1
00:00:02,720 --> 00:00:10,559
Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

2
00:00:10,600 --> 00:00:14,560
Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am

3
00:00:14,600 --> 00:00:17,880
Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg

4
00:00:17,920 --> 00:00:21,040
Speaker 1: Business App. Listen on demand wherever you get your podcasts,

5
00:00:21,360 --> 00:00:23,520
Speaker 1: or watch us live on YouTube.

6
00:00:23,920 --> 00:00:27,280
Speaker 2: I'm looking at Tarja Target report at earnings, strongest sales

7
00:00:27,280 --> 00:00:29,640
Speaker 2: gaining years, but they're a little cautionary. I think in

8
00:00:29,640 --> 00:00:32,000
Speaker 2: their guide it's here the stocks down six percent here today,

9
00:00:32,000 --> 00:00:34,319
Speaker 2: although it's up twenty two percent year to date. Chen

10
00:00:34,360 --> 00:00:37,360
Speaker 2: Bartash as she covers this part of the retail space

11
00:00:37,360 --> 00:00:41,599
Speaker 2: for Bloomberg Intelligence, She joins us from the BI offices

12
00:00:41,680 --> 00:00:44,479
Speaker 2: in Princeton, New Jersey. Jen talk to us about Target.

13
00:00:44,520 --> 00:00:46,199
Speaker 2: What did they report? What's their outlook?

14
00:00:47,240 --> 00:00:50,280
Speaker 3: Yeah, hi, Paul, So, Target had a really good first quarter,

15
00:00:50,600 --> 00:00:53,400
Speaker 3: much better than most people expected. And I think that

16
00:00:53,440 --> 00:00:55,560
Speaker 3: it really is a reflection that some of the tactics

17
00:00:55,560 --> 00:00:58,360
Speaker 3: they're putting in place as part of their turnaround are

18
00:00:58,400 --> 00:01:01,760
Speaker 3: taking hold and that consumer are responding. But as you

19
00:01:01,920 --> 00:01:04,840
Speaker 3: kind of sort of implied in your introduction, they really

20
00:01:04,840 --> 00:01:07,760
Speaker 3: didn't nudge much in with regards to their guidance in

21
00:01:07,760 --> 00:01:10,720
Speaker 3: response to a strong fiscal first quarter, and so I

22
00:01:10,720 --> 00:01:12,880
Speaker 3: think people are looking at that as a very conservative

23
00:01:12,920 --> 00:01:14,120
Speaker 3: outlook for the rest of the year.

24
00:01:14,840 --> 00:01:17,480
Speaker 4: The comp sales for the quarter that ended was pretty

25
00:01:17,680 --> 00:01:20,080
Speaker 4: eye opening, up five point six percent. That was the

26
00:01:20,120 --> 00:01:22,680
Speaker 4: biggest increase since the end of twenty twenty one, and

27
00:01:22,800 --> 00:01:25,840
Speaker 4: also three times the average anaal assessment. Is this more

28
00:01:25,959 --> 00:01:27,880
Speaker 4: than just easy comparisons?

29
00:01:28,720 --> 00:01:31,680
Speaker 3: Well, in part, Scarlett, it's easy comparisons, but we also

30
00:01:31,840 --> 00:01:35,319
Speaker 3: had other things like the tax refund season. There were

31
00:01:35,360 --> 00:01:37,920
Speaker 3: some good tax refunds out there that people were spending.

32
00:01:38,560 --> 00:01:41,080
Speaker 3: There were a few of those sort of tailwinds, and

33
00:01:41,120 --> 00:01:44,600
Speaker 3: so when you strip that out, it's really about, you know,

34
00:01:45,080 --> 00:01:48,480
Speaker 3: how much of this is sustainable going forward? And because

35
00:01:48,520 --> 00:01:51,320
Speaker 3: the company didn't really adjust much of their guidance for

36
00:01:51,400 --> 00:01:54,280
Speaker 3: the balance of the year, it really implies that that

37
00:01:54,400 --> 00:01:56,560
Speaker 3: pace of same store sales is going to drop way

38
00:01:56,600 --> 00:01:59,680
Speaker 3: off starting in second quarter. Still positive, but in the

39
00:01:59,840 --> 00:02:01,480
Speaker 3: very a very low single digit range.

40
00:02:01,600 --> 00:02:01,880
Speaker 5: Right.

41
00:02:02,080 --> 00:02:04,760
Speaker 4: Could this be a case of target managing expectations to

42
00:02:04,840 --> 00:02:08,280
Speaker 4: lower the bars so much that it becomes an easy

43
00:02:08,280 --> 00:02:08,960
Speaker 4: beat later on.

