Costco Wholesale Has Visa Partly To Thank For Better-Than-Expected Q4 Results

Costco Wholesale, the warehouse club retailer, was able to post higher-than-expected profit for its fourth quarter, and it has lower fees to credit card partner Visa partly to blame. The other reason for the better-than-expected performance: Shoppers plunked down more cash for appliances, electronics and hardware.

According to a report, Chief Financial Officer Richard Galanti said the lower payments to Visa helped it offset declining prices of groceries and fresh food during the quarter. During the fourth quarter, Costco completed the switch to Visa from American Express. The report noted Costco probably benefited from higher fees from customers signing up for credit cards.

For the fourth quarter ended Aug. 28, Costco reported net income of $779 million, or $1.77 a share, up from $767 million, or $1.73 a share, in the year earlier fourth quarter.

In June, Costco officially said goodbye to American Express, announcing that, starting June 20, it has begun accepting Visa-branded credit cards at its warehouse and gas locations in the U.S. and Puerto Rico. The company also announced that its new private-label Costco Anywhere Visa Card by Citi was now active for use. The onset of Costco’s Visa partnership marks an end to its 16-year-old relationship with Amex, thereby taking away the business of close to 81 million Costco members from the credit card company. As part of the switcheroo, Costco has shipped out Visa-branded cards to all of its previous Costco-Amex cardholders. The transition would also apply any previously due cash-back rewards to the new Visa-powered account of Costco members, the Washington-based company said.

“We have a strong relationship with our members, and it’s important that we’re rewarding their loyalty to us,” said Craig Jelinek, CEO and president of Costco. “Our new co-brand credit card agreement with Citi on the Visa network enables us to offer significant value and benefits for our members across 494 locations in the U.S. and Puerto Rico.”