WEBVTT - Nvidia and Target Earnings 0:00:02.080 --> 0:00:05.880 This is Bloomberg Intelligence with Alex Steinhl and Paul'sweenye. 0:00:06.000 --> 0:00:09.200 The real AP performance has been the US corporate high yield. 0:00:09.360 --> 0:00:11.680 Are the companies lean enough? Have they trimmed all the fats? 0:00:11.800 --> 0:00:14.960 The semiconductor business is a really cyclical. 0:00:14.560 --> 0:00:18.680 Business, breaking market headlines and corporate news from across the globe. 0:00:18.720 --> 0:00:21.360 Do investors like the M and A that we've seen? 0:00:21.560 --> 0:00:24.640 These are two big time blue chip companies. 0:00:24.800 --> 0:00:28.400 The window between the peak and cut changing super fast. 0:00:28.560 --> 0:00:32.479 Bloomberg Intelligence with Alex Steinhl and Paul'sweenye. 0:00:31.960 --> 0:00:36.360 On Bloomberg Radio. On Today's Bloomberg Intelligence Show, we dig 0:00:36.400 --> 0:00:38.680 inside the big business stories impacting Wall Street and the 0:00:38.680 --> 0:00:39.440 global markets. 0:00:39.479 --> 0:00:41.440 Each and every week we provide in depth research and 0:00:41.560 --> 0:00:43.320 data on some of the two thousand companies and one 0:00:43.400 --> 0:00:46.120 hundred and thirty industries our analysts cover worldwide. 0:00:46.240 --> 0:00:47.879 Today, we'll take a look at how one company is 0:00:47.920 --> 0:00:50.239 looking to fix your terrible board meetings. 0:00:50.400 --> 0:00:52.960 Plus we'll discuss why many Swings Day voters say they're 0:00:53.000 --> 0:00:56.000 worried about violence surrounding the US presidential election. 0:00:56.480 --> 0:00:59.440 But first we dive into big tech and in Vidia. 0:00:59.440 --> 0:01:02.440 This week, maker gave a bullish forecast for second quarter. 0:01:02.280 --> 0:01:04.920 Revenue Nvidia also reported that its sales in the first 0:01:04.959 --> 0:01:07.280 quarter more than triple to twenty six billion, and this 0:01:07.360 --> 0:01:11.200 shows that spending on artificial intelligence computing remains strong for more. 0:01:11.240 --> 0:01:15.679 We were joined by Kunjon Sobani, Bloomberg Intelligence Senior semiconductor analyst. 0:01:16.040 --> 0:01:18.880 We first asked for his takeaways from Nvidia's results. 0:01:19.160 --> 0:01:22.520 Demand on most of their products keep running ahead of supply. 0:01:23.400 --> 0:01:27.839 We don't see any slowing down in terms of purchasing 0:01:27.880 --> 0:01:31.520 from their customers. In fact, beyond their largest cloud customer, 0:01:31.680 --> 0:01:34.920 enterprise and consumer intern companies are coming in strong, so 0:01:35.120 --> 0:01:37.559 we don't see any sort of big risk that says 0:01:37.560 --> 0:01:38.720 they cannot continue. 0:01:38.800 --> 0:01:41.240 So, Kunjon, I was selling Alexon. When we get smart 0:01:41.240 --> 0:01:43.160 people on like yourself, I like to ask the question 0:01:43.200 --> 0:01:47.120 about competition. I'm kind of surprised that, you know, in 0:01:47.200 --> 0:01:51.600 Nvidia has this competitive leadership position relative to everybody else. 0:01:51.800 --> 0:01:55.600 How proprietary is their chip design versus I don't know 0:01:55.640 --> 0:01:58.960 the AMDs of the world, even as Cisco. What is 0:01:59.000 --> 0:02:00.920 the competitive landscape? 0:02:01.200 --> 0:02:03.800 Yeah, I mean, look, they were I would say almost 0:02:03.880 --> 0:02:07.360 two to even arguably three years ahead of everyone, and 0:02:07.400 --> 0:02:10.120 it's not easy in the chip landscape to catch up 0:02:10.200 --> 0:02:13.240 when someone has that kind of a lead. They have 0:02:13.400 --> 0:02:18.360 actually aggressively gone out and out in it their peers. 0:02:18.440 --> 0:02:21.160 Before they were on an eighteen to twenty four month 0:02:21.360 --> 0:02:23.720 product cycle, Now they are on a twelve month product cycle. 0:02:24.000 --> 0:02:26.280 So they just keep staying ahead of their combination. Their 0:02:26.320 --> 0:02:29.680 combination is trying to catch up. AMD has made significant 0:02:29.720 --> 0:02:34.200 progress and now is another second viral alternative in the market. 