WEBVTT - Kohl’s Skyrockets as Stock Becomes Traders’ Latest Meme Darling 0:00:02.720 --> 0:00:10.600 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.600 --> 0:00:14.560 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.640 --> 0:00:18.560 Eastern on Applecarplay and Android Auto with the Bloomberg Business App. 0:00:18.640 --> 0:00:21.880 Listen on demand wherever you get your podcasts, or watch 0:00:21.960 --> 0:00:23.120 us live on YouTube. 0:00:23.680 --> 0:00:26.000 Holes their shares surge as much as one hundred and 0:00:26.040 --> 0:00:29.120 five percent in early trading. Now there's shares, well, they're 0:00:29.160 --> 0:00:32.239 about thirty six percent. It's just a record move. A 0:00:32.320 --> 0:00:36.000 lot of mentions by retail traders on social media. Let's 0:00:36.000 --> 0:00:38.360 bring in someone who knows a little bit more about this. 0:00:38.520 --> 0:00:41.320 Let's bring in Mary Ross Gilbert. She's Bloomberg Intelligence senior 0:00:41.400 --> 0:00:45.159 equity analyst covering all things retail. So Mary, can you 0:00:45.159 --> 0:00:46.680 tell us is this a meme stock? 0:00:47.960 --> 0:00:50.960 Well, it's acting like a memestock, that's for sure, Lisa. 0:00:51.600 --> 0:00:54.320 And as you pointed out, it was on social media, 0:00:54.360 --> 0:00:57.440 it looked like midday yesterday there was a post saying 0:00:57.840 --> 0:01:02.200 showing a Bloomberg chart and showing the short interest and 0:01:02.240 --> 0:01:04.560 if you look at the number of shares or the 0:01:04.600 --> 0:01:08.319 shares borrowed versus the total float, it was about forty 0:01:08.400 --> 0:01:11.399 nine percent, which is pretty high. And it's near a 0:01:11.600 --> 0:01:14.080 historic high at least over the last couple of years, 0:01:14.440 --> 0:01:17.319 and so the post sort of circled that and then 0:01:17.360 --> 0:01:21.959 it identified and noted, hey, how can you be short 0:01:21.959 --> 0:01:25.720 this stock and sleep well at night? And then apparently 0:01:25.760 --> 0:01:29.039 that kind of triggered other posts throughout I guess into 0:01:29.080 --> 0:01:32.600 the evening yesterday, and so of course in pre market, 0:01:32.760 --> 0:01:35.360 you know, we saw the share surge, as you pointed out, 0:01:35.400 --> 0:01:38.920 over two hundred over one hundred percent, and you know 0:01:39.040 --> 0:01:41.760 yesterday the stock was up about eight percent. We saw 0:01:41.880 --> 0:01:44.520 retail stocks on the move yesterday as well, and so 0:01:44.560 --> 0:01:47.400 it could be you know, as one of your earlier 0:01:47.520 --> 0:01:52.520 commendators commendators discussed, you know, with such a strong market overall, 0:01:52.560 --> 0:01:55.680 this is a sector that has been beaten down largely 0:01:55.720 --> 0:01:58.560 with tariffs and then of course with execution issues. When 0:01:58.560 --> 0:01:59.640 we're talking about. 0:01:59.400 --> 0:02:03.040 Coals, Mary, has a company said anything either at last 0:02:03.040 --> 0:02:05.279 evening or today in response to the stock movement? 0:02:05.480 --> 0:02:09.320 Absolutely not, there is There are no releases from the company. 0:02:09.840 --> 0:02:12.240 So I mean, is this something? I mean, what are 0:02:12.240 --> 0:02:14.680 you hearing from you know, the clients that you talked to, 0:02:14.720 --> 0:02:17.280 institutional investors that you talked to, how are they are 0:02:17.280 --> 0:02:19.120 they selling into this? What are they doing. 0:02:20.840 --> 0:02:26.639 Yeah, I'm not hearing anyone discussing exactly what their activity is, 0:02:26.680 --> 0:02:30.200 but you can imagine that there's probably a fair amount 0:02:30.240 --> 0:02:32.680 of hedge funds involved. And so when you think about it, 0:02:32.960 --> 0:02:36.359 the company is highly levered. They have bonds, and hedge 0:02:36.360 --> 0:02:41.280 funds typically will take a position, let's say, in certain bonds, 0:02:41.360 --> 0:02:43.359 and then they'll go short the stock. So I think 0:02:43.400 --> 0:02:46.600 we do have some some of that activity and that's 0:02:46.600 --> 0:02:49.160 how they're positioned. And of course, you know there could 0:02:49.200 --> 0:02:52.239 have been a short squeeze that was triggered with this activity. 