10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 18, 2018

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-20355

Costco Wholesale Corporation

(Exact name of registrant as specified in its charter)

Washington	91-1223280
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

999 Lake Drive, Issaquah, WA 98027

(Address of principal executive offices) (Zip Code)

(Registrant’s telephone number, including area code): (425) 313-8100

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒  NO ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ☒   NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐   NO ☒

The number of shares outstanding of the issuer's common stock as of March 7, 2018 was 438,820,272.

COSTCO WHOLESALE CORPORATION

INDEX TO FORM 10-Q

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	29
	Signatures	29

2

PART I—FINANCIAL INFORMATION

Item 1—Financial Statements

COSTCO WHOLESALE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in millions, except par value and share data)

(unaudited)

	February 18, 2018			September 3, 2017
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	4,781		$	4,546
Short-term investments	1,049			1,233
Receivables, net	2,001			1,432
Merchandise inventories	10,671			9,834
Other current assets	397			272
Total current assets	18,899			17,317
PROPERTY AND EQUIPMENT
Land	6,129			5,690
Buildings and improvements	15,740			15,127
Equipment and fixtures	7,025			6,681
Construction in progress	909			843
	29,803			28,341
Less accumulated depreciation and amortization	(10,754		)	(10,180		)
Net property and equipment	19,049			18,161
OTHER ASSETS	755			869
TOTAL ASSETS	$	38,703		$	36,347
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable	$	10,061		$	9,608
Accrued salaries and benefits	2,997			2,703
Accrued member rewards	1,023			961
Deferred membership fees	1,656			1,498
Other current liabilities	3,176			2,725
Total current liabilities	18,913			17,495
LONG-TERM DEBT, excluding current portion	6,505			6,573
OTHER LIABILITIES	1,232			1,200
Total liabilities	26,650			25,268
COMMITMENTS AND CONTINGENCIES
EQUITY
Preferred stock $.01 par value; 100,000,000 shares authorized; no shares issued and outstanding	0			0
Common stock $.01 par value; 900,000,000 shares authorized; 438,883,000 and 437,204,000 shares issued and outstanding	4			4
Additional paid-in capital	5,920			5,800
Accumulated other comprehensive loss	(897		)	(1,014		)
Retained earnings	6,727			5,988
Total Costco stockholders’ equity	11,754			10,778
Noncontrolling interests	299			301
Total equity	12,053			11,079
TOTAL LIABILITIES AND EQUITY	$	38,703		$	36,347

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

COSTCO WHOLESALE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(amounts in millions, except per share data)

(unaudited)

	12 Weeks Ended						24 Weeks Ended
	February 18, 2018			February 12, 2017			February 18, 2018			February 12, 2017
REVENUE
Net sales	$	32,279		$	29,130		$	63,396		$	56,599
Membership fees	716			636			1,408			1,266
Total revenue	32,995			29,766			64,804			57,865
OPERATING EXPENSES
Merchandise costs	28,733			25,927			56,350			50,215
Selling, general and administrative	3,234			2,980			6,458			5,920
Preopening expenses	12			15			29			37
Operating income	1,016			844			1,967			1,693
OTHER INCOME (EXPENSE)
Interest expense	(37		)	(31		)	(74		)	(60		)
Interest income and other, net	7			(4		)	29			22
INCOME BEFORE INCOME TAXES	986			809			1,922			1,655
Provision for income taxes	273			288			558			579
Net income including noncontrolling interests	713			521			1,364			1,076
Net income attributable to noncontrolling interests	(12		)	(6		)	(23		)	(16		)
NET INCOME ATTRIBUTABLE TO COSTCO	$	701		$	515		$	1,341		$	1,060
NET INCOME PER COMMON SHARE ATTRIBUTABLE TO COSTCO:
Basic	$	1.60		$	1.17		$	3.06		$	2.42
Diluted	$	1.59		$	1.17		$	3.04		$	2.41
Shares used in calculation (000’s):
Basic	439,022			439,127			438,494			438,567
Diluted	441,568			440,657			441,201			440,568
CASH DIVIDENDS DECLARED PER COMMON SHARE	$	0.50		$	0.45		$	1.00		$	0.90

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

COSTCO WHOLESALE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(amounts in millions)

(unaudited)

	12 Weeks Ended				24 Weeks Ended
	February 18, 2018		February 12, 2017		February 18, 2018		February 12, 2017
NET INCOME INCLUDING NONCONTROLLING INTERESTS	$	713	$	521	$	1,364	$	1,076
Foreign-currency translation adjustment and other, net	150		114		127		(231		)
Comprehensive income	863		635		1,491		845
Less: Comprehensive income attributable to noncontrolling interests	22		14		33		19
COMPREHENSIVE INCOME ATTRIBUTABLE TO COSTCO	$	841	$	621	$	1,458	$	826

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

COSTCO WHOLESALE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in millions)

(unaudited)

	24 Weeks Ended
	February 18, 2018			February 12, 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net income including noncontrolling interests	$	1,364		$	1,076
Adjustments to reconcile net income including noncontrolling interests to net cash provided by operating activities:
Depreciation and amortization	679			609
Stock-based compensation	346			322
Other non-cash operating activities, net	10			(49		)
Deferred income taxes	(64		)	45
Changes in operating assets and liabilities:
Merchandise inventories	(802		)	(735		)
Accounts payable	486			1,579
Other operating assets and liabilities, net	96			439
Net cash provided by operating activities	2,115			3,286
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term investments	(407		)	(625		)
Maturities and sales of short-term investments	588			734
Additions to property and equipment	(1,328		)	(1,183		)
Other investing activities, net	(11		)	22
Net cash used in investing activities	(1,158		)	(1,052		)
CASH FLOWS FROM FINANCING ACTIVITIES
Change in bank checks outstanding	(33		)	(272		)
Repayments of long-term debt	(58		)	—
Tax withholdings on stock-based awards	(216		)	(201		)
Repurchases of common stock	(184		)	(190		)
Cash dividend payments	(220		)	(198		)
Other financing activities, net	(37		)	36
Net cash used in financing activities	(748		)	(825		)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	26			(44		)
Net change in cash and cash equivalents	235			1,365
CASH AND CASH EQUIVALENTS BEGINNING OF YEAR	4,546			3,379
CASH AND CASH EQUIVALENTS END OF PERIOD	$	4,781		$	4,744
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the first half of year for:
Interest (reduced by $7 and $8 for interest capitalized in 2018 and 2017, respectively)	$	78		$	54
Income taxes, net	$	661		$	458
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Cash dividend declared, but not yet paid	$	219		$	198

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

COSTCO WHOLESALE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(amounts in millions, except share, per share, and warehouse count data)

(unaudited)

Note 1—Summary of Significant Accounting Policies

Description of Business

Costco Wholesale Corporation (Costco or the Company), a Washington corporation, and its subsidiaries operate membership warehouses and ecommerce websites based on the concept that offering its members low prices on a limited selection of nationally branded and private-label merchandise in a wide range of categories will produce high sales volumes and rapid inventory turnover. At February 18, 2018, Costco operated 747 warehouses worldwide: 519 United States (U.S.) locations (in 44 states, Washington, D.C., and Puerto Rico), 98 Canada locations, 37 Mexico locations, 28 United Kingdom (U.K.) locations, 26 Japan locations, 13 Korea locations, 13 Taiwan locations, nine Australia locations, two Spain locations, one Iceland location, and one France location. The Company operates e-commerce websites in the U.S., Canada, Mexico, U.K., Korea, and Taiwan.

Basis of Presentation

The condensed consolidated financial statements include the accounts of Costco, its wholly-owned subsidiaries, and subsidiaries in which it has a controlling interest. The Company reports noncontrolling interests in consolidated entities as a component of equity separate from the Company’s equity. All material inter-company transactions between and among the Company and its consolidated subsidiaries have been eliminated in consolidation. The Company’s net income excludes income attributable to noncontrolling interests in its operations in Taiwan. During the first quarter of 2018, Costco purchased its former joint venture partner's remaining equity interest in its Korean operations. Unless otherwise noted, references to net income relate to net income attributable to Costco.

These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q for interim financial reporting pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). While these statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (U.S. GAAP) for complete financial statements. Therefore, the interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report filed on Form 10-K for the fiscal year ended September 3, 2017.

Fiscal Year End

The Company operates on a 52/53 week fiscal year basis, with the fiscal year ending on the Sunday closest to August 31. Fiscal 2018 is a 52-week year ending on September 2, 2018. References to the second quarters of 2018 and 2017 relate to the 12-week fiscal quarters ended February 18, 2018, and February 12, 2017, respectively. References to the first half of 2018 and 2017 relate to the twenty-four weeks ended February 18, 2018, and February 12, 2017, respectively.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results and events could differ from those estimates and assumptions.

7

Note 1—Summary of Significant Accounting Policies (Continued)

Fair Value of Financial Instruments

The Company accounts for certain assets and liabilities at fair value. The carrying value of the Company’s financial instruments, including cash and cash equivalents, receivables and accounts payable, approximate fair value due to their short-term nature or variable interest rates. See Notes 2, 3, and 4 for the carrying value and fair value of the Company’s investments, derivative instruments, and fixed-rate debt, respectively.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying a fair value hierarchy, which requires maximizing the use of observable inputs when measuring fair value. The three levels of inputs are:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Significant unobservable inputs that are not corroborated by market data.

Current financial liabilities have fair values that approximate their carrying values. Long-term financial liabilities include the Company's long-term debt, which are recorded on the balance sheet at issuance price and adjusted for unamortized discounts or premiums and debt issuance costs, which are being amortized to interest expense over the term of the loan. There have been no material changes to the valuation techniques utilized in the fair value measurement of assets and liabilities as disclosed in the Company's 2017 Form 10-K.

Merchandise Inventories

Merchandise inventories are stated at the lower of cost or market. U.S. merchandise inventories are valued by the cost method of accounting, using the last-in, first-out (LIFO) basis. The Company believes the LIFO method more fairly presents the results of operations by more closely matching current costs with current revenues. The Company records adjustments quarterly, if necessary, for the projected annual effect of inflation or deflation, and these estimates are adjusted to actual results determined at fiscal year-end, after actual inflation rates and inventory levels have been determined. Canadian and Other International merchandise inventories are predominantly valued using the cost and retail inventory methods, respectively, using the first-in, first-out (FIFO) basis.

As of February 18, 2018, and September 3, 2017, U.S. merchandise inventories valued at LIFO approximated FIFO after considering the lower of cost or market principle.

Derivatives

The Company is exposed to foreign-currency exchange-rate fluctuations in the normal course of business. It manages these fluctuations, in part, through the use of forward foreign-exchange contracts, seeking to economically hedge the impact of fluctuations of foreign exchange on known future expenditures denominated in a non-functional foreign currency. The contracts relate primarily to U.S. dollar merchandise inventory expenditures made by the Company’s international subsidiaries, whose functional currency is not the U.S. dollar. These contracts do not qualify for derivative hedge accounting. The Company seeks to mitigate risk with the use of these contracts and does not intend to engage in speculative transactions. Some of these contracts contain credit-risk-related contingent features that require settlement of outstanding contracts upon certain triggering events. At February 18, 2018, and September 3, 2017, both the aggregate fair value amounts of derivative instruments in a net liability position and the amount needed to settle the instruments immediately if the credit-risk-related contingent features were triggered were immaterial. The aggregate notional amounts of unsettled forward foreign-exchange contracts were $737 and $637 at February 18, 2018, and September 3, 2017, respectively. The Company seeks to manage counterparty risk associated with these contracts by limiting transactions to counterparties with which the Company has an established banking relationship. There can be no assurance that this practice is effective. The contracts

8

Note 1—Summary of Significant Accounting Policies (Continued)

are limited to less than one year in duration. See Note 3 for information on the fair value of unsettled forward foreign-exchange contracts as of February 18, 2018, and September 3, 2017.

The unrealized gains or losses recognized in interest income and other, net in the accompanying condensed consolidated statements of income relating to the net changes in the fair value of unsettled forward foreign-exchange contracts were immaterial in the second quarter of 2018 and a net loss of $29 in the second quarter of 2017. The net changes in fair value of unsettled forward foreign-exchange contracts during the first half of 2018 and 2017 were immaterial.

The Company is exposed to fluctuations in prices for the energy it consumes, particularly electricity and natural gas, which it seeks to partially mitigate through the use of fixed-price contracts for certain of its warehouses and other facilities, primarily in the U.S. and Canada. The Company also enters into variable-priced contracts for some purchases of natural gas and fuel for its gas stations on an index basis. These contracts meet the characteristics of derivative instruments, but generally qualify for the “normal purchases or normal sales” exception under authoritative guidance and require no mark-to-market adjustment.

Foreign Currency

The Company recognizes foreign-currency transaction gains and losses related to revaluing or settling monetary assets and liabilities denominated in currencies other than the functional currency in interest income and other, net in the accompanying condensed consolidated statements of income. Generally, these include the U.S. dollar cash and cash equivalents and the U.S. dollar payables of consolidated subsidiaries revalued to their functional currency. Also included are realized foreign-currency gains or losses from settlements of forward foreign-exchange contracts. The net impact of these items was immaterial in the second quarter and first half of 2018 and 2017.

Stock Repurchase Programs

Repurchased shares of common stock are retired, in accordance with the Washington Business Corporation Act. The par value of repurchased shares is deducted from common stock and the excess repurchase price over par value is deducted by allocation to additional paid-in capital and retained earnings. The amount allocated to additional paid-in capital is the current value of additional paid-in capital per share outstanding and is applied to the number of shares repurchased. Any remaining amount is allocated to retained earnings. See Note 5 for additional information.

Recent Accounting Pronouncements Adopted

In March 2016, the Financial Accounting Standards Board (FASB) issued guidance intended to simplify accounting for share-based payment transactions. The guidance relates to income taxes, forfeitures, and minimum statutory tax withholding requirements. The new standard was effective for fiscal years and interim periods within those years beginning after December 15, 2016, with early adoption permitted. The Company adopted this guidance at the beginning of its first quarter of fiscal year 2018. As a result, in the first half of 2018 the Company recognized an excess tax benefit of $33 as part of its income tax provision in the accompanying condensed consolidated statements of income. This includes the permanent reduction in the U.S. statutory corporate tax rate. Previously these amounts were reflected in equity. Additionally, these amounts are now reflected as cash flows from operations instead of cash flows from financing activities in the consolidated statements of cash flows on a prospective basis. Adoption of this guidance did not have a material impact on the consolidated balance sheets, consolidated statements of cash flows, or related disclosures.

Recent Accounting Pronouncements Not Yet Adopted

In May 2014, the FASB issued guidance on the recognition of revenue from contracts with customers. The guidance converges the requirements for reporting revenue and requires disclosures sufficient to describe the nature, amount, timing, and uncertainty of revenue and cash flows. Transition is permitted either

9

Note 1—Summary of Significant Accounting Policies (Continued)

retrospectively or as a cumulative effect adjustment as of the date of adoption. The new standard is effective for fiscal years and interim periods within those years beginning after December 15, 2017. The Company plans to adopt this guidance at the beginning of its first quarter of fiscal year 2019.

While its review is continuing, based on preliminary assessments, the Company believes the guidance will accelerate recognition of cash-card breakage income to reflect the historical pattern of gift card redemption as compared to the current methodology of recognizing income when redemption is considered remote. The Company will also record, on a gross basis, a refund liability and an asset for recovery. Currently, these amounts are recorded as a net refund liability. The Company continues to evaluate various areas such as gross versus net revenue presentation for certain contracts, identification and treatment of performance obligations associated with membership offers, accounting for warranty arrangements, and its adoption methodology.

In February 2016, the FASB issued guidance on leases, which will require recognition on the balance sheet for the rights and obligations created by leases with terms greater than twelve months. The standard is effective for fiscal years and interim periods within those years beginning after December 15, 2018, with early adoption permitted. The Company plans to adopt this guidance at the beginning of its first quarter of fiscal year 2020. While the Company continues to evaluate this standard and the effect on related disclosures, the primary effect of adoption will be to require recording right-of-use assets and corresponding lease obligations for current operating leases. The adoption is expected to have a material impact on the Company's consolidated balance sheets, but not on the consolidated statements of income or consolidated statements of cash flows.

Note 2—Investments

The Company's major investments have not materially changed from the annual reporting period ended September 3, 2017. The Company’s investments were as follows:

February 18, 2018:	Cost Basis		Unrealized Loss, Net			Recorded Basis
Available-for-sale:
Government and agency securities	$	951	$	(14	)	$	937
Held-to-maturity:
Certificates of deposit	112					112
Total short-term investments	$	1,063	$	(14	)	$	1,049

September 3, 2017:	Cost Basis		Unrealized Gains, Net		Recorded Basis
Available-for-sale:
Government and agency securities	$	947	$	0	$	947
Mortgage-backed securities	1		0		1
Total available-for-sale	948		0		948
Held-to-maturity:
Certificates of deposit	285				285
Total short-term investments	$	1,233	$	0	$	1,233

At February 18, 2018, and September 3, 2017, available-for-sale securities with continuous unrealized-loss positions were immaterial. The proceeds from sales of available-for-sale securities were immaterial during the second quarter of 2018 and $34 during the second quarter of 2017. The proceeds from sales of available-for-sale securities were $39 and $66 during the first half of 2018 and 2017, respectively. Gross realized gains

10

Note 2—Investments (Continued)

or losses from sales of available-for-sale securities during the second quarter and first half of 2018 and 2017 were immaterial.

