1 00:00:02,720 --> 00:00:09,040 Speaker 1: Bloomberg Audio Studios, podcasts, radio news, and Android auto with 2 00:00:09,119 --> 00:00:12,240 Speaker 1: the Bloomberg Business appum listen on demand wherever you get 3 00:00:12,240 --> 00:00:15,040 Speaker 1: your podcasts, or watch us live on YouTube. 4 00:00:15,680 --> 00:00:18,840 Speaker 2: What I learned from our next guest years ago, which 5 00:00:18,880 --> 00:00:21,520 Speaker 2: shocked me and still to this day amazes me. The 6 00:00:21,680 --> 00:00:24,880 Speaker 2: largest supermarket chain in the United States is. 7 00:00:27,160 --> 00:00:27,880 Speaker 3: Walmartmart. 8 00:00:28,040 --> 00:00:30,159 Speaker 2: I never would have guessed that, And now that I 9 00:00:30,200 --> 00:00:33,159 Speaker 2: think about it, of course it is Jen Bartasha. She's 10 00:00:33,200 --> 00:00:35,599 Speaker 2: the one that kind of enlightened me on that. When 11 00:00:35,600 --> 00:00:38,400 Speaker 2: she's Bloomberg Intelligence Senior animost, she covers the retail staples 12 00:00:38,400 --> 00:00:41,400 Speaker 2: and the package goods companies. So, Jen, I'm thinking in 13 00:00:41,440 --> 00:00:44,839 Speaker 2: a world of tariffs, and I'm worried about if I'm 14 00:00:44,880 --> 00:00:47,960 Speaker 2: a retail investor, kind of the margins my retailers like 15 00:00:47,960 --> 00:00:52,159 Speaker 2: a Walmart might have having the grocery store business as 16 00:00:52,200 --> 00:00:54,920 Speaker 2: a traffic driver. That's got to be a good thing, 17 00:00:54,960 --> 00:00:57,200 Speaker 2: is Did we see that in Walmart's numbers today? 18 00:00:58,160 --> 00:00:58,360 Speaker 1: Yeah? 19 00:00:58,480 --> 00:01:02,400 Speaker 4: Hi, Paul absolutely saw that in Walmart's numbers. You know, 20 00:01:03,320 --> 00:01:07,959 Speaker 4: their growth in consumables and grocery mid single digit growth. 21 00:01:07,959 --> 00:01:10,479 Speaker 4: That means people keep coming back to Walmart to buy 22 00:01:10,480 --> 00:01:14,520 Speaker 4: their staples, and you know, that's a that's a foundational 23 00:01:14,560 --> 00:01:17,399 Speaker 4: type of thing because for Walmart, as they get these 24 00:01:17,440 --> 00:01:21,600 Speaker 4: customers doing that regular, repeat shopping and coming in consistently, 25 00:01:22,000 --> 00:01:23,920 Speaker 4: it really bodes well for how well they'll be able 26 00:01:23,959 --> 00:01:27,280 Speaker 4: to retain those customers once all of this market volatility 27 00:01:27,319 --> 00:01:30,880 Speaker 4: fades and people become a little less price sensitive. 28 00:01:31,840 --> 00:01:34,400 Speaker 5: How does Walmart just really in general raise the pressure 29 00:01:34,440 --> 00:01:38,319 Speaker 5: for competitors? We have Home Depot and Target reporting out soon. 30 00:01:38,640 --> 00:01:41,120 Speaker 5: How do you think they will fare well? 31 00:01:41,280 --> 00:01:43,839 Speaker 4: You know, I think that Walmart is really uniquely positioned 32 00:01:43,880 --> 00:01:48,640 Speaker 4: because it arguably has the best view into mainstream America 33 00:01:48,720 --> 00:01:52,120 Speaker 4: consumer of any retailer out there, because they touch such 34 00:01:52,120 --> 00:01:52,760 Speaker 4: a huge. 35 00:01:52,560 --> 00:01:53,520 Speaker 3: Number of households. 36 00:01:53,960 --> 00:01:57,520 Speaker 4: And so when somebody the size of Walmart says that 37 00:01:57,720 --> 00:02:02,400 Speaker 4: even their scale is a big enough to fully offset tariffs, 38 00:02:02,880 --> 00:02:06,360 Speaker 4: the read through on that is with for other retailers 39 00:02:06,400 --> 00:02:11,200 Speaker 4: who are smaller and have bigger exposure to imported goods 40 00:02:11,840 --> 00:02:16,160 Speaker 4: is rather dire because you know, you know, Walmart is 41 00:02:16,360 --> 00:02:18,520 Speaker 4: is the one that is probably best position to whether 42 00:02:18,560 --> 00:02:20,920 Speaker 4: it because of its scale. But that just means for 43 00:02:21,000 --> 00:02:23,840 Speaker 4: the smaller guys, it's going to be a really difficult battle, 44 00:02:23,919 --> 00:02:25,800 Speaker 4: and that there's going to be a lot more price 45 00:02:25,840 --> 00:02:28,880 Speaker 4: that has to be taken and a lot more operational 46 00:02:29,400 --> 00:02:33,640 Speaker 4: maneuvering to try to stay competitive in that in that 47 00:02:33,680 --> 00:02:37,360 Speaker 4: particular set. So Target has a lot of discretionary exposure. 48 00:02:37,639 --> 00:02:41,520 Speaker 4: Home depot lows they both do as well, So you 49 00:02:41,560 --> 00:02:44,240 Speaker 4: know it could be difficult season for those retailers. 