Lindsay Bell: Healthy Retail
In this episode of Forging Connections, a podcast from Honeywell about the convergence of IT and operational technology for industrial companies. We talk with Lindsay Bell, Chief Markets and Money Strategist at Ally Financial, Inc. Listen now!
Welcome to Forging Connections, a podcast from Honeywell about the convergence of IT and operational technology for industrial companies. We'll talk about the future of productivity, sustainability, safety, and cybersecurity. Let's get connected!
Tim Verras (00:19):
You know, one of the great things of working at Honeywell Connected Enterprise is that we've got a, kind of a, a really good central footprint in every major sector of a given economy, whether it's energy, supply chain, logistics, industrials, aerospace, uh, even commercial real estate and, and retail. And, and in many respects, retail solutions today are designed to translate into growth and at the end of the day, our customers want to increase growth through tech and all sorts of other aspects to help them, uh, utilize increased visibility, intelligence, efficiency, and productivity. Also, they can kind of contribute to that bottom line. To dive into those trends, we have Lindsay Bell, she's Ally’s Chief Markets and Money Strategist. She's an award-winning investment professional with a passion for personal finance and more than 17 years of Wall Street experience, as well as a longtime contributor at CNBC. She has her finger on the pulse of where trends are going and we're going to talk to her today. Well, Lindsay, welcome, uh, welcome to the podcast.
Lindsay Bell (01:20):
Thanks for having me.
Tim Verras (01:22):
Yeah, absolutely. So tell me, just, let's start easy. Tell me a little bit about what you do for Ally.
Lindsay Bell (01:26):
Sure. So, my title is Chief Markets and Money Strategist. So, what that means is, I cover everything from savings and budgeting to debt management, all the way to investing and how to get started in investing up to intermediate, to advanced type of investors, giving them ideas. So, I cover the whole gamut of the money conversation at Ally for our retail customers and it's really been a really great experience.
Tim Verras (01:56):
So let's, let's dig into retail a little bit. So, one of the areas that Honeywell Connected Enterprise focuses on is, uh, warehouse productivity software. And I think anyone that's been paying attention to the media kind of knows that, uh, with supply chain issues and, you know, around the clock Sunday deliveries, that retail warehouse space has been really kind of stressed over the last couple of years. Can, help me just kind of tell the story of, uh, where their heads at right now? What's going on in that market?
Lindsay Bell (02:24):
Yeah, I mean, especially over the last couple quarters, it's been an inventory issue. Obviously, the supply chain really impacted the retail industry. First, it slowed things down, um, and it was hard to get a lot of different things, especially things that became in demand and the work-from-home environment, the lockdown environment. And so, uh, retailers really stepped up their game to, to get ahead of some of these issues, especially for the holiday season last year. And what we ended up seeing at the end of last year is a, a build-in inventory. And we're starting to see these supply chains ease. A lot of these orders that were put in are starting to come through and end up at these retailers or end up at these warehouses. And, you know, some, some of these companies just aren't prepared for that. Also happening is the shift in consumer behavior in general too. So, that's not helping. As consumers shift from buying goods and things and stuff to spending money on services and experiences. That shift is happening a lot faster, I think, than many retailers were prepared for, maybe even the economy in general was prepared for. And so I think all that combined together is coming to fruition and making a perfect storm for what has been a very stressful situation for warehouses and for retailers and figuring out how to move, move these goods
Tim Verras (03:50):
Is that what's keeping you up these days, uh, at night. Is it just how, how to get goods from, from A to B?
Lindsay Bell (03:56):
I think so, but I also think it's like, what price can they get for those goods? How's that going to impact their margins and their top lines. And then also, I think they're really struggling to project what, what's the holiday season going to look like, okay? Because we've, we've dealt with high levels of inflation for over a year now and even if you think, and there are signs that inflation could cool in the coming months, but how quickly can it cool? And what's the appetite of consumers to spend going into the holiday season on goods? Uh, and, and so how is that going to, what, what price are they going to, going to pay for the goods at the stores? And so I think it's a really tough job for retailers out there right now to plan the holiday season.
