Last week, many retail chains published financial reports. Shares of companies, who decided to maintain prices and customer loyalty, fell. But those papers, who decided to survive inflation at the client's expense, vice versa, have grown.
Save people money
Retail chains Walmart and Target reported for the third quarter. The results of the companies exceeded analysts' expectations, although it did not help the stocks. After the report, Walmart papers fell by 3%, Target — on 5%.
Both companies did not raise prices for goods and pass the costs on to buyers.. So they want to increase market share and increase the loyalty of their customers..
“We save people money and help them live better. These are the words of our founder Sam Walton. He loved to fight inflation. And so are we.”, Walmart said.
In October, the US consumer price index rose by 6,2% - maximum for the last 30 years. Walmart and Target's Tactics Hurt Margins Amid High Inflation: Walmart's gross margin fell from 25 to 24,6%, Target — with 30.6 to 28%. And investors didn't like it..
The companies also greatly increased their stocks., to deal with the holiday rush: Walmart — at 11%, Target — on 20%. There is a risk in this too.. If consumer demand is not so high, surplus will have to be disposed of at reduced prices.
They will buy it anyway
Macy's department store chain reported better than expected, and improved the forecast for 2021. The company's revenue increased by 35%, up to $5.4 billion. Also Macy's reported, that in 2022 it will launch its own marketplace, where will sell third-party products.
According to Macy's, the company is ready to raise prices for clothes. In recent months, the retailer has been conducting research, to find out, What products are customers willing to pay more for?: "We've gone through inflation before, so we have a lot of experience".
Another benefit of Macy's is that there is no surplus in stock.. Companies do not have to make discounts, to sell off excess goods. Compared to 2020, inventories increased by 19%, but fell on 15% regarding 2019.
After the report, Macy's rose by 22%, to the maximum in the last three years. Total for the last 12 months shares added 233%. Index S&P 500 over the same period increased by 31%.
Kohl's retailers, TJX and Victoria's Secret also published strong reports and announced their willingness to raise prices. After the report, Kohl's papers added 11%, TJX — 6%, Victoria’s Secret — 15%.
