Costco Investors Need to Focus on One Membership Subscription Type

Costco (NYSE:COST) and American Express’s (NYSE:AXP) breakup has caused concerns over the company’s immediate future, with investors worried that subscriber numbers will be affected as a result. The company is switching to Visa (V), which will have an impact on consumers, but the switch has been well-planned for a year.

Letters from the company and the dispatching of new Visa cards will help consumers visit stores as normal on June 20 when the switch occurs.

A major figure and membership type that should take center stage is the company’s executive membership numbers. Executive memberships cost double the amount of a basic membership. Executive memberships account for 36% of the company’s overall subscribers.

During the company’s recent Q3 2016 earnings call, CFO Richard Galanti stated executive memberships make up nearly 66% of the company’s sales.

Costco memberships are up 15% year over year, with the opening of new stores being the driving factor behind sales. Renewal rates are also faring well despite the Visa switch, with 94.4% of business members renewing at the end of the last quarter.  Worldwide, the company’s renewal rates are 87.6%, down slightly.

Membership for the company’s fiscal Q3 2016 showed a year-over-year growth from $518 million to $618 million in membership revenue.

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Daniel Simmons