Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
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Speaker 1: YouTube search Bloomberg Global News. Well, let's talk more restaurants.
Speaker 1: We heard from shake Shack after hours. Uh, and let's
Speaker 1: talk a little bit about Red Lobster. Kelly Valid is
Speaker 1: CEO of Red Bobster. She joins us on the phone
Speaker 1: from Orlando, Florida. Kelly, great to have you. How are you.
Speaker 1: I'm well, thank you, it's great to be here. Good. Well,
Speaker 1: we've been you know, Red Lobster privately held company, so
Speaker 1: we have insight into how competitors have been doing. Um,
Speaker 1: and you know, we're hearing a lot about cost pressures.
Speaker 1: We're hearing a lot about inflation, rising food prices, rising wages.
Speaker 1: Is uh, what is the state of Red Lobster right now? Yeah, exactly,
Speaker 1: it's a It's an interesting time for sure. So all
Speaker 1: that is is true and we've said this all along
Speaker 1: here at Red Lobster that Covid has been an equal
Speaker 1: opportunity disruptor in the way of Yeah, the rising wages, Um,
Speaker 1: you know that's here to stay, right, that won't undo itself.
Speaker 1: And yet we are seeing some stabilization of the of
Speaker 1: the workforce, being able to retain the folks that we have,
Speaker 1: and then we're just continuing to hire and look for
Speaker 1: great people. On the supply chain side. We've got a
Speaker 1: fantastic team. We've stayed in product and we've been able
Speaker 1: to pivot and and still offer great value. We've just
Speaker 1: launched value forward offers on our menu that dropped on
Speaker 1: January first. So, um, we're we're finding that balance and
Speaker 1: that's the key right now. So let's there's a lot there,
Speaker 1: So let's unpack some of it. First of all, when
Speaker 1: it comes to managing labor costs and also having access
Speaker 1: to the workers you need, walk us through both of those.
Speaker 1: Are you paying more for workers? What is that doing
Speaker 1: to your you know, bottom line, And are you even
Speaker 1: being able to find the workers that you need because
Speaker 1: you can do just so much online, you still need people. Yeah, absolutely, Yes,
Speaker 1: a lot of our our business has pivoted off premise
Speaker 1: and catering and delivery, but yes, we still have lots
Speaker 1: of people in the restaurants and the demand has has
Speaker 1: rebounded certainly, which means we've got to have great people
Speaker 1: to take care of them. So then we have no doubt.
Speaker 1: We we're paying more everyone is, and we're paying more,
Speaker 1: and we're keeping up with that same pace you have to.
Speaker 1: And then we are doing everything possible and using every
Speaker 1: channel you can imagine to recruit new talent. And at
Speaker 1: the same time, we're focused on taking care of the
Speaker 1: employees we have so that they choose to stay with
Speaker 1: us for the long haul. So, Kelly, does that mean
Speaker 1: you aren't getting all the workers that you would like
Speaker 1: to be hiring. Well, we're hiring an incredible clip forty
Speaker 1: thousand plus, uh is what. Well, we'll hire more than
Speaker 1: that this year, so we are getting we are finding
Speaker 1: those workers. Sure, it's a challenge, but again the strategies
Speaker 1: are I think outside the box, do whatever we can
Speaker 1: to to just get more people in the door and
Speaker 1: keep the staffing levels up. Level forgiving sounds like a lot.
Speaker 1: It is a lot, but it's not a lot if
Speaker 1: you really need eighty thou workers. To give me some
Speaker 1: perspective here, Yeah, I mean we we need, we will
Speaker 1: need and higher about a total of about fifty thousand
Speaker 1: this year. And you know, um that's about what we need.
Speaker 1: And we're close to forty thou you know. So we
Speaker 1: are in a good place and not yet where we'd
Speaker 1: like to be, but in a in a good place
Speaker 1: in terms of our hiring right now. Uh. Wages, Uh,
Speaker 1: can you give us any numbers average wages? How much
Speaker 1: you've had to increase them as as the pressures have increased. Yes,
Speaker 1: we've increased our wages. Uh, probably about eleven a little
Speaker 1: over eleven percent at this point. So what's an average?
Speaker 1: What's stay away from? Yeah, I'll probably stay away from
Speaker 1: what our average hourly rates is. That's a pretty it's
Speaker 1: so competitive about there right now. We are competitive and
Speaker 1: we are where the industry is paying in full service
Speaker 1: restaurants right now. You mentioned a lot Pivoto online, so
Speaker 1: many of the restaurant space quickly figured it out right.
Speaker 1: It sounds like you guys did too. How much of
Speaker 1: your business is online versus in store? Yeah, our business,
Speaker 1: we tripled our off premise, and off premise would be delivery,
Speaker 1: catering and explaine takeout. We've tripled that, so we are
Speaker 1: over of our business today is takeout and delivery, and
Speaker 1: that is about where the industry sits as well, and
Speaker 1: we expect that to be a permanent there's a permanent
Speaker 1: trend change or permanent behavior changes and shifts. So our
Speaker 1: primary businesses obviously still dine in, but you see people
Speaker 1: pivot to off premise and to go when they want
Speaker 1: to feel safe when things change, uh, and they need
Speaker 1: to us to meet him where they are. And the
Speaker 1: exciting thing is we're getting that's an incremental guests in
Speaker 1: a lot of cases that is now choosing to come
Speaker 1: to Red Lobster. Kelly, Does that mean there's a physical
Speaker 1: redesign or rethink of the actual layout of the restaurant?
Speaker 1: And that's a great question, and that that's all a
Speaker 1: lot of what we're looking at right now. So it
Speaker 1: certainly can. But there's also things like virtual brands that
Speaker 1: were exploring, you know, just how do you find a
Speaker 1: way to get your food into more people's hand, So
Speaker 1: it could be a physical redesign. We've optimized the space
Speaker 1: that we have. We've got the factis actually we have
Speaker 1: big restaurants. We have a lot of space to work with.
