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Costco Wholesale (NASDAQ:COST)
Q1 2021 Earnings Call
Dec 10, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Thank you for standing by, and welcome to the Q1 earnings call. [Operator instructions] Thank you. I would now like to hand the conference over to your speaker today, Mr. Richard Galanti.

Please go ahead.

Richard GalantiExecutive Vice President and Chief Financial Officer

Thank you, Cindy, and good afternoon to everyone. I will start by stating that these discussions will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that may cause actual events, results and/or performance to differ materially from those indicated by such statements. The risks and uncertainties include, but are not limited to, those outlined in today’s call, as well as other risks identified from time to time in the company’s public statements and reports filed with the SEC.

Forward-looking statements speak only as of the date they are made, and the company does not undertake to update these statements, except as required by law. In today’s press release, we reported operating results for the first quarter of fiscal — our fiscal-year 2021, the 12 weeks ended November 22. Reported net income for the quarter came in at $1.166 billion or $2.62 per share, compared to $844 million or $1.90 per diluted share last year. This year’s first quarter included tax benefits of $145 million or $0.33 per share, $0.16 of which was due to the deductibility of the $10 per share special cash dividend to the extent received by the company’s 401(k) plan participants and $0.17 related to stock-based compensation.

Last year’s first quarter included a $77 million or $0.17 per share tax benefit related to stock-based compensation as well. And this year’s results also included the costs related to our COVID-19 premium wages of $212 million pre-tax or $0.35 per diluted share. Net sales for the quarter increased 16.9% to $42.35 billion, up from $36.24 billion last year in Q1. In terms of our first-quarter comp sales metrics, for the — on a reported basis, for the U.S., we reported a 14.6% figure.

Excluding gas deflation and FX impacts, the 14.6% for the 12 weeks would have been 17% increase. Canada for the 12 weeks reported 16.2%; ex gas and FX, 16.8%. Other International reported 18.7%; ex gas and FX, 17.7%. So all told, for the total company, we reported 15.4% comp sales increase.

And excluding gas deflation and FX, the 15.4% would be 17.1%. E-commerce on a reported basis for the 12 weeks was 86.4%; and excluding FX, 86.2%. In terms of Q1 comp sales metrics, traffic or shopping frequency increased 5.5% worldwide and plus 7.6% in the U.S. Our average transaction size was up for the company, 9.4% in the quarter year over year and up 6.5% in the U.S.

These include the negative impacts from gas deflation and the positive impact from FX. Foreign currencies relative to the U.S. dollar positively impacted sales by about 30 basis points, and gasoline price deflation negatively impacted sales by approximately 200 basis points. Now going down the income statement.

Membership fee income came in at $860.9 million, up $57 million or 7.1%. Ex FX, it would have been up $54 million or 6.7%. During the quarter, we opened eight new units. In terms of renewal rates, our U.S.

and Canada renewal rate as of the end of Q1 ’21 was 90.9%. That compares to a quarter ago of 91%. And worldwide, it was 88.4%, which was the same as it was a quarter ago. Now the U.S.

and Canada’s rate of 90.9%, compared to the 91%, this 0.1% decline was primarily a result of what we believe to be the deferred renewals in Canada due to the pandemic. For example, traffic or frequency in our Canada warehouses in Q1 came in at a minus 1.3%, compared to a plus 7.6% figure in the United States. By the way, the U.S. renewal rate was the same at both quarters’ end.

In terms of number of members at Q1 end, total paid households at Q1 end was 59.1 million, up from 12 weeks earlier Q4 end of 58.1 million. And total cardholders at Q1 end was 107.1 million, compared to 12 weeks earlier at 105.5 million. Also at first quarter end, paid executive memberships totaled 23.3 million, an increase of 642,000 during the fiscal first quarter. On to the gross margin line.

Our reported gross margin in the first quarter was higher year over year by 50 basis points, coming in at 11.55% of sales, compared to 11.05% a year ago. Excluding gas deflation, the point — the 50-basis-point increase would be 30 basis points. If you jot down two columns of numbers here to shed a little light on the components of gross margin, on a reported basis in Q1 ’21, the core merchandise margin year over year was up on a reported basis, 83 basis points, plus 83. Second column without gas deflation would have been plus 66 basis points.

Ancillary businesses, minus 15 basis points reported and minus 20 ex gas deflation; 2% Reward, minus 6 basis points and minus 4; other, minus 12 and minus 12. And if you add up the two columns, on a reported basis, again, gross margin reported as a percent of sales year over year in the quarter was up 50 basis points on a reported basis and ex gas deflation up 30 basis points. Now the core merchandise component of gross margin shows it was higher by 83 and up 66 ex gas deflation. Similar to last quarter, we had a sales shift from ancillary to core.

This resulted in a higher contribution of our total gross margin dollars coming from the core operations versus last year. Looking at core merchandise categories in relation only to their own sales, core and core, if you will, margins year over year in the quarter were higher by 65 basis points. Fresh foods was again the biggest driver here. With strong sales in fresh, we benefited from efficiency gains in labor productivity and significantly lower product spoilage.

Food and sundries, softlines and hardlines, the other three main core components, all had higher margins year over year in the quarter as well, but fresh foods was the driver. Ancillary and other businesses gross margins, as I showed you here, was lower on a reported basis by 15 basis points and minus 20 ex gas deflation, most of the impact coming from travel and, to a lesser extent, from gas, optical, hearing aids and food courts. Costco Logistics, which is our name for the acquisition of Innovel that we did several months ago, impacted ancillary margins by minus 6 basis points, a slight relative improvement from the prior quarter year over year. 2% Reward, nothing surprising there.

And the other, the minus 12 basis points, all of this was attributable to the cost of the COVID-19 of $53 million of the $212 million total amount previously mentioned. These are the direct costs for incremental wages allocated to our manufacturing, production and fulfillment operations. All told, even with the $53 million of COVID costs hitting the margin, Q4 year-over-year gross margin on a reported basis ex gas is still up 30 basis points year over year. Moving to SG&A.

Our reported SG&A in the first quarter as a percent of sales was lower or better year over year by 15 basis points, coming in at 10.15% of sales compared to a year earlier — first quarter of 10.30%. And ex gas deflation, the 15 basis improvement would be 32 basis points of improvement. Again, jotting down two columns of numbers, reported and without gas deflation. Core operations in Q1 on a reported basis was lower or better by 49 basis points so a plus 49; ex gas deflation, plus 62.

