COSTCO WHOLESALE CORP /NEW 10-Q

Item 1—Financial Statements COSTCO WHOLESALE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (amounts in millions, except per share data) (unaudited) 12 Weeks Ended November 24, 2024 November 26, 2023 REVENUE Net sales $ 60,985 $ 56,717 Membership fees 1,166 1,082 Total revenue 62,151 57,799 OPERATING EXPENSES Merchandise costs 54,109 50,457 Selling, general and administrative 5,846 5,358 Operating income 2,196 1,984 OTHER INCOME (EXPENSE) Interest expense ( 37 ) ( 38 ) Interest income and other, net 147 160 INCOME BEFORE INCOME TAXES 2,306 2,106 Provision for income taxes 508 517 NET INCOME $ 1,798 $ 1,589 NET INCOME PER COMMON SHARE: Basic $ 4.05 $ 3.58 Diluted $ 4.04 $ 3.58 Shares used in calculation (000s): Basic 443,988 443,827 Diluted 444,891 444,403 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Table of Contents COSTCO WHOLESALE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (amounts in millions) (unaudited) 12 Weeks Ended November 24, 2024 November 26, 2023 NET INCOME $ 1,798 $ 1,589 Foreign-currency translation adjustment and other, net ( 324 ) ( 38 ) COMPREHENSIVE INCOME $ 1,474 $ 1,551 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Table of Contents COSTCO WHOLESALE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (amounts in millions, except par value and share data) (unaudited) November 24, 2024 September 1, 2024 ASSETS CURRENT ASSETS Cash and cash equivalents $ 10,907 $ 9,906 Short-term investments 920 1,238 Receivables, net 2,963 2,721 Merchandise inventories 20,979 18,647 Other current assets 1,754 1,734 Total current assets 37,523 34,246 OTHER ASSETS Property and equipment, net 29,336 29,032 Operating lease right-of-use assets 2,539 2,617 Other long-term assets 3,988 3,936 TOTAL ASSETS $ 73,386 $ 69,831 LIABILITIES AND EQUITY CURRENT LIABILITIES Accounts payable $ 21,793 $ 19,421 Accrued salaries and benefits 4,785 4,794 Accrued member rewards 2,444 2,435 Deferred membership fees 2,683 2,501 Other current liabilities 6,584 6,313 Total current liabilities 38,289 35,464 OTHER LIABILITIES Long-term debt, excluding current portion 5,745 5,794 Long-term operating lease liabilities 2,288 2,375 Other long-term liabilities 2,613 2,576 TOTAL LIABILITIES 48,935 46,209 COMMITMENTS AND CONTINGENCIES EQUITY Preferred stock $ 0.005 par value; 100,000,000 shares authorized; no shares issued and outstanding — — Common stock $ 0.005 par value; 900,000,000 shares authorized; 443,942,000 and 443,126,000 shares issued and outstanding 2 2 Additional paid-in capital 7,901 7,829 Accumulated other comprehensive loss ( 2,152 ) ( 1,828 ) Retained earnings 18,700 17,619 TOTAL EQUITY 24,451 23,622 TOTAL LIABILITIES AND EQUITY $ 73,386 $ 69,831 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Table of Contents COSTCO WHOLESALE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (amounts in millions) (unaudited) 12 Weeks Ended November 24, 2024 Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings Total Equity Shares (000s) Amount BALANCE AT SEPTEMBER 1, 2024 443,126 $ 2 $ 7,829 $ ( 1,828 ) $ 17,619 $ 23,622 Net income — — — — 1,798 1,798 Foreign-currency translation adjustment and other, net — — — ( 324 ) — ( 324 ) Stock-based compensation — — 465 — — 465 Release of vested restricted stock units (RSUs), including tax effects 1,046 — ( 389 ) — — ( 389 ) Repurchases of common stock ( 230 ) — ( 4 ) — ( 202 ) ( 206 ) Cash dividend declared — — — — ( 515 ) ( 515 ) BALANCE AT NOVEMBER 24, 2024 443,942 $ 2 $ 7,901 $ ( 2,152 ) $ 18,700 $ 24,451 12 Weeks Ended November 26, 2023 Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings Total Equity Shares (000s) Amount BALANCE AT SEPTEMBER 3, 2023 442,793 $ 2 $ 7,340 $ ( 1,805 ) $ 19,521 $ 25,058 Net income — — — — 1,589 1,589 Foreign-currency translation adjustment and other, net — — — ( 38 ) — ( 38 ) Stock-based compensation — — 446 — — 446 Release of vested RSUs, including tax effects 1,282 — ( 292 ) — — ( 292 ) Repurchases of common stock ( 288 ) — ( 5 ) — ( 157 ) ( 162 ) Cash dividend declared and other — — — — ( 454 ) ( 454 ) BALANCE AT NOVEMBER 26, 2023 443,787 $ 2 $ 7,489 $ ( 1,843 ) $ 20,499 $ 26,147 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Table of Contents COSTCO WHOLESALE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (amounts in millions) (unaudited) 12 Weeks Ended November 24, 2024 November 26, 2023 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 1,798 $ 1,589 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 548 501 Non-cash lease expense 72 74 Stock-based compensation 463 444 Other non-cash operating activities, net ( 72 ) 43 Changes in