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Customer Growth's Johnson: Performance Fashion Peaking (Audio) · Bloomberg Intelligence

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  Speaker 1: Broadcasting live to New York, Bloomberg eleventh, Rio to Washington,
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  Speaker 1: d C, Bloomberg to Boston, Bloomberg twelve to San Francisco,
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  Speaker 1: Bloomberg nine to the Country series Exam General one nineteen
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  Speaker 1: and around the globe the Bloomberg Radio plus Dappen, Bloomberg
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  Speaker 1: dot Com. This is taking stock consumers spending on everything
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  Speaker 1: from cars to a an airline ticket a service up
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  Speaker 1: about zero point four percent last month, on top of
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  Speaker 1: a gain of one point one percent the month before.
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  Speaker 1: Some have even revised up their forecast for second quarter
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  Speaker 1: GDP because they say the consumer is strong. My next guest, though,
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  Speaker 1: Craig Johnson, president of Customer Growth Partners, said, when you
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  Speaker 1: look inside the report, it's not so good for retailers
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  Speaker 1: and they have a lot on their plate to spend
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  Speaker 1: on and we're gonna find out why. He says that.
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  Speaker 1: By the way, I'm Kathleen Hayes Pin Fox, my co
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  Speaker 1: host on vacation. Now we go to Katherine Cowgary. She
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  Speaker 1: the Bloomberg newsroom with a business flash. Thank you, Kathleen,
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  Speaker 1: with a stock market is extending yesterday's games as global
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  Speaker 1: former Minneapolis Fed president and a Bloomberg View columnists, was
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  Speaker 1: asked about a possible rate cut next month, that I
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  Speaker 1: to the National Association of Realtors. And now look at
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  Speaker 1: some of the other stories were following today on Bloomberg Radio.
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  Speaker 1: Thank you Catherine from the Bloomberg Newsroom. I'm Jill Schneider.
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  Speaker 1: Global News twenty four hours a day, powered by more
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  Speaker 1: and this is Bloomberg Katherine, thank you, and among today's
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  Speaker 1: sit top let's get let's get an update of those benchmarks.
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  Speaker 1: The down industrial laverage is currently up two hundred eighty
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  Speaker 1: one point, trading at seventeen thousand, six nine. Smp F
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  Speaker 1: founded up thirty five points of two thousand seventy one
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  Speaker 1: nastack higher by ninety points. It's trading at forty seven
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  Speaker 1: eighty two. And that's a Bloomberg business flash. This is
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  Speaker 1: taking stock with Kathleen Hayes and Pim Fox on Bloomberg Radio.
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  Speaker 1: The consumer fili spin of the US economy over the
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  Speaker 1: last two months has spent at a strong enough rate
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  Speaker 1: for the Photowers or Bank of Atlanta to say it
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  Speaker 1: looks more than ever like. The U s economy is
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  Speaker 1: on track for growth of over two and a half
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  Speaker 1: percent in the second quarter, and that's the growth of
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  Speaker 1: just over one percent in the first What does this
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  Speaker 1: mean for US retailers? Though a lot of things dry
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  Speaker 1: that broad, broad, broad measure of consumer spending. My next
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  Speaker 1: guest says, for retailers, there's all kinds of signs that
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  Speaker 1: the retail economy is sputtering. Craig Johnson is president of
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  Speaker 1: Customer Growth Partners. He's located in Connecticut, joining me who
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  Speaker 1: over in our New York studio today. Craig, welcome, It's
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  Speaker 1: always great to have you here. Great to be here, Kathleen.
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  Speaker 1: So when you look at that report and people a
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  Speaker 1: lot of economy is saying, oh strong GDP consumer spending
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  Speaker 1: looks good. What is your response, Well, our responses we
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  Speaker 1: look at we we were very forward looking. We're out
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  Speaker 1: in the stores every week, a team of people across
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  Speaker 1: the country. So the consumer does account for about sixty
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  Speaker 1: of the retail economy of the entire economy of the
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  Speaker 1: g DP, but sixty percent of that sixty percent is
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  Speaker 1: in services versus goods. Of course, retail is deal primarily
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  Speaker 1: in goods, and that is is being crowded out now
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  Speaker 1: by demands, nondiscretionary demands, whether healthcare whether insurance, whether housing,
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  Speaker 1: whether student debt payments. That that nondiscretionary set of demands
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  Speaker 1: is basically crowding out any kind of significant growth in retails.
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  Speaker 1: So right now we're looking at a flattish read not zero,
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  Speaker 1: but flattish kind of load to three plus percent in
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  Speaker 1: terms of retail sales growth. Now. In order to make
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  Speaker 1: people spend their money, particularly when they have choices and
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  Speaker 1: they really don't want to let it go easily, you've
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  Speaker 1: got to get them something hot. You've got to give
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  Speaker 1: them a new fashion or something that is so enticing
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  Speaker 1: they'll they'll eke it out even by the less expression
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  Speaker 1: expensive version of That is partly the fault of retailers
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  Speaker 1: that their merchandise just isn't dazzling enough. Well, right now,
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  Speaker 1: there are no giant crazes or fats. There's nothing really
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  Speaker 1: really hot. There are a couple of smaller things that
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  Speaker 1: are hot. Footwear, the sandal side is very Sandals are
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  Speaker 1: having its best season this year. This is where it's
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  Speaker 1: healed sandals, strappy sandals, et cetera. Um and rompers of
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  Speaker 1: all things are having to come back for the younger set.
