WEBVTT - BI Weekend: Nvidia, Retail Earnings, Anthropic Investment 0:00:00.280 --> 0:00:11.400 Bloomberg Audio, Studios, podcasts, radio news. This is Bloomberg Intelligence 0:00:11.480 --> 0:00:13.560 with Scarletfoo and Paul Sweeney. 0:00:13.680 --> 0:00:15.800 How do you think the FED is looking at tariffs? 0:00:15.920 --> 0:00:17.160 The uncertainty of terriffs. 0:00:17.200 --> 0:00:19.200 Let's take a look at the sectors and how. 0:00:19.079 --> 0:00:21.320 They performed a lot of investors getting whip saled every 0:00:21.360 --> 0:00:22.759 day by news events. 0:00:22.440 --> 0:00:26.200 Breaking market headlines and corporate news from across the globe. 0:00:26.200 --> 0:00:28.800 Could we see a market disruption of market events? 0:00:28.920 --> 0:00:30.920 So people just too exuberant out there? 0:00:31.040 --> 0:00:33.600 You see some so called low quality stocks driving this 0:00:33.680 --> 0:00:34.480 short term rally. 0:00:34.520 --> 0:00:39.320 Bloomberg Intelligence with Scarletfoo and Paul Sweeney on Bloomberg Radio, 0:00:39.479 --> 0:00:41.360 YouTube and Bloomberg Originals. 0:00:42.240 --> 0:00:44.479 On today's Bloomberg Intelligence Show, we dig inside the big 0:00:44.520 --> 0:00:46.800 business story is impacting Wall Street and the global markets. 0:00:47.040 --> 0:00:49.280 Each and every week we provide in depth research and 0:00:49.360 --> 0:00:51.199 data on some of the two thousand companies and one 0:00:51.280 --> 0:00:53.760 hundred and thirty industries are analysts covered worldwide. 0:00:53.800 --> 0:00:55.520 Today, we'll look at earnings reports from some of the 0:00:55.520 --> 0:00:57.520 world's largest retailers. 0:00:57.000 --> 0:00:59.360 Plus look at why the Danish drug maker Novo Nordisk 0:00:59.400 --> 0:01:02.160 will be further lowering the prices of its obesity drugs 0:01:02.160 --> 0:01:03.880 for cash paying patients first. 0:01:03.920 --> 0:01:06.319 We'll begin with earnings from chip Giant and Video. 0:01:06.560 --> 0:01:09.000 This week, the company reported third quarter earnings that topped 0:01:09.040 --> 0:01:12.800 analyst estimates, and Vidia also delivered a surprisingly strong revenue 0:01:12.800 --> 0:01:15.600 forecast and pushback on the idea that the AI industry 0:01:15.880 --> 0:01:16.680 is in a bubble. 0:01:16.880 --> 0:01:19.720 For more, we were joined by Kunjohn Sabani, Bloomberg Intelligence 0:01:19.800 --> 0:01:23.240 Senior Semiconductor analyst. We first asked Kunjohn for his take 0:01:23.319 --> 0:01:24.520 on in Vidia this week. 0:01:24.720 --> 0:01:27.360 This was one of the more bullish earnings we have 0:01:27.440 --> 0:01:30.720 seen from this name in a while, not just on 0:01:30.800 --> 0:01:32.800 the numbers of the three Q four Q guide, which 0:01:32.840 --> 0:01:36.840 they blew past even the loftiest Byside targets, but just 0:01:36.920 --> 0:01:39.720 beyond that the long term the twenty six sort of 0:01:40.240 --> 0:01:43.240 and going into twenty seven demands signals that they showed, 0:01:43.760 --> 0:01:46.360 namely the half a trillion of the pipeline, which we 0:01:46.480 --> 0:01:49.520 think now is a conservative number given the number of 0:01:49.520 --> 0:01:52.040 deals they have announced. If supply keeps on coming up 0:01:52.160 --> 0:01:55.600 as it has, and if their customers continue executing on 0:01:55.680 --> 0:01:59.320 these bills without any missteps, we think their significant upside 0:01:59.360 --> 0:02:00.600 to the current numbers. 0:02:01.160 --> 0:02:04.080 Yeah, just looking through the numbers, clearly a beaten Rais report, 0:02:04.160 --> 0:02:06.320 but you know, the scale at which it can be 0:02:06.520 --> 0:02:10.320 in race is impressive. Although within the third quarter numbers, 0:02:10.720 --> 0:02:13.560 I did see that chips used in gaming PCs missed 0:02:13.600 --> 0:02:16.280 analess estimates, and I know that that's a shrinking part 0:02:16.320 --> 0:02:18.280 of the business, or at least it's not as big 0:02:18.320 --> 0:02:20.760 a part of the business, given that the data center 0:02:20.960 --> 0:02:24.000 is where the growth is really at. Are there any 0:02:24.040 --> 0:02:26.120 flaws in this earnings report? Conjohn? 