1 00:00:00,280 --> 00:00:11,680 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is Bloomberg Intelligence 2 00:00:11,840 --> 00:00:12,920 Speaker 1: with Paul Sweeney. 3 00:00:13,080 --> 00:00:16,279 Speaker 2: The real app performance has been the US corporate high yield. 4 00:00:16,360 --> 00:00:20,040 Speaker 2: These are two big time blue chip companies. One person's 5 00:00:20,079 --> 00:00:22,880 Speaker 2: cast is another person's animal spirits. 6 00:00:22,560 --> 00:00:26,240 Speaker 1: Breaking market headlines and corporate news from across the globe. 7 00:00:26,280 --> 00:00:28,360 Speaker 3: Our viewer is if the economy is slowing down. 8 00:00:28,360 --> 00:00:30,400 Speaker 2: There is the possibility of the death spiral. 9 00:00:30,560 --> 00:00:33,080 Speaker 4: Full time competing in AI are going to power the future. 10 00:00:33,200 --> 00:00:36,479 Speaker 1: People are just buying everything with Tex Bloomberg Intelligence with 11 00:00:36,640 --> 00:00:40,840 Speaker 1: Paul Sweeney on Bloomberg Radio, YouTube and Bloomberg Originals. 12 00:00:41,840 --> 00:00:44,080 Speaker 3: I'm Paul Sweeney and I'm Scarlett Food filling in on 13 00:00:44,120 --> 00:00:45,160 Speaker 3: Bloomberg Intelligence. 14 00:00:45,200 --> 00:00:47,440 Speaker 2: On Today's Bloomberg Intelligence Show, we dig inside the big 15 00:00:47,479 --> 00:00:49,880 Speaker 2: business stories impacting Wall Street and the global markets. 16 00:00:49,960 --> 00:00:52,080 Speaker 3: Each and every week we provide in depth research and 17 00:00:52,159 --> 00:00:54,279 Speaker 3: data on some of the two thousand companies and one 18 00:00:54,320 --> 00:00:56,880 Speaker 3: hundred and thirty industries are analysts covered worldwide. 19 00:00:56,960 --> 00:00:58,720 Speaker 2: Today, we'll take a look at how the beverage make 20 00:00:58,760 --> 00:01:02,520 Speaker 2: it Kirk doctor Pepper looking to strengthen its struggling coffee. 21 00:01:02,160 --> 00:01:05,480 Speaker 3: Business, plus Echo Star agrees to sell spectrum licenses to 22 00:01:05,520 --> 00:01:07,600 Speaker 3: at and T. We'll discuss what the deal means for 23 00:01:07,640 --> 00:01:09,480 Speaker 3: the telecommunications companies, but. 24 00:01:09,560 --> 00:01:11,920 Speaker 2: First we begin with earnings from the chip giant and video. 25 00:01:12,200 --> 00:01:14,959 Speaker 2: This week, the world's most valuable publicly traded company reported 26 00:01:15,040 --> 00:01:16,839 Speaker 2: second quarter earnings that beat an allo. 27 00:01:16,840 --> 00:01:19,880 Speaker 3: Expectations, but investors were disappointed after in Vidia gave a 28 00:01:19,959 --> 00:01:23,080 Speaker 3: lukewarm revenue forecast for the current quarter. And this is 29 00:01:23,120 --> 00:01:26,480 Speaker 3: fueling concerns a massive run up and artificial intelligence spending 30 00:01:26,800 --> 00:01:27,280 Speaker 3: is slowing. 31 00:01:27,800 --> 00:01:28,160 Speaker 5: For more. 32 00:01:28,240 --> 00:01:30,680 Speaker 2: Scarlet and I were joined by Ku John Sabani, Bloomberg 33 00:01:30,680 --> 00:01:34,319 Speaker 2: Intelligence Senior semiconductor analysts, first to ask Kun John for 34 00:01:34,400 --> 00:01:36,080 Speaker 2: his take on Invidious results. 35 00:01:36,720 --> 00:01:38,880 Speaker 6: Yeah, like you said, it was once again a solid 36 00:01:38,959 --> 00:01:43,360 Speaker 6: sprinting guide. It checked all the fundamental key boxes, but 37 00:01:43,800 --> 00:01:46,039 Speaker 6: as has been the case with this name, you know, 38 00:01:46,080 --> 00:01:49,480 Speaker 6: the expectations always run higher, and maybe not all the 39 00:01:49,600 --> 00:01:52,880 Speaker 6: numbers were able to clear that high hurdle of expectations. 40 00:01:53,080 --> 00:01:56,600 Speaker 6: Specifically the data center compute numbers in two Q. You 41 00:01:56,640 --> 00:01:58,520 Speaker 6: would have liked to see that come in a little 42 00:01:58,560 --> 00:02:00,840 Speaker 6: bit high, but there were still a lot of strong 43 00:02:01,440 --> 00:02:06,320 Speaker 6: positive underlyings. One the networking was a significant beat, which 44 00:02:06,520 --> 00:02:09,639 Speaker 6: shows the strength and the attachment that they're getting from 45 00:02:09,680 --> 00:02:13,560 Speaker 6: their networking switches and chips in the Blackwell ramp. Second, 46 00:02:13,760 --> 00:02:17,240 Speaker 6: like you mentioned, the three Q consensus had China included, 47 00:02:17,560 --> 00:02:20,480 Speaker 6: and they still beat their three Q guide Without China. 48 00:02:20,520 --> 00:02:22,280 Speaker 6: If you add in the China guide of two to 49 00:02:22,360 --> 00:02:25,440 Speaker 6: five billion, they would have handsomely beaten the three Q numbers. 50 00:02:25,480 --> 00:02:29,640 Speaker 6: So that noisy sort of consensus shadowed the goodness that 51 00:02:29,760 --> 00:02:31,800 Speaker 6: is coming out of the guide of Nvidia. 52 00:02:32,040 --> 00:02:35,640 Speaker 2: All right, so what's the company telling us now about China? 53 00:02:35,639 --> 00:02:37,760 Speaker 2: Goes quite frankly, I just I'm reading the press. I 54 00:02:37,760 --> 00:02:39,040 Speaker 2: don't know whether they're going to be able to sell 55 00:02:39,040 --> 00:02:41,720 Speaker 2: stuff in the China or when, or whether they're gonna 56 00:02:41,760 --> 00:02:44,639 Speaker 2: have to give a fifteen percent cut to the US government. 57 00:02:45,240 --> 00:02:46,240 Speaker 2: How's that going to play out? 58 00:02:46,720 --> 00:02:49,880 Speaker 6: Yeah, so China still remains, you know, after learning sort 59 00:02:49,880 --> 00:02:54,079 Speaker 6: of that overhang in terms of uncertainty. The company did 60 00:02:54,280 --> 00:02:57,800 Speaker 6: guide to a two to five billion revenues from the 61 00:02:57,840 --> 00:03:01,560 Speaker 6: age twenty in China next quarter. Positive. That means they 62 00:03:01,760 --> 00:03:04,400 Speaker 6: feel confident that they'll at least be able to ship 63 00:03:04,880 --> 00:03:08,040 Speaker 6: some and get some of the revenues back. But yes, 64 00:03:08,240 --> 00:03:11,480 Speaker 6: you know, the spark here for the China story will 65 00:03:11,480 --> 00:03:14,760 Speaker 6: not appear until we have a clarity, and we believe 66 00:03:14,840 --> 00:03:17,880 Speaker 6: until they have a blackwell version of a China chip, 67 00:03:17,960 --> 00:03:20,560 Speaker 6: which they get approval from the government, that will end 68 00:03:20,639 --> 00:03:23,720 Speaker 6: up really open up a massive amount of revenues coming 69 00:03:23,720 --> 00:03:26,040 Speaker 6: from China. And there's a lot of hurdles you need 70 00:03:26,080 --> 00:03:28,639 Speaker 6: to clear. Right there's the government, which has nothing to 71 00:03:28,680 --> 00:03:31,160 Speaker 6: do with in media. The US China relationship needs to 72 00:03:31,200 --> 00:03:33,840 Speaker 6: get sorted out because now even China can put in 73 00:03:33,880 --> 00:03:38,520 Speaker 6: a roadblock from Nvidia selling or allowing their companies in 74 00:03:38,840 --> 00:03:41,920 Speaker 6: China from buying in media chip. So there is work 75 00:03:41,960 --> 00:03:44,800 Speaker 6: to be done. As you mentioned, the fifteen percent cut 76 00:03:44,920 --> 00:03:47,720 Speaker 6: is not ironed out in terms of laws. There is 77 00:03:48,000 --> 00:03:50,880 Speaker 6: we have heard new stories about potential lawsuits. So those 78 00:03:50,920 --> 00:03:55,360 Speaker 6: two government and geopolitical angle needs to be cleared before 79 00:03:55,720 --> 00:03:58,440 Speaker 6: we can start seeing billions of dollars of data center 80 00:03:58,560 --> 00:03:59,560 Speaker 6: China revenue coming in. 81 00:04:00,040 --> 00:04:03,200 Speaker 2: What's the competitive landscape here for these chip companies visa 82 00:04:03,280 --> 00:04:07,160 Speaker 2: v in Nvidia and just kind of positioning for AI. 83 00:04:07,400 --> 00:04:10,480 Speaker 2: I assume in Vidia's position A, who's kind of B 84 00:04:10,560 --> 00:04:10,760 Speaker 2: and C. 85 00:04:11,320 --> 00:04:14,880 Speaker 6: Yeah, So you know, the space is divided into two categories. 86 00:04:14,880 --> 00:04:17,440 Speaker 6: One is the merchant GPUs, which is what in media 87 00:04:17,520 --> 00:04:22,160 Speaker 6: sells and dominates that landscape. The sort of second competitor 88 00:04:22,240 --> 00:04:25,440 Speaker 6: there or the b is AMD, which is a very 89 00:04:25,480 --> 00:04:29,080 Speaker 6: far distant. You know, Nvidia today has about over ninety 90 00:04:29,120 --> 00:04:32,680 Speaker 6: percent in terms of revenue share and the remaining is 91 00:04:32,839 --> 00:04:35,640 Speaker 6: going to a very small to AMD. But there's another piece, 92 00:04:35,680 --> 00:04:37,920 Speaker 6: which is we call what we call A six, which 93 00:04:38,000 --> 00:04:41,479 Speaker 6: is what these big hyperscalers and cloud providers like Amazon 94 00:04:41,520 --> 00:04:44,279 Speaker 6: and Google designed their own chips. So that's sort of 95 00:04:44,279 --> 00:04:47,320 Speaker 6: the other competitive landscape where there's a risk of the 96 00:04:47,360 --> 00:04:51,680 Speaker 6: A six taking sort of share away from merchant GPUs 97 00:04:51,720 --> 00:04:54,720 Speaker 6: even though they don't compete directly for the same socket, 98 00:04:54,760 --> 00:04:56,280 Speaker 6: they could take away the wallet share. 