WEBVTT - Kroger Rises After Lifting Outlook on Healthy Grocery Demand 0:00:02.720 --> 0:00:10.600 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 0:00:14.640 --> 0:00:17.880 Eastern on Apple Cockplay and Android Auto with the Bloomberg 0:00:17.920 --> 0:00:21.000 Business App. Listen on demand wherever you get your podcasts, 0:00:21.360 --> 0:00:23.520 or watch us live on YouTube. 0:00:24.480 --> 0:00:27.040 Let's move over to talk a little bit about food. 0:00:27.200 --> 0:00:29.200 I love to talk about food here, and we're talking 0:00:29.240 --> 0:00:30.320 about the grocery. 0:00:29.960 --> 0:00:30.960 Industry is growing. 0:00:31.160 --> 0:00:33.560 Oh, I need too, So this is very timely here. 0:00:33.800 --> 0:00:37.479 But apparently we're seeing through Kroger's results here that it's 0:00:37.520 --> 0:00:40.840 attracting value seeking customers who are now opting to eat 0:00:40.840 --> 0:00:43.520 at home as opposed to potentially ordering out. I don't 0:00:43.520 --> 0:00:45.600 know that I can include myself in that segment, but 0:00:45.640 --> 0:00:48.320 clearly the street likes what Kroger has to say here. 0:00:48.360 --> 0:00:50.240 We're seeing shares that are up as much as four 0:00:50.240 --> 0:00:52.839 point two percent in trading today, now trading about one 0:00:53.080 --> 0:00:55.720 point five percent higher. It's really been a great year 0:00:55.720 --> 0:00:57.920 for Kroger. They're up about eleven percent year to date. 0:00:58.000 --> 0:00:59.960 But we are joined by somebody who's able to break 0:01:00.160 --> 0:01:02.360 down more in depth with us for us, that's Jennifer 0:01:02.360 --> 0:01:05.920 Bartash's She has Bloomberg intelligenc Andior analysts of retail staples 0:01:05.920 --> 0:01:09.080 and packaged food here to break down these earnings for us. Jen, 0:01:09.319 --> 0:01:11.520 talk to us about what you're seeing from this report. 0:01:11.600 --> 0:01:14.920 Are people apparently cooking more well? 0:01:15.160 --> 0:01:18.560 It would it would appear so, especially with middle and 0:01:18.600 --> 0:01:20.960 lower income consumers, they're being a little bit more careful 0:01:20.959 --> 0:01:24.200 about where they're spending. And this is something we usually 0:01:24.240 --> 0:01:27.000 see when there's any kind of thread of inflation, people 0:01:27.160 --> 0:01:30.240 sort of retrench and they cook more at home. And 0:01:30.280 --> 0:01:33.880 it's also complemented by a growth in awareness about health 0:01:33.920 --> 0:01:37.360 and wellness, whether it's gop one drug related or whether 0:01:37.400 --> 0:01:40.640 it's just self induced. People are trying to live healthier 0:01:40.640 --> 0:01:43.559 lives and that's generally easier when you prepare your own food. 0:01:44.319 --> 0:01:48.520 So when you look at comparable sales, Coger's saying that 0:01:48.560 --> 0:01:50.639 for the full year and now it sees comparable sales 0:01:50.640 --> 0:01:53.000 gaining three point four percent versus a previous guide of 0:01:53.040 --> 0:01:55.800 three and a quarter percent, so kind of a marginal 0:01:55.920 --> 0:02:00.720 move higher. Jen, what does Kroger's future look like overall? 0:02:00.760 --> 0:02:04.240 Because not so long ago it was trying to get 0:02:04.280 --> 0:02:06.840 through this deal with Albertson's This twenty four point six 0:02:06.920 --> 0:02:09.760 billion dollar deal that it later abandoned and is now 0:02:10.160 --> 0:02:11.560 stuck in a legal mier. 0:02:13.160 --> 0:02:15.160 Yeah, it's you know, Kroger, I think is at the 0:02:15.160 --> 0:02:18.520 point where they're retrenching and they're reevaluating their core business 0:02:18.520 --> 0:02:21.280 and they're figuring out what is the best way to 0:02:21.320 --> 0:02:23.840 move forward, and I think there's some really encouraging signs 0:02:23.880 --> 0:02:27.440 in the business of how they're approaching that. The first thing, 0:02:27.440 --> 0:02:29.280 and they've talked about this a little bit over the 0:02:29.320 --> 0:02:31.799 last couple quarters, is they're really taking a hard