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Costco Wholesale Corp (COST) Q2 2020 Earnings Call Transcript - The Motley Fool

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Costco Wholesale Corp (NASDAQ:COST)
Q2 2020 Earnings Call
Mar 5, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Q2 Earnings Call and February Sales Conference Call. [Operator Instructions]

After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Mr. Richard Galanti, CFO. Thank you. Please go ahead.

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Thank you, Rochelle, and good morning to everyone, and good afternoon to everyone. I'll start by stating 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.

In today's press release, we reported operating results for the second quarter of fiscal 2020, the 12 weeks ended this past February 16, as well as February retail sales results for the four weeks ended this past Sunday, March 1. Reported net income for the quarter came in at $931 million or $2.10 per share. This compared to last year's second quarter of $889 million or $2.01 per share. Net sales for the quarter came in at $38.26 billion, a 10.5% increase over the $34.63 billion realized last year in the quarter.

Comparable sales for the second quarter were as follows. In the US, for the 12 weeks on a reported basis, 9.1%, excluding gas inflation and the impacts of FX 8.1%. Canada, on a reported basis 8.9%, ex-gas and FX 6.8%. Other International, 7.9% reported and 7.1% ex-gas and FX. For total company reported 8.9% same-store sales increase and ex-gas and FX at 7.9%. Both of those numbers were positively impacted as well by approximately 0.5% due to the Thanksgiving holidays occurring one week later this year than last year.

Our e-commerce, we reported a 28.4% comp for the 12 weeks, ex -- and a 28% ex FX. And again, there is a bigger impact of this Thanksgiving holiday shift there given the importance of that e-commerce. E-commerce sales in the quarter were positively impacted by an estimated 11 percentage points, hence the 28% result. In terms of second quarter comp sales metrics, second quarter traffic or shopping frequency increased 5.9% worldwide, and 6.1% in the US. Strengthening foreign currencies relative to the dollar -- US dollar positively impacted sales by about a 0.25% -- I'm sorry, by about 25 basis points and gasoline price inflation positively impacted these numbers by about 80 basis points.

Our average transaction size or ticket was up 2.9% during the quarter, which includes the positive impacts of gas inflation and FX. Later in the call, I'll review our February sales results.

Moving down the income statement for the second quarter. Membership fee income came in at $816 million or 6.3% higher than the $768 million recorded in Q2 of last year, for $48 million increase. That percent increase is about the same as it was Q1 year-over-year. And in Q1, we opened three -- we had three new openings, in Q2, we had no new openings.

In terms of renewal rates, at Q2 end, our US and Canada renewal rates were -- came in at 90.9% and worldwide renewal rate at 88.4%. These are the same levels of renewal that we've achieved in each of the last two fiscal quarters. In terms of number of members at second quarter end, in terms of member households and total cardholders. At the end of second quarter, we had 55.3 million member households, up about 600,000 from the 54.7 million 12 weeks earlier. And total cardholders totaled 100.9 million, up about 1 million from the 99.9 million we reported at the end of the first quarter.

At Q2 end, paid executive memberships stood at 21.7 million members, an increase of 321,000 during the 12 weeks or about 27,000 per week increase since Q1 end. Going down to the gross margin line. Our reported gross margin in the second quarter was lower year-over-year by 31 basis points coming in at 10.98% compared to 11.29% a year ago. That 31 basis point reduction lower number year-over-year excluding gas inflation that would have been 22 basis points lower. If you please jot down the five -- four line items in two columns as we usually do.

First column is reported for the second quarter and the second would be without gas inflation. The core merchandise margin was down on a reported basis, 30 basis points year-over-year in the quarter. Ex-gas inflation it was down 22 basis points. Ancillary businesses, minus 5 basis points and a minus 2 basis points; 2% reward, plus 4 basis points and plus 2 basis points. And then total, as I mentioned 31 basis points lower year-over-year on a reported basis and ex-gas inflation 22 basis points lower.

The majority of the lower year-over-year core margin was driven by higher sales penetration of two significant lower margin segments of our operations, which are growing at a faster rate in the quarter, notably, gasoline and e-comm, as well as the start-up losses at our new poultry complex, which I had mentioned in the first quarter as well.

Looking at the core merchandise categories in relation to only their own -- to their own sales, core-on-core if you will, margins year-over-year were lower on a reported basis by 15 basis points, of which 6 basis points related to the losses from the new poultry complex. Within the core gross margin year-over-year in Q2, we showed a gross margin increase in soft lines. Food and sundries was about even year-over-year and decreases in both hard lines and fresh foods. Hardlines was down in the quarter primarily due to holiday timing, which shifted more promotional activity into Q2 this year.

Fresh was negatively impacted by our step-up in price investments versus last year in fresh, and by the margin impact from the new poultry complex as I just mentioned. And we're now halfway through our first year of operations in the poultry facility, which opened on September 10. And we would expect the gross margin headwinds to decline but -- continue but decline a little bit as we get to full production capacity and improve operations.

Ancillary and other businesses' gross margins on a reported basis, minus 5 basis points year-over-year and minus 2 ex-gas deflation in the quarter. Basically, you had a few things that hurt you and a few things that helped you. But overall, minus 2 ex-gas inflation. 2% reward was better by 4 basis points on a reported basis and by 2 basis points ex-gas inflation. This relates primarily to a true-up of our breakage estimate of the Executive Member rewards.

Moving to SG&A, our reported SG&A percentage year-over-year was lower or better by 22 basis points coming in at 9.78% of sales, down from 10% a year earlier. Without gas inflation, SG&A was lower by 13 basis points. Again if you jot down the following few numbers four line items in the two columns. Operation -- core operations, year-over-year in Q2 on a reported basis showed an improvement. It was lower, so I'd say a plus 17 basis points and ex-gas inflation plus 10. Central plus 1 basis point, and plus 0 basis point, stock compensation was lower or plus 4 basis points and plus 3 basis points on ex-gas inflation. And again, the total on a reported basis, SG&A was lower by 22 basis points, plus 22 basis points, and without gas inflation, a plus 13 basis points, so lower by 13 basis points.

