WEBVTT - BI Weekend: Novo Pill, Retail Earnings, Restaurant Sales 0:00:00.280 --> 0:00:11.440 Bloomberg Audio, Studios, podcasts, radio news. This is Bloomberg Intelligence 0:00:11.520 --> 0:00:13.600 with Scarletfoo and Paul Sweeney. 0:00:13.680 --> 0:00:15.760 How do you think the FED is looking at tariffs? 0:00:15.960 --> 0:00:17.120 The uncertainty of terriffs. 0:00:17.239 --> 0:00:20.080 Let's take a look at the sectors and how they performed. 0:00:19.720 --> 0:00:22.200 A lot of investors getting whipsaled every day by news. 0:00:22.079 --> 0:00:26.120 Events, breaking market headlines, and corporate news from across the globe. 0:00:26.239 --> 0:00:28.760 Could we see a market disruption of market event? 0:00:28.920 --> 0:00:30.960 So people just too exuberant out there? 0:00:31.080 --> 0:00:33.640 You see some so called low quality stocks driving this 0:00:33.720 --> 0:00:34.480 short term rally. 0:00:34.520 --> 0:00:39.320 Bloomberg Intelligence with Scarletfoo and Paul Sweeney on Bloomberg Radio, 0:00:39.479 --> 0:00:41.400 YouTube and Bloomberg Originals. 0:00:42.600 --> 0:00:44.879 On today's Bloomberg Intelligence Show, we dig inside the big 0:00:44.880 --> 0:00:47.199 business story is impacting Wall Street and the global markets. 0:00:47.400 --> 0:00:49.680 Each and every week we provide in depth research and 0:00:49.760 --> 0:00:51.599 data on some of the two thousand companies and one 0:00:51.680 --> 0:00:54.440 hundred and thirty industries are analysts cover worldwide Today? 0:00:54.480 --> 0:00:56.400 Well, look at why the retailer coals rates is full 0:00:56.480 --> 0:00:58.280 year outlook for the second straight quarter. 0:00:58.400 --> 0:01:00.720 Plus a look at why travelers may be eyeing similar 0:01:00.720 --> 0:01:02.680 spending for vacations in twenty twenty six. 0:01:02.920 --> 0:01:05.479 First, we move next to some news in the biotech space. 0:01:05.560 --> 0:01:07.440 This week, we heard that a pill version of Danish 0:01:07.480 --> 0:01:10.840 drug maker Novo Nordisk's ozempic failed to slow the progression 0:01:10.840 --> 0:01:12.600 of Alzheimer's in a pair of studies. 0:01:12.800 --> 0:01:15.840 Nova said this was based on a cognitive assessment for 0:01:15.959 --> 0:01:18.240 patients who took the medicine. The drug maker will now 0:01:18.280 --> 0:01:21.080 discontinue a plan one year extension of the studies. 0:01:21.120 --> 0:01:23.759 As a result, Novastock plummeted to its lowest in more 0:01:23.760 --> 0:01:26.920 than four years. We were joined by Sam Fazzelli, Bloomberg Intelligence, 0:01:26.959 --> 0:01:30.119 Director of Research for Global Industries and senior pharmaceuticals analysts. 0:01:30.160 --> 0:01:32.840 We first asked Sam to break down Nova's recent studies. 0:01:33.360 --> 0:01:37.200 Is not about OBCD. It's about a drug, semaglutide in 0:01:37.280 --> 0:01:41.600 a pill form that they've tested in Alzheimer's disease. And 0:01:41.880 --> 0:01:44.640 the theory was, and there was some evidence that people 0:01:44.640 --> 0:01:48.000 who were taking the very first version of the GLP 0:01:48.080 --> 0:01:52.320 one brug so victosa or liro glue tide, they had 0:01:52.360 --> 0:01:56.600 a lower risk of developing Alzheimer's when you looked at 0:01:56.800 --> 0:02:00.840 historic or rect prospective data and there's animal models, et cetera. 0:02:00.920 --> 0:02:03.720 So they thought that it's worth a try and it 0:02:03.720 --> 0:02:07.320 didn't work out. They said that they're seeing some impacts 0:02:07.360 --> 0:02:10.399 in some biomarkers, et cetera. And we'll find out next 0:02:10.440 --> 0:02:14.160 week what biomarkers. But the trial didn't work out. And 0:02:14.560 --> 0:02:17.560 the question here is was the theory wrong or is 0:02:17.600 --> 0:02:20.120 the drug not good enough? Is it pill enough? And 0:02:20.240 --> 0:02:22.839 we know the pill doesn't do as well in obesity 0:02:23.120 --> 0:02:25.760 as the injection. Should they have tested the injection? 