operating assets and liabilities: Merchandise inventories ( 2,541 ) ( 1,384 ) Accounts payable 2,601 2,854 Other operating assets and liabilities, net 391 530 Net cash provided by operating activities 3,260 4,651 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of short-term investments ( 247 ) ( 200 ) Maturities of short-term investments 541 878 Additions to property and equipment ( 1,264 ) ( 1,040 ) Other investing activities, net ( 15 ) ( 4 ) Net cash used in investing activities ( 985 ) ( 366 ) CASH FLOWS FROM FINANCING ACTIVITIES Repayments of short-term borrowings ( 194 ) ( 173 ) Proceeds from short-term borrowings 133 144 Proceeds from issuance of long-term debt — 498 Tax withholdings on stock-based awards ( 389 ) ( 292 ) Repurchases of common stock ( 207 ) ( 162 ) Cash dividend payments ( 515 ) ( 905 ) Financing lease payments and other financing activities, net ( 21 ) ( 84 ) Net cash used in financing activities ( 1,193 ) ( 974 ) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS ( 81 ) — Net change in cash and cash equivalents 1,001 3,311 CASH AND CASH EQUIVALENTS BEGINNING OF YEAR 9,906 13,700 CASH AND CASH EQUIVALENTS END OF PERIOD $ 10,907 $ 17,011 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the first 12 weeks of the year for: Interest $ 44 $ 52 Income taxes, net $ 401 $ 210 SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES: Financing lease assets obtained in exchange for new or modified leases $ 111 $ 29 Operating lease assets obtained in exchange for new or modified leases $ 15 $ 18 Capital expenditures included in liabilities $ 204 $ 203 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 Table of Contents COSTCO WHOLESALE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in millions, except share, per share, and warehouse count data) (unaudited) Note 1—Summary of Significant Accounting Policies Description of Business Costco Wholesale Corporation (Costco or the Company), a Washington corporation, and its subsidiaries operate membership warehouses based on the concept that offering members low prices on a limited selection of nationally-branded and private-label products in a wide range of merchandise categories will produce high sales volumes and rapid inventory turnover. At November 24, 2024, Costco operated 896 warehouses worldwide: 616 in the United States (U.S.) located in 47 states, Washington, D.C., and Puerto Rico, 109 in Canada, 41 in Mexico, 36 in Japan, 29 in the United Kingdom (U.K.), 19 in Korea, 15 in Australia, 14 in Taiwan, seven in China, five in Spain, two in France, and one each in Iceland, New Zealand, and Sweden. The Company operates e-commerce sites in the U.S., Canada, the U.K., Mexico, Korea, Taiwan, Japan, and Australia. Basis of Presentation The condensed consolidated financial statements include the accounts of Costco and its wholly-owned subsidiaries. All material inter-company transactions among the Company and its consolidated subsidiaries have been eliminated in consolidation. These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q for interim financial reporting pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). While these statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (U.S. GAAP) for complete financial statements. Therefore, the interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended September 1, 2024. Fiscal Year End The Company operates on a 52/53 week fiscal year basis, with the fiscal year ending on the Sunday closest to August 31. Fiscal 2025 is a 52-week year ending on August 31, 2025. References to the first quarter of 2025 and 2024 relate to the 12-week fiscal quarters ended November 24, 2024, and November 26, 2023. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect; the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements; and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions take into account historical and forward-looking factors that the Company believes are reasonable. Actual results could differ from those estimates and assumptions. Reclassification Reclassifications were made to the condensed consolidated balance sheet and statement of cash flows for the first quarter of fiscal 2024 to conform with current year presentation. 8 Table of Contents Recent Accounting Pronouncements Not Yet Adopted By The Company In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, which is intended to improve reportable segment disclosure requirements, primarily about significant segment expenses. