WEBVTT - Consumer Health Amid Continued Rate Hikes

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<v Speaker 1>I tell you, when you want to talk retail, there

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<v Speaker 1>is no better voice to chat with than Dana Telsey.

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<v Speaker 1>She's a Chief Research Officer and CEO of Telsey Advisory Group.

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<v Speaker 1>Just an outstanding firm. She created really focusing on the

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<v Speaker 1>consumer and on all things retail. She's built a great

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<v Speaker 1>team there. It's a great success story for a lot

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<v Speaker 1>of these boutique research firms. I just hold up Dana's

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<v Speaker 1>firm is one of the best out there. Dana, thanks

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<v Speaker 1>so much for joining us here. You know there's a

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<v Speaker 1>lot to talk about, but you know, having read your

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<v Speaker 1>research over the years, I know I got to focus

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<v Speaker 1>on a few key seasons. One of them is back

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<v Speaker 1>to school. Yes, I know it's not even May, but

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<v Speaker 1>back to school is probably the next big season for retailers.

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<v Speaker 1>And we've got inflation out there, We've got an uncertain

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<v Speaker 1>economic environment. How should I be thinking about back to school?

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<v Speaker 1>How are the retailers prepared?

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<v Speaker 2>I think the retailer. First of all, thank you so

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<v Speaker 2>much for having me, and thank you so much for

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<v Speaker 2>your kind words. I always very much enjoy partnering with

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<v Speaker 2>you in Bloomberg. I would say, when I think about

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<v Speaker 2>this season coming up for back to school and what's happening.

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<v Speaker 2>It's filled with uncertainty. The one thing we know is

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<v Speaker 2>that retailers are cleaning out their inventory, so they're going

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<v Speaker 2>to be lean on goods, which is encouraging. The uncertainty

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<v Speaker 2>with the top line, given the levels of consumer demand

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<v Speaker 2>is where there definitely is caution. You're seeing the end

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<v Speaker 2>of snap benefits, the lower tax refunds by a double

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<v Speaker 2>digit amount, the volatility the stock market with the bank

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<v Speaker 2>failures that are out there, and that's leading to that

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<v Speaker 2>uncertainty where even the luxury goods companies have seen a

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<v Speaker 2>moderation and growth still positive, but a moderation. And thinking

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<v Speaker 2>about back to school, I think we're going to focus

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<v Speaker 2>on the essentials. I think we're going to focus on

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<v Speaker 2>it off price. I think we're still going to have

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<v Speaker 2>the discounters being able to win for back to school.

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<v Speaker 3>That's exactly what I wanted to ask about because I

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<v Speaker 3>noticed a bifurcation in for example, the auto industry. Right

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<v Speaker 3>if you want something that's high end or high dollar,

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<v Speaker 3>you're going to have to wait if you can get

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<v Speaker 3>it at all, Whereas if you want something that's affordable.

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<v Speaker 3>Although in cars right now that's kind of a silly

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<v Speaker 3>term to use, but you can get it. So demand

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<v Speaker 3>is outstripping supply on the higher end. But in terms

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<v Speaker 3>of you know, those who don't earn as much, they're

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<v Speaker 3>able to still get you know, what they need. Is

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<v Speaker 3>that Is that true in terms of a sort of

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<v Speaker 3>a cross retail.

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<v Speaker 2>Yes, you can get what you need. And we're no

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<v Speaker 2>longer seeing what you saw in twenty twenty one and

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<v Speaker 2>a bit of twenty two. Price increases are no longer

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<v Speaker 2>are no longer happening out there. And the real question

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<v Speaker 2>mark is what is the direction of consumer demand? And

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<v Speaker 2>given what all companies have guided to many have guided

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<v Speaker 2>to improvement in the back half of twenty three, is

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<v Speaker 2>that really going to happen given the uncertainty of the macro.

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<v Speaker 1>Hey, Dana, you know, having read your research over the years,

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<v Speaker 1>you know you've been so up out front on the

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<v Speaker 1>theme of right sizing the industry for the number of stores.

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<v Speaker 1>And we've seen really our the last day Gate, plus

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<v Speaker 1>so many of the department stores in particulars you know,

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<v Speaker 1>closed stores to try to right size the inventory's more

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<v Speaker 1>and more shopping goes online. Are we there yet? Is

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<v Speaker 1>the industry kind of right sized itself?

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<v Speaker 2>It has right size to a great degree. I can

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<v Speaker 2>tell you that these bed Bath and Beyond locations that

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<v Speaker 2>are becoming available, I think there's arm wrestling going on

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<v Speaker 2>by the retailers in order to capture those boxes. The

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<v Speaker 2>locations that they have, the adjacencies that they have, and

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<v Speaker 2>the fact that there's a lack of new development, and

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<v Speaker 2>whether it's the dollar stores, the off price retailers, some

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<v Speaker 2>of the department stores, and other constituencies, whether it's arts

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<v Speaker 2>and crafts retailers are home, those Bed Bath and Beyond

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<v Speaker 2>locations will be gobbled up fast.

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<v Speaker 3>Are you looking at other big box stores that could

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<v Speaker 3>be headed the same way. I'm not sure how it

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<v Speaker 3>is across the country, but when I go into the

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<v Speaker 3>best Buy near me, it looks an awful lot like

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<v Speaker 3>bed Bath and Beyond in terms of hardly anyone's there

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<v Speaker 3>to help me. The shelves aren't stocked. I don't even

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<v Speaker 3>know if the lights are on in the entire store.

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<v Speaker 3>So can they pull through.

