WEBVTT - Starbucks Ousts CEO, Home Depot Earnings 0:00:02.920 --> 0:00:08.680 Bloomberg Audio Studios, podcasts, radio news. 0:00:09.960 --> 0:00:13.840 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:00:13.920 --> 0:00:17.000 weekdays at ten am Eastern on Apple CarPlay and Android 0:00:17.000 --> 0:00:20.120 Auto with the Bloomberg Business app. Listen on demand wherever 0:00:20.160 --> 0:00:24.400 you get your podcasts, or watch us live on YouTube. 0:00:25.079 --> 0:00:28.160 Let's get more on Starbucks here. Jody Louri is Bloomberg 0:00:28.200 --> 0:00:32.000 Intelligence credit analyst, and she joined us now on that. Hey, Jody, 0:00:32.520 --> 0:00:34.319 just talk us through your reaction to this. 0:00:36.120 --> 0:00:38.760 I think as the credit analysts were always sort of 0:00:39.240 --> 0:00:42.760 hesitant when there's these full scale changes that happen overnight, 0:00:42.880 --> 0:00:45.159 and when you've had a CEO that's only been there 0:00:45.159 --> 0:00:49.320 since March of last year. So we have just only 0:00:49.440 --> 0:00:52.080 gotten comfortable with the concept. They're giving back twenty billion 0:00:52.120 --> 0:00:55.480 dollars and now you have two activists investors very heavily involved, 0:00:55.480 --> 0:00:58.000 one getting a board seat and pushing out the CEO 0:00:58.080 --> 0:01:00.360 with a new CEO. That could be a pot positive 0:01:00.400 --> 0:01:03.520 for the company long term in terms of performance. But 0:01:03.640 --> 0:01:06.319 I do also think that shareholders might make it better 0:01:06.400 --> 0:01:07.680 than bondholders at this point. 0:01:08.600 --> 0:01:10.400 Why do you say that you think they're just going 0:01:10.480 --> 0:01:12.479 to maybe start returning cash shareholders. 0:01:13.240 --> 0:01:15.319 I think they'll get a little bit more aggressive with that, Paul, 0:01:15.360 --> 0:01:18.120 I mean, I think, you know, it could end up 0:01:18.120 --> 0:01:19.679 being the type of thing that they look at the 0:01:19.680 --> 0:01:21.720 company and that you sort of think about ways to 0:01:22.000 --> 0:01:24.080 sort of boost the value, whether it be spin off 0:01:24.120 --> 0:01:26.319 some entity or what have you. I'm not sure what 0:01:26.480 --> 0:01:28.760 entity they could spin off at a Starbucks because so 0:01:28.880 --> 0:01:31.560 much of the non core business has already been peeled away. 0:01:32.080 --> 0:01:35.080 That said, I mean, I think that when when you're 0:01:35.120 --> 0:01:37.959 dealing with activists, you're always sort of hesitant because you say, Okay, 0:01:38.319 --> 0:01:40.160 how much are they going to risk the balance sheet? 0:01:40.240 --> 0:01:42.440 How much are they going to lever to get the 0:01:42.520 --> 0:01:45.800 company into a different spot. Now, that might be a 0:01:45.840 --> 0:01:49.760 short term pain for long term gain, but for bond holders, 0:01:49.800 --> 0:01:51.440 when you think about that short term pain, that's not 0:01:51.440 --> 0:01:53.520 always necessarily the best thing. You know, we have a 0:01:53.560 --> 0:01:57.000 long history of Yam for for example, you know, which 0:01:57.080 --> 0:01:59.880 which the new CEO is part of. When they sp 0:02:00.160 --> 0:02:02.840 off their entity Young China, you know, they ended up 0:02:02.880 --> 0:02:05.240 giving back so much of their money to shareholders. 0:02:05.000 --> 0:02:07.560 Which then to the point breaks a question like how 0:02:07.640 --> 0:02:10.520 is Starbucks actually doing from a bond holder perspective. 