0:02:52.760 --> 0:02:55.799 This is usually what we'll see in a situation like this, 0:02:56.400 --> 0:02:59.160 So I think that's kind of what we're seeing in 0:02:59.200 --> 0:03:01.160 the activity and the shares. 0:03:01.080 --> 0:03:04.000 And Mary before all of this news came out, How 0:03:04.120 --> 0:03:05.640 was the stock doing before? 0:03:05.800 --> 0:03:07.600 How is Cole's performing before all this? 0:03:08.440 --> 0:03:10.880 Oh it's been atrocious. I mean, this spot is so 0:03:11.000 --> 0:03:14.440 you can look at three years, two years, five years, 0:03:14.480 --> 0:03:17.640 year to date, and the stock has been off significantly 0:03:18.040 --> 0:03:20.680 and that's due to falling revenues. I mean, if you 0:03:20.680 --> 0:03:23.080 look at the revenues over the last few years, it's 0:03:23.120 --> 0:03:26.280 down over two billion dollars. And really, when you look 0:03:26.280 --> 0:03:28.919 at the core business it's down even more. And that's 0:03:29.000 --> 0:03:32.040 even with adding you know, one point eight billion in 0:03:32.080 --> 0:03:34.760 revenues from so fora So it shows that there is 0:03:34.920 --> 0:03:37.680 trouble in the core business. And of course they've rotated 0:03:37.720 --> 0:03:41.440 through several CEOs and they're on an interim CEO as 0:03:41.440 --> 0:03:45.480 they hunt for a permanent their fifth CEO and just 0:03:45.560 --> 0:03:46.360 over two years. 0:03:46.480 --> 0:03:49.680 Oh boy, geez all right, Mary, that's that explains it all. 0:03:49.800 --> 0:03:52.160 Mary Roskilbert, thank you so much for joining us. Mary Roskilbert. 0:03:52.280 --> 0:03:55.360 There's the retailers for Bloomberg Intelligence. She's based out there 0:03:55.400 --> 0:03:57.400 in our Los Angeles euro. 0:03:59.120 --> 0:04:02.800 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:04:02.880 --> 0:04:05.960 weekdays at ten am Eastern on Apple Coarclay, and Android 0:04:06.000 --> 0:04:09.280 Auto with the Bloomberg Business App. Listen on demand wherever 0:04:09.360 --> 0:04:13.160 you get your podcasts, or watch us live on YouTube. 0:04:13.320 --> 0:04:15.240 General Motors. That's where we went to get to it 0:04:15.280 --> 0:04:17.200 took a big hit from President Trump's tariffs. Are you 0:04:17.200 --> 0:04:20.719 ready for this, Paul Okay? One point one billion dollar 0:04:20.760 --> 0:04:23.560 profit hit. So what kind of impact is that going 0:04:23.600 --> 0:04:25.120 to have for the company. Well, we want to hear 0:04:25.160 --> 0:04:27.840 from the expert about all this, So let's find out, 0:04:27.880 --> 0:04:30.520 and let's go to David Wells. He's Bloomberg Detroit bureau chief. 0:04:30.600 --> 0:04:33.400 He's joining us live from Detroit. So, David, were you 0:04:33.640 --> 0:04:36.000 surprised with that figure one point one billion dollars? I mean, 0:04:36.040 --> 0:04:40.600 we heard from Stalantis too, kind of saying something similar yesterday. 0:04:40.760 --> 0:04:43.000 No, not surprised at all. GM said they were going 0:04:43.040 --> 0:04:45.240 to take a four to five billion dollar hit, or 0:04:45.680 --> 0:04:48.200 that they had forty five billion dollars in exposure this 0:04:48.320 --> 0:04:50.279 year to tariffs and then they would only be able 0:04:50.279 --> 0:04:55.040 to offset about thirty percent of it, and the measures 0:04:55.080 --> 0:04:57.000 they're using talk set that you really won't see to 0:04:57.040 --> 0:04:59.200 the second half. I thought there would be a pretty 0:04:59.200 --> 0:05:02.599 big hit to it. I don't think the street was 0:05:02.600 --> 0:05:07.479 surprised either, because the forecast for GM's earnings were for 0:05:07.560 --> 0:05:09.520 a pretty big drop off of the second quarter of 0:05:09.600 --> 0:05:12.120 last