WEBVTT - Delta Gives Upbeat Outlook as CEO Hails ‘Stable’ Environment 0:00:02.720 --> 0:00:10.600 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.640 --> 0:00:14.600 Bloomberg Intelligence podcast. Catch us live weekdays at ten am 0:00:14.640 --> 0:00:17.880 Eastern on Apple, Cocklay and Android Auto with the Bloomberg 0:00:17.960 --> 0:00:21.080 Business app. Listen on demand wherever you get your podcasts, 0:00:21.400 --> 0:00:23.120 or watch US live on YouTube. 0:00:23.960 --> 0:00:26.320 One of the stocks in the news is Delta Airlines. 0:00:26.880 --> 0:00:31.480 Stocks up thirteen point eight percent here today. Delta Airlines 0:00:31.560 --> 0:00:35.080 reinstated profit outlook for the year, and they say that 0:00:35.120 --> 0:00:38.600 the travel in the US is climbing back, corporate travel 0:00:38.640 --> 0:00:42.960 is strengthening, so looks pretty good, and consumers have become 0:00:43.040 --> 0:00:45.280 a little numb to the ongoing trade disputes. 0:00:45.320 --> 0:00:46.600 That's, according to the CEO, is. 0:00:46.680 --> 0:00:50.680 Being numb good though exactly maybe relative to where you're 0:00:50.720 --> 0:00:51.640 flying exactly. 0:00:52.680 --> 0:00:54.360 George Ferguson he does this stuff for a living. 0:00:54.400 --> 0:00:56.400 He files all the airlines and all the aerospace companies 0:00:56.440 --> 0:00:59.600 for Bloomberg Intelligence joins us. Now, George, what did you 0:00:59.600 --> 0:01:02.959 take away from kind of Delta? What's changed since they 0:01:03.040 --> 0:01:05.360 pulled guidance and now they're reinstating their guidance. 0:01:06.600 --> 0:01:08.720 Well, I think what's changed since they pulled guidance is 0:01:08.760 --> 0:01:11.800 that guidance got lower. But they didn't mention that right, 0:01:11.840 --> 0:01:15.200 so they reinstated guidance, but at a lower EPs than 0:01:15.240 --> 0:01:18.720 they had initiated at the end of the year. I 0:01:18.720 --> 0:01:21.440 think the market still looks a little bit soft to us. 0:01:22.640 --> 0:01:24.040 For sure, fuel. 0:01:23.720 --> 0:01:28.039 Prices are giving airlines a bit of a bolster on 0:01:28.080 --> 0:01:31.600 the bottom line. But I think, you know, what we 0:01:31.720 --> 0:01:35.360 heard today was on the demand side was more of 0:01:35.360 --> 0:01:38.760 the continuing story, and that is that premium is holding 0:01:38.800 --> 0:01:41.440 up really well and Delta's going to do very well 0:01:41.440 --> 0:01:45.759 there because of their loyalty programs and such. Basic economy 0:01:45.840 --> 0:01:49.919 isn't And if you look at Delta's you know, price 0:01:49.960 --> 0:01:52.960 paid per mile flown for customer, it was down and 0:01:53.120 --> 0:01:56.440 every single market that they served or maybe flatish in 0:01:56.480 --> 0:01:58.480 Latin America, but all the rest of the markets down 0:01:59.160 --> 0:02:01.960 during the quarters. So to us, it looks like a 0:02:01.960 --> 0:02:05.480 market that still needs to have capacity come out. Some 0:02:05.560 --> 0:02:06.480 of it will see. 0:02:07.080 --> 0:02:10.919 The CEO pointed to progress in trade talks between the 0:02:11.040 --> 0:02:14.440 US and other countries and the potential for some geopolitical 0:02:14.520 --> 0:02:18.679 conflicts to abate. I mean the flying public, really, I 0:02:18.720 --> 0:02:20.800 don't know, are they really thinking about this when they 0:02:20.800 --> 0:02:23.440 book a flight on Delta or any other airline. 