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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is Bloomberg Intelligence

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Speaker 1: with Alex Steinah and Paul'sweenye.

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Speaker 2: The real app performance has been in US corporate high yield.

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Speaker 3: Are the companies lean enough? Have they trimmed all the fats?

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Speaker 2: The semiconductor business is a really cyclical business.

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Speaker 1: Breaking market headlines and corporate news from across the globe.

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Speaker 3: Do investors like the M and A that we've seen?

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Speaker 4: These are two.

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Speaker 2: Big time blue chip companies.

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Speaker 3: The window between the peak and cut changing super fast.

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Speaker 1: Bloomberg Intelligence with Alex Steinhall and Paul'sweenye on Bloomberg Radio.

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Speaker 2: Today's Bloomberg Intelligence Show, we dig inside the big business

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Speaker 2: stories impacting Wall Street and the global markets.

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Speaker 3: Each and every week we provide in depth research and

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Speaker 3: data on some of the two thousand companies and one

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Speaker 3: hundred and thirty industries our analysts cover worldwide.

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Speaker 2: Today, well, look at why fast food chain McDonald's experience

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Speaker 2: its first sales drop in four years.

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Speaker 3: Plus, plainmaker Boeing has a new CEO. We'll discuss that

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Speaker 3: in the company's second quarter earnings.

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Speaker 2: But first we will begin with the big tech earnings

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Speaker 2: and Microsoft. Microsoft reported fourth quarter earnings and revenue the

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Speaker 2: top analysts expectations.

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Speaker 3: But the company's Azure cloud competing service posted a slow

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Speaker 3: down in growth last quarter, and this comes as investors

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Speaker 3: are anxious to see a payoff from huge investments in

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Speaker 3: AI products.

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Speaker 2: For more, we were joined by Anna Agrana, Bloomberg Intelligence

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Speaker 2: technology analyst.

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Speaker 3: We first asked Animog for his key takeaways from Microsoft results.

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Speaker 4: When Microsoft keep guidance for rasher last quarter, they said

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Speaker 4: growth rate of thirty to thirty one percent in constant currency,

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Speaker 4: and boy, they didn't hit thirty one.

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Speaker 5: They hit thirty.

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Speaker 4: People got disappointed, but they did a good job of

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Speaker 4: explaining what's happening on the conference called at the end

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Speaker 4: of the day, they are adding more capacity for their

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Speaker 4: data centers, and the growth rate of the cloud, still

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Speaker 4: very strong, will slow down slightly because of capacity issues

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Speaker 4: and not demand issues. And as they get more data

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Speaker 4: centers up, growth will accelerate.

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Speaker 3: Oh okay, So to be clear, then they're saying, look,

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Speaker 3: it's on us to build out all this stuff and

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Speaker 3: then all of a sudden, the revenue will accelerate. This

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Speaker 3: and not like a trend of slowing cloud revenue growth

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Speaker 3: because of demand.

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Speaker 4: Just to clarify for me, yes, absolutely. In fact, and

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Speaker 4: the cloud growth is driven in part or I would

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Speaker 4: say largely by AI bookloads because of their relationship with

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Speaker 4: Opening Eye. That really is the biggest driving factor. And

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Speaker 4: Microsoft has an edge there over others because of that

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Speaker 4: unique relationship that I mentioned. So I think Microsoft remains

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Speaker 4: the primary beneficiary on the software side, similar to what

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Speaker 4: Nvidia has on the chip side.

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Speaker 2: So an rag part of the discussion I guess probably

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Speaker 2: over the last month or month and a half about

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Speaker 2: AI has been Okay, I understand the spending aspect of it,

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Speaker 2: to build out capacity, to build out you know, whatever

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Speaker 2: I need. Remind me once again, what's the return on

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Speaker 2: that investment? So there's been some questions about the returns.

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Speaker 2: How do you answer that question?

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Speaker 4: So you know, if you were in the semiconductor world,

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Speaker 4: your return is pretty quickly because the people are going

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Speaker 4: to buy chips immediately. But if you're in the software world,

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Speaker 4: first you're going to get those chip, create a data center,

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Speaker 4: add more servers, and then create your software products that

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Speaker 4: which you're going to sell. Now, that thing's going to

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Speaker 4: take time, whether it's going to take six months, twelve months,

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Speaker 4: two years, and then you're going to realize that AI

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Speaker 4: revenue and that's where the entire rest of the world is,

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Speaker 4: whether it's on the software side or the services side,

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Speaker 4: and people need to have a very good understanding of it.

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Speaker 4: Otherwise they keep on harping on this capex issue, which

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Speaker 4: is going to get much bigger, and which is why

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Speaker 4: the chip stocks are doing very well because Microsoft communicated

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Speaker 4: that they're going to increase their capex even.

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Speaker 5: More this year.

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Speaker 4: So this is really where people need to understand this

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Speaker 4: and otherwise this confusion is going to continue going in

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Speaker 4: a next quarter as well.

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Speaker 6: Well.

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Speaker 3: Then to that point, you know, we got AMD boosting

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Speaker 3: at sales forecast for AI at the same time Intel's

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Speaker 3: cutting thousands of jobs. Where is Intel in this party?

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Speaker 5: Yeah?

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Speaker 4: I mean, I think the biggest party player really is

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Speaker 4: in video with their GPUs that are truly required for

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Speaker 4: these workloads, and AMD is also benefiting a little bit

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Speaker 4: from that. Intel, I think is needs to do a

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Speaker 4: lot more work before they can capitalize on this particular trend.

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Speaker 3: So Intel's in like the quad, like not even not

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Speaker 3: even closed to coming into the frat house. Basically, can

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Speaker 3: we look at it that?

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Speaker 2: Yeah?

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Speaker 5: Exactly?

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Speaker 2: How else in your space an A rag what else

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Speaker 2: looks attractive here.

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Speaker 4: I think the fun is going to be tomorrow evening

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Speaker 4: when Amazon reports and they start talking about their AI strategy,

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Speaker 4: because remember they do not have a relationship with open ai,

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Speaker 4: but they are still the largest cloud infrastructure vendor and

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Speaker 4: have more services than anybody else. They will come out

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Speaker 4: and give the message that listen, it's not just OpenAI,

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Speaker 4: but other large language models as well that people are using,

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Speaker 4: and they're using AWS services for that. You know, whether

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Speaker 4: that's anthropic or whether that's meta. All these companies have

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Speaker 4: their models as well, and people should be trying that.

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Speaker 3: And before I let you go, what I also found

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Speaker 3: interesting was that eight percentage points of the increase in

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Speaker 3: as your revenue and cloud revenue was attributable to AI.

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Speaker 3: That was up about seven percentage points. How do you

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Speaker 3: think that winds up looking like, are we going to

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Speaker 3: start to see like double digit increases here? Is it

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Speaker 3: going to be a slow grind higher?

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Speaker 5: No?

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Speaker 4: I think over time it will be double digits, But

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Speaker 4: again the timing is difficult. When we extrapolated this number,

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Speaker 4: we are coming to somewhere around one point four billion

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Speaker 4: in this quarter. That's over ten times in just one year.

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Speaker 4: It was, you know, it was roughly around one hundred

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Speaker 4: plus million a year ago. This is all the AI

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Speaker 4: workloads from open Ai, So I mean it is really

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Speaker 4: a big number frankly. But over time what will also

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Speaker 4: happen is there's going to be a blending between the

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Speaker 4: workloads on AI and the non AI workloads. And for us,

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Speaker 4: the net beneficiary are the three biggest cloud vendors, and

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Speaker 4: in fact, even Oracle is going to benefit from this.

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Speaker 2: Our thanks to anorog Rana Bloomberg Intelligence technology analyst, take.

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Speaker 3: A look at the latest Bloomberg News Morning Console poll.

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Speaker 2: It shows a Kamala Harris has wiped out Donald Trump's

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Speaker 2: leader across seven battle ground states as a vice president,

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Speaker 2: rise a wave of enthusiasm among young, black and Hispanic voters.

