WEBVTT - Macy’s Beats on Profits, Lowe's Earnings 0:00:00.600 --> 0:00:10.799 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.840 --> 0:00:15.000 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:15.040 --> 0:00:17.520 Eastern on Apple car Play and Android Auto with the 0:00:17.520 --> 0:00:21.400 Bloomberg Business App. Listen on demand wherever you get your podcasts, 0:00:21.640 --> 0:00:24.560 or watch us live on YouTube. 0:00:25.079 --> 0:00:26.560 MASUS is down one and a half percent. I was 0:00:26.560 --> 0:00:29.360 looking to see if there was anything that came out recently, 0:00:29.400 --> 0:00:31.319 and it hasn't. So I just wonder if you know, 0:00:31.400 --> 0:00:33.040 it had a nice run up in their earnings or 0:00:33.120 --> 0:00:35.640 still just a few months away from fifty two week high. 0:00:35.800 --> 0:00:37.560 Maybe it's that, but we want to get more insight 0:00:37.800 --> 0:00:40.640 onto that. Yes, raising a full year outlook good, same 0:00:40.640 --> 0:00:43.800 store of sales falling less than estimated. Rachel Tenbrink is 0:00:43.880 --> 0:00:47.000 general partner over Red Bike Capital. She joins us Now 0:00:47.520 --> 0:00:51.640 in studio. Rachel, you deeply cover the retail industry. What 0:00:51.840 --> 0:00:53.599 was your broad takeaway from Macy's. 0:00:54.080 --> 0:00:57.960 So, I think that there's new CEO. The clock is 0:00:58.040 --> 0:00:59.760 taking there's a lot of pressure, and so I think 0:00:59.800 --> 0:01:03.560 that he's trying to as quickly as possible make an impact. 0:01:03.600 --> 0:01:06.920 But truly it's hard to see the short term sort 0:01:06.920 --> 0:01:10.039 of real pop I think what you're seeing is there's 0:01:10.080 --> 0:01:12.520 a lot of focus on top doors. There's a lot 0:01:12.560 --> 0:01:17.240 of focus on top performers in the Bloomingdale's and Blue Mercury, 0:01:17.760 --> 0:01:20.840 but overall, the consumer is still challenged. They still have 0:01:20.959 --> 0:01:24.920 inventory issues, and if you look at the overall performance, 0:01:25.400 --> 0:01:28.120 they did a little better because they had better operating 0:01:28.400 --> 0:01:30.040 but the top line was down. 0:01:31.120 --> 0:01:34.280 So when I think about Macy's, I mean, obviously it 0:01:34.360 --> 0:01:40.080 is the quintessential department store. What's the strategy for Macy's 0:01:40.120 --> 0:01:42.520 going forward, because it just doesn't feel like this has 0:01:42.520 --> 0:01:44.639 been a long term trend for department stores in general, 0:01:45.400 --> 0:01:48.120 you know, with e commerce and so on, kind of. 0:01:48.040 --> 0:01:49.280 A tough place to be. 0:01:49.600 --> 0:01:51.400 What's the strategy for Macy's these days? 0:01:51.400 --> 0:01:52.360 Do you think so? 0:01:52.560 --> 0:01:55.680 I think the reality is just a smaller footprint, a 0:01:55.680 --> 0:02:00.840 smaller company. I think it's shocking if you think about 0:02:00.840 --> 0:02:03.880 the fact that May Season the last twenty years has 0:02:03.920 --> 0:02:07.680 lost about twenty five percent market share and so to 0:02:07.720 --> 0:02:13.239 whom to basically retailers, Amazon Discounters. It's just a much 0:02:13.280 --> 0:02:15.800 smaller company than it used to be twenty years ago. 0:02:16.200 --> 0:02:18.640 And I think that if you think about the fact 0:02:18.680 --> 0:02:21.400 that they're going to close one hundred and fifty stores, 0:02:21.639 --> 0:02:23.960 they're going to be left with three hundred and fifty stores. 0:02:24.240 --> 0:02:26.800 It's just I think that it's a tough place to be. 0:02:27.800 --> 0:02:29.480 I think there's still a place for it, and I 0:02:29.480 --> 0:02:32.959 think they can thoughtfully talk to those customers, but it's 0:02:32.960 --> 0:02:34.560 just going to be a smaller place. 