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Speaker 2: City investigates HR complaints against wealth heead Andy Sieg. City
Speaker 2: Group has hired law firm Paul Weiss to investigate complaints
Speaker 2: about the behavior the bank's wealth management chief, Andy Sieg,
Speaker 2: who was brought on by a chief executive officer, Jane
Speaker 2: Fraser as a high profile hire to drive a key part.
Speaker 3: Of her turnaround plan.
Speaker 2: And one of the reporters on this story joints us
Speaker 2: now on our Bloomberg Interactive Broker studio Todd Gillespie Bloomberg
Speaker 2: financi reporter Todd talk to us about what's happening over
Speaker 2: at City Group with their wealth management chief.
Speaker 3: Andy might pronuncient direction is correct? Yeah, yeah, exactly.
Speaker 4: I mean, well, what we do know is that you
Speaker 4: know at to Andy c you know Rand Meryll for
Speaker 4: a Bank of America's wire house for six years, came
Speaker 4: on in twenty twenty three to turn around the wealth
Speaker 4: business at City Group, which was ailing, was a key
Speaker 4: priority for Jane Fraser's turnaround of you know, Wall Streets,
Speaker 4: one of the least profitable, profitable banks on Wall Street.
Speaker 4: He has been there for just under two years, but
Speaker 4: in that time he has drawn several, you know, we
Speaker 4: know from at least six managing directors complaints about his behavior,
Speaker 4: particularly his treatment of senior female executives, including Ida lu
Speaker 4: who left the bank after eighteen years in January. Some
Speaker 4: of you might remember that it was quite a sudden departure,
Speaker 4: and also towards one of the current his behavior towards
Speaker 4: one of the current direct reports who runs the Wealth
Speaker 4: at Work business there, a woman named Kristin Bitterly.
Speaker 2: Now, which tipment behavior, It's just it's not from what
Speaker 2: I'm reading in your story. It's more just the way
Speaker 2: he speaks to them, or maybe speaks of them, or
Speaker 2: just his it's not necessarily any sexual type of things
Speaker 2: as far as we know now.
Speaker 3: It's just more of his management style.
Speaker 4: Perhaps precisely, Yeah, we call it. There's intimidating behavior. They're
Speaker 4: expletive filled rants, which there you know, we know about
Speaker 4: him reducing a male managing director to tears after berating
Speaker 4: him in front of colleagues, calling people's work pathetic in
Speaker 4: meetings with that person present and their colleagues present. So
Speaker 4: and also undermining Idelu in particular and his COO, a
Speaker 4: man called Valentine Valderbano, directing a managing director to exclude
Speaker 4: her from correspondence that was important to her business in
Speaker 4: the months before she departed the bank.
Speaker 5: Well, let's talk about just his performance business wise, right,
Speaker 5: I mean, under his tenure, the unit reached record levels,
Speaker 5: improved returns.
Speaker 3: What was his what was his style if you will,
Speaker 3: under that wealth division?
Speaker 4: Yeah, absolutely, And it is important to note that, you know,
Speaker 4: City Group appeared to be standing by him, you know,
Speaker 4: they do note, you know that he's really improved profitability
Speaker 4: at the bank. The second quarter revenue, you know, was
Speaker 4: a record and he's really done that by essentially moving
Speaker 4: the unit's focus away from what was quite a lending
Speaker 4: intensive balance sheet heavy private bank focus towards I guess
Speaker 4: more of a wire house style, you might say, like Merrill,
Speaker 4: like Merrill Lynch, where he you know, basically grew up
Speaker 4: in the business and you know, he's focused on attracting
Speaker 4: investment assets into the business and reducing that dependence, you know,
Speaker 4: on the balance sheet at the bank, and that seems
Speaker 4: to have have reaped dividends.
Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.
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Speaker 3: Target tough numbers, that's one thing. I mean, the results
Speaker 3: were not great. I didn't think, but what I know?
Speaker 2: And then CEO, you keep an insider there? I think
Speaker 2: maybe the street wanted an outsiders. John was suggesting stock
Speaker 2: down seven and a half percent.
Speaker 3: I don't know.
Speaker 2: If I were this guy, I would take it personally.