Central, plus 1 and plus 3 basis points; stock compensation, plus 3 and plus 4 basis points; other, minus 38 and minus 37 basis points. And summing those two columns up, total reported SG&A year over year was better or lower — or better, plus 15 basis points; and ex gas deflation, plus 32 basis points. Now SG&A in the core — again, it shows, ex deflation, an improvement of 62 basis points. This excludes the COVID costs, which I’ll talk about in a minute.

There was significant — just basic significant leverage with strong core merchandise sales increases. In terms of other, the minus 38 or minus 37-basis-point number ex deflation — gas deflation, these were our incremental costs from the COVID-19, $159 million of the $212 million total number that we had mentioned earlier. The premium wages have been extended through January 3 at this time. Again, even including these $159 million of COVID-related premium pay expenses, SG&A year over year improved nicely.

Next on the income statement is preopening expense, $22 million this year in the first quarter, compared to $14 million a year earlier. We had 10 openings, eight net of two relocations during the quarter; and four openings gross, three net of one relocation a year earlier. Last year’s $14 million number did include a couple of million dollars related to preopening on our new poultry — on our poultry complex, which was opened and went into business right before the beginning of Q1. All told, reported operating income for Q1 ’21 increased 35%, coming in at $1.43 billion this year, compared to $1.061 billion last year, and even a higher percent increase, of course.

It would have been higher had not we had those — the premium pay. Below the operating income line, interest expense was $39 million this year versus $38 million last year. Interest income and other for the quarter was lower by $6 million year over year. Interest income itself with net interest income and other was lower by $22 million year over year due in large part to lower interest rates, offset by FX and other, which was up — which was higher or better by $16 million year over year.

So overall, reported pre-tax income in Q1 ’21 was up 34%, coming in at $1.42 billion this year, compared to $1.058 billion a year earlier. In terms of income taxes, our tax rate in the first quarter of fiscal ’21 was 16.8%, compared to 19.1% in Q1 last year. Both years’ tax rates benefited from the tax treatment of stock-based compensation, as mentioned earlier. This year’s tax rate in the first quarter also benefited from the tax deductibility of the special dividend payable to company 401(k) participants, as discussed — that portion payable to the 401(k) participants as discussed earlier in the call.

This year’s full — this full year’s — fiscal year’s effective tax rate, excluding these discrete items, is currently projected to be between 26% and 26.5%. In terms of warehouse expansion, as I mentioned in the first quarter of this fiscal year, we opened eight net new units. Our plan for the year is somewhere in the 20 to 22 range. None in the second quarter and six or so — five or six in Q3 and seven or eight in Q4.

As of Q1 end, total warehouse square footage stood at 117 million square feet. In terms of capital expenditures, in the first quarter of ’21, we spent approximately $893 million. Our full-year capex spend for fiscal ’21 is still estimated to be in the $3 billion to $3.2 billion range. In terms of e-commerce, overall, our e-commerce sales in Q1 ex FX increased at 86.2% year over year.

A few of the stronger departments, food and sundries, housewares, pharmacy, OTC and health and beauty aids, small electrics and TVs and other electronics. Total online grocery grew at a very strong rate in Q1, nearly 300%. The comp numbers that I mentioned, the 86.2% figure follow our usual convention, which excludes these third-party same-day grocery program as they come in themselves and shop in our warehouses and then deliver to our members. If we include the third-party same-day in our e-commerce comps, the 86.2% result would have been just over 100%.

Innovel, now rebranded as Costco Logistics, continues to grow, and we continue to push more big and bulky items to the site. We’ve added — in the past quarter, we added an in-cart scheduler this quarter, where members can select specific delivery dates for most big and bulky items; and made improvements to our call center with specifically trained agents as well. That continues to grow nicely. And lastly, a couple of fun sports items just loaded two days ago.

We have a Babe Ruth-autographed baseball for $64,000 and a Ty Cobb-autographed Louisville Slugger bat for $160,000. We’ve also recently sold a number of memberships for Wheels Up, a private jet service operator. Now turning to COVID and some of the issues and impacts surrounding it. From a sales perspective, similar to our strong sales results this past summer and our fiscal fourth quarter, we have continued to enjoy strong sales results during the first quarter of fiscal 2021.

We continue to generate strong sales in food and sundries and health and beauty aids and fresh foods and the like. And we’ve also benefited from improved sales in products and items for the home. As people are spending less on air and travel and hotel and dining out, they seem to have redirected some of those dollars to categories like electronics, furniture and mattresses, exercise equipment, housewares, cookware, domestics, etc. And as mentioned earlier, sales in most of our ancillary businesses were lower year over year in the quarter, travel, gas, hearing aids and food courts.

From a supply chain perspective, a 40,000-foot view, if you will. Most factories are up and running at our suppliers, and in many cases, production capacity has been increased. However, even higher increases in demand of some products are still creating some supply issues. There are instances of 50%, 100% or even more sales increases of an item.

And if we could procure more, we’d have even higher sales. Examples would include things like exercise equipment, certain major appliances, certain electronics items, as well as certain housewares and small electric items. On the transportation front, there have been some container shortages at origin, as well as some congestion at destination ports here in the states. The latter, typically two to four days, but a little longer in some cases.

We’re managing through it and expect relief not until March or so of 2021. As well in the past few weeks, there have been some challenges that you may have read about in the industry in terms of delayed delivery times of e-com item — of items, just given the number of items being shipped now through third-party carriers. While this may reduce some sales if members are confident — are not confident in timely holiday delivery, we, like others, I’m sure, have done a couple of things. We’ve adjusted our stated expected delivery times on our side and reminded people to shop early.

And we — in our case, we took several hundred nonfood items — nonfood online items that are also in line and are providing same-day delivery through Instacart, including items like AirPods and instapots and laptops and many over-the-counter, health and beauty items, as well as some other home essentials. In terms of food and sundries, continued limits on some paper goods. Demand and sales went up as COVID began spiking again. Our toughest areas, nitrile gloves, surface cleaning wipes and sanitizing sprays.

Also, in some cases, some paper goods. Overall, dairy items are in good shape, as well as proteins and produce on the fresh side. In terms of our holiday merchandise planning and results. Halloween, we went into it a little more conservative in terms of costumes and Halloween-specific candy items.

We came out of Halloween with pretty clean inventory levels. Christmas, as I think we mentioned on the last earnings call responding to a question, we went a little more basic in terms of needs and uses for the house. So very strong. We’ve gone into it with fundamental items for the home like housewares, TVs, electronics, even added items like barbecues and pressure washers and furniture items.

A little less, we had cut back a little bit on seasonal items like holiday decorations and gift wrap and some of the candy and food gift baskets. In some instances, we’ve already sold through those inventories. Our warehouses overall have remained open and are mostly back to regular hours with an additional hour on any mornings for seniors and persons with disabilities. Warehouses are still following social distancing and sanitation guidelines.

