Speaker 1: Who you put your trust in matters. Investors have put
Speaker 1: their trust and independent registered investment advisors to the two
Speaker 1: and four trillion dollars. Why learn more and find your
Speaker 1: independent advisor dot com. Welcome to the Bloomberg Surveillance Podcast.
Speaker 1: I'm Tom Keene with David Gura. Daily we bring you
Speaker 1: insight from the best in economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, and
Speaker 1: of course on the Bloomberg Yeah, I'm Francine Lack. What
Speaker 1: in for David or Tom Keene? We're not sure. I'm
Speaker 1: with Michael McKee. Mike, we got to choose who we
Speaker 1: are today. Are you worried about I'm not, but in
Speaker 1: my mind I am everywhere I go to Keane is
Speaker 1: in my mind. Let's have a look at the markets.
Speaker 1: That's what it is, a little bit scary, It's a
Speaker 1: little bit freaky. This is what Tom would do. So
Speaker 1: he'd open it up and look at the dollar pairing
Speaker 1: some of the weekly advance that was spurred by the
Speaker 1: prospect of hire u S interest rates, gold also rebounding
Speaker 1: from a nine month Mike, I know you're watching, of course,
Speaker 1: Black Friday, and the shift for me is really incredibly
Speaker 1: Onto Mobile and the online retailers doing a lot better
Speaker 1: than they did in previous years. Right. Yeah, We've been
Speaker 1: watching live pictures of various retailers coming in because it's
Speaker 1: Black Friday, and you send your cameras out to do that,
Speaker 1: and stories don't look all that crowded. But um, why
Speaker 1: would you This one I don't understand is why you
Speaker 1: would go to a store when you can do the
Speaker 1: same thing and get the same bargains by sitting at
Speaker 1: home and not getting whacked in the head by somebody
Speaker 1: grabbing a TV set and swinging it around. Um, I
Speaker 1: don't get that. I did not realize that it could
Speaker 1: be that violent. Actually remember seeing in the past a
Speaker 1: lot of you know, when the stores open, people actually
Speaker 1: fighting for stuff. I'm a little bit more old school, Mike.
Speaker 1: I like going in shops because I get a feel
Speaker 1: for the things I want to buy, and then I
Speaker 1: can't deal with the hassle of returning them. Let's get
Speaker 1: to someone who knows a thing or two about retail.
Speaker 1: He is Howard Davidovits from Davidovitz Associates. He is chairman there.
Speaker 1: Howard Great to speak to you on this Black Friday.
Speaker 1: Black Friday a success, but are people really moving to
Speaker 1: online massively? Massively? There's a massive moved online. And the
Speaker 1: total picture is, uh, we're so overstowed. We have three
Speaker 1: times the amount of sales of square feet three times
Speaker 1: per person in the United States than any other country England, Japan,
Speaker 1: you mentioned in Canada. We're overstewed and the hottest area
Speaker 1: is online. Now you put those two things together and
Speaker 1: you're going to be in for a massive readjustment in
Speaker 1: retail space and shopping center space. And that's what's going
Speaker 1: on with major retailers across the board closing stores and
Speaker 1: downsizing stores, and that's what's going on. Yeah, but it
Speaker 1: is is anybody gonna can you still make money? Put
Speaker 1: it that way, if you're a retailer, are you gonna
Speaker 1: make money? Or are we gonna see people even if
Speaker 1: they're trying to move people online? A We're gonna see
Speaker 1: people going out of business. We're going to massively see
Speaker 1: people going out of business, as we've seen and as
Speaker 1: we will continue to see malls closing, stores closing, and
Speaker 1: folks going out of business. Departments, well, the largest department
Speaker 1: store in the United States. See here's they're in liquidation.
Speaker 1: What do you want them to do? Came out with
Speaker 1: the largest discounted They were ten times bigger than Walmart.
Speaker 1: They're liquid dating. I mean, if you go and you
Speaker 1: and the list goes on and on and on. If
Speaker 1: you're in the office supply business, you know, off the
Speaker 1: there's just so many people in trouble out there, and
Speaker 1: it's because we're overstowed and the growth areas online. That
Speaker 1: is a deadly combination. All right, But Howard, is this
Speaker 1: because of cheap money out there so we've kept, you know,
Speaker 1: zombie retailers alive. Or do we actually think that because
Speaker 1: Donald Trump is coming on January twenties and he wants
Speaker 1: to remove the US a little bit from globalization, that
Speaker 1: actually it's going to be so much more difficult for
Speaker 1: you guys to import cheap prices cheap clothing from the
Speaker 1: rest of the world, so they'll automatically have to go under.
Speaker 1: First of all, it says nothing to do with Donald
Speaker 1: Trump or anything else. This has been going on for
Speaker 1: some time. What happened is retail is over expanded, and
Speaker 1: one reason they did is with the craziness of Wall Street,
Speaker 1: where you have to show growth. What they don't like you,
Speaker 1: you got to show growth. So they all over expand
Speaker 1: that cheap money was a major part of it. When
Speaker 1: it comes to real estate and shopping centers, the time
Speaker 1: is coming. We're gonna have fifty billion dollars up for
Speaker 1: refinancing in the next eighteen months, and then forty billion
Speaker 1: more f that. At those c MBS loans. There is
Speaker 1: going to be trouble because the banks are going to
Speaker 1: be very tough and the lenders are on renewals and
Speaker 1: new and new structures. So and you're gonna have shopping
Speaker 1: center developers just hand the shopping center back to the banks.
