Pepsi and other big brands lower economic forecasts: “Uncertainty creates a pensive and anxious consumer”
Major consumer companies have been holding earnings calls with investors where they are sharing gloomy prospects for sales and profits for the year ahead.
The first wave of major consumer companies began reporting their first quarter earnings and forecasts for the year last week. Companies like Chipotle, Pepsi and Procter & Gamble told investors that they were slashing their forecasts, predicting that tariffs will eat into their profits and expecting consumers to pull back on their spending.
This is the first earnings season since Trump imposed his sweeping 10% tariffs on most goods coming into the United States and 145% levy on many products coming from China. Trump has also placed 25% tax on imported aluminum, steel and cars.
Furthermore, America’s major trading partners have retaliated with their own tariffs on US goods. So far, at least a dozen companies have reduced or tossed out their earnings forecasts for the year as uncertainty around tariffs reigns.
Come July, Trump may move forward with additional “reciprocal” tariffs that he has put on pause for 90 days. On the flip side of the coin, Treasury Secretary Scott Bessent said on Tuesday that he believes there will be a de-escalation of trade tensions between the US and China. But cautioned that negotiations will likely be “a slog.”
“Uncertainty creates a pensive and anxious consumer”
Beverage makers like Pepsi will see increased costs of packaging their drinks due to the 25% tariff on imported aluminum. The New York-based soft drink maker reported a decrease in net revenue higher than expected due to lower sales volumes around the world according to ABC News. PepsiCo told investors that it expects “elevated levels of volatility and uncertainty” for the remainder of the year as geopolitical tensions impact sales in certain markets.
Colgate-Palmolive CEO Noel Wallace told investors that consumers “see obviously a very volatile external environment,” which is creating uncertainty that is leading to them spending less. The home and personal care products company saw sales down by 3.6% in the first quarter reported NPR.
“Uncertainty creates a pensive and anxious consumer,” said Wallace. “And when you have uncertainty… consumers tend to hunker down and they’re very cautious about the outlook.”
Consumer sentiment has been dropping since the start of the year down 32% in April compared to January. At the same time there are accelerating fears of inflation, layoffs, and the possibility of a recession, which were cited by companies as reasons why shoppers have slowed their spending.
According to a new CNN poll, two thirds of respondents said they are pessimistic about the economy. Nearly 70 percent said they think that a recession is at least somewhat likely. That included a third who said one is very likely coming.
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