99 00:04:57,080 --> 00:05:00,680 Speaker 2: And so does that mean companies like Nvidia have to 100 00:05:00,720 --> 00:05:03,080 Speaker 2: pour money into R and D for that next chip 101 00:05:03,080 --> 00:05:05,520 Speaker 2: to stay on front because I know in your business 102 00:05:06,480 --> 00:05:07,800 Speaker 2: technology changes quickly. 103 00:05:09,360 --> 00:05:12,080 Speaker 6: Yeah, definitely. I mean, look and Media has been even 104 00:05:12,160 --> 00:05:14,520 Speaker 6: before the AI event happened, and Media has been the 105 00:05:14,560 --> 00:05:18,000 Speaker 6: biggest R and D spender. They have continued and this 106 00:05:18,040 --> 00:05:20,320 Speaker 6: is what really got them to the stage of being 107 00:05:20,400 --> 00:05:23,120 Speaker 6: ahead of everyone else, and they have to continue spending 108 00:05:23,279 --> 00:05:26,040 Speaker 6: out spending everyone else to sort of keep that lead. 109 00:05:26,560 --> 00:05:28,640 Speaker 6: Their roadmap for the next two and a half years 110 00:05:28,680 --> 00:05:30,839 Speaker 6: does suggest that they should be able to keep this 111 00:05:31,000 --> 00:05:34,480 Speaker 6: lead handsomely, and for that it will definitely require high 112 00:05:34,600 --> 00:05:35,280 Speaker 6: R and D spending. 113 00:05:35,800 --> 00:05:38,640 Speaker 2: So this name to me who I'm used to stocks 114 00:05:38,640 --> 00:05:41,919 Speaker 2: trading in much lower multiples in my world, But this 115 00:05:42,000 --> 00:05:44,600 Speaker 2: seems like a stock that can actually earn its way, 116 00:05:44,680 --> 00:05:48,160 Speaker 2: and we have seen it earn its way into its multiple. 117 00:05:48,240 --> 00:05:50,039 Speaker 2: I mean, you can make an argument this is not 118 00:05:50,080 --> 00:05:51,000 Speaker 2: an expensive stock. 119 00:05:51,960 --> 00:05:55,520 Speaker 6: You're right. I mean, if you look at from a 120 00:05:55,680 --> 00:05:59,599 Speaker 6: historical perspective, it's actually the multiple is much more lower 121 00:05:59,640 --> 00:06:01,440 Speaker 6: than what we have seen in media trade in the 122 00:06:01,480 --> 00:06:04,880 Speaker 6: past two years. So given that fact, and also when 123 00:06:04,920 --> 00:06:07,479 Speaker 6: we look at the relative comparison, when you think about 124 00:06:07,560 --> 00:06:10,800 Speaker 6: a company growing at fifty percent and making revenue in 125 00:06:10,839 --> 00:06:14,919 Speaker 6: the hundreds of billions, that is unprecedented, especially growing with 126 00:06:15,080 --> 00:06:18,640 Speaker 6: gross margins of seventy mits or low seventy percent. I mean, 127 00:06:18,640 --> 00:06:21,599 Speaker 6: you're talking about a financial profile for software company, not 128 00:06:21,640 --> 00:06:24,680 Speaker 6: a semic network company here. So definitely, when you take 129 00:06:24,680 --> 00:06:27,880 Speaker 6: into those two things into account, it does seem that 130 00:06:28,040 --> 00:06:30,400 Speaker 6: it might not be really highly valued. 131 00:06:30,520 --> 00:06:34,599 Speaker 3: Our thanks to Kunjoan Shobani, Bloomberg Intelligence Senior semiconductor analyst, 132 00:06:35,080 --> 00:06:35,840 Speaker 3: we move next to. 133 00:06:35,800 --> 00:06:38,840 Speaker 2: The anti trust space as anti trust enforcement policies for 134 00:06:38,920 --> 00:06:42,760 Speaker 2: President Donald Trump's administration takes shape, dealmakers and large businesses 135 00:06:42,800 --> 00:06:44,560 Speaker 2: could see a glimmer of hope in some. 136 00:06:44,520 --> 00:06:47,320 Speaker 3: Areas, and one area is Media. Last week, next to 137 00:06:47,360 --> 00:06:49,839 Speaker 3: Our Media agreed to buy the TV station operator Tegna 138 00:06:49,920 --> 00:06:52,240 Speaker 3: for three and a half billion dollars, and this deal 139 00:06:52,279 --> 00:06:55,640 Speaker 3: will likely win FCC approval, according to Bloomberg Intelligence. 140 00:06:55,880 --> 00:06:59,000 Speaker 2: For more guests, Alexis Christophers and I were joined by 141 00:06:59,120 --> 00:07:03,360 Speaker 2: Jennifer ree Burg Intelligence senior litigation analyst. First asked jen 142 00:07:03,480 --> 00:07:06,080 Speaker 2: if the next Star Tegni deal will be approved by 143 00:07:06,080 --> 00:07:06,720 Speaker 2: the FCC. 144 00:07:07,080 --> 00:07:10,640 Speaker 7: I think in the end yes, because the timing was right. 145 00:07:10,680 --> 00:07:12,680 Speaker 7: You know, this isn't a deal. I think that these 146 00:07:12,720 --> 00:07:14,920 Speaker 7: companies could have gotten through a few years ago during 147 00:07:14,960 --> 00:07:17,680 Speaker 7: the Biden administration. But both of the rules that the 148 00:07:17,760 --> 00:07:19,640 Speaker 7: FCC has that would get in the way are in 149 00:07:19,720 --> 00:07:22,920 Speaker 7: the process of being changed as we speak, and Republican 150 00:07:22,960 --> 00:07:26,000 Speaker 7: Commissioners have for a long time wanted to change these rules. 151 00:07:26,240 --> 00:07:29,040 Speaker 7: So the first one is the thirty nine percent ownership cap. 152 00:07:29,120 --> 00:07:31,560 Speaker 7: You know that one company can't own or operate TV 153 00:07:31,640 --> 00:07:34,680 Speaker 7: stations that reach more than thirty nine percent of US households. 154 00:07:34,960 --> 00:07:37,840 Speaker 7: These companies say they'll reach eighty percent. So it's just 155 00:07:37,920 --> 00:07:40,080 Speaker 7: clear on its face that there's a problem there. But 156 00:07:40,120 --> 00:07:43,600 Speaker 7: the FCC is in a rule making process. They'll probably 157 00:07:43,640 --> 00:07:46,280 Speaker 7: have this rule, get rid of it, vacate it. We 158 00:07:46,320 --> 00:07:47,960 Speaker 7: think by the end of the year. You know, my 159 00:07:48,000 --> 00:07:50,840 Speaker 7: colleague Matt Chattenhelm is an expert on the FCC, and 160 00:07:50,880 --> 00:07:53,480 Speaker 7: we've talked about this quite a bit. That's probably going 161 00:07:53,520 --> 00:07:55,880 Speaker 7: to clear out of their way. There could be litigation, 162 00:07:55,960 --> 00:07:58,160 Speaker 7: of course, but we do think the rule will move 163 00:07:58,200 --> 00:08:00,880 Speaker 7: out of the way. The other issue is owning more 164 00:08:00,920 --> 00:08:05,440 Speaker 7: than one of what's called the Big four broadcast stations ABC, CBS, NBC, Fox. 165 00:08:07,040 --> 00:08:09,640 Speaker 7: That rule would also get in the way here probably 166 00:08:09,800 --> 00:08:13,680 Speaker 7: in a number of local areas. Does it called designated 167 00:08:13,720 --> 00:08:17,880 Speaker 7: market areas by Nielsen. That rule has also been vacated 168 00:08:17,960 --> 00:08:20,280 Speaker 7: by the Eighth Circuit Court of Appeals. It will also 169 00:08:20,360 --> 00:08:22,920 Speaker 7: probably be in litigation, but it seems like the road 170 00:08:23,160 --> 00:08:24,680 Speaker 7: is clearing for the FCC. 171 00:08:24,880 --> 00:08:25,160 Speaker 8: There. 172 00:08:25,280 --> 00:08:26,160 Speaker 9: It's a whole new world. 173 00:08:26,320 --> 00:08:28,320 Speaker 7: Yes, it's a whole new world. But we have Department 174 00:08:28,360 --> 00:08:31,440 Speaker 7: of Justice also, so we can't forget that right and 175 00:08:31,480 --> 00:08:34,400 Speaker 7: we always think about the FCC. The Department of Justice 176 00:08:34,440 --> 00:08:36,960 Speaker 7: is going to be looking at this too, but I 177 00:08:37,000 --> 00:08:39,400 Speaker 7: do think they can probably get it cleared through that 178 00:08:39,480 --> 00:08:40,400 Speaker 7: agency as well. 179 00:08:40,640 --> 00:08:43,280 Speaker 2: All we really care about is President Trump, that he 180 00:08:43,360 --> 00:08:46,040 Speaker 2: have voiced any opinion one way or the other about 181 00:08:46,040 --> 00:08:47,840 Speaker 2: this type of deal or these types of deals. 182 00:08:47,920 --> 00:08:50,200 Speaker 7: You know, I haven't heard anything from him. You know, 183 00:08:50,200 --> 00:08:52,079 Speaker 7: it would be reported in the news. I haven't heard 184 00:08:52,160 --> 00:08:54,960 Speaker 7: him say anything about these deals. We are beginning to 185 00:08:54,960 --> 00:08:58,360 Speaker 7: see a trend though, in the merger world, Paul, where 186 00:08:58,440 --> 00:09:00,720 Speaker 7: if the companies do and say the right things for 187 00:09:00,760 --> 00:09:04,280 Speaker 7: the Trump administration, they're getting assistants and getting their deal through. 