WEBVTT - Microsoft Slips on Report of Lower Demand for Some AI Tools 0:00:02.720 --> 0:00:10.559 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 --> 0:00:18.520 Eastern on Applecarplay and Android Auto with the Bloomberg Business App. 0:00:18.640 --> 0:00:21.840 Listen on demand wherever you get your podcasts, or watch 0:00:21.960 --> 0:00:23.480 us live on YouTube. 0:00:23.960 --> 0:00:26.520 A lot of tech stories out there, including the one 0:00:26.520 --> 0:00:29.800 here Microsoft here. The question is I guess the information 0:00:30.560 --> 0:00:34.320 was out earlier that multiple Microsoft divisions lowered how much 0:00:34.560 --> 0:00:37.680 salespeople are supposed to grow their sales of certain air 0:00:37.760 --> 0:00:40.919 products after many missed sales goals in the fiscal year 0:00:40.920 --> 0:00:43.440 and in June. That's what the Information Reporter earlier. Today, 0:00:43.479 --> 0:00:48.600 Microsoft though, has not lowered sales quotas and targets for salespeople. 0:00:48.600 --> 0:00:51.879 That's according to CNBC. They reported that on air, siting 0:00:52.400 --> 0:00:54.639 an emailed statement for Microsoft. So I don't know what's 0:00:54.640 --> 0:00:56.600 going on out there. Microsoft stocks down a little bit 0:00:56.640 --> 0:00:59.440 here on a Rod Rana, technology analyst to Bloomberg Intelligence 0:00:59.520 --> 0:01:04.800 joins this year just kind of put that information reporting 0:01:04.840 --> 0:01:06.920 the CNBC kind of rebutting it. I mean, just give 0:01:06.959 --> 0:01:09.040 us a sense of kind of AI sales how this 0:01:09.080 --> 0:01:12.120 thing is kind of progressing, because I can't imagine there's 0:01:12.120 --> 0:01:14.600 any material slowdown in AI from what I've heard. 0:01:15.760 --> 0:01:17.839 Yeah, Aulso when you look at there are two different 0:01:17.840 --> 0:01:21.760 elements of it. One is the AI infrastructure piece of it. Well, 0:01:21.800 --> 0:01:24.240 there is no slowdown in Microsoft at that point in fact, 0:01:24.280 --> 0:01:27.679 that Microsoft is capacity constraints right now. But to be honest, 0:01:27.720 --> 0:01:29.800 that's not the sales quota somebody is looking at it. 0:01:29.840 --> 0:01:33.000 That just comes in because you're hosting somebody's model, or 0:01:33.000 --> 0:01:36.560 you're trying to get you're hosting chat GPT. The sales 0:01:36.600 --> 0:01:40.400 quotas would be for products such as you know, Microsoft Copilot, 0:01:40.600 --> 0:01:44.760 Office Copilot, Getthub Copilot, all those products. And you know 0:01:44.800 --> 0:01:47.440 that's not the same for everything. There are certain products 0:01:47.440 --> 0:01:49.880 that sell better than the others because of the use 0:01:49.920 --> 0:01:52.880 case of it. Kittub Copilot, for example, because it's a 0:01:52.920 --> 0:01:57.640 coding software platform. The Microsoft Office Copilot is a good 0:01:57.720 --> 0:02:01.040 piece of software or copilot, but it's very expensive. It's 0:02:01.080 --> 0:02:03.160 I think thirty dollars per use of per month, so 0:02:03.400 --> 0:02:06.840 it's not an Apple set of apples comparison throughout the board. 0:02:07.040 --> 0:02:08.920 One of the things that we've been talking about is 0:02:09.360 --> 0:02:12.320 even when you look at the broader tech spending, there 0:02:12.360 --> 0:02:14.960 is a big slowdown when you exclude AI. So that 0:02:15.000 --> 0:02:18.840 could be one reason that enterprise are not comfortable spending 0:02:18.880 --> 0:02:22.160 that level of money right now on those individual software pieces. 0:02:22.480 --> 0:02:24.919 The second piece could be the implementation part of it. 0:02:25.000 --> 0:02:28.480 Because you're buying these sometimes there's data products that you 0:02:28.520 --> 0:02:32.560 have to include in your core software or your core applications, 0:02:32.720 --> 0:02:34.680 and that may take time. So there is a lot 0:02:35.560 --> 0:02:38.440 to be digest from a macro piece. I don't think 0:02:38.440 --> 0:02:39.880 there is any slowdown. 