You need to upgrade your Flash Player

You need to upgrade your Flash Player

Could you elaborate on the trends in the fresh food business?

The fresh food trends were generally positive, but produce had better comparable sales, part of which may be due to pricing.

Could you provide gross margin guidance for the next couple of quarters?

The competition is tough. Considering past records, the company is encouraged that it has the ability to raise its gross margin going forward, although sometimes it doesn''t come as smoothly and quickly as desired.

Could you comment on comparable trends for business customer versus individual customers?

The trends for business customers and individual customers have been consistent and without any dramatic changes.

How much membership-fee income growth do you expect in the second half of the year?

Increase in annual membership fee of $5 was initiated for U.S. and Canada gold star, business and business add-on members, which was effective May 1, 2006 for new members and July 1, 2006 for existing members. A little membership-fee income growth is expected to continue over the next two quarters.

What was the methodology behind the wage increase?

The company has ongoing discussions every month with its operations people with the observations that in some markets, notably California or parts of New York, there has been wage increase over the last year and a half. Costco had to raise starting wages in the given locations so as to be able to hire the right people.

When did you take the last wage increase?

It has been 6 years since the bottom wage scale was changed. The next wage increase would be based on observations in some of the markets. The company is not prepared to have different wage structures in different markets in the U.S.

What is the logic behind not having different wage structures across the country?

This eliminates any risks that are sometimes caused when people are transferred among locations, particularly when the company goes into new markets.

Were there two quarterly price increases for tobacco in Canada?

There was a price increase for tobacco in Canada in the last week of January and the first week of February.

As the new TV return policy starts, how much of the cost associated with extending the warranty to 2 years and the concierge service do you expect to recoup over time?

The company expects to get back 70% to 80% of the cost associated with extra warranty and the concierge service over time.