管理層發言
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 speakers' 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 1 a second time. Thank you. 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 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 Vachris 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 U.S. 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 where we operate. While delays with a couple of our buildings in Spain resulted in us revising our planned net new openings for fiscal year 2026 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, we're being creative with real estate projects to further increase the potential for future growth. Recent examples of this include our new warehouse in Moulouse, 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 2026, we have five relocations planned, including three in the U.S., 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 2025 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 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 make Costco who we are: increasing member loyalty, driving top-line sales, and improving efficiency in our operation 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 prescanning small to medium-sized baskets is leading to better member experience and improved productivity. The warehouses that 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 predictively 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 make 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, especially now during our busiest season. I also wanted to mention that our annual update to Costco's 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.
Thanks, Ron. In today's press release, we reported operating results for the 2026 twelve weeks ended November 23. As usual, we published a slide deck under events and presentations on our investor website with supplemental information to support today's press release. Net income for the first quarter came in at $2.001 billion or $4.50 per diluted share, up from $1.798 billion or $4.04 per diluted share the first quarter last year. This year's results include a tax benefit of $72 million or $0.06 per diluted share relating to stock-based compensation. Last year's results include a tax benefit of $100 million or $0.22 per diluted share also related to stock-based compensation. Excluding these discrete tax items, net income and earnings per diluted share both grew 13.6%. Net sales for the first quarter were $65.98 billion, an increase of 8.2% from $60.99 billion in the first quarter last year. Comparable sales were 6.4%, both before and after adjusting for gas price deflation and foreign exchange. Excluding gas sales entirely and adjusting for the impact of foreign exchange, comparable sales were 7.1%. Digitally enabled comparable sales were 20.5% both with and without adjusting for foreign exchange. Our segment breakout of comparable sales is disclosed in both our earnings release and the supplemental slide deck. In terms of Q1 comp sales metrics, foreign exchange positively impacted sales by approximately 0.1%, while gas price deflation negatively impacted sales by approximately 0.1%. Traffic or shopping frequency increased 3.1% worldwide. And our average transaction or ticket was up 3.2% worldwide, both with and without the impacts of gas price deflation and foreign exchange. Moving down the income statement to membership fee income, we reported membership fee income of $1.329 billion, an increase of $163 million or 14% year over year. Adjusting for foreign exchange, the increase was also 14%. Last September's U.S. and Canada membership fee increase accounted for a little less than half of membership income growth. Excluding the membership fee increase and foreign exchange, membership income grew 7.3% year over year. This was driven by continued growth in our membership base and increased upgrades from Gold Star to Executive membership. At Q1 end, we had 39.7 million paid Executive memberships, up 9.1% versus last year. We ended the quarter with 81.4 million total paid members, up 5.2% versus last year and 105.9 million cardholders, up 5.1% year over year. In terms of renewal rates, at Q1 end, our U.S. and Canada renewal rate was 92.2%. And the worldwide rate came in at 89.7%. Both down 10 basis points from last quarter. This slight decline was due to the factors we discussed last quarter and reflects new online members growing as a percentage of our total base renewing at a slightly lower rate than warehouse sign-ups. The decline was less than anticipated due to some early success with targeted communications to expiring members. Our goal is to continue to improve renewal rates by improving engagement with members who signed up digitally. Although for the reasons previously shared, we may still see a slight decline in the overall renewal rate over the next few quarters. Turning to gross margin, our reported rate was higher year over year by four basis points, both with and without gas deflation, coming in at 11.32% compared to 11.28% last year. Core was flat. In terms of core margins on their own sales, our core-on-core margins were higher by 30 basis points. This increase was broad-based, with nonfoods, foods and sundries, and fresh all higher year over year. Supply chain improvements and an increase in Kirkland Signature penetration benefited margins, as did additional marketing revenue. The improvement in