0:02:34.320 --> 0:02:36.919 Hence you see that in their significant growth as well. 0:02:37.200 --> 0:02:39.920 But we don't think at this point there is anyone 0:02:39.919 --> 0:02:43.519 else who can rival the total system tco and performance 0:02:43.560 --> 0:02:43.920 that they have. 0:02:44.360 --> 0:02:46.639 I was mentioning earlier that Nvidia gets about forty percent 0:02:46.680 --> 0:02:49.480 its revenue from the big four players, Microsoft, Meta Alphabet, 0:02:49.520 --> 0:02:52.320 and Amazon. What kind of risk is that, if any? 0:02:53.720 --> 0:02:55.799 I mean there have been concerns around it. So there's 0:02:55.840 --> 0:02:58.040 two good data points that came out of this print. 0:02:58.080 --> 0:03:01.400 One that concentration did rid use for the very first time, 0:03:01.960 --> 0:03:04.840 and what we liked it, It was not reduced because 0:03:04.880 --> 0:03:07.760 the cloud guys slowed their purchasing. In fact, those top 0:03:07.840 --> 0:03:10.640 four guys that are expected to increase their capec spent 0:03:10.760 --> 0:03:12.920 by forty five percent this year and they are all 0:03:12.960 --> 0:03:15.800 lined up to purchase its newest Blackwell products. But what 0:03:16.040 --> 0:03:19.320 was good was that the share was taken by strong 0:03:19.520 --> 0:03:22.079 enterprise demand, which we really like because that is much 0:03:22.120 --> 0:03:23.520 more diversified and sticky. 0:03:24.200 --> 0:03:26.600 Kunjan. Let's say I'm at Amazon and I buy one 0:03:26.600 --> 0:03:29.360 of nvidious chips. When do I have to replace it? 0:03:29.960 --> 0:03:30.240 Question? 0:03:32.560 --> 0:03:34.440 There's two answers to it. If we were in a 0:03:34.520 --> 0:03:39.400 normal sector semicaractor cycle like you are in smartphones or PCs, 0:03:39.760 --> 0:03:42.840 the refreshed time would be longer, so I would say 0:03:43.760 --> 0:03:46.560 on ideally three to five years. But what's going on 0:03:46.640 --> 0:03:48.880 right now is all of these customers are just racing 0:03:48.920 --> 0:03:52.120 against each other, so they cannot afford to stop. So 0:03:52.160 --> 0:03:54.880 as soon as a newer, better chip is available that 0:03:54.920 --> 0:03:57.400 they can change, they are going to change. 0:03:57.480 --> 0:04:00.840 What would stop all this? We know that AI is 0:04:00.840 --> 0:04:02.400 going to grow, We know that there will be demand 0:04:02.400 --> 0:04:04.640 for chips. We know all that. That's a structural shift 0:04:05.320 --> 0:04:08.400 within the economy. But what makes it cyclical? 0:04:10.120 --> 0:04:13.800 I think the first point of cyclicality would be when 0:04:13.960 --> 0:04:17.600 the demand momentum stops, which we haven't seen no signs of. Look, 0:04:17.640 --> 0:04:20.440 the supply keeps on coming up, so at some point 0:04:20.800 --> 0:04:24.039 demand is going to be meeting supply. And after that, 0:04:24.120 --> 0:04:26.479 if we see any kind of weakness in demand. Look, look, 0:04:26.520 --> 0:04:30.040 if the largest cloud providers don't see return on that investment, 0:04:30.240 --> 0:04:33.760 don't see monetization benefit, don't see their earnings and revenue 0:04:33.760 --> 0:04:36.679 grow from these investments, that's when we can start worrying 0:04:36.720 --> 0:04:38.279 about sort of a cyclical DOWNTOWND. 0:04:38.720 --> 0:04:43.200 All right, So how else in your universe of semiconductors, 0:04:44.480 --> 0:04:45.880 how else do you if you play this trend? 0:04:46.480 --> 0:04:49.719 Look, it's still Nvidia still remains sort of the best 0:04:49.760 --> 0:04:52.719 pure play AI play in semiconductors. So I don't know 0:04:52.760 --> 0:04:54.560 why you would want to look elsewhere, but if you 0:04:54.760 --> 0:04:59.120 were forced to, we also like you know, players like 0:04:59.200 --> 0:05:02.360 broad Common MA when it comes to AI networking, and 0:05:02.520 --> 0:05:06.919 it comes to the ask chips, which and media's largest 0:05:06.920 --> 0:05:10.599 customers are designing themselves. So these are the two areas 0:05:10.680 --> 0:05:13.920 where we see significant growth coming in over the next 0:05:13.920 --> 0:05:14.520 two years. 