BOB, GREAT CATCHING UP WITH YOU,
MY FRIEND.
>> AULT BEST.
NEIL: LET’S GET THE READ ON THE
AMERICAN CONSUMER BUS CONSUMER
CONFIDENCE IS STILL STUBBORNLY
STRONG.
WE TOLD YOU SECURITY ON THE JOBS
FRONT FOR NOW.
YOU KNOW, BUT YOU TAKE THIS WITH
A GRAIN OF SALT HERE, THERE ARE
STILL A LOT OF PEOPLE ARE
DIALING THINGS BACK AHEAD OF THE
HOLIDAY SHOPPING SEASON.
HOW SIGNIFICANT COULD THAT BE?
PSYCHOLOGICALLY THEY’RE ALREADY
PREPARING THEMSELVES TO POTENTIALLY SPEND LESS?
POTENTIALLY SPEND LESS?
GO TO GERALD STORCH, STORE YOU
REMEMBER HIS DAYS RUNNING
TOYS "R" US.
GERALD, HOW ARE YOU?
>> HELLO.
NEIL: WHERE DO YOU SEE THE
CONSUMER NOW CAUTIOUS WHEN IT
COMES TO SPENDING?
DOLLAR GENERAL, DOLLAR STORE,
NOT SO MUCH THE HIGH-END GUYS,
BUT WHERE DO YOU SEE THE
CONSUMER ABOUT NOW?
>> I THINK WE’RE AT A INFLECTION
POINT.
COMING OFF THE POST-PANDEMIC
EUPHORIA, PEOPLE WERE EXCITED TO
TRAVEL, EXCITED TO DO ALL KINDS
OF THINGS.
WE’RE GETTING TO THE POST-SUMMER
HEADACHE AROUND LABOR DAY, WHERE
CONSUMERS ARE LOOKING AT THINGS.
INFLATION IS PRETTY BAD.
I’M NOT VERY HAPPY ABOUT THE
ECONOMY.
THERE IS A LOT OF WARNING SIGNS
OUT THERE.
YOU SEE THAT IN THE WAY
CONSUMERS SPEND THEIR MONEY.
AS YOU POINT OUT MORE DOLLAR
STORES.
MORE IN VALUE PLACES.
LESS ON THINGS LIKE ELECTRONICS
OR APPAREL, WHICH HAD BEEN A BIG
GAIN, GAMER COMING OUT OF THE
PANDEMIC.
MORE ON NECESSITIES PUTTING FOOD
ON THE TABLE.
CONSUMER SALES ARE UP, BUT
THEY’RE UP FOR FOOD.
NEIL: SO DOLLAR GENERAL, DOLLAR
STORE, SOME OF THESE LOW-COST
RETAILERS ARE BENEFITING, IT
DIDN’T EVEN EXTEND ALL THE WAY
UP TO WALMART AND I’M WONDERING
WHAT THAT TELLS YOU?
BECAUSE ON THE SUPER, SUPER
HIGH-END THE WEALTHIER ARE
PROVING NOT SAYING TOTALLY
IMPERVIOUS TO THIS BUT THEY’RE
SPENDING LIKE IT IS NOBODY’S
BUSINESS.
SO WHERE IS THIS POCKET THAT YOU
WORRY ABOUT?
>> LOOK, IT’S ACTUALLY QUITE
CONSISTENT OF A STORY.
KEEP IN MIND THE DOLLAR STORES
WERE DOING GREAT BEFORE THE
PANDEMIC.
THEY DID OKAY DURING THE
PANDEMIC.
THEY’RE DOING FANTASTIC NOW.
PEOPLE ARE WORRIED ABOUT MONEY,
WHERE THEY SPEND IT.
WE SAY WALMART IS NOT DOING THAT
WELL.
THEY’RE NOT DOING AS NEARLY AS
BAD AS TARGET WHO IS REALLY
TAKING IT ON THE CHIN.
BOTH OF THEM RETROSPECTIVELY GOT
CAUGHT AS CONSUMER SPENDING
SHIFTED OUT OF THINGS LIKE
APPAREL, ELECTRONICS, INTO
NECESSITIES.
THAT IS WHERE THEY REALLY GOT
KILLED.
THEY HAD TOO MUCH OF STUFF
PEOPLE DIDN’T WANT ANYMORE.
DOLLAR STORES DIDN’T HAVE THE
PROBLEM BECAUSE THEY NEVER
CARRIED APPAREL TO BEGIN WITH.
BACK TO WALMART, THEY’RE DOING
VASTLY BETTER THAN TARGET.
EASY TO SAY THEY’RE DOING POORLY
LIKE TARGET PUT THEM IN THE SAME
BUCKET BUT THEY’RE NOT.
THEIR GROSS MARGIN EROSION, NOT
GOOD AT 100 BASIS POINTS FIRST
PART OF THE YEAR, TARGET WAS
ALMOST 900 BASIS POINTS GROSS
MARGIN EROSION.
AS WE TURN TO THE BACK HALF OF
THE YEAR, WALMART’S STRENGTH,
NATION’S NUMBER BUN GROCERY,
WALMART IS CONSUMERS WANT TO BE,
VALUE-BASED PRODUCTS PUTS THEM
IN VERY GOOD STEAD.
