WEBVTT - P&L: The Restaurant Industry Is in a Perfect Storm of Problems 0:00:04.760 --> 0:00:07.720 Welcome to the Bloomberg P and L Podcast. I'm Pim 0:00:07.800 --> 0:00:11.080 Fox along with my co host Lisa Abramowitz. Each day 0:00:11.119 --> 0:00:14.360 we bring you the most important, noteworthy, and useful interviews 0:00:14.400 --> 0:00:16.560 for you and your money, whether at the grocery store 0:00:16.800 --> 0:00:19.960 or the trading floor. Find the Bloomberg P L Podcast 0:00:20.000 --> 0:00:29.560 on iTunes, SoundCloud and at Bloomberg dot com. I want 0:00:29.600 --> 0:00:32.720 to take a deeper look at what the potential on 0:00:33.000 --> 0:00:38.080 the ground implications are regardless of who wins this election. 0:00:38.120 --> 0:00:40.560 It is my honor to bring in Jonathan Seagal, founder 0:00:40.560 --> 0:00:44.199 and CEO of the One Groom and St. K restaurants. Um, 0:00:44.200 --> 0:00:46.880 this is you can find them uh in the meatpacking 0:00:47.000 --> 0:00:50.839 district and uh, you know, across the country. Uh. Jonathan, 0:00:50.880 --> 0:00:55.240 are you expecting to see any kind of meaningful change 0:00:55.480 --> 0:00:58.840 either in your customers or the amount of money people 0:00:58.840 --> 0:01:02.440 are willing to spend um in your restaurants or other Well, 0:01:02.720 --> 0:01:04.880 good morning to you, good money. I certainly think there's 0:01:04.920 --> 0:01:09.000 been a change up until now with the election, people 0:01:09.040 --> 0:01:10.840 tend to be a little bit more cautious about going 0:01:10.880 --> 0:01:14.000 out and spending money, and I think, I think, to 0:01:14.000 --> 0:01:15.880 be honest, people are going to wait and see what happens. 0:01:16.760 --> 0:01:18.080 Can you back up because a lot of people have 0:01:18.120 --> 0:01:20.120 said this, A lot of companies have said that people 0:01:20.120 --> 0:01:22.840 have been more cautious. Really, people don't go out to 0:01:22.880 --> 0:01:25.600 eat because of the election. I think people it becomes 0:01:25.760 --> 0:01:28.280 it becomes a mainstream event that people are focused on 0:01:28.280 --> 0:01:31.240 amongst themselves, and they tend to become more isolated, and 0:01:31.240 --> 0:01:33.880 they're more focused on what's going on. And whenever any 0:01:33.959 --> 0:01:37.760 major event happens, whether it's a sport event and the Olympics, 0:01:38.000 --> 0:01:43.560 World Series, anything that's major that really embraces the a 0:01:43.600 --> 0:01:46.320 great many people, it has an impact on people's expenditure 0:01:46.440 --> 0:01:49.200 because they also become aware of the implications of the results. 0:01:49.640 --> 0:01:52.640 And that's also part of what affects their decision to 0:01:52.680 --> 0:01:55.120 spend money. Do they think the economy is going to boom, 0:01:55.160 --> 0:01:56.560 they think it's not going to boom. Do they need 0:01:56.600 --> 0:01:59.000 to save more money? Is look what's happened this morning. 0:01:59.160 --> 0:02:01.480 Obviously the small in the market things that Clinton is 0:02:01.520 --> 0:02:03.520 gonna win, and and the markets up two hundred fifty 0:02:03.520 --> 0:02:07.760 seven points. So there's absolutely a correlation between economics and 0:02:07.840 --> 0:02:12.800 spenditure and investment and and and obviously uh election results. 0:02:13.200 --> 0:02:15.120 You know, I can tell by your accent that you 0:02:15.240 --> 0:02:18.720 come from the heartland of America in the center. How 0:02:18.840 --> 0:02:21.240 how did you did you call the brexit? I mean, 0:02:21.760 --> 0:02:25.000 you know, so I have connected the completely got the 0:02:25.040 --> 0:02:29.359 Brexit wrong. I thought that we would stay um And 0:02:29.400 --> 0:02:32.440 what is unbelievably interesting now that seems to have been 0:02:32.480 --> 0:02:36.000 washed over is what occurred last Friday in London where 0:02:36.040 --> 0:02:39.200 the part of the High Court ruled that there has 0:02:39.280 --> 0:02:42.160 to be an Act of Parliament in order to exit 0:02:42.240 --> 0:02:45.480 to enforce Article forty. You think that we washed over 0:02:45.520 --> 0:02:51.680 that were bloomberg. So this is an unbelievable constitutional will 0:02:51.720 --> 0:02:53.960 that affect your business? With that affect you because I know, 0:02:54.080 --> 0:02:56.799 for example, you've got projects in the lands. You've got 0:02:56.880 --> 0:03:00.520 business in London, Toronto, or land on Miami, Chica. I mean, 0:03:00.560 --> 0:03:02.760 I want you to tell people about some of these places. 