Good morning. My name is Felicia and I will be your conference operator today. At this time, I would like to welcome everyone to the Fourth Quarter Fiscal Year ’13 operating results conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. (Operator Instructions) Thank you. Mr. Galanti, you may begin your conference.

Thank you, Felicia, and good morning to everyone. This morning we are reporting our 16 week fourth quarter and 52 weeks fiscal year 2013 operating results, which ended on September 1. These results are of course were compared to the 17 week and 53 week periods of the prior fiscal year. In addition, we are reporting this morning our September sales results for the five weeks ended this past, on the October 6. Let me start by stating the discussions we’re having will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and that 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. To begin with our fourth quarter operating results, for the 16 week quarter, reported earnings per share came in at $1.40, up a penny from last year’s 17 week fourth quarter earnings of $1.39. I will come back to this in a moment. In terms of sales for the quarter, total sales were up 1%, which again was impacted by the extra week. Comp sales, which compares like 16 week periods were up 5% both on a reported basis and excluding gas and FX. For the quarter gas prices year-over-year were effectively flat, so no impact on the 5% U.S comp figure. However, foreign currencies weakened related to the U.S dollar year-over-year in the fourth quarter, primarily in Canada and Japan. Such that our reported 4% international comp figure assuming flat year-over-year FX rates would have been up 7%. In terms…

(Operator Instructions) And your first question comes from the line of John Heinbockel with Guggenheim Securities. Steve Forbes – Guggenheim Securities: Hey Richard, it's actually Steve Forbes on for John today.

Hi. Steve Forbes – Guggenheim Securities: When you think about the, I guess the holiday selling season coming up; does the shorter selling season between Thanksgiving at Christmas not matter or does something get done differently from a merchandizing or operational standpoint?

It doesn’t matter, I mean every pre-holiday Christmas day is better than a post holiday Christmas day, but overall we’re approaching it the same from an inventory standpoint and it being fairly positive on our buying. Steve Forbes – Guggenheim Securities: Okay. And then just on Canada; how are you progressing with the rollout of gas and then I guess who’s our target for the number of locations that offer gas as for the end of next year?

I have to -- we are 40 right now. North of 40 right now and my guess is this …

Every new building will have a gas station.

That every new building will have a gas station, so those three I guess another three to five. So six to eight is my guess on a -- oh here I got the numbers here. Gas in Canada we have 43 currently, at the end of, as this past sundry, and that’s out of 85 total Costco’s in Canada. So, on a base of 43, six to eight would be given expected gas. Steve Forbes – Guggenheim Securities: And then just lastly on our cost pressure; actually the competitive environment I guess you mentioned fresh foods, the 80 basis points and so forth. Is there anything else you can give a little additional color on and then I guess how are you -- is there any sense of the return that you're seeing on these investments?

Well, keep in mind the return – I used the example of the rotisserie chicken in the past. We get more positive press out there from keeping that incredible giant chicken at 4.99 and over the last year, year and a half, the underlying poultry price have skyrocketed so we've – the underlying price has skyrocketed such that there's very little margin on it right now although it looks like there is some relief in terms of where pricing is going over the next few months based on poultry future's cost. It doesn't mean we're raising price, it means that we'll at least make a little margin. But sometimes that's fast and that's what we do. In terms of the competitive environment out there and then from what I see at the every four-week budget meetings from all the regions, it's not easy but it's not – there's always pockets of something but there's nothing that's changed in the extreme either way.

Okay. Thank you.

Your next question comes from the line of Matthew Fassler with Goldman Sachs. Matthew Fassler - Goldman, Sachs & Co.: Thanks and good morning. Can you comment on whether you bought back stock this quarter and what your general thought process is on the buyback at this stage of the game?

Sure. Well, we did not – I forget to mention that. So for the year we bought very little, about $34 million I think at the very beginning of this year back in September. On a long-term basis we're still positive about the outlook of our company long term and we'll continue to look at it. We report once a quarter and we'll let you know next quarter what we've done or not done this quarter. We did of course do the $3 billion special dividend back in the fall at a time when the stock was showing a lot of strength and so we feel good about the combination too over time and I'm trying to be as coy as possible because I can't give you any direction until we'd let you know a quarter from now. Matthew Fassler - Goldman, Sachs & Co.: Understood on that. And just a quick follow-up. On the electronics business, can you give us a sense whether the weakness was volume or price driven and what do you think your market share did during the quarter?

