Bloomberg News The great rotation in consumer spending continues.
When the world shut down in 2020, we bought what we needed to stay home: Pelotons, pets, sweatpants and sourdough starter. In 2021, our shopping reflected reopening: We put on lipstick again, whitened our teeth and swapped loungewear for chinos and dresses. Most consumer, retail and luxury groups had a pretty good year.
But consumer sectors are now facing another shift in habits, and this one may not be as favorable.
The omicron variant is a headwind for travel, hospitality and retail. Even if the latest wave of infections peaks relatively soon, there are other perils ahead — from lockdown savings being exhausted just as prices are rising to tighter monetary policy and higher borrowing costs, something consumers haven’t had to endure for several years.
Already, the cracks are beginning to show.
Even before the surge in omicron cases, there were signs of consumers becoming more cautious. British retailer Currys Plc, for example, said demand for its electronics was weaker than expected. And amid fewer people heading into city centers and offices, famous London department store Harrods brought forward its sales from Dec. 26 (Boxing Day) to Dec. 17. Other metropolitan areas, such as New York City, have also been suffering.
But it’s not just the new variant weighing on shoppers’ minds. U.S. retail sales less than forecast back in November. True, some spending may have been pulled forward to October, when many retailers ran special offers and consumers shopped to avoid product shortages. But the real concern is that rising prices have finally begun to take their toll.
Up to now, consumers have been able to withstand accelerating inflation on everything from coffee to coffee tables. Many were flush with savings after being homebound for much of the past two years. But reopening economies drew down that cash.
And now prices are rising at an even faster clip. Most consumer-goods companies are already negotiating price hikes with retailers or will start in January. With inflation coming through in commodities from oil to packaging, that will make for some difficult conversations. It is also likely to lead to further spikes. U.S. food prices rose 6.1% in November, the highest level in 13 years. We could see a similar escalation in Europe.
Although wages are increasing too, U.S. inflation is outpacing it by some distance: The gap between the two is the biggest it’s been for more than 20 years.
Some of the caution Currys has seen may reflect a spending squeeze already under way in Britain. After all, a new laptop, iPhone or oven is a large purchase. In the U.S., Lowe’s Cos. said it expected the pandemic home improvement boom to finally wane.
Many people spent big during the pandemic, especially on new homes. This might be another source of weakness as interest rates rise. Higher borrowing costs are expected in 2022, which could lead Americans and Europeans to pull in the purse strings.
While large, expensive items may be the first to feel the pinch, other areas will eventually suffer too. Consumers have a tendency to trade down from big brands to cheaper private labels, or switch from meat to vegetable-based meals, when stressed about their wallets. Cutting back on indulgences that grew during the pandemic, such as ordering takeout, would be another way to save money.
There are some silver linings. Although the arrival of omicron is hurting travel and leisure, it may, in the short term, ease some of the forthcoming consumer pain. Working from home again means saving money on commuting and lunches out. Hopes for a “revenge Christmas” this year — going all out to make up for a bleak 2020 holiday — are already looking fragile, as some people cancel their restaurant reservations and plans to hold large gatherings.
January is always a grim month for retailers, restaurants and bars. It’s when credit card bills land and trends such as dry January and Veganuary take hold. But this year it could be even more brutal.
It’s a timely reminder that, like stocks, consumer rotations don’t only go one way. – Bloomberg
Global CEO Forum fetes one of most influential SL entrepreneurs
In tribute to the late Merril J. Fernando, the esteemed Founder of Dilmah Tea, the Global Brand Creator 2023 Award was bestowed at the Global CEO Forum held recently in Sri Lanka. This prestigious accolade was presented to Kirmali Fernando (the daughter-in-law of late Merril J. Fernando) by the Governor of the Central Bank Dr. Nandalal Weerasinghe, Kataro Katsuki, Deputy Head of Mission at the Embassy of Japan in Sri Lanka, Janaka Abeysinghe, CEO -SLT MOBITEL, Dr. DMA Kulasuriya, Director General-NIBM, Ahamed Ikram, Director-Emerald International , Dilanga Karunaratna- Director Otto Bathware and Anura Siriwardena, Chairman-Global CEO Forum.
