Will Costco Stock Soar After Its Membership Fee Hike? Here's What History Says.

Core Viewpoint - Costco has announced an increase in membership fees, which is expected to boost revenue but may also risk losing some members [1][4]. Group 1: Membership Fee Increase - Costco will raise its standard and premium membership fees by $5 to$65 for Gold Star and business memberships, and by $10 to$130 for Executive memberships, affecting 52 million memberships [4]. - The increase in membership fees is significant as it contributes to a steady stream of high-margin revenue for the company [2][3]. Group 2: Historical Performance - Historically, Costco's stock has performed well following past membership fee increases, with gains of 32% after the last hike in 2017, 43% after the 2011 hike, and 33% after the 2006 increase [5]. - Membership fees are a key part of Costco's profit structure, contributing over $1.1 billion to revenue in the most recent quarter, despite net sales of$57 billion [3]. Group 3: Business Model Resilience - Costco's business model, characterized by low prices on essential goods and a membership fee structure, has allowed it to thrive in various economic conditions [2]. - The company maintains high renewal rates of over 90% in the U.S. and Canada, indicating strong customer loyalty despite fee increases [3]. Group 4: Future Outlook - While there is a possibility of losing some members due to the fee increase, it is expected that most members will continue to see value in the deals offered at Costco [6]. - The historical trend suggests that Costco's shares are likely to perform well in the coming years, making it a strong long-term investment opportunity [7].