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We’re closing out another great week of Troublemaking as we talk about Ally Financial’s report on the strength of consumer demand amongst rising rates. We also talk about why Amazon is faring better than its competitors, as well as JetBlues acquisition of Spirit and what it means for air travel.
- Ally Financial leadership expects demand to hold strong through interest rate hikes
- CEO Jeffrey Brown says that despite volatility that the narrative remains strong that supply is weak and demand is strong citing that there are still 4 to 5 million sidelined shoppers who are poised to replace those who may drop out
- CFO, Jennifer LaClair says the company expects rates of 8% and cited that each point raises monthly payments by $15-20 which consumers may be paying for two loaves of bread
- LaClair reports on the financial health of consumers:
- Savings account levels have started to normalize, she said, but they remain "robust" above pre-pandemic levels at all income levels — despite inflation, higher tax payment levels and strong consumer spending.
- Thirty-day delinquencies rose in the second quarter but remained below 2019 levels, LaClair said. Ally saw 2.5 percent of its auto borrowers default in the second quarter, compared with 3.3 percent in the second quarter of 2019.
- Take Away: Focus on the indicators not the hype
- Amazon reports that inflation is not affecting sales like other competitors
- Sales were down 4% which was less than expected with Amazon projecting 13-17% growth in Q3 which is a much different picture than competitor Walmart
- There is no sign of wavering for Amazon’s 200 Million member Prime subs
- Analysts agree that one of the primary differentiators with Amazon v Walmart is that WM has primarily lower income customers as compared to Amazon’s middle to upper income customer base
- Take Away: Not all income levels are faring the same. Cater your experience
- JetBlue closes on $3.8B Spirit acquisition creating a larger low-cost competitor
- The process has been full of drama as JB stepped in to breakup a merger between Spirit and Frontier that was already pretty far along
- Frontier argued that antitrust regulators would likely break up the deal, JetBlue accuses the Spirit board of not doing what was best for shareholders
- JetBlue ended up paying shareholders a $400M breakup fee and committed $70M in the event that regulators didn’t let the deal go through
- Primary goals would be to advance expansion by years by nearly doubling fleet size and pilot headcount (which was a very big incentive amongst a shortage) to create a large, national discount airline
- All Spirit aircraft will be retrofitted to match JetBlue’s existing fleet and business model
- Take Away: Talent and efficiency of scale are a winning formula in th
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