look 0:02:31.800 --> 0:02:34.520 at their e commerce business and all of the investment 0:02:34.600 --> 0:02:37.800 that they had lined up for the ocado automated fulfillment 0:02:37.840 --> 0:02:41.040 centers that they were building. So we're expecting to hear 0:02:41.080 --> 0:02:43.839 a lot more detail on that next quarter. But they're 0:02:43.880 --> 0:02:48.000 also talking about really looking at non core assets, and 0:02:48.080 --> 0:02:51.360 so to us, that means things like the Fredmeyer jewelry business, 0:02:51.720 --> 0:02:55.360 it means the Vitacost dot com business. So that approach 0:02:55.400 --> 0:02:59.160 to becoming leaner and more efficient and more cost effective 0:02:59.639 --> 0:03:02.919 is really a positive trajectory for the company. 0:03:03.600 --> 0:03:05.520 And just jumping in here with a headline that just 0:03:05.560 --> 0:03:07.840 cross the bloomber gets at hothead, which means it's one 0:03:07.840 --> 0:03:10.440 of those that we deem really important. Gold has just 0:03:10.440 --> 0:03:15.880 surpassed its inflation adjusted record high set in nineteen eighty. So, Nora, 0:03:16.000 --> 0:03:18.720 we talked about that everything rally, whether it's risky assets 0:03:18.760 --> 0:03:21.320 or whether it's safe haven assets. You see that reflected 0:03:21.320 --> 0:03:25.600 in gold prices, gold futures right now higher at the moment, 0:03:25.919 --> 0:03:29.120 and you know, we continue to see this plowing into 0:03:29.560 --> 0:03:30.560 safe haven assets. 0:03:30.600 --> 0:03:32.960 Absolutely, we're seeing that across the board. So this is 0:03:32.960 --> 0:03:34.440 definitely something to look at. 0:03:35.080 --> 0:03:36.040 Jen, back to you. 0:03:36.080 --> 0:03:37.640 I want to talk a bit more about the e 0:03:37.720 --> 0:03:40.680 commerce aspect that Krigger has going on here. So essentially, 0:03:40.680 --> 0:03:43.480 do they have online ordering so that they're able to 0:03:43.480 --> 0:03:46.240 deliver groceries to consumers or how does this work? 0:03:46.960 --> 0:03:49.560 They do, so, they offer the ability to order online 0:03:50.000 --> 0:03:52.240 and then they fill that order in one of two ways. 0:03:52.240 --> 0:03:55.200 They either fill it from one of these highly automated 0:03:56.520 --> 0:03:59.040 fulfillment centers, which is ocado driven and those are the 0:03:59.080 --> 0:04:01.120 ones with all the robots that do all the work 0:04:01.160 --> 0:04:04.480 that you see images of, or and which is much 0:04:04.520 --> 0:04:07.200 more common in the network, they fill those orders in stores, 0:04:07.560 --> 0:04:10.280 so somebody walks around the store, fills the orders and 0:04:10.360 --> 0:04:12.520 people either pick it up or it is delivered from 0:04:12.520 --> 0:04:15.640 the store to their house, so they have these, you know, 0:04:15.680 --> 0:04:19.080 both of these models that are working well. What's interesting 0:04:19.160 --> 0:04:21.520 is that Kroeger said today, for the first time ever, 0:04:22.000 --> 0:04:25.359 delivery sales in terms of e commerce outpace those for 0:04:25.600 --> 0:04:28.800 the curb side pickup, and so that just shows how 0:04:28.880 --> 0:04:32.120 much the consumer has shifted to where they would much 0:04:32.200 --> 0:04:35.400 rather have things brought to them than to stop at 0:04:35.440 --> 0:04:37.160 a store, even if it's only to stop at the 0:04:37.200 --> 0:04:39.880 curb outside the store to pick up their order. So 0:04:39.920 --> 0:04:42.480 there's there's definitely some interesting trends moving there, and I 0:04:42.480 --> 0:04:45.240 think Kroeger's just looking to stay in tune with where 0:04:45.240 --> 0:04:46.600 the customer is moving. 0:04:46.560 --> 0:04:48.640 Right, I mean, they certainly want to cater to the 0:04:48.640 --> 0:04:52.880 customer and the changing preferences of this customer. I'm curious 0:04:52.880 --> 0:04:57.480 about the profitability of this strategy. Does e commerce Are 0:04:57.520 --> 0:04:59.840 the profit margins in delivery higher? 