Execs warn of wobbling consumers in slew of earnings reports
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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.