Speaker 1: The loan is secured with the property, they're gonna say
Speaker 1: goodbye and good luck. You're gonna see this everywhere because
Speaker 1: this is what's going on. Well, it is the same
Speaker 1: thing happening with small businesses, the local retailers as you're
Speaker 1: talking about with the big guys with the Yeah, the
Speaker 1: local retailers, many of them are getting crushed. You know,
Speaker 1: when I started in this business, I traveled a gross
Speaker 1: America and I dealt with independent department stores in almost
Speaker 1: every state affirmed in either way. You know how many
Speaker 1: of them are left none. There are literally you can
Speaker 1: count them on one hand. You don't have any more
Speaker 1: independent department stores in America. Wherever I used to go,
Speaker 1: Think about New York, we had all we had Altmans,
Speaker 1: we had Gimbals, which we had six quarterbacks. We had
Speaker 1: six independent department stores. They're all gone Best and Cup
Speaker 1: they're all out. That's true in every single state. This
Speaker 1: is what's gone on already, and we're just beginning. The
Speaker 1: problem is going to get worse. We're overstored. This is
Speaker 1: the number one retail problem in the United States. Overstored,
Speaker 1: and the fastest growing area is online. How can you
Speaker 1: possibly put those things together? You got a mess, all right?
Speaker 1: But how I mean? This is true in the UK,
Speaker 1: This is true in a lot of our Western societies.
Speaker 1: That the big guys come over, they take office space,
Speaker 1: they can pay so much more than the independent retailer.
Speaker 1: Do you ever see independent retailers coming back? Independent retailers
Speaker 1: will always find the way to come back because there
Speaker 1: is genius and independent entrepreneurs, and I see it everywhere
Speaker 1: I can look. Take New York City. We used to
Speaker 1: have independent uh drug stores on every block with the
Speaker 1: name of the owner. Now or and none, because of
Speaker 1: course all either Walgreens or CBS are right. Eight owns
Speaker 1: everything right to know. Now what what I see now
Speaker 1: are guys opening up little stores without a pharmacist, selling
Speaker 1: health and beauty aids all over the place. And they
Speaker 1: look like they're very profitable. They're narrow spaces, very cheap.
Speaker 1: The owner is there with two employees and they look
Speaker 1: to me like they're really doing well and they're selling
Speaker 1: lots of cosmetics. They know exactly what they do. They're
Speaker 1: selling it for less entreprene door is always find a way,
Speaker 1: but it's harder and harder. Let's talk a little bit
Speaker 1: about a Black Friday itself. This used to be huge.
Speaker 1: A certain presidential candiate would say, uh, and now everybody
Speaker 1: serif why do I want to do that? Well, there
Speaker 1: are several reasons. Number one, Black Friday starts way earlier
Speaker 1: that and that is out of desperation on the part
Speaker 1: of retail is in a fight for market share and
Speaker 1: the mighty Amazon. They all started weeks ago with all
Speaker 1: of the sales for Black Friday, and I mean it's
Speaker 1: it's amazing Amazon Prime. So it started a long time ago.
Speaker 1: Now we have Cyber Monday, which takes up a lot
Speaker 1: of space, which is a huge day. We have Thanksgiving open.
Speaker 1: We got all of his stuff going on, and all
Speaker 1: of that takes away from Black Friday? So is Black
Speaker 1: Friday still are very important? That yes, doesn't have any
Speaker 1: we near the impact it used to have. No, and
Speaker 1: you said something like very important before that, I didn't
Speaker 1: miss you said there were there was a report from
Speaker 1: Target at Walmart on TVs. You know what that means?
Speaker 1: The best Buy is going to do great. That is
Speaker 1: the interpretation of what I heard from you. And best
Speaker 1: Buy has been rolling anyway, look for a very good
Speaker 1: performance from best Buy. Why do people buy TVs? Now?
Speaker 1: This can be the cheapest of the year. If if
Speaker 1: everybody knows you're gonna go buy a TV, I jack
Speaker 1: up the price. Nobody can jack up the price. It
Speaker 1: here's the reason this too much product in too many places.
Speaker 1: You that's what you can do. Nobody has pricing power
Speaker 1: unless your product is unique, no one. So if everybody
Speaker 1: is selling the same TV, that means the only difference
Speaker 1: is price. That drives the a price down. But Howard,
Speaker 1: this is a crazy business model. This won't work long term, right?
Speaker 1: Why I am saying there is gonna be Carne. Do
Speaker 1: you know how many electronics chains we used to have
Speaker 1: in America? You remember CompUSA? Remember Radio Shack? Remember Ultimate
Speaker 1: Electronics circuits? Do you remember all of them? By the way,
Speaker 1: they're all gone. They're all gone. Best Buy is almost
Speaker 1: the only one left standing out of the seventeen we had.
Speaker 1: Welcome to the Club. We are talking Black Friday and
Speaker 1: retail with Howard Davidovitz and Howard Dividov's is coming to us,
Speaker 1: as I understand it, live from Trump Tower, Howard, Absolutely,
Speaker 1: you live in the home of the President elect. Correct.
Speaker 1: What's it like to live in a tower that is
Speaker 1: basically a military outpost? Now it seems, well, I'm my
Speaker 1: reaction is there's no military I mean, I go in
Speaker 1: and that and I put my stuff through the machine.
Speaker 1: It takes one second and that's it. So I I
Speaker 1: don't see a lot I'm in any outpost. However, there
Speaker 1: are a lot of people in the building who do
Speaker 1: feel exactly as you just said, a military outpost. I
Speaker 1: think the NYPD has been absolutely sensational, and so is
Speaker 1: the Secret Service. Their total gentleman and general ladies and
Speaker 1: have been doing the job magnificently and really don't bother
Speaker 1: us very much at all. That's my personal reaction. However,
Speaker 1: if I was one of the stores like Gucci, Tiffany's, Nike,
Speaker 1: or one of those stores that that if you're a customer,
Speaker 1: a lot of customers are going to be turned off ongoing.