core-on-core was offset by changes in mix and lapping higher income in our co-brand credit card program a year ago. Ancillary and other businesses' gross margin was higher by seven basis points, primarily driven by pharmacy and hearing aids. LIFO negatively impacted the gross margin rate by three basis points. We had a $1.9 million LIFO credit in Q1 this year, compared to a $19 million credit in Q1 last year. Moving on to SG&A, our reported SG&A rate was higher or worse year over year by one basis point, coming in at 9.6% compared to last year's 9.59%. The operations component of SG&A was higher or worse by one basis point. Our operators did a great job improving productivity and capturing efficiency benefits from the technology investments that Ron referenced earlier. These productivity improvements fully offset wage investments and the impact of extended operating hours and would have created positive leverage in the quarter had we not experienced higher healthcare costs. Central was lower or better by three basis points. This quarter's SG&A also included a charge relating to a tax assessment for prior years, which negatively impacted the rate by four basis points. Below the operating income line, interest expense was $35 million versus $37 million last year. Interest income was $122 million, versus $96 million last year, driven by higher cash balances and foreign exchange, and other was a $33 million benefit versus a $51 million benefit last year due to lower foreign exchange gains. In terms of income taxes, our tax rate in Q1 was 22.5% compared to 22% in Q1 last year. As mentioned earlier, this year's rate benefited $72 million and last year's rate benefited $100 million from annual RSU vestings. Turning now to some key items of note in the quarter. Capital expenditure in Q1 was approximately $1.53 billion. As shared last quarter, we are making additional investments to support a higher number of new warehouse openings, increased warehouse remodels to drive continued growth in existing high-volume buildings, depot network expansion, and digital. We estimate capital expenditure for the full year will be approximately $6.5 billion. Before we take a closer look at core merchandising results for Q1, here are a few fun facts about the holiday selling season so far. Our U.S. food court set a daily record on Halloween, selling 358,000 whole pizzas, an increase of 31% versus last year. Black Friday was a record-breaking day for our U.S. e-business, generating over $250 million in nonfood orders. Our U.S. bakery also set a record in the three days leading up to Thanksgiving, selling 4.5 million pies. That's over 7,000 pies per warehouse over a three-day period. Turning to Q1 merchandising highlights. Our relentless focus on quality, value, and newness continued to deliver market share gains across virtually all departments. Fresh sales were up mid- to high-single digits, led by double-digit growth in meat. We saw strong growth in higher-cost cuts of beef and even greater unit growth in lower-cost proteins like ground beef and poultry. Bakery experienced high single-digit growth, driven by the introduction of some great new items such as our holiday dessert bars and our crème brûlée bar cake. Nonfoods had comp sales in the mid-single digits. Our buyers continue to do an excellent job finding new and exciting items at great values while also adjusting our assortment to minimize the impact of tariffs. Gold and jewelry, special events, health and beauty were all up double digits. And majors, tires, and small appliances also continue to perform with high single-digit comps. We added a number of new national brand partnerships across a range of nonfood categories in Q1, including Gap and Ulta gift cards, Vera Bradley apparel, and Upper Deck trading cards. Food and sundries comps also grew mid-single digits, with candy and food showing the strongest results. Newness has been driving growth in this category as well, with on-trend items such as Dubai chocolate performing very well. Kirkland Signature continues to grow at a faster pace than overall sales, with Kirkland Signature items typically offering 15 to 20% value compared to the national brand alternative with equal or better quality. In Q1, we launched approximately 45 new Kirkland Signature items, including dry facial daily clean towels, caramelized blueberry croissants, and various apparel items in addition to our latest food court offering, a caramel brownie sundae. As always, our goal is to be the first to lower prices when we see opportunities to do so. A few examples of lower prices this quarter include Kirkland Signature chicken pot pie from $4.29 to $3.99 per pound, Kirkland Signature bacon from $18.99 to $16.99 per packet, Kirkland Signature whipped cream three-pack from $10.49 to $8.99, and Kirkland Signature walnuts three-pound pack from $14.49 to $12.99. In digital, site traffic in the quarter was up 24%. And app traffic was up 48%. Sales in nonfoods were led by pharmacy, gold and jewelry, tires, small electrics, apparel, and majors, all of which grew double digits year over year. Our same-day delivery service offered in partnership with Instacart in the U.S. and Uber Eats and DoorDash internationally also performed extremely well, growing at a faster pace than our overall digital sales. Strong traffic and sales growth in digital were aided by continued web and app improvements, as well as the