Speaker 2: Let's see if Jenn Bartash just takes it personally. She's
Speaker 2: a senior retail analyst to Bloomberg Intelligence. She covers Target
Speaker 2: and all these names. Jen, let's start first with the CEO.
Speaker 3: News here.
Speaker 2: What do you make of this person and should they
Speaker 2: maybe have gone outside the company?
Speaker 6: Good morning? Yeah, it's an interesting choice, and I think
Speaker 6: there are investors for a little while and now I
Speaker 6: have been interested in seeing a CEO change. Brian Cornell
Speaker 6: has done a great job during his tenure, at least
Speaker 6: initially in terms of really driving growth for Target. But
Speaker 6: an internal choice really implies much of the same strategy,
Speaker 6: and I think there was some hopes that there would
Speaker 6: be something a little different and maybe shake things up
Speaker 6: and bring something new to the company.
Speaker 5: You know, I'm wondering if Target is going through an
Speaker 5: existential crisis right for this identity crime, because you feel like,
Speaker 5: I don't know about you Uponda, the last time you
Speaker 5: went into a Target. Sure, but you feel like they've
Speaker 5: lost their mojo, Jennifer, because the last time I was
Speaker 5: in there, the store shelves were not stocked very well,
Speaker 5: felt disorganized, couldn't find a sales associate to help me.
Speaker 5: What does this new CEO have to do to help this.
Speaker 6: Company get back on track. Well, you know, it's very interesting.
Speaker 6: He's highlighted three priorities, but they're not really new priorities.
Speaker 6: But if they can bring focus to it, maybe that
Speaker 6: will help. And that's you know, re energizing the assortment,
Speaker 6: bringing back some of that style and you know value
Speaker 6: that people crave. It's about having a very good, consistent
Speaker 6: in store execution and experience, which is what you were
Speaker 6: actually just talking about having things in stock, having you know,
Speaker 6: associates available. And then the third is an acceleration in
Speaker 6: the deployment of technology to maybe you know, make processes faster,
Speaker 6: improve efficiency, that sort of thing. So we'll see if that,
Speaker 6: you know, if that happens. But it's really about getting
Speaker 6: back to what is it that consumers loved about Target
Speaker 6: and how do you get them back in that frame
Speaker 6: of mind so that they come to stores and spend there.
Speaker 2: Well, you're the expert here, like I don't have a
Speaker 2: sense of what people go to Target for.
Speaker 3: What do you think they go to Target for?
Speaker 6: Well, what they traditionally have gone to Target for was
Speaker 6: that sense of discovery. Right, you had a couple of
Speaker 6: things on your list, you got in and you were inspired.
Speaker 6: You saw home decoration items that you just were like, oh,
Speaker 6: that would look great in my living room. Or you
Speaker 6: would go through apparel and you would see something very
Speaker 6: stylish and you know value that you thought, oh, that's
Speaker 6: a great thing to add to my basket. And so
Speaker 6: that's what's a little bit missing. And part of that
Speaker 6: may be because of just the rise in digital orders.
Speaker 6: It's a less conducive to those impromptu purchases, but it's
Speaker 6: also inspired by the assortment and by what people experience
Speaker 6: when they're in the stores, and that's really where they
Speaker 6: have to focus to get to get that magic back.
Speaker 5: And Jennifer correct me if I'm wrong. I think Target
Speaker 5: has more exposure to tariffs than say, Walmart because of
Speaker 5: its mix of products. It doesn't have as much exposure
Speaker 5: to groceries as Walmart does, but it gets a lot
Speaker 5: of its products from overseas places that are getting hit
Speaker 5: by these tariffs. How did that play out in this
Speaker 5: quarter and how will it play out going forward.
Speaker 6: Yeah, it's a great question, and it is one of
Speaker 6: the things that's sort of been bogging down Target ever
Speaker 6: since we've had very high food inflation. The willingness to
Speaker 6: spend on discretionary categories has been a little bit more limited,
Speaker 6: and that's really the area that Target has always excelled,
Speaker 6: things like apparel and electronics and toys and home decor
Speaker 6: and so you know, right now, the company is saying
Speaker 6: they're doing a pretty good job of mitigating tariffs, but
Speaker 6: they are more exposed because of the merchandise mix that
Speaker 6: they have. So they said they've done some right sizing
Speaker 6: they've paid off kind of the one time cancellation charges
Speaker 6: they had while they were waiting on the terra verdicts.