Speaker 1: So there's been a lot of redesign that's already happened
Speaker 1: in modifications and will continue to look at that as well. Well,
Speaker 1: what's the modification We just got about seconds and we'll
Speaker 1: come back and chat some more, but what is a
Speaker 1: modification that you guys are thinking about? Yeah, you could,
Speaker 1: you know, so we have to go doors and windows today,
Speaker 1: but optimizing that space, um, you know, there are some
Speaker 1: looking at drive thrus. That's a possibility that we'll look at.
Speaker 1: But we've optimized the space and we've got separate rooms
Speaker 1: where we can facilitate greater you know, throughput of our
Speaker 1: to go windows and are to go doors to get
Speaker 1: the food out quicker to the parking lots. Kelly, help
Speaker 1: us understand the ownership structure here because you've been on
Speaker 1: a CEO for less than a year right now, and
Speaker 1: as Carol mentioned before we went to break it was
Speaker 1: owned by Darden for years, then two off to a
Speaker 1: private equity company for a few years and now it's
Speaker 1: owned by this investor group. How does that work and
Speaker 1: how do you work that into your and what's that
Speaker 1: like for you in terms of how you report a CEO? Yeah, sure,
Speaker 1: it's it's basically a board structure. You know, they own
Speaker 1: a fake and and there I have a board assembled
Speaker 1: of mostly those folks in Thailand. How Union is the
Speaker 1: company and the investor group, and then I've got a great,
Speaker 1: really well rounded board, uh, comprised of other folks that
Speaker 1: are industry experts. So it's a great it's a it's
Speaker 1: a pretty normal structure and great relationship and great partnership.
Speaker 1: We'll talk a little bit about supply chain here, because
Speaker 1: how Union is a huge seafood supplier and I'm wondering
Speaker 1: how that works into your supply chain. Yeah, sure, they
Speaker 1: absolutely are supplier of shrimp for us and and a
Speaker 1: few other things. But they Yeah, we keep We've got
Speaker 1: some some great firewalls in place, and uh, they're they're
Speaker 1: able to help us, you know, wherever possible and provide
Speaker 1: great solutions as we you know, are in a challenge environment. Shure,
Speaker 1: We'll forgive me, But why do you need firewalls in place.
Speaker 1: I mean it sounds like, well, if they own you, you
Speaker 1: you can they can provide you with seafood. Oh absolutely,
Speaker 1: just to make sure it's competitive, just to make sure
Speaker 1: we're doing all the right things. Absolutely they can. Sure. Yeah.
Speaker 1: Well and it's interesting too. I mean I do wonder
Speaker 1: about being do you prefer being privately held in a
Speaker 1: market environment that can be very tough on companies. We
Speaker 1: talk about this a lot. We see entrepreneurs in startups.
Speaker 1: We talked about earlier this week about the billions you know,
Speaker 1: uh plus unicorns that are out there. But companies are
Speaker 1: able to grow and stay private for a lot longer
Speaker 1: because there's a lot of money out there that enables
Speaker 1: them to do it. Tell us about the benefits of
Speaker 1: being private, Well, sure, there are those benefits. There absolutely are,
Speaker 1: and I've lived in both worlds. In the public facing
Speaker 1: environment can be challenging and it teaches you, uh well,
Speaker 1: there's a great discipline in that. There's a lot that
Speaker 1: comes with being publicly held and being out there in
Speaker 1: front of of everyone to see your results. So it
Speaker 1: does help. It helps where when there is a need.
Speaker 1: This is a brand will continue to have a revitalization
Speaker 1: strategy in place, and when there's a need for investments,
Speaker 1: there's patience for that and uh, in that case, yeah,
Speaker 1: there's an understanding of what's what's really needed to doing
Speaker 1: the right thing for the business that can help sometimes
Speaker 1: for that reason. Kelly, how have you navigated changing COVID mandates,
Speaker 1: MASK mandates, different restrictions throughout the different states, counties, towns
Speaker 1: where you have read lobster locations. Yeah, it's been interesting
Speaker 1: and you've had to just really make it part of
Speaker 1: every you know, every single day understanding what's happening. We've
Speaker 1: got a task force, we've got a crisis team that's
Speaker 1: in place. We've got QA folks kind of you know
Speaker 1: again that they wake up every day thinking about making
Speaker 1: sure that um, we are up to date on everything
Speaker 1: that has to happen. And so we stayed a prize
Speaker 1: of it, and we listen to listen to our guests.
Speaker 1: We've listened in social sentiment, we understand what's important to
Speaker 1: them as well. And then we've just tried to be
Speaker 1: really clear about our safety protocols and steadfast in what
Speaker 1: we're doing. Uh, stay stay along, you know, go along
Speaker 1: with everything that we need to and UM keep guests
Speaker 1: and employee safe. We've been able to do that. So
Speaker 1: in place, were there ever situations where you had vaccine
Speaker 1: mandates in place and restaurants because a city or a
Speaker 1: town or a state required them of employees. Yeah, absolutely,
Speaker 1: UH in New York, UM, where the guests that required
Speaker 1: the guests to have it. We have absolutely had to
Speaker 1: deal with some things there. In Canada, where have we
Speaker 1: have restaurants that are company owning Canada, we've also had
Speaker 1: restrictions California sets and unique restrictions UM, primarily based on
Speaker 1: the guests and then requirements for employees. Are there different
Speaker 1: dining patterns in those areas due to restrictions? Yeah, i'd
Speaker 1: say you you would feel it. Sure. Yeah, we definitely
Speaker 1: had felt it in UH in New York And in
Speaker 1: response to that, you would have Yeah, there was. I
Speaker 1: think that's obvious. We've seen by now how divisive some
Speaker 1: of this could be. Unfortunately, so you would definitely hear
Speaker 1: at times from guests and and we could we could
Speaker 1: feel the difference with those mandates in place. Not tricky. Hey, listen,
Speaker 1: you have been in this industry a long time. UM.
