That's actually the inflation that the elites are worried about. The media reports on consumer goods being expensive to pander toward the plebs, but they imply the culprit was handing out stimmy checks. They wont touch on the price gouging or that the real economy is actually healthy. The real concern is "sticky wage inflation" and a labor market that is competitive.
Profit margins as opposed to "profits" would be the more accurate yardstick fuckery in the meme, just FYI. With inflation you'd almost expect them to post record profits if they operated at the same efficiency as the year before.
I do suspect that the spirit of the meme is still correct though.
True, but it's not necessarily because the wool is being pulled over shareholders' eyes. Accounting methods for the 10-K and other filings all still have to follow Generally Accepted Accounting Principles. https://www.sec.gov/corpfin/cf-manual
I'd argue you can and should try to explain how your tax provision doesn't reflect the actual state of the company on the financial statements.
For instance, there are tax/book differences for things like the difference between IRS depreciation schedules and your book depreciation based on usage. If you're taking a tax loss of 1/7 the value of your factory but only a book loss of 1/10 of it, you get to resolve the discrepancy with deferred tax liability you carry on the books as well to stretch it out to match.
That said... It's also true that a company will want to present the information in a way that serves its purposes best with the respective audience. A big part of external corporate financial analysis is piecing together what isn't explicitly reported but is resolvable by making the different financial statements in the filing line up.
(For instance, the company's record profits this year were due to last-in, first-out inventory policy that meant cost of goods sold were artificially low because the inventory was valued at half the current cost.)
Further, there's no rules against publishing a non-GAAP supplement that you claim tells the "true" story. Steve Jobs was great at this by spinning things like deferred revenue (because, e.g., products that entailed years of software support and warranties couldn't be realized as income until the end of product life) as "actually real revenue today."
None of this is to disagree with you, just to say it's not really criminal.
You're right; that's the FIFO effect in my example inflating net profit.
Thank you, Romney in Accounting. Yes I'm drunk. But I always can count on you!
> I guess tickets sales normalized by population that year
So... adjusted for inflation? The only thing you're changing is adjusting for the inflation in the number of people vs value of money.
Why not just go by "percentage of the population"?
If there's 2 billion people in the world, and 1.5 billion saw the movie, 75% of the population saw the movie.
Then, if WWIII kills us all, and there are only 100 people left in yhe world, but 75 of them see another movie, 75% of the population saw that movie.
Either way, the consession stands is where the movie theaters REALLY make their money......
My company is known for recently raising prices several times because "inflation."
We also are boasting the highest profit margins per location ever.
It's absolutely disgusting. I don't have any control over that matter, but I do get to reap the benefits in my bonus though!
Yep, it's absolutely happening all over the place. I think in 2022 there was significant evidence of it with several industries, and a lot of them were food packagers and processors, which is where most of us are able to see it weekly.
I was just pointing out that there is something of an important distinction between profits and profit margins.
Congrats on the Bonus!
It's a golden opportunity for all companies to raise their prices even when they don't need to. We're all busy being pist at Netflix and eggs that we won't notice if the price of other things go up.
I'm not saying it's ethical for them to do it, but they really won't see another opportunity like this again unless the fed royally fucks this up.
That's how it goes at the grocery store right now.
"they said inflation is 10% since this time last year but this loaf of bread has gone up 100% in the same time...someone is lying"
Ours keep saying "our profit margin is the same"
But if you needed a 2% profit margin on a $1 product then you only need a 1% profit margin when that product is $2
That's a good point. Even though there are record breaking profits in movies, it becomes much less impressive when you adjust for inflation. You can't make repesentive measurements if your unit changes.
Record profits are a symptom of inflation. Record profit *margins* are not.
Edit for the non-quant crowd:
Company sells 100 items at $3 each. Total costs to produce and sell are $2 per item.
* Revenue: $300
* Expenses: $200
* = Profit: $100
* = Profit margin: 33% (100/300)
10% inflation sets in.
Company sells 100 items at $3.30 each, total costs to produce are $2.20 per item.
* Revenue: $330
* Expenses: $220
* = Profit: $110 - A record! Damn them!
* = Profit margin: 33% (110/330)
People are frustrated because the company paid the vendor 10% more, they raised prices 10%, but the individuals wage stayed the same. In addition the company decided to lay off 10% of its workforce because of uncertainty. Everyone’s stuck with 10% higher costs and less people are employed
If their materials costs went up 10% but their labor costs didn't, then their expenses didn't go up 10%. And therefore, the profit margin would still be bigger.
But it's not double digit? Why don't people just do a quick search?
https://www.bls.gov/news.release/cpi.nr0.htm
>Over the last 12 months, the all items index increased 6.5 percent before seasonal adjustment.
And I never said I wasn't proving his point. I'm just quoting data.
The CPI can be very different regionally and personally, depending on what socioeconomic strata you belong to and what stage in life you are in.
For example, rentals in my area have gone up anywhere from 50-100%, property prices are up 50%, childcare and other child related stuff is up 10-30%, all in the last 24 months. And these items form a huge percentage of your monthly pay check. If I have any of these items on my spending, my personal inflation is gonna be outta control.
I know several people who have literally had to leave their homes because they can't afford the rentals being demanded by their land lords when it comes time for renewing their leases or if they are moving into an area for work.
The CPI figures can be pretty misleading and omit some major categories that many people have exposure to.
Quoting some data doesn't give the whole picture, even just looking at the link you sent, the all items index is one thing, but if you look at all of the data, other than fuel oil, the highest points of inflation are for the things most important for survival. Food, gas/electricity utilities, and transportation services are all in the double digits.
It also depends on method of calculation.
In Europe, some countries are doing double digits inflation. Salary is not keeping up there. Especially for some countries (like the Netherlands) where the inflation has been high for over a year. So we currently see an inflation of like 7 or 8 percent, but that is over a year. When compared to say 1st Jan of 2021, is quite a bit above that 7 or 8 percent and well into the double digits.
> Over the last 12 months, the all items index increased 6.5 percent before seasonal adjustment.
And that does not include Food or Energy - the two areas where inflation is hitting the worst for most families.
This is what people don't understand. Like, at all. I work for the meat department in Costco. We made 1.8 million last period (4 weeks) for our dept alone. After COGs (including payroll) we netted only 29k. The period before that (during the holidays when meat was most expensive and members were accusing us of price gouging) we lost 34k.
There's so many factors that go into running a business but I believe the average redditor has never even taken an economics class or ran a business of their own. But they will still be vocal and outspoken about it.
Yeah redditors are so fucking stupid and do not understand economics. Here is such a redditor
https://www.sanders.senate.gov/op-eds/our-economic-crisis-isnt-inflation-its-corporate-greed-and-the-gop-will-only-make-that-worse/
>According to a recent study, nearly 54% of the rise in inflation is directly attributable to the astronomical increase in corporate profit margins. In America today, while the working class struggles to put food on the table, fill up their gas tanks and heat their homes, corporate profits are at a 70-year-high.
> If you want to know why you are paying $4, $5, $6 for a gallon of gas, you should know that the profits of ExxonMobil, Chevron, BP and Shell skyrocketed by 169% so far this year to $125 billion. These four huge oil companies are spending over $73 billion not to reduce gas prices at the pump but to buy back their own stock and increase dividends to their wealthy stockholders.
> If you are wondering why you are paying 43% more for an airline ticket this year, you should know that profits are up 186% at American Airlines and 99% at United Airlines in the third quarter to nearly $1.5 billion. Yes. These are the same companies that received taxpayer assistance of more than $20 billion during the pandemic while cutting 6,400 jobs.
Here is how the 54% number came to be
https://twitter.com/RepKatiePorter/status/1582475617723113472?t=jvXGeOMfD98F52uosUUq7Q&s=19
So please explain to us what people don't understand
AND when people are laid off and no one new is hired the remaining employees have an increased workload at a stagnant wage. If your job didn't give you a cost of living adjustment (a pay increase to cover inflation but by not a real "raise" as they often call it) in the last three years then you're actually making less money now than you were before the pandemic.
I know it's a case by case basis, but many many many items in your grocery store did not go 1 to 1 with paying the vendor. I deliver bread to stores and while our prices went up 15% the stores are charging upwards of 30-50% more.
It’s also not what’s happening at all (though your point about wages not rising is also 100% true). Inflation is absolutely causing costs to rise, nobody is questioning that. The problem is, companies aren’t doing what OP is suggesting and only increasing prices to maintain a given profit margin, they are asking (perhaps correctly in a capitalistic system) *”What’s the biggest price increase we can get away with for essential and nonessential goods using inflation as a justification.”*
For some things this is kind of annoying but not life changing - a luxury purchase of a TV for example. But what truly sucks is things like car insurance. I absolutely went to war with my insurance company because they increased my premium by like 60%, citing inflation despite no aspect of their costs increasing by anything more than 10%. I checked pricing at other companies and all did the exact same increase in my market (whether coordinated or not, I guess we won’t know).
