WEBVTT - Customer Growth's Johnson: Performance Fashion Peaking (Audio)

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<v Speaker 1>Broadcasting live to New York, Bloomberg eleventh, Rio to Washington,

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<v Speaker 1>d C, Bloomberg to Boston, Bloomberg twelve to San Francisco,

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<v Speaker 1>Bloomberg nine to the Country series Exam General one nineteen

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<v Speaker 1>and around the globe the Bloomberg Radio plus Dappen, Bloomberg

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<v Speaker 1>dot Com. This is taking stock consumers spending on everything

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<v Speaker 1>from cars to a an airline ticket a service up

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<v Speaker 1>about zero point four percent last month, on top of

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<v Speaker 1>a gain of one point one percent the month before.

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<v Speaker 1>Some have even revised up their forecast for second quarter

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<v Speaker 1>GDP because they say the consumer is strong. My next guest, though,

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<v Speaker 1>Craig Johnson, president of Customer Growth Partners, said, when you

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<v Speaker 1>look inside the report, it's not so good for retailers

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<v Speaker 1>and they have a lot on their plate to spend

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<v Speaker 1>on and we're gonna find out why. He says that.

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<v Speaker 1>By the way, I'm Kathleen Hayes Pin Fox, my co

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<v Speaker 1>host on vacation. Now we go to Katherine Cowgary. She

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<v Speaker 1>the Bloomberg newsroom with a business flash. Thank you, Kathleen,

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<v Speaker 1>with a stock market is extending yesterday's games as global

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<v Speaker 1>markets continue to recover following Britain's vote to make a

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<v Speaker 1>break with the European Union. There's speculation that policymakers will

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<v Speaker 1>continue to counter the effects of the withdrawal. In the

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<v Speaker 1>wake of the vote, traders have pushed back bets on

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<v Speaker 1>Federal reserve interest rate increases, indicating higher borrowing costs are

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<v Speaker 1>unlikely before eighteen On taking Stock this afternoon at Marianna Cata, Lakota,

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<v Speaker 1>former Minneapolis Fed president and a Bloomberg View columnists, was

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<v Speaker 1>asked about a possible rate cut next month, that I

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<v Speaker 1>don't anticipate that to be too likely on the FEDS

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<v Speaker 1>genda and July. That is, I don't anticipate that there

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<v Speaker 1>would be cutting rates in July. We check the markets

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<v Speaker 1>every fifteen minutes on Bloomberg Radio, down Industrial average is

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<v Speaker 1>up two hundred ninety points one point seven percent at

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<v Speaker 1>seventeen thousand, six hundred nine eight s and d F

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<v Speaker 1>founded up thirty six points one percent to two thousand

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<v Speaker 1>seventy one. The NAZDAC is up ninety one points I

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<v Speaker 1>gain of two percent. Trading at forty three West Texas

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<v Speaker 1>Intermediate crude oil of a dollar fifty nine and barrel

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<v Speaker 1>free point three percent to forty four. Spickled up six

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<v Speaker 1>dollars nine agounce at ten year treasury down nine thirty

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<v Speaker 1>seconds with the yield of one point four nine percent.

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<v Speaker 1>Among today's South business stories, UBS Group has announced a

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<v Speaker 1>sweeping overhaul of the leadership in its investment banking unit.

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<v Speaker 1>Three senior executives in the division are leaving. Roger Naylor Co.

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<v Speaker 1>Had of Equities, Chris Murphy Co. Had a Fixed Income,

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<v Speaker 1>Rates and Currency and Matt Hemming, head of Corporate Client

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<v Speaker 1>Solutions in the Asia Pacific region, will all step down.

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<v Speaker 1>One measure of home sales cooled and may. That's according

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<v Speaker 1>to the National Association of Realtors. And now look at

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<v Speaker 1>some of the other stories were following today on Bloomberg Radio.

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<v Speaker 1>Thank you Catherine from the Bloomberg Newsroom. I'm Jill Schneider.

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<v Speaker 1>This news update is brought to you by the Jeep

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<v Speaker 1>Grand Cherokee, the most awarded suv ever. The Grand Cherokee

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<v Speaker 1>the attack on an Istanbul airport, Turkey is pointing the

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<v Speaker 1>finger at Islamic state. Speaking at the North Alliance Leader's

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<v Speaker 1>summit in Ottawa today, President Obama said the US is

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<v Speaker 1>committed to quote dismantling these networks of hate. They are

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<v Speaker 1>continually losing ground, unable to govern those areas with me

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<v Speaker 1>taken over, that they're going to be defeated. In Syria,

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<v Speaker 1>they're going to be defeated. British Prime Minister David Cameron

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<v Speaker 1>doesn't think he's the only one who should lose his

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<v Speaker 1>job after the Brexit vote. Cameron called today on Labor

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<v Speaker 1>Party leader Jeremy Corbyn to step down. I have to say,

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<v Speaker 1>the honorable gentleman, he talks about job insecurity and my

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<v Speaker 1>two months ago it might be in my party's interest

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<v Speaker 1>for him to sit there. It's not in the national address,

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<v Speaker 1>and I was saying, for Heaven's sake, man go. Corbyn

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<v Speaker 1>has said he won't quit, even though his colleagues gave

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<v Speaker 1>him a vote of no confide. It's all. Three suspected

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<v Speaker 1>gunmen in the gang related Brooklyn shootout that killed innocent

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<v Speaker 1>bystander Carrie good Bay are in custody and facing murder charges.

