WEBVTT - Starbucks Sales Accelerate as Turnaround Gains Steam 0:00:02.720 --> 0:00:10.559 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 0:00:14.600 --> 0:00:17.840 Eastern on Apple, Coarclay, and Android Auto with the Bloomberg 0:00:17.920 --> 0:00:21.040 Business App. Listen on demand wherever you get your podcasts, 0:00:21.360 --> 0:00:23.520 or watch us live on YouTube. 0:00:23.160 --> 0:00:28.360 Through the Starbucks reported some pretty darn good numbers today. 0:00:28.560 --> 0:00:30.920 Mike tell us about what's going on in Starbucks. 0:00:33.560 --> 0:00:37.920 You know, the turnaround plans are starting to really take 0:00:37.960 --> 0:00:43.320 a whole take a hold right now, and results really improved, rising, 0:00:43.400 --> 0:00:47.159 you know, four percent system wide same store sales US 0:00:47.280 --> 0:00:47.640 as well. 0:00:47.760 --> 0:00:49.040 China was up seven percent. 0:00:49.400 --> 0:00:52.120 You know here in the US, it's you know, mainly 0:00:52.159 --> 0:00:57.280 about better operations, right. They rolled out new operating standards 0:00:58.280 --> 0:01:01.840 late last year, and that they seem to be really 0:01:01.840 --> 0:01:05.920 boosting the speed of service, which is creating happier customers 0:01:05.959 --> 0:01:07.200 that come back more frequently. 0:01:07.319 --> 0:01:07.520 Right. 0:01:08.440 --> 0:01:12.840 Some food innovation including protein cold foam seems to be 0:01:12.920 --> 0:01:15.920 hitting the mark, right, and they're doing a better job 0:01:15.920 --> 0:01:19.640 on the marketing side. So all those are driving drove 0:01:19.800 --> 0:01:21.320 better same Star sales than expected. 0:01:21.520 --> 0:01:24.679 Yeah, I don't know the one I go to the 0:01:24.720 --> 0:01:27.200 Starbucks route thirty five all Township, New Jersey. They do 0:01:27.240 --> 0:01:30.880 a great job for me, and I've noticed the change. 0:01:30.920 --> 0:01:33.000 I mean, you know, little things like you know, writing 0:01:33.000 --> 0:01:34.600 your name back on the cup like they used to 0:01:34.640 --> 0:01:36.560 back in the early days. As in addition to that 0:01:36.840 --> 0:01:40.760 sticker which was a little antiseptic. I guess talk us 0:01:40.800 --> 0:01:43.840 back costs there. Are they looking at their costs as well. 0:01:45.480 --> 0:01:49.200 Yeah, they've identified two billion dollars in annual costs that 0:01:49.200 --> 0:01:51.040 they want to get after over the next one to 0:01:51.160 --> 0:01:51.880 two years. 0:01:53.240 --> 0:01:55.559 You know, right now, margins have been impacted. 0:01:55.600 --> 0:01:58.520 They've gotten those same star sales and traffic numbers up 0:01:58.600 --> 0:02:01.720 by adding labor to the stores, right, and so they're 0:02:01.760 --> 0:02:05.080 seeing margin compression still. So now that they got people 0:02:05.120 --> 0:02:08.120 coming back to the stores, now that the operations are 0:02:08.160 --> 0:02:11.040 more dialed in, you know, CEO Brian Nichol said, they're 0:02:11.040 --> 0:02:13.040 not quite where they need to be throughout the day. 0:02:13.080 --> 0:02:15.680 They're great at peak, but they have some improvement still 0:02:15.720 --> 0:02:15.920 to do. 0:02:16.320 --> 0:02:18.680 But you know, now that people are coming back to 0:02:18.720 --> 0:02:21.519 the stores, they're gonna you know, focus a little bit 0:02:21.560 --> 0:02:25.040 more on where they can save some money because you know, 0:02:25.520 --> 0:02:28.440 it was a smart move real reallocating labor into the stores. 