DJ Price Increases Are 'Rampant' at Retailers. Blame Inflation.

Barron's

Mar 14, 2022

With inflation continuing to hover near multi-decade highs, more retailers are choosing to pass their increased costs on to their customers, according to new research from Gordon Haskett.

Analyst Chuck Grom used a basket of 50 items to compare prices between Walmart (target: WMT), Dollar General (DG), and Dollar Tree's (DLTR) Family Dollar. He used a selection of 65 items to compare Walmart, Target (TGT), Kroger (KR), Amazon.com (AMZN), and local grocers in select regions across the country.

The takeaway? Prices are going up fast.

"There has been a noticeable acceleration in inflation being passed on to the customer with the average price increase across all players rising 8.1% year-over-year," he wrote. Moreover, "items that have exposure to commodities (paper, aluminum) experiencing rampant price increases seeing the largest year-over-year changes."

Prices are up not only compared with a year ago, but on a two-year basis as well, he said.

Grom's study also showed that with price increases, Walmart's price lead over competitors has been reduced relative to both dollar stores and grocers.

While it isn't surprising that retailers are passing along some costs to their customers, it comes at a tricky time for the sector. Oil prices have surged in recent weeks, lifting the cost of gasoline, and consumers are no longer receiving government stimulus checks or an enhanced child tax credit, as they were in 2021.

That combination has made some investor wary of retail, given how difficult it will be for many companies to show year-over-year growth in 2022. That said, the labor market remains fairly strong, and wages have also climbed, albeit not as quickly as inflation.

 

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