caroline: from the bloomberg world headquarters in new york, today we are going to focus on the health of the u.s. consumer. romaine: a lot of earnings came out before and after the bell. shares of dollar general and dollar tree falling on underwhelming reports with pella toms sliding after a big mess on their forecast in the accounting issue that they disclosed. gap seeing a bit of a spike in shares, who knows.

is that gap, old navy, kanye west, who knows. but dollar stores, i'm told you can get a relatively cheap monitor for one dollar. taylor: hard to find anything that costs a dollar these days, but as you mentioned, shares were under pressure. same-store sales, relative to the second quarter, a decline in customer traffic that was arsenal he offset by the increase in average transaction amount. of course, same-store sales in the second quarter included a decline in pretty much consumable seasonal apparel and it seemed to caroline like a broad-based decline. caroline: it really is the tale of two halves. if you are williams-sonoma and selling things for a pretty penny, you are doing all right.

let's focus first on the lack of anything for under a dollar at these dollar stores, the cheaper stores, they are so dependent on cheap goods and freight from china. some of the stories are extraordinary. >> it really is an interesting play. so much of the product they need has to come from overseas, despite the virtue of the costs retail point. it affects dollar tree much more than dollar general. when you see the same-store sales miss, it's a double whammy because you are looking at the health of the consumer and supply chain issues and it gives it a sense of waiting on the outlook for profit. romaine: what is the strategy going forward? seems like the last quarters were a concern here about the fact that they didn't have much of an online presence and the

idea that they were trying to get broader on the in-store offerings to compete with all mark and target, is that still the strategy? >> that is a part of the strategy but when you look at the companies against each other one of the things that will continue to benefit dollar general is that store locations are in rural areas where there are not a lot of other alternatives so the customer base tends to be pretty loyal, coming to them for things. at the tail end of consolidating trips, that favors the mass merchant. we are seeing the group traffic stores unfolding slowly, but we think it will ultimately will help both of these chains, both of these companies as consumers get back to a little bit or of their normal shopping behaviors. but it really is overshadowed by the freight concerns at the moment and will they have products to put on the shelves? taylor: talk to us about the

consumer behavior and the declines offset i this higher basket transaction price. is it because they are happy we are buying more and expensive items? or are those items just more expensive? >> it's a little bit of both that it skews to the first where the consumer is doing well, spending more and buying more items and the reason they are buying more items is these companies have had strategies in place to change their merchandise for the last couple of years and make it more appealing so that when you pick up something that is considered inessential, a discretionary item catches your eye and goes into the basket and it's good for margins and the overall sales data helps to raise the overall basket value. there is a bit of inflation for sure on the consumer side that it is also a lot of the strategy

that we are seeing play out in the stores right now? >> all that i can see on my tiktok is great deals at dollar general and dollar tree, but i'm interested in how much the buyer or consumer at that end is being hurt i inflation in general. we know that the federal reserve has made their focus on making sure that all ships rise in an economic recovery but when you perhaps see inflation in the lower income purse, is that hurting and could it be an issue in general? >> it hurts consumers in general and part of the value proposition for these chains is that the typical customer might go in willing to spend $20 and as -- as long as they can still get things for that, they are meeting the expectation of the customer. there are ways they can do that like private label products or change the package sizes so people can still purchase a particular item in a small --

slightly smaller package size. they are good at managing the mixture and the way they present items so that customers can still feel they are meeting all of their basic needs. taylor: thank you as always, jennifer. pivoting to the other side of the spectrum on retail, peloton. bloomberg intelligence is with us on that story and we have to say that anyone who has taken level 1, level two, or level three, you know you can't mistake your inventory on the balance sheet. is that key concern, even though there are not restatements of financials, what does it say about internal control? >> that will be the first question they asked during the call. but it's also basically the decrease in the price of the bike around 20%. that is also being reflected in

their revenue guidance for the fiscal first quarter. that is going to be another key question. why the price now? has the recall impacted them? is that what's going back quickly in the market? maybe they are trying to do other measures to increase growth post-pandemic. romaine: i am curious as to what the strategy comes if you lower the price of the bike and financing terms, how are they hoping to recoup some of that? >> first, print plus. second, the rumors we keep hearing about the new product, a rower that will be a key catalyst for growth next year. finally, what other peloton verticals are they trying to impact? every time we listen to peloton we hear about strength, how they have really succeeded in the cardio part of the fitness industry but for strength they haven't done too well there, so maybe there is another product there that could be a catalyst for growth for