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<v Speaker 1>The popular aide to Governor Andrew Cuomo, was shot in

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<v Speaker 1>the head during a pre dawn celebration before the West

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<v Speaker 1>Indian American Day Parade in September of two thousand fifteen.

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<v Speaker 1>Global News twenty four hours a day, powered by more

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<v Speaker 1>than twenty six hundred journalists and analysts in more than

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<v Speaker 1>one hundred twenty countries from the Bloomberg Newsroom. I'm Jill Schneider,

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<v Speaker 1>and this is Bloomberg Katherine, thank you, and among today's

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<v Speaker 1>sit top let's get let's get an update of those benchmarks.

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<v Speaker 1>The down industrial laverage is currently up two hundred eighty

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<v Speaker 1>one point, trading at seventeen thousand, six nine. Smp F

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<v Speaker 1>founded up thirty five points of two thousand seventy one

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<v Speaker 1>nastack higher by ninety points. It's trading at forty seven

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<v Speaker 1>eighty two. And that's a Bloomberg business flash. This is

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<v Speaker 1>taking stock with Kathleen Hayes and Pim Fox on Bloomberg Radio.

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<v Speaker 1>The consumer fili spin of the US economy over the

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<v Speaker 1>last two months has spent at a strong enough rate

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<v Speaker 1>for the Photowers or Bank of Atlanta to say it

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<v Speaker 1>looks more than ever like. The U s economy is

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<v Speaker 1>on track for growth of over two and a half

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<v Speaker 1>percent in the second quarter, and that's the growth of

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<v Speaker 1>just over one percent in the first What does this

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<v Speaker 1>mean for US retailers? Though a lot of things dry

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<v Speaker 1>that broad, broad, broad measure of consumer spending. My next

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<v Speaker 1>guest says, for retailers, there's all kinds of signs that

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<v Speaker 1>the retail economy is sputtering. Craig Johnson is president of

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<v Speaker 1>Customer Growth Partners. He's located in Connecticut, joining me who

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<v Speaker 1>over in our New York studio today. Craig, welcome, It's

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<v Speaker 1>always great to have you here. Great to be here, Kathleen.

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<v Speaker 1>So when you look at that report and people a

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<v Speaker 1>lot of economy is saying, oh strong GDP consumer spending

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<v Speaker 1>looks good. What is your response, Well, our responses we

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<v Speaker 1>look at we we were very forward looking. We're out

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<v Speaker 1>in the stores every week, a team of people across

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<v Speaker 1>the country. So the consumer does account for about sixty

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<v Speaker 1>of the retail economy of the entire economy of the

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<v Speaker 1>g DP, but sixty percent of that sixty percent is

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<v Speaker 1>in services versus goods. Of course, retail is deal primarily

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<v Speaker 1>in goods, and that is is being crowded out now

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<v Speaker 1>by demands, nondiscretionary demands, whether healthcare whether insurance, whether housing,

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<v Speaker 1>whether student debt payments. That that nondiscretionary set of demands

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<v Speaker 1>is basically crowding out any kind of significant growth in retails.

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<v Speaker 1>So right now we're looking at a flattish read not zero,

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<v Speaker 1>but flattish kind of load to three plus percent in

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<v Speaker 1>terms of retail sales growth. Now. In order to make

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<v Speaker 1>people spend their money, particularly when they have choices and

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<v Speaker 1>they really don't want to let it go easily, you've

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<v Speaker 1>got to get them something hot. You've got to give

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<v Speaker 1>them a new fashion or something that is so enticing

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<v Speaker 1>they'll they'll eke it out even by the less expression

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<v Speaker 1>expensive version of That is partly the fault of retailers

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<v Speaker 1>that their merchandise just isn't dazzling enough. Well, right now,

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<v Speaker 1>there are no giant crazes or fats. There's nothing really

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<v Speaker 1>really hot. There are a couple of smaller things that

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<v Speaker 1>are hot. Footwear, the sandal side is very Sandals are

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<v Speaker 1>having its best season this year. This is where it's

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<v Speaker 1>healed sandals, strappy sandals, et cetera. Um and rompers of

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<v Speaker 1>all things are having to come back for the younger set.

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<v Speaker 1>The younger female said, I should, I should say, but

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<v Speaker 1>these are not giant category movers. And then the other

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<v Speaker 1>problem that we're having is is that two of the

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<v Speaker 1>things that have been hot, performance wear is peeking out

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<v Speaker 1>and fast fashion is fading fast. And these have been

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<v Speaker 1>two huge drivers in retail, and we're seeing both of

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<v Speaker 1>these begin to peek out a little bit. Fast fashion

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<v Speaker 1>fading fast. Well, that's a great one, isn't it. Let's

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<v Speaker 1>let's say that again. Uh, why where do you see it?

