WEBVTT - Markets, Oil, And Retail (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.560 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.799 at Bloomberg dot com slash podcast. What are we looking 0:00:21.840 --> 0:00:25.119 at here? Is dick cat bounce? Is the bottom? Is it? 0:00:25.920 --> 0:00:28.520 You know we're setting in some kind of support here, 0:00:28.600 --> 0:00:32.080 Dan Jenter, he's a CEO, ce IO and chairman, so 0:00:32.120 --> 0:00:33.800 I guess he kind of runs the whole place. R 0:00:33.880 --> 0:00:36.680 and C Genter Capital Management. Uh, Dan, thanks so much 0:00:36.680 --> 0:00:38.239 for joining us here. When you see it, you know, 0:00:38.280 --> 0:00:40.960 a couple of past days like we've seen, you know 0:00:40.960 --> 0:00:43.239 where you actually has some green on the screen in 0:00:43.280 --> 0:00:46.000 the midst of double digit declines in the ESMP and NASDAC. 0:00:46.800 --> 0:00:50.599 How are you looking at this equity market here? Well, look, 0:00:50.640 --> 0:00:54.240 I think what we're saying is a market that's generally 0:00:54.240 --> 0:00:56.760 trying to find its bottom. Frankly, Uh, you know, even 0:00:56.760 --> 0:00:58.320 though we can make a you can make a good, 0:00:58.320 --> 0:01:02.080 good case that if you're really wanted to have a capitulation. 0:01:02.280 --> 0:01:05.520 Certainly we could go off another five, maybe ten percent, 0:01:05.560 --> 0:01:07.479 but I don't see it at this point. I think 0:01:07.480 --> 0:01:10.319 we'll hold probably a down five if we don't hold somewhere. 0:01:10.360 --> 0:01:12.760 And this as a basing battern, and I think it's 0:01:12.840 --> 0:01:16.319 a pretty normal transition, frankly, of which you typically see 0:01:16.360 --> 0:01:20.400 when you know they when the FED and other indicators 0:01:20.480 --> 0:01:23.640 keep telling you what's going to happen. It's always amazing 0:01:23.680 --> 0:01:25.760 to me that people are still surprised when it does, 0:01:26.720 --> 0:01:29.720 but then when they finally digest it and realize that 0:01:29.840 --> 0:01:32.119 multiples are going to have to adjust. You if you're 0:01:32.120 --> 0:01:34.840 in a situation where you have rising inflation, you have 0:01:34.959 --> 0:01:38.440 rising interest rates, it's gonna have pushed down GDP, it's 0:01:38.440 --> 0:01:41.479 gonna push down earnings, and multiples need to adjust. It's 0:01:41.560 --> 0:01:45.000 pretty well stock valuation one oh one. And and now 0:01:45.040 --> 0:01:47.720 we've seen that adjustment. I mean, we're at much fairer 0:01:47.800 --> 0:01:50.880 p s right now based on this economic condition. I 0:01:50.880 --> 0:01:53.080 think we're in a basing pattern where people should be 0:01:53.120 --> 0:01:56.200 buying into this um. I like buying into the big 0:01:56.280 --> 0:01:59.360 days of weakness, especially when there's weakness for no reason 0:01:59.800 --> 0:02:02.760 you I find that to be an effective deployment of assets, 0:02:03.200 --> 0:02:05.080 and so I think people should you know, they may 0:02:05.080 --> 0:02:07.160 not want to jump ahead first, but putting some toes 0:02:07.200 --> 0:02:09.080 in the water here is a good thing to do. 0:02:09.160 --> 0:02:11.519 Looking at the next certainly two to three years of 0:02:11.600 --> 0:02:15.720 not frankly the next year, I guess the concern is valuations, 0:02:15.840 --> 0:02:21.720 or the concern was valuations. Are you um are you 0:02:22.000 --> 0:02:26.200 happy that we've gotten down to um a level that 0:02:26.400 --> 0:02:29.280 is more consistent with history of still pretty strong on 0:02:29.280 --> 0:02:32.960 the s and P five hundred frankly pe of twenty 0:02:33.040 --> 0:02:36.240 and change, and especially looking at a FED that's going 0:02:36.280 --> 0:02:40.680 to raise what another hundred hundred fifty basis points. Well, look, 0:02:40.720 --> 0:02:43.200 I think that you're right from the standpoint that I 0:02:43.280 --> 0:02:46.320 truly do believe in the old adage that you can't 0:02:46.360 --> 0:02:49.720 fight the FED. I mean