Speaker 1: This is Bloomberg Business Week Inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business finance and tech news as it happened. Bloomberg
Speaker 1: Business Week with Carol Messer and Bloomberg Quick Takes Tim
Speaker 1: Stinovic on Bloomberg Radio. Hi, everyone, Welcome to the weekend
Speaker 1: edition of Bloomberg Business Week. We've got a packed show
Speaker 1: this weekend. We're going to get a pulse check on
Speaker 1: the American consumer with a host of CEOs. We've got
Speaker 1: the CEOs of H and R. Block, the CEO of
Speaker 1: New Balance, and the CEO of Sonos. We're also gonna
Speaker 1: find out how the industrial giant carrier is overcoming supply
Speaker 1: chain snarls and a tight labor market. Plus, my co host,
Speaker 1: Carol Masser was in Panama this past week. She was
Speaker 1: there for the Bloomberg New Economy event called Gateway Latin America.
Speaker 1: We'll hear from her panel. She had a lot of
Speaker 1: executives on it. They talked about the key issues that
Speaker 1: are facing both developed and emerging economies. All of that
Speaker 1: to come. We begin with this week's cover story, though,
Speaker 1: the long slow death of Lehman Brothers is almost complete.
Speaker 1: Bloomberg News reporters Luca day Pali and Jeremy Hill co
Speaker 1: wrote the piece. Jeremy and Business Week editor Joel Webber
Speaker 1: joined me and senior markets reporter Katie Greifeld to explain
Speaker 1: why there's still work to be done even fourteen years
Speaker 1: after Lehman's collapse. We're in some version of a of
Speaker 1: a sell off now. Everyone's fearful that, you know, the
Speaker 1: bottom could fall out at any moment and things get
Speaker 1: much worse. And here we are talking about, you know,
Speaker 1: the thing that kicked off a financial crisis all those
Speaker 1: years ago. Um, Jeremy, how did how did you find
Speaker 1: a role in this story? Um? Yeah? So, as a
Speaker 1: bankruptcy and distress debt reporter, I'm always pouring through legal
Speaker 1: documents and looking for wonky court fights about this and that,
Speaker 1: who is owed one and why they are owded? And
Speaker 1: as you said, Luke actually got in touch with me
Speaker 1: about this, this case going on in the UK over
Speaker 1: these weird subordinated notes called e caps, and he's like
Speaker 1: sending me stories of out how it's so interesting that
Speaker 1: you know these guys they got these they got these
Speaker 1: scraps of debt for almost free and they might get
Speaker 1: a bunch of money. It's very complicated. But underneath all
Speaker 1: of this are these people that are still in what
Speaker 1: are now small offices in the US and in the
Speaker 1: UK that are kind of overseeing the corps of Lehman brothers.
Speaker 1: They're they're pushing paper, they're looking for good times to
Speaker 1: sell their remaining assets and uh, as you said, kind
Speaker 1: of eking out those those last pennies from the estate.
Speaker 1: And Jeremy, you have a lot of great characters in here.
Speaker 1: Let's start with Darryl Radigan. Who was he? Darryl Radigan,
Speaker 1: that was Luca spoke a lot with him. He has
Speaker 1: been in charge of UM some property assets in the
Speaker 1: UK and has done a fantastic job from what we
Speaker 1: can tell, because creditors there have done much much better
Speaker 1: than anybody expected. Um So he was basically one of
Speaker 1: the people that was tasked with, rather than dumping all
Speaker 1: of the bad property assets when we went bankrupt, kind
Speaker 1: of waiting, letting those mature like a fine wine and
Speaker 1: then finding a good time to sell them. So obviously
Speaker 1: there are a ton of bankruptcies every year, uh, none
Speaker 1: as big as Lehman. But what what else has distinguished
Speaker 1: Lehman's long, slow death. The size is, of course important,
Speaker 1: the length is extremely notable, because I mean we're talking
Speaker 1: about nearly fourteen years here. Bankruptcy is often you know,
Speaker 1: even when they fade away from the headlines, there's a
Speaker 1: lot of clean up work to do um But you know,
Speaker 1: mostly we're talking a few years, five years something Sears
Speaker 1: for example, still going on in the background. There's things
Speaker 1: to sort out there. But I mean, this is more
Speaker 1: than a decade we're talking about. Everybody has not forgotten
Speaker 1: about Lehman. But I'm sure I wasn't aware that they
Speaker 1: still have an office space in the Bowery Savings Bank
Speaker 1: building in Midtown. People so still kicking. It's their their
Speaker 1: whole life. They're living and breathing Lehman Brothers to this day.
Speaker 1: It is the cover story of the upcoming issue of
Speaker 1: Amberg Business weeken. It's a great read when you're actually
Speaker 1: reading it in the magazine, but it's also a really
Speaker 1: good read if you're reading it online because it's an
Speaker 1: interactive presentation, and I think it gives a really good
Speaker 1: explanation of how creditors are repaid Jeremy for people who
Speaker 1: aren't familiar with it. Can you kind of sort of
Speaker 1: go through that waterfall? Sure? Yes, when we talk about
Speaker 1: a waterfall in bankruptcy, Uh, you want to sort of
Speaker 1: imagine a stack of champagne flutes um that those by
Speaker 1: the way, Sorry about that, jo Joel, Did you hold on,
Speaker 1: hold on, hold on, Joel? Did you know that before
Speaker 1: you were ordering the art and doing the graphics. I
Speaker 1: like champagne, you know, and I like my champagne and
Speaker 1: more than yeah, you know, just so you're gonna drink it,
Speaker 1: drink it right right? Sorry? Go ahead, Well that's that's
Speaker 1: that's very okay. UM. So imagine a waiter pouring the
Speaker 1: champagne um into the glasses. I'm not even want to
Speaker 1: try to pronounce the correct word. UM. The people with
Speaker 1: the most senior debt we're talking about like secured loans,
Speaker 1: like a mortgage, UM on a house is secured by
Speaker 1: the house itself. People who actually have claims to the assets,
Speaker 1: they get their cups filled up first, and then below
Speaker 1: those there are cups that have weaker claims to the
Speaker 1: estate or none at all, so they just get whatever
Speaker 1: is overflowing. Um. In the UK, there was way more
Speaker 1: champagne than anybody anticipated. So people at the very bottom
Speaker 1: ended up getting their fill um, and that's very unusual.
Speaker 1: I don't know. I'm still stuck on, Darryl. I mean,
Speaker 1: how many people are going to say, you're still stuck
Speaker 1: on Champagne? I mean, thank you? I hate I hate
Speaker 1: coop glasses. I have to say, they're so hard to
Speaker 1: drink out of it. But anyway, Darryl Radigan, how many
Speaker 1: just makes you drink it quicker? I don't know, just
Speaker 1: to get it at a level where you can actually
Speaker 1: use the glass. You guys are at a good mood
Speaker 1: where it's my birthday tempt Yeah, I'm surprised Champagne. Thank you?
Speaker 1: Um later after five, Jeremy, how many people are there,
Speaker 1: like Darryl Radigan that are just sort of helping to
Speaker 1: put Lehman finally in his final resting place. Sure, so
Speaker 1: let's talk about the us UM. Not so long ago,
Speaker 1: a few years ago, there were a couple of hundred
Speaker 1: people that were still sort of acting as portfolio managers
Speaker 1: for this like used financial Asset sales lot UM, and
Speaker 1: now we're down to about twenty as best as we
Speaker 1: can tell. UM. Not a lot of going into the
Speaker 1: office these days, as with many of us. But so
Speaker 1: we're all here. We are all here today. That was
Speaker 1: Bloomberg News Bankruptcy and Distressed Debt reporter Jeremy Hill, along
Speaker 1: with Business Week editor Joel Webber Katie Greifeld also taking
Speaker 1: part coming up tackling the threat of global food shortages.
Speaker 1: You're listening to Bloomberg Business Week. This is Bloomberg. This
Speaker 1: is Bloomberg Business Week with Carol Messer and Bloomberg Quick
Speaker 1: Takes Tim Spinovik from Bloomberg Radio. One thing that's become
Speaker 1: abundantly clear over the last few months to a lot
Speaker 1: of people is that Ukraine is the bread basket of Europe,
Speaker 1: and of course it's currently a battlefield. Export roots through
Speaker 1: the Black Sea to Africa in the Middle East are blocked.
Speaker 1: A global fertilizer shortage is putting many key crops in jeopardy.
Speaker 1: So just how dire is the threat to our global
Speaker 1: food supply and what can be done to mitigate the damage.
