WEBVTT - Novo Next-Generation Obesity Shot Falls Short of Lilly Rival 0:00:02.720 --> 0:00:10.559 Bloomberg Audio Studios, Podcasts, radio news. You're listening to the 0:00:10.600 --> 0:00:14.560 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.600 --> 0:00:17.840 Eastern on Apple, Cocklay and Android Auto with the Bloomberg 0:00:17.920 --> 0:00:21.040 Business App. Listen on demand wherever you get your podcasts, 0:00:21.360 --> 0:00:23.520 or watch us live on YouTube. 0:00:24.360 --> 0:00:27.400 Within the farmer space, Novo Nordisk the eight rs American 0:00:27.440 --> 0:00:30.639 depository seats down by double digits, in fact lower for 0:00:30.800 --> 0:00:33.680 fifth day, losing about sixteen percent today, and this is 0:00:33.760 --> 0:00:38.200 after its next generation obesity shot Cagri Semma delivered less 0:00:38.200 --> 0:00:41.760 weight loss than Eli Lilly's rival treatment. Let's bring in 0:00:41.800 --> 0:00:43.920 Sam Fazzelli. He is our director of research for Global 0:00:43.960 --> 0:00:48.280 Industries and senior pharmaceutils analysts on what's happening here, and Sam, 0:00:48.360 --> 0:00:50.680 I mean, we've been keeping a close eye on Noah 0:00:50.720 --> 0:00:52.880 Nordous because it was a pioneer and weight loss drugs, 0:00:52.880 --> 0:00:55.840 but it appears that it has really fallen behind Eli 0:00:55.880 --> 0:00:59.000 Lilly and continues to fall behind even with this next 0:00:59.040 --> 0:01:02.680 gen obesity shot. The data shows a twenty point two 0:01:02.720 --> 0:01:06.040 percent weight loss after eighty four weeks compared with Eli 0:01:06.080 --> 0:01:09.240 Lilly's twenty three point six percent weight loss. I mean 0:01:09.480 --> 0:01:12.280 that sounds like, it's pretty small differences. Is that an 0:01:12.400 --> 0:01:13.679 unqualified failure? 0:01:15.319 --> 0:01:18.760 Well, the trial was set up Scarlett to test one 0:01:18.800 --> 0:01:22.760 drug against the other and it failed, right, So that's you. 0:01:22.760 --> 0:01:26.119 You know, when they start these trials, I have hypothesis, 0:01:26.400 --> 0:01:28.360 we think our drug is as good as this one, 0:01:28.760 --> 0:01:31.360 and they set the hypothesis up. They do the right 0:01:31.440 --> 0:01:34.600 number of patients to prove that agorisma is as good 0:01:34.600 --> 0:01:37.960 as tears appetite. It didn't prove that. What it does 0:01:38.319 --> 0:01:40.480 I mean, I don't really care about this. Twenty three percent, 0:01:40.560 --> 0:01:43.720 twenty five percent. A lot of people are happy with 0:01:43.800 --> 0:01:46.039 the weight loss they get and they maintain the weight loss. 0:01:46.040 --> 0:01:48.760 That's what they care about. This rapid weight loss of 0:01:48.920 --> 0:01:52.440 very large weight loss may matter for much more Obeis 0:01:52.480 --> 0:01:56.360 patients potentially, But the reality is this is handed the 0:01:56.400 --> 0:01:59.720 gift to Eli Lilly. Now, once the date is published, 0:02:00.240 --> 0:02:02.720 they can go out there and say, well, look we've 0:02:02.760 --> 0:02:06.280 beaten b GOV, We've beaten the next generation drug. They've 0:02:06.280 --> 0:02:09.720 got at least unweight loss on the surface. What happens 0:02:09.720 --> 0:02:11.680 to muscle laws and all that sort of stuff will 0:02:11.720 --> 0:02:14.919 come out, Oh for a fat versus visceral fat, et cetera. 0:02:15.600 --> 0:02:18.200 We've beaten them is the drug to take and they 0:02:18.400 --> 0:02:20.400 should be able to sell as much as they can 0:02:20.440 --> 0:02:23.560 make so, which is kind of what's been going on already. 0:02:23.760 --> 0:02:26.120 All Right, thank you for explaining that it's the relative 0:02:26.160 --> 0:02:29.440 effectiveness and in this case giving Eilily an easy win. 0:02:30.400 --> 0:02:32.919 Why is it that Nova Noordisk has lost so much 0:02:32.960 --> 0:02:35.480 ground and its edge to Eli Lilly. Does it come 0:02:35.520 --> 0:02:37.600 down to the science of it or is there something 0:02:37.639 --> 0:02:41.440 culturally at the company that's led to this underperformance. 