Shampoo and streaming offer gauges for consumer spending as inflation eases
Harry and Meghan, Head & Shoulders. Olay and Enola Holmes. Bounty and the Bullet Train.
Two companies in the homes of millions of Americans, and people across the globe, can be decent gauges for the spending resiliency of consumers — and the ability of firms to navigate higher costs themselves.
Three months ago, household goods giant Procter & Gamble reported stronger-than-expected sales and profits, though the company reduced its outlook due to the strong U.S. dollar pinching overseas sales. The dollar has weakened considerably since last fall, which should bolster P&G’s profits.
About half of the firm’s sales comes from outside North America. Selling soap and cleaning supplies may not be as compelling as algorithms and software code, but it can be a steadier business as recession worries continue.
P&G stock has withstood the awful stock market environment much better than most. Shares are down 5% over the past year. That loss is halved for shareholders collecting its dividend.
“Inflation is testing Americans’ loyalty to Procter and Gamble’s biggest brands,” the Wall Street Journal reported in October. The next test of that devotion comes Thursday with the company’s latest quarterly results.
A very different consumer company is also scheduled to release its latest financial results Thursday. Yet, like P&G, Netflix generates more than half its sales from outside the U.S. and Canada. Over half of its subscriber growth last quarter came from Asia, which is its smallest customer region.
The financial results this week will be the first to include Netflix’s answer to diversify its revenue and keep growing subscribers. In November, the streaming service introduced its advertising-based subscription plan in the U.S. This was after a disastrous spring when it lost more customers than it gained for the first time in a decade. Pandemic subscribers wrestled with high inflation and canceled their accounts.
Subscriber growth has returned, but Netflix stock has yet to regain the level it was trading at before the surprise. Despite a summer and fall rally, shares are down about 40% in the past year.
As inflation slowly eases and recession concerns linger, watching P&G and Netflix will give investors a sense of how consumers are responding.
Tom Hudson is a financial journalist in Washington, D.C. He’s chief content officer at WAMU public radio station.