1 00:00:02,720 --> 00:00:10,600 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:10,600 --> 00:00:14,600 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 3 00:00:14,640 --> 00:00:18,560 Speaker 1: Eastern on Applecarplay and Android Auto with the Bloomberg Business App. 4 00:00:18,640 --> 00:00:21,920 Speaker 1: Listen on demand wherever you get your podcasts, or watch 5 00:00:21,960 --> 00:00:23,120 Speaker 1: us live on YouTube. 6 00:00:24,079 --> 00:00:29,600 Speaker 2: City investigates HR complaints against wealth heead Andy Sieg. City 7 00:00:29,640 --> 00:00:36,080 Speaker 2: Group has hired law firm Paul Weiss to investigate complaints 8 00:00:36,080 --> 00:00:38,760 Speaker 2: about the behavior the bank's wealth management chief, Andy Sieg, 9 00:00:39,040 --> 00:00:41,400 Speaker 2: who was brought on by a chief executive officer, Jane 10 00:00:41,400 --> 00:00:45,639 Speaker 2: Fraser as a high profile hire to drive a key part. 11 00:00:45,520 --> 00:00:47,160 Speaker 3: Of her turnaround plan. 12 00:00:47,320 --> 00:00:49,720 Speaker 2: And one of the reporters on this story joints us 13 00:00:49,720 --> 00:00:52,760 Speaker 2: now on our Bloomberg Interactive Broker studio Todd Gillespie Bloomberg 14 00:00:52,760 --> 00:00:56,480 Speaker 2: financi reporter Todd talk to us about what's happening over 15 00:00:56,600 --> 00:00:59,360 Speaker 2: at City Group with their wealth management chief. 16 00:00:59,360 --> 00:01:03,000 Speaker 3: Andy might pronuncient direction is correct? Yeah, yeah, exactly. 17 00:01:03,240 --> 00:01:04,880 Speaker 4: I mean, well, what we do know is that you 18 00:01:04,920 --> 00:01:07,399 Speaker 4: know at to Andy c you know Rand Meryll for 19 00:01:07,959 --> 00:01:10,880 Speaker 4: a Bank of America's wire house for six years, came 20 00:01:10,920 --> 00:01:14,880 Speaker 4: on in twenty twenty three to turn around the wealth 21 00:01:14,920 --> 00:01:17,520 Speaker 4: business at City Group, which was ailing, was a key 22 00:01:17,560 --> 00:01:20,560 Speaker 4: priority for Jane Fraser's turnaround of you know, Wall Streets, 23 00:01:20,560 --> 00:01:23,240 Speaker 4: one of the least profitable, profitable banks on Wall Street. 24 00:01:24,319 --> 00:01:27,200 Speaker 4: He has been there for just under two years, but 25 00:01:27,280 --> 00:01:30,399 Speaker 4: in that time he has drawn several, you know, we 26 00:01:30,440 --> 00:01:34,480 Speaker 4: know from at least six managing directors complaints about his behavior, 27 00:01:34,600 --> 00:01:39,000 Speaker 4: particularly his treatment of senior female executives, including Ida lu 28 00:01:39,080 --> 00:01:43,480 Speaker 4: who left the bank after eighteen years in January. Some 29 00:01:43,560 --> 00:01:46,360 Speaker 4: of you might remember that it was quite a sudden departure, 30 00:01:47,400 --> 00:01:51,040 Speaker 4: and also towards one of the current his behavior towards 31 00:01:51,080 --> 00:01:54,280 Speaker 4: one of the current direct reports who runs the Wealth 32 00:01:54,280 --> 00:01:56,520 Speaker 4: at Work business there, a woman named Kristin Bitterly. 33 00:01:57,720 --> 00:02:00,800 Speaker 2: Now, which tipment behavior, It's just it's not from what 34 00:02:00,840 --> 00:02:02,920 Speaker 2: I'm reading in your story. It's more just the way 35 00:02:02,960 --> 00:02:05,240 Speaker 2: he speaks to them, or maybe speaks of them, or 36 00:02:05,320 --> 00:02:08,080 Speaker 2: just his it's not necessarily any sexual type of things 37 00:02:08,240 --> 00:02:09,079 Speaker 2: as far as we know now. 38 00:02:09,080 --> 00:02:10,800 Speaker 3: It's just more of his management style. 39 00:02:10,880 --> 00:02:15,280 Speaker 4: Perhaps precisely, Yeah, we call it. There's intimidating behavior. They're 40 00:02:15,680 --> 00:02:19,440 Speaker 4: expletive filled rants, which there you know, we know about 41 00:02:19,520 --> 00:02:22,640 Speaker 4: him reducing a male managing director to tears after berating 42 00:02:22,680 --> 00:02:26,560 Speaker 4: him in front of colleagues, calling people's work pathetic in 43 00:02:26,639 --> 00:02:30,080 Speaker 4: meetings with that person present and their colleagues present. So 44 00:02:30,320 --> 00:02:36,080 Speaker 4: and also undermining Idelu in particular and his COO, a 45 00:02:36,120 --> 00:02:41,000 Speaker 4: man called Valentine Valderbano, directing a managing director to exclude 46 00:02:41,000 --> 00:02:43,480 Speaker 4: her from correspondence that was important to her business in 47 00:02:43,520 --> 00:02:46,040 Speaker 4: the months before she departed the bank. 48 00:02:46,360 --> 00:02:49,920 Speaker 5: Well, let's talk about just his performance business wise, right, 49 00:02:49,960 --> 00:02:53,800 Speaker 5: I mean, under his tenure, the unit reached record levels, 50 00:02:54,720 --> 00:02:55,760 Speaker 5: improved returns. 51 00:02:55,880 --> 00:02:58,200 Speaker 3: What was his what was his style if you will, 52 00:02:58,520 --> 00:02:59,640 Speaker 3: under that wealth division? 