Well, it was both. I honestly don't know what others have done. We've been very strong up until the fourth quarter. Like through May, it seemed like every month we had what we call majors which is electronics principally and TVs within, that's the biggest category, tended to be up in the 5 percentage point to 10 percentage point range. A little of that I think back then was higher average price point even though electronics tends to be deflationary, we were selling bigger and bigger and more advanced televisions, 60s and 80s. Back in June, July as we saw some weakness and we shared that with everybody on our monthly sales call, the big effect tended to be – it was the Olympics a year ago and that's what we've seen so far. Matthew Fassler - Goldman, Sachs & Co.: Thanks so much, Rick. I appreciate it.

Hold on, one other thing here. The managers are telling us there is a challenge that sales have come down a little bit everywhere. I don't know what others have done. Matthew Fassler - Goldman, Sachs & Co.: Got it, thank you.

Your next question comes from the line of Chris Horvers with JPMorgan.

Thanks. Good morning, guys. Can you talk about how you think about inflation in key categories going forward and does that provide an opportunity for some margin relief such that maybe we can move back to flat core margins? And then related to that, how should we think about the LIFO impact related to that?

Okay. Well, first of all, as I've said several times in the last year or two when margins have showed a little year-over-year downturn, in our view it's us more than our competition and we have been pretty extreme on certain categories. I think a year ago was the food court, as I mentioned the rotisserie chicken when you're selling 60 million plus of those a year that adds up to more than a couple of basis points alone for the company. But that's overall what we do. In terms of LIFO and in terms of what does inflation or deflation do? Certainly inflation we tend to – ultimately you got to take some of it subject to competition but we tend to be laggard historically. With deflation we tend to be the first out of the box. So certainly though when there is inflation, there is perhaps a little bit of opportunity and that gets to the LIFO question, what generally you see is when there's a LIFO credit meaning that there has been deflation, you've also had some price reductions. So part of the reason I think the core year-over-year was down a little is that is well; when it goes the other way they tend to go in opposite directions. Not all the time but that's the case. So I think that we do better when we're reducing prices and driving business and overall that's good for us better than others. We view that we tend to be more aggressive and take more advantage of that to show a difference between us and our competition.

So does that mean that are you seeing more deflation and do you expect more deflation going forward and would that result in…?

Keep in mind we're not seeing a lot of anything right now. I did mention gasoline in general. I mean gasoline is quite deflationary. Year-over-year in the month it was 8% lower but it's kind of – everything else is kind of neutral certainly well under 1 percentage point. Again, I mentioned poultry as an example that had more to do with the fact that poultry prices had risen dramatically over a couple year period and we've maintained 4.99 price on that which again we find ourselves in the news about that which is a positive. Now that there is some – it seems like there is some downward pressure on both feed and poultry prices of futures over the next few months as the commitments for the producers go through the higher cost up, we would expect hopefully to see those prices come down which adds to margins and we'll maintain that 4.99.

So what about – isn't there pricing on the grain side, isn't that causing pressure? There is some Nielsen data out today suggesting that prices are coming down on the grain side and if you look at corn and soy out there where the price of the market today that would suggest that prices will come down in the future, so are any of the merchants talking about on the dry grocery side or other areas in the box where they expect pricing to come down or is the outlook basically neutral?

If our landed cost come down, generally you expect to see our prices come down. I think we have the anomalies or the outliers are going to be something like in extreme light of – by the way, rotisserie chicken is just one form of chicken we sell. We sell frozen and fresh and everything else but just that one item is $300 million plus. So when we have been the leader in terms of keeping the price down despite very upward increases in underlying costs, as those come down that gives us a little margin relief. But generally speaking across what I'll call this supermarket canned and box categories, we're going to try to lower prices.

Understood. And then any commentary in terms of how September played out from a cadence perspective week-to-week?

I don't have that detail in front of me. I mean a lot of it has to do with how Labor Day falls and what the weather is with back-to-school. There's probably a 3% or 4% range between the weeks but I don't have that in front of me.

Okay, fair enough. Thanks very much.

Your next question comes from the line of Dan Binder with Jefferies. Daniel Binder - Jefferies & Co.: Hi. Good morning. Just want to touch on a couple of things. First, with regard to competitive pricing, as you know one of your competitors has been out there with a new vendor book program that I think they've done now three or four times. Just curious in your price sensitive organization, how are you dealing with that? Are you matching price when they do a vendor book or do you just set up, do your own vendor book and disregard that as promotional pricing that's not every day?

