WEBVTT - Daybreak Holiday: Oil, Retail, Antitrust 0:00:02.160 --> 0:00:04.560 Thank you so much for joining us for this special 0:00:04.720 --> 0:00:08.119 edition of Bloomberg Daybreak. US markets are close for the 0:00:08.200 --> 0:00:11.680 Juneteenth holiday. I'm Nathan Hager, and coming up this hour, 0:00:11.760 --> 0:00:14.600 we will focus on retail, a close look at the 0:00:14.600 --> 0:00:18.439 health of the country's biggest companies. Bert Flickinger, Managing director 0:00:18.440 --> 0:00:21.560 at Strategic Resource Group, will join us along with Bloomberg 0:00:21.560 --> 0:00:25.400 Intelligence senior retail analyst Punam Gooyle. Plus, the government has 0:00:25.480 --> 0:00:28.800 been very busy filing lawsuits against big tech. We will 0:00:28.800 --> 0:00:31.040 bring you up to date on the latest anti trust 0:00:31.200 --> 0:00:34.600 litigation with the senior analyst who covers just that topic, 0:00:34.760 --> 0:00:38.040 Jennifer Ree of Bloomberg Intelligence. But we want to begin 0:00:38.120 --> 0:00:40.800 with a closer look at the gas and oil market 0:00:40.920 --> 0:00:44.360 as the official start of summer approaches. For that, we 0:00:44.400 --> 0:00:47.839 are pleased to welcome Stephen Shork, the founder and president 0:00:48.159 --> 0:00:52.440 of the energy industry consultancy the Short Group. Steven, great 0:00:52.440 --> 0:00:55.639 to have you with us as always, But we're speaking 0:00:56.280 --> 0:00:58.440 right in the middle of an East Coast heat wave 0:00:58.520 --> 0:01:01.440 and that has got to put high demand on the 0:01:01.600 --> 0:01:05.280 energy grid. Is demand going to keep a lid on prices? 0:01:05.400 --> 0:01:09.759 Do you think it's an interesting situation here with regard 0:01:09.840 --> 0:01:12.480 to the heat wave. Of course, that translates into air 0:01:12.520 --> 0:01:16.520 conditioning demand, so it's also so therefore it's a bullesh 0:01:16.520 --> 0:01:19.560 boom for the natural gas market. Now, the natural gas 0:01:19.600 --> 0:01:22.720 market did have a nice run up up until about 0:01:22.760 --> 0:01:26.200 a week ago, but it looks like that situation is 0:01:26.240 --> 0:01:29.480 over and we're retracing back into a bear market. Why 0:01:30.040 --> 0:01:34.039 even though we have strong demand, we have very strong supplies, 0:01:34.400 --> 0:01:38.759 and that also translates, Nathan into the situation with gasoline. 0:01:39.080 --> 0:01:41.800 We are at the peak season or just beginning with 0:01:42.080 --> 0:01:45.800 the peak season, you know, right from Memorial Day through 0:01:45.880 --> 0:01:48.480 July and August, of course, and when we look at 0:01:48.480 --> 0:01:52.360 the supply situation from either a year over year basis, 0:01:52.640 --> 0:01:56.840 where we're looking at inventories now in and around New 0:01:56.920 --> 0:01:59.440 York Harbor, which is where you take delivery of the 0:01:59.440 --> 0:02:03.120 New York Mark until Exchanges gasoline contract and down in 0:02:03.240 --> 0:02:06.080 Pad three, which is the Gulf Coast refinery at the center. 0:02:06.520 --> 0:02:09.560 So those two market areas are the most important market 0:02:09.600 --> 0:02:13.520 areas as far as East Coast drivers are concerned, because 0:02:13.520 --> 0:02:17.040 you manufacture gasoline in Philadelphia and New York Delaware, and 0:02:17.080 --> 0:02:19.200 then you get the rest of it along the Colonial 0:02:19.200 --> 0:02:22.280 pipeline that gets shipped up from the North coast. So 0:02:22.600 --> 0:02:25.480 when we look at the inventories in those two particular 0:02:25.520 --> 0:02:28.919 market areas, we're looking at a surplus on a year 0:02:29.000 --> 0:02:32.400 over year of three point nine million barrels and a 0:02:32.480 --> 0:02:36.560 one point three million barrel surplus to the seasonal time 0:02:36.680 --> 0:02:39.760 series analysis. So whether we're looking on a year over 0:02:39.880 --> 0:02:44.040 year basis or on a seasonally adjusted basis, supplies as 0:02:44.040 --> 0:02:47.880 we go into the summer driving season are very comfortable 0:02:47.919 --> 0:02:48.640 at this point. 