Inflation hawks have plenty of prey. Stimulus checks, trillions of pandemic government spending, restaurants offering signing bonuses to attract workers — all help increase the amount of money inflation circulating through the economy. And that has helped fuel market worries over sustained, out-of-control inflation.
Investors will hear from important voices in the price pipeline during the week ahead. Several big retailers are scheduled to release their latest quarterly results. If inflationary pressures are broad and sustained, they will show up in the aisles and carts of retailers like Walmart and Home Depot.
Both are expected to release first quarter earnings Tuesday in the week ahead. (Full disclosure: I own HD stock in a retirement account.) Both have made prices a competitive advantage. Squeezing margins between their cost of goods and what shoppers will pay is made up by selling a whole lot of stuff.
The jump in lumber and bacon prices, for instance, may help revenue figures at Home Depot and Walmart, but they don’t necessarily lead to higher profits for shareholders. There are labor, shipping and other costs to consider. And it is a delicate decision to raise prices for shoppers. How much of a wholesale price increase will a store swallow before passing it along to the consumer? Sticker shock is a real phenomenon, even after a year of pandemic-living and after conditioning big-box retail consumers that price is the competitive advantage.
