WEBVTT - Volatile Banking Sentiment Needs to Steady 0:00:01.280 --> 0:00:05.640 This is Bloomberg business Week inside from the reporters and 0:00:05.840 --> 0:00:09.400 editors who bring you America's most trusted business magazine, plus 0:00:09.480 --> 0:00:13.640 global business, finance and tech news. The Bloomberg Business Week 0:00:13.680 --> 0:00:25.079 Podcast with Carol Messer and Tim Stenebec from Bloomberg Radio. 0:00:25.960 --> 0:00:32.360 All Right, the heat is definitely, but what's really interesting 0:00:32.360 --> 0:00:34.880 is you look at the bank trade is You've got 0:00:35.000 --> 0:00:38.920 some stocks doing well, some regionals, some not same with 0:00:38.960 --> 0:00:40.360 the big banks, although it feels like most of the 0:00:40.400 --> 0:00:42.880 big banks holding up. So lots of news coming out. 0:00:42.960 --> 0:00:45.400 You've got UBS's plans to take over Credit Suite with 0:00:45.440 --> 0:00:48.159 an assist we know about that. We've got New York 0:00:48.159 --> 0:00:51.440 Community Bank Corps surging by record, leading that broader rally 0:00:51.440 --> 0:00:53.720 and regional bank stocks after the letter was upgraded by 0:00:53.720 --> 0:00:56.120 at least two Alice following its agreement to take over 0:00:56.160 --> 0:00:59.360 Signature Banks, deposits in some of its loans, metime First 0:00:59.360 --> 0:01:02.040 Republic Bank still having a tough time extending its route 0:01:02.080 --> 0:01:04.200 to an all time intraday load. So let's get to it. 0:01:04.640 --> 0:01:06.959 Carol Master here with Jess Metton, and let's get to 0:01:07.000 --> 0:01:10.120 our roundtable. Back with us is Alison Williams, Senior Global 0:01:10.120 --> 0:01:13.160 Banks analyst on the phone, Herman Chan, senior analyst for 0:01:13.240 --> 0:01:16.759 US regional Banks up both part of our Bloomberg Intelligence team. 0:01:16.800 --> 0:01:19.840 Herman here in our Bloomberg Interactive Broker studio. I want 0:01:19.840 --> 0:01:21.600 to start with you, Herman, only because we did have 0:01:21.640 --> 0:01:24.759 some headlines a short time ago, first Citizens saying it's 0:01:24.760 --> 0:01:28.440 continuing its pursuit of Silicon Valley Bank. Remember about s 0:01:28.480 --> 0:01:32.480 Phoebe that's still out there. Tell us about this as 0:01:32.520 --> 0:01:34.559 significance of this and the importance of this, and maybe 0:01:34.680 --> 0:01:37.560 starting to calm things down. Yeah, I think what we're 0:01:37.600 --> 0:01:41.759 seeing is that we live in a capitalist society and 0:01:41.959 --> 0:01:46.679 banks will fail. That's natural, Yes, exactly. Let's banks take 0:01:46.840 --> 0:01:50.720 risks and inherently sometimes those risks will up end the 0:01:50.720 --> 0:01:53.720 bank and they fail. So what we're seeing is natural 0:01:53.800 --> 0:01:57.160 where other stronger, you know, supposedly stronger banks will come 0:01:57.160 --> 0:02:01.760 in and take over the institution, which I think is 0:02:01.760 --> 0:02:04.320 a vote of confidence that the system still works. And 0:02:04.360 --> 0:02:06.400 if there's a bank out there that feels comfortable enough 0:02:06.440 --> 0:02:08.840 to do it, exactly, and the regulators feel comfortable with 0:02:08.880 --> 0:02:11.919 that bank to take over. So what we're seeing with 0:02:12.200 --> 0:02:15.760 SVB and for Citizens is it seems like for citizens 0:02:15.840 --> 0:02:19.400 really wants to expand. They've been in expansion mode for 0:02:19.400 --> 0:02:23.000 a bit now. They bought CIA not too long ago, 0:02:24.360 --> 0:02:26.880 a specially lender here based in New York and New Jersey, 0:02:26.919 --> 0:02:32.120 so they have wider ambitions and I think SBB fulfills 0:02:32.200 --> 0:02:34.840 those potential ambitions. But we'll see if the regulators let 0:02:34.880 --> 0:02:38.239 them close that transaction. Alison, I want to bring you 0:02:38.240 --> 0:02:40.639 in the conversation because when we're talking about New York 0:02:40.680 --> 0:02:43.400 Bank ORPS and then Signature Bank, is this a guide 0:02:43.440 --> 0:02:48.359 for how more banking deals can be reached? I mean, 0:02:48.400 --> 0:02:51.919 I think to Hermann's point, it could be a great 0:02:51.919 --> 