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One by one, over the past year, many major retailers caved under pressure from conservative groups to weaken their diversity, equity, and inclusion (DEI) programs. But one chain bucked that trend: Costco Wholesale.In December, conservative think tank National Center for Public Policy Research submitted a shareholder <a target="_blank" rel="noopener noreferrer" href="https://s201.q4cdn.com/287523651/files/doc_financials/2024/ar/FY24-Proxy-Statement.pdf">proposal</a> that would have required Costco to evaluate DEI initiatives which it claimed hold “litigation, reputational and financial risks.” Hogwash, Costco’s board responded: DEI is good business, its directors said.“As our membership diversifies, we believe that serving it with a diverse group of employees enhances satisfaction,” Costco wrote. Costco shareholders and customers seem to agree. In the shareholder proxy vote, 98% of votes cast opposed the proposal. In the first three quarters of this fiscal year, net sales were up 8%, outperforming most competitors; and surveys of customer satisfaction suggested that no Costco users were defecting.

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WMA 2024-Costco

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G500-2023-Costco

The retail giant, beloved for its bulk discounts and its $1.50 hot-dog-and-soda combo, continued to benefit from the return to in-person shopping. Revenue rose 16% in 2022 over the previous year, while profits rose 17%. 
<ul> 
 	<li>At the end of its fiscal second quarter in March 2023, the company claimed a 92.6% membership renewal rate.</li> 
 	<li>As of May 2023, Costco had 123 million member-cardholders, in 14 nations; 852 warehouses; and 304,000 full- and part-time employees worldwide.</li> 
</ul>

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WMAC 2022-11-Costco

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G500 2022-26-Costco Wholesale

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F500 2022 Costco

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CTW 2021-03-Costco

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G500-2020-033-Costco

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Costco Wholesale is known for its operation of membership warehouses globally, along with its e-commerce websites. The retailer offers branded and private-label products in a range of merchandise categories, including groceries, and is also responsible for gas sales, pharmaceutics, hearing-aid centers, and tire installation centers, as well as various online services. Costco was founded in 1976.

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Q1 2025

Costco Wholesale (COST): Company Profile, Stock Price, News, Rankings

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Costco Wholesale

costco wholesale

Good afternoon and 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 Fiscal 2025 Conference 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.

Thank you. And I would now like to turn the conference over to Gary Millership, Chief Financial Officer. You may begin.

Good afternoon, everyone, and thank you for joining COSCO's Q1 2025 earnings call. I'd like to start by reminding you that these discussions will include forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that may cause actual events, results and or performance to differ materially from those indicated by such statements. The risks and uncertainties include, but are not limited to, those outlined in today's call, as well as other risks identified from time to time in the company's public statements and reports filed with the SEC. Forward looking statements speak only as of the date they are made, and the company does not undertake to update these statements except as required by law.

Comparable sales and comparable sales excluding impacts from changes in gasoline prices and foreign exchange are intended as supplemental information and are not a substitute for net sales presented in accordance with GAAP. Before we dive into our financial results for the quarter, I'm delighted to say that Ron Vakrus is joining us for today's call. I'll now hand over to Ron for some opening comments.

Thank you, Gary, and good afternoon, everyone, and thank you for joining us today.

As we wrap up the Q1 of fiscal 2025, let me make a few brief comments on some of the highlights since we last spoke in September. In the Q1 of fiscal 2025, we opened 7 new warehouses. This included one relocation and resulted in 6 net new buildings, of which 4 were outside of the U. S. Additionally, after the end of the quarter, on the day before Thanksgiving, we opened our 897th warehouse in Pleasanton, California.

That opening had the highest ever opening day sales for a U. S. Warehouse at $2,900,000 that day. We continue to project 29 openings during fiscal year 2025, of which 3 will be relocations and so 26 net new buildings. 10 of those warehouses will be outside of the U.

S. Gary will speak to a more detailed review of our results in a few moments, but I wanted to share some fun facts regarding our growth across the business. Our U. S. Bakery division has reached new records of 4,200,000 pies being sold the 3 days prior to Thanksgiving.

