WEBVTT - Citi Investigated HR Complaints Against Wealth Head Sieg 0:00:02.720 --> 0:00:10.600 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.600 --> 0:00:14.600 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.640 --> 0:00:18.560 Eastern on Applecarplay and Android Auto with the Bloomberg Business App. 0:00:18.640 --> 0:00:21.920 Listen on demand wherever you get your podcasts, or watch 0:00:21.960 --> 0:00:23.120 us live on YouTube. 0:00:24.079 --> 0:00:29.600 City investigates HR complaints against wealth heead Andy Sieg. City 0:00:29.640 --> 0:00:36.080 Group has hired law firm Paul Weiss to investigate complaints 0:00:36.080 --> 0:00:38.760 about the behavior the bank's wealth management chief, Andy Sieg, 0:00:39.040 --> 0:00:41.400 who was brought on by a chief executive officer, Jane 0:00:41.400 --> 0:00:45.639 Fraser as a high profile hire to drive a key part. 0:00:45.520 --> 0:00:47.160 Of her turnaround plan. 0:00:47.320 --> 0:00:49.720 And one of the reporters on this story joints us 0:00:49.720 --> 0:00:52.760 now on our Bloomberg Interactive Broker studio Todd Gillespie Bloomberg 0:00:52.760 --> 0:00:56.480 financi reporter Todd talk to us about what's happening over 0:00:56.600 --> 0:00:59.360 at City Group with their wealth management chief. 0:00:59.360 --> 0:01:03.000 Andy might pronuncient direction is correct? Yeah, yeah, exactly. 0:01:03.240 --> 0:01:04.880 I mean, well, what we do know is that you 0:01:04.920 --> 0:01:07.399 know at to Andy c you know Rand Meryll for 0:01:07.959 --> 0:01:10.880 a Bank of America's wire house for six years, came 0:01:10.920 --> 0:01:14.880 on in twenty twenty three to turn around the wealth 0:01:14.920 --> 0:01:17.520 business at City Group, which was ailing, was a key 0:01:17.560 --> 0:01:20.560 priority for Jane Fraser's turnaround of you know, Wall Streets, 0:01:20.560 --> 0:01:23.240 one of the least profitable, profitable banks on Wall Street. 0:01:24.319 --> 0:01:27.200 He has been there for just under two years, but 0:01:27.280 --> 0:01:30.399 in that time he has drawn several, you know, we 0:01:30.440 --> 0:01:34.480 know from at least six managing directors complaints about his behavior, 0:01:34.600 --> 0:01:39.000 particularly his treatment of senior female executives, including Ida lu 0:01:39.080 --> 0:01:43.480 who left the bank after eighteen years in January. Some 0:01:43.560 --> 0:01:46.360 of you might remember that it was quite a sudden departure, 0:01:47.400 --> 0:01:51.040 and also towards one of the current his behavior towards 0:01:51.080 --> 0:01:54.280 one of the current direct reports who runs the Wealth 0:01:54.280 --> 0:01:56.520 at Work business there, a woman named Kristin Bitterly. 0:01:57.720 --> 0:02:00.800 Now, which tipment behavior, It's just it's not from what 0:02:00.840 --> 0:02:02.920 I'm reading in your story. It's more just the way 0:02:02.960 --> 0:02:05.240 he speaks to them, or maybe speaks of them, or 0:02:05.320 --> 0:02:08.080 just his it's not necessarily any sexual type of things 0:02:08.240 --> 0:02:09.079 as far as we know now. 0:02:09.080 --> 0:02:10.800 It's just more of his management style. 0:02:10.880 --> 0:02:15.280 Perhaps precisely, Yeah, we call it. There's intimidating behavior. They're 0:02:15.680 --> 0:02:19.440 expletive filled rants, which there you know, we know about 0:02:19.520 --> 0:02:22.640 him reducing a male managing director to tears after berating 0:02:22.680 --> 0:02:26.560 him in front of colleagues, calling people's work pathetic in 0:02:26.639 --> 0:02:30.080 meetings with that person present and their colleagues present. So 0:02:30.320 --> 0:02:36.080 and also undermining Idelu in particular and his COO, a 0:02:36.120 --> 0:02:41.000 man called Valentine Valderbano, directing a managing director to exclude 0:02:41.000 --> 0:02:43.480 her from correspondence that was important to her business in 0:02:43.520 --> 0:02:46.040 the months before she departed the bank. 0:02:46.360 --> 0:02:49.920 Well, let's talk about just his performance business wise, right, 0:02:49.960 --> 0:02:53.800 I mean, under his tenure, the unit reached record levels, 0:02:54.720 --> 0:02:55.760 improved returns. 