The Future of Retail: CEOs and analysts discuss holiday shopping trends and what's ahead in 2022
Foot Locker Chairman CEO Richard Johnson, Refinitiv Director of Consumer Research Jharonne Martis, Abercrombie & Fitch CEO Fran Horowitz, BDO National Managing Partner Natalie Kotlyar, and Authentic Brands Group Founder & CEO Jamie Salter join Yahoo Finance's Brian Sozzi to discuss the short-, medium-, and long-term future of the retail.
Video Transcript
- This is a Yahoo Finance special. Holiday shopping started earlier than ever this year. The surge driven by solid economic growth, stimulus checks, and millions eager to shake off the pandemic and get back out there. The retail industry says it will smash holiday records in the last six weeks of 2021. This rush to the register is providing a much needed boost for businesses both large and small.
But it's not all happy holidays. Stores are having a hard time hiring staff. Prices are up sharply everywhere you look. And our online purchases are stuck at port or anchored out at sea. Join us now as we discover what this all means for American consumers, investors, and the US economy.
BRIAN SOZZI: Welcome to Yahoo Finance's presentation of the future of retail. Or as I like to think of it right now, it is your pre Black Friday kick-off show. I'm Brian Sozzi. Really right in the middle of the retail action in New York City, Greeley Square Park. You could see behind me the H&M, you have Macy's, one of the biggest department stores in the United States. And you also might see crowds of people.
And I was in this space at this time last year, really at the height of the pandemic. Really this whole place barren wasteland, not a lot of people, not a lot of tourists. I can tell you, having been out here for the past two hours, I can't feel my face. I can't feel my hands. This hand might actually be stuck to this mic.
There are crowds of people out here. It is a different holiday shopping season, at least right now before Thanksgiving than it was last year. I see people shopping with bags. I had the bands out there playing. It feels like what one person told me, like 2019, which is pre-pandemic. Certainly good to see, good to see these people back out again.
But I will say this, walking around here for the past hour and a half or so you do see the remnants or the aftershocks of the pandemic. A lot of stores remain closed. For example, right down the block over here there was a GAP right on the corner there. That store was closed right in the middle of the pandemic.
And I will add this for you GameStop fanboys out there, there is a GameStop right across from me. And it's completely empty, not a surprise. But I do want to welcome in my first special guest for the hour. And it is Locker CEO, Richard Johnson. Richard, always nice to see you. I guess this is only fitting we start with you, because I am I think standing nearby one of your stores in the city. What's your outlook for this holiday season?
RICHARD JOHNSON: Well, Brian, it's always great to be here with you. And I would echo based on what my team has told me that the people are back out in New York City. So, it's great to see. Great to hear you affirm that.
And we're believers that the holiday is going to be strong. We just closed our third quarter, had a great quarter. Got our inventories in position to get the holiday season off to a great start. Clearly some of the things that you talked about in your opening with supply chain and boats and ships docked up.
The ports will clearly create some opportunities for us. We'll have to be nimble and agile. But we look forward to a good holiday season.
BRIAN SOZZI: Dick, I think I just realized that this is the first time I have talked to you not inside of my kitchen. So, that is a different change of pace in terms of our conversations. But are you seeing-- Interesting note right there that you mentioned, what your team mentioned. Are you seeing a big disparity between urban Foot Locker stores and suburban Foot Locker stores? In large part because we have seen these tourist shoppers come back.
RICHARD JOHNSON: Yeah. The move that I just talked about was really the tourist storms, right? You know our suburban stores, our borough stores in New York City have been on a pretty good run. But the reality is that Midtown Manhattan where we were missing some of that tourism has certainly started to rebound. And we've seen it in other key tourist cities around the country certainly.
So, as the borders opened up, as airplanes were allowed to land with foreign tourists in it, it certainly has been good in those marketplaces. And obviously New York gearing up for the parade on Thursday and all of the excitement that goes with Black Friday. I think there are certainly going to be a lot of energy. But we're seeing it across the marketplace in the tourist cities, Brian.
BRIAN SOZZI: Well, let's not forget about the local shoppers that keep a lot of these stores open. I mean, you're entering this holiday season with a record setting stock market. You have people that have built up their savings. I think the US savings rate is close to 10%. What are you seeing from that core US shopper?
RICHARD JOHNSON: Yeah, no as you've seen in our results we've posted good quarters throughout 2021. And that core shopper has a lot of energy around the products that we sell. Whether it be the high heat sneakers, whether it be that casual look. We think that our consumer wants to be casual and comfortable.
And they continue to come into our stores. They continue to shop on our digital sites and our social network. And we continue to see a lot of positive from that core consumer, Brian.
BRIAN SOZZI: I like what you said Dick, on the earnings call a couple of days ago. You mentioned that the consumer, when they are coming into your store they may not get their first choice of product but they are finding their second. How severe are these supply chain bottlenecks?
RICHARD JOHNSON: Well, we've been battling the supply chain for challenges for almost a year now. Obviously the shutdown in Vietnam and the slowdown in the ports that's been exaggerated a little bit, exacerbated a little bit as we got close to the holiday puts a lot of pressure on the team to react and find other opportunities.
But our consumer is very clearly out to shop. If they don't find their preferred style color, size, they really are going to the next available. And that's one of the real benefits that we've got being a multi branded retailer is that we've got a lot of partners that we can leverage our relationship with and find ways to get product into our stores.
