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CALIFORNIA / News and Insight on Business in the Golden
State

Costco Pumps Up Its Gas Station Business

Retailing: Membership chain will more than double the number of stores selling fuel next year.

September 29, 1998|LESLIE EARNEST | TIMES STAFF WRITER

Costco, which pumps gasoline at 32 of its membership warehouse stores nationwide, plans to more than double that number by next September, adding several more outlets in Southern California.

The Issaquah, Wash.-based company, one of the nation's largest retailers, has added members and boosted overall sales at warehouses where gas pumps have been installed, Chief Financial Officer Richard Galanti said Monday.

Costco opened its first on-site gasoline station three years ago in Tucson. Members save an average of 10 to 12 cents a gallon on gasoline purchases, the company said.

"It's been a great success so far," Galanti said. "We've actually had some people sign up to be members for the first time because of the gasoline."

The price varies by location, he said, depending partly on what stations in the area are charging. "We check the competition every week," Galanti said.

Costco, which merged with Price Club in 1993, operates 212 wholesale warehouses nationwide, 49 of them in Southern California. Over the next year, Costco intends to add gas stations at 35 more locations, including five more in Southern California.

Costco's Irvine station, which opened in July, has been doing a brisk business, said Steven West, who operates it.

"It's getting busier and busier as days go by," West said.

On Monday, Costco's per-gallon price in Irvine was $1.05 for regular unleaded and $1.20 for premium. At a Union 76 station a couple of miles away, regular unleaded was $1.24 a gallon and premium was $1.48.

Only members can buy gasoline at Costco, which charges an annual membership fee of $40 for eligible individuals. Business memberships cost $35.

Analyst Donald T. Spindel said the chain's competitors have taken notice.

Sam's Club, a membership warehouse chain owned by Wal-Mart Stores Inc., began experimenting with gas stations a year ago and now has pumps at five locations, none of them in California.

"I think that tells you something about the success of it," said Spindel, with A.G. Edwards & Sons Inc. in St. Louis. "Usually, among the wholesale clubs, if an idea is proven to be successful, the others will copy."

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