Costco (COST) Q1 2026 Earnings Call Transcript

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DATE

Thursday, Dec. 11, 2025 at 5 p.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Ron Vachris
• Chief Financial Officer — Gary Millerchip

TAKEAWAYS

• Net Sales -- $65.98 billion, up 8.2%.
• Net Income -- $2 billion or $4.50 per diluted share, compared to $1.8 billion or $4.04 per diluted share.
• Tax Benefit Impact -- $72 million ($0.06 per share) tax benefit this year, $100 million ($0.22 per share) last year; excluding these, net income and EPS grew 13.6%.
• Comparable Sales -- 6.4%, both with and without gas price deflation and FX adjustments.
• Comparable Sales Ex-Gas and FX -- 7.1%.
• Digitally Enabled Comparable Sales -- 20.5%.
• Worldwide Traffic -- Up 3.1%.
• Average Ticket -- Up 3.2% globally.
• Membership Fee Income -- $1.329 billion, up 14%. Excluding fee increase and FX, up 7.3%.
• Paid Executive Memberships -- 39.7 million, up 9.1%.
• Total Paid Members -- 81.4 million, up 5.2%.
• Total Cardholders -- 105.9 million, up 5.1%.
• Renewal Rate -- US/Canada: 92.2%. Worldwide: 89.7%. Both down 10 basis points quarter-over-quarter.
• Gross Margin Rate -- 11.32%, up 4 basis points. Core on core margin up 30 basis points. Ancillary/other margin up 7 basis points.
• LIFO Impact -- $1.9 million credit this year versus $19 million last year.
• SG&A Rate -- 9.6%, up 1 basis point, negatively affected by higher health care costs and a prior-year tax assessment charge.
• Interest Income -- $122 million versus $96 million.
• Interest Expense -- $35 million versus $37 million.
• Capital Expenditure -- $1.53 billion for the quarter; full year estimate $6.5 billion.
• Warehouse Openings -- Eight new warehouses this quarter, total 921 worldwide. Fiscal 2026 planned openings revised to 28 (down due to Spain delays), targeting 30+ per year longer-term.
• New Warehouse Sales Productivity -- Fiscal 2025 openings generated $192 million annualized per warehouse, up from $150 million for 2023 openings.
• Digital Site Traffic -- Up 24%; app traffic up 48%.
• AI Adoption -- Pharmacy inventory AI raised in-stocks above 98% and supported mid-teen script fill growth.
• Executive Membership Upgrades -- Noted as "nice uptick" related to extended hours and Instacart benefit.
• Fresh Sales -- Up mid-to-high single digits; meat up double digits, higher-cost cuts outpacing lower-cost proteins in growth.
• Bakery Sales -- High single-digit comp growth, aided by new products.
• Nonfoods Comp Sales -- Mid-single digits; gold and jewelry, special events, health and beauty up double digits; majors, tires, and small appliances up high single digits.
• Kirkland Signature Growth -- Outpacing overall sales; 45 new KS items launched, offering 15%-20% value versus national brands.
• Gasoline -- Low single-digit comps, with slight price deflation offset by volume growth.
• Costco Travel US -- Over $100 million in gross bookings in five days post-Thanksgiving, up 12%.
• Inflation -- Food and sundries: higher inflation in beef, seafood, coffee; lower in eggs, cheese, butter, produce. Nonfoods: low single-digit inflation, mainly gold and imports.

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RISKS

• US and Canada renewal rates declined by 10 basis points due to lower renewal among new digitally-signed members. "This may still see a slight decline in the overall renewal rate over the next few quarters."
• Higher healthcare costs outpaced sales growth for the first time this quarter, creating SG&A headwinds. "This was perhaps the first quarter where we've seen health care costs grow at faster pace than our sales."
• Fiscal 2026 net new warehouse opening guidance revised downward to 28 due to construction delays in Spain.

SUMMARY

Costco (NASDAQ:COST) reported strong top-line growth, with net sales reaching $65.98 billion and a 13.6% increase in net income and EPS excluding discrete tax benefits. Digitally enabled comparable sales rose 20.5%, site traffic increased 24%, and app traffic increased 48% in the quarter. Membership expansion continued, with executive membership upgrades and total paid members both increasing, though renewal rates ticked down as the share of digitally-acquired, lower-renewing members grew. Gross margin improvement was broad-based and supported by core merchandising, ancillary businesses, and the successful rollout of new high-value Kirkland Signature products. Technology investment, including AI deployment in pharmacy inventory, has already produced operational benefits and enhanced member experience.

