In times of economic challenges, companies that prioritize high-quality experiences often emerge victorious.
You can see this divergence taking shape in the chart below, demonstrating that services spending is accelerating as retail (buying things) spending cools:
Companies providing high-value and high-quality experiences are setting themselves up for long-term market share capture.
Let's take a look at two historical examples before revealing how American Express (AXP) and Delta Airlines (DAL) are following similar paths:
- Apple Inc. (AAPL): During the 2008-2009 financial crisis, Apple stood out by offering high-quality products and superior user experiences with the iPhone and other devices. Apple's focus on design, innovation, and creating an ecosystem of products and services enabled it to gain and maintain a strong market position.
- Starbucks Corporation (SBUX): In the early 2000s, Starbucks set itself apart from other coffee shops by offering a high-quality experience to its customers. The company's focus on creating a comfortable atmosphere, providing personalized service, and consistently delivering high-quality coffee products allowed it to expand rapidly and become the global coffee giant it is today.
Following in the footsteps of these successful companies, AXP and DAL are adopting similar strategies to thrive in the current economic environment.
American Express: A Rising Status Symbol
AXP has managed to impress consumers with an array of perks that cater to their desire for high-quality experiences.
Happiness levels have risen by +6 points YoY to 69% positive, significantly higher than competitors.
AXP's success can be attributed to:
- Attracting younger generations: Millennials and Gen Z customers accounted for over 60% of card acquisitions in 2022.
- Insulation from economic headwinds: AXP's high-earning and business-centric consumer base offers some protection from economic challenges, similar to Apple and Starbucks during past recessions.
Delta Airlines: Setting the Standard for Air Travel
DAL has improved consumer happiness by focusing on delivering a superior experience, especially as peers (like LUV) struggle through logistical hurdles and offer lackluster customer service.
As a major partner of AXP, DAL's success further strengthens the connection between the two companies.
Bottom line: You can spot companies like DAL and AAL by watching for significant improvements in consumer happiness levels and outperformance vs. peers.
In the LikeFolio universe, consumer happiness is a leading indicator of future growth. In other words, first comes an uptick in consumer happiness, then comes an uptick in consumer demand.
AXP reports earnings this week and LikeFolio’s score is officially neutral. Macro headwinds may inhibit growth near-term.
But AXP happiness presents a convicting nod to future growth -- this is a best of breed name and any pullbacks serve as ideal entry points.
I talked about this in detail yesterday on the TD Ameritrade Network.