WEBVTT - Home Building, Consumers, And Green Products (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.520 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:23.160 at Bloomberg dot com slash podcast. Housing Starts month a month, 0:00:23.200 --> 0:00:26.400 down nine point six percent. It's been really during this 0:00:26.560 --> 0:00:29.600 entire pandemic. The one area the economy that just powered 0:00:29.720 --> 0:00:33.519 on from day one was the housing market. Announcing a 0:00:33.520 --> 0:00:36.080 little bit of challenges out there in terms of higher 0:00:36.080 --> 0:00:38.720 interest rates and just other macro trends. But let's get 0:00:38.720 --> 0:00:42.519 the latest on what's going on in the world of construction, housing, construction, 0:00:42.560 --> 0:00:46.760 residential construction. Peter Jackson, chief financial officer of Builders First Choice. 0:00:47.040 --> 0:00:49.640 That is a New York Stock Exchange listed company b 0:00:50.240 --> 0:00:53.599 l d R's a ticker you put into your Bloomberg terminal. Uh, 0:00:53.600 --> 0:00:56.000 it's got about a ten point seven billion dollar market 0:00:56.000 --> 0:00:59.080 cap here it's off off a couple of percent today 0:00:59.480 --> 0:01:02.320 at sixty eight cents per share. Bet thanks what for 0:01:02.400 --> 0:01:04.520 joining us here. We saw that housing start data here 0:01:04.720 --> 0:01:06.520 we'd love for you to just provide us kind of 0:01:06.520 --> 0:01:09.080 from your perspective of your company, kind of how do 0:01:09.200 --> 0:01:13.679 you view viewing the housing market today? Yeah, good morning, gentleman, 0:01:13.720 --> 0:01:15.880 thank you for having me on UM. You know, this 0:01:15.920 --> 0:01:19.000 market has been really amazing for quite a long run, 0:01:19.280 --> 0:01:21.160 and Q two for us, we were really hitting on 0:01:21.160 --> 0:01:26.559 all cylinders, certainly seeing nice volumes, pricing, good volume, approad 0:01:26.880 --> 0:01:29.600 swath of the products that we sell. So it's certainly 0:01:29.640 --> 0:01:34.000 been a very nice trend over the recent past. But 0:01:34.080 --> 0:01:36.160 certainly we've been watching it the same way you have, 0:01:36.280 --> 0:01:40.360 and and the impacts of interest rates and inflation have 0:01:40.480 --> 0:01:42.520 started to have an impact on consumers. Now we've been 0:01:42.560 --> 0:01:45.280 buffered a bit, certainly because of the youths under construction, 0:01:45.800 --> 0:01:48.080 but we've seen a bit of that pause, you know, 0:01:48.160 --> 0:01:52.120 some some lower end maybe first time buyers getting priced out, 0:01:52.360 --> 0:01:56.640 but also some thoughtfulness by home buyers and i'd say 0:01:56.640 --> 0:01:59.280 maybe a prudent reaction to by home builders to be 0:01:59.320 --> 0:02:02.040 thoughtful about how many homes are being built and what 0:02:02.120 --> 0:02:07.480 they're going to purchase those at what prices. So how 0:02:08.120 --> 0:02:14.440 much damage is the Federal Reserve doing to this housing market? Well, 0:02:14.480 --> 0:02:17.440 they're an important component. No doubt. Um, you can't move 0:02:17.840 --> 0:02:23.399 mortgage rates that much without having a tempering impact. Um, certainly, 0:02:23.480 --> 0:02:25.960 we've we've had an impact as a results of inflation. 0:02:26.040 --> 0:02:29.240 You know, broadly speaking, building product costs have gone up 0:02:29.280 --> 0:02:32.880 quite a bit, and that combination has has certainly slowed 0:02:32.919 --> 0:02:35.840 things down. But there's no question that capacity on the 0:02:35.880 --> 0:02:41.519 supply side have limited the available products available homes, and 0:02:41.880 --> 0:02:44.640 demand has really held up quite strong. We're confident in 0:02:44.680 --> 0:02:47.280 that demand in the mid to long term, even if 0:02:47.280 --> 0:02:50.280 fires are taking a pause right now. You know, on 0:02:50.360 --> 0:02:53.760 the you guys employ about twenty employees. That's what we 0:02:53.800 --> 0:02:55.800 show here on a Bloomberg terminal. Talk to us about 0:02:55.880 --> 0:02:59.680 labor and getting people on the you know, for your 0:02:59.720 --> 0:03:02.079 comp and it's just that we see it across the board. 