Q3 2025 Performance - Sales increased by 6.1% to $4657 million compared to $4388 million in Q3 2024 [20] - Daily sales also increased by 6.1% to $728 million [20] - Diluted EPS increased by 3.4% to $1021 [20] - Operating margin decreased by 40 bps to 152% [20] Segment Performance - High-Touch Solutions N A sales increased by 34% to $3635 million [25] - Endless Assortment sales increased by 182% to $935 million [29] - Zoro U S daily sales grew by 178% [31] Guidance and Outlook - The company is narrowing its FY 2025 earnings outlook [16] - Full year sales guidance is $178 billion to $180 billion, representing a 39% to 47% increase [52] - The company anticipates annual Total Company GP% run-rate will stabilize at ~39% as tariff landscape normalizes [40, 47] - Adjusted EPS (diluted) is expected to be $3900 - $3975, a 01% to 20% increase [52]

Financial Data and Key Metrics Changes - The company reported non-GAAP earnings per diluted share of $3.64, consistent with expectations and guidance for the quarter [6][17][24] - Operating cash flow generated in the third quarter was approximately $262 million, which was strategically redeployed into high-value initiatives [7][21] - The capital expenditure budget for 2025 remains at $325 million, with more than half directed towards growth initiatives [7][22] Business Line Data and Key Metrics Changes - Tons sold in the third quarter reached a record high, increasing by 6.2% compared to 2024, significantly outperforming the service center industry, which reported a decrease of 2.9% [11][12] - Non-residential construction represented roughly one-third of third-quarter sales, driven by strong demand in public infrastructure projects [13] - Aerospace products comprised approximately 9% of total sales, with demand in defense and space-related programs remaining strong despite slight declines in commercial demand [14][15] Market Data and Key Metrics Changes - The company's U.S. market share increased to 17.1%, up from 14.5% in 2023, attributed to a smart profitable growth strategy [5][4] - The aerospace and semiconductor markets continue to face challenges due to excess inventories, impacting pricing and margins [6][18] - The overall demand in the fourth quarter is anticipated to remain stable across diversified end markets, with tons sold expected to increase by 3.5% to 5.5% compared to 2024 [23][24] Company Strategy and Development Direction - The company emphasizes a capital allocation strategy designed to drive growth and deliver strong returns to stockholders, including investments in advanced processing equipment [7][8] - The focus remains on investing for growth and delivering value to customers and stockholders, supported by strong cash generation [10] - The company is committed to maintaining a long-term sustainable gross profit margin range of 29% to 31% despite short-term headwinds [6][27] Management's Comments on Operating Environment and Future Outlook - Management noted that trade policy uncertainty and excess inventory have created a competitive market, making it difficult to increase selling prices [5][18] - The company remains confident in its underlying margin profile and expects pressure on gross profit margins to ease as market conditions improve [18][24] - Management anticipates a potential recovery in demand and pricing stability entering 2026, particularly in the aerospace and semiconductor markets [52][54] Other Important Information - The company returned $124 million through dividends and share repurchases during the quarter, with year-to-date repurchases totaling over 1.4 million shares [9][22] - The net debt to EBITDA ratio remains favorable at less than one, providing significant liquidity for capital allocation priorities [22] Q&A Session Summary Question: Is any of the gross margin compression attributable to the focus on growing volumes? - Management acknowledged that while there is some impact from growing volumes, the primary reason for margin compression is the unique market conditions and excess inventory affecting specialty products [26][27] Question: Can you discuss the inventory levels on the balance sheet? - Management explained that the increase in inventory is partly due to mill price increases and a slight uptick in tons sold, allowing the company to better service customers [30][31] Question: How close are we to resolving excess inventory issues? - Management indicated that while destocking is ongoing, there are signs of improvement, and they believe gross profit margins have likely troughed in Q3 [36][37] Question: How does Reliance win new business? - Management emphasized that winning new business is primarily