Costco no longer has the cheapest hot dog deal in town.
During an earnings call this week, Walmart CEO Doug McMillon announced that Sam’s Club, the warehouse club owned by Walmart, will reduce the price of a hot dog and soda combo by 12 cents to $1.38.
The price cut means that the in-store treat is now cheaper than its legendary counterpart at rival chain Costco.
Costco's $1.50 hotdog and drink combo hasn’t changed since 1985, even as other prices have soared in subsequent decades. This fall, the Costco CFO Richard Galanti reiterated that the chain would keep the price of the combo the same “forever.”
Why Costco hot dogs and rotisserie chickens are so cheap
The announcement came as McMillon outlined plans to reduce prices on certain popular items even as persistently high inflation pushes costs higher for businesses and shoppers alike.
“We're removing inflation on a basket of traditional Thanksgiving food items,” he said, “including whole turkeys for under a dollar per pound.” McMillon also said racks of lamb and lobster tails in Sam's Club stores are more than 40% cheaper than they were last year.
Pricing some items very cheaply — sometimes so cheap that the retailer doesn’t even make a profit — is a tried-and-true strategy for warehouse stores like Sam’s Club and Costco.
“There are some businesses that are doing well with margin,” Costco’s Galanti explained in September, like gasoline and travel, where the store makes a big profit. “Those things help us be more aggressive in other areas.”
The idea is that even though Sam’s Club or Costco won’t make profits on what retail experts call “loss leaders,” like $1.50 hot dog combos, or $4.99 rotisserie chickens, or legs of lamb, customers will shop more often and spend money on higher-margin products elsewhere in the store.