1 00:00:00,600 --> 00:00:07,720 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:10,560 --> 00:00:14,400 Speaker 2: This is Bloomberg Intelligence with Alex Steinel and Paul'sweenye. 3 00:00:14,480 --> 00:00:17,720 Speaker 3: The real app performance has been the US corporate high yield. 4 00:00:17,880 --> 00:00:20,239 Speaker 4: Are the companies lean enough? Have they trimmed all the fats? 5 00:00:20,280 --> 00:00:24,079 Speaker 3: The semiconductor business is a really cyclical business. 6 00:00:23,560 --> 00:00:27,160 Speaker 2: Breaking market headlines and corporate news from across the globe. 7 00:00:27,240 --> 00:00:29,840 Speaker 4: Do investors like the M and A that we've seen? 8 00:00:30,080 --> 00:00:31,040 Speaker 5: These are two. 9 00:00:31,000 --> 00:00:33,120 Speaker 3: Big time blue chip companies. 10 00:00:33,280 --> 00:00:36,920 Speaker 4: The window between the peak and cut changing super fast. 11 00:00:37,080 --> 00:00:41,960 Speaker 2: Bloomberg Intelligence with Alex steel and Paul'sweenye on Bloomberg Radio. 12 00:00:43,040 --> 00:00:45,480 Speaker 3: On Today's Bloomberg Intelligence Show, we dig inside the big 13 00:00:45,520 --> 00:00:47,839 Speaker 3: business stories impacting Wall Street and the global markets. 14 00:00:47,960 --> 00:00:49,920 Speaker 4: Each and every week we provide in depth research and 15 00:00:50,000 --> 00:00:51,720 Speaker 4: data on some of the two thousand companies and one 16 00:00:51,800 --> 00:00:54,360 Speaker 4: hundred and thirty industries our analysts cover worldwide. 17 00:00:54,400 --> 00:00:57,800 Speaker 3: Today we'll discuss a leadership shakeup at the coffee chain Starbucks. 18 00:00:57,840 --> 00:01:00,160 Speaker 4: Plus we'll look at why the US Justice Department and 19 00:01:00,200 --> 00:01:02,560 Speaker 4: maybe considering a breakup of Alphabet's Google. 20 00:01:02,680 --> 00:01:04,680 Speaker 3: But first we dive into a big deal in the 21 00:01:04,800 --> 00:01:05,399 Speaker 3: M and A space. 22 00:01:05,560 --> 00:01:08,080 Speaker 4: This year, Mars agreed to buy Calenova for nearly thirty 23 00:01:08,120 --> 00:01:10,960 Speaker 4: six billion dollars and this brings together two major food 24 00:01:11,000 --> 00:01:12,920 Speaker 4: companies and the biggest deal this year. 25 00:01:13,000 --> 00:01:15,000 Speaker 3: And this comes as a package food industry has been 26 00:01:15,040 --> 00:01:17,959 Speaker 3: grappling with declimbing volumes, slow in growth, and a weakening 27 00:01:18,040 --> 00:01:18,880 Speaker 3: global consumer. 28 00:01:19,080 --> 00:01:21,960 Speaker 4: For more, we are adorned by Jennifer Bartasha's Bloomberg Intelligence 29 00:01:21,959 --> 00:01:24,920 Speaker 4: senior analyst Retail, staples and packaged Food. We first asked 30 00:01:25,000 --> 00:01:28,160 Speaker 4: Jennifer why this Mars Kelenova deal is actually happening. 31 00:01:28,520 --> 00:01:30,840 Speaker 1: There's a couple of things. The first is, you know, 32 00:01:30,880 --> 00:01:33,760 Speaker 1: from a Mars portfolio perspective, when it comes to the 33 00:01:33,800 --> 00:01:38,360 Speaker 1: snacking category, they are heavily exposed to chocolate and coco 34 00:01:38,400 --> 00:01:41,280 Speaker 1: has been a structural issue in terms of cost for 35 00:01:41,319 --> 00:01:44,280 Speaker 1: a while and we think that's going to continue indefinitely. 36 00:01:44,959 --> 00:01:48,160 Speaker 1: And so this helps them diversify out that snacking side 37 00:01:48,160 --> 00:01:50,840 Speaker 1: of their portfolio, and it also helps them do a 38 00:01:50,840 --> 00:01:53,120 Speaker 1: little bit more in emerging markets, which is an area 39 00:01:53,160 --> 00:01:54,680 Speaker 1: where Kelenova has some strength. 40 00:01:54,960 --> 00:01:58,640 Speaker 4: So, okay, so is it offense or defense from that perspective, 41 00:01:58,640 --> 00:02:00,560 Speaker 4: because it feels like it could be a combination both 42 00:02:00,600 --> 00:02:04,040 Speaker 4: like diverse by away from just pure cocoa but also expand. 43 00:02:04,480 --> 00:02:06,840 Speaker 1: Yeah, I think it's a combination of the two. It's 44 00:02:07,360 --> 00:02:09,600 Speaker 1: on the cocoa side, it's a little bit of risk mitigation, 45 00:02:10,240 --> 00:02:11,920 Speaker 1: you know, and helping to ease some of the costs 46 00:02:11,919 --> 00:02:15,200 Speaker 1: they're feeling there. And you know, traditionally chocolate has held 47 00:02:15,240 --> 00:02:18,120 Speaker 1: up actually really well through the pandemic and after the pandemic, 48 00:02:18,440 --> 00:02:20,280 Speaker 1: but we're finally starting to see a little bit of 49 00:02:20,320 --> 00:02:24,120 Speaker 1: weakness and consumer demand for chocolate just because of food inflation, 50 00:02:24,880 --> 00:02:28,320 Speaker 1: and so diversification will will certainly help with that. And 51 00:02:28,360 --> 00:02:30,959 Speaker 1: then you know, on a global basis, Mars has leading 52 00:02:31,120 --> 00:02:32,960 Speaker 1: you know, they're in the top three market share in 53 00:02:33,000 --> 00:02:37,360 Speaker 1: almost every region in confectionery, and so having more of 54 00:02:37,400 --> 00:02:40,480 Speaker 1: the salty snack side and getting more into that can 55 00:02:40,520 --> 00:02:42,919 Speaker 1: only consolidate their market share position in a lot of 56 00:02:43,040 --> 00:02:44,760 Speaker 1: leading global, you know, regions. 57 00:02:45,760 --> 00:02:48,200 Speaker 3: Jen, what makes us deal really interesting for me is 58 00:02:48,480 --> 00:02:51,000 Speaker 3: the Mars company. Because it's a private company. What do 59 00:02:51,040 --> 00:02:55,440 Speaker 3: we know about Mars? Maybe I don't know the size capitalization, 60 00:02:56,520 --> 00:02:59,280 Speaker 3: did they ever talk to investors. 61 00:02:59,240 --> 00:03:02,560 Speaker 1: Very rarely, you know, but what they have disclosed, you know, 62 00:03:02,560 --> 00:03:05,320 Speaker 1: their annual revenue is a little over fifty billion dollars, 63 00:03:05,639 --> 00:03:09,320 Speaker 1: So definitely a sizable company. And what I think is 64 00:03:09,400 --> 00:03:12,800 Speaker 1: very interesting is when you break that revenue down, nearly 65 00:03:12,840 --> 00:03:16,160 Speaker 1: sixty percent of their revenue is coming from pet food. 66 00:03:16,800 --> 00:03:20,600 Speaker 1: So although everybody associates Mars with chocolate, the larger portion 67 00:03:20,639 --> 00:03:22,680 Speaker 1: of their business is pet and so they own the 68 00:03:22,680 --> 00:03:26,600 Speaker 1: Pedigree brand, they own the Whiskers brand, and that is 69 00:03:26,639 --> 00:03:29,160 Speaker 1: a big powerhouse for them. That's part of the reason 70 00:03:29,200 --> 00:03:30,919 Speaker 1: we think there actually won't be a lot of FTC 71 00:03:31,080 --> 00:03:33,400 Speaker 1: pushback on this because it's a smaller port of their 72 00:03:33,440 --> 00:03:37,800 Speaker 1: portfolio and the products are there's really no overlap between 73 00:03:37,840 --> 00:03:39,520 Speaker 1: what Kelenova does and what Mars does. 74 00:03:39,840 --> 00:03:41,160 Speaker 4: Amazingly, I did not know that. 75 00:03:41,200 --> 00:03:42,080 Speaker 3: I did not know that at all. 76 00:03:42,520 --> 00:03:46,960 Speaker 4: Why we love John Bartras. I mean, that would kill them, 77 00:03:47,000 --> 00:03:49,880 Speaker 4: but sure right, dogs can't have chocolate from that thing. 78 00:03:50,320 --> 00:03:51,920 Speaker 4: And so Jen, does this mean we're going to see 79 00:03:51,920 --> 00:03:53,560 Speaker 4: a lot of other m and A in the space? 80 00:03:53,560 --> 00:03:55,680 Speaker 4: And if so, sort of who and where would we 81 00:03:55,720 --> 00:03:56,080 Speaker 4: see that. 82 00:03:56,680 --> 00:03:59,240 Speaker 1: We've seen a lot of a sentiment towards tuck In 83 00:03:59,400 --> 00:04:03,160 Speaker 1: acquisition over the last couple of years. But there are 84 00:04:03,200 --> 00:04:06,240 Speaker 1: some pressures that are affecting the industry. So when you 85 00:04:06,480 --> 00:04:08,760 Speaker 1: listen to what all of these package food companies are 86 00:04:08,760 --> 00:04:11,480 Speaker 1: saying their priority for twenty twenty four and headed into 87 00:04:11,520 --> 00:04:16,279 Speaker 1: twenty twenty five is regaining volume. But the problem is 88 00:04:16,320 --> 00:04:18,760 Speaker 1: that consumers not yet in a position where they're buying 89 00:04:18,839 --> 00:04:22,040 Speaker 1: bigger volumes of food, and so M and A is 90 00:04:22,080 --> 00:04:25,760 Speaker 1: a potential route to be able to better navigate the market. 91 00:04:25,920 --> 00:04:28,599 Speaker 1: So you know, in this instance, with this deal, we're 92 00:04:28,640 --> 00:04:32,480 Speaker 1: expecting over a billion dollars in synergies between Mars and Kelenova, 93 00:04:32,600 --> 00:04:36,280 Speaker 1: coming from procurement, coming from manufacturing, things like that. So 94 00:04:36,600 --> 00:04:39,080 Speaker 1: I think that this deal may spark at least some 95 00:04:39,400 --> 00:04:42,920 Speaker 1: consideration for larger deals again in the package food space, 96 00:04:42,960 --> 00:04:45,880 Speaker 1: as they're trying to find ways to contain costs, expand 97 00:04:45,920 --> 00:04:48,920 Speaker 1: their geographic and product footprint at a time when it's 98 00:04:48,960 --> 00:04:53,000 Speaker 1: hard to spend to spur consumers into buying greater volumes, 99 00:04:53,279 --> 00:04:55,040 Speaker 1: So it may be an alternative for them. 100 00:04:55,160 --> 00:04:58,760 Speaker 3: In food inflation, you cover the package good companies, you 101 00:04:59,000 --> 00:05:02,680 Speaker 3: cover the grocery stores as well. Those prices, while the 102 00:05:02,760 --> 00:05:06,159 Speaker 3: rate of inflation has slowed, those prices ain't coming down, 103 00:05:06,240 --> 00:05:06,880 Speaker 3: are they. 104 00:05:06,880 --> 00:05:09,560 Speaker 1: They're coming down, but very very slowly. And so if 105 00:05:09,560 --> 00:05:11,919 Speaker 1: you look on it on a basis, you know, comparison 106 00:05:11,960 --> 00:05:15,040 Speaker 1: back to twenty nineteen, food prices are still almost twenty 107 00:05:15,080 --> 00:05:18,520 Speaker 1: percent higher than they were in twenty nineteen. In certain 108 00:05:18,600 --> 00:05:22,960 Speaker 1: categories where there's been relief, especially from the cost of commodities. 