If you are a Costco member, you probably love the fact that fuel at the warehouse retailer is often much cheaper than you will find at many other gas stations.
However, there are situations in which Costco gas might lose a bit of its price edge, at least for a period.
As it turns out, Costco admits that it does not always lower gas prices as fast as it can.
During the retailer’s fourth-quarter earnings call, Richard Galanti, Costco’s chief financial officer, acknowledged the practice, saying the way the company buys and prices gas helps it squeeze out a little extra profit. He added that other supermarkets and discount retailers have used a similar strategy when it comes to gas prices:
“(T)hey didn’t go down as fast as perhaps they could have been, which gives us, in our view, an ability to make a little more and still be the most competitive, in fact, in our view, gotten a little wider. So I think overall gasoline as a retail business has gotten more profitable in the last couple three years.”
Before you grumble about this ploy, you might want to hear Galanti’s explanation of what Costco does with these extra gas profits.
In an earnings call for the first quarter of 2023, Galanti said that when Costco makes more on gas, it allows the retailer to keep prices of other merchandise lower. He noted:
“And certainly, that’s helped us use some of that to continue to hold prices where we can on some things.”
Of Costco’s $220 billion in annual sales, about $30 billion comes from gas sales, prompting Galanti to call it “the big kahuna among all that stuff.”
The lesson for Costco members is that they should not assume Costco gas is automatically the best deal in town. For more on how to save money on gas, check out:
