Gary Millerchip
Executive Vice President and Chief Financial Officer at Costco Wholesale
Thanks, Ron. In today's press release, we reported operating results for the fourth quarter of fiscal 2024, the 16 weeks ended September 1st. As we did last quarter, we published a slide deck on our Investors site under Events & 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.
Throughout this discussion, when we're comparing to last year's fourth quarter, the best way to normalize for the extra week is to multiply last year's results by sixteen-seventeenths. Net income for the 16-week fourth quarter came in at $2.354 billion, or $5.29 per diluted share, up from $2.16 billion and $4.86 per diluted share in the 17-week fourth quarter last year. This year's results included a non-recurring net tax benefit of $63 million, or $0.14 per diluted share, related to a transfer pricing settlement and true ups of various tax reserves.
Reported net income was up 9% year-over-year. Excluding this year's non-recurring tax benefit and normalized for the extra week last year, net income and earnings per diluted share were up 12.7% and 12.6% respectively. Net sales for the fourth quarter were $78.2 billion, an increase of 1% from $77.4 billion in the fourth quarter last year. Adjusting for the extra week last year, net sales would have been up 7.3%.
The following comparable sales reflect comparable locations year-over-year and 16 comparable retail weeks. US comp sales were up 5.3%, or 6.3%, excluding gas deflation. Canada comp sales were up 5.5%, or 7.9%, excluding gas deflation and FX. And other international comp sales were up 5.7%, or 9.3% adjusted. This all led to total company comp sales of plus 5.4%, or plus 6.9%, adjusted for gas deflation and FX. Finally, e-commerce comp sales were up 18.9%, or 19.5% adjusted for FX.
In terms of Q4 comp sales metrics, foreign currencies relative to the US dollar negatively impacted sales by approximately 0.9%, while gasoline price deflation negatively impacted sales by approximately 0.6%. Traffic or shopping frequency increased 6.4% worldwide and 5.6% in the US. Our average transaction or ticket was negative 0.9% worldwide and negative 0.3% in the US. This includes the headwinds from gas deflation and FX. Adjusted for those items, ticket would have been positive 0.5% worldwide and positive 0.6% in the US.
Moving down the income statement to membership fee income. We reported membership fee income of $1.512 billion, an increase of $3 million, or 0.2% on one less week year-over-year. FX negatively impacted membership fee income by 0.9%. Excluding the impacts from the extra week last year and FX, normalized membership fee income was up 7.4%.
In terms of renewal rates, at Q4 end, our US and Canada renewal rate was 92.9%, down 0.1% from Q3 end. This slight decrease related to an online membership promotion that we ran for a short period in fiscal year 2023, which resulted in over 200,000 new signups. As those members entered the renewal rate calculation during Q4 fiscal year '24, the lower renewal rates for that cohort, which is typical for digital promotions, had a negative impact on the overall US renewal rate. Outside of those signups, there were no meaningful changes in the US renewal rate. The worldwide rate came in at 90.5%, the same as Q3, with improvement internationally offsetting the slight negative in the US.
We ended Q4 with 76.2 million paid household members, up 7.3% versus last year, and 136.8 million cardholders, up 7% year-over-year. About half of new member signups in fiscal year 2024 were under 40 years of age. This percentage has been growing since COVID and has lowered the average age of our member over the last few years. At Q4 end, we had 35.4 million paid executive memberships, up 9.6% versus last year. Executive members now represent 46.5% of paid members and 73.5% of worldwide sales.
Turning to gross margin, our reported rate in the fourth quarter was higher year-over-year by 40 basis points, coming in at 11% compared to 10.6% last year, and up 33 basis points, excluding gas deflation. Core was lower by 5 basis points and lower by 11 basis points without gas deflation. In terms of core margins on their own sales, our core on core margins were higher by 9 basis points.
Ancillary and other businesses gross margin was higher 44 basis points and higher 42 basis points, excluding gas deflation. This increase year-over-year was driven by gas and e-commerce. E-commerce benefited from strong sales growth, item mix, and fulfillment productivity. And gas margins benefited from some moderate tailwinds and lapping a slightly weaker quarter last year, but nothing as significant as benefiting Q1 2024 as a result of the volatility from world events in that quarter. 2% rewards was higher by 4 basis points or 3 basis points without gas deflation, reflecting higher sales penetration from our executive members. And LIFO was a benefit of 5 basis points. We had an $8 million LIFO credit in Q4 this year compared to a $30 million charge in Q4 last year.
Moving to SG&A. Our reported SG&A rate in the fourth quarter was higher year-over-year by 8 basis points, coming in at 9.04% compared to last year's 8.96%. SG&A was higher by 2 basis points adjusted for gas deflation. The operations component of SG&A was higher 4 basis points, but was flat excluding gas deflation. Higher wages went into effect for the last six weeks of the quarter in the US and Canada, which was a headwind for the quarter of approximately 4 basis points.
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 by 3 basis points and 2 basis points without gas deflation. Stock compensation was flat year-over-year, and pre-opening was higher 1 basis point, but flat without gas deflation.
Below the operating income line, interest expense was $49 million versus $56 million last year, reflecting $1 billion of debt pay down in the second week of Q4 this year. Interest income for the quarter was $138 million versus $201 million last year, primarily due to the $6.7 billion special dividend paid in January 2024. Interest income will continue to be a headwind in the first half of this year due to lower year-over-year cash balances and lower interest rates.