0:02:42.000 --> 0:02:44.720 Yeah, I can't speak to the culture, to be honest 0:02:44.720 --> 0:02:46.960 with you. I mean, this has been a phenomenal story 0:02:47.080 --> 0:02:51.720 for years. Right, They were the pioneers in obesity, they 0:02:52.520 --> 0:02:55.919 in diabetes. With this class of drugs they brought for obesity. 0:02:56.480 --> 0:02:59.960 They have a lot to applaud for them. For the point, 0:03:00.000 --> 0:03:03.880 which is all these companies take calculated risks. Back in 0:03:03.960 --> 0:03:07.920 twenty fifteen sixteen, really took a calculated risk by this 0:03:08.120 --> 0:03:12.080 new molecule, a GLP one attached to it, a GOP. 0:03:12.240 --> 0:03:13.919 Let's forget what they are, but they are two different 0:03:13.960 --> 0:03:17.600 ways of modulating the system. And nobody thought that GOP 0:03:17.800 --> 0:03:21.760 would do what it did. So they were lucky. They 0:03:21.760 --> 0:03:23.760 threw the dice and they got the right answer, or 0:03:23.800 --> 0:03:26.400 they just had a very clever biology person said I 0:03:26.480 --> 0:03:28.320 disagree with the rest the world, GP will do this. 0:03:28.560 --> 0:03:31.520 So they ended up with a supercharge product. And then 0:03:31.680 --> 0:03:34.360 of course no one never went down that road. Even 0:03:34.440 --> 0:03:36.560 since twenty eighteen when we all saw the first data 0:03:36.640 --> 0:03:39.400 went wow, there's a whole bunch of other companies who 0:03:39.400 --> 0:03:43.040 did this. We have a list that we keep, not Novoe. 0:03:43.200 --> 0:03:45.560 They put their dice or they put their money on 0:03:45.800 --> 0:03:49.400 this combination amulin. A lot of people have too, but 0:03:49.440 --> 0:03:51.560 so it hasn't worked out. It's just the way that 0:03:51.640 --> 0:03:54.640 drug development goes. In six years time, you might find 0:03:54.680 --> 0:03:58.800 that some mechanism they've got starts to beat what Lily has, 0:03:58.920 --> 0:04:00.440 but we don't see that at the minute, and we 0:04:00.480 --> 0:04:02.960 haven't got any site on those things. 0:04:03.720 --> 0:04:05.600 Karen from the Jersey Shore Rights in and says she's 0:04:05.680 --> 0:04:09.840 a huge fan of weg be worked just great, Yo, Sam, 0:04:09.880 --> 0:04:13.760 Here we go merk splitting its main pharmaceutical unit in 0:04:13.800 --> 0:04:16.760 two as it prepares for the approaching patent experty of 0:04:16.760 --> 0:04:18.520 its best selling drug. 0:04:18.680 --> 0:04:19.479 What's going on here? 0:04:20.600 --> 0:04:22.840 Yes, so there's one other company that does this since 0:04:22.960 --> 0:04:24.800 been one of the you know, you plot the share 0:04:24.880 --> 0:04:27.240 charts and you go, Wow, that's pretty cool. And that's 0:04:27.240 --> 0:04:32.320 ask Seneca as has for a long time had a 0:04:32.400 --> 0:04:36.800 division a personally responsible for oncology business and responsible for 0:04:36.839 --> 0:04:40.520 oncology drug development. That's always been there. I think they 0:04:40.560 --> 0:04:43.920 recognized they had assets and that on coology drug development 0:04:43.960 --> 0:04:47.080 is quite different to every other area. Here's Mark now 0:04:47.080 --> 0:04:51.080 doing the same thing. Is it suggesting that they, because 0:04:51.120 --> 0:04:53.560 of the number of drugs that they've got coming some 0:04:53.720 --> 0:04:56.040 in on college or someone elsewhere, it's better to have 0:04:56.080 --> 0:04:58.520 two units that look after these two things, especially in 0:04:58.560 --> 0:05:00.880 the R and D side. I think doing the right thing. 0:05:01.400 --> 0:05:04.279 I don't think it tells us much about separating the 0:05:04.360 --> 0:05:06.560 reporting lines and all that sort of stuff, or the 0:05:07.040 --> 0:05:10.000 P and L look of things. I think it's much 0:05:10.040 --> 0:05:12.520 more to do with making sure that they're going to 0:05:12.520 --> 0:05:15.880 get the best chance in the specialty farmer as they 0:05:15.920 --> 0:05:18.440 call and oncology, and I think that's the right call 0:05:18.520 --> 0:05:20.000 to make by them. 0:05:20.240 --> 0:05:22.960 Does it lead to a formal spinoff where you might 0:05:23.000 --> 0:05:25.200 have two publicly traded companies or is this more like 0:05:25.240 --> 0:05:27.159 an internal division within the company. 