you, we have definitely transitioned 0:02:49.760 --> 0:02:53.200 from where we had a tailwind to a cross wind. 0:02:53.400 --> 0:02:56.600 So you're look, maybe it's not a direct hurricane force 0:02:56.680 --> 0:02:59.600 head wind, but you're definitely fighting you know, a strong 0:02:59.680 --> 0:03:02.680 cross when if you will, that is making people DVD 0:03:02.760 --> 0:03:04.840 off course and it's harder to stay on course. But 0:03:05.360 --> 0:03:08.079 the but I think the valuations now are are at 0:03:08.160 --> 0:03:10.720 points that you can get you can get back into 0:03:10.760 --> 0:03:13.960 the game, if not as a short term trader, but 0:03:14.000 --> 0:03:16.600 if you're indeed looking at I normally say two to 0:03:16.680 --> 0:03:18.120 three years, I like to look at the three year 0:03:18.160 --> 0:03:20.280 time rising now I think it's much stronger, and even 0:03:20.320 --> 0:03:22.720 looking at one year, because if you look at where 0:03:22.720 --> 0:03:25.919 the valuations are, I agree, from an SMP standpoint, you 0:03:25.960 --> 0:03:29.080 could say at twenty, you know, based upon you know 0:03:29.160 --> 0:03:31.480 somewhere at two thirty on the SMP and two fifty 0:03:31.560 --> 0:03:33.920 next year in the SMP, you know you're above the 0:03:33.960 --> 0:03:36.280 fifteen five long term average. But but bear in mind 0:03:36.360 --> 0:03:39.680 interest rates were still a lot higher when you're looking 0:03:39.720 --> 0:03:42.960 at that long term average over the last fifteen twenty years. 0:03:43.360 --> 0:03:45.080 And when you look at where we are, I mean, 0:03:45.200 --> 0:03:48.440 look at the Russell one thousand value is right now 0:03:48.480 --> 0:03:52.839 down to a right and it's down from sixteen too, 0:03:53.160 --> 0:03:57.000 that's normally about fifteen five. Even the Russell growth, which 0:03:57.040 --> 0:04:01.480 was stratospheric, is at seven and that's down from from 0:04:01.520 --> 0:04:05.440 thirty point six, and it's averages one. So value stocks 0:04:05.440 --> 0:04:09.640 are still undervalued, road stocks are now fairly valued, and 0:04:09.960 --> 0:04:11.800 you know, I don't think you're gonna time the last 0:04:12.520 --> 0:04:15.760 five of this. He then many of our listeners that 0:04:15.800 --> 0:04:18.320 they look at their portfolio, probably a big, big chunk 0:04:18.320 --> 0:04:19.760 of it is made up of some of those big 0:04:20.720 --> 0:04:23.320 cap technology names. And if I think look at Amazon 0:04:23.360 --> 0:04:29.080 down thirty year to date, Microsoft Apple fifteen down year 0:04:29.200 --> 0:04:32.200 to date, do I get back into those names? Do 0:04:32.240 --> 0:04:33.880 I add to my positions there? How do you think 0:04:33.880 --> 0:04:36.920 about some of those you know, big big cap tech 0:04:37.000 --> 0:04:40.480 names have been so good for so long, Well, for 0:04:40.520 --> 0:04:43.320 those names, I would have a standard position, and so 0:04:43.360 --> 0:04:45.880 that that to me is somewhere two and a half 0:04:45.920 --> 0:04:49.840 or three percent position. You're even though they pulled back dramatically, 0:04:49.880 --> 0:04:53.039 you're still dealing at at very high peas And the 0:04:53.080 --> 0:04:55.160 fact of the matter is you're just looking at slower 0:04:55.200 --> 0:04:59.160 growth and and those dynamics you just can't overcome. I mean, 0:04:59.200 --> 0:05:02.200 if the if the economy is going to grow slower, 0:05:02.640 --> 0:05:06.080 if GDP is going to be slower, and financing costs 0:05:06.120 --> 0:05:10.000 and capitalization rates are higher, then earnings come down. You know, 0:05:10.240 --> 0:05:13.680 it's very straightforward. And if you're in that situation, I mean, 0:05:13.680 --> 0:05:17.560 you can't can you cannot support a PEG ratio in 0:05:17.680 --> 0:05:20.960 pe ratios that are at those stratospheric levels. Now, I 0:05:20.960 --> 0:05:24.800 would not abandon those because I believe that Frankly, there's 0:05:24.839 --> 0:05:28.520 just so much popularity, there's so much momentum. People