109 00:05:23,320 --> 00:05:26,080 Speaker 1: So as corn has come down and soy has come down, 110 00:05:26,080 --> 00:05:29,719 Speaker 1: and wheat has come down, sugar has come down, we've seen, 111 00:05:29,800 --> 00:05:32,120 Speaker 1: you know a little bit of price relief, but it's 112 00:05:32,120 --> 00:05:35,000 Speaker 1: going to take some time for that to really translate 113 00:05:35,040 --> 00:05:39,520 Speaker 1: into something that consumers feel in their pocketbook instead of 114 00:05:39,560 --> 00:05:43,400 Speaker 1: just individual products being you know, either not getting increases 115 00:05:43,839 --> 00:05:45,279 Speaker 1: or coming down slightly in price. 116 00:05:45,640 --> 00:05:47,720 Speaker 4: So which company in your space do you feel like 117 00:05:47,880 --> 00:05:49,760 Speaker 4: is doing pretty well on the margin and the top 118 00:05:49,800 --> 00:05:51,560 Speaker 4: line side, because if margins are going to get squeezed, 119 00:05:51,600 --> 00:05:52,880 Speaker 4: you need the top line to grow. But the top 120 00:05:52,920 --> 00:05:55,159 Speaker 4: line is still really struggling with consumers right now. So 121 00:05:55,160 --> 00:05:56,840 Speaker 4: who's managing that the best? 122 00:05:57,640 --> 00:06:00,520 Speaker 1: Well, you know, up until the probably the the you know, 123 00:06:00,560 --> 00:06:03,520 Speaker 1: the last quarter or two, Mandalies has actually navigated that 124 00:06:03,600 --> 00:06:08,120 Speaker 1: pretty well, you know, because the demand for suites and 125 00:06:08,240 --> 00:06:12,000 Speaker 1: indulgences has had held up pretty well. You know, companies 126 00:06:12,000 --> 00:06:15,760 Speaker 1: that do have that exposure to snacking, generally speaking, are 127 00:06:15,800 --> 00:06:18,560 Speaker 1: doing better overall than companies that are more center store, 128 00:06:19,040 --> 00:06:21,120 Speaker 1: and I would point to Kraft Hines as an example 129 00:06:21,120 --> 00:06:23,680 Speaker 1: of center store or Campbell's Soup as a center store type. 130 00:06:23,839 --> 00:06:25,440 Speaker 3: Is center store, I mean, I haven't heard that before. 131 00:06:25,760 --> 00:06:28,400 Speaker 1: So center store is when you're in a grocery store. 132 00:06:28,480 --> 00:06:30,919 Speaker 1: Everything that's not on the outside, so it usually is 133 00:06:30,960 --> 00:06:34,320 Speaker 1: like shelf stable products. So think about your canned soups, 134 00:06:34,800 --> 00:06:38,400 Speaker 1: your pasta, your pasta sauces, things like that. Those are 135 00:06:38,560 --> 00:06:42,400 Speaker 1: the pantry staples that most people you know purchase. And 136 00:06:42,440 --> 00:06:44,600 Speaker 1: then the perimeter is of course all of your fresh food. 137 00:06:45,000 --> 00:06:48,839 Speaker 3: Thanks to Jennifer Bartasha's Bloomberg Intelligence senior retail analyst, we move. 138 00:06:48,760 --> 00:06:51,320 Speaker 4: Next to the home improvement retailer home Depot. This week, 139 00:06:51,400 --> 00:06:55,000 Speaker 4: home Deepot reported quarterly earnings and sales that top analyst expectations, 140 00:06:55,200 --> 00:06:55,520 Speaker 4: but the. 141 00:06:55,440 --> 00:06:58,000 Speaker 3: Company cautioned that sales will be weaker than expected in 142 00:06:58,040 --> 00:07:00,800 Speaker 3: the back half of the year. Home Depot cited high 143 00:07:00,839 --> 00:07:03,400 Speaker 3: interest rates and economic uncertainty. 144 00:07:02,960 --> 00:07:04,359 Speaker 4: For more and all of this. We were joined by 145 00:07:04,440 --> 00:07:07,000 Speaker 4: Red Brown, Bloomberg News earnings reporter, and we first asked 146 00:07:07,000 --> 00:07:09,240 Speaker 4: Red to break down what home Depot's numbers actually mean. 147 00:07:09,760 --> 00:07:11,920 Speaker 6: I think overall kind of the message that I'm sort 148 00:07:11,920 --> 00:07:13,680 Speaker 6: of taking away from the results is this seems like 149 00:07:13,680 --> 00:07:15,400 Speaker 6: they might have kind of found bottom. If we look 150 00:07:15,480 --> 00:07:19,440 Speaker 6: the last six quarters, they've seen earnings top and bottom 151 00:07:19,480 --> 00:07:22,320 Speaker 6: line shrinking, and then for the first time since twenty 152 00:07:22,360 --> 00:07:25,640 Speaker 6: twenty three, things are flattening out a little bit. So, yes, 153 00:07:25,720 --> 00:07:28,800 Speaker 6: they cut the top line outlook maybe a bit of 154 00:07:28,800 --> 00:07:31,680 Speaker 6: a reset there, But I think there's a lot to 155 00:07:31,720 --> 00:07:33,560 Speaker 6: be optimistic about these results. 156 00:07:33,640 --> 00:07:35,480 Speaker 3: Well, I think I guess one of the questions that 157 00:07:35,520 --> 00:07:37,840 Speaker 3: I had, just being a grizzled veteran having listened to 158 00:07:37,880 --> 00:07:40,760 Speaker 3: a million conference calls, is you know, suggesting that maybe 159 00:07:40,760 --> 00:07:42,560 Speaker 3: this is a little bit temporary, that maybe these are 160 00:07:42,640 --> 00:07:46,720 Speaker 3: purchases that are being deferred in anticipation of lower rates. 161 00:07:47,040 --> 00:07:49,040 Speaker 3: How does that kind of stand with you? I mean, 162 00:07:49,080 --> 00:07:49,640 Speaker 3: I think it does. 163 00:07:50,280 --> 00:07:51,680 Speaker 6: I think I maybe I believe it a little bit 164 00:07:51,680 --> 00:07:53,360 Speaker 6: more than that. It sounds like you two might just 165 00:07:53,360 --> 00:07:55,280 Speaker 6: because the one thing that analysts are putting to a 166 00:07:55,320 --> 00:07:59,360 Speaker 6: lot is contractors backlogs. So those are you know, contracted 167 00:08:00,400 --> 00:08:04,600 Speaker 6: that they are expected to eventually fulfill. It's just a 168 00:08:04,640 --> 00:08:07,440 Speaker 6: matter of when the customers are ready to actually you know, 169 00:08:07,560 --> 00:08:09,240 Speaker 6: follow through with that and say yep, let's do it. 170 00:08:09,760 --> 00:08:12,200 Speaker 6: You know, those are long term projects to take several months, 171 00:08:12,240 --> 00:08:14,440 Speaker 6: so it's not something that people are kind of likely 172 00:08:14,480 --> 00:08:16,920 Speaker 6: to back out of their big something you probably need 173 00:08:16,960 --> 00:08:18,760 Speaker 6: to get financing for as well. So it's it's you know, 174 00:08:18,760 --> 00:08:22,720 Speaker 6: it's a significant commitment for the consumer. And yeah, I 175 00:08:22,760 --> 00:08:25,560 Speaker 6: mean this deferral mindset I think is an interesting way 176 00:08:25,600 --> 00:08:28,080 Speaker 6: to spin the situation for for Home Deeper right now. 177 00:08:28,120 --> 00:08:31,880 Speaker 4: Yeah, that's interesting. So you have contractor backlog because customers 178 00:08:31,920 --> 00:08:33,560 Speaker 4: want to get their project in the queue, but they're 179 00:08:33,559 --> 00:08:35,520 Speaker 4: not putting down the money for it yet. So it's 180 00:08:35,520 --> 00:08:38,600 Speaker 4: always like, hmmmm, is that kind of wind the economy really turns? 181 00:08:39,559 --> 00:08:42,400 Speaker 4: What winds up happening? So I guess if we just say, okay, 182 00:08:42,440 --> 00:08:44,280 Speaker 4: we're at the trough, I wonder if we have any 183 00:08:44,360 --> 00:08:46,920 Speaker 4: visibility yet into what the recovery then looks like for 184 00:08:46,960 --> 00:08:47,600 Speaker 4: a home depot. 185 00:08:47,840 --> 00:08:50,320 Speaker 6: Yeah, so I think, you know, if we look into 186 00:08:50,480 --> 00:08:54,080 Speaker 6: what they said the commentary around the guidance cuts, they said, 187 00:08:54,120 --> 00:08:56,720 Speaker 6: if it's going to be the same store sales, the 188 00:08:56,800 --> 00:09:00,160 Speaker 6: top end is down three percent this year. They're saying 189 00:09:00,200 --> 00:09:02,800 Speaker 6: that that will happen if things stay stable from the 190 00:09:02,800 --> 00:09:04,920 Speaker 6: first half of the year, and right now they say 191 00:09:04,920 --> 00:09:07,840 Speaker 6: all signs point to consumer demand like staying at that 192 00:09:07,880 --> 00:09:10,280 Speaker 6: same level, and they're not guiding towards the bottom end 193 00:09:10,320 --> 00:09:12,680 Speaker 6: of that range right now. So right now, that seems 194 00:09:12,720 --> 00:09:15,319 Speaker 6: to be where the company is at with some positive 195 00:09:15,320 --> 00:09:16,160 Speaker 6: outlook here as well. 196 00:09:16,600 --> 00:09:18,480 Speaker 3: You know, I'm just looking at the chart here and 197 00:09:18,600 --> 00:09:20,600 Speaker 3: just thinking back to the pandemic that stuck you know, 198 00:09:20,800 --> 00:09:23,040 Speaker 3: was up about one hundred and seventy percent from you know, 199 00:09:23,080 --> 00:09:24,720 Speaker 3: the beginning of the pandemic through the end of twenty 200 00:09:24,760 --> 00:09:26,920 Speaker 3: twenty one. It's come off since then. So that was 201 00:09:27,000 --> 00:09:30,400 Speaker 3: just such a moonshot for the company. What does the 202 00:09:30,440 --> 00:09:34,120 Speaker 3: company say about the consumer their business kind of now 203 00:09:34,559 --> 00:09:36,600 Speaker 3: versus pre pandemic. Did they ever put it in that 204 00:09:36,679 --> 00:09:37,559 Speaker 3: kind of context. 