Reasoning
Historical data indicates that SG&A as a percentage of revenue has shown some volatility, with major Fortune 500 firms averaging around 30% during stable economic periods. However, in the last couple of years, there has been a trend of increasing operational costs due to inflationary pressures, with SG&A rising by approximately 50 bps year-over-year in 2023. Given that economic indicators are forecasted to stabilize by 2026, a drop of over 100 bps may occur; however, the resilience of rising labor costs and a potential tightening of consumer spending may counteract this decline, making a significant reduction less probable.Key uncertainty
The pace of technological advancements and their adoption in reducing operational costs could significantly alter the SG&A landscape, either mitigating or exacerbating cost pressures for firms.