WEBVTT - U.S Tech, Lululemon Earnings 0:00:02.920 --> 0:00:10.840 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.880 --> 0:00:15.040 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:15.080 --> 0:00:18.079 Eastern on Apple Car playing Android Auto with the Bloomberg 0:00:18.120 --> 0:00:21.440 Business app. Listen on demand wherever you get your podcasts, 0:00:21.640 --> 0:00:24.040 or watch us live on YouTube. 0:00:25.079 --> 0:00:28.800 Let's talk technology here. There's a lot happening again. The 0:00:28.800 --> 0:00:31.560 Bloomberg News story today, which is just amazing to me. Nvidia, 0:00:32.200 --> 0:00:35.200 Microsoft and Apple are bigger than the China stock market. 0:00:35.240 --> 0:00:35.519 That's it. 0:00:35.960 --> 0:00:37.559 I don't know who did that math, but that's like 0:00:37.600 --> 0:00:39.519 a good math. That makes a good story to me. 0:00:39.880 --> 0:00:41.840 That's a great story. I mean, does it mean they're 0:00:41.840 --> 0:00:43.879 overvalued or China's undervalued? 0:00:43.880 --> 0:00:45.239 All right, let me check in with somebody who might 0:00:45.280 --> 0:00:47.279 have an opinion here on Rock ran a Bloomberg Intelligence 0:00:47.320 --> 0:00:50.920 senior tech analyst on a Rock. I mean, ever since 0:00:51.080 --> 0:00:53.560 I've known you, this is we're going fourteen years. You've 0:00:53.560 --> 0:00:55.800 got like the easiest job on Wall Street. All you 0:00:55.840 --> 0:00:58.480 got to do is say tech spending is going up. 0:00:59.000 --> 0:01:02.280 Buy these things that's good for technology. Step back today, 0:01:02.280 --> 0:01:05.760 you walk into a portfolio manager's office here, and the 0:01:05.800 --> 0:01:08.000 portfolio manager he's been in he or she has been 0:01:08.040 --> 0:01:11.039 in industrials their entire career. Now they're told they need 0:01:11.040 --> 0:01:13.480 to get some tech exposure. Where do you send them? 0:01:14.240 --> 0:01:15.959 Yeah, so this is you know, you just made a 0:01:15.959 --> 0:01:18.160 comment that you know, eighteen months ago or so when 0:01:18.160 --> 0:01:20.360 you heard of AI, you said, go by in video 0:01:20.400 --> 0:01:22.840 and that's you know, that has worked out very well. 0:01:22.959 --> 0:01:25.360 But now the question is for the next leg of 0:01:25.440 --> 0:01:29.279 AI beneficiaries, do you go downstream or you still stick 0:01:29.319 --> 0:01:32.360 to the hardware players? And that's a very tough question, frankly, 0:01:32.600 --> 0:01:35.080 but there are enough players in the software area, in 0:01:35.120 --> 0:01:37.399 the in the services area that have not seen the 0:01:37.400 --> 0:01:39.640 benefit of AI, and I think those are the companies 0:01:39.680 --> 0:01:42.480 they're going to see sales improve over the next you know, 0:01:42.560 --> 0:01:45.400 let's say a couple of years, because the downstream effect 0:01:45.520 --> 0:01:48.080 of all the increased spending has to reach them. 0:01:48.120 --> 0:01:49.240 It's just a matter of time. 0:01:49.720 --> 0:01:52.360 The difficult part is to put a real pulse on 0:01:52.440 --> 0:01:53.400 when that's going to happen. 0:01:53.560 --> 0:01:56.400 Yeah, let me throw a fly into the ointment. Can 0:01:56.440 --> 0:01:59.320 the Justice Department screw all this up at some point? 0:02:00.560 --> 0:02:01.840 Yeah, they will try very hard. 0:02:01.880 --> 0:02:04.280 And you know, I think these companies are also getting 0:02:04.320 --> 0:02:07.320 smarter and smarter. But frankly speaking, I think what we 0:02:07.400 --> 0:02:11.400 saw after the financial crisis was banks did become much bigger, 0:02:12.040 --> 0:02:15.360 and I think unfortunately for the Justice Department and other regulators, 0:02:15.560 --> 0:02:18.560 I think the large tech companies will become much bigger 0:02:18.600 --> 0:02:21.280 because of AI, just because they have the capacity to 0:02:21.360 --> 0:02:23.920 run these workloads. It's not easy to run them in 0:02:23.960 --> 0:02:27.280 your you know, backyard or so you really need powerful 0:02:27.360 --> 0:02:30.520 computers to do these processing and they have an unfair 0:02:30.560 --> 0:02:31.280 advantage here. 0:02:31.680 --> 0:02:34.239 All right, Anrarag. We can't get you on the horn 0:02:34.280 --> 0:02:35.280 without talking about Apple. 