What CFOs are saying about inflation, part 2

We can do this the logical way…or the fun way.

There’s the purely rational, numbers-based way of getting a read on inflation: You could take a look at the personal consumption expenditures index, the Federal Reserve’s preferred inflation indicator, which was released August 26.

The PCE price index rose 0.2% in July, up from a 0.1% decrease in June, per the Commerce Department. For the year, the PCE index was up 3.7%, while the core PCE inflation rate rose 3.3% YoY; both were flat with June’s figures.

So…those are numbers. And that’s the logical way to see what’s going on with inflation.

And then there’s the fun way. What’s that, you ask? Well, you could always listen to recent earnings calls and see what CFOs had to say about inflation, obviously!

The general read: If CFOs are talking about inflation right now, they’re not exactly saying “Wow, inflation is so great and awesome.” Still, we’re not seeing the full-blown stress of recent years.

Take recent comments from Dollar Tree CEO Michael Creedon. “The inflationary backdrop continues to pressure all household budgets, particularly for lower-income consumers,” Creedon said on the retailer’s August 27 earnings call.

But that’s not necessarily translating exclusively to negatives for the budget chain: “As our customers look for ways to stretch their dollars, they are increasingly turning to Dollar Tree for everyday essentials at compelling opening price points and pack sizes that help them manage their budgets,” he added.

That’s not to say Dollar Tree can disregard inflation.

“We’ve really been focused in the back half on protecting value for the customer. And so while tariff rates have come down, we’re also navigating some higher inflation…on portions of our assortment,” CFO Stewart Glendinning said on the call, adding that the company is also “seeing some pressure in [the] supply chain, of course, because of fuel.”

“Rather than passing those costs on to the customer, we’ve taken advantage of the fact that we’re getting that lower tariff rate in and that tariff rate is absorbing inflation and helping us to maintain value across key categories,” Glendinning continued. “We think that’s helping our traffic.”

Then there was Diego Scaglione, CFO of Flowers Foods, a producer of packaged bakery foods. When asked for his outlook on the inflationary environment during the company’s August 21 earnings call, Scaglione noted that “overall inflation has gone up in many of our categories from a pricing index perspective.”

Naturally, he was then asked what levers the business had “to help offset” commodity inflation. “Clearly, we have to look at productivity measures, which is part of our annual process, and throughout the year, we’re looking at ways to be more efficient in the bakeries in the network, et cetera,” Scaglione said, adding that “price probably is not going to be the only lever to overcome the inflation.”

Other execs had a more subdued reaction.

After Walmart CFO and EVP John David Rainey mentioned on the retailer’s August 20 earnings call that its “inventory at quarter end increased 6% in constant currency” due to “cost inflation as well as higher inventory to support strategic initiatives in the US,” an analyst then asked CEO John Furner for his “inflationary expectations for the remainder of the year throughout the business.”

Furner wasn’t especially concerned. “Generally, we’ve seen a pretty low inflationary environment throughout the year. We’re between 1% and 2% in total,” he said. “Generally not any big concerns right now on inflation. Fuel costs are probably the one thing that, of course, we’re watching because of the magnitude of it. And hopefully, those can come down over time.”

See? Wasn’t that more fun (and informative) than numbers?