WEBVTT - Warner Bros. Says Paramount’s New $31 Offer May Top Netflix 0:00:02.720 --> 0:00:10.600 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.600 --> 0:00:14.560 Bloomberg Intelligence podcast. Catch us live weekdays at ten am 0:00:14.600 --> 0:00:17.840 Eastern on Apple, Cocklay and Android Auto with the Bloomberg 0:00:17.920 --> 0:00:21.040 Business App. Listen on demand wherever you get your podcasts, 0:00:21.360 --> 0:00:23.520 or watch us live on YouTube. 0:00:24.040 --> 0:00:25.720 Let's get to a little m and a in the 0:00:25.720 --> 0:00:29.320 media space. That Warner Brothers Discovery deal, the never ending 0:00:29.360 --> 0:00:31.400 deal seems like it's moving a little bit forward. 0:00:31.400 --> 0:00:31.560 Here. 0:00:31.600 --> 0:00:34.280 We got a higher bid from Paramount. 0:00:34.560 --> 0:00:36.360 We want to check in Withkeetha rong Anath and she 0:00:36.400 --> 0:00:40.360 covers all the media stocks for Bloomberg Intelligence. So Keitha talk, 0:00:40.400 --> 0:00:44.559 give us the latest on this Warner Brothers Discovery sale process. 0:00:44.560 --> 0:00:45.480 Where are we right now? 0:00:46.640 --> 0:00:49.680 Yeah, so, Paul, we got the higher number from Paramount. 0:00:50.120 --> 0:00:52.879 It's thirty one dollars. So they upted from thirty dollars 0:00:52.920 --> 0:00:56.319 per share for the entire company. Now, what that has 0:00:56.360 --> 0:00:58.360 forced the Warner Brothers Discovery board to do is to 0:00:58.400 --> 0:01:00.320 go back to the drawing board kind of re gauge 0:01:00.320 --> 0:01:02.920 with Paramount see exactly what number they can come up with. 0:01:03.320 --> 0:01:05.959 But ultimately they have to deem whether this is a 0:01:06.040 --> 0:01:09.360 superior proposal or not. So far, they have two offers 0:01:09.360 --> 0:01:11.720 on the table, this one from Paramount and the twenty 0:01:11.840 --> 0:01:15.280 seven dollars and seventy five cents per share from Netflix, 0:01:15.480 --> 0:01:17.119 but that is only for part of the business. That's 0:01:17.120 --> 0:01:19.320 only for the studio and the streaming acids. So they're 0:01:19.360 --> 0:01:22.320 still in the process of making a determination about which 0:01:22.319 --> 0:01:25.320 offer is superior. But the minute that they you know, 0:01:25.360 --> 0:01:27.960 that they make that determination and they call the Paramount 0:01:28.040 --> 0:01:31.640 offers superior, then the clock starts sticking. For Netflix, they 0:01:31.680 --> 0:01:35.080 have four days to come up with their own enhanced 0:01:35.120 --> 0:01:38.800 offer so to match the Paramount offer, and then you know, 0:01:38.840 --> 0:01:40.679 we'll kind of see where the chips fall after that. 0:01:41.080 --> 0:01:44.039 Yeah, well, Gika, you know, I recall the word Brother's 0:01:44.080 --> 0:01:47.360 board really did not like some of the financing terms 0:01:47.360 --> 0:01:51.680 for the Paramount bid initially, right, So does this new 0:01:51.880 --> 0:01:56.320 improved offer improve upon some of those sticking points in 0:01:56.360 --> 0:01:59.520 the earlier deal in does that really de risk the 0:01:59.560 --> 0:02:02.000 transit action? And now that they've come up with another 0:02:02.040 --> 0:02:02.800 offer here. 0:02:03.560 --> 0:02:06.920 They have all of the points that Warner Brothers had 0:02:06.960 --> 0:02:12.600 initially raised. They have the Paramount management team has proposed remedies. 0:02:12.680 --> 0:02:14.519 So one of the big things that they have kind 0:02:14.560 --> 0:02:16.040 of come up with is that they're going to cover 0:02:16.120 --> 0:02:20.720 the financing costs and the termination fee if Netflix exits 0:02:20.800 --> 0:02:25.119 this process. They actually upped their own termination free from 0:02:25.560 --> 0:02:29.239 five point nine billion to seven billion dollars. They are 0:02:29.280 --> 0:02:32.240 going to pay something called a ticking fee, which is 0:02:32.280 --> 0:02:36.280 twenty five cents per share per quarter for every quarter 0:02:36.360 --> 0:02:39.480 that the transaction does not close beyond September. So they've 0:02:39.480 --> 0:02:42.600 offered a lot of different things, including kind of backstopping 0:02:43.120 --> 0:02:46.320 the whole equity portion of the deal as well as 0:02:46.360 --> 0:02:50.440 providing guarantees for the debt financing. So a lot of 0:02:50.440 --> 0:02:55.320 the points that Warner Brothers had initially raised. Your absolutely right, Christine. 