On Thursday, Costco Wholesale Corporation (Nasdaq: COST), announced that it will be increasing the price of memberships to its chain of warehouses, effective June 1, 2017. Jessica Schoen Mace, an analyst with Instinet, forecasts that the fee hike will add $0.30 to 2018 earnings per share. Currently, the consensus of the 30 analysts tracked by Yahoo Finance who publish EPS estimates for the 2018 fiscal year is $6.57. Additional income from the planned fee hike would represent about 4.5 percent of the current 2018 forecast.
#The Street reports that the #Costco membership fee increase will amount to $5 for Goldstar memberships, bringing the price from $55 to $60. Executive-level memberships will see rates hiked by $10, from $110 to $120. The changes are expected to impact approximately 35 million Costco members in the United States and Canada.
Nine percent Costco membership price increase first since 2011
The fee increase, which amounts to 9 percent, is the first instituted by the employer of 126,000 since November 1, 2011, when it hiked fees by 10 percent, with Goldstar membership prices rising from $50 to $55. Richard Galanti, chief financial officer with Costco was quoted by The Street prior to the announcement, when asked about a looming membership price hike, stating that "every five or six years, we have done something."
#COST Stock was hit hard on Friday, closing down $7.72, or 4.34 percent, to close at $170.26, after the retail giant reported disappointing financial results, which included an EPS miss. Even with yesterday's tumble, COST stock is up by 14.91 percent over the past 12 months, compared with a gain of 23.03 percent for the broad market, as measured by the Dow Jones Industrial Average. Shares in Wal-Mart Stores, Inc. (NYSE: WMT) have been weak by comparison, returning only 3.15 percent.
Double-digit bottom-line Costco EPS growth
For the full 2017 and 2018 fiscal years, the Wall Street analyst consensus is for Costco to report EPS of $5.91 and $6.57, respectively. If met, the 2017 forecast will represent year-over-year growth of 10.9 percent; the 2018 number represents growth of 11.2 percent. Thirty-one firms tracked by Yahoo Finance currently publish buy-and-sell recommendations for COST stock, with the average recommendation being 2.1, where 1.0 is a strong buy and 5.0 is a sell. The average price target among the firms is $178.81, with targets ranging from $143 to $200.