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Client Call: How Retailers Will Re-Open

2020-05-06

In a recent client call held by Goldman Sachs Research, Brian Dodge, President of the Retail Industry Leaders Association, discusses how retailers will re-open. Dodge is joined by Goldman Sachs Research’s Kate McShane, Alex Walvis, and Jenna Giannelli, who all cover the retail sector. 

This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
Exchange. I always thought will clearly shady. Is she in the goal? Fewer Corky, Therefore, we have been hard hit by culminating in today. Listen in under discussion about how retailers will relay we'll share, call tat mister chat with Brian. I detail industry associations. accompanied by a certain date machine, our walls and China. Do you know who the coal hell on Tuesday may there? she's out and try and now over to discuss an afternoon is to keep the changeover
that brown eyes and airlines analyse I enjoy today by our while this common specialty, Rachel Department Store and apparent. But where excuse me, brand analysed from Geology Nellie, who covers reach out the Goldman high yields researching we're lucky to be hosting calculated with Brain Dodge president of the retail industry. Leaders and participation are real if you join us for the first call, we our with brine. It took place all the way back on March twenty fifth, but we were surely in the throes of the beginning of the covert nineteen crisis. The level and of uncertainty at the time was very overwhelming eye when we spoke to brine during that period, our question centred on stores would be closed longer than two weeks. What policies could help the retail industry in terms of stimulus and if we could see, run concessions now, almost six weeks later, we are in a very different spot, where many are at least darting cooking.
about we open. Our questions are different from this call. The level of uncertainty and questions on how things will play out remain the same. We look to Brian today the speaker that how retailers and starting to plan for the opening of stores how they'll be staffed it doctor we often ask how retailers are thinking about fifteen the cost of making both employees and customers safe and, finally, how we should be thinking about expensive, like ranch and labour and a likely reduced volume environment. We're gonna be condemned. The call in the form of a firefly chart were Alex. China- and I will ask Brian several questions and then we're gonna open it up to the audience, were questions in it
and by attending the conference you provide call back right. You recorder, redistribute the copper declamation. The views of the third party speakers do not necessarily reflect those Goldman Sachs and then, finally, we are required to make certain disclosures and public appearances about Goldman Sachs relationship with companies that we discuss. The disclosures, related investment, banking relationship compensation received, or one percent or more more ownership were prepared to Rio if colleagues for any issues require bushes already, although in more recent reports available to you on our firm portal in now, got out of the way Brian. Thank you again for joining us today. I'm gonna kick it off with with a couple of questions. Did your enemy Brian. When we, when we last spoke to the convention in the opening remark them, it was a very uncertain. We would time- and I think you will describe MR in time- is good uncertain as well, but if the percentage of retail, I think
on March. Twenty fiscal closed, our finally, at a point where reopening seem to be starting, I wonder if you could tell us where we are now in the number of doors that our back up and running and then, if you could maybe walks through our retailers are approaching reopening with regards to state restriction than and other limitation, Thank you for having made March twenty fifth things like nears nears ago, and the world has changed credible to them. To go to your question the inner in terms of doors open. I dont know if there has been a material change in the total number by since we were, we were together on March twenty. However, I do think that you have changed far more activity and utilization of the stores in in ways out side of the door. So you see many
The tellers who are doing curbside pick up, even if the stores are closed, their doing ship from store to get more capacity. Oliver commerce platform There is a lot of creating innovations that have been employed to ensure that retailers able to serve their customers and in maximize the the opportunity for sales during this period of time that restores clubs looking ahead in a we are preparing now Rico's are preparing for the next step, which is opening, and I think it important to recognise that the opening process is going to be a rolling one in. It will differ from companies in terms of time. Are you will differ from the state and company the company? What we're trying to do? In my last week, we and in coordination with our members rolled out a blueprint for a day. To use when they start to think through the reopening price
It's not important for procedural reasons, not the least of which, if you look at how the restrictions were put into place. in early march. They were done so on a step by step basis. They were done over the course of a row. A week would probably will be less than a week, and understandably so in and not with criticism intended a bit chaotically compels states tried. Two to institute rules, while they kind of improvising with those rules were will now, we ve had a full monk or more of operation under restrictions. We ve learned a lot about how to keep to members and customers stage in the stores bought from those who have been operating on his period of time, and so we built this blueprint, give governors a tool. to use to establish a more streamlined shudder, proven practices from state to state that can be
employed. They can be required in the retailers will employ to ensure the safety of the inside of their stores. This is intended to demonstrate retailers. Readiness should show that when the public health consider oceans of governors reached the point where they feel comfortable in reducing restrictions, they know, retailers have the packaging place and keep customers day Sebastian. We must do now you're, seeing the retailers who have been closed are preparing those practices there. Looking at the things you need to do inside their stores to allow for social distancing out, we need to prepare their staff for those practices, how they need to access thing like people in order to meet these standards, can so they re We are now waiting for the green light from from the stage. One last point around consideration to reopening the stage
