Why Costco Stock Could Be Recession-Proof

Lower-income American consumers are running out of money. The price of gas has spiked in recent months due to the Iran war, reaching $4.55 per gallon according to AAA, the highest level since 2022.

If consumers cut back on spending due to higher gas prices, this could be bad news for the retail sector and consumer discretionary stocks. Recent analysis from Bloomberg found that CEOs are mentioning gas prices more often on earnings calls. What does this mean for warehouse retailers like Costco (NASDAQ: COST)?

The company's stock is up about 17% year to date, outperforming the S&P 500 index and about on par with its major competitor, Walmart (NASDAQ: WMT). During the past five years, Costco shares have slightly lagged behind Walmart's performance but have strongly outperformed other major retail stocks like Target (NYSE: TGT), Home Depot (NYSE: HD), and Amazon (NASDAQ: AMZN).

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Here are a few reasons why Costco stock might be recession proof, even if some consumers cut back on spending.

Costco members are still spending -- and renewing

A big trend in retail is the "K-shaped economy." Fed research shows that most retail spending growth in the past few years has come from high-income households earning more than $125,000 per year. These people can handle higher inflation (and keep shopping at higher prices), even while lower-income customers might feel pressured to cut back.

Good news for Costco shareholders: Costco shoppers tend to be from high-income households. Research from Numerator shows that 40% of Costco members have incomes of $125,000 or higher. A 2023 study from the Northwestern University Medill School of Journalism found that Costco members had an average household income of $81,200, which was higher than members of Walmart+ ($61,500) and Amazon Prime ($66,200).

Image source: Getty Images.

The company also boasts a high rate of member retention. As of the end of fiscal 2025, Costco's member renewal rate in the U.S. and Canada was 92.3%. This indicates strong customer loyalty -- people are unlikely to cancel their Costco memberships in both good times and bad.

On the company's most recent quarterly earnings call in March, CFO Gary Millerchip said, "We are seeing our members are willing to and have the capacity to spend."

Higher gas prices could be good for Costco's business

Higher gas prices aren't good news for the economy, and pain at the pump is a real burden for many lower-income households. But Costco is well positioned to survive and succeed in an environment of higher gas prices.

That's because Costco sells a lot of gasoline. The company's gasoline business made up about 10% of its total net sales in 2025. And its lower-price gas pumps can be a good point of entry to attract new members or drive more repeat business from existing members.

On the company's latest earnings call, Millerchip said that "about half of members that will shop at the gas station will also cross-shop at the warehouse." Even if gas prices rise from their current levels, Costco might become a more attractive place for consumers to buy groceries and other household items.

Costco members tend to be more affluent than average and are likely to keep shopping. The company seems well positioned to keep thriving even if lower-income consumers cut back on their spending. I'd rate this stock as a solid buy.

Ben Gran has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Costco Wholesale, Home Depot, Target, and Walmart. The Motley Fool has a disclosure policy.