0:03:02.760 --> 0:03:04.359 So let's just talk about that for a minute, because 0:03:04.360 --> 0:03:06.320 this is a great question in the Again, in the 0:03:06.440 --> 0:03:10.480 lead up to the Brexit, our business was impacted. Following 0:03:10.480 --> 0:03:13.799 the Brexit, our business returned to where it was. It's 0:03:14.000 --> 0:03:18.440 uncertainty that creates cautiousness. Once that uncertainty has gone, it 0:03:18.480 --> 0:03:20.680 doesn't necessarily have to gone the way you wanted it. 0:03:20.760 --> 0:03:24.120 To go. But once that uncertainty has past us, people 0:03:24.160 --> 0:03:25.920 become a little bit more relaxed. If you look at 0:03:25.919 --> 0:03:29.440 our businesses, particularly in the United Kingdom where we operate 0:03:29.520 --> 0:03:33.400 seven facilities, seven venues in two facilities. In the lead 0:03:33.480 --> 0:03:36.600 up to Brexit, we were impacted and post Brexit business 0:03:36.680 --> 0:03:38.440 to kind of return and in fact is up and 0:03:38.520 --> 0:03:41.080 where it was at this time last year. Restaurant, we 0:03:41.160 --> 0:03:45.160 just gotta make sure food restaurant hospitality, right, I just 0:03:45.200 --> 0:03:48.440 giving example some people understand. So so we have a 0:03:48.520 --> 0:03:51.120 number of venues in England we operate as part of 0:03:51.120 --> 0:03:53.480 our business we go into hotels and run their entire 0:03:53.520 --> 0:03:55.800 food and beverage. So we do that in the Mere 0:03:55.880 --> 0:03:58.600 Hotel in London. We also have an STK restaurant. We 0:03:58.640 --> 0:04:00.960 also have a rooftop bar, and then we have a 0:04:01.000 --> 0:04:04.520 facility in the Hippodrome casino. So really in our London 0:04:05.160 --> 0:04:07.720 is a snapshot of what we do globally as a company. 0:04:07.840 --> 0:04:10.160 And it's also training across the board of people that 0:04:10.200 --> 0:04:13.520 are at all different levels of disposable income. We're sitting 0:04:13.560 --> 0:04:15.360 with someone who lives much better than I do. I 0:04:15.440 --> 0:04:18.440 am sure with all of the food and the entertainment 0:04:18.520 --> 0:04:21.760 and the beautiful hotels that you can go visit. One 0:04:21.800 --> 0:04:27.279 thing I am wondering once the uncertainty settles, there are 0:04:27.360 --> 0:04:30.640 some policies that could make a big difference. Another word 0:04:30.640 --> 0:04:33.720 for one, in particular minimum wage. Do you think that 0:04:33.800 --> 0:04:36.960 if a minimum wage was lifted in the US that 0:04:37.000 --> 0:04:39.320 would affect your business at all? So it definitely affects 0:04:39.320 --> 0:04:41.600 our business, and and part of the problem that's driving 0:04:42.120 --> 0:04:46.280 this minimum wage issue is a very complex arena. Part 0:04:46.360 --> 0:04:48.920 of the problem. For first, you have to split out 0:04:48.920 --> 0:04:52.000 the beneficiaries of it. People that earn money in fast 0:04:52.000 --> 0:04:55.400 casual or in fast food restaurants are not benefits of 0:04:55.720 --> 0:04:58.479 the tip structure, so minimum wage is a really important 0:04:58.520 --> 0:05:01.720 asset for them. The people that work in in casual 0:05:01.800 --> 0:05:04.480 or in fine dining our benefit from the tip structure. 0:05:05.000 --> 0:05:09.880 So you have situations where as you systematically increase minimum wage, 0:05:10.600 --> 0:05:13.200 you're still you're paying your waste weight staff more. And 0:05:13.200 --> 0:05:16.440 whilst tipping still exists, they're still going to twenty percent tipping. 