The core operations component again 17 basis points reported, 10 basis points excluding impacts of gas. This figure includes the impact of the wage increases that occurred last March of '19. This hit our year-over-year comparison by an estimated 3 basis points to 4 basis points. We anniversaried that increase just this past week, so the impact in Q3 will be minimal. SG&A also benefited during Q2 year-over-year, from the shift of sales penetration to lower SG&A -- if you will, lower SG&A segments of our operations, which are growing at a faster rate than the core, again gas and e-comm.

Central was lower -- within SG&A, central was lower on a reported basis by 1 basis point or flat year-over-year ex-gas inflation. We continue to invest and spend in IT to the tune of about 5 basis points higher year-over-year. That -- it was offset by improvement in other expense items and of course, helped by strong sales. And stock comp, as I mentioned on ex-gas inflation improvement of 3 basis points. This varies quarter-to-quarter. Looking at the last couple of years, generally it's a small hit in Q1 and flat to a small benefit in the other quarters, nothing really unusual to report there.

Next on the income statement is preopening expense. Preopening expense was lower, came in at $7 million compared to $2 million in Q2 a year-ago. As I mentioned earlier, this year, we had no openings, last year we had two openings, both in the US. One net new opening and one relo. This year's Q2 preopening expense in this quarter relates primarily to warehouse that we will open during the third and fourth fiscal quarters. Coming up very soon, our opening in Perth, Australia, and also our first in the State of Mississippi, in Ridgeland, Mississippi. That will be our 45th state where we operate. Those will be both opened during the next couple of weeks.

All told, reported operating income in the second quarter of 2020 increased by 5.2% coming in at $1.266 billion this year, compared to $1.203 billion a year ago. Below the operating income line, interest expense was the same year-over-year coming in both quarters at $34 million and interest income and other for the quarter was lower by $1 million, almost flat year-over-year. Overall, pre-tax income was up 5.1% coming in at $1.277 billion, compared to last year's $1.215 billion.

In terms of income taxes, our rate was just slightly higher year-over-year. In the second quarter, it was -- it came in at a 25.9% rate, compared to 25.8% in Q2 last year. For all of fiscal 2020 based on our current estimates, which of course are subject to change, we anticipate that our effective normalized total company tax rate to be approximately 26% to 26.5%. In terms of openings, as I mentioned, we had no openings in Q2. We plan two net new openings in Q3, and it would be in the range in Q4, which is our 16-week fiscal quarter of 11 to 13.

Part of that again mostly openings concentrated in our fourth fiscal quarter and of course there's probably a few subject to slipping into early part of next year based on weather. As of Q2 end, total warehouse square footage stood at 114 million square feet. In terms of capital expenditures, during the quarter, we spent approximately $545 million and our estimated capex for all of fiscal '20 remains right around $3 billion.

In terms of e-commerce, as again, we reported a 28.4% comp sales increase and 28% without FX. Again a lot of that had to do -- a lot of that increase had to do with the Thanksgiving shift. We estimated in the end at about 11 percentage points of that related to Thanksgiving following a week later this year and helping this number. Overall, a few of the stronger departments, majors, special order kiosk items, seasonal and toys and housewares. These departments generally benefited from the holiday shift.

In terms of total online grocery that continues to grow at a faster rate than the store e-comm comp, both two-day and Instacart, the latter of which isn't included in our e-commerce numbers since they come into the warehouse to buy. Although the sales penetration is still very small, the sales are quite large in the high double-digit range year-over-year.

During the second quarter, we successfully launched both our Japan e-commerce site in December and our Australia e-commerce site this past month in February. And not to be outdone, we recently sold another high value large carat diamond for a little over $600,000, if anyone is interested, please give me a call.

Turning to our February sales results. The four weeks ended this past Sunday, March 1, compared to the same period last year. As reported in our release, net sales for the month of February came in at $12.2 billion, a 13.8% increase from $10.72 billion a year ago. In terms of geography, US reported comp for the four weeks 12.4%, ex-gas and FX 11.6%. Canada reported a 10.2%, ex-gas and FX to 10.4%. Other international 12.5%, ex-gas and FX 13.5%. So total company at 12.1% reported and 11.7% ex-gas and FX.

E-comm for the four week period 22.6% for the reported, and 22.7% ex-FX. The February results benefited by last week's big uptick in sales, the fourth week of last month, mostly we believe related to the concerns around the coronavirus. This positively impacted the month's total and comparable sales numbers by approximately 3 percentage points. US regions, with the strong sales results in February -- in February were the North West Texas and the Midwest. Internationally in local currencies, we saw strong results in Taiwan, Japan, Spain and Mexico. For the month, foreign currencies year-over-year relative to $1 hurt Feb comps -- February comps sales in Canada by about 50 basis points, it impacted negatively other International by about 110 basis points and total company by about 20 basis points.

Cannibalization was about a 10 basis point impact to the US to minus, 140 basis point minus impact other international and 30 basis points overall to the company. Moving to merchandise highlights, the following comparable sales results by category. Food and sundries were positive in the low teens, strongest departments included foods, frozen food, sundries and candy. Hard lines were positive in the high singles, better performing departments Lawn & Garden, health and beauty aids and tires. Soft lines were up in the mid-single digits, better performing departments included housewares, domestics and jewelry and finally fresh foods were up in the low double digits, better performing departments included meat and produce.

Within ancillary, pharmacy hearing aids had some of the better comp sales increases in February. Gas price inflation, I think I mentioned this positively impacted total reported comp sales by about 60 basis points. Lastly, our comp traffic or frequency for February was up 9.2% worldwide, and 8.9% in the US. Now, given the impact in week 4 where we really saw the big uptick as I know many did out there, it was related to the concerns over the coronavirus. The first three weeks within that 9.2% worldwide for four weeks. The first 3 weeks stood at 7.6% and again within the 8.9% US frequency number for the four weeks, within that for the three weeks, it was 6.9%. So still a good showing prior to that. For February, the average transaction was up 2.7%.

Now turning to the coronavirus and all the issues and impacts surrounding it. Like everyone, we are keeping a close eye on the developments around the coronavirus, including the impact on operations, the health and safety of our members and employees, and of course our supply chain.