In our U. S. Food courts on Halloween Day, we set a new record of 274,000 whole pizzas being sold. That was an increase of 21%. Our U.

S. Pharmacy business has prescription growth exceeding 19% for the Q1, setting new volume records for that business. And lastly, we continue to gain market share with our e commerce Big and Bulky fulfilled by Costco Logistics. Costco Logistics completed nearly 1,000,000 deliveries in Q1 and over 196,000 deliveries last week alone. That was a new record as well.

The majority of these deliveries were completed in 4 days from the members ordering their merchandise online. All of these milestones reflect the continued strength of our business across the membership offering. These great results are a reflection of the outstanding work done by our over 330,000 employees around the world. Their commitment to our company and the Costco experience for our members is truly inspiring. I'd like to thank all of our people for their outstanding work this year and especially during our busiest time of the year.

As we approach our Annual Shareholders Meeting in January, I also wanted to mention that our annual update to the Costco sustainability commitments was just made available online today. This report provides a comprehensive review of the progress we're making towards our sustainability objectives, and I would encourage all of you to take a look. With that, I'll turn it back over to Gary to discuss the results of the quarter, and I'll jump back on during Q and A to field some questions. Thank you.

Thanks, Ron. In today's press release, we reported operating results for the Q1 of fiscal 2025, the 12 weeks ended November 24. We have once again published a slide deck on our investor site under Events and Presentations with supplemental information to support today's press release. You might find it helpful to have this presentation in front of you as I walk through our results. Net income for the Q1 came in at $1,798,000,000 or $4.04 per diluted share, up from $1,589,000,000 or $3.58 per diluted share in the Q1 last year.

This year's results included a tax benefit of $100,000,000 or $0.22 per diluted share related to stock based compensation. And last year's results included a tax benefit of $44,000,000 or $0.10 per diluted share also related to stock based compensation. Excluding these discrete tax items, net income and earnings per diluted share grew 9.9% and 9.8% respectively. Net sales for the Q1 was $60,990,000,000 an increase of 7.5 percent from $56,720,000,000 in the Q1 last year. U.

S. Comparable sales were up 5.2% or 7.2% excluding gas deflation. Canada comp sales were up 5.8% or 6.7% adjusted for gas deflation and FX. And other international comp sales were up 4.7% or 7.1% adjusted. This all led to total company comp sales of 5.2% or 7.1% adjusted for gas deflation and FX.

Finally, e commerce comp sales were up 13% or 13.2% adjusted for FX. In terms of Q1 comp sales metrics, foreign currencies relative to the U. S. Dollar negatively impacted sales by approximately 0.3%, while gas price deflation negatively impacted sales by approximately 1.6%. Traffic or shopping frequency increased 5.1% worldwide and 4.9% in the U.

S. Our average transaction or ticket was up 0.1% worldwide and 0.3% in the U. S. This includes the headwinds from gas deflation and FX. Adjusted for those items, ticket would have been up 2% worldwide and up 2.3% in the U.

S. Moving down the income statement to membership fee income. We reported membership fee income of $1,166,000,000 an increase of $84,000,000 or 7.8% year over year. Membership fee income growth was also 7.8% excluding FX. Remember that the recent membership fee increase doesn't have much impact yet due to the effects of deferred accounting and represented less than 1% of the fee growth in the quarter.

In terms of renewal rates, at Q1 end, our U. S. And Canada renewal rate was 92.8%, down 1 10th of a percent from Q4 end. The worldwide rate came in at 90.4%, also down 1 10th of a percent primarily due to the U. S.

And Canada. As we mentioned on the last quarterly earnings call, our renewal rates are seeing some impact from higher growth in digital sign ups, which renew at a slightly lower rate than our base as a whole. Underlying renewal rates and membership growth remain strong, but this mix shift is likely to have a continued effect on our published renewal rate for the remainder of 2025. We ended Q1 with 77,400,000 paid household members, up 7.6% versus last year and 138,800,000 cardholders, up 7.2% year over year. At Q1 end, we had 36,400,000 paid executive memberships, up 9.2% versus last year.

