Leading retailer Costco Wholesale Corporation (NASDAQ: COST) announced a new chief financial officer Tuesday who will be tasked with leading the company's financials and improving revenue and profitability.
One item the new CFO likely won't be able to change is the price point of a popular item at stores.
What Happened: Costco is home to a famous $1.50 hot dog and soda combo that has held the same price point for years, despite inflation and rising costs.
The retailer announced Gary Millerchip as the new CFO and executive vice president, with an effective date of March 15, 2024.
Millerchip was most recently the CFO of retailer Kroger Co (NYSE: KR), serving in the role since April 2019. Millerchip has spent the past 15 years with Kroger and over 20 years in banking before that.
Coming into the CFO role, Millerchip could look to make changes to increase revenue or improve costs and margins. One item he won't have much say on is the hot dog and soda $1.50 combo, which is a staple at Costco stores.
Benzinga previously reported on a fake story that circulated on social media in May 2022 of Costco raising the price of the combo by $1. The news shared by a parody account had many Costco fans upset and was even used by the Republican House of Representatives X, formerly known as Twitter, account as an attack on President Joe Biden and inflation.
Despite rising inflation, Costco kept the cost of its famous combo meal the same. The cost will likely stay the same for the foreseeable future or until a legendary Costco figure passes on.
A famous story that circulated over the years is the fact former Costco CEO Craig Jelinek asked Costco founder Jim Sinegal about raising prices on the combo.
"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.' And he said, 'If you raise the effing hot dog, I will kill you. Figure it out,'" Jelinek said, as reported by 425business.
Sinegal discussed the mindset of knowing Costco was famous for the combo and the particular price.
Costco built its own hot dog manufacturing plant and created the Kirkland Signature hot dogs to help with cost controls.
"By having the discipline to say, 'You are not going to be able to raise your price, you have to figure it out,' we took it over and started manufacturing our hot dogs," Sinegal said.
The $1.50 hot dog and soda combo, which was launched at Costco in 1985, is one of many items the retailer has become known for, alongside its rotisserie chickens and lower price of gas at Costco gas stations.
While Costco may lose money on items like the hot dog combo, it makes up for it by getting shoppers in the store to buy other items and getting them to buy and renew their membership each year.
Why It's Important: Millerchip succeeds Richard Galanti as CFO of Costco. Galanti was in the role for more than 30 years and will remain with Costco through January 2025 in an advisory role and helping with the transition.
While Millerchip won't be able to change the price of the hot dog combo, he could make a big change in his early tenure.
Costco last raised its membership fee in June 2017 and typically raises the annual fee every five to six years. The company has hinted that a membership fee increase is a matter of when and not if.
With a new CFO ready to make his mark, a membership fee increase could be an early item to watch. Fans of the hot dog combo likely have nothing to worry about with a new person leading Costco's financials.
Millerchip joins the company as the new CFO shortly after Ron Vachris took over the CEO role from Jelinek on Jan. 1, 2024.
COST Price Action: Costco shares trade at $704.53 versus a 52-week trading range of $465.33 to $714.28. Costco shares are up 40% over the last year and up 250% in the last five years.