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Speaker 2: On Today's Bloomberg Intelligence Show, we dig inside the big
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Speaker 3: Each and every week we provide in depth research and
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Speaker 3: hundred and thirty industries are analysts covered worldwide.
Speaker 2: Today, we'll take a look at how the beverage make
Speaker 2: it Kirk doctor Pepper looking to strengthen its struggling coffee.
Speaker 3: Business, plus Echo Star agrees to sell spectrum licenses to
Speaker 3: at and T. We'll discuss what the deal means for
Speaker 3: the telecommunications companies, but.
Speaker 2: First we begin with earnings from the chip giant and video.
Speaker 2: This week, the world's most valuable publicly traded company reported
Speaker 2: second quarter earnings that beat an allo.
Speaker 3: Expectations, but investors were disappointed after in Vidia gave a
Speaker 3: lukewarm revenue forecast for the current quarter. And this is
Speaker 3: fueling concerns a massive run up and artificial intelligence spending
Speaker 3: is slowing.
Speaker 5: For more.
Speaker 2: Scarlet and I were joined by Ku John Sabani, Bloomberg
Speaker 2: Intelligence Senior semiconductor analysts, first to ask Kun John for
Speaker 2: his take on Invidious results.
Speaker 6: Yeah, like you said, it was once again a solid
Speaker 6: sprinting guide. It checked all the fundamental key boxes, but
Speaker 6: as has been the case with this name, you know,
Speaker 6: the expectations always run higher, and maybe not all the
Speaker 6: numbers were able to clear that high hurdle of expectations.
Speaker 6: Specifically the data center compute numbers in two Q. You
Speaker 6: would have liked to see that come in a little
Speaker 6: bit high, but there were still a lot of strong
Speaker 6: positive underlyings. One the networking was a significant beat, which
Speaker 6: shows the strength and the attachment that they're getting from
Speaker 6: their networking switches and chips in the Blackwell ramp. Second,
Speaker 6: like you mentioned, the three Q consensus had China included,
Speaker 6: and they still beat their three Q guide Without China.
Speaker 6: If you add in the China guide of two to
Speaker 6: five billion, they would have handsomely beaten the three Q numbers.
Speaker 6: So that noisy sort of consensus shadowed the goodness that
Speaker 6: is coming out of the guide of Nvidia.
Speaker 2: All right, so what's the company telling us now about China?
Speaker 2: Goes quite frankly, I just I'm reading the press. I
Speaker 2: don't know whether they're going to be able to sell
Speaker 2: stuff in the China or when, or whether they're gonna
Speaker 2: have to give a fifteen percent cut to the US government.
Speaker 2: How's that going to play out?
Speaker 6: Yeah, so China still remains, you know, after learning sort
Speaker 6: of that overhang in terms of uncertainty. The company did
Speaker 6: guide to a two to five billion revenues from the
Speaker 6: age twenty in China next quarter. Positive. That means they
Speaker 6: feel confident that they'll at least be able to ship
Speaker 6: some and get some of the revenues back. But yes,
Speaker 6: you know, the spark here for the China story will
Speaker 6: not appear until we have a clarity, and we believe
Speaker 6: until they have a blackwell version of a China chip,
Speaker 6: which they get approval from the government, that will end
Speaker 6: up really open up a massive amount of revenues coming
Speaker 6: from China. And there's a lot of hurdles you need
Speaker 6: to clear. Right there's the government, which has nothing to
Speaker 6: do with in media. The US China relationship needs to
Speaker 6: get sorted out because now even China can put in
Speaker 6: a roadblock from Nvidia selling or allowing their companies in
Speaker 6: China from buying in media chip. So there is work
Speaker 6: to be done. As you mentioned, the fifteen percent cut
Speaker 6: is not ironed out in terms of laws. There is
Speaker 6: we have heard new stories about potential lawsuits. So those
Speaker 6: two government and geopolitical angle needs to be cleared before
Speaker 6: we can start seeing billions of dollars of data center
Speaker 6: China revenue coming in.
Speaker 2: What's the competitive landscape here for these chip companies visa
Speaker 2: v in Nvidia and just kind of positioning for AI.
Speaker 2: I assume in Vidia's position A, who's kind of B
Speaker 2: and C.
Speaker 6: Yeah, So you know, the space is divided into two categories.
Speaker 6: One is the merchant GPUs, which is what in media
Speaker 6: sells and dominates that landscape. The sort of second competitor
Speaker 6: there or the b is AMD, which is a very
Speaker 6: far distant. You know, Nvidia today has about over ninety
Speaker 6: percent in terms of revenue share and the remaining is
Speaker 6: going to a very small to AMD. But there's another piece,
Speaker 6: which is we call what we call A six, which
Speaker 6: is what these big hyperscalers and cloud providers like Amazon
Speaker 6: and Google designed their own chips. So that's sort of
Speaker 6: the other competitive landscape where there's a risk of the
Speaker 6: A six taking sort of share away from merchant GPUs
Speaker 6: even though they don't compete directly for the same socket,
Speaker 6: they could take away the wallet share.
Speaker 2: And so does that mean companies like Nvidia have to
Speaker 2: pour money into R and D for that next chip
Speaker 2: to stay on front because I know in your business
Speaker 2: technology changes quickly.
Speaker 6: Yeah, definitely. I mean, look and Media has been even
Speaker 6: before the AI event happened, and Media has been the
Speaker 6: biggest R and D spender. They have continued and this
Speaker 6: is what really got them to the stage of being
Speaker 6: ahead of everyone else, and they have to continue spending
Speaker 6: out spending everyone else to sort of keep that lead.