And executive members now represent 46.8 percent of paid members and 73.1 percent of worldwide sales. Turning to gross margin, our reported rate in the Q1 was higher year over year by 24 basis points, coming in at 11.28% compared to 11.04% last year and up 7 basis points excluding gas deflation. Core margin was higher by 31 basis points and higher by 17 basis points without gas deflation. This was driven by mix and our credit card co brand program. In terms of core margins on their own sales, our core on core margins were higher by 3 basis points.

Ancillary and other businesses gross margin was lower by 12 basis points and lower by 16 basis points ex gas deflation. This decrease year over year was largely due to gas partially offset by e commerce. 2% reward was lower or better by 5 basis points or 6 basis points without gas deflation. And LIFO was flat for the quarter. We had a $19,000,000 LIFO credit in Q1 this year compared to a $15,000,000 credit in Q1 last year.

Moving on to SG and A. Our reported SG and A rate in the Q1 was higher year over year by 14 basis points coming in at 9.59% compared to last year's 9.45%. SG and A was flat adjusted for gas deflation. The operations component of SG and A was higher or worse by 15 basis points and higher 4 basis points excluding gas deflation. Higher employee wages that went into effect in July drove the headwind for the quarter, partially offset by sales leverage and productivity gains.

As always, investing in our employees remains a key part of our strategy and we will continue to focus on driving top line sales and improving productivity to mitigate the incremental costs. Central was higher or worse by 5 basis points and 3 basis points without gas deflation. Stock compensation was lower or better by 2 basis points and 3 basis points without gas deflation and preopening costs were lower or better by 4 basis points both with and without gas deflation. Below the operating income line, interest expense was $37,000,000 versus $38,000,000 last year and interest income was $96,000,000 versus $154,000,000 last year. As mentioned in our Q4 earnings, interest income faced headwinds in the quarter due to lower cash balances subsequent to our special dividend in January 2024 and lower interest rates.

This will continue to negatively impact year over year compared in Q2. FX and other was a $51,000,000 gain in Q1 this year versus a $6,000,000 gain last year. This gain offset much of the headwind we saw in interest income in the quarter and was primarily due to FX. In terms of income taxes, our tax rate in Q1 was 22% compared to 24.5% in Q1 last year. As mentioned earlier, this year's rate benefited from a $100,000,000 discrete item related to our annual RSU vesting.

Adjusted for this benefit, the tax rate for the quarter would have been 26.5%. Turning now to some key items of note for the quarter. Ron talked earlier about our continued momentum with new warehouse openings and capital expenditure in Q1 was approximately $1,260,000,000 We estimate CapEx for the full year will be approximately $5,000,000,000 Taking a deeper look into core merchandising sales, fresh led the way in Q1 with comparable sales up high single digits. Meat was up double digits and demonstrated strength across the department. We have members who are continuing to purchase high ticket premium cut selections and others who are gravitating more towards lower cost per pound options.

As always, our focus remains on delivering exceptional quality and value across every item we sell in fresh. Our non foods category was also up high single digits despite some impact from the calendar shift as our buyers continue to bring in new and exciting items at great values. Golden jewelry, gift cards, home furnishings, sporting goods, health and beauty aids, luggage, kiosk and hardware were all up double digits. This quarter we were able to add several new high quality brands across a broad range of categories including Peloton, Wrangler, Springfree Trampolines and Ruggable. Food and sundries had mid single digit comps with our cooler and frozen food departments leading the way.

