I don't think there's a – we don't see a big difference of how that's changing.
John Heibenbockel
Analyst, Guggenheim
Okay. Secondly, you know, you talked – the 70% on Costco logistics is 70% of your needs. You're at what capacity in logistics? Is it still 50% or is it crept above that?
Richard Galanti
Chief Financial Officer
It's in the 50 range. Maybe it's slightly higher than that based on when we originally bought what's now Costco Logistics a year and a half ago. We've moved over a bunch of volume. We've grown it as well, grown our total base of need. And I think we're slightly above the 50% that we felt we had capacity for at the time. and certainly have plenty of capacity over the next few years. Mind you, we're spending money on it. Part of our fulfillment and logistics is, I think I mentioned on the last quarterly call within CapEx, we had spent $340 or so million on a multi-acre 1.6 million square foot distribution facility in Southern California. That's for a variety of needs. Much of what we bought in the Innovel acquisition in March or April of 2020, uh, more than 10 million square feet of space around the country. Uh, much of it's leased, much of it's fine by the way, but we're, uh, not all of it was geographically, particularly the big sites, the billion square foot sites were in areas where we're stronger relative to where, uh, Sears is stronger or they had most of their business at the time. So, uh, we're still spending money on it and upgrading it. And, uh, But, you know, again, from a merchandising standpoint, we're very excited about it, and it's helped us grow that business in a big way. And given our small market share of many of those items, particularly on the appliance side, we feel there's a lot of growth potential for us.
John Heibenbockel
Analyst, Guggenheim
Okay, thank you.
Sadie
Operator
For the next question, we have Karen Schwartz from Barclays. Karen, your line's open. Thank you.
Karen Schwartz
Analyst, Barclays
Hey, thanks very much. I wanted to just talk about ticket a little bit. So U.S. ticket at 3.5%. Can you kind of parse that out on units per transaction versus AUP, but also tie that into the inflation numbers that you called out for the quarter and or your expectations on inflation?
Richard Galanti
Chief Financial Officer
Honestly, I can't. I don't have that detail or thought in front of me. Generally speaking, you've got electronics like TVs and what have you that are going down in price, maybe a little less this year because there's less promotions because of shortages. I mean, at every budget meeting every four weeks, we're presented examples of items where we're taking down the price of high-volume key items by changing the packaging, by moving some – some aspect of manufacturing to another part of the world. And so I don't have the detail, Karen, in front of me for that. Sorry.
Karen Schwartz
Analyst, Barclays
Okay. And then I wanted to – I don't think this has been asked for a while, but can you give an update maybe on what the average ticket is for executive members versus gold markets? And then, you know, I know you gave the – obviously you've given the percent of sales, but frequency of executive versus gold, how maybe that's changed over the last, you know, almost two years of the pandemic?
Richard Galanti
Chief Financial Officer
I will – somebody's just running out of the room to see if they can grab that sheet, and I'll answer it as soon as they get back. If you want to ask another question or move on to the next one, but I'll intervene when he gets back.
Karen Schwartz
Analyst, Barclays
Well, my standard question would be just on your cash balance in terms of thoughts on a special dividend.
Richard Galanti
Chief Financial Officer
Okay. Well, as soon as we know, you'll know, or the day after. Look, our cash position is strong. One of the things I pointed out is our CapEx is also increasing in a conscious way. Notwithstanding that, our cash flow from operations is growing at quite a stronger rate as well. It's something that we've done four times in eight years. We and the shareholders seem to like it when we do it. And so I'm not trying to be cute, but we haven't made that decision at this juncture. It's probably a when, not if, but, you know, when will be when we do it.
Karen Schwartz
Analyst, Barclays
Okay. And then maybe just while you're waiting for that numbers on the executive, can you just maybe give us some color on what percent of freight is actually spot versus contract? I don't know if you've ever given that number.