205 00:09:37,640 --> 00:09:40,400 Speaker 6: Well, the reason for that ride up, if you remember, 206 00:09:40,600 --> 00:09:45,520 Speaker 6: was because of so much DIY activity. Everyone was stuck home. 207 00:09:45,559 --> 00:09:47,360 Speaker 6: I mean, I'm tired of looking at this shelf, Let 208 00:09:47,400 --> 00:09:49,840 Speaker 6: me fix it, or I hate this paint color. 209 00:09:49,640 --> 00:09:50,240 Speaker 5: Whatever it was. 210 00:09:50,640 --> 00:09:52,520 Speaker 6: Now there's a little bit less of that, just because 211 00:09:52,520 --> 00:09:54,320 Speaker 6: we're spending less time at home, you know, we have 212 00:09:54,400 --> 00:09:57,520 Speaker 6: less time on our hands, and Home Depot is kind 213 00:09:57,520 --> 00:09:59,679 Speaker 6: of accepted that that they're not going to see those 214 00:09:59,760 --> 00:10:02,400 Speaker 6: levels as much anymore, and what they are focusing and 215 00:10:02,679 --> 00:10:05,679 Speaker 6: similar thing happening at Low's as well, is focusing on 216 00:10:05,720 --> 00:10:08,800 Speaker 6: that contractor business. It's a higher margin business, it's a 217 00:10:08,800 --> 00:10:12,240 Speaker 6: little bit more consistent. And we saw what their their 218 00:10:12,280 --> 00:10:16,400 Speaker 6: latest acquisition, eighteen billion dollar acquisition for SRS Distribution, and 219 00:10:16,440 --> 00:10:19,720 Speaker 6: that is part of this pivot towards can we capture 220 00:10:19,720 --> 00:10:22,319 Speaker 6: more of the market share for those contractors. 221 00:10:22,640 --> 00:10:25,320 Speaker 4: Oh yeah, love me some contractors working with some right 222 00:10:25,360 --> 00:10:28,440 Speaker 4: now in the Berkshires. The allowance for my kitchen island 223 00:10:28,520 --> 00:10:28,800 Speaker 4: was huge. 224 00:10:29,120 --> 00:10:31,600 Speaker 3: Are there good contractors up like in that part of 225 00:10:31,600 --> 00:10:31,920 Speaker 3: the world. 226 00:10:32,000 --> 00:10:34,280 Speaker 4: Yeah, yeah, really good? Yeah, Okay, I mean we went 227 00:10:34,320 --> 00:10:37,000 Speaker 4: to one we didn't do like comparison shopping because this 228 00:10:37,240 --> 00:10:39,200 Speaker 4: company had, like we done our roof, had did our 229 00:10:39,400 --> 00:10:41,120 Speaker 4: did our kitchens, like we'd already worked with them for 230 00:10:41,160 --> 00:10:43,800 Speaker 4: the last you know, ten fifteen years. Read when you 231 00:10:43,800 --> 00:10:45,360 Speaker 4: take a look at earnings in general, so you're your 232 00:10:45,400 --> 00:10:49,040 Speaker 4: earnings reporter, like this is as your jam. What are 233 00:10:49,040 --> 00:10:51,040 Speaker 4: some of the takeaways that we can learn from earnings 234 00:10:51,040 --> 00:10:51,920 Speaker 4: in general? Right now? 235 00:10:52,080 --> 00:10:55,240 Speaker 6: I think with home depot it's just a kind of 236 00:10:55,280 --> 00:10:59,360 Speaker 6: repetition of this same pattern in retail, which is consumers 237 00:10:59,480 --> 00:11:01,040 Speaker 6: are trading down you know, last year there was so 238 00:11:01,120 --> 00:11:02,880 Speaker 6: much were when is it happening? When is it happening? 239 00:11:02,920 --> 00:11:05,640 Speaker 6: And it's kind of been slowly trickling in quarter over 240 00:11:05,720 --> 00:11:08,640 Speaker 6: quarter more people are trading down or what that looks 241 00:11:08,720 --> 00:11:10,720 Speaker 6: like on the ground is I'm delaying some of those 242 00:11:10,720 --> 00:11:14,520 Speaker 6: bigger purchases, those bigger, high margin for the company's purchases. 243 00:11:14,679 --> 00:11:17,720 Speaker 6: I'm focusing on what I need. And I think Walmart 244 00:11:17,800 --> 00:11:21,679 Speaker 6: will be the kind of exemplar example of that of people. 245 00:11:21,720 --> 00:11:24,120 Speaker 6: You know, I'm just looking at you know what I need. 246 00:11:24,160 --> 00:11:26,320 Speaker 6: I need food, I need groceries, I need toiletries, things 247 00:11:26,360 --> 00:11:28,839 Speaker 6: like that, and then maybe I'll delay until I get 248 00:11:28,880 --> 00:11:30,360 Speaker 6: a little bit more clarity on when I'm going to 249 00:11:30,400 --> 00:11:30,960 Speaker 6: buy that TV. 250 00:11:31,240 --> 00:11:32,760 Speaker 3: So for our home depot, I think I just think 251 00:11:32,800 --> 00:11:35,360 Speaker 3: of walking into home depot and boyd there's a lot 252 00:11:35,400 --> 00:11:38,079 Speaker 3: of stuff. They're huge, huge stores and there's a lot 253 00:11:38,120 --> 00:11:41,040 Speaker 3: of stuff there. Talk to us about inventory. Inventory management, 254 00:11:41,040 --> 00:11:43,040 Speaker 3: I know for some of these big box retailers is huge. 255 00:11:43,360 --> 00:11:44,559 Speaker 3: What are they saying these days? 256 00:11:44,679 --> 00:11:46,720 Speaker 6: So one thing to look for the inventory is actually 257 00:11:46,720 --> 00:11:48,800 Speaker 6: the transportation costs have been coming down, So I think 258 00:11:48,840 --> 00:11:51,960 Speaker 6: overall that just speaks to an easy supply chain for 259 00:11:52,160 --> 00:11:54,720 Speaker 6: home depot, so they are able to manage a little 260 00:11:54,720 --> 00:11:57,080 Speaker 6: bit better. In general, they're managing their costs quite well. 261 00:11:57,480 --> 00:11:59,920 Speaker 6: That's part of the reason that they were able to 262 00:12:00,280 --> 00:12:03,680 Speaker 6: kind of flatten out the earnings trough there. And yeah, 263 00:12:03,720 --> 00:12:07,840 Speaker 6: I think overall the inventory has been shifting well and 264 00:12:07,880 --> 00:12:09,600 Speaker 6: they are, you know, they have so much stuff there, 265 00:12:09,600 --> 00:12:11,120 Speaker 6: able to manage it well and they're able to get 266 00:12:11,160 --> 00:12:12,960 Speaker 6: the products that people want in the stores. 267 00:12:13,320 --> 00:12:15,720 Speaker 3: Our thanks to Red Brown, Bloomberg News Earnings Reporter. 268 00:12:15,920 --> 00:12:18,360 Speaker 4: Coming up, Starbucks has a new CEO. We're going to 269 00:12:18,400 --> 00:12:19,880 Speaker 4: break down the leadership change. Next. 270 00:12:19,960 --> 00:12:22,760 Speaker 3: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 271 00:12:22,800 --> 00:12:25,240 Speaker 3: depth research and data on two thousand companies and one 272 00:12:25,280 --> 00:12:28,320 Speaker 3: hundred and thirty industries. You can access Bloomberg Intelligence via 273 00:12:28,360 --> 00:12:29,480 Speaker 3: b I go on the terminal. 274 00:12:29,559 --> 00:12:32,400 Speaker 4: I'm Paul Sweeney and m Alex Steel, and this is Bloomberg. 275 00:12:39,960 --> 00:12:43,839 Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live 276 00:12:43,920 --> 00:12:46,599 Speaker 2: weekdays at ten am Eastern on Affo car Playing and 277 00:12:46,760 --> 00:12:49,640 Speaker 2: broud Oto with the Bloomberg Business app. Listen on demand 278 00:12:49,679 --> 00:12:54,400 Speaker 2: wherever you get your podcasts, or watch us live on YouTube. 279 00:12:54,760 --> 00:12:56,480 Speaker 4: We look next to a shake up at the copy 280 00:12:56,559 --> 00:12:59,520 Speaker 4: chain Starbucks. This week, Starbucks out did its CEO and 281 00:12:59,559 --> 00:13:03,280 Speaker 4: picture otlet Mexican Real CEO Brian Nickel as its next leader. 282 00:13:03,440 --> 00:13:04,920 Speaker 4: For more and all of this, we are joined by 283 00:13:05,000 --> 00:13:08,080 Speaker 4: Jody Lori Bloomberg Intelligence credit Analysts, and we first asked 284 00:13:08,160 --> 00:13:10,120 Speaker 4: Jody for her reaction to this week's news. 285 00:13:10,679 --> 00:13:13,320 Speaker 7: I think, as the credit analysts were always sort of 286 00:13:13,800 --> 00:13:17,320 Speaker 7: hesitant when there's these full scale changes that happen overnight, 287 00:13:17,480 --> 00:13:19,719 Speaker 7: and when you've had a CEO that's only been there 288 00:13:19,760 --> 00:13:23,880 Speaker 7: since March of last year, so we have just only 289 00:13:24,000 --> 00:13:26,400 Speaker 7: gotten comfortable with the concept they were giving back twenty 290 00:13:26,400 --> 00:13:29,319 Speaker 7: billion dollars and now you have two activists investors very 291 00:13:29,320 --> 00:13:32,120 Speaker 7: heavily involved, one getting a board seat and pushing out 292 00:13:32,160 --> 00:13:34,320 Speaker 7: the CEO with a new CEO. That could be a 293 00:13:34,400 --> 00:13:37,199 Speaker 7: positive for the company long term in terms of performance. 294 00:13:37,520 --> 00:13:40,040 Speaker 7: But I do also think that shareholders might make it 295 00:13:40,160 --> 00:13:41,760 Speaker 7: better than bondholders at this point. 296 00:13:41,880 --> 00:13:43,400 Speaker 3: Why do you say that you think they're just going 297 00:13:43,480 --> 00:13:45,559 Speaker 3: to maybe start returning cash shareholders. 