53 00:02:59,760 --> 00:03:02,200 Speaker 4: Yeah, absolutely, And it is important to note that, you know, 54 00:03:02,240 --> 00:03:04,640 Speaker 4: City Group appeared to be standing by him, you know, 55 00:03:04,720 --> 00:03:07,359 Speaker 4: they do note, you know that he's really improved profitability 56 00:03:07,360 --> 00:03:09,880 Speaker 4: at the bank. The second quarter revenue, you know, was 57 00:03:09,919 --> 00:03:14,000 Speaker 4: a record and he's really done that by essentially moving 58 00:03:14,080 --> 00:03:16,960 Speaker 4: the unit's focus away from what was quite a lending 59 00:03:17,040 --> 00:03:20,720 Speaker 4: intensive balance sheet heavy private bank focus towards I guess 60 00:03:20,720 --> 00:03:23,239 Speaker 4: more of a wire house style, you might say, like Merrill, 61 00:03:23,360 --> 00:03:25,800 Speaker 4: like Merrill Lynch, where he you know, basically grew up 62 00:03:25,800 --> 00:03:29,920 Speaker 4: in the business and you know, he's focused on attracting 63 00:03:30,000 --> 00:03:34,040 Speaker 4: investment assets into the business and reducing that dependence, you know, 64 00:03:34,080 --> 00:03:36,160 Speaker 4: on the balance sheet at the bank, and that seems 65 00:03:36,200 --> 00:03:37,560 Speaker 4: to have have reaped dividends. 66 00:03:37,920 --> 00:03:41,040 Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this. 67 00:03:43,200 --> 00:03:46,920 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 68 00:03:47,000 --> 00:03:50,360 Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Otto 69 00:03:50,480 --> 00:03:53,560 Speaker 1: with the Bloomberg Business app. Listen on demand wherever you 70 00:03:53,600 --> 00:03:56,560 Speaker 1: get your podcasts, or watch us live on YouTube. 71 00:03:57,840 --> 00:04:00,600 Speaker 3: Target tough numbers, that's one thing. I mean, the results 72 00:04:00,640 --> 00:04:02,520 Speaker 3: were not great. I didn't think, but what I know? 73 00:04:02,960 --> 00:04:06,119 Speaker 2: And then CEO, you keep an insider there? I think 74 00:04:06,160 --> 00:04:09,280 Speaker 2: maybe the street wanted an outsiders. John was suggesting stock 75 00:04:09,320 --> 00:04:10,320 Speaker 2: down seven and a half percent. 76 00:04:10,440 --> 00:04:10,720 Speaker 3: I don't know. 77 00:04:10,720 --> 00:04:12,480 Speaker 2: If I were this guy, I would take it personally. 78 00:04:12,840 --> 00:04:15,200 Speaker 2: Let's see if Jenn Bartash just takes it personally. She's 79 00:04:15,200 --> 00:04:18,360 Speaker 2: a senior retail analyst to Bloomberg Intelligence. She covers Target 80 00:04:18,720 --> 00:04:22,480 Speaker 2: and all these names. Jen, let's start first with the CEO. 81 00:04:23,560 --> 00:04:24,040 Speaker 3: News here. 82 00:04:24,080 --> 00:04:26,840 Speaker 2: What do you make of this person and should they 83 00:04:26,880 --> 00:04:28,400 Speaker 2: maybe have gone outside the company? 84 00:04:29,520 --> 00:04:32,760 Speaker 6: Good morning? Yeah, it's an interesting choice, and I think 85 00:04:32,800 --> 00:04:34,720 Speaker 6: there are investors for a little while and now I 86 00:04:34,720 --> 00:04:38,279 Speaker 6: have been interested in seeing a CEO change. Brian Cornell 87 00:04:38,320 --> 00:04:40,760 Speaker 6: has done a great job during his tenure, at least 88 00:04:40,920 --> 00:04:43,960 Speaker 6: initially in terms of really driving growth for Target. But 89 00:04:44,000 --> 00:04:47,440 Speaker 6: an internal choice really implies much of the same strategy, 90 00:04:48,000 --> 00:04:49,599 Speaker 6: and I think there was some hopes that there would 91 00:04:49,640 --> 00:04:51,960 Speaker 6: be something a little different and maybe shake things up 92 00:04:52,240 --> 00:04:54,760 Speaker 6: and bring something new to the company. 93 00:04:54,839 --> 00:04:57,200 Speaker 5: You know, I'm wondering if Target is going through an 94 00:04:57,240 --> 00:05:01,800 Speaker 5: existential crisis right for this identity crime, because you feel like, 95 00:05:01,920 --> 00:05:03,440 Speaker 5: I don't know about you Uponda, the last time you 96 00:05:03,480 --> 00:05:06,320 Speaker 5: went into a Target. Sure, but you feel like they've 97 00:05:06,360 --> 00:05:09,279 Speaker 5: lost their mojo, Jennifer, because the last time I was 98 00:05:09,320 --> 00:05:11,640 Speaker 5: in there, the store shelves were not stocked very well, 99 00:05:11,760 --> 00:05:15,160 Speaker 5: felt disorganized, couldn't find a sales associate to help me. 100 00:05:15,600 --> 00:05:19,440 Speaker 5: What does this new CEO have to do to help this. 101 00:05:19,400 --> 00:05:22,520 Speaker 6: Company get back on track. Well, you know, it's very interesting. 102 00:05:22,560 --> 00:05:27,000 Speaker 6: He's highlighted three priorities, but they're not really new priorities. 103 00:05:27,320 --> 00:05:29,279 Speaker 6: But if they can bring focus to it, maybe that 104 00:05:29,320 --> 00:05:32,520 Speaker 6: will help. And that's you know, re energizing the assortment, 105 00:05:32,960 --> 00:05:37,039 Speaker 6: bringing back some of that style and you know value 106 00:05:37,080 --> 00:05:40,920 Speaker 6: that people crave. It's about having a very good, consistent 107 00:05:41,000 --> 00:05:44,240 Speaker 6: in store execution and experience, which is what you were 108 00:05:44,240 --> 00:05:48,520 Speaker 6: actually just talking about having things in stock, having you know, 109 00:05:48,600 --> 00:05:51,680 Speaker 6: associates available. And then the third is an acceleration in 110 00:05:51,720 --> 00:05:56,560 Speaker 6: the deployment of technology to maybe you know, make processes faster, 111 00:05:57,080 --> 00:06:00,640 Speaker 6: improve efficiency, that sort of thing. So we'll see if that, 112 00:06:00,880 --> 00:06:03,360 Speaker 6: you know, if that happens. But it's really about getting 113 00:06:03,400 --> 00:06:06,239 Speaker 6: back to what is it that consumers loved about Target 114 00:06:06,560 --> 00:06:08,280 Speaker 6: and how do you get them back in that frame 115 00:06:08,320 --> 00:06:10,640 Speaker 6: of mind so that they come to stores and spend there. 