1
00:00:00,600 --> 00:00:12,600
Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Intelligence

2
00:00:12,640 --> 00:00:14,360
Speaker 1: with Alex Steinhl and Paul'sweeny.

3
00:00:14,480 --> 00:00:17,720
Speaker 2: The real app performance has been the US corporate high yield.

4
00:00:17,880 --> 00:00:20,239
Speaker 3: Are the companies lean enough? Have they trimmed all the fats?

5
00:00:20,320 --> 00:00:23,880
Speaker 2: The semiconductor business is a really cyclical business.

6
00:00:23,600 --> 00:00:27,200
Speaker 1: Breaking market headlines and corporate news from across the globe.

7
00:00:27,240 --> 00:00:29,880
Speaker 3: Do investors like the M and A that we've seen?

8
00:00:30,080 --> 00:00:33,120
Speaker 2: These are two big time blue chip companies.

9
00:00:33,320 --> 00:00:36,920
Speaker 4: The window between the peak and cut changing super fast.

10
00:00:37,080 --> 00:00:42,040
Speaker 1: Bloomberg Intelligence with Alex Steinel and Paul's Wheenye on Bloomberg Radio.

11
00:00:43,440 --> 00:00:43,559
Speaker 5: Well.

12
00:00:43,600 --> 00:00:46,640
Speaker 2: Today's Bloomberg Intelligence Show, we dig inside the big business

13
00:00:46,640 --> 00:00:48,760
Speaker 2: stories impacting Wall Street and the global markets.

14
00:00:48,880 --> 00:00:51,600
Speaker 4: Each and every week, we provide research and data on

15
00:00:51,640 --> 00:00:53,519
Speaker 4: some of the two thousand companies in one hundred and

16
00:00:53,520 --> 00:00:55,880
Speaker 4: thirty industries our analysts cover worldwide.

17
00:00:55,920 --> 00:00:58,160
Speaker 2: Today, we'll look at why Tesla Stiff are said to

18
00:00:58,200 --> 00:00:59,600
Speaker 2: be bracing for potential job.

19
00:00:59,480 --> 00:01:01,960
Speaker 4: Cuts, discuss why warre in the Middle East is hurting

20
00:01:02,080 --> 00:01:03,160
Speaker 4: McDonald's sales.

21
00:01:03,320 --> 00:01:05,760
Speaker 2: For first, we dive into Walt Disney. Earlier in the week,

22
00:01:05,800 --> 00:01:08,759
Speaker 2: the company reported better than expected earnings for its fiscal

23
00:01:08,800 --> 00:01:11,880
Speaker 2: first quarter and issued an upbeat profit outlook for the year.

24
00:01:12,080 --> 00:01:14,040
Speaker 4: For more on all of this, we were joined by Githerang,

25
00:01:14,160 --> 00:01:16,760
Speaker 4: Na than Bloomberg intelligence analyst on US media, and we

26
00:01:16,800 --> 00:01:19,840
Speaker 4: asked her why there is reason for optimism at the company.

27
00:01:20,240 --> 00:01:23,280
Speaker 6: Disney is definitely back back with the bank. One of

28
00:01:23,319 --> 00:01:26,280
Speaker 6: the big pain points with Disney has really been the

29
00:01:26,400 --> 00:01:29,160
Speaker 6: lack of streaming profitability. But now there seems to be

30
00:01:29,680 --> 00:01:32,399
Speaker 6: a clear path to the streaming business kind of getting

31
00:01:32,440 --> 00:01:35,200
Speaker 6: to that profitability metric. So we saw the losses come

32
00:01:35,200 --> 00:01:38,320
Speaker 6: in way below expectations. It was sixty five percent below

33
00:01:38,319 --> 00:01:41,360
Speaker 6: what people were projecting. They're still kind of guiding to,

34
00:01:41,720 --> 00:01:44,880
Speaker 6: you know, hitting profitability by the September quarter, but most people,

35
00:01:44,920 --> 00:01:47,880
Speaker 6: I think on the street expected to happen much much sooner.

36
00:01:48,120 --> 00:01:50,040
Speaker 6: And then Hugh Johnston, who was the new CFO and

37
00:01:50,040 --> 00:01:52,920
Speaker 6: this was his first call with Disney, basically said that

38
00:01:53,200 --> 00:01:57,440
Speaker 6: look to or expect double digit operating margins in the

39
00:01:57,440 --> 00:01:59,840
Speaker 6: streaming business. And I think that was something that was

40
00:02:00,080 --> 00:02:02,760
Speaker 6: really really powerful because we know that, you know, the

41
00:02:02,880 --> 00:02:05,400
Speaker 6: number that we're all chasing is that twenty percent operating

42
00:02:05,440 --> 00:02:08,440
Speaker 6: margin where you know, Netflix has been I think the

43
00:02:08,440 --> 00:02:11,040
Speaker 6: one area that we kind of still need clarity is

44
00:02:11,320 --> 00:02:14,359
Speaker 6: how all of this the streaming bundles are going to work.

45
00:02:14,400 --> 00:02:17,120
Speaker 6: So it's really good to see them kind of be

46
00:02:17,280 --> 00:02:20,880
Speaker 6: proactive and go out with their own solution. So they

47
00:02:20,919 --> 00:02:24,240
Speaker 6: have that sports super app that's coming out a little

48
00:02:24,240 --> 00:02:27,280
Speaker 6: bit later this year in conjunction with Fox and Warner Brothers.

49
00:02:27,280 --> 00:02:31,800
Speaker 6: They have their own ESPN Plus standalone app. Again a

50
00:02:31,800 --> 00:02:34,400
Speaker 6: little bit of you know, we're not really sure whether

51
00:02:34,440 --> 00:02:36,600
Speaker 6: those are necessarily going to cannibalize each other. I don't

52
00:02:36,639 --> 00:02:38,880
Speaker 6: think so. I think really Disney what they're trying to

53
00:02:38,880 --> 00:02:41,960
Speaker 6: do here is kind of create this this super bundle

54
00:02:42,080 --> 00:02:45,320
Speaker 6: because they know that, you know, content bundling works and

55
00:02:45,360 --> 00:02:48,200
Speaker 6: everybody's kind of looking aggregation is the holy grail, and

56
00:02:48,240 --> 00:02:50,160
Speaker 6: I think Disney wants to be at the forefront of it.

57
00:02:50,600 --> 00:02:52,359
Speaker 6: But definitely we need a little bit more kind of

58
00:02:52,639 --> 00:02:55,280
Speaker 6: clarity at least around like what the financial value creation

59
00:02:55,400 --> 00:02:55,840
Speaker 6: is going to be.

60
00:02:56,080 --> 00:02:58,480
Speaker 2: How about the theme park business that seems to continue

61
00:02:58,480 --> 00:03:01,360
Speaker 2: to be a really solid business for them, and I

62
00:03:01,400 --> 00:03:03,080
Speaker 2: know they you know, they announce several months ago that

63
00:03:03,080 --> 00:03:05,840
Speaker 2: they're really stepping up their investment in their theme parks

64
00:03:05,840 --> 00:03:07,320
Speaker 2: and their cruises and all that kind of stuff. How

65
00:03:07,320 --> 00:03:09,560
Speaker 2: did that business do very very well.

66
00:03:09,600 --> 00:03:13,160
Speaker 6: So again, operating income was for the quarter was well

67
00:03:13,200 --> 00:03:15,560
Speaker 6: above three billion dollars. That was again above what the

68
00:03:15,560 --> 00:03:18,000
Speaker 6: street was expecting. And really what we're seeing is a

69
00:03:18,000 --> 00:03:20,919
Speaker 6: lot of momentum at the International parks. So they opened,

70
00:03:21,160 --> 00:03:23,600
Speaker 6: you know, they've opened so many new attractions in their

71
00:03:24,280 --> 00:03:27,280
Speaker 6: overseas properties. You have a new Frozen Land in Hong Kong,

72
00:03:27,560 --> 00:03:31,360
Speaker 6: you have the new Zootopia attraction in in Shanghai, and

73
00:03:31,440 --> 00:03:34,680
Speaker 6: both of those are doing really really well for the company,

74
00:03:34,760 --> 00:03:36,760
Speaker 6: and that has really enabled them to take, you know,

75
00:03:36,800 --> 00:03:40,520
Speaker 6: implement all of these price increases. So International parks really

76
00:03:40,600 --> 00:03:43,720
Speaker 6: kind of doing extremely well. Domestically. There's a little bit

77
00:03:43,760 --> 00:03:46,160
Speaker 6: of pressure from wage inflation, there's a little bit of

78
00:03:46,200 --> 00:03:48,160
Speaker 6: pressure from you know, tough comms from like the Walt

79
00:03:48,200 --> 00:03:51,720
Speaker 6: Disney World fifty that anniversary celebration, But again, just transient

80
00:03:52,040 --> 00:03:54,440
Speaker 6: parks are really set up very very well. And you

81
00:03:54,480 --> 00:03:57,280
Speaker 6: mentioned the sixty billion dollar investment. Now seventy percent of

82
00:03:57,400 --> 00:04:00,960
Speaker 6: that capex is going to be towards new attractions, So

83
00:04:01,280 --> 00:04:04,320
Speaker 6: this is really going to be a major major profit

84
00:04:04,400 --> 00:04:05,600
Speaker 6: driver for them going forward.

85
00:04:05,920 --> 00:04:08,080
Speaker 4: Gito, there was a journal article that I just felt

86
00:04:08,120 --> 00:04:10,480
Speaker 4: like helped someone like me who's not seeped in Disney,

87
00:04:10,480 --> 00:04:14,240
Speaker 4: Like you guys understand how they're just seeping in to

88
00:04:14,440 --> 00:04:16,600
Speaker 4: all the Americana.

89
00:04:15,800 --> 00:04:19,839
Speaker 3: That's out there. They said, Taylor, Swift, football and Fortnite.

90
00:04:19,480 --> 00:04:22,520
Speaker 4: But like anywhere that you will want to be or

91
00:04:22,560 --> 00:04:25,560
Speaker 4: listen to or watch, Disney will be there. What did

92
00:04:25,600 --> 00:04:27,400
Speaker 4: you make of the Fortnite investment?

