WEBVTT - Bloomberg's Shah on Retail: Too Many Stores, Categories (Audio)

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<v Speaker 1>first Word Breaking news desk for today's afternoon call, and

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<v Speaker 1>here's Bill Maloney. Good afternoon, Charlie. Equities are under pressure

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<v Speaker 1>around the world, thought of that North Korean nuclear test

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<v Speaker 1>led by losses in telecom, utilities and the materials down

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<v Speaker 1>fault anyone and the vix is up by thirty two percent.

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<v Speaker 1>Down Leaders to the downside included Verizon, Coca Cola, Bowling,

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<v Speaker 1>and Caterpillar. Finnisar surged as much as eighteen percent after

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<v Speaker 1>its results, while diamondov Shore felt ten percent amid declines

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<v Speaker 1>and energy Live from the first Breaking news desk on

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<v Speaker 1>Bill Maloney, Try alrighty, thank you very much, and to

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<v Speaker 1>hear live breaking news over your Bloomberg type squawk s

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<v Speaker 1>Q you a w K on your terminal. I'm Charlie Pellop.

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<v Speaker 1>That's sub Bloomberg Business Flash. You're listening to taking stock

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<v Speaker 1>with bim Box and Kathleen Hayes on Bloomberg Radio. If

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<v Speaker 1>you happen to be a shareholder of Peer one Imports,

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<v Speaker 1>the retailer um, you'd be forgiven if you feel as

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<v Speaker 1>if you walked off a pier. In the last two

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<v Speaker 1>trading sessions, Peer one Imports stock has lost nearly twenty

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<v Speaker 1>percent of its value. Here to tell us more about

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<v Speaker 1>the consumer discretionary sector of the economy is Sema Shaw

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<v Speaker 1>our consumer discretionary analyst for Bloomberg Intelligence. You can follow

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<v Speaker 1>Seema on Twitter at Sema m Shah. Bloomberg Intelligence, of

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<v Speaker 1>course providing unique in real time research and a variety

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<v Speaker 1>of industries as well as markets and government factors that

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<v Speaker 1>affect business. Our terminal customers can access this function by

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<v Speaker 1>just typing b I go on the Bloomberg Seema thank

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<v Speaker 1>you very much for joining me. Um. You heard what

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<v Speaker 1>I said about Peer one imports. I'm wondering if you

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<v Speaker 1>can kind of dissect those results, but in the context

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<v Speaker 1>of perhaps overall weakness and consumer discretionaries spending. Sure for

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<v Speaker 1>peer one pre announced their two key results they actually

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<v Speaker 1>supposed to report at the end of the month. There

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<v Speaker 1>sames to sales fell four percent, But this is in

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<v Speaker 1>spite of a rise in e commerce by three d

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<v Speaker 1>basis points in terms of penetration year over year. So

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<v Speaker 1>what that tells you is they've been spending money on

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<v Speaker 1>their omni channel investment, but they're not picking up extra

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<v Speaker 1>sales or extra traffic. So O, just the clarifi, omni

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<v Speaker 1>channel means they'll sell it to you anywhere, whether it's

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<v Speaker 1>over the exactly whatever works for you, And what's happening

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<v Speaker 1>is you're seeing them basically destroy value in the company

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<v Speaker 1>because they're spending money and they're not getting a return

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<v Speaker 1>on And what I think is happening is they're just

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<v Speaker 1>they're not seeing the traffic, and poor traffic is permeated

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<v Speaker 1>across the retail industry. Target mentioned it um In fact,

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<v Speaker 1>Barnes and Nobles mentioned it. I heard you talk about

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<v Speaker 1>them earlier, and what he said those very interesting is

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<v Speaker 1>many of these retailers have historically been located adjacent to

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<v Speaker 1>other retailers that drove traffic. So when their peers and

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<v Speaker 1>other categories, say Barnes and Noble and Best Buy, they

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<v Speaker 1>both see traffic decline, it multiplies the multiplier effects so

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<v Speaker 1>that the negative traffic experienced by both is even higher.

