Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. You're listening to the
Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
Speaker 1: Eastern on Apple Cockplay and Android Auto with the Bloomberg
Speaker 1: Business App. Listen on demand wherever you get your podcasts,
Speaker 1: or watch us live on YouTube.
Speaker 2: Let's move over to talk a little bit about food.
Speaker 2: I love to talk about food here, and we're talking
Speaker 2: about the grocery.
Speaker 3: Industry is growing.
Speaker 2: Oh, I need too, So this is very timely here.
Speaker 2: But apparently we're seeing through Kroger's results here that it's
Speaker 2: attracting value seeking customers who are now opting to eat
Speaker 2: at home as opposed to potentially ordering out. I don't
Speaker 2: know that I can include myself in that segment, but
Speaker 2: clearly the street likes what Kroger has to say here.
Speaker 2: We're seeing shares that are up as much as four
Speaker 2: point two percent in trading today, now trading about one
Speaker 2: point five percent higher. It's really been a great year
Speaker 2: for Kroger. They're up about eleven percent year to date.
Speaker 2: But we are joined by somebody who's able to break
Speaker 2: down more in depth with us for us, that's Jennifer
Speaker 2: Bartash's She has Bloomberg intelligenc Andior analysts of retail staples
Speaker 2: and packaged food here to break down these earnings for us. Jen,
Speaker 2: talk to us about what you're seeing from this report.
Speaker 2: Are people apparently cooking more well?
Speaker 4: It would it would appear so, especially with middle and
Speaker 4: lower income consumers, they're being a little bit more careful
Speaker 4: about where they're spending. And this is something we usually
Speaker 4: see when there's any kind of thread of inflation, people
Speaker 4: sort of retrench and they cook more at home. And
Speaker 4: it's also complemented by a growth in awareness about health
Speaker 4: and wellness, whether it's gop one drug related or whether
Speaker 4: it's just self induced. People are trying to live healthier
Speaker 4: lives and that's generally easier when you prepare your own food.
Speaker 5: So when you look at comparable sales, Coger's saying that
Speaker 5: for the full year and now it sees comparable sales
Speaker 5: gaining three point four percent versus a previous guide of
Speaker 5: three and a quarter percent, so kind of a marginal
Speaker 5: move higher. Jen, what does Kroger's future look like overall?
Speaker 5: Because not so long ago it was trying to get
Speaker 5: through this deal with Albertson's This twenty four point six
Speaker 5: billion dollar deal that it later abandoned and is now
Speaker 5: stuck in a legal mier.
Speaker 4: Yeah, it's you know, Kroger, I think is at the
Speaker 4: point where they're retrenching and they're reevaluating their core business
Speaker 4: and they're figuring out what is the best way to
Speaker 4: move forward, and I think there's some really encouraging signs
Speaker 4: in the business of how they're approaching that. The first thing,
Speaker 4: and they've talked about this a little bit over the
Speaker 4: last couple quarters, is they're really taking a hard look
Speaker 4: at their e commerce business and all of the investment
Speaker 4: that they had lined up for the ocado automated fulfillment
Speaker 4: centers that they were building. So we're expecting to hear
Speaker 4: a lot more detail on that next quarter. But they're
Speaker 4: also talking about really looking at non core assets, and
Speaker 4: so to us, that means things like the Fredmeyer jewelry business,
Speaker 4: it means the Vitacost dot com business. So that approach
Speaker 4: to becoming leaner and more efficient and more cost effective
Speaker 4: is really a positive trajectory for the company.
Speaker 5: And just jumping in here with a headline that just
Speaker 5: cross the bloomber gets at hothead, which means it's one
Speaker 5: of those that we deem really important. Gold has just
Speaker 5: surpassed its inflation adjusted record high set in nineteen eighty. So, Nora,
Speaker 5: we talked about that everything rally, whether it's risky assets
Speaker 5: or whether it's safe haven assets. You see that reflected
Speaker 5: in gold prices, gold futures right now higher at the moment,
Speaker 5: and you know, we continue to see this plowing into
Speaker 5: safe haven assets.