As already discussed, we saw strength in our February traffic in comp sales related to the news and concerns about the virus most particularly in the last week of the month and that's continuing in the first few days of this week. Our warehouses have overall remained open with only a few total days of closures at a couple of locations in Korea, as well our Shanghai location, there has been some limitations required on the number of people in the facility at a given time. Members are turning to us for a variety of items associated with preparing for and dealing with the virus such as shelf stable dry grocery items, cleaning supplies, Clorox and bleach, water, paper goods, hand sanitizers, sanitizing wipes, disinfectants, health and beauty aids, and even items like water filtration and food storage items.

And we're doing our best to stay in stock on these and other items. We're getting deliveries daily. But it's still not enough given the increased levels of demand on certain key items. It's been a little crazy this past week in terms of outside shopping frequency and sales levels, and not only in the United States. In terms of placing quantity limits on what a member can purchase, we are doing that in some instances. It tends to be at all locations, but may differ regionally based on supply levels. I do want to give three big shout outs, our buying staffs both here regionally in a broader working and in some cases around the clock to procure supplies from both existing suppliers and from other sources where possible.

Second, a shout out to our warehouse employees. These last nine or so days has been beyond busy, even with the traffic jams in the parking lots, in the long lines, in check -- to check out, they've been absolutely awesome and anecdotally we are hearing that daily from members, we were few other things occasionally too.

And lastly, our suppliers, both domestically and abroad. We feel our strong long-term relationships have helped to this crisis and we've been there for them and they are certainly there for us now. Overall in terms of what the coronavirus related demand items in terms of that is looking better, but not perfect, and we will see what each day brings. At our warehouses, in terms of cleanliness and sanitizing, we have enhanced sanitizing protocols and safety procedures have been implemented all the locations. Some examples, wiping downtrodden handles with sanitizing wipes, placing of sanitizing wipes stands at entrances, also along the fresh line wall and food courts, enhanced procedures at the food courts, patio tables, condiment tables, dispensers and beds, etc, the general things you might expect in that we see in all the recommendations.

In terms of supply chain, closures of many manufacturing facilities extended well beyond the typical one week Chinese New Year holiday, which was the last week in January. In many cases factories over there were closed for one to two additional weeks. That's now improving each week. Initially two to three weeks of factory -- so initially there are two to three weeks of factory closures not one. Then about three weeks ago and just pulling some of the buyers that -- a deal with the factories they felt there was a rough number of 20% to 25% production levels, moving up to 40% and now as high as 60% to 80%. But again, it's improving and it still has a little ways to go.

In terms of transportation issues, with it's Chinese New Year and then a couple of additional closure weeks. There were not only product issues, but also trucking and port issues. These are also abating with port capacity in China improving each day as well. And I say port capacity; it's also the shipping lines that come to the various ports.

Domestically, truck capacity is plentiful. However, exporting items including KS items as well as other US manufactured items to our locations in Asia and Australia. It's been a little bit of a challenge because of some container shortages here. But, overall, OK, it just taken a little more work.

We're finding other ways to handle any potential out of stocks by shifting SKUs to alternative items and categories, particularly in the areas of domestic goods, food and sundries and fresh. And as you might expect, our travel business is impacted due to reduced demand, as well as higher-than-normal cancellations of previously booked trips, particularly as it relates to cruises and international travel. I don't think there's any surprise with that.

At this point, it's hard to quantify what the financial impact will be for our future results -- to our future results. Again, the first week-and-a-half of this fiscal quarter, it's been -- the last week-and-a-half has been quite good with the sales, but we'll see what tomorrow brings. We'll continue to pass that information along and, of course, we do report monthly sales results. Finally, in terms of upcoming releases, we will announce our March sales results for the five weeks ending Sunday, April 5, on Wednesday, April 8, after the market closes.

With that, I will open it up to Q&A and turn it back over to Rochelle. Thank you.

Questions and Answers:

Operator

All right, thank you. [Operator Instructions] Your first question comes from the line of Simeon Gutman from Morgan Stanley, your line is open.

Simeon Gutman -- Morgan Stanley -- Analyst

Hey, Richard, can you hear me OK?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Yes. Yeah.

Simeon Gutman -- Morgan Stanley -- Analyst

Okay, good. Thank you. First question is on the gross margin. I think if we take the core-on-core down 15% and you get rid of the chicken production costs, you're down 9%. Did you say within that what the e-commerce mix shift is? And how that compares to prior quarters up to the prior run rate?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

We weren't that specific, but a lot of it has to do with the fact that, that one -- particularly, that one week, where it's so important to e-commerce on promotional items for Black Friday, Cyber Monday, the weekend, the three days leading up to Thanksgiving, so you do have some lower-margin -- you have some lower-margin categories in there to start with, as well as, we do a lot more promotional stuff, as most retailers do, with that week of Thanksgiving.

Simeon Gutman -- Morgan Stanley -- Analyst

Okay. So this was a little bit unusual, given the timing and given just the fourth quarter, or the holiday period was in that number?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Well I want to stand corrected, there's a couple of people here just correct me. The e-comm numbers are not in the core-on-core. So that would be outside of that.

Simeon Gutman -- Morgan Stanley -- Analyst

Got it, OK.

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

But it's still the strength in majors.

Simeon Gutman -- Morgan Stanley -- Analyst

Right. Okay. Got it. But broadly speaking, the greater mix of e-comm, Richard, is going to depress -- well, you're saying it's not in that number, but it's unfavorable to gross margin broadly, though, is that fair? And is that because of the mix of products that are being bought or because of the discounts or the markup that you're putting on those items.

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

It's both. I mean, as we try to build new categories over the last year or so like apparel, we're giving some hot deals out there. If you buy one shirt, it's X if you buy two, it's a little less for delivery or whatever else. So, we're driving that business. And again we've talked about -- yes, but the big thing is electronics. Electronics tends to be a low-margin business not only TVs, but all the computer and phone things.

