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Friday, April 7, 2006 - Page updated at 12:00 AM

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Costco to raise membership fee from $45 to $50

Seattle Times retail reporter

Wholesale-club giant Costco on Thursday said it would raise annual membership fees for its roughly 15 million members in the United States and Canada, marking its first increase in nearly six years.

On May 1, Costco plans to raise its fees from $45 to $50 for members who use its Gold Star (individual), Business and Business Add-on cards — an increase that could add roughly $75 million in annual revenue.

Its executive membership program, which gives members access to additional services and a 2 percent annual reward program, will remain $100.

The Issaquah company's shares rose $1.45, or 2.63 percent, to close at $56.59 — a significant jump for a company often criticized by Wall Street for spending too much on employment and health care to the detriment of investor returns. Costco's shares have risen 23.6 percent in the last 52 weeks.

Costco has built a multibillion-dollar business buying items directly from manufacturers, passing on the savings to its members and selling in massive quantities. Because the company operates on such thin margins, its membership revenue tends to closely mirror its profit.

For the second quarter ended Feb. 12, Costco collected $269.8 million in membership fees, a 9.9 percent increase over the year-ago period. Its quarterly profit: $296.2 million.

Costco reported a member-renewal rate of 86 percent for the same quarter, giving it one of the most loyal customer bases in retail.

McAdams Wright Ragen analysts Dan Geiman said the fees should have little impact on Costco's membership retention rates. The fee should add 9 cents per share on an annual basis, Geiman said in a research note.

News of the fee increase came on the day the company reported monthly sales results. The company posted $5.36 billion in sales for the five weeks ended April 2, a 10.1 percent increase compared to the same period the year before. Its same-store sales — a key retail metric for stores open at least a year — rose 7 percent.

Costco operates 473 warehouses in the United States, Puerto Rico, Canada, the United Kingdom, Korea, Taiwan, Japan and Mexico. The company announces its third-quarter financial results May 31.

Monica Soto Ouchi: 206-515-5632 or msoto@seattletimes.com

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