0:02:28.440 --> 0:02:31.800 But Costley talk just about the competitive environment because you 0:02:31.840 --> 0:02:34.560 go to like, I don't know, small towns, seems like 0:02:34.560 --> 0:02:37.840 there's a coffee joint on every corner of these days. 0:02:37.880 --> 0:02:40.200 What's the competitive landscape for Starbucks these days. 0:02:41.360 --> 0:02:43.799 Well, you know, it's as it's as competitive as it's 0:02:43.840 --> 0:02:46.720 ever been. You know, you have some of these younger 0:02:47.720 --> 0:02:50.480 chains that seem to do really well with gen z 0:02:50.800 --> 0:02:55.000 like Dutch Bros. And Seven Brew, and they're they're opening 0:02:55.080 --> 0:02:59.640 up these drive through cans, you know, throughout the suburbs 0:02:59.639 --> 0:03:03.160 across America, you know, in the cities. You know, there's 0:03:03.200 --> 0:03:06.200 a lot of competition with these you know, very high 0:03:06.320 --> 0:03:10.040 end coffee shops that are you know, using very you know, 0:03:10.280 --> 0:03:14.320 very high quality coffee and and elevate and offering an 0:03:14.360 --> 0:03:18.360 elevated food experience. So competition is tough, and that's why 0:03:18.520 --> 0:03:21.480 you know Starbucks is is making some changes. You know, 0:03:21.480 --> 0:03:24.120 they're focusing on on health and wellness, right They're looking 0:03:24.160 --> 0:03:27.160 to improve the food in the bake case, They're looking 0:03:27.160 --> 0:03:29.720 to improve the food or throughout the day they're looking 0:03:29.760 --> 0:03:33.480 into some new innovative drink offerings to boost that that 0:03:33.639 --> 0:03:37.640 afternoon day part. And so you know, this this is 0:03:37.720 --> 0:03:40.800 just the beginning of what Starbucks, you know, things they 0:03:40.880 --> 0:03:44.680 need to do for long term continued same Star sales growth. 0:03:45.400 --> 0:03:51.280 Also, Brinker International, another big restaurant holding company here, boosted 0:03:51.320 --> 0:03:54.200 its full year profit. Outlook what's going on in Brinker. 0:03:55.840 --> 0:03:56.720 More of the same. 0:03:56.920 --> 0:04:01.560 And you know CEO Kevin Hawkman worked at Young Brands 0:04:01.600 --> 0:04:04.120 with Brian Nickels, so it shouldn't be a surprise that 0:04:04.160 --> 0:04:08.120 they have had similar turnaround plans. Obviously, Kevin started his 0:04:08.920 --> 0:04:12.120 a little bit earlier than Brian's, but it was about operations, 0:04:12.840 --> 0:04:16.440 then improving the marketing. Right now, it's about continuing to 0:04:16.480 --> 0:04:18.840 work on the food and the food quality. 0:04:18.960 --> 0:04:20.720 So they started by. 0:04:20.560 --> 0:04:23.760 You know, taking menu items off of the menu to 0:04:23.800 --> 0:04:26.200 make it easier to execute, make sure people are getting 0:04:26.200 --> 0:04:29.400 their food hot and fast. But now this year, the 0:04:29.480 --> 0:04:32.960 story is really about improving the quality and the portions. 0:04:33.560 --> 0:04:38.800 Nacho sales jumped one hundred and seventy percent on a relaunch. 0:04:40.040 --> 0:04:43.400 They improved the bacon. Bacon burger sales are up thirty 0:04:43.480 --> 0:04:46.880 or forty percent. They had a caso relaunch. 0:04:47.000 --> 0:04:49.800 You know, those sales are up twenty percent, right so 0:04:49.800 --> 0:04:53.240 so you know they're the money that they're spending, which 0:04:53.279 --> 0:04:58.120 is going to impact their cost of sales negatively. You know, 0:04:58.240 --> 0:05:02.440 customers are seeing the improvement and they're there. It's resulting 0:05:02.440 --> 0:05:04.880 in higher satisfaction and customers are coming back. 0:05:04.880 --> 0:05:06.320 And that's a great story. Man. 0:05:06.320 --> 0:05:09.040 They did a you know, eight plus percent same stor 0:05:09.200 --> 0:05:12.320 sales comp at Chili's comping over a thirty plus percent. 0:05:12.600 --> 0:05:14.719 You know, I've never seen this in the restaurant business. 0:05:15.279 --> 0:05:16.560 I saw incredible. 0:05:16.640 --> 0:05:18.760 I saw the company did call out the Chili's All right, 0:05:18.760 --> 0:05:22.360 thirty seconds left, Cracker Barrel. My favorites up eighteen percent 0:05:22.400 --> 0:05:24.039 year to date. We got a little bit of life there. 0:05:25.800 --> 0:05:26.080 Listen. 