Costco Wholesale Corporation

Ladies and gentlemen, thank you for standing by. My name is Abby and I will be your conference operator today. At this time, I would like to welcome everyone to the Costco Wholesale Corporation Fiscal Second Quarter 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time. Thank you. And I would now like to turn the conference over to Gary Millerchip, Chief Financial Officer. You may begin.

Good afternoon, everyone, and thank you for joining Costco's second quarter 2025 earnings call. In addition to covering our second quarter financial results today, we will also review our February sales results. I'd like to start by reminding you 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. Comparable sales and comparable sales excluding impacts from changes in gasoline prices and foreign exchange are intended as supplemental information and are not a substitute for net sales presented in accordance with GAAP. Before we dive into the numbers, I'm delighted to say that Ron Vakris is joining me for today's call. I'll now hand over to Ron for some opening comments.

Thank you, Gary, and good afternoon, everyone. Thank you for joining us today. As we wrap up the second quarter of fiscal 2025, I'd like to make a few brief comments on some of the highlights since we last spoke. While we only opened one new warehouse in the second quarter of fiscal 25, we have big plans for the rest of the fiscal year. Tomorrow, we will open up in Brentwood, California, followed by an opening in Highlands, California, the following day and four additional U.S. openings next week. including our Sharon, Massachusetts opening on March 12th, which will be our 620th U.S. warehouse and the 900th Costco location worldwide. We're projecting 28 new openings during fiscal year 25, of which three will be relocations for 25 net new buildings. In addition to adding warehouses to serve our members, we also extended our gas station hours in North America during the quarter, to make filling up at Costco more convenient for our members. Generally, our stations are now staying open an hour later than they did previously, with some opening earlier as well. Our updated employee agreement took effect this week in the US and Canada. This agreement reflects our continued commitment to provide industry leading pay and benefits for our employees. Highlights from the new agreement include an immediate $1 hour top of scale increase followed by an additional dollar top of scale increase on March of 2026 and again in March of 2027. The top of scale wage for U.S. service clerks is now $31.90 an hour. Additionally, on March 3rd, our bottom of the scale wage increased by $0.50 an hour, taking our minimum wage to $20 an hour. The average wage for the US and Canada employees is now a little more than $31 an hour, including hourly employee bonuses, with the majority of their employees at the top scale based on tenure. Paid vacation for new employees is now offered during the first year of employment, and a six-week vacation is available to US employees after 30 years of service. Our operations and merchandising teams did a fantastic job in the quarter. delivering strong operating results despite the uncertain macro environment. In particular, our Canada and other international business had an outstanding quarter, delivering record results on a constant currency basis, although reported results outside the U.S. were negatively impacted by foreign exchange fluctuations year over year. As we look ahead to the remainder of this fiscal year, headwinds from foreign exchange look likely to continue. Given events over the last week, it is difficult to predict the impact of tariffs, but our team remains agile and our goal will be to minimize the impact of related cost increases to our members. About a third of our sales in the U.S. are imported from other countries, and less than half of those are items coming from China, Mexico, and Canada. In uncertain times, our members have historically placed even greater importance on the value of high-quality items at great prices and our teams will continue to rise to this challenge by leveraging our global buying power, strong supplier relationships, and innovation. With that said, I'll turn it back over to Gary to discuss the results of the quarter and February sales. I'll jump back on during Q&A to field some questions.