Costco sells 'record-breaking' amounts of gas as fuel costs soar amid US-Iran war

The market is likely underappreciating the composition of Costco’s upside: this is not just a temporary fuel spike, but a traffic-acquisition engine that can compound basket growth. First-time gas customers are the key second-order catalyst because fuel acts like a loss leader with unusually high conversion into higher-margin inside-the-store spending over the following weeks, not just the same visit. That makes the earnings quality better than the headline comp suggest, because the gas-driven traffic halo can persist even if pump demand normalizes.

The beneficiary set extends beyond COST. Lower-income and value-seeking households are trading down more aggressively, which pressures premium grocers, discretionary retailers, and any warehouse competitor with less compelling fuel economics or weaker membership retention. At the same time, higher oil also raises Costco’s working-capital and logistics friction, so the upside is not linear: if gasoline remains elevated for another 1-2 quarters, membership renewal and pricing power matter more than traffic alone, while a sharp retracement in fuel would remove the incremental visit driver quickly.

The key contrarian point is that the market may be too focused on the “gas windfall” and not enough on the inflation hedge Costco represents in a slowing consumer backdrop. If tariff pass-through and oil-linked input costs spill into broader merchandising, Costco’s value proposition strengthens versus nearly every general merchandiser, but margins may remain capped because management will likely sacrifice near-term gross profit to preserve the price gap. That sets up a classic quality-vs-multiple debate: the stock can keep working even without upside revisions if investors migrate toward defensive compounders, but upside could stall if comps decelerate once fuel volumes mean-revert.