And in some jurisdictions, we have to limit occupancy. Since May 4, as you may recall, we’ve required members and employees to the warehouses to wear masks. And since November 16, we’ve required face shields for those unable to wear a mask. Some of these initiatives, of course, will extend well into Q2 of the fiscal year.

Finally, in terms of upcoming press releases, we will announce our December sales results for the five weeks ending Sunday, January 3, on Wednesday, January 6 after market closes. With that, I will open it up to questions and answers, and I’ll turn it back to Cindy. Cindy?

Questions & Answers:

Operator

[Operator instructions] And your first question comes from the line of Simeon Gutman from Morgan Stanley. Your line is now open.

Simeon GutmanMorgan Stanley — Analyst

Hey, everyone. Good afternoon. Richard, I wanted to ask — following on, you talked about some of the merchandising plans around Halloween and Christmas. You’re going to begin to lap some pretty massive surges in growth when you get into the thick of ’21.

I know you don’t guide, but you’re probably planning inventory purchases. So I wanted to ask how you sort of manage with a pretty wide range of outcomes. And I don’t know if you have any guideposts to thinking about some of the gains you’re making in fresh food as far as the spoilage and the markdowns that don’t seem to be happening. So how do you think — how do you plan for lapping some of those as well?

Richard GalantiExecutive Vice President and Chief Financial Officer

Well, I mean, there’s a few different things and time periods that will be in question. If you recall, there was a big surge in frequency and sales results the last week in February and the first two or three weeks of March, when people were coming in and hoarding, in our view. And of course, we were running out of everything basic, from water to paper goods to cleaning supplies and things like that. And in some cases — and then beyond that into April and May, there were some issues as there were some COVID spiking at many fresh plants — protein plants, meat and poultry and the like.

And so it’s hard to project completely. I think historic — of late, we have tried to build a little extra inventory where we can, in some of those key things that aren’t going to go out of style like paper goods and cleaning supplies. Although then — and you hit the next rush of spiking and whatever extra inventory you had, it goes away pretty quickly. Look, we’ll continue to work around it.

We work — I think in some cases, it’s a little easier in the sense that we have fewer suppliers to deal with, we have fewer items to deal with. Arguably in other cases, given our huge volumes, that creates its own challenges sometimes. I think the bigger challenge is going to be post May last year — or this past year, June is when we saw kind of sales strength, not just in those key essential categories like fresh foods and foods and sundries and paper goods and health and beauty aids, but also on the nonfood side, items for the home, if you will, and those types of basic items and, again, people spending some of those dollars. Look, some things will improve and some things may be degraded a little bit.

Some things that are degraded may take a while and not everything is going to happen. A light bulb is not going to go off one day and everything is going to get better from a food standpoint in terms of restaurants being opened. So I think we’re in it together, and we feel pretty good that we’ve got a good format to serve our members well, and we’ll go from there.

Simeon GutmanMorgan Stanley — Analyst

And as far as, I don’t know, the events, I know you have road shows. I don’t know how prevalent they’ve been. Your mailers. Are there things that you can change the cadence of, either to get more aggressive? Grocery, you’ve taken a huge amount of share this year.

Is that an area you’re going to lean into stronger? Just curious how you’re thinking about the merchandise — how the merchants are prepping for the upcoming year.

Richard GalantiExecutive Vice President and Chief Financial Officer

Well, as it relates to promotional forms that we do like the MVM mailers or even online type of mailers, needless to say, some of those have been changed because some of the big ticket nonfood — not big ticket, I’m sorry. Some of the big size items that are always in there, like paper goods, like cleaning supplies, in some cases, we’ve had eliminated some of those items from the mailer. We put other items in. In some cases, it’s done fine.

In some cases, it’s a little bit less of a sales increase. But that’s not just going forward. That’s been in the last few months as well that we’ve changed those things. I think we’ve been pretty good at pivoting and adding new items.

I think the examples of — for Christmas, while we may have — maybe we went a little too deep into cutting back, not that they were big cuts, but we’re running out of some of those decorative things a week or two earlier than we would have liked to. We also though have found success in lots of essential, basic fundamental items. I don’t think this — I think this is the first Christmas that we probably brought in barbecue grills and pressure washers to market. And they’re doing well because people are buying gifts for the home.

Bob NelsonSenior Vice President, Financial Planning, Investor Relations, and Treasury

Ramp-up of groceries.

Simeon GutmanMorgan Stanley — Analyst

Yeah. Thank you.

Operator

And your next question comes from the line of Mr. Mike Baker of D.A. Davidson. Your line is now open.

Mike BakerD.A. Davidson — Analyst

Hi. Thanks. I was a little curious on the holiday trends. Two questions, really.

One, by trying to advertise and get customers to spread out their sales and come in a little bit early, do you think there was any pull forward of holiday sales into November from December? And then a second part of the holiday question, I think you said that you’re out of stock quickly in some of the seasonal items. Do you think you could have made — been a little bit more aggressive on the seasonal stuff? How much do you think your sales could have been up if you had done that?

Richard GalantiExecutive Vice President and Chief Financial Officer

Yeah. Well, first of all, talking to the buyers, they definitely feel that some of the merchandise and sales were pulled forward into November, not only from December but even the week of November. There’s been articles out there about Thanksgiving and overall, not a Costco-specific, but just in general about what’s going on online and what have you. And so certainly, some of that kind of got pushed forward.

In terms of some decorative things, I mean, there are examples where instead of buying 10% more this year of a given item, we bought 10% or 20% less. So we still bought a lot. We — it’s not like we cut our order back by half. But in retrospect, we probably could have sold a little bit more.

I don’t have a dollar number. It’s probably not that meaningful. For every negative, there’s another positive. Needless to say, our comps overall have been very strong.

Mike BakerD.A. Davidson — Analyst

Yeah. That’s fair. And if I could ask one more, I guess, unrelated question. The MFI, the 7.1% increase, that’s better than it has been.

A nice acceleration there. Any color as to where that acceleration came from, from what have been more in the 4%, 5% range in the last few quarters?

Richard GalantiExecutive Vice President and Chief Financial Officer

Well, I think — in terms of shopping frequency?

Bob NelsonSenior Vice President, Financial Planning, Investor Relations, and Treasury

No, membership fee income.

Mike BakerD.A. Davidson — Analyst

No, the — correct.

Richard GalantiExecutive Vice President and Chief Financial Officer

Oh, membership fee — oh, I’m sorry. OK. I didn’t hear the first part of the question. Well, I think we opened a few more units than we did a year earlier.

That — without looking that deeply, that’s probably most of it.

