Costco (NASDAQ:COST) reported net sales of $24.48 billion for the five weeks ended July 7, after the close on Wednesday, while it also announced an increase in its annual membership fees for the U.S. and Canada.
Net sales rose 7.4% from $22.78 billion last year, while net sales for the first 44 weeks were $210.55 billion, an increase of 6.9% from $196.93 billion last year.
Cost also said that, effective September 1, 2024, it will increase annual membership fees by $5 for U.S. and Canada Gold Star (individual), Business, and Business add-on members. The increase will see all U.S. and Canada Gold Star, Business and Business add-on members pay an annual fee of $65.
Reacting to the news, analysts at Evercore ISI said the fee hike "scratches a seven-year itch."
"Costco's June 6.9% Global & 6.3% U.S. Core Comp was a touch stronger than May. But the big news is the long-anticipated membership fee hike," said analysts at Evercore ISI, which raised its target for Costco to $920 from $890.
"Costco's powerful value proposition is helping it outpace U.S. retail sales growth by nearly 2:1, showcasing powerful loyalty (93% renewal rate) now allowing a fee hike," analysts commented. "Discretionary category strength and acceleration is a differentiator reflecting prowess as well as a resilient yet value-focused upper-income consumer."
Meanwhile, analysts at Jefferies said they believe the fee increase is a "positive catalyst for earnings and the stock."
"We even see potential for a higher multiple from here, too, based on continued productivity growth," analysts at Jefferies wrote. The firm raised its price target for COST to $1,050 from $860, reiterating it as a top pick.