Multi-brand retailers 'much better positioned' than traditional retail: Analyst

Coresight Research CEO Deborah Weinswig joins Yahoo Finance Live to discuss the state of the consumer, multi-brand retailers, what to expect from upcoming retail earnings reports, and retail inventory.

Video transcript

JULIE HYMAN: For more on what to expect from retailers this week, we're joined by Deborah Weinberg, Coresight Research CEO. Deb, good to see you. Thanks for being here. Can you hear us OK?

DEBORAH WEINSWIG: Perfect.

JULIE HYMAN: OK. Excellent. So talk to us about-- are we going to continue to see this sort of differentiation from between staples and discretionary, and how is that going to play out in the companies that we've yet to hear from?

DEBORAH WEINSWIG: Well, I think not only are we seeing a difference between the staples retailers and discretionary retailers. We're also seeing a difference between the higher end and let's say the kind of opening price point, right, with Tapestry a few weeks ago talking about how they're seeing, kind of, no price resistances. They're raising prices, yet we are definitely seeing, I would say, a bit of a trade down as Walmart referred to it.

So I think it definitely depends kind of what sector you're in. And if we look at like a TJ Ross Burlington, kind of, that off price, there's certainly a lot of interest from the consumer there, foot traffic, and also conversion.

BRAD SMITH: OK. And so-- I mean, we've already seen-- in terms of some of the retail sales data that's come through as well, Deb-- that it's not looking great for some of the more specialty retailers, especially considering sporting goods hobby musical instruments bookstores month-over-month they declined by about 3.3%. So what does that set up mean-- even in terms of the month over month from March to April-- how could that translate into their own earnings results that they saw, too?

DEBORAH WEINSWIG: Yeah. I think specialty is definitely facing some challenges. I do think that if we look at some of these alternative revenue streams-- I believe in March of 23 that Gap backed away from retail media and advertising services-- and so this has been another kind of revenue stream for the likes of Walmart, Target, Macy's, Kroger-- Amazon I think led the way, but these multi-brand retailers, I believe, are much better positioned because they are finding other revenue streams outside of traditional retail.

So whether it's data monetization, whether it's retail media, whether it's selling their IP, it's one of the reasons we've been so constructive on multi-brand retail. But it's a very, very important point that we would be in the, let's say, kind of outside of the masstige stage to luxury price range-- like a Tapestry-- is why we would be more concerned around the specialty retail retailers right now.

JULIE HYMAN: I'm curious about department stores as well. I mean, we've been talking a little bit about Macy's, and it's what-- 28% slump or something this year, and how they're going to fare in this environment when people are really, sort of, battening down the hatches.

DEBORAH WEINSWIG: I mean, I think that Macy's does deliver overall great value and ultimately ends up being almost the same price as you would pay at a TJ Ross Burlington, but it's, kind of, a coupon on top of deal on top of-- right. It can-- there's a lack of transparency sometimes to the consumer. And so I do think that there continues to be an opportunity for them on the marketing side and also kind of how they communicate to their customers and a loyalty program, et cetera.

So I do think that they are challenged from that perspective. And also with some of the-- I think we have to say it, right-- the organized retail crime that Target talked about last week. There are some retailers who are definitely having more of a challenge with that than others.

BRAD SMITH: When we hear about mix shifts from some of the largest retailers in the US like target, like Walmart, how might those mix shifts show up in the earnings results that are still set to come forward this week, knowing that those mixed shifts have actually meant consumers are perhaps just leaning more into the necessities that they need to purchase from those other retailers?

DEBORAH WEINSWIG: I think you're definitely continuing to see this kind of movement into more necessity. Some of the, kind of, government support was pulled back in the last quarter. I think we're starting to see that show up. And I think that the consumers, while we're not necessarily as it was-- as you said earlier-- we're not seeing like a slowdown. I think everyone's just a bit more tepid.

So-- and we also have-- we look at goods and services, right. The consumer is also kind of redirecting some of their discretionary spend towards services. And I think that in that environment that you either have to have, kind of, a really strong brand like a Tapestry, and the consumer is kind of trading up in some cases. But I think that when it comes to the necessities, that the consumer is watching what they spend. So this frugality almost, right. They are treating themselves, right, to a trip, to a vacation, to whatnot. But when it comes to day to day spending-- this is, I think, the key-- they are definitely, kind of, counting their pennies and being a bit more careful.

And where there are strong loyalty programs, where there's personalization, where there's customization, there are ways that we're seeing some of these retailers win. And some of the names, right-- Target, Walmart, Kroger-- they're really-- I mean they have, kind of, in the show earlier, right-- they have a lot of data on their consumer, right. They're just bigger retailers. I think they're able to do a much better job of delivering that customized experience, which I think is starting to show up in a bigger way in market share gains, but also gains in terms of where the consumer is spending their time, their money and their mindshare.

JULIE HYMAN: And then another story, another thread in all of the retail earnings is inventories, which now seem to be getting more right sized, right. This is something our Seana Smith wrote about. It's on the Yahoo Finance platform. How does that position the retailers for the second half of the year with now inventories being more lean? Is that a good thing? Does it mean that they'll be able to weather things a little bit better?

DEBORAH WEINSWIG: I mean, to me, holiday 21 was on record the most profitable holiday season we've ever seen because inventories were so light. You know, retailers felt that they missed out on sales, so they went the other direction for holiday 22. We're still working down unbelievably some of that inventory, and there still is inventory, kind of, that they haven't taken on to their books yet that is sitting in factories, warehouses, 3PL centers, so I do want to just be somewhat cautious.

We are definitely in a much better position than we were for holiday 22. The stores will be more pleasant to shop. We won't see that very aggressive, kind of, I would say markdown cadence, so it won't be this rush to the bottom I think. We are seeing pricing power. I actually think that is one of the most important things. As we talked today, [INAUDIBLE] earnings season so far.

And I think the positive is, for two age, that we will see much cleaner inventory levels, which will be just a better experience, but also we won't see all this aggressive discounting that we saw last year. So I do think it's a positive I just do want to be cautious that there are still higher inventory levels. It's just not on the retailer's books just yet.

BRAD SMITH: To what extent does credit card spending right now in data that's been amassed even by the New York Fed signal that this is a consumer that's very much bracing for-- and perhaps some of them already experiencing-- the early moments of a recession.

DEBORAH WEINSWIG: You know, it's interesting. Kind of coming out of March 10, SVD, many of us in the kind of retail consumer space were concerned about the consumer. And every additional data point I would say does make one a bit more cautious, but we continue to see spending, honestly, at a level higher than I would have expected in May of 23. But I would say from a debt perspective, from a, sort of, where we're seeing the consumer pull back-- I mean, there are definitely signs that they are more cautious, and that they're debt-- personal consumer debt-- is building.

I would just say I think that we all need to of keep our eye in terms of one or more caution, but that don't count this consumer out yet. They really have, I think, exceeded all expectations to date. And it does seem that while we all continue to, kind of, debate recession over cession, this consumer has definitely continue to spend on goods and services at a higher level than many of us would have expected. And, you know, I'm not counting them out just yet.

JULIE HYMAN: Truth. Deborah Weinswig, thanks so much. Our Coresight Research CEO. Thanks so much.