WEBVTT - Trump  Moves to Have Tech Giants Pay for Surging Power Costs 

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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<v Speaker 1>Bloomberg Intelligence Podcast. Catch us live weekdays at ten am.

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<v Speaker 1>He's done on Apple, Cocklay and Android Auto with the

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<v Speaker 2>Man Deep Sing is here with us.

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<v Speaker 3>He's the Global Tech research head and mandeep this idea

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<v Speaker 3>of big tech being called upon to pay for their

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<v Speaker 3>own rising energy costs. As Bailey pointed out, this is

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<v Speaker 3>authorugh a non binding statement of principles. He pointed out

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<v Speaker 3>the winners and losers on the utility side. What does

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<v Speaker 3>this mean for big tech? I mean, can any of

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<v Speaker 3>them come out of this ahead with something like this

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<v Speaker 3>kind of pressure?

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<v Speaker 4>Well, right now, I think everyone is looking at gigawat

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<v Speaker 4>data centers right and when you think about what is

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<v Speaker 4>existing in terms of AI data centers, these are fifty

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<v Speaker 4>to one hundred megawont data centers. We're already talking about

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<v Speaker 4>power requirements going ten x to one gigawat. And so

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<v Speaker 4>how will a seventy to eighty year old grid supply

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<v Speaker 4>electricity which is ten times more than what these data

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<v Speaker 4>centers already consume? And so from that perspective, it is

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<v Speaker 4>a very topical question that needs to be asked. Where

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<v Speaker 4>are you getting the ten times power that you need

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<v Speaker 4>to run your one gigawot data center? And I think

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<v Speaker 4>that's the realization that's coming in now. It's being reflected

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<v Speaker 4>in the prices that consumers have to pay because prices

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<v Speaker 4>have gone up for electricity. But I mean the computing

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<v Speaker 4>that AI does requires ten times more power. That's getting

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<v Speaker 4>starts a realization and I think everything will follow through.

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<v Speaker 5>Now, Man deep, is there a sense that big tech

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<v Speaker 5>leaders might be open to working with the White House

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<v Speaker 5>on this to kind of be in Trump's favor here

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<v Speaker 5>and what might be impact be on their profit growth?

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<v Speaker 4>I mean, there's no doubt that AI data centers are

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<v Speaker 4>a much lower gross margin business for hyperscalers. And these hyperscalers,

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<v Speaker 4>I mean, Amazon, Microsoft, and Google, the three big ones

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<v Speaker 4>have huge footprint. When it comes to the traditional CPU

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<v Speaker 4>data centers. They were able to get to, you know,

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<v Speaker 4>sixty five to seventy percent gross margins on the public

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<v Speaker 4>cloud businesses they had. Now with AI workloads, we're talking

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<v Speaker 4>about a sub fifty percent gross margin business. No matter

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<v Speaker 4>what kind of scale you have just because of the

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<v Speaker 4>economics involved. These are sub fifty percent ross margin businesses.

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<v Speaker 4>So on premise software used to be eighty to ninety

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<v Speaker 4>percent gross margin. With public cloud we got to sixty

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<v Speaker 4>five to seventy. With AI we are sub fifty gross margin.

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<v Speaker 4>So from that perspective, I mean, even if you're Microsoft,

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<v Speaker 4>you don't have a choice, but your margins will have

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<v Speaker 4>to come down.

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<v Speaker 3>We're also looking at semiconductor saw as the best performers

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<v Speaker 3>in the S and P five hundred by two dozen

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<v Speaker 3>industry groups, and it feels like that TSMC bullish forecast

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<v Speaker 3>was very much a tailwind for the industry. Obviously this

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<v Speaker 3>is good news in terms of demand, But does anyone

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<v Speaker 3>lose out here when TSMC is can't even meet the

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<v Speaker 3>demand that is being required of it, Well.

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<v Speaker 4>Lose out, I think. I mean, what we've seen really

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<v Speaker 4>is Intel really benefiting, So I wouldn't say anybody is

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<v Speaker 4>losing out, But clearly everyone is so focused right now

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<v Speaker 4>on the AI side that I feel suddenly everyone realized, oh,

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<v Speaker 4>storage isn't short supply. We didn't talk about storage up

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<v Speaker 4>until you know, the beginning of this year, so there

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<v Speaker 4>will be you know, instances like this where one of

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<v Speaker 4>the components gets neglected and suddenly everyone finds that to

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<v Speaker 4>be in short supply and you need it, So it

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<v Speaker 4>could happen. I think CPUs. Nobody talked about CPUs in

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<v Speaker 4>the past twelve months. Suddenly CPUs are in short supply.

