Inflation coming to your theatre as US firms flex pricing power

Bloomberg

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 non-labour input costs, while the predominant strategy for tackling wage inflation still seems to be productivity enhancements instead of higher prices.

SILVER SCREEN
“Our average ticket price also increased 3.7 percent 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.

SUGAR BOOST
The maker of Twinkies and Ding Dongs wants to charge more for its sugary snacks. “We will implement a retail price increase and incremental retailer programmes to help offset the inflationary headwinds we and others in the industry are experiencing,” Hostess Brands Inc. Chief Executive Officer Andrew Callahan said on a call, explaining that the company is researching how to do so without choking off growth. The majority of the change will come in 2019, he said.

BUBBLE WRAP
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 apresentation. “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.”

STEEL PRICES
Tariffs are hitting home at Otter Tail Corp.’s metal fabrication unit BTD, but leadership doesn’t sound especially concerned. Thank pricing power.
“We do not anticipate higher steel prices from tariffs having a significant impact on BTD’s margins as steel costs are largely passed through to customers,” Chief Executive Officer Charles MacFarlane said on acall.
“BTD is working to enhance productivity in a period of increased volume and tight labour markets.”
The trade impact pass-through is equally real at semiconductor device maker Diodes Inc. “Products that we import into the US from China, all of those products are going to be ultimately affected by the tariffs,” CFO Richard White said. Between US levies that began July 6 and additional rounds planned to follow, “it’s about $3.6 million per quarter, but we plan to pass these tariff charges on to our customers.”

HOME COSTS
Housing developer LGI Homes Inc. is “consistently” seeing sales price increases as costs bump higher — a sign that pricing power exists even in big-ticket markets like housing.
“We’re able to and need to raise our prices to keep our gross margins consistent,” Chairman Eric Lipar said. “In the market that we’re in, which I’d characterise as a good, solid, strong demand market with a tight supply of houses and the labour challenges, the material challenges that we all face, we see at least for the next couple quarters, that trend continuing. Prices are going to have to increase on a same-store basis if you will in order to offset increased costs.”