0:02:40.040 --> 0:02:43.720 Honor on how is Microsoft tracking against its competitors in 0:02:43.800 --> 0:02:45.360 terms of AI software. 0:02:46.280 --> 0:02:48.880 It is doing much better than everybody else. But again 0:02:49.160 --> 0:02:53.200 with the caveat because they host chatchipt. This is when 0:02:53.200 --> 0:02:55.920 they invested in chat GPT, you know, I don't know 0:02:55.960 --> 0:02:58.639 six seven years ago. That is part of that thing 0:02:58.800 --> 0:03:01.680 was when you're running that application, it runs on their cloud. 0:03:01.919 --> 0:03:03.840 So when you see that, you know, within a three 0:03:03.919 --> 0:03:06.400 year period you have what five hundred and six million 0:03:06.480 --> 0:03:09.520 users out there when we use chat GPT, a large 0:03:09.560 --> 0:03:12.679 portion of that revenue flows into Microsoft Cloud. So when 0:03:12.840 --> 0:03:15.440 they are the ones that have seen the first phase 0:03:15.480 --> 0:03:18.560 of the big benefit of AI. But as we have said, 0:03:18.720 --> 0:03:21.239 you know many times before, all the other vendors will 0:03:21.240 --> 0:03:24.000 see that down the road. When adoption grows in other 0:03:24.040 --> 0:03:26.880 areas of the ecosystem. 0:03:27.080 --> 0:03:31.040 Salesforce reports after the close here what should we expect 0:03:31.080 --> 0:03:32.240 from them? 0:03:32.400 --> 0:03:34.320 Yeah, it goes back to the first piece of what 0:03:34.360 --> 0:03:37.280 I said was enterprise spending is week when you're looking 0:03:37.360 --> 0:03:40.400 at Fortune two thousand companies, they're not hiding at that 0:03:40.440 --> 0:03:43.000 same pace that they used to and we will exclude 0:03:43.000 --> 0:03:46.920 AI companies from it. And that is that weighs on 0:03:47.080 --> 0:03:50.880 the sales of somebody like a salesforce, somebody like a 0:03:50.920 --> 0:03:55.320 workday because they build on a per head basis. So 0:03:55.720 --> 0:03:58.200 when these companies are not hiding at that same rate, 0:03:58.480 --> 0:04:01.120 Salesforce has a tough time to grow their subscription base. 0:04:01.440 --> 0:04:03.000 And you know, we think it is going to be 0:04:03.160 --> 0:04:05.120 very much in line with what they had last time, 0:04:05.240 --> 0:04:08.680 somewhere around at nine ten percent, which is not bad, 0:04:08.760 --> 0:04:10.280 but it's not very exciting as well. 0:04:11.080 --> 0:04:13.000 I mean, is that enough for the stock to be 0:04:13.080 --> 0:04:15.920 down as much as it is here to date? 0:04:16.080 --> 0:04:18.279 I mean it just seems like thirty percent down. 0:04:18.360 --> 0:04:20.960 You're exactly down thirty percent for this is a company 0:04:20.960 --> 0:04:23.680 that just has has been such a great growth story. 0:04:24.480 --> 0:04:26.880 Yeah, so when you and you know, when you look 0:04:26.920 --> 0:04:29.600 at last year, there was a lot of excitement when 0:04:29.600 --> 0:04:32.400 they launched a product called Agent Force, which was their 0:04:32.520 --> 0:04:35.680 answer or the AI answer to the rest of the universe. 0:04:36.080 --> 0:04:38.720 But what happened was the adoption rate has not been 0:04:38.760 --> 0:04:41.640 as strong as the initial you could say the demo 0:04:41.880 --> 0:04:43.760 was so if you look at the stock price, it 0:04:43.839 --> 0:04:45.640 kind of went out quite a bit of when they 0:04:45.720 --> 0:04:49.240 first launched that particular product. Now this year it's not 0:04:49.320 --> 0:04:51.040 showing up in the numbers, and this is one of 0:04:51.120 --> 0:04:53.640 the reasons you're not seeing the stock recovering from that. 0:04:54.440 --> 0:04:56.920 What about Oracle, It seems like there's some worries around 0:04:56.960 --> 0:04:59.440 artificial intelligence there as well. We're looking at a credit 0:04:59.520 --> 0:05:01.559 risk game and reaching as high as since two thousand 0:05:01.600 --> 0:05:01.880 and nine. 0:05:02.800 --> 0:05:05.360 Yeah, and that is why I think the very very 0:05:05.400 --> 0:05:08.400 valid question is what happens to Oracle. When you look 0:05:08.400 --> 0:05:12.479 at this entire AI bubble narrative or the framework, you know, 0:05:12.520 --> 0:05:14.720 you have the big cloud providers that are spending the 0:05:14.720 --> 0:05:17.400 most amount of money. We say, when you look at 0:05:17.400 --> 0:05:20.240 somebody like an Amazon, Microsoft, and Google, they are spending 0:05:20.279 --> 0:05:22.760 quite a bit, but they have real, you know, awesome 0:05:23.360 --> 0:05:25.960 cash flow that's coming in. Plus they have businesses, so 0:05:26.040 --> 0:05:28.880 even if they overbuild, they will have capacity to use it. 0:05:29.360 --> 0:05:32.599 The bigger question is what happens to open ai oracle relationship. 0:05:32.920 --> 0:05:36.919 Open Ai has said that they have given Oracle, you 0:05:36.960 --> 0:05:39.479 could say, a contract of about three hundred billion dollars 0:05:40.080 --> 0:05:42.880 to bleed in terms of sales over the next several years. 0:05:43.000 --> 0:05:45.840 They're going to first build some massive data centers and 0:05:45.920 --> 0:05:48.000 then they're going to use Oracle as a cloud provider. 0:05:48.320 --> 0:05:50.159 The big question is where is opening IM going to 0:05:50.200 --> 0:05:53.080 get money from, And that's really what's weighing on that 0:05:53.160 --> 0:05:55.719 particular part of the equation. And to be very honest, 0:05:55.760 --> 0:05:59.840 there is genuine reason to figure out, like how is 0:06:00.000 --> 0:06:02.160 wi is going to raise that money and how are 0:06:02.160 --> 0:06:04.520 they going to spend So there is some reason to 0:06:04.560 --> 0:06:06.960 be consumed, but not so much on the credit de 0:06:07.000 --> 0:06:09.599 false side of it, but so much more as the 0:06:09.720 --> 0:06:12.359 estimates that are out there for the opious. 0:06:14.240 --> 0:06:17.320 Stay with us. More from Bloomberg Intelligence coming up after this. 0:06:20.960 --> 0:06:24.640 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:06:24.720 --> 0:06:27.799 weekdays at ten am Eastern on Apple, Cocklay and Android 0:06:27.839 --> 0:06:31.120 Auto with the Bloomberg Business app. Listen on demand wherever 0:06:31.200 --> 0:06:34.679 you get your podcasts, or watch us live on YouTube. 0:06:34.920 --> 0:06:38.080 All right, let's talk a little retail Macy's at with 0:06:38.120 --> 0:06:40.480 some numbers. I thought the numbers were pretty good. Stocks 0:06:40.520 --> 0:06:42.320 off one point seven percent, So what do I know? 0:06:42.640 --> 0:06:45.400 Mary Ross Gilbert Senior Echody Allen, she covers the retailer. 0:06:45.520 --> 0:06:48.960 She's the expert for Bloomberg Intelligence. She's based out there 0:06:49.000 --> 0:06:51.839 in la Mary talks us about Macy's. What do we 0:06:51.839 --> 0:06:53.240 hear from them today with the results. 0:06:55.400 --> 0:06:58.760 So, Paul, we saw, actually, I think great results coming 0:06:58.760 --> 0:07:01.640 out of Macy's this morning, you see, And so when 0:07:01.680 --> 0:07:04.560 you think about it, the stock is off, but that's 0:07:04.640 --> 0:07:09.040 because the company put out conservative fourth quarter guidance and 0:07:09.080 --> 0:07:10.560 that's really what they always do. 0:07:10.720 --> 0:07:11.840 They seek to beat. 0:07:11.680 --> 0:07:15.080 Their numbers, and so that guidance came in very close, 0:07:15.200 --> 0:07:17.160 you know, at the high end. It's right around where 0:07:17.200 --> 0:07:20.120 analysts are because they already saw strong results come in 0:07:20.120 --> 0:07:24.640 from other retailers. But we think, when we think about it, 0:07:24.720 --> 0:07:28.640 we think there's upside here. So we really view the 0:07:28.680 --> 0:07:32.720 results as look Macy's name plate because of all the 0:07:32.800 --> 0:07:35.480 changes that they're making, and what that means is they're 0:07:35.480 --> 0:07:39.280 bringing in more relevant brands that are resonating with their consumer. 