Richard A. Galanti
Executive Vice President and Chief Financial Officer at Costco Wholesale
Thank you, Anne and good afternoon to everyone. I'll 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 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 fourth quarter of fiscal 2021, the 16 weeks ended August 29. Reported net income for the quarter came in at $1.67 billion or $3.76 per share. Last year's fourth quarter net income came in at $1.389 billion or $3.13 per diluted share. This year's fourth quarter included an $84 million pre-tax or $0.14 a share charge for the write-off of certain IT assets. Last year's fourth quarter included $281 million pre-tax charge or $0.47 a share of COVID-related costs, as well, it included a $36 million or $0.06 a share a pre-tax charge related to the prepayment of $1.5 billion of debt, partially offset by $84 million or $0.15 per share benefit for the partial reversal of a reserve related to a product tax assessment taken in the fiscal year 2019.
Net sales for the quarter increased 17.5% to $61.44 billion up from $52.28 billion a year earlier in the fourth quarter. Comparable sales for the fourth quarter as reported an hour ago, for the 16 weeks, on a reported basis, the US was 14.9%. Excluding gas inflation and FX, the 14.9% would be 10.3% positive. Canada reported 19.5% plus, ex gas inflation and FX, 6.7%. Other International reported 15%, without gas inflation and FX, 7.3%. Total Company, 15.5% reported, 9.4% ex gas inflation and FX. E-commerce by the way, reported was 11.2% positive, ex gas inflation and FX, 8.9%.
In terms of Q4 comp sales metrics, traffic or shopping frequency increased 9.2% worldwide and 8.8% in the US. Our average transaction or basket was up 5.8% worldwide and 5.6% in the US during the fourth quarter. Those numbers, including the positive impact from gas inflation and FX. Foreign currencies relative to the US dollar positively impact sales by approximately 230 basis points, whereas gasoline price inflation positively impacted sales by approximately 385 basis points.
Moving down the income statement to the membership line. Membership fee income for the fourth quarter came in at $1.234 billion dollars in the fourth quarter of 2021, that's up $120 million from the prior year's fourth quarter membership fee income of $1.106 billion. The $128 million represents an 11.7% increase year-over-year. Excluding the benefit from positive FX, the $128 million positive number would have been $107 million positive or 9.7% effective increase. In terms of renewal rates, at the fourth quarter end, our US and Canada renewal rate was 91.3%, up 0.3% from 16 week earlier number at Q3-end. And worldwide rate came in, renewal rate came in at 88.7%, also up 0.3% from Q3 and 16 weeks earlier.
The renewal rates are benefiting we believe for more members auto renewing as well as increased penetration of executive members, who on average renew at a higher rate than non-executive members. Our first year renewal rates have also improved as well during this time. In terms of number of members at Q4-end, member households and total cardholders, at Q4, the fiscal year end, a few weeks ago, total paid households were 61.7 million, that's up 1.1 million from the 60.6 million figure we shared with you 16 weeks earlier. Total cardholders came in at 111.6 million or 1.8 million higher than the 109.8 million we had as of Q3 end. At Q4 end, paid executive members were came in at 25.6 million, an increase of a little over 1 million new executive members, and that's during the 16-week period as well.
Moving down to the gross margin line. Our reported gross margin in the fourth quarter was lower year-over-year by 32 basis points. And actually, excluding gas deflation, it was higher by 5 basis points. As I usually do -- as you jot down two columns of numbers a little gross margin matrix, if you will, the line items will be core merchandise, ancillary, second line item would be ancillary and other businesses, third line item would be 2% reward, fourth line item would be LIFO, and last line item would be other, and then the finally, the last line item would be total. Two columns, the first one being reported year-over-year in the fourth quarter. In the second column, excluding gas inflation.
So core merchandise, on a reported basis was lower year-over-year by 90 basis points, ex gas inflation that was lower minus 57 basis points. Ancillary and other businesses plus 44 basis points on a reported basis and plus 53 basis points ex gas inflation. 2% reward plus 1 basis point and minus 3 basis points year-over-year on a report -- on ex gas inflation. LIFO minus 5 basis points and minus 5 basis points, and other plus 18 basis points and plus 17 basis points. If you add up the two columns, you get the total for reported, the 32 basis points that I just mentioned. And again, ex gas inflation plus 5 basis points.
Now, the core merchandise component you see here are lower by 90 year-over-year and lower by 57 ex gas inflation. Similar to last quarter. This is primarily a function of sales shifting from core to ancillary versus the last year as we begin to revert back to more historical sales penetrations. Recall last year we saw a significant shift of sales out of ancillary and other businesses and into the core. In terms of the core margin on their own sales, in the fourth quarter, the core on core margins were lower by 40 basis points, with non-food slightly up, food and sundries slightly lower year-over-year. Fresh foods was down and it was the fundamental driver of the core, core being lower in the quarter.