0:02:55.520 --> 0:02:58.000 You know, Paramount has kind of come out and addressed 0:02:58.040 --> 0:03:01.840 that so definitely provide a lot more comfort to the 0:03:01.840 --> 0:03:03.280 Warner Brothers Discovery board. 0:03:03.760 --> 0:03:05.120 Yeah, Githa, you're right. 0:03:05.160 --> 0:03:08.320 It seems like Paramount's really stepped up and really said 0:03:08.520 --> 0:03:11.840 we're going to be really credible here. Meanwhile, Netflix has 0:03:11.840 --> 0:03:14.840 been quietly waiting on the sidelines, not really doing anything, 0:03:15.200 --> 0:03:17.400 but it now seems like now's the time for them to, 0:03:17.880 --> 0:03:21.120 you know, really make a decision, step up with a bigger, 0:03:21.160 --> 0:03:23.880 better offer, different offer. I'm not sure, what do you 0:03:23.919 --> 0:03:25.680 think the options are for Netflix. 0:03:26.520 --> 0:03:29.120 The best option in my view of Paul, for Netflix, 0:03:29.160 --> 0:03:31.799 and I think majority of you know It's investors would 0:03:31.800 --> 0:03:34.680 also agree to just walk away pocket the two point 0:03:34.680 --> 0:03:37.280 eight billion that you get in termination fees, just walk 0:03:37.320 --> 0:03:41.280 away and just focus on just focus on your core business, 0:03:41.320 --> 0:03:45.000 because they do have a very strong core business. You know, 0:03:45.040 --> 0:03:47.440 as we've said many times, Paul and you agree that this, 0:03:47.680 --> 0:03:49.640 you know, Warner Brothers is a great asset, There's absolutely 0:03:49.640 --> 0:03:51.280 no doubt about it. But it is really just a 0:03:51.400 --> 0:03:54.360 nice to have, not a must have for Netflix. So 0:03:54.480 --> 0:03:58.240 it could end up actually becoming a distraction. So you know, 0:03:58.320 --> 0:04:00.320 in many cases. I mean, I think the way that 0:04:01.040 --> 0:04:03.720 you know, the street almost perceives it is that Netflix 0:04:03.840 --> 0:04:07.000 is a winner if they lose this whole bidding process. 0:04:08.240 --> 0:04:09.720 But that said, I mean, they do have a lot 0:04:09.720 --> 0:04:12.360 of financial firepower. If they did have to increase their 0:04:12.360 --> 0:04:14.880 bid up it by about one two dollars, they absolutely 0:04:14.880 --> 0:04:17.840 can do that. The only thing is once they go 0:04:17.920 --> 0:04:20.839 beyond that, then they kind of risk over paying for 0:04:20.960 --> 0:04:24.039 the asset. They risk their leverage profile really kind of 0:04:24.040 --> 0:04:26.480 getting a little bit dangerous. I would say, I mean, 0:04:26.600 --> 0:04:28.159 the gross stut is going to be well above one 0:04:28.200 --> 0:04:31.240 hundred billion dollars, leverage could be at four times. They're 0:04:31.279 --> 0:04:34.640 at zero points six times right now, so you know, 0:04:34.720 --> 0:04:36.680 all of those things start kind of coming into question. 0:04:36.720 --> 0:04:38.760 But of course they have a great free cash flow profile, 0:04:38.839 --> 0:04:41.880 so deleveraging wouldn't be an issue. That said, there still 0:04:41.920 --> 0:04:44.520 are you know, integration and execution risks always with any 0:04:44.640 --> 0:04:45.159 MNA deal. 0:04:45.640 --> 0:04:45.880 Yeah. 0:04:45.920 --> 0:04:48.880 Well, so if Paramount does indeed win the deal, does 0:04:48.880 --> 0:04:51.599 that present stronger competition for Netflix at least in the 0:04:51.640 --> 0:04:52.400 streaming space. 