0:05:26.120 --> 0:05:28.480 I think there's life throughout the restaurant industry. I think 0:05:28.560 --> 0:05:31.720 same star sales are going to increase. They were strong 0:05:31.800 --> 0:05:34.880 in January up until winter Storm Fern. But I think 0:05:35.320 --> 0:05:38.120 I think, you know, tax relief and cheaper gas prices 0:05:39.800 --> 0:05:43.599 and just a better economy are and less inflation are 0:05:43.680 --> 0:05:45.880 all going to help restaurants spending this year. 0:05:46.800 --> 0:05:49.960 Stay with us. More from Bloomberg Intelligence coming up after this. 0:05:53.800 --> 0:05:57.480 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:05:57.560 --> 0:06:00.960 weekdays at ten am Eastern on Appleclock and Android Auto 0:06:01.080 --> 0:06:04.120 with the Blueberg Business app. Listen on demand wherever you 0:06:04.160 --> 0:06:07.120 get your podcasts or watch us live on YouTube. 0:06:07.960 --> 0:06:10.279 It is earning season as well, and AT and T 0:06:10.440 --> 0:06:14.920 has reported earnings. It's revenue beat estimates thanks to broadband strength. 0:06:15.160 --> 0:06:17.400 Let's bring in John Butler. He is our go to 0:06:17.520 --> 0:06:19.400 guy when it comes to the telecom's names. He's our 0:06:19.440 --> 0:06:23.800 senior telecom analyst on Bloomberg Intelligence covering AT and T, 0:06:24.000 --> 0:06:27.279 covering Verizon, covering te Mobile. Where does AT and T 0:06:27.440 --> 0:06:30.279 stand relative to its competitors, Because as much as it's 0:06:30.400 --> 0:06:34.520 getting a boost from customers who subscribe to its broadband services, 0:06:34.839 --> 0:06:39.280 this is a saturated market and it's competing against big 0:06:39.320 --> 0:06:40.839 players and small players alike. 0:06:41.360 --> 0:06:44.200 Yeah, it's a great question. Scorelet you know, post the 0:06:45.160 --> 0:06:48.279 earnings call, they held a breakout session with the mester 0:06:48.400 --> 0:06:51.400 relations with the cell side, and there were a lot 0:06:51.400 --> 0:06:56.719 of questions about how broadband or how competition is now 0:06:56.839 --> 0:07:02.080 shifting from wireless over to broadband. I actually think AT 0:07:02.200 --> 0:07:05.160 and T is in a great position relative to their 0:07:05.200 --> 0:07:09.600 competitors because they're the fiber leader and they're about to 0:07:09.640 --> 0:07:15.119 buy Luhmann's fiber business and add another million fiber subscribers there. 0:07:15.280 --> 0:07:19.400 So in terms of their ability to sell what are 0:07:19.480 --> 0:07:24.720 called converged packages or wireless together with broadband. They're in 0:07:24.760 --> 0:07:28.480 a great position there because they have both fiber and 0:07:28.520 --> 0:07:31.880 they have a smaller fixed wireless access business, which is 0:07:31.880 --> 0:07:33.679 that wireless broadband product. 0:07:34.680 --> 0:07:36.880 John, this is a coup of AT and T that 0:07:36.920 --> 0:07:39.720 spends twenty twenty two billion dollars in capex every year. 0:07:40.400 --> 0:07:41.400 What does that capex for? 0:07:41.600 --> 0:07:47.080 Typically a lot of it, Paul is going towards wireless 0:07:47.160 --> 0:07:50.760 network upgrades as well as the deployment of fibers. So 0:07:51.520 --> 0:07:54.840 this year, for example, they're going to add five million 0:07:54.920 --> 0:07:58.480 new fiber homes, but it costs about two thousand dollars 0:07:59.360 --> 0:08:02.880 maybe twice that in some markets to build a new 0:08:02.920 --> 0:08:06.440 what's called the fiber homes pass. So a lot of 0:08:06.480 --> 0:08:10.440 capital is getting spent this year, next year, and maybe 0:08:10.440 --> 0:08:12.840 to a little bit of a lesser degree in twenty eight. 0:08:12.920 --> 0:08:16.360 That's sort of laying the foundation to build out that 0:08:16.520 --> 0:08:20.760 fiber network and that five G wireless network. Beyond that, 0:08:21.080 --> 0:08:23.200 AT and T has said, we're going to cut our 0:08:23.280 --> 0:08:27.320 cap backs, we're going to lower our capital intensity, and 0:08:27.360 --> 0:08:29.920 you're going to see a lot more free cash flow 0:08:30.320 --> 0:08:33.079 flow through and they're going to be able to fund 0:08:33.080 --> 0:08:37.800 hopefully some dividend growth after that and increase the share buyback. Yeah. 0:08:37.840 --> 0:08:40.320 I'm looking at the dividend yield for AT and T 0:08:40.400 --> 0:08:43.760 four point six percent. For Verizon, it's almost seven percent. 