188 00:09:04,679 --> 00:09:08,280 Speaker 7: And they're all pretty well aware of that. So as 189 00:09:08,280 --> 00:09:10,120 Speaker 7: long as they do and say the right things, hey, 190 00:09:10,160 --> 00:09:14,120 Speaker 7: we won't block political ads, will be neutral in you know, 191 00:09:14,200 --> 00:09:17,360 Speaker 7: our censorship of content things like that that resonate with Trump, 192 00:09:17,520 --> 00:09:18,360 Speaker 7: that's going to help them. 193 00:09:19,240 --> 00:09:21,640 Speaker 9: Sinclair did come in here with an eleventh hour deal, 194 00:09:21,679 --> 00:09:22,080 Speaker 9: did they not? 195 00:09:23,240 --> 00:09:23,440 Speaker 1: Yeah? 196 00:09:23,480 --> 00:09:25,760 Speaker 9: I think so, but you know they rebuff what it 197 00:09:25,840 --> 00:09:28,360 Speaker 9: seemed like on a per share basis, it was better 198 00:09:28,480 --> 00:09:32,000 Speaker 9: than the next Star deal for Tegna, So why rebuffet. 199 00:09:31,800 --> 00:09:33,679 Speaker 7: You know, I can't speak to that. You know, that's 200 00:09:33,760 --> 00:09:37,600 Speaker 7: much more Tegna and Tegna's strategy maybe they think from 201 00:09:37,640 --> 00:09:40,640 Speaker 7: an anti trust perspective, there's less overlap here. I mean, 202 00:09:40,679 --> 00:09:43,240 Speaker 7: it is thirty five of fifty one of their DMAs, 203 00:09:43,280 --> 00:09:46,000 Speaker 7: That's what TECHNA says. But in those thirty five, depending 204 00:09:46,000 --> 00:09:48,800 Speaker 7: on what stations they own, that overlap may not be problematic. 205 00:09:48,840 --> 00:09:51,760 Speaker 7: It may only be problematic into few. They may still 206 00:09:51,800 --> 00:09:54,079 Speaker 7: have to divest some stations in order to get Department 207 00:09:54,080 --> 00:09:57,240 Speaker 7: of Justice approval. I haven't done that comparison analysis, but 208 00:09:57,280 --> 00:09:59,920 Speaker 7: it may be that they have to divest fewer stations. 209 00:10:00,160 --> 00:10:01,959 Speaker 7: This deal perhaps done a different one. 210 00:10:02,080 --> 00:10:06,000 Speaker 2: Yeah, how is the Department of Justice looking at mergers 211 00:10:06,040 --> 00:10:08,920 Speaker 2: and equisisms generally defined? Has it maturely changed under the 212 00:10:08,960 --> 00:10:11,079 Speaker 2: Trump administration versus the Biden administration? 213 00:10:11,240 --> 00:10:13,600 Speaker 7: You know, it's so interesting. The rhetoric at the beginning 214 00:10:13,720 --> 00:10:15,560 Speaker 7: was that it wouldn't change, that there would be this 215 00:10:15,640 --> 00:10:18,320 Speaker 7: read through, and that there was more commonality with the 216 00:10:18,360 --> 00:10:21,720 Speaker 7: Biden administrators than differences. But it has changed. You know, 217 00:10:21,760 --> 00:10:25,240 Speaker 7: they have gone back to settling problematic deals with you know, 218 00:10:25,320 --> 00:10:30,680 Speaker 7: structural even one behavioral remedy that was omnicom interpublic with divestitures. 219 00:10:30,679 --> 00:10:33,360 Speaker 7: This is something that wasn't happening during the Biden administration. 220 00:10:33,640 --> 00:10:35,920 Speaker 7: They just said, if it deals problematic, we're going to 221 00:10:35,920 --> 00:10:39,080 Speaker 7: sue this. Doja in this FTC said no, we're going 222 00:10:39,120 --> 00:10:41,040 Speaker 7: to work it out. If we have problems, we'll work 223 00:10:41,080 --> 00:10:43,320 Speaker 7: out the problems with a fix. We'll have a settlement 224 00:10:43,360 --> 00:10:45,120 Speaker 7: and will allow the broader deal to close. And that's 225 00:10:45,120 --> 00:10:45,800 Speaker 7: a big difference. 226 00:10:46,800 --> 00:10:48,679 Speaker 9: What does this deal tell you, though, just about the 227 00:10:48,800 --> 00:10:53,040 Speaker 9: larger landscape of television, especially local TV, which we know 228 00:10:53,080 --> 00:10:57,480 Speaker 9: has been losing revenue share. They're struggling just because there 229 00:10:57,520 --> 00:10:59,240 Speaker 9: are too many places the eyeballs can go right and 230 00:11:00,000 --> 00:11:02,400 Speaker 9: competing with streaming and with the big guys. So is 231 00:11:02,440 --> 00:11:05,880 Speaker 9: this really a merger of necessity for these local TV stations? 232 00:11:05,960 --> 00:11:07,319 Speaker 7: You know, I would think it is, and I think 233 00:11:07,320 --> 00:11:09,120 Speaker 7: we're going to see more, you know, that kind of 234 00:11:09,160 --> 00:11:12,280 Speaker 7: consolidation has slowly there's been quite a bit of consolidation, 235 00:11:12,360 --> 00:11:15,520 Speaker 7: actually it has over the years. It kind of slowed 236 00:11:15,520 --> 00:11:17,920 Speaker 7: down during the Biden administration, but you know, I think 237 00:11:17,920 --> 00:11:19,720 Speaker 7: it's going to pick back up again because they are 238 00:11:19,760 --> 00:11:23,480 Speaker 7: so challenged by cord cutters, by people who never you know, 239 00:11:23,559 --> 00:11:25,319 Speaker 7: younger people who never watch TV at all. 240 00:11:25,520 --> 00:11:26,160 Speaker 9: You know, what's that? 241 00:11:26,440 --> 00:11:28,680 Speaker 7: What is cable exactly so. 242 00:11:28,920 --> 00:11:31,760 Speaker 2: Broad looking broader here I mean, over the next year 243 00:11:31,840 --> 00:11:35,360 Speaker 2: or two, do you expect to see more deal activity 244 00:11:35,520 --> 00:11:38,840 Speaker 2: just because companies and boards and private and all the 245 00:11:38,880 --> 00:11:41,280 Speaker 2: forces in out in the marketplace. I feel like this 246 00:11:41,320 --> 00:11:43,000 Speaker 2: is the time to do it. This is an administration that 247 00:11:43,040 --> 00:11:44,040 Speaker 2: will support deals. 248 00:11:44,480 --> 00:11:46,040 Speaker 7: I think so, and I think it would have already 249 00:11:46,080 --> 00:11:48,360 Speaker 7: picked up if we didn't have so much teriff uncertainty. 250 00:11:48,400 --> 00:11:50,960 Speaker 7: I think that has slowed things down. But as those 251 00:11:50,960 --> 00:11:53,040 Speaker 7: things sort of work themselves out, I think we're going 252 00:11:53,080 --> 00:11:55,520 Speaker 7: to see a lot more deal activity because you can 253 00:11:55,559 --> 00:11:58,040 Speaker 7: see a path to getting these deals done without having 254 00:11:58,080 --> 00:11:59,599 Speaker 7: to go to court and without dragging it out for 255 00:11:59,600 --> 00:12:00,240 Speaker 7: two years. 256 00:12:01,120 --> 00:12:03,160 Speaker 9: So this is sort of a litmus test, then, isn't it. 257 00:12:03,160 --> 00:12:05,520 Speaker 9: This next Star Techna deal. I think for the rest 258 00:12:05,520 --> 00:12:07,680 Speaker 9: of the industry. Really yeah, I think we have a 259 00:12:07,679 --> 00:12:09,920 Speaker 9: few litmus tests out there. You know, the Google Whiz 260 00:12:09,960 --> 00:12:12,120 Speaker 9: deal that's pending is a litmus test for sure, to 261 00:12:12,160 --> 00:12:14,840 Speaker 9: see what this administration will do with a big tech 262 00:12:14,880 --> 00:12:15,720 Speaker 9: platform merger. 263 00:12:15,920 --> 00:12:18,120 Speaker 7: I think this next Star Techna deal is a litmus 264 00:12:18,120 --> 00:12:20,520 Speaker 7: test because they're breaking all these old rules that were 265 00:12:20,520 --> 00:12:23,400 Speaker 7: the orthodoxy for years. We're going to see where that goes. 266 00:12:24,200 --> 00:12:27,000 Speaker 7: And then you know, you have Dick's footlocker, and you've 267 00:12:27,000 --> 00:12:28,760 Speaker 7: got Charter Cox. And there are a lot of big 268 00:12:28,760 --> 00:12:31,480 Speaker 7: deals pending right now, and I think they all are 269 00:12:31,520 --> 00:12:34,040 Speaker 7: deals that would have had trouble during the Biden administration, 270 00:12:34,120 --> 00:12:35,440 Speaker 7: but I think can get cleared now. 271 00:12:35,640 --> 00:12:39,200 Speaker 3: Our thanks to Jennifer Reeb, Bloomberg Intelligence senior litigation analyst. 272 00:12:39,480 --> 00:12:41,280 Speaker 3: Coming up, we'll look at the results of a second 273 00:12:41,280 --> 00:12:44,040 Speaker 3: obesity pill trial for the pharmaceutical giant Eli Lilly. 274 00:12:44,200 --> 00:12:47,000 Speaker 2: If you're listening to Bloomberg Intelligence on Bloomberg Radio, providing 275 00:12:47,040 --> 00:12:49,120 Speaker 2: in depth research and data on two thousand companies and 276 00:12:49,160 --> 00:12:50,800 Speaker 2: one hundred and thirty industries, you. 277 00:12:50,720 --> 00:12:53,880 Speaker 3: Can access Bloomberg Intelligence via bi go on the terminal. 278 00:12:54,040 --> 00:12:55,400 Speaker 3: I'm Scarlett Foe. 279 00:12:55,040 --> 00:12:56,920 Speaker 2: Oh Faull Sweeney, and this is Bloomberg. 280 00:13:00,480 --> 00:13:05,720 Speaker 1: You're listening to Bloomberg Intelligence with Paul Sweeney on Bloomberg Radio. 281 00:13:06,640 --> 00:13:07,920 Speaker 2: I'm Paul Sweeney. 282 00:13:07,480 --> 00:13:10,439 Speaker 3: And I'm Scarlett Food filling in on Bloomberg Intelligence. 