Consumers shun candles, barbecue kits as budgets tighten

[July 21, 2022]  By Doyinsola Oladipo

NEW YORK (Reuters) - Whether they make strawberry pound cake-scented candles or $300 brisket barbecue delivery meal kits, U.S. companies are telling investors to expect consumers to cut back on discretionary spending with inflation settling into 40-year highs.

Stuck at home during the pandemic, consumers who liberally splurged on assorted goods and services may be cutting back, causing U.S. companies to re-evaluate their quarterly revenue estimates and expansion plans.

"People are cutting back across the board. They're driving less, they're spending proportionately less at the grocery store. And they're getting rid of subscriptions they don't need," said Yahya Mokhtarzada, chief revenue officer at Truebill, a service that helps 3.4 million customers manage their bills.

Investors looking for hints to the direction the U.S. economy might take need only look at company statements predicting job cuts, delays in factory expansions and lower revenue estimates.

Wood pellet grill maker Traeger Inc said on Wednesday it will halt its barbecue meal kit delivery service and postpone plans for a factory in Mexico as well as cut its labor force in an effort to reduce costs.

Shopping mall soap, fragrance, and candle retailer Bath & Body Works Inc on Wednesday lowered its revenue estimate for the second quarter, citing "inflationary pressure" affecting its customers and business.

Both companies declined to comment.

In another example of consumers cutting back on shopping, research firm D.A. Davidson lowered its price targets for Etsy Inc and Shopify Inc, citing "elevated inflation" and "a shift in near-term discretionary spending to travel and away from e-commerce."

Products are displayed in L Brands Inc., Bath & Body Works retail store in Manhattan, New York, U.S., May 13, 2016. REUTERS/Brendan McDermid/File Photo

Even so, subscription analytics firm Antenna chief executive officer Jonathan Carson said his company is not seeing inflation having an impact on premium video subscription services.

He said consumers keen to save money may opt for pizza and streaming at home over dinner and a movie out.

"Consumers' perceived value of video streaming and other home entertainment services is increased when there is more pressure on household budgets," Carson said.

Video streaming subscription service Netflix Inc said on Tuesday it lost 970,000 subscribers from April through June but predicted it would return to customer growth during the third quarter.

"If anything, inflation is tilting people towards subscriptions," said Tien Tzuo, chief executive officer at subscription software company Zuora. "But there is something about separating winners from losers and the winners are the ones that become indispensable to their subscribers."

(Reporting by Doyinsola Oladipo; Editing by Anna Driver and Howard Goller)

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