aren't 0:05:28.520 --> 0:05:30.960 going to abandon those names, and they'll probably always sell 0:05:30.960 --> 0:05:33.320 at a premium pe. But I don't want to be 0:05:33.440 --> 0:05:35.440 over I don't. It's not a bargain basement. You know, 0:05:35.440 --> 0:05:37.560 there's not a garage sale going on here, so I 0:05:37.560 --> 0:05:40.240 wouldn't be overweighting the position. But but having you know, 0:05:40.320 --> 0:05:43.320 somewhere at three percent average position, I think, is that's 0:05:43.320 --> 0:05:47.599 where we are with those names. Just quickly, you've been 0:05:47.640 --> 0:05:52.720 around r n C genders. What's the origin story? If 0:05:52.720 --> 0:05:55.920 you can wrap it up for us in thirty seconds? Sure, 0:05:55.960 --> 0:05:59.919 I mean, we we really started in you know, really 0:06:00.040 --> 0:06:03.440 back before the Pension Reform Act and before investment advisors 0:06:03.480 --> 0:06:06.520 really were popular, just really in a frankly a pretty 0:06:06.520 --> 0:06:09.000 fundamental position that we felt it was better to provide 0:06:09.000 --> 0:06:13.320 investment advice for fees versus commissions. And so we started 0:06:13.320 --> 0:06:16.119 on a pretty simple premise that you know, we felt 0:06:16.120 --> 0:06:18.479 if we were charging fees based on assets, which is 0:06:18.480 --> 0:06:22.000 now popular, that everybody benefited as the portfolios went up, 0:06:22.080 --> 0:06:24.920 versus charging transaction fees. And we were kind of one 0:06:24.920 --> 0:06:26.800 of the first to do that, certainly first in l A. 0:06:26.920 --> 0:06:29.120 And it's worked out well for us. Yeah, at the 0:06:29.160 --> 0:06:32.520 avant garde, because that's then swept across the industry back 0:06:32.520 --> 0:06:34.520 when I started working on the street in the nineties. 0:06:35.680 --> 0:06:38.440 All right, Dan, great stuff, Dan Genter, CEO of RNC 0:06:38.560 --> 0:06:45.520 Genter Capital Management. When I look at oil, I guess 0:06:45.520 --> 0:06:48.200 I've got kind of a fixed supply. I've got a 0:06:48.240 --> 0:06:51.200 reopening global economy, So I guess that means demand is 0:06:51.240 --> 0:06:54.599 going up, and like any commodity, that should push price 0:06:54.640 --> 0:06:57.920 of oil higher. That being said, I'm still surprised, maybe 0:06:58.000 --> 0:07:00.400 shocked to see w A crew did a hundred and 0:07:00.440 --> 0:07:02.920 fifteen dollars an ounce. So let's bring in an expert 0:07:03.000 --> 0:07:04.640 maybe explain it to us a little bit better than 0:07:04.680 --> 0:07:09.480 my simple analysis. Fernando Valley, senior analysts for Bloomberg Intelligence. 0:07:09.840 --> 0:07:14.760 Fernando again, w t AC crudit hundred fifteen dollars. I'm shocked, 0:07:14.800 --> 0:07:19.000 slash surprised. Should I be? Well, if you if you 0:07:19.040 --> 0:07:21.920 wondered if there was any risk from the Chinese lockdowns 0:07:21.920 --> 0:07:25.760 priced into under a two hundred dollar oil, Uh, you've 0:07:25.800 --> 0:07:28.840 now found out that there was significant pressure. So as 0:07:28.920 --> 0:07:30.679 we as soon as we hear there is an easing 0:07:30.720 --> 0:07:33.960 of lockdowns in Shanghai, both Brent and that we take 0:07:33.960 --> 0:07:37.640 off and uh, you know, we talked about how Russian 0:07:37.680 --> 0:07:40.280 supply was going to fall because of sanctions, and we're 0:07:40.280 --> 0:07:43.960 starting to see that even though Europe and Asia are 0:07:44.000 --> 0:07:48.760 still purchasing Russian energy, just the lack of of capital 0:07:48.840 --> 0:07:52.800 and equipment and services from the Western providers has already 0:07:53.080 --> 0:07:55.720 led to a drop off. We also talked about how 0:07:55.960 --> 0:07:58.040 production in the US is we want to struggle to 0:07:58.120 --> 0:08:00.240 catch up because we don't have the people, we don't 0:08:00.240 --> 0:08:02.040 have the equipment, We don't even have to say to 0:08:02.160 --> 0:08:05.600 really get to the levels of the that we would 0:08:05.600 --> 0:08:08.520 need to balance