0:02:35.360 --> 0:02:40.400 To that point, what as their inventory functioning, Like are 0:02:40.440 --> 0:02:43.200 they doing that well? Like having a smaller footprint might 0:02:43.200 --> 0:02:46.040 be good into inventory management, How are they managing that? 0:02:46.440 --> 0:02:50.320 So from what I read, they were struggling a little 0:02:50.320 --> 0:02:53.280 bit trying to figure out the transition between spring and summer, 0:02:53.960 --> 0:02:57.080 so they did have a little bit of elevated inventory levels, 0:02:57.360 --> 0:02:59.600 but they seem to be doing okay. I think what 0:02:59.639 --> 0:03:04.920 they're trying to do is create more proprietary and special experiences, 0:03:05.760 --> 0:03:09.640 private label things that you can't find anywhere else. But 0:03:09.680 --> 0:03:11.200 they need to hit it on the nose, and the 0:03:11.240 --> 0:03:16.440 consumer is being very picky right now about where they're spending. 0:03:16.600 --> 0:03:18.600 You guys know why I asked that question, right Why 0:03:18.919 --> 0:03:22.480 too much inventory means sales? Sales means ALEX shops there. 0:03:23.400 --> 0:03:27.359 Good inventory management mean Alex is not shop there. I'm 0:03:27.360 --> 0:03:29.640 not paying full price. But I mean I asked that 0:03:30.160 --> 0:03:32.000 I say that in Jess, But it does speak to 0:03:32.040 --> 0:03:34.920 the promotional activity and if the consumer stretch and they're 0:03:34.960 --> 0:03:38.000 being picky, that's going to rely on the promotional world 0:03:38.040 --> 0:03:39.600 to kind of get them in the store to help 0:03:39.640 --> 0:03:43.320 for more volume. Is Macy's part of that, Yeah. 0:03:43.200 --> 0:03:45.200 I mean, I think what's interesting if you think about 0:03:45.240 --> 0:03:50.560 Macy's is that they're sort of picking this biffurcated strategy 0:03:50.640 --> 0:03:53.480 where on the one hand, they have their own, you know, 0:03:53.520 --> 0:03:57.040 the Mace's nameplate stores, and I think they're focusing on 0:03:57.080 --> 0:04:00.760 top doors, sharpening the inventory, sharpening the offer, and then 0:04:00.800 --> 0:04:03.640 they're going high end with Macy's and Blue Mercury, sorry, 0:04:03.720 --> 0:04:06.880 with Bloomingdale's and Blue Mercury to try to attract that 0:04:07.000 --> 0:04:09.240 higher end shopper that's willing to spend a little more. 0:04:09.760 --> 0:04:11.720 Rachel, I don't know if you're aware, but the big 0:04:11.720 --> 0:04:13.640 news in this studio over the last week was, for 0:04:13.720 --> 0:04:16.320 the first time ever, I went to a Walmart store 0:04:16.360 --> 0:04:19.960 over the weekend. Hugely impressed, blown away everything. You know, 0:04:20.360 --> 0:04:23.080 it is as you would expect because we had some 0:04:23.120 --> 0:04:26.400 Walmart earnings last week. What do you take away from Walmart? 0:04:26.440 --> 0:04:29.839 They seem to be doing pretty well well. 0:04:29.880 --> 0:04:31.480 I think that you always have to look at the 0:04:31.520 --> 0:04:34.360 relationship between Walmart Target, right, they're always head to head, 0:04:34.400 --> 0:04:36.880 and I think right now the consumer is feeling the 0:04:36.880 --> 0:04:40.159 financial pressure, they're feeling inflation, and they're trying to find deals. 0:04:40.720 --> 0:04:44.680 And what's interesting is there is still this perception that 0:04:44.720 --> 0:04:47.279 if you want to find lower price points, specially in 0:04:47.360 --> 0:04:50.279 things like food that are basic, you go to Walmart. 0:04:50.320 --> 0:04:53.400 Now it'll be interesting. Now, yesterday Target announced that they're 0:04:53.440 --> 0:04:57.240 lowering prices on five thousand skews, And so how is 0:04:57.279 --> 0:05:00.520 that going to affect the dynamic between Wall. You know, 0:05:00.600 --> 0:05:03.680 they're they're still trying Target is still trying to keep 0:05:03.680 --> 0:05:08.480 that upscale image that yep, but you know they're fighting 0:05:08.480 --> 0:05:11.279 for consumers that are really caring about every penny. 