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For decades, Costco’s earnings announcement looked a bit like the movie “Groundhog Day,” with Bill Murray repeating the same day over and over with only his actions changing. He would wake up every morning and see the second of February and the same events would repeat themselves.
That’s not exactly how it worked with Costco’s quarterly earnings calls, but with CFO Richard Galanti leading them, they all followed a very similar script until the Q&A portion. Even this section often included the same group of analysts asking similar questions to the ones they had asked three months earlier.
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However, Galanti retired just days after the warehouse club’s second-quarter earnings announcement. This came after Ron Vacres moved from chief operating officer to CEO, replacing Craig Jelinek in a planned transition.
Having these two changes happen so close together has many wondering whether the company will move toward the structure most companies use for earnings calls, where the CEO leads them. That won’t happen, according to Fatkris, who opened the file Q3 earnings callCommenting on the role of new CFO Gary Millership.
“In keeping with the way Craig and Richard run investor communications, I intend for Gary to host the quarterly conference calls, and I will join when business allows to answer some questions. So, Gary, let’s get to the results, and I’m happy to come back for the Q&A portion to ask some questions today.”
Image source&col; Tim Boyle/Getty Images
Costco is talking about raising membership fees
Over the past few years, Galanti has been asked on every earnings call whether the chain intends to raise its membership fees. He generally acknowledged that the company’s traditional window to do so had been passed, and he would have provided a brief statement on how the increase would be increased, but the company did not have a specific timeline.
Millership was more at length on the subject and provided a much longer comment when asked about Costco (it costs) It plans to raise its Gold membership from $60 and its Executive membership, which comes with 2% cash back on most items up to $1,000 annually, from $120.
“I’d really like to go back to some of the comments Richard shared earlier. I don’t think we think about it any differently than he talked about in the last few calls. You know, historically we’ve looked at increasing membership fees every five years or so. We are clearly past that time period now in terms of the typical cycle.
He said the chain was reluctant to make a change when its business was doing so well.
“There’s nothing in anything we see within how the company is performing that changes our view on that. We feel really good about membership renewal rates. We feel really good about testing whether we’re providing significantly more value to members than we have been or have done since the last time we He added: “But I think we may be our strongest competitor in that.”
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He added that Costco also took into account financial pressures related to inflation and recession risks.
“It’s something that still happens when we increase fees rather than increase fees. But we’re still evaluating those considerations to determine the appropriate timing and when we get to that point where we feel like this is the right time, of course, we’ll be very open and direct and communicate that.”
Costco membership continues to grow
Costco continues to enjoy a very loyal membership base and renewal rates have remained impressive.
“In terms of renewal rates, at the end of the third quarter, our renewal rate in the US and Canada was 93%, an increase of a tenth of a percent from the end of the second quarter. The global rate reached 90.5%, the same level as the end of the second quarter,” the CFO said.
Membership revenue increased to $1.123 billion, an increase of $79 million, or 7.6%, year over year. Obviously, this is not due to high prices, but due to strong growth.
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“We ended the third quarter with 74.5 million paid family members, up 7.8% year over year, and 133.9 million cardholders, up 7.4% year over year. At the end of the third quarter, we had 34.5 million paid executive memberships.” , an increase of 661,000 since the end of the second quarter, Millership added that executive members now represent more than 46% of paid members and 73.1% of global sales.
Costco stock is up 58% over the past 12 months and just over 216% over the past five years.
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