0:02:56.680 opportunity for both banks, for those that have gotten themselves 0:02:56.680 --> 0:03:01.720 in trouble with mismanagement being taken over by a stronger, 0:03:01.800 --> 0:03:05.000 healthier bank that perhaps has a little bit more pro 0:03:05.080 --> 0:03:09.119 west in terms of managing those risks. Um, it's good 0:03:09.160 --> 0:03:11.440 for good for both of those banks and good for 0:03:11.480 --> 0:03:14.040 the system. Alison, how do you see like Jiffian Morgan 0:03:14.120 --> 0:03:16.360 holding up certainly eight tens of a percent higher in 0:03:16.400 --> 0:03:18.919 today's trade and bringing up being of America's down a 0:03:18.960 --> 0:03:22.400 little bit? Goldman sacks what's going on? Up one point 0:03:22.440 --> 0:03:25.640 six percent? And let me just pull up City City 0:03:26.200 --> 0:03:28.320 just down about six tens of a percent. How are 0:03:28.360 --> 0:03:31.040 you looking at it from the big bank perspective as 0:03:31.160 --> 0:03:36.160 we are focusing so much on the regionals, So I think, um, 0:03:36.440 --> 0:03:41.040 certainly this time around, if you will, the the crux 0:03:41.080 --> 0:03:45.600 of the issue, which really relates to mismanagement of bond portfolios, 0:03:45.600 --> 0:03:48.400 mismanagement of uh you know, sort of we have this 0:03:48.480 --> 0:03:51.840 big blow up of deposits and the bond portfolios. This 0:03:52.520 --> 0:03:57.040 has really been to um centered on the regional banks. 0:03:57.080 --> 0:04:01.160 For the largest banks, they're actually benefiting from some of 0:04:01.160 --> 0:04:05.200 the deposits. A couple of them are very unlikely to 0:04:05.240 --> 0:04:09.640 be acquirers because once you're over ten percent of deposits, 0:04:09.680 --> 0:04:14.000 you are not allowed to you know, the understanding is 0:04:14.040 --> 0:04:16.359 that during a crisis they will be allowed. We did 0:04:16.440 --> 0:04:20.200 see a few deals happened last crisis where that tempercent 0:04:20.360 --> 0:04:23.719 was breached, although others some of the launches around those, 0:04:23.800 --> 0:04:27.080 But for the bigger banks, credit sweets was really I 0:04:27.120 --> 0:04:30.480 think the one that people were watching. That's really when 0:04:30.520 --> 0:04:33.560 you started to see the bigger banks selling off last 0:04:33.600 --> 0:04:37.159 week was when you know, there started to be rumors 0:04:37.160 --> 0:04:41.159 about credit sweezes outflows. People weren't concerned about counterparty risk, 0:04:41.640 --> 0:04:44.960 But since that was such a longer developing story, unlike 0:04:45.680 --> 0:04:48.279 Silicon Valley, which happened in the day or so, most 0:04:48.320 --> 0:04:51.920 of the banks had managed down that risk successfully. Herman, 0:04:52.080 --> 0:04:54.640 I wanted to ask you specifically, because this was a 0:04:54.720 --> 0:04:58.120 striking number, looking at the seventeen billion dollars of credit sweezes, 0:04:58.200 --> 0:05:01.760 risky bonds that are now basically worthless, what are the 0:05:01.880 --> 0:05:05.280 wider implication for bond markets moving forward it because it 0:05:05.320 --> 0:05:08.520 seems like a controversial deal if you're a shareholder versus 0:05:08.520 --> 0:05:11.520 if you're a bondholder. Right, Yeah, the AT one issue 0:05:11.640 --> 0:05:16.400 I think is unique to Europe. Historically, when you do 0:05:16.480 --> 0:05:21.560 finance one oh one, if something happens with the company 0:05:21.640 --> 0:05:24.560 that you own, the equity holders usually get wiped out. 0:05:24.560 --> 0:05:27.800 In the bondholders get a certain percentage based on your 0:05:27.839 --> 0:05:31.839 seniority a priority in your capital stack. So it seems 0:05:31.960 --> 0:05:35.040 very unique. I know my colleague Arnold Cacuda had mentioned 0:05:35.080 --> 0:05:38.640 that the Swiss regulators and the Swiss version of these 0:05:38.640 --> 0:05:40.599 AT one bonds are a bit unique versus the rest 0:05:40.600 --> 0:05:43.480 of Europe. So that's something I would point to. Hey, Herman, 0:05:43.640 --> 0:05:47.560 first republic down forty five, So what's the likely scenario 0:05:47.600 --> 0:05:50.560 and this is after what you know, credit rating