0:05:11.400 --> 0:05:15.520 I mean, I was five thousand skews. I mean, how 0:05:15.560 --> 0:05:17.400 often does that happen? I don't think I've heard that. 0:05:17.440 --> 0:05:19.680 I don't know if I know that. I mean, I 0:05:19.680 --> 0:05:23.960 think that's pretty dramatic. Walmart has been lowering prices as well, 0:05:24.000 --> 0:05:25.880 so I think they're just sharpening the competition. 0:05:26.279 --> 0:05:28.720 So they have actually already cut prices on about fifteen 0:05:28.839 --> 0:05:31.800 hundred items, and they had so that thousands more of 0:05:31.800 --> 0:05:35.720 reductions are planned over the course of the summer. Yeah, 0:05:35.800 --> 0:05:38.840 exactly right. One analyst over Barclays was saying that these 0:05:38.880 --> 0:05:40.680 may have been planned as part of sort of the 0:05:40.720 --> 0:05:43.320 second quarter inflection that was embedded in guidance. In the 0:05:43.320 --> 0:05:45.960 second half maybe gets a little bit better, but obviously 0:05:45.960 --> 0:05:48.040 that's going to be a key topic tomorrow. Also, these 0:05:48.040 --> 0:05:52.240 items that we're talking about are milk, bread, soda, fruit, veggies. 0:05:52.440 --> 0:05:54.200 That's good because that's where I've seen it. 0:05:54.279 --> 0:05:57.240 Yeah, but that's also I wonder if that's a direct 0:05:57.839 --> 0:06:01.720 competition then to Walmart, because that's where you can make 0:06:01.720 --> 0:06:03.600 an argument that if you go to Walmart for groceries, 0:06:03.600 --> 0:06:04.839 that's where you buy your other stuff. 0:06:04.880 --> 0:06:07.080 And I wonder if Target's trying to play with that exactly. 0:06:07.120 --> 0:06:08.800 I think that it's sort of a double edged store. 0:06:08.880 --> 0:06:12.720 Target always tried to be like, you know, better quality, 0:06:12.800 --> 0:06:16.000 higher end, but still affordable. And I think what they're 0:06:16.040 --> 0:06:18.640 realizing is right now the customers really focusing on the 0:06:18.680 --> 0:06:21.279 affordable and they're really focusing on the basics. So they're 0:06:21.279 --> 0:06:22.640 going head to head on that piece. 0:06:23.720 --> 0:06:26.640 Is there still too many stores out there, department stores 0:06:26.760 --> 0:06:29.760 or big box I mean, particularly the department stores. I've 0:06:29.760 --> 0:06:32.400 always heard like in the department stores. There's still too 0:06:32.440 --> 0:06:35.719 many stores in America, but now maybe the pandemic solved 0:06:35.720 --> 0:06:36.520 for that. I don't know. 0:06:36.760 --> 0:06:39.240 Well, I think part of the challenge is, you know, 0:06:39.720 --> 0:06:42.159 Macy's did announce one hundred and fifty store closures, so 0:06:42.200 --> 0:06:45.400 they're definitely that's big. That's a big hit for them. 0:06:45.440 --> 0:06:47.480 I think a lot of it is, you know, when 0:06:47.520 --> 0:06:50.880 you think about stores, you also think about location and 0:06:50.920 --> 0:06:52.240 real estate, and you. 0:06:52.160 --> 0:06:53.919 Know, what are the top malls. 0:06:54.440 --> 0:06:56.400 There's obviously you know, it's not just there there are 0:06:56.440 --> 0:06:58.479 too many stores. Is that there are too many malls 0:06:58.880 --> 0:07:01.200 and people aren't going to those malls, but there are 0:07:01.440 --> 0:07:05.640 some shining places. So I think it's about like finding 0:07:05.680 --> 0:07:09.240 the winners and having a smaller sharper footprint versus so 0:07:09.320 --> 0:07:09.960 many doors. 0:07:10.080 --> 0:07:12.400 And it was interesting you say that, Paul, because some 0:07:12.480 --> 0:07:16.360 of these malls are being anchored by Target. So you 0:07:16.400 --> 0:07:18.880 also have to wonder if Target has to retrench a 0:07:18.920 --> 0:07:20.840 little bit here, what does that wind up meaning then 0:07:21.360 --> 0:07:24.840 for the mall what would be good from Target when 0:07:24.880 --> 0:07:25.640 they report? 