Now fresh foods is lapping exceptional labor productivity and low product spoilage that occurred from the outside sales a year ago in Q4. We retain some of that productivity gains from those productivity gains as volumes have remained high. However, we've also elected to hold delay and or mitigate some of the price increases in this increasingly inflationary environment over the last few months. Ancillary and other business gross margin as you see in the chart in the matrix was higher by 44 basis points and higher by 53 basis points ex gas inflation in the quarter. Gasoline had a good quarter as we are lapping year-over-year a softer quarter due to the pandemic. We also showed improvement in food court optical travel, all of which were benefited by easy compares versus last year, also due to the impacts of COVID on those businesses.
Now LIFO, this is a gross margin charge that we haven't seen in this matrix for about seven years. LIFO was lower by 5 basis points, both with and without gas inflation. We had a $30 million LIFO charge in the quarter. The first such charge since -- first such charge since 2014. This is a result of the continued inflationary cost pressures, which I'll discuss more in a few minutes. 2% reward higher by 1 basis point on a reported basis, but more importantly lower by 3 basis points ex gas inflation again implying slightly higher penetration of sales going into the executive member and the associated rewards -- become with it. And other is up 18 basis points and then up 17 ex gas inflation. This is primarily related to COVID related costs from a year ago.
Moving to SG&A, our reported SG&A in the fourth quarter was lower or better year-over-year by 45 basis points and lower or better by 13 basis points, excluding gas inflation. Second matrix of the day, the two columns reported an ex gas inflation and 5 line items, operations; second line item, central; third line item, stock compensation; fourth line item, other. And then total, on a reported basis, core operations was lower or better by plus 19 basis points and ex gas inflation higher by 8 basis points or minus 8 basis point. Central plus, 12 basis points and plus 8 basis points; stock compensation, plus 2 basis points and plus 2 basis points; and other, plus 12 basis points and plus 11 basis points. Adding up the columns again, SG&A on a reported basis was better or lower by 45 basis points and lower ex gas inflation by 13 basis points.
As you can see in the matrix. The core operations component again was better by 19 basis points and low -- and higher by -- lower by 19 basis points and then or higher by 8 basis points excluding the impacts from gas inflation. Keep in mind, this result includes the permanent $1 an hour our wage increase that we implemented in March of this year. This higher by 8 basis point year-over-year expense result includes the 14 basis point cost of the dollar in our wage increase. Central, again improved by 8 basis point ex gas inflation and stock compensation also with strong sales and helped by 2 basis points. Now, the other of plus 12 basis point or plus 11 basis point without gas inflation, so lower like amount of basis points. I
Included in other, last year was the COVID expense of $217 million or 42 basis points and the reversal of a product tax assessment reserve of $84 million or 16 basis points. This year includes the write-off of the IT assets totaling $84 million or 14 basis points. So you add all those up. That's where you get the 11 basis point.
Next on the income statement is preopening. Preopening this year was $35 million, last year, $26 million or higher by 9 basis points preopening is up year-over-year, in part due to the timing of openings and given different amount of preopening only given location, both within the quarter and in the following quarter. All told, reported operating income in the fourth quarter increased by 18% coming in at $2.275 billion this year compared to $1.929 billion a year earlier. Below the operating income line, interest expense was $52 million this year, essentially the same $51 million a year ago.
Interest income and other for the quarter was higher by $77 million year-over-year, roughly half of that is due to favorable FX and the other half is related to last year's fourth quarter charge for the make whole debt prepayment. Overall reported pre-tax earnings in the fourth quarter of 2021 came in, up 23% coming in at $2.291 billion compared to last year's $1.869 billion. Our tax rate in the fourth quarter was 26.1% higher than last year's fourth quarter rate of 24.9%. For fiscal '22 based on our current estimates, which of course can always change, we anticipate that our effective normalized total Company tax rates. An to be similar to fiscal '21, somewhere in the 26% to 27% range. Unless, of course they're changes to the US corporate tax rates. We'll have to see -- wait and see.
A few other items of note, warehouse expansion for fiscal '21, we just ended, we opened net openings of 20 and we actually had 22 openings, including two relocations for the total increase of 20 net new units. This year, we're looking to open at least 25 net new units, including second warehouses in each of China and France. And our first location in New Zealand, as well we plan to relocate five locations. Regarding capital expenditures, our fourth quarter 2021 spend capital expenditure was approximately $1.09 billion. Our full year capital ex spend with $3.59 billion. As I mentioned in last quarter's call, this included a relatively recent $340 million purchase and the distribution facility on the West Coast to support our big and bulky delivery activities.
For e-commerce, e-commerce sales in the fourth quarter ex FX increased by 8.9% year-over-year. That's on top of last year's Q4 e-commerce sales increase of 91%. Stronger departments, jewelry, we actually sold a couple of rings in the $100,000 range. Home furnishings were strong. Pharmacy was strong and sporting goods were strong. A couple of the large departments like majors in electronics while very good sales we had really outsized sales a year ago in the fourth quarter during COVID. Update on Costco Logistics. Logistics continues to drive big and bulky sales. For the quarter, Costco Logistics sales within our delivery was up 130% and in the quarter represented 24% of all sales on our US e-commerce site. That compares to -- that 24% compared to 11% of e-commerce sales last year. Mind you much of that relates to moving things from other third parties to our own internal logistics department.