Simeon Gutman -- Morgan Stanley -- Analyst

Got it. Okay. My follow-up is on just overall reinvestment, right? Your business is growing at a really high level, high single-digit comps. I'm not sure if you planned for that level and the core-on-core, in general, is doing relatively well. It's not down 20% or 30%. And I guess the SG&A that you're spending seems somewhat in line. But I assume you're not flowing through all the leverage that's coming through this model. And so my question is where are you finding places to reinvest. Again it doesn't seem like the core-on-core is getting -- is going down enough to suggest you're putting it back in price. Are you finding other places to spend in SG&A?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Well I'd argue that we are putting a lot of it back in price. Keep in mind of all the buckets we talk about historically from the membership fee income to the tax reform to the changing credit card, those things keep growing and it allows us to be competitive. And when we see strong sales, I think it encourages us to do more of that. And the other thing is I'm not going to go through 10 different things, but there's lots of things. We're very busy. It's not just the five basis points I mentioned in IT. We got a lot going on with the e-comm fulfillment, with the chicken complex which I mentioned, there's a lot -- with the CCPA. These are small things but each of these are various bates numbers of basis points.

CCPA is the privacy -- California Privacy Act. We don't point it out because I'm sure there's something that goes the other way sometimes. But at the end of the day, there's a lot of things going on and we feel pretty good about where our expenses are, in other words, we're going to try to improve them.

Simeon Gutman -- Morgan Stanley -- Analyst

Okay, thank you.

Operator

Your next question comes from the line of Gregory Melich from Evercore ISI. Your line is open.

Gregory Melich -- Evercore ISI -- Analyst

Hi, thanks. Richard two things I wanted to follow-up. One is on the membership fee income could you give us what that is in constant currency. And also if you're seeing any membership sign-ups in Flex like the way sales and traffic have in the last couple of weeks?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

It's $2 million, is it $2 million? It's $2 million even with FX.

Gregory Melich -- Evercore ISI -- Analyst

Got it. Once we adjust for that. Got it. And then on the sign-ups, have you seen any change there in the rate of sign ups?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

I honestly don't know. I know even a few people -- I mean the shopping frequency is off the charts for the last few days. And you see it on social media with people sending in pictures. So, I've got to believe there's been a little bit of it but not enough to move the needle.

Gregory Melich -- Evercore ISI -- Analyst

Got it. And then secondly it was just on gasoline. What -- did you have the average selling price this quarter? And if you have any sort of trends on the gallons would be great as well.

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

I don't have it in front of me. I know that there was -- gas was inflationary, correct? I think [Speech Overlap] in Q2, it was 7.9% inflationary.

Gregory Melich -- Evercore ISI -- Analyst

Inflationary. And that's the average selling price per gallon versus a year ago?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Yes. $2.75 versus $2.55.

Gregory Melich -- Evercore ISI -- Analyst

Got it. And then last I'll sneak in things. I know its coming. The balance sheet, very strong, more volatile markets, how should we think about buyback capital structure in the current rate environment and environment of the world?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Well, every banker calls us every day to let us know that rates are even lower today, time to borrow. But, no, look we continue to look at it. We talked about it in every Board meeting and all I can tell you is stay tuned.

Gregory Melich -- Evercore ISI -- Analyst

All right, thanks. Good luck, guys.

Operator

Your next question comes from the line of Chris Horvers from JP Morgan. Your line is open.

Chris Horvers -- JP Morgan -- Analyst

Thanks. Good evening. So a few follow-ups. First on March, I mean you are limiting some of those high-volume items. It does look like you've got some pretty low in stocks out there. Do you see the potential for comp risk later this month?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Well, we don't know. People have asked us what happens when people have been bulking up on certain items. And, yes, there's out of stocks every day too. But overall the numbers are incredible because there's so many people coming in. And they're buying other stuff as well. So I don't know what tomorrow brings. When asked the question, are people then go through this additional purchasing of water and shelf-stable food items and everything, I guess it depends. Are some of them putting it in their basements for another day, some of it related to the fact that people aren't eating out as much. I think it's a combination of those factors.

All we know is that last week starting Tuesday or Wednesday, which is when a lot of the news went even -- in the US went even further. We had a huge pickup in traffic, which continued over the weekend and increased, and increased the first few days of this even further in the first few days of this month -- this week. And so we'll see what tomorrow brings. And again on the supply side, there is clearly not just -- at Costco and other places, you really can't go in and generally find sanitizing items and what have you. And while we're getting shipments daily somewhere in the US whatever limited amounts we get or allocated is gone pretty quickly. And I would assume that over the next few weeks or several weeks that will abate. But it depends what else happens with the virus itself.

Chris Horvers -- JP Morgan -- Analyst

Yeah. I was at a store on Saturday. I've never -- right after they open. I've never seen a line that all the way back to dairy. The -- my follow-up question is this might be hard to parse out, but I think the big question on investors' minds is how the consumer is going to behave. Obviously you have the pantry load, but you also sell a lot of general merchandise, you also sell a lot of big ticket. So were you able to sort of tease out if you're seeing any pullback relative to trend in the past week or so in some of the more discretionary and larger ticket categories?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Yeah. What's interesting, I'm just looking at some hand-written notes from our -- I spoke to our senior buyers yesterday. You would think things like patio furniture would be impacted because it's a big ticket discretionary items. The comment was we're selling it extremely well. Now part of that is we've got a bunch more people coming in, so maybe per customer -- the purchase per customer is down a little but there's a lot more customers. And so -- and what else Lawn & Garden is doing well. The buyers' view is that's more weather related in certain markets. There has been some impact in -- excuse me?

Chris Horvers -- JP Morgan -- Analyst

Did you say TV? Were you going to say TV?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

No lawn and garden are weather related. And then in some electronics items, while some are strong, there's others like some laptops and some phones where there's been some supply chain issues. But I would say, overall the initial thought -- my initial thought is that, big ticket discretionary items might be negatively impacted right now. To the extent they are, it's been more than offset at least in these last several days by the influx of shopping frequency. I don't know what that means for tomorrow we'll have to see.

