Roland Vachris

Thank you, Gary, and good afternoon, everyone. And thank you for joining us today. As we wrap up the first quarter of fiscal 2025, let me make a few brief comments on some of the highlights since we last spoke in September.
In the first quarter of fiscal '25, we opened seven new warehouses. This included one relocation and resulted in six net new buildings, of which four were outside of the US. Additionally, after the end of the quarter on the day before Thanksgiving, we opened our 897th warehouse in Pleasanton, California. That opening had the highest ever opening day sales for a US warehouse at $2.9 million that day. We continue to project 29 openings during fiscal year '25, of which three will be relocations, and so 26 net new buildings. 10 of those warehouses will be outside of the US.
Gary will speak to a more detailed review of our results in a few moments, but I wanted to share some fun facts regarding our growth across the business. Our US bakery division has reached new records of 4.2 million pies being sold the three days prior to Thanksgiving. At our US food courts on Halloween day, we set a new record of 274,000 whole pizzas being sold, that was an increase of 21%.
Our US pharmacy business has prescription growth exceeding 19% for the first quarter, setting new volume records for that business. And lastly, we continue to gain market share with our e-commerce, big and bulky fulfilled by Costco Logistics. Costco Logistics completed nearly 1 million deliveries in Q1 and over 196,000 deliveries last week alone, that was a new record as well. The majority of these deliveries were completed in four days from the members ordering their merchandise online.
All of these milestones reflect the continued strength of our business across the membership offering. These great results are a reflection of the outstanding work done by our over 330,000 employees around the world. Their commitment to our company and the Costco experience for our members is truly inspiring. I'd like to thank all of our people for their outstanding work this year and especially during our busiest time of the year.
As we approach our annual shareholders meeting in January, I also wanted to mention that our annual update to the Costco sustainability commitments was just made available online today. This report provides a comprehensive review of the progress we're making towards our sustainability objectives, and I would encourage all of you to take a look.
With that, I'll turn it back over to Gary to discuss the results of the quarter and I'll jump back on during Q&A to field some questions. Thank you.

