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This isn’t Black Friday' going by mall crowd sizes, strategist says

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Simeon Siegel, BMO Managing Director, joins Yahoo Finance Live to discuss the outlook for Black Friday shopping at Garden State mall and the reason retailers are shopping smarter now than in the past.

Video Transcript

SIMEON SIEGEL: I think that the reality is, the mall looks like a classic day in 2006. So there's definitely some crowds, definitely busier than the mall is dead rhetoric, but this isn't Black Friday. And I can say that the lines that we're seeing, I rarely do these mall channel checks anymore with any degree of confidence. But the lines that we're seeing are actually in the stores with the least promotions.

So people are buying what they want to buy, they're not buying what the promotions are forcing them to pick up.

JARED BLIKRE: Simeon, this is Jared here. I'm just wondering, we we're touring the mall, you're hearing all of the information coming out, you're seeing the reaction in stocks. I'm just wondering, what's going through your head? As an investor, what are you recommending to clients potentially? How are you playing this situation?

SIMEON SIEGEL: Yeah. I mean-- listen, not to get political, I'm standing out here just in the hallway looking, like, people walking around the mall don't look like they're worried about variants. So if anyone knows about the variant right here looking, kind of what I can see right now. So I think the nature here, it's interesting, right? Like, we're talking about Black Friday, I look at my screen, it looks like Red Friday. And at the end of the day, what I want to encourage people to do for next year is to think about who's going to win and who's going to lose.

I think that since COVID started, we've been clustering in retail was either as a group dead, or as a group alive. But what I think we're going to find is, there are certain companies that did a better job than others. And so what we're looking for, we're looking for the brands that actually improve their pricing power as opposed to simply saw higher prices. Because I guarantee you, promotions are coming back next year. So the question is, once that first 30%, 40%, 50% sign hits the floor, who chases and who holds?

And so I think what we've seen is companies like Capri, companies like Victoria's secret, have actually shown an ability to improve their business, through the-- lower their price elasticity of demand, as opposed to others which are really just benefiting from lower promotions. So as we look into next year, that's what we're going to look for. We're going to look for the brands that have pricing power, that are going to be able to, with comfort, do more with less. Watch their dollars, their EBT dollars, their profit dollars go up, even if sales go down.

And that's, I think, going to be the biggest trick, because I think what we're starting to see now-- not today, but for the past two weeks-- we've started to see meaningful divergence. There are certain retailers that did really poorly this cycle, there are certain ones that did really well. And that's different than what we've seen the past two years.

SEANA SMITH: Simeon, heading into this holiday, and today, and over the next several weeks, potentially months, there's lots of talk about supply chain disruptions, product shortages, what that's going to mean for sales this holiday season. From the checks that you're doing right now, is that as bad as we initially feared? Are there simply not the product that we need on the shelves at these malls?

SIMEON SIEGEL: Yeah, I think you put it perfectly. I think that the reality is, it's never as bad as feared, and it's never as good as loved. At the end of the day, last year supply chains shut down, factories shut down, vendors shut down stores. There was no product last year. This year, supply chains are not shut down, they're slowed down. Right? It's not an issue of creation. It's an issue of transportation.

So what that means is, products going to make its way through, it's just going to make it really slowly. And that's actually a worse problem than not making it here at all. I mean, think about how many red holiday sweaters are going to be on the floor in February. So I think what I'm seeing at least, yes, there's definitely stock out. I mean, you walk through a sneaker store, and there's plenty of really hot items that are just not there. The walls have less than they are, but I guarantee you, there is product.

And what's fascinating-- that I don't think people fully appreciate yet, but they will-- is that we just went through an earnings cycle. Most of the companies have already reported their third quarter. Inventories were up year over year, for almost every single company. So companies are getting some of that in transit, but some companies are getting their product, they're just not necessarily getting it when they want. So I think if you're a consumer right now, and we all are, you're going to see that there's no promotions on the stuff that you want, and there probably is going to be an increasing amount of promotions on the stuff that you don't.

And that's, I think, going to pose a very interesting dilemma. And that's why I go back to this idea of the companies that are able to hold their pricing power, those are going to be the ones that are going to continue to cultivate this strong brand resonance and great full price sell through, which ultimately translates to margin. The ones that don't are going to see things start to stack higher. I think if we're all discount starved, expect that there's going to be more promotions as we head into next year.

SEANA SMITH: Simeon Siegel, thanks so much for joining us. Especially heading out to the mall this morning to you do some channel checks for us. Managing director at BMO.

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