Speaker 6: Their roadmap for the next two and a half years
Speaker 6: does suggest that they should be able to keep this
Speaker 6: lead handsomely, and for that it will definitely require high
Speaker 6: R and D spending.
Speaker 2: So this name to me who I'm used to stocks
Speaker 2: trading in much lower multiples in my world, But this
Speaker 2: seems like a stock that can actually earn its way,
Speaker 2: and we have seen it earn its way into its multiple.
Speaker 2: I mean, you can make an argument this is not
Speaker 2: an expensive stock.
Speaker 6: You're right. I mean, if you look at from a
Speaker 6: historical perspective, it's actually the multiple is much more lower
Speaker 6: than what we have seen in media trade in the
Speaker 6: past two years. So given that fact, and also when
Speaker 6: we look at the relative comparison, when you think about
Speaker 6: a company growing at fifty percent and making revenue in
Speaker 6: the hundreds of billions, that is unprecedented, especially growing with
Speaker 6: gross margins of seventy mits or low seventy percent. I mean,
Speaker 6: you're talking about a financial profile for software company, not
Speaker 6: a semic network company here. So definitely, when you take
Speaker 6: into those two things into account, it does seem that
Speaker 6: it might not be really highly valued.
Speaker 3: Our thanks to Kunjoan Shobani, Bloomberg Intelligence Senior semiconductor analyst,
Speaker 3: we move next to.
Speaker 2: The anti trust space as anti trust enforcement policies for
Speaker 2: President Donald Trump's administration takes shape, dealmakers and large businesses
Speaker 2: could see a glimmer of hope in some.
Speaker 3: Areas, and one area is Media. Last week, next to
Speaker 3: Our Media agreed to buy the TV station operator Tegna
Speaker 3: for three and a half billion dollars, and this deal
Speaker 3: will likely win FCC approval, according to Bloomberg Intelligence.
Speaker 2: For more guests, Alexis Christophers and I were joined by
Speaker 2: Jennifer ree Burg Intelligence senior litigation analyst. First asked jen
Speaker 2: if the next Star Tegni deal will be approved by
Speaker 2: the FCC.
Speaker 7: I think in the end yes, because the timing was right.
Speaker 7: You know, this isn't a deal. I think that these
Speaker 7: companies could have gotten through a few years ago during
Speaker 7: the Biden administration. But both of the rules that the
Speaker 7: FCC has that would get in the way are in
Speaker 7: the process of being changed as we speak, and Republican
Speaker 7: Commissioners have for a long time wanted to change these rules.
Speaker 7: So the first one is the thirty nine percent ownership cap.
Speaker 7: You know that one company can't own or operate TV
Speaker 7: stations that reach more than thirty nine percent of US households.
Speaker 7: These companies say they'll reach eighty percent. So it's just
Speaker 7: clear on its face that there's a problem there. But
Speaker 7: the FCC is in a rule making process. They'll probably
Speaker 7: have this rule, get rid of it, vacate it. We
Speaker 7: think by the end of the year. You know, my
Speaker 7: colleague Matt Chattenhelm is an expert on the FCC, and
Speaker 7: we've talked about this quite a bit. That's probably going
Speaker 7: to clear out of their way. There could be litigation,
Speaker 7: of course, but we do think the rule will move
Speaker 7: out of the way. The other issue is owning more
Speaker 7: than one of what's called the Big four broadcast stations ABC, CBS, NBC, Fox.
Speaker 7: That rule would also get in the way here probably
Speaker 7: in a number of local areas. Does it called designated
Speaker 7: market areas by Nielsen. That rule has also been vacated
Speaker 7: by the Eighth Circuit Court of Appeals. It will also
Speaker 7: probably be in litigation, but it seems like the road
Speaker 7: is clearing for the FCC.
Speaker 8: There.
Speaker 9: It's a whole new world.
Speaker 7: Yes, it's a whole new world. But we have Department
Speaker 7: of Justice also, so we can't forget that right and
Speaker 7: we always think about the FCC. The Department of Justice
Speaker 7: is going to be looking at this too, but I
Speaker 7: do think they can probably get it cleared through that
Speaker 7: agency as well.
Speaker 2: All we really care about is President Trump, that he
Speaker 2: have voiced any opinion one way or the other about
Speaker 2: this type of deal or these types of deals.
Speaker 7: You know, I haven't heard anything from him. You know,
Speaker 7: it would be reported in the news. I haven't heard
Speaker 7: him say anything about these deals. We are beginning to
Speaker 7: see a trend though, in the merger world, Paul, where
Speaker 7: if the companies do and say the right things for
Speaker 7: the Trump administration, they're getting assistants and getting their deal through.
Speaker 7: And they're all pretty well aware of that. So as
Speaker 7: long as they do and say the right things, hey,
Speaker 7: we won't block political ads, will be neutral in you know,
Speaker 7: our censorship of content things like that that resonate with Trump,
Speaker 7: that's going to help them.
Speaker 9: Sinclair did come in here with an eleventh hour deal,
Speaker 9: did they not?
Speaker 1: Yeah?
Speaker 9: I think so, but you know they rebuff what it
Speaker 9: seemed like on a per share basis, it was better
Speaker 9: than the next Star deal for Tegna, So why rebuffet.