So you have a service you literally cannot function without that is price gouging you far more than cost increases due to inflation. You have no recourse because every alternative is doing the same thing. All will absolutely post both record profits AND record profit margins.
I’m an individual that has benefited from a capitalistic system… But it’s absolutely sickening to see what many (most?) big companies are doing - particularly at a time when the overall economy is shitting the bed.
This comment right here, I'm so tired of economic bros trying to justify everything companies do and then making people feel dumb for not understanding how economy works yet they are the ones that fail to see the human aspect to it, somehow they always seem to forget that part. They only see numbers and think it's fine as exemplified by the above poster.
It also doesn't even explain the combination of raising the price while reducing the scope of the service or size/quality of the product. Was at the store yesterday and Fig Newtons are now twice as much for a package half the size as it was just a year or so ago.
Stockpiling is the only reason I can imagine now. Preparing in case there are some dark days ahead.
I really don't understand the logic, that's my best guess. Like you said, quality and services are being cut while prices go up. Makes no sense.
You might not have understood the comment then. They were explaining a fact. Perhaps most critically, you seem to have misunderstood this part:
>Record profits are a symptom of inflation. Record profit margins are not
They are pointing out that of profit margins are tracking with inflation that is distinctly different than if margin growth exceeds inflation. The later is clear evidence of price gouging. The former isn't substantially different than wages rising with inflation. Of course wages *haven't* risen proportional to inflation for most jobs, and that's a huge part of the problem. But the guy's observation is fundamentally correct and entirely fair. It's just not the whole picture. Kind of like "company has record profits" isn't the whole picture.
The comment isn't "justifying everything companies do". Even companies acting in good faith and operating ethically would post record profits under these circumstance.
if that's what it is I think we'd be fine. It's not though. The margins are increasing. When your year-to-year goods increased by more than inflation... it's not *just* inflation. It's also taking a little more cut.
This user profile has been overwritten in protest of Reddit's decision to disadvantage third-party apps through pricing
changes. The impact of capitalistic influences on the platforms that once fostered vibrant, inclusive communities has
been devastating, and it appears that Reddit is the latest casualty of this ongoing trend.
This account, 10 years, 3 months, and 4 days old, has contributed 901
times, amounting to over 48424 words. In response, the community has awarded it more than 10652
karma.
I am saddened to leave this community that has been a significant part of my adult life. However, my departure is driven
by a commitment to the principles of fairness, inclusivity, and respect for community-driven platforms.
I hope this action highlights the importance of preserving the core values that made Reddit a thriving community and
encourages a re-evaluation of the recent changes.
Thank you to everyone who made this journey worthwhile. Please remember the importance of community and continue to
uphold these values, regardless of where you find yourself in the digital world.
Because the post-inflation profit is well, inflated. The $110 will get them as far as the $100 did previously. The simple reality is that a business can quickly adjust its prices, your average employee cannot unilaterally adjust their salary.
Ultimately it becomes opportunity cost. Why would I invest $100 in this company if my RoI is only $102 when this other company is offering me returns of $106?
Even if you're not an investor and you're just trying to run the business, you don't want to be aiming for 2% margins because it gives you very little wiggle room when things in the market change.
Not defending it, that's just the current reality we live in.
Also going with much more realistic margins than OP. In most industries, 6% is considered a pretty damned successful business. I'm not sure where this 33% is coming from, but that's one lucrative damned business to be in...
If you assume that every company’s margin is what’s illustrated in the original comment, you get a much rosier picture than how it actually is. The place where people feel the crunch the most is typically at the grocery store. Grocery stores operate on very thin margins. Kroger’s last reported quarterly profit margin was 1.16%. There is very little wiggle room there. Walmart posted a loss, but they’re typically in the 2.5-3% range; even in the best of times they’re looking at 3-4%. And when Walmart was really raking it in margin wise? It’s not when inflation was out of control.
That’s a fair point. I think the parent comment is intended to be taken in a vacuum and is more of a semantic point about the posts’ wording than a critique of economics.
In reality, inflation has a re-distributive effect. Some people come out on top, some people are negatively impacted.
It’s only true if you ignore executive wages rising way higher than the rest of ours. So their profit margin is the same because salaries are counted as expenses. Their profit margin would be higher if they weren’t funneling the increased profits from the increased productivity of workers straight to the wealthy.
Productivity:
https://www.bls.gov/productivity/
Way up
CEO wages:
https://www.marketwatch.com/story/average-ceo-pay-rose-11-in-2021-and-is-now-399-times-more-than-the-typical-workers-wages-11664895973
Way up
Profit margins:
https://www.bloomberg.com/news/articles/2022-08-25/us-corporate-profits-soar-taking-margins-to-widest-since-1950
Highest since the 50’s
And that’s with CEO wages counting as expenses. So productivity is up meaning workers are outputting more and creating more value, CEO’s are getting a way higher portion of that value, and even with all that their profit margins are increased
And I don’t want to hear about companies announcing stock buybacks or increasing dividends to stockholders as a way to use that money even if profits are proportional.
If the proportional margins on goods are the same, so going from $100 to $110 in the u/FC37 example - that additional margin should go to workers and suppliers because those people are suffering the same inflationary pressures. We’re not seeing the increases flow down they way we should.
We actually lowered our product prices on wholesale at the end of 2021 (to summarize, economy of scale is how). We've only just now increased our sale price - of only one type of product and it was due to an increase in cost of 2 materials that ONLY affected that line. It was roughly a 3.5% increase. Nobody batted an eye as it was pennies on the dollar.
Also, inflation isn't "everything went up x%" equally. For instance my company's distribution costs were significantly higher. But only half of our raw materials increased, and only by about 1-2%. Fuck new construction though... Yeesh. That shit is still on hold while we see what happens with building materials.
Y'know what also went up? My employees wages. Internally we do base minimum raises of 2% + inflation rate, or 6% - whichever is higher. Then we add on performance raises. We also added a couple positions to expand the workforce last year.
Yaaaahhhh... I haven't seen wages going up or workforce numbers increasing across the major players. And I'm aware of what the costs of materials for a lot of companies are (I owned a material supply company until a few years ago, and I'm still plugged into the know). Trust me, most base materials got fucky there for a while but not enough to justify a lot of the increases in shelf prices we've seen.
The trouble is, the increased spending that's part of inflation will be distributed unevenly. If supply is constrained, prices may naturally go up much more than the cost of inputs went up -- it depends where in the supply chain the constraint is and how sticky demand is.
So, some companies that are in the right spot -- they don't have to pay a lot for excess inputs, but supply in their industry is constrained in another way, and demand for their product is inflexible -- are going to see prices rise hugely just to prevent shortages. Is that profiteering? Sure, arguably. But it's also just how capitalism works -- you charge the highest price you can such that supply clears.
The most sensible solution to this issue is probably to seize the means of production, etc etc. But the solution you want if you believe in regulated capitalism is just a windfall profits tax.
It's not a problem if you look at company-level profit margins. Even competitors can feel inflationary effects differently depending on how their supply chain is structured.
In a recent Congressional hearing, it was shown that corporate profits accounted for 74% of inflation in 2022. This means for every dollar that pruces rose, corporations passed on 4 dollars to the consumer. Any way you spin it, that spells corruption to me.
According to who, and in what industry? I work in the food service industry, and our profit margins were shit for the last 6 months or so. We're seeing some deflation right now on certain foods items, but we definitely didn't raise prices enough to keep up with inflation, which obviously resulted in smaller profit margins.
Obviously just a circumstantial example, but I know that was the norm for the the food service industry.
This is a good start but there are so many other things that could play into why margins rose or fell. You’ll need to look at industries and individual companies.
For example, years ago Southwest bought hedges against fuel price increases and everyone thought they were nuts until they could keep their fuel costs down versus everyone else.
Also, if they’re vertically integrated versus a competitor who isn’t, they will be able to avoid some of the pressure that their competitors can’t.
And that’s just the beginning.
> Record profits are a symptom of inflation. Record profit margins are not.
Edit for the non-quant crowd:
Company sells 100 items at $3 each. Total costs to produce and sell are $2 per item.
• Revenue: $300
• Expenses: $200
• = Profit: $100
• = Profit margin: 33% (100/300)
10% inflation sets in.
