WEBVTT - Need For Independence Drives Auto Demand 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.560 with essential market moving news. Find the Bloomberg Markets podcast 0:00:15.560 --> 0:00:18.479 called Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.759 at Bloomberg dot com slash podcast. Now, I want to 0:00:21.760 --> 0:00:24.480 bring in Mike Jackson is the CEO of Auto Nation 0:00:24.840 --> 0:00:28.240 and one of the most respected figures in the industry, 0:00:28.560 --> 0:00:32.760 UM dealing a lot of cars even before the pandemic. 0:00:33.280 --> 0:00:36.200 Mike tell us about the your experience during the pandemic 0:00:36.240 --> 0:00:38.680 and what it's like now as we as we poke 0:00:38.760 --> 0:00:43.839 our heads out well, I think um the pandemic was 0:00:43.880 --> 0:00:52.239 a scarring events for Americans, just horrific, unimaginable, But from 0:00:52.240 --> 0:00:54.720 a business point of view, it had two significant impacts. 0:00:54.720 --> 0:00:56.720 One know in the housing industry. In the second or 0:00:56.760 --> 0:01:00.720 automotive housing, they want more space eight and they want 0:01:00.760 --> 0:01:03.120 the space to be nicer. And then when they leave 0:01:03.160 --> 0:01:05.440 their house, they want to control the environments that they're in. 0:01:05.520 --> 0:01:08.160 They want their personal vehicle and they want to control 0:01:08.200 --> 0:01:12.520 who's in it, when, where it goes. So this independence 0:01:12.680 --> 0:01:18.039 of American spirit was built out by this pandemic. So 0:01:18.160 --> 0:01:26.320 that is dramatically increased demand for individual automobiles and that 0:01:26.400 --> 0:01:31.560 led to a fourth record quarter for automation with an 0:01:31.560 --> 0:01:38.600 increase in our revenue year over year, increase UH in 0:01:38.720 --> 0:01:42.160 gross profit. We had cost measures that we also put 0:01:42.160 --> 0:01:46.200 in place. Hence our earnings per share tripled compared to 0:01:46.240 --> 0:01:50.320 a year ago. So the environment is good, no question though. 0:01:50.360 --> 0:01:54.200 Interest rates is very supportive of housing an automotive. But 0:01:54.280 --> 0:01:59.840 within that automotive UH segment, Auto Nation with its brand, 0:02:00.440 --> 0:02:03.080 it's great experience with one price on pre owned, a 0:02:03.160 --> 0:02:09.359 digital platform. Coast to coast, UH performed extraordinarily. Well, hey, Mike, 0:02:09.400 --> 0:02:12.000 talk to us about the chip shortage. We we've been 0:02:12.040 --> 0:02:14.120 hearing so much about this, and you've been in the 0:02:14.120 --> 0:02:17.880 news making some, um, you know, some clear statements about that. 0:02:18.000 --> 0:02:19.920 Give us a sense of what that really means for 0:02:20.000 --> 0:02:22.720 your business and how long the chip shortage you think 0:02:22.800 --> 0:02:26.360 is going to affect the auto industry in this country. Well, 0:02:26.400 --> 0:02:31.000 we'll have more demand than supply across the board since 0:02:31.680 --> 0:02:36.360 April May of a year ago, when you hit this 0:02:36.440 --> 0:02:39.520 inflection point where American sumer woke up and said listen, 0:02:39.520 --> 0:02:43.880 I want, I want. Personal transportation inventories were, of course 0:02:44.320 --> 0:02:47.000 for new very low then because the plants were closed 0:02:47.040 --> 0:02:51.120 for eight weeks, ten weeks, twelve weeks depending on the manufacturer. 0:02:52.120 --> 0:02:56.200 UH and you had this extraordinarily high demand. Now the 0:02:56.400 --> 0:03:01.320 chip shortage means they can't meet the demand and UM 0:03:01.560 --> 0:03:06.280 shipments are still pretty good, but um and it's much 0:03:06.320 --> 0:03:08.640 better than a year ago. There's no comparison to the 0:03:08.639 --> 0:03:13.600 shuftdown period. This chip shortage is more a disruption of 0:03:13.639 --> 0:03:18.640 a very complex global manufacturing system. So the headline remains 0:03:18.639 --> 0:03:20.560 we have more demand and supply. The way we are 0:03:20.639 --> 0:03:25.720 managing