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's third 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 again. 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 third quarter 2026 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 that 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 Baccaras 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, everybody, and thank you for joining us today. I'll make a few comments on current events and provide a brief update on our strategic priorities before turning the call back over to Gary. Against the backdrop of ongoing macro uncertainty, our focus is providing quality goods and services at the lowest possible price continues to resonate strongly with our members. Nowhere has this been more apparent in the third quarter than our gas business. As events in the Middle East have had a significant impact on product supply and gas prices, Our focus, as always, is to be there for our members by staying in stock and offering the best value. The result was record-breaking volumes. All three four-week fiscal periods of the quarter set successive all-time company volume sales records, with the final five weeks of the quarter becoming our top five volume weeks ever. Our gas team performed exceptionally well to manage this unprecedented demand, which requires multiple daily gas deliveries to many locations. The high consumer price sensitivity, which fueled these record volumes, also drove many members to use our gas stations for the very first time in the third quarter. We believe this will drive even greater loyalty with these members in the future as members who use our gas stations typically spend more with us in the warehouse. We're closely monitoring the longer-term inflationary impacts of higher oil prices as well as the future impacts of tariffs. Our buyers continue to demonstrate their ability to adapt, that are using their significant experience and expertise to try to reduce the impacts on prices for our members. Our goal is to be the first to lower prices and the last to raise them. And Gary will share some examples later on the call where we lowered prices this quarter. We're also able to bring greater value to our members through many exciting new Kirkland signature items in the third quarter. On the topic of tariffs, we've started submitting our refund claims for the IEPA tariffs. We're doing this through the process set up by the US Customs and Border Protection. These submissions will go in over what may be the next few months, and based on what other claimants have experienced, we should start receiving refunds on approved claims on a rolling basis over the following two to three months. As we've mentioned before, our plan is to return to our members in some form the portion of tariffs that were passed on to them. How much we return and when depends on a variety of factors, including how much refund money we receive and when it arrives, as well as developments in the lawsuit filed against the company regarding the return process. Turning to progress with growth priorities, our real estate and operations team continue to focus on increasing our pipeline of new warehouses, both domestically and internationally, as we target 30 plus net new openings per year in the coming years. In the quarter, we opened four net new warehouses, including three in the U.S. and one additional Canadian business center. Those openings brought our total warehouse count to 928 worldwide. We currently expect to have 26 net new openings in fiscal year 26, down two buildings from the prior call with those two buildings now set to open in fiscal year 27. So far this year, we've also completed two relocations with one more planned in Q4 as we continue to relocate select high-volume warehouses to larger locations with more parking and expanded gas stations to provide a better member experience and drives more volumes in these warehouses. In digital, we're making meaningful strides to deliver a more seamless and convenient experience for our members across the warehouse and online. As a result of our investments in technology and the commitment from our employees to use this technology to deliver a great member experience, we're seeing a significant improvement in the speed of checkout. The enhancements we have made include improvements to the mobile wallet, the introduction of digital membership card quick access on the Costco app, and the rollout of our shopping cart pre-scan tool internationally. The pay station pilot I spoke about last quarter has also been successful and we are now incorporating this technology into our new warehouse openings and high volume buildings. We're also enhancing the e-commerce experience for members and recently rolled out same day delivery services in Spain and France. Same day delivery powered by our third party partners has become a highly effective way to deliver more convenience to our members. Average same day delivery time in the US is now less than 45 minutes and the average member satisfaction rating is 4.8 out of 5. This part of our business is growing at an even faster rate than our digital business overall and is a strong driver of loyalty as it is often our highest spending members who are using this service. Finally, as we learn more about how consumers are embracing AI in their shopping habits, we're working with the leading AI companies to improve the visibility of our values to current and potential future Costco members. We believe AI is changing how consumers research products and has a potential to be a significant opportunity for Costco, given our pricing authority and our focus on quality. 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. Thanks, Rob.