So, again, as I said in our earnings call, we don't have a demand problem. The demand is out there and the consumer's looking for product. There's a little bit of a supply chain challenge that, again, we've faced for literally the last year. And the team continues to do a great job finding ways around it and getting product that our consumers want into the stores, onto sites, and ultimately on our customers feet and their apparel choices as well.
BRIAN SOZZI: Do you think these supply chain issues could go away next year?
RICHARD JOHNSON: I certainly think they start to go down a little bit, certainly the production environment in South Vietnam should get healthier. The factories are open and ramping up, so we think that there will be flow. I think that we'll work with our vendor partners to find other routing as opposed to just through Long Beach and LA, which is obviously where a number of retail cargo ships come into.
But there are many other ports that we can try to take advantage of and move things around. So, we'll certainly be working with our partners. So, I do see them lessening. I think that eventually the logjam will break up a bit and we'll be able to see a better flow into our distribution center and ultimately into our stores.
BRIAN SOZZI: I had a personal moment about a month ago, Dick. I realized everything in my closet was completely outdated, that I haven't really shopped much for the past almost two years in the pandemic. I went out and bought a ton of clothes. I imagine I'm not alone. What are some of the hottest selling styles you are seeing in Foot Locker? And what are people gravitating towards?
RICHARD JOHNSON: Well, high heat sneakers always drives the business. So, clearly Nike brings the best heat in the industry. We've seen a great run on ultraboost from Adidas. Our relationships with Puma, the RSX continues to be a great model for us here in North America.
We've got a new brand by the name of On out of Switzerland. They just went public not long ago. They've had a great run as that brand sort of takes hold in the US.
On the apparel side, it really is still driven by fleece. Fleece is our core consumers outerwear. And as we get into the fall and the winter season, it really is about layering. And they want the great fleece pieces that we've got.
We just had some really successful launches of our own brand, Locker and the East Bay performance brand that we launched in the third quarter. And we're about to launch our female consumer the Cozy brand sometime in December. Again, it's about comfort, it's about style, it's about feeling really, really good with how they look and what they wear.
BRIAN SOZZI: Well, listen to that. I really need to go out and get some new sneakers because I am completely off trend, Dick. Last one before I let you go. If I have my math correct, 20% of your market cap is in cash. Foot Locker is sitting on a lot of cash. How do you plan to use that?
RICHARD JOHNSON: Well, I think as Andrew Page, our CFO, pointed out at the end of our call last week, the end of the quarter is just a moment in time, right? We bought Atmos, we bought WSS. We've paid for WSS, but the payment for Atmos would have fallen into the fourth quarter.
Likewise the inventory that we helped to elevate at the end of the third quarter has to be paid for. So, first and foremost, we're going to continue to fuel our business. With the right inventory we're going to look for the right opportunities with our customers to expand capabilities. We've got a good dividend program, a share buyback program that's alive and well. And as we see dislocation we look for opportunities.
But, again, we've known each other a long time, Brian. I'm a guy that feels OK with having cash on the balance sheet. And we continue to put it to good use. If you look at what we've done throughout 2021, we spent $1.1 billion to buy two brands that were our fast growth brands that will help us accelerate our customer base and our growth in Asia. So, again, we'd like to look for opportunities. But first and foremost, we're going to fuel the existing businesses that we've got.
BRIAN SOZZI: And we have talked a good bit through the years, Dick. And I can tell you this, I really can't feel my legs. It is very cold out here in New York City. Foot Locker CR Richard Johnson. Happy Thanksgiving to you. Thanks for coming on, we greatly appreciate it.
RICHARD JOHNSON: Same to you, Happy Thanksgiving to you and your crew, Brian.
BRIAN SOZZI: Thanks so much, Dick. Appreciate it. And we'll be right back. Much more coverage I'm Yahoo Finance's special presentation of the future of retail. Do stick around.
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BRIAN SOZZI: All right, welcome back to Yahoo Finance special coverage of the future of retail. I am Brian Sozzi. Still hanging out in New York City's Greeley Square. Very, very cold. But no better time to talk about retail with Refinitiv, Jharonne Martis. Jharonne, good to see you. It's the first I've seen you since the pandemic. Thanks for coming down here.
JHARONNE MARTIS: Thanks so much for having me. It's good to be here.
BRIAN SOZZI: All right, so it is Black Friday week. What are some of your expectations? How will shopping shape up?
JHARONNE MARTIS: Well, it's interesting, because in a collaboration with Style Sage Refinitiv discovered that this Black Friday, things will be less discounted than compared to the last five years. So, we've been doing this collaboration since 2016. And I can tell you that less than 50% of all of the merchandise in the malls is going to be on sale. Traditionally this is over 50%. The department stores traditionally have almost 80% of their merchandise on sale. This year around, it will only be a little bit over 60%. Which is an improvement, because as you know, they've always seen their margins hurt.
BRIAN SOZZI: Where did the sales goal? Where are my sales? I need my Black Friday deals.
JHARONNE MARTIS: I know, I know. So, there will be deals, enough to entice you into the store. But not everything will be on sale. So, if you combine the inventory constraints with the supply chain issues, combined that with the pent up demand and you have a formula that really gives retailers the upper hand into definitely holding back, pulling back on aggressive discounting.