0:02:27.080 --> 0:02:29.640 That's a good question. And you mentioned that the ingredient 0:02:29.680 --> 0:02:32.600 here that we're paying attention to is some maglitude, which 0:02:32.680 --> 0:02:35.160 I hope I'm pronouncing correctly there. Does that mean that 0:02:35.200 --> 0:02:37.840 this ingredient and Alzheimer's are just a no go from 0:02:37.880 --> 0:02:39.840 here on out? Or does there need to be more 0:02:39.840 --> 0:02:41.240 testing before we can determine that? 0:02:42.120 --> 0:02:43.880 Yeah, there needs to be more testing, But who's going 0:02:43.919 --> 0:02:47.640 to do that? I mean, having failed, now, who's going 0:02:47.680 --> 0:02:51.160 to put the money into test it? Now? Linly does 0:02:51.240 --> 0:02:55.239 have an Alzheimer's business in a completely different with different 0:02:55.240 --> 0:02:59.040 set of drugs, and they have a more party product 0:02:59.360 --> 0:03:04.440 once weekly with a relatively easily administered pen that would 0:03:04.440 --> 0:03:07.560 be interested to see whether that helps, and you know, 0:03:07.800 --> 0:03:09.560 so that you get more much more drug in the 0:03:09.560 --> 0:03:12.360 body or maybe redesign it a bit. So it really 0:03:12.360 --> 0:03:15.600 does depend on how much appetite for risk these companies have. 0:03:15.919 --> 0:03:19.480 And literally now with just over literally just over trillion 0:03:19.480 --> 0:03:21.640 dollar market cap, maybe they should give it a go. 0:03:22.639 --> 0:03:24.880 You know, it would be magic if this thing, It 0:03:24.919 --> 0:03:27.440 literally would be magic if this thing just helped so 0:03:27.440 --> 0:03:28.560 many different diseases. 0:03:29.280 --> 0:03:31.720 Sam talk to us about just the market for dementia. 0:03:32.480 --> 0:03:34.839 Alzheimer's is one one part of it. I would think 0:03:34.920 --> 0:03:37.839 that's a it's a big market and be it. It's 0:03:37.880 --> 0:03:40.080 got to be a growing market with people living longer. 0:03:40.120 --> 0:03:42.200 How do you guys think about it and and how 0:03:42.200 --> 0:03:42.640 do you play it? 0:03:42.640 --> 0:03:45.960 If you're an investor, Yeah, it's it's it is a 0:03:46.200 --> 0:03:50.400 significant societal issue, number one. And you know, I think 0:03:50.400 --> 0:03:53.880 there are many, not many families who would say that 0:03:53.960 --> 0:03:56.280 they haven't experienced it. They have all the people in 0:03:56.320 --> 0:04:02.600 their in their extended family. So the market has humongous potential. 0:04:02.680 --> 0:04:05.560 But you need drugs that actually treat the disease. Remember, 0:04:05.560 --> 0:04:09.839 by the time you have Alzheimer's, I eat a full 0:04:09.920 --> 0:04:13.520 blown dementia of the Alzheimer's it's a bit late. That 0:04:13.640 --> 0:04:16.240 means that a lot that's already happened, So you need 0:04:16.279 --> 0:04:19.919 to go early, long expensive trials, and Lily is doing 0:04:19.920 --> 0:04:23.000 that with their assets, So fingers crossed, we'll find out 0:04:23.000 --> 0:04:24.560 in the next two or three years where they're going 0:04:24.560 --> 0:04:27.440 early with these assets. Russia is doing it too. It 0:04:27.520 --> 0:04:29.720 would be a beneficial right, I. 0:04:29.680 --> 0:04:32.320 Mean, the tests with the pillar form of ozambic was 0:04:32.320 --> 0:04:34.839 definitely a lottery ticket. If it worked, great, If not, 0:04:34.960 --> 0:04:37.839 we're back to the drawing board. Are there any effective 0:04:37.880 --> 0:04:41.040 treatments right now against dementia or Alzheimer's? 0:04:42.120 --> 0:04:44.840 Well, by effective, I mean it's tough to say, but 0:04:44.920 --> 0:04:48.480 there are drugs that lower this thing that is viewed 0:04:48.520 --> 0:04:53.120 as a critical part of the Alzheimer's disease, which amyloid 0:04:53.160 --> 0:04:57.200 plaques in your brain. If they do lower it, Lily's 0:04:57.200 --> 0:05:00.400 got that drug, Biogen's got an equivalent drug, or she's 0:05:00.400 --> 0:05:05.520 trying a similar approach, and you do slow down the degeneration. 