Costco putting off potential membership fee increase as renewal rates hit record

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Costco putting off potential membership fee increase as renewal rates hit record

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

There are no plans for a fee increase at this time, according to Costco Chief Financial Officer Richard Galanti during the company's earnings call on Thursday. The growth in both top line sales and membership households over the last several quarters and increased member loyalty are reflected in the increase in member renewal rates. At the end of the fourth quarter, Costco's membership renewal rate was 92.6% in the U.S. and Canada and 90.4% worldwide, up from 92.3% and 90% in the previous quarter.

The company has 65.8 million paid household members and 118.9 million cardholders as of the end of the fourth quarter, which is up 6.5% compared to a year ago. The memberships for executive membership increased by 29.1 million, an increase of 1.2 million compared to the third quarter. Executives now represent over 44% of Costco's members and just over 72% of its worldwide sales.

Costco has increased its membership fees about every five and a half years. The last three increases were on average five years and seven months apart, according to Galanti. The company, which raised its membership fees in June 2017, currently charges $120 per year for executive memberships and $60 per year for Gold Star and business memberships.

Galanti said that if you look at June of '17, plus five years and seven months, you're talking roughly January '23. I'm just saying it's not there yet. We are confident in our ability to do so, and our view is that. He said that because of the headline of inflation and concerns about the recession, we feel quite comfortable driving sales and earnings the way we are right now and we still have that arrow in our quiver as we go forward.

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 rose 15.2% to $70.76 billion from $61.44 billion a year ago. Revenues from membership fees rose to $1.3 billion in the quarter, up from $1.2 billion a year ago.

The annual club membership fee is going to be raised for the first time in nine years and the annual Plus membership fee will increase for the first time since its introduction in 1999, according to the comments made by Walmart-owned Sam's Club. The annual membership fee will be $50 for Club members and $110 for Plus members, up from $45 and $100, respectively.

We are aware of the financial pressure on wallets right now. Sam's Club CEO Kath McLay said that this year's renewal is on us. We're giving back $5 in Sam s Cash to Club members and $10 in Sam s Cash to Plus members shortly after renewal. The consumer price index rose 8.3% from a year ago, according to the Labor Department earlier this month. The price of the currency rose by 0.1% in the one month period from July.

He noted that there were minor improvements in some areas, despite the fact that Costco's overall price inflation was about 8% during the fourth quarter due to higher commodity prices, higher wages, higher transportation costs and supply chain disruptions.

Some commodities prices are going to go down, such as gas, steel, beef, relative to a year ago, and even some small cost changes in plastics. There's some relief on container pricing, according to Galanti. Wages are still relatively high, but they seem to be the one thing that's still higher. There were some beginnings of some light at the end of the tunnel.