Richard Galanti
Chief Financial Officer at Costco Wholesale
Thank you, Bill, and good afternoon to everyone. I will start by stating that these discussions will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that may cause actual events, results, and/or performance to differ materially from those indicated by such statements. The risks and uncertainties include, but are not limited to, those outlined in today's call, as well as other risks identified from time to time in the company's public statements and reports filed with the SEC.
Forward-looking statements speak only as of the date that they are made and the company does not undertake to update these statements except as required by law. In today's press release, we reported operating results for the first quarter of fiscal 2023, the 12 weeks ended this past November 20. Reported net income for the quarter was $1.364 billion or $3.07 per diluted share. That compared to $1.324 billion or $2.98 a share last year.
This year's results included a charge of $93 million pre-tax or $0.15 per share, primarily related to downsizing our charter shipping activities, and a tax benefit of $53 million or $0.12 per diluted share related to stock-based compensation. Last year's results included an asset write-off of $118 million pre-tax or $0.20 per diluted share and a tax benefit of $91 million or $0.21 a share related to stock-based compensation. Additionally, the strength of the U.S. dollar resulted in our foreign company earnings translating into fewer U.S. dollars. With 25% to 30% of our earnings generally -- generated outside of the United States, this negatively impacted earnings by about $0.12 per share. In terms of sales, net sales for the first quarter increased 8.1% or $53.44 billion versus $49.42 billion reported last year.
On a comparable sales basis during the first quarter, reported U.S. sales increased over the 12 weeks 9.3%. And excluding gas inflation and FX 6.5%. Canada 2.4% reported, 8.3% increase ex gas inflation and FX. Other International reported minus 3.1%, excluding gas inflation and FX plus 9.1%. So, you have all totaled 6.6% reported for the company and ex-gas inflation and FX of 7.1%. E-commerce, by the way, was reported of minus 3.7% and a minus 2% excluding FX.
In terms of first-quarter comp sales metrics, traffic or shopping frequency increased 3.9% worldwide and up 2.2% in the U.S. Our average transaction size was up 2.6% worldwide and 6.9% U.S. during the first quarter. And foreign currencies relative to the U.S. dollar have negatively impacted sales by a little over 3%, while gasoline price inflation positively impacted sales by approximately 2.5%.
Moving down the income statement. Membership fee income reported in the quarter, membership fee income came in right at $1 billion. That's $54 million or 5.7% higher than last year's reported number of $946 million. Again, the relative weakness in foreign currencies relative to the U.S. dollar, excluding the impact of FX -- we're assuming flat FX year over year -- that $54 million number would have been increased by $32 million and the membership on an adjusted basis would have been a little over 9% year over year on flat FX.
In terms of renewal rates, at first quarter-end, our U.S. and Canada renewal rates were 92.5% compared to 92.4% a quarter ago. And worldwide rate came in both this quarter-end and the previous quarter-end the same level at 90.4%. We ended first quarter with $66.9 million paid household members and $120.9 million cardholders, both up 7% versus last year and recognized we added about 22 units over the course of that last year. So, that was about just under 3% of that increase.
At Q1 end, paid executive memberships were right at 30 million, an increase of 904,000 during the 12 weeks or 75,000 a week during the first quarter. Executive members now represent 45% of our paid membership and just under 73% of worldwide sales. Moving down the income statement to gross margin, our reported gross margin in the first quarter was lower year over year by 45 basis points and lower by 21 basis points, excluding gas inflation. And as I'll explain in a minute, the 93% pre-tax charge, excluding that 93% -- $93 million charge we took in the quarter, gross margin ex-gas inflation would have been only down three basis points.
As I always ask you, jot down the following numbers. Two columns and six line items. The first column is reported during the first quarter, a year-over-year delta change in basis points and the second column excluding gas inflation. On a core merchandise basis, we reported in the first quarter, minus 52 basis points and ex-gas inflation, minus 31 basis points. Ancillary and other businesses, plus 23% on a reported basis and plus 30%. 2% reward, minus two and minus five. LIFO plus three and plus three. Other, that's the $93 million charge, minus 17 and minus 18.
