WEBVTT - Salesforce, Kohl's Shares Plunge, Musk Empire 0:00:02.920 --> 0:00:07.280 Bloomberg Audio Studios, podcasts, radio news. 0:00:09.960 --> 0:00:13.840 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:00:13.920 --> 0:00:17.000 weekdays at ten am Eastern on Apple Car, playing Android 0:00:17.040 --> 0:00:20.120 Otto with the Bloomberg Business App. Listen on demand wherever 0:00:20.200 --> 0:00:24.040 you get your podcasts, or watch us live on YouTube. 0:00:25.160 --> 0:00:30.160 One of the movers today is Salesforce dot Com. I 0:00:30.160 --> 0:00:31.600 thought it was just one of those stocks that can 0:00:31.680 --> 0:00:36.080 do no wrong. But the stock's down twenty percent last 0:00:36.479 --> 0:00:39.440 this morning kind of reported some numbers so disappointing to 0:00:39.479 --> 0:00:41.120 the street, so I wanted to break it down and 0:00:41.159 --> 0:00:43.599 al so we can do that with the on Rock 0:00:43.640 --> 0:00:46.360 from Chicago on rog Rana. He's a senior tech analyst 0:00:46.400 --> 0:00:50.400 for Bloomberg Intelligence. Honorrock Mark Bennioff here, I thought everything 0:00:50.440 --> 0:00:52.479 he touches turns of gold. What happened to Salesforce and 0:00:52.520 --> 0:00:53.800 the results last night? 0:00:54.920 --> 0:00:57.160 Yeah, the macro spending is not good right now, and 0:00:57.200 --> 0:00:59.600 we saw that good work day a week ago. People 0:00:59.600 --> 0:01:02.960 are push out contracts so large deals. They're not signing 0:01:02.960 --> 0:01:05.800 at the same pace they did before. So a little 0:01:05.840 --> 0:01:08.480 bit of you know, tale of two tech stories. One 0:01:08.520 --> 0:01:11.320 is companies are spending more on AI, but then they're 0:01:11.319 --> 0:01:14.199 taking spending away from other areas such as, you know. 0:01:14.160 --> 0:01:16.880 Buying new software or consulting and things like that. 0:01:17.760 --> 0:01:22.080 Does Salesforce not have an AI product yet? And why. 0:01:23.400 --> 0:01:23.560 No? 0:01:23.560 --> 0:01:26.880 They have one particular productl data cloud and that twenty 0:01:26.880 --> 0:01:27.440 five percent. 0:01:27.480 --> 0:01:30.440 But frankly speaking, remember, if you have a revenue based 0:01:30.440 --> 0:01:34.640 this size, you know, thirty five forty billion dollars. 0:01:34.280 --> 0:01:36.600 You know that a few million is not going to 0:01:36.680 --> 0:01:39.319 move the needle if all the other spending starts to 0:01:39.319 --> 0:01:39.839 slow down. 0:01:40.640 --> 0:01:42.600 All right, here's Alex, here's the group. 0:01:42.760 --> 0:01:45.800 An example, just a great Wall Street inefficiency, one of 0:01:45.840 --> 0:01:48.200 the reasons that many firms on Wall Street just can't 0:01:48.240 --> 0:01:52.680 generate decent returns. There are fifty six analysts covering Salesforce 0:01:52.720 --> 0:01:55.559 dot com. I'm going to say a lot. I'm thinking 0:01:55.920 --> 0:01:59.760 five get paid, five make aprofit off of bride and 0:01:59.760 --> 0:02:01.040 read research on that name. 0:02:01.200 --> 0:02:02.960 You know, just absolutely crazy. 0:02:03.080 --> 0:02:07.760 Forty buys, fifteen holds one cell, forty buys yep. So 0:02:07.840 --> 0:02:10.399 what's the the forty buys out there? 0:02:10.440 --> 0:02:10.959 Anna Rod? 0:02:11.440 --> 0:02:14.640 Did they fundamentally change their view of Salesforce dot Com 0:02:14.639 --> 0:02:16.840 after these results? 0:02:17.400 --> 0:02:19.919 No, no, no, there's no reason to do that, because 0:02:19.960 --> 0:02:22.800 this is just elongation of the sales cycle. It's not 0:02:22.840 --> 0:02:25.720 that people aren't buying cloud products. It's just a matter 0:02:25.800 --> 0:02:28.880 of there not signing large deals. People are basically saying, 0:02:28.880 --> 0:02:31.040 you know, I can live with what I have right now, 0:02:31.240 --> 0:02:33.240 and I'll wait for next year to go back and 0:02:33.280 --> 0:02:35.720 buy this stuff. It's not that it's not things are 0:02:35.760 --> 0:02:38.040 not that horrible. I mean, they're still growing at ten 0:02:38.080 --> 0:02:40.680 percent or so. It's not the end of the world. 