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Welcome to a new week. The final days of summer are upon us, which brings a few chances to get in some more sunshine, and start getting ready for fall. Here’s a look at what’s on the calendar in ecommerce and retail:
- SuperZoo: Pet retailers, suppliers and manufacturers meet in Las Vegas for a show that is set to bring together more than 20,000 professionals. August 23-25
- NACDS Total Store Expo: Retailers and suppliers in the health and wellness industry will be in Boston to view new products and attend programming featuring speakers including former US Treasury Secretary Larry Summers and Axios National Political Reporter Jonathan Swan. August 27-29
- Durable goods orders for July will be reported on Wednesday. This measures orders placed with manufacturers for goods that are designed to last more than three years. This metric rose unexpectedly in June, with inflation flagged as the likely cause. August 24
- The personal income expenditures index will be reported Friday. The preferred inflation measure of the Federal Reserve, this price index was recorded at a 40-year-high of 6.8% in June. Economists will be looking for signs that interest rate hikes are having an effect, and what this month’s measure says about what action the Fed might take when it meets again in September. August 26
- Consumer sentiment will be reported for the final reading of August on Friday. As measured by the University of Michigan Survey of Consumers, this index only edged up in the first half of August after hitting an all-time low in June. August 27
Retailers are in the spotlight once again as second quarter earnings season makes the final turn for home.
- Tuesday, August 23: Dick’s Sporting Goods, Urban Outfitters, Macy’s, Nordstrom.
- Wednesday, August 24: Williams-Sonoma, Guess.
- Thursday, August 25: Ulta Beauty, Coty, Abercrombie & Fitch, Gap Inc., Movado Group, Peloton Interactive.
Stories we’re following
- Back-to-school hits high gear: With many K-12 schools in the final weeks before a new year and college students gearing up for move-in, the back-to-school deals are getting more visible. We’ll be watching for signs of how retail’s second-busiest season is stacking up at a time when inflation is forcing consumers to make choices.
- Retail earnings, Week 2: A host of apparel and beauty retailers will report second quarter earnings. Last week, Walmart and Target detailed efforts to work through inventory, and their view of consumer behavior amid inflation. This week, we’ll get a clearer look at two of the key categories that shape consumer goods on their own. A host of brands and retailers have laid off corporate employees in recent weeks, so we'll also be watching to see whether that continues, and the fallout from the job cuts that have already taken place.
- Fed tea leaves: Along with new inflation numbers, this week will also feature a speech by Federal Reserve Chairman Jerome Powell from the central bank’s annual retreat in Jackson Hole. While this will not bring a new interest rate increase and there will be more data released before the Fed meeting that will bring the next decision in September, Powell’s words will be watched closely for indications of hikes may continue, and whether they are likely to be as high as the back-to-back 0.75% increases of the summer.
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.