Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and am Marie Hordern. Join us each
Speaker 2: day for insight from the best in markets, economics, and
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Speaker 2: Bloomberg Terminal and the Bloomberg Business app. Ana Stagia joins
Speaker 2: us now for more, Anna Stagia, Can we start by
Speaker 2: talking about the setup going into next week with some
Speaker 2: big data points on deck, including CPI and retail sales.
Speaker 2: Can you walk us through that?
Speaker 1: Sure?
Speaker 3: Well, good morning, John, and first of all, I want
Speaker 3: to comment on those bad news conversation going into next week.
Speaker 3: I don't actually think we have much in terms of
Speaker 3: bad news. You know, we had slightly weaker G to
Speaker 3: Pree report, but if you look underneath the hood, we
Speaker 3: actually have a very strong core demand in the economy.
Speaker 3: When you look at the real time consumer data, it's
Speaker 3: actually improving from earlier in the year, and then if
Speaker 3: you look at the manufacturing SURVEYCE, maybe they disappoint a
Speaker 3: little bit on a one month basis, but I still
Speaker 3: look at the inventory levels and I think they're low
Speaker 3: enough to start to jump start a restocking cycle. So
Speaker 3: I think the setup going into next week, the CPI
Speaker 3: report next week, and then Nvidia the week after, I
Speaker 3: think the setup is fairly strong from the growth perspective.
Speaker 3: And you know, in terms of inflation, you know, we
Speaker 3: were waiting for the last mile of inflation. Guess what
Speaker 3: it's here, it's upon us. We've managed to go from
Speaker 3: five point eight percent CPI a year ago to now
Speaker 3: hopefully three point eight percent or below this year, So
Speaker 3: that's almost two percent points of improvement. And you know,
Speaker 3: if you look at the core PC metric, it's two
Speaker 3: point eight percent, so that's a two handle. So I
Speaker 3: think we are in that last mile and that's actually
Speaker 3: positive development and a sage.
Speaker 4: You sound like someone who would be very comfortable being
Speaker 4: a bull in this equity market right now we're past
Speaker 4: fifty two hundred. Can you keep buying?
Speaker 2: Yes?
Speaker 3: I can't. And obviously the risk reward was better when
Speaker 3: we were closer to five thousand, and that's why we
Speaker 3: were saying that we should be adding to allocations if
Speaker 3: you're underweight relative strategic ones.
Speaker 5: But still, if.
Speaker 3: I look ahead, and if I look at the current multiple,
Speaker 3: which I think can be sustained as long as this
Speaker 3: economic environment is sustained, and if I apply that to
Speaker 3: two hundred and seventy eight dollars in SMP five hundred
Speaker 3: earnings for next year, that gets me to an imply
Speaker 3: price target of fifty four hundred on the SMP. I
Speaker 3: think that's the base case scenario, and so I do
Speaker 3: think stocks are worth being in and we're staying for
Speaker 3: and you know, maybe the upside to fifty four hundred
Speaker 3: is not all that great, but that's for the SMP.
Speaker 3: And I think you can find pockets of opportunity within
Speaker 3: the market that should be able to outperform and stage.
Speaker 6: It's Jim Bianco.
Speaker 5: I want to ask you about the bond market. We
Speaker 5: started the year at the tenure yield at around three
Speaker 5: point nine percent. We got as high as four point
Speaker 5: seven percent a couple of weeks ago. We're around four
Speaker 5: and a half now. Set uptrend going to continue. Do
Speaker 5: you think or do you think we're kind of finding
Speaker 5: a high yield.
Speaker 1: For the year.
Speaker 3: Yeah, I think thanks for the question, Jim, and I
Speaker 3: think for now we have sufficiently priced in the new reality,
Speaker 3: which is growth that is remaining pretty robust, which is
Speaker 3: inflation expectations that have picked up, and of course the
Speaker 3: central bank policy which apparently may not have much in
Speaker 3: terms of rate cuts this year. So I think Jim
Speaker 3: Thatapp moved to four point seven that sufficiently reflected that.