introduction of more personalized member communications. We continue to see many opportunities to enhance digital engagement with our members and look forward to sharing progress on future earnings calls. Within ancillary businesses, pharmacy, food court, hearing aids, and optical departments all had strong quarters. Gas comps were low single digits. Gas prices remained slightly deflationary in the quarter, but this was offset by volume growth. Costco Travel is another way in which we deliver unique membership value, and these services continue to resonate well with our members. Our member-only rates for vacation packages, hotels, cruises, and rental cars often lead to hundreds or even thousands of dollars in savings, in addition to the great service provided by our fantastic Costco Travel agents. Costco Travel U.S. set an all-time daily sales record on Cyber Monday, before beating that record a day later on December 2. In all, we achieved over $100 million in gross bookings in the U.S. through Costco Travel in the five days following Thanksgiving, up 12% from last year. Turning to inflation, overall, inflation remained relatively consistent with recent quarters. Fresh and food and sundries saw higher inflation in commodities such as beef, seafood, and coffee, but this was offset by lower inflation in eggs, cheese, butter, and produce. In nonfoods, we saw low single-digit inflation for the third consecutive quarter, primarily driven by gold and imported goods. Our buyers continue to do a great job reducing the impact of tariffs for our members. The strategies being deployed to achieve this include changing the country of production for some items, sourcing more items produced in the U.S., consolidating buying efforts globally to lower the cost of goods across all our markets, and leaning into Kirkland Signature, where we have more control over the supply chain. Additionally, we are changing our item assortment where appropriate. As discussed last quarter, we have a robust and exciting holiday merchandise selection in our U.S. warehouses; this represents a lower number of SKUs than in prior years. In replacement of some tariff-impacted items, our buyers have sourced a number of alternative great value items including seasonal food, health and beauty, and live goods. In many cases, these items are produced in the U.S. and are largely unimpacted by tariffs. The supply chain has remained stable, and our merchants feel very good about our inventory position. By optimizing our inventory flow and reducing some of the higher inventory levels we built up a year ago in the face of greater supply chain uncertainty at that time, we've been able to improve working capital and lower the labor required to manage inventory without impacting in-stocks or sales. Finally, in terms of upcoming releases, we will announce our December sales results for the five weeks ending Sunday, January 4, on Wednesday, January 7, after market close. That concludes our prepared remarks. We'll now open the line up for questions.
Thank you.
分析師問答
And we'll now begin the question and answer session. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. To be able to take as many questions as possible, we ask that you please limit yourself to one question. Again, our first question comes from the line of Michael Lasser with UBS. Your line is open.
Good evening. Thank you so much for taking my question. Ron, one of the observations that the market has is under your tenure, Costco has had a greater willingness to move with speed, embrace technology, and adopt different modes of retail and change a bit more than in the past. Is that a fair conclusion? And given the benefits of these actions that you're taking, which is greater productivity and efficiency, would you be willing to continue to let the financial benefit fall to the bottom line, or do you see a greater need to reinvest back in the business in areas like technology to continue to drive the top line? Thank you very much.
You're welcome, Michael. Technology and bringing it along has been a focus for several years. A couple of years ago, we really focused on our fundamental base systems and our core systems behind the scenes that will allow us to build for the future. We're now starting to see the benefits of that hard work, with the backroom systems coming to light and to the front face for our members. We feel that technology is going to be a key part of our future. It's equally as important as our other initiatives. But we will never compromise on being the best price and driving prices down for our members. That's what Costco is known for. That will always be our leading mantra.
And our next question comes from the line of Christopher Horvers with JPMorgan. Your line is open.
Thanks. Good evening, guys. So a quick follow-up on the latter and then the former question and then a second question. So as you think about results recently, they're strong by absolute standards. I think the market holds you to very high standards. Is there any concern that you see on the traffic side where there's more of an incidence to invest in price? And then secondly, it looks like executive members per week grew at an accelerated pace from 4Q to January. How are you looking at that in terms of the overall benefit of extending the hours both in terms of the lift that you're seeing in sales, and is this also driving accelerated sign-up? Thanks very much.
