Business

Costco to keep $1.50 hot dog-and-soda combo ‘forever’ despite inflation: exec

A top executive at Costco Wholesale confirmed the big-box retailer has no plans to change the price of its $1.50 hot dog-and-soda combo at its stores, despite months of decades of high inflation.

Costco CFO Richard Galanti reiterated that the fan-favorite deal’s cheap price would remain in place during the company’s fourth-quarter call on Thursday.

An analyst asked if Costco was adjusting prices in other parts of its business to maintain sales margins on its hot dog-and-soda deal and other value offerings.

“Lightning just struck me,” Galanti joked when the combo was mentioned. He added that higher margin businesses, such as gas and travel sales, help Costco maintain its value deals.

“Those things help us be more aggressive in other areas, or, as you mentioned, hold the price of the hot dog and the soda a little longer — forever,” Galanti added.

Costco and other retailers have been raising prices over the past year and passing on the higher cost of raw materials and goods to consumers. Inflation has fallen slightly in recent months, but still fluctuated at a higher than expected 8.3% in August.

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Costco has increased prices for some items due to inflation.
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Galanti estimated price inflation at Costco was about 8% in the fourth quarter, with increases “slightly higher on the food and sundries” side.

Costco has no immediate plans to increase its membership fees, according to the director. The store’s annual membership fee currently starts at $60.

Costco
Costco has no immediate plans to increase membership fees.
SOPA Images/LightRocket via Gett

Still, Galanti noted that membership prices would likely rise at some point in the future. Costco has generally increased its rates about every five to six years.

“Our view is that we are confident in our ability to do this and at some point we will. But it’s a matter of when, not if,” Galanti said.

Despite the inflationary environment, Costco exceeded analyst expectations in the fourth quarter. The retailer posted quarterly revenue of $72.09 billion and earnings per share.

Costco
Costco beat fourth quarter earnings expectations.
SOPA Images/LightRocket via Gett

But the stock still fell more than 4% in trading on Friday after executives noticed a decline in gross margins.

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Costco executives have avoided the famous price hikes in their food courts, especially for the hot dog-and-soda combo, regardless of changes in the economy.

In July, Costco CEO Craig Jelinek gave a one-word response when asked on CNBC if price changes were being considered for the deal.

“No,” he said.

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