1 00:00:00,280 --> 00:00:11,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is Bloomberg Intelligence 2 00:00:11,920 --> 00:00:13,000 Speaker 1: with Paul Sweeney. 3 00:00:13,119 --> 00:00:16,360 Speaker 2: The real app performance has been the US corporate high yield. 4 00:00:16,440 --> 00:00:20,119 Speaker 2: These are two big time blue chip companies. One person's 5 00:00:20,120 --> 00:00:22,960 Speaker 2: cast is another person's animal spirits. 6 00:00:22,600 --> 00:00:26,320 Speaker 1: Breaking market headlines and corporate news from across the globe 7 00:00:26,360 --> 00:00:26,759 Speaker 1: our viewer. 8 00:00:26,800 --> 00:00:28,800 Speaker 2: If the economy is slowing down, there. 9 00:00:28,720 --> 00:00:30,480 Speaker 3: Is the possibility of the death spiral. 10 00:00:30,640 --> 00:00:33,160 Speaker 4: Both partum competing and AI are going to power the future. 11 00:00:33,240 --> 00:00:35,000 Speaker 3: People are just buying everything with tex. 12 00:00:35,040 --> 00:00:39,640 Speaker 1: Bloomberg Intelligence with Paul Sweeney on Bloomberg Radio, YouTube and 13 00:00:39,720 --> 00:00:40,920 Speaker 1: Bloomberg Originals. 14 00:00:42,440 --> 00:00:44,800 Speaker 5: I'm Paul Sweeney and I'm Lisa Matteo filling in on 15 00:00:44,800 --> 00:00:45,920 Speaker 5: Bloomberg Intelligence. 16 00:00:46,040 --> 00:00:48,479 Speaker 2: On Today's Bloomberg Intelligence Show, we dig inside the big 17 00:00:48,560 --> 00:00:51,120 Speaker 2: business stories impacting Wall Street and at the global markets. 18 00:00:51,159 --> 00:00:53,400 Speaker 5: Each and every week, we provide in depth research and 19 00:00:53,520 --> 00:00:55,680 Speaker 5: data on some of the two thousand companies and one 20 00:00:55,720 --> 00:00:58,400 Speaker 5: hundred and thirty industries our analysts cover worldwide. 21 00:00:58,600 --> 00:01:00,800 Speaker 2: Today you'll look at why retailer Target is naming an 22 00:01:00,800 --> 00:01:03,080 Speaker 2: insider as its next chief executive officer. 23 00:01:03,240 --> 00:01:05,520 Speaker 5: Plus well look at why the Danish drug maker Novo 24 00:01:05,640 --> 00:01:08,880 Speaker 5: Nordisk is slashing the cause of its weight loss drug ozempic. 25 00:01:09,240 --> 00:01:11,959 Speaker 2: First, we begin with the earning from TJX companies. 26 00:01:12,160 --> 00:01:14,560 Speaker 5: This week, the off price retailer raised its full year 27 00:01:14,600 --> 00:01:17,959 Speaker 5: guidance and reported second quarter earnings that beat analyst projections. 28 00:01:18,200 --> 00:01:21,440 Speaker 5: It's a sign that shoppers are currently turning toward discounters 29 00:01:21,520 --> 00:01:22,960 Speaker 5: due to economic uncertainty. 30 00:01:23,160 --> 00:01:23,480 Speaker 3: For more. 31 00:01:23,600 --> 00:01:26,800 Speaker 2: Guest hosts, Alexis Christophers and I were joined by Mary 32 00:01:26,959 --> 00:01:30,800 Speaker 2: Ross Gilbert Bloomberg Intelligence senior retail equity analysts. First asked 33 00:01:30,880 --> 00:01:32,760 Speaker 2: Mary for her take on the company's results. 34 00:01:33,200 --> 00:01:36,720 Speaker 6: TJX is hitting it out of the park. This is 35 00:01:36,760 --> 00:01:41,080 Speaker 6: a company that just executes seamlessly and consistently, something in 36 00:01:41,160 --> 00:01:45,039 Speaker 6: retail that's very, very difficult to do. They saw strength 37 00:01:45,080 --> 00:01:49,080 Speaker 6: across all categories, across all income groups, all age groups, 38 00:01:49,440 --> 00:01:52,680 Speaker 6: and they know how to get the merchandise right by store, 39 00:01:53,120 --> 00:01:56,680 Speaker 6: by region, so they have a terrific planning and allocation. 40 00:01:56,800 --> 00:02:00,000 Speaker 6: They sort of emphasize that and another key point because 41 00:02:00,120 --> 00:02:02,840 Speaker 6: they raise their guidance not only for sales but also 42 00:02:03,040 --> 00:02:05,360 Speaker 6: on the margin side. And there was such a huge 43 00:02:05,400 --> 00:02:09,040 Speaker 6: fear with terraffs. They only source probably less than ten 44 00:02:09,080 --> 00:02:13,000 Speaker 6: percent of their sales come for their merchandise is something 45 00:02:13,040 --> 00:02:16,560 Speaker 6: they directly source. They were able to buy better, which 46 00:02:16,560 --> 00:02:19,600 Speaker 6: means they got better deals. That means there's so much 47 00:02:19,639 --> 00:02:22,840 Speaker 6: availability out there, and it's something we've observed in our 48 00:02:22,919 --> 00:02:25,400 Speaker 6: channel checks and when you look at the shopping halls 49 00:02:25,440 --> 00:02:29,800 Speaker 6: on television, on a YouTube and you see the incredible 50 00:02:29,919 --> 00:02:34,760 Speaker 6: brands that are available, and they really are across good, 51 00:02:34,840 --> 00:02:38,400 Speaker 6: better and best. So you can get anything from Puma, Audi, Doos, 52 00:02:38,520 --> 00:02:43,960 Speaker 6: Nike all the way up to Eve, Saint Laurent and Gucci. 53 00:02:44,320 --> 00:02:49,120 Speaker 6: So it's and TJX really really wins across all that, 54 00:02:49,360 --> 00:02:55,280 Speaker 6: so strength across you know, all their channels and internationally, 55 00:02:55,520 --> 00:02:58,680 Speaker 6: I mean Canada was a nine percent comp sales. 56 00:02:59,440 --> 00:03:01,880 Speaker 7: I want to ask about a possible headwind though, because 57 00:03:01,919 --> 00:03:04,720 Speaker 7: it seems like they're firing on all cylinders. But I 58 00:03:04,760 --> 00:03:08,720 Speaker 7: know that TJX mentioned in the past about a key demographic, 59 00:03:08,800 --> 00:03:13,320 Speaker 7: the Hispanic customer. They were concerned that maybe immigration policy 60 00:03:13,360 --> 00:03:15,320 Speaker 7: was going to keep them home or not spend as much. 61 00:03:15,360 --> 00:03:16,760 Speaker 7: Did they mention anything about that. 62 00:03:17,560 --> 00:03:21,000 Speaker 6: I don't think they saw any weakness as a result 63 00:03:21,040 --> 00:03:23,240 Speaker 6: of that. I know it's been a big concern not 64 00:03:23,280 --> 00:03:26,919 Speaker 6: only for TJX, as you brought up Alexai, but also 65 00:03:27,000 --> 00:03:29,880 Speaker 6: for Ross and for Burlington, and probably even more so 66 00:03:30,120 --> 00:03:34,000 Speaker 6: for Burlington because they really skew to a lower income 67 00:03:34,080 --> 00:03:37,040 Speaker 6: consumer and they're due to report next week, and so 68 00:03:37,080 --> 00:03:38,280 Speaker 6: we should learn more on that. 69 00:03:39,640 --> 00:03:41,880 Speaker 2: Mary, I always think the job of a retail animals 70 00:03:42,000 --> 00:03:44,040 Speaker 2: like you was really tough because not only do you 71 00:03:44,040 --> 00:03:46,120 Speaker 2: have to do the regular stuff as an analyst, like 72 00:03:46,160 --> 00:03:48,440 Speaker 2: get the earnings estimates kind of right and on the 73 00:03:48,480 --> 00:03:50,320 Speaker 2: financial analysis, but you kind of have to have an 74 00:03:50,400 --> 00:03:54,280 Speaker 2: opinion on like who's good at picking out the right 75 00:03:54,320 --> 00:03:56,240 Speaker 2: fashion to even put in the store in the first place. 76 00:03:56,800 --> 00:03:59,040 Speaker 2: What is TJX doing so well? Do you think? 77 00:04:00,840 --> 00:04:01,880 Speaker 5: Well, they have. 78 00:04:02,400 --> 00:04:05,680 Speaker 6: The most amazing buying team, and so they spend they 79 00:04:05,720 --> 00:04:09,640 Speaker 6: have sort of like a buying academy where they teach 80 00:04:09,680 --> 00:04:12,600 Speaker 6: their buyers. You know, they have to go through you know, 81 00:04:12,640 --> 00:04:15,400 Speaker 6: I think it's like three years, maybe even up to 82 00:04:15,480 --> 00:04:20,080 Speaker 6: seven years of work that they do with these buyers. 83 00:04:20,120 --> 00:04:24,920 Speaker 6: So the pricing that they work on and the product 84 00:04:24,960 --> 00:04:30,080 Speaker 6: that they're buying is really something that is steeped in 85 00:04:30,200 --> 00:04:35,880 Speaker 6: experience history. They also invest in systems, you know, so 86 00:04:35,960 --> 00:04:40,800 Speaker 6: that means technology logistics to make sure that they can 87 00:04:40,839 --> 00:04:42,680 Speaker 6: get this all right. Because you can imagine that if 88 00:04:42,680 --> 00:04:46,720 Speaker 6: they're shipping multiple merchandise, you got to have fresh drops 89 00:04:46,760 --> 00:04:50,839 Speaker 6: because these customers will shop multiple times a week because 90 00:04:50,839 --> 00:04:55,320 Speaker 6: it's that freshness that brings them in. So yes, TJX 91 00:04:55,520 --> 00:04:57,839 Speaker 6: is the leader. They're the largest in the world. I mean, 92 00:04:57,880 --> 00:05:00,720 Speaker 6: they'll probably hit sixty billion in revenue this year, up 93 00:05:00,720 --> 00:05:04,520 Speaker 6: from fifty six billion last year. And they keep increasing 94 00:05:04,560 --> 00:05:08,280 Speaker 6: the number of potential store openings they see. Previously they 95 00:05:08,320 --> 00:05:11,599 Speaker 6: said we think we have another twelve hundred stores to open. 96 00:05:11,760 --> 00:05:15,000 Speaker 6: Now they're saying it's another eighteen hundred stores to open 97 00:05:15,040 --> 00:05:19,040 Speaker 6: around the country, just around the globe in their existing markets. 