We're going to do what we do. Look, if they keep doing it, it must be working and we've been doing it for a long time ourselves. We're always out there trying to do new things as well and I think that's fine. We take that into account when – the comments I mentioned earlier about levels of competition out there. Daniel Binder - Jefferies & Co.: But I guess just day-to-day when they have a vendor book out there, do you feel compelled to lower the price on those items or do you just treat it as their one-off promotional event that you don't necessarily match?

Well, in a perfect world absolutely yes every time. The reality is, is just like on our NVM booklets when we're getting – we’ve negotiated a specific deal with a specific vendor and its essentially a lower cost to us because of that, but that's because of the deal that we negotiated. We are not going to go way down to match something all the time; we're looking at it as promotional. At the end of the day, all of the big retailers from the biggest to the next three or four and the large supermarket teams as well, all the big manufacturers have various buckets and different silos of promotional monies whether it's for the MBM or slotting allowances or seasonal back to school whatever it is and different retailers going to use it at different times in different ways. So ultimately every day blocking and tackling were going to match prices. We're not going to go crazy 20% below costs for somebody else had used that -- their silo of promotional monies in a way on a promotional basis. As I wouldn't expect they would either. Daniel Binder - Jefferies & Co.: And then with regard to Canada I think you guys are a little bit more aggressive in front of target openings, they kind of came out the gate maybe a little bit higher priced than people thought, just kind of curious how you’ve adjusted to that or if you have at all?

I would say it has been less of an issue than we had thought. We never thought it would be a huge issue other than the fact that having have a formidable player and they certainly are formidable and respected coming into a market where that would impact promotional activities with Walmart, with Loblaws and others up there that there will be a lot of marketing and excitement and promotional stuff. There has been some, but probably not as much as we had felt. Now we’ve also been held by the fact that we have rolled out things like gas that drives business and the economy overall in Canada has been very strong over the last few years. They have not suffered any economy strains that we have here in the U.S. So maybe you can ask them, but we haven't seen a big deal. Daniel Binder - Jefferies & Co.: Have you been able to take price back ups since they weren’t as aggressive or you just stay pretty stable?

No, we cannot do that. Daniel Binder - Jefferies & Co.: Yes, okay. Last item was just on this other income line, you mentioned $22 million outside of interest income, was that related to like FX gains? I know you’ve that Mexico peso issue against the dollar.

It's principally FX gains. Daniel Binder - Jefferies & Co.: FX gains? Okay.

Yes. Daniel Binder - Jefferies & Co.: Great. Thanks.

Your next question comes from the line of Gregory Melich with ISI Group.

Thanks. Richard thanks for the walk through on the membership fee income. I did have a follow-up there. You said that the 3% really sort of gets to 6% if you try and back out the extra week and fee increase, does that also adjust for FX which I presumably would have been a headwind to that year-over-year in the quarter?

That would affect it a little more, you're right.

So that will be another 100 bps, so we just think of it as proportional to the business?

It's probably a little less than that, but I should have mentioned it. I always try to find reasons here.

All right. So that basically in local currency membership fee income might have been up 7% not 6%?

It could have been, I just don't -- I need to calculate it out, but yes certain -- something, but I don't know if it’s (indiscernible) that.

(Indiscernible).

Yes.

Then second on SG&A, I just want to make sure I got the nine bps of headwinds that I got that right, the workers comp sounded like most of it was a catch up for maybe under accrual earlier in the year and then there are few other things that you said were true up by year end. Could you summarize of the nine bps, how much of it was true up versus how much of it is actual cost of running the business ongoing?