44
00:02:10,360 --> 00:02:14,200
Speaker 3: I think that it's not necessarily trying to really like

45
00:02:14,400 --> 00:02:17,320
Speaker 3: under underestimate, but I think there is a level of

46
00:02:17,440 --> 00:02:21,040
Speaker 3: conservatism there, and that's just really based out of the

47
00:02:21,360 --> 00:02:24,560
Speaker 3: track record that they've had. When they go too soon

48
00:02:24,720 --> 00:02:27,400
Speaker 3: and raising guidance, they get held with their feet to

49
00:02:27,440 --> 00:02:30,160
Speaker 3: the fire, and then if they for some reason don't

50
00:02:30,200 --> 00:02:33,600
Speaker 3: meet that, the stock gets hit even harder. And so

51
00:02:33,680 --> 00:02:35,639
Speaker 3: I think that there's that level of prudence in there

52
00:02:35,680 --> 00:02:38,240
Speaker 3: of saying it's only one quarter, there's four quarters in

53
00:02:38,280 --> 00:02:40,679
Speaker 3: a year, three more to go. You know, let's let's

54
00:02:40,800 --> 00:02:41,640
Speaker 3: let's see where we go.

55
00:02:41,760 --> 00:02:41,840
Speaker 6: Now.

56
00:02:41,880 --> 00:02:43,480
Speaker 3: If we get to second quarter and they have strong

57
00:02:43,520 --> 00:02:45,880
Speaker 3: results and they don't make an adjustment, then I would

58
00:02:45,919 --> 00:02:49,120
Speaker 3: say that they're definitely sort of under under promising so

59
00:02:49,160 --> 00:02:49,959
Speaker 3: they can over deliver.

60
00:02:50,960 --> 00:02:54,400
Speaker 2: Talk to us about this the turnaround. What is Target

61
00:02:54,440 --> 00:02:57,520
Speaker 2: trying to do and are they making any headway there?

62
00:02:58,280 --> 00:03:02,040
Speaker 3: Yeah, so you know a lot of the issues with Target,

63
00:03:02,440 --> 00:03:05,880
Speaker 3: they sort of lost their way with what they used

64
00:03:05,919 --> 00:03:08,640
Speaker 3: to deliver in that sense of like targe and the

65
00:03:08,760 --> 00:03:11,560
Speaker 3: joy and the discovery, and so they're going back into

66
00:03:11,720 --> 00:03:15,359
Speaker 3: sort of key topics and key categories where they think

67
00:03:15,400 --> 00:03:19,360
Speaker 3: that they can be differentiated, so things like baby, things

68
00:03:19,400 --> 00:03:22,880
Speaker 3: like beauty, areas of health and wellness where they think

69
00:03:22,919 --> 00:03:25,800
Speaker 3: that they can have a competitive advantage and bring people

70
00:03:25,880 --> 00:03:28,880
Speaker 3: back into stores. So they've been changing their assortment, changing

71
00:03:28,880 --> 00:03:31,000
Speaker 3: what's in the stores. And at the same time, I

72
00:03:31,000 --> 00:03:34,320
Speaker 3: think what's maybe underappreciated is the amount of work they've

73
00:03:34,360 --> 00:03:37,680
Speaker 3: done with their back house operations in terms of supply

74
00:03:37,800 --> 00:03:41,200
Speaker 3: chain to really improve availability of products in the stores.

75
00:03:41,880 --> 00:03:44,600
Speaker 3: There's nothing more worse than a bad experience when you

76
00:03:44,640 --> 00:03:46,880
Speaker 3: go in looking for something and it just isn't even there.

77
00:03:47,560 --> 00:03:50,240
Speaker 3: So those are the kinds of like small winds that

78
00:03:50,320 --> 00:03:52,880
Speaker 3: Target is starting to see that it's helping to build

79
00:03:52,920 --> 00:03:54,000
Speaker 3: a little bit of momentum.

80
00:03:54,360 --> 00:03:57,120
Speaker 4: Yeah, the comparison between Target and Walmart always seem to

81
00:03:57,120 --> 00:04:01,000
Speaker 4: be that Target appealed to the aspirational shopper in a

82
00:04:01,040 --> 00:04:04,880
Speaker 4: way that Walmart hadn't quite mastered. Have those roles reversed,

83
00:04:04,880 --> 00:04:07,080
Speaker 4: I mean Walmart, we keep hearing about how there's a

84
00:04:07,120 --> 00:04:09,000
Speaker 4: lot of customers trading down to Walmart.

85
00:04:09,040 --> 00:04:12,800
Speaker 3: Now, Yeah, I would say Walmart has definitely invested in

86
00:04:12,880 --> 00:04:16,240
Speaker 3: recent years in categories where Target had always been a leader.

87
00:04:16,800 --> 00:04:19,760
Speaker 3: Apparel is a really good example of that. So, you know,

88
00:04:19,839 --> 00:04:22,720
Speaker 3: Walmart has gone from being content of just being a

89
00:04:22,800 --> 00:04:25,400
Speaker 3: fashion basics where you go to buy your socks in

90
00:04:25,440 --> 00:04:28,200
Speaker 3: your underwear to being a little bit more fashion forward,

91
00:04:28,640 --> 00:04:32,640
Speaker 3: and they have seen their apparel sales improving, So there's

92
00:04:32,760 --> 00:04:35,800
Speaker 3: definitely more competition for target in areas where they used

93
00:04:35,839 --> 00:04:39,520
Speaker 3: to have a historical advantage. But we'll see whether this

94
00:04:39,680 --> 00:04:43,120
Speaker 3: new refresh is going to be enough to overcome anything

95
00:04:43,160 --> 00:04:43,839
Speaker 3: that they've lost.