FX and other was an $18 million loss this year versus a $37 million gain last year. This was primarily due to foreign exchange. In terms of income taxes, our tax rate in Q4 was 24.4% compared to 27.1% in Q4 last year. As mentioned earlier, this year's rate benefited from $63 million of net tax discrete items. Adjusted for this benefit, the tax rate for the quarter would have been 26.4%.
Turning now to some key items of note in the quarter. We opened 14 new warehouses in the fourth quarter, 10 in the US, 2 in Japan, and one each in Korea and China. Capital expenditure in Q4 was approximately $1.58 billion, bringing the total year spent to $4.71 billion.
Taking a deeper look into core merchandising sales, once again, non-foods led the way with the highest comparable sales in Q4. Our buyers have done a fantastic job finding new and exciting items at great values. Golden jewelry, gift cards, toys and seasonal, home furnishings, tires, and housewares all were up double-digits in the quarter. Health and beauty aids also performed well as we have expanded and elevated that category with new high-end SKUs both online and in warehouse, including assorted luxury fragrances at a 30% to 70% value to retail.
Across the fresh departments, we saw high single-digit growth as our continued focus on value is resonating with our members. An example of this in the meat department is our Kirkland Signature Boneless Chicken Tenderloins, where we lowered the price 13% and saw a 21% lift in pounds sold. In food and sundries, the introduction of more international food products such as paneer cheese, Punjabi cookies, and fried tofu kimbap are resonating extremely well with our members. We're also delivering greater value by adding some new Kirkland Signature items, such as our KS Organic Golden Maple Syrup and KS Aerosol Whip Cream.
Kirkland Signature offers significant member value compared to the national brands and 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 KS Standard Foil reduced from $31.99 to $29.99, KS Macadamia Nuts reduced from $18.99 to $13.99, KS Spanish Olive Oil 3-Liter reduced from $38.99 to $34.99, and KS Baguette 2-Pack reduced from $5.99 to $4.99.
Our commitment to sustainability and achieving lower emissions is also presenting opportunities to lower our costs. A great example of this is our KS Laundry Packs, which we recently converted from a rigid plastic tub to a pouch. This allowed us to reduce the plastic packaging by 80% and pass these cost savings onto the member, lowering the price by $1 from $19.99 to $18.99.
We've also found success working with suppliers to localize production of bulky items, such as water, paper, and laundry detergents. By manufacturing these goods closer to the countries in which they're sold, both costs and emissions associated with the shipment of these goods are greatly reduced. This quarter, we introduced our new Japan-produced Kirkland Signature Paper Towels.
In addition to the emissions benefits from no longer shipping millions of units of paper towels from the US to Asia, the reduced freight allowed us to lower the price by approximately 30%, or $8 per unit in that market. As production ramps up, we are in the process of transitioning our other Asian markets to locally produced SKUs. Shifting the production country of this one product will result in annual member savings of $30 million.
Within ancillary businesses, pharmacy had the strongest sales percentage increase, driven by double-digit growth in script counts. Our optical department also performed well as more members have taken advantage of the exceptional values in brand name frames and sunglasses. On a like-for-like 16-week basis, gas sales were negative low single-digits in the quarter as a result of the average price per gallon being 5% lower. This was partially offset by gallon growth of 3%.
Inflation was once again effectively 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, we are seeing good flow of products through Panama and Baltimore. The Red Sea is a remaining pain point and is causing some relatively minor shipping delays. Product availability has generally been good with a few exceptions. Egg supplies are still being negatively impacted by avian influenza and prime beef and a handful of vegetable SKUs have been tight.
As Ron shared earlier, we are pleased with the momentum in our digital business and continue to make good progress with our technology priorities. Our app was downloaded 3.5 million times in the quarter, bringing total downloads to approximately 39 million, and we recently upgraded the native search function on our US mobile app, leading to a doubling of the click-through rate on search results. 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 continued strength in bullion was a meaningful tailwind to e-commerce comps, appliances, health and beauty aids, tires, toys, gift cards, hardware, housewares, home furnishings, optical and pharmacy all grew double-digits year-over-year. The rollout of buy online pickup in warehouse for TVs in the US market was also completed in Q4. This allows same day pickup of a new TV for members who prefer not to wait for delivery. While buy online pickup in warehouse isn't cost effective for us on lower priced items, for high value items with high shipping costs like TVs, the freight savings more than offset the added labor required in warehouses to fulfill those orders. We're now testing a similar program on laptops.
Costco Next, our curated marketplace, while still small, continued to grow nicely in the quarter. We added 11 new vendors, bringing the total to 86 and adjusting for the extra week, gross sales grew nearly 40% year-over-year.
A brief comment on the membership fee increase that went into effect on September 1. Due to deferred accounting, this will have minimal impact early in the year. The vast majority of the benefit will come in the back half of fiscal year 2025 and into fiscal year 2026. With that being said, our commitment to invest in our employees and members is continuous, as evidenced by the July wage increase and lower prices, such as the example shared on today's call.
In closing, we are encouraged by our momentum exiting fiscal year 2024, and are excited about the growth opportunities ahead as we continue to execute our strategy of delivering exciting new items and greater value for members, innovating with Kirkland Signature, and growing our warehouse footprint and digital capabilities globally.
In terms of upcoming releases, we will announce our September sales results for the five weeks ending Sunday, October 6, on Wednesday, October 9, after market close.
That concludes our prepared remarks. We'll now open the line up for Q&A.