Speaker 1: Carol Master was in Panama this past week covering the
Speaker 1: Bloomberg New Economy event called Gateway Latin America. Here now
Speaker 1: is an excerpt from her panel discussion with Earther and
Speaker 1: cousin founder and CEO of Food Systems for the Future,
Speaker 1: Mauricio Rodriguez, Bayer's President for the Crop Science Division in
Speaker 1: Latin America, Bio Sarah's Crop Solutions CFO, and Rique Lopez
Speaker 1: Lacube and Marcella Escobari, Assistant Administrator of USAID's Bureau for
Speaker 1: Latin America and the Caribbean. What one action that governments
Speaker 1: are large companies could take today that would make you
Speaker 1: think of the significant difference in terms of our global
Speaker 1: food supplied helping smaller farmers. So if I could jump in,
Speaker 1: first thing for us it was the committee. So having
Speaker 1: the commitment changed substantially the priority. So once we said
Speaker 1: we need to reach out to a hundred million farmers
Speaker 1: and chip a smallholders on to twenty thirty, it directed
Speaker 1: all the efforts and we're seeing that that curve grows
Speaker 1: substantially because then you fin out your your efforts to
Speaker 1: make it happen, and you'll start to understand because different
Speaker 1: from UH selling to a big grower that you don't
Speaker 1: have the same financing problems, you don't have the same
Speaker 1: logistic challenge and so on. You need to dip dive
Speaker 1: and focus your intelligence in making that happen. And once
Speaker 1: we started that, we have grown that curve substantially. As
Speaker 1: I said, we are grovely in our two million farmers.
Speaker 1: We want to reach out to three and a half
Speaker 1: to four million farmers in a few years, but we
Speaker 1: have already gone through that. So I think focus and
Speaker 1: priority makes you have all the necessary resources for you
Speaker 1: to make that happen. So the focus is like your action.
Speaker 1: Yes that keep seeing it. And let me just point
Speaker 1: out how important that hundred million number is in the
Speaker 1: small hole de Farmer. Between the five hundred million small hole,
Speaker 1: do farmers a commitment to support a hundred million. That's
Speaker 1: a fifth of all the farmers in the world. That's massive,
Speaker 1: and we need to remember that small holders, despite the
Speaker 1: importance of the international trade system, to produce eighty percent
Speaker 1: of all the food that is consumed in the countries
Speaker 1: where they where they grow and work. You know what's
Speaker 1: interesting is and prepping for this, as someone said to me,
Speaker 1: we need to think about it's bigger than I mean.
Speaker 1: It's everything, right, It's the food system, is logistics, it's
Speaker 1: all the way from R and D to putting food
Speaker 1: on the table. It's the entire system. How they interact.
Speaker 1: You have to think about climate, if you think about water,
Speaker 1: if doesn't have anything about feet, I mean, it's all
Speaker 1: of them, right, I mean it's massive. How do we
Speaker 1: do this in an economy when we're economics putting out
Speaker 1: a number today and they're cutting global GDP growth by
Speaker 1: one point six trillion, they're concerned about the pullback and globalization,
Speaker 1: the impact of war is having we're seeing play out.
Speaker 1: How do you continue to do the work that you're
Speaker 1: talking about, Mauricio and make all of you in an
Speaker 1: economy that may be top mooting forward. I mean, how
Speaker 1: can you not continue to do it? Is the question?
Speaker 1: But how do we do it right? Without just saying
Speaker 1: very quickly, doing this work is part of solving those
Speaker 1: economic problems because a productive agriculture system, because we're talking
Speaker 1: about what happens not just on the farm, but in
Speaker 1: those other areas as well, processing, warehousing, um as well
Speaker 1: as retail and manufacturing, and so all of that supports
Speaker 1: economic growth within a country. So making the kinds of
Speaker 1: investments that will ensure the agriculture system, that food systems
Speaker 1: ability to contribute to the GDP of any particular country
Speaker 1: is quite critical to addressing the economic challenges that we're
Speaker 1: facing today, and I think what you're posting is the
Speaker 1: reality that we're seeing throughout the the the crisis are increasing.
Speaker 1: We are in a in a crunch because you know, growth,
Speaker 1: I mean has contracted seven percent in this region um
Speaker 1: and I think there there's a pull from everywhere. But
Speaker 1: sometimes it is not about the amount of money, right,
Speaker 1: It is about how we surgically use that money, and
Speaker 1: more so given the technology improvements that exists, that we
Speaker 1: focus that money so that we have technologies that affect
Speaker 1: the small holder that that you know, we have policies
Speaker 1: that help these technologies spread. You know, when we spend
Speaker 1: a couple of million dollars to to to secure and
Speaker 1: the risk you know, a billion dollars towards smallholder farmers
Speaker 1: like there are market failures that with little money, but
Speaker 1: with focus, I think we can make a big difference.
Speaker 1: And I think this is a time to be to
Speaker 1: be to be surgical. Even when we look at the region,
Speaker 1: every country is not being effected in the same way
Speaker 1: in this crisis, and we need to act with that
Speaker 1: with that nuance. Well, this is also interesting in that
Speaker 1: we talk about you know, there are areas of the
Speaker 1: world where there's potentially oversupply. We also have a incredible
Speaker 1: amount of food waste, which also contributes to climate change.
Speaker 1: I mean, it's this really vicious cycle of things that
Speaker 1: are all connected that we need to kind of tackle
Speaker 1: at the same time. You know, So how do we
Speaker 1: kind of think about some of those issues tied altogether
Speaker 1: in weekend? Mean, you guys are working and offer products
Speaker 1: in terms of bioengineering, as you said, to kind of
Speaker 1: provide that floor yield and help it out. How do
Speaker 1: we even go further where the world can be slow
Speaker 1: to adopt and feel comfortable about some of this bioengineering?
Speaker 1: You know, the US back well that that that that
Speaker 1: is that is going good aspect of it because the
Speaker 1: regulatoryform frameworks for biotechnology have been kept the same way
Speaker 1: for the last two decades. Prourity and today humanity has
Speaker 1: hand much better waste of assessing whether technology is viable
Speaker 1: or not. And I think that that's part of what
Speaker 1: we need to operate in the system, right, I mean,
Speaker 1: the first technology that came about, how can we assess
Speaker 1: whether that technology is suitable or not for the system
Speaker 1: in a much faster way? But your question, I think
Speaker 1: that this is an issue of managing surplus and and
Speaker 1: and demand of food. So again, small farmers, I think
Speaker 1: might be a tool that have more of an impact
Speaker 1: in Africa where you don't have infrastructure and would it
Speaker 1: would take enormous effort an investment to catch up. When
Speaker 1: you think about and I think that we need to
Speaker 1: to be careful about the false tradeoffs by your fuels
Speaker 1: and food. It depends on where you're making that question.
Speaker 1: If you're in the US or if you're in Latin America,
Speaker 1: you might end up making the wrong column because you
Speaker 1: might be banning by your fuels thinking that that will
Speaker 1: have an impact on the food space, and at the
Speaker 1: end of the day, you will basically end up with
Speaker 1: at the end of the chain with food waste. So
Speaker 1: I think that again we need to be careful about
Speaker 1: the solutions that we find to this, because applying one
Speaker 1: recipe to a global security issue for food is not
Speaker 1: gonna work. I might even create a worst worst situation.
Speaker 1: That was an excerpt from Carol Master's panel discussion with
Speaker 1: Mauricio Rodriguez of Bayer Food Systems for the Future CEO
Speaker 1: and founder Earther and Cousin and Bio Series Crop Solutions
Speaker 1: CFO Enrique Lopez le Hube and Marcella Escobari of U
Speaker 1: said it was part of Gateway Latin America. Are Bloomberg
Speaker 1: New Economy convening in Panama. For the full conversation, just
Speaker 1: go to Bloomberg dot Com. Still ahead on Bloomberg Business Week,
Speaker 1: we go from food shortages to component backlogs. We speak
Speaker 1: with Sono CEO Patrick Spence, and he tells us why
Speaker 1: his company isn't ready yet to breathe a sigh of
Speaker 1: relief even after strong quarterly learnings. This is Bloomberg Broadcasting
Speaker 1: from the financial capital of the World Boomberg eleven Frio
Speaker 1: in New York to Washington, d C. Bloomberg to Boston,
Speaker 1: Bloomberg one oh six one to San Francisco, Bloomberg nine
Speaker 1: sixty to the country Sirius XM Chado one nine team,
Speaker 1: and around the globe the Bloomberg Business app and Bloomberg
Speaker 1: Radio dot Com. This is Bloomberg Business Week. High end
Speaker 1: audio equipment maker son no It shares John after second
Speaker 1: quarter results came in better than expected. That was back
Speaker 1: on May eleventh. The company maintained its full year two
Speaker 1: revenue guidance. It trimmed the high end of its adjusted
Speaker 1: EBA Duff Forecast analysts called the latest earnings quote impressive,
Speaker 1: while also noting the rising cost of product components is
Speaker 1: having an impact on gross margin. Caroline I caught up
Speaker 1: with Sona's president and CEO, Patrick Spence just after those
Speaker 1: results came out. We broke down the quarter and the
Speaker 1: company's outlook. There's been a ton of demand from our
Speaker 1: customers and that's continued. So we talked last quarter about
Speaker 1: the backlog we've been working through that. We still have
Speaker 1: a backlog, so we still can sent continue to see
Speaker 1: strong consumer demand, and I just I'm so thankful and
Speaker 1: proud of the way our team has continued to execute
Speaker 1: to actually be able to go above and beyond and
Speaker 1: actually deliver in what is such a challenging, uh, you know,
Speaker 1: industry wide supply chain kind of environment. Hey, Patrick, backlog,
Speaker 1: how much of it is just trying to keep up
Speaker 1: or how much is it because the supply chain has
Speaker 1: created some of that backlog? Oh, it's all to do
Speaker 1: with supply chain. I mean, we you know, we uh
Speaker 1: you know, we're seeing those challenges that everybody's seeing in
Speaker 1: Shanghai with the ports we do some manufacturing in China.