BRIAN SOZZI: Sounds like a wallet busting holiday shopping season. To me, this sounds like inflation in it's finest form.
JHARONNE MARTIS: Absolutely. So, as you know retailers are reporting third quarter earnings right now. And the cost of goods sales are already spiking up. If we look at the forecast for the fourth quarter, the Refinitiv data shows that this is expected to increase even further for the holiday season. And then we're expected to see gross profit margins decline. So, retailers have to be very strategic with how they're going to offer these discounts in order not to hurt profit margins further. Because they are hurting from the inflation.
BRIAN SOZZI: What retailers are positioned to really win?
JHARONNE MARTIS: The ones that are positioned better are the discounters, especially like Target and Walmart because we're already seeing that the middle class consumer is trading down. They are already being hit with higher gasoline prices. So they want to pay less when it comes to groceries and everything else. So, Walmart already told us last week that they're seeing a significant amount of new shoppers coming to the store because of this, because of higher prices and they want everyday values. Also, wellness is on top of consumers' minds.
BRIAN SOZZI: Been a tough two years, Jharonne.
JHARONNE MARTIS: Yes.
BRIAN SOZZI: I need to be pampered.
JHARONNE MARTIS: Exactly. So, people don't only want to feel good but they want to look good. So, Lululemon posted impressive comps of 26% last year and they're expected to be even higher for the holiday season. Dick's Sporting Goods, Hibbett Sporting Goods, they're all expected to do well. Nike, as you heard from Foot Locker, is still a favorite, the discounters.
And then consumers are still fixing up their houses. As you know, many Americans are traveling this week alone for Thanksgiving, more so than pre-pandemic. So, as a result, a lot of people are fixing up their houses. So, then you have the Home Depot, and the home improvement, home furnishing, they're all going to do very well this holiday season.
BRIAN SOZZI: You mentioned gas prices. When you talk to shoppers and consumers more broadly, how big an impact is that right now? And depending where you go in this country, you could see $5 a gallon in terms of gas.
JHARONNE MARTIS: Absolutely. And one thing we're already seeing, we talk a little bit about wellness. But also the fact that a lot of consumers did buy bicycles during the pandemic.
BRIAN SOZZI: [INTERPOSING VOICES] higher gas prices, buy a bike.
JHARONNE MARTIS: Exactly. And also you're working on your own wellness. But having said that, despite gasoline prices, the data does show that the sold out rate for the month of November is already higher than the previous two holiday seasons combined. And this is mainly because consumers have that pent up demand. And despite the higher prices, they are shopping. So, it does point all to a merry holiday season for the retailers.
BRIAN SOZZI: I'm still getting used to the crowds around here. This is totally a different scene compared to what we saw last year. Are there any losers this holiday season, companies that may not get it done?
JHARONNE MARTIS: So, the department stores and mall stores have been out of favor even before the pandemic. So, they continue to struggle. And when we look at the discount rates, they are still high which could affect gross margins. They have come down as we spoke. But gross margins could be highly affected at the department stores and at the mall stores.
Now, what's also important is that they are also suffering from inflation. The merchandise hasn't changed much. We're still seeing the same designers at the department stores. So, it's going to be an interesting quarter for them as the reopening has happened.
BRIAN SOZZI: Richard Johnson, Foot Locker CEO, we were just talking to him moments ago. And he's still dealing with supply chain bottlenecks, where the consumer may come to a Foot Locker store. You may not get your first choice, may not get your second choice, maybe you get your third choice. How much longer these bottlenecks going continue?
JHARONNE MARTIS: So there are finitive data points out that we're expected to see inflation and supply issues continue into the second half of the year, at least. And consumers are concerned about it. The latest reading on consumer confidence that showed that consumers are concerned about what it's going to mean for the future in 2022. So, they're worried about, is this really going to hurt my investments, my savings, and to some extent, their job situation? So, we might start seeing consumers hold back a little bit on spending in the first quarter of 2022. But for the holiday season they will shop.
BRIAN SOZZI: Yeah, well certainly. We're really in the thick of retail earnings season. We got those Walmart results, we got Target after the bell. We had Gap, Nordstrom I believe as well. What have been some of your takeaways?
JHARONNE MARTIS: Sure. So, it looks like the third quarter spending actually did slow down a little bit. And it's expected to pick up. Consumers took a mini break before the holiday season. What's interesting about the third quarter, though, is that online spending as a percentage of total US retail sales did decline a little bit, suggesting that consumers actually went more to the stores.
They spend more money at the stores than they did online, which is the first time we saw that slowdown since the pandemic. But looking forward to the fourth quarter, our estimates do suggest that this will pick up. Consumers will go online as they don't want to be all the time out in the cold like we do.
BRIAN SOZZI: All right. Well, nobody's watching here. Let's per se, just between us, what are you buying for yourself this holiday season?
JHARONNE MARTIS: I definitely am into the wellness sector as well. I do enjoy my yoga pants and to work out at home.
BRIAN SOZZI: Fair enough. Lululemon has gotten expensive, I will say there's lots of inflation going on at Lululemon.
JHARONNE MARTIS: And to your point, Target has stolen a lot of that market share. The athleisure merchandise at Target has resonated very well with consumers. And they've stolen a lot of that market share from the department stores.