year. Already, GM did better than that because they 0:05:12.120 --> 0:05:15.040 did have some things, better profits in China than we 0:05:15.080 --> 0:05:18.719 saw a year ago and better sales in the US 0:05:18.720 --> 0:05:21.160 that helped them. But overall, a pretty tough quarter, and 0:05:21.200 --> 0:05:23.719 it really shows that the car companies are going to 0:05:23.800 --> 0:05:28.040 have a tough time getting anything close to pre tariff 0:05:28.120 --> 0:05:30.839 profits going forward, because there's just no easy way to 0:05:30.839 --> 0:05:31.520 get around them. 0:05:31.839 --> 0:05:34.599 So I mean, is what we're to take away from 0:05:34.640 --> 0:05:37.520 the Stalantis numbers yesterday and the GM numbers today is 0:05:37.520 --> 0:05:40.839 that the autumn manufacturers, for whatever reason, maybe they're just 0:05:40.880 --> 0:05:43.000 not able to or they chose not to pass along 0:05:43.320 --> 0:05:46.240 the bulk of their cost increases to consumers. Is at 0:05:46.720 --> 0:05:48.839 a policy or is that just an economic reality? 0:05:49.920 --> 0:05:52.440 It's an economic reality. And look Stoantis has a lot 0:05:52.440 --> 0:05:54.440 of other issues. You know, they're going to do some 0:05:54.440 --> 0:05:58.360 pretty heavy restructuring, which they talked about yesterday. But look, 0:05:58.720 --> 0:06:01.000 we're at a period right now. We're interest rates are 0:06:01.040 --> 0:06:05.160 at pretty high levels. You have historically not record but 0:06:05.200 --> 0:06:07.880 pretty close to record new vehicle prices in the US 0:06:07.960 --> 0:06:10.760 right now, average monthly payment well over seven hundred hours 0:06:10.800 --> 0:06:12.719 a month. We have a record number of people I 0:06:12.720 --> 0:06:14.600 think paying more than one thousand dollars a month for 0:06:14.640 --> 0:06:18.320 their monthly payment. Cars are expensive, so you know, you 0:06:18.320 --> 0:06:20.200 can go out there and say, hey, I'm going to 0:06:20.200 --> 0:06:22.680 pass this tariff cost on to consumers or even some 0:06:22.800 --> 0:06:25.680 of it, but if consumers don't pay it, then you 0:06:25.720 --> 0:06:29.400 just lose the sales. And you haven't seen huge price increases, 0:06:29.400 --> 0:06:32.200 You've seen small and you've seen companies sneak in, you know, 0:06:32.240 --> 0:06:36.760 some bigger fees for transporting the vehicle for example, things 0:06:36.800 --> 0:06:40.479 like that. But it's just not they just don't really 0:06:40.480 --> 0:06:43.480 have the ability to push in big price increases to 0:06:43.960 --> 0:06:46.359 you know, to pass on. In GM's case, a billion 0:06:46.400 --> 0:06:47.920 dollars worth of tariffs in a quarter. 0:06:48.560 --> 0:06:51.600 And it's not just terrors. What else affected profits for GM? 0:06:51.640 --> 0:06:53.599 I mean, how's their inventory for electric vehicles? 0:06:54.960 --> 0:06:56.919 They built that up in the quarter, and since the 0:06:56.960 --> 0:06:59.679 vehicles lose money, they have to count for that. That 0:06:59.680 --> 0:07:02.960 that them I think it was six hundred million dollars 0:07:03.040 --> 0:07:05.080 in the quarter they had three hundred million. Because they've 0:07:05.080 --> 0:07:08.320 had a big engine recalls, they've had higher warranty costs. 0:07:08.480 --> 0:07:10.440 It wasn't just because of that recall. They've had other 0:07:10.480 --> 0:07:13.720 issues and they're working on that. Some of it. Some 0:07:13.760 --> 0:07:16.400 of these quality issues you're seeing that are costing companies 0:07:16.440 --> 0:07:19.880 more in warranty and recall type costs are all the 0:07:19.960 --> 0:07:23.560 software that goes into electric vehicles. These are kind of 0:07:23.560 --> 0:07:28.679 first times out with new software, new infotainment systems, power 0:07:28.720 --> 0:07:32.680 management systems in these vehicles, and it's just tough for 0:07:32.720 --> 0:07:35.560 them to go out there and not be buggy, right, 0:07:35.920 --> 0:07:38.040 you know, think about how many times there's something on 0:07:38.080 --> 0:07:42.160 your smartphone that you know needs an update, and fixing 0:07:42.160 --> 0:07:45.400 that with the cars is often more expensive. So some 0:07:45.480 --> 0:07:48.320 of it was related to that. And actually, you know, 0:07:48.360 --> 0:07:51.320 they saw pricing go down with some of their fleet customers. 