0:02:48.840 --> 0:02:53.000 So do you see that supply demand imbalance coming more 0:02:53.080 --> 0:02:57.080 into balance as we get further into the summer driving season? 0:02:57.200 --> 0:03:00.600 Is demand going to continue even when we we you know, 0:03:00.720 --> 0:03:04.800 have these forecasts of a demand slowdown in global energy. 0:03:04.960 --> 0:03:07.600 Yeah, it will be, and that is contingent on, of course, 0:03:07.840 --> 0:03:11.919 an economics slowdown. So that is certainly a secondary driver 0:03:12.440 --> 0:03:14.760 to prices in the near term. That that is more 0:03:14.840 --> 0:03:17.880 of a long term bearers driver. But as far as 0:03:17.880 --> 0:03:21.880 the summer goes, this is a spot market driven contract 0:03:21.880 --> 0:03:26.200 at this point and therefore the market Nathan is based on. 0:03:26.320 --> 0:03:30.000 Pricing is in balance. That is to say that when 0:03:30.000 --> 0:03:32.560 we look at crude oil prices, for instance, the New 0:03:32.639 --> 0:03:36.440 York WTI market, it's been yo yoing in between the 0:03:36.440 --> 0:03:40.800 middle eighties and the middle seventies, with the mean thus 0:03:40.840 --> 0:03:45.240 far this quarter right around eighty one eighty one dollars 0:03:45.240 --> 0:03:49.480 and twenty cents. Now our modeling coming into the second quarter, 0:03:49.880 --> 0:03:53.200 the central tendency or the median in our model's output 0:03:53.440 --> 0:03:56.960 was eighty one sixty, So we're right there. We're very 0:03:57.000 --> 0:04:00.720 stable market and the stable market Nathan again going into 0:04:01.040 --> 0:04:03.600 I think it's intuitive you have a stable market, that's 0:04:03.640 --> 0:04:07.560 a telltale that the market is in balance. And more importantly, Nathan, 0:04:07.800 --> 0:04:10.680 when we look at the futures market to spread the 0:04:10.800 --> 0:04:15.600 differential and prices between July and August, September, October, this 0:04:15.760 --> 0:04:22.440 gives you the market's view of any potential imbalances coming 0:04:22.560 --> 0:04:25.760 on the horizon. And what we're seeing there is not 0:04:25.800 --> 0:04:28.479 only we're seeing in market that is balanced, but the 0:04:28.520 --> 0:04:31.359 way the spread markets are trading, that is, July is 0:04:31.440 --> 0:04:34.960 losing value to August, August is losing its value relative 0:04:35.000 --> 0:04:37.840 to September. This is a telltale that when we do 0:04:38.000 --> 0:04:40.279 see the imbalance, the market thinks we're going to have 0:04:40.360 --> 0:04:43.559 too much supply not enough enough demand, and of course 0:04:43.600 --> 0:04:49.200 that's going to translate into much more appetizing prices at 0:04:49.240 --> 0:04:50.600 the pump for consumers. 0:04:50.760 --> 0:04:55.240 How appetizing would you say? How accommodating are these gasoline 0:04:55.480 --> 0:04:59.080 retailers going to be to the driving public this summer, 0:04:59.080 --> 0:04:59.440 do you think? 0:04:59.520 --> 0:05:02.480 Well, the great think about gasoline retailers is that there 0:05:02.560 --> 0:05:06.240 are one hundred and forty five thousand retailers in the 0:05:06.279 --> 0:05:10.279 lower forty eight United States. So that's a lot of competition. 0:05:10.800 --> 0:05:15.960 In my hometown in Villanova suburbs of Philadelphia, we have 0:05:16.200 --> 0:05:21.680 virtually a gasoline station on every block. Therefore, that competition 0:05:21.920 --> 0:05:25.960 will certainly keep a lid on prices. Now, of course, 0:05:26.000 --> 0:05:28.680 there will be higher prices in the summer. There are 0:05:28.720 --> 0:05:31.280 always our higher prices in the summer for two very 0:05:31.320 --> 0:05:35.320 obvious reasons. One of course, is demand. We're going to 0:05:35.400 --> 0:05:37.960 hit the pinnacle of our demand in July and August. 