The maturities of available-for-sale and held-to-maturity securities at February 18, 2018, were as follows:

	Available-For-Sale				Held-To-Maturity
	Cost Basis		Fair Value
Due in one year or less	$	188	$	188	$	112
Due after one year through five years	727		714		0
Due after five years	36		35		0
Total	$	951	$	937	$	112

Note 3—Fair Value Measurement

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The tables below present information regarding financial assets and financial liabilities that are measured at fair value on a recurring basis and indicate the level within the hierarchy reflecting the valuation techniques utilized to determine fair value.

February 18, 2018:	Level 1		Level 2
Money market mutual funds(1)	$	10	$	0
Investment in government and agency securities	0		937
Forward foreign-exchange contracts, in asset position(2)	0		2
Forward foreign-exchange contracts, in (liability) position(2)	0		(20		)
Total	$	10	$	919

September 3, 2017:	Level 1		Level 2
Money market mutual funds(1)	$	7	$	0
Investment in government and agency securities	0		947
Investment in mortgage-backed securities	0		1
Forward foreign-exchange contracts, in asset position(2)	0		2
Forward foreign-exchange contracts, in (liability) position(2)	0		(8		)
Total	$	7	$	942

 _______________

(1) Included in cash and cash equivalents in the accompanying condensed consolidated balance sheets.

(2) The asset and the liability values are included in other current assets and other current liabilities, respectively, in the accompanying condensed consolidated balance sheets. See Note 1 for additional information on derivative instruments.

During and at the periods ended February 18, 2018, and September 3, 2017, the Company did not hold any Level 3 financial assets or liabilities that were measured at fair value on a recurring basis. There were no transfers in or out of Level 1 or 2 during the second quarter or first half of 2018 or 2017.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Assets and liabilities recognized and disclosed at fair value on a nonrecurring basis include items such as financial assets recorded at amortized cost and long-lived nonfinancial assets. These assets are measured at fair value if determined to be impaired. There were no fair value adjustments to these items during the secondquarter or first half of 2018 or 2017.

11

Note 4—Debt

The carrying value of the Company’s long-term debt consisted of the following:

	February 18, 2018		September 3, 2017
1.70% Senior Notes due December 2019	$	1,198	$	1,198
1.75% Senior Notes due February 2020	499		498
2.15% Senior Notes due May 2021	995		994
2.25% Senior Notes due February 2022	497		497
2.30% Senior Notes due May 2022	794		793
2.75% Senior Notes due May 2024	991		991
3.00% Senior Notes due May 2027	986		986
Other long-term debt	667		702
Total long-term debt	6,627		6,659
Less current portion	122		86
Long-term debt, excluding current portion	$	6,505	$	6,573

The estimated fair value of Senior Notes is valued using Level 2 inputs. Other long-term debt consists primarily of promissory notes and term loans issued by the Company's Japan subsidiary and are valued primarily using Level 3 inputs. The fair value of the Company's long-term debt, including the current portion, was approximately $6,562 and $6,753 at February 18, 2018, and September 3, 2017, respectively.

Note 5—Equity and Comprehensive Income

Dividends

The Company’s current quarterly dividend rate is $0.50 per share, compared to $0.45 per share in the second quarter of 2017. On January 30, 2018, the Board of Directors declared a quarterly cash dividend in the amount of $0.50 per share, which was paid on March 2, 2018.

Stock Repurchase Programs

Stock repurchase activity during the second quarter and first half of 2018 and 2017 is summarized below:

	Shares Repurchased (000's)	Average Price per Share		Total Cost
Second quarter of 2018	313	$	187.70	$	59
First half of 2018	1,047	$	170.06	$	178
Second quarter of 2017	411	$	159.86	$	66
First half of 2017	1,220	$	153.98	$	188

These amounts may differ from the stock repurchase balances in the accompanying condensed consolidated statements of cash flows due to changes in unsettled stock repurchases at the end of a quarter. The remaining amount available for stock repurchases under our approved plan, which expires in April 2019, was $2,571 at February 18, 2018. Purchases are made from time-to-time, as conditions warrant, in the open market or in block purchases and pursuant to plans under SEC Rule 10b5-1.

Components of Equity and Comprehensive Income

The following tables show the changes in equity attributable to Costco and the noncontrolling interests of consolidated subsidiaries:

	Attributable to Costco			Noncontrolling Interests			Total Equity
Equity at September 3, 2017	$	10,778		$	301		$	11,079
Comprehensive income:
Net income	1,341			23			1,364
Foreign-currency translation adjustment and other, net	117			10			127
Comprehensive income	1,458			33			1,491
Stock-based compensation	348			0			348
Release of vested restricted stock units (RSUs), including tax effects	(216		)	0			(216		)
Repurchases of common stock	(178		)	0			(178		)
Cash dividends declared and other	(436		)	(35		)	(471		)
Equity at February 18, 2018	$	11,754		$	299		$	12,053

12

Note 5—Equity and Comprehensive Income (Continued)

	Attributable to Costco			Noncontrolling Interests		Total Equity
Equity at August 28, 2016	$	12,079		$	253	$	12,332
Comprehensive income:
Net income	1,060			16		1,076
Foreign-currency translation adjustment and other, net	(234		)	3		(231		)
Comprehensive income	826			19		845
Stock-based compensation	322			0		322
Release of vested RSUs, including tax effects	(164		)	0		(164		)
Repurchases of common stock	(188		)	0		(188		)
Cash dividends declared and other	(435		)	0		(435		)
Equity at February 12, 2017	$	12,440		$	272	$	12,712

Note 6—Stock-Based Compensation

The Seventh Restated 2002 Stock Incentive Plan authorized the issuance of 23,500,000 shares (13,429,000 RSUs) of common stock for future grants in addition to the shares authorized under the previous plan. The Company issues new shares of common stock upon vesting of RSUs. Shares for vested RSUs are generally delivered to participants annually, net of shares withheld for statutory taxes.

Summary of Restricted Stock Unit Activity

At February 18, 2018, 8,187,000 shares were available to be granted as RSUs and the following awards were outstanding:

• 7,393,000 time-based RSUs that vest upon continued employment over specified periods of time;

• 127,000 performance-based RSUs, granted to executive officers of the Company, for which the performance targets have been met. The awards vest upon continued employment over specified periods of time; and

• 205,000 performance-based RSUs, granted to executive officers of the Company, subject to achievement of performance targets for fiscal 2018, as determined by the Compensation Committee of the Board of Directors after the end of the fiscal year. These awards are included in the table below and the Company recognized compensation expense for these awards as it is currently deemed probable that the targets will be achieved.

The following table summarizes RSU transactions during the first half of 2018:

	Number of Units (in 000’s)		Weighted-Average Grant Date Fair Value
Outstanding at September 3, 2017	8,199		$	128.15
Granted	3,722		156.19
Vested and delivered	(4,067	)	129.49
Forfeited	(129	)	137.36
Outstanding at February 18, 2018	7,725		$	140.80

The remaining unrecognized compensation cost related to non-vested RSUs at February 18, 2018, was $914, and the weighted-average period over which this cost will be recognized is 1.7 years.

Summary of Stock-Based Compensation

The following table summarizes stock-based compensation expense and the related tax benefits under the Company’s plans:

	12 Weeks Ended						24 Weeks Ended
	February 18, 2018			February 12, 2017			February 18, 2018			February 12, 2017
Stock-based compensation expense before income taxes	$	112		$	111		$	346		$	322
Less recognized income tax benefit (1)	(2		)	(37		)	(79		)	(106		)
Stock-based compensation expense, net of income taxes	$	110		$	74		$	267		$	216

 _______________

(1) In the second quarter and first half of 2018, the income tax benefit reflects the permanent reduction in the U.S. federal statutory income tax rate from 35% to 21%.

Note 7—Income Taxes

In December 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”) was signed into law. Except for certain provisions, the 2017 Act is effective for tax years beginning on or after January 1, 2018. The Company is a fiscal-year taxpayer, so most provisions will become effective for fiscal year 2019, including limitations on the Company’s ability to claim foreign tax credits, repeal of the domestic manufacturing deduction, and

13

Note 7—Income Taxes (Continued)

limitations on certain business deductions. Provisions with significant impacts that are effective for the second quarter of fiscal 2018 include: a decrease in the U.S. federal income tax rate, remeasurement of certain net deferred tax liabilities, and a transition tax on deemed repatriation of certain foreign earnings. The decrease in the U.S. federal statutory income tax rate to 21% will result in a blended rate for the Company of 25.6% for fiscal 2018.

During the second quarter, the Company recorded net tax benefits of $74 related to the 2017 Tax Act, including the impact of lowering the U.S. federal corporate rate. This benefit also included discrete tax expense of $152 on deemed repatriation of foreign earnings, and $39 for the reduction in foreign tax credits and other immaterial items, largely offset by a tax benefit of $165 for the provisional remeasurement of U.S. deferred tax liabilities, which results from the application of the lower tax rate to these liabilities. These are provisional determinations based on the Company's current interpretation of the 2017 Tax Act and estimates that it believes are reasonable. As the Company continues to evaluate the 2017 Tax Act and available data, it anticipates that adjustments may be made in future periods including the first quarter of fiscal 2019.

The determination of the Company’s provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws, all of which are subject to continuing review.

14

Note 8—Net Income per Common and Common Equivalent Share

The following table shows the amounts used in computing net income per share and the weighted average number of shares of potentially dilutive common shares outstanding (shares in 000’s):

	12 Weeks Ended				24 Weeks Ended
	February 18, 2018		February 12, 2017		February 18, 2018		February 12, 2017
Net income available to common stockholders used in basic and diluted net income per common share	$	701	$	515	$	1,341	$	1,060
Weighted average number of common shares used in basic net income per common share	439,022		439,127		438,494		438,567
RSUs and other	2,546		1,530		2,707		2,001
Weighted average number of common shares and dilutive potential of common stock used in diluted net income per share	441,568		440,657		441,201		440,568

Note 9—Commitments and Contingencies

Legal Proceedings

The Company is involved in a number of claims, proceedings and litigation arising from its business and property ownership. In accordance with applicable accounting guidance, the Company establishes an accrual for legal proceedings if and when those matters reach a stage where they present loss contingencies that are both probable and reasonably estimable. There may be exposure to loss in excess of any amounts accrued. The Company monitors those matters for developments that would affect the likelihood of a loss (taking into account where applicable indemnification arrangements concerning suppliers and insurers) and the accrued amount, if any, thereof, and adjusts the amount as appropriate. As of the date of this Report, the Company has recorded an immaterial accrual with respect to one matter described below, in addition to other immaterial accruals for matters not described below. If the loss contingency at issue is not both probable and reasonably estimable, the Company does not establish an accrual, but will continue to monitor the matter for developments that will make the loss contingency both probable and reasonably estimable. In each case, there is a reasonable possibility that a loss may be incurred, including a loss in excess of the applicable accrual. For matters where no accrual has been recorded, the possible loss or range of loss (including any loss in excess of the accrual) cannot, in the Company's view, be reasonably estimated because, among other things: (i) the remedies or penalties sought are indeterminate or unspecified; (ii) the legal and/or factual theories are not well developed; and/or (iii) the matters involve complex or novel legal theories or a large number of parties.

The Company is a defendant in a class action alleging violation of California Wage Order 7-2001 by failing to provide seating to member service assistants who act as greeters and exit attendants in the Company’s California warehouses. Canela v. Costco Wholesale Corp., et al. (Case No. 5:13-cv-03598, N.D. Cal. filed July 1, 2013). The complaint seeks relief under the California Labor Code, including civil penalties and attorneys’ fees. The Company has filed an answer denying the material allegations of the complaint.

On November 23, 2016, the Company’s Canadian subsidiary received from the Ontario Ministry of Health and Long Term Care a request for an inspection and information concerning compliance with the anti-rebate provisions in the Ontario Drug Benefit Act and the Drug Interchangeability and Dispensing Fee Act. The Company is seeking to cooperate with the request.

15

Note 9—Commitments and Contingencies (Continued)

In November 2016 and September 2017, the Company received notices of violation from the Connecticut Department of Energy and Environmental Protection regarding hazardous waste practices at its Connecticut warehouses, primarily concerning unsalable pharmaceuticals. The Company is seeking to cooperate concerning the resolution of these notices.

The Company does not believe that any pending claim, proceeding or litigation, either alone or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations or cash flows; however, it is possible that an unfavorable outcome of some or all of the matters, however unlikely, could result in a charge that might be material to the results of an individual fiscal quarter.

Note 10—Segment Reporting

The Company and its subsidiaries are principally engaged in the operation of membership warehouses in the U.S., Canada, Mexico, U.K., Japan, Korea, Australia, Spain, Iceland and France and through a majority-owned subsidiary in Taiwan. Reportable segments are largely based on management’s organization of the operating segments for operational decisions and assessments of financial performance, which consider geographic locations. The material accounting policies of the segments are as described in the notes to the consolidated financial statements included in the Company's Annual Report filed on Form 10-K for the fiscal year ended September 3, 2017, and Note 1 above. Inter-segment net sales and expenses have been eliminated in computing total revenue and operating income. Certain operating expenses, predominantly stock-based compensation, are incurred on behalf of the Company's Canadian and Other International Operations, but are included in the U.S. Operations because those costs are not allocated internally and generally come under the responsibility of the Company's U.S. management team.

	United States Operations		Canadian Operations		Other International Operations		Total
Twelve Weeks Ended February 18, 2018
Total revenue	$	23,687	$	4,745	$	4,563	$	32,995
Operating income	603		206		207		1,016
Depreciation and amortization	262		31		51		344
Additions to property and equipment	375		39		94		508
Twelve Weeks Ended February 12, 2017
Total revenue	$	21,764	$	4,229	$	3,773	$	29,766
Operating income	520		180		144		844
Depreciation and amortization	241		27		44		312
Additions to property and equipment	358		56		102		516
Twenty-four Weeks Ended February 18, 2018
Total revenue	$	46,500	$	9,516	$	8,788	$	64,804
Operating income	1,136		442		389		1,967
Depreciation and amortization	514		63		102		679
Additions to property and equipment	855		114		359		1,328
Net property and equipment	12,690		1,852		4,507		19,049
Total assets	26,417		3,825		8,461		38,703

16

Note 10—Segment Reporting (Continued)

	United States Operations		Canadian Operations		Other International Operations		Total
Twenty-four Weeks Ended February 12, 2017
Total revenue	$	42,141	$	8,328	$	7,396	$	57,865
Operating income	1,026		371		296		1,693
Depreciation and amortization	467		53		89		609
Additions to property and equipment	784		166		233		1,183
Net property and equipment	12,040		1,688		3,614		17,342
Total assets	24,735		3,926		6,969		35,630
Year Ended September 3, 2017
Total revenue	$	93,889	$	18,775	$	16,361	$	129,025
Operating income	2,644		841		626		4,111
Depreciation and amortization	1,044		124		202		1,370
Additions to property and equipment	1,714		277		511		2,502
Net property and equipment	12,339		1,820		4,002		18,161
Total assets	24,068		4,471		7,808		36,347

17

Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations

(amounts in millions, except per share, share, and warehouse count data)

FORWARD-LOOKING STATEMENTS

Certain statements contained in this Report constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. They include statements that address activities, events, conditions or developments that we expect or anticipate may occur in the future and may relate to such matters as net sales growth, increases in comparable warehouse sales, cannibalization of existing locations by new openings, price or fee changes, earnings performance, earnings per share, stock-based compensation expense, warehouse openings and closures, capital spending, the effect of accounting standards, future financial reporting, financing, margins, return on invested capital, strategic direction, expense controls, membership renewal rates, shopping frequency, litigation, and the demand for our products and services. Forward-looking statements may also be identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements involve risks and uncertainties that may cause actual events, results, or performance to differ materially from those indicated by such statements. These risks and uncertainties include, but are not limited to, domestic and international economic conditions, including exchange rates, the effects of competition and regulation, uncertainties in the financial markets, consumer and small business spending patterns and debt levels, breaches of security or privacy of member or business information, conditions affecting the acquisition, development, ownership or use of real estate, actions of vendors, rising costs associated with employees (generally including health care costs), energy and certain commodities, geopolitical conditions, and other risks identified from time to time in our public statements and reports filed with the SEC. Forward-looking statements speak only as of the date they are made, and we do not undertake to update these statements, except as required by law.

This management discussion should be read in conjunction with the management discussion included in our fiscal 2017 Annual Report on Form 10-K, previously filed with the SEC.