lowered 0:05:50.600 --> 0:05:53.880 again by S and P thirty billion dollars infusion. Last 0:05:53.880 --> 0:05:56.039 week we got some more clarity about how many times 0:05:56.040 --> 0:05:59.760 it's been tapping right into funds. I mean, do we 0:05:59.839 --> 0:06:03.120 know what the likely outcome is here? I was expecting 0:06:03.320 --> 0:06:06.120 some sort of news from from First Republic or the 0:06:06.200 --> 0:06:10.880 regulators over the weekend that didn't happen. From what I've read, 0:06:11.040 --> 0:06:15.200 it seems like, um, you know, management is a very 0:06:16.120 --> 0:06:20.239 proud sort right. The CEO is the founder of the company, 0:06:20.320 --> 0:06:24.000 has been through multiple cycles nurtured this company to become 0:06:24.080 --> 0:06:28.680 one of the biggest US banks in the unit banks, right. 0:06:28.720 --> 0:06:31.760 So is so is that the problem that you've got 0:06:31.880 --> 0:06:35.760 leaders that are proud? I think so, because the issue 0:06:35.839 --> 0:06:39.400 is the hope was that this thirty billion dollars deposit 0:06:39.480 --> 0:06:43.840 injection would calm the markets. Obviously that hasn't happened, and 0:06:44.279 --> 0:06:48.240 your management, I feel like, is now put into a 0:06:48.279 --> 0:06:50.200 corner and they really have to make a decision on 0:06:50.240 --> 0:06:53.159 what's really best for their customer and the bank, both 0:06:53.160 --> 0:06:54.560 of you. I want to ask you. You know, there's 0:06:54.600 --> 0:06:57.400 a great quote this morning about bank failures. I think 0:06:57.400 --> 0:07:00.359 it was on surveillance and it was liking somebody, I 0:07:00.400 --> 0:07:03.720 guess said linking them to cockroaches and basically say, when 0:07:03.720 --> 0:07:05.919 you see one, even if you don't see another, you 0:07:05.960 --> 0:07:08.720 know that there's hundreds behind the walls. And I guess 0:07:08.760 --> 0:07:11.000 our mission all of us right now is to figure 0:07:11.000 --> 0:07:12.480 out if that's the case when it comes to more 0:07:12.560 --> 0:07:15.480 bank failures. So, Alison, how are you thinking about your 0:07:15.520 --> 0:07:20.920 sector or you know, the counterparty, you know, exposures if 0:07:20.960 --> 0:07:24.600 you will, to figure out exposure, what could go wrong next? 0:07:24.680 --> 0:07:28.720 In other words, finding that next cockroach. Well, I think 0:07:28.720 --> 0:07:33.520 what's worrisome at this point is just that the market 0:07:33.640 --> 0:07:37.480 sentiment can drive reality, and so I think that that's 0:07:37.480 --> 0:07:41.080 the concern. So if we look at Credit Suite, you know, 0:07:41.120 --> 0:07:43.120 the regulators were in there. The capital is fine, the 0:07:43.160 --> 0:07:46.560 liquidity was fine, but if the rest of the market worries, 0:07:46.720 --> 0:07:49.400 it creates an issue. And the Swiss regulators pointed to 0:07:49.440 --> 0:07:51.760 the fact that they were that it was really the 0:07:51.760 --> 0:07:54.080 outflows they were seeing that caused them to step in. 0:07:54.720 --> 0:07:57.240 There were reports of them receiving about ten million of 0:07:57.240 --> 0:08:01.200 outflows that jets, So obviously that's signific again, and so 0:08:01.840 --> 0:08:04.440 I think that you know, to your point, investors are 0:08:04.480 --> 0:08:08.160 looking for sort of the next bank at risk each 0:08:08.200 --> 0:08:12.800 time something happens. And I think that it's tricky for 0:08:12.840 --> 0:08:15.880 regulators because they do you to come out and do 0:08:16.000 --> 0:08:20.880 something that's enough to make people's steady sentiment, but not 0:08:20.960 --> 0:08:24.800 too much that makes people nervous that there's more to 0:08:24.840 --> 0:08:28.440 be worried about. So sentiment, sentiment is a tricky thing. 0:08:28.600 --> 0:08:31.800 Same question to you, Herman, like, how do you think 0:08:31.840 --> 0:08:34.800 about what could go wrong next? And I feel like, 0:08:34.960 --> 0:08:37.520 you know, it isn't quite whackamole right when it comes 0:08:37.520 --> 0:08:40.600 to the regional banks. Maybe it's a slow moving game 0:08:40.640 --> 0:08:44.559 of whackamle. I think initially it was whackamle with SBB 0:08:44.720 --> 0:08:48.600 in signature. Now it's more of a okay, we know 0:08:48.720 --> 0:08:51.360 first Republic is the main issue now that the market 0:08:51.440 --> 0:08:55.199 is focused on is there is there anything else? Is there? 