Costco is increasing the prices of its annual memberships. The price of its standard Gold Star membership will increase by $5 to become$60 a year. While the Executive membership, which offers additional discounts and an annual reward on purchases, will go up $10 to become $120 a year.
The increases will take effect on June 1st and will affect around 35 million members. Costco typically increases its fees every few years.
The announcement was made on Thursday as the company released its latest earnings, which disappointed Wall Street. Sales and profits were lower than expected. Early trading Friday saw shares of Costco fall by 4%
Sam’s Club, the warehouse company owned by Walmart, and Target are proving to be tough competition for Costco. Both warehouse retailers have lowered prices to attract more customers.
Richard Galanti, Costco’s Chief financial officer told analysts that the challenges posed by the two big-box giants is “formidable.”
A price war:
A grocery store price war was triggered due to lower food commodity prices. This price war hasn’t only hurt Costco but also supermarkets such as Kroger and Whole Foods.
“Deflation” was mentioned 26 times during Costco’s Executives conference call with analysts. They stated that it has hit not just food but electronics, another key category for the company. TV prices in particular have been decreasing sharply.
Also, the company’s gasoline sales profits from were lower as well.
Costco is currently in the middle of a transition with its new credit card partners. Last year, the company chose Citigroup and Visa to replace American Express as the issuer of its co-branded membership cards
The credit card shift has boosted profit margins, according to the company, however it still wasn’t enough to offset lower prices for many of its products.