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<v Speaker 2>Given the fact that the offering of brands that they

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<v Speaker 2>have it best Buy, and keep in mind, brands are

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<v Speaker 2>part of the key at best Buy? What change would

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<v Speaker 2>that Bath and Beyond they eliminated brands and one to

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<v Speaker 2>more private label. I think the halo of brands is

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<v Speaker 2>a differentiator for Best Buy.

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<v Speaker 1>Hey, Dana, the pandemic impacted so many people in so

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<v Speaker 1>many different ways and so many different businesses, and you know,

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<v Speaker 1>certainly retail is right at the top of the list.

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<v Speaker 1>How we shop and things like that. How do you

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<v Speaker 1>put that into perspective? How is shopping the consumer behavior,

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<v Speaker 1>retailer's response to that behavior. How's that changed over the

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<v Speaker 1>last several years.

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<v Speaker 2>I think one of the things that happened is the

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<v Speaker 2>three elements that we're all talking about. Pre COVID, Amazon's

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<v Speaker 2>going to take over retail didn't happen. You're going to

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<v Speaker 2>have store so many retail stores need to close they

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<v Speaker 2>did close. And you have bankruptcies. We had ninety six

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<v Speaker 2>consumer bankruptcies during the pandemic. You're fast forward and here

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<v Speaker 2>we are today. You have a cleaner landscape than you've

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<v Speaker 2>had in the past. You have an appreciation both by

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<v Speaker 2>the consumer, the retailers, and the landlords of just how

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<v Speaker 2>important that physical experience is. And I think, if anything,

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<v Speaker 2>stores are being invested in for multiple functionalities in terms

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<v Speaker 2>of being able to service with buy online pickup service,

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<v Speaker 2>with omni channel and service with experience. I think we're

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<v Speaker 2>coming here, coming out of this with a new appreciation

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<v Speaker 2>for the store in all categories, and investment in them

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<v Speaker 2>is not only a nice to have, it's a must

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<v Speaker 2>have to win and gain market share.

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<v Speaker 3>How does the labor force look to you, Dana, because

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<v Speaker 3>I know that going into or coming out of the

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<v Speaker 3>holiday season, rather a lot of companies were slow to

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<v Speaker 3>let go of seasonal workers, whereas in the past they

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<v Speaker 3>would have just dropped them post Christmas. They were worried

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<v Speaker 3>this year, at least to the start, about being able

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<v Speaker 3>to get enough people, so they didn't do that. How

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<v Speaker 3>does it look now?

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<v Speaker 2>I think overall what we're hearing about labor, retailers will

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<v Speaker 2>try to keep their full timers. They'll add on when

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<v Speaker 2>they need to add on, but they're still being very

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<v Speaker 2>cautious in terms of labor force in order to be

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<v Speaker 2>able to meet demand and the expense pressures. The labor

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<v Speaker 2>cost increases and the wage price increases, that is not

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<v Speaker 2>going away, that is sticking, and retail is a mindful

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<v Speaker 2>of what the expense expense allocation is into the store.

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<v Speaker 2>But I agree with you, service everywhere needs to be improved.

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<v Speaker 1>Daniel, are you one of the top retail analysts on

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<v Speaker 1>the street. What's your top call right here?

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<v Speaker 2>I think the top call right now overall that we

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<v Speaker 2>have out there. I think we're going to win with

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<v Speaker 2>off Price this year in twenty twenty three. I think

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<v Speaker 2>they're going to be the differentiator.

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<v Speaker 1>So what are some of the names in that category.

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<v Speaker 2>You look at TJX, you look at Burlington, you look

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<v Speaker 2>at Ross stores, and I think also on the lower

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<v Speaker 2>income side, I'm watching what City Trends does very carefully interesting.

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<v Speaker 3>Interesting. Is there anything else we should be watching out for?

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<v Speaker 3>Any hot products, any hot brands that have caught your

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<v Speaker 3>eye lately?

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<v Speaker 2>I mean, I always think there's new neis out there.

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<v Speaker 2>What you have going on with Hoka Onrun and on

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<v Speaker 2>Running is very exciting, given the newness that that they offer.

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<v Speaker 3>My mom just brought her second pair of Hokahs and

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<v Speaker 3>she's seventy three. It's a shoe.

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<v Speaker 2>Oh, it's nearing a billion in sales. It has great cushioning.

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<v Speaker 2>And when you look on the streets, watch what's on

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<v Speaker 2>people's feet.

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<v Speaker 3>Good stuff.

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<v Speaker 1>That's that's primary research.

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<v Speaker 3>Katie Greifeld also she's like, oh, it's not about fashion. Apparently,

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<v Speaker 3>it's just it's good for your joints. Okay, they're more cushioning.

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<v Speaker 3>I don't know if it's all right.

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<v Speaker 1>Dana, thanks so much for joining us. Really appreciate getting

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<v Speaker 1>having you, bet Dana. Dana Telsey is a Chief Research

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<v Speaker 1>Officer and CEO of Tells the Advisory Group. She's one

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<v Speaker 1>of the top analysts on Wall Street flat out. And

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<v Speaker 1>I'll tell you what. Some of the best analysts on

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<v Speaker 1>Wall Street research anals over the last thirty year came

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<v Speaker 1>from a firm that no longer exists called CJ Lawrence.

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<v Speaker 1>Some of the top analysts, and she did a stint

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<v Speaker 1>at CJ Lawrence. So it does not surprise me at all,

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<v Speaker 1>Dana Telsey, this is Bloomberg