Here Are The Companies Hiking Prices In Response To Soaring Inflation

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Earlier today we noted that the one thing every company was obsessing during their Q1 earnings call: inflation. As BofA equity strategist Savita Subramanian calculated, mentions of “inflation” quadrupled YoY, and after last week, mentions have exploded nearly 800% YoY. More striking was her observation that as "mentions skyrocket to near record highs from 2011" these point to at the very least, “transitory hyper-inflation ahead." This is an official statement from a Big-4 bank, not some tinfoil conspiracy blog.

What is more concerning is that not only are companies talking about inflation, they are also responding to soaring input costs by hiking prices either in absolute terms or by stealth shrinkflation.

We presented an example of the latter over the weekend when we showed how Costco was masking nearly 15% inflation by selling a paper roll with 140 sheets for the same price it used to sell 160 sheets.

Red Flag Deals message board pointed out...

I tried telling the clerk at Costco about this, and they said “who cares, it’s just 20 sheets.”

Will be the typical response.

... the obvious next step will be to no longer bother with such attempts at masking double digit inflation, and to hike prices outright until there is an actual decline in supply, or as TBT predicts, "this is the precursor to real inflation next." And sure enough, names from consumer giants from Kimberly-Clark to Clorox, Procter & Gamble, as well as food makers such as Hormel, JM Smucker, General Mills, Skippy and Hershey are already doing just that.

But don't worry, according to the Chairman, "it's transitory." Or maybe it won't be, as increasingly more banks are starting to speculate.

One thing we do know: once companies hike prices, they almost never cut them again. In fact, most companies would rather file for bankruptcy rather than reverse their pricing strategy, especially since among the most striking outcomes of Q1 earnings season are record high profit margins. Well, guess what happens to those margins as input costs continue to soar - either they collapse (and turn negative), or companies hike prices. Guess which choice they will pick.