A：The reported sgna rate was 9.6%, which is a year-over-year increase of one basis point from 9.59% last year. The operations component of sgna also increased by one basis point. Higher productivity and efficiency from technology investments offset wage investments and the impact of extended operating hours, but the rate was negatively impacted by a 4 basis point charge related to a tax assessment for prior years.

A：Interest expense decreased to $35 million from $37 million last year, while interest income grew to $122 million from $96 million. The benefits from foreign exchange were $33 million, compared to $51 million last year, due to lower gains in foreign exchange. The tax rate for the quarter was 22.5%, up from 22% in the same quarter of the previous year.

A：Capital expenditure in Q1 was approximately $1.53 billion, and it is estimated that capital expenditure for the full year will be about $6.5 billion. The additional investments are to support a higher number of new warehouse openings, increased warehouse remodels, depot network expansion, and digital enhancements.

A：Costco's US Food Court set a daily record on Halloween with pizza sales, Black Friday was a record-breaking day for the US eCommerce business with over $250 million in non-food orders, and U bakeries sold 4.5 million pies in the three days leading up to Thanksgiving.

A：Core merchandising in Q1 focused on quality, value, and newness, delivering market share gains across virtually all departments. Fresh sales grew mid to high single digits, with double-digit growth in meat. Bakery experienced high single-digit growth from new items such as hard day dessert bars and creme brule bars. Non-food categories also had comp sales in the mid single digits, with strong performance in tires and small appliances. Overall, the buyer's job was to find new and exciting items at great values and adjust the assortment to minimize the impact of tariffs.

A：New national brand partnerships in Q1 included Gap, Vera Bradley apparel, and Upper Deck trading cards, contributing to a mid single-digit growth in the non-food sundries category, with strong results in candy and food. Newness drove growth with on-trend items like dairy chocolate performing very well.

A：Kirkland's signature items offer 15% to 20% value compared to national brands with equal or better quality. Sales grew at a faster pace than overall sales with new items launched such as facial towels, blueberry croissants, apparel items, and a Caramel Brownie Sundae. Prices were lowered on several items, and the digital site traffic increased 24%.

A：In non-sf toodsi, sectors such as pharmacy, gold and jewelry, tires, small electronics, apparel, and majors grew double digits year over year. The same-day delivery service, offered in partnership with Instacart and others internationally, performed extremely well and grew at a faster pace than overall digital sales.

A：Costco Travel achieved over $100 million in gross bookings in the US through Costco Travel in the five days following Thanksgiving, up 12% from the prior year. Inflation remained relatively consistent with recent quarters, except for higher inflation in commodities such as beef, seafood, and coffee, which was offset by lower inflation in eggs, cheese, butter, and produce. Non-food inflation was low single digit, primarily driven by gold and imported goods.

A：The company's buyers have done a great job reducing the impact of tariffs for members by 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, and leaning into Kirkland's signature. Additionally, the item assortment has been optimized. Tariff impacted items were replaced with alternative value items, some of which are produced in the US and largely unimpacted by tariffs. The supply chain has remained stable, and the merchants feel good about the inventory position.

A：The recent international expansion achievements include the Sweden opening of a second location, a third in France, and several upcoming projects in Asia.

A：The company is balancing growth between domestic and international markets by accelerating sales in busy warehouses to improve the economic model, and by increasing new member sign-ups in markets with less warehouse penetration to drive significant membership increases.

A：To offset the impact of digitally engaged members on renewal rates, the company is focusing on delivering targeted and relevant communication to members to ensure they see the value in continuing their membership. Early results show positive impacts from these engagement efforts.

A：Digital engagement among members is growing as the company enhances its website and app. Traffic to the website grew 24% and the app grew even more, with a focus on increasing relevancy and digital sales are expected to grow faster than overall sales.

A：The upcoming enhancements in the Costco app include the introduction of pay ahead for the pharmacy, ordering cakes and deli trays online, and improving the digital adoption of services previously perceived as clunky by members.

A：The company sees good prospects for international expansion with strong growth in Europe and Asia, and plans to continue balancing expansion internationally with projects in the U.S. They do about 5 to 6 relocations a year in the U.S., with a significant uplift when these occur.

