It’s earnings reporting season again, and out come all of the nincompoops complaining about how the evil oil companies are raping the poor consumer and how certain retailers are going to take over the world. Too bad those guys never bothered to take Finance 101.
The news media, who should know better, doesn’t exactly help. Take CNN/Money’s list of The World’s 20 Most Profitable Companies. A nice visual slide show with a couple of statistical dot points, specifically total profits and change from last year. Let’s take a few of them, from a range of industries:
- Exxon Mobile – profit of $39.5 billion. They are really sticking it to the consumer!
- Wal-Mart – profit of $12.3 billion. That’s huge! Shut them down!
- Toyota – profit of $14.1 billion. We usually like Toyota…
- Microsoft – profit of $12.6 billion. Ahh… but they’re the good guys, right?
You can hear the chants from the unshaven protesters… "regulate Exxon!!". Those profits are simply too great and must be given back to the people! But wait a minute… how much work did those companies have to do to earn that much money? How much had to spent on oilfield development, capital investment, stores, and inventory? In other words, what is the bottom line profit margin?
- Exxon Mobile – 11.0%
- Wal-Mart – 3.4%
- Toyota – 6.9%
- Microsoft – 27.9%
And Exxon Mobile was the only major oil company in double digits. Operating in single digit profit margin territory is exceptionally tough, let alone if you’re like Wal-Mart with low, low single digits. A small false step, a small goof in planning, and your profits are toast. Wal-Mart is learning how precarious that situation can be. Most smaller companies won’t touch anything under 20-30%… it’s simply too dangerous.
So which running-dog evil company is really sticking it to the downtrodden consumer? I’ll let you figure that out.
Apparently size does matter after all. But not profit margin. I guess if those protesters had a nice salary of $100,000 a year but also had $95,000 in taxes and bills they’d call themselves "well off"… while trying to figure out why they had to eat Alpo for dinner every night.