Whenever I walk through the Costco food court, I look up at the giant menu board, see the $1.50 hot dog and soda combo, and let out an involuntary sigh of relief. I don’t always get one, but when I do, the food tastes three times as good because it’s not just affordable, it’s genuinely cheap. It turns out that the $1.50 hot dog still isn’t going anywhere, despite everyone’s fears of a massive recession and continuing inflation concerns. Costco revealed this information in its most recent fourth-fiscal-quarter result presentation, reports MarketWatch. Unfortunately, however, our membership fees are likely to go up relatively soon.
How Costco is able to keep its hot dogs so darn cheap
All of this information comes straight from Costco’s chief financial officer, Richard Galanti, who was asked where the price padding for the hot dogs comes from during the presentation. He responded:
“We really don’t look at it that way. I think the thing I mentioned earlier about there [being] some businesses that are doing well with margin, like [the] gas business, [in] a smaller way — in the travel business, those things help us be more aggressive in other areas, or, as you mentioned, hold the price on the hot dog and the soda a little longer — forever. But at the end of the day, no, I don’t think we necessarily look to find places where we can harvest margin.”
Thank God. He used the word “forever” when describing the deal. Interestingly, it seems like the money from Costco’s gas operation is where a lot of the wiggle room is coming from at the moment, with some money (albeit less), from its travel packages. Frankly, I’m not surprised. Have you seen the line of cars waiting for gas at any Costco? It’s wild.
Costco membership prices might go up early next year
I hate to be the bearer of bad news, though. Come next year, there’s a chance Costco memberships are going to be a little higher. The real question isn’t if, but when. Another MarketWatch piece reports that on average, the last three price increases in memberships (of $5-$10, according to Kiplinger) happened five years and seven months after the previous ones. Which means if the cycle continues, it’ll happen again in January of 2023. That’s coming up quick, everybody.
Galanti said during the investor call, “Now I’m not suggesting it’s January ’23. I’m just saying it’s not there yet anyway. And our view is, is we are confident in our ability to do so. And at some point, we will. But it’s a question of when, not if.”
I’m guessing some of that money will keep the $1.50 hot dog alive as well; nothing good ever comes for free, does it? Recession and inflation, you jerks better keep your dirty paws off our rotisserie chicken. Our lives are hard enough right now.