Home Business amount ABSTRACT-Cost of living crisis? European consumers continue to spend

ABSTRACT-Cost of living crisis? European consumers continue to spend

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Europe’s biggest consumer-focused companies are not seeing a shortage of demand despite a cost-of-living crisis, prompting several to revise their sales forecasts for the current year upwards.

Britain’s Reckitt Benckiser, maker of cleaning products Dettol and Lysol, raised its full-year sales forecast on Wednesday after sharp price increases helped it beat sales expectations for the second trimester. o France’s Danone also raised its full-year revenue growth forecast after second-quarter like-for-like sales beat analysts’ estimates on strong demand for baby food and bottled water.

Like rival Unilever, Reckitt and Danone have relied primarily on price increases to generate revenue. The biggest question for investors is how long this will continue. “What we have seen is that the consumer has accepted these price increases but inflation is not coming down,” said Ashish Sinha, portfolio manager at Unilever and shareholder of Reckitt, Gabelli. “So as inflation rises, it raises questions about the elasticity of demand.”

Shops and supermarkets in Britain raised prices by 4.4% in the 12 months to July, the biggest rise since such records began in 2005, reflecting rising food costs and transport, the British Retail Consortium said on Wednesday. Even McDonald’s, which offers some of the cheapest high street meals, said on Wednesday it would raise the price of a cheeseburger by 20p to 1.19 pounds ($1.44) – the first increase in 14 years .

LUXURY GOODS IN HOT Middle- and upper-income households have been able to build up substantial savings during the pandemic as restrictions have made everything from vacations abroad to dining out more difficult. Although some of these savings have since been eroded by inflation, they still have more flexibility to purchase higher-end items.

In contrast, low-income households have been proportionally more affected by inflation than wealthier households, as more of their income is spent on essential items ranging from food to fuel and shelter. The increased affluence has led to a growing demand for luxury items such as sports cars and designer handbags.

LVMH, the world’s largest luxury goods company, reported better-than-expected second-quarter sales on Monday, with robust growth in the United States and a recovery in Europe offsetting lower revenue in Asia. “We have double-digit growth with most of our brands, so we can’t complain about European customers. On top of that, we have significant tourist activities in Europe,” said LVMH’s chief financial officer, Jean-Jacques Guiony.

American tourists vacationing in London spent more due to the strong dollar. For now, the increased prosperity of affluent consumers is offsetting the hit to the incomes of low-income people who spend less.

Automaker Mercedes, healthcare company GSK, chocolate maker Lindt and sportswear maker Puma also raised their sales forecasts this week. “This is one of those times where investors look at these results in Europe and think that…business has held up,” said Danni Hewson, financial analyst at AJ Bell.

($1 = 0.8293 pounds)

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