ISSAQUAH, Wash. -- Costco Wholesale Corp. reported a third-quarter profit below Wall Street forecasts as rising gas prices continued to pinch margins, said The Seattle Times. The wholesale-club retailer based in Issaquah, Wash., said its third-quarter profit was $235.6 million, or 49 cents a share, a 12.3% gain from a year ago. Sales rose 10.6% to $13.3 billion.
Higher gasoline prices lowered its earnings by two cents for the quarter, the company said. To lure customers into its warehouse clubs, Costco runs gas stations at 241 of its warehouses, aiming [image-nocss] to charge the lowest price for gas within a five-mile radius. But the retail giant, known for deeply discounting items and making a profit by selling massive volumes, has become a victim of its own success, the newspaper said.
According to the report, the company turns its gasoline supply so rapidlyits average station uses its entire inventory in a day-and-a-half versus seven to 10 days for a competitorthat it's more vulnerable to a spike in prices.
When Costco buys fuel at a higher price, it still must compete with stations selling fuel purchased earlier at a lower price. Since Costco aims to charge prices lower than rivals, it eats the difference to remain competitive.
Costco CFO Richard Galanti told analysts that gross margins "will continue to be a little down" due to higher gasoline prices, but the company thinks that gas stations remain an important way to bring in customers.
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