By Joseph Teklits
Our 26th Annual ICR Conference enjoyed a record turnout of 2,700+ professionals: 200+ companies representing the entire consumer landscape, 500 bankers – senior teams from bulge bracket firms down to the best boutiques in the industry, 400 investors including from all of the largest funds, 250 sell-side analysts, 450 private equity professionals, and 30 from the media across 22 outlets including a live CNBC broadcast. Two-and-a-half days of presentations, panels, meetings, drinks, dinners, handshakes and dealmaking.
The tone from the ICR Conference was generally constructive, with holiday sales and consumer demand moderately better than expected. However, in their post-conference research reports, analysts noted that companies remain cautious on the 2024 outlook given high inflation, rising rates, and geopolitical uncertainty. Inventory levels are still running lean, meaning restocking and revenue acceleration will likely be delayed until at least the second half of 2024. Most companies indicated limited impact so far from shipping disruptions like the Suez Canal blockage, though there is some risk especially for businesses with Europe exposure. A common theme was ongoing margin expansion opportunities in 2024 through lower promotions, declining freight costs, rightsized cost structures, and operating leverage.
Still, the best word that we would use to describe the general mood and the outlook for 2024 was hopeful. Hopeful is what you get when the market ends the year on a tear (up 12 percent in Q4), and when there are quality IPOs starting to appear in the pipeline after a long drought. Typically, when there is some uncertainty, everyone is “cautiously optimistic,” but hopeful is one notch up on the scale of potential outcomes, but includes the realization that anything could happen in a year that ends with a feared presidential election. Investors are definitely engaged and hopeful right now. And why wouldn’t you be after watching Abercrombie & Fitch (ANF) shares appreciate 282 percent in 2023 after trading sideways for five years. We heard from many analysts that there were more investors in their company meetings searching for new ideas than in many years. Hopeful is what drives record in-person turnout at our conference in a world gone virtual.
The consumer remains resilient and employed, and confidence is on the rise, but pricing increases will no longer broadly be a tool to drive sales growth so traffic and transactions will again be critical. Additionally, inventories are generally clean throughout the channels, but there still may be some cost pressures (e.g. wages and shipping/Red Sea issues). And in a continuation from 2023, the lower-end consumer could remain under pressure compared to further up the income scale. Walmart’s SVP & Chief Marketing Officer, William White, noted that consumers continue to express concern about prices/inflation, but are still spending – what he calls “customized moderation.”
We now know 70 percent of U.S. consumers are influenced by social media when making purchases. They look to social platforms for inspiration. But in addition, eMarketer says that $56 billion in sales last year were done in social commerce. This is according to Walmart’s William White, who focused his presentation on how Walmart is reframing itself as a digital-first destination and, more specifically, is embedding commerce across its marketing funnel. He highlighted how commerce and driving conversion can happen throughout the marketing communication landscape, not just in lower-funnel performance marketing. The company has invested in alternative marketing channels, such as the Walmart Experience on Roblox (14.7mm visits). Walmart also produced a holiday season movie, “Add to Heart,” which allowed viewers to inspect and buy items featured in each scene (over one billion impressions in the first week). Pacsun’s CEO, Brieane Olson, calls it Social Selling and the specialty retailer is also being very innovative with it. It’s next-level stuff that can be considered omni-channel 3.0, or maybe we need new terminology. Both White and Olson highlighted using influencers as the creators on social media to drive commerce, and so the collaboration continues to expand and deepen.
The growth of everything attached to sports was the standout new discussion at our conference this year, including two panels that focus on sports-driven business opportunities and many callouts by CEOs. Authentic [Brands Group] / ABG (private – keynote fireside chat), owner of 50 brands, is now firmly positioned as a sports & entertainment licensing company, Saks’ CEO Mark Metrick talked about men’s fashion being driven by professional athletes’ pre-game outfits, and other brands (e.g. Faherty) are benefiting from player endorsements (the ultimate influencers). Sports stars – college and pro – are being paid more than ever to promote anything and everything. Viewership continues to grow (record ratings for NFL playoffs), there is a strong globalization trend among fans and athletes, sports betting is mainstream, money is flowing and opportunities abound, and thanks to pickleball – everyone now feels like an athlete. Ticket prices, franchise values, players’ and coaches’ salaries, streaming rights, merchandise sales— and everything else attached to sports —are increasing.
For more on trends and the outlook for 2024 in a variety of industries, check out our Trends series on the ICR Insights blog.
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