As costs rise, inflation’s next front are retailers - East Valley Tribune: Business

As costs rise, inflation’s next front are retailers

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Posted: Sunday, July 27, 2008 5:45 pm | Updated: 10:23 pm, Fri Oct 7, 2011.

NEW YORK - Coming to a store near you: even higher prices.

Most inflation this year has come from food and fuel, as retailers resisted passing along to strapped consumers the higher prices manufacturers charged them, but coming increases from companies such as Johnson & Johnson and Hasbro may leave them with no choice.

“While these increases have not for the most part been passed on at the retail level, it is inevitable that they will be at some point,” said Dean Baker, co-director of the Center for Economic and Policy Research. “Car dealers and other retailers cannot continue to absorb rising costs at the wholesale level and not pass some of these increases on to consumers.”

Sherwin Williams Co. on July 17 announced its third price increase in eight months.

The company has been having “difficult discussions” with retailers, Chris Connor, chairman and CEO, said in the quarterly conference call.

The price increases are “well-supported with facts in terms of why the company needs them,” he said. “Our customers, to the best of their ability, are passing them on.”

The increases leave retailers in a bind: They can keep prices steady and cut profit margins or raise prices and risk losing sales.

Wal-Mart Stores has been in the lead of aggressively keeping prices down, pressuring its competitors to do the same.

“We have seen inflation and we have passed some of that through,” said John Simley, a Wal-Mart spokesman. “We have, wherever possible, worked with our suppliers to reduce the inflationary impact as much as possible.”

Costco Wholesale Corp. said Wednesday its fourth-quarter earnings would be “well-below” Wall Street estimates of $1 a share as it delays price increases.

Stock in rival BJ’s Wholesale Club fell more than 10 percent as investors feared the competitor would have to match Costco’s prices.

Some economists say that once Americans spend their $106.7 billion in tax rebate checks, consumer spending may shrivel, sparking a round of price cuts to entice shoppers.

Others think price increases may be postponed, but they’re on their way.

Much of this depends on how much money consumers have after buying gas and groceries — and what kind of mood they’re in once they’ve filled their tanks.

On Friday, The Reuters/University of Michigan index of consumer sentiment for July came in at 61.2, beating expectations and slightly better than the 28-year low of 56.4 hit in June.

Still, the confidence index was at 90.4 a year ago.

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