The company announced it is raising its international membership fees by 10 percent and a United States/Canada fee hike could soon follow in early- to mid-2017. BMO Capital Markets raised Costco's EPS estimates after the membership fee increase. Furthermore, the firm said benefits from the credit card transition from American Express Company AXP to Visa Inc V are starting to accrue.
Amid a deflationary food market, BMO felt that Costco delivered a solid fourth quarter. Costco's fee hike is said to bring in an additional $50 million in revenue over the next two years. The world's second-largest retailer maintains a solid 90 percent membership renewal rate in the United States and Canada.
Over 11.4 million co-branded cards and 7.5 million accounts have been transferred and activated following Costco's big switch over to Visa/Citigroup Inc C. 1.1 million cards and 730,000 new accounts have been activated since the switch, greater than a 10 percent growth rate.
BMO has a $180 price target on Costco and maintains its Outperform rating.
At time of publication, Costco was up 4.16 percent at $153.62.
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