WEBVTT - Wolfe's Mushkin Sees AMZN Becoming Horizontal Monopoly (Audio)

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<v Speaker 1>Broadcasting live to New York Bloomberg eleventh Rio to Washington,

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<v Speaker 1>d C, Bloomberg to Boston, Bloomberg Well under Its to

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<v Speaker 1>San Francisco, Bloomberg n to the Country series ETAM General

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<v Speaker 1>one nineteen and around the globe the Bloomberg Radio plus

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<v Speaker 1>Appen Bloomberg dot com. This is taking stock in a

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<v Speaker 1>world of retail doom and gloom. Walmart suddenly shines like

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<v Speaker 1>a bright star. Its share price up nine percent today,

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<v Speaker 1>in fact, shares up the most and more than seven years.

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<v Speaker 1>First quarter results beat analysts estimates. PIM. We're going to

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<v Speaker 1>find out what's driving Walmart and if it's particular to them,

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<v Speaker 1>or if maybe the retail industry overall is doing better

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<v Speaker 1>than other retailers would have indicated. Yes, well, we've got

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<v Speaker 1>results from American Eagle Outfitters as well as Perry Ellis International,

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<v Speaker 1>both shares rallying today after topping first quarter earnings estimates.

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<v Speaker 1>Right now, let's go to Charlie Pelligan the Bloomberg news

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<v Speaker 1>room for a Burger business LA and I thank you him,

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<v Speaker 1>thank you, Kathleen. Let us begin with retail, because a

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<v Speaker 1>lot going on there today. You mentioned Walmart up nine percent, right, now,

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<v Speaker 1>American Eagles surging eighteen point eight percent, Urban outfitters up

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<v Speaker 1>thirteen and a half percent. Perry Ellis International it is

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<v Speaker 1>up now by fifteen point one percent. This solid day,

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<v Speaker 1>when the rest of the market is declining, stocks have

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<v Speaker 1>paired declines as anxiety eases over the potential for higher

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<v Speaker 1>rates as soon as next month. Commodity producers erasing losses,

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<v Speaker 1>consumer shares extending their advance. Rick Reader is global chief

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<v Speaker 1>investment Officer for fixed income at black Rock, and on

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<v Speaker 1>Bloomberg Television this morning, he told us July is a

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<v Speaker 1>better bet than June for the next interest rate increase

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<v Speaker 1>from the Federal Reserve. You've got between now and June,

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<v Speaker 1>you have really the big piece of data, and arguably

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<v Speaker 1>the only piece of data of major significance as a

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<v Speaker 1>papal report. So you gotta watch that. Part of why

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<v Speaker 1>I think July is more logical. Get through Brexit, then

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<v Speaker 1>you get CPI data, then you get core PIEC, you

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<v Speaker 1>get a series of retail sales, and you a good

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<v Speaker 1>number of data prints, which is where I think it

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<v Speaker 1>makes sense to wait a respectful effact. There's no press

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<v Speaker 1>conference in July. They like to go into the press countings.

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<v Speaker 1>I don't think they've said it before. Non press conference

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<v Speaker 1>meetings are live. Church and Dwight denying that it is

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<v Speaker 1>engaged in talks with potential acquires, robutting reports that had

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<v Speaker 1>sent the shares surging over the past couple of days. Today,

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<v Speaker 1>Church and Dwight is up one point eight percent SMP

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<v Speaker 1>down nine now a drop of five tenths of one

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<v Speaker 1>percent to down down Night He wanted to decline also

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<v Speaker 1>of five tenths of one percent, and has stack down

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<v Speaker 1>seven tenths of one percent. Gold down eight ounces to

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<v Speaker 1>drop of one and a half percent to thirty two

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<v Speaker 1>on Wall Street. Now we'll look at other news from

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<v Speaker 1>around the world on Bloomberg Radio. Charlie, thank you from

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<v Speaker 1>the Bloomberg news Room. I'm Mark Crumpton. Egypt Civil Aviation

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<v Speaker 1>Ministry says life jackets and plastic items have been found

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<v Speaker 1>in the sea off Greece, close to the suspected side

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<v Speaker 1>of today's Egypt airplane crash. Uh Met A l is

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<v Speaker 1>Vice President of Egypt Are we have found the wreckage.

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<v Speaker 1>We confirmed that the wreckage has been found and the

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<v Speaker 1>search and rescue teams are now. Uh it's turning into

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<v Speaker 1>a search and recovery. French President Francois Olan, speaking to

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<v Speaker 1>the media in Paris through a translator, said his government

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<v Speaker 1>is sending planes and ships to support the search efforts.

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<v Speaker 1>We should express our sordidarity with trick to the families

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<v Speaker 1>and also to find out the cause of the catastrophe.