Coca-Cola Sri Lanka extends its ‘Adopt A Beach’ program for a third year
Coca-Cola Sri Lanka Ltd. proudly continues its mission to safeguard Sri Lanka’s shorelines by extending the ‘Adopt A Beach’ initiative for a triumphant third year. This exciting announcement aligns with the celebration of International Coastal Cleanup Day on September 16, 2023, emphasizing the paramount significance of coastal preservation.
Commemorating the partnership with an exclusive beach cleanup and an enlightening session at Crow Island Beach, the day’s proceedings were honored by the presence of the Governor of the Western Province and Marshal of the Sri Lanka Air Force, Roshan Goonetileke and key government stakeholders representing the Ministry of Local Government, Colombo Municipal Council, Environmental Police Division, Coastal Conservation Department, Waste Management Authority and the Crow Island Beach Management Society.
Additionally, underlining the vital role that the youth of our nation play in forging cleaner and safer coastal regions, particularly through the realms of media and volunteerism, the occasion also brought together young talents from the media sector and a dedicated team of volunteers from the Clean Ocean Force, Clean Ocean Force Youth Club of the Ocean’s University, Clean Ocean Force Youth Club in Negombo, Rotaract Club Colombo Regent, Shri Vimukthi Youth Association, youth from International Schools and Adfactors Public Relations Lanka.
PLC’s profits surge 80.9% in Q1, amidst challenging environment
People’s Leasing & Finance PLC (PLC), a pillar of strength and stability in Sri Lanka’s financial sector, successfully concluded the 1st Quarter of the fiscal year 2023/24 with a year-on-year increase in Profit of 80.9% in the midst of a challenging economic landscape.
PLC’s top line interest income recorded an impressive 10.2%, reaching Rs. 7,465 million owing to the increased investment income during the quarter. However, the company’s net interest income showed a modest fall when compared to the first quarter of 2022/23. This was mostly the result of higher interest expenses brought on by the repricing of deposits to higher rates in line with higher policy rates. Despite the stated decrease in net interest income, PLC was able to end the first quarter with a profit after tax (PAT) of Rs. 331 million as opposed to Rs. 183 million recorded in Q1 2022/23 thanks to the significant year-on-year reduction in Impairment Charges as well as reduction in operating expenses, demonstrative of an intensified commitment to internal sustainability.
Similarly, PLC Group also recorded a PAT of Rs. 552 million during Q1 2023/24, reflecting a year-on-year increase of 21.5% mainly driven by the significant reduction in the Group’s impairment charges and other losses for loans and receivables.
Even in the face of a highly inflationary environment, PLC successfully reduced total operating expenses by 3.5% compared to the corresponding quarter in the year prior due to a determined effort to increase efficiency through digital initiatives, right-sizing of branches, and improvements in internal processes. PLC recognized the significance of recalibrating its balance sheet in a setting not favourable to business expansion and took strategic measures to ensure the right sizing of its balance sheet resulting a total asset base of Rs. 155,380 million as of 30 June 2023. Backed by these strategic moves, total asset base of the PLC Group also remained resilient at Rs. 179,948 million as of 30 June 2023.
In an extremely volatile and complex business setting PLC adopted a highly disciplined liquidity management approach to ensure financial stability whilst maintaining capital adequacy ratios well ahead of the statutory minimums at the end of Q1. The majority of PLC’s funding needs were met through improved collections enabling PLC to remain watchful in growing its deposit base in a high-interest environment. Despite these measures, the deposit base of PLC remained robust at Rs. 93,228 million as of 30 June 2023, showcasing strong customer confidence. The Group deposit base also remained strong at Rs. 100,439 million, as at 30 June 2023.
Meanwhile, PLC retained its No.1 position as Sri Lanka’s Most-Loved Brand in Leasing and Finance category, as ranked by Brand Finance in LMD Brands Annual. The company’s steadfast dedication to excellence was also evident in its ascent from 51 to 36 in the esteemed “Most Respected Entities” ranking by LMD within just one year, further cementing its position as one of Sri Lanka’s most respected and trusted financial services providers.
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