96
00:04:44,600 --> 00:04:47,400
Speaker 2: Jen, you talked to a lot of these retail companies.

97
00:04:47,600 --> 00:04:50,760
Speaker 2: What are they saying about the inflation we're seeing out

98
00:04:50,760 --> 00:04:53,000
Speaker 2: there in the economy, particularly at the gas pump.

99
00:04:54,240 --> 00:04:57,160
Speaker 3: Yeah, it's a great question, Paul, And you know, there

100
00:04:57,160 --> 00:04:59,400
Speaker 3: are some reports out there that say that we haven't

101
00:04:59,400 --> 00:05:03,279
Speaker 3: seen consumers have a huge reaction yet to the higher

102
00:05:03,320 --> 00:05:06,960
Speaker 3: gas prices. When we look back historically, it's usually when

103
00:05:06,960 --> 00:05:09,320
Speaker 3: gas prices are at a high level for a sustained

104
00:05:09,320 --> 00:05:12,440
Speaker 3: period of time that you start to see consumer behavior shift,

105
00:05:12,760 --> 00:05:16,200
Speaker 3: and that shift really takes place into going fewer stops,

106
00:05:16,320 --> 00:05:20,320
Speaker 3: fewer retailers, maximizing your trips, that sort of thing. It's

107
00:05:20,320 --> 00:05:22,599
Speaker 3: still a little early to see that much of a

108
00:05:22,640 --> 00:05:26,520
Speaker 3: consumer reaction to high gas prices, which is why we

109
00:05:26,600 --> 00:05:29,560
Speaker 3: haven't really seen that flow through in results yet. But

110
00:05:29,720 --> 00:05:32,640
Speaker 3: the longer gas prices stay higher, the more that actually

111
00:05:32,680 --> 00:05:35,320
Speaker 3: is an advantage to companies like Walmart and Target that

112
00:05:35,440 --> 00:05:38,039
Speaker 3: have that broad assortment where people can make one stop

113
00:05:38,240 --> 00:05:39,760
Speaker 3: and shop in multiple categories.

114
00:05:40,839 --> 00:05:43,720
Speaker 4: Stay with us more from Bloomberg Intelligence coming up after this.

115
00:05:47,400 --> 00:05:51,080
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

116
00:05:51,160 --> 00:05:54,279
Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

117
00:05:54,279 --> 00:05:57,599
Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever

118
00:05:57,640 --> 00:06:00,760
Speaker 1: you get your podcasts, or watch us live on YouTube.

119
00:06:01,560 --> 00:06:04,640
Speaker 4: Let's talk about TJX, the owner of tj max and

120
00:06:04,960 --> 00:06:07,760
Speaker 4: in the UK, I think it's tkmax. Yeah, I don't

121
00:06:07,760 --> 00:06:10,039
Speaker 4: know why they changed a letter there, but Barry Ross

122
00:06:10,040 --> 00:06:12,920
Speaker 4: Gilbert Polly knows. She is our senior equity analyst covering

123
00:06:13,000 --> 00:06:17,280
Speaker 4: retail and TJX this morning came out with good earnings,

124
00:06:18,440 --> 00:06:22,800
Speaker 4: hiking its sales outlook a real contrast to Target. But Mary,

125
00:06:23,160 --> 00:06:26,840
Speaker 4: this is a very different company because this is a

126
00:06:27,000 --> 00:06:29,440
Speaker 4: off price retailer as opposed to Target, which has its

127
00:06:29,480 --> 00:06:32,200
Speaker 4: own brands and doesn't claim to be off price.

128
00:06:33,800 --> 00:06:37,680
Speaker 7: That's exactly right, Scarlett. Really, the big difference here also

129
00:06:37,880 --> 00:06:43,200
Speaker 7: is on the execution side. TJX is known for executing seamlessly,

130
00:06:43,760 --> 00:06:47,120
Speaker 7: so they also guide conservatively, and you expect them to

131
00:06:47,160 --> 00:06:51,159
Speaker 7: beat every time, and they also surpass analyst estimates because

132
00:06:51,160 --> 00:06:54,800
Speaker 7: analyst estimates are usually a tad above the guidance that

133
00:06:54,839 --> 00:06:57,240
Speaker 7: the company provides. So, yeah, there was a lot of

134
00:06:57,240 --> 00:07:01,279
Speaker 7: strength in the quarter, and I think both TJX and

135
00:07:01,440 --> 00:07:06,200
Speaker 7: also Target benefited from higher tax refunds in the quarter.