0:02:26.520 --> 0:02:29.120 Not really? I mean, look, the gaming is becoming so 0:02:29.400 --> 0:02:33.920 unimportant for analysts that the reliability of the predictability of 0:02:33.960 --> 0:02:36.079 those numbers against which we are comparing the bet and 0:02:36.160 --> 0:02:39.800 miss for gaming is no longer as reliable. So no 0:02:39.960 --> 0:02:42.639 real flaws to really point out in this. We did 0:02:42.760 --> 0:02:46.960 see their supply commitments go up quarter work quarter and 0:02:47.000 --> 0:02:50.720 inventory is rising. I don't think that's a negative. While 0:02:50.720 --> 0:02:53.600 it might seem on the face that's just them getting 0:02:53.680 --> 0:02:56.360 up and getting ready for that next wave to supply 0:02:56.480 --> 0:02:57.560 the chips in the next year. 0:02:57.840 --> 0:03:00.560 So could John what's the latest and Gentin want about 0:03:00.560 --> 0:03:03.000 how he've used China going forward? 0:03:03.600 --> 0:03:06.400 Nothing has changed on the China side. They still don't 0:03:06.440 --> 0:03:09.919 assume any revenues when it comes to data center AI 0:03:10.160 --> 0:03:12.959 China GPUs or the H twenty has been shipped into 0:03:13.200 --> 0:03:16.000 They do have the clearance licenses so they could, but 0:03:16.080 --> 0:03:19.240 it seems because of the geopolitical issues, China has basically 0:03:19.320 --> 0:03:23.520 been shut down for American GPU providers or AC providers 0:03:23.520 --> 0:03:25.560 to be able to ship in the country. There isn't, 0:03:25.800 --> 0:03:27.880 to be honest, no demand. So it seems, you know, 0:03:28.160 --> 0:03:31.519 because of geopolitical issues, the customers in China are not 0:03:31.840 --> 0:03:34.160 just reading and getting up to buy in media chips 0:03:34.200 --> 0:03:34.560 right now. 0:03:34.800 --> 0:03:37.760 Jensenhang said that he from his vantage point, does not 0:03:37.960 --> 0:03:41.000 see anything like an AI bubble. We see something very different, 0:03:41.120 --> 0:03:44.560 and he says competitive pressures remain fairly low because this 0:03:44.640 --> 0:03:46.640 is a company with more than ninety percent of the 0:03:46.680 --> 0:03:51.520 market for those high end super fast AI chips. Who 0:03:51.600 --> 0:03:54.640 is the closest competitor if there is one t Invidia. 0:03:55.040 --> 0:03:57.320 Yeah, in terms of the size of the markets, the 0:03:57.360 --> 0:04:01.400 next closest competitor would be the AIA six chips, So 0:04:01.520 --> 0:04:04.640 Broadcome is one of the biggest providers of AI six chips, 0:04:04.720 --> 0:04:08.280 namely the TPU that Google uses. Another example would be 0:04:08.360 --> 0:04:13.640 Amazon's Treanium chips, which are on different AI asic designers supply. 0:04:13.800 --> 0:04:16.479 So in terms of revenues, or units in terms of 0:04:16.520 --> 0:04:19.840 the market that those are the next closest competitors within 0:04:19.960 --> 0:04:23.840 Nvidia's realm, which it sells merchant gipus, AMD would be 0:04:23.880 --> 0:04:26.440 the second closest competitor in that our Thanks. 0:04:26.279 --> 0:04:30.040 To Kunjan Sabani, Bloomberg Intelligence Senior semiconductor analyst. 0:04:29.839 --> 0:04:31.440 We continue in the tech space. 0:04:31.800 --> 0:04:33.880 This week we heard that the tech giants Microsoft and 0:04:33.960 --> 0:04:36.960 Nvidia are committing to invest up to a combined fifteen 0:04:37.120 --> 0:04:40.279 billion dollars in the AI research and development company Anthropic. 0:04:40.600 --> 0:04:42.840 We heard the investment will be part of anthropics next 0:04:42.839 --> 0:04:45.919 funding round. The companies also said Anthropic has committed to 0:04:45.920 --> 0:04:49.720 purchase thirty billion dollars of computing capacity for Microsoft's Azure 0:04:49.760 --> 0:04:50.520 cloud service. 