it as a company is that we've adjusted margins 0:03:25.720 --> 0:03:30.920 on the new vehicle side and we're selling incoming vehicles, 0:03:31.000 --> 0:03:35.160 preselling incoming vehicles that at a much higher rate than normal, 0:03:35.240 --> 0:03:37.960 so everything comes in and goes out. And on the 0:03:38.040 --> 0:03:42.920 volume side, we've aggressively purchased pre owned. We put very 0:03:42.920 --> 0:03:45.080 good values on the trade ins for our customers, so 0:03:45.080 --> 0:03:47.560 that's a win for them and hence we're able to 0:03:47.680 --> 0:03:52.320 increase our pre owned business by year over year. I 0:03:52.320 --> 0:03:54.960 talked to all of Colonnas, the CEO of Daimler, a 0:03:55.000 --> 0:03:57.040 couple of days ago and he told me, in terms 0:03:57.080 --> 0:03:59.520 of the chip shortage for them, they're prioritizing the higher 0:03:59.520 --> 0:04:03.200 margin vehicles. So the new e q S, for example, 0:04:03.240 --> 0:04:05.480 they're gonna prioritize that in the S class. Of course, 0:04:05.480 --> 0:04:09.280 I see that you had last year bigger growth in 0:04:09.320 --> 0:04:13.360 your premium luxury segment that you did in domestics and imports. 0:04:13.560 --> 0:04:19.919 Is that part of that equation. Premium luxury is in 0:04:19.960 --> 0:04:23.200 the high thirties as a percent of our business. Uh. 0:04:23.200 --> 0:04:26.880 And with the largest retailer of Mercedes in the US 0:04:27.360 --> 0:04:29.280 was a good friend of mine, know him a long time. 0:04:29.279 --> 0:04:33.560 He's an outstanding CEO. All is not the only one 0:04:34.240 --> 0:04:37.240 who's come to that conclusion. And we clearly say, and 0:04:37.279 --> 0:04:40.640 here's an epiphany that the manufacturers saying, let's put the 0:04:40.720 --> 0:04:44.560 chips in the highest demand vehicles, which by the way, 0:04:44.680 --> 0:04:50.400 are also the highest margin vehicles for them. I think that, Uh, 0:04:50.640 --> 0:04:56.240 the industry didn't always do that in s decades. And 0:04:56.640 --> 0:05:00.359 the consumer, just like in the home, is looking for 0:05:00.400 --> 0:05:04.280 a bigger vehicle with more content and hence more chips 0:05:04.720 --> 0:05:09.159 in that particular vehicle, and the manufacturers are prioritizing that. 0:05:10.040 --> 0:05:15.440 And let's not produce vehicles for which there's very little 0:05:15.520 --> 0:05:20.080 interest toward demand. I mean, let's give the customer what 0:05:20.120 --> 0:05:23.520 they want. Wow. Okay, that's a stroke of genius. I 0:05:23.640 --> 0:05:27.640 like it, and it's been very um. I think it's 0:05:28.040 --> 0:05:33.840 I think it may have changed the industry long term 0:05:33.880 --> 0:05:39.080 that there is much rather than being so production driven 0:05:39.160 --> 0:05:43.919 all the time and overproducing, let's really focus on what 0:05:44.040 --> 0:05:49.960 consumers want and have a good balance between demand and supply. 0:05:50.839 --> 0:05:52.560 I just want to ask you a quick question speaking 0:05:52.600 --> 0:05:54.960 of industry changes. We only got thirty seconds here, but 0:05:55.040 --> 0:05:57.520 I've heard that Amazon may come into the market. Do 0:05:57.600 --> 0:06:01.039 you think that they're a potential threat. Amazon is a 0:06:01.080 --> 0:06:03.599 great company, and they've been coming into automotive for I 0:06:03.640 --> 0:06:07.120 think thirty years. I've been hearing that, so listen. It's 0:06:07.120 --> 0:06:11.400 a big, complex business, and I like our position with 0:06:11.440 --> 0:06:15.760 our brand, our experience in our digital platform. Well Auto 0:06:15.839 --> 0:06:18.239 National do well. I have a lot of card dealer 0:06:18.279 --> 0:06:19.599 friends and they wanted me to ask if you have 0:06:19.600 --> 0:06:21.840 any stories for sale? Do you have anything out there 0:06:21.839 --> 0:06:23.960 that you're willing to give up? But I'm guessing the 0:06:24.000 --> 0:06:27.599 answer right now is no. I knew it would be 0:06:27.680 --> 0:06:31.120 Mike Jackson, the CEO of Auto Nation. The stock has 0:06:31.279 --> 0:06:37.280 soared Um, has been time today. Absolutely, this is Bloomberg. 