On Wednesday, July 10th, the US warehouse chain store Costco announced that it will increase the annual membership fees for its customers in the United States and Canada starting from September 1st. This marks the first time in seven years that Costco has raised its membership fees since the new CFO took office less than four months ago.
According to the press release on its website, the last time Costco raised its membership fees was in June 2017. Starting in September this year, the annual fees for regular members, business members, and business add-on members in the US and Canada will increase from the previous 60 US dollars (or Canadian dollars) to 65 US dollars (or Canadian dollars).
The company is also raising the annual fee for its premium membership program from 120 US dollars (or Canadian dollars) to 130 US dollars (or Canadian dollars). The cashback limit will increase from 1,000 US dollars (or Canadian dollars) to 1,250 US dollars (or Canadian dollars).
Costco stated that the fee increase will affect approximately 52 million members, with slightly more than half of them being premium members. In the past, Costco used to raise its membership fees about every five years. The most recent increase affected 35 million members.
Currently, Costco operates 882 warehouse stores, including 609 in the US and Puerto Rico, 108 in Canada, 40 in Mexico, 33 in Japan, 29 in the UK, 18 in South Korea, 15 in Australia, 14 in Taiwan, 7 in China, 4 in Spain, 2 in France, and 1 each in Iceland, New Zealand, and Sweden. Costco also operates e-commerce websites in the US, Canada, the UK, Mexico, South Korea, Taiwan, Japan, and Australia.
According to Reuters, Michael Ashley Schulman, Chief Investment Officer of Running Point Capital Advisors, stated that the market has been anticipating a membership fee increase for years. Costco’s management has historically tended to raise membership fees every 5 to 6 years. Schulman added, “This announcement will bring relief to those who have been waiting, and will provide a strong boost to revenue and stock prices.”
As of the third quarter ended on May 12th, membership fee revenue had grown by approximately 7.6%. In the 2023 fiscal year, membership fee revenue accounted for 1.9% of the company’s total revenue.
Furthermore, on Wednesday, Costco announced that its June retail month net sales increased by 7.4% to $24.48 billion.
Costco currently has nearly 134 million card-carrying members, an increase of 7.4% from last year, with an overall membership renewal rate of 90.5% and a renewal rate of 93.0% in the US and Canada, the company’s largest markets.
On May 30th this year, during his first earnings call as Costco’s new CFO and Executive Vice President, Gary Millerchip addressed the possibility of a membership fee increase. Millerchip told investors, “I will certainly review some of the comments Richard (Galanti, former CFO) shared before.”
Galanti had mentioned last year that a Costco membership fee increase “will happen at some point”. “It’s still a question of when to increase fees, not if we will increase fees. But we are still evaluating these considerations to determine the best timing,” he said.
Currently, the membership fees for Costco’s competitors, BJ’s Wholesale and Sam’s Club, are 55 US dollars and 50 US dollars, respectively.