0:07:39.840 --> 0:07:43.960 Not only that, but the stores look brighter. There's really 0:07:44.080 --> 0:07:48.040 kind of exciting music in the stores, the store associates 0:07:48.120 --> 0:07:51.640 are more engaged with the customer. We've noticed that on 0:07:51.680 --> 0:07:55.080 our channel texts, particularly on Black Friday, we saw more 0:07:55.160 --> 0:07:58.000 traffic in the store than we've seen in years past. 0:07:58.480 --> 0:08:02.040 So we think that the change is that CEO Tony 0:08:02.120 --> 0:08:05.720 Sprain is making and he's really taking his cues from 0:08:05.720 --> 0:08:09.560 what he's done at Bloomingdale's. It's resonating, it's working, and 0:08:09.600 --> 0:08:12.760 so we think this momentum is building and we certainly 0:08:12.800 --> 0:08:15.040 saw it in the third quarter numbers with comp sales 0:08:16.000 --> 0:08:19.360 two point seven percent for the Go Forward stores, and 0:08:19.440 --> 0:08:22.560 so with that, I mean that's a big improvement sequentially, 0:08:22.960 --> 0:08:25.800 and so we think that's building going into the fourth 0:08:25.880 --> 0:08:30.000 quarter and just with the constant improvement that we're seeing there. 0:08:31.080 --> 0:08:33.280 So when most people think about the retail space right now, 0:08:33.320 --> 0:08:36.520 a lot of people think about the transition to e commerce, 0:08:36.559 --> 0:08:38.400 but it sounds as though from what you're explaining, a 0:08:38.400 --> 0:08:40.679 lot of people are going there in person. I mean, 0:08:40.679 --> 0:08:43.360 I'm looking at Coohal's, I'm looking at Dillard's. All of 0:08:43.400 --> 0:08:46.600 these stocks are up pretty substantially on the year, alongside Macy's. 0:08:47.120 --> 0:08:50.280 What are they doing in particular that's really attracting customers 0:08:50.360 --> 0:08:52.920 to come through the doors. Is it also collaborations with 0:08:53.000 --> 0:08:54.120 celebrities by chance? 0:08:56.040 --> 0:08:58.920 Yes, you raised a valid point, and it is. It 0:08:58.960 --> 0:09:04.120 does include collaborations. So for example, they Aqua, you know, 0:09:04.160 --> 0:09:07.480 they're under their Bloomingdale's brand, currently has a collab going 0:09:07.520 --> 0:09:12.760 out with a designer out of Lawn and so yes, 0:09:12.800 --> 0:09:16.880 these collaborations also even you know, they'll have some events. 0:09:17.440 --> 0:09:20.800 But all of that is is certainly drawing in new customers, 0:09:20.800 --> 0:09:24.520 and I think Macy's nameplate could certainly do more on 0:09:24.559 --> 0:09:26.840 that end. They had their first collab with their on 0:09:26.960 --> 0:09:29.840 thirty fourth brand this year, but we think we're going 0:09:29.880 --> 0:09:31.920 to see more next year because if you look at 0:09:31.920 --> 0:09:34.920 what Dillard's has been doing over the last few years, 0:09:35.240 --> 0:09:38.720 and they have a different business model than Macy's does. 0:09:38.800 --> 0:09:42.760 They're not really promotional. For example, for Black Friday, they 0:09:42.840 --> 0:09:46.120 just had clearance sales and it was pretty comparable to 0:09:46.200 --> 0:09:48.640 last year, so that didn't mean that the rest of 0:09:48.679 --> 0:09:52.400 the merchandise was on sale. Macy's the you know, as 0:09:52.480 --> 0:09:56.959 far more promotional. But by doing collaborations, you know, by 0:09:57.000 --> 0:10:00.319 getting celebrities involved. So for example, for the holiday, they 0:10:00.320 --> 0:10:05.480 have Jennifer Hudson that's you know, fronting their campaign for 0:10:05.559 --> 0:10:11.200 the holiday, and they're also engaging with social influencers. So yes, 0:10:11.520 --> 0:10:14.680 all of that is resonating. We're seeing it with other brands, 0:10:14.760 --> 0:10:18.320 like for example, with American Eagle, which just tapped Martha 0:10:18.440 --> 0:10:21.040 Stewart and that that's appealing to gen z. 0:10:22.000 --> 0:10:22.439 Oh wow. 0:10:22.559 --> 0:10:24.000 So one. 0:10:25.160 --> 0:10:29.319 Yeah, So these bold campaigns that these brands are doing, 0:10:29.440 --> 0:10:33.520 Macy's is also getting involved there and they're dipping their 0:10:33.559 --> 0:10:35.360 to I would say they're dipping their toe in the water. 