A：The main challenges affecting productivity and cost leverage include the annual investments through the employee agreement, extended operating hours, higher healthcare costs that grew faster than sales, and a tax charge from several years ago.

A：The company has implemented measures to offset the additional costs related to extended opening hours and employee agreements. This includes work done by the team to manage these costs and an expectation that, if not for the sales tax adjustment, there would have been some leverage during the quarter.

A：The company measures inflation as the purchase of bigger pack sizes or upgraded items by members, in addition to traditional measures of price increases. In the current quarter, food and fresh food inflation was slightly positive, ranging from low to mid single digits, similar to the last quarter. Fresh fruits and vegetables have been deflationary, while items like beef, seafood, and coffee have led to some inflation. However, other items like eggs and cheese have lower inflation than earlier in the year, which has somewhat offset each other, leading to no significant change in overall inflation levels.

A：The impact of inflation on the company's ticket growth in comparable sales is a combination of factors including inflation on like-for-like items, members buying bigger pack sizes, moving to newer models, and some level of unit growth. While specific figures were not provided, the speaker suggests that all these factors contribute to the overall inflation impact on ticket growth.

A：The company has been pleased with the results in the quarter regarding total paid membership growth, noting an increase of over 5% in Q9. While year-over-year growth has slowed compared to the last few years, it remains positive and the company feels good about the health of membership growth. There are opportunities to maintain future growth, supported by factors like actions to improve renewal rates, new warehouse openings, and the maturing of existing ones. The company is also committed to enhancing the value of the membership with changes such as extended opening hours and Instacart benefits. Although the growth rate is slower, the company views the momentum and opportunity for continued growth as positive.

A：The non-food category has seen a decrease in year-over-year growth to low double digits and midsingle digits. Factors influencing this include the sales of gold in warehouses and online, and some of the gift card programs from last year. However, the company still sees good market share gains across most non-food categories. Positive performers include gold and jewelry, special events, health and beauty, and categories like majors, tires, and small appliances. The company believes its teams are delivering great value to members and sees a path for continued market share growth in non-foods by continuing to provide that value.

A：The company looks at a 5 to 10-year plan for real estate and expects to open around 30 new warehouses a year, meeting or exceeding the goal set for themselves. The potential for warehouse expansion in the US and internationally to various markets like Canada, Mexico, Europe, Asia, and Australia was reiterated. The focus is on continued presence in each geography and maintaining the supply chain for private brand products. Price investments are primarily in Kirkland Signature products, where the company aims to be the first to lower prices and the last to increase them, ensuring a strong understanding of costs and seeking opportunities to pass savings onto members.

A：Personalization efforts at Costco seem to be working well early on, and the company is now using membership data to improve the experience, convenience, and relevancy of messaging for members, with a focus on helping them achieve the best value from their Costco membership.

A：Although personalization efforts are showing positive results, there is still a roadmap for further improvement, such as personalizing elements like the items and order of items seen by members on the Mvm and optimizing email communication delivery.

A：Yes, personalization changes are designed to drive improvements in member engagement and digital sales, which are expected to grow at a faster pace than warehouse business overall, and are contributing to more member engagement.

A：The potential for continued renewal rate decline is attributed to the addition of younger, digitally signed-up members who renew at a lower rate. The company is addressing this issue by making targeted and relevant communication to members who have signed up through that channel, and while they're encouraged by the recent improvements, they aim to reverse the decline as soon as possible.

A：The addition of digitally signed-up members, who generally renew at a lower rate, has impacted renewal rates. The company's goal is to close the gap between digital and warehouse signups as quickly as possible.

A：There is relative consistency in how members are shopping, with month-to-month sales fluctuation mostly due to external factors like strikes, consumer uncertainty, and tariffs. The company has observed continued strong growth in non-superfresh (sf) readers and market share gains but a deceleration in non-sf readers, which has been offset by benefits from extended operating hours. Overall, the company is seeing a consistent range of growth in the 6 to 7% area when looking at the past two quarters.