Costco says its been lowering prices despite increasing membership fees
As grocery prices continue to climb, Costco (COST) Wholesale said its been offering some relief to customers by keeping prices low for several staples. This comes in the wake of a membership fee increase, which the company said it had delayed for two years.
“We want to be the first to lower prices and the last to raise prices,” Gary Millerchip, Costco’s CFO, told investors during the company’s Sept. 26 earnings call, according to FactSet (FDS).
Costco has kept prices low on popular items like its $1.50 hot dog combo and its $5 rotisserie chicken, he added.
In its meat department, Millerchip said the company recently reduced the price of its Kirkland Signature boneless chicken tenderloins by 13%, which resulted in a 21% increase in sales.
Price reductions during the quarter were also implemented for other Kirkland Signature (KS) items: standard foil dropped from $31.99 to $29.99; macadamia nuts fell from $18.99 to $13.99; three liters of Spanish olive oil were reduced from $38.99 to $34.99. Additionally, the price of a two-pack of baguettes went down from $5.99 to $4.99. Costco also lowered the price of its laundry packs by $1 from $19.99 to $18.99, due to a switch to pouches instead of a rigid plastic tub.
“Our goal is always to be the first to lower prices where we see the opportunities to do so,” Millerchip said in prepared remarks during the earnings call.
While Costco slashed prices on essentials, shoppers showed more interest in categories like gold and jewelry, gift cards, toys, home furnishings, and tires, which saw double-digit growth.
Despite beating earnings expectations, the retailer reported a slight revenue miss when compared to Wall Street’s forecast. For the fourth quarter, it reported revenue of $79.7 billion, analysts expected it would report $79.9 billion, according to FactSet.
Earlier this year, Costco announced its first membership fee hike in nearly seven years. Millerchip told investors that the timing was “very deliberate,” as they delayed the increase for two years due to the impacts of COVID and rising inflation.” Typically, the company raises the fee every five years.
As of Sept. 1, individual memberships now cost $65, previously they were $60, while executive memberships rose to $130 from $120.
The membership crackdown hasn’t kept members from turning to the retailer’s e-commerce business, which experienced a nearly a 19% boost during the quarter as shoppers opted for convenience to purchase big and bulky items.
