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

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

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

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

5
00:00:21,360 --> 00:00:23,080
Speaker 1: or watch us live on YouTube.

6
00:00:24,200 --> 00:00:26,720
Speaker 2: Walmart reported some numbers. I thought they were pretty darn good.

7
00:00:26,760 --> 00:00:28,840
Speaker 2: They're always seemingly pretty good out of Walmart. They know

8
00:00:28,880 --> 00:00:29,720
Speaker 2: what they're doing over there.

9
00:00:29,840 --> 00:00:30,680
Speaker 3: Stocks up two percent.

10
00:00:30,760 --> 00:00:33,440
Speaker 2: Here today, let's break it down with Emily Cohene, consumer

11
00:00:33,479 --> 00:00:36,760
Speaker 2: team leader for Bloomberg News. Emily talk to us about

12
00:00:36,760 --> 00:00:39,240
Speaker 2: the quarter. What's the company saying about their business?

13
00:00:39,720 --> 00:00:43,040
Speaker 4: Yeah, I think you nailed it as another solid quarter

14
00:00:43,120 --> 00:00:46,080
Speaker 4: for Walmart in the fourth quarter. They did come out

15
00:00:46,080 --> 00:00:50,240
Speaker 4: with conservative guidance, which is pretty typical for Walmart, come

16
00:00:50,240 --> 00:00:54,600
Speaker 4: out with cautious guidance and then exceed it later in

17
00:00:54,640 --> 00:00:57,400
Speaker 4: the year, which is sort of their playbook. And then

18
00:00:57,440 --> 00:01:01,320
Speaker 4: their guidance was also paired with some warning signs or

19
00:01:01,440 --> 00:01:04,640
Speaker 4: cautious outlook about the economy, which I found interesting.

20
00:01:05,319 --> 00:01:07,200
Speaker 5: Yeah, I want to pick up on that idea because

21
00:01:07,240 --> 00:01:10,920
Speaker 5: the CFO talked to Bloomberg and mentioned that tariff driven

22
00:01:10,959 --> 00:01:14,440
Speaker 5: inflation has reached or is reaching its peak, which I

23
00:01:14,440 --> 00:01:17,360
Speaker 5: thought was really interesting given that there's so many people

24
00:01:17,400 --> 00:01:20,880
Speaker 5: expecting rate cuts later on this year, given that inflation

25
00:01:21,000 --> 00:01:23,840
Speaker 5: seems to have settled down, What more can they tell

26
00:01:23,920 --> 00:01:24,800
Speaker 5: us about pricing?

27
00:01:26,120 --> 00:01:29,360
Speaker 4: I think they told us that prices rose one percent

28
00:01:29,400 --> 00:01:31,280
Speaker 4: in the quarter, which I think was the same as

29
00:01:31,319 --> 00:01:34,440
Speaker 4: the last quarter. But they also mentioned other things like

30
00:01:35,240 --> 00:01:41,520
Speaker 4: tepid job growth, student loan delinquencies, rising consumer sentiment being uneven,

31
00:01:42,440 --> 00:01:45,959
Speaker 4: things that you know, would give any CEO or CFO

32
00:01:46,080 --> 00:01:50,320
Speaker 4: or company pause when they're trying to outlay what might

33
00:01:50,360 --> 00:01:52,520
Speaker 4: happen in the coming year.

34
00:01:52,920 --> 00:01:55,320
Speaker 2: And I noticed over the last a couple of years

35
00:01:55,360 --> 00:01:57,840
Speaker 2: they've talked about how maybe their customer base is changing

36
00:01:57,880 --> 00:02:01,240
Speaker 2: a little bit, people, some middle class maybe for income

37
00:02:01,440 --> 00:02:03,200
Speaker 2: areas coming down to Walmart.

38
00:02:03,200 --> 00:02:04,720
Speaker 3: They're seeing more and more of that. Is that still

39
00:02:04,720 --> 00:02:05,120
Speaker 3: the case.