0:02:24.160 --> 0:02:25.800 Yeah, I mean, so when I think of that, I 0:02:25.800 --> 0:02:30.880 think that's going to largely benefit his international business. I 0:02:30.919 --> 0:02:32.880 don't know, you know, I was polis to pick him 0:02:32.919 --> 0:02:36.240 because I get to Paris for Paris Air Show, you know, 0:02:36.360 --> 0:02:38.880 every other summer, and when I was in Paris, it 0:02:38.919 --> 0:02:42.480 was teaming with Americans. So it didn't seem like, even 0:02:42.520 --> 0:02:47.120 with protests going on around, it didn't seem like demand 0:02:47.240 --> 0:02:50.919 was off for international travel at least you know, anecdotally 0:02:50.960 --> 0:02:52.320 and some of the places I've been to. 0:02:53.400 --> 0:02:54.680 So I don't know. 0:02:54.720 --> 0:02:56.360 I mean, I think it takes a little bit of 0:02:56.440 --> 0:02:59.480 demand off, maybe a very little bit, but right now 0:02:59.760 --> 0:03:02.760 the international traveler seems to be rolling right over top 0:03:02.800 --> 0:03:04.400 of that and going anyways. 0:03:04.280 --> 0:03:08.080 George, how does an airline take capacity out of the system? 0:03:08.160 --> 0:03:10.880 Is that just going from like ten flights between Newark 0:03:10.919 --> 0:03:13.480 and Miami a day to I don't know, seven or eight. 0:03:14.720 --> 0:03:19.640 I mean, I think ultimately you gotta park airplanes. I mean, 0:03:20.240 --> 0:03:22.360 you know, it's a capital intensive business. You don't want 0:03:22.360 --> 0:03:25.079 to buy those airplanes and not utilize them. You take 0:03:25.120 --> 0:03:28.360 your old stuff, you park it, you maybe retire it, 0:03:28.560 --> 0:03:31.120 sell it off. But what I mean, what we're seeing 0:03:31.160 --> 0:03:34.320 as three Q develops and so we'll watch as closely 0:03:34.360 --> 0:03:37.400 to see what it does to demand. Is we're seeing 0:03:37.440 --> 0:03:42.080 that the low cost carriers Spirit Frontier look like they're 0:03:42.120 --> 0:03:47.960 taking large portions out of their plan for three Q. 0:03:48.200 --> 0:03:49.440 Now it may not hold. 0:03:49.800 --> 0:03:52.680 They may add some of those those routes back, some 0:03:52.720 --> 0:03:55.600 of those seats back, but we're seeing numbers down twenty 0:03:55.680 --> 0:03:59.320 percent in some of their capacity. On the full service side, 0:04:00.040 --> 0:04:02.600 United and Delta is still adding. United adding the most 0:04:02.680 --> 0:04:04.640 I think, I want to say, five is six is 0:04:04.680 --> 0:04:07.800 percent when I looked at earlier today, Delta adding two 0:04:08.120 --> 0:04:11.560 three ish percent, an economy that's not growing that fast. 0:04:11.880 --> 0:04:14.600 American look kind of flat, meaning the economy is growing 0:04:15.000 --> 0:04:18.719 at rates, you know, some two percent. So it feels 0:04:18.760 --> 0:04:20.840 like the big full service are going to push through 0:04:20.960 --> 0:04:23.680 here and try to push through and continued to subsidize 0:04:23.760 --> 0:04:26.680 the front of the cabin, sorry, subsidized the back of 0:04:26.720 --> 0:04:29.240 the cabin. That basic economy with the front of the 0:04:29.320 --> 0:04:32.800 cabin strength. I feel like at some point they'll break 0:04:32.839 --> 0:04:34.919 that front of the cabin. I think that's sort of 0:04:34.920 --> 0:04:36.239 how the industry always works. 0:04:36.400 --> 0:04:39.000 We'll see in none of these reports do I see 0:04:39.040 --> 0:04:44.320 anything mentioned about jet field prices. Should we be concerned 0:04:44.360 --> 0:04:44.760 about that. 0:04:45.960 --> 0:04:47.839 Well, I mean, right now it's a tailwind, and if 0:04:47.920 --> 0:04:51.680 that reverses could be a problem. Right, But I mean 0:04:51.720 --> 0:04:56.320 jet fuel prices are down because of slower global growth, right, 0:04:56.360 --> 0:04:59.120 I mean, I think the geopolitical backdrop doesn't help it, 0:04:59.160 --> 0:05:01.600 but it doesn't seem to have pushed prices up. 0:05:01.640 --> 0:05:01.960 Firmer. 