Costco Chief Financial Officer Richard Galanti has led the warehouse club's earnings calls for more than 30 years.
His no-nonsense style is mostly business with little bits of humor and playfulness mixed in.
That run came to an end with Costco's second-quarter earnings call. The CFO acknowledged his unprecedented effort in his remarks.
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"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 many of those calls, Galanti has faced questions about whether Costco will increase the cost of membership. Generally, the chain lifts that cost every five to six years, but it has not done so since 2017. A Gold membership costs $60 and an Executive membership, which comes with 2% cash back up to $1,000, is $120.
That puts Costco well overdue for an increase, and it was only fitting that Galanti addressed the issue one final time during his last earnings call as CFO.
Image source: Kevork Djansezian/Getty Images
Costco has strong membership numbers
Costco had a slightly disappointing second quarter based on what Wall Street analysts expected. If you put those expectations aside, by most standards the warehouse club had a very strong quarter.
Net sales for the quarter increased 5.7% to $57.33 billion from $54.24 billion in the year-earlier quarter. Net sales for the first 24 weeks increased 5.9% to $114.05 billion from $107.68 billion.
Costco also had strong membership-growth and renewal numbers. Membership-fee revenue came in at $1.11 billion, up $84 million, or 8.2%, in the quarter, compared with a year earlier.
In response, the shares fell $60.03, or 7.6%, to $725.56 on Friday. The decline was Costco's biggest since a 12.5% decline in May 2022. The shares are still up 9.9% in 2024.
Galanti offered some insight on those numbers during the call.
"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."
Those are stellar numbers, and with the chain's overall sales growth, Galanti was asked once again — for the last time — about a membership-price increase.
Costco CFO answers membership hike question
Sharing a price increase in his final earnings call as CFO would have been a fitting ending to Galanti's career. Instead, questioned about the matter, he repeated the same general words he has leaned on for roughly the past two years.
"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 generally offers little color aside from the "when, not if" line, but he was more expansive 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 closed the discussion on the topic by making clear that the company has not made a decision.
"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, 67, will be succeeded on March 15 by Gary Millerchip, former CFO at grocery giant Kroger (KR) .