Mike BakerD.A. Davidson — Analyst

OK. Fair enough. I appreciate the color.

Richard GalantiExecutive Vice President and Chief Financial Officer

Thank you.

Operator

And your next question comes from Chuck Grom of Gordon Haskett. Your line is now open.

Chuck GromGordon Haskett Research — Analyst

Hey, thanks. Hey, good afternoon, Richard. When you look at your online offering, can you remind us where it stands in terms of total mix of business and also level of profitability relative to the store? And looking ahead, what categories you may start going into more?

Richard GalantiExecutive Vice President and Chief Financial Officer

Well, I think in terms of — in store, of course, in warehouse, we’ve got about 3,800 active items online. We typically have somewhere in the high single-digit thousands, I mean, call it, 9,000-plus. I’m sorry.

Bob NelsonSenior Vice President, Financial Planning, Investor Relations, and Treasury

7%.

Richard GalantiExecutive Vice President and Chief Financial Officer

And in terms of percent of sales, it’s about 7% of sales. Now we don’t include in that number, as I mentioned, like the —

Bob NelsonSenior Vice President, Financial Planning, Investor Relations, and Treasury

Third party.

Richard GalantiExecutive Vice President and Chief Financial Officer

Third-party sales like the Instacart same-day fresh because they’re employee or contracted employees coming in to Costco shopping just like any other customer coming to shop. So you can add a little bit more to that. But in terms of what we call online, it’s about 7%. I think it was 6% in fiscal ’20 for the entirety.

And of course, it was halfway through the year when you saw e-com percentages increases jumped dramatically with the advent of COVID.

Chuck GromGordon Haskett Research — Analyst

And then just level of profitability?

Richard GalantiExecutive Vice President and Chief Financial Officer

Overall, e-commerce is a little less profitable. You’ve got — category-wise, it’s profitable. You’ve got — category-wise, you’ve got merchandise categories that don’t include some of the highest gross margin components of our business like fresh, like apparel in a big way in terms of the penetration. You’ve got electronics, which is a lower-than-average margin business, both in-store and online and a much bigger percentage of penetration online.

So those are examples. Certainly, the profitability of e-commerce has been helped with the types of comp sales increases we’ve had over the past year. But also over this past year, there’s some of the cost inefficiencies of growing it so fast, we — in terms of fulfillment, as we are continually adding locations where it can be shipped out of and getting closer to the customer as this overall size of the business has grown a lot. Yes.

And as I mentioned earlier, the investment in Innovel or call — what’s now we’re calling Costco Logistics, that was, as we expected, a hit year over year to margin simply because we’re — it’s being ramped up and upgrading.

Chuck GromGordon Haskett Research — Analyst

Gotcha. And then just a follow-up on Mike’s question. And I pardon my near-term orientation of it. But when you look at the comp in November and the falloff at the end of the month, albeit still strong, just when you look back, if there’s any learnings on to why you think sales fell off.

And I’m curious if the revenue trends have started to bounce back.

Richard GalantiExecutive Vice President and Chief Financial Officer

I think it’s — I mean our best guess is it’s complete pull forward. I mean the fact is people who have been marketing bigger ticket items and some of those types of holiday items earlier in November —

Bob NelsonSenior Vice President, Financial Planning, Investor Relations, and Treasury

Our Black Friday promotions, for the whole month.

Richard GalantiExecutive Vice President and Chief Financial Officer

Yeah. Bob here mentioned that our Black Friday promotions this year, more of those things we promoted earlier in the month.

Bob NelsonSenior Vice President, Financial Planning, Investor Relations, and Treasury

Everybody.

Richard GalantiExecutive Vice President and Chief Financial Officer

And not just us but everybody else out there, too.

Chuck GromGordon Haskett Research — Analyst

Gotcha. All right. Thanks a lot.

Operator

And your next question comes from Mr. Michael Lasser of UBS. Your line is now open.

Michael LasserUBS — Analyst

Good evening. Thanks a lot for taking my question. Richard, you outlined some nice holiday gifts that some people on this call might be considering getting for loved ones this season. When you look at your sales compared to the rest of the consumable retail landscape, most others are seeing a deceleration in their comp where Costco has seen an acceleration in its comp.

Why do you think that is? Is it simply because customers — members are coming in to buy the discretionary goods and loading up their baskets with the consumable items?

Richard GalantiExecutive Vice President and Chief Financial Officer

We definitely think that — look, being essential and recognizing that people clearly are coming in to buy food and key cleaning items and health and beauty aids and the like, that gets you in the door. And certainly, in our view, given that money is being spent on other things in normal years, perhaps it’s being spent more for things for the home, we have that as well. And I think that has helped us in that regard.

Michael LasserUBS — Analyst

OK. So it really comes down to mix that Costco puts off but not enough to really compare.

Richard GalantiExecutive Vice President and Chief Financial Officer

I’m bias. I’d like to think part of it is people feel hopefully at least relatively safe coming in to a big wide open box environment, where we’ve done, we think, a pretty good job of social distancing and other safety protocols.

Michael LasserUBS — Analyst

OK. And the core, core gross margin increase, it seems like it’s a function of just the strong sales, allowing Costco to be able to sell through better than it might otherwise has been able to. Is that right that we should — it could have gone both ways if —

Richard GalantiExecutive Vice President and Chief Financial Officer

I think — yes. I think most of it is strong sales, which shows its brightest colors with fresh food, where you’ve got two cost components that have improved dramatically: spoilage and labor productivity. So that has certainly helped. The — I had one other thought on it, but I can’t seem to call to mind.

Sorry. Oh, less promotion. The other, Michael, is I think you’ve all read about this from an industry perspective. There’s been less promotional activities out there, while we were still giving great values on things, when you look at TVs in general, while prices have come down across the board just because they always do over time, and TVs keep getting — seem to be getting better, bigger and less expensive, there’s not the kind of promotional money being thrown at it by the manufacturers because they haven’t had to.

And so I think that too has had some impact.

Michael LasserUBS — Analyst

That’s helpful. I hope you have a great holiday. Thank you.

Richard GalantiExecutive Vice President and Chief Financial Officer

You as well.

Operator

And your next question comes from the line of Mr. Scot from RBC Capital Markets. Your line is now open.

Scot CiccarelliRBC Capital Markets — Analyst

Hi, guys. Scot Ciccarelli. So I believe some of the products you guys sell via your website or e-commerce are for members only, but not all of them, or it doesn’t look like that from a labeling perspective. So assuming it’s not just a labeling difference, how much of your e-commerce sales are coming from members?

Richard GalantiExecutive Vice President and Chief Financial Officer

Virtually all. I believe part of the challenges is on some items — as we work with our suppliers and ourselves as well, we want you to be able to have to sign in to see the prices.