116 00:06:10,960 --> 00:06:12,960 Speaker 2: Well, you're the expert here, like I don't have a 117 00:06:12,960 --> 00:06:14,279 Speaker 2: sense of what people go to Target for. 118 00:06:14,480 --> 00:06:16,159 Speaker 3: What do you think they go to Target for? 119 00:06:17,400 --> 00:06:19,880 Speaker 6: Well, what they traditionally have gone to Target for was 120 00:06:19,880 --> 00:06:21,920 Speaker 6: that sense of discovery. Right, you had a couple of 121 00:06:22,000 --> 00:06:24,800 Speaker 6: things on your list, you got in and you were inspired. 122 00:06:24,880 --> 00:06:28,240 Speaker 6: You saw home decoration items that you just were like, oh, 123 00:06:28,279 --> 00:06:30,440 Speaker 6: that would look great in my living room. Or you 124 00:06:30,480 --> 00:06:33,400 Speaker 6: would go through apparel and you would see something very 125 00:06:33,440 --> 00:06:36,800 Speaker 6: stylish and you know value that you thought, oh, that's 126 00:06:36,839 --> 00:06:38,640 Speaker 6: a great thing to add to my basket. And so 127 00:06:39,800 --> 00:06:42,280 Speaker 6: that's what's a little bit missing. And part of that 128 00:06:42,320 --> 00:06:45,000 Speaker 6: may be because of just the rise in digital orders. 129 00:06:45,760 --> 00:06:49,640 Speaker 6: It's a less conducive to those impromptu purchases, but it's 130 00:06:49,680 --> 00:06:52,960 Speaker 6: also inspired by the assortment and by what people experience 131 00:06:53,040 --> 00:06:55,760 Speaker 6: when they're in the stores, and that's really where they 132 00:06:55,800 --> 00:06:58,160 Speaker 6: have to focus to get to get that magic back. 133 00:06:58,640 --> 00:07:00,919 Speaker 5: And Jennifer correct me if I'm wrong. I think Target 134 00:07:00,960 --> 00:07:04,400 Speaker 5: has more exposure to tariffs than say, Walmart because of 135 00:07:04,440 --> 00:07:06,880 Speaker 5: its mix of products. It doesn't have as much exposure 136 00:07:06,920 --> 00:07:09,200 Speaker 5: to groceries as Walmart does, but it gets a lot 137 00:07:09,200 --> 00:07:11,480 Speaker 5: of its products from overseas places that are getting hit 138 00:07:11,880 --> 00:07:14,320 Speaker 5: by these tariffs. How did that play out in this 139 00:07:14,440 --> 00:07:16,160 Speaker 5: quarter and how will it play out going forward. 140 00:07:17,280 --> 00:07:19,360 Speaker 6: Yeah, it's a great question, and it is one of 141 00:07:19,360 --> 00:07:21,960 Speaker 6: the things that's sort of been bogging down Target ever 142 00:07:22,000 --> 00:07:26,280 Speaker 6: since we've had very high food inflation. The willingness to 143 00:07:26,280 --> 00:07:29,200 Speaker 6: spend on discretionary categories has been a little bit more limited, 144 00:07:29,240 --> 00:07:32,000 Speaker 6: and that's really the area that Target has always excelled, 145 00:07:32,400 --> 00:07:36,600 Speaker 6: things like apparel and electronics and toys and home decor 146 00:07:37,440 --> 00:07:39,640 Speaker 6: and so you know, right now, the company is saying 147 00:07:39,680 --> 00:07:42,760 Speaker 6: they're doing a pretty good job of mitigating tariffs, but 148 00:07:42,880 --> 00:07:46,440 Speaker 6: they are more exposed because of the merchandise mix that 149 00:07:46,480 --> 00:07:50,240 Speaker 6: they have. So they said they've done some right sizing 150 00:07:50,280 --> 00:07:53,000 Speaker 6: they've paid off kind of the one time cancellation charges 151 00:07:53,000 --> 00:07:55,000 Speaker 6: they had while they were waiting on the terra verdicts. 152 00:07:55,800 --> 00:07:59,320 Speaker 6: We'll see what unfolds in third quarter, and especially because 153 00:07:59,320 --> 00:08:01,520 Speaker 6: it's back to school, which is a really important quarter 154 00:08:01,600 --> 00:08:02,080 Speaker 6: for Target. 155 00:08:03,080 --> 00:08:04,200 Speaker 3: It's always well. 156 00:08:04,240 --> 00:08:06,000 Speaker 2: I guess what's recently in the last ten fifteen years 157 00:08:06,040 --> 00:08:08,640 Speaker 2: really amaze me about Walmart is it how's effective their 158 00:08:08,680 --> 00:08:11,280 Speaker 2: digital strategy was, and they actually went toe to toe 159 00:08:11,280 --> 00:08:13,080 Speaker 2: with Amazon, and I think they more than hold their own. 160 00:08:13,520 --> 00:08:17,040 Speaker 2: Not just about Target and their digital strategy, how's that performing? 161 00:08:18,360 --> 00:08:18,800 Speaker 7: Overall? 162 00:08:18,800 --> 00:08:21,800 Speaker 6: Target's digital strategy has been doing pretty well. They've been 163 00:08:21,960 --> 00:08:24,600 Speaker 6: a They've made a conscious decision to not go head 164 00:08:24,600 --> 00:08:26,960 Speaker 6: to head with Walmart and Target. So, for example, in 165 00:08:27,000 --> 00:08:31,720 Speaker 6: their marketplace, it's not just an endless aisle of sellers. 