WEBVTT - Amgen, Horizon Deal Faces Off With FTC 0:00:01.360 --> 0:00:05.680 This is Bloomberg Business Wait inside from the reporters and 0:00:05.880 --> 0:00:09.440 editors who bring you America's most trusted business magazine, plus 0:00:09.520 --> 0:00:13.680 global business finance and tech news. The Bloomberg Business Week 0:00:13.720 --> 0:00:19.000 Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:20.560 --> 0:00:23.239 So the FTC suding to block Amgin's twenty seven point 0:00:23.239 --> 0:00:27.720 eight billion dollar acquisition today. You know, it's just amazing. 0:00:27.760 --> 0:00:29.240 There's a lot of stuff that's coming out of the FTC. 0:00:29.320 --> 0:00:30.480 So let's get right to it because we have a 0:00:30.480 --> 0:00:34.640 blockbuster duo of Jennifer Ree, Bloomberg Intelligence Senior Litigation analyst 0:00:34.800 --> 0:00:37.320 here in a Bloomberg Interactive Brokers studio. Also with us 0:00:37.320 --> 0:00:40.440 is Bloomberg News Anti trust reporter leaet Nyland. She's on 0:00:40.520 --> 0:00:42.960 camp from our DC bureau. Lea, I do want to 0:00:42.960 --> 0:00:44.839 just start with you, just lay out the news of 0:00:44.880 --> 0:00:46.240 what the FTC said and did. 0:00:47.000 --> 0:00:47.280 Yeah. 0:00:47.320 --> 0:00:50.720 So, the FTC suit today it's a block anjen from 0:00:50.760 --> 0:00:54.480 buying Horizon Therapeutics. It filed a lawsuit in Illinois federal 0:00:54.520 --> 0:00:59.200 court asking for a preliminary injunction. That just means that 0:00:59.240 --> 0:01:01.560 it's asking the court to pause the deal while the 0:01:01.640 --> 0:01:04.040 FTC would go through this in house process on whether 0:01:04.080 --> 0:01:07.280 the deal is anti competitive. People were pretty shocked because 0:01:07.800 --> 0:01:10.960 for the past ten years, the FTC is routinely okay 0:01:11.000 --> 0:01:15.640 deals like this just by requiring pharmaceutical companies to divest 0:01:15.680 --> 0:01:19.720 any overlapping drugs they had, and instead, here they're moving 0:01:19.720 --> 0:01:22.039 for an outright block of the deal, something they haven't 0:01:22.080 --> 0:01:23.319 done since two thousand and nine. 0:01:24.080 --> 0:01:26.199 So Jen, come on in on this. Were you shocked 0:01:26.200 --> 0:01:26.760 that they did this? 0:01:27.120 --> 0:01:29.039 You know, I really was. I mean, Leah got it 0:01:29.080 --> 0:01:31.600 exactly right. She really knows this stuff. I did expect 0:01:31.600 --> 0:01:34.000 a suit like this, sort of non traditional, but I 0:01:34.000 --> 0:01:36.280 thought it would be Pheiser Segan, which is pending right now. 0:01:36.280 --> 0:01:38.559 I didn't expect it to be this one because really 0:01:38.600 --> 0:01:41.560 they have absolutely no horizontal overlap, at least in their 0:01:41.600 --> 0:01:45.360 marketed drugs. So it's surprising because the theory is just 0:01:45.520 --> 0:01:49.000 so speculative. Yeah, I mean, thinking about what Amgen might 0:01:49.120 --> 0:01:51.320 do in the future with respect to bundling once it 0:01:51.360 --> 0:01:52.680 has horizons products. 0:01:52.680 --> 0:01:54.680 So what's up with the FDC, you know. 0:01:55.360 --> 0:01:58.000 Is just like a limit, like if any deal is 0:01:58.040 --> 0:02:00.000 more than twenty billion dollars, we're going to suit it 0:02:00.120 --> 0:02:02.600 lock it because they just don't want any big deals done. 0:02:02.440 --> 0:02:05.160 So AI program that goes off and right exactly. 