0:02:11.560 --> 0:02:14.400 From a bond holder perspective, you know, over the past year, 0:02:14.440 --> 0:02:17.280 they've been a little bit more volatile. We were looking 0:02:17.320 --> 0:02:19.160 at some of the recent bonds, you know, the twenty 0:02:19.200 --> 0:02:21.840 twenty nine for example, which are five year bonds, have 0:02:21.960 --> 0:02:24.560 actually tightened modestly on the news. 0:02:24.560 --> 0:02:25.600 But I think it's hard to tell. 0:02:25.639 --> 0:02:27.840 I mean, I think it's more of a question of 0:02:27.919 --> 0:02:32.119 what this means longer term from a performance standpoint. It's 0:02:32.160 --> 0:02:34.280 going to take a little while for bondholders to sort 0:02:34.280 --> 0:02:38.320 of digest this news. You know, something that that's very 0:02:38.320 --> 0:02:41.160 clear that we've been tracking is the ALDI the Bloomberg 0:02:41.200 --> 0:02:42.080 Second Measure data. 0:02:42.240 --> 0:02:43.800 Yeah, okay, so wait, first of all, what is this? 0:02:43.840 --> 0:02:45.720 Because I got to be honest, for I've never heard 0:02:45.760 --> 0:02:47.560 of this before, and you mentioned it and you were 0:02:47.560 --> 0:02:49.040 going to talk about it, and now I'm a little 0:02:49.040 --> 0:02:50.640 obsessed with it. 0:02:50.639 --> 0:02:54.320 It is pretty amazing, Alex, particularly when it comes to Starbucks, 0:02:54.440 --> 0:02:56.799 because the R squared or the you know, the sort 0:02:56.840 --> 0:02:59.800 of predictive value of it is pretty great when it 0:02:59.800 --> 0:03:01.280 comes to Starbucks in particular. 0:03:01.720 --> 0:03:02.359 So what it is. 0:03:02.400 --> 0:03:05.560 It's credit card and deborcart swipes only in the United States, 0:03:06.080 --> 0:03:08.400 and Bloomberg aggregates the data. You can see it. You 0:03:08.400 --> 0:03:09.919 can see it both on a year over year basis. 0:03:09.960 --> 0:03:11.919 You can see it on an actual value basis if 0:03:11.919 --> 0:03:14.280 you look at the year over year where it's trending, 0:03:14.360 --> 0:03:16.680 it's actually very much down when it comes to sales 0:03:16.680 --> 0:03:19.840 and transactions, which is not surprising because they've had a 0:03:19.840 --> 0:03:23.280 couple of sort of disappointing points, one of them being geopolitics, 0:03:23.320 --> 0:03:26.560 so the astro turf effort related to the Middle East. 0:03:27.720 --> 0:03:27.920 You know. 0:03:27.960 --> 0:03:30.880 The other portion is obviously China and the fact that 0:03:30.960 --> 0:03:33.680 they really went all in on China and it's been 0:03:33.720 --> 0:03:35.800 a little bit of a disappointment. And then you've also 0:03:35.880 --> 0:03:38.600 just had consumers pulling back in terms of their spending 0:03:38.680 --> 0:03:41.400 on things like Starbucks, McDonald's, what have you, and so 0:03:41.560 --> 0:03:44.119 companies have been trying to just get people in the door. 0:03:44.400 --> 0:03:47.160 Now if you look at it for you know, transaction value, 0:03:47.280 --> 0:03:49.000 or if you look at you know, the PLACER data, 0:03:49.000 --> 0:03:51.280 which we also have embedded on the terminal, even the 0:03:51.280 --> 0:03:54.040 PLACER data is down, so that's estimated visits. So people 0:03:54.080 --> 0:03:57.240 physically going into stores has been down recently. And so 0:03:57.600 --> 0:04:00.080 how does the new CEO get these people back? How 0:04:00.080 --> 0:04:02.320 does he get them comfortable with the Starbucks that we 0:04:02.440 --> 0:04:04.120 used to know and love I'm not sure. 0:04:05.040 --> 0:04:08.240 So what has been talk to us about China, because 0:04:08.280 --> 0:04:10.560 I know you've flagged that before. It talks about China 0:04:10.680 --> 0:04:13.440 and what it means for Starbucks. 0:04:14.720 --> 0:04:16.520 I think China means a lot of things for a 0:04:16.520 --> 0:04:18.400 lot of the companies in our space. I think it's 0:04:18.440 --> 0:04:22.880 been a very common word, more so than normal when 0:04:22.920 --> 0:04:26.919 it comes to across the consumer and leisure space. You know, 0:04:27.000 --> 0:04:30.000 So if you listen to earning calls this quarter, if 0:04:30.160 --> 0:04:33.640 anyone from Hilton to Hyatt to you know, even the 0:04:33.680 --> 0:04:36.640 cruise lines have been mentioning China either as an avenue 0:04:36.640 --> 0:04:39.520 for growth or as a disappointment for an avenue for growth. 