What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-12-19 compared with 2024-06-06 · 97 added, 119 removed, 145 unchanged (60% of the section changed)

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Certain statements contained in this document constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

For these purposes, forward-looking statements are statements that address activities, events, conditions or developments that the Company expects or anticipates may occur in the future and may relate to such matters as net sales growth, changes in comparable sales, cannibalization of existing locations by new openings, price or fee changes, earnings performance, earnings per share, stock-based compensation expense, warehouse openings and closures, capital spending, the effect of adopting certain accounting standards, future financial reporting, financing, margins, return on invested capital, strategic direction, expense controls, membership renewal rates, shopping frequency, litigation, and the demand for our products and services.

For these purposes, forward-looking statements are statements that address activities, events, conditions or developments that the Company expects or anticipates may occur in the future and may relate to such matters as net sales growth, changes in comparable sales, cannibalization of existing locations by new openings, price or fee changes, earnings performance, earnings per share, stock-based compensation expense, warehouse openings and closures, capital spending, the effect of adopting certain accounting standards, future financial reporting, financing, margins, return on invested capital, investments in technology, strategic direction, expense controls, membership renewal rates, shopping frequency, litigation, attainment of sustainability goals, and the demand for our products and services.

In some cases, forward-looking statements can be identified because they contain words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or similar expressions and the negatives of those terms.

Such forward-looking statements involve risks and uncertainties that may cause actual events, results or performance to differ materially from those indicated by such statements.

These risks and uncertainties include, but are not limited to, domestic and international economic conditions, including exchange rates, inflation or deflation, the effects of competition and regulation, uncertainties in the financial markets, consumer and small business spending patterns and debt levels, breaches of security or privacy of member or business information, conditions affecting the acquisition, development, ownership or use of real estate, capital spending, actions of vendors, rising costs associated with employees (generally including health-care costs and wages), energy and certain commodities, geopolitical conditions (including tariffs), the ability to maintain effective internal control over financial reporting, regulatory and other impacts related to climate change, public-health related factors, and other risks identified from time to time in the Company's public statements and reports filed with the Securities and Exchange Commission.

These risks and uncertainties include, but are not limited to, domestic and international economic conditions, including exchange rates, inflation or deflation, the effects of competition and regulation, uncertainties in the financial markets, consumer and small business spending patterns and debt levels, breaches of security or privacy of member or business information, conditions affecting the acquisition, development, ownership or use of real estate, capital spending, actions of vendors, rising costs associated with employees (generally including health-care costs and wages), workforce interruptions, energy and certain commodities, geopolitical conditions (including tariffs), the ability to maintain effective internal control over financial reporting, regulatory and other impacts related to environmental and social matters, public-health related factors, and other risks identified from time to time in the Company's public statements and reports filed with the Securities and Exchange Commission.

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.

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MD&A is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and the accompanying Notes to Financial Statements (Part I, Item 1 of this Form 10-Q), as well as our consolidated financial statements, the accompanying Notes to Financial Statements, and the related Management's Discussion and Analysis of Financial Condition and Results of Operations in our fiscal year 2024 Form 10-K, filed with the United States Securities and Exchange Commission on October 9, 2024.

We operate membership warehouses and e-commerce sites based on the concept that offering members low prices on a limited selection of quality nationally-branded and private-label products in a wide range of categories will produce high sales volumes and rapid inventory turnover.

We operate membership warehouses and e-commerce sites based on the concept that offering our members low prices on a limited selection of nationally-branded and private-label products in a wide range of categories will produce high sales volumes and rapid inventory turnover.

When combined with the operating efficiencies achieved by volume purchasing, efficient distribution and reduced handling of merchandise in no-frills, self-service warehouse facilities, these volumes and turnover enable us to operate profitably at significantly lower gross margins (net sales less merchandise costs) than most other retailers.

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We believe that the most important driver of our profitability is increasing net sales, particularly comparable sales.

Net sales includes our core merchandise categories (foods and sundries, non-foods, and fresh foods), warehouse ancillary (gasoline, pharmacy, optical, food court, hearing aids, and tire installation) and other businesses (e-commerce, business centers, travel, and other).

Comparable sales is

defined as net sales from warehouses open for more than one year, including remodels, relocations and expansions, and sales related to e-commerce sites operating for more than one year.