0:02:05.200 --> 0:02:06.360 Well, you know, at the end of the day, it 0:02:06.440 --> 0:02:08.440 is kind of like that. I mean, they view most 0:02:08.520 --> 0:02:11.760 industries as overly consolidated today. And if you start with 0:02:11.800 --> 0:02:14.280 the view that we've already had too much consolidation, then 0:02:14.320 --> 0:02:17.880 your position is I want to stop further consolidation. And 0:02:17.919 --> 0:02:21.000 pharmaceuticals is a really sensitive area. I mean, prices are high. 0:02:21.040 --> 0:02:23.480 We have a problem with that, and in particular, that's 0:02:23.480 --> 0:02:25.519 what anti trust is trying to avoid, you know, high 0:02:25.560 --> 0:02:28.720 prices and increased innovation, and they believe that the consolidation 0:02:28.800 --> 0:02:32.320 has reduced innovation and increased prices, and so they're trying 0:02:32.360 --> 0:02:34.160 to do the best they can to stem the tide. 0:02:34.240 --> 0:02:36.080 So at the end of the day, you know, it 0:02:36.160 --> 0:02:37.800 is a little bit of a default. If it's a 0:02:37.800 --> 0:02:41.280 big deal, if it's an in an industry that's consolidated, yeah, 0:02:41.320 --> 0:02:42.560 it's likely they're going to challenge. 0:02:42.639 --> 0:02:44.880 I just feel like, you know, even though there is 0:02:44.960 --> 0:02:47.760 consolidation that goes on, but isn't that where regulators supposed 0:02:47.760 --> 0:02:49.239 to come in and kind of regulate and make sure 0:02:49.240 --> 0:02:51.600 that things are being done, right, Leah, come on in, 0:02:51.760 --> 0:02:54.440 So what's next here for Amjet. 0:02:54.200 --> 0:02:57.240 And tell us. Also about the state of antitrust. I mean, 0:02:57.280 --> 0:02:58.760 this used to be a good thing. We were all 0:02:58.760 --> 0:03:03.560 for monopoly busting. We want antitrust to spur innovation and competition. 0:03:04.560 --> 0:03:07.960 It seems like, I don't know, the public is bummed 0:03:08.000 --> 0:03:11.360 out every time the FTC sues to block a giant, 0:03:11.400 --> 0:03:13.320 mega deal. Shouldn't we be cheering them on? 0:03:14.720 --> 0:03:20.880 Well, I guess it depends who you ask. BUTTC is 0:03:21.320 --> 0:03:23.240 moving to block this, it'll have to go through a 0:03:23.280 --> 0:03:26.359 court challenge, so this will be an Illinois federal court 0:03:26.400 --> 0:03:29.880 in Chicago, Amjhen and Horizon so that they remain committed 0:03:29.880 --> 0:03:32.000 to the deal, which means that they're willing to litigate this. 0:03:33.000 --> 0:03:35.400 It is sort of, as Jen was saying, a little 0:03:35.400 --> 0:03:37.800 bit of a speculative theory. But some of the stuff 0:03:37.800 --> 0:03:39.960 that the FTC has been moving forward with is a 0:03:39.960 --> 0:03:42.600 lot of concerns about innovation. You see this in their 0:03:42.640 --> 0:03:46.560 block of Microsoft Activision, which really focused on this cloud 0:03:46.560 --> 0:03:49.120 gaming market, which is a very nascent market that's not 0:03:49.240 --> 0:03:50.120 used by a lot of people. 0:03:50.160 --> 0:03:52.160 Yet again, a lot of stuff we don't know yet. 0:03:52.920 --> 0:03:55.960 Yeah, and I'm this the complaint is not yet unsealed 0:03:55.960 --> 0:03:59.000 it'll be unsealed later today, so we'll see a little 0:03:59.040 --> 0:04:01.360 bit more about some of the exact allegations. I had 0:04:01.400 --> 0:04:03.440 thought that there might be a little bit more about 0:04:03.520 --> 0:04:09.320 overlaps in the pipeline, because both Horizon and Amjen are 0:04:09.360 --> 0:04:12.720 working on some deals related to lupus and Exima that 0:04:12.840 --> 0:04:15.040 have some promise but are still pretty early on in 0:04:15.040 --> 0:04:18.039 the process. But so far, what the FTC has said 0:04:18.120 --> 0:04:21.159 is that they're just really concerned about bundling all of 0:04:21.160 --> 0:04:24.159 these orphan drugs. Those are drugs that are for rare 0:04:24.200 --> 0:04:27.520 diseases and sort of the FDA has given monopoly too 0:04:27.560 --> 0:04:30.919 specific companies to encourage them to develop these drugs for 0:04:31.040 --> 0:04:34.680 rare diseases. They're very concerned about having so many orphan 0:04:34.720 --> 0:04:36.000 drugs in the hands of one company. 