50 00:02:44,440 --> 00:02:46,760 Speaker 2: All right, full disclosure, And John Socker knows this. My 51 00:02:47,000 --> 00:02:50,240 Speaker 2: last job in this illustrious career of mine will be 52 00:02:50,280 --> 00:02:55,080 Speaker 2: as a greeter at Walmart. We hope to see. I 53 00:02:55,160 --> 00:02:56,959 Speaker 2: have never been in one because they don't have near me. 54 00:02:58,440 --> 00:03:00,640 Speaker 2: Root seventy in Brick that's going to be. It's far 55 00:03:01,000 --> 00:03:03,200 Speaker 2: the next stop here on this one. Hey, Jen, you 56 00:03:03,240 --> 00:03:05,200 Speaker 2: mentioned it, and that's kind of where I wanted to go. 57 00:03:06,200 --> 00:03:08,760 Speaker 2: I can see wal Bart dealing with higher tariffs in 58 00:03:08,919 --> 00:03:12,800 Speaker 2: pricing because they're Walmart. But how about the mom and 59 00:03:12,919 --> 00:03:16,800 Speaker 2: pop retailers out there on Main Street USA? How tough 60 00:03:16,840 --> 00:03:17,639 Speaker 2: is it going to be for them? 61 00:03:17,680 --> 00:03:22,160 Speaker 4: Do you think it's It's incredibly tough, Paul, because you 62 00:03:22,200 --> 00:03:26,080 Speaker 4: know the mom and pop retailers, it's usually only a 63 00:03:26,080 --> 00:03:29,800 Speaker 4: handful of employees. It's a very set type of inventory 64 00:03:29,800 --> 00:03:33,160 Speaker 4: that they carry. They don't necessarily have the ability to 65 00:03:33,240 --> 00:03:36,680 Speaker 4: flex in and out of different product categories to to 66 00:03:36,880 --> 00:03:40,840 Speaker 4: lessen the impact of tariffs, because they're usually known for 67 00:03:40,960 --> 00:03:43,960 Speaker 4: a particular type of product, which is why their customers 68 00:03:44,000 --> 00:03:47,360 Speaker 4: come to them, and so you know, they're also they're 69 00:03:47,480 --> 00:03:51,440 Speaker 4: very reliant also on getting goods either directly or through 70 00:03:51,480 --> 00:03:55,120 Speaker 4: third parties that are that are imported, and so there's 71 00:03:55,200 --> 00:04:00,760 Speaker 4: just very little room in there in their operations to 72 00:04:00,760 --> 00:04:03,680 Speaker 4: be able to offset the power of what's come the 73 00:04:03,680 --> 00:04:06,400 Speaker 4: pricing that's going to come with these tariffs. And we've 74 00:04:06,400 --> 00:04:09,560 Speaker 4: heard anecdotally small businesses that are just saying they've had 75 00:04:09,600 --> 00:04:12,400 Speaker 4: to lay off employees already. You know, there could be 76 00:04:12,440 --> 00:04:15,920 Speaker 4: greater ramifications, you know, in terms of unemployment and things. 77 00:04:16,000 --> 00:04:20,359 Speaker 4: If small businesses are impacted to a large degree, Should 78 00:04:20,440 --> 00:04:23,400 Speaker 4: this tariff situation persist for longer than we're expecting? 79 00:04:23,880 --> 00:04:26,600 Speaker 5: Yeah, bring up a good point because they have CFO 80 00:04:26,800 --> 00:04:29,320 Speaker 5: John David Rainey saying the rage of outcomes is pretty 81 00:04:29,360 --> 00:04:32,800 Speaker 5: quote extreme, and it is. How has Walmart have they 82 00:04:32,880 --> 00:04:34,800 Speaker 5: hinted on how they're preparing for it? I mean, we 83 00:04:34,920 --> 00:04:37,239 Speaker 5: know that they're a good barometer of the US economy 84 00:04:37,279 --> 00:04:39,880 Speaker 5: and they're really really huge, but they must still be 85 00:04:40,000 --> 00:04:41,120 Speaker 5: impacted by tariffs. 86 00:04:42,040 --> 00:04:45,680 Speaker 4: Absolutely, they definitely will be impacted. But part of where 87 00:04:45,680 --> 00:04:48,800 Speaker 4: their advantage is is that the company has been investing 88 00:04:48,839 --> 00:04:53,120 Speaker 4: for some time behind technology like AI, and AI has 89 00:04:53,240 --> 00:04:56,720 Speaker 4: across retail, but especially for those retailers who have had 90 00:04:56,720 --> 00:05:00,120 Speaker 4: the time and the balance sheet to invest in it 91 00:05:00,160 --> 00:05:02,839 Speaker 4: gives them a lot of flexibility in their tools for 92 00:05:03,000 --> 00:05:06,120 Speaker 4: predicting what their need is going to be and for 93 00:05:06,520 --> 00:05:10,159 Speaker 4: responding quickly to changes in their supply chain. So you 94 00:05:10,200 --> 00:05:13,320 Speaker 4: know that investment in AI will actually pay some dividends 95 00:05:13,360 --> 00:05:17,839 Speaker 4: and probably help them navigate the tariff situation more easily. 96 00:05:18,360 --> 00:05:20,400 Speaker 4: And again that goes back to the smaller players who 97 00:05:20,480 --> 00:05:23,120 Speaker 4: don't have that kind of technology support or haven't been 98 00:05:23,160 --> 00:05:27,080 Speaker 4: able to make those investments. Will it'll be harder for 99 00:05:27,120 --> 00:05:29,040 Speaker 4: them to maneuver in that environment. 