Yahoo Finance's Rockin' Retail Special

Yahoo Finance's Brian Sozzi reports from the Westfield World Trade Center mall in New York City as retailers gear up for the holiday shopping season.

Video transcript

[? BRIAN SOZZI: ?] This is Yahoo Finance's Rockin' Retail Special. Consumers are flush with cash, thanks to a tight job market and trillions in stimulus dollars. The upcoming holiday shopping season will test what consumers are willing to spend their money on.

There's growing anxiety over the cost of living and a possible recession on the horizon. The biggest retailers, even Amazon, are warning of tough times ahead. And it's all down to this, cost of living crisis with inflation through the roof. It's hitting mortgages, credit cards, cars, gas prices, and, of course, grocery bills.

The housing boom is now a bust in many parts of the country. Add in a bad year for stocks and the latest crypto crash, and it's no wonder consumer confidence is plunging.

Retailers know all this, which is why they started holiday deals even earlier this year. Their number one goal, getting you part with your money.

Loving that silky voice on the intro welcome to Yahoo Finance's Rockin' Retail Special. I'm Brian Sozzi, here in Oculus, New York City, otherwise known as Westfield World Trade Center. About 110 stores, maybe a little bit more than that open in this location. 368,000 square feet of retail space.

And, guys, I've been walking around this for the past half hour. Seeing a lot of tourists. Of course, it's a major tourist hub with the World Trade Center here. You have various subways that feed into this location. A lot of high-end shops, like a John Varvatos. You have BOSS. You have Stuart Weitzman.

Not a lot of-- of course, I'm looking at an Apple store right now. Not a lot of shoppers in these stores just yet. Not seeing a lot of folks carrying bags. But, of course, a couple of days away from Black Friday, and I would venture to say these stores will eventually get crowded as we near that big Black Friday holiday.

But enough about me blabbing here. Let's welcome in our first guest, Alex Mill CEO Mickey Drexler. I should also note, of course, the long-time legendary CEO of Gap and J.Crew. Mickey, always good to see you. Where are all the shoppers? They're not buying anything.

MICKEY DREXLER: Well, they probably will. My guess is they're waiting for the prices to drop. I think Black Friday probably started a week or so ago. Everyone's seems to be on sale with lots of price cuts. And it's been a-- a tough go the last month or two.

BRIAN SOZZI: I have to give you a shout out. I think it was three or four months ago, you were on Yahoo Finance Live. And you said, Brian, I'm not seeing a lot of good things in retail. And nothing good really has come out of retail since you said that.

Margin's under pressure. Retailers were too much inventory. How do you think this holiday season ultimately shakes out?

MICKEY DREXLER: It's funny that you said that. I have a lot of people say, why are you so negative? I say, because it's negative out there. I think it's-- I don't know for sure. It has to be difficult.

Because of the discounts and Black Friday literally started a week ago with most people, I don't think it's easy to call. My hunch is it will be not a good one, but we'll see.

BRIAN SOZZI: When will inventories get past their peak? I'm in a Target. I'm in a Walmart. I go-- recently went yesterday to Roosevelt Field Mall. There's so much inventory in these stores. When is it going to go away?

MICKEY DREXLER: They're in the stores, but there's more in the distribution centers. Some of the companies are OK. I think it'll go away when the prices get low enough to move the goods.

But we all plan too ambitiously for this fall and holiday, and we own the goods. And if you don't make plan, which I don't think many people are, you'll just have the goods stack up.

BRIAN SOZZI: Who ultimately wins in this environment?

MICKEY DREXLER: In this environment? Well, last week, I think Walmart won. I'm trying to think of who else won.

BRIAN SOZZI: I think that was the first-- I've never heard you mention a Walmart.

MICKEY DREXLER: Well, I don't usually, but I think it's interesting. That was a food win. And they counted as retail, but I think half their business is food.

A few others reported. And a lot of the reporting says they beat estimates, but estimates seem to be very conservative. I don't know who else won, really. I don't recall.

BRIAN SOZZI: Macy's was a surprise, a surprise winner.

MICKEY DREXLER: A surprise, but again, you have to see the margins. And you have to see how they end up this quarter. November, from what I hear, and we have the same. It was very difficult.

And now, we're, I guess, entering-- I think we're in the second week or third week. But what I hear anecdotally is that people are complaining about business.

BRIAN SOZZI: Is Black Friday still a big thing?

MICKEY DREXLER: I think it's been promoted to the n-th degree. I think it's almost a cliche. And I don't think it's a big deal, personally, but we don't-- I've never been involved in a Black Friday business. So it's a big deal, and TV makes it a bigger deal, with lots of people lined up at the store.

BRIAN SOZZI: We have to keep the lights on.

MICKEY DREXLER: Yeah, right, right.

BRIAN SOZZI: You have to keep the lights on. Talk to us about your-- well, your former employer, Gap. Now, they don't have a permanent CEO in there. Why don't they just give you the gig?

MICKEY DREXLER: [LAUGHS] Well, you know, I got into trouble when I saw you last time.

BRIAN SOZZI: Yes, you did.

MICKEY DREXLER: So there were a lot of my friends there. I ended up having to apologize to a number of them. So I really can't talk about them.

BRIAN SOZZI: What's their place? What should they look like?

MICKEY DREXLER: Well, they should look like Gap looks. I think it's a great opportunity to be the All-American uniform-ish with very fair prices and with good-looking clothes, lots of color. But, you know, everyone needs to look good. And I think they'll do much better.

BRIAN SOZZI: Talk to us a little about Alex Mill. Why are you still in the game?

MICKEY DREXLER: Well, I--

BRIAN SOZZI: This is in your blood, I imagine.

MICKEY DREXLER: Yeah, well, the game to me is a hobby and a sport. My son started it about 10 years ago. And I always liked the name. And I liked what I had felt there.

I left J.Crew, and I was a little bored. I was on some boards and all that. And then I joined Tim And I have Somsack who was with me for 15 years at Madewell and J.Crew. He quit on the temporary CEO. And so I put them together. And I said, wow, I'm employed again.

