Dive Brief:
- Costco said Wednesday it’s raising its annual membership fees. Starting Sept. 1, individual and business members in the U.S. and Canada will pay $65 — $5 more. Executive membership will be $130, or $10 more per year. The company last raised its membership fees in June 2017.
- Additionally, the maximum annual 2% reward available to Costco’s highest tier members will increase from $1,000 to $1,250. The company said the fee increases will affect about 52 million paid members. Just over half of those people have a higher tier Executive level membership, according to the company.
- Ninety-three percent of U.S. and Canada shoppers typically renew their Costco membership, the retailer said in May. Globally, 90.5% of Costco customers renew their memberships. Costco said it generated $1.12 billion in membership fee income in its most recent quarter, a 7.6% year-over-year increase.
Dive Insight:
Chief Financial Officer Gary Millerchip, who joined the company from Kroger earlier this year, said in May that it was a matter of “when” not “if” a membership fee increase would happen.
“We estimate the fee increase will provide roughly $350 million in incremental sales and operating profit over the next two years, with two-thirds flowing through the model in fiscal 2025 and the remainder primarily in the first half of 2026,” William Blair analyst Phillip Blee said in a Thursday note.
Josh Dahmen, assistant vice president of financial planning and investor relations, confirmed in pre-recorded audio comments that the benefit of the fee increase is expected to play out over the next two fiscal years.
Blee said a similar announcement from rival BJ’s Wholesale Club is likely to follow, “given [BJ’s] historical propensity to wait for Costco to make the first move.”
BJ’s annual personal and business memberships start at $55 annually. The retailer also offers a higher tier Club+ membership for $110 annually. Sam’s Club raised its membership rate in 2022 for the first time in nearly 10 years to $50 a year for the lower tier and $110 annually for a Plus membership.
“We believe the fee increase will allow Costco to expand its competitive edge, with potential for expanded omnichannel and digital offerings that the company has been successfully stubborn to adopt,” Blee said.
Also Wednesday, the company reported earnings for the five weeks ended Sunday. Net sales for the period were $24.5 billion, up 7.4% from $22.8 billion from a year ago. Comparable sales for June in the U.S., excluding fuel, were 6.3%, while e-commerce comps for the month were 19.1%. For the fiscal year-to-date, Costco said its net sales have reached $210.5 billion. That’s up nearly 7% year over year from $196.9 billion.
Analysts with Telsey Advisory Group on Thursday led by Joe Feldman characterized Costco’s June performance as “strong” and said the retailer “is executing exceptionally well in this uncertain operating environment.”
Looking ahead to the company’s next fiscal year, Feldman said Costco should continue generating solid earnings per share growth, driven by mid single digit comps and high single digit to low double digit membership fee income growth.
Costco currently operates 882 retail warehouses worldwide — 609 in the United States and Puerto Rico, 108 in Canada and 40 in Mexico. The company also has a physical presence in 11 other countries and an e-commerce presence in eight countries.
