WEBVTT - Super Micro Fights Delisting, Consumer Spending Outlook as Holidays Loom 0:00:02.920 --> 0:00:10.719 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business 0:00:10.720 --> 0:00:13.960 Wait inside from the reporters and editors who bring you 0:00:14.000 --> 0:00:18.319 America's most trusted business magazine, plus global business finance and 0:00:18.400 --> 0:00:22.640 tech news. The Bloomberg Business Week Podcast with Carol Messer 0:00:23.040 --> 0:00:25.800 and Tim Stenebek from Bloomberg Radio. 0:00:26.800 --> 0:00:28.960 We're going to go next to Carmen Rennicke. She is 0:00:29.000 --> 0:00:32.800 a Bloomberg News equities reporter here with us, and she's 0:00:32.840 --> 0:00:35.840 going to talk about super Microcomputer. 0:00:36.040 --> 0:00:37.479 Oh my gosh, that stock has. 0:00:37.360 --> 0:00:39.120 Been on a wild ride. 0:00:39.159 --> 0:00:40.040 What are you watching? 0:00:40.200 --> 0:00:42.880 It has had an absolutely crazy week. I was just looking. 0:00:42.920 --> 0:00:46.559 Shares right now are up about eleven percent. This is 0:00:46.720 --> 0:00:50.000 on track to gain more than seventy five percent this week, 0:00:50.000 --> 0:00:52.880 which is the best week ever for this stock, which 0:00:52.880 --> 0:00:56.120 has also just had a completely crazy up and down year. 0:00:56.160 --> 0:00:58.760 So what happened this week is on Monday, the company, 0:00:58.800 --> 0:01:01.840 which had fallen out of impliance for listing on the Nasdaq, 0:01:02.120 --> 0:01:05.520 submitted to the Nasdaq a plan to regain compliance, which 0:01:05.560 --> 0:01:09.959 means filing some delayed ten k's and ten cues. It 0:01:10.000 --> 0:01:13.800 also announced that it has a new auditor, BDO USA, 0:01:13.920 --> 0:01:15.559 And I think this is really the piece that people 0:01:15.560 --> 0:01:18.400 were excited about and the traders are trading on because 0:01:18.440 --> 0:01:21.679 this is it just means that it will be easier 0:01:21.720 --> 0:01:25.160 for the company to actually file those filings and get 0:01:25.200 --> 0:01:27.600 back into compliance to stay listed on the Nasdaq. 0:01:27.880 --> 0:01:31.800 The fact that they actually found someone who agreed to 0:01:31.920 --> 0:01:36.920 testify that their numbers aren't fraudulent, Like, if that's the bar, 0:01:37.240 --> 0:01:38.920 it's pretty low, right, So. 0:01:39.800 --> 0:01:40.720 Yeah, well, and that's the thing. 0:01:40.760 --> 0:01:42.960 I mean, this is a company that's burned through a 0:01:43.000 --> 0:01:46.880 few auditors in the past few years. It's one of 0:01:46.920 --> 0:01:49.960 the reasons that it delayed filing its ten K was 0:01:50.000 --> 0:01:52.640 a short seller report from Hindenburg Research came out sort 0:01:52.640 --> 0:01:56.000 of calling into questions some accounting Ernst and Young. It's 0:01:56.040 --> 0:01:59.920 previous auditors stepped down in October, citing issues with govern 0:02:00.040 --> 0:02:03.360 and instant transparency. So yeah, finding a new auditor is 0:02:03.360 --> 0:02:05.760 a big deal, and it kind of remains to be 0:02:05.800 --> 0:02:08.440 seen what exactly, you know, what will happen next. The 0:02:08.520 --> 0:02:12.679 Nasdaq still hasn't accepted super Micro's plan. 0:02:12.600 --> 0:02:13.440 So they filed. 0:02:13.720 --> 0:02:15.720 They said, we have a plan to stay compliant. The 0:02:15.800 --> 0:02:18.440 Nasdaq now has to say yes or no to that. 0:02:18.880 --> 0:02:21.360 It's assumed that it'll take two to five weeks for 0:02:21.440 --> 0:02:24.080 any anything to come out on that, and then if 0:02:24.120 --> 0:02:26.560 the Nasdaq does accept the plan, it has until February 0:02:26.600 --> 0:02:30.400 to file these reports, which as as I've reported this out, 0:02:30.440 --> 0:02:33.000 it seems like is not the easiest lift, right, Like 0:02:33.040 --> 0:02:36.600 it's this is still sort of a truncated timeline to potentially, 0:02:36.680 --> 0:02:39.800 you know, deal with these kinds of issues. Still, that 0:02:39.840 --> 0:02:42.680 being said, some analysts seem to think that this really 0:02:42.680 --> 0:02:45.360 has removed an overhang from the stock and as we 0:02:45.400 --> 0:02:47.639 can see, you know, more more buyers than sellers today. 