Net sales includes our core merchandise categories (foods and sundries, non-foods, and fresh foods), warehouse ancillary (gasoline, pharmacy, optical, food court, hearing aids, and tire

installation) and other businesses (e-commerce, business centers, travel, and other).

E-commerce and business center sales are allocated to the appropriate merchandise categories in the Net Sales discussion.

Comparable sales is defined as net sales from warehouses open for more than one year, including remodels, relocations and expansions, and sales related to e-commerce sites operating for more than one year.

The measure is intended as supplemental information and is not a substitute for net sales presented in accordance with U.S.

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Sales comparisons can also be particularly influenced by certain factors that are beyond our control:

fluctuations in currency exchange rates (with respect to our international operations);

and inflation or deflation and changes in the cost of gasoline and associated competitive conditions.

fluctuations in currency exchange rates (with respect to our international operations) and inflation or deflation in the cost of gasoline and associated competitive conditions.

The higher our comparable sales exclusive of these items, the more we can leverage our selling general and administrative (SG&A) expenses, reducing them as a percentage of sales and enhancing profitability.

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We do not focus in the short-term on maximizing prices charged, but instead seek to maintain what we believe is a perception among our members of our “pricing authority” – consistently providing the most competitive values.

Our investments in merchandise pricing may include reducing prices on merchandise to drive sales or meet competition and holding prices steady despite cost increases instead of passing the increases on to our members, negatively impacting gross margin and gross margin in the near term as a percentage of net sales (gross margin percentage).

Our net sales and gross margin are influenced in part by our merchandising and pricing strategies in response to cost increases.

Those strategies can include, but are not limited to, working with our suppliers to share in absorbing cost increases, earlier-than-usual purchasing and in greater volumes, as well as passing cost increases on to our members.

Our investments in merchandise pricing may include reducing prices on merchandise to drive sales or meet competition and holding prices steady despite cost increases instead of passing the increases on to our members, negatively impacting gross margin and gross margin as a percentage of net sales (gross margin percentage) in the near term.

Our e-commerce business, domestically and internationally, has a lower gross-margin percentage than our warehouse operations.

We believe our gasoline business enhances traffic in our warehouses;

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A decline in gasoline prices has the inverse effect.

Government actions in various countries relating to tariffs, particularly China and the United States, have affected the costs of some of our merchandise.

Government actions in various countries relating to tariffs, particularly China and the United States, affect the costs of some of our merchandise.

The degree of our exposure is dependent on (among other things) the type of goods, rates imposed, and timing of the tariffs.

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Negative aspects of such growth include lower initial operating profitability relative to existing warehouses and cannibalization of sales at existing warehouses when openings occur in existing markets.

Our rate of square footage growth is generally higher in foreign markets, due to the smaller base in those markets, and we expect that to continue.

Our e-commerce business, domestically and internationally, has a lower gross-margin percentage than our warehouse operations.

The membership format is an integral part of our business and our profitability.

Our rate of square footage growth is generally higher in many of our foreign markets, due to the smaller base in those markets, and we expect that to continue.

The membership format is an integral part of our business and profitability.

This format is designed to reinforce member loyalty and provide continuing fee revenue.

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Our paid-membership growth rate may be adversely impacted when warehouse openings occur in existing markets as compared to new markets.

Our worldwide

renewal rate may be adversely impacted by lower renewal rates in newer markets, which historically have been less than rates in mature markets.

Our worldwide renewal rate may be adversely impacted by memberships in newer international markets and a higher penetration of memberships sold online, both of which typically renew at a lower rate.

Our financial performance depends heavily on controlling costs.

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This impact is calculated based on the difference between the current and prior period's exchange rates.

The impact of changes in gasoline prices on net sales is calculated based on the difference between the current and prior period's average price per gallon sold.

The impact of changes in gasoline prices on net sales is calculated based on the difference between the current and prior period's average price per gallon.

Results expressed excluding the impacts of foreign exchange and gasoline prices are intended as supplemental information and are not a substitute for net sales presented in accordance with U.S.

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Our fiscal year ends on the Sunday closest to August 31.

References to the third quarter of 2024 and 2023 relate to the 12-week fiscal quarters ended May 12, 2024, and May 7, 2023.

