Yahoo Finance Costco Wholesale Corporation (COST) Q4 2018 Earnings Conference Call Transcript
Image source: The Motley Fool.
Costco Wholesale Corporation (NASDAQ: COST)
Q4 2018 Earnings Conference Call
Oct. 4, 2018, 5:00 p.m. ET
Contents:
Prepared Remarks
Questions and Answers
Call Participants
Prepared Remarks:
Operator
Good afternoon. My name is Brittany and I'll be your conference operator today. At this time, I would like to welcome everyone to the Q4 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there'll be a question and answer session. If you wanted to ask a question during this time, simply press * then the number 1 onto the phone keypad. If you wanted to withdraw your question, press the # key. I would like now like to turn our call over to our host, Mr. Richard Galanti.
Richard Galanti -- Executive Vice President and Chief Financial Officer
Thank you, Brittany, and good afternoon to everyone. I’ll start by saying 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.
More From The Motley Fool
In today's press release, we reported operating results for the fourth quarter of fiscal 2018 at the 16 weeks ended September 2nd. Net income for the quarter came in at 1.043 billion or $2.36 per share at 13.5% increase compared to the $909 million or $2.08 per share in the 17-week fourth quarter last year. If you normalize the number of weeks, it's about a 20% increase. In terms of sales, net sales for the quarter came in at $43.4 billion, a 5% increase over the 41.4 billion last year. Again, 16 versus 17 weeks on a comp basis, which is on a like-week basis, comps were up 9.5% for the quarter. Sales for the 52-week fiscal year 2018, they increased 9.7% to 100 net 38.4 billion from 126.2 billion last year in the 53-week year.
On a comp basis for the year as well we reported a 9.5% comp. Now comp sales for the fourth quarter were as follows, and again it’s in the press release. On the US on a reported basis was 10.8%. Ex-gas and FX it would’ve been a 7.8. Canada reported was as 5.7 for the 16 weeks on an ex-gas and FX was 4.6%. In other international, 6.7 reported as 6.9% ex-gas and inflation -- gas inflation and FX. All told, total company as I mentioned, reported a 9.5 ex-gas and FX a 7.2. As well, e-commerce, which we’ve started reporting about a year ago on a monthly basis as well.
E-commerce for the 16 weeks was a 26.2% comp and ex-gas and FX a 26.3%. In terms of Q4 sales metrics, fourth quarter traffic or shopping frequency was up 4.9% both on a worldwide basis as well as in the US. Weakening foreign currencies relative to US dollar negatively impacted sales by about 25 basis points. Gas inflation benefited Q4 comps by about 260 basis points. Cannibalization, by the way, weighed on the comp by about 55 basis points to the negative. Our average front-end transaction was up 4.4% during Q4 and excluding the impacts of inflation in FX our average ticker was up a little over 2%.
Next on the income statement line, membership income. We reported $997 million or 2.30% of membership fee income in Q4 of ’18. Last year in the 17-week quarter it was 943, two basis points lower. So about a reported basis $54 million increase are up 5.7% again on a like-week basis up a little over 12%. Of this normalized 12% number, increase year-over-year in Q4, a little over half related to membership fee increases the majority of which came from the $5 and $10 annual fee increases taken last June 1st in the US and Canada.
In terms of membership renewal rates, renewal rates rose in Q4. In our US and Canada, membership renewal rate at Q4 end stood at 90.4%. That's up from 90.1% at Q3 and 16 weeks earlier. And at our worldwide rate improved from 87.9% -- improved to 87.9% up from 87.5% at Q3 end. In terms of number of members at Q4 end, at Q4 end we had 40.7 million gold star households. That’s up from 16 weeks over year 40.0 million. Primary business 7.6 million, up from 7.5 million.
Business add-ons stood at 3.3 million, both at Q3 and at Q4 end. So all told, we went from 50.9 million member households a quarter ago end to 51.6 million at Q4 end. In terms of cardholders, we ended the year with 94.3 million cardholders up from 93.0 million at Q3 end. During the quarter, we had 13 net new openings. Also at Q4 end, paid executive memberships stood at 19.3 million. That’s an increase of 229,000 exec members during the 16 weeks or about 14,000 increase per week. Which by the way’s the same average for the whole year.
Related to the annual fee increases, the year-over-year quarterly fee income benefit peaked in this quarter, the fourth quarter. It will continue to be additive to our numbers during the upcoming four quarters. A very little in Q4 of ’19 but during the four quarters. But we’ll moderate each quarter. And this is due to the nature of deferred accounting treatment of the fee increases. Going down to the gross margin line, our reported gross margin in the fourth quarter was lower year-over-year by 35 basis points coming in at 10.92% down from 11.27%. That 35 basis point negative excluding gas inflation was -9 basis points.
As I always ask you to do, we’ll jot down two columns of numbers. One is that Q4 ’18 reported and then Q4 ’18 ex-gas inflation. The first line item would be core merchandise. On a year-over-year basis on a reported basis, core merchandise gross margin was down 44 basis points year-over-year. Ex-gas inflation was down 22. Ancillary businesses were +14 reported and +21 ex-gas inflation. 2% reward plus 1 and minus 2 basis points. Other was -6 and -6 basis points year-over-year. And if you add those two columns up you’ll get the 35 basis point negative, which we reported and the -9 basis point, which I’ve just mentioned, on an ex-gas inflation basis.
Now the core merchandise component again on a reported basis was lower by 44 and lower by 22 ex-gas inflation. That still takes into account the sales penetration of the different categories. If you look at the core merchandise categories in relation to their own sales, the core merchandise margin categories in terms of their own sales core if you will, margins year-over-year in Q4 were lower by two basis points. Within food industries and hardiness was up a little. Soft lines in fresh were down a little. But all total it was -2 on core on core.
Ancillary and other business gross margin as I mentioned was up 14 reported and up 21 ex-gas inflation. That's because of the extra good margins as well as sales penetration. Other was -6 as was the case in the first three-quarters of fiscal '18 I've mentioned to you that were recurring some incremental costs primarily related to the rollout of a centralized return facilities throughout the country. And that was, during the quarter, a four basis point detriment, which is relatively speaking, an improvement for the first three quarters.
In addition, we’re cycling some one-time items that last year in the quarter, which net benefited last year’s quarter by two basis points. Some positive legal settlement offset by some impact from last year’s hurricane Harvey. Moving to SGNA, our SGNA percentage was lower or better by 15 basis points. And on a ex-gas deflation in FX it was worse by eight basis points coming in at a 982 of sales this year. that would be the 15 basis points lower than the 997 on the reported basis. Again, for ease of explanation, we’ll jot down two columns of numbers.
A Q4 ’18 is reported and then Q4 ’18 ex-gas inflation. Core operations is the first one. Lower by 16 -- I’ll say +16 basis points and -4 basis points or worse by four basis points on an ex-gas inflation basis. Central -4 and -7. Stop compensation zero and zero. In other, it was a benefit, +3 and +3. Again, you add up the columns you get on a reported basis we were lower or better by 15 basis points and ex-gas inflation higher or worse by 8 basis points. Now the core operation component -- the US wage increase that went into effect June 11th to our hourly employees in the US -- that negatively impacted SGNA by six basis points.