0:04:39.560 --> 0:04:41.960 I mean, we haven't seen the value of China. We've 0:04:41.960 --> 0:04:45.400 seen sort of the sluggish, slow growth of late and 0:04:45.480 --> 0:04:48.360 for someone like Starbucks that last year they mapped out 0:04:48.400 --> 0:04:49.960 their plan and they said, we're going to be building 0:04:50.000 --> 0:04:52.680 out more stores in China and that's our international growth plan, 0:04:52.920 --> 0:04:54.720 and that's how we're getting the company back on track. 0:04:55.279 --> 0:04:57.480 All of a sudden, you don't you don't necessarily have that, 0:04:57.920 --> 0:05:00.200 I mean, I mean that's kind of a big problem. 0:05:00.640 --> 0:05:03.440 Yeah, And when they talk about like strategic options for 0:05:03.440 --> 0:05:06.800 that are partnerships, what does that wind up looking like 0:05:06.839 --> 0:05:08.480 they're not going to spin it off, right, So it's 0:05:08.480 --> 0:05:11.560 not gonna be a Yum and Young brand's China kind 0:05:11.560 --> 0:05:13.520 of situation. So how do you digest that? 0:05:14.480 --> 0:05:16.640 I mean, it could be a Yum and China situation. 0:05:16.680 --> 0:05:18.920 Who knows what's on the table at this point. I mean, 0:05:18.960 --> 0:05:21.240 we we could, you know, we could fathom any sort 0:05:21.240 --> 0:05:24.159 of measures. I mean, most of Starbucks stores are owned, 0:05:24.200 --> 0:05:26.000 but then when it comes to international it's a little 0:05:26.040 --> 0:05:28.120 less so. And even places like you know, I mentioned 0:05:28.160 --> 0:05:29.600 the cruise lines. You know, we were on a Royal 0:05:29.680 --> 0:05:31.800 Caribbean ship a couple months ago and they had a 0:05:31.880 --> 0:05:32.799 light in our base. 0:05:33.440 --> 0:05:35.200 It's like, remember that time I was on that cruise 0:05:35.200 --> 0:05:36.960 and it was really awesome. Sorry continue. 0:05:38.160 --> 0:05:41.440 They did actually have a collector mug for kind of 0:05:41.440 --> 0:05:45.240 the Seas that I did buy, which was a Starbucks mug, 0:05:45.600 --> 0:05:47.240 but it was Starbucks with a bunch of icon of 0:05:47.279 --> 0:05:48.640 the Sea stuff. I had to get it. 0:05:48.880 --> 0:05:50.240 I mean, it was two companies I cover. 0:05:50.320 --> 0:05:51.480 I was like, I can't one shot. 0:05:51.920 --> 0:05:54.880 Well on the flip side of this this transaction, Chipotle, 0:05:56.400 --> 0:05:59.200 what's the outlook there, what's the feeling there in the street. 0:06:00.360 --> 0:06:02.640 So Chippote is an interesting one because they don't really 0:06:02.680 --> 0:06:05.000 have that much debt outstanding, so it's one that you know, 0:06:05.120 --> 0:06:07.760 Mike Hallen really deeply covers. We a little less, so 0:06:07.880 --> 0:06:10.920 we cover it from the standpoint that obviously it's a 0:06:11.080 --> 0:06:13.599 very important player in the space. It's that fast, casual 0:06:14.000 --> 0:06:16.840 we love talking about youm and obviously Chipotte sort of 0:06:16.880 --> 0:06:18.840 lines in perfectly with Yum, and it's sort of that 0:06:19.040 --> 0:06:22.320 intersection between Yum and Darden, which we like talking about. 0:06:22.720 --> 0:06:25.680 And so I mean, I think, you know, Chippote obviously 0:06:25.760 --> 0:06:28.720 had a lot of negative headlines. We're talking five years ago, 0:06:29.320 --> 0:06:31.680 you know, in terms of safety for their food, which 0:06:31.680 --> 0:06:34.480 is obviously never, never a good thing. Since then, they've 0:06:34.520 --> 0:06:37.120 turned around the company quite substantially. Now, I don't know 0:06:37.200 --> 0:06:40.279 what this means when you have a Darling CEO jump 0:06:40.320 --> 0:06:42.600 ship and go to another company. I'm not quite sure 0:06:42.640 --> 0:06:45.240 what