Speaker 3: And when we look at the imply fair value in
Speaker 3: a ten year based on some of the models out there,
Speaker 3: relative to where the ten year is today, it is
Speaker 3: trading above some of those fair value models. So I
Speaker 3: do actually think that that's what gives me more optimism
Speaker 3: on the equity market, is if the tenure can pause
Speaker 3: around these current levels, then that's less drag on valuations
Speaker 3: for equities.
Speaker 5: Do you think that the FED is going to move
Speaker 5: this year and would that change your outlook a lot
Speaker 5: if they were to move.
Speaker 3: Look, I do think the FED will likely move once,
Speaker 3: maybe twice this year, and obviously that has to be
Speaker 3: later in the year. Look, the FED, I think realizes
Speaker 3: that they solve what they could solve, which is slowing
Speaker 3: down demand in the interest rates sensitive parts of the economy.
Speaker 3: What the FED cannot solve is the supply of labor
Speaker 3: and the supply of housing. And when you look at
Speaker 3: inflation today, what's really making it sticky. It's the fact
Speaker 3: that wages are still rising and the fact that there's
Speaker 3: a shortage of workers. And I'm in Miami this week
Speaker 3: and apparently the unemployment rate in Miami is one point
Speaker 3: nine percent. So talk about a lot of demand and
Speaker 3: lack of lack of labor. The FED can't really solve that.
Speaker 3: You know, the FED can't also solve the shortage of
Speaker 3: housing and the underbuilding that we've had in the economy
Speaker 3: of housing over the last ten years. They could slowed
Speaker 3: the demand, and they have done that, but they can't
Speaker 3: quickly turn on the supply spicket. So I think having
Speaker 3: this realization is the reason why the FED will likely
Speaker 3: cut interest rates, because they've done a lot and certain
Speaker 3: parts of the economy, certain pockets are certainly feeling the strain,
Speaker 3: which is commercial real estate, especially in office and of
Speaker 3: course that relates to the regional banks as well. So
Speaker 3: I do think, you know, if inflation continues to be
Speaker 3: somewhere in the two to three percent range, as we
Speaker 3: move through the year, they should cut rates.
Speaker 2: Anastacia, you've been constructive for a while. You've had a
Speaker 2: bus to buy. I remember you called the pull back
Speaker 2: in April a better entry point. Clearly, based on the
Speaker 2: last few weeks, you've been right. Could you tell us
Speaker 2: how independent your market call is from your FED code.
Speaker 3: It's fairly independent, Jonathan. When we wrote the outlook for
Speaker 3: this year, we did expect rate cuts, but at the
Speaker 3: same time, we said, what if the FED doesn't cut
Speaker 3: interest rates? And the conclusion was, it is still the
Speaker 3: equity market that's worth staying in and worth being in.
Speaker 3: And the reason we said that was because of the
Speaker 3: growth resilience that we were expecting. You know, there's this
Speaker 3: notion of the US exceptionalism, of the US economic exceptionalism,
Speaker 3: and it is so true because this economy is not
Speaker 3: all that it interest rates sensitive. And in fact, when
Speaker 3: you look at the consumer, what we pay in terms
Speaker 3: of mortgage has not actually reset higher because only five
Speaker 3: percent of mortgages are a floating rate, and yet the
Speaker 3: amount of income that we earn by parking the cash
Speaker 3: that we had in a money market account is quite significant.
Speaker 3: It's a significant pickup. So this is why, you know,
Speaker 3: we thought that the consumer can handle five percent interest
Speaker 3: rates as they have supporting the economy. And that's why,
Speaker 3: even if the FAT doesn't cut rates, the economic backdrop
Speaker 3: should support equity valuations and equity earnings, of course.
Speaker 2: And so far it has. Anaesthice, you've been Great's got
Speaker 2: to catch up and a station there please to say
Speaker 2: that joining us now is nil data of renmac neil.
Speaker 2: I've been looking forward to. This was written a note
Speaker 2: of yours earlier this week. The labor market rebalancing has
Speaker 2: been achieved. Can you walk us through just how we've
Speaker 2: done that?