0:03:02.440 --> 0:03:05.560 Companies really really challenge in terms of labor. What's it 0:03:05.600 --> 0:03:10.000 like in your business, Yeah, you're right, it's challenging for 0:03:10.120 --> 0:03:14.120 us to you know, there's always a challenge to find 0:03:14.160 --> 0:03:17.160 great people. There's a challenge to fill roles that are 0:03:17.760 --> 0:03:22.760 critical to the business, things like both like drivers, roles 0:03:22.880 --> 0:03:26.760 like fabricators, and a lot of our manufactured product facilities. 0:03:27.120 --> 0:03:30.120 And there's a lot of competition out there for that 0:03:30.160 --> 0:03:33.680 type of excellence throughout the industry right and broader than 0:03:33.680 --> 0:03:37.600 our industry. We continue to find ways to you know, 0:03:37.840 --> 0:03:42.640 lwer people in right looking for performance opportunities. We compensate 0:03:42.760 --> 0:03:45.880 very well. I think the opportunity to be part of 0:03:45.880 --> 0:03:49.640 the American dream certainly has an allure um you know, 0:03:49.720 --> 0:03:53.000 even if it maybe has some dark days at certain points. 0:03:53.040 --> 0:03:55.760 I think overall it's still a great industry to be in, 0:03:55.840 --> 0:03:58.080 and we continue to be able to recruit. Can you 0:03:58.160 --> 0:04:01.600 get uh? Is this stronger dollar helping you out? In 0:04:01.680 --> 0:04:07.840 terms of costs for commodities? You know, most of what 0:04:07.920 --> 0:04:10.720 we do in commodities is domestic. You know, there's a 0:04:10.720 --> 0:04:14.280 bit that comes in from Canada. Certainly, probably about of 0:04:14.320 --> 0:04:16.320 the would that we that we use in this country 0:04:16.400 --> 0:04:19.640 comes from Canada, but most of it, most of its domestic, 0:04:19.720 --> 0:04:23.480 So not that much impact from currentcy. You know. It's 0:04:23.480 --> 0:04:25.880 interesting we think about the housing market in the US, 0:04:26.440 --> 0:04:28.880 Peter and people say there's a there's a real shortage there, 0:04:28.880 --> 0:04:30.719 and I think, you know, as as I think about 0:04:30.760 --> 0:04:32.839 some of the you know, the homebuilding companies we talked to, 0:04:33.800 --> 0:04:35.839 you know, they talked about, you know, building these McMansions, 0:04:35.880 --> 0:04:38.000 if you will, because that's where the margin is. But 0:04:38.080 --> 0:04:40.440 how about you know, some of the starter homes are 0:04:40.480 --> 0:04:42.280 you what kind of activity are you seeing there in 0:04:42.360 --> 0:04:45.040 terms of some of the entry level buildings. I think 0:04:45.040 --> 0:04:47.080 about some of these markets that are just exploding in 0:04:47.080 --> 0:04:49.880 the last couple of years, like in Austin, Texas, for example, 0:04:49.920 --> 0:04:53.880 they gotta awesome kind of starter homes, don't they. You're 0:04:53.880 --> 0:04:56.760 absolutely right, Yeah, starter homes has been a challenge, right, 0:04:56.839 --> 0:05:01.120 it's the it's the opportunity to allow people to take 0:05:01.120 --> 0:05:04.239 advantage of that American dream. And it's a challenge because 0:05:04.279 --> 0:05:07.719 they're they're smaller, right, there's less dollars available, there's left 0:05:07.760 --> 0:05:11.159 opportunity for margin. But I think home builders have made 0:05:11.279 --> 0:05:15.280 really good progress in creating offerings that makes sense for 0:05:15.320 --> 0:05:17.760 people in that category, right that are you know, a 0:05:17.760 --> 0:05:20.920 bit smaller, maybe a bit simpler to build, fewer options. 0:05:21.520 --> 0:05:23.680 But certainly, you know, some of the large builders have 0:05:23.760 --> 0:05:26.839 really committed to it, and we see them staying committed 0:05:26.880 --> 0:05:28.359 to it, you know, even in a bit of a 0:05:28.400 --> 0:05:31.120 downturn like this, and I think you'll see more of 0:05:31.160 --> 0:05:34.320 that into the future because it is a critical part um. 0:05:34.400 --> 0:05:36.200 That's not to say we don't like building the bigger 0:05:36.240 --> 0:05:38.359 houses who are certainly you know, a good way to 0:05:38.360 --> 0:05:41.640 build the higher margins. Leave the starter houses to Paul 0:05:41.680 --> 0:05:45.520 and his company exactly, all right, Peter, thanks so much 0:05:45.520 --> 0:05:48.279 for joining us. Really appreciate getting your thoughts there. Peter Jackson. 