0:02:35.320 --> 0:02:38.359 And I know next week June tenth, I believe, will 0:02:38.400 --> 0:02:40.920 be the Developer Conference for Apple, and that's a you know, 0:02:41.080 --> 0:02:42.799 an event every year where people like John Tucker and 0:02:42.840 --> 0:02:45.960 I who don't know much about technology, we do pay 0:02:46.000 --> 0:02:49.240 attention because that tends to be when Apple introduces some 0:02:49.320 --> 0:02:52.880 cool stuff, maybe that it moves the stock of Apple, 0:02:52.919 --> 0:02:56.120 maybe it moves the socks in other tech companies. Give 0:02:56.200 --> 0:02:59.160 us a preview of June tenth at in Cupertino, California. 0:03:00.080 --> 0:03:02.400 Yeah, so I would say that you know, these companies 0:03:02.440 --> 0:03:05.840 hold these events every year, but I would say for Apple, 0:03:05.880 --> 0:03:08.160 I don't think it has ever been so important than 0:03:08.240 --> 0:03:10.560 this year as to what big updates they're going to 0:03:10.560 --> 0:03:13.919 do their software because right now, Apples was caught off 0:03:13.960 --> 0:03:17.040 guard like most of the companies did when chat GPD 0:03:17.200 --> 0:03:19.600 came out and people figured out they are really behind 0:03:19.600 --> 0:03:22.720 the curve when it comes to AI adoption or their 0:03:23.520 --> 0:03:25.239 you know, investments in this area. 0:03:25.280 --> 0:03:27.520 So Apple's been behind, there's no lying about it. 0:03:28.080 --> 0:03:31.000 But we are expected to see you know, you could 0:03:31.000 --> 0:03:35.560 say alliance between Apple and Open Ai. We don't know 0:03:35.600 --> 0:03:38.520 if they're going to do a similar deal with with Google. 0:03:38.640 --> 0:03:40.800 That's pending, So there's going to be a lot of 0:03:40.840 --> 0:03:44.280 interesting stuff that shows up on Monday when Apple's going 0:03:44.320 --> 0:03:47.880 to showcase how this technology is going to get into 0:03:47.920 --> 0:03:50.280 your phone and make your life a little bit easier 0:03:50.280 --> 0:03:53.200 than what it is. And if that, if that thing 0:03:53.320 --> 0:03:57.400 goes through, if it's executed, well, then the the shipment 0:03:57.480 --> 0:03:59.720 data or the unit unit sales data that we have 0:03:59.800 --> 0:04:02.240 seen for iPhones over the last three years, which has 0:04:02.280 --> 0:04:04.640 typically been flat, I mean, the Apple's not seen any 0:04:05.000 --> 0:04:05.880 improvement there. 0:04:06.000 --> 0:04:07.600 I mean you could see a lift over there. 0:04:08.400 --> 0:04:10.760 Let me ask you about Microsoft real quickly. What's the 0:04:10.800 --> 0:04:13.560 deal that they struck with this AI startup. 0:04:13.560 --> 0:04:19.480 I think it's Inflection, Yeah, so basically they paid them 0:04:19.520 --> 0:04:24.599 a fee as you could say compensation to hire a 0:04:24.600 --> 0:04:27.640 lot of their employees and make them part of Microsoft's 0:04:27.640 --> 0:04:28.800 internal AI division. 0:04:29.040 --> 0:04:31.480 And that's the you know, that's what it's been looked 0:04:31.480 --> 0:04:36.280 at because, as you know, larger companies cannot easily buy 0:04:36.279 --> 0:04:39.920 any companies at this point, or AI companies, so they 0:04:39.920 --> 0:04:41.120 are trying to see if they could. 0:04:41.160 --> 0:04:42.320 They are you know, you could. 0:04:42.120 --> 0:04:45.560 Say, skirting the rules around acquisitions by doing this end 0:04:45.560 --> 0:04:47.480 mass hiring folks. 