298 00:13:45,720 --> 00:13:47,760 Speaker 5: I think they'll get a little bit more aggressive with that, Paul. 299 00:13:47,800 --> 00:13:50,560 Speaker 7: I mean, I think you know, it could end up 300 00:13:50,559 --> 00:13:52,079 Speaker 7: being the type of thing that they look at the 301 00:13:52,120 --> 00:13:54,160 Speaker 7: company and that you sort of think about ways to 302 00:13:54,440 --> 00:13:56,520 Speaker 7: sort of boost the value, whether it be spin off 303 00:13:56,559 --> 00:13:58,760 Speaker 7: some entity or what have you. I'm not sure what 304 00:13:58,920 --> 00:14:01,520 Speaker 7: entity they could spin off to Starbucks because so much 305 00:14:01,559 --> 00:14:04,000 Speaker 7: of the non core business has already been peeled away. 306 00:14:04,520 --> 00:14:07,520 Speaker 7: That said, I mean, I think that when when you're 307 00:14:07,520 --> 00:14:10,400 Speaker 7: dealing with activists, you're always sort of hesitant because you say, Okay, 308 00:14:10,760 --> 00:14:12,600 Speaker 7: how much are they going to risk the balance sheet? 309 00:14:12,679 --> 00:14:14,880 Speaker 7: How much are they going to lever to get the 310 00:14:14,960 --> 00:14:18,240 Speaker 7: company into a different spot. Now that might be a 311 00:14:18,280 --> 00:14:22,200 Speaker 7: short term pain for long term gain, but for bond holders, 312 00:14:22,240 --> 00:14:23,880 Speaker 7: when you think about that short term pain, that's not 313 00:14:23,880 --> 00:14:25,840 Speaker 7: always necessarily the best thing. Which you know, we have 314 00:14:25,880 --> 00:14:29,200 Speaker 7: a long history of yam for for example, you know, 315 00:14:29,240 --> 00:14:32,160 Speaker 7: which which the new CEO is part of. When they 316 00:14:32,240 --> 00:14:35,120 Speaker 7: spun off their entity Young China, you know, they ended 317 00:14:35,200 --> 00:14:37,680 Speaker 7: up giving back so much of their money to shareholders. 318 00:14:37,400 --> 00:14:40,000 Speaker 4: Which then to the point breaks a question like how 319 00:14:40,080 --> 00:14:42,960 Speaker 4: is Starbucks actually doing from a bond holder perspective. 320 00:14:43,280 --> 00:14:46,160 Speaker 7: From a bond holder perspective, you know, over the past year, 321 00:14:46,160 --> 00:14:48,720 Speaker 7: they've been a little bit more volatile. Something that that's 322 00:14:48,840 --> 00:14:51,320 Speaker 7: very clear that we've been tracking is the aldi the 323 00:14:51,360 --> 00:14:52,760 Speaker 7: Bloomberg second measure data. 324 00:14:52,960 --> 00:14:53,560 Speaker 5: Yeah, okay, so. 325 00:14:53,520 --> 00:14:55,160 Speaker 4: Wait, first all, what is this? Because I got to 326 00:14:55,160 --> 00:14:57,240 Speaker 4: be honest, for I've never heard of this before, and 327 00:14:57,280 --> 00:14:58,960 Speaker 4: you mentioned it and you're going to talk about it, 328 00:14:59,000 --> 00:15:01,320 Speaker 4: and now I'm a little obsessed with it. 329 00:15:01,320 --> 00:15:05,080 Speaker 7: It is pretty amazing, Alex, particularly when it comes to Starbucks, 330 00:15:05,120 --> 00:15:07,600 Speaker 7: because the R squared or you know, the sort of 331 00:15:07,640 --> 00:15:10,760 Speaker 7: predictive value of it is pretty great when it comes 332 00:15:10,800 --> 00:15:11,960 Speaker 7: to Starbucks in particular. 333 00:15:12,400 --> 00:15:14,840 Speaker 5: So what it is. It's credit card and debitcard. 334 00:15:14,400 --> 00:15:18,360 Speaker 7: Swipes only in the United States, and Bloomberg aggregates the data. 335 00:15:18,440 --> 00:15:19,720 Speaker 7: You can see it. You can see it both on 336 00:15:19,760 --> 00:15:21,120 Speaker 7: a year over year basis. You can see it on 337 00:15:21,160 --> 00:15:23,360 Speaker 7: an actual value basis. If you look at the year 338 00:15:23,440 --> 00:15:26,280 Speaker 7: over year where it's trending, it's actually very much down 339 00:15:26,360 --> 00:15:29,120 Speaker 7: when it comes to sales and transactions, which is not 340 00:15:29,200 --> 00:15:32,200 Speaker 7: surprising because they've had a couple of sort of disappointing points, 341 00:15:32,200 --> 00:15:35,520 Speaker 7: one of them being geopolitics, so the Astro turf effort 342 00:15:35,680 --> 00:15:38,800 Speaker 7: related to the Middle East. The other portion is obviously 343 00:15:38,920 --> 00:15:41,400 Speaker 7: China and the fact that they really went all in 344 00:15:41,440 --> 00:15:43,760 Speaker 7: on China and it's been a little bit of a disappointment. 345 00:15:43,960 --> 00:15:46,480 Speaker 7: And then you've also just had consumers pulling back in 346 00:15:46,560 --> 00:15:49,320 Speaker 7: terms of their spending on things like Starbucks, McDonald's, what 347 00:15:49,400 --> 00:15:52,080 Speaker 7: have you. And so companies have been trying to just 348 00:15:52,120 --> 00:15:53,960 Speaker 7: get people in the door. Now if you look at 349 00:15:53,960 --> 00:15:56,720 Speaker 7: it for you know, transaction value, or if you look 350 00:15:56,760 --> 00:15:58,600 Speaker 7: at you know, the PLACER data which we also have 351 00:15:58,640 --> 00:16:01,200 Speaker 7: embedded on the terminal, and the placer data is down, 352 00:16:01,240 --> 00:16:04,400 Speaker 7: so that's estimated visits. So people physically going into stores 353 00:16:04,440 --> 00:16:07,160 Speaker 7: has been down recently. And so how does the new 354 00:16:07,200 --> 00:16:09,560 Speaker 7: CEO get these people back? How does he get them 355 00:16:09,560 --> 00:16:12,080 Speaker 7: comfortable with the Starbucks that we used to know and love. 356 00:16:12,320 --> 00:16:13,560 Speaker 5: I'm not sure talk. 357 00:16:13,400 --> 00:16:16,120 Speaker 3: To us about China, because I know you've flagged that before. 358 00:16:16,160 --> 00:16:19,920 Speaker 3: It talks about China and what it means for Starbucks. 359 00:16:20,200 --> 00:16:21,960 Speaker 7: I think China means a lot of things for a 360 00:16:21,960 --> 00:16:23,880 Speaker 7: lot of the companies in our space. I think it's 361 00:16:23,920 --> 00:16:28,360 Speaker 7: been a very common word, more so than normal when 362 00:16:28,360 --> 00:16:31,760 Speaker 7: it comes to across the consumer and leisure space. 363 00:16:32,200 --> 00:16:32,400 Speaker 5: You know. 364 00:16:32,440 --> 00:16:35,960 Speaker 7: So if you listen to earning calls this quarter, anyone 365 00:16:35,960 --> 00:16:39,480 Speaker 7: from Hilton to Hyatt to you know, even the cruise 366 00:16:39,480 --> 00:16:42,200 Speaker 7: lines have been mentioning China either as an avenue for 367 00:16:42,240 --> 00:16:45,000 Speaker 7: growth or as a disappointment for an avenue for growth. 368 00:16:45,000 --> 00:16:47,440 Speaker 7: I mean, we haven't seen the value of China. We've 369 00:16:47,440 --> 00:16:48,000 Speaker 7: seen sort of. 370 00:16:47,920 --> 00:16:50,239 Speaker 5: The sluggish, slow growth of late. 371 00:16:50,320 --> 00:16:53,240 Speaker 7: And for someone like Starbucks that last year they mapped 372 00:16:53,280 --> 00:16:54,680 Speaker 7: out their plan and they said, we're going to be 373 00:16:54,720 --> 00:16:57,160 Speaker 7: building out more stores in China and that's our international 374 00:16:57,200 --> 00:16:59,360 Speaker 7: growth plan, and that's how we're getting the company back 375 00:16:59,400 --> 00:17:02,200 Speaker 7: on track. All of a sudden, you don't necessarily have that. 376 00:17:02,600 --> 00:17:04,480 Speaker 7: I mean that's kind of a big problem. 377 00:17:05,000 --> 00:17:07,760 Speaker 4: Yeah, and when they talk about like strategic options for 378 00:17:07,800 --> 00:17:11,159 Speaker 4: that are partnerships, what does that wind up looking like? 379 00:17:11,200 --> 00:17:12,879 Speaker 4: They're not gonna spin it off, right, So it's not 380 00:17:12,920 --> 00:17:16,480 Speaker 4: gonna be a Yum and Yum brand's China kind of situation. 381 00:17:16,640 --> 00:17:17,880 Speaker 4: So how do you digest that? 382 00:17:18,280 --> 00:17:20,440 Speaker 7: I mean, it could be a Yum and China situation. 383 00:17:20,480 --> 00:17:22,720 Speaker 7: Who knows what's on the table at this point. I mean, 384 00:17:22,760 --> 00:17:25,640 Speaker 7: we could fathom any sort of measures. I mean, most 385 00:17:25,680 --> 00:17:27,880 Speaker 7: of Starbucks stores are owned, but then when it comes 386 00:17:27,920 --> 00:17:29,320 Speaker 7: to international it's a little less so. 387 00:17:29,560 --> 00:17:31,720 Speaker 5: And even places like you know, I mentioned the cruise lines. 388 00:17:31,720 --> 00:17:33,760 Speaker 7: You know, we were on a Royal Caribbean ship a 389 00:17:33,800 --> 00:17:35,560 Speaker 7: couple months ago and they had a like in our. 390 00:17:35,520 --> 00:17:37,760 Speaker 4: Bas always like, remember at the time, I was on 391 00:17:37,760 --> 00:17:40,160 Speaker 4: that cruise and it was really awesome. Sorry continue. 392 00:17:40,800 --> 00:17:44,080 Speaker 7: They did actually have a collector mug for Icond of 393 00:17:44,080 --> 00:17:47,960 Speaker 7: the Seas that I did buy, which was a Starbucks mug, 394 00:17:48,200 --> 00:17:49,919 Speaker 7: but it was Starbucks with a bunch of Icon of 395 00:17:49,920 --> 00:17:50,480 Speaker 7: the Sea stuff. 396 00:17:50,640 --> 00:17:52,160 Speaker 5: I had to get it. I mean, it was two 397 00:17:52,160 --> 00:17:52,880 Speaker 5: companies I cover. 398 00:17:52,960 --> 00:17:55,320 Speaker 3: I was like, I can't one shot. Well, on the 399 00:17:55,359 --> 00:17:59,000 Speaker 3: flip side of this this transaction Chipotle, what's the outlook there, 400 00:17:59,040 --> 00:18:00,600 Speaker 3: what's the feeling there in the street. 