0:05:05.880 --> 0:05:08.160 You don't stop it, you slow it down. So what 0:05:08.200 --> 0:05:11.280 we really want is to stop people getting to that degeneration. 0:05:11.560 --> 0:05:16.120 Try and get them before they have full grown Alzheimer's 0:05:16.240 --> 0:05:19.479 or dementia, so that's called mild cognitive impairerment. Try and 0:05:19.520 --> 0:05:22.320 slow that down to give them another ten, twelve, twenty 0:05:22.400 --> 0:05:24.760 years of dignified life. 0:05:25.839 --> 0:05:28.400 So where do you think we are on a time 0:05:28.440 --> 0:05:32.000 frame for something like that, sam Is that measured in 0:05:32.040 --> 0:05:33.800 a couple of years or more than that? 0:05:34.760 --> 0:05:38.840 Well, so Lily is literally trying that and we'll find 0:05:38.880 --> 0:05:42.320 out whether and they have the better rug in this space. 0:05:42.360 --> 0:05:46.040 So we'll find out whether in the next two or 0:05:46.080 --> 0:05:48.359 three years. Do you remember, these things are trials that 0:05:48.400 --> 0:05:51.520 need to be run until you start seeing a difference. 0:05:52.560 --> 0:05:55.360 They get that to that point, and of course then 0:05:55.520 --> 0:05:57.400 society has to decide, well, how we're going to pay 0:05:57.400 --> 0:06:01.120 for this. How many people because there's a lot our market, right, 0:06:01.560 --> 0:06:04.159 how many people are we going to want to treat 0:06:04.560 --> 0:06:06.800 with the prices of these drugs whatever they are, even 0:06:06.839 --> 0:06:09.520 if it's ten thousand dollars a year, right, and they 0:06:09.520 --> 0:06:12.280 are on their way to becoming worse, and we want 0:06:12.320 --> 0:06:14.960 to slow that down. You have ten million people, I mean, 0:06:15.000 --> 0:06:18.680 this could be similar in terms of value to the 0:06:18.720 --> 0:06:22.039 obesity market. But you need the drug to do that. 0:06:22.240 --> 0:06:25.520 So let's wait and see. And RASH has got a 0:06:25.560 --> 0:06:27.159 new way of trying to do it, and they're going 0:06:27.240 --> 0:06:29.360 to go again and also to phase three to test 0:06:29.400 --> 0:06:29.760 that out. 0:06:29.960 --> 0:06:32.599 Our thanks to Sam Fazelli, Bloomberg Intelligence, director of Research 0:06:32.640 --> 0:06:34.960 for Global Industries and senior pharmaceuticals analysts. 0:06:35.080 --> 0:06:36.800 We move next to the restaurant industry. 0:06:37.080 --> 0:06:40.039 Bloomberg Intelligence will release data for November restaurant sales in 0:06:40.080 --> 0:06:43.640 early December, and according to bi US, restaurant same store 0:06:43.680 --> 0:06:46.039 sales rose seven tens of one percent in October but 0:06:46.120 --> 0:06:48.400 could drop in November because of the government shutdown. 0:06:48.680 --> 0:06:51.080 For more on the industry, I was joined by Michael Halen, 0:06:51.120 --> 0:06:54.280 Bloomberg Intelligence, Senior restaurant and food service analyst. I first 0:06:54.320 --> 0:06:56.760 asked Michael to talk to us about how restaurants are 0:06:56.800 --> 0:06:59.000 doing and whether it depends on the segment of the 0:06:59.040 --> 0:06:59.919 market they're targeting. 0:07:00.600 --> 0:07:02.120 That's definitely part of it. 0:07:02.200 --> 0:07:05.880 We saw that in last month's data find dining had 0:07:05.920 --> 0:07:10.280 a really nice rebound, and I think part of it 0:07:10.320 --> 0:07:13.800 is because they're catering to hire income consumers who own 0:07:13.880 --> 0:07:17.480 assets and are feeling pretty good about things moving forward. 0:07:18.000 --> 0:07:20.880 Right now, you know November is going to be a 0:07:20.880 --> 0:07:24.640 tough month. There's no doubt about it. The government shut 0:07:24.680 --> 0:07:27.680 down has definitely impacted sales and traffic for the chains 0:07:27.680 --> 0:07:32.760 we cover, especially in the DMV area as well as 0:07:32.840 --> 0:07:35.840 in the South where there's a lot of government workers. Also, 0:07:36.600 --> 0:07:41.760 last November restaurant sales had a nice boost from the election, 0:07:42.360 --> 0:07:43.040 and so we're going to. 0:07:43.040 --> 0:07:44.600 Be lapping tough comps. 