• New warehouse ramp-up has accelerated, with fiscal year 2025 openings generating $192 million annualized per warehouse of sales in the year of opening, marking a substantial improvement over prior years.
• Capital expenditure is on track for approximately $6.5 billion in fiscal 2026, with spending focused on expansion, remodels, depot logistics, and digital initiatives.
• Nonfood categories—especially gold and jewelry, health and beauty, and special events—maintained double-digit growth, while Gift cards and gold program cycling caused a deceleration in overall nonfood comps to the mid-single digit range.
• Personalization enhancements online drove a measurable sales lift through more relevant recommendations, and continued web/app improvements supported expanded digital engagement.
• Management noted retail media as an emerging growth opportunity, with early success in third-party advertising on digital TV and gas pumps, aiding profitability and providing resources to reinvest in member value.
• Relocations have driven dramatic sales uplifts—sometimes 20%-60%—with ongoing opportunities to upgrade existing warehouses through expansion, increased parking, and enhanced ancillary offerings.

INDUSTRY GLOSSARY

• Kirkland Signature (KS): Costco’s private-label brand, typically providing products at a 15%-20% discount compared to national brands.
• Ancillary Businesses: Segments operated by Costco including pharmacy, optical, hearing aids, tire centers, food court, and gas stations, distinct from core warehouse merchandise.
• Executive Membership: Costco’s premium paid membership tier, offering elevated rewards and earlier/extended warehouse access, as referenced in membership upgrade discussions.
• LIFO: An inventory accounting method (“Last-In, First-Out”) used to determine the cost of goods sold and relevant inventory credits or charges.

Full Conference Call Transcript

Gary Millerchip: 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.

Ron Vachris: 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 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 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 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 have first adopted this prescan technology have shown checkout speed improvements of up to 20%. And across our US warehouses overall, 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.

Gary Millerchip: Thanks, Ron. In today's press release, we reported operating results for the 2026, the 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 $4.5 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. And 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 FX. 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 FX. 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, FX 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 FX. 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 FX, the increase was also 14%. Last September's US and Canada membership fee increase accounted for a little less than half of membership income growth.

Excluding the membership fee increase and FX, 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 US 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 KS 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 FX and other was a $33 million benefit versus a $51 million benefit last year due to lower FX 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 US 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 US e-business, generating over $250 million in nonfood orders. Our US 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 KS 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 KS 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 KS chicken pot pie from $4.29 to $3.99 per pound, KS bacon from $18.99 to $16.99 per packet, KS whipped cream three-pack from $10.49 to $8.99, and KS Walnut's 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 US 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 US 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 US 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 US, 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 US 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 US 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.

Ron Vachris: Thank you.

Operator: 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.

Michael Lasser: 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.

Ron Vachris: You're welcome, Michael. You know, technology and bringing it along has been a focus for several years. We've had to spend 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. And so we're now coming to fruition where we're starting to see the benefits of that hard work of all the backroom systems that we had to build that are now coming to light and coming to the front face for our members. You know, we feel that technology is going to be part of the peak part of our future.

I think it's equally as important as all of our other initiatives that we have out there. But we will never succumb to not 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.

Operator: And our next question comes from the line of Christopher Horvers with JPMorgan. Your line is open.

Christopher Horvers: 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 and 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.

Gary Millerchip: Yeah. Thanks for the questions, Chris. First of all, I guess, your point around sales and overall sort of membership growth in the business, you know, I think from our perspective, we look at it very much over the last really, six to twelve months. And we look at the sort of trends and step back from what we're seeing with the member, there's a lot of consistency. Actually. You know, overall, I think we've shared on the last couple of quarters when we talk about what members are looking for, they're looking for value and, for quality and for newness. And I think we've done a great job.

Our buyers and operators did a great job of bringing that to our members. And when you look at month by month, there's definitely been some lumpiness in the individual monthly sales results that we posted. But a lot of that has been to do with it was uncertainty around tariffs one month to another or port strikes that we have to cycle. And if you sort of take a step back and look at the last seven months that we've reported and the last two quarters, you know, our average sales have been around that six and a half percent growth. We had 6.4% comps adjusted for gas and FX in Q4. We had 6.4 Q1 this quarter.

And, actually, if you look at every individual month, there was only two months in that last seven months that were outside of the range of six to 7%. So I think sometimes there's a bit of fixation on individual month or one particular point of data. But, actually, when we look at what we're seeing with the overall sort of patterns of how members are shopping and how they're behaving, seen a very sort of consistent pattern and a consistency in the results.

