Costco's profits squeezed by higher energy costs

Costco Wholesale Corp. — which has attracted shoppers looking for cheaper options — warned Wednesday that its earnings in the current quarter will be below Wall Street expectations as it faces higher energy costs that are crimping profit margins.

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Here are the details:

_ Soaring energy inflation is affecting the cost of goods, leading suppliers to push higher prices onto Costco and other retailers at a faster and higher rate in the past six to eight weeks than before, according to Richard Galanti, Costco's chief financial officer. Galanti says suppliers want increases of 5 percent to 10 percent and even more in recent weeks, compared to a range of 2 percent to 4 percent earlier in the fiscal year. Costco is trying to delay some of the price increases to help drive sales, but that comes at the expense of profit margins.

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_ Sales of gasoline, a low-profit item, are accounting for a bigger part of Costco's business. The company reported a 9 percent gain for June in sales at stores open at least a year, but excluding gas sales the increase would have been 5 percent.

_ High energy costs have raised freight costs at all levels of the merchandise distribution chain.