During these growingly tense economic times, Costco Wholesale has been on of the go-to stops for consumers looking to stretch their dollar as far as it will possibly go. Due to its membership based operational model, the warehouse giant is able to offer its customers price points that are practically unmatchable.
The wholesale retailer gained even more brownie points after it took a stand against recent Diversity, Equity, and Inclusion controversies. Whilst other retailers like Walmart, Target, and Amazon caved in to pressures to discontinue these policies, Costco reaffirmed its necessity and benefit within the company.
Is Costco really doing that well?
Aside from the now resolved contract negotiation issues faced by the retailer in January, Costco ended 2024 on a strong note and this good streak appears to be continuing on into the current year.
According to the latest earnings report, the warehouse managed to rake in a net income of $1.7 billion for the final few months of 2024. This marked a 2% increase to that of the same period in the previous year. Costco also recorded an increase of 8.3% year over year for comparable sales in the United States.
Whilst things were looking up for the warehouse side of things, the retailer’s gas stations were not doing as well as expected it seems. On the March 6 earnings call, it was discovered that comparable sales for gas had shrunk as the quarter progressed.
According to Costco Chief Financial Officer Gary Millerchip who shared on the call, “Gas comps were negative low single digits during the quarter, driven by the average price per gallon being down slightly.”
Since April of last year, the national average for gas prices saw a decline which spelt trouble for Costco gas stations who offered a price per gallon that was significantly cheaper than the average price. However, just like with the warehouses, Costco filling stations require a membership card for access.
By last September, the average price of gas dropped to $3.20 per gallon which significantly increased competition for the retailer.
In the earnings call, the retailer also highlighted to investors that consumers are becoming increasingly cautious about how their money is spent due to growing macroeconomic tensions.
“We believe that the member is probably as much focused now on quality, value, and newness as they have been for quite some time,” Millerchip shared. “But they are still showing that willingness to spend, but they’re 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.”
The C in Costco stands for convenience
Amidst these gas price tensions, the retailer made the decision to extend the operation hours of its gas stations in the U.S. to better accommodate its customers. This decision was confirmed by CEO Ron Vachris during the recent earnings call.
“In addition to adding warehouses to serve our members, we also extended our gas station hours in North America during the quarter to make filling up at Costco more convenient for our members,” Vachris explained during the call. “Generally, our stations are now staying open an hour later than they did previously, with some opening earlier as well.”
In February, the company shared a social media post confirming the new hours which was extremely well received by customers. According to the announcement, the gas stations will now be open “Monday through Friday from 6 a.m. to 10 p.m., Saturday from 6 a.m. to 8:30 p.m., and Sunday from 6 a.m. to 7:30 p.m.” The company has also claimed that these new hours have resulted in increased gas station usage from members.
Vachris further shared that there is a possibility for warehouse operating hours to be extended as well.
“We did see some demand from the commuters, both at the early hours and the evening hours, so I think that that’s going to be a real benefit to those folks as well,” Vachris stated when discussing the potential expanding of warehouse hours. “But we will continue to look at the warehouse hours. No plans in place at this time.”