0:07:25.840 --> 0:07:28.240 So I think the expectation is that they're going to 0:07:28.240 --> 0:07:32.880 be up slightly about one percent, but we'll have to see. 0:07:33.280 --> 0:07:36.160 I mean, I do think that this news of better 0:07:36.200 --> 0:07:37.880 pricing is going to have an impact on them? 0:07:38.760 --> 0:07:42.920 Mean yeah, meaning that that would be helpful volume, but 0:07:42.960 --> 0:07:47.400 then obviously not with margins correct, So interesting, where. 0:07:47.240 --> 0:07:49.760 Do we go from here for retail? I mean, what's 0:07:49.800 --> 0:07:51.360 your takeaway on the consumer? 0:07:51.400 --> 0:07:51.600 Here? 0:07:53.000 --> 0:07:55.360 The consumer seems like it's I guess that K shaped 0:07:55.400 --> 0:07:59.400 economy where some small percentage are doing quite well, particularly 0:07:59.400 --> 0:08:02.600 those that don't said stocks, bonds, houses, and everybody else 0:08:02.680 --> 0:08:04.720 is really feel into pain. Is that what you're hearing 0:08:04.720 --> 0:08:05.520 from the retailers? 0:08:05.800 --> 0:08:06.440 Absolutely? 0:08:06.480 --> 0:08:09.400 I think that there is this sort of biffurcation of 0:08:09.440 --> 0:08:11.520 like the have and the have nots, And so for 0:08:11.640 --> 0:08:14.640 some consumers it's a small group, but they're very profitable. 0:08:14.640 --> 0:08:18.040 They're doing okay, they're still spending, they're still going to Bloomingdale's, 0:08:18.040 --> 0:08:22.280 they're still buying their targe, And for others, they're really struggling. 0:08:22.440 --> 0:08:24.920 And I think it's sort of come to that breaking 0:08:24.960 --> 0:08:27.960 point where when you start to see stores lowering prices 0:08:28.640 --> 0:08:30.560 there's a real pressure from the consumer. 0:08:30.560 --> 0:08:31.520 Good point, yeah, but. 0:08:31.480 --> 0:08:33.520 Then obviously hurts the margins and then it's like as 0:08:33.520 --> 0:08:35.400 a stock investor, you're like, well, do I like that 0:08:35.720 --> 0:08:39.360 volume versus margins in your experience when the retail sector, 0:08:39.880 --> 0:08:41.760 which ones are kind of crushing it right now, because 0:08:41.760 --> 0:08:44.760 it does seem to me that what names that people 0:08:44.920 --> 0:08:49.080 like are very targeted, right like a specialty retail store 0:08:49.360 --> 0:08:50.559 is the winner? Is that true? 0:08:50.679 --> 0:08:50.880 Yeah? 0:08:50.960 --> 0:08:52.520 I mean the first name that comes to mind is 0:08:52.559 --> 0:08:56.680 Sephora and how it continues to outperform. You know, there's 0:08:56.720 --> 0:08:59.520 a lot of talk about Sephora kids, but. 0:08:59.520 --> 0:09:01.080 You just see, so what's a kid? 0:09:01.320 --> 0:09:03.640 So a Sephora kid is my twelve year old daughter 0:09:03.760 --> 0:09:08.720 who enjoys spending hours at Sephora. But guess what it 0:09:08.880 --> 0:09:12.120 means she buys? It means I buy. And I do 0:09:12.200 --> 0:09:15.480 think that there is an interesting approach where you know, 0:09:15.559 --> 0:09:18.240 these gen Z consumers that everybody thought, well, they don't 0:09:18.240 --> 0:09:21.080 really have that much disposable income, but guess what they 0:09:21.280 --> 0:09:22.560 bring along others? 0:09:22.840 --> 0:09:24.960 And have you ever seen the line and over here 0:09:25.320 --> 0:09:28.440 their story always a long line depths of the pandemic lockdown, 0:09:28.920 --> 0:09:31.760 I mean ground zero, the lockdown people in support. 0:09:31.880 --> 0:09:33.600 A they didn't close the store, and B there were 0:09:33.600 --> 0:09:36.000 people in there, I mean triple massed up or whatever. 0:09:36.280 --> 0:09:38.959 They were there and they were in our chocolate store downstairs. 