166 00:08:31,800 --> 00:08:34,560 Speaker 6: They have a very close criteria of who they let 167 00:08:34,600 --> 00:08:37,120 Speaker 6: onto their platform and that's worked well for them because 168 00:08:37,120 --> 00:08:39,880 Speaker 6: it helps keep the product selection closer to what people 169 00:08:39,960 --> 00:08:43,400 Speaker 6: expect from Target. Their digital sales were up in terms 170 00:08:43,440 --> 00:08:46,440 Speaker 6: of same star sales this quarter, well uppaced the visit 171 00:08:46,960 --> 00:08:51,640 Speaker 6: visits to stores, and so they've been executing pretty well there. 172 00:08:51,720 --> 00:08:53,520 Speaker 6: It's just a matter of how do they marry the 173 00:08:53,520 --> 00:08:56,240 Speaker 6: two parts of the business to grow simultaneously. 174 00:08:56,840 --> 00:08:57,520 Speaker 2: I want to look. 175 00:08:57,360 --> 00:09:01,240 Speaker 5: Ahead tomorrow because we get Walmart. They may strike a 176 00:09:01,240 --> 00:09:04,440 Speaker 5: more cautious tone here. I'm curious if they're going to 177 00:09:04,480 --> 00:09:07,760 Speaker 5: actually say the word tariffs Paul and Jennifer tomorrow, because 178 00:09:08,080 --> 00:09:10,080 Speaker 5: last time when they did, Trump told them to eat 179 00:09:10,080 --> 00:09:12,600 Speaker 5: the tariffs because they said they were blaming the tariffs 180 00:09:12,600 --> 00:09:15,760 Speaker 5: on having to raise prices. What do you think we're 181 00:09:15,760 --> 00:09:17,160 Speaker 5: gonna hear from Walmart tomorrow. 182 00:09:17,000 --> 00:09:20,720 Speaker 6: Jennifer, Well, I think I think tomorrow with Walmart, it's 183 00:09:20,760 --> 00:09:24,599 Speaker 6: going to be more about the value seeking behavior of customers. 184 00:09:25,520 --> 00:09:27,520 Speaker 6: You know, I think that any of these retailers they're 185 00:09:27,559 --> 00:09:30,679 Speaker 6: holding price increases back to the last possible resort. With 186 00:09:30,720 --> 00:09:34,520 Speaker 6: regards to mitigating tariffs. Walmart will certainly be asked about it. 187 00:09:34,559 --> 00:09:38,680 Speaker 6: They certainly won't disclose any specific information about, you know, 188 00:09:38,720 --> 00:09:41,640 Speaker 6: the cost of tariffs on their business or the specifics 189 00:09:41,640 --> 00:09:44,400 Speaker 6: of how they're mitigating them. But I think they will 190 00:09:44,440 --> 00:09:47,320 Speaker 6: remain very cautious, and they have warned that there could 191 00:09:47,320 --> 00:09:50,040 Speaker 6: be volatility from quarter to quarter, especially with regards to 192 00:09:50,120 --> 00:09:52,360 Speaker 6: their margins, and we may see a little bit of 193 00:09:52,360 --> 00:09:53,320 Speaker 6: that play out tomorrow. 194 00:09:53,960 --> 00:09:57,520 Speaker 3: Thirty second, Sten, what's the holiday look like? Do you 195 00:09:57,520 --> 00:09:59,040 Speaker 3: think so far? What's the early take. 196 00:10:00,240 --> 00:10:03,040 Speaker 6: With regards to holiday season. I think the retailers have 197 00:10:03,120 --> 00:10:06,880 Speaker 6: good strategies to have streamlined inventory in place. It's really 198 00:10:06,880 --> 00:10:09,160 Speaker 6: going to come down to how confident is the consumer 199 00:10:09,160 --> 00:10:10,560 Speaker 6: and how much are they willing to spend. 200 00:10:11,400 --> 00:10:14,520 Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this. 201 00:10:16,679 --> 00:10:20,400 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 202 00:10:20,480 --> 00:10:23,559 Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android 203 00:10:23,559 --> 00:10:26,880 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 204 00:10:26,920 --> 00:10:30,040 Speaker 1: you get your podcasts, or watch us live on YouTube. 205 00:10:30,880 --> 00:10:33,640 Speaker 2: All right, let's get back to these markets. Low's is 206 00:10:33,679 --> 00:10:36,800 Speaker 2: a stock that's in the news today. They reported some 207 00:10:36,880 --> 00:10:40,680 Speaker 2: pretty decent numbers and also made a big acquisition, buying 208 00:10:40,920 --> 00:10:44,440 Speaker 2: a company called what is this called Foundation Building? 209 00:10:44,480 --> 00:10:44,959 Speaker 3: Never heard of it? 210 00:10:45,040 --> 00:10:49,520 Speaker 2: Eight point eight billion dollars cash deal, transformational. 211 00:10:48,679 --> 00:10:50,400 Speaker 3: Deal some analysts on Wall Street or calling it. So 212 00:10:50,440 --> 00:10:51,000 Speaker 3: let's break it down. 213 00:10:51,040 --> 00:10:54,560 Speaker 2: When you're reading Bloomberg Intelligence, US home building analysts, Drew 214 00:10:54,600 --> 00:10:58,120 Speaker 2: first talk to us about this acquisition that Low's made. 215 00:10:58,240 --> 00:11:01,800 Speaker 2: What is the company and what's the upside for lows here? 216 00:11:03,679 --> 00:11:05,960 Speaker 7: Yeah, this is a pretty big story today when we 217 00:11:05,960 --> 00:11:08,720 Speaker 7: weren't necessarily expecting, they announced that they're going to acquire 218 00:11:09,320 --> 00:11:11,160 Speaker 7: foundation building Materials. 219 00:11:10,679 --> 00:11:12,199 Speaker 8: For eight point eight billion. 