Speaker 1: Takes us into really what's an encouraging earning story here
Speaker 1: and might this be an undervalued stock? We're talking Walmart here,
Speaker 1: massive pop in the shares overnight five really capping off.
Speaker 1: I believe what the seven day rally here, longest winning
Speaker 1: streak going back to October of last year. Let's get
Speaker 1: a sense really of what we at least the guidance
Speaker 1: from the company means per se and also against the
Speaker 1: broader backdrop of this, it's more evidence of a slowing
Speaker 1: retail story in the US. Joining US now as Jennifer
Speaker 1: Ratasha is here Bloomberg Intelligence Senior Retailed Staples and Packaged
Speaker 1: Food analyst Jennifer David here, Good morning from Hong Kong
Speaker 1: and the Age of Pacific. Hope you're well. Are we
Speaker 1: gonna be okay? That seems to be the headline from Walmart. Yeah,
Speaker 1: good morning and thank you for having me with you today. Um,
Speaker 1: when when we look at Walmart, you know the fact
Speaker 1: that they beat earnings was a positive sign, but we
Speaker 1: also have to bear in mind that only three weeks
Speaker 1: ago they lowered their guidance and then they beat their
Speaker 1: guidance and so um, you know, so it's it's a
Speaker 1: good note, but at the same time, you have to
Speaker 1: take it a little bit with a grain of salt. Now,
Speaker 1: some of the commentary that they shared does give some
Speaker 1: confidence that the back to school season is going well UM,
Speaker 1: gives the little bit more optimism on their ability to
Speaker 1: handle inventory UM, which will be very important as we
Speaker 1: get into the second half of the year. Jennifer Stug
Speaker 1: in New York, I want to say thanks as well
Speaker 1: for joining us here on Day Break Asia. Yeah, the
Speaker 1: inventory build was a curious phenomenon here. I think that
Speaker 1: they perhaps misread the consumer early on in the pandemic.
Speaker 1: Maybe people's tastes have changed, or maybe they've moved away
Speaker 1: from buying goods to services. I mean, there are different
Speaker 1: stories here are part of that overall narrative. But as
Speaker 1: it applies to Walmart, what do we know about the
Speaker 1: way that they were able to unwind inventory or liquidate, Well,
Speaker 1: it's they've done a pretty decent job. And basically, when
Speaker 1: when we were in the hype of the pandemic, the
Speaker 1: retailers couldn't get enough inventory UM. And then as the
Speaker 1: pandemic started to fade, they sort of bulked up and
Speaker 1: they wanted to be sure that they would be able
Speaker 1: to remain with things in stock for consumers and not
Speaker 1: trigger another round of panic buying. UM. But what that
Speaker 1: led to was kind of an over confidence in how
Speaker 1: much they would be able to sell in this huge
Speaker 1: amount of inventory that they were then sitting on. Now
Speaker 1: for Walmart, the trickiest part of that inventory excess they
Speaker 1: have is apparel UM, and they've had a little bit
Speaker 1: more of a hard time selling through that apparel. They've
Speaker 1: done a better job with home decore items and electronics UM.
Speaker 1: And part of the way they cleared some of that
Speaker 1: inventory was through the traditional method of rollbacks and lowering prices,
Speaker 1: but also they ran a Walmart Plus member sales event
Speaker 1: in June UM and a lot of the items that
Speaker 1: were part of that sales event were those categories where
Speaker 1: they had excess inventory. So they took a very strategic
Speaker 1: approach and how to decrease that inventory. UM. And they
Speaker 1: did say on their call today that they've canceled a
Speaker 1: lot of orders and that they're they're more right sized
Speaker 1: in their inventory as they looked at the second half
Speaker 1: of the here. Well, I'm curious then, was that a
Speaker 1: one off in terms of and the reason I asked
Speaker 1: this inventory question is I mean, it's it's not the
Speaker 1: same industry, but for example, Toyota this part of the world,
Speaker 1: you look at Day's inventory has been rising. You know,
Speaker 1: this is a company that's known for just in time,
Speaker 1: just enough, and they're starting to go just in case
Speaker 1: in terms of their inventory. Right. So I'm just trying
Speaker 1: to see whether there's a read through from what Walmart
Speaker 1: did to the entire industry or even just the Walmart
Speaker 1: itself in these next few quarters. Well, there's certainly they
Speaker 1: seem to be learning some of the lessons um and
Speaker 1: and with with regards to inventory and just the value
Speaker 1: of inventory, there there are two factors there. One is
Speaker 1: um just inflation, and the value of inventory has gone
Speaker 1: up even if the actual number of physical goods held
Speaker 1: in inventory hasn't UM So that is part of the
Speaker 1: story UM. But but more importantly, UM, it seems that
Speaker 1: Walmart is gotten much smarter in terms of being strategic
Speaker 1: on where they need to buy and where they've canceled orders.
Speaker 1: Um and so that puts us in a pretty confident
Speaker 1: position that as we as we moved through back to
Speaker 1: school and we get towards the end of the year, UM,
Speaker 1: if they've canceled orders that they thought might be an access.
Speaker 1: That means hopefully that they'll be able to sell through
Speaker 1: their holiday inventory and the end the year on a
Speaker 1: very strong note. Um. And we've heard other retailers talk
Speaker 1: about canceling orders than trying to write size inventory as well. So, UM,
Speaker 1: I think we'll hear more tomorrow from the Target. I
Speaker 1: was just going to ask about that. I mean, so
Speaker 1: today we had the Walmart stock popping about five percent.
Speaker 1: I'm looking at Target shares up two point nine percent today.
Speaker 1: You mentioned the fact that they will deliver numbers tomorrow.
Speaker 1: Is it it's it the same story or is there
Speaker 1: things that we really need to tear a pardon in
Speaker 1: terms of differentiation? Well, when when we when we compare
Speaker 1: Walmart and Target, one of the key things to remember
Speaker 1: is that Target is much more is much less reliant
Speaker 1: on food sales than Walmart, So overt Walmart sales in
Speaker 1: total are for food and consume up goals. So that's
Speaker 1: a huge part of their US business. Walmart is I mean,
Speaker 1: Target is much more focused on apparel, home decore. Um,
Speaker 1: and they do sell essentials as well, but it's a
Speaker 1: smaller part of their overall business. So tomorrow. For Target,
Speaker 1: what we're going to be looking at it is that
Speaker 1: inventory and and UM their management team had taken the
Speaker 1: track of trying to sort of rip the band aid
Speaker 1: off and dump as much inventory as possible in the
Speaker 1: second quarter, So we're going to seem very very weak margins,
Speaker 1: but hopefully we'll see a much better inventory number come
Speaker 1: out of Target UM that will set them up for
Speaker 1: the rest of the year. Okay, Jennifer, good stuff. Always
Speaker 1: a pleasure. Thanks for spending time with us. Jennifer Bartoshes,
Speaker 1: Bloomberg Intelligence senior Retail, staples and package food analysts, joining
Speaker 1: us on the program.