we'd expect there as of now. From a bomb 0:06:45.279 --> 0:06:49.760 holder's perspective, we don't really care at the moment, but 0:06:49.920 --> 0:06:53.160 I do sort of wonder what shareholders are thinking right now. 0:06:53.320 --> 0:06:54.000 All right, Very good. 0:06:54.240 --> 0:06:57.080 Jody Lourie, Senior Credit a also Bloomberg Intelligence, join us 0:06:57.600 --> 0:06:59.840 from the Princeton office via zoom. 0:07:00.080 --> 0:07:01.600 Here Chipotle for you. 0:07:02.680 --> 0:07:06.440 No, no, no, really all right, but it's the same, 0:07:06.560 --> 0:07:09.400 like okay, no matter what you get, doesn't all taste 0:07:09.400 --> 0:07:10.720 the same. And isn't that weird? 0:07:11.680 --> 0:07:14.720 No, and no, it's very good. John help me out here. 0:07:14.760 --> 0:07:17.640 You're Chipotle person? Uh yeah, I mean I like it. 0:07:17.680 --> 0:07:18.320 I don't go there. 0:07:18.360 --> 0:07:19.360 There's no one near me. 0:07:19.440 --> 0:07:22.200 It's not even Lisa Mateo said she liked it, you know, 0:07:22.520 --> 0:07:23.040 she loved it. 0:07:23.200 --> 0:07:25.560 Yeah, and that's hard because usually if you know, it's 0:07:25.640 --> 0:07:28.560 not like super granola healthy thing. 0:07:28.760 --> 0:07:30.400 You know, I don't think I've literally had one in 0:07:30.400 --> 0:07:30.880 twelve years. 0:07:30.920 --> 0:07:31.880 But my problem is. 0:07:31.920 --> 0:07:34.520 There's just too many people involved in the front, too 0:07:34.560 --> 0:07:36.240 many people faced teenagers. 0:07:36.760 --> 0:07:39.960 Wow, you know, loading up my because it's think that 0:07:40.040 --> 0:07:43.760 I make you look like a Come on now, I 0:07:43.840 --> 0:07:48.080 mean I do it myself. Oh what is your chipottle 0:07:48.200 --> 0:07:48.640 of choice? 0:07:48.920 --> 0:07:49.040 Uh? 0:07:49.880 --> 0:07:53.600 Two hard tacos, two hard tacos, chicken okay, yeah, peppers 0:07:53.600 --> 0:07:56.960 and onions, pinco degayo and some cheese and we're. 0:07:56.840 --> 0:07:57.160 Good to go. 0:07:57.520 --> 0:08:01.280 No guakalk, no guac, No okay, no chips. 0:08:01.880 --> 0:08:03.200 No, I don't need chips. 0:08:03.240 --> 0:08:04.760 Oh so you're just and you know what, now they 0:08:04.840 --> 0:08:07.440 feel them so full because the social media was saying 0:08:07.480 --> 0:08:09.680 how they were underfilling them. Now they feel them so 0:08:09.880 --> 0:08:11.800 full that I only get two tacos. 0:08:11.480 --> 0:08:14.200 Versus three before, and you pay by the taco. 0:08:14.120 --> 0:08:17.880 Paid by the taco. So I'm a huge winner here. 0:08:18.200 --> 0:08:20.920 Based upon the social media pressure, They've had a big 0:08:21.000 --> 0:08:23.480 move in the in the restaurant business. Oh yeah, business. 0:08:25.000 --> 0:08:28.840 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:08:28.960 --> 0:08:31.480 weekdays at ten am Eastern on Apple car. 0:08:31.520 --> 0:08:34.240 Play and Android Auto with the Bloomberg Business app. 0:08:34.400 --> 0:08:37.200 You can also listen live on Amazon Alexa from our 0:08:37.280 --> 0:08:41.600 flagship New York station Just say Alexa, playing Bloomberg eleven thirty. 0:08:43.200 --> 0:08:45.800 This is Bloomberg Intelligence Radio. We're broadcasting to you live 0:08:45.840 --> 0:08:49.680 from Interactive Broker Studio right here in midtown Manhattan. Let's 0:08:49.679 --> 0:08:50.959 go back to some of the earnings here and go 0:08:51.040 --> 0:08:54.000 to Home Depot specifically, I'm taking a look at that stock. 0:08:54.120 --> 0:08:56.840 It is up by about three tenths of one percent. 