0:02:47.960 --> 0:02:50.920 So what would happen to super micro if it was 0:02:51.040 --> 0:02:52.480 delisted from the Nasdaq? 0:02:52.760 --> 0:02:55.359 Yeah, so, I mean it would be taken off the exchange, 0:02:55.400 --> 0:02:57.480 it would go over the counter. It would also be 0:02:57.520 --> 0:03:00.359 removed from the NASDAQ one hundred and s and P 0:03:00.440 --> 0:03:02.399 five hundred, which had just joined this year. So that's 0:03:02.440 --> 0:03:05.880 a huge deal. Obviously, it would mean a big rebalance 0:03:05.960 --> 0:03:10.200 for a lot of people, and yeah, a lot of 0:03:10.400 --> 0:03:11.079 a lot of trading. 0:03:11.440 --> 0:03:12.399 It's pretty amazing. 0:03:12.480 --> 0:03:15.880 I mean, it's still a twenty billion dollar company, you know. 0:03:15.880 --> 0:03:20.720 And if you're auditor, one of the most respected orders 0:03:20.720 --> 0:03:23.120 in the world says peace out, like we can't have 0:03:23.240 --> 0:03:27.880 our names even associated with your books, that should be 0:03:27.919 --> 0:03:29.799 a black mark, right, but if you look over the 0:03:29.880 --> 0:03:32.600 last five years, I always default of five years because 0:03:32.600 --> 0:03:34.160 they use the comp function a lot. On the Bloomberg 0:03:34.760 --> 0:03:37.840 the stock is up one four and seventy one percent. 0:03:38.520 --> 0:03:41.120 It has had an incredible run. It's obviously gotten a 0:03:41.200 --> 0:03:45.080 huge lift from the AI wave. It's you know, it's 0:03:45.120 --> 0:03:47.520 it's a sort of a scene as a trading peer, 0:03:47.560 --> 0:03:49.400 at least to Nvidia, and it actually got a shout 0:03:49.400 --> 0:03:52.240 out this week on in Vidia's earnings call. Nvidia said, 0:03:52.240 --> 0:03:54.960 you know, this is one of our most reliable partners, 0:03:55.720 --> 0:03:58.400 and so, yeah, we've seen this stock really really take off. 0:03:58.800 --> 0:04:02.640 What is the precedence for companies being delisted? Like, have 0:04:02.720 --> 0:04:06.440 we ever seen a company then return after delisting and 0:04:06.520 --> 0:04:07.920 come back to the good christage? 0:04:08.120 --> 0:04:11.200 I mean, companies do get delisted. Super Micro itself has 0:04:11.280 --> 0:04:15.240 previously been delisted and come back onto the exchange. So yes, 0:04:15.280 --> 0:04:18.000 that's certainly something that happens. I don't know of an 0:04:18.040 --> 0:04:22.520 instance where a company has done it twice, but yeah, 0:04:22.560 --> 0:04:24.200 it is is definitely something that happens. 0:04:24.360 --> 0:04:25.080 We'll have to look. 0:04:24.960 --> 0:04:27.400 Into that match the Yeah, no, actually I was just 0:04:27.920 --> 0:04:29.919 starting to look into it. I'm like typing away and 0:04:30.000 --> 0:04:32.359 doing some research over here. One of the things I 0:04:32.360 --> 0:04:34.520 did is pull up SPLC, which is one of my 0:04:34.560 --> 0:04:37.480 favorite functions on the terminal for a company like this especially, 0:04:37.560 --> 0:04:39.440 It shows you the supply chain and you can see 0:04:39.800 --> 0:04:43.000 their biggest suppliers and VideA right at the top of 0:04:43.040 --> 0:04:44.159 that list. 0:04:44.400 --> 0:04:45.720 Their biggest customers. 0:04:45.839 --> 0:04:48.320 I note Big Blue is one of those which you know, 0:04:48.440 --> 0:04:52.520 back in my day, IBM was the most reputable tech company. 