WEBVTT - Chipotle CEO Niccol, CVS CEO Lynch Open Up on Earnings and Outlook 0:00:01.360 --> 0:00:05.680 This is Bloomberg Business Wait inside from the reporters and 0:00:05.880 --> 0:00:09.440 editors who bring you America's most trusted business magazine, plus 0:00:09.520 --> 0:00:13.680 global business, finance and tech news the Bloomberg Business Week 0:00:13.720 --> 0:00:19.000 Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:19.920 --> 0:00:22.160 Now we want to get to two key interviews. They 0:00:22.160 --> 0:00:25.640 have to do with earnings. Both shares are higher. Let's 0:00:25.640 --> 0:00:27.760 get to the first one. We're talking about Chipotle Mexican 0:00:27.800 --> 0:00:30.760 grill soaring to a record high. Right now, it's up 0:00:30.760 --> 0:00:34.000 about nine percent, so pretty much at its best levels 0:00:34.040 --> 0:00:37.640 of the session. Fourth quarter sales from profit feed expectations 0:00:37.640 --> 0:00:40.960 as both transactions and check sizes rose, really defining some 0:00:41.000 --> 0:00:44.840 of the fears of waning consumer sentiment. Same store sales growth, folks, 0:00:44.840 --> 0:00:46.560 you know it. This is so key. A gauge that 0:00:46.640 --> 0:00:48.919 tracks restaurants that are open for more than a year. 0:00:48.960 --> 0:00:52.960 That was eight point four percent, surpassing the analyst expectations 0:00:53.000 --> 0:00:55.320 of seven point one percent. Revenue two point fifty two 0:00:55.360 --> 0:00:57.680 billion timp that also topped the two point forty nine 0:00:57.720 --> 0:00:58.800 billion average estimate. 0:00:58.960 --> 0:01:01.200 Well, with more in the business, we welcome back Brian Nicol, 0:01:01.320 --> 0:01:03.880 chairman and CEO of Chipotle. He joins us on Zoom 0:01:03.880 --> 0:01:06.960 from Newport Beach, California. Brian, good to see you again. 0:01:07.000 --> 0:01:09.440 Good to have you with us. Investors are happy with 0:01:09.480 --> 0:01:12.240 this year or they're happy with the quarter. Analyst community 0:01:12.319 --> 0:01:14.720 is too. My question for you is who do you 0:01:14.720 --> 0:01:16.520 think you're taking share from right now? 0:01:18.280 --> 0:01:21.959 You know, look, I think what we believe is happening 0:01:22.080 --> 0:01:24.800 is our operation is executing better than we ever have 0:01:25.920 --> 0:01:31.240 and frankly, we've just been on a journey to get back. 0:01:31.040 --> 0:01:33.360 To executing this business to Chipotle standard. 0:01:33.560 --> 0:01:36.120 So you know, we feel great about our staffing, we 0:01:36.160 --> 0:01:39.080 feel great about our culinary, we feel great about our speed, 0:01:39.600 --> 0:01:43.000 and I think that's why we're being rewarded with customers 0:01:43.000 --> 0:01:45.920 coming in. And you saw the comp that we delivered 0:01:45.920 --> 0:01:49.279 that was driven by transaction growth, right, That eight percent 0:01:49.360 --> 0:01:52.919 plus comp was driven by seven point four percent transaction growth. 0:01:53.000 --> 0:01:55.400 And I think that's a testament to what our teams 0:01:55.400 --> 0:01:57.880 are doing in our restaurants on all those areas that 0:01:57.920 --> 0:01:58.560 I just mentioned. 0:01:58.600 --> 0:02:00.400 Brian, great to be talking with you and dig a 0:02:00.440 --> 0:02:02.080 little bit deeper for us. First of all, that same 0:02:02.080 --> 0:02:05.200 story of sales growth really blown away analyst expectations. Is 0:02:05.240 --> 0:02:08.400 that sustainable? You think in the current quarter and maybe 0:02:08.400 --> 0:02:10.280 throughout the year to see that kind of growth. 