220 00:11:13,400 --> 00:11:18,359 Speaker 7: They're basically distributor of drywall, ceiling tiles, metal framing, insulation 221 00:11:19,080 --> 00:11:23,840 Speaker 7: to builders and remodelers. What's interesting is if you think 222 00:11:23,840 --> 00:11:29,240 Speaker 7: about how Lows has traditionally attacked the professional contractor segment, 223 00:11:30,000 --> 00:11:33,000 Speaker 7: it's really been through small and medium sized contractors. 224 00:11:33,000 --> 00:11:34,920 Speaker 8: That's really been their bread and butter. 225 00:11:35,520 --> 00:11:39,000 Speaker 7: What this deal does is gives them access to larger 226 00:11:39,040 --> 00:11:42,240 Speaker 7: scale projects. It's really the area that Home Depot has 227 00:11:42,280 --> 00:11:44,760 Speaker 7: been going over the last couple of years. But now 228 00:11:44,800 --> 00:11:47,280 Speaker 7: it puts Lows firmly in that lane and really opens 229 00:11:47,360 --> 00:11:49,720 Speaker 7: up a new growth opportunity for them. 230 00:11:50,160 --> 00:11:54,280 Speaker 5: Yeah, and didn't Lows by another sort of pro type 231 00:11:54,320 --> 00:11:57,400 Speaker 5: business earlier in the year. I know Home Depot did 232 00:11:57,480 --> 00:12:00,400 Speaker 5: something similar. They got they bought GMS for over four billion. 233 00:12:00,920 --> 00:12:03,560 Speaker 5: I wonder though, what this means drew for people like 234 00:12:03,640 --> 00:12:05,800 Speaker 5: us who want to di Wyatt. Are we going to 235 00:12:06,040 --> 00:12:09,120 Speaker 5: not be as catered to at the Lows and Home 236 00:12:09,160 --> 00:12:09,920 Speaker 5: Depots of the world. 237 00:12:11,480 --> 00:12:15,240 Speaker 7: So you're right, Lows did just recently close on the 238 00:12:15,280 --> 00:12:19,440 Speaker 7: acquisition of artists and design group who's a distributor of 239 00:12:20,120 --> 00:12:25,760 Speaker 7: internal finishes for things like countertops, flooring, and things along 240 00:12:25,760 --> 00:12:27,760 Speaker 7: those lines. So now Lows is really able to go 241 00:12:27,800 --> 00:12:31,600 Speaker 7: to large scale contractors and builders and really provide an 242 00:12:31,760 --> 00:12:34,840 Speaker 7: entire product suite on the interior of the business. In 243 00:12:34,960 --> 00:12:37,400 Speaker 7: terms of DIY, I mean, Di Wells, why is still 244 00:12:37,440 --> 00:12:40,640 Speaker 7: seventy percent of the business for Lows. That'll remain core 245 00:12:40,720 --> 00:12:43,080 Speaker 7: to their strategy. But what I think this speaks to 246 00:12:43,320 --> 00:12:46,160 Speaker 7: is the relative weakness in that segment and the need 247 00:12:46,200 --> 00:12:49,599 Speaker 7: for them to look for new avenues of growth, you know, 248 00:12:49,720 --> 00:12:50,880 Speaker 7: out over the next several years. 249 00:12:50,920 --> 00:12:51,440 Speaker 8: When we think. 250 00:12:51,360 --> 00:12:54,400 Speaker 7: About how the market is likely to unfold, and Lows 251 00:12:54,400 --> 00:12:56,959 Speaker 7: alluded to this today during the call, we think a 252 00:12:57,000 --> 00:12:59,200 Speaker 7: lot of the growth is going to come from big 253 00:12:59,240 --> 00:13:02,160 Speaker 7: ticket spending that's been pent up over the last several years, 254 00:13:02,200 --> 00:13:04,840 Speaker 7: and this gives them an entrance into that market somewhere 255 00:13:04,880 --> 00:13:07,240 Speaker 7: that where they didn't have that type of penetration before. 256 00:13:08,040 --> 00:13:11,120 Speaker 2: This may surprise you, Drew, but I'm probably the least 257 00:13:11,280 --> 00:13:12,960 Speaker 2: DIY guy you'll ever find. 258 00:13:13,000 --> 00:13:16,320 Speaker 3: I have people for that, Drew. But so I don't 259 00:13:16,360 --> 00:13:18,240 Speaker 3: really know much about the whole Lows thing. Tell me 260 00:13:18,240 --> 00:13:19,640 Speaker 3: about how their earnings were at this quarter. 261 00:13:21,120 --> 00:13:23,160 Speaker 8: Yeah, so the earnings were really a non event. 262 00:13:23,240 --> 00:13:27,079 Speaker 7: Comps were up one percent, pretty much in line. The 263 00:13:27,080 --> 00:13:30,000 Speaker 7: cadence of comps to the quarter was pretty much similar 264 00:13:30,000 --> 00:13:32,640 Speaker 7: to what we heard from Home Depot. They exited at 265 00:13:32,679 --> 00:13:34,760 Speaker 7: a four point seven percent cop and that really had 266 00:13:34,800 --> 00:13:38,400 Speaker 7: to do with how weather evolved throughout the quarter. Obviously 267 00:13:38,480 --> 00:13:40,959 Speaker 7: wouldn't be a retailer call if we didn't mention the weather. 268 00:13:42,600 --> 00:13:45,079 Speaker 7: We did see an improvement in big ticket spending, which 269 00:13:45,240 --> 00:13:47,800 Speaker 7: was encouraging and I think investors were pleased to see 270 00:13:47,800 --> 00:13:50,239 Speaker 7: that despite a still. 271 00:13:50,040 --> 00:13:51,240 Speaker 8: Challenging market out there. 272 00:13:51,280 --> 00:13:53,640 Speaker 7: They maintained their guidance for same store sales for twenty 273 00:13:53,679 --> 00:13:57,280 Speaker 7: twenty five, which calls for flat to up one percent, 274 00:13:57,400 --> 00:14:00,320 Speaker 7: so you know they did mention the environment still tough. 275 00:14:00,360 --> 00:14:03,000 Speaker 8: We think that the big ticket. 