0:10:35.440 --> 0:10:38.520 But I think we're going to see that increase, you know, 0:10:38.600 --> 0:10:42.000 and build as we get into twenty twenty six. And 0:10:42.040 --> 0:10:44.400 when you talk about the digital business, because of course 0:10:44.440 --> 0:10:48.240 you're always hearing, let's say, stronger growth on digital. For example, 0:10:48.280 --> 0:10:51.360 when we looked at Black Friday, you know, over the 0:10:51.400 --> 0:10:55.520 weekend through Cyber Monday, the sale strength was really led 0:10:55.800 --> 0:10:59.360 by digital. Digital was up double digits versus you know, 0:10:59.480 --> 0:11:02.360 load to mid single digits for in the store, So 0:11:02.440 --> 0:11:07.199 I think that's really positive there. So when we look 0:11:07.240 --> 0:11:10.040 at Macy's, a third of their sales come from digital, 0:11:10.120 --> 0:11:13.319 so still in store is very big, but it's also 0:11:13.480 --> 0:11:17.280 omni channel well, the ability to buy online, take back 0:11:17.320 --> 0:11:19.880 in store or buy online, pick up in store. 0:11:20.679 --> 0:11:23.000 Well, when I walked to Penn Station today, I'm going 0:11:23.040 --> 0:11:25.520 to walk past Macy's as I always do, but today 0:11:25.559 --> 0:11:27.120 I'm going to go in. Okay, I'm going to do 0:11:27.160 --> 0:11:29.360 a store walk. Is what the kid? What the retail 0:11:29.400 --> 0:11:31.000 anamals call it a store walk? And I'm going to 0:11:31.080 --> 0:11:33.640 check if John Tucker's would an escalator. 0:11:33.760 --> 0:11:35.040 Still there, We're counting on you. 0:11:35.160 --> 0:11:39.240 Okay, report back, Mary, just real quick, thirty seconds. What's 0:11:39.280 --> 0:11:40.960 macy saying about the consumer out there? 0:11:42.559 --> 0:11:45.360 Yeah, so they're saying that the lower end consumer is 0:11:45.440 --> 0:11:49.400 really feeling pinched and that's where they're seeing some challenges 0:11:49.440 --> 0:11:51.520 on some of the price increases on their lower price 0:11:51.559 --> 0:11:55.640 point items. But the higher middle income, in the higher 0:11:55.640 --> 0:12:00.920 income consumer is resilient and they haven't lashed or battered 0:12:00.960 --> 0:12:04.160 and I with higher prices that they took to offset 0:12:04.240 --> 0:12:05.640 tariffs and they're still buying. 0:12:06.720 --> 0:12:09.800 Stay with us. More from Bloomberg Intelligence coming up after this. 0:12:13.760 --> 0:12:17.440 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:12:17.520 --> 0:12:20.600 weekdays at ten am Eastern on Apple, Cocklay and Android 0:12:20.640 --> 0:12:23.920 Auto with the Bloomberg Business app. Listen on demand wherever 0:12:24.000 --> 0:12:27.120 you get your podcasts, or watch us live on YouTube. 0:12:27.720 --> 0:12:30.600 We continue to get some earnings from the retailers. Today, 0:12:30.640 --> 0:12:34.160 Dollar Tree came out with some numbers, pretty good numbers. 0:12:34.200 --> 0:12:36.000 The street likes that. The stock's up three point four 0:12:36.040 --> 0:12:40.040 percent today. Dollar Tree is up fifty percent year to date, 0:12:40.080 --> 0:12:44.040 So a great move for that company, that stock. Let's 0:12:44.080 --> 0:12:47.600 turn to Lily Meyer here, Bloomberg Deals reporter for Bloomberg News. 0:12:47.640 --> 0:12:51.120 She covers all the retail companies out there. Talk to 0:12:51.200 --> 0:12:53.320 us about Dollar Tree. What did they say here in 0:12:53.360 --> 0:12:54.280 the latest earnings. 