Richard Galanti
Chief Financial Officer
I don't have the exact number, but I'm willing to bet it's 80 plus percent. I could be wrong a little bit, but contracted. Now, recognizing it with contracts, we might do one-, two-, and three-year contracts, so we're still benefiting on three-year stuff and benefiting a little on two-year stuff and have now gone beyond the benefit of the one-year stuff. And so it's over a two- or three-year period, but our assumption is it'll take less than that time to start to normalize somewhat.
Kelly Banya
Analyst, BMO Capital
Okay, great.
Richard Galanti
Chief Financial Officer
Is it higher today than it was? Yes. But I think, again, we probably, with other large users of freight and containers, have probably done a pretty good job of at least staggering that and not having to do a lot of spot stuff so far.
Karen Schwartz
Analyst, Barclays
Great. Yeah, I mean, if you get those numbers on executive and gold on ticket and frequency, that would be great. Totally.
Richard Galanti
Chief Financial Officer
Okay, what they came back with right now is I don't have quickly average ticket changes, but the total spend per executive member compared to a Gold Star member is almost 3X.
Karen Schwartz
Analyst, Barclays
Okay, thank you. Call it two and a half. Thank you. Okay, thanks so much.
Sadie
Operator
For our next question, we have Greg Maddock from Evercore ISI. Greg, your line is open.
Greg Maddock
Analyst, Evercore ISI
Hi, thanks. I have two questions, Richard. One is digging a little bit into the margins, the gross margins. You said gas and travel had helped but then offset by e-commerce. Could you sort of explain, you know, so that gas penny profit was up even if the mix hurt?
Brandon Peterman
Analyst, Citi
Is that?
Richard Galanti
Chief Financial Officer
Margin percent was down, but you've got a 40%, 50% increase in price per gallon. Got it. So you still might have – More pennies per gallon, but the margin itself was down.
Greg Maddock
Analyst, Evercore ISI
Got it. And then that was offset by e-commerce.
Richard Galanti
Chief Financial Officer
Well, e-commerce, yeah. And, again, I wouldn't read a lot into any of that description. We're just trying to share with everyone directionally what helps it and hurts it a little bit. E-commerce, just given all the activity we've gotten, expenditures on fulfillment and expansion, and doing what we can – you know, over time when we're pulling tickets, if we, if something else happened, I don't view as a big issue for my, it's not whatever, whether the margins up a little down a little, it's less about competition and more about what's the product mix that month or week and what else is going on with this rapid expansion and investment in it.
Greg Maddock
Analyst, Evercore ISI
Got it. And then maybe to tie back your discussion on the logistics, Big and bulky, if we look at if e-commerce is roughly 8% of sales, is big and bulky a quarter of that? Is that the kind of scale we're talking about?
Richard Galanti
Chief Financial Officer
It's over a third.
Greg Maddock
Analyst, Evercore ISI
It's over a third. Great. And then last but not least, the renewal rates, you know, continuing to tick up. I guess impressive. How do we – Shouldn't that come off at some point, just given that you have more first-year members?
Richard Galanti
Chief Financial Officer
When it gets to 100. No, just kidding. Look, I think, as I mentioned earlier when I was speaking, probably the single biggest thing that's helping it right now is auto-renew. As we get more people on a credit card, both in the two big co-branded in the U.S. and Canada, that's a no-brainer to help a little bit. As we convert people to executive member, and as we, for every 100 new people signing up, a slightly higher number of them sign up as executive members, they are more likely to renew. So those things help as well. The thing I mentioned about new warehouses in markets around the world tend to be, while they have a much lower renewal rate in their first year of renewal or year two, then that will continue to grow as more people have renewed the prior year. Those are starting at – generally, those are starting at higher rates than they were. So all those things help a little bit. I'd like to think it's all the wonderful things we do and the value proposition, but certainly auto-renew is probably a good help there.
Greg Maddock
Analyst, Evercore ISI
Got it. And then last, because someone has to ask it, just fee increase. I guess back half next year is when it will be five years since the last one. Okay. What are the thoughts on that, just given that members seem to be self-selecting the fee hike already through the executive membership? Does that change your thought process as to when you might hike the fee?
