Is Costco Stock a Buy After Hiking Membership Fees?
Wholesale warehouse operator Costco Wholesale Corporation (NASDAQ: COST) has been a stunning success over the past thirty years. Its stock price performance has been noteworthy compared to all stocks, but especially so in comparison to retail stocks. Costco's focus on warehouses that save its customers time and money has been a stellar success. With the stock up over 2,500% since 2003, it is a proven winner. However, the company has experienced several changes in the last year, making this a great time to review Costco as a potential investment.
Changes of note to customers and investors include a new CEO and updated membership fees. Effective Jan. 1, 2024, longtime CEO Craig Jelinek stepped down and was succeeded by Ron Vachris. This change should be considered a preservation of continuity, since the new CEO has been with Costco for over 40 years. He has been working closely with the outgoing CEO for nearly two years prior to assuming his new role. Investors should have no concerns about the continued competence of management.
The membership fee increases were the the company's first since 2017, and were were less expected. The increases will directly affect Costco's customers, raising prices by $5 and $10 per year at its two membership levels. People don't enjoy fee increases, of course, so this change at least has the potential to disrupt Costco's operations if they experience an overall decline in membership. However, given the generally high regard members have for Costco, and the relative in-frequency of membership rate increases in the past, it seems unlikely that the firm will lose many members due to the most recent price hike. Still, the potential exists, and investors must take such a chance into consideration when valuing Costco as an investment.
Source Fool.com