0:07:51.880 --> 0:07:53.840 There's a lot of competition out there for the for 0:07:53.880 --> 0:07:57.720 the corporate and fleet business, and they actually saw some 0:07:57.760 --> 0:07:59.760 downward price pressure there too, and that cost them a 0:07:59.800 --> 0:08:02.560 couple one hundred million dollars. So a lot of things 0:08:02.560 --> 0:08:05.200 in the quarter that pushed profits down. But tariffs are 0:08:05.240 --> 0:08:06.160 the real story. 0:08:05.840 --> 0:08:09.440 Here, David. You're out there in Detroit. You live and 0:08:09.440 --> 0:08:12.000 breathe this stuff every day. What's the feeling in Detroit 0:08:12.040 --> 0:08:16.520 as it relates to this evolution to evs? And how 0:08:16.560 --> 0:08:19.760 will the tariff and the tariff impact on profitability? Is 0:08:19.760 --> 0:08:22.880 that going to slow this down even more? Do you think? 0:08:24.720 --> 0:08:25.080 I do? 0:08:25.560 --> 0:08:29.920 I think everything that Trump administration is doing is really 0:08:29.920 --> 0:08:33.040 going to slow the ev transition. First of all, you know, 0:08:33.040 --> 0:08:35.559 the obvious one is there. It comes September, they're going 0:08:35.559 --> 0:08:37.240 to be getting rid of the seventy five hundred dollars 0:08:37.320 --> 0:08:41.160 tax break for qualifying electric vehicles. But you know, with tariffs, 0:08:41.280 --> 0:08:46.959 you've got battery components, electronic components, wiring harnesses. There's more 0:08:47.000 --> 0:08:49.880 wiring in an EV than in a conventional vehicle. All 0:08:49.960 --> 0:08:52.199 that stuff adds to the cost of vehicles that already 0:08:52.280 --> 0:08:54.720 lose money. Some of them are actually built overseas. In 0:08:54.720 --> 0:08:58.599 the case of Hyundai, they make some of theirs overseas. 0:08:58.640 --> 0:09:01.800 GM makes a couple of it's evs in Mexico. They 0:09:01.800 --> 0:09:05.280 do qualify for US MCA, but there are still some 0:09:05.480 --> 0:09:09.880 parts component tariffs that they can be hit with on 0:09:09.920 --> 0:09:10.840 some of these vehicles. 0:09:10.920 --> 0:09:11.280 And so. 0:09:12.880 --> 0:09:15.440 You add costs to vehicles that are already pretty expensive, 0:09:15.600 --> 0:09:19.480 and you can't pass it on. If you do, even 0:09:19.520 --> 0:09:22.280 fewer people will buy them. Companies may have less incentive 0:09:22.320 --> 0:09:24.160 to build and sell them if they lose even more 0:09:24.200 --> 0:09:26.400 money on these, So that's going to hurt as well. 0:09:26.440 --> 0:09:29.280 And then, of course Trump's rhetoric for people who are 0:09:30.120 --> 0:09:33.640 politically right of center and pretty far right is that 0:09:33.800 --> 0:09:35.960 you know, evs are a dumb purchase and they don't 0:09:35.960 --> 0:09:39.800 work for you, and I think that hurts sales as well. 0:09:39.920 --> 0:09:42.520 So all of this is just not good for the 0:09:42.520 --> 0:09:46.840 momentum that EV's had in the US before Trump got 0:09:46.840 --> 0:09:47.280 in office. 0:09:47.559 --> 0:09:49.720 Yeah, So, David, last month, the company said it would 0:09:49.720 --> 0:09:52.120 shift some production to the US from Mexico. So what 0:09:52.160 --> 0:09:54.880 other changes can we expect to see from the company, 0:09:54.960 --> 0:09:56.440 like in the last minute or so we have left. 0:09:58.200 --> 0:10:01.120 Yeah, I think you'll see them try to bring more parts, 0:10:01.440 --> 0:10:03.160 more of the parts they buy into the US, so 0:10:03.200 --> 0:10:06.280 they'll be encouraging their suppliers to do what they're doing. 