Tim Verras (04:39):
Do you think they're going to like double down or, or kind of take a step back and kind of see how things shape up? Like there's a couple of different ways they could approach it.
Lindsay Bell (04:48):
I think they're going to take their time. I think they're going to take a step back and see how they can approach it, because I think they'd rather have less goods selling at full price than too many goods selling at a discount because we know they're going to be discounting over the next couple months, um, as they get into that holiday selling period. And they know, they know there has been this massive shift in what the consumer is doing. And so it is hard to tell how, what, what the mindset of the consumer is going to be in the holiday season. I will say we did, uh, a research, we did a consumer research at Ally that's, uh, kind of part of what I do is look at a lot of different consumer survey work that we do in talking to people on the ground, people on the street.
Lindsay Bell (05:29):
And they were very excited about spending for Back-to-School. Because if you think about it, this was like the first back to school, normal back to school season in, in almost three years. Uh, but they are a little bit more cautious and hesitant about what they're going to do in the holiday season. And I do think that there's still that mindset of spending time with people and family and loved ones. And, and that might not just be in, in houses and on meals. It might be outside of their houses at a vacation location, um, and things like that. So, I do think that there is mindset shift to, to services and experiences. Um, but also I think people still want this to be a good Christmas because even though last Christmas was better than the prior Christmas, we still haven't, you know, fully return to pre-pandemic holidays.
Tim Verras (06:18):
Yeah, and I mean, do, do you think that this shift to, uh, more of an experiential mindset with the consumer, is that going to kind of play into the, the levels of, of volume that they're going to see coming through the retail warehouses with physical goods? Do you anticipate that actually decreasing a little bit?
Lindsay Bell (06:35):
Yeah, I would say, I think I do think that the inventory levels coming through this year should, should probably be down versus last year, but the planning, the planning is probably going on now. And I think, I think that, you know, they, what, what happened in the first half of this year really shook a lot of these retailers up. So they're making changes as quickly as they can. I think for bigger organizations, a little, it's a little bit more difficult than some of the smaller organizations who can be a little more nimble. So, I think it depends on where you sit on the spectrum, but at the same time, you have to also think about those organizations that are offering higher levels of value for the consumer versus those that are maybe on the high end. You see the consumer spending in both areas, but this holiday season, I think it's going to, they're going to have to kind of make a trade-off depending on where inflation is, depending on how much they're spending on food and gas going into the holiday season.
Lindsay Bell (07:31):
And the consumer is definitely looking to start spending for the holidays a lot sooner, so that's also going to impact the planning for retailers from a warehouse perspective and an inventory perspective too. And so, it's an extremely complex environment for these people and it's, it's hard. There's not history to look back and point to, to, to kind of provide us any type, type of guidance so that they're trying to be, you know, act as quickly as they can on their feet now and, and react to, to the environment that they just went through in the last six months.
Tim Verras (08:05):
Interesting. Yeah. And I, I think consumer demand is, is, is one side of things, supply chain is another. Do you anticipate them, uh, kind of looking at more technical solutions inside their warehouses and distribution centers to kind of help them move the needle in, in whatever direction they see? I mean, do you see a lot of investment in that area?
Lindsay Bell (08:23):
Yeah, absolutely. I think across the board, whether you're a retailer or you're a financial institution or you’re a manufacturer, technology is playing a much more significant role in, in any industry and you guys know that better, better than anybody because of the number of different industries that you serve and touch every single day. And I think especially when it comes to the retail space, you know, the precedent, right? And, and they've been, it's been very, very clear that they are looking to automate everything, um, within their own supply chain. They're taking a lot of pieces of that in-house so that they can control it and be much more nimble. And so, I, I think that every, every major retailer is, is working to follow suit because, you know, when they, they, like I said, they set the tone when they, next day delivery, everybody had to do it, right?
