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Speaker 2: Through the Starbucks reported some pretty darn good numbers today.
Speaker 2: Mike tell us about what's going on in Starbucks.
Speaker 3: You know, the turnaround plans are starting to really take
Speaker 3: a whole take a hold right now, and results really improved, rising,
Speaker 3: you know, four percent system wide same store sales US
Speaker 3: as well.
Speaker 4: China was up seven percent.
Speaker 3: You know here in the US, it's you know, mainly
Speaker 3: about better operations, right. They rolled out new operating standards
Speaker 3: late last year, and that they seem to be really
Speaker 3: boosting the speed of service, which is creating happier customers
Speaker 3: that come back more frequently.
Speaker 5: Right.
Speaker 3: Some food innovation including protein cold foam seems to be
Speaker 3: hitting the mark, right, and they're doing a better job
Speaker 3: on the marketing side. So all those are driving drove
Speaker 3: better same Star sales than expected.
Speaker 2: Yeah, I don't know the one I go to the
Speaker 2: Starbucks route thirty five all Township, New Jersey. They do
Speaker 2: a great job for me, and I've noticed the change.
Speaker 2: I mean, you know, little things like you know, writing
Speaker 2: your name back on the cup like they used to
Speaker 2: back in the early days. As in addition to that
Speaker 2: sticker which was a little antiseptic. I guess talk us
Speaker 2: back costs there. Are they looking at their costs as well.
Speaker 3: Yeah, they've identified two billion dollars in annual costs that
Speaker 3: they want to get after over the next one to
Speaker 3: two years.
Speaker 4: You know, right now, margins have been impacted.
Speaker 3: They've gotten those same star sales and traffic numbers up
Speaker 3: by adding labor to the stores, right, and so they're
Speaker 3: seeing margin compression still. So now that they got people
Speaker 3: coming back to the stores, now that the operations are
Speaker 3: more dialed in, you know, CEO Brian Nichol said, they're
Speaker 3: not quite where they need to be throughout the day.
Speaker 4: They're great at peak, but they have some improvement still
Speaker 4: to do.
Speaker 3: But you know, now that people are coming back to
Speaker 3: the stores, they're gonna you know, focus a little bit
Speaker 3: more on where they can save some money because you know,
Speaker 3: it was a smart move real reallocating labor into the stores.
Speaker 2: But Costley talk just about the competitive environment because you
Speaker 2: go to like, I don't know, small towns, seems like
Speaker 2: there's a coffee joint on every corner of these days.
Speaker 2: What's the competitive landscape for Starbucks these days.
Speaker 3: Well, you know, it's as it's as competitive as it's
Speaker 3: ever been. You know, you have some of these younger
Speaker 3: chains that seem to do really well with gen z
Speaker 3: like Dutch Bros. And Seven Brew, and they're they're opening
Speaker 3: up these drive through cans, you know, throughout the suburbs
Speaker 3: across America, you know, in the cities. You know, there's
Speaker 3: a lot of competition with these you know, very high
Speaker 3: end coffee shops that are you know, using very you know,
Speaker 3: very high quality coffee and and elevate and offering an
Speaker 3: elevated food experience. So competition is tough, and that's why
Speaker 3: you know Starbucks is is making some changes. You know,
Speaker 3: they're focusing on on health and wellness, right They're looking
Speaker 3: to improve the food in the bake case, They're looking
Speaker 3: to improve the food or throughout the day they're looking
Speaker 3: into some new innovative drink offerings to boost that that
Speaker 3: afternoon day part. And so you know, this this is
Speaker 3: just the beginning of what Starbucks, you know, things they
Speaker 3: need to do for long term continued same Star sales growth.
Speaker 2: Also, Brinker International, another big restaurant holding company here, boosted
Speaker 2: its full year profit. Outlook what's going on in Brinker.
Speaker 4: More of the same.