Scot CiccarelliRBC Capital Markets — Analyst

I got it. OK. And then, Richard, what’s the update today regarding how much of your e-commerce sales are being drop-shipped from vendors versus kind of delivered through Costco?

Bob NelsonSenior Vice President, Financial Planning, Investor Relations, and Treasury

About 50-50.

Richard GalantiExecutive Vice President and Chief Financial Officer

About 50-50.

Bob NelsonSenior Vice President, Financial Planning, Investor Relations, and Treasury

A little less.

Richard GalantiExecutive Vice President and Chief Financial Officer

A little less than 50% is being —

Bob NelsonSenior Vice President, Financial Planning, Investor Relations, and Treasury

Drop-shipped.

Richard GalantiExecutive Vice President and Chief Financial Officer

Drop-shipped.

Scot CiccarelliRBC Capital Markets — Analyst

Got it. All right. Appreciate it. Happy holidays.

Richard GalantiExecutive Vice President and Chief Financial Officer

Same to you.

Operator

And next question from Karen Short of Barclays. Your line is now open.

Karen ShortBarclays — Analyst

Hey. Thanks very much. A couple of questions I wanted to ask. So first, just on COVID and wages.

So the $212 million you called out obviously gave us a breakout on the impact on cost of goods versus SG&A. But that was a little higher than the number, I think, the $14 million per week that you’ve guided. So wondering if that’s — what the delta would have been because that would have gotten us to about $168 million. And then wondering if you can give a little color on what the — like other cleaning component might be, would have been in this quarter and then how to think about it into next quarter because presumably, just like I asked last quarter, that January 3 date is probably not the end date, I would assume.

Richard GalantiExecutive Vice President and Chief Financial Officer

Well, we’ll find out. But needless to say I can’t comment on that. But a big chunk of the difference of $14 million or — I may have rounded honestly down to $14 million, and now it’s rounding up to whatever. But at the end of the day, there’s more hours, the biggest delta, more cumulative hours.

We have —

Karen ShortBarclays — Analyst

OK. And then the cleaning component?

Bob NelsonSenior Vice President, Financial Planning, Investor Relations, and Treasury

Immaterial amount.

Richard GalantiExecutive Vice President and Chief Financial Officer

That’s relatively small.

Karen ShortBarclays — Analyst

OK. And then I’m wondering if you could give a little color on the expansion of the Instacart relationship. You obviously listed a couple of SKUs that you’ve added on to that with respect to the third party. Can you give color on what the markup is on nonfood items versus food and then give a breakdown on what that would be for members versus nonmembers on the markup?

Richard GalantiExecutive Vice President and Chief Financial Officer

Well, I can’t be that specific. We continue — over the last three or four years, we’ve continued to work to lower the effective average markup across the board on items. There is some discretion, some can be a little lower than that and some can be a little higher, but there’s an average, which includes both their markup plus whatever other fees that person is spending, whether it’s a per delivery fee or per monthly fee to Instacart. As — given some of the unique issues during the end of the year with the high demand for shipping and the capacity issues out there with the third-party shippers, we — and given that Instacart is always coming in, we’ve added some items to the fray.

In some cases, there is a maximum markup on those that don’t — that is, in many cases, smaller than that — quite a bit smaller than that other — that mid- to high-teen number percentage-wise.

Karen ShortBarclays — Analyst

OK. And then just last question. In terms of the MFI, obviously, the — I think January of ’21 would be the new time line in terms of the tax deductibility in California. Is there any thoughts in terms of time line in terms of how you would think about an MFI or a membership fee increase? Because I think in the past, you’ve historically done that when you’ve actually seen counterintuitively traffic slowing, and it seems like you may be looking at slower traffic just based on tough compares as we get into parts of next year.

So philosophically color on that.

Richard GalantiExecutive Vice President and Chief Financial Officer

Well, I mean, historically, as you know, for 35 years, we’ve effectively raised the basic fee $5 every roughly five years. When I say roughly, it could be five, five and a half years. And the executive membership has been raised to — originally started at 100, now it’s 110 to 120. The last time we did the increase was — I believe, was in June-ish of ’16.

So five years —

Bob NelsonSenior Vice President, Financial Planning, Investor Relations, and Treasury

’17.

Richard GalantiExecutive Vice President and Chief Financial Officer

That was June of ’16.

Bob NelsonSenior Vice President, Financial Planning, Investor Relations, and Treasury

’17. It’d be four years.

Richard GalantiExecutive Vice President and Chief Financial Officer

Are you sure?

Bob NelsonSenior Vice President, Financial Planning, Investor Relations, and Treasury

I can check that.

Richard GalantiExecutive Vice President and Chief Financial Officer

We’ll check on that. But if you — it was June of one of the years, either ’16 or ’17. But it will be five years from then that we might look. You mentioned that we’ve done it when things are — sales have been stronger and when sales have been weaker, when the economies took a hit or whatever else.

We look at it somewhat independently of that. We look at it and we feel, have we improved the value of the membership by more than that $5 or respective $5 or $10? And I’m not suggesting we might wait or not, but time will tell. Historically, we’ve always felt very good about when we’ve done it, and certainly the value proposition has been enhanced much — at a much greater multiple than the $5 or $10.

Karen ShortBarclays — Analyst

Thanks. Have a great holiday.

Richard GalantiExecutive Vice President and Chief Financial Officer

Thanks. You, too.

Operator

The next question is from Oliver Chen of Cowen. Your line is now open.

Oliver ChenCowen and Company — Analyst

Hi. Thank you very much. Hi, Richard. Regarding what’s ahead with vaccinations, do you see a role that your pharmacy will play in that? And also in this dynamic environment, how are you thinking about managing inventory versus sales as we look forward to hopefully a pathway to vaccination, etc.? Thank you.

Richard GalantiExecutive Vice President and Chief Financial Officer

I believe there — we, in the country, are currently in the first phase of the vaccination process. We are not participating in that, but I believe Phase 2, which will be just a short period down the road, our pharmacies will also be part of the many pharmacies throughout the country that are going to be providing the service of vaccinations for that.

Bob NelsonSenior Vice President, Financial Planning, Investor Relations, and Treasury

We are in Phase 1 —

Richard GalantiExecutive Vice President and Chief Financial Officer

We are in Phase 1 in the state of Alaska only currently. But I think throughout the country, we plan to be in Phase 2, which will be the big push after this first initial round. And in terms of managing inventories, while space is not infinite, certainly, the cost of carrying a little extra inventory isn’t very expensive right now given the very low interest rates. But at the end of the day, as I mentioned a little earlier, we — I think we plan positively in terms of how our sales have been.