276 00:14:02,600 --> 00:14:06,319 Speaker 7: DIY discussionary categories that require financing, as we discussed with 277 00:14:06,320 --> 00:14:07,439 Speaker 7: its Home Depot. 278 00:14:07,400 --> 00:14:09,200 Speaker 8: Are still relative areas of weakness. 279 00:14:09,240 --> 00:14:11,760 Speaker 7: But we think both of these retailers are executing well 280 00:14:12,040 --> 00:14:13,120 Speaker 7: in a challenging market. 281 00:14:13,679 --> 00:14:15,960 Speaker 5: So drew as our home building analysts, I just want 282 00:14:16,000 --> 00:14:17,760 Speaker 5: to broaden this out for a moment and get your 283 00:14:17,760 --> 00:14:18,280 Speaker 5: thoughts on this. 284 00:14:18,440 --> 00:14:19,680 Speaker 3: So we saw that. 285 00:14:21,480 --> 00:14:23,880 Speaker 5: We saw that the gauge of future construction right new 286 00:14:24,200 --> 00:14:27,280 Speaker 5: building permits down more than five and a half percent 287 00:14:27,440 --> 00:14:29,200 Speaker 5: versus last year. But what we're seeing is sort of 288 00:14:29,200 --> 00:14:34,640 Speaker 5: a divergence in the industry. Right apartment construction is steadily 289 00:14:34,680 --> 00:14:37,680 Speaker 5: climbing and not keeping pace with single family homes. What's 290 00:14:37,760 --> 00:14:38,360 Speaker 5: driving that? 291 00:14:40,320 --> 00:14:42,120 Speaker 8: So a lot of it has to do with affordability. 292 00:14:42,160 --> 00:14:44,520 Speaker 7: I mean, with the rise and home prices over the 293 00:14:44,600 --> 00:14:47,200 Speaker 7: last five years up more than fifty percent, rates hovering 294 00:14:47,240 --> 00:14:48,960 Speaker 7: at six and a half percent, there's a lot of 295 00:14:49,000 --> 00:14:52,280 Speaker 7: people that simply can't afford to buy in this market. 296 00:14:52,560 --> 00:14:55,600 Speaker 7: We looked at some data last quarter on household growth 297 00:14:55,680 --> 00:14:58,120 Speaker 7: and really what that showed is that all the new 298 00:14:58,120 --> 00:15:01,520 Speaker 7: household hold formations have been in the renter market at 299 00:15:01,520 --> 00:15:05,120 Speaker 7: the expense of you know, owner occupied units, and it 300 00:15:05,160 --> 00:15:06,680 Speaker 7: really goes back to affordability. 301 00:15:06,760 --> 00:15:09,600 Speaker 8: So I think you're right. If we look at building permits, 302 00:15:09,640 --> 00:15:10,000 Speaker 8: they were. 303 00:15:09,880 --> 00:15:12,120 Speaker 7: Actually down eight and a half percent on the single 304 00:15:12,160 --> 00:15:15,520 Speaker 7: family side compared to last year. You know, there was 305 00:15:15,560 --> 00:15:17,800 Speaker 7: a little bit of a surprise on starts, which tend 306 00:15:17,840 --> 00:15:20,680 Speaker 7: to be volatile month to month, But what we're hearing 307 00:15:20,680 --> 00:15:22,800 Speaker 7: from the builders is that they're not going to keep 308 00:15:22,800 --> 00:15:25,960 Speaker 7: pushing new units into a soft demand environment. We think 309 00:15:25,960 --> 00:15:28,400 Speaker 7: they're going to continue to pull back on starts through 310 00:15:28,400 --> 00:15:30,600 Speaker 7: the remainder of the year and then too next year 311 00:15:30,600 --> 00:15:33,480 Speaker 7: as they look to work through the existing inventory that's 312 00:15:33,480 --> 00:15:35,840 Speaker 7: out there in the market. If you look at the 313 00:15:36,200 --> 00:15:39,040 Speaker 7: new home inventory, we're at two thousand and seven levels, 314 00:15:39,080 --> 00:15:42,080 Speaker 7: so that's requiring builders to have to lean on incentives 315 00:15:42,080 --> 00:15:44,080 Speaker 7: to a greater extent in order to clear that. And 316 00:15:44,080 --> 00:15:46,280 Speaker 7: we think until we get through some more of that inventory, 317 00:15:46,520 --> 00:15:49,360 Speaker 7: you're going to see further weakness in single family construction. 318 00:15:50,080 --> 00:15:53,200 Speaker 2: Stay with us more from Bloomberg Intelligence coming up after this. 319 00:15:55,360 --> 00:15:59,080 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live 320 00:15:59,160 --> 00:16:02,720 Speaker 1: weekdays at tenn on appleclock Lay and Android Auto with 321 00:16:02,800 --> 00:16:05,920 Speaker 1: the Bluemberg Business app. Listen on demand wherever you get 322 00:16:05,920 --> 00:16:08,720 Speaker 1: your podcasts, or watch us live on YouTube. 323 00:16:09,440 --> 00:16:13,080 Speaker 2: Tj Max TJX, owner of tj Max, raised it's fully 324 00:16:13,080 --> 00:16:16,840 Speaker 2: your guidance earnings for share outlook after better than expected results, 325 00:16:16,880 --> 00:16:21,040 Speaker 2: citing shoppers turning to discounters due to economic uncertainty. I 326 00:16:21,040 --> 00:16:23,680 Speaker 2: look at the stock. It's up three point three percent today, 327 00:16:23,680 --> 00:16:26,040 Speaker 2: it's up fifteen percent year to date. Fifty two week 328 00:16:26,080 --> 00:16:29,200 Speaker 2: hi seems like always good at TJX. Let's break it 329 00:16:29,240 --> 00:16:32,080 Speaker 2: down with Mary Ross, Gilbert Cheese's senior ecodanalys. She covers 330 00:16:32,080 --> 00:16:34,960 Speaker 2: the retail space for Bloomberg Intelligence. She's based out there 331 00:16:35,120 --> 00:16:39,120 Speaker 2: in our