40
00:02:05,240 --> 00:02:07,520
Speaker 4: I think yes, that's definitely the case, and that's sort

41
00:02:07,560 --> 00:02:11,120
Speaker 4: of their superpower right now that you know, poor this

42
00:02:11,280 --> 00:02:14,400
Speaker 4: is the case shaped economy that we talk about a lot.

43
00:02:14,639 --> 00:02:18,679
Speaker 4: Poor customers are pulling back in areas, but what they're

44
00:02:18,680 --> 00:02:21,959
Speaker 4: seeing is wealthier clients clientele who might not have come

45
00:02:22,000 --> 00:02:26,200
Speaker 4: to Walmart in the past, shopping at Walmart, especially for

46
00:02:26,360 --> 00:02:29,919
Speaker 4: things like their groceries, which they've invested in a lot

47
00:02:29,960 --> 00:02:32,360
Speaker 4: in the last ten years. You can now find organic

48
00:02:32,400 --> 00:02:35,360
Speaker 4: groceries in Walmart and that's really paying off.

49
00:02:36,400 --> 00:02:39,000
Speaker 5: And they also have this Walmart Plus program which they're

50
00:02:39,040 --> 00:02:41,400
Speaker 5: really putting a lot of emphasis on. It's actually one

51
00:02:41,400 --> 00:02:44,359
Speaker 5: of the benefits if you're an American Express Platinum cardholder,

52
00:02:44,440 --> 00:02:47,000
Speaker 5: which speaks to that idea that they're really reaching for

53
00:02:47,040 --> 00:02:49,919
Speaker 5: the higher income consumer. How's that going in Is it

54
00:02:50,080 --> 00:02:53,640
Speaker 5: making any headway on stealing Marcus share from Amazon with

55
00:02:53,680 --> 00:02:54,600
Speaker 5: its Prime program?

56
00:02:55,080 --> 00:02:58,000
Speaker 4: Yeah, they're seeing a huge growth in e commerce. I

57
00:02:58,000 --> 00:03:00,239
Speaker 4: think that was one of the major areas that grew

58
00:03:00,280 --> 00:03:04,480
Speaker 4: this quarter. That is drawing in higher income shoppers who

59
00:03:04,600 --> 00:03:09,919
Speaker 4: actually pay even more than the membership for faster deliveries,

60
00:03:10,000 --> 00:03:13,840
Speaker 4: speedier pickup times, and that's helping them also grow market

61
00:03:13,840 --> 00:03:18,320
Speaker 4: share among wealthier shoppers who are looking for convenience over

62
00:03:18,639 --> 00:03:19,400
Speaker 4: everything else.

63
00:03:20,280 --> 00:03:23,359
Speaker 2: So what are they saying about Did they even talk

64
00:03:23,360 --> 00:03:26,600
Speaker 2: about on CONFT called tariffs anymore? That's still a discussion point.

65
00:03:27,360 --> 00:03:29,480
Speaker 2: And what's the company saying about tariffs?

66
00:03:29,760 --> 00:03:33,760
Speaker 4: Yeah, tariffs came up a little bit, but they said

67
00:03:33,760 --> 00:03:39,560
Speaker 4: that they expect that that tariff driven inflation to peak.

68
00:03:39,640 --> 00:03:39,960
Speaker 3: Now.

69
00:03:41,160 --> 00:03:44,600
Speaker 4: I think they also benefit here again from their groceries.

70
00:03:44,680 --> 00:03:48,120
Speaker 4: Groceries are a portion of their assortment that is less

71
00:03:48,120 --> 00:03:52,880
Speaker 4: impacted by tariffs, and they're really benefiting from I think

72
00:03:52,920 --> 00:03:55,640
Speaker 4: sixty percent of their sales come from groceries these days.