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. In December 2023, the FASB issued ASU 2023-09, which requires public business entities on an annual basis to disclose specific categories in the income-tax rate reconciliation, provide information for reconciling items that meet a quantitative threshold, and disclose certain information about income taxes paid. The standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The amendments should be applied on a prospective basis. Retrospective application is permitted. In November 2024, the FASB issued ASU 2024-03, which requires disaggregated disclosures of certain costs and expenses on the income statement on an annual and interim basis. The standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The amendments should be applied on a prospective basis. Retrospective application is permitted. The Company is evaluating these standards. Note 2—Investments The Company's investments were as follows: November 24, 2024: Cost Basis Unrealized Losses, Net Recorded Basis Available-for-sale: Government and agency securities $ 702 $ ( 11 ) $ 691 Held-to-maturity: Certificates of deposit 229 — 229 Total short-term investments $ 931 $ ( 11 ) $ 920 September 1, 2024: Cost Basis Unrealized Losses, Net Recorded Basis Available-for-sale: Government and agency securities $ 689 $ ( 1 ) $ 688 Held-to-maturity: Certificates of deposit 550 — 550 Total short-term investments $ 1,239 $ ( 1 ) $ 1,238 Gross unrealized holding gains and losses on available-for-sale securities were not material for the periods ended November 24, 2024, or September 1, 2024 . At those dates, there were no available-for-sale securities in a material continuous unrealized-loss position. There were no sales of available-for-sale securities during the first quarter of 2025 or 2024. 9 Table of Contents The maturities of available-for-sale and held-to-maturity securities at November 24, 2024, are as follows: Available-For-Sale Held-To-Maturity Cost Basis Fair Value Due in one year or less $ 132 $ 132 $ 229 Due after one year through five years 414 408 — Due after five years 156 151 — Total $ 702 $ 691 $ 229 Note 3—Fair Value Measurement Assets and Liabilities Measured at Fair Value on a Recurring Basis The table below presents information regarding the Company’s financial assets and financial liabilities that are measured at fair value on a recurring basis and indicates the level within the hierarchy reflecting the valuation techniques utilized. Level 2 November 24, 2024 September 1, 2024 Investment in government and agency securities $ 691 $ 688 Forward foreign-exchange contracts, in asset position (1) 21 1 Forward foreign-exchange contracts, in (liability) position (1) ( 2 ) ( 28 ) Total $ 710 $ 661 _______________ (1) The asset and liability values are included in other current assets and other current liabilities, respectively, in the accompanying condensed consolidated balance sheets. On November 24, 2024, and September 1, 2024, the Company did not hold any Level 1 or 3 financial assets or liabilities that were measured at fair value on a recurring basis. There were no transfers between levels during the first quarter of 2025 or 2024. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Assets and liabilities recognized and disclosed at fair value on a nonrecurring basis include items such as financial assets measured at amortized cost and long-lived nonfinancial assets. These assets are measured at fair value if determined to be impaired. There were no fair value adjustments to these items during the first quarter of 2025 and no material fair value adjustments in 2024. 10 Table of Contents Note 4—Debt The carrying value of the Company’s long-term debt consisted of the following: November 24, 2024 September 1, 2024 3.000 % Senior Notes due May 2027 $ 1,000 $ 1,000 1.375 % Senior Notes due June 2027 1,250 1,250 1.600 % Senior Notes due April 2030 1,750 1,750 1.750 % Senior Notes due April 2032 1,000 1,000 Other long-term debt 863 919 Total long-term debt 5,863 5,919 Less unamortized debt discounts and issuance costs 21 22 Less current portion (1) 97 103 Long-term debt, excluding current portion $ 5,745 $ 5,794 _______________ (1) Net of unamortized debt discounts and issuance costs . The fair value of the Senior Notes is estimated using Level 2 inputs. Other long-term debt consists of Guaranteed Senior Notes issued by the Company's Japan subsidiary, valued using Level 3 inputs. The fair value of the Company's long-term debt, including the current portion, was approximately $ 5,273 and $ 5,412 at November 24, 2024, and September 1, 2024. Note 5—Equity Dividends A quarterly cash dividend of $ 1.16 per share was declared on October 16, 2024, and paid on November 15, 2024. The dividend was $ 1.02 per share in the first quarter of 