We continue to see strong momentum with new and exciting international food items such as Soneea Pork Soup Dumplings, Sonamuzuri Rice and hot pot beef slice chuck rolls. Kirtland Signature continues to grow at a faster pace than our business as a whole. Our goal is always to be the first to lower prices where we see the opportunities to do so. And just a few examples this quarter include Kirtland Signature Organic Peanut Butter reduced from $11.49 to $9.99 Kirtland Signature Chicken Stock from $9.99 to $8.99 and Kirkland Signature Sauvignon Blanc from $7.49 to $6.99 Our merchants are also driving innovation with Kirkland Signature. Most notably this quarter, we introduced new Kirkland Signature Oxy Powder and Kirkland Signature Food Storage Bags, both offering significant value to the national brand alternatives.

Within ancillary businesses, pharmacy had the strongest sales growth. Our focus continues to be on keeping prescription and OTC prices low, while also leveraging technology to make it easier for our members to use our pharmacy. Recent examples include the introduction of new prescription inventory management software to better stay in stock and enabling delivery of prescriptions via Instacart. Our food court and optical departments also performed well in the quarter. Gas sales were negative low double digits due to the average price per gallon being down low double digits.

Costco Travel is another way we deliver unique membership value and these services continue to resonate well with our members. We offer a wide range of vacation packages, car rentals, cruises, hotels, flights and other travel related services. And in addition to highly attractive rates, many of our offerings include a Costco shop card as extra value for booking with Costco. A couple of fun facts about our travel business. Last year, we sold enough rental cars to fill every U.

S. Costco parking spot 8.5 times. We also offer great value to members on cruises and our largest cruise booking last year was a 150 day around the world cruise starting from Fort Lauderdale and making stops in places like the Galapagos and Easter Islands. The total price was $293,000 for 2 in the owner's suite cabin and added values on the booking included a shipboard credit of $13,000 and the Costco shop card worth $25,000 Members who use Costco travel spend approximately twice as much as members that do not use these services. Inflation was once again essentially flat in the quarter across all core merchandise.

Food and sundries and fresh foods were slightly inflationary and this was offset by deflation in non foods. In the supply chain, while egg supplies have been negatively impacted by avian influenza and the recent East Coast port strikes led to a spike in paper and water product demand, overall product supply has generally been good. The predictability of on time shipping delivery remains below pre COVID levels and items are generally spending more time on the water. Our merchants have adapted well to this change and we are in a great position with inventory for the holidays. As we head into Q2, we continue to monitor for potential port strikes in India, the East Coast and Canada and our merchants are adapting plans as necessary to ensure we remain in stock for our members.

Turning to digital and e commerce. We continue to make progress with our technology roadmap and enhancements made to the member experience like the ability to check warehouse inventory via the Costco app are resonating well. Our U. S. App was downloaded 2,900,000 times in the quarter, bringing total downloads to approximately 42,000,000.

E commerce traffic, conversion rate and average order value were all up year over year, helping to drive another strong quarter of comparable sales growth. While strength in bullion was a meaningful tailwind to e commerce sales, hardware, sporting goods, gift cards and home furnishings all grew double digits year over year. As Ron mentioned earlier, Costco Logistics also had another great quarter driving growth in big and bulky items. And Costco Next, our curated marketplace achieved record sales over the Thanksgiving, Black Friday and Cyber Monday sales period. In closing, let me provide a brief update on retail media.

To use a baseball analogy, we are very much in the early innings with retail media, but we continue to believe this represents a significant growth opportunity in the future. This quarter, we completed our 1st targeted media campaign through 3rd party media channels with one of our largest CPG partners. The campaign achieved 2 to 3 times the return on ad spend typically expected, highlighting the value we can create for our members and suppliers. Our retail media team is now working with over 25 suppliers who are eager to participate in our next wave of off-site campaigns. And finally, in terms of upcoming releases, we will announce our December sales results for the 5 weeks ending Sunday, January 5, on Wednesday, January 8 after market close.

That concludes our prepared remarks and we'll now open the line up for questions.

Thank you. And we'll now begin the question and answer session. And your first question comes from the line of Simeon Gutman with Morgan Stanley. Your line is open.