Speaker 3: And you know CEO Kevin Hawkman worked at Young Brands
Speaker 3: with Brian Nickels, so it shouldn't be a surprise that
Speaker 3: they have had similar turnaround plans. Obviously, Kevin started his
Speaker 3: a little bit earlier than Brian's, but it was about operations,
Speaker 3: then improving the marketing. Right now, it's about continuing to
Speaker 3: work on the food and the food quality.
Speaker 4: So they started by.
Speaker 3: You know, taking menu items off of the menu to
Speaker 3: make it easier to execute, make sure people are getting
Speaker 3: their food hot and fast. But now this year, the
Speaker 3: story is really about improving the quality and the portions.
Speaker 3: Nacho sales jumped one hundred and seventy percent on a relaunch.
Speaker 4: They improved the bacon. Bacon burger sales are up thirty
Speaker 4: or forty percent. They had a caso relaunch.
Speaker 3: You know, those sales are up twenty percent, right so
Speaker 3: so you know they're the money that they're spending, which
Speaker 3: is going to impact their cost of sales negatively. You know,
Speaker 3: customers are seeing the improvement and they're there. It's resulting
Speaker 3: in higher satisfaction and customers are coming back.
Speaker 4: And that's a great story. Man.
Speaker 3: They did a you know, eight plus percent same stor
Speaker 3: sales comp at Chili's comping over a thirty plus percent.
Speaker 4: You know, I've never seen this in the restaurant business.
Speaker 4: I saw incredible.
Speaker 2: I saw the company did call out the Chili's All right,
Speaker 2: thirty seconds left, Cracker Barrel. My favorites up eighteen percent
Speaker 2: year to date. We got a little bit of life there.
Speaker 4: Listen.
Speaker 3: I think there's life throughout the restaurant industry. I think
Speaker 3: same star sales are going to increase. They were strong
Speaker 3: in January up until winter Storm Fern. But I think
Speaker 3: I think, you know, tax relief and cheaper gas prices
Speaker 3: and just a better economy are and less inflation are
Speaker 3: all going to help restaurants spending this year.
Speaker 6: Stay with us. More from Bloomberg Intelligence coming up after this.
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Speaker 7: It is earning season as well, and AT and T
Speaker 7: has reported earnings. It's revenue beat estimates thanks to broadband strength.
Speaker 7: Let's bring in John Butler. He is our go to
Speaker 7: guy when it comes to the telecom's names. He's our
Speaker 7: senior telecom analyst on Bloomberg Intelligence covering AT and T,
Speaker 7: covering Verizon, covering te Mobile. Where does AT and T
Speaker 7: stand relative to its competitors, Because as much as it's
Speaker 7: getting a boost from customers who subscribe to its broadband services,
Speaker 7: this is a saturated market and it's competing against big
Speaker 7: players and small players alike.
Speaker 5: Yeah, it's a great question. Scorelet you know, post the
Speaker 5: earnings call, they held a breakout session with the mester
Speaker 5: relations with the cell side, and there were a lot
Speaker 5: of questions about how broadband or how competition is now
Speaker 5: shifting from wireless over to broadband. I actually think AT
Speaker 5: and T is in a great position relative to their
Speaker 5: competitors because they're the fiber leader and they're about to
Speaker 5: buy Luhmann's fiber business and add another million fiber subscribers there.
Speaker 5: So in terms of their ability to sell what are
Speaker 5: called converged packages or wireless together with broadband. They're in
Speaker 5: a great position there because they have both fiber and
Speaker 5: they have a smaller fixed wireless access business, which is
Speaker 5: that wireless broadband product.
Speaker 2: John, this is a coup of AT and T that
Speaker 2: spends twenty twenty two billion dollars in capex every year.
Speaker 6: What does that capex for?
Speaker 5: Typically a lot of it, Paul is going towards wireless
Speaker 5: network upgrades as well as the deployment of fibers. So
Speaker 5: this year, for example, they're going to add five million
Speaker 5: new fiber homes, but it costs about two thousand dollars
Speaker 5: maybe twice that in some markets to build a new
Speaker 5: what's called the fiber homes pass. So a lot of
Speaker 5: capital is getting spent this year, next year, and maybe
Speaker 5: to a little bit of a lesser degree in twenty eight.