283 00:13:10,320 --> 00:13:12,400 Speaker 2: Next to some M and A news in the consumer space. 284 00:13:12,640 --> 00:13:15,280 Speaker 2: This week, the beverage company Currick Doctor Pepper announced it 285 00:13:15,280 --> 00:13:18,520 Speaker 2: would buy the coffee and tea company JD. E. Pete. 286 00:13:18,679 --> 00:13:20,960 Speaker 3: The goal is for Currick Doctor Pepper to strengthen its 287 00:13:20,960 --> 00:13:23,680 Speaker 3: struggling coffee business. The company also says that plans to 288 00:13:23,720 --> 00:13:26,920 Speaker 3: separate its coffee and soft drinks unit into two independent 289 00:13:27,200 --> 00:13:30,320 Speaker 3: US listed companies next year once the deal is completed. 290 00:13:30,520 --> 00:13:32,959 Speaker 2: For more on all of this, guests host Alexis Christophers 291 00:13:33,000 --> 00:13:35,280 Speaker 2: and I were joined by Ken Shay, Bloomberg Intelligence senior 292 00:13:35,320 --> 00:13:38,480 Speaker 2: consumer products analyst. First ask Ken to explain what this 293 00:13:38,559 --> 00:13:40,560 Speaker 2: deal would do for Kurk Doctor Pepper. 294 00:13:41,040 --> 00:13:46,320 Speaker 5: This two step deal basically addresses a lagging division they've 295 00:13:46,320 --> 00:13:50,040 Speaker 5: had the Carrig coffee business, you know, it's it's cold 296 00:13:50,080 --> 00:13:56,559 Speaker 5: beverage business, namely Dr Pepper, Mott's Canada Dry is doing 297 00:13:56,559 --> 00:14:00,800 Speaker 5: it really well, whereas the cure coffee business really has 298 00:14:00,800 --> 00:14:03,120 Speaker 5: been a laggered over the last couple of years. Now 299 00:14:03,160 --> 00:14:06,840 Speaker 5: that you have higher green coffee costs, you have you know, 300 00:14:06,880 --> 00:14:10,640 Speaker 5: fifty percent tariffs coming in from Brazil, namely coffee beans, 301 00:14:11,760 --> 00:14:15,960 Speaker 5: slow demand for at home you know pod business, you know, 302 00:14:16,000 --> 00:14:20,280 Speaker 5: the ubiquitous ca cups, and it really is painted a 303 00:14:20,280 --> 00:14:22,680 Speaker 5: dismal picture for that division of the second half. So 304 00:14:23,840 --> 00:14:25,600 Speaker 5: rather than try to sell it, and I don't know 305 00:14:25,600 --> 00:14:27,720 Speaker 5: if they try to do that, but rather than try 306 00:14:27,760 --> 00:14:29,880 Speaker 5: to do that at a low multiple. What they're trying 307 00:14:29,920 --> 00:14:33,000 Speaker 5: to do cleverly is team it up with JD. E. Peets, 308 00:14:33,040 --> 00:14:35,400 Speaker 5: which is the number two coffee producer in the world, 309 00:14:35,680 --> 00:14:39,480 Speaker 5: behind only Nesley, but mostly big in Europe, and you know, 310 00:14:39,600 --> 00:14:44,960 Speaker 5: attached the US essentially US business, the CA cup business 311 00:14:45,000 --> 00:14:48,760 Speaker 5: together and you have a pretty good, pretty good entity. 312 00:14:49,080 --> 00:14:51,520 Speaker 9: You know what struck me when I was reading about 313 00:14:51,520 --> 00:14:55,280 Speaker 9: this deal, Guys, Doctor Pepper was the second most popular 314 00:14:55,360 --> 00:14:57,080 Speaker 9: soda in the US last year. 315 00:14:57,200 --> 00:14:57,360 Speaker 6: Is that? 316 00:14:57,440 --> 00:15:00,240 Speaker 9: Right behind coke and a head of PEPSI did not 317 00:15:00,320 --> 00:15:02,520 Speaker 9: know that. I can't remember the last time I drank 318 00:15:02,520 --> 00:15:03,280 Speaker 9: a Doctor Pepper. 319 00:15:03,440 --> 00:15:06,320 Speaker 2: Well, if you're in Texas, that's like the state drink, then. 320 00:15:06,480 --> 00:15:06,840 Speaker 9: Is it now? 321 00:15:06,880 --> 00:15:07,560 Speaker 10: Yes? All right? 322 00:15:08,040 --> 00:15:10,040 Speaker 9: So but Ken, the question here is talk to me 323 00:15:10,080 --> 00:15:14,000 Speaker 9: about the beverage side, the soda side here, because I 324 00:15:14,040 --> 00:15:16,320 Speaker 9: know bottled water has sort of been eating their lunch 325 00:15:16,880 --> 00:15:20,160 Speaker 9: the overall industry right for years now, outpacing the sales 326 00:15:20,200 --> 00:15:22,480 Speaker 9: of soda. So how what's the health of that side 327 00:15:22,480 --> 00:15:23,000 Speaker 9: of the business. 328 00:15:24,400 --> 00:15:27,560 Speaker 5: Oh, it's doing very well, lexis the cold beverage side 329 00:15:27,640 --> 00:15:30,880 Speaker 5: is doing really well, whether it's coke or Pepsi or cuity, 330 00:15:30,920 --> 00:15:34,840 Speaker 5: Doctor Pepper, particularly those three companies because distribution is everything. 331 00:15:35,040 --> 00:15:38,640 Speaker 5: These three companies have national footprints so they can reach 332 00:15:38,680 --> 00:15:41,000 Speaker 5: all the outlets, you know, whether it's fountain drinks or 333 00:15:41,400 --> 00:15:45,160 Speaker 5: traditional supermarkets, you know, vending, whatever, they can reach it. 334 00:15:45,280 --> 00:15:49,080 Speaker 5: And they all had powerful brands. As you said, Doctor 335 00:15:49,080 --> 00:15:51,280 Speaker 5: Pepper has really been coming on strong over the last 336 00:15:51,280 --> 00:15:53,760 Speaker 5: couple of years. And they have other powerful brands. And 337 00:15:53,840 --> 00:15:58,840 Speaker 5: unfortunately there are somewhat mini conglomerate business structure is being 338 00:15:58,920 --> 00:16:02,120 Speaker 5: dragged down by a you know, Carrig the coffee business. 339 00:16:02,280 --> 00:16:05,240 Speaker 5: So that business is doing really well. Carrik has shown 340 00:16:05,280 --> 00:16:09,280 Speaker 5: that it's also flexible and willing to pivot to fast 341 00:16:09,280 --> 00:16:12,160 Speaker 5: growing niche coal beverages. You know, it's a business that 342 00:16:12,200 --> 00:16:15,880 Speaker 5: continually changes with consumer tastes. Over the last year or so, 343 00:16:15,920 --> 00:16:18,680 Speaker 5: for instance, energy drinks have taken off, so what they do. 344 00:16:18,720 --> 00:16:21,120 Speaker 5: They went out and bought Ghost Energy. You know, for 345 00:16:21,760 --> 00:16:26,360 Speaker 5: even a younger demographic that typically drinks beverage, energy beverages. 346 00:16:27,520 --> 00:16:32,000 Speaker 5: They are bigger into the sports, the sports drink category. 347 00:16:32,680 --> 00:16:34,720 Speaker 5: They talked about on the last call a few weeks ago. 348 00:16:34,840 --> 00:16:37,920 Speaker 5: To get stronger in the protein space. Everybody wants protein, 349 00:16:37,960 --> 00:16:40,640 Speaker 5: you know, the GLP one folks need protein, replenishment. So 350 00:16:41,000 --> 00:16:45,160 Speaker 5: they've shown a willingness to branch out and tap into 351 00:16:45,320 --> 00:16:50,240 Speaker 5: anywhere where fast growing coal beverages are you know, doing well. 352 00:16:50,840 --> 00:16:52,920 Speaker 2: So I look on like global commodity screen and I 353 00:16:52,960 --> 00:16:55,880 Speaker 2: see the price of coffee. It's up like twenty five 354 00:16:56,000 --> 00:16:58,720 Speaker 2: percent this year. I mean, what's going on with that? 355 00:16:59,160 --> 00:17:01,160 Speaker 2: Talk to us about coffe and just the cost of 356 00:17:01,600 --> 00:17:02,920 Speaker 2: the beans and all that kind of stuff. 357 00:17:03,880 --> 00:17:07,600 Speaker 5: Well, you know, coffee beans are essentially sourced from Brazil, 358 00:17:07,760 --> 00:17:12,600 Speaker 5: so to some degree, the roasters are hostage to good crops, 359 00:17:13,960 --> 00:17:15,960 Speaker 5: and over the last year or so you really haven't 360 00:17:16,000 --> 00:17:19,520 Speaker 5: had great crops. I think some of the sellers in 361 00:17:19,560 --> 00:17:23,160 Speaker 5: Brazil are also holding back knowing that towers are coming 362 00:17:24,320 --> 00:17:25,919 Speaker 5: and you're not going to get what you know they 363 00:17:25,920 --> 00:17:29,080 Speaker 5: would like to get. And that's exacerbating the run up 364 00:17:29,400 --> 00:17:31,160 Speaker 5: that you've seen over the past six months a year 365 00:17:31,560 --> 00:17:34,000 Speaker 5: in coffee beans. If you went back over the last 366 00:17:34,080 --> 00:17:36,560 Speaker 5: couple of years, through two or three years, you would 367 00:17:36,560 --> 00:17:39,280 Speaker 5: see that the retail price of coffee, whether it's rate 368 00:17:39,359 --> 00:17:42,080 Speaker 5: to drink or hot coffee at your you know, local 369 00:17:42,119 --> 00:17:47,040 Speaker 5: coffee shop, have increased faster than most other beverages soft drinks. 370 00:17:47,040 --> 00:17:52,160 Speaker 5: I'm talking about so you've even seeing some consumers bypower 371 00:17:52,320 --> 00:17:57,639 Speaker 5: or switching from say like cold brew cold coffee to 372 00:17:58,840 --> 00:18:02,720 Speaker 5: move to energy drinks. It's more cost effective. So the 373 00:18:02,760 --> 00:18:05,600 Speaker 5: coffee producers have a condundrum. Do they continue to raise 374 00:18:05,640 --> 00:18:10,320 Speaker 5: prices and get flatter lower volumes or do they eat 375 00:18:10,359 --> 00:18:13,560 Speaker 5: that margin? And so what CURRG has decided to do 376 00:18:13,960 --> 00:18:16,560 Speaker 5: is kind of divest it in a tax efficient way. 377 00:18:17,040 --> 00:18:20,919 Speaker 3: Our thanks to Ken Shay, Bloomberg Intelligence, senior Consumer products analyst. 