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Speaker 3: For more, we are joined by Laura Davison, Bloomberg Politics editor.

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Speaker 2: We first asked her for her key takeaways from this pole.

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Speaker 7: This is the best that the Democratic challenger to Trump

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Speaker 7: has ever done. You know, this is the first time

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Speaker 7: we have polled Harris. It's a statistical tie essentially between

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Speaker 7: the two candidates. She's technically up one percentage point, but

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Speaker 7: that's within the margin of air. The other key takeaway

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Speaker 7: here is that black voters, young voters, Hispanic voters are

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Speaker 7: much more likely to vote now that Harris is on

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Speaker 7: the ticket. So this is, you know, been something that

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Speaker 7: that the Trump campaign has created their strategy around of

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Speaker 7: trying to get you know, pull away at the margins

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Speaker 7: and black voters and Hispanic support. But this would indicate

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Speaker 7: that perhaps the tides are shifting in Harris's favor on

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Speaker 7: that front.

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Speaker 3: Well, that was sort of one of my questions too.

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Speaker 3: Are these voters that are switching or are they new

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Speaker 3: voters that are swinging these poles.

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Speaker 7: So we don't yet know what that is based on

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Speaker 7: how the poll works, but what we see is that

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Speaker 7: voters who are unsure if they're going to vote are

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Speaker 7: now saying they're much more likely that they're going to vote.

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Speaker 7: So these may be people who voted in twenty who

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Speaker 7: were not enthused by either candidate, who are going to

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Speaker 7: stay at home, or people who maybe have never voted.

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Speaker 7: But you know, a turnout election is expected to help

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Speaker 7: Harris on this front versus Trump. You know, the Trump

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Speaker 7: folks were you know, sort of hoping to pull away

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Speaker 7: particularly black men Hispanic men, but you know, we're not

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Speaker 7: hoping to see a big surgeon turnout that you know,

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Speaker 7: really helped Biden in twenty twenty and could potentially help

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Speaker 7: Harris in twenty four.

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Speaker 2: Or you know, as a former Wall Street person, I

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Speaker 2: tend to follow the money and Vice President Kamala Harris

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Speaker 2: has had a pretty good run here in the last

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Speaker 2: week or so raising money. Do we know where that

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Speaker 2: money's coming from.

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Speaker 7: Yeah, So, her campaign says they've raised about two hundred

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Speaker 7: million dollars and that's in the first week or so

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Speaker 7: of the campaign. This is largely from small dollar donors.

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Speaker 7: These are people who are going and giving online and

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Speaker 7: you know, increments of you know, anywhere from you know,

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Speaker 7: just a couple of dollars to you know, up to

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Speaker 7: a couple thousand dollars. We've also known that her super Pack,

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Speaker 7: this is the group that can accept money in unlimited amounts,

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Speaker 7: has gotten one hundred and fifty million in commitments since

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Speaker 7: Biden has dropped out of the race. These big dollar donors,

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Speaker 7: people who give millions of dollars, had decided to withhold

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Speaker 7: a bunch of contributions, you know, in order to sort

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Speaker 7: of pressure Biden to get off of the ticket. So

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Speaker 7: now that money is coming back into the fore just

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Speaker 7: for you know, kind of some in comparison here of

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Speaker 7: Harris when she inherited the Biden campaign accounts that had

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Speaker 7: about one hundred million dollars. Since then, she's raised another

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Speaker 7: two hundred million dollars, So these are really big sums.

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Speaker 3: How much of this could be also attributed just to momentum,

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Speaker 3: as in, when you have the RNC, the candidate gets

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Speaker 3: a boost, the DNC provides a boost. This is an

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Speaker 3: unprecedented moment in political history, so no doubt the candidate

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Speaker 3: would get a boosed.

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Speaker 7: Yes, and the timing year is all really interesting because,

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Speaker 7: of course Biden has dropped out two days after the RNC,

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Speaker 7: so Trump was expecting to see a big polling boost

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Speaker 7: coming out of that. Of course, just a week prior

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Speaker 7: that had been the assassination attempt. Leaving the RNC, Republicans

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Speaker 7: were very confident about their chances, and you know, even

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Speaker 7: Republican operatives were saying one of the things they needed

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Speaker 7: to be cautious of is that they weren't overconfident. Of course,

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Speaker 7: that all switched, you know, just a couple of days later.

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Speaker 7: What the Trump team is saying is, look, this is

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Speaker 7: a Harris honeymoon. This is a surgeon momentum that will

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Speaker 7: just be a flash in the pan and won't last

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Speaker 7: until November. That's really what what we'll be looking for

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Speaker 7: in the next couple weeks, if you know, is she

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Speaker 7: able to maintain both this fundraising edge as well as

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Speaker 7: this polling edge, or do we revert to where you know,

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Speaker 7: the Biden Trump race was just with Harris on the

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Speaker 7: ticket in a couple of weeks.

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Speaker 3: What do we make about the situation in Israel and

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Speaker 3: how that is polling for Kamala Harris, Because clearly there's

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Speaker 3: a huge section of voters that is very unhappy of

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Speaker 3: what's happening in Gaza right that we're maybe not voting

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Speaker 3: at all for President Biden, But are they coming back

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Speaker 3: in now? Do we know anything along those lines?

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Speaker 7: Yeah, So what this poll shows is that people who

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Speaker 7: are very concerned about the Israel Gaza war, and particularly

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Speaker 7: young voters for whom this is a bigger issue, are

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Speaker 7: more likely to vote for Harris. She's taken a softer

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Speaker 7: tone on this and is you know, just doesn't have

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Speaker 7: quite the same negatives on this issue that Biden does.

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Speaker 7: You know, one of the things, you know, particularly just

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Speaker 7: with the you know events of late of you know,

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Speaker 7: kind of there being more unrest in the Middle East.

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Speaker 7: Is you know that the Biden administration is still pushing

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Speaker 7: for a ceasefire. Harris is still pushing for a ceasefire.

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Speaker 7: Democrats really want this to be an issue that is

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Speaker 7: working towards a resolution versus, you know, an issue that's

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Speaker 7: flaring up, particularly as students go back to college campuses

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Speaker 7: in a couple of weeks. They don't want to see

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Speaker 7: the protests that we saw last spring.

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Speaker 2: Did the Republicans have buyer's remorse for JD.

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Speaker 1: Vance.

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Speaker 2: I'm seeing some reporting all along those lines.

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Speaker 7: Yes, there's there's a lot of conversations on that, even

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Speaker 7: on a Bloomberg television mcmulvaney, who's a Trump ally, came

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Speaker 7: on earlier this week and said, no, they're not looking

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Speaker 7: to replace JD. Vance. But of course, if you're being

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Speaker 7: asked about this, this means that this is at least

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Speaker 7: a conversation that is circulating. You know, Vance has had

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Speaker 7: a rough rollout, you know, just in about the you know,

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Speaker 7: two weeks or so that he's been on the ticket.

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Speaker 7: You know, some past comments he's made, you know, sort

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Speaker 7: of degrading childless cat ladies have come up. He has

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Speaker 7: had had some jokes on the campaign trail that have

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Speaker 7: come across as crass and haven't really landed. So this

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Speaker 7: is a conversation that's happening on the upon the sort

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Speaker 7: of Republican elite to the mainstream Republican class, but isn't

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Speaker 7: really reaching the Trump campaign. They have continued to say

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Speaker 7: JD is our guy, and we're going to stick by him.

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Speaker 2: Our thanks to Lard Davison, Bloomberg Politics Editor.

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Speaker 3: Coming up, we're going to break down why wireless carrier

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Speaker 3: Team Mobile added more subscribers last quarter.

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Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing inft

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Speaker 2: research and data on two thousand companies and one hundred

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Speaker 2: and thirty industries. You can access Bloomberg Intelligence via b

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Speaker 2: I go on the terminal.

