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Bloomberg's Shah on Retail: Too Many Stores, Categories (Audio) · Bloomberg Intelligence

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  Speaker 1: That's sub Bloomberg Business Flash. You're listening to taking stock
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  Speaker 1: with bim Box and Kathleen Hayes on Bloomberg Radio. If
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  Speaker 1: you happen to be a shareholder of Peer one Imports,
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  Speaker 1: the retailer um, you'd be forgiven if you feel as
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  Speaker 1: if you walked off a pier. In the last two
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  Speaker 1: trading sessions, Peer one Imports stock has lost nearly twenty
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  Speaker 1: percent of its value. Here to tell us more about
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  Speaker 1: the consumer discretionary sector of the economy is Sema Shaw
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  Speaker 1: our consumer discretionary analyst for Bloomberg Intelligence. You can follow
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  Speaker 1: Seema on Twitter at Sema m Shah. Bloomberg Intelligence, of
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  Speaker 1: just typing b I go on the Bloomberg Seema thank
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  Speaker 1: you very much for joining me. Um. You heard what
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  Speaker 1: I said about Peer one imports. I'm wondering if you
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  Speaker 1: can kind of dissect those results, but in the context
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  Speaker 1: of perhaps overall weakness and consumer discretionaries spending. Sure for
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  Speaker 1: peer one pre announced their two key results they actually
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  Speaker 1: supposed to report at the end of the month. There
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  Speaker 1: sames to sales fell four percent, But this is in
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  Speaker 1: spite of a rise in e commerce by three d
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  Speaker 1: basis points in terms of penetration year over year. So
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  Speaker 1: what that tells you is they've been spending money on
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  Speaker 1: their omni channel investment, but they're not picking up extra
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  Speaker 1: sales or extra traffic. So O, just the clarifi, omni
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  Speaker 1: channel means they'll sell it to you anywhere, whether it's
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  Speaker 1: over the exactly whatever works for you, And what's happening
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  Speaker 1: is you're seeing them basically destroy value in the company
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  Speaker 1: because they're spending money and they're not getting a return
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  Speaker 1: on And what I think is happening is they're just
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  Speaker 1: they're not seeing the traffic, and poor traffic is permeated
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  Speaker 1: across the retail industry. Target mentioned it um In fact,
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  Speaker 1: Barnes and Nobles mentioned it. I heard you talk about
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  Speaker 1: them earlier, and what he said those very interesting is
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  Speaker 1: many of these retailers have historically been located adjacent to
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  Speaker 1: other retailers that drove traffic. So when their peers and
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  Speaker 1: other categories, say Barnes and Noble and Best Buy, they
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  Speaker 1: both see traffic decline, it multiplies the multiplier effects so
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  Speaker 1: that the negative traffic experienced by both is even higher.
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  Speaker 1: And I think that something to take into consideration. So
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  Speaker 1: you have that aspect, and I think generally consumers do
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  Speaker 1: have less extra money to spend, and if they do
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  Speaker 1: they have to spend, they have a lot of necessary
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  Speaker 1: discretionary items to spend it on first before spend it
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  Speaker 1: on funt stuff. Before we get into the details of
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  Speaker 1: that kind of discretionary spending. I'm wondering if you could
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  Speaker 1: just sort of put together when what we've heard about
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  Speaker 1: department stores, because we know that Macy's is in the
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  Speaker 1: process of exitings or more right, so, as we've seen
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  Speaker 1: people move online, a lot of retailers are closing locations
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  Speaker 1: and the ones that they are leaving open have to
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  Speaker 1: be very productive um generating positive cash flow, and they're
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  Speaker 1: trying to eventually integrate those stores into being distribution center
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  Speaker 1: so they can ship product from those locations to lower
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  Speaker 1: freight costs and also to get the product to the
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  Speaker 1: customer quickly and better compete with Amazon. So what you're
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  Speaker 1: seeing across the board as the United of States just
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  Speaker 1: has too many stores and too many categories. That's everybody
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  Speaker 1: overbuilt in the late two thousand. Now they're trying to
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  Speaker 1: close it and be nimbler so they can compete with
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  Speaker 1: Amazon and the other players that are coming up. What
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  Speaker 1: have you learned from the Goldman Sachs Consumer Conference. UM,
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  Speaker 1: there is a lot of focus on omni channel, which
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  Speaker 1: we discussed earlier. That's really where every retailers trying to
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  Speaker 1: going in. I think in terms of the consumer, it's
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  Speaker 1: been mixed. Tractors supply pre announced and said that things
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  Speaker 1: were weak, and while they cited weather, energy related states,
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  Speaker 1: and also agriculture. It seems like the negative effect from
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  Speaker 1: those commodity shocks is spreading to community. So and then
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  Speaker 1: and I think, you know, even the Dollar Store spoke
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  Speaker 1: about UM a weaker consumer on the low end, So
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  Speaker 1: I think that's pretty broad span of companies. And then
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  Speaker 1: you have Restoration Hardware last night, which you know is
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  Speaker 1: performed well today, but their core their core calms were
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  Speaker 1: down three. So despite the fact that they are total
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  Speaker 1: sales increase, a lot of it was from the acquisition
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  Speaker 1: of Waterworks and some of their new store. So the
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  Speaker 1: core business is still slow. And you're still seeing retailer
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  Speaker 1: site driving traffic as a problem. And that's sort of
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  Speaker 1: what we thought the Consumer conference Luxury Retailing tell us
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  Speaker 1: about that UM Luxury retailing continues to be tough. Tourism,
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  Speaker 1: you know, they're going to anniversary, which means that like
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  Speaker 1: the start of the decline in tourism starts a like
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  Speaker 1: Q three, so you'll see easier compares for these retailers,
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  Speaker 1: so they might do better year year and versus street estimates.
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  Speaker 1: But global, I guess a global tourism remains weak. Other
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  Speaker 1: parts are the regions of the world continue to be
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  Speaker 1: remained weak. And even the Chinese tourists who used to
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  Speaker 1: be coming here and spending they've increased their tourism within
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  Speaker 1: their own geography within Asia, so that also hurts retailers here,
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  Speaker 1: and the US luxury consumer is not picking up the slack.
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  Speaker 1: I've waited for last to just ask you about the
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  Speaker 1: Amazon effect, because that ends up being something that's a
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  Speaker 1: bigger and bigger footnote and pact, maybe a paragraph. Now,
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  Speaker 1: Amazon stealing business from everybody, I think for the most part, yes,
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  Speaker 1: maybe not in a specialized brand, maybe not in high
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  Speaker 1: end jewelry, but I think what they They're number one,
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  Speaker 1: and I think it's really, as I mentioned, a race
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  Speaker 1: to number two in your category, and that's what people
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  Speaker 1: are spending on on having an app, on having that
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  Speaker 1: seamless transaction. But as I mentioned, was pure one. A
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  Speaker 1: lot of these retailers are also seeing value destruction in
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  Speaker 1: terms of their return on invested capital because they're not
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  Speaker 1: getting that sales returned. So Amazon continues to be a
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  Speaker 1: threatened They move into more and more categories, and you
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  Speaker 1: have to be nimble if you want to compete with
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  Speaker 1: them and survives. Much is our consumer discretionary analyst for
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