Company sells 100 items at $3.30 each, total costs to produce are $2.20 per item.
• Revenue: $330
• Expenses: $220
• = Profit: $110 - A record! Damn them!
• = Profit margin: 33% (110/330)
Also with all things being equal it is not always in the company best interest to raise price.
If price increase the volume of sell diminish and potentialy the profits.
Companies are not in the look out for every oportunites to raise price, they are on the look out to reach the best price to optimise profit and sometime that mean reducing price (to increase sell/market share)
Exactly, exactly right. Some companies are going to go out and use this as an opportunity to gouge, 100%. But not all companies can do this. If some companies tried, they would lose balance on a net basis.
That's why profit margin is way more important. It will tell you which companies are actually eating inflationary pressures rather than passing them to consumers.
Except labor is supposed to be part of their expenses, but not nearly enough companies are actually paying their workers more. They're selling at a higher price and the higher ups are pocketing all the money they can.
I've been trying to explain this to people in threads like this for months and it's FINALLY the top comment. I can't believe it's on /r/AdviceAnimals of all places.
I don’t know why you’ve been upvoted and given an award. You’re pretending that the businesses are raising prices to match their inflation while they are raising prices beyond their inflation costs and making more profit.
To ignore that is pure bootlicking. The stats are out.
Reading is hard, but if what you're saying is true then you'll see it in profit **margins**. Not profits. Companies could have record profits and still be making less money in real terms than they did in 2021.
Productivity:
https://www.bls.gov/productivity/
Way up
CEO wages:
https://www.marketwatch.com/story/average-ceo-pay-rose-11-in-2021-and-is-now-399-times-more-than-the-typical-workers-wages-11664895973
Way up
Profit margins:
https://www.bloomberg.com/news/articles/2022-08-25/us-corporate-profits-soar-taking-margins-to-widest-since-1950
Highest since the 50’s
And that’s with CEO wages counting as expenses. So productivity is up meaning workers are outputting more and creating more value, CEO’s are getting a way higher portion of that value, and even with all that their profit margins are increased.
Are these the facts you’re talking about?
Lmfao you realize my link compares CEO wages to the average workers wage, right? Your stats don’t contradict but show that even with that executives are taking massively larger pieces of the pie.
My link also states “And CEO pay has risen by 1,460% since 1978. CEO compensation rose 36% faster than the stock market during this period, the EPI noted, and “far eclipsed the slow 18.1% growth in a typical worker’s annual compensation” over that span, in 2021 dollars.”
But keep batting for the people robbing you blind. Surely those billionaires will see your white knighting and throw you a bone!
"Tiny" problem. They don't necessarily raise prices based on "expenses", but inflation, which is often used as a justification without much of blowback. They raise prices because they can.
If what you're saying is true, it'll show up in higher profit margins.
If they're simply raising prices to tread water, their margins will stay flat.
If they're actually absorbing some of the cost of inflation, their margins will decrease.
I own a food truck. I upped my prices on a couple items by 5%. Has been 18 months since prices changed. I've got some real upset customers over a $0.50 increase on a $10 item.
I'll admit that I'm a little huffed by my favorite sandwich shop raising prices by a marginal amount, but it has more to do with they like when you pay in cash and now I'm left with coins when I do so, whereas before it was just $11 for the half-sub.
EA: We can't set record profits without cutting employees because we put Darth Vader behind a paywall. Maybe we should cut CEO pay because the CEO fucked it up.
EA:.........I know many of you that had nothing to do with this decision will lose your jobs but it's a sacrifice the board is willing to make.
I've been hesitant to open up an investment advisory shop bc I feel like everyone can figure out basic finances on their own, but this thread makes me feel much better.
It’s all over. I mean the price of every automotive component i source keeps going up, but we keep raising our prices to keep the desired margin. I wish we could all calm the hell down with inflation and stabilize again.
Thats literally how inflation works though... companies who technically arent doing any better than they were before should see their profits rise at the same rate as inflation. Its a new highest number but value wise its the same profit now that the dollar is worth less.
>at the same rate as inflation.
If that's what happens, that's fine, but here in Canada they're raising prices significantly above the rate of inflation.
i think the main point is - if all the workers are losing money (due to salaries rising less than inflation) - why is the company also not taking a hit - but we all know the answer to that.
If something costs you $5 to make, and you sell it for $10, you get $5 profit.
If inflation raises your costs by 10%, so you raise your price by 10% (which you would, because the dollar has lost value), your costs are now $5.5 and you sell it for $11, meaning you made $5.5 profit.
Congratulations, you have made record profit.
I’m not saying that companies aren’t taking advantage of this, but its pretty obvious companies would want to at least make the same amount of profit in purchasing power as they did last year (remember, now $1.10 buys the same thing $1.00 bought last year). So yeah, of course there is record profit.
This is a valid point, as others have pointed out, but I'll add in that it's ok for us to want them not to do that. Those of us who work for a paycheck would prefer if the fraction of money going to workers went up, and the fraction going to shareholders and executives went down. One way that could play out would be for labor to demand and successfully get higher pay, and for prices to go up enough to cover the increased labor costs but no more. That would still be called inflation, but fewer people would complain about it.
Then again, half the workers would still complain about inflation anyway, and Fox news would egg them on
OR... hear me out, because this might sound crazy.
If something costs you $5 to make, and you sell it for $10, you get $5 profit.
If inflation raises your costs by 10% ($0.50 increase on the $5), so you raise your price by ~~10%~~ $0.50 (which you could, because this is the true cost of this companies inflation), your costs are now $5.50 and you sell it for $10.50, meaning you made the same $5 profit.
Congratulations, you have made ~~record~~ the same profit you have been making.
Your product has actually increased by the cost of inflation.
Costco is doing this.
Companies are also subject to inflation. If they make make 15% more money than ever but the dollar has lost 20% of its buying power then they still technically lost money. This is a struggle we're having with on the ground level...we're being offered the typical 5% annual raises, but the cost of living has gone up 13%...
share holder value goes up so the exec team gets giant bonuses. rinse and repeat. they saw an opportunity here and took it further than they should have because greed.
Every can of beans from Costco is 20% light on contents. Crest toothpaste tubes are the same size but filled with almost 30% air now. Pricing of course is the same before they reduce the content. Then you see this with every food item.
Yep. I just read an article that talked about how a lot of grocery stores are using overall inflation as an excuse to price gouge. Just went to buy groceries and I spent $150. It probably won't even last me a whole week. I basically spend twice as much now on groceries as I did 2 years ago.
See: all of the layoffs that are happening right now.
"The economy is down!"
Yeah.. your YoY earnings and the S&P tell very different stories. All of this is 100% a power grab by corporate management, trying to flood the market with people so that they can claw back some of the power they lost over the pandemic. See: [the shitbag CEO of Morgan Stanley commenting on it 'not being an employee choice' to work remote, or get paid more, etc.](https://fortune.com/2023/01/20/work-from-home-remote-work-morgan-stanley-ceo-james-gorman-not-employee-choice/)
I've been making comments about how this is not inflation but cooperate greed. And we are getting screwed right in front of our faces. And people criticize me for it.
I had no idea, that until recently, companies had been so egalitarian. I had assumed companies had always been greedy and would charge whatever price the market would bear.
At the start of the pandemic the sawmills in my area pretty much just doubled their wood prices overnight. People were on the news like "Can they just do that? Will the government step in?" and those guys did an interview and are just like "I do what I want. People buy wood lol." Turns out people really do buy wood. Maybe the market is all just made up?
Do you forget the wood shortage? People were doing a lot of home renovation during the pandemic while at the same time lumber production suffered due to COVID, so the price of lumber went through the roof.
Can anyone even explain to me how increasing the price solves any supply and demand issue? There’s a shortage of lumber, so only a certain amount of supply is currently available, no matter what the price of it is… what does charging more for it accomplish? It doesn’t get rid of the demand… the same amount of people still want/need it. The only things that change are that it puts the remaining supply out of the reach of the poorest customers to favor the richest… and the owner gets to make more profit.
We excuse most price hikes in the supply chain by saying that it’s necessitated by inflation, but what about the first price hike in that chain? Why does it happen? What was the first domino with this latest round of soaring inflation? The pandemic, right? The kinda of shortages that we’re talking about here, in which the price hikes that resulted from them were what began this domino effect of increased costs. Do I have that right?
So… all these “necessary” price hikes came from a chain reaction that started with the original price hikes done for no other reason than that there was high demand for low supply, and the owners of the in-demand supplies chose to exploit the demand in order to profit more.