0:06:41.000 --> 0:06:44.360 We've got an old fashioned bidding war in the railroad business. 0:06:44.360 --> 0:06:48.520 Canadian National launching a thirty billion dollar bid for Kansas 0:06:48.560 --> 0:06:52.679 City Southern. That comes on top of Canadian Pacifics offer 0:06:52.720 --> 0:06:55.440 from just last week of about twenty billion dollars. Let's 0:06:55.480 --> 0:06:57.480 break it down. We do that with Tony Hatch. Tony 0:06:57.560 --> 0:06:59.960 is a principal a b H Consulting. Tony is one 0:07:00.000 --> 0:07:03.599 of the leading and longest serving rail analysts on the street. 0:07:03.640 --> 0:07:06.440 He knows all of these companies intimately. Well, Tony, thanks 0:07:06.440 --> 0:07:09.760 for joining us here again, the two Canadian rails looking 0:07:09.760 --> 0:07:15.120 at Kansas City Southern. What's the rationale behind behind their interest? Well, Um, 0:07:15.160 --> 0:07:18.520 the rationale really is that there's terrific growth potential. These 0:07:18.680 --> 0:07:21.680 both of the offers were really contingent upon where the 0:07:21.720 --> 0:07:25.679 success was contingent upon synergies, very different from most historic 0:07:25.760 --> 0:07:28.240 mergers in the rail industry, which have been about removing 0:07:28.280 --> 0:07:31.240 duplicate efforts or economies. So I think they both see 0:07:31.360 --> 0:07:34.480 Mexico being a tremendous growth market. Whether or not we 0:07:34.520 --> 0:07:36.560 get a big increase in near shoring and other things, 0:07:36.600 --> 0:07:39.440 that's been the fastest growing market in North American freight 0:07:39.960 --> 0:07:41.760 for some time and will continue to be. And I 0:07:41.800 --> 0:07:45.400 think the both of the networks fit with the Kansa 0:07:45.400 --> 0:07:49.160 City southern pretty well. Tony. How much green space is 0:07:49.200 --> 0:07:51.960 in this industry? I mean, do you just if you 0:07:52.000 --> 0:07:55.320 want more railroads, do you have to buy other railroads? 0:07:55.320 --> 0:07:59.160 Are are they going to be building out more network? Well? Um, 0:07:59.560 --> 0:08:01.840 basic this is sort of like the whole thing about 0:08:01.880 --> 0:08:03.760 real estate. You know, they don't make any more of it. 0:08:04.400 --> 0:08:08.400 Building a railroad is prohibitively expensive, Uh, fighting etter, you 0:08:08.400 --> 0:08:11.440 have to buy them. If you want access, direct access, 0:08:11.800 --> 0:08:14.880 owned access to markets, you need to purchase it or 0:08:14.920 --> 0:08:17.080 cut some other kind of deal. You can't simply build 0:08:17.120 --> 0:08:20.360 into it. Uh you know what, the cost would be astronomical? 0:08:21.080 --> 0:08:23.400 All right, Tony, So behind this deal, I think, you know, 0:08:23.760 --> 0:08:25.840 even someone like me who hasn't looked at, you know, 0:08:25.920 --> 0:08:28.000 a rail stock in thirty years. I look at the 0:08:28.040 --> 0:08:31.720 map here and I see, you know, the Canadian routes 0:08:31.840 --> 0:08:34.000 and then I see them connecting down into Kansas City 0:08:34.040 --> 0:08:35.520 and then going all the way to Mexico, and it 0:08:35.559 --> 0:08:38.360 just seems like this is just a great play on 0:08:38.559 --> 0:08:42.520 just North America and trade kicking back in and maybe 0:08:42.520 --> 0:08:45.680 getting some better trade agreements. Um, is that kind of 0:08:45.720 --> 0:08:48.400 what these guys are thinking. That's absolutely what they're thinking. 0:08:48.400 --> 0:08:49.559 I mean this so you know, I hate to say 0:08:49.600 --> 0:08:51.400 it's a NAFTA or U s m C A play 0:08:51.480 --> 0:08:54.000 because un that's going on for a while, but this 0:08:54.080 --> 0:08:58.560 truly links the continents, links all three players in the continent, uh, 0:08:58.559 --> 0:09:01.760 in the three countries. In addition, it's a big North 0:09:01.880 --> 0:09:04.040 South play. And what is you know, heretofore been really 0:09:04.080 --> 0:09:06.480 an East west world. If you look at the big 0:09:06.520 --> 0:09:09.880 four US railroads, they really work in an East West phenomenon. 