Costco's Earnings Top Expectations in First Results Reflecting Membership Fee Hike

Costco Wholesale Corporation (NASDAQ: COST) has reported its fiscal first quarter 2024 earnings, reflecting the impact of its first membership fee hike in seven years. The results have topped analyst expectations, indicating a strong start to the fiscal year. This article will delve into the key aspects of Costco's earnings report and the impact of the membership fee hike on the company's financial performance.

Costco's earnings per share (EPS) for the first quarter came in at $3.48, surpassing the analyst estimate of $3.42. The company's revenue also beat expectations, reaching $57.80 billion compared to the estimated $57.72 billion. This positive performance can be attributed to several factors, including the membership fee hike, strong comparable sales, and increased customer traffic.



The membership fee hike, which took effect on September 1, 2023, raised the basic annual membership fee from $60 to $65. This increase is expected to generate most of its benefits in the latter half of 2025 and into 2026. However, the initial impact on the first quarter's earnings has been positive, with membership fee income reaching $1.165 billion, up 7.6% year-over-year.

Costco's comparable sales growth also contributed to its strong earnings performance. The company reported a 6.1% increase in net sales, driven partly by the shift in the fiscal calendar due to the 53rd week in fiscal 2023. Excluding the impact of gasoline price deflation and foreign exchange, comparable sales grew by 3.8% worldwide and 3.9% in the United States.

The company's merchandising efforts have also played a significant role in driving comparable sales growth. Gift card sales increased by 12.5% year-over-year, while sales of premium products grew by 15%. These categories accounted for 18% and 22% of total comparable sales, respectively. Additionally, Costco's focus on exclusive and private-label products has helped differentiate its offerings and attract price-sensitive consumers.



In conclusion, Costco's earnings report for the first quarter of 2024 reflects a strong start to the fiscal year, with the membership fee hike contributing to the company's positive performance. The fee increase has not deterred customers from renewing their memberships, as evidenced by the high renewal rates and continued growth in paid household members and cardholders. The additional revenue generated from the membership fee hike has been allocated to drive further growth and improve shareholder value, including investments in e-commerce, product offerings, and customer experience. As Costco continues to execute its strategic initiatives, investors can expect the company to maintain its competitive position in the retail sector and deliver strong financial performance.