Skip to content

ICYWW, yes they are price gouging

American businesses are “dancing” over inflation

This will make you sick:

THE CEO OF Iron Mountain Inc. told Wall Street analysts at a September 20 investor event that the high levels of inflation of the past several years had helped the company increase its margins — and that for that reason he had long been “doing my inflation dance praying for inflation.”

The comment is an unusually candid admission of a dirty secret in the business world: corporations use inflation as a pretext to hike prices. “Corporations are using those increasing costs – of materials, components and labor – as excuses to increase their prices even higher, resulting in bigger profits,” Robert Reich, former Labor Secretary under Clinton, recently argued. Corporate profits are now at their highest level since 1950.

William Meaney, now CEO of Iron Mountain, photographed in Los Angeles in 2009. 

Photo: Jamie Rector/Bloomberg via Getty Images

Iron Mountain is a data storage and management company based in Boston with a current market capitalization of $12 billion. According to its website, over 95 percent of the Fortune 1,000 are Iron Mountain customers. The company’s founder originally bought its first site, an exhausted iron mine, to grow mushrooms.

It wasn’t a one-off comment by the Iron Mountain CEO, William Meaney. On a 2018 earnings call, he invoked a Native American ritual, telling participants that “it’s kind of like a rain dance, I pray for inflation every day I come to work because … our top line is really driven by inflation. … Every point of inflation expands our margins.”

Iron Mountain’s CFO Barry A. Hytinen also said on an earnings call this past April that “we do have very strong pricing power” and for the company, inflation is “actually a net positive.”

At the September 20 investor event, Meaney explained that “where we’ve had inflation running at fairly rapid rates … we’re able to price ahead of inflation” — that is, increase its prices at a greater rate than the high recent rates of inflation. As Meaney put it, raising prices “obviously covers our increased costs, but … a lot of that flows down to the bottom line.” He also noted that this didn’t just apply to his company: “People are seeing what FedEx, UPS, and others are having to do to actually manage their business and pass on that inflation.”

Later in the event, in response to a question from a JPMorgan Chase analyst, Meaney explained that the company had “been getting north of 200 basis points of price increase” — i.e., 2 percent — in the low inflation environment of the mid-2010s. But, he added, he had then hoped for inflation because “pricing for us is actually slightly accretive on the margin” with higher inflation.

Interestingly, both Meaney and Hytinen expressed momentary regret that what was good for Iron Mountain might be bad for everyone in general. “I wish I didn’t do such a good dance,” Meaney said last week, “but that’s more on a personal basis than on a business model.”

Hytinen told earnings call participants that “we feel for folks” regarding inflation, but “we have a high gross margin business, so it naturally expands the margins of the business.”

Right. They “feel” for folks but it’s in their interest to jack up prices during times of high inflation because everybody’s doing it.Unfettered capitalism at its finest.

And here I thought market competition took care of all that stuff. Huh.

Published inUncategorized