0:08:44.720 --> 0:08:46.400 For Team Mobile a little bit less at two point 0:08:46.520 --> 0:08:50.520 nineteen percent. John, Where did the telecom stand when it 0:08:50.559 --> 0:08:53.840 comes to this rotation out of big tech looking for 0:08:53.880 --> 0:08:57.920 some cyclicals, looking for parts of the market that haven't 0:08:57.960 --> 0:08:58.800 been overbought. 0:09:01.440 --> 0:09:03.760 So it's a good question. 0:09:03.880 --> 0:09:07.760 Scorelet I always say telecoms, particularly the dividend payers like 0:09:07.840 --> 0:09:11.320 AT and T and Verizon, are are bond proxies to 0:09:11.400 --> 0:09:15.200 a degree. I think sentiment has been pushed around a 0:09:15.280 --> 0:09:17.599 little bit by the fact that we have new CEOs 0:09:17.600 --> 0:09:21.079 at both Verizon and T Mobile, and these guys are 0:09:21.080 --> 0:09:24.120 going to be looking to make their mark. Verizon on 0:09:24.200 --> 0:09:27.320 Friday is going to set out a new strategy set 0:09:27.360 --> 0:09:28.840 by Dan Shulman. 0:09:28.480 --> 0:09:30.160 Who is the new CEO there. 0:09:31.200 --> 0:09:34.120 So there's been a little bit of concern, or more 0:09:34.160 --> 0:09:37.920 than a little bit of concern that the competitive intensity 0:09:37.920 --> 0:09:40.800 and wireless is going to pick up as these new 0:09:40.880 --> 0:09:43.480 CEOs look to make their mark, and I think that 0:09:43.640 --> 0:09:47.079 has led to some of the pressure, particularly on AT 0:09:47.200 --> 0:09:50.240 and T. Though again this morning. I think they put 0:09:50.240 --> 0:09:53.640 a lot of those concerns to rest with their by 0:09:53.760 --> 0:09:57.520 reiterating their fiber plans and laying out new free cash 0:09:57.559 --> 0:09:58.240 flow guidance. 0:09:59.080 --> 0:09:59.320 John. 0:09:59.360 --> 0:10:01.800 On the competitive land front, where are the cable companies 0:10:02.160 --> 0:10:02.720 these days? 0:10:04.280 --> 0:10:08.880 They're struggling, Paul, I mean they're at a technology disadvantage 0:10:08.920 --> 0:10:14.320 in that they're offering broadband over those legacy coaxial cable networks. 0:10:14.840 --> 0:10:18.560 They're doing what they can to upgrade the technology and 0:10:18.840 --> 0:10:22.199 increase speeds on those networks, but at the end of 0:10:22.240 --> 0:10:26.120 the day, fiber really is a superior product to everything 0:10:26.160 --> 0:10:30.079 else on the market, and fixed wireless access, which has 0:10:30.120 --> 0:10:33.880 been offered by the telcos, has been a very popular 0:10:34.040 --> 0:10:38.000 choice given the fact that it's an easy setup. It's 0:10:38.080 --> 0:10:41.120 over the air, so there's very little problems with it. 0:10:41.120 --> 0:10:45.160 It's pretty much problem free. As broadband goes over time, 0:10:45.200 --> 0:10:47.640 it sort of has a headroom problem. It can't offer 0:10:47.679 --> 0:10:51.439 the same speeds as fiber. But through it all, cable 0:10:51.520 --> 0:10:55.360 is sort of flying underneath those two products, sort of, 0:10:56.080 --> 0:10:59.520 you know, trying to compete with what is a legacy 0:10:59.559 --> 0:11:00.640 product in the market. 0:11:01.720 --> 0:11:04.200 John, did we learn anything from AT and t's results 0:11:04.200 --> 0:11:08.440 regarding iPhones and you know consumers signing on for the 0:11:08.600 --> 0:11:10.599 latest version of the iPhone. 