Antsy consumers prompt weak corporate results
Customers leave a Starbucks Coffee store in San Francisco, Calif. As companies miss their sales targets, more are citing weak consumer confidence as the reason for lower expected profits this year.
Kai Ryssdal: Coke. McDonald's. Procter and Gamble. And, I don't know -- Apple, just for good measure.
I'll give you a dollar if you can guess what they've got in common.
All right, here's a hint. It's about corporate profits. Revenue, more specifically. All four of 'em missed revenue expectations this past quarter. Which is -- in that twisted way business news goes -- your fault.
Which might well be part of a much bigger economic problem. From New York, Marketplace's Mark Garrison reports.
Mark Garrison: Starbucks blames you for its troubles. Not you personally, but the consumer. Its CEO says the slowdown in café traffic is partly because of weak consumer confidence. That number has dipped recently and consumer spending stayed roughly flat.
Economist Chris Christopher of IHS Global Insight says this environment is especially hard for companies occupying the middle market. Take restaurants.
Chris Christopher: Places that are not doing particularly well are some mid-tier restaurants, because people don’t want to pay that extra buck.
Cheap fast food places are largely doing well. And fancy joints with $40 entrees are also OK. He’s talking about one of those bar and grill chains, where they serve vaguely Southwestern fare and give you a pager to tell when your table’s ready. The wait’s not as long lately. Here’s a Chili’s ad fighting the trend.
Ad: The $20 dinner for two, now part of our menu, all day, every day.
Chili’s is moving the price down into the low-end, to let you know you can afford cheese fries and a Quesadilla Explosion Salad. And yes, that’s an actual menu item. If it sells, more tips line the servers’ pockets and they’ll spend a few dollars more somewhere. Maybe the money goes to the company you work for, fattening your wallet.
That’s the hope, but forecaster Jim O'Sullivan of High Frequency Economics doesn’t see consumer spending or confidence rising soon.
Jim O'Sullivan: Unfortunately, there’s probably not going to be a lot of change in the numbers over the next four to five months.
Until consumers feel better about the economy, more companies will struggle, possibly even the one that signs your paycheck.
In New York, I'm Mark Garrison for Marketplace.