‘Stressed consumers’ should worry retailers: Expert
December retail sales data came out stronger than expected on Wednesday, but while the data suggests resiliency in the US consumer, some experts are not fully convinced.
Storch Advisors CEO Jerry Storch joins Yahoo Finance Live to discuss the current state of the consumer and why retailers shouldn't breathe a sigh of relief at recent data just yet.
Acknowledging the strength of the retail sales print, Storch said the consumer "eventually has to crack" and retailers are "on borrowed time."
Storch believes value-driven trends will benefit Walmart (WMT), Costco (COST), and TJ Maxx (TJX).
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Eyek Ntekim.
Video Transcript
SEANA SMITH: Jerry, when you talk about who's best positioned within this race, the lots are focused on some of those discount retailers, especially, when you compare it to the troubles that we've been seeing within department stores, who from your view is best positioned at this point? And do you do you see that trend at all changing as you look ahead to the next 12, 18, 24 months?
JERRY STOCH: Look, eventually, as these numbers were better than I thought they would-- but, eventually, the consumer has to crack. They're under a lot of pressure. Inflation continues. It may not be as high as it was in the midst of the pandemic, but, it's still high by historical standards.
A lot of this spending that we're seeing based on other data is being fueled by consumers going into debt, both with credit cards, and buy-now pay-later types of apps. And, eventually, that comes home to roost.
So you have to feel things continue to slow as we go forward. The most likely winners in that environment are fairly obvious. It's Walmart, who's done well in good times and bad.
And Costco who just keeps doing it. They keep delivering. And I think that's because they really are a great value for the consumer. And someone like TJX who undoubtedly has a lot of the apparel increases that you see in the numbers that came out today. So they've been doing very well as we've come out of the recession. People need to dress up again.
BRAD SMITH: Jerry, what's the-- and I know that as your position as Storch advisor to CEO, but also former Toys R US, you have also, of course, former Hudson's Bay CEO. And still hold board appointments at, I believe, bristol-myers Squibb as well as over at Fanatics.
You've got to read and a line of communication into many CEOs that are still out there right now. What is their biggest concern or the red flag that they are watching and monitoring with this consumer right now?
JERRY STOCH: Look, I think most people feel like we're somewhat on borrowed time. And that the numbers certainly have been better than we all thought they should have been. But there are some tough pockets out there. And, again, I highlight that department store number. It's not a good number.
The luxury space I've heard is not doing very well, which is also a sign of a stressed consumer. And, particularly, that decline or that stress on luxury is coming from what we call "The aspirational luxury shopper." They're the people who every once in a while buy a very expensive pair of sneakers or expensive handbag and save up for it.
Not the really wealthy people but the people just a little below that who are struggling as we go forward here. So I think what we're all going to watch here is to see whether or not the inflation can come down and incomes can come up to the point where people are doing better than they were doing.
We've had year, after year, after year of this compounded inflation. And products still look very expensive to consumers. I think people thought maybe inflation would reverse, right? You'd have deflation. You're hearing more and more talk about that but you're not really seeing it yet in the numbers when you go shopping. And that's what we need to see for the consumer to be stronger.
