Membership Fee Booster: How Retail Giants Are Reimagining Profit Growth

The retail landscape is witnessing a significant shift in how companies generate profits. Membership fees have emerged as a powerful growth booster for major retailers, fundamentally reshaping their revenue models and providing a more stable, high-margin income stream compared to traditional merchandise sales.

Walmart’s Membership Momentum Accelerates

Walmart Inc. (WMT) is leading this transformation with impressive results. The retail giant’s membership income surged 17% year-over-year in Q3 of fiscal 2026, demonstrating the growing financial impact of recurring fee revenues. This expansion extends across all operating segments, with membership and other income climbing 9% overall during the quarter.

The growth is particularly pronounced in international markets. Sam’s Club China posted a remarkable 34% increase in membership income, fueled by expanding member engagement and market penetration. Domestically, Walmart Plus achieved double-digit membership income growth through consistent customer acquisition and expanded service offerings. Meanwhile, Sam’s Club U.S. recorded a 7% rise in membership income, supported by growing member counts, improved renewal rates, and increased adoption of Plus memberships.

What makes this trend especially significant is the profitability contribution. Management disclosed that membership fees combined with advertising income accounted for approximately one-third of consolidated adjusted operating income in the quarter—a striking figure that underscores the superior margin profile of these revenue streams relative to grocery and merchandise categories.

Walmart Plus achieved its most robust quarter of net additions since launch, driven by operational enhancements including faster delivery capabilities, upgraded service levels, and new offerings like the OnePay cash rewards credit card alongside expanded entertainment streaming benefits.

Rivals Follow the Membership Playbook

Target Corporation (TGT) is pursuing a similar strategy with measurable success. The retailer reported nearly 18% growth in non-merchandise sales during Q3, with membership programs, Roundel advertising, and marketplace operations all expanding at double-digit rates. These higher-margin revenue streams have become essential buffers against softer consumer spending on discretionary items.

Costco Wholesale Corporation (COST) remains the gold standard for membership-driven profitability. The company generated $1.329 billion in membership fee income during Q1 of fiscal 2026, representing a 14% year-over-year jump. Costco’s membership base now includes 81.4 million paid members and 39.7 million Executive memberships, both demonstrating steady expansion. For COST, recurring membership fees function as a central pillar of earnings power.

Market Valuation and Performance Context

Walmart’s equity performance has been noteworthy, with shares climbing 23.9% over the past year, essentially matching the broader industry’s 23.5% gain. However, the stock trades at a premium valuation: its forward 12-month price-to-earnings ratio sits at 38.45, above the industry average of 35.09.

Growth expectations remain constructive. The Zacks Consensus Estimate projects Walmart’s current fiscal year sales and earnings per share will rise 4.6% and 4.8% year-over-year, respectively. The stock currently holds a Zacks Rank #3 (Hold) rating.

The Bigger Picture

The membership fee booster represents a strategic response to margin compression in core retail operations. By diversifying revenue toward recurring, predictable, high-margin income streams, Walmart, Target, and Costco are de-risking their business models and creating earnings jumpers that offset merchandise category headwinds. This evolution signals how modern retailers are competing not just on price and selection, but on subscription-based loyalty and premium service experiences.