0:05:27.360 --> 0:05:30.360 Yeah, I doubt this is about a spin off. I mean, 0:05:30.600 --> 0:05:33.680 who knows. I'm not in the board of listening to 0:05:33.720 --> 0:05:36.279 the or even a fly on the wall. And the 0:05:36.360 --> 0:05:38.360 thing is, I don't think you need to go that far. 0:05:38.400 --> 0:05:41.280 I think this just reckly reorganizing the business in a 0:05:41.320 --> 0:05:43.800 way that works best for the pipeline. And I think 0:05:43.800 --> 0:05:46.640 that's the right thing to do, especially if my colleague 0:05:46.720 --> 0:05:50.400 or Guessbacker and Vene Hamilton are right that actually the 0:05:50.480 --> 0:05:52.800 key truder that people think is going to expire in 0:05:52.880 --> 0:05:55.479 terms of their patents in twenty twenty nine has another 0:05:55.520 --> 0:05:57.479 extra three years of cash flow or four years of 0:05:57.520 --> 0:06:00.200 cash flow to twenty thirty three. Remember it's the bigest 0:06:00.279 --> 0:06:03.520 drug in the world. If they're right in their patent analysis, 0:06:04.160 --> 0:06:06.520 you know, this really puts that on collegey business in 0:06:06.640 --> 0:06:07.559 super charge mode. 0:06:07.680 --> 0:06:09.720 Yeah, Sam, thanks so much for joining us. Appreciate it. 0:06:09.760 --> 0:06:12.400 Sam Pazzelli, Director Research for Global Industries and senior Pharma 0:06:12.480 --> 0:06:15.240 analysts for Bloomberg Intelligence. He's based on London, where it's 0:06:15.279 --> 0:06:15.839 not snowing. 0:06:16.480 --> 0:06:19.599 Stay with us. More from Bloomberg Intelligence coming up after this. 0:06:23.480 --> 0:06:27.200 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:06:27.279 --> 0:06:29.960 weekdays at ten am. He's done on Apple, Corplay and 0:06:29.960 --> 0:06:33.240 Android Auto with the Bloomberg Business app. Listen on demand 0:06:33.279 --> 0:06:36.839 wherever you get your podcasts or watch us live on YouTube. 0:06:37.560 --> 0:06:38.279 One of the big. 0:06:38.080 --> 0:06:41.200 Gainers in today's trade, or maybe Vegas an overstatement, but 0:06:41.400 --> 0:06:44.919 given that we're seeing sizable losses in the equity indexes, 0:06:45.640 --> 0:06:48.760 I'd say two point four percent move higher is kind 0:06:48.760 --> 0:06:49.560 of game, kind of. 0:06:49.520 --> 0:06:50.000 Big, right. 0:06:50.200 --> 0:06:53.840 Domino's Pizza DPZ is the ticker moving higher today. The 0:06:53.880 --> 0:06:57.039 company reported a bigger than expected rise in comparable sales. 0:06:57.320 --> 0:06:59.960 So let's bring in Michael Helen. He is our senior 0:07:00.120 --> 0:07:05.000 restaurant and food service analysts for Bloomberg Intelligence, and Michael, 0:07:05.400 --> 0:07:08.000 Domino's provides a lot of value to people. You see 0:07:08.000 --> 0:07:12.000 those ads for buy one, get one free, and they've 0:07:12.040 --> 0:07:15.880 added stuffed pizza crust to their repertoire. So people are 0:07:15.880 --> 0:07:19.920 getting value and they're getting something I guess in terms 0:07:19.960 --> 0:07:23.240 of food value as well. Talk to us about Domino's 0:07:23.240 --> 0:07:24.560 Pizza and the strategy here. 0:07:27.200 --> 0:07:29.920 Yeah, so you know, to your point, they are out 0:07:29.920 --> 0:07:31.960 performing the market pretty handily. 0:07:32.080 --> 0:07:32.360 Today. 0:07:32.400 --> 0:07:37.240 It was a pretty solid report. Saam store sales topped expectations. 