0:04:50.680 --> 0:04:53.000 So of course we had to enlist. Mandeep Singh, global 0:04:53.000 --> 0:04:55.320 tech research head at Bloomberg Intelligence. 0:04:55.040 --> 0:04:56.840 First asked man Deep to tell us a little more 0:04:56.839 --> 0:04:59.039 about Anthropic and what it does well. 0:04:59.160 --> 0:05:04.280 Anthropic is one of the five frontier lms that are remaining, 0:05:04.360 --> 0:05:06.279 I mean, and they are leading the charge when it 0:05:06.320 --> 0:05:08.719 comes to generative AI. So it's one of the five. 0:05:09.320 --> 0:05:14.600 The other one are Google, Open Ai, Meta and XAI. 0:05:14.960 --> 0:05:19.159 And so look, when it comes to these commitments, it's 0:05:19.240 --> 0:05:23.000 pretty obvious that open Ai has raised the bar by 0:05:23.040 --> 0:05:26.600 announcing they're going to spend one point four trillion. So 0:05:26.640 --> 0:05:29.800 the question is what are the other LLM companies going 0:05:29.880 --> 0:05:33.520 to do? And Entropic is also a pure play LLLM, 0:05:33.600 --> 0:05:36.680 and in their case, they don't have the funding. I mean, 0:05:36.760 --> 0:05:39.880 they don't have the balance sheet like Google or Meta have, 0:05:40.640 --> 0:05:42.840 so they have to raise the money either in the 0:05:42.920 --> 0:05:47.280 private markets or from someone like Nvidia, or get into 0:05:47.320 --> 0:05:51.040 an agreement with Microsoft, which also has an agreement with 0:05:51.120 --> 0:05:56.520 open Ai. So that's where you know. Llms need compute. 0:05:56.640 --> 0:05:59.840 That's how you serve billion plus users, and that's where 0:05:59.839 --> 0:06:02.200 you know the numbers get bigger and bigger when it 0:06:02.240 --> 0:06:04.840 comes to the tie ups with cloud provider. 0:06:04.960 --> 0:06:07.279 This is like the popular click in high school, where 0:06:07.279 --> 0:06:10.200 everyone knows each other and everyone's messing around with each other. 0:06:12.200 --> 0:06:14.359 Just give us a little bit of background here on Anthropic, 0:06:14.480 --> 0:06:17.440 because my understanding is that it was founded by folks 0:06:17.480 --> 0:06:20.000 who used to work at open Ai and some of 0:06:20.080 --> 0:06:24.520 the early investors like big stakeholders include Alphabet and include 0:06:24.600 --> 0:06:27.000 Amazon and now you've got Microsoft in there. I mean, 0:06:27.080 --> 0:06:29.760 is there anyone who's not part of Anthropic and not 0:06:29.880 --> 0:06:32.480 committed to investing in this company. 0:06:32.800 --> 0:06:36.400 Well, you could say Meta, they're doing things. 0:06:36.560 --> 0:06:37.280 They're doing their own thing. 0:06:37.360 --> 0:06:40.560 They are doing their own thing in terms of, you know, 0:06:40.720 --> 0:06:43.960 using the computer internally, and they don't have a cloud business. 0:06:44.320 --> 0:06:46.400 Is that a problem for them that Meta's out there 0:06:46.440 --> 0:06:47.680 on its own I know, it doesn't have its own 0:06:47.720 --> 0:06:51.240 cloud business, but it's not buying stakes or committed to 0:06:51.279 --> 0:06:53.560 invest up to five billion or ten billion in any 0:06:53.600 --> 0:06:55.200 of these AI companies. 0:06:55.320 --> 0:06:58.560 I mean so far, just to go to Meta, it 0:06:58.600 --> 0:07:02.279 feels like, you know, investors were okay with them using 0:07:02.320 --> 0:07:05.560 the GPU compute for their own family of apps. But 0:07:05.640 --> 0:07:08.360 the fact that they're talking about one hundred billion plus 0:07:08.360 --> 0:07:12.760 in capex for next year without having a substantial ROI 0:07:12.800 --> 0:07:15.320 and what I mean by rois in the case of Microsoft, 0:07:15.760 --> 0:07:18.920 yes they're raising their CAPEX two hundred and twenty billion, 0:07:19.200 --> 0:07:21.800 but they're winning deals like the one with Nthropic thirty 0:07:21.840 --> 0:07:26.000 billion dollar in commitment from Entropic, so somebody is paying 0:07:26.080 --> 0:07:29.040 for that compute. In the case of Microsoft, you don't 0:07:29.080 --> 0:07:32.880 have that with a Meta. How are you generating ROI 0:07:32.960 --> 0:07:36.080 outside of your family of apps? And over there you 0:07:36.120 --> 0:07:39.800 have to show a really substantial increase in engagement to 0:07:39.920 --> 0:07:42.920 convince investors it's worth hundred billion plus in capex. 