0:02:41.360 --> 0:02:45.320 But what really happened is three quarters ago their new 0:02:45.320 --> 0:02:48.160 bookings rate was slowing down and started to take a 0:02:48.280 --> 0:02:50.800 u turn, so they went from eleven percent to thirteen percent, 0:02:51.320 --> 0:02:53.280 and they were at thirteen percent for two quarters in 0:02:53.280 --> 0:02:53.600 a row. 0:02:54.120 --> 0:02:55.280 This quarter, we were. 0:02:55.200 --> 0:02:58.000 Expecting it to be around twelve percent or so, twelve 0:02:58.040 --> 0:03:01.000 to thirteen percent, and they came at ten. So these 0:03:01.120 --> 0:03:04.239 deals being pushed out, it's it's just a matter of time, 0:03:04.360 --> 0:03:04.880 whether it's. 0:03:04.800 --> 0:03:07.840 Two quarters away, whether it's three, but they will close. 0:03:07.880 --> 0:03:10.160 People are looking to move more things to the cloud 0:03:10.600 --> 0:03:13.680 on the application side also, so it's just I would 0:03:13.680 --> 0:03:16.280 say a little bit of delay, but that delay is 0:03:16.320 --> 0:03:19.280 now takes you into twenty twenty five rather than being 0:03:19.400 --> 0:03:21.520 a middle of the you know, this year's story. So 0:03:21.800 --> 0:03:23.760 that's partially the reason of people are saying, you know, well, 0:03:23.760 --> 0:03:25.880 we'll come back to the story six months from now. 0:03:26.160 --> 0:03:28.960 Are you surprised at the severity of this dock drop though, 0:03:29.080 --> 0:03:31.720 based on this because this is also just a law 0:03:31.760 --> 0:03:34.600 of large numbers, right, You're growing at double digits and 0:03:34.639 --> 0:03:37.760 then eventually that double digits slows. That's like life, right. 0:03:38.520 --> 0:03:40.120 Yeah, Alex, absolutely right. 0:03:40.160 --> 0:03:42.160 I mean, if you look at salesforce on the on 0:03:42.200 --> 0:03:44.720 the rosy side, their free cash flow this year is 0:03:44.720 --> 0:03:47.440 going to grow twenty percent, with the likelihood of another 0:03:47.480 --> 0:03:50.560 fifteen to twenty percent growing next year. This company has 0:03:50.640 --> 0:03:54.280 now changed the narrative from high sales growth or growth 0:03:54.360 --> 0:03:58.000 at any cost, to growing with a lot of margin expansion. 0:03:58.320 --> 0:03:59.760 This company has a long. 0:03:59.600 --> 0:04:03.240 Way to go before the margins reach I would call maturity. 0:04:03.320 --> 0:04:06.360 They still tend turn to a twelve percent away from 0:04:06.360 --> 0:04:08.800 that stage. So there is a lot of free cash 0:04:08.840 --> 0:04:11.560 flow that needs to come out of this company. So, 0:04:11.840 --> 0:04:14.240 you know, I think I am surprised about the severity 0:04:14.240 --> 0:04:15.200 of their reaction. 0:04:16.400 --> 0:04:18.080 You know, an, I guess this kind of goes to 0:04:18.240 --> 0:04:21.159 a question I've been asking since this whole AI scam, 0:04:21.200 --> 0:04:25.320 I mean discussion began eighteen months ago. How much of 0:04:25.320 --> 0:04:29.320 this is really incremental new spending for this new thing 0:04:29.400 --> 0:04:33.040 called AI versus just taking some tech spending from other 0:04:33.080 --> 0:04:36.320 parts of the stack, whether it's software or hardware applications. 0:04:36.880 --> 0:04:39.160 And does I talked to us about that. 0:04:39.960 --> 0:04:41.160 Yeah, I completely agree with you. 0:04:41.200 --> 0:04:43.440 This has been our case because one of the things 0:04:43.440 --> 0:04:46.159 we saw was one of the most important companies in 0:04:46.160 --> 0:04:49.520 the space for leading indicators is Accenture, and their consulting 0:04:49.560 --> 0:04:52.520 revenue has been declining for the last three quarters because 0:04:52.520 --> 0:04:53.640 of exactly what you said. 0:04:53.680 --> 0:04:54.479 People are not. 0:04:55.200 --> 0:04:57.240 You know, if you have a consulting project, you put 0:04:57.240 --> 0:04:59.480 that on hold and you use that money to buy 0:04:59.680 --> 0:05:02.440 you know, few chips new servers trying to figure out 0:05:02.480 --> 0:05:03.560 if your infrastructure is. 0:05:03.520 --> 0:05:06.640 Ready for the next phase of AI development. 