Speaker 7: Well, we've you know, job openings have come down, job openings,
Speaker 7: remember our measure of excess labor demand with very little
Speaker 7: upward movement in the unemployment. Right now, the unemployment rate
Speaker 7: has gone up, but you know it does look for
Speaker 7: the time being that the FED was kind of able
Speaker 7: to successfully, you know, trim excess labor demand without driving.
Speaker 6: Up unemployment all that much. And I think what's.
Speaker 7: Important now, John, is that, yes, the e CI which
Speaker 7: you mentioned earlier did pop in the first port. But
Speaker 7: the underlying you know, sort of drivers of that data
Speaker 7: are the average hourly earnings for non supervisory workers, and
Speaker 7: we saw in April that that's cooling. Over the last
Speaker 7: three months, average hourly earnings growth for non supervisory workers
Speaker 7: are barely up three percent at an annual rate. And
Speaker 7: given the growth and productivity that we've seen, even if
Speaker 7: you assume it's like half that, so let's say one
Speaker 7: to one and a half percent productivity, you're talking about
Speaker 7: wage growth that is broadly consistent with the feds underlying
Speaker 7: inflation objectives, which is why unit labor costs I think
Speaker 7: have been cooling.
Speaker 6: So where's the inflation coming from?
Speaker 7: I mean that to me is the big story here
Speaker 7: is if you ask someone why did inflation perk up
Speaker 7: in the first quarter, they can't really point to a
Speaker 7: fundamental reason for that.
Speaker 6: Is it because expectations are perking back up?
Speaker 1: No?
Speaker 6: Is it because the labor markets are reheating.
Speaker 1: No?
Speaker 7: Is it because the dollars weakening, driving up, you know,
Speaker 7: pushing up the prices for imported consumer goods. No, the
Speaker 7: dollars generally stronger all year. So you can point to
Speaker 7: things like, well, look, financial services inflation picked up, and
Speaker 7: healthcare services and all motor vehicle insurance. Sort of the
Speaker 7: idiosyncratic factors I think it's important for people to kind
Speaker 7: of go to first principles here, and you know, this
Speaker 7: is why I think the case for weaker inflation is
Speaker 7: still quite strong.
Speaker 2: Well, two things to impact their First of you on
Speaker 2: the labor market. Let's just build on that for a
Speaker 2: little bit if we can kneil. So this is the
Speaker 2: line from City and Andrew Hanhorst and the team. They
Speaker 2: say evidence is building that the labor market is poised
Speaker 2: for sharp weakening. You use the word cooling. Can you
Speaker 2: help us understand the difference between a welcome calling in
Speaker 2: the labor market and a prospect of an unwelcome deterioration.
Speaker 7: Well, what you want to do is look for discontinuities
Speaker 7: in the data. That's that Alan Greenspan sort of line.
Speaker 7: Right when you have a bunch of two hundred thousand
Speaker 7: job numbers and then all of a sudden you have
Speaker 7: a fifty, then he should be worried. But if you're
Speaker 7: talking about where we are right now, I mean I
Speaker 7: don't really see much evidence for that. You know, you
Speaker 7: mentioned jobless claims, even if if you assume that number
Speaker 7: is legit, which it's not because it was mostly driven
Speaker 7: by one state, New York the break even level was
Speaker 7: still around two hundred and sixty thousand.
Speaker 6: If you look at the.
Speaker 7: Separations and hires data from Jolts, you can kind of
Speaker 7: back out what break even initial claims are. So you're
Speaker 7: still talking about continued jobs growth, you know, in a
Speaker 7: reign of one hundred and seventy five to two hundred thousand.
Speaker 7: So if you see one hundred and seventy five to
Speaker 7: two hundred thousand jobs and you know, slowing wage growth
Speaker 7: towards you know, let's say three and a half percent,
Speaker 7: that would be cooling. If you see significantly worse than that,
Speaker 7: then you'd be worried. But jobs are something that come
Speaker 7: out of growth, right, Jobs don't necessarily go into growth,
Speaker 7: and if the economy is growing, employment will follow. And
Speaker 7: we know that the economy is growing. You know, if
Speaker 7: you look at underlying domestic demand, I mean, it looks
Speaker 7: like it's close to three percent in the first half
Speaker 7: of the year, So I think that's that doesn't leave
Speaker 7: me that concerned about sort of discontinuities in a labor market.