Speaker 6: We'll see what unfolds in third quarter, and especially because
Speaker 6: it's back to school, which is a really important quarter
Speaker 6: for Target.
Speaker 3: It's always well.
Speaker 2: I guess what's recently in the last ten fifteen years
Speaker 2: really amaze me about Walmart is it how's effective their
Speaker 2: digital strategy was, and they actually went toe to toe
Speaker 2: with Amazon, and I think they more than hold their own.
Speaker 2: Not just about Target and their digital strategy, how's that performing?
Speaker 7: Overall?
Speaker 6: Target's digital strategy has been doing pretty well. They've been
Speaker 6: a They've made a conscious decision to not go head
Speaker 6: to head with Walmart and Target. So, for example, in
Speaker 6: their marketplace, it's not just an endless aisle of sellers.
Speaker 6: They have a very close criteria of who they let
Speaker 6: onto their platform and that's worked well for them because
Speaker 6: it helps keep the product selection closer to what people
Speaker 6: expect from Target. Their digital sales were up in terms
Speaker 6: of same star sales this quarter, well uppaced the visit
Speaker 6: visits to stores, and so they've been executing pretty well there.
Speaker 6: It's just a matter of how do they marry the
Speaker 6: two parts of the business to grow simultaneously.
Speaker 2: I want to look.
Speaker 5: Ahead tomorrow because we get Walmart. They may strike a
Speaker 5: more cautious tone here. I'm curious if they're going to
Speaker 5: actually say the word tariffs Paul and Jennifer tomorrow, because
Speaker 5: last time when they did, Trump told them to eat
Speaker 5: the tariffs because they said they were blaming the tariffs
Speaker 5: on having to raise prices. What do you think we're
Speaker 5: gonna hear from Walmart tomorrow.
Speaker 6: Jennifer, Well, I think I think tomorrow with Walmart, it's
Speaker 6: going to be more about the value seeking behavior of customers.
Speaker 6: You know, I think that any of these retailers they're
Speaker 6: holding price increases back to the last possible resort. With
Speaker 6: regards to mitigating tariffs. Walmart will certainly be asked about it.
Speaker 6: They certainly won't disclose any specific information about, you know,
Speaker 6: the cost of tariffs on their business or the specifics
Speaker 6: of how they're mitigating them. But I think they will
Speaker 6: remain very cautious, and they have warned that there could
Speaker 6: be volatility from quarter to quarter, especially with regards to
Speaker 6: their margins, and we may see a little bit of
Speaker 6: that play out tomorrow.
Speaker 3: Thirty second, Sten, what's the holiday look like? Do you
Speaker 3: think so far? What's the early take.
Speaker 6: With regards to holiday season. I think the retailers have
Speaker 6: good strategies to have streamlined inventory in place. It's really
Speaker 6: going to come down to how confident is the consumer
Speaker 6: and how much are they willing to spend.
Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.
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Speaker 2: All right, let's get back to these markets. Low's is
Speaker 2: a stock that's in the news today. They reported some
Speaker 2: pretty decent numbers and also made a big acquisition, buying
Speaker 2: a company called what is this called Foundation Building?
Speaker 3: Never heard of it?
Speaker 2: Eight point eight billion dollars cash deal, transformational.
Speaker 3: Deal some analysts on Wall Street or calling it. So
Speaker 3: let's break it down.
Speaker 2: When you're reading Bloomberg Intelligence, US home building analysts, Drew
Speaker 2: first talk to us about this acquisition that Low's made.
Speaker 2: What is the company and what's the upside for lows here?
Speaker 7: Yeah, this is a pretty big story today when we
Speaker 7: weren't necessarily expecting, they announced that they're going to acquire
Speaker 7: foundation building Materials.
Speaker 8: For eight point eight billion.