So our goal is to really continue to make sure we're delivering on that value quality, and newness and ensure that we continue to see that growth in membership accounts and in their frequency of visiting, and in the items that they're putting in the basket. And generally, when you look across whether it's nonfoods, food and sundries, and fresh, we've seen consistency in performance in growing market share in those areas. So we'll continue to focus on making sure we're delivering that value on that value, but feel good about the overall sort of consistency and the results that we've been seeing. I think from the second part of your question maybe was around executive membership.

And I think we've been very pleased with the membership response to the extended operating hours. And also, you may remember, we added $10 per month as an extra benefit for executive members who shop on Instacart. You know, the extended opening hours that we did certainly a major benefit for our executive members having an extra hour in the morning on most days to shop the warehouse, but we also added an extra hour on a Saturday evening for all of our members. And if you think about the earlier hours, it often extends the total shopping members in the warehouse. So it spreads out the traffic if you like to make experience better. For all our members.

So we felt very positive about the change that we've seen. It's it's certainly been well received by members. We've seen a really nice uptick executive upgrades to your point. And, you know, it gets hard to track the spend uplift because of the further away from the change you go. You know, it's more difficult to sort of pass the differences that are happening in the impact on sales. But we still think that sort of 1% lift is a was a reasonable kind of view of what we think the impact was.

And, of course, as I mentioned earlier, you see sort of different puts and takes that I would sort of I look at our overall sort of sales trends, I think I look at it as it's probably offset some of that cycling of gift cards and gold that we were expecting at this time of year. We've been able to maintain that overall sales growth even with those impacts.

Christopher Horvers: Thank you very much.

Operator: And our next question comes from the line of Simeon Gutman with Morgan Stanley. Your line is open.

Simeon Gutman: Hey, Ron. Hey, Gary. My question is on warehouse openings in the US. I think we're going to get to the highest number something like twenty years next year. So 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?

Ron Vachris: 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. And so, you know, several of the infill locations don't result in a whole lot of sign-ups, but really drive a lot of top-line sales because it really addresses the frequency aspect of things. And then the new market set, we've done several of those this year, and we have a few more slated for next year. Of markets that we may have been a little reluctant to go into.

We've got much greater confidence at this point we will we'll garner a much better new sign-up approach in those markets as well. So a lot of, you know, continuing on with what we've done before but, some different type of scenarios as we move forward in the US.

Operator: And our next question comes from the line of Oliver Chen with TD Cowen. Your line is open.

Oliver Chen: 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 wanna work with you deeply on digital advertising. Love your thoughts there. And, also, as you approach the marketplace in a customer-centric way, we 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.

Gary Millerchip: Thanks for questions, Oliver. Yeah. I'll I'll take the retail media question first. Yeah. You know, we talked about retail media a few times now on the calls, and I definitely, believe that it's a meaningful opportunity for us. You know, I always like to start the conversation on retail media though to remind everybody that we have a pretty large you know, alternative profit business that many other retailers would define that way today. And, I called out a couple of them on the call today, you know, outside of financial services, we have a large travel business.

We have a traditional sort of media revenue business that we generate meaningful dollars today, and both of those were actually travel and the sort of marketing and media revenue were tailwinds to our business in the quarter. So those a number of strengths that we have today in that space that are part of our model that I think showed through in ability to keep investing in the member and still expanding our operating margins during the quarter.

You know, that being said, we think of retail leaders as slightly opportunity from those because it really is about tapping into that marketing spend that many of our suppliers are investing in other places to, you know, to drive their marketing awareness and drive return on ad spend. We are in the in the early innings. I was still say of retail media. We've been building out, as Ron alluded to earlier, the sort of data and tech platform that allows us to execute personalization at scale. And I think for us, the first priority with personalization is to deliver a better member experience.

To deliver more targeted relevant messaging so we drive more items in the basket, more visits to the warehouse, more visits online. And as you do those things, it just creates an even more compelling value proposition for our media partners While we're building and executing on that capability, we've been introducing some media activity on third party sites. So think of that as being you may have seen, you have the Costco auto program that will run on digital TV, and we've done some targeted MVM amplification campaigns with some of our CPG partners that have been very successful as well.

We also launched advertising on our gas pumps as a new channel for us as well around new media opportunities. So I think the headlines would be we're seeing some early success, but it's still very much know, an opportunity in the future on the road map for us. And bit like Ron mentioned earlier, you know, is all of our focus is on how to drive more value for the member. So as you might expect, the vast majority of the value create here will reinvest in the member to drive down prices and value and increase sales.

