What earnings calls have been revealing about consumer weakness

In their latest quarterly reports, LVMH (MC.PA), Lamb Weston (LW), and Comcast (CMCSA) all suffered from decreasing demand amid broader consumer weakness.

Scott Krisiloff, Editor of The Transcript, studies earnings and conference calls. He anticipates that after the July jobs report and stock market selloff, executives will be asked about recession worries more, but he notes that "we had been seeing broadening consumer softness, slowdown in growth... so these were the precursors to things that we're seeing today."

One thing that Krisiloff notes has changed from previous quarters is that higher-income consumers are starting to show weakness.

Watch the video above to hear what stood out to Krisiloff from Tesla's (TSLA) earnings call.

For more expert insight and the latest market action, click here to watch this full episode of Asking For a Trend.

This post was written by John Lesinski and Stephanie Mikulich.

Video Transcript

Lv.

Mh says no one's buying champagne, Lamb West inside, softening demand for frozen potatoes and Comcast is seeing a slowdown in its theme park business.

So how much concern should there be about broadening consumer weakness?

Joining us now is Scott Kriel, editor of the transcript, Scott.

It is good to see you.

You know, obviously you, you looked at the markets today, Scott investors have new questions about this economy.

You know, I think a lot of people had bought into Jay Pard kind of stuck this, you know, the soft landing Scott as rare and the usual as that is.

And now all of a sudden investors seem to have questions about that.

Maybe this economy is not cooling, maybe it's turned cold.

I'm interested, Scott A as you kind of read through the earnings reports, you read through those earnings transcripts.

Was that a theme?

Uh a question you heard executives bring up?

I don't think that really executives were bringing up recession quite yet.

I think that's a question that we'll see more next week.

I think we've gotten a lot of negative high level economic indicators this week between the employment report and also the ISM uh report earlier this week that have started to um you know, impact people's confidence in the economy to the extent that now people are asking the question that you're asking, are we headed for a recession?

Uh But really before that, what we had been seeing is broadening consumer softness, uh slow down in growth.

Um And so these were the precursors to things that we're seeing today.

I think it just has spilled over into a much higher level, larger question this week.

And broadly, when, when you look at those earnings calls Scott and they talk about consumer weakness, was it was it specific consumers?

They would highlight?

Well, you know, for the past probably 18 months, almost two years, we have been seeing that lower income consumers were showing a lot more weakness than higher income consumers.

And I think that's the big thing that we've noticed has been a change in the last couple of weeks is that higher income consumers are starting to show weakness too.

So you mentioned that champagne comment from LV.

Mh, that was one that really stood out to me because it was talking about, you know, a luxury purchase, something that uh higher income consumers might be purchasing as well as the theme park.

Comment from Comcast is one that I think was really important showing that across the income spectrum, you may be seeing some consumer weakness.

All right.

So some signs there some broad consumer weakness.

But you also, I thought it was interesting, see some reasons for optimism, optimism, maybe a rebound cyclicals you were highlighting.

Yeah, I mean, I think the reason for optimism is actually kind of a counterintuitive one.

It's that uh underlying these trends of slowness that are starting to emerge in broadening consumer areas.

You actually have had weakness within the economy for a much longer period of time, up to eight quarters in areas like transports in areas like capital markets where capital markets have been more or less frozen IP O markets for a long time now.

Um and those have all been symptomatic of higher interest rates.

And so you've actually had this like recession going on underneath the hood of the economy that as the FED is starting to lower interest rates, that provides a springboard for more interest rate, sensitive sectors to start to rebound.

So we may actually be towards the bottom.

Actually, a lot of the pain may have been taken in the economy on a more quiet basis under the radar basis.

And so as the fed lowers interest rates, it may may allow us to have a rebound and let's dig into one specific name, Scott as well.

Tesla.

I know you had some thoughts on that one.

Yeah, I mean, I think Tesla, I mean, going back, I guess to the consumer and the this under the hood slowdown, I think the thing that has really uh prevented it from being a headline basis recession is that there's been a I has been a theme for the markets, as everybody knows, for the last 18 months or two years even.

Um And I think that that theme has been start to slow a little bit as well.

That the surprise in terms of how powerful large language models are is something that's not quite as shocking to investors today as it was a year and a half or two years ago.

And so one of the things that we did notice in the Tesla earnings call that was really interesting though, was Elon talking about the progress that they've made in, in uh full self driving cars and, uh you know, his bullishness on that area with respect to A I is one that if they really solve the full self driving car issue sometime within the next year or two or however long it takes him to do it.

Um The thing that really stood out to me in that call was how quickly they can deploy it and how much that could impact mass psychology for the markets again, in terms of the A I wave of maybe seeing a renewal.

So that's probably not something that's going to happen in the next six months, but it is something to keep on the horizon as something that could be another wave for this A IA I move plenty of Tesla Bulls come on the show, Scott and pound on the table on A I and those robotaxis.

Thanks so much for joining us, Scott.

I appreciate it as always.

Thank you.