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<v Speaker 4>So that's where the IT infrastructure needs to be upgraded

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<v Speaker 4>every four or five years. And when the time comes

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<v Speaker 4>to upgrade the infrastructure, certain components, even if they're not

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<v Speaker 4>tied to AI, could be short supply because we have

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<v Speaker 4>reallocated their resources towards meeting the AI demands.

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<v Speaker 2>Stay with us. More from Bloomberg Intelligence coming up after this.

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<v Speaker 1>You're listening to the Bloomberg Intelligence podcast. Catch us live

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<v Speaker 1>weekdays at ten am easterne on Apple, Cocklay and Android

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<v Speaker 1>Auto with the Bloomberg Business App. Listen on demand wherever

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<v Speaker 3>Some earnings that we want to bring you your attention

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<v Speaker 3>to JB Hunt, the truck carrier reporting quarterly revenue that

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<v Speaker 3>missed analyssessments. Although some people might say that the bar

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<v Speaker 3>was kind of high for this company, even as we've

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<v Speaker 3>seen this continued weakness in freight demand. Lee Colascow is

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<v Speaker 3>Bloomberg Intelligence's senior transport logistics shipping analysts and he joins

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<v Speaker 3>us now to give us his stake on what we're seeing.

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<v Speaker 2>So what is the story with JB.

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<v Speaker 3>Hunt and how it's positioned for the current market environment.

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<v Speaker 6>Yeah, if you take a look at the stock, it's

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<v Speaker 6>been up a lot over the last couple months, and

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<v Speaker 6>some of that has been in anticipation of the trucking

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<v Speaker 6>spot market to kind of turn more positive more positively,

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<v Speaker 6>and that would be through more supply coming out of

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<v Speaker 6>the market. So the stock is off a little bit

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<v Speaker 6>off today, It was off a lot in the after

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<v Speaker 6>markets last night, but it's come back a little bit

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<v Speaker 6>and that's really being driven I think because of that,

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<v Speaker 6>you know, kind of high expectations. But at the end

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<v Speaker 6>of the day, the company did report a pretty good print.

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<v Speaker 6>Their earnings came in above consensus. It was driven by

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<v Speaker 6>their intermodal, their truckload and their final mile businesses.

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<v Speaker 4>JB.

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<v Speaker 6>Hunt is a kind of an integrated transportation company. They

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<v Speaker 6>provide a lot of different types of transportation services. UH,

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<v Speaker 6>some of the ones that fell maybe short of expectations

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<v Speaker 6>where they're freight brokerage business UH and dedicated business uh,

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<v Speaker 6>and that you know, the dedicated business is being driven

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<v Speaker 6>by Uh. It takes you know, their winning business, but

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<v Speaker 6>it takes a while for some of those businesses to

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<v Speaker 6>ramp up and to kind of drive the margins uh

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<v Speaker 6>that they're expected to because those you know, those ramp

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<v Speaker 6>up costs.

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<v Speaker 7>UH.

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<v Speaker 6>You know, what I would say is that I think

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<v Speaker 6>a lot of people were somewhat surprised by management's tone

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<v Speaker 6>on the earnings call last night.

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<v Speaker 4>Uh.

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<v Speaker 6>You know, they noted that the market was fragile, uh,

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<v Speaker 6>and that the supply that we've been seeing coming out

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<v Speaker 6>of the truckload market, while it's been good, they don't

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<v Speaker 6>want to get ahead of themselves and call this, you know,

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<v Speaker 6>we're in full recovery mode because you know, we've had

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<v Speaker 6>some false positives in the past. So they're pretty I guess,

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<v Speaker 6>I guess cautiously optimistic about the outlook when it comes

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<v Speaker 6>to the truck spot market, and that's so important because

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<v Speaker 6>it wants the trucks the spot market. Titans rates will

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<v Speaker 6>go up in that market and that will kind of

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<v Speaker 6>ripple across its contractual business. It's dedicated business, it's brokerage business,

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<v Speaker 6>it's intermodal business. So it's kind of like the Canary

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<v Speaker 6>and the coal Mine for freight transportation logistics providers lead JB.