I don't want to get that granular not because the number is worse than I think. Somewhere in the middle it was probably the right answer. They’re literally the two big ones of course are benefits in membership -- benefits in workers comp, which I mentioned was five bps year-over-year. I know within workers comp, first of all, understand what a true up is. You think about workers comp we have just the U.S workers comp well in excess of $100 million of in current expense every year. There is also what we reserve when somebody gets injured or whatever to say it went down on disability, we set a reserve based on what we think. Now to extend it's a bad injury it might be a reserve of tens of thousands, if not a few hundred thousand dollars based in anticipation over several year period. Every quarter end the actuary -- our actuaries look at that to adjust the -- what's on the balance sheet, if you will, we’ve expensed or reserve already. So on top of that 100 a year of incurring items you are also truing that up at the end of every quarter directly under GAAP accounting. That I think the reserve on our balance sheet at any given time just on workers comp is over $300 million and so a swing of $5 million or $10 million one-way on actuarial changes based on what happened in the last quarter of real expenses and adjusting those things, sometimes it helps you by a few million, sometimes it hurt you by a few million. And there are several large expense pools given our size that we try to be granular to help you understand the numbers, but again if I had to look at last year in Q4, a few more of those moons lined up for us, this year a few of those expense is lined up against us and probably somewhere in the middle of that nine is the right number, I hate to go further than that because I don't know.

All right. Fair enough. And then lastly on the CapEx, I understand that it’s going up this year with more openings. But how should we think about the number there? Is that number -- because I know you spend money on land and everything well before the opening. So should we think about that number is proportional to a number that might be out there in 2015 or in other words we model it out if we’re going to open 30 or 35 plus a year, is this the run rate we use now or is this year elevated because you're going into Spain and it was like …?

I say more of it’s the run rate than one-time elevation. So, I mean, I think something in the 2.3 to 2.5 is a best guess right now.

Right. So that makes sense with this sort of opening level.

Right. And again if its 6 or 7 less and we got delayed on a couple of property purchases and we did a little less or more on depots, all of those things add into that. But probably something in the -- something between 2, 2.5 is the right guesstimate for the next few years.

Okay, great. Thanks a lot.

The next question comes from the line of Jason DeRise with UBS.

Yes, hi. It’s Jason here. I just wanted to understand a bit more on the membership income in addition to what was shared before. I guess, maybe just looking forward though what kind of -- now that the accrual base is in there and you’ve taken the fee increase and renewal rates are high, I mean what can be done to drive more members per store? Is executive membership going to be a bigger focus now that we've got a couple of years from that the increase? And if you can share anything in terms of the international progress in terms of membership obviously the renewal rates are lower than the U.S., but what could be done there? Thanks.

Well, first of all, let me -- what I am always be surprised that this the continued increased penetration of executive membership even in countries like the U.S which has been around for 13 or 14 years and Canada which has been around for 10 years. We still -- we do a better job at thing in store of converting people to executive membership both when they -- new sign ups. I remember several years ago, 10 to 15 of every 100 signed up – existing warehouse in the U.S and Canada signed up as executive membership, now its in the 30s and 40s. Part of that has been a little bit better at just doing that and hopefully it’s as we point that out there, obviously their value. In terms of driving membership the fact that we’re getting a lot more members in some of these countries like Asia and Australia certainly helps that has a higher percentage of our openings go to those markets. The low renewal rate is -- I remember the first previous even in the U.S back in the mid-80s in and the Canada in the late 80s, signed up a hundred people in the first year to get to that what was awfully down to mature a mid 80 renewal rate would have been great, but of course now its 90. In that second year maybe 70 or 72 or 73 of those 100 signed up. But then a new 100 signed up also in the year three, a higher percentage of that 70 or 72 plus 70 or 72 of the second year’s 100. So it kind of builds over time. I would say those starting renewal rates in Asia start out a little lower than that 70, sometimes in the 50s or 60s and then go from there. But mind you it's been somewhat of a phenomena where we get a lot of press, very densely populated cities and people coming in from a little further distance in a city -- in cities where it is little harder to travel. So I think all those things have tended to be the reasons why we’re going to keep doing what we do is it relates to driving membership, I think we got better in our marketing activities in what we do. And so I think overall we will keep driving membership the old fashion way in terms of opening newer houses certainly in less penetrated countries that is a bigger help and giving them value. And historically we've tended to raise fees about every five, five and a half years and I can't promise what it will be again but that's what it's been for 30 years.

In terms of the age of the stores in the international market and the maturity process there are obviously writing, you're talking about adding new stores and new countries even. Is there anything in the cadence of that that we should think about in terms of if we're modeling on a member per store basis on a year-over-year basis if there's anything that you can share there for the coming year or so compared to prior years?