0:04:53.120 --> 0:04:55.960 Obviously it's dropped a little bit in terms of, uh, 0:04:56.160 --> 0:04:59.280 you know, it's size and weight, but still is a 0:04:59.279 --> 0:05:06.080 company that people know and certainly trust SMCI, I guess 0:05:06.240 --> 0:05:09.640 their earnings hasn't really been slowed down by the change 0:05:09.720 --> 0:05:12.039 from EY to bdo not. 0:05:12.680 --> 0:05:15.239 I think it's too early to really say so. They 0:05:15.240 --> 0:05:18.680 did maybe a few weeks ago at this point, give 0:05:18.760 --> 0:05:19.599 sort of an update. 0:05:19.640 --> 0:05:20.800 They called it a business update. 0:05:20.839 --> 0:05:23.520 It was essentially an earnings report, and they gave I 0:05:23.520 --> 0:05:25.600 think a little bit of a weaker forecast than people 0:05:26.080 --> 0:05:30.000 had expected. So shares were actually sort of under pressure 0:05:30.040 --> 0:05:31.839 from that. If I remember correctly, I. 0:05:31.800 --> 0:05:34.400 Should say the revenue has just been soaring, right you 0:05:34.400 --> 0:05:36.360 look back at twenty twenty, they were making like three 0:05:36.400 --> 0:05:39.039 billion in revenue, and now we're talking about twenty. 0:05:38.760 --> 0:05:41.040 Five, just five years, four years later. 0:05:41.240 --> 0:05:43.080 Carmen, great having it here with us, Thanks so much 0:05:43.080 --> 0:05:45.360 for joining us in the Bloomberg Business Week studio. Carmen 0:05:45.400 --> 0:05:48.440 Ryanicky there from our print team. Matt Miller here with 0:05:48.480 --> 0:05:51.760 Emily Graffeo filling in for Tim and Carroll on this Friday. 0:05:51.760 --> 0:05:54.839 We'll be back in just a moment with the CFO 0:05:54.880 --> 0:05:55.760 of Home Depot. 0:05:55.880 --> 0:05:56.960 This is Bloomberg. 0:05:57.920 --> 0:06:01.440 You're listening to the Bloomberg Business Week podcast. Catch us 0:06:01.480 --> 0:06:04.719 live weekday afternoons from two to five pm Eastern. Listen 0:06:04.760 --> 0:06:06.920 on Apple, car Play and and Broud Auto with a 0:06:06.960 --> 0:06:10.000 Bloomberg business act or wants us live on YouTube. 0:06:11.440 --> 0:06:15.240 Matt Miller here in the Bloomberg BusinessWeek studio with Emily Graffeo, 0:06:15.440 --> 0:06:18.359 and we have a special guest. As I said, the 0:06:18.440 --> 0:06:22.560 CFO of Home Depot joins us, Richard McPhail as well 0:06:22.560 --> 0:06:26.880 as Nina Trentman. She runs the Bloomberg CFO briefing. So 0:06:26.920 --> 0:06:29.680 it's great to have both of you with us. And 0:06:30.360 --> 0:06:32.080 I guess I'll just kick it off with one to 0:06:32.240 --> 0:06:35.719 Richard as we kind of gauge the strength of the 0:06:35.839 --> 0:06:38.960 US consumer and the housing market. You're in a perfect 0:06:39.040 --> 0:06:43.039 position to give us an outlook on both. How do 0:06:43.080 --> 0:06:47.560 we look, you know, four days ahead of Black Friday. 0:06:48.080 --> 0:06:50.600 Well, Matt and Emily, Nina, thank you for having me. 0:06:50.960 --> 0:06:51.039 So. 0:06:51.440 --> 0:06:55.360 Look, as we've said now for the last year or two, 0:06:55.680 --> 0:06:59.720 the US consumer remains healthy and strong and engaged in 0:06:59.800 --> 0:07:04.920 him improvement. We had a third quarter that just ended 0:07:05.480 --> 0:07:09.600 in October where we actually saw performance better than expected. 0:07:10.080 --> 0:07:12.880 Now we attribute most of that to the fact that 0:07:13.000 --> 0:07:17.120 weather was exceptional across the country. We also had some 0:07:17.200 --> 0:07:20.480 impact from hurricanes obviously, but you know. 0:07:20.480 --> 0:07:22.880 It's a good sign when the sun is out. 0:07:23.520 --> 0:07:26.480 Our customers are engaged and outdoors doing projects. 0:07:26.680 --> 0:07:30.520 So we think we think the customer mindset is healthy now. 0:07:31.120 --> 0:07:33.840 You know, you ask about the state of housing, there 0:07:33.920 --> 0:07:36.480 is some interplay here with home improvement. 0:07:36.520 --> 0:07:38.000 You know, if you think about the. 0:07:38.000 --> 0:07:44.760 Last five years, since twenty nineteen, we've seen unprecedented increases 0:07:44.880 --> 0:07:48.880 in home values and home equity. Home values up right 0:07:48.880 --> 0:07:52.720 around fifty percent since twenty nineteen, home equity positions up 0:07:54.040 --> 0:07:58.720 or right around eighty percent, and so you've seen unprecedented 0:07:58.760 --> 0:07:59.480 wealth creation. 