Interview With Dana Telsey: Masters in Business (Audio)

were both speaking so quickly. By coincidence, we both used to have our offices in the same building, and I was always bumping into her, usually when she was running out of the building to catch a plane or or something like that. She's pretty much always in motion. I

find her really fascinating. She covers a lot of retail and does it in a way that I don't know if other retail analysts spend nearly as much time as she and her colleagues do in stores with management, kicking tires, looking at looking at malls, looking at at various shopping experiences, looking at all these different channels that consumers could go out and consume goods. Um She's She's one of the most intriguing and highly ranked retail analysts on the street.

If you are all interested in any of the consumer and retailing stocks, and that's everything from Apple and Amazon to Lord and Taylor's, Nordstrom, Macy's two things like Starbucks or or shake Shack. Her firm is called the Telsey Advisory Group or tag get it retail tag Um. They really cover everything. They do a pretty substantial job. They're highly highly regarded, and I find talking to her about

retail to be a whirlwinds. She she may be the single most knowledgeable part US and I've ever encountered when it comes to the world of retail, consumer spending, retail shopping, retail sales, and all the companies that exist within it. So if you are all interested in that space, I think you're gonna find this to be a fascinating conversation. So, with no further ado, here is my conversation with Dana Telsey. This is Masters in Business with Barry Ridholts on Bloomberg Radio.

This week. My special guest is Dana Telsey of the Telsey Advisory Group. She is a retail analyst extraordinaire. I've been following Dana for forever. She was an analyst, institutional investor top rated for thirteen years. You were at bear Stearns for a good couple of years right now, it's there for twelve years, twelve years, and and we'll talk about her timing in her exit was perfect. Dana Telsey, Welcome to Bloomberg. Thank you so much, very great to

be here. Thank you for having me. My pleasure. So began with Ron Barron, which was a seventeen billion dollar firm, and you really started at the bottom, right You began as a secretary. I was Ron's assistant. I was so fortunate. I grew up in the city. You lived in the same building as my family, and I knew him from when he first started the company. So I learned from best in class of pro and he taught me how to understand stocks, how to understand companies, and also how

to read management teams. He believes in long term investing, he believes in guard value at a reasonable price, and he basically believes in the brand of a business kennot grow. And that's what I learned from Ron. I was so fortunate. So so you start working really at a very junior position and eventually you get you go through the c f A processes that right NBA process, NBA process. Okay, I want at night to business school, so you get your m b A. And then how do you then

morph into a full time analysts? Went to the South Side on the brokerage side, and frankly before that, I was fortunate to be in a Bye Side investor group of some of the best names in the business, like Steve Mandel of Lone Pine, where we got to exchange ideas on a monthly basis. And then I went to the South Side and basically went to C J. Lawrence, which was a terrific platform, fantastic people, and I got to learn how analysts sell their product and basically that's

why it's called sell side to the buy side. I was there for three years before they got acquired by Deutsche Bank, and then was at bear Sterns for twelve years. You're a bear Sterns for a long time. How do you morph into a retail analyst from really? Did you start as a generalist or were you always attracted to retail. I've tried everything. When I was at Ron's for a minute, he gave me the latitude. I tried being a traitor, I tried being a salesperson and what I liked about

it is I liked being being an expert. I really liked the idea of not doing research, talking with companies, talking with experts, and understanding and pulling apart the ten k's and the ten queues because it all tells a story. So I'm about storytelling. So so what makes following retail different than other types of UM analysts. There there's a very different energy and a very different focus for for the people who follow the retailers than the people who

follow tech refinance or what have you. So keep in mind, yes, I worked for Ron Barren, but since I grew up in the city, my family had a bookstore on Madison Avenue. My grandfather was cash register number one, my mother was cash register number two, when I was cash registered number three. So being able to understand that retail is detail and understand the complexity of the story, that's what makes retail fun. You could feel it. You can go in a store,

you can talk to customers. But today the world's changed because online and the Internet has really made things different than what it was. But you need physical and digital in order to really capture the consumer. We're gonna spend some more time talking about online in a little bit. But I recall back when you were at bear Stearns, you were notorious for doing a lot of of what what you call resa, what I would call shopping. But

you literally, my wife calls it retail therapy. You literally during the holidays and during major seasons, you're checking off boxes, You're going to thousands and thousands of stores, stores and locations. How aggressive are you aggressively? Are you out in the actual retail environed constantly? I mean, I believe that you can't sit at your desk and know what's happening in the field, so essentially everywhere from Chicago and Boston last week,

the West Coast. I was in London Monday and Tuesday of this week. I need to be able to feel it myself. What's moving, what's checking, what's left on sale, what bags are the consumers carrying, and how is the sales staff approaching them. If you don't feel it yourself, you're not going to know what a brand is. So retail is detail and the pulse of it to me

is being able to see the shoppers. How much do you put yourself at risk for foreign prey to anecdotal evidence, we all know Manhattan is in America, It's a very different place, and I'm constantly checking myself off as we're first coming out of the recession. Looks like things are doing pretty well now when the rest of the country

clearly wasn't wasn't where Manhattan was post bailouts. That's why I do those shopping tours around the country, and that's why my team and I whether they're in Tennessee, whether they're in California, whether they're in Chicago, you can't These companies have thousands of stores, so at least you're going to get a pulse and you're gonna get a read

what's working. And frankly, having combined that also on the international scope, that helps to seeing what a prime mark could mean in the US when prime Mark is based in the UK and that's where they're real retail presences along with the continent of Europe. I want to know what the US has now and what's coming and what could be impacting it. I look for change. How important are the macro environments? Do you look at things like

interest rates, inflation, the cost of the dollar. What does the macro concerns do to for a retail analyst A lot. I mean, look at today it's all about tax reform. What that gonna mean? What could it mean? What do these border adjusted taxes mean? The macro provides the framework and companies need to curate the landscape. So I'm constantly looking at it because it gives a gauge. Macro provides the framework and the companies need to curate for the landscape.