0:09:09.960 --> 0:09:12.280 So this is a way of attaining a different type 0:09:12.280 --> 0:09:14.520 of growth than we had been seeing. I mean, Kensdy 0:09:14.520 --> 0:09:17.439 Southern had been the fastest growing railroad for the last 0:09:17.640 --> 0:09:21.440 many years. The Canadians have been one and two, uh 0:09:21.559 --> 0:09:23.559 and three, all three of us. Are you really talking 0:09:23.559 --> 0:09:27.040 about the railroads here involved in this little fractus are 0:09:27.080 --> 0:09:29.480 all the ones the most focused at this point in growth? 0:09:29.720 --> 0:09:31.440 And the market se as you talked about in the 0:09:31.440 --> 0:09:35.320 trade situation, really is supportive of that. Even if it's great, 0:09:35.760 --> 0:09:39.200 a great commercial play, there's a point when the price 0:09:39.360 --> 0:09:41.480 could just be too high, right, I mean, we all 0:09:41.520 --> 0:09:44.440 agree that getting the first n f T on people 0:09:44.600 --> 0:09:47.840 art would be an incredible opportunity. But for sixty nine 0:09:47.880 --> 0:09:50.880 million dollars, that's too much. So at what point does 0:09:51.280 --> 0:09:55.040 UM does this asset get too expensive? You know, of 0:09:55.080 --> 0:09:57.719 course everything and everything has a value. I don't think 0:09:57.720 --> 0:09:59.920 there're anything near that. It doesn't mean that we'll see 0:10:00.000 --> 0:10:03.320 another bid. This wouldn't surprise me this morning. But you know, 0:10:03.360 --> 0:10:05.040 I think the idea that they're saying that they could 0:10:05.040 --> 0:10:06.840 be you know, that the synergies will be created pretty 0:10:06.920 --> 0:10:09.120 quickly makes a lot of sense, and we'll get more 0:10:09.559 --> 0:10:13.520 information as this process goes along. But we haven't reached 0:10:13.520 --> 0:10:16.400 the point of saturation here. This will make money for 0:10:16.640 --> 0:10:19.000 the buyer at both of those prices, even the higher 0:10:19.000 --> 0:10:21.559 one UM and I think potentially it didn't even hire one. 0:10:21.600 --> 0:10:23.600 But I don't see any but any of the other 0:10:23.679 --> 0:10:26.200 carriers getting involved at this point. But I think that 0:10:26.280 --> 0:10:27.680 you're right. You know, there is a point in which 0:10:27.679 --> 0:10:30.000 you pay too much for the growth. We haven't hit 0:10:30.040 --> 0:10:34.520 that level yet. Wait. I got a quick follow Okay, Uh, 0:10:34.600 --> 0:10:39.240 what was Paul like as a young employee. It's very 0:10:39.240 --> 0:10:42.040 good to hear his voice. He was kind of hate 0:10:42.040 --> 0:10:46.280 to say this publicly. But he was pretty good. You know, 0:10:46.320 --> 0:10:50.320 I wouldn't expect saying that, but but he was. And 0:10:50.360 --> 0:10:53.199 he does know this stuff better that he's letting on here. Um, 0:10:53.600 --> 0:10:55.880 this will be an interesting story that The question to 0:10:55.920 --> 0:10:58.200 me is the regulatory aspect you haven't asked about him? 0:10:58.200 --> 0:11:00.680 Happy to talk about it. I think it could hash mustard, 0:11:00.720 --> 0:11:02.600 But it's getting a little more complicated than it was 0:11:02.960 --> 0:11:06.760 just late last night when I went to bed. Fascinating. 0:11:06.760 --> 0:11:09.760 So Tony, thanks for coming on. We really appreciate it. 0:11:10.040 --> 0:11:13.000 Love getting your perspective here. Chat with you going forward. 0:11:13.000 --> 0:11:15.880 But again, a big big deal UH in the railroad 0:11:15.920 --> 0:11:18.720 business in this country as both Canadian railroads taking a big, 0:11:18.760 --> 0:11:22.160 big liking to Kansas City Southern Tony Hatch principal at 0:11:22.240 --> 0:11:24.880 A B H Consulting, that's his consulting firm. He talks 0:11:25.040 --> 0:11:27.640 all the rig railroads, talks the institutional investors. He's got 0:11:27.640 --> 0:11:30.400 his UH finger on the pulse of that industry and 0:11:30.440 --> 0:11:33.360 he was a very good guy to learn the industry from. UH. 0:11:33.360 --> 0:11:35.079 So I can say that much and I still know 0:11:35.679 --> 0:11:38.800 revenue ton Miles, Matt, that's the key metric for your 0:11:38.840 --> 0:11:41.080 earnings models. How much did you make moving a ton 0:11:41.240 --> 0:11:48.840 of freight. Well, we're all buying more and more stuff online. 