401 00:18:00,920 --> 00:18:03,200 Speaker 7: So Chippote is an interesting one because they don't really 402 00:18:03,240 --> 00:18:05,560 Speaker 7: have that much dead outstanding. So it's one that you know, 403 00:18:05,640 --> 00:18:08,359 Speaker 7: Mike Hallen really deeply covers. We a little less, so 404 00:18:08,400 --> 00:18:11,480 Speaker 7: we cover it from the standpoint that obviously it's a 405 00:18:11,600 --> 00:18:14,160 Speaker 7: very important player in the space. It's that fast casual 406 00:18:14,520 --> 00:18:17,399 Speaker 7: we love talking about Yalm and obviously Chipotte sort of 407 00:18:17,440 --> 00:18:19,439 Speaker 7: lines in perfectly with Yalm and it's sort of that 408 00:18:19,600 --> 00:18:22,879 Speaker 7: intersection between Yum and Darden, which we like talking about. 409 00:18:23,240 --> 00:18:26,240 Speaker 7: And so I mean, I think, you know, Chippote obviously 410 00:18:26,280 --> 00:18:29,320 Speaker 7: had a lot of negative headlines. We're talking five years ago, 411 00:18:29,880 --> 00:18:32,200 Speaker 7: you know, in terms of safety for their food, which 412 00:18:32,240 --> 00:18:35,000 Speaker 7: is obviously never never a good thing. Since then, they've 413 00:18:35,080 --> 00:18:37,679 Speaker 7: turned around the company quite substantially. Now, I don't know 414 00:18:37,720 --> 00:18:40,800 Speaker 7: what this means when you have a Darling CEO jump 415 00:18:40,880 --> 00:18:43,160 Speaker 7: ship and go to another company. I'm not quite sure 416 00:18:43,160 --> 00:18:46,080 Speaker 7: what we'd expect there. I do sort of wonder what 417 00:18:46,240 --> 00:18:47,159 Speaker 7: shareholders are. 418 00:18:47,000 --> 00:18:50,760 Speaker 3: Thinking our thanks to Jody Lourie, Bloomberg Intelligence credit Anios. 419 00:18:50,800 --> 00:18:53,520 Speaker 4: We move next to my favorite space energy. We have 420 00:18:53,600 --> 00:18:56,560 Speaker 4: something here at Bloomberg called Bloomberg New Energy Finance. The 421 00:18:56,600 --> 00:19:00,480 Speaker 4: idea behind it is to provide data on commodities, power, transport, industries, 422 00:19:00,520 --> 00:19:03,040 Speaker 4: buildings and agriculture and new technology. 423 00:19:03,359 --> 00:19:06,280 Speaker 3: This week we looked at battery storage, because you can't 424 00:19:06,280 --> 00:19:08,800 Speaker 3: make a transition if you can't store the energy for more. 425 00:19:08,840 --> 00:19:11,359 Speaker 3: We're dravened by Yea yu Sakhani, head of Energy storage 426 00:19:11,359 --> 00:19:12,439 Speaker 3: research at Bloomberg, and. 427 00:19:13,040 --> 00:19:15,399 Speaker 4: We first ask Yayo just how much energy storage we 428 00:19:15,440 --> 00:19:17,840 Speaker 4: realistically need going forward and how hard is it to 429 00:19:17,880 --> 00:19:18,320 Speaker 4: get there? 430 00:19:18,680 --> 00:19:21,000 Speaker 8: To give you some context, when we talk about storage, 431 00:19:21,040 --> 00:19:25,200 Speaker 8: we're talking about multiple types of technologies. You mentioned batteries specifically, 432 00:19:26,080 --> 00:19:29,600 Speaker 8: we're really talking about many tarotwood hours of battery storage 433 00:19:29,640 --> 00:19:32,639 Speaker 8: capacity that's a little bit hard to make it tangible. 434 00:19:32,720 --> 00:19:34,840 Speaker 8: But just to give you some context on where the 435 00:19:34,840 --> 00:19:38,560 Speaker 8: market is today, we are at about one point two 436 00:19:38,680 --> 00:19:45,520 Speaker 8: tarotwood hours of total batteries Tara what hours, Yeah, exactly, Yeah, 437 00:19:45,640 --> 00:19:49,360 Speaker 8: so that's yeah, when you get to Terra's that's that's 438 00:19:49,359 --> 00:19:50,240 Speaker 8: pretty big, it's bigger. 439 00:19:50,280 --> 00:19:52,000 Speaker 3: Thank okay, thank you exactly. 440 00:19:52,560 --> 00:19:56,280 Speaker 8: So essentially where we're at is like we've had record 441 00:19:56,359 --> 00:19:59,680 Speaker 8: years in terms of total deployment of batteries in the world, 442 00:19:59,760 --> 00:20:01,880 Speaker 8: and the this is in the form of both evs, 443 00:20:01,920 --> 00:20:04,880 Speaker 8: so batteries that go in electric vehicles, that's in the Tesla's, 444 00:20:04,920 --> 00:20:07,680 Speaker 8: the byds that you see being sold, as well as 445 00:20:07,680 --> 00:20:11,640 Speaker 8: in stationary storage markets. So that's like big grid batteries 446 00:20:11,680 --> 00:20:15,480 Speaker 8: that are installed to shift solar and wind generation to 447 00:20:15,680 --> 00:20:19,199 Speaker 8: evening hours as well as you know, some people are 448 00:20:19,240 --> 00:20:21,480 Speaker 8: installing them in their homes because they would like to 449 00:20:21,480 --> 00:20:23,960 Speaker 8: have some backup power or they have their own solar 450 00:20:24,000 --> 00:20:25,679 Speaker 8: system and they would like to shift some of that 451 00:20:25,840 --> 00:20:28,879 Speaker 8: energy to their evening consumption. So that's that's quite a 452 00:20:28,880 --> 00:20:32,600 Speaker 8: lot and definitely records still continuing to be broken. 453 00:20:32,640 --> 00:20:36,320 Speaker 3: There is the efficiency of batteries. Is that getting better? 454 00:20:36,640 --> 00:20:38,200 Speaker 3: And how does it get better? 455 00:20:38,720 --> 00:20:39,000 Speaker 5: Yeah? 456 00:20:39,040 --> 00:20:41,840 Speaker 8: I mean, good question. There, so they are they have 457 00:20:41,920 --> 00:20:45,480 Speaker 8: been getting better. So a lot of the trajectory around 458 00:20:45,480 --> 00:20:48,560 Speaker 8: batteries and improvement on technologies is very much focused around 459 00:20:48,560 --> 00:20:52,280 Speaker 8: with immine batteries. We've seen over the last decade improvement 460 00:20:52,359 --> 00:20:55,359 Speaker 8: in many aspects of the technology, so becoming more energy 461 00:20:55,400 --> 00:20:58,560 Speaker 8: dense so you can carry more energy storage capacity. 462 00:20:58,600 --> 00:21:00,280 Speaker 4: I mean, like it's not one or two hours, maybe 463 00:21:00,320 --> 00:21:01,000 Speaker 4: it could be days. 464 00:21:01,200 --> 00:21:03,719 Speaker 8: It could be it could be days. Although today the 465 00:21:03,760 --> 00:21:06,240 Speaker 8: majority of the systems that we're seeing deployed are pretty 466 00:21:06,280 --> 00:21:10,199 Speaker 8: much two four hours. There is some extension of that 467 00:21:10,440 --> 00:21:12,840 Speaker 8: so that that means like we can shift more energy 468 00:21:12,880 --> 00:21:16,440 Speaker 8: to maybe not another like the next day, but maybe 469 00:21:16,480 --> 00:21:20,040 Speaker 8: then a day in the next week. But primarily today 470 00:21:20,080 --> 00:21:22,920 Speaker 8: the majority of the use cases are are generally two 471 00:21:23,000 --> 00:21:24,280 Speaker 8: four hours within a day. 472 00:21:24,440 --> 00:21:26,679 Speaker 4: Why is it so hard to increase storage life? Like, 473 00:21:26,680 --> 00:21:28,240 Speaker 4: why is it so hard to go from a couple 474 00:21:28,320 --> 00:21:29,840 Speaker 4: hours to longer? 475 00:21:30,640 --> 00:21:33,359 Speaker 8: So it's not technically hard to do, it's more about 476 00:21:33,400 --> 00:21:36,920 Speaker 8: the cost. So once you start looking at multiple hours 477 00:21:36,960 --> 00:21:39,520 Speaker 8: and multiple days, that means you have to add more 478 00:21:39,720 --> 00:21:43,640 Speaker 8: energy storage duration, more capex to that project. And if 479 00:21:43,640 --> 00:21:45,760 Speaker 8: there isn't really a mechanism for you to be paid 480 00:21:45,800 --> 00:21:48,760 Speaker 8: for that additional investment that you're adding the more batteries 481 00:21:48,880 --> 00:21:52,159 Speaker 8: for for duration, You're not really going to want to 482 00:21:52,200 --> 00:21:54,840 Speaker 8: do that as somebody who's building these batteries, and so 483 00:21:54,880 --> 00:21:57,240 Speaker 8: it's it's a lot of it is related to what 484 00:21:57,359 --> 00:21:59,600 Speaker 8: is the market paying for today and what the market 485 00:21:59,600 --> 00:22:02,560 Speaker 8: needs to day in the future. Our expectation and based 486 00:22:02,560 --> 00:22:05,399 Speaker 8: on VNIF analysis, is that we're going to see longer 487 00:22:05,480 --> 00:22:08,359 Speaker 8: duration needs and that's primarily because we're going to be 488 00:22:08,640 --> 00:22:11,159 Speaker 8: we're going to need to be shifting more solar and 489 00:22:11,240 --> 00:22:14,240 Speaker 8: more WIN generation to other hours and for longer periods. 490 00:22:14,520 --> 00:22:18,040 Speaker 8: If we're decommissioning those gas plants that are currently providing 491 00:22:18,040 --> 00:22:18,600 Speaker 8: that service. 492 00:22:18,840 --> 00:22:21,439 Speaker 3: What are the next in terms of batteries and stores, 493 00:22:21,440 --> 00:22:24,359 Speaker 3: what's the next thing that lay people like Alex and 494 00:22:24,400 --> 00:22:27,440 Speaker 3: I and John we should be looking for thinking. 495 00:22:27,240 --> 00:22:32,320 Speaker 8: About so some exciting things aside from the market level stuff, 496 00:22:32,320 --> 00:22:35,439 Speaker 8: which is like as I mentioned, record levels of battery 497 00:22:35,440 --> 00:22:40,440 Speaker 8: capacity being deployed. Probably it's more about like the evs 498 00:22:40,520 --> 00:22:43,240 Speaker 8: becoming more more affordable. So if you want to go 499 00:22:43,320 --> 00:22:46,440 Speaker 8: into the store and buy instead of buying conventional car, 500 00:22:46,800 --> 00:22:49,760 Speaker 8: you want to buy an electric vehicle, actually having that 501 00:22:49,840 --> 00:22:52,560 Speaker 8: at a price point that's more accessible for your focket. 