0:04:36.160 --> 0:04:36.280 Jen. 0:04:36.360 --> 0:04:38.480 For someone who really studies the law here and tries 0:04:38.520 --> 0:04:40.640 to understand, you know, what's going on and make sense 0:04:40.680 --> 0:04:42.120 of it all, I mean, how much of what you're 0:04:42.160 --> 0:04:44.919 looking at it feels like politics in you know, with 0:04:44.960 --> 0:04:49.040 another administration who's watching healthcare generally and what it means, 0:04:49.120 --> 0:04:52.440 pecially as we see private equity increasingly buying up medical practices. 0:04:52.440 --> 0:04:53.600 There's a lot of stuff. 0:04:53.360 --> 0:04:56.039 Going on where I think some would argue consumers are 0:04:56.040 --> 0:04:58.279 getting hurt, no doubt about it. So how do you 0:04:58.279 --> 0:05:00.479 see Is it much more politics in this one or 0:05:00.560 --> 0:05:04.040 is it a case of where the law we need 0:05:04.080 --> 0:05:04.880 to be careful here. 0:05:05.360 --> 0:05:07.760 You know, when I think about it as politics, I 0:05:07.760 --> 0:05:09.279 think of it more as a position. 0:05:09.560 --> 0:05:09.800 Right. 0:05:10.640 --> 0:05:13.599 The current regulators, the heads of the anti trust divisions 0:05:13.640 --> 0:05:16.840 at DOJ and FDC, have a position that has been 0:05:16.920 --> 0:05:20.000 encouraged by the Biden administration, and that is that consumers 0:05:20.040 --> 0:05:22.120 are being harmed and they're on a mission to fix that. 0:05:22.480 --> 0:05:22.600 Right. 0:05:22.640 --> 0:05:24.840 You know, you were talking about deals that people might 0:05:24.880 --> 0:05:27.000 be happy to see. Challenge to the Department of Justice 0:05:27.040 --> 0:05:29.960 is challenging Jeff Blue's acquisition of spirit, and I think 0:05:29.960 --> 0:05:31.320 there are a lot of people that might be happy 0:05:31.320 --> 0:05:34.160 about that that have had really awful experiences flying. You know, 0:05:34.240 --> 0:05:36.520 they are trying to do the best they can for consumers, 0:05:36.560 --> 0:05:39.560 and their position is that the last twenty thirty years 0:05:39.560 --> 0:05:41.000 of anti trust enforcement has been. 0:05:40.880 --> 0:05:42.440 Two lacks and we have this result. 0:05:42.520 --> 0:05:43.240 Do you agree? 0:05:43.680 --> 0:05:45.920 You know, I tend to agree in some industries, but 0:05:46.000 --> 0:05:48.840 not in all. You know, I agree that a new 0:05:48.839 --> 0:05:51.640 position needs to be taken. I think where I have 0:05:51.720 --> 0:05:53.520 a little bit of trouble is that I think it 0:05:53.560 --> 0:05:56.920 needs to be taken with nuance maybe rather than sort 0:05:56.960 --> 0:05:59.480 of with a sledgehammer, because I think if you want 0:05:59.520 --> 0:06:01.080 to make strare, so if you want to push the 0:06:01.120 --> 0:06:03.440 anti trust law, I think it needs to be done carefully. 0:06:03.960 --> 0:06:05.359 And you know they're going to be in front of 0:06:05.360 --> 0:06:08.440 a judge that is I see appointed by Trump and 0:06:08.560 --> 0:06:11.080 was often on a member of the Federalist Society, and 0:06:11.200 --> 0:06:13.400 just at least superficially, that doesn't seem very good for 0:06:13.440 --> 0:06:15.520 the FTC on this one, and they're going to have 0:06:15.560 --> 0:06:16.080 a hard time. 0:06:16.680 --> 0:06:20.839 On the other hand, Look, Leah, Microsoft is a two 0:06:20.839 --> 0:06:24.800 point three trillion dollar company. Do they really need to 0:06:24.839 --> 0:06:27.520 own the biggest and most played video game in the 0:06:27.600 --> 0:06:28.480 whole world? 0:06:28.920 --> 0:06:30.960 I mean, if you're an investor and it's going to 0:06:31.000 --> 0:06:32.880 bring about growth, you're gonna say, yeah, maybe they do. 0:06:33.160 --> 0:06:35.359 Of course, Well, monopolies are really helpful too, So for 0:06:35.440 --> 0:06:37.640 your investor, you'd probably love to have a huge monopoly. 