0:04:53.760 --> 0:04:56.680 I mean, it definitely will to some extent, But I 0:04:56.720 --> 0:04:59.560 think what Netflix and everybody else is banking on is 0:04:59.600 --> 0:05:02.560 that average is just going to be so high for 0:05:02.640 --> 0:05:06.320 the combined Paramount Warner Brothers Discovery that you know, at 0:05:06.440 --> 0:05:08.039 least for the first couple of years. I think they're 0:05:08.080 --> 0:05:10.600 just going to be really focused on kind of driving 0:05:10.640 --> 0:05:14.599 costs down, hitting their synergy targets, not really being able 0:05:14.680 --> 0:05:18.960 to invest in the business. But again, it's you know, 0:05:19.000 --> 0:05:21.640 it all comes down to exactly what the number is 0:05:21.640 --> 0:05:24.720 going to be. But you're right, they definitely will be 0:05:24.760 --> 0:05:27.719 a stronger competitor, although I don't think it's going to 0:05:27.760 --> 0:05:29.880 be a make or break for Netflix at all. 0:05:30.720 --> 0:05:33.800 Stay with us more from Bloomberg Intelligence coming up after this. 0:05:37.720 --> 0:05:41.400 You're listening to the Bloomberg Intelligence podcast. Catch us Live 0:05:41.480 --> 0:05:44.560 weekdays at ten am Eastern on Apple, Cocklay and Android 0:05:44.600 --> 0:05:47.880 Auto with the Bloomberg Business app. Listen on demand wherever 0:05:47.960 --> 0:05:51.080 you get your podcasts, or watch us live on YouTube. 0:05:51.720 --> 0:05:54.479 All right, let's move on there to John Tucker. What 0:05:54.480 --> 0:05:58.560 are John Talker's favorite stocks? And that is low reporting results, 0:05:59.400 --> 0:06:00.960 and I'll say. 0:06:00.760 --> 0:06:04.640 The difference between Low's and Home Depot. I find more 0:06:04.680 --> 0:06:07.520 women at Low's than Home Depot. Used to know. Yeah, 0:06:08.320 --> 0:06:12.320 I wasn't saying that. I'm just like saying just my observation. 0:06:12.520 --> 0:06:15.320 Okay, why is it? I wonder it's more like. 0:06:15.520 --> 0:06:19.159 Non professional Yeah, yeah, I guess we're d y. But 0:06:19.600 --> 0:06:21.560 apparently Paul is going there to pick people up. 0:06:21.760 --> 0:06:25.080 So can I just say that the demographic demographic of 0:06:25.120 --> 0:06:26.800 women might not be interested in you, Paul? 0:06:26.960 --> 0:06:28.720 Okay, yeah, no surprise. 0:06:28.839 --> 0:06:30.880 And John Tucker, speaking of do it yourself, he just 0:06:30.920 --> 0:06:32.440 fixed our microphone here in our studio. 0:06:32.480 --> 0:06:35.839 Folks, we had a professional commenter, Johnson. Now I got it. Yeah, 0:06:35.880 --> 0:06:36.400 that's okay. 0:06:37.360 --> 0:06:38.280 We do it all year. 0:06:38.320 --> 0:06:40.800 Don't worry, Anthony. We got it very much. 0:06:40.800 --> 0:06:43.560 A product of Low's e y. But all right, well, 0:06:43.600 --> 0:06:46.360 so let's get to Lowe's. What is the preview there? 0:06:46.400 --> 0:06:48.480 And with that, let's bring in Drew Redding, who is 0:06:48.520 --> 0:06:52.960 the Boomer intelligence US home a building analyst, Drew, what 0:06:53.160 --> 0:06:54.279 is going to be the takeaway? 0:06:54.960 --> 0:06:57.680 So Low's reporter earlier this morning, and overall it was, 0:06:57.920 --> 0:06:59.800 you know, a solid quarter. They had a nice beat 0:06:59.839 --> 0:07:03.120 on on same store sales really due to the strength 0:07:03.160 --> 0:07:06.520 of their professional customers and their e commerce channel. They 0:07:06.600 --> 0:07:11.280 had about a fifty basis point lift from recent storms. 0:07:11.480 --> 0:07:13.280 You know, you see the stock is down about four 0:07:13.320 --> 0:07:16.119 to five percent. There's a couple of things going on there. 0:07:16.560 --> 0:07:19.000 They guided the same store sales for twenty twenty six 0:07:19.400 --> 0:07:22.160 being about flat to up two percent. While that's exactly 0:07:22.280 --> 0:07:23.880 you know, in line with what we heard from home 0:07:23.960 --> 0:07:26.520 depot consensus was on the higher end of that. We 0:07:26.560 --> 0:07:29.640 think there could be a little bit of conservatism in there, 0:07:29.760 --> 0:07:34.400 which rightfully so, given where we are with housing. Also, 0:07:34.440 --> 0:07:37.800 there's a modest earnings reset for the company. You know, 0:07:37.840 --> 0:07:40.720 the midport of their guidance was about four percent below 0:07:40.840 --> 0:07:44.360 the street and really that's a reflection of weaker that 0:07:44.480 --> 0:07:46.920 expected operating margins and that's largely due to some of 0:07:46.960 --> 0:07:49.400 the acquisitions they've made over the last couple of years. 