U.S. Consumer Is Recovering Faster Than Even the Companies Expected

Americans are opening their wallets again -- faster than a bullish Wall Street had been expecting -- and even the consumer companies are surprised.

Under Armour Inc.’s chief said Friday that third-quarter demand proved “much higher than we had anticipated, especially in North America,” as revenues stabilized following two down quarters. Toymaker Mattel Inc. last week reported its highest quarterly growth in a decade with parents snapping up Barbie dolls and Hot Wheels toys for bored kids stuck inside. Even Starbucks Corp., whose sales have been upended as Americans stop commuting to work and school, has been surprised by the pace of its comeback.

U.S. Consumer Is Recovering Faster Than Even the Companies Expected

“The recovery has actually unfolded faster than we anticipated,” Chief Executive Officer Kevin Johnson said on Bloomberg TV Friday, citing same-store sales that were down just 4% in the U.S. in September, after falling to a low point of negative 65% in April. “We’re focused on those experiences that customers are seeking right now, which we characterize as experiences that are safe, familiar and convenient, and that has fueled our recovery.”

Heading into earnings season, analysts had been expecting packaged-food makers to report a strong third quarter, given the resurgence of pantry loading. But they hadn’t foreseen such brisk demand in other consumer sectors, from quick-service restaurants to luxury goods. The spate of consumer-facing brands reporting better-than-expected results came the same week data showed personal spending rose by an annualized 40.7% in the latest quarter, by far the most on record.

According to Bloomberg data, earnings per share at consumer-facing companies have come in, on average, 24% higher than analyst estimates during their most recent quarters. Under Armour surprised the most, the data show. But others who’d had a tough start to the year amid the pandemic also beat expectations, including Coach owner Tapestry Inc. and Olive Garden parent Darden Restaurants Inc.

“Recent data as to household balance sheets -- despite 11 million still unemployed -- show the healthiest household finances in years,” Craig Johnson, president at Customer Growth Partners, said in an email. The data all “supports our thesis and forecast that Christmas shopping will be robust, up 5.8% year on year.”

©2020 Bloomberg L.P.

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