Chris Horvers -- JP Morgan -- Analyst

Understood and super helpful. And I'm sure all the media outlets are picking this whole lot. My other question, two quick ones; one is, have you expanded the number of SKUs in the MVM. It seems to have picked up over the past couple of months, but wanted to get your thoughts there? And then lastly it looks like you have a new grocery delivery option in the app and on your website sort of an extended delivery option, not the two-day and not the same day. So sort of what's been the strategy there? And is that new or just a repackaging of something you already have?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Generally there's been no change in MVM items. I mean if it's up a little or down a little I think that's random not planned. And as it relates to shipping at least the people in the room with me here are not aware of that. Was it?

Chris Horvers -- JP Morgan -- Analyst

Okay. It must be just a repackaging of something that you already have. Yes. Okay, thanks very much. Best of luck.

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Sure, thank you.

Operator

Your next question comes from the line of Chuck Grom from Gordon Haskett. Your line is open.

John Parke -- Gordon Haskett -- Analyst

Hey, good afternoon. This is actually John Parke on for Chuck. Can you guys provide a little bit of an update on the performance of same-day and Costco two-day and how that's impacting kind of total spend from these customers that are utilizing it?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

It's still relatively new for us over the last year. Overall in -- my knowledge of this is a couple of months old. It's a slight improvement. The concern of course is as they buy more having delivered in one day and two day and then they come in less frequently. But how less frequently and they are coming in a little less regularly but the sum of the two still is fine. Again it's too early to tell in our view just fine continue or does it change a little bit. We're still -- but keep in mind also, we continue to do a lot of things consciously even through emails to get you come back in the location with certain promotional things that are in-store only.

John Parke -- Gordon Haskett -- Analyst

Got it. And then I guess, just going back to the coronavirus. I mean, is there any way to kind of indicate whether the margin on these sales are materially different than your traditional shop?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Food sundries overall is -- yeah, it's about in line, I would say, on the company averages.

John Parke -- Gordon Haskett -- Analyst

All right, perfect. Thank you.

Operator

Our next question comes from the line of Karen Short from Barclays. Your line is open.

Karen Short -- Barclays -- Analyst

Hi. Thank you so much. A couple of questions, you -- Richard, you commented on the fresh gross margin decline. And I'm wondering if you could just give a little bit of color on that, and that's obviously excluding the poultry. You kind of called that a step-up in price investments?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Yes. We're just -- I mean, at the end of the day, our heart is we're merchants, and we try to drive business. And fresh is an area that also is a frequency driver. So it's more -- my comment is more anecdotal than some new change in strategy.

Karen Short -- Barclays -- Analyst

But not necessarily -- also comment on the competitive landscape.

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

No that is -- the increased level of competition that I've talked about that goes back a year and a half plus ago. And that hasn't changed.

Karen Short -- Barclays -- Analyst

Okay. And then can you just maybe clarify a little bit on the -- I guess the true-up of the breakage estimates.

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Well, I mean at the end of the day it's a small amount of basis points. When we issue a significant amount -- you can kind of back into the number yourself of what percentage of our sales are the 2% reward. And we send out those certificates and there's always going to be some slippage. Notwithstanding the fact that, we send out reminders to our members that you haven't cashed this.

At the end of the day we tend to be -- we do our best guess to accrue for slippage. And I'd like to think that we tend to be a little conservative. And therefore when there's a review it picks up the other way. But at the end of the day we -- accounting rules say, you do your best guess of what it should be. And then when you rereview it you adjust that.

Karen Short -- Barclays -- Analyst

Okay. And then I just want to switch gears to the Shanghai store and I think you said you you'll be opening a second one soon. But maybe any thoughts on what you think the actual annual volumes could and will settle out at for that store? And then any update on the number of members at that store since the last call. And then I mean, I ask it in the context that to the extent that China is an opportunity, it's not so much about the units. It's actually about the volume per unit.

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Right. Well, it's hard to say because this one is so off the charts. I mean, again the last few weeks -- the last several weeks with some limitations on number of members for some of that period of time, it's changed a little bit. But I mean that was either a top or second largest location in our company for the several weeks leading up to that. And the number of members is again off the charts. Nearly five times the company.

Karen Short -- Barclays -- Analyst

Okay. And but would we take that same number and apply that to the total revenue for that box? Or how should we think about that?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

No, no, no. Because given the population of Shanghai and the fact that this thing went throughout social media and it was very popular over there. You have a somewhat higher renewal rate, we don't know yet because we opened it in August. But we know from other countries -- I'm sorry, lower -- lower rental rate. And no and you can't just simply multiply that out. But the unit overall is again either number one or two, up until the last few weeks with what's going on over there with coronavirus was one of our top two units.

Karen Short -- Barclays -- Analyst

Okay. And then just last question for me. I don't think I've asked this for a while but do you have any -- are you willing to give an update on what you think or what the -- where the average ticket is in the US of an executive member today versus just the basic membership and how that's trended in the last several years? Because it does seem like the momentum is really continuing to increase in terms of your share gains?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Yes. Look, we don't disclose that but more executive members and more penetration of executive members is good. More members who have the -- in the case of the United States, the co-brand credit card is good. And if they have both in the executive and that it's even better. All those things I think are -- help our sales growth.

Karen Short -- Barclays -- Analyst

Okay, thanks.

Operator

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

John Heinbockel -- Guggenheim Securities -- Analyst

Richard, the price investments you mentioned in fresh food, was that actually proactive price investments or more delays in passing through vendor increases? And then, where those investments occurred, was that more protein as opposed to other categories?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

It's definitely proactive on our part. And, I think, it's all of the above. It's protein. It's fresh -- I mean it's produce.

John Heinbockel -- Guggenheim Securities -- Analyst

Okay. And then, if you -- I mean if you look at the fresh food comp, right, so I think you said low double-digit and that included the final week, right? So, that was the best fresh food comp you've had in a while. I don't know if you can parse out and maybe you can with -- looking at the final week, how much -- was some of that coronavirus related, or was a lot of that step-up related to the price investments?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Who knows? Clearly, week four was different than weeks one, two and three, for everything. And just a sheer number of people coming into the warehouse. I personally believe that given that restaurants probably have been impacted a little bit the last couple of weeks. They're buying more at supermarkets and more at Costco, so those things help a little bit as well.

