Costco is postponing a potential increase in membership fees as its renewal rates hit all-time highs in its fourth quarter.
“In terms of membership fees and a possible increase, there are no specific plans regarding a fee increase at this time,” Costco Chief Financial Officer Richard Galanti said on the call. to the company’s results on Thursday. “We are pleased with the growth in our sales and membership households over the past few quarters and with member loyalty as evidenced by the increase in member renewal rates.”
At the end of the fourth trimester, Costco Membership Renewal Rates reached 92.6% in the United States and Canada, and 90.4% globally, compared to 92.3% and 90% in the prior quarter, respectively.
The company had 65.8 million paying household members and 118.9 million cardholders at the end of the fourth quarter, both up 6.5% from a year ago. Paid executive members totaled 29.1 million, an increase of 1.2 million from the third quarter. Executive members now make up more than 44% of Costco’s membership and just under 72% of its global sales.
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Historically, Costco has increased its membership fees approximately every five and a half years. Galanti noted that the last three increases were on average five years and seven months apart. The company, which last increased its membership fees in June 2017, currently charges $120 per year for executive memberships and $60 per year for its Gold Star and professional memberships.
“If you look at June 2017, plus five years and seven months, you’re pretty much talking about January 23,” Galanti said. “Now I’m not saying it’s January 23. I’m just saying it’s not there yet, anyway. And our opinion is that we’re confident in our ability to do that. And at some point given, we will, but it’s a matter of when, not if.”
“Given inflation and recession concerns, we feel quite comfortable driving sales and earnings as we are doing now, and we still have that arrow in our quiver as we move forward.” , he added.
Interior view of a Costco store on August 18, 2020 in Teterboro, New Jersey. On Thursday, Costco Wholesale (COST) stock hit the upper 90 percentile with an improvement to 93 from 89 the previous day. (Photo by Kena Betancur/VIEWpress)
Costco reported net income of $1.868 billion, or $4.20 per diluted share, in the fourth quarter, compared with $1.67 billion, or $3.76 per diluted share, in the same period last year . Net sales climbed 15.2% to $70.76 billion from $61.44 billion in the same period a year ago. Dues revenue was $1.3 billion in the quarter, compared to $1.2 billion a year ago.
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The comments come as Walmart-owned Sam’s Club prepares to increase their annual membership fee to the Club for the first time in nine years and the annual Plus membership fee for the first time since its introduction in 1999. Starting October 17, the annual membership fee will be $50 for Club members and $110 for Plus members, for $45 and $100, respectively.
“We are aware of the financial pressure on wallets at the moment. So this year’s renewal is upon us,” Sam’s Club CEO Kath McLay said in a notice to customers. “We’re returning $5 in Sam’s Cash to Club members and $10 in Sam’s Cash to Plus members shortly after renewal.”
A sign hangs outside a Sam’s Club store on January 12, 2018 in Streamwood, Illinois. (Photo by Scott Olson/Getty Images)
Earlier this month, the Department of Labor reported that the consumer price index increased by 8.3% in August from a year ago. Prices rose 0.1% in the month-long period from July.
Although Galanti said Costco’s overall price inflation was around 8% in the fourth quarter due to pressures from rising commodity prices, higher wages, higher transportation costs and supply chain disruptions, he noted that there had been minor improvements in some areas.
“We are seeing lower prices in some commodities, such as gas, steel, beef, compared to a year ago, even slight cost changes in plastics. We are seeing some relief on container prices,” Galanti said. “Salaries still seem to be the only thing that’s still relatively higher. But overall, some light beginnings at the end of that tunnel.”
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