What's Behind Costco's 10% Jump in Membership Fee Income?

Costco Wholesale Corporation COST reported a 10.4% year-over-year increase in membership fee income in the third quarter of fiscal 2025, totaling $1,240 million. A key factor behind this growth was the membership fee hike, which contributed approximately 4.6% to the quarterly fee income. This suggests that while the fee increase played a notable role, the bulk of the growth still stemmed from Costco’s expanding member base and improved retention efforts.

Paid household memberships rose 6.8% year over year to 79.6 million, and executive memberships, representing the most lucrative tier, grew 9% to 37.6 million. Executive members now account for 47.3% of paid memberships and drive 73.1% of worldwide sales. Costco achieved an impressive 92.7% renewal rate in the United States and Canada and a global renewal rate of 90.2% despite slight quarter-to-quarter volatility from new digital memberships.

The membership fee hike contributed to Costco’s top-line growth, but it was not the sole driver. The increase worked in tandem with Costco’s growing global footprint, value-focused pricing strategy and strong brand loyalty, particularly among executive members. For investors, this reinforces the company’s ability to enhance recurring revenues through both pricing power and scale without alienating its core customer base.

Costco raised its membership fees in September last year, marking its first increase in seven years. The company cushioned the impact by introducing ongoing product innovations, lowering prices on key staples and enhancing digital offerings, such as flexible payment options through Affirm.

How Walmart and BJ’s Compare to Costco on Membership Growth

Walmart Inc. WMT has taken meaningful strides in bolstering its membership income, achieving a 15% rise across its enterprise in the first quarter of fiscal 2026, with Walmart+ posting double-digit growth. Walmart emphasized strong renewal rates and a growing base of Plus members at Sam’s Club, which helped drive a 9.6% increase in U.S. membership income alone. These figures affirm Walmart’s successful push to diversify revenue streams.

BJ's Wholesale Club Holdings, Inc. BJ reported an 8.1% year-over-year increase in membership fee income to $120.4 million in the first quarter of fiscal 2025. BJ’s Wholesale Club attributes this growth to strong member acquisition and retention, supported by a recent fee hike implemented in January 2025. Higher-tier membership penetration surpassed 40% for the first time, showing BJ’s Wholesale Club is effectively upgrading member value while keeping its tenured renewal rate high at 90%.

Costco’s Price Performance, Valuation and Estimates

Costco stock has been a standout performer, with shares rallying 14.1% in the past year, outpacing the industry’s growth of 5.6%. 
 

From a valuation standpoint, Costco's forward 12-month price-to-earnings ratio stands at 50.75, higher than the industry’s ratio of 32.42. COST carries a Value Score of D.
 

The Zacks Consensus Estimate for Costco’s current financial-year sales and earnings per share implies year-over-year growth of 8% and 12%, respectively. 
 

Costco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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