93
00:04:28,720 --> 00:04:31,920
Speaker 6: Super smart move by them, right, It's so strategic, it's

94
00:04:31,960 --> 00:04:34,159
Speaker 6: so smart, and it's still a kind of not a

95
00:04:34,279 --> 00:04:37,120
Speaker 6: huge investment. One point five billion gives them some steak,

96
00:04:37,200 --> 00:04:39,000
Speaker 6: gives them some skin in the game, and there's a

97
00:04:39,000 --> 00:04:41,280
Speaker 6: lot of upside, not too much downside. So I think

98
00:04:41,279 --> 00:04:43,880
Speaker 6: a really good way for them. And remember, Alex, they've

99
00:04:43,880 --> 00:04:46,360
Speaker 6: had this kind of really checkered past when it comes

100
00:04:46,400 --> 00:04:48,040
Speaker 6: to video games. It's not that they haven't been there.

101
00:04:48,080 --> 00:04:50,560
Speaker 6: They were in the publishing business. Didn't really work out

102
00:04:50,560 --> 00:04:53,880
Speaker 6: for them. They exited that business in twenty sixteen started

103
00:04:53,960 --> 00:04:56,640
Speaker 6: licensing out a lot of their content. But you know, licensing,

104
00:04:56,680 --> 00:04:59,240
Speaker 6: you're still kind of this passive participant. They really need

105
00:04:59,279 --> 00:05:01,240
Speaker 6: to be there. They need to be an active participant

106
00:05:01,240 --> 00:05:04,240
Speaker 6: in the video gaming industry. There's so much overlap between

107
00:05:04,279 --> 00:05:06,279
Speaker 6: all of the audiences that go to the you know,

108
00:05:06,320 --> 00:05:08,760
Speaker 6: the Disney parks and the people who are gaming, right,

109
00:05:08,760 --> 00:05:10,800
Speaker 6: it's all these youngsters and they really want to be

110
00:05:10,880 --> 00:05:12,839
Speaker 6: there and this is a great way for them to

111
00:05:12,839 --> 00:05:13,120
Speaker 6: do it.

112
00:05:13,600 --> 00:05:16,000
Speaker 2: What are they saying about the theatrical business, You.

113
00:05:15,920 --> 00:05:18,640
Speaker 6: Know, the content the studio has not really been the

114
00:05:18,680 --> 00:05:21,520
Speaker 6: blockbuster that it was. We've had a whole string of

115
00:05:21,560 --> 00:05:24,240
Speaker 6: misfires over the past few months. But I think what

116
00:05:24,440 --> 00:05:26,359
Speaker 6: bar Baker was saying is they are in the process

117
00:05:26,360 --> 00:05:30,000
Speaker 6: of rebuilding. The whole content pipeline is refilling. They're having

118
00:05:30,040 --> 00:05:32,359
Speaker 6: this really smart move here with this new Taylor Swift

119
00:05:32,400 --> 00:05:36,159
Speaker 6: movie coming out on March fifteenth, and then they spoke about,

120
00:05:36,200 --> 00:05:38,919
Speaker 6: you know, having this new Moana movie. This was originally

121
00:05:38,920 --> 00:05:40,800
Speaker 6: going to be a series on Disney, plus it's now

122
00:05:40,839 --> 00:05:44,159
Speaker 6: going to be a theatrical, full blown theatrical release. And again,

123
00:05:44,200 --> 00:05:46,880
Speaker 6: we're prepping for twenty twenty six, really, which is going

124
00:05:46,920 --> 00:05:49,800
Speaker 6: to be the biggest year for the box office ever

125
00:05:49,839 --> 00:05:51,680
Speaker 6: since the pandemic, and a lot of that will be

126
00:05:51,839 --> 00:05:54,159
Speaker 6: Disney kind of driving the slate right with. You have

127
00:05:54,240 --> 00:05:57,279
Speaker 6: the whole Star Wars coming back with Mandalorian and Grogu.

128
00:05:57,360 --> 00:06:00,520
Speaker 6: You have a whole set of Marvel releases, so it's

129
00:06:00,560 --> 00:06:02,400
Speaker 6: going to be really interesting as we kind of build that.

130
00:06:02,560 --> 00:06:06,240
Speaker 6: So again, nothing really major in twenty twenty four, maybe

131
00:06:06,240 --> 00:06:08,440
Speaker 6: other than you know, kind of the Deadpool movie, but

132
00:06:08,839 --> 00:06:11,159
Speaker 6: we're kind of building to what's a much stronger slate

133
00:06:11,240 --> 00:06:12,480
Speaker 6: I'm in twenty five twenty.

134
00:06:12,440 --> 00:06:15,360
Speaker 4: Nothing big coming except for the Deadpool. Excuse me, I've

135
00:06:15,400 --> 00:06:18,040
Speaker 4: been waiting for this movie for years. Deadpool three.

136
00:06:18,480 --> 00:06:19,640
Speaker 2: You're a big fan of the franchise.

137
00:06:19,680 --> 00:06:21,880
Speaker 4: Definitely not my audience that I'm talking to right now.

138
00:06:22,960 --> 00:06:26,560
Speaker 4: This is the third one having Wolverine make a little cameo.

139
00:06:26,760 --> 00:06:28,560
Speaker 3: Whatever. Anyway, it's gonna be awesome.

140
00:06:29,120 --> 00:06:29,320
Speaker 5: Paul.

141
00:06:29,360 --> 00:06:30,920
Speaker 4: What do you make of like how fast Disney was

142
00:06:30,960 --> 00:06:33,480
Speaker 4: able to move, Well, a lot.

143
00:06:33,360 --> 00:06:35,320
Speaker 2: Of people tell you they didn't move fast enough. But

144
00:06:35,400 --> 00:06:38,120
Speaker 2: it's I think when i Biger came in, I mean, yeah, yeah,

145
00:06:38,160 --> 00:06:40,040
Speaker 2: and it's but the stock's been kind of dead money

146
00:06:40,080 --> 00:06:42,719
Speaker 2: for a while and Githa well knows here. It's just

147
00:06:42,760 --> 00:06:44,760
Speaker 2: a question of when can we get a sense of

148
00:06:44,760 --> 00:06:46,200
Speaker 2: when the streaming losses are going to be in the

149
00:06:46,200 --> 00:06:49,279
Speaker 2: rear view mirror, and you know, bob Byger's surprises. You know,

150
00:06:49,360 --> 00:06:51,160
Speaker 2: I guess a year or so ago when he said

151
00:06:51,480 --> 00:06:53,040
Speaker 2: some of these assets might be for sale, like the

152
00:06:53,080 --> 00:06:55,840
Speaker 2: ABC networks, some of the cable networks. Any update on that.

153
00:06:56,320 --> 00:06:58,360
Speaker 6: Yes, we did have him kind of say everything's up

154
00:06:58,360 --> 00:07:00,240
Speaker 6: for sale, and then he kind of walked back all

155
00:07:00,240 --> 00:07:02,720
Speaker 6: of that. It's kind of starting to make sense because

156
00:07:02,720 --> 00:07:05,600
Speaker 6: they're obviously taking all that content, they're putting it now

157
00:07:05,640 --> 00:07:07,880
Speaker 6: on the super app, So it makes sense for them

158
00:07:07,880 --> 00:07:09,680
Speaker 6: to still kind of hold on to their linear TV

159
00:07:09,760 --> 00:07:12,640
Speaker 6: assets because they still do have very valuable sports rights

160
00:07:12,680 --> 00:07:14,920
Speaker 6: on there. So I think they're kind of aiming for

161
00:07:14,960 --> 00:07:18,280
Speaker 6: this bigger, kind of grander strategy. I don't necessarily think

162
00:07:18,320 --> 00:07:20,000
Speaker 6: that they're looking to sell any of their linear TV

163
00:07:20,040 --> 00:07:20,840
Speaker 6: networks right now.

164
00:07:21,080 --> 00:07:23,920
Speaker 2: Our thanks to KEITHA. Rong Andathan Bloomberg, intelligence analysts on

165
00:07:24,000 --> 00:07:24,640
Speaker 2: US Media.

166
00:07:24,720 --> 00:07:27,240
Speaker 4: We turn now to the financial services sector. This week,

167
00:07:27,480 --> 00:07:31,160
Speaker 4: UBS reported a fourth quarter net law, citing higher expenses.

168
00:07:31,400 --> 00:07:33,240
Speaker 4: The bank also announced it will buy back up to

169
00:07:33,280 --> 00:07:35,520
Speaker 4: one billion dollars in shares this year, and this comes

170
00:07:35,560 --> 00:07:38,640
Speaker 4: as UBS seeks to keep investors focused on the upside

171
00:07:38,640 --> 00:07:40,560
Speaker 4: of its complex integration of credits.

172
00:07:40,560 --> 00:07:42,760
Speaker 2: Weeeze for more on this. We were joined by Alison

173
00:07:42,800 --> 00:07:46,560
Speaker 2: Williams Bloomberg Intelligence senior analysts Global banks and asset Managers.

174
00:07:46,800 --> 00:07:48,960
Speaker 2: I asked her what her key takeaways were from this

175
00:07:48,960 --> 00:07:49,720
Speaker 2: week's earnings.

176
00:07:50,080 --> 00:07:53,120
Speaker 7: Investor's got as much as they could. They may have

177
00:07:53,280 --> 00:07:56,480
Speaker 7: wanted a bit more. The one negative thing for the

178
00:07:56,520 --> 00:07:59,080
Speaker 7: outlook is that twenty twenty four estimates are likely going

179
00:07:59,120 --> 00:08:03,160
Speaker 7: to come down a little bit because you know, the

180
00:08:03,200 --> 00:08:05,240
Speaker 7: returns are going to be lower. But that's because I

181
00:08:05,280 --> 00:08:08,640
Speaker 7: think UBS is trying to be aggressive in you know,

182
00:08:08,680 --> 00:08:12,440
Speaker 7: pulling forward those costs. So they did upsize the costs

183
00:08:12,960 --> 00:08:15,080
Speaker 7: on a growth basis, but they're going to invest those

184
00:08:15,120 --> 00:08:17,840
Speaker 7: so not falling to the bottom line, so perhaps some

185
00:08:17,920 --> 00:08:21,679
Speaker 7: disappointment there. They did reiterate their sort of three year target.

186
00:08:22,200 --> 00:08:25,240
Speaker 7: They gave a longer term target that was in line

187
00:08:25,280 --> 00:08:27,559
Speaker 7: with the high end before credits we so I think

188
00:08:27,880 --> 00:08:30,640
Speaker 7: those were all positive. The buybacks also a little bit

189
00:08:30,640 --> 00:08:34,600
Speaker 7: better than expected. The big positive news was twenty seven

190
00:08:34,640 --> 00:08:38,720
Speaker 7: percent increase in dividend. Also fourth quarter, you know, not

191
00:08:38,880 --> 00:08:41,559
Speaker 7: so much great things going on there, so that the

192
00:08:41,640 --> 00:08:45,640
Speaker 7: miss was on costs. Their adjusted costs fell, Their integration

193
00:08:45,720 --> 00:08:49,160
Speaker 7: costs or the restructing costs were much bigger than expected.