Speaker 7: You know, I can't speak to that. You know, that's
Speaker 7: much more Tegna and Tegna's strategy maybe they think from
Speaker 7: an anti trust perspective, there's less overlap here. I mean,
Speaker 7: it is thirty five of fifty one of their DMAs,
Speaker 7: That's what TECHNA says. But in those thirty five, depending
Speaker 7: on what stations they own, that overlap may not be problematic.
Speaker 7: It may only be problematic into few. They may still
Speaker 7: have to divest some stations in order to get Department
Speaker 7: of Justice approval. I haven't done that comparison analysis, but
Speaker 7: it may be that they have to divest fewer stations.
Speaker 7: This deal perhaps done a different one.
Speaker 2: Yeah, how is the Department of Justice looking at mergers
Speaker 2: and equisisms generally defined? Has it maturely changed under the
Speaker 2: Trump administration versus the Biden administration?
Speaker 7: You know, it's so interesting. The rhetoric at the beginning
Speaker 7: was that it wouldn't change, that there would be this
Speaker 7: read through, and that there was more commonality with the
Speaker 7: Biden administrators than differences. But it has changed. You know,
Speaker 7: they have gone back to settling problematic deals with you know,
Speaker 7: structural even one behavioral remedy that was omnicom interpublic with divestitures.
Speaker 7: This is something that wasn't happening during the Biden administration.
Speaker 7: They just said, if it deals problematic, we're going to
Speaker 7: sue this. Doja in this FTC said no, we're going
Speaker 7: to work it out. If we have problems, we'll work
Speaker 7: out the problems with a fix. We'll have a settlement
Speaker 7: and will allow the broader deal to close. And that's
Speaker 7: a big difference.
Speaker 9: What does this deal tell you, though, just about the
Speaker 9: larger landscape of television, especially local TV, which we know
Speaker 9: has been losing revenue share. They're struggling just because there
Speaker 9: are too many places the eyeballs can go right and
Speaker 9: competing with streaming and with the big guys. So is
Speaker 9: this really a merger of necessity for these local TV stations?
Speaker 7: You know, I would think it is, and I think
Speaker 7: we're going to see more, you know, that kind of
Speaker 7: consolidation has slowly there's been quite a bit of consolidation,
Speaker 7: actually it has over the years. It kind of slowed
Speaker 7: down during the Biden administration, but you know, I think
Speaker 7: it's going to pick back up again because they are
Speaker 7: so challenged by cord cutters, by people who never you know,
Speaker 7: younger people who never watch TV at all.
Speaker 9: You know, what's that?
Speaker 7: What is cable exactly so.
Speaker 2: Broad looking broader here I mean, over the next year
Speaker 2: or two, do you expect to see more deal activity
Speaker 2: just because companies and boards and private and all the
Speaker 2: forces in out in the marketplace. I feel like this
Speaker 2: is the time to do it. This is an administration that
Speaker 2: will support deals.
Speaker 7: I think so, and I think it would have already
Speaker 7: picked up if we didn't have so much teriff uncertainty.
Speaker 7: I think that has slowed things down. But as those
Speaker 7: things sort of work themselves out, I think we're going
Speaker 7: to see a lot more deal activity because you can
Speaker 7: see a path to getting these deals done without having
Speaker 7: to go to court and without dragging it out for
Speaker 7: two years.
Speaker 9: So this is sort of a litmus test, then, isn't it.
Speaker 9: This next Star Techna deal. I think for the rest
Speaker 9: of the industry. Really yeah, I think we have a
Speaker 9: few litmus tests out there. You know, the Google Whiz
Speaker 9: deal that's pending is a litmus test for sure, to
Speaker 9: see what this administration will do with a big tech
Speaker 9: platform merger.
Speaker 7: I think this next Star Techna deal is a litmus
Speaker 7: test because they're breaking all these old rules that were
Speaker 7: the orthodoxy for years. We're going to see where that goes.
Speaker 7: And then you know, you have Dick's footlocker, and you've
Speaker 7: got Charter Cox. And there are a lot of big
Speaker 7: deals pending right now, and I think they all are
Speaker 7: deals that would have had trouble during the Biden administration,
Speaker 7: but I think can get cleared now.
Speaker 3: Our thanks to Jennifer Reeb, Bloomberg Intelligence senior litigation analyst.
Speaker 3: Coming up, we'll look at the results of a second
Speaker 3: obesity pill trial for the pharmaceutical giant Eli Lilly.
Speaker 2: If you're listening to Bloomberg Intelligence on Bloomberg Radio, providing
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Speaker 3: I'm Scarlett Foe.
Speaker 2: Oh Faull Sweeney, and this is Bloomberg.
Speaker 1: You're listening to Bloomberg Intelligence with Paul Sweeney on Bloomberg Radio.
Speaker 2: I'm Paul Sweeney.
Speaker 3: And I'm Scarlett Food filling in on Bloomberg Intelligence.
Speaker 2: Next to some M and A news in the consumer space.
Speaker 2: This week, the beverage company Currick Doctor Pepper announced it
Speaker 2: would buy the coffee and tea company JD. E. Pete.
Speaker 3: The goal is for Currick Doctor Pepper to strengthen its
Speaker 3: struggling coffee business. The company also says that plans to
Speaker 3: separate its coffee and soft drinks unit into two independent
Speaker 3: US listed companies next year once the deal is completed.
Speaker 2: For more on all of this, guests host Alexis Christophers
Speaker 2: and I were joined by Ken Shay, Bloomberg Intelligence senior
Speaker 2: consumer products analyst. First ask Ken to explain what this
Speaker 2: deal would do for Kurk Doctor Pepper.