Speaker 2: Absolutely, we're seeing that across the board. So this is
Speaker 2: definitely something to look at.
Speaker 3: Jen, back to you.
Speaker 2: I want to talk a bit more about the e
Speaker 2: commerce aspect that Krigger has going on here. So essentially,
Speaker 2: do they have online ordering so that they're able to
Speaker 2: deliver groceries to consumers or how does this work?
Speaker 4: They do, so, they offer the ability to order online
Speaker 4: and then they fill that order in one of two ways.
Speaker 4: They either fill it from one of these highly automated
Speaker 4: fulfillment centers, which is ocado driven and those are the
Speaker 4: ones with all the robots that do all the work
Speaker 4: that you see images of, or and which is much
Speaker 4: more common in the network, they fill those orders in stores,
Speaker 4: so somebody walks around the store, fills the orders and
Speaker 4: people either pick it up or it is delivered from
Speaker 4: the store to their house, so they have these, you know,
Speaker 4: both of these models that are working well. What's interesting
Speaker 4: is that Kroeger said today, for the first time ever,
Speaker 4: delivery sales in terms of e commerce outpace those for
Speaker 4: the curb side pickup, and so that just shows how
Speaker 4: much the consumer has shifted to where they would much
Speaker 4: rather have things brought to them than to stop at
Speaker 4: a store, even if it's only to stop at the
Speaker 4: curb outside the store to pick up their order. So
Speaker 4: there's there's definitely some interesting trends moving there, and I
Speaker 4: think Kroeger's just looking to stay in tune with where
Speaker 4: the customer is moving.
Speaker 5: Right, I mean, they certainly want to cater to the
Speaker 5: customer and the changing preferences of this customer. I'm curious
Speaker 5: about the profitability of this strategy. Does e commerce Are
Speaker 5: the profit margins in delivery higher?
Speaker 1: Uh?
Speaker 4: No, Generally speaking, they're lower. And so that's why it
Speaker 4: becomes so important to be able to be super cost
Speaker 4: efficient when you're filling orders. When you're talking about groceries. Historically,
Speaker 4: you know, grocery as an industry is a very low
Speaker 4: margin industry to begin with. But when people all used
Speaker 4: to go to the grocery store, you were doing the
Speaker 4: fulfillment and you're doing the last mile delivery yourself. You
Speaker 4: took it, you put it in your cart, you bait
Speaker 4: for it, you took it home. You know, is a
Speaker 4: that is the most profitable transaction that a grocery store happens.
Speaker 4: The second most profitable is when you go to the
Speaker 4: store and pick it up, so that curb side, you know,
Speaker 4: that curb side pickup. And then the least profitable is
Speaker 4: when they have to bring it to you because now
Speaker 4: the retailer is absorbing the cost of that last mile
Speaker 4: delivery and getting it to your house. So that's why
Speaker 4: there's such a focus on looking at the operations, looking
Speaker 4: for ways to cut cost to help move that needle
Speaker 4: of profitability to where it will be neutral, you know,
Speaker 4: or similar to what would be for an in store
Speaker 4: shopping experience.
Speaker 3: Unless they start to charge people for that.
Speaker 5: I think about door Dash and Uber eats and all
Speaker 5: those services where you know, the delivery charge is almost
Speaker 5: half of what the actual product costs.
Speaker 4: Yeah, the delivery charges help, but the other thing that's
Speaker 4: probably the more important part that's a little less visible
Speaker 4: to the public is the revenue that they generate from
Speaker 4: ad sales, and so that's when you're online and you
Speaker 4: get special offers for a certain brand of cereal or
Speaker 4: certain type of soup. You know, those that advertising sales
Speaker 4: are driven through their retail media networks, and that is
Speaker 4: a very very high margin, very profitable business. So the
Speaker 4: bigger that online e commerce becomes, the more effective they
Speaker 4: are at managing that that advertising business. That helps offset
Speaker 4: the profitability and the drain on the delivery costs as well.
Speaker 3: Stay with us more from Bloomberg Intelligence coming up after this.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
Speaker 1: you get your podcasts, or watch us live on YouTube.