So what I mean by that is, well, all of a sudden, unemployment is getting lower. Well, then what should companies be doing, whether in discretionary goods, in price points, in articles that they're selling. Should it be different, should it be more luxurious goods or what could be a little bit more expensive? Is consumers can afford it. Companies today have more data and know more about their customer

than ever, both from online and from physical. Therefore, balancing inventory with what consumers really want is something they're able to manage better today than they were in the past. Macro helps provide that. I'm Barry Hults. You're listening to Masters in Business on Bloomberg Radio. My guest today is Dana Telsey. She is best known as a retail analysts. You can run is the tels the advisory group and spent a dozen years or so at bear Stearns. Let's

talk a little bit about online retail. Uh this holiday season, it seems like like every other year it's Amazon and everybody else? Is that still the case? That is still the case. It is Amazon and than everyone else. Whether you're a physical retailer, people are talking about do you sell on Amazon? Where they're a digital retailer, do you want to sell on Amazon? And essentially it's new categories and new brands that are emerging all of a sudden.

Businesses like consignment, the real real or threat up or trades A. That's what we're hearing emerge. But Amazon has not been that strong in apparel. They've been strong in other categories because Amazon is more of an item business. But you know they'll learn that too. And we think Amazon is going to continue to be someone and continue to be a business model that needs to be studied carefully. Well. They did the Zappos acquisition, which was for shoes and sneakers.

I think they did that as much to learned that business as anything else. But are are apparel different than Look, we all buy books and and those of us who still buy CDs and DVDs, as well as electronics and gadgets on on Amazon. Can you translate the fit and feel of a garment from a real store to online or is that always going to be a big advantage to physical brick and motory. The word always is a

dangerous word because some always always changes. And what we've been seeing is that on Amazon it feels to us like the best selling items or some of the replenishment items in apparel underwear, for example, seems very strong. Yet in other words, you know what you're gonna get, and now you're just price shopping to replace the repeatable, replenishable purchase. But collection items and designer where that doesn't do as well.

We're not seeing brands look to adopt Amazon yet because they're not putting them in an environment that's unique and differentiated for them. That's today. We'll see what happens over the next few years if as they scale the business. I'm holiday shopping, I'm looking for something fun and funky. Bloomberg actually had a best Pajamas to Buy and they ranged from fifty bucks to nine hundred dollars, and somewhere in the middle of that, a hundred and fifty dollars.

I found this great set of pajamas. I couldn't find it on Amazon. I ordered it from the manufacturer and then I went back and I did tweak the search a little bit and lo and behold, the right size, the right color comes up in that manufacturer, and um, and it was fired. I was cheaper on Amazon then from the retailer direct. It's it's amazing. And isn't everyone

an Amazon Prime member? It certainly seems what they've done with Prime the synonym for Amazon is the word scale, and is they put more categories to basically make you want to continue renewing that Prime membership, Like what they're doing with media, it's all encompassing. Yes, So Amazon Music, Amazon Video. It's amazing and the latest thing I discovered on Amazon, And I don't want to just talk about Amazon on Over the summer, we bought a TV. It's

for the basement by the treadmill. And months go by and I don't hang it, and finally it's like, all right, I gotta get this thing up and I go back to the store. I got it, and they want four dollars to install it, and I'm like, that's what the TV cost? Thanks? I go back to a Google search, thinking Angie's List or something, they'll come up. Amazon comes up. It's to have a television hung on the wall. It's amazing.

And then you realize, oh, wait a second. They're just a matchmaker between the consumer and the service provider and they take their pound of flesh. It cost them nothing to do this. It's pretty amazing. I mean, and now they're focused on that last mile. They want to be able to make sure that you're getting what you need when you want it, because they want you to renew

that prime membership. So so you could do plumbing, you could do yard work, you could do contracting, you could do there's a whole run of Amazon services that I had no idea that they actually provided it. It's quite astonished. So so outside of Amazon and Amazon Home Services and and all that stuff, who else is doing online? Right? I think you're seeing things from the real real I

think Wayfair is doing interesting things online. I think what you've seen from Binobo's, what you've seen from Dollar Shave Club. I think there's Revolve Clothing is pretty interesting in terms of what they're doing. What are they doing that's kind of unique. We've all seen the Dollar Shave Club videos. They were great, the company was what wasn't it for not in substantial amount of There's a terrific conference called

shop Talk. It began last year and they basically brought physical and digital together, and it's being gonna be held this year also on March nineteen, and that's where you see some of the newest online retailers and how they're growing and how they're becoming physical too, because physical retailers need to better embrace digital also. That's that's fascinating amongst um outside of Amazon, who else from pure digital not having a physical shop? Who else is is catching your eye?

I think just not having a pure physical shop, but just on the on the digital side, I think there's a lot of interest in social media things. What Snapchat is doing, what pinterest is doing. That's really interesting to me. Are they converting their user activity to actual retail sales or at least two retail prospects driving traffics seems like it. I mean, look at the line that's hell that the at the Snapchat pop up shop shop here on sixty

between Fifth and Madison. Everyone wants those virtual reality glasses. Look at Instagram. I've an office filled with people who are consumers, people who like to consume, and frankly, they're learning about new trends, new retailers, new online sites, all through Instagram. A picture is worth more than a thousand words. That's interesting. What about the brick and mortar retailers, which of the physical stores are actually have a good digital

um positioning. You've got to give the department stores credit. Macy's Nordstrom have done a very good job at integrating physical and digital and it's growing fast for them, and I think you're seeing other players. Look at Walmart. Walmart basically now believes online is central to their strategy. I know that if I go to a Lord and Tailor or a Macy's and I want something and they either don't have the right color, don't have the right size, every salesperson will say, oh, we can have that ship

to you for free. If you want this one in this color, we can run it it'll you'll have it in a week. No one wants to lose a sale. Everyone wants you, the shopper, to think of them as in stock all the time and be retail loyal. And how do you get loyalty? You get loyalty by service. You get loyalty by price and convenience, and that's what they're offering. So you mentioned price, what does online due

to price competition? Are we still seeing the same sort of showrooming that was an issue a couple of years ago? You are. Price transparency is one of the biggest competitors for all of retailers and etailers, and so how do you how do you break price transparency exclusive items, more innovation? Basically being able to communicate with your customer services the killer app these days, and being able to be communicative even in store and out of store, I think makes