Speaker 5: This two step deal basically addresses a lagging division they've
Speaker 5: had the Carrig coffee business, you know, it's it's cold
Speaker 5: beverage business, namely Dr Pepper, Mott's Canada Dry is doing
Speaker 5: it really well, whereas the cure coffee business really has
Speaker 5: been a laggered over the last couple of years. Now
Speaker 5: that you have higher green coffee costs, you have you know,
Speaker 5: fifty percent tariffs coming in from Brazil, namely coffee beans,
Speaker 5: slow demand for at home you know pod business, you know,
Speaker 5: the ubiquitous ca cups, and it really is painted a
Speaker 5: dismal picture for that division of the second half. So
Speaker 5: rather than try to sell it, and I don't know
Speaker 5: if they try to do that, but rather than try
Speaker 5: to do that at a low multiple. What they're trying
Speaker 5: to do cleverly is team it up with JD. E. Peets,
Speaker 5: which is the number two coffee producer in the world,
Speaker 5: behind only Nesley, but mostly big in Europe, and you know,
Speaker 5: attached the US essentially US business, the CA cup business
Speaker 5: together and you have a pretty good, pretty good entity.
Speaker 9: You know what struck me when I was reading about
Speaker 9: this deal, Guys, Doctor Pepper was the second most popular
Speaker 9: soda in the US last year.
Speaker 6: Is that?
Speaker 9: Right behind coke and a head of PEPSI did not
Speaker 9: know that. I can't remember the last time I drank
Speaker 9: a Doctor Pepper.
Speaker 2: Well, if you're in Texas, that's like the state drink, then.
Speaker 9: Is it now?
Speaker 10: Yes? All right?
Speaker 9: So but Ken, the question here is talk to me
Speaker 9: about the beverage side, the soda side here, because I
Speaker 9: know bottled water has sort of been eating their lunch
Speaker 9: the overall industry right for years now, outpacing the sales
Speaker 9: of soda. So how what's the health of that side
Speaker 9: of the business.
Speaker 5: Oh, it's doing very well, lexis the cold beverage side
Speaker 5: is doing really well, whether it's coke or Pepsi or cuity,
Speaker 5: Doctor Pepper, particularly those three companies because distribution is everything.
Speaker 5: These three companies have national footprints so they can reach
Speaker 5: all the outlets, you know, whether it's fountain drinks or
Speaker 5: traditional supermarkets, you know, vending, whatever, they can reach it.
Speaker 5: And they all had powerful brands. As you said, Doctor
Speaker 5: Pepper has really been coming on strong over the last
Speaker 5: couple of years. And they have other powerful brands. And
Speaker 5: unfortunately there are somewhat mini conglomerate business structure is being
Speaker 5: dragged down by a you know, Carrig the coffee business.
Speaker 5: So that business is doing really well. Carrik has shown
Speaker 5: that it's also flexible and willing to pivot to fast
Speaker 5: growing niche coal beverages. You know, it's a business that
Speaker 5: continually changes with consumer tastes. Over the last year or so,
Speaker 5: for instance, energy drinks have taken off, so what they do.
Speaker 5: They went out and bought Ghost Energy. You know, for
Speaker 5: even a younger demographic that typically drinks beverage, energy beverages.
Speaker 5: They are bigger into the sports, the sports drink category.
Speaker 5: They talked about on the last call a few weeks ago.
Speaker 5: To get stronger in the protein space. Everybody wants protein,
Speaker 5: you know, the GLP one folks need protein, replenishment. So
Speaker 5: they've shown a willingness to branch out and tap into
Speaker 5: anywhere where fast growing coal beverages are you know, doing well.
Speaker 2: So I look on like global commodity screen and I
Speaker 2: see the price of coffee. It's up like twenty five
Speaker 2: percent this year. I mean, what's going on with that?
Speaker 2: Talk to us about coffe and just the cost of
Speaker 2: the beans and all that kind of stuff.
Speaker 5: Well, you know, coffee beans are essentially sourced from Brazil,
Speaker 5: so to some degree, the roasters are hostage to good crops,
Speaker 5: and over the last year or so you really haven't
Speaker 5: had great crops. I think some of the sellers in
Speaker 5: Brazil are also holding back knowing that towers are coming
Speaker 5: and you're not going to get what you know they
Speaker 5: would like to get. And that's exacerbating the run up
Speaker 5: that you've seen over the past six months a year
Speaker 5: in coffee beans. If you went back over the last
Speaker 5: couple of years, through two or three years, you would
Speaker 5: see that the retail price of coffee, whether it's rate
Speaker 5: to drink or hot coffee at your you know, local
Speaker 5: coffee shop, have increased faster than most other beverages soft drinks.
Speaker 5: I'm talking about so you've even seeing some consumers bypower
Speaker 5: or switching from say like cold brew cold coffee to
Speaker 5: move to energy drinks. It's more cost effective. So the
Speaker 5: coffee producers have a condundrum. Do they continue to raise
Speaker 5: prices and get flatter lower volumes or do they eat
Speaker 5: that margin? And so what CURRG has decided to do
Speaker 5: is kind of divest it in a tax efficient way.
Speaker 3: Our thanks to Ken Shay, Bloomberg Intelligence, senior Consumer products analyst.