98 00:05:19,480 --> 00:05:23,600 Speaker 6: So yes, this company really has the expertise in doing 99 00:05:23,600 --> 00:05:26,680 Speaker 6: it right. Is there a digital strategy here because I 100 00:05:26,720 --> 00:05:29,040 Speaker 6: remember I'm sure you do too, Mary, when you would 101 00:05:29,040 --> 00:05:32,000 Speaker 6: go online to try to find out what tjmax had 102 00:05:32,040 --> 00:05:33,800 Speaker 6: and there was nothing there because you always had to 103 00:05:33,839 --> 00:05:36,720 Speaker 6: go in the store to find out what they had. 104 00:05:36,760 --> 00:05:38,280 Speaker 6: I think they had to step up their game right 105 00:05:38,279 --> 00:05:41,080 Speaker 6: because of Amazon and others online. But what is the 106 00:05:41,120 --> 00:05:44,919 Speaker 6: digital strategy, if anything, at Tjmax and TJX. That's a 107 00:05:44,920 --> 00:05:50,760 Speaker 6: good question. So actually TJX has a digital strategy. It's 108 00:05:50,800 --> 00:05:54,560 Speaker 6: across all their brands except for home goods, and so 109 00:05:55,400 --> 00:05:58,200 Speaker 6: it's about I think it's I think it's just under 110 00:05:58,279 --> 00:06:01,120 Speaker 6: five percent of sales. So it's very small. But they 111 00:06:01,160 --> 00:06:04,760 Speaker 6: also saw strength in this quarter on their e comm business. 112 00:06:04,760 --> 00:06:06,480 Speaker 6: So they do have an e comm business. You can 113 00:06:06,520 --> 00:06:10,240 Speaker 6: go on it and you can shop anything you want 114 00:06:10,279 --> 00:06:12,320 Speaker 6: on there. Now you can't say that you want to 115 00:06:12,360 --> 00:06:17,080 Speaker 6: shop by brand, but you can select. Let's say, let's 116 00:06:17,080 --> 00:06:19,760 Speaker 6: say that you want to just buy the ultra luxe 117 00:06:19,960 --> 00:06:23,000 Speaker 6: you know, merchandise that they have there, and you'll see 118 00:06:23,240 --> 00:06:27,880 Speaker 6: Christian de or sunglasses. You'll see you know, like I mentioned, 119 00:06:27,920 --> 00:06:31,560 Speaker 6: you know, on the handbag size Balan Chiaga. So you 120 00:06:31,600 --> 00:06:33,240 Speaker 6: will be able to find what you want on the 121 00:06:33,320 --> 00:06:35,200 Speaker 6: high end, also on the low end, but you'll have 122 00:06:35,240 --> 00:06:37,839 Speaker 6: to do it by price points, by sorting that way, 123 00:06:38,120 --> 00:06:41,719 Speaker 6: because they're not allowed to necessarily have that ability to 124 00:06:41,760 --> 00:06:44,320 Speaker 6: sort by brands. So you will see they have a 125 00:06:44,440 --> 00:06:49,920 Speaker 6: robust online business, you know, and it's around the globe. Now, 126 00:06:49,960 --> 00:06:54,120 Speaker 6: the key is that they're a key differentiated in that regard. 127 00:06:54,440 --> 00:06:57,400 Speaker 6: Remember that it's still very small, and that the vast 128 00:06:57,440 --> 00:07:00,560 Speaker 6: majority of their sales, you know, more like ninety six 129 00:07:00,600 --> 00:07:04,760 Speaker 6: percent or so, are being generated in store, but nobody 130 00:07:04,760 --> 00:07:06,480 Speaker 6: else in off price other. 131 00:07:06,320 --> 00:07:07,719 Speaker 7: Than the rack. 132 00:07:08,120 --> 00:07:12,840 Speaker 6: The Nordstorm rack has e commerce capabilities all the rest 133 00:07:12,920 --> 00:07:14,960 Speaker 6: it's strictly a bricks and mortar model. 134 00:07:15,400 --> 00:07:18,480 Speaker 5: Our thanks to Mary Ross, Gilbert Bloomberg Intelligence senior retail 135 00:07:18,520 --> 00:07:21,400 Speaker 5: equity analyst. We move next to news from the cosmetics 136 00:07:21,400 --> 00:07:23,800 Speaker 5: company es Day Lauder. This week, the company issued a 137 00:07:23,840 --> 00:07:26,320 Speaker 5: weak profit outlook for its fiscal year. S Day Lauder 138 00:07:26,400 --> 00:07:29,040 Speaker 5: said it was weighed down by sluggish demand for high 139 00:07:29,120 --> 00:07:32,160 Speaker 5: end goods and an escalating trade war for more guestos. 140 00:07:32,200 --> 00:07:35,520 Speaker 2: Alexis, Christopherus and I were joined by Debate and Bloomberg 141 00:07:35,520 --> 00:07:38,640 Speaker 2: Intelligence luxury goods analysts. We first asked deb what she 142 00:07:38,720 --> 00:07:40,760 Speaker 2: took away from s day latter's earnings. 143 00:07:41,240 --> 00:07:45,680 Speaker 8: They're doing well out of the US improve in there. 144 00:07:46,280 --> 00:07:48,280 Speaker 8: Numbers for the full year are still done, but you 145 00:07:48,280 --> 00:07:52,640 Speaker 8: could see sequential improvement by end of year, and also 146 00:07:53,440 --> 00:07:57,080 Speaker 8: somewhat less soft in China. But for them where they 147 00:07:57,120 --> 00:08:01,520 Speaker 8: still have so much exposure in Asia and still particularly 148 00:08:01,560 --> 00:08:05,360 Speaker 8: in travel retail, inventories to me still look stuffed, even 149 00:08:05,400 --> 00:08:09,400 Speaker 8: though if I think about travel retail overall, it's fifteen 150 00:08:09,440 --> 00:08:11,920 Speaker 8: percent of their business now it was near thirty percent 151 00:08:12,000 --> 00:08:14,200 Speaker 8: four years ago, and they're losing about four points of 152 00:08:14,280 --> 00:08:18,120 Speaker 8: growth annually. For me, when I look at the inventory 153 00:08:18,760 --> 00:08:23,400 Speaker 8: data over two hundred days versus one ninety, it still 154 00:08:23,400 --> 00:08:26,640 Speaker 8: says that there's risk there for me. So they need 155 00:08:26,680 --> 00:08:29,000 Speaker 8: to write size Asia. They need to do more in 156 00:08:29,040 --> 00:08:32,720 Speaker 8: getting out of main stores in the US. They're doing 157 00:08:32,760 --> 00:08:37,360 Speaker 8: a lot positively on things like Amazon Beauty and in 158 00:08:37,400 --> 00:08:40,400 Speaker 8: Asia on TikTok, but it's all moving onlines. It's the 159 00:08:40,440 --> 00:08:43,679 Speaker 8: third of their business online, a lot going on, a 160 00:08:43,760 --> 00:08:47,920 Speaker 8: lot of cost savings, cost cutting, and very low on margin. 161 00:08:48,000 --> 00:08:51,000 Speaker 8: You know, and that the company has actually taken away. 162 00:08:51,080 --> 00:08:55,520 Speaker 8: Quarterly guidance and forecast for EPs on the full year 163 00:08:55,640 --> 00:09:01,120 Speaker 8: are six cents below the two sixteen is expected by 164 00:09:01,240 --> 00:09:05,599 Speaker 8: consensus two ten on guidance at the top end is 165 00:09:05,679 --> 00:09:09,720 Speaker 8: already a little bit below. So shares a week again 166 00:09:10,120 --> 00:09:12,439 Speaker 8: on the back of a couple of years of underperformance. 167 00:09:13,320 --> 00:09:15,520 Speaker 7: You no, dev definitely has you just laid out a 168 00:09:15,600 --> 00:09:18,480 Speaker 7: few tough years for this legacy brand. But explain to 169 00:09:18,559 --> 00:09:21,240 Speaker 7: me why there were some upgrades recently. I was surprised 170 00:09:21,280 --> 00:09:24,559 Speaker 7: to see Deutsche Bank HSBC upgrading from whole to buy. 171 00:09:24,679 --> 00:09:28,680 Speaker 7: You got JPM upgrading to overweight. What do they see 172 00:09:28,800 --> 00:09:30,679 Speaker 7: here that maybe others on Wall Street are not. 173 00:09:31,480 --> 00:09:34,640 Speaker 8: I think, especially as we've headed through the last couple 174 00:09:34,679 --> 00:09:37,440 Speaker 8: of quarters, you can see that there are share gains, 175 00:09:38,040 --> 00:09:42,640 Speaker 8: market share gains in some categories in some countries, so 176 00:09:42,960 --> 00:09:46,720 Speaker 8: Japan positively, some parts of China by the end positively, 177 00:09:47,120 --> 00:09:51,000 Speaker 8: some categories in the US positively as well. And there 178 00:09:51,040 --> 00:09:53,640 Speaker 8: are very easy comps that they will cycle through in 179 00:09:53,720 --> 00:09:57,400 Speaker 8: the next year ahead, and certainly under the CEO and 180 00:09:57,520 --> 00:10:00,640 Speaker 8: the CFO, there feels just a lot more entum and 181 00:10:00,920 --> 00:10:04,000 Speaker 8: energy to come. So I think that's what the market 182 00:10:04,040 --> 00:10:07,600 Speaker 8: are buying into, as well as the underperformance that we've seen. 183 00:10:07,920 --> 00:10:11,000 Speaker 8: But we must remember in terms of them being competitive 184 00:10:11,040 --> 00:10:14,560 Speaker 8: and what they're doing, they talk about a solid double 185 00:10:14,640 --> 00:10:17,640 Speaker 8: digital just the EBIT margin, you know, this will will 186 00:10:17,760 --> 00:10:22,040 Speaker 8: back their investment and then being in front of the consumer, 187 00:10:22,080 --> 00:10:25,760 Speaker 8: their innovation pipeline and others. They're only eight percent of 188 00:10:25,840 --> 00:10:28,040 Speaker 8: the end of fiscal twenty twenty five and they say 189 00:10:28,360 --> 00:10:31,600 Speaker 8: they get to a double double digitald just a EBIT 190 00:10:31,720 --> 00:10:35,640 Speaker 8: margin over the next few years. That to me says 191 00:10:35,640 --> 00:10:38,319 Speaker 8: they're still a bumpy ride. So I understand why why 192 00:10:38,400 --> 00:10:40,640 Speaker 8: those quarterly numbers have gone right. 