Approximately -- currently, approximately 7,000 to 10,000 deliveries via Costco Logistics are occurring and continuing to grow. In terms of our e-com out. We have over 10 million downloads. It's continually improving with additional features coming soon. Digital payment, using the Costco credit card. It's in pilot in several locations with full rollout by the middle of next month. The ability to view warehouse receipts online also next month, more detail on online purchase as well. And by October end we -- an improved mobile site improved look and feel, a new landing page and expanded information both for.com news and for enhanced warehouse information.
From a supply chain perspective, I want to go back to two things, supply chain and inflation. From a supply chain perspective, the factors pressuring supply chains and inflation include port delays, container shortages, COVID disruptions, shortages on various components, raw materials and ingredients, labor cost pressures and trucker and driver shortages -- trucks and driver shortages. Domestically, anecdotally rather from a -- even on a domestic side, various major brands are requesting longer lead times. Some cases difficulty in finding drivers and trucks on short notice. Lead times on ingredients and packaging have been extended in some cases. So planning is crucial which I feel we've people have done a great job with that over the last several months. Also we're putting some limitations on key items like bath issues, roll towels, Kirkland Signature water high demand related SKUs related to the uptick in the Delta related demand.
Furniture delays in some shortages of course traditional rollout times to go from 8 to 12 weeks -- from 8 to 12 weeks up to 16 to 18 weeks. And some ways, we think that's an advantage, we're selling out the generally merchandise once it's received within two weeks on most items and we've ordered more and earlier. Same thing with toys and seasonal, we're bringing in some of the items early. Chip shortages impacting many items as I mentioned in the last call. Examples of impacted items computers, tablets, video games, major appliances. The feeling is from the buyers as this will likely extend into 2022.
Again, we're ordering as much as we can and getting in earlier. And I think as evidenced by most recent sales results, we're doing okay with this. Despite these issues -- sorry. In terms of transportation costs, they're increasing -- we're reading about it every day. Containers, trucks and drivers all are impacting the timing of deliveries and higher freight costs. Despite all these issues, we continue to work to mitigate cost increases in a variety of different ways and hold down and/or mitigate our price increases passed onto the members.
We've also chartered three ocean vessels for the next year to transport containers between Asia and the US and Canada and we've leased several thousand containers for use on these ships. Every ship can carry 800 to 1,000 containers at a time and we'll make approximately 10 deliveries during the course of the next year.
Moving to inflation, again, there have been many -- there have been and are a variety of inflationary pressures that we and others are seeing and more of it. As I discussed on last quarter's call, inflationary factors abound, higher labor costs, higher freight cost, higher transportation demand, along with container shortages and port delays, increased demand in certain product categories.
Various shortages of everything from computer chips to oils and chemicals, higher commodities prices. That's a lot of fun right now. Some inflationary soundbites if you will, price increases on items shipped across the oceans. Some suppliers are -- that's paying two to six times for containers and shipping. Price increases of pulp and paper goods, some items up 4% to 8%. Again, we're trying to mitigate those where we can and we think we've done a decent job of mitigating some of it. Plastics, resin increases on things like trash bags, Ziplock skews, pet products include -- resin oriented pet products, plastic cups, plates, plastic wrap, many items up in the 5% to 11% range. Metals, again aluminum foil, mid-single-digit crossed increases as well as cans for sodas and other beverages.
I mentioned commodities earlier, oil, coffee, nuts, they remain generally, according to our buyers at five-year highs, and so on. Higher import prices on things from Europe, like cheeses, but the combination of freight and FX. 3% to 10% increases on certain, but not all apparel items. And fresh foods inflation is up in the mid to high single digits, with meat leading the way up high single to low double-digits due to the feed, labor and transportation costs. Now, I was asked back in March at our second quarter earnings call at what level we felt inflation was running overall on the sale price side. I stated that our best guess at the time was somewhere between 1% and 1.5%. I updated that 16 weeks earlier -- 16 weeks ago on our May 26 third quarter call and we opted estimate to be in the 2.5% to 3.5% range. As of today, in talking with our senior merchants, we would estimate the overall price inflation of the products we're selling to be in the 3.5% to 4.5% range.
As I discussed earlier, this inflation was the driver of the $30 million LIFO charge that we took in the quarter. But all of this said, I feel very good with the job that our merchants, our traffic department and our operators have all been doing enable to -- in order to get the products that we need, pivot when and where necessary, and keep our warehouses full while keeping prices as low as we can for our members and continuing to show incredible value versus our competitors. I think this is reflected in our strong reported sales and profits that we've achieved, despite challenges and our typical aggressive pricing.
Finally, in terms of upcoming releases, we will announce our September sales results for the five weeks ending September, Sunday, October 3, on Wednesday, October 6, after the market close. And with that, I will open it up for questions with Anne. Anne? Thank you.
