Costco Inc. (COST:NSD) Looks to Raise Memberships, will it hurt business?

Costco Increases Membership Cost

Costco, a warehouse club, has a high membership renewal rate (over 90%) and its Executive members drive 76% of the company’s sales. CFO Richard Galanti stated that Costco is nearing the time to raise its membership prices, with the average interval being 5 years and 7 months between price increases, putting the next one in January 2023. Galanti noted that while the company is aware of economic concerns, it will not hold prices indefinitely and may use added revenue from a price increase to hold prices on some items. Galanti also noted that Costco has started to see some prices decreasing, specifically for fresh proteins, and the company intends to remain competitive. He was cautiously optimistic about overall sales remaining strong.

Will Raising Membership Prices Lose Customers

It is difficult to determine for sure if Costco will lose business solely based on changes to their membership range However, price changes to the membership fees could potentially affect customer satisfaction and impact the company’s revenue, as consumer’s debate whether it’s worth it to pay to shop at a business.  It will likely raise a large percentage of customers ire.

Costco Stock Forecast & Analysis

The average target price for Costco Wholesale Corp stock, based on 24 analyst forecasts, is USD 553.65 over the next 12 months. The average analyst rating for the stock is a strong buy, with a bullish outlook from Stock Target Advisor’s own analysis. The analysis considers 13 positive signals and 5 negative signals. Currently, the stock price is USD 503.29 and has seen a 4.83% increase in the past week, 10.24% in the past month, and a 2.21% increase in the last year.

Latest Analyst Coverage

Cowen maintains the Outperform rating on Costco and has a target price of USD 650 (previously USD 600). D.A. Davidson & Co. raised their target price to USD 478 on January 6, 2023. UBS Securities raised their target price to USD 600 on January 6, 2023. Evercore ISI lowered their target price to USD 530 on January 4, 2023.

About Costco

Costco Wholesale Corporation is a multinational retail corporation that operates a chain of membership-only warehouse clubs. The company was founded in 1983 in San Diego, California and is now headquartered in Issaquah, Washington. It offers a wide range of products including groceries, electronics, furniture, and clothing. Costco operates over 800 warehouses in several countries and is known for its bulk purchasing and low prices. The company operates on a membership model, with members paying an annual fee for access to its warehouses and special discounts.

 

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