Speaker 2: Move next to the biotech space. This week, the pharmaceutical
Speaker 2: company Eli Lilly said its second obesity pill trial help
Speaker 2: patients was almost ten percent of their body weight, and
Speaker 2: the success of this weight loss trial moves Eli Lilly
Speaker 2: one step closer to the potential approval of its weight
Speaker 2: loss pill form wrong. On this guest hosts Lise Matteo
Speaker 2: and Alexis Christopherus were joined by Sam Fizzelli, Bloomberg Intelligence
Speaker 2: director of Research for Global Industries and senior pharmaceuticals analysts.
Speaker 2: They first asked Sam how the most recent obesity pill
Speaker 2: trial is different.
Speaker 8: This is a large trial in diabetic patients, but it
Speaker 8: obese diabetic patients, so they're looking at the impact in
Speaker 8: that popular that population tends to have less of a
Speaker 8: weight loss for a variety of reasons. But it's come
Speaker 8: out exactly where we thought it would come out, actually
Speaker 8: maybe a little bit better than people's lowered expectations after
Speaker 8: that first trial read out a couple of weeks ago,
Speaker 8: if you remember when the stock got hit severely lily stock,
Speaker 8: and so we're seeing about ten percent weight loss and
Speaker 8: still the same high levels of discontinuations. This is a
Speaker 8: long trial, so you even find a whole bunch of
Speaker 8: people on placeboud discontinue because they get bored. They want
Speaker 8: to go and get wed loss from another drug. So
Speaker 8: it's actually pretty decent data because it's a small molecular pill.
Speaker 8: It's a pilly can take, relatively easily manufactured, and you
Speaker 8: can take without too much complications in terms of don't eat,
Speaker 8: to eat, take in the morning, take in the evening,
Speaker 8: that sort of stuff.
Speaker 9: And that's the key. Sam, and I'm wondering how much
Speaker 9: of a game changer this is because it's not an injection, right,
Speaker 9: it's a p You're looking at an industry that by
Speaker 9: twenty thirty is projected to be ninety five billion dollars.
Speaker 9: So if this goes Eli Lilly's way. Is it a
Speaker 9: game changer for the company.
Speaker 8: Yeah, I mean it has gone their way. This is
Speaker 8: unless something shows up in the enormous number of files
Speaker 8: that they file to the FDA, or side effects or something.
Speaker 8: This is a drug that's likely to get approved. The
Speaker 8: question is how do you use it. You've got the
Speaker 8: injectibles once a week, once a week, not a big ask,
Speaker 8: very fine needle people even tell me they don't even
Speaker 8: notice the needle going in and out. But still you
Speaker 8: don't see the needle, So what is It's it ten
Speaker 8: percent weight loss versus twenty odd percent weight loss? So
Speaker 8: what is the right way forward here? Some people are needlephobic.
Speaker 8: It's going to be helpful for those. Some people can't
Speaker 8: get access to the drug because it's hard to manufacture.
Speaker 8: The other ones that are injectibles sterile manufacturing. So there's
Speaker 8: lots of room for this. And of course there's this
Speaker 8: other thing that I think a lot of people keep
Speaker 8: thinking about, is you've got your big weight loss with
Speaker 8: your injectables six months, in nine months, in twelve months,
Speaker 8: in switch to this and help you maintain. You might
Speaker 8: not even need the higher doses which are causing some
Speaker 8: side effects, maybe you can get away with a lower
Speaker 8: dose and maintain that weight loss. They would have to
Speaker 8: do a trial to prove that.
Speaker 11: Though, as you're talking, a question kind of popped into
Speaker 11: my head. You're talking about all the different advantages to it.
Speaker 11: What about has there been any talk about price, like
Speaker 11: how much could this pill cost compare to an injection?
Speaker 8: I mean, it would be an error for these companies
Speaker 8: to start competing with themselves on price with their products.
Speaker 8: If you find that actually you can go with the
Speaker 8: lower dose of this, your margins are a bit better,
Speaker 8: definitely because there's no device involved. But I don't know
Speaker 8: what the small molecule manufacturing because they're not all small
Speaker 8: molecules are easy to make, right. It may be small
Speaker 8: discount perhaps, I don't know, but I doubt that this
Speaker 8: will come out at a level that's significantly low. On
Speaker 8: the other hand, it does have lower weight loss, so
Speaker 8: maybe if there is an opportunity to kind of I
Speaker 8: see it, PARI pass whu if whatever, If that's the
Speaker 8: right phrase in line with its weight loss, that you're.
Speaker 3: Getting our Thanks to Sam Vizzelli, Bloomberg Intelligence, Director of
Speaker 3: Research for Global Industries and senior pharmaceuticals analyst.
Speaker 2: We moved next to news from the consumer retail company
Speaker 2: william Sonoma.
Speaker 3: This week, the company raised its full your sales growth
Speaker 3: target after a strong second quarter showing across all its brands. However,
Speaker 3: Wall Street's reaction to this was mixed. Williams Sonoma has
Speaker 3: seen its incremental terror F rate double to twenty eight percent.
Speaker 2: For more on this guest host Alexis Christophers and I
Speaker 2: were joined by Lindsay Dutch Bloomberg Intelligence Consumer Hardline senior analysts.
Speaker 2: We first asked Lindsay to break down Williams Sonoma's earnings
Speaker 2: and how its business is doing.
Speaker 4: Williamsinoma had another really good quarter. We're seeing continued momentum
Speaker 4: and sales, which is a positive for them, especially given
Speaker 4: higher interest rates and new home sales being soft. And
Speaker 4: more importantly, they held the guidance for operating margin flat
Speaker 4: even though they're facing tremendous costs headwinds from tariffs.
Speaker 9: Why not a better reaction from Wall Street?
