Costco keeps $1.50 hot dog and soda combo ‘forever’ despite inflation: exec
A senior executive at wholesaler Costco has confirmed that the big retailer has no plans to change the price of a $1.50 hot dog and soda combo in its stores despite months of decades of high inflation.
Costco chief financial officer Richard Galanti reiterated that the cheap price point on the fan-favorite deal will stay in place during the company’s fourth-quarter earnings call on Thursday.
One analyst asked if Costco is adjusting prices in other parts of its business to maintain sales margins for its hot bar, soda and other value propositions.
“Lightning just hit me,” Galante joked when the combo was mentioned. He added that higher-margin businesses such as gas sales and travel help Costco maintain their value deals.
“These things help us be more aggressive in other areas, or as I mentioned, keep hot dogs and sodas priced a little bit longer — forever,” Galanti added.
Costco and other retailers have raised prices over the past year, driving up costs for goods and merchandise for consumers. Inflation has declined slightly in recent months but is still hovering at a higher-than-expected 8.3% in August.
Galanti estimated that price inflation at Costco was about 8% during the fourth quarter, with increases “a bit higher on the food and dispersal side.”
Costco has no immediate plans to increase membership fees, according to the executive. Annual membership fees at the retailer currently start at $60.
However, Galanti noted that the membership price increases were likely at some point in the future. Costco generally raised its fees approximately every five to six years.
“Our view is that we are confident in our ability to do it and at some point, we will. But the question is when, not if,” Galanti said.
Despite the inflationary environment, Costco beat analysts’ expectations in the fourth quarter. The retailer reported quarterly revenue of $72.09 billion and earnings per share.
But shares still fell more than 4% in Friday trading after executives noticed a drop in gross profit margins.
Costco executives have been known to avoid price hikes in their food court, especially for the hot dog and soda group, regardless of changes in the economy.
In July, Costco CEO Craig Jelinek gave a one-word answer when asked on CNBC if price changes for the deal were being considered.
he said no”.