So, all told, again, reported basis was 45, ex-gas inflation 21. So, starting with the core merchandise's contribution to gross margin on a reported basis was lower by 52 basis points year over year and lower by 31 basis points ex-gas inflation. In terms of the core margin on their own sales, in the first quarter, our core and core gross margin, if you will, was also lower by 31 basis points, with food and sundries being up a little bit, offset by nonfoods and fresh foods being down.
Fresh foods was down. As you know, for the last couple of years, it's been particularly strong and it's come down a little bit. In addition, we are looking to hold prices on some of those price points despite inflated costs in some of the fresh food categories. Ancillary and other business gross margins were higher by 23 and higher by 30 basis points ex-gas inflation in the quarter, with gas, business centers, and travel up year over year, offset in part by e-com, food courts, and optical. A 2% reward, minus two basis points, reported, minus 5%, excluding gas inflation, implying higher sales penetration coming from our executive members.
LIFO plus three basis points. We had a very small LIFO charge this year but lapped a $14 million charge in Q1 last year. You recall last year, during the four quarters, we had LIFO charges in excess of $400 million pre-tax with a small amount about $14 million in the first quarter, over $100 million in Q3 and over $200 million in Q4. So, we'll see what inflation does this year. Hopefully, it will continue to -- its current trends in the right direction.
Other, the minus 17 and 18 basis points reported in ex-gas inflation. This is the $93 million charge as mentioned in the earnings release, mostly related to downsizing our charter shipping activities.
Over a year after COVID began, you will recall that the supply chain challenges related to shortages of the containers and shipping delays greatly intensified with container freight and shipping rate skyrocketing. It was in Q4 of 2021 on our earnings call that we mentioned our initial leasing of three ships and several thousand containers to help mitigate these challenges. Later, we added four additional vessels and additional needed containers with commitments made for up to three years. Our objectives at the time were twofold.
First, to increase the ability for more timely shipping and arrival of overseas merchandise. This allowed us to better stay in stock and drive sales, and second, to reduce some of the skyrocketing shipping and associated container costs. We achieved those objectives for a period of time. Over the course of a year, year and a half, we controlled the shipping and delivery of nearly 50,000 containers, many that would have been greatly delayed and at an estimated savings as compared to the then current shipping container costs of somewhere between $1,000 and $2,000 per container, that, of course, fluctuated.
Now, with a dramatic improvement in shipping times and much lower shipping and container costs, it made sense to downsize our commitment and lower prices for our members.
Moving on to SG&A, our reported SG&A in the first quarter was lower or better year over year by 35 basis points, coming in at a 920 compared to a year ago 955. And that plus 35 basis point improvement would be plus 13 basis point improvement, excluding gas inflation. Again, writing down six line items and two columns, first column being reported, second ex-gas inflation. During the first quarter, our core operations was lower or better by eight basis points plus eight then. Without gas inflation, minus nine, Central, zero and minus three. Stock compensation, plus three and plus one. Preopening, zero and zero. Other, plus 24 and plus 24. For a total first-column reported -- year-over-year reported SG&A of plus 35 or lower by 35 basis points and ex-gas inflation, lower by 13.
Now, going through those numbers, the core operations component of SG&A was, again, lower by eight basis points reported, but higher by nine, excluding impact of gas inflation. These results include three sets of wage increases that were done in the past year plus, as well as a little lower sales results in Q1 as compared to the prior quarter, still increases but a little lower than the prior quarter.
Central was flat or zero and higher by three, ex gas inflation. Stock comp, again, a little lower number in stock comp as a percent. So it came down, improved a little bit.
