Costco will delay membership fee increases due to the negative impact inflation already has had on customer spending habits. The retailer announced plans to increase its membership fees in March but has yet to provide an exact timeline.
The retailer still plans to hike membership fees, but it will happen when the company can “do it without impacting in any meaningful way renewal rates or sign-ups or anything,” said CFO Richard Galanti during a Q3 2023 earnings call. “And at some point, we will, but our view right now is that we’ve got enough levers out there to drive business and we feel that it’s incumbent upon us to be that beacon of light to our members in terms of holding them for right now.”
Costco brought in more than $1.4 billion in membership fees, representing nearly 2% of sales, during Q3 2023, which ended May 7. This was up from $984 million, or 1.9% of sales, in Q3 2022. The retailer also reported a 92.6% membership renewal rate in the U.S. and Canada and a 90.5% renewal rate globally, which were both at all-time highs tied with Q2 2023’s renewal rates.
New memberships are growing as well, with 69.1 million paid household memberships and 124.7 million total cardholders at the end of Q3 2023, both up 7% year-over-year. This includes 31.3 million paid memberships with its more expensive Executive card, representing 45% of memberships and 73% of worldwide sales.
The retailer seems satisfied with the trajectory of its membership growth. While it doesn’t plan to hike fees it isn’t planning to offer any discounts either, according to Galanti. He noted that Costco may bundle coupons with signups, but that it doesn’t offer promotions on membership costs and doesn’t plan to in the immediate future.
Strong membership growth is helping Costco offset weak sales performance: Q3 2023 sales in the U.S. fell 0.1% year-over-year and sales in Canada fell 1% during the same period. The performance was helped along by 4.1% international growth, but overall sales still grew just 0.3%, while ecommerce sales were down 10% from the same period in 2022.