0:02:55.880 --> 0:02:58.200 What was his what was his style if you will, 0:02:58.520 --> 0:02:59.640 under that wealth division? 0:02:59.760 --> 0:03:02.200 Yeah, absolutely, And it is important to note that, you know, 0:03:02.240 --> 0:03:04.640 City Group appeared to be standing by him, you know, 0:03:04.720 --> 0:03:07.359 they do note, you know that he's really improved profitability 0:03:07.360 --> 0:03:09.880 at the bank. The second quarter revenue, you know, was 0:03:09.919 --> 0:03:14.000 a record and he's really done that by essentially moving 0:03:14.080 --> 0:03:16.960 the unit's focus away from what was quite a lending 0:03:17.040 --> 0:03:20.720 intensive balance sheet heavy private bank focus towards I guess 0:03:20.720 --> 0:03:23.239 more of a wire house style, you might say, like Merrill, 0:03:23.360 --> 0:03:25.800 like Merrill Lynch, where he you know, basically grew up 0:03:25.800 --> 0:03:29.920 in the business and you know, he's focused on attracting 0:03:30.000 --> 0:03:34.040 investment assets into the business and reducing that dependence, you know, 0:03:34.080 --> 0:03:36.160 on the balance sheet at the bank, and that seems 0:03:36.200 --> 0:03:37.560 to have have reaped dividends. 0:03:37.920 --> 0:03:41.040 Stay with us. More from Bloomberg Intelligence coming up after this. 0:03:43.200 --> 0:03:46.920 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:03:47.000 --> 0:03:50.360 weekdays at ten am Eastern on Applecarplay and Android Otto 0:03:50.480 --> 0:03:53.560 with the Bloomberg Business app. Listen on demand wherever you 0:03:53.600 --> 0:03:56.560 get your podcasts, or watch us live on YouTube. 0:03:57.840 --> 0:04:00.600 Target tough numbers, that's one thing. I mean, the results 0:04:00.640 --> 0:04:02.520 were not great. I didn't think, but what I know? 0:04:02.960 --> 0:04:06.119 And then CEO, you keep an insider there? I think 0:04:06.160 --> 0:04:09.280 maybe the street wanted an outsiders. John was suggesting stock 0:04:09.320 --> 0:04:10.320 down seven and a half percent. 0:04:10.440 --> 0:04:10.720 I don't know. 0:04:10.720 --> 0:04:12.480 If I were this guy, I would take it personally. 0:04:12.840 --> 0:04:15.200 Let's see if Jenn Bartash just takes it personally. She's 0:04:15.200 --> 0:04:18.360 a senior retail analyst to Bloomberg Intelligence. She covers Target 0:04:18.720 --> 0:04:22.480 and all these names. Jen, let's start first with the CEO. 0:04:23.560 --> 0:04:24.040 News here. 0:04:24.080 --> 0:04:26.840 What do you make of this person and should they 0:04:26.880 --> 0:04:28.400 maybe have gone outside the company? 0:04:29.520 --> 0:04:32.760 Good morning? Yeah, it's an interesting choice, and I think 0:04:32.800 --> 0:04:34.720 there are investors for a little while and now I 0:04:34.720 --> 0:04:38.279 have been interested in seeing a CEO change. Brian Cornell 0:04:38.320 --> 0:04:40.760 has done a great job during his tenure, at least 0:04:40.920 --> 0:04:43.960 initially in terms of really driving growth for Target. But 0:04:44.000 --> 0:04:47.440 an internal choice really implies much of the same strategy, 0:04:48.000 --> 0:04:49.599 and I think there was some hopes that there would 0:04:49.640 --> 0:04:51.960 be something a little different and maybe shake things up 0:04:52.240 --> 0:04:54.760 and bring something new to the company. 0:04:54.839 --> 0:04:57.200 You know, I'm wondering if Target is going through an 0:04:57.240 --> 0:05:01.800 existential crisis right for this identity crime, because you feel like, 0:05:01.920 --> 0:05:03.440 I don't know about you Uponda, the last time you 0:05:03.480 --> 0:05:06.320 went into a Target. Sure, but you feel like they've 0:05:06.360 --> 0:05:09.279 lost their mojo, Jennifer, because the last time I was 0:05:09.320 --> 0:05:11.640 in there, the store shelves were not stocked very well, 0:05:11.760 --> 0:05:15.160 felt disorganized, couldn't find a sales associate to help me. 0:05:15.600 --> 0:05:19.440 What does this new CEO have to do to help this. 0:05:19.400 --> 0:05:22.520 Company get back on track. Well, you know, it's very interesting. 