in life. To them. To do so is is just one very important continuation, but it's just one consideration. The other ones are: are the employees rights to come back to work under the customer? You re the shop and the tellers or looking at their they're, getting a pulse on those things as well as some are able to do so, based on the buying of commerce and curbside and other things if they're doing locally. We are also looking at other indicators near there, giving it an enquiry about whether the customer shows, like the red Cloud, Grouse Papa. How do I know waiting jumping would go a little bit, but I guess we have heard and seen in some retailers are open now and in certain states Do you have any doubt or any anecdotal evidence in terms of how customers responding to the open to worry
I'll give you the data that we have seen, I can quoted by the numbers data retained it that way, anything that David you're gonna give you from from China. Anything. U S would be at a girdle China. You, you see a rat, relatively slow increase in store traffic. Conversions are below the typical level prepared a time and by its slow and steady increase, but does not start with a bag they gave. I would expect that to happen, the surly rather for those who have anecdote early shared where they have opened in the U S and they have been the explosion. I've been remarkably positive of the employees who have come back. I just keep in mind these are, is a regional or who have been very careful about where they ve chosen. Albert jobs are places than it had not had the spikes that are all too familiar to those who live in New York, Bosman, DC, Chicago and other ways of taking areas. There are those
jobs, and so the employees of joy, eager to get out of their homes and go back to work in the customers are excited to be able to satisfy. Murder, craving for shop and they have been remarkably positive, thus far back in the early days of possible side I can create, and then maybe, if you can, I talk to us about how retailers are conveying some of the changes to consumers. Could I think it seemed like a once the shelter and places lifted. It is really not gonna. Go back to normal. Ah, how should we think about how the retailers are preparing in terms of procuring enough safety equipment is being maintained, social distant thing and how they will convey, convey that to look outwards Roger
great question. Practices were pretty straightforward at a gay by you spend your grocery store, has experienced them metering in the stores stowed, something likely less than fifty percent of store capacity or by four or five people per thousand square feet on variation about to limit the crowd into stories. You gonna see when those capacities arranged to listen queuing outside the stories you as you queuing at the register to ensure proper distance. They should face coming These covering four store staff are going to be commonplace. Therapy are absolutely should come to expect that in terms of acquiring the things measure necessary for operating in this environment, ear the retailers who have been closed, understood the supply chains, we're going to be strain and best
in the process of making those orders pretty early. So as we understand it well face coverings arm and modify the challenges and getting over a modest pretty accessible, particularly because the requirement is not for surgical grade discovering covering ginger toward what did it No more challenging issue jump states are just some of their rules around. It has been disinfecting broccoli supply measures taken. Have those two lemons? That's been their area to escape vision on the part of your question that alluding they re there I'm to powder how lander be hijacked conveying cast all others remained glacier great big point You she's really good examples and I won't claim to have seen all of them, but the typewriter noticed last week announced
they were wrong, reinstating their delivery on delivering battle, applying to do things without sort, and they did that with a likely message from corridor either. She deal but also included a video to give those who may use the income delivery. I shouted what that'll actually look like an early start. Did something. Last week were much like back with a gauge customers agenda. What it's like to go inside of a star by planet? That's really smart and import break out. We are going to be making any new normal people and they locked inside their homes. Now for six plus region hanging out, they This is a good way for them to be exposed to about going to be like were to be in a spur appeared at times, but clear, exactly how long and giving
customers know what they're going to encounter when they gonna get to the service, I think, is another piece of giving them the comfort of growing outdoors and leaning her own manage to do so. My last question on an alternative approach to Alex in Vienna. We ve heard through closer than that for online retailers that has been managed to stay open and have had very high demand for their consumables have been hurrying additional workers from places remain. in parallel to reach out and hotels rule from the airline industry is. Is there any risk than it might be tat some of these workers back in June? Answer generally is now follow the rules for low require employees to come back when when their employer cosmic back
by legal language around manage a little bit more Lisbon guy, just put it. There are required to come back and if they don't, they surrender climate insurance for collecting at that time? man found anywhere from the come back, and this is really the deadline in the carriage backed to ensure the boy stayed connected to their their programme warrior and their employers continue today. Health insurance continue at sort. So, generally speaking, it should be relatively new will undoubtedly be examples where people do not certainly many advantages,
It was the lay off as a personal law makes up were allocated. You guys people in order to get them back to work or to the way off Brian Alex. Will there be adding? My thank the cape adjoining us today are one of the biggest conversations than in the past basin, indeed elsewhere in the region, so for this than in the tree management, wisting shop volatility in any country with its building captivated like a power war, more rapidly Nations elsewhere key talk about how we paralyzed managing the staggered store openings when it comes to invent, remember but how are they in thinking about the flow of product and so forth?
