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 first quarter 2026 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. 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 us for Costco's first quarter 2026 earnings call. I'd like to start by reminding you that these discussions will include forward-looking steps 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 Bakris is once again 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. I'll start with a few brief comments on some of our key growth initiatives before turning it back to Gary to discuss the results of the quarter. In Q1, we opened eight new warehouses, including a relocation in Canada, our third warehouse in France, four net new US locations, and two additional Canadian business centers. This brings our total warehouse count to 921 worldwide. We continue to see significant opportunities for future warehouse growth, both domestically and across the international markets and where we operate. While delays with a couple of our buildings in Spain resulted in us revising our plan net new openings for fiscal year 26 down to 28, we continue to plan for 30 plus net openings per year in future years. We've increased the size of our real estate team to support this goal, and without compromising on quality, were being created with real estate projects to further increase the potential for future growth. Recent examples of this include our new warehouse in Malouche, France, where we converted an old hypermart into a Costco warehouse, as well as two Canadian business centers that opened in the last month, both of which were refurbished home improvement warehouses. This approach broadens our options for market expansion and lowers the capital investment required. In addition to opening net new buildings, we will continue to relocate select high volume warehouses to larger locations with more parking and expanded gas stations. By doing this, we're able to provide a better experience for our members and significantly accelerate sales growth in those markets. In fiscal year 26, we have five relocations planned, including three in the US and one each in Canada and Taiwan. The success of our new warehouse expansion has allowed us to consistently drive top line revenue well in excess of our comparable sales and gain significant market share. We continue to see improvements in the performance of our new buildings and a reduction in their time to maturity. With fiscal year 25 openings generating an annualized $192 million per warehouse of sales in the year of opening, that is up from $150 million for new warehouses opened just two years earlier. Turning to digital, our digital vision at Costco is to deliver a seamless experience that builds trust and loyalty with our members both in warehouse and online. We aim to make the shopping at Costco easier, faster, and more personal, no matter where or how our members choose to shop. This isn't about technology for technology's sake. It's about using technology to strengthen the fundamentals that makes Costco who we are, increasing member loyalty, driving top line sales, and improving efficiency in our operations so that we can bring goods to market at the lowest possible price. Progress has already begun and is delivering tangible results. In the warehouse, implementation of scanning memberships at entry, the Costco digital wallet, and pre-scanning small to medium-sized baskets is leading to better member experience and improved productivity. The warehouses that have first adopted this prescan technology have shown checkout speed improvements of up to 20%. And across our U.S. warehouses overall, we achieved record levels of checkout productivity in the final weeks of the quarter. Online, we continue to make enhancements to improve the member experience on our site and app. As an example, this quarter we launched new personalization capabilities that provide members with more relevant product recommendations based on their past search history. The sales lift from this enhancement has been very positive. AI is also being interwoven into our business where we believe it can strengthen our model. Again, we're approaching it in a very Costco way, practical, member focused, and grounded in tangible business value. An early use case has involved integrating AI into our pharmacy inventory system. This system now compares prescription drug pricing across vendors and autonomously and predictably reorders inventory, improving our in-stocks to more than 98%. This change has played an important role in helping us achieve mid-teen growth in pharmacy scripts filled and has improved margins while lowering prices to our members. We're now in the process of deploying AI tools in our gas business which we expect will improve inventory management and drive incremental sales by ensuring we're always delivering the best value to our members. These are just a few of the use cases we're developing into our business as we speak. While digital and technology will play an important role in our future, our people are what makes Costco special. I'd like to recognize the outstanding work done by our more than 340,000 employees around the world. Their commitment to our company and the Costco experience for our members is what drives our success. I'd like to thank our entire team for their outstanding work this year, and especially now during our busiest season. I also wanted to mention that our annual update to Costco sustainability commitments was made available online earlier this month. This report provides a comprehensive review of the progress we're making towards our sustainability objectives, and I would encourage you to take a look. With that, I'll turn it back over to Gary to discuss the results for the quarter, and I'll jump back on during Q&A to field some questions.