Speaker 1: Thank goodness. We diversified into Malaysia and we're also diversifying
Speaker 1: into Vietnam, so we were able to deliver more than
Speaker 1: many companies. You know, we've navigated the last eight quarters
Speaker 1: better than most components. Remain a real challenge as well,
Speaker 1: So um it's all supply chain at this point. You know,
Speaker 1: everybody is talking about consumer demand, but from everything we
Speaker 1: see at this point, consumer demand remains strong. You know,
Speaker 1: I love what you said about your supply chain diversifying
Speaker 1: too Malaysia and elsewhere. Are you going to continue to
Speaker 1: do that? Like, how do you think about the supply
Speaker 1: chain post pandemic? Oh yeah, I mean host pandemic. And
Speaker 1: then as well, I think geopolitically before that, right, we
Speaker 1: were thinking we need to be more diversified, make sure that,
Speaker 1: um it's more resilient in the face of some of
Speaker 1: these challenges that happened, and if anything, these zero COVID
Speaker 1: lockdowns in China have just really underscored that. So we'll
Speaker 1: continue to do that and try and build more resilience,
Speaker 1: more flexibility into the system as well. Help characterize where
Speaker 1: you are with supply chain challenges. Are you in a
Speaker 1: better position than you were in last time we spoke
Speaker 1: back in February, are a backlogs worse at this point
Speaker 1: because of covid zero. Yeah, well you may recall that
Speaker 1: back then we thought that by the second half of
Speaker 1: two things would get a little bit better. It does
Speaker 1: not look like that right now. So this quarter in
Speaker 1: particular is going to be challenging, and it looks like
Speaker 1: right through two we'll see component challenges. You know, let's hope,
Speaker 1: you know, covid um restrictions left right, and we end
Speaker 1: up in a better place in China, But components do
Speaker 1: not look to be getting that much better. So that's why,
Speaker 1: you know, we had to kind of factor that into
Speaker 1: our forward guidance. For sure, we're still confident we can
Speaker 1: you know, navigate these choppy waters to deliver the kind
Speaker 1: of revenue that we've set out to but it's going
Speaker 1: to cost us a little bit more. But how much
Speaker 1: more is it gonna cost? Because we're seeing inflationary pressures
Speaker 1: throughout the supply chain right now, and look what consumers
Speaker 1: are experiencing as well. They're seeing those inflationary pressures even
Speaker 1: beyond just energy and food. What specifically is costing more?
Speaker 1: How much more is it costing? And how much are
Speaker 1: you absorbing that versus raising prices. So we're absorbing all
Speaker 1: of it right now. We raised prices last September, so
Speaker 1: it was about an average of ten percent across the board.
Speaker 1: You know, we saw continued strong demand, so we didn't
Speaker 1: lose any momentum off the back of that. So I
Speaker 1: think it shows kind of for our customer at least
Speaker 1: um some degree of price in elasticity, if you will.
Speaker 1: But you you know, always want to make sure that
Speaker 1: you're optimizing for the value you're delivering for those customers.
Speaker 1: But it's really two things. One is the component costs,
Speaker 1: so we're seeing, you know, just astronomical component costs out
Speaker 1: there today, um, so we've factored that in. And then
Speaker 1: the other thing is these logistics, the shipping, the management,
Speaker 1: all of that that we expect to stay elevated for
Speaker 1: a period of time. And so it's really translated into
Speaker 1: about a half a point on our growth smart And
Speaker 1: you know, the nice thing is we've done a lot
Speaker 1: of work um in that area of the last five years,
Speaker 1: so we'll still be within our long term guidance range
Speaker 1: of forty seven percent ROS margin, which is pretty incredible
Speaker 1: in this day and age. But um, you know there's
Speaker 1: been a cost in terms of doing that, but you
Speaker 1: know we're managing that and making sure we deliver for
Speaker 1: our customers, managing and also developing and introducing new products.
Speaker 1: Tell us about so No voice control. Yeah, so something
Speaker 1: that really builds on an acquisition we made a couple
Speaker 1: of years ago. We've created a voice assistant which is
Speaker 1: very focused on the sons experience itself. So being able
Speaker 1: to control son No speakers really go deep with music
Speaker 1: services as well. And one of the most important things
Speaker 1: is that it really respects your privacy. So all of
Speaker 1: the processing is done on the son No speaker as
Speaker 1: opposed to you know, going to the cloud like which
Speaker 1: is done with Google and Amazon and some of the others.
Speaker 1: We do not collect your data. Um, we don't want
Speaker 1: to advertise to you all of those things that I
Speaker 1: know so many people have been concerned about, and so
Speaker 1: we think it's going to be a real hit um
Speaker 1: with our customers. And it's not exclusionary to Amazon or Google.
Speaker 1: You can run those assistants as well in a Solar speaker.
Speaker 1: This goes in addition to it, so we're super excited
Speaker 1: for people to try that. So Patrick disclosure we always
Speaker 1: did to our audience. Both Tim and I are customers
Speaker 1: of Sons. I know the brand well. So can this
Speaker 1: new UM voice control? Can we tack it on old systems? Yes,
Speaker 1: you can as long as you have a voice enabled speaker. UM.
Speaker 1: It will be available in the United States June one
Speaker 1: for anybody that has a Sonos voice enabled speaker. So
Speaker 1: we just download the new firmware. Role there you have it,
Speaker 1: and talking to my gets better over time. That's the
Speaker 1: promise that was Patrick Spence, President and CEO at Sons.
Speaker 1: You're listening to Bloomberg business Week. Coming up next our
Speaker 1: conversation with Carrier CEO Dave Getlind on the company's commitment
Speaker 1: to serving the world's growing middle class and the industrial
Speaker 1: giants contribution to trying to combat climate change. This is Bloomberg.
Speaker 1: You're listening to blue Bird Business Week with Carol Messer
Speaker 1: and Bloomberg Quick takes Tim Stinovan from Bloomberg Radio. When
Speaker 1: Carol and I took part in the Milk and Institute
Speaker 1: Global Conference earlier this month, the recruiting topic during our
Speaker 1: panels and conversations with e s G Environmental, Social and
Speaker 1: Governance Policy Dave Gitlin, his chairman and CEL at Carrier Global.
Speaker 1: It's a multinational company well known for its HVAC systems,
Speaker 1: it's home appliances, and more. He joined Carol and Me
Speaker 1: with his thoughts on how to meet the demands of
Speaker 1: a more climate focused customer base and his company's business outlook.
Speaker 1: We feel very confident in where we are and where
Speaker 1: we're going, and a big part of it has to
Speaker 1: do with the secular trends you mentioned like E s G.
Speaker 1: But we looked at our first quarter orders were up
Speaker 1: ten percent. Our backlog is up over thirty percent versus
Speaker 1: last year, so demand has continued to be very strong.
Speaker 1: Backlog up because the supply chain problems are just demands. Well,
Speaker 1: partly we have some overdue because the supply chain, but
Speaker 1: it's really because a demand. Our orders have been strong
Speaker 1: multiple quarters in a row. They continue to be strong.
Speaker 1: United States very strong. Europe continues. There's a lot of
Speaker 1: anxiety about Europe, but if you were to be in
Speaker 1: one of our internal meetings, you'd be very bullish on Europe.
Speaker 1: Orders across our portfolio continue to be very strong. We
Speaker 1: have obviously a watch like others on China, but demand
Speaker 1: in our residential business, large commercial are light commercial business,
Speaker 1: which is h VACT for things like K through twelve
Speaker 1: very very strong in the United States, retail with people
Speaker 1: coming back, so we do see very very strong demand
Speaker 1: right now. Would you say that the primary driver of
Speaker 1: demand is reopening, that desire for businesses and schools to
Speaker 1: make sure that they have clean and healthy air for
Speaker 1: the people who are in their buildings. That's a big
Speaker 1: piece of it. If you take K through twelve, it's
Speaker 1: a vertical that's traditionally been starved for capital, and all
Speaker 1: of a sudden in the last in the last year,
Speaker 1: they've been given a hundred and ninety billion dollars in governments, yes,
Speaker 1: by the U. S. Government, and it comes in three essays.