0:05:16.480 --> 0:05:19.320 Do you think that the tipping structure should go away? Well, 0:05:19.360 --> 0:05:21.800 tipping needs to change. One of the ways. It either 0:05:21.920 --> 0:05:24.600 needs to change or the laws that impact it need 0:05:24.680 --> 0:05:26.920 to change. The biggest problem with the tipping sits and 0:05:26.960 --> 0:05:29.800 which is I don't understand why the authorities haven't really 0:05:29.839 --> 0:05:32.320 worked out because it doesn't take a brain surgeon to 0:05:32.360 --> 0:05:35.440 work it out. The rules require that the only people 0:05:35.480 --> 0:05:37.040 that can benefit from the tips and the people that 0:05:37.160 --> 0:05:41.839 actually touched the consumer, So the the the servers, the 0:05:41.880 --> 0:05:44.120 bar staff, et cetera. But if you work in the kitchen, 0:05:44.520 --> 0:05:46.040 or if you work in the back of house, or 0:05:46.080 --> 0:05:48.080 if you work at any other areas where you don't 0:05:48.120 --> 0:05:50.360 impact the guest, you don't actually get to share in 0:05:50.360 --> 0:05:52.600 the tip pole. Now, the truth is you can't sit 0:05:52.600 --> 0:05:54.040 and arrest on and have a meal and this there's 0:05:54.040 --> 0:05:56.600 a kitchen cook in it. But because we can't share 0:05:56.640 --> 0:05:59.960 the tips round amongst everybody, you have this terrible imbalance. 0:06:00.320 --> 0:06:02.839 So certainly at the fine dining and the casual dining 0:06:02.880 --> 0:06:05.640 in arena, one of the areas to fix the the 0:06:05.839 --> 0:06:08.200 split or the or the differential between the back of 0:06:08.200 --> 0:06:11.159 house and front house is just enable everybody down for 0:06:11.279 --> 0:06:13.839 managers to share in the tip pole. That one little 0:06:13.920 --> 0:06:17.840 fix will change that whole category of income, and then 0:06:17.880 --> 0:06:20.280 you can really start to focus on people that are 0:06:20.279 --> 0:06:22.240 not necessarily in a tip pool in the in the 0:06:22.279 --> 0:06:25.479 in the fast food restaurant, where obviously people are entitled 0:06:25.520 --> 0:06:29.080 and should should earn a living wage. The cost of 0:06:29.120 --> 0:06:31.880 doing business. Maybe speak a little bit about that, whether 0:06:31.920 --> 0:06:34.320 it's the input costs, or the real estate costs, or 0:06:34.400 --> 0:06:36.920 just the cost and the risk of going bus Because 0:06:36.920 --> 0:06:39.800 the restaurant industry, as I heard, well not a short thing. No, no, 0:06:39.920 --> 0:06:42.600 Well listen, the restaurant industries in recession at the moment. 0:06:42.600 --> 0:06:45.039 There's no question of doubt about that. And it's it's 0:06:45.080 --> 0:06:47.680 based on all that. It's we're in the perfect storm. 0:06:47.760 --> 0:06:50.159 We have rising rents. You know, every year our rent 0:06:50.160 --> 0:06:52.520 to go up three five, the landlords do not put 0:06:52.560 --> 0:06:55.600 them up. We have increased food costs and we now 0:06:55.640 --> 0:07:00.360 have increased labor costs. We have uncertainty, we have increased petition, 0:07:00.400 --> 0:07:03.520 We have competition from disruptors. You know, you have situations 0:07:03.520 --> 0:07:05.960 with the seamless and the internet food delivery service that 0:07:06.040 --> 0:07:08.440 impact what's going on in the actual restaurant. Sure that 0:07:08.520 --> 0:07:10.480 those that will argue to say, well, you're still getting 0:07:10.560 --> 0:07:13.000 you're selling a meal if you sell it through seamless, 0:07:13.040 --> 0:07:15.000 if you sell it in store. But the truth is 0:07:15.040 --> 0:07:17.240 you're not getting the liquor sales that help to add 0:07:17.280 --> 0:07:19.800 to the profitability of the company, of the of the business, 0:07:20.040 --> 0:07:22.239 and therefore, as a result, we're in a perfect storm, 0:07:22.320 --> 0:07:25.200 in a perfect storm of problems. And the and the 0:07:25.200 --> 0:07:27.200 authorities need to wake up to this because if you 0:07:27.240 --> 0:07:32.560 start to to marginalize the restaurant industry that has overwhelming 0:07:32.560 --> 0:07:37.000 imployments are mostly self inflicted. Yes and no, the rents 0:07:37.040 --> 0:07:40.840 certainly are not. Food costs are certainly not. Um I 0:07:40.840 --> 0:07:43.560 think you know, the let the register, the the legislation 0:07:43.600 --> 0:07:45.960 that we work under, and the and all the enforcement 0:07:46.000 --> 0:07:48.160 rules are crazy. I mean, if you're sitting and understand, 0:07:48.320 --> 0:07:50.440 here's a crazy enforcement law. How about this, It's going 0:07:50.480 --> 0:07:52.600 to give you a five seconds. Okay, if you don't 0:07:52.640 --> 0:07:54.960 see your patios the way they're supposed to be seen, 0:07:55.000 --> 0:07:57.559 but move them to put two fours together, you're breaking 0:07:57.560 --> 0:08:00.840 the law. Charlathan Siegal, thank you very much, Founder, chief 0:08:00.880 --> 0:08:04.120 executive the One Group and S t K Restaurants. This 0:08:04.240 --> 0:08:19.840 is Bloomberg, all right. Thirteen hours, seven minutes and fifty 0:08:19.960 --> 0:08:25.360 six seconds until the first poles open in the clearly 0:08:25.840 --> 0:08:30.000 three towns in New Hampshire are set to vote at midnight. 0:08:30.840 --> 0:08:33.240 So Lisa Brahmins, I think he'll be staying up quite 0:08:33.320 --> 0:08:36.320 a late night, and I think that Mark Niquett also 0:08:36.440 --> 0:08:38.720 better it gets some sleep in the afternoon because he'll 0:08:38.760 --> 0:08:41.959 be spending the night watching. He's our politics and national 0:08:42.040 --> 0:08:45.440 government reporter. Normally he joins us from Columbus, Ohio, but 0:08:45.440 --> 0:08:47.959 he joins us here in our studios in our global 0:08:48.000 --> 0:08:50.360 headquarters in New York. Thank you very much for being here. Mark. 0:08:51.120 --> 0:08:53.199 So what are we supposed to take What's going to 0:08:53.280 --> 0:08:55.920 happen in the next thirteen hours that is going to 0:08:56.080 --> 0:08:58.520 matter to the outcome of the election. Well, we're gonna 0:08:58.520 --> 0:09:00.880 see sort of the final push by the campaigns. We 0:09:00.960 --> 0:09:03.920 have Hillary Clinton with rallies all the way up to midnight, 0:09:04.480 --> 0:09:08.760 her last rallies in Raleigh, North Carolina at midnight. Donald 0:09:08.760 --> 0:09:10.280 Trump will be doing the same and this is sort 0:09:10.280 --> 0:09:13.400 of the last push to get you know, the final late, late, 0:09:13.480 --> 0:09:15.640 late deciders, the people who are actually going to the 0:09:15.640 --> 0:09:18.880 polls tomorrow who haven't already early voted, you know, maybe 0:09:18.920 --> 0:09:21.439 sway just the last few folks that could make a 0:09:21.480 --> 0:09:23.600 difference in some of these key battleground states that could 0:09:23.600 --> 0:09:27.080 decide the election. So you wrote a story basically saying 0:09:27.200 --> 0:09:31.120 that even though James Comey, the FBI director, came out 0:09:31.280 --> 0:09:35.200 and said that he wasn't going to charge any charge 0:09:35.280 --> 0:09:38.560 Hillary Clinton with any crime and that the new review 0:09:38.600 --> 0:09:42.040 of emails did not change the FBI's deliberations. This clears 0:09:42.080 --> 0:09:44.600 the cloud. But you're saying the damage is done. Yeah, 0:09:44.600 --> 0:09:46.840 on a couple of levels. I mean, one, you've had 0:09:46.960 --> 0:09:50.200 millions of people casting early votes at a time this 0:09:50.240 --> 0:09:51.960 cloud was sort of hanging over her head, and to 0:09:52.000 --> 0:09:54.960 the extent that it affected votes, you know, there's no 0:09:55.000 --> 0:09:57.480 way to change those, of course, but I think fundamentally 0:09:57.600 --> 0:09:59.920 it really did change that, you know, the trajectory of 0:09:59.920 --> 0:10:02.959 the race. You know, think about before the first um 0:10:03.120 --> 0:10:06.719 FBI letter came out from Director came Um, I was 0:10:06.760 --> 0:10:09.959 actually was aboard the Clinton campaign plane, you know, when 0:10:10.000 --> 0:10:11.840 that news broke. We were in mid air and they 0:10:11.840 --> 0:10:14.080 were doing a press conference on the plane talking about 0:10:14.080 --> 0:10:17.319 how we can't be complacent, you know, complacencies our enemy. 