Speaker 1: And that's pretty heavy duty because ten percent of Tiffany's
Speaker 1: businesses in their flagship store on Fifth Avenue, so that
Speaker 1: could be a problem for some stores. And that's where
Speaker 1: I see the problem as far as the residents go,
Speaker 1: at least from my perception. In my reality, we just
Speaker 1: go in and out. If you want to make a
Speaker 1: big deal out of it, good luck. But to me,
Speaker 1: it's no big deal. Yeah, I am fascinated, Howard. And actually,
Speaker 1: when Tom Keene was starting to talk about Tiffany's and
Speaker 1: Gucci and how their head, I was laughing it off
Speaker 1: at the start, right, But you really believe that tiffany
Speaker 1: could get hurt because they're really next door to Donald Trump.
Speaker 1: It's not because the Donald Trump and nothing that I
Speaker 1: mean what they they have a store in a location
Speaker 1: where is kind of security that's gonna turn off I
Speaker 1: think certain customers from going in because it's a pain
Speaker 1: in the neck. So I think they're gonna lose potential business,
Speaker 1: and I think that will be hurtful. So I think
Speaker 1: that would be part of this total picture. Go ahead. No,
Speaker 1: I was curious hard when we know we've never seen
Speaker 1: a president like this, so we're expecting the cummings and
Speaker 1: goings to last until January. We understand that. Actually, no, no,
Speaker 1: it's gonna go. He's gonna come home weekends. First of all,
Speaker 1: he loves the building. Look, George Bush was going to
Speaker 1: Texas for months, if you recall, for months and operating
Speaker 1: out of his Texas home because that's what he liked. No, no, no,
Speaker 1: I mean I think this is gonna go on for
Speaker 1: four or eight years, and I think everybody is going
Speaker 1: to get used to it, and all the hysteria will end,
Speaker 1: and everybody will adjust. As Americans, we adjust to things
Speaker 1: and and that, and that's what will happen. I just
Speaker 1: don't think it's that big of a deal for me,
Speaker 1: and yet Howard uh. This is for those who don't know.
Speaker 1: Trump Tower is between fifty six and fifty seven on
Speaker 1: Fifth Avenue, which basically the shopping section part of Fifth
Speaker 1: Avenue starts at fifty and goes down, So you've got
Speaker 1: this security courting that cut cuts Fifth Avenue down to
Speaker 1: one or two lanes when he's there. Does that change
Speaker 1: the whole dynamic of Fifth Avenue itself? I do well.
Speaker 1: There are two dimensions to it. One, it's the most
Speaker 1: expensive space on a planet Earth, five thousand dollars of
Speaker 1: square foot from fort nine to fifty seventh on Fifth.
Speaker 1: So the retail stores are paying the highest rent on
Speaker 1: the planet Earth, highest rent on the planet Earth. Now,
Speaker 1: when you pay the highest rent on the planet Earth,
Speaker 1: you expect to be able to do business. There is
Speaker 1: an obstruction to do we business and I think this
Speaker 1: is going to hurt certain stores and it's unfortunate and
Speaker 1: it's part of what's going on, and that's it. So
Speaker 1: that has to live with it. They'll have to make
Speaker 1: an adjustment in their rent, they'll have to do something
Speaker 1: to litigate, they'll do something. They're going to lose business, okay,
Speaker 1: but can they not make up for that business elsewhere?
Speaker 1: I don't know if they have other stores that are
Speaker 1: not These is a worldwide I said that that stores
Speaker 1: ten percent of their business, which is huge because they've
Speaker 1: got stores everywhere all over. There was a worldwide company
Speaker 1: they've got stores all across America. Of course, that's you know,
Speaker 1: one of the store Nike is a giant organization, Gucci
Speaker 1: that LVMH. I mean, these are giant organizations that will
Speaker 1: suffer just in that location. How divids from Divinos An Associates.
Speaker 1: Thank you very much for joining us today from Chuck Tower.
Speaker 1: Now we're hearing it's black of course we know that
Speaker 1: it's Black Friday, but holiday prices, well, that war is
Speaker 1: intensifying as companies such as Walmart and Target are pursuing Amazon.
Speaker 1: So Mike, let's continue the retail conversation. Let's bring in
Speaker 1: a Jerry Storage. He is Hudson Bay CEO on Black Friday. Jerry,
Speaker 1: great to have you here in the program. To her website.
Speaker 1: I'm looking at the sales you're on offer, They're great.
Speaker 1: Is it not too much? How much of an inconvenience
Speaker 1: is it? If you're a retail a person, then what
Speaker 1: will fly off the shelves or what you will sell
Speaker 1: online is actually the blockbusters. Well, look, this is Black Friday,
Speaker 1: and Black Friday is an American institution, and Black Friday
Speaker 1: is totally about the deals. Everyone knows that. That's that's
Speaker 1: why it exists. It's the super Bowl of retail and
Speaker 1: you have to bring your top game. People don't go
Speaker 1: to stores on Black Friday to buy things at regular price.
Speaker 1: That's a very different time. If you're reconsumer, they come
Speaker 1: to get the bargains and they're having fun doing it.
Speaker 1: You know, it's a treasure hunt, So you have to
Speaker 1: have great bargets. So like a Lord and Taylor with
Speaker 1: Kashma swear for th it is just flying. I mean,
Speaker 1: people are so excited to snag a Kashma whatever tht
Speaker 1: get that online. You can also get online. Every merchandise
Speaker 1: offer we have for Black Friday is also you've been
Speaker 1: visiting stores, your stores, you have, uh, Lord and Taylor,
Speaker 1: You've got Sacks, You've got a whole bunch of department
Speaker 1: stores around the country. Have you noticed fewer people I'm
Speaker 1: not saying lower sales, I'm saying fewer actual bodies in
Speaker 1: the stores? Are more people shopping online? And is Black
Speaker 1: Friday the experience of going out sort of fading? Uh?