0:04:47.520 --> 0:04:49.520 One of the I think the real key advantages of 0:04:49.560 --> 0:04:53.799 Bloomberg Intelligence is that they have access to the best 0:04:54.120 --> 0:04:58.279 data for every industry that they cover in a technology space. 0:04:58.320 --> 0:04:59.120 One of those data. 0:04:58.920 --> 0:05:03.000 Providers Thatloomberg Intelligence has access to is id C. That 0:05:03.080 --> 0:05:07.120 is the gold plated provider of really independent data on 0:05:07.440 --> 0:05:11.440 tech spending, amongst other things a RAG. I know, you've 0:05:11.440 --> 0:05:13.320 worked a lot with the IDC folks. You use your 0:05:13.720 --> 0:05:17.400 the id data a lot in your research. What are 0:05:17.400 --> 0:05:19.799 you getting, What are you sensing in terms of total 0:05:19.839 --> 0:05:24.240 tech spend, in terms of what's incremental for AI and 0:05:24.279 --> 0:05:27.839 maybe what's just kind of taking from one tech you know, 0:05:27.960 --> 0:05:28.839 capex budget and. 0:05:28.800 --> 0:05:30.280 Putting it into AI. What do we know? 0:05:31.240 --> 0:05:33.400 Yeah, so at least this for this year, for twenty 0:05:33.440 --> 0:05:36.279 twenty four. It's more of a reallocation at this point, 0:05:36.480 --> 0:05:39.000 and you know, you have to really think you're long 0:05:39.040 --> 0:05:40.960 and hard and say whether that's going to be the 0:05:41.000 --> 0:05:42.840 same case in twenty five and twenty six. 0:05:43.240 --> 0:05:44.880 We think things are going to improve. 0:05:45.440 --> 0:05:49.160 Geopolitical conditions are not the best right now, so CIOs 0:05:49.440 --> 0:05:53.000 or CFOs are not that excited about ramping up their 0:05:53.040 --> 0:05:55.920 tech budgets. But we think tech as a percentagea of 0:05:55.960 --> 0:05:59.320 global GDP is still a small portion. It's you know, 0:05:59.360 --> 0:06:01.880 we talk about a lot, but it's not as big 0:06:01.960 --> 0:06:04.560 as let's say, healthcare spending in the US, for example, 0:06:04.600 --> 0:06:05.960 when you compare both the numbers. 0:06:06.160 --> 0:06:07.400 So we really feel. 0:06:07.120 --> 0:06:10.320 That, I mean, there are enough you could say, legs 0:06:10.320 --> 0:06:14.000 to this particular story out now. We think it's going 0:06:14.040 --> 0:06:16.560 to be in the form of more software spending over 0:06:16.600 --> 0:06:20.560 the next several years than services spending. Hardware is doing well, 0:06:20.600 --> 0:06:22.680 So I think that may continue or that may not. 0:06:22.800 --> 0:06:25.440 That it's a big question, but we think we think 0:06:25.480 --> 0:06:27.480 it's going to be incremental spent coming in the next 0:06:27.480 --> 0:06:28.080 few years. 0:06:28.200 --> 0:06:32.720 The expectations are really high for technology. What if they 0:06:32.760 --> 0:06:36.360 don't meet the expectations, What's what's in the unexpected bin 0:06:36.440 --> 0:06:38.600 at this point and the potential downside. 0:06:39.320 --> 0:06:42.920 Yeah, you see, you talked about two or three names, 0:06:42.920 --> 0:06:45.839 you know, Nvidia, Apple, and Microsoft. But if you look 0:06:45.880 --> 0:06:48.320 at other companies, let's say, if you were to pull 0:06:48.320 --> 0:06:51.960 a chart of salesforce or workday or accenture or you 0:06:52.000 --> 0:06:54.919 know tcs, they've all been going down or they have 0:06:55.000 --> 0:06:58.000 not seen the same benefit coming through. And that's where 0:06:58.080 --> 0:07:01.400 the allocation is being taken away from and going into 0:07:01.440 --> 0:07:04.080 the hardware areas. So those are the companies that you 0:07:04.120 --> 0:07:07.479 know could see slight improvement next year. The sentiment is 0:07:07.520 --> 0:07:10.560 really bad in the software arena right now because of 0:07:10.600 --> 0:07:12.680 the lack of that spending. I think you know that 0:07:12.760 --> 0:07:16.160 may change next year if economic conditions improve, or I 0:07:16.160 --> 0:07:18.720 would say geopolitical conditions improve. 