SEATTLE, Washington: As Americans are continuing to spend and store memberships remain largely intact amidst surging inflation, Costco is expected to post an increase in quarterly earnings this week.

The bleak profit predictions for Walmart and Target have rattled the retail industry and highlighted the reluctance of low-income households to spend on discretionary goods.

However, as an average shopper at its warehouses has a higher annual income than a typical Walmart and Target customer, Costco is in a better position, and its efforts to keep gas prices below the national average at its pumps have also increased membership numbers.

Income from its membership fee accounts for a bulk of Costco's profits.

In an interview with Reuters, D.A. Davidson analyst Michael Baker said, "The American consumer will go out of their way to save money on gas. The gas business drives traffic to the parking lot, and then somewhere between 30 percent and 50 percent of those customers end up going into the club and buying something."

Analysts are also monitoring the repercussions of China's COVID-19 lockdowns on Costco's supply chain, which sells many products that are made in China, including iPhones, clothing and products for its private-label Kirkland Signature brand.

Last week, Costco's smaller rival, BJ's Wholesale Club, reported higher than expected quarterly profit estimates, as higher-income customers shopped more and made up for a spending slowdown from other income categories.

Analysts polled by Refinitiv expect Costco to earn an average of $3.04 per share for the third quarter, a rise of over 10 percent from last year.

Excluding the effects of changes in gasoline prices and foreign exchange of 12.2 percent and 8.7 percent for March and April, Costco reported same-store sales growth.