Speaker 4: You know, I'm also puzzled by that. I think that
Speaker 4: there's not much more that you can ask for from
Speaker 4: a company like this. You know, they are working on
Speaker 4: getting to some sales growth goals. They're showing progress there.
Speaker 4: They are leveraging their scale, negotiating with suppliers. They're basically
Speaker 4: mitigating all of the costs from the tariffs that they're
Speaker 4: experiencing this year, which was basically a doubling in the
Speaker 4: tariff rate than they were expecting from the first quarter,
Speaker 4: so it's a significant headwind. They're basically planning to offset
Speaker 4: all of it with all of their mitigation efforts, and
Speaker 4: they're going to continue to see some profit growth this year.
Speaker 4: Long term goals are intact.
Speaker 2: So how are they mitigating it? So they're not going
Speaker 2: to pass anything along to consumers? How are they mitigating So.
Speaker 4: They are doing select price increases. They have multiple less
Speaker 4: that they are pulling, so they are negotiating with their
Speaker 4: suppliers sort of managing the cost sort of on the
Speaker 4: supply side, they're shifting sourcing, you know, with a new
Speaker 4: threat of an additional tariff just on furniture imports, they're
Speaker 4: looking to increase US made inventory heading into next year.
Speaker 4: They are also increasing the prices and the fact that
Speaker 4: demand is showing momentum, you know, that's a positive sign
Speaker 4: that they can execute those price increases successfully and continue
Speaker 4: to get a good margin on those products.
Speaker 9: So Williams Sonoma is a company that also owns the
Speaker 9: Pottery Barn brand West Elm. Curious if there were strengths
Speaker 9: sort of across the board across its brand.
Speaker 4: Yes, So this was a second consecutive quarter that we
Speaker 4: saw same source sales growth across all brands. Pottery Barn
Speaker 4: and West Elm are the two big ones that we've
Speaker 4: been watching over the past say, four to six quarters,
Speaker 4: and that's because there really has been a bit of
Speaker 4: a challenge when it comes to demand for furniture coming
Speaker 4: into this year, we saw some positive momentum in that business.
Speaker 4: William Sonoma has continued to outperform, So we saw growth
Speaker 4: in those two brands again in this second quarter while
Speaker 4: the industry was still down for the quarter. So they
Speaker 4: are seeing, you know, good demand with those two big brands,
Speaker 4: and they're saying that a lot of that is coming
Speaker 4: from the new products that they're launching.
Speaker 3: Our thanks to Lindsay Dutch Bloomberg Intelligence Consumer Hardlines senior
Speaker 3: analyst coming up a look at earnings from the retailers
Speaker 3: Coles and Abercromme and Fitch.
Speaker 2: You're listening to the Bloomberg Intelligence on Bloomberg Radio, providing
Speaker 2: in depth research and data on two thousand companies in
Speaker 2: one hundred and thirty industries.
Speaker 3: You can access Bloomberg Intelligence via bi go on the terminal.
Speaker 3: I'm Scarlet Foo and I'm Paul Sweeney.
Speaker 2: This is Bloomberg.
Speaker 1: You're listening to Bloomberg Intelligence with Paul Sweeney on Bloomberg Radio.
Speaker 3: I'm Paul Sweeney and I'm Scarlet Foo. Fill in on
Speaker 3: Bloomberg Intelligence.
Speaker 2: If we move next to news on the telecommunications companies
Speaker 2: EchoStar and AT and T. This week, EchoStar agreed to
Speaker 2: sell spectrum licenses to AT and T for about twenty
Speaker 2: three billion dollars in an all cash transactions.
Speaker 3: The sale will expand AT and d's network. It'll also
Speaker 3: help EchoStar state out of bankruptcy and fend off regulatory
Speaker 3: concerns about its airwave use. The deals expected to close
Speaker 3: by mid twenty twenty six, pending regulatory approval for more.
Speaker 2: Guest host Lisa Mittel and Alexis Christopherus were joined by
Speaker 2: John Butler, Bloomberg Intelligence senior telecom analysts. They first has
Speaker 2: John with this Ecostar AT and T deal means it is.
Speaker 10: Huge for EchoStar, and I think at issue for them
Speaker 10: is they have they've been trying to build their own
Speaker 10: five G network to compete with the big guys, and
Speaker 10: they have the spectrum to do it, but they didn't
Speaker 10: have the capital to do it. They really have an
Speaker 10: outsized debtload that they've really been struggling this service. And
Speaker 10: the FCC intervened here and they've been pressuring ahead of
Speaker 10: Echo Star Charlie Ergan to either use this spectrum and
Speaker 10: start to fill those airwaves or to sell it. And
Speaker 10: so I think this is maybe the first of maybe
Speaker 10: even more moves to sell more Spectrum on the part
Speaker 10: of the company. But given the price tag, it alleviates
Speaker 10: that capital crunch and so any risk of default here
Speaker 10: I think is minimized now in the wake of this deal,
Speaker 10: and so investors are breathing a big sire relief.
Speaker 9: Talk to me a little bit, John about this price.
Speaker 9: Twenty three billion dollars nine billion more than EchoStar paid
Speaker 9: for the spectrum, five billion more than the appraised value
Speaker 9: is at and t getting value out out of this
Speaker 9: twenty three billion dollar deal? Are they grossly overpaying?
Speaker 10: So I'll say Spectrum is like houses on Nantucket. You know,
Speaker 10: the price, it just continues to go up over the years,
Speaker 10: you know, particularly with the advent of AI now and
Speaker 10: the need for more capacity to carry that added traffic.