0:07:19.080 --> 0:07:20.760 All right, Don Rod, thanks so much for joining us 0:07:20.760 --> 0:07:23.360 on Rod Rana. He's a senior technology channels for Bloomberg 0:07:23.440 --> 0:07:27.960 Intelligence based in that burgeoning tech hub of Chicago, Illinois. 0:07:28.240 --> 0:07:31.440 We appreciate him checking in there. So even HPE, you 0:07:31.440 --> 0:07:35.280 think about HP Hewlett Packard Enterprises, they actually came out 0:07:35.280 --> 0:07:39.120 with numbers yesterday were really strong and they cited AI servers. 0:07:39.160 --> 0:07:42.760 So there's a company like Dell. You think Dell PC's right. 0:07:42.800 --> 0:07:46.320 You think HP PCs printer stuff like that. But they're 0:07:46.320 --> 0:07:48.760 doing these servers that are being used by these AI 0:07:48.920 --> 0:07:51.720 folks and boomits moving their numbers. 0:07:51.920 --> 0:07:53.720 Are you saying, well you have to do is attach 0:07:53.840 --> 0:07:56.080 AI something else one of your products? 0:07:56.080 --> 0:07:57.520 Well, one of the one of the things I'm thinking 0:07:57.560 --> 0:07:59.560 about when you think about AI, what we have not 0:07:59.760 --> 0:08:03.480 had like we had with Google and you know, kind 0:08:03.520 --> 0:08:05.600 of the Internet and all that kind of stuff. Where's 0:08:05.600 --> 0:08:10.239 that big IPO company that is the I AI ipo? 0:08:10.840 --> 0:08:12.720 Like Google was, Oh how do I play the Internet? Oh? 0:08:12.760 --> 0:08:15.080 You go buy this Google thing or you buy Yahoo. 0:08:15.160 --> 0:08:17.560 Back in the day, you know, there isn't that IPO 0:08:17.640 --> 0:08:20.280 that's coming out and everybody says, oh, this is the 0:08:20.520 --> 0:08:21.280 AI play. 0:08:21.680 --> 0:08:25.280 Well, I think startups and where the angel investors are 0:08:25.280 --> 0:08:27.960 putting money right now, who's out there you've never heard of? 0:08:28.160 --> 0:08:28.320 Right? 0:08:28.440 --> 0:08:29.960 That's kind of where you know, I'm looking to the 0:08:30.040 --> 0:08:31.520 dan Ives of the world to say, hey, where's that 0:08:31.600 --> 0:08:33.760 next company that's going to come public that's going to 0:08:33.800 --> 0:08:34.760 be the AI play. 0:08:36.320 --> 0:08:40.199 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:08:40.280 --> 0:08:43.800 weekdays at ten am Eastern on applecard Play and Android 0:08:43.840 --> 0:08:46.600 Otto with the Bloomberg Business App. You can also listen 0:08:46.720 --> 0:08:49.800 live on Amazon Alexa from our flagship New York station. 0:08:50.200 --> 0:08:53.679 Just say Alexa play Bloomberg eleven thirty. 0:08:54.640 --> 0:08:57.440 John Tucker sitting in for Alex Steele. Paul Swinge. 0:08:57.480 --> 0:09:00.120 You're live here in a Bloomberg Interactive Brooker's studio so 0:09:00.559 --> 0:09:02.400 in New York City. Were streaming live on YouTube as well. 0:09:02.440 --> 0:09:04.400 So check us out there on Bloomberg Podcast. Is how 0:09:04.400 --> 0:09:06.840 you search for us there? As least was just reporting 0:09:06.880 --> 0:09:10.839 Lululemon has what Bloomberg first ward is saying, Lululemon jumps 0:09:10.840 --> 0:09:13.960 on quote better than feared ONEQBE reports. I think the 0:09:13.960 --> 0:09:17.520 expectations a little bit low there, but the stock's ratling 0:09:17.559 --> 0:09:20.320 about two and a half three percent here today. But 0:09:20.960 --> 0:09:24.160 the shares of Lululemon are down thirty eight percent year 0:09:24.440 --> 0:09:26.840 to date. So let's figure out what's going on there 0:09:26.840 --> 0:09:30.520 in Lululemon. Again, I'm a big fan, but it's interesting 0:09:30.520 --> 0:09:32.920 the stock has really been under pressure. Punhum Goyle, she's 0:09:32.920 --> 0:09:35.920 a senior US retail analyst for Bloomberg Intelligence. She joins 0:09:35.960 --> 0:09:39.360 us via zoom from Princeton, New Jersey. Punham, what did 0:09:39.400 --> 0:09:43.000 you see in Lululemon's earnings and what does it tell 0:09:43.000 --> 0:09:44.360 you about maybe the retail consumer. 