2024. Stock Repurchase Programs The Company's stock repurchase program is conducted under a $ 4,000 authorization by the Board of Directors, which expires in January 2027. At November 24, 2024, the remaining amount available under the program was $ 2,659 . The following table summarizes the repurchase activity: Shares Repurchased (000s) Average Price per Share Total Cost First quarter of 2025 230 $ 899.23 $ 206 First quarter of 2024 288 $ 564.06 $ 162 These amounts may differ from the accompanying condensed consolidated statements of cash flows due to changes in unsettled stock repurchases at the end of each quarter. Purchases are made from time to time, as conditions warrant, in the open market or in block purchases and pursuant to plans under SEC Rule 10b5-1. 11 Table of Contents Note 6—Stock-Based Compensation The 2019 Incentive Plan authorizes the issuance of up to a maximum of 15,885,000 RSUs. To preserve the value of outstanding awards, the number of RSUs that may be granted under this Plan is subject to adjustments from changes in capital structure. The Company issues new shares of common stock upon vesting of RSUs. Shares for vested RSUs are generally delivered to participants annually, net of shares withheld for taxes. Summary of Restricted Stock Unit Activity At November 24, 2024, 6,195,000 shares were available to be granted as RSUs, and the following awards were outstanding: • 2,280,000 time-based RSUs, which vest upon continued employment over specified periods and accelerate upon achievement of a long-service term; • 51,000 performance-based RSUs granted to executive officers, for which the performance targets have been met. The awards vest upon continued employment over specified periods of time and upon achievement of a long-service term; and • 70,000 performance-based RSUs granted to executive officers, subject to achievement of performance targets for 2025, as determined by the Compensation Committee of the Board of Directors after the end of the fiscal year. These awards are not included in the table below or in the amount of unrecognized compensation cost. The following table summarizes RSU transactions during the first quarter of 2025: Number of Units (in 000s) Weighted-Average Grant Date Fair Value Outstanding at September 1, 2024 2,799 $ 463.24 Granted 1,025 883.78 Vested and delivered ( 1,481 ) 557.85 Forfeited ( 12 ) 502.86 Outstanding at November 24, 2024 2,331 $ 534.69 The remaining unrecognized compensation cost related to RSUs unvested at November 24, 2024, was $ 1,277 , and the weighted-average period over which this cost will be recognized is 1.8 years. Summary of Stock-Based Compensation The following table summarizes stock-based compensation expense and the related tax benefits: 12 Weeks Ended November 24, 2024 November 26, 2023 Stock-based compensation expense $ 463 $ 444 Less recognized income tax benefits 101 95 Stock-based compensation expense, net $ 362 $ 349 12 Table of Contents Note 7—Net Income per Common and Common Equivalent Share The following table shows the amounts used in computing net income per share and the weighted average number of shares of basic and of potentially dilutive common shares outstanding (shares in 000s): 12 Weeks Ended November 24, 2024 November 26, 2023 Net income $ 1,798 $ 1,589 Weighted average basic shares 443,988 443,827 RSUs 903 576 Weighted average diluted shares 444,891 444,403 Basic earnings per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is calculated based on the dilutive effect of RSUs using the treasury stock method. Note 8—Commitments and Contingencies Legal Proceedings The Company is involved in many claims, proceedings and litigations arising from its business and property ownership. In accordance with accounting guidance, the Company establishes an accrual for legal proceedings if and when those matters present loss contingencies that are both probable and reasonably estimable. There may be actual losses in excess of amounts accrued. The Company monitors those matters for developments that would affect the likelihood of a loss (taking into account where applicable indemnification arrangements concerning suppliers and insurers) and the accrued amount, if any, thereof, and adjusts the amount as appropriate. The Company has recorded an immaterial accrual with respect to one matter described below, in addition to other immaterial accruals for matters not described below. If the loss contingency at issue is not both probable and reasonably estimable, the Company does not establish an accrual, but monitors for developments that make the contingency both probable and reasonably estimable. In