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00:00Let's talk a little bit about this set of numbers. They were good. This is clearly a company that is enjoying the post pandemic bounce. How sustainable is it. What are we getting in these numbers that tell us the answer to that question. Yeah it's great to be here. Thank you for having me. So I think this was a really important diagnostic event for Macy's not only for the consumer but also for their business portfolio and for some of their strategic actions. So the portfolio from a performance perspective as you mentioned Bloomingdale's was really the shining star at 28 percent. The overall business up about 13 percent on a comp basis. That was just a little bit below consensus. But I think again the composition indicating that that upper end consumer is feeling very very strongly. The other thing I think they need and deserve credit for is that they have done an exceptional job of putting stronger processes and controls into this business. And so the inventory is very much in check. This is not the case that we saw last week which I think created a lot of consternation in the market for Macy's. The inventory was up about 17 percent their sales up about 14. So it's moving really really closely. They do have some pockets. They did admit to some of the Covid benefiting categories. They're going to see some markdowns in the second quarter. But the counterpoint to that is occasion based back work based apparel working really well for them. So Stephanie it does feel like that the narrative is that it's still the reopening trade right. Like Target Wal-Mart. We're totally Covid beneficiaries. And now it's about reopening. How long can we reopening. Less like you're only going to buy X amount of work clothes. You're only going to go to get by X amount of wedding dresses. I think it's a fair question. It was one of the things that we wanted to unpack a little bit more with them in terms of the durability of some of these drivers. Weddings tend to be a summer season affair. And so if that's what's driving some of the occasion base where that's going to fade out as we get into the back half. But I think going back to their ability to manage into inventory control it means that the risk profile for the back to school in the holiday season is just not going to be as extreme. So from a performance perspective across the piano. Yes sales may slow and the guidance would imply that they will as we get into the back half. But the IBEX expansion that this company has delivered is substantially better than anyone expecting. I also think today and I don't like to get into an arm wrestling match with you with investors on department stores but I think these department stores as a collective are showing that they are survivors. I mean Macy's put up one of the strongest operating margins across the entire group 9 percent operating margins the quarter. This is not a business that's on the brink of bankruptcy. So I think we also have to recognize that consumers still still do shop these venues. And these companies are putting up for fighting to make sure we get the game. Stephanie we just talk about the margin story just for a moment. These are companies that have invested in inventory management. These are companies that have invested significantly in their back office. They are running their business leaner and meaner. As you say the jinx are up. We're getting and I'm going to whisper this because Alix Steel isn't gonna like it we're getting fewer and fewer promotions. Is this now a new state of affairs. The consumer's got very used to this kind of promotional story discounting. Are we done with that. I think so I mean I facetiously said to the management team just a few moments ago that the Macy's one day sale is no more because it was becoming every day. And so when it happens you know that it's going to be very isolated and tactical. And so I think they are there. We need the consumer off of this idea that every day you go into Macy's you're going to get a discount. But I also think they're being much more proactive about their point of view. And I think it comes together. You're making more strategic decisions around inventory not just buying inventory to have it but being very disciplined about what you buy when you flow it and how you price it. And not getting into this promotion analogy constantly where you actually train your consumer to only buy on discounts. I think you're doing a good job of navigating got finer points of offering value but not creating dependency of discounts. So dirty little secret. I only buy on discounts. I've had to now resort to sample sales because I will not buy full price and I cannot get decent discounts anywhere anymore. To your point let's not buy the stock for one second. How much of the move can that we're seeing today. Can we attribute to the actual numbers versus hey these stocks got beaten up so badly after the Wal-Mart Target earnings fiasco that they're just making up a little bit of lost ground. Yeah I think it's we're just seeing a bit of a recovery in sentiment. I don't know that the operating margin at almost 9 percent is priced into this topic. We're still seeing these stocks trade at. Bizarrely low multiples in my opinion these are not businesses that are going to fail anytime soon. So I do think part of it is just that the sentiment reversion. But also if we start stepping back and looking at cash flow working capital dynamics and the operating margin structures of these department stores again the surviving class I think you are seeing real business models here that should be valued. One final quick question. Moral macro question. What does this tell us about what these numbers tell us about what is happening with the consumer. I saw a pickup in credit card spending and I'm wondering if that is an indication that maybe actually the consumer is beginning to reliever or whether or not this is just a return to people just using their credit cards. They've got the cash balances to support those credit cards and therefore we're good. Yeah I think this is a big question for us. When you look at the economic data it would suggest that the consumer is stable and that there is capacity to spend. But when you talk to business operators in the retail marketplace they're conscious of the fact that the consumer is showing up feeling differently and purchase decisions are often made out of perception purchasing power and feeling not balance sheets. And so very few consumers go in and check their balance sheet statement when they're shopping around a store. Instead they're based on confidence. And so I think there's an element here of maybe the consumers starting to show that OK I made it through some of that hyper inflation. Boy I didn't like it but I survived it. I have some intentional purchases to make. I'm going out to weddings and events and returning to the office. And so I need to update my wardrobe. So I think it's both confidence may be starting to stabilize composition of what they're buying. And then as we start to see some clarity around how the consumer is positioning for the back half maybe we get through and the consumer seems OK. I still don't think we're kind of back to the glory days of the stimulus but I think we're seeing the consumer is not panicking. Which is certainly.

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Retail Rally Drives Markets Higher

Strong retail earnings from Macys and Dollar General helped to drive the markets higher on Thursday. Stephanie Wissink, Jefferies senior analyst joined Alix Steel and Guy Johnson on "Bloomberg Markets: Americas" for a deep dive on the retail industry. (Source: Bloomberg)

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