Costco turns to fees, not digital, to fuel growth

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Costco turns to fees, not digital, to fuel growth

03/03/2017

The company plans to boost its membership rates by $5 this year on June 1, a move that could help fuel sales and earnings. For the second quarter ended Feb. 12, Costco posted revenue of $29.8 billion, earnings of $1.17 a share and same store sales growth of 3%. Costco pulled in $636 million in membership fees for the second quarter. This is up from $603 million from the same quarter in 2016.

In a call with analysts, CFO Richard Galanti said "nothing major" is planned in terms of investing in e-commerce at Costco. 

"At the end of the day, if anything, our view is – the mode has continued to get bigger, in other words, our competitive position, pricing wise, is stronger than it’s ever been. But we are not resting on that. We are constantly trying to figure out how to widen it," Galanti said.

Costco it will increase annual membership fees for U.S. and Canada Goldstar (individual), Business, and Business add-on members (“Primary” Members). With this increase, all U.S. and Canada Goldstar, Business and Business add-on members will pay an annual fee of $60. Also effective June 1, annual fees for Executive Memberships in the U.S. and Canada will increase from $110 to $120 (Primary membership of $60, plus the Executive upgrade of $60), and the maximum annual 2% reward associated with the Executive Membership will increase from $750 to $1,000. The fee increases will impact around 35 million members, roughly half of them Executive Members.

Costco currently operates 728 warehouses, including 508 in the United States and Puerto Rico, 94 in Canada, 37 in Mexico, 28 in the United Kingdom, 25 in Japan, 13 in Korea, 13 in Taiwan, eight in Australia and two in Spain. Costco also operates electronic commerce web sites in the U.S., Canada, the United Kingdom, Mexico, Korea and Taiwan.