Speaker 1: The answer is that both are happening. So uh, the
Speaker 1: the physical shopper and the and the in stores in
Speaker 1: the online shopper are both happening. So Black Friday is
Speaker 1: definitely a physical experience. People love to go out, and
Speaker 1: still you have to remember of sales in almost any
Speaker 1: category take place in a bricks and mortar store. But
Speaker 1: we are seeing general only in the retail industries as
Speaker 1: a whole, is that more of the growth is taking
Speaker 1: place online, and of course the economy is growing, so
Speaker 1: more the growth is coming online, and certainly Thanksgiving Day
Speaker 1: and Black Friday arrivaling Cyber Monday in terms of online sales,
Speaker 1: so growing very rapidly. For a company like us, whether
Speaker 1: it's Sackforth, Avenue, Lord and Taylor or one of our
Speaker 1: many other banners, what we're focused on is providing the
Speaker 1: best all channel experience. So so we have the same
Speaker 1: offers online and in store, and it's up to the
Speaker 1: customer to choose how she wants to do it. Some
Speaker 1: of is their doorbusters and get people to wait in
Speaker 1: line and come into the stores like there was you know,
Speaker 1: there's a great doorbuster at Lord and Taylor where the
Speaker 1: first five hundred people each day this week get a
Speaker 1: twenty other gift card for being in line and going
Speaker 1: into the store. But but most of the merchandise offers
Speaker 1: are the same in the store and online, and you
Speaker 1: buy it however you choose. It's not our job to
Speaker 1: try to train you or teach you or change your behavior.
Speaker 1: If you want to buy inline, great, you want to
Speaker 1: come to the store, that's great too. I like the
Speaker 1: way that you said she, Jerry, is it the she's
Speaker 1: at The female shoppers actually spend more on Black Friday.
Speaker 1: Let me tell you, after thirty years in retailer, it
Speaker 1: always has been she and always will be she. The
Speaker 1: woman is the CFO of the household and certainly, uh
Speaker 1: you know, buys far more at retail than than men do.
Speaker 1: But but another interesting phenomenon, as long as we're on this,
Speaker 1: is that the men's areas in our stores haven't grown
Speaker 1: more rapidly than the women's. And it's not just us,
Speaker 1: it's industry wide, and we say that men are the
Speaker 1: new women as they're starting to grow their their their purchases.
Speaker 1: Take that. It's a good thing, Mike. Shopping is always
Speaker 1: a good thing. But you know, part of it is
Speaker 1: because with the more casual workplaces, I mean, you know,
Speaker 1: they're less sort of formal suits and ties, men have
Speaker 1: to learn all over again have a dress when they
Speaker 1: go to work, and they need to buy sweaters and
Speaker 1: and different shoes and and really pay attention to it,
Speaker 1: because you know, you can't just wear the same navy
Speaker 1: blue suit aid to work and no one notices. You've
Speaker 1: got to be different each day. And that's part of
Speaker 1: what's driving that. It's still though, uh true that fastly
Speaker 1: more of the spetting is buy women and more of
Speaker 1: it is for women and Jerry overall, do I spend
Speaker 1: more if I go online and I want to buy
Speaker 1: a I don't know, perfumer or one of your great
Speaker 1: sale items that you have on do I end up
Speaker 1: spaying more than if I were in one of your
Speaker 1: shops or the other way around? Actually, and quite interesting,
Speaker 1: you spend more if you're all channel shopper. So we
Speaker 1: love as customers who love the brand and shop with
Speaker 1: us whichever way it works the best for that occasion,
Speaker 1: both online or in store. And we find is those
Speaker 1: are the customers who spend the most with us. It's
Speaker 1: the ones who love us online and love us in
Speaker 1: the store and sometimes use the combination. So we have
Speaker 1: some fantastic integration of online and the internet. So for example,
Speaker 1: if you go to Saxforth Avenue, you're likely to have
Speaker 1: a personal salesperson that you work with. That person knows
Speaker 1: you what you bought the last time. They will send
Speaker 1: you a curated selection from the website in an email
Speaker 1: to you that you can then open up and shop
Speaker 1: the website. But it's not the entire website. It's what
Speaker 1: your salesperson picked us appropriate for you. And of course
Speaker 1: you can get from there to the entire website if
Speaker 1: you if you want to get something else, But it's
Speaker 1: a way of using the Internet is a tool that
Speaker 1: helps shoe shop even better. And if you don't have
Speaker 1: a salesperson, Let's say you go to sax dot com
Speaker 1: a which it pops up and it says, would you
Speaker 1: like to speak to a stylist? And if you say yes,
Speaker 1: we connect you to someone in the store near you
Speaker 1: who's not like someone in a call center in some
Speaker 1: foreign country. It's someone in the store you're you, who
Speaker 1: knows something about style. He says, what would you like
Speaker 1: to get, and we'll do everything to satisfy. I did
Speaker 1: it once in front of a group of investors, and
Speaker 1: I said I wanted a bow tie and and he
Speaker 1: said what type? And you want a fan too? And
Speaker 1: I said, what is the black one? Find next. You know,
Speaker 1: this nice fellow wanted to deliver it to me. Literally
Speaker 1: know that I was in Toronto when I was talking
Speaker 1: to him in the York story in that case. But
Speaker 1: but you know, it's a fantastic integration experience, and that's
Speaker 1: what the customers want. They don't. They don't think, especially
Speaker 1: millennials and young they're not thinking online versus in store.
Speaker 1: They're thinking, this is what I want. This is a
Speaker 1: brand I like, This is a company I like. You know,
Speaker 1: it's sack fordam Lord and Taylor Guilt. How do I
Speaker 1: deal with them? And I deal with him online? When
Speaker 1: I choose to Some say I just look and see
Speaker 1: what I want to buy and they go to the
Speaker 1: store and find it. You know, I do whatever I want.
