1 00:00:02,720 --> 00:00:10,559 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:10,600 --> 00:00:14,560 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 3 00:00:14,600 --> 00:00:17,840 Speaker 1: Eastern on Apple, Coarclay, and Android Auto with the Bloomberg 4 00:00:17,920 --> 00:00:21,040 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:21,360 --> 00:00:23,520 Speaker 1: or watch us live on YouTube. 6 00:00:23,160 --> 00:00:28,360 Speaker 2: Through the Starbucks reported some pretty darn good numbers today. 7 00:00:28,560 --> 00:00:30,920 Speaker 2: Mike tell us about what's going on in Starbucks. 8 00:00:33,560 --> 00:00:37,920 Speaker 3: You know, the turnaround plans are starting to really take 9 00:00:37,960 --> 00:00:43,320 Speaker 3: a whole take a hold right now, and results really improved, rising, 10 00:00:43,400 --> 00:00:47,159 Speaker 3: you know, four percent system wide same store sales US 11 00:00:47,280 --> 00:00:47,640 Speaker 3: as well. 12 00:00:47,760 --> 00:00:49,040 Speaker 4: China was up seven percent. 13 00:00:49,400 --> 00:00:52,120 Speaker 3: You know here in the US, it's you know, mainly 14 00:00:52,159 --> 00:00:57,280 Speaker 3: about better operations, right. They rolled out new operating standards 15 00:00:58,280 --> 00:01:01,840 Speaker 3: late last year, and that they seem to be really 16 00:01:01,840 --> 00:01:05,920 Speaker 3: boosting the speed of service, which is creating happier customers 17 00:01:05,959 --> 00:01:07,200 Speaker 3: that come back more frequently. 18 00:01:07,319 --> 00:01:07,520 Speaker 5: Right. 19 00:01:08,440 --> 00:01:12,840 Speaker 3: Some food innovation including protein cold foam seems to be 20 00:01:12,920 --> 00:01:15,920 Speaker 3: hitting the mark, right, and they're doing a better job 21 00:01:15,920 --> 00:01:19,640 Speaker 3: on the marketing side. So all those are driving drove 22 00:01:19,800 --> 00:01:21,320 Speaker 3: better same Star sales than expected. 23 00:01:21,520 --> 00:01:24,679 Speaker 2: Yeah, I don't know the one I go to the 24 00:01:24,720 --> 00:01:27,200 Speaker 2: Starbucks route thirty five all Township, New Jersey. They do 25 00:01:27,240 --> 00:01:30,880 Speaker 2: a great job for me, and I've noticed the change. 26 00:01:30,920 --> 00:01:33,000 Speaker 2: I mean, you know, little things like you know, writing 27 00:01:33,000 --> 00:01:34,600 Speaker 2: your name back on the cup like they used to 28 00:01:34,640 --> 00:01:36,560 Speaker 2: back in the early days. As in addition to that 29 00:01:36,840 --> 00:01:40,760 Speaker 2: sticker which was a little antiseptic. I guess talk us 30 00:01:40,800 --> 00:01:43,840 Speaker 2: back costs there. Are they looking at their costs as well. 31 00:01:45,480 --> 00:01:49,200 Speaker 3: Yeah, they've identified two billion dollars in annual costs that 32 00:01:49,200 --> 00:01:51,040 Speaker 3: they want to get after over the next one to 33 00:01:51,160 --> 00:01:51,880 Speaker 3: two years. 34 00:01:53,240 --> 00:01:55,559 Speaker 4: You know, right now, margins have been impacted. 35 00:01:55,600 --> 00:01:58,520 Speaker 3: They've gotten those same star sales and traffic numbers up 36 00:01:58,600 --> 00:02:01,720 Speaker 3: by adding labor to the stores, right, and so they're 37 00:02:01,760 --> 00:02:05,080 Speaker 3: seeing margin compression still. So now that they got people 38 00:02:05,120 --> 00:02:08,120 Speaker 3: coming back to the stores, now that the operations are 39 00:02:08,160 --> 00:02:11,040 Speaker 3: more dialed in, you know, CEO Brian Nichol said, they're 40 00:02:11,040 --> 00:02:13,040 Speaker 3: not quite where they need to be throughout the day. 41 00:02:13,080 --> 00:02:15,680 Speaker 4: They're great at peak, but they have some improvement still 42 00:02:15,720 --> 00:02:15,920 Speaker 4: to do. 43 00:02:16,320 --> 00:02:18,680 Speaker 3: But you know, now that people are coming back to 44 00:02:18,720 --> 00:02:21,519 Speaker 3: the stores, they're gonna you know, focus a little bit 45 00:02:21,560 --> 00:02:25,040 Speaker 3: more on where they can save some money because you know, 46 00:02:25,520 --> 00:02:28,440 Speaker 3: it was a smart move real reallocating labor into the stores. 47 00:02:28,440 --> 00:02:31,800 Speaker 2: But Costley talk just about the competitive environment because you 48 00:02:31,840 --> 00:02:34,560 Speaker 2: go to like, I don't know, small towns, seems like 49 00:02:34,560 --> 00:02:37,840 Speaker 2: there's a coffee joint on every corner of these days. 50 00:02:37,880 --> 00:02:40,200 Speaker 2: What's the competitive landscape for Starbucks these days. 51 00:02:41,360 --> 00:02:43,799 Speaker 3: Well, you know, it's as it's as competitive as it's 52 00:02:43,840 --> 00:02:46,720 Speaker 3: ever been. You know, you have some of these younger 53 00:02:47,720 --> 00:02:50,480 Speaker 3: chains that seem to do really well with gen z 54 00:02:50,800 --> 00:02:55,000 Speaker 3: like Dutch Bros. And Seven Brew, and