502 00:22:53,320 --> 00:22:56,680 Speaker 8: That's essentially a factor of multiple things, one of which 503 00:22:56,720 --> 00:22:59,359 Speaker 8: is the battery costs. So for the battery costs to 504 00:22:59,400 --> 00:23:02,080 Speaker 8: come down, which a big portion of an electric vehicle cost, 505 00:23:02,680 --> 00:23:03,679 Speaker 8: that actually makes those. 506 00:23:03,520 --> 00:23:04,560 Speaker 3: Big coming down. 507 00:23:05,000 --> 00:23:07,960 Speaker 8: They are coming down, and that's actually a major story 508 00:23:08,000 --> 00:23:10,440 Speaker 8: for this year. It's the fact that we've seen batteries 509 00:23:10,480 --> 00:23:13,919 Speaker 8: at record low prices, especially in China, but that's starting 510 00:23:13,960 --> 00:23:15,720 Speaker 8: to have a knock on effect in other markets in 511 00:23:15,760 --> 00:23:18,679 Speaker 8: the world as well, and so there's a lot of 512 00:23:18,680 --> 00:23:21,720 Speaker 8: factors around the markets related to that. There's huge over 513 00:23:21,800 --> 00:23:26,080 Speaker 8: capacity in the battery manufacturing sector in China today, and 514 00:23:26,119 --> 00:23:29,240 Speaker 8: then there's the back of that intense competition of the 515 00:23:29,280 --> 00:23:33,680 Speaker 8: battery manufacturers in the Chinese market, and that's essentially really 516 00:23:33,680 --> 00:23:36,280 Speaker 8: putting a lot of pricing pressures downwards in that market. 517 00:23:36,480 --> 00:23:39,400 Speaker 4: Before I let you go to subsidies help from governments 518 00:23:39,440 --> 00:23:40,560 Speaker 4: to make all this happen. 519 00:23:40,720 --> 00:23:43,119 Speaker 8: Yeah, absolutely so. I think in the context of the 520 00:23:43,200 --> 00:23:46,480 Speaker 8: US specifically, we've seen a lot of gigafactories being announced 521 00:23:46,480 --> 00:23:48,760 Speaker 8: in the US at the back of the Inflation Reduction Act. 522 00:23:49,080 --> 00:23:52,080 Speaker 8: They provide multiple types of subsidies. A major one is 523 00:23:52,280 --> 00:23:55,879 Speaker 8: for the production of batteries, battery cells and battery modules, 524 00:23:56,160 --> 00:23:58,280 Speaker 8: which are the building blocks of batteries that you see 525 00:23:58,320 --> 00:24:03,360 Speaker 8: in electric cars, stationary storage. And that's a significant amounts 526 00:24:03,400 --> 00:24:05,800 Speaker 8: thirty five to forty five dollars per kilo what hour 527 00:24:05,880 --> 00:24:08,480 Speaker 8: for the production of these batteries. And so we've seen 528 00:24:08,480 --> 00:24:11,760 Speaker 8: a lot of gigod factories announced, although as of late 529 00:24:11,800 --> 00:24:14,480 Speaker 8: there's been some delays to some of those announcements because 530 00:24:14,520 --> 00:24:16,959 Speaker 8: of the slowdown around av demand growth. 531 00:24:17,320 --> 00:24:20,280 Speaker 3: Our thanks to Yeyu Sakhani, head of Energy storage research 532 00:24:20,280 --> 00:24:20,919 Speaker 3: at Bloomberg and. 533 00:24:20,960 --> 00:24:24,080 Speaker 4: EF coming up on the program laingre retailer Victoria's Secrets, 534 00:24:24,080 --> 00:24:26,960 Speaker 4: appointing a new CEO to lead its turnaround more in details. 535 00:24:27,000 --> 00:24:30,159 Speaker 3: Next, you're listening to Bloomberg Intelligence on Bloomberg Radio, providing 536 00:24:30,200 --> 00:24:32,880 Speaker 3: in research and data on two thousand companies in one 537 00:24:32,920 --> 00:24:35,960 Speaker 3: hundred and thirty industries. You can access Bloomberg Intelligence vmb 538 00:24:36,040 --> 00:24:36,840 Speaker 3: I go in the terminal. 539 00:24:36,920 --> 00:24:39,879 Speaker 4: I'm Paul Sweeney and am Alex Deal and this is Bloomberg. 540 00:24:45,400 --> 00:24:49,280 Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live 541 00:24:49,359 --> 00:24:52,920 Speaker 2: weekdays at ten am Eastern on applecar Play and Android 542 00:24:52,920 --> 00:24:55,680 Speaker 2: Auto with the Bloomberg Business app. You can also listen 543 00:24:55,800 --> 00:24:58,920 Speaker 2: live on Amazon Alexa from our flagship New York station. 544 00:24:59,280 --> 00:25:02,040 Speaker 2: Just say to play Bloomberg eleven thirty. 545 00:25:03,480 --> 00:25:05,880 Speaker 4: We move now to big tech and Google. This week 546 00:25:05,920 --> 00:25:08,800 Speaker 4: we heard the US Justice Department is considering breaking up 547 00:25:08,880 --> 00:25:09,840 Speaker 4: Alphabet's Google. 548 00:25:10,119 --> 00:25:12,320 Speaker 3: This comes after a landmark court ruling found that the 549 00:25:12,359 --> 00:25:14,639 Speaker 3: company monopolized the online search market. 550 00:25:14,680 --> 00:25:15,000 Speaker 2: For more. 551 00:25:15,040 --> 00:25:18,360 Speaker 4: We are joined by Jen Reeed, Bloomberg Intelligence Senior litigation Analyst. 552 00:25:18,480 --> 00:25:21,240 Speaker 3: Your first ask Jen, what exactly the DOJ is thinking 553 00:25:21,280 --> 00:25:22,919 Speaker 3: about doing when it comes to Google. 554 00:25:23,280 --> 00:25:25,639 Speaker 9: You know, now push comes to shove with this case 555 00:25:25,720 --> 00:25:28,200 Speaker 9: because it hasn't the DOJ hasn't really talked too much 556 00:25:28,240 --> 00:25:31,320 Speaker 9: about remedies. It's been working on liability in it won, 557 00:25:31,520 --> 00:25:33,720 Speaker 9: and it won pretty resoundingly. So now it has to 558 00:25:33,760 --> 00:25:35,800 Speaker 9: think about what it wants to ask the judge to 559 00:25:35,920 --> 00:25:38,960 Speaker 9: do to remedy what the judge found to be anti 560 00:25:39,000 --> 00:25:42,240 Speaker 9: competitive about what Google's been doing. And I have to 561 00:25:42,280 --> 00:25:45,199 Speaker 9: say that the idea of a structural request or a 562 00:25:45,240 --> 00:25:48,399 Speaker 9: breakoup's been around since twenty twenty because the Department of 563 00:25:48,520 --> 00:25:51,080 Speaker 9: Justice inserted it into the first complaint it filed back 564 00:25:51,119 --> 00:25:53,760 Speaker 9: in October of twenty twenty. It said, we may be 565 00:25:53,840 --> 00:25:56,560 Speaker 9: asking the judge for structural relief as necessary, and it's 566 00:25:56,600 --> 00:25:59,120 Speaker 9: something the DOJ's thinking about, and I don't think it's 567 00:25:59,160 --> 00:26:01,720 Speaker 9: a surprise. Why not go for it? You know, there's 568 00:26:01,840 --> 00:26:04,080 Speaker 9: kind of a big as bad mentality right now, and 569 00:26:04,280 --> 00:26:06,560 Speaker 9: if that's the case, then you want to break apart 570 00:26:06,600 --> 00:26:09,359 Speaker 9: these dominant firms and they have this win, why not 571 00:26:09,440 --> 00:26:10,760 Speaker 9: try to go for the gold on this? 572 00:26:11,160 --> 00:26:12,919 Speaker 4: So that's the case, though, I mean, is it one 573 00:26:12,920 --> 00:26:14,399 Speaker 4: of those things where they're going to go for it 574 00:26:14,440 --> 00:26:16,280 Speaker 4: but really it's going to be okay and they're not 575 00:26:16,320 --> 00:26:17,840 Speaker 4: going to do it, and they're going to do something else, 576 00:26:17,880 --> 00:26:19,840 Speaker 4: and then what's that something else instead? 577 00:26:20,080 --> 00:26:21,959 Speaker 9: Look, I think they will. It's going to be up 578 00:26:21,960 --> 00:26:23,879 Speaker 9: to the judge. And my gut here is that the 579 00:26:23,960 --> 00:26:27,280 Speaker 9: judge probably would not order that kind of drastic relief. 580 00:26:27,680 --> 00:26:30,280 Speaker 9: I just think that the judge was really specific here 581 00:26:30,320 --> 00:26:33,000 Speaker 9: about finding that it's the default agreements that Google had 582 00:26:33,119 --> 00:26:36,520 Speaker 9: entered into that were anti competitive, and what was harmful 583 00:26:36,520 --> 00:26:38,880 Speaker 9: about them was that it did not allow the rivals 584 00:26:38,880 --> 00:26:41,520 Speaker 9: to gain the data they needed through searches to have 585 00:26:41,600 --> 00:26:43,560 Speaker 9: scale to be a good enough search engine. And those 586 00:26:43,560 --> 00:26:46,280 Speaker 9: are two big issues. So if those are the two 587 00:26:46,320 --> 00:26:48,840 Speaker 9: things that are anti competitive. My suspicion is the judge 588 00:26:48,840 --> 00:26:51,280 Speaker 9: will say, hey, no more default, no more payment to 589 00:26:51,280 --> 00:26:54,479 Speaker 9: be the default search engine at these key search access points. 590 00:26:54,640 --> 00:26:56,399 Speaker 9: And by the way, maybe you need to share some 591 00:26:56,480 --> 00:26:58,600 Speaker 9: of this data you've collected over the years through all 592 00:26:58,640 --> 00:27:01,240 Speaker 9: these searches with these to give them a chance to 593 00:27:01,240 --> 00:27:04,200 Speaker 9: get better. Those are two options. And leahon Island's reporting 594 00:27:04,240 --> 00:27:07,120 Speaker 9: was great about also this AI issue and concerned about 595 00:27:07,200 --> 00:27:09,679 Speaker 9: using its dominance to get a lead in AI. And 596 00:27:09,720 --> 00:27:11,440 Speaker 9: maybe the DoD will do something there. 