on a return, my retailer basis. Every day are, there is no playbook swedish and so some of the questions of their they're trying to ask themselves, are you know what are the proper demand signals for them to utilise to place orders, and I think that's going to be different from from retailer to retailer. What we know is not bay as that. In some cases we have inventory of a baby. To figure out, want to do is drops in the door they won't make. It shows you need to come off the shelf together, but she's having passed? Are they going to dispose about in some way? Are they going to box it up?
she's coming you gonna get decision is best for them by ordering processes is really going to be the new frontier given the challenges and take away their account right now, very far and near to follow up on some of the questions that the number of these positive cause for some time now, I'm back there, retail locations that weren't reopened at all. You know I was just going to be more ambiguous. Precision. Business believes that the others stores that don't make sense the open, for whatever reasons, may apply behind ingratiation retailers are now to be inclined to reopen all stores, others and said that they may not. So
it'll be something that they consider on a case by case basis, for your focus right now is ensuring the ban, the ability words appropriate to do so to make that decision on themselves, as opposed to because restrictions limit their ability to do it understood. Then I have a question on Army channel their number. We telephone trying out new caused by pick up on the beaches aid with their customer purchase prices. Given me other well enough, stepped up their businesses, One of these companies have been going on the channel for some. I'm a little nearer to it looks like more. Retailers are focused on farm and pick up a store by emotion and first, I am using an acceleration in investment strategy.
Is the mother of adventure was my club innovation, so they have recognised that in order to preserve styles volume, it had to try new things and in some cases that required, then to put forward investment of Turkey. One doing so, there been an algerian throbbing used by more than once in your life after the last several weeks. Every day has been cyber Monday, though they have had to look for creative ways. We get more volume out of their economy, commerce channels and in some cases that has been fulfilled from stores
closed and others and spend byline pick up in stores and others have been utilizing shop delivery model. So lots of innovation in there. I think it's also trained customers customers and got a new experiences. We d, E commerce and Digital digitally enabled commerce such that they are likely to stick with Germany. For the workers and take up has been incredibly popular church and I suspect it is only partially because I'm the kind I was element damage. Also, quite can be it so you I was. I would expect to see your retailers. One will learn a lot of lessons from around. Experimentation they will likely have identified places to make investments that will persist passed the point where they required to do these things to make up for close doors and final question before me. The bypass
within China. Can you share your thoughts on the current state of play regarding the parrot, legislation had expected to arrive from here, and how might that invite retailers here? Excuse an issue of great focus for retailers and other industries as well, either it's been modest efforts undertaken by the administration to provide Judy release around a certain set of products from certain reservations but, of course, the thieves that retailers base for them? What the import of goods the exceptionally high left out of the belief that was provided that now, two or three weeks ago, were imports from China. Of course, not the lion's share of volume? So we are, we remain hopeful The administration will cease to exist.
