here was more insight on the state of the consumer
is brian eric retail analyst at kearney brian the ship
that we're seeing in consumer behavior is that good news
for the economy, especially when we hear about rumblings
around a recession and that continuing to grow louder.
I think there are some positive signals in this because
the consumer is getting out there and even with the
high food and gas prices, we still saw them
taking a lot of vacations including this weekend with a
real surge in uh Memorial Day travel. You know
, you look at last week, right, and
we got many of the big name retailers reporting you
think of target and walmart and they really show that
the consumer is seeing this trend is moving from goods
to services and really, even on those lower angles
, I think of groceries being a little more picky
and changing their habits. What does this tell you
about how people are spending their money right now,
especially when it comes to goods? Well, it's
really interesting because it depends a little bit on who
the consumer is. So if you're talking about the
walmart or the target chopper because of the increase in
inflation that we've been seeing, they've been having to
spend a greater share of their wallet on that before
much of the rest of this economy, people are
still living their best lives and have saved a lot
of money and so they're able to spend it on
highly expensive plane tickets. Uh, and you know
, we're back in full swing on concert season and
people are buying outfits for the office. Again,
you know, things are very different now than they
were even just a few months ago. Speaking of
things being very different now than they were a few
months ago. You look at earnings from Dollar General
and dollar tree that starts to show this bifurcation in
the consumer, right? Those on the lower end
spectrum seems to now be kind of surging and looking
for for better prices and really hit, you know
, being hit by inflation more significantly to the tune
that they're turning to a dollar general. They're turning
to a dollar tree at a more robust pace and
they were, you know, say a year ago
or so, what does it say about the economy
or how does the economy operate and function? Well
, when there is this drastic bifurcation of those either
like, you know, Nordstrom consumer spending way more
and those who are on the lower end of the
spectrum really feeling the pain. Yeah, Well right
now it consumers tell us that they're most concerned about
the price of food and the price of gas.
And when you're on a very low income, it
really hurts those consumers more than, than the rest
of the economy and they are trading down significantly to
places like dollar tree and Dollar general. And that's
also why you see reports from companies like walmart and
target talking about how they have too much inventory.
There's even a place like that is more expensive than
a dollar general or a dollar tree. I wonder
if that elevated inventory picture does help with the inflation
picture. Right, Because a part of the inflation
pressures that we have seen have really been on the
, on the supply side, if there is now
over supply, so to speak, in some areas
, maybe that does help bring inflation down a bit
. Yes, I think so. And actually what
we're seeing broadly across the industry right now is that
there's a significant rebuilding of inventory across all the segments
that we're talking about. If you go and walk
the uh, you know, the almost any mass
merchandisers grocery today, you're gonna see a lot of
empty shelves. It's actually significantly historic lows right now
. So as those uh, shelves get rebuilt with
stock, I think we're going to start to see
uh inflation start to come down a little bit,
which would be great news for the consumer again though
, especially on the lower end of the income spectrum
, they need that relief more desperately. When I
look at other retailers, especially this week, obviously
earnings are not over. We've got names like lululemon
, Capri, michael, Kors versace jimmy choo pvh
, these are kind of your higher end retailers,
these luxury brands. Again, we were speaking of
that bifurcation that has been happening here, the higher
income, um, those on the higher income spectrum
seems to be spending more when you look at these
companies expected to report, what are you expecting from
them or you could expect that trend to continue that
they're seeing a surge in kind of, you know
, people going out for events. It's the week
of the summer of weddings, right, buying some
of these items for those events. Yes, I
do. I think the state of these businesses is
going to be very strong. The consumer that's buying
more premium goods, more luxury goods is really out
there, living their best life. And they have
a lot of disposable income to use on products like
these. You know, what I found interesting over
the course of the last year is we keep getting
these consumer sentiment reads right, and I think the
latest one in may showed that it dropped to its
lowest level in terms of consumer sentiment, um,
since 2011. What are your thoughts around consumer sentiment
and actually impacting consumer decisions? Because those haven't correlated
for quite some time now. Mhm. Yeah,
I think there is something strange going on here and
that consumer sentiment is often tied to things like gas
prices and the cost of groceries. And that's really
where we see the bulk when we do our consumer
research, that's where we see the bulk of the
issues as in those two categories. Whereas you don't
see it as much in things like apparel in electronics
, um, and and things of that nature.
So, you know, it's it's really, uh
, you know, maybe some of the old rules
aren't holding up right now. Yeah, it'll be
interesting to see when they come back into effect because
to your point, they haven't held up for quite
some time before I have to let you go.
Here I go again like 30 seconds. But I'm
interested um, what consumer trends are you expecting to
see over the next couple of weeks? Yeah.
Over the next couple of weeks. I think that
we're going to see a really strong start to the
summer and uh, you know, we already see
it with travel happening again and I think that consumers
are getting back out there and we're going to see
them spending very strongly and hopefully on a lot of
these non discretionary items that are more exciting than paying
extra for gas and food. Yeah, I'd rather
spend more for a fun experience than for my commute
to work every day brian, really appreciate your time
and your insight brian eric, retail and analyst at 00:06:13.180 --> kearney