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Speaker 3: I'm Paul Sweeney and am Alex Steele, and this is Bloomberg.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Affo car Playing and

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Speaker 1: Broud Auto with the Bloomberg Business App. Listen on demand

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Speaker 1: wherever you get your podcasts, or watch us live on YouTube.

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Speaker 3: Move next to the aerospace industry and Boeing. This week,

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Speaker 3: Boeing announced its appointing Kelly Ordberg as its next CEO,

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Speaker 3: replacing Dave Calhoun.

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Speaker 2: Bobbing made the announcement as it reported burning through more

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Speaker 2: than four billion dollars in cash last quarter. Well more

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Speaker 2: and all this. We were joined by George Ferguson, Bloomberg

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Speaker 2: Intelligence Senior Aerospace, Defense and Airlines analyst.

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Speaker 3: He first asked, George, if it's new CEO, is the

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Speaker 3: guy that Boeing needs to turn things around?

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Speaker 8: Not so sure. I think it's the guy that Boeing

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Speaker 8: needs for a small period of time, right because he

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Speaker 8: was already retired, right, he has you know, he's a

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Speaker 8: great career in aerospace working to Collins, help him put

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Speaker 8: Collins into RTX, I mean, a great experience. He's sixty four,

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Speaker 8: So my guess is he doesn't have a lot of

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Speaker 8: runway to work at Boeing. I think it'd have been

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Speaker 8: nicer to see a CEO that could have put I

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Speaker 8: don't know, five, seven, ten years into Boeing. But look,

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Speaker 8: I think the job is very difficult, and so I

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Speaker 8: think it's going to take a lot out of the

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Speaker 8: next CEO. And so maybe this is an interim as

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Speaker 8: they continue to develop internal candidates for the job. Maybe

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Speaker 8: it's very pretty difficult to recruit somebody into this job

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Speaker 8: right now. Could be an interim because of that as well.

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Speaker 8: So again, you know, the strong aerospace background at the

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Speaker 8: component at the you know, parts maker level, but doesn't

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Speaker 8: look like someone's going to be around for the next

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Speaker 8: five seven years.

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Speaker 2: All right, George, all right, so that's the CEO. How

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Speaker 2: about on the fundamentals here, I'm looking at the second

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Speaker 2: quarter negative adjusted free cash slow four point three billion dollars.

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Speaker 2: You can't like that. Talk to us about kind of

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Speaker 2: the cash flow, the dynamics and what they need to do.

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Speaker 8: So we kind of expected that four point three billion

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Speaker 8: dollars to be really honest, I'm not totally sure why

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Speaker 8: the stock is up. I don't think it's Kelly because

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Speaker 8: Kelly News started the day out and bowing anchors up

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Speaker 8: about one so post earnings were up. You know, we've

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Speaker 8: done this pop. I mean, you know, we heard from

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Speaker 8: CFO Brian West during the call. He told us Burn

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Speaker 8: was going to be pretty strong in three Q two,

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Speaker 8: and then some the analysts tried to box him in

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Speaker 8: on what Burn was going to be for the year.

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Speaker 8: One said would be closer to five billion or ten billion.

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Speaker 8: He said he wasn't. I think his quote somebody got,

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Speaker 8: I'm not smart enough to tell you at this time.

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Speaker 8: So there's just a lot of variability right now. That look,

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Speaker 8: Boeing has to keep taking inventory, taking ship sets from

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Speaker 8: their supplier base to keep their supplier base in business

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Speaker 8: while they ramp up builds. And they had some good

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Speaker 8: commentaries and builds. They talked about the factory kind of

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Speaker 8: putting out twenty ish I think was the number, and

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Speaker 8: I think total deliveries in the thirty ish range for

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Speaker 8: seven thirty sevens rising to thirty eight shutting down those

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Speaker 8: shadow factories. It's the factories that they have the inventoried airplanes,

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Speaker 8: a lot of seven three sevens, some seven eight sevens

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Speaker 8: in shutting them down by the end of the year.

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Speaker 8: That was I think, great commentary. You know, we got

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Speaker 8: to the commentary about what's going to go on with

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Speaker 8: the union negotiations. Those are coming up in September. Dave

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Speaker 8: Calhoun kind of told us he I think wasn't totally

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Speaker 8: focused on that right now, or didn't have couldn't give

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Speaker 8: us PU and takes there that's incredibly important. Right, So

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Speaker 8: if we get into a situation where the union shuts

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Speaker 8: this company down in September, the cash burn this year

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Speaker 8: looks looks horrible. Their back going to capital markets looking

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Speaker 8: for a bond raise, which I think everybody on the

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Speaker 8: bond side is scared to death about because they don't

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Speaker 8: want to see a fall to investment grade, or they're

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Speaker 8: going to the equity side, which the equity guys don't

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Speaker 8: want to hear about, right, because that's dilution, you know.

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Speaker 8: So I think again commentary was good around deliveries and

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Speaker 8: things like that, but a lot of variability coming, you

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Speaker 8: know here around this cash flow burn, and it's super important.

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Speaker 2: Thanks to George Ferguson Bloomberg Intelligence senior Aerospace, Defense and

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Speaker 2: airlines analysts.

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Speaker 3: We move next to earnings from Training Technologies, the maker

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Speaker 3: of heating and cooling systems. So the company posted better

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Speaker 3: than expected earnings in the second quarter and raise it's

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Speaker 3: full your forecast.

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Speaker 2: From Morewood, joined by Train's CEO Dave REGNERI. First the

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Speaker 2: asked David why the company had such positive results.

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Speaker 6: As far as what's driving our growth? You know, I

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Speaker 6: always tell people we have a system of things that

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Speaker 6: makes Train Technology is a great company. And whether it's

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Speaker 6: the way we operate our facilities, through our business operating

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Speaker 6: system ways, whether it's the way we innovate our new products,

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Speaker 6: or whether it's our direct salesforce. Those are a system

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Speaker 6: of things that make us a great company. And we

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Speaker 6: have a service business that's a third of our company

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Speaker 6: that's performing extremely well. In the second quarter, our service

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Speaker 6: business was up mid teens from a growth perspective, and

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Speaker 6: we have a culture that's you know, we believe in

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Speaker 6: challenging what's possible and innovating for a sustainable world.

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Speaker 3: So based on that, it's great to chat with you.

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Speaker 3: By the way, I love love talking to you, because

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Speaker 3: you have such a great read on the residential and

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Speaker 3: commercial businesses. Basically a commercial HVAC unit and a near

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Speaker 3: term residential HVAC unit, and of course that's heating, ventiletion,

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Speaker 3: air and cooling. Where's the strength, where's the growth, where

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Speaker 3: are the weak points?

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Speaker 6: Yeah, I'll start with residential. We had a very strong

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Speaker 6: quarter in the second quarter or revenue was up low teens,

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Speaker 6: but that our residential business for the prior I'll say,

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Speaker 6: you know, three quarters had really been struggling with a

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Speaker 6: refrigerant change that wasn't clear. That's been clarified. It was

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Speaker 6: really struggling with excess inventory kind of a hangover from

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Speaker 6: the COVID days that was in the channel. Those both

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Speaker 6: correct it, and we're off to a very warm start

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Speaker 6: to the cooling season, which should have us all concerned

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Speaker 6: for a different reason as the climate continues to increase

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Speaker 6: in temperature. But I would tell you that it's a

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Speaker 6: very strong start of the year, so very strong and residential,

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Speaker 6: our commercial business really broad based growth. You know, certainly

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Speaker 6: the high growth verticals like data centers. We do very

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Speaker 6: very well in our education or in healthcare, but we

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Speaker 6: had broad based growth in the Americas. We track fourteen

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Speaker 6: different verticals and we were hard pressed to find a

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Speaker 6: vertical that we were not strong in. So it was

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Speaker 6: just it was a very strong quarter for Trained Technology.

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Speaker 6: I'm very proud of what the team's been able to accomplish.