you feel part of the club. Service is the killer app feels like it? I mean, when you can have sales associates, people who chat online with you, if you're customized to them. Why do you think you're seeing The mobile phone right now is becoming so important to consumers because they're using it for everything. It's not only their work lives, but it's their personal lives too that helped create transactions and complete transactions. I'm barry, what helps You're

listening to Masters in Business on Bloomberg Radio. My special guest today is Dana Telsey of the Telsea Advisory Group. She is a top rated institutional investor analyst for thirteen years. Spent a lot of time at bear Stern before launching her own firm. Let's talk a little bit about the

retail footprints and whether or not we've we've overbuilt it. It It seems that every major town has two malls and the old mall is kind of struggling and the new mall is all bright and shiny, and you wonder, have we built too much retail physical space in America. We've had a lot of physical space in America, and yes, you have space that isn't as productive as others. And that's why you see the differentiation between the A malls

and the Bees and the C malls. It really is about the right malls, and they're all changing right now. The occupancy, the the occupancy levels and also the rents. And those A malls that's where everyone wants to be because you're creating a community of best in class tenants that also retailers and restaurants invest in to continue to make it better. So I am not a big mall shopper. If I could stay out of the malls, I'm I'm

very happy Camper. But where I live, there's certain specific stores you want to go to, like let's go say the Bloomingdale Furniture store or um by me. If I want to go to the one of the big sporting goods stores, they're attached to them all. And not too long ago, before the holiday season, I walked through part of Roosevelt Field and I didn't recognize it. It's totally different than what it used to be. What Simon has done in Roosevelt Field, it looks terrific. Look at that

name and Marcus there. Look at the center court area of the of the court is really nice. I was shocked it used to be you know, junk this and garbage that. It's really good. High end food malls today need to be experiential, not just a place for buying things. They're offering restaurants. You know what. The new name for movie theaters are wine Dyne and Recline because there's a new way to go to movie theaters these days. And

I think that's what you're gonna see. These shopping centers or retail real estate become places where consumers spend time not only to meet people, not only to buy things, but more physical time by offering more services within the center. So what does that mean in terms of the cost structure of rentals for for retailers? This this looks like when Roosevelt is a perfect example. This doesn't look like

a down and dirty, fast and cheap renovation. It looks like they really put some time and effort and money into it. What are rents are going to be? What our rents gonna be like for retailers? For these A malls, rents are going to be high. And the reason retailers will pay those types of rents those centers drive the most traffic, have the most complementary mix of tenants, and are always fully occupied. So we continue to see demand for those centers being tremendous. So who is who else

you mentioned Simon's group? Who else is doing the sort of large scale retail Well, look at general growth properties. They happen to be doing a very good job. Also, what's happening in the Natick mall is very exciting. They've had amendous changes in an uplift in their centers too. And even with the latest parking technology, the latest parking town red light, green light. If you think about what consumers today get frustrated about going to a shopping center

finding a parking spot. For sure, they've made it easy with implementation of red light green light. If you see red spots occupied, if you see green spots available, really and that's making a difference with return business and people. Of course makes the ability and when you think about what retails are doing buy online, pickup and store, it's one of the reasons it makes buy online, pickup and

store easy. Along with the fact that those consumers who do buy online, pickup and store, they typically have an attachment rate of coming in and buying nearly thirty more because they're picking up the pants, but then maybe they're

getting socks or shirt or jacket other items. So Professor Galloway over at n y U Stern was a previous guest, and he talks about physical stores as distributed warehouse chains that will have been in a huge advantage that chains like Macy's and even Marcus have over Amazon in their category groups. They seem to have come to that realization somewhat late. Are they making up for that that being a little behind the April? What what's the future for there?

Look like, I think basically we're not going to see a country that's overrun by warehouses. And I think companies and retailers are using part of their stores as they begin to encompass more digital and omni channel initiatives as supplying goods, and it could be buy online, pickup and store by ship shipped to home from store, either one. And frankly, the cost of doing this fulfillment is not cheap.

So figuring out ways to economize and maybe making retail space more productive using some of the space that maybe back room space for distribution purposes. Yes, we're seeing that. So you just said something that surprised me. You said it's not cheap. I ordered a Monster O blower that I got with m X points um from Lows and it was by online pick up in store. I got one bigger than they actually had in the stores. And I just assumed, oh, that's a free marginal sale for them.

But you're implying that there's a cost to them for this. You bet, the cost to be able to ship that item if you're not fully on stocking, need to ship two boxes or three boxes in order to have the order fully intact. That doesn't come cheap. And that's why what you see is physical stores overall typically are profitable. E commerce helps drive sales. The combination of the two, that multi channel shopper is your most productive shopper. Quite interesting.

I'm very results you're listening to Masters in Business on Bloomberg Radio. My special guest today is retailing expert Dana Telsey. She runs her own shop called Telsey Advisory Group, or TAG as it's better known. You may know her from her days at bear Stearns. Let's let's talk about both physical stores and some specific companies. I have to bring up Nike because I had reference to you. I wanted to talk about Nike, and that was before we knew

the earnings were going to be so spectacular. Not too long ago, I was in the Beaverton, Oregon employee store and I love their campus insane, It makes you want to be a runner. And immediately and I picked up a whole bunch of dry fit tennis garb, sort of reluctant, like, wow, this stuff is really even at employee prices. This is really expensive, And now I am a total convert. You could play two hours of tennis, sweat till the old

and you're perfectly comfortable. And I bet you're winning more too. I wouldn't go that far. I still stink but that it's not apparel, it's technology. That's really a whole new material science, isn't it. It's a new material science. You gotta check out their new store that opened in Soho. It's absolutely awesome. You should speak to Tahiti. She basically works in their customization area. And you know what, Nike

isn't just active anymore. It's urban culture, really, yes, because people are wearing activewear not just to play sports on the field. They're wearing it out to dinner, They're wearing it, shopping on the weekends, you name it. It's really integrated with work weekend. And Jim, consumers are mixing and matching work weekend and Jim that that's really quite fascinating. So let's talk about a couple of other stores. Walmart, Target,

best Buy, Macy's. All these stores. Not too long ago people were questioning whether they would ever make the leap to digital, to leap to online, and do it. Well, all four of these are greatly improved. Who who really seems to understand online? Of that group, Well, it's very interesting because look what Walmart did where their quie Jet dot com and Doug McMillan, the CEO Walmart now says we're any commerce company, so they're looking to move to

that next. When you think about Macy's, look what they're doing with reevaluating the real estate, taking a look at categories and really making enhancements. They're they're looking to next. Look what best Buy is doing branded shop and shops, and you can't forget Nordstrom and all of this, who basically have acquired companies in order to better integrate digital with online. So I think the department stores have been a bit ahead of the game, and now you're seeing

