After rough earnings, Jim Cramer said Costco (NASDAQ: COST) was a “buy.” He said, “And if Costco keeps falling, just keep buying more, because there’s nothing else like this company — never will be.” And, on one count, he was right. Costco will keep one of its most crucial brand builders. The $1.50 hotdog sold in its stores will not get a price increase, despite rumors to the contrary.
Costco’s longtime CFO assured the company’s members that the hot dog price won’t rise today, and it won’t rise tomorrow. CNN reported that during Costco’s earnings, management said, “To clear up some recent media speculation, I also want to confirm the $1.50 hot dog price is safe”
The $1.50 hot dog is part of the Costco brand, which is unique among large retailers. People can only shop in its stores for a fee. A “personal membership” costs $60 a year, and a “business membership” costs $120. A critical part of the membership is that people get paid 2% of the value of their total purchase back at the end of the year.
Other things come with membership. Among them are gas prices below those of the local market. Another is that Costco offers home and auto insurance with insurance company partners.
Costco’s full name is “Costco Wholesale Corporation.” It represents a promise of low prices and a reminder of the value of the $60 or $120. Money paid upfront, Costco reasons, gives consumers entry into a world where they can save money.
As for Costco’s earrings, revenue in the most recent quarter rose from $53.6 billion a year ago to $58.5 billion. EPS was $3.79, up from $2.94. The stock dropped briefly, but for longer-term investors, Costco’s price has been up 238% in the last five years compared to 92% for S&P. In most months, Costco’s sales have still risen strongly.
If the share price is insufficient, people can become members and still get that $1.50 hot dog.
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