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Let's turn out to the world of retail.
If you look at consumer discretionary stocks, they climbed about thirty percent last year, and our next guest expects a continued recovery in this discretionary spending, assuming no additional tariffs are implemented. However, she does go on to say that the likelihood is quite high that.
New tarffs will be implemented.
I'm pleased to welcome back Dana Telsey, founder and CEO at Telsey Advisory Group, who joins us.
Now, Dana, did you see evidence.
Of retailers or brands convincing consumers that perhaps tariffs were coming in it was time to buy a lot of their big purchases now before those tariffs raise prices.
Haven't seen that. But what we did see is more promotions this holiday season than last year. Was definitely a tick up. The holiday season started earlier when best By advertises holiday in September. The compressed season with five fewer days between Thanksgiving and Christmas, makes a real difference and created sense of urgency, which is leaded so far to Visa and MasterCard giving better than expectation numbers. On the season.
Four point eight percent at Visa, three point eight percent at MasterCard, all bigger than the three to three and a half cent gains they're originally expected.
I'm sorry that kind of just followed on the promotions because one thing I noticed, at least for the companies that I buy from, I thought there were a lot of stealth promotions, like if you just went to the website, you wouldn't see the discounts. Even some of the emails they sent really didn't make mention of it. But when you kind of dove deeper, there was always like some little easter egg where if you manage on hatchet, you would get, you know, on that extra twenty percent on
top of the Game of five whatever discount. Yeah, it was, and I thought that was kind of creative because I guess that you have to make a little more effort to get the discount.
Ye keep in mind, loyalty members, they got an extra discount. It was twenty to thirty percent, not like it was years ago when you had forty to sixty percent off. So yes, it is more promotional than last year, but certainly managed and well within the expectations what retailers are looking for. In terms of their margins.
But I guess to the idea that they really do want people to go into the stories because once you get.
Them into the stores, they may spend more.
And we were talking earlier about how gift cards are always a popular gift, if not a very creative one, and retailers love it because when people actually go and redeem the gift cards, that's where the spending happens.
Exactly. This is the month.
January is the month when everyone redeems their gift cards. Typically when they go in to redeem them, and that's when it's counted as a sale in retailer's books. But typically they can spend twenty percent more. So that uptick that you're going to get, it's a benefit to traffic and it's a benefit to sales. And let's not forget February's coming. Valentine's Day is coming. That's the next holiday.
Where chocolate is pricing.
Now it is pricey, you're exactly right, but people are still going to buy chocolate for Valentine's Day.
They are.
I am curious.
This is going to get a little bit more into the economic conditions because we're heading into a year where there is some uncertainty about the health of the consumer and their ability to spend. And I want to specifically start off with this idea as to whether people are trading down because there's been so much anecdotal evidence at high income earners are now trading down to slightly like a Walmart and folks that would normally shop at Walmart
are looking for something even cheaper. Are you seeing that play out?
One hundred percent? We've seen that in many different areas. Look where Doug McMillan, the CEO of Walmart, talked about where his biggest growth is coming from from some of their band of hire income consumers. Look at aspirational consumers. They're no longer spending on some of the luxury goods that they spent in the past. It's trickled down the benefit of the traffic of off pricers where they have very good brands and off pricers, but it's at a
value price. They're getting the traffic and they're getting the sales. So we've seen the conversion of some hire income consumers to essentials and to value pricing.
We're just about I don't know what I said a couple of weeks or so away from the inauguration of President Trump, who's promised to impose additional tariffs as well as some new tariffs. There's a lot of concern this could have an outsize effect on the retail industry. Are they prepared for this?
Are they already preparing for this?
I think they've been prepared for it. The diversification of sourcing of goods away from China has been definitely top of mind. The footwear retailers have the most exposure of China, Others like the Abercrombie some some apparel retailers have already gotten their exposure to China down to single digits from what had been double digits. It's a concern because we know what the consumer doesn't like is price increases, so
it only makes value matter. And that's why we lean defensive in retailers that offer value, like the discounters and like the off pricers, or strong brands offering newness and innovation. Hello Birkenstock where Germany and Portugal where they make their goods. Or you take a look at others, you look at Abercrombie when there's newness and innovation too.
How many pairs of Berkeley thirty pairs at this point of berkanstock Excell, you're past the average of three point six with the average American three point six. I blew past that long ago. Buy those Kloto shoes too, Yes, I do that as well. So terms are a big question mark here. We don't know when they're going to coming or in what form. But another big question mark is a possibility of strikes at the ports once again, we know that talk. They're supposed to resume next week.
What does inventory look like for retailers? I mean, we knew the last time around, they kind of got ahead of it. But are they ready for another potential strike.
A lot of them have been moving where they bring in their goods from, some of them using air. I think they're ready because one of our teams for twenty twenty five is while it's about social service supply chain, it's about surprise. We know this strike has been on the docket for a while, and so they're prepared for it. Luckily it would be happening after Christmas, not before Christmas. Goods are in, but retailers are having to pay more to circumvent where those goods arrive.
Dana always a great conversation looking forward to see how IT twenty twenty five plays out in the retail space. Dantel, the founder and CEO at Telsey Advisory Group,