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Low Prices Help Costco's Quarterly Profit Rise

Jay Laprete | Bloomberg | Getty Images

Costco Wholesale reported third-quarter profit just above analysts' estimates, as its low prices for food and gasoline appealed to shoppers.

The largest U.S. warehouse club chain typically offers everyday items like eggs below supermarket prices, hoping customers will stock up on other goods as well, and usually prices gasoline lower than nearby competing stations to attract members.

Members pay up to $110 per year to shop at Costco's big stores and website, which sell items ranging from food to furniture. The fee revenue pads the bottom line, allowing the company to offer low prices and take in thin profit margins on products it sells.

Shares of Costco closed at $112.95 on the Nasdaq on Wednesday. (Click here to get the latest after-hours quote.)

Membership fees rose 12 percent to $531 million in the third quarter ended May 12.

Costco said net income rose to $459 million, or $1.04 per share, from $386 million, or 88 cents per share, a year earlier.

Analysts on average were expecting profit of $1.03 per share, according to Thomson Reuters I/B/E/S.

Sales rose 8 percent to $23.55 billion but were below market estimates of $24.21 billion.

Total sales at stores open at least a year, or same-store sales, rose 5 percent.

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