Costco Wholesale Earnings Call Insights: Merchant Insights and Margins

Margins

Mark Wiltamuth – Morgan Stanley: I want to ask a little bit about the core merchandising margin only down one basis point X gas, is there any change there or can you really point to what was going on there to keep that number muted?

Richard A. Galanti – EVP and CFO: Not really. As we’ve always said for many quarters, margins of more us than anybody else. No, it’s pretty much as you see it. It’s a little better. I don’t think we started the quarter saying let’s get a little better, or let’s get that trend back to zero, but that’s where it ended up. We’re trying to do both, drive business and make money.

Mark Wiltamuth – Morgan Stanley: Have you seen any uptick in your private label penetration or anything like that, that might be contributing?

Richard A. Galanti – EVP and CFO: Nothing out of the ordinary, we continue to add products, everything from wine and spirits to can goods and all kinds of nut and candy items, so I’d say nothing dramatic. The big dramatic number came in the first half of calendar ’09 after the financial crisis where we saw an usually large increase in sales penetration of private label. I think on the food and sundries side over six months back down it was like 300 basis points, but generally we see a half to three quarters percent a year, and I’m not aware of anything that is different than that right now.

Mark Wiltamuth – Morgan Stanley: Lastly, Black Friday, how did that go for you, looked like there was a lot of activity in the electronics part of the store, especially with the manufacturer rebates that were being featured there. How does that look for you on that category?

Richard A. Galanti – EVP and CFO: It was fine, no surprises versus what we’ve expected. We’ve now done some of our own Black Friday coupon handouts and the like for the last few years, we’re pleased with it.

A Closer Look: Costco Wholesale Earnings Cheat Sheet>>