As I mentioned, probably last quarter, this will continue to impact the SGA comparison over the next three quarters. So June 11th through June 10th of next year. Central expense was higher year-over-year in Q4 by four basis points. Seven ex-gas inflation. IT expenses were about two basis points of that. And the balance coming from a lot of small changes in a variety of miscellaneous items frankly but net added up to a -7 ex-gas.
And lastly, other was better by 3 that related to expenses occurred last year on the SGNA line as well from the hurricane Harvey. Next on the income statement, pre-opening expense. About the same year-over-year. This year it came in at $31 million. Last year it was 30 million so a $1 million higher. Last year in the quarter in Q4 we opened 15 openings, 13 net plus a couple of re-lows. This year we had 12 openings. Eight in the US and Canada, and four international. All told, reported operating income for the 16-week Q4 of ’18 came in at a 1.446 billion. This compares to a 1.450 billion in the 17 weeks results of last year in the fourth quarter.
Below the operating income line, reported interest expense was $5 million lower year-over-year coming in at 48 million this year in Q4 compared to 53 million last year. Interest income and other for the quarter was higher year-over-year by 29 million. Interest income itself was higher by 11 million despite one less week year-over-year. A combination of higher interest rates earned on the cash proceeds, the cash that we have, as well as higher invested cash balances. Also benefitting the year-over-year comparison were positive year-over-year FX items that total amounted to $14 million.
Overall, pre-tax income was higher by 2% or $30 million and this year’s 16-week quarter coming in at $1.449 billion this year versus last year’s 17-weeks results of $1.419 billion. In terms of income taxes, our tax rate in Q4 ’18 came in at a 27.4% and 28.4% for all of fiscal ’18. This compared to 27.4 for Q4 compared to last year’s Q4 of 34.3. This quarter’s tax rate benefit of course from the income tax reform that was effective January 1st as well as some favorable discrete tax adjusts. For fiscal ’19, based on our current estimates, which of course are subject to change, we anticipate our effective total company tax rate to be approximately 28%.
A few other items of note. During in all of fiscal ’18, we opened a net of 21 new units plus four additional re-loans. Of the 21 net, 13 were in the United States and eight were international. For ’19, we expect to open 20+ in the low 20s net new warehouses. About three-quarters will be in the United States and about a quarter international. As well we plan to relocate four units to better located and larger facilities, same number as we did this year. We’re also under construction with our first Costco in China and Shanghai with an opening expected late next September. As of Q4 end, total warehouse square footage stood right at 110 million square feet.
Next subject, stock buybacks in Q4 we repurchased $89 million worth of Costco stock or 419,000 shares at an average price of $211.35. After all of 2018, we repurchased $322 million at an average price of 183.13 per share. Moving to e-commerce activities. Overall, e-commerce sales increases continue at strong levels for the quarter coming in at 26.2% and for the year at 32.2%. First and foremost, we continue to deliver great values for our members as well we continue improving and slightly expanding our offerings, including some new brands at higher-end brands. We continue to improve the member experience as well.
This past fiscal year, our site traffic conversion rates in orders all improved year-over-year. Online grocery, both our dry grocery two-day delivery as well as our same day fresh delivery, the latter through Instacart and others like Shipped are growing nicely but still a very small part of our company’s sales. In terms of online two-day grocery, which is the dry side, we generated sales in all 50 states, including the six states where no physical Costco’s are present. Still relatively small to our company.
We continue to improve the online merchandise and sales offerings and service offerings with hot buys and buyer picks and buy online and pick up in store and we’ll continue to do exciting merchandising activities. Overall, all of these efforts we feel are positively impacting our business both online and in warehouse and are helping our sales increasing member awareness of our digital presence as well as increase traffic that we’ve enjoyed in our warehouses.
The next subject I'll touch on is tariffs and their impact on our business. As you know, there are many moving parts and is extremely fluid, starting with the actions and reactions by both the US and Chinese governments. What actions are we exploring and taking in some short-term and some long term? Accelerating shipments before tariffs go into effect. Recognizing there's a limited ability to do so. Everybody's trying to. Working with suppliers to see what can be done to reduce and/or absorb some of the costs.
And some cases, reducing our commitments on certain impacted items. Alternative country sourcing, sure, but again that’s where possible and feasible if a limited ability it takes time. Five, taking advantage of lower pricing on some US items because of the reverse, if you will, such as pork, nuts, and soybeans. In summary, we’ll have to see how customers and competitors react to tariffs and what impacts it’ll have remain to be seen.
Our last topic, as was noted in this afternoon’s press release, we plan to report in our form 10k a material weakness in internal control related to general IT controls. These controls relate to internal user access and program change management over certain of our IT systems that relate to our financial reporting processes. I can tell you that there have been no misstatements identified in the financial statements as a result of the deficiencies and we expect to timely file our form 10k.
In terms of remediation, remediation efforts have begun but the material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and we conclude through testing as the controls are operating effectively. We expect that the remediation of the material weakness will be completed prior to the end of fiscal 2019. Lastly, in terms of upcoming releases, we will announce our September sales results for the five weeks ending this Sunday, October 7th next week on October 10th. With that, I’ll turn the call back over to Brittany for Q&A. Thank you.
Questions and Answers:
Operator
And at this time, I would like to remind everyone in order to ask a question, press * then the number 1 on your telephone keypad. Again, it’s * then the number 1 for questions.
And at this time we have a question from Michael Lasser.
Michael Lasser -- UBS -- Analyst
Good evening, Richard, thanks a lot for taking my question. With the core gross margin down two basis points, the expectation was that you’d be taking some of the tax reform and investing it in the value proposition, particularly price so have those investments been made? And if they have, has it just been -- and where do you think your pricing currently stands with others in the marketplace that have been investing in price?
Richard Galanti -- Executive Vice President and Chief Financial Officer
Keep in mind, we invest in price, it's in our DNA. Certainly, over the last few years, there's been several buckets if you will, that we've talked about. Starting with a credit card transition that afforded us some great savings, some of which we use to invest in price to fuel. Next was the -- generally every five or six years a fee increase of June of ’17. And then, of course, the tax reform. All those things I think has affords us the ability.
So I don't know if -- it’s not like this one thing -- these moneys are fungible and we’re not only investing in price, we’re investing in infrastructure -- that we would’ve done anyway, mind you with the initial successes of two-day and one-day fresh. So there’s a lot going on. In terms of how we feel competitively, I can tell you every four weeks when we meet for our day and a half budget meeting in each of the US as an example. All regions, including foreign regions. But in the US, the eight geographic regions.
They do price drops compared to our direct competitors and we feel very good about those -- where we stand competitively. As it relates to moneys that traditional retails, whether supermarkets or the other big boxes -- look, it works and it helps. But we think it impacts other traditional retailers a lot more than it does us. I think that we’ve seen, as evidenced by our strong traffic numbers and frankly our strong comps in store, we feel pretty good about where we stand on that.
