Mar 22, 2024 - Business

Execs warn of wobbling consumers in slew of earnings reports

Illustration of a trend line pointing downwards with a shopping cart.

Illustration: Allie Carl/Axios

Consumers might be wobbling if apparel, groceries and restaurant sales are any indication.

Why it matters: Consumer spending is the lifeblood of the U.S. economy.

Between the lines: A slew of companies this week reported signs of consumers weakening:

  • Lululemon CEO Calvin McDonald said consumer activity is "a little soft coming into the year."
  • Darden Restaurants — whose brands include Olive Garden, LongHorn Steakhouse and Ruth's Chris Steak House — said its same-store sales fell for the first time since the pandemic.
  • General Mills said it expects its organic net sales in fiscal 2024 to be anywhere from down 1% to flat as it deals with what CEO Jeff Harmening called an "evolving operating environment."

The big picture: Gas prices — one of the most significant determinants of consumers' feelings about the economy — are rising.

  • While increases are typical at this time of year as the summer travel season approaches, the national average is up 26 cents per gallon over the last month to $3.53, according to AAA.
  • That's also 9 cents higher than a year ago.

The impact: Some consumers are beginning to look for cheaper alternatives to their staples.

  • Darden CEO Ricardo Cardenas said the company is tracking "a few signs of some consumers trading down within our brands," including upper-income diners.
  • "We think as long as we execute great and we have great word of mouth, that will get that higher-end consumer maybe to trade to one of our brands from someone else," he says.

Reality check: The National Retail Federation Wednesday forecast 2024 retail sales growth between 2.5% and 3.5%, in line with last year and the 10-year pre-pandemic average, both of which are 3.6%, the group noted.

  • The booming stock market and rock-solid job market should keep consumer confidence elevated.

The bottom line: Americans aren't exactly pinching pennies, but they are looking for savings.

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