Costco’s Credit Card Transfer Issues Didn’t Affect Sales, Profits

Image courtesy of (Mike Mozart)

Costco’s complicated, complaint-riddled switch from an American Express-branded store credit card to a Visa Citi card may have been a big issue for the membership store’s customers, but it apparently wasn’t a problem for the company’s bottom line. 

Costco recorded higher-than-expected profits for the fourth quarter, partly based on the lower fees it has paid to Citi since switching its credit card portfolio this summer, the retailer said during an earning call as reported by The Motley Fool.

According to the report, Costco increased earning 2% to $1.77/share compared to one year ago, which saw earnings of $1.73/share.

Overall, the company’s comparable-store sales grew 2% in the U.S., despite a rocky credit card transition and lower than anticipated gasoline prices.

Some analysts had predicted that the credit card switcheroo — which involved Costco ending its longtime exclusive deal with American Express — could, at least temporarily, ding the membership club’s earnings as the company wrestled with dissatisfied customers.

“There was a lot of effort and as you know, there were a few operations glitches during the first few weeks after the cutover,” Costco CFO Richard Galanti said during the earnings call. “We are now past that and more importantly, the new card is fantastic for our members.”

As a result of the switch, Galanti said Costco has lowered the cost of accepting credit and debit cards.

Additionally, the retailer says it has added about 1.2 million members, increasing from 85.5 million at the end of the third quarter to 86.7 million at the end of the fourth quarter.

Despite the good earning news, Costco still has faces challenges in the immediate future, including keeping shoppers visiting stores in the face of increased online competition.

Costco Earnings Show Credit Card Woes Are in the Past [The Motley Fool]

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