Costco, Pepsi offer a mixed picture of American consumer spending

One of the credible ways to find out how American consumers behave amid all the noise about recession is through the performance of companies that sell items that we consume every day.

In recent days, investors have been selling shares and moving their money to safer assets, such as concerns that the US trade war with China has started to harm the economy.

In a strong signal that companies are slowing down spending, a report this week showed that they are shrinking for the second consecutive month in September and reaching a low of 10 years. The gain in August was the smallest in six months.

Yesterday was a day on which the two largest consumer companies in the country revealed their income. Let's see how they perform in this uncertain economic environment.

Costco – Losing some steam?

Costco Wholesale (NASDAQ 🙂 reported its fiscal 2019 fourth quarter yesterday and published figures that did not meet expectations, as US sales somewhat missed analysts' expectations.

Sales in the same store in the US, excluding gas, continued to increase by 5.2% in the quarter, just below Consensus Metrix's projections of analysts. Earnings per share was $ 2.47, below the average estimate of $ 2.54.

Costco shares fell by no less than 3.5% in trading after closing time before some losses were compensated. The share had increased by 42% up to and including Thursday, compared to the increase of 16% in the

According to the American consulting firm AlixPartners, holiday revenue is expected to increase between 4.4% and 5.3% compared to last year.

"Although our forecast for 2019 is a revival of last year, rates and the trade war are finally starting to hit consumer confidence, and the buzz of an upcoming recession is getting louder," the company said in a research report.

Until now, Costco shares have remained a favorite with investors. The stock closed at $ 289 on Thursday, an increase of more than 40% so far this year.

Pepsi shows growth despite rising prices

Snack and beverage giant PepsiCo Inc (NASDAQ 🙂 continued its strong growth momentum as consumers did not slow down their purchases despite the fact that the soft drink manufacturer was raising prices for its products.

Pepsi it will achieve or exceed its full year sales growth after sales, both at the top of Wall Street estimates for the last quarter.

The group said organic sales, which eliminates acquisitions and currency effects, increased 4.3% compared to a year earlier in the fiscal third quarter that ended early September. For the full fiscal year, the company now says it can exceed its earlier target of 4% organic growth.

In an interview with Bloomberg, the company's finance director, Hugh Johnston, said that his company saw no sign of consumers cutting back their spending on their products.

Yesterday's report provided additional evidence that Pepsi's sales momentum is supported by a strong rebound in demand and the success of the company's product mix with popular brands such as Frito-Lay, Tostitos and Ruffles brand chips.

The positive earnings surprise pushed Pepsi shares yesterday by 3% to $ 137.93, which increased the profit posted by the cola giant this year by 25%.

Bottom Line

Consumer spending remains one of the strongest pillars of US economic expansion. These income reports show that consumers are not yet feeling the pinch of the trade war between the US and China, which has certainly damaged the industrial economy.

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