US consumers are becoming more prudent with their spending, executives at Amazon and Starbucks said on Tuesday.
“Customers in the US are being very thoughtful about their spend. They look for deals, they trade down and look for lower ASP (average sale price) products,” Amazon’s chief financial officer, Brian Olsavsky, told journalists ahead of the company’s earnings call.
Customers are buying “a lot more consumables and everyday essentials,” which tend to be cheaper, Olsavsky said.
Starbucks CEO Laxman Narasimhan made a similar observation during his company’s earnings call.
“We continue to feel the impact of a more cautious consumer, particularly with our more occasional customer and a deteriorating economic outlook has weighed on customer traffic and impact sales broadly across the industry,” Narasimhan said.
The CEO said that Starbucks’ performance this quarter “did not meet our expectations.” Sales declined 3% in the US year-on-year.
Olsavsky and Narasimhan’s remarks underscore the challenges facing US consumers — and the companies that sell to them — as shoppers attempt to stretch their dollars amid persistent inflation.
“From being a point of strength during 2023, it appears that lower- and middle-income households’ spending growth has been softening,” Bank of America economists wrote in a report published on March 11.
In July, McDonald’s CFO Ian Borden told investors that customers were trying to save money by “trading down” to its value menu items and “buying a little less.”
“A challenging macro environment including rising interest rates and elevated costs continues to create volatile consumer confidence levels and put pressure on consumer spending,” Borden said then.
Representatives for Amazon and Starbucks didn’t immediately respond to requests for comment from BI sent outside regular business hours.