Retailers and restaurants are enjoying a bump up in gross margins as they finally get relief from rising prices for goods, services, and labor. From Dine Brands Global Inc. to Target Corp. to Mattel Inc., Corporate America is benefiting from business costs that are now rising more slowly or actually retreating, underscoring the progress the Federal Reserve has made fighting inflation since kicking off its rate tightening cycle two years ago.

But that cost relief isn't showing up at the cash register for consumers. Instead, it is boosting company profits and helping fuel a boost in share buybacks.

The average gross margin for consumer discretionary and consumer staples companies in the Russell 3000 rose to 34 percent in the latest quarter, up from 31 percent four quarters prior. By comparison, the average gross margin for firms in the index—which encompasses about 98 percent of investable U.S. equities—came in at 40 percent, slightly up from 39 percent four quarters prior.