OVERVIEW

We operate membership warehouses and ecommerce websites based on the concept that offering our members low prices on a limited selection of nationally branded and private-label products in a wide range of merchandise categories will produce high sales volumes and rapid inventory turnover. When combined with the operating efficiencies achieved by volume purchasing, efficient distribution and reduced handling of merchandise in no-frills, self-service warehouse facilities, these volumes and turnover enable us to operate profitably at significantly lower gross margins (net sales less merchandise costs) than most other retailers.

We believe that the most important driver of our profitability is sales growth, particularly comparable warehouse sales (comparable sales) growth. We define comparable sales as sales from warehouses open for more than one year, including remodels, relocations and expansions, as well as online sales related to e-commerce websites operating for more than one year. Comparable sales growth is achieved through increasing shopping frequency from new and existing members and the amount they spend on each visit (average ticket). Sales comparisons can also be particularly influenced by certain factors that are beyond our control: fluctuations in currency exchange rates (with respect to the consolidation of the results of our international operations); and changes in the cost of gasoline and associated competitive conditions (primarily impacting our U.S. and Canadian operations). The higher our comparable sales exclusive of these items, the more we can leverage certain of our selling, general and administrative expenses, reducing them as a percentage of sales and enhancing profitability. Generating comparable sales growth is foremost a question of making available to our members the right merchandise at the right prices, a skill that we believe we have repeatedly demonstrated over the long term. Another substantial factor in sales growth is the health of the economies in which we do business, including the effects of inflation or deflation, especially the United States. Sales growth and gross margins are also impacted by our competition, which is vigorous and widespread, across a wide range of global, national and regional wholesalers and retailers. While we cannot control or reliably predict general economic health or changes in competition, we believe that we have been successful

18

Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) (amounts in millions, except per share, share, and warehouse count data)

historically in adapting our business to these changes, such as through adjustments to our pricing and to our merchandise mix, including increasing the penetration of our private label items, and through our online offerings.

Our philosophy is to provide our members with quality goods and services at the most competitive prices. We do not focus in the short term on maximizing prices charged, but instead seek to maintain what we believe is a perception among our members of our “pricing authority” – consistently providing the most competitive values. Our investments in merchandise pricing can, from time to time, include reducing prices on merchandise to drive sales or meet competition and holding prices steady despite cost increases instead of passing the increases on to our members, all negatively impacting near-term gross margin as a percentage of net sales (gross margin percentage). We believe that our gasoline business draws members, but it generally has a significantly lower gross margin percentage relative to our non-gasoline business. A higher penetration of gasoline sales will generally lower our gross margin percentage. Rapidly changing gasoline prices may significantly impact our near-term net sales growth. Generally, rising gasoline prices benefit net sales growth which, given the higher sales base, negatively impacts our gross margin percentage but decreases our selling, general and administrative (SG&A) expenses as a percentage of net sales. A decline in gasoline prices has the inverse effect. We operate our lower-margin gasoline business in all countries except Korea and France.

We also achieve sales growth by opening new warehouses. As our warehouse base grows, available and desirable potential sites become more difficult to secure, and square footage growth becomes a comparatively less substantial component of growth. The negative aspects of such growth, however, including lower initial operating profitability relative to existing warehouses and cannibalization of sales at existing warehouses when openings occur in existing markets, are increasingly less significant relative to the results of our total operations. Our rate of square footage growth is generally higher in foreign markets, due to the smaller base in those markets, and we expect that to continue. Our e-commerce business growth both domestically and internationally has also increased our sales.

Our membership format is an integral part of our business model and has a significant effect on our profitability. This format is designed to reinforce member loyalty and provide continuing fee revenue. The extent to which we achieve growth in our membership base, increase the penetration of our Executive members, and sustain high renewal rates materially influences our profitability.

Our financial performance depends heavily on our ability to control costs. While we believe that we have achieved successes in this area historically, some significant costs are partially outside our control, most particularly health care and utility expenses. With respect to expenses relating to the compensation of our employees, our philosophy is not to seek to minimize their wages and benefits. Rather, we believe that achieving our longer-term objectives of reducing employee turnover and enhancing employee satisfaction requires maintaining compensation levels that are better than the industry average for much of our workforce. This may cause us, for example, to absorb costs that other employers might seek to pass through to their workforces. Because our business is operated on very low margins, modest changes in various items in the income statement, particularly merchandise costs and selling, general and administrative expenses, can have substantial impacts on net income.

Our operating model is generally the same across our U.S., Canada, and Other International operating segments (see Part I, Item 1, Note 10 of this Report). Certain countries in the Other International segment have relatively higher rates of square footage growth, lower wages and benefits costs as a percentage of country sales, and/or less or no direct membership warehouse competition.

In discussions of our consolidated operating results, we refer to the impact of changes in foreign currencies relative to the U.S. dollar, which are references to the differences between the foreign-exchange rates we use to convert the financial results of our international operations from local currencies into U.S. dollars for financial reporting purposes. This impact of foreign-exchange rate changes is calculated based on the difference between the current period's currency exchange rates and that of the comparable prior period.

19

Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) (amounts in millions, except per share, share, and warehouse count data)

The impact of changes in gasoline prices on net sales is calculated based on the difference between the current period's average price per gallon sold and that of the comparable prior period.

Our fiscal year ends on the Sunday closest to August 31. References to the second quarters of 2018 and 2017 relate to the 12-week fiscal quarters ended February 18, 2018, and February 12, 2017, respectively. References to the first half of 2018 and 2017 relate to the twenty-four weeks ended February 18, 2018, and February 12, 2017, respectively. Certain percentages presented are calculated using actual results prior to rounding. Unless otherwise noted, references to net income relate to net income attributable to Costco.

Key items for the second quarter of 2018 as compared to the second quarter of 2017 include:

• Net sales increased 11% to $32,279, driven by an increase in comparable sales of 8% and sales at new warehouses opened since the end of the second quarter of fiscal 2017;

• Membership fee revenue increased 13% to $716, primarily due to the fee increase and to sign-ups at existing and new warehouses;

• Gross margin percentage decreased two basis points, primarily from the impact of gasoline price inflation on net sales;

• SG&A expenses as a percentage of net sales decreased 21 basis points, due to the impact of gasoline price inflation and leveraging increased net sales;

• Net income increased 36% to $701, or $1.59 per diluted share, compared to $515, or $1.17 per diluted share in 2017. The second quarter of 2018 was positively impacted by a net $74 tax benefit, or $0.17 per diluted share, due to the new U.S. tax law; and

• On January 30, 2018, our Board of Directors declared a quarterly cash dividend of $0.50, which was paid on March 2, 2018.

20

Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) (amounts in millions, except per share, share, and warehouse count data)

RESULTS OF OPERATIONS

Net Sales

	12 Weeks Ended						24 Weeks Ended
	February 18, 2018			February 12, 2017			February 18, 2018			February 12, 2017
Net Sales	$	32,279		$	29,130		$	63,396		$	56,599
Changes in net sales:
U.S.	9		%	5		%	10		%	4		%
Canada	12		%	12		%	14		%	9		%
Other International	21		%	1		%	19		%	3		%
Total Company	11		%	6		%	12		%	4		%
Changes in comparable sales:
U.S.	7		%	3		%	9		%	2		%
Canada	9		%	8		%	10		%	6		%
Other International	16		%	(2		)%	13		%	(1		)%
Total Company	8		%	3		%	9		%	2		%
Changes in comparable sales excluding the impact of changes in foreign exchange rates and gasoline prices:
U.S.	6		%	3		%	7		%	2		%
Canada	2		%	2		%	3		%	3		%
Other International	7		%	3		%	8		%	3		%
Total Company	5		%	3		%	7		%	2		%

Net Sales

Net sales increased $3,149 or 11%, and $6,797 or 12% during the second quarter and first half of 2018, respectively, compared to the second quarter and first half of 2017. This increase was attributable to an increase in comparable sales of 8% and 9% in the second quarter and first half of 2018, respectively, and sales at the 20 net new warehouses opened since the end of the second quarter of 2017.

During the second quarter of 2018, changes in foreign currencies relative to the U.S. dollar positively impacted net sales by approximately $553, or 190 basis points, compared to the second quarter of 2017, attributable to our Canadian and Other International operations. Changes in gasoline prices positively impacted net sales by approximately $384, or 132 basis points, due to a 15% increase in the average sales price per gallon.

During the first half of 2018, changes in foreign currencies relative to the U.S. dollar positively impacted net sales by approximately $844, or 149 basis points, compared to the first half of 2017, attributable to our Canadian and Other International operations. Changes in gasoline prices positively impacted net sales by approximately $780, or 138 basis points, due to a 16% increase in the average sales price per gallon.

Comparable Sales

Comparable sales increased 8% and 9% in the second quarter and first half of 2018, respectively, and were positively impacted by increases in shopping frequency and average ticket. Comparable sales for the second

21

Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) (amounts in millions, except per share, share, and warehouse count data)

quarter and first half of 2018 were negatively impacted by cannibalization (established warehouses losing sales to our newly opened locations).

Membership Fees

	12 Weeks Ended						24 Weeks Ended
	February 18, 2018			February 12, 2017			February 18, 2018			February 12, 2017
Membership fees	$	716		$	636		$	1,408		$	1,266
Membership fees as a percentage of net sales	2.22		%	2.18		%	2.22		%	2.24		%
Total paid members as of quarter end (000's)	50,400			48,300			—			—
Total cardholders as of quarter end (000's)	92,200			88,100			—			—

Membership fees increased 13% and 11% in the second quarter and first half of 2018, respectively. This was primarily due to the fee increase (discussed below) and sign-ups at existing and new warehouses. Renewal rates are 90% in the U.S. and Canada and 87% worldwide.

As previously reported, in fiscal 2017 we increased our annual membership fees in certain of our Other International operations and in the U.S. and Canada. We account for membership fee revenue on a deferred basis, recognized ratably over the one-year membership period. These fee increases had a positive impact on revenues during the second quarter and first half 2018 of approximately $37 and $61 respectively, and will positively impact the next several quarters totaling approximately $175 in fiscal 2018.

Gross Margin

	12 Weeks Ended						24 Weeks Ended
	February 18, 2018			February 12, 2017			February 18, 2018			February 12, 2017
Net sales	$	32,279		$	29,130		$	63,396		$	56,599
Less merchandise costs	28,733			25,927			56,350			50,215
Gross margin	$	3,546		$	3,203		$	7,046		$	6,384
Gross margin percentage	10.98		%	11.00		%	11.11		%	11.28		%

Quarterly Results

The gross margin of core merchandise categories (food and sundries, hardlines, softlines, and fresh foods), when expressed as a percentage of core merchandise sales (rather than total net sales), increased 14 basis points across all core merchandise categories, except softlines. This measure eliminates the impact of changes in sales penetration and gross margins from our warehouse ancillary and other businesses.

Total gross margin percentage decreased two basis points compared to the second quarter of 2017. Excluding the impact of gasoline price inflation on net sales, gross margin as a percentage of adjusted net sales was 11.11%, an increase of 11 basis points. This increase was primarily due to higher warehouse ancillary and other businesses margin of 25 basis points, predominantly driven by higher gasoline margins. Our core merchandise categories decreased eight basis points, primarily driven by softlines and hardlines as a result of decreased sales penetration. Gross margin percentage was also negatively impacted by incremental costs related to our new centralized return centers.

Gross margin on a segment basis, when expressed as a percentage of the segment's own sales and excluding the impact of changes in gasoline prices on net sales (segment gross margin percentage), increased in our U.S. and Canadian operations, primarily due to higher gross margins in our warehouse ancillary and other

22

Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) (amounts in millions, except per share, share, and warehouse count data)

businesses, predominantly our gasoline business. The segment gross margin percentage in our Other International operations increased primarily in our core merchandise categories and gasoline business.

Year-to-date Results

The gross margin of core merchandise categories, when expressed as a percentage of core merchandise sales (rather than total net sales), increased five basis points. This was attributable to increases across all core merchandise categories except fresh foods.

Total gross margin percentage decreased 17 basis points compared to the first half of 2017. Excluding the impact of changes in gasoline prices on net sales, gross margin as a percentage of adjusted net sales was 11.25%, a decrease of three basis points from the first half of 2017. This was primarily due to a decrease of nine basis points due to a non-recurring legal settlement in the first quarter of 2017 and a decrease of four basis points in all of our core merchandise categories, except hardlines. Gross margin percentage was also negatively impacted by incremental costs related to our new centralized return centers. These decreases were partially offset by a increase in our warehouse ancillary and other businesses of 18 basis points, primarily due to our gasoline business.

The segment gross margin percentage decreased in our U.S. operations, predominantly due to all our core merchandise categories and the non-recurring legal settlement in 2017 mentioned above. These were partially offset by an increase in our warehouse ancillary and other businesses, predominantly our gasoline business. The segment gross margin percentage in our Canadian operations increased due to our warehouse ancillary and other businesses, primarily our gasoline and pharmacy businesses. This increase was partially offset by a decrease in our core merchandise categories, primarily food and sundries. The segment gross margin percentage in our Other International operations was flat compared to the first half of 2017.

Selling, General and Administrative Expenses

	12 Weeks Ended						24 Weeks Ended
	February 18, 2018			February 12, 2017			February 18, 2018			February 12, 2017
SG&A expenses	$	3,234		$	2,980		$	6,458		$	5,920
SG&A expenses as a percentage of net sales	10.02		%	10.23		%	10.19		%	10.46		%

Quarterly Results

SG&A expenses as a percentage of net sales decreased 21 basis points compared to the second quarter of 2017. Excluding the impact of gasoline price inflation on net sales, SG&A expenses as a percentage of adjusted net sales were 10.14%, a decrease of nine basis points. Warehouse operating costs decreased eight basis points, predominantly in our U.S. and Other International operations, due to leveraging increased sales. Stock compensation expense also decreased by three basis points. These were partially offset by higher central operating expenses of two basis points.

Year-to-date Results

SG&A expenses as a percentage of net sales decreased 27 basis points compared to the first half of 2017. Excluding the impact of gasoline price inflation on net sales, SG&A expenses as a percentage of adjusted net sales were 10.31%, a decrease of 15 basis points. Warehouse and central operating costs decreased 11 basis points and two basis points, respectively, due to leveraging increased sales. Stock compensation expense decreased by two basis points.

23

Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) (amounts in millions, except per share, share, and warehouse count data)

Preopening Expense

	12 Weeks Ended				24 Weeks Ended
	February 18, 2018		February 12, 2017		February 18, 2018		February 12, 2017
Preopening expenses	$	12	$	15	$	29	$	37
Warehouse openings, including relocations
United States	1		2		7		8
Canada	0		0		1		3
Other International	0		2		0		2
Total warehouse openings, including relocations	1		4		8		13

Preopening expenses include costs for startup operations related to new warehouses and relocations, developments in new international markets, development of new manufacturing and distribution facilities, and expansions at existing warehouses. Preopening expenses vary due to the number of warehouse openings, the timing of the openings relative to our quarter-end, whether the warehouse is owned or leased, and whether the opening is in an existing, new or international market. For the remainder of fiscal 2018, we expect to open 18 to 20 additional warehouses, including three relocations, compared to 15 warehouses, including one relocation, opened in the remainder of fiscal 2017.

Interest Expense

	12 Weeks Ended				24 Weeks Ended
	February 18, 2018		February 12, 2017		February 18, 2018		February 12, 2017
Interest expense	$	37	$	31	$	74	$	60

Interest expense is primarily related to Senior Notes issued by the Company. In May 2017, we issued $3,800 in aggregate principal amount of Senior Notes. Also, in March and June of 2017, we repaid $2,200 in total outstanding principal of the 5.5% and 1.125% Senior Notes, respectively.

Interest Income and Other, Net

	12 Weeks Ended						24 Weeks Ended
	February 18, 2018			February 12, 2017			February 18, 2018			February 12, 2017
Interest income	$	16		$	11		$	29		$	19
Foreign-currency transaction losses, net	(14		)	(20		)	(10		)	(7		)
Other, net	5			5			10			10
Interest income and other, net	$	7		$	(4	)	$	29		$	22

Foreign-currency transaction losses, net, include the revaluation or settlement of monetary assets and liabilities and mark-to-market adjustments for forward foreign-exchange contracts by our Canadian and Other International operations. See Derivatives and Foreign Currency sections in Part I, Item 1, Note 1 of this Report.

24

Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) (amounts in millions, except per share, share, and warehouse count data)

Provision for Income Taxes

	12 Weeks Ended						24 Weeks Ended
	February 18, 2018			February 12, 2017			February 18, 2018			February 12, 2017
Provision for income taxes	$	273		$	288		$	558		$	579
Effective tax rate	27.7		%	35.6		%	29.0		%	35.0		%

The effective tax rate for the second quarter of 2018 was 27.7%, favorably impacted by net income tax benefits of $74 as a result of the Tax Cuts and Jobs Act (the "2017 Tax Act"). This benefit is primarily due to the U.S. federal corporate rate declining from 35% to 21%. Due to the timing of our fiscal year relative to the effective date of the rate change, our U.S. federal corporate rate for fiscal 2018 is expected to be approximately 25.6%. Additionally, we recorded discrete tax expense of $152 for the estimated tax on deemed repatriation of foreign earnings, and $39 for the reduction in foreign tax credits and other immaterial items. This expense was largely offset by a benefit of $165 for the provisional remeasurement of certain deferred tax liabilities. See Part I, Item 1, Note 7 of this Report for additional information.