0:10:17.360 --> 0:10:19.240 Because the polls at that time looked like she was 0:10:19.480 --> 0:10:22.280 headed toward victory and maybe a decisive victory, and that 0:10:22.400 --> 0:10:24.600 you know, letters just sort of reset the race where 0:10:24.600 --> 0:10:27.760 it reinforced you know, questions that people might have had 0:10:27.800 --> 0:10:31.120 about her use of emails. It gave Donald Trump, you know, 0:10:31.200 --> 0:10:34.600 something to to talk about on his campaign rallies. And 0:10:34.600 --> 0:10:37.320 it also you know, what we're seeing is maybe affected 0:10:37.960 --> 0:10:42.720 independence or you know, even Republican leaning independence or um 0:10:42.720 --> 0:10:45.600 suburban women who you know, maybe weren't enamored of Trump, 0:10:45.679 --> 0:10:48.040 but we're you know, unsure about Hillary Clinton, and this 0:10:48.160 --> 0:10:50.360 sort of made them pause about supporting her. So it 0:10:50.400 --> 0:10:52.480 made the race tighten, no question. But why wouldn't they 0:10:52.480 --> 0:10:54.079 reverse that. I mean, if it had such a big 0:10:54.080 --> 0:10:56.559 effect in the other way, why wouldn't people say, all right, this, 0:10:56.640 --> 0:10:58.680 there's nothing to see here. Well, I think the people 0:10:58.679 --> 0:11:00.480 were talking to say it will have some of that 0:11:00.520 --> 0:11:03.520 effect that Again, these are late, late deciders, you know, 0:11:03.559 --> 0:11:06.000 who may have had concerns about Clinton. Maybe this removes 0:11:06.000 --> 0:11:07.760 that cloud and they go ahead and vote for her. 0:11:07.920 --> 0:11:09.840 But I think the feeling was the race was already 0:11:09.880 --> 0:11:12.640 tightening with Republicans coming home is what they say. You know, 0:11:12.679 --> 0:11:14.920 if you're a Republican and maybe you're not sure about 0:11:15.000 --> 0:11:16.880 Donald Trump, but you're not sure about her either, you 0:11:16.920 --> 0:11:20.000 still vote Republican. So this could help on the margins 0:11:20.080 --> 0:11:22.920 with you know, a really really close race, but you know, 0:11:22.960 --> 0:11:24.800 the feeling is a lot of it's already baked in. 0:11:24.840 --> 0:11:27.480 If you cared about this issue or didn't care about 0:11:27.480 --> 0:11:29.800 this issue, you know this isn't gonna change your opinion. 0:11:30.360 --> 0:11:35.160 Mark Niquette, the use of polling data and projections. Uh. 0:11:35.360 --> 0:11:39.520 Major news organizations do not call elections until after the 0:11:39.600 --> 0:11:44.920 polls have closed, but using projections during the election day 0:11:45.120 --> 0:11:47.959 is something that apparently is gonna gonna happen. There's a 0:11:48.280 --> 0:11:51.560 something called vote Caster, and they're going to team up 0:11:51.559 --> 0:11:54.480 with Slate and Vice, I believe, and they're gonna be 0:11:54.600 --> 0:11:59.200 giving information out about the polling while the election is 0:11:59.240 --> 0:12:03.760 still taking place. Right, And traditionally we've also had exit polling. 0:12:03.800 --> 0:12:06.120 This is somewhat similar to that, where you know, they 0:12:06.160 --> 0:12:08.920 take a slice of the electorate coming off the you know, 0:12:09.040 --> 0:12:11.360 from from voting and get a sense of, wow, the 0:12:11.400 --> 0:12:13.679 vote's going to break down. Uh. And it is always 0:12:13.720 --> 0:12:15.880 a little bit you know, dicey, from the standpoint of 0:12:15.920 --> 0:12:18.120 people are still voting, and like you say, there's sort 0:12:18.120 --> 0:12:20.600 of a tradition it might discourage people. It might discourage 0:12:20.640 --> 0:12:22.679 people from actually going to the polls if they think 0:12:22.720 --> 0:12:26.360 that their vote doesn't matter because of these early estimates. 