0:10:06.280 --> 0:10:08.400 Will just move some production to the United States, and 0:10:08.440 --> 0:10:11.440 that'll take time, and you know, you may see them 0:10:12.640 --> 0:10:15.480 make some more production related news. What they've done is 0:10:15.480 --> 0:10:18.640 pretty big, So I'm not anticipating any big announcements. But 0:10:19.320 --> 0:10:20.680 you know, as they look at this and they find 0:10:20.720 --> 0:10:22.560 other ways to do it, you might see more vehicles, 0:10:22.559 --> 0:10:24.280 more parts built here in the US. 0:10:26.080 --> 0:10:28.760 Thank you so much, David Wells, Bloomberg, Detroit ber Chief 0:10:28.920 --> 0:10:31.640 talking about GM earnings and so much more. 0:10:31.880 --> 0:10:34.920 I think GM right here. If you go GM Equity, 0:10:35.040 --> 0:10:39.440 FA just brings up the financial statements. Their net income 0:10:39.840 --> 0:10:44.360 margin is five percent. Ok, that's it. They got like 0:10:44.480 --> 0:10:47.920 no margin, no profit margin. Anything goes wrong for these 0:10:48.080 --> 0:10:49.880 auto companies and they get screwed. 0:10:49.960 --> 0:10:51.800 You always say I never understand the auto company. 0:10:51.800 --> 0:10:53.240 I don't want to, just don't get it. And oh, 0:10:53.280 --> 0:10:55.720 by the way, my top line splat. I mean, you know, 0:10:56.200 --> 0:11:00.240 I just it's a high margin. You will make up 0:11:00.240 --> 0:11:02.400 a volume. I guess it's one of those business So 0:11:02.400 --> 0:11:05.199 it's just a tough, tough business. And then you throw 0:11:05.200 --> 0:11:07.440 on top of the TIFFs and then oh, by the way, 0:11:07.480 --> 0:11:10.640 I have to change my entire industry that I built 0:11:10.679 --> 0:11:14.160 up over the last hundred years to go electric. Yeah, 0:11:14.160 --> 0:11:15.840 I'm invest in that. Yeah, I don't know. 0:11:15.840 --> 0:11:19.120 We got a shift production us to Mexico. It's never 0:11:19.240 --> 0:11:22.040 ending from them. 0:11:22.120 --> 0:11:25.800 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:11:25.880 --> 0:11:29.280 weekdays at ten am Eastern on Applecarplay and Android Auto 0:11:29.360 --> 0:11:32.440 with the Bloomberg Business app. Listen on demand wherever you 0:11:32.480 --> 0:11:35.480 get your podcasts, or watch us live on YouTube. 0:11:36.160 --> 0:11:39.120 And we're listening to Bloomberg Intelligence. I'm Lisa Matteo alongside 0:11:39.120 --> 0:11:41.560 Paul Sweeney, and we are in the thick of earning 0:11:41.600 --> 0:11:45.360 season right among those companies today, one of them, Coca Cola, 0:11:45.559 --> 0:11:48.640 beat on second quarter sales growth, profit. But it's another 0:11:48.760 --> 0:11:51.720 headline that's getting some attention. They are launching a new 0:11:51.800 --> 0:11:55.480 coke product that's made with cane sugar. So here to 0:11:55.520 --> 0:11:57.920 tell us more about it is Candida Jay is Bloomberg Intelligence, 0:11:57.960 --> 0:12:01.520 Senior consumer products Analysts, Kenneth, thanks for joining us here 0:12:01.520 --> 0:12:04.400 from Princeton. How much of an impact did the President 0:12:04.440 --> 0:12:05.880 have on this decision from Coke? 0:12:07.360 --> 0:12:10.680 Yeah, Hi, Lisa. Well, it's hard to say, but it 0:12:10.760 --> 0:12:12.760 certainly is in sync with what Coca Cola has been 0:12:12.760 --> 0:12:15.120 doing for a long time, and that is keeping its 0:12:15.120 --> 0:12:18.040 pulse on what the consumer wants to do. It has 0:12:18.120 --> 0:12:21.240 a lot of assets at its disposal, and a cane 0:12:21.280 --> 0:12:24.719 sugar product is not novel to Coca Cola. I mean, 0:12:24.840 --> 0:12:28.480 it's produced it in the US largely more more outside 0:12:28.480 --> 0:12:31.400 of the US, but in the US on a selected basis, 0:12:31.480 --> 0:12:34.559 So it's really just going to expand that. It may 0:12:34.600 --> 0:12:39.120 have been prompted to a degree by the President's tweets 0:12:39.200 --> 0:12:42.680 or whatever, but it's certainly in sync. Like I said, 0:12:42.800 --> 0:12:44.520 you know, there's a there's an audience out there that 0:12:44.640 --> 0:12:48.920 prefers sugar based as opposed to high fructose cornci based 0:12:49.120 --> 0:12:51.520 full calorie sodas, and they're going to play into that. 0:12:51.600 --> 0:12:54.040 Most likely, it's going to be a brand Coke extension, 0:12:54.240 --> 0:12:56.480 and it's going to be sell at a premium price 0:12:56.600 --> 0:13:00.640 in selected markets to give it an aura of exclusivity. 