0:05:38.160 --> 0:05:40.680 And the second driver is the type of gasoline we 0:05:40.720 --> 0:05:43.000 have to put in our car. It's what's called the 0:05:43.120 --> 0:05:46.159 summer grade gasoline. And when we have to acquire the 0:05:46.240 --> 0:05:50.960 seed stocks that go into making that cocktail of gasoline, 0:05:51.320 --> 0:05:53.920 the seed stocks we use the summer are much more 0:05:53.960 --> 0:05:56.799 expensive than what we can use in the winter. Therefore, 0:05:56.839 --> 0:06:00.640 the manufacturing, the blending of gasoline is more offensive so 0:06:01.000 --> 0:06:05.880 we will see gasoline prices higher, But the retailers. I 0:06:05.920 --> 0:06:09.159 think this is important because I think the retailers they're 0:06:09.200 --> 0:06:11.440 the ones who bear the brunt of it because they're 0:06:11.480 --> 0:06:15.000 on the firing line. But ask yourself, why does a 0:06:15.040 --> 0:06:19.000 gastline station retailer always have a convenience store or an 0:06:19.040 --> 0:06:23.160 auto mechanic garage adjacent to it, Because that's where they 0:06:23.200 --> 0:06:26.599 make their money. They don't make their money on gasoline. 0:06:26.760 --> 0:06:29.599 Their margins are that thin they have to make it 0:06:29.720 --> 0:06:33.560 up elsewhere. So it will be contingent on oil prices, 0:06:33.560 --> 0:06:37.520 which again have been very stable, and the retailers, because 0:06:37.560 --> 0:06:41.560 of this competition, they will not be quote unquote gouging 0:06:41.640 --> 0:06:42.800 the consumer this summer. 0:06:43.000 --> 0:06:45.800 Speaking with Steven Short, the founder and president of the 0:06:45.839 --> 0:06:50.799 Short Group, which consults on the energy industry, and given 0:06:50.880 --> 0:06:54.400 this backdrop, Steven, the stability that you see in the 0:06:54.440 --> 0:06:57.240 gasoline market, I'm curious to get your take as well 0:06:57.680 --> 0:07:02.560 on the decision by OPEC and OPEQ plus to continue 0:07:03.000 --> 0:07:08.080 with supply constraints into next year. What kind of read 0:07:08.160 --> 0:07:11.960 through that potentially could have even longer term as we 0:07:12.000 --> 0:07:13.000 get past the summer. 0:07:13.200 --> 0:07:19.280 Yeah, absolutely, it is certainly a barished telltale because they 0:07:19.360 --> 0:07:22.160 came out with a rather dubbish statement of the last 0:07:22.200 --> 0:07:25.800 meeting that they'll start to curtail these quotas later on 0:07:26.000 --> 0:07:29.840 in the year. And when we look at and it's 0:07:29.840 --> 0:07:33.160 really not surprised because what OPEK, because I've had the 0:07:33.200 --> 0:07:35.320 opportunity to work with OPEC, so I do know this 0:07:35.440 --> 0:07:39.360 firsthand that they will look at the structure of the 0:07:39.400 --> 0:07:43.160 forward market. So there is that curve. There's a price 0:07:43.240 --> 0:07:46.480 for oil every single month going out for the next 0:07:46.520 --> 0:07:49.680 ten years, so they look at the formation of that 0:07:49.800 --> 0:07:53.040 curve and what the curve has been telling us in 0:07:53.080 --> 0:07:55.760 the past six months, whether we're looking at the three 0:07:55.920 --> 0:07:59.000 main oil contracts that trade around the globe of the 0:07:59.080 --> 0:08:02.800 NIMES contract hearing in the US, the Brent contract which 0:08:02.880 --> 0:08:08.640 is a London based contract, and then they do buy contract. 0:08:08.680 --> 0:08:11.880 And when we look at the forward pricing, we're looking 0:08:11.960 --> 0:08:16.040 at a market that is certainly signaling that the barrels 0:08:16.080 --> 0:08:19.320 that are coming closer to delivery are cheaper or are 0:08:19.360 --> 0:08:23.720 losing their value to the longer dated contracts. So what 0:08:23.760 --> 0:08:27.720 this tells you is that the expectation is for weaker 0:08:27.840 --> 0:08:31.240 demand going beyond the summer and through the end of 0:08:31.280 --> 0:08:34.240 this year, and certainly this is the way I think 0:08:34.280 --> 0:08:36.960 OPEC is looking at the market situation. 0:08:37.240 --> 0:08:39.040 Is that something that you agree with that we are 0:08:39.080 --> 0:08:42.840 going to see a continued slow down in global demand 0:08:42.920 --> 0:08:44.600 given where things are this summer? 