0:12:26.360 --> 0:12:28.120 For example, Right, and you've got people on the West 0:12:28.160 --> 0:12:30.480 Coast voting after you know the race has been called 0:12:30.600 --> 0:12:32.840 or some states have already come in, And you know 0:12:32.880 --> 0:12:35.360 that that's always been a sort of attention in terms of, 0:12:35.520 --> 0:12:37.800 you know, we want to get the information as quickly 0:12:37.800 --> 0:12:39.079 as we can, and we want to see what the 0:12:39.120 --> 0:12:42.400 trends are. But you know, ultimately all that matters is 0:12:42.440 --> 0:12:45.080 what's the final vote count when you know when all 0:12:45.080 --> 0:12:47.080 the ballots are counted. So since I want to get 0:12:47.240 --> 0:12:49.480 a sense of who's winning and I wanted the information, Now, 0:12:49.760 --> 0:12:52.960 what are the early polls saying, Well, the polls suggests 0:12:53.000 --> 0:12:55.960 that the race has stabilized, that you know, Hillary Clinton 0:12:56.080 --> 0:12:59.560 still has a structural advantage. What about the actual early voting, Well, 0:12:59.559 --> 0:13:01.520 the early vot voting. Again, I think the the early 0:13:01.640 --> 0:13:04.520 voting suggests that you know, Clinton had an advantage there, 0:13:04.520 --> 0:13:05.959 but she had to have an advantage, I mean the 0:13:06.000 --> 0:13:09.400 way that traditionally works, as Republicans are better at election 0:13:09.480 --> 0:13:12.679 day turnout. You know, even if you know Republican like 0:13:12.720 --> 0:13:16.080 Mitt Romney and twelve loses the election, he'll often win 0:13:16.160 --> 0:13:17.920 in terms of the vote that actually comes out on 0:13:17.960 --> 0:13:20.679 election day. So the idea for Democrats has been and 0:13:20.920 --> 0:13:23.719 certainly the last three cycles. Bank your votes early, get 0:13:23.720 --> 0:13:26.120 your supporters to cast their ballots early, and sort of 0:13:26.120 --> 0:13:29.439 build up a lead that can't be overcome on election day. 0:13:29.440 --> 0:13:31.440 And that's what you're seeing in states like Nevada, where 0:13:31.559 --> 0:13:34.920 the Clinton campaign, for example, estimates Donald Trump would have 0:13:34.920 --> 0:13:38.400 to get ten percent of all of the ten percentage 0:13:38.400 --> 0:13:40.640 points of all the election day votes to overcome the 0:13:40.720 --> 0:13:44.200 lead that Clinton has built with early voting. Mark Niquette, 0:13:44.360 --> 0:13:47.600 thank you so much for joining. I just ask, where's Hill? 0:13:47.640 --> 0:13:50.280 Where's Hillary Clinton going to vote? Yeah, that's a good question. 0:13:50.320 --> 0:13:53.680 I haven't seen any announcement. I'm assuming it's New York, 0:13:53.760 --> 0:13:58.280 but also Donald Trump obviously New Yorkers. Mark Niquette, Limberg 0:13:58.320 --> 0:14:00.560 Politics reporter, thank you so much for joining us. Market 0:14:00.559 --> 0:14:03.320 cat has a full party ready to go just to 0:14:03.360 --> 0:14:06.000 celebrate the end of the election season. He cannot wait. 0:14:06.040 --> 0:14:08.960 An Lisa bram Waits. I am here with Tim Fox. 0:14:09.080 --> 0:14:24.400 This is Bloomberg. You know who we call on when 0:14:24.400 --> 0:14:26.880 we want to know everything about the retail industry, our 0:14:26.960 --> 0:14:31.720 own pun. I'm Goyal, senior US retail analyst for Bloomberg Intelligence. 0:14:32.080 --> 0:14:34.600 Great to have you with us. Tell us about the 0:14:34.640 --> 0:14:40.040 big department stores and they're upcoming all important holiday selling season. 0:14:40.640 --> 0:14:43.360 So the department stores have been struggling, as you know, 0:14:43.400 --> 0:14:45.200 at least to most of them, are many of them, 0:14:45.280 --> 0:14:47.240 and I don't think there will be any different this 0:14:47.320 --> 0:14:50.840 holiday season. Um. They're all slated to report earnings this week, 0:14:50.960 --> 0:14:55.440 beginning Thursday with Macy's North German Cold and then UM 0:14:55.560 --> 0:14:58.640 we have DC Penny reporting on Friday. Now, what I 0:14:58.640 --> 0:15:02.400 can tell you here is that sales likely suffered for 0:15:02.480 --> 0:15:05.120 many of them UM in third quarter, and that's not 0:15:05.240 --> 0:15:08.360 a good sign heading into holidays because it shows the 0:15:08.440 --> 0:15:12.720 lack of customer interest in big box retailing and the 0:15:12.800 --> 0:15:15.920 lack of desire to go to a mall. That said, 0:15:16.200 --> 0:15:19.720 we think margins will likely hold up better because they 0:15:19.760 --> 0:15:22.680 are managing their inventory well, and from what I can 0:15:22.720 --> 0:15:27.200 see in the space, the promotional cadence has somewhat moderated. 