WEBVTT - BI Weekend: Target, Home Depot, TX Earnings 0:00:00.280 --> 0:00:11.719 Bloomberg Audio Studios, podcasts, radio news. This is Bloomberg Intelligence 0:00:11.840 --> 0:00:13.920 with Alex Steel and Paul Sweeney. 0:00:14.040 --> 0:00:17.239 The real app performance has been in US corporate high yield. 0:00:17.440 --> 0:00:19.800 Are the companies lean enough? Have they trimmed all the fats? 0:00:19.840 --> 0:00:23.000 The semiconductor business is a really cyclical. 0:00:22.600 --> 0:00:26.800 Business, breaking market headlines and corporate news from across the globe. 0:00:26.840 --> 0:00:29.280 Do investors like the M and A that we've seen? 0:00:29.520 --> 0:00:32.440 These are two big time blue chip companies. 0:00:32.720 --> 0:00:36.120 Window between the peak and cunt changing super fast. 0:00:36.360 --> 0:00:41.400 Bloomberg Intelligence with Alex Steele and Paul Sweeney on Bloomberg Radio. 0:00:42.960 --> 0:00:45.240 Today's Bloomberg Intelligence Show, we dig inside the big business 0:00:45.280 --> 0:00:47.280 stories impacting Wall Street and the global markets. 0:00:47.560 --> 0:00:49.600 Each and every week we provide in depth research and 0:00:49.680 --> 0:00:51.479 data on some of the two thousand companies and one 0:00:51.520 --> 0:00:54.040 hundred and thirty industries our analysts cover worldwide. 0:00:54.080 --> 0:00:56.440 Today, well look at why home improvement has been resilient 0:00:56.480 --> 0:00:57.400 at the retailer. 0:00:57.120 --> 0:00:59.480 Home depot, and we'll discuss why the tech giant Apple 0:00:59.600 --> 0:01:01.520 still hasn't managed to crack AI. 0:01:01.840 --> 0:01:04.520 But first we begin with earnings from the retailer Targets. 0:01:04.680 --> 0:01:07.240 This week, Target reported sales that dropped in the first quarter, 0:01:07.240 --> 0:01:09.440 and the company also cut at sales forecast for the year. 0:01:09.720 --> 0:01:12.679 Target sited inclining consumer spending along with the impact of 0:01:12.760 --> 0:01:13.800 tariffs and boycotts. 0:01:13.840 --> 0:01:16.000 Target shares fell after the report and raise some questions 0:01:16.040 --> 0:01:18.720 over the company's ability to recapture growth after two years 0:01:18.720 --> 0:01:19.640 of choppy results. 0:01:19.800 --> 0:01:22.600 For more, we were joined by Jennifer Bartashi's Bloomberg Intelligence 0:01:22.600 --> 0:01:25.000 senior analyst Retail, Stables and packaged Food. 0:01:25.120 --> 0:01:27.520 We first asked Jennifer if she was surprised by the results. 0:01:28.040 --> 0:01:31.160 None of this really was a surprise. It's really about 0:01:31.280 --> 0:01:34.119 the degree to which it was a surprise. So sales 0:01:34.160 --> 0:01:36.680 came in softer than expected, profit was a little softer 0:01:36.800 --> 0:01:40.280 than expected, And it's just I think people are waiting 0:01:40.319 --> 0:01:43.000 for Target to say how they're going to fix it. 0:01:43.880 --> 0:01:46.520 And you know, they came out talking about a new office, 0:01:47.319 --> 0:01:49.800 you know, to accelerate their plans. But I think people 0:01:49.800 --> 0:01:52.680 are just waiting for something tangible that they can really 0:01:52.720 --> 0:01:55.880 hold the company accountable for to reignite growth in the 0:01:55.920 --> 0:01:56.960 in what they're trying to do. 0:01:57.440 --> 0:01:59.800 What does Target need to do specifically, because it seems 0:01:59.800 --> 0:02:02.480 like I don't know it just every time I've walk 0:02:02.520 --> 0:02:04.680 into a Target, it's lots of people doing stuff. The 0:02:04.720 --> 0:02:06.600 shelves are in good shape. What do they need to 0:02:06.640 --> 0:02:07.400 do well? 0:02:07.440 --> 0:02:10.880 A lot of it is continuing what they've started, which 0:02:10.919 --> 0:02:14.720 is improving their merchandise mix. You know, Target does best 0:02:14.760 --> 0:02:18.519 when their assortment is new, it's fresh, it's relevant to people, 0:02:18.880 --> 0:02:21.080 and they've made good strides in that area. But those 0:02:21.120 --> 0:02:24.400 types of changes take time for consumers to see and 0:02:24.480 --> 0:02:27.600 to start to embrace, and it's just a hard environment 0:02:27.639 --> 0:02:30.040 where people are still being a little bit conservative for 0:02:30.120 --> 0:02:33.800 those changes to really create some momentum in the business. 