Costco raises subscription rates and keeps customers happy

In the United States, Costco Wholesale announced a raise in its basic annual membership fee on September 1, 2024, increasing it from $60 to $65 for the first time since 2017. This fee hike has been met with mixed reactions from consumers, especially as the company reported an 11% jump in earnings before interest and tax for its fiscal first quarter, with earnings per share increasing by 13% year-on-year. Despite warning consumers about the membership increase, Costco managed to beat Wall Street expectations, posting quarterly earnings of $4.04 per share, significantly surpassing the estimated $3.79. Revenue climbed to $62.15 billion, reflecting an 8% increase from the previous year. During the quarter that ended on November 24, 2024, the retailer enjoyed a robust performance, with same-store sales rising by 7.1% and membership fee income increasing by 7.8% to reach $1.17 billion. The membership fee hike is expected to benefit Costco primarily during the latter half of 2025 and into 2026, as the company aims to leverage technological advancements and ensure that members receive the best offers. The retailer has implemented new membership card scanners to crack down on membership sharing and uphold the integrity of its subscription model. Overall traffic saw a 5.1% increase globally, further underscoring Costco’s effective strategies in responding to a price-conscious consumer base amidst inflation. Costco's e-commerce sales also reported a growth of 13% year-over-year, even though this marks a slowdown compared to the previous quarter's impressive 19.5% increase. Categories such as gold and jewelry, hardware, and gift cards contributed to boosting online sales. Meanwhile, the company has encountered some challenges on the horizon, with potential inflationary impacts from the incoming President Donald Trump's proposed tariff policies which could affect prices of imported products. Nonetheless, both Costco and rival Walmart remain resilient amidst economic pressures as consumers continue to flock to discount brands in search of affordable options during these tough times. Costco operates a substantial number of warehouses worldwide, totaling 897 locations across various countries. In total, 617 of these locations are in the United States and Puerto Rico, while the remaining are spread throughout Canada, Mexico, Japan, the U.K., Korea, Australia, and several other countries. The widespread presence of Costco contributes to its strong market position and shareholder value, evidenced by a nearly 5% rise in its stock price following the earnings update on the previous Thursday. Investors are notably optimistic about Costco's future growth prospects despite any ongoing economic uncertainties that may arise.