Why are companies so sensitive to consumers?

Consumers who have “crossed the limits”

The S&P 500 rose to near an all-time high on Friday after better-than-expected quarterly profits. But Wall Street and Washington are closely monitoring another worrying economic indicator: struggling consumers.

As earnings season draws to a close, the split-screen view of the economy is becoming clearer. Mass market brands such as fast food companies McDonald's, KFC and Starbucks report that many customers are cutting back on spending due to high inflation. But in less price-sensitive industries, such as airlines and hospitality, customers are still booking flights, hotel rooms and tables at more expensive restaurants.

A completely different snapshot may explain why voters support President Biden bad grades For economic management, Even if jobs are plentiful and growth resilient. Michael Reed, an economist at RBC Capital Markets, told Dealbook that this is “an economy of haves and have-nots.” “Wealthy people have more purchasing power.”

Here's what makes “The Haves” so flashy. They tend to have little or no mortgages, cars or student loans, and stock market-linked retirement accounts accumulate healthy profits to fund vacations and nights out.

But those who are less wealthy are feeling the pinch. They have depleted their savings and taken on credit card and other loan debt due to the pandemic. One area to watch out for is that the proliferation of “buy now, pay later” programs may be masking America's “phantom” consumer debt problem.

Corporate executives increasingly warn about this group. At this quarter's financial results conferences, the number of times CEOs and CFOs use “low-income consumers” to explain the reasons for sluggish sales and lackluster profit forecasts has increased sharply.

Here's what they're saying:

• John Payton, CEO of Dine Brands Global, the parent company of Applebee's and IHOP restaurants, told analysts that lower-income consumers are “more active in managing their checks, and our “We're finding products that are value-oriented.”

• PepsiCo CEO Ramon Laguarta was more blunt. “Low-income consumers in the U.S. are stretched to the limit,” he said, adding that these types of customers are “very strategic about making ends meet at the end of the month.”

• Hal Lawton, CEO of agricultural retailer Tractor Supply Company, sees something similar. “In the first quarter, high-income consumers were overrepresented compared to lower-income consumers who prioritized shopping in big-ticket categories and entertainment.” Sho. ”

what's happening here

Israel has slammed President Biden's threat to withhold more weapons. Prime Minister Benjamin Netanyahu said his country would be “isolated” if necessary after the United States refused to send bombs that could be used in a major attack on the Gaza city of Rafah. The comments are the latest sign of a widening rift between Israel and the Biden administration over the war.

T-Mobile and Verizon are said to be in talks to split US Cellular. The Wall Street Journal reports that the telecom giants are in talks to split up one of the nation's last major regional wireless carriers, with each company acquiring different parts of the business. One scenario: T-Mobile's US division pays his $2 billion for some operations and radio frequency licenses. Verizon is negotiating a separate contract with US Cellular.

The White House is reportedly planning to impose tariffs on Chinese-made electric vehicles. According to Bloomberg, the government could target some of China's key strategic sectors as early as next week, including EV, battery and solar cell manufacturing. Biden called Chinese EVs a national security threat and accused China of using unfair industrial policies to distort markets.

Apple has apologized for the iPad ad that caused a huge backlash. The tech giant said a 60-second spot showing a giant mechanical crushing tool used by an artist was “out of line” and would not air on TV. The ad was criticized by actors, artists and designers who said it was a metaphor for how big tech companies destroy or plagiarize their work.

How Biden and Trump are wooing business

President Biden is holding fundraisers on the West Coast as he looks to extend his financial lead over Donald Trump. The trip comes as President Donald Trump has promised to drum up support and donations from CEOs, in part because the president has a one-week window to pitch his economic policies to business leaders and gain their support. It is being

Biden heads to Silicon Valley and Seattle. Venture capital investor Vinod Khosla and former Yahoo CEO Marissa Mayer will host two separate events on Friday, Pac first reported. Mr. Biden is scheduled to head to Seattle tomorrow for a fundraiser.

