Costco Wholesale shoppers have turned to the retailer’s deals – like its $1.50 hot dogs and $4.99 roasted chickens – as the big-box chain announced a slowdown in revenue growth after hiking membership fees.
The company — which raised membership fees this year for the first time since 2017 — missed market expectations for fourth-quarter revenue on Thursday, hurt by cautious consumer spending on pricier items at its stores and lower gasoline prices.
“There’s definitely some signs that the consumer is being very choiceful in how they’re spending their dollars,” Chief Financial Officer Gary Millerchip said on a post-earnings call.
While ultra-low prices are driving demand for groceries and kitchen staples, consumer spending on furniture, home and sporting goods has been choppy, hurting sales at Costco’s warehouses.
“We’ve been able to stave off inflation on things, like the hot dog pricing at $1.50 and the rotisserie chicken at $4.99, and generally demonstrating the way that we’re lowering prices for members wherever we can.”
Same-store stores rose 5.4% on lower gasoline prices – below a 6.6% rise in the third quarter.
Costco revenue rose about 1% to $79.7 billion, below LSEG analysts’ estimates of $80 billion.
Despite the disappointing revenue growth, the retailer said its membership data remained strong.
There has been “no real change in trend” for membership sign-ups or renewals since Costco announced the hike in July, Millerchip said.
Costco reported a membership renewal rate of 92.9% in the US and Canada in the fourth quarter, which ended before the fee hike went into effect.
The company reported $4.8 billion in membership fees for the full fiscal year, which made up half of the total operating income in the same period.
Millerchip said Costco delayed raising the fee by two years from its regular fee hike cycle because of the impact of sticky inflation on consumers.
The company said it expects to see the benefits of the fee hike in the next six to 12 months.
