WEBVTT - Dana Telsey Talks 2025 Retail Outlook

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Let's turn out to the world of retail.

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<v Speaker 3>If you look at consumer discretionary stocks, they climbed about

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<v Speaker 3>thirty percent last year, and our next guest expects a

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<v Speaker 3>continued recovery in this discretionary spending, assuming no additional tariffs

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<v Speaker 3>are implemented. However, she does go on to say that

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<v Speaker 3>the likelihood is quite high that.

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<v Speaker 2>New tarffs will be implemented.

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<v Speaker 3>I'm pleased to welcome back Dana Telsey, founder and CEO

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<v Speaker 3>at Telsey Advisory Group, who joins us.

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<v Speaker 2>Now, Dana, did you see evidence.

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<v Speaker 3>Of retailers or brands convincing consumers that perhaps tariffs were

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<v Speaker 3>coming in it was time to buy a lot of

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<v Speaker 3>their big purchases now before those tariffs raise prices.

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<v Speaker 4>Haven't seen that. But what we did see is more

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<v Speaker 4>promotions this holiday season than last year. Was definitely a

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<v Speaker 4>tick up. The holiday season started earlier when best By

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<v Speaker 4>advertises holiday in September. The compressed season with five fewer

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<v Speaker 4>days between Thanksgiving and Christmas, makes a real difference and

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<v Speaker 4>created sense of urgency, which is leaded so far to

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<v Speaker 4>Visa and MasterCard giving better than expectation numbers. On the season.

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<v Speaker 4>Four point eight percent at Visa, three point eight percent

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<v Speaker 4>at MasterCard, all bigger than the three to three and

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<v Speaker 4>a half cent gains they're originally expected.

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<v Speaker 1>I'm sorry that kind of just followed on the promotions

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<v Speaker 1>because one thing I noticed, at least for the companies

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<v Speaker 1>that I buy from, I thought there were a lot

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<v Speaker 1>of stealth promotions, like if you just went to the website,

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<v Speaker 1>you wouldn't see the discounts. Even some of the emails

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<v Speaker 1>they sent really didn't make mention of it. But when

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<v Speaker 1>you kind of dove deeper, there was always like some

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<v Speaker 1>little easter egg where if you manage on hatchet, you

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<v Speaker 1>would get, you know, on that extra twenty percent on

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<v Speaker 1>top of the Game of five whatever discount. Yeah, it was,

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<v Speaker 1>and I thought that was kind of creative because I

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<v Speaker 1>guess that you have to make a little more effort

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<v Speaker 1>to get the discount.

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<v Speaker 4>Ye keep in mind, loyalty members, they got an extra discount.

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<v Speaker 4>It was twenty to thirty percent, not like it was

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<v Speaker 4>years ago when you had forty to sixty percent off.

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<v Speaker 4>So yes, it is more promotional than last year, but

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<v Speaker 4>certainly managed and well within the expectations what retailers are

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<v Speaker 4>looking for. In terms of their margins.

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<v Speaker 3>But I guess to the idea that they really do

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<v Speaker 3>want people to go into the stories because once you get.

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<v Speaker 2>Them into the stores, they may spend more.

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<v Speaker 3>And we were talking earlier about how gift cards are

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<v Speaker 3>always a popular gift, if not a very creative one,

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<v Speaker 3>and retailers love it because when people actually go and

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<v Speaker 3>redeem the gift cards, that's where the spending happens.

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<v Speaker 2>Exactly. This is the month.

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<v Speaker 4>January is the month when everyone redeems their gift cards.

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<v Speaker 4>Typically when they go in to redeem them, and that's

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<v Speaker 4>when it's counted as a sale in retailer's books. But

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<v Speaker 4>typically they can spend twenty percent more. So that uptick

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<v Speaker 4>that you're going to get, it's a benefit to traffic

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<v Speaker 4>and it's a benefit to sales. And let's not forget

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<v Speaker 4>February's coming. Valentine's Day is coming. That's the next holiday.

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<v Speaker 2>Where chocolate is pricing.

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<v Speaker 4>Now it is pricey, you're exactly right, but people are

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<v Speaker 4>still going to buy chocolate for Valentine's Day.

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<v Speaker 3>They are.

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<v Speaker 2>I am curious.