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<v Speaker 1>And I think that something to take into consideration. So

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<v Speaker 1>you have that aspect, and I think generally consumers do

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<v Speaker 1>have less extra money to spend, and if they do

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<v Speaker 1>they have to spend, they have a lot of necessary

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<v Speaker 1>discretionary items to spend it on first before spend it

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<v Speaker 1>on funt stuff. Before we get into the details of

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<v Speaker 1>that kind of discretionary spending. I'm wondering if you could

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<v Speaker 1>just sort of put together when what we've heard about

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<v Speaker 1>department stores, because we know that Macy's is in the

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<v Speaker 1>process of exitings or more right, so, as we've seen

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<v Speaker 1>people move online, a lot of retailers are closing locations

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<v Speaker 1>and the ones that they are leaving open have to

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<v Speaker 1>be very productive um generating positive cash flow, and they're

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<v Speaker 1>trying to eventually integrate those stores into being distribution center

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<v Speaker 1>so they can ship product from those locations to lower

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<v Speaker 1>freight costs and also to get the product to the

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<v Speaker 1>customer quickly and better compete with Amazon. So what you're

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<v Speaker 1>seeing across the board as the United of States just

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<v Speaker 1>has too many stores and too many categories. That's everybody

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<v Speaker 1>overbuilt in the late two thousand. Now they're trying to

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<v Speaker 1>close it and be nimbler so they can compete with

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<v Speaker 1>Amazon and the other players that are coming up. What

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<v Speaker 1>have you learned from the Goldman Sachs Consumer Conference. UM,

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<v Speaker 1>there is a lot of focus on omni channel, which

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<v Speaker 1>we discussed earlier. That's really where every retailers trying to

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<v Speaker 1>going in. I think in terms of the consumer, it's

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<v Speaker 1>been mixed. Tractors supply pre announced and said that things

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<v Speaker 1>were weak, and while they cited weather, energy related states,

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<v Speaker 1>and also agriculture. It seems like the negative effect from

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<v Speaker 1>those commodity shocks is spreading to community. So and then

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<v Speaker 1>and I think, you know, even the Dollar Store spoke

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<v Speaker 1>about UM a weaker consumer on the low end, So

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<v Speaker 1>I think that's pretty broad span of companies. And then

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<v Speaker 1>you have Restoration Hardware last night, which you know is

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<v Speaker 1>performed well today, but their core their core calms were

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<v Speaker 1>down three. So despite the fact that they are total

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<v Speaker 1>sales increase, a lot of it was from the acquisition

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<v Speaker 1>of Waterworks and some of their new store. So the

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<v Speaker 1>core business is still slow. And you're still seeing retailer

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<v Speaker 1>site driving traffic as a problem. And that's sort of

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<v Speaker 1>what we thought the Consumer conference Luxury Retailing tell us

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<v Speaker 1>about that UM Luxury retailing continues to be tough. Tourism,

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<v Speaker 1>you know, they're going to anniversary, which means that like

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<v Speaker 1>the start of the decline in tourism starts a like

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<v Speaker 1>Q three, so you'll see easier compares for these retailers,

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<v Speaker 1>so they might do better year year and versus street estimates.

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<v Speaker 1>But global, I guess a global tourism remains weak. Other

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<v Speaker 1>parts are the regions of the world continue to be

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<v Speaker 1>remained weak. And even the Chinese tourists who used to

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<v Speaker 1>be coming here and spending they've increased their tourism within

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<v Speaker 1>their own geography within Asia, so that also hurts retailers here,

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<v Speaker 1>and the US luxury consumer is not picking up the slack.

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<v Speaker 1>I've waited for last to just ask you about the

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<v Speaker 1>Amazon effect, because that ends up being something that's a

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<v Speaker 1>bigger and bigger footnote and pact, maybe a paragraph. Now,

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<v Speaker 1>Amazon stealing business from everybody, I think for the most part, yes,

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<v Speaker 1>maybe not in a specialized brand, maybe not in high

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<v Speaker 1>end jewelry, but I think what they They're number one,

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<v Speaker 1>and I think it's really, as I mentioned, a race

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<v Speaker 1>to number two in your category, and that's what people

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<v Speaker 1>are spending on on having an app, on having that

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<v Speaker 1>seamless transaction. But as I mentioned, was pure one. A

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<v Speaker 1>lot of these retailers are also seeing value destruction in

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<v Speaker 1>terms of their return on invested capital because they're not

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<v Speaker 1>getting that sales returned. So Amazon continues to be a

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<v Speaker 1>threatened They move into more and more categories, and you

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<v Speaker 1>have to be nimble if you want to compete with

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<v Speaker 1>them and survives. Much is our consumer discretionary analyst for

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<v Speaker 1>Bloomberg Intelligence. For more on Bloomberg Intelligence, just type V

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<v Speaker 1>I go on the Bloomberg Coming up on taking stock.

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<v Speaker 1>Former Minnesota Governor Jesse Ventura he is gung ho on

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<v Speaker 1>his marijuana manifesto. We've got details ahead.