136
00:07:06,760 --> 00:07:10,880
Speaker 7: And it does appear that Target is improving their execution,

137
00:07:11,040 --> 00:07:15,480
Speaker 7: but they're also cycling a three year stacked comp sales

138
00:07:15,480 --> 00:07:20,920
Speaker 7: decline of seven point four percent, whereas TJX is cycling

139
00:07:20,960 --> 00:07:26,520
Speaker 7: a three year stacked comp sales increase of over nine percent. Again,

140
00:07:26,600 --> 00:07:30,600
Speaker 7: the difference in the execution and the appeal of off

141
00:07:30,680 --> 00:07:34,040
Speaker 7: price and especially now that consumers are having to cope

142
00:07:34,040 --> 00:07:39,000
Speaker 7: with higher gas prices, and then as earlier in your

143
00:07:39,320 --> 00:07:43,520
Speaker 7: just recent broadcast there you were talking about how the

144
00:07:43,560 --> 00:07:48,960
Speaker 7: implications for that are raising costs of some products, and also,

145
00:07:49,240 --> 00:07:51,280
Speaker 7: you know, we could get freight right now, we're not

146
00:07:51,320 --> 00:07:53,640
Speaker 7: seeing that because there's been some hedging in place. For

147
00:07:53,720 --> 00:07:56,840
Speaker 7: example with Target, that was one of the benefits in

148
00:07:56,880 --> 00:08:00,600
Speaker 7: their margin in the quarter was on the front side

149
00:08:00,880 --> 00:08:01,600
Speaker 7: freight hedging.

150
00:08:02,200 --> 00:08:04,720
Speaker 4: Mary, is there anything that TJX isn't doing well? You

151
00:08:04,760 --> 00:08:07,200
Speaker 4: mentioned execution has been flawless, but that's kind of what

152
00:08:07,240 --> 00:08:10,200
Speaker 4: investors expect from this company. What could it be doing better?

153
00:08:10,280 --> 00:08:12,840
Speaker 4: Where is it perhaps leaving money on the table.

154
00:08:14,240 --> 00:08:18,240
Speaker 7: Yeah, that's a good question, Scarlett. It seems I can't

155
00:08:18,360 --> 00:08:20,960
Speaker 7: see where they're really leaving money on the table at

156
00:08:20,960 --> 00:08:25,480
Speaker 7: this juncture. And if anything, what we continue to see

157
00:08:25,600 --> 00:08:29,800
Speaker 7: every single quarter is the availability of excess merchandise. And

158
00:08:29,840 --> 00:08:34,079
Speaker 7: this is across brands that spend you know, that span

159
00:08:34,240 --> 00:08:38,079
Speaker 7: the appeal from consumers at the very low end to

160
00:08:38,480 --> 00:08:42,079
Speaker 7: consumers at the very high end. So we're continuing to

161
00:08:42,120 --> 00:08:46,120
Speaker 7: see a lot more luxury merchandise. It looked like in

162
00:08:46,160 --> 00:08:49,840
Speaker 7: some of these shopping halls that we're posted there's a

163
00:08:49,880 --> 00:08:55,440
Speaker 7: lot of product from Saline, Gucci, Ive Song Luran. I mean,

164
00:08:55,960 --> 00:08:59,719
Speaker 7: it's amazing how much out there in luxury. And we're

165
00:08:59,760 --> 00:09:03,440
Speaker 7: seeing that luxury is off right now and so now

166
00:09:03,520 --> 00:09:06,360
Speaker 7: you can get it at discounted prices in the off

167
00:09:06,400 --> 00:09:09,600
Speaker 7: price channel, at least with TJX and their runway model.

168
00:09:11,160 --> 00:09:14,160
Speaker 2: What's the growth strategy for a company like TJX. Is

169
00:09:14,160 --> 00:09:19,080
Speaker 2: it more stores, is it driving digital growth? Is it

170
00:09:19,160 --> 00:09:21,680
Speaker 2: raising average selling price? What's kind of the growth story

171
00:09:21,720 --> 00:09:22,760
Speaker 2: for a company like TGX.

172
00:09:24,520 --> 00:09:27,920
Speaker 7: Yeah, so Paul, that's a good question for them. It's

173
00:09:28,000 --> 00:09:31,320
Speaker 7: really continuing to expand, so that is opening up new stores,

174
00:09:31,360 --> 00:09:34,400
Speaker 7: and they are opening up more newer stores this year.

175
00:09:34,520 --> 00:09:37,480
Speaker 7: I think they have on target over one hundred. But

176
00:09:37,559 --> 00:09:40,480
Speaker 7: they're also expanding internationally, which is why they have these

177
00:09:40,559 --> 00:09:43,840
Speaker 7: joint ventures in the Middle East, and they just entered

178
00:09:43,960 --> 00:09:48,240
Speaker 7: Spain this year, so that's a new market for them.

179
00:09:48,640 --> 00:09:52,640
Speaker 7: And then of course they also have an investment in Mexico.

180
00:09:53,160 --> 00:09:58,119
Speaker 7: So they're sticking with the off price channel but expanding

181
00:09:58,160 --> 00:10:00,480
Speaker 7: around the globe. And part of the the reason why

182
00:10:00,520 --> 00:10:04,280
Speaker 7: they're doing that is because they have seasoned executives that

183
00:10:04,400 --> 00:10:06,920
Speaker 7: want to take on more responsibility and this is a

184
00:10:06,960 --> 00:10:10,000
Speaker 7: way to do it. So they continue to see a

185
00:10:10,080 --> 00:10:15,240
Speaker 7: long runway, not only in North America. For example, they're

186
00:10:15,320 --> 00:10:22,360
Speaker 7: expecting to open somewhere around I think it's like seven

187
00:10:22,440 --> 00:10:26,120
Speaker 7: thousand stores, so they still have about seventeen hundred and

188
00:10:26,160 --> 00:10:29,600
Speaker 7: thirty eight to go, so they have a big runway still.