0:08:55.360 --> 0:08:58.320 Investor Alliance are not worried about or anything. Western Alliance 0:08:58.360 --> 0:09:01.000 is a name that continues to come up up quest 0:09:01.120 --> 0:09:03.080 pack West is a name that continues to come up, 0:09:03.120 --> 0:09:08.000 but to banks that operate in California and the West Coast. 0:09:09.360 --> 0:09:12.680 I know Western lines a bit better. They offered a 0:09:12.800 --> 0:09:15.560 pretty decent update in terms of their balance sheet and 0:09:15.559 --> 0:09:19.480 their cast position on Friday. So I think that placated 0:09:19.640 --> 0:09:22.920 some folks. So really, what's the next you to drop? 0:09:23.000 --> 0:09:26.319 I think what Alison Suggs and market sentimen creates reality. 0:09:26.480 --> 0:09:29.719 And you'll look at a bank's typical balance sheet. You 0:09:29.880 --> 0:09:32.760 don't mark to market there healthy matual securities. You don't 0:09:32.800 --> 0:09:35.360 mark to market their loans. That's a feature of bank 0:09:35.400 --> 0:09:39.080 accounting it. But that's the market is saying that's a bug. 0:09:39.200 --> 0:09:43.840 And so we're in this weird position where we have 0:09:43.960 --> 0:09:48.640 to question, you know, what was inherent acceptance of how 0:09:48.640 --> 0:09:51.360 banks managed our balance sheet and that that's really upended 0:09:51.400 --> 0:09:54.040 with what's what's happened with SBB and First Republican. We've 0:09:54.040 --> 0:09:56.480 definitely had regulators coming out and just throwing it feels 0:09:56.480 --> 0:09:59.600 like a lot of money thoughtfully into the system, Allison, 0:09:59.720 --> 0:10:02.440 just about twenty five seconds, the big banks just get 0:10:02.440 --> 0:10:06.520 even bigger and bolder and more powerful they do. I mean, 0:10:06.559 --> 0:10:08.920 that does seem to be what's happening. And I think 0:10:09.520 --> 0:10:12.040 again what everyone's waiting to see is if there will 0:10:12.080 --> 0:10:14.960 be some kind of announcement on deposit insurance, which will 0:10:15.080 --> 0:10:18.760 really make things interesting, especially because the big banks pay 0:10:18.800 --> 0:10:21.640 the most for that. But regulators are going to want to, 0:10:22.120 --> 0:10:25.480 you know, protect the smaller banks and then globally, what 0:10:25.520 --> 0:10:30.120 does that mean for global deposits? If the US effectively 0:10:30.160 --> 0:10:33.960 ensures higher amounts, does that attract even more to those 0:10:34.000 --> 0:10:36.439 big institutions? And if your boss has told you guys, 0:10:36.440 --> 0:10:38.800 but you guys get this big Caribbean vacation after all 0:10:38.800 --> 0:10:42.920 of this is over because you're working in so I 0:10:42.960 --> 0:10:46.679 areed sources. According to Alson Williams, thank you so much 0:10:46.679 --> 0:10:49.840 of Bloomberg Intelligence and Herman Chan of our Bloomberg Intelligence team. 0:10:49.840 --> 0:10:52.320 Following the big banks and the regionals. You're listening and 0:10:52.360 --> 0:10:57.640 watching Bloomberg Radio. You're listening to the Bloomberg Business Week podcast. 0:10:57.920 --> 0:11:00.720 Catch us Live week do afternoons from three to six 0:11:00.760 --> 0:11:04.280 Eastern Listen on Bloomberg dot com, the iHeart Radio app, 0:11:04.360 --> 0:11:07.800 and the Bloomberg Business app, or watch us live on YouTube. 