0:08:57.280 --> 0:09:00.440 So they did cut their outlook saying that consume are 0:09:00.440 --> 0:09:03.640 in their quote deferral mindset. I mean to me, I 0:09:03.720 --> 0:09:06.040 begs the question, though, once things get better, don't you? 0:09:06.240 --> 0:09:08.000 Is it just delayed purchasing or am I never going 0:09:08.040 --> 0:09:10.959 to redo my floor? I know, I agree. Okay, so 0:09:11.040 --> 0:09:13.480 let's get some more details here with Red Brown, Bloomberg 0:09:13.559 --> 0:09:16.679 News earnings reporter. He joins us on home depot. All right, Red, 0:09:16.720 --> 0:09:18.000 walk us through some of the numbers here. 0:09:18.480 --> 0:09:21.120 Yeah, I mean, so I think overall, kind of the 0:09:21.160 --> 0:09:23.320 message that I'm sort of taking away from the results 0:09:23.360 --> 0:09:25.240 is this seems like they might have kind of found bottom. 0:09:25.320 --> 0:09:26.480 If we look the last. 0:09:26.679 --> 0:09:30.440 Six quarters, they've seen earnings top and bottom line shrinking 0:09:30.559 --> 0:09:34.960 and then for the first time in since twenty twenty three, Yeah, 0:09:35.040 --> 0:09:37.520 things are flattening out a little bit. So, yes, they 0:09:37.600 --> 0:09:40.960 caught the cut the top line outlook, maybe a bit 0:09:41.000 --> 0:09:43.679 of a reset there. But I think there's a lot 0:09:43.840 --> 0:09:45.760 to be optimistic about these results. 0:09:45.920 --> 0:09:47.679 Well, I think I guess one of the questions that 0:09:47.800 --> 0:09:50.120 I had, just being a grizzled veteran having listened to 0:09:50.160 --> 0:09:54.000 a million conference calls, is you know, suggesting that maybe 0:09:54.040 --> 0:09:55.800 this is a little bit temporary, that maybe these are 0:09:55.920 --> 0:09:56.960 purchases that are being. 0:09:56.920 --> 0:10:02.559 Deferred in anticipation of lower rates. How does that kind 0:10:02.600 --> 0:10:03.120 of stand with you? 0:10:03.480 --> 0:10:05.400 I mean, I think it does. I think, I mean, 0:10:05.480 --> 0:10:06.880 I believe it a little bit more than that. It 0:10:06.920 --> 0:10:09.000 sounds like YouTube might just because the one thing that 0:10:09.040 --> 0:10:12.480 analysts are putting to a lot is contractors backlogs. So 0:10:12.640 --> 0:10:16.320 those are you know, contracted projects that they are expected 0:10:16.360 --> 0:10:20.199 to eventually fulfill. It's just a matter of when the 0:10:20.520 --> 0:10:22.959 customers are ready to actually you know, follow through with 0:10:23.000 --> 0:10:24.920 that and say yep, let's do it. You know, those 0:10:24.960 --> 0:10:27.439 are long term projects to take several months, so it's 0:10:27.480 --> 0:10:29.640 not something that people are kind of likely to back 0:10:29.720 --> 0:10:32.640 out of their big something you probably need to get 0:10:32.640 --> 0:10:34.360 financing for as well. So it's it's you know, it's 0:10:34.360 --> 0:10:38.360 a significant commitment for the consumer. And yeah, I mean 0:10:38.679 --> 0:10:41.079 this deferral mindset I think is an interesting way to 0:10:41.440 --> 0:10:43.560 spin the situation for for Home Deeper right now. 0:10:43.600 --> 0:10:47.319 Yeah, that's interesting. So you have contractor backlog because customers 0:10:47.400 --> 0:10:49.000 want to get their project in the queue, but they're 0:10:49.040 --> 0:10:50.959 not putting down the money for it yet. So it's 0:10:50.960 --> 0:10:53.280 always like, hmmmm, is that gonna wind If the economy 0:10:53.360 --> 0:10:57.120 really turns, what winds up happening? So I guess if 0:10:57.160 --> 0:10:59.160 we just say okay, we're at the trough, I wonder 0:10:59.200 --> 0:11:01.559 if we have any visible ability yet into what the recovery, 0:11:01.640 --> 0:11:03.080 then looks like for a home depot. 