Michael Lasser -- UBS -- Analyst
When you’ve been accelerating your e-commerce growth and it’s growing at a very nice clip -- would you consider further doubling down on some of your e-commerce investment in light of the fact that you’ve been able to show growth through both channels?
Richard Galanti -- Executive Vice President and Chief Financial Officer
Doubling down is I guess -- there can be lots of definitions of doubling down. I think we are. We certainly are putting a lot of focus on it. I can tell you within IT we’ve got a lot of efforts going into fulfillment and sourcing and you name it. I think part of our long-term nature DNA is that we’re gonna do what we feel comfortable doing and grow it nicely. We’ve got a lot of activities in that area. We’ve added brands, we’ve added some categories. But for us, doubling or tripling 3-4,000 skews to 8-9,000 is a lot for us.
But there are plenty of opportunities that we’re seeing. Not only on adding products but the way we do it. We feel that the one and two-day delivery options that we now offer at frankly, better prices than our items are being offered by other third parties before, dramatically better pricing, should help us. Should help that process. We’re finding the ability to benefit not only with e-commerce but using online and emails to drive traffic into the warehouse.
Again, with hot buys and perhaps in some cases, some targeted buys. And online and e-commerce to be able to sell some items that were seasonal in nature that we might only have for 8, 10, 12 weeks. Notably, patio furniture and lawn and garden -- or furniture during the summer. But patio and lawn and garden, we generally were in and out of that stuff for 10-12 weeks. Now we're at 52 weeks online and there's some real sales to be had there. Part of it's on us, though, to keep that awareness going and improving that awareness. I think we’re doing a better job of it but we have more to do there.
Operator
And your next question comes from the line of Simeon Gutman.
Simeon Gutman -- Morgan Stanley -- Analyst
Hi, this is Josh for Simeon Gutman thanks for taking our question. Your comps have been very strong for the last few quarters. If you look at the basket that consumers are buying, would you attribute the strength more to capturing a broader set of categories or are customers trading up within your core consumer categories? And if the former, which new categories are you seeing the most success in?
Richard Galanti -- Executive Vice President and Chief Financial Officer
It’s really pretty balanced. I think not only for us but other non-food retailers like Wal-Mart and Target and certainly Best Buy. Electronics has been strong and there’s some higher price points there in general. Apparel has been helpful to us. So we’ve had some continued strong results for several years now in apparel, both brand and Kirkland Signature. And we keep trying to put another can in that package. So I think all those things help. But it’s more broad-based than specific.
Simeon Gutman -- Morgan Stanley -- Analyst
Thank you. And then, just as quick follow-up. Looking at the consumer health through your lens now, gas prices have leveled off for a while. They’re beginning to rise again. Are you seeing greater sensitivity in any of those categories?
Richard Galanti -- Executive Vice President and Chief Financial Officer
We haven’t yet but again, every day’s a new day. One thing, we’ve found that when gas prices were going down, some retailers weren’t taking it down as much as they could have in our view, which is fine with us. We could’ve gone down a little more but still were able to make a little. So that’s helped us and enhanced that value proposition. Generally, when prices go up, same thing -- we generally can find what people are more conscious.
I remember back in the first part of calendar ’08 when the economy was on fire and gas prices were north of $4.00 and some were saying it’s gonna go into $5.00. We saw a big increase in comp gallons. Same thing we’re seeing in the last couple of years, we’ve enjoyed a big increase in comp gallons because of that value proposition. It’s hard to say how that impacts our numbers. Our numbers have been fortunately pretty good.
Operator
And your next question comes from the line of Chuck Grom.
Chuck Grom -- Gordon Haskett -- Analyst
Thanks a lot, Richard, just a first question on the ancillary -- part of the gross profit margin and the composition that you provided. Just wondering why the ancillary line was up 14 basis points. It’s a big reversal from the third quarter.
Richard Galanti -- Executive Vice President and Chief Financial Officer
The big thing is gas. Gas is now low double-digit percentage of our total sales on a price point that’s 20+% higher per gallon than a year ago. While it’s a low margin business relative to the rest of the company, its margins had improved year-over-year so on that penetration that helped us. Ecomm helped us a little as well.
Chuck Grom -- Gordon Haskett -- Analyst
Okay, so ecomm is sort of captured in that line. The second question is, I know you guys have talked about sort of store targets in the lower 30s and now you’re talking low 20s. Just wondering why the deceleration in the number of openings planned for 2019?
Richard Galanti -- Executive Vice President and Chief Financial Officer
We have a budget that’s between 20 and 25 and so I come in at the low 20s just to be conservative. We’ve got more on our plate. If you look at this year, it’s like three-quarters, one-quarter US. There’s more in the pipeline now internationally, but that pipeline takes longer to get through.
It’s a longer pipeline. And so I think you’ll see that change. Best guess in 2020-21. If I was a betting person, over the next five years beyond ’19, probably some number in the mid-20s is a likely number. But we’ll have to see. That’s subject to change.
Chuck Grom -- Gordon Haskett -- Analyst
Okay, and then just last question on e-commerce. What do you think about the impact from consumers buying online? Have you seen any change in how they're shopping in-store? In other words, are they coming less frequently to the store? I don't think you're too concerned about it but if you could just kind of flush out maybe the entire basket and trends for a total household when you blend in with the store trips along with the online buying habits?
Richard Galanti -- Executive Vice President and Chief Financial Officer
The fact that traffic is actually as strong as it’s ever been, we enjoy like a 4-2 average compound in annual traffic increase for seven years from ’09 to ’15. And I know everybody was concerned -- you guys -- everybody was concerned down to the low threes. We’ve enjoyed it back in the fours now, 4-9-5 the last couple of months I believe. And so, it’ shard to say if it should’ve been higher than that if e-commerce. We think it's been a net additive. But it's hard to say at this point.
Operator
And now we have a question from John Heinbockel.
John Heinbockel -- Guggenheim Securities -- Analyst
So, Rich, let me start with the difference between the -22 margin ex-deflation and the -2 in their own category. So obviously adverse mix. I think that’s maybe picked up a little bit the last six months. What’s the primary driver of that? Is that mostly the strength in electronics or are there other factors at work?
Richard Galanti -- Executive Vice President and Chief Financial Officer
It’s not mix, no, electronics margins are generally where they’ve been. It’s not a big issue there. As gas. You’ve got a business that’s -- what percentage of gas is our business? 12-13%? 12% of our total company sales is gas on a much different margin structure.
John Heinbockel -- Guggenheim Securities -- Analyst
I think when you pull out the -- ex-gas deflation, right? I think margins were down 22 but they were down only two when looked at in their own categories. The difference between the two is not mix driven.