the current demand. Well, and it seems 0:08:08.560 --> 0:08:11.480 like the industry just isn't willing to get um to 0:08:11.560 --> 0:08:15.040 put as much capex as would be necessary in to 0:08:15.240 --> 0:08:18.200 ramp up production, only to have their legs cut off 0:08:18.480 --> 0:08:22.920 as soon as this thing gets the equilibrium again. Exactly, 0:08:23.520 --> 0:08:27.000 it's it's difficult to make a five to seven year 0:08:27.080 --> 0:08:31.360 decision on on building new facilities and making the necessary 0:08:31.480 --> 0:08:33.760 growth in your company if you don't think that that 0:08:34.480 --> 0:08:37.160 scenario is going to continue for for such a long 0:08:37.200 --> 0:08:40.040 period of time. And you have to remember shale didn't 0:08:40.040 --> 0:08:42.520 really make a lot of free cash flow for the 0:08:42.559 --> 0:08:45.520 past fifteen years. This is the first they're they're expected 0:08:45.559 --> 0:08:48.439 to make as much free cash flow in two as 0:08:48.480 --> 0:08:51.760 they've done for the past fifteen years combined out. Uh. 0:08:51.840 --> 0:08:54.800 And so when you put that into perspective, they're really 0:08:54.800 --> 0:08:58.440 paying back their initial investments and what brought us to 0:08:58.520 --> 0:09:02.200 being close to being energy independent, although we're not technically 0:09:02.280 --> 0:09:05.400 energy and dependent as of today. So, Fernando, how about 0:09:05.400 --> 0:09:10.360 OPEQUE plus UM talked to us about production? If OPEC 0:09:10.400 --> 0:09:13.040 plus say, hey, we wanted to increase production by ten 0:09:13.160 --> 0:09:18.400 or does it have the capability to do that? Uh? 0:09:18.640 --> 0:09:21.800 It does, and but they don't really have the will. 0:09:22.200 --> 0:09:24.560 And the question is for how long can they increase 0:09:24.600 --> 0:09:28.240 productions for that by that amount? H Saudi Aramco has 0:09:28.280 --> 0:09:32.240 talked about increasing production to twelve to thirteen million barrels 0:09:32.280 --> 0:09:36.320 a day by six. It does take time, especially to 0:09:36.360 --> 0:09:39.720 grow at that magnitude. They're currently producing closest nine million 0:09:39.720 --> 0:09:43.360 barrels a day of crude oil UM. They could probably 0:09:43.400 --> 0:09:46.400 go as high as ten to ten and a half. Uh. 0:09:46.440 --> 0:09:49.200 And they are the largest one on that growth. And 0:09:49.240 --> 0:09:53.560 then the other ones have political issues. UH. Your Irax, 0:09:53.640 --> 0:09:58.480 your Irans that they could raise production significantly on an 0:09:58.520 --> 0:10:01.520 absolute level, but they have have their own issues guaranteeing 0:10:01.600 --> 0:10:05.839 the security or sanctions the kids to be wrong. You know, 0:10:05.880 --> 0:10:08.680 we've heard a number of people Paul, you and Tom 0:10:08.679 --> 0:10:11.839 were talking yesterday, I think to Bill Smead Yep down 0:10:11.880 --> 0:10:15.600 in Phoenix, and he was saying he loves oil producers 0:10:15.679 --> 0:10:18.280 right now because they're priced at seventy dollars a barrel, 0:10:18.480 --> 0:10:21.760 and obviously we're trading far up above that, at least 0:10:21.760 --> 0:10:23.679 in t I terms, I think one fifteen right now. 0:10:24.120 --> 0:10:27.920 I also saw Marco Kolanovitch JP Morgan, who was voted 0:10:27.960 --> 0:10:32.280 the number one Equity Links strategist in II last years. 0:10:32.800 --> 0:10:35.160 That's a good bump for his bonus, right. He recommended 0:10:35.240 --> 0:10:37.880 using recent weakness and oil and energy aims to add 0:10:37.880 --> 0:10:40.240 exposure there as well. Are you starting to see that 0:10:40.280 --> 0:10:45.000 as a consensus, Fernando, Yeah, it seems like, well, the 0:10:45.000 --> 0:10:49.320 there's a return to oil, and especially against some of 0:10:49.360 --> 0:10:53.400 the earlier bell weathers in the sector tech and retail, 0:10:53.960 --> 0:10:57.720 especially as that sectors that weaken, Oil has come back 0:10:57.720 --> 0:11:00.680 into preference. And when you can are the