Weighing the Impact of Consumer Spending Trends on Stocks

Investors must navigate a divided economy as low-income consumers curtail spending while wealthier groups remain more active. Despite challenges, certain companies, notably Tapestry, On Holding, and Viking Holdings, exhibit strong growth potential amidst market volatility.

Date: 03-05-2025

AI Rating: 7

Market Overview
Current economic conditions indicate a challenging environment for low to middle-income consumers who are tightening their purse strings due to heightened debt levels, primarily from credit cards. However, a segment of more affluent consumers continues to exhibit spending behaviors, especially in the luxury and discretionary sectors. This trend suggests a divided economy, with companies catering to these wealthier consumers likely experiencing continued demand.

Earnings Performance
Tapestry Inc. (TPR) has reported record earnings per share (EPS) of $2 for the second quarter of fiscal year 2025, showcasing strong financial performance despite a relatively low compounded annual sales growth rate of 2.4%. The impressive EPS in a tough economic climate hints at resilient demand for luxury goods, which is critical for long-term investors looking for stability in their portfolio. Analysts have issued a price target reflecting a 12% upside, reinforcing confidence in this stock, albeit caution is advised pending further guidance from their upcoming earnings report.

Price Trends
The report highlights On Holding AG (ONON), which experienced mixed earnings results leading to a decline in stock prices despite a notable consensus price target of $58.77, projecting a 23% upside from current levels. The company’s ability to maintain revenue growth year-over-year, especially targeting the high-performance footwear segment, is promising. However, ongoing concerns regarding tariffs affecting costs could pose challenges looking ahead. Investors may want to monitor quarterly performance closely to gauge consistency in earnings.

Consumer Confidence and Market Position
Newly public Viking Holdings Ltd. (VIK) has shown nearly a 50% increase since its IPO, leveraging its unique luxury cruise positioning. Although it faced a slight downturn of about 6% in 2025, the company reported robust booking numbers that could drive future revenue streams. The cruise industry is generally perceived as resilient to tariffs, which further supports investor confidence in VIK's earnings potential.

Overall, while the economy presents challenges, companies that effectively cater to a wealthier customer base, such as Tapestry, On Holding, and Viking, might continue to see growth. Careful monitoring of earnings reports and economic developments will be key for investors navigating this landscape.

Stocks: TPR ONON VIK