0:05:22.560 --> 0:05:27.000 He's highlighted three priorities, but they're not really new priorities. 0:05:27.320 --> 0:05:29.279 But if they can bring focus to it, maybe that 0:05:29.320 --> 0:05:32.520 will help. And that's you know, re energizing the assortment, 0:05:32.960 --> 0:05:37.039 bringing back some of that style and you know value 0:05:37.080 --> 0:05:40.920 that people crave. It's about having a very good, consistent 0:05:41.000 --> 0:05:44.240 in store execution and experience, which is what you were 0:05:44.240 --> 0:05:48.520 actually just talking about having things in stock, having you know, 0:05:48.600 --> 0:05:51.680 associates available. And then the third is an acceleration in 0:05:51.720 --> 0:05:56.560 the deployment of technology to maybe you know, make processes faster, 0:05:57.080 --> 0:06:00.640 improve efficiency, that sort of thing. So we'll see if that, 0:06:00.880 --> 0:06:03.360 you know, if that happens. But it's really about getting 0:06:03.400 --> 0:06:06.239 back to what is it that consumers loved about Target 0:06:06.560 --> 0:06:08.280 and how do you get them back in that frame 0:06:08.320 --> 0:06:10.640 of mind so that they come to stores and spend there. 0:06:10.960 --> 0:06:12.960 Well, you're the expert here, like I don't have a 0:06:12.960 --> 0:06:14.279 sense of what people go to Target for. 0:06:14.480 --> 0:06:16.159 What do you think they go to Target for? 0:06:17.400 --> 0:06:19.880 Well, what they traditionally have gone to Target for was 0:06:19.880 --> 0:06:21.920 that sense of discovery. Right, you had a couple of 0:06:22.000 --> 0:06:24.800 things on your list, you got in and you were inspired. 0:06:24.880 --> 0:06:28.240 You saw home decoration items that you just were like, oh, 0:06:28.279 --> 0:06:30.440 that would look great in my living room. Or you 0:06:30.480 --> 0:06:33.400 would go through apparel and you would see something very 0:06:33.440 --> 0:06:36.800 stylish and you know value that you thought, oh, that's 0:06:36.839 --> 0:06:38.640 a great thing to add to my basket. And so 0:06:39.800 --> 0:06:42.280 that's what's a little bit missing. And part of that 0:06:42.320 --> 0:06:45.000 may be because of just the rise in digital orders. 0:06:45.760 --> 0:06:49.640 It's a less conducive to those impromptu purchases, but it's 0:06:49.680 --> 0:06:52.960 also inspired by the assortment and by what people experience 0:06:53.040 --> 0:06:55.760 when they're in the stores, and that's really where they 0:06:55.800 --> 0:06:58.160 have to focus to get to get that magic back. 0:06:58.640 --> 0:07:00.919 And Jennifer correct me if I'm wrong. I think Target 0:07:00.960 --> 0:07:04.400 has more exposure to tariffs than say, Walmart because of 0:07:04.440 --> 0:07:06.880 its mix of products. It doesn't have as much exposure 0:07:06.920 --> 0:07:09.200 to groceries as Walmart does, but it gets a lot 0:07:09.200 --> 0:07:11.480 of its products from overseas places that are getting hit 0:07:11.880 --> 0:07:14.320 by these tariffs. How did that play out in this 0:07:14.440 --> 0:07:16.160 quarter and how will it play out going forward. 0:07:17.280 --> 0:07:19.360 Yeah, it's a great question, and it is one of 0:07:19.360 --> 0:07:21.960 the things that's sort of been bogging down Target ever 0:07:22.000 --> 0:07:26.280 since we've had very high food inflation. The willingness to 0:07:26.280 --> 0:07:29.200 spend on discretionary categories has been a little bit more limited, 0:07:29.240 --> 0:07:32.000 and that's really the area that Target has always excelled, 0:07:32.400 --> 0:07:36.600 things like apparel and electronics and toys and home decor 0:07:37.440 --> 0:07:39.640 and so you know, right now, the company is saying 0:07:39.680 --> 0:07:42.760 they're doing a pretty good job of mitigating tariffs, but 0:07:42.880 --> 0:07:46.440 they are more exposed because of the merchandise mix that 0:07:46.480 --> 0:07:50.240 they have. So they said they've done some right sizing 0:07:50.280 --> 0:07:53.000 they've paid off kind of the one time cancellation charges 0:07:53.000 --> 0:07:55.000 they had while they were waiting on the terra verdicts. 