Speaker 5: That's sort of laying the foundation to build out that
Speaker 5: fiber network and that five G wireless network. Beyond that,
Speaker 5: AT and T has said, we're going to cut our
Speaker 5: cap backs, we're going to lower our capital intensity, and
Speaker 5: you're going to see a lot more free cash flow
Speaker 5: flow through and they're going to be able to fund
Speaker 5: hopefully some dividend growth after that and increase the share buyback. Yeah.
Speaker 7: I'm looking at the dividend yield for AT and T
Speaker 7: four point six percent. For Verizon, it's almost seven percent.
Speaker 7: For Team Mobile a little bit less at two point
Speaker 7: nineteen percent. John, Where did the telecom stand when it
Speaker 7: comes to this rotation out of big tech looking for
Speaker 7: some cyclicals, looking for parts of the market that haven't
Speaker 7: been overbought.
Speaker 8: So it's a good question.
Speaker 5: Scorelet I always say telecoms, particularly the dividend payers like
Speaker 5: AT and T and Verizon, are are bond proxies to
Speaker 5: a degree. I think sentiment has been pushed around a
Speaker 5: little bit by the fact that we have new CEOs
Speaker 5: at both Verizon and T Mobile, and these guys are
Speaker 5: going to be looking to make their mark. Verizon on
Speaker 5: Friday is going to set out a new strategy set
Speaker 5: by Dan Shulman.
Speaker 8: Who is the new CEO there.
Speaker 5: So there's been a little bit of concern, or more
Speaker 5: than a little bit of concern that the competitive intensity
Speaker 5: and wireless is going to pick up as these new
Speaker 5: CEOs look to make their mark, and I think that
Speaker 5: has led to some of the pressure, particularly on AT
Speaker 5: and T. Though again this morning. I think they put
Speaker 5: a lot of those concerns to rest with their by
Speaker 5: reiterating their fiber plans and laying out new free cash
Speaker 5: flow guidance.
Speaker 6: John.
Speaker 2: On the competitive land front, where are the cable companies
Speaker 2: these days?
Speaker 5: They're struggling, Paul, I mean they're at a technology disadvantage
Speaker 5: in that they're offering broadband over those legacy coaxial cable networks.
Speaker 5: They're doing what they can to upgrade the technology and
Speaker 5: increase speeds on those networks, but at the end of
Speaker 5: the day, fiber really is a superior product to everything
Speaker 5: else on the market, and fixed wireless access, which has
Speaker 5: been offered by the telcos, has been a very popular
Speaker 5: choice given the fact that it's an easy setup. It's
Speaker 5: over the air, so there's very little problems with it.
Speaker 5: It's pretty much problem free. As broadband goes over time,
Speaker 5: it sort of has a headroom problem. It can't offer
Speaker 5: the same speeds as fiber. But through it all, cable
Speaker 5: is sort of flying underneath those two products, sort of,
Speaker 5: you know, trying to compete with what is a legacy
Speaker 5: product in the market.
Speaker 7: John, did we learn anything from AT and t's results
Speaker 7: regarding iPhones and you know consumers signing on for the
Speaker 7: latest version of the iPhone.
Speaker 5: So great question. It's very interesting at and T over
Speaker 5: indexes to the iPhone. They have a lot more users
Speaker 5: than Verizon or T Mobile because they had an early
Speaker 5: exclusivity deal when the iPhone first launched. They were asked
Speaker 5: about the foldable iPhone that's rumored to be coming out
Speaker 5: next year and whether that's really going to move the
Speaker 5: dial for them. Their answer to me was interesting, I
Speaker 5: didn't expect it, which is they've been tracking the performance
Speaker 5: and the sales of the foldables that they have available
Speaker 5: on the network today on the Android side, and their
Speaker 5: expectation is that we won't see a huge bump in
Speaker 5: iPhone sales next year with a foldable model model. I
Speaker 5: think time will tell. I actually think foldables are going
Speaker 5: to resonate well with people, and Android.