0:07:49.440 --> 0:07:52.320 So there's a little bit of company specific noise in there. 0:07:53.120 --> 0:07:55.240 The other thing that's going on with the stock and really, 0:07:55.280 --> 0:07:57.880 if you look across the housing space as a whole, 0:07:57.920 --> 0:08:02.240 whether you're talking about the builders, that building product, manufacturers, developers, 0:08:02.320 --> 0:08:05.360 really anyone, they're all read across the board. And I 0:08:05.360 --> 0:08:08.000 think that has to do with the lack of dialogue 0:08:08.120 --> 0:08:11.440 around housing policy. During the State of the Union address 0:08:11.680 --> 0:08:14.360 last night, you know, we heard a victory lap on 0:08:14.400 --> 0:08:17.440 mortgage rates, which has certainly come down, but it was 0:08:17.440 --> 0:08:20.880 really just a reiteration of the administration's planned to ban 0:08:21.040 --> 0:08:23.560 institutional parts is So, I think a lot of investors, 0:08:24.120 --> 0:08:27.400 you know, across the housing landscape, including home improvement retailer, 0:08:27.400 --> 0:08:31.080 we're hoping for some policy that could really stoke the 0:08:31.120 --> 0:08:31.800 housing market. 0:08:32.640 --> 0:08:35.679 So I'm looking at the Mortgage Bankers Association thirty year 0:08:35.800 --> 0:08:38.360 fixed mortgage six point zero nine percent. 0:08:38.400 --> 0:08:40.560 That's as low as it's been in a long time. 0:08:40.880 --> 0:08:45.480 Is it low enough to get folks out of their homes, 0:08:45.840 --> 0:08:49.160 you know, and free up the existing home buyer market. 0:08:50.480 --> 0:08:52.880 Yeah, you're right, we're about one hundred basis points below 0:08:53.080 --> 0:08:55.640 where we were just a year ago, and certainly every 0:08:56.000 --> 0:08:58.200 you know, every tike lower and mortgage rates is going 0:08:58.240 --> 0:09:02.440 to help bring that incremental buyer off the fence. Typically, 0:09:02.440 --> 0:09:04.080 what we hear is that's something in that five and 0:09:04.080 --> 0:09:06.360 a half percent range is kind of that magic number. 0:09:06.559 --> 0:09:09.319 Now that being said, you know, as we've as we've 0:09:09.360 --> 0:09:11.720 said for a long time, it's not just about mortgage rates. 0:09:11.720 --> 0:09:15.760 They've certainly helped affordability. They've brought monthly payments down, but 0:09:15.880 --> 0:09:18.360 home prices continue to rise through up more than fifty 0:09:18.360 --> 0:09:21.360 percent since twenty nineteen. So when you look at, you know, 0:09:21.559 --> 0:09:25.520 a more holistic view of housing affordability, it's still really constrained. 0:09:26.480 --> 0:09:28.320 You know. The other thing that we continue to hear, 0:09:28.559 --> 0:09:32.000 whether it's from the retailers or from the builders, is that, 0:09:32.400 --> 0:09:35.480 you know, buyers are increasingly concerned about the economy. They're 0:09:35.480 --> 0:09:38.880 increasingly concerned about the outlook for the labor market. So 0:09:38.880 --> 0:09:41.560 there's a lack of urgency out there. You know, you 0:09:41.600 --> 0:09:43.280 also have a lot of people maybe sitting on the 0:09:43.280 --> 0:09:46.160 fence because you know, they're saying to themselves, look, maybe 0:09:46.200 --> 0:09:48.040 home prices are going to come down, maybe rates are 0:09:48.040 --> 0:09:49.920 going to come down further and maybe I should wait 0:09:50.120 --> 0:09:52.079 before making such a big purchasing decision. 