0:02:11.560 --> 0:02:14.560 You know, what we've guided is mid single digits for 0:02:14.680 --> 0:02:17.679 the year in twenty twenty four. And you know, the 0:02:17.720 --> 0:02:20.440 way we take this approach is we want to make 0:02:20.440 --> 0:02:24.000 sure we've got a strong value proposition, which based on 0:02:24.040 --> 0:02:26.160 all our data, we continue get feedback that the value 0:02:26.200 --> 0:02:28.920 proposition is really strong. And then we want to make 0:02:28.960 --> 0:02:32.400 sure that when customers come in, they get the experience 0:02:32.400 --> 0:02:35.680 that they want. And so what we've seen over the 0:02:35.720 --> 0:02:38.240 fourth quarter and as we walked into the first quarter 0:02:38.320 --> 0:02:40.160 is people are telling us they like what they see. 0:02:40.200 --> 0:02:43.360 You know, our teams are in position, our food is 0:02:43.400 --> 0:02:46.960 ready to go. The culinaries dial in. It tastes delicious, 0:02:47.240 --> 0:02:50.240 and we're working really hard on the speed aspect so 0:02:50.280 --> 0:02:51.799 that people don't have to stand in line too long 0:02:51.880 --> 0:02:53.480 so they can get down the line get to the 0:02:53.480 --> 0:02:56.240 business of enjoying their breed over bowl. I think we 0:02:56.280 --> 0:02:58.919 stay focused on that, we'll continue to deliver really good results. 0:02:59.080 --> 0:03:01.120 You know, I'm curious. You know, so others in the space, 0:03:01.160 --> 0:03:04.320 something like a McDonald's, they've talked about low income consumers 0:03:04.320 --> 0:03:07.600 pulling back on their spending. You guys, your consumer base 0:03:08.160 --> 0:03:10.560 what do you expect in terms of us consumer behavior 0:03:10.639 --> 0:03:12.840 this year? What can you tell us about how the 0:03:12.880 --> 0:03:14.799 consumer is doing and how they are spending Because you 0:03:14.880 --> 0:03:18.360 do talk about transactions up check size is rising, but 0:03:18.400 --> 0:03:20.280 what more can you give us in terms of how 0:03:20.280 --> 0:03:22.919 the consumer is Yeah, you know. 0:03:22.880 --> 0:03:24.880 So we look at this very closely as well. 0:03:25.080 --> 0:03:28.000 And first we start with what are people's perceptions of 0:03:28.000 --> 0:03:30.799 our brand? And the perceptions are really strong right now. 0:03:30.840 --> 0:03:33.280 You know, people are getting the idea that we're all 0:03:33.320 --> 0:03:36.280 about fresh food, we're all about food with integrity. They're 0:03:36.320 --> 0:03:39.320 getting the idea that, hey, this is a great value 0:03:39.480 --> 0:03:41.480 when I think about what I pay for what I get, 0:03:41.680 --> 0:03:43.640 the customization, the speed. 0:03:44.080 --> 0:03:44.440 Okay. 0:03:44.480 --> 0:03:46.880 And so when we look at this among different income cohorts, 0:03:46.960 --> 0:03:50.400 so less than forty thousand, between forty thousand, one hundred thousand, 0:03:50.480 --> 0:03:54.040 over one hundred thousand, we're seeing we're making progress in 0:03:54.120 --> 0:03:58.240 every income coport. So we've seen sales gains with every 0:03:58.320 --> 0:04:02.600 income group. Thing that I think is happening is especially 0:04:02.640 --> 0:04:05.960 the lowering consumer. You know, they are saying, hey, we're 0:04:06.000 --> 0:04:07.440 going to be really choosy with the money that we 0:04:07.560 --> 0:04:08.240 choose to spend. 0:04:08.840 --> 0:04:11.240 You've got to give us what we want on our terms. 0:04:11.240 --> 0:04:13.200 And one of the things that's really great is Chipotle's 0:04:13.200 --> 0:04:15.560 able to do that right. We can get you the 0:04:15.600 --> 0:04:18.560 exact food experience that you want, hopefully at a speed 0:04:18.560 --> 0:04:21.040 that delights you, and then when you walk away, you 0:04:21.080 --> 0:04:23.400 feel like you know, that was money well spent and 0:04:23.640 --> 0:04:24.640 I'm going to come do it again. 0:04:25.160 --> 0:04:27.520 Well, let me go back to comp sales in terms 0:04:27.520 --> 0:04:29.680 of your outlook that you guys put Brian, why do 0:04:29.720 --> 0:04:32.960 you think you see growth though continuing but at a 0:04:33.000 --> 0:04:36.599 slower slightly slower space I mean pace. 0:04:36.680 --> 0:04:39.240 Excuse you, I yeah, yeah, I look. 0:04:39.279 --> 0:04:42.600 The way we think about this is we want to 0:04:42.640 --> 0:04:45.520 continue to focus on executing the basics. Obviously January we 0:04:45.560 --> 0:04:48.080 had to deal with some bad weather across the country. 