0:05:02.000 --> 0:05:05.120 I think I saw today Saudi's are talking potentially about 0:05:05.680 --> 0:05:08.480 reducing some of the capacity ads they're coming on. I 0:05:08.520 --> 0:05:11.240 don't know if that sounds strong enough yet, but if 0:05:11.320 --> 0:05:15.160 jet fuel turns, that would be that would work against them, 0:05:15.160 --> 0:05:17.040 because again, we've got an airline business. If you look 0:05:17.040 --> 0:05:21.600 at Delta, they added three ish percent capacity or around 0:05:21.680 --> 0:05:25.520 there for this quarter and revenues were flat. Right, So 0:05:25.520 --> 0:05:28.960 they're adding capacity and revenues are flat. I generally don't 0:05:29.080 --> 0:05:30.000 like that kind of. 0:05:30.080 --> 0:05:32.640 Backdrop business travel. 0:05:32.720 --> 0:05:36.239 Delta actually kind of called that out as perhaps corporate 0:05:36.279 --> 0:05:37.919 travel is quote unquote strengthening. 0:05:38.720 --> 0:05:40.080 Are you seeing that across the industry? 0:05:40.080 --> 0:05:43.720 And where I guess where's corporate travel versus pre pandemic. 0:05:44.839 --> 0:05:47.279 Yeah, so they're not telling us anymore, right, and usually 0:05:47.880 --> 0:05:52.320 you tell us when you're really excited about where it is. Look, 0:05:52.360 --> 0:05:54.840 I think the summer flying seasons are all about leisure. 0:05:54.920 --> 0:05:59.880 What I heard was that they that they were having weakening, 0:06:00.240 --> 0:06:04.560 weaker pricing power in sort of the off peak demand times. 0:06:05.080 --> 0:06:08.920 And my read through on that is that summer leisure 0:06:08.960 --> 0:06:11.279 traveler where they know they got you right. All my 0:06:11.320 --> 0:06:13.680 friends call me, they go, hey, George, I hear airfares 0:06:13.680 --> 0:06:16.520 are down, but I'm trying to travel over July fourth 0:06:16.560 --> 0:06:19.120 week on vacation with the family, and I'm paying a 0:06:19.120 --> 0:06:21.520 crazy price. And I'm like, yeah, because you're going when 0:06:21.560 --> 0:06:23.760 everyone else in the world wants to go somewhere, right, 0:06:24.440 --> 0:06:26.600 So when I read off peak, I also think that's 0:06:26.600 --> 0:06:30.599 probably a little bit of business travel, and so I 0:06:30.640 --> 0:06:33.200 don't know that it's going swimmingly and they're not. They're 0:06:33.279 --> 0:06:36.800 not giving us numbers. What I heard was kind of stabilized, 0:06:37.200 --> 0:06:39.960 but I didn't hear to me, I didn't hear something 0:06:39.960 --> 0:06:41.880 that sounded like it was getting much better. And again, 0:06:42.000 --> 0:06:43.600 summer's about leisure. 0:06:44.480 --> 0:06:46.680 I live in the flight path of I guess it's 0:06:46.760 --> 0:06:51.280 candy well everything. Yeah. Sometimes I look up and I'm like, oh, wow, Jed, 0:06:51.680 --> 0:06:55.400 it's amazing to me George that I guess the engine 0:06:55.400 --> 0:06:58.840 technology has advanced so much that I barely hear them. 0:06:58.839 --> 0:07:02.800 Should I get excited about the advancements in jet engine technology? 0:07:02.960 --> 0:07:04.279 Thirty seconds? 0:07:04.560 --> 0:07:07.159 Yeah. Look, first, I'm jealous because you're in the flight 0:07:07.200 --> 0:07:08.120 path of everything. 0:07:08.320 --> 0:07:09.520 And yeah, you come over an. 0:07:10.960 --> 0:07:14.280 I'll sit there with a lawn chair and we'll watch them. Jeff, 0:07:14.520 --> 0:07:17.280 jet engine technology is outstanding. It is probably even getting 0:07:17.320 --> 0:07:20.480 quieter and more fuel efficient. It'll cost more to it'll 0:07:20.480 --> 0:07:22.800 cost more to maintain over the long run, but going 0:07:22.800 --> 0:07:23.400 the right direction. 0:07:24.280 --> 0:07:27.119 Years ago, George turned me onto this app flight Radar 0:07:27.160 --> 0:07:27.600 twenty five. 0:07:27.760 --> 0:07:28.200 It's great. 0:07:28.560 --> 0:07:30.400 Yeah, so you can track every plane in now and 0:07:30.720 --> 0:07:30.960 you could. 0:07:30.960 --> 0:07:32.560 There's also a button where you can push where you 0:07:32.600 --> 0:07:36.239 can get the cockpit view. Yes, like pretend you're flying. 