597 00:27:11,280 --> 00:27:15,040 Speaker 3: Too, because the AI thing is the one that I 598 00:27:15,080 --> 00:27:18,320 Speaker 3: think has a lot of people concerned, not investors, but 599 00:27:18,400 --> 00:27:20,560 Speaker 3: just people think about AI and what it means for 600 00:27:20,680 --> 00:27:23,200 Speaker 3: privacy and all these other issues. What does it mean 601 00:27:23,240 --> 00:27:26,800 Speaker 3: for jobs and security and all these things which the 602 00:27:26,840 --> 00:27:29,240 Speaker 3: market nobody has an idea and certainly not the courts 603 00:27:29,359 --> 00:27:33,400 Speaker 3: or regulators here. But what are Google's defenses here here, 604 00:27:33,680 --> 00:27:36,880 Speaker 3: given that they did lose that anti trust case. 605 00:27:37,880 --> 00:27:39,600 Speaker 9: I think one of the things Google will do will 606 00:27:39,640 --> 00:27:41,639 Speaker 9: point to language by the judge, And actually there was 607 00:27:41,720 --> 00:27:43,639 Speaker 9: quite a bit of it in the complaint about the 608 00:27:43,680 --> 00:27:45,960 Speaker 9: fact that it really has been a great innovator, that 609 00:27:46,000 --> 00:27:48,480 Speaker 9: it's been ingenius, that the fact of the matter is 610 00:27:48,520 --> 00:27:51,359 Speaker 9: it developed the best quality search engine in the world 611 00:27:51,680 --> 00:27:54,359 Speaker 9: by putting in money, by putting in innovation, by hiring 612 00:27:54,400 --> 00:27:59,199 Speaker 9: great engineers and ingenuity. The judge did say that, and 613 00:27:59,240 --> 00:28:01,160 Speaker 9: also the judge, by the way, said even though Google 614 00:28:01,200 --> 00:28:04,280 Speaker 9: had obtained a monopoly position, it continued to innovate, even 615 00:28:04,320 --> 00:28:06,800 Speaker 9: though it didn't really have to once it gained that spot. 616 00:28:07,240 --> 00:28:09,600 Speaker 9: So Google will say, look, you know, you have no 617 00:28:09,720 --> 00:28:12,439 Speaker 9: guarantee that that same kind of innovative spirit will be 618 00:28:12,440 --> 00:28:15,200 Speaker 9: behind the parent of this new company. If you cleave 619 00:28:15,200 --> 00:28:18,080 Speaker 9: offf Android or cleaveoff Chrome and it's run by some 620 00:28:18,160 --> 00:28:20,399 Speaker 9: other entity, you know that might not be in that 621 00:28:20,560 --> 00:28:23,800 Speaker 9: entity's DNA. You have acknowledged that we're innovators and that 622 00:28:23,880 --> 00:28:26,040 Speaker 9: will continue to innovate, and it makes the most sense 623 00:28:26,080 --> 00:28:28,280 Speaker 9: for these assets to stay in our hands. That's what 624 00:28:28,320 --> 00:28:29,159 Speaker 9: I think Google. 625 00:28:28,920 --> 00:28:30,880 Speaker 4: Will say, all right, our thanks to Jen Ree, she's 626 00:28:30,920 --> 00:28:33,160 Speaker 4: Bloomberg Intelligence senior litigation analyst. 627 00:28:33,359 --> 00:28:35,840 Speaker 3: We'll turn out to news in the banking industry, Bank 628 00:28:35,880 --> 00:28:38,360 Speaker 3: of Nova Scotia has agreed to buy a minority stake 629 00:28:38,400 --> 00:28:40,920 Speaker 3: in the US regional bank Key Corp. For about two 630 00:28:40,960 --> 00:28:41,920 Speaker 3: point eight billion dollars. 631 00:28:42,080 --> 00:28:44,560 Speaker 4: This comes a Scotia Bank makes good on its plans 632 00:28:44,600 --> 00:28:46,360 Speaker 4: to invest more capital in the US. 633 00:28:46,680 --> 00:28:48,280 Speaker 3: For more on this, we were joined by Herman Chen 634 00:28:48,360 --> 00:28:51,440 Speaker 3: Bloomberg Intelligence, senior analysts for US regional banks. 635 00:28:51,600 --> 00:28:53,480 Speaker 4: I first asked Herman to walk us through what Key 636 00:28:53,520 --> 00:28:56,520 Speaker 4: Corp actually was before Scotia Bank got involved this week. 637 00:28:56,920 --> 00:29:01,360 Speaker 10: Key Corp regional bank based in Ohio, Cleveland, strong presence 638 00:29:01,520 --> 00:29:06,320 Speaker 10: in commercial ending and has a really robust investment bank 639 00:29:06,320 --> 00:29:09,240 Speaker 10: and capital markets capability for its size. On the flip side, 640 00:29:09,520 --> 00:29:13,160 Speaker 10: the bank has been really pressured by the higher interest 641 00:29:13,200 --> 00:29:16,280 Speaker 10: rate environment. It got caught off sides a little bit 642 00:29:16,360 --> 00:29:19,720 Speaker 10: by both its hedging strategy and its investments in low 643 00:29:19,840 --> 00:29:23,560 Speaker 10: yielding securities when interest rates were near zero. So it's 644 00:29:24,000 --> 00:29:26,640 Speaker 10: margin and profitability has lagged the peer group over the 645 00:29:26,680 --> 00:29:30,760 Speaker 10: past couple of years. That being said, things were improving 646 00:29:30,920 --> 00:29:35,239 Speaker 10: and didn't require any additional capital infusion. There was on 647 00:29:35,280 --> 00:29:40,360 Speaker 10: a path to self help. Margin had already reached the bottom, 648 00:29:40,560 --> 00:29:44,120 Speaker 10: but now with the two point eight billion capital infusion 649 00:29:44,160 --> 00:29:48,880 Speaker 10: from Scotia Bank, they can accelerate that earnings profitability improvement story. 650 00:29:49,400 --> 00:29:51,920 Speaker 4: How long does it take to get something like this done? 651 00:29:52,000 --> 00:29:53,240 Speaker 4: Like has this been in the works for a while 652 00:29:53,280 --> 00:29:53,440 Speaker 4: or what. 653 00:29:53,680 --> 00:29:58,000 Speaker 10: Yeah, it seems like based on both the calls that 654 00:29:58,240 --> 00:30:02,160 Speaker 10: that Key Corp and SCOO been conducted, the CEOs had 655 00:30:02,200 --> 00:30:08,400 Speaker 10: ongoing conversations about a potential investment. From what I understand, 656 00:30:08,440 --> 00:30:12,320 Speaker 10: Scotia Bank wanted to expand in the US and had 657 00:30:12,480 --> 00:30:16,280 Speaker 10: done a lot of due diligence in looking at opportunities, 658 00:30:16,320 --> 00:30:20,080 Speaker 10: and Key Corp was their top choice. So it adds 659 00:30:20,680 --> 00:30:24,440 Speaker 10: a great earning stream and exposure to the US for 660 00:30:24,560 --> 00:30:27,560 Speaker 10: Scotia Bank and for Key Corp. It really improves its 661 00:30:27,560 --> 00:30:31,520 Speaker 10: capital and liquidity and really puts them on offense rather 662 00:30:31,560 --> 00:30:33,440 Speaker 10: than playing defense for the past couple of years. 663 00:30:33,520 --> 00:30:36,320 Speaker 4: How are the banks like Key Corp doing as interest 664 00:30:36,400 --> 00:30:38,600 Speaker 4: rates may fall somewhat soon. 665 00:30:39,080 --> 00:30:42,760 Speaker 10: Yeah, I guess I would contrast it with a tumult 666 00:30:42,960 --> 00:30:47,800 Speaker 10: of March and April of last year. The banks had 667 00:30:47,920 --> 00:30:51,760 Speaker 10: largely been very defensive pretty much up to the end 668 00:30:51,800 --> 00:30:57,080 Speaker 10: of last year, reducing its lending capacity, trying to improve 669 00:30:57,120 --> 00:31:02,040 Speaker 10: its capital and liquidity ahead of both fears about deposits 670 00:31:02,120 --> 00:31:06,640 Speaker 10: leaving and also higher regulatory burden. Right now, it seems 671 00:31:06,680 --> 00:31:09,719 Speaker 10: like they're in a much stronger position. Capital has been 672 00:31:10,200 --> 00:31:13,360 Speaker 10: built up, they're back to lending the only issue is 673 00:31:13,400 --> 00:31:16,240 Speaker 10: there's not a lot of demand, and the banks are 674 00:31:16,320 --> 00:31:20,680 Speaker 10: positioned for potentially lower interest rates that can improve some 675 00:31:20,880 --> 00:31:23,920 Speaker 10: lending going forward. They've had a lot of the potential 676 00:31:24,000 --> 00:31:27,120 Speaker 10: rate decline, so they're in a fairly good position to 677 00:31:27,520 --> 00:31:29,880 Speaker 10: really prosecute the opportunity. 678 00:31:30,560 --> 00:31:35,720 Speaker 4: What about deposits? Has deposit flight stopped, particularly if rates 679 00:31:35,760 --> 00:31:37,840 Speaker 4: wind up coming down. I'm just waiting for my market's 680 00:31:37,840 --> 00:31:40,040 Speaker 4: account all of a sudden started to tick lower and 681 00:31:40,200 --> 00:31:42,040 Speaker 4: yield where are we here with that? 682 00:31:42,440 --> 00:31:46,040 Speaker 10: My high savings account is already ticked down in anticipation 683 00:31:46,120 --> 00:31:49,200 Speaker 10: for Rencooks, So American Express, I'm not a big fan 684 00:31:49,240 --> 00:31:53,680 Speaker 10: of that. I would say that the posits have really stabilized. 685 00:31:54,120 --> 00:31:57,719 Speaker 10: There's no real rush to build deposits now because as 686 00:31:57,760 --> 00:32:00,440 Speaker 10: I said before, there's not a lot of demand for 687 00:32:00,480 --> 00:32:02,920 Speaker 10: the lending site, so you don't need a lot of 688 00:32:03,080 --> 00:32:06,680 Speaker 10: deposits to really fuel that muted demand appetite out there 689 00:32:06,760 --> 00:32:10,360 Speaker 10: for loans. That being said, the positle cards aren't rising either, 690 00:32:10,960 --> 00:32:15,520 Speaker 10: and they're pretty stable because the FEDS stabilized the Fed 691 00:32:15,560 --> 00:32:18,960 Speaker 10: funds rate for a bit now, and we'd expect, you know, 692 00:32:19,200 --> 00:32:22,120 Speaker 10: some stable margin. Depending on the bank, some could be 693 00:32:22,160 --> 00:32:24,880 Speaker 10: down over the next year just based on their balance sheets. 694 00:32:25,240 --> 00:32:29,360 Speaker 4: Are there other potential targets for investments from other banks 695 00:32:29,360 --> 00:32:30,440 Speaker 4: in this kind of scenario. 