High-earners are increasingly choosing to shop at discount stores.
Americans' spending habits have changed recently, causing concern among economists. Bank of America's CEO Brian Moynihan reported that his customers are slowing down their purchases, resulting in a growth rate of 3.5% since last year, down from 10% growth the year before. This change in consumer behavior is seen in a survey by accounting firm KPMG, which found that while people are generally optimistic about their financial situations, they're concerned about the state of the US economy. 65% of those surveyed, including those making $200,000 or more, plan to do more discount shopping and use buy now, pay later services.
The discrepancy between consumer and business leader optimism over the economy's prospects can be explained by the impact of inflation. The strong labor market and low unemployment are offset by the erosion of purchasing power, leading to uncertainty about the future economic growth.
In a recent KPMG survey, consumers were more optimistic about their own financial situation but less optimistic about the prospects for the US economy's growth in the coming year compared to business leaders. This is evident in the shift towards discount shopping and increased use of buy now, pay later services, regardless of income level.
The Federal Reserve's interest rate cuts have received mixed reactions from investors and economists. However, 75% of respondents in the KPMG survey don't believe that these cuts will improve their personal financial situation. Consumers are less concerned about interest rates than other factors affecting their finances.
Meanwhile, two advisory firms have called for Tesla shareholders to reject Elon Musk's $51 billion pay package. Instructional Shareholder Services described it as "excessive," while Glass Lewis criticized its size and questioned Musk's numerous side projects, such as X, the former Twitter. Musk responded by arguing that the firms omitted key considerations, used faulty logic, and relied on speculation and hypotheticals. He urged shareholders to approve the pay package and the official relocation of Tesla's headquarters from Delaware to Texas.
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Recently, influential advisory firms have urged Tesla shareholders to reject Elon Musk's controversial $51 billion pay package. Instruction: Shareholder Services (ISS) deemed the package "excessive" and expressed worries that shareholder concerns from 2018 didn't receive proper attention. Although Musk's pay package first got approved in 2018 and was thrown out by a judge in January, it "failed to meet some board objectives" like keeping him more focused on Tesla rather than his other ventures.
Just a few days before this, Glass Lewis equally criticized the pay package's size and voiced concerns over Musk's "outstanding" alternate projects that didn't involve Tesla, like X, which was previously known as Twitter.
Tesla remains popular due to its growth and profitability, but these concerns could create problems for Musk's compensation and Tesla's new headquarters. He urged shareholders to support the pay package and also approve a proposal to reposition Tesla's headquarters from Delaware to Texas. Even though the Federal Reserve's interest rate cuts sparked debates, 75% of the survey respondents think they won't benefit from these changes.
Interestingly, there's a significant difference between the outlooks of business leaders and consumers, despite the strong labor market and low unemployment. This discrepancy stems from the uncertainty due to the impact of inflation and its effect on purchasing power. As a result, people have become more mindful of their spending choices and are looking for ways to save money, such as shopping at discounted prices and using buy now, pay later services.
The relocation to Texas, where Musk runs SpaceX as well, was suggested soon after a Delaware Chancery Court judge backed up Tesla shareholders who questioned the legality of the 2018 pay plan.
Costco's $1.50 Hot Dog Price is Secure
Costco's new CFO has a calming statement for customers who fret about the cost of the $1.50 hot dog-soda combo: Don't be alarmed.
During an earnings call with analysts on Thursday, Costco CFO Gary Millerchip addressed recent media assumptions, "I also want to affirm the $1.50 hot dog price is secure." This was Millerchip's initial earnings call with shareholders since succeeding Richard Galanti, who was Costco's finance chief for almost four decades, making him the longest-serving CFO of any significant American public firm.
As Costco's leadership has shifted and other long-standing bargains like Trader Joe's 19-cent bananas and Planet Fitness' $10 membership have recently concluded due to increasing inflation pressure, there were suspicions about the long-term status of Costco's $1.50 hot dog. It has been charged that same amount since 1985.
If the price of Costco's hot dog had kept pace with inflation, it would be about $4.50 now. However, it's a calculated move by Costco. They are ready to endure losses while selling hot dogs at that price if it attracts and keeps clients at Costco's door.
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In light of economic uncertainties, high-income earners are not only showing optimism about their personal finances but also planning to increase discount shopping and utilize buy now, pay later services. This shift in consumer behavior could potentially impact businesses that rely on full-price sales.
Amidst the changing market conditions, investing in opportunities that cater to cost-conscious consumers might be a strategic decision for businesses looking to stay competitive and maintain their customer base.