194
00:08:49,240 --> 00:08:51,760
Speaker 7: The wealth flows moderated a little bit, and the investment

195
00:08:51,760 --> 00:08:52,920
Speaker 7: buying lost money.

196
00:08:53,120 --> 00:08:56,760
Speaker 2: Allison, what is the new UBS here post Credit Swiss

197
00:08:56,760 --> 00:08:59,079
Speaker 2: and full disclosure on a client of UBS used to

198
00:08:59,160 --> 00:09:01,200
Speaker 2: work at Credit Swiss. So I'm all over the Swiss

199
00:09:01,559 --> 00:09:03,920
Speaker 2: stuff here. But what's where does UBS want to be

200
00:09:04,040 --> 00:09:07,720
Speaker 2: now that they've acquired Credits Swiss? What are their ambitions

201
00:09:07,800 --> 00:09:10,720
Speaker 2: visa a global financial institution?

202
00:09:11,520 --> 00:09:14,959
Speaker 7: So I don't think that the big picture strategy has

203
00:09:15,080 --> 00:09:18,480
Speaker 7: changed much for them, right, So they their focuses on wealth,

204
00:09:18,800 --> 00:09:22,040
Speaker 7: you know, they're the premier global wealth manager. They added

205
00:09:22,080 --> 00:09:25,920
Speaker 7: some assets, they added some relationships with Credit Suite in

206
00:09:25,960 --> 00:09:30,440
Speaker 7: the investment bank. Again, they're still focused on equities. So

207
00:09:30,640 --> 00:09:34,120
Speaker 7: even though profit disappointed, revenue came in about in line.

208
00:09:34,120 --> 00:09:37,160
Speaker 7: So that's that's a positive thing. On the equities trading

209
00:09:37,200 --> 00:09:41,320
Speaker 7: side of things. They did add, you know, some incremental ads.

210
00:09:41,360 --> 00:09:44,880
Speaker 7: There were some numbers around the traders. The Bloomberg News reported,

211
00:09:44,960 --> 00:09:48,240
Speaker 7: We obviously look at the top line of revenue. They

212
00:09:48,360 --> 00:09:51,600
Speaker 7: kept the M and A and the research areas were

213
00:09:51,640 --> 00:09:54,839
Speaker 7: the areas that they added to and those areas did

214
00:09:54,840 --> 00:09:55,360
Speaker 7: pretty well.

215
00:09:55,280 --> 00:09:55,720
Speaker 8: On the corner.

216
00:09:55,960 --> 00:09:57,480
Speaker 4: So what else do you need to hear to get

217
00:09:57,520 --> 00:09:59,839
Speaker 4: more confidence in all of this mean just like a

218
00:10:00,120 --> 00:10:01,680
Speaker 4: kind of holding wait for two more years.

219
00:10:01,720 --> 00:10:04,439
Speaker 7: Basically, I think it is like a show me right,

220
00:10:04,520 --> 00:10:06,120
Speaker 7: So I think it's going to be a step by

221
00:10:06,200 --> 00:10:10,160
Speaker 7: step So Armandi, as you know, said that you know,

222
00:10:10,200 --> 00:10:12,400
Speaker 7: they might sacrifice a little bit of revenue because they

223
00:10:12,440 --> 00:10:15,320
Speaker 7: are focused on profitability. They're focused on doing things right.

224
00:10:15,559 --> 00:10:18,880
Speaker 7: So again like those are the types of things that

225
00:10:19,520 --> 00:10:22,440
Speaker 7: you have to have confidence. He has done a big

226
00:10:22,440 --> 00:10:25,560
Speaker 7: turnaround at UBS before. But I think that it is

227
00:10:25,559 --> 00:10:27,280
Speaker 7: the kind of thing where it's like quartered by quarter.

228
00:10:27,320 --> 00:10:30,319
Speaker 7: Investors have to start to see, you know, some support

229
00:10:30,640 --> 00:10:33,640
Speaker 7: for these estimates. Another target they put out was one

230
00:10:33,679 --> 00:10:36,599
Speaker 7: hundred billion per year for the next two years in

231
00:10:36,640 --> 00:10:39,160
Speaker 7: net new wealth asset. So I think that's a pretty

232
00:10:39,160 --> 00:10:41,920
Speaker 7: good target. But again we saw some slowing in the

233
00:10:41,920 --> 00:10:45,280
Speaker 7: fourth quarter. Some of that was mandates leaving with credit sweee,

234
00:10:45,360 --> 00:10:50,280
Speaker 7: relationship managers still pretty stable. But I think investors will

235
00:10:50,280 --> 00:10:53,600
Speaker 7: want to see you know more so you know, over

236
00:10:53,600 --> 00:10:56,880
Speaker 7: the next few quarters, UBS delivering on its plans.

237
00:10:57,520 --> 00:11:00,360
Speaker 2: So Elison, just, I mean you cover everything the all

238
00:11:00,360 --> 00:11:04,480
Speaker 2: the global big investment banks, commercial banks. Here is the

239
00:11:04,520 --> 00:11:08,520
Speaker 2: global bank is that just left to the Morgan Stanley's

240
00:11:08,640 --> 00:11:11,040
Speaker 2: the Goldman Sachs is or what it doesn't seem like

241
00:11:11,040 --> 00:11:14,920
Speaker 2: anybody in Asia, anybody in Europe can compete against the

242
00:11:15,000 --> 00:11:16,240
Speaker 2: JP Morgans of the world.

243
00:11:16,640 --> 00:11:19,120
Speaker 7: So Paul, it's I mean, it's really been over the

244
00:11:19,160 --> 00:11:21,679
Speaker 7: last decade, you know, ever since you left the business,

245
00:11:21,800 --> 00:11:25,880
Speaker 7: but it was it was last decade, you know, the

246
00:11:26,000 --> 00:11:29,880
Speaker 7: US bank just follow you know, really making those market

247
00:11:29,920 --> 00:11:32,600
Speaker 7: share games. Credit SUITEE was is sort of the latest

248
00:11:32,679 --> 00:11:36,160
Speaker 7: to provide some games to those US players, if you

249
00:11:36,240 --> 00:11:39,679
Speaker 7: will keep in mind that that sale from UBS follows

250
00:11:39,679 --> 00:11:43,680
Speaker 7: them exiting prime brokerage. Before Credit Suite, we had Deutsche Bank,

251
00:11:43,760 --> 00:11:46,559
Speaker 7: who also accident in prime brokerage. They shed parts of

252
00:11:46,600 --> 00:11:49,160
Speaker 7: their fixed income business. If we went back to several

253
00:11:49,240 --> 00:11:52,400
Speaker 7: years prior, there was a lot of the European players

254
00:11:52,440 --> 00:11:55,920
Speaker 7: getting out of fix and you know, keep in mind,

255
00:11:56,280 --> 00:11:59,560
Speaker 7: it is a scale business and I think where banks

256
00:11:59,600 --> 00:12:02,880
Speaker 7: like JP, if you Morgan have been winning at In fact,

257
00:12:02,880 --> 00:12:05,120
Speaker 7: Goldman Sachs has gained the most market share over the

258
00:12:05,200 --> 00:12:09,120
Speaker 7: last several years. Or that they are investing in technology

259
00:12:09,200 --> 00:12:11,440
Speaker 7: that helps them get better revenue, that helps them have

260
00:12:11,480 --> 00:12:14,640
Speaker 7: more money to invest. And so it's really that virtuous

261
00:12:14,679 --> 00:12:18,240
Speaker 7: cycle that some of those big US banks have been enjoying.

262
00:12:18,200 --> 00:12:21,880
Speaker 2: Thanks to Alison Williams, Bloomberg Intelligence, senior analysts for global banks.

263
00:12:22,280 --> 00:12:24,200
Speaker 4: Coming up, we're going to break down earnings from Caterpillar,

264
00:12:24,240 --> 00:12:26,800
Speaker 4: one of the world's largest manufacturers of heavy machinery.

265
00:12:27,040 --> 00:12:30,160
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing up

266
00:12:30,240 --> 00:12:32,800
Speaker 2: research and data on two thousand companies one hundred and

267
00:12:32,800 --> 00:12:35,760
Speaker 2: thirty industries. You can access Bloomberg Intelligence via b I

268
00:12:35,840 --> 00:12:37,719
Speaker 2: go on the terminal, I'll Paul Sweet.

269
00:12:37,480 --> 00:12:39,679
Speaker 3: And am Alex Steel and this is Bloomberg.

270
00:12:47,679 --> 00:12:51,560
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

271
00:12:51,640 --> 00:12:54,720
Speaker 1: weekdays at ten am Eastern on fo Cardplay and Android

272
00:12:54,760 --> 00:12:57,840
Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever

273
00:12:57,920 --> 00:13:02,240
Speaker 1: you get your podcasts, or watch us live on YouTube.

274
00:13:03,240 --> 00:13:04,240
Speaker 3: Let's turn out a Tesla.

275
00:13:04,400 --> 00:13:06,720
Speaker 4: So Tesla staff are said to be racing for potential

276
00:13:06,800 --> 00:13:09,760
Speaker 4: job cuts, and we're told managers were asked whether each

277
00:13:09,800 --> 00:13:12,560
Speaker 4: of their employees' positions is critical.

278
00:13:12,720 --> 00:13:15,280
Speaker 2: We would join this week by Steve Man Bloomberg Intelligence,

279
00:13:15,320 --> 00:13:18,600
Speaker 2: Global Autos and Industry Research Channels. You're first asked for

280
00:13:18,679 --> 00:13:20,440
Speaker 2: his take on the potential job cuts.

281
00:13:20,679 --> 00:13:23,320
Speaker 5: Job cuts are never good for the employees. But I

282
00:13:23,320 --> 00:13:27,000
Speaker 5: think the investors will probably look at it positively because

283
00:13:27,000 --> 00:13:29,840
Speaker 5: the stock's been down like twelve percent since their last

284
00:13:29,840 --> 00:13:34,080
Speaker 5: earnings call, in thirty percent year to day, and that's

285
00:13:34,080 --> 00:13:38,000
Speaker 5: all because you know, slowing EV sales, price cuts. So

286
00:13:38,240 --> 00:13:41,040
Speaker 5: the company needs to do something to address them of

287
00:13:41,080 --> 00:13:43,280
Speaker 5: the short term challenges they're facing.

