As the “transitory” inflation debate rages on, we thought we’d turn directly to the source to gauge what some of the most recognizable publicly traded companies are experiencing and expressing on earnings calls. Are CEOs and corporate executives being kept awake at night by pricing pressures, or are they sweeping them under the rug as nothing but a temporary setback? We discovered that while executives are highly concerned over the current state of inflation, many are even more worried about the pricing pressures that they may face in 2022. As such, Fortune 500 executives are discussing inflation at the highest rate in over a decade…
S&P 500 companies have inflation on the brain, as ‘inflation’ mentions on earnings calls hit 10-year high
MarketWatch, 9/17/21
Below we have compiled a sizeable, yet incomprehensive, collection of recent inflation-related quotes from company executives. We think that you’ll find perusing through these inflation anecdotes to be both an eye-opening and interesting experience.
“It will be tempting for some to translate the higher sales growth expectations into higher expectations for our underlying trading operating profit margin. I would like to caution against that in the current cost inflation environment, where input costs are rising faster than we can roll forward through pricing. As you know, we have consistently cautioned on this aspect as from our Q1 conference call in April. The situation has not improved. If anything, we’re seeing further downsides compared to what we told you in the summer.”
Nestle (NSRGY)
“In the fourth quarter, we expect to incur several billion dollars of additional costs in our consumer business as we manage through labor supply shortages, increased wage costs, global supply chain issues, and increased freight and shipping costs.”
Amazon (AMZN)
“There’s inflationary pressures all over the board.”
“Raising prices on items that were previously $1 is not likely to be welcomed and it may, at least initially, cause some customer dissatisfaction. However, Dollar Tree needs to take this step as its fixed price point model cannot work in a high inflation environment where costs are rising dramatically.”
“Freight costs have reached unprecedented levels as a result of increased demand, limited capacity, and shipping delays. For context, 3 months ago, the Shanghai Containerized Freight Index, which reflects spot rates on ocean freight from China, was already at an all-time high, up more than 280% year-over-year and more than 400% since 2019. These rates have continued to rise and have increased more than 20% since we last reported on May 27.”
Dollar Tree (DLTR)
“In this Q3, also as we expected, we probably saw the highest inflation increase ever year-over-year. I mean 6.5% which is sitting in the Q3 P&L. Frankly, in 22 years, I never had a single quarter with that kind of inflation… going forward, we don’t expect that the inflation will quickly fall off and will be short term. But by definition, that will carry over into next year.”
Whirlpool (WHR)
“In addition to the significant supply challenges, raw material pricing remains highly elevated, and we are increasing our full-year raw material inflation outlook to be up a high-teens percentage compared to last year. We continue to combat these elevated costs with pricing actions across all of our businesses.”
“The persistent and industry-wide raw material availability concerns and pricing inflation we have previously reported have worsened, and we do not expect to see improved supply or lower raw material pricing in our fourth quarter as anticipated.”
“On the cost side of the equation… we do not see any meaningful improvement until well into 2022.”
“We have had to make some wage rate adjustments in some of our factories, distribution centers and fleet drivers to, I’d say, attract and retain some of our employees.”
Sherwin Williams (SHW)
“In the last few months, inflation has continued to ratchet it up, mainly with packaging and transportation costs. We’re experiencing the highest inflationary period of the last decade or even two. We, along with our peers and customers, are also facing additional pressure on our supply chain due to strained transportation capacity and labor shortages.”
“We’re looking at unprecedented inflation, as all of our industry is right now. We’re going to have to manage our way through this time of cost inflation, just as we have in the past. It’s going to be a mix of price increases, unfortunately, and also cost-effectiveness through our [comprehensive continuous improvement] program.”
McCormick & Company (MKC)
“In terms of macroeconomic factors, we’re not anticipating an improvement to the unprecedented global supply chain conditions that exist. We are exercising caution on the near-term pressures related to rising costs inflation and the ongoing tightening of supply availability… The challenges we faced in August have not abated in September.”
Bed, Bath, & Beyond (BBBY)
“I expect we’ll probably see a little bit more pricing increases in the first quarter of next year as we deal with the fact that input costs are just higher… That’s just the reality for us and everybody else.”
