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Various consumer companies have reduced year-round forecasts, citing tariffs and more cautious consumers. Pepsico, Chipotle, Procter & Gamble are among the companies that lower forecasts.
From Procter & Gamble to Chipotle, consumer companies are cutting forecasts, tariffs will strain profits and put more pressure on already unstable consumers.
At least dozens of companies have cut or pulled their full-year outlook so far this revenue season, with more weeks of quarterly reports still on deck.
For many businesses, tariffs mean that major commodities such as Peruvian avocado and saccharin are expensive and produce toothpaste. But the uncertainty nurtured by the trade war is that consumers are as damaging to the bottom of the business as they pull back their spending.
The careful forecast comes midway through a 90-day suspension of higher rates under President Donald Trump’s so-called mutual tariff plans. Until early July, most imports will face a 10% obligation and will be excluded along with goods from China (for 145% duties), along with aluminum, cars and other non-exempt items.
Still, things change almost every day. Treasury Secretary Scott Bescent told investors at a closure meeting on Tuesday, which he expects “a break-escalation” in the trade war between Trump and China in the “very near future.” The White House also said Wednesday that carmakers can win some tariff exemptions.
Higher prices to fight lower profits
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Cascade Platinum and Dishwasher Cleaner Packages are stacked on March 11, 2025 at a Costco Wholesaler Store in San Diego, California.
Nowadays, under the real tariffs, coffee, board games and aircraft are more expensive to make by companies. Many executives will choose to raise prices to ease profits.
“Aircraft are already too expensive. We don’t want to pay more for the aircraft,” American Airlines CEO Robert Isom said Thursday. “That doesn’t make sense. And certainly, we’re drawing guidance. Certainly, this is not something we’re going to absorb. And I don’t expect you to be welcomed by our customers, so we need to work on this.”
Tariffs around the world, including retaliatory ones, not just the US, “really put pressure on” the industry’s supply chain improvements, Airbus America CEO Robin Hayes said at a New York Wingsclub luncheon on Thursday. The US aerospace industry has a trade surplus that helps to ease the overall deficit of the country.
Calls are on the rise between airlines and aerospace suppliers, regaining the terms of a more than 45-year agreement that the industry can operate mostly tax-free. Other industries are also seeking exemption from tariffs.
But with the exception of rate cuts or new sculptures of goods, travel is not the only sector that sees price increases. P&G, Keurig Dr Pepper, Hasbro said Thursday that prices could be raised in the near future to offset higher costs.
“There may be a pricing [changes] – Tariffs are inherently inflation, but we are also looking at sourcing options,” P&G CEO Jon Moeller said in CNBC’s “Squawk Box.”
Although we predicted that the costs of producing coffee and soda would rise, Keurig Dr Pepper did not lower its full-year forecast. The company experienced strong revenue growth in the first quarter, bolstered by the sale of minority stakes in coconut water manufacturer Vita Coco, giving the drink giant the flexibility to repeat its outlook.
“Nervous” consumers
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Shoppers scan coupons at grocery stores in Washington, DC
Tariffs take time to affect prices in grocery store shelves and malls. But they’re already taking a blow to the shopper’s spirit.
Earlier this month, US consumer sentiment fell into the second-lowest read since 1952. Shoppers are already reclaiming their spending as they fear inflation, unemployment and a potential recession.
“I think the main driver is the more nervous consumers who reduce consumption in the short term, and their ability to reduce their impact on the cost structure and revenue,” P&G CFO Andre Schulten explained in a call with the media on Thursday why they cut forecasts.
P&G, which owns top household brands like Charmin and Tide, has lowered its core revenue and revenue outlook for the last quarter for the entire fiscal year. Sales in the third quarter did not reach Wall Street estimates.
“It’s not illogical to see consumers adopt a ‘wait’ attitude. We saw traffic dropping at retailers,” Schulten said.
Another grocery staple, PepsiCo, cited “silent” consumers and tariffs as reasons for reducing forecasts for core constant currency revenue per share.
Anxious consumers are also weighing it at Chipotle, the first public restaurant company, to report its results.
The burrito chain has lowered the top edge of its outlook for sales growth for the same store all year round. Executives said traffic began to slow down in February as diners began to worry more about their finances. This trend continues until April.
“We could see this in our visiting research, which is the overwhelming reason why saving money due to economic concerns has led consumers to reduce the frequency of restaurant visits,” Chipotle CEO Scott Boatwright told analysts Wednesday.
Hasbro chose to repeat the prediction. This will provide a headwind of $100 million to $300 million for businesses from tariffs. The toy company’s outlook assumes that China’s tariffs range from 50% to 145% current.
Executives also warned of potential unemployment related to increased costs.
Airlines are also weak in demand, especially in economy cabins. Delta Air Lines CEO Ed Bastian told CNBC in an interview earlier this month that Trump’s tariff policy at the time was a “wrong approach” and that uncertainty has hurt both domestic economic class demand and corporate travel.
American Airlines pulled out its 2025 financial guidance on Thursday, joining Southwest Airlines, Alaska Airlines and Delta, citing the US economy that each finds too difficult to predict. United Airlines has taken the unusual step of offering two outlooks in the event of a deterioration in the US economy, but it still hopes to make money this year.
– CNBC’s Leslie Josephs contributed to this report.
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