Speaker 1: The last is a hundred twenty billion that's going to
Speaker 1: be spent over these next few years, and a good
Speaker 1: chunk of that's going to go to h v A
Speaker 1: C because it's not need to build more energy efficient,
Speaker 1: more sustainable type solutions. But schools are very aware of
Speaker 1: the criticality of the health of the indoor environment, and
Speaker 1: that's what COVID has really done, is shined a light
Speaker 1: on the criticality of having safe and healthy indoor environments.
Speaker 1: If you're in a school system, it not only helps
Speaker 1: prevent a spread of airborne illnesses like COVID one and
Speaker 1: thirteen kids have asthma, and then you also look at
Speaker 1: kids test better when you have lower CEO two levels.
Speaker 1: So there's multiple benefits and a lot of that spending
Speaker 1: is going. So our k through twelve orders in the
Speaker 1: first quarter of So are we all Dave looking at
Speaker 1: things differently post pandemic about because we understand the air
Speaker 1: quality really makes a difference. Or is it just something
Speaker 1: that Okay, we were worried about the pandemic and we're
Speaker 1: not so worried now are you saying that? Are you
Speaker 1: seeing that kind of as a sustained concern and then
Speaker 1: a sustained upgrade, you know, And I think what's happened
Speaker 1: is you can see there's a certain amount of anxiety
Speaker 1: when people go into very crowded indoor environments where your
Speaker 1: shoulders shoulders. So we're very confident that it's sustained. You know,
Speaker 1: if you take bottle water in the United States, people
Speaker 1: spend thirty six billion dollars on bottle water when it's free.
Speaker 1: And what's happened is people are sensitized to that's a
Speaker 1: safer way to drink water. What's going to happen with
Speaker 1: health errors because it's invisible. People don't know whether or
Speaker 1: not it's safe. Our job is to make air visible.
Speaker 1: And what we're selling now is a new digital platform
Speaker 1: we call abound, which can make air visible. It's an
Speaker 1: aggregated scorecard of whether or not the air that you're
Speaker 1: breathing is safe. And our goal is to make that ubiquitous.
Speaker 1: So when you come into Bloomberg, or you go into
Speaker 1: a restaurant, or you go into a school, it's an
Speaker 1: you can see it in the Atlanta Braves Games in
Speaker 1: Trumans Park. It's an aggregate score that tells you you
Speaker 1: are in a safe and healthy indoor environment. So that's
Speaker 1: our goal to make it sustainable is make it visible.
Speaker 1: But this only works for HVAC systems and filtration systems
Speaker 1: that are carrier systems right. Our our system can work
Speaker 1: with others as well, like it can overlay with anyone's
Speaker 1: building management system or anyone else's equipment. It's a it's
Speaker 1: a digital tool that we've launched in partnership with a
Speaker 1: WS to really make it so you know, in anywhere
Speaker 1: we can attach the sensors and collect the data. It
Speaker 1: looks at CEO two levels, particular matter rate on t
Speaker 1: V O C. So it's a way to kind of
Speaker 1: get data and make it visible so you get confident
Speaker 1: to go back indoors. How much of what you're doing
Speaker 1: is upgrades of existing systems day versus what you're what
Speaker 1: is new construction, because I'm trying to get an idea
Speaker 1: of construction that's going on right now. Well in the
Speaker 1: large in the large commercial side, it's seventy new construction
Speaker 1: and replacement. And if we look at that space, we
Speaker 1: look at the Architectural Building Index because that's a six
Speaker 1: month leading indicator of people work on architectural designs and
Speaker 1: advance of course of construction and the A B I
Speaker 1: you want that to be north of fifty. It's been
Speaker 1: north of fourteen months in a row. So there is
Speaker 1: demand for large commercial buildings. In the residential and light
Speaker 1: commercial space, it's the reverse. It's eight percent replacement and
Speaker 1: new construction, and residential has been Residential for US was
Speaker 1: up over in the first quarter. Light commercial, which is
Speaker 1: things like data center's retail K through twelve that was
Speaker 1: up over in the first quarter, so very strong demand
Speaker 1: in that particular vertical. All right, I'm gonna go back
Speaker 1: to you sound positive and optimistic. So I'm trying to
Speaker 1: figure out where we are in this economic cycle. You know,
Speaker 1: I think there is this there's this anxiety that is
Speaker 1: very understandable because obviously with the inflation we've seen people
Speaker 1: know that leads to rate increases, which typically slows in economy.
Speaker 1: So you can understand the anxiety. But when you kind
Speaker 1: of go back to things like secular trends that we
Speaker 1: know there's going to be demand for things like more
Speaker 1: energy efficient h v A C systems. So in Europe
Speaker 1: are orders for heat pumps, for commercial heat pumps where
Speaker 1: were the market leader, They were up thirty percent in
Speaker 1: the first quarter. As Europe weans itself off Russian gas,
Speaker 1: you know there's going to be more demand for systems
Speaker 1: like heatpumps. You know that if you're if your air
Speaker 1: conditioner fails when it's hot, it's going to be replaced.
Speaker 1: You know, people spend time at home, hopefully don't yes,
Speaker 1: hopefully get so sorry a spot like that, you can
Speaker 1: help the quarter care. So what you say is like
Speaker 1: it was an old system twenty years or so, and
Speaker 1: it's much more efficient, Like it's just the technology continues
Speaker 1: to get better and better, and we see the government
Speaker 1: require it, yes, and people in governments incentivize it. But
Speaker 1: people are also mixing up, you know, because people spend
Speaker 1: more time at home. They don't want it when their
Speaker 1: air conditioner goes off and on, you know, makes that sounds,
Speaker 1: So they're actually going for variable speed, more higher end equipment.
Speaker 1: So to your point, there is this juxtaposition with anxiety
Speaker 1: about the future and some secular trends like E s
Speaker 1: G and healthy indoor environments are rising middle class globally,
Speaker 1: only seven percent of people in India have air conditioning
Speaker 1: and it's a pretty hot country, you know, at one
Speaker 1: point four billion people. So you can see that these
Speaker 1: forces coming together that's driving demand. Our challenge. We both
Speaker 1: want to ask you questions climate change. What signs are
Speaker 1: you seeing of Like you're putting systems in places you
Speaker 1: never thought you'd put air conditioning, Like that just speaks
Speaker 1: to kind of what's going on in our environment globally. Yeah,
Speaker 1: you know what's really encouraging is the continued trend around
Speaker 1: around heat pumps, in particular for h v A C
Speaker 1: system so um in in Europe, almost all new construction
Speaker 1: is going to heat pumps in Europe for residential we're
Speaker 1: seeing in the United States states like South Carolina by
Speaker 1: more they look at we look at their heat pump
Speaker 1: where they sell heatpumps with um connected to their split
Speaker 1: system versus a cooling only. They sell more integrated heat
Speaker 1: pumps than they do cool and only. So the demand
Speaker 1: for heatpumps in the United States and globally is going
Speaker 1: up exponentially. More energy efficient solutions in the United States
Speaker 1: next year there's going to be the entire country is
Speaker 1: going to a switch to higher serre units in the
Speaker 1: South fourteen and fifteen, North thirteen and fourteen. So governments
Speaker 1: globally are incentivizing their populations to drive more energy efficient solutions,
Speaker 1: and that's what we do. So that's why there is
Speaker 1: this overall anxiety. But when you have things that impact
Speaker 1: can make a meaningful impact on climate change, that there's
Speaker 1: going to be demand. If there's going to be things
Speaker 1: that impact health and wellness, there is going to be demand.
Speaker 1: There there is this overarching anxiety. But at the same
Speaker 1: time you do sound really optimistic, as as Carol said,
Speaker 1: but there is a lot to be concerned about. We've
Speaker 1: got concerns about the recession here in the United States
Speaker 1: that milk, and we heard a lot about a potential
Speaker 1: recession in Europe and concerned about the customer in Europe.
Speaker 1: What what keeps you up at night? What concerns you
Speaker 1: right now? Our biggest challenge is keeping up with the demand.
Speaker 1: So clearly we understand the concerns around recessions. Um and
Speaker 1: you know, we all kind of read about it, and
Speaker 1: you can understand some of the underlying reasons why there
Speaker 1: is that anxiety. But it's canceling orders. No one's canceling
Speaker 1: orders are demand has you know, our biggest challenge right
Speaker 1: now is truly keep you know, we have chip shortages.
Speaker 1: We're working around the clock to rectify those. But as
Speaker 1: we operationally perform, we're taking share because we're able to
Speaker 1: support our customers better than some of our peers. We
Speaker 1: are managing inflation. Came into the year saying that we
Speaker 1: would get a five percent price increase a billion dollars
Speaker 1: on twenty billion of sales. In anticipation of a billion
Speaker 1: dollars of inflation. The only good news with the anxiety
Speaker 1: that folks have about the economy is some of the
Speaker 1: commodities have recently been coming down copper, steel, aluminums. So
Speaker 1: if we can keep prices at the at the raised
Speaker 1: levels that we've done, and if we get some relief
Speaker 1: on some of the commodities, that should drop through with
Speaker 1: some margins date based on what you're seeing in terms
Speaker 1: of commodities. I thought that was a really important point.
