Shoppers haven't minded higher prices. That might change soon
BNN Bloomberg
Dear shopper, how are you doing? Wall Street is dying to know.
Dear shopper, how are you doing? Wall Street is dying to know.
Investors and market strategists are poring over a spate of economic data and commentary from corporate earnings calls, trying to determine how people feel about spending money in these strange times. Some investors are worried and some are jubilant, and there are data to support both perspectives. Yet while it might seem like third-quarter results tipped in the direction of consumer-spending bulls, they should think twice before declaring victory.
What’s clear is consumers continue to spend more on the basics. Trips to the grocery store, mall and McDonald’s drive-through have gotten more expensive in recent months, and price increases on Hasbro Inc. toys are hitting just as parents start their holiday shopping. Consumer-goods giant Procter & Gamble Co. announced higher prices in nine out of 10 product categories. According to Hershey Co., there is more to come as businesses look to offset the cost of getting goods routed through a clogged freight system and confront workers’ demands for higher pay. Church & Dwight Co., known for its Arm & Hammer brand; Kimberly-Clark Corp., which makes Kleenex tissues; and Starbucks Corp. are among companies leaving open the possibility of further increases heading into the new year.
Overall, business leaders are quite optimistic that consumers will continue to tolerate higher prices. “In the event we feel like we need to pull that pricing lever, we have the ability to do it,” Brian Niccol, chief executive officer of Chipotle Mexican Grill Inc., told earnings call listeners last month. The heads of Keurig Dr. Pepper Inc., L’Oreal SA, Unilever PlC invoked similarly pliable pricing levers.
Spending optimists point to the extraordinary buying demand that has persisted throughout the pandemic, fueling the strain on the global supply-chain system. “Congrats on the pricing success so far — it’s better than I expected,” Jason English, an analyst for Goldman Sachs Group Inc., said to Kraft Heinz Co. executives on their call last week. The National Retail Federation expects 26 million twenty-foot-long containers’ worth of retail imports to the U.S. this year, an 18 per cent jump from 2020.