189
00:10:29,800 --> 00:10:33,160
Speaker 7: Okay that and by the way, they keep moving that

190
00:10:33,320 --> 00:10:36,720
Speaker 7: target right as they see more and more opportunities.

191
00:10:37,440 --> 00:10:40,560
Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.

192
00:10:44,440 --> 00:10:48,120
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

193
00:10:48,200 --> 00:10:51,280
Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

194
00:10:51,320 --> 00:10:54,640
Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever

195
00:10:54,679 --> 00:10:58,200
Speaker 1: you get your podcasts, or watch us live on YouTube.

196
00:10:58,520 --> 00:10:59,040
Speaker 1: All right, boks.

197
00:10:59,080 --> 00:11:01,480
Speaker 2: Our next segment is is sponsored by John Tucker and

198
00:11:01,520 --> 00:11:04,480
Speaker 2: All to Do with Yourself. People out there Drew reading

199
00:11:04,559 --> 00:11:08,319
Speaker 2: joints the here. Bloomberg Intelligence home building analyst Low's reported

200
00:11:08,320 --> 00:11:11,920
Speaker 2: some numbers there, Drew. Are all these crazy people that

201
00:11:12,000 --> 00:11:14,000
Speaker 2: actually do their work on their own homes? Are they

202
00:11:14,120 --> 00:11:15,000
Speaker 2: still buying stuff?

203
00:11:15,480 --> 00:11:20,440
Speaker 5: It was still largely in inline quarter for Lows zero

204
00:11:20,440 --> 00:11:24,240
Speaker 5: point six percent comp on same store sales. They maintained

205
00:11:24,240 --> 00:11:28,600
Speaker 5: their full year guidance calling for flat to two percent growth,

206
00:11:28,600 --> 00:11:34,520
Speaker 5: which I think was encouraging. So underlying trends in the

207
00:11:34,559 --> 00:11:38,720
Speaker 5: business are relatively stable, but I think that still reflect

208
00:11:38,760 --> 00:11:42,000
Speaker 5: a number of challenges out there, the most important being

209
00:11:42,040 --> 00:11:44,880
Speaker 5: what we're seeing in the housing market. Turnover still we

210
00:11:46,080 --> 00:11:50,400
Speaker 5: about twenty percent below normalized levels. We haven't seen that

211
00:11:50,480 --> 00:11:53,320
Speaker 5: meaningful lift in spring demand that we were hoping for,

212
00:11:54,160 --> 00:11:56,200
Speaker 5: and now we have rates back up to six and

213
00:11:56,200 --> 00:11:58,800
Speaker 5: three quarters percent through on housing at least in the

214
00:11:58,800 --> 00:12:02,160
Speaker 5: near term. At the same time, we've got consumer uncertainty,

215
00:12:03,040 --> 00:12:05,760
Speaker 5: you know, whether people are concerned about the outlook for

216
00:12:05,800 --> 00:12:08,199
Speaker 5: economic growth, the outlook for employment. Now we have these

217
00:12:08,240 --> 00:12:11,400
Speaker 5: geopolitical tensions, so all these are kind of of weighing

218
00:12:11,720 --> 00:12:14,440
Speaker 5: on that DIY consumer And where we're seeing it most

219
00:12:14,440 --> 00:12:17,800
Speaker 5: importantly is in a pullback and spending in those bigger

220
00:12:17,800 --> 00:12:19,520
Speaker 5: ticket discretionary categories.

221
00:12:20,480 --> 00:12:22,959
Speaker 4: So for companies like Lows and Home Depot, they kind

222
00:12:22,960 --> 00:12:24,480
Speaker 4: of have to wait out this cycle. They have to

223
00:12:24,520 --> 00:12:27,200
Speaker 4: wait for things to improve, and that's that's a cyclical

224
00:12:27,440 --> 00:12:31,000
Speaker 4: headwind that they really have no control over. Where they

225
00:12:31,040 --> 00:12:34,520
Speaker 4: do have control over is to create more productivity, create

226
00:12:34,520 --> 00:12:36,960
Speaker 4: more efficiencies. What is Low's doing on that front.

227
00:12:38,840 --> 00:12:41,719
Speaker 5: Yeah, So you make a great point is they really

228
00:12:41,800 --> 00:12:43,920
Speaker 5: can't battle what's happening in the housing market. But what

229
00:12:43,960 --> 00:12:46,840
Speaker 5: they have been doing is investing for when the market

230
00:12:46,840 --> 00:12:49,800
Speaker 5: eventually turns. And where we've seen it from both retailers

231
00:12:49,880 --> 00:12:52,280
Speaker 5: is really on the pro side. So Loads have done

232
00:12:52,360 --> 00:12:55,960
Speaker 5: has done a lot of investments, you know, in crafting

233
00:12:56,040 --> 00:12:59,040
Speaker 5: kind of a portfolio of products that the pros really demand.

234
00:12:59,040 --> 00:13:01,680
Speaker 5: They've worked hard on build holding out a loyalty program.

