Costco leans on cheap fuel to pull members in, but its private-label Kirkland push is the longer play

Costco’s gas stations are getting a lot of attention again as consumers hunt for lower prices. TheStreet’s latest look at the warehouse club’s strategy argues that Costco’s “member deal” at the pump is only the opening act, and that the retailer’s private-label Kirkland Signature brand may matter more to long-term membership retention.

In coverage attributed to CNN, Costco is described as routinely undercutting local gas stations by about 30 cents per gallon. The same report says Costco is “not a loss leader” in the usual sense, noting the company makes a profit on gas of only a few cents per gallon, even though that margin is far lower than what typical independent gas stations charge for markup. As gas demand rose, Costco also reported that store foot traffic increased by around 5% and that about half of members who fill up end up walking into the warehouse.

The underlying funding model is membership-driven. In its fiscal third-quarter results press release for the 12 weeks ended May 10, 2026, Costco reported membership fee revenue of $1.373 billion. Over the same quarter, net sales rose 11.6% to $69.15 billion, reinforcing how the subscription cash flow can support lower-priced offerings across the business.

Costco’s leadership also tied gas performance directly to consumer behavior during that quarter. On the fiscal Q3 2026 earnings call transcript, CEO Ron Vachris said the company’s “gas business” was especially visible in the period, pointing to record-breaking volumes and noting that high consumer price sensitivity drove “many members” to use the gas stations for the very first time. The transcript also describes the logistics challenge of keeping supply steady, with multiple daily gas deliveries to many locations.

Where Costco’s strategy appears to go beyond fuel is in how it turns that initial traffic into repeat shopping. TheStreet’s framing and Costco’s own commentary both point toward Kirkland Signature as a competitive weapon that reaches into categories far larger than gasoline. Kirkland Signature is Costco’s private label, meaning the brand is owned and marketed by Costco, not by national packaged-goods companies.

In the earnings call transcript, CFO Gary Millerchip said Kirkland Signature is driving growth in food and sundries, adding that Kirkland items offer savings of at least 15% to 20% versus the national-brand equivalent while maintaining equal or better quality. He also described new Kirkland launches during the quarter, including KS energy drink, KS ultra filtered milk, KS sea salt popcorn, and KS oven roasted chicken dog food. In the same discussion, Millerchip pointed to Kirkland’s protein-related lineup, including beef sticks, and Vachris cited the launch of a Kirkland Signature ultra-filtered protein milk as “taking off” with members.

The key idea, reflected in the reporting, is that gas prices can change quickly, but private-label value can compound. Even when gas discounts do the job of drawing members into the parking lot, Kirkland products can keep the value proposition inside the warehouse, where Costco’s higher-volume shopping trips and repeat purchases generate the bulk of sales.

What remains unclear is how much of Costco’s Kirkland-related advantage can be separated from broader pricing and merchandising initiatives, because Costco did not break out specific Kirkland gross margin or direct customer cross-shop metrics in the excerpts highlighted here. The gasoline component is also inherently cyclical, and the CNN-derived reporting notes demand and profitability dynamics can shift as gas prices move. Investors and members will likely watch whether Costco’s next set of quarterly results continues to show steady membership engagement when fuel pricing pressure eases, and whether Kirkland keeps expanding its share across food and sundries.