0:13:00.720 --> 0:13:04.760 I'm guessing to command those prices and so just theys 0:13:04.760 --> 0:13:07.080 a little more excitement. It's it's one of many things 0:13:07.080 --> 0:13:09.440 Coke is doing now on the innovation front. 0:13:10.679 --> 0:13:14.160 So from Coca Cola's economic perspective, do they care which 0:13:14.280 --> 0:13:15.360 ingredient they use? 0:13:17.160 --> 0:13:19.880 Well, it depends, Paul, it depends if they can capture 0:13:19.920 --> 0:13:22.200 the premium price they're going to you know, price it 0:13:22.200 --> 0:13:25.360 at Kine. Shugar costs more than high frucos corns here. 0:13:25.480 --> 0:13:28.280 You know, a corn is a heavily, heavily subsidized crop 0:13:28.320 --> 0:13:32.920 in the US. They built their supply chain around HFCs 0:13:32.960 --> 0:13:36.640 because of that, and most consumers early, you know, they 0:13:36.679 --> 0:13:40.360 don't really notice the difference. Some do, but buy and large. 0:13:40.920 --> 0:13:44.880 You know, they've grown that franchise very well. But I 0:13:44.920 --> 0:13:47.320 guess you know some tourists that go to Mexico and 0:13:47.360 --> 0:13:50.600 they taste the sugar cane sugar coke down the air 0:13:50.640 --> 0:13:51.960 and they say, you know what, this is really good, 0:13:52.440 --> 0:13:55.160 and they want to capture the same experience in the US. 0:13:55.320 --> 0:13:58.040 I'm going to Chipotle today and they do offer the 0:13:58.160 --> 0:14:00.160 Mexican zoda there. 0:14:00.280 --> 0:14:03.080 Can I give you the history of high fructose corn syrup. 0:14:03.120 --> 0:14:06.400 It was in the nineteen seventies, with high inflation and 0:14:06.559 --> 0:14:10.400 high sugar prices. President Nixon said, do something about this, 0:14:10.760 --> 0:14:13.400 and this guy said, well, we can make a sugary 0:14:14.679 --> 0:14:19.920 tasting stuff from corn from American farmers and US high 0:14:19.960 --> 0:14:23.800 fructose corn syrup, which most doctors say is like poison 0:14:23.920 --> 0:14:26.240 to your system. There we go, thank. 0:14:26.360 --> 0:14:29.080 Don taker with the value added there. Let me ask, 0:14:29.360 --> 0:14:32.560 let me shift gears here. What is a ZIN patch? 0:14:36.480 --> 0:14:38.840 A Zin patch? Do you want to patch it? I 0:14:38.840 --> 0:14:42.280 think they made a pouch pouch. Zin pouch is a pouch, 0:14:42.320 --> 0:14:45.920 you know, it's it's an oral tobacco product. Actually, Zin 0:14:47.080 --> 0:14:51.080 doesn't even contain tobacco. It's a synthetic product. Its lads 0:14:51.080 --> 0:14:55.120 with nicotine that is a facsimile for tobacco, which a 0:14:55.160 --> 0:14:57.520 lot of people will say causes harm, and a lot 0:14:57.560 --> 0:15:00.560 of people are right. So this is a product that 0:15:01.320 --> 0:15:03.800 you know, people can get their nicotine buzz in a 0:15:04.920 --> 0:15:07.120 you know, hands off kind of way, doesn't emit smoke, 0:15:07.200 --> 0:15:10.000 doesn't offend your neighbor that you're working with, and it's 0:15:10.000 --> 0:15:12.480 done really really well. So those are really the Zin 0:15:12.640 --> 0:15:14.200 pouches that are doing really well. 0:15:14.280 --> 0:15:17.600 Yeah, yeah, I thought it was Zinfindel. The line that's 0:15:17.600 --> 0:15:21.520 no kidding, No, I that pouch so but I mean 0:15:21.800 --> 0:15:24.240 it's it's big enough a business can that Philip mars 0:15:24.280 --> 0:15:25.360 would would call it out. 0:15:27.320 --> 0:15:30.360 Oh yeah, it is in it's about eight percent of 0:15:30.360 --> 