Inflation fears are still top of mind for American consumers. But according to some leading retailers and brands, these concerns have yet to have a material impact on spending.
In the last few weeks, companies such as Skechers, Amazon, Steve Madden and Columbia Sportswear Company have acknowledged the challenges of the current inflationary environment while discussing results for the most recent financial quarter.
The Commerce Department said on Friday that the personal consumption expenditures (PCE) price index rose 6.6% for the year ended in March, reflecting increases in both goods and services.
Despite these inflationary challenges, some big players said they had not yet observed material softening on consumer demand.
“We’re not seeing softness,” said Amazon’s SVP and CFO Brian Olsavsky in a call with investors on Thursday. “We’re cognizant of the current inflationary environment and the impact it has on household budgets.”
Amazon shares plunged 10% after the market closed on Thursday after it reported a $3.8 billion net loss in the first quarter, which included a pre-tax valuation loss of $7.6 billion due to its investment in electric car company Rivian Automotive. Amazon CEO Andy Jassy said that the war in Ukraine and inflation and supply chain pressures had also challenged the company’s business.
Still, Olsavsky added that Amazon’s competitive prices and wide selection have kept consumer demand high, with most of the inflationary impact being felt on the cost side.
As prices rise, many brands are passing down price increases onto consumers — which could also have an impact on overall spending. Skechers, Steve Madden and Columbia Sportswear all noted in their most recent quarter that consumers have seemed to accept these moves.
“Our expectation is that consumers are expecting inflation across the product categories that they buy, and they’ve been responsive so far,” said Columbia CEO Tim Boyle, who mentioned that modest price increases for Spring of 2022 “have not yet been impactful.”
Similarly, Skechers CFO John Vandemore mentioned that it has continued to see strong wholesale sales, sell-through, and higher average selling prices without “any significant pullback in consumer discretionary spending.”
Steve Madden CEO Edward Rosenfeld noted that while the brand has raised its prices, it feels strong that consumers are accepting this change, especially when the products are new.
“Particularly when we have newness, we’re seeing that the customers are not pushing back on the price increases,” Rosenfeld said.
In general, consumer demand has continued to surge amid record high inflation. Retail and food service sales in March 2022 totaled $665.7 billion, marking a seasonally adjusted 0.5% increase from the previous month and a 6.9% leap from March 2021.
Meanwhile, consumer confidence in the U.S. economy is low, according to a recent Gallup poll conducted in the first half of April. 38% of polled adults said the current economic situation in the U.S was fair and 42% described conditions as poor. Furthermore, 76% of Americans said the economy is getting worse. Gallup’s Economic Confidence Index is currently hovering at -39, which is above the record low of -72 during the 2008 Great Recession.