0:02:34.320 --> 0:02:37.919 So where are they with the pricing stuff in terms 0:02:37.919 --> 0:02:40.200 of their inventory, in terms of tariffs, in terms of 0:02:40.200 --> 0:02:41.400 where they source their material. 0:02:42.440 --> 0:02:45.839 Yeah, so from a pricing perspective, you know, when people 0:02:45.919 --> 0:02:47.839 look at value, price is one of the first things 0:02:47.840 --> 0:02:51.399 they look at. They're fairly priced competitive, and we've seen 0:02:51.440 --> 0:02:53.919 an uptick in the number of promotions that they're doing, 0:02:54.040 --> 0:02:56.520 so you know, buy forty dollars of these kinds of 0:02:56.680 --> 0:02:59.400 essentials and get a five dollars gift card. They're doing 0:02:59.440 --> 0:03:01.359 a lot more of that kind of promotion to pull 0:03:01.400 --> 0:03:04.679 people in. But one of the issues is that they 0:03:04.960 --> 0:03:08.600 talk today about inventory and having to you know, adjust 0:03:08.600 --> 0:03:10.920 and right size their inventory. And that's a little bit 0:03:10.960 --> 0:03:13.760 concerning because that's been a topic that has It's not 0:03:13.960 --> 0:03:16.240 new for Target, It's come up a couple of times 0:03:16.280 --> 0:03:18.640 in the past few years. And so the fact that 0:03:18.680 --> 0:03:23.000 they are expecting, you know, some inventory adjustments and markdowns 0:03:23.000 --> 0:03:26.440 to weigh on margins and profit you know, for the 0:03:26.480 --> 0:03:29.480 next quarter, is a little bit concerning that they still 0:03:29.480 --> 0:03:32.880 haven't quite figured out how they're going to navigate that, Jen. 0:03:32.919 --> 0:03:35.760 I know Walmart said on there recently that they would 0:03:36.000 --> 0:03:40.560 pass along probably some of their terror related cost increases 0:03:40.600 --> 0:03:43.320 to consumers, and then President Trump came out pretty publicly 0:03:43.440 --> 0:03:47.920 against that. What is Target saying about their ability to 0:03:47.960 --> 0:03:52.160 take whatever price increases cost increases may come about through tariffs, 0:03:52.160 --> 0:03:54.560 either in their margin or passing it along to consumers. 0:03:54.960 --> 0:03:57.800 Yeah, it's a definitely a good topic, Paul, And you 0:03:57.800 --> 0:04:00.360 know what they said was that price increases would be 0:04:00.360 --> 0:04:04.040 the last resort, but they didn't count them out. Instead, 0:04:04.080 --> 0:04:06.120 they focused on the tactics that he needs to try 0:04:06.160 --> 0:04:09.080 to mitigate some of the some of the pressure from tariffs. 0:04:09.400 --> 0:04:12.240 They're the same levers that every company is pulling. It's 0:04:12.440 --> 0:04:15.040 using your scale, it's working with your suppliers, it's trying 0:04:15.080 --> 0:04:18.880 to negotiate better you know, you know, better sourcing and 0:04:18.960 --> 0:04:22.839 better prices on the on the purchasing side. So you know, 0:04:22.960 --> 0:04:25.760 Target is certainly able to offset some of the some 0:04:25.800 --> 0:04:28.000 of the cost of tariffs, but it would be surprising 0:04:28.000 --> 0:04:30.360 if they can offset all of it. And and ultimately 0:04:30.440 --> 0:04:33.640 they're most likely going to have to be some selective 0:04:33.839 --> 0:04:35.520 price increases that get pushed through. 0:04:35.760 --> 0:04:38.159 Oh what are there? What's their inventory like in terms 0:04:38.160 --> 0:04:41.040 of that part and how that filters into their pricing. 0:04:42.200 --> 0:04:44.840 Yeah, so inventory has actually been getting a little bit 0:04:44.880 --> 0:04:48.760 better in terms of on shelf availability and tracking through 0:04:48.800 --> 0:04:52.520 the supply chain. It's just I think because they skew 0:04:52.600 --> 0:04:56.600 so much more to discretionary. If there's like, for example, 0:04:56.640 --> 0:04:59.239 in first quarter, we had some very unseasonably cold weather 0:04:59.560 --> 0:05:02.440 that impact apparel sales, That impacts a lot of those things. 