Some of the nation’s largest retailers have been using soaring inflation rates as an excuse to raise prices and rake in billions of dollars in additional profit, a corporate watchdog group charged on Friday.
Companies such as CVS Health, Kroger and T.J. Maxx parent company TJX appear to have raised their prices unnecessarily in 2020 and 2021 at a time when Americans were dealing with the economic fallout from the coronavirus pandemic, Accountable.US said in a new report. The group asserts that corporations are putting profit ahead of price stability for families in need.
Accountable.US said it examined the financial statements of the nation’s top 10 retailers over the past two years — including Lowe’s and Target — and found that they collectively increased their profits by $24.6 million for a grand total of $99 billion.
The new figures comes as companies enjoy their most profitable year since the 1950s. Pre-tax profits last year soared 25% from 2020, far outpacing the increase in consumer prices. This report exposes a continuing debate on inflation. Some consumer advocates argue that corporations use inflation to justify higher prices for consumers.
Companies have used some of that profit to boost CEO compensation and give lofty benefits to shareholders like increased dividends or stock buybacks, the report charges. Many corporate executives have claimed to be able to transfer price rises to their consumers to boost shareholder returns, the report claims.
“When corporate profits are at their highest levels in nearly 50 years and companies are showering their shareholders with billions in new benefits over the last year, it raises serious questions whether industries like retail have had to hike prices on families to such excessive degrees,” Accountable.US President Kyle Herrig said in a statement to CBS MoneyWatch.
Amazon, CVS Health, Kroger, Lowe’s, Target and TJX did not immediately respond to requests for comment on the report.
Home Depot told CBS MoneyWatch that Accountable.US’ report misrepresents why the company’s profits grew in 2021.
” “As customers who advocate value, we are constantly working with suppliers to keep our customers’ costs as low and affordable as possible,” said the company in a statement. Our growth is based upon overwhelming home-improvement demand. “
Supply-chain issues or “unconscionable” hikes?
To be sure, inflation is rising sharply due to a number of underlying economic issues, such as supply-chain bottlenecks, labor shortages and strong demand from consumers. Inflation in the U.S. reached a new 40-year high in March, with consumer prices jumping 8.5% in the last 12 months — the fastest annual rate since the Reagan administration. But in many instances, executives at retail have made it clear that they are willing to raise prices. Kroger Chief Financial Officer Gary Millerchip said during a 2021 earnings call that the grocery store chain is “passing along higher costs to the customer where it makes sense to do so.” Ernie Herman, CEO of TJX, stated that TJX’s strategy to increase retail prices [prices] for select products was well under way and it appears to be working extremely well.
Some businesses have blamed inflation for raising prices. However, Accountable.US (and some legislators) argue that these increases go well beyond what is necessary to pay increased costs.
“This isn’t about inflation,” Sen. Elizabeth Warren told MSNBC recently. This is price gouging. “
“We’ve seen outrageous price increases in every day consumer goods,” Rep. Jan Schakowsky (Democrat from Illinois) stated in a congressional hearing in February. Instead of giving Americans relief from the skyrocketing costs, corporations are making more money.
This report cites, among others, Lowe’s’ $8.4 Billion profit for its latest quarter, which it attributed to its new pricing strategies. TJX (parent company of Marshalls, TJ Maxx and Home Goods) saw its profits rise to $3.3B last year as CEO David Lowe spoke out about his company’s aggressive price hikes. Target boosted its profits to $6.9 billion in 2021, in a year its CEO touted “a year of record growth.”
“Companies know that consumers expect higher prices right now and they’re really seeing how far they can push that,” Lindsay Owens, executive director of the left-leaning economic think tank Groundwork Collaborative, told PBS.
Accountable.US stated that it expected retailers to keep raking in billions of dollars in profits due to price increases. The National Retail Federation predicts retail profits will grow between 6% and 8% in 2022.
“It is time for corporations to shoulder the responsibility that average Americans took on during the current health crisis.” Herrig stated. Corporations can stabilize prices and not chase higher profits, Herrig said. They also need to pay their fair share of taxes. “
Khristopher Brooks is a CBS MoneyWatch reporter covering financial, consumer and business stories. These include housing and economic inequalities as well as bankruptcies.