Walmart really involved and get integrated with online. Let's let's talk about a category that I think is just perplexing, the teen retailers. You look at Abercrombie and Fish. This was what were the eight billion dollars seven billion dollars and now barely a billion dollars. How can anybody adequately evaluate these companies? When you think about American Eagle, go

go through the whole list of of teen retailers. There, they're impossible to keep up with, and they all seem to be on fire one quarter and then that's it. It's like the fed is over. How do you stay on top of that? Got to be in the stores. You gotta be in the stores, but you also have to check online. I put out this new product, the Weekly Trend Report, that basically looks at online sites last week and this week and what's changed and a lot changes.

It keeps you in the know because it shows you the prices, and it shows you what's trending and not trending. So how do I stay on top of it? You have to watch what Forever twenty one and H and M and Azara is doing, and watch what the a's are doing. Logo is that's what they are. Logos are no longer the comfort factor that they used to be because the teens of ten years ago they were into logo. The teens of today not into logo. The teens of today are into more fashion, more, what patterns are more,

what is trending and that's active where. So take a look at American Eagle lately they put a whole new sport window in their store windows and also on online. They're going to capture a new trend. And take a look what Limited Brands L Brands is doing with Victoria's Secret Pink is hot and it drives the most traffic.

So the teen retailers have gotten more competition incoming from the fast fashion read tailors, more competition fast fashion that's fashion like Zara, like h and M, like Forever twenty one, speed to market in terms of goods and what's trending, and then if you don't buy it, then it may not be in stock. Really, it's that it's that quick. What about some of the luxury retailers out there, I don't recall if you still cover Coach and Tiffany, So so they had a huge run and the past couple

of years not so great. What's going on there? And I think one of the things that's changed their same thing. You need product innovation and product innovation. Take a look at what Coach has done. They brought in Stewart Fever's. They now have new models and new camp, new marketing campaigns that are attracting the millennial consumer. And so they've become a reinvigorated brand. And so the handbag space alone

now smaller bags. So you're not getting the same high same a you are, but what are you doing for newness? Check out the new Coach flagship store on fifty three fifty fourth Street and Fifth Avenue. It's quite the experience, so luxury goods. Overall, we had weak tourism in two thousand and sixteen in the United States. The strong dollar impacted you don't know. With some of these new lower tax laws that could be in coming, could help the local consumer. And what you're seeing is the Chinese is

starting to travel again. LVMH's latest results talked about it. Tiffany saw some improvement in tourism. You saw Coach talk about some improvement in tourism, and even Macy's saw the tourism drops less worse than they had been. So fingers crossed for a better two thousand and seventeen. So what about some of the other you mean, we talked about Nike, some of the other athletic brands, Athleta, Athleta, I don't know I'm pronouncing that. Yep, that's Party Gap and they

basically have very good success online. Take a look at Audit Das. I mean they just opened a new flagship to take a look at that gym stadium. What it looks like they got. They have the trend right product now and that makes it exciting. And don't leave out Kevin Plank from under Armour because under Armour has big aspirations and what they did, whether it's buying different apps, they're creating an under Armor community. Huh, that's quite fascinating.

Earlier you mentioned best Buy here. That's another example. In OH six it was a sixty stock it plummeted to eleven dollars. That's a twenty seven billion to four billion dollar drop. And now it's not too far from its old time eyes, it's back to dollars. What do you make of best Buy and what's driving that recovery? They fought back up against Amazon, and they fought back against showrooming. Prices are now the same where they match. Customers can

have the item same day of Best Buys. Online orders are picked up at the store. Wait, wait to say that again. Online people bypass the whole salesman, retail exit order online, show up with a receipt and they bring it out to your car, bring it and also maybe you want to buy some extra things while you're there. That's been very effective for them, along with the fact vendors need and want Best Buy to thrive, They need

that physical presence and location. How important is it for vendors that there's a legitimate competitor to Amazon very important. You want to be able to have diversification among your customer base. It makes pricing rational. So um, what about some of the other specialty shoes. Warby Parker seems to have come out of out of nowhere, very exciting, and then jet dot Com that was pretty quick from startup to to total sale. Who else is out there? Who

else is interesting we might not have heard about. Well, that's that real real. On the consignment store, threat up trades a all very interesting in terms thread up. What is threat up consignment? Something you don't wear, then you may want to sell it and be able to buy something else. So you're gonna sell it on some of these apparel consignment sites. That makes it, That makes it interesting. Carbon thirty eight in the act of where that's been super interesting also in terms of some of the on

trend active wear sites that's appealing to. So how many of these stores are you going to on a regular basis? Are you out of the office every day? I'm in stores every weekend. I am out in stores at least two to three times a week. Any city I go to, I always spend my time going part of the time going to malls and going to see a store. So, so take me through a day in the life of

of Dana Telsey. What because I know you're always so for people who are listening to Dana and I actually used to be in the same building and we were constantly bumping into each other, usually as she was running out of the building like it was on fire. What's a day in the like of Dana Telsea? Like it? You know, there is no typical day. And part of the reason there's no typical day, it depends who you're

interacting with and talking with. It starts with what's happening globally, what I see macro wise, what's on the news that night, going into the office, checking out what the stocks are doing, and then whether it's meetings for the day, whether it's meeting with companies for the day. I'm learning all day long, and I'm a student, and I'm so lucky to be able to be a tuned and have the ability to speak to some of these business leaders. It's I'm learning

and knowledge is knowledge is what's great. And then also so I have my research hat where basically I'm listening to conference calls talking to companies going into stores. We have the Telsea Consumer Fund, which is a long short consumer hedge fund. It's up around double digits this year so far, and so we're in the midst of asset raising for that fund, and each day it's something a

little bit different, but it's always about the people. So that's for that's we say, we don't really care about predictions and forecast, but tell us about some of the trends you see shifting in the coming year. Structural change is something that we have in the consumer landscape that we've never seen before. Structural change and a man but that it's about. That's about online and what's happening with

companies becoming physical and digital at the same time. That's about the mobile phone becoming the new way to communicate. That's about data and loyalty pro grams, about how does a retailer stay on top. You got to know more about your customer and be able to interpret the data that you receive. It's about speed and that's a competitive advantage, whether it's ordering a product delivered to that customer's home.