100 00:05:29,720 --> 00:05:33,440 Speaker 2: So Jennifer Kroger are some big, you know, grocery store, 101 00:05:33,600 --> 00:05:35,960 Speaker 2: and I don't know, craft Food comes in and says, 102 00:05:36,160 --> 00:05:39,000 Speaker 2: cheese Whiz is going to be ten or fifteen percent 103 00:05:39,160 --> 00:05:42,040 Speaker 2: higher price to you Kroger because of teriffs. How does 104 00:05:42,080 --> 00:05:45,240 Speaker 2: that conversation go? Who's got the leverage there? Who eats it, 105 00:05:45,240 --> 00:05:45,800 Speaker 2: who takes it? 106 00:05:45,839 --> 00:05:46,080 Speaker 6: Is it? 107 00:05:46,640 --> 00:05:47,200 Speaker 3: How does that go? 108 00:05:48,240 --> 00:05:51,719 Speaker 4: Yeah, it's it's usually a combination of a couple of things. 109 00:05:52,120 --> 00:05:55,560 Speaker 4: So the first thing is that because the grocers all 110 00:05:55,600 --> 00:06:00,119 Speaker 4: have private label programs, they are very very well in 111 00:06:00,160 --> 00:06:03,640 Speaker 4: formed on what cost of ingredients are, which ingredients are 112 00:06:03,640 --> 00:06:08,000 Speaker 4: being imported, you know, packaging costs. So when a counterpart 113 00:06:08,080 --> 00:06:10,120 Speaker 4: from a package food company comes to them and says 114 00:06:10,160 --> 00:06:12,719 Speaker 4: we need to increase prices because of X, Y, and z, 115 00:06:13,320 --> 00:06:15,920 Speaker 4: the retailer can call them out if they don't see 116 00:06:15,960 --> 00:06:20,359 Speaker 4: the same pattern that they're being given as an excuse. Now, 117 00:06:20,720 --> 00:06:24,599 Speaker 4: then there's a collaborative, a collaboration where ultimately both the 118 00:06:24,640 --> 00:06:27,480 Speaker 4: retailer and the food package the package foo company want 119 00:06:27,520 --> 00:06:30,160 Speaker 4: to you know, increase the volume sold and make sure 120 00:06:30,200 --> 00:06:32,360 Speaker 4: that their products are getting in the hands of customers. 121 00:06:32,680 --> 00:06:35,840 Speaker 4: So when it comes to pricing, usually there can be 122 00:06:35,880 --> 00:06:38,719 Speaker 4: a bit of a sharing in terms of cost, but 123 00:06:39,120 --> 00:06:41,760 Speaker 4: most of it does fall into the package food company 124 00:06:41,760 --> 00:06:44,680 Speaker 4: itself and that comes in the form of having to 125 00:06:44,720 --> 00:06:49,000 Speaker 4: do promotions you know, or or you know, offering discounts 126 00:06:49,000 --> 00:06:50,920 Speaker 4: and things like that to make sure that their products 127 00:06:50,960 --> 00:06:54,560 Speaker 4: are actually moving and that they're generating turnover and that 128 00:06:54,600 --> 00:06:56,400 Speaker 4: they're then getting some profit out of it. 129 00:06:57,240 --> 00:06:59,080 Speaker 2: Jen, thanks so much for joining us always appreciate it. 130 00:06:59,080 --> 00:07:02,200 Speaker 2: Always learned something speaking to you. Jen Bartash's senior retail 131 00:07:02,560 --> 00:07:05,200 Speaker 2: analyst from Bloomberg Intelligence. I mean Jen had a real 132 00:07:05,320 --> 00:07:08,120 Speaker 2: career at Bloomberg. She was managing departments, managing a bunch 133 00:07:08,160 --> 00:07:10,960 Speaker 2: of people in global data. And then we asked her, 134 00:07:11,120 --> 00:07:14,120 Speaker 2: like fifteen years ago, hey, come to Bloomberg Intelligence, that 135 00:07:14,120 --> 00:07:16,560 Speaker 2: we think you'd be a really good analyst. And she 136 00:07:16,720 --> 00:07:18,680 Speaker 2: did come over, she accepted, and she's been great, and 137 00:07:18,680 --> 00:07:20,640 Speaker 2: now she's one of the leading voices on retail. So 138 00:07:21,280 --> 00:07:24,600 Speaker 2: another success story coming out of Bloomberg Intelligence. 139 00:07:26,280 --> 00:07:30,000 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 140 00:07:30,080 --> 00:07:33,120 Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android 141 00:07:33,160 --> 00:07:36,480 Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever 142 00:07:36,520 --> 00:07:39,640 Speaker 1: you get your podcasts, or watch us live on YouTube. 143 00:07:40,320 --> 00:07:43,760 Speaker 2: Checking with Mariy Shore. She's a senior Ecodana's a Columbia threadneeder. 144 00:07:43,800 --> 00:07:45,200 Speaker 2: She's up in Boston. We'd love to talk to he 145 00:07:45,280 --> 00:07:47,320 Speaker 2: ed when we get the retail sales on her because 146 00:07:47,320 --> 00:07:49,760 Speaker 2: she really spends a lot of time looking at the retailers, 147 00:07:49,840 --> 00:07:52,640 Speaker 2: the consumer, that kind of thing, so a real helpful 148 00:07:52,720 --> 00:07:54,560 Speaker 2: voice to us. Mari what did you make of the 149 00:07:54,600 --> 00:07:57,160 Speaker 2: retail sales here. I mean, I guess there's some noise 150 00:07:57,200 --> 00:08:00,440 Speaker 2: here about you know, tariffs, and did that impact kind 151 00:08:00,480 --> 00:08:03,480 Speaker 2: of how consumers are spending money these days? What did 152 00:08:03,520 --> 00:08:05,240 Speaker 2: you make of the retail sales number today? 