Costco’s new employee agreement took effect this week, increasing its minimum wage to $20 per hour and its average wage to more than $31 an hour in the US and Canada.
CEO Ron Vachris told investors the agreement “reflects our continued commitment to provide industry-leading pay and benefits for our employees.”
But the company also acknowledged that its labor investments will come at a cost. Costco estimates the new agreement will create a headwind in the mid-single digits to selling, general, and administrative expenses (SG&A), per CFO Gary Millerchip.
- The agreement stipulates an immediate $1 pay increase at the top of scale this month, followed by additional dollar increases in March of both 2026 and 2027.
- First-year employees will also now have access to paid vacation, and 30-year employees can take up to six weeks off.
Expansion mode: In other investments, Costco plans to open 25 new warehouse stores in the coming fiscal year, including new locations in Brentwood, California, and Sharon, Massachusetts, that opened this week, bringing its US footprint to 620 stores.
- The announcement came as part of Costco’s latest quarterly earnings, which showed net sales increasing 9.1% year over year to $62.5 billion.
- E-commerce also continued to outpace overall sales, rising 20.9% last quarter.
Costco is also reaping the benefits of its first hike to membership fees in seven years, which raised the annual cost from $60 to $65. Membership fee income jumped 7.4% year over year, with the increase contributing 3% of fee income last quarter.
This kind of non-sales revenue could prove more important in the emerging macroeconomic environment. Millerchip noted that consumers are “being very choiceful where they’re spending their dollars, and we think that’s likely to continue and maybe even become more choiceful as the impact of some return of inflation and the potential impact of tariffs could flow through as well.”
This report was written by Alex Vuocoloand was originally published by Retail Brew.