French Consumer Confidence Crash: Time to Bet on Europe’s Retail Winners—and Avoid the Losers

The French consumer is in a funk, and it’s time to act. The latest data shows France’s consumer confidence index plummeted to 88 in May 2025, a catastrophic miss of its 93 forecast. This is a “Big Surprise” that spells trouble for European retailers—but also presents a goldmine for investors who know where to look. Let’s break down the carnage and the opportunities.

The Decline: Why France’s Shoppers Are Frozen

French households are terrified. The INSEE data reveals a 7-point drop in “major purchases intentions”—the nerve center for discretionary spending. Why? Blame soaring unemployment fears (up to 51 on the index) and a 12-point plunge in future savings confidence, which signals households are hunkering down. Even the modest uptick in current savings capacity (to 19) can’t offset the gloom.

This isn’t just a French problem—it’s a European contagion. Retailers in Germany, Spain, and Italy are already bracing for spillover effects. The STOXX Europe 600 Retail Index has been gutted, down 15% YTD. But here’s the twist: Not all retailers are doomed. Some are immune to the panic—and even thriving.

The Vulnerable: Discretionary Retailers on the Brink

If you own shares in luxury goods, apparel, or electronics retailers, you’re in a war zone. The data is clear:
- Major purchases intentions (cars, appliances, furniture) are at rock bottom (-23), worse than 2020’s lockdown lows.
- Inflation expectations are moderating (down to -37), but that’s cold comfort when unemployment looms.

Luxury stocks like LVMH (LVMH.PA) are already buckling. While their Chinese clients still spend, European demand is evaporating. Meanwhile, discount retailers like Aldi or Lidl (unlisted) are the only ones seeing traffic—bad news for mid-tier players like Kering (PRTP.PA) or Inditex (ITX.MC).

The Winners: Defensive Plays and Pricing Power

The playbook here is simple: Avoid discretionary, embrace essentials and pricing power.

1. Grocery and Staples:

2. Ahold Delhaize (ADR: Ahold) or Danone (DANO.PA)** are non-negotiable buys. Shoppers cut back on designer handbags, not milk.

3. Utilities and Necessities:

4. Vivendi (VIV.PA) or Engie (ENGI.PA) are insulated from consumer whims.

5. Healthcare Retailers:

6. Boots (part of Walgreens WBA) or Optical chains like EssilorLuxottica (ELUX.PA)**—people prioritize eyesight over vacations.

7. The Secret Weapon: Price Hikes:

8. Companies like Unilever (UNc.N) or Nestlé (NESN.SW)** can raise prices without losing customers. Look for margins expanding here.

The Contrarian Play: Short the Losers, Buy the Resilient

This isn’t just about buying “safe” stocks—it’s about profiting from the collapse.

• Short Kering (PRTP.PA) or Hermès (HRMS.PA)—their reliance on discretionary spending makes them sitting ducks.
• Buy Reckitt Benckiser (RB.L) or Procter & Gamble (PG)—essentials stocks with global scale.

The Bottom Line: Act Now or Pay Later

The French consumer is in retreat, and Europe’s retailers are paying the price. But this isn’t a blanket sell—this is a time to pick sides. Dump the discretionary trash, load up on essentials, and bet on companies that can raise prices. The data is screaming: the next 6 months will reward the bold.

Action Items:
1. Sell any exposure to luxury or mid-tier retail.
2. Buy staples and utilities with strong pricing power.
3. Short overvalued discretionary names before the panic deepens.

This is a market reset—and the winners will be the ones who see it coming.

The clock is ticking. Don’t wait for the headlines to confirm what the data already shows.