0:08:44.760 --> 0:08:48.200 Yes, I do. I think for two reasons. One, the 0:08:48.320 --> 0:08:52.600 US consumer is completely tapped out with credit card debt 0:08:52.760 --> 0:08:56.960 these high interest rates. We know that household debt is 0:08:57.000 --> 0:09:00.400 got record highs, now, credit card debt at record highs, 0:09:00.440 --> 0:09:03.000 and so forth, so we do know. And then now 0:09:03.040 --> 0:09:06.400 what Maason, what we're starting to see is a delinquency 0:09:06.520 --> 0:09:09.000 rate on credit card payments that are ninety days in 0:09:09.000 --> 0:09:12.160 the arrears. We're starting to see that now at highs 0:09:12.160 --> 0:09:16.040 we have not seen since before the Great Recession. So 0:09:16.120 --> 0:09:19.480 clearly the consumer is tapped out. Now that doesn't mean 0:09:19.520 --> 0:09:22.640 they won't tap out more on their credit cards, but 0:09:22.720 --> 0:09:27.960 certainly consumer spending will certainly take a hit. And because 0:09:28.600 --> 0:09:31.960 you don't have to drive to the Jersey Shore, you 0:09:32.000 --> 0:09:34.160 can stand in your backyard and run a hose over 0:09:34.200 --> 0:09:38.400 your head, your demand is much greater or much more 0:09:38.440 --> 0:09:42.040 susceptible to these high prices. So yes, the answer that question, 0:09:42.440 --> 0:09:47.280 I do see constraints on demand because even though gasoline 0:09:47.320 --> 0:09:50.520 prices are cheaper than a year ago. The consumer is 0:09:50.520 --> 0:09:52.920 in a much worse place than they were a year ago. 0:09:53.080 --> 0:09:54.959 So it's a little bit of both here. 0:09:55.120 --> 0:09:58.720 To that point, Stephen, we've had predictions many times over 0:09:58.760 --> 0:10:01.240 the past few months about that the consumer is going 0:10:01.280 --> 0:10:03.640 to crack, even if we are starting to see some 0:10:03.720 --> 0:10:06.480 of those signs come through now, I mean, what's the 0:10:06.520 --> 0:10:10.000 possibility that we could continue to see the consumer power 0:10:10.160 --> 0:10:12.679 through like they seem to have done over the last 0:10:12.720 --> 0:10:15.080 few months, defying some of the predictions. 0:10:15.240 --> 0:10:21.880 Yeah. Absolutely, that has been a major surprise, certainly to me. 0:10:22.480 --> 0:10:27.520 But there are other signs. As we said now a 0:10:27.600 --> 0:10:32.000 year ago people defaulting or not making their credit card payments, 0:10:32.240 --> 0:10:35.640 even minimum payments with half of what it is today 0:10:35.720 --> 0:10:39.439 that are defaulting or delinquent, I should say. So that 0:10:39.960 --> 0:10:46.040 is a clear telltale. Also when we look at the 0:10:46.160 --> 0:10:49.400 jobs numbers. Now we're looking at the jobs numbers and 0:10:49.480 --> 0:10:53.439 the establishment and the households. You have two different surveys, 0:10:53.840 --> 0:10:58.240 and there is a considerable deficit between these two. The 0:10:58.440 --> 0:11:02.360 establishment survey, which is the one that the market trades on, 0:11:02.559 --> 0:11:08.360 which has beaten expectations by the biggest Wall Street banks 0:11:08.360 --> 0:11:11.480 have been wrong on the jobs number month in, month 0:11:11.600 --> 0:11:14.600 out for the past year. So what is going on there? 0:11:14.640 --> 0:11:18.160 These are very good economists. What are they missing? Well, 0:11:18.200 --> 0:11:21.120 part of the missing is the way they calculate, that 0:11:21.320 --> 0:11:23.640 is to say, the way the Bureau of Labor Statistics 0:11:23.679 --> 0:11:29.280 calculates their numbers. They're making some assumptions that that are 0:11:29.360 --> 0:11:32.560 pretty grandy oaks when it comes to the amount of 0:11:32.640 --> 0:11:38.360 new businesses being created, which factors into statistically what they 0:11:38.520 --> 0:11:42.360 think the new jobs being created are. All it is 0:11:42.360 --> 0:11:45.080 is a statistical number that they are guessing at and 0:11:45.120 --> 0:11:47.880 putting in and when you look at this adjustment, it 0:11:47.960 --> 0:11:51.240 is very high relative to what we've seen in the past. 0:11:51.559 --> 0:11:54.440 So where I'm going with this, Nathan, is perhaps the 0:11:54.520 --> 0:11:57.679 jobs market, which continues to beat on the headline numbers. 