Costco Will Soon Open Its First Stand-Alone Gas Station to Members. Here's What Investors Need to Know.

High gas prices in the current environment make Costco even more valuable. The popular wholesale retailer Costco (NASDAQ: COST) plans to expand its gasoline offerings beyond its traditional stores and will soon launch stand-alone gas stations that will remain exclusive to its members, who pay a $65 or $130 annual membership fee. The first one is set to launch in Mission Viejo, California, in June with a 40-pump station. Another is slated to open in Honolulu, Hawaii in 2027. Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue " While Costco executives have not specifically commented on the rationale for the new gas stations, most people have interpreted it as a way to ease congestion at the company's current lots, since the gas stations are set up right next to its wholesale stores. Long waits for gas can also exacerbate congestion in parking lots for people going into stores. But Costco's lower gas prices, which can be $0.10 to $0.30 below the U.S. average, according to U.S. News and World Report, are also a significant draw for members. At the end of its fiscal year 2025, Costco had 747 gas stations worldwide, which accounted for 10% of the company's net revenue. It's easy to see how this might be a draw for new members simply looking for cheaper gas, especially after the recent surge in gas prices due to the conflict in Iran. Say a person refills their gas tank twice per month, which means they buy 24 refills per year, and depending on one's job and daily travel, it can be much more than that. Then say the typical gas tank holds 16 gallons. If we assume a Costco member saves $0.20 per gallon, that's $3.20 in savings per refill and nearly $77 in savings per year. Plus, the Costco membership gives members access to its wholesale groceries and other products, which are often cheaper than at regular grocery stores. This easily makes a $65 membership a good value. Gas at Costco is more than just a way to attract new members; it helps drive the company's overall strategy, as CFO Gary Millerchip stated during the company's fiscal 2026 second-quarter earnings. ... on gas, generally speaking, we see about half of members that will shop at the gas station will also cross-shop at the warehouse. And obviously, as Ron mentioned, it is early days to know what the impact longer term might be from events in the Middle East at the moment. But 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. Wholesale retailers like Costco differ from traditional grocers because their profits are driven more by membership fees than by product sales. An estimated 70% of Costco's profits come from the membership fees, according to Alan Gin, an economist at the University of San Diego. That's why offering things like gas, which typically isn't a high-margin business, and other unique value-adds, like hot dog combos that cost only $1.50, may not directly make a profit. Instead, they are key aspects of the Costco strategy, and help to make it one of the premier defensive stocks in the market. Costco stock is up 15% this year. While it's not cheap, trading at 48 times forward earnings, it's precisely times like today, during extremely tense geopolitical situations or concerns about a recession, when you want to own a stock like Costco. I think the new strategy of stand-alone gas stations makes sense and should be viewed positively by shareholders. Before you buy stock in Costco Wholesale, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now... and Costco Wholesale wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $503,861!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,026,987!* Now, it's worth noting Stock Advisor's total average return is 884% -- a market-crushing outperformance compared to 179% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

Costco Will Soon Open Its First Stand-Alone Gas Station to Members. Here's What Investors Need to Know.

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