0:07:44.640 --> 0:07:50.760 So November is not looking great, but things should bounce 0:07:51.080 --> 0:07:53.880 back a little bit here in December. And we're not 0:07:54.000 --> 0:07:57.440 crazy bullish, but we're more bullish about the first half 0:07:57.520 --> 0:07:58.160 of next year. 0:07:58.480 --> 0:08:00.920 Let's start with quick quick service dining. Talk to just 0:08:01.000 --> 0:08:03.360 about that marketplace. I think back to McDonald's of the 0:08:03.400 --> 0:08:05.800 world and so on, how's that varing. 0:08:06.240 --> 0:08:08.920 Quick service had a really difficult first half of the year. 0:08:08.960 --> 0:08:11.360 They were lapping strong comps and they and they kind 0:08:11.400 --> 0:08:14.720 of lost their way when it came to value, right. 0:08:14.760 --> 0:08:17.360 They just had implemented too big of. 0:08:17.360 --> 0:08:20.720 Price increases over the last few years, and customers started 0:08:20.720 --> 0:08:23.840 to push back, especially low income consumers who have been 0:08:24.280 --> 0:08:27.240 you know, who are really impacted by inflation to a 0:08:27.320 --> 0:08:30.440 much greater degree than middle and higher income consumers. So 0:08:31.320 --> 0:08:34.200 the first half was difficult, but here in the second 0:08:34.200 --> 0:08:37.079 half of the year, things have gotten better, largely because 0:08:37.280 --> 0:08:41.280 they've re established their value propositions. You know, McDonald's has 0:08:42.360 --> 0:08:46.000 revamped its dollar menu this year. They also reintroduced snack 0:08:46.000 --> 0:08:49.720 wraps out a three dollars price point, which have boosted 0:08:49.800 --> 0:08:54.120 checks by you know, people adding them on to their orders, 0:08:54.120 --> 0:08:57.120 as well as bringing in some low income consumer traffic. 0:08:57.200 --> 0:09:00.160 But you know, low income consumers are pulling back at 0:09:00.200 --> 0:09:01.600 a pretty big rate. 0:09:01.840 --> 0:09:04.640 You know, we think part of that is the snap 0:09:04.800 --> 0:09:06.319 benefit pullback. 0:09:06.440 --> 0:09:07.839 But they've been able to. 0:09:07.760 --> 0:09:11.000 Bring in some higher income consumers and middle income consumers. 0:09:11.040 --> 0:09:13.760 So things are starting to look better. 0:09:13.960 --> 0:09:16.440 McDonald's especially, I mean McDonald's is going to be lapping 0:09:16.440 --> 0:09:18.719 the eat Coli or right now is lapping the eat 0:09:18.760 --> 0:09:22.360 colip about them from last year, and so you know, 0:09:22.440 --> 0:09:24.880 they're the eight hundred pound gorilla. And I think good 0:09:24.920 --> 0:09:27.400 results out of McDonald's over the next few quarters should 0:09:27.440 --> 0:09:29.800 boost the entire category. 0:09:30.040 --> 0:09:32.160 How about the cost of beef, which you know consumers 0:09:32.200 --> 0:09:35.000 complain about across the board. I know companies are dealing 0:09:35.040 --> 0:09:36.840 with it, and what I understand is we're not going 0:09:36.880 --> 0:09:39.480 to see a material improvement in the cattle herd till 0:09:39.480 --> 0:09:42.240 maybe twenty twenty eight. So how does that factor into 0:09:42.320 --> 0:09:44.800 the profit margins of all these restaurants. 0:09:45.559 --> 0:09:49.760 The restaurants that are impacted the most are you know, 0:09:50.080 --> 0:09:55.560 burger chains like Shakeshack, or steakhouses like Texas Roadhouse that 0:09:55.640 --> 0:09:58.400 own and operate all of their stores. You know, to 0:09:58.440 --> 0:10:01.480 your point, beef inflation for these chains is going to 0:10:01.480 --> 0:10:04.880 be in the mid teens in the fourth quarter, so yeah. 0:10:04.720 --> 0:10:05.600 Yeah, very high. 0:10:05.600 --> 0:10:09.679 So definitely a lot of margin pressure for those chains. 