COST - Why Did Costco Stock Slide After Raising Membership Prices by a Rotisserie Chicken?
2024-07-12 07:44:15 ET
Costco Wholesale (NASDAQ: COST) is finally scratching a seven-year itch. The leading warehouse club operator announced this week that it is boosting its annual membership prices by 8% in September. Its most popular entry-level Gold Star plan will increase from $60 to $65 a year, essentially jumping by the price of its signature $4.99 rotisserie chicken. Its business-focused Executive tier will rise from $120 to $130 -- or, well -- two of those savory three-pound birds.
The market initially applauded the move, Costco's first membership fee hike since June 2017. The shares ticked higher at the open on Thursday, but, like many of the warehouse club's prepared meal offerings, it didn't last in the hands of the public. Costco stock closed 4% lower by the closing bell. Why did the undisputed champ of warehouse clubs slide on a day it secured a sizable jump in future profitability? Let's take a closer look at the method to the sadness and why the market on Thursday is missing the point.
There are a couple of potential explanations for the market souring on the Costco news. The obvious letdown is that an 8% increase after a little more than seven years could've been higher. It breaks down to an annualized increase of barely 1%, well south of the country's inflation rate.
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Why Did Costco Stock Slide After Raising Membership Prices by a Rotisserie Chicken?