Gary Millerchip

Thanks, Ron. In today's press release, we reported operating results for the first quarter of fiscal 2025, the 12 weeks ended November 24.
We have once again published a slide deck on our investor site under events and presentations with supplemental information to support today's press release. You might find it helpful to have this presentation in front of you as I walk through our results.
Net income for the first quarter came in at $1.798 billion or $4.04 per diluted share up from $1.589 billion or $3.58 per diluted share in the first quarter last year. This year's results included a tax benefit of $100 million or $0.22 per diluted share related to stock-based compensation. And last year's results included a tax benefit of $44 million or $0.10 per diluted share also related to stock based compensation. Excluding these discrete tax items, net income and earnings per diluted share grew 9.9% and 9.8% respectively.
Net sales for the first quarter was $60.99 billion, an increase of 7.5% from $56.72 billion in the first quarter last year. US comparable sales were up 5.2% or 7.2% excluding gas deflation. Canada comp sales were up 5.8% or 6.7% adjusted for gas deflation and FX. And other international comp sales were up 4.7% or 7.1% adjusted. This all led to total company comp sales of 5.2% or 7.1% adjusted for gas deflation and FX.
Finally, e-commerce comp sales were up 13% or 13.2% adjusted for FX. In terms of Q1 comp sales metrics, foreign currencies relative to the US dollar negatively impacted sales by approximately 0.3% while gas price deflation negatively impacted sales by approximately 1.6%.
Traffic or shopping frequency increased 5.1% worldwide and 4.9% in the US. Our average transaction or ticket was 0.1% worldwide and 0.3% in the US. This includes the headwinds from gas deflation and FX. Adjusted for those items, ticket would have been up 2% worldwide and up 2.3% in the US.
Moving down the income statement to membership fee income. We reported membership fee income of $1.166 billion an increase of $84 million or 7.8% year over year. Membership fee income growth was also 7.8% excluding FX. Remember that the recent membership fee increase doesn't have much impact yet due to the effects of deferred accounting, and represented less than 1% of the fee growth in the quarter.
In terms of renewal rates, at Q1 end, our US and Canada renewal rate was 92.8% down 1/10 of a percent from Q4 end. The worldwide rate came in at 90.4% also down 1/10 of a percent primarily due to the US and Canada. As we mentioned on the last quarterly earnings call, our renewal rates are seeing some impact from higher growth in digital sign ups which renew at a slightly lower rate than our base as a whole.
Underlying renewal rates and membership growth remain strong, but this mix shift is likely to have a continued effect on our published renewal rate for the remainder of 2025. We ended Q1 with 77.4 million paid household members up 7.6% versus last year and 138.8 million cardholders up 7.2% year over year.
At Q1 end, we had 36.4 million paid executive memberships up 9.2% versus last year. And executive members now represent 46.8% of paid members and 73.1% of worldwide sales. Turning to gross margin, our reported rate in the first quarter was higher year over year by 24 basis points coming in at 11.28% compared to 11.04% last year, and up 7 basis points excluding gas deflation.
Core margin was higher by 31 basis points and higher by 17 basis points without gas deflation. This was driven by mix and our credit card cobrand program. In terms of core margins on their own sales, core-on-core margins were higher by 3 basis points. Ancillary and other businesses gross margin was lower by 12 basis points and lower by 16 basis points ex gas deflation. This decrease year over year was largely due to gas partially offset by e-commerce.
2% reward was lower or better by 5 basis points or 6 basis points without the gas deflation. Employee wage was flat for the quarter. We had a [$90 million light for crediting Q1 this year compared to a $50 million] credit Q1 last year.
Our reported SG&A rate was higher year over year by 14 basis points, coming in at 9.59% compared to last years 9.45%. SG&A was flat adjusted to gas deflation. The operations compared to SG&A with higher or worse by 15 basis points and higher 4 basis points excluding gas deflation. Higher employee wages that went into effect in July drove the headwind for the quarter partially offset by sales leverage and productivity gains. As always, investing in our employees remains a key part of our strategy and we will continue to focus on driving top line sales and improving productivity to mitigate the incremental costs.
Central was higher or worse by 5 basis points and three basis points without gas deflation. Stock compensation was lower or better by 2 basis points and 3 basis points without gas deflation, and preopening costs were lower or better by 4 basis points both with and without gas deflation.
Below the operating income line, interest expense was $37 million versus $38 million last year. And interest income was $96 million versus $154 million last year. As mentioned in our Q4 earnings, interest income faced headwinds in the quarter due to lower cash balances subsequent to our special dividend in January 2024 and lower interest rates. This will continue to negatively impact year-over-year compare in Q2.
FX and other was a $51 million gain Q1 this year versus a $6 million gain last year. This gain offset much of the headwind we saw in interest income in the quarter and was primarily due to FX. In terms of income taxes, our tax rate in Q1 was 22% compared to 24.5% in Q1 last year. As mentioned earlier, this year's rate benefited from a $100 million discrete item related to our annual RSU vesting. Adjusted for this benefit, the tax rate for the quarter would have been 26.5%.
Turning now to some key items of note for the quarter. Ron talked earlier about our continued momentum with new warehouse openings and capital expenditure in Q1 was approximately $1.26 billion. We estimate CapEx for the full year will be approximately $5 billion. Taking a deeper look into core merchandizing sales, fresh led the way in Q1 with comparable sales of high single digits. Meat was up double digits and demonstrated strength across the department.
We have members who are continuing to purchase high ticket premium cut selections and others who are gravitating more towards lower cost per pound options. As always, our focus remains on delivering exceptional quality and value across every item we sell in fresh.
Our non-foods category was also up high single digits despite some impact from the calendar shift as our buyers continue to bring in new and exciting items at great values. Gold and jewelry, gift cards, home furnishings, sporting goods, health and beauty aids, luggage, kiosk and hardware, were all up double digits.
This quarter, we were able to add several new high-quality brands across a broad range of categories including Peloton, Wrangler, Springfree Trampolines, and Ruggable. Food and sundries had mid single digit comps with our cooler and frozen food departments leading the way. We continue to see strong momentum with new and exciting international food items such as [Sania] pork soup dumplings, sona Missouri rice, and hot pot beef sliced chuck rolls.
Kirkland's signature continues to grow at a faster pace than our business as a whole. Our goal is always to be the first to lower prices where we see the opportunities to do so. And just a few examples this quarter include Kirkland's Signature organic peanut butter reduced from $11.49 to $9.99. Kirkland's Signature chicken stock from $9.99 to $8.99, and Kirkland's signature Sauvignon Blanc from $7.49 to $6.99.
Our merchants are also driving innovation with Kirkland Signature. Most notably this quarter, we introduced new Kirkland Signature oxy powder and Kirkland's Signature food storage bags, both offering significant value to the national brand alternatives. Within ancillary businesses, pharmacy had the strongest sales growth. Our focus continues to be on keeping prescription and OTC prices low while also leveraging technology to make it easier for our members to use our pharmacy.
Recent examples include the introduction of new prescription inventory management software to better stay in stock and enabling delivery of prescriptions via instacart. Our food court and optical departments also perform well in the quarter.
Gas sales were negative low double digits due to the average price per gallon being down low double digits. Costco travel is another way we deliver unique membership value and these services continue to resonate well with our members. We offer a wide range of vacation packages, car rentals, cruises, hotels, flights, and other travel related services. And in addition to highly attractive rates, many of our offerings include a Costco shop card as extra value for booking with Costco.
A couple of fun facts about our travel business. Last year, we sold enough rental cars to fill every US Costco parking spot 8.5 times. We also offer great value to members on cruises. And our largest cruise booking last year was a 150 day around the world cruise starting from Fort Lauderdale and making stops in places like the Galapagos and Easter Islands. The total price was $293,000 for two in the owner's suite cabin and added values on the booking included a shipboard credit of $13,000 and the Costco shop card worth $25,000.
Members who use Costco travel spend approximately twice as much as members that do not use these services. Inflation was once again, essentially flat in the quarter across all core merchandise. Food and sundries and fresh foods were slightly inflationary and this was offset by deflation in non-foods. In the supply chain, while egg supplies have been negatively impacted by avian influenza and the recent east coast port strikes led to a spike in paper and water product demand, overall product supply has generally been good.
The predictability of on-time shipping delivery remains below pre-COVID levels and items are generally spending more time on the water. Our merchants have adapted well to this change, and we are in a great position with inventory for the holidays.
As we head into Q2, we continue to monitor for potential port strikes in India, the east coast, and Canada and our merchants are adopting plans as necessary to ensure we remain stock for our members. Turning to digital and e-commerce, we continue to make progress with our technology, road map and enhancements made to the member experience like the ability to check warehouse inventory via the Costco app are resonating well.
Our US app was downloaded 2.9 million times in the quarter bringing total downloads to approximately 42 million. E-commerce traffic, conversion rates, and average order value were all up year over year helping to drive another strong quarter of comparable sales growth. While strength in [bullion] was a meaningful tailwind to e-commerce sales, hardware, sporting goods, gift cards, and home furnishings, all grew double digits year over year.
As Ron mentioned earlier, Costco Logistics also had another great quarter driving growth in big and bulky items. And Costco Next, a curated marketplace achieved record sales over the Thanksgiving, Black Friday, and Cyber Monday sales period.
In closing, let me provide a brief update on retail media. To use a baseball analogy, we are very much in the early innings with retail media but we continue to believe this represents a significant growth opportunity in the future. This quarter, we completed our first targeted media campaign through third-party media channels with one of our largest CPG partners.
The campaign achieved 2 to 3 times the return on ads spent typically expected, highlighting the value we can create for our members and suppliers. Our retail media team is now working with over 25 suppliers who are eager to participate in our next wave of offsite campaigns. And finally, in terms of upcoming releases, we will announce our December sales results for the five weeks ending Sunday, January 5, on Wednesday, January 8, after market close.
That concludes our prepared remarks, and we will now open the line up for questions.

