Costco still selling gold bars like hot cakes as prices surge
09/27/2024 19:32
The business of gold remains lucrative for Costco.
Costco (COST) is slinging a lot of gold bars as prices for the yellow metal continue to surge.
Sales of gold were up "double-digits" in the most recent quarter, Costco CFO Gary Millerchip told analysts on its earnings call Thursday evening. Millerchip went on to add that gold was a "meaningful tailwind" to e-commerce sales in the quarter.
Costco began selling gold bars in the fall of 2023. Wells Fargo analysts have estimated Costco is selling $100 million to $200 million in gold bars each month.
The most recent gold performance led to a tongue in cheek moment as Costco's call was nearing an end.
Veteran EvercoreISI analyst Greg Melich asked executives "given the nonfood, the success there...I'm just curious, are there any plans to maybe bring Kirkland Signature into the gold bullion market?"
Kirkland Signature is Costco's large private label business.
"No plans at this time," Vachris said.
The gold rush at the warehouse club comes as (GC=F) futures for the metal hit record highs at $2,708.70 an ounce during Thursday's trading session. Year-to-date, gold is up 30%, with Fed's decision to cut rates by a half percentage point last week giving it another boost.
Top gold stocks such as Freeport McMoRan (FCX) and Barrick Gold (GOLD) have gained a cool 22% and 18%, respectively, in 2024.
On its website, Costco sells its 1 oz gold bar for $2,679.99. You have to be a member to buy the bullion. It's also non-refundable, and there's a limit of 5 total units per membership.
It's likely that Costco's gold business will stay lucrative in the near-term, pros suggest.
IDX CIO Ben McMillan told Yahoo Finance this week that after years of gold being "sleepy," it's now firing on all cylinders as investors look to de-risk their portfolios.
“Gold historically has been.... kind of associated with very risk-off, very flight to safety type trades like hard landing recessions," McMillan said.
Despite the hefty sales of gold, Costco's bread and butter is still hawking... products like bread and butter to cost conscious shoppers.
Its fiscal fourth quarter same-store sales growth came in at 6.9%, compared to estimates of 6.4%. E-commerce sales jumped 19.5%, slightly lower than the 19.63% growth rate Wall Street was projecting.
Sales were powered by growth in appliances, food health and beauty aids, tires, toys, and gift cards, among other items.
Shares of Costco fell 1.5% in pre-market trading on Friday.
"In total, we think strong comparable sales and membership growth, and solid member retention rates indicate the company’s value proposition continues to appeal, with strong share gains across most of the company’s businesses. We anticipate the recently enacted membership fee increase will be largely reinvested, further aiding sales, comp, and traffic growth over the next 12-18 months," said Stifel analyst Mark Astrachan in a client note.
Astrachan maintained a Buy rating on the stock.
Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected].