Cashing Out? Companies Raise Prices On The Low

July 28, 2014  |  

Is your money spread a little more thin now than it had a few months ago? It’s because prices have almost imperceptibly crept up. Imperceptible to everything but your bank account.

USA Today Money reports says companies are raising their prices, but they’re not required to disclose their price hikes. Companies like Chipotle, Netflix and Allergan revealed to investors during a second-quarter conference call how they have raised prices for their products.

“At least 11 companies in the Standard & Poor’s 500 mentioned raising prices during conference calls over the past three weeks,” the article says. “…[I]nvestors hope there’s more to come, since it’s still early in the reporting season and more than half the companies in the S&P 500 yet to report.”

The undetected price increases help build profits for companies that are trying to grow their numbers post-recession. In 2008, at the beginning of the economic crisis, companies had to lower prices in order to earn more money.  Now that the economy is becoming more stable, they have more power to inflate their prices.

The rationale for the price increases vary from company to company. Chipotle claims their prices rose 6.5 percent over the past three years with CFO John Hartung saying consumers have shifted from eating more beef to chicken, which hasn’t risen in price to the same degree.

Netflix’s CEO said subscribers have accepted its price hikes for the most part. He called customer dissatisfaction with the prices “background noise” and even noted once a business explains why there will be a price hike it will have no noticeable effect.

And Allergan, which is best known for Botox, stated they were able to increase their prices for other products such as Pred Forte-branded eye drops because there was a shortage of ophthalmic products in the nation.

Most people expect prices to creep up a bit, but it doesn’t necessarily mean everyone will pay the higher prices. Today’s news that Dollar Tree would acquire Family Dollar for $8.5 billion sounds good on the surface, for instance. But the business will still have issues stemming from the reservations of consumers who are still concerned about the health of the economy.

“Unemployment is dropping, but consumers from the very low end of the market all the way through the middle remain skittish. Wages aren’t rising. Government support for strapped households has faded. As a result, retailers are struggling mightily to juice sales,” writes New York magazine.

What are you willing to pay for?

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