0:11:03.320 --> 0:11:05.720 Yeah, so I think, you know, if we look into 0:11:05.960 --> 0:11:09.679 what they said the commentary around the guidance cut. So 0:11:09.840 --> 0:11:11.480 right now they said, if it's going to be the 0:11:12.040 --> 0:11:15.440 same store sales, the top end is down three percent 0:11:15.520 --> 0:11:18.880 this year. They're saying that that will happen if things 0:11:18.920 --> 0:11:21.679 stay stable from the first half of the year. And 0:11:21.840 --> 0:11:24.440 right now they say all signs point to consumer demand 0:11:24.840 --> 0:11:27.000 like staying at that same level, and they're not guiding 0:11:27.040 --> 0:11:28.959 towards the bottom end of that range right now. So 0:11:29.440 --> 0:11:31.560 right now, that seems to be where the company is at, 0:11:31.840 --> 0:11:34.679 and I think we can see, you know, and the 0:11:34.960 --> 0:11:38.040 market seems to we kind of be digesting that with 0:11:38.559 --> 0:11:39.880 some positive. 0:11:39.520 --> 0:11:40.319 Outlook here as well. 0:11:40.800 --> 0:11:42.640 You know, I'm just looking at the chart here and 0:11:42.800 --> 0:11:44.760 just thinking back to the pandemic. That stock, you know, 0:11:45.040 --> 0:11:47.199 was up about one hundred and seventy percent from you know, 0:11:47.240 --> 0:11:48.880 the beginning of the pandemic through the end of twenty 0:11:48.920 --> 0:11:49.320 twenty one. 0:11:49.360 --> 0:11:51.480 It's come off since then. So that was just such 0:11:51.520 --> 0:11:53.600 a moonshot for the company. 0:11:54.240 --> 0:11:57.200 What does the company say about the consumer their business 0:11:57.320 --> 0:12:00.280 kind of now versus pre pandemic, they. 0:12:00.200 --> 0:12:02.080 Ever put it in that kind of context. 0:12:01.800 --> 0:12:04.600 Well, the reason for that ride up, if you remember, 0:12:04.800 --> 0:12:09.679 was because of so much DIY activity. Everyone was stuck home. 0:12:09.760 --> 0:12:11.560 I mean, I'm tired of looking at this shelf, Let 0:12:11.640 --> 0:12:14.040 me fix it, or I hate this paint color, whatever 0:12:14.080 --> 0:12:16.160 it was. Now there's a little bit less of that, 0:12:16.400 --> 0:12:18.199 just because we're spending less time at home. You know, 0:12:18.320 --> 0:12:20.760 we have less time on our hands and if we 0:12:21.240 --> 0:12:24.200 and Home Depot is kind of accepted that that they're 0:12:24.240 --> 0:12:26.280 not going to see those levels as much anymore. And 0:12:26.400 --> 0:12:29.160 what they are focusing and similar thing happening at Low's 0:12:29.160 --> 0:12:32.400 as well, is focusing on that contractor business. It's a 0:12:32.480 --> 0:12:36.160 higher margin business. It's a little bit more consistent. And 0:12:36.280 --> 0:12:39.280 we saw what their their latest acquisition, eighteen billion dollar 0:12:39.320 --> 0:12:42.599 acquisition for SRS Distribution, And that is part of this 0:12:42.720 --> 0:12:45.880 pivot towards can we capture more of the market share 0:12:46.040 --> 0:12:48.360 for those contractors. 0:12:48.760 --> 0:12:51.440 Oh yeah, love me some contractors working with some right 0:12:51.480 --> 0:12:54.520 now in the Berkshires. The allowance for my kitchen Island 0:12:54.640 --> 0:12:54.920 was huge. 0:12:55.240 --> 0:12:57.679 Are there good contractors up like in that part of 0:12:57.679 --> 0:12:57.960 the world. 0:12:58.120 --> 0:12:59.319 Yeah, yeah, really good. Yeah. 0:12:59.880 --> 0:13:00.719 We went to one. 0:13:00.840 --> 0:13:03.920 We didn't do like comparison shopping because this company had, 0:13:04.000 --> 0:13:05.720 like we done our roof had did our did our 0:13:05.840 --> 0:13:07.600 kitchens like we'd already worked with them for the last 0:13:07.640 --> 0:13:10.079 you know, ten fifteen years. Red when you take a 0:13:10.120 --> 0:13:12.360 look at earnings in general, so you're your earnings reporter, 0:13:12.600 --> 0:13:15.199 like this is this is your jam. What are some 0:13:15.280 --> 0:13:17.559 of the takeaways that we can learn from earnings in general? 