Investing.com – In its “Global Consumer Outlook 2025” report released on Monday, RBC Capital Markets identified the significant challenges and opportunities shaping global consumer markets.
Drawing on views across regions and sectors, the report underscores the key trends and themes expected to impact consumer behavior and retail performance in the coming year.
A challenging consumer landscape
RBC analysts highlight the financial pressures faced by global consumers due to rising inflation, rising interest rates and unemployment. These factors are expected to impact consumer fundamentals at least through the first half of 2025
The report also indicates a marked shift in consumer behavior towards value-seeking strategies, such as reducing basket sizes, increasing reliance on private labels, and preference for discount retail channels. Luxury spending appears weak, as consumers gravitate towards higher-value restaurant options and dining at home.
Regional and global topics
While consumer trends vary by geographic region, several universal themes emerge:
1) As inflationary pressures ease, volume and unit growth are expected to lead to relative stock outperformance.
“Our global team’s view is that organic growth will be more volume-based next year as inflation/pricing capacity fades and promotional spending increases due to a challenging consumer environment,” RBC analysts noted.
2) RBC notes that with the US elections over, attention has turned to the potential political impacts of a second Trump administration. A major concern is the imposition of new tariffs, which could create significant regulatory challenges.
Companies are already exploring cost-mitigation strategies, such as enhancing productivity and adjusting prices. However, analysts warn that these cost pressures are likely to be passed on to consumers, which could hinder growth and exacerbate inflationary pressures.
3Trade policies, such as tariffs proposed by the Trump administration, and geopolitical risks in regions such as China and Europe, pose challenges. The report highlights concerns about slowing growth in Latin America and potential currency fluctuations affecting performance.
4) Rising costs, moderate demand, and foreign exchange rate fluctuations are likely to challenge profitability.
“We believe 2025 will be another year of balancing margin dynamics including moderate demand, subdued volumes, slowing pricing and FX benefits, higher/lower commodity costs, increased promotional environment, need to increase marketing spend, and normalizing flexibility,” the analysts said. “. .
5Despite expectations of gradual improvement, consumer sentiment and spending in China remain weak. Structural changes, such as the growing preference for second-hand goods and alternative retail platforms, indicate a shift in consumer preferences.
6) With organic growth difficult to achieve, RBC believes M&A activity may accelerate. The report forecasts favorable conditions for consolidation in the latter half of the year, driven by stable interest rates and reasonable valuations.
In terms of sector-specific insights, RBC highlights several key themes across the consumer goods, luxury and premium brands, restaurants and entertainment sectors.
For consumer goods, analysts point out that the sector faces persistent pressure from weak volume growth and macroeconomic uncertainty. Despite poor performance in recent years, RBC remains cautious about potential earnings risks associated with inflation and regulatory developments.
In luxury and premium brands, the investment bank expects stable or modest improvement in revenue growth, especially in North America. LVMH (EPA:) stands out as RBC's top pick. The company believes the stock is “better positioned for this scenario, given its size, diverse category mix, slightly higher U.S. revenue mix and relatively weaker revenue growth trends in Fashion and Leather which provide greater potential for a reversal in our view.”
Finally, analysts said they are “cautiously optimistic” about the restaurant space for 2025.
“Recent macro data points point to a stable economic backdrop where improved consumer sentiment could translate into traffic growth after a challenging 2024, although we expect the improvement to be more gradual as consumers continue to grapple with higher prices,” the analysts noted. .
They feel more optimistic about the fitness sector, as they expect consumers to continue to prioritize health and wellness.