0:07:55.800 --> 0:07:59.320 We'll see what unfolds in third quarter, and especially because 0:07:59.320 --> 0:08:01.520 it's back to school, which is a really important quarter 0:08:01.600 --> 0:08:02.080 for Target. 0:08:03.080 --> 0:08:04.200 It's always well. 0:08:04.240 --> 0:08:06.000 I guess what's recently in the last ten fifteen years 0:08:06.040 --> 0:08:08.640 really amaze me about Walmart is it how's effective their 0:08:08.680 --> 0:08:11.280 digital strategy was, and they actually went toe to toe 0:08:11.280 --> 0:08:13.080 with Amazon, and I think they more than hold their own. 0:08:13.520 --> 0:08:17.040 Not just about Target and their digital strategy, how's that performing? 0:08:18.360 --> 0:08:18.800 Overall? 0:08:18.800 --> 0:08:21.800 Target's digital strategy has been doing pretty well. They've been 0:08:21.960 --> 0:08:24.600 a They've made a conscious decision to not go head 0:08:24.600 --> 0:08:26.960 to head with Walmart and Target. So, for example, in 0:08:27.000 --> 0:08:31.720 their marketplace, it's not just an endless aisle of sellers. 0:08:31.800 --> 0:08:34.560 They have a very close criteria of who they let 0:08:34.600 --> 0:08:37.120 onto their platform and that's worked well for them because 0:08:37.120 --> 0:08:39.880 it helps keep the product selection closer to what people 0:08:39.960 --> 0:08:43.400 expect from Target. Their digital sales were up in terms 0:08:43.440 --> 0:08:46.440 of same star sales this quarter, well uppaced the visit 0:08:46.960 --> 0:08:51.640 visits to stores, and so they've been executing pretty well there. 0:08:51.720 --> 0:08:53.520 It's just a matter of how do they marry the 0:08:53.520 --> 0:08:56.240 two parts of the business to grow simultaneously. 0:08:56.840 --> 0:08:57.520 I want to look. 0:08:57.360 --> 0:09:01.240 Ahead tomorrow because we get Walmart. They may strike a 0:09:01.240 --> 0:09:04.440 more cautious tone here. I'm curious if they're going to 0:09:04.480 --> 0:09:07.760 actually say the word tariffs Paul and Jennifer tomorrow, because 0:09:08.080 --> 0:09:10.080 last time when they did, Trump told them to eat 0:09:10.080 --> 0:09:12.600 the tariffs because they said they were blaming the tariffs 0:09:12.600 --> 0:09:15.760 on having to raise prices. What do you think we're 0:09:15.760 --> 0:09:17.160 gonna hear from Walmart tomorrow. 0:09:17.000 --> 0:09:20.720 Jennifer, Well, I think I think tomorrow with Walmart, it's 0:09:20.760 --> 0:09:24.599 going to be more about the value seeking behavior of customers. 0:09:25.520 --> 0:09:27.520 You know, I think that any of these retailers they're 0:09:27.559 --> 0:09:30.679 holding price increases back to the last possible resort. With 0:09:30.720 --> 0:09:34.520 regards to mitigating tariffs. Walmart will certainly be asked about it. 0:09:34.559 --> 0:09:38.680 They certainly won't disclose any specific information about, you know, 0:09:38.720 --> 0:09:41.640 the cost of tariffs on their business or the specifics 0:09:41.640 --> 0:09:44.400 of how they're mitigating them. But I think they will 0:09:44.440 --> 0:09:47.320 remain very cautious, and they have warned that there could 0:09:47.320 --> 0:09:50.040 be volatility from quarter to quarter, especially with regards to 0:09:50.120 --> 0:09:52.360 their margins, and we may see a little bit of 0:09:52.360 --> 0:09:53.320 that play out tomorrow. 0:09:53.960 --> 0:09:57.520 Thirty second, Sten, what's the holiday look like? Do you 0:09:57.520 --> 0:09:59.040 think so far? What's the early take. 0:10:00.240 --> 0:10:03.040 With regards to holiday season. I think the retailers have 0:10:03.120 --> 0:10:06.880 good strategies to have streamlined inventory in place. It's really 0:10:06.880 --> 0:10:09.160 going to come down to how confident is the consumer 0:10:09.160 --> 0:10:10.560 and how much are they willing to spend. 