Costco has a honeypot, and it’s gold-plated.
While it may be better known for cult-favorite house brands and surprisingly crispy food-court pizza, the wholesale membership chain is generating $100 to $200 million per month by selling a new staple: gold bars, according to an equity research note from Wells Fargo.
In September, Costco began selling gold bars for $2,000. By late January, it started peddling one-ounce silver coins in a package of 25 for $675.
“We view the addition of gold [and] silver as a smart move for Costco, as it only reinforces its value position” the note said. “That being said, pricing at that level and shipping costs suggests it’s a very low-profit business at best.”
Wells Fargo said Costco priced its gold “attractively” by selling the bars to members 2% above spot prices, and before a 2% cash back reward for executive members, with another 2% in cash back for those with Citi card, the company’s credit card.
Since its debut, gold accounted for more than $100 million in sales during Costco’s first fiscal quarter, analysts noted. That interest is in part due to its pricing strategy and high level of customer trust.
The price of gold was down during early afternoon hours, trading at $2,353.
More retail news
Gold bars and silver coins have Costco riding high
Costco is starting to kick non-members out of the food court
Small business optimism hit an 11-year low as inflation fears persist
Target’s new self-checkout tech will warn you if you forgot to scan something
Costco stock had its worst day in almost two years