0:11:15.000 --> 0:11:28.679 Hell yeah, we're gonna talk a little bit about Teddy Bears. Um, 0:11:28.960 --> 0:11:31.040 let's sten back for a moment. I'm all our focus 0:11:31.120 --> 0:11:33.400 on banking, and rightfully so, but let's get a feel 0:11:33.400 --> 0:11:36.120 of how this change and sentiment over the past couple 0:11:36.160 --> 0:11:39.280 of weeks, or at least this new narrative, if you will, 0:11:39.640 --> 0:11:42.679 might be impacting consumers and retail with us right now 0:11:42.760 --> 0:11:45.040 is Sharon Price John. She's president CEO of the publicly 0:11:45.040 --> 0:11:48.160 held small cap Build a Bear Workshop back with us 0:11:48.240 --> 0:11:50.560 via zoom in New York City. Sharon, nice to have 0:11:50.640 --> 0:11:53.679 you here with justin myself. Um, last and we talked, 0:11:53.720 --> 0:11:55.839 it was more than a year ago, December twenty twenty one. 0:11:56.200 --> 0:11:59.680 What's changed for you in your business and what's on 0:11:59.720 --> 0:12:02.880 your per view if you will, in the last twelve 0:12:02.920 --> 0:12:07.840 to fifteen months. What's changed? Yeah, well, we've continued to 0:12:07.840 --> 0:12:11.959 post record results. I mean, we just announced our year 0:12:12.000 --> 0:12:15.560 in on March ninth, and we're happy to be able 0:12:15.600 --> 0:12:18.760 to share double digit improvement in both the top line 0:12:18.840 --> 0:12:22.120 and the pretax profit line, with our top line up 0:12:22.160 --> 0:12:25.480 about fourteen percent and our bottom line up about twenty 0:12:25.480 --> 0:12:29.080 two percent, and that we had seen at that point 0:12:29.120 --> 0:12:33.120 continued momentum in the business at first quarter a year 0:12:33.120 --> 0:12:38.079 to date. And but that's so that's not what's changed. 0:12:38.760 --> 0:12:42.240 That's what's remained the same, and that last year, twenty 0:12:42.320 --> 0:12:45.320 twenty one was a record profitability year for us, and 0:12:45.400 --> 0:12:48.800 we eclipse that in twenty twenty two with another record 0:12:48.840 --> 0:12:52.280 profitability year. What's changed is that we've evolved so much 0:12:52.280 --> 0:12:55.000 as a company and that we have a much broader 0:12:55.040 --> 0:13:00.439 addressable market. We appeal to consumers for different reasons for opping, 0:13:01.559 --> 0:13:04.839 not just which would be a typical type of event 0:13:04.880 --> 0:13:06.720 for us, which would be a birthday for a child. 0:13:06.760 --> 0:13:10.040 But now from the adult consumer what's called adulting. A 0:13:10.080 --> 0:13:14.920 big trend with gifting and adult to adult gifts. A 0:13:14.960 --> 0:13:17.600 lot going on with build a Bear, a lot of collectibles. 0:13:17.640 --> 0:13:21.720 We have a lot of fun licenses, like most recently 0:13:21.760 --> 0:13:25.120 announced ted Lasso Bear, but things like a Deadpool Bear 0:13:25.400 --> 0:13:28.880 or Matrix Bears, Friends Bears. How well did those kind 0:13:28.920 --> 0:13:32.000 of bears do really fun? Like? How well? I mean 0:13:32.160 --> 0:13:37.079 is it? Are they profit drivers? Or give me an idea. Well, 0:13:37.320 --> 0:13:40.040 I'm as a publicly traded company, clearly, you know one 0:13:40.040 --> 0:13:42.320 of our objectives is that we choose to do things 0:13:42.320 --> 0:13:46.120 that hopefully are profit drivers. But the kid that the 0:13:46.320 --> 0:13:49.880 business now has, as I noted, when I speak about 0:13:49.880 --> 0:13:52.079 it having a broader addressable market, I don't mean that 0:13:52.080 --> 0:13:55.120 that's not meaningful for us. About forty percent of our 0:13:55.160 --> 0:13:58.080 sales are now to teens and adults, and yes, those 0:13:58.120 --> 0:14:01.640 licenses often had Clearly they're going to have a royalty 0:14:01.640 --> 0:14:05.320 associated with them, if that's the emphatus for the question, 0:14:05.640 --> 0:14:10.720 But they also generate generally a little higher price point 0:14:10.720 --> 0:14:13.800 as well, because that consumer has more latitude and the 0:14:13.840 --> 0:14:15.959 way they think about it. At the same time, we 0:14:16.120 --> 0:14:20.160 balanced the portfolio with a very accessible prices, with very 0:14:20.200 --> 0:14:24.120 accessible prices for kids, particularly with our Birthday treat Bear, 0:14:24.160 --> 0:14:26.480 where you can come in at the month of your 0:14:26.520 --> 0:14:29.680 birthday and pay your age to get the Birthday Treat Bear. 0:14:29.720 --> 0:14:31.640 So if you're turning two years old, you can get 0:14:31.640 --> 0:14:36.560 an entire Build the Bear special one thermoney stopping experience 0:14:36.640 --> 0:14:40.320 for two bucks. That's pretty cool. Your products have definitely 0:14:40.360 --> 0:14:42.720 evolved with the tastes of children today, So when you 0:14:42.720 --> 0:14:45.720 