Inflation is causing havoc in the retail industry as consumers are increasingly being put in a position to have to scale back on expenses to afford the necessities in life.
With budget-busting, 40-year high inflation crushing many American families, bargains like Costco’s $1.50 hot dog-and-soda combo take on greater importance, but are consumers in for a rude awakening here?
Not according to Costco Wholesale CFO Richard Galanti, who said during the company’s fourth-quarter earnings call Thursday that the $1.50 combo price is safe — perhaps “forever.”
$1.50 for a hotdog and a drink at Costco. No inflation detected pic.twitter.com/ay9BqAgN93
— Saul Bermudez (@sauljbermudez) September 25, 2022
When asked if Costco was adjusting prices to maintain its value offerings, Galanti said higher-margin businesses like gas and travel sales help the company maintain its fan-favorite deal, the New York Post reported.
“Lightning just struck me,” Galanti joked when the combo was mentioned, according to the Post.
“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,” the executive added.
Much like the national figures, Galanti estimated that price inflation at Costco was about 8% during the fourth quarter, the newspaper noted, with increases “a little higher on the food and sundries side.”
While Costco doesn’t have any immediate plans to hike its annual membership fees, which currently start at $60, Galanti said membership price increases were likely at some point in the future. The article pointed out that Costco generally “hiked its fees roughly every five to six years.”
“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,” the CFO said.
According to Mashable, Costco “actually loses money on every single combo sold, which adds up to around 135 million hot dogs per year.”
Citing 425Business, the digital media platform recounted an exchange between Costco CEO W. Craig Jelinek, who complained about the hotdog combo, and Costco co-founder Jim Sinegal:
“I came to (Jim Sinegal) once and I said, ‘Jim, we can’t sell this hot dog for a buck fifty. We are losing our rear ends,'” Jelinek explained. “And he said, ‘If you raise the effing hot dog, I will kill you. Figure it out.’ That’s all I really needed. By the way, if you raised (the price) to $1.75, it would not be that big of a deal. People would still buy (it). But it’s the mindset that when you think of Costco, you think of the $1.50 hot dog (and soda).”
And he’s right on the money with that assessment.
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