Costco: The $65 Card Behind the $1.50 Hot Dog

A Store You Pay to Enter

Most stores want everyone to walk through the door. Costco Wholesale asks shoppers to pay first: to shop in one of its warehouses, a customer needs a membership card. Co-founders Jim Sinegal and Jeff Brotman started Costco in 1983, when its first warehouse opened in Seattle. Today the company is headquartered in Issaquah, Washington. At the end of its 2026 fiscal year on August 30, 2026, Costco operated 939 warehouses in the United States, Puerto Rico, and 13 other countries, and it employed about 355,000 people.

Costco’s annual report lays out the formula: sell a limited range of name-brand and store-brand goods at low prices, move a large volume of merchandise quickly, and accept much thinner gross margins than most retailers. In fiscal 2026, Costco’s gross margin (net sales minus the cost of the merchandise) was about 11 percent of net sales. The company says its store brand, Kirkland Signature, is generally priced below national brands.

Low Markups and a $1.50 Hot Dog

Sinegal led Costco as CEO until the start of 2012. As he prepared to step down, The Seattle Times reported that he had long refused to mark up brand-name items by more than 14 percent. Low prices became part of Costco’s identity, and nothing shows it better than the food court. By 2024, Costco’s hot dog and soda combo had cost $1.50 for nearly four decades, since 1985. In 2011, Craig Jelinek, who was about to succeed Sinegal as CEO, told the newspaper that he did not expect Costco to raise the price and called it a Costco trademark.

News outlets have called the combo a loss leader, meaning Costco will take a loss on it if the deal gives shoppers another reason to join and to keep coming back. After media speculation that inflation might finally push the price up, Gary Millerchip used his first earnings call as Costco’s chief financial officer, on May 30, 2024, to confirm that the $1.50 price was safe.

Where the Profit Comes From

If Costco keeps merchandise prices close to its costs, how does it make money? A big part of the answer is the membership card. Since September 2024, a basic U.S. Gold Star membership has cost $65 a year. An Executive membership costs $130 and gives members a reward of 2 percent on qualified purchases, up to $1,250 a year. In fiscal 2026, Costco collected $5.9 billion in membership fees. That was only about 2 percent of its total revenue, but it equaled nearly two-thirds of the company’s $9.2 billion net income (see Exhibit 1).

Members keep paying. At the end of fiscal 2026, Costco had 84.1 million paid members, including 42.3 million Executive members, and 150.4 million cardholders when extra household cards are counted. In the United States and Canada, 92.3 percent of members renewed; worldwide, the renewal rate was 89.8 percent.

Raising the Price of the Card

Costco does not raise its fee often. Before 2024, its last increase was in 2017. In July 2022, as inflation squeezed household budgets, Jelinek told CNBC the company was holding off. In September 2023, then-CFO Richard Galanti told investors the question was when, not whether, fees would rise. In July 2024, Costco announced that starting September 1, 2024, fees in the U.S. and Canada would rise from $60 to $65 for Gold Star and Business members and from $120 to $130 for Executive members. The maximum Executive reward would rise from $1,000 to $1,250. The change affected about 52 million memberships, a little over half of them Executive. Costco predicted the new fees would add about $370 million in revenue over two years.

Membership fee revenue climbed from $4.8 billion in fiscal 2024 to $5.9 billion in fiscal 2026. Costco reported that the fee increase accounted for about 40 percent of membership income growth in fiscal 2025 and about 30 percent in fiscal 2026; most of the rest came from new member sign-ups and upgrades to Executive membership. The U.S. and Canada renewal rate slipped from 92.9 percent at the end of fiscal 2024 to 92.3 percent a year later. Costco said the dip came from a larger share of memberships sold online, including through digital promotions; on average, those members are a bit less likely to renew.

Outside Forces and What Comes Next

Costco’s prices also depend on forces outside its control. In February 2025, the U.S. government began charging tariffs on certain imports under a 1977 emergency-powers law, the International Emergency Economic Powers Act (IEEPA). Costco paid about $500 million in these tariffs. In late November 2025, Costco sued the federal government, seeking a full refund. In February 2026, the U.S. Supreme Court ruled that the IEEPA tariffs were unlawful. Ron Vachris, who replaced Jelinek as CEO on January 1, 2024, told investors in March 2026 that Costco would pass any refunds back to members through lower prices and better values. By the end of fiscal 2026, Costco had received $184 million in refunds and interest, and on its September 2026 earnings call, Millerchip said the company planned to keep reinvesting most of the refund money in value for members. On the same call, he listed Kirkland Signature price cuts from the quarter as examples of Costco’s goal of lowering prices whenever it sees a chance, such as walnuts falling from $13.79 to $9.99 and Colombian whole-bean coffee falling from $21.99 to $19.99.

The law limits pricing in other ways, too. The Federal Trade Commission explains that under federal antitrust law, a company may choose its own prices, but competitors who agree with one another on prices are almost always breaking the law. A business may match a rival’s price on its own, but it may not coordinate prices with that rival. That rule applies to everything from the price of a membership card to the price of a pack of paper towels.

As of October 2026, Costco is growing on both sides of its model. Net sales rose to $297.2 billion in fiscal 2026, net income rose 14 percent to $9.2 billion, and the number of paid members grew about 4 percent from a year earlier. The basic U.S. fee is $65. The challenge for Costco’s leaders is to keep members convinced that the card pays for itself through low markups, Kirkland Signature, and symbols like the $1.50 hot dog, while tariffs, competitors, and the law shape what Costco can charge.