Published - May 30, 2022 @ 3:07 PM (EET)

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Last week, Costco Wholesale (NASDAQ:COST) reported fiscal 2022 third-quarter earnings that beat earnings per share and revenue expectations, bolstered by a record-setting membership renewal rate.

As consumers looked to benefit more from their pennies, the warehouse retailer's relative outperformance stood out, speaking to the rising popularity of membership warehouses.

For the quarter ending May 8, membership revenue grew from $901 million in the same quarter last year to $984 million. Overall, Costco boasted a 6% increase in membership households to 64.4 million, while renewal rates in the US ticked higher to 92.3% and 90% globally.

Net sales came in at $51.6 million, up 16.3% from its previous $44.4 billion.

MARGIN HEADWINDS

Costco's gross margins for the third quarter declined 99 basis points (bps) to 10.19% compared with 11.18% a year earlier, driven by supply chain costs, raw material inflation, labor, and other headwinds.

Oppenheimer analysts Rupesh Parikh and Erica Eiler believe these gross-margin pressures could continue to dampen the near-term outlook for Costco Wholesale.

However, while there's some disappointment surrounding the margin, the company seems to strike a good balance between raising prices and maintaining a good value proposition.

(NO) PRICE INCREASES

In the earnings call last week, Senior Vice President Bob Nelson addressed comments about a potential increase to the membership fee for its customers as well as rumors of a price increase for its hot dog and soda combo.

The popular combo has remained at $1.50 since being introduced in the mid-1980s and is considered one of the many benefits of Costco's membership program.

Nelson said,

"I want to address some incorrect information floating around ----- claiming that we have increased the price of our hotdog and soda combinations sold in our food courts. The price today is $1.50, and we have no plans to increase the price at this time."  

Due to the current macro environment and historically high inflation, Costco said now is not the right time to raise member prices.

Historically, Costco has raised its membership fee every five to six years, with the last fee increase coming in June 2017.
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PRICE ACTION: On Friday, Costco shares were up 0.75% to $468.49.