0:07:37.360 --> 0:07:40.400 You know, they're doing it with a few different things. Yes, 0:07:40.480 --> 0:07:44.400 the food innovation stuff crust isn't groundbreaking, but it's something 0:07:44.400 --> 0:07:47.240 that their national competitors had already offered, right, and so 0:07:47.240 --> 0:07:49.880 they're trying to take a piece of that market here 0:07:49.920 --> 0:07:53.160 in the US value to your point, right, they're number 0:07:53.200 --> 0:07:55.680 one pizza player here in the United States. They have 0:07:56.160 --> 0:07:58.880 more stores than anyone else, and they have that scale, 0:07:58.920 --> 0:08:01.360 so they are able to offer price points that their 0:08:01.360 --> 0:08:05.680 competitors really can't match and and keep it profitable for 0:08:05.760 --> 0:08:07.640 the franchisees. 0:08:07.920 --> 0:08:08.120 You know. 0:08:08.240 --> 0:08:10.280 And then another big part of the strategy here has 0:08:10.320 --> 0:08:14.880 been the door Dash and Uber Eats expansion, right, So 0:08:14.920 --> 0:08:18.120 they're still delivering the food themselves, but they're posting their 0:08:18.800 --> 0:08:23.320 their food on the third party aggregator sites and that's 0:08:23.360 --> 0:08:26.840 been been a big boost to their business as well. 0:08:27.120 --> 0:08:30.000 What's the difference in economics might using one of their 0:08:30.040 --> 0:08:32.120 own drivers versus a third. 0:08:31.880 --> 0:08:37.000 Party like a door Dash. Yeah, it's a big difference, Paul. 0:08:37.040 --> 0:08:41.640 It's it probably costs a big player like Dominoes, it 0:08:41.640 --> 0:08:44.280 would probably you know, for them to deliver it themselves. 0:08:44.360 --> 0:08:45.439 It probably costs them. 0:08:45.280 --> 0:08:49.800 Half of what it would cost, maybe even less than 0:08:49.840 --> 0:08:51.640 half of what it would call. So it makes a 0:08:51.720 --> 0:08:55.880 huge difference on the delivery economics, you know. So for 0:08:55.960 --> 0:08:59.480 the chains that already have a delivery network like Dominoes. 0:08:59.480 --> 0:09:00.560 It's really a no brainer. 0:09:01.640 --> 0:09:04.480 One thing that Dominoes did over the last quarter was 0:09:04.520 --> 0:09:06.640 make more money by selling more food to its stores, 0:09:06.720 --> 0:09:10.720 charging higher prices for ingredients, collecting more fees from the 0:09:10.720 --> 0:09:14.120 franchise operators for advertising and royalties. That's good for the 0:09:14.120 --> 0:09:19.120 bottom line, But does it sour relationships with franchise operators? 0:09:19.400 --> 0:09:21.600 I mean, how does that? How does Dominoes manage that 0:09:21.679 --> 0:09:22.280 going forward? 0:09:23.720 --> 0:09:25.760 Yeah, that's that's a good question, Scarlett. 0:09:25.880 --> 0:09:29.480 You know, franchise ze relationships is crucial in this business 0:09:29.480 --> 0:09:31.679 because they're going to be the ones, you know, forking 0:09:31.760 --> 0:09:34.760 up the capital to build new stores, right, So you 0:09:34.800 --> 0:09:37.319 want to keep them happy with strong same source sales, 0:09:37.360 --> 0:09:39.760 you know, at three percent plus almost four percent. Game 0:09:39.920 --> 0:09:44.200 keeps them happy, you know, in terms of the supply chain, 0:09:44.320 --> 0:09:47.080 so you know, Domino's owns the supply chain. They want 0:09:47.080 --> 0:09:51.480 to make sure that their franchisees aren't skimping on quality, right, 0:09:51.559 --> 0:09:54.560 and so what they do to make this palatable for 0:09:54.720 --> 0:09:58.920 their franchisees is they actually split the revenues on a 0:09:58.960 --> 0:10:02.720 monthly basis via checks with their franchisees, right. And so, yes, 0:10:02.840 --> 0:10:05.520 prices are going up expected to go up low single 0:10:05.520 --> 0:10:10.439 digits this year for commodities and in the supply chain. Right, 0:10:10.440 --> 0:10:13.679 but they give back half of that half of their 0:10:13.720 --> 0:10:16.680 profit increase back to their franchises and a sharing agreement. 0:10:17.400 --> 0:10:19.200 All right, Mike, thanks so much for joining us as 0:10:19.200 --> 0:10:21.640 always our go to voice on all things in the 0:10:21.640 --> 0:10:25.120 restaurant business. Mike Kaitlin covers the restaurants for Bloomberg Intelligence. 