- Costco Wholesale is holding back on its plans to hike up fees for its Gold Star members as inflation continues to depress consumer spending and impact retail sales, long-time CFO Richard Galanti said Thursday during the company’s earnings call for its third quarter fiscal 2023 results.
- Galanti declined to give a timeline for any coming hikes. At the end of the day, “with the headline being inflation, we feel very good about if we want to do it, we do it without impacting in any meaningful way renewal rates or sign-ups or anything,” Galanti said about the eventual raise.
- The Issaquah, Wash.-based company hinted at the coming price jump for its Gold Star members during its second quarter earnings call in March, with Galanti — a long-term veteran of the company who has served as its CFO since 1993 — noting it was a question of “when, not if.”
Galanti reiterated the bulk retailer’s commitment to its plan of eventually hiking up fees during its most recent quarterly earnings call late Thursday, despite economic headwinds, noting that at some point, the hike will occur.
However, “our view right now is that we've got enough levers out there to drive business and we feel that it's incumbent upon us to be that beacon of light to our members in terms of holding them for right now,” he said.
Inflation remained a critical factor during the company’s most recent quarter. While Costco reported a nearly 2% jump in net sales for the quarter ending May 7 as well as a boost in membership revenue and same-store sales, results were weaker than forecast due to a slump in consumer spending on non-discretionary items.
Net sales rose to $52.6 billion for the quarter, compared to $51.6 billion for the same period last year. Membership fee revenue rose 6.1% to $1.04 billion, compared to $984 million a year ago, according to the company’s earnings results.
However, the company’s average daily transaction or ticket was down 4.2% worldwide and declined 3.5% for the quarter in the U.S., Galanti said Thursday, owing to weaker sales for bigger ticket non-food discretionary items.
“This is the second quarter that we've seen that discussion of lower sales of big ticket discretionary items,” Galanti said.
Galanti also pointed to positives in the quarter, such as Costco’s relatively stable shrink rate — a term used to describe a loss of inventory that can be attributed to human error, theft and other causes. Costco hasn’t seen “any major change in shrinkage,” he said. “It fluctuated a couple of 3 basis points up really before COVID as we rolled out self-checkout, and since then, it's come back down a little bit. And so it's been a very tight range and so we've been fortunate in that regard.”
Costco is also taking steps forward regarding digital transformation, aiming to bolster its e-commerce sales, which has historically been a lukewarm sector for the bulk retailer. Costco’s e-commerce sales declined by 10% for the 12 weeks reported in its fiscal Q3 quarter, following a 9.6% slump for the same period in the prior quarter, according to the company’s earnings results.
“We've really, over the last six to nine months, began a two-year roadmap to improve and re-platform our primary e-commerce website, and the same goes for our mobile apps and mobile site,” Galanti said.