Speaker 1: Do you think we have hit peak inflation? Um? It's
Speaker 1: hard to call that because I you know, every time
Speaker 1: we feel like it's peak inflation, the next quarters worse.
Speaker 1: So UM, I could tell you that, UM, we have
Speaker 1: seen over the last few weeks some relief, but it's
Speaker 1: really hard to anticipate what's going to happen a few
Speaker 1: quarters from now. You know, we've been able to now
Speaker 1: stay out in front of bits. So we've been very,
Speaker 1: very aggressive because last year we came in. Last year
Speaker 1: we chased inflation all the year with pricing. This year
Speaker 1: we said we are not going to chase inflation. We
Speaker 1: are to get out in front from pricing. We have
Speaker 1: to get pricing in the first quarter, and we're very
Speaker 1: confident that we will do very well on the pricing
Speaker 1: side this year. Dave, Our high energy prices actually good
Speaker 1: for you because it compels people to upgrade their systems
Speaker 1: to more efficient ones. Yes, that does. Overall, that does
Speaker 1: drive demand for more energy efficient solutions, which is actually
Speaker 1: good for our business. That was Carrier Global Chairman and
Speaker 1: CEO Dave Gitlin. And that wraps up the first hour
Speaker 1: of the weekend edition of Bloomberg Business Week from Bloomberg Radio.
Speaker 1: I'm Tim Stanovic. Carol Master on assignment this week in
Speaker 1: Panama with our Bloomberg New Economy team, and coming up
Speaker 1: in our next hour, we're gonna hear from her panel
Speaker 1: discussion on the entrepreneurship economy, plus our conversations with the
Speaker 1: CEO of New Balance and H and R. Block. This
Speaker 1: is Bloomberg. This is Bloomberg Business Week inside from the
Speaker 1: reporters and editors who bring you America's most trusted business magazine,
Speaker 1: plus global business, finance and tech news as it happened.
Speaker 1: Bloomberg Business this Week with Carol Messier and Bloomberg Quick
Speaker 1: Takes Tim Stinovin on Bloomberg Radio. Plenty ahead in our
Speaker 1: second hour of the weekend edition of Bloomberg Business Week,
Speaker 1: including a conversation with the CEO of New Balance on
Speaker 1: the importance of manufacturing on us soil and our guide
Speaker 1: to summer travel with the team from Bloomberg Pursuits. First
Speaker 1: up this hour, though, we go back to more CEO
Speaker 1: conversations that we recently had. This time we're checking out
Speaker 1: on the health of the U S. Consumer. We do
Speaker 1: that with Jeff Jones, the president and CEO of H
Speaker 1: and R Block. Carol and I spoke with Jeff back
Speaker 1: on May eleventh, that was following the firm's third quarter
Speaker 1: profit beat. He told us that H and R Block
Speaker 1: is set to generate roughly fifty million dollars in earnings
Speaker 1: this year, and yet the tax prep giant is still
Speaker 1: feeling the weight of rising prices and rising wages. There's
Speaker 1: two sides of it for us as a professional service.
Speaker 1: You know, where it impacts our business the most is
Speaker 1: in labor. But remembering most of our labor our tax professionals,
Speaker 1: and they largely aren't paid an hourly rate age. They're
Speaker 1: paid based on their certification and their and their returns
Speaker 1: as a business. These kind of times are really what
Speaker 1: we're built for. I mean, we're fundamentally here to help
Speaker 1: people be good with their money, and so whether that's
Speaker 1: getting the most they can in their tax refund or
Speaker 1: offering a really value driven product like spruce. So we
Speaker 1: look at inflation both ways, the way it impacts our
Speaker 1: business and the ways we can help consumers. Based on
Speaker 1: the consumers that you worked with over the last year,
Speaker 1: Jeff wrapping up their tax returns back in April, how
Speaker 1: is the American consumer? Because consumers are dipping into their
Speaker 1: savings in order to be able to afford higher prices
Speaker 1: for things, how is the American consumer? Well, I think
Speaker 1: going into these times, the consumer was more prepared than
Speaker 1: they have been in history, meaning we saw personal balance sheets,
Speaker 1: we saw in our business tax refunds, or stimulus payments
Speaker 1: or unemployment benefits. But obviously those wells are not very deep.
Speaker 1: And so from a mindset perspective, we absolutely know the
Speaker 1: American consumer, who we see every day is is worried
Speaker 1: about where this is headed and what it will mean
Speaker 1: and how long that little bit of savings they've built
Speaker 1: up can actually last. And so that's why, again we're
Speaker 1: so focused on helping people with their money as as
Speaker 1: core to our business. Well, that's what I love about
Speaker 1: talking with you, Jeff, because I do feel like you
Speaker 1: really get to mainstream America, and it's so easy for
Speaker 1: us on the coast to talk about the high end
Speaker 1: of our labor market and a high end of our
Speaker 1: society which sometimes doesn't feel the strains and stresses of
Speaker 1: inflation as much, or you know, supply chains and so
Speaker 1: on and so forth. How would you describe that, you know,
Speaker 1: middle America consumer individual, how they are doing what you
Speaker 1: guys see front and center? And then how would you
Speaker 1: describe the overall economic situation when so many people are
Speaker 1: talking either stagflation and recession. Curious how you see it? Yeah? Well,
Speaker 1: I thank you for remembering that, Errol, because it is
Speaker 1: a real pleasure of of my role in our business.
Speaker 1: I am out a lot with consumers, and you know,
Speaker 1: the American consumer has a resilient mindset, and so it's
Speaker 1: important that we never judge people as struggling because from
Speaker 1: a mindset perspective, they do whatever it takes to get by.
Speaker 1: And like I said, they've had a little more cash
Speaker 1: in the pocket coming into where we are now. But
Speaker 1: we do see worry about you know, because we all
Speaker 1: we hear it on the news, we see it at
Speaker 1: the pumps, gas prices, dairy prices. Where is this going war?
Speaker 1: There's a lot of uncertainty and instability, and so we
Speaker 1: do see consumers worry, but we also see them to
Speaker 1: be incredibly resilient and doing whatever it takes to get by,
Speaker 1: which is obviously how we try to help them. How
Speaker 1: how would you describe the economy right now? Broad macro thought, uh, transitioning? Okay,
Speaker 1: And you know it's interesting because you guys did raise
Speaker 1: your forecast, your revenue guides for the full year. So
Speaker 1: do you feel like you do have decent transparency and
Speaker 1: visibility because here we are what is it May? Early May?
Speaker 1: But you feel comfortable? Yeah, we do. We we feel
Speaker 1: like we understand how our fiscal year will play out,
Speaker 1: which is through June thirty. We feel very good about
Speaker 1: those results. You know, this is one of the first
Speaker 1: times we've been able to raise in many, many years.
Speaker 1: And if I just take a step back for a second,
Speaker 1: you know you've heard me talk about our strategy we
Speaker 1: call block horizons. But really across the board, are assisted
Speaker 1: tax prep business, are small business business, the launch of
Speaker 1: spruce Wave in Toronto. Really, all of our businesses right
Speaker 1: now are showing great signs of momentum and that's what
Speaker 1: gives us the confidence to raise. Like we did, how
Speaker 1: do you keep the momentum going beyond the media term?
Speaker 1: So when you're thinking about the long term strategy here, Jeff,
Speaker 1: So for us, we feel really good about the strategy.
Speaker 1: We spend a lot of time developing it, and like
Speaker 1: business oftentimes does, it comes down to deeply understanding the
Speaker 1: customer and executing at a high level. And that's what
Speaker 1: Block is doing right now. And so that's my job
Speaker 1: as a leader and my partners as our leadership team,
Speaker 1: is to help the company prioritize, focus on the fewest,
Speaker 1: most impactful things possible, and execute like crazy. And that's
Speaker 1: really where we're focused to finish the year strong. That
Speaker 1: was Jeff Jones, President and CEO of H and R. Block.
Speaker 1: He joined us back on May eleven, just after the
Speaker 1: company reported earnings. You're listening to Bloomberg Business Week coming up,
Speaker 1: we go back to Panama City for a lesson and
Speaker 1: how to build a better entrepreneurship economy, especially in underserved
Speaker 1: regions across the globe. This is Bloomberg. This is Bloomberg
Speaker 1: Business Week with Carol Messer and Bloomberg Quick Takes Tim
Speaker 1: Stinovik from Bloomberg, where THEO this past week my co host,
Speaker 1: Carol Master, went to the Bloomberg New Economy Gateway Latin
Speaker 1: America event in Panama. She hosted a panel on the
Speaker 1: region's entrepreneurship economy with Summit Depended, the chief operating officer
Speaker 1: at d Local, and Helica fuent Is, the founder and
Speaker 1: president of move Up, and Mante Pence, the founder and
Speaker 1: co CEO at Loft. The excerpt begins with Summit Depended
Speaker 1: explaining the disconnect and getting startup funding for underserved people,
Speaker 1: especially for women. I think there are multiple reasons for that.