193 00:10:40,920 --> 00:10:44,160 Speaker 2: Hey, deb sde Lauder said, the terriff's going to cost 194 00:10:44,160 --> 00:10:48,000 Speaker 2: them about one hundred million dollars to profitability this year. 195 00:10:48,800 --> 00:10:51,800 Speaker 2: What do you what are some of the luxury companies, 196 00:10:52,040 --> 00:10:54,960 Speaker 2: the brands that you follow. Are they taking these terriff 197 00:10:55,200 --> 00:10:57,199 Speaker 2: costs into their p and L or they're trying to 198 00:10:57,240 --> 00:10:58,959 Speaker 2: pass them along to customers. 199 00:10:59,040 --> 00:11:03,120 Speaker 8: What's been the strategy for Yeah, and certainly for the 200 00:11:03,240 --> 00:11:06,959 Speaker 8: very high end. We saw even at the beginning of 201 00:11:07,000 --> 00:11:10,480 Speaker 8: the year pre tariff announcements. The very high end like 202 00:11:10,720 --> 00:11:14,440 Speaker 8: MS would say, because the wage costs and others, we'll 203 00:11:14,440 --> 00:11:17,080 Speaker 8: be looking at five to six percent price increases, start 204 00:11:17,120 --> 00:11:18,959 Speaker 8: to passing those through the beginning of the year, and 205 00:11:19,080 --> 00:11:22,079 Speaker 8: then in May when the spring summer collections came through. 206 00:11:22,720 --> 00:11:26,679 Speaker 8: They then have commented generally for the luxury space, and 207 00:11:26,760 --> 00:11:29,200 Speaker 8: from the work we've done that some may need up 208 00:11:29,240 --> 00:11:32,199 Speaker 8: to four five percent price to be passed through, and 209 00:11:32,320 --> 00:11:34,400 Speaker 8: the plan is that they pass most of it through. 210 00:11:34,480 --> 00:11:36,880 Speaker 8: I don't think very much of it goes up put 211 00:11:36,920 --> 00:11:40,080 Speaker 8: down the supply chain, and it's going to be done 212 00:11:40,679 --> 00:11:45,320 Speaker 8: gradually in some categories rather than you know, some completely 213 00:11:45,400 --> 00:11:49,040 Speaker 8: pass it through more visibly than others. And some will 214 00:11:49,040 --> 00:11:52,319 Speaker 8: struggle more. And then we heard the news from Switzerland 215 00:11:52,400 --> 00:11:56,360 Speaker 8: with the thirty nine percent tariff, So companies like Swatch 216 00:11:56,440 --> 00:11:59,880 Speaker 8: for US will find it difficult. Companies like I still 217 00:12:00,400 --> 00:12:03,200 Speaker 8: it's not every brand that is resonating with the consumer 218 00:12:03,240 --> 00:12:06,520 Speaker 8: will find it difficult in some brands in some categories. 219 00:12:06,920 --> 00:12:09,240 Speaker 8: So that's why I think we wait quart by quarter 220 00:12:09,840 --> 00:12:11,559 Speaker 8: and across the rest of the year to see what 221 00:12:11,760 --> 00:12:13,679 Speaker 8: companies do need to take a little bit of that 222 00:12:13,800 --> 00:12:16,480 Speaker 8: on board. But most of them are finding cost cutting 223 00:12:16,520 --> 00:12:19,199 Speaker 8: as part of that, and certainly on the gross we 224 00:12:19,280 --> 00:12:22,599 Speaker 8: did see for full years forty basis points improvement on 225 00:12:22,720 --> 00:12:25,400 Speaker 8: gross margin for US to order with a little bit 226 00:12:25,440 --> 00:12:29,280 Speaker 8: of that tariff impact mixed in there, and that they're 227 00:12:29,360 --> 00:12:32,880 Speaker 8: expecting further gross margin improvement in twenty twenty six. 228 00:12:33,480 --> 00:12:36,760 Speaker 5: All right, thanks a Debic and Bloomberg Intelligence Luxury goods analysts. 229 00:12:37,000 --> 00:12:39,360 Speaker 5: Coming up, I'll look at earnings from the world's largest 230 00:12:39,360 --> 00:12:41,120 Speaker 5: home improvement retailer, home Depot. 231 00:12:41,240 --> 00:12:43,959 Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 232 00:12:44,040 --> 00:12:46,320 Speaker 2: depth research and data on two thousand companies and one 233 00:12:46,440 --> 00:12:47,400 Speaker 2: hundred and thirty industries. 234 00:12:47,520 --> 00:12:50,720 Speaker 5: You can access Bloomberg Intelligence via Bi go on the terminal. 235 00:12:50,800 --> 00:12:53,960 Speaker 2: I'm Lis Matheo and I'm Paul Sweeney. This is Bloomberg. 236 00:12:58,280 --> 00:13:01,760 Speaker 1: You're listening to Bloomberg and tell Legends with Paul Sweeney 237 00:13:02,160 --> 00:13:03,480 Speaker 1: on Bloomberg Radio. 238 00:13:04,080 --> 00:13:06,400 Speaker 5: I'm Paul Sweeney and I'm Lisa Matteo filling in on 239 00:13:06,440 --> 00:13:09,680 Speaker 5: Bloomberg Intelligence. We moved next to news from the merchandise 240 00:13:09,760 --> 00:13:10,600 Speaker 5: retailer Target. 241 00:13:10,960 --> 00:13:14,200 Speaker 2: This week, Target named insider Michael Fidelki as its next 242 00:13:14,400 --> 00:13:17,800 Speaker 2: chief executive officer. Shares of Target fell after the appointment, 243 00:13:17,800 --> 00:13:20,240 Speaker 2: indicating that Wall Street had been hoping for an outsider 244 00:13:20,360 --> 00:13:21,760 Speaker 2: to take over the company's leadership. 245 00:13:21,880 --> 00:13:24,640 Speaker 5: This all comes after the company reported second quarter earnings 246 00:13:24,640 --> 00:13:28,920 Speaker 5: that only narrowly surpass analysts expectations. Target also maintained its 247 00:13:28,960 --> 00:13:31,120 Speaker 5: outlook for the full year after slashing it a few 248 00:13:31,160 --> 00:13:31,640 Speaker 5: months back. 249 00:13:31,880 --> 00:13:34,480 Speaker 2: For more guest hosts, Alexis Christopheros and I were joined 250 00:13:34,520 --> 00:13:37,920 Speaker 2: by Jen bartashis Bloomberg Intelligence senior retail analyst. We first 251 00:13:37,960 --> 00:13:39,760 Speaker 2: asked Jen for her take on the new CEO and 252 00:13:39,840 --> 00:13:41,959 Speaker 2: whether Target should have gone with an outsider. 253 00:13:42,559 --> 00:13:45,600 Speaker 9: It's an interesting choice, and I think there are investors. 254 00:13:45,720 --> 00:13:48,120 Speaker 9: For a little while now, I've been interested in seeing 255 00:13:48,120 --> 00:13:51,120 Speaker 9: a CEO change Brian Cornell has done a great job 256 00:13:51,360 --> 00:13:54,600 Speaker 9: during his tenure, at least initially in terms of really 257 00:13:54,720 --> 00:13:57,880 Speaker 9: driving growth for Target. But an internal choice really implies 258 00:13:58,120 --> 00:14:00,599 Speaker 9: much of the same strategy, and I think there was 259 00:14:00,640 --> 00:14:02,720 Speaker 9: some hopes that there would be something a little different 260 00:14:02,760 --> 00:14:05,160 Speaker 9: and maybe shake things up and bring something new to 261 00:14:05,240 --> 00:14:05,680 Speaker 9: the company. 262 00:14:06,840 --> 00:14:09,160 Speaker 7: You know, I'm wondering if Target is going through an 263 00:14:09,200 --> 00:14:13,719 Speaker 7: existential crisis right for this identity crisis because you feel like, 264 00:14:13,920 --> 00:14:15,400 Speaker 7: I don't know about upon and the last time you 265 00:14:15,440 --> 00:14:18,240 Speaker 7: went into a Target, Sure, but you feel like they've 266 00:14:18,360 --> 00:14:21,240 Speaker 7: lost their mojo, Jennifer, because the last time I was 267 00:14:21,280 --> 00:14:23,600 Speaker 7: in there, the store shelves were not stocked very well, 268 00:14:23,760 --> 00:14:27,120 Speaker 7: felt disorganized, couldn't find a sales associate to help me. 269 00:14:27,600 --> 00:14:31,200 Speaker 7: What does this new CEO have to do to help 270 00:14:31,240 --> 00:14:33,800 Speaker 7: this company get back on track. Well, you know, it's 271 00:14:33,920 --> 00:14:37,560 Speaker 7: very interesting. He's highlighted three priorities, but they're not really 272 00:14:38,120 --> 00:14:40,800 Speaker 7: new priorities. But if they can bring focus to it, 273 00:14:40,920 --> 00:14:43,800 Speaker 7: maybe that will help. And that's you know, re energizing 274 00:14:43,880 --> 00:14:48,240 Speaker 7: the assortment, bringing back some of that style and you 275 00:14:48,320 --> 00:14:52,000 Speaker 7: know value that people crave. It's about having a very good, 276 00:14:52,320 --> 00:14:56,000 Speaker 7: consistent in store execution. And experience, which is what you 277 00:14:56,080 --> 00:14:56,800 Speaker 7: were actually. 278 00:14:56,640 --> 00:14:59,840 Speaker 9: Just talking about, having things in stock, having you know 279 00:15:00,320 --> 00:15:03,520 Speaker 9: you associates available. And then the third is an acceleration 280 00:15:03,600 --> 00:15:07,480 Speaker 9: in the deployment of technology to maybe you know, make 281 00:15:07,560 --> 00:15:12,080 Speaker 9: processes faster, improve efficiency, that sort of thing. So we'll 282 00:15:12,120 --> 00:15:14,360 Speaker 9: see if that, you know, if that happens. But it's 283 00:15:14,480 --> 00:15:16,920 Speaker 9: really about getting back to what is it that consumers 284 00:15:17,160 --> 00:15:19,720 Speaker 9: loved about Target and how do you get them back 285 00:15:19,760 --> 00:15:21,360 Speaker 9: in that frame of mind so that they come to 286 00:15:21,440 --> 00:15:22,560 Speaker 9: stores and spend there. 