The determination of our provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws, all of which are subject to continuing review.

LIQUIDITY AND CAPITAL RESOURCES

The following table summarizes our significant sources and uses of cash and cash equivalents:

	24 Weeks Ended
	February 18, 2018			February 12, 2017
Net cash provided by operating activities	$	2,115		$	3,286
Net cash used in investing activities	(1,158		)	(1,052		)
Net cash used in financing activities	(748		)	(825		)

Our primary sources of liquidity are cash flows from warehouse operations, cash and cash equivalents, and short-term investment balances. Cash and cash equivalents and short-term investments were $5,830 and $5,779 at February 18, 2018, and September 3, 2017, respectively. Of these balances, approximately $1,129 and $1,255 represented unsettled credit and debit card receivables, respectively. These receivables generally settle within four days.

Management believes that our cash position and operating cash flows will be sufficient to meet our liquidity and capital requirements for the foreseeable future. While we believe that our U.S. current and projected asset position is sufficient to meet our U.S. liquidity requirements, beginning in the second quarter of fiscal 2018, we no longer consider current fiscal year and future earnings of our non-U.S. consolidated subsidiaries to be permanently reinvested. We have recorded the estimated incremental foreign withholding (net of available foreign tax credits) and state income taxes payable assuming a hypothetical repatriation to the U.S. We consider undistributed earnings of non-U.S. consolidated subsidiaries prior to fiscal 2018 to be indefinitely reinvested.

In December 2017, the 2017 Tax Act was signed into law. We recorded in the second quarter of 2018 a charge of $152 for the estimated tax on deemed repatriation of unremitted earnings. The 2017 Tax Act provides for the payment of the tax over an eight year period. Because of the availability of foreign tax credits, the amount payable is $105, of which $88 was included in other liabilities on our condensed consolidated balance sheet for the period ended February 18, 2018.

25

Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) (amounts in millions, except per share, share, and warehouse count data)

Cash Flows from Operating Activities

Net cash provided by operating activities totaled $2,115 in the first half of 2018, compared to $3,286 in the first half of 2017. Cash provided by operations is primarily derived from net sales and membership fees. Cash used in operations generally consists of payments to our merchandise vendors, warehouse operating costs (including payroll, employee benefits, and utilities), as well as payments for income taxes. The decrease in net cash provided by operating activities was primarily due to accelerated vendor payments of approximately $1,700 made in the last week of fiscal 2016, which positively impacted cash flows in the first half of 2017. 

Cash Flows from Investing Activities

Net cash used in investing activities totaled $1,158 in the first half of 2018 compared to $1,052 in the first half of 2017. Cash used in investing activities is primarily to fund warehouse expansion and remodeling activities. Net cash from investing activities also includes purchases and maturities of short-term investments.

Capital Expenditure Plans

We opened eight new warehouses including two relocations in the first half of 2018 and plan to open 18 to 20 additional new warehouses, including three relocations, for the remainder of fiscal 2018. Our primary requirements for capital are acquiring land, buildings, and equipment for new and remodeled warehouses. To a lesser extent, capital is required for initial warehouse operations, information systems, manufacturing and distribution facilities, and working capital. In the first half of 2018, we spent approximately $1,328, and it is our current intention to spend approximately $2,500 to $2,700 during fiscal 2018. There can be no assurance that current expectations will be realized, and plans are subject to change upon further review of our capital expenditure needs.

Cash Flows from Financing Activities

Net cash used in financing activities totaled $748 in the first half of 2018 compared to $825 in the first half of 2017. Cash flow used in financing activities primarily related to the payment of cash dividends, withholding taxes on stock-based awards, and repurchases of common stock.

Stock Repurchase Programs

During the first half of 2018 and 2017, we repurchased 1,047,000 and 1,220,000 shares of common stock, at an average price of $170.06 and $153.98, totaling approximately $178 and $188, respectively. These amounts may differ from the stock repurchase balances in the accompanying condensed consolidated statements of cash flows due to changes in unsettled stock repurchases at the end of a quarter. The amount available for stock repurchases under our approved plan was $2,571 at February 18, 2018. Purchases are made from time-to-time, as conditions warrant, in the open market or in block purchases and pursuant to plans under SEC Rule 10b5-1. Repurchased shares are retired, in accordance with the Washington Business Corporation Act.

Dividends

Our current quarterly cash dividend rate is $0.50 per share. On January 30, 2018, our Board of Directors declared a quarterly dividend of $0.50 per share payable to shareholders of record on February 16, 2018. The dividend was paid on March 2, 2018.

26

Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) (amounts in millions, except per share, share, and warehouse count data)

Bank Credit Facilities and Commercial Paper Programs

We maintain bank credit facilities for working capital and general corporate purposes. At February 18, 2018, we had borrowing capacity under these facilities of $875, of which $363 was maintained by our international operations. Of the $363, $170 is guaranteed by the Company. There were no outstanding short-term borrowings under the bank credit facilities at the end of the second quarter of 2018 or at the end of 2017.

The Company has letter of credit facilities, for commercial and standby letters of credit, totaling $228. Outstanding commitments under these facilities at the end of the second quarter of 2018 totaled $154, mostly for standby letters of credit with expiration dates within one year. The facilities have various expiration dates, all within one year, and we generally intend to renew these facilities. The amount of borrowings available at any time under the facilities is reduced by the amount of standby and commercial letters of credit outstanding.

Contractual Obligations

As of the date of this report, there were no material changes to our contractual obligations outside the ordinary course of business since the end of our last fiscal year.

Critical Accounting Estimates

The preparation of our consolidated financial statements in accordance with U.S. generally accepted accounting principles (U.S. GAAP) requires that we make estimates and judgments. We base these on historical experience and on assumptions that we believe to be reasonable. Our critical accounting policies are discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K, for the fiscal year ended September 3, 2017. There have been no material changes to the critical accounting policies previously disclosed in that Report.

Recent Accounting Pronouncements

See discussion of Recent Accounting Pronouncements in Note 1 to the condensed consolidated financial statements included in Part I, Item 1 of this Report.

Item 3—Quantitative and Qualitative Disclosures About Market Risk

Our direct exposure to financial market risk results from fluctuations in foreign currency exchange rates and interest rates. There have been no material changes to our market risks as disclosed in our Annual Report on Form 10-K, for the fiscal year ended September 3, 2017.

Item 4—Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, we performed an evaluation under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934 (the Exchange Act)). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures are effective.

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) during our most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

27

PART II—OTHER INFORMATION

Item 1—Legal Proceedings

See discussion of Legal Proceedings in Note 9 to the condensed consolidated financial statements included in Part I, Item 1 of this Report.

Item 1A—Risk Factors

In addition to the other information set forth in the Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K, for the fiscal year ended September 3, 2017. There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K.

Item 2—Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth information on our common stock repurchase program activity for the second quarter of fiscal 2018 (amounts in millions, except share and per share data):

Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs(1)	Maximum Dollar Value of Shares that May Yet be Purchased Under the Programs(1)
November 27, 2017 - December 24, 2017	116,000	$	184.82	116,000	$	2,609
December 25, 2017 - January 21, 2018	90,000	188.82		90,000	2,592
January 22, 2018 - February 18, 2018	107,000	189.87		107,000	2,571
Total second quarter	313,000	$	187.70	313,000

 _______________

(1) Our stock repurchase program is conducted under a $4,000 authorization approved by of our Board of Directors in April 2015, which expires in April 2019.

Item 3—Defaults Upon Senior Securities

None.

Item 4—Mine Safety Disclosures

Not applicable.

Item 5—Other Information

None.

28

Item 6—Exhibits

The following exhibits are filed as part of this Quarterly Report on Form 10-Q or are incorporated herein by reference.

			Incorporated by Reference
Exhibit Number	Exhibit Description	Filed Herewith	Form	Period Ending	Filing Date
3.1	Articles of Incorporation as amended of Costco Wholesale Corporation		10-Q	2/15/2015	3/11/2015
3.2	Bylaws as amended of the registrant		8-K		11/2/2017
10.1*	Fourth Amendment to Citi, N.A. Co-Branded Credit Card Agreement	x
31.1	Rule 13(a) – 14(a) Certifications	x
32.1	Section 1350 Certifications	x
101.INS	XBRL Instance Document	x
101.SCH	XBRL Taxonomy Extension Schema Document	x
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	x
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	x
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	x
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	x

_____________

*Portions of this exhibit have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	COSTCO WHOLESALE CORPORATION (Registrant)
March 14, 2018	By	/s/ W. CRAIG JELINEK
Date		W. Craig Jelinek President, Chief Executive Officer and Director
March 14, 2018	By	/s/ RICHARD A. GALANTI
Date		Richard A. Galanti Executive Vice President, Chief Financial Officer and Director

29

EX-10.1

[*] Indicates confidential portions omitted pursuant to a request

for confidential treatment filed separately with the Commission

Exhibit 10.1

FOURTH AMENDMENT TO THE

CO-BRANDED CREDIT CARD PROGRAM AGREEMENT

This Fourth Amendment (“Amendment”) is between Citibank, N.A. (“Bank”) and Costco Wholesale Corporation (“Costco”), is effective as of January 1, 2018, and amends that certain Co-Branded Credit Card Program Agreement, by and between Bank and Costco, dated February 27, 2015 (the “Agreement”).

Pursuant to Section 16.10 and 4.05(a) of the Agreement, the Bank and Costco agree as follows:

1. Defined Terms. All capitalized terms used but not defined in this Amendment will have the meanings ascribed to such terms in the Agreement.

2. Amendments to Co-Branded Cardholder Account Terms.

a. No Introductory Rate. Effective January 25, 2018, the Co-Branded Cardholder Account Terms will no longer include an introductory rate of 0% for 7 months from date of account opening on purchases. Accordingly, as of January 25, 2018, the first row of the chart in Schedule 4.05(a)(Consumer Co-Branded Cardholder Account Terms) and first row of the chart in Schedule 4.05(a)(ii)(Small Business Co-Branded Card Terms) are each deleted and replaced with the following:

Annual Percentage Rate (APR) for purchases Your APR will be 16.24%. This APR will vary with the market based on the Prime Rate.

b. No Foreign Exchange Fee and Incremental Rewards Costs. Effective January 25, 2018, the Co-Branded Cardholder Account Terms will no longer include a fee for foreign purchases of 3% of the US dollar amount of each purchase.

i. Accordingly, as of January 25, 2018, the references in the penultimate row of the chart in Schedule 4.05(a)(Consumer Co-Branded Cardholder Account Terms) and the penultimate row of the chart in Schedule 4.05(a)(ii)(Small Business Co-Branded Card Terms) to “3% of each purchase transaction in US dollars” are deleted and replaced with the following: “No fee”.

ii. A new Paragraph (11) is added to Schedule 9.01 as follows:

“(11)    Bank will reimburse Costco for the annual net incremental Rewards costs (“Foreign Sales Rewards Reimbursement”) Costco incurs due to the removal of the foreign exchange fee from the Co-Branded Cardholder Account Terms on January 25, 2018, up to a maximum amount of [*] per year. The applicable annual reimbursement amount will be calculated as set forth on Exhibit 1 to this Schedule 9.01, using the agreed-upon baseline numbers as set forth therein. Bank will make the resulting reimbursement payment annually on or about the date that the true up payment referenced in Paragraph (4)(d) above is made. Calculation for partial calendar year 2026 will be performed following the Expiration of the Agreement unless the Agreement is renewed.”

iii. Exhibit 1 to Schedule 9.01 is attached to this Amendment as Attachment 1.

3. Full Force and Effect. The Agreement, as modified hereby, will remain in full force and effect and this Amendment will not be deemed to be an amendment or a waiver of any other provision of the Agreement except as expressly stated herein. All such other provisions of the Agreement will also be deemed to apply to this Amendment.

4. No Modification or Waiver; Incorporation. No modification, amendment or waiver of this Amendment will be effective or binding unless made in writing and signed by the Parties. The Parties agree that, except for those modifications expressly set forth in this Amendment, all terms and provisions of the Agreement will remain unchanged and in full force and effect. This Amendment and the Agreement will hereafter be read and construed together as a single document, and all references to the Agreement will hereafter refer to the Agreement as amended by this Amendment.

[*] Indicates confidential portions omitted pursuant to a request

for confidential treatment filed separately with the Commission

5. Counterparts. This Amendment may be executed in counterparts and if so executed will be enforceable and effective upon the exchange of executed counterparts, including by facsimile or electronic transmissions of executed counterparts.

[Signature page follows]

[*] Indicates confidential portions omitted pursuant to a request

for confidential treatment filed separately with the Commission

Duly authorized representatives of the Parties have executed this Amendment.

COSTCO WHOLESALE CORPORATION By: /s/ Paul Latham Name: Paul Latham Title: SVP - Membership, Marketing, Services CITIBANK, N.A. By: /s/ Val Greer Name: Val Greer Title: MD, Citi Cards

[*] Indicates confidential portions omitted pursuant to a request

for confidential treatment filed separately with the Commission

Attachment 1 to Amendment 4

Exhibit 1

Foreign Sales Rewards Reimbursement Calculation

The Foreign Sales Rewards Reimbursement will be calculated as [*]:

• [*]

• [*]

• [*]

If the Foreign Sales Rewards Reimbursement calculation results in a negative number, [*]. The Foreign Sales Rewards Reimbursement payment from Citi to Costco is capped at [*].

Definitions

• [*]

• [*]

• [*]

• [*]

• [*]

• [*]

• [*]

• [*]

• [*]

• [*]

• [*]

Note: Letters in { } correspond to the sample calculation provided by Citi attached to this Exhibit 1.

[*] Indicates confidential portions omitted pursuant to a request

for confidential treatment filed separately with the Commission

Exhibit 1: Foreign Exchange Related Rewards Cost Reimbursement Calculation

[*]

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, W. Craig Jelinek, certify that:

1) I have reviewed this Quarterly Report on Form 10-Q of Costco Wholesale Corporation (“the registrant”);

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 14, 2018

/s/    W. CRAIG JELINEK

W. Craig Jelinek

President, Chief Executive Officer and Director

CERTIFICATIONS

I, Richard A. Galanti, certify that:

1) I have reviewed this Quarterly Report on Form 10-Q of Costco Wholesale Corporation (“the registrant”);

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 14, 2018

/s/    RICHARD A. GALANTI

Richard A. Galanti

Executive Vice President, Chief Financial Officer and Director

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Costco Wholesale Corporation (the Company) on Form 10-Q for the quarter ended February 18, 2018, as filed with the Securities and Exchange Commission (the Report), I, W. Craig Jelinek, President, Chief Executive Officer and Director of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ W. CRAIG JELINEK	Date: March 14, 2018
W. Craig Jelinek
President, Chief Executive Officer and Director

A signed original of this written statement has been provided to and will be retained by Costco Wholesale Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Costco Wholesale Corporation (the Company) on Form 10-Q for the quarter ended February 18, 2018, as filed with the Securities and Exchange Commission (the Report), I, Richard A. Galanti, Executive Vice President, Chief Financial Officer and Director of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ RICHARD A. GALANTI	Date: March 14, 2018
Richard A. Galanti
Executive Vice President, Chief Financial Officer and Director

A signed original of this written statement has been provided to and will be retained by Costco Wholesale Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	6 Months Ended
	Feb. 18, 2018	Mar. 07, 2018
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Feb. 18, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2
Trading Symbol	COST
Entity Registrant Name	COSTCO WHOLESALE CORP /NEW
Entity Central Index Key	0000909832
Current Fiscal Year End Date	--09-02
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		438,820,272