0:06:37.720 --> 0:06:39.960 I'm sure if you're an investor you would love to 0:06:39.960 --> 0:06:43.800 break all the rules. But for the consumer, it's not 0:06:43.880 --> 0:06:46.799 necessarily healthy to give the biggest company in the world 0:06:46.960 --> 0:06:49.040 even bigger size, is it. 0:06:50.600 --> 0:06:50.840 Yeah? 0:06:50.920 --> 0:06:53.240 I mean That's a bit why the FTC has had 0:06:53.240 --> 0:06:55.839 a big focus on some of the large tech mergers. 0:06:55.839 --> 0:06:57.479 I mean, if you look, two of the things that 0:06:57.520 --> 0:07:00.640 they've challenged over the past year have been the Microsoft activision, 0:07:00.640 --> 0:07:03.039 and then they challenged one by Facebook over It was 0:07:03.040 --> 0:07:06.800 a very small sort of startup I deal over Within, 0:07:06.960 --> 0:07:11.480 which makes a virtual reality fitness app that probably a 0:07:11.520 --> 0:07:13.520 lot of people had never even heard of. But this 0:07:13.680 --> 0:07:16.360 idea of like innovation wanting to make sure that there's 0:07:16.400 --> 0:07:20.320 still a lot of innovation across the economy is one 0:07:20.560 --> 0:07:22.960 that we keep seeing come up over and over again 0:07:23.000 --> 0:07:24.880 in a lot of the suits that the Justice Department, 0:07:24.920 --> 0:07:27.760 in particularly the FTC is filing. You know, the meta 0:07:27.800 --> 0:07:30.640 within challenges. I mentioned. They were really worried that, you know, 0:07:31.520 --> 0:07:33.800 Facebook was buying up this small competitor, sort of like 0:07:33.840 --> 0:07:36.440 it did with Instagram back in the day. And they said, 0:07:36.440 --> 0:07:38.640 you know, Facebook is a huge company. If it really 0:07:38.680 --> 0:07:41.520 wanted to move into virtual reality, it could build some 0:07:41.560 --> 0:07:44.920 of these programs itself. That seems like maybe an argument 0:07:44.960 --> 0:07:47.800 that they're making here. You know, Amjen is not a 0:07:47.840 --> 0:07:51.760 small company. This is one of the largest acquisitions it 0:07:51.800 --> 0:07:53.680 has ever done. You know, maybe if it put that 0:07:53.720 --> 0:07:56.200 money towards developing a drug on its own, it could 0:07:56.240 --> 0:07:56.880 have some success. 0:07:56.960 --> 0:07:59.400 Changens one hundred and twenty billion dollar company. They're making 0:07:59.400 --> 0:08:00.920 a thirty billion dollar acquisition. 0:08:01.080 --> 0:08:02.600 It's a lot. It's a lot if you do the 0:08:02.600 --> 0:08:05.400 percentages there. So, Jen, how do you see what is 0:08:05.640 --> 0:08:07.240 kind of the balance? How do you think about it 0:08:07.240 --> 0:08:10.640 in terms of the law versus innovation, you know, and 0:08:10.720 --> 0:08:13.000 companies looking potentially for growth here. 0:08:12.960 --> 0:08:15.440 We know there's a lot of question about innovation and 0:08:15.480 --> 0:08:17.760 how innovation's impacted. I mean, there are some that would 0:08:17.840 --> 0:08:20.400 argue a lot that would argue that we don't have 0:08:20.520 --> 0:08:23.880 enough competition, and competition spurs innovation, and that's certainly the 0:08:23.960 --> 0:08:28.120 FTC's position, as Leah outlined. But there are others that say, well, 0:08:28.120 --> 0:08:31.640 innovation will be slowed because if a startup is basing 0:08:31.680 --> 0:08:35.079 their model, you know, starting their product with the idea 0:08:35.160 --> 0:08:36.720 that it's going to be able to sell out for 0:08:36.760 --> 0:08:38.960 a lot of money to a bigger company down the road, 0:08:39.200 --> 0:08:40.680 and they see that they can't do that, they're not 0:08:40.720 --> 0:08:41.719 going to start to begin with. 0:08:41.800 --> 0:08:46.160 Although Uber, look what Uber is exactly, So I mean, 0:08:46.160 --> 0:08:48.120 I think that there's a debate and really, you know, 0:08:48.160 --> 0:08:49.240 there's no right answer. 