Costco CFO hints at membership fee hike

Costco CFO Richard Galanti on Thursday evening appeared to hint at the wholesale retailer raising its membership fee in the future.

Responding to an analyst’s question about whether a “weaker economic backdrop” factors into the company’s calculus on the timing of a fee increase, Galanti said that it “certainly goes into the thought process.” He noted that Costco is “still not even to the average of the last three increases in terms of timing between the last one and the next one.”

Costco has raised its membership fees roughly every five years and seven months in the past, with the most recent hike having taken place in June 2017.

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“What we’ve said again, and I’ll say again, is that our view is all the parameters, as it relates to member loyalty and value proposition that we’ve improved to our member, we have no problem thinking about doing it and doing it ultimately,” he said during the earnings call. “So it’s a question of when, not if.”

“But we feel that we’re in a very strong competitive position right now,” he continued. “And if we have to wait a few months or several months, that’s fine. And I’ll be purposely coy on when that might be.”

Costco saw a revenue increase from its membership fees in fiscal 2023’s first quarter, the results for which the company reported Thursday.

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Overall, it generated $54.44 billion in first-quarter revenue, a roughly 7.5% increase from the $50.36 billion reported in the same three-month period last year. For the quarter, its net income widened to $1.36 billion, with its adjusted earnings-per-share coming out to be $3.10.

Costco also reported a 6.6% increase in total first-quarter comparable sales, with U.S. comparable sales rising 9.3%, Canada’s going up 2.4% and other international comparable sales falling 3.1%.

“I think we’ve probably done it in times of lower comps or higher comps or good economy or tougher economy,” Galanti also said about membership fee increases in the call. “With the headline being ‘recession question mark’ and ‘inflation exclamation point,’ there’s no rush.”

“I know now that five years and seven months from June of ‘17 is January of ‘23,” he continued. “I know on the last call I said that doesn’t mean it’s going to be January ‘23. It’s a question of when, not if, but at this junction, we’ll just have to wait and see.”

Galanti said Costco feels “very good about our member loyalty and our strength.” 

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The retailer’s membership-renewal rates for U.S. and Canada were 92.5% at the end of the first quarter, while its worldwide rate stayed flat from the prior quarter at 90.4%. 

“If we wanted to do it yesterday, we could, and if we want to do it six months from now, we can,” Galanti told analysts. “We’ll wait and see.”

He previously used the “when, not if” language when discussing potential membership fee increases during the last earnings call in September.