Thanks for the questions, Chris. First, on sales and membership growth in the business, we look at trends over the last six to twelve months. There's a lot of consistency. Members are looking for value, quality, and newness, and our buyers and operators have delivered on that. When you look month by month, there's been some lumpiness in the individual monthly sales results, but a lot of that has been due to uncertainty around tariffs one month to another or port strikes that we have to cycle. If you step back and look at the last seven months we've reported and the last two quarters, our average sales have been around the six and a half percent growth mark. We had 6.4% comps adjusted for gas and foreign exchange in Q4 and 6.4% in Q1 this quarter. If you look at each individual month, only two months in that last seven months were outside the range of six to seven percent. So when you take a broader view, the pattern is consistent. Our goal is to continue delivering value, quality, and newness, and ensure we continue to see growth in membership accounts, visitation frequency, and items in the basket. Across nonfoods, food and sundries, and fresh, we've seen consistency in performance and market share gains. Regarding executive membership, we've been pleased with the membership response to extended operating hours. We also added a $10 per month Instacart benefit for executive members. The extended opening hours give executive members an extra hour in the morning most days to shop warehouses, and we added an extra hour on a Saturday evening for all members. Earlier hours spread out traffic and improve experience for all members. We've seen a nice uptick in executive upgrades. Quantifying spend uplift is harder over time, but we estimate roughly a 1% lift from the hours change. Different factors offset and cycle, but overall we've been able to maintain strong sales growth despite those impacts.
Thank you very much.
And our next question comes from the line of Simeon Gutman with Morgan Stanley. Your line is open.
Hey, Ron. Hey, Gary. My question is on warehouse openings in the U.S. I think we're going to get to the highest number in something like twenty years next year. Do you do anything different from a membership perspective? I know we're lapping some of the short-term promotions that you did on membership. Is there anything you do different as you approach next year?
I don't think so. Next year's openings will be a good mix of some infills in established markets, and we still have some opportunities in some new markets. Several of the infill locations don't result in a lot of sign-ups but drive top-line sales because they address frequency. The new market set, which we did several of this year and have a few planned next year, should garner strong new sign-ups. So we'll continue with our approach, with some different scenarios as we move forward in the U.S.
And our next question comes from the line of Oliver Chen with TD Cowen. Your line is open.
Hi. Thanks, Ron and Gary. On the technology side, it's been really exciting. As we think about retail media, there are plenty of companies that really want to work with you deeply on digital advertising. Love your thoughts there. And, also, as you approach the marketplace in a customer-centric way, we'd love to have your thoughts on that development. And finally, AI and gas. AI has so many applications across the customer experience as well as employees and inventory management. What's on your road map for how that will innovate your business going forward? Thank you.
Thanks for the questions, Oliver. On retail media, we think it's a meaningful opportunity. We already have a number of alternative profit businesses that others might categorize differently, such as our travel business and our traditional media revenue. Those were tailwinds in the quarter. Retail media is about tapping into marketing spend that suppliers invest elsewhere to drive awareness and return on ad spend. We're in the early innings of retail media. We've been building out the data and tech platform that allows us to execute personalization at scale. For us, the first priority with personalization is to deliver a better member experience—more targeted, relevant messaging to drive items in the basket, more visits to the warehouse, and more visits online. As we do that, it creates a more compelling value proposition for media partners. We've introduced some media activity on third-party sites, like the Costco Auto program on digital TV, and we've done targeted amplification campaigns with some CPG partners. We also launched advertising on our gas pumps as a new channel. So, we're seeing early success but it's an opportunity for the future. Our focus is on driving value for the member, and the majority of value created here will be reinvested in the member to drive down prices and increase sales. That's an advantage with national brand partners who know we are committed to driving growth in their overall business.
On the AI front, we're extremely excited about the future. We see many business-driven opportunities with tangible business value. Look at procurement and supply chain—being a global retailer that buys from around the world, AI can add great value. It improves employees' work abilities and skill sets in their day-to-day work. We see a lot of value, and we're excited about the journey. We look at AI in a two-phase approach: concurrently focusing on member-facing improvements to the experience and on business basics to strengthen our core operations. Our mantra is to bring goods to market at the lowest possible price, and AI can help us become better merchants.
Best regards. Happy holidays. Thank you.
Thank you.
And our next question comes from the line of Chuck Grom with Gordon Haskett. Your line is open.
Gary. Hi, Ron. Nice quarter. In your annual report, your sales waterfall chart is impressive. The class of '25, $192 million in sales versus $150 million in 2023. Can you help us think about the opportunity to continue to expand on this front and the steps you're taking to continue to improve productivity within the store?