Pepsico (PEP)
“…we have taken pricing [action] over the last 12 months in anticipation of costs going up, and that’s part of the reason we’re seeing these incredible gross margins over the last couple of months, as we priced ahead of some of these inflationary pressures hitting us.”
Levi Strauss (LEVI)
“With inflation, to the extent that there are permanent inflationary items, like freight costs, or even somewhat permanent for the next year, we can’t hold on to all those, some of that has to be passed on and is being passed on.”
“In talking with our senior merchants, we would estimate the overall price inflation of the products we’re selling to be in the 3.5% to 4.5% range.”
Costco (COST)
“I’m afraid [supply chain issues] are going to last for a while. These issues have been a long time coming and it’s going to take all of us working together to clear those blockages.”
UPS (UPS)
“A year ago, our package handlers at Ground, we are paying an hourly rate that is 16% more than previously. At our Express major sort locations the hourly rate is north of a 25% increase. So that is the reality of the labor market right now.”
“The impact of constrained labor markets remains the biggest issue facing our business as with many other companies around the world and was a key driver of our lower than expected result.”
“While wage rates are higher the more significant impact is the widespread inefficiencies in our operation from constrained labor markets. To illustrate this, I’d like to share a brief example from FedEx Ground. Our Portland, Oregon hub is running with approximately sixty five percent of the staffing needed to handle its normal volume. This staffing shortage has a pronounced impact on the operations, which results in our teams diverting twenty five percent of the volume, that would normally flow to this hub because it simply cannot be processed efficiently to meet our service standards. And in this case, the volume that’s diverted must be rerouted and processed, which drives inefficiencies in our operations and in turn higher costs.”
FedEx (FDX)
“As you read about in the paper and as I’ve seen in some write-ups and I’ve seen from some of our peers and some of our other industries, the product and shipping cost inflation is not just high, it’s brutally high. The chaos and the impact, not just from a financial perspective, but from the toll it takes on our human capital, is immense.“
Fastenal (FAST)
“Inflation is clearly not temporary… The Fed is starting to indicate it’s time for them to move.”
Bank of America (BAC)
“It’s not transitory. I’ve never seen a greater divergence between what’s defined as transitory and what’s being seen day in and day out. Most CEOs I talk to today are very concerned about supply chain, very concerned about import costs, whether they’re materials, commodities, and increasingly labor.”
Goldman Sachs (GS)
“Inflationary trends are appearing more than just transitory, reflecting structural changes, including a shift from consumerism to job creation, rising wage growth, and energy transition. As I said in a speech to the G20 in July, society needs to rapidly invest in innovation to offset inflationary pressures associated with the transition to a net 0 economy.”
Blackrock (BLK)
“Supply chains are under pressure from tight labor markets, tight transportation markets, and overall capacity constraints. inflationary pressures are broad-based and sustained.”
Blackstone (BX)
“Our earnings were negatively impacted by significant inflation and supply-chain disruptions that increased our costs beyond what we anticipated.”
“We are taking further action, including additional pricing and enhanced cost management, to mitigate these headwinds as it is becoming clear they are not likely to be resolved quickly.”
“I think the headwinds and the increased distribution costs will certainly be with us into 2022.”
“It does feel like there’s more options for hourly employment and because of that, that’s putting pressure on the labor markets and hiring for the roles that we need.”
Kimberly-Clark (KMB)
“We don’t see the raw material or the inflation environment slowing down in any way.”
“Ocean freight costs have more than doubled over the last year, and the number of containers on the water is up 70% because of port congestion.”
3M (MMM)
“Consistent with the broader market, we are experiencing inflation pressure… Next year we anticipate a more challenging inflation environment.”
General Electric (GE)
“While we are seeing an impact from the rising commodity and labor costs we have also been adjusting pricing, which should help to compensate.”
Tesla (TSLA)
“With a competitive labor market, this is putting some pressure on our labor cost, including higher acquisition and retention costs, which is not yet reflected in our current pricing. We expect to capture this value in future engagements, but it will take time to appear in our margin profile.”
International Business Machines (IBM)