WEBVTT - Meta to Spend Up to $27 Billion on Nebius AI Infrastructure 

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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<v Speaker 2>Boy, the tech news continues to come fast and hear us.

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<v Speaker 2>Let's get the latest with Ed Ludlow, be tech co host.

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<v Speaker 3>He's out there somewhere in California getting into trouble in

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<v Speaker 3>Silicon Valley. And I want to start with the meta

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<v Speaker 3>platforms paying twenty as much as twenty seven billion dollars

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<v Speaker 3>for cutting edge artificial intelligence infrastructure from Nebuas Group. Nebbus

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<v Speaker 3>Group stocks up thirteen percent today, all right, not bad?

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<v Speaker 2>Up fifty two percent. You're to date, okay, better up.

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<v Speaker 3>Three hundred and forty five percent on a trailing twelve

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<v Speaker 3>month basis.

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<v Speaker 2>Ed, let's just start with the basics. What is Nebbius Group.

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<v Speaker 3>What's going on over there?

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<v Speaker 4>Yeah, it's what we call a neo cloud. It's a

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<v Speaker 4>fancy way of saying it's a data set that just

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<v Speaker 4>runs AI workloads. Because prior to this point, lots of

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<v Speaker 4>data centers have done all kinds of software and storage,

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<v Speaker 4>and you know, Meta is pursuing this kind of everything strategy.

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<v Speaker 4>Meta is not a cloud computing company, but it has

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<v Speaker 4>a lot of compute demand, and so it's buying loads

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<v Speaker 4>of chips from in Video and AMD for its own

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<v Speaker 4>data centers. It's working on its own chips in house

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<v Speaker 4>that go into its own data centers, and then it's

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<v Speaker 4>basically leasing or renting capacity from a number of other players.

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<v Speaker 4>The difference with this Nebyis deal is like it's really big.

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<v Speaker 4>You know, it's twenty seven billion dollars over five years,

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<v Speaker 4>but upfront twelve billion dollars next year for dedicated capacity.

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<v Speaker 4>And that tells you that they've moved very quickly, and

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<v Speaker 4>it's a very serious arrangement.

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<v Speaker 5>And it adds to it's three billion dollar deal with

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<v Speaker 5>Nebus last year as well. You talk about Meta really

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<v Speaker 5>diversifying and not betting on just any one company, right,

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<v Speaker 5>I mean, it's kind of spread its chips everywhere.

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<v Speaker 1>Yeah.

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<v Speaker 4>The idea is that in an environment where you are

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<v Speaker 4>supply constrained, in other words, the demand that a company

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<v Speaker 4>has for compute power is greater than what exists in

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<v Speaker 4>the real world. They have found that diversifying is the

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<v Speaker 4>best way to get the compute needed for different workloads.

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<v Speaker 4>Meta is a very big and serious buyer of video chips.

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<v Speaker 4>You know, it's in the top five easily. But there

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<v Speaker 4>is benefit to designing at scale, Like the economics of

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<v Speaker 4>designing your own chips makes sense, particularly when it's for

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<v Speaker 4>running internal workloads. Right when I visited Meta's chip lab

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<v Speaker 4>last week, one of the chips they've come up with,

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<v Speaker 4>for example, trains the algorithm that does ranking and recommendations.

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<v Speaker 4>In other words, how ads show up in your timeline.

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<v Speaker 4>That's like very specific to them, and so it's paid

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<v Speaker 4>off the investment so far.

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<v Speaker 2>I'm just looking at the graph of this chart from DEBS.

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<v Speaker 3>I mean, when public in twenty eleven, kind of bouncing

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<v Speaker 3>around not doing anything, and then around the February of

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<v Speaker 3>twenty twenty two, at the price of twenty dollars a share,

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<v Speaker 3>people said, oh, this is an AI play, so we

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<v Speaker 3>go from twenty to one hundred and twenty eight dollars.

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<v Speaker 2>Where was that call ed Ludlow.

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<v Speaker 4>Well, there's also a history part of it, which is

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<v Speaker 4>that it was previously associated with the or, a property

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<v Speaker 4>of Yandex, which is a Russian cloud computing company. And

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<v Speaker 4>so you know, just simply due to what's the word

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<v Speaker 4>and I'm looking for, I guess sanctions. You know, it

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<v Speaker 4>changed itself. It is now an Amsterdam based company, so

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<v Speaker 4>that's a part of it, but it's completely I'm visualizing

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<v Speaker 4>the chart for our audio audience. But you know that

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<v Speaker 4>it completely coincides with the birth of the neo cloud

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<v Speaker 4>and demand specifically the data since that just run ai.