0:11:10.679 --> 0:11:14.600 So great question. It's very interesting at and T over 0:11:14.760 --> 0:11:17.680 indexes to the iPhone. They have a lot more users 0:11:17.800 --> 0:11:21.720 than Verizon or T Mobile because they had an early 0:11:21.840 --> 0:11:26.920 exclusivity deal when the iPhone first launched. They were asked 0:11:26.960 --> 0:11:30.520 about the foldable iPhone that's rumored to be coming out 0:11:30.600 --> 0:11:33.000 next year and whether that's really going to move the 0:11:33.120 --> 0:11:36.240 dial for them. Their answer to me was interesting, I 0:11:36.280 --> 0:11:40.360 didn't expect it, which is they've been tracking the performance 0:11:41.360 --> 0:11:44.960 and the sales of the foldables that they have available 0:11:45.000 --> 0:11:48.120 on the network today on the Android side, and their 0:11:48.240 --> 0:11:51.680 expectation is that we won't see a huge bump in 0:11:51.800 --> 0:11:55.840 iPhone sales next year with a foldable model model. I 0:11:55.880 --> 0:11:59.079 think time will tell. I actually think foldables are going 0:11:59.120 --> 0:12:03.640 to resonate well with people, and Android. 0:12:03.200 --> 0:12:05.520 Isn't always the best read through there. 0:12:06.440 --> 0:12:08.600 I think it's a different kind of user that's on 0:12:08.679 --> 0:12:10.640 the Android phone versus iPhone. 0:12:10.679 --> 0:12:12.080 But we'll have to see in the fall. 0:12:12.920 --> 0:12:16.080 Stay with us more from Bloomberg Intelligence coming up after this. 0:12:19.960 --> 0:12:23.679 You're listening to the Bloomberg Intelligence podcast. Catch us Live 0:12:23.760 --> 0:12:26.840 weekdays at ten am Eastern on Apple corplay and Android 0:12:26.880 --> 0:12:30.160 Auto with the Bloomberg Business App. Listen on demand wherever 0:12:30.240 --> 0:12:33.760 you get your podcasts, or watch us live on YouTube. 0:12:34.320 --> 0:12:35.400 Caroline Hydroints is here. 0:12:35.440 --> 0:12:36.840 So there's just a lot going on in the world 0:12:36.840 --> 0:12:39.640 of tech and Caroline heidaz b tech co anchor. I'm 0:12:39.679 --> 0:12:43.720 gonna start with ASML some really big numbers over the night, Caroline, 0:12:43.720 --> 0:12:46.720 from this big chip maker that I guess that bodes 0:12:46.720 --> 0:12:49.040 well for folks that want to see continued momentum and 0:12:49.440 --> 0:12:50.920 AI spending if nothing else. 0:12:50.800 --> 0:12:53.080 Might not bide well for fear their employees. 0:12:54.120 --> 0:12:56.400 See a company put out such a strong earnings and 0:12:56.400 --> 0:12:58.480 then at the same time combine it with headcut something. 0:12:58.720 --> 0:13:01.839 This is AI, folks, This is AI. This is efficiency, 0:13:01.920 --> 0:13:05.240 this is agility, as the CEO causes, it's actually shares 0:13:05.240 --> 0:13:07.360 that have now turned red, which is interesting. We're trying 0:13:07.400 --> 0:13:10.920 to delve into the reasoning why because they booked record 0:13:10.960 --> 0:13:13.760 all orders thirteen point two billion euros worth. In fact, 0:13:13.760 --> 0:13:15.160 they're trying to point us to the fact that orders 0:13:15.200 --> 0:13:17.040 aren't the big tell anymore and don't always look at 0:13:17.040 --> 0:13:19.520 our backlog. But more broadly, this is a company that 0:13:19.520 --> 0:13:24.040 has lit a far underneath European peers today, SMI is 0:13:24.160 --> 0:13:26.280 up and awful. Lot B semon Conductor is up a lot. 0:13:26.440 --> 0:13:28.880 You've seen LAMB researcher in the United States of prime Materials, 0:13:28.920 --> 0:13:31.600 because this is the chip equipment maker to the world, 0:13:32.000 --> 0:13:34.880 in particular to China. In fact, most of its sales 0:13:34.920 --> 0:13:36.840 still go to China, even though I will tell you 0:13:37.080 --> 0:13:42.120 they sell their eighth generation lithography cup not even allow 0:13:42.160 --> 0:13:45.720 to ship lithography, but their chip equipment is so old. 0:13:45.960 --> 0:13:50.720 But still China needs that deprecated chip equipment manufacturing ability 0:13:50.760 --> 0:13:53.240 because they want to make their own domestic chips. Now 0:13:53.280 --> 0:13:55.920 we're also seeing the fact that they're good in Taiwan. 