And actually think that's a real advantage with the national brand partners that we work with on media because they know that we're committed to really driving the flywheel and driving growth in their overall business.

Ron Vachris: And on the AI front, we're extremely excited about what the future holds for us. I mean, we see many opportunities that are really business driven, and tangible have great tangible business value for us. And you look at things like our procurement system as we are a global retailer, we buy from around the world, as well as supply chain, what it can do there, and just the tools that we've seen that this has improved our employees' work abilities. And their skill sets as well as they do their day to day work. So we see a lot of value. We're very excited about the journey.

We look at it in a two phase approach that concurrently gonna be focusing on member facing, how do we improve the experience for the member through AI, and then business in basics. How do we continue to focus on the business basics? Know, our mantra is bring goods to market at the lowest possible price. And we think AI has a great asset to that and it really can help us become a much better merchant out there.

Oliver Chen: Best regards. Happy holidays. Thank you.

Ron Vachris: Thank you.

Operator: And our next question comes from the line of Chuck Grom with Gordon Haskett. Your line is open.

Chuck Grom: 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?

Ron Vachris: You know, we see we see a good horizon on expansion. You know, we continue to the creativity. I mentioned just a couple of examples of things that we're doing differently. We've got a project in Los Angeles where we're working with some developers that there's some affordable housing going above Costco just north of LAX. That project will open up in 2027. That would be a market that we could it's Baldwin Hills is where it's called. That would be a market we would never be able to go into and find 25 acres to build a Costco It just wouldn't happen.

So we're finding creative ways to get closer to our members and relieve some pressure from some of our highest volume locations, And, again, like I said, we continue to see some opportunities in markets that we would have questioned in the past due to maybe some competition is there. But we're feel much stronger is going in and attacking these markets. So you know, I like I said in the early opening remarks, good runway for 30 plus locations as we look forward for the next few years for sure. And a good combination of both, both type of openings. And international still presents some very good strengths for us.

In our recent Sweden opening, our second location in Sweden. Our third in France, and we've got quite a few in Asia that are upcoming as well. So we feel really strong about our future expansion.

Gary Millerchip: Shubh, I think on the point on the growth per where, I think Ron's final point there is a really important one around the balance that we're able to get. So we find with many of The US and Canada warehouses where we're filling in, we can accelerate the sales very quickly because Costco is known. We're we're sort of filling capacity where maybe there's some very busy warehouse around. So it really helps the economic model with getting returns from the quick acceleration in sales growth. And then in the international markets or places where we have less penetration of warehouses, it really drives a significant increase in new member count.

So it's nice to have a balance between those two. The returns a little bit different in how you get there, but they both generate strong return on investment. In different ways, and they create a nice balance in the business overall as we grow.

Chuck Grom: Great.

Operator: Thanks. And our next question comes from the line of Kate McShane with Goldman Sachs. Your line is open.

Kate McShane: Hi. Good afternoon. Thanks for taking our question. The renewal rate 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?

Gary Millerchip: Sure. Yeah. Well, you're exactly right. You know, when we talked about the, membership renewal rate last quarter, we'd shared that as a result of this change in mix around us adding more new digitally engaged members or signing up digitally to become a member. What we what we've always seen with that group is that they're generally a bit younger, And, generally speaking, renew at a slightly lower rate. That's always been true, but there's a bigger number of them now coming into the base. So as they flow into the math model, it was impacting the overall renewal rate. And so I think you may have heard us talk last quarter.

We said we think of while that's sort of a mathematical fact, we think there are opportunities for us to be able to change that outcome by delivering more targeted and relevant communication to those members that are have signed up digitally and are reaching that point in maturity where they're considering whether to renew or not to renew their membership with us. And so our membership team is really focused on delivering targeted relevant messaging to engage those members to ensure continue to see the value of the membership and really helping them see why there's significant value for them to continue to be members.

And what you saw in this quarter was that really some of the early work the team's done to engage those members and improve the renewal rate. And, obviously, it's it's early days, so we wanna make sure that we can continue to build that momentum, but it's been encouraging to see the impact of those changes and we were expecting based on purely flowing through the sort of the renewal rate that we've seen before to see a slightly higher decline in the quarter and we were able to offset a part of that with the changes that we made in communication with members. Thank you.

Operator: And our next question comes from the line of Peter Benedict with Baird. Your line is open.

Peter Benedict: Oh, hey, guys. Thanks for thanks for taking the question. I wanna ask about digital. Maybe if there's any metrics you guys can share with the success you're having, maybe the how many what percentage of the member that's engaging with you digitally now versus before? I don't think I may have missed it, but any stats around Costco logistics how you're doing with delivery there? Thank you.