Richard Galanti
Chief Financial Officer
No. And our only thought is we'll probably start getting questions about now. There you go. But it's still a while away. But we certainly feel good, as I've said in the past, renewal rates, strong renewal rates and loyalty. help that thought process, and we'll see. But, you know, it's still a little bit of time to think about it.
Greg Maddock
Analyst, Evercore ISI
Great. Well, have a great holiday season, everyone.
Richard Galanti
Chief Financial Officer
Thank you.
Sadie
Operator
For our next question, we have Rupesh Parikh from Oppenheimer. Rupesh, your line is open.
Rupesh Parikh
Analyst, Oppenheimer
Good evening. Thanks for taking my question. So I wanted to touch on Canada and other internationals. We saw a strong and accelerating two-year conference for both Canada and other internationals. Is there any more color you can provide in terms of maybe what you're seeing in those geographies?
Richard Galanti
Chief Financial Officer
I'm getting a little help here. It's more, it's probably most, I agree, it's probably most about how COVID impacted different countries differently timing-wise. I remember a year ago, a year and a half ago, some of the foreign countries did better while we were being locked down And then a little later, they got locked down. And so part of it is one of the reasons I think everybody's picked up on the two-year stack concept. But I think that's, as much as anything, that's the reason.
Rupesh Parikh
Analyst, Oppenheimer
Okay, great. And then as you look at your ancillary businesses, is there a way you can find an update in terms of how they're trending now versus pre-pandemic?
Richard Galanti
Chief Financial Officer
I don't have that detail with me. But generally speaking, you know, tires are picked up as an example. It's not an ancillary business. But the Costco auto program is down because there's a shortage of cars out there. Travel is up, not where it was pre. It was almost back to where it was pre-COVID, and then Delta variant hit. And then it was coming back again, and then Omicron hit. And so it fluctuates pretty quickly. Omicron, no. And I'm trying to think of the other things. Food courts have come back. I don't think they're quite where they were, but they're almost there. Hearing aids have come back, but still, I think, slightly below pre-pandemic. Optical is doing great. Pharmacy is doing great, helped, frankly, by the shots. We, like other retail pharmacies, are providing plenty of vaccines.
Rupesh Parikh
Analyst, Oppenheimer
Okay, great. Thank you for all the color.
Richard Galanti
Chief Financial Officer
Okay.
Sadie
Operator
For our next question, we have Stephanie Winsick from Jefferies. Stephanie, your line's open.
Stephanie Winsick
Analyst, Jefferies
Hi, good afternoon. This is Blake on for Steph. First question will be higher level. You know, you guys are a big proponent of the in-store shopping experience. It seems like store sales have been fairly strong as of late for retailers. So wondering, you know, how have your How's your in-store shopping compared versus e-comm versus your expectations recently? And then maybe if you can share any e-comm pilots you might have that you've been working on. I know you mentioned you did a pickup test, but you discontinued that. Anything maybe in the works that you can share?