free cash 0:11:00.880 --> 0:11:03.600 that they are generating, and that most of those uh 0:11:03.679 --> 0:11:06.640 that free cash was being reverted to shareholders. It is 0:11:06.640 --> 0:11:11.400 a compelling UH distribution yield that dwarfs what the SMP 0:11:11.559 --> 0:11:15.959 is currently offering. So where do you think oil gets 0:11:16.000 --> 0:11:17.880 too and over what time frame? Or do we still 0:11:17.920 --> 0:11:21.880 have more to move higher with the crewed I think 0:11:22.240 --> 0:11:25.960 in the current conjecture, yes, it remains a question of 0:11:26.000 --> 0:11:29.400 what the U S does with rates and how demand reacts. 0:11:29.640 --> 0:11:33.319 I think ultimately we are major concern is that higher 0:11:33.360 --> 0:11:36.000 a combination of higher rates and inflation will have a 0:11:36.040 --> 0:11:40.040 significant impact on emerging market demand and we're starting to 0:11:40.080 --> 0:11:43.120 see some of those cracks in the horizon. That's probably 0:11:43.160 --> 0:11:45.960 still in the second half of the year UH, but 0:11:46.440 --> 0:11:49.640 we think there's room to run through the summer, especially 0:11:49.720 --> 0:11:53.040 as the northern hemisphere gets into its high demand season, 0:11:53.520 --> 0:11:56.760 and that could be north of one UH for for 0:11:56.800 --> 0:12:00.960 the w T. I what happens if China UH let's 0:12:01.040 --> 0:12:05.480 up on the lockdowns. We're seeing I think fewer infections 0:12:05.679 --> 0:12:09.760 intra community and there's a lot of talk anyway about 0:12:09.800 --> 0:12:13.560 the fact that the party needs to to let up 0:12:13.559 --> 0:12:15.920 a little bit. Is that gonna spur the demand side 0:12:15.920 --> 0:12:21.320 big time? Yes? Again, if we all return to the 0:12:21.400 --> 0:12:24.320 to the to the our usual situations. Yes, the big 0:12:24.400 --> 0:12:29.000 question there is supply chains because regardless of UH returning 0:12:29.040 --> 0:12:32.119 to to normal tomorrow, we still had a massive destruction 0:12:32.440 --> 0:12:35.320 and a lot of ships that are parked outside of 0:12:35.360 --> 0:12:37.920 ports in China. UH, and that will lead to that 0:12:38.000 --> 0:12:40.559 cost inflation that we talked about. So again, in the 0:12:40.600 --> 0:12:42.800 short term, yes, we think that that that could be. 0:12:43.040 --> 0:12:46.520 That could mean higher demand as China reopens and experiences 0:12:46.520 --> 0:12:50.560 something similar slightly less aggressive as we saw in the 0:12:50.679 --> 0:12:54.440 US in Europe and we reopened UM. But our biggest 0:12:54.480 --> 0:12:58.240 concern is that the real push from inflation will come 0:12:58.240 --> 0:13:01.679 in the second half, and especially from emerging markets that 0:13:01.720 --> 0:13:04.080 are already on the brink. I mean, you can see 0:13:04.080 --> 0:13:08.080 the situations in Sri Lanka, in Brazil, UH, in Mexico 0:13:08.840 --> 0:13:12.440 the fiscal situations are worse, and UH the protests are 0:13:12.559 --> 0:13:17.640 are increasing over the concerns over food and fuel. So 0:13:17.679 --> 0:13:19.920 I see, just you know, I guess it shouldn't surprise 0:13:19.960 --> 0:13:21.640 that Saudi a Ramco is said to weigh an I 0:13:21.840 --> 0:13:25.439 p O of its trading unit amid oil Boom. This 0:13:25.480 --> 0:13:27.080 seems like a big deal, could be a big I pill, 0:13:27.120 --> 0:13:28.640 like thirty billion dollars. What do you make of that 0:13:28.720 --> 0:13:33.960 just a good opportunities to play there Fern end of Yeah, yeah, 0:13:33.960 --> 0:13:36.440 I agree, but I think it's a it's an opportunity 0:13:36.480 --> 0:13:39.920 to play. Clearly, sorry, doesn't need the capital right now, 0:13:39.960 --> 0:13:44.560 but they are trying to increase, uh, the diversification of 0:13:44.600 --> 0:13:47.880 their economy, and they're trying to get more capital into 0:13:47.880 --> 0:13:51.080 the kingdom. Uh. You know, the only concerned with trading 0:13:51.400 --> 0:13:54.280 having a separate trading arm from your integrated oil company 