0:15:27.440 --> 0:15:30.200 Now that doesn't mean that there aren't any more promotions, 0:15:30.440 --> 0:15:34.040 but they're being very strategic with them and they're more planned. Held. 0:15:34.080 --> 0:15:36.240 One second, when you say that you're talking about how 0:15:36.320 --> 0:15:39.920 much discounts they're giving. That is right. So you know, 0:15:40.000 --> 0:15:43.840 typically you've seen sixty seventy percent clearance racks and many 0:15:43.880 --> 0:15:47.400 of these retailers, and that's largely because of lots of 0:15:47.440 --> 0:15:51.400 inventory left over. So they're watching their inventory, they're keeping 0:15:51.440 --> 0:15:53.880 an eye on how much they're selling, and they're cutting 0:15:53.880 --> 0:15:56.440 back orders just to make sure that they don't get 0:15:56.440 --> 0:15:59.160 into that position they did last year where they had 0:15:59.200 --> 0:16:02.320 way too much, couldn't sell it and had to discount 0:16:02.320 --> 0:16:06.000 it aggressively to make room for new merchandise. Right. Well, 0:16:06.080 --> 0:16:08.640 these are not all the same either. I mean, Nordstrom 0:16:08.720 --> 0:16:12.080 usually caters to a higher end UH clients help were 0:16:12.240 --> 0:16:15.400 whereas Coals is more um of sort of middle or 0:16:15.520 --> 0:16:20.040 lower h tier of shoppers. Correct, I mean there's there 0:16:20.080 --> 0:16:22.120 there is a split here. So which do you which 0:16:22.120 --> 0:16:24.520 do you expect to do better? So for a third quarter, 0:16:24.560 --> 0:16:27.040 I think nord Storm will do, but better only because 0:16:27.080 --> 0:16:29.800 they have that one week of their anniversary sale moving 0:16:29.840 --> 0:16:32.440 into the third quarter, and even in general. You know, 0:16:32.560 --> 0:16:35.680 the problem that Nordstrom has right now is tourism and 0:16:35.760 --> 0:16:39.120 just that the luxury consumer that's coming from abroad isn't 0:16:39.200 --> 0:16:42.320 hitting those key tourist areas, whether it's Miami, New York City, 0:16:42.720 --> 0:16:46.520 Los Angeles, or so forth. If that starts to come back, 0:16:46.600 --> 0:16:48.480 I think they'll do better. But when you look at 0:16:48.480 --> 0:16:50.920 the Macy's, the Colds, the Dillards, the more mid tier 0:16:51.080 --> 0:16:54.200 retailers that are essentially overstored. I mean I feel like 0:16:54.200 --> 0:16:57.240 a Macy's they have a hundred stores. Coals has over 0:16:57.280 --> 0:17:01.480 a thousand. Too many stores. Uh, no real place of 0:17:01.640 --> 0:17:05.040 why I should come here. I mean, there's little differentiation, 0:17:05.640 --> 0:17:10.720 so consumers are just opting to go elsewhere. T j X, 0:17:10.800 --> 0:17:17.600 Ross Stores, Burlington's stores, these are the thrifty retailers. Fort 0:17:18.119 --> 0:17:22.280 off retail prices. Are they going to benefit Absolutely, They've 0:17:22.320 --> 0:17:25.040 been benefiting for the last at say seven eight years, 0:17:25.040 --> 0:17:27.359 and they continue to do so. And it's not so 0:17:27.440 --> 0:17:30.119 much about the discount Well, the discounts great, it's not 0:17:30.200 --> 0:17:32.760 when you walk in there, you'll always find something new. 0:17:33.119 --> 0:17:36.920 So customers like that element of surprise when I walk in, 0:17:37.240 --> 0:17:39.120 I grab it. If I don't get it, it may 0:17:39.119 --> 0:17:42.320 not be here. And that's really what's been helping these retailers. 0:17:42.359 --> 0:17:45.280 These retailers don't have an online presence. T j X 0:17:45.280 --> 0:17:48.160 is very small, so all the business that they're doing 0:17:48.240 --> 0:17:50.920 is in the store and they're getting customers to come 0:17:50.960 --> 0:17:53.360 to that store. So we've heard a lot of excuses 0:17:53.520 --> 0:17:56.720 over the quarter as We've heard about whether that was 0:17:56.800 --> 0:17:58.800 too warm, We've heard about whether that was too cold. 0:17:59.040 --> 0:18:01.880 We've heard recently about the election and how that's crimping 0:18:01.920 --> 0:18:05.240 people's expenditures. What do you expect to be the excuse 0:18:05.320 --> 0:18:08.600 this time around and maybe whether again, um, you know, 0:18:08.720 --> 0:18:11.080 it's it's very important, as much as we'd like to 0:18:11.119 --> 0:18:14.000 call it an excuse, but apparel retailers needed to get 0:18:14.000 --> 0:18:17.040 cold and for key to self sweaters and cold weather accessories. 