Retailers use price-gouging to score record profits, watchdog charges
Some of the nation’s largest retailers have been using soaring inflation rates as an excuse to raise prices and rake in billions of dollars in additional profit, a corporate watchdog group charged on Friday.
Companies such as CVS Health, Kroger and T.J. Maxx parent company TJX appear to have raised their prices unnecessarily in 2020 and 2021 at a time when Americans were dealing with the economic fallout from the coronavirus pandemic, Accountable.US said in a new report. The group claims that corporations have overcharged Americans instead of maintaining stable prices for families in crisis.
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 a continuing debate about inflation. Some consumer advocates argue that corporations are justifying higher prices for consumers by using inflation.
Companies have used some of that profit to boost CEO compensation and give lofty benefits to shareholders like increased dividends or stock buybacks, the report charges. Many corporate leaders boasted to investors about their ability to pass on 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 value, we’re constantly working with our suppliers to maintain costs as low for our customers,” the company stated in a statement. “Our growth has been driven by overwhelming demand for 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 U.S. reached a new 40-year high in March, with consumer prices jumping 8.5% in the last 12 months — the fastest annual rate since the Reagan administration. But in many cases, retail executives are open about their willingness to raise prices. Kroger Chief Financial Officer Gary Millerchip said during a 2021 earnings call that the grocery store chain is “passing along higher costs to the customer where it makes sense to do so.” Ernie Herman, CEO of TJX, stated that the company’s strategy to surgically increase retail [prices], on selected items, was well underway and it is working very well.
Some companies blame inflation for their price rises, but Accountable.US or some lawmakers claim that these increases are far more than what companies need to cover increased costs.
“This isn’t about inflation,” Sen. Elizabeth Warren told MSNBC recently. “This is about price gouging. “
“We have witnessed unconscionable price increases in everyday consumer goods,” Rep. Jan Schakowsky (Democrat of Illinois) stated in a February congressional hearing. “Companies are making more money than Americans because of skyrocketing costs.”
The report cites, among other things, that Lowe’s reported a profit of $8.4 billion for its most recent quarter, largely due to its “new pricing strategies.” TJX, the parent company of Marshalls, TJ Maxx and Home Goods, saw its profits rise to $3.3 billion last year as the CEO spoke out 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 stated that it expects retailers will continue to make billions from the price rises. The National Retail Federation predicts retail profits will grow between 6% and 8% in 2022.
“It is time for corporations to shoulder the burden that average Americans have taken on during the health crisis,” Herrig stated. “Corporations should stabilize prices for consumers, not chase higher profits — and finally pay their fair share of taxes. “
Khristopher Brooks is a CBS MoneyWatch reporter covering financial, consumer and business stories. These stories range from economic inequality and housing problems to bankruptcies or the business of sport.