Headline: Inflation up 7% from last year
Conclusion: To an optimist, the cup is half-full. To a pessimist, the cup is half-empty. To me, the cup is twice the size it has to be.
Jeff
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If sales are 102% of last year but only buy 93% as much then aren’t sales really down 5.14%?
math: (1.00 - 1.02 * 0.93) * 100%
Mike
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LMAO you will never be an economist left handed or right handed.
Profits are up considerably more. The prices were raised…
It is even possible the cost of goods dropped. If you sell fewer goods at a higher price your profits can rise while your costs drop.
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To answer your question, yes, sales are down 5.14% in inflation-adjusted (real) terms. So, customers spent more nominally but received less value (5.14% less value for each $1 spent), less bang for each buck. The retailers also, of course, delivered less total value in products in real terms.
To understand the impact on the retailers’ profitability, we would need to look at operating and perhaps other expenses. Here’s an example from Walmart, with their Q3 ending Oct 31, so fairly recent. Q3 revenues were up 8.7% in 2022 vs 2021, but operating expenses were up more. Cost of sales was up 10.1% and operating and sga expenses were up 16.1%. Hence, operating income was down in Q3 2022 by 53.5% relative to Q3 2021.
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Not true in 3 ways for Walmart in Q3 2022, at least. Correct? See above post.
I’m not even sure this is the case. Wages went up by about 4.5% (I think), but sales only went up by 2% (so far). These are nominal of course.
Tell that to the purchasing people at all the big retailers
Mike
Not to worry - all it will mean is increasing the credit card debt of the innumerates to new heights.
Jeff
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Sorry ML, The 3Q is a non issue. Black Friday is around the time retail becomes profitable. The prior 9 months accounting is just keeping the lights on for the sake of the holiday season.
The other thing that is missing from your statements of income is the online aspect. Online shopping really has continued to grow since Thanksgiving. It will cut off around December 10 as many smaller retailers can not guarantee delivery and UPS becomes worrisome to the general public for Christmas delivery.
The issue for Walmart is online the other retailers can and do present better and the customers are not already captive in a super store brick and mortar.