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Speaker 2: Yeah, I'm reading the Bloomberg Intelligence research note on your earnings.

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Speaker 2: North America's sixteen percent organic growth was much greater than

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Speaker 2: the ten percent consensus.

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Speaker 3: What drove that?

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Speaker 6: Yeah, really two things. Our residential business perform better. Okay,

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Speaker 6: we thought that was going to be. You know, in

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Speaker 6: the beginning of the year, we thought our residential business

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Speaker 6: would below single digits. We came in you know, low

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Speaker 6: teams in the quarter, so we significantly outdrove that. And

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Speaker 6: then our commercial HVAC business just continues to operate at

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Speaker 6: a very high level.

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Speaker 5: And like I.

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Speaker 6: Said, services was up in the high teens actually in

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Speaker 6: the Americas, and their equipment business just continues to exceed

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Speaker 6: our customers' expectations. So very strong quarter. You know, I

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Speaker 6: was listening to your show earlier. You were talking about sustainability,

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Speaker 6: and I would tell you that Trained Technologies our purpose

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Speaker 6: is built around sustainability. And what people are talking about

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Speaker 6: right now as you're hearing a lot about, you know,

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Speaker 6: how much power is going to have to be generated

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Speaker 6: to meet the demand that's coming, and you'll hear a

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Speaker 6: lot about data centers using a lot of the electricity.

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Speaker 6: What nobody is talking about is the amount of power

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Speaker 6: that's being generated that's being wasted. And I would tell

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Speaker 6: you we call it demand side management. And we know

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Speaker 6: because we've done hundreds of thousands of energy audits and

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Speaker 6: buildings that most buildings operate about thirty percent inefficiently So

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Speaker 6: just think if we could solve that problem, and if

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Speaker 6: we can make buildings perform the way they were designed

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Speaker 6: or assets performed the way they're designed. Just think about

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Speaker 6: the amount that we could save and the energy that's

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Speaker 6: being produced and which was obviously has a trickle effect

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Speaker 6: to the carbon footprint. So that's what train technology is

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Speaker 6: all about. People always ask me, where do you see

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Speaker 6: the growth coming from. It's going to be on the

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Speaker 6: demand side, management side, all.

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Speaker 3: Right, thanks to train Technology CEO at Dave REGNERI.

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Speaker 2: We move next to earnings from the wireless carrier T Mobile.

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Speaker 2: The company reported new monthly mobile phone subscribers that exceeded

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Speaker 2: analys estimates.

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Speaker 3: For more on this, we were joined by John Butler,

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Speaker 3: Bloomberg Intelligence Senior Telecom analyst, and we first asked John

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Speaker 3: why T Mobile did have such a successful quarter.

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Speaker 9: You know, it just boils down to this. They lead

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Speaker 9: in five G and for any wireless carrier, the lifeblood

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Speaker 9: of the network, the speed of the network, that download

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Speaker 9: speeds that you get on your phone is dictated by

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Speaker 9: how much spectrum you own. In plain English, how fat

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Speaker 9: are your air waves? And the great news for T

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Speaker 9: Mobile is they have the most spectrum of any of

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Speaker 9: their competitors, and they have the right amount of spectrum

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Speaker 9: for five G and we're now seeing it translate into

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Speaker 9: better results.

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Speaker 2: And I'll note that our own Charlie Pellett is a

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Speaker 2: very happy T Mobile customer.

440
00:20:46,800 --> 00:20:49,200
Speaker 5: Oh I'm okay, very good.

441
00:20:49,280 --> 00:20:51,400
Speaker 2: I didn't really know any You're probably the only two

442
00:20:51,440 --> 00:20:53,840
Speaker 2: I know, which says something about the circles I run in,

443
00:20:54,240 --> 00:20:57,480
Speaker 2: John Butler, So is this just a share game?

444
00:20:57,560 --> 00:20:57,800
Speaker 8: John?

445
00:20:57,840 --> 00:20:59,800
Speaker 2: I mean, everybody's got a cell phone's got a cell phone?

446
00:20:59,840 --> 00:21:02,480
Speaker 2: So is this just a share game between AT and T,

447
00:21:02,640 --> 00:21:03,840
Speaker 2: Verizon and Timo?

448
00:21:04,320 --> 00:21:06,720
Speaker 9: It is, Paul. You know, it's really in a way

449
00:21:06,800 --> 00:21:10,520
Speaker 9: become a zero sum game. In some ways, there's natural

450
00:21:10,840 --> 00:21:15,520
Speaker 9: organic growth as you know, young kids get phones, older

451
00:21:15,560 --> 00:21:18,800
Speaker 9: people who have been getting phones post pandemic here. I

452
00:21:18,800 --> 00:21:21,600
Speaker 9: think that really shook up enough of the market to

453
00:21:21,720 --> 00:21:24,320
Speaker 9: lead to that little bit of growth on the edges.

454
00:21:25,400 --> 00:21:28,919
Speaker 9: But the bottom line is it's a very slow growth market,

455
00:21:29,000 --> 00:21:31,840
Speaker 9: and so it's all about not only protecting your share,

456
00:21:32,440 --> 00:21:36,119
Speaker 9: but taking it away from your competitors. And T Mobile

457
00:21:36,200 --> 00:21:41,240
Speaker 9: has you know, people forget that. Really wireless is almost

458
00:21:41,240 --> 00:21:44,879
Speaker 9: a retailing game, right, So it's all about branding and

459
00:21:44,960 --> 00:21:50,479
Speaker 9: T Mobile has done a brilliant job manufacturing a brand

460
00:21:50,600 --> 00:21:55,800
Speaker 9: image that's all about being consumer friendly and low prices,

461
00:21:55,960 --> 00:21:58,960
Speaker 9: and so quarter and in quarter out they tend to

462
00:21:59,080 --> 00:22:02,600
Speaker 9: lead their peers at and Team Verizon in terms of

463
00:22:03,280 --> 00:22:07,080
Speaker 9: net new subscriber growth, and this quarter, in my mind,

464
00:22:07,080 --> 00:22:09,159
Speaker 9: they really hit the ball out of the park on

465
00:22:09,240 --> 00:22:09,800
Speaker 9: that front.

466
00:22:10,400 --> 00:22:13,400
Speaker 3: At some point, will I also get my Internet from

467
00:22:13,640 --> 00:22:16,080
Speaker 3: Team Mobile? Like, is this the next area that they

468
00:22:16,119 --> 00:22:17,760
Speaker 3: can just start gobbling up share?

469
00:22:18,520 --> 00:22:21,399
Speaker 9: Possibly? Actually, if you live in New York, I would

470
00:22:21,440 --> 00:22:27,200
Speaker 9: say a definite. Maybe. They've been very cautious in terms

471
00:22:27,400 --> 00:22:32,160
Speaker 9: of managing expectations for where their broadband business is going

472
00:22:32,240 --> 00:22:36,440
Speaker 9: to go. But T Mobile offers both over the air

473
00:22:36,520 --> 00:22:40,639
Speaker 9: broadband called fixed wireless access. You basically put a modem

474
00:22:40,680 --> 00:22:44,080
Speaker 9: in your window. It talks to the wireless network and

475
00:22:44,160 --> 00:22:48,080
Speaker 9: provides you broadband that way. It's a real set it

476
00:22:48,119 --> 00:22:52,000
Speaker 9: and forgeted thing. It's been a major hit with consumers.

477
00:22:52,840 --> 00:22:55,840
Speaker 9: Verizon is also a major player there. But Tea Mobile

478
00:22:55,920 --> 00:22:59,960
Speaker 9: is also getting into fiber broadband. And when you think

479
00:23:00,600 --> 00:23:04,399
Speaker 9: the future of broadband and where it's headed, it really

480
00:23:04,480 --> 00:23:07,040
Speaker 9: is going to come down to fiber in the long run.

