Costco wholesale shoppers have turned to the retailer's deals — such as $1.50 hot dogs and $4.99 roasted chicken — 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 expensive items at its stores and low gasoline prices.
“There are certainly some signs that consumers are becoming very selective in terms of where they spend their dollars,” Chief Financial Officer Gary Millerchip said on a call after earnings.
While extremely low prices are driving demand for groceries and kitchen goods, consumer spending on furniture, home and sporting goods is fluctuating, hurting sales at Costco's warehouses.
“We have been able to stop inflation on things like Hot dogs cost $1.50 and this Rotisserie Chicken at $4.99“And generally demonstrating that we are keeping prices down for members wherever possible.”
Same-store purchases increased 5.4% due to lower gasoline prices – down from 6.6% growth in the third quarter.
Costco's revenue rose about 1% to $79.7 billion, missing LSEG analysts' estimate of $80 billion.
Despite disappointing revenue growth, the retailer said its subscription data remains strong.
Millerchip said there has been “no real change in the trend” for membership sign-ups or renewals since Costco announced the increases in July.
Costco reported a 92.9% membership renewal rate in the US and Canada in the fourth quarter, which ended before the fee increases were implemented.
The company reported $4.8 billion in membership fees for the full fiscal year, half of its total operating income over the same period.
Millerchip said Costco delayed fee increases by two years from its regular fee increase cycle due to the impact of sticky inflation on consumers.
The company said it expects to benefit from the fee increase in the next six to 12 months.
