00:00Nora was talking about oil prices being something that Walmart warned about. And that might be one reason why the
00:05stock is lower. Talk about the interplay of rising oil prices and Walmart's business because yes it's pressure for its
00:10consumers. But it also raises expenses for logistics. Yet if I remember correctly Walmart does sell gasoline through BJ's. So
00:19you know it benefits and it also hurts. Right. Sure. So Walmart was talking this morning on its call about
00:25the Sam's actually customer who buys gas from them as well.
00:29Spending so much more in their stores than they would otherwise. And that makes sense. Sorry. No worries. We've got
00:35that one tomorrow. So I think that gas prices have been somewhat muted on consumer so far because of in
00:44part because of those tax refunds. So one of the things Walmart and Target yesterday has said is that now
00:50that most of those are spent or at least the portion that consumers aren't trying to save are spent.
00:55We'll see if there is more of an impact on consumer spending. Most of the sales numbers for Q1 have
01:01been just fine. But of course there's caution as we don't know what happens next with gas prices.
01:06Walmart is a consumer staple because people go there to get their groceries. And other competitors have started to notice
01:13and are really trying to compete with Walmart on that front.
01:16You mentioned to me that Kroger's new CEO is looking at Walmart saying I want a piece of that. Absolutely.
01:22And what they're saying unfortunately is even scarier because they're saying we need to lower prices to get a piece
01:27of that.
01:27So you've got inflation coming from freight impacting Walmart's margins. The same time competitors who might get more aggressive. Now
01:35what we've heard is that Kroger wants vendors to fund that.
01:38They want consumer staples companies to pay for those lower prices. We'll see how successful the CEO can be. He
01:44was successful when he ran Walmart's U.S. business.
01:47I think Kroger's a little bit of a different game. So we'll see how much pressure this puts on Walmart.
01:52Walmart stock is rich though. I think that's a lot of what just is pushing them putting the pressure on
01:56Walmart.
01:57Walmart can respond to that though right. It's got a lot of heft with the suppliers like it if nothing
02:01else can tell suppliers and vendors hey you know work with us here.
02:05Right. And during the quarter we actually heard that Kroger's price discrepancy versus Walmart had increased from high single digits
02:14to low double digits.
02:15So they've got a lot of ground to make up if they want to compete with Walmart. There'll always be
02:20items they can compete on but I think part of what has people spooked about Kroger's comments is that the
02:25CEO acknowledged that consumers have different baskets.
02:28So it's thousands of items they have to cut prices on. Right. Makes it makes it tough for Walmart to
02:34square up when what they usually do are item by item rollbacks.
02:38So I compare that with a TJX where you walk in knowing that you're going to get a good deal
02:43because the whole premise of the store is this is off price compared to where you might get it somewhere
02:48else.
02:49TJX just seems to be doing just fine. It does well in great environments and it does well in tricky
02:54environments as well.
02:55Is there anything here that you know kind of gets you concerned or makes you think things are not working
03:00well?
03:00You know TJX also has performed really well in this home goods comp they just put up.
03:06I think it was a nine is awesome in a home space that's under so much pressure.
03:10It's all share gain. I think Ross and Burlington which are about to report are going to have good numbers
03:14too.
03:15So we feel good about off price in general.
03:17The customer's been value oriented for a long time and department stores although they've shrunk a lot are still giving
03:24up share in general to off price.
03:26It's just kind of a cheap and easy way for a consumer to get that kind of discretionary spending fix
03:32and the brands are good.
03:34Now that TJX, Ross, Burlington and almost all their categories are a top 10 retailer it's hard for vendors not
03:42to give them product.
03:43What can these off price retailers do better that perhaps they're not taking advantage of right now?
03:48It's interesting because they've actually been bringing in some higher price products.
03:51So in our recent checks at Marmax we've seen a lot of Birkenstock.
03:55We've seen some Kate Spade.
03:57So I think they'll bring in better and better products.
03:59They're bringing in some K-beauty in their beauty.
04:01So less of a drugstore feel and more of a boutique-y feel.
Comments