Costco rate hike: what are the reasons and how much could it go up?
Prices have been going up on just about everything and recently Costco indicated that its membership fee will get a hike in the near future.
Costco hasn’t raised the price of membership fees since 2017 but in a recent call with investors the company’s CFO Richard Galanti said “at some point it will happen.” The timing of the increase tracks with the company’s history of bumping up membership fees roughly every five years since 2000.
If history is anything to go by the price hikes in both 2011 and 2017 were $5 for the Gold Star membership fee and $10 for Executive membership fees. Exactly when the Costco shoppers will see the increase wasn’t disclose, “stay tuned," Galanti said.
Costco members stay loyal despite rate hikes
Around 90 percent of Costco shoppers choose to renew their membership each year. Currently the warehouse club giant has nearly 115 million cardholders in total according to the company’s corporate profile. Shoppers have a choice between two types of accounts available to the general public Gold Star and Executive. There exists a third type of account, Business, which you qualify for if you own or operate a business.
Membership has been steadily increasing over the years, now over 63 million households are signed up, that’s up over 20 million households from the last time Costco raised rates in 2017. Then around 50 percent of households had Executive membership.
Costco shoppers can use their card at any of the over 800 stores the company operates worldwide in 12 different countries.
Membership rate hike likely to follow past increases
The amount that shoppers can expect to pay after the coming increase hasn’t been announced yet. However, if the company follows previous rate increases the Executive membership will jump from $120 to $130 and the Gold Star membership will go from $60 to $65.
Those who are Business members likewise could see a $5 increase for the primary membership fee of $60. Currently the fee includes one free household card, while additional cards for partners or associates in the business are an additional $60 which would likely increase by $5 as well.
Cardholders can renew their membership up to 90 days before it expires. So, you’ll want to keep that in mind in order to lock in the lower rate before Costco raises it.
Membership fee hike will help offset inflationary pressures on profits
The United States along with the rest of the world have been experiencing higher-than-normal inflation pushing up the cost of just about everything. Labor shortages and increased transportation costs in particular are attacking Costco’s bottom line. By raising the membership fees the company can alleviate some of those pressures.
Previous rate hikes in membership fees have also pleased investors in the past. The previous three increases saw the stock price rise on average in the three months prior to the announcement by 11 percent and 15 percent six months prior.