378 00:18:21,000 --> 00:18:23,760 Speaker 2: Move next to the biotech space. This week, the pharmaceutical 379 00:18:23,760 --> 00:18:27,280 Speaker 2: company Eli Lilly said its second obesity pill trial help 380 00:18:27,359 --> 00:18:30,240 Speaker 2: patients was almost ten percent of their body weight, and 381 00:18:30,280 --> 00:18:32,960 Speaker 2: the success of this weight loss trial moves Eli Lilly 382 00:18:33,000 --> 00:18:35,680 Speaker 2: one step closer to the potential approval of its weight 383 00:18:35,760 --> 00:18:38,200 Speaker 2: loss pill form wrong. On this guest hosts Lise Matteo 384 00:18:38,359 --> 00:18:41,600 Speaker 2: and Alexis Christopherus were joined by Sam Fizzelli, Bloomberg Intelligence 385 00:18:41,600 --> 00:18:45,600 Speaker 2: director of Research for Global Industries and senior pharmaceuticals analysts. 386 00:18:45,680 --> 00:18:48,600 Speaker 2: They first asked Sam how the most recent obesity pill 387 00:18:48,640 --> 00:18:49,679 Speaker 2: trial is different. 388 00:18:50,000 --> 00:18:55,399 Speaker 8: This is a large trial in diabetic patients, but it 389 00:18:55,400 --> 00:18:59,359 Speaker 8: obese diabetic patients, so they're looking at the impact in 390 00:18:59,440 --> 00:19:04,000 Speaker 8: that popular that population tends to have less of a 391 00:19:04,040 --> 00:19:07,840 Speaker 8: weight loss for a variety of reasons. But it's come 392 00:19:07,880 --> 00:19:10,800 Speaker 8: out exactly where we thought it would come out, actually 393 00:19:10,800 --> 00:19:15,359 Speaker 8: maybe a little bit better than people's lowered expectations after 394 00:19:15,440 --> 00:19:17,600 Speaker 8: that first trial read out a couple of weeks ago, 395 00:19:17,640 --> 00:19:22,040 Speaker 8: if you remember when the stock got hit severely lily stock, 396 00:19:22,520 --> 00:19:26,120 Speaker 8: and so we're seeing about ten percent weight loss and 397 00:19:27,119 --> 00:19:31,000 Speaker 8: still the same high levels of discontinuations. This is a 398 00:19:31,080 --> 00:19:33,560 Speaker 8: long trial, so you even find a whole bunch of 399 00:19:33,600 --> 00:19:36,760 Speaker 8: people on placeboud discontinue because they get bored. They want 400 00:19:36,760 --> 00:19:38,560 Speaker 8: to go and get wed loss from another drug. So 401 00:19:38,920 --> 00:19:43,160 Speaker 8: it's actually pretty decent data because it's a small molecular pill. 402 00:19:43,280 --> 00:19:47,439 Speaker 8: It's a pilly can take, relatively easily manufactured, and you 403 00:19:47,480 --> 00:19:51,200 Speaker 8: can take without too much complications in terms of don't eat, 404 00:19:51,240 --> 00:19:53,159 Speaker 8: to eat, take in the morning, take in the evening, 405 00:19:53,240 --> 00:19:53,959 Speaker 8: that sort of stuff. 406 00:19:54,080 --> 00:19:56,800 Speaker 9: And that's the key. Sam, and I'm wondering how much 407 00:19:56,840 --> 00:19:59,440 Speaker 9: of a game changer this is because it's not an injection, right, 408 00:19:59,520 --> 00:20:02,200 Speaker 9: it's a p You're looking at an industry that by 409 00:20:02,240 --> 00:20:06,080 Speaker 9: twenty thirty is projected to be ninety five billion dollars. 410 00:20:06,119 --> 00:20:09,879 Speaker 9: So if this goes Eli Lilly's way. Is it a 411 00:20:09,880 --> 00:20:11,080 Speaker 9: game changer for the company. 412 00:20:11,400 --> 00:20:13,520 Speaker 8: Yeah, I mean it has gone their way. This is 413 00:20:13,800 --> 00:20:17,640 Speaker 8: unless something shows up in the enormous number of files 414 00:20:17,680 --> 00:20:20,640 Speaker 8: that they file to the FDA, or side effects or something. 415 00:20:21,160 --> 00:20:24,760 Speaker 8: This is a drug that's likely to get approved. The 416 00:20:24,840 --> 00:20:26,840 Speaker 8: question is how do you use it. You've got the 417 00:20:26,880 --> 00:20:30,080 Speaker 8: injectibles once a week, once a week, not a big ask, 418 00:20:30,560 --> 00:20:33,520 Speaker 8: very fine needle people even tell me they don't even 419 00:20:33,600 --> 00:20:35,760 Speaker 8: notice the needle going in and out. But still you 420 00:20:35,760 --> 00:20:39,480 Speaker 8: don't see the needle, So what is It's it ten 421 00:20:39,520 --> 00:20:42,959 Speaker 8: percent weight loss versus twenty odd percent weight loss? So 422 00:20:43,520 --> 00:20:46,080 Speaker 8: what is the right way forward here? Some people are needlephobic. 423 00:20:46,280 --> 00:20:48,960 Speaker 8: It's going to be helpful for those. Some people can't 424 00:20:49,000 --> 00:20:51,320 Speaker 8: get access to the drug because it's hard to manufacture. 425 00:20:51,320 --> 00:20:54,600 Speaker 8: The other ones that are injectibles sterile manufacturing. So there's 426 00:20:54,640 --> 00:20:56,280 Speaker 8: lots of room for this. And of course there's this 427 00:20:56,359 --> 00:20:58,600 Speaker 8: other thing that I think a lot of people keep 428 00:20:58,640 --> 00:21:02,199 Speaker 8: thinking about, is you've got your big weight loss with 429 00:21:02,320 --> 00:21:05,440 Speaker 8: your injectables six months, in nine months, in twelve months, 430 00:21:05,520 --> 00:21:08,840 Speaker 8: in switch to this and help you maintain. You might 431 00:21:08,880 --> 00:21:12,359 Speaker 8: not even need the higher doses which are causing some 432 00:21:12,400 --> 00:21:14,560 Speaker 8: side effects, maybe you can get away with a lower 433 00:21:14,560 --> 00:21:17,000 Speaker 8: dose and maintain that weight loss. They would have to 434 00:21:17,000 --> 00:21:18,080 Speaker 8: do a trial to prove that. 435 00:21:18,119 --> 00:21:20,720 Speaker 11: Though, as you're talking, a question kind of popped into 436 00:21:20,760 --> 00:21:23,760 Speaker 11: my head. You're talking about all the different advantages to it. 437 00:21:24,119 --> 00:21:26,399 Speaker 11: What about has there been any talk about price, like 438 00:21:26,480 --> 00:21:29,960 Speaker 11: how much could this pill cost compare to an injection? 439 00:21:30,160 --> 00:21:33,000 Speaker 8: I mean, it would be an error for these companies 440 00:21:33,040 --> 00:21:36,680 Speaker 8: to start competing with themselves on price with their products. 441 00:21:37,840 --> 00:21:40,840 Speaker 8: If you find that actually you can go with the 442 00:21:40,840 --> 00:21:43,680 Speaker 8: lower dose of this, your margins are a bit better, 443 00:21:44,359 --> 00:21:46,919 Speaker 8: definitely because there's no device involved. But I don't know 444 00:21:46,960 --> 00:21:50,280 Speaker 8: what the small molecule manufacturing because they're not all small 445 00:21:50,359 --> 00:21:53,639 Speaker 8: molecules are easy to make, right. It may be small 446 00:21:53,680 --> 00:21:56,879 Speaker 8: discount perhaps, I don't know, but I doubt that this 447 00:21:56,920 --> 00:22:00,840 Speaker 8: will come out at a level that's significantly low. On 448 00:22:00,880 --> 00:22:03,160 Speaker 8: the other hand, it does have lower weight loss, so 449 00:22:03,440 --> 00:22:06,359 Speaker 8: maybe if there is an opportunity to kind of I 450 00:22:06,480 --> 00:22:08,280 Speaker 8: see it, PARI pass whu if whatever, If that's the 451 00:22:08,320 --> 00:22:10,800 Speaker 8: right phrase in line with its weight loss, that you're. 452 00:22:10,680 --> 00:22:13,639 Speaker 3: Getting our Thanks to Sam Vizzelli, Bloomberg Intelligence, Director of 453 00:22:13,680 --> 00:22:16,639 Speaker 3: Research for Global Industries and senior pharmaceuticals analyst. 454 00:22:17,080 --> 00:22:19,520 Speaker 2: We moved next to news from the consumer retail company 455 00:22:19,560 --> 00:22:20,720 Speaker 2: william Sonoma. 456 00:22:20,800 --> 00:22:23,040 Speaker 3: This week, the company raised its full your sales growth 457 00:22:23,040 --> 00:22:26,760 Speaker 3: target after a strong second quarter showing across all its brands. However, 458 00:22:27,160 --> 00:22:30,280 Speaker 3: Wall Street's reaction to this was mixed. Williams Sonoma has 459 00:22:30,320 --> 00:22:33,479 Speaker 3: seen its incremental terror F rate double to twenty eight percent. 460 00:22:33,800 --> 00:22:35,919 Speaker 2: For more on this guest host Alexis Christophers and I 461 00:22:35,920 --> 00:22:39,400 Speaker 2: were joined by Lindsay Dutch Bloomberg Intelligence Consumer Hardline senior analysts. 462 00:22:39,560 --> 00:22:41,960 Speaker 2: We first asked Lindsay to break down Williams Sonoma's earnings 463 00:22:42,000 --> 00:22:43,480 Speaker 2: and how its business is doing. 