481
00:23:07,119 --> 00:23:10,280
Speaker 9: So I think they're placing the right bets. They're moving

482
00:23:10,320 --> 00:23:13,879
Speaker 9: ahead with fixed wireless access for now because they have

483
00:23:14,000 --> 00:23:18,680
Speaker 9: excess capacity on the network, but they're reluctant to really

484
00:23:19,200 --> 00:23:22,960
Speaker 9: ramp up expectations there because broadband eats up a lot

485
00:23:23,000 --> 00:23:26,360
Speaker 9: of that spectrum we were talking about on the network,

486
00:23:26,480 --> 00:23:30,040
Speaker 9: So they don't want to endanger their core wireless mobile

487
00:23:30,119 --> 00:23:33,399
Speaker 9: business by rolling out too much in the way of

488
00:23:33,440 --> 00:23:37,639
Speaker 9: broadband over the air. But I think Fiber hedges their

489
00:23:37,720 --> 00:23:40,879
Speaker 9: bets there, and by the way, they over index in

490
00:23:40,960 --> 00:23:44,000
Speaker 9: New York. They really have great share in New York

491
00:23:44,200 --> 00:23:48,120
Speaker 9: in mobile, so I think broadband is their next foray

492
00:23:48,240 --> 00:23:49,160
Speaker 9: for that market.

493
00:23:49,400 --> 00:23:52,959
Speaker 2: All right, Thanks to John Butler, Bloomberg Intelligence Senior TELECOMMENTA.

494
00:23:52,440 --> 00:23:54,320
Speaker 3: List coming up on the program, a look at quarterly

495
00:23:54,359 --> 00:23:55,400
Speaker 3: earnings from it again.

496
00:23:55,680 --> 00:23:58,679
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in

497
00:23:58,720 --> 00:24:01,359
Speaker 2: depth research and data two thousand companies in one hundred

498
00:24:01,359 --> 00:24:04,439
Speaker 2: and thirty industries. You can access Bloomberg Intelligence via Bigo

499
00:24:04,520 --> 00:24:06,320
Speaker 2: on the terminal on Paul Sweeney.

500
00:24:05,920 --> 00:24:08,000
Speaker 3: And am Alex Steele and this is Bloomberg.

501
00:24:13,080 --> 00:24:16,960
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

502
00:24:17,040 --> 00:24:20,560
Speaker 1: weekdays at ten am Eastern on Applecard Play and Android

503
00:24:20,600 --> 00:24:23,359
Speaker 1: Auto with the Bloomberg Business app. You can also listen

504
00:24:23,480 --> 00:24:26,600
Speaker 1: live on Amazon Alexa from our flagship New York station

505
00:24:26,960 --> 00:24:29,720
Speaker 1: Just say Alexa Play Bloomberg eleven thirty.

506
00:24:31,080 --> 00:24:33,720
Speaker 3: We move next to the fast food chain McDonald's. This week,

507
00:24:33,760 --> 00:24:36,800
Speaker 3: the burger chainsaid it experienced its first sales drop in

508
00:24:37,000 --> 00:24:39,520
Speaker 3: four years when it reported second quarter results.

509
00:24:39,960 --> 00:24:42,280
Speaker 2: This comes as a company has pledged to launch new

510
00:24:42,320 --> 00:24:45,359
Speaker 2: promotions to help offset a decline in customer visits, and

511
00:24:45,400 --> 00:24:47,760
Speaker 2: this includes a five dollar value meal deal launched in

512
00:24:47,800 --> 00:24:49,119
Speaker 2: the final week of last quarter.

513
00:24:49,200 --> 00:24:50,679
Speaker 3: For more on all of this, we are joined by

514
00:24:50,680 --> 00:24:53,960
Speaker 3: Michael Hale and Bloomberg Intelligence senior restaurant and food service analyst.

515
00:24:54,160 --> 00:24:57,040
Speaker 2: We first asked Michael first key takeaways for McDonald's earnings.

516
00:24:57,200 --> 00:24:59,119
Speaker 10: The biggest takeaway is that they still have work to do.

517
00:24:59,240 --> 00:25:01,520
Speaker 10: I guess results and as bad as expected. You know,

518
00:25:02,040 --> 00:25:04,679
Speaker 10: July data that we've seen is pretty bad, so the

519
00:25:04,680 --> 00:25:07,920
Speaker 10: fact that they're still negative isn't really surprising, but they

520
00:25:08,000 --> 00:25:10,000
Speaker 10: definitely still have work to do. The five dollars meal

521
00:25:10,040 --> 00:25:12,560
Speaker 10: deal seems to be bringing in some traffic. They're hopeful

522
00:25:12,600 --> 00:25:14,959
Speaker 10: that you know, the sales will follow, but it hasn't

523
00:25:15,040 --> 00:25:17,440
Speaker 10: happened yet, you know, And they talked about the US

524
00:25:17,520 --> 00:25:20,600
Speaker 10: really needing a revamp of its one two three dollar

525
00:25:20,760 --> 00:25:23,359
Speaker 10: value meal. This company has scale that nobody else does.

526
00:25:23,400 --> 00:25:26,160
Speaker 10: They can offer price points that nobody else can. They

527
00:25:26,160 --> 00:25:29,480
Speaker 10: have a ton of marketing might So for those reasons,

528
00:25:29,520 --> 00:25:32,760
Speaker 10: in this really competitive market where where chains are fighting

529
00:25:32,800 --> 00:25:36,439
Speaker 10: hard to track low income consumers, you know, McDonald's definitely

530
00:25:36,440 --> 00:25:37,359
Speaker 10: has the tools.

531
00:25:37,119 --> 00:25:37,439
Speaker 5: To be in.

532
00:25:37,840 --> 00:25:40,959
Speaker 2: For me, the McDonald's experience was always an airport experience

533
00:25:40,960 --> 00:25:43,160
Speaker 2: because I always say I could justify it per say, hey,

534
00:25:43,160 --> 00:25:45,000
Speaker 2: I'm rushed for time to gonna make my flake hid

535
00:25:45,080 --> 00:25:47,879
Speaker 2: something quick. But now all the new airports and like

536
00:25:47,920 --> 00:25:51,000
Speaker 2: the renovated Newark Airport, there's no fast food in those

537
00:25:51,040 --> 00:25:53,199
Speaker 2: things anymore. You have to sit down and order and

538
00:25:53,240 --> 00:25:55,720
Speaker 2: do all that kind of stuff. So that's why that's interesting.

539
00:25:55,760 --> 00:25:57,879
Speaker 3: Isn't there fast food? But you it's like nice stuff

540
00:25:57,920 --> 00:25:58,879
Speaker 3: like wraps.

541
00:25:58,520 --> 00:26:00,399
Speaker 2: Well you get that stuff to go, But I mean

542
00:26:00,480 --> 00:26:03,600
Speaker 2: you could always get like some fast food, serious fast food.

543
00:26:03,440 --> 00:26:03,760
Speaker 5: All right.

544
00:26:03,800 --> 00:26:06,600
Speaker 2: So, Mike, so what's the story for McDonald's here. Do

545
00:26:06,680 --> 00:26:09,800
Speaker 2: they open stores, do they rationalize their footprint, what's kind

546
00:26:09,840 --> 00:26:12,600
Speaker 2: of the strategy there? In terms of managing their footprint

547
00:26:12,600 --> 00:26:13,080
Speaker 2: these days.

548
00:26:13,800 --> 00:26:17,360
Speaker 10: Yeah, well they're there and they're investedtily. Late last year

549
00:26:17,359 --> 00:26:21,160
Speaker 10: they pushed for more aggressive store openings, right, and so

550
00:26:21,520 --> 00:26:23,639
Speaker 10: that's going to continue to be the focus. They're going

551
00:26:23,720 --> 00:26:26,800
Speaker 10: to push hard to grow internationally. China obviously is a

552
00:26:26,800 --> 00:26:29,840
Speaker 10: big point of focus for them. But yeah, it's going

553
00:26:29,920 --> 00:26:33,160
Speaker 10: to be to open stores. But in order to motivate

554
00:26:33,200 --> 00:26:35,760
Speaker 10: their franchisees to open stores, they're going to have to,

555
00:26:36,359 --> 00:26:38,480
Speaker 10: you know, have a strong marketing program that's going to

556
00:26:38,520 --> 00:26:42,400
Speaker 10: pull people into the restaurants, the existing restaurants, grow same

557
00:26:42,480 --> 00:26:46,120
Speaker 10: store sales, improve profitability, and make it just a more

558
00:26:46,119 --> 00:26:49,960
Speaker 10: attractive proposition for their international and US franchisees to open

559
00:26:50,000 --> 00:26:50,560
Speaker 10: new stores.