0:05:06.800 --> 0:05:09.559 You're actually experimenting with new products and trying to figure 0:05:09.600 --> 0:05:11.520 out and the big question for a lot of them 0:05:11.640 --> 0:05:13.760 is do I really need to buy a brand new 0:05:13.800 --> 0:05:17.840 software product where my next generation CRM product could look 0:05:17.880 --> 0:05:20.160 a little bit different or some other product could look 0:05:20.200 --> 0:05:21.120 at a little bit different. 0:05:21.520 --> 0:05:22.000 What we are. 0:05:21.920 --> 0:05:25.479 Seeing right now is text spending flat from last year, 0:05:25.960 --> 0:05:29.160 no new increment, but we're hopeful that you know, the 0:05:29.279 --> 0:05:34.400 typical waterfall is you have hardware semiconductor spending first, then 0:05:34.400 --> 0:05:37.480 it trickles down to software, then it trickled downs to services. 0:05:37.600 --> 0:05:39.080 So we are optimistic that. 0:05:39.040 --> 0:05:42.279 Next year we should see some improvement in software spending, 0:05:42.520 --> 0:05:45.039 and perhaps the second half of next year into the 0:05:45.080 --> 0:05:48.880 year after something on the consulting and then the services side. 0:05:49.000 --> 0:05:52.279 Do we learn anything from Dell in terms of AI 0:05:52.520 --> 0:05:54.240 and spend from Salesforce? 0:05:55.560 --> 0:05:57.320 Yeah, but that's the same exact thing that they are 0:05:57.320 --> 0:06:00.039 buying more AI servers, but at the expense of some 0:06:00.080 --> 0:06:03.120 thing perhaps like a salesforce or for that matter, workday. 0:06:03.440 --> 0:06:06.279 Okay, so a woe for salesforce is good for Dell. 0:06:07.360 --> 0:06:10.000 Yeah, it's good for all the semiconductor names and the 0:06:10.040 --> 0:06:13.800 GPO players. People are basically saying, Okay, if I have 0:06:13.880 --> 0:06:16.840 to go experiment on AI, I gotta find that money somewhere. 0:06:17.080 --> 0:06:19.800 Net Net, I'm still spending the same amount on technology 0:06:19.800 --> 0:06:22.280 that I did last year. It's a question of reallocation 0:06:22.360 --> 0:06:25.839 of those resources. Another place where seeing an improvement in 0:06:25.880 --> 0:06:29.240 spending is companies outsourcing a lot more work because that 0:06:29.360 --> 0:06:31.600 they're saying is I got to find cost savings in 0:06:31.680 --> 0:06:34.280 order to deploy it into these AI products. 0:06:34.760 --> 0:06:38.400 So just stepping back even further for tech spending. What 0:06:38.400 --> 0:06:42.280 are the likes of IDC saying about tech spending over 0:06:42.320 --> 0:06:44.839 the next couple three years on RUG? 0:06:46.120 --> 0:06:49.000 So the next three is I think almost everybody unanimously 0:06:49.040 --> 0:06:50.919 believes that it is going to be a good number 0:06:51.000 --> 0:06:53.640 because frankly speaking, and I've said this a number of times, 0:06:53.800 --> 0:06:55.839 when you look at it is as a percentage of GDP, 0:06:56.040 --> 0:06:57.760 tech spending is still a small portion. 0:06:58.200 --> 0:07:00.520 When I look at just the US alone, and we. 0:07:00.560 --> 0:07:04.560 Have somewhere around enterprise technology spending, you know, excluding smartphones, 0:07:04.800 --> 0:07:07.400 somewhere around one and a half trillion or so. When 0:07:07.400 --> 0:07:10.080 you look at healthcare spending, it's not a four trillion. 0:07:10.320 --> 0:07:11.000 So we we. 0:07:11.000 --> 0:07:13.400 Talk a lot about tech, but as a percentage of 0:07:13.400 --> 0:07:15.880 total GDP in the US, it's still a small number. 