0:09:39.000 --> 0:09:41.679 You know what we do, Paul, We invest in our face, yes, yes, 0:09:41.720 --> 0:09:47.040 and that comes in many different forms. And after we 0:09:48.840 --> 0:09:51.760 go eat chocolate, and that is what we do. Very good, 0:09:51.800 --> 0:09:53.439 all right, good stuff. Thanks a lot, really appreciate it. 0:09:53.520 --> 0:09:56.160 Rachel Tenbring joining us. I'm a partner over at Red 0:09:56.240 --> 0:09:59.839 Bike Capital. We'll see how those numbers wind up stacking up. 0:10:01.400 --> 0:10:05.280 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:10:05.360 --> 0:10:08.400 weekdays at ten am Eastern on Apple car Play and 0:10:08.400 --> 0:10:11.320 androyd Otto with the Bloomberg Business App. You can also 0:10:11.400 --> 0:10:14.600 listen live on Amazon Alexa from our flagship New York 0:10:14.640 --> 0:10:18.760 station Just Say Alexa playing Bloomberg eleven thirty. 0:10:19.360 --> 0:10:20.160 Let's top Low's. 0:10:20.559 --> 0:10:23.440 I mean I went to I've been to a Low's 0:10:23.520 --> 0:10:25.440 and now I had not been to a Walmart until 0:10:25.480 --> 0:10:27.920 this past Sunday, but I've been to Lolaise. Now I'm 0:10:27.920 --> 0:10:30.600 not John Tucker, but I know my way around a Lows. 0:10:30.679 --> 0:10:32.559 Drew reading those his way around the Lows. He's the 0:10:32.559 --> 0:10:36.320 home building autost of Bloomberg Intelligence. Joining us from Princeton, 0:10:36.320 --> 0:10:38.680 New Jersey. Forgot about the whole New Jersey transit can 0:10:38.720 --> 0:10:39.800 get into New York City thing? 0:10:39.920 --> 0:10:43.000 No, apparently not today. It's really. Oh yeah, it already 0:10:43.120 --> 0:10:43.720 broken down. 0:10:43.840 --> 0:10:47.040 It's like I'm just ignoring it and hoping it'll be 0:10:47.040 --> 0:10:48.680 fine by the time I leave here. 0:10:48.880 --> 0:10:50.560 That's my That's how I'm approaching this. 0:10:50.760 --> 0:10:53.200 Drew talk to us about Low's here. Are people still 0:10:53.240 --> 0:10:55.600 kind of remodeling their basements. 0:10:56.880 --> 0:10:58.599 Yeah, So the quarter was a little bit of a 0:10:58.679 --> 0:11:01.800 tug of war between sales and margins, and I think 0:11:01.840 --> 0:11:04.559 you're seeing that reflected in the stock today. Same store 0:11:04.559 --> 0:11:07.200 sales were down about four percent, which was better than 0:11:07.240 --> 0:11:10.040 the five to six percent decline consensus was looking for. 0:11:10.840 --> 0:11:13.200 But part of that sales performance was due to the 0:11:13.240 --> 0:11:15.640 fact that there was a more promotional environment out there. 0:11:16.080 --> 0:11:19.160 If you think back to when Home Depot reported last week, 0:11:19.320 --> 0:11:22.000 they cite a late start to spring as something that 0:11:22.080 --> 0:11:24.960 muted sales. Lows actually said Spring got off to a 0:11:24.960 --> 0:11:27.160 good start, and that has to do with them being 0:11:27.240 --> 0:11:30.760 more aggressive on promotions as part of their Spring Fest, 0:11:31.559 --> 0:11:33.680 and I think that really speaks to you know, what 0:11:33.720 --> 0:11:36.520 we're seeing really across the retail landscape with the consumer, 0:11:36.559 --> 0:11:39.320 and that's that they're looking for value wherever they could 0:11:39.320 --> 0:11:42.680 get it. Now. They did reaffirm their full year operating 0:11:42.720 --> 0:11:44.880 margin guidance, but that's going to require the company to 0:11:44.920 --> 0:11:48.280 execute on some internal initiatives. In the back half of 0:11:48.320 --> 0:11:52.320 the year, Low's has made good progress in improving their 0:11:52.400 --> 0:11:55.360 their margin profile and them narrowing the gap with Home 0:11:55.400 --> 0:11:58.800 Depot has really been a key that investors have kind of, 0:11:59.000 --> 0:12:01.480 you know, grasped onto. So the fact that they're taking 0:12:01.480 --> 0:12:04.240 a little bit of a step back here maybe making 0:12:04.280 --> 0:12:05.280 them a little bit uneasy. 0:12:06.120 --> 0:12:09.360 When how much would the stock have to rerate for 0:12:09.760 --> 0:12:13.160 investors and analysts to say, okay, fine, the margins are suffering, 0:12:13.160 --> 0:12:14.960 but at least the volume and the sales are there. 