Richard Galanti -- Executive Vice President and Chief Financial Officer
It may be mix driven somewhat but keep in mind there’s lots of other things that go into margin. There’s the ancillary businesses that have higher margins -- if you’re thinking about pharmacy and optical, their gross margin, which is sales minus cost of sales, is a higher gross margin than the 14 or 15 we talk about because it includes professional optometrist and pharmacist.
So it’s kind of like, what is the price the customers buying it all in? You’ve got other categories that have ancillary categories are services that have higher margins. All those things go into the mix.
John Heinbockel -- Guggenheim Securities -- Analyst
But yet you’re seeing a penetration of chaos continuing to rise and is it rising the same as it had been, faster or slower?
Richard Galanti -- Executive Vice President and Chief Financial Officer
I think it’s been consistently rising. Not faster or slower. Keep in mind, there’s still new items out there but you’ve got a lot of items that start out at 10, 20, 30 million. The big items, like toilet paper and water, yet we saw a big growth over the last couple of years in water as when we brought the price down from 3.49 to 2.99. I’m just looking down a list. The Kirkland Signature 14-cartridge razor blades with a handle, several of the organic cheeseburger in the food court, fragrances, all kinds of beverages.
John Heinbockel -- Guggenheim Securities -- Analyst
And then just a separate topic. You obviously were doing some stuff with -- on a limited basis. I think you wanted to keep it limited. Is it still just applying to those items -- the notebooks and the bags? Is there an idea of expanding that?
Richard Galanti -- Executive Vice President and Chief Financial Officer
In the past, we mentioned things like jewelry, some limited electronics items like tablets, and small sized items as well as handbags, high-end handbags. We have expanded it to some additional electronics items but it's still -- we still want to do it our way. We think that these are areas where we've been surprised that many people are buying it because it's convenient and then they're gonna come by to shop.
Not to suggest these are all incremental shops by no means. But while they’re in there, over half of them are not just picking up the item, they’re going into the shop. And frankly, shop at a much higher average than the average shopper. So far so good. We’ll see.
Operator
Your next question comes from the line of Karen Short.
Karen Short -- Barclays -- Analyst
Hi, thanks. I just wanted to start with e-commerce for a second. Can you just give us an update on where e-commerce is as a percent of sales? And then, I wanted to see if you could give us a little color on how to think about the growth rate of e-commerce going forward?
Richard Galanti -- Executive Vice President and Chief Financial Officer
I’m sorry, what was the last part of the question?
Karen Short -- Barclays -- Analyst
How to think about the growth rate of e-commerce going forward?
Richard Galanti -- Executive Vice President and Chief Financial Officer
The numbers right around 5% of sales. I’m sorry, a little over four. Look, we’ll drive it as much as we can. I think a few months ago when we went from a string of monthly 30s+ to 23 or something people were disappointed a little bit out there. We feel very good about it. I think we’ve shown in the last couple of months -- I can’t say anything about September -- that’ll be next week -- but we’ve seen good numbers and we feel -- look, we have the benefit of having not focused on a lot for many years and now taking advantage of that in a big way.
The example of some big ticket seasonal items like home furnishings and furniture in one part of the year and adding 40 extra weeks of offerings if you will -- offering it online now -- as well as what we’ve done with white goods and the success there. And three years we’ve gone from 50 to $500 million in white goods sales, which has been helped of course by the brands willing to sell us good high-end stuff and our ability to sell it.
Karen Short -- Barclays -- Analyst
Okay. That’s helpful. Just in terms of the tariff commentary that you made. Any way you could give some sense of what percent of product is imported from China today and where you kind of see that going in the next few years?
Richard Galanti -- Executive Vice President and Chief Financial Officer
It's really hard to -- no, we don't want to give out specifics. There have been some of the analysts out there that have done some estimates that seem to be within the range but its fluid. The real answer is that things can't change overnight. What can change is demand for an item if the price is set to go up 15% or 25%. We've experienced not distiller things.
In Mexico when you've got a bunch of US-sourced goods historically and when the peso to the dollar has changed dramatically from three to eight to ten and then from 10 to 14 and more recently in the last couple of years, 14 to 18 to 20 range. That'll have a dampening effect on certain products. So it has less of a dampening impact. It's really too early to tell.
Karen Short -- Barclays -- Analyst
Okay. And then just last question. I guess, can you give us inflation in 4Q both on cost and at retail and then expectations for inflation given all the narratives from vendors calling out passing on cost increases?
Richard Galanti -- Executive Vice President and Chief Financial Officer
I don't know. I don’t have that off the top of my head -- on a cost basis, and this is purely like looking your life -- and not on sales because some categories have a higher penetration. It’s very small. It’s slightly inflationary but I’m talking about capital S to the word slightly.
Karen Short -- Barclays -- Analyst
Okay. And then, what are your thoughts just generally because there has been a lot of narrative from the vendors in terms of passing on price increases? Where do you guy’s kind of stand or what are you seeing on that front?
Richard Galanti -- Executive Vice President and Chief Financial Officer
Our DNA is, we want to be the last to raise the price. We want to work with any supplier to figure out how to not do that. But ultimately, you can’t eat all these. But we feel competitively we’ll keep doing what we do. We’re usually the last to raise the price and the first to lower it. I think we have, as a company, one advantage is that we don’t have to sell every brand alternative, every size alternative, every skew alternative of given item.
And there are times when our buying power is in effect the octane in that buying power is more than the $138 billion of purchasing power because it’s a much number of limited items and not only brands competing but also what we know about many of these items because of our private label nature. So it affords us, I think, some opportunities that perhaps make it a little easier for us. But nothing’s equal.
Operator
And your next question comes from the line of Christopher Horvers.
Christopher Horvers -- JP Morgan -- Analyst
Thanks. Good evening. So first question is, you mentioned in the release that there have been no misstatements found related to the internal control weakness. Is that the highness -- is there any risk that there could be a misstatement of the financials in the future? Or is it more about fixing the systems and getting the testing done?
Richard Galanti -- Executive Vice President and Chief Financial Officer
Keep in mind, first of all, that we feel comfortable and we feel that ultimately our auditors feel comfortable or else we wouldn’t have expressed a level of comfort we did in the press release about there’s no misstatements and there’s the timing that we filed on time including the K. The issues had to do with internal user access. People within IT are contractors and somebody who may have had access to something they should’ve is sometimes that once they should’ve had that access relieved, it took a little too long to do so.
So the controls were in place -- we should’ve done a better job. We went back as far as we could and some systems for the entire fiscal year, which is what you want to do, and some of the newer systems there was no look back ability for certain things. I can tell you all the look-backs that we have done and that our outside help has done, has found no issues whatsoever in terms of misstatements or breaches. So that’s what we can tell you. But we can’t be more positive of that until we release the 10K. And so, I don’t want to belittle it. It should’ve been fixed. It was internal to us, not external. We’ll go from there.
Christopher Horvers -- JP Morgan -- Analyst
Understood. That’s very helpful. Can you also talk about the organic MFI growth number -- sort of XFX in the 53rd week? It looks like all in that number was running a little bit below 5% in the first half of the year and then in the third quarter sort of picked up over 5% and then in the fourth quarter nearly 6%. Is that sort of rough math that you’re seeing sort of like an MFI comp accelerating?
