It looks like the big box retail empire, Costco Wholesale, has been facing some financial troubles. According to Wednesday’s Fiscal Second financial report, it showed that was up almost 6% to $29.77 billion, which shocked investors.
Their primary issue, however, is the net income; unfortunately, Costco has had a 6% drop to $515 million in revenue. This means that earnings have gone down $1. 17 per share; this is rather disappointing because Costco’s earnings were at $1.36 per share.
Sales have improved from past quarters but many feel that it is still not good enough. Sales wise, the U.S market was up 3%. Canada has 8% rise in the company, however other international companies have dropped down 2%. This makes the company look bad, consequently.
Membership fee revenue is another issue that is concerning Costco, Primarily. Fees have risen 5% to $636 million, barely keeping up with overhead expenses. Moreover, expansion has slowed down. Five stores have opened up in the following locations: U.S. (2), Mexico (1), Korea (1), and Taiwan (1). This recent expansion brings Costco total store count to 728.
In order to combat the stagnate growth in membership fees, Costco will raise fees on June 1. It will include $5 per year price U.S. and Canadian Gold Star, Business, and Business add-on members, ushering in a new rate that is $60 per year. Executive member’s rates will rise $10 to $120 per year, in U.S and Canada. The company believes the increase will have an effect on 35 million members, namely the executives. This quite possibly means the company will have a potential $ 260 to $260 million increase in revenue, as long as members stay on when the price increases.
Costco also stated they would increase Executive member’s rewards by 2%. This is just a tactic to hang on to their members, due to the price increase.
