Shop Talk

Retailers, consumers and prices

Check Out Line: Strong earnings in consumer world, but don’t get too excited

July 22, 2010

ShoppingCheck out the latest crop of results from the consumer and retail world.

U.S. consumer companies ranging from cigarette makers Philip Morris and Reynolds American to apparel company VF Corp and chocolate maker Hershey Co beat quarterly profit estimates on Thursday.

The stronger-than-expected results are certainly a welcome relief in an uncertain U.S. economy. However, it might be premature to assume all’s well again as a good chunk of the numbers were buoyed by aggressive cost-cutting and price hikes even as total sales remained lackluster.

Marlboro cigarette maker Philip Morris and Camel cigarette maker Reynolds American showed that even in a sluggish global economy, they have the power to raise prices.

With their strong results and forecast, the tobacco industry giants eased concerns that a large increase in the U.S. tax on tobacco last year, and high unemployment in Western Europe and the United States, would force a switch by consumers to lower-priced smokes.

VF Corp, which owns more than 30 brands including Jansport, Vans, Wrangler and Lee, managed inventories tightly and took fewer discounts to boost margins significantly. The company too said it will rely on price hikes to fight any rise in input and labor costs.

Hershey, the maker of Hershey’s Kisses, Kit Kat bars and Reese’s peanut butter cups, also posted better-than-expected quarterly profits and lackluster sales numbers.

Also in the basket:

SABMiller Q1 beer volumes dip, better in June

Safeway cuts year view amid price deflation

Champagne makers signal return to growth

(Reuters photo)

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