And to the extent that — in the example of those seasonal items, we came down a little bit but not a lot. And I think we’ll continue to do that kind of planning. A lot of times, on items that are short, but there’s certainly no risk of having — the only risk of having some extra paper towels for a few weeks is the risk of having them. There’s not any obsolescence or markdown risk on it.

We always tried in times when there’s more of that available, we’ll build up a few extra weeks of supply. But overall, I don’t see a big change in our inventory turns or payables ratios.

Oliver ChenCowen and Company — Analyst

OK. And e-commerce —

Richard GalantiExecutive Vice President and Chief Financial Officer

They’re dictated more by comp sales than anything. When we were enjoying a — pre-COVID, a 6% to 8% comp sales number, inventories as a percent of — payables as a percent of inventories was whatever the number was. When we saw the big increase in comps, you saw the payables as a percent of inventories going up.

Oliver ChenCowen and Company — Analyst

Got it. That’s very helpful. And on the topic of e-commerce, as we think about longer-term growth rates, as well as new customer acquisition that you’re seeing an engagement online, what are some of the major catalysts for innovation going forward that you’ll implement or that you’re looking to implement? And then how do you think growth rates may evolve as hopefully reopenings occur eventually?

Richard GalantiExecutive Vice President and Chief Financial Officer

Well, look, we, as much as anybody, want things to get back to normal from a business standpoint but also most importantly from a personal standpoint. And over the next couple of years, God willing, starting with this process of vaccinations and vaccines and hopefully a big chunk of this progress through by the beginning of — during the summer, people will get out more, will be going back to restaurants and the like. And will that have an impact on our food sales? Of course, it will. Some of this positive will be sticky.

Some of the new members will be sticky. And we’ll go from there. I think that there are lots of attributes to value and customer loyalty. Certainly, the best prices on great quality merchandise that the member trusts, in our view, is the biggest attribute, and that’s where we start from.

We — e-commerce is certainly — and the acquisition of Innovel in terms of big ticket items and having a great service at a great value for those items, we think, helps us. But ultimately, we still want our members to come into the warehouse. When they come in, they see the items, and they’re more likely to buy some of those items. And certainly, driving them in with great value and great quality is what we’re all about.

Oliver ChenCowen and Company — Analyst

That’s helpful. And last on that logistics, Costco Logistics part. What should we know about as we model that going forward in terms of the margin headwinds and the dimensions around the size of that business relative to total? Thanks.

Richard GalantiExecutive Vice President and Chief Financial Officer

Well, the only two data points we’ve given you is in Q4, year over year, it was about, I think, an 8-basis-point margin hit. In Q1, which we just reported for this new fiscal year, it was a 6-basis-point margin hit. As guessing games go, assume that there’ll be constant improvement in that over the next several quarters so that it won’t be a negative. Now mind you, that doesn’t include any benefit we get from increased sales of those items and the margin associated with that.

But when we bought this thing, we knew that it would be dilutive from an earnings standpoint for certainly the first year and perhaps into the second year, hopefully, on a decreasing basis. And certainly, the first two quarters would indicate a little of that. But at the end of the day, we think it — those companies that have had their own infrastructure to be able to do last-mile delivery and installations, it’s a positive. Certainly, the home improvement companies have done that, the retailers, and it works out for us, and we’re excited about what we can do with it.

Oliver ChenCowen and Company — Analyst

Thank you very much. Happy holidays. Best regards.

Richard GalantiExecutive Vice President and Chief Financial Officer

Same to you.

Operator

Your next question, from Edward Kelly of Wells Fargo. Your line is now open.

Edward KellyWells Fargo Securities — Analyst

Yeah. Hi, Richard. Good afternoon. You mentioned freight.

I was hoping you could provide just a little bit more color on the headwind. And then you talked about an improvement maybe coming in March. Any more color behind that?

Richard GalantiExecutive Vice President and Chief Financial Officer

Not really. Before each call, I’ll sit down with the head of merchandising and some of the other senior people in merchandising and just get the color on their departments and what’s going on. And it was — by the way, comment that with things coming from Asia, as an example, there’s — or in general, there’s container shortages. And so it may take a few extra days to get things on to a ship or the ship may go sailing not full in some cases.

The same thing is on some of the big ports in the United States like on the West Coast, particularly, they were — they mentioned two to four days of delay. Again, two days to four days is not a lot. But when you’re moving inventory fast, you want to have it — once it’s — you ordered it, you want it built and put on the ship and get here and on to our floor. So it’s not a big deal.

It’s — and the comment was, I said, when will it improve? And he said probably not until February, March. So just — that’s what I threw out. Not any more impactful than that.

Edward KellyWells Fargo Securities — Analyst

OK. And then I just had a question on e-com and just digital strategy generally. Any updated thoughts on buy online, pick up at store? I mean it has essentially kind of become a standard offering across the industry, and we’ve obviously accelerated a lot of digital adoption. Just curious as to whether you’re rethinking that at all.

Richard GalantiExecutive Vice President and Chief Financial Officer

We’re not rethinking it. We continue to look at it and scratch our heads a little bit. But at this juncture, we don’t have any current plan to do so.

Edward KellyWells Fargo Securities — Analyst

OK. And then just lastly for you. Fuel, I think, gross profit per gallon this quarter was probably up quite a bit. I mean I look at the OPIS data, it looks like maybe double.

Is that about right? And then what did gallons sold do this quarter?

Richard GalantiExecutive Vice President and Chief Financial Officer

We don’t — gallons sold were down, not down as much as they had been in its trough a few months ago. And you’re right on margins. Not a double, I can’t give you any quantitative number there. But in terms of — margins were up year over year as a percent, and gallons were down year over year.

Edward KellyWells Fargo Securities — Analyst

OK. Thank you.

Operator

And your next question, from Chris Horvers of J.P. Morgan. Your line is now open.

Chris HorversJ.P. Morgan — Analyst

Thanks. Good evening. So I wanted to follow up on the holiday pull-forward question. I was curious what the merchants are thinking about how the season progresses, particularly as we get close to Christmas, some retailers think that given the earlier cutoff time to get the gifts in time for Christmas that there could be a big brick-and-mortar surge.

I think other retailers are saying that, no, it just started like with Prime Day. And it’s just been a pull forward, so don’t expect anything out of the — anything unusual close to Christmas. So curious what your merchants are thinking.

