The Consumer Kept Swiping Through All of It.

The Swipe Data

Visa logged higher revenue in its latest quarter as consumers continued to spend, even amid inflationary pressures. The payments company posted fiscal second-quarter revenue growth of 17%, topping Wall Street’s expectations. Chief Executive Ryan McInerney said consumer spending remained resilient in the quarter, and Visa saw particular strength in consumer payments, commercial and money movement solutions, and value-added services.

In the U.S., payments volume rose 8% in the quarter with broad-based spending improvement in both credit and debit, which the company attributed in part to higher tax refunds. “Both discretionary and nondiscretionary spend remain strong. We do not see signs of the lower spend consumer weakening in our volumes,” Chief Financial Officer Chris Suh said on a call with analysts. Overall, payments volume and processed transactions both rose 9% from the year-ago quarter, while cross-border volumes gained 12%.

For the quarter, profit came in at $6.02 billion, or $3.14 a share, compared with $4.58 billion, or $2.32 a share, a year earlier. Revenue was $11.23 billion against analyst estimates of $10.75 billion. Visa also bumped up its revenue and profit outlook for the full year, and said it expects consumer-spending stability to continue despite near-term uncertainty tied to the conflict in the Middle East.

And Also: 2,600 Jobs

The same release carried a second number that does not fit the cheerful headline, and we are not going to skip it. Visa said it is cutting 2,600 jobs, or about 7% of its workforce, as it works to adapt to the rapidly changing payments industry. In a memo to employees, McInerney said most of the roles affected would be in technology and product teams, but that there would be cuts across the organization. He said technology trends are creating “a once-in-lifetime inflection point in payments” that is changing how money moves around the world.

Hold the two facts together: record volume, smaller staff. That is not a consumer story. That is an operating-leverage story, and it is precisely why we own the toll booth rather than the traffic.

The World Cup Sugar High

Coca-Cola boosted its earnings outlook after the company’s marketing efforts, including its World Cup campaign, helped drive volume despite consumer caution. Advertising before and during the tournament helped fuel a 5% increase in overall case volume in the second quarter; the campaign boosted Powerade volume by 8% and Trademark Coca-Cola by 5%.

The company said it expects adjusted earnings per share to increase 9% to 10% during the full year, up from previous guidance of 8% to 9%. Profit increased 16% to $1.03 a share in the second quarter; stripping out certain one-time items, adjusted per-share earnings were 97 cents, ahead of the 93 cents anticipated by analysts, according to FactSet. Revenue rose 7% to $13.4 billion against forecasts of $13.17 billion. Shares closed up 5% on the news.

The interesting detail is not the tournament, which ends. It is the pricing. Price and mix increased the most in North America, where it rose 4%, contributing to a 2% overall increase globally. To address price-wary customers, Coca-Cola is adding products such as the mini can, which has an even lower price point than regularly sized bottles — shoppers can now buy individual mini cans at convenience stores. Chief Financial Officer John Murphy told investors that “while the external environment remains uncertain, our strong first-half performance and business flexibility give us confidence.” Selling a smaller unit at a higher price per ounce to a budget-conscious shopper is the most durable trick in consumer staples, and it survives World Cups.

When the Best Balance Sheet in the World Starts Renting You the Phone

Apple launched a new product-leasing program with Klarna that will allow customers to pay monthly for new devices and then return, upgrade or buy them. The program, dubbed Apple Upgrade, offers 12- and 24-month leasing options for iPhone and Apple Watch, and 24- and 36-month terms for Mac and iPad; Klarna, the buy now, pay later company, will provide the leasing options.

The timing is the part worth noticing. The announcement comes a month after Apple raised prices on some of its devices because of soaring memory and chip-storage costs. Financing is what a manufacturer offers when the sticker price has outrun the customer’s willingness to pay it in one go. That is not a crisis; it is a late-cycle tell, and it belongs in the same file as the merger approach we wrote about in Part I.