Speaker 1: We love talking with folks who are dealing with you know,
Speaker 1: consumers um just got about thirty thirty five seconds left here.
Speaker 1: Based on what you're seeing, the outlook, the visibility, how
Speaker 1: do you think the consumer is doing and what does
Speaker 1: it tell you about where we are in terms of
Speaker 1: economic growth? Yeah, I think the consumer is still they're
Speaker 1: very sensitive to all the price that's been that that's happening,
Speaker 1: all the things that are happening around inflation that I
Speaker 1: think they feel that they know that, you know, we're
Speaker 1: doing everything we can to price under where inflation is
Speaker 1: and still have great value forward offers h in place
Speaker 1: of red lobster. People count on us for that, so
Speaker 1: we're working really hard on that. I think the consumer,
Speaker 1: you know, there's obvious, uh, the tax returns and the
Speaker 1: idea of maybe those being smaller this year. I think, well,
Speaker 1: we could certainly have an impact. The consumer headset, I
Speaker 1: think is still a little bit uncertain, and yet they
Speaker 1: still want to be out in restaurants enjoying a great
Speaker 1: meal around the table with friends and family. So I'm
Speaker 1: optimistic and that Guarden Alright, We're gonna leave on that note.
Speaker 1: Thank you so much, really appreciated all your time, Kelly
Speaker 1: valat Vlad. Excuse me, Kelly Valade, uh CEO Red Lobster
Speaker 1: joining us on the phone in Orlando, Florida. Great snapshot
Speaker 1: of the restaurant industry, which we know has had such
Speaker 1: a tough time during the pandemic. And just to hear
Speaker 1: her insight, Yeah, Kelly, you gotta come back soon. That
Speaker 1: was just fantastic. So we've been watching a lot of
Speaker 1: the markets. Just want to point out that we are
Speaker 1: going to new lows here on those major equity average
Speaker 1: in fact right now down about two point seven percent
Speaker 1: on the Nazis Charlie mentioned, two percent down on the
Speaker 1: S and P and the Dow down about one point
Speaker 1: eight percent. So as Charlie mentioned, that selling intensifying, and
Speaker 1: we've also seen some pressure when it comes to the
Speaker 1: oil market as well. Yeah, that's right. We're actually seeing
Speaker 1: West Texas Intermediate down two dollars right now, Yeah, down
Speaker 1: about two point two. Yeah. Interestingly enough, Hey, we got
Speaker 1: a really special guest with us today, Mike mclogan's senior
Speaker 1: Commodity Strategies at Bloomberg Intelligence. It is I say special
Speaker 1: because he's with us in the Bloomberg Interactive Broker studio
Speaker 1: from Miami where he is now based. These days, Mike,
Speaker 1: I want to start with oil and then of course
Speaker 1: talk crypto with you as well. Um help us understand
Speaker 1: the oil move that we're seeing today, because if tensions
Speaker 1: do and as they have been rising on the border
Speaker 1: of Russia and Ukraine, shouldn't we see that reflected in
Speaker 1: higher oil prices. Yes, I think oil is doing a
Speaker 1: two thousand and eight. It went up on the escalator
Speaker 1: and down on the elevator, so we have to worry
Speaker 1: about that. So right now it's got a very significant
Speaker 1: reason to be high potential war with a lot one
Speaker 1: of the largest crudeil exporters in the world against one
Speaker 1: of the largest grain exporters in the world. But you
Speaker 1: can only go so far. You get leverage positions and
Speaker 1: you pull back. I think we're just seeing some of
Speaker 1: that today. But if this armed conflict happens, crudel can
Speaker 1: easily jump well of a hundred dollars. But I think
Speaker 1: that will be the beginning of its end and its demise,
Speaker 1: because they will kick into a recession. It's like a
Speaker 1: repeat of two thousand and eight. That's my prediction. But
Speaker 1: right now what we're seeing is just a little pull
Speaker 1: black in that bull trend and The key thing is
Speaker 1: we're seeing the great reversion in total as surprises like
Speaker 1: Carol mentioned, you know stock markets down, what don't we
Speaker 1: down in the year almost almost twelve percent in the
Speaker 1: NASTAC To me, that's what's happening. So at the beginning
Speaker 1: of the year, where facing okay, FED going to tighten.
Speaker 1: Now we're facing the FED and the war um. So
Speaker 1: to me, that's what's part of it. Just crude oil
Speaker 1: is year is making everything worse, it's just pulling back
Speaker 1: a little bit. Well that's what I mean. How do
Speaker 1: we incorporate crude as an indicator of inflation, Well, it's
Speaker 1: it's look at two thousand and eight crude oil peak
Speaker 1: that onl in July, and that was right before everything collapsed.
Speaker 1: So it is one of the prime indicators. But the
Speaker 1: juxtaposition of which happened versus then and now is unique.
Speaker 1: Back then, the US had a property crisis, and we're
Speaker 1: the largest net importer. Who's doing that? Now China is
Speaker 1: having a property crisis and there's the world's largest net
Speaker 1: import and what's net exporters? So US is very well
Speaker 1: poised for this potential conflict. That's the binary nut model
Speaker 1: right now, If there's a conflict, then Crudel will continue
Speaker 1: advance in the shorter term, but it will lead to
Speaker 1: a move back towards fifty. Why fifty that's the cost
Speaker 1: of production to the US or below that. If if,
Speaker 1: if there's a cleat complete pullback, stocks will do well.
Speaker 1: Crewe Kroto goes back right back to seventy. And that's
Speaker 1: what the forward curve of pricing for. So it's violatively
Speaker 1: but it's just so much going on there. And look,
Speaker 1: we probably see a lot of pressure ease at the
Speaker 1: pump for American consumers, which is something that there are
Speaker 1: a place through they're feeling a lot of pressure. Like
Speaker 1: I want to go back to what you said about
Speaker 1: a possible recession here. Um yeah, well what makes you
Speaker 1: say that all the signs of starting to starting to
Speaker 1: show up in the curve. This was one of the things. Obviously,
Speaker 1: I was one of those people who did well in
Speaker 1: two thousand and eight. I was just too early. Um
Speaker 1: ti timing. Yeah, it is time you get stopped out
Speaker 1: Like the big short he was just able to hold on.