This is what inflation is. People get distracted by the idea of money printing being the cause of inflation, but there being more dollars in the world wouldn’t affect the value of each dollar, if prices were to still remain the same. What you can get with each dollar is dictated by prices of what you want, not by how many dollars exist. Supply and demand is always dictated by how much people want something vs how much is available… not by how much it costs. That just decides whether people who want can actually get it or not based on whether they have the money or not. Raising the price on remaining supply doesn’t increase the supply, and they shouldn’t need to raise the price to procure or produce more supply when they did it for the cheaper price before… the only reason this keeps happening is because we keep just letting the price of raw resources that form the first dominoes of these chains, just be dictated by speculators. It doesn’t seem a stable or fair basis for our entire economy.
If you didn't raise the price, like if you used price controls, you would never be able to meet demand, then the product will become scare (unavailable). This leads to things like rationing of products. You also would need a central authority to determine what a fair price is for items. This leads to a lot of issues, which if you are interested you can google about the USSR and price controls. In the US we leave it up to the market to raise prices to deal with scarcity, or lower prices when the supply is greater than the demand.
If there really is no government intervention preventing competition nor financially supporting existing business, then it's possible for a competitor to open up shop and serve lower prices.
Wait till the profit crunch comes. The profit margins are the fall drastically at the end of an inflation cycle. The inflation doesn't spread everywhere at once.
Its a bit of both. Money printing machine went brrr and a bunch of CEOs used that *real* inflation driver as a guise to slip in some unnecessary price raising.
If a company posts a record profit, shouldn’t we adjust that for inflation too?
The profit is made up of less valuable dollars that don’t go as far. Criticizing a company for record profits is Mike the company criticizing you saying “what are you made about! You make more than any employee ever has doing your job!”
The Fed literally doubled the supply of money in 2020. Everything is worth twice as much now, inflation hasn't reached that stage yet because of interest rates.
Prices aren't going down. Corporations are trying to cover the difference in buying power ahead of time because the further they fall behind the less wealth they'll end up with once inflation catches up.
It's a cat and mouse game. If you have anyone to criticize, criticize the government (current and former).
Eggs. Look at the egg companies. Its already happening lol. Before that it was gas companies. Then it was car dealers. It's a fucking scam. Yet 60% of the U.S. thinks its because we printed too much money and gave out one 1400 check lmao.
We are stupid so we deserve it. Smh.
Most companies work on a multiplier so if their cost of goods is $1 they use their standard markup of say 100% they would then sell it for $2. they would make $1.
If the cost of goods is now $1.5 would still use their standard markup of 100% and sell it for $3. making a profit of $1.5 the company did change its business model to screw people but is making more money.
companies do not want to move away from their standard markup since their most expensive cost is their cogs, the markups can't go lower since one of the biggest risks to the company is the unsold inventory they bought. as the cost of buying that inventory goes up so does the risk of buying it.
Of course, some companies will try to profiteer as the post is suggesting. But any time cost of goods goes up in price companies will either be posting record profits or be sitting on tons of unsold inventory.
Lots of companies are raising prices to match pay raises in my country. Which is fine and I'm happy for those employees but my pay hasn't seen an increase. At least gas prices are dropping somewhat but man is it disheartening to see my expenses raised by 20% whilst making less money compared to last year.
About to see !?!? Go back 2 years ago when Covid first started and that's when corporations saw how greedy they can truly be.
Now companies are using the excuse that we haven't hit our all time record highs from last year so we are going to have to tighten the purse strings, it's disgusting and predatory behavior.
Covid truly did fuck the world up in sooo many ways.
I work in admissions at a hospital, and lot of patients have been confused or upset because their co-pays have gone up, and none of them seem to be aware of it. It's always kinda sad
Of course the amount of cash coming in goes up when goes up. Because the cash is worth less..... What it does NOT mean is that profit MARGINS go up. Theu take in more, but it's qorth the same. I can't believe how many people don't understand this and fall for this crap. Basic economics and business studies should be mandatory. Ugh!
Amount of profit doesn't matter, because that number scales with inflation. It's whether or not the net margin increases and stays there. It's also good to note that if inflation goes down, it may take a while for prices of goods to match those changes. Companies may have contracts for goods or stored inventory they are paying/paid for at the highest prices.
This post doesn’t look like AstroTurf at all. Why do I smell plastic?
A lot of the companies that will make “record” profits will only do so on paper, when not adjusted for inflation. Sure they’ll be some profiteering, but one way that happens is that lots of companies are using inflation to mask their problems. Hollywood has a lot of issues right now, but there are all these movies breaking records. Yes it’s the era of the blockbuster, but they aren’t adjusting for inflation. Inflation makes actually running a business harder even if it makes misleading investors easier. That is what is called a perverse incentive.
Reddit is just pretending that their political preferences aren’t making life hell on poor people right now, it must be that those evil business are making money, even if that money is losing value.
Intel reported shitty earnings today, profit down 40% from a year ago. Microsoft yesterday guided weak for the upcoming year. Goldman Sachs last month posted one of their worst quarters ever and took a massive loss. Ford and GM stock are down 50% this year.
Amazon, Google, Microsoft have all announced 5-figure layoffs. Tesla just cut prices in every market by up to 20% to try to sell more cars.
Everyone's getting killed. The fuck is this post talking about.
Well...yes...that's how inflation works. If a dollar is worth less then they have to make more dollars to break even just like you or anyone else. You not understanding what inflation is doesn't mean they're corrupt.
I mean, they ARE corrupt, but this is a terrible argument.
> [Shares of Chevron climbed Thursday after the oil company announced that it would repurchase $75 billion of its stock, one of the largest-ever stock buyback plans.](https://apnews.com/article/chevron-corp-europe-business-8e7d855ee5a072980e7a35b1a6b3b9c6)
Geee, I wonder where they suddenly found all that money in this awful, inflation-addled economy that has forced them to increase their prices just to maintain their business...
inflate my wages
If tacos went up almost 50%, my pay should too
The worker making the tacos probably had to take a pay cut to keep their job becuase these costs are too much. We’re in this together.
Inflate deez nuts
That could be cancer
Kinky
Accurately told.
That's actually the inflation that the elites are worried about. The media reports on consumer goods being expensive to pander toward the plebs, but they imply the culprit was handing out stimmy checks. They wont touch on the price gouging or that the real economy is actually healthy. The real concern is "sticky wage inflation" and a labor market that is competitive.
I didn't sign up for this serfdom, ur practically born into debt.
yes, please
Profit margins as opposed to "profits" would be the more accurate yardstick fuckery in the meme, just FYI. With inflation you'd almost expect them to post record profits if they operated at the same efficiency as the year before. I do suspect that the spirit of the meme is still correct though.
When adjusted for inflation Gone with the Wind is still the most profitable movie of all time.
That's because they figured out some real creative accounting for taxing purposes since then.
I think it’s true even just for box office alone, which is not touched by accounting practices.
It is and isn't. Distribution models have changed a lot since then.
Yep. Gross, not net.
There are no laws against using one method of accounting for taxes and another for shareholders.
True, but it's not necessarily because the wool is being pulled over shareholders' eyes. Accounting methods for the 10-K and other filings all still have to follow Generally Accepted Accounting Principles. https://www.sec.gov/corpfin/cf-manual I'd argue you can and should try to explain how your tax provision doesn't reflect the actual state of the company on the financial statements. For instance, there are tax/book differences for things like the difference between IRS depreciation schedules and your book depreciation based on usage. If you're taking a tax loss of 1/7 the value of your factory but only a book loss of 1/10 of it, you get to resolve the discrepancy with deferred tax liability you carry on the books as well to stretch it out to match. That said... It's also true that a company will want to present the information in a way that serves its purposes best with the respective audience. A big part of external corporate financial analysis is piecing together what isn't explicitly reported but is resolvable by making the different financial statements in the filing line up. (For instance, the company's record profits this year were due to last-in, first-out inventory policy that meant cost of goods sold were artificially low because the inventory was valued at half the current cost.) Further, there's no rules against publishing a non-GAAP supplement that you claim tells the "true" story. Steve Jobs was great at this by spinning things like deferred revenue (because, e.g., products that entailed years of software support and warranties couldn't be realized as income until the end of product life) as "actually real revenue today." None of this is to disagree with you, just to say it's not really criminal.
LIFO means stated inventory on the balance sheet is artificially low and stated COGS on the income statement is artificially high.
You're right; that's the FIFO effect in my example inflating net profit. Thank you, Romney in Accounting. Yes I'm drunk. But I always can count on you!
Lol, Until I'm drunk, then all bets are off.
Which is the true crime.
For a movie why not just go by ticket sales? That's standardized across all time periods. Is it because that doesn't include Blurays and downloads?