they're they're opening 55 00:02:55,080 --> 00:02:59,640 Speaker 3: up these drive through cans, you know, throughout the suburbs 56 00:02:59,639 --> 00:03:03,160 Speaker 3: across America, you know, in the cities. You know, there's 57 00:03:03,200 --> 00:03:06,200 Speaker 3: a lot of competition with these you know, very high 58 00:03:06,320 --> 00:03:10,040 Speaker 3: end coffee shops that are you know, using very you know, 59 00:03:10,280 --> 00:03:14,320 Speaker 3: very high quality coffee and and elevate and offering an 60 00:03:14,360 --> 00:03:18,360 Speaker 3: elevated food experience. So competition is tough, and that's why 61 00:03:18,520 --> 00:03:21,480 Speaker 3: you know Starbucks is is making some changes. You know, 62 00:03:21,480 --> 00:03:24,120 Speaker 3: they're focusing on on health and wellness, right They're looking 63 00:03:24,160 --> 00:03:27,160 Speaker 3: to improve the food in the bake case, They're looking 64 00:03:27,160 --> 00:03:29,720 Speaker 3: to improve the food or throughout the day they're looking 65 00:03:29,760 --> 00:03:33,480 Speaker 3: into some new innovative drink offerings to boost that that 66 00:03:33,639 --> 00:03:37,640 Speaker 3: afternoon day part. And so you know, this this is 67 00:03:37,720 --> 00:03:40,800 Speaker 3: just the beginning of what Starbucks, you know, things they 68 00:03:40,880 --> 00:03:44,680 Speaker 3: need to do for long term continued same Star sales growth. 69 00:03:45,400 --> 00:03:51,280 Speaker 2: Also, Brinker International, another big restaurant holding company here, boosted 70 00:03:51,320 --> 00:03:54,200 Speaker 2: its full year profit. Outlook what's going on in Brinker. 71 00:03:55,840 --> 00:03:56,720 Speaker 4: More of the same. 72 00:03:56,920 --> 00:04:01,560 Speaker 3: And you know CEO Kevin Hawkman worked at Young Brands 73 00:04:01,600 --> 00:04:04,120 Speaker 3: with Brian Nickels, so it shouldn't be a surprise that 74 00:04:04,160 --> 00:04:08,120 Speaker 3: they have had similar turnaround plans. Obviously, Kevin started his 75 00:04:08,920 --> 00:04:12,120 Speaker 3: a little bit earlier than Brian's, but it was about operations, 76 00:04:12,840 --> 00:04:16,440 Speaker 3: then improving the marketing. Right now, it's about continuing to 77 00:04:16,480 --> 00:04:18,840 Speaker 3: work on the food and the food quality. 78 00:04:18,960 --> 00:04:20,720 Speaker 4: So they started by. 79 00:04:20,560 --> 00:04:23,760 Speaker 3: You know, taking menu items off of the menu to 80 00:04:23,800 --> 00:04:26,200 Speaker 3: make it easier to execute, make sure people are getting 81 00:04:26,200 --> 00:04:29,400 Speaker 3: their food hot and fast. But now this year, the 82 00:04:29,480 --> 00:04:32,960 Speaker 3: story is really about improving the quality and the portions. 83 00:04:33,560 --> 00:04:38,800 Speaker 3: Nacho sales jumped one hundred and seventy percent on a relaunch. 84 00:04:40,040 --> 00:04:43,400 Speaker 4: They improved the bacon. Bacon burger sales are up thirty 85 00:04:43,480 --> 00:04:46,880 Speaker 4: or forty percent. They had a caso relaunch. 86 00:04:47,000 --> 00:04:49,800 Speaker 3: You know, those sales are up twenty percent, right so 87 00:04:49,800 --> 00:04:53,240 Speaker 3: so you know they're the money that they're spending, which 88 00:04:53,279 --> 00:04:58,120 Speaker 3: is going to impact their cost of sales negatively. You know, 89 00:04:58,240 --> 00:05:02,440 Speaker 3: customers are seeing the improvement and they're there. It's resulting 90 00:05:02,440 --> 00:05:04,880 Speaker 3: in higher satisfaction and customers are coming back. 91 00:05:04,880 --> 00:05:06,320 Speaker 4: And that's a great story. Man. 92 00:05:06,320 --> 00:05:09,040 Speaker 3: They did a you know, eight plus percent same stor 93 00:05:09,200 --> 00:05:12,320 Speaker 3: sales comp at Chili's comping over a thirty plus percent. 94 00:05:12,600 --> 00:05:14,719 Speaker 4: You know, I've never seen this in the restaurant business. 95 00:05:15,279 --> 00:05:16,560 Speaker 4: I saw incredible. 96 00:05:16,640 --> 00:05:18,760 Speaker 2: I saw the company did call out the Chili's All right, 97 00:05:18,760 --> 00:05:22,360 Speaker 2: thirty seconds left, Cracker Barrel. My favorites up eighteen percent 98 00:05:22,400 --> 00:05:24,039 Speaker 2: year to date. We got a little bit of life there. 99 00:05:25,800 --> 00:05:26,080 Speaker 4: Listen. 100 00:05:26,120 --> 00:05:28,480 Speaker 3: I think there's life throughout the restaurant industry. I think 101 00:05:28,560 --> 00:05:31,720 Speaker 3: same star sales are going to increase. They were strong 102 00:05:31,800 --> 00:05:34,880 Speaker 3: in January up until winter Storm Fern. But I think 103 00:05:35,320 --> 00:05:38,120 Speaker 3: I think, you know, tax relief and cheaper gas prices 104 00:05:39,800 --> 00:05:43,599 Speaker 3: and just a better economy are and less inflation are 105 00:05:43,680 --> 00:05:45,880 Speaker 3: all going to help restaurants spending this year. 106 00:05:46,800 --> 00:05:49,960 Speaker 6: Stay with us. More from Bloomberg Intelligence coming up after this. 107 00:05:53,800 --> 00:05:57,480 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 108 00:05:57,560 --> 00:06:00,960 Speaker 1: weekdays at ten am Eastern on Appleclock and Android Auto 109 00:06:01,080 --> 00:06:04,120 Speaker 1: with the Blueberg Business app. Listen on demand wherever you 110 00:06:04,160 --> 00:06:07,120 Speaker 1: get your podcasts or watch us live on YouTube. 