Speaker 2: I want to move on to a conversation in the
Speaker 2: consumer space. Let's talk about CBS and ALTA and how
Speaker 2: they can spur growth by connecting wellness with beauty. We're
Speaker 2: joined by Lindsay Dutch. She's Bloomberg Intelligence Consumer Hardline Senior Analyst,
Speaker 2: and we have a lot to dig into here.
Speaker 3: Lindsay tell us what's.
Speaker 2: Going on in this space and how CBS and ULTA
Speaker 2: could potentially connect beauty and wellness.
Speaker 6: Hi, Nora, thanks for having me. The wellness market is huge,
Speaker 6: four hundred to five hundred billion dollars at least, that's
Speaker 6: four to five times the beauty market alone. Beauty is
Speaker 6: closer to one hundred billion dollar opportunity. But in our survey,
Speaker 6: you know, we found that seventy percent of people prefer
Speaker 6: to shop beauty and wellness together. So we think that
Speaker 6: the opportunity for retailers, both big and small, to sort
Speaker 6: of break into this wellness category and gain share is
Speaker 6: to bring the two categories together with marketing in the
Speaker 6: store and really get people to shop across both.
Speaker 5: Let me ask an obvious question, lindsay, what is the
Speaker 5: difference between wellness and beauty?
Speaker 3: Is wellness products or is wellness services?
Speaker 6: So in this, you know, in this conversation, we were
Speaker 6: really thinking about products, but the wellness market is very
Speaker 6: difficult to define. So we're thinking about you know, you know,
Speaker 6: people are leaning into you know, preventative routines, they're thinking
Speaker 6: about longevity, they're trying to improve their sleep, their digestion.
Speaker 6: They also want to look better, they want to feel better,
Speaker 6: so it's really across all, you know, aspects of you know, mind,
Speaker 6: body and wellness, and but products that you would be
Speaker 6: like taking off the off the shelf from like a
Speaker 6: CBS or a Walmart type of product.
Speaker 5: So my question here then is if products are these
Speaker 5: products that are regulated in any way, So.
Speaker 3: Some of them are, some of them are not.
Speaker 6: I mean, if you think about maybe your social feed,
Speaker 6: you probably see a lot of you know, influencers touting products.
Speaker 6: You know, there's a big focus on gut health recently
Speaker 6: that I've seen. You know, a lot of people are
Speaker 6: buying into you know, that idea and thinking about that
Speaker 6: and buying products for that. And the bottom line is
Speaker 6: when they shop for things that make them feel better
Speaker 6: on the inside, they're also shopping for things that make
Speaker 6: them look better on the outside.
Speaker 2: You know what's interesting as I'm reading through your research
Speaker 2: report here, one of your points is beauty enthusiasts also
Speaker 2: like to shop wellness products, and you're mentioning how a
Speaker 2: lot of people want to pour into themselves on the
Speaker 2: inside as well as the outside. Can you talk a
Speaker 2: bit about you know, influencer culture and how this could
Speaker 2: potentially also be adding to this push You mentioned CBS
Speaker 2: al to Walmart, what what does this look like right now?
Speaker 2: What's the landscape?
Speaker 3: Okay, So if we.
Speaker 6: Take a step back, so we think, you know, some
Speaker 6: of the biggest players in this space, it would not
Speaker 6: be surprising to you. You know, you're talking about an Amazon,
Speaker 6: You're talking about Walmart, CBS, you know, Dollar General I
Speaker 6: think also has a big, you know hold in this space.
Speaker 6: But then there's a lot of smaller retailers that are
Speaker 6: also looking to get into this space. So Aulti Beauty,
Speaker 6: for example, they have about seven hundred SKUs that are
Speaker 6: devoted to wellness. That's that's a small portion of the
Speaker 6: twenty thousand plus SKUs that they carry in their store.
Speaker 6: But they're really getting trying to push into this market.