0:05:48.320 --> 0:05:52.120 He's a chief financial officer for Builders First Source as 0:05:52.160 --> 0:05:55.360 a New York exchange company. B L d R is 0:05:55.400 --> 0:05:57.520 a ticket you can put into your Bloomberg terminal. They're 0:05:57.520 --> 0:06:04.520 based in Dallas, Texas doing the homebuilding stuff. You know what, 0:06:04.800 --> 0:06:07.080 I don't know, call me a glass half full kind 0:06:07.120 --> 0:06:10.120 of person, but we had some some pretty good jobs 0:06:10.160 --> 0:06:12.840 numbers a couple of weeks ago, inflation coming in a 0:06:12.839 --> 0:06:16.080 little bit better than expected. Maybe that's you know, kind 0:06:16.080 --> 0:06:19.000 of peeking. Um. One can make the argument that may 0:06:19.120 --> 0:06:21.320 you know, things aren't so bad at there, that the Fed, 0:06:21.520 --> 0:06:23.400 you know, may not have to be as aggressive as 0:06:23.440 --> 0:06:24.800 we originally thought. That's kind of what some of the 0:06:24.839 --> 0:06:26.520 equity markets have been telling us over the last four 0:06:26.600 --> 0:06:28.720 or five weeks. Um, But let's check with somebody who 0:06:28.760 --> 0:06:31.440 does this stuff for a living. Ben Emmon's, managing director 0:06:31.480 --> 0:06:35.480 of Global macro Strategy at Medley Global Advisors, joins us. 0:06:35.560 --> 0:06:39.080 Live here in our Bloomberg Interactive Broker Studio. So Ben, 0:06:39.480 --> 0:06:41.520 you know again, I'm gonna be a half the glass 0:06:41.520 --> 0:06:43.680 half full person. It seems pretty good out there. Can 0:06:43.720 --> 0:06:47.000 my Felter reserve maybe not be as aggressive in raising 0:06:47.080 --> 0:06:50.760 rates as maybe were originally thought Paul and math it's 0:06:50.800 --> 0:06:53.440 great to be here. Um well, I think we want 0:06:53.440 --> 0:06:56.560 to be cautious there, because you know, the inflation story 0:06:56.640 --> 0:06:59.600 isn't done. I think that's what the equity market may 0:06:59.640 --> 0:07:02.320 have been assuming, is that as we started to turn 0:07:02.400 --> 0:07:05.600 in commodity prices around the mid June, and that now 0:07:05.720 --> 0:07:11.400 coming through headline inflation and no Master and um Brainard 0:07:11.440 --> 0:07:13.800 had guided the markets earlier saying okay, we want to 0:07:13.840 --> 0:07:16.280 see the client in headline inflation every month and then 0:07:16.280 --> 0:07:19.800 well maybe change our course. That the markets listened too 0:07:19.880 --> 0:07:23.320 much to that that the inflation picture isn't so changing 0:07:23.360 --> 0:07:26.119 just yet. And I take note of like the gas 0:07:26.120 --> 0:07:30.080 prices in Europe spiking again, in Asia spiking again, Canadian 0:07:30.120 --> 0:07:32.720 inflation much stronger than expected the more this morning, which 0:07:32.840 --> 0:07:36.200 is by the way, effects are inflation. So I think 0:07:36.240 --> 0:07:38.840 you want to be somewhat cautious on that. The fat 0:07:38.960 --> 0:07:42.440 is just turning his course here. The communications come out 0:07:42.480 --> 0:07:44.360 obviously clear about what we want to try to reach 0:07:44.400 --> 0:07:47.520 four percent of a fat funds rate maybe higher. They're 0:07:47.560 --> 0:07:49.800 pushing back and the market hasn't listened so far to that, 0:07:49.880 --> 0:07:51.640 and that's what everybody's looking at. There's a big di 0:07:51.760 --> 0:07:55.280 virgins again. But I think the inflation pressure is is 0:07:55.280 --> 0:07:58.360 not abating such that we're in a let's say, automatic 0:07:58.360 --> 0:08:01.760 descent and inflation the next months. I had, right, And 0:08:01.760 --> 0:08:04.240 if they go fifty instead of seventy five, isn't that 0:08:04.280 --> 0:08:07.120 a signal that they're soft that you could take it 0:08:07.160 --> 0:08:11.280 that way? Yeah, you