0:05:14.720 --> 0:05:18.640 Our thanks to Kunjan Sobani, Bloomberg Intelligence senior semiconductor analysts. 0:05:19.000 --> 0:05:21.640 We move now to the home improvement retailer. Low's Lowe 0:05:21.680 --> 0:05:24.000 said the comparable sales fell four point one percent in 0:05:24.040 --> 0:05:26.800 the first quarter, though they were better than analysts projected. 0:05:27.000 --> 0:05:29.719 This all comes as uncertainty around interest rates and inflation 0:05:29.839 --> 0:05:32.120 continue to weigh on home improvement demand. 0:05:32.279 --> 0:05:33.680 For more on all of this, we were joined by 0:05:33.760 --> 0:05:36.280 Drew Redding, Bloomberg Intelligence US home building analyst. 0:05:36.520 --> 0:05:39.039 First asked Drew for his key takeaways on Loew's most 0:05:39.040 --> 0:05:39.680 recent report. 0:05:40.080 --> 0:05:41.720 Quarter was a little bit of a tug of war 0:05:41.920 --> 0:05:45.400 between sales and margins. Part of that sales performance was 0:05:45.480 --> 0:05:47.400 due to the fact that there was a more promotional 0:05:47.480 --> 0:05:50.400 environment out there. If you think back to when Home 0:05:50.440 --> 0:05:53.719 Deepot reported last week, they cite a late start to 0:05:53.760 --> 0:05:57.080 spring is something that muted sales lows actually said. Spring 0:05:57.120 --> 0:05:58.919 got off to a good start, and that has to 0:05:58.960 --> 0:06:02.200 do with them being more we're aggressive on promotions as 0:06:02.240 --> 0:06:04.440 part of their Spring Fest, and I think that really 0:06:04.480 --> 0:06:07.080 speaks to, you know, what we're seeing really across the 0:06:07.120 --> 0:06:09.720 retail landscape with the consumer, and that's that they're looking 0:06:09.760 --> 0:06:12.920 for value wherever they could get it. Now, they did 0:06:13.000 --> 0:06:15.960 reaffirm their full year operating margin guidance, but that's going 0:06:16.000 --> 0:06:19.720 to require the company to execute on some internal initiatives. 0:06:19.720 --> 0:06:22.480 In the back half of the year. Loses made good 0:06:22.520 --> 0:06:26.760 progress in improving their their margin profile and them narrowing 0:06:26.800 --> 0:06:29.480 the gap with home Depot has really been a key 0:06:29.560 --> 0:06:32.680 that investors have kind of you know, grasped onto. So 0:06:32.720 --> 0:06:34.279 the fact that they're taking a little bit of a 0:06:34.320 --> 0:06:37.480 step back here maybe making them a little bit uneasy. 0:06:37.680 --> 0:06:40.159 How much would the stock have to re rate for 0:06:40.560 --> 0:06:43.960 investors and analysts to say, okay, fine, the margins are suffering, 0:06:43.960 --> 0:06:45.760 but at least the volume and the sales are there. 0:06:46.320 --> 0:06:49.400 Yeah, Well, the stock is still trading above you know, 0:06:49.480 --> 0:06:51.320 the ten year average, even if you go back to 0:06:51.920 --> 0:06:55.040 prior to the pandemic. So from a pure valuation perspective, 0:06:55.680 --> 0:06:58.120 you know, it's still a little bit elevated. The move 0:06:58.160 --> 0:07:00.640 they've made on margins and now rowing the gap with 0:07:00.680 --> 0:07:03.159 Home Depot has been impressive over the last couple of years, 0:07:03.240 --> 0:07:05.880 So I think, you know, the bulls would argue that 0:07:05.920 --> 0:07:08.000 this is kind of a one off, and as we 0:07:08.000 --> 0:07:10.680 get to the back half of the year, margins start 0:07:10.720 --> 0:07:14.320 to improve as they implement some of their PPI initiatives, 0:07:14.720 --> 0:07:17.280 And in terms of sales, you know, we're not expecting 0:07:17.280 --> 0:07:20.080 a huge rebound in sales this year and the second 0:07:20.120 --> 0:07:22.640 half comps will definitely get easier, but even Lows has 0:07:22.640 --> 0:07:25.360 stated that comps may turn positive, but that's not a 0:07:25.400 --> 0:07:29.000 reflection of an improved demand. Environment. It's strictly a reflection 0:07:29.120 --> 0:07:31.600 of easier comps. So we think as we get into 0:07:31.600 --> 0:07:34.200 twenty twenty five, that's when we would expect the market 0:07:34.200 --> 0:07:36.200 to see more of a turn, as we get more 0:07:36.200 --> 0:07:38.000 of a rebound and existing home sales. 