Investors feel the pinch of thriftier consumers on company profits

Investors in large consumer-goods companies are having to up their stock-picking game, as a post-pandemic spending splurge dries up and increasingly price-sensitive shoppers start to erode corporate pricing power.

“Consumers have been able to absorb price increases thanks also to the exceptionally high level of savings accumulated . It seems that now this is coming to an end,” Chiara Robba, head of LDI equity at Generali Asset Management in Paris, said. Notable examples include Nestle and Ryanair in Europe and McDonald’s in the U.S., along with payment firms such as Visa and Worldline. In many cases, share prices have tumbled.

“Weak brands that had been jumping on the bandwagon and increased prices materially are forced now to correct through discounts and promotions,” he said. “This is happening because middle-class consumers in the West are sobering up from the post-pandemic euphoria.” “There is certainly a sense of consumer resistance to higher prices, given the ongoing cost of living crisis,” Sanjiv Tumkur, head of equities at Rathbones Investment Management, said.

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