Speaker 4: Well, neil to that point, and you know, earnings of
Speaker 4: backed up everything you've said. We've seen huge capex coming
Speaker 4: from companies to what could possibly drive a cooling?
Speaker 7: Then well, what could drive a cooling in the labor market? Well,
Speaker 7: I just think it's that turnovers is coming down. I mean,
Speaker 7: that's that's really what it is. You know, there's there's
Speaker 7: been a pick up in labor supply and there's been
Speaker 7: less turnover in the job market, and so I think
Speaker 7: those things basically.
Speaker 6: Tell you and come combined for you know, a moderation.
Speaker 6: I mean, we're.
Speaker 7: Basically hitting equilibrium now in the labor market, and I
Speaker 7: think that's that's the bigger story.
Speaker 6: And at the same time, I mean, the economy isn't
Speaker 6: getting away from the FED. Yes, you mentioned capex.
Speaker 7: Capex could be a big driver of growth this year,
Speaker 7: but there are other areas that will probably cool.
Speaker 6: I mean, for example, residential investment.
Speaker 7: I mean, that was a very strong area in Q one,
Speaker 7: but given the backup in rates that we've seen, it's
Speaker 7: unlikely that that repeats over the next couple of quarters.
Speaker 7: And you should see some rebalancing and consumer spending, right
Speaker 7: because a lot of the up movement in consumption and
Speaker 7: we have retail sales next week, a lot of that
Speaker 7: in the last two months has been driven by a
Speaker 7: decline of the savings rate, It's hard to see that lasting.
Speaker 7: So I'd expect a better sort of more balanced mix
Speaker 7: to growth going forward. So you know, I don't think
Speaker 7: growth is getting away from us. But you know, again,
Speaker 7: it's not something I'm lighting my hair on fire for.
Speaker 7: I mean, it's sort of you're talking about two and
Speaker 7: a half percent growth, steady job of growth, and an
Speaker 7: ongoing sort of disinflation trend given the improvement and supply conditions.
Speaker 6: Yeah.
Speaker 4: Right, But again, your words that you're using neil normalized,
Speaker 4: more balance, getting back to averages. Is that a good
Speaker 4: enough reason for the Fed to cut?
Speaker 7: Absolutely, because ultimately they believe that they control inflation.
Speaker 6: So if inflation slows more.
Speaker 7: Quickly than they think over the next several months, then
Speaker 7: they should be cutting because they wouldn't want to tolerate
Speaker 7: an even higher rate of real rates. So you have
Speaker 7: to kind of recalibrate policy just to.
Speaker 2: Stay even should So his will what do you think
Speaker 2: they will do?
Speaker 6: I think they will cut. They will cut.
Speaker 7: At the end of the year, we will still be
Speaker 7: talking about how much is the economy growing and how
Speaker 7: many times has the Fed been cutting.
Speaker 6: I think the case for cuts is still quite strong.
Speaker 6: I think. I put it to you this way. I
Speaker 6: think they go at least once.
Speaker 7: I think two is a good baseline, and I think
Speaker 7: there's an option for three if we're right about how
Speaker 7: quickly inflation slows over the next two quarters.
Speaker 2: I think there's an argument that that's basically what we're
Speaker 2: hearing from Fed officials as well. Neil, Now, can you
Speaker 2: help me with something I'm wrestling with? And that's this
Speaker 2: supply side story in the labor market. Tons has been said,
Speaker 2: tons have been said about the amount of immigration that's
Speaker 2: coming across the southern border. How that's allowed us to
Speaker 2: have this really strong payrolls growth without the corresponding pickup
Speaker 2: in wages. Noil, based on basic communication we've had over
Speaker 2: the last week or so, apparently border encounters have dropped
Speaker 2: and dropped by quite a bit. How can we sort
Speaker 2: of anticipate the data in the months to come based
Speaker 2: on that?
Speaker 6: If it's so, I mean, I don't think that.
Speaker 7: I think that that's sort of the immigration story is
Speaker 7: kind of a rationale.
Speaker 6: That people are working back to.
