Costco is postponing the membership fee increase as renewals have reached all-time highs

Costco is postponing a potential membership fee increase as its renewal rates hit all-time highs in its fourth quarter.

“In terms of membership dues and a possible increase, there are currently no specific plans regarding a dues increase,” Costco Chief Financial Officer Richard Galanti said during the company’s earnings call Thursday. “We are pleased with our growth in both frontline sales and member families over the past few quarters and in member loyalty, as reflected in the increase in member renewal rates.”

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COST WHOLESALE COSTCO CORP. 463.65 -23.52 -4.83%

At the end of the fourth quarter, Costco’s membership renewal rate was 92.6% in the US and Canada and 90.4% worldwide, compared to 92.3% and 90% respectively. of the previous quarter.

The company has 65.8 million paid family members and 118.9 million cardholders at the end of the fourth quarter, both up 6.5% from a year ago. Subscriptions to paid executives were 29.1 million, an increase of 1.2 million compared to the third quarter. Executive members now represent over 44% of Costco’s members and just under 72% of its worldwide sales.

SUPPLY CHAIN ​​PROBLEMS AND BILLION DOLLAR FUEL MARKET INFLATION

Historically, Costco has increased its membership dues approximately every five and a half years. Galanti noted that the last three increases have averaged five years and seven months of each other. The company, which last increased its membership dues in June 2017, currently charges $ 120 per year for executive memberships and $ 60 per year for Gold Star and corporate memberships.

“If you look at June ’17, plus five years and seven months, you are talking about January ’23,” said Galanti. “Now I’m not suggesting it’s January ’23. I’m just saying it’s not here yet, anyway. And our opinion is that we are confident in our ability to do that. And at some point we will, but it’s a question or when. , not if.”

“Given the headline of inflation and recession concerns, we feel quite comfortable driving sales and earnings as we are right now, and we still have that arrow in our quiver as we move forward,” he added.

Costco reported net income of $ 1.868 billion, or $ 4.20 per diluted share, in the fourth quarter, compared to $ 1.67 billion, or $ 3.76 per diluted share, in the same period last year. Net sales increased 15.2% to $ 70.76 billion from $ 61.44 billion in the same period a year ago. Membership dues revenue amounted to $ 1.3 billion during the quarter, up from $ 1.2 billion a year ago.

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The comments come as Walmart-owned Sam’s Club prepares to increase the Club’s annual membership fee for the first time in nine years and the Annual Plus membership fee for the first time since its introduction in 1999. Starting in October 1999. 17, the annual membership fee will be $ 50 for Club members and $ 110 for Plus members, from $ 45 and $ 100 respectively.

“We are aware of the financial pressure on portfolios right now. So, this year’s renewal is up to us,” said Kath McLay, CEO of Sam’s Club, in a notice to clients. “We will return $ 5 in Sam’s Cash to Club members and $ 10 in Sam’s Cash to Plus members shortly after renewal.”

Sam's club logo

Starting October 17, Sam’s Club will charge $ 50 for its annual Club membership and $ 110 for its Plus membership, from $ 45 and $ 100 respectively. (REUTERS / Rick Wilking / File Photo / Reuters Photo)

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Earlier this month, the Labor Department reported that the CPI rose 8.3% in August from a year ago. Prices have risen by 0.1% in the one-month period since July.

Although Galanti said Costco’s overall price inflation was around 8% during the fourth quarter due to pressures from rising commodity prices, higher wages, higher transportation costs and supply chain disruptions, he noted that there have been minor improvements in some areas.

“We are seeing a drop in the prices of some commodities, such as gas, steel, beef, compared to a year ago, even some small changes in the cost of plastic. We are seeing some relief on container prices,” he said. Galanti. “Wages still seem to be the only thing that’s still relatively higher. But overall, some light starts at the end of that tunnel.”

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