0:05:02.480 --> 0:05:06.600 So you know that that increases markdowns. Hopefully that's a 0:05:06.640 --> 0:05:09.920 transitory type of thing. But they are talking about getting 0:05:09.960 --> 0:05:12.080 their inventory right sized as they head into back to 0:05:12.120 --> 0:05:13.800 school and the holiday season. 0:05:13.800 --> 0:05:16.919 And Jen the stock seems cheap to me? Is it 0:05:17.120 --> 0:05:20.160 cheap on a historical basis? Or how are people thinking 0:05:20.160 --> 0:05:20.839 about valuation? 0:05:21.320 --> 0:05:23.960 Yeah, it's it's definitely, you know, at a discount from 0:05:23.960 --> 0:05:27.359 it from a historical, you know, valuation perspective. But I 0:05:27.400 --> 0:05:29.919 think part of the part of the reason that it 0:05:30.040 --> 0:05:32.479 is where it is is that for a long time, 0:05:32.640 --> 0:05:36.760 what has differentiated Target was their private label selection, their 0:05:36.800 --> 0:05:40.240 own brands things that the quality of those brands where 0:05:40.240 --> 0:05:43.279 people could get value and style at a really compelling price. 0:05:43.720 --> 0:05:46.120 In the last couple of years, a lot of their competitors, 0:05:46.160 --> 0:05:49.320 whether you're talking about Walmart or Cohal's or or or 0:05:49.360 --> 0:05:52.520 companies like that, have invested in their private label. They've 0:05:52.600 --> 0:05:55.920 improved the quality, They've they've become a little bit more 0:05:55.960 --> 0:06:00.240 fashion forward, and that's that erodes the differentiation that it 0:06:00.320 --> 0:06:03.280 has always enjoyed and part of what has catapulted their 0:06:03.360 --> 0:06:08.240 success in recent years. So until Target gets that newness 0:06:08.240 --> 0:06:11.560 and that assortment readjusted again to be a leader and 0:06:11.600 --> 0:06:16.000 a differentiator, you may see that kind of valuation discount 0:06:16.040 --> 0:06:17.040 persist our. 0:06:17.120 --> 0:06:20.560 Thanks to Jen Bartashi's Bloomberg Intelligence Senior Retail Analyst. 0:06:20.400 --> 0:06:22.840 Each week we look at research from Bloomberg n EF 0:06:22.839 --> 0:06:25.400 previously known as New Energy Finance. They're the team at 0:06:25.400 --> 0:06:28.800 Bloomberg the tracks and analyzes the energy transition from commodities 0:06:28.839 --> 0:06:32.279 to power, transport, industries, buildings, and agricultural sectors. 0:06:32.480 --> 0:06:34.360 This week we looked at how the cost of clean 0:06:34.480 --> 0:06:37.560 energy technologies has changed. Solar and wind have been the 0:06:37.600 --> 0:06:40.760 most competitive source of new power for a few years. 0:06:40.520 --> 0:06:43.200 Now and for more. We are joined by Amar vasdev 0:06:43.520 --> 0:06:47.080 v an EF, a lead levelized cost expert. We first 0:06:47.080 --> 0:06:48.840 asked AMR to break down his research and what his 0:06:48.920 --> 0:06:49.760 team actually does. 0:06:50.120 --> 0:06:54.520 Effectively. We collect cost data on recently finance power projects 0:06:54.600 --> 0:06:57.599 and we sum that up into a metric that we 0:06:57.680 --> 0:07:01.160 call the levetized cost of electricity. And in short, what 0:07:01.200 --> 0:07:03.680 that is is it tells us what the long term 0:07:03.680 --> 0:07:08.400 off take price is that project developer needs to hit 0:07:08.440 --> 0:07:11.160 their IRR, recoup all of their costs and of course 0:07:11.200 --> 0:07:13.520 pay back the pay the taxes. 0:07:14.000 --> 0:07:17.480 So, Amara, here's what I don't think people understand, and 0:07:17.560 --> 0:07:20.400 I did not understand it until recently, that renewables are 0:07:20.440 --> 0:07:24.800 the cheapest source to meet new demand almost everywhere. Talk 0:07:24.840 --> 0:07:25.520 to us about that. 0:07:27.000 --> 0:07:31.760 Yeah, So the cost reductions in renewable technology, so specifically 0:07:31.800 --> 0:07:35.640 wind and solar, have been quite remarkable over the last 0:07:35.920 --> 0:07:39.760 decade or so. And so when we look at those 0:07:39.800 --> 0:07:44.000 projects that were financed last year and we estimate those costs. 