After a marathon of strong sales increases over the past two years, things are finally starting to settle down at Costco Wholesale (COST 0.17%). The mega-warehouse chain posted a single-digit comparable store (or "comps") sales increase in its 2023 first quarter for the first time since the pandemic started. Or is it the other way around? Are double-digit comps the new normal, and is this an anomaly as the economy retrenches? 

That's yet to be seen. In the meantime, management indicated that a fee hike might be on the horizon. That was due to happen just about now anyway, and the genius move should keep Costco's coffers filled without too much heartache for its higher-income members. Together with some other possible moves, Costco stock is a strong bet to generate continued shareholder wealth.

Still building, but coming back to Earth

Costco has demonstrated unprecedented growth since the pandemic started. It began with customers flocking to get their essentials at the best prices. That morphed into shoppers returning to buying bigger-ticket items as restrictions eased, and then it became shoppers pinching pennies as inflation jumped. 

Costco was well-positioned to enjoy high sales during these times. It offers some of the best prices around, and loyal customers like to get the most out of their fee-based memberships. But the increasing comps numbers are finally slowing down as inflation beats out even Costco's low prices.

Sales increased 8.1% over last year in the 2023 first fiscal quarter (ended Nov. 20), and comps rose only 6.6%. Those are numbers typical of Costco's pre-pandemic performance. Profitability remained strong, and earnings per share rose to $3.07 from $2.98 last year.

Membership drives sales and profits

Fees remain a huge asset to both the top and bottom line. They came in at $1 billion for the first time, a 5.7% year-over-year increase. Renewals were steady at 90%, with a 7% increase in card members. Executive members, who pay double the regular membership fee, increased by more than 900,000 in the first quarter alone. They accounted for 45% of customers but 73% of sales. Despite the cost of the membership, customers pay up because they feel they get far more back in the lower markups. The executive membership gets two cards plus other perks, such as 2% cash back on certain purchases, making it attractive to high-volume shoppers. 

So even though sales growth is coming down, it's these numbers that tell the strongest and most credible story about where Costco is going.

The perfect time for a fee hike

That brings me to what many investors and card members have on their minds: When is there going to be another fee increase? CFO Richard Galanti pointed out on the first-quarter earnings call that the company is not quite up to the average time between the last three fee increases; that will be coming up in January. And he reiterated that the next increase is a question of when, not if. He added that he'll be "purposely coy on when that might be."

Right now, management feels very comfortable with its growth in the current atmosphere, and it feels that Costco is in a great position to keep pumping out sales. But investors can be confident that management will pull that out of its sleeve when the time is right.

Galanti noted that data points to its shoppers being in a higher income bracket than some of its discount competitors, as is Walmart-owned Sam's Club. Walmart recently announced a fee increase for a Sam's Club membership, and Galanti feels that Costco's members would embrace the fee increase as well. Costco has rolled out increases in the past when comps and renewals were strong, and it will use any fee increase to drive greater value for members.

Galanti also said that Costco would issue another special dividend when the time is right. Costco's regular dividend only yields 0.75% at the current price, but the special dividend makes it a great dividend stock.

It's getting cheaper

Costco stock fell after the report, and it's now trading at 37 times trailing-12-month earnings. That's not incredibly cheap, but it's attractive for a no-brainer stock like Costco. It may fall further, so I wouldn't call this a historic opportunity. But when the fee increase comes, the stock is likely to jump. Shareholders will also benefit from a special dividend, whenever it's announced. If you are considering Costco stock as an investment for the long term, now is a great time to buy.