I WOULD NOT PUT WALMART AND
TARGET IN IN THE SAME BUCKET.
COSCO, TJ MAXX, WHO IS DOING
POORLY?
DEPARTMENT STORES ARE A
DISASTER.
MACY’S DID WELL.
THAT WAS COMPARED TO VERY POOR
LOW EXPECTATIONS.
KOHL’S NUMBERS ARE TERRIBLE.
NORDSTROM ARE DISASTEROUS
NUMBERS.
GAP NUMBERS ARE BAD.
YOU DON’T WANT TO SELL APPAREL
THESE DAYS.
NEIL: FOR THE HOLIDAY SEASON YOU
USED TO SAY RUNNING TOYS "R" US,
PEOPLE SHOP FOR THE KIDS, THEY
WILL SURRENDER GOODIES FOR
THEMSELVES FOR THE KIDS.
TO ME DEPENDS ON HOW I FEEL
ABOUT THEM ANY GIVEN DAY, HAVING
SAID THAT WHAT DO YOU SEE THE
HOLIDAY SEASON?
>> VERY GOOD MEMORY.
BY THE WAY TOYS WERE VERY STRONG
SELLERS DURING THE PANDEMIC.
I THINK LARGELY BECAUSE KIDS
WERE HOME.
YOU HAD TO BUY THEM A LEGO SET
OR SOMETHING OR ELSE THERE IS
LOT OF NOISE IN THE HOUSE.
TOYS HAVE BEEN SELLING GREAT
THROUGHOUT THE ENTIRE PERIOD.
I WOULD EXPECT THAT CONTINUE
THROUGHOUT THE FALL HOLIDAY.
THE QUESTION COMES, TALK ABOUT
LUXURY DOING WELL, HIGH-END
PRODUCTS, WELL GENERALLY THAT’S
TRUE BUT WHEN THE STOCK MARKET
IS DOWN, LUXURY SALES EVENTUALLY
HAVE TO GO DOWN BECAUSE THAT
FUELS LUXURY GROWTH.
HIGHEST R-SQUARED ANY ANALYSIS I
EVER DONE IN RETAIL BETWEEN THE
STOCK MARKET AND LUXURY SALES.
THEY’RE VERY HIGHLY CORRELATED.
THE MARKET CONTINUES TO BE
ROUGH.
EVENTUALLY SALES WILL EVENTUALLY
SETTLE DOWN.
YOU WILL NOT SEE THAT FOR THE
HOLIDAY.
SEE IT MUCH MORE IN NECESSITIES,
MUCH MORE FOR YOUR KIDS.
THAT IS ALWAYS A NECESSITY IN
TOYS.
IT WILL NOT BE THAT GREAT.
I’M REALLY WORRIED ABOUT THE
FUTURE HERE.
I DON’T THINK WE’RE TAKING THE
RIGHT STEPS TO DEAL WITH
INFLATION, ECONOMY.
FOR THE FED KEEP RAISING RATES,
HIGHER, HIGHER.
THAT IS A SINGLE-MINDED SOLUTION
TO A BIG PROBLEM.
ALL IT WILL DO DRIVE A STAKE
THROUGH THE HEART OF THE
AMERICAN CONSUMER EVENTUALLY, BY
GOVERNMENT YOU MEAN WHAT IS
GOING ON IN CONGRESS RIGHT NOW
AND ALL THE EXTRA SPENDING NOW,
RIGHT?
>> NEIL, THE PROBLEM WE HAVE WAS
NOT CREATED SOLELY BY LOSE FED
POLICY.
CERTAINLY THAT WAS A FACTOR BUT
HIGHLY CREATED BY FISCAL
STIMULUS, RIGHT?
SPENDING TONS OF MONEY.
BY SUPPLY CHAIN ISSUES,
TRANSPORTATION, DISTRIBUTION,
SHIPPING.
BY ENERGY GOING UP IN PRICE AND
GOVERNMENT POLICIES THAT
SUPPRESS THE PRODUCTION OF
FOSSIL FUELS IN FAVOR OF
LONGER-TERM GAINS IN TERMS OF
GLOBAL WARNING.
BY EMPLOYMENT ISSUES.
SAW IT AGAIN TODAY WE SIMPLY
DON’T HAVE ENOUGH PEOPLE TO
STAFF THE JOBS.
THERE ARE FIVE DIFFERENT REASONS
WHY WE HAVE HIGH INFLATION AND
PROBLEMS WE HAVE, ALL WE’RE
DOING IS SAYING OKAY THE FED
WILL TAKE CARE OF IT BY RAISING
RATES.
EVENTUALLY ALL THE FED DOES PUT
US INTO MASSIVE RECESSION F THAT
IS THE ONLY TOOL YOU USE, YOU
DON’T ADDRESS GOVERNMENT
SPENDING DON’T ADDRESS THE
SUPPLY CHAIN, DON’T INVEST,
ADDRESS THE ENERGY ISSUES, YOU
DON’T ADDRESS THE EMPLOYMENT
ISSUES YOU’RE NOT GOING TO FIX
THE PROBLEM.
NEIL: ALL RIGHT.
WE’LL WATCH VERY CLOSELY.