Costco Wholesale Corp. on Thursday reported quarterly earnings rose a slight 6 percent, as steep oil prices cut into profits at its gas stations.
The largest U.S. warehouse club operator operates gas stations at many of its 334 U.S. stores and usually charges less than traditional gas stations in hopes of using the discount to bring customers into its stores.
But its profits suffer when gas prices rise quickly because Costco replenishes its gasoline supplies on a daily basis while most gas stations typically turn their inventory only weekly.
That means when energy prices soar, Costco must pay the higher price of the day while competitors are still selling supplies they bought cheaper a week earlier.
Costco posted a net profit of $209.8 million, or 43 cents per share, in its fiscal third quarter ended May 8, compared with a profit of $198.7 million, or 42 cents per share, a year earlier.
Analysts, on average, expected a profit of 42 cents per share, according to Reuters Estimates. Costco said in April that earnings would be in the range of 41 cents to 43 cents per share, which was below Wall Street expectations at the time.
Net sales for the quarter rose 10 percent to $11.75 billion, while stores open at least a year saw sales increase by 7 percent from the year-ago quarter.
Analysts had hoped Costco would beat the lowered expectations since gas prices have come down since the company’s April 22 profit warning, but they only edged out Wall Street estimates by 1 cent per share.