235
00:13:02,200 --> 00:13:06,120
Speaker 5: They've done two pretty significant acquisitions of LBM and ADG,

236
00:13:06,320 --> 00:13:09,560
Speaker 5: which will give them exposure not only to kind of

237
00:13:09,600 --> 00:13:13,760
Speaker 5: the larger pro where there's somewhat of an untapped addressable

238
00:13:13,800 --> 00:13:16,800
Speaker 5: market for both of those retailers, but it'll also give

239
00:13:16,840 --> 00:13:19,400
Speaker 5: them exposure to the home building space, which is an

240
00:13:19,480 --> 00:13:24,760
Speaker 5: area that they have historically had no exposure. Now, as

241
00:13:24,800 --> 00:13:27,720
Speaker 5: we've discussed before, the new home market is under similar pressure.

242
00:13:27,760 --> 00:13:32,199
Speaker 5: We're seeing housing starts actually contract, But as you mentioned,

243
00:13:32,200 --> 00:13:35,600
Speaker 5: it's really about positioning themselves for the next leg of

244
00:13:35,600 --> 00:13:38,000
Speaker 5: growth when the housing market and the consumer starts to

245
00:13:38,040 --> 00:13:38,480
Speaker 5: come back.

246
00:13:39,600 --> 00:13:43,920
Speaker 2: Existing home sales bumping along around four million per year,

247
00:13:44,000 --> 00:13:46,240
Speaker 2: Where should that number be in a healthy market?

248
00:13:47,360 --> 00:13:49,079
Speaker 5: Yeah, so we've been there for a couple of years.

249
00:13:49,120 --> 00:13:53,160
Speaker 5: We're about twenty percent or so below normalized levels, so

250
00:13:53,200 --> 00:13:56,120
Speaker 5: we should be, you know, somewhere around the five million mark.

251
00:13:57,200 --> 00:13:59,360
Speaker 5: You know. I think the fact that we've been bumping

252
00:13:59,400 --> 00:14:02,559
Speaker 5: along these legs with all of the different challenges that

253
00:14:02,600 --> 00:14:05,439
Speaker 5: we've had, you know, from rates to economic uncertainty to

254
00:14:05,559 --> 00:14:09,199
Speaker 5: gap political uncertainty, tells us that we're at a bottom.

255
00:14:09,480 --> 00:14:11,640
Speaker 5: You know. We think that we can grow existing home

256
00:14:11,679 --> 00:14:15,280
Speaker 5: sales low single digits in twenty twenty six as more

257
00:14:15,320 --> 00:14:18,480
Speaker 5: inventory starts to come onto the market. That's likely to

258
00:14:18,520 --> 00:14:21,000
Speaker 5: come at the expense of home prices, which you know,

259
00:14:21,080 --> 00:14:23,080
Speaker 5: as we know, are up over fifty percent over the

260
00:14:23,200 --> 00:14:26,720
Speaker 5: last several years. So you know, for the home improvement retailers,

261
00:14:26,920 --> 00:14:31,120
Speaker 5: the headwind associated with the existing home market has started

262
00:14:31,160 --> 00:14:34,360
Speaker 5: to fade, but it just hasn't emerged it as a

263
00:14:34,400 --> 00:14:35,520
Speaker 5: catalyst for growth.

264
00:14:36,280 --> 00:14:39,440
Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.

265
00:14:43,320 --> 00:14:47,040
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

266
00:14:47,120 --> 00:14:50,160
Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

267
00:14:50,200 --> 00:14:53,520
Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever

268
00:14:53,560 --> 00:14:56,680
Speaker 1: you get your podcasts, or watch us live on YouTube.

269
00:14:57,600 --> 00:15:02,120
Speaker 4: We are an AI obsessed market in every way, whether

270
00:15:02,240 --> 00:15:05,000
Speaker 4: it's talking about companies that are making some changes to

271
00:15:05,160 --> 00:15:09,120
Speaker 4: staffing because of spending due to AI, or awaiting in

272
00:15:09,200 --> 00:15:13,840
Speaker 4: videos results, or watching a legal case involving open AI

273
00:15:14,080 --> 00:15:16,360
Speaker 4: and Elon Musk. And it's really that one that I

274
00:15:16,400 --> 00:15:19,480
Speaker 4: want to pick up on because that's been going on

275
00:15:19,520 --> 00:15:20,960
Speaker 4: for a couple of weeks and it's really captured a

276
00:15:21,000 --> 00:15:24,360
Speaker 4: lot of people's attention. La sweeneers two billionaires joking it

277
00:15:24,360 --> 00:15:27,720
Speaker 4: now and it looks like Elon Musk lost, and he

278
00:15:27,760 --> 00:15:29,680
Speaker 4: says he's going to appeal. I want to get a

279
00:15:29,680 --> 00:15:32,960
Speaker 4: better understanding of what this lawsuit means and what it

280
00:15:33,000 --> 00:15:36,040
Speaker 4: allows for Matthew Schttenhelm is our media litigation analyst at

281
00:15:36,080 --> 00:15:39,240
Speaker 4: Bloomberg Intelligence. He is joining us right now from Washington,

282
00:15:39,320 --> 00:15:43,040
Speaker 4: d C. So is it as simple as Matthew Elon

283
00:15:43,120 --> 00:15:45,920
Speaker 4: Musk lost Sam Altman one? So now open ai can

284
00:15:45,960 --> 00:15:46,480
Speaker 4: go public.