Lindsay Bell (09:17):
And so I think that we were, we are just in that environment where the consumer over the last two years got really, really used to purchasing things online. And of course that means changes for, for retailers and their distribution system, their warehouse, their entire supply chain. And so, the, the only way, or the best way I should say, to combat that in an efficient and quick way is through technology. So, I think that's going to be one area of even if we are going into a slowdown or currently in one, um, even a recession that is an area where you, CEOs and CFOs are going to have a hard time really pulling back on that type of spend.
Tim Verras (09:57):
Great, and kind of in this environment right now, the kind of like, will it, or won’t it with the recession or a slow down or, you know, whatever you want to call it, what are some things you think the, these companies should be thinking about as they look to the future?
Lindsay Bell (10:08):
You know, I think one, one of the most important things for corporations to, to think about is where they're coming from. I think that unfortunately companies have been trained by the stock market and shareholders and their boards to consistently be thinking about growth, not just in top line sales or bottom line earnings, but really that margin line. And a lot of companies are operating it at all time high levels of, of margins. And I think that it's, you know, I almost think the narrative needs to change that for companies, there, there might need to be a period of, of giving back some of that margin to, to maybe, maybe getting closer to more historical levels, but still above historical levels. We're significantly, if I look at the S&P 500, which is what I look at quite frequently as a barometer for, for different statistics is if I look, I look there, we're looking at percent EBIT margins (earnings before interest in taxes) for this year that compares to about 14 and a half to 15% historically pre-pandemic.
Lindsay Bell (11:22):
So, I, I think it's not unreasonable to get back to that level by hiring more, increasing wages, which you're seeing companies do, spending money on technology, uh, to become more efficient, um, to then eventually return margins to, to more elevated levels over time. But I think that now is not a time to pull back extremely sharply on spend that is going to increase productivity for your company or for your consumers or clients, whoever they might be, whether it's a business or a consumer. So to me, that's, that's where I think companies should be focused and they should be having conversations with their boards and their shareholders. That just because you're, we might endure a little bit of pressure in the near term, over the longer term that's going to make us much more productive and much more efficient and improve and increase cash flow.
Tim Verras (12:18):
You know, and, and as, as they're thinking about these things, you know, one element we're seeing in a lot of our customers here in Honeywell Connected Enterprise is sort of increased investor and, uh, regulatory, and even from their board, demands around being more sustainable, being more efficient. And are, are you seeing that kind of come into play in the retail warehouse space as well, where there's a big push around not only just being sustainable, but proving it out and being transparent about that? Is that having an effect on the way they look at themselves?
Lindsay Bell (12:47):
Yeah, I think so. And you know, the C-suite is taking that conversation as you know, better than anyone they're taking that conversation very, very seriously. And, and there's heightened scrutiny around that conversation. You can't just say, oh, my building is LEED certified, right? You have to, you have to, like you just said, you have to prove it out. And because, because there's a lot of companies, I mean, you look at the tech space, it has historically been considered like the sustainable bell weather, the best in the business. But if you really look under the surface, look under the hood, what you, what you see is some of their governance isn't up to par, you know, what they're doing in their communities, their waste, different things are really not up to snuff from a true sustainability perspective. And so, so I think that a lot of corporations have a lot of work to do.
Lindsay Bell (13:41):
You know, I think it's been proven out that that being sustainable and employing more sustainable practices can lead to increased profitability and sustainability. But again, it gets, it kind of gets back to that conversation of if you're going to have that focus, that's a longer-term focus and it does improve profitability over long periods of time. But if you're going to be graded and your scorecard is quarterly, then that, those two things don't really jive. So I think that's something that boards and shareholders and the way that's communicated probably has to be revisited and in the future. But we know it's something that it, retail investors especially are really looking for in companies as they're investing.
Tim Verras (14:26):
And, you know, one, uh, one, one thing that we hear around the, the, the labor shortage aspect of, of this whole thing is, you know, one, one way you can be more sustainable is kind of reducing the amount of, of travel people have to do, reducing the amount of, uh, um, I mean, even shipping in, in this area, uh, how do they navigate, uh, when you're a retail warehouse and your whole business is predicated on shipping, how do you, how do you navigate those, those waters of being more sustainable yet increasing the amount of shipping that you're doing?