Speaker 7: It's like, oh, why why has the labor market slopes
Speaker 7: cooled off a bit? Well, you know, here's this big
Speaker 7: pick up in labor force growth. I'm not so sure
Speaker 7: that's the case.
Speaker 6: I mean, I think, you know, unit.
Speaker 7: Labor costs have moderated because you know, people are getting
Speaker 7: a little bit more productive in the jobs that they're
Speaker 7: they're in. So we've seen a picking up of labor
Speaker 7: of labor productivity. So I think that's a that's a
Speaker 7: more important driver. And to your point, I mean, I'm
Speaker 7: not entirely convinced yet that this is like a big,
Speaker 7: you know, secular increase in immigration.
Speaker 6: I mean, it could just be so sort of one
Speaker 6: off dynamics related to the.
Speaker 7: You know, to the opening up of the visa approval
Speaker 7: process following the pandemic, right, so you had a lot
Speaker 7: of people that were kind of on the sidelines, then
Speaker 7: they got their visas finally approved as things reopened and
Speaker 7: and that, and that may well slow down. So again,
Speaker 7: I mean it's something closer to equilibrium. But I think
Speaker 7: that people are getting more productive in their roles, right,
Speaker 7: And I think that's what's important. You aren't seeing quits
Speaker 7: go up as much, and that means that people are
Speaker 7: staying in their jobs longer. And if they're staying in
Speaker 7: their jobs longer, presumably they'll get more productive in those roles.
Speaker 4: No one of the things that people use that that
Speaker 4: immigration piece to say this is an argument that calm
Speaker 4: pickering uses basically to say that we are in for
Speaker 4: an inflation spike next year if we get Trump in
Speaker 4: the White House, because you get more curtailed flow of immigrants.
Speaker 4: Given what you're saying, given again this idea of what
Speaker 4: we're seeing as normalization, it was from some of the
Speaker 4: visa processes opening up. Is that not as relevant of
Speaker 4: a fear.
Speaker 7: Well, Shuretz, I mean, I think worrying about inflation if
Speaker 7: you have I mean, if you know with respect to
Speaker 7: the election, I think you know who knows what the
Speaker 7: outcome is.
Speaker 6: Going to be.
Speaker 7: But I do think it's fair to say that if
Speaker 7: Trump were to win, former President Trump or to win,
Speaker 7: then there's a probably there's a higher.
Speaker 6: Likely good then that you have a unified government.
Speaker 7: And we know that whenever you have a new unified
Speaker 7: government coming out of the elections, they're always going to
Speaker 7: do something.
Speaker 6: It's not like they're going to get into office and.
Speaker 7: Say, hey, everyone, we're going to raise the retirement age
Speaker 7: and cut spending. They're going to want to do something
Speaker 7: that makes people feel good and whether that's uh, you know,
Speaker 7: I think they'll probably lead with something like that tax
Speaker 7: cut spending that'll be inflationary, so you know, to the
Speaker 7: extent that there's a restrictive immigration policy that comes about it,
Speaker 7: it'll add.
Speaker 2: To that even more interested. Neil enjoyed this. Thank you, sir.
Speaker 2: I know you've got thoughts on Gucci. Will do that
Speaker 2: another time. No, DA's a Renmac No, thank you. Oliver
Speaker 2: Shannon TV Cowen joined us. Now for more, Oliver, Let's
Speaker 2: get into that and then we can get to what
Speaker 2: you love, which is luxury sert. Don't worry, we will
Speaker 2: get to that topic in just a moment. Let's look
Speaker 2: add to home Depot and Walmart. What you and the
Speaker 2: team looking for next week.
Speaker 8: We're excited about Walmart, that's our pick. We're more cautious
Speaker 8: and optimistic on target. Walmart is a needs retailer, being
Speaker 8: sixty percent grocery, very helpful in terms of traffic.
Speaker 1: They're also managing.
Speaker 8: Well through this tough time where the consumer really is
Speaker 8: looking for value, very sensitive to price.
Speaker 1: So we're excited about Walmart.
