Shoppers at Costco Wholesale are turning to the company's sale items, including $1.50 hot dogs and $4.99 roast chicken, as the chain announced slower revenue growth after increasing membership fees. .
The company raised membership fees this year for the first time since 2017, but on Thursday its fourth-quarter sales fell short of market expectations due to cautious consumer spending on higher-priced items in stores and lower gas prices.
“There are certainly signs that consumers are being very selective about how they spend their money,” Chief Financial Officer Gary Millerchip said on a post-earnings conference call.
Ultra-low prices have boosted demand for groceries and kitchen essentials, while consumer spending on furniture, home goods and sporting goods has been volatile, hurting sales at Costco's warehouse stores.
“We are able to stem inflation by lowering the price of hot dogs to $1.50 and rotisserie chicken to $4.99, showing that we are keeping prices as low as possible for our members.”
Same-store sales rose 5.4% due to lower gas prices, lower than the 6.6% increase in the third quarter.
Costco's sales rose about 1% to $79.7 billion, below the $80 billion expected by analysts at LSEG.
Despite disappointing sales growth, the retailer said membership data remained strong.
Millerchip said there has been “no significant change in trends” in membership registrations and renewals since Costco announced price increases in July.
Costco announced that its membership renewal rate in the U.S. and Canada was 92.9% in the fourth quarter, which ended before the price increases went into effect.
The company reported full-year dues of $4.8 billion, which accounted for half of its total operating income for the period.
Millerchip said Costco delayed rate increases by two years from its normal rate increase cycle, citing the impact of inflation on consumers.
The company said it expects the effects of the fee increases to be felt within the next six to 12 months.