Question and Answer Session

Operator

(Operator Instructions) Simeon Gutman, Morgan Stanley.

Simeon Gutman

Hi, everyone. I hope you can hear me. My one question with a couple parts. Actually diagnosing the health of the consumer, can you give us some sense of how you're clearing some of the seasonal inventory, maybe apparel bigger ticket? And then once in a while we talk about market share in some discretionary, categories, can you share your perspective on that? Thank you.

Gary Millerchip

Sure. Thanks, Simeon. We can hear you well and thanks for the question. Yes. So maybe taking that question in a, in a few parts. As we look at the consumer, I think we're seeing a lot of similar trends that we've talked about on the last few quarters. What we're seeing with our members is that now probably more than any time in recent history that combination of newness of items, quality and value are really important to the member. We're seeing the member being very choiceful about how they're spending the dollars. All that being said, I think we're finding that our merchants are doing a great job of finding that newness and quality at great value.
We've seen some great strength in our non-food categories and certainly, as you heard me say on the prepared comments, we're seeing really strong performance across many of the categories around things like gold and jewelry, gift cards, home furnishings, sporting goods, health and beauty, hardware, all up double digits during the quarter. So we're pleased with the momentum that we're seeing there. And I think it reflects the fact that our members are willing to spend as inflation comes down as long as those sort of three key ingredients that I mentioned are there for the member as well.
I think in terms of overall what we're seeing with the member on food and grocery, I would say that we are seeing what we think is a little bit of a shift from food away from home to food at home. And that's certainly reflected in strong meat and produce sales that we've seen in our own business. And we are seeing, I think a little bit even more of a trend that we've talked about in prior quarters of bifurcation with the member where we have high quality premium cuts, they're selling well. But we're also seeing a gravitation towards those lower price per pound items across categories like poultry, cuts of beef, and pork as well.
So Ron, would you like add?

Roland Vachris

Yeah, I guess send me another part of your question, seasonal sell through appears to be very strong. You know, it's a unique retail calendar with a shorter period of time after Thanksgiving. But our buyers have been through this before and they've responded properly with that as well. So that feels good. Seems to be a very foundational Christmas though, as you see, furniture driving a lot of our e-commerce sales appliances, sporting goods, hardware. And so just people are very, very basic buying this year but good trends.

Gary Millerchip

And I think Simeon, I guess I didn't mention specifically, we tend to focus on our member and how can we deliver that great value. The data that we do see would tend to suggest that we're growing our share across most of the categories that I mentioned.

Operator

Oliver Chen, TD Cowen.

Oliver Chen

Hi, Ron and Gary, Happy Holidays. Their traffic continues to impress a lot as we look forward. What are your thoughts and key drivers and mix opportunities as you think about ticket and UPT. Also, you highlighted retail media, which is a huge great opportunity, how does that intersect with your important multi-vendor mailer and also, as you think about incrementality of that of that opportunity? That would be great to hear. Thank you very much.

Gary Millerchip

Thanks, Oliver. I think the first part of your question you've probably heard in some of the comments that we made that we have been pleased with the traffic that we've seen and the continued frequency of shop from our members. What was nice to see at the end of last quarter, we did see when you adjust for foreign exchange and gasoline that we started to turn positive on the items per basket. And then this quarter, when you adjust for those items, we were up about 2% on the -- slightly over 2% I think on the US and 2% worldwide.
So we have seen some improved momentum on the items per basket. And I think that's a lot of great work being done by, again, our merchants, making sure that we've got great product offerings in the warehouse and then our operators really executing those campaigns exceptionally well when the members are in the warehouse as well.
From a media perspective, I think we look at it very much as an incremental opportunity. Our goal is to continue to maximize the value we can put into everyday product quality and pricing. And where we're seeing a lot of the interest in retail media is really coming from the marketing agencies, which gives us a lot of confidence that this is an opportunity for us to tap into new marketing dollars where a lot of our national brand suppliers are going to those media agencies to invest those marketing dollars to really make sure they're getting a good return on that ad spend, so where we're seeing a lot of traction.
And again, I would emphasize it's very early days with retail media for us is something that we're just really embarking on that offsite journey. But really where most of the interest is coming from is from retail media agencies, which we believe is the way for us to make sure that we're driving incrementality and growth in the model.

Oliver Chen

Thank you very much, very helpful.

Operator

Christopher Horvers, JP Morgan.

Christopher Horvers

Thanks, good evening, guys. So can you talk about what drove the core-on-core margin performance this quarter? You have the MFI now rolling through. How do you think about reinvestment of price either, in terms of expected price reductions that you see coming down the supply chain or maybe even going above and beyond that? And just as a side question, can you divine what's in the hardware category, is that consumer electronics? Thank you.