Speaker 1: I don't that that line is a false dichotomy. Do
Speaker 1: you have a demographic breakdown as to who shops online
Speaker 1: versus who shops in the brick and mortar stores is
Speaker 1: and the millennials who are more likely to shop online, Well,
Speaker 1: there's no doubt that the younger you are, the more
Speaker 1: likely you're you are to use a smartphone or some
Speaker 1: Internet enable tool. But make no mistake about it. You know,
Speaker 1: even our most senior customers use the internet now and
Speaker 1: have a smartphone, and so everybody's online, everybody's in the store,
Speaker 1: and that's the that's the world of the future, and
Speaker 1: the online owner retailers better get physical pretty darn fast,
Speaker 1: or are we physical retailers is gonna kill them. And
Speaker 1: that's why you see some of the internet guys starting
Speaker 1: to open up stores now where it's Warwy Parker with
Speaker 1: glasses or Amazonism stores because they realize that that bricks
Speaker 1: and more thing is kind of an advantage that we're
Speaker 1: getting a report from the front lines of Black Friday shopping.
Speaker 1: Jerry Starch is the chief executive officer of Hudson's Bay Company.
Speaker 1: They own a whole bunch of department stores, and um,
Speaker 1: I want to ask you about that because we've been
Speaker 1: told that by of retail analysts the department stores are
Speaker 1: kind of the worst place you want to be these
Speaker 1: days in retail because everybody's going to specialty stores or
Speaker 1: they're going online and uh, and department stores getting killed.
Speaker 1: Um So why tell me why it's a good business
Speaker 1: to buy in Dudson's Bay. Department stores are incredibly flexible format,
Speaker 1: so we can adapt with the time. So if one
Speaker 1: category is not selling, we can go into a different category. Meanwhile,
Speaker 1: because offering so broad is the perfect foundation for an
Speaker 1: all channel business to unite the Internet and the stores.
Speaker 1: Because we certain we sell products for young and old,
Speaker 1: for for men, for women, for kids, we saw, we
Speaker 1: sell home products, and uh and apparel products. We sell everything.
Speaker 1: So it's a great foundation for for the future we're
Speaker 1: retelling is going. But meanwhile, what we've learned in country
Speaker 1: after country is that it's not that people like department stores.
Speaker 1: That don't like department stores. People love good department stores
Speaker 1: and they don't like bad ones. And so it's so
Speaker 1: important that we continue to invest in our in our
Speaker 1: in our buildings, invest in our in our technology in
Speaker 1: the stores, invest in the experience in the stores. So
Speaker 1: that's something special to go to the department store that
Speaker 1: gets you out of your chair at home in your
Speaker 1: pajamas into the store to experience something you can't possibly
Speaker 1: see any way, but in a physical sense. But Jerry,
Speaker 1: how often, I mean how much in advance you actually
Speaker 1: have to howard your stuff And you say your flexible,
Speaker 1: which is true, but you still have to what book
Speaker 1: or buy things and trends and ideas six months in
Speaker 1: advance or even a year. Well, you know, it varies.
Speaker 1: So we're experimenting a lot with fast fashion inside the
Speaker 1: department store. So the equivalent to what someone like an
Speaker 1: H and M R as R might do where we
Speaker 1: have much shorter lead times on on certain categories or products.
Speaker 1: There are other products where let's take Kashmir swinters where
Speaker 1: it doesn't where where it doesn't make any sense to
Speaker 1: wait till less second to order them because you get
Speaker 1: a much better deal for you yourself and for the
Speaker 1: customer to offer that thirty kashmeer switter at well. But
Speaker 1: it's true. You know, if you want to sell a
Speaker 1: sweater at thirty nine dollars nine cents, you need to
Speaker 1: order a lot of them and order them well in advance.
Speaker 1: So so we make that decision on a case by
Speaker 1: case basis. So we need just as flexible as anyone
Speaker 1: can be. We were talking with Howard David if it's
Speaker 1: the retail analyst earlier on the program, who's this country
Speaker 1: in particular still has a problem of way too many
Speaker 1: stores and that the story for retailers going forward is
Speaker 1: just you're going to have to close stores, which not
Speaker 1: only throws people out of work, but then you end
Speaker 1: up with real estate problems as well. Uh, is that
Speaker 1: something you're experiencing now? Is this down the road? Let
Speaker 1: me give you a couple of thoughts on that. I
Speaker 1: believe it is true that the United States, almost unique
Speaker 1: or especially among countries, has too much retail score footage.
Speaker 1: You know, it's way to proportion, you know, it's it's
Speaker 1: it's uh, you know, a third more than Canada, for example,
Speaker 1: which it would be the closest pier. It's it's quite
Speaker 1: a bit more far beyond that. Then what we see
Speaker 1: when we operate the large parter store in Germany, for example,
Speaker 1: far less retail score for capital capital in Europe. First,
Speaker 1: i'd say so clearly too much. So that parts right.
Speaker 1: But what's going to happen next is it is different
Speaker 1: I think a little bit from what you just said.
Speaker 1: So it doesn't mean that all the retailer should get
Speaker 1: together somehow. Even if you could even envision this and
Speaker 1: I'll agree, oh we'll I'll close a third of our
Speaker 1: stores or something like that. You know, that's not how
Speaker 1: it works. Uh. What really needs to happen, what will happen,
Speaker 1: is that individual retailers will simply go out of business,
Speaker 1: and we've seen that already, like sports Authority for example,
Speaker 1: are fairly fairly recently and you know many others. Is
Speaker 1: that entire change will go to business and that will
Speaker 1: put things put the market more in equaliver if you,
Speaker 1: as an individual retailer, starts closing to profitable stores, and
Speaker 1: most stores that you operate are profitable, if you start
Speaker 1: closing them, it's it's ridiculous to think that customer is
Speaker 1: gonna go, oh, you close the store near my house,
Speaker 1: then I won't shop at you know, your competitor across
Speaker 1: the street. Now that who's still open, I'm going to
Speaker 1: go to your website instead and shop. That's that's not logical,
Speaker 1: because the customer chooses how she wants to shop. And
Speaker 1: uh strongly, I believe that if she decides she wants
Speaker 1: to shop in a physical store, she's gon shop in
Speaker 1: physical store. You closure, she's going to your competitor. So
Speaker 1: simply closing stores doesn't accomplish anything for you individually as
Speaker 1: a retailer, unless you have some that are losing money,
Speaker 1: but most successful retailers don't. It's really hard to lose
Speaker 1: money in individual store in retailing, so most don't. So
Speaker 1: what's what will happen is they'll be a rationalization of
Speaker 1: the retail community. That's probably why we do grow a
Speaker 1: lot through acquisition. That's part of that rationalization. I think.