0:10:10.800 --> 0:10:10.960 You know. 0:10:11.040 --> 0:10:14.640 Luckily, those two chains have driven traffic as of late 0:10:14.920 --> 0:10:18.240 into the stores which you know, and driven higher sales 0:10:18.240 --> 0:10:20.840 and been able to pass along price increases and that 0:10:20.880 --> 0:10:23.560 has kind of helped their operating leverage, which has helped 0:10:23.600 --> 0:10:25.640 offset the higher costs. 0:10:26.120 --> 0:10:27.040 For the burger chains. 0:10:27.080 --> 0:10:29.320 They there's less impact for the chains that we cover 0:10:29.360 --> 0:10:33.280 for McDonald's, Wendy's, Jack in the Box because they're largely franchised, 0:10:33.280 --> 0:10:35.880 so that the franchisees are the ones footing the bill 0:10:35.960 --> 0:10:37.080 for the higher beef costs. 0:10:37.160 --> 0:10:40.920 Why, like, why do not all changs do like the 0:10:41.000 --> 0:10:44.800 McDonald's franchise e model. What's the benefits of franchising or 0:10:44.800 --> 0:10:46.760 what's the benefit of owning versus a franchise. I think 0:10:46.760 --> 0:10:48.679 I thought I would. I saw the movie. I think 0:10:48.720 --> 0:10:51.720 I understand the economics and franchising. It seems pretty good. 0:10:52.080 --> 0:10:55.240 Listen, the franchise business, that's a great business, you know, 0:10:55.280 --> 0:10:58.000 and from where I sit as an analyst, you know, 0:10:58.040 --> 0:11:00.120 we love it. It's easier to predict the earnings and 0:11:00.160 --> 0:11:03.720 the free cash flow. It's it's a much more steady 0:11:03.760 --> 0:11:07.640 business model. Franchising eliminates a lot of the operating leverage 0:11:07.640 --> 0:11:11.920 and thus the risk to your margins out of the business. 0:11:12.000 --> 0:11:14.280 Right. But if you are. 0:11:14.240 --> 0:11:18.679 Running a full service restaurant chain where operations is very 0:11:18.840 --> 0:11:24.040 core to your business, think Darden, think Texas Roadhouse, you 0:11:24.160 --> 0:11:26.559 want to own and operate your source because you want 0:11:26.559 --> 0:11:28.280 to have control over those operations. 0:11:28.320 --> 0:11:29.199 You want to make sure. 0:11:29.040 --> 0:11:32.600 People are getting a good experience, and they're just much 0:11:32.600 --> 0:11:36.040 harder to run than a McDonald's or a Wendy's. And 0:11:36.080 --> 0:11:38.880 then I'd say, on the last case would be somebody 0:11:38.920 --> 0:11:43.160 like shake Shack or wink Stop or Cava. You know, 0:11:43.200 --> 0:11:47.840 when your cash on cash returns are forty fifty sixty percent, 0:11:49.080 --> 0:11:50.840 we don't think it's a bad thing to be greedy 0:11:50.880 --> 0:11:52.959 and you want to open up as many stores as 0:11:53.000 --> 0:11:54.240 possible are. 0:11:54.120 --> 0:11:57.080 Thanks to Michael Helen, who covers restaurants and food services 0:11:57.080 --> 0:11:59.640 for Bloomberg Intelligence. Coming up, look at why the tech 0:11:59.679 --> 0:12:02.320 company Cisco maybe on a Goldilocks growth path. 0:12:02.480 --> 0:12:05.360 You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 0:12:05.360 --> 0:12:07.520 depth research and data on two thousand companies and one 0:12:07.600 --> 0:12:08.680 hundred and thirty industries. 0:12:08.800 --> 0:12:11.840 You can access Bloomberg Intelligence via Bigo on the terminal. 0:12:11.920 --> 0:12:13.080 I'm Scarlett Foo. 0:12:12.920 --> 0:12:15.040 And I'm Paul Sweeney, and this is Bloomberg. 0:12:20.400 --> 0:12:24.920 This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney 0:12:25.240 --> 0:12:26.560 on Bloomberg Radio. 0:12:27.600 --> 0:12:30.120 We moved next to more earnings in the retail sector 0:12:30.240 --> 0:12:32.280 this week. We got third quarter earnings from Cohle's and 0:12:32.400 --> 0:12:35.640 Abercrombing and Finch Coles raised its full year outlook for 0:12:35.679 --> 0:12:38.600 the second straight quarter. It's a signed the chief executive officer, 0:12:38.640 --> 0:12:42.199 Michael Bender, is helping to stabilize performance at the struggling retailer. 