Costco announces major update on membership fees – but there is a ‘when, not if’ catch

COSTCO said it has no plans to hike its membership fees immediately this summer, but as inflation remains high, increased prices might be on the way sooner rather than later.

Costco executives have long warned shoppers that its Gold Star membership price could surge soon as the wholesaler and other grocers face higher prices on goods 

The company’s CFO Richard Galanti assured stakeholders last week however that even if Costco does raise its prices, sales and overall membership numbers should not be impacted.

“With the headline being inflation, we feel very good about if we want to do it, we do it without impacting in any meaningful way renewal rates or sign-ups or anything,” Galanti said about the upcoming price hikes, which have never been formally announced. 

Despite talks of Costco’s price jumps starting around a year ago, the bulk grocery chain has been able to keep the membership cost surge at bay.

Still, Galanti has been clear in the past, saying it’s a question of “when, not if.”

But as retailers across the country are already increasing prices on grocery items for shoppers, Costco is holding out on the price hike, executives said.

“Our view right now is that we’ve got enough levers out there to drive business and we feel that it’s incumbent upon us to be that beacon of light to our members in terms of holding them for right now,” Galanti said.

Costco generally has performed well financially throughout the pandemic and the high inflationary period that occurred after it.

The company reported a 2 percent growth in net sales for the quarter ending May 7, and membership revenue and same-store sales both grew during the period.

Specifically, net sales climbed to $52.6billion that quarter, a full billion higher than the same period last year.

Meanwhile, membership fee revenue increased 6.1 percent to $1.04billion, compared to $984million last year.

There are still some concerns, however, as Costco navigates its future forward.

For instance, the average ticket price has crept down 4.2 percent globally and 3.5 percent in the United States this quarter.

The company attributes the descent to Americans reeling in their discretionary spending due to high inflation rates.

“This is the second quarter that we’ve seen that discussion of lower sales of big ticket discretionary items,” Galanti said during Costco’s earnings call.

If this trend continues, it could spark the wholesaler to hike membership prices.

MEMBERSHIP AT COSTCO

Historically, Costco has increased its membership prices roughly every five or six years.

The last price hike occurred in June 2017, making the upcoming months ahead a likely time for prices to surge on customers, especially with the dramatic inflation Costco is already facing on its goods.

More than a million new members joined Costco’s membership ranks last quarter, with more than 69million paying for the membership globally today.

And once members join, they tend to stay, with membership renewal rates tending to stay above 90 percent for both the United States and Canada.

Executive Memberships drive a larger percentage of sales, as well, with those members comprising 45 percent of current shoppers and 73 percent roughly of sales.

Today, shoppers can purchase a Costco Gold Star membership for just $60, while an Executive Membership is priced at $120.

OTHER COSTCO CHANGES

In recent years, Costco has attempted to lean in on its e-commerce sales. This shift occurred as online shopping took out a considerable stake of the sales brick and mortar shops drove historically.

However, this hasn’t been reflected in Costco’s numbers – e-commerce sales still dropped 10 percent for quarter three, and they fell 9.6 percent already in the quarter before that. 

“We’ve really, over the last six to nine months, began a two-year roadmap to improve and re-platform our primary e-commerce website, and the same goes for our mobile apps and mobile site,” Galanti said.

Alongside its push for more digital sales, Costco leaders are getting creative when it comes to the stores’ product lineup.

The grocer has long been known for its legendary multiple-pound desserts, but a new four-pound Lemon Meringue Cheesecake is going viral.

The treat has multiple layers, with its base cheesecake placed under another tangy lemon filling and then topped with a meringue cream and toasted graham cracker crust.

The massive treat sells at Costco for $19.99.

The store is also plotting to grow its store fleet, with plans to open 24 new stores alone this year. Fifteen of those are slated to open in the United States.

Costco has also recently introduced pickup lockers so customers can easily pick up their online orders with no wait time.

This ensures that packages won’t be stolen from your porch, and you can pick up your items whenever best works for you.

Here’s the full list of changes coming to Costco shoppers this year.

Costco executives also revealed the secret tool stores use to keep theft at low levels across the country.