Costco Wholesale Corporation (NASDAQ:COST) Q2 2023 Earnings Call Transcript

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Richard Galanti: It’s a long road ahead. We only have 11 carwashes. So we have plenty of room for carwashes 30 years from now. But at the end of the day, we think it’s a very long road. It’s not happening in the next few years. And the fact that we’re still taking such market share relative to U.S. gas gallons in general is a positive. So I think it’s a question that we can defer for 5 or 10 years, frankly.

Scott Mushkin: Yes, tell this to the California guy. My last question, I know this call has gone long, just wondering about a little bit long term the initiatives. You had a big push into fresh several years ago. It’s obviously worked out really well. We had the credit card. We had the big push in the big ticket. Is there anything on the horizon like that, that will change the business a little bit and maybe grow it a little faster?

Richard Galanti: Well, international, in general, there’s plenty of opportunities. If you look at some of the foreign countries, as a percent of sales, they are more profitable than the U.S. So those things, that creates more opportunity. I don’t see anything big right now coming on vertical integration. Might we do another poultry activity at some point, but that’s still a few years down the road to even consider. We did a second meat plant outside of Chicago for the Midwest and East Coast just a couple of years ago. We’re expanding our bakery commissary. So there’s nothing, another couple of hundred million dollar plus projects going on like that. I think another area that I think bodes well for us in terms of competitiveness and continuing to work on getting prices down is working with suppliers, certain things that we currently ship from the U.S., elsewhere, or air freight in the case of produce elsewhere, there’s plenty of activity going on what I’ll call the hot house side, could you grow more vegetables.

But that’s all good in concept, but it takes time to figure out. And there’s plenty of people trying to figure it out, and so we’re waiting for that. The other thing I think I gave an example a few years ago, of something as simple as cashews. Historically, they’re all grown and washed and prepped for roasting in Eastern Africa, shipped to America for roasting, quality roasting, packaging and then shipped out to the 13 or 14 countries. Today, those that are ultimately sold in Korea, Taiwan, Japan, Australia and China, are now shipped to Vietnam to a quality roaster supplier of ours. They grew over time with us. And we dramatically lowered the cost on that portion of a huge amount of dollars, and then using that to do what we normally do, take 80% or 90% of that savings and lower the price even further in those countries.

There’s plenty of opportunities. Now we’re now talking with big suppliers of these hundred- and multi-hundred-million dollar items that we buy, whether it’s paper goods, plastic items, things like that, which of these items could be produced overseas, particularly on the Asia side, rather than having to produce them here and ship them there. There’s a lower cost of production and as long as we can maintain that quality. And so I think there’s going to be lots of little opportunities that become, in total, a good opportunity for us.

Richard Galanti: Well, thank you, everyone. We’re around. I’m sure we’ll be talking to a few of you today and tomorrow and early next week. Have a good afternoon or evening.

Operator: This concludes today’s call. Thank you for attending. You may now disconnect.

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