0:12:42.360 --> 0:12:44.839 Separately, Abercromi and Fitch raised the low end of its 0:12:44.840 --> 0:12:47.719 full year sales outlook as its Hollister brand continue to 0:12:47.760 --> 0:12:51.200 gain momentum. We are joined by Mary Ross Gilbert Bloomberg Intelligence, 0:12:51.240 --> 0:12:53.040 senior equity analyst covering retail. 0:12:53.240 --> 0:12:55.320 We first asked Mary for her take on Cohle's most 0:12:55.320 --> 0:12:56.240 recent earnings report. 0:12:56.640 --> 0:12:59.320 They've kind of gone back to the basics. What's something 0:12:59.559 --> 0:13:02.480 something that clos has always been known for SO One 0:13:02.679 --> 0:13:04.560 is their private brand. So if you think about some 0:13:04.679 --> 0:13:08.240 of the brands like SO and Juniors, Lauren Conrad for women, 0:13:09.000 --> 0:13:12.719 and they brought those brands back because they actually sacrifice 0:13:12.760 --> 0:13:17.160 some of those brands under the prior leadership and replace 0:13:17.280 --> 0:13:21.880 them with some more name brands like Madden Girl, trying 0:13:21.920 --> 0:13:26.920 to really attract the junior shopper there. And now that 0:13:26.960 --> 0:13:30.920 they've brought the private brands back, they brought back petite sizing, 0:13:30.920 --> 0:13:33.800 which was really important to their customer base. Now they're 0:13:33.840 --> 0:13:38.120 really starting to see a recovery. But they're not out 0:13:38.120 --> 0:13:40.959 of the woods yet, Scarlett, as you pointed out, I mean, 0:13:40.960 --> 0:13:44.280 they're really cycling three years of declines, but we are 0:13:44.320 --> 0:13:47.800 seeing encouraging results and given that they actually turned positive 0:13:47.920 --> 0:13:50.720 in the latest month, it looks like they could actually 0:13:51.360 --> 0:13:54.800 reach a break even in the fourth quarter, even though 0:13:54.800 --> 0:13:58.199 they're guiding to a one point seven percent comp sales decline. 0:13:58.440 --> 0:14:02.440 So it's very encouraging to see with Cohle's again not 0:14:02.480 --> 0:14:03.839 out of the woods. And when you look at what's 0:14:03.840 --> 0:14:05.720 going on with SO For, it's now a two billion 0:14:05.720 --> 0:14:08.440 dollar business and as you were sort of highlighting, that 0:14:08.480 --> 0:14:10.840 means they really lost you know, over the last four 0:14:10.920 --> 0:14:14.400 years something like four to five billion in other categories, 0:14:14.880 --> 0:14:17.120 so they have lost market share. We think they're losing 0:14:17.160 --> 0:14:20.280 it to off price and some of the value players 0:14:20.320 --> 0:14:23.200 in the specialty space such as Old. Maybe you know 0:14:23.280 --> 0:14:24.440 a gap brand. 0:14:24.600 --> 0:14:26.640 Mary, I will also want to ask you about Abercomie 0:14:26.640 --> 0:14:29.600 and Fitch. It was the Darling two years ago because 0:14:29.640 --> 0:14:32.440 the new CEO found a way to make the brand 0:14:32.520 --> 0:14:35.920 relevant to a new audience. It was no longer targeting 0:14:35.960 --> 0:14:39.200 teenage boys, for instance, and really targeting young working women. 0:14:39.600 --> 0:14:41.760 But it's had a brutal twenty twenty five, a lot 0:14:41.800 --> 0:14:45.800 of concerns about tariffs perhaps and maybe even a lack 0:14:45.840 --> 0:14:49.200 of fresh ideas in terms of its offerings. What's the 0:14:49.320 --> 0:14:51.000 narrative with Abercomie and Fitch right now? 0:14:51.400 --> 0:14:54.440 Yeah, so Scarlett with Abercrombie and Fitch, their numbers came 0:14:54.480 --> 0:14:57.800 in better than expected. So the namesake brand, as you 0:14:57.920 --> 0:15:01.280 pointed out, I mean that had been double digit increases 0:15:01.640 --> 0:15:04.920 over the last three years, so they're cycling those increases 0:15:05.400 --> 0:15:08.360 and that's why their sales are coming in less than expected. 0:15:08.720 --> 0:15:11.800 But this quarter the comp sales declined. There was about 0:15:11.800 --> 0:15:14.600 three point three percent, so that was better than expected. 