0:13:54.520 --> 0:13:57.520 is that they ultimately play hand in hand. You're trying 0:13:57.559 --> 0:14:01.800 to sell your cargoes and sometimes maximize the overall profit 0:14:01.920 --> 0:14:04.920 by putting that profit in the integrated signs and sometimes 0:14:04.920 --> 0:14:06.880 at the trading. So they'll have to make it very 0:14:06.880 --> 0:14:09.800 clear as to how they'll uh what kind of Chinese 0:14:09.840 --> 0:14:12.640 wall there will be between the two the two entities 0:14:12.760 --> 0:14:16.240 in order to make this a viable offering to third 0:14:16.280 --> 0:14:19.680 party investors. All right, interesting stuff again. W T a 0:14:19.760 --> 0:14:23.440 cood Oil pushing one fifteen a barrel go figure. Fernando Valley, 0:14:23.720 --> 0:14:30.560 senior analyst for Bloomberg Intelligence covering all things uh energy. 0:14:31.360 --> 0:14:33.920 All right, let's dig into these Walmart numbers. Stocks down 0:14:33.960 --> 0:14:36.920 nine percent here. Inflation a big issue for the costs 0:14:36.960 --> 0:14:40.320 there are in Sunda Rama. He's a senior equity research 0:14:40.320 --> 0:14:42.720 analysts at cf are A. Joins us Auran. Thanks so 0:14:42.800 --> 0:14:44.960 much for taking a time here. What's your takeaway from 0:14:44.960 --> 0:14:48.080 these Walmart numbers? Yeah, yeah, thanks for having me. Yeah, 0:14:48.120 --> 0:14:50.480 it was it was a rare miss by Walmart. You know, 0:14:50.680 --> 0:14:54.720 historically they've done Walmart has done a great job managing expectations, 0:14:54.760 --> 0:14:57.440 so rarely do they miss on earnings. So when they 0:14:57.480 --> 0:14:59.960 do miss like this, especially about this kind of magnets, 0:15:00.000 --> 0:15:01.880 you know, you tend to see a pretty big hit 0:15:01.960 --> 0:15:04.440 to the to the stock price. But you know, the 0:15:04.480 --> 0:15:07.440 big takeaway that from from from Learning's called today with 0:15:07.760 --> 0:15:09.720 what I took away is that, you know a lot 0:15:09.760 --> 0:15:11.680 of the issues that they pointed to was really on 0:15:11.720 --> 0:15:14.600 the bottom line, and a lot of that can be 0:15:14.640 --> 0:15:17.880 isolated to the specific quarter, and maybe some of that 0:15:17.920 --> 0:15:20.800 will flow into Q two. So you know, and argue, 0:15:21.040 --> 0:15:23.720 you know, don't expect Walmart to continue missing like this 0:15:23.880 --> 0:15:25.880 because like I said, they rarely do miss on the 0:15:25.880 --> 0:15:29.240 bottom line, and and you know, historically during periods of 0:15:29.320 --> 0:15:33.640 tough economic times, challenging times, Walmart his historically outperformed competition. 0:15:33.720 --> 0:15:36.120 So you know that for for those reasons, we kept 0:15:36.120 --> 0:15:38.360 our by rating today. We did drop our pull montagrat 0:15:38.400 --> 0:15:41.160 price to one six two from but we kept our 0:15:41.200 --> 0:15:43.720 bierrating on the stuff on the shares. The thing is, 0:15:43.760 --> 0:15:45.680 if I look at you know, if I compare to 0:15:45.680 --> 0:15:48.720 what happened at Home depot Um, which you know, the 0:15:48.760 --> 0:15:51.880 beat was all driven by higher prices, they actually had 0:15:51.920 --> 0:15:56.520 lower unit sales. It looks tough for Walmart since they 0:15:56.560 --> 0:15:59.560 can't raise prices like that, or at least that's the narrative. 0:15:59.680 --> 0:16:01.520 I don't know if it's true, but that's this is 0:16:01.560 --> 0:16:04.280 what I hear. They can't raise prices until they absolutely 0:16:04.320 --> 0:16:09.200 have have to. Um. Is that actually the case? Yes, 0:16:09.280 --> 0:16:11.920 So the their average ticket prices in the US was 0:16:11.960 --> 0:16:14.200 only up three percent. And you know, if you if 0:16:14.240 --> 0:16:17.080 you assume that their costs cost instlation is probably of 0:16:17.160 --> 0:16:19.760 double digits for them. So they only increased prices by 0:16:19.800 --> 0:16:22.680 three percent. So there was a mismatch there. But they 0:16:22.720 --> 0:16:24.880 know that mismatch on