US: Costco Hikes Membership Fees After Q2 Profit Drop

Costco has announced plans to raise its membership fees after reporting an unexpected drop in profits for its fiscal second quarter.

For the three months to 12 February 2017, net profit fell by 5.7% to $515m, while operating profit declined by 3.8% to $809m.   Sales, meanwhile, were up a modest 5.7% to $29.1bn, while membership fees were up 5.4%.  Overall like-for-like sales (excl. fuel, constant-currency) rose by 3%, helped by a 3% increase in the US, a 2% rise in Canada, and 3% growth in other markets.

Costco also slowed down its expansion, opening just five new outlets in the quarter, ending the period with 728 outlets.

The chain said it will now hike membership fees across the board, effective 1 June 2017 – its US and Canadian Gold Star, Business, and Business add-on members will now pay $60 (up from $55), while Executive members will pay $120 (up from $110). The move could potentially bring in an additional $260m-$265m of revenue, if all current members renew.  To counter the hikes, Costco is also increasing the maximum limit on the 2% reward that Executive members receive to $1,000 (from $750).