0:07:38.600 --> 0:07:41.640 How about lumber, that's something they buy a lot of. 0:07:42.080 --> 0:07:44.600 How's the cost of lumber these days? How's that impacting 0:07:44.920 --> 0:07:45.840 their margins? 0:07:46.360 --> 0:07:49.160 Yeah, lumber is about ten percent of sales for both 0:07:49.200 --> 0:07:53.280 Home Depot and Low's. Lumber was really more of a story. 0:07:53.360 --> 0:07:56.480 Last year was extremely volatile, so you saw the impact 0:07:56.520 --> 0:07:58.800 on the on their top line. There not so much 0:07:58.800 --> 0:08:01.520 of a story this year. I think Cody, particularly lumber 0:08:01.560 --> 0:08:03.040 are going to have less of an impact in the 0:08:03.080 --> 0:08:04.160 near term. 0:08:04.240 --> 0:08:06.200 So you feel like we're not going to really see 0:08:06.520 --> 0:08:08.760 a benefit in hold twenty twenty five. I mean, some 0:08:08.800 --> 0:08:10.480 analysts are looking for the back half of this year 0:08:10.480 --> 0:08:12.280 maybe some improvement, but for you, it's really like a 0:08:12.360 --> 0:08:13.320 year out kind of thing. 0:08:14.600 --> 0:08:16.400 Well, I think as we get to the end of 0:08:16.440 --> 0:08:18.160 this year, I think you'll start to see a little 0:08:18.200 --> 0:08:19.880 bit of a turn, and you know, a lot of 0:08:19.880 --> 0:08:23.440 that is predicated upon with what happens in the housing market. Obviously, 0:08:23.520 --> 0:08:25.960 people are looking for the FED to cut rates at 0:08:25.960 --> 0:08:28.200 some point this year. Obviously not as much as we 0:08:28.280 --> 0:08:31.040 had hoped for previously, but we think that you know, 0:08:31.080 --> 0:08:33.840 when you when you look at existing home sales, we're 0:08:34.080 --> 0:08:36.199 you know, at the lowest levels in you know, more 0:08:36.240 --> 0:08:39.560 than two decades. So there's not a whole lot lower 0:08:39.600 --> 0:08:42.559 we can go absent you know, a broader economic decline 0:08:42.559 --> 0:08:44.360 where you start to see a lot of job loss. 0:08:44.679 --> 0:08:46.280 So we think that you know, if it's come in 0:08:46.280 --> 0:08:47.760 a little bit, you could kind of start to build 0:08:47.800 --> 0:08:50.520 a little momentum ending this year carrying into next year. 0:08:50.880 --> 0:08:53.080 When we think, you know, bigger picture about the home 0:08:53.080 --> 0:08:56.200 improvement market, there's some there's some solid tail winds out there. 0:08:56.640 --> 0:08:58.960 You know, you have homeowners who are sitting on record 0:08:59.000 --> 0:09:01.680 amount of home equity. When you think about you know, 0:09:01.720 --> 0:09:03.800 the rise and home prices we've seen over the last 0:09:03.840 --> 0:09:07.040 several years, you've got an aging housing stock, and I 0:09:07.040 --> 0:09:10.199 think the fact that mobility has been so low is 0:09:10.240 --> 0:09:12.400 going to continue to encourage people to invest in their 0:09:12.400 --> 0:09:14.560 house And I think what kind of triggers that is 0:09:14.640 --> 0:09:16.280 rates coming back in a little bit so you can 0:09:16.360 --> 0:09:17.520 start to tap that equity. 0:09:17.880 --> 0:09:20.200 True, how many stores as lows have and are they 0:09:20.240 --> 0:09:23.480 adding stores, are they pairing backstores? Kind of worthy with 0:09:23.480 --> 0:09:24.880 their store count these days. 0:09:25.000 --> 0:09:28.760 Yeah, so they're under two thousand. It's an interesting dynamic. 0:09:28.880 --> 0:09:32.560 So their competitor, Home Depot, is actually embarking on their 0:09:32.559 --> 0:09:35.600 first store expansion in a long time. Lows, on the 0:09:35.600 --> 0:09:37.600 other hand, has cut back. They got out of their 0:09:37.600 --> 0:09:41.000 Canadian business, which reduced their store count. But what they're 0:09:41.040 --> 0:09:44.280 doing from a store perspective is really introducing new formats. 