0:11:57.920 --> 0:12:00.000 If you just dig into the weeds a little bit, 0:12:00.520 --> 0:12:03.120 the job situation in this country is not as rosy 0:12:03.160 --> 0:12:06.360 as the headline number would suggest. So now you marry 0:12:06.520 --> 0:12:11.800 that with tap dot consumers and inflation which is still high. 0:12:11.960 --> 0:12:15.240 Granted that inflation might only be grown at four percent 0:12:15.360 --> 0:12:17.880 this year. That's four percent on top of the twenty 0:12:17.920 --> 0:12:21.080 percent it's grown over the past three years. So we're 0:12:21.120 --> 0:12:24.120 looking at a market. So to answer your question. It's great. 0:12:24.280 --> 0:12:30.040 Who knows ken consumer continue to power on perhaps, but 0:12:30.160 --> 0:12:34.080 we do know that they're facing a considerable wall and 0:12:34.480 --> 0:12:37.160 eventually at one point they're going to have to cry 0:12:37.320 --> 0:12:41.040 uncle when that is. Your guess is as good as mine. 0:12:41.160 --> 0:12:43.560 Thank you for this. Stephen, really great having on with us. 0:12:43.679 --> 0:12:47.000 Matt Stephen Short, founder and president of the Short Group. 0:12:47.240 --> 0:12:49.200 And coming up next we'll take a closer look at 0:12:49.240 --> 0:12:51.640 the health of the country's retailers. Will be speaking with 0:12:51.720 --> 0:12:55.040 Bert Flickinger of Strategic Resource Group and put them Goyle, 0:12:55.160 --> 0:12:59.360 senior retail analysts at Bloomberg Intelligence. It's twenty minutes past 0:12:59.400 --> 0:13:06.960 the hour, Nathan Hager, and this is Bloomberg Welcome back 0:13:07.000 --> 0:13:10.640 to this special edition of Bloomberg Daybreak. US markets are 0:13:10.679 --> 0:13:13.640 closed for the June teen holiday. I'm Nathan Hager. Thanks 0:13:13.720 --> 0:13:16.120 for joining us. We want to turn our attention now 0:13:16.160 --> 0:13:18.720 to the health of the country's retailers, and for that 0:13:18.760 --> 0:13:21.960 we have a special holiday roundtable for you. Joining us 0:13:22.000 --> 0:13:26.800 now Bert Flickinger, Managing director at Strategic Resource Group, along 0:13:26.840 --> 0:13:31.000 with Punham Goyle, senior US retail analyst at Bloomberg Intelligence. 0:13:31.040 --> 0:13:32.719 It's great to have the both of you with us 0:13:33.120 --> 0:13:35.800 on this holiday, and we are doing this as we 0:13:35.840 --> 0:13:39.240 come off the latest read on retail sales, we are 0:13:39.320 --> 0:13:44.080 still seeing signs of slow down in the American consumer. Bert, 0:13:44.120 --> 0:13:47.240 I'll start with you, what does this slowdown mean in 0:13:47.320 --> 0:13:48.880 terms of where we could go for the rest of 0:13:48.960 --> 0:13:49.720 the summer. 0:13:49.559 --> 0:13:52.839 Nathan, As you reference the monthly retail sales reported on 0:13:52.920 --> 0:13:56.880 the Bloomberg terminal yesterday Tuesday, it's stick an ask. It's 0:13:56.960 --> 0:13:59.240 the worst of times for retailers. It's the best of 0:13:59.280 --> 0:14:04.600 times of times for retailers like Kroger and Costco. Costco 0:14:04.679 --> 0:14:09.160 hit a fifty two week high. Kroger's doing a very constructive, 0:14:09.679 --> 0:14:14.000 well intentioned merger with Albertson's the lower prices to consumers 0:14:14.040 --> 0:14:18.079 even more as consumers are fighting record inflation, which you're 0:14:18.080 --> 0:14:20.960 seeing in the rest of retail. Nathan. That the only 0:14:21.000 --> 0:14:24.160 other elements other than food retail that are doing well 0:14:24.240 --> 0:14:28.880 or off price, led by TJX and other off price, 0:14:28.960 --> 0:14:33.920 with a handful of specialty retailers also putting together strong 0:14:34.000 --> 0:14:34.600 results too. 0:14:35.120 --> 0:14:38.840 Speaking of specialty retailers, Punham, I know you cover those, 0:14:38.920 --> 0:14:42.600 particularly in the specialty apparel space. Is it a best 0:14:42.600 --> 0:14:45.320 of time's worst of time situation in your world as well. 0:14:45.400 --> 0:14:47.400 Well, I