0:09:45.400 --> 0:09:47.600 Sure, So I think the earnings are better than expected 0:09:47.640 --> 0:09:50.160 because well, we do see slow in growth at Lululemon, 0:09:50.160 --> 0:09:54.040 where it's decelerating from the mid teens to low double 0:09:54.040 --> 0:09:57.760 digits near ten percent. There is concern that is that 0:09:57.880 --> 0:10:01.080 because of a slower macro and the fact that Lulu 0:10:01.160 --> 0:10:04.559 Lemon is losing out to competition Alo Yoga, et cetera. 0:10:04.960 --> 0:10:07.600 We discovered that part of that is true, but part 0:10:07.600 --> 0:10:09.440 of that is not true, and I think that's why 0:10:09.480 --> 0:10:11.360 investors have a little more confidence. 0:10:12.640 --> 0:10:15.199 How big is the US market for them? And are 0:10:15.200 --> 0:10:17.040 they selling overseas and how much? 0:10:17.960 --> 0:10:20.760 Yeah, so the US market the America is eighty percent 0:10:20.800 --> 0:10:24.440 of their business. International is twenty percent, with China half 0:10:24.480 --> 0:10:24.720 of that. 0:10:26.200 --> 0:10:28.800 And is demand picking up or slowing in China or 0:10:28.840 --> 0:10:30.880 is it new to the Lulu Lemon market. 0:10:31.760 --> 0:10:35.240 So international was a bright spot this quarter. International sales 0:10:35.320 --> 0:10:39.640 grew about thirty five percent, and within that, China was 0:10:39.720 --> 0:10:42.480 up Mainland China was up forty five percent, So a 0:10:42.520 --> 0:10:45.520 lot of growth there. It's a bright spot for lul Lemon. 0:10:45.600 --> 0:10:48.680 International is part of their three pronged strategy to double 0:10:48.720 --> 0:10:52.920 sales into twenty twenty seven. It's been doing very very 0:10:52.920 --> 0:10:54.680 well and we expect that to continue. 0:10:55.240 --> 0:10:55.600 All right. 0:10:55.800 --> 0:10:58.560 So and folks, if you want the best research on 0:10:59.040 --> 0:11:01.840 the street on Lululan, Lululemon just gonna be I go 0:11:02.080 --> 0:11:04.120 and you can find Punam's research there. 0:11:04.160 --> 0:11:05.600 And I'm looking at your research here. Punham. 0:11:06.200 --> 0:11:08.280 You're talking about you know, when you talk about that 0:11:08.360 --> 0:11:11.120 doubling sales to twelve and a half million, you know 0:11:11.120 --> 0:11:14.320 by twenty twenty six the company, and you're saying strong 0:11:14.400 --> 0:11:17.679 international growth. Okay, I get that men's growth. Talk to 0:11:17.720 --> 0:11:19.800 us about Lululemon and men's I mean, it's just not 0:11:20.400 --> 0:11:21.600 John and I don't know where to go with this. 0:11:21.679 --> 0:11:23.480 Do real men go to Lululemon? 0:11:24.400 --> 0:11:28.240 Is what it's. Real men are going to Lululemon. You know, 0:11:28.280 --> 0:11:30.800 it's one of their bright spots right now. And they 0:11:30.960 --> 0:11:33.800 actually think that men's could become overtime. I think you'll say, 0:11:33.880 --> 0:11:36.640 take some time fifty percent of the business. So there's 0:11:36.800 --> 0:11:39.240 a lot of opportunity in men's. And you know when 0:11:39.280 --> 0:11:41.679 you walk those stores and I looked at the men's inventory, 0:11:41.760 --> 0:11:44.920 it actually looks great. It's not just about outfitting the 0:11:44.960 --> 0:11:47.520 men to go to the gym. It's about outfitting the 0:11:47.559 --> 0:11:51.880 men to go into work with casual, comfortable where that they. 0:11:51.760 --> 0:11:56.000 Can where everybody who listens to this program of views 0:11:56.000 --> 0:12:00.360 this on YouTube knows Paul is the company fashion police. Yes, 0:12:00.440 --> 0:12:03.600 if you saw somebody in like Lululemon come into the office, 0:12:04.080 --> 0:12:04.640 might have a. 0:12:04.600 --> 0:12:05.880 Film, it might be a problem. 