Speaker 1: I think in most cases, what we what we saw,
Speaker 1: and I would say this is more When I was
Speaker 1: an agent and was trying to connect what I would
Speaker 1: call founders with capital sources, what we saw was that
Speaker 1: there was a big impact because of the networks that
Speaker 1: people lived in. A lot of the capital races that
Speaker 1: happened in the earliest stages of a company's life journey
Speaker 1: journey typically happened from friends and family. Who you network with.
Speaker 1: What's your immediate circle makes a huge difference to where
Speaker 1: you end up taking your company. I do think that
Speaker 1: that's changing. I think there is more structured and purposeful
Speaker 1: investment criteria that investors are using today. Uh. And this
Speaker 1: brings into question an important point which is close to
Speaker 1: my heart, which is about how purposeful should it be.
Speaker 1: Should investors have more specific guidelines as to where and
Speaker 1: how they invest or should it be really driven by
Speaker 1: just a profit motive? And I think that's the social
Speaker 1: question we need to understand as we think about investors.
Speaker 1: Most investors are driven by a profit motive. There is
Speaker 1: no other motive. But sometimes just a profit motive is
Speaker 1: not the best motive when it comes to where capital
Speaker 1: is actually flowing in the short term. And I think
Speaker 1: when there is abundant capital, it becomes easier to go
Speaker 1: after social causes. I think as capital titans, it's going
Speaker 1: to actually become harder for some of the social cause
Speaker 1: is to get funded. And that's going to be an
Speaker 1: important question, and I'm durious to hear Angelica's views on this.
Speaker 1: You're very close to this, Angelica, But I would think
Speaker 1: that if capital actually becomes more constrained, it's going to
Speaker 1: be harder to do good than to make money. Is
Speaker 1: it becoming harder? They just remind everybody if you have questions,
Speaker 1: please please submit them to the Bloomberg New Economy app
Speaker 1: we'd love to hear from you. So is it becoming
Speaker 1: tougher already as capital it is becoming tougher. The thing
Speaker 1: is that I believe, you know, to your point about
Speaker 1: our people going to or investors going to do just
Speaker 1: you know, I for profit company to invest in. I
Speaker 1: think that the younger generations are a lot more creative
Speaker 1: on funding solutions for social problems that we face today.
Speaker 1: So I think there's a lot more companies out there,
Speaker 1: startups out there, there are for profit for purpose. So
Speaker 1: in that respect, I think we're changing mind frame about
Speaker 1: doing things. You know, I've been working on women's issues
Speaker 1: for a little over thirty years of my life, and
Speaker 1: to me it's very important, you know, the creativity that
Speaker 1: women have, and most of the ones that at least
Speaker 1: I personally know, have those two concepts. Within the startups,
Speaker 1: they want to do good because it's it's something great
Speaker 1: for environment or for women themselves or you know, well
Speaker 1: they do need right but yeah, right, And but it's
Speaker 1: also for profit company. And I think that we're seeing
Speaker 1: those two linked together a lot more. But yes, definitely
Speaker 1: there is you know, a restriction of capital growing into companies. Well,
Speaker 1: they I wanted to ask you three of you, is
Speaker 1: what is it that you think the world needs to
Speaker 1: understand about Latin America as an incubator for innovation and ideas?
Speaker 1: And you know, come on back in. I mean you
Speaker 1: could have you you yourself have lived around the world, right,
Speaker 1: and I just wonder, why is it that you chose
Speaker 1: to start your company up in Latin America, specifically in Brazil.
Speaker 1: Why what was it about Brazil that made you want
Speaker 1: to do it? Yeah, I think it actually really connects
Speaker 1: with uh, you know, point around diversity and gender equality
Speaker 1: and generally just the depth of the op opportunity set
Speaker 1: that we see in Brazil and Latin market. I was
Speaker 1: really really excited, uh, to to solve hard and big problems.
Speaker 1: Now it's not that you know, other places around the
Speaker 1: world don't offer heart problems or big opportunities, but I
Speaker 1: felt that, um, you know, you could really especially when
Speaker 1: it comes to bringing technology, UM and uh innovative you know,
Speaker 1: new ways of doing things to bear. Uh. The Latin
Speaker 1: market ecosystem is just you know, really underfunded and uh
Speaker 1: and short on innovation. So I think that's that's what
Speaker 1: attracted me initially. UH, that's what kept me here for
Speaker 1: for over a decade and and certainly UH, you know,
Speaker 1: UH there's an increasing kind of ecosystem of UM foreign
Speaker 1: founders or foreign founder led UH companies also a lot
Speaker 1: across fertilization. One of the large largest company is that
Speaker 1: went public here in Brazil last year, New Bank, is
Speaker 1: led by an on Brazilian. So I think that there
Speaker 1: over the last decade or so, it has been a
Speaker 1: recognition that, uh, there's a lot of opportunity UM in
Speaker 1: bringing technology to bear. And you're talking about less incremental improvements,
Speaker 1: you're really talking about fundamentally changing people's lives UM. And
Speaker 1: I think, you know, just connecting a little bit to
Speaker 1: the point around opportunities for a linment and and UH
Speaker 1: investment in in female lead UM companies. You know, I've
Speaker 1: invested in over a hundred fifty companies, both personally and
Speaker 1: also through Canary, which is a seat stage fund that
Speaker 1: I helped co found and co create here in Brazil.
Speaker 1: UM and I you know, UM, one of the challenges
Speaker 1: that we have is even if you put a pure
Speaker 1: profit motive aside, UH, for now, we're missing UM a pipeline.
Speaker 1: We're missing a more fertile ecosystem UM of female ad companies,
Speaker 1: So there is still a chicken and neck problem, UM
Speaker 1: to which I think part of the solution are actually
Speaker 1: the companies are the latest stage companies themselves. So one
Speaker 1: of the things that we're doing at Loft is, uh,
Speaker 1: you know, we have you know, we have a stated
Speaker 1: goal of gender equality across the company, but not just
Speaker 1: for the company as a whole. I think it's relatively
Speaker 1: easy to say that you have women men across the company,
Speaker 1: but women in leadership positions, um, you know, with which
Speaker 1: then becomes a feeder into uh women that are well educated,
Speaker 1: that are well trained, and have the ability and the
Speaker 1: financial wherewithal to step aside and say, um, you know,
Speaker 1: I've um, you know, worked here for a couple of
Speaker 1: years and I love to start my own company. And
Speaker 1: we're starting to see that, um you know. We're still
Speaker 1: talking about small numbers, but I think that this last
Speaker 1: cycle of innovation, which frankly was mostly led at least
Speaker 1: at least at the top of the pyramid by UM,
Speaker 1: by male founders, male C, E, O, s U, is
Speaker 1: now seeing a kind of second wave of female led
Speaker 1: UM executive ranks who you know, this is my hope
Speaker 1: certainly will go out there and UH and start companies
Speaker 1: on their own. We're certainly encouraging that proactively. We're investing
Speaker 1: behind that. It's very early days, but I think it's UH.
Speaker 1: It's not not just incumbent upon the UM investors, it's
Speaker 1: also incumbent upon the companies that are being successful in
Speaker 1: scaling to UH TO to TO TO, to strengthen that
Speaker 1: UM as they promote UM, as they promote general quality
Speaker 1: across the board. That was part of Carol Master's panel
Speaker 1: discussion with the local CEO SUMI to pand It Move
Speaker 1: Up founder and president and Helica Fuentes, and Mate Pence,
Speaker 1: the founder and co CEO at Loft. For the full
Speaker 1: conversation on the entrepreneurship economy from the Bloomberg New Economy
Speaker 1: Gateway Latin America event, go to Bloomberg dot Com and
Speaker 1: next on Bloomberg Business Week, New Balance CEO Joe Preston
Speaker 1: on the importance of manufacturing close to home. This is
Speaker 1: Bloomberg broadcasting from the financial capital of the World, bloom Burg.
Speaker 1: He live in Frio in New York to Washington, d C.
Speaker 1: Bloomberg to Boston Bloomberg one oh six one to San Francisco,
Speaker 1: Bloomberg nine six to the country, Sirius XM Chado one
Speaker 1: nine team, and around the globe, the Bloomberg Business app
Speaker 1: and Bloomberg Radio dot Com. This is Bloomberg Business Week
Speaker 1: with strains on global supply chains. We're hearing more about
Speaker 1: companies thinking about or actually relocating supply chains back to
Speaker 1: the US. New Balance has been producing shoes and apparel
Speaker 1: on its home soil for more than seventy five years.