The duty relation to include a larger share of the terrorist threat, or do and we hope that the Us Congress will do its part to weigh in women. Illustration to encourage them to do so is by and large and administration decision around motor boat. Certainly, Congress can provide encouragement I ran this is that this is done. I'm just gonna followed with some questions. I guess thing on that topic over the administration. I know. Last time we talked about potential stimulus efforts on. Can you share with us? Your latest thought there in any particular benefits or implications the greater funds that you are seeing for retailers right now from stimulant. after equation, good question,
First and foremost, we need to make sure that the credit markets continue to flow, though when we don't anticipated, they won't take action on the next round of. In town, but the earliest later where am I Let them in doing so. Ensuring that credit markets continue. The flowers on reserve has done drudgery of dont, really great work. There want them to be focused on that and adjusting its second is ensuring that their each continued safety net for those who are out of work making sure those people are able Tuesday, financially comparable in that risk, further integrating the economy and it gets out of those. I should note the carefully shining a cumbersome do in order to encourage shall carefully
Would be helpful to other bucket cervical worth noting one is around liability for businesses which their many visitors that it had an obligation to operate during a particular challenging time, and it would be in future the trembling hand, the things they need it will be important for Congress to consider the risk with those buildings we now face from the plaintiffs bar and provide some sort of liability mitigation to ensure that bears they're not deluged with lawsuits heard their ability to function on board the other trees considerations around release relating to read the landlord lieutenant relationship has been strain of it during this period of time has been unable to remain focused on making their cash balance
and so there will hopefully be efforts? Hundreds conversely provides relief. She guidance on how to resolve those disputes helpful max, I guess, get ahead to one of my other question on ran, given that you brought it up, I'm curious now, apps than anything coming in from from Congress, but just as retailers think about reopening in instances where they haven't paid Rand. Ah, but there and to be opening my stay in a lower capacity. Only fifty percent of people out in the door had better whatever it how it stipulated. Do you think that they're going try to say, ok were open, will pay you fifty percent or start paying like normal again. How do you think that that payment or verandas, owing to our Howard, those conversations now playing out on as the conversation, birth or the other regions. to reopen ya You know, I don't have a great deal of visibility
Your conversation than I am probably disappoint you in my answer, but I think it honestly the conversation retailer my retailer with all their landlords measures now a lot of variations variables that she say that would impact the negotiations from location occasion they will, we know, is that there's stream throughout the entire ecosystem and from the retailers, paying property owners and probably on his paying the banks and insurers who go back all of it up to all of those parties are allowed to work together to get from some larger scale solution that were hopeful? My will be able to trust you pink and ethics. Moreover, a macro question and one that occurring alot now among the largest investors and everybody. But how do you think
Retailers are planning on in terms of recovery. Do you think it's their thinking? Their base gazed at least eight Alice Dave. You shake w like whatever your letter is. What would you say the base cases where the retail industries thinking about a recovery? You know I am sad to most. Like I'm sure you have many May presentations around our expectations. I think they run the gathered at all. depends on on things that are unknowable right now, which is their per hour, the duration of the state, our borders and the risk of a second wave of their, though I think you know everyone looking at their than bolder bear in their there they're gonna midway case. And hope for the best began one as the obligation were people here Gore before the worst re rain understand my fine
one. I know we did talk a little bit about employees and the process. As you know, in a returning to work, you mentioned that in some of the lesser effective state, where they're starting to reopen you're, seeing a lot of willingness and wine to come back to work in some of those more affected area where it might be more of a sensitive issue, either conversations going on around here, I guess incentive right there over time or bonus, did anything to a kind of entice. Very people, love Vena Wanna, go back a little bit more arm, you know, but what? What things. Tat reopening yeah No, I'm not. I heard that discussion. there is going to bring people back, but their review steam retailers and how can open in a variety of different again strong Reno, increased pay for it no time the Earl of permitting the increase in salary others, have offered
Oh you're, more creative things. On top of that, one, The jailer offering, particularly in those early days when the other groups, the boy dreams were were stretched distribution that employees could they parted with a grocery store to allow distribution. Pleased by no eggs, toilet paper, think of that sort The other guy. Did you make a convenient for themselves, are right away that their internalize employees to come to work and to stay at work during spirit of recognising that the challenges are not only their discomfort. I will believe in your homes, and sometimes there are challenges- are things and allows. I better work this ship, then I came to the grocery store in time to give the things that I need began to be bigger. Start with the time about their work. So I don't you see, retailers can do be creating and how they may carry their ancient history there. So you need me
now employed in a location our region. Thank you, ladies and gentlemen. This does concrete raise conference. Call you may disconnect your PA minds at this time have a wonderful day. Thank you for your participation that include this changed over there. Obviously you enjoy the oasis you really are
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Transcript generated on 2021-07-02.