73
00:03:56,360 --> 00:03:58,920
Speaker 5: You mentioned e commerce, It sounds like Walmart will continue

74
00:03:58,960 --> 00:04:02,760
Speaker 5: to invest in techlogy and automation. What were some of

75
00:04:02,760 --> 00:04:04,640
Speaker 5: the things that they flagged that they're working on in

76
00:04:04,720 --> 00:04:08,320
Speaker 5: terms of innovation and building on the technology that they

77
00:04:08,320 --> 00:04:10,520
Speaker 5: have already implemented into their system.

78
00:04:10,680 --> 00:04:12,120
Speaker 6: Yeah, it was interesting.

79
00:04:12,160 --> 00:04:15,880
Speaker 4: They said most of their fulfillment and stores is now

80
00:04:15,920 --> 00:04:19,400
Speaker 4: coming from automated warehouses, most of their fulfillment for e

81
00:04:19,440 --> 00:04:23,800
Speaker 4: commerces coming from automated warehouses. They have really made huge

82
00:04:23,960 --> 00:04:29,880
Speaker 4: gains here to speed up fulfillment centers, and I think

83
00:04:29,920 --> 00:04:32,599
Speaker 4: we should expect to see more of that in the

84
00:04:32,600 --> 00:04:35,920
Speaker 4: coming quarters. They cited story models and automation as the

85
00:04:36,640 --> 00:04:39,800
Speaker 4: main areas where they're going to be continuing to invest.

86
00:04:40,000 --> 00:04:41,960
Speaker 2: You know, one of the things that's amazed me really

87
00:04:41,960 --> 00:04:45,039
Speaker 2: for ten fifteen years about Walmart is how well their

88
00:04:45,040 --> 00:04:46,200
Speaker 2: digital business has been.

89
00:04:46,240 --> 00:04:47,440
Speaker 3: Their e commerce business.

90
00:04:47,440 --> 00:04:50,360
Speaker 2: They have built that to not only I mean they

91
00:04:50,360 --> 00:04:52,839
Speaker 2: can go toe to toe with Amazon dot Com just

92
00:04:52,839 --> 00:04:54,200
Speaker 2: about anything, it seems like.

93
00:04:54,520 --> 00:04:56,120
Speaker 3: Is that still a growth story for them?

94
00:04:56,440 --> 00:04:59,400
Speaker 4: Yeah? I think they said something like a third. They've

95
00:04:59,480 --> 00:05:04,080
Speaker 4: you know, a huge amount of shoppers are now actually

96
00:05:04,120 --> 00:05:11,240
Speaker 4: interacting with their AI, their AI assistant on their app

97
00:05:11,279 --> 00:05:15,480
Speaker 4: and on their website. That really helping people make shopping

98
00:05:15,520 --> 00:05:20,120
Speaker 4: decisions faster. They're seeing an increasing spend from customers who

99
00:05:20,160 --> 00:05:24,440
Speaker 4: interact with the AI shopping assistant, they said, which which

100
00:05:24,520 --> 00:05:25,680
Speaker 4: I think we can expect to see.

101
00:05:25,880 --> 00:05:28,839
Speaker 2: Just in the last five years, their ibathas roughly doubled,

102
00:05:29,200 --> 00:05:30,680
Speaker 2: but their cap X is tripled.

103
00:05:30,880 --> 00:05:33,880
Speaker 3: Yeah, so commerce build out, that tech build out, yep.

104
00:05:33,920 --> 00:05:35,720
Speaker 3: So I mean they're putting their money where their mount

105
00:05:35,800 --> 00:05:36,120
Speaker 3: is here.

106
00:05:36,360 --> 00:05:38,760
Speaker 5: You know what Paul's dream job is, Emily us He

107
00:05:38,880 --> 00:05:39,960
Speaker 5: mentioned this to you, No.

108
00:05:40,600 --> 00:05:44,160
Speaker 2: Be a greeter at Walmart. See I'm a nice, friendly guymock.