0:09:44.320 --> 0:09:48.120 So they're starting to go after the rural customer. Their 0:09:48.160 --> 0:09:51.720 stores tend to be located in more rural locations compared 0:09:51.720 --> 0:09:54.960 to Home Depot, which are more densely populated locations, and 0:09:55.000 --> 0:09:57.680 they found success with that, so they're starting to compete 0:09:57.679 --> 0:10:00.400 more with the detractor supplies of the w world. They're 0:10:00.440 --> 0:10:05.400 also introducing Lows outlets, so if you think of, you know, 0:10:05.920 --> 0:10:08.600 appliances that might have things and scratches, you could go 0:10:08.640 --> 0:10:11.600 there and get heavily discounted items. And that's another way 0:10:11.640 --> 0:10:14.400 they're looking to kind of, you know, drive traffic through 0:10:14.440 --> 0:10:15.120 the Low's brand. 0:10:15.280 --> 0:10:18.360 Okay, now you're speaking my language. You put outlet there 0:10:18.400 --> 0:10:20.880 and I'm like, boom, we will go find things that 0:10:20.920 --> 0:10:21.440 are cool. 0:10:21.520 --> 0:10:22.520 I don't do outlets either. 0:10:23.160 --> 0:10:26.319 I know you don't do outlets. That's my thing. It's 0:10:26.400 --> 0:10:29.160 just my thing. Even if I had a bazillion dollars, 0:10:29.200 --> 0:10:31.400 I wouldn't pay full price part of the hunt. Okay, 0:10:31.960 --> 0:10:35.160 AnyWho so drew based on all this, If I wanted 0:10:35.160 --> 0:10:38.040 to play this housing market right now, what is the 0:10:38.080 --> 0:10:40.200 best play? And I say that because it's not like 0:10:40.240 --> 0:10:44.080 the housing market that the demand isn't there, The supply 0:10:44.280 --> 0:10:46.880 might not be there, the costs are a little too high, 0:10:47.000 --> 0:10:50.240 mortgage rates are too high, but eventually it'll normalize. What's 0:10:50.280 --> 0:10:51.840 the best way to capitalize? 0:10:52.480 --> 0:10:55.280 We think right now, kind of sitting at the top 0:10:55.320 --> 0:10:59.800 of the broader housing ecosystem is the home builders. We think, 0:11:00.040 --> 0:11:02.800 you know, from a supply perspective, they're in a good position. 0:11:03.640 --> 0:11:06.479 Their ability to buy down mortgage rates and make payments 0:11:06.800 --> 0:11:10.400 more palatable to the consumers is something that differentiates them 0:11:10.520 --> 0:11:13.680 versus the resale market. They're going to grow community counts 0:11:13.720 --> 0:11:15.560 in the coming year, so we really think that they're 0:11:15.640 --> 0:11:18.640 still in a good position from a competitive perspective. And 0:11:18.760 --> 0:11:21.240 when you look at you know, within the home building space, 0:11:21.280 --> 0:11:24.960 you have the large, well capitalized, publicly traded homebuilders who 0:11:25.000 --> 0:11:28.040 have access to land, access to labor, and you compare 0:11:28.080 --> 0:11:30.760 that versus the smaller private piers, and you have to 0:11:30.760 --> 0:11:34.960 remember home building is a very fragmented industry, particularly outside 0:11:35.280 --> 0:11:38.559 some of the largest markets. But those smaller private peers 0:11:38.840 --> 0:11:42.520 tend to rely on regional banks for growth capital. And 0:11:42.679 --> 0:11:45.679 with you know, a slowing economy and more concern there, 0:11:45.920 --> 0:11:48.040 you're starting to see a poolback and lending. So we 0:11:48.080 --> 0:11:50.719 think it's a good opportunity for those larger builders to 0:11:50.760 --> 0:11:51.720 continue to take share. 0:11:52.120 --> 0:11:55.200 Our thanks to Drew reading Bloomberg Intelligence, US home building analyst. 0:11:55.240 --> 0:11:56.880 All right, coming out, we're going to say on retail 0:11:56.880 --> 0:11:58.760 and breakdown targets quarterly results. 