288
00:13:44,080 --> 00:13:46,760
Speaker 2: So when I see news like this, it really makes

289
00:13:46,800 --> 00:13:50,600
Speaker 2: me think, Steve, that maybe they see something fundamental in

290
00:13:50,679 --> 00:13:53,240
Speaker 2: their business such that they have to look at a

291
00:13:53,280 --> 00:13:57,520
Speaker 2: big fixed cost like people. What's the company saying these

292
00:13:57,600 --> 00:13:59,319
Speaker 2: days about where they see.

293
00:13:59,320 --> 00:14:02,199
Speaker 5: Well, Man, well, that's a good question. I think you

294
00:14:02,280 --> 00:14:05,400
Speaker 5: got two questions there. First of all, fundamentally, you know,

295
00:14:05,559 --> 00:14:08,280
Speaker 5: they've done a lot of price cutting, you know, in

296
00:14:08,320 --> 00:14:12,880
Speaker 5: their operations, in the administrative side of things, in their manufacturing.

297
00:14:13,520 --> 00:14:15,800
Speaker 5: They plucked out all the low hanging fruits. There's not

298
00:14:15,920 --> 00:14:20,200
Speaker 5: much to cut anymore other than looking at their human resources,

299
00:14:20,240 --> 00:14:22,480
Speaker 5: and that's what they're doing at this time.

300
00:14:23,000 --> 00:14:23,320
Speaker 9: Now.

301
00:14:23,480 --> 00:14:26,800
Speaker 5: Obviously, you know you don't want to cut, but I

302
00:14:26,840 --> 00:14:30,080
Speaker 5: think they have to. If you look at Forge Earning's call,

303
00:14:31,000 --> 00:14:35,680
Speaker 5: the market is really brutal. They've the margins was down,

304
00:14:35,840 --> 00:14:38,920
Speaker 5: like was at negative ninety eight percent for Ford's EV

305
00:14:39,080 --> 00:14:43,280
Speaker 5: business that's worse than their third quarter. So from that

306
00:14:43,320 --> 00:14:47,680
Speaker 5: you can see the whole entire EV market is still

307
00:14:47,800 --> 00:14:52,560
Speaker 5: facing you know, price cuts, slower demand, and that's you know,

308
00:14:52,640 --> 00:14:55,200
Speaker 5: I think that's what Testa is trying to dress for

309
00:14:55,320 --> 00:14:56,680
Speaker 5: twenty twenty four he Steve.

310
00:14:56,760 --> 00:14:59,320
Speaker 4: Do we have an idea of when the trough might

311
00:14:59,400 --> 00:15:02,280
Speaker 4: happen for evs? When is it just going to take

312
00:15:02,360 --> 00:15:04,360
Speaker 4: cheaper ones or is it going to be actually more

313
00:15:04,440 --> 00:15:06,760
Speaker 4: hybrid and that trough be really pushed out.

314
00:15:07,680 --> 00:15:11,800
Speaker 5: I think hybrid is a good kind of fill in

315
00:15:12,040 --> 00:15:17,520
Speaker 5: between now and when EV's can take off. Our view

316
00:15:17,760 --> 00:15:21,240
Speaker 5: is actually, you know, around twenty twenty six, because I

317
00:15:21,280 --> 00:15:26,200
Speaker 5: think that's when prices, cost of manufacturing evs will come

318
00:15:26,240 --> 00:15:31,320
Speaker 5: down with localization of battery production, more EV models out there,

319
00:15:31,560 --> 00:15:36,560
Speaker 5: and everyone, every automaker right now is talking about the

320
00:15:36,600 --> 00:15:40,880
Speaker 5: second generation of EV vehicles, the third generation of EV vehicles.

321
00:15:40,920 --> 00:15:44,480
Speaker 5: They're actually designed on a very different platform than the

322
00:15:44,520 --> 00:15:48,600
Speaker 5: ICE vehicles, the internal combustion engine vehicles that is supposed

323
00:15:48,640 --> 00:15:52,720
Speaker 5: to streamline production, cut parts, cut the number of parts,

324
00:15:53,000 --> 00:15:55,600
Speaker 5: and hopefully drive costs down to make it more affordable

325
00:15:56,040 --> 00:15:58,120
Speaker 5: for the consumers.

326
00:15:57,760 --> 00:16:02,480
Speaker 2: So it's a twenty six story. Will the charging infrastructure

327
00:16:02,920 --> 00:16:04,320
Speaker 2: also be a twenty six story?

328
00:16:05,640 --> 00:16:09,120
Speaker 5: Well, no, there are some spending at the moment to

329
00:16:09,200 --> 00:16:13,880
Speaker 5: increase charging infrastructure. I mean, that's another bottleneck that the

330
00:16:13,960 --> 00:16:17,000
Speaker 5: industry is facing. I think you know, out in the

331
00:16:17,040 --> 00:16:20,440
Speaker 5: West coast, out in the East coast, charging infrastructure are

332
00:16:20,800 --> 00:16:24,360
Speaker 5: not of a big concern, but Central America is. So

333
00:16:24,400 --> 00:16:26,200
Speaker 5: that's where the focus is, I think in the next

334
00:16:26,240 --> 00:16:29,000
Speaker 5: couple of years to really built up the charging infrastructure

335
00:16:29,640 --> 00:16:30,680
Speaker 5: in that part of the country.

336
00:16:30,880 --> 00:16:33,760
Speaker 2: How many charging units do you have at the Princeton

337
00:16:33,760 --> 00:16:35,320
Speaker 2: campus at Bloomberg right now?

338
00:16:36,280 --> 00:16:37,600
Speaker 9: Oh, it's it's interesting.

339
00:16:37,640 --> 00:16:40,080
Speaker 5: If you go out to the parking lot here, you

340
00:16:40,440 --> 00:16:49,640
Speaker 5: think it's a Tesla dealership out here, there's probably you know, fifty.

341
00:16:48,040 --> 00:16:51,000
Speaker 4: Fifty the cars, Like, are the Teslas actually being plugged

342
00:16:51,000 --> 00:16:51,840
Speaker 4: in or ev.

343
00:16:51,880 --> 00:16:54,800
Speaker 9: Oh yeah, oh yeah, oh yeah. You'll see mostly Tesla.

344
00:16:54,960 --> 00:16:57,880
Speaker 5: You'll see a couple of Volkswagen, a couple of Volvols.

345
00:16:57,960 --> 00:16:59,680
Speaker 9: But because I that's why.

346
00:17:00,040 --> 00:17:01,920
Speaker 2: When I was at the Princeton campus, Steve, you know,

347
00:17:02,000 --> 00:17:04,760
Speaker 2: I guess I haven't been there since before the pandemic.

348
00:17:04,960 --> 00:17:06,960
Speaker 2: It's called it five years. Five years are gonna be

349
00:17:06,960 --> 00:17:10,240
Speaker 2: ad two? Now you're telling me, we have fifty. That

350
00:17:10,560 --> 00:17:13,960
Speaker 2: is a good barometer. I think Bloomberg is usually on

351
00:17:13,960 --> 00:17:16,320
Speaker 2: the cutting edge of this stuff. But still interesting.

352
00:17:16,400 --> 00:17:17,919
Speaker 4: Yeah, and I wonder like, did you get the idea

353
00:17:17,920 --> 00:17:21,240
Speaker 4: that the charging was there, therefore you brought the EV's

354
00:17:21,840 --> 00:17:25,119
Speaker 4: or it's just a clientele that has the EV's unfair question,

355
00:17:25,320 --> 00:17:26,040
Speaker 4: But like, what do.

356
00:17:26,000 --> 00:17:28,919
Speaker 5: You think that's a good question. It's all about the

357
00:17:28,920 --> 00:17:29,919
Speaker 5: cost of ownership.

358
00:17:30,400 --> 00:17:31,320
Speaker 9: You're right, Alex.

359
00:17:31,560 --> 00:17:35,000
Speaker 5: Having the charging stations here make it convenient for people

360
00:17:35,040 --> 00:17:38,640
Speaker 5: to charge and really cut their monthly costs. Right, there's

361
00:17:38,640 --> 00:17:41,160
Speaker 5: no fuel costs anymore with the evs our.

362
00:17:41,080 --> 00:17:43,960
Speaker 2: Thanks to Steve Man, Bloomberg Intelligence Global Auto Analyst.

363
00:17:44,359 --> 00:17:46,199
Speaker 4: Now we look at Caterpillar, one of my faves, one

364
00:17:46,200 --> 00:17:47,960
Speaker 4: of the world's largest manufacturers of.

365
00:17:47,880 --> 00:17:49,280
Speaker 3: Heavy machinery, and then early in.

366
00:17:49,200 --> 00:17:52,040
Speaker 4: The week the company reported higher fourth quarter sales and

367
00:17:52,080 --> 00:17:53,760
Speaker 4: his energy and transportation business.

368
00:17:54,000 --> 00:17:56,760
Speaker 2: For more, we spoke with Chris Chilino, Bloomberg Intelligence Senior

369
00:17:56,840 --> 00:17:59,760
Speaker 2: US machinery analyst. We first asked Chris for his key

370
00:17:59,840 --> 00:18:01,440
Speaker 2: tape ways from the earnings results.

371
00:18:01,880 --> 00:18:04,280
Speaker 10: It was a real solid print despite the fact that

372
00:18:04,320 --> 00:18:07,439
Speaker 10: we continued to see these really cautionary signs out there

373
00:18:07,520 --> 00:18:10,960
Speaker 10: of slowing demand. Four key results you know, broadly exceeded

374
00:18:11,000 --> 00:18:14,440
Speaker 10: not only our expectations, but I think Kat's internal expectations

375
00:18:14,440 --> 00:18:18,119
Speaker 10: as well. Pricing continues to surprise to the upside. The

376
00:18:18,200 --> 00:18:21,840
Speaker 10: margin performance was quite good, particularly in their energy and

377
00:18:21,840 --> 00:18:26,400
Speaker 10: transportation business. Retail sales to end users continued to hold

378
00:18:26,480 --> 00:18:30,080
Speaker 10: up reasonably well, orders came in better than we anticipated,

379
00:18:30,320 --> 00:18:32,719
Speaker 10: and the cash generation of the business, you know, remains

380
00:18:32,840 --> 00:18:35,880
Speaker 10: very strong. So there's a lot of positives to take

381
00:18:35,880 --> 00:18:38,760
Speaker 10: away from the report, and I think this probably dispelled

382
00:18:38,840 --> 00:18:41,440
Speaker 10: some of those, you know, concerns over a more pronounced

383
00:18:41,480 --> 00:18:45,000
Speaker 10: or near term cyclical downturn, at least for the time being.

