Thursday, August 18, 2022

What CEOs Are Saying About Inflation: ‘The World Has Changed’

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Apple Chief Executive Tim Cook, Visa Chief Financial Officer Vasant Prabhu and Diageo CFO Lavanya Chandrashekar
Photo: Evan Agostini/Invision/AP; Patrick T. Fallon/Bloomberg News; Diageo

This is what some of the world’s corporate leaders said on their quarterly earnings calls this week about what they are seeing and doing about inflation.

“We’re seeing inflation.…Logistics, as I’ve mentioned on a previous call, is very elevated in terms of the cost of moving things around. I would hope that at least a portion of that is transitory,…

This is what some of the world’s corporate leaders said on their quarterly earnings calls this week about what they are seeing and doing about inflation.


Apple Inc.
Chief Executive

Tim Cook:

“We’re seeing inflation.…Logistics, as I’ve mentioned on a previous call, is very elevated in terms of the cost of moving things around. I would hope that at least a portion of that is transitory, but the world has changed, and so we’ll see.” (Jan. 27)


Kimberly-Clark Corp.
Chief Executive

Michael Hsu:

“Historically, what we see is a quick reversion in our commodities.…But this cycle is a little different because the peak is higher, it’s broader and it’s longer.…We’re not expecting reversion this year, and if we do, then our recovery will be a little bit faster. That said, there will be reversion at some point.” (Jan. 26)

3M CFO Monish Patolawala
Photo: GE Healthcare


3M Co.
Chief Financial Officer

Monish Patolawala:

“What we saw exiting December was the pace of inflation slowed down versus the prior months. It’s still inflationary, but we saw the pace slow down. And I think that’s a positive. But again, it will depend on how winter plays itself out, it depends on logistics, etc. and whether the ports get uncongested.” (Jan. 25)


Nasdaq Inc.
Chief Financial Officer

Ann Dennison:

“I do think that there’s some inflationary pressure across our supplier contracts, which we’ll manage through. But the vast majority is on the wage side.…And so, while we see the pressure right now here being short term in nature, we expect to continue to invest over the long term against those needs.” (Jan. 26)


McDonald’s Corp.
Chief Financial Officer

Kevin Ozan:

“It is fair to say to your point that there is commodity pressure going into 2022. Just to give a perspective, in 2021, in the U.S., our food and paper costs were up about 4% for the year. If we look forward to 2022, our expectation is that will be about double or in high-single-digits increases for 2022. Most of that pressure or more of that pressure will be in the first half of the year, and as the year progresses, we expect that to ease somewhat.” (Jan. 27)

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Whirlpool Corp.
Chief Executive

Marc Bitzer:

“So far, we do not see any major concerns about price elasticity. The demand continues to remain strong and robust. And frankly, right now, with the most recent increase we put out there, we don’t see that as the No. 1 constraint. So again, it comes back to the overall theme: Consumer, right now, is not our prime concern. It is on the supply chain side.” (Jan. 27)


Diageo
PLC Chief Financial Officer

Lavanya Chandrashekar:

“In response to increased inflation across the supply chain and supported by strong marketing investment, we increased prices through the half [year].…I’ll share a couple of examples with you. In the U.S., we increased prices by an average of just over 4.5% across Casamigos and Don Julio in the half. We continued to see strong volume growth for both brands, despite supply constraints on certain aged variants, and both brands have continued to grow share.” (Jan. 27)


Mondelez International Inc.
Chief Executive

Dirk Van de Put:

“As we found in our state of snacking survey released last week, the tendency for daily snacking is up for a third consecutive year. And although 70% of global consumers report concerns about inflation, it has done little to date to change their grocery shopping behavior. This is consistent with the observed price elasticity.” (Jan. 27)


Levi Strauss
& Co. Chief Executive

Chip Bergh:

“Inflation is partially psychological…and we’re watching the consumer like a hawk. But right now, every signal that we’re seeing is positive. And we know that we’ve been successful in getting pricing passed through over the last six months.” (Jan. 26)


Raytheon Technologies Corp.
Chief Executive

Greg Hayes:

“We have seen inflation, obviously, I think like everybody else, and it has been higher than what we expected, I would say, towards the end of last year. As we think about 2022, we probably got about $150 million of, I would say, price pressure from unexpected inflation in the supply chain. Now, typically, we enter the year and we’ll see about $200 million or so of pricing pressure that we go out and we work to alleviate.…This year, we got a little more work to do.” (Jan. 25)

Southwest Airlines CFO Tammy Romo
Photo: Christopher Goodney/Bloomberg News


Southwest Airlines Co.
Chief Financial Officer

Tammy Romo:

“We continue to experience inflationary cost pressure experienced in fourth quarter, primarily in salary, wages and benefits and airport costs as expected.…Of course, the labor market continues to be a challenge, which continues to pressure wage rates across the board.” (Jan. 27)


Sherwin-Williams Co.
Chief Executive

John G. Morikis:

“Our outlook also assumes that the market rate of inflation for our raw-material basket will be up by a low-double-digit to midteens percentage in 2022 compared to 2021. We expect to see year-over-year inflation in all four quarters with the largest impacts likely occurring in the first quarter and gradual reductions each quarter as the year progresses.” (Jan. 27)

Dow CEO Jim Fitterling
Photo: Aaron M. Sprecher/Bloomberg News


Dow Inc.
Chief Executive

Jim Fitterling:

“I’m not pessimistic about inflation killing demand. Honestly, inflation has always been a positive for our business. And over the last 30 years, when the Fed raises interest rates, that typically tends to drive outperformance in our sector versus the other sectors.” (Jan. 27)


Visa Inc.
Chief Financial Officer

Vasant Prabhu:

“In terms of inflation,…our service fees—cross-border, etc.—are denominated primarily in basis points on ticket size. So to the extent that there is inflation driving up ticket size, clearly, it’s beneficial to us.” (Jan. 27)


Tractor Supply Co.
Chief Financial Officer

Kurt Barton:

“We expect that inflation, as I mentioned in our 2022 guidance, to persist. And over the next few years, we expect a general inflationary environment but more typical modest inflation.” (Jan. 27)


Oshkosh
Corp. Chief Executive

John C. Pfeifer:

“As we saw big backlogs build, we saw material costs escalate. And that’s what we’re getting through right now, and we’re very confident that we’re going to get through that.…We think we’re kind of heading into a new normal. We don’t know that—we don’t believe that this material cost is transitory. We believe that inflation will most likely continue.” (Jan. 26)


Verizon Communications
Inc. Chief Financial Officer

Matt Ellis:

“We all know inflation is out there, and certainly we’ll see some of that. The good news is that we have a good part of our cost basis tied to longer-term contracts, which means we’re not necessarily going to see the full impacts of inflation at the same pace that other industries are seeing. But certainly it’s real. We’ll take actions to address that.” (Jan. 25)


McCormick
& Co. Chief Financial Officer

Mike Smith:

“Cost inflation will have a more significant impact in the first half of 2022 as cost pressures accelerated in the back half of last year.” (Jan. 27)

Quotes were pulled from transcripts provided by FactSet.

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