BRIAN SOZZI: [LAUGHS]

MICKEY DREXLER: So I'm in work every day because, you know, I don't know what else I'd do. I don't play golf. I don't sit on the couch much.

BRIAN SOZZI: But you're a bit of a celebrity here. We were sitting over there in the corner. Somebody came over to you completely unprompted, said, hey, Mickey Drexler. You must be Mickey Drexler.

I sent an email to you 20 years ago, and you replied. You acknowledged that something was wrong with the product. I don't see a lot of other merchants do that. But give some advice to these retail CEOs who may not be doing that.

MICKEY DREXLER: Well, you know, most big corporations-- this is my personal, private opinion-- very bureaucratic. You have to touch the team. You have to touch the people. And I-- a lot of them are big shots.

And I grew up in the Bronx, so I don't love big shots. But I felt like everyone else felt. Please say hello. I work here, and you're important. And I learned what not to do. And I grew up in the Bronx. And that's kind of a place where you respect people, you're ambitious, and you want to be recognized.

BRIAN SOZZI: What is it like working with your son?

MICKEY DREXLER: We have-- we've worked it out.

BRIAN SOZZI: OK.

MICKEY DREXLER: It's difficult for him. And it was difficult for me. But we've worked things out over the last year. It was not easy.

BRIAN SOZZI: Before I let you go, I have 30 seconds. Your big prediction this holiday season? I could be a retailer that does well, how things will shake out.

MICKEY DREXLER: I think huge sales. And I think it's not going to be a very good one. I hope I'm really wrong.

BRIAN SOZZI: Well, it is always great to get some time with you. Mickey Drexler, thanks for coming out here. I know you're a busy guy. And this is not an easy location, per se, to get to.

MICKEY DREXLER: Yeah.

BRIAN SOZZI: Always nice to see you. Thank you so much.

MICKEY DREXLER: Thank you.

BRIAN SOZZI: All right, coming up, we're going to get out to a UPS distribution center. Our very own Dani Romero visited that distribution center. We'll bring Dani in on the other side of the break.

[MUSIC PLAYING]

Welcome back to Yahoo Finance's Rockin' Retail Special at the Oculus in New York City. Joining me now is our very own Dani Romero, who got to hang out at a distribution center for UPS in Manhattan ahead of the holiday. Sounds pretty cool.

DANI ROMERO: Yeah, so 'tis the season for holiday shopping, but guess what? It's also the season for holiday shipping. So I got an inside look at one of the UPS centers here in Manhattan on how they're tackling this holiday season. Take a look.

As customers click, companies like UPS ship.

LEO CUMMINGS: It starts with the planning of the job prior to the actual unload, where the data that comes in from the shipping labels is sorted. The planners are then able to determine which vehicles will get which packages. And that sets up for the label application processes throughout the facility and allows for the package to flow through the facility in the right manner.

DANI ROMERO: When you compare volume from last year to this year, what does that look like?

LEO CUMMINGS: At this point, we're seeing a slight decrease. And we said that that may happen due to the fact that there's not an inventory shortage of goods in the market.

DANI ROMERO: Leo Cummings is the New York Operations Manager at this UPS center on West 43rd Street in Manhattan.

LEO CUMMINGS: Well, I can tell you that all of the packages that come through this facility, 90% of the packages in our network go through some automated facilities.

DANI ROMERO: Here's how automation works at this location. Packages pass through machines like this, that scans each parcel and spits out another label, giving workers a clear indication to where that package is going.

LEO CUMMINGS: Well, automation here allows us to deskill certain handling opportunities for us. It allows us to make sure we're aware of where packages need to go and their final destination.

It's a great tool for the entire building to use so we can identify what packages truly belong and get to the customer. Ultimately, we want to get to the point where the packages are going to the right vehicle so they can get to the right customer.

DANI ROMERO: Cummings says this has not reduced their number of workers inside the facility.

LEO CUMMINGS: Automation allows you to take out the variables.

DANI ROMERO: This facility processes more than 200,000 packages a day during this holiday season. At this site, they've already started to ramp up.

LEO CUMMINGS: From the plant aspect, are we able to handle extra volume? Are we able to adjust when we have less volume? So we're ready for peak season.

DANI ROMERO: Cummings says they will continue to hire more people. There's a great opportunity for people. Last year alone, over 35,000 seasonal employees became permanent employees at UPS.

And those positions that you just heard, they range from $15 to $36 an hour. But, Sozzi, there's also something else on the table for UPS, and that is one of the largest rail unions rejected a tentative deal, so that really-- UPS is one of the largest rail customers.

They sent us a statement that reads, we encourage an immediate resolution that is beneficial to all parties, and we believe that agreements can be reached. A rail strike would cause unnecessary impacts for the US economy and consumers. And UPS will flex our integrated smart logistics network to serve our customers. So the stakes are really high here, Brian.

BRIAN SOZZI: All right, Dani Romero, good reporting. Let's stay on all things supply chain here. Let's bring in John Gold, the National Retail Federation's Vice President for supply chains and customs.

And, John, you just heard Dani mention the potential railroad strike. How debilitating would this be for the retail shopping season, but, look, even the economy more broadly?

JONATHAN GOLD: Look, I think a rail strike would cause $2 billion in damage a day for the US economy. That's what the American Association of Railroads has projected. It's significant.

I mean, everybody relies on the rails to get their goods to market; imports, exports, agriculture, manufacturers, waiting on inputs to production, also sensitive materials, things like chlorine, which need to get into healthy drinking water. So this is significant if a rail strike were to occur on December 9th.

DANI ROMERO: Yeah, and speaking on labor, automation has been tossed around a lot in the conversation. Is that the future of supply chain, seeing on the port side also anything revolving around supply chain?

JONATHAN GOLD: I think technology and automation certainly are critical to the future of the supply chain. If we truly want to have a 21st century global supply chain, we've got to bring technology and automation into it.

We've got to bring the workers into it as well. They've got to be part of the discussion as we're talking about the future and technology and automation. They've got to be part of that conversation.

But it is going to be significant, and we've got to move forward on getting that as a part of the supply chain. We've got to have better visibility and better connectivity for all the partners to understand what's happening at any stage in the supply chain.