0:07:36.800 --> 0:07:38.600 Great. So now I'm completely addicted to that. 0:07:39.160 --> 0:07:43.640 George Ferguson's senior aerospace, defense and Airlines analyst of Bloomberg Intelligence, 0:07:44.080 --> 0:07:45.920 giving us the latest here on Delta and again Delta 0:07:45.920 --> 0:07:48.800 stock up about thirteen percent here today on news that 0:07:48.840 --> 0:07:52.000 they are putting out guidance which they had pulled their guidance, 0:07:52.320 --> 0:07:54.800 so Street taking that as a positive sign that the 0:07:54.800 --> 0:07:57.560 company has some confidence in their business allegory. 0:07:59.280 --> 0:08:03.000 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:08:03.080 --> 0:08:06.120 weekdays at ten am Eastern on Apple, Cocklay and Android 0:08:06.160 --> 0:08:09.480 Auto with the Bloomberg Business app. Listen on demand wherever 0:08:09.520 --> 0:08:12.600 you get your podcasts, or watch us live on YouTube. 0:08:13.200 --> 0:08:16.680 Speaking of technology, we like talking to men Deep Singing. 0:08:16.680 --> 0:08:19.560 He's a senior tech and also Bloomberg Intelligence. All right, 0:08:21.600 --> 0:08:24.400 you've scoled us on AI over the last several years. 0:08:24.440 --> 0:08:26.960 I think I now understand what it is. I understand 0:08:26.960 --> 0:08:31.080 that it's big. It's a big business. But four trillion 0:08:31.280 --> 0:08:34.000 dollar market cap for NVIDI are you kidding me? 0:08:34.400 --> 0:08:36.800 What's going on? I mean, tell me that's overvalued. 0:08:37.600 --> 0:08:41.679 Well, when you see a company that's growing fifty percent 0:08:42.080 --> 0:08:45.760 and is able to generate almost one hundred billion dollars 0:08:45.760 --> 0:08:49.320 in free cash flow, then it's not. And that's where 0:08:49.480 --> 0:08:51.680 you know you have to look at it from the 0:08:51.760 --> 0:08:56.160 lens of what is sustainable versus what is happening right 0:08:56.200 --> 0:09:01.559 now now. Typically chip companies, we know they have that 0:09:01.600 --> 0:09:06.120 cyclical element where you know, after a period of rapid growth, 0:09:06.160 --> 0:09:09.760 there is a digestion period. I don't think this time 0:09:09.840 --> 0:09:12.680 is any different. But what we are witnessing now is 0:09:12.679 --> 0:09:16.520 the super cycle in terms of the buildout of AI infrastructure, 0:09:16.679 --> 0:09:20.280 so you are not going to see a very quick 0:09:20.400 --> 0:09:24.240 slowdown simply because right now we are in AI land 0:09:24.240 --> 0:09:27.920 grab mode. Everyone is. I mean, we talked about picks 0:09:27.920 --> 0:09:31.000 and shovels for the longest time, you know, in the 0:09:31.040 --> 0:09:35.319 past twelve months. That trade is still ongoing simply because 0:09:35.960 --> 0:09:41.960 the demand for GPU compute really continues to rise. Because 0:09:42.120 --> 0:09:46.079 you have this explosion in coding agents now. I mean, 0:09:46.120 --> 0:09:49.600 think of what has coding agents done in the past 0:09:49.640 --> 0:09:53.400 six months. That is the use case that every hyperscaler 0:09:53.480 --> 0:09:57.600 is using now, every enterprise is looking to deploy. In fact, 0:09:57.600 --> 0:10:00.640 Microsoft set thirty five percent of their new code is 0:10:00.679 --> 0:10:05.160 written by a coding agent. That's all AIGPU based And 0:10:05.160 --> 0:10:06.800 that's why there is so much exciting. 0:10:06.559 --> 0:10:09.719 And if I'm in a company with earnings coming up, 0:10:09.840 --> 0:10:12.160 I don't have to wait very long to show the 0:10:12.240 --> 0:10:15.439 results of my big investments in AI do It's already 0:10:15.440 --> 0:10:17.040 there right well? 0:10:17.280 --> 0:10:21.440 I think for hyperscalers, especially Microsoft. 0:10:21.000 --> 0:10:23.640 Send users, I mean the regular Joe's out there. 0:10:24.080 --> 0:10:27.959 Yeah, I think again depends on w sector you are 0:10:27.960 --> 0:10:30.440 in and how far along you are in terms of 0:10:30.480 --> 0:10:33.640 deploying those I mean, what these companies have shown is 0:10:34.040 --> 0:10:37.280 not only are they investing in AI data center build out, 0:10:37.520 --> 0:10:40.640 they're actually deploying it in house. And Microsoft is the 0:10:40.679 --> 0:10:44.240 prime example of that, where they've done a couple of restructurings. 