0:04:48.520 --> 0:04:51.040 The good news is the days where we haven't seen 0:04:51.800 --> 0:04:55.320 bad weather, the businesses strengthened right back up, and so 0:04:56.040 --> 0:04:59.039 we're optimistic about where we can get to. You know, 0:04:59.080 --> 0:05:02.400 we've switched back to to what our pre pandemic practice was, 0:05:02.400 --> 0:05:05.160 was just guiding for the full year. You know, Hopefully 0:05:05.200 --> 0:05:08.000 what happens is we're able to beat those expectations. That's 0:05:08.000 --> 0:05:10.839 always our goal, and we'll see how it all unfolds 0:05:10.839 --> 0:05:13.120 over the course of the year. But we're set up 0:05:13.240 --> 0:05:16.359 very well to open a lot of restaurants deliver I 0:05:16.360 --> 0:05:20.800 think really strong in store experiences and digital experiences, which 0:05:20.800 --> 0:05:24.160 hopefully we'll build on the momentum that we've achieved thus far. 0:05:24.279 --> 0:05:26.599 Hey, Brian, let's talk more when it comes to labor. 0:05:26.680 --> 0:05:28.960 Fifteen percent of your restaurants are in California. You're joining 0:05:29.040 --> 0:05:32.440 us from Newport Beach right now. We saw California minimum 0:05:32.520 --> 0:05:35.960 wage raised this year to sixteen dollars per hour. It's 0:05:35.960 --> 0:05:38.000 going to continue to rise this year and over the 0:05:38.000 --> 0:05:42.160 next few years. How else, apart from raising prices, is 0:05:42.240 --> 0:05:45.800 Chipotle going to cope with California's new minimum wage law. 0:05:47.279 --> 0:05:47.520 Yeah. 0:05:47.520 --> 0:05:49.800 Look, I mean we're always working hard on what can 0:05:49.800 --> 0:05:52.440 we do to be more efficient so that we don't 0:05:52.480 --> 0:05:54.360 have to pull the pricing lever. 0:05:55.279 --> 0:05:56.920 You know, you've heard us talk about things. 0:05:56.720 --> 0:05:59.680 Like autocato, where we're automating how we cut core and 0:05:59.720 --> 0:06:03.720 screw avocados. We're working on some things automating our digital 0:06:03.760 --> 0:06:06.880 make line. We're also exploring things on how we could 0:06:07.080 --> 0:06:12.159 potentially cut our onions peppers in the restaurants in a 0:06:12.160 --> 0:06:14.680 more efficient fashion. So we're going to invest in those 0:06:14.720 --> 0:06:19.120 things The unfortunate fact is the wage increases moving much 0:06:19.160 --> 0:06:21.880 faster than these efficiencies that we're going to be able 0:06:21.920 --> 0:06:24.920 to find. So price will be part of the puzzle 0:06:24.920 --> 0:06:28.680 in order to handle the inflation that's looming. But we're 0:06:28.720 --> 0:06:30.719 going to do everything we can to avoid having to 0:06:30.720 --> 0:06:33.560 pull that pricing lever. And you know, you'll continue to 0:06:33.560 --> 0:06:36.160 see us innovate on what we're calling cobotics so that 0:06:36.200 --> 0:06:39.440 hopefully we can make the job more efficient, more effective. 0:06:39.839 --> 0:06:42.320 Team members like it and it gives the great culinary 0:06:42.360 --> 0:06:44.520 output that our customers have come to expect. 0:06:44.640 --> 0:06:48.719 Totally get it. Other costs, other input costs, coren avocados, 0:06:49.240 --> 0:06:51.560 the cost of ingredients. What are we seeing on that front? 0:06:51.800 --> 0:06:55.960 Are you seeing prices actually going down or increases not 0:06:56.120 --> 0:06:58.240 as significant as they were before? What can you tell 0:06:58.279 --> 0:06:58.560 us there? 0:06:58.600 --> 0:06:59.800 Yeah, yeah, that's right. 0:07:00.080 --> 0:07:02.680 Right, We're not seeing any deflation, but we've definitely seen 0:07:02.839 --> 0:07:04.240 a slowdown in the inflation. 0:07:04.520 --> 0:07:06.880 You know, it's more in the load to mid single digits. 