Shoppers Expected to Spend the Same or More This Holiday Season

0:00All right. So with all this recession talk, people are talking about if holiday spending from consumers is going to go up or down. And here's the crazy thing. It's either going to break even or it's going to go even higher for this holiday season. So I'm going to share my screen real quick and then we're going to react to this news over here because I don't know about you, Neil. It's a little eye-opening to me. So as it pops up, I'm going to read the headline because the screen is loading right now. So here's the screen. So the headline is holiday spend expected to reach$1.6 trillion. It's from ICSC.

0:33And it says nearly two-thirds, 63 % of consumers plan to shop at discount department stores, followed by traditional department stores, 34 % according to an ICSC report. Thoughts out the gate? Yeah, it's actually not too alarming or shocking for me. And here's why. We talk about inflation all the time and the government saying that, yeah, even though the stock market, other than the main tech stocks that are driving up the market, other than them, a lot of the stocks aren't performing well. And if you look at it, people are like, inflation is still kicking in, but then they're saying people are still spending.

1:12Maybe they're not spending at the growth rate that they were in the past, but they're still spending. so i'm not shocked it's more so it doesn't mean that it's a good thing either and here's why i'll give you a great example of this i have a friend and he's dating someone and this person is in debt and you know they're getting closer and closer to being out of debt but it's credit card debt so you can imagine how high the rates are no it stacks yeah it stacks and he's just like yeah she can be done with it in two, three months. And I'm like, but then she'll want to buy all her friends, Christmas presents, et cetera.

1:50So she's going to get herself more into debt. And it's not just her. And I'm not saying that's wrong or right. It's just the reality of the situation. And a lot of people are okay with that kind of life. And it also is what helps keep spending going up and up and up. As long as people have steady jobs, they justify why they should spend more and it's okay. I can pay it off later. The interest isn't bad. Instead of just thinking about saving the money. Yep. So here's, get this over here. I just want to read this. So those of you that can't see the screen. So it says in September, Deloitte released a report projecting that retail sales could rise between 3.5 and 4.6 % this holiday season, pushing sales up.

2:31So, um, and oh, here's the, here's the headline. So not the headline, but Neil just talked about inflation, right? So it says, though many consumers plan to spend the same or more this year, inflation has driven some to reduce their holiday budgets. Of the consumers who expect their budgets to rise this year, 42 % attribute that increase to inflation and higher cost of holiday items. So, I mean, here's the thing. Neil, you talked about stocks. So I was looking at Amazon, I think, reported great earnings. Who else reported great earnings? Was it Meta as well? Microsoft did really well. meta reported great earnings but then they talked about the middle east can impact their stock and then they lost the gains um alphabet did not report amazing uh earnings uh their cloud division wasn't growing as fast as the market would like yeah so you know we're still in this look at this wild shoppers earning between 100k and 200k anticipate spending two percent more than last year, those with incomes between$50 ,000 and$99 ,000 expect to spend 26 more percent than last year.

3:32So look, with all the crazy stuff happening in the world right now, the spend's still going up. So the economy is kind of still resilient, right? So who knows what's going to happen. But I think the key takeaway here is that you still should be mindful of how you're watching your spend overall, if you're a business, and at least you have a sense for how consumers are spending? I think 2024 is going to be the year where people start becoming more realistic. And the reason I say that is eventually this is going to have to catch up with some people. Tech layoffs, I don't know if you saw the recent articles on TechCrunch are starting to increase again.

4:07There's a lot of other industries that we work with that we're seeing them starting to lay off as well. And it's just a matter of time. The big reason the world isn't going round and round is money's not cheap. When money's not cheap, it's harder for businesses to buy and to invest more. It's harder for consumers to spend more because they're paying an arm and a leg more on their credit card rates, right? All these things just drastically impact how people spend. And I think next year, people start coming to reality. Dude, I was talking to a business that's in Mexico a few weeks ago, and we tried buying them.

4:41And I won't mention the name, but they're doing around$5 million in revenue. They used to do around a million in profit. They had an offer in the past to sell for around$5 million. And their revenue has stayed roughly the same. It's not really higher, but it's flat. Their EBITDA has gone down by half, actually a little bit more than half. And they're coming to me and they're like, yeah, we want the same price that we were getting when we were doing really well. And I'm like, okay, that's not going to happen. If you get by the numbers back, I'll give you$5 million. and then he's like well next year i'm gonna make triple the money right it wasn't really triple it went from 500 to 1.4 million in ebda but close enough to triple and i was like okay how are you gonna get there he's like oh we're gonna add in these new lines of services that we've never done we're gonna sell it have you started selling it no have you started doing those businesses no he's like we'll just make it work and we know our customers are gonna buy it i'm like it's not that easy to just you know if you've never been at 1.5 million in ebda you're not just gonna go from 400 something to 1.5.

5:44I'm like, cool. Next year will be a reality check. I kept a good relationship. And I'm like, when you don't hit the numbers, or if you do hit the numbers, come back to us. And either way, we'll give you a normal multiple. You know, what he pretty much wanted was roughly 11 times. I'm like, no one's going to give you 11 times profit for a declining business where a lot of your revenue is project-based and there's no outlook over the next few years. But I'm like, once you come back down to reality, I'm here to buy the company when you're ready. here's the thing it's you can't one thing people should understand is you can't trade on potential we we in the last 10 years or so we traded on potential we traded on future earnings right um and and here's the thing too the the the discipline that the lack of discipline we had in this zero interest rate environment that we were previously in was oh you know you know what i'm just going to look forward to raising the next round i'm going to look to raise the next round the next round and um it was just this whole like and then it's like oh then i'm just going to take some secondary and that's how i'm going to make my money right people weren't really focused on driving, creating actual business, creating customers and doing a good job for them.

6:42They're just trying to raise the next round because that was the incentive, right? And then these funds were focused on raising the next fund too. And it's this whole thing, this whole circle that just kept going back and forth. And then it's like, now it's about efficiency. And what's going to need to happen is the economy is going to get punched in the face. People need to get punched in the face a little bit, ourselves included, right? It's not that we want people to get punched in the face, but it's going to bring us back to discipline. no totally and look that's why i think next year we're really going to start seeing things shake up because you're going to have a long time of high interest rates and then reality is going to kick in with people because a lot of people in this world are in debt you know we've been saying this will be the last thing but we've been saying this for a while it's like you know it's gonna be 2023 it's gonna be the next year the next year i truly do believe it's gonna be the next year and hopefully it gets better but who knows if it actually gets better in 2025 honestly who knows man I'm hoping it gets better eventually.

7:36I'd rather just take my licks now. Let's just get it over. Get it over with. Yeah, I'm with you on that. All right, that is it for today. Please don't forget to rate, review, and subscribe. And we will see you tomorrow.