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Costco may be about 9 months away from raising membership fees: analyst

Costco (COST) could be nearing its first increase in membership fees in some five years. 

"We believe we are now 8-9 months away from a likely membership fee increase, a historical catalyst for the shares. As is well known, Costco has increased its annual membership fee every five and a half years by $5-10. On this timetable, the next hike would come in August-September 2022. The Gold Star fee would go to $65 from $60 while the Executive membership would move to $130 from $120," said Guggenheim analyst John Heinbockel in a new research note on Monday. 

Costco's last membership fee increase kicked in on June 1, 2017. It took its Gold Star membership fee up $5 to $60. Executive membership fees increased by $10 to $120. At the time, the increases impacted about 35 million members.

But with inflationary pressures in areas like labor and transportation running hot, a hike in membership fees would go a long way to alleviating cost increases for the giant warehouse retailer. 

And it could also be very beneficial to Costco's stock price, if history is any predictor. 

Heinbockel's analysis of Costco's last three membership fee increases in 2006, 2011 and 2017 shows the stock rose on average 11% three months prior to the announcement. The stock gained on average 15% six months prior to the announcement.

"Because membership fee increases are so predictable and beneficial to the bottom line, investors anticipate them with Costco shares typically outperforming the S&P 500 by 15-20% in the 6-12 months before the membership fee increase announcement. Solid outperformance is also seen in the three months prior," points out Heinbockel. 

Even absent this potential catalyst, Costco is poised to cap off an impressive 2021 as shoppers continue to consume more goods at home during the COVID-19 pandemic. 

Costco reported earlier this month that its fiscal first quarter comparable sales rose 15% from a year ago. Earnings per share increased 14%. 

Shares of Costco are up 49% year-to-date, outperforming the S&P 500's 27% ascent. Target's stock is up 25% on the year, while Walmart is down 3%. Best Buy's stock is down about 1% year-to-date.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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