We see a good runway for expansion. We're getting creative with projects. I mentioned a project in Los Angeles where we're working with developers on affordable housing above Costco just north of LAX. That project will open in 2027 in Baldwin Hills—a market where finding 25 acres for a traditional Costco would be impossible. We're finding creative ways to get closer to members and relieve pressure from highest-volume locations. We continue to see opportunities in markets we might have hesitated on in the past, and we feel stronger about entering those markets now. We see a good runway for 30-plus locations in the next few years and a good combination of new and relocation projects. International also presents strong opportunities; we've recently opened in Sweden (our second location), our third in France, and have several in Asia upcoming. We feel really strong about future expansion.
On growth per warehouse, we find that U.S. and Canada infill locations can accelerate sales quickly because Costco is known; these infills fill capacity and relieve busy warehouses, which helps the economic model with quick acceleration in sales. International or less-penetrated markets drive significant increases in new member count. It's nice to have a balance between those two types of openings—the returns differ in how you get there, but both generate strong return on investment and create a nice balance in the business overall.
Great.
And our next question comes from the line of Kate McShane with Goldman Sachs. Your line is open.
Hi. Good afternoon. Thanks for taking our question. The renewal rate softness sounded better than what you had expected. Could you maybe talk to some of the things you did to try and offset the softness from the more digital members?
Sure. When we talked about membership renewal rate last quarter, we shared that adding more new digitally engaged members—who are generally younger—has lowered the overall renewal rate slightly because they renew at a slightly lower rate than warehouse sign-ups. Our membership team focused on delivering targeted, relevant messaging to those members approaching renewal. The early work to engage those members has been encouraging and we were able to offset part of the expected decline with changes in communication. It's early days, but we're focused on continuing to build that momentum and improving renewal rates by engaging digitally signed-up members more effectively.
And our next question comes from the line of Peter Benedict with Baird. Your line is open.
Oh, hey, guys. Thanks for taking the question. I want to ask about digital. Maybe if there's any metrics you guys can share with the success you're having, like what percentage of members are engaging with you digitally now versus before? I may have missed it, but any stats around Costco logistics—how you're doing with delivery there? Thank you.
Sure. We haven't typically disclosed the percentage of members engaging digitally, but it continues to grow as we enhance the website and the app and deliver more relevancy. In the prepared remarks, we shared site traffic was up 24% during the quarter and app traffic was up over 40% during the quarter. We continue to be pleased with the momentum in digital engagement, and our expectation is that digital sales will grow at a faster pace over the longer term than our overall sales as more members engage digitally and we use personalized communications to drive higher engagement both online and into the warehouse.
We're very excited about what's coming in the app—more engagement and more integration between brick-and-mortar and digital. As we roll out enhancements, we've got pay-ahead for the pharmacy coming, ordering cakes and deli trays online, and other things members found clunky. We're seeing great adoption out of the gate. We see upside to continued digital growth, and the digital membership card and Costco wallet have a very nice road map over the next twelve months. We expect digital to continue to outpace warehouse growth.
Thank you.
And our next question comes from the line of John Heinbockel with Guggenheim. Your line is open.
So hey, guys. Two real estate questions. Lot of opportunity internationally. What does the pipeline look like both in some of your European countries and Asia? I know it takes a while. And then secondly, you mentioned remodels, which I don't think you talked about too much. What is the remodel philosophy in the U.S.? How many do you do? What's the extent of that? How impactful is that?
We see a good runway internationally—strength in Europe, especially Spain and the U.K., and very good strength in Asia. These projects take longer, but they will come to fruition. We've been about fifty-fifty for expansion between the U.S. and outside the U.S., and we expect about half of the 30-plus openings to be outside the U.S. over the next five years, including Canada, Mexico, Europe, Asia, and Australia. Regarding relocations, we normally do about five to six a year. The uplift from relocations can be dramatic. Moving an underserving market location into a larger facility with better parking and gas often results in 50–60% increases when you add a gas station and significant parking; even a building that simply moves to a better facility can see 20% uplift. We strategically look at relocations. We also continuously invest in current warehouses to update fresh foods areas and bring in ancillary businesses. It's a process we plan every year with a combination of new locations, relocations, and investment in existing buildings.
On the growth per warehouse, Ron's point is important: infill locations in the U.S. often accelerate sales quickly because Costco is known, and these infill locations fill capacity. International openings drive significant new member sign-ups. That balance between infill and international helps deliver strong returns in different ways and creates a balanced growth strategy.