BRIAN SOZZI: Let the record show I think I'm buying myself a watch. Refinitiv's Jharonne Martis, thank you for braving this very cold weather to come out here. Happy Thanksgiving.
JHARONNE MARTIS: Happy Thanksgiving. Thank you.
BRIAN SOZZI: All right, let's go over Jared Blikre, who's standing by. Let's look at some of the retail stocks after hours. Gap earnings out, Nordstrom earnings are out. Jared, what do you have for us?
JARED BLIKRE: Sozzi, you're not going to believe this. And first of all, I feel for you because I know how cold it is out there. But let's get to the WiFi Interactive where we see Nordstrom down 22% after hours. Just check that out right there. I'll go over some of the numbers. We're not going to dwell on them, because I want to leave you, Brian, something to do tonight and tomorrow morning, which I know you will.
Here's Gap, it is down 15%. Let me just go through some of the numbers. So Gap third quarter EPS $0.39. Guess what? The street was looking for $0.55. Excuse me, that is Nordstrom. So, I'm going to go back there.
Nordstrom missed on EPS that was supposed to be, street was expecting $0.55 came in at $0.39. Some of the other stats not too bad, but you can just tell from Erik Nordstrom, the CEO's tone in the letter what he's dealing with. He says work is also underway to improve merchandise margin across the company. Ensure we have the visibility and flexibility we need to serve our customers seamlessly despite global supply chain challenges. Lots of key words that we've been hearing from other companies as well.
Here's Gap, down 16% right now. And their full year forecast seeing net sales about 20%. Previously they saw 30%. That is a huge reduction. Comp sales up 5% versus 2019. But guess what, in the Old Navy those comp sales are down 9% versus that two year benchmark.
So, I'm going to move on to our heat map because I think we had some retail earnings this morning that were truly, truly disastrous. And we're just going to take a look at some of those stocks right now. I'm going to turn off these after hours quotes so that we can focus in on the action.
But here is Best Buy. This is a stock that's down 17%. And some of the others are in a similar situation. Let me look at some of these down here. Some of these stocks so small it's difficult to see them on this heat map now.
But Urban Outfitters is now 9%. , However, a lot of these stocks have bounced back over the last month. Here's what this heat map looks like on a trailing 1 month basis. Some of these smaller guys have made some huge moves. Dollar Tree is up 40% over the last month. And you can see on your screen there from the lower left to the upper right. And this is as we've seen the value trade once again kind of expanding and we see the yield curve marching upward.
We had a lot of movement. Fed has been in play with that. I'm not going to get into all the wonky details but I want to contrast what you're seeing here. This is the value trade over the last month compared to what Ark has done over the last five days. And this is an incredible showing here. Besides Tesla, which literally takes up half the screen up 5% and thank goodness for them, Roku down 18%, Zoom down 21%. So, there's been a real dichotomy over what has happened simply in the last month here.
And Sozzi, I know you're going to be all over a lot of these earnings. And let me just back this up to a year to date look. So, some of these names are still holding on to incredible gains. Home Depot, Lowe's, each up more than 50%. Give you an idea of what those year to date charts look like.
But it's a different story for a lot of these other retailers. And admittedly some of these were meme stocks. Here's Macy's, it was a meme stock earlier in the year but they've managed to build on it. They've managed to really enact their transformation strategy as you talk about quite a bit, Brian. 200% up year to date, I'm sure they're going to take them.
But really gives you pause here to think, what is in store for investors as we head into the rest of the year? Everybody wants to know what to buy. Maybe a little bit of both. Maybe a little bit of value, maybe a little bit of growth here, Brian.
BRIAN SOZZI: Thanks so much, Jared. Those are tough moves off by Gap and Nordstrom there again. But you're seeing now a pattern here you saw with Best Buy, saw with Dick's Sporting Goods. Now we're seeing with Gap, seeing with Nordstrom. Really these negative reactions to earnings by a lot of specialty apparel retailers. So, a mental note there for traders as we move forward in the retail reporting season. As for me, we'll be right back. More on the Yahoo Finance's presentation of the future of retail live from New York City's Greeley Square.
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BRIAN SOZZI: Welcome back to Yahoo Finance, this special presentation of the future of retail or as I have been calling it all special long, your pre Black Friday kick off show. I'm Brian Sozzi. Really still in the middle of New York City, the action where it's happening, Greeley Square. See H&M behind me, see Macy's. Lots of activity here in the city.
Very interesting to be back out in the thick of it all. This was not the scene last year as the pandemic was absolutely raging. These streets were ghost lands, ghost lands I assure you. But let's stay on here, let's keep it moving and bring in Abercrombie and Fitch's CEO Fran Horowitz. Fresh off her earnings call a couple of hours ago.
Fran, always nice to see you. Wish you were here with me doing this, but I will take you wherever you are. I can't exactly see you. So, take us through some aspects of the quarter. How is your momentum headed into the holiday season?
FRAN HOROWITZ: Hey, Brian. So happy to be here. And yes, I wish I was out there with you shopping the stores in person. I'm looking forward to getting out there myself this Friday for Black Friday and feeling all that energy that you're feeling out there today.
Listen, we reported a great third quarter. Some really exciting statistics for us. All the brands are firing on all cylinders. It's our best Q3 operating margin up income since almost a decade. Q3 sales best since 2014. Our product, our voice, and our experience or resonating. We are definitely heading into the holiday season with some momentum.
