Wall Street Punishing Retail Stocks Ahead of the Holidays
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This is Your Money Matters from The Wall Street Journal. Welcome to Your Money Matters. I'm J.R. Whalen in New York. It's been a tough year for brick-and-mortar retailers as consumers favor e-commerce shopping. And this holiday season, when the weather outside is frightful, Wall Street doesn't see things getting any better. The Wall Street Journal's Michael Wursthorn joins us to discuss. So, Michael, holiday sales are expected to rise about 4% this year, but investors, they're actually adding to their bets against the big retailers.
Yeah, it's interesting. So you're seeing, and it's similar to last year, but you're seeing that while holiday spending is going to be up, you're going to mostly see a lot of those increases go to the e-commerce focused retailers that are out there. So you have to think Amazon and some of the other companies that have been further along in transforming the amount of sales that they bring in each year, just increasing the proportion of how much of that is coming from online versus the actual stores. So while there will be more spending across the board, you have a lot of consumers that just are more confident in the economy. They're making slightly more money than they were last year and are overall in a better position financially because you have things like oil prices being a little down than they were last year at this time.
A lot of that spending is probably going to go to the benefit of the e-commerce giants and not those traditional stores.
Why are brick-and-mortar retailers struggling as the holidays approach?
And this is pretty much seen as the Amazon threat. And analysts really don't see that going away.
No, I mean, if anything, you're still, I would say, in the earlier stages of this for a lot of companies. There's a lot of uncertainty as to just who will end up surviving sort of this new retail landscape as you have. Amazon continued to move into other industries that it hasn't been in before, like you saw with the purchase of Whole Foods, and it just embeds itself deeper in what it's already been doing. such as selling apparel. It's going to eventually surpass Macy's to be one of the biggest apparel sellers in the world. So it's really shaking up the industry still quite a bit. And analysts really aren't sure as to just who's going to be the ones left standing along with Amazon.
And so the key for large retailers is not only to boost their try to boost their in-store experience just to attract foot traffic and I guess keep the foot traffic coming back, but it's also to improve their online operations.
Yeah, very much so. I mean, you're seeing, say, at the likes of Kohl's and Macy's, they're trying to improve the experience where customers can purchase something online and be able to pick it up in store much more seamlessly. Even beyond that, you're seeing a lot of these stores try to boost the types of merchandise that they're offering just to make it more affordable.
How will holiday spending growth split between e-commerce and physical stores?
alluring for a customer to come into the store versus just purely shopping online. You saw that with Kohl's and their partnership with Under Armour, that they have all these Under Armour products and you saw their sales get a little bit of a boost from that in the last quarter, which for a lot of analysts was better or less terrible, as they might say, than expected. But it still goes to show that there's a lot of experimentation going on amongst the traditional retailers to sort of figure out what is the best path to compete with Amazon.
We're speaking with The Wall Street Journal's Michael Wursthorn about pressure on retailer shares heading into the holiday shopping season. And you're listening to Your Money Matters from The Wall Street Journal. Thanks for listening, everyone. Now, Michael, e-commerce stocks rising and retailer stocks falling. It isn't as simple as it sounds. There are actually some bearish bets being placed against Amazon.
Yeah, that is true too. And a big part of that, according to some of the folks I spoke with, is just because Amazon shares have gone up as much as they have over the last year. So there are some expectations amongst especially large institutional investors, such as like a hedge fund, that Amazon shares could end up falling just a little bit, especially as they're still testing and figuring out where are these other industries that they're going to go into.
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