References to the first thirty-six weeks of 2024 and 2023 relate to the 36 weeks ended May 12, 2024, and May 7, 2023.

References to the first quarter of 2025 and 2024 relate to the 12-week fiscal quarters ended November 24, 2024, and November 26, 2023.

Certain percentages presented are calculated using actual results prior to rounding.

Highlights for the third quarter of 2024 versus 2023 include:

• Net sales increased 9% to $57,392, driven by an increase in comparable sales and sales at 24 net new warehouses opened since the end of the third quarter of 2023;

Highlights for the first quarter of 2025 versus 2024 include:

• Net sales increased 8% to $60,985, driven by an increase in comparable sales and sales at 26 net new warehouses opened since the end of the first quarter of 2024;

• Membership fee revenue increased 8% to $1,166, driven by new member sign-ups and upgrades to Executive Membership;

• Gross margin percentage increased 52 basis points, driven primarily by the absence of a charge of $298, $0.50 per diluted share, recorded in the third quarter of 2023 predominantly related to the discontinuation of our charter shipping activities;

• SG&A expenses as a percentage of net sales decreased 15 basis points, primarily due to warehouse operations and other businesses, largely attributable to improved productivity;

• A quarterly cash dividend of $1.16 per share was declared on April 10, 2024, and paid on May 10, 2024;

• Gross margin percentage increased 24 basis points;

seven basis points excluding the impact of gasoline price deflation on net sales;

• SG&A expenses as a percentage of net sales increased 14 basis points and was flat excluding the impact of gasoline price deflation;

• The provision for income taxes was positively impacted by a benefit related to stock compensation of $100, $0.22 per diluted share, compared to $44, $0.10 per diluted share, in 2024;

• Net income was $1,798, $4.04 per diluted share, compared to $1,589, $3.58 per diluted share in 2024;

• A quarterly cash dividend of $1.16 per share was declared on October 16, 2024, and paid on November 15, 2024.

RESULTS OF OPERATIONS

12 Weeks Ended 36 Weeks Ended

$ 57,392 $ 52,604 $ 171,440 $ 160,280

Changes in net sales:

12 Weeks Ended

2024 November 26,

$ 60,985 $ 56,717

Increases in net sales:

Canada 6 % 7 %

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Total Company 8 % 6 %

Changes in comparable sales (1) :

6 % — % 4 % 5 %

Increases in comparable sales (1) :

Canada 6 % 6 %

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E-commerce 13 % 6 %

Changes in comparable sales excluding the impact of changes in foreign-currency and gasoline prices (1) :

6 % 2 % 4 % 5 %

Increases in comparable sales excluding the impact of changes in foreign-currency and gasoline prices (1) :

Canada 7 % 8 %

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(1) Comparable sales for the third quarter and first thirty-six weeks of 2024 were calculated using comparable retail weeks.

The improvement in net sales for the third quarter and first thirty-six weeks of 2024 was attributable to an increase in comparable sales and sales at the 24 net new warehouses opened since the end of the third quarter of 2023.

Sales increased $3,892 or 9% and $9,458 or 7% in core merchandise categories during the third quarter and first thirty-six weeks of 2024, due to increases in all categories.

Sales in warehouse ancillary and other businesses increased $896 or 8% during the third quarter of 2024, led by gasoline, and $1,702 or 5% during the first thirty-six weeks of 2024, led by pharmacy.

During the third quarter of 2024, higher gasoline prices positively impacted net sales by $149, 28 basis points, compared to 2023, with a 2% increase in the average price per gallon.

C hanges in foreign currencies relative to the U.S.

dollar negatively impacted net sales by approximately $108, 21 basis points, compared to the third quarter of 2023, primarily attributable to our Other International operations.

During the first thirty-six weeks of 2024 , l ower gasoline prices negatively impacted net sales by $423, 26 basis points, compared to 2023, with a 2% decrease in the average price per gallon.

(1) Comparable sales for the first quarter of 2024 were calculated using comparable retail weeks.

Net sales increased $4,268 or 8% during the first quarter of 2025.

The improvement was attributable to an increase in comparable sales and sales at the 26 net new warehouses opened since the end of the first quarter of 2024.

Sales increased $4,333 or 10% in core merchandise categories during the first quarter of 2025.