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<v Speaker 1>Flight eight oh four and Airbus A three twenty with

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<v Speaker 1>sixties six people aboard, crashed into the Mediterranean early today

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<v Speaker 1>while in the route to Cairo from Paris. France's lower

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<v Speaker 1>House of Parliament has approved the two month extension of

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<v Speaker 1>the state of emergency that was declared after last falls

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<v Speaker 1>deadly terror attacks in Paris. The measure is aimed at

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<v Speaker 1>covering the European Championship soccer tournament and the Tour de France.

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<v Speaker 1>Police have been given more powers to make arrests and

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<v Speaker 1>authorities than restrict movement of people or vehicles. One of

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<v Speaker 1>two men who killed the New York City violinist insider

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<v Speaker 1>Upstate summer home in has been sentenced to twenty five

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<v Speaker 1>years to life in state prison. Forty year old Jonathan

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<v Speaker 1>Conklin was sentenced yesterday in Chautuckwack County. In November, he

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<v Speaker 1>pleaded guilty to a second degree murder charge in the

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<v Speaker 1>slaying of Mary Whittaker. Global News twenty four hours a day,

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<v Speaker 1>powered by our two hundred journalists in more than one

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<v Speaker 1>hundred fifty news bureaus around the world from the Bloomberg

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<v Speaker 1>News Room by Mark Crumpton, Charlie and we thank you,

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<v Speaker 1>and we are brought to you by Pershing's Inside twenty

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<v Speaker 1>six conference, a must attend for advisers June seventh through

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<v Speaker 1>the ninth in Orlando, Florida. Register at Inside dot com.

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<v Speaker 1>That's I N S I T E SI dot com

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<v Speaker 1>recapping Stock's lawer SMP down ten a drop of five

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<v Speaker 1>tenths of one percent. I'm Charlie Pellaton. That's a Bloomberg

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<v Speaker 1>business flash. You're listening to taking Stock with Lee Mays

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<v Speaker 1>and Pox on Bluebird Radio. Walmart beating analysts estimates Walmart

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<v Speaker 1>getting good results from its grocery sales its neighborhood market stores.

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<v Speaker 1>Is Walmart uh fighting its way back to being a

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<v Speaker 1>big winner in the retail space, or is the struggle

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<v Speaker 1>to boost its online sales ultimately going to stand in

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<v Speaker 1>its way. Scott Mushkin joins us now. He's senior retail

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<v Speaker 1>and staples analysts at Wolf Research to weigh in not

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<v Speaker 1>only on Walmart, but we hope also on urban outfitters

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<v Speaker 1>and more. Thank you for joining us, Scott Hey, thanks

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<v Speaker 1>for having me appreciate it. So, Walmart, what is what

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<v Speaker 1>is the takeaway here? What's what are the key points

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<v Speaker 1>that everyone should know about Walmart from this earnings report?

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<v Speaker 1>I mean, I think they're they're they're too really. One

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<v Speaker 1>is it's been a dreadful a couple of weeks in

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<v Speaker 1>retail land. Most companies have had significant earnings misses. Um.

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<v Speaker 1>And so I think the idea that you have a

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<v Speaker 1>company here that's doing okay, now, earnings were still down

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<v Speaker 1>here over here, they were just you know, down less

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<v Speaker 1>than people anticipated. So so I think that that's good. UM.

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<v Speaker 1>And I also think there's this idea that maybe, um,

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<v Speaker 1>maybe that the company is finding its footing. We have

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<v Speaker 1>deep concerns on that and we don't think that's really

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<v Speaker 1>the case if you kind of look through some of

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<v Speaker 1>the numbers. UM. But Greg Foreign, who's the U S

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<v Speaker 1>head now, has been has been here for about a year.

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<v Speaker 1>He's clearly doing a much better job running this company,

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<v Speaker 1>and it's showing up. I mean, their in store conditions

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<v Speaker 1>are better, the sales are a little stronger. UM. So

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<v Speaker 1>I think right now Walmart is getting a lot of

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<v Speaker 1>credit given the environment we're in. Hey, Scot, I'm wondering

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<v Speaker 1>if you could give us a little detail, a little

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<v Speaker 1>color on your concerns. So when I think, if you

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<v Speaker 1>you know kind of both medium term and long term.

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<v Speaker 1>So as we look at at the back half of

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<v Speaker 1>the year of him Walmart, like I said, Greg's done

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<v Speaker 1>a good job here. He came in about a year

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<v Speaker 1>ago and it's really got his hands around these operations.

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<v Speaker 1>They had terrible in stock situation, uh not enough aduct

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<v Speaker 1>on the shelf. UM. So he's he's done a good

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<v Speaker 1>job fixing that. They've had to throw a lot of

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<v Speaker 1>store labor to get it fixed. Also took inventories down

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<v Speaker 1>for store they were terribly overstocked, particularly in their back rooms.

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<v Speaker 1>As we get to the third quarter of this year,

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<v Speaker 1>they're going to start cycling through some of these benefits.

