Costco is seeing e-commerce gains as it raises membership costs
Costco Wholesale (COST) is experiencing a significant increase in shoppers seeking convenience, despite a crackdown on membership sharing.
Shares of Costco increased slightly after the retail giant reported robust quarterly earnings. The most recent quarter was fueled by e-commerce sales, which has attracted consumers looking for quick and convenient shopping options. The demand for easy access to groceries has positioned Costco favorably, even as some shoppers hold off on paying for annual memberships, which increased to $65 earlier this month.
In the fourth quarter, Costco reported revenue of $78.2 billion, up 1% from the $77.4 billion during the same period a year ago.
Even amid a “Netflix-style” crackdown on membership moochers — those using someone else’s card — membership fee income has continued to grow, underscoring that a significant portion of Costco’s customer base still finds value in the loyalty program. The retailer reported 76 million subscribers, according to FactSet (FDS).
Moreover, the Washington-based company has continued to see foot traffic increase compared to the same time last year. According to foot traffic analytics firm Placer.ai, visits to Costco were up 10.6% year over year in August, 7.6% in July, and 10.5% in June. Those figures surpassed other superstores like Walmart (WMT) and Target (TGT).
While it may be too soon to assess the impact of the membership chain’s recent fee hike, Placer.ai said the warehouse chain appears “poised to enjoy a robust holiday season” this November and December. To manage the holiday rush, Costco plans to hire 24,000 seasonal employees.
Additionally, shoppers have been spending more time at Costco, likely due to its bulk offerings, endless free samples, and its inexpensive food court items, like its iconic $1.50 hot dog combo.
With plans to aggressively expand its store footprint with 30 new locations in fiscal 2024, including international markets like Japan and Korea, Costco also wants to break new ground in affordable housing.
In South Los Angeles, Costco plans to open a news store with 800 apartments above it, of which 184, about 23%, will be dedicated to low-income households. The building will also provide accommodations for seniors and will include a fitness center, workspaces, community rooms, and a rooftop pool.
