US companies brace for inflationary hikes

Theatres, junk food only a couple of industries that will get hit by Trump’s tariff blowback

From the big screen to the snack aisle, American companies plan to hike prices as their input costs creep higher.

It’s a sign that businesses have faith consumers will keep shopping even as products become more expensive.

And that belief in pricing power, showcased on earnings calls and presentations during the week of August 6-10, could signal a turning point.

Businesses have spent much of the economic expansion saying customers will abandon them if they charge more, and it’s become an often-blamed reason for low overall inflation.

Still, perceived pricing power isn’t uniform, as the comments show. For the most part, businesses raising prices are doing so in response to higher nonlabour input costs, while the predominant strategy for tackling wage inflation still seems to be productivity enhancements instead of higher prices.

“Our average ticket price also increased 3.7 per cent to $8.08, largely as a result of inflation, incremental pricing opportunities associated with recliner conversions, and favourable adult-versus-child ticket type mix,” said chief financial officer Sean Gamble.

“As we’ve continued to roll out recliners, our general tactic has been to go forward with limited pricing upfront and then when we see the demand opportunity increase there, and I’d say there’s still — we still believe there is further opportunity as we look to the back half of this year and forward in that regard.”

To be fair, movie ticket prices have been marching steadily higher in recent years. But theatres aren’t the only ones planning to pass on costs.

The maker of Twinkies and Ding Dongs wants to charge more for its sugary snacks, while Sealed Air Corp, the maker of bubble wrap and other packaging materials, is trying “to do everything we can operationally to keep our freight costs low,” chief financial officer William Stiehl said in a presentation.

“Where I’ve been very happy with the company’s success is our ability to pass along price increases to our customers for our relevant input cost.”

Hitting home

Tariffs are hitting home at Otter Tail Corp’s metal fabrication unit BTD, but leadership doesn’t sound especially concerned. Thank pricing power.

Not everyone is finding opportunities to pass along costs: Civitas Solutions Inc, a health and human services provider, is seeing slimmer margins.

“The number of people that are exiting the company are still a concern to us and I think it’s driven largely by the full, robust economy,” chairman Bruce Nardella said on a call, citing workers seeing opportunities to leave to get higher wages.

“Over the last two years, our margins have eroded because of that labour pressure.”