John Heinbockel -- Guggenheim Securities -- Analyst

And then, lastly, when you think about it -- and I know you said the margin on some of that stuff is sort of in line with the average. When you think about the -- sort of the cost associated with restocking and dealing with that volume and you think about an EBIT margin tied to the volume. Normally, the EBIT margin will be -- the incremental margin will be a lot higher. Is that less the case here because of the cost required to keep up with that volume?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Well, yeah, I think, there's a lot of additional things that cost you. I mean, there's not a lot of it, but I'm sure there's a little air freight going on. And I'm sure there's -- when you've got a high-cube, high-weight, low-value items like water, for the hectoliter it's for $2.99 or something, and you're going through it faster than you could put it on the floor. There's more labor and everything else. But it's still a net positive. In the scheme of things, I don't know if it helps or hurts the bottom a little bit. So. Okay. Yes. And the other thing is, they're not just coming and getting those five items and moving. They're shopping a little bit. Again, I personally was surprised that patio furniture is strong. And maybe per person it's a little weaker, but there's a lot more persons.

John Heinbockel -- Guggenheim Securities -- Analyst

Okay, thank you.

Operator

Your next question comes from the line of Mike Baker from Nomura. Your line is open.

Mike Baker -- Nomura -- Analyst

Okay. Thanks. A couple of questions. One, can you tell us how gas profits were this year versus last year. And then, remind us if you could, how much that helped 2Q 2019, versus 2Q 2018?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

I believe -- I don't have it in front of me, but I believe last year we said gas helped us, relative to the prior year. It was pretty -- it wasn't worth talking about, plus or minus either way this year versus last.

Mike Baker -- Nomura -- Analyst

Okay. Got it. Okay. Shifting gears a couple more, if I could. So, February, even if you take out -- first of all, the 300 basis points, can we take that out pro rata across international and the US? Or is it that impacts one region more than the other? And the real question is, when you strip that out, February was much stronger than you've been running, even so? In other words, I presume the first three weeks were strong. So what do you think is behind that uptick, even before you got to week four?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

It must be those investments in price. No, at the end of the day it is generally around the world. I think Korea has been a little less of that probably a little less of that benefit. But there's been -- there was an outbreak there that had a lot of publicity and I think there were more people perhaps staying home are not going out. The -- but when I look at US, Canada, and several other countries, all of them had big upticks in that last -- the past nine or so days. And I'm sorry what was the last part of the question?

Mike Baker -- Nomura -- Analyst

Just why do you think weeks one -- so weeks one, two and three were obviously strong as well because when you take out that 300 basis points, it's still -- you're high single digits. So, what do you think is behind that big uptick?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

There's probably lots of little things I'd like -- my mother would say we're good merchants and great stuff at low prices. There's nothing that stands out completely. And certainly there was not a lot of press out there, issues around coronavirus even though was in the news a little bit. So, maybe on a macro basis, there's a little bit of that in there. I think there may have been some weather issues a year ago that may have impacted a little. But overall, we were -- in those three weeks, forgetting about week four, which was off the charts, it was -- we're feeling pretty good about it that some of the stuff we're doing is working from a merchandising standpoint and a pricing standpoint.

Mike Baker -- Nomura -- Analyst

Okay, fair enough. Appreciate the time.

Operator

Your next question comes from the line of Rupesh Parikh from Oppenheimer. Your line is open.

Rupesh Parikh -- Oppenheimer -- Analyst

Good afternoon. Thanks for taking my questions and thanks for all the comments on the coronavirus. So, I guess, Richard, just going back to your commentary on the supply chain. So, as you guys look forward, at this point, do you expect any impact on your supply chain-related to coronavirus or is it too early to tell earlier in the year?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Well, I think -- first of all, there has been an impact on it. It's now starting to get a little bit further than normal back to normal on regular stuff. On some of the virus-related items that people are buying like water and sanitizing items and paper towels and things like that, that's going to take a little bit while longer. When I ask the buyers they're working day-to-day with suppliers. You've got suppliers that are literally working around the clock to produce and to ship. But again people are coming in and buying stuff, if you will, for their basement.

Rupesh Parikh -- Oppenheimer -- Analyst

And what about -- I guess I was asking more on some of the other categories like electronics. And some of those categories that may come from Asia. Just curious if you expect an impact?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Well, I think I mentioned there have been -- we have seen some little impact on some laptops and some cellphones and I think that's related to some of the things that we all read about in the paper about some shortage -- some delays because of some of the component parts. I think one thing that helps us a little as we're able to pivot a little bit. So, if there was a shortage or something with one area, we're able to put something else in its place since we sell pretty much everything. But we just don't know what's going to happen tomorrow.

First order of business is to get the supply chains back open and running well. There are two kinds of supply chain issues. There's a supply chain issue related to all these very high demand items related to fighting and protecting yourself, the waters, the sanitizing, and things like that. And then there's just stuff, I mean everything from furniture to apparel to electronics coming from China. And on the latter, it seems at least while the one week -- and keep in mind given the planned Chinese New Year week, there were stuff bought in early not only by us, but I'm sure others and so but then there's two more weeks of closures.

So, those kind of things over the last three weeks in terms of talking about buyers, the supply chain has -- and the manufacturers are now back open they went from zero if you will the 25% to 40% to 50% to 60%, 80% and now it's getting to the ports. And some of those things are also being abated, some of the issues there. So my guess is if everything got better tomorrow from a concern standpoint, you still have a few weeks here where it takes time to fill those supply chains.

Rupesh Parikh -- Oppenheimer -- Analyst

Great. And one follow-up question. Just on the holiday season. You guys had a really strong performance even with fewer selling days, so just curious if there's any surprises or what do you think contributed to the really strong outperformance?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Well, I think we -- this is -- that's what we do. I mean, I think we've done a great job. We've been helped by strong big-ticket categories like electronics, like patio furniture and Lawn & Garden right now and other hardlines and softlines areas. Fresh continues to drive our business. As you know when we're asked what are the two or three big factors that drive our business or categories. It's fresh, it's gas, it's executive membership. And again utilizing those different bucket, even when sales are good, we want to be aggressive in pricing. And when sales are bad, we want to be aggressive more aggressive in pricing. When the sales are good, we want to be more aggressive in pricing. It drives -- the top line improvements drive the bottom line.

