Dana Telsey is the CEO and Chief Research Officer of Telsey Advisory Group (TAG). Telsey Advisory Group was founded in 2006 and Telsey Consumer Fund Management LP, an asset management firm, was founded in 2016. Ms. Telsey has followed over 100 companies during her 30-plus year career. From 1994 to 2006, she worked for Bear, Stearns & Co., covering the retail sector as a Senior Managing Director. Earlier, Ms. Telsey was the Retail Analyst at C.J. Lawrence and Vice President of the Baron Asset Fund at Baron Capital. Ms. Telsey was recognized for her leadership in finance by Barron’s, on their list of the 100 Most Influential Women in U.S. Finance on their inaugural list in 2020 and again in 2021.
Kimberly Greenberger, a Managing Director in Retail Research, joined Morgan Stanley in 2010. She focuses on North American specialty apparel and department stores and has covered the apparel industry for nearly two decades. She is also a Chartered Financial Analyst. Ms. Greenberger consistently ranks among the top analysts for coverage of the retail sector in industry surveys from Institutional Investor, The Wall Street Journal, and others.
These two professional equity analysts recently reviewed the retail stock landscape, exclusively for the Wall Street Transcript, in interviews totalling 5,403 words.
Dana Telsey sees a new era of “supercharged change.”
“It’s been a time of what we call supercharged change. One of the things that happened with the pandemic, a lot of the headwinds that were being discussed over the past few years have really been minimized, and to some extent, eliminated, given the force of the pandemic. The headwinds included: Why go to a store? And now, the essential need for a physical store is greater than ever and integrates seamlessly with digital and creates socialization that consumers crave, and drives conversion…
With the hybrid work model that looks like it will be in place, at least over the next few years, it is going to lead to what will be an always-work-from-home environment. We’re almost seeing more work hours than we would have expected before, because of the reduction in commuting time.
I think the future for the near-term in office may only be two to four days per week, because what we need is that collaboration. We need that culture building. We need the experiences that you get from training in office, from meetings that basically create memories.
The other element of supercharged change is schedules. Given the fact that we can virtually communicate, we are seeing multifunctional activities and placemaking. The home being multifunctional as an office, exercise center and an entertainment center.
And take a look at people’s schedules. We’re seeing schedules where all of a sudden, medical appointments or other activities have more flexible time options, allowing for greater control of one’s schedule. Basically, if you have staff that is more satisfied, they may be more productive workers, also.
The other element of supercharged change would be personal technology. With personal technology, connectivity and speed are essential. The ability to communicate anywhere, anytime is the benefit. And now its use has only increased.
Next, I think of supercharged change being about contactless commerce — contactless payments that are replacing cash given the focus on safety. In addition, buy online, pickup in store, curbside pickup, faster delivery are all other contactless options.
And the last part of supercharged change is a return to nature. The outdoors is providing peace of mind. And, given that it takes 66 days to form new habits, increased outdoor activities may be longer lasting.”
One of the points of change that Dana Telsey reviews is the retail mall experience:
“I think right now what we’re seeing is the greatest strength happens to be open air. Outdoor centers that are grocery anchored are very compelling. And they’re able to get back to sales and/or traffic at or near 2019 levels.
Some of the best enclosed malls also have seen a resurgence in traffic with the increase in vaccinations.
Through socialization, the camaraderie, the ability to engage, they create an experience that is what makes people want to go to stores. Yes, malls are going to change. They’ve been undergoing change. But those very best malls with locations around strong demographic areas — these areas that are growing in terms of the number of people, growing in terms of household incomes — are compelling.
And whether it’s hotels, restaurants, museums, medical, health and wellness, or whether it is co-working, we’re seeing new usages, and new business models going into these malls.
I think the mall of the past isn’t the mall of the future. It may not even be called a mall. Community shopping centers are basically the new term for the future. What helps drive it is community and engagement, along with entertainment that includes the services of food, beverage and restaurants.”
Kimberly Greenberger has also seen a rebound from e-commerce to physical stores:
“…In fact, retailers like TJX (NYSE:TJX), Ross (NASDAQ:ROST), Burlington (NYSE:BURL) that really do not have an e-commerce presence or much presence online, those retailers were actually able to restore their in-store traffic levels to pre-pandemic levels earlier this year.
So not all of the non-essential stores have seen a full recovery in store traffic.
But what we are seeing is that, in general, the retailers have recovered back to 2019 levels of revenue, as a result of either a combination of restored store traffic, as is the case for TJX, Ross and Burlington and their U.S. operations, or the combination of a much higher e-commerce business and the store business that is still below 2019 levels.
But on balance, their revenue has recovered to pre-pandemic levels. And I think they’re sitting in very good shape today compared to where they were, let’s say, a year ago.”
The Morgan Stanley Managing Director Kimberly Greenberger sees further improvement for these retailers:
“…In addition, Ross and TJX and Burlington, the retailers who’ve seen the fastest rebound in in-store traffic, they responded very, very quickly to changing buying behavior among consumers.
So consumers, certainly, were not very interested late last year or early this year in purchasing work apparel or suits, or in many cases, special occasion dresses. They were interested in being comfortable, because many of them were working from home.
If they were working out of the home, they really needed to dress very comfortably for the job. And so they adjusted the inventory on hand for those changing preferences.
They also, in many cases, enhanced the offering of home-related merchandise in their stores. Most of us were spending a lot more time at home over the last year and a half than we had previously and we got tired of our interior decoration.
We wanted a bit of change, or we wanted more comfortable chairs or more comfortable desks to work from, or just a few more conveniences at home. And so consumers were buying products to enhance their quality of life at home, more so over the last year than we had seen previously.”
Get the complete picture from these two highly experienced equity analysts by reading both interviews in their entirety, only in the current Retail Report from the Wall Street Transcript.