Costco’s first earnings report after member fee increase looks solid

How many $1.50 hot dogs would Costco have to sell to get by on frankfurters alone?

That’s a question we’ll (probably) never get answered. But in Costco’s latest earnings call, CFO Gary Millerchip was talking very specifically about meat.

First, the basics: For Q1 2025, Costco’s net income climbed to $1.8 billion, up from $1.6 billion in Q1 last year. Revenue also jumped to $62.2 billion, a fair leap from $57.8 billion a year ago.

Now, the beef: Costco customers are finally spending a bit more as inflation eases, the Wall Street Journal reported, though they’re selective about it—and they’re congregating at the lower and upper ends of the pricing spectrum. And that’s where meat comes in.

Millerchip said the company is “seeing what we think is a little bit of a shift from food away from home to food at home, and that’s certainly reflected in strong meat and produce sales that we’ve seen in our own business.”

Crucially, though, there’s a “bifurcation with the member,” he added, as some customers spend on “high-quality premium cuts” while others gravitate toward “those lower price per pound items across categories like poultry, cuts of beef and pork as well.”

This was a notable quarter for Costco with respect to membership. In September, the warehouse-club chain upped its annual membership fee for the first time since 2017. The company’s Q1 report was the first one since the fee hikes.

For the quarter, revenue from membership fees was $1.2 billion, a nearly 8% climb from last year, excluding forex impact.

Still, on the earnings call, Millerchip was careful to add that the fee hike hadn’t affected the quarter significantly. “Remember that the recent membership fee increase doesn’t have much impact yet due to the effects of deferred accounting and represented less than 1% of the fee growth in the quarter,” he said.

All the more reason to tune in again to Costco’s next report.