0:07:59.680 --> 0:08:04.000 And what's interesting about that is typically that. 0:08:04.000 --> 0:08:08.120 Drives human improvement demand and hume improvement spend as homeowners 0:08:08.560 --> 0:08:12.280 invest in their homes. What our customers tell us though, 0:08:12.480 --> 0:08:15.520 is that the interest rate and environment is still sticky. 0:08:15.920 --> 0:08:18.960 You know, we actually saw mortgage rates increase since the 0:08:18.960 --> 0:08:22.280 September FED meeting, So that's led to a dis incentive 0:08:22.680 --> 0:08:23.800 for folks to move and. 0:08:23.760 --> 0:08:25.680 Do projects that are oriented with moving. 0:08:26.280 --> 0:08:30.680 And if you think about those larger remodeling projects that 0:08:30.720 --> 0:08:34.720 are oftentimes financed by debt drawn against home equity positions, 0:08:35.160 --> 0:08:38.200 our customers tell us, while those rates are decreasing slightly, 0:08:38.559 --> 0:08:40.160 they're still around eight and four to eight and a 0:08:40.200 --> 0:08:43.240 half percent, and so they're saying, look, we're just gonna 0:08:43.280 --> 0:08:46.040 we're deferring large projects for the moment until. 0:08:45.800 --> 0:08:47.160 We see what happens with rates. 0:08:47.360 --> 0:08:50.240 So you have a healthy customer with a deferral mindset 0:08:50.280 --> 0:08:51.720 when it comes to larger projects. 0:08:52.400 --> 0:08:55.200 Richard, maybe I can follow up on that. During our interview, 0:08:55.240 --> 0:08:58.480 we also talked about the impact of your business potentially 0:08:58.559 --> 0:09:02.880 simming from to as the new administration comes in next year. 0:09:03.160 --> 0:09:04.760 Talk to us a little bit about that, how you 0:09:04.840 --> 0:09:07.680 navigated that in twenty nineteen, and also how are you 0:09:07.760 --> 0:09:09.640 thinking about that going into next year. 0:09:11.480 --> 0:09:14.679 Sure, well, first, it's too early to speculate. 0:09:14.280 --> 0:09:18.800 On what the administration might might be thinking here, So 0:09:18.880 --> 0:09:21.680 we don't want to speculate in particulars. In twenty seventeen, 0:09:21.720 --> 0:09:30.080 we saw tariffs of significant degree in certain classes of goods. 0:09:30.600 --> 0:09:31.200 There were some. 0:09:31.160 --> 0:09:35.520 Appliances classes that saw tariff supworbs of twenty five percent. Look, 0:09:35.559 --> 0:09:38.160 that's something that we sit down with our supplier base 0:09:38.360 --> 0:09:42.280 and work through it. And so we've got a lot 0:09:42.280 --> 0:09:46.040 of experience in this and we are ready for whatever 0:09:46.120 --> 0:09:48.520 inner environment we're going to be operating in. 0:09:49.280 --> 0:09:50.320 Again, too early. 0:09:50.120 --> 0:09:52.800 To speculate, but you know, we feel like if there's 0:09:52.840 --> 0:09:55.800 anybody who can manage through this weekend and you know, 0:09:56.040 --> 0:09:58.960 unique to the home deeper, perhaps over half of our 0:09:59.000 --> 0:10:01.719 products are actually manufacturer in the. 0:10:01.720 --> 0:10:05.320 United States, and so if you think about the kind 0:10:05.320 --> 0:10:05.480 of the. 0:10:06.960 --> 0:10:12.120 Less than half that is manufactured or sourced from foreign countries, 0:10:13.000 --> 0:10:17.839 we've been diversifying our countries of origin really for the 0:10:17.920 --> 0:10:20.640 last fifteen years. We're in a different position than we 0:10:20.640 --> 0:10:24.079 were in twenty seventeen in respect to diversification. That's something 0:10:24.080 --> 0:10:25.120 we're going to continue. 