It tends to be higher internationally. I think when we opened in Australia we got off to an incredible start, our highest per share volumes ever in a country. Again, I think people around the world know what our membership club is and we get a lot more press when we go into a country. We've had outsized members and it helps when you got five or six locations in a 20 million population city and it's getting to press. And so I think – given the size of our whole company and the fact that still 70% of our company is in the U.S. and another 10% or 12% is in Canada that yes, the international keeps moving the needle but it moves it a little upward.

And maybe just to wrap up my line of questioning on the member fees, so talking about 6% is the clean number, maybe something closer to 7% really clean for FX for the way that it grew in the fourth quarter. How would you consider that as a run rate and with the new store openings, do you think it could be better than that or do you think that – I guess I'm going to let you answer how you think about that?

Yes. We're going to try but I think that – again, something plus or minus a couple of percentage points from that is probably a best guess at this point. Mind you also there's deferred accountings, so when – I've shared examples when we open a new unit in the United States membership sign ups as of opening day which tends to be the eight or 12-week period prior to opening day, through opening day because you've got tabling activities there where people can come in and sign up once the parking lot you can get in and out of. And in the best markets in the U.S., Northern Cal, Southern Cal, Seattle, when we open a new unit it's a no-brainer success story that you might only have 5,000 to 8,000 sign ups or 4,000 to 8,000 sign ups because a lot of people were already members, they're going to come more frequently because we have – we're closer to them. When you open in some of these countries you might have 20,000 to 40,000 new signs ups through opening day. Now even that's the case it takes a year for that to get into the system based on deferred accounting because it's basically you book that annual fee one-twelfth a month. So I think it will trend in there over time but on a base of 635 or 640 locations, an extra few locations internationally again it moves the needle in the right direction as it relates to this question but it's not a giant mover.

Okay, thank you very much.

Your next question comes from the line of Charles Grom with Sterne, Agee. Charles Grom - Sterne, Agee & Leach: Thanks. Good morning, Richard. As part of these modernization efforts that you talked about, when you look at your membership fee data base, is there any thought internally to start data mining some of the consumer information that you have and begin more personalized couponing or targeted promotions versus the standard 3.5 week MBMs that you're currently doing?

I would say we're closer than we've ever been but it's still going to be a while. One of the modernization things that we're doing is rewriting the membership system. Let's start with some of the basics. The extreme examples last year when we replatformed a dot.com a year ago, prior to that the search engines couldn't even crawl on the site so you'd never Google us and see Costco.com. And now I guess and that is the membership and the data mining. I think that Craig has shown a little openness to our marketing people but we're not going to go crazy quickly for us, but there's some opportunity there. But again, as we do some things we'll let you know like we did with dot.com. Charles Grom - Sterne, Agee & Leach: Okay, fair enough. And then just to fall back on Matt's question on the balance sheet and with $14 per share in cash and then adjusted the EBITDA ratio one of lowest in retail, what's the Board waiting to see before you guys get more aggressive on the buyback? I get last year with the big dividend kind of holding back on the buyback but what are you guys waiting to see to get more aggressive?

Well, stay tuned to 12 weeks from now when we talk to you. We'll let you know. I mean again I think we view our runway, if you will, long term that we've got a lot of opportunity. We certainly – I agree with you even with the risk of CapEx we have a strong balance sheet and we'll continue to talk at our quarterly Board meetings, but I really can't say a whole lot more than that at this point. Charles Grom - Sterne, Agee & Leach: Okay. And then I know your purpose when the K comes up, but do you have the U.S., Canada and international margins for the fiscal year of 2013?

I don't think I can give that to you unless it goes out publicly from an 8-K standpoint. Next Wednesday is our plan to send out the K. Charles Grom - Sterne, Agee & Leach: Okay, great. And then on the 80 basis points and pressures in the 10 to 25 up in the three areas, could you just give us a little bit of perspective how that compared to the last quarter?

Why don't we go to the next question and then I'll answer it. I think I did talk about it in the last earnings call which I have in front of me, so we'll go to the next question and I can answer that. Charles Grom - Sterne, Agee & Leach: Okay. And just a follow-up on Chris' question earlier with regards to that price investment. It appears that you guys weren't really necessarily offensive, it was more of a defense. I mean the fact that your costs were going up and so you were keeping rotisserie chicken prices at the 4.99, is that fair to say the large chunk of why you saw the margin pressure in fresh foods?

No, that was the outsized component of it but there were a few other items within fresh foods as well. Charles Grom - Sterne, Agee & Leach: Okay, great.