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<v Speaker 1>And they benefited both sales and margins um and so

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<v Speaker 1>you know, we worry as they get to the third

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<v Speaker 1>quarter when they had dirty plus basis points at gross

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<v Speaker 1>margin improvement. In the fourth color, they had sixty nine

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<v Speaker 1>basis points a gross margin improvement. Uh, and clearly some

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<v Speaker 1>sales benefits that the cycling over some of these things

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<v Speaker 1>is going to be pretty tough on the company. I

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<v Speaker 1>think as we look longer term. Uh, it's the structure

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<v Speaker 1>of the supercenter and it really goes to Amazon e

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<v Speaker 1>commerce and just the changing preferences, shopping preferences and a

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<v Speaker 1>lot of these everyday essentials that Walmart's known for. There's

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<v Speaker 1>two challenges. Number one, they're not priced cheaper than anyone

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<v Speaker 1>else anymore. And number two, the propensity to buy those

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<v Speaker 1>on line is rising rapidly because let's face it, going

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<v Speaker 1>to the store, going to a supercenter to buy paper towel,

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<v Speaker 1>that's a chore. And Amazon also got a demographic issue, right,

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<v Speaker 1>I mean, because your customer base is aging out at

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<v Speaker 1>the top and new customers are coming in it are

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<v Speaker 1>quite ready to order everything using their phone. Yeah. We

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<v Speaker 1>had a Huger port out called the Amazon generation, talking

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<v Speaker 1>about the millennials. Just what you're talking about, what you're

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<v Speaker 1>speaking of, And yeah, they they want to buy online.

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<v Speaker 1>They're used to it. That's what I called it, the

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<v Speaker 1>Amazon generation. They don't want to spend their time going

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<v Speaker 1>down to a supercenter. If Amazon is going to deliver

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<v Speaker 1>it to their house. Um, and for busy household young

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<v Speaker 1>households working a lot, Amazon's giving them their time back

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<v Speaker 1>and that's incredibly valuable because they don't have to do

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<v Speaker 1>that chore. They can go see Johnny's baseball game on

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<v Speaker 1>the weekend. So incredible challenges for the supercenter format as

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<v Speaker 1>we move forward over you know, over the next couple

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<v Speaker 1>of years, at some point does Amazon's business model catch

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<v Speaker 1>up with it? Though that can't crush everybody before. It

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<v Speaker 1>has to somehow make it make more money doing what

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<v Speaker 1>it basically does. I mean, they're starting to make make

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<v Speaker 1>more money and um, so we're seeing that already and

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<v Speaker 1>I think the and it's a little bit unknowable, but

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<v Speaker 1>when you take some and I think this is a

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<v Speaker 1>really important point I said it earlier. Is it when

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<v Speaker 1>you take time and give it back to people As

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<v Speaker 1>an old fashioned economics term, but utility, there's literally no utility.

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<v Speaker 1>And going down to buy tied at a store, if

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<v Speaker 1>someone's going to deliver that to you, um, they're giving

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<v Speaker 1>you something so valuable back. They're giving you back your time.

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<v Speaker 1>And Amazon, we think, is honest way to becoming a

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<v Speaker 1>horizontal monopoly I'm not sure anything can stop it because

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<v Speaker 1>those trends are so powerful. You have an outperform rating

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<v Speaker 1>on the shares of Amazon. I just want to get

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<v Speaker 1>your quick thoughts if I can. On Home Depot and Lows.

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<v Speaker 1>They reported results this week. I mean both companies tremendous

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<v Speaker 1>report um. You know Home Deepo in particular, we think

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<v Speaker 1>it's gaining a lot of share. I think the question is,

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<v Speaker 1>if we've slowed this economy down, can the housing market

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<v Speaker 1>still outperformed. We think the answers yes, There's been a

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<v Speaker 1>lot of under investment in the housing stock and the

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<v Speaker 1>housing stock has aged a lot um. But I think

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<v Speaker 1>that there's any concern around the sectors if we turn

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<v Speaker 1>this economy down, do we you know, we see a pullback.

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<v Speaker 1>We think Home Depot and Lows can continue to perform

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<v Speaker 1>nicely given the consolidation in the industry and the dynamics

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<v Speaker 1>behind the housing market right now. Thank you very much

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<v Speaker 1>for joining us. Scott Mushkin, He's managing director and a

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<v Speaker 1>senior staples retail analyst for Wolf Research. Taking a look

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<v Speaker 1>right now, it's the shares of Walmart. They are up

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<v Speaker 1>more than five dollars a share. Walmart stock is up

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<v Speaker 1>more than nine trade against sixty. You're listening to Taking

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<v Speaker 1>Stock on Bloomberg Radio. Bloomber Taking Stock has brought to

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<v Speaker 1>you by Bentley University. Why the time, the finances at

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<v Speaker 1>Converse and managing asset allocations that J P. Morgan have

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<v Speaker 1>in common a business degree from Bentley University. Because business

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<v Speaker 1>is everywhere. Prepare here