0:11:48.880 --> 0:11:50.959 It seems like there are boxes in front of every 0:11:51.000 --> 0:11:53.920 door across America on a daily basis. But what about 0:11:53.920 --> 0:11:57.680 the jewelry business? Has that gone online? Has that gone digital? 0:11:57.720 --> 0:11:59.960 Let's check in with Tom Nolan. He's a newly appointed 0:12:00.080 --> 0:12:04.120 CEO of Julie firm Kendrick Scott. Tom, thanks so much 0:12:04.160 --> 0:12:06.800 for joining us here, love to get your thoughts. Just 0:12:06.840 --> 0:12:11.360 starting out, how has your business, the jewelry business been 0:12:11.880 --> 0:12:15.640 impacted by the pandemic. Yeah, thanks for having me on. 0:12:15.679 --> 0:12:19.440 I appreciated good morning. Um, you know, two thousand twenty, 0:12:20.280 --> 0:12:23.120 the year of COVID and even leading into has really been. 0:12:23.800 --> 0:12:26.439 It's been a fantastic year for us from our business perspective, 0:12:27.440 --> 0:12:30.920 challenging one for our society obviously, But um, we really 0:12:30.920 --> 0:12:33.680 weather the storm remarkably well. I would say we were 0:12:34.000 --> 0:12:35.880 for sure an outlier, and I'm really proud of the 0:12:35.880 --> 0:12:37.480 team and what a great job they did do in it. 0:12:39.800 --> 0:12:44.480 So what have you been doing to sell more stuff online? 0:12:44.520 --> 0:12:47.960 I mean, I imagine, you know, sometimes I'll go around 0:12:47.960 --> 0:12:49.920 and look at watch I'm not really a jewelry guy, 0:12:49.920 --> 0:12:52.840 but I'll look at watch websites and they have kind 0:12:52.840 --> 0:12:56.400 of developed into more interesting places I guess to spend time, 0:12:56.440 --> 0:12:58.880 but otherwise, you know, I just need to see a 0:12:58.920 --> 0:13:03.360 picture and I know if I want it. Yeah, you know. 0:13:03.440 --> 0:13:06.200 I think our our business has always been really experiential. 0:13:06.280 --> 0:13:08.160 And then it's from when Kendra started the company twenty 0:13:08.240 --> 0:13:11.040 years ago. It's been been a really experiential business and 0:13:11.080 --> 0:13:13.800 we lead that to brick and mortar and retail, and 0:13:13.840 --> 0:13:15.880 so it was a it was a challenge for us 0:13:16.440 --> 0:13:19.480 as more customers migrated to the web business to create 0:13:19.520 --> 0:13:22.240 that experience and and deliver it to folks online. I 0:13:22.240 --> 0:13:23.800 think at the end of the day, what we've really 0:13:23.840 --> 0:13:27.040 always focused on. We know that the customers are boss. 0:13:27.080 --> 0:13:29.400 I mean she she ultimately signed my paychecks and all 0:13:29.400 --> 0:13:32.559 of our companies paychecks, and and it's important that we're 0:13:32.559 --> 0:13:34.760 meeting her and him wherever they are. And I think 0:13:35.200 --> 0:13:40.360 what we saw was that everybody migrated online when brick 0:13:40.360 --> 0:13:43.560 and mortar stores were closed. We managed to have a 0:13:43.600 --> 0:13:46.240 successful retail the year last year. We're still having a 0:13:46.280 --> 0:13:49.600 successful retail year this year. And additionally, on top of it, 0:13:49.640 --> 0:13:52.600 and there's huge incre mentality and what happened in the 0:13:52.600 --> 0:13:55.640 web business um and we just tried to pivot and 0:13:55.640 --> 0:13:58.920 move very quickly to meet them where they where they 0:13:58.960 --> 0:14:01.000 wanted to buy. And as everybody is seen in the 0:14:01.040 --> 0:14:04.520 markets and the macroeconomic indicators, I mean, there was a 0:14:04.520 --> 0:14:06.800 lot more discretion your income. People weren't going on vacations, 0:14:06.800 --> 0:14:08.640 they weren't taking trips the same way. So