0:07:07.320 --> 0:07:09.800 There's a couple of pockets where we're still watching things 0:07:09.840 --> 0:07:13.280 like on beef. We're always careful with where the avocado 0:07:13.320 --> 0:07:16.480 market might be moving. But for the most part, that's 0:07:16.600 --> 0:07:19.360 I would say started to normalize, with exception of a 0:07:19.360 --> 0:07:22.120 few pockets of inflation that we're still dealing with. 0:07:22.240 --> 0:07:24.240 Brian, do you see yourself raising prices this year? 0:07:26.000 --> 0:07:29.040 You know, we always try to wait till we get 0:07:29.080 --> 0:07:30.640 to about the end of the year to assess what 0:07:30.680 --> 0:07:33.320 we think we need to do. You know, obviously, this 0:07:33.440 --> 0:07:36.800 California minimum wage movement, we'll have to assess how that 0:07:36.840 --> 0:07:40.000 it really impacts the business and we'll take action accordingly. 0:07:40.120 --> 0:07:42.000 But for the bulk of the business, we usually wait 0:07:42.040 --> 0:07:43.000 till around the end of the year. 0:07:43.360 --> 0:07:46.280 See where all the inflation lands, see where our growth lands, 0:07:46.320 --> 0:07:49.320 see where our productivity lands, and then if we need to, 0:07:49.360 --> 0:07:51.560 we take pricing, usually in that one two to three 0:07:51.600 --> 0:07:52.440 percent range. 0:07:52.640 --> 0:07:52.800 Hey. 0:07:52.840 --> 0:07:55.160 One thing I'm thinking about also, and we saw it 0:07:55.200 --> 0:07:57.320 play out with some others about the impact of the 0:07:57.320 --> 0:08:00.520 Middle East East conflict. You guys last year talked about 0:08:00.680 --> 0:08:04.640 entering Kuwait and the UAE. This year, has the conflict 0:08:04.640 --> 0:08:08.320 in the Middle East, Brian impacted that timeline at all. 0:08:08.600 --> 0:08:09.400 Yeah, not yet. 0:08:09.600 --> 0:08:11.760 Our partner over there is the Alshinty Group, and they're 0:08:11.760 --> 0:08:15.560 a terrific operator. They have a lot of brands and 0:08:15.640 --> 0:08:18.160 a lot of experience of operating over there. So as 0:08:18.160 --> 0:08:21.240 of right now, we're still on schedule to open this year. Obviously, 0:08:21.840 --> 0:08:22.720 they will be the first. 0:08:22.600 --> 0:08:24.360 Ones to tell us that if we need to change 0:08:24.360 --> 0:08:25.160 that timeline. 0:08:25.560 --> 0:08:27.760 The good news is we think they're a great partner, 0:08:27.800 --> 0:08:29.840 we think they're a great operator, and I think the 0:08:29.880 --> 0:08:33.080 folks are going to love Chipotle when we're able to 0:08:33.120 --> 0:08:35.040 finally open our restaurant in that part of the world. 0:08:35.200 --> 0:08:36.920 Hey, just got about a minute or so left. Speaking 0:08:36.920 --> 0:08:39.160 of timelines, I've got two quick questions for you. You 0:08:40.320 --> 0:08:41.959 have been at the company for almost I think you're 0:08:41.960 --> 0:08:45.120 coming up on your six year anniversary. How are you 0:08:45.160 --> 0:08:48.000 thinking about that timeline? I mean, investors are happy stock 0:08:48.080 --> 0:08:52.000 is up almost one thousand percent in that time, So 0:08:52.240 --> 0:08:55.000 how are you thinking about kind of the next leg 0:08:55.040 --> 0:08:57.800 of that timeline for you? Because I've got to imagine 0:08:57.800 --> 0:08:59.800 there are people knocking at your door saying, can you 0:09:00.160 --> 0:09:02.920 do what you did for Jiboutle for us? And I'm 0:09:02.920 --> 0:09:06.000 also curious if there's any timeline for stocksplit because it's 0:09:06.000 --> 0:09:06.920 an expensive stock. 0:09:07.520 --> 0:09:10.280 I got about a minute, Yeah, yeah, sure. 0:09:10.320 --> 0:09:12.360 Look, what I hope is the next fix years are 0:09:12.520 --> 0:09:14.920 like what these last six years were from a total 0:09:14.960 --> 0:09:17.560 performance standpoint. I could do without some of the macro shocks. 0:09:18.400 --> 0:09:22.240 But you know, it's been a tremendous honor leading this brand. 