XML

Condensed Consolidated Balance Sheets - USD ($)	Feb. 18, 2018	Sep. 03, 2017
CURRENT ASSETS
Cash and cash equivalents	$ 4,781,000,000	$ 4,546,000,000
Short-term investments	1,049,000,000	1,233,000,000
Receivables, net	2,001,000,000	1,432,000,000
Merchandise inventories	10,671,000,000	9,834,000,000
Other current assets	397,000,000	272,000,000
Total current assets	18,899,000,000	17,317,000,000
PROPERTY AND EQUIPMENT
Land	6,129,000,000	5,690,000,000
Buildings and improvements	15,740,000,000	15,127,000,000
Equipment and fixtures	7,025,000,000	6,681,000,000
Construction in progress	909,000,000	843,000,000
Gross property and equipment	29,803,000,000	28,341,000,000
Less accumulated depreciation and amortization	(10,754,000,000)	(10,180,000,000)
Net property and equipment	19,049,000,000	18,161,000,000
OTHER ASSETS	755,000,000	869,000,000
TOTAL ASSETS	38,703,000,000	36,347,000,000
CURRENT LIABILITIES
Accounts payable	10,061,000,000	9,608,000,000
Accrued salaries and benefits	2,997,000,000	2,703,000,000
Accrued member rewards	1,023,000,000	961,000,000
Deferred membership fees	1,656,000,000	1,498,000,000
Other current liabilities	3,176,000,000	2,725,000,000
Total current liabilities	18,913,000,000	17,495,000,000
LONG-TERM DEBT, excluding current portion	6,505,000,000	6,573,000,000
OTHER LIABILITIES	1,232,000,000	1,200,000,000
Total liabilities	26,650,000,000	25,268,000,000
COMMITMENTS AND CONTINGENCIES
EQUITY
Preferred stock $.01 par value; 100,000,000 shares authorized; no shares issued and outstanding	0	0
Common stock $.01 par value; 900,000,000 shares authorized; 438,883,000 and 437,204,000 shares issued and outstanding	4,000,000	4,000,000
Additional paid-in capital	5,920,000,000	5,800,000,000
Accumulated other comprehensive loss	(897,000,000)	(1,014,000,000)
Retained earnings	6,727,000,000	5,988,000,000
Total Costco stockholders' equity	11,754,000,000	10,778,000,000
Noncontrolling interests	299,000,000	301,000,000
Total equity	12,053,000,000	11,079,000,000
TOTAL LIABILITIES AND EQUITY	$ 38,703,000,000	$ 36,347,000,000

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Feb. 18, 2018	Sep. 03, 2017
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	100,000,000	100,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	900,000,000	900,000,000
Common stock, shares issued	438,883,000	437,204,000
Common stock, shares outstanding	438,883,000	437,204,000

XML

Condensed Consolidated Statements Of Income - USD ($) shares in Thousands, $ in Millions	3 Months Ended		6 Months Ended
	Feb. 18, 2018	Feb. 12, 2017	Feb. 18, 2018	Feb. 12, 2017
REVENUE
Net sales	$ 32,279	$ 29,130	$ 63,396	$ 56,599
Membership fees	716	636	1,408	1,266
Total revenue	32,995	29,766	64,804	57,865
OPERATING EXPENSES
Merchandise costs	28,733	25,927	56,350	50,215
Selling, general and administrative	3,234	2,980	6,458	5,920
Preopening expenses	12	15	29	37
Operating income	1,016	844	1,967	1,693
OTHER INCOME (EXPENSE)
Interest expense	(37)	(31)	(74)	(60)
Interest income and other, net	7	(4)	29	22
INCOME BEFORE INCOME TAXES	986	809	1,922	1,655
Provision for income taxes	273	288	558	579
Net income including noncontrolling interests	713	521	1,364	1,076
Net income attributable to noncontrolling interests	(12)	(6)	(23)	(16)
NET INCOME ATTRIBUTABLE TO COSTCO	$ 701	$ 515	$ 1,341	$ 1,060
NET INCOME PER COMMON SHARE ATTRIBUTABLE TO COSTCO:
Basic (in dollars per share)	$ 1.60	$ 1.17	$ 3.06	$ 2.42
Diluted (in dollars per share)	$ 1.59	$ 1.17	$ 3.04	$ 2.41
Shares used in calculation (000's)
Basic (shares)	439,022	439,127	438,494	438,567
Diluted (shares)	441,568	440,657	441,201	440,568
CASH DIVIDENDS DECLARED PER COMMON SHARE	$ 0.50	$ 0.45	$ 1.00	$ 0.90

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Condensed Consolidated Statements Of Comprehensive Income - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Feb. 18, 2018	Feb. 12, 2017	Feb. 18, 2018	Feb. 12, 2017
Statement of Comprehensive Income [Abstract]
NET INCOME INCLUDING NONCONTROLLING INTERESTS	$ 713	$ 521	$ 1,364	$ 1,076
Foreign-currency translation adjustment and other, net	150	114	127	(231)
Comprehensive income	863	635	1,491	845
Less: Comprehensive income attributable to noncontrolling interests	22	14	33	19
COMPREHENSIVE INCOME ATTRIBUTABLE TO COSTCO	$ 841	$ 621	$ 1,458	$ 826

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Condensed Consolidated Statements Of Cash Flows - USD ($) $ in Millions	6 Months Ended
	Feb. 18, 2018	Feb. 12, 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net income including noncontrolling interests	$ 1,364	$ 1,076
Adjustments to reconcile net income including noncontrolling interests to net cash provided by operating activities:
Depreciation and amortization	679	609
Stock-based compensation	346	322
Other non-cash operating activities, net	10	(49)
Deferred income taxes	(64)	45
Changes in operating assets and liabilities:
Merchandise inventories	(802)	(735)
Accounts payable	486	1,579
Other operating assets and liabilities, net	96	439
Net cash provided by operating activities	2,115	3,286
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term investments	(407)	(625)
Maturities and sales of short-term investments	588	734
Additions to property and equipment	(1,328)	(1,183)
Other investing activities, net	(11)	22
Net cash used in investing activities	(1,158)	(1,052)
CASH FLOWS FROM FINANCING ACTIVITIES
Change in bank checks outstanding	(33)	(272)
Repayments of long-term debt	(58)	0
Tax withholdings on stock-based awards	(216)	(201)
Repurchases of common stock	(184)	(190)
Cash dividend payments	(220)	(198)
Other financing activities, net	(37)	36
Net cash used in financing activities	(748)	(825)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	26	(44)
Net change in cash and cash equivalents	235	1,365
CASH AND CASH EQUIVALENTS BEGINNING OF YEAR	4,546	3,379
CASH AND CASH EQUIVALENTS END OF PERIOD	4,781	4,744
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest (reduced by $7 and $8 for interest capitalized in 2018 and 2017, respectively)	78	54
Income taxes, net	661	458
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Cash dividend declared, but not yet paid	$ 219	$ 198

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Condensed Consolidated Statements Of Cash Flows (Parenthetical) - USD ($) $ in Millions	6 Months Ended
	Feb. 18, 2018	Feb. 12, 2017
Statement of Cash Flows [Abstract]
Interest capitalized	$ 7	$ 8

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Summary of Significant Accounting Policies

6 Months Ended

Feb. 18, 2018

Accounting Policies [Abstract]

Summary of Significant Policies

Description of Business

Costco Wholesale Corporation (Costco or the Company), a Washington corporation, and its subsidiaries operate membership warehouses and ecommerce websites based on the concept that offering its members low prices on a limited selection of nationally branded and private-label merchandise in a wide range of categories will produce high sales volumes and rapid inventory turnover. At February 18, 2018, Costco operated 747 warehouses worldwide: 519 United States (U.S.) locations (in 44 states, Washington, D.C., and Puerto Rico), 98 Canada locations, 37 Mexico locations, 28 United Kingdom (U.K.) locations, 26 Japan locations, 13 Korea locations, 13 Taiwan locations, nine Australia locations, two Spain locations, one Iceland location, and one France location. The Company operates e-commerce websites in the U.S., Canada, Mexico, U.K., Korea, and Taiwan.

Basis of Presentation

The condensed consolidated financial statements include the accounts of Costco, its wholly-owned subsidiaries, and subsidiaries in which it has a controlling interest. The Company reports noncontrolling interests in consolidated entities as a component of equity separate from the Company’s equity. All material inter-company transactions between and among the Company and its consolidated subsidiaries have been eliminated in consolidation. The Company’s net income excludes income attributable to noncontrolling interests in its operations in Taiwan. During the first quarter of 2018, Costco purchased its former joint venture partner's remaining equity interest in its Korean operations. Unless otherwise noted, references to net income relate to net income attributable to Costco.

These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q for interim financial reporting pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). While these statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (U.S. GAAP) for complete financial statements. Therefore, the interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report filed on Form 10-K for the fiscal year ended September 3, 2017.

Fiscal Year End

The Company operates on a 52/53 week fiscal year basis, with the fiscal year ending on the Sunday closest to August 31. Fiscal 2018 is a 52-week year ending on September 2, 2018. References to the second quarters of 2018 and 2017 relate to the 12-week fiscal quarters ended February 18, 2018, and February 12, 2017, respectively. References to the first half of 2018 and 2017 relate to the twenty-four weeks ended February 18, 2018, and February 12, 2017, respectively.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results and events could differ from those estimates and assumptions.

Fair Value of Financial Instruments

The Company accounts for certain assets and liabilities at fair value. The carrying value of the Company’s financial instruments, including cash and cash equivalents, receivables and accounts payable, approximate fair value due to their short-term nature or variable interest rates. See Notes 2, 3, and 4 for the carrying value and fair value of the Company’s investments, derivative instruments, and fixed-rate debt, respectively.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying a fair value hierarchy, which requires maximizing the use of observable inputs when measuring fair value. The three levels of inputs are:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Significant unobservable inputs that are not corroborated by market data.

Current financial liabilities have fair values that approximate their carrying values. Long-term financial liabilities include the Company's long-term debt, which are recorded on the balance sheet at issuance price and adjusted for unamortized discounts or premiums and debt issuance costs, which are being amortized to interest expense over the term of the loan. There have been no material changes to the valuation techniques utilized in the fair value measurement of assets and liabilities as disclosed in the Company's 2017 Form 10-K.

Merchandise Inventories

Merchandise inventories are stated at the lower of cost or market. U.S. merchandise inventories are valued by the cost method of accounting, using the last-in, first-out (LIFO) basis. The Company believes the LIFO method more fairly presents the results of operations by more closely matching current costs with current revenues. The Company records adjustments quarterly, if necessary, for the projected annual effect of inflation or deflation, and these estimates are adjusted to actual results determined at fiscal year-end, after actual inflation rates and inventory levels have been determined. Canadian and Other International merchandise inventories are predominantly valued using the cost and retail inventory methods, respectively, using the first-in, first-out (FIFO) basis.

As of February 18, 2018, and September 3, 2017, U.S. merchandise inventories valued at LIFO approximated FIFO after considering the lower of cost or market principle.

Derivatives

The Company is exposed to foreign-currency exchange-rate fluctuations in the normal course of business. It manages these fluctuations, in part, through the use of forward foreign-exchange contracts, seeking to economically hedge the impact of fluctuations of foreign exchange on known future expenditures denominated in a non-functional foreign currency. The contracts relate primarily to U.S. dollar merchandise inventory expenditures made by the Company’s international subsidiaries, whose functional currency is not the U.S. dollar. These contracts do not qualify for derivative hedge accounting. The Company seeks to mitigate risk with the use of these contracts and does not intend to engage in speculative transactions. Some of these contracts contain credit-risk-related contingent features that require settlement of outstanding contracts upon certain triggering events. At February 18, 2018, and September 3, 2017, both the aggregate fair value amounts of derivative instruments in a net liability position and the amount needed to settle the instruments immediately if the credit-risk-related contingent features were triggered were immaterial. The aggregate notional amounts of unsettled forward foreign-exchange contracts were $737 and $637 at February 18, 2018, and September 3, 2017, respectively. The Company seeks to manage counterparty risk associated with these contracts by limiting transactions to counterparties with which the Company has an established banking relationship. There can be no assurance that this practice is effective. The contracts are limited to less than one year in duration. See Note 3 for information on the fair value of unsettled forward foreign-exchange contracts as of February 18, 2018, and September 3, 2017.

The unrealized gains or losses recognized in interest income and other, net in the accompanying condensed consolidated statements of income relating to the net changes in the fair value of unsettled forward foreign-exchange contracts were immaterial in the second quarter of 2018 and a net loss of $29 in the second quarter of 2017. The net changes in fair value of unsettled forward foreign-exchange contracts during the first half of 2018 and 2017 were immaterial.

The Company is exposed to fluctuations in prices for the energy it consumes, particularly electricity and natural gas, which it seeks to partially mitigate through the use of fixed-price contracts for certain of its warehouses and other facilities, primarily in the U.S. and Canada. The Company also enters into variable-priced contracts for some purchases of natural gas and fuel for its gas stations on an index basis. These contracts meet the characteristics of derivative instruments, but generally qualify for the “normal purchases or normal sales” exception under authoritative guidance and require no mark-to-market adjustment.

Foreign Currency

The Company recognizes foreign-currency transaction gains and losses related to revaluing or settling monetary assets and liabilities denominated in currencies other than the functional currency in interest income and other, net in the accompanying condensed consolidated statements of income. Generally, these include the U.S. dollar cash and cash equivalents and the U.S. dollar payables of consolidated subsidiaries revalued to their functional currency. Also included are realized foreign-currency gains or losses from settlements of forward foreign-exchange contracts. The net impact of these items was immaterial in the second quarter and first half of 2018 and 2017.

Stock Repurchase Programs

Repurchased shares of common stock are retired, in accordance with the Washington Business Corporation Act. The par value of repurchased shares is deducted from common stock and the excess repurchase price over par value is deducted by allocation to additional paid-in capital and retained earnings. The amount allocated to additional paid-in capital is the current value of additional paid-in capital per share outstanding and is applied to the number of shares repurchased. Any remaining amount is allocated to retained earnings. See Note 5 for additional information.

Recent Accounting Pronouncements Adopted

In March 2016, the Financial Accounting Standards Board (FASB) issued guidance intended to simplify accounting for share-based payment transactions. The guidance relates to income taxes, forfeitures, and minimum statutory tax withholding requirements. The new standard was effective for fiscal years and interim periods within those years beginning after December 15, 2016, with early adoption permitted. The Company adopted this guidance at the beginning of its first quarter of fiscal year 2018. As a result, in the first half of 2018 the Company recognized an excess tax benefit of $33 as part of its income tax provision in the accompanying condensed consolidated statements of income. This includes the permanent reduction in the U.S. statutory corporate tax rate. Previously these amounts were reflected in equity. Additionally, these amounts are now reflected as cash flows from operations instead of cash flows from financing activities in the consolidated statements of cash flows on a prospective basis. Adoption of this guidance did not have a material impact on the consolidated balance sheets, consolidated statements of cash flows, or related disclosures.

Recent Accounting Pronouncements Not Yet Adopted

In May 2014, the FASB issued guidance on the recognition of revenue from contracts with customers. The guidance converges the requirements for reporting revenue and requires disclosures sufficient to describe the nature, amount, timing, and uncertainty of revenue and cash flows. Transition is permitted either retrospectively or as a cumulative effect adjustment as of the date of adoption. The new standard is effective for fiscal years and interim periods within those years beginning after December 15, 2017. The Company plans to adopt this guidance at the beginning of its first quarter of fiscal year 2019.

While its review is continuing, based on preliminary assessments, the Company believes the guidance will accelerate recognition of cash-card breakage income to reflect the historical pattern of gift card redemption as compared to the current methodology of recognizing income when redemption is considered remote. The Company will also record, on a gross basis, a refund liability and an asset for recovery. Currently, these amounts are recorded as a net refund liability. The Company continues to evaluate various areas such as gross versus net revenue presentation for certain contracts, identification and treatment of performance obligations associated with membership offers, accounting for warranty arrangements, and its adoption methodology.

In February 2016, the FASB issued guidance on leases, which will require recognition on the balance sheet for the rights and obligations created by leases with terms greater than twelve months. The standard is effective for fiscal years and interim periods within those years beginning after December 15, 2018, with early adoption permitted. The Company plans to adopt this guidance at the beginning of its first quarter of fiscal year 2020. While the Company continues to evaluate this standard and the effect on related disclosures, the primary effect of adoption will be to require recording right-of-use assets and corresponding lease obligations for current operating leases. The adoption is expected to have a material impact on the Company's consolidated balance sheets, but not on the consolidated statements of income or consolidated statements of cash flows.

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Investments

6 Months Ended

Feb. 18, 2018

Investments, Debt and Equity Securities [Abstract]

Investments

The Company's major investments have not materially changed from the annual reporting period ended September 3, 2017. The Company’s investments were as follows:

February 18, 2018:	Cost Basis		Unrealized Loss, Net			Recorded Basis
Available-for-sale:
Government and agency securities	$	951	$	(14	)	$	937
Held-to-maturity:
Certificates of deposit	112					112
Total short-term investments	$	1,063	$	(14	)	$	1,049

September 3, 2017:	Cost Basis		Unrealized Gains, Net		Recorded Basis
Available-for-sale:
Government and agency securities	$	947	$	0	$	947
Mortgage-backed securities	1		0		1
Total available-for-sale	948		0		948
Held-to-maturity:
Certificates of deposit	285				285
Total short-term investments	$	1,233	$	0	$	1,233

At February 18, 2018, and September 3, 2017, available-for-sale securities with continuous unrealized-loss positions were immaterial. The proceeds from sales of available-for-sale securities were immaterial during the second quarter of 2018 and $34 during the second quarter of 2017. The proceeds from sales of available-for-sale securities were $39 and $66 during the first half of 2018 and 2017, respectively. Gross realized gains or losses from sales of available-for-sale securities during the second quarter and first half of 2018 and 2017 were immaterial.

