Pershing Square believes the businesses it owns have substantial pricing power that will enable them to cover the costs of inflation.

Judge over the 2022–2023 inflation period against the core portfolio companies Pershing Square held when the claim was made (as listed in its 2021/2022 annual reports). The test is whether these companies raised prices enough to offset cost inflation, shown by stable or rising operating margins (or gross/restaurant-level margins where more relevant) and by management or Pershing Square commentary saying price increases covered higher input and labour costs. TRUE: all or nearly all core holdings kept or expanded their margins through 2022–2023, with pricing credited for offsetting inflation. MOSTLY TRUE: most holdings did so, and one minor holding, or one brief period, showed margin compression from costs. MIXED: roughly half the core holdings offset inflation through pricing and roughly half had clear margin compression from cost inflation. MOSTLY FALSE: most core holdings had clear margin compression that their own results attribute to cost inflation not passed on, with only a minority offsetting it. FALSE: nearly all core holdings failed to cover inflation, with material margin declines blamed on costs they could not pass through.

Set before the research began.

1. E1 cmg-20231231x10k U.S. Securities and Exchange Commission (Form 10-K filed by Chipotle Mexican Grill, Inc.) · 7 February 2024

   “During the year ended December 31, 2023, our restaurant operating costs (food, beverage and packaging; labor; occupancy; and other operating costs) were 73.8% of total revenue, a decrease from 76.1% during the year ended December 31, 2022.”

2. E2 cmg-20231231x10k U.S. Securities and Exchange Commission (Form 10-K filed by Chipotle Mexican Grill, Inc.) · 7 February 2024

   “In 2023, we implemented menu price increases to partially offset the increases in ingredients, labor and other costs; however, our higher menu prices may cause some guests to shift their purchases to other restaurants offered on the platform.”

3. E3 CHIPOTLE ANNOUNCES FOURTH QUARTER AND FULL YEAR ... Chipotle Mexican Grill, Inc. (via PRNewswire) · 7 February 2023

   “Restaurant level operating margin for 2022 was 23.9%, an increase from 22.6% in 2021. The improvement was primarily due to the benefit of sales leverage and, to a lesser extent, lower delivery fees associated with a lower volume of delivery transactions, partially offset by higher food costs and wage inflation.”

4. E4 Pershing Square Holdings, Ltd. 2022 Annual Report Pershing Square Holdings, Ltd. · March 2023 Own record

   “In recent months, a number of the DSPs (digital service providers or streaming platforms) including Apple, Amazon and Deezer increased prices for their individual subscription plans in developed markets by 10% to $10.99 and by an even higher percentage for family and student plans.”

5. E5 cmg-20231231x10k U.S. Securities and Exchange Commission (Chipotle Mexican Grill, Inc. Form 10-K) · 7 February 2024

   “our restaurant operating costs (food, beverage and packaging; labor; occupancy; and other operating costs) were 73.8% of total revenue, a decrease from 76.1% during the year ended December 31, 2022.”

6. E6 cmg-20231231x10k U.S. Securities and Exchange Commission (Chipotle Mexican Grill, Inc. Form 10-K) · 7 February 2024

   “Food, beverage and packaging costs decreased 0.6% as a percentage of total revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022, including 1.6% from menu price increases and 0.6% from lower avocado costs, partially offset by 1.6% due to inflation across several ingredient costs, primarily beef, tortillas and queso.”

7. E7 (none) Chipotle Mexican Grill, Inc. (PRNewswire release on company IR site) · 7 February 2023

   “Food costs benefited from menu price increases and, to a lesser extent, lower avocado prices. These benefits were partially offset by inflation across the menu primarily due to higher costs for dairy and tortillas.”

8. E8 Restaurant Brands revenue rises but profit falls BusinessDesk (NZ) · 27 February 2023

   “The company said it had lifted prices to offset the rising costs where possible, but margins had fallen from 16.2% to 14.5% due to pressure in all divisions.”

9. E9 Restaurant Brands International Inc. Reports Full Year and Fourth Quarter 2022 Results Restaurant Brands International Inc. (filed as SEC Exhibit 99) · 14 February 2023

   “The year-over-year increase in Total Revenues for the full year and fourth quarter on an as reported and on an organic basis was primarily driven by the increase in system-wide sales as well as increases in commodity prices passed on to franchisees and an increase in sales to retailers.”

10. E10 Restaurant Brands revenue rises but profit falls BusinessDesk (NZ) · 27 February 2023

    “Like most businesses, RBD is facing rising input cost pressures. However, the company is unable to match pace with price increases, which is weighing on margins,”

11. E11 Universal Music Group N.V. Reports Financial Results for the Fourth Quarter and Full Year Ended December 31, 2023 PR Newswire (Universal Music Group N.V.) · 28 February 2024

    “Excluding these amounts, Adjusted EBITDA was €2,369 million, up 11.0% in 2023, or 14.6% in constant currency, driven by the revenue growth. Adjusted EBITDA margin improved 0.7pp year-over-year to 21.3%.”

Chipotle's filings show restaurant-level margin rising in 2022 (E3) and operating costs falling as a share of revenue in 2023 (E1, E5). They credit menu price increases with offsetting ingredient inflation (E6, E7), though E2 calls the offset only partial. UMG's 2023 Adjusted EBITDA margin rose 0.7pp; the release attributes the EBITDA growth to revenue growth and does not discuss pricing against cost inflation (E11). RBI's release says commodity costs were passed on to franchisees but gives no margin figures (E9). E8 and E10 cover Restaurant Brands NZ, and none of the evidence shows that it is one of Pershing Square's holdings. Several other core holdings have no evidence at all, so it can't be shown whether all or most of them covered inflation.