The trip follows efforts to gain support from business leaders. Biden welcomed seven CEOs to the White House on Tuesday, including Citi's Jane Fraser, Evercore founder Roger Altman and United Airlines President Scott Kirby, to discuss geopolitics and the economy.

Biden administration officials are ramping up aid efforts. Biden's chief of staff, Jeff Zients, and others have compiled a list of more than 100 CEOs to contact (the White House has not disclosed their names). The group of officials tasked with facilitating relations with the board, known as the “hub,” includes Treasury Secretary Janet Yellen. Lael Brainard, Director of the National Economic Council. and Commerce Secretary Gina Raimondo. “At the request of the President and Jeff, we are engaging strategically with business leaders,” Deputy Treasury Secretary Wally Adeyemo told Dealbook.

Biden wants CEOs to help make his case. A senior official said the administration is asking executives, including former PayPal CEO Dan Schulman, to call other business leaders for feedback that cannot be relayed directly to the president.

Many of the big companies are not happy with his first term. Some executives are unhappy with Biden's plan to raise taxes on the wealthy and corporations. Business groups are suing Lina Khan's FTC to ban non-compete agreements, and banks are complaining that the Consumer Financial Protection Bureau, led by Rohit Chopra, is He claims that he is committing fraud.

President Trump has promised businesses he will roll back Biden-era rules. The Republican candidate last month told Big Oil executives that they should donate $1 billion to his campaign to overturn environmental regulations that have hurt the industry. He also promised to extend the tax cuts he passed when he was president, and said he would cut taxes further if re-elected.

Fast food executive charged in 'fake' loan case

Federal prosecutors on Friday accused Andrew Wiederhorn, chairman of Fat Brands, the parent company of the Fatburger, Johnny Rockets and Hot Dogs on a Stick fast-food chains, of a string of $47 million off-the-cuff deals. He was charged with arranging a “false” payment.

Federal prosecutors accused Wiederhorn of concealing payments from the company to him from 2010 to 2021. According to a grand jury indictment released Friday, these were classified as “shareholder loans” and were made directly from the company's board of directors. Mr. Wiederhorn “had no intention of repaying these sham 'loans,'” the filing states. Charges include tax evasion, filing false tax returns, wire fraud, and certifying incomplete financial reports.

Wiederhorn has had previous run-ins with the law. Twenty years ago, he served time in federal prison for charges including filing false tax returns related to running his holding company, Fog Cutter Capital. While Mr. Fog Cutter served his 18-month sentence, his case attracted national media attention, including The Times, as he continued to receive salary, bonuses and “time off pay”.

Wiederhorn founded Phat Brands in 2017. . The publicly traded company notified shareholders in February that the SEC was investigating Mr. Wiederhorn and two other unidentified officials in a possible criminal case, but did not provide details. At the time, the company said it was cooperating with authorities.

The lawsuit was filed in the United States District Court for the Central District of California. Other defendants named in Friday's indictment are William Amon, Rebecca Hersinger and Fat Brands.

“There is no law that says the Fed will act first.”

— Andrew BaileyThe Bank of England governor has indicated the central bank could cut interest rates as soon as this summer, potentially before the Fed.Meanwhile, first-quarter GDP figures released on Friday showed the UK economy was performing well. came out of recession.

Cocoa prices have been on a rollercoaster this year, leaving some of the world's biggest food companies wondering how to price their chocolate. The market volatility started with the disappointing 2023 cocoa harvest. Commodity prices more than tripled in a few months, reaching a record of more than $11,000 per ton in mid-April.

What does this mean for chocolate lovers? Mondelez, the maker of Chips Ahoy cookies and Cadbury chocolate, raised its prices by about 6% in the first quarter, and Hershey's by about 5%. The companies said they would not rule out further price increases if cocoa prices remain high.

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• A federal jury has convicted a financial executive of securities fraud in an insider trading case involving Donald Trump's social media company. (New York Times)

• How former Google CEO Eric Schmidt emerged as the top AI matchmaker in Washington. (POLITICO)

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