BRIAN SOZZI: For those that don't have your expertise, John, would a railroad strike-- does that mean that truckers, logistics companies, how can they pick up the slack? Would they just be overrun with demand and orders?

JONATHAN GOLD: So if a rail strike were to happen, that means the entire freight rail system would shut down. That means products moving from the ports, moving in the country, exports moving out.

There is some capacity pick up in truck, but you're not going to be able to pick up all the cargo that moves on truck, on rail that goes on to trucks, so we're going to have capacity issues.

BRIAN SOZZI: Well, it sounds like major delays of products.

JONATHAN GOLD: Definitely major delays if it were to happen. Obviously, a short-term would be better, but we hope there's no disruption whatsoever.

DANI ROMERO: Yeah, and speaking of trucking, California has this ambitious plan to make their trucking fleets change from diesel to electric. How feasible is that really for our current environment, our supply chain?

JONATHAN GOLD: I think as the truckers have said in California, it's a challenge. You don't have the infrastructure in place to be able to do the charging for the trucks that are needed, especially at our ports.

We've got clean truck programs that are going into effect at the ports of LA and Long Beach, but we don't have the number of trucks we need. We don't have the infrastructure.

So I think many shippers want to work with California legislature. And let's get to a greener economy, but let's do it in the right way where we don't force people out of business to make it happen.

BRIAN SOZZI: Inflation and the supply chain, based on what you're seeing and based on what you're hearing from your contacts, what does the inflationary outlook look like over the next six months?

JONATHAN GOLD: I think inflation continues to be a concern. Obviously, consumers continue to be concerned about that. But, look, we're going to have a positive holiday season. From what we've seen thus far, the research we've done, we're looking at 6% to 8% growth in the holiday season this year. So we're looking at $942 to $960 billion in spending by consumers.

So I think there's a lot of unknowns to what happens going into next year. But I think retailers are trying to plan their best to be ready for that continuing consumer demand that we've seen for the past 30 months.

DANI ROMERO: And speaking of that, things have really shifted on the West Coast. They've gone from choke to fluid now. But there's also a dilemma, and that is on the warehousing capacity. What is the solution there? I mean, I've heard that warehouses are now expanding their outdoor space, but how much of that is really a temporary solution?

JONATHAN GOLD: Yeah, I think a lot of the challenges we face on the West Coast was everybody bringing product in earlier in the season, but also, we've got the ongoing labor negotiations in the West Coast. That's why you saw such a shift this summer to the East Coast.

And we've got-- East Coast and Gulf Coast ports are full. I think warehousing certainly is a challenge, as you've had full warehouses. But I think as retailers rightsize their inventory, they're going to be better able to process that inventory moving forward.

But making sure we're able to open up new warehouses, have better fulfillment centers that are in place, have regulations that help incentivize opening warehouses. Move warehouses to other locations. Have inland locations where you can then shift cargo to there. So I think there are some options there, but we've all got to work together to make it happen.

BRIAN SOZZI: Is the labor shortage in the trucking industry still as severe as it was a year ago?

JONATHAN GOLD: From what we hear, there still is a significant driver shortage that we continue to face both on the drayage side as well as the long-haul side. So I think labor throughout the supply chain continues to be a challenge.

DANI ROMERO: Yeah, and I wanted to shift gears a little bit on the US-China trade dispute saga. Do you believe that tariffs are inflationary? And is it really worth it given our inflationary environment right now?

JONATHAN GOLD: We've said from the outset the tariffs were not the right strategy to deal with the China trade issues we've been dealing with. Putting tariffs on products for everyday consumers doesn't make sense, and it has not worked.

We haven't seen China make the changes they were supposed to because of the tariffs. So we think there's a better-- there are better opportunities to engage China on some of these trade practices that not only impact the US but impact our trading partners as well.

BRIAN SOZZI: How do you engage them?

JONATHAN GOLD: I think through ongoing dialogue. I think, look, having President Biden and President Xi actually have a conversation. Once again, get that dialogue going.

But then let's figure out a better path forward, because the tariffs have been applied on the China imports impact US consumers, impact US manufacturers. It only raises the cost of these goods for the ultimate consumer.

DANI ROMERO: Do you see any change happening, though?

JONATHAN GOLD: Not right now, but we want to continue to see change, hopefully. Now with USTR having their four-year review of the tariffs, hopefully now they already have an opportunity to talk about the negative impact the tariffs have had over the past four-plus years. And then again, opening the door to have those conversations with the Chinese, which we haven't had in almost two years.

BRIAN SOZZI: I'm asking every guest that we have on here their big prediction for this holiday season. Are empty shelves over? What is your big prediction?

JONATHAN GOLD: I think, look, our big prediction, we put our forecasts out a couple of weeks ago. And we're looking at 6% to 8% growth over last year's holiday sales, roughly $942 to $960 billion in consumer spending this year.

BRIAN SOZZI: That's not recessionary.

JONATHAN GOLD: That's not recessionary. And I think, look, consumers have continued to spend throughout the pandemic and then some. We've seen 30-plus months of month-on-month growth in the retail sector.

Consumers want to go out and continue to spend and celebrate the holidays when they haven't been able to do in the past. So, again, we're looking for another positive holiday season.

We're looking at 166 million consumers ready to engage in this five-day holiday weekend we're going to have coming up, either in store or online. So consumers are ready to get out there and shop.

BRIAN SOZZI: Oh, I'm ready to engage, my man. I'm going to go out there and buy myself something. I don't know what it is, but you know what? I'm going to find it. John Gold, National Retail Federation's Vice President for Supply Chain and Customs. Good to see you. And, Dani Romero--

JONATHAN GOLD: Thank you very much.

BRIAN SOZZI: --really good reporting on UPS. Good to see you. Appreciate it.

All right, straight ahead, we're going to look at some worst and best retail performers with Jared Blikre at the [? YFi ?] Interactive, that big board back at HQ. We'll be right back.

[MUSIC PLAYING]

Welcome back to Yahoo Finance's Rockin Retail Special. I'm Brian Sozzi, here still in Oculus, New York City, at the World Trade Center.