0:09:22.240 --> 0:09:25.680 We've got wonderful people, We've got a terrific purpose and 0:09:25.760 --> 0:09:28.520 product that we provide, and I couldn't be happier to 0:09:28.559 --> 0:09:29.440 be leading this company. 0:09:29.520 --> 0:09:31.320 And I'm really excited about all the growth that's in 0:09:31.320 --> 0:09:31.720 front of us. 0:09:31.720 --> 0:09:33.680 You know, we're going to go from thirty five hundred 0:09:33.720 --> 0:09:36.559 restaurants to seven thousand restaurants. We're going after four million 0:09:36.600 --> 0:09:39.440 average unit volumes, so there's just tremendous growth in front 0:09:39.480 --> 0:09:41.160 of us, which I'm super excited about. 0:09:41.360 --> 0:09:44.280 Yeah, you know, everybody asked us about the stock split. 0:09:45.240 --> 0:09:47.720 We'll have to wait and see what city raised. 0:09:47.840 --> 0:09:50.719 It's now like a street high over three pet for 0:09:50.720 --> 0:09:53.480 you to yeah, briefly, is there a level real quickly? 0:09:54.720 --> 0:09:57.600 You know what, We never have a defined level, but 0:09:57.760 --> 0:09:59.800 it's something we talk about and if it makes. 0:09:59.679 --> 0:10:00.960 Sense, you will do all right. 0:10:01.000 --> 0:10:03.040 Listen, you are always so generous with your time. We 0:10:03.120 --> 0:10:06.040 really appreciate it. Be well, and thank you so much. 0:10:06.080 --> 0:10:08.520 Brian Nickel, of course, he's the chairman and chief executive 0:10:08.559 --> 0:10:12.600 officer Chapotle Mexican Grill. The stock on a taire, as 0:10:12.600 --> 0:10:14.240 we said, hitting a record. 0:10:14.280 --> 0:10:16.960 Twenty seven twenty seven to twenty five right now, up 0:10:17.080 --> 0:10:18.320 nine point five percent today. 0:10:18.360 --> 0:10:20.080 All right, we really appreciate. We're going to check in 0:10:20.080 --> 0:10:23.680 with another CEO. We've got the CEO of CBS Health, Carolyn. 0:10:23.760 --> 0:10:25.600 She's coming our way in just a moment. You're listening 0:10:25.600 --> 0:10:27.640 and watching Bloomberg Business Week. This is Bloomberg. 0:10:28.440 --> 0:10:32.000 You're listening to the Bloomberg Business Week podcast. Catch us 0:10:32.040 --> 0:10:35.280 live weekday afternoons from two to five pm Eastern. Listen 0:10:35.320 --> 0:10:37.480 on Apple car Play and then brought auto with a 0:10:37.480 --> 0:10:41.160 Bloomberg Business app or watch us live on YouTube. 0:10:41.960 --> 0:10:44.200 Now to another stock on the move, and it's related 0:10:44.240 --> 0:10:46.600 again to earning shares of CBS Health. They're up nearly 0:10:46.640 --> 0:10:49.439 five percent out their high today right now again of 0:10:49.480 --> 0:10:52.640 about two point four percent. CVS Health reported better fourth 0:10:52.679 --> 0:10:55.360 quot results than Wall Street expected, and it really did 0:10:55.400 --> 0:10:59.080 relieve some investor concerns about the impact of rising care expenses, 0:10:59.280 --> 0:11:01.480 particularly in the companies at an insurance. 0:11:01.600 --> 0:11:03.600 Well, let's get to the outlook. Because the drugstore chain 0:11:03.640 --> 0:11:06.560 now expects annual adjusted earnings of at least eight dollars 0:11:06.559 --> 0:11:08.360 and thirty a share, down from at least eight to 0:11:08.400 --> 0:11:10.960 fifty a share. Cash flow from operations will be at 0:11:11.040 --> 0:11:14.080 least twelve billion dollars carrol, down from an earlier outlook 0:11:14.200 --> 0:11:16.079 of at least twelve point five billion dollar. 0:11:16.080 --> 0:11:18.360 All right, delighted to have with us Karen Lynch. She's 0:11:18.400 --> 0:11:21.440 president CEFCVS Health, joining us on Zoom from the company's 0:11:21.440 --> 0:11:26.240 CVS headquarters in Wonsocket, Rhode Island. Hey, Karen, so nice 0:11:26.240 --> 0:11:29.959 to have you here with us. Let's start big broad 0:11:30.000 --> 0:11:34.079 if we may your business mide of three large revenue drivers. 