And our next question comes from the line of Rupesh Parikh with Oppenheimer. Your line is open.
Afternoon. Thanks for taking my questions. I just want to go back to the comments on SG&A leverage. It sounds like this quarter higher healthcare costs prevented your team from leveraging costs. Curious about the dynamics there. And then as you think about productivity, how do you think about the runway there? It sounds like it could continue for a few more quarters. Thank you.
Thanks for the question, Rupesh. There were four main headwinds or investments during the quarter. First, the investments from our employee agreement last March, which on an incremental basis were a mid-single-digit headwind. Second, the extended operating hours we implemented in June. Third, higher healthcare costs in the quarter—we've generally seen healthcare costs increase, and this was the first quarter where healthcare costs grew at a faster pace than our sales, creating a headwind. Fourth, we had a four-basis-point impact from a tax assessment charge relating to prior years. Overall, we were one basis point negative on productivity. If we had not had the sales and use tax charge and without the healthcare costs, we would have seen mid-single-digit positive leverage during the quarter. Going forward, we'll continue to support wage investments and the extended hours; we think operators did a great job absorbing that. Healthcare costs are an area we're managing, but they could continue to be higher. We wouldn't expect the tax impact to persist. Historically, we need about mid-single-digit sales growth to leverage SG&A. Given the work the team has done to offset extended hours and employee agreement impacts, we believe we're in that ballpark and can achieve leverage with appropriate sales growth.
And our next question comes from the line of Greg Melich with Evercore ISI. Your line is open.
Hi. Thanks. Gary, you mentioned that inflation was running similar. I wanted to make sure I got the numbers right. Was merchandise up low single digits in general merchandise? Was food inflationary or not in the quarter? And how do you see that trending?
Food and fresh were slightly inflationary—low to mid-single digits—similar to last quarter. There are various puts and takes: items like beef, seafood, and coffee are inflationary, while produce is deflationary, and eggs and cheese are still inflationary but at lower rates than earlier in the year. In nonfoods, we saw low single-digit inflation for the third consecutive quarter, primarily driven by gold and imported goods. Overall, those offsetting elements leveled out the inflation picture to be consistent with recent quarters.
Would it be fair to say most of the ticket growth in comp was driven by inflation?
I think it’s a combination. Inflation-like effects can reflect members buying larger pack sizes or upgraded items—newer electronics or appliances. So you generally have a mix of like-for-like inflation, pack-size changes, upgraded purchases, and unit growth contributing to ticket growth.
Got it. That's great. Good luck, and have a great holiday.
Thank you. You too.
And our next question comes from the line of Edward Kelly with Wells Fargo. Your line is open.
Wanted to dig into total paid members. You've had remarkable growth over the last few years. The model's obviously resonated, and 5% this quarter is still very good, but it has slowed a little over the last few quarters. Could you discuss what's driving that? Is that more so in the U.S.? Have you seen any stabilization? The math suggests maybe an exit rate lower than 5.2. Thoughts?
Thanks, Ed. We're pleased with membership results: continued new members, younger population recruitment, and acceleration in upgrades—Executive up 9%. Year-over-year growth has slowed a bit versus the prior couple years, partially due to cycling strong growth from prior periods. We still feel good about membership health and opportunities to maintain growth. Each year we open 20 to 30 warehouses and can see the maturity curve of new members as warehouses mature. International openings tend to bring higher new member sign-ups, and the mix continues to balance closer to fifty-fifty between international and U.S. The actions we're taking to improve renewal rates and add membership value—like extended hours, Instacart benefits, and 5% gas on the credit card—support continued membership growth. So while growth is a little slower than the recent past, momentum remains healthy.
Thank you.
And our next question comes from the line of Jiang Ma with Bernstein. Your line is open.
Hi. Thank you for taking my question. On the nonfood side of things, comp is now in the mid-single-digit range. Can you update us on when you expect to lap the tough comps from gift card sales? Does that timing coincide with tax refunds or incremental ones consumers will get early next year, especially middle- to higher-income consumers? Will you start to see more outsized benefit in that category?