each case, there is a reasonable possibility that a loss may be incurred, including a loss in excess of the applicable accrual. For matters where no accrual has been recorded, the possible loss or range of loss (including any loss in excess of the accrual) cannot, in the Company's view, be reasonably estimated because, among other things: the remedies or penalties sought are indeterminate or unspecified; the legal and/or factual theories are not well developed; and/or the matters involve complex or novel legal theories or a large number of parties. In November 2023, a former employee filed a class action against the Company alleging claims under California law for failure to pay minimum wage, failure to pay overtime, failure to provide meal and rest breaks, failure to provide accurate wage statements, failure to reimburse expenses, failure to pay wages when due, and failure to pay sick pay. Martin Reyes v. Costco Wholesale Corporation, Sacramento County Superior Court (No. 23cv011351), removed to federal court, No. 2:24-cv-00300 (E.D. Cal.). A second amended complaint was filed, which the Company has moved to dismiss. In January 2024, the same plaintiff filed a related Private Attorneys General Act (PAGA) representative action, seeking civil penalties and asserting the same alleged underlying Labor Code violations and an additional suitable seating claim. In May 2024, the plaintiff filed an amended PAGA complaint; the Company has denied the material allegations of the complaint and filed a motion to stay the action. In August 2024, an employee filed an action under PAGA against the Company, alleging claims for penalties for alleged violations of the California Labor Code regarding: off-the-clock work, incorrect and untimely payment of wages. Nader v. Costco (No. CV-24-006198; Stanislaus County Superior Court). An amended complaint was filed in November 2024, as to which the Company has yet to respond. 13 Table of Contents Beginning in December 2017, the United States Judicial Panel on Multidistrict Litigation consolidated numerous cases concerning the impacts of opioid abuses filed against various defendants by counties, cities, hospitals, Native American tribes, third-party payors, and others. In re National Prescription Opiate Litigation (MDL No. 2804) (N.D. Ohio). Included are cases filed against the Company by counties and cities in Michigan, New Jersey, Oregon, Virginia and South Carolina, a third-party payor in Ohio, and a hospital in Texas, class actions filed on behalf of infants born with opioid-related medical conditions in 40 states, and class actions and individual actions filed on behalf of individuals seeking to recover alleged increased insurance costs associated with opioid abuse in 43 states and American Samoa. Claims against the Company filed in federal court outside the MDL by one county in Georgia are pending, and claims filed by certain cities and counties in New York are pending in state court, as are claims by certain county district attorneys in Pennsylvania. Claims against the Company in state courts in New Jersey, Oklahoma, Utah, and Arizona have been dismissed. Claims against the Company in federal court in Georgia and Florida have been dismissed. The Company is defending all of the pending matters. Between September 25 and October 31, 2023, five class action suits were filed against the Company alleging privacy law violations stemming from pixel trackers on Costco.com: Birdwell v. Costco Wholesale Corp., No. T23-1405, Contra Costa County Superior Court; and Scott v. Costco Wholesale Corp., No. 2:23-cv-08808 (C.D. Cal.), now consolidated with R.S. v. Costco Wholesale Corp., No. 2:23-cv-01628 (W.D. Wash.); Groves, et ano., v. Costco Wholesale Corp., No. 2:23-cv-01662 (W.D. Wash.), and Castillo v. Costco Wholesale Corp., under No. 2:34-cv-01548 (W.D. Wash.). The Castillo plaintiffs filed a consolidated complaint on January 26, 2024, which seeks damages, equitable relief and attorneys’ fees under various statutes, including the Washington Consumer Protection Act, Washington Privacy Act, Washington Uniform Health Care Information Act, Electronic Communications Privacy Act, California Invasion of Privacy Act, and California Confidentiality of Medical Information Act. The consolidated complaint also alleges breach of implied contract, invasion of privacy, conversion, and unjust enrichment. The Company filed a motion to dismiss the Castillo complaint on March 11, 2024. In November 2024 the court denied the motion to dismiss in substantial part. On May 16, 2024, the parties stipulated to stay Birdwell pending resolution of Castillo. On January 2, and August 