Throughout 2024, despite a decrease the previous year, inflation has remained a significant factor, forcing consumers to scrutinize their spending. These changes in consumer behavior are beginning to manifest themselves in the first-quarter financial results for a variety of businesses, marking a tough period for some while others thrive.
Restaurants and food delivery services are among those sectors feeling the pinch as they strive to attract budget-conscious customers. Conversely, many consumer goods manufacturers appear to be weathering the inflation storm well, with consumers still favoring popular brands.
McDonald’s (MCD), renowned for its affordability, reported a slow down in comparable or same-store sales for the first quarter, indicative of consumers' waning spending power in what company executives labeled a “pressured consumer spending environment.” However, McDonald's earnings per share increased by 9% YoY, emphasizing their focus on promotional campaigns that highlight their affordability.
Starbucks (SBUX) experienced a 4% decline in same-store sales in the first quarter, attributing the drop to higher prices detering sporadic customers, despite maintaining their loyal customer base.
The rising cost of living is affecting not just physical eateries, but delivery services as well. DoorDash (DASH) disclosed a larger than expected loss in Q1 due to dampened demand for restaurant deliveries. Yet, by broadening its services to essential grocery and retail deliveries, it managed to increase its sales for the quarter.
Despite higher prices dissuading some consumers from eating out or ordering deliveries, popular retail products remain desirable. This was evidenced by The Coca-Cola Company’s (KO) revenue increase after raising its prices and subsequently raising its yearly revenue forecast. Coca-Cola executives observed consumers adapting to higher prices, shifting toward in-home consumption of its beverages.
Similarly, consumers found it hard to curb their sweet tooth, allowing the volatile cocoa market to drive Hershey's (HSY) prices up by over 5% from the previous year, securing almost 9% more revenue.
Procter & Gamble (PG), the manufacturer of Tide, Dawn, and Pampers, raised its prices more than analysts' expectations but continued to see significant sales growth, showing that despite rising costs, well-established brands still have a strong consumer base.