0:10:26.040 --> 0:10:29.199 Stay with us. More from Bloomberg Intelligence coming up after this. 0:10:33.080 --> 0:10:36.800 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:10:36.880 --> 0:10:39.920 weekdays at ten am Eastern on Apple, Cocklay and Android 0:10:39.960 --> 0:10:43.280 Auto with the Bloomberg Business App. Listen on demand wherever 0:10:43.320 --> 0:10:46.440 you get your podcasts, or watch us live on YouTube. 0:10:47.200 --> 0:10:51.880 A pair of retailers, retailers, they win some tailor relief, 0:10:52.480 --> 0:10:54.199 teriff relief on Supreme Court ruling. 0:10:54.240 --> 0:10:54.760 So how about that? 0:10:54.800 --> 0:10:56.400 So maybe some of these are pair of retailers that 0:10:56.440 --> 0:10:58.120 get a little bit of a break here as they've 0:10:58.160 --> 0:11:00.240 been bearing some of the brunt of the terror here. 0:11:00.240 --> 0:11:02.680 Mary Ross Gilbert joins his senior equity analysts. 0:11:02.800 --> 0:11:03.360 She covers the. 0:11:03.280 --> 0:11:05.880 Retail space for Bloomberg Intelligence. She's out there in La 0:11:05.960 --> 0:11:09.600 where it is not snowing. I can tell you that Mary, 0:11:09.600 --> 0:11:12.600 thanks so much for joining us here. Supreme Court ruling 0:11:13.000 --> 0:11:15.560 striking down some of those I reciprocal tariffs. What's it 0:11:15.600 --> 0:11:17.760 mean for the retailers that you cover? 0:11:19.240 --> 0:11:22.400 Yes, so, Paul, what this means is that we're going 0:11:22.440 --> 0:11:26.120 to get some relief. We're not getting complete relief from tariffs. 0:11:26.120 --> 0:11:28.960 So when you think about it, just before Trump over 0:11:29.000 --> 0:11:32.120 the weekend on Saturday, I mean, first, on Friday, he 0:11:32.200 --> 0:11:37.560 said he was going to exercise his ability to enforce 0:11:37.679 --> 0:11:40.240 Section one point twenty two of the nineteen seventy four 0:11:40.320 --> 0:11:44.240 Tariff Code, and you can go up to about fifteen percent. 0:11:44.280 --> 0:11:47.760 So on Friday he announced ten percent immediately or actually 0:11:47.800 --> 0:11:50.319 it was in three days, and then Saturday said immediately 0:11:50.360 --> 0:11:53.360 fifteen percent. So really, what that means is you're going 0:11:53.400 --> 0:11:57.600 to get about a twenty five percent savings from the 0:11:57.679 --> 0:12:02.440 tariff rates that these apparel retailers were paying just prior 0:12:02.520 --> 0:12:05.400 to this news that came out on Saturday. And so 0:12:05.480 --> 0:12:08.520 we estimate that the savings could be anywhere from twenty 0:12:08.520 --> 0:12:11.240 to fifty basis points, maybe a little more than that. 0:12:11.880 --> 0:12:14.760 And many of these apparel companies have been putting in 0:12:14.840 --> 0:12:18.240 mitigation measures, and of course the number one being well 0:12:18.280 --> 0:12:21.360 first of all diversifying away from China so they have 0:12:21.400 --> 0:12:26.360 a lot less exposure there, and then also their suppliers 0:12:26.440 --> 0:12:30.679 absorbing let's say, about half of the tariff impact, and 0:12:30.760 --> 0:12:33.640 then of course price increases and that's being passed on 0:12:33.720 --> 0:12:37.440 to the consumer, and it's done very selectively, and so 0:12:37.760 --> 0:12:41.000 that's why the savings, the net savings is going to 0:12:41.040 --> 0:12:43.640 be somewhere around twenty to fifty basis points. And just 0:12:43.679 --> 0:12:46.680 to give you an example, what companies have disclosed is 0:12:46.679 --> 0:12:49.959 on an annual basis, they were looking for a net 0:12:50.240 --> 0:12:53.800 tariff impact again net of these mitigation measures to be 0:12:53.960 --> 0:12:56.400 somewhere in that sort of one hundred to two hundred 0:12:56.440 --> 0:12:59.120 basis points in that range. 