Ahead of retail earnings, here’s what we know about the consumer so far

The consumer landscape in 2024 is already taking shape — even before the country’s major retailers start reporting first-quarter earnings, which is beginning home depot And wal-mart Next week.

There are signs that the American consumer is still spending, especially on experiences. But extremely high prices are hurting low-income consumers, putting pressure on everyday purchases and corporate profits.

Broadly speaking, credit card companies prefer American Express, visa And master card Spending trends have been described as “relatively strong,” “relatively stable,” and even “healthy.” payment firms like paypal And block Still seeing strong transaction volume and payment growth.

Airlines and hotels are expecting Strong travel season ahead, Especially when it comes to international destinations Morgan Stanley’s Michael Wilson stated that “one third of consumers prioritize travel over other discretionary purchases and services.”

In fact, a Morgan Stanley survey revealed that 60% of US consumers are planning summer vacations this year – and nearly half of those traveling are expecting to spend more than last summer.

price guardian Booking Holdings Analysts said there are no signs that consumers are taking shorter vacations or declining their hotel choices. Kaiser That said, overall spending at Las Vegas casino resorts is still strong.

What’s more, cruise lines are seeing record bookings despite rising prices. Despite paying significantly more for food and drinks, passengers are spending lavishly on ships.

Even concerts, even at skyrocketing prices, are still hot tickets – with live nation Saying that “there is no problem on fan demand compared to last summer” and “global fan demand is stronger than ever.”

As an online artisan market Etsy Put it this way, “Consumers’ wallets remain tight so there is often little left after paying for food, gas, rent and child care.”

Consumers are delaying large purchases for their homes amid economic uncertainty – potentially an important factor to watch when Home Depot and lowe’s Report results this month.

wayfairWho Results reported on ThursdayAnalysts noted that the big-ticket category “remains weak” and it is uncertain when demand for home furnishings will recover. stanley black and decker Issuing a similar warning, it said “low consumer and DIY demand” is “the result of some levels of hesitancy in larger ticket items on the consumer and any end user side.”

Whirlpoolhas also experienced struggling appliance sales. And Pool Corporation — one of the nation’s largest distributors of pool supplies — said that although pool maintenance spending is “stable,” pool construction and more discretionary purchasing were weak due to higher interest rates.

Consumers have also become more savvy about how often or where they dine out. Restaurant Sales in the Quarter Wall Street largely disappointed amid the traffic struggle.

starbucks CEO Laxman Narasimhan told analysts, “We continue to feel the impact of a more cautious consumer, particularly on our occasional customers. And the worsening economic outlook has led to an impact on customer traffic, the impact of which is felt widely across the industry Is.” McDonald’s He added that “consumers are certainly being very discriminating in how they spend their dollars.”

It’s become clear this earnings season that American consumers are becoming increasingly price-sensitive, especially when it comes to everyday purchases. Bank of America Savita Subramaniam says that “consumer cleavages are emerging,” especially among low-income people.

Here are some companies warning about price sensitivity:

• Both Coca-Cola And PepsiCo A change in value-seeking consumer behavior has been observed, especially at the lower end.
• meat producer Tyson Foods Analysts reported that cumulative inflationary pressures have “created a more cautious, price-sensitive consumer” and that it is experiencing “a slight decline in private labels with lower-income households”.
• hershey said it continues to see “value-seeking behavior from consumers.”
• Owner of Special K and Pringles banananova North America volumes saw a 5% decline amid elasticity pressures as prices were 5% higher than a year ago.
• Burger King and Popeyes Parents restaurant brand noted, “We have seen consumers become somewhat more price sensitive, which has resulted in a decline in check growth.”
• shoes and apparel manufacturers Steve Madden Frankly said, “We see a customer that is still price-sensitive” and noted that its outlet stores have performed better than its full-price business.

Weakness in consumer bottom line could pose problems for discounters dollar general And dollar Tree Also loved by off-price retailers tjx, Ross Stores And Burlington Stores When they all report earnings in the coming weeks.

Amazon Briefly describes the new normal: “Customers are shopping but remain cautious, trading on price when possible and looking for deals.” Etsy also shared the same sentiment: “Consumers really feel the pressure and so they’re looking for value and deep discounts and deep promotions.”

shake Shack It said its sales improved from February to April due to effective promotions and offers. Domino Said its revamped loyalty program has helped sales. Taco Bell’s value menu has encouraged guest visits.

While companies are under increasing pressure to cut prices to win over consumers, steady inflation in food, energy, labor and other input costs has become a major obstacle to profitability for restaurants, retailers and consumer products firms.

Most companies have Pricing power is already seeing a decline In recent quarters – partly due to a more challenging demand environment and partly due to prices already being at very high levels.

Shake Shack said it raised prices in mid-March, but executives told analysts they have “no current plans to raise prices further this year.” The decision was taken even though he expected “inflationary pressures in wages, food and paper to persist.”

More focus on promotions will put more pressure on profit margins. Look at Starbucks, whose margins missed Wall Street estimates and fell short of a year ago. One of the reasons cited in its earnings report for the disappointing margin performance: “increased promotional activities.” Combine this with weak traffic, and it becomes a problem.

Ultimately, as companies face greater pricing pressure going forward, they will have to rely on other cost cutting or effective cost management to help maintain their profit margins in the coming quarters.

Prepare yourself for an interesting retail earnings season in the coming weeks.