Looking for real-life signs of inflation — despite what official statistics say? Just listen to what some corporate executives are already talking about.
Five Below (FIVE) this week said it will start selling select items for more than five bucks. Meanwhile, Dollar Tree (DLTR)and Dollar General (DG) executives recently said higher prices are likely coming. Retailers' whose names are pegged to certain dollar prices are just the most dramatic examples of the trend.
XBut talk about raising prices to boost profit or to head off the hit of higher prices due to tariffs or higher wages, is coming from beyond dollar stores, according to an Investor's Business Daily analysis of data from Sentieo. The analysis reviews recent transcripts where top executives of consumer companies talked about price hikes. They're mounting.
Inflation Signs Ahead At Five Below
Retailers like Five Below are the most glaring examples of rising prices since they've literally built their businesses on the allure of low prices of a set dollar amount.
Even a seemingly small hike is a big deal for Five Below. "Increasing prices beyond the $5 price point is a decision we do not take lightly," CEO Joel Anderson said in the company's earnings call June 5. "We will be testing higher pricing on select products in a group of stores before rolling out increases to the entire chain. Whether some items are priced at $5, $5.25 or $5.55, we remain firmly committed to providing extreme value to our customers on fresh, high-quality, trend-right products in a fun, differentiated shopping experience."
Investors pay close attention to Five Below because it's a market leader.
Sign Of Inflation: Dollar Stores Reach Beyond The Buck
Such words echo similar sentiments from Dollar Tree. CEO Gary Philbin described to analysts on a May 30 investor call plans to prominently test products selling for up to $5. The products "will be displayed in four-foot sections or end-caps clearly branded as Dollar Tree Plus! in order to minimize confusion with our dollar values that our customers have come to expect," he says. "This is not raising items from our dollar price point to a higher retail, this is about adding new items and categories to add sales and margin."
Dollar General is also looking to go beyond the buck, largely to combat the hike of tariffs from 10% to 25% on Chinese goods, but more cautiously so, Chief Financial Officer John Garratt told investors on a May 30 call with analysts. "We will do everything we can to minimize the impact of tariffs on our customers," he said. "But even with these efforts, we believe our shoppers will be facing higher prices as 2019 progresses."
Even 99 Cents Only Stores, a market pioneer despite being privately held, is now selling products priced $1.99 or higher.
Why Screaming At The Theme Park? Higher Prices
Disney (DIS) has already raised prices for theme park tickets consistently. Disneyland ticket prices rose every year this decade and pushed well past the $100 a ticket per day barrier. Now, it's being more creative to find ways to drive pricing higher and control the masses expected to line up for its just-opened Star Wars Galaxy's Edge attraction. In recent weeks, Disney launched a new, more expensive annual pass that requires guests to make reservations on busy days.
But it's not alone. At rival park operator Six Flags Entertainment (SIX), "raising the prices on our existing tickets and decreasing the amount of discounts and promotions" is one of the company's growth opportunities, the company's Treasurer Stephen Purtell told analysts June 5 at an investment conference. "So we feel like we have several — we have years to come of growing pricing above inflation."
Ticket prices are already higher, the company's Chief Financial Officer Marshall Barber told investors June 6 at an industry conference. The company is using dynamic, real-time testing online to see how much it can raise prices further. That's very different than asking consumers how much more they'll pay. The result gives a more accurate picture of where price meets demand in reality, when consumers take out their credit cards.
"If you log into the website, you get a price. I may log in right after you and get $1 more. You may log in, get $1 more," Barber said. "We're not asking our guests. We're actually seeing real time which one drives the highest revenue. And so we're not being aggressive and just guessing what it is; we're actually testing it to make sure that whether it's ticket prices or fees or all-season dining, we're testing those price and testing those price increases."
Dining For Dollars
Restaurant chains, too, are seeing opportunities to raise prices. At Mexican chain El Pollo Loco (LOCO), the company is facing higher avocado prices due to the proposed Mexican tariffs. Higher prices will likely be a result for consumers, CFO Laurance Roberts told investors at the annual shareholders' meeting on June 4. "If we assume that the tariffs are fully implemented ... we estimate the balance of the impact to be about a 30-basis-point increase in our food cost as a percentage of sales," he said. "Of course, we were already looking at actions we can take to offset any price increases that may result from the tariffs, including additional pricing."
And at Cracker Barrel Old Country Store (CBRL), the company already implemented a 1.8% price increase, CFO Jill M. Golder told investors on the June 4 call with analysts and investors. "We would think about, is there some pricing that we could take to help offset things like higher commodity inflation," she said.
Some Aren't Pulling The Price Lever Just Yet
Prices are rising in many places, but not all. Official measures of inflation still show muted price growth in most consumer categories. Some retailers, like home decor seller At Home (HOME), don't think they can keep raising prices. "Strategic retail price increases" initially muted the blow from the 10% tariff on Chinese imports, CEO Lewis Bird told investors on the June 6 earnings call. But the company is holding on prices. "Because we will not pass along additional price increases to our customers, there will be some increased costs that we cannot mitigate," he says.
Same at Chipotle Mexican Grill (CMG), which has staged a powerful comeback from 2017 food safety concerns. The company's CEO Brian Niccol weighed in on Chipotle's plans with regard to pricing. He acknowledges many competitors are raising prices. Niccol, though, during a June 5 conference, told investors the company isn't looking at pricing as a key growth driver.
"But we still continue to believe pricing is really the last resort for action as opposed to ... I think most people's growth right now is all coming from pricing," he says.
Follow Matt Krantz on Twitter @mattkrantz
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