Speaker 1: And there's no better way. I mean, let's put it
Speaker 1: this way. If we have armed conflict in Europe and
Speaker 1: commands continues like there's a very good chance we're gonna
Speaker 1: have a global recession. We're way overdue because we had
Speaker 1: that massive stimulus. They had a sugar high, and it's
Speaker 1: all going away, right. Every central bank in the planet
Speaker 1: is looking to titan except maybe in China for reasons
Speaker 1: they have to. So that's what I think we're looking
Speaker 1: forward to here, and the stock market might be the
Speaker 1: best thing to price it in. If the stock market way,
Speaker 1: we're doing correction. We did it in two thousand nineteen
Speaker 1: and those who worked up fine was that eighteen I
Speaker 1: think was the end of eighteen um. But it's way
Speaker 1: overdue for that, and I think that's what's happening. It's
Speaker 1: just a question. The unique thing is also bitcoin has
Speaker 1: been a leading indicator. It's been weird. Hell that's been
Speaker 1: working like today it was are you saying we should
Speaker 1: be following what bitcoin is doing? Absolutely like today. It
Speaker 1: showed weakness from the very I shot last night, and
Speaker 1: it's predicting what you said right at the top of
Speaker 1: the show that the stock markets down a lot. It's
Speaker 1: been doing that consistently, and we have those days when
Speaker 1: the stock markets down a lot and bitcoin starts move
Speaker 1: bumping up the stock market foul. So it's unique. So
Speaker 1: far this year, bitcoin has been a very good leading indicator.
Speaker 1: But it's it's it's just a question of how long
Speaker 1: that lasts. That's what's so strange, because you know, months
Speaker 1: ago we talked about and you would come in here
Speaker 1: and we talked about it being digital gold right like.
Speaker 1: And on Bloomberg TV when we were joining our friends
Speaker 1: at Bloomberg TV, Caroline Hide had her chart that showed
Speaker 1: the divergence of gold and bitcoin right now, and they're
Speaker 1: moving in completely opposite directions and Bitcoin not not acting
Speaker 1: like hey then can't make it easy. So the way
Speaker 1: I like to describe goal is you can't hold the
Speaker 1: old analog anymore without having some bitcoin into space. Because
Speaker 1: it's a fact that their gold is being replaced in
Speaker 1: portfolios with bitcoin. It's a question of the duration of that.
Speaker 1: So I fully expect Bitcoin to come out ahead. And
Speaker 1: what I see is a very bullish gold. One problem
Speaker 1: with bitcoin and all cryptos if they advanced so much
Speaker 1: so far, they're still very speculative and they have the
Speaker 1: most room to go back. But I think they will
Speaker 1: come out ahead. It's just gonna take time and a
Speaker 1: lot of opinion between It's particularly if the stock market
Speaker 1: continues to drop. You know what happens when stock mark
Speaker 1: drops a lot, more correlations go to one. I don't
Speaker 1: know if you say this story about Heavier Blast and
Speaker 1: Marcus Ashroth by central banks got inflation so wrong, and
Speaker 1: it just talks about monetary policymakers um misjudging commodity markets.
Speaker 1: What do policymakers have to be careful about as they
Speaker 1: look at commodity market moves? So I'm a big fan
Speaker 1: of Javier um and I did you agree with this
Speaker 1: a little bit? I think the key thing is they
Speaker 1: didn't get it wrong. They were too late because it
Speaker 1: was the most of an inflation we're having now is
Speaker 1: not from commodities commandies are. Finally, let's look at Crudel.
Speaker 1: If the Crudel catches up to its peak price in
Speaker 1: UM two thousand and eight in terms of pp I
Speaker 1: would be two a barrel. Yeah, so that's a barren
Speaker 1: market and it's going to continue that beer market. That
Speaker 1: most inflation is from um UM employment cost index is
Speaker 1: from that's owner's equivalent rent and and wages, So crude.
Speaker 1: That's why I look at Crudel's a great leading indicator though,
Speaker 1: because it's it's potential for a reversion is what I
Speaker 1: think will lead this total reversion and everything. But right
Speaker 1: now it's at that stage where there's a war potential war,
Speaker 1: and it's just bidding for that potential. Like you know,
Speaker 1: exactly why the bid is because of the geopolitical is
Speaker 1: completely geolomical, because this is just going to make more
Speaker 1: supply commine. We love when you're in town. We love
Speaker 1: when you're in Florida, but it's even nicer when you're
Speaker 1: in town. Mike mcleogan, Senior Commodity Strategies of Bloomberg Intelligence,
Speaker 1: here with us. Well. According to Mckinzion Coast sales of
Speaker 1: pre on watches which reached nineteen billion and nineteen our
Speaker 1: forecast to grow to more than thirty billion. Remember that's
Speaker 1: something our Bloomberg Pursuits team highlighted in last week's issue
Speaker 1: of Bloomberg Business Week. The team took the time time
Speaker 1: to really dig into how to buy a vintage watch online.
Speaker 1: Not only did they take the time to do that, Carol,
Speaker 1: they really dug into the pre owned sector of watches.
Speaker 1: We have the perfect guest to join us right now.
Speaker 1: Are Vander wall Is, CEO of watch Finder and Company,
Speaker 1: joining us on the phone from London. Are you and
Speaker 1: how are you? I'm doing very well. It's thank you
Speaker 1: for having me well, thank you so much for joining
Speaker 1: us on this. It seems like pre owned watches everywhere
Speaker 1: I turn. You know, a new friend is starting this
Speaker 1: watch collection and I'm wondering the activity that you're seeing
Speaker 1: right now and why you think that. Look. I think
Speaker 1: it's fair to say watches have always had a moment,
Speaker 1: but it really feels particularly right now, like the stats
Speaker 1: that Carol shared, they're having a moment. Yeah, it's there's
Speaker 1: an an incredible I would say the watch Finder we've
Speaker 1: been around this year will actually be our twentieth anniversary year.