0:05:01.120 --> 0:05:01.280 Uh? 0:05:01.400 --> 0:05:05.839 No, Generally speaking, they're lower. And so that's why it 0:05:05.880 --> 0:05:08.839 becomes so important to be able to be super cost 0:05:08.839 --> 0:05:13.560 efficient when you're filling orders. When you're talking about groceries. Historically, 0:05:14.000 --> 0:05:16.360 you know, grocery as an industry is a very low 0:05:16.400 --> 0:05:19.480 margin industry to begin with. But when people all used 0:05:19.520 --> 0:05:21.680 to go to the grocery store, you were doing the 0:05:21.720 --> 0:05:24.760 fulfillment and you're doing the last mile delivery yourself. You 0:05:24.800 --> 0:05:26.520 took it, you put it in your cart, you bait 0:05:26.560 --> 0:05:28.880 for it, you took it home. You know, is a 0:05:29.080 --> 0:05:32.600 that is the most profitable transaction that a grocery store happens. 0:05:32.920 --> 0:05:35.039 The second most profitable is when you go to the 0:05:35.080 --> 0:05:37.240 store and pick it up, so that curb side, you know, 0:05:37.320 --> 0:05:40.440 that curb side pickup. And then the least profitable is 0:05:40.480 --> 0:05:42.320 when they have to bring it to you because now 0:05:42.360 --> 0:05:45.520 the retailer is absorbing the cost of that last mile 0:05:45.600 --> 0:05:48.760 delivery and getting it to your house. So that's why 0:05:48.800 --> 0:05:51.920 there's such a focus on looking at the operations, looking 0:05:51.960 --> 0:05:55.040 for ways to cut cost to help move that needle 0:05:55.040 --> 0:05:57.919 of profitability to where it will be neutral, you know, 0:05:58.080 --> 0:06:01.000 or similar to what would be for an in store 0:06:01.040 --> 0:06:02.600 shopping experience. 0:06:02.200 --> 0:06:03.880 Unless they start to charge people for that. 0:06:03.960 --> 0:06:06.200 I think about door Dash and Uber eats and all 0:06:06.240 --> 0:06:08.880 those services where you know, the delivery charge is almost 0:06:08.920 --> 0:06:10.840 half of what the actual product costs. 0:06:12.360 --> 0:06:14.680 Yeah, the delivery charges help, but the other thing that's 0:06:14.720 --> 0:06:17.599 probably the more important part that's a little less visible 0:06:17.600 --> 0:06:20.880 to the public is the revenue that they generate from 0:06:21.000 --> 0:06:24.960 ad sales, and so that's when you're online and you 0:06:25.360 --> 0:06:28.120 get special offers for a certain brand of cereal or 0:06:28.200 --> 0:06:32.400 certain type of soup. You know, those that advertising sales 0:06:32.480 --> 0:06:36.400 are driven through their retail media networks, and that is 0:06:36.440 --> 0:06:40.320 a very very high margin, very profitable business. So the 0:06:40.360 --> 0:06:45.240 bigger that online e commerce becomes, the more effective they 0:06:45.240 --> 0:06:49.680 are at managing that that advertising business. That helps offset 0:06:49.760 --> 0:06:53.400 the profitability and the drain on the delivery costs as well. 0:06:54.839 --> 0:06:57.680 Stay with us more from Bloomberg Intelligence coming up after this. 0:07:01.480 --> 0:07:05.200 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:07:05.279 --> 0:07:08.359 weekdays at ten am Eastern on Apple, Cocklay and Android 0:07:08.400 --> 0:07:11.680 Auto with the Bloomberg Business App. Listen on demand wherever 0:07:11.760 --> 0:07:15.320 you get your podcasts, or watch us live on YouTube. 0:07:16.120 --> 0:07:18.160 I want to move on to a conversation in the 0:07:18.200 --> 0:07:21.280 consumer space. Let's talk about CBS and ALTA and how 0:07:21.320 --> 0:07:25.080 they can spur growth by connecting wellness with beauty. We're 0:07:25.120 --> 0:07:29.560 joined by Lindsay Dutch. She's Bloomberg Intelligence Consumer Hardline Senior Analyst, 0:07:29.840 --> 0:07:31.640 and we have a lot to dig into here. 0:07:31.720 --> 0:07:33.480 Lindsay tell us what's. 0:07:33.280 --> 0:07:35.520 Going on in this space and how CBS and ULTA 0:07:35.520 --> 0:07:38.160 could potentially connect beauty and wellness. 