Costco to Raise Membership Fees by $5 in U.S. and Canada Starting Sept. 1

Starting September 1, Costco will implement a price hike for its membership fees in the U.S. and Canada. The standard annual membership fee will increase to $65 from the previous $60, marking a $5 rise. Additionally, the "Executive Membership" fee, which offers extra benefits, will see a $10 increase, rising from $120 to $130 annually.

Impact on Memberships

Approximately 52 million memberships will be affected by these fee adjustments. It is noteworthy that slightly over half of these memberships are executive memberships, which indicates a significant impact on this segment of customers.

Following this announcement, there was a positive market response as Costco's shares rose by about 2% during extended trading on the same day.

This marks the first time Costco has raised its membership fees since June 2017. Historically, the company has adjusted its rates approximately every five and a half years. Based on this pattern, the fee increase was anticipated to occur in late 2022 or early 2023. However, the company had delayed this action.

Reasoning for the Hike

Costco's decision to delay the fee increase was influenced by factors such as consumer challenges with high inflation. Both the former CEO, Craig Jelinek, and the former Chief Financial Officer, Richard Galanti, emphasized that the timing was not appropriate in previous statements to CNBC.

Comparison with Competitors

Costco heavily relies on membership fees to drive its revenue and maintain competitive merchandise prices. Notably, its competitor, Sam's Club, raised its membership fee for the first time in nine years in 2022. Even with the increase, the Sam's Club membership fee remains lower than Costco's, at $50 for club members and $110 for the higher-tier level "Plus." Similarly, BJ's Wholesale offers annual membership fees of $55 for club members and $110 for its higher tier.

Enforcement Measures

In response to potential membership misuse, Costco implemented stricter measures, including additional checks for memberships at self-checkout aisles. These actions are reminiscent of Netflix's crackdown on unauthorized service usage.