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<v Speaker 3>All right, here's another story that just recently crossed the

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<v Speaker 3>Bloomberg trouble again. Big numbers open ai and talks for

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<v Speaker 3>ten billion dollars joint venture with Pe firms. What's up

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<v Speaker 3>at that?

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<v Speaker 4>Yeah, so we've just moved our own version of this story.

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<v Speaker 4>And what I'm told by sources is that basically it

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<v Speaker 4>helps a lot for open ai to have some money

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<v Speaker 4>that's off the back sheet to go out there and

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<v Speaker 4>find a vehicle a mechanism to sell its software. And

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<v Speaker 4>so what these guys are doing is they've set up

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<v Speaker 4>an entity where those private equity companies in the first instance,

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<v Speaker 4>can go to all of the different kinds of companies

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<v Speaker 4>that they own and are trying to make better in

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<v Speaker 4>the classic pees style and say, you know what, why

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<v Speaker 4>don't you guys use open ai stuff. It's pretty good.

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<v Speaker 4>And so that gives like open ai a way of

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<v Speaker 4>going to market, and it gives these private equity firms

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<v Speaker 4>some exposure to open ai and a mechanism to do

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<v Speaker 4>business with them that also benefits all of their existing

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<v Speaker 4>portfolio of investment.

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<v Speaker 5>Do we think that this is going to be the

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<v Speaker 5>template that it starts to use more of these off

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<v Speaker 5>balance sheet adventures.

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<v Speaker 2>Yeah.

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<v Speaker 4>I think this is very interesting because like what I

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<v Speaker 4>hear from time to time across Silicon Valley for all

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<v Speaker 4>sorts of things is that there is benefit in having

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<v Speaker 4>multiple entities, be that a geographic split or be it

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<v Speaker 4>a business line split. And in part because you at

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<v Speaker 4>scale with enterprises, the open ai Private X story is

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<v Speaker 4>about selling open AI's platform to different enterprise companies. It's

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<v Speaker 4>just a sort of old archaic world where it seems

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<v Speaker 4>like going back to that model is what is in favor.

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<v Speaker 4>But this news that broke this morning is the first

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<v Speaker 4>real example I've seen of it. The idea has been

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<v Speaker 4>spoken about in the corridors for a little while. Stay

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<v Speaker 4>with us.

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<v Speaker 5>More from Bloomberg Intelligence coming up after this.

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<v Speaker 1>You're listening to the Bloomberg intelligence podcast. Catch us live

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<v Speaker 1>weekdays at ten am Eastern on Apple, Cocklay and Android

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<v Speaker 1>Otto with the Bloomberg Business App. Listen on demand wherever

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<v Speaker 5>One of the big movers was Dollar Tree, and the

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<v Speaker 5>outlook here from Dollar Tree was kind of mixed because

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<v Speaker 5>even though adjusted earnings per share is going to meet

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<v Speaker 5>the average channelist estimate, the outlook for revenue came in

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<v Speaker 5>a little bit light. So let's bring in Jen Bartashis.

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<v Speaker 5>She is our senior analyst covering retail staples and packaged foods,

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<v Speaker 5>and Jen, we've seen these value retailers do pretty well

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<v Speaker 5>in this current environment with a lot of higher income

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<v Speaker 5>consumers trading down. Yet this sales view did miss the

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<v Speaker 5>average analyssessment. Is that because analysts investors have gotten a

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<v Speaker 5>little bit ahead of themselves when it comes to the outlook.

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<v Speaker 6>Here, Well, it's a it's a good question, Scarlett, you know,

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<v Speaker 6>with regards to the overall revenue growth for Dollar Tree,

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<v Speaker 6>you know, last year was a real transition year for them.

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<v Speaker 6>They shed the family dollar unit, they're refocusing, they've been

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<v Speaker 6>you know, investing in the business, but that trade down

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<v Speaker 6>customer doesn't come all that often into stores. And so

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<v Speaker 6>while they bring a much higher basket and they're taking

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<v Speaker 6>their big, their big adopters of that higher price point

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<v Speaker 6>of three to five dollars, they're just not coming in

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<v Speaker 6>as frequently as kind of the core low income consumer.

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<v Speaker 6>And so I think the conservative view on the top

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<v Speaker 6>line is that there are a lot of things going

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<v Speaker 6>on right now. You've got, you know, fuel prices are

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<v Speaker 6>on the rise, You've got consumers who are her stretched,

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<v Speaker 6>and you've got a mixed behavior with regards to the

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<v Speaker 6>types of households that are coming into Dollar Tree.

