Inflation has been one of the hottest topics for markets this year, and rising prices are affecting Berkshire Hathaway’s portfolio companies in different ways.
In March, the Federal Reserve’s favorite inflation gauge rose 5.2% and the central bank is beginning to raise interest rates, trying to mend the thread between slowing inflation and avoiding a recession.
Ahead of Berkshire’s annual shareholder meeting, executives from several of the conglomerate’s companies told CNBC how inflation is hitting their companies.
Irv Blumkin, the CEO and chairman of Nebraska Furniture Mart, said the higher prices are starting to affect the fundamentals of its business, but overall things are in good shape. Home furnishings have been a booming industry during the pandemic as stuck-at-home Americans redesigned their living spaces and adapted to remote work.
“Inflation is affecting our business a bit and we can see a slight slowdown in business written, but it’s coming from such large numbers through the pandemic. … It’s still at a high level, but you can definitely see a slowdown,” Blümkin said.
Brooks Running CEO Jim Weber said raising prices is difficult, but he thinks some of the cost pressures will ease soon.
“We do not have unlimited pricing power, but have made selective price increases where we believe it is possible. But our entire industry is so competitive. It’s a big marketplace. … I believe in conveying to the supply chain that costs are going down a bit,” Weber said.
In relation to inflation, Troy Bader, CEO of Dairy Queen, specifically highlighted the tight job market as a challenge for the restaurant industry.
“This is the biggest challenge facing our franchisees, and I would say it affects us on three distinct fronts: First, our franchisees,” he said. “The others are really our suppliers and our distributors.”
About 20% of Dairy Queen’s franchise locations still have dining rooms closed due to staffing issues, Bader said.
“It’s not about wages today. People pay whatever they have to pay. There just aren’t enough people to really get into the industry and work,” Bader said.
Watch all coverage of the CNBC Berkshire Hathaway Annual Meeting here.