285
00:15:48,200 --> 00:15:50,720
Speaker 6: I think that's the big takeaway from this. It's not

286
00:15:50,760 --> 00:15:54,680
Speaker 6: completely over yet. As you said, Elon Musk has vowed

287
00:15:54,760 --> 00:16:00,560
Speaker 6: to appeal this decision on Monday, but at this stage

288
00:16:00,640 --> 00:16:04,360
Speaker 6: things are looking much better for open Ai. This was

289
00:16:04,400 --> 00:16:08,080
Speaker 6: a pretty serious case that because it had advanced this far,

290
00:16:08,240 --> 00:16:12,040
Speaker 6: the judge had led it clear motion to dismiss a

291
00:16:12,080 --> 00:16:14,600
Speaker 6: motion for summary judgment, let it go all the way

292
00:16:14,640 --> 00:16:20,200
Speaker 6: to trial. And Musk was seeking pretty severe remedies against

293
00:16:20,240 --> 00:16:23,720
Speaker 6: open Ai, not just over one hundred billion dollars in

294
00:16:23,800 --> 00:16:29,320
Speaker 6: potential damages, but limits on the company's ability to seek

295
00:16:29,360 --> 00:16:34,280
Speaker 6: private investor returns. Musk wanted the company to be limited

296
00:16:34,320 --> 00:16:37,320
Speaker 6: to serve the good of the world first and foremost,

297
00:16:37,360 --> 00:16:41,520
Speaker 6: and effectively that would cap private investor returns. Doesn't really

298
00:16:41,560 --> 00:16:45,760
Speaker 6: work for an AI company. So Musk losing this with

299
00:16:45,840 --> 00:16:49,040
Speaker 6: this jury decision that the judge adopted on Monday is

300
00:16:49,440 --> 00:16:53,000
Speaker 6: a big step forward for Open Ai in avoiding this overhang.

301
00:16:53,880 --> 00:16:56,960
Speaker 2: Elon, Musk says he's going to appeal. I know you

302
00:16:57,000 --> 00:17:00,080
Speaker 2: have opinions on how successful appeals may be. What do

303
00:17:00,120 --> 00:17:00,800
Speaker 2: you think in this case?

304
00:17:01,880 --> 00:17:03,720
Speaker 6: Yeah, so I think it's going to be an uphill

305
00:17:03,800 --> 00:17:07,959
Speaker 6: battle for Musk. At this point, most appeals fail, and

306
00:17:08,040 --> 00:17:10,280
Speaker 6: here this appeal would go to the Ninth Circuit Court

307
00:17:10,320 --> 00:17:14,240
Speaker 6: of Appeals and Musk would be limited to arguing that

308
00:17:14,720 --> 00:17:17,119
Speaker 6: the jury and then the judge got it wrong on

309
00:17:17,160 --> 00:17:20,919
Speaker 6: the statute of limitations. The jury said Musk filed this

310
00:17:21,040 --> 00:17:23,639
Speaker 6: suit too late, and there's a three year statute of

311
00:17:23,680 --> 00:17:28,359
Speaker 6: limitations for breach of charitable trust claims. Typically, appeals courts

312
00:17:28,400 --> 00:17:31,880
Speaker 6: look at legal questions. Was the judge right on that

313
00:17:32,000 --> 00:17:36,400
Speaker 6: three year test? As being the controlling law Where appeals

314
00:17:36,400 --> 00:17:40,119
Speaker 6: courts have trouble and have limited ability to intervene is

315
00:17:40,240 --> 00:17:44,200
Speaker 6: factual questions, And here a jury took up the factual

316
00:17:44,280 --> 00:17:47,520
Speaker 6: questions of what did Musk know and when did he

317
00:17:47,600 --> 00:17:50,880
Speaker 6: know it? And getting into the nitty gritty of that,

318
00:17:51,440 --> 00:17:55,080
Speaker 6: their conclusion that he should have sued earlier because he

319
00:17:55,160 --> 00:17:59,159
Speaker 6: knew about any alleged wrongdoing earlier. That's going to be

320
00:17:59,160 --> 00:18:02,080
Speaker 6: a tough thing for or three appellate judges to to

321
00:18:02,240 --> 00:18:05,480
Speaker 6: second guests because they tend to deffer on factual questions.

322
00:18:05,560 --> 00:18:08,520
Speaker 6: So I would think Muskt is a pretty significant underdog

323
00:18:09,000 --> 00:18:10,600
Speaker 6: as this case goes to appeal.

324
00:18:11,040 --> 00:18:13,720
Speaker 4: So what did Elon Musk get out of this trial

325
00:18:13,920 --> 00:18:14,399
Speaker 4: this case?

326
00:18:16,240 --> 00:18:20,560
Speaker 6: Well, I mean, anyway, he put a lot of pressure

327
00:18:20,720 --> 00:18:23,960
Speaker 6: on open AI. I think some have argued that that

328
00:18:24,040 --> 00:18:29,600
Speaker 6: Sam Altman, he had a very difficult cross examination, and

329
00:18:29,600 --> 00:18:34,680
Speaker 6: and maybe there were questions raised about his his truthfulness.

