Richard Galanti: Look, I think when we’re asked that question, we’re fortunate to answer it that we’re, first of all, looking at the consumer through somewhat rose-colored glasses here. The we have enjoyed great value. And again, we’re convinced it’s value. We’ve got — I think on the margin, there’s a few extra things that we’ve done. We’ve improved the site of the website. We’ve gotten a little better communicating stuff, not completely. But I think overall, it’s — and we’ve been good merchants. I think the merchants have done a great job of bringing in new stuff. And not being shy when we see an industry category down a lot, that we can still — if we’re driving people in, we’ve got a better chance of getting them to buy something.
Rupesh Parikh: Thank you. Happy holidays.
Richard Galanti: Thanks.
Operator: We’ll take our next question from Oliver Chen with TD Cowen.
Thomas Nass: Hi. This is Tom Nass on for Oliver. Just a quick question on the trend of Kirkland relative to last year. If you could just remind us how that’s trending maybe across categories. And then if you have any notable callouts, any recent innovations? Just curious if this is essentially driving any efficiencies and supplier negotiations that can position Costco for stronger gross margin ahead.
Richard Galanti: Well, I would say, allowing us to get better deals, which means lower prices. But look, I think we — Kirkland signature (ph) relative to non-gas sales is in the high-20s. And I think it was probably a good year ago when inflation was in the 8 and 9 range, if you will, if you remember. And we talked about that year-over-year, we saw probably the biggest increased penetration of KS at Costco. It was 1, 1.5 percentage points, when historically, it has been 25 basis points to 50 basis points a year. I think we’re back to that, but we’ve maintained that higher level and we’re back to seeing smaller increases in penetration every year, but nonetheless still driving that business. But we’ve got — yeah. I think that helps with some of the deflationary certainly with KS stuff, we’re closer to the supplier.
We’re not the only — we’re the only customer buying that item and we can drive a little bit more business. So I think it just continues to work that way for us.
Thomas Nass: Great. And then just a quick follow-up on any notable behavioral trends you’ve seen in consumer shopping this holiday season?
Richard Galanti: Some colleague in my room said they’re buying gold. But no, that’s actually online mostly. But no, I think — again, I think the traffic thing is the thing that we’re happily surprised about that we’re continuing to drive people in on an increasing basis. We know we benefited during those, call it those two years, kind of March, April of ’20 to March, April of ’22, the kind of the two years of COVID, we benefited in many ways from more members and more volumes. And we’ve not only kept it, we’re continuing now to add to those levels, so we feel very fortunate in that regard.
Thomas Nass: Thanks.
Richard Galanti: One of my colleagues here just mentioned that discretionary merchandise trends are getting a little better. And that’s not only on big ticket but in general, nonfood stuff. I think that corresponds with my comment earlier that we feel good about the seasonal — how we’ve done seasonally.
Thomas Nass: Great. Thank you.
Operator: Thank you. We’ll take our next question from Mark Astrachan with Stifel.
Mark Astrachan: Yes. Thanks and good afternoon, everyone. I guess I wanted to ask on the Kirkland products, specifically maybe on the CPG that you mentioned. How has pricing or how has prices trended on those versus the branded products? Have you seen any deviation there, given you’re closer? Are you able to lower prices? I suppose to the extent that, that has happened, do you notice any more market share changes within those CPG categories?
Richard Galanti: I think it’s slightly — it’s deflationary. It’s a little more deflationary in the KS than in the CPG, which drives more value to KS, frankly. But we’re seeing some — our ability to work with our CPG suppliers as well, but just a little stronger ability to do that with KS.
Mark Astrachan: Got it.
Richard Galanti: And it is, again, a comment in the room here. We’ve had — it’s allowed us to do some new item introductions on the KS side as well.
Mark Astrachan: Great. And then just following up on the last question. Anything you can call out amongst the newer memberships cohorts in terms of renewal rates versus the average?
Richard Galanti: Generally speaking, if you compare, everybody was always concerned. I remember 10-plus years ago, people would ask you, how are you going after millennials? And then it’s how you go after the next gen or whatever, the Gen Zs or whatever? At the end of the day, when we look at the different cohorts, if you just change the names, the curve seems to be about the same in terms of getting new younger members. They buy less, they buy more as they get older into that 40- to 55-year-old sweet spot. I don’t know in terms of renewal rates. I think the rates are – our overall rates are improving so I think we’re probably doing a better job there. Certainly, things like, frankly, auto renewal helped that as well.
Mark Astrachan: Got it. Thank you. Happy holidays.
Richard Galanti: Same to you.
Operator: We’ll take our next question from Corey Tarlowe with Jefferies.