think there is a confluence of events that 0:14:47.440 --> 0:14:49.720 are happening. So you do have a weaker consumer that's 0:14:49.760 --> 0:14:52.880 spending less undiscretionary, but at the same time, you have 0:14:52.960 --> 0:14:55.920 this fashion cycle where consumers are out and about more 0:14:56.240 --> 0:14:58.720 so they are spending a little more in apparel. They're 0:14:58.760 --> 0:15:01.480 just deciding where to go. So we think in this case, 0:15:01.840 --> 0:15:04.760 the retailers that are benefiting with a play on value 0:15:05.120 --> 0:15:07.880 are some of the ones that we've seen rise very fast. 0:15:07.920 --> 0:15:12.120 Those you know, Chinese based or originated retailers, whether it's 0:15:12.120 --> 0:15:15.960 Shean or Temu, They're they're starting to take share. And 0:15:16.000 --> 0:15:18.920 then the Walmarts of the world, we've seen that they've 0:15:18.920 --> 0:15:22.240 posted strong results and they continue to make their play 0:15:22.320 --> 0:15:26.160 for value, drive consumer interest, whether it's the high end 0:15:26.280 --> 0:15:28.480 now or even you know, continue to keep the mid 0:15:28.520 --> 0:15:29.560 and low tier consumer. 0:15:30.080 --> 0:15:34.000 Well, if we do bert continue to see pile into 0:15:34.360 --> 0:15:39.080 sort of lower priced retail names and sectors, what could 0:15:39.160 --> 0:15:42.440 that mean for some of the higher price point companies. 0:15:42.480 --> 0:15:44.880 Are they going to have to start bringing in sales 0:15:44.920 --> 0:15:45.440 this summer. 0:15:45.720 --> 0:15:49.160 Yes, the higher price companies will have to bring in sales, 0:15:49.240 --> 0:15:52.000 and it's going to be tough. In a presidential year 0:15:52.080 --> 0:15:56.120 with record ad spending and costs to bring in that consumer. 0:15:56.160 --> 0:15:59.760 And also what's interesting is in our strategic Resource group 0:16:00.480 --> 0:16:04.480 analyzes chain drug, which is normally a safe harbor and 0:16:04.760 --> 0:16:09.840 typically good and affordability, is struggling. Walgreens down seventy five 0:16:10.440 --> 0:16:14.800 five years, write a down ninety nine point seven CBS 0:16:14.920 --> 0:16:18.840 down fifteen percent. Walmart wins. As Poonam said, and you said, 0:16:18.920 --> 0:16:23.640 Nathan and Kroger Elbertson's with over four thousand pharmacy went. 0:16:23.920 --> 0:16:29.120 Pharmacies win and consumers win. But unless it's everyday low 0:16:29.200 --> 0:16:35.680 price or price impact like Costco, like Winco, like TJX, Ross, 0:16:35.760 --> 0:16:40.120 Dress for Last, et cetera, promotional will still be a 0:16:40.120 --> 0:16:43.160 big part of the playbook for Macy's and others, but 0:16:43.200 --> 0:16:47.760 it'll be tougher to track customers. As Punham reference that 0:16:47.960 --> 0:16:51.560 shoppers are spending for want, not for need. 0:16:51.880 --> 0:16:55.440 So in terms of the retail names that you cover, Poonam, 0:16:55.720 --> 0:16:59.800 how could that play out for names like some of 0:16:59.800 --> 0:17:03.240 those apparel companies that you look at, are they going 0:17:03.320 --> 0:17:05.160 to start discounting as well? 0:17:05.760 --> 0:17:08.480 They will start discounting. I mean, discounts will definitely come 0:17:08.520 --> 0:17:10.800 into play. And sometimes it's not a function of the 0:17:10.800 --> 0:17:13.760 inventory that they have at hand. But it's the neighbors, right, 0:17:13.800 --> 0:17:16.400 So if the stores around you are discounting, you need 0:17:16.440 --> 0:17:18.760 to show the value proposition too. But there is a 0:17:18.760 --> 0:17:21.320 group that I cover that I think benefits in this environment, 0:17:21.320 --> 0:17:24.280 and that's the resale companies like Rent the Runway, like 0:17:24.359 --> 0:17:28.399 thread Up, Poshmark. These companies have a resale element to 0:17:28.480 --> 0:17:32.320 them and eBay and they drive the value message across 0:17:32.359 --> 0:17:34.880 pretty nicely. So we think that they're going to benefit 0:17:34.880 --> 0:17:35.320 in all of this. 0:17:36.080 --> 0:17:40.639 And Bert, what about the interplay between brick and mortar 0:17:40.680 --> 0:17:44.359 stores and e commerce? How do you see that playing 0:17:44.359 --> 0:17:45.320 out into the summertime. 