Thursday, January 26, 2023
Jan. 26, 2023

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Shampoo, streaming give clue to spending amid inflation

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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 navigating higher costs themselves.

Three months ago, household goods giant Procter and Gamble reported stronger than expected sales and profits, although it reduced its outlook some 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. And about half of the company’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 gathering.

P&G stock has withstood the awful stock market environment much better than most. Shares are down 5 percent 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,” wrote the Wall Street Journal 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 turn in 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 its subscriber growth last quarter came from Asia, which is its smallest region.

The results in the week ahead will be the first to include Netflix’s answer to diversify its revenue and keep growing subscribers. The streaming service introduced its advertising-based subscription plan in November in the U.S. This was after a disaster 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 the stock has yet to regain the level where it was trading at before the surprise. Despite a summer and fall rally, shares are down about 40 percent in the past year.

As inflation data slowly cools and recession concerns continue, watching these firms will give investors a sense of how consumers are responding.

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