How do you be faster in stock so that customer comes to you again and that's what every single brand is looking to be. I think brands have value, they have meaning because do you want to be part of the club. Brands will give you pricing and a pricing umbrella, and if you have the innovative product, that's what gives you a life cycle. We've been speaking with Dana Telsey. She runs the Telsey Advisory Group covering all manners of retail stock. If you enjoy this conversation, be sure and

stick around for the podcast extras. Will we keep the tape rolling and continue discussing all things retail. Be sure and check out my daily column on Bloomberg View dot com. You can follow me on Twitter at Rid Halts. We love your comments and feedback. Be sure to write to us at m IB podcast at Bloomberg dot net. I'm Barry Rehults. You've been listening to Masters in Business on Bloomberg Radio. Welcome to the podcast, Dana. Thank you so much for doing this. I've been I've been looking forward

to this UM for a while. There there's so much retail stuff I can talk about. UM. We didn't mention this in the broadcast portion, but I grew up my father owns a chain of of sporting goods stores. They had three sneakers and sportswear sweatshirts. I remember when I was a kid, the Champion sweatshirts were huge, and he used to occasionally bring sneakers home and say, here's a new brand, Pony, see how you like. And I was like, these are great. If I like them, they would toast.

He's a fantastic right and right in the tubes. So I've been did in the store, which is why I went to grad school because I said, I am never working retail again. You have to have a certain you have to have tolerance and pay and the ability to be empathetic with people. I have none of that. So are you doing what you're doing? Now? Let me tell you it was. It was motivating because people don't realize that's a hard job, standing on your feet all day,

the hours a long folding. I mean, there's a reason they like to talk to customers and people are I think it's worse today than it was when I was a kid, where there was some civil discourse and decor. Now I've I've watched people be so rude to sales help and so rude to cashiers. I waited tables in in college, and so I've always whenever anybody is rude to a wait or, it's always, oh, you don't know

what goes on in the kitchen, do you? You probably shouldn't eat what you just ordered because you've been way too rude to that guy. But it's a really tough job. I think it's tough job, and the good ones hard to find. The weight in gold. How do you evaluate the retail sales staff of a big you know? Change? Can you do that? How much can they control the

quality of their sales? You can tell if people feel they're on a winning team or not or not on a winning team, or more hours being allocated to that particular store and labor hours in order to make the store nicer. Take a look at the way some of the stores look in terms of the care that's put into them, so you can tell if people care. Just like you walk in an office, you can tell what the mood is. You can walk into a store and say, this is a good staff. Everybody's happy here, you know.

You can you talk to the sales people, engage them in conversation. What what's happening? I need to buy something from my mom? What would you suggest what's working having fun here? Just talk to people. They're human beings too and they want to talk. Also, do you cover any of the restaurants or food stores like star does? Yes? So Darrington does a great job. So what do you think of what's going on um in Starbucks and and

what else is interesting out there in restaurant world. Restaurant world is where you've had the most new concept of crazy, said it. And that's because look at all the Instagram pictures people take their food? Is that so I do that? I don't Instagram. I tweet more than Instagram, but shake Shock and Chick fil A and go down the list. Is Instagram really driving traffic or Twitter drging traffic I have?

I just got a Twitter account also, and I'm putting pictures up and showing people things, and all of a sudden, people listen. They want to see what see what you're showing, And yes it does. I think it helps to drive traffic. It makes people more brand aware. And I love putting putting pictures up on my Twitter account. I mean, all of a sudden you have new followers. So, so what is going on in food other than the burger wars? And what about organic, What about ramen and the whole

noodle traumas out there? Now, how much of that is Manhattan and how much of that is the rest of the country. It's going the rest of the country to It's definitely the coast first, but then it's going the rest of the country. And what about everything that's happening with sweet greens and local farm to table is all over not Manhattan. I live on the north shore of Long Island. Two of our favorite new restaurants are both.

One is called a Stereo leon as a little place in Oyster Bay, and the other place U is called I always get this wrong roots Beeds in in Um. I want to say, siost to Jericho. The food is delicious. It's always crazy fresh. And when you look at the menu, you're not just ordering. It's here's this comes from roth Camp Farms. This comes from here, this comes from the North Fork, all the local one, all the local ales. That seems to be a huge, huge tramp and look

at blue apron and plated. All of a sudden, house it's coming to you and you're cooking it. They're giving an exact right amount of ingredients and why it's speed. It basically makes it faster, and what is it creating an experience because all of a sudden you're cooking with your friends or whatever it may be. So blue apron plated organic ramen. That's the future. Now what does that

mean to supermarkets? If you don't have to go killing out forty five minutes driving to the local supermarket, running through the through the various aisles, picking up and then first bringing it home to makes it much more competitive. But look at the prepared food section of some of these supermarkets. Look what Kroger has done with organics. They've been able to capture that trend to and make the

prices competitive for all income level consumers. That that's really interesting. Um, do you because still you don't cover whole foods, do you. My colleague Joe Feldman, who has worked with me forever, he's the superstar of supermarkets and hardlines, discounters and all things out of the mall, on all things in the mall. He basically he covers the supermarkets and is a huge fan of Kroger. Likes Kroger, like likes what they've been doing.

That that that's really quiet and there's new competition coming in All delight Ale from overseas, You've got Walmart obviously having a big part of their business being food to what what about these new Amazon cashier list supermarkets? What is going on with that? That's going to be very interesting. That and driverless cars that's like the new world of how we're going to consume right now. That's only available to employees, but it just goes to show you speed

technology all wrapped up into one. It's the game changer. When can I send my driverless car out to pick up my dinner and bring it home and cook it for me. Let's wait, let's wait another five years, two thousand twenty two, something like that. But but these new supermarkets, the cashier list, the driven by not the usual supermarket folks. Um, so it's Amazon, You like Kroger, You like what they're doing? Yes, we do. Who else is doing interesting things in that space?

