Free samples are back... Costco, the Disneyland of bulk retail, just dropped its March sales numbers. Sales growth accelerated from February, jumping 18% compared to March of last year — impressive, since that was the month when 56-packs of TP were more cherished than gold. While pandemic hoarding season has passed, the bulk love has not: Costco's 807 warehouses brought in $18B in sales from March to April this year.
Not just 20-pound salmon... Packaged food is Costco's literal bread and butter, but it also has "ancillary businesses" (read: side-hustles). These include gas stations, which make up 9% of Costco's yearly sales. Gasoline = a convenient perk that lures Costco members to shop more frequently. Stop for the gas, stay for the Costco Muffins (and vice versa). But oil didn't shine last quarter...
- As demand for gas fell from December to February, gas prices fell 10% on average. Related to that...
- Costco's quarterly gas sales by volume dropped 9% from 2020 as people drove less (and online-ordered Kirkland coffee pods, instead).
Costco has a "gas paradox"... No matter which way gas prices move, it kind of loses either way: When gas prices rise, so do Costco's sales numbers. But its profit margin generally falls — since it's spending more on gas, it keeps less in profit. Its gas biz is also generally less profitable that its other businesses, so the more gas it sells, the more its overall profit margin dips. On the flip side: when gas prices fall, so does sales growth. Costco believes gas stations build loyalty and attract customers — but long-term, it'll have to decide if the "gas paradox" is worth it.