0:11:59.000 --> 0:12:01.840 You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 0:12:01.880 --> 0:12:04.240 depth research and data on two thousand companies and one 0:12:04.360 --> 0:12:07.319 hundred and thirty industries. You can access Bloomberg Intelligence via 0:12:07.320 --> 0:12:09.400 bi go on the terminal. I'm Paul Sweeney and. 0:12:09.440 --> 0:12:11.400 I'm Alex Steel, and this is Bloomberg. 0:12:18.320 --> 0:12:22.720 This is Bloomberg Intelligence with Alex Steel and Paul Sweeney 0:12:23.000 --> 0:12:24.240 on Bloomberg Radio. 0:12:25.360 --> 0:12:27.600 We look now at the retailer target. This week, the 0:12:27.600 --> 0:12:30.840 company reported first quarter earnings that missed analyst expectations and 0:12:30.880 --> 0:12:33.000 at sales fell about three percent year over year. 0:12:33.240 --> 0:12:36.400 Target also said it remains cautious on discretionary spending over 0:12:36.400 --> 0:12:39.800 the coming months, despite having optimism for later this year. 0:12:40.080 --> 0:12:43.079 For more, we were joined by Jennifer bartashis Bloomberg Intelligence 0:12:43.080 --> 0:12:45.520 Senior analyst Retail, Staples and packaged Food. 0:12:45.679 --> 0:12:48.160 We first asked jen for her reaction to this week's report. 0:12:48.480 --> 0:12:52.200 Target missed on profit, but they are very optimistic about 0:12:52.360 --> 0:12:54.480 second quarter and for the rest of the year, and 0:12:54.559 --> 0:12:56.640 so I think there's a little bit of reticence about 0:12:56.920 --> 0:12:59.600 how realistic that is when it comes to second quarter 0:12:59.679 --> 0:13:02.080 in terms so same store sales. You know, Target says 0:13:02.120 --> 0:13:04.079 that they're going to return to profit, like they're going 0:13:04.120 --> 0:13:08.040 to return to growth in second quarter. It's feasible, but 0:13:08.160 --> 0:13:10.920 remember last year second quarter is when they had the 0:13:10.960 --> 0:13:13.520 blowback from all of the boycotts, so they have a 0:13:13.600 --> 0:13:17.640 really easy comparison when you talk about a year over year. 0:13:17.720 --> 0:13:20.960 So that return to growth, yes, but there's a caveat 0:13:21.000 --> 0:13:23.520 around it. That means to me that the second half 0:13:23.559 --> 0:13:25.920 is going to be really important if they're going to 0:13:25.920 --> 0:13:28.160 reach those goals that they put out to is the. 0:13:28.160 --> 0:13:33.480 Target shopper the same similar no relation to the Walmart shopper. 0:13:33.840 --> 0:13:37.040 Well, historically speaking, the Target shopper has been a slightly 0:13:37.120 --> 0:13:39.760 higher income household. They tend to be a little bit 0:13:39.800 --> 0:13:45.240 more fashion forward, fashion focus type individuals, so there's been overlap. 0:13:45.320 --> 0:13:48.600 But Walmart has slowly been encroaching on what has been 0:13:48.640 --> 0:13:52.360 Target's kind of main audience, and Target has seen that 0:13:52.720 --> 0:13:56.480 their customers are under a lot of pressure because they're 0:13:56.520 --> 0:13:59.080 sort of middle income households. There's been a lot of 0:13:59.080 --> 0:14:02.520 inflationary press sure, a lot of cutbacks and discretionary spending, 0:14:02.880 --> 0:14:05.560 so there's been kind of pressure from both sides, and 0:14:05.640 --> 0:14:08.360 so Walmart says they're going to up their private label game, 0:14:08.440 --> 0:14:11.080 especially in apparel. That could be a threat to Target, 0:14:11.160 --> 0:14:14.440 but it is one of Target's core strengths. So if 0:14:14.480 --> 0:14:17.560 they can get people to come back and start engaging again, 0:14:17.960 --> 0:14:21.800 that's really what historically has helped Target drive their success. 