Back to your other question, I did find what I said a quarter ago. The four core categories – this is in Q3 of '13, the four core categories; food and sundries, hardlines, softlines and fresh foods each showed lower year-over-year gross margin percentages, so that compares to what I mentioned this quarter that food and sundries, hardlines, softlines being up year-over-year. All four of those subcategories were low year-over-year in Q3. Charles Grom - Sterne, Agee & Leach: Okay, great. Thanks a lot.

Your next question comes from the line of Mark Miller with William Blair. Mark Miller - William Blair & Company, L.L.C.: Hi, Richard. I wanted to know whether Costco is giving consideration to having its employees enter healthcare exchanges, going to kind of a defined contribution, if you will. And additionally, if you can give us some color on the rising healthcare costs and is it likely we'll see that continuing to run ahead of sales?

First of all we have no plans to change what we currently do. As it relates to continuing to rise, the answer is probably yes. We have made a few tweaks to our plan to try to – have the participants in the plan make more thoughtful decisions on a few things and made some very other, very small changes which maybe it brings down the rate a little bit. In each of the last three years, part of the Affordable Care Act as it is transitioning in we estimate was about 1 to 1.5 percentage points of increase each year, so even when we showed in 11 let's say or 11.5 a couple of years ago year-over-year, that 11.5 included 1.5 from affordable care incrementally. And I think this is the last year of a few of those transition items that are going in. An example would be you have to have the same limit, lifetime limit irrespective of the plan and we had a different lifetime limit for part time and full time plans. We opted – as you would expect us to do we opted to the higher limit for both. And so there's things like that that's part of those 1% and 1.5% growth items on a sizable number to start with. I would guess whatever it would have been it'd be a little less because of one, these annual pieces that have gone into the Affordable Care Act that are transitioning over three or four years now, I think this is the last year of that as it relates to what we know now, but I've read some articles that they seem cost come down and when I talk to a few others of different industries, they don't see it a lot of low inflation…

It's still very low. It did come down and a lot of that had to do I think when the economy hit hard and it means that economy hasn’t improved greatly. I think then probably our retention rates of employees has continued at a low good rate in our view, because we have -- we drew -- we have a good compensation and benefits package, and it's tough out there. And so it's, I think our renewal rate overall in the U.S. is about 11%, those numbers are most familiar with and after a year it's 6% I believe. And that’s pretty much about how low. I think there’ll be a 11% -- might have been a 10% a year or two ago, a (indiscernible) It can be off five percentage point here, but that’s pretty where its been. Mark Miller - William Blair & Company, L.L.C.: Okay. And a separate question; do your buyers see much ability to trade the consumer up, I mean really the average ticket is kind of moving with inflation, it seems like at this point but I mean are you -- as you’re planning for the holiday do you think you’ve got any ability to move it up usually with the upper end comp consumer showing some strength in consumer confidence at least up until recently you’ve been able to do that, what's the outlook now?

Well we keep trying and we keep -- I think we keep being successful. By the way, while the average ticket has moved as you suggested with inflation maybe a little more or less depending on the quarter that’s now stating the fact that we’ve had four plus percent sharper frequency for five years compounding now. So, which compared to 1%, 1.5% compounding for the each of the 20 years before that. So I think that in part tends to put downward pressure on that number. So we’re actually kind of pleased that it's held up where it is given that increase of frequency. Also in new markets it's a lower number to start with. And so that all goes into that weighted average as well. So I think overall our number is holding up pretty well. And look and mind you as merchants we’re always trying to upgrade the product. We want to save a member money, but on the best item and the biggest quantity as you might expect that we do and so always trying to drive that and sometimes that’s because we can drive more value that way particularly on very competitive items. Mark Miller - William Blair & Company, L.L.C.: All right. Thanks, Richard.

Your next question comes from the line of Chuck Cerankosky with Northcoast Research.

Good morning, Richard. Regarding the venture into Spain anything you would point out about those clubs that will be different from some of the others?

Nothing really. Yeah, it will be -- it looks like warehouse. I think the one thing is that they’ll be on one floor as you know in several of the very densely populated cities in Asia and even in Sydney we’ve got some double deck retail facilities with two and three decks of parking on top of that or below that. In Spain our plan is to be on one level so far but that we could have over time but the first one will be on across.

And the size is in inline with the corporate average?

