Costco Wholesale Corporation

Ladies and gentlemen, thank you for standing by. My name is Abby and I'll be your conference operator today. At this time, I would like to welcome everyone to the Costco wholesale corporation's fourth quarter fiscal 25 earnings 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 star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time. And thank you. I would now like to turn the conference over to Mr. Gary Millerchip, Chief Financial Officer. You may begin.

Good afternoon, everyone, and thank you for joining us for Costco's fourth quarter 2025 earnings call. 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 our financial results, I'm delighted to say that Ron Vakris is once again joining me for today's call. I'll now hand over to Ron for some opening comments.

Thank you, Gary. Good afternoon, everyone, and thank you for joining us today. As we wrap up fiscal year 2025, I'll make a few brief comments on some of the highlights. In the fourth quarter, we opened 10 new warehouses, including a relocation in Canada, our 20th warehouse in Korea, our second warehouse in Sweden, and five net new locations in the US. For the fiscal year, we opened 27 new warehouses, including three relocations for a total of 24 net new buildings. This brings our total warehouse count to 914 worldwide. We plan to open another 35 warehouses in fiscal year 26, of which five are relocations. We continue to see significant opportunities for expansion both domestically and internationally across the markets where we currently operate. Gary will go into details about the quarter results, but a few highlights for the fiscal year. Net sales came in just under $270 billion, an increase of over 8% versus last year, and e-commerce sales exceeded $19.6 billion, increasing over 15%. And we had a record year for gas volumes, which benefited from longer gas station hours, new gas stations, and expansions of existing gas stations as well. We also recently celebrated a few milestones, including the 40th anniversary of our $1.50 hot dog and soda combo. Fittingly, we've just completed the rollout of Coca-Cola, the original soda partner from the 1985 inception of the iconic combo. to all food courts worldwide. Our private label Kirkland Signature reached its 30th year anniversary this year. Kirkland Signature sales penetration continues to increase, bringing even more high quality value to our members while offsetting potentially inflationary impacts from tariffs. As mentioned last quarter, we are continuing to look at opportunities to move more KS product sourcing into the countries and regions where the items are sold And this is helping to lower costs as well as reduce emissions from transporting goods around the world. To increase value and convenience for our members, on June 30th, we added executive member exclusive operating hours in the mornings and additional hour on Saturday evenings for all members in our U.S. warehouses. We estimate these incremental hours have added about 1% to weekly U.S. sales since implementation. This has been very well received by our members. In addition to the early opening hours for executive members, we also introduced a $10 credit per month on Instacart purchases greater than $150. Since announcing these new executive benefits, we've seen the meaningful increase in upgrades from Gold Star members to executive membership. Another way we are improving the member experience is through the rollout of enhanced checkout technology in all U.S. warehouses. This is speeding up the checkout process by allowing our employees to scan small and medium sized transactions while the member is still in line. So upon reaching the cashier, nothing has to be removed from the cart, only payment is needed. We also continue to make progress with our technology roadmap for digital and e-commerce. Enhancements this quarter included using data augmentation to improve search effectiveness, adding passwordless sign-in to our mobile app, and creating a waiting room for high velocity items such as Pokemon cards. These waiting rooms reduce the traffic from bots, increase the opportunity for members to purchase high demand items while improving the speed and the stability of the site during peak traffic periods. Reflecting on fiscal year 2025 overall, our merchandising and operations team did a fantastic job delivering strong financial results while also investing in our employees and improving value and convenience for our members. Our merchants adjusted their plans to mitigate tariff impacts and source items that our members need while delivering the lowest price at the best value. Our operators quickly and efficiently adapted to pay raises in March of 24, July of 24, and again March of 25 that brought our average hourly U.S. wage to over $31 per hour, and most recently to the expansion of our operating hours. Their focus on efficiency and improving productivity allowed us to absorb these significant investments with minimal impact to our SG&A rate. As we look ahead to fiscal year 2026, despite the current macroeconomic uncertainty, we remain confident in our ability to grow market share by continuing to deliver exciting, high quality items at the best value for our members. With that, I'll turn it back over to Gary to discuss the results for the quarter. And I'll jump back in during Q&A to field some questions.