0:07:16.120 --> 0:07:18.920 And software is even a smaller portion of that. So 0:07:19.160 --> 0:07:22.560 you know, we are I'm pretty optimistic to bullish that 0:07:22.920 --> 0:07:25.800 in the long run, I'm happy with, you know, with 0:07:25.880 --> 0:07:28.400 the tech space in you know, in terms of growth rate, 0:07:28.440 --> 0:07:31.960 in terms of profitability, in terms of sustainability compared to 0:07:32.040 --> 0:07:32.880 other sectors. 0:07:33.280 --> 0:07:35.280 What else? What else is on your radar right now 0:07:35.320 --> 0:07:37.720 on our AGAs we're almost done with all the big 0:07:37.720 --> 0:07:38.280 tech guys. 0:07:39.480 --> 0:07:39.840 Yeah. 0:07:39.880 --> 0:07:42.360 So now when you look at it, Workday and Salesforce 0:07:42.400 --> 0:07:44.800 are the first companies to report in the next cycle 0:07:44.840 --> 0:07:47.880 of earning. So when you look at, you know, results 0:07:47.880 --> 0:07:50.360 that coming out in July, we're going to head a 0:07:50.400 --> 0:07:52.560 lot of the same what we have heard from these 0:07:52.560 --> 0:07:55.200 two companies. Now, the two exceptions from that in our 0:07:55.280 --> 0:07:58.520 view would could be Microsoft and perhaps even SAP. But 0:07:58.680 --> 0:08:02.480 other than that, every other you know, software company we anticipate, 0:08:02.520 --> 0:08:05.600 and even services companies we anticipate, we'll talk about the 0:08:05.640 --> 0:08:08.640 same thing. Deal delays elongation of that, and this is 0:08:08.680 --> 0:08:10.960 partially the reason. You know, if you look at somebody 0:08:10.960 --> 0:08:13.240 like a service now he's getting really hammered today, or 0:08:13.360 --> 0:08:16.240 article getting hammered, and then that makes sense because this 0:08:16.320 --> 0:08:18.600 is a leading indicator that things are not going to 0:08:18.640 --> 0:08:21.320 be good when results come out come out in July. 0:08:22.200 --> 0:08:25.360 Great stuff, I likes the best of course, right, thanks 0:08:25.360 --> 0:08:27.560 a lot on a rock run a Bloomberg Intelligence a 0:08:27.600 --> 0:08:31.600 senior technology analyst. Salesforce is getting totally creamed. I mean 0:08:31.600 --> 0:08:33.480 it's down like twenty percent. It's a raise in like 0:08:33.520 --> 0:08:36.319 three hundred and seventy points from the now like this 0:08:36.520 --> 0:08:39.080 serious decliner here today. 0:08:38.960 --> 0:08:42.360 And Mark Pennioff. You know he's the before today. The 0:08:42.600 --> 0:08:44.800 net worth of according to Rich Gover, about ten billion 0:08:44.800 --> 0:08:45.800 dollars to take a little. 0:08:45.559 --> 0:08:47.240 Bit of it, a little bit of a head there. 0:08:47.240 --> 0:08:52.560 Today you're listening to the Bloomberg Intelligence Podcast. Catch us 0:08:52.640 --> 0:08:55.800 live weekdays at ten am Eastern on Apple car Play 0:08:55.840 --> 0:08:58.880 and Android Auto with the Bloomberg Business. You can also 0:08:59.000 --> 0:09:02.520 listen live on Amazon Alexa from our flagship New York station, 0:09:02.880 --> 0:09:05.920 Just Say Alexa playing Bloomberg eleven thirty. 0:09:07.600 --> 0:09:10.640 Cole's Way, The stock is down the most on record, 0:09:10.920 --> 0:09:14.960 huge miss on earnings, cut the guidance, and the street 0:09:15.040 --> 0:09:18.120 sending this stock down twenty seven percent, the most on 0:09:18.240 --> 0:09:21.800 records is extraordinary. Let's check in with the Bloomberg Intelligence 0:09:21.800 --> 0:09:24.520 analyst that covers this stock in this sector. Mary Ross Gilbert, 0:09:24.679 --> 0:09:29.280 Senior Equity analyst for Retail for Bloomberg Intelligence, joining us 0:09:29.320 --> 0:09:32.520 from La via zoom So, Mary, thanks so much for 0:09:32.600 --> 0:09:36.520 joining us here. Twenty seven percent reduction in this stock price. Here, 0:09:37.040 --> 0:09:40.160 what does a market not like from the earnings? 