I think some of the privately held supermarkets public is doing some interesting things. Wegman's obviously Wegmans is going to be opening in the Native Mall in two thousand eighteen. So we're seeing some of those private supermarkets also do interesting things that that's kind of that's kind of fascinating. So we went through a lot of questions. I'm just curious if there's anything I missed, What what sectors of retail did we not talk at out that you think

is is kind of interesting. I think the apparel manufacturers are interesting. Ralph Lauren, p V H VF Corps. They really own their brands who Calvin Klein, Tommy Hill, Fliger is what they own. And these companies are global businesses. They're now doing more of their own direct to consumer stores, and they're looking to enhance their in store shops and some of the better department stores. Branded companies that allocators of capital and taking brands and making them grow. So

I think it's something you want to watch. So let's go through that list. So at this point, everybody knows Ralph Lauren, I would imagine, and there's it's a work in progress, the Way Forward plan that the new CEO, Stephan Larson put in place. He's executing on the operational enhancements. So what what are they doing? Because I think of here, this shirt is Ralph Lauren and I don't know who the sweater is the guest Lord and Taylor, So I

think of them as the Polo shirts. I think of them as um sweaters and other sort of traditionally preppy things. What are they doing to move beyond that? So you're going to see in the fall of two thousand seventeen some enhancements to their iconic products. So wait, you're you're looking at product almost a year in advance. You got to you got it's that it takes that'll shift over time. I mean, Neil looking to get their lead times down from fifteen months to nine months, and that's a work

in progress right now. And that's why you see some of the fast fashion retailers they're super quick. But brands like Ralph Lauren who are first now becoming more modernized, more up to date. I think you're gonna see the product become that way too. So p V eight you mentioned was um, Calvin and Tommy not Tommy Bahama. Tommy Tommy Bahammas Oxford Industries and who else does Oxford Industries have?

Lily Pulitzer that's been so popular, that's the pink and greens, and the other one that's like that in a privately held way, vineyard vines. Everyone is a fan of vineyard vines these days. So these are all these names we're talking about out they've been around a couple of years, are all well known. Who how do you identify or what? Tell me about your process to look for Hey, this is an interesting company, there are some legs here. How do you how do you sift through all that options

to find the diamond in the rough? So a couple of different ways. I look at what's trending online. I look at Instagram. I look at bloggers. Bloggers are your new celebrities in terms of what they're endorsing or what their wat Totally, that's how you be able to pick up on trends and so yes, able to see what's trending, what's working. So I watched the bloggers, I watched who's who's watching them and who their followers are, what the Instagram leads are that I look in the stores and

I see what's happening talking to salespeople. You can look online all you want and you can see what's trending, but really it's not the same. You've got to marry that with going into the stores. Also, So this we've been reading about this so called old social media influencers is that And I've also been reading about how those metrics can be gamed is that a real important thing to driving a specific product sales house It is, it's

become part of that. I mean, look at the fashion shows now where all of a sudden it's brought, it's brought to your living room. And these fashion bloggers if they're wearing things, if all of a sudden, the right celebrities. Look at Selina Gomez and their Kardashians and Kendall Jenner, they make a real difference in being able to attract millennials because everyone wants to be part of a club that they want to be like them, and that's what

happens that that's astonishing. So we we've talked about online, we've talked about physical stores, we've talked about brands. Um. The one company I haven't asked you about is Apple. Um. The Apple stores to this day, even though their their sales numbers seem to have their growth rate is slowed down. Every time I go to an Apple store, they're still

jam packed. What what's going on with that? Look at the ecosystem that they created, Look at all the Apple users that they have, so you have either have to go to the genius bar, you're upgrading, and people seem to be upgrading faster, and yet what you're gonna see is the Apple stores themselves. They're reinventing themselves. Take a

look at the newest store downtown at Westfield's Oculus. Pretty cool in terms of what they put together there, and it's basically collaborative engagement sales associates and the customers and looking to sell them more of the Apple products. Who else is competitive in terms of driving their own retail sales through their own stores. Apples seem to have created a niche that didn't exist previously, at least not for

technology stores. You know what else? Cosmetic stores? Look at Sephora absolutely packed, Look at Alta absolutely packed off price. Look at t j X Ross stores and Burlington. People like the treasure hunt atmosphere. It's two time consuming, but a lot of people they love spending their time that way. If you or if you have, if you have the time for it in the interest, sure you can certainly find great deals. Take a look at their checkoutlines. They've

got the time. I would I would guess what else is is striking you as interesting and different these days? What's really capturing your attention? I think the things that are capturing my attention is companies overall that are updating and enhancing their brands. What are they doing with the investment in technology in terms of data, How are they enhancing speed? How are you incorporating that's so called experience

or collaborative engagement. Food matters and being able to create an event that marries the whether it's food, whether it's an activity, that's what's that's what interesting. It's not just about selling an item, it's selling the experience. So let's talk about the technology side of this a little bit. And I don't mean Apple or Amazon. I mean the traditional retailers. What are they doing to take advantage of the fact that everyone walks around with the supercomputer in

their pocket? How are they using that loyalty programs? A lot of retailers today are enhancing and updating their loyalty programs so that they know the preferences of those consumers. That's what technology allows them to do today. It used to be just around ten of CAPEX spending was spent on technology. Now for some retailers it could be up Is there anything competitive with the UH with the Starbucks app? I know that when I come into the city as soon as I'm above ground. The first thing I do

is order breakfast and a cup of falls. Pretty easy, isn't it. And and by the time there's a Starbucks on the ground floor of my building, by the time I walk the three blocks to the building that are they walk intore like here, they're handing it to you. There's no interaction with a cash register. It's the easiest thing in the world. And I always look at the people online and wonder how come they haven't figured out

the app is so awesome. I think people need to know more about it, And I agree with you, But think about the other cultural changes there? What about Uber?