Richard Galanti -- Executive Vice President and Chief Financial Officer
That’s a pretty good rough math. Keep in mind, one of the issues is under deferred accounting. The US and Canada, $5 and $10 fee increases that went into effect June 1st of ’17 so it affected in total was about $245 million. Well over the next 12 months, using that number as the example, that’s how much more we have in our checking account. Based on deferred accounting it takes 23 months to get that into the P&L. So part of the increase from year-over-year Q3 relative to year-over-year Q4 is you peak in 12 months cents if you think about it.
Somebody who got a $10 increase for the first time their renewal happened to be in June, that $10 was effectively $0.80 a month for 12 months, right? June to May. Somebody who got it 11 months later in May, they paid it for the first time but 11 months after the first person did, that’ll hit the $0.80 a month 12 through 23. Rough numbers. So if you will, in month 12 is when you peak in terms of that -- getting what I’ll call the full effect of 1/12th of the 245 million in this example.
I think a little of it probably has to do with that. I wouldn’t suggest that what used to be a 4% increase became a five and is now a six. Some of that increase is related to that. Some of it, of course, is related to how many openings we have and where the openings are. When we opened a very successful unit on the east side of Seattle in Redmond a year and a half ago, with three other units on the east side, including Kirkland and our headquarter here and one other. We went from 195,000 members or 65 per building on average, maybe we added another 8-10,000 over the next year.
We reduce the average members but we added debt of cannibalization 120-130 million of extra sales in year one and we’ll grow from there. So when you do that that changes that growth metric a little bit. Similarly, when we opened in Australia or Asia, we’re afforded huge numbers of new sign-ups in the first year with a lower renewal rate.
But nonetheless, there have been openings where we’ve had 40-50,000 new members when the company average for all warehouses whose average age is probably in the high-teens if not low-20s an average in the low-60s of warehouse. International impacts it. A few of the living social things that we’ve done once every year or two. All those things impact that number a little bit.
Christopher Horvers -- JP Morgan -- Analyst
So I guess fighting through all the noise, how would you describe sort of like an MFI comp trend over the past 12 months? Has it improved?
Richard Galanti -- Executive Vice President and Chief Financial Officer
I would say -- if you take out the benefit of the fee increase and you take out the difference of weeks, my guess is a bit about the same. I’m guessing. We picked up a little from some of the Sam’s closings. The 63 Sam’s closings. We opened up a couple of units less than we did a year ago and I think proportionally a few less international units.
I don’t have that in front of me. So all those things would tweak it a little bit one way or another. I think overall the fact that our renewal rates had improved and continue to improve finally after the impact of the transitions with credit cards at the US and Canada makes us feel pretty good about it.
Christopher Horvers -- JP Morgan -- Analyst
Understood. And then the last question. Could you give us how many Visa cardholders you have in the US currently and how does that compare to what you entered in with from an AmEx cardholder perspective?
Richard Galanti -- Executive Vice President and Chief Financial Officer
I don’t have that number in front of me. It continues to grow. I believe that in the US our Visa tenders -- total Visa, not just the co-brand card -- is approaching 50%, in the high 40s. It’s probably 55, 45 to Costco co-brand Visa. That could be 60-40, I don’t have that number in front of me. But it continues to grow. We continue to get sign-ups. I think when somebody sees some of the things we’ve done with some of those moneys, we talked earlier about investing in price.
When you can buy something like a high-end television that’s already great value at Costco and then when it’s on MDM or coupon, it’s another $200 off and on top of that if you use your Citi Visa card, not only is it you get a cash card -- and that’s not on every item but in terms of promotional things that we’ve done over some of the holidays -- it’s really worked. So those are the kinds of things that we’ve used that for.
Christopher Horvers -- JP Morgan -- Analyst
Understood. Thanks very much.
Operator
And your next question comes from the line of Edward Kelly.
Edward Kelly -- Wells Fargo -- Analyst
Yeah, hi, good morning. Or sorry, good afternoon. Rich, I wanted to ask you about complements. If you could just maybe reflect a little bit on the impressive run that you’ve had. It wasn’t long ago in the US the comps had kind of slowed to the low single digits, which now seems like a one-off. But cost now are above historical norms. Can you just talk about what you think is driving that incremental strength? How should we be thinking about what I would call mean reversion? And the timing around that and what is the real mean in this 2016 even relevant to think about?
Richard Galanti -- Executive Vice President and Chief Financial Officer
Look, I don't know. I remember 2016 -- one, we did a little bit to hurt ourselves when we changed up the MDMs and greatly reduced the number of promotional days of shopping if you will. We changed that over a few months and we got back to where we were. There was also add on that the conversion of credit cards where you had a lot of people that were auto-renewal on credit card that lost that auto-renewal. Any member under the old AmEx program that was using a different AmEx card at Costco, whether it was the Delta card or a hotel card, store reward card.
All those things -- some of those became auto-renewal that our members opted to just have auto-renewal. Well, when we switched from one network to another, all those non-cards were acquired by those auto-renewals went off. Some of that is tied up into that 16 year. I also think that some of the things we've done with buyers' picks and hot buys and collecting email addresses. Again, we're proud of the fact that we've greatly increased the number of email addresses we have. Some would look at it and say, well why didn't you just do this all along? Well, we didn't. And we're not benefiting from that. So all those things I think have helped and hopefully, that new norm will continue for a while. Every day’s a new day.
Edward Kelly -- Wells Fargo -- Analyst
And then just circling back on e-commerce growth. Obviously, you started the year strong. You had actually mentioned something, Richard, about people being a little bit disappointed when it slowed. Did that surprise you at all? That it had slowed the way that it did? And then, can you talk about how groceries ramping relative to your expectations two-day, same day, and is there any metrics you can share relative to the basket size, margin, etcetera?
Richard Galanti -- Executive Vice President and Chief Financial Officer
In terms of when renewal rates or comp slowed a little bit. I remember when our shopping frequency had slowed a little bit after this incredible run from ’09 to ’15. I remember at the end of ’09 when we achieved I think a 3-8 or a 4-0 of frequency up from a historical average of like 1-7. I was the first to say and remind people. If it’s a lot lower than 10, it’s still a good two-year stack because this is not sustainable. And then for four years, we enjoyed it.
But I think you look at the things that we’ve done merchandising wise, the added brands we have, the better communications tools that we can communicate with our members. Really that low-hanging fruit that we are benefiting from on top of what one of my colleagues just said, great merchandise at low prices. There’s a lot of good things that we’ve had going on for ourselves. I think that should continue. We still have a lot of buckets here.
Edward Kelly -- Wells Fargo -- Analyst
I meant on the e-commerce comp or e-commerce growth. And what we've seen recently there relative to how you've started the year, has that small slowdown surprised you at all and how has two day, same day delivery?
