Starbucks Sales Stay Strong As Consumers Continue Spending

Key Takeaways

• Starbucks Customers Keep Buying Despite Increased Prices
• Uber Revenue Doubles
• Credit Card Spending Increases

Earnings season continues to plow along with results coming in, shall we call it, less bad than feared. Last night after the close, UberUBER
Advanced Micro DevicesAMD
StarbucksSBUX
and CaterpillarCHAT
all reported. We also had an early announcement from Robinhood.

Despite inflationary pressure and concerns about consumer spending, Starbucks reported numbers suggesting no change in customer spending habits despite price increases. Starbucks has proven itself something of an anomaly in its impervious resistance to economic conditions. People, this person being one of them, simply want their coffee.

Uber revenue doubled from a year ago. While their Uber Eats growth slowed, the ride service remained strong. Uber also saw an uptick in drivers as people began looking for side hustles to offset rising inflation with additional sources of income. LyftLYFT
will report earnings later this week and it’ll be interesting to see if they have kept pace with Uber.

Caterpillar, which often serves as a gauge on the overall economy, reported strong sales in North America. Those sales offset weaker sales in both Europe and Asia Pacific. Again, in a trend we’re seeing this quarter, management offered forward-looking statements that were more optimistic than many expected.

Advanced Micro Devices reaffirmed full year forecasts but warned of a weak third quarter, sending the stock lower in the after-hours last night. It’s interesting that despite a softer outlook for Q3, management didn’t temper full-year expectations. This could be a potential sign that the company does not expect a long-term period of economic weakness. That hypothesis may have been backed by news from credit card issuers.

The biggest surprising news came from Robinhood, which announced earnings last night along with a 23% reduction in staff. Robinhood has suffered from a client slowdown since Crypto and the meme stock craze. It’ll be interesting to see if the announced cost cutting efforts turn the momentum.

Despite evidence of a weakening economy, retail customers continue to rack up credit card debt. JPMorgan and Capital OneCOF
both reported increased credit card balances among consumers in 2Q on a year-over-year basis. Balances at JPM and Capital One increased by 17% and 21%, respectively. In the context of a potentially weakening economy, continued consumer spending can be seen as encouraging. This is something I’m going to continue monitoring, especially in conjunction with this week’s jobs number. If the unemployment rate remains low and credit card spending remains strong, it could suggest less fear of a recession. However, if credit card balances continue to increase and we see a weakening job market combined with delinquency in credit card payments, then a different narrative could be in place.

tastytrade, inc. commentary for educational purposes only.