0:12:59.360 --> 0:13:02.920 So I guess it's interesting here because some of these 0:13:02.960 --> 0:13:05.360 retailers have in fact been right kind of in the 0:13:05.400 --> 0:13:09.120 crosshairs of the tariff debate. Have any of the companies 0:13:09.120 --> 0:13:11.480 that you covered they talked about whether they would even 0:13:11.520 --> 0:13:16.800 think about getting tear rebates if that's a possibility, Paul, that's. 0:13:16.679 --> 0:13:22.080 A really good question. It's I can't imagine that a 0:13:22.200 --> 0:13:26.320 rebate process could actually go into effect. It would be 0:13:27.040 --> 0:13:30.560 a nightmare to try to go back and recover these funds. 0:13:31.400 --> 0:13:35.840 It just seems I don't know, I think it's too complex. 0:13:35.880 --> 0:13:39.600 I think we just have to let whatever tariffs were 0:13:39.840 --> 0:13:44.559 already enforced and the funds received. I certainly hope that 0:13:44.640 --> 0:13:46.880 doesn't happen because that could turn out to be a 0:13:47.040 --> 0:13:50.960 very expensive nightmare trying to recover those funds, and then 0:13:51.160 --> 0:13:53.200 the idea would be, well, should it go back to 0:13:53.240 --> 0:13:56.600 the consumer once, you know, if companies were to recover it. 0:13:56.679 --> 0:14:00.559 So, yeah, it's very cool. So given that, I mean 0:14:00.640 --> 0:14:03.280 we've had, you know, roughly a year of these tariffs. 0:14:03.760 --> 0:14:06.200 Is there a kind of a ballpark that you've arrived at, 0:14:06.280 --> 0:14:08.760 or the companies have disclosed about how much they took 0:14:08.800 --> 0:14:12.360 into their margin versus maybe how much the importer took 0:14:12.440 --> 0:14:15.880 into its margin the consumer took into its margin. 0:14:15.960 --> 0:14:16.160 There. 0:14:17.320 --> 0:14:22.520 Yeah, it's very it's complex to say specifically, but I 0:14:22.560 --> 0:14:25.520 think what we were trying to allude to earlier, that 0:14:25.560 --> 0:14:28.560 one hundred to two hundred basis points is what these 0:14:28.680 --> 0:14:32.760 companies are effectively taking in on an annual basis based 0:14:32.800 --> 0:14:36.280 on commentary from the third quarter earnings call. So they 0:14:36.360 --> 0:14:42.280 might have gotten hit more or less depending on the 0:14:42.320 --> 0:14:46.040 retailer that we're talking about and goods that were sourced 0:14:46.120 --> 0:14:48.800 during various times, right, because if you had some retailers 0:14:49.080 --> 0:14:52.560 that sourced fall and winter during that time when China 0:14:53.120 --> 0:14:55.600 had a tariff that was well over one hundred percent, 0:14:56.240 --> 0:15:00.400 then that merchandise and their margin was affected very much 0:15:00.440 --> 0:15:03.160 so because they had already taken delivery of that product. 0:15:03.560 --> 0:15:06.960 So really it depends on the retailer. And then you 0:15:06.960 --> 0:15:10.920 have a couple of retailers, for example, Aritzia and Ralph Lauren. 0:15:12.120 --> 0:15:15.520 Both of those companies have been posting margin increases all 0:15:15.600 --> 0:15:19.240 year and so they've been able to benefit from strong sales. 0:15:19.560 --> 0:15:22.000 What that means is that they're able to leverage fixed 0:15:22.040 --> 0:15:25.320 costs and get incremental benefits there and also pass on 0:15:25.440 --> 0:15:29.560 price increases. And so even though they've been negatively impacted 0:15:29.560 --> 0:15:33.040 by tariffs, you're not seeing that net effect, whereas most 0:15:33.040 --> 0:15:36.320 of the other retailers you have seen margins dented, and 0:15:36.360 --> 0:15:40.000 they've disclosed every quarter what the tariff impact has been 0:15:40.520 --> 0:15:45.400 net mitigation measures, and also they'll provide sort of the 0:15:45.440 --> 0:15:48.400 gross impact. So like I said, I would say the 0:15:48.840 --> 0:15:51.360 net one hundred to or two hundred basis points. Think 0:15:51.400 --> 0:15:55.000 about gap Abercrombie gaps at the lower level, they set 0:15:55.040 --> 0:15:57.040 annual impact about one hundred to one hundred and ten 0:15:57.080 --> 0:16:02.160 basis points, Abercrombie and Fitch about one seven, and American 0:16:02.200 --> 0:16:04.520 Eagle they were sort of harder two hundred to two 0:16:04.600 --> 0:16:06.000 hundred and twenty five basis points. 