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<v Speaker 2>So what's what's Dollar Tree and the other dollar stores?

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<v Speaker 3>How are they adjusting their strategies at all?

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<v Speaker 6>So with regards to strategy, they're you know, one of

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<v Speaker 6>the things that they really ran into trouble with and

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<v Speaker 6>this is why they went beyond that one dollar price

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<v Speaker 6>point back in twenty twenty two, was being able to

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<v Speaker 6>have a compelling variety of merchandise in the stores. So

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<v Speaker 6>the multi purchase, the multi price point strategy that Dollar

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<v Speaker 6>Tree is rolling out has been really effective for them

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<v Speaker 6>because it gives people, you know, slightly more choice of

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<v Speaker 6>what's in the store, and they can offer more compelling value,

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<v Speaker 6>So that's been a tactic that's really paying off. It's

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<v Speaker 6>just a question of you know, they're still in the

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<v Speaker 6>process of rolling that out to all of their stores,

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<v Speaker 6>so it's not everywhere yet, and so they're getting that

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<v Speaker 6>bump as stores are adopting these these these higher price points.

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<v Speaker 6>But once they're in all the stores, the question is

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<v Speaker 6>how sustainable will it be, So that's one of the

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<v Speaker 6>things that everyone is looking for.

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<v Speaker 5>And jen one thing we know about Dollar Tree is

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<v Speaker 5>that it has done better in terms of operations and

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<v Speaker 5>of performance because of this decision to divest its family

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<v Speaker 5>dollar chain, which was begun last year. How far long

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<v Speaker 5>that process is dollar Tree is it? You know, halfway done,

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<v Speaker 5>two thirds done, one hundred percent done.

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<v Speaker 6>So the divestitures is done. The question is the refocusing

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<v Speaker 6>on their own internal operations. So you know, with regards

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<v Speaker 6>to last year, they started to pay a little bit

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<v Speaker 6>more attention. They're really working at improving their supply chain efficiency.

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<v Speaker 6>They're working at improving store level productivity. They've invested in

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<v Speaker 6>wages in the stores to help have more employees there

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<v Speaker 6>at the right times and to provide the right amount

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<v Speaker 6>of customer service. But it's still early days. For their

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<v Speaker 6>overall transformation of the company now that it's back to

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<v Speaker 6>being just a single bit, and so it will probably

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<v Speaker 6>extend through this year that we see more of those

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<v Speaker 6>tactics start to take hold and to have a real

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<v Speaker 6>material impact on the business overall.

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<v Speaker 2>Let just Target, What is Walmart? What are they doing

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<v Speaker 2>in response here?

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<v Speaker 6>What's really interesting it, Paul, is that Dollar General as

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<v Speaker 6>a direct competitor in the dollar store space. They talk

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<v Speaker 6>about having over five hundred items that are at the

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<v Speaker 6>one dollar price point or below, so they're actually undercutting

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<v Speaker 6>Dollar Tree on some of that value play. If you

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<v Speaker 6>go into a Walmart or a Target, when you first

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<v Speaker 6>walk in, they have kind of those value alleys where

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<v Speaker 6>they have low priced items right at the front where

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<v Speaker 6>you can see them. So everybody has a strategy to

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<v Speaker 6>try to show value through some variety that's at very

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<v Speaker 6>low price points. But then when you get to the

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<v Speaker 6>big box guys there a competitive advantage really is in

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<v Speaker 6>the breadth of assortment that they carry, and if they

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<v Speaker 6>can be compelling on value across the store, that puts

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<v Speaker 6>them in a good position.

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<v Speaker 5>Stay with us. More from Bloomberg Intelligence coming up after this.

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<v Speaker 1>You're listening to the Bloomberg Intelligence Podcast. Catch us live

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<v Speaker 1>weekdays at ten am Eastern on Apple, Cocklay and Android

0:10:14.200 --> 0:10:17.480
<v Speaker 1>Auto with the Bloomberg Business App. Listen on demand wherever

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<v Speaker 1>you get your podcasts, or watch us live on YouTube.

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<v Speaker 3>We have a great guest here, Michelle coursmo Joins, the

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<v Speaker 3>CEO of the National Restaurant Association.

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<v Speaker 2>Michelle, thanks so much for joining us here.

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<v Speaker 3>You know, one of the industries that was thought to

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<v Speaker 3>be impacted or could be impacted severely by some of

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<v Speaker 3>the change in immigration policy from this administration was the

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<v Speaker 3>restaurant business.

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<v Speaker 2>Has that in fact happened.