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<v Speaker 5>Hunt is of course a big macroeconomic bell weather. What

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<v Speaker 5>is it telling us about the broader economy and the

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<v Speaker 5>year ahead.

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<v Speaker 6>Yeah, you know, companies like this will really do well

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<v Speaker 6>when demand grows. Obviously, you know, they have seen, you know,

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<v Speaker 6>a somewhat resilient consumer.

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<v Speaker 4>They did note that, you know, while.

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<v Speaker 6>There wasn't a lot of imports coming into the country

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<v Speaker 6>for peak season, they benefited from a lot of freight

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<v Speaker 6>that was already in the country moving across the country.

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<v Speaker 6>So it does seem like, you know, they did see

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<v Speaker 6>some peak demand during the fourth quarter, which is obviously positive.

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<v Speaker 6>But you know, I don't need to tell you guys,

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<v Speaker 6>it does seem like this economy is a Casehape economy

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<v Speaker 6>and it's really not kind of a widespread economic growth

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<v Speaker 6>that we're seeing, where there's pockets of strength and pockness

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<v Speaker 6>of pockets of weakness.

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<v Speaker 3>So cost cuts helped limit The downside for JB. Hunt

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<v Speaker 3>is that the catalyst to get people excited again about JB.

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<v Speaker 2>Hunt.

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<v Speaker 3>You know what kind of cost savings that can realize

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<v Speaker 3>this year. Maybe it can go further than what it

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<v Speaker 3>had projected. When it comes to reducing expenses.

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<v Speaker 6>Yeah, I think there's two things here that people can

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<v Speaker 6>get excited about. I think there is the prospect of

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<v Speaker 6>a better pricing environment for JB. Hunt and the broader transports.

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<v Speaker 6>That's one. Secondly, you know, they're not just sitting and

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<v Speaker 6>resting on their laurels. They are actively trying to take

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<v Speaker 6>out costs. They took out around twenty five million dollars

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<v Speaker 6>in a fourth quarter. Their run rate was somewhat over

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<v Speaker 6>one hundred million. Management didn't really want to guide too

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<v Speaker 6>much and what they expect that they can take out

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<v Speaker 6>in twenty twenty six. But I suspect that they're going

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<v Speaker 6>to continue, you know, that trend next year and they

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<v Speaker 6>could bring some of their you know, margin targets. You know,

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<v Speaker 6>most of their margins right now are trending below their

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<v Speaker 6>kind of long term targets. And you know, through these

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<v Speaker 6>cost cutting initiatives, productivity gains. And it's not just you know,

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<v Speaker 6>you know, cutting to the bone. We're not talking about that.

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<v Speaker 6>They're trying to get more productive. So whether it's better

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<v Speaker 6>utilization rates or their trailers, maybe it's better quicker turns

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<v Speaker 6>for their draage fleet. All these things you know, will

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<v Speaker 6>lower lower the overall costs, and if you put on

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<v Speaker 6>top of that higher rates, it really could drive margins

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<v Speaker 6>significantly higher and closer to those longer term targets.

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<v Speaker 3>Stay with us more from Bloomberg Intelligence coming up after this.

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<v Speaker 1>You're listening to the Bloomberg Intelligence podcast. Catch us live

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<v Speaker 1>weekdays at ten am Eastern on Apple, Colocklay and Android

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<v Speaker 1>Auto with the Bloomberg Business App. Listen on demand wherever

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<v Speaker 1>you get your podcasts, or watch us live on YouTube through.

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<v Speaker 5>Sax Global Files four Chapter eleven bankruptcy protection a humbling

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<v Speaker 5>turn for the lux or retailer following a stretch of losses,

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<v Speaker 5>flagging turnaround efforts, and a substantial merger related debt. There

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<v Speaker 5>are also hidden costs to luxury consumers and brands. To

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<v Speaker 5>discuss this with us is Rania set Home, managing partner

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<v Speaker 5>at set Home Law Group Rania. What does this bankruptcy mean?

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<v Speaker 5>Also for sax As shoppers and the brands that work

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<v Speaker 5>with it.

