The Goods (U.S. Edition) – Prime and Punishment
Welcome back to The Goods! This week we’re discussing Americans using Buy Now, Pay Later for groceries, the rising cost of baby basics in the tariff era, and Chef Boyardee’s new owner.
Wall Street got a dose of ‘Bring Your Kids to Work Day’ when Jefferies analyst Kaumil Gajrawala had his tweens join him on earnings calls – and they stole the show. While his daughter Milena grilled PepsiCo’s CEO on weight-loss drugs like a seasoned pro, her brother Kamran got Keurig Dr. Pepper’s CEO talking about blackberry soda and full-funnel marketing. Both CEOs were caught off guard but impressed, calling the young analysts’ questions “awesome” and thoughtful.
What’s In: This Week’s Trends
- Leather the Storm: Tariffs have American leather businesses in a bind. Although many hides are processed in the U.S., most are shipped overseas for manufacturing – leaving salt-cured hides piling up and imports outpacing exports by more than tenfold. A surge in cowboy boot sales as shoppers rush to buy before prices climb is offering a short-term lift to the industry, but the long-term outlook hinges on whether consumers keep feeling good enough to splurge on luxury leather.
- Prime and Punishment: Reports surfaced this week of Amazon’s plans to display how much of an item’s cost is attributable to tariffs. The White House called the move a “hostile and political act,” while an Amazon spokesperson said that the plan was “never approved and not going to happen.” The tension comes as some third-party merchants, facing steep tariffs on Chinese-made products, are opting out of Amazon Prime Day or significantly cutting back on deals in order to protect their profit margins.
- Bundle of Costs: New parents are infamous for their incessant research in the quest for the perfect baby products – but now their biggest worry is if tariffs will send prices soaring. With 90% of baby and children’s products manufactured exclusively in China, stroller prices are expected to increase 25% and car seats 20%, adding even more pressure to the already $20,000 estimated cost of a baby’s first year. As a result, many expecting parents are skipping registries, scrambling to buy gear early, and hoping that Congress’s push to exempt baby products from tariffs will ease the financial squeeze.
Cash or Card: Consumer Behavior
What’s going on with the consumer these days?
This week we discuss consumers pulling back across the board, the rise of Buy Now, Pay Later at the grocery store, and a move away from synthetic fabrics.
- Wait and Spree: While there have been reports that consumers are rushing to buy big-ticket items like cars and cellphones ahead of tariff cost increases, survey results show that shoppers might be kicking the can rather than accelerating purchases. About 35% of U.S. consumers said they planned to put off a major purchase, such as a home, car, appliance or furniture because of tariffs, according to a NielsenIQ survey. Airlines are also feeling the pinch, with travelers cutting back on domestic flights and airfares decreasing 5.3% in March as carriers pull the pricing lever to win back customers.
- Fry Now, Pay Later: As inflation, interest rates, and tariff uncertainty remain high, more Americans are turning to Buy Now, Pay Later (BNPL) to cover their grocery bills. A Lending Tree survey shows 25% of BNPL users are financing grocery purchases with the loans, a jump from 14% last year. While BNPL avoids interest charges, late fees are becoming a growing problem, with 41% of users reporting a late payment in the past year – up from 34% the year before. The data comes in the wake of DoorDash announcing that it would begin accepting BNPL financing from Klarnafor food deliveries.
- Cut From a Different Cloth: Health-conscious consumers now not only care about what goes in their bodies, they are also scrutinizing what goes on their bodies. Online wellness influencers are reframing fashion as a health issue amid concerns over microplastics and PFAS exposure, specifically for synthetic athleticwear. Some big brands are responding: Under Armour launched its first regenerative sportwear capsule made with 100% plant-based materials, while Luluemon is debuting “LuluLinen,” a natural fiber blend that wicks sweat without the plastic.
Making Moves: Industry Transformations & Innovation
ICYMI, even industry icons need to reinvigorate their brand presence through unique and creative ways. Here are some new brand moves that you should know about:
- Fizz with Rizz: We are in the golden age of healthy pop, from bubbly apple cider vinegar to prebiotic botanical bevvies. These fizzy drinks – called everything from “next gen beverages” to “enhanced soda” – are gaining share. Olipop and Poppi captured 2.7% of retail sales in the $44 billion U.S. carbonated beverage market last month, almost double their share a year earlier. While a majority of functional soda consumers are Gen Z or millennials, three-quarters of American soda drinkers have heard of prebiotic soda at this point, according to Zappi.
- Spray it Safe: For only $8.99 per pair, DSW customers can now shield their shoes from tough stains and harsh weather in just 60 seconds. The footwear retailer has partnered with Imbox Protection to install eco-conscious, water-based spray kiosks in nearly 500 U.S. stores. The rollout marks Imbox’s largest North American retail partnership to date and underscores DSW’s efforts in sustainability and customer satisfaction, extending the lives of shoes by protecting from water, stains, dirt, mud and fading.
- A Lease of the Action: Brands are taking advantage of open storefronts resulting from Joann’s second bankruptcy and store closures. Burlington is emerging as the biggest winner, taking over 45 of the craft retailers’ shuttered locations across the country. Burlington opened 101 net new stores last year, and continues to chase growth amid tumultuous economic times when its off-price model is positioned to perform best. Still, off-price companies such as Burlington, TJX and Ross Stores could see hits to their customer bases in the U.S. because of new immigration policies.
Capital Markets Corner
ICYMI, even industry icons need to reinvigorate their brand presence through unique and creative ways. Our investor relations experts break down this week’s trends and headlines.
- Earnings Learnings: Consumer companies are slashing guidance as tariffs threaten to increase costs and rattle already-cautious shoppers. Last week, Chipotle reported its first revenue decline since 2020 and lowered its outlook for same-store sales growth as customers reduce the frequency of restaurant visits. P&G, Pepsi, and Kraft-Heinz also cut their forecasts, citing weak consumer sentiment and potential inflationary effects from tariffs. In another sign of the economic times, McDonald’s reported its worst quarterly sales for the U.S. since the height of the pandemic in 2020. The fast food giant saw traffic among middle-income diners fall by “nearly double digits” alongside an ongoing drop-off among low-income consumers.
- Chef Buy-ardee: Conagra Brands has agreed to sell the nearly century-old Chef Boyardee brand to private-equity firm Brynwood Partners for $600 million. The move comes as many food giants are reshaping their product lineups to suit changing tastes and health preferences. Conagra has said it is focused on growing its frozen food and snacks businesses, emphasizing its protein and fiber offerings and pitching its products to users of weight-loss drugs. The company rolled out a “GLP-1 friendly” label on certain products last year. Chef Boyardee was created by Hector Boiardi, an Italian immigrant who came to the U.S. in 1914 and became head chef at New York City’s Plaza Hotel.
Tariffs, Ands or Buts
The tariff-free shopping spree for goods from China is coming to an end, as President Trump closed the de minimis loophole for shipments under $800 beginning Friday – affecting over a billion packages a year. Shoppers are already feeling the pinch: one Temu cart that once cost $275 now rings up at over $600 with import charges, and Shein loyalists are seeing price tags quietly climb ahead of the policy shift. As consumers adjust their carts and expectations, the era of ultra-cheap online hauls may be fading fast.
At FTI Consulting, we help clients think comprehensively about the problems they face, understand their exposure, assess and mitigate risks, and manage change needed. Have questions about tariffs? Reach out to our experts Cory Fritz, Jackson Dunn, Ana Heeren, John Whitcomb, and Nick Baker.
For more information about FTI Strategic Communications Retail & Consumer Products sector service offerings and expertise, please contact [email protected]
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