0:13:17.640 --> 0:13:17.920 Right now? 0:13:18.200 --> 0:13:22.240 I think with home Depot and we'll see with Walmart 0:13:22.360 --> 0:13:24.640 later this week. It's just a kind of repetition of 0:13:24.880 --> 0:13:28.760 this same pattern in retail, which is consumers are trading down. 0:13:28.760 --> 0:13:30.320 You know, last year there was so much where when 0:13:30.400 --> 0:13:32.199 is it happening? When is it happening? And it's kind 0:13:32.200 --> 0:13:35.360 of been slowly trickling in quarter over quarter more people 0:13:35.440 --> 0:13:37.599 are trading down. Or what that looks like on the 0:13:37.640 --> 0:13:40.839 ground is I'm delaying some of those bigger purchases, those 0:13:40.880 --> 0:13:44.000 bigger high margin for the company's purchases. I'm focusing on 0:13:44.080 --> 0:13:46.839 what I need. And I think Walmart will be the 0:13:47.160 --> 0:13:50.439 kind of exemplar example of that of people. You know, 0:13:50.520 --> 0:13:52.800 I'm just looking at you know what I need. I 0:13:52.840 --> 0:13:55.079 need food, I need groceries, I need toiletries, things like that, 0:13:55.200 --> 0:13:57.760 and then maybe I'll delay until I get a little 0:13:57.760 --> 0:13:59.800 bit more clarity on when I'm going to buy that TV. 0:14:00.080 --> 0:14:00.720 For a Home Depot. 0:14:01.000 --> 0:14:03.360 I just think of walking into Home Depot and boyd, 0:14:03.440 --> 0:14:06.160 there's a lot of stuff. They're huge, huge stores and 0:14:06.200 --> 0:14:08.720 there's a lot of stuff there. Talk to us about inventory. 0:14:08.800 --> 0:14:10.559 Inventory management, I know for some of these big box 0:14:10.640 --> 0:14:11.520 retailers is huge. 0:14:11.960 --> 0:14:13.080 What are they saying these days? 0:14:13.280 --> 0:14:15.720 So one thing to look for the inventory is actually 0:14:15.720 --> 0:14:17.800 the transportation costs have been coming down, so I think 0:14:18.000 --> 0:14:21.720 the overall that just speaks to an easy supply chain 0:14:21.880 --> 0:14:24.400 for Home Depot, so they are able to manage a 0:14:24.440 --> 0:14:27.000 little bit better. In general, they're managing their costs quite well. 0:14:27.440 --> 0:14:29.880 That's part of the reason that they were able to 0:14:30.240 --> 0:14:33.640 kind of flatten out the earnings trough there. And yeah, 0:14:33.680 --> 0:14:37.760 I think overall the inventory has been shifting well, and 0:14:37.840 --> 0:14:39.560 they are you know, they have so much stuff, they're 0:14:39.560 --> 0:14:41.080 able to manage it well and they're able to get 0:14:41.120 --> 0:14:42.880 the products that people want in the stores. 0:14:43.160 --> 0:14:45.600 All right, Red, thanks a lot, super appreciate it. Red Brown, 0:14:45.640 --> 0:14:48.840 Bloomberg News Earnings reporter, joining us on Home Depot. 0:14:50.280 --> 0:14:54.120 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:14:54.240 --> 0:14:57.600 weekdays at ten am Eastern on affocarplaying En broud Otto 0:14:57.680 --> 0:15:00.560 with the Bloomberg Business App. Listen on demand wherever you 0:15:00.680 --> 0:15:03.640 get your podcasts, or watch us live on YouTube. 0:15:05.440 --> 0:15:08.600 This is Bloomberg Intelligence Radio and Alex Stee alongside Paul Sweeney. 0:15:09.200 --> 0:15:11.280 We cover everything that you need to know in business 0:15:11.320 --> 0:15:13.200 and finance and economics, and we do it through our 0:15:13.280 --> 0:15:15.600 lens of our Bloomberg Intelligence folks. They cover two thousand 0:15:15.680 --> 0:15:18.720 companies and one hundred and thirty industries all around the world. 0:15:18.800 --> 0:15:21.080 We also like to go outside Bloomberg Intelligence to get 0:15:21.120 --> 0:15:23.640 a broader take on what some money managers are doing 0:15:23.760 --> 0:15:25.520 in this market, and for that we go to Anna 0:15:25.640 --> 0:15:30.320 Rathburn see io at Sibiz Investment Advisory Services. I'm looking 0:15:30.360 --> 0:15:33.080 at a market, Anna, that is definitely responding to this 0:15:33.200 --> 0:15:35.960 PPI data as in another green light for the Fed 0:15:36.040 --> 0:15:38.560 to cut in September. Is that how you're taking this? 0:15:40.000 --> 0:15:42.360 Yeah, that's the initial reaction from the markets today. 