0:16:06.120 --> 0:16:08.200 All right, very good, Mary Ross Gilbert, thank you so 0:16:08.280 --> 0:16:08.880 much for joining us. 0:16:08.880 --> 0:16:09.560 Mary ros Gilbert. 0:16:09.600 --> 0:16:11.760 She's a senior ecodanaly she covers the retail space for 0:16:11.760 --> 0:16:16.800 Bloomberg Intelligence, and she's located out there in La California office. 0:16:18.520 --> 0:16:20.920 Stay with us. More from Bloomberg Intelligence coming up. 0:16:21.080 --> 0:16:21.560 Fire for this. 0:16:24.640 --> 0:16:28.360 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:16:28.440 --> 0:16:31.520 weekdays at ten am Eastern on Apple, Cocklay and Android 0:16:31.520 --> 0:16:34.840 Auto with the Bloomberg Business app. Listen on demand wherever 0:16:34.920 --> 0:16:38.000 you get your podcasts, or watch us live on YouTube. 0:16:38.720 --> 0:16:41.320 Friday, we had the Supreme Court strike down some of 0:16:41.400 --> 0:16:45.040 President Trump's reciprocal tires. We've got some new ones. They're 0:16:45.040 --> 0:16:48.240 back ten no, fifteen percent coming back. 0:16:48.760 --> 0:16:50.800 Are these things going to be litigated? I have no idea. 0:16:50.840 --> 0:16:55.560 Holly from she's a Bloomberg Intelligence litigation analyst. Holly, thanks 0:16:55.640 --> 0:16:57.440 much for joining us here. We had the Supreme Court 0:16:57.520 --> 0:17:01.160 ruling here, what's left to be gated? If any because 0:17:01.160 --> 0:17:03.960 there's still lots and lots and lots of tariffs out there. 0:17:06.200 --> 0:17:10.000 So what's left to be litigated probably is what happens 0:17:10.040 --> 0:17:12.879 with all the tariffs that have been collected, Like, do 0:17:12.880 --> 0:17:17.119 do the importers have to go who want refunds have 0:17:17.200 --> 0:17:20.359 to go to the Court of International Trade to see refunds? 0:17:20.400 --> 0:17:22.359 Do they have to file lawsuits or can they just 0:17:22.440 --> 0:17:24.960 file some kind of application with the Customs with Worder 0:17:25.000 --> 0:17:27.960 Protection Agency. So that's a question that's still outstanding. It 0:17:28.040 --> 0:17:32.440 doesn't affect the tariffs that Trump imposed via Section two 0:17:32.480 --> 0:17:37.639 thirty two, which work on things like aluminium, steel and 0:17:37.680 --> 0:17:40.200 auto and autoparts, and it doesn't affect through one tariffs 0:17:40.240 --> 0:17:42.159 that were imposed in twenty eighteen. 0:17:43.640 --> 0:17:46.560 Okay, So that's that's where it stands. Well on the 0:17:46.560 --> 0:17:50.280 main tariffs. What about the deminimous exemption. Explain to us 0:17:50.359 --> 0:17:53.320 how that works and whether that's affected by the Supreme 0:17:53.359 --> 0:17:53.920 Courts ruling. 0:17:55.119 --> 0:17:58.880 So the dominimus exemption is not necessarily affected. It's an exemption. 0:17:58.960 --> 0:18:01.800 It's not a terriff, so it's an exemption to a terriff. 0:18:01.840 --> 0:18:06.360 So we don't know if this if the ruling means 0:18:06.440 --> 0:18:11.200 that the that the Court that he cannot remove an 0:18:11.880 --> 0:18:15.080 a terror he cannot remove an exemption to a teriff. 0:18:15.480 --> 0:18:17.919 So it's not necessarily the case that that So the 0:18:17.920 --> 0:18:20.399 Supreme Court didn't answer that question. In other words, that 0:18:20.480 --> 0:18:23.840 ruling doesn't answer the question. But I think there's a 0:18:23.880 --> 0:18:27.560 case that's playing out now UH at the International Trade Court. 0:18:27.560 --> 0:18:30.320 That ruling was that that case case was stay pending 0:18:30.440 --> 0:18:34.920 appeal of the of the Supreme Court ruling. And so 0:18:35.280 --> 0:18:38.160 what I think happens is I think that the court 0:18:38.240 --> 0:18:42.480 will say that he probably can't remove that exemption via 0:18:42.520 --> 0:18:45.959 executive order. It probably has to be some kind of regulation. 