BRIAN SOZZI: Help us understand the stock price reaction. I mean, we're not asking you to trade the stock here or whatever it is. Just because the quarter to me looked good. I would say gross margins down 30 bips or basis points year over year, that is good in an environment where you're seeing inflation, you're seeing supply chain bottlenecks. How do you explain what happened here?
FRAN HOROWITZ: Listen Brian, I'm focused on the long term. Our gross margin on a two year basis is up several basis points. And we are ready to compete for holiday. We feel very good about our third quarter results and we feel even better about where we are headed into the holiday season. This is a big week that's coming up, and it is just the beginning of four to five good weeks for us, best weeks of the year that really bring our customer out for both for self purchasing and gifting as well.
BRIAN SOZZI: So, let's dive into the US results. Sales up double digits. How did Abercrombie do and how did Hollister do?
FRAN HOROWITZ: Company was up 17%. 17% for both brands in the US. It is our largest market as you know, and it's been our strongest results year to date. We're really seeing a very healthy consumer here in the US.
BRIAN SOZZI: What are you seeing consumers gravitate towards to? We were just talking to Foot Locker CEO Dick Johnson. And I realized that my wardrobe is completely out of style. What are people buying?
FRAN HOROWITZ: , Well that's great news. We love to hear that. We love to hear a consumer that's ready to go shopping.
BRIAN SOZZI: I'm sure, I'm sure.
FRAN HOROWITZ: So, let's start with denim. Denim we just set a record for the company for the third quarter, our best denim in history. We are seeing so many exciting trends happening in denim, actually across men's and women's. He and she responding to all the new fits that are out there. I certainly hope you bought our 90s straight jean for mens, it's one of our bestsellers.
At the same time, we saw another record for dresses in Abercrombie. Our Abercrombie female shopper, she is out there, she's socializing, she's ready for holiday. And at the same time, we're still seeing cozy. We're still seeing nice selling in our knits and our fleece. So, whatever your occasion is, we are ready there to dress you for whichever occasion, however you want to celebrate the holidays this year.
BRIAN SOZZI: If you are implying that I should head back to the 90s, you might be right. That probably was the last era I was pretty cool in. Help settle the record for us. Are skinny jeans, are they out of style? Is that now just a trend that's just not going to play post-pandemic?
FRAN HOROWITZ: You know what Brian, my favorite word and everyone on campus knows this is balance. It's very important to keep your assortments balanced. We are still seeing a customer who's interested in the skinny jean. And when the season changes, as you are out there in the cold today, and people start to wear their boots they're going to be looking for skinny jeans.
Our wide leg jeans and our newer fits, our mom, our dad, our flair, those are selling extremely well. So, what's exciting is she actually needs both in her closet. So, she may have a skinny jean, she may need a refreshner skinny jean. But she definitely needs some of the new silhouettes out there.
BRIAN SOZZI: I think I did a double take. I've been seeing a lot more cargo pants from the late 90s for guys appear back in stores and online. Why is the cargo pant coming back?
FRAN HOROWITZ: The 90s is the biggest influence that's happening out there for our consumer today. They're taking a lot of their style cues from TikTok. TikTok has really been the most influential social platform that's out there. And when our customers seeing something on TikTok, they're adopting earlier than they ever have before.
BRIAN SOZZI: Let's head overseas, Fran. The sales were down in the third quarter both in Europe and Asia. Is that the direct effect of the pandemic just hasn't ended overseas at all?
FRAN HOROWITZ: Listen Brian, we believe so. As you mentioned earlier, terrific what we've seen happening in the US. Definitely a much slower recovery both in EMEA as well as in APAC. The good news is the UK, which is our second largest market out there, we are starting to see sequential improvement. We're starting to hear and see that the footfall and the customers back out shopping.
In fact, we just opened up a new Abercrombie adult store on Regent Street. We were able to relocate from Savile Row where we opened a smaller, more intimate store that we've already seen a nice reaction to. In fact, I'm heading overseas next week to visit the team and visit that store and I can't wait.
BRIAN SOZZI: Are you saying, is Abercrombie still committed, Fran, to the Asia-Pacific region?
FRAN HOROWITZ: We are. It is our smallest and our newest region. It's less than 5% of our sales today. We are building a team in the region. We have some really terrific talent that we've recruited in there. And we are still committed to the region.
BRIAN SOZZI: Heading back to the US, have you seen international consumers come back? We have seen that travel ban lifted here. Are you starting to see some of these urban flagships? And I know you've closed a lot of the flagships, but you still have a presence in urban areas. Have you seen that international tourist come back?
FRAN HOROWITZ: You know to your point Brian, that ban was lifted very, very recently. We're seeing some kick back from that tourist customer. But we actually have seen is a domestic tourist. And we've been seeing that all year. The domestic tourists around the United States visiting our stores.
BRIAN SOZZI: Fourth quarter, do you anticipate that you'll have enough inventory to get through the holiday season? What have you done just to ensure you have clothes on the racks?
FRAN HOROWITZ: We do. So, let's just start with we've been navigating these challenges obviously since COVID and certainly for the first three quarters of this year. And the team has done an outstanding job getting our product from factory to the selling floor, as evidenced by the results that we've put up for the last three quarters. What's kind of interesting is this quarter we're going to see a different cadence to our product. So, where we would typically land most of our product by Black Friday, we will have newness from Black Friday all the way through Holiday peak.