109
00:05:44,200 --> 00:05:45,120
Speaker 3: He wants to wear the smock.

110
00:05:45,600 --> 00:05:48,840
Speaker 5: But you know, to that point, Walmart employees about two

111
00:05:48,839 --> 00:05:52,120
Speaker 5: point one million people, which makes it a huge employer.

112
00:05:52,680 --> 00:05:54,320
Speaker 5: Do we have a sense of whether they've been growing

113
00:05:54,360 --> 00:05:58,560
Speaker 5: their employee base at all with this commitment to technology,

114
00:05:58,600 --> 00:05:59,240
Speaker 5: to automation.

115
00:06:00,480 --> 00:06:03,800
Speaker 4: I think They've definitely made a huge investment in technology.

116
00:06:04,320 --> 00:06:06,240
Speaker 4: They have a lot more people working on tech than

117
00:06:06,279 --> 00:06:08,479
Speaker 4: they ever have, and I think we could expect to

118
00:06:08,480 --> 00:06:10,279
Speaker 4: see more of that for sure.

119
00:06:11,080 --> 00:06:14,240
Speaker 3: Stay with us more from Bloomberg Intelligence coming up after this.

120
00:06:18,080 --> 00:06:21,760
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

121
00:06:21,839 --> 00:06:24,960
Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

122
00:06:24,960 --> 00:06:28,279
Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever

123
00:06:28,320 --> 00:06:31,440
Speaker 1: you get your podcasts, or watch us live on YouTube.

124
00:06:31,920 --> 00:06:35,280
Speaker 2: All right, let's move from cars to tractors. We can

125
00:06:35,320 --> 00:06:39,080
Speaker 2: do that with John Deere. John Deer reported some really

126
00:06:39,120 --> 00:06:41,839
Speaker 2: solid numbers of stocks up twelve percent today, so a

127
00:06:41,839 --> 00:06:44,720
Speaker 2: big move for Dear. It's up forty two percent year

128
00:06:44,760 --> 00:06:46,640
Speaker 2: to date. And when you think about the John Deer company,

129
00:06:46,640 --> 00:06:49,000
Speaker 2: you think about the US farmer because that's the primary

130
00:06:49,040 --> 00:06:51,800
Speaker 2: customer there. When a farmer has money, the farmer links

131
00:06:51,839 --> 00:06:54,080
Speaker 2: to buy some new tractors. So let's check in with

132
00:06:54,200 --> 00:06:57,039
Speaker 2: Chris Chiolino. He covers all the big equipment companies for

133
00:06:57,200 --> 00:07:01,040
Speaker 2: Bloomberg Intelligence. Chris tell us about what did they tell

134
00:07:01,120 --> 00:07:02,200
Speaker 2: us in their earnings report?

135
00:07:03,320 --> 00:07:05,640
Speaker 6: Yeah, it was a really solid beat and race quarter.

136
00:07:06,040 --> 00:07:07,640
Speaker 7: And I think this kind of gives us the all

137
00:07:07,720 --> 00:07:10,160
Speaker 7: clear on the cycle and that you know twenty six

138
00:07:10,280 --> 00:07:13,800
Speaker 7: will be the trough earnings year. The one Q beat

139
00:07:13,960 --> 00:07:18,160
Speaker 7: was was broad based, all segments, better top line, better

140
00:07:18,200 --> 00:07:21,720
Speaker 7: margins than expected, really on the back of higher shipment volumes,

141
00:07:22,680 --> 00:07:26,160
Speaker 7: with particular strength in the small agg business and construction.

142
00:07:27,360 --> 00:07:29,840
Speaker 7: Those those are markets that you know, have started to

143
00:07:29,920 --> 00:07:31,440
Speaker 7: already recover now this year.

144
00:07:32,280 --> 00:07:33,200
Speaker 6: The large agg.

