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Costco’s new CFO recently confirmed that the $1.50 hot dog combo price is staying put. Can the same be said for membership fees? Read on to find out. [[{“value”:”
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Costco is known for its amazing prices. But if you’ve been to a store recently, you’ve probably noticed that the prices you’re seeing are higher than they were a few years ago.
Unfortunately, that’s part of a general trend. For the past three years or so, stubbornly high inflation has been driving the cost of living upward across the board. So you’re probably paying more now for everyday expenses like groceries and utilities than you were not so long ago. And frankly, that’s frustrating.
But one thing you won’t have to pay more for in the near term is Costco’s famous $1.50 hot dog and soda combo. Although some rumors emerged that Costco was looking to raise the price of that combo for the first time since introducing it in 1985, during the company’s most recent earnings call, Gary Millerchip, the new CFO, confirmed that the $1.50 price point customers love is here to stay.
However, there’s also been talk of membership fees rising. So you may be interested in what Millerchip had to say about those, too.
The hot dog deal is sticking
A CNN analysis found that if Costco were to adjust the price of its hot dog and soda combo to today’s dollars, it would run customers about $4.50. Instead, Costco has kept its $1.50 price in place for almost 40 years.
Costco’s intent is to not make money on its hot dog deal. If anything, it loses money there. But if that combo gets shoppers in the door, then ultimately, the company wins.
Think about it. Let’s say Costco could get away with charging you $4.50 for a hot dog and soda, but you’re able to snag it for $1.50. If you then go and spend $200 on store merchandise, Costco wins — so it’s willing to let you keep your $3 and pay less at the food court.
Recently, some rumors started to circulate about Costco raising the price of its hot dog deal. But Millerchip said on May 30, “To clear up some recent media speculation, I also want to confirm the $1.50 hotdog price is safe.”
Are Costco’s membership fees safe, too?
Costco has historically raised the cost of a membership about every five years and change. At this point, we’re well beyond that point. The last time Costco increased membership fees was June 2017.
Since the cost of existing has gotten so out of hand, at this point, a Costco membership fee hike might push cash-strapped consumers over the edge. But the good news is that Costco has no immediate plans to increase its membership costs, which currently sit at $60 per year for a basic membership and $120 per year for an Executive membership that gives you 2% cash back on your purchases.
“We feel really good about membership renewal rates,” said Millerchip. “We feel really good about the test of are we delivering significantly more value to members than we were or have since we last increased the membership fee…But we’re still evaluating those considerations to determine what the right timing is and when we reach that point where we feel it is the right time, of course, we’ll be very open and direct and communicating that.”
In other words, Costco fee hikes are not off the table. But they’re clearly not happening anytime soon.
Just because the cost of a Costco membership isn’t rising doesn’t automatically mean you should keep paying your $60 or $120 annual fee. If you’ve noticed you’re visiting Costco less frequently or your circumstances have changed in a way that makes Costco less convenient (say, you’ve moved farther away or no longer own a car), then you may want to reconsider your membership.
But if you intend to keep shopping at Costco, you can rest assured that you’re not looking at paying more for a hot dog or your membership in the near future.
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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.
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