0:10:25.720 --> 0:10:29.000 So, Richard, I'm wondering what is the strategy to grow 0:10:29.320 --> 0:10:31.720 the business right now when we're in an environment where 0:10:31.760 --> 0:10:34.920 home sales are at the lowest level in over a decade, 0:10:34.960 --> 0:10:37.560 how does home Depot kind of combat that? 0:10:39.000 --> 0:10:42.760 Well, you know, Emily, there's so much improvement we can 0:10:42.800 --> 0:10:46.679 make in our current model. We have the fifth largest 0:10:46.720 --> 0:10:50.080 e commerce business in the United States, even though folks don't. 0:10:49.960 --> 0:10:53.120 Normally think about that, but the uniqueness of that business 0:10:53.160 --> 0:10:57.920 is it is interconnected with our stores. Virtually all of 0:10:57.960 --> 0:11:01.040 our customers who shop online shop in our stores as well. 0:11:01.400 --> 0:11:04.320 But there still there are too many points of friction 0:11:04.800 --> 0:11:09.600 when you think about customer returns, order modifications, and the 0:11:09.679 --> 0:11:14.400 delivery experience. We're making huge gains and taking friction out 0:11:14.480 --> 0:11:17.360 of the process for our customer, but we're nowhere near 0:11:17.400 --> 0:11:19.120 where we want to be. We know if we begin 0:11:19.200 --> 0:11:23.640 to delight customers more, that absolutely translates into higher sales. 0:11:24.080 --> 0:11:27.440 Another huge opportunity for the home depot is what the 0:11:27.520 --> 0:11:33.160 professional contractor. Roughly half of our sales are come from 0:11:33.200 --> 0:11:36.199 that professional contractor who's working on behalf of the homeowner. 0:11:36.880 --> 0:11:41.360 We've made significant investments in an ecosystem to really drive 0:11:41.480 --> 0:11:44.880 into that larger remodel and so while the market is 0:11:44.920 --> 0:11:49.720 solvedware remodeling, our ability to capture market share really shouldn't 0:11:50.360 --> 0:11:52.280 depend on what the external environment is. 0:11:52.600 --> 0:11:53.559 We've invested in a. 0:11:53.559 --> 0:11:59.040 Digital experience, in rolling out a salesforce across the nation, 0:11:59.600 --> 0:12:05.680 and filment assets and capabilities, networks of platbed distribution centers 0:12:05.679 --> 0:12:08.960 that will be in seventeen markets this year where we 0:12:09.040 --> 0:12:12.120 can get products straight to the job site, not even 0:12:12.160 --> 0:12:15.000 touching the store, straight to the job site same day, 0:12:15.040 --> 0:12:17.880 next day. And the uniqueness of Home Depot is, while 0:12:17.880 --> 0:12:20.280 there are plenty of companies serving the pro like that, 0:12:20.679 --> 0:12:23.040 we're the only one who can serve them across all 0:12:23.120 --> 0:12:27.240 product categories, so we can simplify the pros lives and 0:12:27.520 --> 0:12:30.199 they turn to us because they know that they can 0:12:30.200 --> 0:12:33.680 rely on us. And I should say, actually, and one 0:12:33.679 --> 0:12:35.400 thing that I think is unique to the Home Depot, 0:12:35.880 --> 0:12:38.000 you know, we're building stores again. 0:12:38.920 --> 0:12:42.280 We really stopped in any material sense building stores in 0:12:42.320 --> 0:12:45.760 two thousand and eight. In twenty twenty three, we announced 0:12:45.760 --> 0:12:49.199 an eighty store build that will roll out over five years. 0:12:49.240 --> 0:12:49.880 By the end of this. 0:12:49.920 --> 0:12:53.120 Year, we will have built twenty five of those new stores, 0:12:53.640 --> 0:12:56.200 and we're so excited about what we're already seeing. 0:12:56.200 --> 0:12:58.280 It's one of the best investments. We can actually make 0:12:58.320 --> 0:12:59.000 it Home Depot. 0:12:59.320 --> 0:12:59.920 All right, Richard. 0:13:00.080 --> 0:13:01.599 Great to have a little bit of time with you, 0:13:01.640 --> 0:13:04.160 and I hope we can get you back either here 0:13:04.200 --> 0:13:05.960 on Bloomberg Business Week or you join me on my 0:13:06.040 --> 0:13:09.160 show every day nine to eleven on Bloomberg Open Interest. 