Retail stocks take a hit after disappointing data

Michael Brown, Kearney Consumer Products and Retail Practice Partner, joined Yahoo Finance to discuss the latest retail data.

Video Transcript

ADAM SHAPIRO: Part of the reason we're selling off today-- just part-- had to do with the disappointing retail sales figures that we got early this morning from the Commerce Department. Michael Brown from Kearney Partner Consumer Products and Retail Practice joins us now to break this down. And it wasn't only that December was down, or at least not what we had expected, they actually revised down November. So markets not happy with this, but what is it telling us about going forward?

MICHAEL BROWN: Yeah, I think we were surprised to see that it was down a little bit. But when we look at the three months for the holiday season, the way a lot of it was pulled forward, it was still a strong holiday season for retailers. So I think the market might be overreacting a little bit to the numbers. I think just being down 0.7% in the current conditions we're in with people having limited opportunities to really spend the way they have is a good result for us.

SEANA SMITH: And, Michael, how would you characterize the consumer right now? It sounds like you actually think the consumer might be much stronger than what this number is necessarily reflecting.

MICHAEL BROWN: It is. I think the consumer has the ability to spend. If you think about the areas where they're not spending outside of retail-- travel, entertainment, those categories-- it's leaving a lot of consumer dollars available to spend in traditional retail. I think it's just giving them reasons to spend, and I think we're going to still be a little soft through the first quarter. But once we get through the first quarter and we start to get vaccinations, I think we'll see an uptick in people starting to go out again, spend in restaurants again, want to get dressed again, and potentially going back to the office, which will really ignite the spending.

ADAM SHAPIRO: What about supply chain issues? Because you point out they could be a problem for people looking for furniture or even electronics.

MICHAEL BROWN: There was a lot of issues in the supply chain this year in furniture, electronics, automobiles. It was very difficult-- you go back September, October, and November-- to actually get a new car if you wanted one. Assembly lines were backed up in all these different areas.

And again, that's still a risk right now as people are potentially going out sick with COVID or there's reduced capacities in factories. So I think, again, once we can get to full production, the goods can be available, and consumers can make those purchases, they'll be out there making them.

SEANA SMITH: We talk about consumer behavior shifting as a result of the pandemic-- obviously, we see a lot more money now being spent online. How much of that do you think is going to be a permanent shift once we get beyond the pandemic?

MICHAEL BROWN: The pandemic has really shifted the amount of online purchasing forever. We won't be returning to levels that we saw in 2019. We've been accelerated three to five years, and we're going to stay at that level. The consumer is enjoying the convenience, the variety of buying online and ship to their store-- to their homes.

And when they want to leverage buy online and pick up in the store just for a fast and easy transaction, they have that ability as well. So it really ingrained new behaviors into the consumer that they're going to stick with for everything from apparel, to sporting goods, to their groceries, you know, to buy them online and have them delivered to the house or pick them up at the store.

ADAM SHAPIRO: How many more iconic realtors will we lose? If you go to Midtown-- I mean, Brooks Brothers, for instance, around since, what, 1818-- empty, gone. What's going to happen next?

MICHAEL BROWN: Yeah, we're seeing, unfortunately, just because of the variety and the diversity of different businesses or different products that are out there online, the scale retailers of the past are just not unique or innovative enough. The consumer has such a diverse group of bespoke businesses that they can shop with right now, these mass brands no longer have relevance with enough consumers to maintain the infrastructure that they've built over the years.

So I think we'll see continued emergence of new brands online. They will move to physical stores, but it'll be a whole new generation of brands that today's young consumer is going to shop. And they'll shop them in their way and on their terms.

ADAM SHAPIRO: All right, we appreciate your joining us-- Michael Brown, Kearney Partners Consumer Products and Retail Practice, all the best.