0:12:05.880 --> 0:12:07.880 But I'm going to refer to Punum because she knows 0:12:07.960 --> 0:12:11.360 fashion here and she knows what works. So if I'm 0:12:11.440 --> 0:12:15.160 Lulu Lemon, talk to us just about what they're saying 0:12:15.200 --> 0:12:18.160 about the consumer out there, Punham. 0:12:18.520 --> 0:12:20.600 So the consumer, We've been talking about this for a 0:12:20.640 --> 0:12:24.360 while now. The consumer is selective. They're choosing where to shop, 0:12:24.520 --> 0:12:26.840 when to shop, how to shop, and if they see 0:12:26.880 --> 0:12:29.360 the right product, they are still purchasing it. The one 0:12:29.360 --> 0:12:32.080 thing that struck out during the call was that traffic 0:12:32.280 --> 0:12:35.079 was up in the quarter, which means people are still 0:12:35.120 --> 0:12:38.040 going to Lulu Lemon. They still have purchased intent. But 0:12:38.320 --> 0:12:41.160 there were some product missteps which they're working to correct 0:12:41.160 --> 0:12:43.560 into the second half of the year, where they didn't 0:12:43.600 --> 0:12:45.880 have the right colors, or they didn't have enough colors. 0:12:45.880 --> 0:12:48.600 I should say, they didn't have enough depth and sizes. 0:12:48.640 --> 0:12:50.640 They were running out of the small sizes. So these 0:12:50.679 --> 0:12:53.200 are problems that I would think are execution related and 0:12:53.400 --> 0:12:55.760 are being fixed and can be fixed into the back half. 0:12:56.080 --> 0:12:58.520 So while there is still part of a macro problem, 0:12:58.800 --> 0:13:02.000 the story isn't that Lemon people are not going to 0:13:02.040 --> 0:13:04.439 shop there. People still are interested in the apparel. They 0:13:04.480 --> 0:13:07.440 just have to fix the product a little and really 0:13:07.440 --> 0:13:09.280 improve our execution into the back half. 0:13:09.600 --> 0:13:12.640 They're known for form fitting, but just to get back 0:13:12.640 --> 0:13:15.720 to the men's fashion, they have anything for old fat guys. 0:13:17.320 --> 0:13:21.160 Well, their ABC men's franchise is really popular and it's 0:13:21.240 --> 0:13:24.920 not form fitting. It's about the casual flare and they 0:13:24.960 --> 0:13:28.080 have done very well there. And you don't need to 0:13:28.080 --> 0:13:30.960 wear tight leggings for men's that's not the appeal there. 0:13:31.000 --> 0:13:33.559 That's for the women. But I'd say even for the woman, 0:13:33.600 --> 0:13:35.760 you know what worked really well in the corner where 0:13:35.760 --> 0:13:38.920 they're loose fitting pants and their biker shorts. So yes, 0:13:39.000 --> 0:13:41.600 leggings is a big business for them, but they are 0:13:41.640 --> 0:13:42.240 broadening that. 0:13:43.320 --> 0:13:44.800 Hey, let's switch gears just a little bit. 0:13:44.800 --> 0:13:47.040 I saw it yesterday reporting in a Wall Street journal 0:13:47.040 --> 0:13:51.319 Punum Dollar Tree is among the potential sales spin off 0:13:51.320 --> 0:13:52.240 of Family Dollar. 0:13:52.440 --> 0:13:54.960 What is going on with the dollar stores here. 0:13:55.080 --> 0:13:57.880 I would have thought that if a part of the 0:13:57.880 --> 0:14:01.439 consumer market is weak and the low end economically, that. 0:14:01.440 --> 0:14:04.600 Perhaps that would be good for the dollar stores. But 0:14:04.960 --> 0:14:05.920 what's going on there? 0:14:06.679 --> 0:14:10.160 So they're really two very different types of dollar stores. 0:14:10.240 --> 0:14:13.880 Gen Bartashus covers the space, but from my coverage over 0:14:14.080 --> 0:14:17.440 years ago, I can tell you that Dollar Tree targets everyone, right. 