Uber-Wealthy First To Feel Price Pass-Throughs As Tiffany's Raises Prices On Most Jewelry Products, Complains About Dropping Margins
While so far the broader US consumer has been insulated from the surge in commodity input prices as supermarkets and retailers continue to believe that things will normalize, and nobody is desperate enough yet to be the first to defect from what has been a comfortable deflationary game theoretical equilibrium (except for the now bankrupt Great Atlantic and Pacifics of the world...it's too late for them), this is no longer the uniform case. Tiffany's has just announced it is raising prices on "most of its jewelry in the last couple of days in a move to help offset higher precious-metal and diamond costs." Dow Jones reports that increases depend on what metals are in the jewelry, a spokesman said, but are not commensurate with the metal-price jumps last year. He declined to be more specific. TIF feels customers are likely to find the moves more palatable than in 2009, when the company didn't raise prices despite higher costs because of the recession. Margins fell as a result. In other words exactly as we have been predicting for almost a year now, as we have been anticipating the liquidity driven inflation now gripping virtually every single commodity.
And with Tiffany's leading the charge, expect this move to be imitated as copycat retailers (many of whom are still stuck with massive excess inventory) finally take the plunge and follow through with a move that is sure to blow up not only margins in the short and long run, but earnings and as a result, earning multiples. The biggest loser of course, will be the US middle class which between energy, food and now discretionary price increases will not be able to fund the difference even factoring in the fact that nobody actually pays their mortgage any more.
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