Speaker 8: In addition, Walmart as a technology company, don't forget about
Speaker 8: digital advertising in the marketplace model, and Walmart's getting a
Speaker 8: higher household income customer. For example, you can buy Apple
Speaker 8: Macintosh on the marketplace on the website, as well as
Speaker 8: fragrances like Burberry Goddess.
Speaker 1: So the whole flywheel is working.
Speaker 2: Let's sit on Walmart and let's talk about price and
Speaker 2: pricing power. We've heard from various executives over the last
Speaker 2: few months and maybe they're losing some and that we're
Speaker 2: starting to see some disinflation perhaps even deflation in certain places.
Speaker 2: What do you make of that? What would you expect
Speaker 2: to hear next week?
Speaker 1: That is definitely happening.
Speaker 8: What we have with this new consumer is a consumer
Speaker 8: who's not necessarily very loyal and doesn't want to overpay
Speaker 8: for national brands. What consumers are doing is what we
Speaker 8: call customized moderation value hacking, creating down to private label
Speaker 8: when they want to or need to, and trading up
Speaker 8: very selectively. So that will continue to be a big issue.
Speaker 8: The bottom line is Walmart wants every day low prices.
Speaker 8: They want suppliers to offer low prices too, so that
Speaker 8: the consumer has more money to spend on non food
Speaker 8: and discretionary items. That's still a work in progress in
Speaker 8: terms of the consumer. What's good about the consumer is
Speaker 8: that there's low unemployment and they're still spending power given
Speaker 8: six hundred and seventy billion on the sidelines. What's bad
Speaker 8: about the consumer is that it's still bifurcated with pressure
Speaker 8: at the middle and lower end, in part due to inflation.
Speaker 8: As we look, fundamentally, inflation is getting less bad. However,
Speaker 8: consumer confidence and what the consumer feels is still fairly volatile,
Speaker 8: So mixed signals here. But racing is a hot topic
Speaker 8: because everybody wants low prices oliver.
Speaker 4: Then do you expect, with some of those headwinds you're
Speaker 4: talking about, for it no longer to have the case
Speaker 4: shape that at some point, maybe not the upper echelons
Speaker 4: who will always continue to spend, but for it not
Speaker 4: to just be the lowest end consumer that starts to
Speaker 4: get more price conscious.
Speaker 8: Yeah, I think everybody's getting somewhat priced conscious. We see
Speaker 8: this value hacking consumer, this do it yourself consumer, So
Speaker 8: consumers are looking for newness. Also, what we're seeing in
Speaker 8: our studies is that there's so much receptivity to private
Speaker 8: brands and private labels such as Kirklin at Costco and
Speaker 8: others so that trend should continue.
Speaker 1: What we do see at the higher.
Speaker 8: End is the wealth effect, some confidence, and some pockets
Speaker 8: of strength in the US in particular kind of something
Speaker 8: we're watching that's been very volatile as well.
Speaker 2: Can we talk about luxury then, I know you love it,
Speaker 2: and I promise we talk about that's it. There are
Speaker 2: some luxury brands that aren't seeing that stability. They're struggling.
Speaker 2: I'm thinking more specifically about Gucci all but who's getting
Speaker 2: it right and who's getting it wrong?
Speaker 8: Yeah, we're most excited about Louis Baton, given powerhouse brands
Speaker 8: such as Louis Baton as well as d Or. They
Speaker 8: also own Sephora, which is a wonderful beauty concept that's
Speaker 8: global caring. We downgraded the stock that the owner of Gucci.
Speaker 8: Gucci's a work in progress. They really have to reset
Speaker 8: this brand. So some of these issues are somewhat specific
Speaker 8: to the Gucci brand, which needs to return to classic
Speaker 8: and timelessness, but also needs to be more elevated. So
Speaker 8: in this process it's been quite painful and the numbers
Speaker 8: have been quite sharp. What's been happening in luxury goods
Speaker 8: is share shifts as well, so big players like Louis
Speaker 8: Vuitton offer a full range of more quiet, more loud
Speaker 8: luxury all kinds as well as hard luxury, and that's
Speaker 8: been working better in terms of their execution.
Speaker 1: Gucci is something we're watching.
