From inflation to recession: US retailers keep faith in the consumer

Wall Street is busy fretting over how far the US Federal Reserve will go to rein in inflation to its 2 percent target. A recession looks imminent and the latest comments by Fed chief Jerome Powell at an annual meeting of central bankers in Jackson Hole, Wyoming, leave little to the imagination when it comes to the central bank’s inflation fight.

Rate hikes won’t slow even if the US economy does not slip into a recession. A recession coupled with inflation is deadly for corporate earnings and that is driving investors away from stocks.

But if we parse through the management commentary by US companies that have declared their results so far, the outlook isn’t so bleak. Some companies are in sync with the market in their worries over stagflation but many others believe that Wall Street’s nightmares may not come true in their entirety. Main Street — the real economy — participants are confident that the US citizen will continue to consume and borrow just as in pre-pandemic times.

Three broad themes have emerged from the results of 30 companies whose stocks inhabit the DJIA index.

-US firms don’t like a strong dollar and exchange rate volatility-Inflation is playing havoc on their operating expenses, and this is particularly visible in the consumer and retail space

-A recession is very much on their minds but most believe it can be managed without much damage to earnings

Home Depot (Fiscal year: February-January)

Q2FY22: Revenue - $43.8 billion; net income - $5.2 billion

Q2FY21: Revenue - $41.1 billion; net income - $4.8 billion

Walmart (Fiscal year: February-January)

Q2FY23: Revenue - $152.9 billion; net income - $5.15 billion

Q2FY22: Revenue - $141 billion; net income - $7.4 billion

Coca-Cola (Fiscal year: January-December)

Q2FY22: Revenue - $11.3 billion; Net income - $1.9 billion

Q2FY21: Revenue - $10.13 billion; Net income - $2.62 billion

McDonald’s (Fiscal year: January-December)

Q2FY22: Revenue - $5.72 billion; Net income- $1.19 billion

Q2FY21: Revenue - $5.89 billion; Net income- $2.22 billion

Apple (Fiscal year: October-September)

Q2FY22: Revenue - $63.55 billion; net income - $19.44 billion

Q2FY21: Revenue - $63.94 billion; net income- $21.74 billion

3M (Fiscal year: January-December)

Q2FY22: Revenue - $8.7 billion; net income - $1,524 million

Q2FY21: Revenue - $8.9 billion; net income - $78 million

Boeing Inc (Fiscal year: January-December)

Q2 2022 Revenue - $16.68 billion; net Income - $160 million;

Q2 2021 Revenue – $16.99 billion; net Income - $567 million;

source: https://www.moneycontrol.com/news/business/earnings/from-inflation-to-recession-us-retailers-keep-faith-in-the-consumer-part-1-9117511.html