287 00:15:22,960 --> 00:15:24,920 Speaker 2: Well, you're the expitt here, like I don't have a 288 00:15:24,960 --> 00:15:27,000 Speaker 2: sense of what people go to Target for. What do 289 00:15:27,080 --> 00:15:28,120 Speaker 2: you think they go to Target for? 290 00:15:29,400 --> 00:15:31,840 Speaker 9: Well, what they traditionally have gone to Target for was 291 00:15:31,880 --> 00:15:33,920 Speaker 9: that sense of discovery. Right, you had a couple of 292 00:15:33,960 --> 00:15:36,760 Speaker 9: things on your list, you got in and you were inspired. 293 00:15:36,880 --> 00:15:40,200 Speaker 9: You saw home decoration items that you just were like, oh, 294 00:15:40,280 --> 00:15:42,400 Speaker 9: that would look great in my living room. Or you 295 00:15:42,440 --> 00:15:45,360 Speaker 9: would go through apparel and you would see something very 296 00:15:45,440 --> 00:15:48,800 Speaker 9: stylish and you know value that you thought, oh, that's 297 00:15:48,840 --> 00:15:50,600 Speaker 9: a great thing to add to my basket. And so 298 00:15:51,800 --> 00:15:54,200 Speaker 9: that's what's a little bit missing. And part of that 299 00:15:54,320 --> 00:15:56,920 Speaker 9: may be because of just the rise in digital orders. 300 00:15:57,760 --> 00:16:01,600 Speaker 9: It's a less conducive to those impromptu purchases. But it's 301 00:16:01,680 --> 00:16:04,920 Speaker 9: also inspired by the assortment and by what people experience 302 00:16:05,000 --> 00:16:07,680 Speaker 9: when they're in the stores, and that's really where they 303 00:16:07,800 --> 00:16:10,120 Speaker 9: have to focus to get that magic back. 304 00:16:10,600 --> 00:16:12,840 Speaker 7: And Jennifer correct me if I'm wrong. I think Target 305 00:16:12,960 --> 00:16:16,360 Speaker 7: has more exposure to tariffs than say, Walmart because of 306 00:16:16,440 --> 00:16:18,840 Speaker 7: its mix of products. It doesn't have as much exposure 307 00:16:18,880 --> 00:16:21,120 Speaker 7: to groceries as Walmart does, but it gets a lot 308 00:16:21,200 --> 00:16:23,400 Speaker 7: of its products from overseas places that are getting hit 309 00:16:23,840 --> 00:16:26,280 Speaker 7: by these tariffs. How did that play out in this 310 00:16:26,400 --> 00:16:28,120 Speaker 7: quarter and how will it play out going forward. 311 00:16:29,240 --> 00:16:31,320 Speaker 9: Yeah, it's a great question, and it is one of 312 00:16:31,360 --> 00:16:33,920 Speaker 9: the things that's sort of been bogging down Target ever 313 00:16:34,000 --> 00:16:38,280 Speaker 9: since we've had very high food inflation. The willingness to 314 00:16:38,280 --> 00:16:41,160 Speaker 9: spend on discretionary categories has been a little bit more limited. 315 00:16:41,240 --> 00:16:43,960 Speaker 9: And that's really the area that Target has always excelled, 316 00:16:44,400 --> 00:16:48,560 Speaker 9: things like apparel and electronics and toys and home decor 317 00:16:49,400 --> 00:16:51,640 Speaker 9: and so you know, right now, the company is saying 318 00:16:51,640 --> 00:16:54,720 Speaker 9: they're doing a pretty good job of mitigating tariffs, but 319 00:16:54,840 --> 00:16:58,360 Speaker 9: they are more exposed because of the merchandise mix that 320 00:16:58,440 --> 00:17:02,480 Speaker 9: they have. They said they've done some right sizing. They've 321 00:17:02,520 --> 00:17:04,960 Speaker 9: they've paid off kind of the one time cancellation charges 322 00:17:05,000 --> 00:17:07,000 Speaker 9: they had while they were waiting on the terra verdicts. 323 00:17:07,760 --> 00:17:11,320 Speaker 9: We'll see what unfolds in third quarter, and especially because 324 00:17:11,359 --> 00:17:13,480 Speaker 9: it's back to school, which is a really important quarter 325 00:17:13,560 --> 00:17:14,000 Speaker 9: for Target. 326 00:17:15,040 --> 00:17:17,280 Speaker 2: What's always well? I guess what's recently in the last 327 00:17:17,320 --> 00:17:19,280 Speaker 2: ten fifteen years really amazed me about Walmart is it 328 00:17:19,440 --> 00:17:22,800 Speaker 2: how's effective their digital strategy was, and they actually went 329 00:17:22,840 --> 00:17:24,359 Speaker 2: toe to toe with Amazon, and I think they more 330 00:17:24,440 --> 00:17:27,280 Speaker 2: than hold their own, not just about Target in their 331 00:17:27,320 --> 00:17:29,000 Speaker 2: digital strategy. How's that performing? 332 00:17:30,359 --> 00:17:33,560 Speaker 9: Overall? Target's digital strategy has been doing pretty well. They've 333 00:17:33,680 --> 00:17:36,240 Speaker 9: done a They've made a conscious decision to not go 334 00:17:36,400 --> 00:17:38,840 Speaker 9: head to head with Walmart and Target. So, for example, 335 00:17:38,880 --> 00:17:43,639 Speaker 9: in their marketplace, it's not just an endless aisle of sellers. 336 00:17:43,760 --> 00:17:46,480 Speaker 9: They have a very close criteria of who they let 337 00:17:46,560 --> 00:17:49,080 Speaker 9: onto their platform and that's worked well for them because 338 00:17:49,119 --> 00:17:51,800 Speaker 9: it helps keep the product selection closer to what people 339 00:17:51,920 --> 00:17:55,400 Speaker 9: expect from Target. Their digital sales were up in terms 340 00:17:55,440 --> 00:17:58,400 Speaker 9: of same star sales this quarter, well uppaced the visit 341 00:17:58,960 --> 00:18:03,560 Speaker 9: visits to stores, and so they've been executing pretty well there. 342 00:18:03,720 --> 00:18:05,480 Speaker 9: It's just a matter of how do they marry the 343 00:18:05,520 --> 00:18:08,160 Speaker 9: two parts of the business to grow simultaneously. 344 00:18:08,440 --> 00:18:12,080 Speaker 5: Aur Thanks to Jen Bartashi's Bloomberg Intelligence Senior retail analyst. 345 00:18:12,320 --> 00:18:14,159 Speaker 2: We move next to news from the world's largest home 346 00:18:14,200 --> 00:18:15,600 Speaker 2: improvem in retail or home Depot. 347 00:18:15,800 --> 00:18:18,080 Speaker 5: This week, Home Depot said sales return to growth in 348 00:18:18,119 --> 00:18:20,800 Speaker 5: the second quarter. This comes as shoppers invested in smaller 349 00:18:20,840 --> 00:18:23,040 Speaker 5: projects such as lighting and gardening. 350 00:18:23,280 --> 00:18:23,560 Speaker 3: For more. 351 00:18:23,680 --> 00:18:25,920 Speaker 2: Lisa and I were joined by Drew Redding, Bloomberg Intelligence 352 00:18:26,080 --> 00:18:27,119 Speaker 2: US home building analyst. 353 00:18:27,440 --> 00:18:30,320 Speaker 5: We first asked Drew for his take on Home Depot's earnings. 354 00:18:30,760 --> 00:18:34,119 Speaker 10: It was actually a pretty much inline quarter for home Depot. 355 00:18:34,160 --> 00:18:37,520 Speaker 10: Today comps up about one little shy consensus, but if 356 00:18:37,560 --> 00:18:40,080 Speaker 10: you back out some of the four X impact, it 357 00:18:40,200 --> 00:18:43,920 Speaker 10: was pretty much in line. Now. Of course, growth isn't 358 00:18:43,960 --> 00:18:45,960 Speaker 10: as strong as you would like to see, and a 359 00:18:46,000 --> 00:18:47,800 Speaker 10: lot of that, as you mentioned, has to do with 360 00:18:48,000 --> 00:18:51,639 Speaker 10: where rates are, both rates on home equity loans and 361 00:18:51,720 --> 00:18:54,919 Speaker 10: mortgage rates. You have to remember, housing turnover is at 362 00:18:54,960 --> 00:18:57,720 Speaker 10: the lowest level since the financial crisis, and what we've 363 00:18:57,760 --> 00:19:00,920 Speaker 10: heard consistently from Home Depot over the last quarters is 364 00:19:00,960 --> 00:19:04,480 Speaker 10: that consumers are pulling back on big ticket discretionary categories, 365 00:19:04,560 --> 00:19:07,399 Speaker 10: So think of things like kitchen and bathroom models are 366 00:19:07,440 --> 00:19:10,440 Speaker 10: flooring And the reason is because these tend to be 367 00:19:10,560 --> 00:19:13,320 Speaker 10: financed with that and with rates where they are, and 368 00:19:13,600 --> 00:19:16,600 Speaker 10: consumers with the expectation that rates are going to pull back, 369 00:19:16,680 --> 00:19:19,359 Speaker 10: they're taking a wait and see approach and deciding to 370 00:19:19,600 --> 00:19:21,720 Speaker 10: opt for their smaller ticket to projects instead. 371 00:19:22,600 --> 00:19:26,680 Speaker 2: Drew, What what does home depots say about terr risk 372 00:19:26,920 --> 00:19:28,639 Speaker 2: for them? How did they quantify for the street? 373 00:19:29,040 --> 00:19:31,640 Speaker 10: Yeah, good question obviously on you know, top of mind 374 00:19:31,680 --> 00:19:34,120 Speaker 10: for a lot of investors. So home Depot has done 375 00:19:34,160 --> 00:19:37,359 Speaker 10: well to diversify that are sourcing over the last several years. 376 00:19:37,920 --> 00:19:40,800 Speaker 10: They get about fifty percent of their products from the US, 377 00:19:40,920 --> 00:19:43,520 Speaker 10: so they are in pretty good shape from that regard. 