0:12:54.440 --> 0:12:56.920 Yeah, so dollar Tree did well this quarter at matt 0:12:57.000 --> 0:13:01.480 expectations on revenue and same store sale, and it raised 0:13:01.520 --> 0:13:05.320 its profit outlook for the year. I think they really 0:13:05.320 --> 0:13:08.359 have hit a niche in being able to capture consumers, 0:13:08.760 --> 0:13:12.199 both lower end consumers who need cheaper goods and then 0:13:12.280 --> 0:13:14.600 high income consumers who are looking to trade down. 0:13:15.160 --> 0:13:17.640 So, I mean, what do we think about elasticity of 0:13:17.679 --> 0:13:19.800 the lower end consumer right now? Because I mean, if 0:13:19.840 --> 0:13:21.600 you think about Walmart, I used to think of this 0:13:21.640 --> 0:13:24.480 as a company that you know, was a cheaper place 0:13:24.559 --> 0:13:26.200 to shop, but it seems as though it's appealing to 0:13:26.320 --> 0:13:29.280 multiple consumer types. But it seems as though Dollar Tree 0:13:29.320 --> 0:13:31.520 really is a great place for the lower end consumer. 0:13:31.880 --> 0:13:34.560 Yeah, and actually recently Dollar Tree has been looking to 0:13:34.679 --> 0:13:37.520 kind of break into that higher income shopper as well. 0:13:37.600 --> 0:13:41.040 So it has this pricing strategy, so it has some 0:13:41.320 --> 0:13:44.200 products that are still cheaper, but then it has some 0:13:44.360 --> 0:13:47.320 it's getting more products that are more expensive. 0:13:48.280 --> 0:13:52.760 What is Dollar Tree saying about its core consumer out there? 0:13:53.320 --> 0:13:55.160 Who is that core consumer and how are they behaving? 0:13:55.520 --> 0:13:55.720 Yeah? 0:13:55.760 --> 0:13:58.080 So I think it's core consumer is still a lower 0:13:58.160 --> 0:14:01.000 income shopper. Eighty five percent of their products are two 0:14:01.040 --> 0:14:03.559 dollars an under, so they really still have a lot 0:14:03.559 --> 0:14:06.559 of value. So they're seeing those shoppers continue to go in. 0:14:06.640 --> 0:14:09.960 But this quarter they saw traffic down and they attributed 0:14:10.000 --> 0:14:11.520 that to tariff increases. 0:14:12.280 --> 0:14:14.080 See I missed when things were actually a dollar, a 0:14:14.120 --> 0:14:15.240 dollar Tree, a dollar general. 0:14:15.720 --> 0:14:19.720 Did you say two dollars? I remember? Should we change 0:14:19.720 --> 0:14:22.680 the name? And I remember it? John, and I remember 0:14:22.680 --> 0:14:26.320 the five and dime and Penny can do it yep, exactly, 0:14:26.480 --> 0:14:28.600 dating ourselves ourselves, all. 0:14:28.560 --> 0:14:30.960 Right, So what's the takeaway in terms of the outlook. 0:14:31.000 --> 0:14:33.280 I mean, you talked about tariff still being a drag here. 0:14:33.680 --> 0:14:36.120 Yeah, so tariffs will really dragged this quarter. They said 0:14:36.120 --> 0:14:38.440 that's gonna lessen. So I think this was the quarter 0:14:38.480 --> 0:14:41.720 where we're really seeing the biggest tariff impact. It'll be 0:14:41.800 --> 0:14:46.000 really interesting to see what they predict for consumers next year. 0:14:46.160 --> 0:14:49.120 I'm interested to hear about that and also what they 0:14:49.160 --> 0:14:51.440 see for holiday if they continue to see high income 0:14:51.480 --> 0:14:53.120 shoppers trading down for gifts? 0:14:53.400 --> 0:14:58.080 Is dollar stores do they see a surgeon sales seasonal 0:14:58.120 --> 0:15:00.280 surge and sales from holiday sales? Is that? Do they 0:15:00.280 --> 0:15:02.120 see that like a department store would. 0:15:02.480 --> 0:15:04.520 Yeah, I don't know if it's the same surge, but 0:15:04.680 --> 0:15:06.560 you know, they sell a lot of gift wrapping and 0:15:06.640 --> 0:15:09.840 gift bags and some of those smaller gifts stocking stuffers, 0:15:09.880 --> 0:15:11.440 so I think they see a lot of that around 0:15:11.480 --> 0:15:12.119 the holidays. 0:15:12.600 --> 0:15:14.320 So what are we seeing in terms of just the 0:15:14.320 --> 0:15:16.560 broader read on the retail space. This kind of gives 0:15:16.600 --> 0:15:18.320 us a picture of the lower end consumer, But what 0:15:18.360 --> 0:15:19.480 are you seeing across the board? 