So, we are going to surprise and delight that customer all month. And we have marketing dollars targeted to make sure that we tell the consumer that there's considerable newness. So, the best scenario would be the customer that comes out shopping early and then comes back and shops again because they've seen something else new and exciting in our assortments.
BRIAN SOZZI: Well, you heard here first, Abercrombie and Fitch CEO Fran Horowitz saying the 90s are back. Unfortunately, I gave all my clothes away. But maybe that's good for you, Fran. I can go back into your stores and restock on 90s and relive my high school glory. Fran Horowitz, Happy Thanksgiving. Thank you for doing this. We'll talk to you soon.
All right, let's get over to our very own Dan Howley, who has a holiday season. Take of his own. Dan? Dan, I think you're muted.
DAN HOWLEY: More than a year and I still can't figure this out. So, I want to start off and explain to you the things that you should buy and shouldn't buy for this holiday season. And really I want to give you the best advice of all, and that's to shop now. Holding off until the very last minute, never a good idea as my father unfortunately learned when I was younger.
But what happens is because of the supply chain crunch, you're not going to be able to get as many goods towards the tail end of the shopping season. So, start shopping now. If it means skipping out on Black Friday or Cyber Monday then do it. There are still great deals out there. In fact, a lot of companies are already offering Black Friday deals as we speak.
Now, let's talk about actual products. There are two in particular that I think that you should avoid. And it's going to come as a little bit of a shock, but the first one are TVs. TVs usually are what you think of when you think of Black Friday. Hoards of people running through the stores, barreling over each other trying to grab a TV.
But the reality is those TVs aren't very good quality. You're going to end up spending a few on something that looks like a big screen, but doesn't have all of the features that you may want from a more expensive TV. You're not getting those on the cheap. What you're getting is lower grade products that may not last as long as you want. So, if you're looking for something with OLED, you want at least four HDMI ports so you can connect multiple consoles or things along those lines. You're going to have to end up paying a little bit more than those door busters ideas.
The other thing that I want to point out is laptops and desktops. I used to work at a place, it rhymes with test guy, where we would have people come in every Sunday and they would pick up the cheapest laptop and then run out the door. The problem is, those cheap laptops end up dying quickly. They're going to be slow as soon as you open the box. And you're going to need to replace them with another laptop and just spend more money in the long run.
So, my suggestion is, that if you're shopping around Black Friday, you're shopping around Cyber Monday, and you need a laptop go for something that's a little bit pricier but has at least an Intel Core I5 processor. Maybe around 8 gigabytes of RAM. That's going to do it for you.
I think if you really want to get something and you don't want to get the hassle of this is too expensive or this is too cheap and I'm not getting the right product, the best things to go for are headphones. Which you don't really have to worry about specs on them. The main thing to think of is, how long is the battery last? And how is the active noise canceling if there is any?
Apple's AirPods are going to be on sale. We know that Beats are going to be on sale. Samsung's are going to be on sale. So, any major manufacturer, those are going to be a great get.
And then finally, I think an often overlooked gift and something that a lot of people would probably appreciate are gift cards for things like services. I'm talking about like Xbox Game Pass, Netflix, your Amazon Prime, PlayStation online, Nintendo's online service. Things along those lines that really are on the cheap, but still a great product.
And in particular, Microsoft's Xbox Game Pass, I say this all the time, it's a ridiculous deal. But they're really going to go hard on Black Friday and Cyber Monday, giving away three months for a lot cheaper than you would expect. I've seen them for as low as $1 per month. So, if you can get them, get them for sure.
BRIAN SOZZI: Dan Howley, always with the top tips. I'm ready to get out of here and go buy myself something. Dan, thanks so much. All right, do stick around. Much more ahead on Yahoo Finance's special presentation of the future of retail. Stay tuned.
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BRIAN SOZZI: All right, welcome back to Yahoo Finance's special presentation of the future of retail. I'm Brian Sozzi. Still stationed in very cold New York City, seeing it get a little dark out here. The temperatures are dropping. You hear that cement truck moving. Lots of tourists coming back here into the city. The crowds have been very strong. A lot different holiday shopping season this year compared to last year.
But let's stay in all things holiday shopping and bring in BDO's National Practice Leader Natalie Kotlyar. Good to see you.
NATALIE KOTLYAR: Good to see you, Brian. Thanks for having us.
BRIAN SOZZI: Yeah, if course. So, what's your outlook for the holiday season?
NATALIE KOTLYAR: So, I think to make a big story easy and simple, is this holiday season we're expecting to see fewer markdowns. Fewer markdowns in the store than we have seen in quite some time. As you know, most consumers are looking for that hot ticket item on Black Friday and Cyber Monday. And I think we're going to see fewer of those, primarily driven by the supply chain issues that we're seeing for the last six to nine months.
BRIAN SOZZI: How intense is the inflation in retail right now?
NATALIE KOTLYAR: So, inflation is definitely playing a role in pricing. I think that consumers are starting to get anxious about it. We did see an increase in October sales of 1.7%. But again, I think some of that was driven by inflation. Consumers are not necessarily buying more items, they are paying more for those items.
I think one thing really important to remember is that the consumer's wallet is not infinite. The consumer has a fixed budget. They're going to spend what they're going to spend. Some may spend over and they'll see that in their bills in January, but that's a whole other story.