0:09:41.600 --> 0:09:45.080 Yeah, so we sort of knew going into earnings that 0:09:45.160 --> 0:09:50.680 they have a wonderful data measure that we use called 0:09:50.679 --> 0:09:56.680 Bloomberg's Second Measure. And it basically tracks consumer transactions ATM 0:09:56.920 --> 0:10:00.280 and credit card transactions, and so based on that data, 0:10:00.880 --> 0:10:02.959 we had a feeling that they might miss by two 0:10:03.040 --> 0:10:05.960 hundred to three hundred basis points, which they did. Comp 0:10:06.080 --> 0:10:10.120 sales fell four point four percent. That was below analysts 0:10:10.160 --> 0:10:14.240 one point seven percent estimate. And really what was happening 0:10:14.280 --> 0:10:17.800 there for the company is that they were going against 0:10:18.400 --> 0:10:22.880 a significant clearance activity in the first quarter of twenty three. 0:10:23.520 --> 0:10:26.200 Now they knew that going into the quarter, and that's 0:10:26.200 --> 0:10:29.319 why they expected sales to be flat. But they expected 0:10:29.360 --> 0:10:33.640 their new category initiatives. This means like Home de Corps 0:10:34.840 --> 0:10:37.640 of course so Fa, which continues to do really well. 0:10:37.960 --> 0:10:40.800 The key was so FORA bringing in all the customers 0:10:40.800 --> 0:10:45.440 and generating real sales and very profitable sales is the 0:10:45.480 --> 0:10:48.520 fact that those customers are not buying enough of the 0:10:48.600 --> 0:10:52.440 adjacent categories. So that's where they sort of came up short. 0:10:52.720 --> 0:10:56.160 So they did show that their initiatives are working, but 0:10:56.400 --> 0:11:00.520 just not enough and it's not across the whole store, 0:11:00.679 --> 0:11:02.600 and that's what they need to do, and so this 0:11:02.640 --> 0:11:05.400 is going to take some time for them to really 0:11:05.480 --> 0:11:11.559 get category mixed throughout the store and really be executing 0:11:11.760 --> 0:11:15.400 so it just delays this potential turnaround for the company. 0:11:15.640 --> 0:11:17.800 Okay, so let me just break that down. So, one, 0:11:17.840 --> 0:11:20.880 you got tough comps because it was really promotional last year, 0:11:20.960 --> 0:11:23.600 so that was stressful. But all the stuff that they're 0:11:23.640 --> 0:11:26.440 doing to entice people to buy stuff also isn't working 0:11:26.559 --> 0:11:29.280 in the way that they thought. Is that a consumer 0:11:29.960 --> 0:11:33.199 problem or is that a Coohle's execution problem. 0:11:33.920 --> 0:11:36.440 Yeah, so actually I'm going to reword what you just 0:11:36.480 --> 0:11:40.720 said there because it is working those new categories. So 0:11:40.800 --> 0:11:45.960 for example, their home seasonal and eight Everyday Decore, those 0:11:45.960 --> 0:11:49.520 sales were up thirty percent, Impulse items were up sixty percent, 0:11:50.640 --> 0:11:55.280 women's full price sales were up three percent, gifting of 0:11:55.640 --> 0:11:58.880 thirty percent. So we're seeing that they're working, but it's 0:11:59.080 --> 0:12:03.000 just not enough up to offset, you know, the weakness 0:12:03.000 --> 0:12:06.240 that they're experiencing. For example, in active wear, even though 0:12:06.240 --> 0:12:12.000 they're private brand, private brands within active are doing well. 0:12:12.400 --> 0:12:14.400 They need to have a better mix of some of 0:12:15.720 --> 0:12:19.520 some national brands in there to really rejuvenate the sales 0:12:19.559 --> 0:12:22.160 in that category. Also, when they brought in so far 0:12:22.240 --> 0:12:24.960 As shops, they got rid of jewelry and so they 0:12:25.000 --> 0:12:28.439 sort of missed out on gifting in the jewelry area, 0:12:28.559 --> 0:12:31.440 so they're planning to bring that back. They're also hoping 0:12:31.520 --> 0:12:35.439 to boost conversion of those so for a shoppers by 0:12:35.440 --> 0:12:38.040 bringing in more relevant junior brands, and that's going to 0:12:38.080 --> 0:12:41.800 come later this year, and that includes Aero Coal, Stall, Roxy, 0:12:41.960 --> 0:12:45.240 Madden World, Quicksilver for example. And then of course they're 0:12:45.280 --> 0:12:48.800 going to be adding babies shops, which could also help 0:12:48.840 --> 0:12:51.000 them later in the year. So we do expect to 0:12:51.040 --> 0:12:54.880 see some improvement and these categories are working, it's just 0:12:55.080 --> 0:12:58.200 going to take a lot longer to get the overall 0:12:58.559 --> 0:13:01.760 mix right, That's what we think is happening. 