0:18:46.320 --> 0:18:49.359 And it's not even clear that that that his his 0:18:49.440 --> 0:18:53.159 Trade secretary can promulgates. And it's not even clear that 0:18:53.200 --> 0:18:56.399 he can remove it at all, because there's some question 0:18:56.400 --> 0:18:59.119 as to whether that exemption is mandatory based on the 0:18:59.160 --> 0:19:00.000 language of the statue. 0:19:00.080 --> 0:19:04.040 You if I want to get a refund to some 0:19:05.160 --> 0:19:07.720 terroriffts that I've paid, how do I do that? 0:19:09.520 --> 0:19:13.640 So normally what you do is what happens is the 0:19:13.680 --> 0:19:16.679 goods come in you, you ask to me what you 0:19:16.720 --> 0:19:20.600 think you owe. The Customs Order Protection Agency decides whether 0:19:20.880 --> 0:19:24.680 that's correct. That's called liquidation. If that amount is finalized 0:19:24.680 --> 0:19:27.080 and it liquidates, you have one hundred and eighty days 0:19:27.080 --> 0:19:30.880 to protest what the Customs Agency says you owe. So 0:19:31.000 --> 0:19:34.160 that's normally how you get a refund. You file a protest, 0:19:34.560 --> 0:19:36.679 and they think that that might be the procedure used here, 0:19:36.760 --> 0:19:39.360 but nobody really knows because this has never happened before. 0:19:40.640 --> 0:19:43.040 Well, if I'm if I'm Nike or something like that, 0:19:43.800 --> 0:19:47.000 I mean, do I say you owe me hundreds of 0:19:47.000 --> 0:19:49.160 millions of dollars or something like that? Is that how 0:19:49.200 --> 0:19:49.919 we think it's going to go? 0:19:50.000 --> 0:19:51.800 Or are they are? They actually are people? 0:19:51.840 --> 0:19:54.719 Actually our companies actually go through that the work of 0:19:54.800 --> 0:19:55.320 doing this. 0:19:56.600 --> 0:19:59.600 Well, you know, it probably depends on the amount that 0:19:59.720 --> 0:20:04.119 they think that they're overpaid, and there are also you know, 0:20:04.240 --> 0:20:08.080 other issues that they may take into account. So you know, 0:20:08.240 --> 0:20:11.399 it's not clear whether all companies will see refunds. There 0:20:11.400 --> 0:20:14.240 are probably some companies that say it's not worth it 0:20:14.280 --> 0:20:16.239 for them to try, so they're going to weigh their 0:20:16.320 --> 0:20:19.120 right to do that. Some of them may be time 0:20:19.119 --> 0:20:21.960 barred from doing that by virtue of the deadline super protest. 0:20:22.720 --> 0:20:24.960 So we don't expect the full amount that's been collected 0:20:24.960 --> 0:20:25.760 to be refunded. 0:20:26.840 --> 0:20:29.680 Holly what will you be watching for and listening for 0:20:29.760 --> 0:20:31.840 when the President speaks in his State of the Union 0:20:31.880 --> 0:20:34.080 tomorrow When it comes to tariffs, I mean, he's going 0:20:34.160 --> 0:20:36.040 to say a lot of things, and we know that 0:20:36.160 --> 0:20:38.680 a lot of what he says he doesn't necessarily it's 0:20:38.720 --> 0:20:41.520 more in the spirit of what he wants. But specifically 0:20:41.560 --> 0:20:45.040 when it comes to the legality of some of this stuff, 0:20:45.040 --> 0:20:48.000 what will you be listening for, Well, we. 0:20:47.920 --> 0:20:49.520 Want to see what he like what you said, We 0:20:49.560 --> 0:20:51.560 want to see what he says because what he wants 0:20:51.600 --> 0:20:54.920 has to be justified by some kind of legal authority, 0:20:55.280 --> 0:20:57.840 and so we want to see, you know, what he's 0:20:57.840 --> 0:21:00.640 aiming to do, and then we'll try to figure out 0:21:00.680 --> 0:21:02.399 how he's going to do that. And so there are 0:21:02.480 --> 0:21:05.400 various tariffing tools that he has, and he's already imposed 0:21:05.680 --> 0:21:09.280 terrorist via Section one twenty two, but those are time 0:21:09.359 --> 0:21:12.000 limited for one hundred and fifty days, so we'll probably 0:21:12.600 --> 0:21:15.879 he'll probably use other authorities. And so that's something where 0:21:15.560 --> 0:21:17.800 we're going to look at, is you know, what is 0:21:17.800 --> 0:21:20.040