0:13:09.400 --> 0:13:12.760 David McPhail there, the CFO of Home Depot. Sorry, need, 0:13:12.800 --> 0:13:14.239 I'm kind of stealing your guests. 0:13:14.000 --> 0:13:15.880 Yes here stealing my thunder you. 0:13:16.400 --> 0:13:18.120 Well, you have a lot of it, so there's nothing 0:13:18.200 --> 0:13:21.120 go around. You talked to a lot of important CFOs 0:13:21.200 --> 0:13:24.240 for the CFO briefing, one of them recently CFO of 0:13:24.280 --> 0:13:27.160 Saudi Ramco, and what did he have to say? 0:13:27.880 --> 0:13:30.200 Yeah, so that was earlier this week in Boston. I 0:13:30.240 --> 0:13:33.400 got to catch up with him there. We covered quite 0:13:33.440 --> 0:13:37.920 a range of topics sort of ranging from their dividends, spending, debt, 0:13:37.960 --> 0:13:42.560 financing plans CAPEX. So yeah, I was quite pleased to 0:13:42.640 --> 0:13:46.199 secure that interview. Amongst the things that we talked about 0:13:46.400 --> 0:13:49.480 was their plans to spend over one hundred and twenty 0:13:49.480 --> 0:13:51.920 billion this year on dividends, which is of course a 0:13:51.960 --> 0:13:55.960 mind boggling number. There is a lot of talk around 0:13:56.000 --> 0:13:58.560 sort of how much Saudio Ramco will keep spending on 0:13:58.559 --> 0:14:02.559 on dividends going forward. I think the main point there 0:14:02.640 --> 0:14:05.400 is that they have a performance led portion of that dividend, 0:14:05.440 --> 0:14:12.040 which they implemented in starting last year when basically they realized, Okay, 0:14:12.040 --> 0:14:15.400 we're generating a lot of returns from high energy prices 0:14:15.440 --> 0:14:20.080 following the invasion of Ukraine through Russia. This performance led 0:14:20.200 --> 0:14:23.480 portion will be reset at the end of this year, 0:14:23.720 --> 0:14:26.720 and the question is very much okay, well, what will 0:14:26.760 --> 0:14:30.080 this company be spending on dividends going forward, because they 0:14:30.280 --> 0:14:33.520 moved from having a lot of surplus cash into actually 0:14:33.520 --> 0:14:36.360 moving into a debt position at the at the end 0:14:36.400 --> 0:14:38.720 of the past quarter, and so there's been a lot 0:14:38.720 --> 0:14:41.400 of questions around that that the CFO received. 0:14:41.720 --> 0:14:44.360 Yeah, very interesting stuff, and I know he is an 0:14:44.480 --> 0:14:45.680 MIT alarm. 0:14:45.800 --> 0:14:48.000 He was there in Boston. 0:14:47.640 --> 0:14:50.840 Giving a speech and some protesters made such a racket 0:14:50.840 --> 0:14:54.240 that he actually had to leave the event and not 0:14:54.360 --> 0:14:56.440 come back. You can see all of that and more 0:14:56.600 --> 0:14:58.560 in Nina's CEO briefing. 0:15:00.160 --> 0:15:04.000 You're listening to the Bloomberg Business Week podcast. Listen live 0:15:04.080 --> 0:15:07.280 each weekday starting at two pm Eastern nott, applecar Play, 0:15:07.320 --> 0:15:10.160 and Android Auto with the Bloomberg Business app. You can 0:15:10.200 --> 0:15:13.440 also listen live on Amazon Alexa from our flagship New 0:15:13.520 --> 0:15:17.160 York station. Just say Alexa playing Bloomberg eleven thirty. 0:15:18.560 --> 0:15:22.600 All right, holiday season quickly approaching, and we want to 0:15:22.640 --> 0:15:25.560 get our finger on the pulse of the consumer. To 0:15:25.600 --> 0:15:28.160 do that, we go over to Katie Thomas. She's from 0:15:28.160 --> 0:15:31.120 the Carney Consumer Institute. They've recently done a study of 0:15:31.560 --> 0:15:35.120 fourteen thousand choppers. She joins us from Pittsburgh, in the 0:15:35.160 --> 0:15:38.640 middle of America, where the normal people live. Katie, thanks 0:15:38.680 --> 0:15:41.640 so much for joining us. How do the normal people 0:15:41.640 --> 0:15:42.400 feel right now? 0:15:44.000 --> 0:15:46.680 The normal people are actually feeling okay going into the 0:15:46.720 --> 0:15:51.000 holiday season. There's a lot of optimism. Even talking to 0:15:51.080 --> 0:15:55.440 folks post election, people are surprisingly willing to spend. They 0:15:55.480 --> 0:16:00.680 say they're feeling better about the economy, or conversely, they're anticipating. 