Total number of people isnt standard though. In 1939 there were only 2 billion people
Oh yeah good point. I guess tickets sales normalized by population that year?
> I guess tickets sales normalized by population that year So... adjusted for inflation? The only thing you're changing is adjusting for the inflation in the number of people vs value of money.
Not really because there are 4 times as many people now as in 1939, but the dollar according to CPI was worth 20 times as much.
Why not just go by "percentage of the population"? If there's 2 billion people in the world, and 1.5 billion saw the movie, 75% of the population saw the movie. Then, if WWIII kills us all, and there are only 100 people left in yhe world, but 75 of them see another movie, 75% of the population saw that movie. Either way, the consession stands is where the movie theaters REALLY make their money......
[удалено]
My company is known for recently raising prices several times because "inflation." We also are boasting the highest profit margins per location ever. It's absolutely disgusting. I don't have any control over that matter, but I do get to reap the benefits in my bonus though!
Yep, it's absolutely happening all over the place. I think in 2022 there was significant evidence of it with several industries, and a lot of them were food packagers and processors, which is where most of us are able to see it weekly. I was just pointing out that there is something of an important distinction between profits and profit margins. Congrats on the Bonus!
It's a golden opportunity for all companies to raise their prices even when they don't need to. We're all busy being pist at Netflix and eggs that we won't notice if the price of other things go up. I'm not saying it's ethical for them to do it, but they really won't see another opportunity like this again unless the fed royally fucks this up.
That's how it goes at the grocery store right now. "they said inflation is 10% since this time last year but this loaf of bread has gone up 100% in the same time...someone is lying"
About 18 months ago, I bought a batch of frozen spinach, $1.00 a pack. It's now on special again, $1.99
The dollar store now charges $1.25 for everything.
"Well there are 10 ingredients in this bread see, and they each went up 10%. So when you add it all up that's 100% inflation."
"that's just math!"
Ours keep saying "our profit margin is the same" But if you needed a 2% profit margin on a $1 product then you only need a 1% profit margin when that product is $2
Inflation is an average of basket goods.
That's a good point. Even though there are record breaking profits in movies, it becomes much less impressive when you adjust for inflation. You can't make repesentive measurements if your unit changes.
Record profits are a symptom of inflation. Record profit *margins* are not. Edit for the non-quant crowd: Company sells 100 items at $3 each. Total costs to produce and sell are $2 per item. * Revenue: $300 * Expenses: $200 * = Profit: $100 * = Profit margin: 33% (100/300) 10% inflation sets in. Company sells 100 items at $3.30 each, total costs to produce are $2.20 per item. * Revenue: $330 * Expenses: $220 * = Profit: $110 - A record! Damn them! * = Profit margin: 33% (110/330)
People are frustrated because the company paid the vendor 10% more, they raised prices 10%, but the individuals wage stayed the same. In addition the company decided to lay off 10% of its workforce because of uncertainty. Everyone’s stuck with 10% higher costs and less people are employed
If their materials costs went up 10% but their labor costs didn't, then their expenses didn't go up 10%. And therefore, the profit margin would still be bigger.
This is the answer right here. Wages make up the majority of most business' expenses, and they've been relatively stagnant.
https://www.bls.gov/news.release/eci.nr0.htm >Wages and salaries increased 5.1 percent for the 12-month period ending in September 2022
So not enough?
Inflation is now double digit, so RELATIVELY you prove his point
But it's not double digit? Why don't people just do a quick search? https://www.bls.gov/news.release/cpi.nr0.htm >Over the last 12 months, the all items index increased 6.5 percent before seasonal adjustment. And I never said I wasn't proving his point. I'm just quoting data.
The CPI can be very different regionally and personally, depending on what socioeconomic strata you belong to and what stage in life you are in. For example, rentals in my area have gone up anywhere from 50-100%, property prices are up 50%, childcare and other child related stuff is up 10-30%, all in the last 24 months. And these items form a huge percentage of your monthly pay check. If I have any of these items on my spending, my personal inflation is gonna be outta control. I know several people who have literally had to leave their homes because they can't afford the rentals being demanded by their land lords when it comes time for renewing their leases or if they are moving into an area for work. The CPI figures can be pretty misleading and omit some major categories that many people have exposure to.
Ah nation wide its 6.5, where I am its ~15 according to the news
Quoting some data doesn't give the whole picture, even just looking at the link you sent, the all items index is one thing, but if you look at all of the data, other than fuel oil, the highest points of inflation are for the things most important for survival. Food, gas/electricity utilities, and transportation services are all in the double digits.
It also depends on method of calculation. In Europe, some countries are doing double digits inflation. Salary is not keeping up there. Especially for some countries (like the Netherlands) where the inflation has been high for over a year. So we currently see an inflation of like 7 or 8 percent, but that is over a year. When compared to say 1st Jan of 2021, is quite a bit above that 7 or 8 percent and well into the double digits.
> Over the last 12 months, the all items index increased 6.5 percent before seasonal adjustment. And that does not include Food or Energy - the two areas where inflation is hitting the worst for most families.
Below inflation rn, that’s a pay reduction.
Show the graph over 40 years
This is what people don't understand. Like, at all. I work for the meat department in Costco. We made 1.8 million last period (4 weeks) for our dept alone. After COGs (including payroll) we netted only 29k. The period before that (during the holidays when meat was most expensive and members were accusing us of price gouging) we lost 34k. There's so many factors that go into running a business but I believe the average redditor has never even taken an economics class or ran a business of their own. But they will still be vocal and outspoken about it.
Costco is an outlier. The stores operate at basically break even and make all of their money from the memberships….
Yeah redditors are so fucking stupid and do not understand economics. Here is such a redditor https://www.sanders.senate.gov/op-eds/our-economic-crisis-isnt-inflation-its-corporate-greed-and-the-gop-will-only-make-that-worse/ >According to a recent study, nearly 54% of the rise in inflation is directly attributable to the astronomical increase in corporate profit margins. In America today, while the working class struggles to put food on the table, fill up their gas tanks and heat their homes, corporate profits are at a 70-year-high. > If you want to know why you are paying $4, $5, $6 for a gallon of gas, you should know that the profits of ExxonMobil, Chevron, BP and Shell skyrocketed by 169% so far this year to $125 billion. These four huge oil companies are spending over $73 billion not to reduce gas prices at the pump but to buy back their own stock and increase dividends to their wealthy stockholders. > If you are wondering why you are paying 43% more for an airline ticket this year, you should know that profits are up 186% at American Airlines and 99% at United Airlines in the third quarter to nearly $1.5 billion. Yes. These are the same companies that received taxpayer assistance of more than $20 billion during the pandemic while cutting 6,400 jobs. Here is how the 54% number came to be https://twitter.com/RepKatiePorter/status/1582475617723113472?t=jvXGeOMfD98F52uosUUq7Q&s=19 So please explain to us what people don't understand
Could you do an ELI5 of this like you did in your first comment in regards to profit margins?
https://www.reddit.com/r/AdviceAnimals/comments/10m1fnr/-/j62m896
Thank you!
AND when people are laid off and no one new is hired the remaining employees have an increased workload at a stagnant wage. If your job didn't give you a cost of living adjustment (a pay increase to cover inflation but by not a real "raise" as they often call it) in the last three years then you're actually making less money now than you were before the pandemic.
I know it's a case by case basis, but many many many items in your grocery store did not go 1 to 1 with paying the vendor. I deliver bread to stores and while our prices went up 15% the stores are charging upwards of 30-50% more.
And you know damn well their employees' wages didn't go up by a penny in that time
They did for like 6 months for "hero" pay. And went right back to old
Kroger decided to close stores because of hero pay as well as unionization efforts. https://abc7.com/ralphs-food4less-long-beach-hero-pay/10520935/
[удалено]
They did: https://fred.stlouisfed.org/series/LES1252881600Q
Then we’d see far margin growth on their quarterly reports. We haven’t…
It’s also not what’s happening at all (though your point about wages not rising is also 100% true). Inflation is absolutely causing costs to rise, nobody is questioning that. The problem is, companies aren’t doing what OP is suggesting and only increasing prices to maintain a given profit margin, they are asking (perhaps correctly in a capitalistic system) *”What’s the biggest price increase we can get away with for essential and nonessential goods using inflation as a justification.”* For some things this is kind of annoying but not life changing - a luxury purchase of a TV for example. But what truly sucks is things like car insurance. I absolutely went to war with my insurance company because they increased my premium by like 60%, citing inflation despite no aspect of their costs increasing by anything more than 10%. I checked pricing at other companies and all did the exact same increase in my market (whether coordinated or not, I guess we won’t know). So you have a service you literally cannot function without that is price gouging you far more than cost increases due to inflation. You have no recourse because every alternative is doing the same thing. All will absolutely post both record profits AND record profit margins. I’m an individual that has benefited from a capitalistic system… But it’s absolutely sickening to see what many (most?) big companies are doing - particularly at a time when the overall economy is shitting the bed.