Gary Millerchip: Sure. Thanks for the question, Peter. Yes, we haven't typically talked about percentage of members that are engaging with digitally. It does continue to, to grow as you might imagine as we're continuing to make enhancements to the website, to the app, and really as we're delivering more relevancy to members through those channels. And so we are continuing to see growth. We did share the prepared remarks that traffic was up 24% during the quarter on the website, and it was up even higher than that in the 40% plus range on the app during the quarter.

So we continue to be pleased with the momentum that we're seeing in, in digital engagement with our members, and our expectation would be that digital sales as we define it would continue to grow at a fast pace over the longer term. Than our average sales overall as more members engage digitally, and we're able to use some of those targeted personalized communication tools to really help members see the relevancy of all the offers that we have online also to use those channels to help drive higher engagement into the warehouse as well and really creating seamless experience across the channels.

Ron Vachris: Very excited about what we have coming in the app. I mean, more engagement, more lock in. The brick and mortar business with the virtual digital business as well. And, as we as we continue to roll out enhancements, we've got pay ahead for the pharmacy coming We've got ordering cakes and deli trays online coming. Many of the things that we've heard from our members that could be a little bit clunky are now moving to a digital state, and we're seeing great adoption right out of the chute.

So we continue to we see some upside to the continued growth and the digital value of having the app and using the digital membership card, the Costco wallet, those things have all got a very nice road map the next twelve months. We see that number is gonna hopefully continue to outpace the growth of the warehouse.

Gary Millerchip: Thank you.

Operator: And our next question comes from the line of John Heinbockel with Guggenheim. Your line is open.

John Heinbockel: So hey, guys. So 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 haven't talked about too much. What is the remodel philosophy in The US How many do you do What's the what's the extent of that What's the lift? Know, I don't know how impactful that is. Thank you. You wanna oh, I can start. You know, a good runway internationally We see some good growth in Europe, especially in Spain and The UK.

We have got a lot of good things going on there, and we see that those two countries will be ramping up. We continue to see very, very good strength in Asia. And so that market, we see the next five years that we think that those projects do, like you mentioned, do take a little bit longer. They're gonna start coming to fruition. So we'll see a good balance. It we've been about fifty half of the expansion in The US and half outside of The US. And now we're we're seeing even more opportunities in Canada and North America and Mexico. So a good balance.

About half of the 30 should be outside The US we see in the next five years. Expansions and relocations, we'd normally do about five to six relocations a year. The uplift is dramatic. When we do these, we normally are moving a building that is you know, underserving the market and goes into a larger facility, better parking, If we have a gas station, expanded gas, or we add gas to it, And a variety of uptake to extreme 50, 60% increases when you add a gas station and really add a lot of parking. To 20% uplift to a building that had everything just got into a better facility.

So we strategically look at that And then we are continuously investing in our current warehouses too. To make sure that we're updating the fresh foods areas. We're bringing the new ancillary businesses in there. So it's a it's a process we go through every year of planning ahead. And we look out several years in a good combination of all three. New, locations, relocations, and taking care of the existing buildings that we're doing business in as well.

Gary Millerchip: Thank you.

Operator: And our next question comes from the line of Rupesh Parikh with Oppenheimer. Your line is open.

Rupesh Parikh: Afternoon. Thanks for taking my questions. So I just want to go back to the comments on SG and A leverage. So it sounds like this quarter higher health care costs prevented your team from leveraging costs. So just curious about the dynamics there. And then as you think about productivity, how do you think about the runway there? It sounds like a could continue for a few more quarters. Thank you.

Gary Millerchip: Yes. Thanks for the question, Rupesh. Yes. You've summarized it pretty well actually from how we looked at the quarter. If I just take a step back, there were kind of four main sort of headwinds or investments, if you like, that we had during the quarter. When you think about the impact on the warehouses. The first, of course, is the investments that we make through our employee agreement each year. So was the March 25 agreement, and that on an incremental basis was sort of mid single digits headwind that the team had to kind of overcome in improving productivity. The second was, of course, the extended operating hours that we implemented in June.

And then you mentioned it that we had higher health care costs in the quarter. It We've generally seen, of course, health care costs increasing. This was perhaps the first quarter where we've seen health care costs grow at faster pace than our sales. So we saw a little bit of a headwind overall from health care costs in the quarter. And then we also had the four basis point impact from the tax charge that relates back to multiple years ago that we took during the quarter as well. So overall, we were one basis point negative on productivity.