know, I will. You could think 0:08:11.320 --> 0:08:14.720 about it like, okay, they are moderating the tightening paces 0:08:14.840 --> 0:08:18.200 powless set at some point they would do that. Um, 0:08:18.240 --> 0:08:19.840 So it's a bit of a toss still here. Right, 0:08:19.880 --> 0:08:21.880 the market is actually priced right in the middle of 0:08:21.960 --> 0:08:24.480 fifty and seventy five for September. I think there is 0:08:24.560 --> 0:08:26.960 caution markets and the interest rates are at least thinking 0:08:27.600 --> 0:08:29.400 you can't take your chances that they may have to 0:08:29.440 --> 0:08:32.560 move seventy five to be sure that infacient is indeed 0:08:32.559 --> 0:08:37.040 in this descent lower from here. So I think the 0:08:37.080 --> 0:08:40.520 feathers is still in a tough position, definitely, given the 0:08:40.520 --> 0:08:44.680 the commodity picture, that's not like completely changed. I'm watching, 0:08:44.720 --> 0:08:47.319 for example, what's happening in Europe yep. Alright, so f 0:08:47.440 --> 0:08:50.240 o MC meeting minutes tomorrow at two pm Wall Street time. 0:08:50.280 --> 0:08:54.079 My natural inclination is to ignore it. I probably shouldn't 0:08:54.080 --> 0:08:56.720 ignore it tomorrow, should I should pay a little with attention. 0:08:56.920 --> 0:08:58.839 You should always pay attention to it no matter what 0:09:00.240 --> 0:09:03.800 there's But it was very interesting discussions in there and information. 0:09:03.840 --> 0:09:06.560 Of course, this is the July meeting. They were debating 0:09:06.960 --> 0:09:09.160 the pace of tightening there. That will be in there. 0:09:09.600 --> 0:09:12.480 They were debating there, maybe even the balance sheet and 0:09:12.559 --> 0:09:15.720 the outlook. I think it will be much about what 0:09:15.840 --> 0:09:18.040 we saw that press conference. Of what has come out 0:09:18.120 --> 0:09:20.400 so far since the press conference, by the likes of 0:09:20.520 --> 0:09:24.480 Cascari and Ballard and Master and others. Everyone is still 0:09:24.480 --> 0:09:28.600 on the same camp of about we move. We have 0:09:28.679 --> 0:09:31.520 to keep moving with rage. We can't stop, right, that's clearly, 0:09:32.040 --> 0:09:34.560 we can maybe even slow down. We can certainly not 0:09:34.679 --> 0:09:38.520 say what the market's price from going from September investigates 0:09:38.559 --> 0:09:42.640 to November. That's probably not likely either. So I think 0:09:42.640 --> 0:09:44.600 a lot of that will be in the minutes tomorrow. 0:09:45.080 --> 0:09:47.839 The market reaction maybe muted because it's a lot of 0:09:47.920 --> 0:09:51.280 us communicated out there, but everybody's kind of edgy here. 0:09:51.280 --> 0:09:53.600 I think still about these surprises, right right, it's the 0:09:53.600 --> 0:09:56.000 minutes or the Jackson hole coming up. You mentioned the 0:09:56.040 --> 0:09:59.280 balance sheet. What do you see when you look under 0:09:59.280 --> 0:10:01.640 the hood, you know, Paul and I just know about 0:10:01.720 --> 0:10:04.120 the headline rate, but there's a lot of other things 0:10:04.160 --> 0:10:07.120 that the Fed do, the discount window and money supply 0:10:07.400 --> 0:10:12.640 and what are they doing that, um maybe affecting financial 0:10:12.679 --> 0:10:16.160 conditions because they're certainly not bringing them down, you know, no, 0:10:16.360 --> 0:10:19.480 and the financial conditions of late have been particularly influenced 0:10:19.520 --> 0:10:22.559 by real interest rates right where at least in Julyman 0:10:22.600 --> 0:10:25.000 they were falling as much to come up a bit 0:10:25.160 --> 0:10:28.880 from from since then, Um, yeah, the balance sheet is 0:10:28.920 --> 0:10:33.160 about an asset and liability site accounting entity. If you 0:10:33.160 --> 0:10:36.200 think about the liability sign in particular, you have reverse 0:10:36.320 --> 0:10:39.480 repos and you have these reserves, and there's a lot 0:10:39.480 --> 0:10:41.640 of analysis out there of how the feather is going 0:10:41.640 --> 0:10:46.320 to manage to too. Because the experience was about money 0:10:46.360 --> 0:10:50.320 center banks, the big banks hoarding quote unquote reserves as 0:10:50.440 --> 0:10:52.840 the economy started to change, as they cut more cautious 0:10:52.920 --> 0:10:55.440 as they started to see that the foot and foot 0:10:55.440 --> 0:10:58.320 of a drawing liquating from the system. I think that's 0:10:58.360 --> 0:11:00.920 still a risk to mark gets in the sense of 0:11:01.160 --> 0:11:04.160 we've got repo disruptions from that. But there's also an 0:11:04.160 --> 0:11:06.960 effect on the economy in itself of banks heart reserves. 