New Haven Register (Sunday) (New Haven, CT)
Companies see rising consumer spending despite headwinds
In the first quarter of this year, the U.S. economy was hit by high inflation, supplychain disruptions and the COVID-19 omicron variant. Despite those headwinds, consumer spending increased for many goods and services.
Consumers’ resilience was highlighted in the quarterly financial results released in the past few weeks by some of Connecticut’s largest companies. Encouraged by those numbers, executives at those firms expect to see rising demand during the remainder of the year.
“The consumer, on the back side of the pandemic, is looking to engage. They’re going to look to travel, socialize and get out of their homes,” Brian Wenzel, chief financial officer of Stamford-based Synchrony, the country’s largest provider of private-label and storebrand credit cards, said in an interview. “Consumers want to get back to life as normal.”
Synchrony customers’ purchase volume totaled about $40 billion in the first quarter, up 17 percent from the same period in 2021 — well ahead of inflation. At the same time, the
No. 187 company on the 2021 Fortune list grew its average number of active customer accounts by 6 percent to about 70 million.
Buoyed by the widespread easing of COVID-19-related travel restrictions, Norwalkbased Booking Holdings, the No. 424 Fortune company, saw its customers’ gross bookings hit about $27 billion, rocketing 129 percent from a year ago. Gross bookings refer to the total dollar value, generally including taxes and fees, of all travel services booked by customers.
“There are still restrictions and inconve
niences imposed on travelers today by some countries, though we believe that the industry is moving in the right direction and progressing back to normalcy,” Booking CEO and President Glenn Fogel said on a May 4 earnings call.
“While we are pleased with the trends we are seeing right now across our brands, as we look toward the rest of the year, we are cognizant of the potential for macro uncertainty and are aware that inflation or other macro factors may have an impact on consumer demand.”
Stamford-based WWE was another beneficiary of consumers getting out more. It posted first-quarter revenues of about $333 million, an increase of 27 percent. The company was boosted by live events, including WrestleMania 38, held April 2 and 3 in front of a total of about 156,000 fans at AT&T Stadium in Arlington, Texas.
“We’re pleased with the results for the quarter,” WWE President and Chief Revenue Officer Nick Khan said on a May 5 earnings call. “We’re confident the company’s momentum is strong coming out of WrestleMania 38.”
Consumer spending, in fact, is so strong that the Federal Reserve is trying to tamp it down in order to control inflation and give supply chains time to catch up. Fed Chairman Jerome Powell, in interviews with national media outlets including Marketplace, said in recent days that slowing demand is necessary to bring inflation back down to the target of 2 percent.
But the spending spree continues, including with Connecticut’s largest consumer-goods makers.
At New Britain-headquartered toolmaker Stanley Black & Decker, the No. 209 firm on the Fortune list, first-quarter revenues grew 20 percent to about $4 billion — an uptick largely attributable to outdoor power equipment acquisitions.
“Customer demand remained strong across many of our global markets,” Stanley Black & Decker CEO Jim Loree said on an April 28 earnings call. “The volume could have been higher, but for the supplyconstrained environment that we continue to make progress on resolving.”
E-commerce also remains robust, contributing to the rising revenues of Stamford-based shipping-and-mailing firm Pitney Bowes, Greenwich-based goods transporter XPO Logistics and Greenwich-based warehouse operator
GXO Logistics.
GXO was spun off last year from XPO, with the latter ranking No. 190 on the Fortune list.
“In the short term, as physical retail reopens, we have seen some shifts from e-commerce back to brick-and-mortar retail,” GXO CEO Malcolm Wilson said on a May 5 earnings call.
“However, our customers continue to invest heavily with us in developing their direct-to-consumer channels. When you combine this with our high revenue retention levels, we have great confidence in the robust nature of our growth trajectory in 2022 and the coming years.”
Despite the inflation spike — highlighted by the consumer price index increasing 8.5 percent in March, the largest year-over-year increase since 1981 — many customers can still spend because they have accumulated significant savings since the start of the pandemic.
The personal saving rate — which refers to income left after people spend money and pay taxes — surged to a record of nearly 34 percent in April 2020, according to the U.S. Bureau of Economic Analysis. The rate then dropped, before surging back to about 27 percent in March 2021. Those jumps reflected the impact of federal-government stimulus packages.
In the past year, the saving rate has plunged, running at 6.2 percent in March 2022.
Among other key indicators of personal finances, Synchrony’s net charge-off rate for debts that it does not expect to recoup totaled 2.73 percent in the past quarter, compared with 3.62 percent in the same period in 2021.
“When you look at consumers, they are very healthy,” Wenzel said, referring to finances. “There are historically low delinquency rates, low unemployment, a number of open jobs and rising hourly wages across the board to combat inflation.
“Then, for some, they have excess savings they’ve built up during the pandemic. They’re operating from a position of strength.”