Bufetico
On his lunch break one day in March, Costco’s chief executive, Ron Vachris, ordered a hot dog at one of the company’s food courts, sat down at a table, took a huge bite and made a promise on camera. When he was asked if the price was going up, he said the hot dog price won’t change as long as he’s around.
Vachris has been chief executive since January 2024, and before he ran the Northwest Region he spent 28 years in management jobs in warehouse operations. The price he was talking about is $1.50, for an all-beef hot dog and a 20-ounce soda, and it’s been $1.50 since 1985.
That price has been tested before. In a 2018 speech, Craig Jelinek, who ran the company before Vachris, said he once went to the co-founder, Jim Sinegal, and told him they were losing money selling it at that price. Sinegal’s answer: “If you raise the effing hot dog, I will kill you. Figure it out.” The price stayed.
Keeping it there isn’t free, because the hot dog lives inside a company with a big payroll. Costco’s annual report says pay and benefits are its biggest cost after the goods themselves, and that it aims to pay much of its workforce better than the industry average. In March 2025 it raised starting pay in the U.S. and Canada to at least $20 an hour. One page of the same report shows how a $1.50 hot dog fits.
Four profits on one page
That page is the income statement: the money that came in at the top, then the costs, one layer at a time, down to what’s left. Costco’s covers the 52 weeks that ended August 31, 2025, and it has four different profits on it. The hot dog is in every one.
Costco’s sales that year were $269,912 million, hot dogs included. After paying for the goods it kept 11.1 percent, eleven cents on the dollar. That’s the profit after the goods, what accountants call gross margin, and it’s thin on purpose. The hot dog’s own costs sit right here. Costco has made its own hot dogs since the late 2000s. Years ago, when its Coca-Cola contract came up for renewal, it switched to Pepsi to save money, Fortune reported. It’s back to Coke now.
Running the place, which is mostly pay plus the buildings and the power bills, took the bulk of what was left. What remains, plus one line I’ll come back to at the end, is operating income, $10,383 million, or 3.8 percent of everything that came in, $275,235 million, a bit more than it sold. Of the four, I start with this one, because it’s what the business earns from doing what it does. The bank and the taxman haven’t had their turn yet. It’s also where a promise like Vachris’s has to fit, at under four cents on the dollar.
Below that comes the bank, and after it the taxman. Costco earned more interest than it paid, so the profit went up a little, and tax took about 25 percent of it. Net income, at the bottom, was $8,099 million, the number that makes the headlines. That’s 2.9 percent of what came in. So one year gives you eleven cents on the dollar after the goods, under four after running the place, a little more after the bank and under three after tax. When somebody tells you a company has a good margin, ask which one.
Where this breaks
Costco puts more into the cost of its goods than the goods. Freight is in there, and its depots, and the plants where it makes its own products. So are the pay, the benefits, the power and the wear and tear in its fresh food departments and some of its side businesses. Another retailer can book the same things lower down, under running the place, so two gross margins side by side in a table can be measuring different things. Tesla and Inditex run into the same problem in the lesson on how to read an income statement.
And it’s one year. Costco’s year is 52 weeks, 53 every few years, and in a long year every line grows while the business stays the same size. Operating income only tells you the most when nothing odd is sitting inside it, like a write-down or a one-time charge, and this one didn’t have anything big like that. None of the four profits is cash, either, and cash has a page of its own.
Back at the counter
Go back to the top of the page, where the $1.50 hot dog is counted with everything else Costco sold, $269,912 million of it. The money that came in was $275,235 million. The difference is a line most readers skip on the way down: membership fees, $5,323 million, paid for the card you need to shop there. The basic one is $65 a year in the U.S., and lately Costco has cracked down on people eating at its food courts without one, The Ringer reported in July.
That line was 1.9 percent of the money that came in. The card costs money to run too, and those costs sit in the other lines. Even so, the fees were equal to 51 percent of the operating income, the profit I start with. People pay for the card because the prices inside are low, and the prices are that low because the goods side runs so thin.
Costco raised the price of the card in September 2024, just as the year on that page began. By its own count, the raise made up about 40 percent of that year’s growth in membership fees.