Speaker 1: It just opened its fifth factory in New England. It
Speaker 1: also has one in the UK. Joe Preston is the
Speaker 1: company's president and CEO, and Caroline I recently spoke to him.
Speaker 1: We asked him all about the biggest headwinds that are
Speaker 1: facing US manufacturers. Check it out. The biggest issue, quite frankly,
Speaker 1: on the cost front, is on the distribution part of it.
Speaker 1: The cost of containers, the cost of the shipping product
Speaker 1: is just so far ahead of what it was prior
Speaker 1: to pandemic, and so we're we are absorbing some of
Speaker 1: those costs and we are passing on some of them
Speaker 1: through the selected price increases. So manufacturing in the United
Speaker 1: States is just is just one part of it. Because
Speaker 1: the the components that go into the materials that go
Speaker 1: into making a shoe come from all over the world.
Speaker 1: So where are you seeing sort of the most supply
Speaker 1: chain snarls and the biggest price increases. Well, I mean
Speaker 1: right now, you're seeing it in oil. So the impact
Speaker 1: of oil is going to impact rubber, which is obviously
Speaker 1: on the bottom of every running shoe that's made. It
Speaker 1: impacts e v A, which is in the midstle. It
Speaker 1: impacts some of the synthetics that are that are in
Speaker 1: the that are that are in the uppers on shoes,
Speaker 1: that are in the materials of polyester, etcetera, that are
Speaker 1: made on apparel, athletic apparel. So you're seeing that verberate
Speaker 1: throughout the entire product cost chain, if you will. So okay,
Speaker 1: So that's good to know. And I'm also curious about
Speaker 1: labor costs in particular, Um, whether it's that stores or elsewhere.
Speaker 1: How are you dealing with that? What kind of increases
Speaker 1: have you seen there? Uh? And so I'm also curious
Speaker 1: about if you're getting all the workers that you need
Speaker 1: to do what you need to do. Yeah, So we
Speaker 1: just opened up a new factory, as you mentioned in
Speaker 1: the wind masks, and we've hired over a hundred people,
Speaker 1: and quite frankly, we were a little bit surprised that
Speaker 1: that that it was. It wasn't easy. It's not easy
Speaker 1: hiring people today, but it went a lot smoother than possible.
Speaker 1: And we believe it's because it's proxim in proximity to
Speaker 1: our other factory up there, which is about five miles
Speaker 1: away in Lawrence, and because we have a long tenure
Speaker 1: associate there. There's a lot of word of mouth on
Speaker 1: whether or not you're a good employer or not, and
Speaker 1: so I think that's helped us in uh In in
Speaker 1: hiring for that facility. But certainly wages are going up everywhere,
Speaker 1: whether it's inside distribution centers, whether it's retail stores, or
Speaker 1: on the factory floor. So how much have you had
Speaker 1: to increase wages that these factories in order to attract
Speaker 1: and retain talent. Well, we went through a process in
Speaker 1: and which we raised associate wages in our factories. We
Speaker 1: just felt it was time. Our folks and our factories
Speaker 1: have been working there and continued to work there throughout
Speaker 1: the pandemic. Actually they closed for three weeks in March
Speaker 1: and open back up and began to produce over a
Speaker 1: million masks in the question whyday UH to use our
Speaker 1: factories to to make products to help the medical community.
Speaker 1: So we we've seen wages increase and UH and we
Speaker 1: increased them again this year when you see the struggles
Speaker 1: that we've had with supply chains during the pandemic, and
Speaker 1: so coming out of it, like, what do you think
Speaker 1: are the big smart macro discussions we need to be
Speaker 1: having right now? I think we've all learned through COVID
Speaker 1: that early on how the country was not prepared and
Speaker 1: we were not controlling our own destiny. We didn't have
Speaker 1: manufacturing facilities for just simple but basic UH protective equipment
Speaker 1: for for our medical community. So just prior to COVID,
Speaker 1: we came up with this philosophy of about controlling our
Speaker 1: destiny and it was all about getting closer to the
Speaker 1: consumer work. And we fundamentally believe that domestic manufacturing allows
Speaker 1: us to get closer to the consumer, to detect changes
Speaker 1: and trends, and to allow us to reach to respond quicker.
Speaker 1: But it is challenging. Were the only athletic footwear manufacturer
Speaker 1: that produces here in the US, and so the supplier
Speaker 1: base is limited, and so there's a need for additional
Speaker 1: incentives for suppliers to come back on to to support
Speaker 1: a community so that domestic manufacturing can can can prosper.
Speaker 1: You've been at this company for a long time. I
Speaker 1: think you joined it back in if I'm correct. So
Speaker 1: I mean this whole retail industry continues to change significantly.
Speaker 1: What have you seen in the you know your arc
Speaker 1: and just even the ark of the last couple of
Speaker 1: years in terms of increased digitization, Uh, in terms of
Speaker 1: how people shop. Um, you know where this kind of
Speaker 1: retail world has gone, and there's so much competition. There's
Speaker 1: new upstart brands. You guys have been around for a while,
Speaker 1: but there's a lot of selection for consumers out there. Yeah.
Speaker 1: When I joined the company, the company was a hundred
Speaker 1: and fifty million and today we're four point four billions.
Speaker 1: So I've seen a lot of change for us here
Speaker 1: in the US and how we have grown around the globe.
Speaker 1: But retail has has gone through a complete transformation, and
Speaker 1: it's really been driven by the digital revolution. It's putting
Speaker 1: the consumer completely in control of when they want to shop,
Speaker 1: how they want to shop, and where they want to shop.
Speaker 1: And it's up to brands to make sure that they
Speaker 1: are up for that challenge. That was New Balance President
Speaker 1: and CEO Joe Preston. You're listening to Bloomberg Business Week
Speaker 1: coming up next, it's time to pack your bags. Are
Speaker 1: Bloomberg Pursuits team is out with its summer travel guide
Speaker 1: for this is Bloomberg. You're listening to Bloomberg Business Week
Speaker 1: with Carol Messer and Bloomberg Quick to Tim Stinovan from
Speaker 1: Bloomberg Radio. All right, well, that's Mellow Yellow, of course,
Speaker 1: by the singer songwriter Donovan, popular in the nineteen sixties,
Speaker 1: but we all know it. It is a good introduction
Speaker 1: to our weekly deep dive into our Bloomberg Pursuits section.
Speaker 1: My co host, Carol Master traveling for work this week,
Speaker 1: but we do want to talk about leisure right now.
Speaker 1: For that, I'm joined by Bloomberg Pursuits Deputy editor Jim
Speaker 1: Daddy also Travel editor Nicki Eckstein. They're here with us
Speaker 1: to help build the perfect itinerary for our summer vacations. Yes,
Speaker 1: there's still time to do that, Jim. I want to
Speaker 1: start with you, though, why are we listening to Mellow Yellow.
Speaker 1: Mellow Yellow has a prominent role in one of the
Speaker 1: stories this week. Uh, summer travel season is upon us,
Speaker 1: and we're all feeling a little bit sensory deprived, and
Speaker 1: so Nikki came with this really great idea about how
Speaker 1: to reinvigorate your senses. So we picked five, you know,
Speaker 1: the five senses, and found itineraries for each one where
Speaker 1: you can kind of engage those senses and get back
Speaker 1: in touch with them. Nikki, what were you thinking whenever
Speaker 1: you were had this sort of like, you know, wide
Speaker 1: world of travel, uh, and how to engage your senses?
Speaker 1: You know, we always think about travel in terms of
Speaker 1: a destination first, Right where am I going? Do here?
Speaker 1: It feels a little bit like people don't care where
Speaker 1: they're going. They want to go anywhere and they want
Speaker 1: to feel something. And I think in comparison to how
Speaker 1: we were traveling, we were still a little bit conscious
Speaker 1: of COVID, We were still social distancing. And I just
Speaker 1: remember going to the Caribbean and seeing the bluest water
Speaker 1: I thought I had ever seen in my full entire life,
Speaker 1: because my eyes had not laid you know, I haven't
Speaker 1: laid eyes on that conger in so long. But touch, uh,
Speaker 1: the sound of people close by, all of those other
Speaker 1: senses were still far in the background, and this year,
Speaker 1: I think we can really flood our senses in a
Speaker 1: in a less restrained way, and that's what we were
Speaker 1: going for here. Yeah, I remember, you know, going to
Speaker 1: the Caribbean as well, and the sun on my skin
Speaker 1: just felt a little bit warmer. You didn't get to
Speaker 1: touch any whales, though, did You did not touch any
Speaker 1: well anywhere. I want to talk a little bit about that, Nikki,
Speaker 1: because I think this was was such a great way
Speaker 1: to approach the travel section in the pursuit section for
Speaker 1: the magazine, and I want to start with that that
Speaker 1: sense of touch. You found uh an area of the
Speaker 1: world where people can travel to not so easily, it
Speaker 1: turns out, and make contact with whales. Yeah. So you
Speaker 1: think about Baja California in Mexico, and you think about Cabo.
