3 Costco Secrets That Could Help You Save Big
Eager to save extra money at Costco? Read on to see how.
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Raging inflation has caused many consumers to change their spending habits. Many have cut back on non-essential spending to conserve cash and avoid adding to their credit card debt. That, in turn, is impacting many retail giants. And Costco is one of them.
Costco recently reported earnings for the quarter ending March 31, and the numbers fell short of expectations. The warehouse club giant had a quarterly profit of $2.93 per share, missing analysts’ expectations of $3.29, according to Refinitiv data. Meanwhile, Costco’s total revenue for the quarter was $53.65 billion, compared to estimates of $54.57 billion.
Now, one thing that helps Costo generate revenue is the fees it charges for memberships. For its most recent fiscal quarter, Costco reported $1.044 billion of membership fee income.
But Costco also hasn’t imposed a membership fee hike since June 2017. And that therefore begs the question — in light of missed earnings, will the warehouse club giant increase fees to compensate and ramp up revenue next quarter?
A fee hike wouldn’t be out of the question
Costco normally raises its fees at around the five-and-a-half-year mark. So at this point, the warehouse club giant is actually overdue for an increase. And given the company’s recent earnings, it wouldn’t be so far-fetched to think that a near-term fee hike is coming.
But that may not necessarily be so problematic for consumers. If Costco raises its fees, that increase is likely to be minimal. The last time Costco raised fees in June 2017, a basic membership went from $55 to $60, and an executive membership went from $110 to $120.
Chances are, Costco will follow a similar pattern for its next fee hike. We could see the cost of a basic membership rise from $60 to $65, while an executive membership could go from $120 to $130.
Price increases are aggravating at a time when consumer goods are so expensive. But, were they to occur, they’d also be reasonable given that they apply to the yearly membership price. If the cost of executive membership rises $10, that’s less than $1 extra a month for the privilege of shopping at Costco, saving money, and earning 2% cash back on purchases (a perk that comes with the upgraded executive membership).
Will a Costco membership still be worth it following a fee hike?
That depends. Shoppers who visit Costco frequently will likely retain their memberships even if the cost goes up. But those who have been on the fence about canceling may use a fee hike as the impetus to cut ties with Costco and either take their business elsewhere or stop shopping at warehouse club stores altogether.
Of course, it’s worth noting that a near-term Costco membership fee hike is not a given. And missed earnings won’t necessarily be the catalyst for an increase. However, when we consider the timing of Costco’s last fee increase, a hike in 2023 does make sense. So all told, consumers shouldn’t be shocked to see their costs go up before the year comes to an end.
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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.