0:07:43.560 --> 0:07:47.280 Any of these open aies anthropics, are they going to 0:07:47.320 --> 0:07:48.440 ever come public? Do you think? 0:07:49.360 --> 0:07:52.480 I mean, in the case of Entropic, look, I know 0:07:53.120 --> 0:07:56.120 the numbers are getting big, but their gross margins at 0:07:56.120 --> 0:07:59.440 this point are probably better than open AI, which is 0:07:59.440 --> 0:08:01.720 doing too much any things. I mean, the biggest risk 0:08:01.800 --> 0:08:05.240 I see for Opening Eyes they feel they can get 0:08:05.280 --> 0:08:09.320 into any business, whether it's chip business, whether it's you know, 0:08:09.400 --> 0:08:13.400 obviously LLLM is their turf, any type of applications, and 0:08:13.520 --> 0:08:16.200 that's where there's a possibility of a misstep. You can 0:08:16.280 --> 0:08:20.160 end up wasting time because you just don't have, uh, 0:08:20.360 --> 0:08:23.960 you know, the capability. Yeah, the focus Entropic is more. 0:08:23.760 --> 0:08:26.840 Focused our thanks Toman deep saying, global tech research head 0:08:26.880 --> 0:08:28.000 at Bloomberg Intelligence. 0:08:28.200 --> 0:08:29.840 We move next to some earnings from some of the 0:08:29.880 --> 0:08:31.360 world's largest retailers. 0:08:31.560 --> 0:08:32.000 This week. 0:08:32.080 --> 0:08:34.560 Target posted a drop in third quarter sales due to 0:08:34.600 --> 0:08:38.319 intense competition and a weakening economy, with shoppers pulling back 0:08:38.360 --> 0:08:39.600 on apparel and home goods. 0:08:39.720 --> 0:08:43.280 Separately, Walmart reported third quarter earnings that beat analysts expectations. 0:08:43.640 --> 0:08:46.040 The retailer also increased its outlook for sales in the 0:08:46.080 --> 0:08:48.959 full year. It's a sign Walmart is winning over priced 0:08:49.000 --> 0:08:52.240 sensitive shoppers while digesting costs it expects to rise in 0:08:52.280 --> 0:08:52.960 the coming months. 0:08:53.000 --> 0:08:55.800 For more, we were joined by Jennifer bartashis Bloomberg Intelligence 0:08:55.880 --> 0:08:58.560 senior analysts covering retail staples and packaged foods. 0:08:58.760 --> 0:09:00.640 First test jenf for her take on the most recent 0:09:00.679 --> 0:09:01.640 results at Walmart. 0:09:02.040 --> 0:09:04.880 You know, Walmart had another good quarter, and I think 0:09:04.880 --> 0:09:07.400 that it's very easy to attribute a lot of their 0:09:07.440 --> 0:09:10.640 success to just the value seeking behavior of consumers in 0:09:10.679 --> 0:09:13.240 this environment. But I think that would also be overlooking 0:09:13.280 --> 0:09:15.320 a lot of the investments they've made in things like 0:09:15.400 --> 0:09:18.960 convenience that is really spurring the e commerce growth. And 0:09:19.000 --> 0:09:20.520 that was really a notable takeaway. 0:09:20.720 --> 0:09:25.160 Yeah, that e commerce aspect helps draw on higher income shoppers, 0:09:25.200 --> 0:09:27.720 so it's a larger pool of customers at Walmart now 0:09:27.760 --> 0:09:30.640 has access to and in our Bloomberg News reporting we 0:09:30.720 --> 0:09:33.959 indicate that the digital offerings now include luxury items like 0:09:34.040 --> 0:09:37.079 pre owned Chanel bags. I had no idea that that 0:09:37.160 --> 0:09:39.040 kind of stuff was available on walmart dot com. 0:09:39.760 --> 0:09:42.000 Well, you know, Walmart has done a lot to really 0:09:42.080 --> 0:09:45.720 expand its marketplace, and that includes bringing in items that 0:09:45.960 --> 0:09:49.160 you know, will appeal to that higher income consumer, you know, 0:09:49.200 --> 0:09:51.720 And the tactic behind all of this is that the 0:09:51.920 --> 0:09:55.480 more people are integrated with e commerce in going to stores, 0:09:55.559 --> 0:09:58.760 they become sticky and they become loyal customers, so that 0:09:58.840 --> 0:10:02.520 when the macre can comic backdrop fades, it really increases 0:10:02.520 --> 0:10:05.960 Walmart's ability to hang onto these customers going forward, and 0:10:06.000 --> 0:10:09.080 that just drives future growth. So it's a really interesting 0:10:09.120 --> 0:10:10.880 play out of how they're applying that tactic. 