Speaker 6: They think that wellness could be a billion dollar opportunity
Speaker 6: for them. But I think retailers both big and small
Speaker 6: can find an opportunity in this big market. Also because
Speaker 6: the growth in the market, you know, exceeds lots of
Speaker 6: other categories, including beauty. If we think about sort of
Speaker 6: the influencer angle that that you talked about, you know,
Speaker 6: the survey is really interesting because you know, people say,
Speaker 6: you know, a large amount of people said that they
Speaker 6: prefer an expert opinion and I think that's why they
Speaker 6: like to shop at places like CBS. The pharmacist is
Speaker 6: right there, you can get their opinion. But then they
Speaker 6: also said thirty four percent said that they value a
Speaker 6: celebrity or an influencer backing a product. So there's sort
Speaker 6: of like two different things going on. And there's a
Speaker 6: lot of misinformation in the social media world, you know,
Speaker 6: so we're sort of seeing consumers lean into both, you know,
Speaker 6: that social viral product and then also wanting an expert
Speaker 6: to weigh in somehow.
Speaker 5: I feel like we might see a scenario where CBS
Speaker 5: or Alta will now have an influencer at the store. Yeah,
Speaker 5: actually provide advice, lindsay, when it comes to products related
Speaker 5: to wellness that these stores can stock, what would they make,
Speaker 5: what would they give up shelf space for? Meaning what
Speaker 5: would they remove from their stores in order to make
Speaker 5: available products that relate to longevity, sleep nutrition?
Speaker 6: I don't think, yeah, I don't think they are necessarily
Speaker 6: removing things. I think, you know, they might just be
Speaker 6: doing sort of an end cap.
Speaker 5: You know.
Speaker 6: Alta has been working really hard to make their wellness
Speaker 6: section a lot bigger, you know, and they go through
Speaker 6: their brand negotiations very often, especially with their merging brands,
Speaker 6: so you might be sort of swapping one emerging for
Speaker 6: another in a different category. I also think that for wellness,
Speaker 6: you know, wellness really lends itself well to online, and
Speaker 6: obviously online is an endless aisle. You can carry as
Speaker 6: many products as you want. And the reasons for that
Speaker 6: is really that, like wellness products are often in like
Speaker 6: a thirty day supply, So that's something that if you
Speaker 6: start taking a vitamin or any type of supplement, creatine,
Speaker 6: whatever you're going to, you know want to take that
Speaker 6: every single day, and you don't want to run out.
Speaker 6: So I think online subscribe and save models are going
Speaker 6: to be really important in this space.
Speaker 5: Stay with us more from Bloomberg Intelligence coming up after this.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 1: weekdays at tenn on Apple, Cocklay and Android Auto with
Speaker 1: the Bloomberg Business app, Listen on demand wherever you get
Speaker 1: your podcasts, or watch us live on YouTube.
Speaker 2: Let's move over into the airlines industry. We are about
Speaker 2: to be joined here by George Ferguson. He's Bloomberg Intelligence
Speaker 2: senior Aerospace, Defense and airlines analysts George, we always love
Speaker 2: speaking with you. What's the leadst right now with Delta.
Speaker 7: Well, so Delta came out with an eight K this morning,
Speaker 7: you know where they disclosed to the marketplace that they're
Speaker 7: going to speak at the Laguna conference that gets Morgan
Speaker 7: Stanley's Laguna's conference, and they said that their revenue numbers
Speaker 7: would be at the high end of the original range
Speaker 7: they gave. So I guess that's a good sign. I
Speaker 7: guess that fairs have come in in the current quarter
Speaker 7: at least not worse than what Delta thought. Right, and
Speaker 7: again maybe ooched a little bit to the higher end
Speaker 7: of their expectations. We didn't see any change to EPs
Speaker 7: though guidance or any other guidance, So it makes you
Speaker 7: wonder if some of the expenses aren't a little bit higher.
Speaker 7: So I thought it was. It was okay news, but
Speaker 7: this was sort of raised guidance because the quarter's been
Speaker 7: going much better than they expected.