0:14:22.200 --> 0:14:24.680 So reaffirming their guidance for the full year, I mean, 0:14:24.800 --> 0:14:26.360 like you mentioned, that means they're going to have to 0:14:26.400 --> 0:14:28.480 really deliver in the back of what are the levers 0:14:28.600 --> 0:14:29.640 they can pull to do that. 0:14:30.240 --> 0:14:32.720 So from a profit perspective, they have a lot of 0:14:32.760 --> 0:14:34.800 things that are that they've been doing in terms of 0:14:34.840 --> 0:14:37.920 cost control, in terms of streamlining their supply chain. Their 0:14:37.960 --> 0:14:40.800 inventory was down in another seven percent this quarter. Those 0:14:40.800 --> 0:14:43.160 are all great things because it helps make them more 0:14:43.200 --> 0:14:47.200 efficient and cost effective. So from a margin perspective, you know, 0:14:47.320 --> 0:14:50.880 there's still some runway to continue to expand margins. The 0:14:50.960 --> 0:14:53.000 real question is are they going to be able to 0:14:53.080 --> 0:14:57.360 drive sales growth. What's concerning is that the in store 0:14:57.400 --> 0:15:01.720 sales for same store sales are still significantly lower. And 0:15:02.040 --> 0:15:05.160 you know, part of the idea behind the discretionary categories 0:15:05.200 --> 0:15:06.960 is that people come into stores and they browse and 0:15:07.000 --> 0:15:10.040 they find an outfit or they find an accessory. And 0:15:10.240 --> 0:15:13.200 it's great that digital sales are reaccelerating, but if people 0:15:13.240 --> 0:15:15.880 aren't in the store, that's a hard thing for Target 0:15:15.920 --> 0:15:16.440 to deal with. 0:15:16.720 --> 0:15:19.400 Hey, Jen, want to think back to the Walmart releases 0:15:19.440 --> 0:15:21.920 that I've really paid attention to. I always see double digit, 0:15:22.000 --> 0:15:25.800 maybe twenty percent e commerce sales growth. How does Target 0:15:25.840 --> 0:15:26.200 do there? 0:15:26.560 --> 0:15:26.760 Well? 0:15:26.840 --> 0:15:30.080 Target actually does pretty well in terms of digital sales growth, 0:15:30.120 --> 0:15:33.360 but there's a very different strategy. Walmart is pursuing a 0:15:33.400 --> 0:15:36.840 strategy of as many possible items as possible on the 0:15:36.840 --> 0:15:39.360 Walmart dot Com. They do a lot of third party sales. 0:15:39.800 --> 0:15:42.840 When it comes to Target, their broader assortment is much 0:15:42.840 --> 0:15:46.440 more curated, and so they are very thoughtful about which 0:15:46.520 --> 0:15:49.880 vendors they bring onto the target dot com to enhance 0:15:49.920 --> 0:15:53.240 the offering that Target has. So they're different approaches to 0:15:53.360 --> 0:15:56.720 e commerce. Both are seeing some success, but you can't 0:15:56.720 --> 0:15:59.720 really compare them strictly side by side. 0:16:00.040 --> 0:16:03.160 What other company, like what did you make of then TJX, 0:16:03.200 --> 0:16:05.960 for example, because in some ways they can be immune 0:16:06.160 --> 0:16:09.680 from the slowdown, right because everyone me included, we'll go shop. 0:16:09.720 --> 0:16:12.520 There are we seeing that reflected in the numbers? 0:16:13.000 --> 0:16:15.120 I mean, I think the strong results from TJX just 0:16:15.240 --> 0:16:18.360 underscore that people still like the treasure hunt, but people 0:16:18.440 --> 0:16:21.680 are seeking value and one of the things that Target 0:16:21.720 --> 0:16:25.040 talked about is that they need to reinforce that value proposition. 0:16:25.360 --> 0:16:28.920 That's part of why they've rejiggered their entire Target loyalty 0:16:28.960 --> 0:16:33.000 program with Target Circle TJX, everybody knows you can go 0:16:33.120 --> 0:16:36.200 and you have the potential to find something that is 0:16:36.240 --> 0:16:40.040 an amazing deal, and that's enough to draw people into stores. 0:16:40.920 --> 0:16:43.120 Target has has gotten a little bit away from that. 0:16:43.440 --> 0:16:46.280 Yeah, yeah, see polism. So pauls, we've been in a TJX. 0:16:46.560 --> 0:16:48.600 I don't think he truly understands the beauty of this. 0:16:48.720 --> 0:16:50.479 I went to my first Walmart last weekend. 0:16:50.680 --> 0:16:53.160 Yeah, I'm so. That's like a semi gold star. So 0:16:53.360 --> 0:16:56.560 they have not only just discounted stuff, but they have 0:16:56.680 --> 0:17:00.920 the runway and that's the jam. That is designer stuff 0:17:00.960 --> 0:17:03.040 on some serious sale and you can get that on 0:17:03.120 --> 0:17:05.520 clearance and you're looking at like a ninety percent off 0:17:05.560 --> 0:17:07.600 a designer kind of situation. 