0:15:15.640 --> 0:15:19.000 And when you look at Hollister, though, Hollister has been 0:15:19.000 --> 0:15:22.840 coming in ahead of expectations and they've been posting double 0:15:22.920 --> 0:15:27.360 digit increases. So as you were talking about sort of 0:15:27.400 --> 0:15:30.400 the millennial women who really love and also the men, 0:15:30.880 --> 0:15:33.080 but it does tend to favor more of the women 0:15:33.240 --> 0:15:37.240 on the Abercrombie side, on the Hollister side, which really 0:15:38.320 --> 0:15:42.440 caters to gen Z that has been on fire, and 0:15:42.560 --> 0:15:45.840 so that's what's helping to kind of overcome the weakness 0:15:45.880 --> 0:15:48.880 that they're seeing at Abercrombie. But also it's looking like 0:15:49.040 --> 0:15:52.320 Abercrombie could turn positive in the fourth quarter with a 0:15:52.400 --> 0:15:55.120 number of the initiatives that they have in place going 0:15:55.200 --> 0:15:58.000 into the holiday quarter, even though they're cycling some pretty 0:15:58.040 --> 0:16:01.280 strong gains in the prior year and the year before that. 0:16:01.680 --> 0:16:04.560 Are Thanks to Mary Ross Gilbert, Bloomberg Intelligence, senior equity 0:16:04.560 --> 0:16:05.960 analyst who covers retail, we. 0:16:06.080 --> 0:16:08.560 Moved next to some research from Bloomberg Intelligence in the 0:16:08.640 --> 0:16:12.280 tech space. It's titled Cisco and a Golden Locks growth path. 0:16:12.640 --> 0:16:15.920 According to Cisco mayc twenty twenty six, sales above the 0:16:15.920 --> 0:16:18.560 top end of its five to seven percent target, and 0:16:18.600 --> 0:16:21.080 this comes as the company balances strong AI growth with 0:16:21.200 --> 0:16:22.160 networking gains. 0:16:22.400 --> 0:16:24.600 For more on this, we were joined by Wouchinho, Bloomberg 0:16:24.600 --> 0:16:26.280 Intelligence senior technology analyst. 0:16:26.480 --> 0:16:28.960 We began by asking Wooje to break down why Cisco's 0:16:28.960 --> 0:16:30.360 shares have had a good run this year. 0:16:30.640 --> 0:16:32.520 So there's a couple of things driving it. That they're 0:16:32.600 --> 0:16:37.960 actually a massive forty three billion dollar a product upgrade 0:16:38.000 --> 0:16:41.400 cycle that Cisco will potentially benefit from, which is going 0:16:41.440 --> 0:16:44.200 to give them outsize growth in their core networking business. 0:16:44.760 --> 0:16:47.120 But their AI store has actually been a lot better 0:16:47.160 --> 0:16:49.960 than I thought. AI is going to be about three 0:16:49.960 --> 0:16:54.160 billion dollars of sales tripling or three billion dollars in 0:16:54.200 --> 0:16:56.440 sales in fiscal twenty twenty six tripling out of twenty 0:16:56.480 --> 0:16:59.360 twenty five. So there are this goldly locks of good 0:16:59.400 --> 0:17:03.080 AI store as well as an upgrade cycle tailwind. 0:17:03.560 --> 0:17:06.399 Paul was asking Michael Casper earlier about a lot of 0:17:06.440 --> 0:17:10.480 the tech companies issuing debt to pay for their AI buildout. 0:17:11.119 --> 0:17:13.760 What does Cisco's debt profile look like and will it 0:17:13.920 --> 0:17:17.040 also need to sell bonds to fund everything that's doing? 0:17:17.880 --> 0:17:21.479 Yeah, hey' Carlo. So that's one of the great stories 0:17:21.520 --> 0:17:25.800 about about Cisco. I mean, they have roughly about twenty 0:17:25.800 --> 0:17:29.600 billion dollars in debt and roughly thirty billion dollars in cash, 0:17:30.119 --> 0:17:34.560 so look their net cash positive, they don't need to 0:17:34.560 --> 0:17:37.240 take on debt. If anything, they've been very active buyers 0:17:37.240 --> 0:17:41.359 of their stock, very good stewards of the cash, strong 0:17:41.440 --> 0:17:45.760 cash flow profile, and if anything, they're using their cash 0:17:45.760 --> 0:17:48.160 as levers to build up the inventory for the AI 0:17:48.200 --> 0:17:49.320 opportunity that's ahead of them. 0:17:49.880 --> 0:17:51.920 So talk to us about just kind of the growth 0:17:52.000 --> 0:17:55.600 drivers for this company, which what is he looked at 0:17:55.640 --> 0:17:58.560 twenty twenty six, what kind of underpins their top line growth? 