Costco Wholesale announced on Wednesday that it will increase its annual membership fees for customers in the United States and Canada, marking the first increase in seven years. The new rates will be effective from September 1. Costco’s membership program offers a variety of benefits to its customers, such as free sample testing, discounts on a wide range of products and services, and an annual 2% reward on eligible purchases made at its warehouses.
The annual membership fee, which was last increased in June 2017, will rise by $5, bringing the total to $65 for gold star and business members. Executive members will see their annual fee increase to $130, up from the previous $120. In addition, the maximum annual 2% reward for executive members will also increase, moving up to $1,250 from the previous cap of $1,000.
The fee increase will impact approximately 52 million members, with just over half of them being executive members, according to the membership-only retailer. The move is expected to provide a significant boost to the company’s revenue and stock.
Costco’s shares, which have risen about 34% this year, saw a further increase of 2.2% in extended trading following the announcement. Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors, noted that the market has been anticipating a membership fee increase for a couple of years, as the company typically raises membership rates every 5 to 6 years.
Schulman added that the announcement will likely be well-received by those who have been waiting for it, and it should provide a solid lift to both revenue and the stock.
In the third quarter ending May 12, revenues from membership fees had increased by about 7.6%. For fiscal 2023, membership fee revenue accounted for 1.9% of the company’s total revenue.
In other news, Costco reported a 7.4% increase in net sales to $24.48 billion for the retail month of June on Wednesday.