Speaker 1: This is a part of that that state granted Cabos
Speaker 1: and Baja California sore. This is regular Baja California just
Speaker 1: north of that um. And there's a bay with or
Speaker 1: sheltered lagoons in Baja California. It's called Laguna soun Ignacio.
Speaker 1: And there is an operator called Baja Expeditions that runs
Speaker 1: the only luxury leaning trips to this area. Getting there
Speaker 1: is a little bit of a schlett. But once you arrive,
Speaker 1: you stay in sort of like a plush safari camp
Speaker 1: kind of a situation, and you go out on these
Speaker 1: boat rides where you can visit gray whales. These are
Speaker 1: huge animals. They grow up to almost a hundred thousand
Speaker 1: pounds each. They're enormous, and you're on tiny little boats
Speaker 1: and what do you do. You splash in the water
Speaker 1: to draw their attention, and they come right up to
Speaker 1: you and they introduce you to their babies who are
Speaker 1: born in these lagoons learning how to swim, and you
Speaker 1: can interact with them, and you can physically touch them.
Speaker 1: They give you permission to touch them, which is pretty
Speaker 1: unprecedented in terms of wildlife encounters and ethical wildlife encounters. Nikki.
Speaker 1: The writer Sarah Clements has a really funny image describing
Speaker 1: what it's like to touch one of these These are
Speaker 1: huge animals, as you mentioned, but how did she describe that?
Speaker 1: It's a little bit like touching a hard boiled egg.
Speaker 1: Hard boiled egg also talked about similar debscratching a dog belly,
Speaker 1: but a two ton puppy at that um, she has.
Speaker 1: She has a very very funny way of writing. And
Speaker 1: she also really struggles with this idea of petting wild
Speaker 1: animals because it's something that we as travel writers usually
Speaker 1: are telling people not to do. So how is this okay, Nikki?
Speaker 1: It's okay because the whales are interacting on their own terms. Um.
Speaker 1: There are a lot of restrictions put into place on tourism.
Speaker 1: There are only sixteen tiny little boats allowed into an
Speaker 1: approved viewing area at any one time, which is very
Speaker 1: few people. Uh. The whales, it's at their discretion whether
Speaker 1: they come up to you or not. Nothing is being
Speaker 1: done to feed them to entice them, um. And and
Speaker 1: all of the interactions are completely on their terms. Interestingly enough,
Speaker 1: wills are very sense three animals. We're kind of coming
Speaker 1: back to this idea of the five senses. They communicate
Speaker 1: the a touch, which I did not know. The babies
Speaker 1: roll all over their moms to signal that they're ready
Speaker 1: to nurse. They touch one another to talk. Dude, this
Speaker 1: is something that they like to do. I want to
Speaker 1: talk about site the next sense that you cover in
Speaker 1: the sniky uh and I think for anyone who saw
Speaker 1: HBO's white lotus, Uh, this this will be a familiar image,
Speaker 1: but the forgotten Polynesian are of voyaging or wayfinding. For that,
Speaker 1: we go to Hawaii tell us about it. Yes, so
Speaker 1: we you know, we really wanted to do something surprising
Speaker 1: with each sense. We didn't want to give you, you know,
Speaker 1: the classic blue water in the Caribbean, because we've all
Speaker 1: been there and done that, as I have already established, right,
Speaker 1: but what about seeing at night? What about seeing in
Speaker 1: the dark. That's what our writer Jen Murphy did when
Speaker 1: she learned how to read the stars in order to
Speaker 1: steer her outrigger canoe in Maui, which is the sport
Speaker 1: that she had been first doing for fitness. And when
Speaker 1: she realized that there was this kind of forgotten cultural
Speaker 1: aspect lurking beneath the surface of this thing that she'd
Speaker 1: been doing to work out, she got really interested in it,
Speaker 1: started learning and ended up training with a master voyager
Speaker 1: who who teaches her about reading the stars and reading
Speaker 1: the way of like fingerprints in the ocean. And it
Speaker 1: is poetic and lyrical and beautiful to think about how
Speaker 1: nature sends all of these visual signs our way that
Speaker 1: um we take for granted, and she stopped taking them
Speaker 1: for granted in this piece and teaching us a little
Speaker 1: bit about what we can be looking for. Yeah, that
Speaker 1: was what was interesting to me about this story. You know,
Speaker 1: you think of going to Maui and it's like a
Speaker 1: feast for the eyes kind of thing, you know, this
Speaker 1: sort of you know, stereotypical travel writing kind of thing,
Speaker 1: um nikki. But one of the things that was really
Speaker 1: impressive to me about this is that it feels very
Speaker 1: relevant to average people like myself, who may not have
Speaker 1: the best sense of direction. Um, you know. She uh,
Speaker 1: she's getting trained on how to read the stars, and
Speaker 1: she's like, what can you see? And she immediately goes
Speaker 1: to the constellations, the big Dipper, Ryan's belt. But that's
Speaker 1: not really how you navigate, right, Well, that's what I
Speaker 1: would have done too, right, like super relatable moment, and
Speaker 1: the master navigator immediately corrects her just because she looks
Speaker 1: up into the sky and and that's such an interesting thing, right,
Speaker 1: Like you think, how do you look at the stars?
Speaker 1: How do you read the stars without looking up? But
Speaker 1: as it turns out, the stars are read like a
Speaker 1: compass if you look out onto the horizon. And she
Speaker 1: teaches Jim the writer, she she teaches her that as
Speaker 1: you watch stars move from their origin point on the
Speaker 1: horizon up into the sky, each one has a trajectory
Speaker 1: and if you learn the patterns of the stars when
Speaker 1: they come up on the horizon, then you can continue
Speaker 1: tracking them throughout the course of an evening and understand
Speaker 1: where you are. But what's on the horizon is really
Speaker 1: what's telling, not what's directly above you. Yeah. It takes
Speaker 1: some courage, I think though, to to get out on
Speaker 1: the open ocean in the dark, and something I think
Speaker 1: I would have to be convinced about. Um we we uh,
Speaker 1: we now get to mellow yellow and for that we
Speaker 1: we we go with the sound sense, and James, I
Speaker 1: want to start with you here. For that we we
Speaker 1: find ourselves in Botswana's Alcavoo delta. Yeah. You know, we
Speaker 1: were talking about these senses in our meetings, and I
Speaker 1: really vividly remember Nikki being like, you know, this is
Speaker 1: gonna sound like I'm talking about site, but I'm really
Speaker 1: talking about sound. Nikki, you want to take it from here.
Speaker 1: So when you think about uh, you think about sound.
Speaker 1: You don't think about any verb that ends been watching,
Speaker 1: do you exactly? Birdwatching is the subject of this essay.
Speaker 1: And that's because I don't know if you've ever gone
Speaker 1: birdwatching in any capacity, but you bird watch with your
Speaker 1: ears first, and the key to find ending beautiful birds
Speaker 1: is to listen for them. And if you listen for birds,
Speaker 1: you can actually see your entire surrounding in a different
Speaker 1: way because what they're chirping about and the songs that
Speaker 1: they're making will actually point your eyes to all sorts
Speaker 1: of things that you might not see otherwise. And that's
Speaker 1: what this piece is about. We've got to cover the
Speaker 1: other senses in the remaining time we have sent. It
Speaker 1: takes us to Tokyo Nikki uh and too. I think
Speaker 1: a really surprising conclusion in this piece for a writer
Speaker 1: looking for breakfast that is not fish spoiler yellow would work. Yes,
Speaker 1: this is you know this. This piece is about a
Speaker 1: travel truism gone wrong, and the writer is convinced that
Speaker 1: all the guide books must be right in saying that
Speaker 1: you've got to get to Sukiji Fish Market at four
Speaker 1: m and see the fish auctions. This is obviously before
Speaker 1: the Sukigi Fish Market had closed. That she goes on
Speaker 1: this trip, but um she wakes up at the crack
Speaker 1: of dawn tries to do this thing that she wants
Speaker 1: to check off of a bucket list that's been established
Speaker 1: for her by all the outsiders that told her that
Speaker 1: it was the thing to do, and she arrives at
Speaker 1: the market still completely full and bloated from her night
Speaker 1: of indulgences before a big thank you to Bloomberg Pursuits
Speaker 1: Deputy editor Jim Gaddy and Travel editor Nikki Eckstein for
Speaker 1: our guide to summer travel. And that wraps up the
Speaker 1: weekend edition of Bloomberg Business Week from Bloomberg Radio. Thanks
Speaker 1: so much for joining us. I'm Tim Stanivik. Carol Master
Speaker 1: returns next week. Be sure to tune into Bloomberg Business
Speaker 1: Week Monday through Friday, starting at two pm Wall Street
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Speaker 1: broadcast on YouTube. Just search Bloomberg Global News and check
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Speaker 1: This is Bloomberg.