Speaker 1: The other other point is what happens to the malls
Speaker 1: because you asked that question right, so, uh, the malls
Speaker 1: are are you know, are not homogeneous. So there are
Speaker 1: a malls that are really fantastic places really that you
Speaker 1: been well well maintained. They have beautiful stores, they have
Speaker 1: beautiful experience them. Those are gonna thrive, they can they'll
Speaker 1: continue to do well in any environment. It's the B
Speaker 1: malls and the C malls that are going to become
Speaker 1: like places to get a cat scans and insurance offices,
Speaker 1: things like that. Only got a minute left, so I
Speaker 1: gotta I can talk about that part all day long.
Speaker 1: But let me ask you this, um, can you raise prices?
Speaker 1: These days everybody's talking about the return of inflation, but
Speaker 1: can you uh, you know, we're really focused on providing
Speaker 1: great deals every day and particularly in Black Friday. Your
Speaker 1: question feels like like, you know, totally beside the point
Speaker 1: because what we're trying to do now is to offer
Speaker 1: the best possible deals in every one of our stores
Speaker 1: where it's sacked with having a lord and Taylor sacks
Speaker 1: off five or guilt or anywhere. All right, Jerry Storch,
Speaker 1: thanks for joining us, the CEO of Hudson's Bay Company.
Speaker 1: Good luck on Black Friday shopping. And uh, friend, you
Speaker 1: you want to order a sweater? Right? I was gonna
Speaker 1: say so. Nice of Tunking to be off today to
Speaker 1: bias Cashmere sweaters. Thank you, Tom, I know you're listening.
Speaker 1: We'll get a blue and a red one. Who you
Speaker 1: put your trust in matters. Investors have put their trust
Speaker 1: in independent registered investment advisors to the tune of four
Speaker 1: trillion dollars. Why they see their roles to serve, not sell.
Speaker 1: That's right. Al Schwab is committed to the success over
Speaker 1: seven thousand independent financial advisors who passionately dedicate themselves to
Speaker 1: helping people achieve their financial goals. Learn more and find
Speaker 1: your independent advisor dot com. Don riss Miller is with us.
Speaker 1: He is the chief economist at Strategist Partners, and we've
Speaker 1: been talking to him for the last hour on Bluebirg
Speaker 1: Surveillance on television about all of this and how the
Speaker 1: election may be influencing what people think that. It certainly
Speaker 1: has in the markets as we've seen um, but how
Speaker 1: is it going to affect the economy itself. Can we
Speaker 1: say that the enthusiasm we're seeing in equity markets for
Speaker 1: Donald Trump is justified? Well, it's nice to be here,
Speaker 1: and I certainly think at least some of it's justified.
Speaker 1: So part of the issue is we have some optimism
Speaker 1: on the regulatory side. There's reason for optimism on the
Speaker 1: fiscal side, and so we have monetary policy which could
Speaker 1: continue to normalize at a gradual pace. And even if
Speaker 1: we don't get big changes on immigration or some of
Speaker 1: the other policies, that's enough when we look at the
Speaker 1: economy itself to say, yeah, some of this is justified.
Speaker 1: We could do a little better going forward versus where
Speaker 1: we've been. So versus a forecast of muddle through going
Speaker 1: into the election, at least there's some upside risk that
Speaker 1: could transpire over the next year. And don what is
Speaker 1: the one thing that that Donald Trump and his team
Speaker 1: need to get absolutely right? Is it the spending so
Speaker 1: they've promised to trillion? Is it enough if they and
Speaker 1: they get ten of that, or is it actually the
Speaker 1: repatriation of a lot of foreign cash under a new
Speaker 1: tax regime. So I think all those would help. If
Speaker 1: I said, the one thing they have to get right,
Speaker 1: I would go over and look at the trade side,
Speaker 1: because I think that's where the biggest uncertainty is at
Speaker 1: the moment, and that's not that hard to get right.
Speaker 1: What they have to do is basically not get it wrong.
Speaker 1: So you could get some of the spending, you could
Speaker 1: get half of the spending, you could get the spending. Still,
Speaker 1: all that could be good in this environment where we've
Speaker 1: had lackluster growth for quite some time. I would say
Speaker 1: the removal of a negative in this case, some of
Speaker 1: the rhetoric on trade, and there's been some move in
Speaker 1: that direction over the last two weeks. We need to
Speaker 1: see more. But if we see more of that, I
Speaker 1: really think that would help reassure people, and not just
Speaker 1: in the US but in other places as well, that
Speaker 1: there really is some upside potential here. Well. Obviously, it's
Speaker 1: going to take a while to get anything like a
Speaker 1: tax cut through Congress, so the effects are going to
Speaker 1: be down the road a bit. The president has a
Speaker 1: lot of power on his own to affect trade, So
Speaker 1: how much does rhetoric matter. How far can Trump go
Speaker 1: on trade aid before it affects the economy. So there
Speaker 1: are a couple of things he's talked about, and this
Speaker 1: is in the first hunder day plan. There's the NAFTA issue.
Speaker 1: There's the t p P issue, and there's some concerns
Speaker 1: about China. So TPP looks like it's dead, and that
Speaker 1: could be a very early issue that could be done
Speaker 1: pretty much right away. NAFTA is something where you need
Speaker 1: a renegotiation, and there may be some appetite for that
Speaker 1: on all sides, so I'm not as worried about that one.
Speaker 1: There there's some negotiating room. This could be a give
Speaker 1: and take in North America. China is the one where
Speaker 1: I think I'd like some reassurance just to say that
Speaker 1: we're not going to really get into a trade war,
Speaker 1: that we're not going to see the worst case scenario transpire.