Gary Millerchip

Sure, thank. Thank you for the question. Yeah, in terms of the core-on-core margin, first of all, which I think was the first part of your question. If you break it down between the sort of three main categories that we see within the business that's foods, fresh, and non-foods. Foods would have been essentially flat. Non-foods would have been down slightly and fresh would have been up slightly. So those three kind of, obviously, overall, we were just up three basis points. So there really wasn't a tremendous amount of change overall, but they would have been the sort of key puts and takes in the overall number.

Roland Vachris

And then the description of the hardware category really is just that it's storage, plumbing, lighting, power tools, batteries, those type of the household goods that you would find that the typical hardware store.

Christopher Horvers

And then on the price investment side, your thought process there?

Roland Vachris

You know, that's something that we've done for the history of the company. We're going to continue to invest in price and some of it may come in holding certain prices as some commodities are starting to increase. But investing in items like Gary described, leading with Kirkland Signature. I mean, we feel that we're going to be asking our members and our vendors to contribute with lower prices. We've got set that example and start with Kirkland. So we're going to continue to look at those opportunities and invest where we can and keep driving sales.

Christopher Horvers

Thank you, have a great holiday season.

Roland Vachris

Thank you as well.

Operator

[Gia Ma] Bernstein.

Thank you for taking my question. I have a two part question. One, I think Gary, you mentioned the difference in renewal rates from online sign ups and then offline sign ups. Can you help us break it out and and understand the difference in online behaviors? And second part on the retail media side, how do you expect Costco Connect, the third-party marketplace to contribute to the growth of retail media going forward and will that impact the membership loyalty in any way or regard? Thank you.

Gary Millerchip

Yeah, sure. Thanks for the question. So first of all, on the membership rate, I'd maybe take a step back and just say overall, we're feeling very good about the underlying membership metrics that we're seeing so renewal rates in general signup activity and then the membership growth remains very strong. As I mentioned in the prepared remarks, really what we're seeing is that over the last few years, we've seen some shift in more of the members that we're acquiring coming through digital channels. And that's helping with the comment that we made last quarter where we're also seeing a slightly a reduction in the average age of members because of that change in shift as well.
But what it does mean is that often when we have new members being recruited through that digital channel, they're renewing at a slightly lower rate than the historical base that we have. And you may recall that when we talk about membership renewal rates, it's effectively an 18 month lag that we see -- that we report out on that renewal rate. And so as we look forward and see that trend continuing as we build more of that new digital member into the base, and it slightly affects the mix.
We expect it will have a slight impact on that over membership renewal rate that we report. So we wanted to make sure we gave you visibility into that. When we look at individual sort of cohorts of members, we feel good about the ability for us to be able to continue to drive improvement in renewal rate. But we are going to see that impact through as it becomes a flow through from the continued growth in digital members.

Roland Vachris

And then this is Ron, the question Costco Next. Costco Next is our marketplace. This is an exclusive Costco member only marketplace. It's fully curated by our buyers. So everything that's on that site has been reviewed by our buyers but is exclusive to Costco members. So we think it's just going to enhance the relationship we have our members and give more options for their shopping needs.

Got it. Just to clarify, I was wondering if you were going to have more [three-p] marketplace vendors using the retail media service and whether that's there's any implications on the member side?

Roland Vachris

That again is as mentioned earlier, we're in the very early stages and we're going to look at where we feel the benefits would be to our members. So that that is to be determined yet.

Thank you.

Roland Vachris

You're welcome.

Operator

Karen Short, Melius Research.

Karen Short

Hey, thanks very much. I know this is maybe a little out of left field but just curious, there's kind of been a trend in retail for some -- for stock splits generally. And I'm wondering what your philosophy is on that because I know you want your employees to have an opportunity to buy stock below the store manager level. And the second question that's kind of unrelated is just tariffs and any thoughts on that and thoughts on what that could do to inflation?

Gary Millerchip

Thanks, Karen. Yeah, on the stock split, you're probably aware that Costco has done stock splits in the past. And it's something that we'll continue to evaluate and discuss with our board, but there isn't a plan at this time for a stock split. I think for us, the way we think about it is the economic arguments that were true in the past are a little bit less clear, because retail investors and employees both have the ability now to buy fractional shares. But we do also recognize that there's a benefit of the stock feeling more affordable for our retail investors and employees who are very important constituents for us. So we'll continue to evaluate over time.
And then I think the second part of the question was on tariffs. Yeah, I think from a tariff point of view, what I would say is that, first of all, there's a lot of uncertainty around the timing and scope of changes. So it makes it difficult for anyone to predict what the impact will be with confidence. And in general, of course, tariffs raise cost, that's not something that we see as a, as a positive in general.
With that being said, I'll quote my predecessor, Richard, he'd say when it rains, it rains on everybody. And I think for us, we've faced tariffs in the past and we believe that our merchants and buyers are equipped as anybody is to sort of work through and navigate and manage that situation. We have a plan over time where we have done that in the past and typically we'll look where we can to pull forward inventory buying, which actually we've done already because of some of the less predictability around shipping and how much time product spends on the water. And also because of the risk of strikes that we've seen in the past as well.
We'll, of course, try and work with our vendors to make sure we're looking for ways where we can to mitigate the cost. And we also consider alternative sourcing locations where that's practical as well. I guess the final sort of string in our bow would be is if we didn't see the value in an individual skew, then we could always pivot to a different skew item for the member, if we felt the value just wasn't there and it was more effective for us to move to a different item in the warehouse.
I guess in context for us that the sort of the amount of business that's affected, we're about a quarter of our business is nonfoods and then a subset of that is imported. So remember, it is a minority of our overall business and then it's a smaller part of that as well we actually import just for context.

