here to break this all down for us as Marshal
Cohen chief retail industry analyst at the NPD group,
Marshal, glad to have you on this morning.
Can you just talk to us about what trends
you know you're seeing that is signaling kind
of this current consumer behavior right now?
Well,
we're clearly seeing the consumer pull back a little bit for a couple of reasons.
One we're up against the comp numbers from last year where stores were open
when the stores were not opened the year before that.
So we have very high comp numbers.
So it looks like retail is doing well, we're now up against those high comps,
so you're gonna start to see that slide back.
But what's really impacting the consumer higher prices,
les promotions.
We're seeing retailers because remember we had a supply shortage
and a lot of product that was causing retailers not to
necessarily have to promote as much plus during the pandemic and
that covid consumer was really spending without the same level of
need for discounting.
So retailers didn't have to discount as much,
particularly when they didn't have as much inventory.
Now,
we're starting to see a little bit of a different play because some
of the inventory is now caught up and in some cases backed up.
But the other big thing to think about
is we're about to head into some significant headwinds with the economy,
think about the shift in the tax
refund checks for those people that took tax credits earlier in the year.
A lot of them don't realize that their refund check is going to be less.
That's going to cause some headwinds and then another big one is the 40
plus million people who have student loans that haven't had to pay it.
You know,
if that deadline on May 1st kicks in and people have to
on average spend another $420 to start paying back their student loans,
that's going to impact the consumer in a big way as well.
It's really notable there in terms of the consumer,
potentially in the near term not having as
much cash as they've had over the better part
of the last two years.
Obviously the retail sales data number that came
out recently showed a bit of a pullback,
but in the greater context, especially when you compare it to last year,
it still was up 17.6% from the
this here.
So, you know, americans out there are still willing to spend to some makes sense.
I'm curious then, what are the categories?
Because clearly they're willing to spend some areas, not in the other
one of the categories in which they're willing to kind of splurge on.
So when you look at the momentum that's happening right now,
you've got this clear movement of what I call social progression,
we're going out more.
We're going back to work more. So we've got fashion,
the whole fashion sector, which includes apparel, footwear,
accessories and the beauty business is on fire.
Uh, you know,
we've got the consumer who's clearly saying we need to update our wardrobe.
We need to rethink the equation.
Some people haven't worn certain apparel items for over two
years now and when they put him on there,
a little surprised that they may not fit, they've either gotten too big or too small.
So we're seeing the consumer feel as if they've got to update their wardrobe.
And we're also because we're going out
more and experiences are returning initially.
We thought as experiences recovered,
retail sales of tangible items would pull back, that hasn't happened.
So that's why you've seen that big growth that's occurred up to now.
But as I mentioned,
we're up against a shift in the behavior period that we're about to go into.
So we may not see these big growth that we saw February was a very strong month,
January for retail was a moderate month and we all know, 2021 was a good, a good year.
Yeah.
You know, we talk about the Fed's activity and raising interest rates quite a bit.
And so I'm curious what do you expect the Fed's interest rate hikes,
How that's going to impact kind of consumer behavior
traditionally.
What it does is it impacts a little bit of the home sector because that, you know,
the impact really fits into the mortgage money to some degree.
Credit card debt is impacted,
but credit card debt coming out of the pandemic was in a pretty healthy position.
So I don't expect too much
of an impact
of what's going on in relationship to the consumers spend early on.
The bigger impact is going to be the emotional quotient that the price of gas,
the things that we buy often.
So if we start to see food pricing increases,
if we start to see gasoline keep going up,
that's the emotional quotient that impacts consumers
more so than necessarily the the almost invisible amount that they
feel that when they have to have interest rates rise,
they're willing to borrow money and pay out that debt
Really quickly. I've only got about 30 seconds.
But I am curious, do you think there is a way for businesses to raise
prices to offset their costs from commodity to
even transportation all all throughout the supply chain
without scaring off customers? Or are they just gonna have to wait and wait out this
this era of high inflation?
Mhm.
It's a little bit of a combination of both.
There are retailers who have been tremendously successful.
Look at somebody like a target who hasn't really had to elevate prices too much,
but yet they're doing so well and they're resonating with new consumers as well.
So what we've got our retailers that are going
to start to play out with different cards,
new innovative products,
better value oriented products doesn't mean the lowest price.
It means product that's going to either last longer
or give you more diversified uses utilitarian product.
The consumer is looking for guidance when it comes to what the
next stage as we go into the post covid retail environment,
they're looking for help.
Well, that provides that you're going to be the winner.
Marshall really appreciate your insight.
Marshal Cohen, chief retail industry analyst
at the NPD Group.