Q2 2014 Earnings Call Transcript

Transcript Call Date 03/06/2014

In terms of sales for the quarter total sales were up 6% and on a comp basis up 3%. In the quarter sales were negatively impacted by gas price deflation as well a bigger impact by weakening foreign currencies relative to the dollar year-over-year, that alone was about 200 basis points.

Excluding gas reported 4% U.S. comp in Q2 would have been plus 5, and reported flat international comp assuming flat year-over-year our tax rates would have been plus 7%, such that the total Company reported, which we reported again the 3% comp for the quarter, excluding gas (effects), would have been plus 5.

For the four-week month of February, which included the last two weeks of the fiscal second quarter, comps came in at plus 2. This consisted of a plus 3 reported in the U.S. and minus 1 internationally. Again, gas deflation and FX had an impact such that the 3% reported U.S. comp increase from February would have been a plus 4, and the minus 1 international, excluding same FX exchange rates year-over-year would have been plus 5, and the total Company the plus 2 that we reported would have been a plus 4.

I now mention which I haven't in quite a while; weather. It's been all over, particularly in the U.S., snow, rain, just crazy weather. We estimate that the weather impact to February sales results represented about 1 percentage point hit to the four-week reported period.

In terms of new openings, after opening 13 new locations in the first quarter, as well as closing our Acapulco, Mexico location due to the hurricane damage, we opened three new locations in the second quarter; two in the U.S., one each in Illinois and Texas, and one also in Ontario, Canada. All told, that puts our fiscal 2014 openings through the second quarter at 16 new locations and we now operate 649 locations around the world.

Between now and the end of fiscal '14, we expect to open an additional 14 locations; three in the third quarter and 11 in the fourth quarter. These 14, which again will be before fiscal year-end on August 31, six are planned for the U.S., two additional locations in each of Japan and Korea, and one each in Canada, U.K., Australia and, of course, our first location opening in Spain in Seville in the spring; such that we'd expect to end the year with 30 new openings for the year.

This morning I'll review with you, of course, our membership trends and renewal rates, our e-commerce activity and, of course, additional discussion about margins and SG&A.

To start off, again, sales – total sales were up to $25.76 billion, up 6% year-over-year and comps again was reported 3%, a plus 3% and a plus 5% excluding gas and FX. In terms of the 3%, the plus 3% reported comp sales, the average transaction was minus 1% for the quarter on a reported basis. Again, FX is impacting that as well, would have been a little over 1% plus, on a flat currency year-over-year. Average frequency was a little over 4%. For the three recent months, frequency was just under 4%, just under 5% and just under 3% for December, January and February and year-to-date shopping continues to be in the 4.5%, 4.25% range.

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