Costco’s Chief Financial Officer, Richard Galanti, has been at the helm of the warehouse club’s earnings calls for over 30 years. His straightforward approach leans heavily on business matters, sprinkled with a touch of humor and playfulness. This long streak concluded during Costco’s fiscal second-quarter earnings call, where the CFO recognized his exceptional dedication in his comments.
“I’d like to take a moment to say thank you to many of you who have tuned into each quarter, some for many years, to allow me to share with you Costco’s results, both our ups and our downs and, thankfully, many more ups and downs and provide some fun and informative color on how we’re doing along the way, he said.
Since Costco went public in December 1985, “I have hosted all but one call. It has been an absolute privilege and honor to do so, so thank you all.”
During a bunch of those calls, Galanti has been hit with questions about whether Costco will jack up the membership fees. Normally, the chain increases the cost every five to six years, but it hasn’t budged since 2017. A Gold membership goes for $60, while an Executive membership, throwing in 2% cash back up to $1,000, is priced at $120. That means it’s way past due for a bump, and it was only right that Galanti tackled the issue one last time during his final earnings call as CFO.
Costco had a somewhat underwhelming second quarter compared to what Wall Street analysts were hoping for. If you ignore those expectations, the warehouse club actually had a really solid quarter.
“In terms of renewal rates, at the second-quarter end our U.S. and Canada renewal rate came in at 92.9%, which is up 0.1% from Q1 and 12 weeks earlier, and the worldwide rate came in at 90.5% similar to the last quarter,” he said.
“Membership growth continues. We ended the second quarter with 73.4 million paid household members, up 7.8% versus last year, and 132 million cardholders, up 7.3%, with continuing growth throughout the quarters.”
Well, those numbers are truly stellar! With the chain’s sales growth on the rise, Galanti faced that inevitable question once more — yes, for the very last time — regarding a possible membership-price hike. It would have been quite the dramatic conclusion to his career as CFO if he had announced it during his final earnings call. However, when pressed on the topic, he simply repeated the same old lines he’s been using for nearly two years now.
“It’s when, not if, still. But really, we’re — joking aside, we’re not that smart in terms of figuring out exactly why. I mean, we know that all the factors that we believe would — if we wanted to do it when we feel comfortable in terms of renewal rates, new member signups, loyalty, all those things are continuing in the right direction,” he shared.
Galanti doesn’t usually provide much color beyond the “when, not if” line, but he did open up more during this call.
“It really is a function — and I don’t think it would be done simply because, hey, things have slowed down a little bit, let’s do it now. We like the fact that we’re performing well. We like the fact that all — almost all metrics are going in the right direction in our business right now. We’ve got plenty of runway left,” he added.
He shut down the talk on the subject, clearly stating that the company hasn’t made up its mind yet.
“And given the economy and given everything else, it’s us, it’s Costco. So, I think it is simply still not trying to be cute about it. It’s not some big analytical formula. It’s simply a measure of, we will, at some point, I’m sure, do it,” the outgoing CFO said.
Galanti, a seasoned 67-year-old, will pass on the baton to Gary Millerchip on March 15. Millerchip, the former CFO at the grocery behemoth Kroger, steps into his new role.
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