0:14:17.520 --> 0:14:19.360 I would shop at Dollar Tree, Paul. You would shop 0:14:19.400 --> 0:14:21.760 a Dollar Tree. You buy that one twenty five item 0:14:21.840 --> 0:14:25.840 there and you go treasure hunt. But a family Dollar customer, 0:14:25.960 --> 0:14:28.960 that's their principal discount store. That is where they buy 0:14:29.000 --> 0:14:31.040 their groceries, that is where they buy their day to 0:14:31.120 --> 0:14:34.440 day needs. So as that customer's wallet is being stretched, 0:14:34.760 --> 0:14:36.920 that business does come into more pressure. 0:14:37.920 --> 0:14:40.880 I'm going to tell you my Dollar Tree story. I 0:14:40.920 --> 0:14:43.160 bought a loaf of bread I brought to the counter 0:14:43.600 --> 0:14:48.640 and the casher said, sir, you don't want that. Apparently 0:14:48.640 --> 0:14:51.040 they had some sort of rat problem. I didn't know 0:14:51.080 --> 0:14:51.520 about it. 0:14:53.360 --> 0:14:55.680 All right, Punam, thank you so much for joining us there. 0:14:55.800 --> 0:14:58.520 Putnam Goyle, Senior US e Commerce and retail Anams Bloomberg 0:14:58.560 --> 0:15:02.200 Intelligence give us a breakdown on Lululemon again, some better 0:15:02.240 --> 0:15:04.800 than feared or results, and n actually lifted their guidance 0:15:04.840 --> 0:15:07.360 a little bit here. So some good news there for 0:15:07.440 --> 0:15:09.440 Lululemon stocks up about two and a half percent, but 0:15:09.480 --> 0:15:13.200 it's down pretty big this year, concerns about growth. 0:15:13.200 --> 0:15:13.440 There. 0:15:15.800 --> 0:15:19.680 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:15:19.760 --> 0:15:22.840 weekdays at ten am Eastern on Apple Car playing Android 0:15:22.880 --> 0:15:25.960 otto with the Bloomberg Business app. Listen on demand wherever 0:15:26.040 --> 0:15:29.880 you get your podcasts, or watch us live on YouTube. 0:15:31.120 --> 0:15:33.840 If you look at the equal weighted standard and Poor's 0:15:33.880 --> 0:15:36.800 index of about five percent, the question is kind of 0:15:36.840 --> 0:15:38.440 where do we go from here with We've got a 0:15:38.480 --> 0:15:40.280 FED that appears at. 0:15:40.240 --> 0:15:42.480 Some point it's going to be cutting rates. You got 0:15:42.520 --> 0:15:43.000 that on one hand. 0:15:43.040 --> 0:15:45.800 The other hand, you've got decent earnings growth That kind 0:15:45.800 --> 0:15:48.240 of seems pretty constructive here in the marketplace. Let's check 0:15:48.280 --> 0:15:50.200 in with somebody who does this stuff for a living. 0:15:50.280 --> 0:15:52.960 Nicole Webbs. She's the senior vice president. She's a financial 0:15:52.960 --> 0:15:56.760 advisor at Wealth Enhancement Group, joining us via that Zoom thing. 0:15:57.080 --> 0:15:58.840 So Nicole, is you sit down and talk to your 0:15:58.840 --> 0:16:02.320 clients here today. They've had a pretty good start to 0:16:02.360 --> 0:16:04.760 the year by and large. What are you telling them 0:16:04.760 --> 0:16:06.160 about the back half of this year. 0:16:07.160 --> 0:16:09.160 Yeah, you know, I think the back half is a 0:16:09.160 --> 0:16:13.880 little bit to be determined, But in the interim, we 0:16:13.960 --> 0:16:16.240 expect it to be pretty choppy. And I say that, 0:16:16.720 --> 0:16:19.160 you know, for a myriad of reasons. You know, I 0:16:19.240 --> 0:16:22.320 think the first being, there was so much expectation that 0:16:22.600 --> 0:16:25.680 entering this year and your lead in was so perfect, 0:16:26.080 --> 0:16:28.280 was that you know, we're going to see this broadening 0:16:28.400 --> 0:16:31.880 out in the market, a breath that would come through 0:16:31.880 --> 0:16:34.800 the first two quarters of twenty twenty four, and that's 0:16:34.840 --> 0:16:37.440 not really been the case. And actually over the last 0:16:37.480 --> 0:16:40.560 couple of weeks which we've seen is less breath and 0:16:40.840 --> 0:16:44.720 more leadership in mega technology again, and so you know, 0:16:45.120 --> 0:16:50.120 probably to get that next stickiness the next run from here, 0:16:50.640 --> 0:16:53.840 one would expect that we need more confidence throughout the 0:16:53.880 --> 0:16:57.840 cap spectrum, not just concentrated in technology. And then you 0:16:57.880 --> 0:16:59.560 couple that with the fact that we've had a lot 0:16:59.560 --> 0:17:01.960 of interest rate volatility. I mean, really even in the 0:17:02.040 --> 0:17:06.680 last five, six, seven trading days, the tenure has moved 0:17:06.680 --> 0:17:09.600 a lot, and so you know, there's there's some underpinnings 0:17:09.600 --> 0:17:13.080 to this market right now that we expect to keep 0:17:13.119 --> 0:17:15.320 it choppy for the coming weeks ahead. 