Hi, everyone. I hope you can hear me. My one question with a couple of parts. Actually diagnosing the health of the consumer, can you give us some sense of how you're clearing some of the seasonal inventory, maybe apparel, bigger ticket? And then once in a while, we talk about market share in some discretionary categories.

Can you share your perspective on that? Thank you.

Sure. Thanks, Simeon. Yes, we can hear you well and thanks for the question. Yes, so maybe taking that question in a few parts. As we look at the consumer, I think we're seeing a lot of similar trends that we've talked about on the last few quarters.

What we're seeing with our members is that now probably more than any time in recent history that combination of newness of items, quality and value are really important to the member. And we're seeing the member being very choiceful about how they're spending the dollars. All that being said, I think we're finding that as our merchants are doing a great job of finding that newness and quality at great value, we've seen some great strength in our non food categories. And certainly, as you heard me say on the prepared comments, we're seeing really strong performance across many of the categories around things like gold and jewelry, gift cards, home furnishings, sporting goods, health and beauty, hardware, all up double digits during the quarter. So we're pleased with the momentum that we're seeing there and I think it reflects the fact that our members are willing to spend as inflation comes down as long as those sort of 3 key ingredients that I mentioned are there for the member as well.

I think in terms of overall what we're seeing with the member on food and grocery, I would say that we are seeing what we think is a little bit of a shift from food away from home to food at home and that's certainly reflected in strong meat and produce sales that we've seen in our own business. And we are seeing I think a little bit even more of a trend that we've talked about in prior quarters of bifurcation with the member where we have high quality premium cuts they're selling well, but we're also seeing a gravitation towards those lower price per pound items across categories like poultry, cuts of beef and pork as well. Ron, anything you'd like to add?

Yes, I guess, Simeon, the other part of your question, seasonal sell through appears to be very strong. It's a unique retail calendar with a shorter period of time after Thanksgiving, but our buyers have been through this before and they've responded properly with that as well. So that feels good. Seems to be a very foundational Christmas though, as you see furniture driving a lot of our e commerce sales, appliances, sporting goods, hardware. And so just people are very basic buying this year, but good trends.

Yes. And I think, Simeon, I guess I didn't mention specifically, we tend to focus on our member and how can we deliver that great value. The data that we do see would tend to suggest that we're growing our share across most of the categories that

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

Hi, Ron and Gary. Happy holidays. Their traffic continues to impress a lot. As we look forward, what are your thoughts and key drivers and mix opportunities as you think about ticket and UPT? Also you highlighted retail media, which is a huge great opportunity.

How does that intersect with your important multi vendor mailer? And also as you think about incrementality of that opportunity, that would be great to hear. Thanks. Thank you very much. Yes.

Thanks, Oliver. I think the first part of your question, you probably heard in some of the comments that we made that we were we have been pleased with the traffic that we've seen and the continued frequency of shop from our members. What was nice to see at the end of last quarter, we did see when you adjust for foreign exchange and gasoline that we started to turn positive on the items per basket. And then this quarter when you adjust for those items, we were up about 2% on the slightly over 2% I think on the U. S.

And 2% worldwide. So we have seen some improved momentum on the items per basket and I think that's a lot of great work being done by again our merchants making sure that we've got great product offerings in the warehouse and then our operators really executing those campaigns exceptionally well when the members are in the warehouse as well. From a media perspective, I think we look at it very much as an incremental opportunity. Our goal is to continue to maximize the value we can put into everyday product quality and pricing. And where we're seeing a lot of the interest in retail media is really coming from the marketing agencies, which gives us a lot of confidence that this is an opportunity for us to tap into new marketing dollars where a lot of our national brand suppliers are going to those media agencies to invest those marketing dollars to really make sure they're getting a good return on that ad spend.

And so where we're seeing a lot of the traction and again, I would emphasize it's very early days with retail media for us is something that we're just really embarking on that off-site journey. But really where most of the interest is coming from is from retail media agencies, which we believe is the way for us to make sure that we're driving incrementality and growth in the model.