on the call today, and a 0:16:24.880 --> 0:16:27.320 lot of that was due to fuel costs, because the 0:16:27.440 --> 0:16:30.320 fuel really started the surge at the end of February, 0:16:30.520 --> 0:16:32.640 and it was really tough for really a lot of 0:16:32.640 --> 0:16:35.960 these retailers to manage that that those costs, and I 0:16:35.960 --> 0:16:38.040 think now they're doing a little bit better job kind 0:16:38.040 --> 0:16:41.760 of matching pricing and costs. We do expect more pricing 0:16:41.800 --> 0:16:45.440 to flow into Walmart's income statements over the next few quarters, 0:16:45.480 --> 0:16:48.880 because because outside the fuel the fuel aspect for you know, 0:16:49.280 --> 0:16:52.960 things like food and other consumables and even general merchandise items, 0:16:53.240 --> 0:16:56.440 Walmart is they're noting that they are passing those costs 0:16:56.440 --> 0:16:59.440 through at least the cost increase. They're not offsetting the 0:16:59.480 --> 0:17:02.160 margin impact, but the costs are being passed over to 0:17:02.200 --> 0:17:05.040 the to the consumer, and it seems are in that well, 0:17:05.080 --> 0:17:08.960 if I'm Walmart, if I can't pass costs increases through, 0:17:09.280 --> 0:17:11.880 who can Because I mean, where are my customers generally 0:17:11.880 --> 0:17:15.760 gonna go? I'm so big and have you know, just 0:17:15.840 --> 0:17:19.680 so many items? Yeah, I mean, And I think that 0:17:19.720 --> 0:17:21.640 kind of goes to show the state of the overall 0:17:21.680 --> 0:17:24.920 consumer right now. You know, Walmart is probably over index 0:17:25.040 --> 0:17:27.800 to the to the lower income consumer, and I think 0:17:27.800 --> 0:17:30.640 we're starting to see some cracks among the lower income consumer. 0:17:30.720 --> 0:17:33.960 You know. Walmart noted that some some consumers are trading 0:17:34.000 --> 0:17:36.920 down some branded products to private label because that tends 0:17:36.960 --> 0:17:39.320 to be a little bit cheaper. They haven't really seen 0:17:39.320 --> 0:17:42.800 that among the middle income consumer the upper income consumer. 0:17:42.880 --> 0:17:47.320 But you know, the longer inflation stays at this elevated level. Uh, 0:17:47.359 --> 0:17:49.760 you know, it's it's it's it's most most likely we're 0:17:49.760 --> 0:17:52.800 going to see as more consumers changed their shopping habits 0:17:53.200 --> 0:17:56.280 trade down from branded to private label shop and more 0:17:56.359 --> 0:17:59.000 value aren't oriented stores like a Walmart or or a 0:17:59.080 --> 0:18:03.960 Costco or somewhere somewhere like that. Um, what do you 0:18:04.359 --> 0:18:08.720 if you if you look across the retail spectrum, are 0:18:08.760 --> 0:18:11.720 there companies that you think are going to be winners 0:18:11.840 --> 0:18:14.320 and losers here? I mean, are there some that you 0:18:14.359 --> 0:18:19.040 feel really strongly about? Yeah, I mean certainly all the 0:18:19.560 --> 0:18:23.600 We really like the big box diversified retailers, So that 0:18:23.640 --> 0:18:29.000 includes Walmart, Costco, Target as well. You know, not only 0:18:29.040 --> 0:18:31.000 do we like them because they're a large big box 0:18:31.040 --> 0:18:34.560 diversified retailer you know that also prides themselves on value, 0:18:34.840 --> 0:18:37.760 but they also have these alternative business dreams that are 0:18:37.760 --> 0:18:40.440 starting to pop up into their business. And it's things 0:18:40.480 --> 0:18:44.760 like advertising, things like uh, first party and third party marketplaces, 0:18:44.800 --> 0:18:48.480 fulfillment services, healthcare, financial services, all these things we're kind 0:18:48.480 --> 0:18:50.680 of non existing for a lot of these companies. Five 0:18:50.680 --> 0:18:54.000 ten years ago, and these are very uh passet light, 0:18:54.240 --> 0:18:56.640 high margin businesses, and as these business continue to grow, 0:18:56.760 --> 0:18:59.199 I think these retailers can continue to invest in the 0:18:59.240 --> 0:19:02.520 core retail bus in an area like wages and so forth, 0:19:02.520 --> 0:19:04.400 and continue to grow the bottom line. All right, good 0:19:04.400 --> 0:19:06.840 stuff are in sunder. I'm senior equity research analyst at 0:19:06.880 --> 0:19:13.199 cfre A breaking down the Walmart numbers. We had some 0:19:13.240 --> 0:19:16.159 retail sales numbers come out this morning. Pretty darn solid 0:19:16.400 --> 0:19:18.800 for the consumer there. Let's break it down, Angie Solanki, 0:19:19.359 --> 0:19:22.720 National director of Retail Services for the United States for Colliers. 