00:00What is that Hardline? What's Hardline? How's that part of what you do, Michael?
00:07Yeah, good morning. Thank you so much for having me. Hardline is anything non-apparel-related,
00:11big box retail. And we really appreciate you having us today. We're coming live from
00:16the UBS Global Consumer and Retail Conference, where we've had 90 companies present over a
00:22two-day period to get a great read on what's happening with the consumer.
00:26Well, we appreciate you joining us as well. Excuse my JK moment here. Just to Dick's Sporting
00:34Goods and Foot Locker, what did you think about the outlook and how do you feel about the way
00:38they're turning around that brand? So our view is that Dick's is well positioned to continue to take
00:46market share within the footwear and apparel space. We saw very healthy trends over the holiday season.
00:56positioning them in a good spot as they enter 2026. It's very early in its tenure where it acquired
01:06Foot Locker. And we expect to see more progress over time. Hey, Michael, the thing that alongside
01:11earnings starting to trickle in that that really has captured the sentiment of this market is what
01:16oil prices mean for consumer and for retailers. When you look across your coverage area, who is the
01:22most exposed to higher oil prices? There's really no retailer that doesn't have some either direct or
01:32indirect exposure from the price of oil. As I mentioned, we've had the chance to meet with a host of
01:40retailers over the last couple of days. The takeaway has been a couple fold. Number one, right now, the consumer
01:47is
01:48steady but trepidatious. The question associated with oil is all going to be around the persistence and level of where
01:56something like gasoline goes to.
01:58If we start to see four and five dollar a gallon of gasoline on a national level, that could have
02:06the impact of destroying some demand for certain areas.
02:10Now, with that being said, other retailers have noted they're seeing encouraging signs. For example, Lowe's said yesterday that in
02:18areas where the weather has been quote unquote more normal, which that's not in many parts of the country, but
02:24in areas where there has been some normal weather, it's seeing very good engagement with categories like lawn and garden,
02:31which that's a favorable sign for the spring selling season.
02:34The one other point with respect to oil is that it's all very new. On average, the consumer fills up
02:41gasoline every two to three weeks. So only 10 to 15 percent of consumers might have filling up recently and
02:49experienced that shock at the system.
02:53So we're all waiting to see how the consumer is going to respond. Thus far, everything's been steady based on
02:59what we've heard over the last couple of days.
03:00Michael, we were just looking at the S&P broken down into 11 industry groups, the major industry sectors over
03:09the last month.
03:10So since the war has started, essentially, and consumer staples are one of the biggest losers. Just is this market
03:18mechanics?
03:19Is this about, you know, valuations? Because I would expect such a defensive sector normally to rise in times of
03:27turmoil.
03:28And I'm just wondering why you think we would see consumer staples off six and a half percent so far
03:34this month.
03:37So there's a couple of important points there. If you look prior to that coming into this year, consumer staples
03:42had been the best performing sector because it was viewed as a place of relative safety in this otherwise very
03:49uncertain environment.
03:51So some of those gains have been given back as all this macro and geopolitical uncertainty has set in.
03:59Second, as we see the price of oil continue to rise, that is going to make its way through the
04:06supply chain, which could put further pressure on consumer staples producers and the consumer in general, which will have an
04:15impact on consumption habits.
04:17So those are the two factors that have had a near term impact on those stocks.
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