Speaker 1: And there's been I would say tremendous growth throughout, but
Speaker 1: especially in the last two years, and there's a there's
Speaker 1: a further acceleration, and I think it's just at the
Speaker 1: overall level of awareness has has grown significantly, so that
Speaker 1: previously many customers they simply didn't know that you could
Speaker 1: buy pre owned watches, or that you could sell them
Speaker 1: and part exchange them. And now it's becoming a more
Speaker 1: and more appealing option and um I think also the
Speaker 1: concept of sustainability and circular circular economy plays into that
Speaker 1: um and beyond that, with the growth in demand, there's
Speaker 1: also just a mismatch in supply and demand. If you
Speaker 1: look at new and that's exactly where we where we
Speaker 1: come in. It's, yeah, that's tremendous growth. We'll tell us
Speaker 1: about what you're seeing in terms of the amount of
Speaker 1: buying activity, changing, repeat customers coming back making a purchase
Speaker 1: and then maybe a year later doing something else. Selling, buying,
Speaker 1: How does it all work? Yeah, So for us, there's
Speaker 1: really three different paths that we define. So one is
Speaker 1: everything that we sell we buy ourselves, and pretty much
Speaker 1: all of what we what we buy we built side
Speaker 1: directly from customers. So that's a big part of our business.
Speaker 1: And what we do for all the watches that we buy,
Speaker 1: we authenticate them and we service them and we bring
Speaker 1: them in the best possible state before we sell them.
Speaker 1: And that's the second party is selling, and then the
Speaker 1: last party is party exchanging. So it's really uh, upgrading
Speaker 1: your pre owned watch and buying a new pre owned
Speaker 1: watch through us. And I would say the customer base
Speaker 1: is gradually changing that we see more and more younger
Speaker 1: age groups getting in and what you also see and
Speaker 1: pre owned is very easy to access it through digital,
Speaker 1: much easier than it is with with buying new and
Speaker 1: then the existing audience that we've had historically, you also
Speaker 1: see a stronger and stronger interests and also because it's
Speaker 1: shifting more and more being seen really as an asset
Speaker 1: and as an as an investment. Essentially are and you can.
Speaker 1: You can buy watches through watch Finder, you can sell
Speaker 1: your watch through watch Finder, you can exchange for another
Speaker 1: watch through watch Finder. Can you help me out with
Speaker 1: some of the numbers here because I know you do. Uh.
Speaker 1: Can you refurbish in a sense? Right, somebody exchanges a watch,
Speaker 1: but is there what's the premium that then you turn
Speaker 1: around and sell it for when you're when you're able
Speaker 1: to sell it, and what's the idea of like a
Speaker 1: time for turnaround? Well, it really depends. So if you
Speaker 1: look at our current capability, then we can roughly buy
Speaker 1: or we can buy essentially what is in the market.
Speaker 1: But we can serves around three thou watches a month,
Speaker 1: and that's at the current magnitude that we have across
Speaker 1: all of the markets that we operate. And something that
Speaker 1: we're scaling significantly over time, and in terms of our
Speaker 1: ability to make a return on it, it really depends
Speaker 1: on the brands. If you look at ro Legs and Potectually,
Speaker 1: there's an incredible demand, so we're not the only ones
Speaker 1: in the market are interested in buying a piece and
Speaker 1: therefore the margin opportunity for us is smaller. But it
Speaker 1: also depends greatly on at the level of work that
Speaker 1: needs to be done to the watch. So the watch
Speaker 1: Finder has at the largest independent service center in Europe
Speaker 1: where we service and repair all of the watches in
Speaker 1: house and all of these factoring so it's a it's
Speaker 1: a very wide range in that sense. So if somebody
Speaker 1: if somebody Exchanges are watching your New York show room,
Speaker 1: for example, you're sending it to Europe to be serviced. Um,
Speaker 1: it depends so currently some of the work so we
Speaker 1: are starting to localize more and more of our activity.
Speaker 1: So historically everything would be shipped to the UK, but
Speaker 1: especially in the U S which is a very important
Speaker 1: market for us and a real focus market, is where
Speaker 1: we're developing more and more local servicing capabilities so that
Speaker 1: we can do everything and the watch doesn't have to
Speaker 1: leave the US, so really fun to look on your website. Uh,
Speaker 1: and you know you've got watches that are thirteen twenty thousand,
Speaker 1: a hundred thousand, two hundred thousand. So tell me how
Speaker 1: the process works. Because the pandemic, like really, even on
Speaker 1: the high end, people would have like a virtual show
Speaker 1: room or meeting with between a customer and a salesperson.
Speaker 1: Like it it happened. So how what what do you do?
Speaker 1: I want to buy a two dollar watch from you
Speaker 1: guys that's online. Do I ultimately go to a showroom? Yeah?
Speaker 1: I would say at that price point, the majority of
Speaker 1: our customers would want to have the watch in hand
Speaker 1: and make the transaction after having personally inspected to watch.
Speaker 1: Although what we have seen, especially during the pandemic when
Speaker 1: all of the show rooms and all of our critiques
Speaker 1: were closed, we even transacted very high end watches completely digitally,
Speaker 1: which was very surprising to us as well. UM. But
Speaker 1: our average sales prices is not at the two on
Speaker 1: a thousand US level, so it's much closer to ten
Speaker 1: thou us UM and at the lower price point, we
Speaker 1: see a lot of transactions taking place online and what
Speaker 1: we have additionally as an in house sales team where
Speaker 1: people send an inquiry to us and then we follow
Speaker 1: up and then most of it has actually done quite
Speaker 1: old school by phone um and the transaction taking place digitally.
