Costco Seeing Improvement in California

Dec.17.07 | About: Costco Wholesale (COST)

Despite the housing slump, signs of life in California?

From Costco Wholesale Corporation's F1Q08 Earnings Call Transcript:

Bob Drbul - Lehman Brothers

...Any trends that you really do see discernible in [California] for you?

Richard A. Galanti - CFO, Executive VP, Director Costco Wholesale Corporation

...If I look at the L.A. region, if you go back over the last couple of years, generally speaking -- and I’m making these numbers up, but if the U.S. was let’s say a six, within that U.S. California, which is 38% I believe of the U.S., or 40% of the U.S., was probably a 2.5, so call it -- or three, I’m sorry, a three versus a six. No, three, three-and-a-half, so 250 to 300 basis points lower, if you will, just looking at that metric, that gap.

And it’s not other U.S. versus L.A. or California or versus L.A. -- it’s L.A. versus the total which includes L.A. And that 250 to 300 basis point gap over the last several months has gotten up to maybe 450, so another couple of hundred.

And so relatively speaking, while everything has come down a little bit from a couple of years ago, L.A. has come down a little bit more... Gas is more expensive. The housing market arguably has been hit harder there than in some markets but the housing market has been hit in other markets that haven’t been as impacted. ...

... California comp, if I look at September, October, or November, there is actually -- the lowest number was in September. Now, it was probably lower in August because if you’ll recall, as a company we had a pretty crappy number in August. But basically, California comp was almost flat in September and both in October and November, up 2%-plus, so it’s coming back."