Bloomberg's Shah on Home Improvement, Housing Trends (Audio)

that have an effect on business. Our terminal customers can access this function at b I go on the Bloomberg Sema Shaw, thank you very much for being here. All right,

so where do where do you want to begin? I mean, because I know that there were some retailers such as Home Depot, Lows and so on, uh, that you want to talk about and some trends it has to do with them, well, just some tail winds you say, from housing right So um, our thought right now is that there's near term pressure on the home improvement segment from the macro perspective that as you can see that in the August US retail sales were building materials were down

one point for from the month prior, and I think a lot of that has to do with just the consumer is a little bit more cautious heading into the election cycle and not really quite sure what's going to happen, and I think that some of the other macro figures are not telling the true story of how the consumer really feels. But there are long term tail winds for the home improving sector. The most obvious is the rising home values and so people feel more comfortable investing in

their homes. And then we also have the fact that most homes over six homes in the US are over thirty years old, and more of the population of the US is aging, and they tend to want to age in place, so that often requires some sort of home renovation. The biggest hold up right now is also that home prices have appreciated so much that they are less affordable.

And that also that might help the home retailers because or the home improvement guys, because you just might fix up where you are because it's hard to move into a new place. I just want to ask you to to go a little bit deeper force because you said something interesting, which is that a lot of the macro indicators do not capture perhaps the real state of the consumer.

And I mentioned that only in the context of today's UH consumer spending that spending was up to tens of a percent, earnings were I beg your pardon, earnings were up two tens of a percent, spending was flat. And then also we got the University of Michigan report which said,

you know, things were doing pretty well. Right. Um, the surveys have gone all over the place in terms of how the confident the consumer is, but the macro data points, I'm thinking about our participation rates in the job market, how many people have actually left and are not looking for a job, And then also what types of jobs are you seeing, what type of creative job creation is there, and if it is more part time, those jobs tend to be less secure and pro worker productivity has not increased,

So even if more people are working, they're not being more productive. And I think there still is a I guess the headwind from what happened though eight where people are a little bit nervous and I don't know very many people that feel like they could walk out of their job and get another one right away. So if you have one, maybe you're focused on saving or paying down the debt that you have and maybe just not buying stuff. And I think part of it is also

a demographic change. The millennials tend to be broadly speaking, less focused on stuff and brands and more focused on um experiences, and they're into a shared economy. So that's sort of a different way of looking at what is the future of retail and how will the millennials shape that going forward. Well, you also have at least some

some information from a Deloitte study. Correct. This Deloitte study is about the holiday forecast, and the forecast is for growth of between let's say three and a half to four percent, And I guess your point is that maybe a little bit too optimistic based on what we've seen so far, and even the g d P numbers that came out for two Q, they would have to see a huge acceleration in the back half in my mind

to see that, and just generally it's not proven. But the way that Q three and back to school sales tend to go is how holiday often is. And from the retailers we've seen that I have a little bit of a delay in their reporting, doesn't sound like things were all that robust in August and September. Well, have you even said that. Let's say that you had a view of the market and you said that it was

doing pretty well. And the stocks. I mean, if I take a look at Home Deepot, the shares down about two and a half percent so far this year, uh lows a stock down five this year. If you take a look at it from a perspective of buying them, you're buying that you would be buying these things at you know, a twenty multiple. Is that considered to be expensive? I mean I made relative to I think that the home improvement retailers probably trade out a premium compared to

the SMP. But if you looked at the home furnishings subgroup, you'd probably see that they've come in a lot. That segment has been hit a lot harder one from the softening consumer, in my view, and also from just the rise of competition across the board, from the targets j C. Penny's and Macy's of the world, and also from someone like Amazon and Wayfair, which recently went public two years ago and over seven thousand items on their website. Because

home furnishings tends to be less brand specific. I don't know how many people can name the brand of their coffee table. You just go and look. It's very visually driven, and I think they're seeing a lot of share games as this category moves online, so just quickly seem as so.

The companies that might be effected in this case are things like what peer one imports restoration hardware Williams Sonoma right, Yes, those would be the ones, particularly someone like a bed bathroom beyond that tends to have less differentiated or unique product. Peer one has their own style of product, but they're still affected by us. Thank you very much for spending

time with me. Se Michelle is our consumer discretionary analyst for Bloomberg Intelligence, and of course you can access all of the Bloomberg Intelligence reports by just typing b I go on the Bloomberg Thank you for listening to taking stockh. I'm pim Fox. This is Bloomberg