Speaker 1: But even when people prefer then obviously we have the
Speaker 1: ability to meet in one of our showrooms. But I
Speaker 1: would say the biggest difference between pre owned and new
Speaker 1: is that traditionally and pre owned we were already much
Speaker 1: more set up to cater to digital distribution. It already
Speaker 1: represented maybe and during the pandemic, you see and knew
Speaker 1: that there has been a tremendous growth in in kind
Speaker 1: of the service offering. But I would say it's um,
Speaker 1: it's something where we had a good head start and
Speaker 1: we really benefited from it over the last year and
Speaker 1: a half a y and I know, you know, we
Speaker 1: just have thirty seconds left. Uh, it's hard to name
Speaker 1: your favorite children, but what's your favorite wise, that's a
Speaker 1: great question. And we are part of the Richmond Group,
Speaker 1: so I might defend some of us in the group,
Speaker 1: and it's a it's a long end zone, which is
Speaker 1: part of the group. We had him on the company
Speaker 1: we had him on recently. Incredible. Yeah, it's a it's
Speaker 1: an incredible very aspirational and and the history and how
Speaker 1: they do it is just remarkable. Come back, please, we'd
Speaker 1: love to talk more. Arian vanderwald Val is a CEO
Speaker 1: of watch Finder and Company on the phone in the UK.
Speaker 1: So we've gone from daily COVID updates being atop the
Speaker 1: most red on the Blueberg to Ukraine updates being at
Speaker 1: the top, and today that included a story about President
Speaker 1: Biden saying that there's a very high risk of a
Speaker 1: Russian invasion of Ukraine within the next several days. There's
Speaker 1: a lot going on. And earlier Anne Marie Hordon Bloomberg
Speaker 1: TV Washington Correspondence, she caught up the Ukraine Ambassador to
Speaker 1: the United States, Oxana Makarova, and she talked about Ukraine
Speaker 1: specific goals here. We will never give up on our sovereignty,
Speaker 1: we will never give up on our territorial integrity. We
Speaker 1: will we give up on our EU Atlantic aspirations. But
Speaker 1: how to dren peace and how to stop the ceasefire
Speaker 1: we are ready to discuss because for us again, we
Speaker 1: are prepared to defend our country. But unlike Mr putin
Speaker 1: the value each of our soldiers and each of our civilians.
Speaker 1: So we would like to averd the war. That was
Speaker 1: Ukrainian Ambassador to the United States Oxana Marcarava telling talking
Speaker 1: to Bloomberg News is Anne Marie Hordern. Let's get into
Speaker 1: it with the Bill Ferries, national Security team leader for
Speaker 1: Bloomberg News. He joins us on the phone from Washington,
Speaker 1: d C. Bill, bring us up to speed on on
Speaker 1: the latest right now, and because we're certainly seeing a
Speaker 1: play out in financial markets. We heard from Secretary of
Speaker 1: State Anthony Blincoln earlier in the day, as we did
Speaker 1: from President Joe Biden as well. Um, what's the latest. Well,
Speaker 1: the U S seems to be taking I think a
Speaker 1: much more pessimistic tone to what was probably already a
Speaker 1: pessimistic tone on the situation, saying that with President Biden
Speaker 1: saying that there there may be some sort of false
Speaker 1: flag event already starting on Pool along the Ukraine border
Speaker 1: or in that eastern region, the don Bass region that
Speaker 1: has been a contested for years between UH separatists and
Speaker 1: the Ukrainian government. And then you had you had a
Speaker 1: big U N Security Council meeting that followed up with
Speaker 1: that with Secretary Blincoln kind of diverting his travel plans
Speaker 1: he was due to head straight to Munich this morning,
Speaker 1: and he flew to New York and gave a presentation
Speaker 1: there uh and made a made a little bit of
Speaker 1: a peace offering, saying that he had reached out to
Speaker 1: Russia's foreign minister to propose some sort of a meeting
Speaker 1: next week. B Lincoln will be in Europe starting starting
Speaker 1: this evening, I guess, and and there at least through Sunday.
Speaker 1: We don't have a response from the Russian side on that.
Speaker 1: The Russians, of course continue to say that they're undertaking
Speaker 1: military exercises, that they have no plans to invade. But
Speaker 1: the U s tone this morning, starting with Secretary b
Speaker 1: Lincoln and President Biden, was much more downbeat from what
Speaker 1: we heard earlier in the week when there was talk
Speaker 1: about Russian troops possibly pulling back. You know what I
Speaker 1: find baffling, Bill, is that at a time where there's
Speaker 1: incredible surveillance that we can all do of one another
Speaker 1: on so many different levels, right through the cyber world
Speaker 1: through physical I'm trying to understand, does the US really
Speaker 1: have a clear handle or do NATO allies have a
Speaker 1: clear handle on what is really going on on the ground,
Speaker 1: so that they have a true understanding of what the
Speaker 1: intent is on on the part of Russia. Well, the
Speaker 1: intent is the big question. I don't think we have
Speaker 1: a sense of the intent. Um, they certainly have very
Speaker 1: good insight into the numbers of troops, the kind of material,
Speaker 1: whether it's tanks, mortars, missiles, those kind of things that
Speaker 1: are getting moved around, and that's where they've really pushed
Speaker 1: back on the Russian narrative that that they're starting to
Speaker 1: draw down as these exercises wind down. Last night we
Speaker 1: had a briefing from US officials saying that in fact,
Speaker 1: they think up to seven thousand more troops have arrived
Speaker 1: uh In in the borders, so they see the opposite
Speaker 1: they're they're saying, basically the opposite of what Russia is saying.