Rupesh Parikh -- Oppenheimer -- Analyst

Great, thank you.

Operator

Your next question comes from the line of Scott Ciccarelli from RBC Capital Markets. Your line is open.

Scott Ciccarelli -- RBC Capital Markets -- Analyst

Good afternoon, guys. Richard, you talked about expecting margin pressure to moderate a bit from the poultry plant ramp. And I know there was an incubation period there. So is that plant actually turning out product at this point? And related to that can you give us an idea of what the incremental benefit you guys are expecting once you're in full production mode?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Well, I think it was mid-September when the first chicken went through the plan if you will. The plan was that 45 weeks later there would be approximately 2.2 million birds a week being processed. And so call it September to August. And so we're a little bit past the halfway mark on that. And I believe in terms of projection, we're a little bit past the halfway mark on that. Call it one million birds a week. It should be off a little bit on either side. And so a lot of this has to do with the fact that you've got this big facility that is running at well below capacity.

The amount of impairment to margin related to that in Q2 was less than Q1. We would expect it to be less than in Q3 and further. So once we get the full capacity I think -- and then I'm sure there's going to be some operational improvements over the first couple of years as well. At the end of the day, it's a combination of sourcing just simpler supply. And our view is, is we can improve if you will the ultimate cost per bird. But we don't know that yet. We spent a little more than we planned, but we also upgraded the facility to be air chilled instead of water chilled. It truly is a state-of-the-art facility for the US and a very high volume facility.

And I would say, right now, things are going as planned in terms of that 45-week cycle. And I would like to think that a year from now -- six months from now or two more quarters from now, it's not going to be an issue that we really even talk about as it relates to how it impacted margin.

Scott Ciccarelli -- RBC Capital Markets -- Analyst

Got it. I appreciate that.

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

A little bit. I don't think it'll be all around.

Scott Ciccarelli -- RBC Capital Markets -- Analyst

Got it. And then I know you obviously had the surge in that kind of fourth week, as you pointed out, because of the coronavirus. Warehouses were obviously jammed. Everyone kind of sees that. But I'm curious if you happen to see an even larger increase from e-comm in terms of -- like has there been some sort of shift in consumer behavior at all? Or is all the activity concentrated on warehouses?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

No. I mean we saw an increase but not really. I mean mind you that -- we saw -- yes throughout February we saw some increase in e-commerce. But again if people are looking for those -- the sense of urgency I'm going out right now and get it -- things like water and everything. And some of those key items like peanut butter and crackers and the like, we have online as well. And those too in some regions there might be in and out of stocks.

Scott Ciccarelli -- RBC Capital Markets -- Analyst

Got it. All right, thanks guys.

Operator

Our next question comes from the line Judah Frommer from Credit Suisse. Your line is open.

Judah Frommer -- Credit Suisse -- Analyst

Hi, thanks for taking the question. I was hoping maybe you could help us with kind of how things trended in Korea over the last few weeks. You have exposure there potentially weeks ahead of where the US could be worst-case scenario for the virus. So in terms of demand and kind of stock up and then potentially demand falling off as the virus spreads, are there any insights there?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Well I think the only insight is -- from what I've read it is not -- is the issue that more people are staying at home and not even going out. Whereas even near the -- the publicity that the state of Washington and King County is getting with a few of the deaths, there are people out and about. There's a little less traffic on the highways. And but notwithstanding that's -- some are always coming to see us.

Judah Frommer -- Credit Suisse -- Analyst

Got it. And then kind of changing gears. We've seen some stuff about potentially requiring membership in some food courts in the press, anything behind the thought process there?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Well first of all, it's gotten more press than it deserves. There are I believe seven current locations on the West Coast where we -- and I believe they are all outdoor locations. And one of the challenges that we've had is, particularly on very busy locations where people that are non-members just come and eat there every day. You've got member complaints saying, why are you -- I have to pay to come to Costco. And so we took -- we're testing it in seven locations that we are limiting it to members only. It's easy in locations where you have the food court inside. But on -- and many of the ones in areas where the weather is generally good like California, Arizona and things like that you have a lot of them are outside. And so we'll see. But that's -- but again, seven locations out of 540, we're testing it at and it's gotten a lot of press.

Judah Frommer -- Credit Suisse -- Analyst

Okay, got it. And if I could squeeze in one more, anything on supply in pharmacy and any people stocking up there and potentially running out of inventory?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

This is just a quote from the FDA yesterday and said well the FDA and other outlets are reporting disruptions and medical products are possible. At this time manufacturers are reporting that no specific drugs are experienced in shortage due to the impact of COVID-19. And talking to our Head of Pharmacy yesterday, he said the only thing that we've seen there's been a little pickup there as well. Let's say somebody has a year-long prescription. So a prescription plus 990-day refills for -- and they'll come in and they'll want all four of them filled now.

And in some cases even when their particular insurance plan doesn't cover it, they're paying cash. They're just hoarding -- they're hoarding up on their prescription to make sure we're not running out. But that's more again, I think the same thing you're seeing with paper goods. But from a supply and availability standpoint, we haven't seen anything yet.

Judah Frommer -- Credit Suisse -- Analyst

Okay thanks.

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Why don't we take two more questions?

Operator

Okay. Next question comes from the line of Oliver Chen from Cowen. Your line is open.

Oliver Chen -- Cowen -- Analyst

Hi, Richard, regarding the supply chain and what you're seeing, what are your thoughts regarding the price increases or potential price increases, whether that be from transportation costs or other and what your buyers think may happen there. And the second question is related to e-commerce. You made a lot of progress on your mobile app. Just what's ahead for changes to the mobile app? And also more broadly, capital investments related to e-comm and supply chain? Thank you.

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

As it relates to costs, the general view of the buyers is, is that we have -- I get back to the comment I made earlier about strong relations. To the extent that there's some raw materials cost increases because of shortages, that's going to rain on everybody. In our view, it rains on us a little less. But I think we -- given the limited number of items we buy and the amount of things we -- the amount of any given item that we buy, our buyers, we feel, know a lot more about the cost structure. And so I haven't seen any commentary on that internally other than there was one small comment I can't find it in my mess of papers here, that there may be in some small cases, some raw material increases on some particular item, some particular raw material for some manufacturing process. But overall, there's not been a big issue.