0:13:56.040 --> 0:13:58.240 They're saying strength in the United States as we build 0:13:58.240 --> 0:14:00.960 out domestic chip manufacturing here as well. And that's why 0:14:01.000 --> 0:14:02.920 Intel has been so much higher to Dell as well, 0:14:02.920 --> 0:14:05.480 because it really is just to tell, like TSMC was, 0:14:05.800 --> 0:14:08.480 that this is an AI bubble, this is real orders 0:14:08.640 --> 0:14:12.719 for real chip manufacturing. And the CEO had said, look, 0:14:12.720 --> 0:14:14.520 we've got a lot of clarity in the last three months, 0:14:14.559 --> 0:14:16.800 so much clarity in fact that they are making those 0:14:16.840 --> 0:14:19.920 seventeen hundred job cuts where they're trying to be more agile, 0:14:19.920 --> 0:14:21.920 where they're innovation and they're cutting out from the IT 0:14:22.200 --> 0:14:23.800 and the tech part of the business. 0:14:23.880 --> 0:14:27.200 Okay, Well, speaking of job cuts, another big name announcing 0:14:27.240 --> 0:14:31.440 job cuts as Amazon sixteen thousand corporate jobs. 0:14:31.840 --> 0:14:34.160 And that's thirty thousand in the last three months that 0:14:34.200 --> 0:14:36.520 they've announced. So this is a company that signaled this 0:14:36.680 --> 0:14:40.400 like Andy Jasse in his letter to his shareholders had said, 0:14:40.520 --> 0:14:43.800 I am going to make AI work for me. But 0:14:43.840 --> 0:14:46.360 what does that mean. I'm going to have a smaller 0:14:46.600 --> 0:14:50.240 employee base. He's trying to strip out that layer of 0:14:50.320 --> 0:14:53.560 management and bureaucracy that built up during COVID where many 0:14:53.600 --> 0:14:57.280 would say big companies over hired in that period, and 0:14:57.320 --> 0:15:00.680 therefore we're starting to still see the area of being 0:15:00.960 --> 0:15:03.840 fixated on where they will rehire is areas of AI, 0:15:04.080 --> 0:15:07.840 of areas of AGI, and areas of LLM and all 0:15:07.880 --> 0:15:10.040 the areas of growth for the business. So they are 0:15:10.080 --> 0:15:13.360 going to try over the ninety days find new homes 0:15:13.600 --> 0:15:16.880 for some of these laid off employees, but fourteen thousand 0:15:16.960 --> 0:15:18.720 of them, they're not going to find homes for all 0:15:18.760 --> 0:15:21.160 of those. But this is again about efficiency for the company. 0:15:21.280 --> 0:15:21.480 Yep. 0:15:21.560 --> 0:15:26.440 Absolutely, Soft Bank in talks to invest thirty billion dollars 0:15:26.480 --> 0:15:30.320 more into Open AI A. The numbers are just monsters, 0:15:30.880 --> 0:15:33.200 but the valuation, you know, about seven hundred and fifty 0:15:33.240 --> 0:15:33.920 billion dollars. 0:15:34.040 --> 0:15:37.440 I mean SoftBank's all in on this AI, think yeah. 0:15:37.240 --> 0:15:40.880 And Massa is really committing to open A in particular. Look, 0:15:40.920 --> 0:15:42.840 the number one holding for SoftBank as far has been 0:15:42.960 --> 0:15:45.080 arm and that is all about chip design in the 0:15:45.080 --> 0:15:47.880 future of artificial intelligence in that direction. But this would 0:15:47.920 --> 0:15:50.520 actually probably bring their number one exposure, their number one 0:15:50.560 --> 0:15:52.880 stake to being open AI if they put this thirty 0:15:52.920 --> 0:15:55.480 billion into work. And this is why Massa has been 0:15:55.640 --> 0:15:59.240 selling down his Nvidia steake, has been trying to free 0:15:59.360 --> 0:16:01.680 up capital to get in on the gender to AI 0:16:01.800 --> 0:16:04.120 move that in many ways people would say you kind 0:16:04.120 --> 0:16:06.800 of missed from its own business model perspective, But he's 0:16:06.880 --> 0:16:09.120 really tried to late claim to betting on some of 0:16:09.120 --> 0:16:11.880 the biggest makers. Remember they just bought Ampere as well, 0:16:11.880 --> 0:16:15.600 which is another chip manufacturing company which was backed by 0:16:15.600 --> 0:16:18.760 Oracle previously. But Masa all in, you know, is a 0:16:18.800 --> 0:16:21.240 guy who makes big bets. Sometimes they work really well, 0:16:21.600 --> 0:16:24.560 like Ali Baba. Sometimes they work less well like we work. 0:16:24.680 --> 0:16:26.040 But more broadly, he's a man in the. 0:16:26.040 --> 0:16:30.120 Commitment stay with us more from Bloomberg Intelligence coming. 