If we'd have not had the sort of sales and use tax charge that we had during the quarter, And without the health care costs, we'd have been sort of a mid single digit or so positive leverage during the quarter. Without those sort of factors. Now I would say as you look forward, you know, we're still gonna have, of course, the continued investment that we've we've already implemented around wages. So we have to continue to support those costs. We've implemented the extended opening hours We think the operator did a great job of absorbing that as you've seen the last couple of quarters.

The health care costs, you know, that's something we're taking action to make sure that we're comfortable with the trends that we're seeing. But, of course, there's possibilities those costs could continue to be to be higher in the future. We wouldn't expect to have the sort of the four basis point impact that we had from tax. So when I think when you take all those things and look at it going forward, know, if historically said that we need to get to about mid single digit sales to be able to leverage SG and A.

And I think with the work the team's done to offset extended operating hours, the work the team's done to offset the employee agreement. I think we're in that kind of ballpark. And actually in the in the first quarter, have we not have had the adjustment for sales tax? I think we do we'd have actually seen some leverage during the quarter. So I think that's the way to sort of think about it overall.

Rupesh Parikh: Great. Thank you, Bhaskar.

Operator: And our next question comes from the line of Greg Melich with Evercore ISI. Your line is open.

Greg Melich: Hi. Thanks. Gary, think you mentioned that in was running similar. I just wanted to make sure I got the numbers right. It was it was up low single digits in general merchandise. Was food in inflationary or not in the quarter? And how do you see that trending?

Gary Millerchip: Yeah. Food and fresh. Food and some reason fresh, Greg, would have been slightly inflation, so low single low to mid single digit. No real change really from last quarter. There are quite a few puts and takes in there, as I mentioned in the prepared comments that you've got a few of the commodities that would be inflationary right now when you look at items like beef and seafood and coffee. But then you've got produce, which is deflationary currently, and there are other items like eggs and cheese, which are still inflationary year over year, but at lower inflation than they were earlier in the year.

So you've got kinda puts and takes that are offsetting each other, which really essentially sort of leveled it all out at the same level as it was the last couple of quarters.

Greg Melich: It would it be fair to say that most of the ticket growth in comp was driven by inflation?

Gary Millerchip: I think there'd be a combination of both in there. We have know? And I remember for us, there's inflation for us the way we measure it would be it could be the members buying a bigger pack size or it could be the members buying an upgraded item of a newest electronic or appliance. So I think you kinda have to look at it.

There's there's sort of probably a comb or there is a combination of some level of natural inflation on like for like items, some level of inflation of members buying bigger pack sizes, and increasing you know, the moving to the newer model if you like, and then some level of unit growth as well in there.

Greg Melich: Got it. That's great. Good luck, and have a great holiday.

Gary Millerchip: Thank you. You too.

Operator: And our next question comes from the line of Edward Kelly with Wells Fargo. Your line is open.

Edward Kelly: Wanted to dig into total pay members. You've had remarkable growth over the last you know, few years. Model's obviously resonated, and 5%, you know, this quarter is still very good. But it has slowed a little over the last few quarters. I was wondering if you could just maybe discuss, you know, what you're seeing there Is that more so in The US? Then have you seen any stabilization in that? I think the math would kinda suggest that maybe know, exit rate lower than 5.2. So just thoughts there. Thank you.

Gary Millerchip: Yeah. Thanks, Ed. Yeah. You know, our membership, as you mentioned, in general, we've been really pleased with the results that we've seen in the quarter with the new members and the younger population that we're recruiting. The acceleration in upgrades, and overall growth that you mentioned just over 5% in exec up nine. So we're we're pleased with the results that we've seen I think your point's accurate that if you look at the year over year growth, it has slowed a little bit from where it's been over the last couple of years. And I think some of that's just starting to cycle some strong growth in the last year or so.

But we still feel really good about the health of the membership growth. And we think there's a lot of continued opportunities to maintain that growth in the future. I know Ron mentioned a few of them in one of the questions we answered earlier, but with know, partly with the existing warehouses that we're I think we're in a good position where every year, we've been opening 20 to 30 warehouses, and we can see the maturity curve of the increase in the number of members that sign up as warehouses mature.

We're obviously opening new warehouses each year, and in particular, to your point in international, we tend to see a much higher number of new member sign ups and there's that mix. Continues to blend out to sort of closer to fifty between international and The US. We do think with the actions that we're taking, as I mentioned, also earlier on the call around improving renewal rates, as an opportunity to, you know, to help, that trend as well.