Sales in warehouse ancillary and other businesses decreased less than 1% during the first quarter of 2025, due to lower gasoline prices, partially offset by pharmacy and all other warehouse ancillary businesses.

Lower gasoline prices negatively impacted net sales by $908, 160 basis points, compared to 2024, with a 12% decrease in the average price per gallon.

The volume of gasoline sold increased approximately 1% .

C hanges in foreign currencies relative to the U.S.

dollar positively impacted net sales by approximately $180, 11 basis points, compared to the first thirty-six weeks of 2023, attributable to our Other International operations, partially offset by our Canadian operations.

dollar negatively impacted net sales by approximately $164, 29 basis points, attributable to our Other International and Canadian operations.

Comparable Sales

Comparable sales increased 7% in the third quarter of 2024 and were positively impacted by increased shopping frequen cy and a slightly higher average ticket.

Comparable sales increased 5% in the first thirty-six weeks of 2024 and were positively impacted by increased shopping frequency, partially offset by a slight decrease in average ticket.

Comparable sales increased 5% in the first quarter of 2025 and were positively impacted by increased shopping frequen cy a nd a slightly higher average ticket.

Membership Fees

12 Weeks Ended 36 Weeks Ended

12 Weeks Ended

2024 November 26,

Membership fees $ 1,166 $ 1,082

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Total cardholders (000s) 138,800 129,500

Membership fee revenue increased 8% in both the third quarter and first thirty-six weeks of 2024, driven by new member sign-ups and upgrades to Executive Membership.

At the end of the third quarter of 2024, our renewal rates were 93.0% in the U.S.

Membership fee revenue increased 8% in the first quarter of 2025, driven by new member sign-ups and upgrades to Executive Membership.

At the end of the first quarter of 2025, our renewal rates were 92.8% in the U.S.

and Canada and 90.4% worldwide.

Renewal rates benefited from higher penetration of Executive members.

Our renewal rate, which excludes affiliates of Business members, is a trailing calculation that captures renewals during the period seven to eighteen months prior to the reporting date.

As previously reported, we increased our annual membership fees in the U.S.

and Canada, effective September 1, 2024.

We account for membership fee revenue on a deferred basis, recognized ratably over the one-year membership period.

12 Weeks Ended 36 Weeks Ended

Due to this deferral, the increases had an immaterial impact in the first quarter of 2025.

12 Weeks Ended

2024 November 26,

Net sales $ 60,985 $ 56,717

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Gross margin percentage increased 24 basis points.

Excluding the impact of gasoline price inflation on net sales, gross margin percentage was 10.86%, an increase of 54 basis points.

The 54 basis-point increase was positively impacted by:

56 basis points due to the absence of a charge related to the discontinuation of our charter shipping activities that was recorded in the third quarter of 2023;

two basis points due to core merchandise categories, and two basis points due to a LIFO benefit.

This increase was partially offset by five basis points due to warehouse ancillary and other businesses, predominantly gasoline, partially offset by e-commerce, and one basis point due to increased 2% rewards.

The gross margin in core merchandise categories, when expressed as a percentage of core merchandise sales (rather than total net sales), increased 10 basis points.

The increase was primarily due to non-foods, partially offset by fresh foods.

Excluding the impact of gasoline price deflation on net sales, gross margin percentage was 11.11%, an increase of seven basis points.

This increase was positively impacted by:

17 basis points in our core merchandise categories, primarily due to sales mix and our co-branded credit card program, and six basis points related to 2% rewards.

This increase was partially offset by 16 basis points due to warehouse ancillary and other businesses, primarily gasoline, partially offset by e-commerce.

The gross margin in core merchandise categories, when expressed as a percentage of core merchandise sales (rather than total net sales), increased three basis points.

The increase was primarily due to fresh foods, partially offset by non-foods.

This measure eliminates the impact of changes in sales penetration and gross margin from our warehouse ancillary and other businesses.

Gross margin percentage on a segment basis, when expressed as a percentage of the segment's own sales and excluding the impact of changes in gasoline prices on net sales (segment gross margin percentage), increased in our U.S.

and Canadian segments.

segment performed similarly to the consolidated results above.

Our Canadian segment gross margin increased primarily due to increases in

core merchandise categories, partially offset by increased 2% rewards.