Richard GalantiExecutive Vice President and Chief Financial Officer

Well, merchants are feeling pretty, I would say, aggressive with a small A. They feel that, again, some of it was pulled forward, but there’s still — and again, running out of some gift wrapping paper two weeks before you wanted to is not the end of the world. But every sale is a sale that we want. In the same token, bringing in fundamental items that if you end up having a few extra SKUs or a few extra quantity of certain SKUs the day after Christmas is not going to kill you because it’s not stuff that’s seasonal that has to be marked down in a big way.

So I think that we’re going into it recognizing that our sales overall, particularly brick-and-mortar, have done well, that we’re basing our assumptions of what we’re going to do even over the next two weeks positive relative to this — recognizing that there could be some pull forward and there could be some because of the dates got a little longer on shipping. But at the end of the day, we think that — we agree with you, that could help the in-store experience, and we’ll see.

Chris HorversJ.P. Morgan — Analyst

Got it. And then in terms of the — you called out travel, in gross margin, as a big impact there. Is there something around the accounting of that? You haven’t called it out prior, maybe it was just because it’s relative to other things in the ancillary business. But is there an accounting thing? Is there seasonality to that? And would we expect that to sort of get worse for some reason?

Richard GalantiExecutive Vice President and Chief Financial Officer

Well, what the accounts make you do, just like in the 10-K, you got to rank them in order of dollars. So in the case of travel, first of all, it’s a very high gross margin business. To the extent that we’re simply acting as a broker like our car rentals, there’s sales — and no cost of sales equals gross margin or very little cost of sales. Only when we curate an item and take ownership of it, if you will, like 100 cruise ship weeks or whatever, I’m making this example up, where you sell $100,000 of something and make a few thousand dollars or $5,000 of margin, that’s a 5%.

But you have big chunks of that business that are 80-plus percent margin. So it’s a business that started to show a little bit of life as the summer — we entered summer. But with the spiking of COVID in the last several weeks, that has dissipated quite a bit. And even some of the life that occurred in the summer were bookings out as — for Christmas, some of those are being canceled as you would expect them to be.

So it’s — that’s just — it’s the rank order of them, which one hit harder a little bit.

Chris HorversJ.P. Morgan — Analyst

Got it. And then the last question is on price gaps relative to peers and club and grocery, how are you — what do you — have they widened? Where do you see them now? I think if you go back to this ’09 time frame where you sort of lapped peak food-at-home inflation and you lapped some food-at-home wallet gains, you seem to get more aggressive on price. So just want to get your thoughts on where you see the price gaps now and how you’re thinking about that into ’21.

Richard GalantiExecutive Vice President and Chief Financial Officer

Well, I mean, when we look at our comp shops compared to other warehouse clubs, as well as comp shops specifically on certain items and other traditional retail formats, we feel very good about our competitive moat, if you will. And we don’t think that’s an issue at all for us right now. But we’re the ones that keep pushing the limits further.

Chris HorversJ.P. Morgan — Analyst

Got it. Have a great season, guys. Thanks.

Richard GalantiExecutive Vice President and Chief Financial Officer

Thank you.

Operator

And next question, from Robert Moskow of Credit Suisse. Your line is now open.

Robert MoskowCredit Suisse — Analyst

Thanks for the question. Richard, you mentioned that manufacturers, I guess, for packaged goods, they’re not promoting as much, not giving as many discounts as usual because they don’t have to. At any point, do you think that could flip the other way? And if so, what would drive it? Is it availability of supply or maybe a more intense competitive environment?

Richard GalantiExecutive Vice President and Chief Financial Officer

Gosh, when I find out, I’ll let you know. I mean what’s happened, of course, with everything — you mean the strength — both the strength in electronics items, TVs, AirPods and everything else in between, and laptops and — the demand for those things is enormous. And in some cases, some shortages of supplies in general, even if capacity has gone up, it could go up a lot more. So it’s hard to say.

Robert MoskowCredit Suisse — Analyst

OK. I was thinking more on the lines of packaged food. We’ve heard some categories putting promotions back in. Do you have any insight into that?

Richard GalantiExecutive Vice President and Chief Financial Officer

OK. I don’t. I’m sorry.

Robert MoskowCredit Suisse — Analyst

OK. Alright. Thank you.

Operator

And next question, from Greg Melich of Evercore ISI. Your line is now open.

Greg MelichEvercore ISI — Analyst

Richard, hi. Hey, it’s Greg Melich. I think that was me. So I have really two questions.

One, was there any grocery inflation showing up? And we see CPI for grocery picking up, and there’s less promotion. What are you guys seeing there?

Richard GalantiExecutive Vice President and Chief Financial Officer

Very, very, very little.

Bob NelsonSenior Vice President, Financial Planning, Investor Relations, and Treasury

Three verys.

Greg MelichEvercore ISI — Analyst

So there’s something but it’s nothing like 4% or 5%, some of those other numbers we see out there?

Richard GalantiExecutive Vice President and Chief Financial Officer

Oh, it’s not even 1%. It’s very, very, very little. Three verys.

Bob NelsonSenior Vice President, Financial Planning, Investor Relations, and Treasury

Triple verys.

Greg MelichEvercore ISI — Analyst

On cash, so the special dividend, congratulations on keeping the special and getting it done. You should be back a little under $10 billion of cash. What’s the right number that you want to run the business with, either still during COVID or even on the other side of it?

Richard GalantiExecutive Vice President and Chief Financial Officer

Well, keep in mind, there’s a chunk of it that is weekend debit and credit card receivables that could be $1 billion or $1.5 billion. There’s upwards of just under $1 billion that is related to insurance captives and the like. There’s a $2 billion to $3 billion that overseas, in different countries, which for whatever reasons, it’s the last money you want to bring back because of whatever withholding or other taxes related to it. So at the end of the day, someone asked the question, after we announced the $10 dividend, we could have done more.

The answer is we could have, but why rush? I mean right now, we still don’t know what’s going to happen with COVID and what may happen next year in the economy. And so we’ll probably have a little more cash than normal than pre-COVID, if you will, but that’s OK, too.

Greg MelichEvercore ISI — Analyst

And then last, could you just — where are average wage rates today to sort of level set where the — we know the COVID top up, thanks for that, helping us there. But where are we now before all that?

Richard GalantiExecutive Vice President and Chief Financial Officer

You mean the average U.S. hourly wage?

Greg MelichEvercore ISI — Analyst

Yes.

Richard GalantiExecutive Vice President and Chief Financial Officer

I think we’re in the — well, ex the $2, we’re at the — we’re either right above or just approaching $24 average in the U.S.

Greg MelichEvercore ISI — Analyst

Approaching $24 in the U.S. And so the — and the changes for the base rates going up, that was — you did that — that was completed when?

Richard GalantiExecutive Vice President and Chief Financial Officer

The — in March, I believe, last year.