0:10:11.400 --> 0:10:14.520 Stay with us. More from Bloomberg Intelligence coming up after this. 0:10:16.679 --> 0:10:20.400 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:10:20.480 --> 0:10:23.559 weekdays at ten am Eastern on Apple, Cocklay and Android 0:10:23.559 --> 0:10:26.880 Auto with the Bloomberg Business App. Listen on demand wherever 0:10:26.920 --> 0:10:30.040 you get your podcasts, or watch us live on YouTube. 0:10:30.880 --> 0:10:33.640 All right, let's get back to these markets. Low's is 0:10:33.679 --> 0:10:36.800 a stock that's in the news today. They reported some 0:10:36.880 --> 0:10:40.680 pretty decent numbers and also made a big acquisition, buying 0:10:40.920 --> 0:10:44.440 a company called what is this called Foundation Building? 0:10:44.480 --> 0:10:44.959 Never heard of it? 0:10:45.040 --> 0:10:49.520 Eight point eight billion dollars cash deal, transformational. 0:10:48.679 --> 0:10:50.400 Deal some analysts on Wall Street or calling it. So 0:10:50.440 --> 0:10:51.000 let's break it down. 0:10:51.040 --> 0:10:54.560 When you're reading Bloomberg Intelligence, US home building analysts, Drew 0:10:54.600 --> 0:10:58.120 first talk to us about this acquisition that Low's made. 0:10:58.240 --> 0:11:01.800 What is the company and what's the upside for lows here? 0:11:03.679 --> 0:11:05.960 Yeah, this is a pretty big story today when we 0:11:05.960 --> 0:11:08.720 weren't necessarily expecting, they announced that they're going to acquire 0:11:09.320 --> 0:11:11.160 foundation building Materials. 0:11:10.679 --> 0:11:12.199 For eight point eight billion. 0:11:13.400 --> 0:11:18.359 They're basically distributor of drywall, ceiling tiles, metal framing, insulation 0:11:19.080 --> 0:11:23.840 to builders and remodelers. What's interesting is if you think 0:11:23.840 --> 0:11:29.240 about how Lows has traditionally attacked the professional contractor segment, 0:11:30.000 --> 0:11:33.000 it's really been through small and medium sized contractors. 0:11:33.000 --> 0:11:34.920 That's really been their bread and butter. 0:11:35.520 --> 0:11:39.000 What this deal does is gives them access to larger 0:11:39.040 --> 0:11:42.240 scale projects. It's really the area that Home Depot has 0:11:42.280 --> 0:11:44.760 been going over the last couple of years. But now 0:11:44.800 --> 0:11:47.280 it puts Lows firmly in that lane and really opens 0:11:47.360 --> 0:11:49.720 up a new growth opportunity for them. 0:11:50.160 --> 0:11:54.280 Yeah, and didn't Lows by another sort of pro type 0:11:54.320 --> 0:11:57.400 business earlier in the year. I know Home Depot did 0:11:57.480 --> 0:12:00.400 something similar. They got they bought GMS for over four billion. 0:12:00.920 --> 0:12:03.560 I wonder though, what this means drew for people like 0:12:03.640 --> 0:12:05.800 us who want to di Wyatt. Are we going to 0:12:06.040 --> 0:12:09.120 not be as catered to at the Lows and Home 0:12:09.160 --> 0:12:09.920 Depots of the world. 0:12:11.480 --> 0:12:15.240 So you're right, Lows did just recently close on the 0:12:15.280 --> 0:12:19.440 acquisition of artists and design group who's a distributor of 0:12:20.120 --> 0:12:25.760 internal finishes for things like countertops, flooring, and things along 0:12:25.760 --> 0:12:27.760 those lines. So now Lows is really able to go 0:12:27.800 --> 0:12:31.600 to large scale contractors and builders and really provide an 0:12:31.760 --> 0:12:34.840 entire product suite on the interior of the business. In 0:12:34.960 --> 0:12:37.400 terms of DIY, I mean, Di Wells, why is still 0:12:37.440 --> 0:12:40.640 seventy percent of the business for Lows. That'll remain core 0:12:40.720 --> 0:12:43.080 to their strategy. But what I think this speaks to 0:12:43.320 --> 0:12:46.160 is the relative weakness in that segment and the need 0:12:46.200 --> 0:12:49.599 for them to look for new avenues of growth, you know, 0:12:49.720 --> 0:12:50.880 out over the next several years. 