Strategic Movements January 2022


Tim J. Smith, PhD
Founder and CEO, Wiglaf Pricing

Published January 14, 2022


Profits Down Following FedEx Price Hike

FedEx posted a 14% increase in profits in the fiscal second quarter following a price increase, yet cost increases related to labor led to operating income falling 13%.  Contrast this performance to that of UPS and we conclude the price increases weren’t enough at FedEx, and the pressure to gain revenue and market share overweighed that of delivering profits.

FDX is slightly up to $245.55 on 17 December following the news from a prior $238.52 with a P/E ratio of 15; 2021 revenue was $84 million.

General Mills Plans Further Price Increases

Supply chain disruptions and costs inflation are weighing on the maker of Cheerios and Betty Crocker.  Methods include list price increases and package size reductions.  “The current operating environment is as dynamic and challenging as I’ve seen in my 27-plus years in the industry,” said GM CEO Jeff Harmening.  Missing from the announcement is any indication of the size of the price increase.

Pricing Game Announcement

The challenge facing many companies in price management relates to competitive pressures, differences between brand and industry elasticity, and predicting the reaction of consumers to a price increase.  Wiglaf Pricing offers a price simulation game that includes cost increases.  It was developed to help executives get a more guttural feel for the nature of cost inflation and pricing decisions on volumes, revenue, and profits.  Contact us for more information.

Judy’s on Cherry Is Charging for Bread

Rosemary focaccia used to be served free at Judy Henry’s chef-owned restaurant.  Now, she charges $1.50 per loaf.  She also stopped giving free refills on non-alcoholic beverages.  If a customer values it, they will pay.

About The Author

Tim J. Smith, PhD, is the founder and CEO of Wiglaf Pricing, an Adjunct Professor of Marketing and Economics at DePaul University, and the author of Pricing Done Right (Wiley 2016) and Pricing Strategy (Cengage 2012). At Wiglaf Pricing, Tim leads client engagements. Smith’s popular business book, Pricing Done Right: The Pricing Framework Proven Successful by the World’s Most Profitable Companies, was noted by Dennis Stone, CEO of Overhead Door Corp, as "Essential reading… While many books cover the concepts of pricing, Pricing Done Right goes the additional step of applying the concepts in the real world." Tim’s textbook, Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures, has been described by independent reviewers as “the most comprehensive pricing strategy book” on the market. As well as serving as the Academic Advisor to the Professional Pricing Society’s Certified Pricing Professional program, Tim is a member of the American Marketing Association and American Physical Society. He holds a BS in Physics and Chemistry from Southern Methodist University, a BA in Mathematics from Southern Methodist University, a PhD in Physical Chemistry from the University of Chicago, and an MBA with high honors in Strategy and Marketing from the University of Chicago GSB.