Speaker 1: A lot of that is trackable from the intelligence agencies,
Speaker 1: But I think at the end, ultimately you're asking a
Speaker 1: question about, you know, what's inside Vladimir Putin's head, and
Speaker 1: I don't know that even his top aids would be
Speaker 1: able to explain that. Well, maybe what less about what's
Speaker 1: in his head, but more about what intelligence analysts think
Speaker 1: is the long term goal of Russia here. What do
Speaker 1: you what do they tell you when what are your
Speaker 1: sources telling you? Well, we hear you know, there's a
Speaker 1: variety of things, and some of it has Russia has
Speaker 1: already achieved in terms of of of Putin and Russia
Speaker 1: as a nation being taken far more seriously than they
Speaker 1: were to say, several years ago. Um. You know, Ukraine
Speaker 1: has been a thorn in the side of Russia ever
Speaker 1: since the collapse of the Soviet Union, and for Vladimir
Speaker 1: Putin in particular. Uh, if you wanted to get more
Speaker 1: mercenary about it, you could say, listen, this build up.
Speaker 1: We did some reporting last week. This build up has
Speaker 1: helped bring billions of dollars or into the Russian treasury
Speaker 1: through the through the spike and oil prices. I think
Speaker 1: our estimate was something like up to sixty five billion
Speaker 1: dollars more for Russia. So that will really help help
Speaker 1: keep these troops deployed. If that's if that's part of
Speaker 1: what Putin's goal has been, all right, forgive me, I'm
Speaker 1: not so good with my European history always, So why
Speaker 1: is it that the Ukraine has been or Ukraine has
Speaker 1: been a thorn in the side of Russia since the
Speaker 1: breakup of the Soviet Union. Well, there's a lot of
Speaker 1: you know, it was a part of it was considered
Speaker 1: a part of Russia by many Russians for for a
Speaker 1: long time, and it was you know, even I think, uh, frankly,
Speaker 1: there are Russians who don't agree with Putin's policies, who
Speaker 1: never took the idea that Ukraine was a was a separate,
Speaker 1: independent nation very seriously. But more recently Russia has definitely
Speaker 1: seen Ukraine's aspirations towards getting into NATO, towards being more
Speaker 1: closely alive with the West, as a real threat to
Speaker 1: its national security. Would have thought that this is kind
Speaker 1: of the discussions we'd be having here, Hey, Bill, just
Speaker 1: in the last thirty seconds that we have with you,
Speaker 1: talk to us about sanctions and the power of the
Speaker 1: United States and the European community actually have in thirty seconds. Well,
Speaker 1: there's you know, there are some nuclear options that the
Speaker 1: West has if the US and its allies can agree.
Speaker 1: You talk about and we don't mean literally nuclear, although
Speaker 1: we do have that, but no, no, but no like
Speaker 1: nuclear financial like kicking kicking the kicking Russia out of
Speaker 1: the swift financial messaging system that would be that would
Speaker 1: be devastating for their banking system. For where's Putin's money
Speaker 1: just quickly. We don't know. I know that's there's a
Speaker 1: lot of a lot of energy has gone into trying
Speaker 1: to figure that one out. All right, good stuff, Bill,
Speaker 1: thank you so much. I know it's busy on your end,
Speaker 1: so thanks for a funny time for us. Bloomberg News
Speaker 1: National Security Team lead leader Bill Ferries on the phone
Speaker 1: in Washington, This is Bloomberg. Yeah, but you let me drive?
Speaker 1: Oh no, no, no, no, oh please, I'll let I
Speaker 1: want to drive. It's a good question. This is the
Speaker 1: Drive to the Clothes down on Bluebird Radio. All right,
Speaker 1: just about ten minutes left in today's trading session. Our team,
Speaker 1: of course and led by Charlie Pellett, updating you on
Speaker 1: the markets. We're hovering near are loads of the session.
Speaker 1: So definitely a risk off trade for this Thursday. Let's
Speaker 1: get to it. Let's get to the drive to the close.
Speaker 1: Janna Barton is equity portfolio manager who now focuses on
Speaker 1: tax managed equity and core equity strategies at Eaton Vans.
Speaker 1: You wanna joined this on the phone from Boston, Yanna,
Speaker 1: how are you? I'm doing great, My timing could be better.
Speaker 1: I think to join you guys only on red Day.
Speaker 1: But well, there have been a lot of them recently.
Speaker 1: In fact, I was just looking at one of the
Speaker 1: functions terminal and you know, I see the SMP five
Speaker 1: hundred down, you know, right now, significantly, But it's it's
Speaker 1: only it's worst day since February three, so it's it's
Speaker 1: been a day a year of declines thus far. What
Speaker 1: do you make of it, Yanna, I, I think again,
Speaker 1: there are lots of questions. It's very fewful proof answers,
Speaker 1: a lot of uncertainty, which obviously investors don't like. But
Speaker 1: you name it, uh, and the visibility is market, whether
Speaker 1: it's policy, geopolitics, growth, inflation, um. But if you mentioned,
Speaker 1: I think the draw down that we're seeing in the market,
Speaker 1: the SEP is down about ten percent sort of from
Speaker 1: peak to trough level. It feels very uncomfortable, but it's
Speaker 1: actually quite normal. The the SUP five pounder usually declines
Speaker 1: around fourteen percent on an annual basis. And I think
Speaker 1: for investors to us, the asset class of choice remains
Speaker 1: equities because the cash flow yield is an excessive four
Speaker 1: percent earning field is an excessive five percent and dividing
Speaker 1: yield is an excessive one and a half percent. And
Speaker 1: this is relative obviously to the fixed income instrument. And
Speaker 1: that's what it's all about, and that's what it's about, right,
Speaker 1: we kid about Tina, there is no alternative, but I
Speaker 1: mean when it comes to equities versus fixed income, just
Speaker 1: a very simple um comparison in the markets. I mean,
Speaker 1: this is why equities, many would argue, is still attractive exactly.
Speaker 1: I think what it's also on discourse is just the
Speaker 1: importance of being diversified in the equity market, right, and
Speaker 1: we talk about sort of the the the ABC is
Speaker 1: being active, being balanced, and very company specifics. So being
Speaker 1: selective I think matters in any market, but particularly now
Speaker 1: where you're seeing more peing that is really taking hold
Speaker 1: with then growthier areas of the market. So does that
Speaker 1: mean there's no place in a portfolio right now for
Speaker 1: fixed income? Oh you're talking to an equity manager, I know,
Speaker 1: but you know you but you still have to but
Speaker 1: you know, you still have to figure out asset allocation.