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<v Speaker 1>This is going to get a little bit more into

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<v Speaker 1>the economic conditions because we're heading into a year where

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<v Speaker 1>there is some uncertainty about the health of the consumer

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<v Speaker 1>and their ability to spend. And I want to specifically

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<v Speaker 1>start off with this idea as to whether people are

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<v Speaker 1>trading down because there's been so much anecdotal evidence at

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<v Speaker 1>high income earners are now trading down to slightly like

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<v Speaker 1>a Walmart and folks that would normally shop at Walmart

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<v Speaker 1>are looking for something even cheaper. Are you seeing that

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<v Speaker 1>play out?

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<v Speaker 4>One hundred percent? We've seen that in many different areas.

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<v Speaker 4>Look where Doug McMillan, the CEO of Walmart, talked about

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<v Speaker 4>where his biggest growth is coming from from some of

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<v Speaker 4>their band of hire income consumers. Look at aspirational consumers.

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<v Speaker 4>They're no longer spending on some of the luxury goods

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<v Speaker 4>that they spent in the past. It's trickled down the

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<v Speaker 4>benefit of the traffic of off pricers where they have

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<v Speaker 4>very good brands and off pricers, but it's at a

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<v Speaker 4>value price. They're getting the traffic and they're getting the sales.

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<v Speaker 4>So we've seen the conversion of some hire income consumers

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<v Speaker 4>to essentials and to value pricing.

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<v Speaker 1>We're just about I don't know what I said a

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<v Speaker 1>couple of weeks or so away from the inauguration of

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<v Speaker 1>President Trump, who's promised to impose additional tariffs as well

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<v Speaker 1>as some new tariffs. There's a lot of concern this

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<v Speaker 1>could have an outsize effect on the retail industry. Are

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<v Speaker 1>they prepared for this?

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<v Speaker 2>Are they already preparing for this?

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<v Speaker 4>I think they've been prepared for it. The diversification of

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<v Speaker 4>sourcing of goods away from China has been definitely top

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<v Speaker 4>of mind. The footwear retailers have the most exposure of China,

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<v Speaker 4>Others like the Abercrombie some some apparel retailers have already

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<v Speaker 4>gotten their exposure to China down to single digits from

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<v Speaker 4>what had been double digits. It's a concern because we

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<v Speaker 4>know what the consumer doesn't like is price increases, so

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<v Speaker 4>it only makes value matter. And that's why we lean

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<v Speaker 4>defensive in retailers that offer value, like the discounters and

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<v Speaker 4>like the off pricers, or strong brands offering newness and innovation.

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<v Speaker 4>Hello Birkenstock where Germany and Portugal where they make their goods.

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<v Speaker 4>Or you take a look at others, you look at

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<v Speaker 4>Abercrombie when there's newness and innovation too.

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<v Speaker 3>How many pairs of Berkeley thirty pairs at this point

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<v Speaker 3>of berkanstock Excell, you're past the average of three point

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<v Speaker 3>six with the average American three point six. I blew

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<v Speaker 3>past that long ago. Buy those Kloto shoes too, Yes,

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<v Speaker 3>I do that as well. So terms are a big

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<v Speaker 3>question mark here. We don't know when they're going to

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<v Speaker 3>coming or in what form. But another big question mark

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<v Speaker 3>is a possibility of strikes at the ports once again,

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<v Speaker 3>we know that talk. They're supposed to resume next week.

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<v Speaker 3>What does inventory look like for retailers? I mean, we

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<v Speaker 3>knew the last time around, they kind of got ahead

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<v Speaker 3>of it. But are they ready for another potential strike.

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<v Speaker 4>A lot of them have been moving where they bring

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<v Speaker 4>in their goods from, some of them using air. I

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<v Speaker 4>think they're ready because one of our teams for twenty

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<v Speaker 4>twenty five is while it's about social service supply chain,

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<v Speaker 4>it's about surprise. We know this strike has been on

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<v Speaker 4>the docket for a while, and so they're prepared for it.

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<v Speaker 4>Luckily it would be happening after Christmas, not before Christmas.

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<v Speaker 4>Goods are in, but retailers are having to pay more

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<v Speaker 4>to circumvent where those goods arrive.

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<v Speaker 1>Dana always a great conversation looking forward to see how

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<v Speaker 1>IT twenty twenty five plays out in the retail space. Dantel,

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<v Speaker 1>the founder and CEO at Telsey Advisory Group,