think of Super Mario Brothers or Paul Patrol, Harry Potter 0:14:45.760 --> 0:14:48.280 and I know, a lot of the accessories can definitely 0:14:48.320 --> 0:14:51.360 add up quick. So with the straws earning out look ahead, 0:14:51.400 --> 0:14:54.120 what do you think this really tells us about the 0:14:54.160 --> 0:14:57.720 direction of the economy if consumers are still willing to 0:14:57.760 --> 0:15:03.600 spend on discretionary items at specialty retailers like yours. Well, 0:15:03.640 --> 0:15:05.320 first of all, we don't think of ourselves is just 0:15:05.400 --> 0:15:09.120 a specialty retailer. We think of ourselves as an experiential brand, 0:15:09.760 --> 0:15:13.520 an opportunity for families to come together to share memories. 0:15:13.520 --> 0:15:17.560 We're multigenerational, like twenty five years old, and yes we 0:15:17.640 --> 0:15:21.400 do evolve our licenses with the times, as you mentioned, 0:15:21.880 --> 0:15:25.120 but things that are evergreen, like a Harry Potter that 0:15:25.200 --> 0:15:30.200 appeals to a broad broad range of consumers. To your question, though, 0:15:31.160 --> 0:15:33.800 our accessories business is, you know, to be able to 0:15:33.800 --> 0:15:35.920 address your bear and make it very much your own. 0:15:35.960 --> 0:15:38.720 That's just a part of our creative process. That's how 0:15:39.040 --> 0:15:43.200 kids and adults feel empowered by making it incredibly unique. 0:15:43.240 --> 0:15:45.040 And you can even put the sound in the bear, 0:15:45.160 --> 0:15:47.960 so it's a one of a kind in many cases, 0:15:48.800 --> 0:15:52.440 and that's you know, And when you think about that 0:15:52.640 --> 0:15:55.480 as the experience and the takeaway and the importance that 0:15:55.520 --> 0:15:58.560 Teddy Bears play in the lives of children, particularly as 0:15:58.600 --> 0:16:03.880 comfort animals, a lot of psychological background on the need 0:16:04.000 --> 0:16:07.720 for that type of special, kind of special relationship with 0:16:07.760 --> 0:16:10.520 a stuffed animal. Um. I don't know if you can 0:16:10.520 --> 0:16:14.240 consider us completely discretionary. I gotta say for my daughter 0:16:14.240 --> 0:16:17.480 it was a discretionary which was a little kid. Hey 0:16:17.840 --> 0:16:19.920 I say that. I say that from a vantage point 0:16:19.920 --> 0:16:22.880 of a mom of three. So you know, some of 0:16:22.880 --> 0:16:24.920 it could be tongue in cheek, you know, as a CEO, 0:16:25.120 --> 0:16:27.520 but there's some reality to that. I remember going on 0:16:27.560 --> 0:16:29.840 a trip and we forgot we forgot our stuffy and 0:16:29.880 --> 0:16:31.160 man we had to get a new one in front 0:16:31.160 --> 0:16:33.520 of replacement one really quickly. Hey, m One thing I 0:16:33.520 --> 0:16:35.600 want to ask you, Sharon is um and I want 0:16:35.640 --> 0:16:37.360 to step back just to some of the bigger, broader 0:16:37.360 --> 0:16:41.880 macro that's going on. As a CEO of a company, 0:16:42.000 --> 0:16:45.920 you have to think about recession, consumer retail in general. 0:16:46.200 --> 0:16:50.040 But the recent market volatility and concerns about our banking system. 0:16:50.120 --> 0:16:53.600 How has that impacted you at all? Yeah, of course 0:16:53.640 --> 0:16:57.480 that's very concerning. I mean, we want to see a 0:16:57.560 --> 0:17:00.600 strong economy, We want to see people in you know, 0:17:00.680 --> 0:17:05.520 good financial situations. I can also say, though, on looking 0:17:05.560 --> 0:17:07.920 back on the last few years, there's certainly been a 0:17:07.960 --> 0:17:11.200 lot of volatility. I think some of the most MULTIPLEUS 0:17:11.240 --> 0:17:14.760 economic times in our modern history, clearly inclusive of the 0:17:14.800 --> 0:17:18.280 COVID outbreak and even prior to that in retail, the 0:17:18.320 --> 0:17:22.280 retail apocalypse. So constant feels like a lot of constant 0:17:22.600 --> 0:17:26.080 changes and uncertainty. And I think that you know, families 0:17:26.080 --> 0:17:28.239 and businesses have to be prepared for that. You know, 0:17:28.280 --> 0:17:31.680 we're in a strong financial situation. We have very prudent 0:17:31.720 --> 0:17:36.080 