111 00:06:07,960 --> 00:06:10,279 Speaker 7: It is earning season as well, and AT and T 112 00:06:10,440 --> 00:06:14,920 Speaker 7: has reported earnings. It's revenue beat estimates thanks to broadband strength. 113 00:06:15,160 --> 00:06:17,400 Speaker 7: Let's bring in John Butler. He is our go to 114 00:06:17,520 --> 00:06:19,400 Speaker 7: guy when it comes to the telecom's names. He's our 115 00:06:19,440 --> 00:06:23,800 Speaker 7: senior telecom analyst on Bloomberg Intelligence covering AT and T, 116 00:06:24,000 --> 00:06:27,279 Speaker 7: covering Verizon, covering te Mobile. Where does AT and T 117 00:06:27,440 --> 00:06:30,279 Speaker 7: stand relative to its competitors, Because as much as it's 118 00:06:30,400 --> 00:06:34,520 Speaker 7: getting a boost from customers who subscribe to its broadband services, 119 00:06:34,839 --> 00:06:39,280 Speaker 7: this is a saturated market and it's competing against big 120 00:06:39,320 --> 00:06:40,839 Speaker 7: players and small players alike. 121 00:06:41,360 --> 00:06:44,200 Speaker 5: Yeah, it's a great question. Scorelet you know, post the 122 00:06:45,160 --> 00:06:48,279 Speaker 5: earnings call, they held a breakout session with the mester 123 00:06:48,400 --> 00:06:51,400 Speaker 5: relations with the cell side, and there were a lot 124 00:06:51,400 --> 00:06:56,719 Speaker 5: of questions about how broadband or how competition is now 125 00:06:56,839 --> 00:07:02,080 Speaker 5: shifting from wireless over to broadband. I actually think AT 126 00:07:02,200 --> 00:07:05,160 Speaker 5: and T is in a great position relative to their 127 00:07:05,200 --> 00:07:09,600 Speaker 5: competitors because they're the fiber leader and they're about to 128 00:07:09,640 --> 00:07:15,119 Speaker 5: buy Luhmann's fiber business and add another million fiber subscribers there. 129 00:07:15,280 --> 00:07:19,400 Speaker 5: So in terms of their ability to sell what are 130 00:07:19,480 --> 00:07:24,720 Speaker 5: called converged packages or wireless together with broadband. They're in 131 00:07:24,760 --> 00:07:28,480 Speaker 5: a great position there because they have both fiber and 132 00:07:28,520 --> 00:07:31,880 Speaker 5: they have a smaller fixed wireless access business, which is 133 00:07:31,880 --> 00:07:33,679 Speaker 5: that wireless broadband product. 134 00:07:34,680 --> 00:07:36,880 Speaker 2: John, this is a coup of AT and T that 135 00:07:36,920 --> 00:07:39,720 Speaker 2: spends twenty twenty two billion dollars in capex every year. 136 00:07:40,400 --> 00:07:41,400 Speaker 6: What does that capex for? 137 00:07:41,600 --> 00:07:47,080 Speaker 5: Typically a lot of it, Paul is going towards wireless 138 00:07:47,160 --> 00:07:50,760 Speaker 5: network upgrades as well as the deployment of fibers. So 139 00:07:51,520 --> 00:07:54,840 Speaker 5: this year, for example, they're going to add five million 140 00:07:54,920 --> 00:07:58,480 Speaker 5: new fiber homes, but it costs about two thousand dollars 141 00:07:59,360 --> 00:08:02,880 Speaker 5: maybe twice that in some markets to build a new 142 00:08:02,920 --> 00:08:06,440 Speaker 5: what's called the fiber homes pass. So a lot of 143 00:08:06,480 --> 00:08:10,440 Speaker 5: capital is getting spent this year, next year, and maybe 144 00:08:10,440 --> 00:08:12,840 Speaker 5: to a little bit of a lesser degree in twenty eight. 145 00:08:12,920 --> 00:08:16,360 Speaker 5: That's sort of laying the foundation to build out that 146 00:08:16,520 --> 00:08:20,760 Speaker 5: fiber network and that five G wireless network. Beyond that, 147 00:08:21,080 --> 00:08:23,200 Speaker 5: AT and T has said, we're going to cut our 148 00:08:23,280 --> 00:08:27,320 Speaker 5: cap backs, we're going to lower our capital intensity, and 149 00:08:27,360 --> 00:08:29,920 Speaker 5: you're going to see a lot more free cash flow 150 00:08:30,320 --> 00:08:33,079 Speaker 5: flow through and they're going to be able to fund 151 00:08:33,080 --> 00:08:37,800 Speaker 5: hopefully some dividend growth after that and increase the share buyback. Yeah. 152 00:08:37,840 --> 00:08:40,320 Speaker 7: I'm looking at the dividend yield for AT and T 153 00:08:40,400 --> 00:08:43,760 Speaker 7: four point six percent. For Verizon, it's almost seven percent. 