Jim Cramer: Costco's membership fee hike actually signals good news for inflation

Published Thu, Jul 11 202412:09 PM EDT

CNBC's Jim Cramer said Thursday that Costco 's membership fee hike suggests inflation is becoming more manageable for consumers. The fee increase "is significant because management said it wasn't going to raise its membership fee until they saw inflation under control," Cramer said on " Squawk on the Street ." Costco late Wednesday announced its long-awaited membership fee increase — the first since 2017. It will go into effect on Sept. 1 in the U.S. and Canada. The annual cost of the Gold Star card will go up by $5 to $65, while the higher-tier Executive plan will increase by $10 per year to $130. The company said about 52 million memberships, more than half of which are Executive, will be affected. Shares of Costco were higher in extended-hours trading Wednesday after the fee hike was announced alongside strong June sales. Thursday morning, however, shares fell more than 3% — perhaps on some profit-taking after Tuesday's record-high close. There could also be a "buy the rumor, sell the news" dynamic at play here. Either way, Cramer later told members of the CNBC Investing Club who don't have any Costco shares to consider buying in the coming days if declines continue. Costco is a Club holding. COST YTD mountain COST stock performance year-to-date. Costco has historically hiked membership fees every 5½ years, but it has taken longer this time around. Management had previously said they didn't want to put extra financial burdens on members when inflation was so hot. Price pressures, however, have been moderating from their multi-decade highs after Covid. The government's June consumer price index confirms a continuation of that trend. The CPI dipped 0.1% from May. That translated to just a 3% year-over-year increase — the lowest level in over three years. Many companies, including Costco, have benefited from higher prices during the still-elevated inflationary environment. But Costco, which keeps its prices lower than most, is by no means dependent on pricing power. Rather, the company is focused on offering extreme value for members and aims to present the most competitive prices by negotiating better deals with suppliers. "If you want to get these lower prices that the CPI is now reflecting, [Costco] had these prices months ago," Cramer said. "If a product is too expensive, they'll kick you out," he added, referring to suppliers. The membership fee hike has been a second catalyst the Club has been waiting for. Profits from the fee increase will go into the bottom line while some will be reinvested in the business. The other catalyst — a special dividend, which was also historically overdue — was announced late last year.