0:16:29.960 --> 0:16:36.880 Up after this, you're listening to the Bloomberg Intelligence podcast. 0:16:37.200 --> 0:16:39.760 Catch us live weekdays at ten am. He's done on 0:16:39.840 --> 0:16:43.080 Apple Coarclay and Android Otto with the Bloomberg Business app. 0:16:43.160 --> 0:16:46.400 Listen on demand wherever you get your podcasts, or watch 0:16:46.480 --> 0:16:47.640 us live on YouTube. 0:16:48.720 --> 0:16:53.120 LVMH kicking off some earnings here for luxury brands and 0:16:53.360 --> 0:16:56.920 not particularly good numbers, talking about a tough Christmas period, 0:16:57.200 --> 0:16:58.840 and that was kind of the tail to tape there. 0:16:59.280 --> 0:17:03.640 Andrea Felsta joined us Bloomberg Opinion Calmness from London, Andrew, 0:17:03.640 --> 0:17:07.119 what can you tell us from LVMH and their results? 0:17:07.720 --> 0:17:10.600 Well, this was kind of There were two reasons I 0:17:10.640 --> 0:17:13.840 think for the really strong share price reaction we've had today. 0:17:13.880 --> 0:17:18.480 One is, you know, these weren't really there was nothing 0:17:18.560 --> 0:17:22.320 really terrible about these results, apart from the drink's division, 0:17:22.359 --> 0:17:27.080 which was much worse. But investors, after being far too 0:17:27.119 --> 0:17:30.840 gloomy about luxury sort of in the first half middle 0:17:30.880 --> 0:17:32.800 of last year, they thought no one was ever going 0:17:32.840 --> 0:17:36.840 to buy luxury goods again, which was ridiculous. But now 0:17:37.119 --> 0:17:40.399 they sort of came back last fall and they started 0:17:40.400 --> 0:17:43.359 to get really excited about luxury and they pushed one 0:17:43.400 --> 0:17:48.400 of the indexes up thirty percent between you know, August 0:17:48.480 --> 0:17:50.960 and earlier in January, and that was just like a 0:17:51.040 --> 0:17:53.320 head of where we are. So where we are at 0:17:53.359 --> 0:17:56.960 the moment is China has stabilized, but it's not it's 0:17:57.000 --> 0:18:00.840 not a V shaped recovery. The US is pretty good 0:18:01.000 --> 0:18:04.399 thanks to stock markets, but the US compared with the 0:18:04.440 --> 0:18:07.119 period a year ago, which was also pretty good before 0:18:07.119 --> 0:18:10.879 we had the tariff trauma. After the election, there was 0:18:10.920 --> 0:18:16.000 a real boom in luxury goods after the elections unleashed 0:18:16.040 --> 0:18:19.200 a lot of spending. So you've got the numbers that weren't, 0:18:19.359 --> 0:18:23.520 you know, great, but weren't terrible. But investors had got 0:18:23.600 --> 0:18:28.280 far too excited about luxuries of anything other than a 0:18:27.720 --> 0:18:30.439 B a big earnings upgrade that they were always going 0:18:30.440 --> 0:18:33.719 to be disappointed. And Richmont, which owned Cartio, which is 0:18:33.760 --> 0:18:37.439 absolutely on fire at the moment, they had some pretty 0:18:37.440 --> 0:18:40.720 good numbers a couple of weeks ago, but they weren't, 0:18:40.840 --> 0:18:43.679 you know, they weren't any better than anyways. Did we 0:18:43.720 --> 0:18:45.239 knew they were going to be good, so they were 0:18:45.280 --> 0:18:47.800 going to be good, and they were good. The shares 0:18:47.880 --> 0:18:51.280 failed wearing a very funny sort of environment at the moment. 0:18:51.960 --> 0:18:54.080 I really like the way you put that the tariff trauma, 0:18:54.119 --> 0:18:56.720 because I'm sure that's a big, big problem for these 0:18:56.840 --> 0:18:57.800 lundury purveyors. 0:18:58.520 --> 0:19:00.320 Three of the five division. 