Karen Short

Great. Thank you very much. Have a great holiday.

Gary Millerchip

You too, thanks.

Operator

Edward Kelly, Wells Fargo.

Edward Kelly

Yeah, hi, good morning, everyone. I wanted to ask you about CapEx. CapEx is kind of been inching up over the last couple of years. But taking a step back and thinking about the evolution of your business, your goals growing the most. How are you thinking about the outlook for CapEx? Any meaningful changes ahead and as part of this, anything different sort of in the pipeline from a project or priority standpoint?

Gary Millerchip

Yeah, thanks, Ed. I wouldn't say there's really any major change. As you mentioned, we have been gradually increasing capital expenditure more a reflection of the continued growth of the business as we've opened new warehouses, seen some inflation in those costs over the last few years. And we have of course, been investing a little bit more in technology as well as we sort of modernize the platforms there and look to build the right capabilities to support growth in the future.
But I think philosophically, we focus on -- number one, of course, is to focus on the warehouses and invest in continuing to maintain the quality of athletes and invest in new growth warehouses in that 25 to 30 range, updating our supply chain and depots to support the capabilities there and both digitally. And then also, as I mentioned, sort of technology investments. But I wouldn't indicate at this point that there's any major change in trajectory, it's more just continuation of the growth strategy that we've had in executing on that strategy.

Edward Kelly

Okay, thank you.

Operator

John Heinbockel, Guggenheim.

John Heinbockel

Hey, guys, two quick things. Philosophically, price investments get a lot of publicity. But when you think about reinvesting the MFI increase price, product quality, right, IT labor, there's a lot of things to invest in. Where do those other things rank relative to price? And then what does the international club pipeline look like? I'm thinking in particular where you control sites, even though they may be years away. Is that -- I don't I it's over 100, but how big is that pipeline today?

Gary Millerchip

Yeah, thanks, John. I'll jump in first and Ron may want to add some color as well. I think overall we look at the reinvestment of the membership fee holistically. So it's partly where is it that we can lower prices, of course, part of its where can we mitigate the impact of inflation to maintain the value for the member even if costs are increasing. It's how can we improve the membership experience including investing in our employees wages as we've done recently as well.
And of course, innovation with new new products through Kirkland Signature. So I think we tend to look at it holistically and say, how do we make sure that when we think about what our members are paying for the membership fee each year that we're delivering more value and showing them that they're getting greater value than they're paying by a meaningful margin for the value of being a member. Ron, anything you want to add on that.

Roland Vachris

I think that's accurate and an expansion around the world. I think you'll continue to see an equal amount of 3,030 warehouses opening up over the next few years for sure. A good portion of those being out of the US, we see some great opportunities in Canada and Mexico have been strong countries for us. We continue to see growth opportunities both in Europe and Asia as well. So some of these projects take a lot longer than other ones will, so they'll come on at different times. But I think the outline of 30year seems very realistic and a good portion of those not quite half to be outside of the US.

John Heinbockel

Thank you. You're welcome.

Operator

Rupesh Parikh, Oppenheimer.

Rupesh Parikh

Good afternoon. Thanks for taking my question. So I just wanted to Gary to go back to your comment that core margins ex gas were up 17 basis points, and you called out Mix and credit card co brand program. Is there any more color you can provide in terms of what's driving that?

Gary Millerchip

Sure. Yeah, thanks, Rupesh. Overall, as you mentioned that we were pleased with where reported gross margin rate came in. We tend to look at it ex gas deflation as you know, and that was up seven basis points and then core on core was up three. So I think the overall message is that things were stable when we look at the gross margin rate.
There were a number of puts and takes in that that largely offset each other within the overall results. The main headwind as we signaled potentially could be the case was around gas which was impacted by the fact that we had a major event obviously 12 months ago or so in the Middle East that created volatility and often that can create some strange margin performance. And we were cycling that. So that was the large headwind. I wouldn't say overall that we've seen in the long term gas margins be unpredictable. It just tends to be more unpredictable on an individual quarter when you have that.
So that was the sort of biggest headwind. And then offsetting that in the quarter, we had some benefit again this quarter from ecommerce as margins improved there. And the rate of improvement in ecommerce would have been largely similar to what we saw last quarter. So we were pleased with the progress we continue to see there.
And then, as you mentioned in the core, we had a couple of offsets, we saw some benefit from mix as we look at the business. And then secondly, we saw some benefit from the Cobrand Credit Card program. As you mentioned, essentially the way the credit card cobrand works is that we fund a portion of the rewards that are paid to members and then we receive various incentives and payments from our issuing bank and all that flows into gross margin.
And essentially, the net effect of that was favorable for the quarter which offset along with mix and the e-commerce benefits the gas headwind. So as I mentioned, overall, I think there were no major takeaways from the puts and takes. But we were pleased that gross margin was up slightly even though we continued to invest in lower prices and deliver more value for the member.

Rupesh Parikh

Great. Thank you for all the call. Happy holidays.

Gary Millerchip

You too.

Operator

Peter Benedict, Baird.