0:16:00.720 --> 0:16:04.720 In some retail therapy, they're concerned teariff prices will drive 0:16:04.840 --> 0:16:08.320 up the cost of electronics and other items. So I'm 0:16:08.360 --> 0:16:11.600 anticipating a healthy holiday season, even though it's a little 0:16:11.640 --> 0:16:15.240 bit shortened giving the late Thanksgiving timing. Like you guys said, 0:16:15.280 --> 0:16:17.960 Black Friday sales have been going on for weeks already, 0:16:18.040 --> 0:16:20.040 so I think we're gonna have a strong season. 0:16:20.480 --> 0:16:24.120 And what are these consumers buying. Are they going to 0:16:24.160 --> 0:16:26.320 the big ticket items or are they being a little 0:16:26.320 --> 0:16:29.200 bit choosier and just finding maybe smaller luxuries. 0:16:30.360 --> 0:16:33.000 Yeah, I think right now we're seeing people still feel 0:16:33.040 --> 0:16:35.840 pretty thoughtful. I think we thought this in the last 0:16:35.880 --> 0:16:38.960 couple of weeks with earnings, right Walmart coming through with 0:16:39.080 --> 0:16:42.000 really strong price value. And that's what you're seeing with 0:16:42.120 --> 0:16:45.240 consumers in general. And that starts to tie into some 0:16:45.280 --> 0:16:48.240 of the work that we just wrapped up around tensions 0:16:48.240 --> 0:16:51.240 consumers are facing. So you see them wanting to spend. 0:16:51.400 --> 0:16:54.120 People love to spend around the holiday, but they do 0:16:54.160 --> 0:16:58.400 still have these lingering concerns around how their wallet looks, 0:16:58.400 --> 0:17:01.280 and they don't want to overspend and start the year 0:17:01.320 --> 0:17:02.200 off on the wrong foot. 0:17:03.160 --> 0:17:03.400 Yeah. 0:17:03.400 --> 0:17:05.760 I don't love to spend around the holiday. I just 0:17:05.760 --> 0:17:07.639 feel like I have no choice, right, I mean, you 0:17:07.720 --> 0:17:10.720 got to buy people presents, you got to get plane tickets, 0:17:10.760 --> 0:17:14.680 you got to hire more staff or whatever. 0:17:14.920 --> 0:17:17.000 I mean, I don't have I don't know. 0:17:17.000 --> 0:17:18.200 I'm just trying to think of the things that he 0:17:18.320 --> 0:17:20.720 might want to be spending money on for the holidays. 0:17:22.000 --> 0:17:26.560 Are people feeling like their wages have really kept up 0:17:26.600 --> 0:17:30.520 with inflation, because it seems to me I get one 0:17:30.560 --> 0:17:33.439 answer from one economist and a different answer from another. 0:17:33.600 --> 0:17:37.080 So you know, how are we doing in terms of 0:17:37.160 --> 0:17:38.520 keeping up with higher prices? 0:17:39.640 --> 0:17:42.160 Yeah, I mean I think objectively speaking, when you look 0:17:42.200 --> 0:17:44.520 at data rolled up, that is what you see, Matt, 0:17:44.560 --> 0:17:48.720 that technically wages are outpaced inflation. But to your exact point, 0:17:48.800 --> 0:17:51.440 we run some analytics with what we call the consumer 0:17:51.520 --> 0:17:55.320 stress Index. We have seen a slow uptick in concerns 0:17:55.400 --> 0:17:58.840 around cost of living as well as concerns about personal 0:17:58.960 --> 0:18:01.840 job security, which is a little bit concerning, even though 0:18:01.880 --> 0:18:04.840 you're not seeing that that much in the employment in 0:18:04.960 --> 0:18:08.720 job growth numbers right now. People feeling concerned that if 0:18:08.760 --> 0:18:10.560 they lost their job they might not be able to 0:18:10.600 --> 0:18:12.960 find one, or that they could lose their job. That 0:18:13.040 --> 0:18:16.240 could be something meaningful that drives kind of a pullback 0:18:16.280 --> 0:18:19.280 and spend and a resistance to spend. But when it 0:18:19.280 --> 0:18:22.639 comes specifically to the holidays, people do typically like to 0:18:22.680 --> 0:18:27.040 spend