Covid-19 creates negative growth for retail industry: Former Macy's CEO

Well, I think, as it's always been the case, Sarah, you've got to pick your spots in this industry, and that's certainly more pronounced than ever today. I start with the essential retailers. Those guys have been open for the whole portion of the pandemic, and while they've been open, they've not only been stealing market share, they've been investing in the future for their business. So you've got to go with guys like Target and Walmart. I think they're doing fantastic, innovative things and reinvesting into their future. There's going to be a... you just mentioned Brooks Brothers... I mentioned to you before, Sarah, that there's going to be a lot of shakeout here. There's a combination of bankruptcies and then those that are just going to be hanging by a thread and not able to invest in their business. There's going to be weakness, and those are opportunities for the strong ones that come through here. So I think that's another place where you'll be able to invest when you pick the winners coming out of this post-coronavirus fog. And you'll find there'll be winners and losers, but it'll be a different marketplace. It'll be a smaller marketplace, there'll be fewer stores, and frankly, there'll be less competitors. That will be good for the winners.

It's obviously complicated because, you know, what back-to-school was, it was an occasion. It was an occasion to buy apparel, buy accessories, buy footwear. And so obviously that occasion doesn't look very promising. Having said that, over the last several years, the whole back-to-school business has turned into a back-to-athletic wear and back-to-athleisure wear. That's what kids were wearing to school anyway. That category is still very strong and growing. Even if you're at home, you're wearing that product category. So it won't be as damaging as it would have been five years ago, but still, it's not an occasion to buy. So it's a general overall negative for the industry.

Well, I hope so. I mean, I hope so. But you know, it's been hard to predict for sure because they've been beaten so badly. You think they're going to be open and all of a sudden then they're closed again. And so it's been quite challenging for the sector. I said to you before in a previous conversation that those who are highly leveraged, those who have a weak balance sheet, those guys are in trouble. They'll never get through this, at least not in the same form that they were coming in. So that's where the weakness is. I think there's going to be opportunities for the stronger ones, the ones who have a strong balance sheet, to come through this and take advantage of those weaknesses and take market share when this is over.

I love it. I absolutely love it. And Amazon has done phenomenally well, of course. They've been incredibly innovative, they've been super smart with the way that they've attacked the business. And of course, this COVID-19 buyer, Sarah, just played right into their hands. Of course, most customers were quarantined and couldn't go into physical stores. So I think the fact that Walmart was able to stay open, they've done a fantastic job. They're doing lots of new, innovative, creative things. I love what they're doing with using their parking lots when, during times at night when they're not particularly busy, turning it into a drive-in theater. A lot of innovation that Walmart is doing. They have nothing but upside as far as I'm concerned on online business. Amazon's already the powerhouse there, but Walmart is going up. They've got an upside potential here, as does Target. Both of them were very underdeveloped just a few years ago with their online penetration. They're now catching up aggressively and I think investing heavily in the right way into making their companies much more digitally friendly to consumers. So I like the rivalry very much. I think it makes them both better. And I think Walmart at 23 PE versus Amazon 147 PE, you know, I think I like the investment opportunities at Walmart and Target for the next several years as an upside opportunity.

Well, I think, you know, it's been challenging. The fact of the matter is, this was nothing about what they did. It was all about this virus. And the fact that some retailers were able to stay open and others were not was a difficult hand here. And I understand it, of course. I understand the reasons why. Having said that, Walmart and Target, other stores, Amazon obviously sell apparel, sell shoes, sell accessories, and were able to sell those products during the pandemic, while all the clothes stores, whether it be Nordstrom's or Macy's or whoever, were not able to do that, at least in their physical stores, the large percent of their business. So the answer is, they've been dealt a difficult hand, and I think they do indeed need to get back on their feet and have government assistance to help them do so. They're an important part of the fabric of retail. They're an important part of consumption in America. This is what drives GDP, and I think it's important that the government be there to assist them in this time of need.

32 million, at least in January of this year, and last year, Sarah, 32 million jobs were in the retail sector. 52 million, don't forget the ones today, there are 20 million that either supply retailers or help advertise retailers or have another role directly dependent on retail sales and performance. And so 52 million, one in four jobs in America are either retail or retail-related. I think without a strong retail business, those are challenging numbers to get to. I think it's going to be a long, slow recovery, and so I'm concerned about that for sure. We need to get retail back on its feet, and then finally, that's a major part of GDP as well, consumption. And it's also, you know, you just want people employed. You want people to be employed to feel good about what they're doing and how they're contributing, as opposed to the government having an additional long-term bill for unemployment that's not in their current plans and budget.