153 00:08:06,480 --> 00:08:10,040 Speaker 6: Yes, thanks Paulin Isabelle, thank you for having me. Absolutely 154 00:08:10,200 --> 00:08:12,360 Speaker 6: you said it better than I could have. The tariffs 155 00:08:12,400 --> 00:08:15,040 Speaker 6: are definitely creating some monthly noise. 156 00:08:15,560 --> 00:08:17,120 Speaker 3: When we look year over. 157 00:08:17,080 --> 00:08:20,160 Speaker 6: Year, the growth has been a little more consistent and 158 00:08:20,360 --> 00:08:24,640 Speaker 6: actually showed acceleration in April versus March. 159 00:08:24,720 --> 00:08:25,840 Speaker 3: But on a month over. 160 00:08:25,720 --> 00:08:30,520 Speaker 6: Month basis, we did see softness in April versus March, 161 00:08:31,040 --> 00:08:34,120 Speaker 6: given the pull forward that we saw in March ahead 162 00:08:34,120 --> 00:08:39,400 Speaker 6: of some tariff driven price increases that the consumer anticipated 163 00:08:39,440 --> 00:08:44,000 Speaker 6: in some big ticket categories like autos. And you know, 164 00:08:44,080 --> 00:08:46,840 Speaker 6: when I look and really step back and just getting 165 00:08:46,840 --> 00:08:50,040 Speaker 6: off of Walmart's earnings call, I think their tone on 166 00:08:50,120 --> 00:08:53,520 Speaker 6: the consumer is very consistent. Obviously, tariffs are creating a 167 00:08:53,559 --> 00:08:56,960 Speaker 6: lot of noise in the spending trends, but you know, 168 00:08:57,000 --> 00:08:59,920 Speaker 6: in their words, the consumer is still very focused on 169 00:09:00,240 --> 00:09:03,960 Speaker 6: value and speed of delivery, and that is what we've 170 00:09:04,000 --> 00:09:07,360 Speaker 6: been seeing for years now coming out of the pandemic. 171 00:09:07,280 --> 00:09:09,560 Speaker 5: I'm glad you brought up consumer because for Walmart, we 172 00:09:09,600 --> 00:09:12,080 Speaker 5: saw traffic, which is the number of shoppers less of 173 00:09:12,120 --> 00:09:14,800 Speaker 5: a boost to the figure than ticket. What does that 174 00:09:14,880 --> 00:09:17,320 Speaker 5: tell you that maybe there are less shoppers, but they're 175 00:09:17,360 --> 00:09:21,440 Speaker 5: buying more expensive things or at least higher amount of tickets. 176 00:09:21,520 --> 00:09:26,360 Speaker 6: Well, right, So that could either say they're coming in 177 00:09:26,800 --> 00:09:29,760 Speaker 6: less frequently and when they are in, they're buying a 178 00:09:29,800 --> 00:09:33,400 Speaker 6: lot more, right, they're stalking up more or to your point, 179 00:09:33,679 --> 00:09:37,320 Speaker 6: they're buying more expensive things. But we did see relative 180 00:09:37,480 --> 00:09:42,680 Speaker 6: weakness in their general merchandise category. We saw like their 181 00:09:42,880 --> 00:09:46,360 Speaker 6: you know, food categories up mid single digits, Health and 182 00:09:46,400 --> 00:09:48,920 Speaker 6: wellness was up high teams. A lot of that is 183 00:09:49,000 --> 00:09:53,520 Speaker 6: GLP ones, and general merchandise for them was actually down slightly, 184 00:09:53,640 --> 00:09:56,080 Speaker 6: which is worse than what we saw in. 185 00:09:58,320 --> 00:10:00,480 Speaker 3: Q four. And so I think it's a us that 186 00:10:00,559 --> 00:10:02,360 Speaker 3: the consumer is you know. 187 00:10:02,400 --> 00:10:05,280 Speaker 6: Coming to Walmart for their stock up trip, which is 188 00:10:05,360 --> 00:10:08,839 Speaker 6: typically what we've seen with Walmart. 189 00:10:08,880 --> 00:10:10,680 Speaker 3: But you know, I think a lot of that. 190 00:10:12,080 --> 00:10:16,559 Speaker 6: Intra week spend, those like fill in trips that we 191 00:10:16,600 --> 00:10:19,160 Speaker 6: talk about, you know, I think that the consumer may 192 00:10:19,200 --> 00:10:23,120 Speaker 6: be doing less of that just given their general caution 193 00:10:23,360 --> 00:10:26,120 Speaker 6: and uncertainty over what tariffs are going to do to 194 00:10:26,200 --> 00:10:27,960 Speaker 6: their spending ability in the future. 