154 00:08:44,720 --> 00:08:46,400 Speaker 7: For Team Mobile a little bit less at two point 155 00:08:46,520 --> 00:08:50,520 Speaker 7: nineteen percent. John, Where did the telecom stand when it 156 00:08:50,559 --> 00:08:53,840 Speaker 7: comes to this rotation out of big tech looking for 157 00:08:53,880 --> 00:08:57,920 Speaker 7: some cyclicals, looking for parts of the market that haven't 158 00:08:57,960 --> 00:08:58,800 Speaker 7: been overbought. 159 00:09:01,440 --> 00:09:03,760 Speaker 8: So it's a good question. 160 00:09:03,880 --> 00:09:07,760 Speaker 5: Scorelet I always say telecoms, particularly the dividend payers like 161 00:09:07,840 --> 00:09:11,320 Speaker 5: AT and T and Verizon, are are bond proxies to 162 00:09:11,400 --> 00:09:15,200 Speaker 5: a degree. I think sentiment has been pushed around a 163 00:09:15,280 --> 00:09:17,599 Speaker 5: little bit by the fact that we have new CEOs 164 00:09:17,600 --> 00:09:21,079 Speaker 5: at both Verizon and T Mobile, and these guys are 165 00:09:21,080 --> 00:09:24,120 Speaker 5: going to be looking to make their mark. Verizon on 166 00:09:24,200 --> 00:09:27,320 Speaker 5: Friday is going to set out a new strategy set 167 00:09:27,360 --> 00:09:28,840 Speaker 5: by Dan Shulman. 168 00:09:28,480 --> 00:09:30,160 Speaker 8: Who is the new CEO there. 169 00:09:31,200 --> 00:09:34,120 Speaker 5: So there's been a little bit of concern, or more 170 00:09:34,160 --> 00:09:37,920 Speaker 5: than a little bit of concern that the competitive intensity 171 00:09:37,920 --> 00:09:40,800 Speaker 5: and wireless is going to pick up as these new 172 00:09:40,880 --> 00:09:43,480 Speaker 5: CEOs look to make their mark, and I think that 173 00:09:43,640 --> 00:09:47,079 Speaker 5: has led to some of the pressure, particularly on AT 174 00:09:47,200 --> 00:09:50,240 Speaker 5: and T. Though again this morning. I think they put 175 00:09:50,240 --> 00:09:53,640 Speaker 5: a lot of those concerns to rest with their by 176 00:09:53,760 --> 00:09:57,520 Speaker 5: reiterating their fiber plans and laying out new free cash 177 00:09:57,559 --> 00:09:58,240 Speaker 5: flow guidance. 178 00:09:59,080 --> 00:09:59,320 Speaker 6: John. 179 00:09:59,360 --> 00:10:01,800 Speaker 2: On the competitive land front, where are the cable companies 180 00:10:02,160 --> 00:10:02,720 Speaker 2: these days? 181 00:10:04,280 --> 00:10:08,880 Speaker 5: They're struggling, Paul, I mean they're at a technology disadvantage 182 00:10:08,920 --> 00:10:14,320 Speaker 5: in that they're offering broadband over those legacy coaxial cable networks. 183 00:10:14,840 --> 00:10:18,560 Speaker 5: They're doing what they can to upgrade the technology and 184 00:10:18,840 --> 00:10:22,199 Speaker 5: increase speeds on those networks, but at the end of 185 00:10:22,240 --> 00:10:26,120 Speaker 5: the day, fiber really is a superior product to everything 186 00:10:26,160 --> 00:10:30,079 Speaker 5: else on the market, and fixed wireless access, which has 187 00:10:30,120 --> 00:10:33,880 Speaker 5: been offered by the telcos, has been a very popular 188 00:10:34,040 --> 00:10:38,000 Speaker 5: choice given the fact that it's an easy setup. It's 189 00:10:38,080 --> 00:10:41,120 Speaker 5: over the air, so there's very little problems with it. 190 00:10:41,120 --> 00:10:45,160 Speaker 5: It's pretty much problem free. As broadband goes over time, 191 00:10:45,200 --> 00:10:47,640 Speaker 5: it sort of has a headroom problem. It can't offer 192 00:10:47,679 --> 00:10:51,439 Speaker 5: the same speeds as fiber. But through it all, cable 193 00:10:51,520 --> 00:10:55,360 Speaker 5: is sort of flying underneath those two products, sort of, 194 00:10:56,080 --> 00:10:59,520 Speaker 5: you know, trying to compete with what is a legacy 195 00:10:59,559 --> 00:11:00,640 Speaker 5: product in the market. 196 00:11:01,720 --> 00:11:04,200 Speaker 7: John, did we learn anything from AT and t's results 197 00:11:04,200 --> 00:11:08,440 Speaker 7: regarding iPhones and you know consumers signing on for the 198 00:11:08,600 --> 00:11:10,599 Speaker 7: latest version of the iPhone. 199 00:11:10,679 --> 00:11:14,600 Speaker 5: So great question. It's very interesting at and T over 200 00:11:14,760 --> 00:11:17,680 Speaker 5: indexes to the iPhone. They have a lot more users 201 00:11:17,800 --> 00:11:21,720 Speaker 5: than Verizon or T Mobile because they had an early 202 00:11:21,840 --> 00:11:26,920 Speaker 5: exclusivity deal when the iPhone first launched. They were asked 203 00:11:26,960 --> 00:11:30,520 Speaker 5: about the foldable iPhone that's rumored to be coming out 204 00:11:30,600 --> 00:11:33,000 Speaker 5: next year and whether that's really going to move the 205 00:11:33,120 --> 00:11:36,240 Speaker 5: dial for them. Their answer to me was interesting, I 206 00:11:36,280 --> 00:11:40,360 Speaker 5: didn't expect it, which is they've been tracking the performance 207 00:11:41,360 --> 00:11:44,960 Speaker 5: and the sales of the foldables that they have available 208 00:11:45,000 --> 00:11:48,120 Speaker 5: on the network today on the Android side, and their 209 00:11:48,240 --> 00:11:51,680 Speaker 5: expectation is that we won't see a huge bump in 210 00:11:51,800 --> 00:11:55,840 Speaker 5: iPhone sales next year with a foldable model model. I 211 00:11:55,880 --> 00:11:59,079 Speaker 5: think time will tell. I actually think foldables are going 212 00:11:59,120 --> 00:12:03,640 Speaker 5: to resonate well with people, and Android. 