Speaker 7: They're basically distributor of drywall, ceiling tiles, metal framing, insulation
Speaker 7: to builders and remodelers. What's interesting is if you think
Speaker 7: about how Lows has traditionally attacked the professional contractor segment,
Speaker 7: it's really been through small and medium sized contractors.
Speaker 8: That's really been their bread and butter.
Speaker 7: What this deal does is gives them access to larger
Speaker 7: scale projects. It's really the area that Home Depot has
Speaker 7: been going over the last couple of years. But now
Speaker 7: it puts Lows firmly in that lane and really opens
Speaker 7: up a new growth opportunity for them.
Speaker 5: Yeah, and didn't Lows by another sort of pro type
Speaker 5: business earlier in the year. I know Home Depot did
Speaker 5: something similar. They got they bought GMS for over four billion.
Speaker 5: I wonder though, what this means drew for people like
Speaker 5: us who want to di Wyatt. Are we going to
Speaker 5: not be as catered to at the Lows and Home
Speaker 5: Depots of the world.
Speaker 7: So you're right, Lows did just recently close on the
Speaker 7: acquisition of artists and design group who's a distributor of
Speaker 7: internal finishes for things like countertops, flooring, and things along
Speaker 7: those lines. So now Lows is really able to go
Speaker 7: to large scale contractors and builders and really provide an
Speaker 7: entire product suite on the interior of the business. In
Speaker 7: terms of DIY, I mean, Di Wells, why is still
Speaker 7: seventy percent of the business for Lows. That'll remain core
Speaker 7: to their strategy. But what I think this speaks to
Speaker 7: is the relative weakness in that segment and the need
Speaker 7: for them to look for new avenues of growth, you know,
Speaker 7: out over the next several years.
Speaker 8: When we think.
Speaker 7: About how the market is likely to unfold, and Lows
Speaker 7: alluded to this today during the call, we think a
Speaker 7: lot of the growth is going to come from big
Speaker 7: ticket spending that's been pent up over the last several years,
Speaker 7: and this gives them an entrance into that market somewhere
Speaker 7: that where they didn't have that type of penetration before.
Speaker 2: This may surprise you, Drew, but I'm probably the least
Speaker 2: DIY guy you'll ever find.
Speaker 3: I have people for that, Drew. But so I don't
Speaker 3: really know much about the whole Lows thing. Tell me
Speaker 3: about how their earnings were at this quarter.
Speaker 8: Yeah, so the earnings were really a non event.
Speaker 7: Comps were up one percent, pretty much in line. The
Speaker 7: cadence of comps to the quarter was pretty much similar
Speaker 7: to what we heard from Home Depot. They exited at
Speaker 7: a four point seven percent cop and that really had
Speaker 7: to do with how weather evolved throughout the quarter. Obviously
Speaker 7: wouldn't be a retailer call if we didn't mention the weather.
Speaker 7: We did see an improvement in big ticket spending, which
Speaker 7: was encouraging and I think investors were pleased to see
Speaker 7: that despite a still.
Speaker 8: Challenging market out there.
Speaker 7: They maintained their guidance for same store sales for twenty
Speaker 7: twenty five, which calls for flat to up one percent,
Speaker 7: so you know they did mention the environment still tough.
Speaker 8: We think that the big ticket.
Speaker 7: DIY discussionary categories that require financing, as we discussed with
Speaker 7: its Home Depot.
Speaker 8: Are still relative areas of weakness.
Speaker 7: But we think both of these retailers are executing well
Speaker 7: in a challenging market.
Speaker 5: So drew as our home building analysts, I just want
Speaker 5: to broaden this out for a moment and get your
Speaker 5: thoughts on this.
Speaker 3: So we saw that.
Speaker 5: We saw that the gauge of future construction right new
Speaker 5: building permits down more than five and a half percent
Speaker 5: versus last year. But what we're seeing is sort of
Speaker 5: a divergence in the industry. Right apartment construction is steadily
Speaker 5: climbing and not keeping pace with single family homes. What's
Speaker 5: driving that?
Speaker 8: So a lot of it has to do with affordability.
Speaker 7: I mean, with the rise and home prices over the
Speaker 7: last five years up more than fifty percent, rates hovering
Speaker 7: at six and a half percent, there's a lot of
Speaker 7: people that simply can't afford to buy in this market.
