Yahoo Finance Live anchors discuss the Sam’s Club membership hike and what this could mean for Costco and BJ’s.
BRAD SMITH: Inflation hitting hard on this one. Sam's Club is raising its annual fees, this fall, for the first time in nine years. Fees, they're going up, increasing to $50 from $45, starting on October 17. Wow. The company blaming record-high inflation for the price hikes. All right, Soz, this means that Costco might not be too far behind here.
BRIAN SOZZI: And I chuckle a little bit, because I always think, you have to pay to go inside of a store to go buy more stuff and spend hundreds of dollars. So that's just my own personal, funny moment, but look, I'm reading a good note out of Jefferies on Costco. They reported their sales, yesterday afternoon, noting that same-store sales in August were up 10.1%. Costco just keeps blowing it out of the water, but nonetheless, Jefferies noting that Costco is going to have a board meeting in October, and they might be able to use the cover of Sam's Club raising prices for them to finally raise prices for their memberships, the first time in going on six years.
Now, Costco pushed back on this on their May 26 earnings call. They did not feel it was the right time to raise membership prices on their consumers that have been battling high levels of inflation, food, and gas. But now that Sam's Club has done it, you best believe that, sometime within the next six to eight months, those membership fees are very likely to go higher for Costco, and that could be a major profit tailwind for this company over the next two years.
BRAD SMITH: It's a source of revenue for them, but it's really just a margin-inducing source of revenue for them as well, acts as a backstop for some of their margins. Because they still want to be able to, of course, move through the inventory that we've been tracking over the course of this earnings season. And getting updates from everyone from Costco, to BJ's, Walmart, Sam's Club, within Walmart, of course. And for Sam's Club, they've continued to see growth within Sam's Club and the number of consumers and those that are contributing to the revenue that Sam's Club is seeing-- I almost said Samsung-- but that Sam's Club is seeing right now, particularly.
And you think about what this says about the consumer in looking for the best discounts and deals, but even if those deals are because of the quantity that you're buying and just not having to make as many trips to the grocery store. Where else does that save you? Saves you on gas, and gas is one of the key elements that a lot of these companies, especially Sam's Club and Costco, have used to go head to head. Offering gas discounts to be able to woo consumers, at a time where they knew that was one other thing that they had to combat just to get to the store. So you know what, if we've got gas for them, if we've got it, maybe they will still continue to come, and we'll offer discounts on that too.
BRIAN SOZZI: Those gas lines at BJ's and wholesale-- you cut somebody in line on a weekend, you're--
BRAD SMITH: Why are you cutting people in line?
BRIAN SOZZI: Getting your tires slashed. All right? That is the reality. You cut one of those lines, you're going to leave there with no tires and maybe Saran wrap around your car, like I used to do in high school. We'll take that offline.
Nonetheless, I think you're learning that how bad a quarter is, a company like Best Buy. And it just goes to my bigger, longer term thinking, chains like that, a Kohl's, Best Buy, they need to evolve. Why are they just selling electronics? They should be selling food. Get us some food in there. Get consumers more of a reason to come in these stores, outside of twice a year, whether it's the holidays or someone's birthday.
BRAD SMITH: All right. Bullish, Up and Up, Saran wrap, and fading Reynolds wrap.
BRIAN SOZZI: Yeah. That was a tough times in college.