BRIAN SOZZI: I'm sure they will. Well, some of these retail executives I've talked to think we all have infinite wallets. So, I can assure you that. Are you surprised how consumers have overcome inflation? We've seen a lot of retailers, they reported earnings, sales up pretty good. Stocks, not so much. But still, consumers have come out here and shopped.
NATALIE KOTLYAR: I think it's the excitement of coming back into the store, coming back into some level of normalcy that we haven't seen in quite some time. We'll probably see that continuing into November and then in December. I do believe that once those bills come in January and February--
BRIAN SOZZI: Those are the worst
NATALIE KOTLYAR: Exactly. And I think that's what's going to happen in Q1. We'll definitely see a slowdown in purchasing in Q1. However, that's going to be a double down for the retailers because all of the goods that are underwater right now, they're going to be coming in January, February, March. And those could be older goods that will need to be marked down.
So retailers are going to be having a double whammy. One, is you're going to have a smaller wallet because all those credit card bills are coming in. And two, they're going to need to get rid of and liquidate that inventory.
BRIAN SOZZI: I've been hearing that too. Like the first part of next year could be interesting for retail. It sounds like it could be a sea of markdowns in retail.
NATALIE KOTLYAR: I do believe there's going to be a significant amount of markdowns. Because think about it, you're receiving goods that have been on the water potentially for quite some time. So, you may be getting sweaters in March. You may be getting outdated technology in March. And that's going to require markdowns.
BRIAN SOZZI: When do you see the supply chain bottlenecks getting better?
NATALIE KOTLYAR: I don't see that happening at least for some time. I think that this will continue at least into the back-to-school season of 2022 and potentially into the holiday season. My advice to retailers is plan wisely, plan early, and plan ahead. So you know what you'll be doing come November of 2022.
BRIAN SOZZI: If we Zoom out, what is the state of retail post-pandemic? And we're still in the pandemic in many respects, of course, but I mean, I look around the city here, there are so many stores still closed. It's kind of jarring. Right across the street was a JCPenney, that's no longer there anymore. I mean, what's the state of retail?
NATALIE KOTLYAR: I think COVID has really turned retail in a different direction. It's definitely gone more to a digital, to a digital way. Brick and mortar is going to be a lie forever. In many years ago or for the past several years, everyone has been saying brick and mortar is going to die, brick and mortar is going to die. Brick and mortar is not going anywhere. It's going to morph. And brick and mortar is going to partner with e-commerce. So, whether that's through a very strong omnichannel concept, whether that's utilizing BOPIS. E-commerce and--
BRIAN SOZZI: Its buy online, pick in-store.
NATALIE KOTLYAR: Correct. Sorry, buy online, pick up in store.
BRIAN SOZZI: No, it's cold out here. I know we get used to all this retail stuff, I understand. Do you still see retailers opening up stores post-pandemic?
NATALIE KOTLYAR: Definitely. We're seeing a lot of retailers opening up stores. Those that have a good strong strategy, digital strategy, a strategy related to how to employ their employees properly and retain those employees, how to build strong brand loyalty is critical today. The worst thing that could happen to a retailer is if you buy something online or it has availability online but you go to the store and it's not there. That is the most frustrating experience for a consumer and will certainly hurt the brand loyalty to the retailer.
BRIAN SOZZI: Before we let you go, you mentioned labor. And I know the supply chain bottlenecks, those will eventually end. But is labor one of the biggest problems in retail after the pandemic? We've seen a lot of retailers raise wages to $15 an hour, but they still can't get the workers they need.
NATALIE KOTLYAR: It's definitely going to be a significant issue going forward. I think in retail as well as in other different industries. The key is to understand and to offer what the young generation is looking for. Whether that's giving them a special technology to work with, whether it's bonuses, whether it's wages. That's going to be the most critical aspect, is understanding how to bring those employees in.
BRIAN SOZZI: Before I let you go, any big holiday plans for you? It's good to be out, right?
NATALIE KOTLYAR: It is awesome to be out. And I will be out this holiday weekend. I hope everybody's out there shopping. So, shopping and early.
BRIAN SOZZI: Shopping, all right. Well, thank you so much. Natalie Kotlyar of BDO. Good to see you. Thanks for braving the frigid cold for us. We appreciate it. We'll talk to you soon.
NATALIE KOTLYAR: Great. Thank you so much, Brian.
BRIAN SOZZI: All right. And we'll be right back. Much more ahead I'm Yahoo Finance's special presentation of the future of retail. Do stick around.
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BRIAN SOZZI: All right, welcome back to Yahoo Finance's special presentation of the future of retail. I'm Brian Sozzi. Still stationed smack in the middle of all the retail action in New York City Greeley Square Park. The crowds are back. You could see some tourists in here. Again, this was a very different situation last year. Very much an empty area in here. But the stores are back. People are back in there shopping.
And a very interesting week for our next guest here. Let's bring in Authentic Brands CEO Jamie Salter. Jamie, good to see you. We were just talking in break. I'm actually standing in front of your Aeropostale stores here in New York City. It is very crowded in there. The styles look pretty cool. I'm certainly I'm sure that's very good to hear from you. But take us through this deal you and Authentic Brands made this weekend?
