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Welcome to a new week. A post-Easter burst of economic data will provide a picture of inflation and consumer demand as the second quarter gets underway. In earnings reports, this week’s snapshot of the state of retail will come from Rent the Runway and Albertsons.
Modern Retail DTC Summit: The retail news outlet gathers direct-to-consumer leaders in New Orleans for sessions on trends and shifts in this growing area of retail. (April 11-13)
Consumer Inflation Expectations: The Federal Reserve of New York releases data on consumer projections for inflation for the year ahead. If this becomes high, policymakers will become concerned that inflation is becoming entrenched in the mindset of consumers. However, they have remained “well-anchored” during this last year’s bout of high inflation, as Fed Chair Jerome Powell terms the fact that they’ve held in relative moderation. (April 10, 9 a.m.)
Consumer Price Index : The U.S. Bureau of Labor Statistics releases data on inflation for March 2023. In the last several months, inflation has fallen back from highs seen last summer and fall, but the comedown remains gradual. (April 12, 8:30 a.m.)
Producer Price Index: The U.S. Bureau of Labor Statistics releases data on inflation for goods before they reach retail shelves for March 2023. Known as wholesale inflation, this metric is seen as a forward looking indicator of prices to come for consumers. (April 13, 8:30 a.m.)
Retail sales: The US Commerce Department releases data on overall dollars brought in by retailers for March 2023. Along with being a barometer on the health of the retail trade, this is an indicator of consumer demand. (April 14, 8:30 a.m.)
Consumer sentiment: The University of Michigan releases preliminary data for April on consumer expectations and buying plans, as well as inflation. In March, sentiment fell for the first time in four months. (April 14, 10 a.m.)
Tuesday, April 11: Albertsons, Bed Bath and Beyond
Wednesday, April 12: Rent the Runway
Friday, April 14: JP Morgan Chase, Wells Fargo, Citigroup, PNC
Trending in Economy
Campbell Soup Company CEO Mark Clouse offered thoughts on messaging amid inflationary shifts in consumer behavior.
After months of elevated inflation and interest rate hikes that have the potential to cool demand, consumers are showing more signs of shifting behavior.
It’s showing up in retail sales data, but there’s also evidence in the observations of the brands responsible for grocery store staples.
The latest example came this week from Campbell Soup Company. CEO Mark Clouse told analysts that the consumer continues to be “resilient” despite continued price increases on food, but found that “consumers are beginning to feel that pressure” as time goes on.
This shows up in the categories they are buying. Overall, Clouse said Campbell sees a shift toward shelf-stable items, and away from more expensive prepared foods.
There is also change in when they make purchases. People are buying more at the beginning of the month. That’s because they are stretching paychecks as long as possible.
These shifts change how the company is communicating with consumers.
Clouse said the changes in behavior are an opportunity to “focus on value within our messaging without necessarily having to chase pricing all the way down.”
“No question that it's important that we protect affordability and that we make that relevant in the categories that we're in," Clouse said. "But I also think there's a lot of ways to frame value in different ways, right?”
A meal cooked with condensed soup may be cheaper than picking up a frozen item or ordering out. Consumers just need a reminder. Even within Campbell’s own portfolio, the company can elevate brands that have more value now, even if they may not always get the limelight.
The open question is whether the shift in behavior will begin to show up in the results of the companies that have raised prices. Campbell’s overall net sales grew 5% for the quarter ended April 30, while gross profit margins held steady around 30%. But the category-level results were more uneven. U.S. soup sales declined 11%, though the company said that was owed to comparisons with the quarter when supply chains reopened a year ago and expressed confidence that the category is seeing a longer-term resurgence as more people cook at home following the pandemic. Snacks, which includes Goldfish and Pepperidge Farm, were up 12% And while net sales increased overall, the amount of products people are buying is declining. Volumes were down 7%.
These are trends happening across the grocery store. Campbell is continuing to compete. It is leading with iconic brands, and a host of different ways to consume them. It is following that up with innovation that makes the products stand out. Then, it is driving home messaging that shows consumers how to fit the products into their lives, and even their tightening spending plans.
Campbell Soup is more than 150 years old, and has seen plenty of difficult economic environments. It is also a different business today, and will continue to evolve. At the end of the day, continued execution is what’s required.
“If it's good food, people are going to buy it, especially if it's a great value,” Clouse said.