0:15:19.840 --> 0:15:22.880 So broadly, we're really still seeing consumer spend. So there 0:15:22.880 --> 0:15:25.400 hasn't been that massive pullback that I think some of 0:15:25.480 --> 0:15:28.720 us were imagining might happen. We're still seeing consumer spend, 0:15:28.760 --> 0:15:31.080 but they're really value driven, so they're looking for the 0:15:31.080 --> 0:15:34.240 best deals they can get. They're trading down when they 0:15:34.240 --> 0:15:36.360 need to. They're stocking up on essentials. 0:15:37.320 --> 0:15:41.920 How promotional are retailers right now? Because I mean, I know, 0:15:42.200 --> 0:15:44.840 talking to Punam Gooyle, the retail analysts of Bloomberg Intelligence, 0:15:44.880 --> 0:15:47.400 he says, you know, the more promotions you see out there, 0:15:47.440 --> 0:15:49.320 that's going to be that goes right to the margins, 0:15:49.360 --> 0:15:52.400 the profit margins of some of these retailers. What are 0:15:52.400 --> 0:15:54.240 we seeing this season, that's a good question. 0:15:54.320 --> 0:15:57.040 So this season, we've actually seen some retailers pull back 0:15:57.080 --> 0:16:01.000 on deals to protect their margin. So companies are doing 0:16:01.000 --> 0:16:02.920 that as part of a broader strategy, and then some 0:16:03.000 --> 0:16:05.640 are having to do that because of tariff. So you know, 0:16:05.720 --> 0:16:08.640 for Black Friday, typically they'd offer big discounts and some 0:16:08.720 --> 0:16:11.040 are pulling back or not offering discounts at all. 0:16:11.800 --> 0:16:14.920 So consumers have still been broadly spending in the retail space. 0:16:15.000 --> 0:16:16.240 What are they spending on? 0:16:16.440 --> 0:16:16.720 Is it? 0:16:16.920 --> 0:16:20.080 You know, are we spending money on essentials right now, 0:16:20.160 --> 0:16:21.200 skipping this lurging? 0:16:21.680 --> 0:16:24.960 Yeah, yeah, that's exactly it. So this Black Friday, we 0:16:25.000 --> 0:16:26.680 talked to a lot of folks who were saying they're 0:16:26.680 --> 0:16:29.960 going to just get essentials this Black Friday, so instead 0:16:29.960 --> 0:16:33.960 of buying you know, a Lake Crusette, Dutch oven they were. 0:16:34.000 --> 0:16:35.880 We talked to someone who instead was going to buy 0:16:35.920 --> 0:16:38.320 like three bags of forty pound dog food. 0:16:38.560 --> 0:16:43.880 Oh okay, yeah, I don't have a dog for them, 0:16:43.960 --> 0:16:45.000 right yeah. 0:16:45.520 --> 0:16:49.800 Dot Com so really using you know, deals to get 0:16:49.800 --> 0:16:52.360 things that they need for themselves rather than getting that 0:16:52.400 --> 0:16:53.880 big ticket item they waited for. 0:16:54.400 --> 0:16:57.560 What I learned from talking to retail folks is omni 0:16:57.840 --> 0:17:02.000 channel retail, which is you use both the online and 0:17:02.080 --> 0:17:04.320 the bricks and mortar and maybe you look at something 0:17:04.320 --> 0:17:06.359 online then you want to go touch and feel it, 0:17:06.440 --> 0:17:07.720 or maybe you order it then you pick it up 0:17:07.760 --> 0:17:10.360 at the store. Omni channels that still a thing. 0:17:10.880 --> 0:17:13.399 Yeah, yeah, So we were out there on Black Friday 0:17:13.440 --> 0:17:15.320 and some of the stores, and you know, while a 0:17:15.359 --> 0:17:18.200 lot of people have switched their holiday shopping to be online, 0:17:18.240 --> 0:17:21.080 we still saw a ton of people in stores, especially 0:17:21.119 --> 0:17:24.000 at stores with really good deals and stores that appear 0:17:24.240 --> 0:17:28.000 appealed to young shoppers. So brands like Addicted and Princess 0:17:28.040 --> 0:17:30.960 Polly that are in malls were really flooded with young people. 0:17:31.720 --> 0:17:34.840 Stay with us more from Bloomberg Intelligence coming up after this. 0:17:38.760 --> 0:17:42.440 You're listening to the Bloomberg Intelligence podcast. Catch us Live 0:17:42.520 --> 0:17:45.600 weekdays at ten am Eastern on Apple, Cocklay and Android 0:17:45.640 --> 0:17:48.919 Auto with the Bloomberg Business app. Listen on demand wherever 0:17:49.000 --> 0:17:52.120 you get your podcasts, or watch us live on YouTube. 