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Costco Wholesale Corporation Message Board

  • onlinegirl_us onlinegirl_us Apr 19, 2000 4:11 PM Flag

    stockpix re: Costco gas price

    I�ve never seen longer lines at our local COST
    for gas than in the last weeks. Rising gas prices
    brought MORE people to buy gas at COST than before - they
    have to buy gas somewhere and COST is the cheapest
    merchant!!! Every gas station just passes the higher oil
    prices to their customers.

    So it should have a
    positive effect on earnings. Hope you are not short on
    COST. Fundamentals and chart look terrific.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • I agree with you that it is strictly against
      Costco's philosophy to sell something at a loss (they
      don't play the game of loss-leaders), and that they
      would stop carrying an item if they could not offer the
      best price on it. But how does Costco stop selling gas
      when when a third of the buildings have gas stations?
      Nor would it make sense to charge a higher price at
      the Costco pumps when you could get it cheaper at the
      local gas station. The paying member doesn't care about
      margins, they shop at Costco because they have the best
      prices. So that would leave Costco with only one real
      altertive...take an initial loss on selling gas, and retain member
      loyalty.

      As an investor, I am all for Costco selling gas, the
      benefits in my opinion out weigh the negatives. Costco's
      net margin on selling gas is very small, but as NE
      metioned earlier, it does wonders in helping sales
      increases, and that's vital for a growth stock. It also
      helps add more value to the membership
      card.

      COST is a great stock to own, but I have lightened my
      position and will look to increase it again after next
      quarter reports are posted. For my money, there are many
      under valued stocks on the market with low PE ratios.
      Costco is currently sitting at a 40+ PE ratio, the
      average ratio on an S&P 500 stock is around
      20.

      Why take an unnecessary risk?

    • I took the numbers off the annual report, there
      was a $118,323,000 charge for the change in
      realization of membership income. That is where I came by
      1.44, oopsy....

      I am still curious, are there
      really buildings out there doing over 10% in gas? We
      aren't seeing that here in Sacramento......Location #'s
      or names??

      I am not arguing that fluctuation
      in gasoline affects margin, I just do not believe
      that Costco would ever sell something for a loss. It
      would be such a change in philosophy, it would almost
      be like getting rid of the membership
      fee.

      p.s. I get it already about the Oil Companies and
      their reserves. Conversely COST is in a better position
      when prices drop. Gas prices always fall eventually
      because of greed, the Oil Companies eventually figure out
      a way to produce more of their expensive gas, even
      the OPEC countries begin cheating on each other. They
      can't stand to sit on their product when it is at an
      all time high, and guess what happens. Just like when
      COST stock gets over $55, the price starts to come
      down as it isn't as scarce as before. I just think
      when it is all averaged out, no one has any huge
      advantage. If anyone does I would think COST does as they
      are moving it so fast. My buddy worked at the Gas
      Station at Cal Expo #471 the other day, and he was
      telling me they had 3 deliveries of gas that day. The
      vendor actually ran out of regular and had to pump
      premium in all the tanks, for which COST paid only for
      regular. And as usual COST passed the savings on to the
      member.....Get ready to buy some more stock on the dip that's
      coming!!

    • You'ld think COST would make $$$$ with the rising
      price, but, since our turnover is so high, we have to
      pay a higher price everyday as well. As mentioned by
      a previous poster, if big oil companies bought
      their reserves for lower, COST will suffer. The reverse
      is true in a falling market with anything COST
      sells. If we are constantly buying on the low side, then
      the company is able to beat out competitors that may
      have bought thier inventories at higher prices. It
      helps to have strong buying power also, but thats a
      another story.

      NE1

    • Does 10%+ gas a day, I don't know of any. Give me
      a location # or a name, so I can look them up. I am
      just curious. The building in New Mexico has great
      gasoline sales but the Warehouse rocks also.

      I will
      say it once again.....

      Costco doesn't sell
      anything for a loss, period. When Costco couldn't match
      Walmarts price for Snapple and Kodak some time ago, as
      Walmart had a more favored price. Costco shipped those
      items out and sold them elsewhere. This is secondhand,
      but I heard that Jim told the buyer to get that s#$^
      out of my buildings. They did it again recently with
      truck tires, Michelin of America tried to dictate the
      sell price for it's tires. It was higher than our
      normal price, Costco had them come pick up the unsold
      inventory. He is an old fashioned guy, and I don't think he
      will play the game of loss leader just to improve
      comps in 90+/-? buildings. What is Costco's net margin,
      like 1.4%, there is no room for giving anything away.

    • In this area, gasoline does 10% or more of sales
      every day. Sure, the company was losing a bit while
      price was going up and in a market of this nature I
      would think Costco expects some good days and some bad.
      But, to shut down the pumps and give back the sales
      would have been extreme. The managers look at total
      sales very closely each day and are expected to make
      their numbers. If gasoline is sold at a loss, that's
      headquarter's fault, not theirs. In most cases, on a typical
      day, the response is "gas saved us". Now that tells
      you something doesn't it?

      Comps company wide
      have been boosted quite dramatically over the last
      year or so, because of all the new stations. These
      sales of 20-40K per day (gasoline), are being compared
      to previous years that didn't have such figures. In
      a warehouse that does an avg. of 300K, we're
      looking at 10% gains in comps because of gasoline alone.
      These figures are even more inflated due to the run-up
      in crude prices. It's great while it lasts, but as
      soon as most locations have stations, then those
      additional sales won't be there anymore.

      NE1

    • Judging by the type of Management operating the
      clubs I have been in lateley Cost is having trouble
      finding qualified help. Indecisive inept and too
      concerened about the bonus to be of any use to the costomer
      or vendor.

    • Selling lots of gas is not the problem, selling
      it at a loss is.
      Bigger refinery companies are
      able to absorb price hikes much better because they
      have huge fuel reserves that was purchased at a lower
      price.
      Costco doesn't have a fuel reserve and sells
      gas below market prices and tries to make a small
      profit.
      In Feb-March, prices went up so fast that that
      Costco (from what I gather) had to sell its gas at a
      loss to stay competitive with the local gas
      stations.
      When oil prices go down fast, that helps Costco. When
      you get a surge in Oil prices that initially hurts
      Costco.
      Don't get me wrong, this is a great company and if your
      long on COST you will be rewarded.

 
COST
118.14+0.55(+0.47%)Jul 24 4:00 PMEDT

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