Speaker 1: And you know, I know a lot of your clients
Speaker 1: have to figure out asset allocation, or you have to
Speaker 1: figure out asset allocation for them, and there are a
Speaker 1: lot of questions about, you know, because they must ask you. Hey, Yanna,
Speaker 1: I know you're the equity person, but I gotta think
Speaker 1: about fixed income definitely. I think the way I would
Speaker 1: look about finding value right um, Ultimately, it's exactly what
Speaker 1: you said, Carol, which is where is the value in
Speaker 1: the market today. I think for investors that are attracted
Speaker 1: to fixed income instruments, perhaps in the area like utilities,
Speaker 1: which we refer to as defensive, growth can offer a
Speaker 1: mix of capital appreciation with that stability as um, you know,
Speaker 1: given yield is an excessive two and a half and
Speaker 1: three percent, and they're really at the cust book sort
Speaker 1: of enabling that green tech revolution and energy efficiency. So
Speaker 1: I think there's a lot to be had there for
Speaker 1: growth investors, value investors, or investors that are seeking stability.
Speaker 1: Well there it is, okay, well, so, okay, it is
Speaker 1: tricky at this point. I mean, how many how many
Speaker 1: of your clients, Yanna, do you say, listen, this is volatility.
Speaker 1: I'm looking at the VIX right now and you know,
Speaker 1: another spike and no kidding, we know it's a volatile environment.
Speaker 1: How many of them do you say, kind of stay put,
Speaker 1: let's see where this settles, or how many do you say,
Speaker 1: here's here's the transparency, or here's the visibility that we
Speaker 1: have that we know the next six months are going
Speaker 1: to be X, and so here's how you should do it. Well.
Speaker 1: We're very fortunate our best clients, we always say, at
Speaker 1: the most educated, and what we're trying to do and
Speaker 1: what we're trying to construct the portfolio of diversified equity
Speaker 1: exposure that is really focused on achieving long term after
Speaker 1: tax returns. That means that we have exposure um to
Speaker 1: all sectors in the market and over sixty industries, and
Speaker 1: it's that's skew when we're using this volatility to kind
Speaker 1: of lean into laggards and teach some money off the
Speaker 1: table in areas of the market that have done well.
Speaker 1: And that's exactly what we're doing right now, which is
Speaker 1: why I'm mentioning utilities. Healthcare is an interesting area, Materials
Speaker 1: is an interesting area, all of all of which have
Speaker 1: been laggers to date. So to us, it's kind of
Speaker 1: balanced constantly balt onnesting and unfortunately, unfortunately we've been pretty
Speaker 1: active and harvesting losses as well. Because to us it's
Speaker 1: all about capital preservation. Where are we when it comes
Speaker 1: to the cycle that we're seeing, at least in terms
Speaker 1: of this down market. Look another day of declines for
Speaker 1: the SP five hundred for the Nasdaq, for the TAO.
Speaker 1: But at the same time, we're at levels that we
Speaker 1: last saw less than a month ago, back in January,
Speaker 1: when we saw sort of the bottom for at least
Speaker 1: this this most recent cycle. What what's the bottom here?
Speaker 1: What a great question, Tim, and I wish I knew
Speaker 1: the answer, But I do know that there are two
Speaker 1: sort of key events that we're waiting for as investors
Speaker 1: to give us some mark priority. Obviously, during the March
Speaker 1: sixteen sevent meeting of the FED, we will know how
Speaker 1: fast the tightening policy is going to take shape and
Speaker 1: what it will look like. There will be a lot
Speaker 1: of visibility to the biggest fear that the market has
Speaker 1: right now. And obviously the conflict that we're all watching
Speaker 1: between Rush and Ukraine as well. So, um, you know,
Speaker 1: to me, the sentiment is wobbly at best, and it's
Speaker 1: really feels oversold. But as I'm watching many of the
Speaker 1: stocks that you guys mentioned, just when you think you
Speaker 1: can't go lower, it does, so that is why you know,
Speaker 1: I think it's it's very difficult to call the market,
Speaker 1: which is why you've got a dollar cost average, know
Speaker 1: what you own and have a list ready to go
Speaker 1: when the opportunity presents itself. Yeah, I mean exactly. And
Speaker 1: this is where you need to know your fundamental stories,
Speaker 1: which is many would say and understand it. Where don't
Speaker 1: you want to be though, um that you feel with
Speaker 1: certain confidence at least on the equity side of things.
Speaker 1: Oh um, My colleagues are probably not like this answer.
Speaker 1: But anything that sort of um is driven by things
Speaker 1: we can't control as fundamental investors. I mean to me, um,
Speaker 1: an area like energy, I understand why it has done
Speaker 1: so well, But I look at the scorecard of all
Speaker 1: the sectors. You've got one sector that up over and
Speaker 1: everything else in the green. With geo politics and crude
Speaker 1: oil prices and currency what it's doing, I just think that,
Speaker 1: uh we in a couple of months we might be
Speaker 1: on the other side of that trade. It's not to
Speaker 1: say that energy doesn't have a place from the portfolio.
Speaker 1: I'm just saying, tactically speaking, you know, you should always
Speaker 1: lean in areas of the market that others are shying
Speaker 1: away from, and that seems to be an opportunity there.
Speaker 1: All right, we're gonna run, Janna. Thank you so much.
Speaker 1: Janna Barton, she's equity portfolio manager over at Eaton Vance,
Speaker 1: joining us on the phone. Thanks for listening to Bloomberg
Speaker 1: Business Week. Download the podcast on iTunes, SoundCloud, or Bloomberg
Speaker 1: dot com, and you can also listen to our radio
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