CEO of Affirm: High Gas Prices Impacting U.S. Consumers

Affirm Holdings stock saw a 7% increase on Friday following the company's strong fiscal fourth-quarter earnings report. CEO Max Levchin indicated that high gasoline prices are significantly affecting U.S. shoppers.

Levchin stated, "The U.S. consumer undoubtedly sees the higher gas prices, so can't, can't ignore that. They're also coming to us to help manage those prices across all the various inflationary points."

As of Friday, the national average for gasoline stood at $4.09 per gallon, according to AAA data. While this is a decrease from May's peak above $4.50, prices remain considerably higher than pre-Iran war levels, having been below $3 on March 2nd.

"In times of inflation, we see more demand because folks are budgeting," Levchin explained. "They're more thoughtful about how they want to use the money, and we're there to help."

The annual inflation rate was reported at 3.7% in July, according to the latest personal consumption expenditures price index. This index, closely watched by the Federal Reserve, rose 0.2% in July. However, other indicators showed some consumer resilience, with personal income and spending both increasing by 0.4% and 0.2% respectively in July, exceeding expectations.

These economic factors are influencing the Federal Reserve and Chairman Kevin Warsh as they prepare for their September policy meeting. Levchin acknowledged that while the consumer remains generally healthy, caution is warranted.

"I do think that sustained pressure on prices isn't great in the long term, and so can't ignore that either," he commented.

Affirm reported fourth-quarter revenue of $1.17 billion, surpassing LSEG's estimate of $1.11 billion. The company anticipates first-quarter fiscal revenue between $1.19 billion and $1.22 billion, which is higher than the $1.16 billion expected by analysts. Gross merchandise volume also performed well, reaching $14.1 billion, significantly exceeding the $13.39 billion forecast.

Affirm Holdings' stock experienced a notable 7% surge on Friday after the 'buy now, pay later' company announced robust fiscal fourth-quarter earnings. CEO Max Levchin revealed that elevated gas prices are having a discernible impact on American shoppers.

Levchin articulated this point to CNBC, stating, "U.S. consumers are undoubtedly noticing the higher gas prices; it's impossible to overlook. They are turning to us for assistance in managing these costs, alongside other inflationary pressures."

Data from AAA shows the national average gas price at $4.09 per gallon on Friday. Although this represents a decline from over $4.50 in May, it remains substantially higher than pre-war figures, having not fallen below $3 since March 2nd.

"During inflationary periods, we observe increased demand as individuals focus on budgeting," Levchin commented. "They are more deliberate in their spending decisions, and Affirm provides a solution to support them."

The annual inflation rate in July was 3.7%, based on the latest personal consumption expenditures price index. This metric, favored by the Federal Reserve for forecasting, saw a 0.2% increase in July. Nevertheless, other economic data points to consumer strength, with personal income rising 0.4% and spending up 0.2% in July, both exceeding forecasts.

These economic dynamics are a key consideration for the Federal Reserve and Chairman Kevin Warsh as they deliberate their next policy actions at the September meeting. Levchin acknowledged the general health of the consumer but cautioned against complacency.

"Sustained price pressure is not beneficial in the long run, and that is also something that cannot be disregarded," he added.

The fintech firm released its Q4 results after market close on Thursday, reporting revenue of $1.17 billion, which surpassed the LSEG estimate of $1.11 billion. Affirm projects fiscal first-quarter revenue to be between $1.19 billion and $1.22 billion, outperforming the Street's expectation of $1.16 billion. Gross merchandise volume also stood out, reaching $14.1 billion, comfortably exceeding the StreetAccount forecast of $13.39 billion.