0:09:52.760 --> 0:09:53.000 Yeah. 0:09:53.040 --> 0:09:56.160 Well, so if that sort of turned over a new 0:09:56.559 --> 0:10:00.040 housing buyers, that's still going to be stalled given the 0:10:00.120 --> 0:10:03.880 uncertainty in the macro environment with something like repair and 0:10:03.920 --> 0:10:08.160 remodels spending, that segment of lowest customers, is that something 0:10:08.200 --> 0:10:10.760 that's going to be enough to carry them through? And 0:10:10.800 --> 0:10:13.240 I suppose for the rest of the house building sector. 0:10:14.480 --> 0:10:18.440 Yeah. For the home improvement retailers specifically, I think demand 0:10:18.520 --> 0:10:21.600 has been pretty stable, if not modestly improving. If you 0:10:21.640 --> 0:10:24.240 look at compstore sales on a to your basis, there 0:10:24.280 --> 0:10:26.520 was a little bit of an uptick this quarter, so 0:10:26.559 --> 0:10:30.120 I think their customer has been pretty resilient. When you 0:10:30.160 --> 0:10:33.880 think about what's holding back more robust growth in the sector, 0:10:33.960 --> 0:10:38.200 it's really that big ticket discretionary spending. These are categories 0:10:38.280 --> 0:10:41.040 like large scale kitchen and bathroom moodels, maybe a big 0:10:41.080 --> 0:10:44.800 flooring project, you know, replacing all the doors and windows 0:10:44.800 --> 0:10:47.000 in your house, and these are things that typically tend 0:10:47.080 --> 0:10:50.160 to be financed. So with rates at an elevated level, 0:10:50.200 --> 0:10:52.240 you've seen a pullback in that. And it also goes 0:10:52.280 --> 0:10:54.599 back to what we've said on confidence. You know, with 0:10:55.360 --> 0:10:57.880 less confidence in the home, the direction of home prices, 0:10:58.320 --> 0:11:00.520 you have people who are maybe waiting to take on 0:11:00.559 --> 0:11:02.040 those bigger ticket projects. 0:11:02.720 --> 0:11:05.880 Stay with us. More from Bloomberg Intelligence coming up after this. 0:11:09.760 --> 0:11:13.440 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:11:13.520 --> 0:11:16.600 weekdays at ten am Eastern on Apple, Cocklay and Android 0:11:16.640 --> 0:11:19.920 Auto with the Bloomberg Business App. Listen on demand wherever 0:11:20.000 --> 0:11:23.120 you get your podcasts, or watch us live on YouTube. 0:11:23.760 --> 0:11:26.079 We're going to be talking a little bit about retail 0:11:26.240 --> 0:11:28.960 now and for that, let's bring in maryor Ross Gilbert 0:11:29.000 --> 0:11:32.720 to Bloomberg Intelligence, senior equity analyst, joining us from a 0:11:32.760 --> 0:11:35.560 sunny la very different from the weather that we're seeing 0:11:35.600 --> 0:11:39.240 over here in New York. Mary, thank you so much 0:11:39.280 --> 0:11:41.680 for joining us. Let's start with TJ Max because we 0:11:41.720 --> 0:11:45.720 did get that disappointing outlook from them, and very surprising 0:11:45.800 --> 0:11:48.080 right because they did have a strong holiday season, but 0:11:48.760 --> 0:11:51.560 it seems like they're guiding expectations now for the future. 0:11:52.000 --> 0:11:54.920 What's to take away from that is this whole customer's 0:11:55.000 --> 0:11:58.240 trading down to more affordable goods. Is that flocks over 0:11:58.280 --> 0:11:59.240 now for TJ Max? 0:12:00.320 --> 0:12:05.000 Thank you, Christine, But actually TGX is known for providing 0:12:05.360 --> 0:12:08.600 conservative guidance. So even though this guidance is coming in 0:12:08.679 --> 0:12:12.360 below what analysts expect for the first quarter already, if 0:12:12.400 --> 0:12:14.480 you look at the first quarter and the company said this, 0:12:14.559 --> 0:12:17.120 they're off to a great start. When we looked at 0:12:17.200 --> 0:12:22.360 the Bloomberg second Measure transaction data, we're seeing really robust sales. 