Costco is experiencing a remarkable surge in gold bar sales amidst a significant rise in gold prices. The retail giant reported a substantial increase in gold sales, attributed to the soaring demand for the precious metal, as it became a focal point in their recent quarterly earnings call. Costco’s CFO, Gary Millerchip, mentioned that the sales figures for gold have seen a “double-digit” increase, highlighting its role as a powerful contributor to the company’s e-commerce growth during the past quarter.
Since beginning to offer gold bars in the fall of 2023, Costco has captured substantial market interest. Analysts from Wells Fargo estimate that the retailer is moving between $100 million and $200 million worth of gold bars each month, indicating a vibrant market for these investments. During a light-hearted moment in the earnings call, an industry analyst humorously inquired whether the retailer would consider adding Kirkland Signature, Costco’s renowned private label, to the gold offerings. However, Costco’s CEO, Ron Vachris, confirmed that there are currently no plans to expand into that area.
The demand for gold at Costco has coincided with the recent spike in gold futures, which reached an impressive $2,708.70 an ounce in trading, marking a 30% increase year-to-date. This surge has been bolstered by a recent decision from the Federal Reserve to reduce interest rates by half a percentage point. Consequently, notable gold mining stocks, such as Freeport-McMoRan and Barrick Gold, have also reaped the benefits, seeing considerable growth over the past year.
Costco’s pricing strategy for gold bars includes selling a one-ounce bar for $2,679.99. However, customers must hold a Costco membership to make a purchase. Additionally, the gold is non-refundable, and purchases are limited to five bars per member, ensuring a structured buying process.
Market analysts predict that Costco’s gold segment will remain highly profitable, particularly as investors seek safe-haven assets in uncertain economic times. Ben McMillan, CIO at IDX, observed that gold is regaining its reputation as a protective investment, particularly during periods of heightened economic stress.
Despite these impressive gold sales, Costco’s core business still thrives on traditional goods, catering to budget-conscious consumers. The company’s overall same-store sales growth for the recent fiscal quarter reached 6.9%, surpassing expectations and reflecting continued customer loyalty. This growth was particularly influenced by strong sales in household appliances, food, health and beauty items, and various seasonal products.
Investors are encouraged by Costco’s trajectory and expected continued membership growth. Stifel analyst Mark Astrachan affirmed a “Buy” rating on the stock, citing Costco’s appealing value proposition and robust retention rates—further supported by a recently implemented increase in membership fees.
As Costco continues to expand its offerings and adapt to changing market conditions, it positions itself as not only a leader in retail but also as an emerging player in the precious metals market. With gold becoming a prominent part of its inventory, Costco’s innovative approach promises ongoing engagement from both loyal customers and new investors.