Shares of wholesaler Costco (COST) are ticking lower as gas prices (NG=F) jump to a four-month high. Yahoo Finance Executive Editor Brian Sozzi explores the relationship between Costco’s performance at the pump whenever gas prices move higher.
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Editor’s note: This article was written by Luke Carberry Mogan.
Video Transcript
JARED BLIKRE: Now, I’m watching Costco. Shares of Costco with gas prices at a four-month high to $3.40 a gallon on average nationwide. You might be wondering, why am I watching Costco with this? And really, Costco operates 692 gas stations across the country. And the old rule of thumb is, as gas prices go up, Costco actually makes less margin on gas and it brings their overall profit margin down.
So something to watch, especially as Costco stock chart starts to break down after the company’s earnings last week. Of course, they noted they sold a lot of gold bars, a lot of silver. Great. But profit margins under a little pressure. And I would be watching to see on how those lower margins on gas sales impact their business. Now, Julie the flip side of this is maybe they see a traffic burst because people are looking for cheaper gas. But nonetheless, something to watch.
JULIE HYMAN: I don’t really have anything to add on this. I’m sorry.
JARED BLIKRE: OK.
JULIE HYMAN: I mean, I know they reported earnings next week. I know people were disappointed with them. I don’t know.
JARED BLIKRE: Cheap gas.