0:08:49.400 --> 0:08:51.840 But the bottom line is that there there is some 0:08:51.880 --> 0:08:55.240 evidence and economists have done studies showing that the rate 0:08:55.280 --> 0:08:59.400 of innovation has slowed down, particularly in pharma and in 0:08:59.480 --> 0:09:02.200 tech and the United States, and so it could be 0:09:02.360 --> 0:09:04.559 into the view is that it's part and parcel the 0:09:04.679 --> 0:09:05.520 lack of competition. 0:09:06.440 --> 0:09:09.560 Interesting, got anything else there, buddy, Well, I'm just thinking 0:09:09.559 --> 0:09:13.440 about you know, the innovation that spurred the mRNA vaccines, right, 0:09:13.559 --> 0:09:16.440 didn't come from big pharma. That came from smaller players. 0:09:16.440 --> 0:09:18.000 Of course, they probably also. 0:09:17.760 --> 0:09:21.080 Came with government backing. It came with government backing initially. 0:09:21.679 --> 0:09:28.559 Remember that, yes, messenger RNA technology was initially funded in 0:09:28.600 --> 0:09:30.520 part by government. I did not it was out there 0:09:30.520 --> 0:09:31.480 for four or five years. 0:09:32.120 --> 0:09:34.360 And that's part of the FTC's theory here, because what 0:09:34.400 --> 0:09:36.680 they're concerned about is that amjen is going to thwart 0:09:37.200 --> 0:09:40.480 a foreclosed smaller rivals to push them out by being 0:09:40.520 --> 0:09:42.400 able to have a lot of money to give huge 0:09:42.440 --> 0:09:43.800 rebates to favor its drugs. 0:09:43.800 --> 0:09:45.839 Although Big Farmer looks at those smaller rivals in a 0:09:45.840 --> 0:09:49.000 big way in terms of ultimately buying them up. And 0:09:49.480 --> 0:09:51.600 it's a tough, complicated anyway, we'll have more. 0:09:51.679 --> 0:09:52.880 It is complicated and tough. 0:09:52.960 --> 0:09:56.240 It is Jennry Love Love Love, senior litigation analyst at 0:09:56.240 --> 0:09:59.520 Bloomberg Intelligence Love Leoniland. She's anti trust reporter a Blomberg News. 0:09:59.600 --> 0:10:01.320 Check her out on the terminal and on Twitter. 0:10:01.600 --> 0:10:05.199 You're listening to the Bloomberg Business Week podcast. Catch us 0:10:05.200 --> 0:10:08.560 Live weekday afternoons from three to six Eastern Listen on 0:10:08.640 --> 0:10:12.679 Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App, 0:10:12.960 --> 0:10:15.199 or watch us Live on YouTube. 0:10:16.120 --> 0:10:19.000 So we know earlier this morning we got to read 0:10:19.080 --> 0:10:22.000 on US retail sales. Right up, it is a bad 0:10:22.040 --> 0:10:23.400 read steady consumer spending. 0:10:23.400 --> 0:10:25.160 Why was it bad Home Depot? 0:10:25.200 --> 0:10:25.320 Oh? 0:10:25.360 --> 0:10:26.600 I thought you were talking about home Depot. 0:10:26.679 --> 0:10:27.800 I'm so glad you listened to me. 0:10:28.280 --> 0:10:30.040 Well, we did get a read on consumer sales from 0:10:30.080 --> 0:10:31.240 home Depot and it was bad. 0:10:31.400 --> 0:10:35.439 Well, we got economic data right from the government retail sales. 0:10:35.559 --> 0:10:37.720 Oh yeah, I trust that less than home deepo Okay. 0:10:37.760 --> 0:10:39.880 And then we got where we saw most of the 0:10:39.920 --> 0:10:41.839 categories showing firmer sales in the month of April. And 0:10:41.840 --> 0:10:43.440 then we got Home Depot coming out and cutting us 0:10:43.440 --> 0:10:44.520 out look for the first. 0:10:44.559 --> 0:10:48.600 Yes for the air, And that's like worrying. I think 0:10:48.679 --> 0:10:52.160 more worrying than because the economy numbers. Of course we 0:10:52.240 --> 0:10:56.760 wait and people trade on them. But the Home Depot 0:10:56.920 --> 0:11:00.959 forecast shows you what Corporate America sees go going forward, right, 0:11:01.000 --> 0:11:02.280 and it's not a pretty. 0:11:01.960 --> 0:11:04.240 Picture, all right, So let's see what our guests has 0:11:04.280 --> 0:11:06.960 to say about it. Mary Luke Gardner is Associate partner 0:11:07.040 --> 0:11:11.760 for CpG Retail and Logistics at Emphasis Consulting. She drews 0:11:11.840 --> 0:11:14.240 us on zoom from Naples, Florida. Hey, Mary Luke, good 0:11:14.240 --> 0:11:16.319 to have you here with Matt and myself. So all right, 0:11:16.679 --> 0:11:19.320 tell us what's more important retail sales, the data or 0:11:19.360 --> 0:11:21.520 home depot or you can say both, or you can 0:11:21.559 --> 0:11:22.080 see me either. 