From WMT to ROST: Jan Kniffen's Take on Retail's Biggest Winners

**SPEAKER_1** (0:00)
With Jan Rogers Kniffen, CEO of J. Rogers Kniffen Worldwide. Jan, always nice to see you.
So Walmart, interesting. Obviously, the headline was the slowest sales growth in six years, which makes your eyes pop. But then if you look at the numbers, they weren't that bad. In fact, the analysts have been saying they look pretty strong. Is the reaction we're seeing today got to do with the valuation perhaps?

**Jan Rogers Kniffen** (0:23)
Well, every, sure. Everything was good, but store-of-store sales, right? They had great growth online, they had great growth in advertising, had great growth in all those ancillary areas that have better gross margin, and they had great earnings numbers. What they didn't have was great store-of-store sales. But we know it got knocked down by about 125 basis points just through the pharmacy part. So had that not happened, they'd have been very close to what we expected their sales to be.
So I looked at it and said, well, yeah, they've got a 40 multiple. Maybe that's the problem. But it's not so much, not their performance. They're still the best retailer in America. They're doing a great job. They're gaining market share. Their two-year stack on numbers still looked great even with that slow number today.
Still better than Target's two-year stack by 600 basis points. So yes, they're a fabulous operator. They've done a great job. They're giving some of the money back to the customers in pricing that they're getting back on, and it makes their store-for-store sales look not quite as good. But they are hitting the ball pretty hard. I'm really surprised, other than the multiple, that we could see Walmart down 10 percent on that report. Yeah.

**SPEAKER_3** (1:39)
It's been a pretty consistent move to the downside here. Jan, I want to talk about the consumer though. Coming out and saying, resilient consumer, the consumer is still spending a lot of the same language we're getting across the retailers. But Walmart is still increasingly attracting this higher income consumer. They're moving more broadly across the K here. How significant is that shift for Walmart?
Will it eventually or is it already becoming a threat to retailers that are well beyond this traditional more discount space or big box retailer space?

**Jan Rogers Kniffen** (2:12)
Well, yeah, the biggest problem targets had is that Walmart's been taking the higher end consumer. And so when your biggest growth is coming from people making $100,000 a year annual household income or more, you're hurting a lot of people that you didn't hurt back when your best growth was coming from $50,000 household income consumers. So yes, they're crawling up because they've got better merchandise, they're doing a much better job online, and they have continually done that over the last two years, and it's hurting everybody. They're also doing a better job in fashion. So if you're competing on fashion like Target is, that's been a problem too, or even if you're Amazon. So is there enough room really for Walmart, Target and Amazon to all continue to have market share gains? The world seems to think so.
And maybe there is, but they're in a pretty tight battle there, those three. And Walmart seems to be winning the game across the board.

**SPEAKER_1** (3:04)
Yeah, it's interesting that you mentioned now, obviously, with fashion, because I was looking at some LSEG data, which says nine of the top 10 same store sales results here came from the apparel category just in time for back to school. So given the ones that we've heard of, and throw in the DIY guys there as well, how does that set us up? I mean, are we likely to hear kind of the same from the rest that are expected to report? I mean, obviously, we've got Ross Stores later today, we've got Costco coming up as well next month, and then how does that set us up, Jan, for the rest of the year, do you think?

**Jan Rogers Kniffen** (3:37)
Well, we've had a lot of reports, right? And we've seen pretty good numbers. Home Depot had pretty good numbers for what we expected, but they're in a tough macro. Lowe's wasn't very good, they're in a tough macro too. But even those weren't terrible. And then when you looked at the other people that reported, Target's numbers for Target were really good compared to what they've been showing. And as you looked at the higher end businesses, they're all reporting good numbers. I mean, Tapestry's been doing really well.
Ralph Lauren's doing really well. So it's not like the consumers walked away.
And even when you get to the lower end, I bet we're going to see a really good number out of Ross. But even TJ at 1% didn't look great on store for store sales. But there the earnings were okay. And so there's nothing really happening here yet. Am I worried about wage growth? No. Am I worried about inflation? Not really. Am I worried about the leverage on the consumer? They can pay back just as well as 2019