Yes. The size is in line with the corporate average of new locations. I think our average per warehouse is about 144, 143. We tend to build things in the 155 range.

Got you. And the real estate pipeline is ready for additional international expansion is that why we’re seeing this nice step up here in the new openings?

Yeah, I mean I think the pipeline has been built over the last couple of years there. If you go back four, five years ago there were a few if any real estate people on the ground in many of these countries. Now there are people on the ground in every country and that’s been for the last couple of years. And so, yes the pipeline is full but it's never any easier, sometimes when you look out at dates in these cities it has planned opening in 2016 if everything goes well, and sometimes a lot sooner. But the fact is, is it's certainly harder than some of the smaller cities in the United States.

What would you -- how would you rate the prospects for additional new countries in Europe?

Well I think we talked about going likely into two countries, one in ’14 and one in ’15, and beyond that we’ll see.

And finally can you give us what the gasoline sales were in fiscal 2013?

I don’t know if I have that in front of me. We’ll go to the next question and I have somebody looking at that one.

All right. Thanks.

And your next question comes from the line Paul Trussell with Deutsche Bank.

Hey, guys how you doing? It's actually Matt for Paul. I was wondering if we could talk a little bit about SG&A. I know you kind of ran through healthcare as an issue and some of the other things you’re facing with the technology investment, but with your payroll, your payrolls are getting better as a percentage of cost, how would we think about SG&A kind of for the remainder of the year? Thanks.

Well, look we keep trying to bring it down, but we’re not going to bring it down. We have our own constraints on certain aspects of that life. We’re going to still do top of scale increases for our two thirds of our hourly employees that are top of scale. We’re going to not cut back which we could easily do on certain healthcare aspects. So we’re going to do the things that we’ve always done. We’re going to do it first and foremost by trying to drive sales. Gas -- by the way gas deflation does hurt you a little bit. When there is inflating gas it's a very low gross margin business but it's an even lower thankfully SG&A -- low SG&A business. So when you’ve got a big gas inflation that seems to hurt your margin a little bit and help your SG&A conversely the other way. So, given that gas was 8% deflation in September if that continued to the next couple of months I’ll be showing you that second column again for margin in SG&A, but that hurts it a little bit when it's deflationary. The thing that’s going to help it first and foremost is top line sales growth and secondly is lower -- ultimately lower structural SG&A in several of these other countries so far that we’re currently in like Asia, Mexico, frankly Australia.

Okay, great, thanks. I appreciate it.

Your next question comes from the line of Budd Bugatch with Raymond James.

Hi, good morning. Thanks for taking my question. Richard just on Asia I think you talked to -- you said there was cannibalization in Asia and I just wonder how you think about cannibalization in Asia going forward given the high productivity in those clubs?

We want to get more open faster even if it's a little hurtful -- even if it's a little hurtful to cannibalization. Mind you, you’re going from five to six locations in a 20 million population city you might have some cannibalization, but we’ve been blessed by having some units that are $250 million, the 300 plus million dollars in some cities in Taiwan, in Korea and Japan where we opened the second unit, you’ll take $50 million to $75 million of that $300 million away and the only thing that goes into your comp is that negative $50 million or $75 million for that first year, but come second year you’ve got two units that are going nicely, and so that’s part of the business.

And typically in the second year or in the third year you usually start to see that first unit rebuild, is that been your experience so far or?

We really see the 53rd week out, I mean once that impact -- that cannibalizing impact anniversaries is when you’ll see that rebound.

So almost immediately after you get to that second year. Secondly and just lastly for me, I know in the States we’re all thinking about the government shutdown and just interested to how the management thinks about that impact going on your business and if there’s anything strategic you’re doing because of it?

Other than scratching our head in disbelief …

We’re all getting bald doing that.

I actually told our senior executives in operations, on the west coast there is really not seen any effect. Around D.C. is the only place where we’ve seen some effect downward a little bit.

Okay. All right. Thank you very much.

Your next question comes from the line of Joe Feldman with Telsey Advisory Group.

Yes, hi. Good morning, guys. Wanted to go back to the SG&A again, I had a couple of questions. Just talking to the people this morning about with the 5% comp why not get it -- couldn't you get a little bit more leverage? I know there were some incremental expense, it sounds like some true ups things like that, but should SG&A had a little more leverage or what -- how should we think about it going forward I guess?