0:11:34.120 --> 0:11:36.160 First of all, how would you describe the last quarter 0:11:36.679 --> 0:11:39.960 and where, you know, were the areas that made managing 0:11:40.000 --> 0:11:43.600 it a little bit more difficult, which were upbeat and 0:11:43.679 --> 0:11:46.520 our upside surprises if you will. 0:11:46.720 --> 0:11:48.760 Yeah, Hi Carol, It's a pleasure to be here and 0:11:48.800 --> 0:11:51.079 thanks for having me. You know, in the fourth quarter, 0:11:51.240 --> 0:11:54.560 you know, we had strong results in our pharmacy Benefit 0:11:54.600 --> 0:11:58.960 management company. We had very strong results in our pharmacy 0:11:58.960 --> 0:12:03.400 and consumer Wellness segment, which essentially is our stores. And 0:12:03.840 --> 0:12:07.000 you know, we continue to demonstrate growth in our ATA 0:12:07.040 --> 0:12:10.280 health and business. Where we had challenges in the quarter 0:12:10.480 --> 0:12:13.079 is really at the end of the year, we saw 0:12:14.000 --> 0:12:18.120 elevated trends in our medicare advantage business where we saw 0:12:18.880 --> 0:12:22.880 you know, trends in outpatient services you know, think hips 0:12:22.920 --> 0:12:27.040 and knees. We also saw an increase in utilization and 0:12:27.200 --> 0:12:31.200 dental and vision. But overall, as you said, you know, 0:12:31.200 --> 0:12:35.319 we ended the year strong. We delivered on our financial commitments. 0:12:35.320 --> 0:12:38.480 We grew revenues of eleven and a half percent, and 0:12:38.720 --> 0:12:42.440 you know, we delivered EPs of eight point eight seventy four, 0:12:42.520 --> 0:12:44.240 which was a really strong result. 0:12:44.480 --> 0:12:48.120 Yeah, investors, kudos because they have set your stock hired today. 0:12:48.160 --> 0:12:51.360 The results really do suggest that your insurance unit, you 0:12:51.400 --> 0:12:54.760 were able to manage those costs and drive the quarterly results. 0:12:54.960 --> 0:12:57.200 Can you continue to do so? Talk to us about 0:12:57.240 --> 0:12:59.400 kind of the stress and strain from doing that. 0:13:00.760 --> 0:13:05.160 You know, obviously, you know, we have programs in place, 0:13:05.240 --> 0:13:08.320 whether it's the benefit designs that we put in place, 0:13:08.360 --> 0:13:12.280 whether it's our you know, care coordination programs that we 0:13:12.360 --> 0:13:15.640 have in place, you know, whether how we contract with 0:13:15.920 --> 0:13:17.760 our network and our physicians. 0:13:17.800 --> 0:13:21.400 So you know, you know, we we feel very confident. 0:13:21.000 --> 0:13:26.160 That we can continue to navigate this environment as we 0:13:26.200 --> 0:13:30.520 move into twenty twenty four. We haven't seen anything unusual 0:13:31.200 --> 0:13:33.480 in the early part of twenty twenty four, but things 0:13:33.480 --> 0:13:37.320 are you know, still emerging and will monitor it throughout 0:13:37.320 --> 0:13:37.640 the year. 0:13:37.840 --> 0:13:40.120 What was unusual about last quarter? You said, hips and 0:13:40.200 --> 0:13:42.760 knees really dragged on the quarter at the end of 0:13:42.800 --> 0:13:45.680 the year. What was unusual about that and why why 0:13:45.720 --> 0:13:49.240 can't you really model for that moving forward? 0:13:49.720 --> 0:13:52.160 Yeah, Well, we just what we saw was just an 0:13:52.160 --> 0:13:57.120 elevated utilization and you know, we you know, I think 0:13:57.160 --> 0:13:59.560 part of it is, you know, there is there's been 0:14:00.120 --> 0:14:03.600 some pent up demand over a period of time. What 0:14:03.640 --> 0:14:07.760 we've also seen is more capacity in the healthcare system, 0:14:07.840 --> 0:14:12.520 so you know, more outpatients. Clinics are staffed now, so 0:14:12.559 --> 0:14:15.720 they can have more you know, they have more. 0:14:15.600 --> 0:14:18.240 Scheduling available to them. So there's a number of. 0:14:18.200 --> 0:14:22.160 Factors that you know that we wouldn't have seen that 0:14:22.360 --> 0:14:25.800 you know, uh, started that elevated trend in the latter 0:14:25.840 --> 0:14:27.120 half of December. 