0:15:32.760 the sales, I believe at this point. But it's growing, 0:15:32.920 --> 0:15:36.160 you know, a twenty thirty percent rate, as opposed cigarettes 0:15:36.200 --> 0:15:39.480 which are flat, if not down. But you know, Icoas 0:15:39.640 --> 0:15:43.200 is their smoke free device segment, which is doing very well. 0:15:43.800 --> 0:15:46.000 But if the low large numbers at some point, that's 0:15:46.000 --> 0:15:48.640 going to slow and Zen is filling the gap. They 0:15:48.760 --> 0:15:53.000 keep the overall volumes in a positive trend. They price 0:15:53.120 --> 0:15:55.239 these things very high. There's not a lot of competition 0:15:55.840 --> 0:15:57.920 in this space. So you know, one of the things 0:15:57.960 --> 0:16:00.560 investors would say about the world of tobacco, because it's 0:16:00.560 --> 0:16:03.880 so consolidated, they can pass on a very high pricing 0:16:04.040 --> 0:16:06.200 and that's what really drives a top line and you 0:16:06.200 --> 0:16:09.440 know the cash flows and so on. And Zen plays very, 0:16:09.200 --> 0:16:11.240 very very well into that model. 0:16:11.920 --> 0:16:13.960 And how does it fair as far as we're hear 0:16:14.000 --> 0:16:16.720 about e cigarettes vaping things like that, how has Philip 0:16:16.720 --> 0:16:19.400 Marris been doing competing with this category. 0:16:20.880 --> 0:16:23.640 So they have a product called viv which is their 0:16:24.200 --> 0:16:26.760 e vapor product as opposed to what they call heat 0:16:26.840 --> 0:16:30.400 not burn, which has actual tobacco in it, and they 0:16:30.440 --> 0:16:35.040 would say as a more appealing alternative for smokers who 0:16:35.040 --> 0:16:38.840 are trying to quit. It's a lower margin product. It's 0:16:38.920 --> 0:16:40.760 kind of seen by Philip Morris as a kind of 0:16:40.760 --> 0:16:43.240 an entry level product. If for those who are trying 0:16:43.240 --> 0:16:46.480 to move away from combustible cigarettes, they can turn to 0:16:46.640 --> 0:16:50.120 e cigarettes a low cost method, and their hope is that, 0:16:50.600 --> 0:16:52.640 you know, even though it's a low margin product, their 0:16:52.680 --> 0:16:56.520 hope is that they can get that consumer maybe some 0:16:56.680 --> 0:16:59.400 at some point to trade up to their heat not 0:16:59.480 --> 0:17:04.000 burn product, which is, you know, a more profitable product 0:17:04.000 --> 0:17:04.600 for them. 0:17:04.880 --> 0:17:06.840 All right, good stuff. I mean I learned about the 0:17:06.960 --> 0:17:12.159 zin pouch today. How about it's not Zinfindel. Okay, all right, 0:17:12.280 --> 0:17:14.800 very good, so good stuff there, Ken Shay, thanks so much. 0:17:15.040 --> 0:17:19.240 Ken covers all those consumer products at companies for Bloomberg Intelligence. 0:17:19.240 --> 0:17:21.000 Appreciate getting a few minutes of this time. 0:17:22.680 --> 0:17:26.399 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:17:26.480 --> 0:17:29.840 weekdays at ten am Eastern on Applecarplay and Android Auto 0:17:29.960 --> 0:17:33.040 with the Bloomberg Business app. Listen on demand wherever you 0:17:33.080 --> 0:17:36.040 get your podcasts or watch us live on YouTube. 0:17:36.920 --> 0:17:39.280 Lis MITTEO, Paul Sweety, We're live here on Bloomberg Interactive 0:17:39.280 --> 0:17:42.480 Broker Studio. Let's talk about Lockheed Martin. Put out some 0:17:42.560 --> 0:17:45.720 numbers disappointing here, took some losses here. Let's break it 0:17:45.720 --> 0:17:49.480 down with will Lee Aerospace and Defense channels for Bloomberg Intelligence. Well, 0:17:50.040 --> 0:17:53.280 Lockheed Martin, I mean, they just do everything. What happened 0:17:53.400 --> 0:17:54.200 in the quarter. 