Peter Benedict

Hey guys, Thanks for taking the question. I wonder maybe Ron for you on the runway for growth in the US. You said, 30 new clubs per year, next handful of years here, most of those are going to be in the US. You guys are just over 600 right now. I think if you include the other two players are talking about 1,400 plus clubs in the US, they're growing as well. How do you think about maybe the capacity for the club industry in the US and maybe for Costco in particular? What are you seeing that gives you confidence in your ability to keep going at this pace in the US?

Roland Vachris

I think the one thing I see is the continued success of operations like I spoke of pleasanton, California, that we opened the day before Thanksgiving. Right in between three high volume Bay Area locations in the East Bay and we opened this, this warehouse up not long ago and even finding incremental business, significant incremental business from our members. As we relieve the pressure off of those high volume warehouses, we see the existing member base coming more frequently. And the build back is quite nice for us.
So we see incrementality of the new warehouse and then we see very, very quick build back on those as well. So not only do we still see some opportunities, Scarborough Maine, we opened over a year ago, building has had a tremendous first year in a smaller market like that, that we see. So we see some runway for a few years ahead of us yet where we have a combination of new markets. But we really are focusing on how do we continue to improve that member experience by relieving pressure off of some of these super high-volume warehouses and we're finding it to be incremental to the business.

Peter Benedict

Thank you very much.

Operator

Greg Melich, evercore. ISI.

Greg Melich

Hey, thanks. I wanted to circle back on e-commerce, the growth there 13%. Could you update us on what the penetration is now? And also how if you add on Instacart and I guess the Uber Eats start where we're getting up to on that?

Gary Millerchip

Yeah, thanks Greg for the question. Yeah, we were pleased with the growth that we saw in digital. I think it's important to remember as well as we shared in the November sales release that there was some impact of timing of calendar as well. So the 13% -- if you think about, I think we shared, the team shared that we were like a 15% headwind in our November sales results. And so crudely, if you take about a third of that, you wouldn't be a million miles out with the impact that it would have had on our sales in the quarter as well.
So we were pleased overall with the underlying trend and the metrics that we saw around up downloads and traffic and average order were all up as well, which was encouraging. If you think about the mix of the business, it would be in the sort of -- from the numbers that we disclose publicly as being part of our digital business in the sort of 7% to 8% range of our total sales. So as you know, it continues to outpace our overall growth and we expect that trend to continue.
You're exactly right that when you recognize how we define it compared to how other, define it, we wouldn't include some of those third-party sites that are delivering. And there's a few other business parts of our business that we don't include in there as well that would fit in under other businesses. When we add those in there and when you sort of strip out gas, which I think most companies do, when they compare, we'd be north of 10% in terms of total penetration of e-commerce sales.

Greg Melich

Got it. Thanks. And then maybe circling back on private label, could you just update us now on the penetration, especially given some of those great new items you've come out with that you highlighted earlier in the call and what that could eventually be?

Roland Vachris

Yeah, I think it's up about 30 -- almost 33% this point at in the US is where we've now. And that's primarily the food and sundry side of things where we see the majority of our private label, but we're just bumping up against 33%. And it's growing a little faster than the rest of the business.

Greg Melich

That's great guys. Have a great holiday.

Roland Vachris

You as well.

Gary Millerchip

Thank you.

Operator

Scott Mushkin, R5 Capital.

Scott Mushkin

Thanks. Hey guys, thanks for taking my questions. So I just wanted to kind of maybe ask a higher level question around your business. The traffic growth, which is the lifeblood of a retailer has been very strong, given the size of the company you talked about the Pleasanton in opening.
So I was wondering if you kind of give us an idea of what you think is driving this, is it the club format generally resonating consumer mind (technical difficulty) initiatives and how do we think it's (technical difficulty)

Roland Vachris

We've lost you halfway through the questions. I'm sorry.

Scott Mushkin

(technical difficulty) this type of traffic growth is your initiatives, the industry set and what your thoughts are about keeping this type of going for years?

Roland Vachris

Okay. And I think we got most of most of your questions and it really regards around traffic growth and what we see that happening if we feel that that can continue on and that's what I'll, that's what I'll try to answer. And hopefully that was what you're talking about.
I think from some of the comments you made, I think it's all of the above. And some of the fun facts I gave out there was, was just really to point to the growth success we're seeing in several parts of our company. Be it, the pharmacy, the food court, our Fresh foods area, we have got to contribute a big part of that to our buyers and operators and the work that they're doing and keeping relevance to the member needs and being reflective of what (inaudible)
We were focusing on some of the lower cost proteins for some of our members. And while we're focusing on the wag for the members that would like that those goods as well. So I think our people are doing a tremendous job knowing our customer, but it really is all parts of the business are contributing. Their tire business is very strong, our non-food business continues to strengthen, e-commerce is doing their part. And it just goes back to execution from the teams.

Operator

Robbie Ohmes, Bank of America.

Robbie Ohmes

Thank you. Thanks for taking my question. It's on the competitive impact. So it may end up sounding like more than one question. But I are there any competitive impacts you guys are seeing, worth calling out, benefits or headwinds? So maybe remind us when a regional player you compete with, raises their membership fee. Does that help you guys at all retain or retention rates, things like that? And also I know you've been asked this but any pressures you're seeing on the fact that you guys don't do scan and go and Sam's seems to be doing really well with it and any other competitive impacts you can call out? Thanks.

