Serrari Group

Costco, the retail giant known for its value offerings, has made a strategic move into the precious metals market, and it’s paying off handsomely. According to reports from Wells Fargo’s equity research note, the company is reaping significant monthly revenues, estimated between $100 million to $200 million, from the sale of gold bars.

This venture began last October when Costco introduced 1-ounce bars of nearly pure 24-karat gold, priced at around $2,000 each. Analysts commend the move, recognizing it as a savvy reinforcement of Costco’s value proposition. However, they caution that while revenues are impressive, profit margins might be narrower than expected due to pricing and associated shipping costs.

Costco’s pricing strategy has played a pivotal role in driving sales. With prices hovering slightly above spot rates for members, and additional incentives like cash back rewards, the company has successfully attracted buyers. Sales of gold bars reached $100 million between the debut and the end of the last fiscal quarter, ending Nov. 26.

Not content with just gold, Costco has expanded its offerings to include silver coins. Sold in tubes of 25, these coins have also seen strong demand. The 1-ounce Canada Maple Leaf Silver Coins, priced at approximately $680, sold out swiftly online earlier this month.

For those seeking variety, Costco also offers coins featuring a maple leaf on the front and a silhouette of King Charles III on the back, available at select warehouses. Costco members can purchase up to five tubes of these coins, indicating the company’s commitment to catering to the growing demand for precious metals among its clientele.

As Costco continues to diversify its offerings, its success in the precious metals market underscores its ability to capitalize on emerging trends while providing value to its members. With analysts projecting continued growth in this segment, Costco’s venture into gold and silver sales is poised to be a significant contributor to its revenue stream in the foreseeable future.

Photo source Google

By: Montel Kamau

Serrari Financial Analyst

11th April, 2024

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