Inflation is a natural part of the economy and there are few industries that have not been impacted. Machines impact inflation, but many CEOs see it as an opportunity to reduce their prices and better serve customers in today’s world.
Inflation is all over the place. CEOs are saying that it has changed the world and that they have to adapt.
This is what some of the world’s business executives said about what they’re seeing and doing about inflation on their quarterly results calls this week.
“We’re witnessing an increase in inflation…. As I indicated on a prior call, logistics is highly expensive in terms of moving stuff around. I’m hoping that at least some of it is just temporary, but the world has changed, so we’ll see.” (27 January)
Michael Hsu, CEO of Kimberly-Clark Corporation:
“In the past, we’ve seen a swift turnaround in our commodities…. This cycle, however, is unique in that the peak is higher, wider, and lasts longer…. This year, we don’t foresee reversal, and if we do, our recovery will be a little quicker. However, reversion will occur at some time.” (26 January)
CFO 3M Monish Patolawala is a character in the film Monish Patolawala
Photo courtesy of GE Healthcare
Monish Patolawala, Chief Financial Officer of 3M Company:
“As we approached December, we saw that the rate of inflation had decreased compared to previous months. Although inflation is still occurring, the rate has slowed. That, in my opinion, is a good thing. But, once again, it will rely on how the winter plays out, logistics, and if the ports get less clogged.” (25 January)
Ann Dennison, Nasdaq Inc.’s Chief Financial Officer:
“I believe there is some inflationary pressure in our supplier contracts, which we will handle.” The great bulk, though, is on the wage side…. As a result, although we believe the current pressure is temporary, we intend to continue to spend in such requirements in the long run.” (26 January)
Kevin Ozan, Chief Financial Officer of McDonald’s Corporation:
“It’s reasonable to suggest that there will be commodity pressure in 2022, as you said. To put things in perspective, food and paper expenses in the United States increased by around 4% in 2021. Looking ahead to 2022, we anticipate double-digit or high-single-digit gains. The majority of that pressure, if not all of it, will be felt in the first half of the year, and we anticipate it to subside as the year unfolds.” (27 January)
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Marc Bitzer, CEO of Whirlpool Corporation:
“We haven’t seen any serious problems regarding pricing elasticity thus far.” The demand has been strong and steady. And, to be honest, we don’t view it as the No. 1 restriction right now, given the most recent increase we announced. So, to return to the overarching theme, the consumer is not our primary priority right now. It has to do with the supply chain.” (27 January)
Lavanya Chandrashekar, Chief Financial Officer of Diageo PLC:
“We hiked pricing during the half [year] in response to growing inflation throughout the supply chain, which was bolstered by substantial marketing spending.” … I’ll give you a handful of instances. Throughout the first half, we raised prices across Casamigos and Don Julio by an average of little over 4.5 percent in the United States. Despite supply difficulties on some aged varieties, both brands continued to expand in volume, and both brands increased their market share.” (27 January)
Dirk Van de Put, CEO of Mondelez International Inc.:
“As we discovered in our state of snacking study published last week, everyday snacking is on the rise for the third year in a row. And, despite the fact that 70% of worldwide consumers are concerned about inflation, it has had little effect on their food buying habits to far. This is in line with the price elasticity found.” (27 January)
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Levi Strauss & Co. Chief Executive Chip Bergh:
“Inflation is a psychological phenomenon… We’re keeping a close eye on the customer. However, everything we’re witnessing right now is good. And we know that over the past six months, we’ve been effective in having price passed through.” (26 January)
Greg Hayes, CEO of Raytheon Technologies Corp.:
“Of course, we’ve experienced inflation, as as everyone else, and it’s been more than we anticipated, I’d say, near the end of last year.” When we think about 2022, we’re definitely looking at around $150 million in pricing pressure from unforeseen supply chain inflation. Now, we usually start the year with around $200 million in price pressure, which we strive to ease…. We’ve got a bit more work to do this year.” (25 January)
Tammy Romo, Southwest Airlines’ Chief Financial Officer
Bloomberg News/Bloomberg News/Christopher Goodney
Tammy Romo, Chief Financial Officer of Southwest Airlines:
“As predicted, we continue to see inflationary cost pressure in the fourth quarter, notably in compensation, wages, and benefits, as well as airport charges…. Of course, the labor market remains challenging, putting downward pressure on pay rates across the board.” (27 January)
John G. Morikis, CEO of Sherwin-Williams Company:
“Our forecast also projects that, compared to 2021, the market rate of inflation for our raw-material basket would rise by a low-double-digit to mid-teens percentage in 2022.” We estimate year-over-year inflation in each of the four quarters, with the highest effects expected in the first quarter and steady decreases as the year continues.” (27 January)
Jim Fitterling, the CEO of Dow Chemical,
Photo courtesy of Bloomberg News/Aaron M. Sprecher
Jim Fitterling, Chairman and CEO of Dow Inc.:
“I’m not worried about inflation suffocating demand. To be honest, inflation has always been beneficial to our company. And, over the previous 30 years, when the Federal Reserve increases interest rates, our industry has usually outperformed other sectors.” (27 January)
Vasant Prabhu, Chief Financial Officer of Visa Inc.:
“Our service fees—cross-border, etc.—are typically priced in basis points on ticket size in terms of inflation.” So, to the degree that ticket sizes are increasing due to inflation, it definitely benefits us.” (27 January)
Kurt Barton, Chief Financial Officer of Tractor Supply Co.:
“As I said in our 2022 forecast, we anticipate inflation to endure. And we foresee a general inflationary climate in the next years, although it will be more usual mild inflation.” (27 January)
John C. Pfeifer, CEO of Oshkosh Corporation:
“As large backlogs grew, material prices skyrocketed.” And that is what we are going through right now, and we are extremely certain that we will succeed. … We believe we’re approaching a new normal. We don’t know, and we don’t think this material expense is temporary. Inflation, we feel, will most likely persist.” (26 January)
Matt Ellis, Chief Financial Officer of Verizon Communications Inc.:
“We all know inflation is a thing, and we’re going to see some of it.” The good news is that we have a large portion of our cost base connected to longer-term contracts, so we won’t necessarily feel the full effects of inflation at the same rate as other businesses. But it’s undeniably true. We’re going to do something about it.” (25 January)
McCormick & Co. Chief Financial Officer Mike Smith:
“As cost pressures escalated in the second half of last year, cost inflation will have a greater effect in the first half of 2022.” (27 January)
FactSet supplied transcripts, which were used to compile the quotes.
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Inflation is a problem that many countries are facing, and it’s one of the biggest challenges for CEOs. In this blog post, we will see what some of the biggest CEOs have to say about inflation. Reference: inflation calculator.
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