0:07:38.840 --> 0:07:42.640 Hi, Nora, thanks for having me. The wellness market is huge, 0:07:42.720 --> 0:07:46.480 four hundred to five hundred billion dollars at least, that's 0:07:46.520 --> 0:07:48.920 four to five times the beauty market alone. Beauty is 0:07:48.920 --> 0:07:53.760 closer to one hundred billion dollar opportunity. But in our survey, 0:07:54.120 --> 0:07:58.080 you know, we found that seventy percent of people prefer 0:07:58.200 --> 0:08:01.080 to shop beauty and wellness together. So we think that 0:08:01.240 --> 0:08:04.560 the opportunity for retailers, both big and small, to sort 0:08:04.600 --> 0:08:07.800 of break into this wellness category and gain share is 0:08:07.840 --> 0:08:10.480 to bring the two categories together with marketing in the 0:08:10.520 --> 0:08:13.640 store and really get people to shop across both. 0:08:14.320 --> 0:08:16.600 Let me ask an obvious question, lindsay, what is the 0:08:16.600 --> 0:08:18.679 difference between wellness and beauty? 0:08:19.000 --> 0:08:21.440 Is wellness products or is wellness services? 0:08:22.680 --> 0:08:26.160 So in this, you know, in this conversation, we were 0:08:26.240 --> 0:08:29.240 really thinking about products, but the wellness market is very 0:08:29.280 --> 0:08:33.040 difficult to define. So we're thinking about you know, you know, 0:08:33.280 --> 0:08:37.319 people are leaning into you know, preventative routines, they're thinking 0:08:37.320 --> 0:08:41.320 about longevity, they're trying to improve their sleep, their digestion. 0:08:42.440 --> 0:08:44.720 They also want to look better, they want to feel better, 0:08:45.080 --> 0:08:50.240 so it's really across all, you know, aspects of you know, mind, 0:08:50.320 --> 0:08:53.440 body and wellness, and but products that you would be 0:08:53.600 --> 0:08:55.560 like taking off the off the shelf from like a 0:08:55.600 --> 0:08:57.480 CBS or a Walmart type of product. 0:08:58.120 --> 0:09:00.959 So my question here then is if products are these 0:09:01.000 --> 0:09:05.000 products that are regulated in any way, So. 0:09:04.920 --> 0:09:06.680 Some of them are, some of them are not. 0:09:06.960 --> 0:09:09.319 I mean, if you think about maybe your social feed, 0:09:09.400 --> 0:09:13.560 you probably see a lot of you know, influencers touting products. 0:09:13.600 --> 0:09:15.800 You know, there's a big focus on gut health recently 0:09:15.840 --> 0:09:17.559 that I've seen. You know, a lot of people are 0:09:17.559 --> 0:09:21.760 buying into you know, that idea and thinking about that 0:09:21.840 --> 0:09:24.960 and buying products for that. And the bottom line is 0:09:25.000 --> 0:09:27.240 when they shop for things that make them feel better 0:09:27.240 --> 0:09:29.720 on the inside, they're also shopping for things that make 0:09:29.760 --> 0:09:31.400 them look better on the outside. 0:09:31.760 --> 0:09:33.959 You know what's interesting as I'm reading through your research 0:09:34.000 --> 0:09:37.960 report here, one of your points is beauty enthusiasts also 0:09:38.080 --> 0:09:40.560 like to shop wellness products, and you're mentioning how a 0:09:40.559 --> 0:09:42.920 lot of people want to pour into themselves on the 0:09:42.920 --> 0:09:45.120 inside as well as the outside. Can you talk a 0:09:45.120 --> 0:09:48.160 bit about you know, influencer culture and how this could 0:09:48.160 --> 0:09:51.800 potentially also be adding to this push You mentioned CBS 0:09:51.800 --> 0:09:54.760 al to Walmart, what what does this look like right now? 0:09:54.800 --> 0:09:55.760 What's the landscape? 0:09:56.920 --> 0:09:57.679 Okay, So if we. 0:09:57.640 --> 0:09:59.760 Take a step back, so we think, you know, some 0:09:59.800 --> 0:10:02.040 of the biggest players in this space, it would not 0:10:02.080 --> 0:10:04.720 be surprising to you. You know, you're talking about an Amazon, 0:10:04.800 --> 0:10:08.199 You're talking about Walmart, CBS, you know, Dollar General I 0:10:08.200 --> 0:10:11.199 think also has a big, you know hold in this space. 