Retail's Durability Against Inflation: From KKS & GAP to TGT & WMT

**SPEAKER_1** (0:01)
Let's take a look at some of the major retailers this morning. We've got Target Lower by one and a half, though the restaurant at the moment, Walmart is just fractionally higher. Cost goes up 1.4.
TJX up three tenths right now. So it's been a busy week for our retailers. Out with a lot of earnings. We got some more yesterday as well, Alter Beauty, Gap. So let's break some of this down on retail earnings season. Joining us now is Charlie O'Shea, O'Shea Advisors. Good morning to you, Charlie. Thank you so much for your time. You and I didn't speak long ago about how you would summarize what we've seen from some of the big box retailers that we just had on the screen. But we've started to hear from more obviously Best Buy, Gap was interesting yesterday as to what they're doing. I mean, obviously, Old Navy, that's a critical component there. Alter Beauty was a standard. I mean, is that the lipstick effect? Just walk us through some of the more recent reports we've heard from.

**Charles O'Shea** (0:56)
Okay, Alta, I'm not going to be able to help a whole lot with as a consumer, but I'm guessing that Alta will do very, very well going forward. I mean, we've got back to school here and people tend to buy a lot of different things during back to school. So I think that's a driver for Alta.
I think when you look into this, I've always been a Best Buy fan. I think that's been well documented over the last 15 years or so.
I just think that Best Buy is going to do really well for the balance of the year. There's so much new tech out there. People have cited AI, and there's a new TV cycle coming out, et cetera, et cetera. So I feel pretty good about Best Buy. We talked about Walmart. We talked about Target last week. We talked about TJX in the context of Ross. A couple of the names I call out would be, Kohl still doesn't seem to know what it wants to be. I can remember years ago, and I'm gonna give a history lesson here. I covered Kohl's when it was building 125, 150 stores a year back at the beginning of what is now the 21st century. And then all of a sudden, they hit the brakes. And that was telling to me, and they hit the brakes hard. And they're still suffering. They had good merchandise for a while. They didn't pick up much when Sears won under. They didn't pick up much when JCPenney had its issues. And I just don't know that Kohl's has much direction and hasn't had much direction for a while. We're hearing the Sephora's not generating a whole lot for them, and that's really kind of scary, especially when you see what Ulta just did. And then Gap, you brought Gap up.
The fact that on the heels of disappointing Old Navy results, they rearranged the deck chairs, that's telling to me as well. The core Gap business is doing really well. Banana's doing well. Athleta's kind of always been a laggard, but the fact that Old Navy can't get out of its own way is really telling, and that's gonna be a challenge for Gap to back out for the year, I think.

**SPEAKER_1** (2:53)
Right.
I just want to flag as well, I mean, we did get the Umish consumer sentiment out just as Walsh was speaking, but obviously not paying attention to that because all eyes on Jackson Hole, but it did fall about 6% from last month and landed about 11% below a year ago. There are worries about kitchen table issues right now, Charlie. I mean, given we know the backdrop of, you know, the economic situation and how the consumer is feeling right now, given the performance of some of these companies, what would you say it's down to? I mean, consumer trends or operational efficiencies at some of these businesses?

**Charles O'Shea** (3:28)
You got to operate. I mean, that's true in any economic cycle. You have to be a world class operator, especially in an environment like this. When the consumer is more fickle now than they are just generally, when economic times are a little difficult, they're a little choppy, and I think we're in that right now, especially when you look at gas prices, the consumer is going to be very thoughtful about where they spend their money, and you have to give them a reason to spend. I've used this analogy a million times over the last several years.
You gotta get, if they're gonna come to your store, it's gotta be a great experience, because they don't have to come to your store. They can go to someone else's store. They can just sit on the couch and order online. So you've gotta be just hitting the cover off the ball from an operating perspective, or the consumer will notice. In times like this with social media, a bad experience will spread like wildfire. If it's the wrong person that has a bad experience in your store, and they've got a following, you better watch out. And you may not get those people back. And that's tragic. I mean, we saw what happened with Penny years ago when they lost their shoppers. They still haven't gotten them back. And that's kind of a death story for any retailer out there right now.