0:13:02.000 --> 0:13:04.640 Mary Again, a twenty seven percent decline in the stock 0:13:04.679 --> 0:13:06.880 press on a piece of news like this, to me, 0:13:07.840 --> 0:13:11.440 it calls into question how investors are viewing this management team. 0:13:11.440 --> 0:13:14.240 I look on the MGMT function on the Bloomberg terminal 0:13:14.400 --> 0:13:16.240 and I see most of the senior managers are only 0:13:16.240 --> 0:13:17.760 there less than a couple of years. 0:13:17.800 --> 0:13:19.839 So this is a relatively new management team. 0:13:20.040 --> 0:13:22.520 Is this Wall Street saying we don't have much confidence 0:13:22.520 --> 0:13:23.000 in you guys? 0:13:24.440 --> 0:13:26.400 It could be temporary, That's the way I look at it, 0:13:26.440 --> 0:13:30.960 because frankly, Tom Kingsbury, who's the CEO here, he is 0:13:31.000 --> 0:13:35.880 the one responsible for turning Burlington Stores into the successful, 0:13:36.640 --> 0:13:40.120 fast growing off price retailer that it is. It's very 0:13:40.120 --> 0:13:43.680 focused on the low end consumer. So he, I think 0:13:43.920 --> 0:13:46.960 is the right person and all of the initiatives that 0:13:47.000 --> 0:13:50.760 he's been doing. We've noticed the changes dramatically since he 0:13:50.840 --> 0:13:53.400 came on board in the stores. In fact, even the 0:13:53.480 --> 0:13:57.080 culture of the environment you go in there and you 0:13:57.120 --> 0:14:00.600 talk to the salespeople. Year over year, once he came 0:14:00.679 --> 0:14:04.120 on board, we observed a huge change, a huge lift 0:14:04.160 --> 0:14:07.960 in the culture where everyone is more excited about the business. So, 0:14:08.480 --> 0:14:11.880 you know, it's the first quarter. They had tough comparisons, 0:14:12.240 --> 0:14:14.240 and we'll have to see as more and more of 0:14:14.240 --> 0:14:17.240 these initiatives come into play. We think it's really just 0:14:17.280 --> 0:14:20.560 going to be a delay in the turnaround rather than hey, 0:14:20.600 --> 0:14:23.680 this is a failure for management, because these things, when 0:14:23.720 --> 0:14:28.160 you're doing a complete redo of a business, it really 0:14:28.200 --> 0:14:33.120 takes time to gain traction, especially in an intense segment 0:14:33.360 --> 0:14:34.280 which they play in. 0:14:35.120 --> 0:14:38.680 We also get Nordstrom's gap costco out after the closing 0:14:38.720 --> 0:14:41.680 bell that that's a pretty random mix. It's going to 0:14:41.720 --> 0:14:44.200 be interesting to see the macro read for that. What 0:14:44.280 --> 0:14:46.160 are you going to be paying most attention. 0:14:45.920 --> 0:14:52.040 To well, a lot of exciting things happening with Gap, 0:14:52.600 --> 0:14:56.320 and we're expecting to, you know, hear some pot of 0:14:56.640 --> 0:15:00.640 positive results coming out of Gap. Nordstrom. I think they're 0:15:00.680 --> 0:15:03.240 seeing an improvement overall in the business, but most of 0:15:03.240 --> 0:15:05.440 it is being driven on the rack side, so again 0:15:05.520 --> 0:15:08.440 that's their off price model and that's really sort of 0:15:08.480 --> 0:15:11.240 the big story for Nordstrom. But we think the full 0:15:11.280 --> 0:15:15.000 line store is seeing some improvement as well. And if 0:15:15.040 --> 0:15:18.880 you look at other retailers that are really executing well 0:15:18.960 --> 0:15:22.800 like Abercrombie, which their numbers are out yesterday and just 0:15:23.000 --> 0:15:27.120 bluep same with urban outfitters with their free people and 0:15:27.160 --> 0:15:32.400 anthropology brands once again just blew past estimates. So it's 0:15:32.520 --> 0:15:37.600 really a case where if you're really executing, then you're 0:15:38.120 --> 0:15:41.040 coming out and head of plan and then of course 0:15:41.080 --> 0:15:42.560 the shares react accordingly. 