0:10:11.520 --> 0:10:13.320 But then there's a lot of smaller retailers that are 0:10:13.360 --> 0:10:15.680 also looking to get into this space. So Aulti Beauty, 0:10:15.720 --> 0:10:19.800 for example, they have about seven hundred SKUs that are 0:10:19.840 --> 0:10:23.200 devoted to wellness. That's that's a small portion of the 0:10:23.280 --> 0:10:26.079 twenty thousand plus SKUs that they carry in their store. 0:10:26.120 --> 0:10:29.360 But they're really getting trying to push into this market. 0:10:29.400 --> 0:10:32.320 They think that wellness could be a billion dollar opportunity 0:10:32.400 --> 0:10:36.920 for them. But I think retailers both big and small 0:10:37.120 --> 0:10:40.559 can find an opportunity in this big market. Also because 0:10:40.600 --> 0:10:43.120 the growth in the market, you know, exceeds lots of 0:10:43.120 --> 0:10:46.960 other categories, including beauty. If we think about sort of 0:10:46.960 --> 0:10:50.200 the influencer angle that that you talked about, you know, 0:10:50.200 --> 0:10:53.800 the survey is really interesting because you know, people say, 0:10:54.440 --> 0:10:56.360 you know, a large amount of people said that they 0:10:56.360 --> 0:11:00.520 prefer an expert opinion and I think that's why they 0:11:00.600 --> 0:11:04.079 like to shop at places like CBS. The pharmacist is 0:11:04.160 --> 0:11:06.679 right there, you can get their opinion. But then they 0:11:06.760 --> 0:11:10.120 also said thirty four percent said that they value a 0:11:10.160 --> 0:11:14.199 celebrity or an influencer backing a product. So there's sort 0:11:14.240 --> 0:11:16.000 of like two different things going on. And there's a 0:11:16.000 --> 0:11:19.560 lot of misinformation in the social media world, you know, 0:11:19.640 --> 0:11:22.760 so we're sort of seeing consumers lean into both, you know, 0:11:22.800 --> 0:11:26.560 that social viral product and then also wanting an expert 0:11:26.600 --> 0:11:27.880 to weigh in somehow. 0:11:27.880 --> 0:11:31.360 I feel like we might see a scenario where CBS 0:11:31.520 --> 0:11:35.320 or Alta will now have an influencer at the store. Yeah, 0:11:35.360 --> 0:11:40.320 actually provide advice, lindsay, when it comes to products related 0:11:40.360 --> 0:11:42.960 to wellness that these stores can stock, what would they make, 0:11:43.120 --> 0:11:46.199 what would they give up shelf space for? Meaning what 0:11:46.240 --> 0:11:49.480 would they remove from their stores in order to make 0:11:49.520 --> 0:11:53.000 available products that relate to longevity, sleep nutrition? 0:11:54.320 --> 0:11:57.400 I don't think, yeah, I don't think they are necessarily 0:11:57.440 --> 0:12:01.120 removing things. I think, you know, they might just be 0:12:01.200 --> 0:12:02.280 doing sort of an end cap. 0:12:02.440 --> 0:12:02.600 You know. 0:12:02.640 --> 0:12:05.160 Alta has been working really hard to make their wellness 0:12:05.200 --> 0:12:08.560 section a lot bigger, you know, and they go through 0:12:08.679 --> 0:12:12.040 their brand negotiations very often, especially with their merging brands, 0:12:12.040 --> 0:12:14.560 so you might be sort of swapping one emerging for 0:12:14.640 --> 0:12:19.280 another in a different category. I also think that for wellness, 0:12:19.360 --> 0:12:23.120 you know, wellness really lends itself well to online, and 0:12:23.160 --> 0:12:25.920 obviously online is an endless aisle. You can carry as 0:12:25.960 --> 0:12:28.880 many products as you want. And the reasons for that 0:12:29.040 --> 0:12:31.520 is really that, like wellness products are often in like 0:12:31.559 --> 0:12:34.960 a thirty day supply, So that's something that if you 0:12:35.040 --> 0:12:39.160 start taking a vitamin or any type of supplement, creatine, 0:12:39.240 --> 0:12:41.280 whatever you're going to, you know want to take that 0:12:41.320 --> 0:12:43.040 every single day, and you don't want to run out. 0:12:43.080 --> 0:12:46.240 So I think online subscribe and save models are going 0:12:46.280 --> 0:12:48.160 to be really important in this space. 