them. caroline: were you worried at all by what they call material we as and internal control? >> we will have to wait and see. they said they won't you restating that under significant impact in the way they calculate. caroline: but what does it say about corporate governance? >> it was in the way they responded to the threat issues they had in the past and in many ways they came out strongly and improved the messaging. when you look at this industry, the number one most important thing is image, right? product branding. they have done well to improve that by dealing with the issue of the recall on the thread plus products and are doing the right thing as they eventually look at the immaterial. taylor: well of course going to let you running get ready for that ever important call on

those issues you just raised. thank you as always. time for an update with first word news and mark from tin. -- crumpton. mark: 12 american service members were killed in the attack in kabul, making it the deadliest day for the u.s. military in years. the explosions detonated as the u.s. works to get remaining americans out of the country and a u.s. general says the military will, in his words, go after whomever carried out the attacks if they can be identified. afghan officials say that at least 60 afghans were killed and 140 others were wounded in the attack. u.s. general frank mckenzie of central command said one of the blasts was followed by a number of isys gunmen opening fire on civilians and military verses and he believes that these suicide bombers were linked to isys. -- isis.

>> we want to make sure we take the steps we can to protect ourselves there. over the next few hours we will learn more. mark: the general says the united states will continue to execute the mission of evacuations in afghanistan. the white house says a meeting set for today between president biden and the israeli prime minister will now take place tomorrow. they had planned to talk at the white house about a strategy concerning iran, which both countries say have been speeding up their new your program at an alarming rate. in other news, new vaccine mandates across the united states are adding to the nursing shortage as many are waiting when faced with the directives. a survey by the american nurses association shows one and eight had not got in a vaccine or didn't plan to, despite having had access to the shop for

almost nine months. one reason given is that young female nurses are concerned by rumors that vaccines could affect fertility. the american college of obstetricians and gynecologists haves said there is no evidence of that. global news 24 hours per day on air and on bloomberg quicktake, powered by 2700 journalists and analysts in 120 countries. i'm mark crumpton, this is bloomberg. ♪

romaine: all right, today we are focused on the health of the consumer and we spoke to a couple of ceos earlier to get their take on the willingness of

customers to spend. >> if we look at the six months since the beginning of this 2021 year, we are growing slightly ahead of the market and this tendency is seen everywhere, but there are two standout regions, the u.s. and china. >> tourist locations particularly in the united states and in metro areas are starting to build backup and we are seeing some good business there. romaine: all right, people still buying their, buying makeup. at mckinsey and company, they recently put out a report on consumer sentiment and buying habits. i guess the big question here isn't whether or not consumers are still spending, but what are they buying? are they buying what they want to buy or buying what they need to buy? >> thanks for having me, it's a great question. we have started to see recovery and a shift of spending in consumers and what they want to

buy. before we dive in there, it's good to just reflect a little bit on what happened this year, what has happened since 2020. since then we have seen two historic shift. the first is the shock to e-commerce, obviously, which all the retail facing companies have felt. right? 10 years of penetration in a matter of months. the second is a real shock to loyalty. regardless of their category, consumers have been more fickle, spending but new brands and new retailers. they effectively redefined what matters. we have been really focused on looking at the shock to loyalty. and we are in a pivotal moment where spending was starting to recover and that now, there are a lot of questions about going forward from here. caroline: it's interesting that you call it fickle. aren't we just building different loyalties now? there was talk in particular that

maybe gen z and millennials wanted to spend their money on causes that they believed in as well, that stood for something rather than ones that didn't. what did you make of that? >> we definitely saw that in the research, two. the biggest driver in retail choice has been value. that has been true across all segments. we saw an increase in terms of drivers and where people are spending but where the gen z and the millennials, 40% of them have said that the purpose of a brand, its quality or alignment with what i think is important is right -- is really driving my behavior. taylor: one interesting conversation we have been having of late is the consumer doesn't even want to go to amazon, let's say, but we have talked about the not -- the rise of social e-commerce within tiktok, instagram. can you give us any insight on

