Costco Raises Member Fees

ELLIOT ZWIEBACH

ISSAQUAH, Wash. — Costco Wholesale Corp. here said last week it plans to increase annual membership fees next month.

Richard A. Galanti, executive vice president and chief financial officer, said Costco believes “the enhanced value of … membership far exceeds the modest $5 and $10 increases in the fee level and will continue to allow us to bring our members even greater value on everything we offer.”

Fees will be raised $5, to $55, for individual members and U.S. and Canadian business members; and $10, to $110, for executive members in the U.S. and Canada.

“It is a relatively small increase, and we don't take it lightly,” Galanti said. “But we recognize modest increases are part of what we have done historically over 25 years, [and] every time we have done it, we take a hard look at ourselves and feel we have continued to enhance the value of that membership by a lot more than [the increase].”

The company disclosed plans for the fee increases at the same time it announced financial results for the fourth quarter and fiscal year ended Aug. 28.

Net income for the 16-week quarter rose 10.7% to $478 million, with sales increasing 16.9% to $27.6 billion and comparable-store sales, excluding gasoline and foreign exchange rates, up 7%. For the year, net income was up 12.2% to $1.5 billion, while sales increased 14.2% to $87.1 billion and comps, excluding gas and foreign exchange rates, were up 6%.

The strongest comps came from the Southeast, the Midwest and California, “though all regions were fairly good,” Galanti told industry analysts.

He said Costco plans to spend between $1.4 billion to $1.6 billion on capital expenditures in fiscal 2012 to open 20 new stores — the same number it opened in fiscal 2011. The company expects to increase capital spending in the two following fiscal years, Galanti added.

Asked about price increases, Galanti said, “Ultimately you have got to pass the increases on.”

But despite “the gloom and doom we read about every day,” he added, “we see pretty good stuff at our place, and we're reminded every day that the key is the value proposition and being out there and showing it every day.”