Investors in consumer goods companies are grappling with significant challenges as post-pandemic spending patterns shift and price sensitivity increases. The stock market recently experienced a $4.8 trillion selloff, reflecting growing concerns about a potential economic slowdown.
Chiara Robba, head of LDI equity at Generali Asset Management, noted that while consumers initially absorbed price increases due to high pandemic savings, this trend is now reversing. The second-quarter reports reveal a slowdown in consumer spending, leading companies to reduce prices to stimulate demand.
Recent S&P Global surveys indicate that businesses in the U.S. and the euro zone are struggling to pass on higher costs. Companies such as Nestle, Ryanair, McDonald’s, Visa, and Worldline have reported weakened pricing power, with many seeing sharp declines in their share prices.
In the luxury sector, brands like Kering and Burberry have adjusted prices or issued profit warnings, signaling a broader slowdown. Kering’s Saint Laurent reduced prices on its Loulou bag by 10-15% in multiple countries, and luxury price inflation is reverting to more typical levels. Even leading companies like LVMH are facing challenges due to increased consumer resistance.
Gillian Diesen from Pictet Asset Management highlights a trend of consumer polarization, where high-end brands continue to raise prices, while less differentiated sectors, such as personal care and food and beverages, are more vulnerable. Ferrari’s success with premium models contrasts with the struggles of mainstream brands like Nike and Puma.
In the airline industry, while Ryanair has issued warnings, competitors like Easyjet and Jet2 are performing better due to varying customer preferences.
As consumer spending patterns evolve and economic uncertainties persist, investors must focus on selecting stocks in businesses that are better positioned to navigate these challenges.