Preopening, no impact. And the other, the 24 basis points you recall last year in Q1, this consisted of an asset write-off totaling $118 million pre-tax, which impacted the SG&A line last year. Below the operating income line, interest expense was $34 million this year, down $5 million or down from $39 million last year. And interest income and other for the quarter was higher by 11 year over year, $53 million versus $42 million a year ago.
Interest income was higher year over year, offset by unfavorable FX. Overall, reported pre-tax income in the quarter was up 4%, coming in at $1.77 billion, compared to $1.696 billion a year ago. And excluding the charges described earlier in both years, pre-tax income was up around 3%. In terms of income taxes, our tax rate in Q1 was 23.0% compared to 20.7% Q1 last year, so a little higher this year.
Both years' tax rates benefited from the tax treatment of stock-based compensation as mentioned earlier. The fiscal '23 effective tax rate, excluding these discrete items -- this discrete item, is currently projected to be between 26% and 27%.
A few other items of note. In terms of warehouse expansion, we plan to open a net of 24 units this year, 27 openings, including three relocations, so a net of 24. In the first quarter, the net of that 24 included seven. We plan three more in Q2, four in Q3, and 10 in Q4. In the first quarter, we opened, as I mentioned, seven net new warehouses. Four were in the U.S. and one each was in Korea, our first in New Zealand, and our first in Sweden.
Additionally, last week, we opened another building in the U.S. And just yesterday, we opened our 14th location in Australia, our second on the country's West Coast in or near Perth. In fiscal '23, again, 27 total new openings including three locations for a net of 24. Of the net 24, it's made up of 15 in the U.S. and nine in Other International, including our third and fourth locations in China. Regarding capex, in the first quarter, capex was approximately $1.06 billion. And our estimate for the entire fiscal year is capex of somewhere in the $3.8 billion to $4.0 billion range.
Moving to e-commerce, e-commerce as we mentioned in the press release, on a reported basis, was -- for the quarter, year-over-year sales were minus 3.7 and minus two ex FX. Including sales -- what we don't include in this numbers are sales through like same day delivery for fresh foods with our partners like Instacart, which we don't include those, and they are fulfilled in our warehouse. Our ecom comps, ex FX, would have been if we included it, in the positive low single digits. Stronger departments in terms of year-over-year percentage increases were tickets and gift cards, tires, candy, and health and beauty aids.
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The largest e-comm merchandise department majors, which includes consumer electronics and appliances, which represents over 40 -- close to 40% to 50% of our -- over 40% of our e-com volume was down in the high single digits. Subsequent to quarter-end, we did have our two biggest ecom selling days in our company history, both on Black Friday and Cyber Monday. Now, a few comments regarding inflation. Recall, we've seen some minor improvements in a few areas.
Hopefully, continuing the comment I made last quarter's earnings call, a little light at the end of the tunnel, but it's still little. Recall last quarter and fourth quarter, we estimated that year-over-year price inflation was about 8%. In the first quarter, we estimate the equivalent year-over-year inflation number in the range of 6% to 7%. Food and sundries is still up more than nonfoods, but overall, a little better level than a quarter ago for the company.
And commodity costs are mostly coming down, whether it's corn flour, sugar, and butter or even some things like steel. A few things are up, but overall, we're seeing a little bit of a trend, but we'll keep you posted. Switching over to inventory levels, recall that our total inventory in both -- at the end of Q3 and at the end of Q4 on a year-over-year basis were up 26% year over year.
I'm happy to report that good progress was made during the first quarter of this fiscal year. Our increase as of Q1 end dropped to a 10% year-over-year increase, largely driven by an estimated 6% to 7% inflation and about just under 2% year-over-year unit growth. So, inventories, while we still have some pockets of a little over inventory, overall, we feel pretty good about it. As a reminder, in terms of upcoming releases, we will announce our December sales results for the five weeks ending Sunday, January 1 and Thursday, January 5, after the market closes.
With that, I will open it up to Q&A and turn it back over to Bill. Thank you.