384
00:18:45,400 --> 00:18:47,720
Speaker 10: As it appears, you know, twenty four is really shaping

385
00:18:47,800 --> 00:18:49,800
Speaker 10: up to be a little bit maybe more resilient than

386
00:18:49,800 --> 00:18:53,680
Speaker 10: we had anticipated going into the print. That being said,

387
00:18:53,840 --> 00:18:57,120
Speaker 10: you know, we still think there remains risk and it's

388
00:18:57,160 --> 00:19:00,760
Speaker 10: mostly to the downside moving forward here, and we're really

389
00:19:00,840 --> 00:19:03,919
Speaker 10: kind of cautious on the sustainability of this performance, especially

390
00:19:04,000 --> 00:19:06,840
Speaker 10: as the macro backdrop begins to soften.

391
00:19:07,200 --> 00:19:10,600
Speaker 2: So what's the company saying about their outlook? And I

392
00:19:10,600 --> 00:19:13,240
Speaker 2: guess my question A what's the company saying and B

393
00:19:13,680 --> 00:19:16,320
Speaker 2: what's their lead time on they can how far out

394
00:19:16,320 --> 00:19:18,200
Speaker 2: can they see in terms of their orders and things

395
00:19:18,240 --> 00:19:18,560
Speaker 2: like that.

396
00:19:19,760 --> 00:19:22,560
Speaker 10: Yeah, so they're looking at twenty twenty four's kind of

397
00:19:22,560 --> 00:19:27,280
Speaker 10: being more of a flatish type top line environment. Caterpillars

398
00:19:27,320 --> 00:19:30,760
Speaker 10: notorious for not giving much on the guidance, but they're

399
00:19:30,840 --> 00:19:35,000
Speaker 10: kind of suggesting that the top line will be relatively flatish.

400
00:19:35,160 --> 00:19:37,560
Speaker 10: Volumes will be down next year, So this is going

401
00:19:37,600 --> 00:19:39,879
Speaker 10: to be more of a pricing story, and particularly in

402
00:19:39,920 --> 00:19:41,359
Speaker 10: the first half of the year, as we get some

403
00:19:41,400 --> 00:19:46,600
Speaker 10: of those carryover pricing benefits. So I suspect margins will

404
00:19:46,600 --> 00:19:49,320
Speaker 10: come under some pressure and we could see some modest

405
00:19:49,359 --> 00:19:52,920
Speaker 10: contraction on the earnings line as well. In terms of

406
00:19:52,960 --> 00:19:56,520
Speaker 10: the backlog and the visibility, it's above average. The backlog

407
00:19:56,560 --> 00:19:59,960
Speaker 10: continues to be, you know, remarkably strong. You have rough

408
00:20:00,320 --> 00:20:02,679
Speaker 10: twenty seven and a half billion dollars in the backlog.

409
00:20:03,160 --> 00:20:05,240
Speaker 10: I think one of the surprises of this report to

410
00:20:05,359 --> 00:20:08,080
Speaker 10: US was orders orders implied orders only came down about

411
00:20:08,119 --> 00:20:10,760
Speaker 10: four percent, so we saw the decline and the order

412
00:20:10,840 --> 00:20:13,880
Speaker 10: rate moderate. So I think that's another positive sign that,

413
00:20:14,280 --> 00:20:17,040
Speaker 10: you know, we're not looking at this type of draconian

414
00:20:17,119 --> 00:20:19,560
Speaker 10: type scenario for twenty twenty four So.

415
00:20:20,080 --> 00:20:22,000
Speaker 3: Explain this one to me. What about the China factor?

416
00:20:22,040 --> 00:20:25,119
Speaker 4: Because air products, their chemicals business in China did terribly

417
00:20:25,160 --> 00:20:26,879
Speaker 4: and that's why the stock is down so much. I

418
00:20:26,920 --> 00:20:29,560
Speaker 4: appreciate their different industries, but still CAT is very lover

419
00:20:29,680 --> 00:20:31,920
Speaker 4: to China. Also, what did we learn about that?

420
00:20:32,720 --> 00:20:33,639
Speaker 10: Nothing incremental?

421
00:20:33,760 --> 00:20:33,920
Speaker 9: Right?

422
00:20:34,000 --> 00:20:38,520
Speaker 10: So, Caterpillar China. For Caterpillars, historically it's been kind of

423
00:20:38,520 --> 00:20:41,560
Speaker 10: in that five to ten percent of revenues. Twenty twenty three.

424
00:20:41,600 --> 00:20:45,120
Speaker 10: This past year we were below five percent. They're telling

425
00:20:45,240 --> 00:20:49,160
Speaker 10: us that they don't anticipate much change in twenty twenty four.

426
00:20:49,640 --> 00:20:51,479
Speaker 10: But if you, if you're a CAT bull, I think

427
00:20:51,520 --> 00:20:53,920
Speaker 10: that's one of the catalysts that you could potentially look at,

428
00:20:54,000 --> 00:20:56,600
Speaker 10: is that if for when we do get this China recovery,

429
00:20:57,160 --> 00:20:59,280
Speaker 10: that would certainly bode well for Cat.

430
00:21:00,200 --> 00:21:03,200
Speaker 2: Hey, Chris, I know investors in these types of stocks,

431
00:21:03,200 --> 00:21:05,960
Speaker 2: these industrial stocks, they're used to cycles and they're probably saying,

432
00:21:05,960 --> 00:21:08,200
Speaker 2: but God, we have to have a downcycle coming up here.

433
00:21:08,359 --> 00:21:11,840
Speaker 2: But there's a lot of infrastructure work out there, stimulus

434
00:21:11,840 --> 00:21:13,760
Speaker 2: coming out of the US government out of the pandemic.

435
00:21:14,200 --> 00:21:16,720
Speaker 2: Isn't this going to make this cycle different? Like it's

436
00:21:16,760 --> 00:21:19,040
Speaker 2: going to be longer up for these companies.

437
00:21:19,840 --> 00:21:22,600
Speaker 10: Yeah, I mean, we hear that this cycle is different

438
00:21:22,640 --> 00:21:24,920
Speaker 10: almost all the time. Right, I'm a little bit more

439
00:21:24,920 --> 00:21:28,080
Speaker 10: in the skeptic camp. Listen, North America was tremendous this

440
00:21:28,480 --> 00:21:30,359
Speaker 10: past quarter. In this year, I think it was the

441
00:21:30,359 --> 00:21:32,800
Speaker 10: only region with positive growth on the top line. We

442
00:21:32,840 --> 00:21:35,560
Speaker 10: saw eleven percent growth here in North America. A lot

443
00:21:35,560 --> 00:21:39,080
Speaker 10: of that is largely driven by non residential and infrastructure

444
00:21:39,080 --> 00:21:42,520
Speaker 10: related spending. So it's certainly been a tailwind, and I

445
00:21:42,520 --> 00:21:45,120
Speaker 10: do suspect that still has some longevity to it here

446
00:21:45,119 --> 00:21:47,479
Speaker 10: over the next few years. But there's a number of

447
00:21:47,520 --> 00:21:51,160
Speaker 10: cyclical factors to your point at play here, and historically

448
00:21:51,240 --> 00:21:54,000
Speaker 10: this stock when the backlock starts to come down, when

449
00:21:54,119 --> 00:21:59,159
Speaker 10: orders inflect, that's not an encouraging sign for future performance.

450
00:21:59,480 --> 00:22:00,320
Speaker 3: But we also have.

451
00:22:00,280 --> 00:22:03,359
Speaker 4: Lots of stuff like the IRA, we have the Semiconductor Bill,

452
00:22:03,440 --> 00:22:06,840
Speaker 4: we have the Industrial Act, sort of reshoring all that stuff.

453
00:22:07,240 --> 00:22:10,480
Speaker 4: We have learned from industrials that booking those getting benefits

454
00:22:10,520 --> 00:22:14,280
Speaker 4: from those pieces of legislation takes a lot longer than

455
00:22:14,359 --> 00:22:16,920
Speaker 4: the market was expecting, like just in the Chips Act.

456
00:22:16,960 --> 00:22:19,000
Speaker 4: Maybe we're seeing some stuff happening, and even that's getting

457
00:22:19,000 --> 00:22:21,679
Speaker 4: pushed out like we saw with Intel. What is Catapillar

458
00:22:21,680 --> 00:22:23,160
Speaker 4: saying about that visibility?

459
00:22:24,000 --> 00:22:27,879
Speaker 10: Yeah, so I think longer term there is certainly an opportunity,

460
00:22:28,000 --> 00:22:31,960
Speaker 10: particularly what they've kind of deemed this energy transition to

461
00:22:32,480 --> 00:22:37,200
Speaker 10: alternative fuels or electrification, there is going to be demand

462
00:22:37,240 --> 00:22:41,359
Speaker 10: for mind commodities, and they anticipate that this shift will

463
00:22:41,400 --> 00:22:44,840
Speaker 10: increase their addressable market. So, no doubt, we do think

464
00:22:44,880 --> 00:22:47,680
Speaker 10: there is a longer term opportunity here. We think it's

465
00:22:47,720 --> 00:22:51,119
Speaker 10: probably still many years out before we start seeing you know,

466
00:22:51,240 --> 00:22:56,119
Speaker 10: more tangible financial impact from some of these infrastructure bill

467
00:22:56,200 --> 00:22:58,280
Speaker 10: is the is the more near term impact that we've

468
00:22:58,280 --> 00:23:00,800
Speaker 10: seen and the results this far, So we think that's

469
00:23:00,800 --> 00:23:03,320
Speaker 10: probably still a little bit longer down the road and

470
00:23:03,840 --> 00:23:06,560
Speaker 10: you know, somewhat difficult to quantify at this juncture.

471
00:23:07,080 --> 00:23:09,399
Speaker 2: So, Chris, you follow all these big industrial companies in

472
00:23:09,440 --> 00:23:12,639
Speaker 2: addition to cat I mean, you know Oshkosh, come Ins,

473
00:23:12,720 --> 00:23:15,919
Speaker 2: you know, Volvo pack Are What are those big companies

474
00:23:15,920 --> 00:23:18,240
Speaker 2: that are so skewed and so exposed kind of the

475
00:23:18,280 --> 00:23:20,919
Speaker 2: industrial side of the economy. What are they kind of

476
00:23:21,080 --> 00:23:22,080
Speaker 2: telling you these days?

477
00:23:22,840 --> 00:23:25,639
Speaker 10: Yeah, so if you think about all the machinery verticals,

478
00:23:25,720 --> 00:23:29,400
Speaker 10: we were essentially at peak cycle in twenty twenty three.

