Peter Bar, Seo Gerald Storch, Nike discussed on CNBC's Fast Money
We picked this story because of the broader implications in part of that is whether or not you know in six months time whenever these supply chain issues get ironed out and there are no container ships stranded out in the ocean is dollar going to put out a press. Release saying hey good news everybody going back to a buck or prices gonna stick a dollar twenty five. What struck today. And i know you saw. This guy was our good friend. Peter bar bleakly advisors tweeted this bank. A bank of england governor said today. Transitory doesn't have a fixed time point which i thought was odd. It reminded me of eddie murphy routine. I won't tell you the two things that he said were permanent but nothing is permanent. So when they say transitory i mean. Of course there's an end at some point but it's preposterous when you start hearing these things and the fact that that officials said that mean rational people just have to be screaming like me you get into. I mean i find myself you want to get into a pool so you scream underwater and nobody hears you but you get it. I mean it's maddening in terms of dollar tree just to answer your question. It would be a brilliant not smart a brilliant marketing ploy. If the reason they did this is because they know six months from now they'll come out remember. I think it was mr mom schooner tuner you know. We're we're lowering the price for you. If they came out with the little schooner tuner thing and said guess what it was transitory. Were lowering our prices that would be a homerun accept. It ain't gonna happen. This is to me permanent. And it's just the world we live in right now. i'm not sure. Eighty percent of the audience knows what you're referring to but i get your point. No squall smell. I will tell you. The mr mom fans out there are numerous. They know about schooner tuna a little schooner sooner flag. Tammy raising your hand one thing. No i'll go ahead. And i have nothing to add other than fan. Funny tony one. Whatever it takes. Go ahead karen all right no i was just gonna say. I know your kids tim. They're no dummies. They're passing this onto you. You gotta get six twenty five to seven fifty. That's what's happening. I hope they are listening right now. All right let's more about what this all means for the consumer with by the way just eighty seven days to go until christmas joining us now is for toys r. Seo gerald storch storch advisors gerald great to have you with us so jerry you think that consumer strength that that's going to trump all it's going to trump price increases is gonna trump inventory issues all of that absolutely all these pressures are real staffing shortages inflation logistic. What are they're all real consumer stronger than all of them put together. We've been seeing huge increases in consumer spending when you look at a two year basis versus pre pandemic two thousand nineteen. And i just gonna continue on and on well into the fall certainly through christmas. This is a wonderful time to be a retail. I don't care if a dollar tree or walmart and the reason is because you are gonna pass these price increases on and you're going to see your top line rise faster than your cost going to rise. Why some your costs are certainly going up like labor costs but your fixed costs are fixed. Things like rent a lot of the written a lot of these stores. There are five year ten year accelerator. That kind of thing or some of the stores are owned our own people and so they have fixed costs for occupancy rising prices the arbitrage is tremendous. They're gonna make a lot of money across the board. That's what's going to happen. There will be shortages you to buy the right toy. You better get it fast. Because they're going to be out of stock sued but most things are going to be available and most you're going to sell. Scarcity is good. How do we think about it. In the in. Through the lens of say nike jerry. And i'm not asking you to opine about ninety per se in terms of their issues with supply. A lot of their factories are in fact. Shut down because they operate in southeast asia but yet they're able probably to not promote as much as they might have to or maybe their levels of promotional fairly low to begin with. How do we think about that sort of offset to not worry. Great question parts of that. It doesn't mean that every branded vendor is going to well depending upon what. They have available at nike said. They're going to have problems. That growth is going to slow because of the supply chain issues. vietnam particular. So some of these brandon. There's going to issues so and some of them are going to do fine. I'm talking about retail. If they don't sell nike they sell another shoe. The reality is christmas. Aren't going to be empty. They're gonna have something in them so retailer. Different from specific vendors may have their own issues. Now you also mentioned margin was the second part your question. Those are just going to keep expanding. We've already seen significant margin expansion especially among the troubled apparel department store sector. We haven't seen that in many many years where we're basically again. Because of shortages they haven't had to discount as much in their margins have been going up. I believe that's going to continue throughout the fall at the holiday period. I remember one of the things that one of the old saws and retelling stories. Is that your most profitable. Ours are on christmas eve in the daytime when all the husbands by their wives presence. And you're out of stock on think. They're absolutely desperate. They'll buy anything they'll pay anything for it. It may not be what she wanted. But you gotta come on with the president and they do and your margin is using your sales per hour actually biggest than even bigger. They are black friday so think about it this way. Each of the days between thanksgiving and christmas. They're kind of like christmas eve day. You've gotta go out and shop if you want to buy what you want. And margin's gonna expand like jerry. How do you see this playing out. Did you see work arounds. As far as the supply chain do you see sourcing move away from china and two different countries and then the other question is for christmas. Do you see the return of brick and mortar and then being a bigger piece of the pie versus digital online again to great questions. First of all. I've been saying for several years. This began back. With the trump tariffs on china. That'd be management malpractice not to diversify sourcing away from china so re. Everyone's been working hard to do that. And that's remember nike's problems are in vietnam was more than china right now. So you know. One of the things that everyone's been doing is trying to get multiple sources apply. That's only going to continue by the way really been the pattern for decades where we're sourcing tends to chase low cost. China isn't necessarily lowest cost to manufacture anything anymore so we all expect india to be more than in the past there. Other countries are coming up and live in america and north africa. depending upon the product it'd be manufactory in multiple places that's capitalism. it works it will diversify as you know so i have absolutely no no doubt that's going to occur. I'm sorry what was the second part of your question. I forgot brick and mortar. Do you see that. Yes as well last year. Last year we got hit with the second wave of the virus. You may recall. There were a lot of lockdowns at some key states like california that could happen delta. It's not what i'm seeing. The numbers i monitoring very closely. I'm sure you do too. We're seeing it come down. And so we have to watch the northeast and california for what happens over christmas bill. Start going back inside a little more. But we don't have a big uptick Do delta very the bricks and mortar will definitely huge..