Speaker 1: There's been some talk of labeling China currency manipulator. What
Speaker 1: that would do is start a discussion, So we'll see
Speaker 1: if that happens, how the Treasury departments. The Treasury Department
Speaker 1: is going to react, but that's where I'd like some clarity,
Speaker 1: in particular around China as we look at what trade
Speaker 1: is going to be. Don are you concerned? It's my
Speaker 1: understanding actually that first of all, he'll focus on domestic
Speaker 1: policy and then he deals with trade, and then he
Speaker 1: deals with China. Right he has lost tweet twenty one
Speaker 1: hours ago saying I'm working hard even on Thanksgiving trying
Speaker 1: to get Carrier, a c company to stay in the US.
Speaker 1: If he does focus a lot on domestic policy, then
Speaker 1: it doesn't increase the chances of him getting foreign policy,
Speaker 1: your trade policy wrong. Well, this depends also who's advising him,
Speaker 1: And this is where I think there's a lot of
Speaker 1: attention being paid to who's coming in in the cabinet,
Speaker 1: how those individuals are going to view the world, what
Speaker 1: we're going to see in terms of policy advice that's
Speaker 1: provided to the president. So yeah, I think it's okay
Speaker 1: to focus on domestic policy in the way we're talking
Speaker 1: about here, as long as there's a team assembled that
Speaker 1: can deal with some of the international items, and as
Speaker 1: long as there's not a push from the top to
Speaker 1: get into tariffs or a trade war those type of things.
Speaker 1: What what's the impact of a trade war? I mean,
Speaker 1: we we say trade war, but suppose he labels China
Speaker 1: currency manipulator? Does that's like the old Monte Python joke
Speaker 1: of you know, if you don't surrender, I'll insult you again.
Speaker 1: Does it actually mean anything? Not directly, it would start
Speaker 1: a conversation. And I think the biggest risk is if
Speaker 1: we go down that road and there's some action on
Speaker 1: the other side that that comes about that we don't
Speaker 1: know at the moment. In other words, if we label
Speaker 1: you currency manipulator, what do you do? And that's where
Speaker 1: frictions are always going to be treated poorly in economic models.
Speaker 1: So if we increase the friction in global trade, if
Speaker 1: we increase the friction in the economy, it's tough to
Speaker 1: grow in that type of environment. And I think that's
Speaker 1: where the analysis of the trade implications is going to
Speaker 1: focus over the next few months. Well, what if I could,
Speaker 1: for let me just ask, uh done, have you heard
Speaker 1: any names of people on the economic side, because we've
Speaker 1: gotten all these foreign policy people are appointed, um, who
Speaker 1: would be advising the president? Elearned, Well, so there's clearly
Speaker 1: a hawkish move on the foreing policy side. I think
Speaker 1: we can safely say that at the moment, and I'm
Speaker 1: not sure I know who's going to get the President's
Speaker 1: here more or less over the next four years in
Speaker 1: terms of whether the economy should go. But what I
Speaker 1: do think is we're looking at an environment where if
Speaker 1: we take a step back and we say, this is
Speaker 1: a global economy, whether we like it or not. We
Speaker 1: can do domestic policy, but let's do it in a
Speaker 1: global context. The more of that we get, I think,
Speaker 1: the better we're going to be. Don are you talking
Speaker 1: about retaliation from China? So there there are two questions right.
Speaker 1: First of all, whether as Trump becomes president, then China
Speaker 1: moves to fill in this global leadership vacuum which the
Speaker 1: U s would leave if you retrench from foreign policy
Speaker 1: and global trade. But the other one is if Donald
Speaker 1: Trump or someone on his team say their currency manipulator,
Speaker 1: do they actually stop access of you know, US companies
Speaker 1: to certain you know, to the Chinese market essentially? Well,
Speaker 1: so there's the end of access. There's also just more
Speaker 1: expensive access. If we talked about how tariffs could be implemented.
Speaker 1: So I think that there's a couple different issues here.
Speaker 1: There's the political issue of the region. In other words,
Speaker 1: part of the move on the t p P was
Speaker 1: for the United States to have some influence in Asia,
Speaker 1: pivot to Asia. That looks like that could be over
Speaker 1: and so that leaves a bit of a vacuum. It's
Speaker 1: natural for China to step into that position. I'm not
Speaker 1: sure that's bad. We'll see how that how that goes.
Speaker 1: So the biggest thing that would worry me is some
Speaker 1: sort of retaliation, some sort of competition that's created on
Speaker 1: the price of goods on a tariff side. That's where
Speaker 1: I think you create the friction that would slow down growth.
Speaker 1: This is Bloomberg Surveillance and Michael McKey sitting in for
Speaker 1: Tom Keene and Francine Lackwi is with me today sitting
Speaker 1: in for David Gurr Or is it the other way around.
Speaker 1: You're sitting in for Tom and I'm sitting in for day.
Speaker 1: How do we know, Well, when the music stops, you
Speaker 1: just grab a chair. Sitting in a chair next to
Speaker 1: me is Don rist Miller. He's the chief economist at Strategous.
Speaker 1: We were talking during the Brake brand about something that
Speaker 1: to go right up your alley, Um, the impact not
Speaker 1: just on the United States but on the world of
Speaker 1: what's going on in Europe. That has been the story
Speaker 1: every year since basically the financial crisis ended, and we
Speaker 1: still can't get away from it because in another week
Speaker 1: we have a referendum vote in Italy and you were
Speaker 1: talking about how that is also affecting the markets. Yeah,
Speaker 1: it looks to me like the political uncertainty could be
Speaker 1: shifting to Europe. So we had this big build up
Speaker 1: to the US election, and then we had two weeks
Speaker 1: where we kind of processed a surprise, and now we
Speaker 1: have to start thinking about how the referendum in Italy
Speaker 1: will go. And Rensey said he would resign with a
Speaker 1: vote that went against him. We have an Austrian election,
Speaker 1: we have the French election next year, There's a German
Speaker 1: election coming up. So this isn't gonna end. This is
Speaker 1: gonna continue for quite some time. Yeah. Although Don and
Speaker 1: I understand that there's a lot of political turmoil coming
Speaker 1: up potentially in Europe, but remember we had the Great Crisis,
Speaker 1: So Mike, it's not like it's anything new here in Europe.
