Summary of Costco Wholesale (COST) Conference Call Company Overview - **Company**: Costco Wholesale (COST) - **Market Cap**: $418.5 billion - **Enterprise Value**: $407.8 billion - **Industry**: Retail, Specialty Hardlines, Supermarkets, and Discount Stores Key Financial Results - **F4Q EPS**: $5.87, exceeding GS/consensus estimates of $5.85/$5.80 [19][20] - **Total Company Same Store Sales (SSS)**: +6.4%, in line with consensus but below GS estimate of +7.1% [19][20] - **Gross Margin**: 11.1%, above GS/consensus of 11.0%/10.9% [19][20] - **EBIT Margin**: 3.9%, compared to GS/consensus at 4.1%/3.9% [19][20] Membership Growth - **Total Paid Memberships**: 81.0 million, with a 7% year-over-year increase in membership income [13] - **Executive Memberships**: 38.7 million, representing 47.7% of all members, up from 47.2% last quarter [13] - **Incremental Sales from Extended Hours**: Estimated to contribute an additional +1% to U.S. weekly sales [13] Sales Performance - **Traffic Growth**: +3.7% contributing to SSS growth [2] - **Fresh Sales**: Up high single digits, driven by double-digit growth in meat [2] - **Non-Food Sales**: Up high single digits, with notable growth in gold, jewelry, and toys [2] - **Pharmacy, Optical, and Hearing Aids**: Continued strong performance [2] E-commerce Trends - **E-commerce Traffic Growth**: +27%, with significant increases in categories like gold, jewelry, and housewares [14] - **Delivery Improvements**: New delivery experience led to a +13% increase in items delivered [14] - **Personalized Offers**: Launched on the COST homepage, resulting in a +22% increase in traffic to product detail pages [14] Inflation and Cost Management - **Inflation Trends**: Remains in the low single digits (LSD) to mid single digits (MSD) range [14] - **LIFO Charge**: $43 million due to inflation impacts [14] - **Management Strategy**: Focus on changing assortments to mitigate inflation impacts, emphasizing high-ticket categories [14] Future Outlook - **12-Month Price Target**: Increased to $1,218 from $1,133, reflecting confidence in the company's value proposition [24] - **EPS Estimates**: Updated for FY26/27 to $19.68/$21.99, with a new FY28 estimate of $23.94 [22] Risks - **Competitive Landscape**: Risks from grocery, convenience, big-box, and e-commerce competitors [28] - **Macroeconomic Factors**: Potential headwinds from consumer demand and supply chain issues [28] Conclusion - **Investment Rating**: Reiterated Buy rating based on strong performance metrics and growth potential in membership and e-commerce [24]

Core Insights - Both PepsiCo and Coca-Cola have reported anemic growth due to declining demand for soda and snack foods, with Q2 revenue increases of 1% attributed to price hikes offsetting slight sales drops [1][7] - Coca-Cola's Q2 net income rose to $3.8 billion from $2.4 billion year-over-year, while PepsiCo's net income fell to $1.3 billion from $3.1 billion, primarily due to a $1.9 billion impairment charge [8][9] - PepsiCo offers a higher dividend yield of approximately 3.8% compared to Coca-Cola's 2.9%, making it potentially more attractive for income-focused investors [12][16] Company Comparisons - Both companies are diversified beverage holdings with a range of products including juices, coffees, teas, and waters, and have entered the alcohol market with new offerings [4][5] - The shift towards healthier ingredients has impacted sales, particularly for PepsiCo, which is responding by producing cane sugar versions of its flagship colas [6] - Despite Coca-Cola's recent stock outperformance, PepsiCo's lower forward P/E ratio of 18 compared to Coca-Cola's 23 suggests it may be a more cost-effective investment [11][15] Investment Considerations - Both companies are considered Dividend Kings, having a long history of annual dividend increases, but PepsiCo's stronger yield may appeal more to dividend investors [12][14] - The iconic brands of both companies are expected to drive sales growth in the long term, but PepsiCo's revenue diversification from its snack business provides an additional advantage [15][16] - Overall, PepsiCo appears to offer a slight edge for shareholders due to its higher dividend returns and lower valuation metrics [14][16]