0:10:44.280 --> 0:10:47.280 They've set thirty five percent of their code is written 0:10:47.280 --> 0:10:50.920 by AI. So it's hard to argue against the proof 0:10:50.920 --> 0:10:54.160 points that they're giving us. And look at open Aiy's growth. 0:10:54.520 --> 0:10:57.000 They've almost doubled their revenue in the first six months 0:10:57.000 --> 0:11:00.319 of the year, and Tropic has foxed its revenue from 0:11:00.320 --> 0:11:02.160 one to four billion, and in the first six months 0:11:02.200 --> 0:11:05.559 of the year. That kind of growth, it's hard to argue. 0:11:05.559 --> 0:11:07.760 Again said, you're right. I mean some of it will 0:11:07.800 --> 0:11:11.360 be visible and you know the companies that are using 0:11:11.400 --> 0:11:15.240 it as end customers. But really there is so much 0:11:15.320 --> 0:11:19.240 runway because these use cases are all new and everyone 0:11:19.600 --> 0:11:23.400 is looking at the productivity aspect, and that's what everyone 0:11:23.480 --> 0:11:24.200 is excited about. 0:11:24.480 --> 0:11:26.559 All right, let's switch gears to something near and dear 0:11:26.559 --> 0:11:29.440 to my heart, which is paying huge compensation packages for people. 0:11:29.440 --> 0:11:31.400 It used to be like in my Wall Street, this 0:11:31.480 --> 0:11:34.119 is like sports teams. He did it for bankers and traders. 0:11:34.480 --> 0:11:39.080 Now in your world, the geek engineers are getting pay 0:11:39.080 --> 0:11:41.920 packages of a couple hundred million dollars. I'm seeing Meta 0:11:41.920 --> 0:11:45.720 Platforms has made high compensation offers to new members of 0:11:45.720 --> 0:11:48.960 its super intelligence team, including more than a two hundred 0:11:48.960 --> 0:11:51.319 million dollar package for a former Apple executive. 0:11:52.200 --> 0:11:53.400 What's going on here. 0:11:53.840 --> 0:11:57.560 Well, I mean with this AI wave specifically, when you 0:11:57.559 --> 0:12:02.560 think about the transformer model and the subsequent development, a 0:12:02.600 --> 0:12:05.679 lot of it has been pioneered by I would say, 0:12:05.720 --> 0:12:08.440 you know one hundred to two hundred AI researchers that 0:12:08.480 --> 0:12:11.960 were at the forefoil. So if you are one of those, 0:12:12.400 --> 0:12:16.599 and everyone knows you're either working at open Ai or 0:12:16.920 --> 0:12:22.040 Entropic or Google DeepMind, that's where you know. Meta was like, 0:12:22.160 --> 0:12:26.240 we are lacking behind in our large angline model efforts. 0:12:26.280 --> 0:12:29.040 We have really got all the compute and the data. 0:12:29.559 --> 0:12:32.200 What is it that we can do to fill up 0:12:32.240 --> 0:12:34.920 that gap in terms of whire model is not being 0:12:35.080 --> 0:12:37.560 as heavily used as an open ai model. 0:12:37.960 --> 0:12:38.400 So they have. 0:12:38.440 --> 0:12:41.559 Brought in all the researchers. I doubt they'll be able 0:12:41.600 --> 0:12:45.040 to fix all the problems with their model by bringing 0:12:45.080 --> 0:12:47.800 in all the researchers over the next six months, but 0:12:47.880 --> 0:12:50.760 what it could do is slow down open ai because 0:12:50.800 --> 0:12:54.240 open ai was shipping product you know pretty much every month. 0:12:54.559 --> 0:12:57.520 Now suddenly, if you lose two or three of your 0:12:57.600 --> 0:13:01.800 key people, then maybe cheap doesn't get shipped in the 0:13:01.840 --> 0:13:05.000 second half. So I think what Meta has done is 0:13:05.440 --> 0:13:08.880 really made every attempt to slow others down and then 0:13:08.920 --> 0:13:11.400 in the process they'll have more time to catch up. 0:13:11.440 --> 0:13:14.080 And I think that seems to be the strategy. 