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<v Speaker 8>A lot of the brands that worked with it are

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<v Speaker 8>no longer working with it, which also you know, precipitated

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<v Speaker 8>it's decline. It is sad. As you were saying, and

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<v Speaker 8>I'm sure it's humbling. So it started I would say

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<v Speaker 8>at least a year and a half ago. I started

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<v Speaker 8>hearing from smaller brands, some of whose only footprint in

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<v Speaker 8>the United States is with saxoth Avenue and Meme and

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<v Speaker 8>Marcus Group, which is owned by the same company. They

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<v Speaker 8>were not paying for consigned goods, although the goods were selling.

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<v Speaker 8>So this was the start of the end, really, And

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<v Speaker 8>if you've tried to go shopping recently Sax with Avenue,

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<v Speaker 8>you will notice a shift in the products that are

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<v Speaker 8>available to you. And this is one of the reasons

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<v Speaker 8>for consumers. You know, it's it's tough to say. When

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<v Speaker 8>there's a bankruptcy estate they do not have to honor

0:11:15.120 --> 0:11:20.160
<v Speaker 8>any kind of credit or rewards program, but I understand

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<v Speaker 8>in this instance they will be honoring it. The issue

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<v Speaker 8>becomes for you, is there something there that you want

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<v Speaker 8>to purchase? And how are you feeling about the brand

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<v Speaker 8>in general? Something that I think Sacks did poorly was communicate.

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<v Speaker 8>I received my first email from them about the bankruptcy yesterday,

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<v Speaker 8>nothing prior to yesterday, So I think there's some room

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<v Speaker 8>for growth there on the communication end. And you know,

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<v Speaker 8>going back to the brands. What's going to happen to them?

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<v Speaker 8>It's you know, it's too late, you know for them

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<v Speaker 8>to do anything. But on a going forward basis, if

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<v Speaker 8>you are a brand and you're consigning your goods, there

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<v Speaker 8>are a few things that you need to look out for.

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<v Speaker 8>The first thing is is your contractual provision. It should

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<v Speaker 8>state in this agreement that you own your merchandise until

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<v Speaker 8>it is sold. That's the very first thing. And then

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<v Speaker 8>once that provision is there, there's something called a UCC filing.

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<v Speaker 8>You should file a lean because this will give you

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<v Speaker 8>an interest in the merchandise and you're no longer an

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<v Speaker 8>unsecured creditor for purposes of bankruptcy, so you may actually

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<v Speaker 8>get something.

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<v Speaker 3>So there's legal recourse for the vendors of sacks, many

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<v Speaker 3>of which we're not getting paid regularly in the last

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<v Speaker 3>couple of months. How does SAX go about repairing its

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<v Speaker 3>relationship not just with customers, but with these brands, the

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<v Speaker 3>brands that relies on in order to bring customers through

0:12:42.200 --> 0:12:42.559
<v Speaker 3>the doors.

0:12:42.720 --> 0:12:46.880
<v Speaker 8>Yeah, I think, you know, people really discount the efficacy

0:12:46.880 --> 0:12:50.079
<v Speaker 8>of good communication. But you know, as an attorney, I

0:12:50.120 --> 0:12:52.280
<v Speaker 8>can tell you that as of paramount importance In fact,

0:12:52.600 --> 0:12:57.160
<v Speaker 8>usually when there's a breakdown in relationship, it's because of communication.

0:12:57.280 --> 0:12:59.120
<v Speaker 8>So the first thing that SAX needs to do, in

0:12:59.160 --> 0:13:02.480
<v Speaker 8>my mind is tell everyone why this happened and what

0:13:02.600 --> 0:13:05.520
<v Speaker 8>steps they're taking to remedy it, because we don't want

0:13:05.640 --> 0:13:08.280
<v Speaker 8>them to be repeat offenders five years from now. We

0:13:08.280 --> 0:13:10.480
<v Speaker 8>don't want to be sitting in the studio talking about

0:13:10.920 --> 0:13:14.760
<v Speaker 8>the other bankruptcy that they're undergoing. So it's important to

0:13:14.880 --> 0:13:18.520
<v Speaker 8>figure out the why when it's such a drastic step

0:13:18.520 --> 0:13:21.480
<v Speaker 8>that you have to take, and tell everyone, tell your

0:13:21.520 --> 0:13:25.040
<v Speaker 8>vendors what you're doing to and help build trust again.

0:13:25.640 --> 0:13:28.840
<v Speaker 5>Rania. When you get this type of bankruptcy filing, what

0:13:28.920 --> 0:13:31.520
<v Speaker 5>does Sex owe its investors and creditors?

