EXCLUSIVE: Telsey Advisory Group CEO Dana Telsey Says 'You're Going To See A Lot Of Retail Companies Reset Guidance'

Benzinga’s Money Mitch had the opportunity to catch up with Dana Telsey, CEO and chief research officer of Telsey Advisory Group, on Benzinga’s Stock Market Movers to discuss her thoughts on the retail sales report that was issued on Friday.

A retail expert, in her 31-year career Telsey has tracked more than 100 companies and she is the only analyst in the U.S. to offer a comprehensive analysis of the European luxury goods market. She held positions at Bear Stearns, C.J. Lawrence, and Baron Asset Fund at Baron Capital, Inc. before starting her own advisory business.

What did you see in this retail sales report that caught your eye?
I think overall it was definitely a little better than expected. That’s good to see; even with the inflationary headwinds — we saw a little improvement. But, I think there could be a bit of a lag, given the fact that some of the price increases have taken hold more recently and, we’ve seen the level of inventories rise, even more recently.

So, I can’t wait to see what July and August numbers show, because I think we’re heading into a very promotional back-to-school season with a lot of excess inventory that will have to be moved.

We saw [inventory] issues in the first-quarter period with Target Corporation TGT and Walmart Inc WMT – how do you think the back-to-school season will treat department stores this time around?

I think it’ll be more promotional this time around, and I think it’s not just going to be the department stores. When you have companies like Old Navy [part of Gap Inc. GPS] looking to move merchandise like they are, American Eagle Outfitters Inc AEO also, that’s an offset to everyone. We also know — well the back-to-school season, we’ve seen figures out there expected to be up 7%-7.5%, and that’s without inflation. So, the real number may not be as robust.

We’re also going into Q2 earnings season; I think you’re going to see many of the retail companies reset their guidance a little lower, given the fact that sales have slowed, and it's become more promotional. It is a changed environment.

What can we expect to see with earnings coming up? Are there any big reports on your radar?

All of them. That’s what I do, it is a connect-the-dots scenario across all of them. What I want to see, more recently is how sales are trending — you want to see where it is happening.

We’re seeing a pick-up in store traffic, and moderation in terms of online sales. We’re seeing the continued shift to services from goods. Yet, with 2.6 million weddings happening this year, coupled with more [in-person] events, people have been buying.

Consumer savings rates are back to more normalized levels, we do have continued wage growth — but the wage growth isn’t offset by the heavy headwinds of inflation.

What industries are more resistant if we were to get into an official recession?

Well, certainly the essentials and off-price. Remember, off-price is what consumers go to because of the pricing, the value, the convenience and the brands that they offer. So that’s where I’d be looking on the discretionary side.

Nike Inc NKE is 40% off of its highs, is this an opportunity?

With the market churn they have, the global reach they have, and the continued interest in sporting goods — that is an opportunity for companies like Nike. Big global brands have a pricing power presence, and certainly, with the product innovation that Nike has, there’s more to come.

I also believe that when you think of activewear and sportswear in general, I think you’re seeing with the new hybrid work environment, people are dressing more casually at the office. And, that is a benefit for more casual apparel companies.

To see the show, click on the video below:

Photo: Telsey Advisory Group