378 00:19:44,359 --> 00:19:47,280 Speaker 10: We would estimate, you know, products coming from China somewhere 379 00:19:47,320 --> 00:19:50,080 Speaker 10: around fifteen to twenty percent. And there's a couple of 380 00:19:50,119 --> 00:19:52,000 Speaker 10: ways that they're going to manage this. One, given the 381 00:19:52,080 --> 00:19:54,800 Speaker 10: scale that they have, they're able to push back against suppliers. 382 00:19:55,680 --> 00:19:58,800 Speaker 10: The second they continue to diversify their supply chain. On 383 00:19:58,920 --> 00:20:01,919 Speaker 10: their last quarter call, they mentioned that no single country 384 00:20:01,960 --> 00:20:04,080 Speaker 10: outside of the US will be more than ten percent 385 00:20:04,240 --> 00:20:07,399 Speaker 10: of sourcing. And then lastly, I think We're going to 386 00:20:07,440 --> 00:20:10,840 Speaker 10: start to see some selective price increases coming through in 387 00:20:10,960 --> 00:20:13,520 Speaker 10: the next several quarters. Now, they've done a little bit 388 00:20:13,840 --> 00:20:15,880 Speaker 10: of pre buy on the inventory side to make sure 389 00:20:15,920 --> 00:20:18,280 Speaker 10: that they had some of that lower cost product on 390 00:20:18,440 --> 00:20:20,919 Speaker 10: the shelves for consumers. But I think, you know, as 391 00:20:20,960 --> 00:20:22,320 Speaker 10: we get to the end of this year and into 392 00:20:22,400 --> 00:20:23,960 Speaker 10: next year, you're going to start to see a little 393 00:20:24,000 --> 00:20:26,840 Speaker 10: bit of pricing. Now, we wouldn't expect it to be 394 00:20:27,080 --> 00:20:30,960 Speaker 10: to be widespread or significant. Remember, home Depot sales about 395 00:20:31,040 --> 00:20:33,720 Speaker 10: thirty to forty thousand products on their shelves, so they 396 00:20:33,760 --> 00:20:36,960 Speaker 10: tend to take a portfolio approach and manage pricing really 397 00:20:37,000 --> 00:20:41,800 Speaker 10: across the entire project, rather than raising prices across the board. 398 00:20:42,080 --> 00:20:44,679 Speaker 5: Sure, so are you telling me my next home Depot 399 00:20:44,760 --> 00:20:47,080 Speaker 5: run is going to be more expensive? It's going to 400 00:20:47,119 --> 00:20:49,080 Speaker 5: cost me more, Drew, I have painting, I have a 401 00:20:49,200 --> 00:20:51,879 Speaker 5: deck to build, I have things to do. I mean 402 00:20:51,920 --> 00:20:53,560 Speaker 5: you're saying this could take effect pretty soon. 403 00:20:54,040 --> 00:20:57,120 Speaker 10: Well maybe not your next trip back, Okay, the next couple. 404 00:20:57,320 --> 00:20:59,600 Speaker 10: Maybe Looking more towards the end of this year or 405 00:20:59,640 --> 00:21:02,600 Speaker 10: into the next year, we would expect to see prices 406 00:21:02,680 --> 00:21:03,360 Speaker 10: up marginally. 407 00:21:03,600 --> 00:21:06,879 Speaker 5: So I need to rush now, well, if consumers are 408 00:21:06,880 --> 00:21:09,600 Speaker 5: putting off those big projects, what are they focusing on? 409 00:21:09,720 --> 00:21:12,399 Speaker 5: I mean, is it the smaller ones or are they 410 00:21:12,480 --> 00:21:13,840 Speaker 5: just canceling projects altogether. 411 00:21:14,359 --> 00:21:19,000 Speaker 10: Yeah, it tends to be more maintenance repair oriented, you know. 412 00:21:19,119 --> 00:21:22,040 Speaker 10: So there's there's projects around the house where things break 413 00:21:22,080 --> 00:21:25,760 Speaker 10: and you have to fix them immediately, or replacement products 414 00:21:25,800 --> 00:21:28,760 Speaker 10: for appliances and things of that nature. And again, what 415 00:21:28,840 --> 00:21:31,480 Speaker 10: we're not seeing is the big ticket discretionary of things 416 00:21:31,600 --> 00:21:34,800 Speaker 10: like like kitchen and bess that require financing. 417 00:21:35,359 --> 00:21:38,879 Speaker 2: Our thanks to Drew Redding, Bloomberg Intelligence US home building analyst. 418 00:21:38,680 --> 00:21:41,160 Speaker 5: We move next to the medical device industry. 419 00:21:41,359 --> 00:21:44,240 Speaker 2: This week, the medical device company Medtronic reported profit that 420 00:21:44,359 --> 00:21:47,680 Speaker 2: beat analyst expectations. The company also lifted its full year 421 00:21:47,720 --> 00:21:48,520 Speaker 2: earnings guidance. 422 00:21:48,680 --> 00:21:51,080 Speaker 5: This came after Medtronic announced that it will expand it's 423 00:21:51,119 --> 00:21:54,840 Speaker 5: bored after Elliott Investment Management became one of its biggest investors. 424 00:21:55,160 --> 00:21:57,360 Speaker 2: For more, Lisa and I were joined by Matt Hendrickson 425 00:21:57,560 --> 00:22:01,080 Speaker 2: Bloomberg Intelligence senior medtech analysts as Matt to bring. 426 00:22:01,000 --> 00:22:03,280 Speaker 5: Us up to date on what is happening at Metronic. 427 00:22:03,880 --> 00:22:07,440 Speaker 11: With the Elliott Management news, they reported that they have 428 00:22:07,560 --> 00:22:10,879 Speaker 11: a significant stake in the stock and they're going to 429 00:22:10,960 --> 00:22:15,960 Speaker 11: plan to bring on two new border directors. These are 430 00:22:16,119 --> 00:22:23,120 Speaker 11: previous medtech CEOs from back in history and basically they're 431 00:22:23,200 --> 00:22:25,320 Speaker 11: looking to revitalize growth. 432 00:22:25,280 --> 00:22:27,120 Speaker 3: And capture efficiencies too. 433 00:22:27,240 --> 00:22:31,320 Speaker 11: As they quoted in the earnings call built oxygen for 434 00:22:31,440 --> 00:22:34,840 Speaker 11: future growth. And so one of the things we saw 435 00:22:35,000 --> 00:22:38,920 Speaker 11: in the quarter in the earnings today, there were some 436 00:22:39,080 --> 00:22:42,720 Speaker 11: areas that had strong growth, strong momentum, but in their 437 00:22:42,760 --> 00:22:46,399 Speaker 11: diversified portfolio, there are other areas that kind of, let's say, 438 00:22:46,520 --> 00:22:47,360 Speaker 11: needed some tweaking. 439 00:22:48,200 --> 00:22:51,480 Speaker 5: But when it comes to this the board, who were 440 00:22:51,560 --> 00:22:53,480 Speaker 5: some of the additions that are that are coming in 441 00:22:54,119 --> 00:22:56,560 Speaker 5: because of Elliot and has Elliott the schools, the size 442 00:22:56,560 --> 00:22:57,200 Speaker 5: of the state. 443 00:22:57,480 --> 00:23:00,359 Speaker 11: As I've seen now, I have not seen a actual 444 00:23:00,480 --> 00:23:06,119 Speaker 11: size of what the steak is. Some of these the 445 00:23:06,359 --> 00:23:09,920 Speaker 11: board directors, they were former CEOs at den Supply so 446 00:23:10,119 --> 00:23:14,320 Speaker 11: some medtech companies. They were also previously at Beckman, Dickinson 447 00:23:15,320 --> 00:23:18,359 Speaker 11: other ones. They are able to come in with more 448 00:23:18,400 --> 00:23:21,560 Speaker 11: of an operational background and so being able to drive 449 00:23:21,840 --> 00:23:24,800 Speaker 11: kind of that efficiency, to be able to create the savings, 450 00:23:24,880 --> 00:23:27,040 Speaker 11: to be able to invest into their R and D programs. 451 00:23:27,320 --> 00:23:28,879 Speaker 2: Right for the folks in front of the terminal with 452 00:23:28,960 --> 00:23:31,960 Speaker 2: tickers M D T. Then you type in the A 453 00:23:32,240 --> 00:23:35,080 Speaker 2: n R function, get the analyst rating. Street doesn't know 454 00:23:35,119 --> 00:23:37,960 Speaker 2: what to do with this stuff. Seventeen buy, sixteen holds 455 00:23:38,000 --> 00:23:40,920 Speaker 2: in one sell. What's what's the confusion out there about 456 00:23:40,960 --> 00:23:41,280 Speaker 2: this name? 457 00:23:41,800 --> 00:23:47,360 Speaker 11: Then everybody needs medicals, everyone needs medical devices. Metronic has 458 00:23:47,440 --> 00:23:51,520 Speaker 11: invested a lot of money into these home run type products, 459 00:23:52,160 --> 00:23:55,879 Speaker 11: polse field ablation, renal de innervation. All these products are 460 00:23:55,920 --> 00:24:01,240 Speaker 11: trying to disrupt a current market. Either if it's atual fibrillation, hypertension, 461 00:24:02,440 --> 00:24:03,960 Speaker 11: if you get if you hit a home run like 462 00:24:04,000 --> 00:24:05,960 Speaker 11: you're doing with pulsteril ablation, it is going to drive 463 00:24:06,080 --> 00:24:10,880 Speaker 11: us pulse field ablation. It's basically a way to ablate 464 00:24:11,560 --> 00:24:14,360 Speaker 11: an area that's being affected by autral fibrillation without using 465 00:24:14,440 --> 00:24:17,320 Speaker 11: heat or without freezing, so that prevents kind of the 466 00:24:17,640 --> 00:24:20,960 Speaker 11: damage to the tissue. If you hit home runs like that, 467 00:24:21,040 --> 00:24:24,040 Speaker 11: you're gonna have key growth drivers. Other products like renal 468 00:24:24,080 --> 00:24:28,560 Speaker 11: deinnervation is taking longer for that growth to develop. So analysts, 469 00:24:28,600 --> 00:24:32,080 Speaker 11: including myself, see all these products in the pipeline get 470 00:24:32,240 --> 00:24:35,879 Speaker 11: very excited about the potential for that growth to accelerate. 471 00:24:36,200 --> 00:24:37,920 Speaker 3: From let's say the four to five percent. 