0:13:32.840 --> 0:13:34.760
<v Speaker 2>Well, I don't know what the numbers are.

0:13:34.920 --> 0:13:41.080
<v Speaker 8>However, the Bankruptcy Code ranks people by importance secured versus unsecured,

0:13:41.559 --> 0:13:44.439
<v Speaker 8>and you know, the landlord is certainly a secured creditor

0:13:44.440 --> 0:13:47.240
<v Speaker 8>to the extent that they owe them money, they will

0:13:47.280 --> 0:13:51.000
<v Speaker 8>be paid first. Any kind of loan they'll be paid,

0:13:51.120 --> 0:13:53.720
<v Speaker 8>you know, amongst one of the first as well. So

0:13:53.760 --> 0:13:56.200
<v Speaker 8>it's too early. I don't have the list yet.

0:13:56.480 --> 0:13:59.600
<v Speaker 5>You were talking about some of the MNA debt and

0:13:59.640 --> 0:14:01.880
<v Speaker 5>this BA and gripscy, of course, comes a year after

0:14:02.040 --> 0:14:05.719
<v Speaker 5>investors handed Sacks billions of dollars for its acquisition of

0:14:05.800 --> 0:14:08.840
<v Speaker 5>Nieman Marcus, which was also struggling. What kind of risk

0:14:09.240 --> 0:14:13.320
<v Speaker 5>was it putting investors through by acquiring Neman Marcus.

0:14:14.080 --> 0:14:16.400
<v Speaker 8>I'm not sure that that marriage was off to a

0:14:16.400 --> 0:14:19.720
<v Speaker 8>good start from the beginning. You know, we as shoppers,

0:14:19.720 --> 0:14:22.400
<v Speaker 8>I can speak for women, or at least for myself,

0:14:22.960 --> 0:14:25.920
<v Speaker 8>we shop at a whole host of different places, and

0:14:26.280 --> 0:14:30.560
<v Speaker 8>you could have one customer shop in multiple stores for

0:14:30.680 --> 0:14:34.280
<v Speaker 8>different types of items. But in general, it's safe to

0:14:34.320 --> 0:14:37.360
<v Speaker 8>say that the Marcus Group shopper is not the same

0:14:37.840 --> 0:14:41.040
<v Speaker 8>as the Sasith Aveny shopper, who's not the same as

0:14:41.360 --> 0:14:46.200
<v Speaker 8>Bloomingdale's or Macy's shopper. So I think that marriage was

0:14:46.440 --> 0:14:49.320
<v Speaker 8>rocky to begin with, and it was a.

0:14:49.200 --> 0:14:50.560
<v Speaker 2>Hefty price that was paid.

0:14:50.720 --> 0:14:55.040
<v Speaker 8>I'm hoping, as a consumer and for everyone's sake, that

0:14:55.880 --> 0:14:59.360
<v Speaker 8>someone else buys name and Marcus Group, or perhaps they

0:14:59.360 --> 0:15:02.480
<v Speaker 8>can buy themselves back. We do see that sometimes where

0:15:02.520 --> 0:15:04.400
<v Speaker 8>you purchase yourself back from your acquirer.

0:15:04.640 --> 0:15:04.880
<v Speaker 1>Yeah.

0:15:04.880 --> 0:15:07.360
<v Speaker 5>I just went across the street to sas off Fifth

0:15:07.400 --> 0:15:10.160
<v Speaker 5>thinking that I could get a nice deal on something

0:15:10.200 --> 0:15:12.920
<v Speaker 5>and they just, yeah, I got rid of everything. What

0:15:13.120 --> 0:15:15.400
<v Speaker 5>is next for SAX here? Do you think it makes

0:15:15.400 --> 0:15:15.880
<v Speaker 5>it out of this?

0:15:16.560 --> 0:15:18.840
<v Speaker 8>I think SAX does make it out of this. But

0:15:18.880 --> 0:15:23.360
<v Speaker 8>I'm an optimist by nature, just so everyone listening knows that.

