The loyal consumers of Costco, a large membership warehouse supermarket in the United States, have just received bad news.
Costco announced on Wednesday that starting from September 1st, the annual basic membership fee for the United States and Canada will be increased by $5, from $60 to $65. The annual fee for higher-level "administrative members" will increase from $120 to $130. The average increase is about 8%.
Costco stated that this move will affect approximately 52 million members, of which more than half are administrative members.
Although the annual membership fee for Costco will be higher, the good news is that the most popular hot dog package among consumers will still be priced at $1.50.
Affected by the increase in membership fees, Costco's stock price rose by about 2% in post market trading on Wednesday. As of Wednesday's close, the stock has risen nearly 36% this year, surpassing the S&P 500 index.
On Wednesday, Costco also announced that its net sales increased by 7.4% compared to the same period last year in the five weeks ending July 7th.
Costco operates 882 large retail stores, of which 609 are located in the United States and Puerto Rico, and 108 are located in Canada.
Membership fees have always been one of Costco's largest sources of profit, with membership fee revenue of approximately $4.6 billion last year, an 8% increase from 2022.
It's time to raise the membership fee
This is the first time Costco has raised its membership fee since June 2017. On average, Costco increases its annual membership fee approximately every five and a half years, and this adjustment has been 7 years since the last increase in membership fees.
Part of the reason why Costco has temporarily suspended the increase in membership fees is related to inflation. In the past few years, American consumers have faced the problem of skyrocketing prices, and the growth rate has begun to slow down.
Costco CEO Craig Jelinek previously stated that it is not the right time to raise membership fees as consumers are dealing with high inflation. The company's Chief Financial Officer, Richard Galanti, also made similar comments during a previous earnings conference call.