479
00:23:30,160 --> 00:23:32,600
Speaker 10: Almost all those markets we expect volumes to be down

480
00:23:32,640 --> 00:23:35,959
Speaker 10: in twenty four, some holding up better than others. But

481
00:23:36,119 --> 00:23:38,199
Speaker 10: I think one of the things that we continue to

482
00:23:38,200 --> 00:23:41,359
Speaker 10: hear is that this downturn looks a little bit more

483
00:23:41,760 --> 00:23:44,800
Speaker 10: modest and short lived than what we have seen historically.

484
00:23:45,320 --> 00:23:47,399
Speaker 10: I might say the one caveat to that being on

485
00:23:47,440 --> 00:23:49,840
Speaker 10: the ag side, as we continue to see crop prices

486
00:23:49,880 --> 00:23:53,760
Speaker 10: and farmer incomes under pressure. But at least at this point,

487
00:23:53,800 --> 00:23:56,080
Speaker 10: you know, we see on the commercial vehicle side being

488
00:23:56,080 --> 00:23:59,160
Speaker 10: a little bit more modest, and even on construction equipment

489
00:23:59,280 --> 00:24:02,920
Speaker 10: there's a number of offsets to the more traditional cyclical headwinds.

490
00:24:02,960 --> 00:24:06,439
Speaker 10: So again not looking at this as some kind of

491
00:24:06,680 --> 00:24:09,200
Speaker 10: a steep or severe downturn. It just seems to be

492
00:24:09,520 --> 00:24:11,840
Speaker 10: much more modest than what we've become accustomed to.

493
00:24:12,000 --> 00:24:16,200
Speaker 2: Our Thanks to Chris Ciolino, Bloomberg Intelligence, Senior US machinery analyst.

494
00:24:15,960 --> 00:24:17,399
Speaker 4: All right, coming up on the program, we're going to

495
00:24:17,440 --> 00:24:20,159
Speaker 4: discuss why warre in the Middle East is hurting McDonald sales.

496
00:24:20,320 --> 00:24:23,159
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in

497
00:24:23,200 --> 00:24:25,440
Speaker 2: depth research and data on two thousand companies and one

498
00:24:25,480 --> 00:24:28,560
Speaker 2: hundred and thirty industries. You can access Bloomberg Intelligence via

499
00:24:28,640 --> 00:24:31,120
Speaker 2: b I go on the terminal. I'm Paul Sweeney and.

500
00:24:31,040 --> 00:24:32,879
Speaker 3: I'm Alex Steele, and this is Bloomberg.

501
00:24:45,280 --> 00:24:49,200
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

502
00:24:49,280 --> 00:24:52,800
Speaker 1: weekdays at ten am Eastern on applecard Play and Android

503
00:24:52,800 --> 00:24:55,600
Speaker 1: Auto with the Bloomberg Business app. You can also listen

504
00:24:55,720 --> 00:24:58,800
Speaker 1: live on Amazon Alexa from our flagship New York station

505
00:24:59,160 --> 00:25:01,520
Speaker 1: Just Say Alexa, playing Bloomberg eleven.

506
00:25:04,000 --> 00:25:06,600
Speaker 4: We turned out to the fast food industry. McDonald sales

507
00:25:06,600 --> 00:25:09,840
Speaker 4: missed investor expectations in the fourth quarter as growth accelerated.

508
00:25:09,960 --> 00:25:12,440
Speaker 2: To help REKIP, we were joined by Michael Halen, Bloomberg

509
00:25:12,440 --> 00:25:15,760
Speaker 2: Intelligence senior Restaurant and food service analyst. Were first to

510
00:25:15,760 --> 00:25:18,800
Speaker 2: ask Michael for his big takeaway from McDonald's earnings results.

511
00:25:19,280 --> 00:25:22,879
Speaker 11: Yeah, it was a weaker quarter than most expected.

512
00:25:23,000 --> 00:25:26,679
Speaker 9: For sure, sales growth was kind of weak. You know.

513
00:25:27,280 --> 00:25:30,239
Speaker 11: They cited the impact from the Israel Hamas war and

514
00:25:30,840 --> 00:25:33,320
Speaker 11: obviously that hurt results in the Middle East, but also

515
00:25:33,560 --> 00:25:37,040
Speaker 11: in a Muslim countries like Malaysia and also countries like

516
00:25:37,119 --> 00:25:40,000
Speaker 11: France that have a large Muslim population.

517
00:25:40,800 --> 00:25:43,159
Speaker 9: It may have impacted sales here in the US a

518
00:25:43,160 --> 00:25:43,720
Speaker 9: bit as well.

519
00:25:43,720 --> 00:25:47,200
Speaker 11: There were some calls to boycott the brand right after

520
00:25:47,240 --> 00:25:49,760
Speaker 11: the start of the Israel Hamas war. Those kind of

521
00:25:49,760 --> 00:25:53,600
Speaker 11: went away in December in January, however, so there could

522
00:25:53,600 --> 00:25:53,840
Speaker 11: have been.

523
00:25:53,800 --> 00:25:56,000
Speaker 9: A mild impact in the United States as well.

524
00:25:56,600 --> 00:25:59,040
Speaker 11: And then in terms of key takeaways from the call,

525
00:25:59,240 --> 00:26:02,399
Speaker 11: you know, they don't like inspect their developmental markets where

526
00:26:02,440 --> 00:26:05,040
Speaker 11: the Middle East is located, to improve really until the

527
00:26:05,560 --> 00:26:08,879
Speaker 11: war ends. And they cited some consumer weakness in the

528
00:26:08,960 --> 00:26:12,159
Speaker 11: United States, which they have before, right, but seems like

529
00:26:12,200 --> 00:26:14,520
Speaker 11: it may be spreading in terms of you know, just

530
00:26:15,000 --> 00:26:18,560
Speaker 11: low income consumer weakness. You know, it sounds like their

531
00:26:18,560 --> 00:26:22,000
Speaker 11: customers right now are managing their guest checks.

532
00:26:22,400 --> 00:26:25,399
Speaker 2: Hey, Mike, I'm just looking at the PGeo function on

533
00:26:25,400 --> 00:26:27,639
Speaker 2: the Bloomberg turbine. I see that roughly sixty percent of

534
00:26:27,640 --> 00:26:31,080
Speaker 2: the revenue comes from franchise operated stores, in about forty

535
00:26:31,080 --> 00:26:34,199
Speaker 2: percent from company operating stores. How did they make that

536
00:26:34,320 --> 00:26:36,399
Speaker 2: decision about what when they go to a particular location,

537
00:26:36,440 --> 00:26:38,200
Speaker 2: whether the franchise or own it.

538
00:26:38,320 --> 00:26:41,800
Speaker 11: I think a big part of it is return on investment, right,

539
00:26:41,880 --> 00:26:44,440
Speaker 11: So if the returns on the investment are very strong,

540
00:26:44,440 --> 00:26:46,360
Speaker 11: they typically want to hold on.

541
00:26:46,359 --> 00:26:48,240
Speaker 9: To those stores or develop stores.

542
00:26:48,280 --> 00:26:50,320
Speaker 11: You know, they'll they'll do some store development in the

543
00:26:50,440 --> 00:26:54,720
Speaker 11: United States and in their more established markets, but it's

544
00:26:54,760 --> 00:26:56,920
Speaker 11: going to be a small percentage of what they're doing

545
00:26:56,960 --> 00:26:59,560
Speaker 11: going forward. You know, most of their growth is going

546
00:26:59,640 --> 00:27:02,520
Speaker 11: to be you know, done by their strong franchise partners,

547
00:27:02,880 --> 00:27:06,280
Speaker 11: particularly in China and some of these other very fast

548
00:27:06,320 --> 00:27:07,160
Speaker 11: growing markets.

549
00:27:07,480 --> 00:27:10,200
Speaker 4: Talk about the input part of the situation in terms

550
00:27:10,200 --> 00:27:13,840
Speaker 4: of their costs, in terms of their labor and all

551
00:27:13,840 --> 00:27:14,719
Speaker 4: that kind of good stuff.

552
00:27:15,040 --> 00:27:19,439
Speaker 11: Inflation is easing for them this year, but it's still

553
00:27:19,480 --> 00:27:21,600
Speaker 11: probably higher than normals.

554
00:27:21,600 --> 00:27:24,359
Speaker 3: They're looking at cowsman cows.

555
00:27:24,400 --> 00:27:27,320
Speaker 11: That's part of it, for sure. Beef and dairy costs

556
00:27:27,480 --> 00:27:30,080
Speaker 11: are expected to be higher this year. So but they're

557
00:27:30,080 --> 00:27:32,920
Speaker 11: looking at you know, low single digit commodity inflation in

558
00:27:32,960 --> 00:27:33,880
Speaker 11: the United.

559
00:27:33,720 --> 00:27:34,960
Speaker 9: States and abroad.

560
00:27:35,000 --> 00:27:38,520
Speaker 11: Abroad had you know, Europe had very high inflation last year,

561
00:27:38,520 --> 00:27:41,320
Speaker 11: and that that's going to settle down a bit. Labor

562
00:27:41,359 --> 00:27:44,840
Speaker 11: inflation is going to continue to be higher. And a

563
00:27:44,840 --> 00:27:47,119
Speaker 11: big chunk of a big part of that here is

564
00:27:47,320 --> 00:27:51,359
Speaker 11: you know, in the US, you know, their California April

565
00:27:51,400 --> 00:27:53,720
Speaker 11: first puts in the twenty dollars minimum wage for fast

566
00:27:53,720 --> 00:27:56,199
Speaker 11: food workers, and so that's going to impact some of

567
00:27:56,200 --> 00:27:59,639
Speaker 11: their stores, primarily their franchisees. However, so they're still seeing

568
00:27:59,800 --> 00:28:03,639
Speaker 11: you know, higher inflation than you know, we had in

569
00:28:03,640 --> 00:28:05,000
Speaker 11: the twenty teens for sure.

570
00:28:05,600 --> 00:28:07,320
Speaker 2: Hey, Mike, I look at the stock, and you know,

571
00:28:07,520 --> 00:28:09,120
Speaker 2: I need to pay a twenty two to twenty three

572
00:28:09,200 --> 00:28:12,639
Speaker 2: times earnings for this stock. What am I really getting?

573
00:28:12,840 --> 00:28:15,520
Speaker 2: Is it something more than GDP top line growth? What's

574
00:28:15,520 --> 00:28:17,920
Speaker 2: really the call behind this kind of stock?

