With inflation setting a new 40-year high for the month of February, the Federal Reserve looks to pump the brakes on surging prices with the first rate increases since 2018. In light of these inflationary pressures, Lands' End (LE) CEO Jerome Griffith believes that the outlook for American consumers is optimistic.
“I think people are generally concerned about inflation out there. But at the same time, you know, people are still out spending,” he told Yahoo Finance Live. “The resiliency of the American consumer is, I think, sort of legendary. And depending on what's going on in the world, yes — things, from a demand standpoint, could change slightly. But I think overall, consumers want to still see positivity.”
Griffith joined Yahoo Finance Live to discuss fourth-quarter earnings for the company, pandemic shopping trends, inflation, and the road ahead in 2022 for consumer discretionary growth. Lands’ End reported financial results for Q4 2021 and the full 2021 fiscal year on Wednesday. The American clothing and home decor retailer saw net annual revenue increase 14.7% to $1.64 billion compared to $1.43 billion in the prior year.
Even in the face of 7.9% inflation, consumer demand remains strong, bolstered by record levels of e-commerce spending according to a report by Adobe (ADBE) Analytics. American consumers are expected to spend $1 trillion online this year, with this forecast representing an increase of 13% from 2021 and following a total spend of $1.7 trillion since March 2020.
Griffith said that demand for services like vacations have bounced back from pandemic lows as well. He noted the growth Lands’ End has been seeing in its product lines that are associated with travel.
“There's a lot of pent-up demand out there for people to go out and do things,” he said. “I can tell you that in our business-to-business portion of our firm, we're seeing — in the travel sector — big increases over where we were a year ago. Also, in our swimwear business and our athletic business, we're seeing big increases as well. We're still seeing big demand for products that people are going to go on vacation with.”
Some experts argue that consumers are positioned strongly amid inflation, geopolitical risks, and overall market turbulence. The personal savings rate dropped to 6.4% in January — lower than pre-pandemic levels — suggesting that Americans are tapping into the savings they accumulated throughout the pandemic.
Increasingly concurrently alongside the Consumer Price Index, however, is the Producer Price Index. The Bureau of Labor Statistics (BLS) reported on Tuesday that final demand prices moved up 10% on an unadjusted basis for the last 12 months ended in February, rising 0.8% over the previous month.
Griffith commented on the implications of rising producer costs on the consumer.
“We're seeing increased costs in raw materials, absolutely,” he said. “We're also seeing increased costs in transportation, though we think that that's transitory — yet, we don't believe that that's going to go back to 2019 levels. So obviously, there is going to be increases out there for the consumer in prices of products and energy. But we're concerned, but hopeful that that starts to slow down soon.”
Thomas Hum is a writer at Yahoo Finance. Follow him on Twitter @thomashumTV
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