Analyst unveils Costco membership fee warning

These days, something as routine as a quick stop to the grocery store can prompt the gamut of emotions.

For those of us who pay attention to prices (and that's most Americans, at least loosely speaking) it can feel less like an errand and a bit more like a long-haul trip we need to budget for — and maybe practice some breathing exercises for, too.

And for those of us who prefer to order groceries online, our routine shopping may not feel as real since we aren't being stared in the face by higher sticker prices. But those added dollars and pennies tacked on to each item still add up.

And then there are those of us who visit the grocery store perhaps less frequently because we are members of discount warehouses, like Costco (COST) or the Sam's Club division of Walmart. (WMT)

The benefit of belonging to one of these members-only hubs is that customers pay up-front recurring fees in return for access to lower retail prices.

Costco members, for example, pay an annual fee of about $60 to $120, depending on your tier status. But by paying that set amount, customers are afforded access to bulk items sold at discount, on things like toilet paper, shampoo, pet food, organic produce, snacks, and meat.

Customers shop at a Costco store.
Justin Sullivan/Getty Images

Grocery prices are still rising

Now, whether you belong to a discount warehouse or you pride yourself in finding the best deals in town, the bottom line is that food is still costlier this month than it was just one month prior.

The most recent Consumer Price Index numbers are in for June, and they show that the cost of food overall, food at home, and food away from home (as with dining out, for example) rose across the board.

Here's a look at how some prices have changed month over month:

Food: increase 0.2%
Food at home: increase 0.1%
Food away from home: increase 0.4%
Energy: decrease 2%
New vehicles: decrease 0.2%
Used vehicles: decrease 1.5%
Apparel: increase 0.1%
Medical care service: increase 0.2%

Costco analyst watching price increases closely

It's not just food that's getting more expensive.

Costco said on Wednesday that it would lift the cost of its basic membership for the first time in seven years, to $65 a year from $60. Executive membership fees will go up $130 a year from $120. Both increases are about 8%.

The changes go into effect Sept. 1 and are not expected to hurt consumers' appetite for the brand, though one analyst foresees a potential downward trend if the hikes continue.

More Retail:

Morgan Stanley analyst Simeon Gutman said this week that the rate increase might contribute to short-term growth for Costco but is unlikely to break the store's brand recognition and devoted following.

Morgan Stanley is maintaining its overweight rating on the stock with an $855 price target. At last check COST was trading around $841.

Other analysts saw this as a routine price increase, unrelated to inflation.

"Costco's announcement that it would raise membership fees by $5 for the base level and $10 for the executive tier was expected and is overdue from its usual five-year cadence," Bloomberg Intelligence analyst Jennifer Bartashus said of the decision.

"The company delayed an increase amid consumer concerns about inflation and the economic outlook, which have eased some."

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