0:12:48.840 --> 0:12:51.760 Stay with us more from Bloomberg Intelligence coming up after this. 0:12:55.480 --> 0:12:59.160 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:12:59.240 --> 0:13:02.840 weekdays at tenn on Apple, Cocklay and Android Auto with 0:13:02.920 --> 0:13:06.040 the Bloomberg Business app, Listen on demand wherever you get 0:13:06.040 --> 0:13:09.280 your podcasts, or watch us live on YouTube. 0:13:10.520 --> 0:13:14.240 Let's move over into the airlines industry. We are about 0:13:14.280 --> 0:13:17.160 to be joined here by George Ferguson. He's Bloomberg Intelligence 0:13:17.200 --> 0:13:21.040 senior Aerospace, Defense and airlines analysts George, we always love 0:13:21.080 --> 0:13:23.679 speaking with you. What's the leadst right now with Delta. 0:13:25.120 --> 0:13:28.320 Well, so Delta came out with an eight K this morning, 0:13:28.960 --> 0:13:31.920 you know where they disclosed to the marketplace that they're 0:13:31.960 --> 0:13:34.640 going to speak at the Laguna conference that gets Morgan 0:13:34.640 --> 0:13:40.120 Stanley's Laguna's conference, and they said that their revenue numbers 0:13:40.160 --> 0:13:43.560 would be at the high end of the original range 0:13:43.640 --> 0:13:46.200 they gave. So I guess that's a good sign. I 0:13:46.200 --> 0:13:50.760 guess that fairs have come in in the current quarter 0:13:51.320 --> 0:13:54.319 at least not worse than what Delta thought. Right, and 0:13:54.360 --> 0:13:57.200 again maybe ooched a little bit to the higher end 0:13:57.200 --> 0:14:00.920 of their expectations. We didn't see any change to EPs 0:14:01.000 --> 0:14:04.640 though guidance or any other guidance, So it makes you 0:14:04.720 --> 0:14:08.280 wonder if some of the expenses aren't a little bit higher. 0:14:08.320 --> 0:14:12.480 So I thought it was. It was okay news, but 0:14:14.320 --> 0:14:18.520 this was sort of raised guidance because the quarter's been 0:14:18.520 --> 0:14:20.000 going much better than they expected. 0:14:20.160 --> 0:14:22.400 Okay, So it was encouraging, but it was not in 0:14:22.600 --> 0:14:25.280 all clear like, let's increase our guidance and tell you 0:14:25.320 --> 0:14:29.040 that things are notably better. What's interesting is that the 0:14:29.080 --> 0:14:31.960 CEO at Bassian spoke at the Economic Club of Washington 0:14:32.160 --> 0:14:35.200 earlier this week and gave a little more color about 0:14:35.240 --> 0:14:39.160 what he's seen, and his takeaway was that the lower 0:14:39.160 --> 0:14:42.400 income customers remain challenged, but they're seeing a lot more 0:14:42.480 --> 0:14:45.440 enthusiasm from business travelers and premium customers, and this is 0:14:45.480 --> 0:14:49.000 where Delta has really staked its claim on that segment 0:14:49.040 --> 0:14:49.560 of the market. 0:14:50.320 --> 0:14:53.960 Agreed, Agreed. I mean we saw a CPI number this morning, 0:14:54.040 --> 0:14:56.840 right that has airfares in it. It was up about 0:14:56.880 --> 0:14:59.960 three percent year every year, and I think the sequential 0:15:00.240 --> 0:15:03.120 was up fourst to five if I remember correctly, So 0:15:03.200 --> 0:15:07.680 I mean those were decently strong numbers for airfare growth. 0:15:08.320 --> 0:15:10.960 But I still suspect we have the same trend going 0:15:11.000 --> 0:15:13.520 on inside the business that we saw in two Q, 0:15:13.680 --> 0:15:15.760 and that is as you said, I think the high 0:15:15.880 --> 0:15:21.080 end consumer continues to travel and want more amenities, want 0:15:21.080 --> 0:15:25.840 better seating as they travel. So if you're American United Delta, 0:15:26.480 --> 0:15:30.080 you're well positioned to capture that and subsidize what I 0:15:30.080 --> 0:15:33.200 think is probably still weakness at the lower end of 0:15:33.200 --> 0:15:34.640 the business. I think as we gin into three Q, 0:15:34.760 --> 0:15:37.800 will hear that. You know, if you're a basic economy flyer, 0:15:38.360 --> 0:15:41.720 you're managing other increased costs in your budget and so 0:15:41.800 --> 0:15:45.320 you may be not flying or you know, flying less, 0:15:45.720 --> 0:15:46.560 trading down a bit. 0:15:47.360 --> 