0:11:07.360 --> 0:11:10.160 They're not lending as much, credit is being more constrained. 0:11:10.520 --> 0:11:12.400 That's one thing under the hood of the bounty I 0:11:12.400 --> 0:11:14.920 think to pay attention to. The Other part is that 0:11:14.960 --> 0:11:18.960 reverse repo facility that's so bloated because there's so limited 0:11:19.000 --> 0:11:22.240 supply of T bills at the moment that can change. 0:11:22.720 --> 0:11:25.160 I've always thought about that as a low hanging food 0:11:25.160 --> 0:11:27.960 for the fat to online that first and leave reserves 0:11:27.960 --> 0:11:31.440 alone and then manage the assets side. If that's the case, 0:11:31.520 --> 0:11:35.360 then that's a more benign strategy for markets. In terms 0:11:35.400 --> 0:11:38.280 of the bound sheet, some say that that's maybe the 0:11:38.280 --> 0:11:40.520 direction we're heading. At the end of the day, the 0:11:40.520 --> 0:11:42.560 bound she is going to contract, and I think when 0:11:42.600 --> 0:11:45.319 Barkin was on the other day in one of the networks, 0:11:45.440 --> 0:11:47.760 he said, like, it's the bounc sheet and rad has 0:11:47.760 --> 0:11:50.280 are symmetric, so in other words, we're going to continue 0:11:50.320 --> 0:11:53.400 to wind it out ninetllion a month, and we're gonna 0:11:53.440 --> 0:11:56.800 keep raising rates. That's I think a viewing in the 0:11:56.800 --> 0:11:59.000 fat that's more broadly health. That's what they want to 0:11:59.000 --> 0:12:01.800 stay on on that course. All right, Ben, we appreciate 0:12:01.800 --> 0:12:05.839 you coming to our studios here here at is your 0:12:05.880 --> 0:12:09.600 firm based at one World Trade World Trade Center? Yeah? 0:12:09.640 --> 0:12:12.160 What's it like? What's the one World Trade Center building? Like? 0:12:12.200 --> 0:12:15.240 I've not been in it. It's fantastic. It's like brand new, 0:12:15.840 --> 0:12:18.640 really hyper modern building. I went all the way up 0:12:18.640 --> 0:12:21.960 to the upper floor, right, fantastic. Yeah, it's really nice. 0:12:22.040 --> 0:12:25.000 Like is anybody in it? Yeah, it's a favorite of 0:12:25.160 --> 0:12:26.840 what's it like down in Lower manhatt I haven't been 0:12:26.840 --> 0:12:28.439 down there in a long time. On a weekday, a 0:12:28.559 --> 0:12:31.320 work day, is there are there people there? I mean 0:12:31.440 --> 0:12:34.559 we we we look at the prep index, which manages traffic. 0:12:34.679 --> 0:12:37.959 You know, what's it like downtown on a weekday, It's 0:12:38.080 --> 0:12:40.320 it's I think it's fairly busy there. If you know, 0:12:40.640 --> 0:12:44.040 you can tell people are definitely behind the past the pandemic. 0:12:44.480 --> 0:12:48.480 No masks everybody. It's like, you know, walking around, it's 0:12:48.480 --> 0:12:51.679 not fully back to full occupancy. That's clear. Even on 0:12:51.760 --> 0:12:56.240 the office they're not fully occupied. Um, maybe after Libid 0:12:56.280 --> 0:12:58.960 Day they want to change advice. Are the tourists coming back. 0:12:59.240 --> 0:13:03.560 I've definitely seen tourism even in midtown here right, that's 0:13:03.559 --> 0:13:05.800 just happening. You've got to get the man on the 0:13:05.800 --> 0:13:08.520 ground kind of view because I don't get to downtown. 