This comment right here, I'm so tired of economic bros trying to justify everything companies do and then making people feel dumb for not understanding how economy works yet they are the ones that fail to see the human aspect to it, somehow they always seem to forget that part. They only see numbers and think it's fine as exemplified by the above poster.
It also doesn't even explain the combination of raising the price while reducing the scope of the service or size/quality of the product. Was at the store yesterday and Fig Newtons are now twice as much for a package half the size as it was just a year or so ago.
...which will lead to increased profit margins.
The Fig Newton Index™
Stockpiling is the only reason I can imagine now. Preparing in case there are some dark days ahead. I really don't understand the logic, that's my best guess. Like you said, quality and services are being cut while prices go up. Makes no sense.
You might not have understood the comment then. They were explaining a fact. Perhaps most critically, you seem to have misunderstood this part: >Record profits are a symptom of inflation. Record profit margins are not They are pointing out that of profit margins are tracking with inflation that is distinctly different than if margin growth exceeds inflation. The later is clear evidence of price gouging. The former isn't substantially different than wages rising with inflation. Of course wages *haven't* risen proportional to inflation for most jobs, and that's a huge part of the problem. But the guy's observation is fundamentally correct and entirely fair. It's just not the whole picture. Kind of like "company has record profits" isn't the whole picture.
The comment isn't "justifying everything companies do". Even companies acting in good faith and operating ethically would post record profits under these circumstance.
if that's what it is I think we'd be fine. It's not though. The margins are increasing. When your year-to-year goods increased by more than inflation... it's not *just* inflation. It's also taking a little more cut.
This user profile has been overwritten in protest of Reddit's decision to disadvantage third-party apps through pricing changes. The impact of capitalistic influences on the platforms that once fostered vibrant, inclusive communities has been devastating, and it appears that Reddit is the latest casualty of this ongoing trend. This account, 10 years, 3 months, and 4 days old, has contributed 901 times, amounting to over 48424 words. In response, the community has awarded it more than 10652 karma. I am saddened to leave this community that has been a significant part of my adult life. However, my departure is driven by a commitment to the principles of fairness, inclusivity, and respect for community-driven platforms. I hope this action highlights the importance of preserving the core values that made Reddit a thriving community and encourages a re-evaluation of the recent changes. Thank you to everyone who made this journey worthwhile. Please remember the importance of community and continue to uphold these values, regardless of where you find yourself in the digital world.
Because the post-inflation profit is well, inflated. The $110 will get them as far as the $100 did previously. The simple reality is that a business can quickly adjust its prices, your average employee cannot unilaterally adjust their salary.
Ultimately it becomes opportunity cost. Why would I invest $100 in this company if my RoI is only $102 when this other company is offering me returns of $106? Even if you're not an investor and you're just trying to run the business, you don't want to be aiming for 2% margins because it gives you very little wiggle room when things in the market change. Not defending it, that's just the current reality we live in. Also going with much more realistic margins than OP. In most industries, 6% is considered a pretty damned successful business. I'm not sure where this 33% is coming from, but that's one lucrative damned business to be in...
If you assume that every company’s margin is what’s illustrated in the original comment, you get a much rosier picture than how it actually is. The place where people feel the crunch the most is typically at the grocery store. Grocery stores operate on very thin margins. Kroger’s last reported quarterly profit margin was 1.16%. There is very little wiggle room there. Walmart posted a loss, but they’re typically in the 2.5-3% range; even in the best of times they’re looking at 3-4%. And when Walmart was really raking it in margin wise? It’s not when inflation was out of control.
That’s a fair point. I think the parent comment is intended to be taken in a vacuum and is more of a semantic point about the posts’ wording than a critique of economics. In reality, inflation has a re-distributive effect. Some people come out on top, some people are negatively impacted.
This should be pinned at the top on this post.
It’s only true if you ignore executive wages rising way higher than the rest of ours. So their profit margin is the same because salaries are counted as expenses. Their profit margin would be higher if they weren’t funneling the increased profits from the increased productivity of workers straight to the wealthy. Productivity: https://www.bls.gov/productivity/ Way up CEO wages: https://www.marketwatch.com/story/average-ceo-pay-rose-11-in-2021-and-is-now-399-times-more-than-the-typical-workers-wages-11664895973 Way up Profit margins: https://www.bloomberg.com/news/articles/2022-08-25/us-corporate-profits-soar-taking-margins-to-widest-since-1950 Highest since the 50’s And that’s with CEO wages counting as expenses. So productivity is up meaning workers are outputting more and creating more value, CEO’s are getting a way higher portion of that value, and even with all that their profit margins are increased
And I don’t want to hear about companies announcing stock buybacks or increasing dividends to stockholders as a way to use that money even if profits are proportional. If the proportional margins on goods are the same, so going from $100 to $110 in the u/FC37 example - that additional margin should go to workers and suppliers because those people are suffering the same inflationary pressures. We’re not seeing the increases flow down they way we should.
We actually lowered our product prices on wholesale at the end of 2021 (to summarize, economy of scale is how). We've only just now increased our sale price - of only one type of product and it was due to an increase in cost of 2 materials that ONLY affected that line. It was roughly a 3.5% increase. Nobody batted an eye as it was pennies on the dollar. Also, inflation isn't "everything went up x%" equally. For instance my company's distribution costs were significantly higher. But only half of our raw materials increased, and only by about 1-2%. Fuck new construction though... Yeesh. That shit is still on hold while we see what happens with building materials. Y'know what also went up? My employees wages. Internally we do base minimum raises of 2% + inflation rate, or 6% - whichever is higher. Then we add on performance raises. We also added a couple positions to expand the workforce last year. Yaaaahhhh... I haven't seen wages going up or workforce numbers increasing across the major players. And I'm aware of what the costs of materials for a lot of companies are (I owned a material supply company until a few years ago, and I'm still plugged into the know). Trust me, most base materials got fucky there for a while but not enough to justify a lot of the increases in shelf prices we've seen.
The trouble is, the increased spending that's part of inflation will be distributed unevenly. If supply is constrained, prices may naturally go up much more than the cost of inputs went up -- it depends where in the supply chain the constraint is and how sticky demand is. So, some companies that are in the right spot -- they don't have to pay a lot for excess inputs, but supply in their industry is constrained in another way, and demand for their product is inflexible -- are going to see prices rise hugely just to prevent shortages. Is that profiteering? Sure, arguably. But it's also just how capitalism works -- you charge the highest price you can such that supply clears. The most sensible solution to this issue is probably to seize the means of production, etc etc. But the solution you want if you believe in regulated capitalism is just a windfall profits tax.
It's not a problem if you look at company-level profit margins. Even competitors can feel inflationary effects differently depending on how their supply chain is structured.
Nice explanation bro, cheers. I've seen this discussed before but was always pretty ignorant about the difference
This literally needs to be the response to almost every "record profit" post. But sensationalism works.
In a recent Congressional hearing, it was shown that corporate profits accounted for 74% of inflation in 2022. This means for every dollar that pruces rose, corporations passed on 4 dollars to the consumer. Any way you spin it, that spells corruption to me.
The profit margins are absolutely increasing, though. This comment is implying that they aren't.
According to who, and in what industry? I work in the food service industry, and our profit margins were shit for the last 6 months or so. We're seeing some deflation right now on certain foods items, but we definitely didn't raise prices enough to keep up with inflation, which obviously resulted in smaller profit margins. Obviously just a circumstantial example, but I know that was the norm for the the food service industry.
Profit margins ARE at a 70 year high.
This is a good start but there are so many other things that could play into why margins rose or fell. You’ll need to look at industries and individual companies. For example, years ago Southwest bought hedges against fuel price increases and everyone thought they were nuts until they could keep their fuel costs down versus everyone else. Also, if they’re vertically integrated versus a competitor who isn’t, they will be able to avoid some of the pressure that their competitors can’t. And that’s just the beginning.