Richard Galanti -- Executive Vice President and Chief Financial Officer
Well, if you say slowdown it went from a low 30s number to a low to mid 20s number. I’ll throw it the two-year stack back at you. We feel very good about it. We feel very good about what we’re doing and we think we’ve got a lot of new things to come on and to expand it. We still have a lot of -- if you will -- funds in the bucket to drive business in that direction as well.
And the brands that are willing to sell us that historically hadn’t. So all those things help. But I think the biggest thing is we’re focusing on it. But we’re focusing in our way. We don’t need to go buy a company and we’re finding out that there’s a lot of opportunity for us doing some of the things that we want to do.
Operator
And your next question comes from the line of Scott Mushkin.
Scott Mishkin -- Wolfe Research -- Analyst
Hi, guys, thanks for taking the question. This is Paul Carnan for Scott. Just a question on growth going forward and also just business today. Where do you think you are in terms of wild share of your current customers and what’s the biggest opportunity to grow wild share of the customers? And also, if you had to divide going forward where most of your growth is coming from, is it coming from wild share? Is it coming from acquiring new members? Or continued unit growth and new markets?
Richard Galanti -- Executive Vice President and Chief Financial Officer
Look, frequency’s up, average sale is up. We know there’s an example when we did filled that we don’t add a lot of new members. We have a lot of loyal members that are shopping a lot more frequently. We know that our success with both -- when we’re asked the question, what are big two or three things that impact that help our sales?
I think, generally speaking, we all generally feel it’s our strength in fresh foods, which continues to grow and improve, it’s our gas stations, which gets you in the parking lot. And the executive membership. And we’re doing a better job of now emailing you. So I think all those things have helped. As our head of merchandising would say, it’s great merchandise at low prices and some of these buyer picks and hot buys have helped as well.
Scott Mishkin -- Wolfe Research -- Analyst
Great. One quick follow-up and maybe it’s too early to tell. Are you seeing any changes in membership trends for your clubs that are more heavily using Instacart? Is Instacart delivery for non-members leading to any uptick in memberships for those clubs? And thanks.
Richard Galanti -- Executive Vice President and Chief Financial Officer
Instacart and our other third parties like Shipped and others. We have good relationships with them. It’s growing nicely. But it’s still a pretty small part of our -- we have not discerned any big difference there. Where we’ve looked -- and this is anecdotal, not statistically valid -- but when we’ve looked at it. When you take a group of loyal Costco members and then a group within that group who had like characteristics of average basket to shopping frequency and they’re loyal.
And then you have some of them start using Instacart. Some of them remember using it to fill in some of it that they may reduce their annual shops by a few and increase this way several. The key for us, though, is making sure they still get into Costco occasionally. And so far we’ve seen a net increase of that but it’s a very small population and it’s a very small size in its entirety at this point.
Operator
And your next question comes from the line of Scot Ciccarelli.
Scot Ciccarelli -- RBC Capital Markets -- Analyst
Hi, yes Richard, thanks for taking my questions. This is Jonathan Liverson for Scot Ciccarelli. Just a question on e-commerce as well as it continues to be of focus. You've made sizable investments there and still putting up pretty impressive growth. Could you tell us what percentage of e-commerce is shipped by your stores versus shipped by vendors?
Richard Galanti -- Executive Vice President and Chief Financial Officer
Very little. 50% is us but not through the warehouses just us shipping directly from our e-commerce fulfillment centers. Very little is done at the warehouse. It's only the business center with our two-day dry.
Operator
And your next question comes from the line of Oliver Chen.
Oliver Chen -- Cowen & Co. -- Analyst
Hi, Richard. Regarding e-commerce as it becomes a bigger percentage of your total business. What are the main dynamics in terms of the margin impact there? And you have been speaking about this but how would you prioritize the main drivers to drive the awareness growth of ecomm and the kinds of initiatives that you're pursuing? Because that seems a big opportunity.
Richard Galanti -- Executive Vice President and Chief Financial Officer
Well, again, we’ve said before. First and foremost, we want to get you to the facility. There’s certainly in some categories, like white goods and big-ticket fiscal items as well, e-commerce is the way to go in a big way and we've certainly benefited from that. We don't see e-commerce taking in over our brick and mortar.
We've also tried to figure out how to do some of the e-commerce or delivery related activities that some members want and that we can provide a savings too but doing it our way. I think there's still plenty of low-hanging fruit and we don’t want you to get comfortable just shopping at Costco online unless there’s not a Costco within 100 miles.
Oliver Chen -- Cowen & Co. -- Analyst
Okay. And Richard, from a modeling perspective for CapEx for next year. What are some of the major buckets and how should we think about how that will unfold?
Richard Galanti -- Executive Vice President and Chief Financial Officer
First and foremost, this warehouse and there’s the few international, a couple more. IT is a few hundred extra. Not extra from the year before but in general. We’ve got a chicken plant, which is north of 300 million. Big chunk of that is expended in fiscal ’19 and we’ve already started spending money. The cheapest money was the acreage. The expensive money is the facility and all the equipment and everything.
The whole fulfillment -- I guess what's new would be some things like the chicken plant, some of the fulfillment activities we have on two-day delivery. And e-commerce, small package ecomm where that'll be a savings frankly to us but we're just -- we're doing a lot of those things a lot more manual than we needed to. There’s a few extra things. I think the number will still be in the very high twos-ish.
Oliver Chen -- Cowen & Co. -- Analyst
Okay and lastly, the multi-vendor mailer. Are you pretty pleased with the state of it now? Is it in the right place? I know it’s an important document and you’ve been thinking about making sure that it’s efficient with respect to breadth and depth.
Richard Galanti -- Executive Vice President and Chief Financial Officer
I think we’re pleased. Other than a year and a half ago, a year and nine months ago when we changed the number of MDM days in the warehouse, which hurt frequency in the warehouse. Once we changed that back, the fact that we’ve reduced the number of offerings in and of the end by 20+% and increased the total value by more than that and by a net positive.
And it’s definitely working in terms of what we want to get out of it. Mind you, also, we’ve taken some of those items -- not every item works the same way. Sometimes some items that have been regular to get stale. Sometimes we got to shake it up a little bit or change the value proposition. Sometimes we take it out of the MDM and do it in a different way with these hot buys and buyers picks. So I think we’ve in a way added to the arsenal a little bit and it’s working. But it’ll still evolve some more.
Oliver Chen -- Cowen & Co. -- Analyst
Yeah. And do you believe that tariffs will contribute to risk factors with consumer confidence? What are your thoughts on how that may interplay because we're in such a great backdrop currently?
Richard Galanti -- Executive Vice President and Chief Financial Officer
On an item given basis, when you have an expensive, discretionary item, take like a patio set. I’m just using that as an example. You’re gonna have a little less demand probably. Is it gonna change -- mind you, there’s a few items on the food side that are going the other way because this is an example of pork where something like a third of the US pork is exported to China.
Well, that’s changed and therefore pork prices are way down. Those are great savings. That’s creating some opportunity. Same thing with nuts. Same thing with soybeans, I believe. I’m just giving you some anecdotal examples. So you’re gonna lose some and win some. How it impacts -- I think everybody feels that tariffs -- people smarter than me don’t like them. So it’s probably a small net negative. Certainly, whatever negative it is we can weather it better than others.
