This Week in Earnings – Q4’24

Demand trends are mixed across the sector, with relative pockets of strength among travel/leisure, restaurant/QSRs, and lifestyle apparel names (with some noting good momentum into Q1 and a resilient consumer). On the other end of the spectrum, the group has seen its share of Q4 disappointments and lower-than-expected guides, with those tied to automotive/recreational vehicles and housing continuing to face a challenging demand backdrop amid still-elevated interest rates.

Executive commentary broadly reflects a cautious stance toward the near-term macro environment, driven in part by heightened policy uncertainty under the new administration. To that end, many remain in wait-and-see mode, characterizing 2025 outlooks as “status quo” and similar to 2024. That said, comments skew toward appropriate conservatism rather than outright dourness, with some optimism for gradual improvement as the year progresses.

Trump 2.0 policy remains a hot topic on earnings calls, with analysts probing for the potential impacts from tariffs (particularly threats of 25% tariffs on Canada and Mexico as soon as this weekend), stricter immigration policy (labor supply), and changes to the tax code. Broadly speaking, executives maintain they are watching closely and will share updates when they gain greater clarity from the new administration, while readying playbooks and preparing for various outcomes.

Looking abroad, views toward China show an expectation for continued softness in 2025 amid prolonged consumer weakness despite government stimulus efforts. Still, executives highlight success navigating a challenging environment and remain optimistic longer-term given the size of the market opportunity.

Key Themes

• Macro/Outlook – Executives Across Consumer Sub-Industries ‘Not Anticipating a Sudden Improvement’ in Macro Conditions, though Cautious Optimism Takes Root for 2025 as the Year Progresses; Leisure Remains a Bright Spot
• Trump 2.0 Impact – Most Stop Short of Speculating around Vague Tariff Details, Instead Opting to Highlight Operational Adaptability and Supply Chain Levers; Labor Availability a Burgeoning Concern and Focus in the Household Durables Industry
• Demand & Consumer Health – Trends Bifurcated by End Market but with Some Pockets of Strength, Including Leisure and Specialty Retail; Those Tied to Housing Still Feeling the Pain
• Margins & Efficiency – Executives Emphasize Operational Efficiencies throughout Commentary; Cost Takeout and Automation Investments Key to Bolstering Profitability ‘When Volume Does Return’
• China – Unfavorable Consumer Conditions Extend into New Year while Uncertainty over Near-term Economy Proliferates