Los Angeles bureau. Mary looks like TJX is 332 00:16:39,160 --> 00:16:43,280 Speaker 2: doing pretty well here what you hear from the company, Yes. 333 00:16:43,160 --> 00:16:46,320 Speaker 5: Paul, you're absolutely right. TJX is hitting it out of 334 00:16:46,360 --> 00:16:50,479 Speaker 5: the park. This is a company that just executes seamlessly 335 00:16:50,760 --> 00:16:54,640 Speaker 5: and consistently, something in retail that's very, very difficult to do. 336 00:16:55,240 --> 00:16:59,400 Speaker 5: They saw strength across all categories, across all income groups, 337 00:16:59,440 --> 00:17:01,840 Speaker 5: all age groups, and they know how to get the 338 00:17:01,840 --> 00:17:06,399 Speaker 5: merchandise right by store, by region, so they have a 339 00:17:06,480 --> 00:17:09,679 Speaker 5: terrific planning and allocation. They sort of emphasize that and 340 00:17:09,720 --> 00:17:12,920 Speaker 5: another key point because they raise their guidance not only 341 00:17:12,960 --> 00:17:15,640 Speaker 5: for sales but also on the margin side. And there 342 00:17:15,720 --> 00:17:18,800 Speaker 5: was such a huge fear with tariffs. They only source 343 00:17:18,960 --> 00:17:22,440 Speaker 5: probably less than ten percent of their sales come for 344 00:17:22,640 --> 00:17:26,600 Speaker 5: their merchandise is something they directly source. They were able 345 00:17:26,640 --> 00:17:29,480 Speaker 5: to buy better, which means they got better deals. That 346 00:17:29,640 --> 00:17:32,840 Speaker 5: means there's so much availability out there, and it's something 347 00:17:32,920 --> 00:17:35,680 Speaker 5: we've observed in our channel checks and when you look 348 00:17:35,680 --> 00:17:39,399 Speaker 5: at the shopping halls on television, on a YouTube, and 349 00:17:39,480 --> 00:17:43,680 Speaker 5: you see the incredible brands that are available, and they 350 00:17:43,840 --> 00:17:47,400 Speaker 5: really are across good, better and best. So you can 351 00:17:47,440 --> 00:17:51,040 Speaker 5: get anything from Puma, Audi, Doos, Nike all the way 352 00:17:51,119 --> 00:17:57,440 Speaker 5: up to Eve, Saint Laurent and Gucci. So it's and 353 00:17:57,800 --> 00:18:02,160 Speaker 5: TJX really really wins across all that, so strength across 354 00:18:02,640 --> 00:18:07,600 Speaker 5: you know, all their channels and internationally, I mean Canada 355 00:18:07,680 --> 00:18:11,240 Speaker 5: was up nine percent comp sales. I want to ask 356 00:18:11,240 --> 00:18:13,840 Speaker 5: you about a possible headwind though, because it seems like 357 00:18:14,200 --> 00:18:17,400 Speaker 5: they're firing on all cylinders. But I know that TJX 358 00:18:17,480 --> 00:18:21,800 Speaker 5: mentioned in the past about a key demographic, the Hispanic customer. 359 00:18:22,160 --> 00:18:25,000 Speaker 5: They were concerned that maybe immigration policy was going to 360 00:18:25,040 --> 00:18:26,960 Speaker 5: keep them home or not spend as much. Did they 361 00:18:27,000 --> 00:18:30,679 Speaker 5: mention anything about that on the earnings call. Yeah, well, 362 00:18:30,720 --> 00:18:34,639 Speaker 5: you know, the earnings call wasn't quite finished when you know, 363 00:18:34,680 --> 00:18:36,880 Speaker 5: I came in here, so I missed the point that 364 00:18:37,240 --> 00:18:39,680 Speaker 5: it was a question that was brought up. I didn't 365 00:18:39,760 --> 00:18:43,280 Speaker 5: see it. I don't think they saw any weakness as. 366 00:18:43,080 --> 00:18:43,800 Speaker 3: A result of that. 367 00:18:43,880 --> 00:18:46,920 Speaker 5: I know it's been a big concern, not only for TJX, 368 00:18:47,000 --> 00:18:50,240 Speaker 5: as you brought up Alexai, but also for Ross and 369 00:18:50,280 --> 00:18:53,879 Speaker 5: for Burlington, and probably even more so for Burlington because 370 00:18:54,160 --> 00:18:57,880 Speaker 5: they really skewed to a lower income consumer and they're 371 00:18:57,960 --> 00:19:00,199 Speaker 5: due to report next week, and so we should learn 372 00:19:00,280 --> 00:19:00,840 Speaker 5: more on that. 373 00:19:02,200 --> 00:19:02,480 Speaker 8: Mary. 374 00:19:02,640 --> 00:19:04,560 Speaker 2: I always think the job of a retail analyst like 375 00:19:05,080 --> 00:19:06,679 Speaker 2: you was really tough because not only do you have 376 00:19:06,680 --> 00:19:08,840 Speaker 2: to do the regular stuff as an analyst, like get 377 00:19:08,840 --> 00:19:11,800 Speaker 2: the earnings estimates kind of right and on the financial analysis, 378 00:19:11,840 --> 00:19:13,520 Speaker 2: but you kind of have to have an opinion on 379 00:19:14,320 --> 00:19:17,240 Speaker 2: like who's good at picking out the right fashion to 380 00:19:17,280 --> 00:19:18,760 Speaker 2: even put in the store in the first place. 381 00:19:19,359 --> 00:19:23,640 Speaker 3: What is TJX doing so well? Do you think? Well, 382 00:19:23,720 --> 00:19:24,480 Speaker 3: they have. 383 00:19:24,960 --> 00:19:28,240 Speaker 5: The most amazing buying team, and so they spend they 384 00:19:28,240 --> 00:19:32,160 Speaker 5: have sort of like a buying academy where they teach 385 00:19:32,240 --> 00:19:35,119 Speaker 5: their buyers. You know, they have to go through you know, 386 00:19:35,200 --> 00:19:37,919 Speaker 5: I think it's like three years, maybe even up to 387 00:19:38,040 --> 00:19:42,639 Speaker 5: seven years of work that they do with these buyers. 