The time for the raise in the Costco membership is finally near. It was hinted by Costco’s Chief Financial Officer Richard Galanti earlier in the year that Costco would soon raise its membership price, but the question that remained unanswered was when.
However, recently we got a hint that the time is coming soon. So everyone who thought of saving money by buying products from Costco has to change their plans a little.
The news came after the fifth largest retailer in the world, Costco, shared its fiscal first-quarter earnings with the world.
On Thursday, during the earning call indicated that membership prices will be increasing soon within months, but he was intentionally imprecise with the details.
Galanti shared how Costco was trying to earn profit by benefiting the customers. He said that Costco’s revenues from fresh food sales dropped during the most recent quarter, partly because the retail company refused to raise its prices even with inflated food costs.
Planning More Tactics For Profit Hike
Costco aims to earn profits by selling more by reducing the prices, and a higher volume of selling would lead to bigger profits.
He shared views and said that people do notice these price differences.
He said they are ready to raise the price because they have to do it ultimately, and also currently, they are in a very strong competitive position. Then he continued that even if they have to wait a few months or several months and that’s okay.
However, the question remains the same: when could a fee increase come? Historically speaking, Costco‘s most recent and last three fee changes all came about five years and seven months apart on average. If we follow that pattern then the last increase was in June of 2017, so the next increase could come as soon as January.
Costco’s last membership fee increase followed the company’s Gold Star and Executive memberships both increasing by 9 percent. The Gold membership of Costco is $60 and the Executive membership is $120. After the membership fee increase, direct growth was visible in earnings.
Galanti intentionally emphasized that the last three price increases’ average time does not mean that it is going to be January 2023.
He cleared that they don’t use any analytical framework. It is all about when we feel very good about member loyalty and our strength.
The wholesaler company reported over $54 million in net sales in its recent quarter. There is an increase of 8 percent but it does not meet the expectation of analysts.
Costco has deeply ingested this policy of providing members with quality goods and services at the lowest possible prices. It is stubborn in maintaining its low price whether it is the membership fees or the company’s famously cheap rotisserie chicken despite rising poultry costs.
For earning profits and sales growth, Costco will use the higher membership-fee revenue to continue improving its value propositions for the customers. The company’s less price philosophy will help it maintain the loyalty of previous customers and bring new memberships.
In the last quarter, Costco earned $1 billion in revenue from membership fees alone and saw an increase in memberships by 7 percent from last year. It currently has 66.9 million members globally, according to the company’s data.
Earlier this year, there was an increase in membership fees for Costco’s competitors Sam’s club (increased in August and started rolling out in October) and Amazon prime(increased in March). Now, it is Costco’s turn to increase its membership fee and to be too soon likely next year. This news can prove to be profitable for many stockholders.