0:12:50.920 --> 0:12:51.440 When we think. 0:12:51.360 --> 0:12:54.400 About how the market is likely to unfold, and Lows 0:12:54.400 --> 0:12:56.959 alluded to this today during the call, we think a 0:12:57.000 --> 0:12:59.200 lot of the growth is going to come from big 0:12:59.240 --> 0:13:02.160 ticket spending that's been pent up over the last several years, 0:13:02.200 --> 0:13:04.840 and this gives them an entrance into that market somewhere 0:13:04.880 --> 0:13:07.240 that where they didn't have that type of penetration before. 0:13:08.040 --> 0:13:11.120 This may surprise you, Drew, but I'm probably the least 0:13:11.280 --> 0:13:12.960 DIY guy you'll ever find. 0:13:13.000 --> 0:13:16.320 I have people for that, Drew. But so I don't 0:13:16.360 --> 0:13:18.240 really know much about the whole Lows thing. Tell me 0:13:18.240 --> 0:13:19.640 about how their earnings were at this quarter. 0:13:21.120 --> 0:13:23.160 Yeah, so the earnings were really a non event. 0:13:23.240 --> 0:13:27.079 Comps were up one percent, pretty much in line. The 0:13:27.080 --> 0:13:30.000 cadence of comps to the quarter was pretty much similar 0:13:30.000 --> 0:13:32.640 to what we heard from Home Depot. They exited at 0:13:32.679 --> 0:13:34.760 a four point seven percent cop and that really had 0:13:34.800 --> 0:13:38.400 to do with how weather evolved throughout the quarter. Obviously 0:13:38.480 --> 0:13:40.959 wouldn't be a retailer call if we didn't mention the weather. 0:13:42.600 --> 0:13:45.079 We did see an improvement in big ticket spending, which 0:13:45.240 --> 0:13:47.800 was encouraging and I think investors were pleased to see 0:13:47.800 --> 0:13:50.239 that despite a still. 0:13:50.040 --> 0:13:51.240 Challenging market out there. 0:13:51.280 --> 0:13:53.640 They maintained their guidance for same store sales for twenty 0:13:53.679 --> 0:13:57.280 twenty five, which calls for flat to up one percent, 0:13:57.400 --> 0:14:00.320 so you know they did mention the environment still tough. 0:14:00.360 --> 0:14:03.000 We think that the big ticket. 0:14:02.600 --> 0:14:06.319 DIY discussionary categories that require financing, as we discussed with 0:14:06.320 --> 0:14:07.439 its Home Depot. 0:14:07.400 --> 0:14:09.200 Are still relative areas of weakness. 0:14:09.240 --> 0:14:11.760 But we think both of these retailers are executing well 0:14:12.040 --> 0:14:13.120 in a challenging market. 0:14:13.679 --> 0:14:15.960 So drew as our home building analysts, I just want 0:14:16.000 --> 0:14:17.760 to broaden this out for a moment and get your 0:14:17.760 --> 0:14:18.280 thoughts on this. 0:14:18.440 --> 0:14:19.680 So we saw that. 0:14:21.480 --> 0:14:23.880 We saw that the gauge of future construction right new 0:14:24.200 --> 0:14:27.280 building permits down more than five and a half percent 0:14:27.440 --> 0:14:29.200 versus last year. But what we're seeing is sort of 0:14:29.200 --> 0:14:34.640 a divergence in the industry. Right apartment construction is steadily 0:14:34.680 --> 0:14:37.680 climbing and not keeping pace with single family homes. What's 0:14:37.760 --> 0:14:38.360 driving that? 0:14:40.320 --> 0:14:42.120 So a lot of it has to do with affordability. 0:14:42.160 --> 0:14:44.520 I mean, with the rise and home prices over the 0:14:44.600 --> 0:14:47.200 last five years up more than fifty percent, rates hovering 0:14:47.240 --> 0:14:48.960 at six and a half percent, there's a lot of 0:14:49.000 --> 0:14:52.280 people that simply can't afford to buy in this market. 0:14:52.560 --> 0:14:55.600 We looked at some data last quarter on household growth 0:14:55.680 --> 0:14:58.120 and really what that showed is that all the new 0:14:58.120 --> 0:15:01.520 household hold formations have been in the renter market at 0:15:01.520 --> 0:15:05.120 the expense of you know, owner occupied units, and it 0:15:05.160 --> 0:15:06.680 really goes back to affordability. 