Inflation Cools but Some Companies Raise Prices
Despite both the gains in disinflation seen by April’s CPI and PPI readings, there remains several companies that have continued to raise prices to offset higher costs. With April’s cooler-than-expected reports depicting average lower prices for the producer, it is expected that most companies will in turn lower their prices to increase demand. However, this is not definite, as several companies, specifically those providing luxury or comfort goods, have continued to raise prices throughout 2023. This is true in the S&P 500, which is currently on track to post a new record not seen since 2021. Halfway through the current earnings cycle, companies in the S&P 500 have, on average, reported an increase in their net profit margin, the first in six quarters.
As companies continue to find ways to cut costs, several at the same time have boosted margins by raising prices. This is true in the luxury brand industry, with the likes of several designers and fashion companies raising prices to meet surprisingly high demand. In February, several LVMH subsidiaries reported price raises on certain fashion lines to reach increases as high as 18%. Recently, popular luxury conglomerate Tapestry reported sales that far exceeded expectations, with its stock growing around 11% in two days. Coach, one of the brands under Tapestry, reported average increases in handbags to be 30% when compared to three years ago. Outside the luxury industry, even companies in the tech space have been allowed to raise prices to reach the consumer. Disney raised their monthly subscription prices for Disney+ by $3 to $10.99, attempting to boost revenues for the year. Multinational food and beverage company PepsiCo increased prices by 13% last quarter and still was able to higher their forecast for revenue growth this year. Overall, the resiliency of the consumer in several industries will be encapsulated in this week’s release of April’s retail sales as well as the next couple weeks of high-value earnings reports.
Want to learn how to invest? Download the Invstr app, where you can play Fantasy Finance and manage a virtual investment portfolio or open a brokerage account and invest for real. Take our interactive investing course on Invstr Academy and become a better investor today!
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.