Operator
Your next question comes from the line of Greg Melich.
Greg Melich -- Evercore ISI -- Analyst
Hi, thanks, Richard. I had a couple of questions. One was on gasoline. Obviously, grown a lot but what was the gallon growth on the quarter and did it penny profit actually improve? It sounds like it did but I just want to see if that’s the case.
Richard Galanti -- Executive Vice President and Chief Financial Officer
The gallon increases were in the low double digits, 11% or 12%, which is huge compared to the US economy. That’s also the new gas stations as well but I think the comp has got to be in the high singles.
Greg Melich -- Evercore ISI -- Analyst
Stations are at most of the clubs that you can have them, right? Is there a penetration number you have?
Richard Galanti -- Executive Vice President and Chief Financial Officer
Well, new openings are getting them more so than not. And international we’re still adding where we can. I think in Australia with 10 locations we’ve got four, maybe five with gas. Mexico we’re adding some. Japan we have a few. US and Canada certainly is more saturated with gas stations. People say we’re not gonna have at 117th street east river drive.
Generally speaking of when we relocate, we do. A good example in your neck of the woods is the land occupied or constrained Hackensack Costco and moved it to Teterboro and then turned the Hackensack into a business center. The Teterboro is the -- guessing here -- 20,000 square feet larger with all the bells and whistles with the gas station with a lot better parking. A few here and few there that way.
Greg Melich -- Evercore ISI -- Analyst
And then a follow-up on the co-branded card. If I did my math right, sort of upper 20s percent of the tender now would be on your card in the club. And if I remember correctly, part of the benefit of this is getting people top of wallet and getting them to use it everywhere. Do you have any sort of update on the usage of how much more it’s being used outside of Costco? And therefore how much more loyal that member is in terms of using the card and then coming back to the club?
Richard Galanti -- Executive Vice President and Chief Financial Officer
I’ll just say, yes we do. We do have that information.
Greg Melich -- Evercore ISI -- Analyst
Is it the same -- is it back to where it was with AmEx I guess is what I would say, or above?
Richard Galanti -- Executive Vice President and Chief Financial Officer
It’s quite a bit above. Keep in mind, part of that is the fact that it can be used in more places. So if we get -- whichever of those cards was your top of wallet, you had more potential to use it say than you did before.
Greg Melich -- Evercore ISI -- Analyst
That’s great. Good luck. Thanks a lot.
Operator
And your next question comes from the line of Matt Fassler.
Matt Fassler -- Goldman Sachs -- Analyst
Hello, Richard, good afternoon. How are you? My first question relates to SGNA. Trying to figure out a couple of the moving pieces. First of all, it looks like the wage increase that you discussed probably drove the SGNA higher by a bit less than a percentage point. So not an overwhelming increase. Just trying to benchmark the year-over-year increase when you exclude the factor of the extra week a year ago. I went back and you weren’t terribly granular I think on last year’s call about the expense profile of that extra week.
So as we think about the apples to apples increase because clearly the SGNA seems like it’s gonna -- might increase at a slightly accelerated rate with the wage increases. How was that an average week you would’ve had with the extra week a year ago? Are there expenses that don’t get carried in for the extra week?
Richard Galanti -- Executive Vice President and Chief Financial Officer
There’s little, if any, expenses. Some of the people said virtually nothing. So the week are fully allocated. It’s not like if we took an annual expense and divided it by an extra week or had a free week at the end of the year. We don’t. We do it by the number of days of the year. Nothing there. What was the other part of the question? In terms of the wage increases related to the tax reform. At the time we did that we announced it was gonna be somewhere between $110-120 million a year.
Matt Fassler -- Goldman Sachs -- Analyst
Understood. I guess partial impact here in Q4 given the June implementation.
Richard Galanti -- Executive Vice President and Chief Financial Officer
June 11th so is about three-quarters -- even though Q4 is normally a 16-week quarter not a 12-week, it was about 12 of the 16-week was this.
Matt Fassler -- Goldman Sachs -- Analyst
Understood. Secondly, your inventory increase was a bit higher and I did speak to front-loading some receipts in anticipation of tariffs. Was that a factor? And anything else moving the inventory in that direction?
Richard Galanti -- Executive Vice President and Chief Financial Officer
When I looked in the list category wise, electronics year-over-year is higher by choice. A little of it is what you just mentioned. I think the last thing is we clearly have increased our inventory levels, particularly in e-commerce and delivery-related items.
Matt Fassler -- Goldman Sachs -- Analyst
Great. And then finally, on renewal rates, you seem to have shaken off some of the cobwebs that emerged in the period after the credit card transition. Your US and Canada renewal rate is back to where it was in the third quarter of 2016. So I guess the best in nine quarters or so and even more so for the worldwide rate. Have we sort of shaken the cobwebs off now and are we -- do you think there’s more room to move higher here or do you think we’re kind of back at the level where we’re likely to plateau?
Richard Galanti -- Executive Vice President and Chief Financial Officer
Who knows. I think we feel good about the loyalty and what we’re doing to drive loyalty. There’s some things that either impacted either a little up or a little down. That depends on rounding, you round to the next tenth or not. When we do one of those -- I think we’ve done four of them now in the last four or five years -- the living social or anything like that. We had an extra 250,000 members in a 12-day period or a 12-day period. By definition have a low renewal rate on them a year hence. So that hurts you a little bit with that anniversary a little later, it helps you a little bit.
There’s lot of little things like that but when we look at the underlying rates and I look at -- even taking a country like Australia, which is only 10 locations. Its renewal rate is lower -- it's still in the 70s but it's relatively new. The average age of those locations is, what? Four years-ish, maybe. I look at the last four years -- I only know this because I'm going there next week. If renewal rate is consistently improved for the company and each of the last four years. Which is consistent with what we've seen in other countries. So I think the bell weathers, of course, are US and Canada, where we're but sure the average age of these locations are in the 20s. So far, so good.
Operator
And your next question comes from the line of Peter Benedict.
Peter Benedict -- Baird -- Analyst
Hey, Richard. A clarification just on the CapEx. Just want to make sure I heard you right. So CapEx this year, high twos, maybe low threes with the incremental increase driven I guess a part of it by the chicken plant? Is that the way we should think about it?
Richard Galanti -- Executive Vice President and Chief Financial Officer
Yes. Typically, our own internal budgets are 2-300 million above where we come out. I believe this year maybe we’re 100 above, right at 300 or 310. And that includes the beginnings of the chicken plant. Some additional things we’re doing with fulfillment. Overall, something in the high twos. I think we graduated from 2-5 to 2-8 range to 2-8 to 3-1 range.
Peter Benedict -- Baird -- Analyst
Do you have the fourth quarter CapEx number?
Richard Galanti -- Executive Vice President and Chief Financial Officer
Not yet. It’ll be in the K in the couple of the weeks.