what you are seeing not only between brick-and-mortar and online, but within online, the trends that you see? >> social commerce has definitely increased. we saw, whether does tiktok or social buying, it took a big step up last year. looking at markets like china, you can see it growing increasingly fast as a piece of the pie, leading edge compared to the u.s.. e-commerce overall, there was a big question at the beginning of this pull forward, which of it was actually going to stick? there was skepticism about that. what we have seen is that it has stuck. even the last month or two, 30% higher online penetration than the covid and that's even as stores started to open. social selling is definitely a part of that. taylor: what about the she --

romaine: what about the shift during the pandemic with the omni-channel strategies? these companies sort of diving deep into it and then other companies like dollar general and dollar tree that basically said we are fine with the business model that is still pretty much rick and mortar. how do these coexist in a post-pandemic world? >> it's interesting, i think you are highlighting two different phenomenon. one is orientation towards value and that is still very. what we have seen up through a few months ago was lower income consumers driving that. lower come in the high single digits. in the last few months you have seen that start to go down. there is a tightening of the belt pressure on the lower income consumer for sure. that's one value-oriented thing that you highlighted. the value, rita -- retailers and

commerce, they are drawing in traffic from the consumer that wants to have that kind of traffic. separately, a lot of the winners now and frankly over the next six months are going to be the ones who during the holiday season can drive e-commerce and offer the capabilities that they could after covid and that will be a key determinant i think of the winners versus the louvers -- losers over the next six months. caroline: consumer health is strong, from your perspective? >> strong, but we are at a pivotal moment. 40% of americans said that they were feeling good, that economic recovery was coming. i think that right now you are starting to see some pivotal moments around lower income not inc. supported by the government or state programs. and a question of whether a lien

into services that we thought would happen in out of home experiences will be able to be sustained in the fall. romaine: so great to have you on the program there, kelsey, partner there at mckinsey and company. talking to us about what consumers are willing to spend. some are willing to spend -- caroline: on a jacket? puffy jacket? romaine: fancy thermometers? puffy jacket? what was that, would you pay for that? caroline: how was your taste? there is kanye, he's not wearing the taste -- the jacket. romaine: we will talk about gap earnings and kanye west and what it all means. this is bloomberg. ♪ ♪

caroline: all show we have been

focused on the consumer as it was one of the main themes in the market that continued after the bell, where we had a series of earnings, including gap are you joining us now from atlanta, it looks like a beat, but i'm trying to work out which bit of the business did well. >> athletea seems to have been what did it for gap. it just goes with the trend of consumers wanting more comfortable clothes, no matter what the new normal looks like. it's a strong growth there, as well as in banana republic. it had been dormant over the last year, so compared to this year that was a strong growth spot for the company. >> but about the actual brand here? there was a partnership with kanye west that was announced with a lot of hoopla.

that first round jacket sold out, i believe. we are showing it to you now. it's interesting. is this their future? >> yes, their brand saw a decline this past her but it was also the first time that there was a preorder for this line. like you said, kind of this bubble jacket looking thing and one note they made was that 75% of the preorders for the jacket were from new customers. which is why they wanted to partner with him, it introduces them to a new customer as they try to grow and make brand relevant again. >> how do they make the customers stay? >> that's a huge question. they are contending with shipping issues, like the rest of the industry. but also they have seen a huge growth in online business as it accounts for about one third of their business right now, so like most retailers they are

trying to figure out how you holding on to the customers that shopped with you and now we have options to spend money elsewhere? caroline: always great to have you with us on camera. we turn now our attention away from the consumer story to what is now very much april the story . president biden is going to be talking about the attack outside the kabul airport in just a few minutes time. we will be ringing those comments live to our audience at 5 p.m., but it's clearly something to watch even if it does not impact the market that much. caroline: we did see some -- romaine: we did see a bit about the u.s. market response earlier, general mckenzie earlier in the day making it clear that the u.s. was waiting to complete the pullout. he also made it clear that in order to get that done, they are still going to have to face the potential for additional attacks. taylor: saying that for now they

have all the members on the ground they need, they don't need additional sub art, but there are a lot of concerning images and news stories coming out as we look forward to that press conference and more information. caroline: that does it for "what'd you miss?" this is bloomberg. ♪

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