Richard Galanti
Chief Financial Officer
Well, you know, both in-store and online have picked up. You know, the pickup from things like Instacart for Same Day Fresh skyrocketed during the lockdowns in mid to late summer 2020. It came down from those peaks, but it's still way above where it was pre-COVID. E-commerce, as you know, because we talk about it every quarter, is 8% or 9% of our sales on a company that has $192 billion in sales for the year ended this last August. So that's a lot bigger than it was You know, two years ago, I think the last three or four quarters, the two-year stack is 100-plus percent. But notwithstanding that, and part of that is the big and bulky that has helped that number, which we really weren't driving that kind of business in store anyway. The fact that I think that, as we've heard occasionally, that notwithstanding some people don't like our mask requirements when we first put them in back in May of 2020 – I think overall people felt if I've got to go out, I'm going to go out to one place and bulk up on stuff. And with taller ceilings and wider aisles and all those things, I got to believe that psychologically that's helped a little bit. At the end of the day, we were all surprised by, if you go back to March of 2020, we're surprised by the strength in non-foods categories, summer and fall of 2020, much less now. much the same now. It was because people weren't traveling and they weren't going to games and concerts, but they were buying things for their home. And we certainly had, on top of all the food items, all the other things they could buy for their home. So that was a pleasant surprise to us, and that's continued. In terms of other tests, not a whole lot. I mean, we did have that small test in New Mexico with buy online and pick up in store. Warp, as I mentioned on the call, you know, have over a year from now have over 200 of our u.s warehouses with lockers um uh in terms of buying online and pick up a store we're not quite sure about that um we have very busy locations there's not a lot of room for it and it doesn't seem to be a lot of people clamoring for in fact half or over half the people that come in and do that on a few things that we buy online and the lockers they come in and shop while they're there and so and that's what we want so uh i Beyond that, I think some of the things we're doing that I mentioned briefly about mobile and digital, some of these things everybody else have. We are sometimes late to the game on some of these things, but those should be all net additive to what we do.
Stephanie Winsick
Analyst, Jefferies
That's super helpful. I was also wondering on your inventory positioning, how much are you getting ahead of any seasonal items or any challenges you may foresee for Q2 and Q3 for the spring and summer?
Richard Galanti
Chief Financial Officer
I don't know exactly. I know that consciously the buyers, when they present at the budget meetings, are talking about those issues. We are bringing in things early. We certainly have, you know, you think about it, what we call our depot, our view of distribution system in the U.S. was something like 10 million square feet, and we essentially slightly more than doubled that with the InterVal acquisition. Aside from other things, that helps us with a little storage if we need it or bringing in things early. And recognizing we start with – we are somewhat seasonal, but historically we've always brought things in early anyway. So whatever it may be, we certainly have the cash, as somebody mentioned earlier, to have some extra billion dollars invested in inventory, even if it hangs around for a little bit. But I think overall some of our items are still a little later than they would be pre-COVID, but better than they would be if we were not – doing as good a job as I think we are doing on, on, on, on forward buying. Perfect.
Stephanie Winsick
Analyst, Jefferies
If I could sneak one last one in, I might've missed it, but I think you said for the net new openings this year, you said 19. I thought the last quarter you were aiming more towards 25. Is there anything to call out there?
Richard Galanti
Chief Financial Officer
Well, I said it was 19 more in the, in the, the last three quarters of the year, the fiscal year plus the 81. Perfect.
Stephanie Winsick
Analyst, Jefferies
Thank you very much.
Sadie
Operator
For our next question, we have Paul Lewis from Citi. Paul, your line's open.
Brandon Peterman
Analyst, Citi
Hey, everyone. This is Brandon Peterman for Paul. I was wondering if we could talk about the increase in CapEx. I think last we spoke, we thought CapEx would have a three in front of it. Now it sounds like it has a four in front of it. I was just wondering, was there a change in the strategy there? specifically on the, on the e-com investments, you know, do you feel like you're playing some catch up there or laying the groundwork for growth? Just anything that you can share with that.
Richard Galanti
Chief Financial Officer
Sure. I think in sort of previous, as it relates to this year, we had talked about, I think three, eight to four, two quote unquote, and now we're saying about four. And these numbers are up from the, from the mid threes over the last couple of years, low to mid threes over the last couple of years. In fact, last year's three, six, included a $340 or $345 million asset purchase that I mentioned earlier in the southwest in Southern California, which is basically a million and a half plus square foot facility with lots of acreage to help with our fulfillment as well as our import stuff. And so I think there's – if you said what are the big things taking you from the low threes to the low fours over a few years of period, it's – More international expansions, which tends to be a little more expensive for location. More expansion, you know, in fiscal 20, we were down to 13 net new units because some delays with COVID. I think we were at 20 and 21, and we're going to be 27 net new units this fiscal year, plus five reloads, which is six reloads planned. We might miss that a little bit, but at the end of the day, so there's more warehouses. Clearly more in the whole fulfillment process. concept, starting with the billion-dollar acquisition a year ago of what's now Costco Logistics, starting with adding additional square footage to that, as well as the international things. And even on the distribution side, or what we call our cross-stock depots, spending money overseas now in some of these countries to do some of that in a better way. Actually building a mini-depot in Hawaii where we have Five locations? Seven, I'm sorry. Seven locations, but huge volume locations. And so we've gotten to the volume and efficiency there that these are good investments. So it's a lot of those things. Mind you, we still spend all in, you know, close to a billion dollars a year in IT.