The maturities of available-for-sale and held-to-maturity securities at February 18, 2018, were as follows:

	Available-For-Sale				Held-To-Maturity
	Cost Basis		Fair Value
Due in one year or less	$	188	$	188	$	112
Due after one year through five years	727		714		0
Due after five years	36		35		0
Total	$	951	$	937	$	112

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Fair Value Measurement

6 Months Ended

Feb. 18, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurement

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The tables below present information regarding financial assets and financial liabilities that are measured at fair value on a recurring basis and indicate the level within the hierarchy reflecting the valuation techniques utilized to determine fair value.

February 18, 2018:	Level 1		Level 2
Money market mutual funds(1)	$	10	$	0
Investment in government and agency securities	0		937
Forward foreign-exchange contracts, in asset position(2)	0		2
Forward foreign-exchange contracts, in (liability) position(2)	0		(20		)
Total	$	10	$	919

September 3, 2017:	Level 1		Level 2
Money market mutual funds(1)	$	7	$	0
Investment in government and agency securities	0		947
Investment in mortgage-backed securities	0		1
Forward foreign-exchange contracts, in asset position(2)	0		2
Forward foreign-exchange contracts, in (liability) position(2)	0		(8		)
Total	$	7	$	942

 _______________

(1) Included in cash and cash equivalents in the accompanying condensed consolidated balance sheets.

(2) The asset and the liability values are included in other current assets and other current liabilities, respectively, in the accompanying condensed consolidated balance sheets. See Note 1 for additional information on derivative instruments.

During and at the periods ended February 18, 2018, and September 3, 2017, the Company did not hold any Level 3 financial assets or liabilities that were measured at fair value on a recurring basis. There were no transfers in or out of Level 1 or 2 during the second quarter or first half of 2018 or 2017.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Assets and liabilities recognized and disclosed at fair value on a nonrecurring basis include items such as financial assets recorded at amortized cost and long-lived nonfinancial assets. These assets are measured at fair value if determined to be impaired. There were no fair value adjustments to these items during the secondquarter or first half of 2018 or 2017.

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Debt

6 Months Ended

Feb. 18, 2018

Debt Disclosure [Abstract]

Debt

The carrying value of the Company’s long-term debt consisted of the following:

	February 18, 2018		September 3, 2017
1.70% Senior Notes due December 2019	$	1,198	$	1,198
1.75% Senior Notes due February 2020	499		498
2.15% Senior Notes due May 2021	995		994
2.25% Senior Notes due February 2022	497		497
2.30% Senior Notes due May 2022	794		793
2.75% Senior Notes due May 2024	991		991
3.00% Senior Notes due May 2027	986		986
Other long-term debt	667		702
Total long-term debt	6,627		6,659
Less current portion	122		86
Long-term debt, excluding current portion	$	6,505	$	6,573

The estimated fair value of Senior Notes is valued using Level 2 inputs. Other long-term debt consists primarily of promissory notes and term loans issued by the Company's Japan subsidiary and are valued primarily using Level 3 inputs. The fair value of the Company's long-term debt, including the current portion, was approximately $6,562 and $6,753 at February 18, 2018, and September 3, 2017, respectively.

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Equity and Comprehensive Income

6 Months Ended

Feb. 18, 2018

Equity [Abstract]

Equity and Comprehensive Income

Dividends

The Company’s current quarterly dividend rate is $0.50 per share, compared to $0.45 per share in the second quarter of 2017. On January 30, 2018, the Board of Directors declared a quarterly cash dividend in the amount of $0.50 per share, which was paid on March 2, 2018.

Stock Repurchase Programs

Stock repurchase activity during the second quarter and first half of 2018 and 2017 is summarized below:

	Shares Repurchased (000's)	Average Price per Share		Total Cost
Second quarter of 2018	313	$	187.70	$	59
First half of 2018	1,047	$	170.06	$	178
Second quarter of 2017	411	$	159.86	$	66
First half of 2017	1,220	$	153.98	$	188

These amounts may differ from the stock repurchase balances in the accompanying condensed consolidated statements of cash flows due to changes in unsettled stock repurchases at the end of a quarter. The remaining amount available for stock repurchases under our approved plan, which expires in April 2019, was $2,571 at February 18, 2018. Purchases are made from time-to-time, as conditions warrant, in the open market or in block purchases and pursuant to plans under SEC Rule 10b5-1.

Components of Equity and Comprehensive Income

The following tables show the changes in equity attributable to Costco and the noncontrolling interests of consolidated subsidiaries:

	Attributable to Costco			Noncontrolling Interests			Total Equity
Equity at September 3, 2017	$	10,778		$	301		$	11,079
Comprehensive income:
Net income	1,341			23			1,364
Foreign-currency translation adjustment and other, net	117			10			127
Comprehensive income	1,458			33			1,491
Stock-based compensation	348			0			348
Release of vested restricted stock units (RSUs), including tax effects	(216		)	0			(216		)
Repurchases of common stock	(178		)	0			(178		)
Cash dividends declared and other	(436		)	(35		)	(471		)
Equity at February 18, 2018	$	11,754		$	299		$	12,053

	Attributable to Costco			Noncontrolling Interests		Total Equity
Equity at August 28, 2016	$	12,079		$	253	$	12,332
Comprehensive income:
Net income	1,060			16		1,076
Foreign-currency translation adjustment and other, net	(234		)	3		(231		)
Comprehensive income	826			19		845
Stock-based compensation	322			0		322
Release of vested RSUs, including tax effects	(164		)	0		(164		)
Repurchases of common stock	(188		)	0		(188		)
Cash dividends declared and other	(435		)	0		(435		)
Equity at February 12, 2017	$	12,440		$	272	$	12,712

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Stock-Based Compensation Plans

6 Months Ended

Feb. 18, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation Plans

The Seventh Restated 2002 Stock Incentive Plan authorized the issuance of 23,500,000 shares (13,429,000 RSUs) of common stock for future grants in addition to the shares authorized under the previous plan. The Company issues new shares of common stock upon vesting of RSUs. Shares for vested RSUs are generally delivered to participants annually, net of shares withheld for statutory taxes.

Summary of Restricted Stock Unit Activity

At February 18, 2018, 8,187,000 shares were available to be granted as RSUs and the following awards were outstanding:

• 7,393,000 time-based RSUs that vest upon continued employment over specified periods of time;

• 127,000 performance-based RSUs, granted to executive officers of the Company, for which the performance targets have been met. The awards vest upon continued employment over specified periods of time; and

• 205,000 performance-based RSUs, granted to executive officers of the Company, subject to achievement of performance targets for fiscal 2018, as determined by the Compensation Committee of the Board of Directors after the end of the fiscal year. These awards are included in the table below and the Company recognized compensation expense for these awards as it is currently deemed probable that the targets will be achieved.

The following table summarizes RSU transactions during the first half of 2018:

	Number of Units (in 000’s)		Weighted-Average Grant Date Fair Value
Outstanding at September 3, 2017	8,199		$	128.15
Granted	3,722		156.19
Vested and delivered	(4,067	)	129.49
Forfeited	(129	)	137.36
Outstanding at February 18, 2018	7,725		$	140.80

The remaining unrecognized compensation cost related to non-vested RSUs at February 18, 2018, was $914, and the weighted-average period over which this cost will be recognized is 1.7 years.

Summary of Stock-Based Compensation

The following table summarizes stock-based compensation expense and the related tax benefits under the Company’s plans:

	12 Weeks Ended						24 Weeks Ended
	February 18, 2018			February 12, 2017			February 18, 2018			February 12, 2017
Stock-based compensation expense before income taxes	$	112		$	111		$	346		$	322
Less recognized income tax benefit (1)	(2		)	(37		)	(79		)	(106		)
Stock-based compensation expense, net of income taxes	$	110		$	74		$	267		$	216

 _______________

(1) In the second quarter and first half of 2018, the income tax benefit reflects the permanent reduction in the U.S. federal statutory income tax rate from 35% to 21%.

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Income Taxes Income Taxes

6 Months Ended

Feb. 18, 2018

Income Tax Disclosure [Abstract]

Income Taxes

Note 7—Income Taxes

In December 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”) was signed into law. Except for certain provisions, the 2017 Act is effective for tax years beginning on or after January 1, 2018. The Company is a fiscal-year taxpayer, so most provisions will become effective for fiscal year 2019, including limitations on the Company’s ability to claim foreign tax credits, repeal of the domestic manufacturing deduction, and limitations on certain business deductions. Provisions with significant impacts that are effective for the second quarter of fiscal 2018 include: a decrease in the U.S. federal income tax rate, remeasurement of certain net deferred tax liabilities, and a transition tax on deemed repatriation of certain foreign earnings. The decrease in the U.S. federal statutory income tax rate to 21% will result in a blended rate for the Company of 25.6% for fiscal 2018.

During the second quarter, the Company recorded net tax benefits of $74 related to the 2017 Tax Act, including the impact of lowering the U.S. federal corporate rate. This benefit also included discrete tax expense of $152 on deemed repatriation of foreign earnings, and $39 for the reduction in foreign tax credits and other immaterial items, largely offset by a tax benefit of $165 for the provisional remeasurement of U.S. deferred tax liabilities, which results from the application of the lower tax rate to these liabilities. These are provisional determinations based on the Company's current interpretation of the 2017 Tax Act and estimates that it believes are reasonable. As the Company continues to evaluate the 2017 Tax Act and available data, it anticipates that adjustments may be made in future periods including the first quarter of fiscal 2019.

The determination of the Company’s provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws, all of which are subject to continuing review.

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Net Income per Common and Common Equivalent Share

6 Months Ended

Feb. 18, 2018

Earnings Per Share [Abstract]

Net Income Per Common and Common Equivalent Share

The following table shows the amounts used in computing net income per share and the weighted average number of shares of potentially dilutive common shares outstanding (shares in 000’s):

	12 Weeks Ended				24 Weeks Ended
	February 18, 2018		February 12, 2017		February 18, 2018		February 12, 2017
Net income available to common stockholders used in basic and diluted net income per common share	$	701	$	515	$	1,341	$	1,060
Weighted average number of common shares used in basic net income per common share	439,022		439,127		438,494		438,567
RSUs and other	2,546		1,530		2,707		2,001
Weighted average number of common shares and dilutive potential of common stock used in diluted net income per share	441,568		440,657		441,201		440,568

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Commitments and Contingencies

6 Months Ended

Feb. 18, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Legal Proceedings

The Company is involved in a number of claims, proceedings and litigation arising from its business and property ownership. In accordance with applicable accounting guidance, the Company establishes an accrual for legal proceedings if and when those matters reach a stage where they present loss contingencies that are both probable and reasonably estimable. There may be exposure to loss in excess of any amounts accrued. The Company monitors those matters for developments that would affect the likelihood of a loss (taking into account where applicable indemnification arrangements concerning suppliers and insurers) and the accrued amount, if any, thereof, and adjusts the amount as appropriate. As of the date of this Report, the Company has recorded an immaterial accrual with respect to one matter described below, in addition to other immaterial accruals for matters not described below. If the loss contingency at issue is not both probable and reasonably estimable, the Company does not establish an accrual, but will continue to monitor the matter for developments that will make the loss contingency both probable and reasonably estimable. In each case, there is a reasonable possibility that a loss may be incurred, including a loss in excess of the applicable accrual. For matters where no accrual has been recorded, the possible loss or range of loss (including any loss in excess of the accrual) cannot, in the Company's view, be reasonably estimated because, among other things: (i) the remedies or penalties sought are indeterminate or unspecified; (ii) the legal and/or factual theories are not well developed; and/or (iii) the matters involve complex or novel legal theories or a large number of parties.

The Company is a defendant in a class action alleging violation of California Wage Order 7-2001 by failing to provide seating to member service assistants who act as greeters and exit attendants in the Company’s California warehouses. Canela v. Costco Wholesale Corp., et al. (Case No. 5:13-cv-03598, N.D. Cal. filed July 1, 2013). The complaint seeks relief under the California Labor Code, including civil penalties and attorneys’ fees. The Company has filed an answer denying the material allegations of the complaint.

On November 23, 2016, the Company’s Canadian subsidiary received from the Ontario Ministry of Health and Long Term Care a request for an inspection and information concerning compliance with the anti-rebate provisions in the Ontario Drug Benefit Act and the Drug Interchangeability and Dispensing Fee Act. The Company is seeking to cooperate with the request.

In November 2016 and September 2017, the Company received notices of violation from the Connecticut Department of Energy and Environmental Protection regarding hazardous waste practices at its Connecticut warehouses, primarily concerning unsalable pharmaceuticals. The Company is seeking to cooperate concerning the resolution of these notices.

The Company does not believe that any pending claim, proceeding or litigation, either alone or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations or cash flows; however, it is possible that an unfavorable outcome of some or all of the matters, however unlikely, could result in a charge that might be material to the results of an individual fiscal quarter.

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Segment Reporting

6 Months Ended

Feb. 18, 2018

Segment Reporting [Abstract]

Segment Reporting

The Company and its subsidiaries are principally engaged in the operation of membership warehouses in the U.S., Canada, Mexico, U.K., Japan, Korea, Australia, Spain, Iceland and France and through a majority-owned subsidiary in Taiwan. Reportable segments are largely based on management’s organization of the operating segments for operational decisions and assessments of financial performance, which consider geographic locations. The material accounting policies of the segments are as described in the notes to the consolidated financial statements included in the Company's Annual Report filed on Form 10-K for the fiscal year ended September 3, 2017, and Note 1 above. Inter-segment net sales and expenses have been eliminated in computing total revenue and operating income. Certain operating expenses, predominantly stock-based compensation, are incurred on behalf of the Company's Canadian and Other International Operations, but are included in the U.S. Operations because those costs are not allocated internally and generally come under the responsibility of the Company's U.S. management team.

	United States Operations		Canadian Operations		Other International Operations		Total
Twelve Weeks Ended February 18, 2018
Total revenue	$	23,687	$	4,745	$	4,563	$	32,995
Operating income	603		206		207		1,016
Depreciation and amortization	262		31		51		344
Additions to property and equipment	375		39		94		508
Twelve Weeks Ended February 12, 2017
Total revenue	$	21,764	$	4,229	$	3,773	$	29,766
Operating income	520		180		144		844
Depreciation and amortization	241		27		44		312
Additions to property and equipment	358		56		102		516
Twenty-four Weeks Ended February 18, 2018
Total revenue	$	46,500	$	9,516	$	8,788	$	64,804
Operating income	1,136		442		389		1,967
Depreciation and amortization	514		63		102		679
Additions to property and equipment	855		114		359		1,328
Net property and equipment	12,690		1,852		4,507		19,049
Total assets	26,417		3,825		8,461		38,703

	United States Operations		Canadian Operations		Other International Operations		Total
Twenty-four Weeks Ended February 12, 2017
Total revenue	$	42,141	$	8,328	$	7,396	$	57,865
Operating income	1,026		371		296		1,693
Depreciation and amortization	467		53		89		609
Additions to property and equipment	784		166		233		1,183
Net property and equipment	12,040		1,688		3,614		17,342
Total assets	24,735		3,926		6,969		35,630
Year Ended September 3, 2017
Total revenue	$	93,889	$	18,775	$	16,361	$	129,025
Operating income	2,644		841		626		4,111
Depreciation and amortization	1,044		124		202		1,370
Additions to property and equipment	1,714		277		511		2,502
Net property and equipment	12,339		1,820		4,002		18,161
Total assets	24,068		4,471		7,808		36,347

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Feb. 18, 2018

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The condensed consolidated financial statements include the accounts of Costco, its wholly-owned subsidiaries, and subsidiaries in which it has a controlling interest. The Company reports noncontrolling interests in consolidated entities as a component of equity separate from the Company’s equity. All material inter-company transactions between and among the Company and its consolidated subsidiaries have been eliminated in consolidation. The Company’s net income excludes income attributable to noncontrolling interests in its operations in Taiwan. During the first quarter of 2018, Costco purchased its former joint venture partner's remaining equity interest in its Korean operations. Unless otherwise noted, references to net income relate to net income attributable to Costco.

These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q for interim financial reporting pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). While these statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (U.S. GAAP) for complete financial statements. Therefore, the interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report filed on Form 10-K for the fiscal year ended September 3, 2017.

Fiscal Year End

Fiscal Year End

The Company operates on a 52/53 week fiscal year basis, with the fiscal year ending on the Sunday closest to August 31. Fiscal 2018 is a 52-week year ending on September 2, 2018. References to the second quarters of 2018 and 2017 relate to the 12-week fiscal quarters ended February 18, 2018, and February 12, 2017, respectively. References to the first half of 2018 and 2017 relate to the twenty-four weeks ended February 18, 2018, and February 12, 2017, respectively.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results and events could differ from those estimates and assumptions.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company accounts for certain assets and liabilities at fair value. The carrying value of the Company’s financial instruments, including cash and cash equivalents, receivables and accounts payable, approximate fair value due to their short-term nature or variable interest rates. See Notes 2, 3, and 4 for the carrying value and fair value of the Company’s investments, derivative instruments, and fixed-rate debt, respectively.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying a fair value hierarchy, which requires maximizing the use of observable inputs when measuring fair value. The three levels of inputs are:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Significant unobservable inputs that are not corroborated by market data.