0:17:58.720 --> 0:18:03.200 They got it to roughly the top of the top 0:18:03.280 --> 0:18:06.240 end of their four to six percent growth. I think 0:18:06.240 --> 0:18:08.119 they're going to do roughly about seven to eight percent 0:18:08.160 --> 0:18:11.000 growth for this year. So if we think about the 0:18:11.320 --> 0:18:14.680 AI story itself trippling from one billion to three billion, 0:18:15.359 --> 0:18:17.640 that's going to be the incremental growth that gets you 0:18:17.680 --> 0:18:20.000 above to the top end of their revenue growth guidance. 0:18:21.000 --> 0:18:24.080 You know, the way I have networking flashed out right now, 0:18:24.600 --> 0:18:28.439 the networking business, you know, Xai is growing roughly around 0:18:28.440 --> 0:18:31.359 four percent, and that's probably towards the low end and 0:18:31.680 --> 0:18:33.960 quite frankly, if the upgrade's coming stronger than a lot 0:18:33.960 --> 0:18:36.680 better than we think. There's a little bit of upside. 0:18:36.720 --> 0:18:39.040 Now there is a little bit of drag. The security 0:18:39.040 --> 0:18:42.200 business hasn't panned out as as strongly as they hoped, 0:18:42.720 --> 0:18:45.880 primarily because it is going through this business model transition. 0:18:46.359 --> 0:18:48.479 But you know, it would have been a story at 0:18:48.480 --> 0:18:52.200 another time. But the two stories AI as well as 0:18:52.200 --> 0:18:55.440 a core networking upgrade cycle. I mean, that's doing very 0:18:55.520 --> 0:18:57.720 very well in twenty six and if anything, I would 0:18:57.800 --> 0:18:59.760 argue we'd probably be better in twenty twenty seven. 0:19:00.720 --> 0:19:03.560 Is Cisco part of this whole circular deal making, circular 0:19:03.600 --> 0:19:08.120 funding concern that has investors worried that if one company 0:19:08.119 --> 0:19:11.040 in this link stops spending or maybe slows down spending, 0:19:11.119 --> 0:19:13.000 everyone else will get affected. 0:19:13.359 --> 0:19:14.280 To some degree. 0:19:14.359 --> 0:19:18.520 Yeah, Scarlett, And that's why I think if you look 0:19:18.560 --> 0:19:20.560 at some of the AI stories there, it's one of 0:19:20.560 --> 0:19:24.480 the safe bets, right. They are exposed to some of 0:19:24.520 --> 0:19:26.879 the I would say the hyperscale names, but a very 0:19:26.920 --> 0:19:29.760 small exposure to it, as well as some of the 0:19:31.240 --> 0:19:34.119 neo clouds. They do sell some routing products and some 0:19:34.160 --> 0:19:38.679 of the sovereigns. Now, if that business disappears, you know, 0:19:39.320 --> 0:19:42.639 the cashflow story is still well intact. Right, If I 0:19:42.680 --> 0:19:46.920 calculate the amount of AI revenue relative their total total 0:19:46.960 --> 0:19:49.800 revenue base. We're only talking about, you know, six to 0:19:49.800 --> 0:19:53.040 seven percent of total sales, right, So if the AI 0:19:53.119 --> 0:19:57.720 story collapse, I mean, AI evaporates, they're still in very 0:19:57.760 --> 0:19:58.320 good standing. 0:19:58.840 --> 0:20:00.920 Not to mention the fact that they out a dividend too. 0:20:00.960 --> 0:20:02.760 I mean it's not a huge one, but a tech 0:20:02.800 --> 0:20:05.679 company with a two percent dividend yield to something and 0:20:05.720 --> 0:20:06.440 they've been steadying. 0:20:06.520 --> 0:20:09.160 The sock was lower. Yeah, the soccer just to be three. 0:20:09.280 --> 0:20:11.600 So yeah, there we go. I mean, it's not the 0:20:11.760 --> 0:20:14.000 like stock bog backs and a dividendil and an a 0:20:14.160 --> 0:20:15.240 story if it works out. 0:20:15.440 --> 0:20:18.600 Our thanks to Wou Jinho, Bloomberg Intelligence senior technology analyst. 0:20:19.040 --> 0:20:21.359 We move next to the news in the media space. 0:20:21.680 --> 0:20:24.200