0:17:45.480 --> 0:17:50.560 We're seeing Internet sales trailing twelve month growth rate below 0:17:50.640 --> 0:17:53.920 seven percent for a long time, so still strong, still 0:17:53.960 --> 0:17:56.840 stronger than the rest of retail. But people are going 0:17:56.840 --> 0:18:00.160 to bricks and mortar because, as Punam said, they're own 0:18:00.200 --> 0:18:03.680 to Walmart, they're going to Target, they're going to Costco, 0:18:03.840 --> 0:18:06.760 aldi in Kroger, and they want to see the produce 0:18:06.800 --> 0:18:10.760 and see the meat, especially with meat prices soaring because 0:18:10.760 --> 0:18:14.480 of a b and bird flow affecting first the poultry 0:18:15.440 --> 0:18:21.639 flocks but now transferring over to livestock, so egg prices, 0:18:21.760 --> 0:18:26.840 especially for meat pork poultry are the highest in years, 0:18:26.880 --> 0:18:30.160 with poultry still a value, but maybe not for long. 0:18:30.240 --> 0:18:32.600 Of course, a lot of those names that Bert just 0:18:32.720 --> 0:18:36.560 referenced have some e commerce business of their own Punham, 0:18:37.960 --> 0:18:42.560 Do you see any interplay there, some divergence between foot 0:18:42.640 --> 0:18:44.800 traffic and clicks. 0:18:45.480 --> 0:18:48.160 Yeah. Look, I think you know, for grocery, it's still 0:18:48.200 --> 0:18:50.879 a largely brick and mortar business, so I think consumers 0:18:50.920 --> 0:18:54.560 will prefer that channel for the foreseeable future as the 0:18:54.560 --> 0:18:57.560 way they shop for their produce, especially, But when you 0:18:57.560 --> 0:18:59.879 talk about the off price retailers that were just mentioned 0:19:00.080 --> 0:19:03.159 don't have a clicks business. Teach X is a very 0:19:03.200 --> 0:19:06.440 small online presence, so for those stores, if you want 0:19:06.440 --> 0:19:08.679 the value, you have to go into them. But on 0:19:08.760 --> 0:19:11.880 the same front, retailers like Amazon, which you know you're 0:19:11.920 --> 0:19:15.040 shopping online. The reason to go to Amazon is because 0:19:15.080 --> 0:19:16.840 you can get the breadth of offering and you can 0:19:16.880 --> 0:19:20.400 get the convenience and the items same day, next day. 0:19:20.440 --> 0:19:23.280 So I think that's still a medium that people will 0:19:23.320 --> 0:19:26.040 want to shop at because they want their things quickly, 0:19:26.119 --> 0:19:28.919 and some people still don't like going to stores for 0:19:29.240 --> 0:19:31.439 some of the stuff that can be replenished automatically, and 0:19:31.440 --> 0:19:32.840 they don't need to feel in touch. 0:19:33.640 --> 0:19:37.919 Speaking with Punam Goyle, senior US retail analyst at Bloomberg Intelligence, 0:19:37.960 --> 0:19:43.320 along with Bert Flickinger, the Managing director of Strategic Resource Group, Bert, 0:19:43.359 --> 0:19:46.440 I know something you follow in particular is the impact 0:19:46.440 --> 0:19:50.480 of movie attendance on brick and mortar mall traffic. It 0:19:50.480 --> 0:19:52.280 seems like it's been kind of hit or miss. I mean, 0:19:52.280 --> 0:19:55.920 we just had a record weekend for the new Pixar sequel. 0:19:56.000 --> 0:20:00.600 Some other movies haven't done as well. What could this 0:20:00.760 --> 0:20:06.240 mean for malls in terms of this cinema traffic that 0:20:06.480 --> 0:20:08.080 in a lot of ways they've had to come to 0:20:08.119 --> 0:20:09.880 rely on in recent years. 