Speaker 10: It's really not a concern on my part as to
Speaker 10: whether or not AT and T is going to get
Speaker 10: a good return on this investment. And again all kitting aside,
Speaker 10: I go back to that analogy that really Spectrum does.
Speaker 10: It tends to increase in value over time. It's a
Speaker 10: very ill liquid market, so it's hard to really get
Speaker 10: a good feel for their fair value of different frequencies.
Speaker 10: But I have no doubt that at the end of
Speaker 10: the day, even expensive is going to prove cheap here
Speaker 10: for them.
Speaker 11: Hey, John, can you dig a little bit into how
Speaker 11: this is going to expand AT and T's network.
Speaker 10: So if you look at this spectrum holdings of Verizon,
Speaker 10: T Mobile and AT and T and Spectrum, I'll just
Speaker 10: take a step back for listeners that don't know, when
Speaker 10: you're making a caller transmitting data over the area, you're
Speaker 10: doing it using spectrum. And the more you have think
Speaker 10: of it like the width of a pipe. The more
Speaker 10: you have, the fatter the pipe, the faster the download speeds.
Speaker 10: And so AT and T intends to put this spectrum
Speaker 10: to use almost immediately to really enhance the download speeds
Speaker 10: of the network, and so network quality gets better, word
Speaker 10: gets around, people begin to say AT and T has
Speaker 10: a better network. So from a branding standpoint, there's a
Speaker 10: real benefit here. And then longer term again, as AI
Speaker 10: continues to scale up and imprinting those queries that we
Speaker 10: make and the answers we get back. Now, a lot
Speaker 10: of that's going to be done at the edge of
Speaker 10: the network where you need that big fat pipe to
Speaker 10: support that traffic. So I think in their minds, those
Speaker 10: are the two things there, after improving the network quality
Speaker 10: and the brand image and having the pipes to move
Speaker 10: the traffic that's coming down the road here.
Speaker 9: On a call with investors, AT and t's CEO Stanky
Speaker 9: said that, you know, regulators shouldn't be concerned that this
Speaker 9: transaction was going to put too much wireless spectrum, I
Speaker 9: guess in the hands of one of the largest telecom carriers.
Speaker 9: That's what he told investors. But do you think regulators
Speaker 9: are going to bulk at this No.
Speaker 10: I think regulators have been behind prompting the sale. If
Speaker 10: that's the right way to put it so again, the
Speaker 10: FCC was really on Echo Star to sell some of
Speaker 10: that spectrum. They're educated and well educated and wireless as
Speaker 10: regulators to know that it was probably going to be
Speaker 10: one of the big guys that would step up and
Speaker 10: buy it. If I look at at and T spectrum
Speaker 10: holdings the whole, they had a competitive disadvantage or less
Speaker 10: holdings in the band or the frequencies that they purchased
Speaker 10: from Echo Star here. So I don't think there's any
Speaker 10: sort of regulatory argument against the deal here, but I
Speaker 10: would defer to our legislative analysts in Washington to really
Speaker 10: make the call there. But I'm not concerned.
Speaker 3: Are Thanks to John Butler, Bloomberg Intelligence senior telecom analyst, moved.
Speaker 2: Next to earnings from the retailers Coals and Abercrombie and.
Speaker 3: Fitch this week, coleshare surging after the company offered a
Speaker 3: more optimistic full Your Sales outlook.
Speaker 2: The company now expects comparable sales to fall no more
Speaker 2: than five percent this year. It's prior forecast was six percent.
Speaker 3: Separately, Abercommy and Fitch raised it's full Your Sales guidance
Speaker 3: following us stronger than expected quarter at its teen focused
Speaker 3: Hollister brand.
Speaker 2: More on all of this. Guest hosts Alexis, Christopherus and
Speaker 2: I were joined by Mary Ross Gilbert Bloomberg Intelligence senior
Speaker 2: equity analyst who covers retail. We first asked Mary for
Speaker 2: her key takeaways on coals earnings.
Speaker 1: Coles.
Speaker 12: Okay, look, they reported comp sales down still and as
Speaker 12: you pointed out, fourteen consecutive quarters of declines or another
Speaker 12: way to look at it, over the past three years.
Speaker 12: They're cycling three years of declines. So but what really
Speaker 12: we're looking at in the news that came out with
Speaker 12: Cole's one is that on the call, the company said
Speaker 12: July sales were flat. That was really encouraging. And when
Speaker 12: you look at the third quarter and the guidance for
Speaker 12: the third quarter again still looking for declines for the
Speaker 12: balance of the year, down four to five percent on
Speaker 12: a comp sales basis, but for the third quarter they're
Speaker 12: going to cycle a nine point three percent decline last year.
Speaker 12: So that means that comparisons are easier and they're off
Speaker 12: to a good start. So it's encouraging. And what we're
Speaker 12: finding is that they're bringing back the core private brands
Speaker 12: that are really resonating the their core consumer, which is
Speaker 12: that sort of load to low middle income consumer. They're
Speaker 12: really pressed by inflation still, and so they are really
Speaker 12: looking for the value and is they've brought that back
Speaker 12: in and they brought back fashion jewelry and you know,
Speaker 12: they're working on refining fine jewelry, but that's all resonating
Speaker 12: now with the customer. And so that's where they're seeing
Speaker 12: some strength. And so we're seeing encouraging signs there. But
Speaker 12: they're not out of the woods yet, right because you know,
Speaker 12: again three years of sales declines and you know, they're
Speaker 12: still their sales are still declining. So we'll see if
Speaker 12: they actually reach stabilization by the end of the year.