0:15:48.880 George's corporate travel back. 0:15:50.280 --> 0:15:53.080 So at the end of two Q, I think, you know, 0:15:53.080 --> 0:15:56.800 what we heard was that corporate travel was was starting 0:15:56.800 --> 0:16:02.280 to surpass or twenty nineteen levels. So so we definitely 0:16:02.280 --> 0:16:06.760 know corporate travel has returned slower than a leisure and 0:16:06.800 --> 0:16:10.680 I think, frankly, it's probably very structural and will continue 0:16:10.760 --> 0:16:16.040 this way. I think there are industries like consultants that 0:16:16.160 --> 0:16:20.040 traditionally went sat at their at their customer's offices to 0:16:20.080 --> 0:16:22.400 do their work. I think, you know, now we've gotten 0:16:22.440 --> 0:16:25.040 a lot more comfortable with video conferencing and things like that. 0:16:25.440 --> 0:16:29.360 I think you'll you'll miss some of that old demand 0:16:29.440 --> 0:16:33.880 for corporate that you know, had supported airfares. I think 0:16:33.920 --> 0:16:37.000 it has become much more of a leisure business. But 0:16:37.200 --> 0:16:38.680 three Q is going to be a wash on that 0:16:38.720 --> 0:16:41.960 because three Q is really a leisure story typically for 0:16:42.000 --> 0:16:44.000 the airlines. Well, one more thinking for you. 0:16:45.360 --> 0:16:48.240 Stay with us. More from Bloomberg Intelligence coming up after this. 0:16:52.000 --> 0:16:55.680 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:16:55.760 --> 0:16:59.120 weekdays at ten am Eastern on Applecarcklay and Android Auto 0:16:59.280 --> 0:17:02.320 with the Bloomberg Business Up. Listen on demand wherever you 0:17:02.360 --> 0:17:05.800 get your podcasts, or watch us live on YouTube. 0:17:06.920 --> 0:17:09.199 We're going to break down what's going on in the 0:17:09.200 --> 0:17:11.280 real estate market. Of course, this is an area that 0:17:11.320 --> 0:17:13.840 people are always focused on, especially as it pertains to 0:17:14.400 --> 0:17:17.119 real estate investment trust. That's a place where you're seeing 0:17:17.119 --> 0:17:20.920 so many different segments really having some different moves here. 0:17:21.040 --> 0:17:24.000 And we're going to be joined by one person who 0:17:24.080 --> 0:17:27.560 is all over this, Jeffrey Lingbaum. He is Bloomberg Intelligence 0:17:27.600 --> 0:17:30.199 senior US RITE analysts, and we want to kind of 0:17:30.200 --> 0:17:33.240 discuss and break down what's the latest with real estate. Jeff, 0:17:33.760 --> 0:17:35.640 what did you take away from these earnings is I'm 0:17:35.640 --> 0:17:38.359 looking at the rate index here in the s top 0:17:38.440 --> 0:17:41.080 five hundred. It's only up about one point nine percent 0:17:41.200 --> 0:17:43.280 this year, so nothing to run home about. But what 0:17:43.320 --> 0:17:45.720 were you really seeing through these reports this earning season? 0:17:46.920 --> 0:17:49.879 Yeah, thanks, Nora, thanks for having me on. I mean, 0:17:49.920 --> 0:17:51.879 one of the things, one of the things we're thinking 0:17:51.880 --> 0:17:55.840 a lot about is what the future looks like. You know, 0:17:56.240 --> 0:18:00.520 the earnings that come out, you know, you know, are 0:18:00.640 --> 0:18:03.520 less important than the outlook. And one of the sectors 0:18:03.520 --> 0:18:08.680 we're looking a lot at is residential rental residential. We're 0:18:08.720 --> 0:18:11.520 in a cycle now where rent growth has been slowing, 0:18:11.840 --> 0:18:15.399 impacted by some heavy supply, but the opportunity exists for 0:18:15.480 --> 0:18:18.320 rent growth to accelerate into twenty twenty six. And one 0:18:18.359 --> 0:18:20.160 of the things we just put out a piece about 0:18:20.240 --> 0:18:22.439 is the comparison between the cost to rent and the 0:18:22.440 --> 0:18:25.680 cost to own, and owning a home is still significantly 0:18:25.760 --> 0:18:28.879 higher than renting, and the reats that play in the 0:18:29.200 --> 0:18:32.640 rental residential space are poised to benefit from that, both 0:18:32.640 --> 0:18:35.600 on the apartment side and on the single family rental side. 0:18:35.920 --> 0:18:37.720 And so I think that as we look forward to 0:18:37.720 --> 0:18:40.720 the next year, we could see rental growth accelerate for 0:18:40.800 --> 0:18:41.359 those guys. 0:18:42.000 --> 0:18:46.440 So are you seeing any bifurcation at all between multifamily 0:18:46.680 --> 0:18:48.560 rates versus single family rentals? 