0:13:14.120 --> 0:13:17.400 It's a show Hey O Tani type contract man Deep 0:13:17.440 --> 0:13:20.439 saying thank you so much because you guys can't do 0:13:20.760 --> 0:13:21.680 lave exactly. 0:13:21.720 --> 0:13:23.600 We're going to see it and lead go exactly. 0:13:24.720 --> 0:13:26.920 Yeah, you wait it on the way out of. 0:13:26.920 --> 0:13:30.320 The door, men Deep seeing senior tech analysts for the moment. 0:13:30.400 --> 0:13:34.000 Bloomberg Intelligence. Here in our Bloomberg Inactive Broker's. 0:13:33.600 --> 0:13:39.200 Studio, you're listening to the Bloomberg Intelligence Podcast. Catch us 0:13:39.240 --> 0:13:42.280 live weekdays at ten am Eastern on Apple Corplay and 0:13:42.280 --> 0:13:45.560 Android Auto with the Bloomberg Business App. Listen on demand 0:13:45.640 --> 0:13:49.200 wherever you get your podcasts, or watch us live on YouTube. 0:13:49.800 --> 0:13:51.720 All right, John Tucker Ball Sweeney, We're live. 0:13:51.600 --> 0:13:53.439 Here on Bloomberg Directive Broker Studio. 0:13:53.200 --> 0:13:55.600 Or streaming live on YouTube as well as to check 0:13:55.640 --> 0:13:59.520 us out there Amazon Prime Day. I know you're all 0:13:59.520 --> 0:14:02.319 over John, It's actually Prime Days plural. I think there's 0:14:02.400 --> 0:14:03.040 four of them. 0:14:03.040 --> 0:14:05.640 So you spread it out and things are I don't know. 0:14:05.600 --> 0:14:08.520 But it just gets you just buy stuff in July. 0:14:08.640 --> 0:14:10.840 I guess you wouldn't ordinarily be thinking about buying stuff. 0:14:10.920 --> 0:14:12.360 But let's see how it's going out there in the 0:14:12.360 --> 0:14:14.400 world of retail and etail. 0:14:14.640 --> 0:14:14.960 Put them. 0:14:14.960 --> 0:14:18.200 Goyle, senior US e commerce and retail analysts, joins us here, 0:14:18.640 --> 0:14:23.120 she's at Bloomberg Intelligence. She's down there in prinstance, put 0:14:23.400 --> 0:14:26.600 what are we learning about Amazon and Amazon Prime Days 0:14:26.720 --> 0:14:28.960 and maybe how the consumers do in these days? 0:14:29.800 --> 0:14:32.240 Sure, so you know the days. It's four days this 0:14:32.400 --> 0:14:35.760 year versus two days last year, so longer, which means 0:14:35.760 --> 0:14:39.080 that people have more time to shop. So early reads 0:14:39.120 --> 0:14:42.520 from different third party vendors suggest that sales were down 0:14:42.640 --> 0:14:45.560 in its first day, and I'm not surprised by that 0:14:45.680 --> 0:14:49.080 because there's no urgency, right you have till Friday midnight 0:14:49.120 --> 0:14:52.240 to shop, so I think people are taking their time. Overall, 0:14:52.280 --> 0:14:55.880 we do expect a Prime Day versus last year will 0:14:55.920 --> 0:14:58.280 be up by the end of it. Consumers are looking 0:14:58.320 --> 0:15:01.240 for deals, Prices are are going to go up with 0:15:01.280 --> 0:15:05.600 the terriff situation and the best time until block Friday 0:15:05.600 --> 0:15:07.360 to get deals is this week? 0:15:07.800 --> 0:15:09.440 Okay, you always leave it to me to ask the 0:15:09.520 --> 0:15:12.640 stupid question, Well, what are the big sellers on the 0:15:12.680 --> 0:15:14.480 AM on the amasode. 0:15:15.880 --> 0:15:18.640 So what they're pushing is exactly what they've pushed before. 0:15:18.720 --> 0:15:21.400 You have electronics, you have home products, you have the 0:15:21.440 --> 0:15:24.760 vacuum cleaners, you have the devices that they have, whether 0:15:24.800 --> 0:15:28.160 it's the Alexa, it's really a little bit of everything 0:15:28.360 --> 0:15:31.800 is on sale. The average discount that I've seen, you know, 0:15:31.840 --> 0:15:33.960 there are clearly some things that are fifty to sixty 0:15:34.000 --> 0:15:36.400 percent off, but I'd say the average discount is probably 0:15:36.400 --> 0:15:38.840 in the twenty to thirty five percent range from just 0:15:38.880 --> 0:15:40.760 the products that I've seen as I've been tracking it. 0:15:41.360 --> 0:15:43.960 But that's the stuff they're pushing. What is this stuff 0:15:44.000 --> 0:15:45.280 people are actually buying. 