472 00:24:37,960 --> 00:24:42,200 Speaker 11: They're currently at to six percent, and then we're just 473 00:24:42,240 --> 00:24:45,439 Speaker 11: still waiting for that execution of those commercialization of the. 474 00:24:45,480 --> 00:24:47,359 Speaker 3: Products to get to that higher growth. 475 00:24:48,040 --> 00:24:50,600 Speaker 11: Some analysts, as you see in the A and R, 476 00:24:51,119 --> 00:24:53,760 Speaker 11: they are more bullish on when that will come up. 477 00:24:54,200 --> 00:24:56,080 Speaker 11: Others are starting to say, wait a minute, We've seen 478 00:24:56,119 --> 00:24:58,680 Speaker 11: this story before, and so they are waiting. It's a 479 00:24:58,760 --> 00:25:01,000 Speaker 11: wait and see story for those analysts. 480 00:25:01,600 --> 00:25:04,760 Speaker 5: I noticed when we talk with tariffs, they scaled back 481 00:25:04,840 --> 00:25:07,240 Speaker 5: the impact of TERRAFF, so they lifted their full year guidance. 482 00:25:07,280 --> 00:25:10,320 Speaker 5: Are you seeing that more from other companies in this space? 483 00:25:10,560 --> 00:25:12,920 Speaker 11: Yes, I would say the majority of the companies that 484 00:25:13,040 --> 00:25:17,520 Speaker 11: reported so far. Metronic always reports because their July fiscal 485 00:25:17,640 --> 00:25:20,760 Speaker 11: quarter end. All the companies that reported their June fiscal 486 00:25:20,880 --> 00:25:22,600 Speaker 11: end had a similar thing where they cut it by 487 00:25:22,680 --> 00:25:26,200 Speaker 11: roughly half of what they had predicted in the first quarter. 488 00:25:26,680 --> 00:25:29,919 Speaker 2: Our thanks to Matt henrickson Bloomberg Intelligence, senior metech allist. 489 00:25:30,160 --> 00:25:32,800 Speaker 5: Coming up, we'll look at sustainable aviation fuel and how 490 00:25:32,840 --> 00:25:34,760 Speaker 5: it's breaking records. From twenty twenty four. 491 00:25:35,080 --> 00:25:38,040 Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 492 00:25:38,080 --> 00:25:40,159 Speaker 2: depth research and data on two thousand companies in one 493 00:25:40,240 --> 00:25:41,240 Speaker 2: hundred and thirty industries. 494 00:25:41,320 --> 00:25:44,359 Speaker 5: You can access Bloomberg Intelligence via bi go on the terminal. 495 00:25:44,440 --> 00:25:46,280 Speaker 5: I'm Lisa Matteo and I'm Paul Sweeney. 496 00:25:46,400 --> 00:25:47,560 Speaker 2: This is Bloomberg. 497 00:25:55,400 --> 00:26:00,639 Speaker 1: You're listening to Bloomberg Intelligence with Paul Sweeney on bloom Radio. 498 00:26:01,320 --> 00:26:03,639 Speaker 5: I'm Poul Swiney and I'm Lisa Mateo filling in on 499 00:26:03,720 --> 00:26:06,400 Speaker 5: Bloomberg Intelligence. We move next to news in the drug 500 00:26:06,480 --> 00:26:09,399 Speaker 5: and pharmaceutical space. This week, the Danish drug maker Novo 501 00:26:09,560 --> 00:26:12,680 Speaker 5: Nordis announced it's slashing the cost of ozempic for cash 502 00:26:12,720 --> 00:26:13,480 Speaker 5: paying patients. 503 00:26:13,680 --> 00:26:16,000 Speaker 2: The company said patients can now get ozempic for four 504 00:26:16,080 --> 00:26:18,120 Speaker 2: hundred and ninety nine dollars a month, that's about half 505 00:26:18,200 --> 00:26:21,240 Speaker 2: of its US list price through Novo's cash pay pharmacy 506 00:26:21,359 --> 00:26:21,840 Speaker 2: Novo Care. 507 00:26:22,000 --> 00:26:25,119 Speaker 5: Nova is also partnering with the healthcare company Gutarex to 508 00:26:25,240 --> 00:26:28,720 Speaker 5: offer ozempic for the same price as pharmacies across the US. 509 00:26:29,200 --> 00:26:31,920 Speaker 5: And this all comes after Novo's weightlaws drug we go 510 00:26:32,119 --> 00:26:34,960 Speaker 5: Vy received FDA approval to treat a serious form of 511 00:26:35,080 --> 00:26:35,760 Speaker 5: liver disease. 512 00:26:36,119 --> 00:26:38,240 Speaker 2: For more, Lisa and I were joined by Madison Muller 513 00:26:38,359 --> 00:26:41,400 Speaker 2: Bloomberg Health reporter, We first asked Madison for her take 514 00:26:41,440 --> 00:26:43,320 Speaker 2: on Nova's recent breakthrough with wegov. 515 00:26:43,880 --> 00:26:46,640 Speaker 12: Nova artists got approval for regov, which is its weight 516 00:26:46,680 --> 00:26:49,440 Speaker 12: loss drug to treat a liver disease called MASH. 517 00:26:49,840 --> 00:26:52,200 Speaker 13: And this sort of is a we've seen over the 518 00:26:52,280 --> 00:26:53,200 Speaker 13: last couple of years. 519 00:26:53,400 --> 00:26:56,240 Speaker 12: So many studies come out to show the potential health 520 00:26:56,280 --> 00:26:59,359 Speaker 12: benefits of these weight laws drugs beyond just you know, 521 00:26:59,440 --> 00:27:01,920 Speaker 12: the producing the number on the scale. And we knew 522 00:27:02,040 --> 00:27:04,640 Speaker 12: from studies that there was some benefit to the liver 523 00:27:05,160 --> 00:27:07,760 Speaker 12: from taking these drugs, and so Nova was able to 524 00:27:07,800 --> 00:27:11,560 Speaker 12: notch and approval for that, which helps one with insurance coverage. 525 00:27:12,080 --> 00:27:14,880 Speaker 12: Wigov and then Eli Lilly's drug zet Bound are still 526 00:27:14,960 --> 00:27:19,440 Speaker 12: not super widely covered by insurance companies for weight loss, 527 00:27:19,520 --> 00:27:22,720 Speaker 12: but having some of these other health benefits shown and 528 00:27:22,800 --> 00:27:25,760 Speaker 12: proven in studies helps them convince ensures that they are 529 00:27:25,880 --> 00:27:28,960 Speaker 12: worth covering, and so this gives them an edge against Lily. 530 00:27:29,000 --> 00:27:32,640 Speaker 12: Lily's drug, Zetbound is not approved yet for this indication, 531 00:27:32,920 --> 00:27:36,320 Speaker 12: and so it gives them sort of a leg up there, 532 00:27:37,160 --> 00:27:41,440 Speaker 12: and then it also gets I mean, it sort of 533 00:27:41,880 --> 00:27:47,400 Speaker 12: is another benefit for Novo because they've been struggling over 534 00:27:47,480 --> 00:27:51,280 Speaker 12: the last year, just with zet Bound sort of making 535 00:27:52,119 --> 00:27:55,080 Speaker 12: waves in the market and taking market share from Wigov. 536 00:27:55,320 --> 00:27:58,120 Speaker 13: This gives them a leg up there as well. 537 00:27:58,280 --> 00:28:01,520 Speaker 12: And just with the tumultuousness of the last few weeks 538 00:28:01,840 --> 00:28:05,840 Speaker 12: they had a CEO ouster and a few other moving pieces. 539 00:28:05,960 --> 00:28:10,440 Speaker 12: So this is good news for them and we'll we'll 540 00:28:10,480 --> 00:28:12,760 Speaker 12: see well, but it will maybe help them gain back 541 00:28:12,800 --> 00:28:13,440 Speaker 12: some market share. 542 00:28:13,920 --> 00:28:15,680 Speaker 2: One of the issues for these weight loss drugs is 543 00:28:15,760 --> 00:28:18,439 Speaker 2: the cost, and if you're not covered by insurance, they 544 00:28:18,640 --> 00:28:22,440 Speaker 2: really are expensive. So by slashing the cost of a 545 00:28:22,480 --> 00:28:25,200 Speaker 2: zempic in half, does a company believe that's going to 546 00:28:25,200 --> 00:28:28,600 Speaker 2: open up a big new vein of new customers. 547 00:28:28,680 --> 00:28:28,880 Speaker 10: Maybe. 548 00:28:29,359 --> 00:28:32,320 Speaker 12: So it's interesting because if patients are on ozempic, they 549 00:28:32,800 --> 00:28:35,119 Speaker 12: are usually on it. It's you know, type two diabetes 550 00:28:35,160 --> 00:28:38,320 Speaker 12: treatment and usually that's covered by insurance diabetes. 551 00:28:38,360 --> 00:28:41,240 Speaker 2: But does it have a side benefit I guess, of 552 00:28:41,320 --> 00:28:41,840 Speaker 2: weight loss? 553 00:28:42,120 --> 00:28:42,320 Speaker 13: Yes? 554 00:28:42,480 --> 00:28:45,040 Speaker 12: So, I mean there are two different drugs, right, There's ozembic, 555 00:28:45,120 --> 00:28:47,800 Speaker 12: which is the diabetes drug Wigov. They both use the 556 00:28:47,880 --> 00:28:50,400 Speaker 12: exact same active ingredient, which is semiglue tide. 557 00:28:50,600 --> 00:28:52,200 Speaker 13: Wigov is a higher dose version. 558 00:28:52,920 --> 00:28:55,080 Speaker 12: If you're on ozempic, it's lower doses, so it's not 559 00:28:55,200 --> 00:28:57,920 Speaker 12: quite as strong, but there is that weight loss side 560 00:28:57,920 --> 00:28:59,400 Speaker 12: effect on both drugs. 561 00:29:00,600 --> 00:29:02,320 Speaker 13: Previously, Novo actually. 