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'The underlying trend of the consumer is very healthy,': Mastercard Sr. Adviser

Mastercard Sr. Adviser & Fmr Saks Chairman and CEO, Steve Sadove, joined Yahoo Finance Live to break down the current state of the retail industry and how COVID-19 has impacted it.

Video Transcript

ADAM SHAPIRO: We talk a lot about the economy and how much consumers are spending. And we've got the latest numbers for February from Mastercard. Let's bring in Steve Sadove. He is a Mastercard senior advisor and a former chairman and CEO of Saks Incorporated. You have quite the background in retail, too. I mean, you started General Mills. You're Bristol-Myers Squibb. So you've seen everything from the pills to the purses at the high end stores. According to the Mastercard survey, in February, overall sales increased, retail sales, 4.6%. It would have been greater, though, because of the freeze, right?

STEVE SADOVE: Well, I think the underlying trend of the consumer is very healthy. And you're right. The freeze in Texas, the winter storms hindered sales to some extent. But what you're seeing is an overarching healthy consumer representing 70% of the US economy is growing. And if you look at the January numbers, where you saw a 9% growth. February, you're seeing, again, continuing growth. Online tracking extremely well, growing at 55%. So this is a healthy consumer overall.

SEANA SMITH: Steve, how much of the recent bump up do you think had to do with the stimulus? And now that we'll likely get that $1.9 trillion package, more direct payments to Americans, what does that mean for spending going forward over the next couple of months?

STEVE SADOVE: Well, there's clearly an effect from the stimulus checks. What you saw, for example, in the month of January, the 9% growth, you saw almost a day by day impact when the $600 checks went out. So that early in the month, you saw a big bump. It started to tail off towards the end of the month. I don't think it had that much of an effect on the February numbers. February at 4.6 is probably close to what the underlying trend of the consumer is at.

And I'm guessing that if we get another stimulus, you're going to get a bump again with the consumer. The interesting thing is that the consumer is spending on the types of businesses and categories that they were spending on pre-stimulus and have been throughout the pandemic. It's the home, the home improvement, the grocery. Those continued to be very, very healthy. And you're seeing it on a continued basis. Categories like department stores, apparel, having a much tougher time.

ADAM SHAPIRO: So, Steve, the reason I went through your whole background is you really do know retail. And I'm curious what you think, based on what we're seeing from this data, because it's backward-looking, what we're going to see, I'm going to say starting in August, once we believe the majority of adults in the country will be vaccinated and the economies of the different states really opened up. What are you predicting is going to happen? Will we stay on this strong spending, or would it be even better?

STEVE SADOVE: Oh, I'm very optimistic going forward, relative to the health of the consumer. There's a lot of pent-up demand. The savings rate is high. Categories that have been hurt, such as lodging, restaurants, travel, those are ones that are going to outperform as we get into the, let's use your time frame of the fall. I see enormous pent-up demand.

I'll give you an example. My youngest daughter got engaged. She wants to get married, let's call it-- have a reception a year from now. Can't get a wedding reception venue. So you've got to really book them. And if you're thinking about travel a year from now, I think these are going to be categories that perform extremely well. So I would look at a recovery what-- and you're seeing it in the market in terms of what I call the COVID recovery stocks. But the underlying health, I do agree with you that you're going to see a building momentum with the consumer. Now, having said that--

SEANA SMITH: Well, congrats to you on your youngest daughter getting engaged there, Steve. But just breaking it down even further, though, and to the local level, because I know your data dug into this and some of the trends that we saw at the local level. Did this reflect the COVID-19 policies that we're seeing in various states? Because today, we were just talking about it with the doctor earlier on the show, how we have Mississippi, Alabama, and Texas all rolling back their COVID restrictions.

STEVE SADOVE: Yeah, I think that what you find is a trade-off between the online and the stores. So for example, when Texas had their storms, it clearly affected the overall sales for a period of time. But people migrated to online. If I look at the sales, for example, from the southern part of the country to the northern part of the country, you have-- and where you've had more closures, either because of the weather or because of COVID practices in terms of shutdowns, you have a bigger proportion of the sales being online.

So while there is an overall impact on shutdowns, I'm finding that it's a bigger shift between the brick and mortar and the online. So that's why California, for example, if I look at the last several months of sales, California has been in a bit more of a lockdown, but their overall sales, if you look at brick and mortar and online, is not materially different than the aggregate.