575
00:28:19,000 --> 00:28:21,640
Speaker 11: Yeah, Well, with their global growth, they're going to probably

576
00:28:21,680 --> 00:28:25,520
Speaker 11: grow quicker than GDP. You know, what you're buying with

577
00:28:25,560 --> 00:28:29,879
Speaker 11: a franchise business is you know, pretty stable and predictable

578
00:28:29,880 --> 00:28:33,360
Speaker 11: earnings growth, free cash flow growth. There's not a lot

579
00:28:33,359 --> 00:28:36,399
Speaker 11: of operating leverage in the model, and so they're asset

580
00:28:36,480 --> 00:28:39,200
Speaker 11: light and so they can lever the business up and return.

581
00:28:38,960 --> 00:28:40,880
Speaker 9: Cash to shareholders pretty aggressively.

582
00:28:41,320 --> 00:28:44,920
Speaker 11: So it's definitely an attractive model, especially one with the

583
00:28:44,960 --> 00:28:47,880
Speaker 11: strong top line growth like McDonald's has. And they they're

584
00:28:47,920 --> 00:28:52,440
Speaker 11: also most investors can consider them slightly insulated against a

585
00:28:52,520 --> 00:28:55,080
Speaker 11: recession in slower economic times, and a big part.

586
00:28:54,960 --> 00:28:57,120
Speaker 9: Of that is that the is the value that they.

587
00:28:57,040 --> 00:29:00,880
Speaker 11: Offer during the Great Recession, they outperformed the quick service

588
00:29:00,920 --> 00:29:05,160
Speaker 11: industry pretty significantly, acquired a lot of market share during

589
00:29:05,200 --> 00:29:08,560
Speaker 11: that time, and so investors feel some safety investing in

590
00:29:08,640 --> 00:29:11,000
Speaker 11: McDonald's versus some of the other restaurant chains out there.

591
00:29:11,040 --> 00:29:13,920
Speaker 4: But that confuses me with what you said about customers

592
00:29:13,960 --> 00:29:17,440
Speaker 4: watching their checks and their items and what they're buying,

593
00:29:17,440 --> 00:29:19,640
Speaker 4: because you would think if things are hard and people

594
00:29:19,680 --> 00:29:21,880
Speaker 4: are struggling, that you would get more value and people

595
00:29:21,920 --> 00:29:24,239
Speaker 4: would go to McDonald's. But you were mentioning how in

596
00:29:24,320 --> 00:29:27,280
Speaker 4: general people are watching their money more so they're not

597
00:29:27,440 --> 00:29:28,280
Speaker 4: How does that kind of.

598
00:29:28,280 --> 00:29:31,560
Speaker 11: Square Yeah, so what we've seen is a lot of

599
00:29:31,600 --> 00:29:34,520
Speaker 11: traffic deterioration over the last couple of years because price

600
00:29:34,560 --> 00:29:38,720
Speaker 11: increases have been so aggressive and people's spending is being pinched.

601
00:29:38,800 --> 00:29:39,000
Speaker 9: Right.

602
00:29:39,480 --> 00:29:42,120
Speaker 11: But the thing about quick service, you know, they're in

603
00:29:42,160 --> 00:29:45,280
Speaker 11: the lower end of the market, right, and so they'll

604
00:29:45,320 --> 00:29:48,880
Speaker 11: see during an economic slowdown, they'll see higher and middle

605
00:29:48,880 --> 00:29:51,840
Speaker 11: income consumers kind of fall into their bucket. They'll spend

606
00:29:51,960 --> 00:29:56,480
Speaker 11: less at higher cost full service occasions and they'll visit

607
00:29:56,720 --> 00:29:59,760
Speaker 11: McDonald's more often, whereas a lot of the low income

608
00:29:59,800 --> 00:30:02,040
Speaker 11: can uomers will kind of fall out of that bucket.

609
00:30:02,120 --> 00:30:04,880
Speaker 11: And decide to opt for the grocery store more often.

610
00:30:05,000 --> 00:30:07,720
Speaker 11: So they'll lose some traffic on the low end, but

611
00:30:07,760 --> 00:30:10,640
Speaker 11: they'll they'll probably gain some with some of the middle

612
00:30:10,680 --> 00:30:12,480
Speaker 11: and upper income consumers.

613
00:30:12,600 --> 00:30:16,160
Speaker 2: So, my, who's really their competition these days? When I

614
00:30:16,200 --> 00:30:17,840
Speaker 2: was a kid, it was Burger King and Wendy's. But

615
00:30:17,880 --> 00:30:20,440
Speaker 2: now there's so much more out there. How do you

616
00:30:20,520 --> 00:30:21,320
Speaker 2: kind of slice it?

617
00:30:22,240 --> 00:30:25,920
Speaker 11: Yeah, it's the restaurant business man. It's so fragment that

618
00:30:26,000 --> 00:30:29,560
Speaker 11: there's competition everywhere, man, you know, to your point, convenience stores,

619
00:30:29,600 --> 00:30:34,160
Speaker 11: grocery stores, food trucks, you name it. Still, primarily their

620
00:30:34,200 --> 00:30:38,200
Speaker 11: biggest competition are the fast food restaurants that are located

621
00:30:38,320 --> 00:30:41,680
Speaker 11: closest to them. So it depends on the market. You know, California,

622
00:30:41,880 --> 00:30:44,120
Speaker 11: Jack in the Box is number two, you know, on

623
00:30:44,160 --> 00:30:47,360
Speaker 11: the East Coast, Yeah, you know, Burger King is number two,

624
00:30:47,400 --> 00:30:49,719
Speaker 11: and in most markets, i'd say in the United States,

625
00:30:49,720 --> 00:30:52,360
Speaker 11: Wendy's obviously is a big competitor of theirs. But also

626
00:30:52,720 --> 00:30:55,720
Speaker 11: you know, places like Chipotle and shake Shack are all

627
00:30:55,720 --> 00:30:59,720
Speaker 11: competing for restaurant dollars with McDonald's. But you know, we

628
00:30:59,760 --> 00:31:02,640
Speaker 11: don't look too closely at market share in this business

629
00:31:02,680 --> 00:31:06,240
Speaker 11: because it is so fragmented, and I don't really like

630
00:31:06,320 --> 00:31:09,240
Speaker 11: total addressable market and restaurants because nobody's going to eat

631
00:31:09,240 --> 00:31:11,800
Speaker 11: at McDonald's three times a day, seven days a week.

632
00:31:12,200 --> 00:31:15,160
Speaker 2: Thanks to Michael Halen, Bloomberg Intelligence senior restaurant and food

633
00:31:15,200 --> 00:31:15,880
Speaker 2: service analysts.

634
00:31:15,880 --> 00:31:18,520
Speaker 3: All right, let's go next to the luxury industry. Earlier

635
00:31:18,520 --> 00:31:18,840
Speaker 3: in the week.

636
00:31:18,960 --> 00:31:20,720
Speaker 4: Esday Latter is that it's cutting as many as three

637
00:31:20,720 --> 00:31:23,600
Speaker 4: thousand job positions as part of a broad restructuring plan.

638
00:31:23,800 --> 00:31:26,200
Speaker 4: A plan is aimed at making the cosmetic giant a

639
00:31:26,240 --> 00:31:27,720
Speaker 4: more profitable company.

640
00:31:27,600 --> 00:31:29,840
Speaker 2: And this comes as plumbing sales in Asia have dragged

641
00:31:29,840 --> 00:31:32,560
Speaker 2: down revenue and profit at Esday Lauder in the past year.

642
00:31:32,600 --> 00:31:34,200
Speaker 2: For more on all of this, we're joined by Deb

643
00:31:34,240 --> 00:31:39,000
Speaker 2: Aich and Bloomberg Intelligence senior analyst. It covers global luxury goods, home, beauty,

644
00:31:39,040 --> 00:31:42,200
Speaker 2: and personal care. I first asked her for context of

645
00:31:42,280 --> 00:31:43,960
Speaker 2: the restructuring plan already in play.

646
00:31:44,480 --> 00:31:47,800
Speaker 8: They've raised five hundred to seven hundred million of cost

647
00:31:47,880 --> 00:31:52,200
Speaker 8: on a deeper restructure program to bring up to one

648
00:31:52,240 --> 00:31:55,560
Speaker 8: point four billion through twenty five and twenty six, mostly

649
00:31:56,000 --> 00:32:01,160
Speaker 8: twenty five or majority twenty five weighted, So the expectation

650
00:32:02,000 --> 00:32:04,560
Speaker 8: so that's kind of like four hundred million extra on

651
00:32:04,600 --> 00:32:08,400
Speaker 8: what they were expecting before in terms of operating profitability.

652
00:32:08,760 --> 00:32:10,680
Speaker 3: What was the problem that they had to fix by

653
00:32:10,720 --> 00:32:12,560
Speaker 3: doing that? Like why is it so hard to be

654
00:32:12,640 --> 00:32:13,160
Speaker 3: es Da lader?

655
00:32:13,200 --> 00:32:15,920
Speaker 4: I thought everyone would pay a million dollars for perfect skin.

656
00:32:16,160 --> 00:32:18,680
Speaker 3: Not talking my book or anything, right.

657
00:32:18,720 --> 00:32:20,680
Speaker 8: The big thing over the last couple of years that

658
00:32:20,760 --> 00:32:24,240
Speaker 8: we've seen, We've always known that estill Order a very

659
00:32:24,280 --> 00:32:27,000
Speaker 8: premium product, and it did so well for so many years,

660
00:32:27,000 --> 00:32:29,760
Speaker 8: but it had very high exposure in Asia. So we

661
00:32:29,880 --> 00:32:34,320
Speaker 8: ended up a couple of years ago with a stuffed retail,

662
00:32:34,400 --> 00:32:39,120
Speaker 8: duty free travel retail area across China and some parts

663
00:32:39,120 --> 00:32:42,160
Speaker 8: of Asia, which were exacerbated by South Korea also in

664
00:32:42,200 --> 00:32:45,080
Speaker 8: the issues there with the de Goose shopper and what

665
00:32:45,200 --> 00:32:47,600
Speaker 8: we found. And we'd always been saying, you know, there's

666
00:32:47,760 --> 00:32:51,040
Speaker 8: supply side. The way that they organized themselves, the logistics,

667
00:32:51,280 --> 00:32:53,520
Speaker 8: They didn't have the hubs in place in Asia to

668
00:32:53,560 --> 00:32:55,560
Speaker 8: do as much as they were doing, so they were

669
00:32:55,560 --> 00:32:58,480
Speaker 8: caught short or caught overstuffed, so they had far too

670
00:32:58,560 --> 00:33:01,680
Speaker 8: much in trade, and that has taken a long long

671
00:33:01,760 --> 00:33:04,640
Speaker 8: time to temper down and start to normalize, and we

672
00:33:04,640 --> 00:33:08,040
Speaker 8: should return overall to growth this next quarter.

