by Theo Francis

American companies are once again beating profit expectations, but this time around they aren't banking on blockbuster consumer spending to make it happen.

Instead, the latest batch of quarterly earnings are getting a lift from managers who are squeezing out costs, boosting productivity and turning to new technologies. Companies from Monster Beverage to Estée Lauder said they are holding down hiring, often while finding new ways to get employees to work more efficiently. And they are raising prices when they can.

"The processes are human-light now," Damon Lee, chief financial officer of C.H. Robinson Worldwide, said last month as he told investors about an initiative that includes automation upgrades. The global logistics company reported higher profit margins in the second quarter despite a nearly 8% drop in revenue, which it attributed to a prolonged freight recession. It said it had increased productivity 35% since 2022.

"The outcome of those transformations means less head count, more productivity," he said.

More broadly, the gains enjoyed by companies and their investors aren't softening the unease consumers and employees feel -- and might be obscuring signals that ordinary Americans are putting their anxiety into action.

So far, corporate efforts to trim their way to profit growth haven't led to the deep business or consumer-spending cuts that often precede recessions, said Gregory Daco, chief economist at EY-Parthenon.

Still, he added, "My fear is that the longer this lasts, the more likely we are to enter something akin to a downturn."

Estée Lauder, the cosmetics company, said its job cuts and pricing hikes are part of an initiative announced in February to improve profitability and restore sustainable sales growth, alongside some price reductions. The drink maker Monster Beverage told investors last month that it cut jobs in its small alcohol-brands unit as part of cost-reduction efforts and that sales and gross profit rose on pricing and supply-chain changes.

Many Americans aren't sanguine. Consumer sentiment decreased in August, though it remained above April and May lows.

Inflation expectations worsened, and inflation has remained above Federal Reserve targets.

Employee surveys suggest many are being asked to do more with less at work as companies continue their efficiency drives. In a spring Korn Ferry poll of 15,000 global professionals, more than 40% said their companies had slashed management ranks. Nearly as many said the lack of supervisors had left them feeling directionless. Managers are miserable too.

A separate survey found that many believe job security is tenuous even for top performers -- and half expect a recession in the next year, according to the staffing firm franchiser Express Employment Professionals, which sponsored a June survey of 1,000 U.S. adults.

Shoppers are showing the strain in store aisles. U.S. snack sales have dropped, and Procter & Gamble, which makes household products including Pampers diapers and Bounce dryer sheets, has said consumers are shopping less, using up supplies they own before restocking, and watching for deals.

The gloom is showing in economic data. Consumers pulled back on restaurant and recreation spending in July from the prior month and showed more caution in spending on healthcare and other services, according to a Commerce Department report on consumer spending on Friday.

Executives and analysts have noticed. In conference calls with investors, references to consumer risk tripled in the second quarter and remained at double recent levels through Aug. 15, according to data from NL Analytics. Until this year, the topic had been waning in frequency.

Spectrum Brands Holdings, which makes Cutter insect repellent and DreamBone dog chews, said it had cut jobs and left others unfilled while reducing office space and other spending because of tariff costs and softening consumer demand. It also raised prices. The company said earnings rose 7% in its June quarter from a year earlier on a 10% drop in sales driven in part by tariff-related supply-chain snarls.

"We are reducing our cost profile to adapt to consumer demand and, quite frankly, the tariff headwinds," Chief Executive David Maura told investors in August.

Earnings per share for S&P 500 companies rose by about 13% in the second quarter compared with a year earlier -- toward the upper end of the range seen over the past two years, according to data from LSEG. By contrast, sales grew less than half that rate. (Both figures include estimated results for around a dozen companies that hadn't reported results through late August.)

For retailers, price increases have generated most of the growth in sales since 2021, with volumes largely flat, Daco added. If consumers balk at new price increases, revenue and profit growth for the industry could halt or even drop.

"For retailers, that should be an alarm," he said.

Share buybacks have helped put a shine on profits. Reducing the number of shares outstanding increases companies' earnings-per-share numbers mechanically, regardless of operating results. Overall, LSEG data indicates that repurchases added about 1.3 percentage points to the S&P 500's gains in the second quarter.

At one company out of six, buybacks added at least 4 percentage points to earnings growth, S&P Dow Jones Indices found. That is the highest level since early 2023.

Write to Theo Francis at theo.francis@wsj.com

(END) Dow Jones Newswires

September 02, 2025 21:00 ET (01:00 GMT)

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