213 00:12:03,200 --> 00:12:05,520 Speaker 8: Isn't always the best read through there. 214 00:12:06,440 --> 00:12:08,600 Speaker 5: I think it's a different kind of user that's on 215 00:12:08,679 --> 00:12:10,640 Speaker 5: the Android phone versus iPhone. 216 00:12:10,679 --> 00:12:12,080 Speaker 8: But we'll have to see in the fall. 217 00:12:12,920 --> 00:12:16,080 Speaker 2: Stay with us more from Bloomberg Intelligence coming up after this. 218 00:12:19,960 --> 00:12:23,679 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live 219 00:12:23,760 --> 00:12:26,840 Speaker 1: weekdays at ten am Eastern on Apple corplay and Android 220 00:12:26,880 --> 00:12:30,160 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 221 00:12:30,240 --> 00:12:33,760 Speaker 1: you get your podcasts, or watch us live on YouTube. 222 00:12:34,320 --> 00:12:35,400 Speaker 6: Caroline Hydroints is here. 223 00:12:35,440 --> 00:12:36,840 Speaker 2: So there's just a lot going on in the world 224 00:12:36,840 --> 00:12:39,640 Speaker 2: of tech and Caroline heidaz b tech co anchor. I'm 225 00:12:39,679 --> 00:12:43,720 Speaker 2: gonna start with ASML some really big numbers over the night, Caroline, 226 00:12:43,720 --> 00:12:46,720 Speaker 2: from this big chip maker that I guess that bodes 227 00:12:46,720 --> 00:12:49,040 Speaker 2: well for folks that want to see continued momentum and 228 00:12:49,440 --> 00:12:50,920 Speaker 2: AI spending if nothing else. 229 00:12:50,800 --> 00:12:53,080 Speaker 9: Might not bide well for fear their employees. 230 00:12:54,120 --> 00:12:56,400 Speaker 2: See a company put out such a strong earnings and 231 00:12:56,400 --> 00:12:58,480 Speaker 2: then at the same time combine it with headcut something. 232 00:12:58,720 --> 00:13:01,839 Speaker 9: This is AI, folks, This is AI. This is efficiency, 233 00:13:01,920 --> 00:13:05,240 Speaker 9: this is agility, as the CEO causes, it's actually shares 234 00:13:05,240 --> 00:13:07,360 Speaker 9: that have now turned red, which is interesting. We're trying 235 00:13:07,400 --> 00:13:10,920 Speaker 9: to delve into the reasoning why because they booked record 236 00:13:10,960 --> 00:13:13,760 Speaker 9: all orders thirteen point two billion euros worth. In fact, 237 00:13:13,760 --> 00:13:15,160 Speaker 9: they're trying to point us to the fact that orders 238 00:13:15,200 --> 00:13:17,040 Speaker 9: aren't the big tell anymore and don't always look at 239 00:13:17,040 --> 00:13:19,520 Speaker 9: our backlog. But more broadly, this is a company that 240 00:13:19,520 --> 00:13:24,040 Speaker 9: has lit a far underneath European peers today, SMI is 241 00:13:24,160 --> 00:13:26,280 Speaker 9: up and awful. Lot B semon Conductor is up a lot. 242 00:13:26,440 --> 00:13:28,880 Speaker 9: You've seen LAMB researcher in the United States of prime Materials, 243 00:13:28,920 --> 00:13:31,600 Speaker 9: because this is the chip equipment maker to the world, 244 00:13:32,000 --> 00:13:34,880 Speaker 9: in particular to China. In fact, most of its sales 245 00:13:34,920 --> 00:13:36,840 Speaker 9: still go to China, even though I will tell you 246 00:13:37,080 --> 00:13:42,120 Speaker 9: they sell their eighth generation lithography cup not even allow 247 00:13:42,160 --> 00:13:45,720 Speaker 9: to ship lithography, but their chip equipment is so old. 248 00:13:45,960 --> 00:13:50,720 Speaker 9: But still China needs that deprecated chip equipment manufacturing ability 249 00:13:50,760 --> 00:13:53,240 Speaker 9: because they want to make their own domestic chips. Now 250 00:13:53,280 --> 00:13:55,920 Speaker 9: we're also seeing the fact that they're good in Taiwan. 251 00:13:56,040 --> 00:13:58,240 Speaker 9: They're saying strength in the United States as we build 252 00:13:58,240 --> 00:14:00,960 Speaker 9: out domestic chip manufacturing here as well. And that's why 253 00:14:01,000 --> 00:14:02,920 Speaker 9: Intel has been so much higher to Dell as well, 254 00:14:02,920 --> 00:14:05,480 Speaker 9: because it really is just to tell, like TSMC was, 255 00:14:05,800 --> 00:14:08,480 Speaker 9: that this is an AI bubble, this is real orders 256 00:14:08,640 --> 00:14:12,719 Speaker 9: for real chip manufacturing. And the CEO had said, look, 257 00:14:12,720 --> 00:14:14,520 Speaker 9: we've got a lot of clarity in the last three months, 258 00:14:14,559 --> 00:14:16,800 Speaker 9: so much clarity in fact that they are making those 259 00:14:16,840 --> 00:14:19,920 Speaker 9: seventeen hundred job cuts where they're trying to be more agile, 260 00:14:19,920 --> 00:14:21,920 Speaker 9: where they're innovation and they're cutting out from the IT 261 00:14:22,200 --> 00:14:23,800 Speaker 9: and the tech part of the business. 