0:10:11.480 --> 0:10:14.000 Jen, I also want to get your take on Walmart transferring. 0:10:14.000 --> 0:10:17.200 It's listing to the NASAC that's going to happen on 0:10:17.240 --> 0:10:20.240 December ninth, and that of course is to reflect as 0:10:20.280 --> 0:10:23.560 focus on being a tech forward company. But I'm wondering, 0:10:23.600 --> 0:10:25.360 I mean, how much of this is really just about 0:10:25.400 --> 0:10:27.880 being included in the Nazak one hundred and therefore the 0:10:27.960 --> 0:10:30.559 qqq etl Oh. 0:10:30.679 --> 0:10:33.400 Yeah, there's certainly part of that scarlet where you know, 0:10:33.480 --> 0:10:36.360 that's that's probably part of the motivation. I think that 0:10:36.440 --> 0:10:39.960 there is. You know, obviously there's a perception with regards 0:10:40.040 --> 0:10:42.960 to being perceived more as a tech company, which Walmart 0:10:43.040 --> 0:10:47.320 in all truthfulness, has evolved into a tech company, especially 0:10:47.360 --> 0:10:51.720 amongst other retailers. By being listed at NASDAK, you know, 0:10:51.840 --> 0:10:54.800 long term, maybe it helps their valuation, you know, just 0:10:54.840 --> 0:10:58.040 in terms of having that perception of being more you know, 0:10:58.120 --> 0:11:01.600 aligned with peers. You know, Amazon listed on Nasdaq, things 0:11:01.640 --> 0:11:03.200 like that. So I think that there's a lot of 0:11:03.200 --> 0:11:07.480 those components together combined, are really behind the move. 0:11:08.000 --> 0:11:11.040 Jen nobody arguably has a better finger on the pulse 0:11:11.040 --> 0:11:13.600 of the consumer than Walmart. What are they saying these days? 0:11:14.120 --> 0:11:18.280 Actually, they seem relatively optimistic. You know, they talk about 0:11:18.320 --> 0:11:20.840 you know, spending, holding study for kind of that middle 0:11:20.880 --> 0:11:24.440 income consumer, high end consumer seemed to be spending pretty freely, 0:11:25.160 --> 0:11:27.000 a little bit of concern about some of the lower 0:11:27.080 --> 0:11:29.200 end consumer, but it does seem to be sort of 0:11:30.000 --> 0:11:32.600 evening out. And so when they were looking forward to 0:11:32.600 --> 0:11:35.200 the holiday season, which is you know, the most important 0:11:35.200 --> 0:11:38.800 thing with regards to the retailers that I cover, they 0:11:38.840 --> 0:11:41.680 seem cautiously optimistic that there will be a pretty good 0:11:41.679 --> 0:11:44.720 holiday season this year. We do think that they're going 0:11:44.800 --> 0:11:47.480 to people will prioritize spending on kids. That's usually what 0:11:47.559 --> 0:11:49.880 happens first if they're holding back in other parts of 0:11:49.920 --> 0:11:53.760 their budget. But all indicators right now seem that we're 0:11:53.880 --> 0:11:56.559 headed towards a reasonably solid holiday season. 0:11:56.840 --> 0:12:00.240 Are thanks to Jennifer Bartash's Bloomberg Intelligence senior analysts covering retail, 0:12:00.280 --> 0:12:02.839 staples and packaged food. Coming up, we'll take a look 0:12:02.840 --> 0:12:06.160 at why the global payments services provider Klarna reported record 0:12:06.160 --> 0:12:08.120 revenue in its first quarter since going public. 0:12:08.200 --> 0:12:11.080 You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 0:12:11.080 --> 0:12:13.240 depth research and data on two thousand companies and one 0:12:13.320 --> 0:12:14.400 hundred and thirty industries. 0:12:14.520 --> 0:12:17.559 You can access Bloomberg Intelligence via Bigo on the terminal. 0:12:17.640 --> 0:12:18.800 I'm Scarlet Foo and. 0:12:18.720 --> 0:12:20.760 I'm Paul Sweeney, and this is Bloomberg. 