Most Of Costco's Recent Earnings Came From An Unexpected Source
We all know someone who shops at Costco. That someone might even be you. The point is that the warehouse store is pretty darn popular. In fact, Costco's net sales for 2021 totaled more than $192 billion (via Supermarket News).
So what are people buying from Costco? By general consensus, some of the best items to buy at Costco include prescriptions, diapers, and gas. Gas in particular is a huge draw for customers, as it's cheap compared to other gas stations. However, the real reason Costco's gas is so cheap is that you're just paying the difference with your membership fee.
Either way, gas is definitely a big ticket item for Costco. According to KSL News Radio, Costco's gas sales reach around $20 billion each year, or around 10% of its net sales. That's a sizable chunk, but still much less than Costco makes off its in-house items. Up until recently, that is.
Gas price inflation is sending Costco gas sales skyrocketing
Inflation affects just about every aspect of everyday life. Goods cost more, and the dollar buys less. Comparatively speaking, people can't afford as much now as they could a year ago, even if they're being paid higher wages. This is called "inflation-adjusted earnings," and according to Forbes, this "buying power" has dropped 2.6% since June 2021.
For Costco customers, this means one perk is disappearing -– cheaper gas. Because of nationwide inflation, Costco gas prices are no longer significantly lower than those of other gas stations. For many people, it's not even worth the drive.
Despite all this, Costco still saw an increase in gas sales this past quarter. The chain's total sales increased 16.3%, says the Motley Fool, with gas sales accounting for around 5% of the increase. Between the chain's lower prices and higher customer satisfaction, it's clear that Costco has a secret weapon in its battle against inflation.