0:07:44.600 --> 0:07:47.640 We find that either wind or soda is out competing 0:07:47.920 --> 0:07:51.800 either coal or gas in markets that are equivalent to 0:07:51.840 --> 0:07:56.040 two thirds of global power generation, so that includes China, 0:07:56.760 --> 0:07:58.320 includes most of Europe as well. 0:07:58.680 --> 0:08:02.240 But we take into a the intermittent power issue for 0:08:02.520 --> 0:08:04.840 wind and solar and how does that change the cause 0:08:04.920 --> 0:08:06.920 profile Like it might be cheaper to build a wind 0:08:07.280 --> 0:08:09.880 a wind farm than a billion nuclear plant, but the 0:08:09.920 --> 0:08:12.440 intermittent power of it all is an issue. 0:08:12.840 --> 0:08:16.680 Yeah, that is definitely right. It is a it is 0:08:16.720 --> 0:08:22.120 a problem with renewables that is often cited. But there 0:08:22.200 --> 0:08:30.680 are supporting technologies for supporting a grid that is dominated 0:08:30.680 --> 0:08:34.120 by wind and soda, and that would be battery storage 0:08:34.160 --> 0:08:37.520 for example. And so if we look last year alone, 0:08:37.559 --> 0:08:42.959 the cost of the typical projects fell by one third 0:08:43.240 --> 0:08:46.000 and out to twenty thirty five, we estimate that the 0:08:46.040 --> 0:08:51.240 cost of battery storage projects for by fifty percent. So 0:08:52.080 --> 0:08:55.880 there are supporting technologies that pair with wind and soda, 0:08:56.960 --> 0:09:00.640 and we also model we look at these, we break 0:09:00.640 --> 0:09:03.880 them down, and we look at the view out of 0:09:03.960 --> 0:09:07.200 twenty fifty how different power markets are likely to change. 0:09:07.880 --> 0:09:09.880 And just to put that in context, when we take 0:09:09.960 --> 0:09:13.600 that system view, we see that there are really strong 0:09:13.720 --> 0:09:19.040 long term fundamentals for renewables. So today wind and soda 0:09:19.120 --> 0:09:23.360 around eight percent of generation and that increases to sixty 0:09:23.360 --> 0:09:26.520 percent in our modeling by twenty fifty. And at the 0:09:26.559 --> 0:09:29.760 same time, the flip side of that is with fossil 0:09:29.760 --> 0:09:33.319 few assets, so coal and gas plants today they're at 0:09:33.320 --> 0:09:36.200 sixty percent. By twenty to fifty they go down to 0:09:36.240 --> 0:09:38.240 twenty five percent. And what they do is they kind 0:09:38.240 --> 0:09:41.679 of operate in a space where they support wind and 0:09:41.720 --> 0:09:44.359 soda as well as battery storage. 0:09:44.840 --> 0:09:48.839 So thinking just in the near term, what do high 0:09:48.840 --> 0:09:51.959 tariffs and maybe possible cuts to tax credits, what does 0:09:51.960 --> 0:09:55.880 that mean for this transition? Does it slow it down materially? Possibly? 0:09:57.080 --> 0:10:01.520 Yeah, it is a really interesting question, and it's as 0:10:01.520 --> 0:10:05.320 you know, it's moving very quickly. So our team in 0:10:05.320 --> 0:10:08.120 the US are really attracting this very very closely. And 0:10:09.600 --> 0:10:11.560 what we can say is that the policy and tariff 0:10:11.640 --> 0:10:17.160 uncertainty is posing a challenge for business confidence. It kind 0:10:17.200 --> 0:10:23.960 of impacts the willingness and investor appetite. But we do 0:10:24.040 --> 0:10:30.640 see that there is resilient demand that deployment stays resilient 0:10:31.200 --> 0:10:33.480 over the next ten years or so, because we do 0:10:33.520 --> 0:10:37.720 see increased electricity demand from AI needs from manufacturing as well, 0:10:38.520 --> 0:10:42.200 and what tends to be the cheapest source of electricity 0:10:43.640 --> 0:10:47.559 is wind and soda, so there is resilient deployment. We 0:10:47.600 --> 0:10:52.640 did model a scenario where if tax if tax credits 0:10:52.640 --> 0:10:56.240 were cut, the amount of wind and soda being added 0:10:56.280 --> 0:10:59.880 over the next ten years would reduce by around seven 0:11:00.000 --> 0:11:02.720 teen percent or so. So there is there is a 0:11:02.720 --> 0:11:06.599 material impact. But if we're adding new power to the 0:11:06.880 --> 0:11:09.040 if we're adding new supply to the grid, then it 0:11:09.080 --> 0:11:11.240 would tend to come from wind and sola. 0:11:12.280 --> 0:11:16.439 What about geothermal? The administration is definitely positive on geothermal. 