0:12:24.840 --> 0:12:29.320 This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney 0:12:29.679 --> 0:12:31.000 on Bloomberg Radio. 0:12:31.760 --> 0:12:33.640 We move next to earnings from some of the world's 0:12:33.760 --> 0:12:35.319 largest home improvement retailers. 0:12:35.360 --> 0:12:38.600 This week, Low's reported third quarter profit that topped analyst estimates. 0:12:38.800 --> 0:12:41.000 This was a result of online sales and demand from 0:12:41.000 --> 0:12:42.240 professional contractors. 0:12:42.400 --> 0:12:44.800 Separately, we heard from Home Depot, who cut its full 0:12:44.840 --> 0:12:46.880 of your guidance. This come as a company warned that 0:12:46.960 --> 0:12:49.840 some unsteady consumers are hitting the pause button on big 0:12:49.880 --> 0:12:50.840 ticket home purchases. 0:12:50.920 --> 0:12:53.319 So we spoke with Drew Redding Bloomberg Intelligence US home 0:12:53.320 --> 0:12:54.559 building analyst. 0:12:54.320 --> 0:12:56.559 We first Saske Drew to break down this week's results 0:12:56.559 --> 0:12:58.720 from Low's and how they compare it to Home Depots. 0:12:58.960 --> 0:13:02.080 So, I think Loew's result could be best characterized as 0:13:02.320 --> 0:13:05.880 better than feared, particularly in light of what we heard 0:13:05.920 --> 0:13:08.959 from Home Depot. They did fall short of consensus estimates 0:13:09.000 --> 0:13:11.920 on same store sales, but I think the buy side 0:13:11.960 --> 0:13:14.920 was probably looking for something flat to lower, so a 0:13:14.920 --> 0:13:18.200 little bit better than they were looking for. Now that 0:13:18.280 --> 0:13:21.760 being said, they did trim their four year outlook. Now 0:13:21.760 --> 0:13:23.760 they're looking for four year comp sales to be flat 0:13:23.800 --> 0:13:26.040 from flat to up one percent, So that would imply 0:13:26.160 --> 0:13:29.520 that four Q is relatively flat. But you know, similar 0:13:29.520 --> 0:13:31.400 to what we heard from Home Depot, they had about 0:13:31.400 --> 0:13:35.480 one hundred basis point impact from hurricane activity that was 0:13:35.520 --> 0:13:38.040 not replicated this year. So again, if you were to 0:13:38.080 --> 0:13:40.360 back that out, it looks like the underlying trends in 0:13:40.400 --> 0:13:42.680 the business are pretty stable. 0:13:43.240 --> 0:13:43.400 You know. 0:13:43.480 --> 0:13:46.440 That being said, they're still grappling with the same consumer 0:13:46.559 --> 0:13:49.480 uncertainty and you know, the same weak housing market that 0:13:49.520 --> 0:13:52.520 their competitors, so you know, still challenges out there in 0:13:52.559 --> 0:13:52.960 the market. 0:13:53.520 --> 0:13:56.920 Drew, I think I understand it. Correctly that Lows has 0:13:57.240 --> 0:14:00.280 a lower percentage of sales to professional contractors than does 0:14:00.440 --> 0:14:03.440 Home Depot If so, are they trying to narrow the gap? 0:14:03.440 --> 0:14:05.320 Are they targeting that segment a little more? 0:14:05.559 --> 0:14:08.920 Yeah, great question. So Low's is about thirty percent professional 0:14:08.960 --> 0:14:13.080 contractors seventy percent DIY. Home Depot is about fifty to 0:14:13.080 --> 0:14:16.320 fifty maybe even a little bit higher on the pro front. 0:14:16.360 --> 0:14:19.400 What's interesting, and to your point on investment, is the 0:14:19.440 --> 0:14:23.640 pro space, especially in building products distribution, has really become 0:14:24.360 --> 0:14:28.360 a battleground among home improvement retailers. You had Home Depot 0:14:28.400 --> 0:14:33.000 recently do acquisitions for srs and gms, and then you 0:14:33.080 --> 0:14:37.680 have Lows who recently acquired foundation building materials, So it's 0:14:37.720 --> 0:14:40.880 certainly an area where they're making a concerted effort to grow. Now. 0:14:41.080 --> 0:14:45.200 Lows has historically focused on the small and medium sized 0:14:45.280 --> 0:14:48.400 pro and what this acquisition does is it gives them 0:14:48.480 --> 0:14:52.960 exposure to larger pros who do more complex projects, so 0:14:52.960 --> 0:14:57.160 they're able to be the supplier of choice across more 0:14:57.200 --> 0:15:00.120 building product categories and at a larger scale. 