0:11:22.800 --> 0:11:28.520 Well, home depot is its own problem. So retail sales 0:11:28.679 --> 0:11:30.800 were really kind of just in line with the Consumer 0:11:30.840 --> 0:11:35.240 Price Index. There wasn't anything, you know, the expectations. They 0:11:35.280 --> 0:11:37.840 didn't quite meet, you know, they didn't meet the Wall 0:11:37.840 --> 0:11:42.559 Street expectations, but I don't think that they were not surprising. 0:11:43.520 --> 0:11:46.679 Home Depot on the other example, on the other side, 0:11:46.920 --> 0:11:49.080 is they really missed their estimates. 0:11:49.280 --> 0:11:49.439 Right. 0:11:49.520 --> 0:11:54.479 Their revenue dropped four point two percent. They did beat earnings, 0:11:54.600 --> 0:11:57.760 but their comp store growth was down. But that isn't 0:11:58.320 --> 0:12:00.720 that is a result of if you think about year 0:12:00.800 --> 0:12:03.320 over year, when people were stuck in their homes and 0:12:03.360 --> 0:12:06.560 they were, you know, looking around and saying, I need 0:12:06.600 --> 0:12:10.160 to make improvements, and people were spending more on big 0:12:10.200 --> 0:12:15.160 ticket items like appliances and grills and patio sets because 0:12:15.200 --> 0:12:17.319 they were home a little bit more. So there was 0:12:17.360 --> 0:12:20.439 a lot of spending that you wouldn't necessarily repeat year 0:12:20.520 --> 0:12:26.199 over year. And there's also you know, while inflation is 0:12:26.240 --> 0:12:30.320 still very much on the mindes of consumers, lumber hit 0:12:30.640 --> 0:12:34.480 costs have gone down pretty significantly. So the combination of 0:12:34.520 --> 0:12:38.280 those two, those two and then triangulate it with the 0:12:38.280 --> 0:12:43.280 weather extremes on the West Coast really impacted some of 0:12:43.480 --> 0:12:46.640 home depot's sales. So it'll be interesting to see. I 0:12:46.640 --> 0:12:48.760 know they took their guidance down, but it'll be interesting 0:12:48.800 --> 0:12:52.840 to see how long that new kind of that trend. 0:12:52.920 --> 0:12:55.640 And you know how people the consumers are spending in 0:12:55.720 --> 0:12:56.880 that particular sex. 0:12:56.960 --> 0:13:02.160 So essentially, consumers are spending least on projects that require 0:13:02.200 --> 0:13:05.840 them to buy lumber, and lumber prices have fallen, so 0:13:05.960 --> 0:13:09.200 home depots fat margins are now a lot skinnier than 0:13:09.240 --> 0:13:13.880 they were before. Correct, Yes, what does the consumer look 0:13:13.960 --> 0:13:15.600 like to you right now. This is another thing that 0:13:15.640 --> 0:13:20.640 Carol and I have been talking about. We saw, obviously 0:13:20.720 --> 0:13:24.040 the savings rate has just plummeted to nothing, and we've 0:13:24.040 --> 0:13:28.800 seen credit card debt balloon. What I can't get a 0:13:28.800 --> 0:13:30.920 handle on his bank balance is when we listen to 0:13:30.960 --> 0:13:34.280 people like Jamie Diamond, he says, they're still high, but 0:13:34.880 --> 0:13:38.959 surely they've come off. Otherwise consumers wouldn't need to be 0:13:39.000 --> 0:13:40.040 putting things on plastic. 0:13:40.920 --> 0:13:43.920 Well, but yeah, exactly, and credit has gone through the roof, 0:13:44.120 --> 0:13:46.920 and now the challenges around that. They're going to be 0:13:47.360 --> 0:13:50.319 higher interest rates, we're going to be tightening credit limits 0:13:50.800 --> 0:13:53.800 and so and there's a weaker job market. So you 0:13:53.960 --> 0:13:57.720 comminate all those things, consumers are starting to say, oh, 0:13:57.760 --> 0:14:00.640 you know, I need to be careful, and then you've 0:14:00.640 --> 0:14:03.680 got this, you know, you know, if we don't solve 0:14:03.679 --> 0:14:06.680 the debt ceiling problem, which hopefully we will, the news 0:14:06.720 --> 0:14:08.880 over the last hour at least appeared to be a 0:14:08.920 --> 0:14:13.840 little bit better that they're looking for a bipartisan solution, 0:14:14.880 --> 0:14:18.600 that if they don't, then we're in for an economic disaster. 