0:15:46.600 --> 0:15:48.920 I think they're buying what they're pushing because people want 0:15:48.960 --> 0:15:51.840 to buy what's on sale, right, So if it's not 0:15:51.920 --> 0:15:54.040 on sale, why do I need to buy it today? 0:15:54.080 --> 0:15:56.120 I can wait till I need it, all right? 0:15:56.160 --> 0:15:59.040 So next Wednesday we are picking up our new puppy, 0:15:59.120 --> 0:16:01.280 and so we've spent the last couple of days taking 0:16:01.320 --> 0:16:05.000 advantage of Amazon Prime buying a lot of dog stuff. 0:16:05.680 --> 0:16:09.520 Is that dog stuff? Manufactured overseas where you're now paying like. 0:16:09.640 --> 0:16:13.320 I don't know teriffs, and that's kind of where I 0:16:13.320 --> 0:16:16.280 wanted to go poon them. If we haven't seen the 0:16:16.320 --> 0:16:18.320 tariff impact yet, or maybe we have, I don't know. 0:16:18.960 --> 0:16:21.120 When do you and the retail companies you talk to, 0:16:21.840 --> 0:16:25.000 when do you think the tariff price increases? If any 0:16:25.360 --> 0:16:28.480 come through to the consumer, they may not. When do 0:16:28.600 --> 0:16:30.600 your companies think we'll see it? 0:16:31.120 --> 0:16:33.120 So I can tell you that I think they're there, 0:16:33.200 --> 0:16:37.600 but they're selectively there. Companies have already started to raise prices. Nike, 0:16:37.720 --> 0:16:40.640 for example, has raised the price of its sneakers that 0:16:40.680 --> 0:16:43.160 are over one hundred and forty dollars by five dollars. 0:16:43.360 --> 0:16:46.360 And that's that the ten percent pause teriff rate. When 0:16:46.400 --> 0:16:48.920 I'd say, it depends where these rates settle. Right now, 0:16:48.960 --> 0:16:53.800 we're hearing Vietnam twenty percent, and that's ten percent versus 0:16:53.800 --> 0:16:56.600 twenty percent. So now Nike will it have to increase 0:16:56.640 --> 0:17:00.160 its rates further? I think so they will act they 0:17:00.200 --> 0:17:01.720 have to do that. They said the ten percent is 0:17:01.760 --> 0:17:04.840 costing them an additional billion dollars in costs this year 0:17:05.080 --> 0:17:08.840 in their physical twenty twenty six. If it goes to 0:17:08.840 --> 0:17:13.040 twenty percent, Vietnam is a big sourcing country for footwear especially, 0:17:13.560 --> 0:17:15.879 They're definitely going to have to take prices up unless 0:17:15.880 --> 0:17:17.160 they're going to let the margin. 0:17:16.880 --> 0:17:17.320 Take a hit. 0:17:17.720 --> 0:17:20.720 Do these companies like Puma do they have to reinvent 0:17:20.800 --> 0:17:25.400 themselves in light to all this, So to. 0:17:25.320 --> 0:17:27.440 A certain extent, they have to think about their cost 0:17:27.480 --> 0:17:29.600 structure a little more. But what I would say is 0:17:29.680 --> 0:17:33.200 Puma is a little more diversified. Right, It's a European name, 0:17:33.320 --> 0:17:35.399 so the exposure to the US is less than what 0:17:35.440 --> 0:17:38.080 it is for a Nike, so they do benefit from that. 0:17:38.119 --> 0:17:41.639 Even ADDIAUS, for example, their exposure to the US is 0:17:41.760 --> 0:17:44.440 less the Nike, so they can take what they make 0:17:44.640 --> 0:17:48.320 in the higher tariff countries and use that for everywhere 0:17:48.320 --> 0:17:51.120 else but the US. So they do have some strategies 0:17:51.119 --> 0:17:54.360 that they can deploy and are already deploying. But strategies 0:17:54.400 --> 0:17:57.120 will have to change, right, will materials get compromise if 0:17:57.119 --> 0:18:00.440 the consumers not willing to pay for the added costs. 0:18:00.520 --> 0:18:05.879 These retailers cannot absorb a twenty percent tariff, They just cannot. 