NPD's Cohen: Department Stores Must Change Their Game (Audio)

talk about retail spending. We've got Marshall Cohen, chief industry analysts for the np D Group. Maybe he could explain why retail sales were up one point three percent like many department store chains showed losses in a Marshall start started his career pim folding Ralph Lauren Polo sweaters at a Macy's Bloomingdale's on Long Island. Will be interesting to see he's watching his industry for so long because he's seen these trands, a lot of them developing. And we'll

have him way ensued. Let's have Charlie Pellett way in on the news. Now he's back in Bloembrook World headquarters with a business flash all right, Ralph Laurence shares. They are down Kathleen now by one and a half percent. Nordstrom, though the big retail story today disappointing earnings, IT shares plunging thirteen point six percent. PepsiCo is suffering its biggest interday decline in more than two months, after Nelson Peltz's investment firms sold off IT shares in the beverage and

snack Giant. PepsiCo shares they're down now by one point six percent. We are brought to you by National Realty Returns on cash in rented real estate find them at n r I A dot net stocks extending lessons losses to fall to a one month low. The dollar climbed after the biggest gain in US retail sales in a year, reignited speculation the Federal Reserve may liff rates as early as June. Kevin Karen is market strategist at Stephile Nicholas. Yes,

the Fed raising interest rates, but it's very lows. The cash rates are still a low, and bond great yields of where they are, So the last question then becomes, well, what do you do with the growth part of the portfolio? And our take on it has been to shift the portfolio to look more companies that have more consistency in the mix and focus more on attaining kind of lower, more consistent returns than grabbing for the very high returns.

SMP five hundred index down seventeen a drop of eight tenths of one percent, naz stackdown nineteen, a drop of point four percent down, Industrials down one hundred seventy seven points a drop of one percent, Gold up to ninety beyond the twelve seventy four a gain of point two percent. And now let's take a look at the other stories making us. Thank you Charlie from the Bloomberg news Room, Myrami Inoescentio. This news update is brought to you by

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From the Bloomberg Newsroom. I'm Rainy in essentio, Charlie, and we thank you and again recapping stocks bouncing along the bottom with the SMP five hundred index down eighteen, a drop of nine tenths of one percent. I'm Charlie Pellett and that's a bloom Bread business flash. The surf music boy playing that well because I'm Caffeine is along with Pim Fox, and we are continuing our live broadcast here from Elbow Beach, Bermuda, an ocean front on claim of

classic style, contemporary luxury. Just a delightful place to be. These entire island at Nation is brimming with beautiful sites and wonderful, kind, gracious people, and I certainly want to thank all of them that have helped us here at Elbow Beach and in our time so far on the island. Retail sales people are spending money here that where people are spending money at resorts. What about the United States,

What about department stores? The government's retail sales report look pretty darn good today, But for a lot of retailers, Nordstrom's j C Penny list gets longer and longer. They're cutting earnings forecast, they're cutting their sales forecast. Joining us Marshall Cohen he retails US at np D Group. Marshall, do you ever check in on places like community to

see how people are spending money? Actually I do. I don't get to be there often enough, but we certainly do look at boos spending on resorts and boos spending on experiences. And that's actually one of the reasons why that middle sector of the market has challenged, because the experiential customer, the millennial, is a big part of the focus for these guys, but it's also a big part of the spend diversion. Marshall wondering if you can help me.

I looked at the numbers from the government today, an increase of one point three. But all week I've been mindful of the downturn in the reports from many of the major department store chains. You saw it happened to northstron You saw what happened to Macy's and Coal's. Can you explain this when you look at what's going on. It's actually a four part answer online, which is, you know, you have to be careful what you wish for you

might just get it. Well. A lot of these retailers have really stepped up and ramped up their offerings online. That cannibalizes the activity in the store. Omni channel, which is the big piece of what they're all talking about as far as how they're going to grow their business doesn't really grow business at displaced this and then online outside of that retail environment certainly has become a formidable

competition in some categories. Four Online penetration is eroding the market share that these mid level of department stores have had. Uh you add in the fact that they've all made the play to the millennial consumer, and as we just kind of discussed, millennial is all about very limited discretionary income spending across a very wide field of product, and very experiential, which is what the department store doesn't offer.

The third piece of the puzzle is value. Right now, a lot of the categories that are not getting growth are all about price points and lower price points and discounts, and an example of that would be the ath leisure movement. We all know how the big uh trend for the whole season of and now into has been this movement towards more athletic inspired product. So imagine what stores are doing.

They're selling, you know, stretched leggings for forty dollars where they used to sell stretched denim for a hundred and fifty dollars. They have to sell two and three times as much merchandise to make up those lost dollars. Marshall, you spend what fifty weeks out of the year on the road. You go to three or four different stores a week. You're all over the country, You're in and

out of them. Let's take a look at Nordstrom's. Northstrom's has been such a successful department store chain, expanding over the entire country. But it's even a big successful chain like north Rom's kind of doomed. Have we seen the end of retail and department stores as we once knew it? Not?

If they change with the consumer. The consumer has changed at a faster pace than the stores at Nordstrom if you look at them and any other traditional retailer are steeped in tradition, they still keep doing the same thing they've been doing since I was folding sweaters of Bloomingdales are absolutely right, I've heard that, um. But it's really about recognizing that if they don't change who and what they are, they will have a tough time. But they

really can do better, they can do more. They just have to learn how to transition quicker. They don't have time to test some of these things and then sit there and see because the consumer has already moved on to something else. So when you have the leading edge when it comes to service, that's a big differentiator than online. So the stores do have the ability to not only survive,

but actually start growing again. Well, Marshall, can you tell us who the good, the bad, and the ugly when it comes to being able to execute as you describe, Well, you have to look at individual performers within certain channels. Uh. And it's a nice fancy way of basically saying there's going to be one or two leaders in every one of the of the different channels of distributions. So when you look at somebody like in the mass market a target,

they're out performing the mark it uh. When everybody else in apparel was dropping for the quarter, they actually had growth. When you look at somebody like a warehouse club, the warehouse club channel, you know they actually for the first time, you're starting to show some vulnerability. So there's another one

that you've got to look at. On the negative side, when you look at some of the luxury retailers, they're holding their own, but they're up against some softer numbers, So we have to be careful that we're not looking at them as being the growth of the market when they're up against some you know, lower numbers, easier softer numbers to kind of anniversary. And then when we look at the department store sector, but we have to recognize is that we are looking at a channel of distribution

that must change the game. So we have Marshall Cohen, Chief Industry Analysts, the n p D Group based in Port Washington, New York. You're listening to Taking Stock on Bloomberg Radio. Coming up on a taking Stock, how about stepping back from the tough time for retailers this week and looking at a three to five year outlook for big cap companies that can make you money. That's coming up on Bloomberg Radio.