Wrapup 1: U.S. consumers spurn cars, couches and cruises, results show

Upbound

30/09/2022 18:19

By Mehr Bedi
       Sept 30 (Reuters) - U.S. consumers are exhibiting
fragility ahead of the peak period for corporate results next
month, as some are struggling to pay bills and others are
slowing purchases of cars, sneakers, and household goods, the
week's earnings show.
    Data released on Friday showed U.S. consumer spending
increased more than expected in August, but aggressive interest
rate hikes from the Federal Reserve as it battles stubbornly
high inflation are slowing demand. 
    Nike, maker of Air Jordan and Converse sneakers, saw its
shares tumble to the lowest level in 2-1/2 years on Friday, a
day after the company said it needed bigger discounts to clear a
build-up of inventory. 
    "We are seeing evidence of a slowdown in spending across a
wide swath of the consumer space, with the combination of
inflation and rising interest rates pressuring household
budgets," said Garrett Nelson, VP and senior equity analyst at
CFRA Research.
    Big-ticket items like furniture and cars that are typically
financed have been hit particularly hard, he said. 
    Rent-A-Center Inc  RCII.O , a retailer that rents
televisions, sofas and appliances to lower-income customers, cut
its profit forecast for the third-quarter on Thursday, citing a
weakening economy. 
    "External economic conditions have continued to deteriorate
over the past few months," Rent-A-Center's Chief Executive Mitch
Fadel, said in a statement. "This has affected both retail
traffic and customer payment behavior," he said.
    Used-car retailer CarMax Inc  KMX.N  on Thursday said higher
interest rates and inflation were starting to take a toll on
vehicle demand, a warning that spooked investors in the wider
autos sector.
    "Obviously, consumers are having to make decisions ... I
just think they are prioritizing their spend a little
differently," Chief Executive Officer William Nash told
analysts.
    Home goods retailer Bed Bath & Beyond Inc  BBBY.O  on
Thursday said net sales plunged 28% as it heavily discounted to
rid its shelves of unsold inventory. 
    "We're in a situation right now where a lot of companies are
having to work through inventory issues and at the same time
that inflation is having some impact on consumer spending," said
Morningstar analyst David Swartz.
    Caution is even creeping into spending on travel, a red-hot
sector that has benefited from the easing of COVID restrictions.
    Cruise line operator Carnival Corp  CCL.N  saw its shares
plummet more than 20% on Friday after reporting third-quarter
results that fell well short of analyst estimates.
    Carnival has been heavily discounting and ramping up
advertisements to attract passengers after a long pandemic-led
interval. It also has a higher exposure to the mass-market
category that has been more affected by inflation.
    All the weak results and warnings seen this week have left
investors cautious heading into October when the bulk of
companies report results, said CFRA's Nelson.
 (Writing by Anna Driver; Editing by Andrea Ricci)
 ((anna.driver@thomsonreuters.com; 646-223-4342; Reuters
Messaging: anna.driver@thomsonreuters.com@reuters.net))