0:15:00.000 --> 0:15:02.720 So basically directly competing with Home DEEPO in many ways. 0:15:03.560 --> 0:15:05.320 Is this going to become a duopoly or are there's 0:15:05.320 --> 0:15:09.400 still a lot of other places that professional contractors can 0:15:09.440 --> 0:15:09.720 go to. 0:15:10.320 --> 0:15:14.240 Yeah, so the building products distribution space is still very 0:15:14.440 --> 0:15:17.920 highly fragmented, you know, I wouldn't be surprised to see 0:15:17.920 --> 0:15:21.760 further consolidation within the industry, you know, across different categories. 0:15:22.320 --> 0:15:25.000 Home Depot and Lows are certainly, you know, two of 0:15:25.040 --> 0:15:27.640 the behemoths in the industry who have, you know, the 0:15:27.680 --> 0:15:31.920 scale and financial flexibility to further consolidate the industry. But 0:15:31.920 --> 0:15:35.280 there's some other players as well, like QXO. So it 0:15:35.360 --> 0:15:38.080 is a mented industry, but I would expect, you know, 0:15:38.080 --> 0:15:41.240 in the coming years, it's something that continues to get consolidated. 0:15:41.600 --> 0:15:43.320 I can't keep track of where all the tariffs are 0:15:43.360 --> 0:15:45.200 these days on all the different products, but I'm just 0:15:45.240 --> 0:15:48.160 guessing if I'm a Low's or Home Depot, my plywood 0:15:48.320 --> 0:15:51.840 from Canada that's probably being tariff A power tool from 0:15:51.880 --> 0:15:54.480 somewhere in Asia that's probably subject to tariff's. How are 0:15:54.520 --> 0:15:57.360 these companies dealing with it? What have they been telling 0:15:57.360 --> 0:15:57.720 you guys? 0:15:58.160 --> 0:16:01.880 So, Lows gets about sixty percent of its products from 0:16:01.920 --> 0:16:05.400 the US, so their exposure internationally is maybe not as 0:16:05.440 --> 0:16:07.760 high as you would expect. China's probably around fifteen to 0:16:07.800 --> 0:16:10.480 twenty percent. You know, there hasn't been a whole lot 0:16:10.480 --> 0:16:13.160 of talk. I think we have seen their average ticket 0:16:13.200 --> 0:16:15.560 increase this quarter was up about three percent, and part 0:16:15.560 --> 0:16:19.440 of that is in response to tariff related price increases. 0:16:19.600 --> 0:16:22.000 Loose told us that they were only modest increases, and 0:16:22.240 --> 0:16:24.400 you know, they'll take a portfolio approach to how they 0:16:24.480 --> 0:16:27.360 increase prices. They'll look at their product line up and 0:16:27.400 --> 0:16:30.040 see where they have more elasticity. But I think the 0:16:30.080 --> 0:16:32.640 impact of costs will start to come in a little 0:16:32.680 --> 0:16:35.840 greater as we look into Q four in early twenty 0:16:35.880 --> 0:16:37.360 twenty six. And you know some of the areas that 0:16:37.400 --> 0:16:41.360 we're looking at. You mentioned plywood so lumber tariffs from Canada. 0:16:41.800 --> 0:16:45.520 We also had the implementation of tariffs on cabinetry both 0:16:45.520 --> 0:16:47.280 the kitchen and bath, which to go up to fifty 0:16:47.320 --> 0:16:50.280 percent in January. So I do think that the impact 0:16:50.320 --> 0:16:52.080 gets a little greater as we look at the next year. 0:16:52.080 --> 0:16:55.960 So I would expect further price increases from both retailers. 0:16:56.320 --> 0:16:59.720 Are Thanks to Drew Reading Bloomberg Intelligence, US home building analyst. 0:16:59.440 --> 0:17:02.280 We've moved to third quarter earnings from the global payment 0:17:02.320 --> 0:17:04.280 services provider Klina this week. 0:17:04.240 --> 0:17:07.720 Kliner reported record revenue that beat analysts estimates on Wall Street. 0:17:07.760 --> 0:17:10.560 The firm also set aside more provisions for credit losses 0:17:10.680 --> 0:17:12.760 in its first set of earnings since going public. 