0:15:23.840 --> 0:15:26.720
<v Speaker 8>But I do think they're going to have to contract

0:15:26.920 --> 0:15:29.640
<v Speaker 8>in order to grow. So this is the time to

0:15:29.680 --> 0:15:35.080
<v Speaker 8>be extremely self aware, extremely scrutinous, and determine which stores

0:15:35.400 --> 0:15:39.280
<v Speaker 8>are going to provide you with the most relevance to

0:15:39.400 --> 0:15:43.360
<v Speaker 8>your customers, and which ones can you stock well and

0:15:43.520 --> 0:15:47.480
<v Speaker 8>have pre eminent customer service, and then close the others.

0:15:47.760 --> 0:15:52.640
<v Speaker 8>You can always reopen stores. It's not a good idea

0:15:52.680 --> 0:15:56.640
<v Speaker 8>to just have a huge footprint that's lackluster.

0:15:57.640 --> 0:16:00.560
<v Speaker 2>Stay with us. More from Bloomberg Intelligence coming up after this.

0:16:04.320 --> 0:16:08.000
<v Speaker 1>You're listening to the Bloomberg Intelligence podcast. Catch us live

0:16:08.080 --> 0:16:11.160
<v Speaker 1>weekdays at ten am Eastern on Apple, Cocklay, and Android

0:16:11.200 --> 0:16:14.440
<v Speaker 1>Otto with the Bloomberg Business app. Listen on demand wherever

0:16:14.560 --> 0:16:18.120
<v Speaker 1>you get your podcasts, or watch us live on YouTube.

0:16:18.720 --> 0:16:21.440
<v Speaker 5>John, when was the last time you ate at McDonald's

0:16:21.480 --> 0:16:22.200
<v Speaker 5>or Taco Bell?

0:16:22.560 --> 0:16:26.240
<v Speaker 7>Ah, it's been a while Taco Bell, never McDonald's, maybe

0:16:26.280 --> 0:16:30.920
<v Speaker 7>like years. Look at me, I can't that's stuff anyway. Well,

0:16:30.960 --> 0:16:33.640
<v Speaker 7>apparently it is approaching noontime, so lunch is here.

0:16:33.880 --> 0:16:35.800
<v Speaker 2>Yeah, maybe you'll have to go there for lunch. We'll

0:16:35.840 --> 0:16:36.920
<v Speaker 2>have to check out Taco Bell.

0:16:37.040 --> 0:16:40.440
<v Speaker 5>Apparently those restaurants are going to get a boost from

0:16:40.840 --> 0:16:44.520
<v Speaker 5>December economic data that is poised to lift US restaurant

0:16:44.600 --> 0:16:48.240
<v Speaker 5>same store sales. That's along with cheaper gas prices and

0:16:48.360 --> 0:16:52.000
<v Speaker 5>relief from new tax rules. We'll get more into this

0:16:52.040 --> 0:16:57.320
<v Speaker 5>with Michael Halen, Bloomberg Intelligence Senior restaurant and food services analyst. Michael,

0:16:57.480 --> 0:17:01.200
<v Speaker 5>what is your outlook for restaurants sales going into twenty

0:17:01.240 --> 0:17:01.800
<v Speaker 5>twenty six.

0:17:03.360 --> 0:17:07.760
<v Speaker 9>Yeah, we think sales are set to improve here in

0:17:08.040 --> 0:17:10.439
<v Speaker 9>twenty twenty six, especially in the first half. You know,

0:17:10.840 --> 0:17:16.000
<v Speaker 9>oil guessling prices are down, you know, thirteen ish percent

0:17:17.040 --> 0:17:20.080
<v Speaker 9>versus one queue of last year. We're lapping you know,

0:17:20.200 --> 0:17:24.680
<v Speaker 9>bad weather, cold weather, snow, and a really bad flu

0:17:24.760 --> 0:17:28.359
<v Speaker 9>season from a year ago. And then we have tax relief,

0:17:28.400 --> 0:17:35.080
<v Speaker 9>which which historically really helps restaurants spending, and you know,

0:17:35.119 --> 0:17:36.719
<v Speaker 9>and then we have a couple of things on the upside.