financial control. We finished this year with forty million dollars 0:17:36.080 --> 0:17:38.680 in cash and return seventy million over the last two 0:17:38.760 --> 0:17:41.720 years to our shareholders, announced a special dividend, and have 0:17:41.800 --> 0:17:44.760 no borrowings on our credit facility. So with all of 0:17:44.760 --> 0:17:47.360 that in mind, and that we did mention that we 0:17:47.400 --> 0:17:50.879 expect are in the guidance that we provided from a 0:17:50.960 --> 0:17:55.320 range perspective, another five to seven percent on the top line, 0:17:55.359 --> 0:18:01.160 another ten to fifteen percent profit expansion through twenty twenty three. 0:18:01.800 --> 0:18:05.159 But the reason that we feel and shared that and 0:18:05.240 --> 0:18:08.720 feel like that there's some confidence. Clearly that's excluding anything 0:18:09.400 --> 0:18:14.199 entirely appeaving, but we've been able to manage as a 0:18:14.240 --> 0:18:17.960 team and as a company that that brand relationship that 0:18:18.000 --> 0:18:21.080 we have with guests and be able to pull the 0:18:21.119 --> 0:18:26.400 proper levers when needed to manage through some of these 0:18:26.800 --> 0:18:30.920 uncertain economic times. Clearly you've probably heard as well, I've 0:18:30.960 --> 0:18:33.440 we already been in a recession or we undersid a recession. 0:18:33.440 --> 0:18:36.320 Now are we going into a recession? Right? It's um, 0:18:37.000 --> 0:18:38.880 you know, I don't know that we you know, there's 0:18:38.920 --> 0:18:42.400 a lot of different I would say earmarks that are 0:18:42.400 --> 0:18:45.600 pointing in different directions, and I think that the key 0:18:45.760 --> 0:18:48.480 is to be diversified and flexible, and that's what we've 0:18:48.480 --> 0:18:52.920 been attempting to do by pivoting the company to have 0:18:53.480 --> 0:18:58.080 revenue streams in traditional retail as well as e com entertainment, 0:18:59.119 --> 0:19:01.880 looking for different ways to meet the needs of guests 0:19:01.880 --> 0:19:05.000 for different reasons. Hang on very second, just quickly, did 0:19:05.000 --> 0:19:09.040 you shift around your banking at all because of the 0:19:09.119 --> 0:19:12.800 nervousness within the banking system. We have a very strong 0:19:12.840 --> 0:19:15.680 relationship with our banking partners. Okay, that's what I wanted 0:19:15.680 --> 0:19:18.800 to know. You talk about expanding your revenue stream and 0:19:18.880 --> 0:19:22.600 these strategies. You've got the metaverse that you guys are 0:19:22.640 --> 0:19:27.280 certainly embracing. You're also thinking about content and linking up 0:19:27.280 --> 0:19:31.119 with Rheese Witherspoon and her media company. Just got about 0:19:31.119 --> 0:19:33.120 forty five fifty seconds. Just talk to us a little 0:19:33.119 --> 0:19:36.560 bit about these strategies if you could. Yeah, in a 0:19:36.640 --> 0:19:39.320 brand that has sold two hundred and twenty five million 0:19:39.359 --> 0:19:42.640 Furrey Friends over the last twenty five years, and when 0:19:42.640 --> 0:19:45.440 you understand that each one of those very friends represents 0:19:45.440 --> 0:19:49.119 a story, we're really a storytelling company. So when you 0:19:49.160 --> 0:19:51.800 think about the extension and expansion of our brand and 0:19:51.800 --> 0:19:55.960 our business into the entertainment arm and the content driven arm, 0:19:56.000 --> 0:20:01.679 it's not really that much of a stretch from that perspective. Yes, Hello, Sunshines, 0:20:01.720 --> 0:20:04.840 Freese Witherspoon's company. We did announce a feature film deal. 0:20:05.160 --> 0:20:08.520 We also have Mary Mission our Christmas holiday and holiday. 