Speaker 12: They're saying, no, we're not, but we're thinking they're providing
Speaker 12: conservative guidance so that they can be.
Speaker 2: Hey, Mary, what are Coals and some of the other
Speaker 2: companies saying about, I don't know, their strategies for dealing
Speaker 2: with tariffs in terms of a passing along to consumers,
Speaker 2: b taking it maybe even their margin or c. I
Speaker 2: don't know, kind of pushing back on some of their suppliers.
Speaker 2: Is there a consensus building about how some of these
Speaker 2: retailers are dealing with it.
Speaker 12: Yeah, Paul, that's a really good question because tariffs is
Speaker 12: absolutely top of mind. And with Coals, Coals really sources
Speaker 12: most of their product from other brands and companies. They
Speaker 12: do have their own private brand business. It's probably somewhere
Speaker 12: around a third of the business. You know, they're getting
Speaker 12: it back in order because of course they went too
Speaker 12: low last year. And what they're finding is they're sharing
Speaker 12: with their vendors. This is what we're finding across the board,
Speaker 12: and they're finding an ability to raise prices on select items.
Speaker 12: So with Coals, we did see a margin improvement in
Speaker 12: the quarter. And so because the private brands do deliver
Speaker 12: a higher margin on an overall basis versus the third
Speaker 12: party brands, they're getting that benefit and that's helping to
Speaker 12: offset a bit of the tariffs. And again they're less
Speaker 12: impacted versus some of the specialty apparel brands like Abercrombie
Speaker 12: and PVH and those companies reporting which they did disclose
Speaker 12: what kind of exposure they have. But we are seeing
Speaker 12: across the board that there is sharing. It's usually about
Speaker 12: fifty percent, where their suppliers will say we'll absorb fifty
Speaker 12: percent of the cost, and then the other fifty percent
Speaker 12: is taken by that brand. Then they will do strategic
Speaker 12: price increases on certain items that they feel will be
Speaker 12: less noticeable to the consumer.
Speaker 5: Mary.
Speaker 9: Before we get to Abercrombie, one more question here on
Speaker 9: Cole's Bloomberg News is reporting that Coles is having trouble
Speaker 9: paying its vendors on time. What do we know about that.
Speaker 12: Alexis I'm really glad you brought that up, because that
Speaker 12: was never brought up on the call. Nothing came up
Speaker 12: in that conversation. When we saw that article, we said,
Speaker 12: what I mean, that's kind of like a warning sign,
Speaker 12: and it basically says, look, they're just trying to manage
Speaker 12: their working capital needs because we're in a period right
Speaker 12: now where they're taking in all of the inventory that
Speaker 12: for the holiday season that's coming in right now, and
Speaker 12: so that's a big cash use and that's kind of
Speaker 12: where we are in the third quarters where they're going
Speaker 12: to have to, you know, raise their revolver borrowings to
Speaker 12: fund those needs. And so there was a bit of
Speaker 12: a concern, but nobody on the earnings call brought that
Speaker 12: up with the company. But we we kind of were
Speaker 12: watching that closely like I said, Cole's is not out
Speaker 12: of the woods yet.
Speaker 2: All right, Ambercrombie, what's the story there.
Speaker 12: So on Abercrombie, generally they beat but okay, and it
Speaker 12: was all led by Hollister, which we could see in
Speaker 12: the transaction data, and it was something that we saw
Speaker 12: in the first quarter. And they're cycling some big comparable
Speaker 12: sales increases in the prior year period for their namesake
Speaker 12: Abercrombie brand. But the decline in comp sales, you know,
Speaker 12: it is down about eleven percent, was way worse than
Speaker 12: what analysts were looking for. They were looking for a
Speaker 12: decline of you know, something like down seven percent. The
Speaker 12: reason for that is they had some carryover inventory at
Speaker 12: lower average price points that they were selling through in
Speaker 12: the quarter and that's what really took the comp sales down.
Speaker 12: But they were very optimistic about you know, third quarter
Speaker 12: start with their denim program, with their NFL collaboration, and
Speaker 12: so they feel like that's going to really benefit all
Speaker 12: of the initiatives that they have to benefit the Abercrombie
Speaker 12: brand going forward. So they feel like, no, this is
Speaker 12: just a little bit of a hiccup, nothing to be
Speaker 12: alarmed about. And I think what we're seeing generally when
Speaker 12: we think about all these earnings reports so far, is
Speaker 12: that the consumer is resilient. We have the lower income
Speaker 12: being a little more strained and being very careful and
Speaker 12: choosing what they're going to buy. But when they see
Speaker 12: the value, they're spending. And then, of course, you know,
Speaker 12: when you get the consumer that's in a better position,
Speaker 12: they're definitely spending.
Speaker 3: Are thanks to Mary Ross Gilbert Bloomberg Intelligence, senior equity
Speaker 3: analysts for Retail.
Speaker 2: That's this week's edition of Bloomberg Intelligence on Bloomberg Radio,
Speaker 2: providing in depth research and data on two thousand companies
Speaker 2: in one hundred and thirty industries.
Speaker 3: And of course, as always, you can access Bloomberg Intel
Speaker 3: Diligence via b I go on the terminal. I'm Scarlet Foo.
Speaker 2: And I'm Paul Sweeney. Stay with us. Today's top stories
Speaker 2: and global business headlines are coming up right now.
Speaker 7: Mm hmm