With inflation causing grocery prices to hike 28% in just five years, it’s no wonder shoppers are being careful about where and how they spend their hard-earned money—and warehouse chain Costco is paying close attention to how that’s playing out in their stores. During the company’s recent earnings call on December 12, 2024, Chief Financial Officer Gary Millerchip pointed out some interesting trends in the way Costco members are approaching their shopping, and how it reflects on trends outside of grocery stores. Here’s the surprising spending changes Costco is noticing in their customers.
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Customers Are Cooking At Home
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Millerchip pointed out Costco customers are buying more food to cook at home, instead of eating out at restaurants. “I think in terms of overall what we’re seeing with the member on food and grocery, I would say that we are seeing what we think is a little bit of a shift from food away from home to food at home, and that’s certainly reflected in strong meat and produce sales that we’ve seen in our own business,” he said during the call.
High-End and Bargain Cuts
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Customers are buying both the high-end and bargain cuts, Millerchip says—but clearly the shoppers want raw ingredients they can prepare at home. “And we are seeing, I think, a little bit even more of a trend that we’ve talked about in prior quarters of bifurcation with the members where we have high-quality premium cuts they’re selling well. But we’re also seeing a gravitation toward those lower price-per-pound items across categories like poultry, cuts of beef, and pork as well.”
Fast Food Prices
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Eating out at restaurants, even fast food, has become so expensive it’s no wonder people are choosing to eat at home instead. “When you look at McDonald’s, they’re not getting a majority of high-income customers — the middle- and lower-income class are the bulk of their business,” restaurant analyst Mark Kalinowski, president of Kalinowski Equity Research, tells CBS News. “They need to be cautious with their spending, and that’s what you’re seeing right now.”
Costco Membership
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Costco membership numbers are up, despite (or because of) their crackdown on card sharing. “Overall, we’re feeling very good about the underlying membership metrics that we’re seeing,” Millerchip says. “So, renewal rates and general sign-up activity and then the membership growth remains very strong.”
Great Deals
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While grocery prices remain high, Costco has an edge in the market with the deals it offers members. “What we’re seeing with our members is that now, probably more than any time in recent history, that combination of newness of items, quality, and value are really important to the member. And we’re seeing the member being very choiceful about how they’re spending the dollars,” Millerchip says.