• by Sarah Mahoney  @mahoney_sarah, June 3, 2024

Costco's recent financial results show that no matter how nervous consumers may be in other areas, they’re not afraid to spend at their favorite warehouse store. The retailer’s “treasure hunt” positioning is going strong, and shoppers are so enthusiastic about Swedish dish towels, seven-foot artificial trees and a $1,200 swing set that the company is struggling to keep them in stock.

The company’s quarterly report beat Wall Street expectations, with sales rising 9.1% to $57.39 billion for the third quarter of its fiscal year from $52.60 billion in the comparable period of 2023. On a comparable basis, they advanced 6.6%.

And net income for the Issaquah, Washington-based retailer climbed 29% to $1.68 billion, compared to $1.3 billion in the 2023 quarter.

The company has long had a reputation for low-drama corporate announcements, with its chief executive officer usually deferring to the chief financial officer. And results have typically been so solid that analysts are forced into evergreen questions about whether it will ever raise prices on its $1.50 hot dogs or how many people are clamoring for its gold or silver bars.

And despite a new cast of characters, with Gary Millerchip, executive vice president and chief financial officer, who joined Costco in March from Kroger, and Ron Vachris rising to the chief executive role in January, the answer to one perennial question remains the same: Membership fees are staying the same, at least for now.

Costco hasn’t raised the cost of joining in more than five years and is in no hurry, with consumers still struggling to handle rising costs.

 “I don't think we're thinking about it any differently,” says Millerchip. “We feel really good about membership renewal rates,” he said, leading his first Costco earnings call. “And we feel really good about delivering significantly more value to members since we last increased the membership fee.”

The company made $1.123 billion in membership fee income for the quarter, a 7.6% year-over-year increase, with a 93% renewal rate in the U.S. and Canada.

The company now has 133.9 million regular cardholders, up 7.4% year over year, and 34.5 million paid executive memberships. Those members, who pay $120 per year compared to the $60 regular price, now represent 46% of all paid members and accounted for 73.1% of worldwide sales.

Company executives say they were encouraged not just by gains in consumables but also by discretionary spending categories, including toys, home, lawn and garden. And while Costco's seeing strong demand for ground beef and chicken breasts, it’s also doing a brisk trade in Wagyu beef and prime rib.

“With CEO Ron Vachris and new CFO Gary Millerchip anchoring the call, the voices were different, but the message was the same,” writes Peter Benedict, an analyst who follows the company for Baird and continues to rate it as likely to outperform competitors. “Costco’s member-focused/value-driven flywheel continues to take share on multiple fronts, and the company is increasingly leveraging tech and data to enhance its already considerable competitive advantages.”