0:14:27.160 --> 0:14:30.360 Actually, hey, Karen, some other health insurers Humanity United Health 0:14:30.400 --> 0:14:33.200 for instance, who obviously are in this field as well, 0:14:33.720 --> 0:14:36.080 they have warned that these rising costs will mean raising 0:14:36.240 --> 0:14:39.600 prices to increase profit margins. Will you have to do 0:14:39.640 --> 0:14:40.200 the same. 0:14:41.800 --> 0:14:45.320 Well, I think it all depends on the business that 0:14:45.320 --> 0:14:49.200 we're in. So for medicare, uh, you know, CMS essentially 0:14:49.240 --> 0:14:53.560 sets the rates, and so we received our first rate 0:14:53.640 --> 0:14:57.600 notice this past week, and so what we've said is, 0:14:57.720 --> 0:15:00.000 you know, we it was in line with the expectations, 0:15:00.080 --> 0:15:05.040 relatively flat flat, but it didn't cover the overall rising 0:15:05.080 --> 0:15:08.080 medical trends. So we have the opportunity to go back 0:15:08.120 --> 0:15:11.280 to CMS and you know, give them comments, which we'll 0:15:11.320 --> 0:15:16.160 be doing in the upcoming week so that that price 0:15:16.240 --> 0:15:19.720 is really set, and then we design the benefits around 0:15:19.880 --> 0:15:22.640 the price that's set by CMS. So we'll be you know, 0:15:22.720 --> 0:15:25.440 modifying the benefits as we go, as we learn more 0:15:25.480 --> 0:15:28.640 about the final rate notice that comes out in April. 0:15:28.920 --> 0:15:31.280 And then in our commercial business, we obviously have the 0:15:31.320 --> 0:15:36.240 ability to adjust prices to rising trends and we've been 0:15:36.280 --> 0:15:40.320 doing that all along through twenty three and into twenty four. 0:15:40.440 --> 0:15:42.120 So this takes into account because I know you guys 0:15:42.120 --> 0:15:43.520 had had warned I think it was at the JP 0:15:43.600 --> 0:15:48.240 Morgan Healthcare Conference that your medical benefit ratio could be 0:15:48.320 --> 0:15:51.760 higher than expected in the fourth quarter. So I'm just wondering, 0:15:51.800 --> 0:15:54.400 so you're feeling like that you'll be able to manage 0:15:54.400 --> 0:15:56.400 that in the in the rest of the year or 0:15:56.480 --> 0:15:57.520 this year specifically. 0:15:57.560 --> 0:15:59.480 Yeah, So yeah, So Carol. 0:15:59.760 --> 0:16:01.960 In the fourth quarter, you know, we saw some of 0:16:02.000 --> 0:16:06.080 this emerging trend with medical benefit ratio. So as you saw, 0:16:06.160 --> 0:16:09.080 we were we expected. Our original guidance it was eighty 0:16:09.080 --> 0:16:11.800 six percent at the end of the year, which we've 0:16:11.880 --> 0:16:14.760 just reported today was eighty six point two percent, So 0:16:14.840 --> 0:16:17.360 it was a little bit higher, but we had anticipated 0:16:17.400 --> 0:16:20.600 it and talked about it at JP Morgan as we 0:16:20.680 --> 0:16:24.360 turned the corner into twenty twenty four. We're watching these 0:16:24.440 --> 0:16:27.120 trends and we'll, you know, we'll we have lots of 0:16:27.200 --> 0:16:31.160 tools and techniques that we use to help people get 0:16:31.200 --> 0:16:33.600 the care they need when they need it, at the 0:16:33.760 --> 0:16:37.840 right at the right levels, at the appropriate sites of care, 0:16:38.080 --> 0:16:40.920 and you know, we help people navigate, you know, and 0:16:40.960 --> 0:16:42.400 coordinate their care. 0:16:42.520 --> 0:16:44.040 Hey, Karen, I want to talk about a different part 0:16:44.040 --> 0:16:46.120 of the business, the second biggest part of the business, 0:16:46.200 --> 0:16:49.800 that's the pharmacy and consumer wellness segment. Talk to us 0:16:49.800 --> 0:16:52.440 a little bit about how the retail environment is right now. 0:16:52.560 --> 0:16:54.680 What you're seeing out there from the consumer, is the 0:16:54.720 --> 0:16:58.360 consumer healthy? You have a great view on the American consumer, 0:16:58.440 --> 0:16:59.960 so share with us those thoughts. 