Brandon Peterman
Analyst, Citi
Got it. And that's how we should kind of think about it going forward long term.
Richard Galanti
Chief Financial Officer
By the way, that's not all CapEx. That's expenses as well. Go ahead. I'm sorry.
Brandon Peterman
Analyst, Citi
And the $4 billion range is what we should think about CapEx for the long term?
Richard Galanti
Chief Financial Officer
I don't know. For the long term, I think $4 sounds about right for the next year or two. And if things continue to grow well, go well and grow well, maybe it goes up from there a little bit. But, you know, we're not looking to spend it if we don't think we have good things to spend it on, just because our cash flow has been exceeding net income plus, you know, cash flow has been exceeding regular dividend plus capital expenditures and the like. Got it.
Brandon Peterman
Analyst, Citi
And you also mentioned that, you know, you're able to change out products when you're, you know, faced with shortages. I was wondering if you could quantify that versus, you know, kind of a normal quarter. And, you know, if you are switching out, you know, more than usual, you know, what impact does that have on, you know, consumer behavior there and anything on the logistics side as well?
Richard Galanti
Chief Financial Officer
I think it's – I don't have the exact number, but my guess is it's a small – low to mid-single-digit percentage. What it means, though, is when going all the way back to spring of 2020 and people were hoarding goods, we were going out to additional suppliers to see what we can get, recognizing from their perspective it creates new relationships, which we'll honor going forward, not just for the three months that we needed it then. And so I think there were opportunities to just expand product brands and by necessity to some things. And with, I think, going into last summer and fall, with that advent of all the things for the home, both patio furniture and lawn garden and barbecue grills and indoor furniture and electronics and gadgets for the kitchen, we took advantage of that and brought in additional items. And so it's more that than anything. And the treasure hunt. Yeah. So it's still a small piece, but I think it's – sometimes when I go into some retailers, I'm not going to name names, but you'll see a shelf half empty or some spaces. First of all, why don't you put something there? But at the end of the day, I think our buyers have done a very good job of keeping the warehouses full.
Brandon Peterman
Analyst, Citi
Great. Thanks, and good luck for a holiday. Thank you.
Sadie
Operator
For our next question, we have Edward Kelly from Wells Fargo. Edward, your line is open.
Edward Kelly
Analyst, Wells Fargo
Hi, good afternoon, guys. Happy holidays. Richard, I wanted to ask you, gross margin, you know, all things considered, any additional thoughts that you can share in the current quarter? Any reason we should expect some incremental, you know, somewhat similar?
Richard Galanti
Chief Financial Officer
You were breaking up entirely during that call, so I heard about every other word, if you want to repeat yourself.
Edward Kelly
Analyst, Wells Fargo
Yeah, sorry. So I wanted to ask you about the gross margin. You know, as you said, pretty good, all things considered. Any additional thoughts you can share on the current quarter? You know, comparisons in the core look similar, I think. Just wondering if there's any reason we should expect any incremental pressure.
Richard Galanti
Chief Financial Officer
From a competitive standpoint, I mean, there's lots of companies. Everybody's competitive. Again, I think structurally our model allows us to benefit from that. We talked about more pennies per gallon of profit. That allows us to do some other things. I think we have a lot of levers to pull here, and we feel pretty good that we are able to – To hold the prices on key items and to – I don't really think that we consider the challenge of achieving a margin. We're pretty good at figuring out how to get there while still being the company we are in terms of competitiveness. So no big changes of what we see out there. Okay. Just there's a lot of changes every month, and some things go up and some things go down, but overall we feel pretty good about it.