0:13:08.760 --> 0:13:10.560 We could just go down there, we could just do that, 0:13:10.800 --> 0:13:12.360 but I mean we just you know, I kind of 0:13:12.559 --> 0:13:15.520 kind of go back and forth the Bloomberg HQ, but 0:13:15.559 --> 0:13:17.560 you wonder about what different parts of the city and 0:13:17.600 --> 0:13:20.880 downtown you know, Um, the New seven World Trade that's 0:13:20.880 --> 0:13:22.520 where I worked when I was at Solomon Brothers, the 0:13:22.520 --> 0:13:25.400 old seven World Trade, the One World Trade, they got 0:13:25.400 --> 0:13:28.400 the whole. A couple of towers are up and running 0:13:28.400 --> 0:13:31.680 and looks just awesome down there, and the oculus and everything. 0:13:31.960 --> 0:13:34.160 I mean, the rebuilding Lower Manhattan. Folks, if you haven't 0:13:34.160 --> 0:13:36.760 been to the city in a while, go down to 0:13:36.760 --> 0:13:39.320 the Lower Manhattan. The rebuilding there has just been awesome, 0:13:40.040 --> 0:13:43.120 anchored by One World Trade Center, which is just an 0:13:43.160 --> 0:13:46.720 awesome building. And uh and Ben Emmon's Managing Director Global 0:13:46.720 --> 0:13:49.720 macro Strategy at Medley Global Advisors uh MET that's where 0:13:49.720 --> 0:13:51.880 Medley is. They're based on One World Trade Center, forty 0:13:51.920 --> 0:13:54.880 seven floor. So we appreciate Ben coming into our Bloomberg 0:13:54.880 --> 0:13:59.360 and Actors studios here in midtown. Uh, Manhattan, folks out 0:13:59.400 --> 0:14:02.559 and about Tuesday, Wednesday and Thursdays. This city is pretty bustling, 0:14:05.080 --> 0:14:09.360 all right. We had some retailer's report. Home Depot stocks 0:14:09.400 --> 0:14:12.800 up four percent today, Walmart a little bit better than expected, 0:14:12.800 --> 0:14:15.880 although they lower their expect their forecast twice. But that 0:14:15.920 --> 0:14:18.360 stocks up five percent today. But we've got somebody who 0:14:18.400 --> 0:14:23.240 does uh follow these big retailers, Jen Bartashes, senior equity 0:14:23.280 --> 0:14:26.760 research analysts for Bloomberg Intelligence. Jen, you joined Bloomberg in 0:14:26.800 --> 0:14:29.800 two thousand two. This is twenty years for you. It's 0:14:29.800 --> 0:14:32.120 been a long time, that's for sure. Paul Nice and 0:14:32.200 --> 0:14:35.520 Jen's had leadership positions all throughout Bloomberg and you know, 0:14:35.560 --> 0:14:38.000 maybe ten years ago we we entice her to join 0:14:38.040 --> 0:14:41.359 Bloomberg Intelligence, and since then she's built this great franchise 0:14:41.400 --> 0:14:44.160 looking at some of these big retailers here. Uh, And 0:14:44.200 --> 0:14:47.560 we appreciate Jen's research at b I Go. Jen talked 0:14:47.560 --> 0:14:50.840 to us about home Depot, Walmart, maybe what you expect 0:14:50.840 --> 0:14:53.960 from Target tomorrow. What are some of the takeaways from 0:14:53.960 --> 0:14:57.640 these retailers? Well, thanks, Paul. You know, when I look 0:14:57.720 --> 0:15:00.000 at these big retailers, I think some of the big 0:15:00.040 --> 0:15:03.840 takeaways are that things are maybe not as bad as 0:15:03.840 --> 0:15:08.400 everyone was thinking, um, And that these retailers, especially Walmart 0:15:08.680 --> 0:15:11.960 in particular, is really getting better at managing their supply 0:15:12.080 --> 0:15:14.680 chain UM and that's helping to smooth things out throughout 0:15:14.680 --> 0:15:18.280 the entire business UM. And so it does give a 0:15:18.280 --> 0:15:20.720 little bit of confidence that the second half of this 0:15:20.880 --> 0:15:23.280 year may actually turn out to be better than we 0:15:23.320 --> 0:15:27.400 additionally has anticipated, especially for retailers that cater to kind 0:15:27.440 --> 0:15:31.160 of the lower income to middle income consumer. So, Jen, 0:15:31.680 --> 0:15:33.840 one of the things that we had learned over the 0:15:33.840 --> 0:15:36.960 past several quarters is some of the retailers had some 0:15:37.400 --> 0:15:40.640 bloated inventories and that was kind of impacting their margins 0:15:40.680 --> 0:15:42.600 as I had to cut price to kind of move 0:15:42.640 --> 0:15:45.800 that inventory. Is that still an issue? It is definitely 0:15:45.840 --> 0:15:48.080 still an issue. Um. We we heard Walmart talk about 0:15:48.120 --> 0:15:51.120 it this morning, but more importantly when we're looking and 0:15:51.240 --> 0:15:54.480 turning it to look at Target for tomorrow. UM. You