560
00:26:50,760 --> 00:26:53,639
Speaker 3: Didn't they unveil like a five dollars meal thingy, But

561
00:26:53,720 --> 00:26:55,000
Speaker 3: that was at the end of the quarter, right, so

562
00:26:55,040 --> 00:26:57,480
Speaker 3: we don't really know the full impact of that for McDonald's.

563
00:26:57,640 --> 00:27:00,280
Speaker 10: Yes, yes, so on the call, management said that it's

564
00:27:00,359 --> 00:27:02,840
Speaker 10: driving traffic but not sales yet. So it seems like

565
00:27:02,840 --> 00:27:06,320
Speaker 10: there's some trade down from current customers saying, you know,

566
00:27:06,520 --> 00:27:08,159
Speaker 10: well five dollars, I get a lot of food for

567
00:27:08,200 --> 00:27:10,760
Speaker 10: that five dollars, So maybe instead of getting a big McNeal,

568
00:27:10,840 --> 00:27:13,840
Speaker 10: I'll get this five dollars meal deal. But so it

569
00:27:13,880 --> 00:27:18,000
Speaker 10: hasn't really impacted results yet, but they said that, you know,

570
00:27:18,200 --> 00:27:21,840
Speaker 10: historically traffic comes before the sales boosts, and so they

571
00:27:21,880 --> 00:27:24,720
Speaker 10: seem positive on it in this near term. You know,

572
00:27:24,760 --> 00:27:27,080
Speaker 10: they said ninety three percent of franchisees in the US

573
00:27:27,119 --> 00:27:30,520
Speaker 10: have agreed to extend this offer deeper into the summer.

574
00:27:31,000 --> 00:27:33,800
Speaker 10: So they seem positive on it. But their real focus

575
00:27:33,880 --> 00:27:35,200
Speaker 10: is going to have to be on the one, two,

576
00:27:35,280 --> 00:27:39,920
Speaker 10: three dollars value menu. That menu isn't resonating with customers, right,

577
00:27:39,960 --> 00:27:42,880
Speaker 10: and it seems like a full revamp is in the cards.

578
00:27:42,920 --> 00:27:44,320
Speaker 5: You know, they've they've received a lot of.

579
00:27:44,320 --> 00:27:47,320
Speaker 10: Shade on social media that you can't find anything on

580
00:27:47,359 --> 00:27:50,480
Speaker 10: that menu for a buck, right, and so some reengineering

581
00:27:50,760 --> 00:27:52,760
Speaker 10: is going to be necessary here in the United States.

582
00:27:52,840 --> 00:27:55,159
Speaker 2: All right, dumb question of the day comes from me.

583
00:27:55,400 --> 00:27:59,120
Speaker 2: Never at McDonald's, Burger King, even Starbucks, the drive through

584
00:27:59,200 --> 00:28:03,280
Speaker 2: line or the twenty cars deep. I walk inside, I

585
00:28:03,320 --> 00:28:05,760
Speaker 2: walk right up to the counter and boom, I'm served.

586
00:28:05,800 --> 00:28:07,879
Speaker 2: And if I'm a McDonald's, isn't that a source of

587
00:28:07,920 --> 00:28:09,560
Speaker 2: opportunity for me to figure out how to get them

588
00:28:09,560 --> 00:28:10,040
Speaker 2: through faster.

589
00:28:10,520 --> 00:28:11,960
Speaker 5: Yeah, well, I guess we're lazy.

590
00:28:12,200 --> 00:28:16,280
Speaker 10: That's that's the problem, right, But uh no, to your point,

591
00:28:16,359 --> 00:28:20,080
Speaker 10: you know, a big percentage. You know, historically the counter

592
00:28:20,160 --> 00:28:23,520
Speaker 10: was like say fifteen percent of a drive through restaurant sales,

593
00:28:23,560 --> 00:28:26,840
Speaker 10: and historically that's really just been used when the drive

594
00:28:26,840 --> 00:28:28,800
Speaker 10: through line is too long and people say, you know,

595
00:28:28,800 --> 00:28:30,359
Speaker 10: I don't want to wait that long. I'm gonna go

596
00:28:30,440 --> 00:28:33,840
Speaker 10: inside and pick up my stuff. So there is an opportunity,

597
00:28:33,840 --> 00:28:35,720
Speaker 10: there's and it's a it's a point of focus for

598
00:28:35,760 --> 00:28:38,320
Speaker 10: all of the quick service restaurants we cover. Everybody is

599
00:28:38,400 --> 00:28:42,120
Speaker 10: constantly trying to improve their throughput, you know, decrease the

600
00:28:42,200 --> 00:28:45,760
Speaker 10: time waiting in line, because they know, if there's you know,

601
00:28:45,880 --> 00:28:49,200
Speaker 10: at a certain number of cars for McDonald's, historically it's

602
00:28:49,200 --> 00:28:50,800
Speaker 10: been you know, say five or six cars in the

603
00:28:50,880 --> 00:28:53,120
Speaker 10: drive through, people will either you know, drive past the

604
00:28:53,160 --> 00:28:55,160
Speaker 10: restaurant or maybe they'll say, you know what, I'll park

605
00:28:55,200 --> 00:28:59,160
Speaker 10: and come in. But uh that's that's potentially business loss.

606
00:28:59,240 --> 00:28:59,440
Speaker 5: Right.

607
00:28:59,480 --> 00:29:02,400
Speaker 10: So you know, improving throughput at the drive through, in

608
00:29:02,480 --> 00:29:05,200
Speaker 10: at the counter is constantly a point.

609
00:29:07,640 --> 00:29:09,440
Speaker 3: I mean in theory, right, you get like an I

610
00:29:09,760 --> 00:29:13,440
Speaker 3: thing to do the drive through, right, But that has

611
00:29:13,480 --> 00:29:16,400
Speaker 3: been really tough to manage right now, right, it's not

612
00:29:16,440 --> 00:29:17,200
Speaker 3: really the best.

613
00:29:17,960 --> 00:29:18,719
Speaker 5: It's not working.

614
00:29:18,880 --> 00:29:21,160
Speaker 10: I mean, people have they're having a lot of trouble

615
00:29:21,240 --> 00:29:25,680
Speaker 10: with accents, not only from you know, international customers, but

616
00:29:25,720 --> 00:29:29,720
Speaker 10: also dialects across the United States, so voice ordering and

617
00:29:30,400 --> 00:29:32,480
Speaker 10: a lot of these AI initiatives. You know, there's a

618
00:29:32,560 --> 00:29:35,080
Speaker 10: lot of potential with them, but they haven't been able

619
00:29:35,080 --> 00:29:36,520
Speaker 10: to really pay dividends just yet.

620
00:29:36,680 --> 00:29:39,400
Speaker 2: All right, So what is the investment call here, Mike

621
00:29:39,480 --> 00:29:43,560
Speaker 2: for some of these fast service McDonald's, Burger King, what's

622
00:29:43,600 --> 00:29:45,400
Speaker 2: the investment call here for these names?

