EconomyThe recession is coming — and CEOs feel fine

The recession is coming — and CEOs feel fine


Are bikini waxes sticky during a recession? A chain of salons based in Texas, European Wax Center, is confident they are.

Chief executive David Berg told investors this week that he based this optimism on “how quickly we rebounded coming out of Covid”, when customers soon “got back into their regular beauty care regimen”.

Facing rising rates, soaring inflation and lower growth forecasts, many other executives were putting on a brave face during earnings calls this week.

Companies that have spent years wanting to be considered as “tech”, for the racier multiples, now emphasise their dull reliability — staples rather than discretionary, value rather than growth. The message to investors: do not adjust your portfolios — we are safe.

Airbnb’s Brian Chesky sees upside from the looming downturn. He reckons more people struggling with their rent and mortgages will turn to hosting paying guests. At the same time, he says, travellers will be more budget-conscious, trading down to Airbnb from hotels. “I think we’re a pretty resistant business,” he told investors this week.

Garden products company ScottsMiracle-Gro noted that even when most home improvement categories fall in a recession, people keep buying paint and lawn care items. “I wouldn’t say we’re recession-proof,” said chief executive Jim Hagedorn, “but I do believe we’re recession-resistant.”

Door-to-door protein shakes? “Based on the last 100 years of direct selling, it’s been very countercyclical,” said Herbalife chief John DeSimone.

Alarm systems? “People tend to move less frequently, which means that they don’t tend to cancel their accounts,” said ADT chief financial officer Jeffrey Likosar. “In recessions, people tend to be more concerned about things like safety and security.”

Dating websites? “We’ve seen increased engagement during times of anxiety and trouble,” said Match Group chief executive Sharmistha Dubey.

Some companies will indeed perform well during a downturn, weathering the storm and picking up share from weaker competitors. Others will not.

Founded as an Ohio hardware store back in 1868, the claimed resilience through business cycles of ScottsMiracle-Gro has weight. Climate change is a bigger threat to the lawn seed seller than a common or garden downturn.

But other companies require more of a leap of faith. European Wax Center admits it has limited evidence for its recession resilience. Launched in 2004, the company was a much smaller business for the last severe recession in 2009.

Airbnb does not even include that caveat. Chesky noted proudly that the company launched in August 2008 on the verge of the Great Recession. But it was minuscule back then. By January 2009 Chesky was celebrating weekly fees of less than $1,000.

Today Airbnb is turning over $7bn a year and has a $93bn market capitalisation. What Chesky has built is phenomenal, but its early weeks are not much of a guide to how it will weather a recession now.

Credit to the rare boss who admits the uncertainty. “We have never been through truly a recession,” said Shake Shack chief executive Randy Garutti. The premium burger chain only started to grow seriously in 2008 and 2009. “Not going to make a claim on who we’re going to be in an unknown consumer spending environment.”

His hope is that instead of customers trading up from McDonald’s, they might trade down from restaurants. Which is a thesis just as well founded but far less aggravating than most of the “recession-resistant” chuntering.





Original Source Link

Latest News

Will Trump be good for business? It’s illuminating to remember how his last term played out

“Steel Stocks Put the Pedal to the Metal” the Wall Street Journal declared within hours of Donald Trump’s...

Norway supports MiCA, considers CBDC for financial stability

Norges Bank backs the EU’s MiCA regulation while considering a CBDC to enhance cross-border payments and support financial...

Donald Trump asks arch protectionist Robert Lighthizer to run US trade policy

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington...

Taylor Swift Fans Are Leaving X for Bluesky After Trump’s Election

Following the US presidential election, Swifties, the name for Taylor Swift’s fans, are fleeing X for Bluesky. X’s...

Australian Prime Minister Proposes Total Social Media Ban for Anyone Under 16

Australian Prime Minister Anthony Albanese has announced plans to ban social media for all Australians under the age...

Must Read

North Korea launches intercontinental ballistic missile to space, reaches record altitude

North Korea reportedly reached space on Wednesday, Oct....

Where the Late Singer Will Be Buried – Hollywood Life

Liam Payne continues to be remembered and mourned...
- Advertisement -

You might also likeRELATED
Recommended to you