WEBVTT - Dana Telsey on Retailers Entering Multiple Categories (Audio)

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<v Speaker 1>and that's a bloombird business flash. This is taking stock

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<v Speaker 1>with Pim's Box and Kathleen Hays on Bloomberg Radio. Detail

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<v Speaker 1>on retail, Yes, discounting, heavy discounting and declining foot traffic

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<v Speaker 1>at two major retailers, though the shares moving in opposite

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<v Speaker 1>to action. Shares of Ralph Lauren higher right now by

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<v Speaker 1>nine and a quarter percent, Michael Core's down two and

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<v Speaker 1>three quarters of a percent. Here to explain all of

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<v Speaker 1>this is Dana Telsea, chief executive of Telsey Advisory Group. Dana,

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<v Speaker 1>thanks very much for being with me. Thank you very

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<v Speaker 1>much for having me all right, can you explain what

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<v Speaker 1>is going on with retailing? Because Michael Cores has said

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<v Speaker 1>they're cutting back sales to department stores and Ralph Lauren

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<v Speaker 1>is closing I believe about ten of their retail shops.

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<v Speaker 1>Why are they doing this? I think overall everyone is

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<v Speaker 1>looking to figure out ways to enhance sales, drive margins,

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<v Speaker 1>and minimize their exposure to promotions, friends and family events.

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<v Speaker 1>Everyone's thinking about their brand and how to maintain and

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<v Speaker 1>enhance the health of their brands. But isn't that what

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<v Speaker 1>they always do? I mean, is there any difference now

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<v Speaker 1>than trying to enhance your brand five years ago? It

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<v Speaker 1>is a difference, I think. Right now, we've just seen

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<v Speaker 1>so many retailers working working to be able to appeal

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<v Speaker 1>to the consumer. Prices, the vocabulary that many consumers know

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<v Speaker 1>when goods are full price versus marked down. Retailers want

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<v Speaker 1>to be able to sell goods at full price, not

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<v Speaker 1>marked down. We've seen a lot of department stores and brands, frankly,

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<v Speaker 1>in the desire to have sell through and drive traffic there.

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<v Speaker 1>They've been doing it with markdowns and promotions. And so

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<v Speaker 1>now what's gonna what's going to change, lower inventory levels,

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<v Speaker 1>personal personalization and customization or products, and being able to

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<v Speaker 1>differentiate between department store distribution and your own store distribution. Now,

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<v Speaker 1>as part of that effort enclosing stores, is that an

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<v Speaker 1>admission that they all expanded much too quickly or did

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<v Speaker 1>they meet the market demand at the time, and now

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<v Speaker 1>they're just right the ship. Different times call for different

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<v Speaker 1>business strategies, And certainly what was happening five and ten

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<v Speaker 1>years ago and even fifteen years ago was totally different today.

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<v Speaker 1>The advent of what we're having with smart phones being

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<v Speaker 1>able to make purchases or seeing something on Instagram or

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<v Speaker 1>basically the instantaneous feedback reaction and ability to purchase goods

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<v Speaker 1>is very different from having to go to a store.

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<v Speaker 1>It used to be the customer needed to go to

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<v Speaker 1>the store to make a purchase. Now the store is

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<v Speaker 1>coming to the customer. So at the time the way

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<v Speaker 1>companies grew was opening stores, it was square footage growth,

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<v Speaker 1>but same store sales gave you total sales increase. Now

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<v Speaker 1>it's all about total sales and do it when the

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<v Speaker 1>customer wants where the customer wants. All right, So, Dana,

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<v Speaker 1>let's say someone from Michael Core's were to call you

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<v Speaker 1>and talk about their new two hundred and twenty one

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<v Speaker 1>stores and the acquisition of their China business, would you

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<v Speaker 1>send them back and say, do a rethink on that.

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<v Speaker 1>I think they've done a rethink on it already. I

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<v Speaker 1>think they're one of the ones who have basically said

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<v Speaker 1>they're not really seeing the opportunity to expand stores much more.

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<v Speaker 1>They've reached their penetration that they would like. We've seen

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<v Speaker 1>come Pani's acquired their foreign distributors or licensed partners in

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<v Speaker 1>order to be able to enhance the brand and the

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<v Speaker 1>brand image, and that's what Cores is doing. I think

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<v Speaker 1>the focus for Cores these days is all about continuing

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<v Speaker 1>to offer newness in the product as a way to

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<v Speaker 1>regain a faster rate of sales growth. Now, Coach just

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<v Speaker 1>yesterday said it's going to pull out of two hundred

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<v Speaker 1>and fifty department stores. What does that mean for the

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<v Speaker 1>future of companies such as Macy's and Coals they report

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<v Speaker 1>results tomorrow, Yes, it's going to be the department store

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<v Speaker 1>a week at the end of the week with North

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<v Speaker 1>trom Macy's, Coals and J. C. Penny's coming up. What

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<v Speaker 1>we're seeing many of the department stores doing is searching

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<v Speaker 1>for what are the new categories that they should sell,

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<v Speaker 1>what should be private label, what should be exclusive. Maybe

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<v Speaker 1>you look at what you're seeing at Macy's. We're testing

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<v Speaker 1>some in store best buy shops. Look at what you're

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<v Speaker 1>seeing at Nordstrom in the Grove in Los Angeles testing

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<v Speaker 1>selling a Tesla, or look at J. C. Penny putting

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<v Speaker 1>in appliances. What what changed the landscape was the fact

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<v Speaker 1>that in the eighties and the nineties, as more women

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<v Speaker 1>entered the workforce, a carol became front and center of

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<v Speaker 1>these department stores. Now, with active being a category that

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<v Speaker 1>women wear to work and we're on the weekends, there

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<v Speaker 1>needs to be other category extensions that are being offered.

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<v Speaker 1>And there you go. You have different categories now being

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<v Speaker 1>offered and sold in department stores. Do you see also

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<v Speaker 1>a change in merchandizing, because one of the areas that

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<v Speaker 1>was mentioned in the Michael Corp's report was slow down

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<v Speaker 1>in wristwatch sales and also lower average tickets as the

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<v Speaker 1>shoppers were all looking to buy smaller handbags. The smaller

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<v Speaker 1>handbag trend has been going on for a while. That's

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<v Speaker 1>not something new. Certainly we've been seeing the watch category

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<v Speaker 1>being challenged. The Swiss watch export data that comes out

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<v Speaker 1>on a monthly basis certainly shows that. And the increase

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<v Speaker 1>in the number of wearables and brands that are doing

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<v Speaker 1>wearables is first to come in the back half of

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<v Speaker 1>this year. So I think, if anything, we're seeing some

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<v Speaker 1>of the brands extend into multiple category ras, whether it's apparel,

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<v Speaker 1>whether it's foot where, whether it's handbags, or even whether

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<v Speaker 1>it's jewelry. And that's why you're seeing companies like Coach,

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<v Speaker 1>like Cores being talking about the potential for acquisitions, strong

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<v Speaker 1>balance sheets and ways to continue to help to drive

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<v Speaker 1>additional EPs and margin enhancement. Thank you very much. Dana

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<v Speaker 1>Telsey is the chief executive and the founder of Telsey

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<v Speaker 1>Advisory Group. Giving us detail on retail shares of Ralph

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<v Speaker 1>Lauren there higher right now by more than nine percent,

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<v Speaker 1>Michael Core's stock down two and a half percent. This

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<v Speaker 1>is taking Stockheim pim Fox, and this is Bloomberg. Bloomberg.

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