Bob NelsonSenior Vice President, Financial Planning, Investor Relations, and Treasury

March, last March.

Richard GalantiExecutive Vice President and Chief Financial Officer

Last March, beginning of March.

Bob NelsonSenior Vice President, Financial Planning, Investor Relations, and Treasury

March ’19. March of 2019.

Richard GalantiExecutive Vice President and Chief Financial Officer

March of 2019. I believe it was near the beginning of March, whatever that Monday start for that weekly pay period was — or biweekly pay period. And that was $2 across the board.

Greg MelichEvercore ISI — Analyst

Right. And the COVID stuff was on top of it.

Richard GalantiExecutive Vice President and Chief Financial Officer

Excuse me?

Greg MelichEvercore ISI — Analyst

The COVID was on top of the actual wage rate.

Richard GalantiExecutive Vice President and Chief Financial Officer

Yes.

Greg MelichEvercore ISI — Analyst

Right. Got it. Great. Well, good luck.

Have a great holiday.

Richard GalantiExecutive Vice President and Chief Financial Officer

Thanks. You, too.

Operator

And next question, from Rupesh Parikh of Oppenheimer. Your line is now open.

Rupesh ParikhOppenheimer and Company — Analyst

Good evening. Thanks for taking my question. So I wanted to ask, Richard, just some of the countries where you have lower COVID infections, china, Australia seems to be normalizing now, has purchasing behavior in those markets return back to where it was maybe pre pandemic? I’m guessing Australia is probably a better read than China.

Bob NelsonSenior Vice President, Financial Planning, Investor Relations, and Treasury

They’re both strong.

Richard GalantiExecutive Vice President and Chief Financial Officer

They’re — both, they’re stronger comps.

Rupesh ParikhOppenheimer and Company — Analyst

From a category perspective, have you seen the category shift to, I guess, maybe where they were pre pandemic, if you look at the mix?

Richard GalantiExecutive Vice President and Chief Financial Officer

Well, I don’t have that detail in front of me, unfortunately. And when I look at comps by country in local currencies, in most countries, we’re back to normal, if not a little better.

Rupesh ParikhOppenheimer and Company — Analyst

OK. OK. Great. And then just in the U.S., just given we’ve seen spikes in infections, and California has had more restrictions recently put in place.

Just curious if you can just comment on anything you’re seeing more recently just in terms of changes in consumer behavior, traffic to your stores?

Richard GalantiExecutive Vice President and Chief Financial Officer

The only thing that I’ve noted is when it first started a few weeks ago or when the California — everybody was waiting for California — in California, everybody was waiting to hear what the new restrictions was going to be in terms of lockdowns, there was a spike in shopping, and people were coming in. So we had particular strength over a couple of week period when more spiking was occurring.

Rupesh ParikhOppenheimer and Company — Analyst

OK. Great. Thank you. Have a great holiday.

Richard GalantiExecutive Vice President and Chief Financial Officer

Thank you. You, too. Why don’t we take two more questions? We will take two more questions, Cindy.

Operator

OK. Your next question, from Kelly Bania of BMO Capital. Your line is now open.

Kelly BaniaBMO Capital Markets — Analyst

Great. Thanks for fitting me in here. Richard, just wanted to go back to the buy online and pick up at store question. I know you’ve said for several quarters now you continue to scratch your head, but it does seem like a lever that maybe you could pull one day that’s already been pulled by pretty much everybody else in retail.

But I guess just given the massive growth that you’ve seen with Instacart and your third-party partners there, there just does clearly seem to be a segment of your membership base that’s willing to pay a premium or that markup for that service. So I’m just curious if you’ve thought about even a markup type structure for pickup or even like a higher price point membership for a pickup type service?

Richard GalantiExecutive Vice President and Chief Financial Officer

As it relates to general conversations about it, those are topics that are discussed. One of the challenges right now is that a lot of the buy online and pick up in store traditional retail promotions are the same prices which you can come in and buy it for. So somebody is paying for the picking it up and storing it and waiting for you to pick it up. I think that will shake out to over time as people — as companies — somebody has to pay for it, either the company or the customer.

I’m not trying to be cute. We’re just — we’re looking at all those things, but we haven’t made any decisions to go forth with it.

Kelly BaniaBMO Capital Markets — Analyst

OK. And just maybe a quick follow-up. You mentioned the 7% e-com penetration from a sales perspective. But just curious if you could share just a percent of your maybe membership households that are engaged with Costco from a digital e-commerce perspective.

Richard GalantiExecutive Vice President and Chief Financial Officer

We don’t give out that information yet.

Kelly BaniaBMO Capital Markets — Analyst

OK. Thanks

Richard GalantiExecutive Vice President and Chief Financial Officer

As you might expect, it’s growing.

Kelly BaniaBMO Capital Markets — Analyst

Of course.

Operator

And your last question, from Steph Wissink of Jefferies. Your line is now open.

Steph WissinkJefferies — Analyst

Thanks. Good afternoon, everyone. And thanks for squeezing me in. I just want to follow up on Rupesh’s earlier question but ask it a slightly different way, which is looking at your cohort of new members that have joined really from kind of the third quarter of last year.

Any performance distinctions or category mix distinctions that might give you encouragement that those members might be a bit more sticky going forward or might be a bit longer lifetime value customers for you into the future? Thank you.

Richard GalantiExecutive Vice President and Chief Financial Officer

We don’t have a lot of that information yet. Recognizing that some of them signed up because of COVID and because we can deliver through, start through fresh and — or we can serve them online. But there’s not a lot to go on yet.

Steph WissinkJefferies — Analyst

OK. Thank you.

Richard GalantiExecutive Vice President and Chief Financial Officer

Well, thank you, everyone. Hopefully, you have a happy and healthy holiday season and on to a better 2021. Have a good day.

Duration: 64 minutes

Call participants:

Richard GalantiExecutive Vice President and Chief Financial Officer

Simeon GutmanMorgan Stanley — Analyst

Bob NelsonSenior Vice President, Financial Planning, Investor Relations, and Treasury

Mike BakerD.A. Davidson — Analyst

Chuck GromGordon Haskett Research — Analyst

Michael LasserUBS — Analyst

Scot CiccarelliRBC Capital Markets — Analyst

Karen ShortBarclays — Analyst

Oliver ChenCowen and Company — Analyst

Edward KellyWells Fargo Securities — Analyst

Chris HorversJ.P. Morgan — Analyst

Robert MoskowCredit Suisse — Analyst

Greg MelichEvercore ISI — Analyst

Rupesh ParikhOppenheimer and Company — Analyst

Kelly BaniaBMO Capital Markets — Analyst

Steph WissinkJefferies — Analyst

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