0:15:06.760 --> 0:15:09.600 So I think you're right. If we look at building permits, 0:15:09.640 --> 0:15:10.000 they were. 0:15:09.880 --> 0:15:12.120 Actually down eight and a half percent on the single 0:15:12.160 --> 0:15:15.520 family side compared to last year. You know, there was 0:15:15.560 --> 0:15:17.800 a little bit of a surprise on starts, which tend 0:15:17.840 --> 0:15:20.680 to be volatile month to month, But what we're hearing 0:15:20.680 --> 0:15:22.800 from the builders is that they're not going to keep 0:15:22.800 --> 0:15:25.960 pushing new units into a soft demand environment. We think 0:15:25.960 --> 0:15:28.400 they're going to continue to pull back on starts through 0:15:28.400 --> 0:15:30.600 the remainder of the year and then too next year 0:15:30.600 --> 0:15:33.480 as they look to work through the existing inventory that's 0:15:33.480 --> 0:15:35.840 out there in the market. If you look at the 0:15:36.200 --> 0:15:39.040 new home inventory, we're at two thousand and seven levels, 0:15:39.080 --> 0:15:42.080 so that's requiring builders to have to lean on incentives 0:15:42.080 --> 0:15:44.080 to a greater extent in order to clear that. And 0:15:44.080 --> 0:15:46.280 we think until we get through some more of that inventory, 0:15:46.520 --> 0:15:49.360 you're going to see further weakness in single family construction. 0:15:50.080 --> 0:15:53.200 Stay with us more from Bloomberg Intelligence coming up after this. 0:15:55.360 --> 0:15:59.080 You're listening to the Bloomberg Intelligence podcast. Catch us Live 0:15:59.160 --> 0:16:02.720 weekdays at tenn on appleclock Lay and Android Auto with 0:16:02.800 --> 0:16:05.920 the Bluemberg Business app. Listen on demand wherever you get 0:16:05.920 --> 0:16:08.720 your podcasts, or watch us live on YouTube. 0:16:09.440 --> 0:16:13.080 Tj Max TJX, owner of tj Max, raised it's fully 0:16:13.080 --> 0:16:16.840 your guidance earnings for share outlook after better than expected results, 0:16:16.880 --> 0:16:21.040 citing shoppers turning to discounters due to economic uncertainty. I 0:16:21.040 --> 0:16:23.680 look at the stock. It's up three point three percent today, 0:16:23.680 --> 0:16:26.040 it's up fifteen percent year to date. Fifty two week 0:16:26.080 --> 0:16:29.200 hi seems like always good at TJX. Let's break it 0:16:29.240 --> 0:16:32.080 down with Mary Ross, Gilbert Cheese's senior ecodanalys. She covers 0:16:32.080 --> 0:16:34.960 the retail space for Bloomberg Intelligence. She's based out there 0:16:35.120 --> 0:16:39.120 in our Los Angeles bureau. Mary looks like TJX is 0:16:39.160 --> 0:16:43.280 doing pretty well here what you hear from the company, Yes. 0:16:43.160 --> 0:16:46.320 Paul, you're absolutely right. TJX is hitting it out of 0:16:46.360 --> 0:16:50.479 the park. This is a company that just executes seamlessly 0:16:50.760 --> 0:16:54.640 and consistently, something in retail that's very, very difficult to do. 0:16:55.240 --> 0:16:59.400 They saw strength across all categories, across all income groups, 0:16:59.440 --> 0:17:01.840 all age groups, and they know how to get the 0:17:01.840 --> 0:17:06.399 merchandise right by store, by region, so they have a 0:17:06.480 --> 0:17:09.679 terrific planning and allocation. They sort of emphasize that and 0:17:09.720 --> 0:17:12.920 another key point because they raise their guidance not only 0:17:12.960 --> 0:17:15.640 for sales but also on the margin side. And there 0:17:15.720 --> 0:17:18.800 was such a huge fear with tariffs. They only source 0:17:18.960 --> 0:17:22.440 probably less than ten percent of their sales come for 0:17:22.640 --> 0:17:26.600 their merchandise is something they directly source. They were able 0:17:26.640 --> 0:17:29.480 to buy better, which means they got better deals. That 0:17:29.640 --> 0:17:32.840 means there's so much availability out there, and it's something 0:17:32.920 --> 0:17:35.680 we've observed in our channel checks and when you look 0:17:35.680 --> 0:17:39.399 at the shopping halls on television, on a YouTube, and 0:17:39.480 --> 0:17:43.680 you see the incredible brands that are available, and they 0:17:43.840 --> 