WEBVTT - Bloomberg Intelligence: U.S Consumer Confidence Falls, Macy’s Closures 0:00:02.920 --> 0:00:10.840 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.880 --> 0:00:15.040 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:15.080 --> 0:00:18.079 Eastern on Apple card playing Android Auto with the Bloomberg 0:00:18.120 --> 0:00:21.440 Business App. Listen on demand wherever you get your podcasts, 0:00:21.640 --> 0:00:23.320 or watch us live on YouTube. 0:00:24.840 --> 0:00:27.520 So let's get to that consumer confidence data. So overall, 0:00:27.560 --> 0:00:29.400 as Paul and Jahmer talking about, coming in at one 0:00:29.400 --> 0:00:33.559 o six point seven, that is lower than January, and 0:00:33.600 --> 0:00:36.400 it also missed present situation not looking as great either, 0:00:36.479 --> 0:00:39.760 one forty seven point two, the expectation number coming in 0:00:39.760 --> 0:00:42.720 at seventy nine point eight. So Dana Peterson is chief 0:00:42.760 --> 0:00:45.640 economist over at the conference board. She helps to get 0:00:45.680 --> 0:00:48.599 through all this data. Hey Dan, what should my takeaway 0:00:48.640 --> 0:00:49.760 be from these numbers? 0:00:50.920 --> 0:00:53.120 I think the k takeaway is that the numbers are 0:00:53.159 --> 0:00:55.840 still pretty range bound. We haven't seen a breakout in 0:00:55.920 --> 0:00:58.840 confidence to the upside yet. We did see a dip 0:00:58.880 --> 0:01:03.680 in the measure for February, and January was also revised. 0:01:03.840 --> 0:01:07.800 I'm sorry for January, and then December was also revised downward. 0:01:07.840 --> 0:01:11.080 And certainly in this month reading, we saw that both 0:01:11.160 --> 0:01:16.960 expectations and current position. Current conditions were weaker and importantly, 0:01:17.000 --> 0:01:21.160 when we ask consumers about recession, that expectation ticked up 0:01:21.200 --> 0:01:24.080 a little bit after falling pretty steadily for many months. 0:01:24.640 --> 0:01:27.119 So what do we take here, I mean, how when 0:01:27.120 --> 0:01:29.959 we look at this consumer confidence data points, how do 0:01:30.000 --> 0:01:30.760 you guys look at it? 0:01:30.840 --> 0:01:35.640 What's a reasonable time series for you guys? Well, we 0:01:35.680 --> 0:01:37.160 look at it as a whole. 0:01:37.200 --> 0:01:39.720 There's a lot of information in there, and certainly when 0:01:39.720 --> 0:01:43.000 we look at the details, consumers were a little less 0:01:43.000 --> 0:01:47.400 optimistic about employment and business conditions right now. They also 0:01:47.480 --> 0:01:52.440 complained about their finances not being as strong currently. Also 0:01:52.560 --> 0:01:56.880 looking ahead, consumers were pretty unhappy about employment, business and 0:01:57.040 --> 0:02:02.040 income and their financial situations. They're expected financial situations were 0:02:02.040 --> 0:02:04.680 also a little bit worse. So we're still kind of 0:02:04.720 --> 0:02:07.360 just moving back and forth in the data, but I 0:02:07.400 --> 0:02:09.640 think some key things in the write in suggests that 0:02:09.680 --> 0:02:13.400 consumers are a little less concerned about food and energy prices, 0:02:14.240 --> 0:02:18.840 and certainly they are. We're showing that the expectations gauge 0:02:18.880 --> 0:02:21.520 continues to decline, so that's all good news on the 0:02:21.520 --> 0:02:25.120 inflation front, But they are more concerned about jobs going forward, 0:02:25.160 --> 0:02:28.120 and they're also more concerned about the political climate, and 0:02:28.160 --> 0:02:31.400 so we'll be watching not only the inflation gauges, but 0:02:31.480 --> 0:02:35.799 also the jobs gauges within this, because if consumers get 0:02:35.800 --> 0:02:39.040 the whiff that more layoffs are coming, then they'll pull 0:02:39.080 --> 0:02:42.480 back on spending and that'll contribute to slower growth over 0:02:42.520 --> 0:02:43.480 the course of this year. 0:02:44.280 --> 0:02:47.160 What am I still spending on and what have they 0:02:47.240 --> 0:02:47.920 now avoided? 0:02:49.520 --> 0:02:53.160 Well, consumers are definitely still spending on services. We see 0:02:53.200 --> 0:02:57.440 that in retail sales, we see that in the consumer 0:02:57.560 --> 0:03:01.320 spending data that the BEA puts out. But when it 0:03:01.360 --> 0:03:03.600 comes to goods, they are starting to pull back on 0:03:03.680 --> 0:03:09.080 things that require financing, so homes, cars, big ticket appliances, 0:03:09.120 --> 0:03:11.480 and that's because interest rates are high. And indeed, in 0:03:11.520 --> 0:03:16.040 this in today's report, consumers said that they don't expect 0:03:16.040 --> 0:03:19.000 interest rates to continue falling. They think interest rates might 0:03:19.040 --> 0:03:21.880 actually tick up. So that's pretty material when it comes 0:03:21.880 --> 0:03:24.840 to their buying attitudes for goods. But certainly when it 0:03:24.880 --> 0:03:27.600 comes to vacations, we did see a little bit of 0:03:27.600 --> 0:03:30.720 a pullback and expectations about going on vacations. But that's 0:03:30.760 --> 0:03:33.320 just one aspect of services, and we're really going to 0:03:33.360 --> 0:03:36.920 need to see the PCEE data this Friday to see 0:03:36.960 --> 0:03:40.960 about whether services consumption is still pretty robust. 0:03:40.640 --> 0:03:41.480 In the United States. 0:03:42.200 --> 0:03:43.880 Talk to us about the labor market and how that 0:03:44.160 --> 0:03:45.480 impacts consumer confidence. 0:03:45.480 --> 0:03:47.440 I would think that would be a big one, because 0:03:47.480 --> 0:03:48.080 it seems. 0:03:47.800 --> 0:03:49.960 Like everybody who's got a job has a job, and 0:03:50.000 --> 0:03:51.880 wages are going higher, so that's got to be helpful. 0:03:53.400 --> 0:03:56.440 Yes, I mean, when we look at payrolls, we saw 0:03:56.800 --> 0:04:03.080 really shockingly surprisingly strong numbers in January and December, and 0:04:03.120 --> 0:04:05.880 it wasn't just kind of your big three driving things. 0:04:05.880 --> 0:04:09.560 The big three are leisure and hospitality, government, and also 0:04:10.440 --> 0:04:13.800 healthcare and social assistance. You saw gains across the board, 0:04:13.840 --> 0:04:16.680 and you also saw an uptake contemporary employment for the 0:04:16.720 --> 0:04:20.960 first time in a little over a year. So those 0:04:21.040 --> 0:04:23.000 data are pretty good. But we need to continue to 0:04:23.040 --> 0:04:28.280 see improvement in the labor market or in terms of 0:04:28.320 --> 0:04:30.920 the gains being more broadly based, or else we're going 0:04:30.960 --> 0:04:33.960 to see weakness ahead. Indeed, you still do have some 0:04:34.120 --> 0:04:37.800 industries that are letting people go, certainly finance, tech, transportation, 0:04:37.880 --> 0:04:41.200 and warehousing. We don't think that's really going to improve. Also, 0:04:41.320 --> 0:04:45.240 residential constructions probably not can improve until interest rates start 0:04:45.320 --> 0:04:48.679 to fall more materially. So we're definitely watching the labor market. 0:04:48.680 --> 0:04:51.520 We think there will be weakness in the US economy 0:04:51.640 --> 0:04:55.840 slowing down probably around zero percent, between one and zero percent, 0:04:56.279 --> 0:04:58.520 a little bit of an uptake and unemployment rate before 0:04:58.520 --> 0:05:00.520 the end of this year to four point three set, 0:05:00.640 --> 0:05:02.800 but then we'll see things get better towards the end 0:05:02.800 --> 0:05:05.240 of the year. Certainly as a FED as we think 0:05:05.279 --> 0:05:08.359 we'll have begun cutting interest rates, probably starting around June, 0:05:08.560 --> 0:05:10.400 and then we'll cut interest rates further next year. 0:05:10.920 --> 0:05:14.640 So they're looking at sort of prices everyday, prices to 0:05:14.680 --> 0:05:16.520 sort of give them a read on inflation. They're looking 0:05:16.560 --> 0:05:19.000 at their job status to feel good about that. What 0:05:19.040 --> 0:05:21.760 other factors do they wind up looking for? Like, is 0:05:21.760 --> 0:05:23.559 it I'm gonna go buy a car and I don't 0:05:23.640 --> 0:05:26.520 like a five percent interest rate? Is it the mortgage rate? 0:05:26.760 --> 0:05:28.960 Is it the stock market? I know that the stock 0:05:29.000 --> 0:05:30.880 market's not the economy, but we have a four on 0:05:30.920 --> 0:05:33.760 one K probably pretty happy, which what has come through 0:05:33.800 --> 0:05:34.520 in the last year. 0:05:36.200 --> 0:05:38.279 I think consumers looking at all of that, and certainly 0:05:38.360 --> 0:05:41.880 we've seen that consumers have continued to spend, but some 0:05:41.960 --> 0:05:45.119 of that spending is depicit spending. They're using credit cards, 0:05:45.120 --> 0:05:47.760 so that means that you know, their real incomes are 0:05:47.760 --> 0:05:50.560 probably not rising as much and certainly is below the 0:05:50.560 --> 0:05:54.200 real spending that we've seen, and this isn't really sustainable. 0:05:54.880 --> 0:05:59.080 So but again, as many consumers are working, they still 0:05:59.120 --> 0:06:01.960 feel confident that they can put expenditures on the credit 0:06:02.040 --> 0:06:03.640 card and they'll be able to pay it off. But 0:06:03.680 --> 0:06:05.320 the thing is that if you fall behind, and we 0:06:05.400 --> 0:06:09.840 are seeing delinquencies rise, the cost of that credit is skyrocketed. 0:06:09.839 --> 0:06:13.000 And indeed, when you look at the amount of interest 0:06:13.040 --> 0:06:16.040 that people are paying in the PCEE data on debt, 0:06:16.080 --> 0:06:19.440 it's skyrocketed along with the amount of consumer credit card 0:06:19.520 --> 0:06:21.520 debt that's piling up. 0:06:22.240 --> 0:06:25.200 In terms of future expectations, the conference board expectations came 0:06:25.240 --> 0:06:28.760 in at seventy nine point eight last month versus last month, 0:06:28.839 --> 0:06:31.040 which was revised down to eighty one point five. 0:06:31.560 --> 0:06:33.479 Where would you like to see that? Where would economists 0:06:33.560 --> 0:06:34.680 like to see that number? 0:06:36.560 --> 0:06:38.680 Well, I mean the thing is that people always say 0:06:38.680 --> 0:06:41.839 economists they are dismal scientists, but really we are optimistic. 0:06:41.920 --> 0:06:46.760 And you know, anything above the eighty threshold signals that 0:06:46.800 --> 0:06:49.560 consumers think the economy is going to continue to expand, 0:06:49.600 --> 0:06:52.640 and that's always a hope among economists. But you know, 0:06:52.720 --> 0:06:55.760 this measure has been over and above eighty over the 0:06:55.839 --> 0:06:59.760 last few months, and certainly the uptick in the percentage 0:06:59.760 --> 0:07:02.120 saying that they think a recession might be on the 0:07:02.120 --> 0:07:06.040 horizon is disconcerting. So we want to continue to watch 0:07:06.040 --> 0:07:09.560 the data and see how consumers feel in line with 0:07:09.640 --> 0:07:13.160 the real data that gets pumped out by the government. 0:07:13.240 --> 0:07:17.280 So certainly we want to see better growth, but we 0:07:17.320 --> 0:07:19.680 see tremendous risks to the downside. 0:07:20.000 --> 0:07:22.200 All Right, Danny, thanks so much for joining us. Dan Peterson, 0:07:22.240 --> 0:07:23.880 chief economist at the Conference Board. 0:07:25.440 --> 0:07:29.320 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:07:29.400 --> 0:07:32.960 weekdays at ten am Eastern on applecar Play and Android 0:07:32.960 --> 0:07:35.720 Auto with the Bloomberg Business Act. You can also listen 0:07:35.840 --> 0:07:38.960 live on Amazon Alexa from our flagship New York station, 0:07:39.320 --> 0:07:42.120 Just say Alexa playing Bloomberg eleven thirty. 0:07:43.360 --> 0:07:44.960 Let's go to Macy's. 0:07:45.080 --> 0:07:47.000 That's not us now up by three point six percent. 0:07:47.200 --> 0:07:50.720 They're closing about one hundred and fifty namesake stores. Certain 0:07:50.760 --> 0:07:54.680 areas like Blue Mercury did pretty well, which, as I 0:07:54.720 --> 0:07:57.240 keep telling you guys, invest in your face is a thing. 0:07:57.640 --> 0:07:59.680 Okay, I think it's the time has past for John 0:07:59.720 --> 0:08:00.920 and I am no it's next. 0:08:01.240 --> 0:08:01.600 I know. 0:08:01.880 --> 0:08:04.360 I went into one of these stupid stories with my daughter. 0:08:04.640 --> 0:08:07.920 She wanted to whatever, the margins on these things must 0:08:07.960 --> 0:08:08.720 be incredible. 0:08:08.840 --> 0:08:10.760 Yes, I'm like, there was eighty. 0:08:10.560 --> 0:08:12.480 Dollars and they never go on You don't even want 0:08:12.480 --> 0:08:14.240 to know. And I spent on my skincare but they 0:08:14.280 --> 0:08:15.960 never go on sale. You just had to take it. 0:08:16.000 --> 0:08:19.160 And you can see that through Macy's numbers for Bloo Mercury. Anyway, 0:08:19.320 --> 0:08:20.920 Mary Ross Gilbert is going to help me out here 0:08:21.000 --> 0:08:24.800 Bloomberg Intelligence senior equity analysts covering retail. Okay, Mary, what 0:08:24.800 --> 0:08:27.040 did you make of Macy's quarter? And do you invest 0:08:27.080 --> 0:08:27.559 in your face? 0:08:30.760 --> 0:08:33.480 I invest in my face. That's why beauty has been 0:08:33.520 --> 0:08:37.840 the outperformer for almost anyone who announces, including when Dillard's 0:08:37.880 --> 0:08:41.360 came out with their numbers yesterday. So with Macy's for 0:08:41.360 --> 0:08:44.640 the quarter, they beat their estimates on sales and on 0:08:44.800 --> 0:08:48.280 earnings margins, so sort of across the board. But the 0:08:48.320 --> 0:08:51.680 focus really wasn't on how they did in the fourth quarter. 0:08:52.080 --> 0:08:55.560 It's really their new plan that was the big focus. 0:08:55.679 --> 0:08:58.960 The new plan and their guidance for the year. So 0:08:59.000 --> 0:09:03.360 their guidance came in softer than consensus, and I guess 0:09:03.400 --> 0:09:06.600 it's just no surprise just thinking about how department stores 0:09:06.600 --> 0:09:09.800 are under pressure, and we've seen it across the board 0:09:09.880 --> 0:09:14.040 with you know again, Dillard's showed some weakness yesterday. We're 0:09:14.080 --> 0:09:17.559 seeing it with Macy's in their outlook. But Macy's has 0:09:17.559 --> 0:09:22.880 a plan to address the department store model in shuttering 0:09:23.000 --> 0:09:25.960 one hundred and fifty underperforming stores and then they're going 0:09:26.000 --> 0:09:28.440 to invest in the three hundred and fifty remaining and 0:09:28.440 --> 0:09:30.319 those are going to be primarily an A and eight 0:09:30.360 --> 0:09:34.400 plus plus plus malls, and what they're going to do 0:09:34.520 --> 0:09:38.360 is increase the service levels. Beauty has been something they've 0:09:38.360 --> 0:09:41.880 been investing in almost every year and expanding the floor 0:09:41.920 --> 0:09:45.480 space dedicated to beauty. So you'll notice that if you 0:09:45.520 --> 0:09:48.320 walk into Macy's, you'll see that they have expanded the 0:09:48.360 --> 0:09:50.640 space and who knows, they could expand it again this year. 0:09:50.679 --> 0:09:53.280 We've been seeing it for the last five years that 0:09:53.280 --> 0:09:57.040 that space has been expanded. So there's a lot of 0:09:57.120 --> 0:10:00.440 details in what Macy's is doing. It's something they need 0:10:00.480 --> 0:10:02.720 to do. They really need to up their game, and 0:10:02.720 --> 0:10:07.880 that's exactly how they started their presentation, and that includes 0:10:08.360 --> 0:10:11.200 really making the assortments a lot better than they are 0:10:11.600 --> 0:10:14.760 because if you look at the inline store performance at malls, 0:10:15.120 --> 0:10:18.280 they're the ones that are executing, such as the Abercrombi's, 0:10:18.280 --> 0:10:20.640 the Urban outfitters, they're outperforming. 0:10:21.559 --> 0:10:23.719 So Mary I was kind of surprised to see this 0:10:23.960 --> 0:10:26.160 number of stores one p fifty because I kind of 0:10:26.200 --> 0:10:31.800 thought that this decade plus long shrinkage of department store 0:10:31.840 --> 0:10:34.960 footprints across the country by a lot of different companies, 0:10:35.920 --> 0:10:38.040 that was more or less kind of we're done that, 0:10:38.280 --> 0:10:40.280 or we're at near the finish line. So to see 0:10:40.280 --> 0:10:43.720 another big round of closings that kind of surprised me. 0:10:43.760 --> 0:10:45.200 Did it surprise the market at all? Or is this 0:10:45.240 --> 0:10:47.880 something that analyst and investors have been asking for. 0:10:49.320 --> 0:10:53.520 What Macy's had said is we don't need to close 0:10:53.559 --> 0:10:57.120 stores except for the usual stores that you close every year, 0:10:57.120 --> 0:11:01.280 which is maybe less than ten year. But the reason 0:11:01.679 --> 0:11:05.280 that they've decided to close them is because these stores 0:11:05.280 --> 0:11:07.880 were underperforming, but they were still profitable on a four 0:11:07.920 --> 0:11:10.679 wall basis, so historically that their thought was, well, if 0:11:10.679 --> 0:11:14.160 it's still profitable and we're still generating cash, we'll keep 0:11:14.200 --> 0:11:17.600 it open. And this time what they did is they 0:11:17.640 --> 0:11:22.120 took a more holistic approach and said, okay, even though 0:11:22.120 --> 0:11:25.320 it's four wall profitable. We could do a lot better 0:11:25.360 --> 0:11:28.560 with the funds that we could generate closing these stores, 0:11:28.640 --> 0:11:31.240 selling the real estate and redeploying it back into the 0:11:31.280 --> 0:11:33.760 existing store base. And for all the initiatives that they 0:11:33.800 --> 0:11:36.880 have going forward, it makes a lot of sense because 0:11:36.960 --> 0:11:42.040 that space, we really need to rethink the department store model. 0:11:42.080 --> 0:11:43.160 It has to evolve. 0:11:44.240 --> 0:11:44.520 Mary. 0:11:45.880 --> 0:11:50.440 Does this do enough to get activist investors off Macy's back? 0:11:52.800 --> 0:11:56.120 That is a good question. I think it may. I 0:11:56.160 --> 0:11:59.120 think it may. I think board has made it very 0:11:59.240 --> 0:12:03.960 clear that they are supporting this plan. Could they enhance 0:12:04.160 --> 0:12:07.719 the board with additional directors That could be a possibility, 0:12:07.760 --> 0:12:11.800 So learn more about that in the coming months. But 0:12:12.200 --> 0:12:15.559 I think that this plan is it's been decided that 0:12:15.600 --> 0:12:18.920 this is the move forward. And when you think about 0:12:18.920 --> 0:12:23.559 what's happening with the activists, it's usually it usually involves 0:12:23.559 --> 0:12:26.840 the real estate. And what we have seen in past 0:12:26.960 --> 0:12:31.720 transactions is the real estate is usually milked and it 0:12:31.760 --> 0:12:35.720 can be to the detriment of the retail operations, and 0:12:35.800 --> 0:12:41.520 so sometimes it's not always the best move. So they 0:12:41.520 --> 0:12:43.160 do have valuable real estate here. 0:12:43.360 --> 0:12:45.520 Talk to us about that, like a relative performance between 0:12:45.520 --> 0:12:48.720 like a Macy's store and a comparable Bloomingdale store. Is 0:12:48.720 --> 0:12:52.000 the Bloomingdale store maturely more profitable. 0:12:52.040 --> 0:12:52.679 I guess. 0:12:54.040 --> 0:12:58.280 Yes, they don't disclose the profitability on Bloomingdale's versus Macy's, 0:12:58.280 --> 0:13:02.520 but Bloomingdale's outperform, as does blooem Mercury. This year, their 0:13:02.520 --> 0:13:05.040 comp sales were down one point six percent because the 0:13:05.080 --> 0:13:09.160 aspirational luxury consumer is spending less. And we've been, you know, 0:13:09.320 --> 0:13:14.160 hearing about the overall luxury business being impacted, especially after 0:13:14.200 --> 0:13:20.080 we came off the post pandemic spending from stimulus checks 0:13:20.080 --> 0:13:25.320 that really had that aspirational customer going after luxury. So 0:13:25.480 --> 0:13:29.319 now that that's kind of you know, falling back, we're 0:13:29.320 --> 0:13:32.640 seeing more of a normalization. This is something Nordstrom asco slided, 0:13:33.080 --> 0:13:35.640 so their sales were just down one point six percent, 0:13:35.720 --> 0:13:39.040 but they think that could probably stabilize and go higher 0:13:39.160 --> 0:13:41.960 next year. And of course, you know, with the beauty 0:13:42.000 --> 0:13:45.360 side on luxury, you know that's posting positive comp sales, 0:13:45.720 --> 0:13:47.880 So that's that's stronger. 0:13:48.120 --> 0:13:51.320 Yeah, Mary, I was going to ask about then, the inventory. 0:13:52.040 --> 0:13:55.200 Macy's notoriously last year struggled with inventory. The last quarter 0:13:55.240 --> 0:13:57.160 we saw they really got to together. What did we 0:13:57.200 --> 0:13:58.719 learn this quarter about their inventory. 0:13:59.559 --> 0:14:02.640 Yeah, even though inventory was up two percent year every year, 0:14:03.240 --> 0:14:08.040 it's still down over twenty percent versus twenty nineteen. So 0:14:08.040 --> 0:14:12.520 they've really done a great job reducing their inventory and 0:14:12.760 --> 0:14:15.680 that means that they're having less clearance activity. This is 0:14:15.720 --> 0:14:19.200 something that's going to affect their first quarter because last 0:14:19.280 --> 0:14:22.600 year they had more clearance and this year less. So 0:14:24.400 --> 0:14:28.160 they're doing a great job overall. They've just been improving 0:14:28.160 --> 0:14:33.640 their execution with data technology, logistics, and they talked about 0:14:33.640 --> 0:14:35.560 that on the call. They're going to be even employing 0:14:35.600 --> 0:14:40.920 some generative AI. They've already been employing machine learning, so 0:14:41.960 --> 0:14:44.040 you know, we'll see more. And they're going to be 0:14:44.040 --> 0:14:47.120 streamlining operations. We didn't talk about that, but they're going 0:14:47.160 --> 0:14:50.960 to be consolidating some of their facilities, so they've really 0:14:51.160 --> 0:14:55.560 and they've reduced layers within the management structure, so overall 0:14:55.720 --> 0:15:01.160 simplifying the operations. So all of these things could restore 0:15:01.640 --> 0:15:03.760 positive growth in twenty twenty five. 0:15:04.760 --> 0:15:07.400 Mary, who's the retailer out there that you think is 0:15:07.440 --> 0:15:09.360 doing the best job. 0:15:11.240 --> 0:15:14.400 Of all of retail or just within the department store space, just. 0:15:14.400 --> 0:15:17.200 Kind of within your coverage because you cover a broad 0:15:17.440 --> 0:15:18.800 range of the retailers. 0:15:19.760 --> 0:15:24.240 Yeah, so I think that what we're seeing right now 0:15:24.400 --> 0:15:27.680 is some of the inline specialty retailers are doing really well. 0:15:27.720 --> 0:15:30.600 If you look at what Ralph Lauren has done, Ralph 0:15:30.680 --> 0:15:35.560 Lauren is outperforming. But what they did was they sort 0:15:35.560 --> 0:15:39.000 of retrenched the business they do supply to Macy's and 0:15:39.080 --> 0:15:43.640 other department store retailers with their wholesale business. But what 0:15:43.680 --> 0:15:46.760 they did is really focus on DTC direct to consumer. 0:15:47.120 --> 0:15:50.320 This is something other brands have been doing as well. 0:15:50.360 --> 0:15:54.200 But Ralph Lauren cut back on off price, they cut 0:15:54.240 --> 0:15:57.880 back on wholesale, they elevated the product so it's much 0:15:57.960 --> 0:16:02.720 higher quality, and then they've theated the overall consumer and 0:16:02.800 --> 0:16:06.760 so it's much more of a luxury brand now and 0:16:06.760 --> 0:16:10.120 and uh. But but they also do have, you know, 0:16:10.320 --> 0:16:14.720 some aspirational brands in their portfolio like Lauren Ralph Lauren, 0:16:14.840 --> 0:16:17.720 which you'll find at Macy's, and then you'll find Polo 0:16:17.800 --> 0:16:22.320 Ralph Lauren and Double R Ranch in their Bloomingdale's concept 0:16:22.400 --> 0:16:25.640 for example. Hey, Mary, I think Lauren's a good example. 0:16:25.920 --> 0:16:28.280 Mary. We appreciate it, Thank you very much, Mary Ross, 0:16:28.280 --> 0:16:31.400 Gilbert Bloomberg Intelligence and your equity analysts. But my point 0:16:31.480 --> 0:16:33.280 is that like, what if you can get men really 0:16:33.280 --> 0:16:34.320 invested in skincare. 0:16:35.320 --> 0:16:37.040 He's not like makeup on is he? 0:16:37.200 --> 0:16:41.640 No, he's in investing in his face. That's what it is. 0:16:41.640 --> 0:16:43.280 Can you become a certain age Tucker? 0:16:43.640 --> 0:16:47.280 You gotta do that at what age? Well? 0:16:47.560 --> 0:16:47.800 You know? 0:16:48.040 --> 0:16:53.560 Now anyway, intelligence, do you That's not good? 0:16:56.080 --> 0:16:59.920 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:17:00.120 --> 0:17:02.720 weekdays at ten am Eastern on Affo, card Play, and 0:17:02.720 --> 0:17:05.720 Android Otto with the Bloomberg Business App. Listen on demand 0:17:05.800 --> 0:17:09.440 wherever you get your podcasts, or watch us live on YouTube. 0:17:11.040 --> 0:17:13.760 Hes is down three point twenty five percent. It's one 0:17:13.760 --> 0:17:15.440 of the worst performing stocks in the S and P. 0:17:15.680 --> 0:17:19.080 Chevron is also off by two percent. Here's the interesting 0:17:19.160 --> 0:17:21.879 reason why so Chefron had a filing that came out 0:17:21.960 --> 0:17:24.359 late last night that said one of their risks about 0:17:24.359 --> 0:17:27.680 its takeover of Hesse is actually the fact that Exon 0:17:27.800 --> 0:17:32.119 and Sinook, which are partners with Hesse in Guyana, say 0:17:32.200 --> 0:17:35.119 they have the right of first refusal for Hess's portion 0:17:35.680 --> 0:17:38.600 of Guyana, which basically means that Exon and Sinok, which 0:17:38.600 --> 0:17:41.560 is a Chinese oil company, could bust up this merger 0:17:41.600 --> 0:17:45.240 between Chevron and Hess. So for nerds like me. This 0:17:45.400 --> 0:17:48.000 is cool, that's big, this is stuff that's happening. So 0:17:48.040 --> 0:17:50.560 for that I turned to Fernando Vali. He's Bloomberg Intelligence 0:17:50.560 --> 0:17:53.320 senior oil and gas analysts. Fernando, when we think about 0:17:53.359 --> 0:17:55.880 these mergers, we think about ooh, competing bids, we think 0:17:55.880 --> 0:17:59.000 about antitrust, we think about those things. We didn't think 0:17:59.000 --> 0:18:00.000 that this was going to happen. 0:18:01.040 --> 0:18:04.240 Yeah, Typically you don't see preemption rights on corporate takeovers. 0:18:04.240 --> 0:18:05.199 It's very rare. 0:18:05.680 --> 0:18:11.120 You saw it recently when Suncrep acquired Total Energies Canadian subsidiary, 0:18:11.119 --> 0:18:14.800 and there are some preemption rights there on Chronicle Philps 0:18:14.840 --> 0:18:18.359 acquiring fifteen percent of Sermid. But typically you're acquiring the 0:18:18.359 --> 0:18:21.919 whole company and the owner itself doesn't change, just the 0:18:21.960 --> 0:18:27.280 controller of it. So most joint operating agreements don't foresee 0:18:27.640 --> 0:18:30.560 for that to be a preemption right event. 0:18:31.480 --> 0:18:33.760 So what does the contract say here? It's got to 0:18:33.760 --> 0:18:36.480 be cut and dry. If I'm Chevron and I'm buying Hess, 0:18:37.119 --> 0:18:39.320 I have to have a high level of confidence that 0:18:39.359 --> 0:18:41.360 I'm going to get the Hess steak in Guyana. 0:18:42.200 --> 0:18:44.840 Well, all we can do is speculate because it's a 0:18:44.880 --> 0:18:49.639 private agreement. So we're not We are not really privy 0:18:49.640 --> 0:18:51.320 to the details of that contract. 0:18:51.680 --> 0:18:53.600 Has seemed to be very confident. 0:18:53.160 --> 0:18:54.840 That they will be able to push this through and 0:18:54.880 --> 0:18:58.200 there is no preemption rights. I would argue that that 0:18:58.359 --> 0:19:01.879 Guyana is the value the most valuable ascid In has 0:19:01.960 --> 0:19:04.400 his portfolio. I think most people would agree with that. 0:19:04.760 --> 0:19:09.200 And so, as Alex mentioned, if this if Guiana was excluded, 0:19:09.400 --> 0:19:14.199 then likely there's no deal for Chevron anyway, and so 0:19:14.840 --> 0:19:19.040 I doubt that that we'll get clarity in the next 0:19:19.040 --> 0:19:21.440 few days. But has seems to be fairly confident there's 0:19:21.520 --> 0:19:22.800 no preemption rights. 0:19:22.520 --> 0:19:23.119 In this case. 0:19:23.359 --> 0:19:25.919 So why is Chevron doing sorry, why is Exon doing this? 0:19:26.880 --> 0:19:29.400 Well, because it's the second best asset in the. 0:19:29.359 --> 0:19:31.120 World, So why isn't just buy Hess then? 0:19:32.600 --> 0:19:34.920 Because you know, they don't want to buy everything else 0:19:34.960 --> 0:19:36.000 that's included with Hes. 0:19:36.040 --> 0:19:37.240 They want to buy Guiana. 0:19:37.320 --> 0:19:39.760 And so why did't they do this before Chevron got 0:19:39.800 --> 0:19:40.240 into this? 0:19:41.960 --> 0:19:45.080 Probably because Hess wouldn't want to sell just Guiana. And 0:19:45.160 --> 0:19:48.840 now Chevron has laid out the marker, the pricing marker 0:19:48.880 --> 0:19:51.520 for it. And if you can just find a way 0:19:51.560 --> 0:19:55.080 to just get pull out the best asset out, why wouldn't. 0:19:54.760 --> 0:19:58.959 You so this is an exercise for the lawyers here. 0:19:59.000 --> 0:20:00.960 Who's got the better lawyer? I mean, that's what it 0:20:00.960 --> 0:20:02.399 comes down to. Do we have any sense as to 0:20:02.960 --> 0:20:04.520 when we're gonna get some visibility here? 0:20:06.000 --> 0:20:09.000 Probably within the next couple a month or two, I 0:20:09.000 --> 0:20:13.320 would expect some visibility. It does take the dragon tend 0:20:13.320 --> 0:20:17.120 to drag on with Konaco. It took upwards of two 0:20:17.160 --> 0:20:21.440 months to see the actual preemption and then to find 0:20:21.480 --> 0:20:23.960 a new over six months to get a new deal 0:20:24.000 --> 0:20:29.160 between Suncren to Hotel Energies. But I think probably within 0:20:29.200 --> 0:20:32.120 two months we'll get more clarity on this. It's really 0:20:32.160 --> 0:20:35.200 about the contract at this stage. And you know, if 0:20:35.200 --> 0:20:39.600 they were negotiated at a suitable way for Hess and 0:20:39.680 --> 0:20:42.440 Chevron back when the joint operating agreement. 0:20:42.040 --> 0:20:44.960 Was signed, how much of a bummer would this be 0:20:45.000 --> 0:20:47.600 for Mike where that Chevron if this deal collapsed. 0:20:48.520 --> 0:20:49.800 I mean, this would be huge. 0:20:49.880 --> 0:20:53.959 This is, as I said, the second best asset available 0:20:54.080 --> 0:20:57.119 for sale in it and you know, really that's the 0:20:57.119 --> 0:20:59.800 only block that has any production out of Guiana, any 0:21:00.119 --> 0:21:04.080 real potential as it stands. So if they lose out 0:21:04.080 --> 0:21:08.720 on that as a big part of the growth opportunity 0:21:08.720 --> 0:21:11.080 for Chevron and it puts X on a whole new 0:21:11.160 --> 0:21:14.280 level because now they would own upwards to sixty percent 0:21:14.320 --> 0:21:17.720 of that asset and give them a lot of growth 0:21:17.720 --> 0:21:21.200 over the next decade. You know, you don't spend sixty 0:21:21.240 --> 0:21:25.120 billion dollars on hes if you don't think that Kayana 0:21:25.200 --> 0:21:28.720 is a very very attractive development over the next ten 0:21:28.760 --> 0:21:29.440 to fifteen years. 0:21:29.480 --> 0:21:30.880 Yeah, And to your point, it's not like they can 0:21:30.920 --> 0:21:33.000 just like go buy the next asset, right Like, it's 0:21:33.040 --> 0:21:35.080 not like they're buying for areas in the Permian where 0:21:35.080 --> 0:21:37.120 there's a ton of producers where maybe you could look 0:21:37.119 --> 0:21:39.920 at different acres somewhere else. Like this is kind of 0:21:39.920 --> 0:21:42.720 a make or break it moment. If the deal does 0:21:42.800 --> 0:21:47.159