0:17:07.840 --> 0:17:09.600 Do you know beforehanded whether it's going to be there? 0:17:09.640 --> 0:17:12.920 No, that's that's that's fun. Then you add the treasure hunt, 0:17:12.920 --> 0:17:15.399 and you don't know the beauty that will be unveiled 0:17:15.480 --> 0:17:17.520 as you go in. Am I selling this appropriately? 0:17:17.600 --> 0:17:17.800 Jen? 0:17:18.400 --> 0:17:21.080 Absolutely? I mean that is that is some of the appeal. 0:17:21.240 --> 0:17:22.920 You just you never know what you're going to find, 0:17:22.960 --> 0:17:24.800 and so you go as often as you as you 0:17:24.840 --> 0:17:27.520 can because there's a chance you'll find that amazing deal. 0:17:27.920 --> 0:17:31.800 What's the promotional environment out there, Jenner. Are the Walmarts, 0:17:31.880 --> 0:17:35.040 the tjx's, the targets. Are they putting out a lot 0:17:35.040 --> 0:17:37.520 of promotions to get people in the store or to 0:17:37.520 --> 0:17:38.240 click that button. 0:17:38.600 --> 0:17:42.320 The promotional environment has been escalating, and so we talk 0:17:42.400 --> 0:17:45.600 you hear Walmart talk about rollbacks that's basically putting things 0:17:45.680 --> 0:17:48.959 on sale or discounts. Target talked about cutting prices by 0:17:49.000 --> 0:17:51.160 the end of the summer up to five thousand items, 0:17:51.240 --> 0:17:53.840 all for essential So the idea is to try to 0:17:54.760 --> 0:17:57.639 advertise that there's value proposition there and you know in 0:17:57.760 --> 0:18:00.800 force that they're they're looking at for the customer, trying 0:18:00.800 --> 0:18:03.720 to get people to engage in coming back and perhaps 0:18:03.800 --> 0:18:06.480 buying a little bit more. And let's be honest, it 0:18:06.520 --> 0:18:09.000 doesn't hurt from a public relations perspective when you have 0:18:09.119 --> 0:18:12.200 the White House talking about retailers not being responsible enough 0:18:12.440 --> 0:18:15.920 and rolling back costs on essentials. So there's certainly a 0:18:15.960 --> 0:18:18.119 little bit of a play there to help appease some 0:18:18.160 --> 0:18:19.119 of that political pressure. 0:18:19.160 --> 0:18:20.359 Is but that doesn't make me want to buy the 0:18:20.400 --> 0:18:21.880 stock though, No. 0:18:21.920 --> 0:18:26.119 But you know it does help ultimately from a consumer perspective. 0:18:26.320 --> 0:18:29.240 If you think that it's a better value to shop there, 0:18:29.359 --> 0:18:31.640 or that you're getting more for your money, you're more 0:18:31.640 --> 0:18:34.080 inclined to shop there, and that ultimately leads to your 0:18:34.080 --> 0:18:36.159 traffic and your sales, and that is what is appealing 0:18:36.200 --> 0:18:36.879 to investors. 0:18:37.440 --> 0:18:40.879 What are the dollar stores seeing these days? Are they 0:18:40.920 --> 0:18:43.960 seeing a pickup in traffic, maybe the people trading down 0:18:44.040 --> 0:18:45.439 from a Walmart or Target. 0:18:46.400 --> 0:18:48.760 There's been some trade down into the dollar stores, and 0:18:48.800 --> 0:18:50.760 we tend to see that every time we go through 0:18:50.840 --> 0:18:53.639 sort of an economic depression. One of the challenges for 0:18:53.680 --> 0:18:56.199 the dollar stores is that people are coming in, but 0:18:56.359 --> 0:19:00.640 they've abandoned the discretionary spending, even though at dollar store 0:19:00.640 --> 0:19:05.480 the discretionary spending is not that expensive, so their consumables mix. 0:19:05.520 --> 0:19:07.920 For example, a Dollar General is is close to eighty 0:19:07.960 --> 0:19:10.760 percent of their sales are what would could be considered 0:19:10.800 --> 0:19:14.440 consumable items. That is good in terms of people coming 0:19:14.440 --> 0:19:16.480 into the store, but it's not great for the long 0:19:16.560 --> 0:19:20.000 term mix for the company because those are very low 0:19:20.040 --> 0:19:23.880