And then, you know, we're we're committed to continuing to improve the value of the membership We've made obviously some major changes recently with the extended opening hours and the Instacart benefits and 5% gas on the credit card, but we'll we'll continue to look for ways to add greater membership value. So I think it's accurate to say that it's a little bit slower than it has been, but we feel good about the momentum and the opportunity to continue to grow.

Edward Kelly: Thank you.

Operator: And our next question comes from the line of Jiang Ma with Bernstein. Your line is open.

Jiang Ma: Hi. Thank you for taking my question. So on the nonfood side of things, I think your comp is now in the mid single digit percentage range. Can you just update us on when you expect to unlet the tough comps from the gift card sales And does that timing coincide with the tax refunds or the incremental ones that consumers are gonna get, especially middle to higher income consumers early next year? Will you start to see some more outsized benefit in that category? Thank you.

Gary Millerchip: Yeah. I think in overall, we generally don't provide sort of comments on forward looking what we would expect. I think what we would say around nonfoods is that the team's done a great job of continuing deliver exciting items of great value and quality. And we see while we have I think your comment is accurate that the growth year over year has come down to low double digits into that mid single digit range. And I think you've you've heard us mention before and you referenced it that some of that really is starting to cycle the impact of gold being sold in warehouse and online and also of the gift card programs that we had last year.

But overall, we still see good market share gains in really pretty much all of the non food categories. And we saw may have heard us mention in the prepared comments that golden jewelry, special events, health and beauty were all double digits. We also saw high single digit growth in majors, in tires, and small appliances, and didn't mention apparel during the call earlier, but that's also showing really strong improvement in sales momentum and comp growth as well.

So I think our perspective on nonfoods is that we think our teams are doing a really good job in delivering great value for the member, and we think we have a clear path to continue to grow our market share in nonfoods by continuing to deliver on that promise to our members, and that's really where our focus is.

Jiang Ma: K. Thank you. Happy holidays.

Gary Millerchip: Happy holidays. Thank you.

Operator: And our next question comes from the line of Scott Ciccarelli with Truist Securities. Your line is open.

Scott Ciccarelli: Good afternoon, guys. Thanks for the time. I guess another question on warehouse expansion. What are your latest thoughts around long term warehouse potential both in The US and in total? And then second, I think all of the lower price examples you gave were Kirkland products. So are most of your heaviest price investments on your private brand products? Thanks.

Gary Millerchip: Yeah. On the first part of the question, Scott, I think Ron briefly alluded to it earlier as well. You know, we tend to look five to ten years out in terms of our real estate plans and we would still see a really good roadmap for 30 plus warehouses a year is the goal that we have at least achieving 30 new warehouses a year. The goal that we set for ourselves. And when we look at that five to ten year plan, we see opportunities for growth in all the markets and geographies that we're operating in today.

So generally speaking, we're expecting around half, maybe slightly over half to be in The US And then just around half to slightly under a half to be in the rest of the markets that we operate in. So think of that being Canada, Mexico, Europe, Asia, Australia. Across those different markets. And I wouldn't say it's you know, one specific geography. It's really fairly well spread across those markets continue to build our presence in each of those different geographies.

The second part of your question around Kirkland Signature, you know, I think it's more a reflection of, you know, we tend to have a, obviously, a very strong understanding of the cost involved in those items, and we want to be always the first to lower prices for our members and the last to increase them. And so buyers in our in our category managers who look at those items whenever we see an opportunity either to work with our partners or to find ways to buy more effectively want to be looking for those opportunities.

So in most of those cases, that's us really working very closely with our suppliers to look at what we're seeing in the cost base and working creatively to either increase buying globally so that we can improve our economies of scale or looking at ways to operate more efficiently without ever compromising on the quality of the and those would be all great examples of where our teams really looked and found opportunities to bring down the price and increase the value for our members.

Scott Ciccarelli: Thank you, and happy holidays.

Ron Vachris: Happy holidays. You too.

Operator: And our next question comes from the line of David Bellinger with Mizuho. Your line is open.

David Bellinger: Regarding the personalization efforts, those seem to be working pretty well early on. How much further does that have to roll out? Is it hitting every number at this point? And any specific examples you can share on the conversion or the fills up with that some of these personalization changes are helping with today?

Gary Millerchip: Yeah. We've been we have been pleased as you heard Ron mention in the comments around the progress that we made on personalization where we really are now starting to use our data to look for ways. How can we really make the experience better for the member? How do we improve the convenience for them? How do we help them see the most relevant messages that help them get to the best value from Costco. You know, I still think there's plenty of road map and opportunity for us to continue to improve.

