Strategy

What CFOs are saying about pricing

The (pricing power) struggle is real.
article cover

Francis Scialabba

· 4 min read

Call it the perpetual pricing power struggle. It’s a fine line: Don’t raise prices, and you risk falling behind, but raise them too much and there goes your customer base.

In recent months, many companies seemed to have reached the end of their pandemic-era pricing power. You probably already saw: Target cut prices on thousands of products, in an appeal to the inflation-weary consumer. Amazon Fresh and Walmart have done the same.

But wait. Exercising pricing power is still big business. S&P 500 companies are on track to hit their highest profits in over a decade, according to analyst estimates gathered by Bloomberg Intelligence. They’ve benefited from layoffs, lower commodity prices, and—would you look at that—pricing power.

Like we said, it’s a fine line. And the pricing-power power struggle has been an ever-changing conversation in recent years, particularly throughout the pandemic. So, for a spring 2024 pulse check, let’s take a look at what CFOs and other execs have been saying about pricing in their latest earnings calls.

Cuts at Beyond Meat: In one corner, there’s someone like Ethan Brown, president and CEO of Beyond Meat, who lists pricing as one of the company’s top five priorities, explaining that the plant-based meat company plans on “implementing changes to our US trade and pricing programs beginning in Q2, which we believe will meaningfully impact gross margin.” The “overarching goal,” Brown said, is to “restore margins to previous levels achieved in 2019 and 2020 over time.” Short answer: Pricing is prime.

Airbnb customers choosing cheaper options: At vacation rental company Airbnb, pricing was similarly top of mind. “A year and a half ago, we noticed that there was a lot of concern about Airbnb prices increasing,” co-founder and CEO Brian Chesky said, adding that the company has since “created a whole team to identify a series of initiatives to modulate our prices.” He highlighted initiatives, like a “Compare Listing” tool that allows would-be vacationers to see how much others are charging in the same neighborhood.

“They can actually see people who are getting booked, not getting booked. And no surprise, the people getting booked generally have lower prices,” he explained. “We have nearly 2 million hosts that now use the Compare Listing Tool.”

News built for finance pros

CFO Brew helps finance pros navigate their roles with insights into risk management, compliance, and strategy through our newsletter, virtual events, and digital guides.

In light of a focus on pricing, Chesky said “the net of all of it is that hotel prices are up year over year and Airbnb listings on a like-for-like basis are down. So today, the value of Airbnb versus a hotel is better than it was a year ago.”

Planet Fitness rethinks not emphasizing price in ads: The “we are absolutely, positively paying attention to pricing” message was similar at Planet Fitness, where interim CEO Craig Benson said the company’s decision to not include price pointed offers in advertising was “a contributing factor” to its “lower net joins in Q1 versus last year.”

“We believe that this was due in part to the messaging not resonating as broadly as we anticipated as well as our strategic decision to not include price-pointed offers as part of our nationally funded portion of the advertising,” he explained.

“In a study that we commissioned to assess our first quarter campaign, consideration of Planet Fitness is trending upwards and is the highest it's been in years,” he continued. “However, the lack of a price point in our national funded January sale adds may have created less urgency for consumers to get off the couch and join.”

AutoZone bucks the trend: Others are taking a much harder line. Take Jamere Jackson, CFO of AutoZone. Asked if a period of sluggish sales would make the company consider another round of price investments, he doubled down: “We’ve been very disciplined on pricing. And we executed around the pricing initiatives [for] a couple of years and it helped us grow our shares and improve our units,” Jackson said. “We like where we’re priced today. And we don’t see the need to go move the needle on pricing as a way to go to accelerate sales growth.”

This tougher stance is largely due to industry trends, he noted, though another automotive parts maker, Advance Auto Parts, recently adjusted prices on 8,500 items in Q1. “I’ll just remind you that the lion’s share of the demand in this business is relatively inelastic. So this industry has been disciplined about pricing for decades, and we continue to see that being the case,” Jackson said.

News built for finance pros

CFO Brew helps finance pros navigate their roles with insights into risk management, compliance, and strategy through our newsletter, virtual events, and digital guides.