0:11:16.760 --> 0:11:19.520 In speaking with the Energy Secretary here, he speaks a 0:11:19.520 --> 0:11:22.240 lot about that as well as clean coal. What's the 0:11:22.280 --> 0:11:23.920 cost profile like for geothermal? 0:11:25.480 --> 0:11:27.640 Yeah, it's hard for me to comment on that. I 0:11:27.640 --> 0:11:33.200 think the configuration of geothermal changes significantly, but there have 0:11:33.280 --> 0:11:36.000 been developments recently, and I suppose with the pairing with 0:11:37.200 --> 0:11:40.640 the kind of coupling with oil and gas experience with geothermal, 0:11:40.679 --> 0:11:43.480 there's a lot of overlap there on the specific costs. 0:11:43.840 --> 0:11:46.679 I couldn't comment on our Thanks to amar a Vestev 0:11:46.840 --> 0:11:49.440 b n EF lead levelized cost Expert. 0:11:49.480 --> 0:11:51.120 Coming up, We're going to look at why cancer risks 0:11:51.160 --> 0:11:53.280 are being linked to a popular over the counter drug. 0:11:53.480 --> 0:11:56.240 You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 0:11:56.320 --> 0:11:58.439 depth research and data on two thousand companies in one 0:11:58.480 --> 0:12:01.360 hundred and thirty industries. You can access Bloomberg Intelligence via 0:12:01.440 --> 0:12:02.720 Bidell on the terminal. 0:12:02.480 --> 0:12:05.160 From Whole Sweeting and a Malex Steel and this is Bloomberg. 0:12:09.840 --> 0:12:13.520 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:12:13.600 --> 0:12:16.679 weekdays at ten am Eastern on Apple, Cocklay and Android 0:12:16.720 --> 0:12:20.000 Auto with the Bloomberg Business App. Listen on demand wherever 0:12:20.080 --> 0:12:23.600 you get your podcasts, or watch us live on YouTube. 0:12:24.280 --> 0:12:26.439 We move next to news from the world's largest home 0:12:26.480 --> 0:12:28.080 improvement retailer, Home Depot. 0:12:28.320 --> 0:12:30.840 This week, Home Depot maintained its guidance for their fiscal 0:12:30.920 --> 0:12:32.480 year as US sales ticked up. 0:12:32.559 --> 0:12:35.199 The company said consumers are deferring larger projects due to 0:12:35.200 --> 0:12:38.599 the raid environment, but are still taking on smaller home projects. 0:12:38.920 --> 0:12:41.479 For more. We were joined by Drew Redding, Bloomberg Intelligence 0:12:41.640 --> 0:12:42.720 US home building analysts. 0:12:42.720 --> 0:12:44.439 We first asked Drew for his take on my home 0:12:44.480 --> 0:12:46.960 improvement has been so resilient at home Depot. 0:12:47.360 --> 0:12:49.920 One of the reasons why Home Improvement and Hope Depot 0:12:49.920 --> 0:12:53.440 have been so resilient is because a large portion of 0:12:53.440 --> 0:12:55.680 the industry has to do with that maintenance and repair 0:12:55.800 --> 0:12:57.839 oriented work. So I think that's where they're seeing a 0:12:57.840 --> 0:13:01.079 lot of the lift now. It's homeowners are taking care 0:13:01.120 --> 0:13:03.000 of the things that they need to just to maintain 0:13:03.080 --> 0:13:05.440 their home. This really isn't no, it's been a couple 0:13:05.480 --> 0:13:07.600 of quarters now where we've heard from them that big 0:13:07.600 --> 0:13:11.400 ticket discretionary categories have been relatively weaker. So think about 0:13:11.440 --> 0:13:16.360 things like kitchenry models, bathroom models, flooring projects. These are 0:13:16.360 --> 0:13:19.560 things that tend to be financed by the consumer, and 0:13:19.880 --> 0:13:21.520 with rates as high as they are right now, it's 0:13:21.559 --> 0:13:24.320 just become a little bit prohibitive for them to undertake 0:13:24.360 --> 0:13:27.280 those projects. So I think in order to see more 0:13:27.400 --> 0:13:29.680 robust growth out of these categories, which is really the 0:13:29.720 --> 0:13:32.679 missing piece of the story, we need to see rates 0:13:32.679 --> 0:13:34.040 start to come back down a little bit. 0:13:34.760 --> 0:13:38.120 How about tires. Is that impacting the costs of their 0:13:38.160 --> 0:13:40.559 goods like getting lumber from Canada, for example. 