Right now, the only increase in transportation is on some very limited items where there's been a little bit of airfreight, what we're finding is, is that the ports are getting back to capacity and there's plenty of space. And so that's not been as big an issue. As it relates to an e-comm investment, there's not a lot I have in my plate to tell you today, we're working on more things related to our app, to our membership digital app. And we certainly have some things going on, on the fulfillment side of e-commerce. And we've been focused on getting two more countries opened, as I mentioned in the last quarter. And we think there are a few other things that we've got going on that I'll be happy to chat with the next time around.

Oliver Chen -- Cowen -- Analyst

Okay. And is buy online, pick up in-store going as you like? And do you expect a lot of enhancements ahead to that as customers like it?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Well, customers like it, but we don't like it necessarily. We're doing buy online and pick up in-store for some small items -- small high-value items. But we're not at the point where we're looking for members to buy online they come up and pick up their whole grocery baskets. So we're trying to figure out our way. And certainly again, the last nine or so days notwithstanding, seems -- things seem to be working pretty well for us in that regard. We continue to work on the -- where we've had good sales and good strength over the last few years in e-commerce is taking certain big and bulky things out of the warehouse, white goods and things that are delivered, in some cases, installed, and so we continue to work on those kind of things as well.

Oliver Chen -- Cowen -- Analyst

And lastly, Richard, with the surge in demand and the traffic trends that you've seen, how have you managed, like, this customer and guest satisfaction and also labor in your stores, those kinds of things that we're curious about?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

How do we measure?

Oliver Chen -- Cowen -- Analyst

How have you managed it and just -- and tried your best to make sure that customers are happy. And also, you have the appropriate labor levels, relative to spikes and changes in demand.

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Well, again, the last week-and-a-half notwithstanding, because it's been nuts. No, first of all, member comments and basic member renewal rates. I mean, we actually -- the operators and all the way up to Craig, see weekly information on comments. You can't imagine how many people call and email when they have something that they're concerned about. And we also measure the least expected, but the positive letters to that effect.

On the operations side, the key is still aside from merchandising, the art of merchandising out there and giving the warehouse managers, the assistant managers and the merchandisers, gross merchandisers some leeway, not -- I mean, certainly electronics is when you walk in and there's defensive promotional goods and fresh is in the back. But the end of the day, there is a bit of merchandising that is pushed down to the regional and warehouse level. And that's what, I think, drives our business there. In terms of the front end, managing the front end, I think, we've got less count, 120 of our 540-ish locations in the US with self-checkout. And we plan another 100 in the next three months. And so, always trying to figure out and measuring the number of transact -- number of member transactions through the front end per hour.

Oliver Chen -- Cowen -- Analyst

Great. Thank you. Best regards. Great job.

Operator

Next question from the line of Peter Benedict from Baird. Your line is open.

Peter Benedict -- Robert W. Baird & Co. -- Analyst

Hey, Richard, just two quick ones here to close out. So, it looks like the business probably comping in the 20% range there in that last week and, certainly the demand is probably even higher than that, just given that you guys are running out toward the end of the day. How do you think about the ability for the club to kind of keep up that pace -- with that pace of demand? I mean, if this were to go on for three, four more weeks. Do you guys think you've got the supply chain able to keep up with that level of demand? Or are you hitting a point where you're not -- you're just not going to get another delivery tomorrow of pick your category?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Yes. No. Well, I think, it's all over the board. Yesterday, I think, there was a couple of -- either Los Angeles or San Diego counties that announced a heightened level of concern. King County here in Seattle did that a couple of days ago. When that happens, that's another catalyst to push people to go out and get more stuff. I would hope -- and, look, we would all hope this thing peaks and starts to slow down. It depends what happens tomorrow. We'll be tired, but still working hard. Given that half of our employees -- roughly -- a little over half of our -- of the 90% of employees in our warehouses that are hourly, about a little over half of those 90% are full-time and a little under half of are part-time. Certainly, there are employees that want to work more than part-time and so we've been able to accommodate some additional hours there. But everybody is a little tired but that's what you do.

Peter Benedict -- Robert W. Baird & Co. -- Analyst

Okay. And then my last question is just on Lawn & Garden, you mentioned that a couple of times and you talked about seasonal. Maybe expand on that a little bit. Where in particular are you seeing the strong -- I guess, it's an early start to spring, but maybe talk a little bit about what you're seeing on that front?

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Well, the only thing I mentioned there was that in -- and getting ready for today's call, I had spoken to several of the senior merchants in the different categories. And one thing without even looking at the numbers I thought is I assume some of the big ticket discretionary items might be a little weaker because people are not running in to get those items. They're running in to get other concerned items. And the fact was to my surprise that they said that certain items like patio furniture and Lawn & Garden was strong. They felt and again it was just their view that patio -- Lawn & Garden was more related to some of the areas of the country where the weather has turned already. And but clearly because you got X percent more people coming in every day than normal.

Peter Benedict -- Robert W. Baird & Co. -- Analyst

No. That makes sense. Fair enough. Thanks so much.

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Okay. Well thank you everyone. Have a good afternoon and we're around to answer any questions. Have a good day.

Operator

[Operator Closing Remarks]

Duration: 65 minutes

Call participants:

Richard A. Galanti -- Executive Vice President and Chief Financial Officer

Simeon Gutman -- Morgan Stanley -- Analyst

Gregory Melich -- Evercore ISI -- Analyst

Chris Horvers -- JP Morgan -- Analyst

John Parke -- Gordon Haskett -- Analyst

Karen Short -- Barclays -- Analyst

John Heinbockel -- Guggenheim Securities -- Analyst

Mike Baker -- Nomura -- Analyst

Rupesh Parikh -- Oppenheimer -- Analyst

Scott Ciccarelli -- RBC Capital Markets -- Analyst

Judah Frommer -- Credit Suisse -- Analyst

Oliver Chen -- Cowen -- Analyst

Peter Benedict -- Robert W. Baird & Co. -- Analyst

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