0:15:43.560 --> 0:15:48.200 So, Mary, what are you hearing from your companies, your contexts. 0:15:48.720 --> 0:15:51.160 How about the health of the consumer these days? 0:15:52.200 --> 0:15:52.960 What are we seeing? 0:15:54.680 --> 0:15:57.680 You know, it's a good question. I would say overall, 0:15:57.880 --> 0:16:01.120 the consumer is very resilient, so of course, you know, 0:16:01.200 --> 0:16:04.400 within off price or value, the low end consumer is 0:16:04.480 --> 0:16:08.640 still being challenged with inflation. But the good news is 0:16:09.280 --> 0:16:13.320 they're employed, and so being employed I think is one 0:16:13.360 --> 0:16:15.520 of the biggest factors out there. And of course we 0:16:15.640 --> 0:16:21.160 just saw so that all bodes well for retail generally, 0:16:21.840 --> 0:16:25.960 but again it's really going to be segmented, with those 0:16:26.000 --> 0:16:29.280 earning a higher income being able to spend more and 0:16:29.320 --> 0:16:32.640 those with lower income being even more discerning. 0:16:33.080 --> 0:16:35.440 When I find so interesting and you bought up Abercrombie, 0:16:36.320 --> 0:16:39.320 is it and we're talking to the Red Robin CEO. Also, 0:16:39.600 --> 0:16:42.920 if you know your customer and I want to say niche, 0:16:42.960 --> 0:16:44.840 because like Gap is a niche, but like you know 0:16:44.880 --> 0:16:47.840 who you're designing for and that's the business that you're doing, 0:16:47.840 --> 0:16:49.400 and you're not going to try and chase all the 0:16:49.440 --> 0:16:54.240 things you can actually outperform in this market across the board, 0:16:54.280 --> 0:16:56.800 whether you're super high end to take a look at LVMH, 0:16:57.240 --> 0:16:59.800 whether you're looking at Swiss Watches, or whether you're looking 0:16:59.800 --> 0:17:03.200 at Gap, or whether you're looking say ad best Buy, 0:17:03.240 --> 0:17:06.120 and I find that to be a really striking difference 0:17:06.119 --> 0:17:07.520 maybe than what we've seen before. 0:17:10.040 --> 0:17:12.480 I would agree with you. So if Abercrombie, you raised 0:17:12.520 --> 0:17:15.960 a good point, they're sort of poor millennial customer with 0:17:16.000 --> 0:17:21.439 the Abercrombi brand will continuing to introduce new categories. So 0:17:21.560 --> 0:17:26.000 for example, they brought out, you know, the wedding shop 0:17:26.240 --> 0:17:28.719 and that was sort of an add on to the 0:17:28.720 --> 0:17:32.119 best Dressed Guests, and it was just so well received 0:17:32.240 --> 0:17:35.040 because they were listening to their customer and they're giving 0:17:35.080 --> 0:17:38.119 them more and more of what that customer wants. And 0:17:38.200 --> 0:17:41.600 it's also extending the age range sort of beyond the 0:17:41.680 --> 0:17:45.400 millennial poor consumer that they go after, and so that's 0:17:45.440 --> 0:17:49.360 also helping to bring in new customers. And then they're 0:17:49.400 --> 0:17:53.479 starting to look at the adjacent categories and buying there. 0:17:53.520 --> 0:17:57.040 So they're really showing how they can continue to execute 0:17:57.119 --> 0:18:01.399 against very difficult comparisons where they're already showing double digit 0:18:01.440 --> 0:18:05.960 lifts in comp sales. So that's a sign of great 0:18:06.040 --> 0:18:07.240 execution right there. 0:18:08.040 --> 0:18:09.600 All right, Mary, thanks so much for joining us. 0:18:09.600 --> 0:18:12.200 Mary Ross Gilbert, she's a senior Ecadannaals covering the retail 0:18:12.200 --> 0:18:15.400 space for Bloomberg Intelligence, joining us from Los Angeles via 0:18:15.480 --> 0:18:18.399 zoom Here looking at Coles again, that's stock down twenty 0:18:18.400 --> 0:18:20.440 five percent plus on some week numbers. 