The Consumer industry spent the third quarter separating the purchases households protect from the ones they can put off.
Households kept spending, but rising fuel prices, firmer inflation and lasting tariff costs made them choosier about where their money went. Essentials held their ground, while restaurants and apparel fell to the lows of their charts.
With deal activity also slowing, the question for the coming months is whether that caution deepens into the holiday season.
Sector Performance
Consumer sector performance diverged over the past year. Four of the seven sectors finished higher year over year, while most gave back ground in the quarter. Consumers kept spending, and real spending rose 0.6% in August.1 Confidence weakened, however. Consumer sentiment fell to 48.1 in September as year-ahead inflation expectations rose to 4.6%.2
Food Service reversed its second-quarter rebound, falling 14.0% quarter over quarter to finish at the bottom of its chart. Diners spent more carefully across the sector. In the National Restaurant Association's third-quarter survey, 39% of consumers said they spent less at restaurants than in the prior quarter.3 Another 40% reported relying more heavily on discounts, and engagement was lowest among lower-income households.3 Domino's said consumers "remain under pressure," even as its own orders grew.4
Consumer Durables & Apparel extended its decline, falling 18.3% in the quarter and 28.4% year over year. Tariffs continued to weigh on consumer goods companies. New Section 301 duties on imports from most U.S. trading partners replaced the expiring Section 122 tariffs on July 24.5 Demand also appeared to weaken. Lululemon expects full-year revenue to decline after Americas comparable sales fell 12% in its latest quarter.6 Leggett & Platt, a maker of bedding and furniture components, said bedding demand remained challenged by sluggish consumer activity.7
Household & Personal Products held up best over the year. Its index slipped 1.6% in the quarter but was up 12.1% year over year. Among its companies, P&G reported in October that organic volume rose 2.4% in its July to September quarter.8
Valuations followed the same split. Consumer Durables & Apparel had the industry's lowest multiple at 7.7x, down from 11.1x a year ago. Food Service's EV/EBITDA multiple fell to 13.5x, its lowest level in the period shown, reflecting a decline in valuation relative to earnings. Household & Personal Products' multiple edged higher, suggesting investors maintained their valuations relative to earnings. Automobile remains the highest at 21.9x.
Middle-Market M&A Perspective
The Dinan Consumer Index† declined 3.0% quarter over quarter and was unchanged year over year. Measured over the same quarter, it fell less than five of the seven Consumer segment indices.
The index's EV/EBITDA multiple eased to 15.5x from 16.0x, still above five of the seven segment multiples. The S&P 500 multiple stood at 18.1x. For owners of middle-market consumer businesses, the Dinan Consumer Index suggests relative stability in public-market valuations, even as several broader consumer sectors experienced sharper stock-price declines.
M&A Activity & Transaction Environment
Consumer M&A volume fell to 237 transactions in Q3 2026, down from 317 in the prior quarter and 376 a year earlier. It is the lowest quarter on the chart, which begins in 2023.
The quarter's larger deals show buyers deepening their position in categories they already know, while large owners sold brands outside their focus. Somnigroup, the parent of Tempur Sealy and Mattress Firm, agreed to acquire Leggett & Platt, a longtime supplier. Somnigroup tied the deal to its vertical integration strategy.9
Henkel, a German consumer brands and adhesives company, acquired Olaplex, a premium hair care brand. Henkel said the deal makes hair care a larger core category for its consumer business.10 On the selling side, Yum! Brands sold Pizza Hut's business outside China to LongRange Capital, a private investment firm. Yum began that review because of the chain's continued U.S. sales and market share declines.11
Outlook & What to Watch
The Federal Reserve raised rates in September for the first time since 2023, and most officials expected another increase this year.12 Higher borrowing costs, fuel prices and tariffs will test whether spending holds through the holidays. This quarter's deals show that buyers are still committing capital to brands in categories they know well.
† The Dinan Consumer Index is a proprietary index of publicly traded middle-market Consumer companies maintained by Dinan Capital Advisors. Index composition is available upon request.
References
1 U.S. Bureau of Economic Analysis. "Personal Income and Outlays, August 2026." September 30, 2026. https://www.bea.gov/news/2026/personal-income-and-outlays-august-2026
2 Trading Economics. "US Consumer Sentiment at a Four-Month Low in September" (University of Michigan Surveys of Consumers). September 25, 2026. https://tradingeconomics.com/united-states/consumer-confidence/news/586955
3 National Restaurant Association. "Affordability Pressures Mount, but Consumers Continue to Prioritize Restaurants." September 17, 2026. https://www.restaurant.org/research-and-media/research/restaurant-economic-insights/analysis-commentary/affordability-pressures-mount,-but-consumers-continue-to-prioritize-restaurants
4 Investing.com. "Earnings call transcript: Domino's tops Q3 2026 estimates but shares fall." October 13, 2026. https://www.investing.com/news/transcripts/earnings-call-transcript-dominos-tops-q3-2026-estimates-but-shares-fall-93CH-4946954
5 EY Tax News. "USTR takes final action imposing tariffs on 60 trading partners as Section 122 tariffs expire." July 24, 2026. https://taxnews.ey.com/news/2026-1603-ustr-takes-final-action-imposing-tariffs-on-60-trading-partners-as-section-122-tariffs-expire
6 lululemon athletica inc. "lululemon athletica inc. Announces Second Quarter Fiscal 2026 Results" (Form 8-K, Exhibit 99.1). September 3, 2026. https://www.sec.gov/Archives/edgar/data/0001397187/000139718726000126/lulu-20260802xex991.htm
7 Big Furniture Group. "Somnigroup and Leggett & Platt both see Q2 sales decline." August 7, 2026. https://bigfurnituregroup.com/somnigroup-and-leggett-platt-both-see-q2-sales-decline/
8 The Procter & Gamble Company. "P&G Announces Fiscal Year 2027 First Quarter Results" (Form 8-K, Exhibit 99.1). October 22, 2026. https://www.sec.gov/Archives/edgar/data/0000080424/000008042426000250/fy2627q1jas8-kexhibit991.htm
9 Furniture News. "Somnigroup confirms Leggett & Platt acquisition." April 13, 2026. https://furniturenews.net/news/somnigroup-confirms-leggett-platt-acquisition
10 Henkel. "Henkel to acquire premium hair care brand OLAPLEX." March 26, 2026. https://www.henkel-northamerica.com/press/press-releases-and-kits/2026-03-26-henkel-to-acquire-premium-hair-care-brand-olaplex-2136290
11 Nation's Restaurant News. "Pizza Hut to be sold to LongRange Capital." June 16, 2026. https://www.nrn.com/quick-service/pizza-hut-sold-to-longrange-capital
12 Trading Economics. "Fed Raises Rates for 1st Time Since 2023." September 16, 2026. https://tradingeconomics.com/united-states/interest-rate/news/584300