696 00:32:30,680 --> 00:32:35,440 Speaker 10: Yeah, from what I understand that there's a unique way 697 00:32:35,480 --> 00:32:40,320 Speaker 10: of accounting for the Canadians. A small portion of investments 698 00:32:40,360 --> 00:32:46,600 Speaker 10: in financial institutions has as a positive capital calculation, so 699 00:32:46,920 --> 00:32:50,040 Speaker 10: it might be more focused on the Canadians in general. 700 00:32:50,440 --> 00:32:53,520 Speaker 10: But that being said that, we have seen some pickup 701 00:32:53,760 --> 00:32:56,200 Speaker 10: in traditional m and A activity in the United States. 702 00:32:57,120 --> 00:32:59,920 Speaker 10: Discover Capital one is the biggest one that we're still 703 00:33:00,000 --> 00:33:02,800 Speaker 10: waiting for regulatory approval on, and then there's some smaller 704 00:33:02,840 --> 00:33:05,920 Speaker 10: banks that have done some deals as well, So it 705 00:33:06,040 --> 00:33:09,960 Speaker 10: seems like that the activity is going to rebound even 706 00:33:10,000 --> 00:33:11,840 Speaker 10: more once we get rate cuts. 707 00:33:11,920 --> 00:33:14,840 Speaker 3: Our thanks to Herman Chan and Bloomberg Intelligence senior analysts 708 00:33:14,880 --> 00:33:16,040 Speaker 3: for US regional banks. 709 00:33:16,360 --> 00:33:19,520 Speaker 4: We move next to the lingerie retailer at Victoria's Secret. 710 00:33:19,680 --> 00:33:22,160 Speaker 4: This week we got news at Victoria's Secret is poaching 711 00:33:22,200 --> 00:33:24,960 Speaker 4: the top executive from Rihanna's Lingerie brand to lead the 712 00:33:24,960 --> 00:33:26,040 Speaker 4: retailers turnaround. 713 00:33:26,320 --> 00:33:29,640 Speaker 3: Hillary super will replace Martin Waters, who was terminated as 714 00:33:29,680 --> 00:33:31,400 Speaker 3: CEO and resigned from the board. 715 00:33:31,760 --> 00:33:33,440 Speaker 4: For more on this, we are joined by Mary Ross, 716 00:33:33,440 --> 00:33:36,600 Speaker 4: Gilbert Bloomberg Intelligence senior equity analyst covering retail. 717 00:33:36,840 --> 00:33:38,680 Speaker 3: We first asked Mary if this week's news is a 718 00:33:38,680 --> 00:33:40,160 Speaker 3: big deal for Victoria's Secret. 719 00:33:40,480 --> 00:33:42,720 Speaker 11: I think this is a big deal. Being a woman 720 00:33:42,840 --> 00:33:46,480 Speaker 11: focused brand, we think that Hillary Super And as you mentioned, 721 00:33:46,520 --> 00:33:52,600 Speaker 11: she was just the CEO at Rihanna's brand Fenti x Savage, 722 00:33:52,800 --> 00:33:56,160 Speaker 11: and that's a lingerie company. It's a teeny, teeny tiny company. 723 00:33:56,640 --> 00:34:01,360 Speaker 11: But Hillary has three decades of experience, was the chief 724 00:34:01,440 --> 00:34:06,400 Speaker 11: of the Anthropology brands more recently and prior to that, 725 00:34:06,440 --> 00:34:09,680 Speaker 11: she's worked at a number of other brands, including American Eagle. 726 00:34:09,719 --> 00:34:12,799 Speaker 11: And speaking of competition to Victoria's Secret and why they've 727 00:34:12,800 --> 00:34:16,600 Speaker 11: lost share, American Eagle has a brand called Airy and 728 00:34:16,880 --> 00:34:19,960 Speaker 11: that's about, you know, one point six billion dollar business. 729 00:34:20,400 --> 00:34:24,160 Speaker 11: So Victoria's Secret has lost market share, but they have 730 00:34:24,480 --> 00:34:27,600 Speaker 11: been in a turnaround mode for the past three to 731 00:34:27,680 --> 00:34:31,400 Speaker 11: four years and we're starting to see some traction. But 732 00:34:31,520 --> 00:34:36,640 Speaker 11: we really think that with Super's understanding of the consumer, 733 00:34:36,719 --> 00:34:40,240 Speaker 11: working with multiple brands and really getting the brand heat, 734 00:34:40,920 --> 00:34:43,240 Speaker 11: we think that she could really make a difference here 735 00:34:43,280 --> 00:34:45,200 Speaker 11: at the HELM. So we think this is good news, 736 00:34:45,200 --> 00:34:47,200 Speaker 11: and of course it comes as they say that they 737 00:34:47,400 --> 00:34:51,359 Speaker 11: just beat two Q earnings. You know, they gave preliminary 738 00:34:51,440 --> 00:34:53,280 Speaker 11: estimates for their second quarter. 739 00:34:53,640 --> 00:34:56,400 Speaker 4: When did things really fall apart for Victoria's Secret, what 740 00:34:56,480 --> 00:34:57,000 Speaker 4: was the trigger? 741 00:34:57,280 --> 00:34:59,600 Speaker 11: Yeah, the trigger was really this sort of me too 742 00:34:59,800 --> 00:35:04,120 Speaker 11: move movement, and given that it was a brand that 743 00:35:04,280 --> 00:35:08,560 Speaker 11: was sort of focused on the perspective of what made 744 00:35:08,560 --> 00:35:13,799 Speaker 11: women sexy from a male perspective rather than from the 745 00:35:14,040 --> 00:35:19,319 Speaker 11: female consumer perspective, and that has has shifted. It used 746 00:35:19,320 --> 00:35:22,200 Speaker 11: to be part of limited brands. It was then spun off. 747 00:35:22,520 --> 00:35:25,200 Speaker 11: They've become a more inclusive brand. I mean, how many 748 00:35:25,239 --> 00:35:29,000 Speaker 11: companies out there can say that they have one hundred 749 00:35:29,040 --> 00:35:33,759 Speaker 11: percent equal pay across the business. I don't know of 750 00:35:33,800 --> 00:35:36,799 Speaker 11: any others, but they have achieved that. You know, it's 751 00:35:36,840 --> 00:35:42,080 Speaker 11: third party documented or certified, I should say. So, they've 752 00:35:42,080 --> 00:35:45,240 Speaker 11: made tremendous progress. They've really improved the lineup. 753 00:35:45,480 --> 00:35:47,560 Speaker 9: But I think kind of getting it to. 754 00:35:47,520 --> 00:35:50,239 Speaker 11: The next level and really getting that turnaround to a 755 00:35:50,280 --> 00:35:53,000 Speaker 11: point where they can get back to growth. I think 756 00:35:53,120 --> 00:35:55,680 Speaker 11: this is the right time at the moment to pivot 757 00:35:56,080 --> 00:35:59,440 Speaker 11: and bring in somebody like Hillary super So. I think 758 00:35:59,480 --> 00:36:02,000 Speaker 11: it's very, very exciting for the company at this time. 759 00:36:02,640 --> 00:36:05,880 Speaker 3: Well, Mary if the industry has changed, that the lingerie 760 00:36:05,960 --> 00:36:10,440 Speaker 3: part of the business has changed. Where are success coming 761 00:36:10,520 --> 00:36:11,840 Speaker 3: from in that new world? 762 00:36:12,239 --> 00:36:13,960 Speaker 11: Yeah, well, so there's a couple of things that happened. 763 00:36:14,000 --> 00:36:16,560 Speaker 11: I mean, the category had been growing for many years 764 00:36:16,680 --> 00:36:19,520 Speaker 11: and had been expected to grow, but they did experience 765 00:36:19,560 --> 00:36:22,040 Speaker 11: a slow down last year. But we're already starting to 766 00:36:22,080 --> 00:36:25,880 Speaker 11: see improvements in the category, at least in the US. Internationally, 767 00:36:25,920 --> 00:36:29,520 Speaker 11: by the way, Victoria's Secret is growing in the double digits. 768 00:36:29,560 --> 00:36:32,520 Speaker 11: I think in the last quarter international was up eleven percent. 769 00:36:33,160 --> 00:36:35,799 Speaker 11: So the category did weaken, but it looks like it's 770 00:36:35,800 --> 00:36:39,080 Speaker 11: starting to turn back up again. And really what happened 771 00:36:39,120 --> 00:36:41,920 Speaker 11: is with this sort of me too moment, it became 772 00:36:42,040 --> 00:36:47,160 Speaker 11: more inclusive, and so Victoria's Secret has adopted their brands 773 00:36:47,200 --> 00:36:50,799 Speaker 11: to be more inclusive, and you know, once again to 774 00:36:51,440 --> 00:36:54,440 Speaker 11: come from the perspective of a woman and what the 775 00:36:54,480 --> 00:36:57,640 Speaker 11: woman needs, you know, and it's a whole assortment. And 776 00:36:57,680 --> 00:36:59,279 Speaker 11: if you go into the stores, you will see a 777 00:36:59,360 --> 00:37:03,320 Speaker 11: dramatic improvement in the assortment that they have. In the 778 00:37:04,280 --> 00:37:07,719 Speaker 11: employee culture. I would say it's very positive, very exciting 779 00:37:08,440 --> 00:37:10,560 Speaker 11: environment when you go into the stores. But they do 780 00:37:10,640 --> 00:37:14,040 Speaker 11: need to remodel most of the stores. They've only been 781 00:37:14,080 --> 00:37:16,960 Speaker 11: able to touch a small percentage of the store base 782 00:37:17,080 --> 00:37:20,080 Speaker 11: so far, so there's still more to go. And then 783 00:37:20,160 --> 00:37:22,880 Speaker 11: the Pink brand is really at an earlier stage of 784 00:37:22,920 --> 00:37:26,600 Speaker 11: a turnaround, but we're already seeing fallen assortments really improve. 785 00:37:26,680 --> 00:37:31,680 Speaker 11: And they brought on Natalia Bryant as a brand ambassador, 786 00:37:31,800 --> 00:37:35,080 Speaker 11: so that's pretty exciting. We're heading in the right direction. 787 00:37:35,560 --> 00:37:38,160 Speaker 4: Thanks to Mary ros Gilbert, Bloomberg Intelligence and your equity 788 00:37:38,160 --> 00:37:39,360 Speaker 4: analyst covering retail. 789 00:37:40,000 --> 00:37:44,480 Speaker 2: This is the Bloomberg Intelligence podcast, available on Apples, Spotify, 790 00:37:44,719 --> 00:37:47,919 Speaker 2: and anywhere else you get your podcasts. Listen live each 791 00:37:47,920 --> 00:37:51,320 Speaker 2: weekday ten am to noon Eastern on Bloomberg dot com, 792 00:37:51,400 --> 00:37:54,840 Speaker 2: the iHeartRadio app, tune In, and the Bloomberg Business app. 793 00:37:54,920 --> 00:37:58,040 Speaker 2: You can also watch us live every weekday on YouTube 794 00:37:58,160 --> 00:38:01,640 Speaker 2: and always on the Bloomberg terminal count