262 00:14:23,880 --> 00:14:27,200 Speaker 7: Okay, Well, speaking of job cuts, another big name announcing 263 00:14:27,240 --> 00:14:31,440 Speaker 7: job cuts as Amazon sixteen thousand corporate jobs. 264 00:14:31,840 --> 00:14:34,160 Speaker 9: And that's thirty thousand in the last three months that 265 00:14:34,200 --> 00:14:36,520 Speaker 9: they've announced. So this is a company that signaled this 266 00:14:36,680 --> 00:14:40,400 Speaker 9: like Andy Jasse in his letter to his shareholders had said, 267 00:14:40,520 --> 00:14:43,800 Speaker 9: I am going to make AI work for me. But 268 00:14:43,840 --> 00:14:46,360 Speaker 9: what does that mean. I'm going to have a smaller 269 00:14:46,600 --> 00:14:50,240 Speaker 9: employee base. He's trying to strip out that layer of 270 00:14:50,320 --> 00:14:53,560 Speaker 9: management and bureaucracy that built up during COVID where many 271 00:14:53,600 --> 00:14:57,280 Speaker 9: would say big companies over hired in that period, and 272 00:14:57,320 --> 00:15:00,680 Speaker 9: therefore we're starting to still see the area of being 273 00:15:00,960 --> 00:15:03,840 Speaker 9: fixated on where they will rehire is areas of AI, 274 00:15:04,080 --> 00:15:07,840 Speaker 9: of areas of AGI, and areas of LLM and all 275 00:15:07,880 --> 00:15:10,040 Speaker 9: the areas of growth for the business. So they are 276 00:15:10,080 --> 00:15:13,360 Speaker 9: going to try over the ninety days find new homes 277 00:15:13,600 --> 00:15:16,880 Speaker 9: for some of these laid off employees, but fourteen thousand 278 00:15:16,960 --> 00:15:18,720 Speaker 9: of them, they're not going to find homes for all 279 00:15:18,760 --> 00:15:21,160 Speaker 9: of those. But this is again about efficiency for the company. 280 00:15:21,280 --> 00:15:21,480 Speaker 8: Yep. 281 00:15:21,560 --> 00:15:26,440 Speaker 2: Absolutely, Soft Bank in talks to invest thirty billion dollars 282 00:15:26,480 --> 00:15:30,320 Speaker 2: more into Open AI A. The numbers are just monsters, 283 00:15:30,880 --> 00:15:33,200 Speaker 2: but the valuation, you know, about seven hundred and fifty 284 00:15:33,240 --> 00:15:33,920 Speaker 2: billion dollars. 285 00:15:34,040 --> 00:15:37,440 Speaker 6: I mean SoftBank's all in on this AI, think yeah. 286 00:15:37,240 --> 00:15:40,880 Speaker 9: And Massa is really committing to open A in particular. Look, 287 00:15:40,920 --> 00:15:42,840 Speaker 9: the number one holding for SoftBank as far has been 288 00:15:42,960 --> 00:15:45,080 Speaker 9: arm and that is all about chip design in the 289 00:15:45,080 --> 00:15:47,880 Speaker 9: future of artificial intelligence in that direction. But this would 290 00:15:47,920 --> 00:15:50,520 Speaker 9: actually probably bring their number one exposure, their number one 291 00:15:50,560 --> 00:15:52,880 Speaker 9: stake to being open AI if they put this thirty 292 00:15:52,920 --> 00:15:55,480 Speaker 9: billion into work. And this is why Massa has been 293 00:15:55,640 --> 00:15:59,240 Speaker 9: selling down his Nvidia steake, has been trying to free 294 00:15:59,360 --> 00:16:01,680 Speaker 9: up capital to get in on the gender to AI 295 00:16:01,800 --> 00:16:04,120 Speaker 9: move that in many ways people would say you kind 296 00:16:04,120 --> 00:16:06,800 Speaker 9: of missed from its own business model perspective, But he's 297 00:16:06,880 --> 00:16:09,120 Speaker 9: really tried to late claim to betting on some of 298 00:16:09,120 --> 00:16:11,880 Speaker 9: the biggest makers. Remember they just bought Ampere as well, 299 00:16:11,880 --> 00:16:15,600 Speaker 9: which is another chip manufacturing company which was backed by 300 00:16:15,600 --> 00:16:18,760 Speaker 9: Oracle previously. But Masa all in, you know, is a 301 00:16:18,800 --> 00:16:21,240 Speaker 9: guy who makes big bets. Sometimes they work really well, 302 00:16:21,600 --> 00:16:24,560 Speaker 9: like Ali Baba. Sometimes they work less well like we work. 303 00:16:24,680 --> 00:16:26,040 Speaker 9: But more broadly, he's a man in the. 304 00:16:26,040 --> 00:16:30,120 Speaker 6: Commitment stay with us more from Bloomberg Intelligence coming. 305 00:16:29,960 --> 00:16:36,880 Speaker 1: Up after this, you're listening to the Bloomberg Intelligence podcast. 306 00:16:37,200 --> 00:16:39,760 Speaker 1: Catch us live weekdays at ten am. He's done on 307 00:16:39,840 --> 00:16:43,080 Speaker 1: Apple Coarclay and Android Otto with the Bloomberg Business app. 308 00:16:43,160 --> 00:16:46,400 Speaker 1: Listen on demand wherever you get your podcasts, or watch 309 00:16:46,480 --> 00:16:47,640 Speaker 1: us live on YouTube. 310 00:16:48,720 --> 00:16:53,120 Speaker 2: LVMH kicking off some earnings here for luxury brands and 311 00:16:53,360 --> 00:16:56,920 Speaker 2: not particularly good numbers, talking about a tough Christmas period, 312 00:16:57,200 --> 00:16:58,840 Speaker 2: and that was kind of the tail to tape there. 