0:13:41.160 --> 0:13:44.000 So we think Home Depot's pretty well positioned from a 0:13:44.080 --> 0:13:47.920 tariff perspective. They source about fifty percent of the products 0:13:47.920 --> 0:13:50.400 they sell from inside the US, and you know, like 0:13:50.440 --> 0:13:52.680 a lot of other retailers, over the last decade, they've 0:13:52.720 --> 0:13:55.920 done a great job in diversifying their supply chain. They 0:13:55.920 --> 0:13:59.079 actually said that over the next twelve months, no single 0:13:59.080 --> 0:14:01.079 country outside of the US is going to account for 0:14:01.240 --> 0:14:05.440 more than ten percent of their product purchases. So the 0:14:05.480 --> 0:14:08.160 fact that they're diversifying their supply chain should help with costs. 0:14:08.160 --> 0:14:10.800 At the same time, given their scale the largest home 0:14:10.840 --> 0:14:13.880 improvement retailer, they'll have the ability to push back on 0:14:13.920 --> 0:14:16.800 some of their suppliers in terms of cost. Now, what 0:14:16.840 --> 0:14:20.960 they said is that they're looking to generally maintain their prices, 0:14:21.880 --> 0:14:24.160 so I think people took that as a positive. You 0:14:24.240 --> 0:14:26.760 have to remember Home Depot sales about thirty thousand to 0:14:26.760 --> 0:14:29.720 forty thousand products in their store. So when they talk 0:14:29.760 --> 0:14:32.800 about pricing, they take a portfolio approach. So you may 0:14:32.880 --> 0:14:35.360 not see them raise the price on a particular item 0:14:35.360 --> 0:14:37.840 that was tariffed, but they look at the elasticities of 0:14:37.880 --> 0:14:40.680 their various products and they'll take prices they need to 0:14:40.720 --> 0:14:42.720 where they can, gotcha. 0:14:43.560 --> 0:14:46.200 So they're going to manage that margin. So they're not 0:14:46.240 --> 0:14:47.760 going to sacrifice margin then. 0:14:49.240 --> 0:14:51.760 So they actually guided to an operating margin pretty much 0:14:51.800 --> 0:14:54.320 in line with what they were looking for at the 0:14:54.440 --> 0:14:57.120 end of last quarter. There are a couple puts in takes. 0:14:57.120 --> 0:14:59.840 They're doing better on shrinks, so they're managing their re 0:15:00.040 --> 0:15:03.160 tell theft a little better, which is always a positive. 0:15:04.240 --> 0:15:08.200 So they're also you know, getting some more leverage from productivity. 0:15:08.320 --> 0:15:10.400 So you know, I think pricing is going to be 0:15:10.400 --> 0:15:12.360 a component of it, but they also have other levers 0:15:12.360 --> 0:15:14.240 within the business that are going to help to maintain 0:15:14.280 --> 0:15:17.040 their margins, you know, where they expected them. 0:15:17.400 --> 0:15:19.960 Just what's home Depot do with the number of stores? 0:15:20.000 --> 0:15:23.200 Have they added stores? Are they fully kind of where 0:15:23.200 --> 0:15:25.320 they want to be? What's the store count story? 0:15:26.360 --> 0:15:29.080 Yeah, So interestingly, Home Depot over the last year has 0:15:29.120 --> 0:15:31.760 actually returned to store growth, which is something we haven't 0:15:31.800 --> 0:15:34.640 seen from them in a very long time. They kind 0:15:34.640 --> 0:15:37.480 of have had the established footprint in the US, but 0:15:37.520 --> 0:15:40.040 as the business has grown so much, as they've grown 0:15:40.080 --> 0:15:43.400 their pro business, they've started to add new stores in 0:15:43.520 --> 0:15:46.200 markets where you know, populations are growing or where they 0:15:46.240 --> 0:15:48.480 want to kind of take some of the pressure off 0:15:48.520 --> 0:15:51.920 the existing store base to look to drive some additional productivity. 