Despite the continuous rise in gold prices, the American warehouse retailer Costco has been selling a large quantity of gold bars, with members rushing to purchase them and causing a shortage of Costco gold bars currently. Some analysts jokingly inquired whether Costco would introduce Kirkland Signature branded gold bars.
Costco is well-known for its bulk-packaged goods, free food samples, and oversized pieces of salmon, all favored by consumers. In the fall of 2023, Costco began selling 1-ounce gold bars, coinciding with a bullish gold market, and quickly achieved great success, with the momentum of sales remaining strong to date. Analysts from Wells Fargo estimated that Costco sells gold bars worth $100 million to $200 million per month.
On Thursday night (September 27), Costco’s Chief Financial Officer, Gary Millerchip, informed analysts during an earnings conference call that gold sales in the most recent quarter had grown by “double digits,” with other categories experiencing similar growth, such as jewelry, toys, and home goods.
He added that gold had been a “significant driver” of e-commerce sales this quarter.
Costco exclusively sells 1-ounce 24-karat gold bars to members online, with prices fluctuating depending on market conditions. Last fall, Costco sold gold bars for about $2,000; on Friday, the price on the Costco website was $2,699.99, labeled as “out of stock.”
Gold bar purchases are non-refundable, with each member being allowed to purchase a maximum of five units at a time.
According to LSEG Workspace data, the price of Costco gold bars is about $48 higher than the spot price of gold at $2,652 on Friday.
In 2024, gold has been one of the best-performing assets in the market, with a return rate close to 30%, compared to the S&P 500 Index’s return rate of about 21%. Gold has benefited from a range of factors including rate cuts by the Federal Reserve and central banks’ purchases. Market data from Dow Jones shows that the spot gold price reached a new closing high of $2,672.25, while gold futures hit a historical high of $2,708.70 per ounce during Thursday’s trading session.
Surprisingly, individual investors seemingly on the sidelines in the gold market are American investors, as evidenced by the high demand for Costco gold bars.
During Costco’s conference call on Thursday, an analyst made a joke based on Costco’s gold bar sales performance.
Yahoo Finance reported that Greg Melich, a senior analyst at Evercore ISI, asked Costco executives, “Given success in non-food areas, … I’m just curious, any plans to bring Kirkland Signature brand into the gold bar market?”
Kirkland Signature is Costco’s well-known house brand.
“There are currently no plans.” Costco’s CEO Ron Vachris responded decisively.
Experts suggest that Costco’s gold business is likely to remain profitable in the short term.
Ben McMillan, Chief Information Officer at IDX, told Yahoo Finance this week that after years of “silence,” gold is now full steam ahead as investors seek to reduce portfolio risks.
“Historically, gold has always been associated with risk aversion and hedge trades, such as a hard landing economic recession,” McMillan said.
Despite impressive gold sales, Costco’s main source of revenue still comes from selling daily products to cost-conscious members. Costco’s same-store sales in the fourth quarter increased by 6.9%, surpassing expectations of 6.4%. E-commerce sales rose by 19.5%, slightly lower than Wall Street’s forecast of 19.63%.
The growth in sales was mainly driven by increases in appliances, food, health and beauty products, tires, toys, and gift cards.
In pre-market trading on Friday, Costco’s stock price fell by 1.5%.
Yahoo Finance reported that Mark Astrachan, an analyst at Stifel, wrote in a client report, “Overall, we believe strong comp sales and membership growth, along with solid membership retention, suggest the company’s value proposition remains attractive, with strong gains in most of the company’s businesses.”
“We anticipate that most of the recent membership fee increases will be reinvested, further driving sales, comp sales, and traffic growth over the next 12-18 months.”