464 00:22:43,720 --> 00:22:47,760 Speaker 4: Williamsinoma had another really good quarter. We're seeing continued momentum 465 00:22:47,760 --> 00:22:51,040 Speaker 4: and sales, which is a positive for them, especially given 466 00:22:51,119 --> 00:22:55,240 Speaker 4: higher interest rates and new home sales being soft. And 467 00:22:55,280 --> 00:22:59,040 Speaker 4: more importantly, they held the guidance for operating margin flat 468 00:22:59,080 --> 00:23:03,560 Speaker 4: even though they're facing tremendous costs headwinds from tariffs. 469 00:23:04,119 --> 00:23:06,520 Speaker 9: Why not a better reaction from Wall Street? 470 00:23:06,880 --> 00:23:10,000 Speaker 4: You know, I'm also puzzled by that. I think that 471 00:23:10,040 --> 00:23:12,240 Speaker 4: there's not much more that you can ask for from 472 00:23:12,240 --> 00:23:15,480 Speaker 4: a company like this. You know, they are working on 473 00:23:16,280 --> 00:23:19,399 Speaker 4: getting to some sales growth goals. They're showing progress there. 474 00:23:20,080 --> 00:23:24,399 Speaker 4: They are leveraging their scale, negotiating with suppliers. They're basically 475 00:23:24,480 --> 00:23:28,960 Speaker 4: mitigating all of the costs from the tariffs that they're 476 00:23:29,000 --> 00:23:32,919 Speaker 4: experiencing this year, which was basically a doubling in the 477 00:23:33,000 --> 00:23:35,959 Speaker 4: tariff rate than they were expecting from the first quarter, 478 00:23:36,400 --> 00:23:40,280 Speaker 4: so it's a significant headwind. They're basically planning to offset 479 00:23:40,320 --> 00:23:43,080 Speaker 4: all of it with all of their mitigation efforts, and 480 00:23:43,119 --> 00:23:46,320 Speaker 4: they're going to continue to see some profit growth this year. 481 00:23:46,520 --> 00:23:48,920 Speaker 4: Long term goals are intact. 482 00:23:48,960 --> 00:23:51,520 Speaker 2: So how are they mitigating it? So they're not going 483 00:23:51,560 --> 00:23:54,880 Speaker 2: to pass anything along to consumers? How are they mitigating So. 484 00:23:55,359 --> 00:24:00,480 Speaker 4: They are doing select price increases. They have multiple less 485 00:24:00,480 --> 00:24:02,640 Speaker 4: that they are pulling, so they are negotiating with their 486 00:24:02,640 --> 00:24:04,920 Speaker 4: suppliers sort of managing the cost sort of on the 487 00:24:05,160 --> 00:24:08,800 Speaker 4: supply side, they're shifting sourcing, you know, with a new 488 00:24:08,960 --> 00:24:12,640 Speaker 4: threat of an additional tariff just on furniture imports, they're 489 00:24:12,640 --> 00:24:16,840 Speaker 4: looking to increase US made inventory heading into next year. 490 00:24:18,200 --> 00:24:21,280 Speaker 4: They are also increasing the prices and the fact that 491 00:24:21,359 --> 00:24:24,400 Speaker 4: demand is showing momentum, you know, that's a positive sign 492 00:24:24,520 --> 00:24:29,880 Speaker 4: that they can execute those price increases successfully and continue 493 00:24:30,040 --> 00:24:32,640 Speaker 4: to get a good margin on those products. 494 00:24:32,960 --> 00:24:35,520 Speaker 9: So Williams Sonoma is a company that also owns the 495 00:24:35,520 --> 00:24:40,240 Speaker 9: Pottery Barn brand West Elm. Curious if there were strengths 496 00:24:40,280 --> 00:24:42,679 Speaker 9: sort of across the board across its brand. 497 00:24:43,680 --> 00:24:46,040 Speaker 4: Yes, So this was a second consecutive quarter that we 498 00:24:46,080 --> 00:24:49,840 Speaker 4: saw same source sales growth across all brands. Pottery Barn 499 00:24:50,040 --> 00:24:52,120 Speaker 4: and West Elm are the two big ones that we've 500 00:24:52,119 --> 00:24:55,200 Speaker 4: been watching over the past say, four to six quarters, 501 00:24:55,640 --> 00:24:58,000 Speaker 4: and that's because there really has been a bit of 502 00:24:58,000 --> 00:25:01,560 Speaker 4: a challenge when it comes to demand for furniture coming 503 00:25:01,560 --> 00:25:05,280 Speaker 4: into this year, we saw some positive momentum in that business. 504 00:25:05,680 --> 00:25:09,359 Speaker 4: William Sonoma has continued to outperform, So we saw growth 505 00:25:09,400 --> 00:25:12,880 Speaker 4: in those two brands again in this second quarter while 506 00:25:12,880 --> 00:25:16,040 Speaker 4: the industry was still down for the quarter. So they 507 00:25:16,080 --> 00:25:19,760 Speaker 4: are seeing, you know, good demand with those two big brands, 508 00:25:19,800 --> 00:25:21,480 Speaker 4: and they're saying that a lot of that is coming 509 00:25:21,480 --> 00:25:23,200 Speaker 4: from the new products that they're launching. 510 00:25:23,640 --> 00:25:27,119 Speaker 3: Our thanks to Lindsay Dutch Bloomberg Intelligence Consumer Hardlines senior 511 00:25:27,200 --> 00:25:30,120 Speaker 3: analyst coming up a look at earnings from the retailers 512 00:25:30,160 --> 00:25:31,640 Speaker 3: Coles and Abercromme and Fitch. 513 00:25:31,760 --> 00:25:34,439 Speaker 2: You're listening to the Bloomberg Intelligence on Bloomberg Radio, providing 514 00:25:34,440 --> 00:25:36,639 Speaker 2: in depth research and data on two thousand companies in 515 00:25:36,640 --> 00:25:37,920 Speaker 2: one hundred and thirty industries. 516 00:25:38,080 --> 00:25:41,080 Speaker 3: You can access Bloomberg Intelligence via bi go on the terminal. 517 00:25:41,200 --> 00:25:43,160 Speaker 3: I'm Scarlet Foo and I'm Paul Sweeney. 518 00:25:43,359 --> 00:25:46,440 Speaker 2: This is Bloomberg. 519 00:25:50,480 --> 00:25:55,720 Speaker 1: You're listening to Bloomberg Intelligence with Paul Sweeney on Bloomberg Radio. 520 00:25:56,800 --> 00:25:59,000 Speaker 3: I'm Paul Sweeney and I'm Scarlet Foo. Fill in on 521 00:25:59,080 --> 00:25:59,960 Speaker 3: Bloomberg Intelligence. 522 00:26:00,080 --> 00:26:02,720 Speaker 2: If we move next to news on the telecommunications companies 523 00:26:02,920 --> 00:26:06,040 Speaker 2: EchoStar and AT and T. This week, EchoStar agreed to 524 00:26:06,080 --> 00:26:08,680 Speaker 2: sell spectrum licenses to AT and T for about twenty 525 00:26:08,680 --> 00:26:11,080 Speaker 2: three billion dollars in an all cash transactions. 526 00:26:11,160 --> 00:26:13,680 Speaker 3: The sale will expand AT and d's network. It'll also 527 00:26:13,720 --> 00:26:16,879 Speaker 3: help EchoStar state out of bankruptcy and fend off regulatory 528 00:26:16,920 --> 00:26:20,160 Speaker 3: concerns about its airwave use. The deals expected to close 529 00:26:20,200 --> 00:26:23,400 Speaker 3: by mid twenty twenty six, pending regulatory approval for more. 530 00:26:23,480 --> 00:26:26,520 Speaker 2: Guest host Lisa Mittel and Alexis Christopherus were joined by 531 00:26:26,640 --> 00:26:30,320 Speaker 2: John Butler, Bloomberg Intelligence senior telecom analysts. They first has 532 00:26:30,480 --> 00:26:33,760 Speaker 2: John with this Ecostar AT and T deal means it is. 533 00:26:33,880 --> 00:26:37,280 Speaker 10: Huge for EchoStar, and I think at issue for them 534 00:26:37,440 --> 00:26:40,720 Speaker 10: is they have they've been trying to build their own 535 00:26:40,960 --> 00:26:44,080 Speaker 10: five G network to compete with the big guys, and 536 00:26:44,119 --> 00:26:47,200 Speaker 10: they have the spectrum to do it, but they didn't 537 00:26:47,240 --> 00:26:49,800 Speaker 10: have the capital to do it. They really have an 538 00:26:49,800 --> 00:26:53,960 Speaker 10: outsized debtload that they've really been struggling this service. And 539 00:26:55,280 --> 00:27:00,520 Speaker 10: the FCC intervened here and they've been pressuring ahead of 540 00:27:00,640 --> 00:27:05,479 Speaker 10: Echo Star Charlie Ergan to either use this spectrum and 541 00:27:05,600 --> 00:27:09,240 Speaker 10: start to fill those airwaves or to sell it. And 542 00:27:09,320 --> 00:27:12,359 Speaker 10: so I think this is maybe the first of maybe 543 00:27:12,359 --> 00:27:15,480 Speaker 10: even more moves to sell more Spectrum on the part 544 00:27:15,520 --> 00:27:19,320 Speaker 10: of the company. But given the price tag, it alleviates 545 00:27:19,400 --> 00:27:23,520 Speaker 10: that capital crunch and so any risk of default here 546 00:27:23,720 --> 00:27:27,320 Speaker 10: I think is minimized now in the wake of this deal, 547 00:27:28,040 --> 00:27:31,760 Speaker 10: and so investors are breathing a big sire relief. 548 00:27:32,760 --> 00:27:36,280 Speaker 9: Talk to me a little bit, John about this price. 549 00:27:36,440 --> 00:27:42,000 Speaker 9: Twenty three billion dollars nine billion more than EchoStar paid 550 00:27:42,040 --> 00:27:45,440 Speaker 9: for the spectrum, five billion more than the appraised value 551 00:27:46,080 --> 00:27:49,240 Speaker 9: is at and t getting value out out of this 552 00:27:49,280 --> 00:27:52,080 Speaker 9: twenty three billion dollar deal? Are they grossly overpaying? 553 00:27:53,240 --> 00:27:58,359 Speaker 10: So I'll say Spectrum is like houses on Nantucket. You know, 554 00:27:59,400 --> 00:28:02,520 Speaker 10: the price, it just continues to go up over the years, 555 00:28:02,600 --> 00:28:05,720 Speaker 10: you know, particularly with the advent of AI now and 556 00:28:05,800 --> 00:28:10,200 Speaker 10: the need for more capacity to carry that added traffic. 