First of all, you know, we're we're relatively early on the journey, so we're learning what do our members really like, where are the places we can fine tune and improve those communications and the places in which they show up. I still think there are there are a number of elements on our road map where we still see parts of the experience that our members have that we can make that personalization more relevant, whether that's the, you know, the items and the order in which they see among things like the MVM or whether it's way in which we deliver email communication to our members. So we still see a really strong runway to continue to improve.

We don't really talk about metrics. I think our focus is much more on how we're driving overall member experience and top line sales. So some of these things are intended to improve the way the members are able to engage in our warehouses or the way they're able to buy online. So tend to look at it more of, is it is it driving an improvement in member engagement, and is that helping drive our digital sales, which we continue to expect to grow at a faster pace overall than our than our warehouse business, and is it driving more member engagement overall? And we've been really pleased with the results so far on that journey.

David Bellinger: Great. Thank you.

Operator: And our next question comes from the line of Kelly Bania with BMO. Your line is open.

Kelly Bania: Hi. Thanks for taking our question. Hoping to go back to the topic of renewal rates a little bit. I know you don't prefer to guide or forecast, but I think you did say, Gary, we might see still a decline in the renewal rates the next few quarters. So I was just wondering if that's a little bit of conservatism because sounds like you are having some success on mitigating that dynamic. Wondering if you could comment on that. But also, if you were to pull out that cohort of those younger consume members, would the membership rates be improving, excluding that, or can you share any, you know, of a deeper dive on that renewal rate dynamic?

Gary Millerchip: Sure. Yeah. It really the Kelly, the impact that we've been talking about really is attributable to this phenomena that I've mentioned on the call earlier around as we add in and it sounds like you fully understand the sort of concept of what's happening with the membership base overall. But as we've brought more of these digitally signed up members who are generally younger that just they do renew a lower rate. So really, the impact that we've talked about the last few quarters on renewal rate is a function of those members moving into the renewal rate overalls. That really is what's driving the or what has driven the slight decline that we've seen over recent quarters.

To your point, our goal obviously is to arrest that decline as quickly as possible. And certainly, we're we're encouraged by what we saw last this last quarter with the improvements that we made through the more targeted and relevant communication to members who we know have signed up through that channel. So we're very encouraged by what we've seen so far. Our goal is to you know, to stop that decline and to reverse that decline as quickly as we possibly can. As we're only one quarter into the change that we made, we wanted to flag that, of course, you know, there's still work to be done there.

And you know, we are still at a lower renewal rate on digital sign ups than we are on warehouse sign ups. And so our expectation of ourselves is to close that gap as quickly as but we wanna be transparent in all that we share that there's still work for us to do. And, you know, and there is a possibility the next couple of quarters could still show a slight decline because of the factors that I've mentioned in prior calls.

Kelly Bania: Super helpful. Thank you.

Gary Millerchip: Thanks, Caddy.

Operator: And our final question comes from the line of Spencer Hamas with Wolfe Research. Your line is open.

Spencer Hamas: Good evening. Thanks for the question. Just curious if you could talk about the cadence of comps you saw through November and then into December. And how that's informing how the consumer is holding up heading into the holiday from your vantage point? And then you're any trade down or divergence in performance by customer cohort that is changing how you guys are buying?

Gary Millerchip: Yeah. I think so. Thanks for the question. I think we don't obviously get into talking about specifically our current quarter because we report our sales on a monthly basis. But overall, I would say we're seeing relative consistency in how our members are shopping. I mentioned it earlier that we've you know, we have seen month to month some I call it bumpiness if you like in the in the sales, but most of that's been attributable to whether it's cycling port strikes or consumer uncertainty one month with tariffs and then the sales come back the next month.

And if we look at the last six months or so outside of the you know, the two things that I mentioned around you know, we've seen continued strong growth in nonfoods and market share gains, but we have seen a deceleration in nonfoods. And I think that's really been offset when you look at the total comps by the benefit we've seen from extended operating hours. But net, you know, really in that sort of six and a half percent range when you look at the last two quarters over the last seven months, really.

Outside of a couple of months being one slightly above and one slightly below that six to 7% growth range, and those months are right next to each other. So when you average out the two, they came in at six and a half as well. We've been really in that consistent range. So nothing that we'd call out that we're seeing as a change other than the two factors I just mentioned in terms of member behavior and the way in which we believe our value is resonating with them.

Spencer Hamas: K. Got it.

Operator: 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.

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