388 00:19:42,680 --> 00:19:47,480 Speaker 5: So the pricing that they work on and the product 389 00:19:47,480 --> 00:19:52,600 Speaker 5: that they're buying is really something that is steeped in 390 00:19:52,720 --> 00:19:58,439 Speaker 5: experience history. They also invest in systems, you know, so 391 00:19:58,480 --> 00:20:03,360 Speaker 5: that means technology logistics to make sure that they can 392 00:20:03,359 --> 00:20:05,199 Speaker 5: get this all right, because you can imagine that if 393 00:20:05,240 --> 00:20:09,280 Speaker 5: they're shipping multiple merchandise, you got to have fresh drops 394 00:20:09,320 --> 00:20:13,359 Speaker 5: because these customers will shop multiple times a week because 395 00:20:13,400 --> 00:20:17,879 Speaker 5: it's that freshness that brings them in. So yes, TJX 396 00:20:18,040 --> 00:20:20,399 Speaker 5: is the leader, though the largest in the world. I mean, 397 00:20:20,400 --> 00:20:23,240 Speaker 5: they'll probably hit sixty billion in revenues this year, up 398 00:20:23,280 --> 00:20:27,080 Speaker 5: from fifty six billion last year. And they keep increasing 399 00:20:27,119 --> 00:20:30,840 Speaker 5: the number of potential store openings they see. Previously they 400 00:20:30,880 --> 00:20:34,160 Speaker 5: said we think we have another twelve hundred stores to open. 401 00:20:34,320 --> 00:20:37,560 Speaker 5: Now they're saying it's another eighteen hundred stores to open 402 00:20:37,560 --> 00:20:41,600 Speaker 5: around the country, just around the globe in their existing markets. 403 00:20:42,000 --> 00:20:46,080 Speaker 5: So yes, this company really has the expertise in doing 404 00:20:46,160 --> 00:20:49,239 Speaker 5: it right. Is there a digital strategy here because I 405 00:20:49,280 --> 00:20:51,560 Speaker 5: remember I'm sure you do too, Mary, when you would 406 00:20:51,600 --> 00:20:54,400 Speaker 5: go online to try to find out what tj MAX 407 00:20:54,440 --> 00:20:56,280 Speaker 5: had and there was nothing there because you always had 408 00:20:56,280 --> 00:20:59,239 Speaker 5: to go in the store to find out what they had. 409 00:20:59,280 --> 00:21:00,800 Speaker 5: I think they had a step up their game right 410 00:21:00,840 --> 00:21:03,639 Speaker 5: because of Amazon and others online. But what is the 411 00:21:03,640 --> 00:21:08,000 Speaker 5: digital strategy, if anything, at TJX and TJX Alexa. 412 00:21:08,119 --> 00:21:09,040 Speaker 3: That's a good question. 413 00:21:09,320 --> 00:21:14,880 Speaker 5: So actually TJX has a digital strategy. It's across all 414 00:21:14,920 --> 00:21:19,679 Speaker 5: their brands except for home goods, and so it's about 415 00:21:19,800 --> 00:21:22,399 Speaker 5: I think it's I think it's just under five percent 416 00:21:22,440 --> 00:21:25,200 Speaker 5: of sales, so it's very small. But they also saw 417 00:21:25,280 --> 00:21:28,320 Speaker 5: strength in this quarter on their e comm business. So 418 00:21:28,359 --> 00:21:30,080 Speaker 5: they do have an e comm business. You can go 419 00:21:30,200 --> 00:21:34,120 Speaker 5: on it and you can shop anything you want on there. 420 00:21:34,240 --> 00:21:36,840 Speaker 5: Now you can't say that you want to shop by brand, 421 00:21:37,359 --> 00:21:40,960 Speaker 5: but you can select. Let's say, let's say that you 422 00:21:41,000 --> 00:21:44,639 Speaker 5: want to just buy the ultra luxe you know, merchandise 423 00:21:44,720 --> 00:21:48,359 Speaker 5: that they have there, and you'll see Christian d or sunglasses. 424 00:21:48,480 --> 00:21:53,000 Speaker 5: You'll see you know, like I mentioned, you know, on 425 00:21:53,080 --> 00:21:56,640 Speaker 5: the handbag size balan Chiaga. So you will be able 426 00:21:56,680 --> 00:21:58,639 Speaker 5: to find what you want on the high end, also 427 00:21:58,680 --> 00:21:59,960 Speaker 5: on the low end, but you'll have to do it 428 00:22:00,160 --> 00:22:03,240 Speaker 5: by price points, by sorting that way because they're not 429 00:22:03,320 --> 00:22:07,160 Speaker 5: allowed to necessarily have that ability to sort by brands. 430 00:22:07,440 --> 00:22:12,000 Speaker 5: So you will see they have a robust online business, 431 00:22:12,160 --> 00:22:14,880 Speaker 5: you know, and it's around the globe. Now, the key 432 00:22:15,080 --> 00:22:19,360 Speaker 5: is that they're a key differentiated in that regard. Remember 433 00:22:19,400 --> 00:22:22,440 Speaker 5: that it's still very small and that the vast majority 434 00:22:22,480 --> 00:22:25,479 Speaker 5: of their sales, you know, more like ninety six percent 435 00:22:25,600 --> 00:22:29,560 Speaker 5: or so are being generated in store, but nobody else 436 00:22:29,600 --> 00:22:33,640 Speaker 5: in off price other than the rack. The Nordstorm rack 437 00:22:34,320 --> 00:22:38,320 Speaker 5: has e commerce capabilities. All the rest it's strictly a 438 00:22:38,359 --> 00:22:39,520 Speaker 5: bricks and mortar model. 439 00:22:40,280 --> 00:22:45,000 Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify, 440 00:22:45,160 --> 00:22:49,120 Speaker 1: and anywhere else you get your podcasts. 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