0:12:16.760 --> 0:12:19.840 Yeah, well, the stock is still trading above you know, 0:12:19.880 --> 0:12:21.760 the ten year average, even if you go back to 0:12:22.320 --> 0:12:25.480 prior to the pandemic, So from a pure valuation perspective, 0:12:26.640 --> 0:12:29.160 you know, it's still a little bit elevated. That being said, 0:12:29.200 --> 0:12:31.400 I mean, if you take a step back, the move 0:12:31.440 --> 0:12:34.160 they've made on margins and narrowing the gap with home 0:12:34.200 --> 0:12:36.440 Depot has been impressive over the last couple of years. 0:12:36.520 --> 0:12:39.160 So I think, you know, the bulls would argue that 0:12:39.200 --> 0:12:41.760 this is kind of a one off, and as we 0:12:41.760 --> 0:12:44.440 get to the back half of the year, margins start 0:12:44.480 --> 0:12:48.600 to improve as they implement some of their PPI initiatives, 0:12:49.840 --> 0:12:52.400 and in terms of sales, you know, we're not expecting 0:12:52.400 --> 0:12:56.080 a huge rebound in sales this year and the second 0:12:56.160 --> 0:12:58.640 half comps will definitely get easier. But even Lows has 0:12:58.679 --> 0:13:02.280 stated that comps may turn positive, but that's not a 0:13:02.320 --> 0:13:06.240 reflection of an improved demand environment. It's strictly a reflection 0:13:06.360 --> 0:13:08.840 of easier comps. So we think as we get into 0:13:08.840 --> 0:13:11.400 twenty twenty five, that's when we would expect the market 0:13:11.440 --> 0:13:13.400 to see more of a turn, as we get more 0:13:13.400 --> 0:13:15.240 of a rebound and existing home sales. 0:13:16.320 --> 0:13:19.360 How about lumber, That's something they buy a lot of. 0:13:19.800 --> 0:13:22.280 How's the cost of lumber these days? How's that impacting 0:13:22.600 --> 0:13:23.720 their margins? 0:13:24.040 --> 0:13:26.880 Yeah, lumber is about ten percent of sales for both 0:13:26.920 --> 0:13:30.680 Home Depot and Lows. Lumber was really more of a 0:13:30.720 --> 0:13:33.760 story last year was extremely volatile, so you saw the 0:13:33.760 --> 0:13:37.360 impact on their top line. There not so much of 0:13:37.400 --> 0:13:40.640 a story this year. I think commodity particularly lumber, are 0:13:40.640 --> 0:13:42.600 going to have less of an impact in the near term. 0:13:43.640 --> 0:13:46.080 So you feel like we're not going to really see 0:13:46.400 --> 0:13:48.640 a benefit in HOLD twenty twenty five. I mean, some 0:13:48.720 --> 0:13:50.360 analysts are looking for the back half of this year. 0:13:50.360 --> 0:13:52.160 Maybe some improvement. But for you it's really like a 0:13:52.240 --> 0:13:53.200 year out kind of thing. 0:13:54.480 --> 0:13:56.280 Well, I think as we get to the end of 0:13:56.320 --> 0:13:58.040 this year, I think you'll start to see a little 0:13:58.080 --> 0:14:00.439 bit of a turn, and a lot of that predicate 0:14:00.559 --> 0:14:03.760 upon with what happens in the housing market. Obviously people 0:14:04.160 --> 0:14:05.920 are looking for the FED to cut rates at some 0:14:06.000 --> 0:14:08.400 point this year, obviously not as much as we had 0:14:08.640 --> 0:14:11.120 hoped for previously. But we think that you know, when 0:14:11.120 --> 0:14:14.160 you when you look at existing home sales, we're you know, 0:14:14.200 --> 0:14:17.040 at the lowest levels in you know, more than two decades, 0:14:17.120 --> 0:14:19.880 So there's not a whole lot lower we can go 0:14:20.160 --> 0:14:22.960 absent you know, a broader economic decline where you start 0:14:23.000 --> 0:14:25.240 to see a lot of job loss. So we think that, 0:14:25.360 --> 0:14:26.680 you know, if rates come in a little bit, you 0:14:26.680 --> 0:14:28.720 could kind of start to build a little momentum ending 0:14:28.760 --> 0:14:31.600 this year carrying into next year. When we think, you know, 0:14:31.680 --> 0:14:34.480 bigger picture about the home improvement market, there's some there's 0:14:34.480 --> 0:14:37.600 some solid tail winds out there. You know, you have 0:14:37.760 --> 0:14:40.520 homeowners who are sitting on record amount of home equity. 