Speaker 7: We looked at some data last quarter on household growth
Speaker 7: and really what that showed is that all the new
Speaker 7: household hold formations have been in the renter market at
Speaker 7: the expense of you know, owner occupied units, and it
Speaker 7: really goes back to affordability.
Speaker 8: So I think you're right. If we look at building permits,
Speaker 8: they were.
Speaker 7: Actually down eight and a half percent on the single
Speaker 7: family side compared to last year. You know, there was
Speaker 7: a little bit of a surprise on starts, which tend
Speaker 7: to be volatile month to month, But what we're hearing
Speaker 7: from the builders is that they're not going to keep
Speaker 7: pushing new units into a soft demand environment. We think
Speaker 7: they're going to continue to pull back on starts through
Speaker 7: the remainder of the year and then too next year
Speaker 7: as they look to work through the existing inventory that's
Speaker 7: out there in the market. If you look at the
Speaker 7: new home inventory, we're at two thousand and seven levels,
Speaker 7: so that's requiring builders to have to lean on incentives
Speaker 7: to a greater extent in order to clear that. And
Speaker 7: we think until we get through some more of that inventory,
Speaker 7: you're going to see further weakness in single family construction.
Speaker 2: Stay with us more from Bloomberg Intelligence coming up after this.
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Speaker 2: Tj Max TJX, owner of tj Max, raised it's fully
Speaker 2: your guidance earnings for share outlook after better than expected results,
Speaker 2: citing shoppers turning to discounters due to economic uncertainty. I
Speaker 2: look at the stock. It's up three point three percent today,
Speaker 2: it's up fifteen percent year to date. Fifty two week
Speaker 2: hi seems like always good at TJX. Let's break it
Speaker 2: down with Mary Ross, Gilbert Cheese's senior ecodanalys. She covers
Speaker 2: the retail space for Bloomberg Intelligence. She's based out there
Speaker 2: in our Los Angeles bureau. Mary looks like TJX is
Speaker 2: doing pretty well here what you hear from the company, Yes.
Speaker 5: Paul, you're absolutely right. TJX is hitting it out of
Speaker 5: the park. This is a company that just executes seamlessly
Speaker 5: and consistently, something in retail that's very, very difficult to do.
Speaker 5: They saw strength across all categories, across all income groups,
Speaker 5: all age groups, and they know how to get the
Speaker 5: merchandise right by store, by region, so they have a
Speaker 5: terrific planning and allocation. They sort of emphasize that and
Speaker 5: another key point because they raise their guidance not only
Speaker 5: for sales but also on the margin side. And there
Speaker 5: was such a huge fear with tariffs. They only source
Speaker 5: probably less than ten percent of their sales come for
Speaker 5: their merchandise is something they directly source. They were able
Speaker 5: to buy better, which means they got better deals. That
Speaker 5: means there's so much availability out there, and it's something
Speaker 5: we've observed in our channel checks and when you look
Speaker 5: at the shopping halls on television, on a YouTube, and
Speaker 5: you see the incredible brands that are available, and they
Speaker 5: really are across good, better and best. So you can
Speaker 5: get anything from Puma, Audi, Doos, Nike all the way
Speaker 5: up to Eve, Saint Laurent and Gucci. So it's and
Speaker 5: TJX really really wins across all that, so strength across
Speaker 5: you know, all their channels and internationally, I mean Canada
Speaker 5: was up nine percent comp sales. I want to ask
Speaker 5: you about a possible headwind though, because it seems like
Speaker 5: they're firing on all cylinders. But I know that TJX
Speaker 5: mentioned in the past about a key demographic, the Hispanic customer.
Speaker 5: They were concerned that maybe immigration policy was going to
Speaker 5: keep them home or not spend as much. Did they
Speaker 5: mention anything about that on the earnings call. Yeah, well,
Speaker 5: you know, the earnings call wasn't quite finished when you know,
Speaker 5: I came in here, so I missed the point that
Speaker 5: it was a question that was brought up. I didn't
Speaker 5: see it. I don't think they saw any weakness as.
Speaker 3: A result of that.