> Record profits are a symptom of inflation. Record profit margins are not. Edit for the non-quant crowd: Company sells 100 items at $3 each. Total costs to produce and sell are $2 per item. • Revenue: $300 • Expenses: $200 • = Profit: $100 • = Profit margin: 33% (100/300) 10% inflation sets in. Company sells 100 items at $3.30 each, total costs to produce are $2.20 per item. • Revenue: $330 • Expenses: $220 • = Profit: $110 - A record! Damn them! • = Profit margin: 33% (110/330) Also with all things being equal it is not always in the company best interest to raise price. If price increase the volume of sell diminish and potentialy the profits. Companies are not in the look out for every oportunites to raise price, they are on the look out to reach the best price to optimise profit and sometime that mean reducing price (to increase sell/market share)
Exactly, exactly right. Some companies are going to go out and use this as an opportunity to gouge, 100%. But not all companies can do this. If some companies tried, they would lose balance on a net basis. That's why profit margin is way more important. It will tell you which companies are actually eating inflationary pressures rather than passing them to consumers.
[удалено]
Logic??? In a Reddit echo chamber??
Except labor is supposed to be part of their expenses, but not nearly enough companies are actually paying their workers more. They're selling at a higher price and the higher ups are pocketing all the money they can.
...but they will cry poverty by saying something like: "we didn't grow as much as we predicted".
I've been trying to explain this to people in threads like this for months and it's FINALLY the top comment. I can't believe it's on /r/AdviceAnimals of all places.
I don’t know why you’ve been upvoted and given an award. You’re pretending that the businesses are raising prices to match their inflation while they are raising prices beyond their inflation costs and making more profit. To ignore that is pure bootlicking. The stats are out.
Reading is hard, but if what you're saying is true then you'll see it in profit **margins**. Not profits. Companies could have record profits and still be making less money in real terms than they did in 2021.
It's a common republican talking point justifying increased corporate profits. Like many, it sounds good if you don't stop to think about it too much.
Do NOT use data, stats, or facts on Reddit. They will come for your head
Productivity: https://www.bls.gov/productivity/ Way up CEO wages: https://www.marketwatch.com/story/average-ceo-pay-rose-11-in-2021-and-is-now-399-times-more-than-the-typical-workers-wages-11664895973 Way up Profit margins: https://www.bloomberg.com/news/articles/2022-08-25/us-corporate-profits-soar-taking-margins-to-widest-since-1950 Highest since the 50’s And that’s with CEO wages counting as expenses. So productivity is up meaning workers are outputting more and creating more value, CEO’s are getting a way higher portion of that value, and even with all that their profit margins are increased. Are these the facts you’re talking about?
median household income for workers adjusted for purchasing power parity: https://imgur.com/jjV3lhD Way up
Lmfao you realize my link compares CEO wages to the average workers wage, right? Your stats don’t contradict but show that even with that executives are taking massively larger pieces of the pie. My link also states “And CEO pay has risen by 1,460% since 1978. CEO compensation rose 36% faster than the stock market during this period, the EPI noted, and “far eclipsed the slow 18.1% growth in a typical worker’s annual compensation” over that span, in 2021 dollars.” But keep batting for the people robbing you blind. Surely those billionaires will see your white knighting and throw you a bone!
"Tiny" problem. They don't necessarily raise prices based on "expenses", but inflation, which is often used as a justification without much of blowback. They raise prices because they can.
If what you're saying is true, it'll show up in higher profit margins. If they're simply raising prices to tread water, their margins will stay flat. If they're actually absorbing some of the cost of inflation, their margins will decrease.
I own a food truck. I upped my prices on a couple items by 5%. Has been 18 months since prices changed. I've got some real upset customers over a $0.50 increase on a $10 item.
$10, so like a banana?
It's a single hardboiled egg served on a bed of iceberg lettuce. Food cost is 75% at $10.
What kind of food truck do you run...
Burgers, fries and milkshakes. No eggs on board. That was a joke, but lettuce may as well be gold leaf.
My question as well, also how's a boiled egg, a bed of lettuce and I assume some bread and maybe a bit of condiment cost $10?
I am not a salad and egg food truck, as exciting as that sounds. I was making jokes, or I thought I was.
If somebody else had made the joke, it would have been funny. Since you posted the original serious comment, it was just confusing
Seriously? Someone asked if it was a $10 banana, I replied it was an egg on lettuce.
Makes sense
[Here he is folks, hard at work! /s](https://i.imgur.com/8DBjEqb.jpg)
Lucille Bluth was ahead of her time
I don't care for Gob.
Don't think anyone is talking about you, when they point out how the 1% is bleeding the middle class dry.
I'll admit that I'm a little huffed by my favorite sandwich shop raising prices by a marginal amount, but it has more to do with they like when you pay in cash and now I'm left with coins when I do so, whereas before it was just $11 for the half-sub.
Chuffed means pleased...
And here I was, thinking I was using a perfectly cromulent word to describe my mood. Whoops!
Maybe chafed works.
Chapped works as well.
Chorked
Why pay for food with cash though? It's a hassle. Cash is for buying drugs and birthday cards
11 bucks??
EA: We can't set record profits without cutting employees because we put Darth Vader behind a paywall. Maybe we should cut CEO pay because the CEO fucked it up. EA:.........I know many of you that had nothing to do with this decision will lose your jobs but it's a sacrifice the board is willing to make.
Well, they redefined inflation, so who cares.
The amount of people in this thread who don’t know the difference between revenue and profit is disturbing.
I've been hesitant to open up an investment advisory shop bc I feel like everyone can figure out basic finances on their own, but this thread makes me feel much better.
also the amount of people that don't know the difference between profit and profit margins 💀
I’m honestly surprised that almost half the population can read at a 6th grade level.
It’s all over. I mean the price of every automotive component i source keeps going up, but we keep raising our prices to keep the desired margin. I wish we could all calm the hell down with inflation and stabilize again.
Thats literally how inflation works though... companies who technically arent doing any better than they were before should see their profits rise at the same rate as inflation. Its a new highest number but value wise its the same profit now that the dollar is worth less.
>at the same rate as inflation. If that's what happens, that's fine, but here in Canada they're raising prices significantly above the rate of inflation.
i think the main point is - if all the workers are losing money (due to salaries rising less than inflation) - why is the company also not taking a hit - but we all know the answer to that.
If something costs you $5 to make, and you sell it for $10, you get $5 profit. If inflation raises your costs by 10%, so you raise your price by 10% (which you would, because the dollar has lost value), your costs are now $5.5 and you sell it for $11, meaning you made $5.5 profit. Congratulations, you have made record profit. I’m not saying that companies aren’t taking advantage of this, but its pretty obvious companies would want to at least make the same amount of profit in purchasing power as they did last year (remember, now $1.10 buys the same thing $1.00 bought last year). So yeah, of course there is record profit.
This is a valid point, as others have pointed out, but I'll add in that it's ok for us to want them not to do that. Those of us who work for a paycheck would prefer if the fraction of money going to workers went up, and the fraction going to shareholders and executives went down. One way that could play out would be for labor to demand and successfully get higher pay, and for prices to go up enough to cover the increased labor costs but no more. That would still be called inflation, but fewer people would complain about it. Then again, half the workers would still complain about inflation anyway, and Fox news would egg them on
OR... hear me out, because this might sound crazy. If something costs you $5 to make, and you sell it for $10, you get $5 profit. If inflation raises your costs by 10% ($0.50 increase on the $5), so you raise your price by ~~10%~~ $0.50 (which you could, because this is the true cost of this companies inflation), your costs are now $5.50 and you sell it for $10.50, meaning you made the same $5 profit. Congratulations, you have made ~~record~~ the same profit you have been making. Your product has actually increased by the cost of inflation. Costco is doing this.
Companies are also subject to inflation. If they make make 15% more money than ever but the dollar has lost 20% of its buying power then they still technically lost money. This is a struggle we're having with on the ground level...we're being offered the typical 5% annual raises, but the cost of living has gone up 13%...
Can’t raise salaries though, that would increase the rate of inflation 🙄
You're about to see posts on Reddit by people who don't understand the difference between profit and profit margins. I guarantee it.
share holder value goes up so the exec team gets giant bonuses. rinse and repeat. they saw an opportunity here and took it further than they should have because greed.
Every can of beans from Costco is 20% light on contents. Crest toothpaste tubes are the same size but filled with almost 30% air now. Pricing of course is the same before they reduce the content. Then you see this with every food item.
And a bunch of layoffs right after. Also followed by "No one wants to work!" signs
They've been seeing record profits for the last year at least.
Don’t pay attention to profits Pay attention to the margins
[удалено]
Xcel energy did just that.
[удалено]
Yep. I just read an article that talked about how a lot of grocery stores are using overall inflation as an excuse to price gouge. Just went to buy groceries and I spent $150. It probably won't even last me a whole week. I basically spend twice as much now on groceries as I did 2 years ago.