JAMIE SALTER: Well, it's an interesting deal. We were scheduled to do our IPO in July and we did file our S-1. And then we were looking at Reebok. Reebok heated up towards the end of July. And we had to make a decision sort of do an IPO or do the Reebok deal. So, we chose to do the Reebok deal.
And it's been sort of gangbusters since we closed that deal in August. And so we signed the deal in August and we'll be closing in middle of February to the end of February. But we had a lot of interesting parties. And one of the parties that was bidding against us, CVC actually called us up and asked us if we were interested in partnering with them on the Reebok transaction. And we said no, but we would be interested in possibly bringing you in and not going public.
So, CVC and HPS came into ABG. They bought approximately 25% of the company. And we're going to stay private now for the next few years.
BRIAN SOZZI: Jamie, that sounds like a big chunk of change you just raised. How much did you, in fact, what was the cash infusion as part of the transaction? And how do you plan to spend that money?
JAMIE SALTER: Well, look, really the truth of the matter there wasn't a cash infusion in the company. The cash went to the existing stakeholders and shareholders of ABG. ABG has plenty of cash on their balance sheet and available through their debt facility.
BRIAN SOZZI: Let's focus in on Reebok. That deal is expected to close if I'm correct sometime in the first quarter of next year. It's a brand that I know, that I have loved, I have purchased many items there through the years. But it went unloved inside that Adidas portfolio. How do you plan to revive Reebok?
JAMIE SALTER: Well, look, I don't know that it went unloved. When you look really deep into Reebok, Adidas was doing exactly what Adidas should be doing, which is growing the Adidas brand. And that's what Adidas really focused on. And when you have a sales force that is out there selling Adidas shoes and then the last 20 minutes they start to sell Reebok shoes, Reebok gets a lot less of the wallet from the retailers.
So, now that Reebok will be on its own, Reebok will have a much bigger opportunity to take more of the wallet from the retailers. And more importantly, what we're really seeing is that as Nike continues to pull out of certain retailers around the world and go more on a direct basis, it's opening up a very big opportunity for Reebok. So, we'll think about Reebok sort of Monday morning at 7 o'clock. And maybe Adidas was thinking about Reebok on a Wednesday versus Monday morning at 7 o'clock in the morning. So, we're very laser focused on building Reebok back to what it once was a decade ago. And we're already seeing a 25% lift in Reebok revenue since they announced the partnership with ABG.
BRIAN SOZZI: I think Reebok, Jamie, I think Shaq. Now Shaq is a brand you have inside of this portfolio at ABG. How do you plan to leverage Shaq? I think Reebok has an amazing catalog and amazing history. How do you plan to just move that forward?
JAMIE SALTER: Well, look, know it's Iverson or whether Shaquille O'Neal bringing back the pump and getting back into the basketball business in a major way is one of the focuses that we will plan on doing with shops like Foot Locker and JD Sports and Finish Line. So, we do plan on really bringing back a lot of the archives and classics in a much bigger way than they have been in the past. And I think that is some of the real important things about Reebok is really digging into the archive files and bringing some of those classic silhouettes back.
BRIAN SOZZI: I mentioned at the top, Jamie, I walked into the Aeropostale store which is part of your portfolio of brands. Crowded and the styles look great. People were in there buying and leaving with a good number of bags. What's your outlook for the holiday season?
JAMIE SALTER: Look, we're incredibly optimistic. I mean inventory levels are definitely at an all time low. But what we're seeing is consumers are coming in, they're buying, they're not looking for big discounts, and they are looking to sort of buy early. So, we're incredibly optimistic about Aeropostale and obviously lots of our other brands.
But what we're also seeing is they're buying not only in store, they're also buying online. So, you're seeing this omnichannel effect really start to kick in like we've never seen before, where they're shopping in both venues. We haven't seen the malls this busy really in three years. So, the malls are cranking and we're quite optimistic of the outcome for this year.
BRIAN SOZZI: Last thing before I let you go Jamie, you've built one very interesting company here. Many brands that we all know and shopped through the years. Forever 21, Brooks Brothers, Aeropostale. Eddie Bauer, you name it. What's your ultimate vision for the company?
JAMIE SALTER: Look, our ultimate vision is to build great brands and really consolidate under one pillar. And if you really look at ABG today, we have 30 plus brands in the portfolio. And the portfolio is very robust around the world. Today, we sell in over 150 countries. We have over 7,000 sort of partner franchised stores around the world. And the model is fairly simple, which is consolidate and work on sort of one platform.
So, when you look at the US, we're consolidated under SPARC, which stands for Simon Properties Authentic Retail Concept. And that's sort of our retail play as well as e-commerce. And then we also have AEG, which is obviously the company that I run today where we have roughly 1,200 partners around the world generating approximately $20 billion in annual retail sales per year.
BRIAN SOZZI: Well, it's fun to watch you build this company. Looking forward to following your journey from here. Jamie Salter, Authentic Brands founder and CEO. Good to see you. Happy Thanksgiving. And we'll talk to you soon.
All right, well that's a wrap for us here at Yahoo Finance. From Greeley Square Park in New York City, the sun has set but the shoppers are still here. And I assure you, again, this is a very different situation on the ground here in New York City. The shoppers are back, the tourists are back, people are buying stuff, the stock market is pretty much still at a record high. It's good to see these things, this commerce happen again.
All right, well do stick around. I'll be back on air tomorrow 9 o'clock. Have a great night.
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