0:14:41.120 --> 0:14:42.840 When you think about you know, the rise and home 0:14:42.880 --> 0:14:45.760 prices we've seen over the last several years, you've got 0:14:45.760 --> 0:14:48.240 an aging housing stock, and I think the fact that 0:14:48.320 --> 0:14:51.760 mobility has been so low because of those high interest 0:14:51.840 --> 0:14:54.520 rates is going to continue to encourage people to invest 0:14:54.520 --> 0:14:56.640 in their house and I think what kind of triggers 0:14:56.640 --> 0:14:58.400 that is rates coming back in a little bit so 0:14:58.440 --> 0:15:00.520 you can start to tap that equity. 0:15:01.440 --> 0:15:03.360 True, how many stores as Lows have and are they 0:15:03.520 --> 0:15:07.080 adding stores? Are they pairing backstores? Kind of worthy with 0:15:07.120 --> 0:15:08.200 their store count these days? 0:15:08.600 --> 0:15:12.360 Yeah, so they're under two thousand. It's an interesting dynamic. 0:15:12.480 --> 0:15:16.160 So their competitor, Home Depot, is actually embarking on their 0:15:16.160 --> 0:15:19.200 first store expansion in a long time. Lows, on the 0:15:19.200 --> 0:15:21.200 other hand, has cut back. They got out of their 0:15:21.200 --> 0:15:24.800 Canadian business, which reduced their store a count. But what 0:15:24.840 --> 0:15:28.320 they're doing from a store perspective is really introducing new formats. 0:15:28.360 --> 0:15:32.160 So they're starting to go after the rural customer. Their 0:15:32.200 --> 0:15:35.760 stores tend to be located in more rural locations compared 0:15:35.760 --> 0:15:39.000 to Home Depot, which are more densely populated locations, and 0:15:39.000 --> 0:15:41.720 they found success with that, so they're starting to compete 0:15:41.720 --> 0:15:44.640 more with the tractor supplies of the world. They're also 0:15:44.760 --> 0:15:50.640 introducing Low's outlets, So if you think of you know, 0:15:51.160 --> 0:15:53.840 appliances that might have things and scratches. You could go 0:15:53.880 --> 0:15:56.840 there and get heavily discounted items, and that's another way 0:15:56.880 --> 0:15:59.600 they're looking to kind of, you know, drive traffic through 0:15:59.640 --> 0:16:00.360 the lows brand. 0:16:00.520 --> 0:16:03.600 Okay, now you're speaking my language. You put outlet there, 0:16:03.640 --> 0:16:06.120 and I'm like, boom, we will go find things that 0:16:06.160 --> 0:16:06.680 are cool. 0:16:06.760 --> 0:16:07.760 I don't do outlets either. 0:16:08.000 --> 0:16:08.280 You don't. 0:16:08.400 --> 0:16:11.560 I know, you don't do outlets. That's my thing. It's 0:16:11.640 --> 0:16:14.400 just my thing. Even if I had a bazillion dollars, 0:16:14.440 --> 0:16:16.080 I wouldn't pay full price. Part of the hunt. 0:16:16.200 --> 0:16:16.640 Okay. 0:16:17.200 --> 0:16:20.400 AnyWho so drew based on all this, If I wanted 0:16:20.400 --> 0:16:23.320 to play this housing market right now, what is the 0:16:23.320 --> 0:16:25.440 best play? And I say that because it's not like 0:16:25.480 --> 0:16:29.320 the housing market that the demand isn't there, the supply 0:16:29.520 --> 0:16:32.120 might not be there. The costs are a little too high, 0:16:32.240 --> 0:16:35.480 mortgage rates are too high, but eventually it'll normalize. What's 0:16:35.520 --> 0:16:37.160 the best way to capitalize. 0:16:38.360 --> 0:16:41.800 We think right now kind of sitting at the top 0:16:41.840 --> 0:16:46.680 of the broader housing ecosystem is the home builders. We think, 0:16:46.840 --> 0:16:49.200 you know, from a supply perspective, they're in a good 0:16:49.200 --> 0:16:52.600 position their ability to buy down mortgage rates and make 0:16:52.680 --> 0:16:56.640 payments more palatable to the consumers is something that differentiates 0:16:57.040 --> 0:16:59.960 them versus the resale market. They're going to grow community 0:17:00.040 --> 0:17:02.160 accounts in the coming years, so we really think that 0:17:02.200 --> 0:17:05.400 they're still in a good position from a competitive perspective. 