0:18:49.680 --> 0:18:53.560 Well, single family rentals have had faster growth over the 0:18:53.600 --> 0:18:58.040 past year as multifamily growth slowed on the rental side. 0:18:58.040 --> 0:19:02.919 On the rental revenue side, and frankly, there's less competitive 0:19:02.960 --> 0:19:07.440 supply for single family rentals than there is for multifamily rentals. 0:19:08.400 --> 0:19:11.439 The growth rate may slow a little bit for single 0:19:11.440 --> 0:19:13.480 family just because their comps are a little bit harder 0:19:13.760 --> 0:19:17.320 as multifamily rents start to rise. A little bit, but 0:19:17.480 --> 0:19:19.920 for the most part, I think they both are poised 0:19:19.920 --> 0:19:25.480 to benefit from this you know, attractive rental environment compared 0:19:25.520 --> 0:19:27.960 to the cost to buy homes as mortgage rates remain 0:19:28.000 --> 0:19:31.720 at elevated, sticky, sticky, elevated high and there's just not 0:19:31.880 --> 0:19:35.840 enough inventory and rens renters are winning from that well. Jeff. 0:19:35.920 --> 0:19:39.040 Of course, we know that we are working with United 0:19:39.080 --> 0:19:41.520 States that is short a lot of housing here. And 0:19:41.560 --> 0:19:44.080 if you rewind about one to two years ago, there 0:19:44.119 --> 0:19:47.719 was a conversation about flipping some of these multi family 0:19:47.760 --> 0:19:51.639 properties or office properties excuse me, into multi family properties. 0:19:52.040 --> 0:19:53.639 Is that something that's still being discussed. 0:19:55.080 --> 0:19:58.280 It's definitely being discussed, and it's happening, and it's going 0:19:58.359 --> 0:20:02.000 to happen more. It's not yet nearly as significant as 0:20:02.119 --> 0:20:05.800 I think the logic would tell you it should be, 0:20:05.880 --> 0:20:09.320 both in terms of how much housing is needed and 0:20:09.359 --> 0:20:14.400 how much unused office space there is, so there will 0:20:14.440 --> 0:20:16.879 be more of it. But it's definitely starting to happen. 0:20:17.520 --> 0:20:19.840 And New York City is an interesting place to look 0:20:19.880 --> 0:20:24.200 at on that. You know, right now there is excess 0:20:24.240 --> 0:20:28.080 inventory of office space, but the excess inventory and the 0:20:28.119 --> 0:20:31.040 availability is really at the lower end and that's the 0:20:31.040 --> 0:20:34.840 stuff that's going to get turned into residential. The higher 0:20:35.000 --> 0:20:39.239 end office space is full and there's not availability, and 0:20:39.320 --> 0:20:43.560 so tenants that want large blocks of high end new 0:20:43.600 --> 0:20:46.240 space are really having to pay up for it if 0:20:46.240 --> 0:20:48.840 they can even find it at all. And interestingly enough, 0:20:48.880 --> 0:20:51.159 we're starting to see signs of new development of New 0:20:51.240 --> 0:20:52.400 York office buildings. 0:20:53.240 --> 0:20:55.760 So you mentioned the new development here in New York 0:20:55.800 --> 0:20:59.119 for office buildings. Talk to me just regionally what the 0:20:59.160 --> 0:21:02.680 activity is looking like when we think about leasing office leasing. 0:21:03.760 --> 0:21:07.280 So leasing is different than building and on the leasing side, again, 0:21:07.400 --> 0:21:11.360 New York early is one market where the leasing activity 0:21:11.400 --> 0:21:14.840 has been the most robust. You know, if you look 0:21:15.480 --> 0:21:18.600 across the country, San Francisco is a is a kind 0:21:18.600 --> 0:21:20.879 of the two markets kind of kind of get paired 0:21:20.880 --> 0:21:23.320 together as almost like the opposites of like how how 0:21:23.600 --> 0:21:27.520