0:12:22.400 --> 0:12:25.760 So it looks like a huge beat right now. The 0:12:26.080 --> 0:12:29.000 trend that we're seeing, it's very early in the first quarter, 0:12:29.360 --> 0:12:31.560 but it's looking very, very strong. And I think when 0:12:31.559 --> 0:12:35.520 you think about TGX, this company, the management team here 0:12:35.760 --> 0:12:40.640 executes so seamlessly, and the brands that they have, which 0:12:40.679 --> 0:12:45.360 include Stuart White Weitzmann's Jeweled sandals for example, you can 0:12:45.360 --> 0:12:48.080 get rag and Bone attire and. 0:12:48.480 --> 0:12:49.640 Consumers love it. 0:12:52.160 --> 0:12:54.200 So I mean I am looking at the stock actually 0:12:54.679 --> 0:12:56.920 is up about nine tens a one percent today at 0:12:56.920 --> 0:12:58.160 a fifty two week high. 0:12:58.520 --> 0:13:00.559 So good news there. Mary. 0:13:00.559 --> 0:13:04.320 What's the company saying about the consumer out there? You know, 0:13:04.360 --> 0:13:06.640 we've got the K shaped economy. I'm not sure how 0:13:07.040 --> 0:13:10.600 TGX kind of plays within that marketplace, but what are 0:13:10.600 --> 0:13:11.000 they seeing? 0:13:12.080 --> 0:13:15.520 Yeah, so, Paul, you raise a valid point the K 0:13:15.760 --> 0:13:20.120 shaped economy. The thing about TGX when you think about 0:13:20.280 --> 0:13:24.320 all of the off price retailers, they're in the best 0:13:24.400 --> 0:13:29.240 position to appeal to consumers across all income cohorts. So 0:13:29.280 --> 0:13:35.280 they've got the brands that include Selene, Chloe, Gucci, Brunello, Cucinelli. 0:13:35.400 --> 0:13:39.520 But then they'll have brands like Theory or Eli Tahari, 0:13:39.679 --> 0:13:44.600 so they Nike Puma. So they really cover brands across 0:13:44.640 --> 0:13:48.840 the spectrum that appeal to consumers across both the high 0:13:49.000 --> 0:13:52.240 end all the way down to those consumers that are 0:13:52.280 --> 0:13:56.040 really paycheck to paycheck. And so that's what makes them 0:13:56.200 --> 0:14:00.320 in a great position and why they're business mind model 0:14:00.640 --> 0:14:03.760 really works. And when you think about home goods, everybody 0:14:03.760 --> 0:14:06.199 shops home goods. Whenever you go to a dinner party, 0:14:06.480 --> 0:14:09.400 what you're seeing there on the table likely came from 0:14:09.400 --> 0:14:10.000 home goods. 0:14:10.600 --> 0:14:13.480 All very interesting us in the retail space. Kind of 0:14:13.600 --> 0:14:15.440 the developments that we're seeing as a result of that 0:14:15.520 --> 0:14:19.920 K shaped economy that Paul mentioned, because you know, in contrast, 0:14:19.920 --> 0:14:22.240 we did have the Sax CEO, of course, on Bloomberg 0:14:22.240 --> 0:14:26.400 TV yesterday talking about where they are in the chapter 0:14:26.440 --> 0:14:29.280 eleven process. But they're also saying that, you know, hundreds 0:14:29.320 --> 0:14:32.720 of luxury brands are shipping again, and then at the 0:14:32.720 --> 0:14:36.240 same time, you know TJX holding a relatively Well, what 0:14:36.280 --> 0:14:38.920 does this tell us about the state of consumers? You know, 0:14:39.000 --> 0:14:43.080 are you seeing some kind of a bifurcation where these segments, 0:14:43.120 --> 0:14:45.280 certain segments are doing better than others. 0:14:46.920 --> 0:14:51.280 Yeah, So I would say that we're seeing strength across 0:14:51.800 --> 0:14:54.400 all consumers really, and you see it with the consumer 0:14:54.440 --> 0:14:58.160 confidence data. But most importantly, I think whenever you have 0:14:58.240 --> 0:15:02.200 strong employment, which we have had for many years now, 0:15:02.720 --> 0:15:05.720 and that really keeps the consumer resilience. So even if 0:15:05.760 --> 0:15:09.200 you're sort of going paycheck to paycheck, when you're employed, 0:15:09.400 --> 0:15:12.520 you feel really good and you might cut back on 0:15:12.560 --> 0:15:15.360 some essentials just so that you can get something new 0:15:15.440 --> 0:15:19.040 that makes you feel good. So I really see strength 0:15:19.440 --> 0:15:23.720 across all consumer segments. It really comes down to the 0:15:23.760 --> 0:15:27.360 retailer and their ability to execute. So when you see 0:15:27.400 --> 0:15:31.280 companies that are outperforming, it's because they're executing. And that's 0:15:31.360 --> 0:15:33.480 really the delineation that we see there. 