yesterday,
Macy's and lululemon fell after suggesting a possible miss on Q four earnings.
Could that spell bad news for more retailers ahead
retail and e commerce analyst Claire Tassan joins us now to discuss.
Claire thanks so much for joining us this morning. Welcome to the show.
What's behind this trend here?
Well,
what we're seeing over the over Q four over the last few
months with within the retail sector is a lot a lot,
a lot of discounting being very attractive to consumers.
So especially around the holidays,
we saw that shoppers were really taking advantage of the deep discounts that were
on offer and that meant an extremely
competitive environment for a lot of retailers.
Not clear how much of this is driven by consumer behavior
versus these larger economic issues that we've been talking about.
Like high inflation.
Sure.
I mean that that is high inflation is
driving that discounting that discount seeking from consumers.
So there's a few key forces specific to the retail sector.
One is that inventory challenge.
We were hearing a lot about last fall and into last winter or the beginning
of winter thinking about those Overstock warehouses and
retailers doing a lot of early seasoned,
aggressive discounting to try and clear out some of that space.
That's really taught consumers that they have a lot
of power and then they were able to hold out
for a while and really start to see those
deeper discounts come in later in the holiday season.
The challenge on the consumer side is that,
you know the story of 2022 was the resilient American consumer
who was continuing to shop despite that really high inflation,
but we're starting to see consumers lean more and more on debt
and savings in order to continue to afford what they need to.
So that's not really a strong set up for 2023.
Yeah, Claire I want to address, you know,
kind of how these retailers are addressing this in just a minute.
But first we've seen e commerce retailers as well, um struggling.
So amazon stitch fix even ever lane announcing cuts or layoffs this week
is e commerce dealing with some of the same
issues as we're seeing with brick and mortar here.
Oh absolutely.
Every month I get to track where people are shopping and why they're shopping there.
And what I'm seeing month over month for about the last six months
is that people are going online specifically to look for deals and discounts.
So they see e commerce channels as a way to save money.
Very easy to have a bunch of browser tabs over
compare prices to find the best deal on what
it is that you're looking for which puts retailers in
kind of a tough spot when they can really
only compete on discounts for a cash strapped consumer.
So how are retailers taking steps to address these pressures
affecting consumers and these other macro shifts that we're seeing.
Yeah, so there's a few things happening first, like I mentioned,
continuing to discount to stay competitive.
Not something any retailer is excited to be doing,
but feels like the necessary move at this moment.
Um also seeing a lot of stores continue to, for those with a physical presence,
continue to re evaluate their brick and mortar presence to make
sure they have the right size stores in the right places.
We have a long history of kind of an
excessive amount of retail square footage in this country.
So we're still seeing some effects of that and rebalancing to make sure that
the right stores are in front of the right shoppers and you know,
that does change over time.
Last declare, you know,
bed Bath and beyond reported their third quarter earnings results this morning.
Obviously a majorly volatile and bumpy story there.
Do you anticipate that we'll see any major retailers declaring bankruptcy in 2023?
I that is a tough call you're asking me to make.
I know Bed Bath beyond has really singled, especially, you know,
as a single going into that earnings release
that that is an option under consideration.
Um, I am not going to speculate another bankruptcies for retailers this year.
All right, Claire,
thank you so much for joining us this morning for your insight on this
important story that's clear to us and
retail and e commerce analyst at morning consult