Current financial liabilities have fair values that approximate their carrying values. Long-term financial liabilities include the Company's long-term debt, which are recorded on the balance sheet at issuance price and adjusted for unamortized discounts or premiums and debt issuance costs, which are being amortized to interest expense over the term of the loan. There have been no material changes to the valuation techniques utilized in the fair value measurement of assets and liabilities as disclosed in the Company's 2017 Form 10-K.

Merchandise Inventories

Merchandise Inventories

Merchandise inventories are stated at the lower of cost or market. U.S. merchandise inventories are valued by the cost method of accounting, using the last-in, first-out (LIFO) basis. The Company believes the LIFO method more fairly presents the results of operations by more closely matching current costs with current revenues. The Company records adjustments quarterly, if necessary, for the projected annual effect of inflation or deflation, and these estimates are adjusted to actual results determined at fiscal year-end, after actual inflation rates and inventory levels have been determined. Canadian and Other International merchandise inventories are predominantly valued using the cost and retail inventory methods, respectively, using the first-in, first-out (FIFO) basis.

As of February 18, 2018, and September 3, 2017, U.S. merchandise inventories valued at LIFO approximated FIFO after considering the lower of cost or market principle.

Derivatives

Derivatives

The Company is exposed to foreign-currency exchange-rate fluctuations in the normal course of business. It manages these fluctuations, in part, through the use of forward foreign-exchange contracts, seeking to economically hedge the impact of fluctuations of foreign exchange on known future expenditures denominated in a non-functional foreign currency. The contracts relate primarily to U.S. dollar merchandise inventory expenditures made by the Company’s international subsidiaries, whose functional currency is not the U.S. dollar. These contracts do not qualify for derivative hedge accounting. The Company seeks to mitigate risk with the use of these contracts and does not intend to engage in speculative transactions. Some of these contracts contain credit-risk-related contingent features that require settlement of outstanding contracts upon certain triggering events. At February 18, 2018, and September 3, 2017, both the aggregate fair value amounts of derivative instruments in a net liability position and the amount needed to settle the instruments immediately if the credit-risk-related contingent features were triggered were immaterial. The aggregate notional amounts of unsettled forward foreign-exchange contracts were $737 and $637 at February 18, 2018, and September 3, 2017, respectively. The Company seeks to manage counterparty risk associated with these contracts by limiting transactions to counterparties with which the Company has an established banking relationship. There can be no assurance that this practice is effective. The contracts are limited to less than one year in duration. See Note 3 for information on the fair value of unsettled forward foreign-exchange contracts as of February 18, 2018, and September 3, 2017.

The unrealized gains or losses recognized in interest income and other, net in the accompanying condensed consolidated statements of income relating to the net changes in the fair value of unsettled forward foreign-exchange contracts were immaterial in the second quarter of 2018 and a net loss of $29 in the second quarter of 2017. The net changes in fair value of unsettled forward foreign-exchange contracts during the first half of 2018 and 2017 were immaterial.

The Company is exposed to fluctuations in prices for the energy it consumes, particularly electricity and natural gas, which it seeks to partially mitigate through the use of fixed-price contracts for certain of its warehouses and other facilities, primarily in the U.S. and Canada. The Company also enters into variable-priced contracts for some purchases of natural gas and fuel for its gas stations on an index basis. These contracts meet the characteristics of derivative instruments, but generally qualify for the “normal purchases or normal sales” exception under authoritative guidance and require no mark-to-market adjustment.

Foreign Currency

Foreign Currency

The Company recognizes foreign-currency transaction gains and losses related to revaluing or settling monetary assets and liabilities denominated in currencies other than the functional currency in interest income and other, net in the accompanying condensed consolidated statements of income. Generally, these include the U.S. dollar cash and cash equivalents and the U.S. dollar payables of consolidated subsidiaries revalued to their functional currency. Also included are realized foreign-currency gains or losses from settlements of forward foreign-exchange contracts. The net impact of these items was immaterial in the second quarter and first half of 2018 and 2017.

Stock Repurchase Programs

Stock Repurchase Programs

Repurchased shares of common stock are retired, in accordance with the Washington Business Corporation Act. The par value of repurchased shares is deducted from common stock and the excess repurchase price over par value is deducted by allocation to additional paid-in capital and retained earnings. The amount allocated to additional paid-in capital is the current value of additional paid-in capital per share outstanding and is applied to the number of shares repurchased. Any remaining amount is allocated to retained earnings. See Note 5 for additional information.

Recent Accounting Pronouncements Adopted

Recent Accounting Pronouncements Adopted

In March 2016, the Financial Accounting Standards Board (FASB) issued guidance intended to simplify accounting for share-based payment transactions. The guidance relates to income taxes, forfeitures, and minimum statutory tax withholding requirements. The new standard was effective for fiscal years and interim periods within those years beginning after December 15, 2016, with early adoption permitted. The Company adopted this guidance at the beginning of its first quarter of fiscal year 2018. As a result, in the first half of 2018 the Company recognized an excess tax benefit of $33 as part of its income tax provision in the accompanying condensed consolidated statements of income. This includes the permanent reduction in the U.S. statutory corporate tax rate. Previously these amounts were reflected in equity. Additionally, these amounts are now reflected as cash flows from operations instead of cash flows from financing activities in the consolidated statements of cash flows on a prospective basis. Adoption of this guidance did not have a material impact on the consolidated balance sheets, consolidated statements of cash flows, or related disclosures.

Recent Accounting Pronouncements Not Yet Adopted

Recent Accounting Pronouncements Not Yet Adopted

In May 2014, the FASB issued guidance on the recognition of revenue from contracts with customers. The guidance converges the requirements for reporting revenue and requires disclosures sufficient to describe the nature, amount, timing, and uncertainty of revenue and cash flows. Transition is permitted either retrospectively or as a cumulative effect adjustment as of the date of adoption. The new standard is effective for fiscal years and interim periods within those years beginning after December 15, 2017. The Company plans to adopt this guidance at the beginning of its first quarter of fiscal year 2019.

While its review is continuing, based on preliminary assessments, the Company believes the guidance will accelerate recognition of cash-card breakage income to reflect the historical pattern of gift card redemption as compared to the current methodology of recognizing income when redemption is considered remote. The Company will also record, on a gross basis, a refund liability and an asset for recovery. Currently, these amounts are recorded as a net refund liability. The Company continues to evaluate various areas such as gross versus net revenue presentation for certain contracts, identification and treatment of performance obligations associated with membership offers, accounting for warranty arrangements, and its adoption methodology.

In February 2016, the FASB issued guidance on leases, which will require recognition on the balance sheet for the rights and obligations created by leases with terms greater than twelve months. The standard is effective for fiscal years and interim periods within those years beginning after December 15, 2018, with early adoption permitted. The Company plans to adopt this guidance at the beginning of its first quarter of fiscal year 2020. While the Company continues to evaluate this standard and the effect on related disclosures, the primary effect of adoption will be to require recording right-of-use assets and corresponding lease obligations for current operating leases. The adoption is expected to have a material impact on the Company's consolidated balance sheets, but not on the consolidated statements of income or consolidated statements of cash flows.

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Investments (Tables)

6 Months Ended

Feb. 18, 2018

Investments, Debt and Equity Securities [Abstract]

Available-for-sale and Held-to-maturity Investments

The Company’s investments were as follows:

February 18, 2018:	Cost Basis		Unrealized Loss, Net			Recorded Basis
Available-for-sale:
Government and agency securities	$	951	$	(14	)	$	937
Held-to-maturity:
Certificates of deposit	112					112
Total short-term investments	$	1,063	$	(14	)	$	1,049

September 3, 2017:	Cost Basis		Unrealized Gains, Net		Recorded Basis
Available-for-sale:
Government and agency securities	$	947	$	0	$	947
Mortgage-backed securities	1		0		1
Total available-for-sale	948		0		948
Held-to-maturity:
Certificates of deposit	285				285
Total short-term investments	$	1,233	$	0	$	1,233

Maturities of Available-for-sale and Held-to-maturity Securities

The maturities of available-for-sale and held-to-maturity securities at February 18, 2018, were as follows:

	Available-For-Sale				Held-To-Maturity
	Cost Basis		Fair Value
Due in one year or less	$	188	$	188	$	112
Due after one year through five years	727		714		0
Due after five years	36		35		0
Total	$	951	$	937	$	112

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Fair Value Measurement (Tables)

6 Months Ended

Feb. 18, 2018

Fair Value Disclosures [Abstract]

Fair Value of Financial Assets and Liabilities Measured on Recurring Basis

The tables below present information regarding financial assets and financial liabilities that are measured at fair value on a recurring basis and indicate the level within the hierarchy reflecting the valuation techniques utilized to determine fair value.

February 18, 2018:	Level 1		Level 2
Money market mutual funds(1)	$	10	$	0
Investment in government and agency securities	0		937
Forward foreign-exchange contracts, in asset position(2)	0		2
Forward foreign-exchange contracts, in (liability) position(2)	0		(20		)
Total	$	10	$	919

September 3, 2017:	Level 1		Level 2
Money market mutual funds(1)	$	7	$	0
Investment in government and agency securities	0		947
Investment in mortgage-backed securities	0		1
Forward foreign-exchange contracts, in asset position(2)	0		2
Forward foreign-exchange contracts, in (liability) position(2)	0		(8		)
Total	$	7	$	942

 _______________

(1) Included in cash and cash equivalents in the accompanying condensed consolidated balance sheets.

(2) The asset and the liability values are included in other current assets and other current liabilities, respectively, in the accompanying condensed consolidated balance sheets. See Note 1 for additional information on derivative instruments.

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Debt (Tables)

6 Months Ended

Feb. 18, 2018

Debt Disclosure [Abstract]

Carrying Value and Estimated Fair Value of Company's Long-term Debt

The carrying value of the Company’s long-term debt consisted of the following:

	February 18, 2018		September 3, 2017
1.70% Senior Notes due December 2019	$	1,198	$	1,198
1.75% Senior Notes due February 2020	499		498
2.15% Senior Notes due May 2021	995		994
2.25% Senior Notes due February 2022	497		497
2.30% Senior Notes due May 2022	794		793
2.75% Senior Notes due May 2024	991		991
3.00% Senior Notes due May 2027	986		986
Other long-term debt	667		702
Total long-term debt	6,627		6,659
Less current portion	122		86
Long-term debt, excluding current portion	$	6,505	$	6,573

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Equity and Comprehensive Income (Tables)

6 Months Ended

Feb. 18, 2018

Equity [Abstract]

Stock Repurchased During Period

Stock repurchase activity during the second quarter and first half of 2018 and 2017 is summarized below:

	Shares Repurchased (000's)	Average Price per Share		Total Cost
Second quarter of 2018	313	$	187.70	$	59
First half of 2018	1,047	$	170.06	$	178
Second quarter of 2017	411	$	159.86	$	66
First half of 2017	1,220	$	153.98	$	188

Components Of Equity And Comprehensive Income

The following tables show the changes in equity attributable to Costco and the noncontrolling interests of consolidated subsidiaries:

	Attributable to Costco			Noncontrolling Interests			Total Equity
Equity at September 3, 2017	$	10,778		$	301		$	11,079
Comprehensive income:
Net income	1,341			23			1,364
Foreign-currency translation adjustment and other, net	117			10			127
Comprehensive income	1,458			33			1,491
Stock-based compensation	348			0			348
Release of vested restricted stock units (RSUs), including tax effects	(216		)	0			(216		)
Repurchases of common stock	(178		)	0			(178		)
Cash dividends declared and other	(436		)	(35		)	(471		)
Equity at February 18, 2018	$	11,754		$	299		$	12,053

	Attributable to Costco			Noncontrolling Interests		Total Equity
Equity at August 28, 2016	$	12,079		$	253	$	12,332
Comprehensive income:
Net income	1,060			16		1,076
Foreign-currency translation adjustment and other, net	(234		)	3		(231		)
Comprehensive income	826			19		845
Stock-based compensation	322			0		322
Release of vested RSUs, including tax effects	(164		)	0		(164		)
Repurchases of common stock	(188		)	0		(188		)
Cash dividends declared and other	(435		)	0		(435		)
Equity at February 12, 2017	$	12,440		$	272	$	12,712

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Stock-Based Compensation Plans (Tables)

6 Months Ended

Feb. 18, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of RSU Transactions

The following table summarizes RSU transactions during the first half of 2018:

	Number of Units (in 000’s)		Weighted-Average Grant Date Fair Value
Outstanding at September 3, 2017	8,199		$	128.15
Granted	3,722		156.19
Vested and delivered	(4,067	)	129.49
Forfeited	(129	)	137.36
Outstanding at February 18, 2018	7,725		$	140.80

Summary of Stock-Based Compensation Expense and Related Tax Benefits

The following table summarizes stock-based compensation expense and the related tax benefits under the Company’s plans:

	12 Weeks Ended						24 Weeks Ended
	February 18, 2018			February 12, 2017			February 18, 2018			February 12, 2017
Stock-based compensation expense before income taxes	$	112		$	111		$	346		$	322
Less recognized income tax benefit (1)	(2		)	(37		)	(79		)	(106		)
Stock-based compensation expense, net of income taxes	$	110		$	74		$	267		$	216

 _______________

(1) In the second quarter and first half of 2018, the income tax benefit reflects the permanent reduction in the U.S. federal statutory income tax rate from 35% to 21%.

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Net Income per Common and Common Equivalent Share (Tables)

6 Months Ended

Feb. 18, 2018

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The following table shows the amounts used in computing net income per share and the weighted average number of shares of potentially dilutive common shares outstanding (shares in 000’s):

	12 Weeks Ended				24 Weeks Ended
	February 18, 2018		February 12, 2017		February 18, 2018		February 12, 2017
Net income available to common stockholders used in basic and diluted net income per common share	$	701	$	515	$	1,341	$	1,060
Weighted average number of common shares used in basic net income per common share	439,022		439,127		438,494		438,567
RSUs and other	2,546		1,530		2,707		2,001
Weighted average number of common shares and dilutive potential of common stock used in diluted net income per share	441,568		440,657		441,201		440,568

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Segment Reporting (Tables)

6 Months Ended

Feb. 18, 2018

Segment Reporting [Abstract]

Segment Reporting Information, by Segment

Certain operating expenses, predominantly stock-based compensation, are incurred on behalf of the Company's Canadian and Other International Operations, but are included in the U.S. Operations because those costs are not allocated internally and generally come under the responsibility of the Company's U.S. management team.