0:17:05.440 --> 0:17:07.400 And when you look at you know, within the home 0:17:07.400 --> 0:17:11.160 building space, you have the large, well capitalized, publicly traded 0:17:11.200 --> 0:17:14.399 homebuilders who have access to land, access to labor, and 0:17:14.400 --> 0:17:17.399 you compare that versus the smaller private piers, and you 0:17:17.440 --> 0:17:20.080 have to remember home building is a very fragmented industry, 0:17:20.840 --> 0:17:24.520 particularly outside some of the largest markets. But those smaller 0:17:24.600 --> 0:17:28.280 private peers tend to rely on regional banks for growth 0:17:28.320 --> 0:17:31.760 capital and with you know, a slowing economy and more 0:17:31.800 --> 0:17:34.679 concern there, you're starting to see a poolback and lending. 0:17:34.720 --> 0:17:37.119 So we think it's a good opportunity for those larger 0:17:37.119 --> 0:17:38.560 builders to continue to take share. 0:17:39.359 --> 0:17:41.520 Great stuff. Drew, really appreciate it. Thank you so much 0:17:41.600 --> 0:17:45.640 to reading Bloomberg Intelligence US home Building Analyst. Joining us there. 0:17:48.119 --> 0:17:52.000 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:17:52.080 --> 0:17:55.400 weekdays at ten am Eastern on Focarplay and rout outo 0:17:55.520 --> 0:17:58.399 with the Bloomberg Business app. Listen on demand wherever you 0:17:58.480 --> 0:18:02.160 get your podcasts, or just live on YouTube. 0:18:03.160 --> 0:18:06.360 This is Bloomberg Intelligence Radio. I'm Alex C alongside Paul 0:18:06.400 --> 0:18:08.879 Sweeney and John Tucker. We bring you all the news 0:18:08.880 --> 0:18:11.360 in finance and economics through our lens of our Bloomberg 0:18:11.359 --> 0:18:14.720 Intelligence analysts. They cover about two thousand companies one hundred 0:18:14.720 --> 0:18:17.080 and thirty industries worldwide. We also use this time to 0:18:17.080 --> 0:18:19.840 talk about stuff that Paul and I are interested in, 0:18:19.960 --> 0:18:23.399 so media, maybe some retail, maybe some sports, oh and 0:18:23.520 --> 0:18:26.960 maybe some energy. Joining us in studio is a doctor 0:18:27.040 --> 0:18:31.919 Jeff Chamberlain. He is CEO of Volta Energy Technologies. I 0:18:31.920 --> 0:18:33.440 don't know what that is, so I'm going to learn 0:18:33.440 --> 0:18:37.120 about it, doctor Jeff Chamberlain. Welcome, thank you for joining us. 0:18:37.520 --> 0:18:39.720 What is Volta Energy Technologies? 0:18:39.960 --> 0:18:42.680 Well, thank you Alex for having me. Volta Energy Technologies 0:18:42.720 --> 0:18:44.720 is a venture capital firm that we spun out of 0:18:44.880 --> 0:18:48.600 Argon National Laboratory, which is one of the seventeen Department 0:18:48.600 --> 0:18:51.040 of Energy labs and the lead in battery and storage 0:18:51.040 --> 0:18:53.440 tech and development for vehicles and for the grid. 0:18:53.840 --> 0:18:57.160 So that means that you are trying to find good 0:18:57.240 --> 0:19:01.440 battery storage solutions that we can adopt on a cheaper scale. 0:19:02.040 --> 0:19:03.639 YEP, that's going. That's it. 0:19:03.680 --> 0:19:07.160 Basically. And I'll tell you the big thing that we've 0:19:07.200 --> 0:19:10.040 noticed is a couple of things. One is, a lot 0:19:10.040 --> 0:19:12.639 of people are focused on the downstream device. Who's going 0:19:12.680 --> 0:19:14.280 to be the next big electric, who's going to be 0:19:14.320 --> 0:19:16.880 the next Tesla, who's going to be the next Panasonic 0:19:17.000 --> 0:19:20.400 or CTL in terms of the battery manufacturing. But before 0:19:20.440 --> 0:19:22.159 I worked for the government, I worked in the chip industry, 0:19:22.160 --> 0:19:24.280 and we expect this to go just like the chip industry, 0:19:24.280 --> 0:19:27.120 where costs down will be king, and cost down will 0:19:27.119 --> 0:19:30.760 come from innovations in the supply chain and in the adjacencies, 0:19:30.800 --> 0:19:33.960 things like fast charge, things like power electronics on board 0:19:34.000 --> 0:19:37.000