But I want to get back to Yahoo Finance HQ, and that is where we find our very own Jared Blikre, who is rocking that YFi Interactive, looking at some of the best and worst retail performers so far this year. Jared.

JARED BLIKRE: Yeah, let me tell you, Brian. Let's break this down by sector first. And this is a year-to-date look at the 11 S&P 500 sectors. What stands out is energy is the only one in the green.

Following that, we have consumer staples, and that is a part of retail. That's only down about 2.2%. To the downside, consumer discretionary. That is down 32%.

So kind of a bifurcation in terms of what people need-- that's staples-- versus what they might not need-- that's discretionary. And here is a similar look over the last month. Only consumer discretionary and communication services are in the red.

And I'll tell you what, you peer into the retail sector itself, and guess what? All of this-- not all of it, but most of it is due to Amazon, because we can see over the last month, many of these stocks, if not most, almost all of them, largely in the green here. Home Depot, up 15%. Walmart, up 11%.

And if you're screening for some winners to buy, hoping on that Santa Claus rally into the end of the year-- and technically, it's really only the last five days a year plus two days of the following year. But nevertheless, if you're looking for some of those guys, want to show you who is the least worst off from their highs.

Now, if we sort by here, we can see at the very top, a lot of these consumer staples and also some of those discounting stocks. We've got Dollar General. That is only off 1.5% from its record-- or 52-week high. Excuse me. TJX, down 2%. Ulta Beauty, down 2.7%.

In fact, if you take a look at this top line here, also going into Ross stores. Ross stores, Walmart, Dollar Tree, BJ's, Costco, those are all staples and basically selling people-- selling things that people need.

To the downside is where we find a lot of those electronic retailers. Look at this. Down 89%, Wayfair. Also seeing that in Shopify, down by 80%. And then Amazon, we already took a look at that, that's down 50% from its 52-week high, Brian.

BRIAN SOZZI: Jared, you know what a good time for me is? Buying plastic forks at Dollar General. Sharing everything with our audience. No, I never hide anything.

But besides that, Jared, I know you're also crunching some data on how stocks trade during a holiday-shortened trading week.

JARED BLIKRE: Yes. Fortunately, Almanac Trader is doing the heavy lifting for us. This is November. And this is what the major averages, and he breaks them out individually. So we've got four here due over the month of November.

What's notable is that we kind of go about sideways to maybe a little bit down into the middle of the month. And then just around last Friday would be around the turning point. Tend to see that rise into the end of the month.

And his bottom line here is the best short-term trade appears to be getting along into any weakness in the week or days before the holiday-- so presumably, that would be today. Today is a down day-- and selling any subsequent rally toward the end of Thanksgiving week or before the end of the month.

Let me just show you what the S&P 500 has been doing. This is over the last three months. We can see after hitting that low, that recent low-- in fact, that's the low of the year-- in October, it has been a steady climb up, but kind of flagging. Just a little bit of sideways action here. So maybe that Thanksgiving rally going to take effect? We'll have to see, Brian.

- All right, Jared. Send me a turkey leg back there at Yahoo Finance HQ. Jared Blikre, thanks so much.

All right, let's stay on all things retail and economy. Let's bring in friend of the show, Mastercard Chief US Economist Michelle Meyer. Michelle, actually, this is the first time I'm seeing you in person after 10 years of knowing you.

MICHELLE MEYER: I think that's right. [LAUGHS]

BRIAN SOZZI: All right, so take us through some of your holiday numbers. I'm an avid consumer of the Mastercard SpendingPulse data. How do you think this holiday season will shake out?

MICHELLE MEYER: Well, it's interesting. We're forecasting just over 7% growth this holiday season for retail sales X autos. And we're really keenly focused on what happens this Black Friday period. We're looking for just Black Friday alone to be up 15% year over year.

And I think what we learned so far from this season and looking at our high-frequency data is that the consumer is focused on promotions. They're looking for those moments in time where they feel like it's the appropriate point to purchase, so to go in full ahead and buy those holiday gifts. So you see a bit of fits and starts thus far, and I wonder if that's going to continue into the rest of the holiday season.

BRIAN SOZZI: Michelle, that's a huge number, 15%.

MICHELLE MEYER: It is.

BRIAN SOZZI: I thought we were nearing a recession.

MICHELLE MEYER: You know, part of the reason it is a big number is because last year, Black Friday wasn't really characteristic of Black Friday, Similarly, as the year before, because you didn't have as much in-store purchasing. You didn't have the typical door buster sales that you had in prior years.

Last year and the year before that, it was a lot more spread out. It was much more concentrated online, and retailers also accommodated that or looked for that.

This year, I think you're anticipating-- and we'll see, but it seems like we're going to see a lot more of that in-person sales where people rush out to get those promotions and make sure they check everything off their list.

BRIAN SOZZI: One thing that has surprised me just talking to a lot of retail executives as they have been reporting earnings the past two weeks, they're telling us that consumers making over $100,000 a year, those higher-income households, they're trading down.

MICHELLE MEYER: Yeah.

BRIAN SOZZI: I haven't heard that in some time. Are you hearing that?

MICHELLE MEYER: Yeah, I think that is something we have to keep an eye out for. And I think we are seeing it to a certain extent. And it makes sense given the macro backdrop, as you noted before.

The economy has been faced with high inflation. A lot of categories have seen extremely high price shocks. We are seeing an environment of higher interest rates. The Federal Reserve is actively hiking rates and anticipates will continue to hike interest rates.

So the consumer is trying to navigate this environment. So a certain amount of trading down when their budget is becoming more constrained makes a lot of sense.

Also, consider where we're coming off of. Last year and the year before was really, really, really strong when it comes to overall consumer spending, where consumers had a lot of discretionary income to put to work.

BRIAN SOZZI: I'm really testing your knowledge here, but how concerned are you about the savings rate really coming down? The way I look at the decline of the savings rate this year is people have tapped their savings to go out there and buy food and household essentials. How concerning is that for the economy as you look towards next year?

MICHELLE MEYER: So it's going to get a little wonky, but there's the raters--

BRIAN SOZZI: Love it. By the way, that's what we're here for.