0:20:10.800 --> 0:20:13.720 This is a particular property that we launched years ago 0:20:13.960 --> 0:20:17.639 starring Glisten. We'll be out this holiday as well in 0:20:17.760 --> 0:20:21.520 an animated feature, and we're we'll be in launching the 0:20:21.560 --> 0:20:25.159 Build Abair feature documentary with award winning documentary and Taylor 0:20:25.200 --> 0:20:28.280 more than later this year. So we have a lot 0:20:28.320 --> 0:20:32.200 of different ways to connect again with a broad base 0:20:32.280 --> 0:20:36.879 of consumers yep, and to monetize the value and enormous 0:20:37.000 --> 0:20:39.119 quity of the build Away Ram. Sharon's so good to 0:20:39.160 --> 0:20:42.120 check in with you. Sharon Price, John CEO of Build 0:20:42.119 --> 0:20:45.000 a Bear Workshop, joining us right here on Bloomberg Business Week. 0:20:45.600 --> 0:20:49.159 You're listening to the Bloomberg Business Week Podcast. Catch us 0:20:49.200 --> 0:20:53.240 live weekday afternoons from three to six Eastern on Bloomberg Radio, 0:20:53.400 --> 0:20:56.720 the Bloomberg Business app and YouTube. You can also listen 0:20:56.800 --> 0:20:59.920 live on Amazon Alexa from our flagship New York station, 0:21:00.280 --> 0:21:05.359 jo say Alexa playing Bloomberg eleven thirty. All right, folks, 0:21:05.400 --> 0:21:09.360 we've seen this movie before. Big tech company cutting jobs again. 0:21:09.640 --> 0:21:11.800 Last week it was Meta. This week it's Amazon laying 0:21:11.800 --> 0:21:14.920 off an additional nine thousand employees, adding to cuts that 0:21:14.960 --> 0:21:18.000 were already the largest round of firings in the company's history. 0:21:18.000 --> 0:21:19.560 Stuck down on the news, down about one and a 0:21:19.640 --> 0:21:23.080 quarter percent in today's sessions, still up roughly sixteen percent 0:21:23.160 --> 0:21:25.240 year to date. So let's get to it with the 0:21:25.320 --> 0:21:29.640 latest down the company. Bloomberg's Intelligence senior technology analyst, annoag 0:21:29.680 --> 0:21:32.960 Granta joins us via zoom from Chicago. Annorag, good to 0:21:33.000 --> 0:21:36.280 have you here with Jess Metten and myself. So I'm 0:21:36.280 --> 0:21:38.680 trying to think, first of all, let's get through the news. 0:21:38.880 --> 0:21:42.920 Why did they have to cut another round of jobs. 0:21:42.960 --> 0:21:44.879 Futt of the update that they gave that they were 0:21:45.160 --> 0:21:47.560 going through an operational planning and trying to figure out 0:21:47.600 --> 0:21:50.560 how much excess capacity do they have? And they did, 0:21:50.800 --> 0:21:53.240 you know, the first round a couple of months ago, 0:21:53.320 --> 0:21:56.520 and then the other review wasn't completed. One it was completed, 0:21:56.840 --> 0:21:59.280 they found out they could you know, eliminate another nine 0:21:59.280 --> 0:22:01.719 thousand jobs. That's really the rationale that was given by 0:22:01.760 --> 0:22:03.880 the company. So is this smart management in your view, 0:22:04.000 --> 0:22:06.040 saying Okay, we still have too many workers, we had 0:22:06.040 --> 0:22:08.240 to cut back, rather than doing a massive layoff and 0:22:08.280 --> 0:22:11.720 maybe figuring out they cut too much. One could argue 0:22:11.760 --> 0:22:14.600 that they just took their time in making sure that 0:22:14.640 --> 0:22:17.120 they don't overreact at the first goal. You know, our 0:22:17.200 --> 0:22:19.359 read on this is we don't think the fundamentals of 0:22:19.400 --> 0:22:21.720 the cloud business are recovering at this point, which is 0:22:21.760 --> 0:22:24.719 partially the reason why they had to go undergo another 0:22:25.280 --> 0:22:28.040 random layoff. You know, they may have avoided it if 0:22:28.040 --> 0:22:30.639 we saw a rebound and talk growth, I mean the 0:22:30.680 --> 0:22:33.159 cloud growth, I would say, I mean, that could be 0:22:33.200 --> 0:22:35.199 a reason, but we won't know that. You know, the 0:22:35.280 --> 0:22:38.840 end of April, when they announced their results on a 0:22:38.920 --> 0:22:43.399 rock we're specifically were jobs cut in this latest round 0:22:43.600 --> 0:22:48.800 versus compared to what we saw earlier this year. Yeah. 0:22:48.840 --> 0:22:52.880 So they highlighted four divisions, AWS being one of them, 0:22:52.920 --> 0:22:57.000 at advertising being one of them, Twitch, and PXT, which 0:22:57.080 --> 0:23:01.600 is their human employee experience segment. Now, from our revenue 0:23:01.640 --> 0:23:04.080 side of it, AW is just far bigger than anything 0:23:04.080 --> 0:23:06.719 else we think the majority of the cuts could be 0:23:06.800 --> 0:23:09.120 in that area. They didn't break up by a segment, 0:23:09.480 --> 0:23:11.520