0:18:22.359 --> 0:18:26.240 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:18:26.320 --> 0:18:29.400 weekdays at ten am Eastern on Apple Card Playing Android 0:18:29.440 --> 0:18:32.520 Auto with the Bloomberg Business App. Listen on demand wherever 0:18:32.600 --> 0:18:36.400 you get your podcasts, or watch us live on YouTube. 0:18:37.240 --> 0:18:40.560 I'm Alex the alongside Paul Sweeny. This is Bloomberg Intelligence Radio. 0:18:40.600 --> 0:18:42.280 We bring you all the top news and economics and 0:18:42.320 --> 0:18:45.480 finance through our lens of Bloomberg Intelligence analysts. They cover 0:18:45.560 --> 0:18:48.359 two thousand companies and one hundred and thirty industries all 0:18:48.400 --> 0:18:51.400 around the world. We're also taking a look here at 0:18:51.400 --> 0:18:53.720 some stocks really on the move after earnings, and one 0:18:54.119 --> 0:18:57.040 is Red Robin Gourmet Bergers. That stock is up a 0:18:57.080 --> 0:19:00.600 whopping twenty percent. If you look inside the numbers, you're 0:19:00.600 --> 0:19:05.080 looking to adjusted loss per share at eighty cents, revenue down 0:19:05.119 --> 0:19:08.000 seven point one percent year on year, comm sales down 0:19:08.040 --> 0:19:10.480 six point five percent, average check is a little higher 0:19:10.480 --> 0:19:13.879 by about three percent, and mark operating margin was eleven percent. 0:19:13.920 --> 0:19:18.320 But the street loves it. Let's get a read on why. GJ. 0:19:18.480 --> 0:19:21.560 Hart is president's CEO and director of Red Robin Gormet 0:19:21.560 --> 0:19:24.400 Berger's and he joins us now DJ great to get 0:19:24.400 --> 0:19:27.359 your perspective. What do you think the street is loving 0:19:27.400 --> 0:19:29.720 so much about these earnings when the numbers and the 0:19:29.760 --> 0:19:31.640 comps feel a little weak on the numbers. 0:19:33.520 --> 0:19:36.680 Well, I think what they like is our strategic plan 0:19:36.800 --> 0:19:39.160 to move this company forward. We call it the North 0:19:39.200 --> 0:19:43.720 Star Plan. And we reported that in the first five 0:19:43.760 --> 0:19:46.680 weeks of the second quarter that our comps that turned positive, 0:19:47.000 --> 0:19:49.800 and I think that that surprised them a bit because 0:19:49.840 --> 0:19:52.960 I think they all had us slightly negative. And I 0:19:52.960 --> 0:19:55.800 think we're making great progress. Our teams have done amazing 0:19:55.920 --> 0:19:58.520 work and we're really proud of where we are today. 0:19:58.600 --> 0:20:01.240 And we sequentially really proved in the first quarter in 0:20:01.280 --> 0:20:03.960 spite of a very tough start. So we feel great 0:20:03.960 --> 0:20:05.920 about where we're going. And I think they see that, 0:20:06.320 --> 0:20:07.320 and it's great to see. 0:20:08.320 --> 0:20:12.560 GJ talk to us about your consumer, your customer, Who 0:20:12.680 --> 0:20:14.520 is your customer and kind What are you seeing from 0:20:14.560 --> 0:20:16.119 your customer's behavior these days? 0:20:17.000 --> 0:20:22.359 Sure, well, our customer is basically Middle America and families 0:20:22.560 --> 0:20:25.800 and all over the United States. And what we're seeing, 0:20:26.960 --> 0:20:31.800 interestingly enough, is in our premium burgers, in our premium 0:20:31.800 --> 0:20:34.960 gourmet burgers that we promote, we're seeing a real high 0:20:34.960 --> 0:20:35.440 take rate. 0:20:36.240 --> 0:20:40.080 We're also seeing that on the value in the. 0:20:39.840 --> 0:20:43.480 Tavern burgers are actually having a high take grade as well. 0:20:43.920 --> 0:20:46.000 And so what we are seeing is some trade down 0:20:46.040 --> 0:20:50.200 from some of our guests, but then it's still surprising 0:20:50.240 --> 0:20:53.040 to see that our gourmet lines are still doing as 0:20:53.040 --> 0:20:55.480 well as they are. The other indicator is that things 0:20:55.520 --> 0:20:59.520 like add ons, appetizers, desserts, those take grates are about 0:20:59.520 --> 0:21:03.280