MICHELLE MEYER: There's a rate of savings, and then there's the level of savings. So the rate of savings has certainly come down. And it will remain a lot lower because, in part, people have a stock of money still out there, this pandemic savings.

By our calculations, about a quarter to maybe a third of that cumulative pandemic savings has been used. So there's still some capacity out there to put that money to work, but it does mean that the rate of savings, that savings rates are going to remain historically low for some time.

BRIAN SOZZI: As we look towards next year, we have a slowing housing market.

MICHELLE MEYER: Yeah.

BRIAN SOZZI: We have a stock market that has just caused a lot of wealth destruction. How do consumers adjust to that? How do you see that playing out.

MICHELLE MEYER: So I think what you're speaking of is the idea of a negative wealth shock--

BRIAN SOZZI: Negative. Yes, negative wealth effect.

MICHELLE MEYER: --that consumers are now seeing their finances shift, particularly those higher-income consumers that are more levered to the stock market or maybe homeowners.

But I also think it's important to think about the starting point. The wealth effect doesn't happen overnight. It is a response to the cumulative change in wealth that happens over several years.

So a bit of what we've seen throughout this year has been a payback from extraordinary appreciation in the stock market, even in the housing market as well. Home price appreciation nationally on a year-over-year basis ran above the peak rate in the early 2000s.

So we're now seeing the normalization of that market, and it's happening quickly. And it's causing some ripples and some shocks, and people have to adjust to that. But it makes sense that we're seeing these adjustments given how excessive some of these gains were over the last few years.

BRIAN SOZZI: Based on what you're seeing there and just inflation, inflation is still high. I know we had a positive reaction in markets to that CPI index rolling over a little bit a couple of weeks ago. But, I mean, do you see a recession at all next year?

MICHELLE MEYER: So first on the inflation point, I think the October inflation report was really important as the markets react. And the reason that it was so important is if you dig into the details, what we're starting to see is core goods inflation come down. Some of the categories that have the biggest price increases are now starting to see some declines. That's critical.

And that matters for how you think about the possibility of a soft landing. because to the extent that inflation can come off the highs, that supply chain issues start to be resolved, as you just spoke about, that the demand story starts to shift, then you get a more natural mitigation of inflation pressure, which means that maybe the Fed doesn't have to be as aggressive as slowing down the economy in order to achieve their goals.

That's not to say the Fed is done. Clearly, the Fed still has more to go in terms of interest rate hikes, but it's really the path forward for inflation and the success in terms of getting to price stability that will dictate whether or not we'll end up seeing that downturn or not.

BRIAN SOZZI: When does the economy feel the effect of these Fed rate hikes? I guess, what, the old rule of thumb was six months down? What does that affect even look like?

MICHELLE MEYER: Those long and variable lags in monetary policy?

BRIAN SOZZI: Yes, please. My CFA textbook. Oh, no. Oh, god. I can't take.

MICHELLE MEYER: I'll bring it out of you.

BRIAN SOZZI: No.

MICHELLE MEYER: So Chair Powell actually talks about that in the last press conference that they are quite aware of the lags. They're studying them. They don't know exactly what those lags look like. And it's possible that the lags are a lot shorter now because of so much forward guidance that goes into monetary policy.

The market moves in advance of the actual changes in monetary policy. So if those lags are indeed shorter, then it-- from the Fed, they can react maybe a bit more to real-time movements in the economy.

But it's a risk, and they have to be aware of that. Because what they don't want to do is tighten too much, realize, oops, we overdid it. The economy is going to be too weak, and then they have to pull that back. So they're going to tread very carefully, I think, from here on.

BRIAN SOZZI: Last 30 seconds. Your big prediction for this holiday season?

MICHELLE MEYER: [LAUGHS] I think experiences are still going to be key, still be a priority in terms of gifting and experiences, spending on experiences, travel, restaurants, recreation, theater. People still want to go out and live and enjoy themselves, and they have to buy good clothes to do that.

BRIAN SOZZI: Yes, yes, yes. Yes, they do. Well, it's good to see you in person.

MICHELLE MEYER: You too.

BRIAN SOZZI: Mastercard Chief US Economist Michelle Meyer. Have a happy Thanksgiving.

MICHELLE MEYER: You as well.

BRIAN SOZZI: Thanks for doing this.

MICHELLE MEYER: Thank you.

BRIAN SOZZI: Appreciate it. All right, still to come, our very own tech editor Dan Howley. He's been here for about two hours, sitting on the floor over there, working on his top tech deals. He will be on with us next.

[MUSIC PLAYING]

Welcome back to Yahoo Finance's Rockin Retail special here at Oculus in New York City. The energy, well, it's popping. We're looking at a lot of shops. People are not exactly in them buying things.

But Black Friday, of course, is right around the corner, and that means everybody, mostly everybody will be looking for awesome tech gifts. And here's our very own tech editor, Dan Howley, looking for the hottest tech items.

DAN HOWLEY: Yeah, yeah. So every holiday season comes around, everybody wants to get their hands on some kind of tech for the people in their lives or just for themselves. That's kind of what I like to do. So I do have a good list--

BRIAN SOZZI: Hit us.

DAN HOWLEY: --of some of the biggest items. I think despite coming out two years ago, one of the biggest ones is still Sony's PlayStation 5. It's been a bear for people to get them.

You had the COVID shutdowns. You had the chip shortages. You had a huge amount of demand, not enough product. It's still out there as one of the gifts that people really want. I was trying to get one the other day for my buddy. I'm not paying for it. He's going to pay me back. But it's still sold out.

After that, we have the rival, Xbox. It might not be as popular as the PlayStation, but Microsoft has some amazing services. They have Game Pass, which lets you get up to 300 games that you can just play on your Xbox without having to buy them, part of a subscription. And you have cloud gaming. So if you're on the go and on your phone, you can play those PC games or Xbox games on your device.

There's a number that are outside of the gaming space, though. One of the more obscure ones that I want to hit real quick is the Valve's Steam Deck. This is-- think of a Nintendo Switch.

BRIAN SOZZI: I don't even know what that is.

DAN HOWLEY: Yeah.

BRIAN SOZZI: I'm not supposed to say that, but I've never heard of it, Dan.