Speaker 8: I do love the brand personally, but it's going through
Speaker 8: a lot of change and part of that will be
Speaker 8: de leveraged or losing some customers as well.
Speaker 7: Well.
Speaker 2: Whose customers are they trying to attract? Can we talk
Speaker 2: about that a little bit more? When we talk about
Speaker 2: the high end we're talking about the high end luxury player.
Speaker 2: We're not necessarily talking about the upper income consumer, because
Speaker 2: I don't believe the last few years with Gucci has
Speaker 2: been about the upper ring income consumer. I think it's
Speaker 2: been across the board, getting access to its aspirational luxury names,
Speaker 2: all of it, and I'm trying to work out who
Speaker 2: the target audience is going to be for that brand.
Speaker 8: Yeah, it's a bit of a reset, and you're one
Speaker 8: hundred percent right. What's happened with the Gucci brand, which
Speaker 8: had very massive growth, is really broaden the aperture of
Speaker 8: what luxury means. It was rethinking technology and gender and
Speaker 8: very very exciting. But on the other side, of this,
Speaker 8: this aspirational customer has been more under pressure, so that's
Speaker 8: something the whole industry is facing as well as Gucci,
Speaker 8: and Gucci has a new designer as well, so.
Speaker 1: In rethinking the brand, luxury.
Speaker 8: Is always about elevation, that's a big focus, and then
Speaker 8: timelessness and taking you back to classic items and hearkening
Speaker 8: back to.
Speaker 1: A lot of the heritage of Gucci too.
Speaker 8: Somewhat specific to Gucci, but they're definitely losing share to
Speaker 8: players like er Mez, like Louis Baton and others which
Speaker 8: have a real anchor on time timelessness as well.
Speaker 1: Well.
Speaker 4: With all that tension of the aspirational buyer, Oliver, it's
Speaker 4: even more remarkable that someone like Sephora, all those beauty
Speaker 4: brands continue to do well because you could say people
Speaker 4: are going to trade down, go to just a convenience store,
Speaker 4: a drug store, get their makeup there. But why is
Speaker 4: that story so enduring? Is it just you know, the
Speaker 4: thirteen year olds on TikTok looking at influencers then deciding
Speaker 4: to go to Sephora to buy something.
Speaker 8: Yeah, it's all happening. I mean ten year olds too
Speaker 8: with skincare regimes. What I love about beauty is that
Speaker 8: it's an essential good. It also gets a bit blurred
Speaker 8: with health and wellness, but lots of abundant innovation and cosmetics,
Speaker 8: hair care, skincare. As we think about fragrances, our favorite
Speaker 8: idea is Cody. We also like Alta, which in many
Speaker 8: ways is like home depot for women in terms of
Speaker 8: that routine.
Speaker 1: There's a ton of innovation as well.
Speaker 8: As social media that fuels new processes for cosmetics, skincare
Speaker 8: is taking care of yourself and self care. It's been
Speaker 8: a very resilient industry because a lot of the habits
Speaker 8: that were picked up during pandemic really stuck in beauty,
Speaker 8: and beauty is a profitable, growing business globally.
Speaker 1: We also see.
Speaker 2: You're going to get us in trouble Home deepot for women.
Speaker 2: Do you want to elaborate on that a little bit more?
Speaker 8: Well, The whole Alta experience is really comprehensive in terms
Speaker 8: of mass plus prestige. You definitely find stuff you didn't
Speaker 8: know you needed, but you also think about replenishment and
Speaker 8: really investing in your face and body and skin. And
Speaker 8: that's a principle that men and women love. But women
Speaker 8: can be very loyal to certain categories such as hair
Speaker 8: care and skincare, and then the cosmetics. There's a lot
Speaker 8: of newness and innovation, so we're excited about alter, especially
Speaker 8: on the pullback and the evaluation level.
Speaker 1: Here, I'll be at the.
Speaker 8: Women's Word Daily Beauty CEO summer talking about the official
Speaker 8: intelligence means beauty.
Speaker 1: That's a very vibrant industry.
Speaker 2: We're looking forward to catching up with you again soon.
Speaker 2: Olivi chen FTD Cowen. This is the Bloomberg Surveillance podcast,
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