Taylor Swift's Funflation: Best Buy's Retail Warning

Taylor Swift is killing it. The pop music sensation is extending her brand beyond music to movies and fun experiences. Retailers call this funflation, and they worry consumers will curtail spending on the stuff they sell.

Investors should avoid electronics retailers like Best Buy (BBY).

Taylor Swift transcends boundaries in ways few artists have been capable. Her concerts routinely sell out in minutes. Her fans, who call themselves Swifties, often pay up to $1,000 per ticket for live shows, and then stream themselves endlessly on TikTok wearing elaborate costumes and officially licensed Swiftie gear.  

Swift’s Eras Tour started in March in Glendale, Arizona. Forbes notes that ticket and merchandising sales from the 53-stop tour should bring in a well over $1 billion in revenues, a record. 

“Taylor Swift: The Eras Tour” was filmed in August during four sold-out nights at SoFi Stadium in Inglewood, California. AMC Theatres (AMC) announced in August that advance ticket sales for the movie reached $26 million. And after its debut on October, studio executives and AMC officials estimate the film earned $97 million, according to a report in Variety.  

The appeal of Swift is fun experiences over materialism. That last part worries bad retailers. 

They have been struggling since 2021 when the pandemic trapped billions of consumers in their homes. It was easy then to sell smartphones upgrades, flat screen TVs and audio systems. Bad retailers fear that era has permanently come to an end. 

Corie Barry, chief executive of Best Buy, was at the Fortune’s Most Powerful Women Summit last week and her message was glum. Barry says that consumers are not skimping when it comes to paying up for fun experiences. They are buying costumes, arranging parties, and renting hotels. They are making concerts and movie-going into a full-on event. 

Global live music sales reached $25.3 billion so far in 2023, according to a note for Bank of America analysts, up from only $9.2 billion in 2021. And the summer blockbusters, “Barbie” and “Oppenheimer” spawned costume parties, while grabbing nearly $25 billion in ticket sales, according to IMBD.

Leaders of the bad retailers blame this transition to fun experiences for their woes. It’s not that.  

Apple (AAPL) stores are still busy. The same is true for Lululemon (LULU) and Costco (COST). And Nike (NKE) is having a rebirth as consumers reacquaint themselves with iconic swoosh shoes and apparel.

Barry reported in July that second quarter financials fell across the board, year-over-year. Revenues tumbled 7.2% to $9.5 billion. Profits slipped 10.4% to only $274 million. Most disturbingly, net cash declined to $59 million, down a staggering 69.3%.

Best Buy is not failing because of Taylor Swift, or funflation. The company is stagnating. Leadership is not moving with the times, or embracing new forms of marketing, like influencers.

The company will report quarterly results November 21. Investors should use strength in the interim to reduce exposure.

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