CFOs navigate a K-shaped economy and reporting changes

The consumer market is splitting into haves and have nots.

Chief Financial Officers (CFOs) are grappling with the consequences of a K-shaped economy, where uneven economic gains are reshaping consumer behavior, demand patterns, and growth opportunities.

CFOs are seeing high-income households, bolstered by strong equity market performance, continue to spend robustly on premium goods and services while lower-income groups are actively pulling back, creating a challenging dual reality for businesses.

The CFO for a restaurant chain noted, “We track different customer segments based on income. Customers at the lower end make up about 10 percent of our sales. That customer is completely gone.”

Disappearing customer segments and consumers trading down are happening across industries. In auto sales, for example, customers are holding on to their cars for a record average of 13 years. It’s reflected in choices like opting for servicing rather than purchasing new vehicles. 

“Used cars are high in demand,” according to an automotive retail CFO. “It really comes back to affordability.”

At the other end of the market, it’s the best of times for premium luxury brands. This bifurcation is forcing companies to sharpen their strategies, either by capturing the margin available at the premium end of the market or by catering to value-conscious consumers.

Affordability is less of an issue in the airline industry. A CFO remarked: “More customers are buying premium cabins. It hasn’t slowed down at all. Higher-end consumers are still spending.” 

To navigate this polarization, finance leaders are scrutinizing their product mixes and channel strategies. A manufacturing and packaging CFO observed this shift firsthand, noting that products supplying the restaurant sector are underperforming compared to those routed to grocery or dollar-store channels. 

“People are trading down from expensive beverages to just plain water and milk,” highlighting how purchasing habits have shifted toward absolute necessities.

For CFOs, this means the traditional middle-market consumer is hollowing out. Consequently, financial planning now requires a hyper-segmented approach rather than relying on broad macroeconomic indicators. Companies must vigorously defend their margins on premium offerings while aggressively managing costs on value-tier products to maintain volume among increasingly price-sensitive shoppers.

“We track customer segments based on income. Our lower end customer is completely gone.” --Restaurant chain CFO

Growth persists as underlying risks multiply

Despite significant inflation and geopolitical disruptions, the broader economy bolstered by AI investments continues to demonstrate surprising resilience. While CFOs acknowledged the strain of these events, many were struck by the economy's ability to weather the storm, creating a unique environment where growth persists even as underlying risks multiply. 

KPMG Economist Ben Shoesmith details these risks, emphasizing that the recent ceasefire in the Strait of Hormuz represents the beginning of a deal process, and that the economic fallout will have a long tail. While oil prices have receded from their peak, that optimism is likely misplaced, according to Shoesmith. Governments must rebuild their strategic reserves, and damaged infrastructure will limit supply production. Oil prices should remain elevated into 2027.

It’s not just oil that was disrupted by the strait. A third of the supply of fertilizer and helium pass through the Straight of Hormuz. That impacts agriculture and semiconductor companies.

CFOs express amazement at how well corporate performance has weathered these storms, creating a unique environment where the economy continues to grow even as general consumer sentiment remains sour.

AI is the primary catalyst for keeping the economic engine running. Beyond the hype, AI is driving massive, tangible capital expenditures that ripple across industries. An industrial manufacturing CFO pointed out that their order books are higher today than before recent geopolitical tensions, fueled largely by energy-intensive infrastructure projects like data centers, chip fabrication facilities, and advanced manufacturing. The data center buildout has sparked a surge in demand for raw building materials, cement, and structured steel. 

Shoesmith provided a striking macroeconomic perspective on this phenomenon, noting that the AI boom is creating a powerful wealth effect that buffers against other economic drags.

“We've been riding this AI train exceptionally well,” he observed. “AI equity gains in the stock market are going into consumers' pockets and being spent.”

This long-term technological promise is also keeping equity markets remarkably steady in the face of global uncertainty. Case in point: there is a direct correlation between a 2% or 3% drop in the S&P 500 and luxury good sales within a day or two. 

"Almost half of the GDP growth last year could be accounted for via AI investment.” --Ben Shoesmith, KPMG Economist

Relieving an administrative burden comes at a price

A hot topic among CFOs is the potential shift from quarterly 10-Q filings to a semi-annual schedule. While the prospect of reducing the administrative burden is attractive, a deeper analysis reveals significant challenges. The consensus among CFOs is that even if the formal filing is relaxed, the demands from investor relations will remain, forcing most companies to adopt a hybrid reporting model.

This hybrid approach would involve continuing to issue detailed quarterly press releases and host earnings calls, a necessity for companies that need to maintain an open window for capital markets activities. As one CFO explained their company’s need, providing this quarterly information is essential "because we want to be able to buy back stock at the lowest level," a strategy that requires consistent and timely disclosure to the market.

However, if the quarterly reporting infrastructure must be maintained, what is the true benefit of eliminating the final filing? The discussion revealed a wide range of current practices, from companies that file their 10-Q weeks after the earnings call to those that file it the very next day.

For many firms, the disclosure process is already being accelerated. One leader shared that their team is actively moving up earnings by a week to tighten their reporting cycle. This focus on speed highlights a key company risk: a semi-annual schedule could create an unwelcome information and liability gap between an informal quarterly earnings release and the formal SEC filing months later. 

Underwriters managing debt or equity offerings may find this gap unacceptable because they require legal protection from a formally filed, auditor-reviewed 10-Q to price transactions. Without a synchronized filing, companies face a closed capital-raising window and cannot safely execute stock buybacks due to the risk of possessing material, non-public information.

Ultimately, CFOs point out that drafting the 10-Q document itself is a fraction of the time compared to the extensive data aggregation, internal reviews, and audit processes required to close the books each quarter. The actual savings might be negligible when weighed against the demands of a market conditioned to a steady cadence of quarterly information.

“I can't imagine a situation where investors are going to be okay with us providing only semi-annual material updates.” — Industrial Manufacturing CFO