Will Customers Get Onboard With Costco’s Costlier Membership?

Costco Earnings

This week, retail wholesaler Costco announced plans to raise the price of its membership fee by $5.

Costco Wholesale's individual membership, business and business add-on memberships will now cost $60 per year, up from $55. Meanwhile, Costco's executive membership will increase from $110 per year to $120 per year, MarketWatch reported. The new membership prices will go into effect on June 1, 2017.

The news comes as Costco missed expectations in its reported earnings and revenue last week.

According to Yahoo Finance, Costco’s earnings per share in Q2 were $1.17, which fell below the $1.36 expectation from Wall Street analysts. The retailer’s revenue came in at $29.13 billion, missing the expected amount of $29.86 billion.

Sucharita Mulpuru, chief retail strategist at Shoptalk, told MarketWatch that the hike in membership prices aren’t likely to deter long-time Costco customers.

“These are customers who will pay $5 for a latte and not think twice about it,” she said. “I just don’t think they’ll drop their Costco membership because of this modest price increase.”

Still, others believe that customers who may have been on the fence about getting a Costco membership might be put off by the new price increase, which will place Costco as a $15 higher option than the same membership level at Sam’s Club and $10 more than BJ’s.

Earlier this year, Business Insider said Costco cards saw more than $52 billion in purchase sales during the first six months of the cards and more than $6 billion in loan growth. That compared to American Express, which saw $80 billion in Costco card purchases in 2015, puts Citi’s run rate from the card at $24 a billion a year, way ahead of American Express.



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