Costco is opening its first standalone gas stations that are only accessible to the warehouse club members amid a spike in gas prices tied to the Iran war.
The first standalone station will open in California in Mission Viejo in June. At 17,000 square feet with 40 pumps, it will be Costco’s largest gas terminal yet, according to USA Today.
At least one second stand-alone station is scheduled open in Honolulu in 2027, per C-Store Dive. Costco hasn’t publicly responded on the openings.
Costco opened its first gas station in 1995, 12 years after opening its first store. In its last fiscal year, 747 of its 914 warehouses global had a gas station, with gas making up about 10% of total sales.
With prices often 5 cents to 40 cent below nearby competitors, Costco’s gas stations have been seen as traffic drivers to bring customers to their warehouse clubs. As March 26, GasBuddy data -- according to CNBC -- showed regular gas prices in various regions:
- Los Angeles: Costco, $5.39, traditional gas station per gallon, $5.95.
- Chicago: Costco, $4.29; traditional gas station per gallon, $4.48.
- Rochester, New York: Costco, $3.71; traditional gas station per gallon, $3.91.
In its fiscal second quarter ended Feb. 15, Costco’s gas comps were negative mid-single digits, driven by mid to high single-digit price deflation partially offset by gallon growth.
However, gas prices have spiked since U.S. and Israeli forces attacked Iran on Feb. 28. On Friday, the average U.S. gas price held at $3.98 per gallon, up from $2.98 cents a month ago and $3.16 a year ago, according to AAA.
Higher Gas Prices Can Be Favorable for Costco
Former Costco CFO Richard Galanti in 2022 said rising gas prices often lead to better fuel margins for Costco. Following general industry practices, when gasoline prices fall, Costco does not lower prices at the same pace it raises them when prices are climbing, he explained.
On a quarterly call on March 5, five days after the Iran war started, Gary Millerchip, Costco’s CFO, told analysts that when gas prices rise, fuel becomes a bigger traffic driver for Costco. He noted that “about half” of its members who use the Costco gas station will also make a purchase at the warehouse.
Millerchip said, “Generally speaking, if gas prices start to increase, then we tend to see our value proposition resonate better with members, just because obviously we want to be the pricing authority on gas. And so when prices are higher, that will tend to cause members to maybe take the extra mile that it might involve to get to the gas station because of the incremental value they see there. But, obviously, we will have to see what happens with gas prices over the coming months there.”