195 00:10:28,400 --> 00:10:30,600 Speaker 2: Hey, Mari, wh when you speak to the retailers that 196 00:10:30,640 --> 00:10:34,000 Speaker 2: you talk to across your coverage area, Let's see what's 197 00:10:34,040 --> 00:10:37,240 Speaker 2: the feeling today in terms of how much they want 198 00:10:37,280 --> 00:10:41,480 Speaker 2: to pass through to customers versus how much they're willing 199 00:10:41,480 --> 00:10:42,920 Speaker 2: to kind of take in their margin here. 200 00:10:43,960 --> 00:10:46,720 Speaker 6: Yeah, it's a great question, and it's so interesting seeing 201 00:10:46,760 --> 00:10:50,679 Speaker 6: like the uh, you know, the commentary from the retailers 202 00:10:50,800 --> 00:10:54,200 Speaker 6: versus what we see in the stock market is very different, right, 203 00:10:54,240 --> 00:10:56,880 Speaker 6: I mean, the stock market is acting as if these 204 00:10:56,920 --> 00:11:00,440 Speaker 6: tariffs are no big deal. We got some resolution, things 205 00:11:00,480 --> 00:11:03,160 Speaker 6: are going to be fine. Then you listen to the retailers. 206 00:11:03,160 --> 00:11:05,800 Speaker 6: I mean you listen to Walmart today. They're talking about, 207 00:11:06,040 --> 00:11:09,280 Speaker 6: you know, starting now, there will be less product on shelves. 208 00:11:09,480 --> 00:11:11,360 Speaker 6: They're going to do all they can to try to 209 00:11:11,400 --> 00:11:16,280 Speaker 6: protect pricing in their value position in faster turn categories 210 00:11:16,400 --> 00:11:16,960 Speaker 6: like food. 211 00:11:17,320 --> 00:11:18,480 Speaker 3: But there's certain. 212 00:11:18,240 --> 00:11:23,920 Speaker 6: Categories like toys, electronics, even some of the textile categories 213 00:11:23,960 --> 00:11:26,640 Speaker 6: like apparel and soft home where it's going to be 214 00:11:26,800 --> 00:11:31,040 Speaker 6: really hard for them to absorb the full impact of terraft. 215 00:11:31,120 --> 00:11:34,120 Speaker 6: So I think, you know, the ten percent rate for 216 00:11:34,200 --> 00:11:36,839 Speaker 6: a lot of companies is a lot more manageable. When 217 00:11:36,840 --> 00:11:39,240 Speaker 6: you talk to them about the ten percent we see 218 00:11:39,280 --> 00:11:42,640 Speaker 6: globally x China, they seem to feel a little bit 219 00:11:42,679 --> 00:11:46,080 Speaker 6: better about that. I think, you know, the thirty percent 220 00:11:46,200 --> 00:11:50,280 Speaker 6: in China is still too high, and the margin levels 221 00:11:50,320 --> 00:11:51,959 Speaker 6: and a lot of the categories that come out of 222 00:11:52,080 --> 00:11:54,400 Speaker 6: China are very low, and they just do not have 223 00:11:54,480 --> 00:11:59,240 Speaker 6: the ability to absorb that pricing themselves, share it with 224 00:11:59,320 --> 00:12:03,280 Speaker 6: their vendors who or their vendor partners, their manufacturing partners. 225 00:12:03,360 --> 00:12:05,959 Speaker 3: We're also operating on very low margin. 226 00:12:06,000 --> 00:12:08,400 Speaker 6: And so it's inevitable that some of that is going 227 00:12:08,440 --> 00:12:12,120 Speaker 6: to have to come through to higher prices. It's just 228 00:12:12,240 --> 00:12:14,600 Speaker 6: a question of you know, I think what the retailers 229 00:12:14,600 --> 00:12:17,240 Speaker 6: are really trying to they're really struggling with now how 230 00:12:17,240 --> 00:12:21,000 Speaker 6: to think about that trade off between price and volume. 231 00:12:21,200 --> 00:12:22,199 Speaker 3: You know, I mean. 232 00:12:22,320 --> 00:12:25,320 Speaker 6: During the pandemic, as everyone took pricing, we did not 233 00:12:25,600 --> 00:12:28,800 Speaker 6: see the kind of elasticity of demand that you would 234 00:12:28,800 --> 00:12:33,040 Speaker 6: typically expect to see when prices move up. And I 235 00:12:33,080 --> 00:12:36,920 Speaker 6: think how the retailers manage their unit inventories is going 236 00:12:36,960 --> 00:12:39,240 Speaker 6: to be a huge area of focus for them and 237 00:12:39,360 --> 00:12:43,360 Speaker 6: for investors during this really volatile period. 238 00:12:44,040 --> 00:12:46,200 Speaker 5: One thing that also caught my edw with Walmart is 239 00:12:46,240 --> 00:12:49,040 Speaker 5: it said it's online business posted a quarterly profit for 240 00:12:49,080 --> 00:12:51,720 Speaker 5: the first time. Are you seeing the same trend across 241 00:12:51,720 --> 00:12:54,599 Speaker 5: the board and what does that tell you? 242 00:12:54,640 --> 00:12:56,719 Speaker 3: No, this is very Walmart specific. 