Costco says it’s not ready to raise its $60 membership fee — for now
Costco is once again kicking the can on raising its membership fee.
But don’t expect it to stay that way.
“I would really kind of revert to some of the comments that Richard shared previously,” CFO Gary Millerchip told investors Thursday, referring to his predecessor, Richard Galanti, who said last year that a Costco membership fee increase would “happen at some point.”
“There’s nothing about anything that we see within how the business is performing that’s changing our view on that,” Millerchip said.
The wholesale club last raised fees in 2017, and analysts have noted that an increase is long overdue, based on the typical five- to six-year interval of prior hikes.
Because Costco sells merchandise at extremely low markups, membership fees are a key way the company makes a profit.
Costco reported nearly $1.1 billion in revenue from membership fees last quarter, representing over half its operating income.
Costco now boasts nearly 134 million member cardholders, up 7.4% from a year ago, and said more than 90% of members renew each year.
The company has resisted a fee increase in favor of alternatives like encouraging entry-level members to upgrade and last year’s Netflix-style crackdown on shoppers improperly sharing membership cards.
“It’s still a case of when we increase the fee, rather than if we increase the fee, but we’re still evaluating those considerations to determine the right timing,” Millerchip said.
In addition, a fee increase would put Costco’s $60 basic Gold Star membership even more ahead of competitors BJ’s Wholesale and Sam’s Club, who charge $55 and $50, respectively.
“Fee increases go back to the members in lower prices,” Costco CEO Ron Vachris said on Thursday, explaining why the company will eventually take the plunge.
“One of the key things that we use that money for is that it allows us to broaden that distance from the competition, bring greater value, and improve our overall operation for the member,” Vachris added.
