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Costco’s move to extend operating hours this summer is paying off big.
“We estimate these incremental hours added about 1% to weekly US sales since implementation. This has been very well received by our members,” CEO Ron Vachris said during the company’s fourth quarter earnings call Thursday.
The company beat expectations with full-year revenue of $269.9 billion, or 8.1% over last year.
CFO Gary Millerchip also said that the extended hours and other new perks led a higher share of shoppers to upgrade their memberships.
Costco finished the quarter with 81 million paid memberships, of which 38.7 million were executive tier. Within the quarter’s 1.4 million additional memberships, 1.1 million were executive.
Foot traffic data from Placer.ai indicates the adjustment is helping the company accomplish several key goals, namely getting shoppers to visit more quickly and more often.
“It’s early, but I do think this is a win,” Placer.ai analyst RJ Hottovy told Business Insider.
Costco also said it is managing to grow the additional top-line sales without significant new spending on operating costs.
The company attributed a slight decline in membership renewal rates to a larger share of online signups, which Millerchip said tends to attract less loyal customers than in-warehouse signups.
“Overall, we view the growth in online sign-ups as a net positive,” Millerchip said, adding that online members skew younger. “Almost half of our new member sign-ups are now under the age of 40.”
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Millerchip’s remarks are consistent with what Placer.ai has inferred about the wholesale club’s increasing popularity among lower-income households.
“They’re picking up what we believe to be younger consumers — kind of younger Millennial and Gen Z customers that are starting families. It seems to be one of the areas of growth,” Hottovy said.
“I think Costco would make that trade any day of the week,” he added. “A lower-income consumer, but they’re gonna be loyal customers for a lifetime.”
The extended hours — and suite of other perks — were one way that Millerchip said Costco is looking to enhance the value of a membership and keep shoppers coming back.
Indeed, executive members account for nearly three-quarters of total sales for Costco, in spite of representing less than half of the total membership.
“We’re encouraged by the what we’re seeing,” he said. “It was part of the goal that we had when we introduced those benefits.”
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