Consumer Spending Slowdown? Not So Fast, Visa Execs Say -- This Industry Is Winning

Zinger Key Points
  • Walmart's earnings miss triggered fears that U.S. consumer spending is deteriorating.
  • Visa's earnings report on Tuesday suggests consumer spending is simply shifting to travel.

Walmart Inc. WMT spooked the market last week with its large second-quarter earnings and revenue misses, leading to concerns U.S. consumer spending may be deteriorating.

However, the second-quarter numbers and commentary from credit card giant Visa Inc. V on Tuesday suggest consumers are still spending, but they are focusing more on travel and experiences.

The Numbers: Visa reported 19% revenue growth in the second quarter and said cross-border travel spending surpasses 2019 levels for the first time since the COVID-19 pandemic began.

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Visa's earnings and commentary are the latest bit of positive news on the health of the U.S. consumer as investors weigh the possibility that inflation and aggressive Federal Reserve interest rate hikes will push the economy into a recession.

Second-quarter bank earnings sent mixed signals to investors on the strength of the consumer, but Visa's numbers and commentary suggest the market shouldn't read too deeply into Walmart's struggles.

"Based on our numbers, we haven't seen any evidence of consumers pulling back spending in our markets," Visa CEO Al Kelly said on the company's earnings call.

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Spending Is Shifting: Visa CFO Vasant Prabhu said spending is not weakening — it's shifting.

"There has been a general shift in consumer preferences. You've heard this from other people to move away from goods to experiences, and travel is very much a beneficiary of that," Prabhu said.

That shift in preference has been reflected in the market as well. In the past month, the AdvisorShares Hotel ETF BEDZ is up 7.6%. Many leisure and travel stocks, including Las Vegas Sands Corp. LVS, Marriott International Inc. MAR and Southwest Airlines Co. LUV, have held up well in a difficult market over the past month.

Benzinga's Take: Visa's solid results support the idea that consumer weakness is showing up in certain patches of the economy, but overall spending is fine. Earlier this month, U.S. retail sales for the month of June came in better than expected, demonstrating particular strength in gas stations, e-commerce and bars and restaurants.

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