0:18:05.880 --> 0:18:08.840 Their margins are in the single digits, so it's just 0:18:08.880 --> 0:18:09.959 not something they can afford. 0:18:10.520 --> 0:18:13.920 So what Yeah, interesting, So Bloomberg News is out with 0:18:13.920 --> 0:18:17.760 the stories saying that talking about the running category, and 0:18:17.800 --> 0:18:20.320 that's critical for a lot of these sneaker makers in 0:18:20.400 --> 0:18:23.000 how competitive it is. How do you think about that 0:18:23.119 --> 0:18:24.879 part of the retail space. 0:18:25.880 --> 0:18:28.399 So running is a very important category for all the 0:18:28.440 --> 0:18:31.960 at leisure brands. I would say probably since the pandemic, 0:18:32.000 --> 0:18:34.679 it's grown and important. So there have been more people 0:18:34.720 --> 0:18:37.520 that choose to run. Now, is it going to be 0:18:37.560 --> 0:18:40.119 easy for any of them to win the running race? No? 0:18:40.560 --> 0:18:44.760 Because really the clear standouts in running today are the Adds, 0:18:45.240 --> 0:18:48.399 the Asex, the Brooks, and the Nikes. Those are the 0:18:48.520 --> 0:18:50.160 names that you kind of think of when you think 0:18:50.160 --> 0:18:53.119 about running. And while Puma has its own shoe and 0:18:53.160 --> 0:18:56.840 Sodas Adidas, it's going to be hard to penetrate in 0:18:56.840 --> 0:19:00.400 that market because the others aren't slowing down. Everyone layser 0:19:00.440 --> 0:19:02.840 focused on this category and we'll just have to see 0:19:02.880 --> 0:19:05.640 who bites that what because it is a very very 0:19:05.640 --> 0:19:07.679 competitive category in the leisure space. 0:19:07.880 --> 0:19:11.440 And I'll quote Calvin Coolidge here, I choose not to run. 0:19:12.280 --> 0:19:16.560 That's exactly right. I don't know though, I'll walk on 0:19:16.400 --> 0:19:17.200 the warlock. 0:19:17.440 --> 0:19:18.880 There we go, All right, let'll stick with. 0:19:18.840 --> 0:19:20.199 That all right, put them goil. Thank you so much 0:19:20.200 --> 0:19:21.359 for we appreciate that putting Goile. 0:19:21.520 --> 0:19:26.240 She covers all the retail stuff for Bloomberg Intelligence. 0:19:27.960 --> 0:19:31.680 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:19:31.760 --> 0:19:34.800 weekdays at ten am Eastern on Apple Coarcklay and Android 0:19:34.840 --> 0:19:38.160 Auto with the Bloomberg Business App. Listen on demand wherever 0:19:38.200 --> 0:19:41.320 you get your podcasts, or watch us live on YouTube. 0:19:42.240 --> 0:19:44.120 Fall swing you live here on Bloomberg and Active Broker 0:19:44.200 --> 0:19:46.120 Studio streaming live on YouTube. 0:19:46.119 --> 0:19:46.199 Well. 0:19:46.200 --> 0:19:48.840 A lot of investors trying to get a sense of 0:19:48.880 --> 0:19:52.159 how the consumer is faring during this time of uncertainty 0:19:52.760 --> 0:19:55.879 brought about in part by all this discussion of tariffs 0:19:55.920 --> 0:19:57.399 and what I might mean for the economy. One of 0:19:57.400 --> 0:19:59.359 the areas they look at is the retailers. What are 0:19:59.400 --> 0:20:00.280 the retailers well? 0:20:00.320 --> 0:20:00.639 Today? 0:20:00.880 --> 0:20:04.919 On Bloomberg Television, Ralph Lauren, CEO Patrese Louvey said that 0:20:05.040 --> 0:20:08.840 demand for its signature clothing such as cable knit sweaters 0:20:08.840 --> 0:20:11.679 remain strong even as the fashion industry is buffetted by 0:20:11.760 --> 0:20:13.680 terras and an economic slowed down. 0:20:13.720 --> 0:20:15.480 Let's break that down a little bit. Mary Ross Gilbert 0:20:15.520 --> 0:20:15.960 joins us. 0:20:16.160 --> 0:20:18.440 She's a senior equity analy's covered in the retail space 0:20:18.480 --> 0:20:24.280 for Bloomberg Intelligence. She joins us from La via Zoom. So, Mary, 0:20:24.359 --> 0:20:27.440 we heard from the Ralph Lauren CEO says he still 0:20:27.480 --> 0:20:29.959 sees demand kind of pretty solid. What do you make 0:20:30.000 --> 0:20:32.320