Speaker 5: Okay, So it was encouraging, but it was not in
Speaker 5: all clear like, let's increase our guidance and tell you
Speaker 5: that things are notably better. What's interesting is that the
Speaker 5: CEO at Bassian spoke at the Economic Club of Washington
Speaker 5: earlier this week and gave a little more color about
Speaker 5: what he's seen, and his takeaway was that the lower
Speaker 5: income customers remain challenged, but they're seeing a lot more
Speaker 5: enthusiasm from business travelers and premium customers, and this is
Speaker 5: where Delta has really staked its claim on that segment
Speaker 5: of the market.
Speaker 7: Agreed, Agreed. I mean we saw a CPI number this morning,
Speaker 7: right that has airfares in it. It was up about
Speaker 7: three percent year every year, and I think the sequential
Speaker 7: was up fourst to five if I remember correctly, So
Speaker 7: I mean those were decently strong numbers for airfare growth.
Speaker 7: But I still suspect we have the same trend going
Speaker 7: on inside the business that we saw in two Q,
Speaker 7: and that is as you said, I think the high
Speaker 7: end consumer continues to travel and want more amenities, want
Speaker 7: better seating as they travel. So if you're American United Delta,
Speaker 7: you're well positioned to capture that and subsidize what I
Speaker 7: think is probably still weakness at the lower end of
Speaker 7: the business. I think as we gin into three Q,
Speaker 7: will hear that. You know, if you're a basic economy flyer,
Speaker 7: you're managing other increased costs in your budget and so
Speaker 7: you may be not flying or you know, flying less,
Speaker 7: trading down a bit.
Speaker 2: George's corporate travel back.
Speaker 7: So at the end of two Q, I think, you know,
Speaker 7: what we heard was that corporate travel was was starting
Speaker 7: to surpass or twenty nineteen levels. So so we definitely
Speaker 7: know corporate travel has returned slower than a leisure and
Speaker 7: I think, frankly, it's probably very structural and will continue
Speaker 7: this way. I think there are industries like consultants that
Speaker 7: traditionally went sat at their at their customer's offices to
Speaker 7: do their work. I think, you know, now we've gotten
Speaker 7: a lot more comfortable with video conferencing and things like that.
Speaker 7: I think you'll you'll miss some of that old demand
Speaker 7: for corporate that you know, had supported airfares. I think
Speaker 7: it has become much more of a leisure business. But
Speaker 7: three Q is going to be a wash on that
Speaker 7: because three Q is really a leisure story typically for
Speaker 7: the airlines. Well, one more thinking for you.
Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Applecarcklay and Android Auto
Speaker 1: with the Bloomberg Business Up. Listen on demand wherever you
Speaker 1: get your podcasts, or watch us live on YouTube.
Speaker 2: We're going to break down what's going on in the
Speaker 2: real estate market. Of course, this is an area that
Speaker 2: people are always focused on, especially as it pertains to
Speaker 2: real estate investment trust. That's a place where you're seeing
Speaker 2: so many different segments really having some different moves here.
Speaker 2: And we're going to be joined by one person who
Speaker 2: is all over this, Jeffrey Lingbaum. He is Bloomberg Intelligence
Speaker 2: senior US RITE analysts, and we want to kind of
Speaker 2: discuss and break down what's the latest with real estate. Jeff,
Speaker 2: what did you take away from these earnings is I'm
Speaker 2: looking at the rate index here in the s top
Speaker 2: five hundred. It's only up about one point nine percent
Speaker 2: this year, so nothing to run home about. But what
Speaker 2: were you really seeing through these reports this earning season?
Speaker 8: Yeah, thanks, Nora, thanks for having me on. I mean,
Speaker 8: one of the things, one of the things we're thinking
Speaker 8: a lot about is what the future looks like. You know,
Speaker 8: the earnings that come out, you know, you know, are
Speaker 8: less important than the outlook. And one of the sectors
Speaker 8: we're looking a lot at is residential rental residential. We're
Speaker 8: in a cycle now where rent growth has been slowing,
Speaker 8: impacted by some heavy supply, but the opportunity exists for
Speaker 8: rent growth to accelerate into twenty twenty six. And one
Speaker 8: of the things we just put out a piece about
Speaker 8: is the comparison between the cost to rent and the
Speaker 8: cost to own, and owning a home is still significantly
Speaker 8: higher than renting, and the reats that play in the
Speaker 8: rental residential space are poised to benefit from that, both
Speaker 8: on the apartment side and on the single family rental side.