0:20:09.800 --> 0:20:12.520 Nathan, you synthesize it very well, hit or missed with 0:20:13.040 --> 0:20:17.960 fewer theatrical releases as a carryover from the understandable artists 0:20:18.000 --> 0:20:23.840 and writers strike, so fewer properties from Disney, Marvel, etc. 0:20:24.200 --> 0:20:27.359 From the major studios, so new releases don't come to 0:20:27.400 --> 0:20:32.200 the rescue Nathan until after the December holidays. In the meantime, 0:20:32.240 --> 0:20:35.159 to your point, customer counsel are down thirty percent, and 0:20:35.200 --> 0:20:38.119 a lot to the movies at the malls, and a 0:20:38.160 --> 0:20:41.239 lot of those customers cross over and shop after they 0:20:41.280 --> 0:20:45.399 go to the movies, especially families with large presence of 0:20:45.480 --> 0:20:50.040 children or caregivers going with children. So at a time 0:20:50.080 --> 0:20:54.480 that the malls are suffering and Walmart's abandoning tens of 0:20:54.520 --> 0:20:59.600 millions of square feet of real estate that reached their 0:20:59.640 --> 0:21:03.640 plan absolescence, some of the co anchors are either going 0:21:03.680 --> 0:21:07.080 bankrupt or where they're just segueing out as Walmart and 0:21:07.119 --> 0:21:12.600 Amazon do. And so it's very concerning crossroads for retail 0:21:12.640 --> 0:21:15.199 this summer, especially with the movie drop off for the 0:21:15.240 --> 0:21:16.320 first time in a decade. 0:21:16.560 --> 0:21:19.720 Curious to get your view on the mall outlook as well, Punam. 0:21:19.760 --> 0:21:22.679 I know you spent a fair amount of time in 0:21:22.720 --> 0:21:23.800 the outlets as well. 0:21:24.080 --> 0:21:26.679 Yeah. I think Look, mall traffic has been challenged for 0:21:26.760 --> 0:21:29.400 over a decade now and I don't see that changing 0:21:29.920 --> 0:21:32.520 regardless of where we go in the future. I see 0:21:32.560 --> 0:21:35.840 that there is a shift more growing to digital, which 0:21:35.880 --> 0:21:39.680 is going to continue to really deter especially the lower 0:21:39.760 --> 0:21:42.359 quality malls. Right. I think the A malls like the 0:21:42.359 --> 0:21:45.760 Short Hills Mall in New Jersey, they'll have traffic. But 0:21:45.800 --> 0:21:48.120 when you go to some of these other malls when 0:21:48.160 --> 0:21:50.840 they lose the anchors, as brit just said, that the 0:21:50.920 --> 0:21:54.359 traffic really falls off, and that's going to continue to 0:21:54.440 --> 0:21:57.400 hurt the mall cycle in the stores within those malls. 0:21:57.320 --> 0:22:01.640 Anything else besides movie theater, they can keep them all 0:22:01.920 --> 0:22:02.760 business going. 0:22:02.800 --> 0:22:09.040 Bird BJS and Costco are constructively converting former Macy's, former Seers, 0:22:09.119 --> 0:22:13.080 former j C. Pennies to wholesale clubs as his wind 0:22:13.160 --> 0:22:16.840 Co a Esop, which is the highest volume food retailer 0:22:16.840 --> 0:22:19.960 in America and also the lowest price, even lower than Walmart. 0:22:20.320 --> 0:22:24.199 So there is repurposing in the space. But to Punam's 0:22:24.440 --> 0:22:28.919 present point, we're seeing America go from four hundred percent 0:22:28.960 --> 0:22:32.000 over stored a decade ago in terms of retail mall 0:22:32.080 --> 0:22:34.760 space to between one hundred and twenty to one hundred 0:22:34.800 --> 0:22:39.399 and thirty percent over stored, which will be back in 0:22:39.560 --> 0:22:43.000 balance probably a few to no more than five years 0:22:43.000 --> 0:22:45.520 from now. And there's going to be quite a commercial 0:22:45.600 --> 0:22:51.240 quote unquote casualty count with a even viable change closing 0:22:51.840 --> 0:22:55.520 brick and mortar flagship stores and undercapitalized chains going out 0:22:55.520 --> 0:22:55.959 of business. 0:22:56.000 --> 0:22:59.159 We're also going to see America go to Paris in 0:22:59.200 --> 0:23:01.720 the next few weeks for the Summer Olympics. Just to 0:23:01.760 --> 0:23:05.960 think about summer in general. Punam, in your world when 0:23:05.960 --> 0:23:08.840 it comes to apparel sales. Can we see something of 0:23:08.880 --> 0:23:10.560 a Team USA gear bump? 0:23:10.680 --> 0:23:13.480 Yeah. Absolutely. Look, these sporting events are back in full 0:23:13.520 --> 0:23:15.679 motion to how they were a pre pandemic. It's the 0:23:15.720 --> 0:23:18.960 first year, you know, we're really back the way we 0:23:19.080 --> 0:23:21.719 used to watch sports and attend sporting events. We not 0:23:21.760 --> 0:23:23.679 only have the Paris Olympics, though, we also have the 0:23:23.680 --> 0:23:27.800