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Dana Telsey on Retailers Entering Multiple Categories (Audio) · Bloomberg Intelligence

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  Speaker 1: and that's a bloombird business flash. This is taking stock
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  Speaker 1: with Pim's Box and Kathleen Hays on Bloomberg Radio. Detail
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  Speaker 1: on retail, Yes, discounting, heavy discounting and declining foot traffic
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  Speaker 1: at two major retailers, though the shares moving in opposite
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  Speaker 1: to action. Shares of Ralph Lauren higher right now by
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  Speaker 1: nine and a quarter percent, Michael Core's down two and
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  Speaker 1: three quarters of a percent. Here to explain all of
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  Speaker 1: this is Dana Telsea, chief executive of Telsey Advisory Group. Dana,
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  Speaker 1: thanks very much for being with me. Thank you very
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  Speaker 1: much for having me all right, can you explain what
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  Speaker 1: is going on with retailing? Because Michael Cores has said
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  Speaker 1: they're cutting back sales to department stores and Ralph Lauren
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  Speaker 1: is closing I believe about ten of their retail shops.
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  Speaker 1: Why are they doing this? I think overall everyone is
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  Speaker 1: looking to figure out ways to enhance sales, drive margins,
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  Speaker 1: and minimize their exposure to promotions, friends and family events.
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  Speaker 1: Everyone's thinking about their brand and how to maintain and
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  Speaker 1: enhance the health of their brands. But isn't that what
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  Speaker 1: they always do? I mean, is there any difference now
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  Speaker 1: than trying to enhance your brand five years ago? It
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  Speaker 1: is a difference, I think. Right now, we've just seen
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  Speaker 1: so many retailers working working to be able to appeal
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  Speaker 1: to the consumer. Prices, the vocabulary that many consumers know
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  Speaker 1: when goods are full price versus marked down. Retailers want
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  Speaker 1: to be able to sell goods at full price, not
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  Speaker 1: marked down. We've seen a lot of department stores and brands, frankly,
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  Speaker 1: in the desire to have sell through and drive traffic there.
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  Speaker 1: They've been doing it with markdowns and promotions. And so
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  Speaker 1: now what's gonna what's going to change, lower inventory levels,
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  Speaker 1: personal personalization and customization or products, and being able to
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  Speaker 1: differentiate between department store distribution and your own store distribution. Now,
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  Speaker 1: as part of that effort enclosing stores, is that an
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  Speaker 1: admission that they all expanded much too quickly or did
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  Speaker 1: they meet the market demand at the time, and now
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  Speaker 1: they're just right the ship. Different times call for different
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  Speaker 1: business strategies, And certainly what was happening five and ten
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  Speaker 1: years ago and even fifteen years ago was totally different today.
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  Speaker 1: The advent of what we're having with smart phones being
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  Speaker 1: able to make purchases or seeing something on Instagram or
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  Speaker 1: basically the instantaneous feedback reaction and ability to purchase goods
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  Speaker 1: is very different from having to go to a store.
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  Speaker 1: It used to be the customer needed to go to
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  Speaker 1: the store to make a purchase. Now the store is
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  Speaker 1: coming to the customer. So at the time the way
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  Speaker 1: companies grew was opening stores, it was square footage growth,
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  Speaker 1: but same store sales gave you total sales increase. Now
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  Speaker 1: it's all about total sales and do it when the
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  Speaker 1: customer wants where the customer wants. All right, So, Dana,
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  Speaker 1: let's say someone from Michael Core's were to call you
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  Speaker 1: and talk about their new two hundred and twenty one
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  Speaker 1: stores and the acquisition of their China business, would you
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  Speaker 1: send them back and say, do a rethink on that.
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  Speaker 1: I think they've done a rethink on it already. I
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  Speaker 1: think they're one of the ones who have basically said
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  Speaker 1: they're not really seeing the opportunity to expand stores much more.
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  Speaker 1: They've reached their penetration that they would like. We've seen
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  Speaker 1: come Pani's acquired their foreign distributors or licensed partners in
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  Speaker 1: order to be able to enhance the brand and the
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  Speaker 1: brand image, and that's what Cores is doing. I think
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  Speaker 1: the focus for Cores these days is all about continuing
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  Speaker 1: to offer newness in the product as a way to
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  Speaker 1: regain a faster rate of sales growth. Now, Coach just
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  Speaker 1: yesterday said it's going to pull out of two hundred
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  Speaker 1: and fifty department stores. What does that mean for the
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  Speaker 1: future of companies such as Macy's and Coals they report
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  Speaker 1: results tomorrow, Yes, it's going to be the department store
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  Speaker 1: a week at the end of the week with North
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  Speaker 1: trom Macy's, Coals and J. C. Penny's coming up. What
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  Speaker 1: we're seeing many of the department stores doing is searching
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  Speaker 1: for what are the new categories that they should sell,
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  Speaker 1: what should be private label, what should be exclusive. Maybe
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  Speaker 1: you look at what you're seeing at Macy's. We're testing
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  Speaker 1: some in store best buy shops. Look at what you're
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  Speaker 1: seeing at Nordstrom in the Grove in Los Angeles testing
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  Speaker 1: selling a Tesla, or look at J. C. Penny putting
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  Speaker 1: in appliances. What what changed the landscape was the fact
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  Speaker 1: that in the eighties and the nineties, as more women
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  Speaker 1: entered the workforce, a carol became front and center of
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  Speaker 1: these department stores. Now, with active being a category that
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  Speaker 1: women wear to work and we're on the weekends, there
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  Speaker 1: needs to be other category extensions that are being offered.
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  Speaker 1: And there you go. You have different categories now being
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  Speaker 1: offered and sold in department stores. Do you see also
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  Speaker 1: a change in merchandizing, because one of the areas that
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  Speaker 1: was mentioned in the Michael Corp's report was slow down
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  Speaker 1: in wristwatch sales and also lower average tickets as the
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  Speaker 1: shoppers were all looking to buy smaller handbags. The smaller
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  Speaker 1: handbag trend has been going on for a while. That's
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  Speaker 1: not something new. Certainly we've been seeing the watch category
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  Speaker 1: being challenged. The Swiss watch export data that comes out
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  Speaker 1: on a monthly basis certainly shows that. And the increase
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  Speaker 1: in the number of wearables and brands that are doing
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  Speaker 1: wearables is first to come in the back half of
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  Speaker 1: this year. So I think, if anything, we're seeing some
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  Speaker 1: of the brands extend into multiple category ras, whether it's apparel,
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  Speaker 1: whether it's foot where, whether it's handbags, or even whether
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  Speaker 1: it's jewelry. And that's why you're seeing companies like Coach,
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  Speaker 1: like Cores being talking about the potential for acquisitions, strong
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  Speaker 1: balance sheets and ways to continue to help to drive
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  Speaker 1: additional EPs and margin enhancement. Thank you very much. Dana
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  Speaker 1: Telsey is the chief executive and the founder of Telsey
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  Speaker 1: Advisory Group. Giving us detail on retail shares of Ralph
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  Speaker 1: Lauren there higher right now by more than nine percent,
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  Speaker 1: Michael Core's stock down two and a half percent. This
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