243 00:12:57,160 --> 00:13:01,120 Speaker 6: We have seen in the e commerce space Amazon and 244 00:13:01,240 --> 00:13:07,240 Speaker 6: Walmart taking incredible share. And so when you listen to Walmart, 245 00:13:07,240 --> 00:13:09,360 Speaker 6: and they've been kind of alluding to the fact that 246 00:13:09,360 --> 00:13:13,120 Speaker 6: they were nearing this inflection and profitability for some time, 247 00:13:13,440 --> 00:13:15,520 Speaker 6: I think it's really coming from two things. That's coming 248 00:13:15,559 --> 00:13:18,880 Speaker 6: from the scale that they are now seeing as that 249 00:13:18,960 --> 00:13:22,280 Speaker 6: business has grown so much. And also they've talked about 250 00:13:22,280 --> 00:13:27,200 Speaker 6: how consumers are increasingly willing to pay for delivery for 251 00:13:27,600 --> 00:13:32,000 Speaker 6: expedited shipment. So if you're making dinner tonight and you 252 00:13:32,120 --> 00:13:35,760 Speaker 6: realize you forgot a certain spice, you know, you could 253 00:13:35,760 --> 00:13:38,360 Speaker 6: pay five dollars to have Walmart deliver it. 254 00:13:38,240 --> 00:13:39,439 Speaker 3: To you in the next hour. 255 00:13:39,880 --> 00:13:43,960 Speaker 6: And in those cases, the consumer is more willing to 256 00:13:43,960 --> 00:13:47,200 Speaker 6: pay for delivery, and I think that's something Walmart had 257 00:13:47,240 --> 00:13:51,120 Speaker 6: not expected, but it is a key I think part 258 00:13:51,160 --> 00:13:53,800 Speaker 6: of the reason why they are able to achieve e 259 00:13:53,840 --> 00:13:57,400 Speaker 6: commerce profitability. They also have, of course, the benefit of 260 00:13:57,760 --> 00:14:02,400 Speaker 6: the growth in the marketplace and addizing and fulfillment services 261 00:14:02,400 --> 00:14:04,040 Speaker 6: and membership. 262 00:14:03,880 --> 00:14:06,080 Speaker 3: All of which are higher margin and are. 263 00:14:06,000 --> 00:14:09,280 Speaker 6: Really starting to move the needle for them as we 264 00:14:09,360 --> 00:14:13,120 Speaker 6: see with Amazon. But I think Walmart and Amazon are 265 00:14:13,160 --> 00:14:15,480 Speaker 6: in a league of their own as it relates to 266 00:14:15,520 --> 00:14:18,000 Speaker 6: what they're seeing in e commerce, both in terms of 267 00:14:18,040 --> 00:14:20,400 Speaker 6: the growth that they're putting up in that business and 268 00:14:20,440 --> 00:14:22,600 Speaker 6: the profitability that they're able to achieve. 269 00:14:23,320 --> 00:14:25,080 Speaker 2: Mari, thank you so much for joining us. As always, 270 00:14:25,080 --> 00:14:29,120 Speaker 2: Mario Sure, Senior Equity aas for Columbia Threadneedle Investment, she's 271 00:14:29,200 --> 00:14:31,400 Speaker 2: up there in Boston and she joined us. View that 272 00:14:31,880 --> 00:14:32,360 Speaker 2: zoom thing. 273 00:14:34,120 --> 00:14:37,800 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 274 00:14:37,880 --> 00:14:41,000 Speaker 1: weekdays at ten am Eastern on Apple, Colocklay, and Android 275 00:14:41,000 --> 00:14:44,320 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 276 00:14:44,360 --> 00:14:47,640 Speaker 1: you get your podcasts, or watch us live on YouTube. 277 00:14:48,040 --> 00:14:50,520 Speaker 2: President Trump making lots and lots of news in his 278 00:14:50,720 --> 00:14:54,000 Speaker 2: trip to the Middle East, lots of economic deals of 279 00:14:54,000 --> 00:14:56,800 Speaker 2: being announced, big big dollar amounts as well. All that 280 00:14:56,840 --> 00:14:58,680 Speaker 2: is good for the companies involved, but it does call 281 00:14:58,720 --> 00:15:02,440 Speaker 2: out Apple a Tim Cook not there with him, as 282 00:15:02,520 --> 00:15:07,000 Speaker 2: Jensen Wang is in Nvidia also suggesting that Apple should 283 00:15:07,040 --> 00:15:10,560 Speaker 2: stop moving iPhone production to India. What is that all about? 284 00:15:10,680 --> 00:15:14,160 Speaker 2: Anurag Rana technologychannels for Bloomberg Intelligence, he covers Apple, he 285 00:15:14,200 --> 00:15:17,600 Speaker 2: covers all this tech stuff for us in the burgeoning 286 00:15:17,640 --> 00:15:23,240 Speaker 2: tech capital Chicago, Illinois, anurag Apple computer. They're trying to 287 00:15:23,240 --> 00:15:26,440 Speaker 2: diversify their supply chain, maybe get a little bit less 288 00:15:26,480 --> 00:15:29,720 Speaker 2: reliant on China taking some of that over to India. 289 00:15:30,080 --> 00:15:31,440 Speaker 2: There's a president not like that. 290 00:15:32,800 --> 00:15:34,920 Speaker 7: Yeah, we just heard that. In fact, it looks like 291 00:15:34,960 --> 00:15:37,480 Speaker 7: Apple cannot you know, catch a break right now. We 292 00:15:37,560 --> 00:15:41,040 Speaker 7: thought that the US China deal would probably put a 293 00:15:41,040 --> 00:15:44,040 Speaker 7: lot of those fears to rest. But you know, it 294 00:15:44,240 --> 00:15:47,240 Speaker 7: just looks like that. You know, it's not He's not 295 00:15:47,360 --> 00:15:50,720 Speaker 7: happy with the Apple moving some of that iPhone facilities 296 00:15:50,720 --> 00:15:53,240 Speaker 7: to India. Now that is the case because you know, 297 00:15:53,240 --> 00:15:56,960 Speaker 7: frankly speaking, you do need a low cost labor setup. 