313 00:16:59,280 --> 00:17:03,640 Speaker 2: Andrea Felsta joined us Bloomberg Opinion Calmness from London, Andrew, 314 00:17:03,640 --> 00:17:07,119 Speaker 2: what can you tell us from LVMH and their results? 315 00:17:07,720 --> 00:17:10,600 Speaker 10: Well, this was kind of There were two reasons I 316 00:17:10,640 --> 00:17:13,840 Speaker 10: think for the really strong share price reaction we've had today. 317 00:17:13,880 --> 00:17:18,480 Speaker 10: One is, you know, these weren't really there was nothing 318 00:17:18,560 --> 00:17:22,320 Speaker 10: really terrible about these results, apart from the drink's division, 319 00:17:22,359 --> 00:17:27,080 Speaker 10: which was much worse. But investors, after being far too 320 00:17:27,119 --> 00:17:30,840 Speaker 10: gloomy about luxury sort of in the first half middle 321 00:17:30,880 --> 00:17:32,800 Speaker 10: of last year, they thought no one was ever going 322 00:17:32,840 --> 00:17:36,840 Speaker 10: to buy luxury goods again, which was ridiculous. But now 323 00:17:37,119 --> 00:17:40,399 Speaker 10: they sort of came back last fall and they started 324 00:17:40,400 --> 00:17:43,359 Speaker 10: to get really excited about luxury and they pushed one 325 00:17:43,400 --> 00:17:48,400 Speaker 10: of the indexes up thirty percent between you know, August 326 00:17:48,480 --> 00:17:50,960 Speaker 10: and earlier in January, and that was just like a 327 00:17:51,040 --> 00:17:53,320 Speaker 10: head of where we are. So where we are at 328 00:17:53,359 --> 00:17:56,960 Speaker 10: the moment is China has stabilized, but it's not it's 329 00:17:57,000 --> 00:18:00,840 Speaker 10: not a V shaped recovery. The US is pretty good 330 00:18:01,000 --> 00:18:04,399 Speaker 10: thanks to stock markets, but the US compared with the 331 00:18:04,440 --> 00:18:07,119 Speaker 10: period a year ago, which was also pretty good before 332 00:18:07,119 --> 00:18:10,879 Speaker 10: we had the tariff trauma. After the election, there was 333 00:18:10,920 --> 00:18:16,000 Speaker 10: a real boom in luxury goods after the elections unleashed 334 00:18:16,040 --> 00:18:19,200 Speaker 10: a lot of spending. So you've got the numbers that weren't, 335 00:18:19,359 --> 00:18:23,520 Speaker 10: you know, great, but weren't terrible. But investors had got 336 00:18:23,600 --> 00:18:28,280 Speaker 10: far too excited about luxuries of anything other than a 337 00:18:27,720 --> 00:18:30,439 Speaker 10: B a big earnings upgrade that they were always going 338 00:18:30,440 --> 00:18:33,719 Speaker 10: to be disappointed. And Richmont, which owned Cartio, which is 339 00:18:33,760 --> 00:18:37,439 Speaker 10: absolutely on fire at the moment, they had some pretty 340 00:18:37,440 --> 00:18:40,720 Speaker 10: good numbers a couple of weeks ago, but they weren't, 341 00:18:40,840 --> 00:18:43,679 Speaker 10: you know, they weren't any better than anyways. Did we 342 00:18:43,720 --> 00:18:45,239 Speaker 10: knew they were going to be good, so they were 343 00:18:45,280 --> 00:18:47,800 Speaker 10: going to be good, and they were good. The shares 344 00:18:47,880 --> 00:18:51,280 Speaker 10: failed wearing a very funny sort of environment at the moment. 345 00:18:51,960 --> 00:18:54,080 Speaker 7: I really like the way you put that the tariff trauma, 346 00:18:54,119 --> 00:18:56,720 Speaker 7: because I'm sure that's a big, big problem for these 347 00:18:56,840 --> 00:18:57,800 Speaker 7: lundury purveyors. 348 00:18:58,520 --> 00:19:00,320 Speaker 6: Three of the five division. 349 00:19:00,200 --> 00:19:03,760 Speaker 7: Said LVMH missed estimates and what is traditionally the strongest period, 350 00:19:03,760 --> 00:19:07,120 Speaker 7: So that does not help either. Which divisions, which part 351 00:19:07,280 --> 00:19:10,479 Speaker 7: of the LVMH empire are doing well? Which one are 352 00:19:10,480 --> 00:19:12,640 Speaker 7: really liking? You mentioned wines and spirits. We know that's 353 00:19:12,760 --> 00:19:14,960 Speaker 7: kind of you know, been a problem child all along now. 354 00:19:15,040 --> 00:19:17,400 Speaker 7: But what's doing well? What's not doing so well? 355 00:19:18,520 --> 00:19:23,680 Speaker 10: Jewelry is absolutely sparkling. There's a few reasons for that. 356 00:19:23,840 --> 00:19:28,840 Speaker 10: So over the over the past five years, handbags particularly 357 00:19:28,920 --> 00:19:33,000 Speaker 10: have gone up in price. So you know, a large 358 00:19:33,040 --> 00:19:36,520 Speaker 10: flap chanel bag you are looking at around ten thousand dollars. 359 00:19:36,640 --> 00:19:41,880 Speaker 10: Most nice handbags are about three thousand pounds plus. I'm 360 00:19:41,880 --> 00:19:43,160 Speaker 10: not sure what that is dollars. 