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 TJ 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 pandemicAccountable.US said in a new report. Instead of keeping prices stable for struggling families, corporations have overcharged Americans and prioritized profit, the group claims.
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. The report highlights an ongoing debate about the causes of inflation, with some consumer advocates arguing that corporations are using inflation as a justification for passing on even higher price hikes to 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. Indeed, many corporate leaders have boasted to investors of their ability to pass along price increases to consumers.
“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 our customers advocate for value, we’re continuously working with our suppliers to keep costs as low as possible for our customers,” the company said in a statement. “Our growth has been based on overwhelming demand in home improvement.”
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 US 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 cases, retail executives have been open about their ability to hike 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.” Also last year, TJX CEO Ernie Herman told investors that the company’s “strategy to surgically raise retail [prices] on select items is well underway, and we believe it is working very effectively.”
Some companies have publicly blamed inflation for their own price increases, but Accountable.US and some lawmakers argue that those increases are well above what companies need to cover their own increased costs.
“This isn’t about inflation,” Sen. elizabeth warren told MSNBC recently. “This is about price gouging.”
“We have seen unconscionable price hikes in everyday consumer goods,” Rep. Jan Schakowsky, Democrat of Illinois, said in a February congressional hearing. “Instead of giving Americans a break from skyrocketing beginnings, companies are pocketing this extra cash.”
The report notes, among other examples, that Lowe’s recorded $8.4 billion in profit in its most recent quarter as it touted its “new pricing strategies.” TJX, parent company of TX Maxx, Marshalls and Home Goods, saw last year’s profits soar to $3.3 billion as the CEO spoke about the company’s “aggressive” price increases. 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 said it expects retailers to continue raking in billions in profit due to the price hikes. The National Retail Federation predicts retail profits will grow between 6% and 8% in 2022.
“It’s time corporations finally help shoulder the burden average Americans have taken on throughout the health crisis,” Herrig said. “Corporations can start by stabilizing prices for consumers instead of pursuing even higher profits — on top of finally paying their fair share in taxes.”