Gross margin decreased in our Other International segment, due to decreases in core merchandise categories and increased 2% rewards.

Year-to-date Results

Gross margin percentage increased 34 basis points.

Excluding the impact of gasoline price deflation on net sales, gross margin percentage was 10.86%, an increase of 31 basis points.

The 31 basis-point increase was positively impacted by:

24 basis points due to the absence of charges related to the discontinuation of our charter shipping activities that were recorded in the first and third quarters of 2023;

nine basis points due to warehouse ancillary and other business, primarily e-commerce;

and two basis points due to a LIFO benefit.

This increase was partially offset by four basis point s due to increased 2% rewards.

Our core merchandise categories were flat.

The gross margin in core merchandise categories, when expressed as a percentage of core merchandise sales (rather than total net sales), increased 13 basis points.

The increase was primarily due to non-foods, partially offset by fresh foods.

Segment gross margin percentage increased in our U.S.

and Canadian segments.

segment performed similarly to the consolidated results above.

Our Canadian segment gross margin increased, primarily due to increases in core merchandise categories and warehouse ancillary and other businesses, partially offset by increased 2% rewards.

Gross margin percentage decreased in our Other International segment, primarily due to decreases in core merchandise categories and increased 2% rewards.

Our Canadian and Other International segment's gross margin percentage increased, primarily due to increases in core merchandise categories, partially offset by increased 2% rewards.

Selling, General and Administrative Expenses

12 Weeks Ended 36 Weeks Ended

12 Weeks Ended

2024 November 26,

SG&A expenses $ 5,846 $ 5,358

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Quarterly Results

SG&A expenses as a percentage of net sales decreased 15 basis points.

SG&A expenses as a percentage of net sales excluding the impact of gasoline price inflation was 8.99%, a decrease of 12 basis points.

The comparison to last year was favorably impacted by 12 basis points due to warehouse operations and other businesses, largely attributable to improved productivity.

Year-to-date Results

SG&A expenses as a percentage of net sales increased four basis points.

SG&A expenses as a percentage of net sales excluding the impact of gasoline price deflation was 9.16%, an increase of two basis points.

The comparison to last year was negatively impacted by three basis points in warehouse operations and other businesses, driven by our U.S.

operations, which included the impact of wage increases in March and September 2023, partially offset by one basis point due to central operating costs.

SG&A expenses as a percentage of net sales were lower in our Canadian and Other International operations.

SG&A expenses as a percentage of net sales increased 14 basis points.

Excluding the impact of gasoline price deflation that measure was flat.

The comparison to last year was favorably impacted by four basis points due to lower preopening costs and three basis points due to stock compensation expense.

SG&A was negatively impacted by four basis points due to warehouse operations and other businesses, which included the impact of the wage increase in July 2024, partially offset by sales leverage and improved productivity.

Central operating costs were also higher by three basis points.

SG&A expenses as a percentage of net sales were lower in our U.S.

segment and higher in our Canadian and Other International segments.

Interest Expense

12 Weeks Ended 36 Weeks Ended

12 Weeks Ended

2024 November 26,

Interest expense $ 37 $ 38

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Interest Income and Other, Net

12 Weeks Ended 36 Weeks Ended

12 Weeks Ended

2024 November 26,

Interest income $ 96 $ 154

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Interest income and other, net $ 147 $ 160

The decrease in interest income in the third quarter was due to lower average cash and investment balances, caused by the payment of the special dividend.

The increase in interest income in the first thirty-six weeks of 2024 was primarily due to higher global interest rates and higher average cash and investment balances, prior to the payment of the special dividend.

Foreign-currency transaction gains, net, include revaluation or settlement of monetary assets and liabilities by our Canadian and Other International operations and mark-to-market adjustments for forward foreign-exchange contracts.

The decrease in interest income in the first quarter was due to lower average cash and investment balances, following the special dividend in January 2024, and lower interest rates.

Foreign-currency transaction gains, net, include mark-to-market adjustments for forward foreign-exchange contracts and revaluation or settlement of monetary assets and liabilities by our Canadian and Other International operations.

See Derivatives and Foreign Currency sections in Item 8, Note 1 of our Annual Report on Form 10-K, for the fiscal year ended September 1, 2024.