DAN HOWLEY: I love it. The Steam Deck, oh, it's awesome.

BRIAN SOZZI: Don't even know what it is.

DAN HOWLEY: It's basically a Nintendo Switch that lets you play PC games.

BRIAN SOZZI: OK.

DAN HOWLEY: It's $399. A little on the pricier side. It's a little chunky too, but it's really, really cool if you're a big PC gamer. Outside of gaming, though, there's the murderer's row, right? We have the iPhone 14 Pro. I might have one in my hand right now.

BRIAN SOZZI: Very important, too. We're supposed to get Best Buy earnings this week too as well. That is supposed to be a key driver. I would really be listening to that Best Buy earnings call to see the adoption on that new iPhone. That is a great holiday season tell.

DAN HOWLEY: And it's the bigger one, the Pro, so that's the one that's going to drive ASP for Apple and also the one that's kind of hard to get now because of those COVID shutdowns.

So if you are shopping for one for somebody for the holidays, make sure that you go sooner rather than later because you might not be able to get it later on in the holiday season.

Apple also has the Apple Watch. There's the SE and the Series 8. Don't go for the Ultra. It's $800. And unless you're climbing Everest--

BRIAN SOZZI: That's nothing for a man of your stature.

DAN HOWLEY: I mean, no. That's-- look, a million or bust, that's what I like to spend. Give me a couple of Rollies.

BRIAN SOZZI: [LAUGHS]

DAN HOWLEY: So I would say for most people, go with the SE. That one's going to run you a little bit less than the Series 8. We're talking about around $249. The Series 8 is $399. I have the Series 8 on because I'm bougie and that's what I like to go for.

There's also the AirPods Pro. They've got the new AirPods, the second-generation AirPods Pro. Great noise cancellation. Great transparency mode, kind of increases the ambient noise around you. So if you go for a run at night, and you're kind of creeped out and you can hear what's going on around you more.

And then outside of Apple, we have Google, actually. They have--

BRIAN SOZZI: You care about Google this year?

DAN HOWLEY: I do.

BRIAN SOZZI: Google products. We care about Google products?

DAN HOWLEY: I'm throwing out the Pixel 7. Great smartphone. Relatively inexpensive. Google throws all that Google AI magic in there, improves the camera capabilities. You have photo editing. You have true tone.

So it's a great, great smartphone. It's also just straight-up Android, so there's not a whole bunch of other stuff thrown on top of it.

And then, believe it or not, they also have a great smartwatch too, called the Pixel Watch. That thing is beautiful. It's the first Android smartwatch that I look at--

BRIAN SOZZI: Did they get the battery right yet? I have a Google OS operating watch for golf. I have a golf watch. The battery dies. It doesn't even make it a round, Dan.

DAN HOWLEY: It's going to go. I'll give you about a day, maybe a day and a half--

BRIAN SOZZI: It's horrible.

DAN HOWLEY: --if you turn the "always on display" off. The Apple Watch will last you a little bit longer with the "always on display" on.

And then outside of those gifts, there's an Echo Dot.

BRIAN SOZZI: Mhm.

DAN HOWLEY: There's the new Echo Dot, Amazon Alexa. It's got the clock built in. It's not bad.

BRIAN SOZZI: Outside of all these items-- and just because you're on staff, you're still getting this question-- your biggest prediction from the tech space this holiday season?

DAN HOWLEY: This holiday season, you know, it's hard. I think-- we were talking about the iPhone. We were talking about how it's going to be difficult for people to get their hands on.

Apple really needs the iPhone to do well this holiday season. The holiday season is when so many people go out and buy their devices. I think it might be a little bit of a disappointment just because we're talking about these lockdowns.

They lasted longer in that factory that really produces the Pro and the Pro Max. That's where they get the bulk of their iPhone money. That's also the one that people want the most. It has that new dynamic island. It has the better camera. It has the better display. So I think it might be a little disappointing there.

I also want to throw out, gaming might do a little bit better than we're expecting, but it could still-- it's not going to push the year-over-year to new limits or anything.

BRIAN SOZZI: We've seen a pullback in mobile gaming.

DAN HOWLEY: We have. That's all advertising. And that's part of the reason why gaming suffered so far this year. They're not getting the mobile ads. And you look at an Activision Blizzard, their mobile side, all about ads.

I mean, anybody that's anybody that's in the gaming space and in the advertising space is dealing with that kind of pullback. But if you can still get a PlayStation 5, I'm rooting for you.

BRIAN SOZZI: Well, I'll let you do your thing. Across that way is that big, bright Apple Store. I'm seeing some shoppers in there. Dan Howley, tech editor for Yahoo Finance, always good to see you, my man. I appreciate it.

DAN HOWLEY: Good to see you too.

BRIAN SOZZI: All right, we're talking all things retail, of course in our Rockin Retail Special. Oculus, New York City. Not really seeing a lot of shoppers, per se, but a lot of tourists out here at this location.

Very much looking forward to talking to our next guest, that is retail analyst Hitha Herzog. Talk a little about luxury shopping, you name it, et cetera. We'll be right back.

INTERVIEWEE: The price of things have gone up. My salary hasn't gone up. It's still the same, so it has really affected a lot of my decision making.

INTERVIEWEE: It's a little bit difficult, but if you save, you can make it work. Inflation is affecting everybody.

INTERVIEWEE: I will be spending more time shopping online, absolutely. I'm trying to spend less.

INTERVIEWEE: I plan on spending smarter, so hopefully that's less.

BRIAN SOZZI: All right, a little short break here. Yahoo Finance's Rockin Retail Special, still at Oculus in New York City, still planted in the seats, still watching shoppers maybe buy some high-end luxury goods. And speaking of luxury, we have our friend of the show, retail analyst Hitha Herzog. Hitha, it's been forever. Good to see you.

HITHA HERZOG: It really has been forever. We have a long history.

BRIAN SOZZI: Yes. Yes, we do. Talking retail, I know luxury, you love talking about luxury shopping. How do you think that luxury shopper will come out this holiday season?