623
00:29:45,680 --> 00:29:47,880
Speaker 10: Well, they're looking at you know, it's interesting because the

624
00:29:48,200 --> 00:29:50,840
Speaker 10: year over your comparisons, base effects get easier into the

625
00:29:50,880 --> 00:29:54,200
Speaker 10: second half, but the consumer's weakening, right, and so you

626
00:29:54,240 --> 00:29:58,200
Speaker 10: know McDonald said they expect you know, more consumer weakness

627
00:29:58,200 --> 00:30:02,160
Speaker 10: over the next few quarters, right, And so there's definitely

628
00:30:02,200 --> 00:30:05,200
Speaker 10: concern about about restaurants spending here in the second half.

629
00:30:05,240 --> 00:30:07,000
Speaker 5: You know, I think I mentioned it at the top.

630
00:30:07,080 --> 00:30:11,480
Speaker 10: McDonald's is well positioned though in you know, periods of distress.

631
00:30:11,520 --> 00:30:14,280
Speaker 10: You know, during the Great Recession, they outperform by offering

632
00:30:14,400 --> 00:30:17,720
Speaker 10: value that competitors couldn't match, right, and so it's a

633
00:30:17,800 --> 00:30:20,920
Speaker 10: very tough environment. But we think McDonald's is positioned pretty

634
00:30:20,960 --> 00:30:23,040
Speaker 10: well for such a tough environment.

635
00:30:23,360 --> 00:30:26,760
Speaker 3: In the value war where everyone's chasing a smaller part

636
00:30:26,800 --> 00:30:30,600
Speaker 3: of everyone's wallet. How do these guys remain profitable? I'm

637
00:30:30,600 --> 00:30:33,000
Speaker 3: not saying McDonald's, but like all its competitors too, like

638
00:30:33,040 --> 00:30:35,520
Speaker 3: it's sort of a race to the bottom to some perspective,

639
00:30:35,520 --> 00:30:36,440
Speaker 3: how does that play out?

640
00:30:37,160 --> 00:30:39,080
Speaker 10: It's not just a race to the bottom. So in

641
00:30:39,160 --> 00:30:42,520
Speaker 10: terms of the loan, they're trying hard to keep that

642
00:30:42,720 --> 00:30:45,760
Speaker 10: low income consumer business, and there's no doubt that that's

643
00:30:45,800 --> 00:30:49,160
Speaker 10: a big focus right now, but they're also bringing in

644
00:30:49,640 --> 00:30:53,960
Speaker 10: you know, middle income and higher income consumers into the fold, right,

645
00:30:54,000 --> 00:30:58,040
Speaker 10: So you also get this traded down effect where you know, yes, sure,

646
00:30:58,080 --> 00:31:00,520
Speaker 10: low income consumers are trading down into grosser restore, but

647
00:31:00,720 --> 00:31:03,120
Speaker 10: McDonald's and some of their competitors, Jack in the Box

648
00:31:03,160 --> 00:31:06,320
Speaker 10: being one, you know, Chipotle, have been able to attract

649
00:31:06,320 --> 00:31:09,200
Speaker 10: these higher income consumers that actually come in and buy

650
00:31:09,200 --> 00:31:12,280
Speaker 10: premium items and spend more when they come. The problem

651
00:31:12,320 --> 00:31:15,040
Speaker 10: is they're just a much lower percentage of the of

652
00:31:15,080 --> 00:31:17,440
Speaker 10: the overall traffic. But that's what we've seen over the

653
00:31:17,480 --> 00:31:19,520
Speaker 10: last year and a half or so's chains that have

654
00:31:19,560 --> 00:31:22,680
Speaker 10: been able to attract these higher income consumers are definitely outperforming.

655
00:31:22,880 --> 00:31:25,920
Speaker 2: So where in your overall space there mic on the

656
00:31:25,960 --> 00:31:28,560
Speaker 2: restaurant side is the best place to be these days.

657
00:31:29,000 --> 00:31:31,720
Speaker 10: It's companies that provide a lot of value and a

658
00:31:31,840 --> 00:31:34,400
Speaker 10: very good price point, right and so, you know, like

659
00:31:34,480 --> 00:31:37,520
Speaker 10: most earning seasons and industries, you know, a lot of

660
00:31:37,520 --> 00:31:41,000
Speaker 10: the top performers end up reporting earnings first, and we've

661
00:31:41,040 --> 00:31:45,120
Speaker 10: seen that Chipotle and Texas Roadhouse are two They outperform

662
00:31:45,200 --> 00:31:48,640
Speaker 10: everybody on seamsore sales over the last five years and

663
00:31:48,720 --> 00:31:50,959
Speaker 10: it's not even there's not even a close second. And

664
00:31:51,000 --> 00:31:53,760
Speaker 10: a big reason why they've outperformed by so much is

665
00:31:53,800 --> 00:31:56,800
Speaker 10: that customers see a lot of value on that plate

666
00:31:56,840 --> 00:31:59,120
Speaker 10: for the price that they pay right and there, and

667
00:31:59,160 --> 00:32:02,800
Speaker 10: they're provided a pret good customer experience, and that's what's

668
00:32:02,840 --> 00:32:06,000
Speaker 10: bringing people in the door. If you're providing very strong

669
00:32:06,160 --> 00:32:10,120
Speaker 10: everyday value and a good in restaurant experience, you know,

670
00:32:10,200 --> 00:32:13,560
Speaker 10: clean restaurants, good service, when everything that that entails, then

671
00:32:13,560 --> 00:32:14,320
Speaker 10: you're winning, all right.

672
00:32:14,320 --> 00:32:17,200
Speaker 3: Thanks to Michael Halen, Bloomberg Intelligence Senior restaurant and food

673
00:32:17,280 --> 00:32:18,880
Speaker 3: service analyst, we next.

674
00:32:18,680 --> 00:32:21,280
Speaker 2: Take a look at earnings from the Dutch brewer Heineken.

675
00:32:21,520 --> 00:32:24,040
Speaker 2: This week, the company report a quarterly profit and revenue

676
00:32:24,040 --> 00:32:26,040
Speaker 2: that fell short of analyst expectations.

677
00:32:26,200 --> 00:32:28,680
Speaker 3: Heinegansited a nine hundred and forty nine million dollars hit

678
00:32:28,760 --> 00:32:32,000
Speaker 3: as at stake in China's largest brewer has fallen in value.

679
00:32:32,120 --> 00:32:33,960
Speaker 3: For more on this, we were joined by Duncan Fox,

680
00:32:33,960 --> 00:32:36,200
Speaker 3: Bloomberg Intelligence consumer staples analyst.

681
00:32:36,480 --> 00:32:38,640
Speaker 2: We first asked Duncan to take us through the laundry

682
00:32:38,680 --> 00:32:40,560
Speaker 2: list of things that were a problem for Heinegen.

683
00:32:40,960 --> 00:32:43,520
Speaker 11: Well, I suppose the main one was consumer sentiment was

684
00:32:43,880 --> 00:32:47,640
Speaker 11: still quite weak, so what they were hoping for was

685
00:32:47,640 --> 00:32:50,160
Speaker 11: a bit of a bounce back in Europe for volume

686
00:32:50,200 --> 00:32:53,640
Speaker 11: with the euro twenty four, but unfortunately the weather was

687
00:32:53,840 --> 00:32:56,600
Speaker 11: just again four in northern Europe, so that was a

688
00:32:56,680 --> 00:33:01,920
Speaker 11: his In China, it's just that China Resources a share

689
00:33:01,960 --> 00:33:04,880
Speaker 11: price has been below the price they bought it for

690
00:33:05,040 --> 00:33:08,640
Speaker 11: about four or five months now, and the accounting system

691
00:33:08,760 --> 00:33:11,720
Speaker 11: means they have to take that hit. So if if

692
00:33:11,760 --> 00:33:14,280
Speaker 11: that share price goes back up again whenever the Chinese

693
00:33:14,480 --> 00:33:18,920
Speaker 11: economy recovers, then they'll get some sort of recovery from that.

694
00:33:19,040 --> 00:33:20,880
Speaker 11: But I can't tell you when that will be, so

695
00:33:20,920 --> 00:33:22,600
Speaker 11: it's just double consumer.