0:19:23.000 --> 0:19:25.040 Angie again, you know, we kind of had the retail 0:19:25.080 --> 0:19:27.639 sales numbers. They look pretty good to me. What is 0:19:27.680 --> 0:19:31.600 your takeaway? I completely agree with you. Um, there's a 0:19:31.600 --> 0:19:34.760 lot of resiliency that we're seeing, and so as you stated, 0:19:34.880 --> 0:19:38.159 sales are up, we saw an increase by seven percent 0:19:38.240 --> 0:19:40.720 year over year, so that's incredible. I think what we're 0:19:40.720 --> 0:19:43.119 really seeing right now is people are coming back to 0:19:43.200 --> 0:19:46.600 work and there's been a nice healthy increase in the 0:19:46.640 --> 0:19:50.000 apparel side, UM, where people are saying, hey, it's time 0:19:50.040 --> 0:19:53.120 to kind of get back into some new clothes and 0:19:53.560 --> 0:19:55.760 head on back into the office. Here. Even though it's 0:19:55.760 --> 0:19:58.320 a shorter week, people still want to look good. Do 0:19:58.400 --> 0:20:02.280 we not have to be concerned about savings rates? They've 0:20:02.359 --> 0:20:05.800 dropped back below pre pandemic levels right now we're looking 0:20:05.840 --> 0:20:09.160 at six point two percent and um. Goldman Sachs, chief 0:20:09.160 --> 0:20:12.199 economist on hopsis today said that consumers are reaching for 0:20:12.320 --> 0:20:15.679 leverage again. Um. Are we getting to that kind of 0:20:15.720 --> 0:20:19.400 good old American place where we spend more than we make? 0:20:21.000 --> 0:20:24.240 We are? Um? I think there's still a balance between 0:20:24.280 --> 0:20:26.520 that because I think people are still you know, looking 0:20:26.600 --> 0:20:31.679 at inflation, what's going on from more macroeconomics. But nonetheless, 0:20:31.720 --> 0:20:33.600 you know, they've been saving for quite a while now, 0:20:33.920 --> 0:20:36.879 and so a little spend, not percent, but even just 0:20:38.680 --> 0:20:42.680 more and spend from their perspective is not a bad thing. 0:20:42.960 --> 0:20:45.000 I think we need to really look at how we're 0:20:45.000 --> 0:20:47.600 taking the spend and where we're seeing some of those 0:20:47.640 --> 0:20:51.960 increases that we look at, For example, the increase in 0:20:52.080 --> 0:20:55.480 just spending restaurants, it's a nice healthy growth of two. 0:20:57.119 --> 0:20:58.879 So andre we kind of had a mixed bag in 0:20:58.960 --> 0:21:02.080 terms of the retail earnings today. Home Depot pretty good 0:21:02.080 --> 0:21:04.159 to be able to pass along price increases, Walmart not 0:21:04.240 --> 0:21:07.199 so much, and the stocks down about So as you 0:21:07.200 --> 0:21:10.639 look at those two big, big retailers, how did you 0:21:10.680 --> 0:21:13.960 think about that at vs. To be the consumer? You know, 0:21:14.119 --> 0:21:16.119 I think it's just um, if you really take a 0:21:16.160 --> 0:21:20.040 look at the consumer and their spends between Home Depot 0:21:20.160 --> 0:21:23.320 and Walmart, Walmart definitely did see a little bit of 0:21:23.359 --> 0:21:26.159 a softening. I just I think, in my opinion, what 0:21:26.200 --> 0:21:28.959 we're seeing here is just a slight shift. I think 0:21:28.960 --> 0:21:31.399 we're going to see that come back, you know, to spend. 0:21:31.560 --> 0:21:34.840 You know, the shock of gas prices going up, you 0:21:34.880 --> 0:21:38.600 know several weeks ago to uh, you know, the lack 0:21:38.800 --> 0:21:42.040 of certain products. A lot of that takes into account 0:21:42.160 --> 0:21:44.600