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<v Speaker 1>And uh will it pick up when more people It's

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<v Speaker 1>only late June when people are more seriously saying, let's

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<v Speaker 1>go to the mall, let's go downtown and buy some

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<v Speaker 1>back to school close. Well, the lower traffic at the

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<v Speaker 1>mall is part of the issue. But the problem in

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<v Speaker 1>fast fashion per se is has been such an explosion

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<v Speaker 1>of capacity of square foot its capacity over the last

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<v Speaker 1>half decade or decade. This is from twenty one from

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<v Speaker 1>H and M, from Zara and Unicuo, and these companies

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<v Speaker 1>have all collectively overshot the runway, and so we're left

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<v Speaker 1>with too many retails square feet in in fast fashion

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<v Speaker 1>chasing too few customer feet. And that's why a unicorne

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<v Speaker 1>has begun to show uh closed stores uh fever twenty one,

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<v Speaker 1>which has been the giant, is seeing double digit negative comps. Uh.

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<v Speaker 1>Even even H and M, which is remains of powerhouse internationally,

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<v Speaker 1>is a little soft in the US well, speaking of retailers,

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<v Speaker 1>UM and not sandals, but you know athletic footwear. Nike

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<v Speaker 1>uh having some was under pressure. It's bounced back today,

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<v Speaker 1>but yesterday reported that it's it's it's what they call

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<v Speaker 1>their futures. Orders were up eleven percent. Analysts had projected

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<v Speaker 1>what's gone with Nike? Are you worried about in Niko? Well,

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<v Speaker 1>there's a couple of issues. That one is the performance

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<v Speaker 1>where issue wanting this on the on the apparel side,

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<v Speaker 1>the apparel is is a growing part of their business,

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<v Speaker 1>but they're getting increasingly competition from from the vertical chains

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<v Speaker 1>such as Lulu into one hand, and an under armour,

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<v Speaker 1>which remains a powerhouse on the other hand. Uh, And

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<v Speaker 1>so that's part of that, that's that's part of the issue. Now.

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<v Speaker 1>They also claim in their commentary that there was some

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<v Speaker 1>issue a year ago with the poor congestion delays which

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<v Speaker 1>hyped up last year's work hard. Well, that's a little

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<v Speaker 1>bit of excuse, but we think it's more the market

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<v Speaker 1>is changing number one and under armour and the other

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<v Speaker 1>performance where our specialties have been playing a bigger role. Brexit.

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<v Speaker 1>That's not gonna have much influence on US retailers, is it,

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<v Speaker 1>except that maybe people whose currency has fallen in value,

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<v Speaker 1>like people who live in the UK, won't be coming

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<v Speaker 1>over here as much as shot well on on the

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<v Speaker 1>Brexit side. Yeah. What what we're seeing, I guess is

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<v Speaker 1>a couple of things. One is not going to be

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<v Speaker 1>a giant impact. First of all, international tourism has already

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<v Speaker 1>been slow here. This is whether it's from a Britain, UH, Europe,

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<v Speaker 1>South America, China, Asia, It's already been a week, so

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<v Speaker 1>it isn't gonna get dramatically weaker. There are a couple

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<v Speaker 1>of US vitos that have exposure in in in UH

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<v Speaker 1>the UK, for instance, Abercrombie and Fitch, Walmart osdy unit

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<v Speaker 1>and Costco. Costco is doing fine. A and f as

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<v Speaker 1>weaken in over there, and then Walmart and Walmart's OZZ

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<v Speaker 1>is weak. Costco is doing great. Walmart, how are they doing?

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<v Speaker 1>Got ten seconds left? Uh? The Ozda unit right now

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<v Speaker 1>is not faring well at all well in the UK.

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<v Speaker 1>That that's their their their primarily grocery in some general

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<v Speaker 1>e MERCHANCT that's a little weak. Otherwise, Walmart is doing

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<v Speaker 1>a little bit better domestical in the US and some

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<v Speaker 1>foreign geographies. All right, well, thanks so much to Craig Johnson,

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<v Speaker 1>president of Customer Growth Partners. He says reef Tail is

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<v Speaker 1>being hurt because families have too many things like education

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<v Speaker 1>and healthcare to spend on and they can't buy as

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<v Speaker 1>many closed shoes. In Athletic where I'm Kathleen Haze and

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<v Speaker 1>this is taking stock on Bloomberg Radio, the consumer doesn't

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<v Speaker 1>just buy clothes and shoes, you know, they go to

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<v Speaker 1>the food and buy a lot of store. Coming up,

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<v Speaker 1>Scott Rothbort from Lakeview Asset Management. He's been buying some

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<v Speaker 1>whole foods and it is in partly lined with Brexit