0:17:36.720 --> 0:17:40.920
<v Speaker 9>I mean, this administration is looking into, you know, potentially

0:17:41.000 --> 0:17:43.840
<v Speaker 9>credit card reform, and I don't know, if they're done

0:17:43.920 --> 0:17:48.200
<v Speaker 9>with the tax reform, and we could see more interest

0:17:48.280 --> 0:17:50.239
<v Speaker 9>rate cuts. So all of those things we think are

0:17:50.280 --> 0:17:54.040
<v Speaker 9>going to feed into better consumer sentiment. And we saw

0:17:54.080 --> 0:17:57.359
<v Speaker 9>that in some of the economic data last month, and

0:17:57.440 --> 0:18:00.480
<v Speaker 9>we think it spells, you know, a much better a

0:18:00.560 --> 0:18:01.679
<v Speaker 9>year for restaurants spending.

0:18:01.840 --> 0:18:05.200
<v Speaker 7>Were were talking about Daniel Blues Restaurants or Mickey D's.

0:18:06.560 --> 0:18:09.760
<v Speaker 9>Well, you know, we think McDonald's, you know, a lot

0:18:09.800 --> 0:18:11.560
<v Speaker 9>of these chains we cover are going to benefit, but

0:18:11.640 --> 0:18:13.800
<v Speaker 9>we think you know, McDonald's in Taco Bell in our

0:18:14.000 --> 0:18:16.640
<v Speaker 9>most recent note, we're two that we pointed to because

0:18:17.280 --> 0:18:20.840
<v Speaker 9>low income consumer are going to benefit from the tax reform.

0:18:20.920 --> 0:18:25.040
<v Speaker 9>They're they're the segment of the consumer that I have

0:18:25.119 --> 0:18:27.200
<v Speaker 9>kind of pulled back from restaurants in the last couple

0:18:27.240 --> 0:18:31.200
<v Speaker 9>of years and so giving them a boost with tax reform.

0:18:31.440 --> 0:18:34.359
<v Speaker 9>They're the ones that you know, are most sensitive to

0:18:34.440 --> 0:18:36.840
<v Speaker 9>gasoline prices, so the cheaper gas is going to help

0:18:36.920 --> 0:18:39.600
<v Speaker 9>them the most. And like I said, we've seen it

0:18:39.640 --> 0:18:43.640
<v Speaker 9>in the consumer sentiment data that the improvement in University

0:18:43.680 --> 0:18:46.760
<v Speaker 9>of Michigan consumer sentiment was due to low income consumers.

0:18:46.760 --> 0:18:49.960
<v Speaker 9>So these things are all pointing to, you know, better

0:18:50.000 --> 0:18:53.720
<v Speaker 9>results at fast food chains like McDonald's and Taco Bell.

0:18:54.359 --> 0:18:57.880
<v Speaker 5>Are there any specific chains that you think will be

0:18:58.240 --> 0:18:59.879
<v Speaker 5>bigger beneficiaries than others?

0:19:01.119 --> 0:19:03.600
<v Speaker 9>Well, outside of those two, you know, cav and Wingstop

0:19:03.640 --> 0:19:05.159
<v Speaker 9>are a couple of the names that we think can

0:19:05.200 --> 0:19:09.040
<v Speaker 9>have big bounce back years. You know, Cava, you know,

0:19:10.680 --> 0:19:12.720
<v Speaker 9>in a vacuum. It had a very good year, right,

0:19:12.760 --> 0:19:15.920
<v Speaker 9>but they didn't hit lofty targets that they had set,

0:19:16.000 --> 0:19:19.680
<v Speaker 9>and earning slowed off of a very strong twenty twenty four,

0:19:19.800 --> 0:19:22.800
<v Speaker 9>and so we think they're set up really nicely to

0:19:22.800 --> 0:19:26.280
<v Speaker 9>see an acceleration here in same store sales and kind

0:19:26.280 --> 0:19:29.840
<v Speaker 9>of same thing in Wingstop. Both of them were victims

0:19:29.880 --> 0:19:33.280
<v Speaker 9>in twenty twenty five of incredible twenty twenty four success,

0:19:33.320 --> 0:19:37.200
<v Speaker 9>and now that they have much more reasonable same store

0:19:37.240 --> 0:19:40.360
<v Speaker 9>sales comps to LAP, you know, we think we could

0:19:40.359 --> 0:19:42.240
<v Speaker 9>see a big boost there.

0:19:42.440 --> 0:19:42.679
<v Speaker 7>You know.

0:19:42.840 --> 0:19:44.920
<v Speaker 9>Wingstop, one of the big things that they have going

0:19:44.960 --> 0:19:48.040
<v Speaker 9>on is a new smart kitchens that are gonna massively,

0:19:48.200 --> 0:19:52.399
<v Speaker 9>massively help the operations improve sea service and get people

0:19:52.480 --> 0:19:54.679
<v Speaker 9>their wings hotter and faster.