I think the two biggest things are the fact that, again given our size and given even our $30 billion sales number for the quarter, $3 million which isn't what it used to be when you are doing a $100 billion a year. $3 million of anything is a basis point swing. When you’ve got just a similar example of workers comp where you’re adjusting every quarter as you do it for GAAP accounting, actuarially a $300 million plus tale of previous years of workers’ comp issues. You have got a much bigger number adjusting in healthcare; you have got lots of other expenses. So I think it’s a combination of several of those lining up in one direction instead of some of them offsetting. There is always going to be a range. Usually you have got half one way and half the other. We will see what else was there. The fact that we’ve 17 versus 16 weeks hurt you a little bit. Again, my guess is at the end of the day, you – we’ve some increased expansion efforts with opening in Spain and IT monetization that's a few basis points. So all of those things add up. I think at the end of the day what I was trying to convey when we look at all the numbers it's nine over stated kind of the underlying secular trend. But I don’t want to suggest it was zero, it was probably somewhere north of zero and south of five, but I don't know what the number is.

Got it. That’s helpful. Thanks for that. And then just another question, as far as holiday season goes, any changes to how you’re approaching this year versus last year, opening closing, different times of events, anything like that we should think about?

Nothing.

Okay. And then the one last thing I wanted to ask you guys was just -- I know you give us the monthly trends, so we kind of know where things are at. But I want to ask anyway, any changes in sort of purchasing habits from the core consumer in terms of surprises, when you’ve -- maybe launched the new -- some of those special items that you’ve that things either sold better or worse or than you may have expected and the way people are purchasing. Do you have anything to comment on?

I think we -- I continue to be pleasantly surprised and happy that our frequency is where it is with [four in] front of it. Recognizing some of that gas expansion in Canada some of its new markets where we opened new units, but overall no.

Okay. Thanks guys. Good luck for this quarter.

Why don’t we take two last questions?

Your next question comes from the line of (indiscernible) with Citi.

Hi. Thanks for taking my question. I wanted to ask how you do think small business owners are feeling right now. What’s the sentiment that you are perceiving?

Well, I’m not in a kind of -- we haven’t seen a big change in our small business members in terms of their sales trends. So it’s hard to say. I can’t really answer that one.

Okay, thanks a lot.

And your next question comes from the line of Scott Mushkin with Wolfe Research.

Hey guys, thanks for slipping me in and I know a lot of questions have been asked. So I just wanted to talk about the magnitude of the price investments in Fresh Food next year, I guess, it could vary to some degree on what happened competitively -- from what you can control, do you anticipate a continuation of the trend there?

Well, I can’t really give you any direction going forward other than -- we’re going to be aggressive, it’s in our blood. Again, good news is that to the extent that certain commodity prices are coming down. We kept our prices down when commodity -- those underlying raw material costs skyrocketed. Now that they’re coming back, its – it hopefully will give us a fair -- a fairer margin in some of those areas where we have really hit ourselves hard, and so hopefully -- under that scenario that's -- they’re positive to margin. But we’re going to keep doing what we’re doing in terms of being aggressive and I do want to say while we certainly aren’t cavalier about our competition, we think our toughest competitor is ourselves and we’re going to keep driving that.

So just to clarify if I heard you right, that you’re going to be pretty aggressive, but -- and we’ve noted this in our research as a chance that the wholesale prices could come down faster than have as a retail. So you actually think it could be a potentially net benefit given that dynamic, is that a good read of what you were saying?

Potentially and again I’m using a data sample of one item here to check in. Certainly just few other a lot of those in fresh foods are like that because if you recall a few years ago, we were talking about food court margins got hammered, because the cost of cheese skyrocketed and needless to say we sell a lot of pizza. And so -- but we gave that as an anecdotal example of where we’re going to hold the pricing though, because it’s such a value proposition. And so there are few of those. On general merchandise, subject to competitive challenges out there, it rains on all of us -- all the competition out there and when underlying costs are coming down a little bit, there is -- if there is pressure out there we probably are more of it than others, but a little of it we will retain.

Okay. Richard, thank you for taking my questions. I appreciate it.

Sure. Okay, before we hang it up here, were Bob and Jeff and I are in a budget meeting -- monthly budget meeting till about one, so we will take calls after that if you have any questions or shoot us an email. Thank you.

Thank you. This concludes today's conference call. You may now disconnect.