Please read the Unison Asset Management Social Media Disclaimer

From shortage to surplus, retailers are dealing with massive gluts of inventory resulting in significant discounts across the retail space. With retail facing high levels of inflation and weakening consumer demand many retailers are being forced to discount slow moving inventory hurting near-term profits. This wide discounting has led retailers across different markets to issue financial warnings and guide more conservatively as the industry deals with secular and macro headwinds. We have already seen some retailers make massive changes with Gap firing its CEO and Target making the decision to aggressively liquidate massive amounts of slow-moving inventory. With the Consumer Discretionary Select SPDR Fund down -27% vs -18% the S&P 500 and inflation still riding hot we wonder if things will get worse before normalizing. 

As macroeconomic conditions worsen dying/dead retailers are sticking together with Macy’s and Toys R Us partnering up to make a desperate bid to stay relevant to consumers. Toys R Us which has already attempted several unsuccessful comebacks via various owners partnered with Macy’s last year to open stores within 400 of Macy’s department stores and to have their products sold on Macy’s website. Toys R Us’ new owner WHP Global is planning to build out small stores across Macy properties with a new strategy of offering customer-friendly perks such as demonstration tables for new toys and photo opportunities. With Toys R Us on its last legs and Macy’s slowly spiraling toward the path of other defunct retailers it will be crucial for both companies to offer a unique shopping experience to have chance to succeed. Even if both companies are successful the current macroeconomic environment and long-term trend toward ecommerce could prove too much to overcome. 

The hiring slowdown continues to make headlines with Apple joining its FAANG peers with rumors of a hiring slowdown and lower spending for some teams. With the tech sector seeing explosive growth during COVID we saw many tech companies aggressively trying to hire new talent and increase spending to spur growth. The tide is now turning with COVID tailwinds subsiding with consumers returning back to pre-COVID habits, inflation eroding consumer demand, and tech growth slowing down. Even with some cutbacks on hiring and spending Apple still plans to launch four new iPhone models, three new Apple Watch variations, new Mac desktops and laptops, and updated Apple TV, and a new Home Pod speaker next year. The company is also still continuing its foray into augmented reality, autonomous vehicles, and creating more content for its Apple TV service.