0:18:17.359 --> 0:18:20.760 So as of right now, temperatures are i'd say, you know, 0:18:21.080 --> 0:18:23.080 have so many degrees here last week, so they're not 0:18:23.320 --> 0:18:24.960 that cold where it would prompt you to get a 0:18:24.960 --> 0:18:27.840 coat or a sweater. But if they don't turn cold, 0:18:28.160 --> 0:18:30.560 we will have another excuse, and it will be whether 0:18:30.840 --> 0:18:33.399 if temperatures do cool, though, I think they'll all be 0:18:33.480 --> 0:18:36.400 positioned for a very good fourth quarter because last year 0:18:36.480 --> 0:18:40.760 November was just very bleak. I don't think that the 0:18:40.800 --> 0:18:44.199 weather really affects anything in the cosmetic industry, or am 0:18:44.200 --> 0:18:46.359 I wrong? Maybe I'm wrong there. You know that's the 0:18:46.359 --> 0:18:48.720 one industry that's on fire. Okay, I want you to 0:18:48.760 --> 0:18:50.560 tell me about Alta salon. I want you to tell 0:18:50.560 --> 0:18:53.439 me about the details because there are all new ways 0:18:53.520 --> 0:18:57.440 that cosmetics are now being introduced into the marketplace, whether 0:18:57.520 --> 0:19:00.119 it is dry bars, whether it is all kinds of 0:19:00.440 --> 0:19:04.159 services combined with products. So I don't cover cosmetics closely 0:19:04.200 --> 0:19:06.159 outside of Sapphora, which is in J. C. Penny, but 0:19:06.200 --> 0:19:08.400 I can tell you our hardlines there. Analyst that does 0:19:08.880 --> 0:19:11.480 UM had just mentioned in our holiday preview that Alta 0:19:11.560 --> 0:19:14.960 us on fire growing um double digits for the last 0:19:15.000 --> 0:19:17.560 few years and will continue to do so. And that's 0:19:17.680 --> 0:19:21.200 largely because it kind of fits back into the experience. 0:19:21.320 --> 0:19:23.399 And you know, you want to dress up because you 0:19:23.440 --> 0:19:25.800 want to go out, you want to have nice makeup, 0:19:25.840 --> 0:19:27.760 you want to have your hair done, and you want 0:19:27.760 --> 0:19:29.560 to have the right products to do so. So the 0:19:29.600 --> 0:19:32.879 whole shift that we're seeing from buying things to spending 0:19:32.880 --> 0:19:36.400 money on experiences beauty just sits right into that. Well. 0:19:36.400 --> 0:19:39.600 They talk about things like salon services including hair, brow 0:19:39.840 --> 0:19:44.080 and skin bars, as well as prestige boutiques, and also 0:19:44.160 --> 0:19:48.159 the point is made that their share of the wallet 0:19:48.200 --> 0:19:51.040 and the shopping frequency at an ALTA salon sets them 0:19:51.080 --> 0:19:55.359 apart from their rivals. Yeah, I mean, speaking to ALTA, 0:19:55.600 --> 0:19:57.399 I don't follow it. Once again, I was closely, but 0:19:57.480 --> 0:19:59.800 I can tell you that, you know, it's cheaper right 0:20:00.000 --> 0:20:01.680 to go there, So it kind of fits into the 0:20:01.720 --> 0:20:04.960 discount the value chain, and that's something that the customer 0:20:05.040 --> 0:20:07.760 is looking for right now. So the more expansion that 0:20:07.840 --> 0:20:09.520 they can have, or the more bread that they can 0:20:09.520 --> 0:20:12.480 have in the types of seauty services they offer should 0:20:12.520 --> 0:20:15.800 continue to help them. So what about currency? Does the dollar? 0:20:16.040 --> 0:20:18.359 Are we going to hear anything about the dollar strengthening 0:20:18.359 --> 0:20:20.480 and the potential for that, especially as the Federal reserve 0:20:20.600 --> 0:20:23.960 hikes or is that sort of over? It's not over, 0:20:24.040 --> 0:20:26.880 it's still there. But given that we've seen a lot 0:20:26.920 --> 0:20:29.080 of the surge already with the dollar strengthing in the 0:20:29.119 --> 0:20:32.199 past twelve d eighteen months, I think the pressure is 0:20:32.240 --> 0:20:35.520 somewhat abate heading into four Q and next year. That said, 0:20:35.560 --> 0:20:38.760