Gary Millerchip

Yeah, thanks for the question, Robbie. I think we're generally our own biggest competitor honestly, that that's, generally how we approach the business. The maybe the couple of trends that add some color on that that I would call out would be we haven't talked for some time about cannibalizing our own business with opening new warehouses. And as Ron mentioned, generally, we're seeing significant incrementality, but as we have opened more warehouses, we certainly create some of that. We don't split out in our numbers. We just flow through our results, but it does impact the number because we are moving some traffic from existing warehouses when we open a new one.
I think from a competitive point of view, I guess the biggest tailwind I would call out and Ron mentioned it briefly in prepared comments around our business is that obviously we're seeing quite a lot of disruption in the retail pharmacy business right now. And I think with the work our teams are doing to deliver great value for the member and continuing to improve the experience and make it easier to engage with our pharmacies. As I mentioned in my prepared comments, we're seeing significant growth in that in that business today. I think that's partly the work that we're doing and partly I think there is some disruption in the industry currently as well.

And just any comments on scan and go, and maybe remind us why that might not be on your agenda?

Roland Vachris

I mean, I think we've got -- our job is as Gary said to take care of the members and make sure they move through. Do we hear about scan and go? Yes, we do. Self checkout has been a great option for our members and we focus on that. Our job really is that we will continue to keep an eye on technology and how we can improve that front end experience. That is the one pinch point. That was the focus of our door scanners is we took a lot of pressure off of the cashiers and moving lines through and saw some nice productivity enhancements when we did that.
But at this point, it's not something we're hearing quite often. We do hear it randomly. But we're going to keep an eye out there on technology and make sure that we're doing our part to keep the experience as strong as we can for our members.

Robbie Ohmes

Great. Thank you.

Roland Vachris

You're very welcome.

Operator

Michael Lasser, UBS.

Michael Lasser

Good evening, thank you so much for taking my question. I'm given the recent sales contribution from categories like precious metals and gift cards, have you a, expanded the aperture of what Costco is now willing to sell or what the member is willing to buy from Costco? And b, have you changed your philosophy on the margin where you are expecting more profitability from traditional product vendors to offset the negative margin impact from selling these items that don't drive a lot of profit? Thank you very much.

Roland Vachris

I think as far as new categories, you go back to caskets that we've we started many years ago that we would have never thought would have been a business for us. And we were able to find a way to deliver great member value and great quality. And that was such as the addition to gasoline we had many years ago in the company as well, is that can we find something that meets the needs of our members? Make sure we can deliver the right quality and the great price.
So I think the tickets and precious metals was again great work by our buying teams and finding new is that we can deliver great quality and great value to our members. And I see them working hard on the next categories that are going to be coming for us. But that's part of the treasure hunt of Costco, is that always keeping nimble and continue to change those categories that we can find new areas to improve the lives of our members.

Gary Millerchip

Yeah, maybe Ron just to add on that Michael to your question of, I think we give a bit more credit in addition to Ron's point about its great work by our merchants creating new and exciting items. We give a bit more credit, I think to the impact they have on the business. Not necessarily because we see significant margin as you mentioned from them, but they're driving significant traffic to our website, and we do get a high proportion of cross selling when members are buying things like precious metal. So it's driving our ability to grow our digital business overall.
And I think we see it as something that also just creates a lot of awareness about our e-commerce business as well. So as you know, we don't advertise, but it's identifying these exciting items that help drive traffic and awareness of what Costco offers. So -- and I think some of that is a factor in what helps with the continued growth in e-commerce, not just from a top line perspective, but also the margin improvement that we talked about on the call. So I think we would look at it a little bit more broadly for sure.

Michael Lasser

But just to clarify that second point, are you having to offset the margin impact from selling these traffic driving items that don't carry a lot of margin by requiring even better margins on the rest of the assortment?

Gary Millerchip

Now, what we're seeing is we're driving a mix improvement overall because of the traffic, it's driving and the engagement with the website. And, and remember, of course, as well that there's very low SG&A cost associated with that product. So it also helps create leverage in the e-commerce model as well.

Roland Vachris

So yeah, so the answer is really no, we're not making more margin on those other items that offset that. We're just driving down our SG&A. So we don't require more margin.

Michael Lasser

Thank you very much and have a good holiday.

Roland Vachris

You as well. Thank you.

Operator

Chuck Grom, Gordon Haskett.

Chuck Grom

Hey, thanks very much. Ron, can you talk about Costco's right to earn more wallet share with your more affluent higher income shopper, particularly on the discretionary side of the business? And then Gary, just on on the margin bridge. Can you just explain why the 2% rebate was favorable five basis points? Historically, it's almost always negative or neutral. Thank you.

Roland Vachris

Sure thing. Chuck your, your question was why are we gaining more market share with our affluent customer? Is that what your question was?

Chuck Grom

Now, my question is, do you think you've earned the right to earn more wallet share with that higher income shopper?

Roland Vachris

Absolutely. I think we do. I think, as we continue to find the brands and deliver also with great quality Kirkland Signature, we will continue to see that growth and that customer, we resonate that that is our member and that's who we cater our mixes to. And I think that we see great runway for us in the future.

Gary Millerchip

And then chuck on the second part of your question. So with the 2% rewards, think of it as that throughout the year, we're accruing what we believe is the right amount of redemption for the 2% rewards. And generally speaking, we're going to be conservative around that because we want to make sure we're fully accrued. And then when we get into the first quarter each year where we're sort of trueing up if you like what the actual spend was. So I'd almost think of the adjustment this quarter, sort of offsetting the increases that we saw in the back half of last year. And so you have to net those out to say underlying there is a gradual increase in the 2% spend, but it kind of nets off between quarter by quarter.

Chuck Grom

Okay. So it was essentially a true up then.

Gary Millerchip

Right.

Chuck Grom

Okay, great. Awesome. Thank you.

Operator

Kelly Bania, BMO capital markets.

