Since 2017, Costco has increased its basic membership fee from $60 per year to $65, the first time since then. In a statement on Wednesday, Costco said its American and Canadian membership prices will rise by 8%, effective September 1. The company's premium membership price will rise from $120 to $130. This will affect about 52 million members. In post-market trading, Costco's stock price rose 2.4%. As of Wednesday's close, the stock had risen 34% this year, outperforming the S&P 500 index. Investors and analysts have been waiting for the Washington State-based company to increase its membership fees. Costco typically raises membership fees every five years or so, prompting analysts to constantly inquire about the company in recent quarters. Executives have said that growth is only a matter of time, and that the company's renewal rate, new sign-up users, and customer loyalty are high. They acknowledged on the earnings call that growth has taken longer than usual to materialize.
In a statement on Wednesday, Costco said its American and Canadian membership prices will rise by 8%, effective September 1. The company's premium membership price will rise from $120 to $130. This will affect about 52 million members.
(Source: Google)
In post-market trading, Costco's stock price rose 2.4%. As of Wednesday's close, the stock had risen 34% this year, outperforming the S&P 500 index.
Investors and analysts have been waiting for the Washington State-based company to increase its membership fees. Costco typically raises membership fees every five years or so, prompting analysts to constantly inquire about the company in recent quarters.
Executives have said that growth is only a matter of time, and that the company's renewal rate, new sign-up users, and customer loyalty are high. They acknowledged on the earnings call that growth has taken longer than usual to materialize.
Industry research analyst Jennifer Bartashus pointed out in a report on Wednesday that this fee increase was expected, and it was already expected according to Costco's usual five-year rhythm.
"Due to concerns about inflation and economic prospects, the company has postponed price increases, and these concerns have now eased," she wrote. She also added that she expects the follow-up rate after the price increase to remain stable.
In recent years, American consumers have been facing the problem of soaring prices, although the rate of increase has begun to slow down. Retailers expect the inflation rate to return to normal levels this year, namely low single-digit levels, and report that inflation rates in some areas, including daily goods, have declined.
Due to Costco's membership model, its customer base is often more affluent, and the company is relatively unaffected by the overall industry sales growth and widespread discretionary spending declines.
The company said on Wednesday that same-store sales in the United States (excluding gasoline) in June increased by 6.3% year-on-year.
Membership revenue is particularly important to Costco, which uses membership revenue to invest in operations and lower commodity prices. Higher membership fees will bring profit growth to Costco, and the company tries to attract shoppers with relatively few items at low prices. Premium members have propelled growth, accounting for just over half of Costco's paid members.
(Source: Bloomberg)
Costco appointed a new CFO earlier this year, Gary Millerchip, from Kroger Co. Ron Vachris has been CEO since January. The company has been adding stores in the United States and overseas, while investing in e-commerce.
As American consumers flock to warehouse-style stores that offer wholesale volume goods, the company is following Sam's Club, a Walmart-owned member store, in raising membership fees. Sam's Club will raise its basic annual membership fee to $50 in 2022, and its premium annual membership fee to $110, although it will use its reward program to refund the extra cost to members in the first year.