Costco Profits Fueled by Pump Discounts

The big-box store reels in shoppers with its low gas prices, a strategy that has boosted its bottom line.

March 02, 2012

ISSAQUAH, Wash. -- Costco Wholesale Corp has increased its profits by luring customers into its stores through low pump prices, Reuters reports. The retailer registered a larger-than-anticipated bump in quarterly profits, attributable to discounted gasoline prices at its service stations.

Costco underbids area gasoline stations, which draws shoppers to its pumps €" and stores €" when gasoline prices rise. Costco also prices some everyday goods, such as bananas, under grocery store cost. The retailer has said that around 30% of its members purchase gasoline and shop on the same trip.

Second-quarter profits jumped to $394 million, up from $348 million during the same time in 2011. Sales in the second quarter soared 10% to reach $22.51 billion. Same-store sales increased 8% during the second quarter, and advanced the same percentage in February, beating analyst expectations by 0.4%, according to Thomson Reuters. January also saw same store sales soar 8%.

Sam€™s Club has also seen positive gains from high gasoline prices. Sam€™s Club total sales, which include gasoline, jumped 6.8% to reach $14.01 billion during the last quarter. Same-store sales, without gasoline, at Sam€™s Club increased 5.4% in the last quarter.

Costco was one of the winners in the recent ASCII customer satisfaction survey.

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