361 00:19:43,280 --> 00:19:46,960 Speaker 4: Maybe you know too much, you want that out too. 362 00:19:46,880 --> 00:19:47,720 Speaker 9: Much exactly so. 363 00:19:48,320 --> 00:19:52,640 Speaker 10: But actually jewelry, which everyone alas thought is really expensive 364 00:19:52,840 --> 00:19:56,000 Speaker 10: because those leather goods have gone up so much. So 365 00:19:56,119 --> 00:19:59,800 Speaker 10: something like a Cartier love bangle that you can wear 366 00:19:59,880 --> 00:20:02,119 Speaker 10: a gain and again and again, and it's made of gold. 367 00:20:02,160 --> 00:20:06,159 Speaker 10: It's got receidure value that's actually seen as better value 368 00:20:06,240 --> 00:20:10,760 Speaker 10: for money than a handbag. Plus, you know, the luxury 369 00:20:10,760 --> 00:20:14,560 Speaker 10: industry's really matured. You know, twenty years ago we were 370 00:20:14,600 --> 00:20:18,400 Speaker 10: all buying our first git bag. Now you know many 371 00:20:18,440 --> 00:20:21,520 Speaker 10: people have got a wardrobe full of it bags and 372 00:20:21,920 --> 00:20:25,800 Speaker 10: they've moved on to jewelry. There's been a democratization of jewelry, 373 00:20:25,840 --> 00:20:32,280 Speaker 10: a shift from unbranded jewelry to Tiffany, Kartier, Bogari, and 374 00:20:32,320 --> 00:20:34,880 Speaker 10: that's really helped the jewelry sector. 375 00:20:35,920 --> 00:20:39,320 Speaker 2: Andrew, what is the company saying about the Chinese consumer 376 00:20:39,600 --> 00:20:42,520 Speaker 2: these days? Are they buying on mainland? Are they going 377 00:20:42,520 --> 00:20:44,359 Speaker 2: to Japan to buy? Are they coming to Europe or 378 00:20:44,400 --> 00:20:46,000 Speaker 2: the US? What's going on? 379 00:20:46,080 --> 00:20:49,800 Speaker 10: They were going to Japan and then they came back 380 00:20:49,840 --> 00:20:52,320 Speaker 10: to China. Now, with the currency moves, I wouldn't be 381 00:20:52,359 --> 00:20:55,439 Speaker 10: surprised if they went back to Japan again. Now, the 382 00:20:55,600 --> 00:20:58,080 Speaker 10: thing about Japan is really interesting. 383 00:20:58,520 --> 00:20:59,639 Speaker 4: It's not a great. 384 00:21:00,000 --> 00:21:04,480 Speaker 10: Economics of selling in Japan aren't great. It tends to 385 00:21:04,480 --> 00:21:06,520 Speaker 10: be less profitable. So if we do get that big 386 00:21:06,600 --> 00:21:10,959 Speaker 10: Japan tried, that's not going to be great for profitability 387 00:21:11,119 --> 00:21:12,119 Speaker 10: going forwards. 388 00:21:14,119 --> 00:21:17,320 Speaker 7: Okay, we also have the dispute between China and Japan 389 00:21:17,480 --> 00:21:21,240 Speaker 7: certainly not helping things either with you know, Chinese tourists 390 00:21:21,280 --> 00:21:24,199 Speaker 7: going to Japan to buy luxury goods. Nevertheless, if you 391 00:21:24,240 --> 00:21:26,160 Speaker 7: wanted to, you know, are of the currency difference that 392 00:21:26,160 --> 00:21:27,400 Speaker 7: that possibility exists. 393 00:21:27,640 --> 00:21:29,199 Speaker 6: What about American consumers? 394 00:21:29,320 --> 00:21:31,439 Speaker 7: You mentioned the stock market doing well, and certainly that 395 00:21:31,560 --> 00:21:34,040 Speaker 7: helps the one percent and the zero point one percent. 396 00:21:34,560 --> 00:21:36,879 Speaker 7: Where are we seeing the American consumer pickup slack? 397 00:21:38,560 --> 00:21:38,720 Speaker 8: Well? 398 00:21:38,760 --> 00:21:42,080 Speaker 10: The US consumer has picked up sack all the way through, 399 00:21:42,760 --> 00:21:45,920 Speaker 10: while China has been in the doll rubs. US luxury 400 00:21:45,960 --> 00:21:49,360 Speaker 10: demand tends to be very correlated with stock markets and 401 00:21:49,400 --> 00:21:52,040 Speaker 10: also bitcoin, and I know we've had a wobble on bitcoin, 402 00:21:52,080 --> 00:21:54,760 Speaker 10: but the fact that you know, we're testing new highs 403 00:21:54,760 --> 00:21:58,040 Speaker 10: on markets that is very good for luxury demand. Now, 404 00:21:58,080 --> 00:22:02,280 Speaker 10: where it's where we're really seeing is those very wealthy consumers, 405 00:22:02,720 --> 00:22:06,280 Speaker 10: the middle class customers. You know, they felt more pressure 406 00:22:06,280 --> 00:22:11,679 Speaker 10: from inflation, from tariffs, perhaps the weakening job market. That 407 00:22:11,880 --> 00:22:14,560 Speaker 10: is the sector where you know, we would written the 408 00:22:14,600 --> 00:22:16,920 Speaker 10: indust you would really like to see them come back. 409 00:22:16,960 --> 00:22:19,080 Speaker 10: And they were also the segment of the market that 410 00:22:19,200 --> 00:22:23,240 Speaker 10: was probably priced out the most by those pricing raaces 411 00:22:23,359 --> 00:22:27,080 Speaker 10: so you know, luxury really needed middle class customers back. 412 00:22:27,760 --> 00:22:32,440 Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, 413 00:22:32,640 --> 00:22:36,600 Speaker 1: and anywhere else you get your podcasts. 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