0:15:42.360 --> 0:15:45.440 I mean it is a prelude to tomorrow's CPI which 0:15:45.480 --> 0:15:47.480 is even more closely watched. But it was a really 0:15:47.560 --> 0:15:51.880 good prelude. We had services and that was really good news. 0:15:52.040 --> 0:15:57.080 Contribute to this disinflationary trend here and you know, the 0:15:57.200 --> 0:15:59.360 numbers were down even though we had a week er 0:15:59.440 --> 0:16:02.840 dollar really pulling up those trade prices. So in all, 0:16:03.040 --> 0:16:06.080 it was actually a really good good news, at least 0:16:06.120 --> 0:16:09.600 in the first reaction for the markets. But honestly, I'm 0:16:09.640 --> 0:16:12.440 starting to wonder if we have to start worrying about 0:16:12.600 --> 0:16:16.200 this inflationary force is actually reflecting some of the other 0:16:16.440 --> 0:16:19.200 slowing economic trends that we've seen in the labor market 0:16:19.360 --> 0:16:22.480 and from the consumers, and frankly from home depot as well. 0:16:23.240 --> 0:16:26.400 So what did you take from the home depot numbers? Here? 0:16:26.640 --> 0:16:28.800 We'll get retail sales later this week, but boy, home 0:16:28.880 --> 0:16:31.000 depot's a pretty good barometer out there. 0:16:31.040 --> 0:16:32.320 What did you take away from their earnings? 0:16:33.640 --> 0:16:33.840 Yeah? 0:16:33.920 --> 0:16:36.240 I mean, in some ways, we're not surprised, right because 0:16:36.240 --> 0:16:40.080 we've been talking about weak consumers actually for a really 0:16:40.160 --> 0:16:43.320 long time and some pressure on retailers for a long time, 0:16:43.760 --> 0:16:46.880 so it actually fits that struggling consumer theme. But I 0:16:46.920 --> 0:16:48.920 think there's a little bit more to this. It's the 0:16:49.040 --> 0:16:52.600 interest rate sensitivity, and it's tied to the housing market. 0:16:53.120 --> 0:16:55.840 So you know, this whole PPI CPI, what will the 0:16:55.960 --> 0:16:58.720 Fed dude, this will actually have a lot more weight 0:16:59.280 --> 0:17:02.200 on details are like home depot that are very much 0:17:02.320 --> 0:17:05.840 tied to the housing market, because frankly, unless we see 0:17:06.080 --> 0:17:09.040 cuts going down to like two hundred or three hundred 0:17:09.080 --> 0:17:11.879 basis points, we're not going to see stabilization of the 0:17:11.960 --> 0:17:16.800 housing market. Effective mortgage rate is below four percent, so 0:17:17.840 --> 0:17:21.920 from a perspective of a lower guidance perfectly makes sense 0:17:22.000 --> 0:17:25.720 to us. Higher interest rates being named as one of 0:17:25.720 --> 0:17:28.480 the culprits makes perfectly perfect sense to us. 0:17:28.720 --> 0:17:31.720 And I also think there's sort of an upgrade fatigue. 0:17:31.880 --> 0:17:35.600 Everybody upgraded everything during the pandemic and the ensuing years, 0:17:35.680 --> 0:17:37.560 and now like what else are you going to upgrade? 0:17:37.640 --> 0:17:37.720 Right? 0:17:38.240 --> 0:17:40.239 So that's actually a relatively I mean, that's a lot 0:17:40.320 --> 0:17:42.600 of cuts we have to get to get some juice 0:17:42.640 --> 0:17:45.119 going in the housing market. And you mentioned sort of 0:17:45.200 --> 0:17:49.000 the other slowing economic trends from consumers, and that sort 0:17:49.040 --> 0:17:53.920 of the disinflation was creating like a veil that we're 0:17:54.160 --> 0:17:57.080 not really seeing those slowing eco trends. What exactly are 0:17:57.119 --> 0:17:58.600 you referring to? And how worried are you? 0:18:00.440 --> 0:18:03.119 So I'm not worried like sky is falling, right, I 0:18:03.160 --> 0:18:07.560 mean we're slow. We're watching everything very carefully. So labor market, 0:18:07.760 --> 0:18:10.119 we've been watching it for about a year, household survey 0:18:10.240 --> 0:18:13.359