22, 2024, the Company received related civil investigative demands from the Washington Attorney General's Office. On January 3, 2024, the Company received a related pre-litigation letter from the Los Angeles Office of the County Counsel. The Company is in the process of responding to both agencies. On June 20, 2024, a class-action lawsuit was filed against the Company and Nice-Pak Products, Inc., alleging that Kirkland Signature Fragrance Free Baby Wipes contain 3.7 parts per billion of per-and polyfluoroalkyl substances. The complaint alleges that the label claim that the wipes are "made with naturally derived ingredients" thus violates various state consumer protection and false advertising laws. The complaint seeks unspecified damages, including punitive damages, as well as equitable relief and attorneys' fees and costs. The defendants filed a motion to dismiss on August 9, 2024. Bullard, et ano., v. Costco Wholesale Corp., et ano., No. 3:24-cv-03714 (N.D. Cal.). The Company has been served in over seventy product liability cases in California and Oregon related to its alleged sale of artificial and natural stone countertops. These lawsuits allege strict liability, negligence, breach of warranty, fraud, and failure to warn claims on the grounds that the fabricators and cutters of the stone slabs used to fabricate countertops offered for sale by Costco are exposed to silica particulates in the air while performing such work, allegedly causing lung diseases, including, but not limited to, silicosis. The defendants in these cases include the manufacturers, distributors, and retailers. The Company has denied all claims, has filed cross-claims pertaining to indemnity and contribution, and otherwise sought indemnity from responsible parties. In January 2023 the Company received a Civil Investigative Demand from the U.S. Attorney's Office, Western District of Washington, requesting documents. The government is conducting a False Claims Act investigation concerning whether the Company presented or caused to be presented to the federal government for payment false claims relating to prescription medications. 14 Table of Contents In May 2024 the Company received a Notice of Intent to File Administrative Complaint for Violations of the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA) from the U.S. Environmental Protection Agency. The EPA is seeking administrative fines for importation, sale and distribution of misbranded devices and unregistered products the government asserts are pesticides under FIFRA. The Company does not believe that any pending claim, proceeding or litigation, either alone or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations or cash flows; it is possible that an unfavorable outcome of some or all of the matters, however unlikely, could result in a charge that might be material to the results of an individual fiscal quarter or year. Note 9—Segment Reporting The Company is principally engaged in the operation of membership warehouses through wholly owned subsidiaries in the U.S., Canada, Mexico, Japan, the U.K., Korea, Australia, Taiwan, China, Spain, France, Iceland, New Zealand, and Sweden. Reportable segments are largely based on management’s organization of the operating segments for operational decisions and assessments of financial performance, which consider geographic locations. The material accounting policies of the segments are as described in the notes to the consolidated financial statements included in the Company's Annual Report filed on Form 10-K for the fiscal year ended September 1, 2024, and Note 1 above. Inter-segment net sales and expenses have been eliminated in calculating total revenue and operating income. The following table provides information for the Company's reportable segments: United States Canada Other International Total 12 Weeks Ended November 24, 2024 Total revenue $ 45,088 $ 8,404 $ 8,659 $ 62,151 Operating income 1,498 362 336 2,196 12 Weeks Ended November 26, 2023 Total revenue $ 41,833 $ 7,901 $ 8,065 $ 57,799 Operating income 1,358 325 301 1,984 52 Weeks Ended September 1, 2024 Total revenue $ 184,143 $ 34,874 $ 35,436 $ 254,453 Operating income 6,217 1,648 1,420 9,285 Disaggregated Revenue The following table summarizes net sales by merchandise category; sales from e-commerce sites and business centers have been allocated to the applicable merchandise categories: 12 Weeks Ended November 24, 2024 November 26, 2023 Foods and Sundries $ 25,062 $ 23,024 Non-Foods 16,171 14,766 Fresh Foods 8,218 7,328 Warehouse Ancillary and Other Businesses 11,534 11,599 Total net sales $ 60,985 $ 56,717 15 Table of Contents