673
00:33:08,320 --> 00:33:10,280
Speaker 2: And dead let's stay with the China stories. I know

674
00:33:10,320 --> 00:33:12,600
Speaker 2: from talking to you over the years and reading your research,

675
00:33:13,280 --> 00:33:18,120
Speaker 2: the China consumer is just critical for luxury shopping. Can

676
00:33:18,160 --> 00:33:19,800
Speaker 2: you give us a sense because I don't. When I

677
00:33:19,800 --> 00:33:22,840
Speaker 2: walk down Madison Avenue or Fifth Avenue, I see all

678
00:33:22,880 --> 00:33:27,000
Speaker 2: the European tourists back. They're back in, you know, in size,

679
00:33:27,400 --> 00:33:29,840
Speaker 2: not so much with the Chinese. What's going on there?

680
00:33:30,800 --> 00:33:31,360
Speaker 9: The big thing.

681
00:33:31,880 --> 00:33:36,280
Speaker 8: We very late in getting visas through the reopening of

682
00:33:37,120 --> 00:33:39,680
Speaker 8: you as we thought from the beginning of last year,

683
00:33:40,120 --> 00:33:44,400
Speaker 8: reopening of travel, but the viewers that travel internationally won't

684
00:33:44,400 --> 00:33:46,640
Speaker 8: come back until the second half the year. And we

685
00:33:46,680 --> 00:33:49,240
Speaker 8: are starting to hear some of those luxury companies sane.

686
00:33:49,680 --> 00:33:53,520
Speaker 8: We're seeing more Chinese, more Asian customers in our stores

687
00:33:54,560 --> 00:33:57,760
Speaker 8: back home. There's a lot more spending, flights are fuller.

688
00:33:58,560 --> 00:34:01,000
Speaker 8: The surveys that we're doing us that they will travel.

689
00:34:01,000 --> 00:34:02,840
Speaker 8: But a lot of that travel so far has been

690
00:34:02,880 --> 00:34:04,400
Speaker 8: across Asia.

691
00:34:04,480 --> 00:34:07,280
Speaker 4: But what's interesting is that not all are created equal.

692
00:34:07,320 --> 00:34:09,480
Speaker 4: I feel like you can Jerry pick a couple of

693
00:34:09,560 --> 00:34:13,239
Speaker 4: luxury stocks that have been somewhat immune and I'm just

694
00:34:13,280 --> 00:34:16,799
Speaker 4: wondering what those are. And I still and in the

695
00:34:16,800 --> 00:34:20,759
Speaker 4: skincare world too, like what is that immune skincare high

696
00:34:20,880 --> 00:34:23,400
Speaker 4: end product? That doesn't matter, We're all buying it anyway.

697
00:34:23,880 --> 00:34:26,280
Speaker 8: I think that you know, there are there's some huge

698
00:34:26,960 --> 00:34:29,640
Speaker 8: numbers in terms of some of the brands within the

699
00:34:30,440 --> 00:34:34,120
Speaker 8: portfolio doing extremely well, lots of the brands of double digit.

700
00:34:34,440 --> 00:34:36,839
Speaker 8: But it's that trade that draws down when you look

701
00:34:36,840 --> 00:34:40,799
Speaker 8: at the Europe number for Estill order that's where they

702
00:34:40,840 --> 00:34:43,000
Speaker 8: stock travel retail, that's where it sits in its P

703
00:34:43,160 --> 00:34:46,000
Speaker 8: and L and it's still minus fourteen. But actually Europe

704
00:34:46,080 --> 00:34:48,399
Speaker 8: underline is flat, and it's the same for the North

705
00:34:48,440 --> 00:34:51,759
Speaker 8: American market. Within that there are brands like The Ordinary

706
00:34:51,920 --> 00:34:54,960
Speaker 8: and La Mayor and several of the higher end brands

707
00:34:55,239 --> 00:34:58,080
Speaker 8: doing very very well of double digit. And it's the

708
00:34:58,120 --> 00:35:01,080
Speaker 8: same across if I think about the way actually luxury

709
00:35:01,200 --> 00:35:04,600
Speaker 8: and you know Lorrel aside Loreal is doing phenomenally well

710
00:35:04,680 --> 00:35:07,760
Speaker 8: with a high base of its product in moder classes

711
00:35:07,800 --> 00:35:09,600
Speaker 8: as Lorel looks. But let's go to some of the

712
00:35:09,680 --> 00:35:12,799
Speaker 8: luxury companies and the way that LVMH and others are

713
00:35:12,840 --> 00:35:18,560
Speaker 8: building sizeable scale in perfume and cosmetics that's for growth

714
00:35:18,560 --> 00:35:21,480
Speaker 8: of six to eight percent per year and very strong margin.

715
00:35:22,200 --> 00:35:23,759
Speaker 8: So there are a lot of brands out there doing

716
00:35:23,880 --> 00:35:28,080
Speaker 8: very very well. But in particular what has happened is

717
00:35:28,160 --> 00:35:32,879
Speaker 8: and stockpicking, cherry picking. It's about the brands who've had

718
00:35:32,920 --> 00:35:36,840
Speaker 8: the portfolio that hasn't had so much Asia travel retail

719
00:35:37,000 --> 00:35:39,240
Speaker 8: or where it's really been able to manage that. Because

720
00:35:39,400 --> 00:35:42,680
Speaker 8: even if I think about LVMH within its selective retail,

721
00:35:42,719 --> 00:35:46,320
Speaker 8: and it housed dfs due to free stores and Sophora,

722
00:35:46,400 --> 00:35:48,479
Speaker 8: and at one point last year they were both down

723
00:35:48,920 --> 00:35:51,279
Speaker 8: and they've now fully recovered. We're starting to see if

724
00:35:51,280 --> 00:35:54,400
Speaker 8: the US some robust numbers coming through even from that

725
00:35:54,520 --> 00:35:58,319
Speaker 8: aspirational end. Across the luxury across brands, it's getting a

726
00:35:58,320 --> 00:36:00,600
Speaker 8: little better, but it's going to take time.

727
00:36:01,120 --> 00:36:03,320
Speaker 2: How are the luxury stocks? What's kind of the luxury

728
00:36:03,360 --> 00:36:05,719
Speaker 2: call here? I look at the FA function for Sday

729
00:36:05,760 --> 00:36:08,600
Speaker 2: latter it looks like for your the fiscal twenty twenty five,

730
00:36:08,680 --> 00:36:11,279
Speaker 2: the June of twenty five year, the street's looking for

731
00:36:11,320 --> 00:36:14,360
Speaker 2: a big pickup in revenue and profitability for Esday Latterer.

732
00:36:14,520 --> 00:36:19,640
Speaker 8: What's behind that's that's all about that inventory. To put

733
00:36:19,640 --> 00:36:23,719
Speaker 8: that inventory in Asia into context. It's dragged down skincare

734
00:36:23,880 --> 00:36:28,120
Speaker 8: in this quarter organic cells minus ten percent. It's dragged

735
00:36:28,160 --> 00:36:31,600
Speaker 8: down Europe to minus fourteen, where underlying Europe was flat

736
00:36:31,680 --> 00:36:34,680
Speaker 8: because it stores that travel retail. So it's about that

737
00:36:34,800 --> 00:36:37,919
Speaker 8: inventory normalizing, and they're saying that that has happened right

738
00:36:37,960 --> 00:36:40,200
Speaker 8: now at the end of two Q, so we head

739
00:36:40,200 --> 00:36:43,560
Speaker 8: into three Q with normalized level and so therefore if

740
00:36:43,560 --> 00:36:46,000
Speaker 8: that is the case, then it's better manage. We should

741
00:36:46,080 --> 00:36:49,120
Speaker 8: start to see double digit growth coming from there. And

742
00:36:49,320 --> 00:36:52,719
Speaker 8: if we were looking underlying without that area, then we

743
00:36:52,800 --> 00:36:55,600
Speaker 8: saw mid single digit growth. So that's what that's about.

744
00:36:55,640 --> 00:36:58,719
Speaker 8: And then also on top of this new restructuring program

745
00:36:58,920 --> 00:37:01,200
Speaker 8: and with some of those benefits to come through twenty five,

746
00:37:01,200 --> 00:37:04,239
Speaker 8: we've been playing around on MDL on the calculator and

747
00:37:04,280 --> 00:37:07,080
Speaker 8: what we see there is around an expectation of twelve

748
00:37:07,160 --> 00:37:10,960
Speaker 8: to thirteen percent uplift to that twenty twenty five operating

749
00:37:11,000 --> 00:37:12,279
Speaker 8: profit to hopefully come through.

750
00:37:12,320 --> 00:37:16,280
Speaker 4: One consensus our thanks to Debra Agin, Bloomberg Intelligence, Senior Analyst,

751
00:37:16,320 --> 00:37:18,799
Speaker 4: Global Luxury Goods, Home, Beauty, and Personal Care.

752
00:37:19,000 --> 00:37:21,759
Speaker 2: That's this week's edition of Bloomberg Intelligence on Bloomberg Radio,

753
00:37:21,920 --> 00:37:24,320
Speaker 2: providing in depth research and data on two thousand companies

754
00:37:24,320 --> 00:37:25,680
Speaker 2: and one hundred and thirty industries.

755
00:37:25,800 --> 00:37:28,520
Speaker 4: And remember you can access Bloomberg Intelligence the movie I

756
00:37:28,600 --> 00:37:29,440
Speaker 4: Go on the Terminal.

757
00:37:29,520 --> 00:37:31,240
Speaker 3: I'm Alex Steele, Paul Sweeney.

758
00:37:31,400 --> 00:37:34,160
Speaker 2: Stay with us. Today's top stories and global business headlines

759
00:37:34,200 --> 00:37:35,680
Speaker 2: are coming up right now.

760
00:37:36,960 --> 00:37:41,480
Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apples, Spotify,

761
00:37:41,719 --> 00:37:44,919
Speaker 1: and anywhere else you get your podcasts. Listen live each

762
00:37:44,920 --> 00:37:48,320
Speaker 1: weekday ten am to noon Eastern on Bloomberg dot Com,

763
00:37:48,400 --> 00:37:51,799
Speaker 1: Thehart Radio app, tune In, and the Bloomberg Business app.

764
00:37:51,920 --> 00:37:55,040
Speaker 1: You can also watch us live every weekday on YouTube

765
00:37:55,160 --> 00:37:57,000
Speaker 1: and always on the Bloomberg Terminal