0:17:54.359 --> 0:17:56.480 Yeah, So, I mean if you look at the quarter 0:17:56.680 --> 0:17:59.560 of the performance was modeled by this hefty one point 0:17:59.600 --> 0:18:02.800 six billion dollars chart on program losses and then another 0:18:02.800 --> 0:18:06.440 one hundred sixty nine million of other charges. There was 0:18:06.480 --> 0:18:08.919 the end gap right off. I think that was around 0:18:08.920 --> 0:18:10.480 like sixty sixty six. 0:18:10.800 --> 0:18:13.000 Let's go back to the big one one point six billion, 0:18:13.280 --> 0:18:14.239 So what's that for? 0:18:14.480 --> 0:18:16.720 So out that one point six nine hundred and fifty 0:18:16.760 --> 0:18:20.200 million is for for a classified aeronautics. 0:18:19.600 --> 0:18:20.800 Program, so they can't tell us. 0:18:20.880 --> 0:18:22.000 They can't tell us what it is. 0:18:22.080 --> 0:18:25.520 But if it's something that big and it's been going on, 0:18:25.720 --> 0:18:28.600 and in fourth quarter they also recorded another four hundred 0:18:28.640 --> 0:18:31.680 and forty million dollars or four hundred and seventy seven stop. 0:18:31.560 --> 0:18:34.160 Doing that program, then I don't know what they could 0:18:34.240 --> 0:18:36.199 tell you, but then they have to kill you. 0:18:36.359 --> 0:18:39.440 Well, given that it's a huge program and they're taking 0:18:39.920 --> 0:18:42.480 over a billion dollars of charges, what could possibly be 0:18:42.760 --> 0:18:46.439 so important so big and most likely is the A 0:18:46.560 --> 0:18:52.520 name six generation ISR. What's IRR Intelligence surveillance reconstants, So 0:18:52.600 --> 0:18:55.800 think of as the replacement for the SR seventy SRC. 0:18:56.520 --> 0:19:01.800 Now we're talking SR seventy one to Okay, So. 0:19:02.280 --> 0:19:05.840 If you think about in that respect, Bowen has the 0:19:06.040 --> 0:19:09.159 F forty seven, that's the sixth generator, sixth generation of 0:19:09.240 --> 0:19:12.240 fighter jet. That's going to be the biggest sixth generation program. 0:19:13.040 --> 0:19:17.000 Navy wants their own sixth generation, the FAXX. I think 0:19:17.040 --> 0:19:19.479 that Northrope has the inside tractor. When that given that 0:19:20.160 --> 0:19:22.000 Dood doesn't want to make the same mistake that I 0:19:22.040 --> 0:19:24.560 made with F thirty five, given lot UH with F 0:19:24.560 --> 0:19:27.760 three five F twenty two, given Lockie both control of 0:19:27.800 --> 0:19:30.359 the fifth generation fighters, so they break up into multiple 0:19:30.400 --> 0:19:35.399 defense contractors and have more resilient industrial base. So in 0:19:35.480 --> 0:19:41.479 that with that mindset, Bowen has F forty seven UH, 0:19:42.200 --> 0:19:45.879 Northrope pass the FAXX, and Lockie could potentially have the 0:19:46.000 --> 0:19:48.200 sixth generation reconnaissance aircraft. 0:19:48.400 --> 0:19:50.760 So what all those numbers that my son would be 0:19:50.840 --> 0:19:53.200 having a field day with this conversation right now. He 0:19:53.280 --> 0:19:57.879 is so into this is this typical of defense contracting environment? 0:19:57.920 --> 0:19:59.720 I mean growth is marginal there, you were mentoring a 0:19:59.760 --> 0:20:00.879 number of numbers before. 0:20:01.000 --> 0:20:04.800 Is this typical? I mean to this large extent, this 0:20:04.880 --> 0:20:08.840 is sort of unusual. I mean they've locky teased that 0:20:08.920 --> 0:20:11.200 they were going to they were looking at additional charges 0:20:12.119 --> 0:20:16.240 after the quarter. They didn't mention or indicate how large 0:20:16.240 --> 0:20:19.320 that magnitude was. So this sort of caught the street 0:20:19.560 --> 0:20:22.440 by surprise the size of it. But I mean, I 0:20:22.440 --> 0:20:25.240 think it just shows that this is a key program 0:20:25.280 --> 0:20:28.439 that's that's going to keep going for But even if 0:20:28.440 --> 0:20:32.240 you just strip out all the charges from the quarter 0:20:32.320 --> 0:20:35.480 and you look at the underlying performance, the performance actually 0:20:35.520 --> 0:20:38.399 was not bad. In second quarter, Aeron ONLYYX grew seven 0:20:38.400 --> 0:20:40.879 percent on high F thirty five volumes and the F 0:20:40.920 --> 0:20:44.040 thirty five, and they also took up the the prop 0:20:44.160 --> 0:20:47.600