Wall Street Transcript Interview with R.J. Hottovy, Global Director and Senior Analyst at Morningstar: Higher-End Retail Outperforms the Lower End

Wall Street Transcript

67 WALL STREET, New York - September 3, 2013 - The Wall Street Transcript has just published its Retail Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Brick-And-Mortar Versus Online Retail Sales - Cautious Consumer Spending - Strong Secular Growth in E-Commerce - Competition From Big-Box Retailers

Companies include: The Home Depot, Inc. (HD), Lowe's Companies Inc. (LOW), Wal-Mart Stores Inc. (WMT), The TJX Companies, Inc. (TJX), Ross Stores Inc. (ROST), Petsmart Inc. (PETM), Amazon.com Inc. (AMZN), Costco Wholesale Corporation (COST), J. C. Penney Company, Inc. (JCP), Kohl's Corp. (KSS), Macy's, Inc. (M) and many more.

In the following excerpt from the Retail Report, an expert analyst discusses the outlook for the sector for investors:

TWST: There have been a lot of retail companies reporting this week and last week. What is happening with retail right now?

Mr. Hottovy: It has been an interesting week in terms of what we have seen for retailers. There have been pockets of strength, and I point mainly to the home improvement retailers; both Home Depot (HD) and Lowe's (LOW) showed exceptional results.

In my mind, we are seeing bifurcation between the high-end and the low-end consumers accentuated this week, and I think that showed up in Home Depot results and the high-end consumer who could still afford a house is looking to build or renovate it.

At the same time, that low- to middle-income consumer is still struggling, as we saw in the results from Wal-Mart (WMT). You also have a situation where teen retailers have also been under quite a bit of pressure. I think that would speak to the unemployment rates at the teen level.

It has been an interesting week in that regard, but I think the key takeaway is that you really do have two different consumers that you're talking about, at least in the U.S., one being an upper-end consumer that seems to be holding in there pretty well, and one low-end consumer that is facing a number of pressures.

TWST: That is interesting, because about six months ago, there was a lot of talk about the lower-end retailers gaining strength. Are you saying that has shifted?

Mr. Hottovy: I think we are starting to see a shift in that situation. I would exclude TJ Maxx (TJX) and Ross (ROST) from that...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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