696
00:33:22,920 --> 00:33:26,280
Speaker 2: So what is Heineken saying about just underlying demand in general?

697
00:33:26,320 --> 00:33:28,600
Speaker 2: What are they saying about the consumer and is there

698
00:33:28,960 --> 00:33:29,880
Speaker 2: regional differences?

699
00:33:29,920 --> 00:33:36,040
Speaker 11: I guess basically the consumer's been hit by inflation curvac

700
00:33:36,080 --> 00:33:39,360
Speaker 11: years from double digit pricing, and I think they're just

701
00:33:39,560 --> 00:33:42,600
Speaker 11: pairing back. The big problem is that people are not

702
00:33:42,640 --> 00:33:45,640
Speaker 11: really going to the partner as much the entrade that's

703
00:33:45,680 --> 00:33:48,840
Speaker 11: where they make great profit. Well in Europe, it's certainly

704
00:33:48,880 --> 00:33:52,520
Speaker 11: been the case in places like Africa where you've had

705
00:33:52,560 --> 00:33:55,840
Speaker 11: devaluation as well. You've just got a working way through

706
00:33:55,880 --> 00:33:58,520
Speaker 11: that and they've done a very good job actually, but

707
00:33:59,120 --> 00:34:03,360
Speaker 11: you still have short term issue where you know, Nigeria

708
00:34:03,440 --> 00:34:05,400
Speaker 11: is a big, big market for them and you get

709
00:34:05,400 --> 00:34:09,319
Speaker 11: a massive devaluation and so they're just working their way

710
00:34:09,360 --> 00:34:11,680
Speaker 11: through all these issues. They're doing actually quite a good

711
00:34:11,719 --> 00:34:14,879
Speaker 11: job on the ground. But weather was the real thing

712
00:34:14,920 --> 00:34:17,480
Speaker 11: that was a surprise. I mean, the upgraded guidance a little,

713
00:34:17,920 --> 00:34:19,799
Speaker 11: but I think people are expecting a bit more because

714
00:34:19,800 --> 00:34:20,759
Speaker 11: of the Euro twenty four.

715
00:34:21,200 --> 00:34:25,120
Speaker 3: So Paul brought up sort of those mixed infused cocktails

716
00:34:25,160 --> 00:34:27,880
Speaker 3: and stuff. I can get the mimosa in a can.

717
00:34:28,000 --> 00:34:31,000
Speaker 3: It's not terrible at all. Does Heineken have exposure to

718
00:34:31,080 --> 00:34:33,239
Speaker 3: that kind of stuff and is that sort of eroding

719
00:34:33,400 --> 00:34:34,920
Speaker 3: the appeal of beer at all?

720
00:34:35,480 --> 00:34:38,359
Speaker 11: Well, beers getting it from each from every angle really,

721
00:34:38,360 --> 00:34:41,000
Speaker 11: because you're seeing a lot of these new odd drinks.

722
00:34:41,040 --> 00:34:41,919
Speaker 11: I probably grew with.

723
00:34:41,800 --> 00:34:42,440
Speaker 8: Poorn and that once.

724
00:34:42,560 --> 00:34:45,919
Speaker 11: Some of them are a bit weird. But they've got Desperado,

725
00:34:46,000 --> 00:34:49,719
Speaker 11: which is a spirit tasted beer, tequila based beer, which

726
00:34:49,800 --> 00:34:53,480
Speaker 11: is doing very well. So they have got things that

727
00:34:53,520 --> 00:34:57,040
Speaker 11: they can attack these products with. But you need to

728
00:34:57,120 --> 00:35:01,920
Speaker 11: keep basically innovating with new things all the time. You know,

729
00:35:02,000 --> 00:35:05,040
Speaker 11: Diazu're doing a pretty good job on trying to do that.

730
00:35:05,120 --> 00:35:07,640
Speaker 11: But the problem is some of these don't last very

731
00:35:07,680 --> 00:35:10,520
Speaker 11: long the eighteen months and then things sort of fall

732
00:35:10,560 --> 00:35:12,960
Speaker 11: off a cliff, So you've got to sort of keep

733
00:35:13,000 --> 00:35:16,000
Speaker 11: replacing them otherwise you're getting to a bit of trouble. Actually,

734
00:35:16,000 --> 00:35:18,000
Speaker 11: the Hearneken one's doing well, but they just haven't come

735
00:35:18,040 --> 00:35:20,560
Speaker 11: up with innovation in that area. It's probably not their

736
00:35:20,640 --> 00:35:21,600
Speaker 11: key area for them.

737
00:35:21,880 --> 00:35:24,320
Speaker 2: Is Hanegan calling out different regions of the world behaving

738
00:35:24,680 --> 00:35:27,960
Speaker 2: differently as the US market stronger than the European.

739
00:35:27,680 --> 00:35:30,680
Speaker 3: If you have a nice beach, your sales are up exactly.

740
00:35:31,640 --> 00:35:33,879
Speaker 11: Well, certainly it's the suns out. They're not that big.

741
00:35:33,880 --> 00:35:37,520
Speaker 11: In the US Latin America, they're big, and they've they've

742
00:35:37,560 --> 00:35:40,120
Speaker 11: been they've taken quite a lot of costs out. They

743
00:35:40,160 --> 00:35:42,960
Speaker 11: were importing bottles to Brazil, for instance, which is a

744
00:35:43,040 --> 00:35:45,680
Speaker 11: huge market for them, so they've taken the cost down.

745
00:35:45,719 --> 00:35:49,920
Speaker 11: So it's not particularly great consumer environment there, but the

746
00:35:49,920 --> 00:35:53,520
Speaker 11: profits are improving because you know, they've realigned their cost space.

747
00:35:54,000 --> 00:35:57,200
Speaker 11: In Asia, they're bouncing back from a really horrid time

748
00:35:57,280 --> 00:35:58,080
Speaker 11: last year where.

749
00:35:57,920 --> 00:35:58,600
Speaker 6: The economy is.

750
00:35:58,719 --> 00:36:02,120
Speaker 11: Vietnam in particular, had a terrible time in sort of

751
00:36:02,200 --> 00:36:05,280
Speaker 11: Q two and Q three last year. That's bouncing back.

752
00:36:05,760 --> 00:36:09,560
Speaker 11: I wouldn't say the beer market because of regulation, is buoyant,

753
00:36:10,200 --> 00:36:14,200
Speaker 11: but they're gaining share and they've done innovation on the beer.

754
00:36:14,600 --> 00:36:16,719
Speaker 11: Beer market there there seems to be working very well.

755
00:36:16,800 --> 00:36:18,839
Speaker 11: So there are a few issues in Asia that they've

756
00:36:18,840 --> 00:36:23,359
Speaker 11: still got to overcome. China some quite a chunky bit

757
00:36:23,400 --> 00:36:26,080
Speaker 11: of their market now, so they need to see that

758
00:36:26,239 --> 00:36:29,799
Speaker 11: economy improved. Places like Cambodia have got a bit of

759
00:36:29,800 --> 00:36:32,160
Speaker 11: an issue in the short term because of the economic growth.

760
00:36:32,480 --> 00:36:37,040
Speaker 11: So just a case of good old policies from governments

761
00:36:37,120 --> 00:36:40,760
Speaker 11: turning the economies around. I'm surely get a bit happier

762
00:36:40,760 --> 00:36:43,480
Speaker 11: with book. We'd life and people then go out and

763
00:36:43,520 --> 00:36:44,000
Speaker 11: buy beer.

764
00:36:44,320 --> 00:36:47,799
Speaker 3: Thanks to Duncan Fox, Bloomberg Intelligence Consumer Staples Analyst.

765
00:36:48,000 --> 00:36:52,120
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766
00:36:52,239 --> 00:36:54,719
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767
00:36:54,960 --> 00:36:58,040
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768
00:36:58,120 --> 00:37:01,480
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769
00:37:01,560 --> 00:37:04,480
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770
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