0:17:47.400 really are across good, better and best. So you can 0:17:47.440 --> 0:17:51.040 get anything from Puma, Audi, Doos, Nike all the way 0:17:51.119 --> 0:17:57.440 up to Eve, Saint Laurent and Gucci. So it's and 0:17:57.800 --> 0:18:02.160 TJX really really wins across all that, so strength across 0:18:02.640 --> 0:18:07.600 you know, all their channels and internationally, I mean Canada 0:18:07.680 --> 0:18:11.240 was up nine percent comp sales. I want to ask 0:18:11.240 --> 0:18:13.840 you about a possible headwind though, because it seems like 0:18:14.200 --> 0:18:17.400 they're firing on all cylinders. But I know that TJX 0:18:17.480 --> 0:18:21.800 mentioned in the past about a key demographic, the Hispanic customer. 0:18:22.160 --> 0:18:25.000 They were concerned that maybe immigration policy was going to 0:18:25.040 --> 0:18:26.960 keep them home or not spend as much. Did they 0:18:27.000 --> 0:18:30.679 mention anything about that on the earnings call. Yeah, well, 0:18:30.720 --> 0:18:34.639 you know, the earnings call wasn't quite finished when you know, 0:18:34.680 --> 0:18:36.880 I came in here, so I missed the point that 0:18:37.240 --> 0:18:39.680 it was a question that was brought up. I didn't 0:18:39.760 --> 0:18:43.280 see it. I don't think they saw any weakness as. 0:18:43.080 --> 0:18:43.800 A result of that. 0:18:43.880 --> 0:18:46.920 I know it's been a big concern, not only for TJX, 0:18:47.000 --> 0:18:50.240 as you brought up Alexai, but also for Ross and 0:18:50.280 --> 0:18:53.879 for Burlington, and probably even more so for Burlington because 0:18:54.160 --> 0:18:57.880 they really skewed to a lower income consumer and they're 0:18:57.960 --> 0:19:00.199 due to report next week, and so we should learn 0:19:00.280 --> 0:19:00.840 more on that. 0:19:02.200 --> 0:19:02.480 Mary. 0:19:02.640 --> 0:19:04.560 I always think the job of a retail analyst like 0:19:05.080 --> 0:19:06.679 you was really tough because not only do you have 0:19:06.680 --> 0:19:08.840 to do the regular stuff as an analyst, like get 0:19:08.840 --> 0:19:11.800 the earnings estimates kind of right and on the financial analysis, 0:19:11.840 --> 0:19:13.520 but you kind of have to have an opinion on 0:19:14.320 --> 0:19:17.240 like who's good at picking out the right fashion to 0:19:17.280 --> 0:19:18.760 even put in the store in the first place. 0:19:19.359 --> 0:19:23.640 What is TJX doing so well? Do you think? Well, 0:19:23.720 --> 0:19:24.480 they have. 0:19:24.960 --> 0:19:28.240 The most amazing buying team, and so they spend they 0:19:28.240 --> 0:19:32.160 have sort of like a buying academy where they teach 0:19:32.240 --> 0:19:35.119 their buyers. You know, they have to go through you know, 0:19:35.200 --> 0:19:37.919 I think it's like three years, maybe even up to 0:19:38.040 --> 0:19:42.639 seven years of work that they do with these buyers. 0:19:42.680 --> 0:19:47.480 So the pricing that they work on and the product 0:19:47.480 --> 0:19:52.600 that they're buying is really something that is steeped in 0:19:52.720 --> 0:19:58.439 experience history. They also invest in systems, you know, so 0:19:58.480 --> 0:20:03.360 that means technology logistics to make sure that they can 0:20:03.359 --> 0:20:05.199 get this all right, because you can imagine that if 0:20:05.240 --> 0:20:09.280 they're shipping multiple merchandise, you got to have fresh drops 0:20:09.320 --> 0:20:13.359 because these customers will shop multiple times a week because 0:20:13.400 --> 0:20:17.879 it's that freshness that brings them in. So yes, TJX 0:20:18.040 --> 0:20:20.399 is the leader, though the largest in the world. I mean, 0:20:20.400 --> 0:20:23.240 they'll probably hit sixty billion in revenues this year, up 0:20:23.280 --> 0:20:27.080 from fifty six billion last year. And they keep increasing 0:20:27.119 --> 0:20:30.840 the number of potential store openings they see. Previously they 0:20:30.880 --> 0:20:34.160 said we think we have another twelve hundred stores to open. 0:20:34.320 --> 0:20:37.560