Speaker 8: Isn't always the best read through there.
Speaker 5: I think it's a different kind of user that's on
Speaker 5: the Android phone versus iPhone.
Speaker 8: But we'll have to see in the fall.
Speaker 2: Stay with us more from Bloomberg Intelligence coming up after this.
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Speaker 6: Caroline Hydroints is here.
Speaker 2: So there's just a lot going on in the world
Speaker 2: of tech and Caroline heidaz b tech co anchor. I'm
Speaker 2: gonna start with ASML some really big numbers over the night, Caroline,
Speaker 2: from this big chip maker that I guess that bodes
Speaker 2: well for folks that want to see continued momentum and
Speaker 2: AI spending if nothing else.
Speaker 9: Might not bide well for fear their employees.
Speaker 2: See a company put out such a strong earnings and
Speaker 2: then at the same time combine it with headcut something.
Speaker 9: This is AI, folks, This is AI. This is efficiency,
Speaker 9: this is agility, as the CEO causes, it's actually shares
Speaker 9: that have now turned red, which is interesting. We're trying
Speaker 9: to delve into the reasoning why because they booked record
Speaker 9: all orders thirteen point two billion euros worth. In fact,
Speaker 9: they're trying to point us to the fact that orders
Speaker 9: aren't the big tell anymore and don't always look at
Speaker 9: our backlog. But more broadly, this is a company that
Speaker 9: has lit a far underneath European peers today, SMI is
Speaker 9: up and awful. Lot B semon Conductor is up a lot.
Speaker 9: You've seen LAMB researcher in the United States of prime Materials,
Speaker 9: because this is the chip equipment maker to the world,
Speaker 9: in particular to China. In fact, most of its sales
Speaker 9: still go to China, even though I will tell you
Speaker 9: they sell their eighth generation lithography cup not even allow
Speaker 9: to ship lithography, but their chip equipment is so old.
Speaker 9: But still China needs that deprecated chip equipment manufacturing ability
Speaker 9: because they want to make their own domestic chips. Now
Speaker 9: we're also seeing the fact that they're good in Taiwan.
Speaker 9: They're saying strength in the United States as we build
Speaker 9: out domestic chip manufacturing here as well. And that's why
Speaker 9: Intel has been so much higher to Dell as well,
Speaker 9: because it really is just to tell, like TSMC was,
Speaker 9: that this is an AI bubble, this is real orders
Speaker 9: for real chip manufacturing. And the CEO had said, look,
Speaker 9: we've got a lot of clarity in the last three months,
Speaker 9: so much clarity in fact that they are making those
Speaker 9: seventeen hundred job cuts where they're trying to be more agile,
Speaker 9: where they're innovation and they're cutting out from the IT
Speaker 9: and the tech part of the business.
Speaker 7: Okay, Well, speaking of job cuts, another big name announcing
Speaker 7: job cuts as Amazon sixteen thousand corporate jobs.
Speaker 9: And that's thirty thousand in the last three months that
Speaker 9: they've announced. So this is a company that signaled this
Speaker 9: like Andy Jasse in his letter to his shareholders had said,
Speaker 9: I am going to make AI work for me. But
Speaker 9: what does that mean. I'm going to have a smaller
Speaker 9: employee base. He's trying to strip out that layer of
Speaker 9: management and bureaucracy that built up during COVID where many
Speaker 9: would say big companies over hired in that period, and
Speaker 9: therefore we're starting to still see the area of being
Speaker 9: fixated on where they will rehire is areas of AI,
Speaker 9: of areas of AGI, and areas of LLM and all
Speaker 9: the areas of growth for the business. So they are
Speaker 9: going to try over the ninety days find new homes
Speaker 9: for some of these laid off employees, but fourteen thousand
Speaker 9: of them, they're not going to find homes for all
Speaker 9: of those. But this is again about efficiency for the company.
