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Monday, July 11, 2022

Costco CEO’s one-word answer to whether he would raise the price of hot dogs: 'No' - CNBC

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Some good news for inflation-weary Americans: There will be no price hike on Costco's hot dogs.

In an interview Monday on CNBC's "Squawk on the Street," CEO Craig Jelinek had a one-word answer when asked whether he would raise the signature food court item's price: "No."

Costco has continued to put up strong sales, even as other retailers have spoken about consumers becoming more budget-conscious and spending more on services instead of goods. It's also avoided another recent problem for many retailers: excess inventory that's racked up in warehouses and stores, which must now be packed away or marked down.

Yet amid nearly four-decade high inflation, Costco has raised the prices of some food court staples. Earlier this month, its chicken bake jumped from $2.99 to $3.99 and its 20-ounce soda rose by 10 cents to 69 cents. That prompted speculation that its hot dog's super low price could be due for a hike, too. The hot dog and soda combo has sold for $1.50 for decades, and was the subject of a Mental Floss article from 2018 that recently began circulating again.

The article recounts a time when Jelinek approached Costco co-founder and former CEO Jim Sinegal. He told him the company was losing money over the iconic food item.

"I came to (Sinegal) once and I said, 'Jim, we can't sell this hot dog for a buck fifty," Jelinek said, according to the Mental Floss article, which cites 425Business. "We are losing our rear ends.' And he said, 'If you raise (the price of the) effing hot dog, I will kill you. Figure it out.' That's all I really needed."

Another aspect of Costco's business has also been under scrutiny: When its membership fee might increase. Costco membership costs $60 a year or $120 a year for an executive membership, a higher-tier option that includes additional discounts and perks.

The vast majority of Costco's profit comes from the annual fees rather than from selling items. It has historically raised it every 5½ years and the last increase was in June 2017, putting it on track for a rise soon, according to Corey Tarlowe, an analyst at Jefferies. Its membership fee typically increases by $10.

On Monday, Jelinek told CNBC that a membership fee hike is "not on the table right at the moment."

"I made it very clear," he said. "I don't think it's the right time. Our sign-ups continue to be strong."

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Costco CEO’s one-word answer to whether he would raise the price of hot dogs: 'No' - CNBC
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