Speaker 8: And so I think that as we look forward to
Speaker 8: the next year, we could see rental growth accelerate for
Speaker 8: those guys.
Speaker 2: So are you seeing any bifurcation at all between multifamily
Speaker 2: rates versus single family rentals?
Speaker 8: Well, single family rentals have had faster growth over the
Speaker 8: past year as multifamily growth slowed on the rental side.
Speaker 8: On the rental revenue side, and frankly, there's less competitive
Speaker 8: supply for single family rentals than there is for multifamily rentals.
Speaker 8: The growth rate may slow a little bit for single
Speaker 8: family just because their comps are a little bit harder
Speaker 8: as multifamily rents start to rise. A little bit, but
Speaker 8: for the most part, I think they both are poised
Speaker 8: to benefit from this you know, attractive rental environment compared
Speaker 8: to the cost to buy homes as mortgage rates remain
Speaker 8: at elevated, sticky, sticky, elevated high and there's just not
Speaker 8: enough inventory and rens renters are winning from that well. Jeff.
Speaker 2: Of course, we know that we are working with United
Speaker 2: States that is short a lot of housing here. And
Speaker 2: if you rewind about one to two years ago, there
Speaker 2: was a conversation about flipping some of these multi family
Speaker 2: properties or office properties excuse me, into multi family properties.
Speaker 2: Is that something that's still being discussed.
Speaker 8: It's definitely being discussed, and it's happening, and it's going
Speaker 8: to happen more. It's not yet nearly as significant as
Speaker 8: I think the logic would tell you it should be,
Speaker 8: both in terms of how much housing is needed and
Speaker 8: how much unused office space there is, so there will
Speaker 8: be more of it. But it's definitely starting to happen.
Speaker 8: And New York City is an interesting place to look
Speaker 8: at on that. You know, right now there is excess
Speaker 8: inventory of office space, but the excess inventory and the
Speaker 8: availability is really at the lower end and that's the
Speaker 8: stuff that's going to get turned into residential. The higher
Speaker 8: end office space is full and there's not availability, and
Speaker 8: so tenants that want large blocks of high end new
Speaker 8: space are really having to pay up for it if
Speaker 8: they can even find it at all. And interestingly enough,
Speaker 8: we're starting to see signs of new development of New
Speaker 8: York office buildings.
Speaker 2: So you mentioned the new development here in New York
Speaker 2: for office buildings. Talk to me just regionally what the
Speaker 2: activity is looking like when we think about leasing office leasing.
Speaker 8: So leasing is different than building and on the leasing side, again,
Speaker 8: New York early is one market where the leasing activity
Speaker 8: has been the most robust. You know, if you look
Speaker 8: across the country, San Francisco is a is a kind
Speaker 8: of the two markets kind of kind of get paired
Speaker 8: together as almost like the opposites of like how how
Speaker 8: office markets have responded post COVID. People came back to
Speaker 8: the office faster in New York. The demand came back
Speaker 8: faster in New York. San Francisco is a little bit behind,
Speaker 8: but we're starting to hear signs AI is causing some
Speaker 8: some ramp up demand there for office space. Leasing is
Speaker 8: starting to pick up as well as a result of that,
Speaker 8: I mean, then you look around to some other markets,
Speaker 8: you know, they all have their local nuances. D C
Speaker 8: is a market where, you know, kind of in the
Speaker 8: in the Northern Virginia, you've got you've got tech and defense,
Speaker 8: you know, really driving demand and driving leasing, and in
Speaker 8: the disc strict itself, maybe a little bit slower. So
Speaker 8: you know, and if you look around suburbs, probably not
Speaker 8: nearly as as a significant demand as urban centers, you know,
Speaker 8: but it's really going to differ market by market.
Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify,
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,
Speaker 1: ten am to noon Eastern on Bloomberg dot com, the
Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You
Speaker 1: can also watch us live every weekday on YouTube and
Speaker 1: always on the Bloomberg terminal