0:19:55.119 --> 0:19:57.800
<v Speaker 7>Oh okay, what are you talking about the intersection of

0:19:57.880 --> 0:19:59.879
<v Speaker 7>AI and chicken wings?

0:20:02.000 --> 0:20:06.120
<v Speaker 9>Yeah, I mean, you know, restaurant business. Listen, the restaurant

0:20:06.160 --> 0:20:11.840
<v Speaker 9>businessman has been historically underinvested in technology, you know, and

0:20:12.240 --> 0:20:13.640
<v Speaker 9>they've been quickly.

0:20:14.640 --> 0:20:17.520
<v Speaker 7>And a deep fryer. What technology?

0:20:18.520 --> 0:20:20.480
<v Speaker 9>Yeah, Well, listen, when you go and sit down in

0:20:20.520 --> 0:20:25.400
<v Speaker 9>a restaurant and you have five people ordering five different things, right,

0:20:26.560 --> 0:20:29.040
<v Speaker 9>you don't start them all at the same time, right,

0:20:29.160 --> 0:20:31.720
<v Speaker 9>Like your sushi is going to be done a lot,

0:20:31.880 --> 0:20:35.679
<v Speaker 9>maybe faster or slower than my chicken karaaki, right. And

0:20:35.720 --> 0:20:39.120
<v Speaker 9>so technology is being used in the kitchen to let

0:20:39.160 --> 0:20:41.880
<v Speaker 9>the cooks know when to fire each meal so that

0:20:41.960 --> 0:20:45.600
<v Speaker 9>everything comes out at the exact same time hot. Right.

0:20:45.600 --> 0:20:49.359
<v Speaker 9>So there's definitely a lot of uses for artificial intelligence

0:20:49.400 --> 0:20:50.920
<v Speaker 9>and small kitchens in this industry.

0:20:51.320 --> 0:20:53.160
<v Speaker 5>So, Michael, what does that mean. Are we going to

0:20:53.200 --> 0:20:56.600
<v Speaker 5>go into a McDonald's and see robots making our fries?

0:20:56.640 --> 0:20:58.960
<v Speaker 5>What does this mean for jobs at restaurant chains?

0:21:00.200 --> 0:21:03.320
<v Speaker 9>Well, you know, restaurant chains have been able to reduce

0:21:03.440 --> 0:21:08.520
<v Speaker 9>labor hours by increasing the amount of automation. Me personally,

0:21:09.119 --> 0:21:12.600
<v Speaker 9>you know, I don't and I don't think we're going

0:21:12.680 --> 0:21:16.080
<v Speaker 9>to go into restaurants that don't have humans working in

0:21:16.119 --> 0:21:21.080
<v Speaker 9>them anytime soon or maybe ever. But you'll continue to

0:21:21.119 --> 0:21:26.439
<v Speaker 9>see kiosks right, because that takes away labor at the

0:21:26.560 --> 0:21:31.119
<v Speaker 9>at the counter. You'll continue to see upgrades to kitchens

0:21:31.200 --> 0:21:36.359
<v Speaker 9>and more kitchen automation to help decrease the labor needs

0:21:36.400 --> 0:21:38.600
<v Speaker 9>in the kitchen. It will it will continue to be

0:21:38.680 --> 0:21:42.360
<v Speaker 9>a point of focus as minimum wage continues to increase

0:21:42.440 --> 0:21:47.040
<v Speaker 9>and labor continues to become hard to find. So yeah,

0:21:47.119 --> 0:21:49.320
<v Speaker 9>it's it's going to continue to move this direction. Like

0:21:49.359 --> 0:21:52.320
<v Speaker 9>I said, we've this business is underinvested in technology for

0:21:52.320 --> 0:21:55.000
<v Speaker 9>a very long time, and so they have a long

0:21:55.040 --> 0:21:58.199
<v Speaker 9>way to catch up to you know, competitors say in

0:21:58.359 --> 0:22:01.680
<v Speaker 9>packaged food, where they're our plants are very automated.

0:22:02.440 --> 0:22:07.159
<v Speaker 1>This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,

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0:22:14.720 --> 0:22:18.240
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