Groundwork on New Inflation Report: Companies Are Choosing to Keep Prices High – Despite Decreasing Costs
August 10, 2022 Groundwork Collaborative
Today’s Consumer Price Index (CPI) shows year-over-year inflation at 8.5% for July, with energy prices decreasing, especially gas prices. This follows the release of new Q2 corporate earnings calls, which show companies are choosing to keep prices high, even as costs begin to subside.
Groundwork’s Executive Director Lindsay Owens reacted with the following statement:
“Today’s inflation report contains a lot of good news – energy prices are coming down and inflation in goods and services is cooling off. But a key question remains: When will consumers begin to see relief?
“One answer to this question can be found in corporate earnings calls, where CEO after CEO is essentially telling consumers, ‘Don’t hold your breath.’ Costs are coming down for companies, but they have no plans to pass those savings back to consumers. Instead, many plan to move forward with further price increases – using this opportunity to push profits even higher.
“To truly see recovery on prices for consumers, policymakers need to hold companies accountable for price gouging and rein in the corporate profiteering that is driving painful prices and record profits.”
- HB Fuller’s CEO told an analyst that the company expected “sizable margin expansion” as costs declined because of “extremely sticky” prices and said the company would “push harder” on price increases. [HB Fuller Q2 2022 Earnings Call, 6/23/22]
- Colgate-Palmolive’s CEO told investors “the pricing in the market needs to hold” to boost their profits but luckily they believed their competitors were acting “rationally” by not cutting prices even if inflation slows, “so my instinct is you’re not going to see a lot of people chasing volume by discounting price. They’re going to try to regain margin”. [Colgate-Palmolive Q2 2022 Earnings Call, 7/29/22]
- Kraft Heinz is looking forward to inflation going down so they can keep their price increases. Its CFO predicted the company’s margins would increase because “as we continue to price inflation, the inflation events that start to ease, that might put us in a better position for us to continue to recover the margin.” [Kraft Heinz Q2 2022 Earnings Call, 7/27/22]
- Kimberly-Clark has continued to raise prices throughout 2022 and that remained the case on their Q2 earnings call with their CEO stating, “…we will continue to expand (profit) margins.” They’re even surprised it’s working so well with their CEO saying, “I think we have said that the volumes have come in slightly better than our original expectation, given all the pricing that we’ve taken.” [Kimberly Clark Q2 2022 Earnings Call, 7/26/22]