I think 0:14:09.040 --> 0:14:11.959 folks like yourself, we're looking for things to do in 0:14:12.040 --> 0:14:14.439 a lot of ways, and I think we're fortunate to 0:14:14.960 --> 0:14:17.000 be on the receiving end of that. And our brand 0:14:17.040 --> 0:14:18.640 just means a lot to a lot of people. It's 0:14:19.160 --> 0:14:21.120 philanthropies and the core of it and the heart of it, 0:14:21.160 --> 0:14:24.240 and we always try to do good. It's it was 0:14:24.640 --> 0:14:26.560 remarkable year and it taught us a lot and it 0:14:26.560 --> 0:14:29.440 made us all better and stronger and faster. So who 0:14:29.440 --> 0:14:32.360 do you compete with? Uh, Tom? You know, now as 0:14:32.440 --> 0:14:34.560 your as your business kind of you know, becomes a 0:14:34.560 --> 0:14:39.240 little bit more digital, you know, yeah, first and foremost, 0:14:39.280 --> 0:14:42.400 I think are we our largest competitors ourselves? Right? I mean, 0:14:42.440 --> 0:14:44.320 we just we're always competing against doing better than we 0:14:44.400 --> 0:14:46.880 did the day before, the year before. But we're in 0:14:46.880 --> 0:14:50.280 the jewelry space and accessory space. Brands like Kate Spade, 0:14:50.320 --> 0:14:55.080 brands like Tiffany's and Tom and James, Bablo, bar Pandora Oriana. 0:14:55.640 --> 0:14:57.800 I'd say brands like that are the ones that we 0:14:57.800 --> 0:15:00.200 were competing against on the day to day basis. So 0:15:00.240 --> 0:15:03.680 what kind of spending do you expect from stimulus? Have 0:15:03.720 --> 0:15:05.800 you seen a big boost from the checks that went 0:15:05.840 --> 0:15:08.280 out or do you think we're going to see, you know, 0:15:08.360 --> 0:15:13.640 post pandemic, a huge spending splurge. Yeah, I think that 0:15:13.720 --> 0:15:15.160 we all saw it. I mean, if you're if you're 0:15:15.160 --> 0:15:19.440 paying attention to networks and stations like y'alls, there was 0:15:19.480 --> 0:15:23.360 definitely an increase in stimulus spending, and I think there 0:15:23.440 --> 0:15:25.520 was a lot of consumer brands around the receiving into that. 0:15:26.360 --> 0:15:29.160 You know, it's the market is you know, is so 0:15:30.160 --> 0:15:32.880 so challenging. I mean, it's really more it's harder to 0:15:32.920 --> 0:15:34.320 figure out that there never has been before us. So 0:15:34.400 --> 0:15:37.400 I think for us, we think about controlling the things 0:15:37.440 --> 0:15:39.080 that we can control. If we know that if we 0:15:39.120 --> 0:15:41.440 make a great product, if we focus on the customer, 0:15:41.840 --> 0:15:43.880 if we deliver a great experience, we make our web 0:15:43.920 --> 0:15:47.280 experience as good or better than our retail experience, we're 0:15:47.280 --> 0:15:49.480 going to continue to win. So you know, I can't 0:15:49.480 --> 0:15:53.760 control what what happens in the market, so we can 0:15:53.800 --> 0:15:55.280 control the things that we do, and I think when 0:15:55.280 --> 0:15:56.880 we when we do that, well, we're gonna continue to 0:15:56.880 --> 0:15:59.000 be successful and win, all right, tom So, it just 0:15:59.040 --> 0:16:00.840 gives a sense of how much of your business now 0:16:00.920 --> 0:16:03.560 is sold in stores, you know, the brick and mortar 0:16:03.680 --> 0:16:06.080 versus online, and how do you think that split might 0:16:06.200 --> 0:16:10.040 develop going forward? Yeah, so so two thousand nineteen is 0:16:10.080 --> 0:16:13.040 probably the best indicator is a benchmark. In that year, 0:16:13.040 --> 0:16:15.360 almost six of our business was brick and mortar and 0:16:15.400 --> 0:16:20.120 retail about it was was online. At the end of 0:16:20.200 --> 0:16:22.800 last year, it almost was. I think at the end 0:16:22.800 --> 0:16:24.400 of this year it's going to be pretty close to 0:16:24.440 --> 0:16:27.200 that as well. As it relates to our direct consumer business. 