Speaker 8: Yep.
Speaker 2: Absolutely, Soft Bank in talks to invest thirty billion dollars
Speaker 2: more into Open AI A. The numbers are just monsters,
Speaker 2: but the valuation, you know, about seven hundred and fifty
Speaker 2: billion dollars.
Speaker 6: I mean SoftBank's all in on this AI, think yeah.
Speaker 9: And Massa is really committing to open A in particular. Look,
Speaker 9: the number one holding for SoftBank as far has been
Speaker 9: arm and that is all about chip design in the
Speaker 9: future of artificial intelligence in that direction. But this would
Speaker 9: actually probably bring their number one exposure, their number one
Speaker 9: stake to being open AI if they put this thirty
Speaker 9: billion into work. And this is why Massa has been
Speaker 9: selling down his Nvidia steake, has been trying to free
Speaker 9: up capital to get in on the gender to AI
Speaker 9: move that in many ways people would say you kind
Speaker 9: of missed from its own business model perspective, But he's
Speaker 9: really tried to late claim to betting on some of
Speaker 9: the biggest makers. Remember they just bought Ampere as well,
Speaker 9: which is another chip manufacturing company which was backed by
Speaker 9: Oracle previously. But Masa all in, you know, is a
Speaker 9: guy who makes big bets. Sometimes they work really well,
Speaker 9: like Ali Baba. Sometimes they work less well like we work.
Speaker 9: But more broadly, he's a man in the.
Speaker 6: Commitment stay with us more from Bloomberg Intelligence coming.
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Speaker 2: LVMH kicking off some earnings here for luxury brands and
Speaker 2: not particularly good numbers, talking about a tough Christmas period,
Speaker 2: and that was kind of the tail to tape there.
Speaker 2: Andrea Felsta joined us Bloomberg Opinion Calmness from London, Andrew,
Speaker 2: what can you tell us from LVMH and their results?
Speaker 10: Well, this was kind of There were two reasons I
Speaker 10: think for the really strong share price reaction we've had today.
Speaker 10: One is, you know, these weren't really there was nothing
Speaker 10: really terrible about these results, apart from the drink's division,
Speaker 10: which was much worse. But investors, after being far too
Speaker 10: gloomy about luxury sort of in the first half middle
Speaker 10: of last year, they thought no one was ever going
Speaker 10: to buy luxury goods again, which was ridiculous. But now
Speaker 10: they sort of came back last fall and they started
Speaker 10: to get really excited about luxury and they pushed one
Speaker 10: of the indexes up thirty percent between you know, August
Speaker 10: and earlier in January, and that was just like a
Speaker 10: head of where we are. So where we are at
Speaker 10: the moment is China has stabilized, but it's not it's
Speaker 10: not a V shaped recovery. The US is pretty good
Speaker 10: thanks to stock markets, but the US compared with the
Speaker 10: period a year ago, which was also pretty good before
Speaker 10: we had the tariff trauma. After the election, there was
Speaker 10: a real boom in luxury goods after the elections unleashed
Speaker 10: a lot of spending. So you've got the numbers that weren't,
Speaker 10: you know, great, but weren't terrible. But investors had got
Speaker 10: far too excited about luxuries of anything other than a
Speaker 10: B a big earnings upgrade that they were always going
Speaker 10: to be disappointed. And Richmont, which owned Cartio, which is
Speaker 10: absolutely on fire at the moment, they had some pretty
Speaker 10: good numbers a couple of weeks ago, but they weren't,
Speaker 10: you know, they weren't any better than anyways. Did we
Speaker 10: knew they were going to be good, so they were
Speaker 10: going to be good, and they were good. The shares
Speaker 10: failed wearing a very funny sort of environment at the moment.