Peter Benedict -- Baird -- Analyst
On the international openings, you said 75% of the clubs this year are gonna be in the US but you said you’ve got a bigger pipeline and internationally they take longer. Is there a timeframe where we should be thinking about when non-US club openings will account for more than half of year openings? Is that a couple of years down the road?
Richard Galanti -- Executive Vice President and Chief Financial Officer
If you’d have asked me a couple of years ago I would say it’s three years around the road. If you asked me today it’s probably two to three down the road. And I could be wrong by a year further. We do definitely have more in the pipeline. We’ve also been surprised by more opportunities in the US that we -- if you go back to 10+ years ago, some of the cities we’re in today we would’ve say, no, we’re not gonna go there.
There’s somebody else there already and it’s not that big of a town. But we’re finding success in those examples. I think ultimately, international -- I don't know what it is. Whether it’s three years or four years or two years from now.
Peter Benedict -- Baird -- Analyst
Okay. Last question just around brands, both yours and others. Which category beyond white goods are you seeing kind of an incremental step up in your ability to get premium brands? What was the private label penetration for Q4 and for the year?
Richard Galanti -- Executive Vice President and Chief Financial Officer
I can’t give you the latter number but in terms of ability to get new brands, apparel continues. Cosmetics. Some specialty food items, but those are fewer and further between. Sporting goods to some extent.
Operator
And your next question comes from the line of Kelly Bania.
Kelly Bania -- BMO Capital Markets -- Analyst
Hi, thanks for taking my questions, Richard. Wanted to just ask about -- with e-commerce now about 4% of sales, just curious what percent of your members are really engaging online and I guess in connection with the renewal rates question. As you look at those members that are engaging online, are they renewing at a similar rate or a higher rate? Just curious how that could influence the renewal rates over time.
Richard Galanti -- Executive Vice President and Chief Financial Officer
We don’t disclose how many of our members. It’s increasing dramatically but from a smaller base because we have tried in the past. As it relates to -- I’m guessing -- I know that an executive member is more frequent and more loyal than a gold star member. An executive member with the Citi Visa card comes more often and spends more and is more loyal than that.
I would guess that somebody who’s using it online -- if they had come from the warehouse and they’re using online in addition to that -- that’s more loyal than their respective groups of those other things. But beyond that, when you’ve got somebody that’s just using it online, I don't know off the top of my head.
Kelly Bania -- BMO Capital Markets -- Analyst
Just a clarification on the CapEx. I think you mention some spend there going towards the two-day delivery program. What exactly is that for?
Richard Galanti -- Executive Vice President and Chief Financial Officer
The two-day delivery is about seven or -- most of that’s ecomm fulfillment. There’s some additional expenditures in some of the business centers, including building a couple of the business centers in geographies that will greatly reduce what I’ll call the outsize UPS fees relative to the current mileage that has to be traveled to get those packages to their customers.
Kelly Bania -- BMO Capital Markets -- Analyst
Okay, got it. And maybe just one last one on wages. You’ve obviously been making investments. But with the announcement this week from Amazon going to $15, just curious if you see more pressure from that or broadly speaking and how you plan to over the next couple of years?
Richard Galanti -- Executive Vice President and Chief Financial Officer
Well, first of all, we raised our entry-level wages to $14 and $14.50 in the United States in the past year related to the tax reform. We give increases of top of scale every year. Even though our starting wage is $14-14.50, an employee who's been here a number of years can get up into the equivalent of the mid-40s to the mid-50s on an hourly basis overtime on top of great health benefits. So the end of the day, we feel very good about where we are.
Employees starting today on a full-time basis it takes about five years to get to top of scale. I think on average, US hourly wage is in the mid-22s, 22.5, roughly, which we believe dwarfs any other retail or retail-type entity out there on a big scale. You’ll see more pressure on it. And by the way, there are some geographies around the country, even before we raised it to $14.50 we were already above that. We started above that because of necessities. Parts of the Bay Area would be an example.
Operator
And your last question comes from the line of Bud Bugoch [inaudible] [01:15:57].
Bud Bugoch
Hi, Richard, thank you for taking the question and thank you for lasting this long on the call. Most of my questions have been answered just on e-commerce can you give us the e-commerce impact on comps? Do we have that number?
Richard Galanti -- Executive Vice President and Chief Financial Officer
I’m sorry, the comps?
Bud Bugoch
Yeah. E-commerce impact on comps. How many basis points does it impact the comp?
Richard Galanti -- Executive Vice President and Chief Financial Officer
It’s somewhere in the 70 or 80 basis point range.
Bud Bugoch
Okay. Thank you.
Richard Galanti -- Executive Vice President and Chief Financial Officer
It’s north of 50 basis points and it’s below 100.
Bud Bugoch
And can you talk a little bit about the demographics of the membership sign-ups by age? What does it look like? Is your average age of members reducing, getting younger? And what about the sign-up distribution?
Richard Galanti -- Executive Vice President and Chief Financial Officer
We feel very good about the sign-ups. By the way, one day they were called Gen Xers or Gen Zs or whatever they were called before that. That’s what you generally sign these people up. I think we’re in the very high 30s or low 40s in terms of younger people signing up, which is consistent with what we’ve seen. What was the other part of the question? I need to find that out myself. I haven’t seen that since we told people that our average member in the US went from 54 to 52. That was a number of years ago.
Bud Bugoch
Okay. And last on e-commerce, is there e-commerce activity outside of the US? Can you talk about the strength that you might see there?
Richard Galanti -- Executive Vice President and Chief Financial Officer
We're in US, Canada, Mexico, UK, Taiwan, and Korea. And over the next year and a half, I think we have two other countries planned. It's growing nicely in other markets. Frankly, the US ecomm business dwarfs the others and has probably had the biggest benefit other than starting off from a very small base because of where we had taken and combined in line and online buying together, two years ago. And we’ve seen a big benefit for that. It works.
Operator
And this concludes today’s conference call. You may now disconnect.
Duration: 74 minutes
Call participants:
Richard Galanti -- Executive Vice President and Chief Financial Officer
Michael Lasser -- UBS -- Analyst
Simeon Gutman -- Morgan Stanley -- Analyst
Chuck Grom -- Gordon Haskett -- Analyst
John Heinbockel -- Guggenheim Securities -- Analyst
Karen Short -- Barclays -- Analyst
Christopher Horvers -- JP Morgan -- Analyst
Edward Kelly -- Wells Fargo -- Analyst
Scott Mishkin -- Wolfe Research -- Analyst
Scot Ciccarelli -- RBC Capital Markets -- Analyst
Oliver Chen -- Cowen & Co. -- Analyst
Greg Melich -- Evercore ISI -- Analyst
Matt Fassler -- Goldman Sachs -- Analyst
Peter Benedict -- Baird -- Analyst
Kelly Bania -- BMO Capital Markets -- Analyst
This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.
More From The Motley Fool
The Motley Fool recommends Costco Wholesale. The Motley Fool has a disclosure policy.