0:15:51.920 --> 0:15:55.000 So this year they're adding about thirteen new stores. They're 0:15:55.000 --> 0:15:57.040 going to do that. I think their their plan was 0:15:57.080 --> 0:16:00.000 about eighty over a five year period, So the next 0:16:00.080 --> 0:16:01.440 couple of years they'll continue to add. 0:16:01.440 --> 0:16:04.080 To you to our thanks, did you're writing, Bloomberg Intelligence, 0:16:04.200 --> 0:16:05.160 US homebuilding analyst. 0:16:05.600 --> 0:16:08.360 We move next to earnings from the off price retailer TJX. 0:16:08.520 --> 0:16:11.600 TJX reported a gross margin shortfall for its first quarter 0:16:11.840 --> 0:16:15.120 and issued for your guidance that fell short expectations. 0:16:15.160 --> 0:16:17.440 However, the company said it's global network of vendors and 0:16:17.480 --> 0:16:20.880 flexibility on prices will help it manage future tariff pressures. 0:16:21.200 --> 0:16:24.200 For more, we were joined by Mary Ross Gilbert, Bloomberg Intelligence, 0:16:24.240 --> 0:16:26.000 senior equity analysts covering retail. 0:16:26.160 --> 0:16:28.800 We first asked Mary for her key takeaways from tjx 0:16:28.840 --> 0:16:29.400 as results. 0:16:29.640 --> 0:16:33.360 So, when I look at the results, they beat for 0:16:33.440 --> 0:16:36.280 the quarter. They beat on the top line, you know, 0:16:36.320 --> 0:16:38.600 for total sales, and they came in line on comp 0:16:38.720 --> 0:16:41.480 sales comp sales being up three percent, and that was 0:16:41.560 --> 0:16:44.280 at the high end of their guidance. The real issue, 0:16:44.400 --> 0:16:47.840 I think is the forward guidance. So when you look 0:16:47.880 --> 0:16:51.840 at the second quarter, analysts were looking for EPs of 0:16:51.920 --> 0:16:56.720 about a dollar four and the top end of their guidance, 0:16:56.840 --> 0:16:59.760 it's ninety seven cents to a dollar, and so I 0:16:59.760 --> 0:17:02.960 think there's a disappointment there. But frankly, this management team 0:17:03.240 --> 0:17:07.480 really executes. They tend to provide conservative guidance, So we 0:17:07.520 --> 0:17:11.320 really view this as whatever guidance they put out there, 0:17:11.359 --> 0:17:14.359 we see upside to it. They certainly have seen a 0:17:14.440 --> 0:17:19.000 strong start to the second quarter concerns around tariffs. They're 0:17:19.080 --> 0:17:23.160 saying that they can mostly mitigate most of the impact 0:17:23.600 --> 0:17:27.480 when it comes to directly sourced merchandise. And then with 0:17:27.600 --> 0:17:32.600 regard to indirectly sourced merchandise, this is where they're buying overstocks. 0:17:32.920 --> 0:17:37.560 They'll be able to negotiate. They see plenty of availability 0:17:37.600 --> 0:17:40.320 and so they see a lot of opportunity in terms 0:17:40.320 --> 0:17:42.720 of the buying there, and they'll make sure that they 0:17:42.880 --> 0:17:46.080 always maintain that gap, and that gap being twenty to 0:17:46.119 --> 0:17:50.040 sixty percent versus what you'd see a department in specialty store. 0:17:50.280 --> 0:17:52.800 Oh I know, yes, I was telling these guys that 0:17:53.040 --> 0:17:55.639 I feel like I'm single handedly keeping home Goods in business, 0:17:55.760 --> 0:17:57.800 having to furnish a house. 0:17:58.119 --> 0:18:02.399 Who is the TJX consumer other than Alex Deal and 0:18:02.400 --> 0:18:05.040 Lisa MATTEI, who I know? Who is that consumer? Who 0:18:05.080 --> 0:18:07.400 is that customer and what's the company saying about their 0:18:07.520 --> 0:18:08.120 their customer. 