0:15:34.000 --> 0:15:37.080 Hey, Mary, the Supreme Court and our president just brought 0:15:37.200 --> 0:15:39.400 terrrifs right back to the front burner again. I wonder 0:15:39.440 --> 0:15:42.120 if the good folks a TGX had any thoughts about 0:15:42.320 --> 0:15:44.480 what seems to be a new round or a renewed 0:15:44.480 --> 0:15:45.400 interest in tariffs. 0:15:46.720 --> 0:15:49.320 Yes, well, so the tariff question is going to be 0:15:49.360 --> 0:15:52.760 top of mind with the fourth quarter earnings coming in. 0:15:52.800 --> 0:15:57.000 And TJX though, because they buy primarily closeouts, like less 0:15:57.000 --> 0:16:01.800 than ten percent, they're sourcing directly, so they're really not 0:16:02.040 --> 0:16:07.520 that impacted by tariffs. It's so small for them because, 0:16:07.520 --> 0:16:09.920 like I said, over ninety percent of the inventory that 0:16:09.960 --> 0:16:18.120 they're sourcing is closeouts and they see tremendous availability of closeouts, 0:16:18.120 --> 0:16:21.080 so they're not impacted. But we did have news out 0:16:21.120 --> 0:16:25.120 today that Steve Madden decided not to provide margin guidance. 0:16:25.160 --> 0:16:28.120 They did provide sales guidance, which was strong, but they 0:16:28.160 --> 0:16:31.680 decided not to provide that guidance because they felt that 0:16:32.240 --> 0:16:34.760 there was some uncertainty. But when you look at it, 0:16:34.760 --> 0:16:38.040 we already know the tariffs that went into place prior 0:16:38.160 --> 0:16:40.760 to the ten percent that went into effect, so you 0:16:40.880 --> 0:16:43.160 know that you get at least of fifty percent savings 0:16:43.160 --> 0:16:45.720 for one hundred and fifty days on new shipments, and 0:16:45.760 --> 0:16:49.880 then once they issue the executive order for fifteen percent, 0:16:50.120 --> 0:16:52.600 then you'll have a twenty five percent saving. So that's 0:16:52.680 --> 0:16:55.720 really the best way to look at what the margin 0:16:55.760 --> 0:16:59.040 impact could be and most of these companies are passing 0:16:59.080 --> 0:17:03.040 on those pricing press and then they're also employing other 0:17:03.120 --> 0:17:05.880 mitigation measures, including sharing with the suppliers. 0:17:06.720 --> 0:17:09.080 Stay with us more from Bloomberg Intelligence coming. 0:17:09.000 --> 0:17:09.800 Up there for this. 0:17:12.840 --> 0:17:16.560 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:17:16.640 --> 0:17:19.720 weekdays at ten am Eastern on Apple Cocklay and Android 0:17:19.760 --> 0:17:23.040 Auto with the Bloomberg Business app. Listen on demand wherever 0:17:23.119 --> 0:17:26.200 you get your podcasts, or watch us live on YouTube. 0:17:27.080 --> 0:17:29.200 Certainly, if you're a tech investor, you've been dealing with 0:17:29.760 --> 0:17:32.560 the other side of AI, which is to what extent 0:17:32.640 --> 0:17:35.359 is AI threat to my business? And that's been a 0:17:35.359 --> 0:17:38.320 real big problem for a lot of sectors out there, 0:17:38.320 --> 0:17:42.840 including software. Software as a service has certainly been dealing 0:17:42.880 --> 0:17:44.800 with that over the last several weeks. We're gonna check 0:17:44.800 --> 0:17:47.159 in with anurag Ruana and get the latest there on 0:17:47.240 --> 0:17:49.520 our run as senior tech analyst covers all the tech 0:17:49.560 --> 0:17:53.000 stuff for Bloomberg Intelligence, Honour, talk to us about the 0:17:53.000 --> 0:17:56.280 conversations you're having with institutional investors these days, because you know, 0:17:56.320 --> 0:17:59.760 several weeks ago solved just a big, big sell on 0:18:00.160 --> 0:18:01.640 your whole software sector. 0:18:01.720 --> 0:18:02.960 There where are we tay on that. 0:18:04.480 --> 0:18:06.640 It's been okay the last two days, but and things 0:18:06.640 --> 0:18:09.399 will probably change by the time next week comes around 0:18:09.840 --> 0:18:12.280 because the you know, the discussion around here is not 0:18:12.359 --> 0:18:14.840 so much about what's happening to the earnings power or 0:18:15.160 --> 0:18:17.960 sales growth over the next twelve to twenty four months. 