What about left Those are the other things too, So so what does Uber do for retailers because I recall hearing at one point in time people wanted to use Uber as a delivery service, for physical delivery service or take them to the mall or now look at people when they're going out at night to have dinner and if they're having something to drink, they don't need to drive themselves. So there's a service. We were just talking about this yesterday over dinner. There there's two interesting services

that are both local. I don't know if they're national. One is called Via, which isn't It's sort of like a group uber and it's just going north south on the main thoroughfares in Manhattan and East West and you get in, it's five bucks and they take you to wherever you're going and then you get out, and it's basically a group uber. And the other I'm trying to

remember you used it. I haven't, but people for sure, especially if you're coming from Penn Station and you have to go go Cross Down or or anything like that. The other one I heard about is kind of fascinating. You're out on a Friday night and I don't know if this is in Manhattan, but I know it's definitely on Long Island. You you order a driver, and what I mean by that is a car will show up,

someone will come out. They will get in your car and drive you home, followed by the other car who then picks them up and takes them wherever they want to go. I heard of. That's very smart. No do we know worrying about driving under the influence. It's hey, we could go out, we don't need to. Very smart. And it's that's actual legitimate business. That's amazing, isn't it. I think there's all new services and businesses that are being created. Look at look at Postmates for example, no Postmates.

Let's say you want a let's say you want a channel lipstick you're going out or whatever it is, which whatever cosmetics you want, but you don't have time to go to an either st wars. You can basically order it and they'll deliver to you physically to you, not through the mail. It's messenger to you. And look at like netaport Netaporte. They're getting goods to you within an hour or two hours. That's that's really high end stuff though, isn't it? Is that going to work its way down

to the to us pleabs. It's working in urban areas there's a density, so it's a combination of income density and delivery is relatively easy. You're not covering a lot of a lot of square footage. So I know I only have you for a finite amount of time before before you have to go on with your day. Let let me go to some of my favorite questions that

I asked all of my guests. Um, we started talking about your background with Ron Barron, So you went from Ron Barron to C. J. Lawrence to Bear is that exactly? And so you were at was c J. Lawrence where they acquired or they were acquired by Deutsche Bank exactly? All right? So how long were you therefore? I was at Barren Capital for seven years, I was at c J. Lawrence for three years, and I was at bear Stearns

for twelve years. And if memory serves, I don't want to embarrass you or anything, but you left Bear pretty well timed, if if I got that right, I left to know six before it went away in two thousand eight, and I hope you managed to liquidate some of your stock. I was fortunate to be fortunate enough to be able to start TAG. TAG had been in the in the planning for a couple of years, and now we're gonna

be celebrating our eleventh birthday. So we really haven't talked at all about you as a woman working on Wall Street. Bear Stearns had a reputation as a kind of rough and tumbled place, But you don't strike me as a shrinking, violent or anything like that. And I've asked this to all the women I've interviewed. What's it like being a woman in an environment that sometimes is just overwrought with

with male stupidity. I think, prove your capability and show that you're capable, that you're able, that you can drive market share, can drive business and it works. The capability is what I'm all about. Being able to show that you have the ability, that you're recognized by clients, and that you do just as good work, if not better than others. So I believe in the ability of people. So it's a true meritocracy. That's what I believe in. Show what you can do that that works. Tell us

a little bit about some of your early mentors. Obviously Ron Barren, John Barron, who taught me about everything that I've known. I mean, SIGs A Gallis at Jennison is just someone I look up to every day and in terms of what he's doing. I mean, I've watched Mario Gabelly for years and watched his success in creating value and how he thinks about value companies. So it's so many of these money managers who have been so influential

in and what I do. Bill Miller at leg Mason, I mean, he was one of the first investors I met on the South Side, and his his ability to glean insights was trumendous. Both Goobelly and Miller have been guests on the show. They're fascinating, fascinating guys. Miller said something that I thought was so astute. I mean, Belly said a million things that and and he was really fascinating. Miller said, you know the problem with active management is

an active management. It's that most of the active managers are closet indexers. And I've never quite heard it put the way he did. He said, if you're gonna be if you're gonna be a high cost active manager, you have to be different from the index. But if you're gonna be a closet indexer and be high cost, of course, of course investors are gonna leave you. What's what's the point. He's really quite a fascinating guy. I didn't realize you, uh, you had you had known him? Um who Let's talk

about other investors. Who else influenced your approach to thinking about research, thinking about the product you create for for the by side investor. I think in terms of the product that we create for the by side investor, you have to be able to answer all from types of questions. You look at investors who are growth investors, You look at GARP investors, you look at deep value investors. So you have to be able to answer those questions. And

basically what I learned about look at Steve Mandel. Steve Mandel of Lone Pine. I was in his group years ago when I was on the buy side, and he taught me how to understand brands, and he taught me about the three hundred and sixty degree loop of the productivity cycle, something that's pretty creative. Explained that what is

the three sixty degree loop of the productivity cycle. It's basically, how do you manage inventory, the velocity which it sells, the margin with a marginal which you earn, and the turner of the inventory to help drive earnings growth. And so that's consistent and that takes place, so that that that makes some sense um any other investors really changed the way you think about about retail. I think in terms of thinking about retail, I think it's a host

of investors. There isn't and frankly it's company executives. To Less Wexner, for example, of L Brands, I learned something new from him every time because to me, he's the dean of retail and he sees into the future, and he always makes his brand younger and younger. That's how he stays relevant. So I think that's something that's to be gleaned and watched carefully. Michael Gould, former CEO Bloomingdale's

Michael glued Gould. Complete engagement with the customer, engagement with his staff, that's what makes the experience and what he created so special. I did a show, um, I think it was Stephanie Rule early one morning and I had never met Gould before, and I have no idea who this gentleman is sitting next to me. And we started this conversation about retail. And during the break, I turned

to Stephanie, go, this guy's great. Who is he? And I believe the comment was idiot, that's the head of Bloomingdale's. Although it's Stephanie. So it was a little sold. Michael Gould's belief in people, his training and mentorship, best in class. He was really really the one time I met him, he very much. Uh, he he very much stayed with me. Let's talk a little bit about books. It's always a favorite subject here. What are some of your favorite books?