	United States Operations		Canadian Operations		Other International Operations		Total
Twelve Weeks Ended February 18, 2018
Total revenue	$	23,687	$	4,745	$	4,563	$	32,995
Operating income	603		206		207		1,016
Depreciation and amortization	262		31		51		344
Additions to property and equipment	375		39		94		508
Twelve Weeks Ended February 12, 2017
Total revenue	$	21,764	$	4,229	$	3,773	$	29,766
Operating income	520		180		144		844
Depreciation and amortization	241		27		44		312
Additions to property and equipment	358		56		102		516
Twenty-four Weeks Ended February 18, 2018
Total revenue	$	46,500	$	9,516	$	8,788	$	64,804
Operating income	1,136		442		389		1,967
Depreciation and amortization	514		63		102		679
Additions to property and equipment	855		114		359		1,328
Net property and equipment	12,690		1,852		4,507		19,049
Total assets	26,417		3,825		8,461		38,703

	United States Operations		Canadian Operations		Other International Operations		Total
Twenty-four Weeks Ended February 12, 2017
Total revenue	$	42,141	$	8,328	$	7,396	$	57,865
Operating income	1,026		371		296		1,693
Depreciation and amortization	467		53		89		609
Additions to property and equipment	784		166		233		1,183
Net property and equipment	12,040		1,688		3,614		17,342
Total assets	24,735		3,926		6,969		35,630
Year Ended September 3, 2017
Total revenue	$	93,889	$	18,775	$	16,361	$	129,025
Operating income	2,644		841		626		4,111
Depreciation and amortization	1,044		124		202		1,370
Additions to property and equipment	1,714		277		511		2,502
Net property and equipment	12,339		1,820		4,002		18,161
Total assets	24,068		4,471		7,808		36,347

	United States Operations		Canadian Operations		Other International Operations		Total
Twelve Weeks Ended February 18, 2018
Total revenue	$	23,687	$	4,745	$	4,563	$	32,995
Operating income	603		206		207		1,016
Depreciation and amortization	262		31		51		344
Additions to property and equipment	375		39		94		508
Twelve Weeks Ended February 12, 2017
Total revenue	$	21,764	$	4,229	$	3,773	$	29,766
Operating income	520		180		144		844
Depreciation and amortization	241		27		44		312
Additions to property and equipment	358		56		102		516
Twenty-four Weeks Ended February 18, 2018
Total revenue	$	46,500	$	9,516	$	8,788	$	64,804
Operating income	1,136		442		389		1,967
Depreciation and amortization	514		63		102		679
Additions to property and equipment	855		114		359		1,328
Net property and equipment	12,690		1,852		4,507		19,049
Total assets	26,417		3,825		8,461		38,703

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Summary of Significant Accounting Policies - Additional Information (Detail) $ in Millions	3 Months Ended		6 Months Ended
	Feb. 18, 2018 USD ($) warehouse states	Feb. 12, 2017 USD ($)	Feb. 18, 2018 USD ($) warehouse states	Feb. 12, 2017 USD ($)	Sep. 03, 2017 USD ($)
Summary Of Significant Accounting Policies [Line Items]
Number of warehouses operated	747		747
Gain (loss) on foreign currency derivative instruments not designated as hedging instruments | $		$ (29)
Income Tax Expense (Benefit) | $	$ 273	$ 288	$ 558	$ 579
Accounting Standards Update 2016-09 [Member]
Summary Of Significant Accounting Policies [Line Items]
Income Tax Expense (Benefit) | $			(33)
Forward Foreign-exchange Contracts
Summary Of Significant Accounting Policies [Line Items]
Notional amount of forward foreign-exchange derivative | $	$ 737		$ 737		$ 637
UNITED STATES
Summary Of Significant Accounting Policies [Line Items]
Number of warehouses operated	519		519
Number of states in country | states	44		44
CANADA
Summary Of Significant Accounting Policies [Line Items]
Number of warehouses operated	98		98
MEXICO
Summary Of Significant Accounting Policies [Line Items]
Number of warehouses operated	37		37
UNITED KINGDOM
Summary Of Significant Accounting Policies [Line Items]
Number of warehouses operated	28		28
JAPAN
Summary Of Significant Accounting Policies [Line Items]
Number of warehouses operated	26		26
KOREA
Summary Of Significant Accounting Policies [Line Items]
Number of warehouses operated	13		13
TAIWAN
Summary Of Significant Accounting Policies [Line Items]
Number of warehouses operated	13		13
AUSTRALIA
Summary Of Significant Accounting Policies [Line Items]
Number of warehouses operated	9		9
SPAIN
Summary Of Significant Accounting Policies [Line Items]
Number of warehouses operated	2		2
ICELAND
Summary Of Significant Accounting Policies [Line Items]
Number of warehouses operated	1		1
FRANCE
Summary Of Significant Accounting Policies [Line Items]
Number of warehouses operated	1		1

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Investments - Available-for-sale and Held-to-maturity Investments (Detail) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Feb. 12, 2017	Feb. 18, 2018	Feb. 12, 2017	Sep. 03, 2017
Available-for-sale and Held-to-maturity [Line Items]
Available-for-sale, recorded basis		$ 937
Available-for-sale, cost basis, total		951
Held-to-maturity, cost basis		112
Total investments, recorded basis		1,049		$ 1,233
Proceeds from Sale of Available-for-sale Securities	$ 34	39	$ 66
Short-term Investments
Available-for-sale and Held-to-maturity [Line Items]
Unrealized gains/(loss), net		(14)		0
Total investments, recorded basis		1,049		1,233
Total investments, cost basis, total		1,063		1,233
Available-for-sale Securities [Member] | Short-term Investments
Available-for-sale and Held-to-maturity [Line Items]
Available-for-sale, recorded basis		937		948
Unrealized gains/(loss), net		(14)		0
Available-for-sale, cost basis, total		951		948
Available-for-sale Securities [Member] | Short-term Investments | Government and Agency Securities
Available-for-sale and Held-to-maturity [Line Items]
Available-for-sale, recorded basis		937		947
Unrealized gains/(loss), net		(14)		0
Available-for-sale, cost basis, total		951		947
Available-for-sale Securities [Member] | Short-term Investments | Mortgaged-backed Securities
Available-for-sale and Held-to-maturity [Line Items]
Available-for-sale, recorded basis				1
Unrealized gains/(loss), net				0
Available-for-sale, cost basis, total				1
Held-to-maturity Securities [Member] | Short-term Investments
Available-for-sale and Held-to-maturity [Line Items]
Held-to-maturity, recorded basis		112		285
Held-to-maturity, cost basis		112		285
Held-to-maturity Securities [Member] | Short-term Investments | Certificates of deposit
Available-for-sale and Held-to-maturity [Line Items]
Held-to-maturity, recorded basis		112		285
Held-to-maturity, cost basis		$ 112		$ 285

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Investments - Maturities of Available-for-sale and Held-to-maturity Securities (Details) $ in Millions	Feb. 18, 2018 USD ($)
Available-for-sale, Cost Basis
Due in one year or less	$ 188
Due after one year through five years	727
Due after five years	36
Available-for-sale, cost basis, total	951
Available-for-sale, Fair Value
Due in one year or less	188
Due after one year through five years	714
Due after five years	35
Available-for-sale, recorded basis, total	937
Held-to-maturity
Due in one year or less	112
Due after one year through five years	0
Due after five years	0
Held-to-maturity, cost basis, total	$ 112

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Fair Value Measurement - Fair Value of Financial Assets and Financial Liabilities Measured on Recurring Basis (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Millions		Feb. 18, 2018	Sep. 03, 2017
Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on recurring basis		$ 10	$ 7
Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on recurring basis		919	942
Money Market Funds | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on recurring basis	[1]	10	7
Money Market Funds | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on recurring basis	[1]	0	0
Government and Agency Securities | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on recurring basis		0	0
Government and Agency Securities | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on recurring basis		937	947
Mortgaged-backed Securities | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on recurring basis			0
Mortgaged-backed Securities | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on recurring basis			1
Forward Foreign-exchange Contracts | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on recurring basis	[2]	0	0
Fair value of liabilities measured on recurring basis	[2]	0	0
Forward Foreign-exchange Contracts | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on recurring basis	[2]	2	2
Fair value of liabilities measured on recurring basis	[2]	$ (20)	$ (8)

[1] Included in cash and cash equivalents in the accompanying condensed consolidated balance sheets.

[2] The asset and the liability values are included in other current assets and other current liabilities, respectively, in the accompanying condensed consolidated balance sheets. See Note 1 for additional information on derivative instruments.

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Debt (Carrying Value and Estimated Fair Value of Company's Long-term Debt) (Details) - USD ($) $ in Millions	6 Months Ended
	Feb. 18, 2018	Sep. 03, 2017
Debt Instrument [Line Items]
Total long-term debt, carrying value	$ 6,627	$ 6,659
Less current portion, carrying value	122	86
Long-term debt, excluding current portion	6,505	6,573
Total long-term debt, fair value	$ 6,562	6,753
1.7% Senior Notes Due December 2019
Debt Instrument [Line Items]
Debt instrument, interest rate, stated percentage	1.70%
Debt instrument, maturity date	Dec. 15, 2019
Total long-term debt, carrying value	$ 1,198	1,198
1.75% Senior Notes Due February 2020
Debt Instrument [Line Items]
Debt instrument, interest rate, stated percentage	1.75%
Debt instrument, maturity date	Feb. 15, 2020
Total long-term debt, carrying value	$ 499	498
2.15% Senior Notes Due May 2021
Debt Instrument [Line Items]
Debt instrument, interest rate, stated percentage	2.15%
Debt instrument, maturity date	May 18, 2021
Total long-term debt, carrying value	$ 995	994
2.25% Senior Notes Due February 2022
Debt Instrument [Line Items]
Debt instrument, interest rate, stated percentage	2.25%
Debt instrument, maturity date	Feb. 15, 2022
Total long-term debt, carrying value	$ 497	497
2.30% Senior Notes Due May 2022
Debt Instrument [Line Items]
Debt instrument, interest rate, stated percentage	2.30%
Debt instrument, maturity date	May 18, 2022
Total long-term debt, carrying value	$ 794	793
2.75% Senior Notes Due May 2024
Debt Instrument [Line Items]
Debt instrument, interest rate, stated percentage	2.75%
Debt instrument, maturity date	May 18, 2024
Total long-term debt, carrying value	$ 991	991
3.00% Senior Notes Due May 2027
Debt Instrument [Line Items]
Debt instrument, interest rate, stated percentage	3.00%
Debt instrument, maturity date	May 18, 2027
Total long-term debt, carrying value	$ 986	986
Other Long-term Debt
Debt Instrument [Line Items]
Total long-term debt, carrying value	$ 667	$ 702

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Equity and Comprehensive Income - Additional Information - Dividends (Detail) - $ / shares	3 Months Ended		6 Months Ended
	Feb. 18, 2018	Feb. 12, 2017	Feb. 18, 2018	Feb. 12, 2017
Dividends Payable [Line Items]
Dividends declared	$ 0.50	$ 0.45	$ 1.00	$ 0.90
Dividend Rate
Dividends Payable [Line Items]
Dividends declared	$ 0.50	$ 0.45

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Equity and Comprehensive Income (Stock Repurchased During Period) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions	3 Months Ended		6 Months Ended
	Feb. 18, 2018	Feb. 12, 2017	Feb. 18, 2018	Feb. 12, 2017
Equity [Abstract]
Shares repurchased (000's)	313	411	1,047	1,220
Average price per share	$ 187.70	$ 159.86	$ 170.06	$ 153.98
Total cost	$ 59	$ 66	$ 178	$ 188

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Equity and Comprehensive Income Equity and Comprehensive Income - Additional Information - Stock Repurchase Programs (Details) $ in Millions	Feb. 18, 2018 USD ($)
Equity [Abstract]
Stock repurchase program, remaining authorized repurchase amount	$ 2,571

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Changes in Equity Attributes to Costco and the Noncontrolling Interests of Consolidated Subsidiaries (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Feb. 18, 2018	Feb. 12, 2017	Feb. 18, 2018	Feb. 12, 2017
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Equity at beginning of period			$ (11,079)	$ (12,332)
Comprehensive income:
Net income	$ 713	$ 521	1,364	1,076
Foreign-currency translation adjustment and other, net	150	114	127	(231)
COMPREHENSIVE INCOME ATTRIBUTABLE TO COSTCO	841	621	1,458	826
Comprehensive income (loss), net of tax, attributable to noncontrolling interest	22	14	33	19
Comprehensive income	863	635	1,491	845
Stock-based compensation			348	322
Release of vested restricted stock units (RSUs), including tax effects			216	164
Repurchase of common stock	(59)	(66)	(178)	(188)
Cash dividends declared and other			(471)	(435)
Equity at end of period	(12,053)	(12,712)	(12,053)	(12,712)
Attributable to Costco
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Equity at beginning of period			(10,778)	(12,079)
Comprehensive income:
Net income			1,341	1,060
Foreign-currency translation adjustment and other, net			117	(234)
COMPREHENSIVE INCOME ATTRIBUTABLE TO COSTCO			1,458	826
Stock-based compensation			348	322
Release of vested restricted stock units (RSUs), including tax effects			216	(164)
Repurchase of common stock			(178)	(188)
Cash dividends declared and other			(436)	(435)
Equity at end of period	(11,754)	12,440	(11,754)	12,440
Noncontrolling Interests
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Equity at beginning of period			(301)	(253)
Comprehensive income:
Net income			23	16
Foreign-currency translation adjustment and other, net			10	3
Comprehensive income (loss), net of tax, attributable to noncontrolling interest			33	19
Cash dividends declared and other			(35)	0
Equity at end of period	$ (299)	$ (272)	$ (299)	$ (272)

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Stock-Based Compensation Plans - Additional Information (Detail) $ in Millions	6 Months Ended
	Feb. 18, 2018 USD ($) shares
Seventh Restated 2002 Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Additional number of shares authorized	23,500,000
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Additional number of shares authorized	13,429,000
Number of shares available to be granted as RSUs	8,187,000
Time-based RSUs awards outstanding	7,393,000
Performance-based RSUs awards outstanding	127,000
Outstanding performance-based RSUs awards granted, subject to achievement of performance targets	205,000
Unrecognized compensation cost | $	$ 914
Weighted-average recognition period	1 year 8 months 12 days

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Stock-Based Compensation Plans - Summary of RSU Transactions (Details) shares in Thousands	6 Months Ended
	Feb. 18, 2018 $ / shares shares
Number of units
Outstanding at September 3, 2017 | shares	8,199
Granted | shares	3,722
Vested and delivered | shares	(4,067)
Forfeited | shares	(129)
Outstanding at February 18, 2018 | shares	7,725
Weighted average grant date fair value
Outstanding at September 3, 2017 | $ / shares	$ 128.15
Granted | $ / shares	156.19
Vested and delivered | $ / shares	129.49
Forfeited | $ / shares	137.36
Outstanding at February 18, 2018 | $ / shares	$ 140.80

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Stock-Based Compensation Plans - Summary of Stock-Based Compensation Expense (Details) - USD ($) $ in Millions	2 Months Ended	3 Months Ended			4 Months Ended	6 Months Ended			12 Months Ended
	Feb. 18, 2018	Feb. 18, 2018		Feb. 12, 2017	Dec. 31, 2017	Feb. 18, 2018		Feb. 12, 2017	Sep. 01, 2019	Sep. 02, 2018
Stock-based compensation expense before income taxes		$ 112		$ 111		$ 346		$ 322
Less recognized income tax benefit		(2)	[1]	(37)		(79)	[1]	(106)
Stock-based compensation expense, net of income taxes		$ 110		$ 74		$ 267		$ 216
Scenario, Plan [Member]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%				35.00%				21.00%	25.60%

[1] In the second quarter and first half of 2018, the income tax benefit reflects the permanent reduction in the U.S. federal statutory income tax rate from 35% to 21%.

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Income Taxes Income Taxes (Details) - USD ($) $ in Millions	2 Months Ended	3 Months Ended	4 Months Ended	12 Months Ended
	Feb. 18, 2018	Feb. 18, 2018	Dec. 31, 2017	Sep. 01, 2019	Sep. 02, 2018
Net Tax Expense (Benefit), 2017 Tax Act		$ (74)
Tax Expense on Deemed Repatriated Earnings		152
Reduction in Foreign Tax Credits		39
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability		$ (165)
Scenario, Plan [Member]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%		35.00%	21.00%	25.60%

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Net Income per Common and Common Equivalent Share - Schedule of Earnings per Share Effect on Net Income and Weighted Average Number of Dilutive Potential Common Stock (Details) - USD ($) shares in Thousands, $ in Millions	3 Months Ended		6 Months Ended
	Feb. 18, 2018	Feb. 12, 2017	Feb. 18, 2018	Feb. 12, 2017
Earnings Per Share [Abstract]
Net income available to common stockholders used in basic and diluted net income per common share	$ 701	$ 515	$ 1,341	$ 1,060
Weighted average number of common shares used in basic net income per common share	439,022	439,127	438,494	438,567
RSUs and other	2,546	1,530	2,707	2,001
Weighted average number of common shares and dilutive potential of common stock used in diluted net income per share	441,568	440,657	441,201	440,568

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Segment Reporting Information by Segment (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended		12 Months Ended
	Feb. 18, 2018	Feb. 12, 2017	Feb. 18, 2018	Feb. 12, 2017	Sep. 03, 2017
Segment Reporting Information [Line Items]
Total revenue	$ 32,995	$ 29,766	$ 64,804	$ 57,865	$ 129,025
Operating income	1,016	844	1,967	1,693	4,111
Depreciation and amortization	344	312	679	609	1,370
Additions to property and equipment	508	516	1,328	1,183	2,502
Net property and equipment	19,049	17,342	19,049	17,342	18,161
Total assets	38,703	35,630	38,703	35,630	36,347
Operating Segments [Member] | UNITED STATES
Segment Reporting Information [Line Items]
Total revenue	23,687	21,764	46,500	42,141	93,889
Operating income	603	520	1,136	1,026	2,644
Depreciation and amortization	262	241	514	467	1,044
Additions to property and equipment	375	358	855	784	1,714
Net property and equipment	12,690	12,040	12,690	12,040	12,339
Total assets	26,417	24,735	26,417	24,735	24,068
Operating Segments [Member] | CANADA
Segment Reporting Information [Line Items]
Total revenue	4,745	4,229	9,516	8,328	18,775
Operating income	206	180	442	371	841
Depreciation and amortization	31	27	63	53	124
Additions to property and equipment	39	56	114	166	277
Net property and equipment	1,852	1,688	1,852	1,688	1,820
Total assets	3,825	3,926	3,825	3,926	4,471
Operating Segments [Member] | Other International Operations
Segment Reporting Information [Line Items]
Total revenue	4,563	3,773	8,788	7,396	16,361
Operating income	207	144	389	296	626
Depreciation and amortization	51	44	102	89	202
Additions to property and equipment	94	102	359	233	511
Net property and equipment	4,507	3,614	4,507	3,614	4,002
Total assets	$ 8,461	$ 6,969	$ 8,461	$ 6,969	$ 7,808