On 28 October, PayPal (PYPL.O) reported a slowdown in payments activity during September, which continued into October across both the U.S. and Europe, as consumers became more selective in their purchases, Chief Financial Officer Jamie Miller told analysts on a call.
Shares of the company, which had initially jumped 17% following PayPal’s announcement of a partnership with OpenAI and the release of exceptional results, pared some gains during the conference call as investors digested Miller’s remarks. The stock was last up 10%.
U.S. companies across industries are experiencing pressure from a widening gap between lower-income and affluent consumers, with tariffs adding further uncertainty, as reflected in third-quarter earnings reported so far.
“We’re seeing basket sizes just trade down. Average order value is down, particularly in retail, where consumers are being more selective, and that behaviour has continued into October,” Miller said.
This shift, echoed by major retailers and consumer goods companies, indicates a slowdown in discretionary purchases, even as everyday spending remains steady, keeping the payments sector largely on firm footing.
PayPal forecast its current-quarter adjusted earnings per share (EPS) between $1.23 and $1.27, below Street expectations of $1.31 according to estimates compiled by LSEG.
“Concerns over a weaker jobs market in the U.S., signs of financial strain among lower-income families, and the slower-than-anticipated pace of interest rate cuts from the U.S. Federal Reserve have all added a cyclical element to more structural concerns,” said Russ Mould, investment director at AJ Bell.
However, the year-end holiday season, traditionally a strong period for retailers and payment firms, could help lift spending in the next couple of months. Retailers typically rely on the fourth-quarter holiday period for a significant portion of annual sales, with spending during Christmas, Black Friday, and Thanksgiving providing a boost.
“The holiday season is very back-end loaded. So it’s something we’re watching,” Miller added.