24/7 Wall St. Insights
- For the first time in seven years, Costco Wholesale Corp. (NASDAQ: COST) has raised membership fees.
- Time will tell whether this drives any members away.
- Also: 2 Dividend Legends to Hold Forever.
Costco Wholesale Corp. (NASDAQ: COST) members were warned about it months ago. For the first time in seven years, the retailer raised its membership fees. Its base Gold Star annual membership fee rose $5 to $65, and its higher-level Executive yearly fee membership rose $10 to $130. No one knew ahead of time whether this would drive any members away.
According to Statista, Costco has about 130 million members, up from 76 million in 2014. Maybe management decided that the membership figures were strong enough that the increases would not matter. Since Costco releases these membership numbers annually, the figure will be posted next year, or earlier if management elects to disclose them.
The fee increase does not matter much in terms of Costco’s revenue. In the most recent quarter, revenue was $58.5 billion. Only $1.1 billion was from membership fees, which begs the question of why Costco made this decision at all. Perhaps it is because the company’s cost of having members is close to zero, so the entire increase goes to the bottom line. That bottom line in the most recent quarter was $1.7 billion, which may be the reason the membership increase was a good decision.
Membership fees may be a key to an increase in net income in future quarters.
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