on gifts and on gifts for themselves, and then 0:18:27.080 --> 0:18:29.000 what you'll see is a bit of a slowdown in 0:18:29.040 --> 0:18:29.520 the new year. 0:18:30.480 --> 0:18:33.440 You mentioned demographics in the notes that you sent over, 0:18:33.520 --> 0:18:36.240 and I'm wondering what your research is showing about just 0:18:36.280 --> 0:18:40.080 how different different demographics are spending and how they act 0:18:40.119 --> 0:18:44.520 as a consumer. I imagine the gen zs are getting 0:18:44.520 --> 0:18:48.480 a lot of their favorite brands from TikTok and social media, 0:18:48.520 --> 0:18:50.840 and I'm wondering if that kind of spans across all ages. 0:18:50.880 --> 0:18:53.560 Now, you know, we're. 0:18:53.440 --> 0:18:55.800 Certainly seeing a pick up there. One of the things 0:18:55.800 --> 0:18:57.960 we see though, is it's hard to slice just by 0:18:58.000 --> 0:19:02.440 demographics alone. So we ask consumers in our work. For instance, 0:19:02.480 --> 0:19:05.840 one question is are you living paycheck to paycheck? And 0:19:05.880 --> 0:19:08.879 we you know, like two out of three consumers actually 0:19:08.920 --> 0:19:11.520 say yes. It's self reported, so that could mean a 0:19:11.560 --> 0:19:13.919 lot of different things, but we well, we split that 0:19:14.000 --> 0:19:17.080 into paycheck to paycheck and then living within means we 0:19:17.119 --> 0:19:19.720 actually see a lot more similarities there in terms of 0:19:19.800 --> 0:19:23.760 behaviors and stressors than if we cut by just income alone. 0:19:23.920 --> 0:19:26.159 So we are seeing people kind of you know, it 0:19:26.240 --> 0:19:30.360 depends a little bit on more of those attitudinal psychographics, 0:19:30.359 --> 0:19:33.280 so not necessarily gen Z on TikTok, but just your 0:19:33.480 --> 0:19:36.679 likelihood to be engaging on a social media platform. 0:19:37.520 --> 0:19:37.720 Matt. 0:19:37.800 --> 0:19:40.280 To your point at the top, there are folks across 0:19:40.320 --> 0:19:42.760 the country who are who are not all that engage 0:19:42.920 --> 0:19:44.800 or all that online, as some of the rest of 0:19:44.880 --> 0:19:47.719 us are, So it really kind of depends on what 0:19:47.760 --> 0:19:49.320 your media consumption looks like. 0:19:49.920 --> 0:19:52.560 Oh, they're so lucky, you know what. 0:19:52.960 --> 0:19:59.560 Speaking of psychographic I noticed this sentence in the survey packet, 0:19:59.720 --> 0:20:02.840 just time for the holidays. This nuanced meta economic and 0:20:02.880 --> 0:20:06.159 psychographic view is based on a unique set of macroeconomic 0:20:06.240 --> 0:20:09.080 data and proprietary CASEI research. Are you sure you're in 0:20:09.119 --> 0:20:13.480 Pittsburgh because I don't know what that Those. 0:20:13.119 --> 0:20:15.280 Are the notes I sent over, So I'm gonna have 0:20:15.359 --> 0:20:18.399 to That's a lot of a bit of a word 0:20:18.520 --> 0:20:19.400 salad there, matt. 0:20:19.480 --> 0:20:21.840 But I think, what do you mean when you say psychographic? 0:20:22.960 --> 0:20:25.879 Well, it is it's just really capturing the lifestyle of 0:20:25.920 --> 0:20:29.080 a consumer. So this research was really grounded and the 0:20:29.160 --> 0:20:33.359 fact that consumers have continued to see this proliferation of choice. 0:20:33.359 --> 0:20:35.760 You guys were actually talking about it with the mattresses. 0:20:35.960 --> 0:20:38.960 We have more options than ever, more access to information 0:20:39.119 --> 0:20:41.480 than ever. And then we tend to get lost in 0:20:41.520 --> 0:20:46.000 this narrative that consumers are increasingly demanding more and more options, 0:20:46.040 --> 0:20:49.800 when in fact, in most categories, consumers are overwhelmed by 0:20:49.840 --> 0:20:52.760 what's out there, are simply satisfied. They don't feel like 0:20:52.840 --> 0:20:57.040 they need this constant influx of options, so the psychographics 0:20:57.040 --> 0:20:59.800