The warehouse retailer is raising fees just as profit slows. As Fred Katayama reports, quarterly profit fell and missed Wall Street's estimates.
You'll soon pay more to shop at Costco. The warehouse retailer is hiking its membership fees for its 35 million members just as profit slows. Come June, fees for Goldstar and business members will rise by $5 to $60 and for executive members by $10 to $120. Membership fees are key because they account for nearly three-fourths of Costco's operating income. Cowen senior analyst Oliver Chen said, "Our back of the envelope analysis indicates th fee increase will grow overall membership fees by ~9 percent. We anticipate a significant percentage of fee increase will not fully flow through as Costco intends to invest back in the business, primarily through lowered price." Costco's profit fell nearly 6 percent in the latest quarter. That, along with rising sales, fell short of analysts' estimates. Sales at existing stores rose, but that, too, disappointed Wall Street. Costco shares dropping at the start of trading, chipping away at its 11 percent gain this year.