0:17:12.960 --> 0:17:15.520 For more, I was joined by Anthony Hughes, Bloomberg Equity 0:17:15.520 --> 0:17:18.080 Capital Markets reporter. I first asked Anthony to talk to 0:17:18.160 --> 0:17:20.320 us about Cliner's most recent results. 0:17:20.560 --> 0:17:22.400 Yeah, Well, klan is a company that's actually been around 0:17:22.440 --> 0:17:26.360 for about two decades. It's just that since about twenty 0:17:26.440 --> 0:17:28.640 and nineteen they've really expanded quickly in. 0:17:28.560 --> 0:17:29.880 The US and by now. 0:17:29.920 --> 0:17:32.879 Pay Later is a lending slash payments product which basically 0:17:32.920 --> 0:17:38.760 allows people to buy products and obviously pay for them 0:17:38.760 --> 0:17:41.960 over time. And this is an alternative to the credit 0:17:41.960 --> 0:17:45.440 card in a credit card option. So really a lot 0:17:45.480 --> 0:17:48.200 of Klana's growth really reflects the fact that this product's 0:17:48.200 --> 0:17:50.240 becoming more popular relative to credit cards and for a 0:17:50.240 --> 0:17:52.080 lot of consumers, it's a good way to manage your 0:17:52.080 --> 0:17:55.080 cash flow and you know, obviously buy a product and 0:17:55.160 --> 0:17:56.879 not have to pay for over time, and that suits 0:17:56.880 --> 0:17:58.399 a lot of people, and it is a fast growing 0:17:58.880 --> 0:18:02.199 part of the fintech or say consumer lending space. 0:18:02.800 --> 0:18:06.760 And as a consumer, how does Clorina make money on 0:18:07.080 --> 0:18:10.520 my one hundred dollars purchase that they put on their system. Yeah, 0:18:10.560 --> 0:18:12.640 well they trudge me interest. 0:18:12.680 --> 0:18:15.280 No, well, this number of different products that some of 0:18:15.359 --> 0:18:17.840 the longer term lending products do have interests associated with them. 0:18:17.840 --> 0:18:21.199 But that paying for product they talk about, which is 0:18:21.200 --> 0:18:23.800 paying in four installments over a few months, that is 0:18:24.000 --> 0:18:26.800 an interest free product. And really the source of revenue 0:18:26.800 --> 0:18:29.159 in this in that instance is from the merchant, and 0:18:29.800 --> 0:18:32.560 merchants pay merchant service fee. It's high for them, it's 0:18:32.920 --> 0:18:35.560 higher than they pay on a credit card transaction. But 0:18:35.640 --> 0:18:39.440 basically they see the benefit of Klana bringing in extra 0:18:39.480 --> 0:18:42.040 customers so they can sell more product. And you know, 0:18:42.320 --> 0:18:44.600 people will ask themselves, well, who actually pays the merchant 0:18:44.600 --> 0:18:47.200 service fee? While the merchant does pay that to Klana, 0:18:47.280 --> 0:18:50.119 but the merchant does incorporate that as a cost of 0:18:50.160 --> 0:18:52.320 doing business into the products that these sells to you 0:18:52.400 --> 0:18:55.480 and I. So we in the sense we all pay 0:18:55.560 --> 0:18:59.639 for the fees that are hidden within the payment system 0:19:00.080 --> 0:19:03.399 and really merchants passed on to the consumer depending on 0:19:03.440 --> 0:19:05.600 how you pay the interesting you pay for. 0:19:05.560 --> 0:19:09.679 Your who's a typical Klarner consumer out there? Like what 0:19:09.680 --> 0:19:12.359 what's and what's kind of a typical transaction for a 0:19:12.400 --> 0:19:12.800 buy nine. 0:19:12.840 --> 0:19:15.560 Yeah, well, these are mainly small transactions of you know, 0:19:15.600 --> 0:19:17.880 can be a few hundred dollars or you know, not 0:19:17.880 --> 0:19:21.240 not not large transactions. And and you know, this obviously 0:19:21.800 --> 0:19:24.240 suits a younger audience, and that's where a lot of 0:19:24.280 --> 0:19:26.600 the you know, a lot of their customer bases come from. 0:19:26.680 --> 0:19:29.840 But they've built a large business which globally has something 0:19:30.000 --> 0:19:33.199 like one hundred and ten billion of what they call 0:19:33.240 --> 0:19:36.720 gross merchandise volume, and that's you know, it's a fast 0:19:36.720 --> 0:19:39.040 growing business in the US. It's been growing pretty fast 0:19:39.440 --> 0:19:43.120