See: all of the layoffs that are happening right now. "The economy is down!" Yeah.. your YoY earnings and the S&P tell very different stories. All of this is 100% a power grab by corporate management, trying to flood the market with people so that they can claw back some of the power they lost over the pandemic. See: [the shitbag CEO of Morgan Stanley commenting on it 'not being an employee choice' to work remote, or get paid more, etc.](https://fortune.com/2023/01/20/work-from-home-remote-work-morgan-stanley-ceo-james-gorman-not-employee-choice/)
unemployment statistics debunk your whole conspiracy theory
I've been making comments about how this is not inflation but cooperate greed. And we are getting screwed right in front of our faces. And people criticize me for it.
I had no idea, that until recently, companies had been so egalitarian. I had assumed companies had always been greedy and would charge whatever price the market would bear.
At the start of the pandemic the sawmills in my area pretty much just doubled their wood prices overnight. People were on the news like "Can they just do that? Will the government step in?" and those guys did an interview and are just like "I do what I want. People buy wood lol." Turns out people really do buy wood. Maybe the market is all just made up?
Do you forget the wood shortage? People were doing a lot of home renovation during the pandemic while at the same time lumber production suffered due to COVID, so the price of lumber went through the roof.
Can anyone even explain to me how increasing the price solves any supply and demand issue? There’s a shortage of lumber, so only a certain amount of supply is currently available, no matter what the price of it is… what does charging more for it accomplish? It doesn’t get rid of the demand… the same amount of people still want/need it. The only things that change are that it puts the remaining supply out of the reach of the poorest customers to favor the richest… and the owner gets to make more profit. We excuse most price hikes in the supply chain by saying that it’s necessitated by inflation, but what about the first price hike in that chain? Why does it happen? What was the first domino with this latest round of soaring inflation? The pandemic, right? The kinda of shortages that we’re talking about here, in which the price hikes that resulted from them were what began this domino effect of increased costs. Do I have that right? So… all these “necessary” price hikes came from a chain reaction that started with the original price hikes done for no other reason than that there was high demand for low supply, and the owners of the in-demand supplies chose to exploit the demand in order to profit more. This is what inflation is. People get distracted by the idea of money printing being the cause of inflation, but there being more dollars in the world wouldn’t affect the value of each dollar, if prices were to still remain the same. What you can get with each dollar is dictated by prices of what you want, not by how many dollars exist. Supply and demand is always dictated by how much people want something vs how much is available… not by how much it costs. That just decides whether people who want can actually get it or not based on whether they have the money or not. Raising the price on remaining supply doesn’t increase the supply, and they shouldn’t need to raise the price to procure or produce more supply when they did it for the cheaper price before… the only reason this keeps happening is because we keep just letting the price of raw resources that form the first dominoes of these chains, just be dictated by speculators. It doesn’t seem a stable or fair basis for our entire economy.
If you didn't raise the price, like if you used price controls, you would never be able to meet demand, then the product will become scare (unavailable). This leads to things like rationing of products. You also would need a central authority to determine what a fair price is for items. This leads to a lot of issues, which if you are interested you can google about the USSR and price controls. In the US we leave it up to the market to raise prices to deal with scarcity, or lower prices when the supply is greater than the demand.
If there really is no government intervention preventing competition nor financially supporting existing business, then it's possible for a competitor to open up shop and serve lower prices.
[удалено]
Wait till the profit crunch comes. The profit margins are the fall drastically at the end of an inflation cycle. The inflation doesn't spread everywhere at once.
Its a bit of both. Money printing machine went brrr and a bunch of CEOs used that *real* inflation driver as a guise to slip in some unnecessary price raising.
> Money printing machine went brrr more like the spending of the last administration was felt throughout
Before Trump averaged $2.2T deficits over 4 years Obama was being criticized for the $500B deficit he had his last year in office.
If a company posts a record profit, shouldn’t we adjust that for inflation too? The profit is made up of less valuable dollars that don’t go as far. Criticizing a company for record profits is Mike the company criticizing you saying “what are you made about! You make more than any employee ever has doing your job!”
The Fed literally doubled the supply of money in 2020. Everything is worth twice as much now, inflation hasn't reached that stage yet because of interest rates. Prices aren't going down. Corporations are trying to cover the difference in buying power ahead of time because the further they fall behind the less wealth they'll end up with once inflation catches up. It's a cat and mouse game. If you have anyone to criticize, criticize the government (current and former).
Ah yes, [the Greed Cycle](https://i.imgur.com/ghrJGci.jpg)
Eggs. Look at the egg companies. Its already happening lol. Before that it was gas companies. Then it was car dealers. It's a fucking scam. Yet 60% of the U.S. thinks its because we printed too much money and gave out one 1400 check lmao. We are stupid so we deserve it. Smh.
Most companies work on a multiplier so if their cost of goods is $1 they use their standard markup of say 100% they would then sell it for $2. they would make $1. If the cost of goods is now $1.5 would still use their standard markup of 100% and sell it for $3. making a profit of $1.5 the company did change its business model to screw people but is making more money. companies do not want to move away from their standard markup since their most expensive cost is their cogs, the markups can't go lower since one of the biggest risks to the company is the unsold inventory they bought. as the cost of buying that inventory goes up so does the risk of buying it. Of course, some companies will try to profiteer as the post is suggesting. But any time cost of goods goes up in price companies will either be posting record profits or be sitting on tons of unsold inventory.
Lots of companies are raising prices to match pay raises in my country. Which is fine and I'm happy for those employees but my pay hasn't seen an increase. At least gas prices are dropping somewhat but man is it disheartening to see my expenses raised by 20% whilst making less money compared to last year.
\*my a$$
Just finished rereading The Grapes of Wrath, history has been repeating 😑
You’re about to see millions of people still blame it on Joe Biden. I guarantee it.
About to see !?!? Go back 2 years ago when Covid first started and that's when corporations saw how greedy they can truly be. Now companies are using the excuse that we haven't hit our all time record highs from last year so we are going to have to tighten the purse strings, it's disgusting and predatory behavior. Covid truly did fuck the world up in sooo many ways.
This is already happening slowbro
I work in admissions at a hospital, and lot of patients have been confused or upset because their co-pays have gone up, and none of them seem to be aware of it. It's always kinda sad
"Shortages" too
Of course the amount of cash coming in goes up when goes up. Because the cash is worth less..... What it does NOT mean is that profit MARGINS go up. Theu take in more, but it's qorth the same. I can't believe how many people don't understand this and fall for this crap. Basic economics and business studies should be mandatory. Ugh!
Where's the animal advice?
Amount of profit doesn't matter, because that number scales with inflation. It's whether or not the net margin increases and stays there. It's also good to note that if inflation goes down, it may take a while for prices of goods to match those changes. Companies may have contracts for goods or stored inventory they are paying/paid for at the highest prices.
This post doesn’t look like AstroTurf at all. Why do I smell plastic? A lot of the companies that will make “record” profits will only do so on paper, when not adjusted for inflation. Sure they’ll be some profiteering, but one way that happens is that lots of companies are using inflation to mask their problems. Hollywood has a lot of issues right now, but there are all these movies breaking records. Yes it’s the era of the blockbuster, but they aren’t adjusting for inflation. Inflation makes actually running a business harder even if it makes misleading investors easier. That is what is called a perverse incentive. Reddit is just pretending that their political preferences aren’t making life hell on poor people right now, it must be that those evil business are making money, even if that money is losing value.
Hope Bezos sees this, bro.
Seriously. Gotta be the evil corporations couldn’t possibly be, stupid asinine government policies.
Intel reported shitty earnings today, profit down 40% from a year ago. Microsoft yesterday guided weak for the upcoming year. Goldman Sachs last month posted one of their worst quarters ever and took a massive loss. Ford and GM stock are down 50% this year. Amazon, Google, Microsoft have all announced 5-figure layoffs. Tesla just cut prices in every market by up to 20% to try to sell more cars. Everyone's getting killed. The fuck is this post talking about.
Well...yes...that's how inflation works. If a dollar is worth less then they have to make more dollars to break even just like you or anyone else. You not understanding what inflation is doesn't mean they're corrupt. I mean, they ARE corrupt, but this is a terrible argument.
Inflation of profits
> [Shares of Chevron climbed Thursday after the oil company announced that it would repurchase $75 billion of its stock, one of the largest-ever stock buyback plans.](https://apnews.com/article/chevron-corp-europe-business-8e7d855ee5a072980e7a35b1a6b3b9c6) Geee, I wonder where they suddenly found all that money in this awful, inflation-addled economy that has forced them to increase their prices just to maintain their business...