Costco to Increase Membership Fees Amidst Earnings Miss
Costco announced on Thursday that it plans to increase its membership fees after reporting second quarter earnings that, despite increasing $1.7 billion from a year ago, didn't meet Wall Street expectations. The company said that that effective June 1, the price of entry into its U.S. and Canada stores will be $60 for individual and business cardholders, an increase of $5. Executive members will see their fees go up by $10, to $120. Costco last raised its membership fee in 2011, and typically does so every five years to six years. The changes will impact some 35 million members, roughly half of whom belong to its executive program. Costco generates three-fourths of its operating income from membership fees.
Total Retail’s Take: It’s rare that you hear a negative story about Costco’s earnings, but given the current retail environment, it could be expected. Costco's lighter-than-expected second quarter earnings come on the heels of weaker-than-expected results for many of its competitors. Last week, for example, J.C. Penney said it plans to shut 140 stores, and this week both Target and Best Buy reported lower-than-expected earnings. And, perhaps even more concerning, on Monday, credit rating company Moody's Analytics came out with a report saying that the number of U.S. retailers on the lowest and distressed tier of its rating spectrum has tripled over the last six years, reaching a level not seen since the Great Recession of 2008 and 2009.