Speaker 1: We are used to it. Do we worry too much
Speaker 1: about politics in Europe? I know it's difficult to predict, Don,
Speaker 1: but there is a sense of actually Brexit happened. The
Speaker 1: polls weren't really predicting Trump happened. We weren't really predicting it,
Speaker 1: and so now everything is priced in that no referendum
Speaker 1: voter is priced in and also possible marrying lepen when
Speaker 1: his price in France, it seems to be Rensey's big
Speaker 1: hope would be the polls are wrong. So we've seen
Speaker 1: the polls be incorrect and the Brexit vote the polls
Speaker 1: were somewhat off here in the United States that we
Speaker 1: could argue about whether it's the polls themselves or the
Speaker 1: interpretation of the polls, but certainly that the hope would
Speaker 1: be if you were Rerenzy that maybe the polls wrong again,
Speaker 1: maybe it could it could change. So I think the
Speaker 1: issue with political uncertainty as I see it is does
Speaker 1: the euro survive? Does the EU survive in a way
Speaker 1: that that makes sense? And so if we had a
Speaker 1: euro member start to challenge EU membership, that seems tougher
Speaker 1: to swallow than the briggs And vote. Is that really
Speaker 1: at the forefront of anybody's mind or is it just
Speaker 1: sort of you know, do people look at Italy and
Speaker 1: think that is something that could actually happen. Well, maybe not,
Speaker 1: But that's why it's useful, I think for market participants
Speaker 1: to to watch, in other words, what's priced in in
Speaker 1: terms of where we're going with let's say the FED
Speaker 1: in December, it looks like we've had that priced into
Speaker 1: the market if we look at at market odd So
Speaker 1: if we're trying to say where could the surprise be, Well,
Speaker 1: the surprise, certainly in the last few weeks, has been
Speaker 1: the US election. The surprise going forward maybe somewhere else,
Speaker 1: and Italy's up there is something that could start a
Speaker 1: chain reaction. So by itself it's not that big a deal.
Speaker 1: But if this starts a chain reaction where we start
Speaker 1: getting EU referendums in Italy or in other places, I
Speaker 1: think that's that's something to consider. Right, So how should
Speaker 1: the markets deal with it? Right? What you're implicating is
Speaker 1: that we kind of, you know, start jumping at shadows
Speaker 1: and looking at every world changing implication, even if it's
Speaker 1: as harmless in certain cases as a referendum, should the
Speaker 1: markets deal with that? So I expect the worst and
Speaker 1: hope for the best. Well that or well, let's let's
Speaker 1: put this way. Let's take the strengthen the dollar over
Speaker 1: the past few weeks. That makes some sense if we
Speaker 1: have fiscal stimulus coming in the US, if we've had
Speaker 1: a regime change in terms of regulatory items. But it
Speaker 1: also makes sense in a context where whatever is happening
Speaker 1: with single party control now in the US, there's some certainty.
Speaker 1: The uncertainty is abroad, and so I certainly think for
Speaker 1: foreign currency traders as matters, let me ask you this. Uh,
Speaker 1: the markets are trading as if there is a new
Speaker 1: new normal or else we've gone back to the old normal.
Speaker 1: Do you think that is the case? Uh? There there
Speaker 1: seems to be this general view that the U s
Speaker 1: economy is going to suddenly reignite. Yeah, I'm not sure
Speaker 1: we're all the way back to the old normal. Maybe
Speaker 1: we're a part of the way back to the old normal.
Speaker 1: In other words, we had this fear of deflation that
Speaker 1: was being driven by a lot of debt and aging, demographic,
Speaker 1: some of these structural items. So none of that's really changed,
Speaker 1: and and that was part of this new normal idea
Speaker 1: that trend growth would be slower because we have these
Speaker 1: large structural factors that are out there, So that's still
Speaker 1: in place. It would seem to me what we're saying
Speaker 1: is for the next year maybe there's a reprieve for
Speaker 1: the next year, maybe there's a boost in sentiment, maybe
Speaker 1: there's a change in the regulatory side, things that could
Speaker 1: be done quickly, and then for the year after that,
Speaker 1: maybe there's the knock on effects of fiscal policy. So
Speaker 1: there's the indirect effects of stimulus right now in terms
Speaker 1: of sentiment. There's the direct effects of stimulus, say a
Speaker 1: year from now, in terms of actual fiscal spending. And
Speaker 1: it looks like with single party controls something will get done.
Speaker 1: So it's all good for equity markets. Well, uh, until
Speaker 1: we get, say, bond deals up high enough where we
Speaker 1: have to start worrying about housing, or we have to
Speaker 1: start worrying about some of those secondary effects. I say,
Speaker 1: the near term risk and trade certainly makes sense. DoD
Speaker 1: Ris Miller with some optimistic views here on Black Friday.
Speaker 1: Maybe you want to go shopping because at least in
Speaker 1: the short run things will be good. He's just chief
Speaker 1: you got of this tat Strategious. Thanks for listening to
Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on iTunes, SoundCloud,
Speaker 1: or whichever podcast platform you prefer. I'm out on Twitter
Speaker 1: at Tom Keene David Gura is at David Gurra. Before
Speaker 1: the podcast, you can always catch us worldwide on Bloomberg Radio.
Speaker 1: Who you put your trust in matters. Investors have put
Speaker 1: their trust and independent registered investment advisors to the two
Speaker 1: and four trillion dollars. Why Learn more and find your
Speaker 1: independent advisor dot com