562 00:29:02,080 --> 00:29:05,000 Speaker 12: Did cut the cost of wigo V down to about 563 00:29:05,040 --> 00:29:07,640 Speaker 12: the same price five hundred dollars a month back in March, 564 00:29:08,080 --> 00:29:10,600 Speaker 12: and now they are doing the same for ozempic. But 565 00:29:10,760 --> 00:29:13,160 Speaker 12: it's interesting because the question of whether or not this 566 00:29:13,320 --> 00:29:16,000 Speaker 12: is going to expand access for more patients sort of 567 00:29:16,040 --> 00:29:19,080 Speaker 12: remains to be seen, because again, if you have ozempic, 568 00:29:19,160 --> 00:29:21,520 Speaker 12: you usually are covered by insurance for it. 569 00:29:22,480 --> 00:29:25,160 Speaker 5: Now something I also said, there are partnering in this article, 570 00:29:25,200 --> 00:29:27,400 Speaker 5: it's said with good Rx to offer ozempic we go 571 00:29:27,520 --> 00:29:30,800 Speaker 5: before the same price as pharmacies. But didn't Novo try 572 00:29:30,920 --> 00:29:33,400 Speaker 5: the partnership thing with Hymns and hers and that didn't 573 00:29:33,400 --> 00:29:34,240 Speaker 5: work out so well. 574 00:29:34,240 --> 00:29:37,000 Speaker 12: Yeah, yeah, So Hyms was one of several partners that 575 00:29:37,160 --> 00:29:39,480 Speaker 12: Novo has sort of worked with over the last couple 576 00:29:39,480 --> 00:29:43,240 Speaker 12: of months again to really make waves and get into 577 00:29:43,400 --> 00:29:46,760 Speaker 12: this market or gain back market share because it's really 578 00:29:46,960 --> 00:29:50,000 Speaker 12: lost ground to Eli Lilly. Hyms was one of the 579 00:29:50,040 --> 00:29:52,080 Speaker 12: companies that they've partnered with. They've partnered with a couple 580 00:29:52,120 --> 00:29:55,960 Speaker 12: of other telehealth companies as well as CVS to make 581 00:29:56,080 --> 00:29:59,160 Speaker 12: this cash pay price more widely available. But this is 582 00:29:59,200 --> 00:30:01,680 Speaker 12: the first time that they're dropping the price of ozempic 583 00:30:01,760 --> 00:30:04,840 Speaker 12: as well. So this partnership with good Rx, you know, 584 00:30:04,960 --> 00:30:07,400 Speaker 12: any patient is essentially a coupon, like any patient who 585 00:30:07,400 --> 00:30:10,800 Speaker 12: goes to a pharmacy uses good rx is going to 586 00:30:10,840 --> 00:30:13,520 Speaker 12: be able to get this cash pay price for ozempic. 587 00:30:13,560 --> 00:30:18,000 Speaker 2: And Wigov mentioned that the hymns and hers those compound drugs, 588 00:30:18,240 --> 00:30:21,880 Speaker 2: how effective are they vis a v the golp ones 589 00:30:22,280 --> 00:30:24,400 Speaker 2: them themselves, because that would be a if I were 590 00:30:24,440 --> 00:30:26,360 Speaker 2: like Novo Nordics, I spent all this money to develop, 591 00:30:26,400 --> 00:30:27,680 Speaker 2: but that would be a bummup recease. 592 00:30:27,800 --> 00:30:30,920 Speaker 12: Yes, and that's a really good question actually, that question 593 00:30:31,080 --> 00:30:34,040 Speaker 12: of how effective are these drugs, because that's the problem 594 00:30:34,200 --> 00:30:37,680 Speaker 12: is we don't know. There are studies that drug makers 595 00:30:37,720 --> 00:30:39,480 Speaker 12: are required to do. They have to go through a 596 00:30:39,560 --> 00:30:42,600 Speaker 12: length the FDA approval process to prove that their medications 597 00:30:42,640 --> 00:30:45,560 Speaker 12: are safe and effective. Compounded drugs don't go through that 598 00:30:45,640 --> 00:30:49,000 Speaker 12: same approval process, so there's no actual studies showing how 599 00:30:49,120 --> 00:30:51,960 Speaker 12: effective those medications are. And it's a little bit of 600 00:30:52,000 --> 00:30:55,120 Speaker 12: a gamble. I mean, we've seen patients losing weight on 601 00:30:55,200 --> 00:30:59,920 Speaker 12: these compounded medications, and we haven't seen a tremendous amount 602 00:31:00,280 --> 00:31:04,360 Speaker 12: of side effects that are really different from the branded medications. 603 00:31:04,480 --> 00:31:07,880 Speaker 12: So the problem is just more that we don't actually 604 00:31:07,920 --> 00:31:10,520 Speaker 12: have a lot of visibility into that compounded market and 605 00:31:10,680 --> 00:31:15,640 Speaker 12: don't know how those drugs stack up to the branded medications. 606 00:31:15,840 --> 00:31:17,720 Speaker 5: Where does this all put Eli Lilly then, I mean, 607 00:31:17,760 --> 00:31:19,920 Speaker 5: they already had the setback with the weight loss pill, 608 00:31:20,200 --> 00:31:22,400 Speaker 5: so now we're hearing all this about Nova. Where does 609 00:31:22,440 --> 00:31:22,920 Speaker 5: this put them? 610 00:31:23,240 --> 00:31:23,400 Speaker 13: Yeah? 611 00:31:23,480 --> 00:31:26,080 Speaker 12: Yeah, I mean it's been it's interesting, like the two companies. 612 00:31:26,120 --> 00:31:29,080 Speaker 12: I think last year it was just they were so 613 00:31:29,360 --> 00:31:31,880 Speaker 12: red hot and there was like nothing that expectations were 614 00:31:31,920 --> 00:31:34,160 Speaker 12: sky high. There was really nothing that seemingly could bring 615 00:31:34,200 --> 00:31:36,920 Speaker 12: them down. But now we're seeing a couple of stumbles 616 00:31:36,960 --> 00:31:39,520 Speaker 12: and I think that that, you know, shows again how 617 00:31:39,680 --> 00:31:41,640 Speaker 12: high the expectations are for this market. 618 00:31:41,680 --> 00:31:44,760 Speaker 13: There's just no room for failure. But we'll see what 619 00:31:44,840 --> 00:31:45,880 Speaker 13: happens next to Lily. 620 00:31:46,640 --> 00:31:50,600 Speaker 2: When is the pill going to be available day year? 621 00:31:50,720 --> 00:31:53,200 Speaker 12: Sometime twenty twenty six, So they said that they're planning 622 00:31:53,240 --> 00:31:55,440 Speaker 12: to file for FDA approval by the end of the 623 00:31:55,560 --> 00:31:57,840 Speaker 12: year and then hopefully launch next year. 624 00:31:58,200 --> 00:32:00,400 Speaker 5: Our thanks to Madison Mueller Bloomberg Health Reporter. 625 00:32:00,720 --> 00:32:03,240 Speaker 2: Each week we look at research from Bloomberg and EF 626 00:32:03,400 --> 00:32:05,240 Speaker 2: previously known as New Energy Finance. 627 00:32:05,520 --> 00:32:08,080 Speaker 5: They're the DM at Bloomberg that tracks and analyzes the 628 00:32:08,240 --> 00:32:12,760 Speaker 5: energy transition from commodities to power transport industries. This week 629 00:32:12,840 --> 00:32:15,480 Speaker 5: we took a look at sustainable aviation fuel and how 630 00:32:15,520 --> 00:32:17,400 Speaker 5: it's breaking records from twenty twenty four. 631 00:32:17,680 --> 00:32:20,560 Speaker 2: For more, Lisa and I were joined by Anna Davies BNF, 632 00:32:20,640 --> 00:32:21,920 Speaker 2: head of Renewable Fuels. 633 00:32:22,160 --> 00:32:24,680 Speaker 5: We first asked Anna to explain the reason behind the 634 00:32:24,800 --> 00:32:27,400 Speaker 5: record breaking use of sustainable aviation fuel. 635 00:32:27,840 --> 00:32:31,880 Speaker 4: There has been an influx in attention and growth in 636 00:32:31,960 --> 00:32:34,960 Speaker 4: the sustainable aviation fuel market. And this is basically a 637 00:32:35,040 --> 00:32:38,040 Speaker 4: market to produce a jet fuel molecule but not use 638 00:32:38,080 --> 00:32:41,760 Speaker 4: fossil fuels, so usually they use biofuels instead of fossil fuels. 639 00:32:41,760 --> 00:32:44,000 Speaker 4: So something like used cooking oil out of a fryer. 640 00:32:44,600 --> 00:32:47,840 Speaker 4: You can clean it, purify it, upgrade it, and then 641 00:32:47,880 --> 00:32:50,280 Speaker 4: you can make a hydrocarbon molecule like jet fuel from 642 00:32:50,360 --> 00:32:52,840 Speaker 4: that oil. And it's a way to decarbonize a sector 643 00:32:52,920 --> 00:32:55,680 Speaker 4: like aviation, which another if you don't have these fuels, 644 00:32:55,680 --> 00:32:58,280 Speaker 4: it's very hard to decarbonize because there's no real alternative 645 00:32:58,280 --> 00:33:00,960 Speaker 4: to jet fuel, and jet fuel is so carbon emissions. 646 00:33:02,200 --> 00:33:05,320 Speaker 2: How efficient is this jet fuel? This renewable jet fuel, 647 00:33:05,800 --> 00:33:06,160 Speaker 2: so it. 648 00:33:06,320 --> 00:33:09,280 Speaker 4: Is almost identical to fossil jet fuel. So in terms 649 00:33:09,280 --> 00:33:11,040 Speaker 4: of it works the same way you burn it in 650 00:33:11,120 --> 00:33:15,360 Speaker 4: an aircraft engine. It releases CO two like fossil jet 651 00:33:15,400 --> 00:33:18,480 Speaker 4: fuel does. But the main thing is that it's from 652 00:33:18,560 --> 00:33:21,760 Speaker 4: a plant or some other renewable source, and so if 653 00:33:21,800 --> 00:33:25,360 Speaker 4: you think of agriculture, they absorb carbon dioxide for a photosynthesis, 654 00:33:25,400 --> 00:33:26,960 Speaker 4: and so therefore you can think of it as sort 655 00:33:26,960 --> 00:33:30,520 Speaker 4: of a net CO two neutralish technology because it at 656 00:33:30,560 --> 00:33:33,000 Speaker 4: least absorbs some CO two in the growing of the fuels. 657 00:33:33,280 --> 00:33:36,120 Speaker 5: So are there any challenges with renewable jet fuel. 658 00:33:36,200 --> 00:33:39,320 Speaker 4: There's a lot of challenges, and the main challenge. The 659 00:33:39,440 --> 00:33:42,680 Speaker 4: main challenge is cost. It's very costly. So the cheapest 660 00:33:42,680 --> 00:33:44,200 Speaker 4: way to make these fuels is kind of what I've 661 00:33:44,240 --> 00:33:46,520 Speaker 4: been describing. You take an oil like use cooking oil. 662 00:33:47,960 --> 00:33:50,440 Speaker 4: That alone is at least two to four times the 663 00:33:50,520 --> 00:33:53,160 Speaker 4: cost of fossil jet fuel. And that one is tough 664 00:33:53,160 --> 00:33:55,040 Speaker 4: because there's only so much used cooking oil out there. 