US companies struggle as economic divide hits lower-income consumers
US companies face mounting challenges as spending gaps widen between affluent and lower-income consumers. Retailers and financial services catering to budget-conscious buyers feel the pinch, while premium services continue to thrive.
U.S. companies across sectors are feeling the pressure from a growing economic divide as lower-income consumers curb spending, even as wealthier households remain resilient. The shift is complicating growth for retailers, service providers, and financial firms alike, News.Az reports, citing Reuters.
Bellwether companies such as Coca-Cola, as well as toymakers, hoteliers, and financial service providers, are starting to reveal the impact of this split as quarterly results continue to roll in.
“Businesses are increasingly feeling the fallout on their sales and profits from the mounting skew between the haves and the have-nots,” said Mark Zandi, chief economist at Moody’s Analytics. “It is a tough business environment for those companies that don’t cater to the well-to-do.”
Affluent consumers are continuing to support overall spending despite rising prices, but lower-income households are delaying purchases or avoiding non-essential items.
Target, which has faced several quarters of weak sales due to inventory missteps and retail crime, announced it will cut roughly 1,800 jobs as part of a turnaround plan under incoming CEO Michael Fiddelke. Much of Target’s inventory consists of discretionary products, which budget-conscious shoppers have increasingly skipped over the past year.
A National Retail Federation survey found that nearly two-thirds of customers plan to wait until Thanksgiving weekend for most holiday shopping to take advantage of discounts, up from 59% last year.
The trend of deferred spending is also visible in other sectors. O’Reilly Automotive, a replacement auto parts retailer, raised its annual revenue target after stronger-than-expected sales, but CEO Brad Beckham noted some customers are delaying major repairs, a shift not seen earlier in the year.
Meanwhile, American Airlines boosted its 2025 profit forecast, supported by continued strong demand for premium, high-margin services, highlighting the resilience of affluent consumers.
The U.S. credit market is feeling strain as several lenders serving lower-income consumers file for bankruptcy. Financial-tech firm PROG Holdings, which provides credit to those who may not qualify for traditional loans, cut its revenue outlook and tightened lease approvals amid economic headwinds.
“The heightened financial stress and greater caution among lower-income consumers across our leasable categories is a headwind to gross merchandise volume,” said CEO Steve Michaels.
Other bankruptcies include PrimaLend Capital Partners, which finances car purchases for clients with limited credit, and Tricolor, which catered primarily to low-income Hispanic communities in the U.S. Southwest. Both filed for bankruptcy in recent months.
While overall headline spending appears stable, consumer sentiment surveys reflect pessimism about inflation and future economic conditions, signaling ongoing challenges for businesses that rely on lower-income consumers.
Similar news