298 00:15:56,960 --> 00:16:00,480 Speaker 7: You do need really large factories and the amount of 299 00:16:00,520 --> 00:16:03,840 Speaker 7: labor to assemble some of these products. Remember, even in 300 00:16:03,880 --> 00:16:06,160 Speaker 7: an iPhone, you know, the chip can come from a 301 00:16:06,600 --> 00:16:09,600 Speaker 7: you know, high cost region, but the assembly of the phone, 302 00:16:09,720 --> 00:16:11,600 Speaker 7: you know, cannot be done in a high cost region. 303 00:16:11,640 --> 00:16:13,120 Speaker 7: So I think they are in a bit of a 304 00:16:13,200 --> 00:16:16,320 Speaker 7: jam as to what to do because we have Bloomberg 305 00:16:16,360 --> 00:16:19,120 Speaker 7: News reported that they wanted to double their capacity in 306 00:16:19,120 --> 00:16:21,120 Speaker 7: India to ensure that they don't have to pay the 307 00:16:21,160 --> 00:16:24,080 Speaker 7: high tariff strate coming out of China. But you know, 308 00:16:24,240 --> 00:16:27,120 Speaker 7: let's see what Apple does to counter that. You know, 309 00:16:27,160 --> 00:16:30,600 Speaker 7: our best gut feeling is that they will ramp up 310 00:16:30,640 --> 00:16:33,760 Speaker 7: the investments in the US and perhaps target more on 311 00:16:33,800 --> 00:16:37,240 Speaker 7: the higher margin items such as chips or really expensive 312 00:16:37,600 --> 00:16:39,720 Speaker 7: max But it will be tough for them to do 313 00:16:39,760 --> 00:16:41,920 Speaker 7: this on the on the iPhone level, frankly. 314 00:16:42,120 --> 00:16:44,280 Speaker 5: But that's the thing. Apple already promised to hire more 315 00:16:44,320 --> 00:16:47,080 Speaker 5: workers domestically here in the US and spend five hundred 316 00:16:47,120 --> 00:16:49,080 Speaker 5: billion over the next four years. So you think they 317 00:16:49,120 --> 00:16:51,000 Speaker 5: will need to add more to that. 318 00:16:52,400 --> 00:16:54,520 Speaker 7: Either they need to add more to that or support 319 00:16:54,560 --> 00:16:57,760 Speaker 7: some of the local manufacturing, perhaps in the chip capacity, 320 00:16:58,200 --> 00:17:01,600 Speaker 7: or explain to the president how they're doing it in 321 00:17:01,640 --> 00:17:04,760 Speaker 7: the US a lot more benefits to you know, the 322 00:17:04,800 --> 00:17:09,080 Speaker 7: local workers, because you know, for President Trump to call him, 323 00:17:09,240 --> 00:17:11,439 Speaker 7: call him out, you know, out in the open, you know, 324 00:17:11,520 --> 00:17:13,399 Speaker 7: dost put him in a tough position. 325 00:17:13,560 --> 00:17:17,359 Speaker 2: Right now, What is the Apple strategy here? Because again, 326 00:17:17,440 --> 00:17:20,679 Speaker 2: we think of some of the quote unquote China exposure. 327 00:17:21,160 --> 00:17:23,000 Speaker 2: The company that comes to the top of most people's 328 00:17:23,040 --> 00:17:25,800 Speaker 2: list is Apple because they get twenty percent of their 329 00:17:25,880 --> 00:17:30,960 Speaker 2: revenue from China. Their supply chain is fully enmeshed in China. 330 00:17:31,160 --> 00:17:33,239 Speaker 2: And I know we've talked to you, you know, for 331 00:17:33,359 --> 00:17:36,360 Speaker 2: the last several years about how they can diversify. Here 332 00:17:36,440 --> 00:17:39,639 Speaker 2: what is the reality in today's world for Apple? 333 00:17:40,840 --> 00:17:44,080 Speaker 7: See, the reality is the higher value products. So let's 334 00:17:44,080 --> 00:17:46,520 Speaker 7: say that the chip that they do or they make, 335 00:17:46,600 --> 00:17:49,160 Speaker 7: you know, those are all designed in the US. It's 336 00:17:49,160 --> 00:17:53,320 Speaker 7: made by TSMC. Those plants have been shifted, some of 337 00:17:53,320 --> 00:17:57,920 Speaker 7: them to Arizona. So the higher value products can be done. 338 00:17:57,960 --> 00:18:01,160 Speaker 7: But frankly speaking, think about it, you know, lower whether 339 00:18:01,200 --> 00:18:04,360 Speaker 7: it's an air pod or whether it's just an assembly 340 00:18:04,400 --> 00:18:06,639 Speaker 7: of the phone, it's not that easy to just you know, 341 00:18:06,720 --> 00:18:08,840 Speaker 7: come up and then make those things in the US. 342 00:18:08,880 --> 00:18:11,280 Speaker 7: I mean it's they've been trying to perfect that over 343 00:18:11,320 --> 00:18:14,640 Speaker 7: a twenty year period, across different parts that they get 344 00:18:14,680 --> 00:18:18,119 Speaker 7: from China. The factories that employs you know, hundreds and 345 00:18:18,160 --> 00:18:20,879 Speaker 7: thousands of people. You know, it's just not easy to 346 00:18:20,920 --> 00:18:23,600 Speaker 7: move those I think they will be pushing a lot 347 00:18:23,680 --> 00:18:26,040 Speaker 7: more on the R and D front over here hiring 348 00:18:26,080 --> 00:18:29,879 Speaker 7: more local workers to offset some of that actim which means, 349 00:18:29,880 --> 00:18:32,560 Speaker 7: on the at least over the next few years, there 350 00:18:32,600 --> 00:18:36,199 Speaker 7: could be some downward pressure on their gross margins, you know, 351 00:18:36,280 --> 00:18:38,800 Speaker 7: in order to you know, showcase that they are investing 352 00:18:38,840 --> 00:18:39,680 Speaker 7: heavily in the US. 353 00:18:40,400 --> 00:18:42,880 Speaker 5: How has it been like as an analyst covering all 354 00:18:42,920 --> 00:18:45,440 Speaker 5: the tire flip flops and all these big tech companies 355 00:18:45,520 --> 00:18:48,120 Speaker 5: that are at the mercy of some of Trump's pronouncements 356 00:18:48,160 --> 00:18:49,720 Speaker 5: that are sometimes really unexpected. 