through execution and high levels of customer service rather than price competition [38][39] Question: What is the outlook for the semiconductor and aerospace markets? - Management expects continued improvement in these markets as excess inventories are worked through, with a positive long-term outlook [52][53] Question: What is the anticipated capital expenditure for 2026? - Management indicated that the 2026 capital expenditure budget is expected to be lower than 2025, focusing on better utilization of existing equipment [54][56] Question: How does the company view share buybacks versus investing in the business? - Management views share buybacks as a low-risk use of capital and adjusts their activity based on market conditions [95][96] Question: Is the company impacted by aluminum supply disruptions in New York State? - Management confirmed that there have been disruptions but emphasized their collaborative efforts to mitigate the impact [99][100] Question: What is the expected seasonality for the business going forward? - Management expects typical seasonality patterns to continue, with Q1 and Q2 being the strongest quarters, followed by declines in Q3 and Q4 [102][104]

Financial Data and Key Metrics Changes - Net income for Q3 was $1.9 billion or $4.28 per diluted share, up more than 13% from $1.68 billion or $3.78 per diluted share in the same quarter last year [12][13] - Net sales for Q3 were $61.96 billion, an increase of 8% from $57.39 billion in the same quarter last year [14] - Membership fee income was $1.24 billion, an increase of $117 million or 10.4% year over year [17] Business Line Data and Key Metrics Changes - U.S. comparable sales were up 6.6% or 7.9% excluding gas deflation, while Canada comp sales were up 2.9% or 7.8% adjusted for gas deflation and FX [14] - E-commerce comp sales were up 14.8% or 15.7% adjusted for FX [15] - Fresh category comparable sales were up high single digits, led by double-digit growth in meat [28] Market Data and Key Metrics Changes - Traffic or shopping frequency increased 5.2% worldwide and 5.5% in the U.S. [15] - Average transaction or ticket was up 0.4% worldwide and up 1.1% in the U.S. [16] - Gas comps were negative low double digits during the quarter, driven by a lower average price per gallon [32] Company Strategy and Development Direction - The company plans to open another 10 warehouses during Q4, including locations in Sweden, Korea, and Canada, bringing the total warehouse count to 914 worldwide [5] - The focus on digital and technology is seen as crucial for future growth, with investments aimed at improving member experience [9][10] - The company is committed to providing quality items at the lowest possible prices, viewing price increases as a last resort [35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to navigate challenges posed by tariffs and inflation, emphasizing the importance of maintaining competitive pricing [11][35] - The company noted that in uncertain times, its value proposition resonates strongly with members [11] - Management highlighted the importance of agility in sourcing and pricing strategies to mitigate tariff impacts [35] Other Important Information - Membership renewal rates were 92.7% in the U.S. and Canada, with a worldwide rate of 90.2% [18] - The company ended Q3 with 79.6 million paid household members, up 6.8% year over year [20] - Capital expenditure in Q3 was approximately $1.13 billion, with an estimated full-year CapEx of over $5 billion [28] Q&A Session Summary Question: What is Costco telling merchants regarding pricing strategy? - Management indicated that they are focused on lowering prices wherever possible and have seen improvements in the competitive landscape [41][43] Question: How are price gaps changing in the current inflationary environment? - Management noted that they are closely monitoring pricing and have been proactive in lowering prices as commodity costs decrease [46][48] Question: How should expectations be recalibrated as Costco laps outsized growth from precious metals and gift cards? - Management acknowledged that some deceleration in growth is expected but remains confident in the ability to find quality items at great value [55][61] Question: What is being done to improve member experience in high-volume warehouses? - Management emphasized strategic openings of new warehouses to alleviate congestion and improve member experience [62][65] Question: What is the outlook for LIFO charges in the coming quarters? - Management provided insights into the LIFO charge calculations and indicated that future charges will depend on inflation rates and tariff impacts [76][82]