557 00:28:11,000 --> 00:28:13,679 Speaker 10: It's really not a concern on my part as to 558 00:28:13,800 --> 00:28:16,000 Speaker 10: whether or not AT and T is going to get 559 00:28:16,040 --> 00:28:20,360 Speaker 10: a good return on this investment. And again all kitting aside, 560 00:28:20,400 --> 00:28:23,840 Speaker 10: I go back to that analogy that really Spectrum does. 561 00:28:25,119 --> 00:28:29,240 Speaker 10: It tends to increase in value over time. It's a 562 00:28:29,359 --> 00:28:32,119 Speaker 10: very ill liquid market, so it's hard to really get 563 00:28:32,640 --> 00:28:36,800 Speaker 10: a good feel for their fair value of different frequencies. 564 00:28:36,840 --> 00:28:39,480 Speaker 10: But I have no doubt that at the end of 565 00:28:39,520 --> 00:28:42,640 Speaker 10: the day, even expensive is going to prove cheap here 566 00:28:42,720 --> 00:28:43,080 Speaker 10: for them. 567 00:28:43,400 --> 00:28:45,360 Speaker 11: Hey, John, can you dig a little bit into how 568 00:28:45,400 --> 00:28:47,280 Speaker 11: this is going to expand AT and T's network. 569 00:28:48,880 --> 00:28:53,400 Speaker 10: So if you look at this spectrum holdings of Verizon, 570 00:28:53,520 --> 00:28:57,280 Speaker 10: T Mobile and AT and T and Spectrum, I'll just 571 00:28:57,360 --> 00:29:00,520 Speaker 10: take a step back for listeners that don't know, when 572 00:29:00,560 --> 00:29:03,640 Speaker 10: you're making a caller transmitting data over the area, you're 573 00:29:03,680 --> 00:29:07,320 Speaker 10: doing it using spectrum. And the more you have think 574 00:29:07,360 --> 00:29:09,280 Speaker 10: of it like the width of a pipe. The more 575 00:29:09,320 --> 00:29:13,280 Speaker 10: you have, the fatter the pipe, the faster the download speeds. 576 00:29:13,440 --> 00:29:17,120 Speaker 10: And so AT and T intends to put this spectrum 577 00:29:17,160 --> 00:29:22,160 Speaker 10: to use almost immediately to really enhance the download speeds 578 00:29:22,160 --> 00:29:26,080 Speaker 10: of the network, and so network quality gets better, word 579 00:29:26,120 --> 00:29:29,040 Speaker 10: gets around, people begin to say AT and T has 580 00:29:29,080 --> 00:29:33,680 Speaker 10: a better network. So from a branding standpoint, there's a 581 00:29:33,760 --> 00:29:37,800 Speaker 10: real benefit here. And then longer term again, as AI 582 00:29:38,000 --> 00:29:42,720 Speaker 10: continues to scale up and imprinting those queries that we 583 00:29:42,840 --> 00:29:45,320 Speaker 10: make and the answers we get back. Now, a lot 584 00:29:45,320 --> 00:29:47,080 Speaker 10: of that's going to be done at the edge of 585 00:29:47,120 --> 00:29:50,520 Speaker 10: the network where you need that big fat pipe to 586 00:29:50,640 --> 00:29:54,720 Speaker 10: support that traffic. So I think in their minds, those 587 00:29:54,760 --> 00:29:58,360 Speaker 10: are the two things there, after improving the network quality 588 00:29:58,360 --> 00:30:03,080 Speaker 10: and the brand image and having the pipes to move 589 00:30:03,200 --> 00:30:05,440 Speaker 10: the traffic that's coming down the road here. 590 00:30:06,120 --> 00:30:09,520 Speaker 9: On a call with investors, AT and t's CEO Stanky 591 00:30:09,760 --> 00:30:12,440 Speaker 9: said that, you know, regulators shouldn't be concerned that this 592 00:30:12,480 --> 00:30:16,000 Speaker 9: transaction was going to put too much wireless spectrum, I 593 00:30:16,000 --> 00:30:18,800 Speaker 9: guess in the hands of one of the largest telecom carriers. 594 00:30:19,080 --> 00:30:21,560 Speaker 9: That's what he told investors. But do you think regulators 595 00:30:21,600 --> 00:30:24,000 Speaker 9: are going to bulk at this No. 596 00:30:24,200 --> 00:30:28,080 Speaker 10: I think regulators have been behind prompting the sale. If 597 00:30:28,120 --> 00:30:31,080 Speaker 10: that's the right way to put it so again, the 598 00:30:31,200 --> 00:30:34,680 Speaker 10: FCC was really on Echo Star to sell some of 599 00:30:34,720 --> 00:30:41,640 Speaker 10: that spectrum. They're educated and well educated and wireless as 600 00:30:41,760 --> 00:30:45,959 Speaker 10: regulators to know that it was probably going to be 601 00:30:46,040 --> 00:30:48,160 Speaker 10: one of the big guys that would step up and 602 00:30:48,200 --> 00:30:51,400 Speaker 10: buy it. If I look at at and T spectrum 603 00:30:51,440 --> 00:30:57,720 Speaker 10: holdings the whole, they had a competitive disadvantage or less 604 00:30:57,760 --> 00:31:02,200 Speaker 10: holdings in the band or the frequencies that they purchased 605 00:31:02,200 --> 00:31:08,000 Speaker 10: from Echo Star here. So I don't think there's any 606 00:31:08,040 --> 00:31:12,520 Speaker 10: sort of regulatory argument against the deal here, but I 607 00:31:12,560 --> 00:31:16,080 Speaker 10: would defer to our legislative analysts in Washington to really 608 00:31:16,080 --> 00:31:18,400 Speaker 10: make the call there. But I'm not concerned. 609 00:31:18,720 --> 00:31:22,680 Speaker 3: Are Thanks to John Butler, Bloomberg Intelligence senior telecom analyst, moved. 610 00:31:22,520 --> 00:31:25,720 Speaker 2: Next to earnings from the retailers Coals and Abercrombie and. 611 00:31:25,640 --> 00:31:28,920 Speaker 3: Fitch this week, coleshare surging after the company offered a 612 00:31:28,920 --> 00:31:30,840 Speaker 3: more optimistic full Your Sales outlook. 613 00:31:31,000 --> 00:31:33,800 Speaker 2: The company now expects comparable sales to fall no more 614 00:31:33,800 --> 00:31:36,840 Speaker 2: than five percent this year. It's prior forecast was six percent. 615 00:31:37,160 --> 00:31:39,960 Speaker 3: Separately, Abercommy and Fitch raised it's full Your Sales guidance 616 00:31:39,960 --> 00:31:42,719 Speaker 3: following us stronger than expected quarter at its teen focused 617 00:31:42,760 --> 00:31:43,600 Speaker 3: Hollister brand. 618 00:31:43,880 --> 00:31:46,360 Speaker 2: More on all of this. Guest hosts Alexis, Christopherus and 619 00:31:46,440 --> 00:31:49,480 Speaker 2: I were joined by Mary Ross Gilbert Bloomberg Intelligence senior 620 00:31:49,520 --> 00:31:52,640 Speaker 2: equity analyst who covers retail. We first asked Mary for 621 00:31:52,720 --> 00:31:54,520 Speaker 2: her key takeaways on coals earnings. 622 00:31:55,320 --> 00:31:56,360 Speaker 1: Coles. 623 00:31:56,560 --> 00:32:00,800 Speaker 12: Okay, look, they reported comp sales down still and as 624 00:32:00,840 --> 00:32:04,160 Speaker 12: you pointed out, fourteen consecutive quarters of declines or another 625 00:32:04,200 --> 00:32:06,920 Speaker 12: way to look at it, over the past three years. 626 00:32:06,960 --> 00:32:11,080 Speaker 12: They're cycling three years of declines. So but what really 627 00:32:11,400 --> 00:32:13,920 Speaker 12: we're looking at in the news that came out with 628 00:32:14,000 --> 00:32:17,120 Speaker 12: Cole's one is that on the call, the company said 629 00:32:17,280 --> 00:32:21,680 Speaker 12: July sales were flat. That was really encouraging. And when 630 00:32:21,720 --> 00:32:23,720 Speaker 12: you look at the third quarter and the guidance for 631 00:32:23,760 --> 00:32:26,600 Speaker 12: the third quarter again still looking for declines for the 632 00:32:26,600 --> 00:32:28,800 Speaker 12: balance of the year, down four to five percent on 633 00:32:28,840 --> 00:32:33,000 Speaker 12: a comp sales basis, but for the third quarter they're 634 00:32:33,040 --> 00:32:37,640 Speaker 12: going to cycle a nine point three percent decline last year. 635 00:32:37,680 --> 00:32:40,840 Speaker 12: So that means that comparisons are easier and they're off 636 00:32:40,840 --> 00:32:43,120 Speaker 12: to a good start. So it's encouraging. And what we're 637 00:32:43,160 --> 00:32:49,840 Speaker 12: finding is that they're bringing back the core private brands 638 00:32:49,920 --> 00:32:52,880 Speaker 12: that are really resonating the their core consumer, which is 639 00:32:52,920 --> 00:32:57,240 Speaker 12: that sort of load to low middle income consumer. They're 640 00:32:57,400 --> 00:33:03,160 Speaker 12: really pressed by inflation still, and so they are really 641 00:33:03,200 --> 00:33:05,320 Speaker 12: looking for the value and is they've brought that back 642 00:33:05,360 --> 00:33:09,360 Speaker 12: in and they brought back fashion jewelry and you know, 643 00:33:09,360 --> 00:33:13,120 Speaker 12: they're working on refining fine jewelry, but that's all resonating 644 00:33:13,200 --> 00:33:16,160 Speaker 12: now with the customer. And so that's where they're seeing 645 00:33:16,200 --> 00:33:18,760 Speaker 12: some strength. And so we're seeing encouraging signs there. But 646 00:33:18,800 --> 00:33:21,760 Speaker 12: they're not out of the woods yet, right because you know, 647 00:33:21,880 --> 00:33:26,640 Speaker 12: again three years of sales declines and you know, they're 648 00:33:26,680 --> 00:33:29,840 Speaker 12: still their sales are still declining. So we'll see if 649 00:33:29,880 --> 00:33:33,360 Speaker 12: they actually reach stabilization by the end of the year. 650 00:33:33,440 --> 00:33:35,880 Speaker 12: They're saying, no, we're not, but we're thinking they're providing 651 00:33:36,320 --> 00:33:38,680 Speaker 12: conservative guidance so that they can be. 652 00:33:39,280 --> 00:33:41,920 Speaker 2: Hey, Mary, what are Coals and some of the other 653 00:33:41,960 --> 00:33:45,240 Speaker 2: companies saying about, I don't know, their strategies for dealing 654 00:33:45,240 --> 00:33:48,440 Speaker 2: with tariffs in terms of a passing along to consumers, 655 00:33:48,480 --> 00:33:50,840 Speaker 2: b taking it maybe even their margin or c. I 656 00:33:50,880 --> 00:33:53,320 Speaker 2: don't know, kind of pushing back on some of their suppliers. 