665 00:33:55,440 --> 00:33:57,720 Speaker 4: You can use other oils like soybean oil, but that 666 00:33:57,880 --> 00:34:01,560 Speaker 4: has fewer emission benefits associated with it because then you're 667 00:34:01,560 --> 00:34:04,440 Speaker 4: growing soybeans to cultivate for their oil, so you have 668 00:34:04,560 --> 00:34:07,680 Speaker 4: land issues, you have you know, all the pesticides and 669 00:34:07,720 --> 00:34:09,719 Speaker 4: fertilizers and emissions that come from agriculture with that. 670 00:34:10,120 --> 00:34:11,040 Speaker 3: Who makes this stuff? 671 00:34:11,560 --> 00:34:15,000 Speaker 4: It is mostly the oil refineries these days. Because they 672 00:34:15,080 --> 00:34:18,560 Speaker 4: can utilize existing oil refineries and upgrade them to handle 673 00:34:19,239 --> 00:34:22,600 Speaker 4: a biooil similar to a fossil oil, the process for 674 00:34:22,680 --> 00:34:25,840 Speaker 4: making it becomes quite similar. So your largest producers there 675 00:34:25,840 --> 00:34:27,720 Speaker 4: are things like Neste or here in the US, Phillip 676 00:34:27,800 --> 00:34:31,400 Speaker 4: sixty six and Valero have some pretty big operations. 677 00:34:31,760 --> 00:34:34,440 Speaker 5: Now, you talked about twenty twenty five numbers, so how 678 00:34:34,440 --> 00:34:37,600 Speaker 5: do you compare that to twenty twenty four Like it 679 00:34:37,680 --> 00:34:40,000 Speaker 5: was a significant, significant jump. 680 00:34:40,200 --> 00:34:42,640 Speaker 4: Yeah, so this was a really big well, twenty twenty 681 00:34:42,719 --> 00:34:44,839 Speaker 4: five numbers so far is on track to double twenty 682 00:34:44,920 --> 00:34:47,799 Speaker 4: twenty four numbers of production of this fuel in the US. 683 00:34:48,360 --> 00:34:52,520 Speaker 4: Twenty twenty four was a quadrupling of twenty twenty three volumes, 684 00:34:52,560 --> 00:34:54,840 Speaker 4: So these are really growing at a quick rate. That 685 00:34:54,920 --> 00:34:56,879 Speaker 4: set is growing for a very small number. So even 686 00:34:57,000 --> 00:35:00,200 Speaker 4: with this quadrupling and doubling, we're still at less than 687 00:35:00,400 --> 00:35:03,000 Speaker 4: half of one percent of all US fossil jet fuel 688 00:35:03,200 --> 00:35:04,279 Speaker 4: or less of all US fuel. 689 00:35:04,440 --> 00:35:06,440 Speaker 2: So it seems to me this is probably one of 690 00:35:06,480 --> 00:35:09,480 Speaker 2: those supplying demand situations. I need demand to ramp up 691 00:35:09,840 --> 00:35:12,279 Speaker 2: production to bring down the unit costs here, So what 692 00:35:12,560 --> 00:35:16,200 Speaker 2: are the are the airlines committed to taking this fuel? 693 00:35:16,560 --> 00:35:19,880 Speaker 4: This is definitely a chicken and egg scenario. The airlines 694 00:35:20,040 --> 00:35:22,960 Speaker 4: have targets in place. A lot of them want to 695 00:35:23,200 --> 00:35:27,319 Speaker 4: have ten percent of their fuel being sustainable aviation fuel 696 00:35:27,360 --> 00:35:29,960 Speaker 4: by twenty thirty, But these are just targets. There's no 697 00:35:30,120 --> 00:35:33,800 Speaker 4: real ramifications if they don't meet it. Some countries like 698 00:35:33,840 --> 00:35:36,759 Speaker 4: the EU and UK are setting very strict mandates. So 699 00:35:36,880 --> 00:35:40,399 Speaker 4: both of those regions have two percent mandates for saff 700 00:35:40,480 --> 00:35:43,399 Speaker 4: use in twenty twenty five, and that increases over time 701 00:35:43,480 --> 00:35:45,719 Speaker 4: and there are penalties associated with it if they don't 702 00:35:45,760 --> 00:35:47,840 Speaker 4: meet that. Here in the US, we're definitely taking the 703 00:35:47,880 --> 00:35:52,120 Speaker 4: incentive approach by offering tax incentives or other policy incentives 704 00:35:52,520 --> 00:35:55,880 Speaker 4: to try and encourage production. There's no strict target. 705 00:35:56,120 --> 00:35:58,960 Speaker 5: Now, what about looking longer term? Is the outlook for 706 00:35:59,040 --> 00:36:01,879 Speaker 5: this as as it's been on this trajectory you're saying, 707 00:36:01,920 --> 00:36:03,760 Speaker 5: but does it can it continue. 708 00:36:03,360 --> 00:36:07,760 Speaker 4: This, So that is a really good question. The countries 709 00:36:07,800 --> 00:36:11,320 Speaker 4: like the EU and UK have very ambitious targets. The 710 00:36:11,360 --> 00:36:13,800 Speaker 4: EU wants to see seventy percent of all jet fuel 711 00:36:14,120 --> 00:36:17,239 Speaker 4: be made from sustainable aviation fuel by twenty fifty. We 712 00:36:17,360 --> 00:36:19,160 Speaker 4: have benf think that that's going to be very hard 713 00:36:19,200 --> 00:36:22,440 Speaker 4: to achieve. Just to produce that quantity of these fuels, 714 00:36:22,440 --> 00:36:23,799 Speaker 4: where would you get the feedstock from? 715 00:36:23,960 --> 00:36:24,000 Speaker 10: What? 716 00:36:24,200 --> 00:36:28,000 Speaker 4: Who would shoulder the cost of that? So we anticipate 717 00:36:28,040 --> 00:36:30,440 Speaker 4: it will probably be closer to the ten percent by 718 00:36:30,480 --> 00:36:33,880 Speaker 4: twenty fifty twenty thirties. Another time, there's a lot of targets. 719 00:36:33,880 --> 00:36:35,919 Speaker 4: Like I said, airlines have ten percent by twenty thirty. 720 00:36:36,480 --> 00:36:38,399 Speaker 4: We don't think that will be achieved either, just because 721 00:36:38,440 --> 00:36:40,360 Speaker 4: a lot of projects have been delayed or canceled in 722 00:36:40,440 --> 00:36:44,040 Speaker 4: recent years, especially as interest rates are high, policies have 723 00:36:44,080 --> 00:36:46,239 Speaker 4: been changing. There's a lot of uncertainty, especially here in 724 00:36:46,239 --> 00:36:48,400 Speaker 4: the US where a lot of these facilities are being planned. 725 00:36:49,320 --> 00:36:51,120 Speaker 4: So there's been a lot of slow down and delay 726 00:36:51,160 --> 00:36:53,239 Speaker 4: in this industry. And the twenty thirty might be a 727 00:36:53,320 --> 00:36:55,960 Speaker 4: time where we see really ambitious targets and not enough supply. 728 00:36:55,760 --> 00:36:56,080 Speaker 8: To meet it. 729 00:36:56,239 --> 00:36:58,880 Speaker 2: We reticent to asked this question, but how has this 730 00:36:59,000 --> 00:37:03,239 Speaker 2: current administration impacted the adoption of a. 731 00:37:04,880 --> 00:37:08,640 Speaker 4: These aviation fuels. Yes, you can't talk about aviation feel 732 00:37:08,640 --> 00:37:13,239 Speaker 4: without talking about policy. This current administration, aviation feel is 733 00:37:13,280 --> 00:37:15,800 Speaker 4: something that they've permitted. They've allowed policies. There was a 734 00:37:15,880 --> 00:37:19,239 Speaker 4: tax incentive and the Inflation Reduction Act to continue. They've 735 00:37:19,280 --> 00:37:21,319 Speaker 4: done a few tweaks though that really changed the game 736 00:37:21,360 --> 00:37:24,960 Speaker 4: for the industry. The first is that they are really 737 00:37:25,080 --> 00:37:30,960 Speaker 4: promoting domestic production ahead of decarbonization, so things like US 738 00:37:31,040 --> 00:37:35,480 Speaker 4: crops now fare better relatively than say imported use cooking oil, 739 00:37:37,520 --> 00:37:39,960 Speaker 4: the other challenges. They've sort of shifted the incentives a bit, 740 00:37:40,000 --> 00:37:41,960 Speaker 4: so now it's a lot cheaper to produce the counterpart, 741 00:37:42,000 --> 00:37:44,719 Speaker 4: which is road field renewable diesel for trucking, than it 742 00:37:44,800 --> 00:37:47,240 Speaker 4: is for stable aviation field. They're produced in the same method. 743 00:37:47,719 --> 00:37:49,960 Speaker 4: It's a taed costlier to make jet fuel over diesel, 744 00:37:50,120 --> 00:37:53,000 Speaker 4: just by the mechanics of how to produce. So the 745 00:37:53,200 --> 00:37:55,480 Speaker 4: Inflation Reduction Act offered more of a tax credit for 746 00:37:55,560 --> 00:37:57,600 Speaker 4: jet fuel, making the economics kind of more on par. 747 00:37:58,200 --> 00:38:00,320 Speaker 4: They've sort of reduced that leg up, so we expect 748 00:38:00,480 --> 00:38:03,120 Speaker 4: more diesel less jet fuel in the coming years. 749 00:38:03,680 --> 00:38:06,360 Speaker 2: Our thanks to Anna Davies BNEF, head of Renewable Fuels. 750 00:38:06,560 --> 00:38:09,239 Speaker 2: That's this week's edition of Bloomberg Intelligence on Bloomberg Radio, 751 00:38:09,360 --> 00:38:11,800 Speaker 2: providing in depth research and data on two thousand companies 752 00:38:11,800 --> 00:38:13,080 Speaker 2: and one hundred and thirty industries. 753 00:38:13,200 --> 00:38:15,840 Speaker 5: And remember you can access Bloomberg Intelligence via bi Go 754 00:38:16,040 --> 00:38:16,800 Speaker 5: on the terminal. 755 00:38:16,840 --> 00:38:19,239 Speaker 2: I'm Lisa Matteo and I'm Paul Sweeney. Stay with us. 756 00:38:19,239 --> 00:38:21,680 Speaker 2: Today's top stories and global business headlines are coming up 757 00:38:22,000 --> 00:38:22,359 Speaker 2: right now