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Costco Mulls Raising Membership Fee, Add Warehouses Amid Rising Sales

Costco is weighing a raise in its membership fee, and plans to add new warehouses and expand partnerships amid rising sales, the retailer said Thursday (May 30) in its quarterly earnings report.

During the quarter ended May 12, Costco’s net sales increased 9.1% year over year, while comparable sales rose 6.6%, according to a Thursday earnings release. The retailer’s eCommerce comparable sales were up 20.7%, per a presentation released Thursday.

Amid these gains, Costco is considering raising its membership fee, Gary Millerchip, executive vice president and chief financial officer at Costco, said Thursday during the company’s quarterly earnings call.

It’s been more than five years since the company has raised its membership fee — and it has historically done so every five years — and membership renewal rates have been good, Millerchip said.

He added that “it is still a case of when we increase the fee rather than if we increase the fee. But we are still evaluating those considerations to determine what the right timing is.”

The retailer is also looking to add new locations. During fiscal year 2024, Costco plans to add 23 warehouses in the U.S., one in Canada and five in the other countries it serves.

Currently, the company operates 878 warehouses worldwide, including 605 in the United States and Puerto Rico. It also has eCommerce sites in the U.S. and seven other countries, per the release.

“What it’s doing for us in fill-in markets is, it’s creating capacity for our members that are shopping very busy warehouses today to be able to shop more frequently and drive more engagement with us and also it increases membership renewal rates over time as well,” Millerchip said of the addition of warehouses.

Costco also enhanced its eCommerce offerings during the quarter by expanding its partnership with Uber, Millerchip said during the call. Following a test of this offering in Texas, customers in Canada and 17 U.S. states can now order from Costco through Uber Eats. The retailer plans to expand this partnership to several other countries in the coming months.

“We were testing Uber for some time in Texas,” Millerchip said. “We had the tests going on there and we did see a new cohort of members’ engagement that are on the Uber platform.”

As far as trends seen during the quarter, Costco said that discretionary items are back on consumers’ shopping lists. The retailer saw toys, tires, lawn and garden, and health and beauty aids lead growth in the non-foods category.

“As inflation has leveled off, our members are returning to purchasing more discretionary items,” Millerchip said during the call.

As was the case in the previous quarter, the most recent 12-week period saw inflation remain “essentially flat” across all the retailer’s core merchandise, Millerchip said. Deflation was seen in hardware, sporting goods and furniture — categories that benefited from a year-over-year reduction in freight costs.

Asked by an analyst if the strength of discretionary sales meant that members are more confident and more willing to spend on wants versus needs, Millerchip said, “It does indeed look that way.”

“Categories such as the home division and toys are categories that have lagged quite a bit post-COVID, that with great excitement — I mean, our buyers have come out and delivered some great items at phenomenal values, have really rejuvenated those categories, and those are both leading categories for us,” Millerchip said. “And sporting goods, toys, furnishing, domestics — all those categories are really coming on very strong now and all are discretionary in nature.”