0:18:18.160 --> 0:18:20.640 The big question is whether these guys will be relevant 0:18:20.680 --> 0:18:23.159 five years from or not. And when you put a 0:18:23.240 --> 0:18:26.320 question on somebody's terminal value, then you know there is 0:18:26.359 --> 0:18:26.959 no argument. 0:18:27.040 --> 0:18:28.040 It's a one out or zero. 0:18:28.320 --> 0:18:30.760 So there are those that think that some of them 0:18:30.880 --> 0:18:33.640 will be fine and maybe even grow stronger, and there 0:18:33.640 --> 0:18:36.720 are certain companies that will be disrupted quite a bit. 0:18:36.760 --> 0:18:39.120 So I think that's where the dilemma is. At this point, 0:18:39.200 --> 0:18:42.040 people are just telling the entire index. They're not even 0:18:42.160 --> 0:18:44.320 looking at some of the bigger ones or the better 0:18:44.359 --> 0:18:45.439 ones at this point. 0:18:45.600 --> 0:18:49.000 Yeah, well, Honuric, let's get into which ones are the 0:18:49.080 --> 0:18:51.720 bigger ones and the better ones, right, because we've seen 0:18:51.880 --> 0:18:54.600 so far the most vulnerable vulnerable names seem to be 0:18:55.119 --> 0:18:58.320 companies in online travel or smaller software first, but then 0:18:58.400 --> 0:19:02.720 meanwhile cybersecurity it seems to be relatively insulated from the 0:19:02.800 --> 0:19:05.879 recent baout of caution that we've seen. You know, is 0:19:05.880 --> 0:19:09.439 that a sector or a segment within this space that 0:19:09.480 --> 0:19:13.919 could actually benefit from increased spending on security. 0:19:15.280 --> 0:19:17.760 Yeah, I mean, we did publish a big report yesterday 0:19:17.800 --> 0:19:19.919 and we have put out a framework where we have 0:19:20.000 --> 0:19:23.320 looked at four or five different segments or different factors. 0:19:23.440 --> 0:19:26.280 So if somebody has a very high market share, are 0:19:26.280 --> 0:19:29.159 they selling into an enterprise or a smaller business, do 0:19:29.200 --> 0:19:31.960 they have network effect? And are they a platform or 0:19:32.000 --> 0:19:35.959 a point product company? So, you know, let's you mentioned cybersecurity. 0:19:36.040 --> 0:19:39.199 This is an area that is doing better than the 0:19:39.280 --> 0:19:42.000 others and in fact could even benefit down the road 0:19:42.080 --> 0:19:44.919 if a lot of the agents that you know, people 0:19:44.960 --> 0:19:47.840 will create would need to have their own identity, would 0:19:47.840 --> 0:19:51.080 need to have their own safeguards around it. But you know, 0:19:51.119 --> 0:19:53.919 there are certain places where we will see more disruptions. 0:19:53.920 --> 0:19:55.360 Online travel is one area you. 0:19:55.359 --> 0:19:59.080 Mentioned, and even the smaller software names, whether that's in HR, 0:19:59.200 --> 0:20:03.080 whether it's since sales automation, I think they are the 0:20:03.119 --> 0:20:04.879 most at risk of getting disrupted. 0:20:06.000 --> 0:20:08.879 What are the companies saying here? Do they acknowledge that 0:20:09.080 --> 0:20:12.560 AI is a threat to their business? Are they trying 0:20:12.600 --> 0:20:15.440 to pivot? Are they ignoring it? What are you hearing 0:20:15.440 --> 0:20:17.240 from the companies these days. 0:20:17.440 --> 0:20:20.440 So everybody's pivoting at a very fast pace. I'll name 0:20:20.480 --> 0:20:23.080 a couple of examples. You know, a company like Workday, 0:20:23.080 --> 0:20:26.399 which is the de facto leader in HR software, they 0:20:26.400 --> 0:20:29.360 are creating their own agents and down the road, when 0:20:29.880 --> 0:20:32.360 you and I will interact with an HR software company, 0:20:32.600 --> 0:20:35.200 it would be through a chat pok or could be conversational. 0:20:35.520 --> 0:20:36.639 There is a company called Figma. 0:20:36.920 --> 0:20:39.919 It has added more AI capabilities to its core software. 0:20:40.000 --> 0:20:43.760 So when you're developing the software, you're actually giving prompts 0:20:43.760 --> 0:20:45.720 to say this is what I want the design to 0:20:45.760 --> 0:20:48.280