Speaker 5: I know it's been a big concern, not only for TJX,
Speaker 5: as you brought up Alexai, but also for Ross and
Speaker 5: for Burlington, and probably even more so for Burlington because
Speaker 5: they really skewed to a lower income consumer and they're
Speaker 5: due to report next week, and so we should learn
Speaker 5: more on that.
Speaker 8: Mary.
Speaker 2: I always think the job of a retail analyst like
Speaker 2: you was really tough because not only do you have
Speaker 2: to do the regular stuff as an analyst, like get
Speaker 2: the earnings estimates kind of right and on the financial analysis,
Speaker 2: but you kind of have to have an opinion on
Speaker 2: like who's good at picking out the right fashion to
Speaker 2: even put in the store in the first place.
Speaker 3: What is TJX doing so well? Do you think? Well,
Speaker 3: they have.
Speaker 5: The most amazing buying team, and so they spend they
Speaker 5: have sort of like a buying academy where they teach
Speaker 5: their buyers. You know, they have to go through you know,
Speaker 5: I think it's like three years, maybe even up to
Speaker 5: seven years of work that they do with these buyers.
Speaker 5: So the pricing that they work on and the product
Speaker 5: that they're buying is really something that is steeped in
Speaker 5: experience history. They also invest in systems, you know, so
Speaker 5: that means technology logistics to make sure that they can
Speaker 5: get this all right, because you can imagine that if
Speaker 5: they're shipping multiple merchandise, you got to have fresh drops
Speaker 5: because these customers will shop multiple times a week because
Speaker 5: it's that freshness that brings them in. So yes, TJX
Speaker 5: is the leader, though the largest in the world. I mean,
Speaker 5: they'll probably hit sixty billion in revenues this year, up
Speaker 5: from fifty six billion last year. And they keep increasing
Speaker 5: the number of potential store openings they see. Previously they
Speaker 5: said we think we have another twelve hundred stores to open.
Speaker 5: Now they're saying it's another eighteen hundred stores to open
Speaker 5: around the country, just around the globe in their existing markets.
Speaker 5: So yes, this company really has the expertise in doing
Speaker 5: it right. Is there a digital strategy here because I
Speaker 5: remember I'm sure you do too, Mary, when you would
Speaker 5: go online to try to find out what tj MAX
Speaker 5: had and there was nothing there because you always had
Speaker 5: to go in the store to find out what they had.
Speaker 5: I think they had a step up their game right
Speaker 5: because of Amazon and others online. But what is the
Speaker 5: digital strategy, if anything, at TJX and TJX Alexa.
Speaker 3: That's a good question.
Speaker 5: So actually TJX has a digital strategy. It's across all
Speaker 5: their brands except for home goods, and so it's about
Speaker 5: I think it's I think it's just under five percent
Speaker 5: of sales, so it's very small. But they also saw
Speaker 5: strength in this quarter on their e comm business. So
Speaker 5: they do have an e comm business. You can go
Speaker 5: on it and you can shop anything you want on there.
Speaker 5: Now you can't say that you want to shop by brand,
Speaker 5: but you can select. Let's say, let's say that you
Speaker 5: want to just buy the ultra luxe you know, merchandise
Speaker 5: that they have there, and you'll see Christian d or sunglasses.
Speaker 5: You'll see you know, like I mentioned, you know, on
Speaker 5: the handbag size balan Chiaga. So you will be able
Speaker 5: to find what you want on the high end, also
Speaker 5: on the low end, but you'll have to do it
Speaker 5: by price points, by sorting that way because they're not
Speaker 5: allowed to necessarily have that ability to sort by brands.
Speaker 5: So you will see they have a robust online business,
Speaker 5: you know, and it's around the globe. Now, the key
Speaker 5: is that they're a key differentiated in that regard. Remember
Speaker 5: that it's still very small and that the vast majority
Speaker 5: of their sales, you know, more like ninety six percent
Speaker 5: or so are being generated in store, but nobody else
Speaker 5: in off price other than the rack. The Nordstorm rack
Speaker 5: has e commerce capabilities. All the rest it's strictly a
Speaker 5: bricks and mortar model.
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