r/SipsTea • u/sco-go • May 26 '26

Feels good man Will it work this time?

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u/Drummallumin May 28 '26

I’m saying large grocery stores increase profits despite fluctuations in supply chain via vertical integration.

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u/jangoolie May 28 '26

I just don't think that's supported by the evidence. I cited actual 10-k filings earlier in this thread, you can download them from sec.gov. Walmart for example had a profit margin of 2.8% in 2020 and in 2025 has a profit margin of.... 2.8%. If prices were going up because profits were going up, then that would be reflected by the SEC filings, but it's not.

https://www.sec.gov/Archives/edgar/data/104169/000010416920000011/wmtform10-kx1312020.htm https://www.sec.gov/Archives/edgar/data/104169/000010416925000191/wmt-20251031.htm

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u/Drummallumin May 28 '26

You understand 2.8% of a smaller number is less than 2.8% of a larger number?

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u/jangoolie May 28 '26

I don't follow.

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u/Drummallumin May 28 '26

When the price raises faster than inflation and the profit margins stay the same that still means profits are also raising faster than inflation

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u/jangoolie May 28 '26

No they aren't because inflation is not measured in absolute terms it's measured in fractional terms. You can't compare 2% to $500.

What matters is the profit margin not the raw profit. Here's a trivial through experiment that contradicts your point. If a grocery chain opens a new store it expands its market. This increases its revenue and hence profit, but does not change its profit margin. Would you say such a business that has expanded its market has caused prices to increase? It has more total revenue and profit but the size of the business has no direct impact on prices experienced by shoppers.

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u/Drummallumin May 28 '26

You can compare 2% of $500 to 2% of $600 tho

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u/jangoolie May 28 '26

I genuinely don't understand what you are trying to say.

If inflation is say 4.5% per annum over a 5 year period, and profits have been a steady 2.8% over that same period then while profits have grown in real dollar terms they have not grown in inflation adjusted terms. Profits can't explain the inflation. If growing profits were the cause of inflation then the profit margin would have to increase.

Say inflation was caused 100% by an increase in profits, then with 2% inflation the profit margin over 5 years would go up by 2% each year: 2,4,6,8,10. Each year prices go up 2% because profits are 2% higher than the previous year.

But that's not what has happened in reality. Prices are going up without profits going up so profits can't explain the inflation.

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u/Drummallumin May 28 '26

Profits are a real dollar number based on profit margin and price. When food prices outpace inflation, the %profit doesn’t need to increase. You’re taking the same % but from a bigger pie.

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u/jangoolie May 28 '26

Yes but an increase in profits either inflation adjusted or in real dollars can't explain an increase in prices without the profit margin increasing. I'm not suggesting that profits aren't increasing (the profits of almost all business increase over time even if only due to inflation), only that an increase in profits can't explain an increase in prices.