Kelly Bania

Hi, thanks for taking our questions, Ron and Gary. I was wondering if you could just talk a little bit about your partnerships with Instacart and Uber, now that you've had Uber for quite some time? What you've learned, what is the pace of growth and, and how that's adding to comps? And just general awareness among your membership base of the service there, particularly as you add new services like you mentioned, the pharmacy, I guess, coming in and what something like that could do to the growth there?

Roland Vachris

Yeah, I guess I will start with that very strong partnerships with both organizations. We've closely looked at what the behaviors of the members were and found great incrementality to our members, shop frequency goes way up. And it changes the shopping habits. I think they'll use us more for a fill in between their big Costco brick and mortar shop to go into an Instacart or an Uber, and shop those directions. So I think that we're finding that it's the most cost effective way to do some small non-food item deliveries as well, where we would have otherwise shipped those via UPS or carrier from a distribution center.
We can now have those to a member within a few hours. So if you're looking for a blender that will fit in the back of a Prius, we can get that to you in a couple of hours at a very low cost. So it's improving our e-commerce delivery speed and time to the member and convenience is there as well. So we're very happy with the partnership. Our head merchant works very closely with both of those organizations and we think it's a great service for our members.

Gary Millerchip

I guess the only thing to add, Kelly, is the first part of your question. It continues to grow very strongly. So at least in line with the pace that we see in our digital business overall.

Roland Vachris

Slightly higher than our e-commerce business growth.

Operator

Chuck Cerankosky, Northcoast Research Study.

Chuck Cerankosky

Good afternoon, everyone. Could you talk a little bit about labor relations and the current negotiations with the teamsters, please?

Roland Vachris

You know, I guess what I will say about that is that the Costco, we will always take care of our employees as we always have done. That means that we're going to focus on a fair and a timely process for getting to an agreement with the Teamsters. We have a 40 year track record of dealing fairly with the Teamsters Union and really nothing has changed about that. So these are Costco employees, they're of great importance to us, and we're going to do everything as we can to take care of those employees as we do all of our employees.

Operator

Corey Tarlowe, Jeffrey.

Corey Tarlowe

Hi, good afternoon. Thanks for taking my question. I was wondering if you could talk a little bit about the international performance that you saw comps decelerated on a multi-year stack versus Q4. So just curious by region, if there's anything to call out that that changed versus the prior quarters? Thank you.

Gary Millerchip

Yeah, thanks for the question, Cory. I don't think there's anything we'd be particularly calling out. I mean, there's certainly some nuances sometimes between some of the international markets of when certain holidays fall and they would have had -- I'll give you an example which I wasn't familiar with, before joining the company and having recent conversations that in Taiwan, there's a big impact from the holiday season in the same way there is here around Black Friday.
And so there are nuances like that that we see in individual markets that sometimes can affect calendar. But overall, we've been pleased with the momentum that we've seen in the international businesses. And we continue to see a strong growth relative to both our own internal expectations. And then also as we look at the growth in those markets, how we continue to grow our market share. So nothing I would call out as being unusual there.

Corey Tarlowe

Thank you.

Operator

Laura Champine, Loop Capital.

Laura Champine

Thanks for taking my question. It's a follow up on your digital business which obviously is growing well. But how would senior management diagnose or grade your online presence from a look, feel, and function perspective relative to your competition? And related to that this growth in members who are are joining online, is that something you're driving or is that just an an output of the attractiveness of your online offer?

Gary Millerchip

Yeah. Thanks for the question. And I think again, I'll say we're probably our own toughest critic. I think when we look at our business overall and we look at the growth over the last 10 years. We've actually grown at a faster pace than the e-commerce. Sort of business in the US has grown in general. So in one respect, we're very pleased with the momentum and the growth that we've seen and continuing to see that higher engagement.
But we're never satisfied. We believe there's more work we can do to keep improving the member experience. We made recent changes with things like search functionality and making inventory available through the mobile app. And those changes are certainly -- members are seeing the benefit of that and commenting positively on the changes that we're seeing.
But we know that we, we're on a technology journey. We've sort of been building the foundations of that journey over the last few years and the goal is to keep getting better and to keep enhancing the member experience. So I'd say, we still believe there's more work to do and we believe by doing that work, we can continue growing our digital business even more effectively.

Roland Vachris

And I would add to that, we realize that we do have some opportunity. We definitely see that we can continue to improve. Gary is exactly right. We're doing the back of the house work at this point on. Speed stability, making sure that all the foundational work is done so we can build on that. And then I think in short order, people will start seeing the front side of things that will come in. But I think Costco Logistics is a great example of the progress we've made.
We are now able to predeploy things around the US and have deliveries made in four days which a couple of years ago would have taken us two weeks. So we're seeing the distribution centers coming online. We're starting to see the app usage go way up functionality is being added to that as well. So it's a journey. We're going to start seeing some more forward facing improvements in the next 12 months. That as we sort of start putting our logistics sides behind us and we get those things taken care of.
And as far as the e-commerce engage with membership sign ups, probably the biggest difference is that we have less executive members sign up online, which do renew at a higher basis. And I think that that big part -- a big part of that is that they don't have an employee to talk to when they're making that transaction and they don't understand all the benefits of the executive membership. So we're able to capture those later on the path. And but that's the first thing we see there. At least we start engaging with the member as a member and then we will work on showing them the benefits of the executive membership down the road.

Laura Champine

Got it. Thank you.

Operator

And ladies and gentlemen, this concludes today's conference call, and we thank you for your participation. You may now disconnect.