0:16:27.240 --> 0:16:30.440 We have a meaningful wholesale business as well, but I'm 0:16:30.600 --> 0:16:33.880 continue to still build pretty bullish on the retail side 0:16:33.880 --> 0:16:36.680 of things. I think it has also created some nice 0:16:36.720 --> 0:16:39.960 inventory opportunities and the right kind of places. We always 0:16:39.960 --> 0:16:43.320 focused on outdoor centers primary for us, and those those 0:16:43.360 --> 0:16:47.680 certainly got through COVID better than others. Um. But I 0:16:47.720 --> 0:16:49.840 think that there's been such a pent up demands. I 0:16:49.920 --> 0:16:52.760 was with some folktion of Cowboys last night and we're 0:16:52.760 --> 0:16:55.400 talking about this. There's been such a pent up demand 0:16:55.440 --> 0:16:57.320 for people to get out and get back to normalcy. 0:16:57.960 --> 0:17:00.560 I think the web customer has change and forever and 0:17:00.560 --> 0:17:03.200 it's always going to be dominant force. But I also 0:17:03.240 --> 0:17:05.360 think that there's this demand of people wanting to get 0:17:05.359 --> 0:17:07.840 back out and return to normalcy. They're going to a 0:17:07.840 --> 0:17:12.040 sporting event, going shopping for themselves or somebody in their lives. 0:17:12.040 --> 0:17:15.320 And I we've seen a little bit of that regionally 0:17:15.520 --> 0:17:17.520 where states that open up a little bit sooner, like 0:17:17.560 --> 0:17:20.800 Texas in the southeast, and I anticipate seeing a little 0:17:20.840 --> 0:17:24.479 bit more in the markets that we're a little bit 0:17:24.520 --> 0:17:27.159 more behind. So at the end of this year, we're 0:17:27.200 --> 0:17:29.520 gonna be real post to answer your question, but I 0:17:29.560 --> 0:17:31.880 think retail still is going to be meaningful for us 0:17:32.359 --> 0:17:34.120 and all the other retailers. Some things to think about 0:17:34.119 --> 0:17:37.800 it that way, and business too. I would just add 0:17:37.840 --> 0:17:41.199 one more thing is that we're small footprints. Um, you know, 0:17:41.240 --> 0:17:43.399 in the jewelry of business, we don't have sizes. We 0:17:43.440 --> 0:17:48.280 don't need huge, big, monster storytelling retail spaces, so it 0:17:48.280 --> 0:17:50.919 helps us economically as well. Tom grad spending some time 0:17:50.960 --> 0:17:57.400 with you, Tom Nolan, CEO of Kendra Scott. Now we're 0:17:57.400 --> 0:18:01.440 bringing Fiona Sincana Senior Mark could find a senior financial 0:18:01.440 --> 0:18:05.680 markets analysts City Index. It's a retail division of stone 0:18:05.960 --> 0:18:08.520 X and Fiona, let me start by asking you about 0:18:08.600 --> 0:18:12.080 what we're seeing in U s docks um investors selling 0:18:12.119 --> 0:18:15.800 off buying into bonds even with you know, these huge 0:18:15.840 --> 0:18:21.400 growth expectations and inflation fears. What's happening in the US 0:18:21.480 --> 0:18:25.040 equity market today. Yes, so what we're seeing is we 0:18:25.119 --> 0:18:28.080 said we we we sort of had record high struck 0:18:28.240 --> 0:18:31.720 last week with the Dow in the SMP and then 0:18:31.760 --> 0:18:33.960 today is the second day of losses that we're seeing. 0:18:34.040 --> 0:18:36.120 So we sort of set off yesterday, we're seeing another 0:18:36.160 --> 0:18:38.480 still off today, and there is that sort of there 0:18:38.600 --> 0:18:42.600 is this feeling of risk off trade going on. We've 0:18:42.600 --> 0:18:46.040 got demands for sort of riskier assets such as equity 0:18:46.080 --> 0:18:49.040 is sort of really coming off invested litten to pull 0:18:49.160 --> 0:18:51.240 risk off the table, when whilst we've got sort of 0:18:51.280 --> 0:18:54.119 the more safe haven such as the US gold just 0:18:54.280 --> 0:18:57.439 taking higher. I think the big concern here is with 0:18:57.520 --> 0:19:00.600 these rising COVID numbers again, so well, the US is 0:19:00.640 --> 0:19:03.280 doing a very good job at reopening and getting vaccines 0:19:03.280 --> 0:19:05.960 out there. The rest of the world of very much 0:19:06.000 --> 0:19:09.720 sort of India and Pakistani can talk with Asia, the 0:19:09.800 --> 0:19:13.199 situation is much more concerning, and I think there is 0:19:13.240 --> 