0:17:52.800 --> 0:17:55.400 Let's talk a little luxury here. That's right down John 0:17:55.400 --> 0:17:58.760 Tucker's alley. Here, Debi, and she's the expert luxury goods 0:17:58.760 --> 0:18:03.199 analyst of Bloomberg Intelligence. She's based in London. There, just 0:18:03.200 --> 0:18:05.560 give us some kind of a post mortem. How was 0:18:05.600 --> 0:18:09.280 twenty twenty five for the luxury companies and maybe what's 0:18:09.280 --> 0:18:10.240 the oulok for twenty six? 0:18:12.200 --> 0:18:17.359 Hi. Yeah, So we started out twenty twenty five with 0:18:17.560 --> 0:18:20.760 an expectation that we'd moved back to growth, and that 0:18:20.880 --> 0:18:24.120 certainly didn't materialize through the first half of the year, 0:18:25.680 --> 0:18:28.560 but we seem to be ending at around three to 0:18:28.600 --> 0:18:32.640 four percent growth as we exit twenty twenty five. Now, 0:18:32.640 --> 0:18:36.439 the US has been robust, Middle East doing very well, 0:18:36.680 --> 0:18:38.960 but particularly in the first half the year, it was 0:18:39.080 --> 0:18:42.080 China which was the drag. And what we've noticed is 0:18:42.119 --> 0:18:45.879 we end the year. We've actually just heard on a 0:18:45.920 --> 0:18:49.440 fireside chat over the last few days from Laurel where 0:18:49.440 --> 0:18:52.320 they're mentioning high end beauty doing very well out of 0:18:52.359 --> 0:18:56.639 the US, but also in China too, so they're adding 0:18:56.680 --> 0:18:59.680 to what we've heard from the luxury companies where we've 0:18:59.720 --> 0:19:04.040 seen two thirds of luxury companies and most of the 0:19:04.080 --> 0:19:07.440 top ten switching to growth in China in Q three 0:19:07.800 --> 0:19:10.240 from a low base from negatives a year ago. But 0:19:10.359 --> 0:19:13.960 actually that we're calling green shoots into the end of year. 0:19:15.200 --> 0:19:17.160 How are these companies holding up as it re leads 0:19:17.200 --> 0:19:18.320 to tariff overhangs. 0:19:20.440 --> 0:19:23.680 Yeah, so we did a lot of work around May 0:19:23.760 --> 0:19:26.520 time and again through July and August with the different 0:19:26.600 --> 0:19:30.840 tariff rates moving around, and what we've actually seen it 0:19:30.920 --> 0:19:36.400 was less detrimental overall in our numbers. We probably think 0:19:36.440 --> 0:19:39.639 that EPs won't be pulled as much as was expected 0:19:39.680 --> 0:19:42.880 because there have been some cost savings and the biggest 0:19:42.920 --> 0:19:46.440 companies and those that were where brands were really in 0:19:46.520 --> 0:19:49.959 favor have managed to pass on price and generally because 0:19:50.000 --> 0:19:54.800 these companies operate on high gross margin, the cost into 0:19:54.840 --> 0:19:57.520 the US, they've moved around two to FOXX and on 0:19:57.600 --> 0:20:00.520 additional price into the US as well well as two 0:20:00.680 --> 0:20:03.320 three percent from the beginning of the year, So some 0:20:03.359 --> 0:20:06.320 of those brands have absorbed passing through six seven percent 0:20:06.400 --> 0:20:10.000 pricing to the US consumer. And we think into twenty 0:20:10.080 --> 0:20:13.480 twenty six that moves nearer to two to three percent overall, 0:20:13.600 --> 0:20:17.320 so it should be less intimidating for the consumer overall 0:20:17.640 --> 0:20:20.560 twenty twenty six. So it's one of our drivers for 0:20:20.640 --> 0:20:21.600 the year ahead. 0:20:22.119 --> 0:20:25.040 DEV talk to us about the Chinese consumer. We don't 0:20:25.080 --> 0:20:27.399 see the Chinese consumer here. I'm going to walk the 0:20:27.440 --> 0:20:30.800 Penn station today, walk down Fifth Avenue, Madison Avenue. I'll 0:20:30.800 --> 0:20:32.600 see a lot of Europeans. I see a lot of 0:20:32.640 --> 0:20:36.320 American tours. I won't see many from Asia. Are they 0:20:36.560 --> 0:20:39.240 not traveling? So is that an impact for New York 0:20:39.359 --> 0:20:41.160 and London and Paris and things like that. 0:20:42.760 --> 0:20:45.720 We actually have a survey out of our Asia office 0:20:45.760 --> 0:20:50.680