330
00:18:34,760 --> 00:18:37,560
Speaker 6: Some some may view and and some some may suggest

331
00:18:37,680 --> 00:18:41,040
Speaker 6: may maybe open AI isn't as pleasing a place for

332
00:18:41,160 --> 00:18:44,560
Speaker 6: investment going forward based on that leadership. I think this

333
00:18:44,800 --> 00:18:50,080
Speaker 6: was was certainly motivated, arguably by Musk's desire to compete

334
00:18:50,119 --> 00:18:53,000
Speaker 6: with this company since he's no longer tied to it.

335
00:18:53,440 --> 00:18:56,000
Speaker 6: And and you could you could argue that maybe this

336
00:18:56,200 --> 00:18:58,639
Speaker 6: you know passed some dirt at the company in a

337
00:18:58,680 --> 00:19:01,400
Speaker 6: way that that that you know may may have set

338
00:19:01,440 --> 00:19:04,960
Speaker 6: it back slightly, but I more likely than that. I

339
00:19:05,000 --> 00:19:08,320
Speaker 6: think Musk losing this case is the big takeaway I

340
00:19:08,320 --> 00:19:11,040
Speaker 6: think that's a big win for open ai, and unless

341
00:19:11,040 --> 00:19:13,439
Speaker 6: he can overturn that, I think open Ai moves ahead,

342
00:19:14,080 --> 00:19:15,800
Speaker 6: and I don't think Must gets all that much at

343
00:19:15,840 --> 00:19:16,480
Speaker 6: the end of the day.

344
00:19:17,119 --> 00:19:19,960
Speaker 2: So at the heart of this, though, was whether open

345
00:19:20,000 --> 00:19:23,639
Speaker 2: ai should be, I guess, a kind of for the

346
00:19:23,640 --> 00:19:27,200
Speaker 2: public trust or is it a profit making institution. Where

347
00:19:27,240 --> 00:19:30,280
Speaker 2: does that whole concept standout whole argument because again that

348
00:19:30,359 --> 00:19:34,119
Speaker 2: we may see I tried to go public here exactly.

349
00:19:34,280 --> 00:19:37,480
Speaker 6: So the argument was was a very unique one that

350
00:19:38,320 --> 00:19:40,920
Speaker 6: this was a breach of a charitable trust, that open

351
00:19:40,960 --> 00:19:45,360
Speaker 6: ai basically created a charitable trust when it started as

352
00:19:45,359 --> 00:19:50,000
Speaker 6: a nonprofit seeking to benefit the world, and Musk's claim

353
00:19:50,280 --> 00:19:55,320
Speaker 6: was that by moving to a for profit model that

354
00:19:55,480 --> 00:19:59,480
Speaker 6: breached that charitable trust and that open Ai couldn't move

355
00:19:59,520 --> 00:20:03,080
Speaker 6: ahead to you seek private investor returns because of how

356
00:20:03,119 --> 00:20:06,480
Speaker 6: it started up. What Musk never really had, though, was

357
00:20:06,520 --> 00:20:10,119
Speaker 6: any sort of written documentation. There's no trust agreement that

358
00:20:10,800 --> 00:20:13,520
Speaker 6: says that. What there was was sort of piece together

359
00:20:13,680 --> 00:20:17,960
Speaker 6: conversations and corporate filings and things like that to try

360
00:20:18,000 --> 00:20:20,920
Speaker 6: to make that argument. So it was never a real

361
00:20:21,080 --> 00:20:24,560
Speaker 6: air type case on Musk's part. And so what this

362
00:20:24,680 --> 00:20:27,800
Speaker 6: freeze OpenAI to do is to go ahead to have

363
00:20:27,920 --> 00:20:31,159
Speaker 6: a for profit component. It still has the charity, it

364
00:20:31,240 --> 00:20:34,000
Speaker 6: still has been not for profit, but it also has

365
00:20:34,040 --> 00:20:37,479
Speaker 6: a secondary piece, the for profit model, which fuels the

366
00:20:37,520 --> 00:20:40,399
Speaker 6: business brings in the money needed for an AI company

367
00:20:40,480 --> 00:20:43,840
Speaker 6: to work. And so now that business model can proceed

368
00:20:43,960 --> 00:20:46,320
Speaker 6: full speed ahead with this case out of the way.

369
00:20:47,240 --> 00:20:51,959
Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,

370
00:20:52,119 --> 00:20:55,600
Speaker 1: and anywhere else you get your podcasts. Listen live each

371
00:20:55,640 --> 00:20:59,400
Speaker 1: weekday ten am to noon Eastern on Bloomberg dot com,

372
00:20:59,520 --> 00:21:03,040
Speaker 1: the iHeart Radio app, tune In, and the Bloomberg Business app.

373
00:21:03,480 --> 00:21:06,360
Speaker 1: You can also watch us live every weekday on YouTube

374
00:21:06,800 --> 00:21:09,040
Speaker 1: and always on the Bloomberg terminal