know, 0:15:54.560 --> 0:15:57.800 Target had a slightly different approach to handling their inventory 0:15:57.880 --> 0:15:59.760 than Walmart, and that they were choosing to sort of 0:15:59.800 --> 0:16:02.040 rip the band aid off and try to shed as 0:16:02.120 --> 0:16:04.480 much as their inventory in the second quarter as possible 0:16:04.920 --> 0:16:06.960 UM and so they were really looking to call that 0:16:07.120 --> 0:16:09.560 they were canceling some future orders in order to right 0:16:09.600 --> 0:16:12.880 size their inventory. UM and that does mean that their 0:16:12.920 --> 0:16:17.160 their profit will be significantly crimp tomorrow. But if if 0:16:17.160 --> 0:16:19.880 the consumer is behaving a little bit better than expected, 0:16:20.120 --> 0:16:22.400 there may be a slight surprise for Target tomorrow on 0:16:22.440 --> 0:16:27.560 the upside. So what's the UM deal with the inventory 0:16:27.600 --> 0:16:31.440 issues that Walmart has been having? Target had had them 0:16:31.480 --> 0:16:34.320 as well. Do you think they're going to fare just 0:16:34.400 --> 0:16:38.280 as poorly as Walmart on the home goods and electronic side. Well, 0:16:38.600 --> 0:16:40.960 you know, home goods and electronics are certainly two of 0:16:40.960 --> 0:16:43.360 the areas UM where Target actually has a little more 0:16:43.400 --> 0:16:46.560 exposure even than Walmart is on apparel because they are 0:16:46.640 --> 0:16:49.840 so strong in apparel. And you know, this is the 0:16:49.880 --> 0:16:52.680 time when they're selling through their excess summer inventory, when 0:16:52.720 --> 0:16:55.760 they're trying to clear out seasonal merchandise UM and so 0:16:56.000 --> 0:16:58.960 the discounting that's been happening is is higher than it 0:16:59.240 --> 0:17:03.080 usually is this time of year because of that excess inventory. So, 0:17:03.360 --> 0:17:05.000 you know, the good news is that if they were 0:17:05.040 --> 0:17:09.040 successful in actually canceling orders, and Walmart mentioned this morning 0:17:09.040 --> 0:17:11.840 that they also canceled a lot of orders to sort 0:17:11.880 --> 0:17:14.440 of right size inventory. Then they should be set up, 0:17:14.600 --> 0:17:16.760 you know, pretty well for the second half of the year. 0:17:17.920 --> 0:17:20.560 All right, Jen, it's mid August. The last thing I 0:17:20.640 --> 0:17:23.000 want to think about are the holidays. But I know, 0:17:23.080 --> 0:17:26.399 you retail analyst people, you do, in fact think about 0:17:26.400 --> 0:17:29.000 that at this time. So what are the retailers telling 0:17:29.000 --> 0:17:32.320 me about the back to school and the holiday season? 0:17:32.440 --> 0:17:34.240 Did they think it's going to be good, bad, or 0:17:34.240 --> 0:17:36.720 and different? Well, right now we're in the midst of 0:17:36.760 --> 0:17:39.040 back to school, Um, it seems that it will be 0:17:39.080 --> 0:17:42.240 a fairly solid season. Um. It's probably not going to 0:17:42.320 --> 0:17:45.320 be stellar, um, but but fairly solid. Um. But when 0:17:45.320 --> 0:17:49.119 you look at holiday, um, it's it's looking a little 0:17:49.119 --> 0:17:51.479 better than it did even a month ago. Um. You know, 0:17:51.560 --> 0:17:55.439 as these retailers are showing that they're able to to 0:17:55.520 --> 0:17:57.960 work through some of their supply chain issues, UM, that 0:17:58.040 --> 0:18:00.600 that gives a little bit of confidence. But but more importantly, 0:18:01.040 --> 0:18:03.560 on the macro side, we're seeing fuel prices come down, 0:18:03.960 --> 0:18:07.880 We're seeing food inflations start to stabilize in some categories, 0:18:08.320 --> 0:18:11.080 and that means that you know, the consumer pivoted very 0:18:11.119 --> 0:18:14.560 quickly when those costs escalated, and if the consumer pivots 0:18:14.680 --> 0:18:17.960 back just as quickly as those costs come down, that 0:18:18.000 --> 0:18:20.920 could really set us up for a nice strong holiday 0:18:20.920 --> 0:18:24.000 season this fall. Jen, I know you also follow the 0:18:24.040 --> 0:18:28.080 supermarket business. Talk to us about the cost of food, 0:18:28.320 --> 0:18:31.240 kind of where are we how did the supermarkets think 0:18:31.280 --> 0:18:33.879 it's gonna trend over the next several months. I know 0:18:33.880 --> 0:18:36.480 you're pretty close to that industry. Yeah, and you know, 0:18:36.520 --> 0:18:39.760 food inflation is is slowly starting to stabilize. UM. But 0:18:39.800 --> 0:18:42.000 the issue that we really have is that the package 0:18:42.000 --> 0:18:45.399 food companies are still struggling to control their costs, and 0:18:45.440 --> 0:18:49.640 that means that they're passing through still additional price increases 0:18:49.640 --> 0:18:52.280 to the retailers. And for the retailers then like the 0:18:52.359 --> 0:18:54.520 Krogers of the world, or the Albertson's of the world, 0:18:54.840 --> 0:18:58.080 and Walmart for that matter, who sells a lot of groceries. UM, 0:18:58.119 --> 0:19:01.960 it's very hard to to not pass prices on to consumers, 0:19:01.960 --> 0:19:04.919 and so there's a there's a lag effect that you know, 0:19:04.960 --> 0:19:07.920 when the actual commodity prices come down, it takes time 0:19:07.960 --> 0:19:11.120 to move through that whole food chain, from the manufacturers 0:19:11.119 --> 0:19:13.240 through the through to the retailers and then to the 0:19:13.280 --> 0:19:16.719 consumer before we see some relief. And so you know, 0:19:16.760 --> 0:19:18.600 when we look out towards the end of the year, 0:19:19.000 --> 0:19:21.880 we see food inflation remaining elevated until we get into 0:19:21.920 --> 0:19:26.159 the early but it should become more manageable as the 0:19:26.240 --> 0:19:30.679 year progressive. Alright, So the stock does it recover to 0:19:30.760 --> 0:19:35.480 the highs that we saw before the profit warning? Your 0:19:35.520 --> 0:19:39.320 meaning target? Um? No, I'm talking about Walmart, but in 0:19:39.359 --> 0:19:42.560 general retailers, I mean, did they come back? Well? I 0:19:42.600 --> 0:19:44.840 think that if if we have a good back to 0:19:44.880 --> 0:19:47.439 school season, that will create a lot of confidence in 0:19:47.520 --> 0:19:51.000 terms of investors for the holiday season. Um. I don't 0:19:51.000 --> 0:19:53.760 know that we'll recapture everything that was lost um year 0:19:53.800 --> 0:19:57.040 to date, um, given given the challenges that they've had, 0:19:57.080 --> 0:19:59.760 but there's certainly some cause for some optimism as we 0:19:59.800 --> 0:20:01.800 will towards the end of the year. And Jen just 0:20:01.840 --> 0:20:04.880 real quickly, thirty seconds are people going to the stores? 0:20:05.000 --> 0:20:06.480 So when I have to look at the Walmart earnings 0:20:06.520 --> 0:20:10.000 is hard target earnings? Is that e commerce? Is that 0:20:10.040 --> 0:20:12.520 people going to the stores? Where are we on that trend? Yeah? 0:20:12.560 --> 0:20:15.159 People are definitely going back into stores more. Um. And 0:20:15.160 --> 0:20:18.119 actually one of the things that that differentiates Target above 0:20:18.160 --> 0:20:21.040 Walmart is the traffic that they bring into stores. UM. 0:20:21.080 --> 0:20:24.160 They historically outpaced Walmart by a huge margin in terms 0:20:24.200 --> 0:20:27.440 of traffic growth UM. So e commerce is still continuing 0:20:27.480 --> 0:20:30.080 to grow UM, but people are a lot more comfortable 0:20:30.119 --> 0:20:33.080 being out and about UM, and so visits into stores 0:20:33.200 --> 0:20:35.960 is pretty strong. And it's you know, supporting people buying 0:20:36.240 --> 0:20:38.639 those impulse purchases when they're in the store as well. 0:20:38.760 --> 0:20:41.080 All Right, Jen, good stuff. As always, we can ask 0:20:41.160 --> 0:20:44.919 Jen anything about retail and she's got an informed opinion. 0:20:45.000 --> 0:20:50.359 Jen Bartash a senior equity research analysts. She covers consumer staples, retail. Basically, 0:20:50.400 --> 0:20:53.359 we just bring her on to talk anything retail for 0:20:53.440 --> 0:20:56.680 Bloomberg Intelligence. Really one of our leaders at bloombergt Talents. 0:20:56.680 --> 0:21:02.440 We appreciate getting some of her time. All Right, let's 0:21:02.440 --> 0:21:07.920