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

Thanks. Good evening, guys. So can you talk about what drove the core on core margin performance this quarter? You have the MFI now rolling through. How do you think about reinvestment of price either in terms of expected price reductions that you see coming down the supply chain or maybe even going above and beyond that?

And just as a side question, can you define what's in the hardware category? Is that consumer electronics? Thank you.

Sure. Thank you for the question. Yes, in terms of the core on core margin, first of all, which I think was the first part of your question, if you break it down between the sort of 3 main categories that we see within the business, that's foods, fresh and non foods. Foods would have been essentially flat, non foods would have been down slightly and fresh would have been up slightly. So those 3 kind of obviously overall we were just up 3 basis points.

So there really wasn't a tremendous amount of change overall, but they would have been the sort of key puts and takes in the overall number.

And then the description of the hardware category really is just that, it's storage, plumbing, lighting, power tools, batteries, those type of the household goods that you would find at a typical hardware store.

And then on the price investment side, your thought process there?

That's something that we've done for the history of the company. We're going to continue to invest in price and some of it may come in holding certain prices as some commodities are starting to increase. But investing in items like Gary described, leading with Kirkland Signature. I mean, we feel that we're going to be asking our members and our vendors to contribute with lower prices. We've got to set that example and start with Kirkland.

So we're going to continue to look at those opportunities and invest where we can and keep driving sales.

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

Thank you for taking my question. I have a 2 part question. One, I think Gary you mentioned the difference in renewal rates from online sign ups and then offline sign ups. Can you help us break it out and understand the difference in online behaviors? And second part on the retail media side, how do you expect Costco Connect the 3rd party marketplace to contribute to the growth of retail media going forward?

And will that impact the membership loyalty in any way or regard? Thank you.

Yes, sure. Thanks for the question. So first of all, on the membership rate, I'd maybe take a step back and just say overall, we're feeling very good about the underlying membership metrics that we're seeing. So renewal rates in general sign up activity and then the membership growth remains very strong. As I mentioned in the prepared remarks, really what we're seeing is that over the last few years, we've seen some shift in more of the members that we're acquiring coming through digital channels.

And that's helping with the comment that we made last quarter where we're also seeing a slightly reduction in the average age of members because of that change in shift as well. But what it does mean is that often when we have new members being recruited through that digital channel, they're renewing at a slightly lower rate than the historical base that we have. And you may recall that when we talk about membership renewal rate is effectively an 18 month lag that we see that we report out on that renewal rate. And so as we look forward and see that trend continuing as we build more of that new digital member into the base and it slightly affects the mix, we expect it will have a slight impact on that overall membership renewal rate that we report. So we wanted to make sure we gave you visibility into that.

When we look at individual sort of cohorts of members, we feel good about the ability for us to be able to continue to drive improvement in renewal rate, but we are going to see that impact through as it becomes a flow through from the continued growth in digital members.

And then this is Ron. The question on Costco Next. Costco Next is our marketplace. This is an exclusive Costco member only marketplace. It's fully curated by our buyers.

So everything that's on that site has been reviewed by our buyers, but is exclusive to Costco members. So we think it's just going to enhance the relationship we have our members and give more options for their shopping needs.

Got it. Just to clarify, I was wondering if you were going to have more 3P Marketplace vendors using the retail media service and whether that's there's any implications on the member side?

That and that again is as Gary mentioned earlier, we're in the very early stages and we're going to look at where we feel the benefits will be to our members. So that is to be determined yet.

And your next question comes from the line of Karen Short with Melius Research. Your line is open.

Hey, thanks very much. I know this is maybe a little out of left field, but just curious, there's kind of been a trend in retail for some for stock splits generally. And I'm wondering what your philosophy is on that because I know you want your employees to have an opportunity to buy stock below the store manager level. And the second question that's kind of unrelated is just tariffs. Any thoughts on that and thoughts on what that could do to inflation?

