Costco’s gas stations saw a surge in demand in the most recent quarter as consumers sought out its low-priced gasoline, which helped the company top the market expectations for its third-quarter sales.
Costco CEO Ron Vachris noted the “backdrop of ongoing macro uncertainty” has consumers searching out affordable options given the pressure on household budgets, which helped attract members to its gas stations.
“Nowhere has this been more apparent in the third quarter than our gas business. As events in the Middle East have had a significant impact on product supply and gas prices, our focus, as always, is to be there for our members by staying in stock and offering the best value,” Vachris said.
“The result was record-breaking volumes, all three four-week fiscal periods of the quarter set successive all-time company volume sales records, with the final five weeks for the quarter becoming our top five volume weeks ever,” he said.
Vachris commended the Costco team’s work managing the deliveries necessary to meet demand, “which requires multiple daily gas deliveries to many locations.”
Energy markets were upended by the Iran war, which sent gas prices surging above $4 a gallon around the country as global oil supplies were constrained by the closure of the Strait of Hormuz, which sent crude prices above $100 a barrel.
The latest AAA data shows the national average price for a gallon of regular gasoline was $4.39 on Friday, up about 38% from the average of $3.17 a gallon a year ago.
Vachris noted that the low-cost gasoline offered at Costco stations helped attract new members and customers into stores, driving more sales momentum for the wholesale club in the future.
“The high consumer price sensitivity, which fueled these record volumes, also drove many members to use our gas stations for the very first time in the third quarter. We believe this will drive even greater loyalty with these members in the future as members who use our gas stations typically spend more with us in the warehouse,” he said.
Costco CFO Gary Millerchip added that Costco’s volumes of gas sales allowed the company to widen its price gap with higher-cost stations, adding that the company knows “that’s something that’s very high on our members’ minds.”
Reuters contributed to this report.