0:17:15.840 --> 0:17:19.640 The data that we've been getting, does that show slowing 0:17:19.680 --> 0:17:22.840 that indicates, uh, interest rate cut that's going to be 0:17:22.880 --> 0:17:26.320 good for equities, or does it show slowing of the 0:17:26.400 --> 0:17:28.960 economy that's going to be bad for corporate profits. 0:17:30.480 --> 0:17:35.360 You know, our stance on cuts is that it kind 0:17:35.359 --> 0:17:38.399 of circles back to the ECB today, which I I 0:17:38.480 --> 0:17:42.200 loved that their words were a bit hawkish in tone, 0:17:42.800 --> 0:17:46.440 but their actions were that they want to see rate stabilize. 0:17:47.800 --> 0:17:50.280 Yeah, they ec be cut, but at the same time 0:17:50.359 --> 0:17:54.800 Lagarn also said there were inflation concerns or if she 0:17:54.880 --> 0:17:57.119 doesn't know how close they are to the neutral radar 0:17:57.280 --> 0:17:59.600 words to that effect exactly. 0:17:59.680 --> 0:18:01.720 And so you know, I think as we keep seeing 0:18:01.760 --> 0:18:05.440 economic data that is in support of you know, many 0:18:05.520 --> 0:18:08.840 consumers that are slowing, but then many who are benefiting 0:18:08.880 --> 0:18:12.040 from the run in the markets also clipping five percent 0:18:12.119 --> 0:18:15.520 coupons on risk free assets, and you kind of need 0:18:15.560 --> 0:18:18.560 to start hearing a tone from our FED that we 0:18:18.680 --> 0:18:22.200 need to start the process of normalization of rates because 0:18:22.200 --> 0:18:27.120 there are certain elements of the inflationary trends around us, 0:18:27.119 --> 0:18:31.200 some of these pockets of stickiness and service, the undersupply 0:18:31.320 --> 0:18:35.800 in housing that simply probably can't be fixed by leaving 0:18:35.960 --> 0:18:38.399 rates as restrictive as they are. And so, you know, 0:18:38.440 --> 0:18:40.320 I think it was a really balanced message from the 0:18:40.320 --> 0:18:43.960 ECB and one that we would love to see, you know, 0:18:44.040 --> 0:18:47.000 the Fed here take more of that stance on. You 0:18:47.040 --> 0:18:52.000 can remain hawkish in your tone, but you can start 0:18:52.040 --> 0:18:56.119 to move towards normalization and do it at a slow 0:18:56.119 --> 0:18:59.760 and steady pace, versus continuing this narrative of going into 0:18:59.760 --> 0:19:03.040 a cutting cycle, which you know, sounds very different. 0:19:03.080 --> 0:19:06.000 It sounds like fixing a new problem. 0:19:06.680 --> 0:19:09.440 So Nicole, talk to us about valuation here. 0:19:09.440 --> 0:19:11.160 I'm looking at kind of s and P earnings growth 0:19:11.280 --> 0:19:14.639 kind of ten eleven maybe twelve percent over the you know, 0:19:14.760 --> 0:19:17.760 next year or so. Is that enough to support this 0:19:17.880 --> 0:19:20.199 valuation in the market or do you feel like you 0:19:20.280 --> 0:19:22.359 need to maybe get a little defensive in valuation. 0:19:25.040 --> 0:19:25.280 There? 0:19:25.320 --> 0:19:30.400 You know, there's there's this convergence of themes, one of 0:19:30.440 --> 0:19:35.080 them being we went in to the year with earning expectation, 0:19:35.680 --> 0:19:42.320 you know, consensus among analysts. Generally, you see analysts start 0:19:42.320 --> 0:19:45.120 to cut those earnings forecasts, which in the first month 0:19:45.200 --> 0:19:47.080