We generally don't provide specific forward guidance on timing. For nonfoods, the team has done a good job delivering exciting items with great value. Growth has moderated to mid-single digits from higher rates, and part of that is starting to cycle gift card programs and gold sales from last year. Overall, we still see good market share gains across nonfood categories—gold and jewelry, special events, health and beauty were all double digits, and majors, tires, and small appliances performed well. Apparel is also showing strong momentum. Our focus is continuing to deliver value to members and grow market share in nonfoods.
Okay. Thank you. Happy holidays.
Happy holidays. Thank you.
And our next question comes from the line of Scott Ciccarelli with Truist Securities. Your line is open.
Good afternoon, guys. Thanks for the time. Another question on warehouse expansion. What are your latest thoughts around long-term warehouse potential both in the U.S. and in total? And second, most of the lower-price examples you gave were Kirkland products. Are most of your heaviest price investments on your private brand products?
On long-term potential, we look five to ten years out. We still see a strong roadmap for 30-plus warehouses a year as a goal. About half or slightly over half would be in the U.S., and the rest across Canada, Mexico, Europe, Asia, and Australia. It's fairly well spread across markets. Regarding Kirkland Signature, it's a reflection of our ability to understand cost and act when opportunities arise. We aim to be the first to lower prices for members and the last to raise them. Buyers and category managers look at costs and seek ways to improve economies of scale, change sourcing, and operate more efficiently without compromising quality. Those efforts often result in price reductions, and many of the examples called out were Kirkland items where we have more control over the supply chain.
Thank you, and happy holidays.
Happy holidays. You too.
And our next question comes from the line of David Bellinger with Mizuho. Your line is open.
Regarding personalization efforts, those seem to be working well early on. How much further does that have to roll out? Is it hitting every member at this point? Any specific examples you can share on the conversion lifts or the fills that these personalization changes are helping with today?
We've been pleased with progress on personalization. We're using our data to make the experience more relevant and convenient for members. We're relatively early in the journey and learning which elements members like and where to fine-tune communications and placements. There's a strong roadmap ahead. We focus more on whether personalization drives improved member experience and top-line sales rather than specific public metrics. The goal is to increase digital sales and member engagement and drive more visits to warehouses and online. So far, results have been encouraging and we expect to continue improving personalization over time.
Great. Thank you.
And our next question comes from the line of Kelly Bania with BMO. Your line is open.
Hi. Thanks for taking our question. Going back to renewal rates, I know you don't like to guide, but Gary, you said we might still see a decline in renewal rates over the next few quarters. Is that a conservative view because it sounds like you're having success mitigating that dynamic? If you pulled out the cohort of younger digital members, would membership rates be improving, excluding that? Any deeper dive on the renewal dynamic?
Kelly, the renewal rate impact is driven by the growing cohort of digitally signed-up members who are generally younger and renew at a lower rate than warehouse sign-ups. As they flow into the overall base, they lower the renewal rate mathematically. Our goal is to arrest and reverse that decline quickly. We were encouraged by the quarter's improvement due to more targeted and relevant communications to digitally signed-up members approaching renewal. It's early—only one quarter of these changes is reflected—so we wanted to be transparent that more work remains. We do expect to close the gap between digital sign-up renewal rates and warehouse sign-up renewal rates, but there is a possibility of a slight decline in renewal rates over the next couple of quarters as the mix change continues to flow through.
Super helpful. Thank you.
And our final question comes from the line of Spencer Hamas with Wolfe Research. Your line is open.
Good evening. Thanks for the time. Curious if you could talk about the cadence of comps you saw through November and then into December. How is that informing how the consumer is holding up heading into the holiday from your vantage point? Any trade-down or divergence in performance by customer cohort that's changing how you guys are buying?
We don't comment on the current quarter beyond our monthly sales releases, but generally we're seeing relative consistency in how members are shopping. There has been some month-to-month bumpiness, often attributable to cycling of port strikes or uncertainty around tariffs. Looking at the last six months, outside of two adjacent months that were slightly outside the six to seven percent range, our overall trend has been consistent around six and a half percent. We've seen continued strong growth in nonfoods and market share gains, though nonfoods have decelerated from prior higher growth rates. That deceleration has been offset by benefits such as extended operating hours. Net-net, we're in a consistent range and don't see a major change in member behavior beyond the factors mentioned.
Okay. Got it.
And ladies and gentlemen, that concludes our question and answer session and today's call. We thank you for your participation, and you may now disconnect.