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<v Speaker 7>Well, it's interesting, Paul, when you look at last year,

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<v Speaker 7>we had some growth, but not really strong growth. It

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<v Speaker 7>was four point six percent nominal growth in less than

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<v Speaker 7>one percent full time growth. And we know that that

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<v Speaker 7>has a lot to do with the fact that consumers

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<v Speaker 7>were a lit little bit more weary. The immigration policies

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<v Speaker 7>and the immigration disruption definitely made a difference in restaurant business,

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<v Speaker 7>particularly people coming to sit down in family dining. You know,

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<v Speaker 7>it's interesting when you think about immigration, because one out

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<v Speaker 7>of every five people that work in restaurants was born

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<v Speaker 7>outside the US. Many of those are citizens, many of

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<v Speaker 7>those obviously are fully documented and able to work. But

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<v Speaker 7>in terms of an immigrant population, the restaurant industry very

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<v Speaker 7>much represents that.

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<v Speaker 3>So what are your operators telling you about, Maybe just

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<v Speaker 3>their access to the ability to attract and retain labors

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<v Speaker 3>have been a challenge for them.

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<v Speaker 7>Yeah, it's always tough to find and retain the best labor.

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<v Speaker 7>We're thinking about the value of working in restaurants as

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<v Speaker 7>people are considering do they go and work in healthcare?

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<v Speaker 7>Do they go and work in education? And people need

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<v Speaker 7>to know that you can find a great career in restaurants.

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<v Speaker 7>In fact, there's a lot of opportunity that this eight

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<v Speaker 7>out of every ten restaurant managers started an entry level

0:12:05.520 --> 0:12:07.160
<v Speaker 7>and so we know, I'm sorry, nine out of ten

0:12:07.240 --> 0:12:09.560
<v Speaker 7>started an entry level and eight out of ten owners

0:12:09.600 --> 0:12:11.600
<v Speaker 7>started in entry levels. So we know that there's a

0:12:11.600 --> 0:12:14.920
<v Speaker 7>lot of upward mobility. So finding people to come in

0:12:15.000 --> 0:12:17.600
<v Speaker 7>and then building that upward mobility is always a priority

0:12:17.640 --> 0:12:18.679
<v Speaker 7>for restaurant operators.

0:12:19.320 --> 0:12:21.079
<v Speaker 2>Michelle, talk to us about tariffs.

0:12:21.400 --> 0:12:26.720
<v Speaker 3>We're going into year two of this uncertain tariff regime

0:12:26.800 --> 0:12:30.160
<v Speaker 3>or situation. How is that impacting the restaurant industry. As

0:12:30.160 --> 0:12:31.640
<v Speaker 3>the industry figured out a way to kind of just

0:12:31.679 --> 0:12:32.199
<v Speaker 3>deal with it.

0:12:32.920 --> 0:12:34.880
<v Speaker 7>Yeah, it's interesting you talk about figuring out a way.

0:12:35.000 --> 0:12:37.640
<v Speaker 7>It has a little bit normalized that we have some

0:12:37.800 --> 0:12:41.880
<v Speaker 7>disrupted prices. Food and beverage tariffs have been pretty stable

0:12:41.920 --> 0:12:44.160
<v Speaker 7>for at least the last six months, and so that's

0:12:44.200 --> 0:12:48.760
<v Speaker 7>provided some more continuity in terms of pricing. But food

0:12:48.760 --> 0:12:52.880
<v Speaker 7>price is tough, right. Food prices have been steadily increasing

0:12:52.920 --> 0:12:55.679
<v Speaker 7>since before the pandemic, and that's something we're watching. So

0:12:56.160 --> 0:13:00.280
<v Speaker 7>it's often more now about availability. We know we don't

0:13:00.360 --> 0:13:05.280
<v Speaker 7>have enough cattle herd that exists today to meet the

0:13:05.320 --> 0:13:07.720
<v Speaker 7>beef demand in the United States, so that has an

0:13:07.720 --> 0:13:11.520
<v Speaker 7>impact on pricing. So we're seeing those types of activities

0:13:11.600 --> 0:13:14.360
<v Speaker 7>impact food prices almost more than terriff activity.

0:13:14.360 --> 0:13:17.680
<v Speaker 3>Today, I noticed going to restaurants more and more and

0:13:17.760 --> 0:13:20.560
<v Speaker 3>more signed saying we're going to charge you three percent

0:13:20.640 --> 0:13:22.720
<v Speaker 3>more if you use a credit card versus cash.

0:13:22.760 --> 0:13:25.040
<v Speaker 2>And that's a big, big issue.

