With prices rising 8.5 percent over the past year, it’s an understatement to say it’s scary out there for many Americans as they face difficult budget choices day-to-day due to inflation. But a recent report from the watchdog group Accountable.US shows that for many companies, especially retailers, these are actually halcyon days unlike anything seen in decades.
Past history suggests the U.S. president currently residing in the White House will receive the lion’s share of blame over any economic jitters, including inflation (witness Richard Nixon, Gerald Ford and Jimmy Carter during the 1970s and George H. W. Bush in 1992). But the numbers don’t lie: The current volatility is not only about supply chain disruptions, the war in Ukraine or the pandemic, but it's also about America’s largest retailers doing far more than only passing along their costs to consumers.
Editor's note: Be sure to subscribe to our Brands Taking Stands newsletter, which comes out every Wednesday.
Researchers at Accountable.US concluded that the largest U.S. retailers together reaped 2021 profits that surged to $99 billion. Meanwhile, payouts to shareholders in the form of stock buybacks and dividends reached $79 billion last year, about a $45 billion increase from 2020.
“Many of the nation's largest retailers are exploiting the situation to inflate their profits,” independent journalist Judd Legum wrote in his Popular Information newsletter, noting that during 2021, U.S. corporate profits in total roared upward by 25 percent to more than $2.8 trillion, an increase not seen since 1976.
If you don’t believe the numbers, listen to corporate earnings reports. The researchers at Accountable.US show how the terms CEOs and CFOs have used during earnings calls are largely couched and toned down; after all, no one wants to admit they are price gouging or taking advantage of what’s happening in global markets. But terms such as “pricing strategy” and describing inflation as a “major opportunity for us” to “adjust” (i.e., “increase” prices) are on the record. Those aren’t terms we see on store signs or online shopping portals.
As Accountable.US sums up, “Overall, companies in the S&P 500 saw near-record operating margins in 2021 because they were able to raise prices.” Retailers in particular benefitted as consumers opened their wallets after spending the previous year sheltering in place. Retail spending so far is projected to increase by 6 percent to 8 percent during 2022.
The companies on which Accountable.US focused reads like an A-to-W list of America’s largest retailers, with the report centered on the actions of retail brands such as Amazon, Costco, CVS, Dollar General, Home Depot, Kroger, Lowes, Target, TJX Companies and Walmart.
Not all companies are using inflation as a ruse to squeeze consumers. Take the mini market staple, AriZona iced tea, which is still 99 cents and has been for almost 30 years. The company’s founder just assured NBC’s Today show that the price will remain the same; incidentally, his net worth is estimated at about $3 billion.
Viral stories of AriZona aside, however, the news networks are for the most part offering their readers and viewers a much different narrative about inflation.
“There is a lot of coverage of inflation in the media. Why do you seldom hear about the relationship between price increases and corporate profits? Well, many media outlets rely on advertising from the same corporations that are increasing prices,” Legum observed.
Image credit: olieman.eth via Unsplash
Leon Kaye has written for 3p since 2010 and become executive editor in 2018. His previous work includes writing for the Guardian as well as other online and print publications. In addition, he's worked in sales executive roles within technology and financial research companies, as well as for a public relations firm, for which he consulted with one of the globe’s leading sustainability initiatives. Currently living in Central California, he’s traveled to 70-plus countries and has lived and worked in South Korea, the United Arab Emirates and Uruguay.
Leon’s an alum of Fresno State, the University of Maryland, Baltimore County and the University of Southern California's Marshall Business School. He enjoys traveling abroad as well as exploring California’s Central Coast and the Sierra Nevadas.