Provision for Income Taxes

12 Weeks Ended 36 Weeks Ended

12 Weeks Ended

2024 November 26,

Provision for income taxes $ 508 $ 517

Effective tax rate 22.0 % 24.5 %

The effective tax rate for the first thirty-six weeks of 2024 was favorably impacted by net discrete tax benefits of $146.

This included $94 related to the portion of the special dividend payable through our 401(k) plan in the second quarter and $44 of excess tax benefits related to stock compensation in the first quarter.

Excluding discrete net tax benefits, the tax rate was 26.6%.

The effective tax rate for the first thirty-six weeks of 2023 was impacted by net discrete tax benefits of $57, primarily due to excess tax benefits related to stock compensation in the first quarter.

Excluding discrete net tax benefits, the tax rate was 26.2%.

The effective tax rate for the first quarter of 2025 and 2024 was favorably impacted by discrete tax benefits of $100 and $44 of excess tax benefits related to stock compensation.

LIQUIDITY AND CAPITAL RESOURCES

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12 Weeks Ended

2024 November 26,

Net cash provided by operating activities $ 3,260 $ 4,651

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Our primary sources of liquidity are cash flows from operations, cash and cash equivalents, and short-term investments.

Cash and cash equivalents and short-term investments were $11,499 and $15,234 at May 12, 2024, and September 3, 2023.

Of these balances, unsettled credit and debit card receivables represented approximately $2,391 and $2,282 at May 12, 2024, and September 3, 2023.

Cash and cash equivalents and short-term investments were $11,827 and $11,144 at November 24, 2024, and September 1, 2024.

Of these balances, unsettled credit and debit card receivables represented approximately $2,789 and $2,519 at November 24, 2024, and September 1, 2024.

These receivables generally settle within four days.

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Construction and land-purchase obligations consist of contracts primarily related to the development and opening of new and relocated warehouses, the majority of which (other than leases) are due in the next 12 months.

Management believes that our cash and investment position and operating cash flows, with capacity under existing and available credit agreements, will be sufficient to meet our liquidity and capital requirements for the foreseeable future.

We believe that our U.S.

We believe that our cash and investment position and operating cash flow, with capacity under existing and available credit agreements, will be sufficient to meet our liquidity and capital requirements for the foreseeable future and our U.S.

current and projected asset position is sufficient to meet our U.S.

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Cash Flows from Operating Activities

Net cash provided by operating activities totaled $8,381 in the first thirty-six weeks of 2024, compared to $7,343 in the first thirty-six weeks of 2023.

Net cash provided by operating activities totaled $3,260 in the first quarter of 2025, compared to $4,651 in the first quarter of 2024.

The decrease in net cash provided by operating activities was due to an increase in our net investment in merchandise inventories.

Our cash flow provided by operations is primarily fr om net sales and membership fees.

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Cash used in operations also includes payments for income taxes.

Changes in our net investment in merchandise inventories (the difference between merchandise inventories and accounts payable) is impacted by several factors, including inventory levels and turnover, payment terms with suppliers, and early payments to obtain discounts.

Cash Flows from Investing Activities

Net cash used in investing activities totaled $2,706 in the first thirty-six weeks of 2024, compared to $3,147 in the first thirty-six weeks of 2023, and is primarily related to capital expenditures.

Net cash used in investing activities totaled $985 in the first quarter of 2025, compared to $366 in the first quarter of 2024, and is primarily related to capital expenditures.

Net cash from investing activities also includes purchases and maturities of short-term investments.

Capital Expenditure Plans

Our primary requirements for capital are acquiring land, buildings, and equipment for new and remodeled warehouses.

Capital is also required for information systems, manufacturing and distribution facilities, initial warehouse operations, and working capital.

In the first thirty-six weeks of 2024, we spent $3,133 on capital expenditures, and it is our current intention to spend a total of approximately $4,300 to $4,500 during fiscal 2024.

These expenditures are expected to be financed with cash from operations, existing cash and cash equivalents, and short-term investments.

We opened 16 new warehouses, includ ing one relocation, in the first thirty-six weeks of 2024 and plan to open 14 additional new warehouses in the remainder of fiscal 2024.

Our primary requirements for capital are acquiring land, buildings, and equipment for new and remodeled warehouses, information systems and manufacturing and distribution facilities.