0:19:00.200 --> 0:19:03.760 Said LVMH missed estimates and what is traditionally the strongest period, 0:19:03.760 --> 0:19:07.120 So that does not help either. Which divisions, which part 0:19:07.280 --> 0:19:10.479 of the LVMH empire are doing well? Which one are 0:19:10.480 --> 0:19:12.640 really liking? You mentioned wines and spirits. We know that's 0:19:12.760 --> 0:19:14.960 kind of you know, been a problem child all along now. 0:19:15.040 --> 0:19:17.400 But what's doing well? What's not doing so well? 0:19:18.520 --> 0:19:23.680 Jewelry is absolutely sparkling. There's a few reasons for that. 0:19:23.840 --> 0:19:28.840 So over the over the past five years, handbags particularly 0:19:28.920 --> 0:19:33.000 have gone up in price. So you know, a large 0:19:33.040 --> 0:19:36.520 flap chanel bag you are looking at around ten thousand dollars. 0:19:36.640 --> 0:19:41.880 Most nice handbags are about three thousand pounds plus. I'm 0:19:41.880 --> 0:19:43.160 not sure what that is dollars. 0:19:43.280 --> 0:19:46.960 Maybe you know too much, you want that out too. 0:19:46.880 --> 0:19:47.720 Much exactly so. 0:19:48.320 --> 0:19:52.640 But actually jewelry, which everyone alas thought is really expensive 0:19:52.840 --> 0:19:56.000 because those leather goods have gone up so much. So 0:19:56.119 --> 0:19:59.800 something like a Cartier love bangle that you can wear 0:19:59.880 --> 0:20:02.119 a gain and again and again, and it's made of gold. 0:20:02.160 --> 0:20:06.159 It's got receidure value that's actually seen as better value 0:20:06.240 --> 0:20:10.760 for money than a handbag. Plus, you know, the luxury 0:20:10.760 --> 0:20:14.560 industry's really matured. You know, twenty years ago we were 0:20:14.600 --> 0:20:18.400 all buying our first git bag. Now you know many 0:20:18.440 --> 0:20:21.520 people have got a wardrobe full of it bags and 0:20:21.920 --> 0:20:25.800 they've moved on to jewelry. There's been a democratization of jewelry, 0:20:25.840 --> 0:20:32.280 a shift from unbranded jewelry to Tiffany, Kartier, Bogari, and 0:20:32.320 --> 0:20:34.880 that's really helped the jewelry sector. 0:20:35.920 --> 0:20:39.320 Andrew, what is the company saying about the Chinese consumer 0:20:39.600 --> 0:20:42.520 these days? Are they buying on mainland? Are they going 0:20:42.520 --> 0:20:44.359 to Japan to buy? Are they coming to Europe or 0:20:44.400 --> 0:20:46.000 the US? What's going on? 0:20:46.080 --> 0:20:49.800 They were going to Japan and then they came back 0:20:49.840 --> 0:20:52.320 to China. Now, with the currency moves, I wouldn't be 0:20:52.359 --> 0:20:55.439 surprised if they went back to Japan again. Now, the 0:20:55.600 --> 0:20:58.080 thing about Japan is really interesting. 0:20:58.520 --> 0:20:59.639 It's not a great. 0:21:00.000 --> 0:21:04.480 Economics of selling in Japan aren't great. It tends to 0:21:04.480 --> 0:21:06.520 be less profitable. So if we do get that big 0:21:06.600 --> 0:21:10.959 Japan tried, that's not going to be great for profitability 0:21:11.119 --> 0:21:12.119 going forwards. 0:21:14.119 --> 0:21:17.320 Okay, we also have the dispute between China and Japan 0:21:17.480 --> 0:21:21.240 certainly not helping things either with you know, Chinese tourists 0:21:21.280 --> 0:21:24.199 going to Japan to buy luxury goods. Nevertheless, if you 0:21:24.240 --> 0:21:26.160 wanted to, you know, are of the currency difference that 0:21:26.160 --> 0:21:27.400 that possibility exists. 0:21:27.640 --> 0:21:29.199 What about American consumers? 0:21:29.320 --> 0:21:31.439 You mentioned the stock market doing well, and certainly that 0:21:31.560 --> 0:21:34.040 helps the one percent and the zero point one percent. 0:21:34.560 --> 0:21:36.879 Where are we seeing the American consumer pickup slack? 0:21:38.560 --> 0:21:38.720 Well? 0:21:38.760 --> 0:21:42.080 The US consumer has picked up sack all the way through, 0:21:42.760 --> 0:21:45.920 while China has been in the doll rubs. US luxury 0:21:45.960 --> 0:21:49.360 demand tends to be very correlated with stock markets and 0:21:49.400 --> 0:21:52.040