0:17:00.040 --> 0:17:01.480 Yeah. 0:17:01.560 --> 0:17:04.240 So, well, first of all, you know, stepping back, those 0:17:04.280 --> 0:17:08.640 stores are really another avenue for healthcare delivery. So when 0:17:08.680 --> 0:17:13.040 consumers are coming into CBS, more likely than not, they're 0:17:13.080 --> 0:17:16.119 coming in to fill a prescription. So we have seen 0:17:16.640 --> 0:17:21.240 an increase in you know, our script volume over the 0:17:21.280 --> 0:17:24.320 course of twenty three and starting in twenty twenty four, 0:17:24.760 --> 0:17:28.800 we built an immunization franchise, so people are coming to 0:17:28.920 --> 0:17:32.639 our stores for their RSPE vaccine, for their COVID vaccines, 0:17:32.680 --> 0:17:35.680 for their flu vaccines, for their shingle vaccines. That's really 0:17:35.720 --> 0:17:39.160 creating you know, additional revenue streams for us, an additional 0:17:39.240 --> 0:17:43.000 value to the consumer because it offers a convenient place 0:17:43.080 --> 0:17:46.399 for people to get their immunizations. It's right usually right 0:17:46.440 --> 0:17:49.920 around the corner from your home. We've built digital assets 0:17:49.920 --> 0:17:53.600 so that you have the ability to schedule online, so 0:17:53.640 --> 0:17:57.520 we've made it very convenient for those individuals. And what 0:17:57.560 --> 0:17:59.240 we're seeing in the front of the store, you know, 0:17:59.280 --> 0:18:04.439 we're obviously seeing consumer behavior. People are making choices for 0:18:04.640 --> 0:18:08.440 lower prices. We're seeing more of the CBS brand where 0:18:08.960 --> 0:18:12.080 so people are cost you know, just cost comparison, and 0:18:12.160 --> 0:18:14.399 we are starting to see people kind of leveraging the 0:18:14.440 --> 0:18:16.400 CBS brand products. 0:18:16.480 --> 0:18:19.320 Okay, so going to generics a little bit, It sounds like, hey, 0:18:19.640 --> 0:18:22.320 let's talk about shrinkage. It's a huge, a huge problem 0:18:22.359 --> 0:18:23.359 over the last couple of years. 0:18:23.359 --> 0:18:25.200 We all want products to be taken out of jail 0:18:25.240 --> 0:18:28.120 because it's so frustrating the retail jo. 0:18:29.080 --> 0:18:31.080 Is it getting any better? Is it still a huge issue? 0:18:31.359 --> 0:18:32.280 Is there any improvement? 0:18:33.480 --> 0:18:36.000 Yeah, I would say it's a concern for ours and 0:18:36.280 --> 0:18:39.080 first and foremost, we're very concerned about the safety of 0:18:39.119 --> 0:18:41.439 our colleagues, and we put a number of measures in 0:18:41.480 --> 0:18:44.560 place to make sure that our colleagues are safe. 0:18:45.160 --> 0:18:47.440 And as you pointed. 0:18:47.119 --> 0:18:50.000 Out, we lock things up so that we can deter 0:18:50.760 --> 0:18:53.480 some of the thieves from coming into our stores and 0:18:53.880 --> 0:18:59.640 stealing our products. And you know, we've seen it somewhat moderate, 0:18:59.800 --> 0:19:03.639 but we're working very closely with attorney generals with local 0:19:03.720 --> 0:19:10.040 law enforcement to really have people prosecuted when they are 0:19:10.240 --> 0:19:12.760 are stealing from our stores. And this is not just 0:19:12.800 --> 0:19:16.200 a CVS health problem, this is a retail problem. And 0:19:16.680 --> 0:19:19.960 you know, we all are coordinated to really work with 0:19:20.080 --> 0:19:23.400 law enforcement so that you know, we can deter the theft. 0:19:23.440 --> 0:19:26.199 It is very costly to us, and my you know, 0:19:26.280 --> 0:19:28.919 my big concern is making sure that our colleagues are 0:19:28.920 --> 0:19:29.840 safe in our stores. 0:19:29.920 --> 0:19:31.639 Totally get it, and I'm just curious. It sounds like 0:19:31.680 --> 0:19:33.160 you've answered it, but I want to ask you about 0:19:33.160 --> 0:19:36.679 pharmacist specifically walking out. How are you addressing those concerns 0:19:37.200 --> 0:19:39.600 and also just concerned about not having enough staff those 0:19:39.600 --> 0:19:42.200