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  Speaker 1: The younger female said, I should, I should say, but
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  Speaker 1: these are not giant category movers. And then the other
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  Speaker 1: problem that we're having is is that two of the
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  Speaker 1: things that have been hot, performance wear is peeking out
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  Speaker 1: and fast fashion is fading fast. And these have been
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  Speaker 1: two huge drivers in retail, and we're seeing both of
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  Speaker 1: these begin to peek out a little bit. Fast fashion
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  Speaker 1: fading fast. Well, that's a great one, isn't it. Let's
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  Speaker 1: let's say that again. Uh, why where do you see it?
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  Speaker 1: And uh will it pick up when more people It's
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  Speaker 1: only late June when people are more seriously saying, let's
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  Speaker 1: go to the mall, let's go downtown and buy some
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  Speaker 1: back to school close. Well, the lower traffic at the
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  Speaker 1: mall is part of the issue. But the problem in
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  Speaker 1: fast fashion per se is has been such an explosion
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  Speaker 1: of capacity of square foot its capacity over the last
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  Speaker 1: half decade or decade. This is from twenty one from
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  Speaker 1: H and M, from Zara and Unicuo, and these companies
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  Speaker 1: have all collectively overshot the runway, and so we're left
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  Speaker 1: with too many retails square feet in in fast fashion
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  Speaker 1: chasing too few customer feet. And that's why a unicorne
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  Speaker 1: has begun to show uh closed stores uh fever twenty one,
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  Speaker 1: which has been the giant, is seeing double digit negative comps. Uh.
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  Speaker 1: Even even H and M, which is remains of powerhouse internationally,
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  Speaker 1: is a little soft in the US well, speaking of retailers,
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  Speaker 1: UM and not sandals, but you know athletic footwear. Nike
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  Speaker 1: uh having some was under pressure. It's bounced back today,
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  Speaker 1: but yesterday reported that it's it's it's what they call
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  Speaker 1: their futures. Orders were up eleven percent. Analysts had projected
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  Speaker 1: what's gone with Nike? Are you worried about in Niko? Well,
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  Speaker 1: there's a couple of issues. That one is the performance
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  Speaker 1: where issue wanting this on the on the apparel side,
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  Speaker 1: the apparel is is a growing part of their business,
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  Speaker 1: but they're getting increasingly competition from from the vertical chains
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  Speaker 1: such as Lulu into one hand, and an under armour,
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  Speaker 1: which remains a powerhouse on the other hand. Uh, And
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  Speaker 1: so that's part of that, that's that's part of the issue. Now.
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  Speaker 1: They also claim in their commentary that there was some
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  Speaker 1: issue a year ago with the poor congestion delays which
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  Speaker 1: hyped up last year's work hard. Well, that's a little
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  Speaker 1: bit of excuse, but we think it's more the market
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  Speaker 1: is changing number one and under armour and the other
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  Speaker 1: performance where our specialties have been playing a bigger role. Brexit.
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  Speaker 1: That's not gonna have much influence on US retailers, is it,
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  Speaker 1: except that maybe people whose currency has fallen in value,
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  Speaker 1: like people who live in the UK, won't be coming
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  Speaker 1: over here as much as shot well on on the
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  Speaker 1: Brexit side. Yeah. What what we're seeing, I guess is
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  Speaker 1: a couple of things. One is not going to be
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  Speaker 1: a giant impact. First of all, international tourism has already
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  Speaker 1: been slow here. This is whether it's from a Britain, UH, Europe,
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  Speaker 1: South America, China, Asia, It's already been a week, so
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  Speaker 1: it isn't gonna get dramatically weaker. There are a couple
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  Speaker 1: of US vitos that have exposure in in in UH
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  Speaker 1: the UK, for instance, Abercrombie and Fitch, Walmart osdy unit
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  Speaker 1: and Costco. Costco is doing fine. A and f as
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  Speaker 1: weaken in over there, and then Walmart and Walmart's OZZ
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  Speaker 1: is weak. Costco is doing great. Walmart, how are they doing?
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  Speaker 1: Got ten seconds left? Uh? The Ozda unit right now
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  Speaker 1: is not faring well at all well in the UK.
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  Speaker 1: That that's their their their primarily grocery in some general
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  Speaker 1: e MERCHANCT that's a little weak. Otherwise, Walmart is doing
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  Speaker 1: a little bit better domestical in the US and some
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  Speaker 1: foreign geographies. All right, well, thanks so much to Craig Johnson,
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  Speaker 1: president of Customer Growth Partners. He says reef Tail is
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  Speaker 1: being hurt because families have too many things like education
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  Speaker 1: and healthcare to spend on and they can't buy as
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  Speaker 1: many closed shoes. In Athletic where I'm Kathleen Haze and
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  Speaker 1: this is taking stock on Bloomberg Radio, the consumer doesn't
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  Speaker 1: just buy clothes and shoes, you know, they go to
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  Speaker 1: the food and buy a lot of store. Coming up,
• 11:06
  Speaker 1: Scott Rothbort from Lakeview Asset Management. He's been buying some
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  Speaker 1: whole foods and it is in partly lined with Brexit