0:14:18.720 --> 0:14:21.080 So I think consumers right now are just waiting and 0:14:21.120 --> 0:14:24.320 making sure that you know that they're not going to 0:14:24.400 --> 0:14:26.360 be losing their four oh one k on top of 0:14:26.400 --> 0:14:29.960 their you know, whatever savings they might have left that 0:14:30.000 --> 0:14:32.760 they had accumulated, you know, during the COVID time. 0:14:33.000 --> 0:14:35.040 So, Marri Lou, it's a big week for retail earnings, 0:14:35.080 --> 0:14:37.200 right We're going to hear from a bunch of companies 0:14:37.200 --> 0:14:41.280 throughout the week and then some But every retailer isn't 0:14:41.280 --> 0:14:43.960 the same, and we know that. So who do you 0:14:44.040 --> 0:14:50.520 think is best positioned considering the economic backdrop? Uh, you know, 0:14:50.640 --> 0:14:53.560 and if you look at individuals, you know, balance sheets, 0:14:53.640 --> 0:14:55.280 as Matt was just talking about, who do you think 0:14:55.320 --> 0:14:56.680 are the best positions? Who are not? 0:14:57.680 --> 0:15:01.360 My bet is on Walmart. I think that you know, 0:15:01.360 --> 0:15:04.160 there's a lot of consensus out there that Walmart versus Target, 0:15:05.240 --> 0:15:10.400 the you know, their their orientation towards delivering value, plus 0:15:10.440 --> 0:15:13.640 the fact that they're a grocery retailer, so you have 0:15:13.720 --> 0:15:17.800 to go in there. There's you're more there's more traffic 0:15:18.000 --> 0:15:21.440 driving through the Walmart door than the Target door. And 0:15:21.520 --> 0:15:24.880 so if you look at the Walmart Target debate right now, 0:15:25.520 --> 0:15:28.560 they've done a better job recovering from their problems that 0:15:28.600 --> 0:15:31.080 they had, you know, in the past year with inventory 0:15:31.120 --> 0:15:34.160 issues than Target has. So my bet would be in 0:15:34.200 --> 0:15:37.920 the Walmart that that they will come out hopefully with 0:15:38.120 --> 0:15:42.440 you know, better earnings, and then Target's got some work 0:15:42.480 --> 0:15:46.760 to do, I think, to regain that consumer and figure out, 0:15:46.920 --> 0:15:49.960 you know, what are they going to do? Particularly if 0:15:50.000 --> 0:15:53.040 there is this you know they're they they're seen as 0:15:53.080 --> 0:15:54.680 the high end of the Walmart. 0:15:54.760 --> 0:15:56.280 Yeah, I was gonna I was going to ask that 0:15:56.360 --> 0:15:59.520 merrily because I mean, we see we have Targets here 0:15:59.520 --> 0:16:01.200 in New York, so I get to go into at 0:16:01.280 --> 0:16:03.960 least smaller versions of I guess they must be bigger 0:16:04.440 --> 0:16:06.360 in the middle of the country, but there's no Walmarts 0:16:06.400 --> 0:16:11.640 around here. Is is Walmart a better bet if you're 0:16:11.640 --> 0:16:14.200 headed into a recession? Do they have lower prices? Is 0:16:14.200 --> 0:16:16.320 that one of those stores that consumers can go to 0:16:16.400 --> 0:16:20.680 if they can no longer afford the prices say at 0:16:20.680 --> 0:16:23.120 a Target? Or are they on a similar level. 0:16:22.880 --> 0:16:24.800 Because it's interesting Walmart and Target if you look at 0:16:24.800 --> 0:16:27.160 their share prices are both up about five percent this year. 0:16:29.080 --> 0:16:34.760 They are. But my bet right now is next we've bet? 0:16:34.920 --> 0:16:36.880 I think was it Walmart tomorrow or Target tomorrow? 0:16:37.040 --> 0:16:39.280 Target tomorrow and then Walmart the day after. 0:16:39.640 --> 0:16:44.120 I knew that they were with that that I think 0:16:44.120 --> 0:16:48.040 we're going to see that Walmart is winning that play 0:16:48.120 --> 0:16:53.160 right now. Target. Right the problem with Target is, you know, 0:16:53.560 --> 0:16:56.720 they haven't invested as heavily in private label and private label. 0:16:56.760 --> 0:17:00.920 We're seeing a lot of trade down from know the 0:17:01.080 --> 0:17:05.200 CpG companies, I mean P and G had earnings that 0:17:05.560 --> 0:17:07.919 really showed that they were losing the private label in 0:17:07.960 --> 0:17:10.640 this past year. And Walmart's done a really good job 0:17:10.720 --> 0:17:14.480 expanding their private label offerings. And well, Target has up 0:17:14.520 --> 0:17:16.920 and up and they've got their their brand. I don't 0:17:16.960 --> 0:17:19.520 think they've done as good of a job there, and 0:17:20.960 --> 0:17:22.960 I don't think they've done a good job just with 0:17:23.080 --> 0:17:29.119 their their brand equity as it relates to value. And 0:17:29.200 --> 0:17:32.600 so right now when we're looking at that you know, 0:17:32.760 --> 0:17:35.920 value proposition in certain markets, I think, well Walmart is 0:17:35.920 --> 0:17:36.280 going to win. 0:17:37.160 --> 0:17:39.800 Target, by the way, is out tomorrow before the market, 0:17:40.240 --> 0:17:44.080 before the bell, and then Walmart is out on Thursday 0:17:44.160 --> 0:17:47.320 morning before the bell correct And there's, like you mentioned, 0:17:47.359 --> 0:17:51.440 a ton of other tjmax Is out tomorrow, we get 0:17:52.280 --> 0:17:57.200 Bath and body Works on Thursday, raw stores on Thursday, 0:17:57.280 --> 0:18:00.840 so there's a lot of retail coming out. Do you 0:18:00.880 --> 0:18:03.280 think we're headed for a recession, Mary Lou, or are 0:18:03.400 --> 0:18:05.040 consumers girding for that? 0:18:06.680 --> 0:18:09.719 I think, you know, people are so nervous about it, 0:18:09.760 --> 0:18:13.159 but hopefully we can stave it off. I'm not one 0:18:13.200 --> 0:18:17.679 hundred percent convinced we can. But the other interesting thing, 0:18:17.720 --> 0:18:19.800 you know, you're talking about all those retailers that and 0:18:19.840 --> 0:18:21.520 you were saying. You know, you're in the city, so 0:18:21.600 --> 0:18:26.400 you see target in their small formats, but the retail 0:18:27.359 --> 0:18:32.399 traffic in the cities has gone down significantly versus the 0:18:32.480 --> 0:18:37.560 suburban areas. So there is this whole other dynamic happening 0:18:37.680 --> 0:18:40.159 right now because people aren't commuting into the cities at 0:18:40.240 --> 0:18:42.760 least not five days a week. You know, they're doing 0:18:42.880 --> 0:18:48.480 true a combination. So there's this whole other dynamic influencing 0:18:48.960 --> 0:18:52.440 retail right now, particularly in the urban markets where they 0:18:52.720 --> 0:18:56.120 do it's significant amount of volume where you've got retailers 0:18:56.119 --> 0:18:59.560 that are starting to pull out of certain markets or 0:18:59.640 --> 0:19:00.640 close stores. 0:19:00.840 --> 0:19:03.360 So there's just on that. On that note, Mary Lou, 0:19:03.480 --> 0:19:06.359 I heard someone today say Low's is better positioned in 0:19:06.440 --> 0:19:08.200 terms of where they are. Do you think that's true 0:19:08.200 --> 0:19:10.080 as well? And we only got about twenty seconds here. 0:19:11.440 --> 0:19:15.280 Ooh, I don't actually know Lowe's footprint as well as 0:19:15.280 --> 0:19:18.600 I know home Depots footprint, but they're different. 0:19:18.800 --> 0:19:20.399 They'll come back to you on that one because they 0:19:20.400 --> 0:19:21.479 are in different places. 0:19:21.520 --> 0:19:23.879 Home deepos down about ten percent this year. Low's has 0:19:23.960 --> 0:19:25.719 just called it flat. But I think from what I understand, 0:19:25.760 --> 0:19:27.800