And I don't care if it's fiction, non fiction, investing related or not. What do you like to read. I love to read all the periodicals. I'm a huge Barons reader, Wall Street Journal, Business Week reader. I do Financial Times, and then I read what's relevant to my industry, Women's Where, Daily, Business of Fashion. I like staying current because I don't believe you can look back. I'm all about looking forward. So the list you just named, that's forty hours a

week worth of reading easily. You're you're plowing through all those periodicals. That's so I get to the office five in the morning. Got to be able to know what's happening. Women's Where Delhi is still very relevant. Yes it is. It's relevant to the industry. It gives you a pulse. Business of Fashion is relevant to w gs N is very relevant. What is Business of Fashion? Basically takes key topics in the consumer world and talk about how different

companies are integrated, are being integrated literally business effects. I don't even know such a thing existed. That's that's fascinating. And the last one you mentioned, the other one right after that, w gs N interesting. W was a big magazine for a long and it still is. It's not Women's Where. It's not the same as women's wear daily, but it still is and there isn't any of those fashion magazines. I don't read too because I want to

pick up on the trends. So you'll so if you're thumbing through a Glamour or a a Red Book or whatever, you're actually seeing things that you might not see elsewhere. And I'll go back to merchants, say, wait, I now saw six dark maroon boots. Is dark maroon the trend that I should be noticing Because I'm a believer in patterns. If you both put together patterns, patterns can become reality

of what consumers adopt. And I'm all out there trying to understand what they're adopting now, what they're not adopting now, and what the future could be. So if enough people are advertising and enough people are seeing it, enough people are buying it, that that becomes a full blown trend. And marrying that with the quantitative, what could that mean to sales? What could that mean to margins? Which companies

doesn't benefit? That's the story of retail analysis. So you've been covering retail for over time years, Um, what's changed since you joined the industry? What is different about covering retail stocks? Today than than when you started. Everything, everything and everything in terms of how fast goods are produced, how you learn about goods, emailing, blogging, instagramming, what what's changes?

Physical stores they're smaller. What's changed? Some of them smaller in terms of size, And there's definitely more destinations spending. What about online? And what about the global reach? So everything's changed about retailing and what it is today. I know it won't be in ten years, but I'm going to be there to watch every path of it. Because remember, I've got a grandmother who's a hundred and two years old.

God bless you. So so you have good genes and you're going to be doing this for a long time. Not a job, it's my life. I wake up in the morning. That's really impressive. Thank you. Um that that's some really good genes. Well, we'll take some blood from you on the way out to run a we'll run a little genetic study. UM. So we just you talked about all the things that have changed, and then the other big thing is going to be I believe in

this theory of ization, personalization, theory ofation. So how a company is gonna be different? Because now if you know more about the customer, there's personalization, there is localization out there, there is customization out there, and regionalization. So now businesses that were big become smaller to the blending of mobile and technology are very influential to consumer spending and they're only going to become more so. And what that could

give you opportunity, give sales opportunity, and it gives margin opportunity. Hello, earnings growth. So you just answered my next question. What that was past? What what's few? Um? So let me shift gears. This is a question that always comes from a certain email or what do you do outside of the office to stay physically fit? What do you do to stay mentally acute? And what do you just do

to relax or for enjoyment when you're not shopping. So basically, by the way, I shouldn't say that, because I don't mean it in a denigrating way, but I know they're gonna be some when you're out doing My wife and I call joking. We call it economic research. When you're out doing research. When you're out in retail stores, I don't mean shopping in a I hope that doesn't come because because you know what I mean, when you're out looking at stores when you're kicking tires. Effectively you're out

in store shopping. When you're not doing that, I'm doing that all the time by walking, traveling, swimming or all the things. Going to restaurants. I want to see culture and be able to see how that in great c into retail. And what do you do to relax if you want to just kick back. That's the walking part, I mean, that's what it is. I mean, that's being outside and seeing the sky because we're always in offices all the time, and seeing what's new, and typing like up,

here's the trend, here's a trend. You gotta because you're not gonna remember things right away, so I love typing and just writing it down. That's really that's really interesting. Um, all right, My last two questions, these are my favorite questions. If a millennial were to come to you or someone just starting their career and say, I'm interested in becoming a retail analyst, what sort of advice would you give them. I'd say, find a category, find a topic that you

love that you want to be an expert at. Think about it. I was fortunate Ron Baron gave me the opportunity I tried trading, I tried being a salesperson, and I found I loved the ten k's, the ten queues and understanding companies. Find out something that you love that you want to spend all the time at to become an expert. Being an expert gives you the ability to have answers or be able to be valued and to have insight. And that's what you have to find. Find

a mentor who you can learn from. That's quite interesting. And my final question before we get thrown out of here, Um, what is it that you know about covering retail today that you wish you knew when you started those years ago? What pitfalls companies can get into and how they can

emerge from them. So give us a couple of examples that that's a that's a fascinating thing because very often we fall in love with these companies and the next thing we know, they stumble, and hey, how did that happen? And and how do they turn themselves around? So, look, you have companies like a coach. It's stumbled that became overdistributed. Now it's become less distributed. They reinvigorate when you say

over distributed. They were somewhat of a limited in too many department store and then then they were once they're everywhere, they lose a little PRIs and also managing their stores more carefully, investing in marketing. Look at all brands. What's happening now. L Brand's got rid of is getting rid of swimwear. They're reducing the level of promotions to come

out a healthier brand and attract younger, younger consumers. So you have to evaluate when a brand stumbles, is there a way back or is there just not a way back? When you look at for example, today, you just had the apparel company UM Limited Brands, which is the old apparel Sour. It's not part of Limited UM. You just had that file for chapter eleven didn't come back. Why they didn't provide differentiation When you think of other companies,

providing differentiation is what allows you to survive. That's the key. We have been speaking with Dana Telsey of the Telsey Advisory Group. If you enjoy this conversation, be sure and look up an inch or down on the inch on Apple iTunes and you can see any of the other hundred and ten or so such prior conversations. We love your comments and feedback, be sure and email us at m IB podcast at Bloomberg dot net. If people want to find your work. I forgot to ask you this before.

It's donel me Detaelsey at Telsea Group group dot com and the website is Telsea Group dot com. Easy enough. We've been speaking with Dana Telsey. I would be remiss if I did not forget. If I'm going to say that again, I would be remiss if I did not thank Taylor Riggs are Booker and Michael Batnick, the head of research, who helped prepare all of these questions. I'm Barry Ridolts. You've been listening to Masters in Business on Bloomberg Radio.