HITHA HERZOG: You know, it's interesting, Brian. We've really saw a V-shaped recovery with the luxury sector past-- post-pandemic, I should say. But now, I think what's happening just in terms of--

The high-end shopper's definitely going to buy luxury, but when you come to that middle-range shopper, the aspirational shopper, they're the ones that are going to feel the crunch because of all of these headwinds we are seeing, because of the inflation issues we are seeing and also with supply chain.

BRIAN SOZZI: What are they buying? What is a high-end shopper shopping for?

HITHA HERZOG: Oh. Hermes handbags, for sure.

BRIAN SOZZI: [LAUGHS]

HITHA HERZOG: If you-- some of the statistics that were coming out of Hermes, I think they had increased prices by almost 4% to 5%, and revenues had increased 20% to 30%. And they plan on increasing the prices of the bags.

So right now, you have these bags going for, at the minimum, $10,000. So those high-end shoppers are going to be buying those handbags.

BRIAN SOZZI: You know what is-- it's interesting. We were just talking to Michelle Meyer, Mastercard's US Chief Economist. That pullback in high-end consumers, I have not heard that since probably the Great Recession.

HITHA HERZOG: Right. I think it was right around the time when we knew each other--

BRIAN SOZZI: Yes, yes.

HITHA HERZOG: --or met each other.

BRIAN SOZZI: We still know each other.

HITHA HERZOG: Well, we know each other, of course, but when we started doing this together, started out in our respective careers, the Great Recession happened, and we saw that pullback from the high-end shopper. And I remember people were even hiding their bags of where they were shopping. I don't think we're going to see that--

BRIAN SOZZI: You took my next question. That's exactly what I was going-- luxury got shunned. I mean, if the economy is slowing down again, do you think we're going back there where we're no longer buying Coach C-bags anymore?

HITHA HERZOG: Well, this is what's going on. A study by Oracle said that 88% of people just want new experiences. 45% of those people haven't really felt happiness in two years. So what you're going to see those 45% of people doing is going into stores to try to get that happiness back, regain that happiness.

BRIAN SOZZI: No happiness? That's terrible.

HITHA HERZOG: Two years, they have not felt happiness.

BRIAN SOZZI: [LAUGHS]

HITHA HERZOG: So they're going to go into stores. They're going to want to go into the Kiehl's store and get their skin checked. They're going to want to go into all these other stores and just experience life.

If you think about it, the American consumer, this is a great professional pastime. People like to go shopping. So it's all about those retailers bringing in the experience so that people can experience that.

BRIAN SOZZI: Well, I'll speak for you for a second. I imagine you've been happy over the past two years. I know I definitely have been happy.

But let's go from luxury to Specialty Pow. We just had former Gap CEO, Mickey Drexler-- wow, what an icon of retail-- talking about Gap a little bit. But what's the future for a company like that? Hitha, I just don't see it. I don't see it, I don't see it.

HITHA HERZOG: I think what's going on with these companies, especially those middle-range companies, they need to understand that it's all about inventory control and making sure that they have a good pacing of what's coming out in the store, so have a real understanding of what's going on with their consumer base and understand how that consumer is shopping.

Are they coming into stores? Do they really want to see Kanye West's collection in massive bags on the floor? I don't think so. But that just goes to show you that they don't know what the consumer base is yet. Will they get back to it? I'm sure. But that's-- it's all about returning to who their shopper is and how they shop.

BRIAN SOZZI: You've been covering retail for a while. Is it surprising that Gap couldn't figure out a way to make money off of Kanye West?

HITHA HERZOG: [LAUGHS] It is a little surprising. But from what I understand, there were a lot of cooks in the kitchen and a lot of people weighing in on what was going on with that collaboration.

As we saw Mr. Ye-- I don't know what he goes by now, but Ye, he was saying that, to my point, there were a lot of cooks in the kitchen, and no one really could make a decision. So when you have that situation, I can only imagine how difficult that must be.

BRIAN SOZZI: A little bit more of a positive story and one that has surprised me is Macy's. I was on the Macy's earnings call last week, Hitha, I was shocked.

Bloomingdale's is doing pretty well. They were selling discretionary items. A completely different story than what we heard from Kohl's. Macy's has turned into like a comeback story here.

HITHA HERZOG: I think what ended up happening with Macy's is they finally got a clue that they needed to bring younger people to the table. And one collaboration that they are doing, which I love, is that for their VIP customers, they are incorporating cameos from the Santa to talk to the kids of the VIP customers.

So these kids are going to be getting actual videos from Santa, which is absolutely genius. This is how people shop now. People want that experience, and, to your point, that's what gives true happiness.

And in terms of Bloomingdale's, I have a friend that's a former executive of beauty and fashion there. And the way that it is merchandising and what she's told me, it's quite astounding.

I mean, the way that everything is laid out and how it just draws in that shopper, Brian, it's all about what that shopper is going to experience this holiday season. And if those retailers can really hit the nail on the head with that, well, if they haven't figured it out by today, there's an issue.

BRIAN SOZZI: I just had a moment of unhappiness because I remember thinking back to my mom would take me to Sears to go visit Santa, and now they're getting cameos.

HITHA HERZOG: [LAUGHS] Now they're getting-- welcome to 2022, Brian.

BRIAN SOZZI: Exactly. I know. I'm a couple of years behind. Last thing before we let you go, I'm asking everybody their retail predictions for this holiday season. Hit us with one.

HITHA HERZOG: I think the consumer is still going to shop. I think what we're going to see is a real issue come February, March, when those credit card bills start coming in.

But I think, as I said, people want to feel true happiness. They're going to go out there and they're probably going to buy out a lot of debt, and then the reality is going to hit them in the face come February, March.

BRIAN SOZZI: All right, we'll will say this too. We didn't plan these colors, even though--

HITHA HERZOG: No, we did not.

BRIAN SOZZI: --we've known each other for a long time. Hitha Herzog, retail analyst. Always good to see you. Happy holidays to you.

HITHA HERZOG: Happy holidays.

BRIAN SOZZI: All right, we will be right back from Oculus. Our Rockin Retail Special, well, it rolls right along.