657 00:33:53,400 --> 00:33:57,280 Speaker 2: Is there a consensus building about how some of these 658 00:33:57,320 --> 00:33:58,360 Speaker 2: retailers are dealing with it. 659 00:33:59,360 --> 00:34:02,400 Speaker 12: Yeah, Paul, that's a really good question because tariffs is 660 00:34:02,520 --> 00:34:07,640 Speaker 12: absolutely top of mind. And with Coals, Coals really sources 661 00:34:07,880 --> 00:34:11,680 Speaker 12: most of their product from other brands and companies. They 662 00:34:11,680 --> 00:34:15,280 Speaker 12: do have their own private brand business. It's probably somewhere 663 00:34:15,320 --> 00:34:17,600 Speaker 12: around a third of the business. You know, they're getting 664 00:34:17,600 --> 00:34:19,640 Speaker 12: it back in order because of course they went too 665 00:34:19,680 --> 00:34:23,120 Speaker 12: low last year. And what they're finding is they're sharing 666 00:34:23,120 --> 00:34:26,960 Speaker 12: with their vendors. This is what we're finding across the board, 667 00:34:27,040 --> 00:34:31,280 Speaker 12: and they're finding an ability to raise prices on select items. 668 00:34:31,280 --> 00:34:33,759 Speaker 12: So with Coals, we did see a margin improvement in 669 00:34:33,760 --> 00:34:38,040 Speaker 12: the quarter. And so because the private brands do deliver 670 00:34:38,120 --> 00:34:41,120 Speaker 12: a higher margin on an overall basis versus the third 671 00:34:41,160 --> 00:34:44,520 Speaker 12: party brands, they're getting that benefit and that's helping to 672 00:34:44,600 --> 00:34:47,560 Speaker 12: offset a bit of the tariffs. And again they're less 673 00:34:47,680 --> 00:34:52,080 Speaker 12: impacted versus some of the specialty apparel brands like Abercrombie 674 00:34:52,120 --> 00:34:55,600 Speaker 12: and PVH and those companies reporting which they did disclose 675 00:34:56,080 --> 00:34:59,040 Speaker 12: what kind of exposure they have. But we are seeing 676 00:34:59,080 --> 00:35:02,880 Speaker 12: across the board that there is sharing. It's usually about 677 00:35:02,880 --> 00:35:05,760 Speaker 12: fifty percent, where their suppliers will say we'll absorb fifty 678 00:35:05,800 --> 00:35:08,880 Speaker 12: percent of the cost, and then the other fifty percent 679 00:35:09,000 --> 00:35:12,400 Speaker 12: is taken by that brand. Then they will do strategic 680 00:35:12,440 --> 00:35:15,640 Speaker 12: price increases on certain items that they feel will be 681 00:35:15,800 --> 00:35:17,600 Speaker 12: less noticeable to the consumer. 682 00:35:18,400 --> 00:35:18,640 Speaker 5: Mary. 683 00:35:18,680 --> 00:35:21,799 Speaker 9: Before we get to Abercrombie, one more question here on 684 00:35:21,920 --> 00:35:25,080 Speaker 9: Cole's Bloomberg News is reporting that Coles is having trouble 685 00:35:25,120 --> 00:35:27,919 Speaker 9: paying its vendors on time. What do we know about that. 686 00:35:28,200 --> 00:35:31,480 Speaker 12: Alexis I'm really glad you brought that up, because that 687 00:35:31,640 --> 00:35:34,600 Speaker 12: was never brought up on the call. Nothing came up 688 00:35:34,600 --> 00:35:38,080 Speaker 12: in that conversation. When we saw that article, we said, 689 00:35:38,160 --> 00:35:41,480 Speaker 12: what I mean, that's kind of like a warning sign, 690 00:35:41,960 --> 00:35:45,040 Speaker 12: and it basically says, look, they're just trying to manage 691 00:35:45,080 --> 00:35:47,680 Speaker 12: their working capital needs because we're in a period right 692 00:35:47,719 --> 00:35:51,440 Speaker 12: now where they're taking in all of the inventory that 693 00:35:52,000 --> 00:35:55,399 Speaker 12: for the holiday season that's coming in right now, and 694 00:35:55,520 --> 00:35:58,960 Speaker 12: so that's a big cash use and that's kind of 695 00:35:58,960 --> 00:36:01,080 Speaker 12: where we are in the third quarters where they're going 696 00:36:01,160 --> 00:36:04,480 Speaker 12: to have to, you know, raise their revolver borrowings to 697 00:36:04,520 --> 00:36:07,160 Speaker 12: fund those needs. And so there was a bit of 698 00:36:07,200 --> 00:36:10,960 Speaker 12: a concern, but nobody on the earnings call brought that 699 00:36:11,120 --> 00:36:14,480 Speaker 12: up with the company. But we we kind of were 700 00:36:14,520 --> 00:36:17,359 Speaker 12: watching that closely like I said, Cole's is not out 701 00:36:17,360 --> 00:36:19,000 Speaker 12: of the woods yet. 702 00:36:19,640 --> 00:36:21,399 Speaker 2: All right, Ambercrombie, what's the story there. 703 00:36:22,600 --> 00:36:27,960 Speaker 12: So on Abercrombie, generally they beat but okay, and it 704 00:36:28,000 --> 00:36:30,120 Speaker 12: was all led by Hollister, which we could see in 705 00:36:30,160 --> 00:36:32,239 Speaker 12: the transaction data, and it was something that we saw 706 00:36:32,239 --> 00:36:35,799 Speaker 12: in the first quarter. And they're cycling some big comparable 707 00:36:35,840 --> 00:36:40,040 Speaker 12: sales increases in the prior year period for their namesake 708 00:36:40,160 --> 00:36:44,200 Speaker 12: Abercrombie brand. But the decline in comp sales, you know, 709 00:36:44,200 --> 00:36:47,120 Speaker 12: it is down about eleven percent, was way worse than 710 00:36:47,120 --> 00:36:49,440 Speaker 12: what analysts were looking for. They were looking for a 711 00:36:49,520 --> 00:36:52,600 Speaker 12: decline of you know, something like down seven percent. The 712 00:36:52,680 --> 00:36:56,319 Speaker 12: reason for that is they had some carryover inventory at 713 00:36:56,400 --> 00:36:59,279 Speaker 12: lower average price points that they were selling through in 714 00:36:59,320 --> 00:37:02,080 Speaker 12: the quarter and that's what really took the comp sales down. 715 00:37:02,520 --> 00:37:06,520 Speaker 12: But they were very optimistic about you know, third quarter 716 00:37:06,640 --> 00:37:10,879 Speaker 12: start with their denim program, with their NFL collaboration, and 717 00:37:11,160 --> 00:37:14,400 Speaker 12: so they feel like that's going to really benefit all 718 00:37:14,440 --> 00:37:17,640 Speaker 12: of the initiatives that they have to benefit the Abercrombie 719 00:37:17,680 --> 00:37:21,040 Speaker 12: brand going forward. So they feel like, no, this is 720 00:37:21,200 --> 00:37:23,600 Speaker 12: just a little bit of a hiccup, nothing to be 721 00:37:23,800 --> 00:37:26,879 Speaker 12: alarmed about. And I think what we're seeing generally when 722 00:37:26,920 --> 00:37:29,600 Speaker 12: we think about all these earnings reports so far, is 723 00:37:29,600 --> 00:37:33,000 Speaker 12: that the consumer is resilient. We have the lower income 724 00:37:33,080 --> 00:37:36,000 Speaker 12: being a little more strained and being very careful and 725 00:37:36,080 --> 00:37:38,959 Speaker 12: choosing what they're going to buy. But when they see 726 00:37:38,960 --> 00:37:42,279 Speaker 12: the value, they're spending. And then, of course, you know, 727 00:37:42,280 --> 00:37:44,560 Speaker 12: when you get the consumer that's in a better position, 728 00:37:45,040 --> 00:37:46,200 Speaker 12: they're definitely spending. 729 00:37:46,480 --> 00:37:49,440 Speaker 3: Are thanks to Mary Ross Gilbert Bloomberg Intelligence, senior equity 730 00:37:49,480 --> 00:37:50,520 Speaker 3: analysts for Retail. 731 00:37:50,920 --> 00:37:53,600 Speaker 2: That's this week's edition of Bloomberg Intelligence on Bloomberg Radio, 732 00:37:53,719 --> 00:37:56,240 Speaker 2: providing in depth research and data on two thousand companies 733 00:37:56,400 --> 00:37:57,760 Speaker 2: in one hundred and thirty industries. 734 00:37:57,840 --> 00:37:59,960 Speaker 3: And of course, as always, you can access Bloomberg Intel 735 00:38:00,000 --> 00:38:03,480 Speaker 3: Diligence via b I go on the terminal. I'm Scarlet Foo. 736 00:38:03,400 --> 00:38:05,720 Speaker 2: And I'm Paul Sweeney. Stay with us. Today's top stories 737 00:38:05,719 --> 00:38:07,960 Speaker 2: and global business headlines are coming up right now. 738 00:38:12,040 --> 00:38:12,560 Speaker 7: Mm hmm