Lindsay Bell (14:59):
Yeah, I, I mean, it's a really, it's a really tough question, and there's just, there's some industries that aren't going to be able to get to the same level of sustainability as, as others. And I think that that's something that shareholders and governments, uh, alike are going to have to learn to accept and learn and, and come to in the industries in general are going to have to come to a conclusion of what is, what is acceptable, how far can we go? And obviously technology and time and education all improves upon, will improve upon these things over again, long, slow periods of time, but it, it's a difficult, it's a difficult question to answer because you, you know, there's, there's only really, you know, we're trying to make ships more fuel efficient. And there, there have been a lot of different changes over the, the last few years and, and different requirements and regulations, but there's, there's still a lot of work to do. And so, there's a lot of R&D that needs to be done, and there's only certain ways, the ship can get across the sea. So, I think it's just going to be the industry is focused on it. And I think they're going to, together have to work, work together and come up with a better solution over time.
Tim Verras (16:17):
Yeah, yeah, absolutely. And, you know, let's talk about time a little bit. Where do you see things kind of maybe in like the three to five year timeline? I mean, do you, do you anticipate these current problems just kind of snowballing and getting worse? Do, do new factors come into play? What, what are you seeing in your crystal ball?
Lindsay Bell (16:33):
<laugh> I wish I had a crystal ball, but the, the one that I think I have it's, it's not as, as clear as I'd like it to be, but, um, at three to five years, I look, I think, I think we'll be in an improved and better place. I think that right now we're navigating really murky, uncertain waters right now. And I think whether you are a, a CEO, a CFO, if you are a professional investor or you an economist or professional researcher, you're trying to figure out ‘Where do we go in the next six months?’ and that, there are bigger questions there, there are near-term headwinds. We're dealing with inflation, we're dealing with, um, fed policy, fiscal policy. There's a lot of big uncertainties that a lot of us in, in whatever position you're in really haven't had to endure or deal with in our lifetimes.
Lindsay Bell (17:28):
So it's, it's kind of really a new and confusing environment for everybody. And so, you can look back at history at certain times, but, but history, isn't exact - doesn't give you a clear roadmap. So you, you, you take your learnings with what you can, but then you have to kind of navigate the current waters more clearly. But I think that we're going to come up the other side in, in a better place. We're going to end up being more efficient. We continue to find new ways to use technology to our advantage. We're, we are, you know, we're seeing major shifts in the job market right now. And I think that human beings, we are also adapting to that. We need a changing skillset. The world is moving at a much faster place. And the, the policies and institutions that are currently in place are going to need to change, change to adapt with that.
Lindsay Bell (18:19):
And so, I think the sooner that we, as a society and as a world and as a, you know, various economies, accept that. I think we'll be able to move forward, um, a lot more quickly. But I, look, you know, the consumer is, us as humans tend to be optimistic by nature, and we've been able to, to really survive through this rough period in, in 2022, you know, we endured 2020, which was extremely difficult. So I think there, there are more good things to come. And the consumer, as long as the consumer can stay strong, corporations have a strong foundation right now as well. And it's really kind of comes down to our mindset at the end of the day. And I think we have a lot of, a lot of, you know, just, we have a lot of opportunity to move forward in, in a positive way. Three to five years, I'm, I'm optimistic about the future.
Tim Verras (19:11):
That's awesome, yeah, optimistic, but again, it's, uh, it's a whole new world out there, so, uh, you know, it'll be, it won't be boring, I guess is what you’re saying.
Lindsay Bell (19:19):
<laugh> It won't be boring.
Tim Verras (19:21):
<laugh> Well, uh, Lindsay, I think that's all I have for you today. Thank you so much for taking time to us, uh, to talk with us today. And, uh, I look forward to chatting with you again in the future.
Lindsay Bell (19:32):
Awesome. Thanks for having me, appreciate it.
All right, thanks.
This has been Forging Connections, a podcast from Honeywell. You can follow Honeywell Forge on LinkedIn and download new episodes from our website at honeywellforge.ai. Thanks for listening.