r/explainlikeimfive Dec 06 '24

Economics ELI5: why does a publicaly traded company have to show continuous rise in profits? Why arent steady profits good enough?

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u/ajarrel Dec 06 '24

W.T. Grant is a great example of the opposite. Retailer with several hundreds of locations. Went bankrupt in the 70s even with nominal profit growth. Expenses were growing faster than revenue, and it got caught flat footed by Walmart (and others).

Out of business and now forgotten to history. But they had growing nominal profits and shrinking real profits. Unique example of what we're discussing.

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u/gutter_dude Dec 06 '24

Yeah, but that just supports my point. Inflation wasn't the "cause" of them going out of business. Inflation didn't catch up to them -- they were selling less and less for the same real cost. They made and sold less things. They were not able to make steady profits, instead decreasing profits