It's clear that Americans have slowed their spending drastically as many industries essentially grind to a halt amid the coronavirus pandemic and job losses mount. But the head of credit card company Discover Financial Services offered an inside glimpse at just how grim the picture is right now.
During an earnings conference call on Thursday, Discover CEO Roger Hochschild broke down cardholders' spending patterns this month in different categories amid the coronavirus crisis.
"So far in April, everyday sales are down 14% year-over-year," Hochschild said. "Discretionary spend is down 33%, driven by the travel category, which, although only 8% of cardholder spending, is down 99%, and by retail, which is down 11%."
The jaw-dropping datapoints from Discover raised eyebrows on Wall Street.
"Yeah, it's that bad," Christopher Harvey, Wells Fargo's head of equity strategy, wrote in a note on Friday citing Hochschild's comments. "It shouldn't be surprising, but still we gasped at this conference-call quote from the CEO of Discovery Financial."
With businesses shuttered from coast to coast to slow the spread of the coronavirus, retail sales in the U.S. suffered a record drop last month. Total sales plunged 8.7% in March, the biggest decline since the government started tracking the series in 1992.
Discover CEO's comments about April indicate that those official numbers will likely get even worse.
"As long as stay-at-home orders remain in place and many businesses remained closed, we expect the weak sales volume trend to continue and future trends will depend upon the pace of the recovery," Hochschild said on the conference call.
The travel industry — including airlines, hotels, agencies — has been hit the hardest as the government issued stay-at-home advisories, while events were forced to be canceled, in a bid to contain the deadly virus. Air travel has dropped by more than 95% as the Covid-19 pandemic spreads around the U.S.
Discover said there has been increased spending on groceries as people bulk up on essentials, but everyday sales were offset by a 60% reduction in spending on petroleum in April. Demand for gas is at its lowest level since 1968 as the majority of the country avoid going out in an effort to slow the spread of the coronavirus.
Discover reported a surprise loss of 25 cents a share for the first quarter versus a $2.15 profit a year ago. The shares have tumbled more than 50% this year.
— CNBC's Michael Bloom contributed reporting.
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