80x Growth
"That’s just crazy, and it’s too hard to handle."
Summary: Consumers are spending money, but it’s a two-tiered economy. Higher-income consumers remain resilient, while lower-income consumers are under pressure. Meanwhile, the AI spending boom seems to be building even more momentum.
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Macro
Consumers are spending money
“It’s kind of surprising that you look at the headlines and all the worry beats that people have. They had the kind of noise around tariffs, and I have a war going on. It really hasn’t weakened the economy to a material degree. So I think we’re still -- we thought coming into the year, we’d had 2% to 2.5% GDP growth in the U.S. I think we might head a little to the lower side of that, but still be in the range...consumers generally are still getting on with their lives and spending money.” - Citizens Financial Group (CFG 0.00%↑) CEO Bruce Van Saun
But it’s a two-tiered economy
“There’s kind of a 2-tiered economy, where the more well-off people are benefiting from still strong stock markets, strong housing values, and not even batting an eye at what they’re seeing in the headlines. And then I’d say the folks that are less fortunate are still catching up to the inflation that we had. So their kind of real wages took a dip. And now salary increases are catching up, but they’re not all the way caught up. So I think they’re being a little more cautious still at this point.” - Citizens Financial Group (CFG 0.00%↑) CEO Bruce Van Saun
Higher-income consumers remain resilient
“I think at a macro level, it’s largely unchanged, and that the higher income continues to have very resilient spending, and that is true for our business as well, where we’re seeing solid growth, good growth with higher income, and also gaining share with higher income for us. On that lower income, while the declines are not as pronounced as they were maybe 6 or 12 months ago when we were talking about high single digit, the low income is absolutely still declining. I think some of that is probably due to lapping.” - McDonald’s ( MCD 0.00%↑) CEO Christopher Kempczinski
Lower-income consumers are under pressure
“...clearly, when you have elevated gas prices, which is the core issue that I think we’re all seeing about it in the press right now, gas prices, inflation on that, that is going to disproportionately impact low-income consumers. And so we expect the pressures there are going to continue.” - McDonald’s (MCD 0.00%↑) CEO Christopher Kempczinski
“We’re seeing the most pressure on lower income consumers, and as a result, this is driving greater focus on offerings that combine compelling price points with quality, abundance, and differentiated experiences like Applebee’s 2 for $25 value platform and IHOP’s everyday value menu...our price sensitive, more value-oriented guests seem to be staying home a bit more and/or looking for lower cost alternatives.” - Dine Brands Global (DIN 0.00%↑) CEO John Peyton
They’re literally running out of money at the end of the month
“They’re literally running out of money at the end of the month. We’re seeing negative cash flows in the lower-income brackets where they’re dipping into savings.” - The Kraft Heinz (KHC 0.00%↑) CEO Steve Cahillane
We could see another wave of inflation
“We could see more significant inflation, and nobody wants to see that because in our industry, we still haven’t seen a return to volume growth. We had four years of volume degradation because the consumers had to absorb too much price. I think the industry has been battling to be as affordable as possible, but the consumer hasn’t been able to really handle that. Seeing another wave of inflation is not what anybody wants to see, and nobody wants to be out there taking more price [increases], but it’s just the world that we live in—we have to be prepared for what could be yet again another unprecedented event. Nobody had in their plan a war in the Middle East.” - The Kraft Heinz (KHC 0.00%↑) CEO Steve Cahillane
Consumer sentiment is at a 50-year low
“...we can see that consumer sentiment has dropped to its lowest level in 50 years. The consumer sentiment was already on a very low level by any historical standards, but the war in Iran amplified consumer concerns about the cost of living. As a direct result, the consumer sentiment index in the US plunged, reaching the lowest level on record in March. Now, while our view is that consumer sentiment is unsustainably low and should rebound from here, these events clearly pressured our industry and particularly discretionary demand.” - Whirlpool (WHR 0.00%↑) CEO Marc Bitzer
