Most American shoppers say they are willing to pay more for their retail club memberships — a sentiment that bodes well for Investing Club holding Costco (COST). The survey says … According to an Evercore ISI survey of more than 2,500 U.S. consumers, more than 80% said they’d be willing to pay a higher annual fee to stay in their shopping clubs, up 25 percentage points from 2015. The survey also found that Americans intend to renew memberships at “record high levels,” or more than nine of every 10 respondents. “We viewed member pushback as minimal and lower than prior year surveys,” Evercore said, indicating consumers are receptive to fee hikes following increases for Amazon’s (AMZN) Prime service in March and Walmart’s (WMT) Sam’s Club in October. This is a positive readthrough for Costco, which hasn’t hiked annual membership prices in several years. In the Evercore survey, Costco was reported as having the “highest fee inelasticity,” or consistent demand for its products, even in a deteriorating economy, with 60% of its members willing to pay 10% or more in membership fees. Moreover, an overwhelming 94% of Costco members in the survey said they’ll ‘definitely’ or ‘probably’ renew their memberships as loyal customers continue to see value in the club model. Those numbers are consistent with renewal rates in the U.S. and Canada at 92.5%, according to Costco’s latest quarterly results , which were released earlier this month. The worldwide renewal rate was 90.4%. As a result of the survey findings, Evercore favors Costco for a planned fee increase and the potential for a special dividend sometime next year. The firm kept its outperform, or buy rating, on COST and increased the stock’s price target to $540 per share from $530. “We are boosting our COST base case as a result of today’s survey findings, as the company (Costco) appears well positioned to continue compounding as traffic and renewal rates hit record highs, with the added survey insight that a fee hike is likely to be relatively well received by members while boosting earnings growth to double digits,” analysts at Evercore said. Costco’s standard Gold Star Membership costs $60 per year. For an additional $60, customers get the Executive Membership and earn additional rewards and lower prices on certain products and services. Costco’s last membership price hike was in June 2017, when the wholesale retailer increased its standard membership fee from $55 to $60 and its Executive membership from $110 to $120. Historically, Costco has increased its membership fee every five years, an anniversary that passed a few months ago. While no formal announcements have been made yet, CFO Richard Galanti said in the company’s last earnings report that “it’s a question of when not, if.” Galanti added during the Dec. 9 call, “We feel that we’re in a very strong position right now. And if we have to wait a few months or several months, that’s fine.” Earlier this year, management said the company…
Read More: Survey shows a Costco membership hike would face little resistance