A price increase in Costco memberships is coming soon, analyst says

Attention shoppers: Now may be the time to buy a Costco membership.

UBS US Hardline & Broadline and Food Retail Analyst Michael Lasser told Yahoo Finance (video above) that the company likely sees the current moment as “an opportune time to charge members a little bit more because we’re delivering so much value to them.”

UBS has a Buy rating on Costco stock and a $575.00 price target.

“I suspect they will announce it later this spring and implement it early summer,” Lasser said. “What they find is that as they get the profit from this fee, because it’s really pure profit, they take some of it and reinvest it back into lower prices. And that helps drive the model. It helps in differentiating Costco versus other retailers out there.”

Costco saw a 6.8% increase in same-store sales last quarter, primarily driven by consumers’ shift to essentials like fresh food and away from discretionary items, and announced that 92% of its US members renewed. Membership dues brought in $1.03 billion last quarter, up 6.2% year over year.

Asked about raising prices in the latest earnings call, Costco CFO Richard Galanti reiterated, “It’s a matter of when, not if.” He also explained how the company leverages “wow items” like the $4.99 barbecue chicken to keep Coscto members coming back.

“If you go and do the homework on what it costs to process and sell a rotisserie chicken, our price of $4.99 … is an investment in low prices to drive membership, to drive sales greatly,” Galanti explained.

People shop for groceries at a Costco store in Monterey Park, California on November 22, 2022. (Photo by FREDERIC J. BROWN/AFP via Getty Images)

In December, longtime Costco executive Craig Jelinek told Yahoo Finance that the retailer had “no plans to change” the prices of its $1.50 hot dog and soda combo.

Costco last raised membership rates — a Costco Gold Star membership costs $60 a year and an Executive membership costs $120 — in June 2017. Lasser noted that the company raises prices every 5 years and every seven months on average, suggesting the next increase is imminent.

“Costco offers a very good deal to the consumer,” Anaist said. “You pay to shop there. And the reason you pay to shop there is that you find prices as good or better than anywhere else.”

Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.

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