Edward Kelly
Analyst, Wells Fargo
All right, and it's just fun for a little bit more big picture just around customer data. I was hoping you maybe could just provide an update on things like personalization and then media is something that we hear a lot of people talk about. Maybe just any thoughts on what you're doing with that opportunity as well.
Richard Galanti
Chief Financial Officer
I think there's still low-hanging fruit on the tree here. We've talked about it a little bit. We've done a little bit more targeting than we have ever done, but very little. There is more to come. You know, it was just a year and a half ago that we hired someone at a relatively senior level in terms of, you know, data analytics. But that's not the only thing they're working on in the group that he's put together. But, you know, so I think those are things that will come over time in the next few years. That's pretty much what I can tell you about that. Okay. Thank you. Okay, I'm going to take two more questions, Sadie.
Sadie
Operator
Will do, sir. And for the next question, we have Laura Champagne from Loop Capital. Laura, line's open.
Laura Champagne
Analyst, Loop Capital
Thanks, Richard. Mine will be quick. It's a follow-on. You'd mentioned that renewal rates are still headed higher in part because of, likely, because of the auto-renew. What percentage of your membership is on auto-renew at this point?
Chuck Broome
Analyst, Gordon Hasek
A little over 15%. It's a little under 50 U.S.
Richard Galanti
Chief Financial Officer
and Canada. It's about 50 in the U.S. and Canada, which would imply, and that's really where we have it, where we have the co-brand cards. And U.S. and Canada is about 80% of our companies, so the 50 becomes a 40, rough numbers.
Rupesh Parikh
Analyst, Oppenheimer
Got it. You can do it on any card.
Richard Galanti
Chief Financial Officer
Oh, I'm sorry. You can do it on any card, not just co-brand. But in the U.S. and Canada, it's about 50.
Laura Champagne
Analyst, Loop Capital
Understood. Thank you so much.
Sadie
Operator
And for our last question, we have Kelly Banya from BMO Capital. Kelly, line's open.
Kelly Banya
Analyst, BMO Capital
Oh, thanks for squeezing me in here. Just wanted to talk, Richard, about just the inflationary environment. And you've talked a little bit in the past couple quarters about how your price gaps have widened. Do you think this kind of magnitude of inflation is just
Richard Galanti
Chief Financial Officer
good for costco's business i mean have you seen anything like this in the past where it could possibly just drive even more volume into your doors i mean from an argument that things are more costly on the one hand maybe it reduces demand overall on the sense that we're the extreme value proposition that helps us uh so you know who the heck knows i don't you know I think what I was reading this morning in the paper was this is the highest inflation in so many years. It wasn't that long ago, though, 10-plus years ago, that regular inflation was 2% or 3% a year. And, of course, it's going to be a little more for a year. But at the end of the day, I think it helps us a little because of the value proposition that we have.
Kelly Banya
Analyst, BMO Capital
That makes sense, and a lot has been asked here, but just wanted to also just check on self-checkout and where you are with that and if there's any color you can help us understand on the savings or the impact on the cost structure when you put in some self-checkout and the potential for that initiative going forward.
Richard Galanti
Chief Financial Officer
We pretty much have it now in most locations, and I'm speaking of the U.S. and Canada. And I know even across the street in many locations we've expanded it from originally, you know, two lanes of three or six to three lanes of three or even four lanes of three. So in a four-lane area you could have 12 people checking out. And so my guess is it's still going to grow a little as we expand existing units to offer a little bit more of it. And it's been a positive.
Kelly Banya
Analyst, BMO Capital
Okay, thank you.
Richard Galanti
Chief Financial Officer
Well, thank you, everyone, and have a good holiday season, and we're around to answer additional questions. Have a good day.
Sadie
Operator
And ladies and gentlemen, this concludes today's conference call. Thank you all for participating.
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