Speaker 7: I really like the way you put that the tariff trauma,
Speaker 7: because I'm sure that's a big, big problem for these
Speaker 7: lundury purveyors.
Speaker 6: Three of the five division.
Speaker 7: Said LVMH missed estimates and what is traditionally the strongest period,
Speaker 7: So that does not help either. Which divisions, which part
Speaker 7: of the LVMH empire are doing well? Which one are
Speaker 7: really liking? You mentioned wines and spirits. We know that's
Speaker 7: kind of you know, been a problem child all along now.
Speaker 7: But what's doing well? What's not doing so well?
Speaker 10: Jewelry is absolutely sparkling. There's a few reasons for that.
Speaker 10: So over the over the past five years, handbags particularly
Speaker 10: have gone up in price. So you know, a large
Speaker 10: flap chanel bag you are looking at around ten thousand dollars.
Speaker 10: Most nice handbags are about three thousand pounds plus. I'm
Speaker 10: not sure what that is dollars.
Speaker 4: Maybe you know too much, you want that out too.
Speaker 9: Much exactly so.
Speaker 10: But actually jewelry, which everyone alas thought is really expensive
Speaker 10: because those leather goods have gone up so much. So
Speaker 10: something like a Cartier love bangle that you can wear
Speaker 10: a gain and again and again, and it's made of gold.
Speaker 10: It's got receidure value that's actually seen as better value
Speaker 10: for money than a handbag. Plus, you know, the luxury
Speaker 10: industry's really matured. You know, twenty years ago we were
Speaker 10: all buying our first git bag. Now you know many
Speaker 10: people have got a wardrobe full of it bags and
Speaker 10: they've moved on to jewelry. There's been a democratization of jewelry,
Speaker 10: a shift from unbranded jewelry to Tiffany, Kartier, Bogari, and
Speaker 10: that's really helped the jewelry sector.
Speaker 2: Andrew, what is the company saying about the Chinese consumer
Speaker 2: these days? Are they buying on mainland? Are they going
Speaker 2: to Japan to buy? Are they coming to Europe or
Speaker 2: the US? What's going on?
Speaker 10: They were going to Japan and then they came back
Speaker 10: to China. Now, with the currency moves, I wouldn't be
Speaker 10: surprised if they went back to Japan again. Now, the
Speaker 10: thing about Japan is really interesting.
Speaker 4: It's not a great.
Speaker 10: Economics of selling in Japan aren't great. It tends to
Speaker 10: be less profitable. So if we do get that big
Speaker 10: Japan tried, that's not going to be great for profitability
Speaker 10: going forwards.
Speaker 7: Okay, we also have the dispute between China and Japan
Speaker 7: certainly not helping things either with you know, Chinese tourists
Speaker 7: going to Japan to buy luxury goods. Nevertheless, if you
Speaker 7: wanted to, you know, are of the currency difference that
Speaker 7: that possibility exists.
Speaker 6: What about American consumers?
Speaker 7: You mentioned the stock market doing well, and certainly that
Speaker 7: helps the one percent and the zero point one percent.
Speaker 7: Where are we seeing the American consumer pickup slack?
Speaker 8: Well?
Speaker 10: The US consumer has picked up sack all the way through,
Speaker 10: while China has been in the doll rubs. US luxury
Speaker 10: demand tends to be very correlated with stock markets and
Speaker 10: also bitcoin, and I know we've had a wobble on bitcoin,
Speaker 10: but the fact that you know, we're testing new highs
Speaker 10: on markets that is very good for luxury demand. Now,
Speaker 10: where it's where we're really seeing is those very wealthy consumers,
Speaker 10: the middle class customers. You know, they felt more pressure
Speaker 10: from inflation, from tariffs, perhaps the weakening job market. That
Speaker 10: is the sector where you know, we would written the
Speaker 10: indust you would really like to see them come back.
Speaker 10: And they were also the segment of the market that
Speaker 10: was probably priced out the most by those pricing raaces
Speaker 10: so you know, luxury really needed middle class customers back.
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