357 00:18:51,080 --> 00:18:53,520 Speaker 7: I mean, really listen, it is very tough, and frankly, 358 00:18:53,600 --> 00:18:56,560 Speaker 7: we're going to see how and if this leads to 359 00:18:56,640 --> 00:19:00,439 Speaker 7: some kind of demand destruction on any of the you know, 360 00:19:00,480 --> 00:19:03,200 Speaker 7: and markets we cover. So so far, it doesn't look 361 00:19:03,240 --> 00:19:05,920 Speaker 7: like it's having an impact on the cell phone market, 362 00:19:06,240 --> 00:19:08,240 Speaker 7: it doesn't look like it's having an impact on the 363 00:19:08,240 --> 00:19:11,760 Speaker 7: cloud market. But when you look at something like consulting market, 364 00:19:12,200 --> 00:19:14,840 Speaker 7: I mean it is having a second degree impact because 365 00:19:15,200 --> 00:19:18,000 Speaker 7: people or companies are not sure how they're going to be, 366 00:19:18,840 --> 00:19:21,120 Speaker 7: you know, what kind of economic environment they will see 367 00:19:21,240 --> 00:19:23,280 Speaker 7: down the road, whether they'll be a recession or not. 368 00:19:23,680 --> 00:19:25,720 Speaker 7: So there has been an absolute stop and a lot 369 00:19:25,760 --> 00:19:29,239 Speaker 7: of the consulting work and a consulting related you know, 370 00:19:29,440 --> 00:19:32,200 Speaker 7: bookings or contracts out there, and I think that's kind 371 00:19:32,240 --> 00:19:34,679 Speaker 7: of what we are seeing, you know, at least in 372 00:19:34,720 --> 00:19:36,120 Speaker 7: the overall tech space right now. 373 00:19:36,640 --> 00:19:38,679 Speaker 2: And Ron, thanks so much for joining us. Always appreciate 374 00:19:38,720 --> 00:19:40,919 Speaker 2: getting a couple of minutes of your time. On aur Agrana, 375 00:19:40,960 --> 00:19:44,760 Speaker 2: he's a senior technology analyst for Bloomberg Intelligency and Mandeep saying, 376 00:19:44,800 --> 00:19:49,080 Speaker 2: kind of lead our global technology research. It is a 377 00:19:49,119 --> 00:19:52,560 Speaker 2: global technology research team. We've got analysts on the ground 378 00:19:52,960 --> 00:19:57,239 Speaker 2: North America, Europe and most importantly Asia given where that 379 00:19:57,400 --> 00:19:59,920 Speaker 2: is in the supply chain there. So on Aurono Mende, 380 00:20:00,160 --> 00:20:01,720 Speaker 2: manage that business for us. What are you looking at? 381 00:20:02,240 --> 00:20:05,600 Speaker 5: I'm just really kind of I'm surprised because imagine Apple, 382 00:20:05,720 --> 00:20:08,320 Speaker 5: You're a big company, trillon dollar market cap and the 383 00:20:08,320 --> 00:20:10,480 Speaker 5: president said shift out of China, so you do that 384 00:20:10,600 --> 00:20:12,240 Speaker 5: and you go to India and now they saying why 385 00:20:12,280 --> 00:20:14,760 Speaker 5: are you in India? And I just don't want to 386 00:20:14,760 --> 00:20:15,600 Speaker 5: be Tim Cook right now. 387 00:20:15,680 --> 00:20:18,440 Speaker 2: Yeah, it could be a tough situation, but all companies 388 00:20:18,480 --> 00:20:20,919 Speaker 2: are dealing with and trying to adapt. And what thing 389 00:20:20,960 --> 00:20:26,320 Speaker 2: Tom Keen always says is companies adapt, whether it's a 390 00:20:26,359 --> 00:20:32,480 Speaker 2: global pandemic, or whether it's trade tensions. Companies adapt, consumers adapt, 391 00:20:32,520 --> 00:20:36,840 Speaker 2: and that's arguably what the tech industry and global trade 392 00:20:36,880 --> 00:20:38,000 Speaker 2: will do as well. 393 00:20:38,720 --> 00:20:43,399 Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, 394 00:20:43,600 --> 00:20:47,560 Speaker 1: and anywhere else you get your podcasts. Listen live each weekday, 395 00:20:47,760 --> 00:20:51,120 Speaker 1: ten am to noon Eastern on Bloomberg dot com, the 396 00:20:51,160 --> 00:20:55,040 Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You 397 00:20:55,040 --> 00:20:58,359 Speaker 1: can also watch us live every weekday on YouTube and 398 00:20:58,560 --> 00:21:00,439 Speaker 1: always on the Bloomberg terminal 399 00:21:04,000 --> 00:21:04,320 Speaker 7: YAHM