0:18:08.640 --> 0:18:14.400 So Paul gg Max's customer, you know, Marmax and Home Goods, 0:18:14.840 --> 0:18:18.280 it spans from low income all the way up to 0:18:18.400 --> 0:18:22.480 high income. So within the Marmax you know, which is 0:18:22.520 --> 0:18:25.520 where you have TJ Max and Marshall's, they carry brands 0:18:25.560 --> 0:18:29.560 as high as Gucci, Fendy, Chloe, you name it, and 0:18:29.560 --> 0:18:32.000 we see a lot of that merchandise there. They have 0:18:32.320 --> 0:18:35.200 stores where you can walk in and you'll see these 0:18:35.560 --> 0:18:38.600 high end handbags and glass cases, just like you would 0:18:38.640 --> 0:18:41.720 in a department store where it's really tethered, and so 0:18:41.880 --> 0:18:43.879 they have that as well. But then they also have 0:18:44.400 --> 0:18:47.159 you know, more moderate brands like a Tommy hillfigure and 0:18:47.200 --> 0:18:51.800 a Calvin Klein or Juicy Couture, even you know, at 0:18:51.840 --> 0:18:53.080 a lower end there. 0:18:53.520 --> 0:18:56.000 So they're able to attract. 0:18:55.720 --> 0:19:00.520 All income levels and they know how to merchandise stores 0:19:00.560 --> 0:19:04.600 appropriately all around the country and actually all around the world, 0:19:04.920 --> 0:19:09.000 because we're seeing strength in all of their markets. And 0:19:09.359 --> 0:19:11.680 you raised a good point, Alex. I think you talked 0:19:11.680 --> 0:19:15.159 about home goods, and you're absolutely right. Home goods actually 0:19:15.240 --> 0:19:18.399 led the comps. They were up four percent and so 0:19:18.480 --> 0:19:21.080 when you look at the comps that were at Marmax, 0:19:21.119 --> 0:19:24.200 they were up two percent, so they definitely saw strength 0:19:24.240 --> 0:19:25.600 and home goods our. 0:19:25.600 --> 0:19:29.320 Thanks to Mary Ross, Gilbert Bloomberg Intelligence senior equitanaals covering retail. 0:19:29.760 --> 0:19:32.000 This week, we focused on the Bloomberg Big Take story 0:19:32.040 --> 0:19:35.240 titled Possible Cancer Health risks are lurking in a popular 0:19:35.320 --> 0:19:38.440 OTC drug and you can find it on Bloomberg dot 0:19:38.480 --> 0:19:39.360 com and in the terminal. 0:19:39.600 --> 0:19:41.800 The story looks at the dangers of a widely available 0:19:41.840 --> 0:19:45.439 drug for urinary tract infections that has never been formally 0:19:45.440 --> 0:19:48.159 approved by the US government, and it's not the only one. 0:19:48.240 --> 0:19:50.520 For more. We were joined by the story's author, Anna Edney, 0:19:50.520 --> 0:19:53.439 Bloomberg National healthcare reporter, and we first asked Anna to 0:19:53.440 --> 0:19:55.399 walk us through some of the over the counter drugs 0:19:55.440 --> 0:19:56.359 discussed in the story. 0:19:56.840 --> 0:19:59.119 Probably the most popular one, I think a lot of 0:20:00.240 --> 0:20:04.000 our listeners will recognize as Azo. It's an over the 0:20:04.040 --> 0:20:07.399 counter drugs, so you can go into most any store 0:20:08.119 --> 0:20:12.679 you know, Target, Walmart, anything like that, and and purchase it. 0:20:12.760 --> 0:20:16.280 You don't need a prescription. Your a stat is another brand, 0:20:16.359 --> 0:20:20.960 but all of these stores also make their own generic version, 0:20:21.160 --> 0:20:25.080 so it's something that is supposed to treat the pain 0:20:25.400 --> 0:20:29.280 with your airy tract infections. A lot of people seem 0:20:29.400 --> 0:20:32.040 to think it goes beyond that and it's actually curing 0:20:32.240 --> 0:20:35.760 their infections. So one of the issues being that, you know, 0:20:36.520 --> 0:20:40.280 people might need antibiotics, but instead they're they're using this. 0:20:41.040 --> 0:20:44.359 Now, what's the drug in it that is causing some 0:20:44.400 --> 0:20:46.159 of the issues and how do we know? 0:20:47.480 --> 0:20:50.960 Yeah, so this is the active ingredient in all of 0:20:51.000 --> 0:20:53.920 these drugs. It's what the generics will go by. It's 0:20:53.960 --> 0:20:58.760 called naso purdine. I may still be butchering that name, 0:20:59.160 --> 0:21:04.159 but it's an unapproved drug, which was really interesting to 0:21:04.200 --> 0:21:07.320 me and something sort of new to me even though 0:21:07.320 --> 0:21:09.359 I've covered these issues for a long time that I 0:21:09.400 --> 0:21:12.840 came across. What it means is the FDA has never 0:21:13.359 --> 0:21:17.679