0:13:25.480 --> 0:13:26.800
<v Speaker 3>Not for me because I walk around with a lot

0:13:26.800 --> 0:13:30.080
<v Speaker 3>of cash, but for most people, the younger folks, they

0:13:30.080 --> 0:13:31.960
<v Speaker 3>would know a fifty dollars both.

0:13:32.040 --> 0:13:32.800
<v Speaker 2>They tripped over it.

0:13:32.840 --> 0:13:35.880
<v Speaker 3>So I mean, talk to us about these swipe fees

0:13:35.920 --> 0:13:36.840
<v Speaker 3>and all that type of stuff.

0:13:37.480 --> 0:13:42.640
<v Speaker 7>Well, you are one of a quarter of restaurant patrons

0:13:42.640 --> 0:13:46.040
<v Speaker 7>who uses cash, but the vast majority three quarters are

0:13:46.120 --> 0:13:50.080
<v Speaker 7>using credit cards. And the US is the last country

0:13:50.800 --> 0:13:54.760
<v Speaker 7>nation really to have any kind of competition that exists

0:13:54.800 --> 0:13:59.120
<v Speaker 7>between our credit card carriers, and so without that competition,

0:13:59.200 --> 0:14:02.480
<v Speaker 7>it allows those carriers to charge what we see is

0:14:02.600 --> 0:14:06.320
<v Speaker 7>really high swipe fees, costing the average American at least

0:14:06.360 --> 0:14:09.400
<v Speaker 7>twelve hundred dollars a year because of the swipe fees

0:14:09.440 --> 0:14:11.600
<v Speaker 7>being higher in the US than say they are in

0:14:11.880 --> 0:14:16.120
<v Speaker 7>Europe or in Asia. And so that's something that restaurant

0:14:16.120 --> 0:14:18.719
<v Speaker 7>operators need to figure out how to account for, is

0:14:18.880 --> 0:14:22.200
<v Speaker 7>how do you manage three, sometimes four or five percent

0:14:22.240 --> 0:14:25.240
<v Speaker 7>depending on a credit card swipe fees. And so those

0:14:25.320 --> 0:14:28.840
<v Speaker 7>extra charges are helping people understand what a difference it

0:14:28.840 --> 0:14:30.600
<v Speaker 7>makes when you're using a credit card as supposed to

0:14:30.640 --> 0:14:31.560
<v Speaker 7>paying cash.

0:14:31.920 --> 0:14:34.320
<v Speaker 3>So what's the longer term trend, Michelle, just in terms

0:14:34.360 --> 0:14:36.840
<v Speaker 3>of people eating home versus eating out? I know that

0:14:36.960 --> 0:14:40.520
<v Speaker 3>pandemic upended a lot of people's kind of how.

0:14:40.400 --> 0:14:42.640
<v Speaker 2>They do things. What's the longer term outlook?

0:14:43.560 --> 0:14:46.480
<v Speaker 7>Well, long term outlook for restaurants is always great. In fact,

0:14:46.480 --> 0:14:50.040
<v Speaker 7>even today we talk about the numbers in our State

0:14:50.080 --> 0:14:52.760
<v Speaker 7>of the Industry survey that shows that seven out of

0:14:52.760 --> 0:14:55.440
<v Speaker 7>ten Americans are saying they'd spend more money in restaurants

0:14:55.440 --> 0:14:57.800
<v Speaker 7>if they had more disposable income. So you know that

0:14:57.840 --> 0:15:00.200
<v Speaker 7>the demand is there. There's always a pent up demand,

0:15:00.480 --> 0:15:03.960
<v Speaker 7>and people really like the taste and the flavor profile

0:15:04.040 --> 0:15:08.840
<v Speaker 7>for restaurants. The convenience, the speed, with lives getting faster

0:15:08.960 --> 0:15:12.160
<v Speaker 7>and busier, restaurants are definitely a win. The other thing

0:15:12.160 --> 0:15:14.920
<v Speaker 7>that's great about restaurants is that it's a pretty competitive industry,

0:15:15.000 --> 0:15:18.480
<v Speaker 7>and that competition causes each restaurant to figure out how

0:15:18.520 --> 0:15:21.440
<v Speaker 7>they can do better to get those customers in the door,

0:15:21.760 --> 0:15:24.360
<v Speaker 7>So the quality of the food is going up. Pricing

0:15:24.440 --> 0:15:27.560
<v Speaker 7>a stain competitive restaurant industry is a great business.

0:15:27.280 --> 0:15:27.560
<v Speaker 6>To be in.

0:15:29.560 --> 0:15:34.239
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