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Welcome back to Yahoo Finance's Rockin Retail Special from Oculus in New York City. And who doesn't love some good face cream? I use it every single day because, look. Look at this face. I'm really 20 years old all because of the face creams. So let's stay on this in personal care products with Kiehl's David Cohen, New York City District Manager. Good to see you here.

DAVID COHEN: Thanks for having me.

BRIAN SOZZI: I imagine this is a big week for you and the team.

DAVID COHEN: Yeah, it's huge. I mean, it is now go-time. We've spent months preparing for this. It's a really exciting week for us. And we're really looking forward to some great things.

BRIAN SOZZI: How do you prepare for a Black Friday week like this?

DAVID COHEN: So the win is all in the preparation, right? So it's making sure that we have the right people who are trained. We have a very extensive training program that's really focused on ingredients. So our skin pros, which is who we call our team, our skin pros are ready to serve our customers and give expert advice.

BRIAN SOZZI: What are consumers coming into Kiehl's for nowadays?

DAVID COHEN: You know, it varies, right? So a lot of people are coming in for their favorites that they've used for years and years. I mean, Kiehl's has been around since 1851.

We started here in New York City in the East Village, right on the corner of 13th and 3rd, so we have a large heritage customer who comes in looking for their old favorites; the ultra facial moisturizer, the ultra facial creams. And then also, we have some newer clients who are looking for something that lifts, tones, firms. And we have a little something for everybody. Kiehl's--

BRIAN SOZZI: Are you trying to send me a message?

DAVID COHEN: I'm trying to sell you something.

BRIAN SOZZI: Oh, you're trying to sell me something? OK. You know, I'm still-- I think I'm still looking pretty young, but, you know, maybe I'm not.

DAVID COHEN: Yeah.

BRIAN SOZZI: So when-- who is the customer demographic? Is it the 40-year-old male now starting to navigate into your stores a little bit?

DAVID COHEN: It really varies. I mean, Kiehl's is about skin care for all, plain and simple. And we see everybody. We see older folks, younger folks, folks of different genders really looking for great skin care advice from our skin care pros. And we're happy to take care of that.

BRIAN SOZZI: How has the selling process changed? You mentioned there's a lot of training that is going on right now.

DAVID COHEN: Yeah.

BRIAN SOZZI: Customer traffic to all stores, it's sparse because everybody's shopping online. How have you had to retrain the workforce?

DAVID COHEN: You know, we really focus on delighting our customers, plain and simple, and really making the most of every interaction. And really what separates us is our skin pro, is that person who's giving amazing advice and creating a one-to-one experience where they want to come back, right, and they want to shop with us.

BRIAN SOZZI: Are the products-- how is inflation impacting the business? Have you had to take up prices at all?

DAVID COHEN: Since I've been with Kiehl's, I've not seen a price increase.

BRIAN SOZZI: All right, so you are a friend to the consumer. So take us through some of these products.

DAVID COHEN: Yeah.

BRIAN SOZZI: What do you have there? What do you got?

DAVID COHEN: Amazing. So first, this is our ultra facial barrier cream, which we just launched. It actually launches on December 1. And it's available actually right now in stores.

BRIAN SOZZI: So what is this supposed to do?

DAVID COHEN: It is immediately supposed to soothe and repair your skin. So it starts off like a balm. You'll feel it kind of thick instantly.

BRIAN SOZZI: It's thick.

DAVID COHEN: And then it goes down into a nice cream. So it's for your face. It's for your hands, or for your knees or--

BRIAN SOZZI: So is this anti-aging?

DAVID COHEN: So the properties of it are about soothing and repairing. So it doesn't really have a lot of anti-aging properties in it. However, because it hydrates the skin and provides a nice skin barrier--

BRIAN SOZZI: It's tingling a little bit, it's tingling a little bit.

DAVID COHEN: And it's nice and warm, right?

BRIAN SOZZI: I like it.

DAVID COHEN: So because it prevents moisture from leaving, it also helps to keep you young-looking, yeah.

BRIAN SOZZI: What are, do you think, some of the top sellers would be? Do you sell like baskets? That's a little thing in personal care?

DAVID COHEN: Oh, we don't actually sell baskets, per se. We have a lot of great gift sets that deal with or that speak to hydration, that speak to, you know, gift giving for teachers and your neighbors, and all varying price points that are really focused on ingredients that are efficacious and also really do something. Right? So whether there's an anti-aging set or there's a hydration set, there's a little something for everybody.

BRIAN SOZZI: I just wiped off 10 years by putting that on my forehead.

DAVID COHEN: You look great. Congratulations.

BRIAN SOZZI: Oh, I appreciate you.

DAVID COHEN: Look good.

BRIAN SOZZI: I appreciate you. So before we let you go, what is your Black Friday like? You're closed on Thanksgiving, right?

DAVID COHEN: We are closed on Thanksgiving.

BRIAN SOZZI: So you open up again on Black Friday. Take us through that day. How crazy is it, you know, considering we are in this world where people are buying stuff online?

DAVID COHEN: Yeah. So while I can't predict what's going to happen on Black Friday-- you know, I wish I had a crystal ball that I could do that-- what I do know is that we are really excited about our trends right now that we're seeing since last weekend and looking forward to that continuing through Black Friday.

And what we're focused on right now is just making sure that our teams are ready, that they're trained, that we have the right amount of product. Because when our customers come in to our stores, what they're looking for is an amazing experience, right? And our-- excuse me-- our skin pros are able to deliver that.

BRIAN SOZZI: Well, thanks for taking some time. I know this is very, very busy week.

DAVID COHEN: Yeah.

BRIAN SOZZI: David Cohen, Kiehl's New York City District Manager, good luck. Get some sleep.

DAVID COHEN: Thank you.

BRIAN SOZZI: Appreciate the product.

DAVID COHEN: Yeah, thank you. Appreciate it.

BRIAN SOZZI: All right, well, that's it for me at the Oculus, New York City, Yahoo Finance's Rockin Retail Special. Again, the crowds are sparse here. This is a major tourist hub here in New York City. I imagine as Black Friday nears, those shops will in fact be full.

That's it for me. More on the other side of the break. Seana Smith, David Briggs have you for the next few hours of market coverage. We'll check you guys later.