In the first quarter of 2025, we spent $1,264 on capital expenditures, and it is our current intention to spend a total of approximately $5,000 during fiscal 2025.

These expenditures are expected to be financed with cash from operations, cash and cash equivalents, and short-term investments.

We opened seven new warehouses, includ ing one relocation, in the first quarter of 2025 and plan to open 22 additional new warehouses, including two

relocations, in the remainder of fiscal 2025.

There can be no assurance that current expectations will be realized, and plans are subject to change upon further review of our capital expenditure needs and the economic environment.

Cash Flows from Financing Activities

Net cash used in financing activities totaled $8,948 in the first thirty-six weeks of 2024, compared to $1,950 in the first thirty-six weeks of 2023.

Cash flow used in financing activities during the first thirty-six weeks of 2024 was primarily related to the payment of dividends, repayments of short-term borrowings, repurchases of common stock, and withholding taxes on stock-based awards.

Cash flow provided by financing activities included proceeds from short-term borrowings and four Guaranteed Senior Notes totaling approximately $500, at fixed interest rates ranging from 1.400% to 2.120% issued by our Japan subsidiary.

Subsequent to the end of the quarter on May 18, 2024, we paid the outstanding principal balance and interest on the 2.750% Senior Notes using cash and cash equivalents and short-term investments.

A quarterly cash dividend of $1.16 per share was declared on April 10, 2024, payable to shareholders of record on April 26, 2024, which was paid on May 10, 2024.

On January 12, 2024, an aggregate payment of approximately $6,655 was made in connection with a special dividend of $15.00 per share, declared on December 13, 2023.

Net cash used in financing activities totaled $1,193 in the first quarter of 2025, compared to $974 in the first quarter of 2024.

Cash flow used in financing activities during the first quarter of 2025 was primarily related to the payment of dividends, withholding taxes on stock-based awards, repurchases of common stock, and repayments of short-term borrowings.

Cash flow provided by financing activities included proceeds from short-term borrowings .

A quarterly cash dividend of $1.16 per share was declared on October 16, 2024, and paid on November 15, 2024.

Share Repurchase Program

On January 19, 2023, the Board of Directors authorized a share repurchase program in the amount of $4,000, which expires in January 2027.

During the first thirty-six weeks of 2024 and 2023, we repurchased 749,000 and 908,000 shares of common stock, at an average price per share of $646.07 and $492.30, totaling approximately $484 and $447.

During the first quarter of 2025 and 2024, we repurchased 230,000 and 288,000 shares of common stock, at an average price per share of $899.23 and $564.06, totaling approximately $206 and $162.

These amounts may differ from the accompanying condensed consolidated statements of cash flows due to changes in unsettled repurchases at the end of a quarter.

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Repurchased shares are retired, in accordance with the Washington Business Corporation Act.

The remaining amount available to be purchased under our approved plan was $3,079 at the end of the third quarter.

The remaining amount available to be purchased under our approved plan was $2,659 at the end of the first quarter.

Bank Credit Facilities and Commercial Paper Programs

We maintain bank credit facilities for working capital and general corporate purposes.

At May 12, 2024, we had borrowing capacity under these facilities of $1,145.

At November 24, 2024, we had borrowing capacity under these facilities of $1,184.

Our international operations maintain $689 of this capacity under bank credit facilities, of which $159 is guaranteed by the Company.

Short-term borrowings outstanding under the bank credit facilities, which are included in other current liabilities on the consolidated balance sheets, were immaterial at the end of the third quarter of 2024 and at the end of fiscal 2023.

The Company has letter of credit facilities, for commercial and standby letters of credit, totaling $204.

The outstanding commitments under these facilities at the end of the third quarter of 2024 totaled $187, most of which were standby letters of credit that do not expire or have expiration dates within one year.

Short-term borrowings outstanding under the bank credit facilities, which are included in other current liabilities on the consolidated balance sheets, were immaterial at the end of the first quarter of 2025 and at the end of fiscal 2024.

We have letter of credit facilities, for commercial and standby letters of credit, totaling $222.

The outstanding commitments under these facilities at the end of the first quarter of 2025 totaled $202, most of which were standby letters of credit that do not expire or have expiration dates within one year.

The bank credit facilities have various expiration dates, most within one year, and we generally intend to renew these facilities.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis