1 00:00:00,280 --> 00:00:11,440 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Intelligence 2 00:00:11,560 --> 00:00:13,680 Speaker 1: with Alex Steel and Paul Sweeney. 3 00:00:13,760 --> 00:00:17,000 Speaker 2: The real app performance has been in US corporate high yield. 4 00:00:17,160 --> 00:00:19,520 Speaker 3: Are the companies lean enough? Have they trimmed all the fats? 5 00:00:19,600 --> 00:00:23,200 Speaker 2: The semiconductor business is a really cyclical business. 6 00:00:22,840 --> 00:00:26,560 Speaker 1: Breaking market headlines and corporate news from across the globe. 7 00:00:26,600 --> 00:00:29,040 Speaker 3: Do investors like the M and A that we've seen? 8 00:00:29,240 --> 00:00:32,199 Speaker 2: These are two big time blue chip companies. 9 00:00:32,479 --> 00:00:35,839 Speaker 3: Window between the peak and count changing super fast. 10 00:00:36,120 --> 00:00:41,160 Speaker 1: Bloomberg Intelligence with Alex Steel and Paul Sweeney on Bloomberg Radio. 11 00:00:42,360 --> 00:00:44,840 Speaker 2: On Today's Bloomerg Intelligence Show, we dig inside the big 12 00:00:44,840 --> 00:00:47,199 Speaker 2: business stories impacting Wall Street and the global markets. 13 00:00:47,280 --> 00:00:49,280 Speaker 3: Each and every week we provide in depth research and 14 00:00:49,360 --> 00:00:51,080 Speaker 3: data on some of the two thousand companies and one 15 00:00:51,120 --> 00:00:53,680 Speaker 3: hundred and thirty industries our analysts cover worldwide. 16 00:00:53,880 --> 00:00:56,240 Speaker 2: Today, we'll look at why Apple is investing five hundred 17 00:00:56,280 --> 00:00:58,400 Speaker 2: billion dollars in the US over the next four years. 18 00:00:58,440 --> 00:01:00,960 Speaker 3: Plus, we'll discuss how the global reach tell giant Walmart 19 00:01:01,000 --> 00:01:03,400 Speaker 3: is navigating a second Donald Trump presidency. 20 00:01:03,760 --> 00:01:06,160 Speaker 2: First, we begin with big tech and the chip giant 21 00:01:06,200 --> 00:01:08,920 Speaker 2: and video This week and Vidia reported good but not 22 00:01:09,000 --> 00:01:09,800 Speaker 2: great earnings. 23 00:01:10,040 --> 00:01:12,280 Speaker 3: The company also warn the gross profit margins would be 24 00:01:12,319 --> 00:01:14,679 Speaker 3: tighter than anticipated as it rushes to roll out a 25 00:01:14,680 --> 00:01:16,160 Speaker 3: new chip design called Blackwell. 26 00:01:16,319 --> 00:01:18,080 Speaker 2: For more on this, we were joined by Gene Munster, 27 00:01:18,240 --> 00:01:20,679 Speaker 2: managing partner at deep Water Asset Management. 28 00:01:20,800 --> 00:01:23,240 Speaker 3: We first asked Gene for his take on Vidia earnings. 29 00:01:23,440 --> 00:01:27,200 Speaker 4: Well, the results were good but not great, And specifically 30 00:01:27,319 --> 00:01:30,920 Speaker 4: is the margin guidance at seventy one percent versus the 31 00:01:30,959 --> 00:01:33,600 Speaker 4: three to seventy two and there weren't a whispers that 32 00:01:33,640 --> 00:01:36,160 Speaker 4: they were going to lower margins. I think that really 33 00:01:36,200 --> 00:01:39,600 Speaker 4: stood out to me. The upside on revenue a billion 34 00:01:40,280 --> 00:01:42,760 Speaker 4: compares to the expectations of like a billion and a 35 00:01:42,800 --> 00:01:45,319 Speaker 4: half to two billion, and so I think that these 36 00:01:45,319 --> 00:01:47,840 Speaker 4: were good in the sense they did raise on revenue, 37 00:01:47,840 --> 00:01:51,160 Speaker 4: but not great effectively. What they're doing is pushing the 38 00:01:52,080 --> 00:01:55,560 Speaker 4: ramp to the back half of the year, especially on margins. 39 00:01:55,600 --> 00:01:57,200 Speaker 4: That's when the margins they said to kind of go 40 00:01:57,240 --> 00:01:59,360 Speaker 4: to seventy five percent. And I would add one other 41 00:01:59,400 --> 00:02:02,600 Speaker 4: piece to this is going into the print. I believe 42 00:02:02,640 --> 00:02:06,160 Speaker 4: that the most important point was related to commentary about 43 00:02:06,160 --> 00:02:09,160 Speaker 4: how sold out they were on Blackwell. This is a 44 00:02:09,200 --> 00:02:12,079 Speaker 4: metric that they typically give and last quarter they said 45 00:02:12,080 --> 00:02:14,720 Speaker 4: they were sold out. For basically three quarters of this year, 46 00:02:15,280 --> 00:02:18,600 Speaker 4: they were radio silent on the topic. They surprisingly didn't 47 00:02:18,600 --> 00:02:21,040 Speaker 4: get asked a question on it. But I think that 48 00:02:21,600 --> 00:02:26,000 Speaker 4: Jensen's comments about the need for compute being one hundred 49 00:02:26,040 --> 00:02:29,480 Speaker 4: to one million I double checked that on the transcript. 50 00:02:29,639 --> 00:02:32,480 Speaker 4: One hundred to one million times more compute needed for 51 00:02:32,600 --> 00:02:38,399 Speaker 4: reasoning and physical AI and robotics AI. That increase in compute, 52 00:02:38,800 --> 00:02:42,440 Speaker 4: I think gave investors some optimism that, well, this year 53 00:02:42,520 --> 00:02:45,480 Speaker 4: might not be the year that twenty twenty six is 54 00:02:45,520 --> 00:02:47,600 Speaker 4: going to grow faster than what people think. And so 55 00:02:48,280 --> 00:02:51,760 Speaker 4: set a different way is that the results and guidance 56 00:02:52,040 --> 00:02:55,040 Speaker 4: don't give a ton of optimism. But if you look 57 00:02:55,080 --> 00:02:58,600 Speaker 4: at where this ultimately could go, if you take what 58 00:02:58,720 --> 00:03:01,840 Speaker 4: Jensen is saying right to buy ten, that means they're 59 00:03:01,880 --> 00:03:04,040 Speaker 4: still going to comfortably beat the numbers next year. 60 00:03:05,040 --> 00:03:07,160 Speaker 3: Okay, there's a lot of unpack with that. So let's 61 00:03:07,160 --> 00:03:09,799 Speaker 3: go back to gross margins for a second. Based on 62 00:03:10,120 --> 00:03:12,600 Speaker 3: their call that gross margins will hit seventy five percent 63 00:03:12,600 --> 00:03:14,560 Speaker 3: in the back half of the year, when do we 64 00:03:14,600 --> 00:03:15,760 Speaker 3: think they're going to bottom? 65 00:03:16,120 --> 00:03:18,600 Speaker 4: So they got answered the guess that question on the call, 66 00:03:18,639 --> 00:03:20,600 Speaker 4: and they kind of sidestep it, but if you read 67 00:03:20,680 --> 00:03:23,920 Speaker 4: between the lines, they probably go lower again in the 68 00:03:24,000 --> 00:03:26,200 Speaker 4: July quarter. So there's an April quarter that we're in 69 00:03:26,280 --> 00:03:28,040 Speaker 4: right now than they go to the July quarter. My 70 00:03:28,120 --> 00:03:31,120 Speaker 4: guess is they probably bottom then at around seventy percent, 71 00:03:31,280 --> 00:03:36,440 Speaker 4: So effectively going from seventy to seventy five over six months, 72 00:03:36,440 --> 00:03:39,200 Speaker 4: it's a pretty big jump. At the time of the call, 73 00:03:39,280 --> 00:03:42,360 Speaker 4: the stock was up two percent in after hours when 74 00:03:42,440 --> 00:03:44,240 Speaker 4: they came to the last question on the call, which 75 00:03:44,360 --> 00:03:47,600 Speaker 4: was related to that ramp in margins and how realistic 76 00:03:47,760 --> 00:03:51,880 Speaker 4: is that if we have more export controls and the 77 00:03:52,000 --> 00:03:54,760 Speaker 4: answer was, we don't know how export controls are going 78 00:03:54,800 --> 00:03:57,120 Speaker 4: to impact our business, And immediately the stock went from 79 00:03:57,240 --> 00:04:00,000 Speaker 4: up call it two percent to down a half a percent. 80 00:04:00,280 --> 00:04:02,680 Speaker 4: We saw basically two percent move in it, and so 81 00:04:02,880 --> 00:04:06,800 Speaker 4: I think that speaks to investors saying like that's that's 82 00:04:06,800 --> 00:04:08,960 Speaker 4: a risk here is like are we really going to 83 00:04:08,960 --> 00:04:11,840 Speaker 4: get to that margin ramp we talked about the seventy 84 00:04:11,920 --> 00:04:14,800 Speaker 4: three percent margins for a tech company, for a hardware company. 85 00:04:15,160 --> 00:04:17,279 Speaker 4: I think at the end of the day, they're still remarkable. 86 00:04:17,400 --> 00:04:19,919 Speaker 4: But for these stocks to keep working, you need to 87 00:04:19,920 --> 00:04:23,320 Speaker 4: have margins at a minimum stable and growing. And I 88 00:04:23,400 --> 00:04:25,279 Speaker 4: just want to put one final thought on this Alex 89 00:04:25,360 --> 00:04:27,919 Speaker 4: is that ultimately I think margins will get back to 90 00:04:27,960 --> 00:04:29,479 Speaker 4: that seventy five percent. I don't know if it's going 91 00:04:29,520 --> 00:04:32,560 Speaker 4: to be in Q four early next year, but if 92 00:04:32,760 --> 00:04:34,479 Speaker 4: the ramp is what I think it's going to be 93 00:04:34,520 --> 00:04:36,040 Speaker 4: for next year, I think we're going to get back 94 00:04:36,080 --> 00:04:38,120 Speaker 4: to some go go days and video. 95 00:04:38,520 --> 00:04:42,320 Speaker 2: Geene, the driver for this stock tremendous performance over the 96 00:04:42,320 --> 00:04:45,160 Speaker 2: past two years has been beaten and raised by a 97 00:04:45,200 --> 00:04:48,560 Speaker 2: certain order of magnitude. If for no other reason than 98 00:04:48,560 --> 00:04:51,600 Speaker 2: the law of large numbers, that order of magnitude likely 99 00:04:51,640 --> 00:04:55,160 Speaker 2: will be lower. Can this stock continue to work with 100 00:04:55,680 --> 00:04:57,560 Speaker 2: the law of large numbers not giving in that two 101 00:04:57,680 --> 00:05:00,280 Speaker 2: three four billion dollar beat and raise every quarter? 102 00:05:01,320 --> 00:05:03,760 Speaker 4: I think it can. And just to put in perspective, 103 00:05:03,800 --> 00:05:05,800 Speaker 4: we've gone from a twenty billion dollar business a few 104 00:05:05,839 --> 00:05:07,400 Speaker 4: years ago. It's going to be about a two hundred 105 00:05:07,400 --> 00:05:10,200 Speaker 4: billion dollar business this year. But there's still our companies 106 00:05:10,240 --> 00:05:11,960 Speaker 4: apples a four hundred billion dollar business. I mean, you 107 00:05:12,000 --> 00:05:15,080 Speaker 4: can still continue to grow from that, and it doesn't 108 00:05:15,120 --> 00:05:18,400 Speaker 4: need to have that breathtaking growth. And I would come 109 00:05:18,480 --> 00:05:21,839 Speaker 4: back to the central question here. It's not about twenty 110 00:05:21,880 --> 00:05:25,200 Speaker 4: twenty five, it's the twenty three percent growth in calendar 111 00:05:25,240 --> 00:05:27,760 Speaker 4: twenty six, and do you think that the number is 112 00:05:27,800 --> 00:05:29,760 Speaker 4: going to be higher or lower than that? And ultimately 113 00:05:29,800 --> 00:05:31,000 Speaker 4: I think the number is going to be higher. I 114 00:05:31,040 --> 00:05:32,880 Speaker 4: think we're going to get back to a point where we, 115 00:05:33,440 --> 00:05:36,000 Speaker 4: despite the law of large numbers, we get to some 116 00:05:36,040 --> 00:05:39,880 Speaker 4: of those improving, those improving upsize and beats, and it 117 00:05:39,960 --> 00:05:42,839 Speaker 4: just comes down to what I think is a large 118 00:05:42,880 --> 00:05:45,440 Speaker 4: tam and what I still believe is a competitive advantage 119 00:05:45,480 --> 00:05:49,080 Speaker 4: that GPUs have over custom silicon, and we'll see how 120 00:05:49,080 --> 00:05:52,360 Speaker 4: that plays out. But that's essentially the debate that's going 121 00:05:52,400 --> 00:05:55,200 Speaker 4: on right now is just how much compute you need 122 00:05:55,200 --> 00:05:58,520 Speaker 4: and how defensible is Vidia. I think there's a boatload 123 00:05:58,520 --> 00:06:00,520 Speaker 4: of compute, much more than we realize it's going to 124 00:06:00,520 --> 00:06:02,120 Speaker 4: be needed, and I think in Videa's in a great 125 00:06:02,120 --> 00:06:04,000 Speaker 4: position related to that. We're going to have to wait 126 00:06:04,600 --> 00:06:08,200 Speaker 4: to get to those results, but I think anticipation of 127 00:06:08,240 --> 00:06:09,840 Speaker 4: that is going to be positive for the stock at 128 00:06:09,839 --> 00:06:10,599 Speaker 4: some point this year. 129 00:06:10,680 --> 00:06:13,240 Speaker 2: Our thanks to Gene Mounster, managing partner at deep Water 130 00:06:13,279 --> 00:06:14,560 Speaker 2: Asset Management. 131 00:06:14,160 --> 00:06:16,279 Speaker 3: We moved next to the Energy sector. This week, we 132 00:06:16,320 --> 00:06:20,080 Speaker 3: looked at the energy technologies company American Superconductor Corp. It's 133 00:06:20,160 --> 00:06:22,360 Speaker 3: NASDAK ticker is AMSC. 134 00:06:22,800 --> 00:06:26,279 Speaker 2: The firm specializes in using superconductors for the development of 135 00:06:26,480 --> 00:06:29,520 Speaker 2: diverse power systems, and the hope is to meet the 136 00:06:29,560 --> 00:06:32,000 Speaker 2: world's demand for smarter, cleaner, and better energy. 137 00:06:32,360 --> 00:06:35,200 Speaker 3: AMSC also recently reported third quarter earnings and said it's 138 00:06:35,240 --> 00:06:37,840 Speaker 3: revenue grew fifty five percent from a year ago. 139 00:06:38,279 --> 00:06:41,400 Speaker 2: For more on AMSC, we were joined by its CEO, 140 00:06:41,680 --> 00:06:42,480 Speaker 2: Daniel McGahn. 141 00:06:42,800 --> 00:06:45,200 Speaker 3: We first asked Daniel to describe what is company actually 142 00:06:45,279 --> 00:06:46,720 Speaker 3: does with regard to power. 143 00:06:47,160 --> 00:06:49,039 Speaker 5: We don't really make the power move the power, but 144 00:06:49,080 --> 00:06:50,919 Speaker 5: we make sure that the power is where it is 145 00:06:50,960 --> 00:06:51,680 Speaker 5: when it's needed. 146 00:06:52,040 --> 00:06:53,680 Speaker 3: So what does that wind up meaning so you can 147 00:06:53,720 --> 00:06:55,839 Speaker 3: tuck to the electricity basically. 148 00:06:55,720 --> 00:06:58,360 Speaker 5: Yeah, So if it's an industrial site in the manufacturer 149 00:06:58,360 --> 00:07:01,599 Speaker 5: that needs power at a certain level, certain frequency, we 150 00:07:01,720 --> 00:07:04,719 Speaker 5: modulate that and make it the right way for that factory. 151 00:07:05,000 --> 00:07:08,000 Speaker 5: Same thing if you're trying to deal with bringing generation 152 00:07:08,120 --> 00:07:11,400 Speaker 5: onto the grid or even different spots within the grid itself, 153 00:07:11,440 --> 00:07:13,400 Speaker 5: to bolster and make sure that the power can go 154 00:07:13,440 --> 00:07:14,200 Speaker 5: where it's needed. 155 00:07:14,600 --> 00:07:18,000 Speaker 2: All right, that sounds critical sounds important, but it doesn't 156 00:07:18,040 --> 00:07:20,000 Speaker 2: sound sexy. Are you guys getting caught up in that 157 00:07:20,160 --> 00:07:21,800 Speaker 2: AI and the need for energy? 158 00:07:21,880 --> 00:07:23,920 Speaker 5: And I don't. Yeah, I think we're getting caught up 159 00:07:23,920 --> 00:07:25,400 Speaker 5: in the need for energy. I think there's a lot 160 00:07:25,400 --> 00:07:28,680 Speaker 5: of drivers that are changing our need for power. If 161 00:07:28,680 --> 00:07:31,560 Speaker 5: you think about everything you do in your day now 162 00:07:31,640 --> 00:07:35,480 Speaker 5: requires electricity, and that can be from healthcare to data 163 00:07:35,520 --> 00:07:39,960 Speaker 5: to semiconductor manufacturing and everything in between. So power it 164 00:07:39,960 --> 00:07:42,720 Speaker 5: becomes more and more critical. We're becoming more dependent upon it. 165 00:07:42,920 --> 00:07:45,640 Speaker 5: And the grid really wasn't built for the modern era 166 00:07:45,720 --> 00:07:47,040 Speaker 5: of electricity. 167 00:07:46,640 --> 00:07:48,920 Speaker 3: And from that perspective, I mean just for a super 168 00:07:48,960 --> 00:07:51,920 Speaker 3: nerdy moment. You guys also make the conductors, right, like 169 00:07:51,960 --> 00:07:53,800 Speaker 3: the thing that so if you have a wind farm 170 00:07:53,840 --> 00:07:55,320 Speaker 3: and you need attached to a grid, there's like a 171 00:07:55,360 --> 00:07:57,480 Speaker 3: piece of equipment that you need to attach it. You 172 00:07:57,520 --> 00:08:00,480 Speaker 3: make those and those are in super super soon tight 173 00:08:00,520 --> 00:08:03,520 Speaker 3: demand like tons of demand, not on a supply, doesn't 174 00:08:03,520 --> 00:08:05,560 Speaker 3: matter what kind of power source that is. Am I accurate? 175 00:08:05,640 --> 00:08:07,920 Speaker 5: Yeah, And many of the suppliers are from overseas as well, 176 00:08:08,000 --> 00:08:10,240 Speaker 5: So we're kind of unique also being in an American 177 00:08:10,280 --> 00:08:13,760 Speaker 5: company making product in America with Americans and I think 178 00:08:13,880 --> 00:08:16,440 Speaker 5: that fits very well in today's climate where we're trying 179 00:08:16,480 --> 00:08:17,400 Speaker 5: to push the country. 180 00:08:17,600 --> 00:08:19,720 Speaker 2: What are the drivers for your company right here, right now? 181 00:08:19,760 --> 00:08:22,360 Speaker 2: I know you've recently reported earnings of what did you 182 00:08:22,400 --> 00:08:24,080 Speaker 2: identify as the drivers for your business? 183 00:08:24,800 --> 00:08:26,600 Speaker 5: A lot of it is this further in the need 184 00:08:26,680 --> 00:08:30,000 Speaker 5: for demand. A lot of it we're seeing our business 185 00:08:30,040 --> 00:08:33,560 Speaker 5: start to really with the reshoring of manufacturing capacity and 186 00:08:33,559 --> 00:08:37,440 Speaker 5: capability in America. All those operations need power, so we 187 00:08:37,480 --> 00:08:41,360 Speaker 5: see expansion in manufacturing that's starting to happen critically in 188 00:08:41,679 --> 00:08:44,320 Speaker 5: these critical elements if you want to deal with cars 189 00:08:44,360 --> 00:08:46,960 Speaker 5: and chips and AI and all those things. We sit 190 00:08:47,080 --> 00:08:49,880 Speaker 5: kind of secondarily that we help enable the power to 191 00:08:49,960 --> 00:08:53,160 Speaker 5: be there. But more and more operations are becoming more 192 00:08:53,200 --> 00:08:54,679 Speaker 5: dependent upon electricity. 193 00:08:55,320 --> 00:08:57,920 Speaker 3: So from that perspective, does it matter to you where 194 00:08:57,920 --> 00:09:00,839 Speaker 3: the electricity comes from? In that is the policy from 195 00:09:00,880 --> 00:09:04,200 Speaker 3: a Biden administration and transition to a Trump administration on 196 00:09:04,440 --> 00:09:06,920 Speaker 3: say energy and climate, does that matter? 197 00:09:07,400 --> 00:09:09,760 Speaker 5: Well, I'll say something that may not be popular, but 198 00:09:09,840 --> 00:09:12,520 Speaker 5: I'll still say that I think that the end result 199 00:09:12,640 --> 00:09:16,280 Speaker 5: and desire from both are the same. We want to 200 00:09:16,320 --> 00:09:19,520 Speaker 5: make sure that we're building an economy in America for Americans. 201 00:09:20,320 --> 00:09:22,760 Speaker 5: I think that was consistent with the last administration. It's 202 00:09:22,760 --> 00:09:25,760 Speaker 5: definitely consistent with the current administration. The question is the 203 00:09:25,760 --> 00:09:28,719 Speaker 5: policy and how how do we help enable it. Are 204 00:09:28,720 --> 00:09:32,400 Speaker 5: we trying to create a market that people want to 205 00:09:32,679 --> 00:09:35,280 Speaker 5: companies want to invest in, or is the government trying 206 00:09:35,320 --> 00:09:38,599 Speaker 5: to help foster that through money and through policy that 207 00:09:39,040 --> 00:09:41,080 Speaker 5: is more economic. At the end of the day, for us, 208 00:09:41,120 --> 00:09:43,760 Speaker 5: it doesn't quite matter. The problem is still the problem. 209 00:09:43,800 --> 00:09:46,959 Speaker 5: The grid needs to be improved. Utilities are working on that, 210 00:09:47,160 --> 00:09:51,160 Speaker 5: but as more manufacturing capacity comes online, there's need for 211 00:09:51,280 --> 00:09:53,800 Speaker 5: higher quality power and that's where we come in and 212 00:09:53,840 --> 00:09:56,599 Speaker 5: help solve those problems. Who do you compete against? A 213 00:09:56,679 --> 00:09:59,319 Speaker 5: lot of the big guys from your and what we 214 00:09:59,480 --> 00:10:02,280 Speaker 5: found is that be like Semens, It could be Semans 215 00:10:02,360 --> 00:10:05,000 Speaker 5: or ABB locally here in the US a small company 216 00:10:05,040 --> 00:10:08,720 Speaker 5: called General Electric. But what we've found is over the 217 00:10:08,720 --> 00:10:12,600 Speaker 5: past several years, our largest competitors have become very good customers. 218 00:10:13,480 --> 00:10:15,800 Speaker 5: And what we found is what we offer, the uniqueness 219 00:10:15,800 --> 00:10:18,160 Speaker 5: of what we do and the service that we provide, 220 00:10:19,080 --> 00:10:21,480 Speaker 5: it complements their offering and I think they're starting to 221 00:10:21,600 --> 00:10:24,280 Speaker 5: understand that we're not really a threat per se to 222 00:10:24,320 --> 00:10:26,719 Speaker 5: their business. We're a helpful solution to. 223 00:10:26,679 --> 00:10:27,360 Speaker 6: The end customer. 224 00:10:27,679 --> 00:10:30,320 Speaker 3: What inputs do you need for your business? So? What 225 00:10:30,360 --> 00:10:32,800 Speaker 3: things are tight for you? What things do you want 226 00:10:32,800 --> 00:10:33,680 Speaker 3: to help change? 227 00:10:33,840 --> 00:10:36,000 Speaker 5: When you say inputs, I think supply chaining. 228 00:10:36,120 --> 00:10:37,719 Speaker 3: That's what I'm and that's what I'm trying to get at. 229 00:10:37,760 --> 00:10:39,679 Speaker 3: So is it like the raw materials that you need 230 00:10:39,679 --> 00:10:41,360 Speaker 3: to build stuff in the US to themselves? 231 00:10:41,559 --> 00:10:44,200 Speaker 5: Yeah, almost everything that we make in the US, so 232 00:10:44,280 --> 00:10:47,640 Speaker 5: probably eighty five percent of our businesses here home in 233 00:10:47,640 --> 00:10:51,840 Speaker 5: the US manufactured here. Almost all of our supply chain, 234 00:10:52,040 --> 00:10:54,920 Speaker 5: probably more than ninety five ninety six percent is sourced 235 00:10:54,960 --> 00:10:58,480 Speaker 5: in the US. So the current applimate really puts us 236 00:10:58,480 --> 00:11:02,199 Speaker 5: in a unique opportunity that we may have unique opportunities 237 00:11:02,240 --> 00:11:05,880 Speaker 5: presented to us because we are American, American, made by Americans, 238 00:11:05,880 --> 00:11:10,800 Speaker 5: supplied mostly by American suppliers. When people talk about tariffs 239 00:11:10,800 --> 00:11:13,960 Speaker 5: and these kind of external policies, they don't have a 240 00:11:13,960 --> 00:11:16,800 Speaker 5: great impact on what we do now. They may. I 241 00:11:16,800 --> 00:11:18,360 Speaker 5: don't know how things are going to sort out. There's 242 00:11:18,360 --> 00:11:20,160 Speaker 5: a lot of rhetoric and then we'll see how reality 243 00:11:20,200 --> 00:11:22,880 Speaker 5: translates from that reetarc and really what gets put in place. 244 00:11:23,200 --> 00:11:25,040 Speaker 5: But a lot of this is trying to push the 245 00:11:25,080 --> 00:11:27,560 Speaker 5: country in a certain direction, and I think that general 246 00:11:27,559 --> 00:11:28,600 Speaker 5: direction is good for us. 247 00:11:29,080 --> 00:11:31,640 Speaker 2: So are you having conversations with your customers now? They 248 00:11:31,640 --> 00:11:33,599 Speaker 2: may be calling you them saying, hey, Dan, we're a 249 00:11:33,640 --> 00:11:36,520 Speaker 2: little nervous about what might be happening over the next three, six, 250 00:11:36,640 --> 00:11:39,600 Speaker 2: twelve months in terms of tariffs. Are they Are you 251 00:11:39,640 --> 00:11:41,440 Speaker 2: seeing that in your order flow or are you seeing 252 00:11:41,440 --> 00:11:42,920 Speaker 2: that maybe just in conversations you're having. 253 00:11:43,240 --> 00:11:46,840 Speaker 5: We're seeing that from companies in Canada, Mexico, We're seeing 254 00:11:46,840 --> 00:11:50,280 Speaker 5: that to some extent, some companies on the continent of Europe, 255 00:11:51,000 --> 00:11:53,280 Speaker 5: but certainly in the US they're comforted by the fact 256 00:11:53,320 --> 00:11:54,800 Speaker 5: of where we make it and how we make it 257 00:11:54,840 --> 00:11:56,360 Speaker 5: and where we source broughduct from. 258 00:11:56,400 --> 00:11:58,040 Speaker 3: Some of the headlines over the last couple of days 259 00:11:58,080 --> 00:12:01,160 Speaker 3: have evolved around tariffs on things like aluminum. Copper was 260 00:12:01,160 --> 00:12:04,800 Speaker 3: thrown into the mix yesterday. If that winds up denting 261 00:12:04,920 --> 00:12:06,800 Speaker 3: demand as and we're not going to build as much 262 00:12:06,800 --> 00:12:09,920 Speaker 3: manufacturing or industrial sites because it's just really expensive, how 263 00:12:09,920 --> 00:12:10,920 Speaker 3: does that trickle to you? 264 00:12:11,200 --> 00:12:13,440 Speaker 5: Well, I think the opposite's going to happen. The need 265 00:12:13,559 --> 00:12:15,800 Speaker 5: is going to persist. The question is can it absorb 266 00:12:15,840 --> 00:12:18,280 Speaker 5: the cost and there's going to have to be a 267 00:12:18,280 --> 00:12:20,960 Speaker 5: way to figure that out and find that out. But 268 00:12:21,040 --> 00:12:23,959 Speaker 5: I think all of the things that go into the 269 00:12:24,000 --> 00:12:27,199 Speaker 5: electric grid use all those materials, so they're going to 270 00:12:27,280 --> 00:12:30,720 Speaker 5: have to get sources. And if it makes American sourced 271 00:12:30,840 --> 00:12:34,840 Speaker 5: product more competitive, then so be it. From my standpoint, 272 00:12:34,880 --> 00:12:37,960 Speaker 5: it doesn't directly affect us because we're already sourcing most 273 00:12:37,960 --> 00:12:40,040 Speaker 5: of our principal equipment from the US. 274 00:12:40,440 --> 00:12:43,720 Speaker 2: Our thanks to amsc CEO Daniel mcgahann. 275 00:12:43,800 --> 00:12:45,199 Speaker 3: All right, coming up, we're going to break down why 276 00:12:45,200 --> 00:12:48,240 Speaker 3: the coffee giant Starbucks is cutting jobs across it's corporate ranks. 277 00:12:48,360 --> 00:12:51,280 Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 278 00:12:51,320 --> 00:12:53,480 Speaker 2: depth research and data on two thousand companies and one 279 00:12:53,600 --> 00:12:56,760 Speaker 2: hundred and thirty industries. You can access Bloomberg Intelligence VfB. 280 00:12:57,000 --> 00:12:58,040 Speaker 2: I go on the terminal. 281 00:12:58,160 --> 00:13:01,079 Speaker 3: I'm Paul swinging anmlex deal. This is Bloomberg. 282 00:13:05,440 --> 00:13:09,120 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 283 00:13:09,200 --> 00:13:12,319 Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android 284 00:13:12,320 --> 00:13:15,600 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 285 00:13:15,679 --> 00:13:19,720 Speaker 1: you get your podcasts, or watch us live on YouTube. 286 00:13:20,280 --> 00:13:22,640 Speaker 3: We moved next to news from the coffee giant Starbucks. 287 00:13:22,960 --> 00:13:25,679 Speaker 2: This week, the company announced that it's eliminating eleven hundred 288 00:13:25,760 --> 00:13:26,480 Speaker 2: corporate jobs. 289 00:13:26,600 --> 00:13:29,200 Speaker 3: The move by Starbucks has aimed at increasing efficiency and 290 00:13:29,240 --> 00:13:31,240 Speaker 3: revitalizing the company for more. 291 00:13:31,280 --> 00:13:34,400 Speaker 2: We were joined by Michael Halen Bloomberg Intelligence senior Restaurant 292 00:13:34,400 --> 00:13:35,400 Speaker 2: and food service Anaallygics. 293 00:13:35,400 --> 00:13:37,600 Speaker 3: We first asked Michael what he thinks of this week's news. 294 00:13:38,200 --> 00:13:40,800 Speaker 7: Well, you know, every situation is a little different. You know, 295 00:13:41,360 --> 00:13:43,360 Speaker 7: I did a lot of TV and radio last year 296 00:13:43,400 --> 00:13:46,720 Speaker 7: when Brian Nichol was hired, and you know, I said 297 00:13:46,760 --> 00:13:50,800 Speaker 7: he's going to instill a culture of transparency and accountability 298 00:13:50,840 --> 00:13:53,680 Speaker 7: and if you're not adding value, you know, you're probably 299 00:13:53,720 --> 00:13:55,880 Speaker 7: going to be shown the door. So this is really 300 00:13:55,920 --> 00:13:58,400 Speaker 7: not a surprise to us. It's not a surprise to 301 00:13:58,400 --> 00:14:02,120 Speaker 7: the street. It was communicated back in January. And you know, 302 00:14:02,160 --> 00:14:05,720 Speaker 7: we've seen a lot of senior management changes as well. 303 00:14:05,760 --> 00:14:08,640 Speaker 7: You know, this was a company that was performing pretty 304 00:14:08,640 --> 00:14:12,120 Speaker 7: poorly under the previous management team. I'm sure there was 305 00:14:12,240 --> 00:14:17,200 Speaker 7: plenty of deadweight in that large company, So not really 306 00:14:17,200 --> 00:14:17,960 Speaker 7: a surprise here. 307 00:14:18,640 --> 00:14:20,920 Speaker 3: What about them cutting all the drinks, like all the 308 00:14:20,920 --> 00:14:23,960 Speaker 3: stuff my daughter likes to order and I was thinking, 309 00:14:23,960 --> 00:14:25,960 Speaker 3: I joke, but really like, she's not gonna want anything 310 00:14:26,000 --> 00:14:28,520 Speaker 3: from Starbucks now, and they're no longer training her as 311 00:14:28,560 --> 00:14:30,760 Speaker 3: a ten year old to then come into Starbucks as 312 00:14:30,760 --> 00:14:31,440 Speaker 3: they get older. 313 00:14:32,200 --> 00:14:33,040 Speaker 7: Is that a bad thing? 314 00:14:33,600 --> 00:14:36,800 Speaker 3: Not for me, but I'm guessing for Starbucks maybe. 315 00:14:37,080 --> 00:14:39,760 Speaker 7: Well, you know, I think what they're trying to get 316 00:14:39,800 --> 00:14:44,040 Speaker 7: back to is what made Starbucks great. How did Starbucks 317 00:14:44,080 --> 00:14:46,680 Speaker 7: get to be you know, tens of thousands of stores 318 00:14:46,680 --> 00:14:51,280 Speaker 7: globally it was it was really by through the espresso, drinks, 319 00:14:51,320 --> 00:14:54,240 Speaker 7: through a great in store experience where the barista knew 320 00:14:54,320 --> 00:14:56,800 Speaker 7: your name right, and and so they're trying to get 321 00:14:56,840 --> 00:15:01,840 Speaker 7: back to a lot of those things. You know, they're 322 00:15:01,880 --> 00:15:05,480 Speaker 7: they're looking for that that core. Guess that's that's coming 323 00:15:05,480 --> 00:15:08,280 Speaker 7: in there multiple times a day and providing them a 324 00:15:08,320 --> 00:15:11,960 Speaker 7: great experience. I think that's a that's a smart path forward. 325 00:15:12,720 --> 00:15:12,920 Speaker 5: Mike. 326 00:15:12,960 --> 00:15:15,120 Speaker 2: You cover the whole restaurant space here. You see the 327 00:15:15,200 --> 00:15:19,040 Speaker 2: different price points. What are you seeing out there? How's 328 00:15:19,080 --> 00:15:22,920 Speaker 2: the consumer doing? From maybe just the data you see 329 00:15:22,920 --> 00:15:24,160 Speaker 2: about restaurant activity. 330 00:15:25,120 --> 00:15:27,560 Speaker 7: Yeah, so last year was a restaurant recession. You know, 331 00:15:27,640 --> 00:15:30,240 Speaker 7: we think things will be a little bit better here 332 00:15:30,240 --> 00:15:33,400 Speaker 7: in twenty twenty five, but it's been choppy kind of 333 00:15:33,440 --> 00:15:35,720 Speaker 7: to start the year. And a big problem has been 334 00:15:35,760 --> 00:15:39,720 Speaker 7: this cold weather. January was the coldest, you know, the 335 00:15:39,840 --> 00:15:42,560 Speaker 7: oldest January in like fourteen years, I think in the 336 00:15:42,640 --> 00:15:46,240 Speaker 7: United States. There was a significant amount of snow throughout 337 00:15:46,280 --> 00:15:48,720 Speaker 7: the United States in January and February. So there's been 338 00:15:48,720 --> 00:15:51,640 Speaker 7: a lot of closed restaurant days, and so it's been 339 00:15:51,680 --> 00:15:54,080 Speaker 7: a choppy start to the year for the restaurant space. 340 00:15:54,160 --> 00:15:56,160 Speaker 7: You know, we think it's going to be better than 341 00:15:56,160 --> 00:15:59,280 Speaker 7: twenty twenty four, but you know, we don't expect the 342 00:15:59,320 --> 00:16:03,040 Speaker 7: gang Busters year, mainly because of inflation still continuing to 343 00:16:03,560 --> 00:16:05,360 Speaker 7: crimp low income consumer spending. 344 00:16:05,720 --> 00:16:08,400 Speaker 3: Yeah, and also you know, for example, coffee prices are 345 00:16:08,400 --> 00:16:10,400 Speaker 3: really high. Egg price is still really high. Like those 346 00:16:10,440 --> 00:16:13,680 Speaker 3: things are pretty sticky. Going back to Starbucks for a second, 347 00:16:13,840 --> 00:16:17,440 Speaker 3: So the CEO, Brian Nicol, took over in September as 348 00:16:17,480 --> 00:16:21,000 Speaker 3: sales were declining. Obviously he's formerly of Chipotle. Do we 349 00:16:21,120 --> 00:16:23,880 Speaker 3: have this playbook from Chipotle and then how it's being implemented, 350 00:16:23,960 --> 00:16:26,080 Speaker 3: say into Starbucks, and if so, kind of where are 351 00:16:26,120 --> 00:16:26,560 Speaker 3: we in that. 352 00:16:27,960 --> 00:16:31,840 Speaker 7: Yeah, it's it's a little bit different but similar, right, 353 00:16:31,880 --> 00:16:33,600 Speaker 7: it's it's going to be number one. It's going to 354 00:16:33,640 --> 00:16:36,880 Speaker 7: be about nailing the operations, and they've worked hard to 355 00:16:36,960 --> 00:16:39,680 Speaker 7: make the jobs easier for the barises. You know, part 356 00:16:39,720 --> 00:16:42,360 Speaker 7: of the reason why they're not offering your daughter's favorite 357 00:16:42,400 --> 00:16:44,480 Speaker 7: drink is because they were difficult to make, right, and 358 00:16:44,480 --> 00:16:47,240 Speaker 7: it's because the barisas really didn't personally want to make them. 359 00:16:47,920 --> 00:16:53,080 Speaker 7: They added labor hours into the into the cafes to 360 00:16:53,160 --> 00:16:56,640 Speaker 7: help boost operations, right, and then from there it's it's 361 00:16:56,720 --> 00:17:00,720 Speaker 7: been spending more on marketing. This company has on invested 362 00:17:00,800 --> 00:17:04,600 Speaker 7: for a very long time on marketing, and now you 363 00:17:04,640 --> 00:17:07,280 Speaker 7: know they've been able to do that. They sell an 364 00:17:07,359 --> 00:17:12,600 Speaker 7: item that's pretty addictive, caffeine, right, but they've under invested 365 00:17:12,640 --> 00:17:16,200 Speaker 7: in marketing for a long time. And Starbucks is starting 366 00:17:16,480 --> 00:17:19,520 Speaker 7: to push the gas pedal on that. And it's they're saying, 367 00:17:19,560 --> 00:17:22,359 Speaker 7: it's they're starting to see better transaction data in the 368 00:17:22,480 --> 00:17:26,359 Speaker 7: US and we're starting to lap some really weak results 369 00:17:26,400 --> 00:17:29,960 Speaker 7: from last year, and so you know, I think they're 370 00:17:30,000 --> 00:17:32,240 Speaker 7: going to start to see some momentum on the top 371 00:17:32,280 --> 00:17:35,000 Speaker 7: line here before Starbucks, especially in the United States. 372 00:17:35,480 --> 00:17:37,720 Speaker 3: All Right, Thanks to Michael Hale and Bloomberg Intelligence Senior 373 00:17:37,760 --> 00:17:39,119 Speaker 3: restaurant and food service analyst. 374 00:17:39,520 --> 00:17:41,919 Speaker 2: We moved next to the news from the tech giant Apple. 375 00:17:42,320 --> 00:17:44,600 Speaker 2: This week, Apple said it we'll hire twenty thousand new 376 00:17:44,600 --> 00:17:47,560 Speaker 2: workers and invest five hundred billion dollars in the US 377 00:17:47,600 --> 00:17:48,480 Speaker 2: over the next four years. 378 00:17:48,720 --> 00:17:51,320 Speaker 3: This comes as Apple seeks relief from President Donald Trump's 379 00:17:51,320 --> 00:17:53,200 Speaker 3: tear off some goods imported from China. 380 00:17:53,440 --> 00:17:55,680 Speaker 2: For more, we were joined by Mark Derman, Bloomberg Chief 381 00:17:55,680 --> 00:17:57,280 Speaker 2: correspondent on Global Technology. 382 00:17:57,359 --> 00:17:59,960 Speaker 3: We first asked Mark how this news came about from Apple. 383 00:18:00,520 --> 00:18:05,439 Speaker 8: During the first Trump administration, Tim Cook other companies were 384 00:18:05,440 --> 00:18:08,639 Speaker 8: obviously very worried about tariffs, right, and so their strategy was, 385 00:18:09,520 --> 00:18:11,320 Speaker 8: we can try to make a deal here. What does 386 00:18:11,359 --> 00:18:16,479 Speaker 8: Trump want? Trump wants his supporters to know or see 387 00:18:16,520 --> 00:18:20,399 Speaker 8: that he's bringing jobs back to the US, bringing money 388 00:18:20,440 --> 00:18:23,359 Speaker 8: back to the US, bringing manufacturing back to the US. 389 00:18:24,240 --> 00:18:27,280 Speaker 8: Apple doesn't want tariffs on the phone, and it wants 390 00:18:27,280 --> 00:18:29,800 Speaker 8: to keep as much phone manufacturing in China as possible. 391 00:18:30,119 --> 00:18:31,800 Speaker 8: We don't have to get into the reasons why there's 392 00:18:32,359 --> 00:18:35,640 Speaker 8: a ton of them. Okay, So you have these two sides, right, 393 00:18:36,119 --> 00:18:38,280 Speaker 8: there is a universe in which both parties can get 394 00:18:38,320 --> 00:18:41,800 Speaker 8: exactly what they want. It's like a trade right, and 395 00:18:41,880 --> 00:18:48,480 Speaker 8: so you saw that strategy in full form Trump for months, obviously, 396 00:18:48,520 --> 00:18:51,359 Speaker 8: the secondministration has been talking again about bringing back jobs, 397 00:18:51,760 --> 00:18:55,680 Speaker 8: has been talking again about moving things to the US, 398 00:18:55,720 --> 00:18:58,600 Speaker 8: has been talking again about extra tariffs some goods from China. 399 00:19:00,000 --> 00:19:02,680 Speaker 8: Aple comes out with the press release We're investing five 400 00:19:02,760 --> 00:19:05,800 Speaker 8: hundred billion dollars in the US over the next four years, which, 401 00:19:05,840 --> 00:19:07,879 Speaker 8: by the way, that's. 402 00:19:07,840 --> 00:19:08,720 Speaker 5: Trump's term, right. 403 00:19:08,760 --> 00:19:14,600 Speaker 8: He just started, Okay, twenty thousand new jobs, AI server manufacturing, 404 00:19:14,640 --> 00:19:18,560 Speaker 8: Fox con in Houston, doubling our manufacturing fund from five 405 00:19:18,600 --> 00:19:22,480 Speaker 8: billion to ten billion, setting up a manufacturing academy like 406 00:19:22,520 --> 00:19:25,760 Speaker 8: a school in Detroit. So you ask yourself, what's really 407 00:19:25,800 --> 00:19:30,080 Speaker 8: going on here. They want Trump to know that they're 408 00:19:30,119 --> 00:19:33,760 Speaker 8: investing heavily in the US, and since we're doing that, 409 00:19:33,800 --> 00:19:36,639 Speaker 8: we don't want tariffs. And so the spin to Trump 410 00:19:36,760 --> 00:19:40,440 Speaker 8: is that we're doing this because of you. The reality 411 00:19:40,880 --> 00:19:43,639 Speaker 8: is somewhere in the middle. The reality is that Apple 412 00:19:43,680 --> 00:19:45,760 Speaker 8: has been investing as part of its business operations in 413 00:19:45,800 --> 00:19:49,439 Speaker 8: the US from the very beginning. The reality is in 414 00:19:49,440 --> 00:19:52,400 Speaker 8: twenty twenty one, Apple announced the four hundred and thirty 415 00:19:52,400 --> 00:19:56,720 Speaker 8: billion dollar investment in the US. The reality is that 416 00:19:56,760 --> 00:20:00,280 Speaker 8: Apple hires four thousand R and D employees year in 417 00:20:00,280 --> 00:20:04,359 Speaker 8: the US anyways, So what's actually new here? To be 418 00:20:04,400 --> 00:20:07,600 Speaker 8: fair to both Trump and Apple, there is a bit 419 00:20:07,640 --> 00:20:11,160 Speaker 8: of an acceleration. So their typical spend on the twenty 420 00:20:11,200 --> 00:20:18,639 Speaker 8: twenty one US Investment Plan eighty six billion dollars annually. Okay, 421 00:20:19,600 --> 00:20:22,080 Speaker 8: the new plan one hundred and twenty five billion dollars 422 00:20:22,080 --> 00:20:25,280 Speaker 8: a year annually. So you're getting a forty billion dollar 423 00:20:25,320 --> 00:20:30,760 Speaker 8: Trump under Trump, and you're moving from four thousand people 424 00:20:31,359 --> 00:20:33,400 Speaker 8: on the R and D side hired annually to five 425 00:20:33,480 --> 00:20:38,520 Speaker 8: thousand people. So incremental, sure, but definitely an acceleration. 426 00:20:39,560 --> 00:20:43,000 Speaker 5: Okay, one minute, is there a quid pro quote here? 427 00:20:43,200 --> 00:20:45,639 Speaker 2: Do you think Apple actually already has a deal with 428 00:20:45,680 --> 00:20:48,119 Speaker 2: President Trump that they will be exempt from tariffs? 429 00:20:48,440 --> 00:20:48,880 Speaker 3: No? 430 00:20:49,000 --> 00:20:52,320 Speaker 8: Okay, But Tim Cook went to Donald Trump's office last 431 00:20:52,359 --> 00:20:55,920 Speaker 8: week and presented this to him, said, we're going to 432 00:20:56,000 --> 00:20:59,200 Speaker 8: do this because of you man. Oh and by the way, 433 00:20:59,240 --> 00:21:02,400 Speaker 8: we don't want to pay tariffs. And Trump knows that 434 00:21:03,040 --> 00:21:08,919 Speaker 8: Trump doesn't care about giving Apple or a prieve on tariffs. 435 00:21:08,920 --> 00:21:11,080 Speaker 8: He's happy to do it, and he's happy to do 436 00:21:11,080 --> 00:21:12,720 Speaker 8: it and tell people that he did it because Tim 437 00:21:12,760 --> 00:21:16,600 Speaker 8: Cook is investing half a trillion dollars during his presidency. 438 00:21:17,000 --> 00:21:19,080 Speaker 8: He can go back to his supporters, his base, he 439 00:21:19,119 --> 00:21:21,240 Speaker 8: can go back to Congress. He can go back to 440 00:21:21,320 --> 00:21:23,840 Speaker 8: the world and tell them that the world's biggest technology company, 441 00:21:23,840 --> 00:21:26,480 Speaker 8: the most famous company in the world, is investing half 442 00:21:26,480 --> 00:21:30,399 Speaker 8: a trillion dollars. It's biggest investment commitment ever, right because 443 00:21:30,400 --> 00:21:32,080 Speaker 8: of me and for Trump, that's awesome. 444 00:21:32,240 --> 00:21:32,480 Speaker 5: Yep. 445 00:21:32,920 --> 00:21:35,159 Speaker 8: And for Tim Cook not having to pay tariffs is awesome. 446 00:21:35,520 --> 00:21:38,400 Speaker 8: And I think that's good enough to get some sort 447 00:21:38,440 --> 00:21:40,600 Speaker 8: of tariff for Prieve. And by the way, let's say 448 00:21:40,600 --> 00:21:44,600 Speaker 8: Trump doesn't give them a tariff for Prieve. Who cares? Right, 449 00:21:44,960 --> 00:21:46,760 Speaker 8: I was doing this anyways if I'm Tim Cook. 450 00:21:47,000 --> 00:21:50,639 Speaker 2: Thanks to Mark Derman, Blueberg Chief correspondent on global technology. 451 00:21:50,280 --> 00:21:52,480 Speaker 3: We move next to earnings from the home improvement retailer 452 00:21:52,480 --> 00:21:53,080 Speaker 3: home Depot. 453 00:21:53,240 --> 00:21:55,720 Speaker 2: Home Depot said it expects a key sales metric to 454 00:21:55,760 --> 00:21:58,119 Speaker 2: return to growth this year, and this comes despite the 455 00:21:58,119 --> 00:22:01,560 Speaker 2: company cautioning that housing the man won't change significantly in 456 00:22:01,560 --> 00:22:02,080 Speaker 2: the near term. 457 00:22:02,200 --> 00:22:04,640 Speaker 3: For more, we were joined by Drew Redding, Bloomberg Intelligence 458 00:22:04,720 --> 00:22:06,919 Speaker 3: US home building analysts. We first asked Drew for his 459 00:22:07,040 --> 00:22:08,080 Speaker 3: take on earnings. 460 00:22:08,320 --> 00:22:10,920 Speaker 9: It was a good quarter for them. Comp sales were 461 00:22:10,920 --> 00:22:13,320 Speaker 9: positive for the first time in eight quarters, so I 462 00:22:13,320 --> 00:22:15,920 Speaker 9: think that's something a lot of people are latching onto 463 00:22:15,960 --> 00:22:18,800 Speaker 9: on a positive indicator moving forward. You know, we came 464 00:22:18,880 --> 00:22:20,920 Speaker 9: into the quarter thinking that they could do a little 465 00:22:20,920 --> 00:22:24,160 Speaker 9: bit better than consensus on the comp line, really because 466 00:22:24,160 --> 00:22:26,280 Speaker 9: of some of the positive data we've been seeing coming 467 00:22:26,320 --> 00:22:30,480 Speaker 9: through in retail sales, along with the expectation that some 468 00:22:30,520 --> 00:22:33,000 Speaker 9: of the recent hurricane activity would benefit them, and that's 469 00:22:33,000 --> 00:22:35,639 Speaker 9: something they called out. They had about a two hundred 470 00:22:35,680 --> 00:22:38,680 Speaker 9: million dollar benefit from hurricanes, which is about a sixty 471 00:22:38,680 --> 00:22:42,800 Speaker 9: five basis point lift to comp sales. The guidance was 472 00:22:42,840 --> 00:22:46,119 Speaker 9: pretty positive. They're looking for about one percent growth next year, 473 00:22:46,160 --> 00:22:49,240 Speaker 9: which we think is appropriately conservative, and it's pretty much 474 00:22:49,240 --> 00:22:51,760 Speaker 9: in line with what we've heard from some other players 475 00:22:51,760 --> 00:22:54,399 Speaker 9: in the home improvement space who are looking for the 476 00:22:54,440 --> 00:22:57,640 Speaker 9: market to be flat to modestly hire next year. There's 477 00:22:57,680 --> 00:23:00,760 Speaker 9: really no incentive for them to come out be overly 478 00:23:00,840 --> 00:23:03,480 Speaker 9: optimistic for next year, given you know, the struggles we're 479 00:23:03,520 --> 00:23:04,520 Speaker 9: still seeing with housing. 480 00:23:05,480 --> 00:23:07,320 Speaker 3: I was struck by the fact they said they are 481 00:23:07,359 --> 00:23:09,840 Speaker 3: seeing more refis does that mean that people are going 482 00:23:09,920 --> 00:23:12,000 Speaker 3: to refly to then spruce up their house. 483 00:23:12,640 --> 00:23:15,679 Speaker 9: Yeah, I mean in order for this industry to see 484 00:23:15,840 --> 00:23:18,639 Speaker 9: more normalized growth going forward, that's something you're certainly going 485 00:23:18,720 --> 00:23:21,760 Speaker 9: to need to see, is people tapping that home equity 486 00:23:22,040 --> 00:23:25,679 Speaker 9: undertaking larger scale renovations. It's still one of the areas 487 00:23:25,680 --> 00:23:28,199 Speaker 9: that's kind of holding back growth. They cite it, you know, 488 00:23:28,359 --> 00:23:32,040 Speaker 9: kitchens and baths as a particular area of weakness, and 489 00:23:32,080 --> 00:23:35,399 Speaker 9: the reason is because those projects are typically financed. So 490 00:23:35,440 --> 00:23:37,560 Speaker 9: while they did mention that they saw a little bit 491 00:23:37,600 --> 00:23:39,919 Speaker 9: of improvement, it's still nowhere near you know, what the 492 00:23:39,960 --> 00:23:41,879 Speaker 9: industry would need to see in order to get more 493 00:23:42,000 --> 00:23:43,320 Speaker 9: robust growth going forward. 494 00:23:43,680 --> 00:23:45,800 Speaker 2: Hey, Drew, it may shock you to learn that I 495 00:23:45,840 --> 00:23:50,199 Speaker 2: spend very little time in either Home Depot or a Lows. 496 00:23:51,760 --> 00:23:53,760 Speaker 2: How does the street different shape between you too? Because 497 00:23:53,760 --> 00:23:55,399 Speaker 2: I'm look at the stocks over the last five years 498 00:23:55,800 --> 00:23:57,919 Speaker 2: they both up, you know, eleven, twelve, thirteen percent on 499 00:23:57,920 --> 00:24:01,359 Speaker 2: a compound of basis to this, I'm sureholders are on HD. 500 00:24:01,480 --> 00:24:02,640 Speaker 2: Do they own Lows as well? 501 00:24:02,680 --> 00:24:03,480 Speaker 5: How do you differentiate? 502 00:24:03,960 --> 00:24:07,000 Speaker 9: Yeah, So the main point of differentiation between the two 503 00:24:07,240 --> 00:24:11,000 Speaker 9: is really their customer exposure. You remember, home depot is 504 00:24:11,000 --> 00:24:15,879 Speaker 9: about fifty percent DIY fifty percent professional contractor, whereas Lows 505 00:24:15,960 --> 00:24:20,240 Speaker 9: is about seventy percent DIY thirty percent pro customer. You know, 506 00:24:20,280 --> 00:24:22,919 Speaker 9: as we look forward, we think that the primary engine 507 00:24:22,920 --> 00:24:25,040 Speaker 9: of growth for the industry is going to be from 508 00:24:25,080 --> 00:24:28,119 Speaker 9: professional contractors. As you start to look out ahead and 509 00:24:28,160 --> 00:24:30,360 Speaker 9: you do see people tap that home equity, we think 510 00:24:30,359 --> 00:24:31,879 Speaker 9: that's where a lot of the growth is going to 511 00:24:31,920 --> 00:24:35,200 Speaker 9: come from. You know, for Lows, as I mentioned, they've 512 00:24:35,240 --> 00:24:37,720 Speaker 9: really been focused on DIY, but over the last couple 513 00:24:37,760 --> 00:24:40,560 Speaker 9: of years, they're starting to transform their business to cater 514 00:24:40,760 --> 00:24:43,359 Speaker 9: more towards that professional contractor because I think they realize 515 00:24:43,359 --> 00:24:46,600 Speaker 9: that's where the growth opportunity is now for for home 516 00:24:46,640 --> 00:24:49,720 Speaker 9: depots specifically. You know, their strategy is to go after 517 00:24:49,720 --> 00:24:53,600 Speaker 9: an untapped two hundred billion dollar market for more complex pros, 518 00:24:53,960 --> 00:24:56,600 Speaker 9: which are those looking at you know, larger scale remodeling 519 00:24:56,640 --> 00:24:59,639 Speaker 9: projects that span a lot of product categories, and they 520 00:24:59,640 --> 00:25:02,960 Speaker 9: want to con and solidate those contractor vendor relationships so 521 00:25:03,000 --> 00:25:04,600 Speaker 9: they could become the one stop shop. 522 00:25:04,840 --> 00:25:07,520 Speaker 2: So if lumber is such a big part of these businesses, 523 00:25:07,960 --> 00:25:10,800 Speaker 2: what are they saying about tariffs? If I would guess 524 00:25:10,800 --> 00:25:12,920 Speaker 2: they get a lot of their lumber from I don't know, Canada. 525 00:25:13,480 --> 00:25:16,440 Speaker 9: Yeah, surprisingly, it wasn't really an emphasis of the call 526 00:25:17,119 --> 00:25:20,159 Speaker 9: home depot and Lows are among the largest importers of 527 00:25:20,200 --> 00:25:23,240 Speaker 9: goods as you would expect, but over the last several years, 528 00:25:23,240 --> 00:25:25,800 Speaker 9: I mean, the point is really that since the last 529 00:25:26,400 --> 00:25:29,640 Speaker 9: time this administration put larger tariffs into place, they've really 530 00:25:29,680 --> 00:25:32,199 Speaker 9: diversified their supply chains out of some of the markets 531 00:25:32,200 --> 00:25:34,919 Speaker 9: that are most in dependent, like a China. Now a 532 00:25:35,040 --> 00:25:37,800 Speaker 9: majority of their products, the costs of good is still 533 00:25:38,640 --> 00:25:42,280 Speaker 9: sourced domestically, but they certainly do have exposure to China 534 00:25:42,320 --> 00:25:44,439 Speaker 9: and some other markets, and we would expect to see 535 00:25:44,640 --> 00:25:47,040 Speaker 9: somewhat of a margin impact, you know, as these tariffs 536 00:25:47,080 --> 00:25:48,200 Speaker 9: continue to go through. 537 00:25:48,440 --> 00:25:51,480 Speaker 2: Our Thanks did you're writing Bloomberg Intelligence US homebolding analyst 538 00:25:51,640 --> 00:25:52,160 Speaker 2: coming up on. 539 00:25:52,119 --> 00:25:54,760 Speaker 3: The program and look at how Walmart CEO Doug McMillan 540 00:25:54,840 --> 00:25:56,960 Speaker 3: is navigating a second Donald Trum presidency. 541 00:25:57,200 --> 00:26:00,119 Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 542 00:26:00,160 --> 00:26:02,560 Speaker 2: depth research and data on two thousand companies and one 543 00:26:02,600 --> 00:26:05,400 Speaker 2: hundred and thirty industries. You can access Bloomberg Intelligence via 544 00:26:05,480 --> 00:26:06,560 Speaker 2: b I go on the terminal. 545 00:26:06,680 --> 00:26:09,560 Speaker 3: I'm Paul Sweeney and a'm alex Deal and this is Bloomberg. 546 00:26:16,240 --> 00:26:20,160 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch the program 547 00:26:20,240 --> 00:26:23,640 Speaker 1: live weekdays at ten am Eastern on Applecarplay and Android 548 00:26:23,680 --> 00:26:26,679 Speaker 1: Auto with the Bloomberg Business app. You can also listen 549 00:26:26,760 --> 00:26:30,040 Speaker 1: live on Amazon Alexa from our flagship New York station. 550 00:26:30,560 --> 00:26:33,920 Speaker 1: Just say Alexa Play Bloomberg eleven thirty. 551 00:26:34,160 --> 00:26:38,200 Speaker 3: We move now to investor Warren Buffett's multinational conglomerate Berkshire Hathaway. 552 00:26:38,440 --> 00:26:41,119 Speaker 2: The company recently said it's fourth quarter earnings were about 553 00:26:41,160 --> 00:26:44,800 Speaker 2: fourteen billion dollars, higher than analysts expected. Berkshire also said 554 00:26:44,840 --> 00:26:46,960 Speaker 2: that it has more than three hundred and thirty four 555 00:26:47,080 --> 00:26:49,200 Speaker 2: billion dollars in cash, a record high. 556 00:26:49,320 --> 00:26:52,400 Speaker 3: For more. We were joined by Matthew Palazoa, Bloomberg Intelligence 557 00:26:52,440 --> 00:26:54,160 Speaker 3: Senior analyst for P and C Insurance. 558 00:26:54,320 --> 00:26:56,520 Speaker 2: We first asked Matthew what some of the highlights were 559 00:26:56,520 --> 00:26:57,880 Speaker 2: from Berkshire's earnings report. 560 00:26:58,000 --> 00:27:02,119 Speaker 10: Big earnings jump from the year ago due to their 561 00:27:02,280 --> 00:27:06,040 Speaker 10: most exciting and best business in my view, the insurance business. 562 00:27:06,960 --> 00:27:07,360 Speaker 6: There. 563 00:27:07,880 --> 00:27:12,040 Speaker 10: We've been probably talking a while about auto insurance prices 564 00:27:12,080 --> 00:27:15,120 Speaker 10: going up, and that is really showing through in the 565 00:27:15,119 --> 00:27:18,000 Speaker 10: results of auto insurance companies like all Stay, Progressive and 566 00:27:18,119 --> 00:27:21,200 Speaker 10: Geico at Berkshire. So that was one of the big drivers. 567 00:27:21,400 --> 00:27:24,960 Speaker 10: Another one was their investment income. So they've been selling 568 00:27:25,000 --> 00:27:27,440 Speaker 10: a lot of stock, as you said, their cash pile 569 00:27:27,480 --> 00:27:31,159 Speaker 10: which is three hundred and thirty four billion dollars going 570 00:27:31,440 --> 00:27:35,240 Speaker 10: up and up, and the investment income on that has 571 00:27:35,480 --> 00:27:36,680 Speaker 10: rose dramatically as well. 572 00:27:37,280 --> 00:27:38,639 Speaker 3: So how much cash does he have now? 573 00:27:38,760 --> 00:27:42,080 Speaker 10: So three hundred and thirty four billion in cash, that's 574 00:27:42,119 --> 00:27:42,520 Speaker 10: just cash. 575 00:27:42,920 --> 00:27:44,000 Speaker 3: It's my tiny little brain. 576 00:27:44,080 --> 00:27:48,040 Speaker 10: Yeah, good problem to have, right, you're going up? Yeah, 577 00:27:48,040 --> 00:27:49,240 Speaker 10: I mean, and what has. 578 00:27:49,119 --> 00:27:51,720 Speaker 3: Happened is O can you imagine? Put that in a mark? 579 00:27:51,800 --> 00:27:52,840 Speaker 3: Is fun? What you're throwing off? 580 00:27:53,200 --> 00:27:56,560 Speaker 10: Sure, they're getting about eleven billion dollars in investment income 581 00:27:56,640 --> 00:27:59,520 Speaker 10: a year just on their fixed investments, and that's incredibly 582 00:27:59,520 --> 00:28:01,280 Speaker 10: short term you know T bills. 583 00:28:01,680 --> 00:28:01,920 Speaker 3: Right. 584 00:28:02,440 --> 00:28:05,440 Speaker 2: The reality is the problem, if there is a problem, 585 00:28:05,960 --> 00:28:08,359 Speaker 2: is and it's been this way for years, and there's 586 00:28:08,400 --> 00:28:11,040 Speaker 2: just nowhere to put that money. I mean, to find 587 00:28:11,119 --> 00:28:15,080 Speaker 2: something of that scale is almost impossible. 588 00:28:15,119 --> 00:28:17,199 Speaker 10: Yeah, he talks a lot about that that there's not 589 00:28:17,359 --> 00:28:19,600 Speaker 10: much they can do to move the needle on results. 590 00:28:19,880 --> 00:28:22,080 Speaker 10: They bought Allegheny a couple of years ago. That was 591 00:28:22,080 --> 00:28:25,560 Speaker 10: thirteen billion dollars they've put I don't know the exact number, 592 00:28:25,560 --> 00:28:31,760 Speaker 10: but several billion into these Japanese trading house investments, so 593 00:28:31,760 --> 00:28:34,720 Speaker 10: they've been putting money to work. But none of those 594 00:28:34,760 --> 00:28:37,520 Speaker 10: really moved the needle. And they sold a ton of 595 00:28:37,520 --> 00:28:40,080 Speaker 10: Apple stock they sold in the fourth quarter, particularly, they 596 00:28:40,080 --> 00:28:42,120 Speaker 10: sold a bunch of Bank of America stock, which we 597 00:28:42,200 --> 00:28:44,360 Speaker 10: knew was going to happen, So there weren't really any 598 00:28:44,360 --> 00:28:49,120 Speaker 10: other surprises as far as stock moves. They bought Constellation Brands, 599 00:28:49,360 --> 00:28:52,680 Speaker 10: which you know makes beverages. I don't know all that 600 00:28:52,720 --> 00:28:54,280 Speaker 10: much about them. They put about a billion and a 601 00:28:54,320 --> 00:28:57,440 Speaker 10: half to work at that, so we So what. 602 00:28:57,360 --> 00:28:59,880 Speaker 3: Does Warren Buffett say about the market being overvalued or not? 603 00:29:00,440 --> 00:29:03,040 Speaker 3: And what does he say about say AI trade? 604 00:29:03,520 --> 00:29:05,480 Speaker 10: Probably not much. He didn't say, you know, nothing that 605 00:29:05,560 --> 00:29:07,960 Speaker 10: I've heard, you know, Warren Buffett and interviews or anything. 606 00:29:08,000 --> 00:29:10,960 Speaker 10: We've got the annual meeting coming up in May, so 607 00:29:11,040 --> 00:29:14,040 Speaker 10: he probably I would be shocked if he doesn't get 608 00:29:14,120 --> 00:29:18,000 Speaker 10: one question on AI at least at this point. You know, 609 00:29:18,240 --> 00:29:24,320 Speaker 10: they're not huge investors in tech names, obviously Apple notwithstanding 610 00:29:26,320 --> 00:29:29,280 Speaker 10: the investment managers might be more interested in stuff like that, 611 00:29:29,360 --> 00:29:32,320 Speaker 10: and he does. He had said in his annual letter, 612 00:29:32,360 --> 00:29:34,920 Speaker 10: it won't be long before greg Abel's the CEO, so 613 00:29:34,960 --> 00:29:37,680 Speaker 10: he kind of always acknowledges that and kind of more 614 00:29:37,680 --> 00:29:38,800 Speaker 10: building towards the future. 615 00:29:39,640 --> 00:29:43,520 Speaker 2: So if I'm buying BRK today, Berkshire Hathaway, what's my 616 00:29:43,600 --> 00:29:44,960 Speaker 2: investment theme. 617 00:29:45,520 --> 00:29:47,880 Speaker 10: It's tough because in the earnings I didn't see a 618 00:29:47,880 --> 00:29:50,239 Speaker 10: lot of things that were, you know, telling me, oh, 619 00:29:50,280 --> 00:29:53,280 Speaker 10: this is these are positive signals for the future earnings 620 00:29:53,320 --> 00:29:58,280 Speaker 10: of Berkshire. Necessarily, Berks's got a huge retail ownership, so 621 00:29:58,320 --> 00:30:00,480 Speaker 10: there's kind of some of that moves it. The fact 622 00:30:00,480 --> 00:30:03,600 Speaker 10: that the earnings beat by a lot didn't impress me. 623 00:30:03,800 --> 00:30:07,000 Speaker 10: You know, we knew about Geico improving. They also had 624 00:30:07,000 --> 00:30:11,200 Speaker 10: a lot of insurance favorable loss reserve development, which means 625 00:30:11,960 --> 00:30:15,360 Speaker 10: they sell the business, their claims come out later, so 626 00:30:15,400 --> 00:30:17,960 Speaker 10: they don't know the claims what happened as their claims 627 00:30:18,000 --> 00:30:19,640 Speaker 10: turned out to be a lot better. But in the 628 00:30:19,680 --> 00:30:22,440 Speaker 10: third quarter they had adverse development. So the things that 629 00:30:22,480 --> 00:30:26,160 Speaker 10: pushed their earnings were not too impressive. The operating businesses 630 00:30:26,200 --> 00:30:30,200 Speaker 10: like the railroad had a one time comp expense in it. 631 00:30:30,200 --> 00:30:32,960 Speaker 10: It seems to me like earnings probably will not grow 632 00:30:33,440 --> 00:30:36,400 Speaker 10: in twenty five just because of these items and insurance 633 00:30:36,760 --> 00:30:40,680 Speaker 10: and even the other underlying businesses, it'll be modest, if 634 00:30:41,120 --> 00:30:41,920 Speaker 10: much growth at all. 635 00:30:42,400 --> 00:30:45,800 Speaker 3: So because I'm me, I'm really into a warm Buffett's 636 00:30:45,800 --> 00:30:49,480 Speaker 3: steak and Oxy. So it's an oil company, but they're 637 00:30:49,480 --> 00:30:52,520 Speaker 3: also doing a lot of director capture and which basically 638 00:30:52,520 --> 00:30:53,960 Speaker 3: you get carbon out of the air and you put 639 00:30:53,960 --> 00:30:55,880 Speaker 3: it in the ground. But the reason why he has 640 00:30:55,960 --> 00:30:58,200 Speaker 3: a stake that he continues to build. But originally it 641 00:30:58,240 --> 00:31:00,200 Speaker 3: was when Oxy was buying in a darko and they 642 00:31:00,240 --> 00:31:01,920 Speaker 3: needed some funding and they needed it fast, and so 643 00:31:01,960 --> 00:31:04,719 Speaker 3: we got a sweetheart deal. The rumor always is that, oh, 644 00:31:04,760 --> 00:31:05,920 Speaker 3: he's going to buy the company. 645 00:31:06,280 --> 00:31:09,400 Speaker 10: So he flat out said, I'm not looking to buy 646 00:31:09,440 --> 00:31:10,840 Speaker 10: the whole company. I think it was at the last 647 00:31:10,880 --> 00:31:13,160 Speaker 10: annual meeting and I was writing the day before, maybe 648 00:31:13,160 --> 00:31:16,600 Speaker 10: they'll Buyoxy so and then he came out and literally 649 00:31:16,640 --> 00:31:18,640 Speaker 10: threw cold water on it. They did buy more stock 650 00:31:19,080 --> 00:31:22,160 Speaker 10: in the fourth quarter and the first quarter, and like 651 00:31:22,200 --> 00:31:25,600 Speaker 10: you said, Alex, he made a very typical Buffet deal, 652 00:31:25,640 --> 00:31:28,040 Speaker 10: like this is a company that desperately needs cash, We're 653 00:31:28,040 --> 00:31:30,480 Speaker 10: going to get a great deal from them. But he 654 00:31:30,640 --> 00:31:34,640 Speaker 10: has repeatedly talked about the management of the company and 655 00:31:34,680 --> 00:31:37,480 Speaker 10: how he likes how the positions, so I don't think 656 00:31:37,480 --> 00:31:39,720 Speaker 10: it was you know, it wasn't just taking that sweetheart deal. 657 00:31:39,760 --> 00:31:42,560 Speaker 10: He does like the forward look of the company. Also, 658 00:31:42,640 --> 00:31:46,040 Speaker 10: Greg Abel, the future CEO, is an energy guy, so 659 00:31:46,160 --> 00:31:48,160 Speaker 10: I assume he played, you know, a big role in 660 00:31:48,160 --> 00:31:49,000 Speaker 10: that whole deal. 661 00:31:50,440 --> 00:31:51,480 Speaker 2: What about this Able guy? 662 00:31:51,480 --> 00:31:52,080 Speaker 5: Do we like him? 663 00:31:52,360 --> 00:31:54,080 Speaker 2: We've not had a few years to get the nome ring. 664 00:31:54,080 --> 00:31:56,760 Speaker 10: I think we like him. We don't know a ton honestly, 665 00:31:56,840 --> 00:31:59,800 Speaker 10: Like Buffett has him with him in interviews, he has 666 00:32:00,160 --> 00:32:02,640 Speaker 10: in the annual meetings. He will be there again, I 667 00:32:02,680 --> 00:32:04,960 Speaker 10: think from they'd said it in the report, he'll be 668 00:32:04,960 --> 00:32:08,600 Speaker 10: there for I believe most of the time with Buffett. 669 00:32:09,160 --> 00:32:11,560 Speaker 10: Mostly what I'm going on is how Buffett talks about him. 670 00:32:11,680 --> 00:32:14,880 Speaker 10: Talks about him in terms of capital allocation, you know, 671 00:32:15,240 --> 00:32:19,080 Speaker 10: and he always praises his managers. One thing I think 672 00:32:19,120 --> 00:32:21,680 Speaker 10: you could point to is that Able has taken over 673 00:32:21,720 --> 00:32:24,040 Speaker 10: a lot of the day to day So a lot 674 00:32:24,080 --> 00:32:28,280 Speaker 10: of the managers of the company's Berkshire owns call Buffett 675 00:32:28,320 --> 00:32:31,720 Speaker 10: and he's kind of nicely gently passed them on to Able. 676 00:32:32,640 --> 00:32:35,360 Speaker 10: So you know, if things are going well, they're probably 677 00:32:35,400 --> 00:32:37,240 Speaker 10: going well due to greg ables effort all. 678 00:32:37,160 --> 00:32:40,120 Speaker 3: Right, thanks to Matthew Palizola, Bloomberg Intelligence, Senior Analyst for 679 00:32:40,120 --> 00:32:41,040 Speaker 3: P ANDC Insurance. 680 00:32:41,240 --> 00:32:43,600 Speaker 2: This week we focused on a Bloomberg Big Take story 681 00:32:43,720 --> 00:32:46,560 Speaker 2: entitled Walmart Wants to be Something for Everyone in a 682 00:32:46,680 --> 00:32:49,760 Speaker 2: Divided America. You can find it on Bloomberg dot Com 683 00:32:49,760 --> 00:32:50,520 Speaker 2: and The Terminal. 684 00:32:50,760 --> 00:32:53,120 Speaker 3: The story looks at how Walmart's CEO Doug McMillan is 685 00:32:53,160 --> 00:32:56,520 Speaker 3: navigating a second Donald Trump presidency while going after Amazon's 686 00:32:56,560 --> 00:32:57,600 Speaker 3: e commerce crown. 687 00:32:58,000 --> 00:33:00,160 Speaker 2: For more, we were joined by one of the stories authors, 688 00:33:00,240 --> 00:33:04,560 Speaker 2: Devin Leonard, Bloomberg BusinessWeek's senior Global Business writer. First asked 689 00:33:04,560 --> 00:33:07,280 Speaker 2: Devin about how Walmart is trying to position itself today. 690 00:33:07,720 --> 00:33:09,840 Speaker 6: Well, I mean, it's it's a really interesting time to 691 00:33:09,960 --> 00:33:13,520 Speaker 6: be doing a story about Walmart because it's Doug McMillan's 692 00:33:13,640 --> 00:33:16,000 Speaker 6: I guess it's just a little past his first decade, 693 00:33:16,080 --> 00:33:19,480 Speaker 6: and he he took the company through through this transformation. 694 00:33:19,680 --> 00:33:22,400 Speaker 6: Just I mean, you know, when he came in twenty fourteen, 695 00:33:23,120 --> 00:33:25,120 Speaker 6: they were just you know, considered it in that clueless. 696 00:33:25,120 --> 00:33:29,320 Speaker 6: They were behind not just Amazon but eBay and Apple, 697 00:33:29,720 --> 00:33:32,400 Speaker 6: and you know he sort of turned them into you know, 698 00:33:32,600 --> 00:33:35,400 Speaker 6: an actual you know Amazon rival, you know, at least 699 00:33:35,520 --> 00:33:37,479 Speaker 6: they had a future. So now he's trying to do 700 00:33:39,560 --> 00:33:41,200 Speaker 6: you know, you know, trying to turn it into into 701 00:33:41,320 --> 00:33:44,440 Speaker 6: sort of more of a real tech company with its big, 702 00:33:44,480 --> 00:33:48,200 Speaker 6: expensive campus and also you know all of these you know, 703 00:33:48,240 --> 00:33:50,920 Speaker 6: not just Walmart dot com, but you know, a marketplace 704 00:33:50,960 --> 00:33:53,840 Speaker 6: for a third place sellers, you know, you know, you know, 705 00:33:53,880 --> 00:33:56,239 Speaker 6: online advertising and all those things. And of course, as 706 00:33:56,280 --> 00:33:58,520 Speaker 6: you pointed out, he's trying to do it, you know, 707 00:33:58,680 --> 00:34:01,960 Speaker 6: all at a time when when Donald Trump's come back, 708 00:34:02,520 --> 00:34:04,720 Speaker 6: you know, you know, to you know, to Washington and 709 00:34:05,480 --> 00:34:09,520 Speaker 6: you know, you know, you know, very aggressively pursuing you know, 710 00:34:09,560 --> 00:34:13,479 Speaker 6: the second term term agenda. So so, but you know, 711 00:34:13,480 --> 00:34:16,200 Speaker 6: they're trying to hold on to their to their you know, 712 00:34:16,640 --> 00:34:19,520 Speaker 6: I don't want to say downscale customers, but their core customers, 713 00:34:19,840 --> 00:34:23,239 Speaker 6: while you know, reaching out to you know, up upscale customers, 714 00:34:23,800 --> 00:34:27,680 Speaker 6: you know, primarily online and also navigating you know, tariffs, 715 00:34:28,000 --> 00:34:29,760 Speaker 6: you know and all that stuff, but also and also 716 00:34:30,560 --> 00:34:35,600 Speaker 6: kind of moderating his his sort of political positions or 717 00:34:35,680 --> 00:34:39,000 Speaker 6: you know, positions on socialations as CEO. As we've seen 718 00:34:39,480 --> 00:34:42,720 Speaker 6: in the last couple of months, rolling back DEI basically 719 00:34:42,760 --> 00:34:44,480 Speaker 6: not being as critical as Trump, you know, as he 720 00:34:44,640 --> 00:34:47,200 Speaker 6: was during Trump's first administration. So you know, it's a 721 00:34:47,280 --> 00:34:49,759 Speaker 6: it's a difficult kind of balancing act, but that's what 722 00:34:49,760 --> 00:34:51,000 Speaker 6: he's trying to do well. 723 00:34:51,040 --> 00:34:53,840 Speaker 3: Also in the piece, you guys talk about their opening 724 00:34:53,920 --> 00:34:56,440 Speaker 3: of the three hundred and fifty AC or Walmart campus. 725 00:34:56,880 --> 00:34:59,799 Speaker 3: The pictures are amazing. It's not yet done, but they 726 00:34:59,840 --> 00:35:02,759 Speaker 3: have like a fitness center, they have meditation rooms, they 727 00:35:02,800 --> 00:35:06,160 Speaker 3: got pickleball cords, shops, restaurants and brewery like. 728 00:35:06,480 --> 00:35:11,480 Speaker 6: What now, Well, that's I mean, it was it was 729 00:35:11,480 --> 00:35:13,799 Speaker 6: pretty It was pretty fun, you know, I mean, just 730 00:35:14,000 --> 00:35:16,520 Speaker 6: the whole town and has changed a lot thought. I mean, 731 00:35:16,640 --> 00:35:19,000 Speaker 6: you know, Jay One had actually been there a couple 732 00:35:19,040 --> 00:35:21,200 Speaker 6: of times, when more recently because she covers walmartel all 733 00:35:21,200 --> 00:35:22,759 Speaker 6: the time. The last time I was down there was 734 00:35:22,760 --> 00:35:24,600 Speaker 6: two thousand and five when I wrote a cover story 735 00:35:24,640 --> 00:35:29,440 Speaker 6: for one of our competitors about Fortune. But sorry about Fortune. 736 00:35:29,520 --> 00:35:32,880 Speaker 6: Fortune was the magazine, Uh it was. It was a 737 00:35:32,880 --> 00:35:35,520 Speaker 6: piece about Walmart. But but but we spent you know, 738 00:35:35,560 --> 00:35:39,400 Speaker 6: four days down there. The last day we're really really 739 00:35:39,800 --> 00:35:44,200 Speaker 6: on campus and everything. But I mean, you know, both 740 00:35:44,840 --> 00:35:48,480 Speaker 6: both you know, McMillan and Walmart and the Walton family 741 00:35:48,520 --> 00:35:51,080 Speaker 6: who control you know, forty percent of you know the company. 742 00:35:52,080 --> 00:35:55,720 Speaker 6: You know, they're trying to both turn the company and 743 00:35:55,920 --> 00:35:59,200 Speaker 6: Bentonville into a place that will attract you know that 744 00:35:59,320 --> 00:36:01,960 Speaker 6: you know, top town people, you know who from Silicon 745 00:36:02,040 --> 00:36:05,160 Speaker 6: Valley who might not have come to Walmart and Bettonville 746 00:36:05,320 --> 00:36:07,280 Speaker 6: other otherwise. So it's all part of a big push 747 00:36:07,760 --> 00:36:11,040 Speaker 6: to do that and to retain people you know, you 748 00:36:11,040 --> 00:36:13,800 Speaker 6: know as they as they become this company that's for 749 00:36:13,920 --> 00:36:15,800 Speaker 6: the top ranks. It's not a bunch of lifers anymore. 750 00:36:15,800 --> 00:36:18,960 Speaker 6: It's people from PayPal, people from Amazon, you know, people 751 00:36:18,960 --> 00:36:20,839 Speaker 6: from Instacart and a lot of stuff. So that's really 752 00:36:20,880 --> 00:36:21,720 Speaker 6: what that's all about. 753 00:36:22,000 --> 00:36:26,360 Speaker 2: And I guess the makeover of Walmart into a really 754 00:36:26,880 --> 00:36:30,960 Speaker 2: extraordinarily competitive digital player in digital retail and digital e commerce, 755 00:36:31,320 --> 00:36:35,080 Speaker 2: competing very well against Amazon. That's not cheap and it 756 00:36:35,120 --> 00:36:38,680 Speaker 2: impacts their margins. I guess they've got a board that 757 00:36:38,880 --> 00:36:40,040 Speaker 2: is supportive of this. 758 00:36:40,040 --> 00:36:43,520 Speaker 6: This fellow, well, that was a really interesting thing because 759 00:36:44,120 --> 00:36:48,160 Speaker 6: we were down there. I guess this was on January seventeenth, 760 00:36:48,200 --> 00:36:51,040 Speaker 6: and there was a press conference where you know McMillan 761 00:36:51,080 --> 00:36:53,279 Speaker 6: and also the you know, the governor of Arkansas, Sarah 762 00:36:53,320 --> 00:36:56,640 Speaker 6: Huckabee Sanders and others gave a whole presentation all you know, 763 00:36:56,680 --> 00:37:00,320 Speaker 6: but the company in the new campus. But meanwhile, Millan 764 00:37:00,360 --> 00:37:02,080 Speaker 6: had given a speech earlier in the day. It was 765 00:37:02,120 --> 00:37:06,640 Speaker 6: just an employee only event. Well we I should actually 766 00:37:06,680 --> 00:37:09,719 Speaker 6: say Jay one jay one did this, but but she 767 00:37:09,920 --> 00:37:12,680 Speaker 6: was able to get you know, you know, recording, you know, 768 00:37:13,040 --> 00:37:17,560 Speaker 6: the earlier speech, and in that uh, you know, you know, McMillan, 769 00:37:17,600 --> 00:37:21,600 Speaker 6: who's very very almost zen like and sort of sort 770 00:37:21,600 --> 00:37:25,080 Speaker 6: of you know, you know, unflappable, gave a more sort 771 00:37:25,120 --> 00:37:27,960 Speaker 6: of spirited speech and you know, and he's basically saying, like, 772 00:37:28,719 --> 00:37:30,440 Speaker 6: you know, we made this transformation, but there's you know, 773 00:37:30,560 --> 00:37:32,359 Speaker 6: was there's so much more we have to do and 774 00:37:32,400 --> 00:37:34,600 Speaker 6: it's really expensive. And he pointed to this chart behind 775 00:37:34,640 --> 00:37:37,719 Speaker 6: him showing how they're you know, operating margins just just 776 00:37:38,080 --> 00:37:40,520 Speaker 6: dropping and they're starting to go up, go up a 777 00:37:40,560 --> 00:37:43,200 Speaker 6: little bit. But but it really was that was pretty incredible, 778 00:37:43,280 --> 00:37:44,359 Speaker 6: he said, you know, he said, I want to thank 779 00:37:44,400 --> 00:37:48,120 Speaker 6: the board for not firing me, because but it was 780 00:37:48,160 --> 00:37:50,120 Speaker 6: it was real. It was really revealing and a great 781 00:37:50,120 --> 00:37:52,760 Speaker 6: thing to have. And you know, kudus to my co. 782 00:37:52,640 --> 00:37:56,959 Speaker 3: Writer thanks to Devin Leonard, Bloomberg BusinessWeek Senior Global Business Writer. 783 00:37:57,760 --> 00:38:02,440 Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, 784 00:38:02,640 --> 00:38:06,600 Speaker 1: and anywhere else you get your podcasts. Listen live each weekday, 785 00:38:06,800 --> 00:38:10,080 Speaker 1: ten am to noon Eastern on Bloomberg dot com, the 786 00:38:10,160 --> 00:38:14,040 Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You 787 00:38:14,080 --> 00:38:17,360 Speaker 1: can also watch us live every weekday on YouTube and 788 00:38:17,560 --> 00:38:19,560 Speaker 1: always on the Bloomberg terminal