0:19:16.280 this fear about how that's going to impact on the 0:19:16.359 --> 0:19:22.199 global growth and global economic recovery. So if you know, 0:19:22.680 --> 0:19:26.040 we're just you know, about ten the way through this 0:19:26.080 --> 0:19:28.800 first quarter earning season, we've seen some names and when 0:19:28.840 --> 0:19:30.560 you think about the banks, lest we've put up some 0:19:30.680 --> 0:19:34.240 huge numbers, yet the stocks, uh you know, are flat 0:19:34.320 --> 0:19:36.600 or down on the news. Is that suggests to you 0:19:36.720 --> 0:19:41.960 that this market is priced too close to perfection it does, 0:19:42.280 --> 0:19:45.959 or even slightly slightly overextended. It could be. I mean, 0:19:46.000 --> 0:19:48.959 we did have some really strong data at the end 0:19:48.960 --> 0:19:51.640 of last week as far as the U S data 0:19:51.680 --> 0:19:54.680 on retail PUS and inflation. With bolts so higher, we'd 0:19:54.720 --> 0:19:58.240 have some great UM numbers from the banks as well. 0:19:58.280 --> 0:20:01.920 So so really we were with those really strong numbers 0:20:01.920 --> 0:20:05.040 sitting at all time high UM, and then we've had 0:20:05.080 --> 0:20:07.120 this sort of sort of doubt to come in. There 0:20:07.160 --> 0:20:10.480 are some concerns about where we might be going forward. 0:20:10.680 --> 0:20:14.400 I think there's also a lot of high high expectations 0:20:14.400 --> 0:20:17.679 for this earning season and when expectations are so high, 0:20:18.000 --> 0:20:21.240 it does make it very difficult to please the market. 0:20:21.320 --> 0:20:23.080 So sort of you know, to have a really good 0:20:23.200 --> 0:20:26.119 upside surprise is given me much harder um. And so 0:20:26.240 --> 0:20:30.399 that does mean that sort of any slight um concerns 0:20:30.520 --> 0:20:33.000 or any niggles that the market could have to see 0:20:33.000 --> 0:20:36.280 the stocks fall off quite quickly. How important our Netflix 0:20:36.280 --> 0:20:40.159 earnings to text docs? I think these are going to 0:20:40.200 --> 0:20:43.359 be really important. They're really going to be closely watched. 0:20:43.480 --> 0:20:45.600 I mean, if we think about it, that the first 0:20:45.640 --> 0:20:48.720 three months of this year, they were still lockdown um 0:20:49.359 --> 0:20:53.760 uh sort of measured imposed and so that does support 0:20:53.840 --> 0:20:59.080 the stay at home steam really boosted Netflix across the 0:20:59.160 --> 0:21:03.080 past year. But we've also got heating up competition. There's 0:21:03.119 --> 0:21:05.959 a big focus on content. So I think there's going 0:21:06.000 --> 0:21:09.560 to be a really really close watch on how these 0:21:09.600 --> 0:21:11.960 are going to perform and also what that means for 0:21:12.000 --> 0:21:14.960 other text stops coming forward to next week when we've 0:21:14.960 --> 0:21:18.720 got the big US TEX stops coming through. So these 0:21:18.720 --> 0:21:20.840 are really going to be sort of you know, setting 0:21:20.880 --> 0:21:23.960 the trends and letting investors sort of have an idea 0:21:24.400 --> 0:21:28.240 to how that stay at home play is still in 0:21:29.200 --> 0:21:31.399 going on, or whether we are sort of on that 0:21:31.520 --> 0:21:35.880 customers rotation out of that. So if you know, kind 0:21:35.880 --> 0:21:38.400 of on the other side of the typical tech traders, 0:21:38.400 --> 0:21:41.640 you've got a cyclical trade and a trade into small 0:21:41.680 --> 0:21:45.280 cap stocks that's been working for a lot of investors. 0:21:45.440 --> 0:21:49.320 Really since September of last year. That cyclical rotation trade, 0:21:49.359 --> 0:21:51.400 if you will, has really been paying off. Is that's 0:21:51.440 --> 0:21:56.879 something you expect to continue. It could do. It's something 0:21:56.920 --> 0:21:59.680 that I think we could still seem much more room 0:21:59.760 --> 0:22:03.200 for the cyclical to to gain. But it just depends 0:22:03.240 --> 0:22:06.359 now and what happens as far as the COVID situation 0:22:06.480 --> 0:22:09.960