Thanks, Karen. Yes, on the stock split, you're probably aware that Costco has done stock splits in the past. And it's something that we'll continue to evaluate and discuss with our board, but there isn't a plan at this time for a stock split. I think for us the way we think about it is the economic arguments that we're showing the repast are a little bit less clear because retail investors and employees both have the ability now to buy fractional shares, but we do also recognize that there's a benefit of the stock feeling more affordable for our retail investors and employees who were very important constituents for us. So we'll continue to evaluate over time.

And then I think the second part of the question was on tariffs?

Yes. Yes. I think from a tariffs point of view, what I would say is that, first of all, there's a lot of uncertainty around the timing and scope of changes. So it makes it difficult for anyone to predict what the impact will be with confidence. And in general, of course, tariffs raised costs.

So that's not something that we see as a positive in general. With that being said, I'll quote my predecessor Richard. He'd say, when it rains, it rains on everybody. And I think for us, we've faced tariffs in the past and we believe that our merchants and buyers are equipped as anybody is to sort of work through and navigate and manage that situation. We have a plan over time where we have done that in the past and typically we'll look where we can to pull forward inventory buying, which actually we've done already because of some of the less predictability around shipping and how much time product spends on the water and also because of the risk of strikes that we've seen in the past as well.

We'll of course try and work with our vendors to make sure we're looking for ways where we can to mitigate the cost. And we also consider alternative sourcing locations where that's practical as well. I guess the final sort of string in our bow would be is if we didn't see the value in an individual SKU then we could always pivot to a different SKU item for the member if we felt the value just wasn't there and it was more effective for us to move to a different item in the warehouse. I guess in context for us, the sort of the amount of business that's affected, we're about a quarter of our business is non foods and then a subset of that is imported. So remember it's a minority of our overall business and then it's a smaller part of that as well we actually import just for context.

Great. Thank you very much. Have a great holiday.

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

Yes. Hi, good morning everyone. I wanted to ask you about CapEx. CapEx is kind of inching up over the last couple of years. But taking a step back and thinking about the evolution of your business, your goals, growing the moat, how are you thinking about the outlook for CapEx?

Any meaningful changes ahead? And as part of this, anything different sort of in the pipeline from a project or priority standpoint?

Yes. Thanks, Ed. I wouldn't say there's really any major change. As you mentioned, we have been gradually increasing capital expenditure, more reflection of the continued growth of the business as we've opened new warehouses, seen some inflation in those costs over the last few years. And we have of course been investing a little bit more in technology as well as we sort of modernize the platforms there and look to build the right capabilities to support growth in the future.

But I think philosophically, we focus on job number 1, of course, is to focus on the warehouses and invest in continuing to maintain the quality of athletes and invest in new growth warehouses in that 25 to 30 range, updating our supply chain and depots to support the capability there and both digitally. And then also as I mentioned sort of technology investments. But I wouldn't indicate at this point that there's any major change in trajectory. It's more just continuation of the growth strategy that we've had in executing on that strategy.

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

Hey, guys. Two quick things. Philosophically, price investments get a lot of publicity. But when you think about reinvesting the MFI increase, price, product quality, right, IT labor, there's a lot of things to invest in. Where do those other things rank relative to price?

And then what does the international club pipeline look like? I'm thinking in particular, where you control sites, even though they may be years away, Is that I don't think it's over 100, but how big is that pipeline today?

Yes. Thanks, John. I'll jump in first and Ron may want to add some color as well. I think overall, we look at the reinvestment of the membership fee holistically. So it's partly where is it that we can lower prices of course, part of it's where can we mitigate the impact of inflation to maintain the value for the member even if costs are increasing.

It's if we how can we improve the membership experience including investing in our employees' wages as we've done recently as well. And of course innovation with new products through Kirkland Signature. So I think we tend to look at it holistically and say how do we make sure that when we think about what our members are paying for the membership fee each year that we're delivering more value and showing them that they're getting greater value than they're paying by a meaningful margin for the value of being a member. Ron, anything you want to add on that?

Costco Wholesale (COST) Q1 2025 Earnings Call Transcript

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