145
00:07:33,040 --> 00:07:36,200
Speaker 7: Business, which is obviously their their bigger growth engine, continues

146
00:07:36,240 --> 00:07:39,120
Speaker 7: to be soft. But I think we're seeing that business

147
00:07:39,120 --> 00:07:42,200
Speaker 7: stabilize and really for the first time, you know, in years,

148
00:07:42,240 --> 00:07:45,000
Speaker 7: we're starting to see some green shoots emerge there. Order books,

149
00:07:45,040 --> 00:07:47,200
Speaker 7: you know, strengthened a little bit during the quarter as well.

150
00:07:49,120 --> 00:07:52,080
Speaker 5: How about how does this compare it in contrast with

151
00:07:52,120 --> 00:07:55,480
Speaker 5: what CNH Industrial reported earlier this week, which took more

152
00:07:55,840 --> 00:07:57,520
Speaker 5: It feels like a cautious stance.

153
00:07:58,640 --> 00:08:01,000
Speaker 7: Yeah, you know, I think so. Both companies are calling

154
00:08:01,040 --> 00:08:03,480
Speaker 7: twenty six as the bottom. I think that's pretty well

155
00:08:03,560 --> 00:08:06,559
Speaker 7: understood at this point. I think the incremental piece coming

156
00:08:06,560 --> 00:08:09,320
Speaker 7: out of Deer today is that you're starting to see

157
00:08:09,320 --> 00:08:12,320
Speaker 7: some early signs of improvement in the North American lar

158
00:08:12,440 --> 00:08:15,280
Speaker 7: jag business. That's a market they're projecting in terms of

159
00:08:15,400 --> 00:08:18,560
Speaker 7: unit volumes to you down fifteen to twenty percent this year.

160
00:08:18,880 --> 00:08:20,640
Speaker 7: That's going to put volumes at the lowest level in

161
00:08:20,680 --> 00:08:23,120
Speaker 7: more than four decades. But what you're starting to hear

162
00:08:23,160 --> 00:08:26,080
Speaker 7: from them this quarter is that the order book strengthened.

163
00:08:25,560 --> 00:08:29,320
Speaker 6: Particularly just in the last month of the quarter. You're

164
00:08:29,320 --> 00:08:29,680
Speaker 6: starting to.

165
00:08:29,640 --> 00:08:31,840
Speaker 7: See a little bit more trade flows going to China,

166
00:08:32,080 --> 00:08:35,160
Speaker 7: the fleets continue to age, you have the government aid support,

167
00:08:36,000 --> 00:08:38,000
Speaker 7: so this is not a big step change, but it's

168
00:08:38,040 --> 00:08:40,079
Speaker 7: really the first signs of incremental improvement.

169
00:08:43,760 --> 00:08:46,360
Speaker 2: You got to have a great sense of timing, Chris,

170
00:08:47,040 --> 00:08:49,400
Speaker 2: as I said, Deer's up forty two percent year to date,

171
00:08:49,440 --> 00:08:52,600
Speaker 2: so the market's anticipating this business bottoming and then turning up.

172
00:08:52,920 --> 00:08:55,400
Speaker 2: How long is this cycle for some of these companies

173
00:08:55,400 --> 00:08:57,000
Speaker 2: that you followed here, they are cyclical.

174
00:08:58,080 --> 00:09:00,719
Speaker 7: Yeah, so a typical downturn in this business will last

175
00:09:00,760 --> 00:09:02,320
Speaker 7: anywhere from two to four years.

176
00:09:02,360 --> 00:09:04,080
Speaker 6: This will be the third year of the downturn.

177
00:09:04,160 --> 00:09:07,800
Speaker 7: So in terms of the downturn, it looks very similar

178
00:09:07,880 --> 00:09:12,600
Speaker 7: to what we've seen historically. Typically the upturns last a

179
00:09:12,679 --> 00:09:17,240
Speaker 7: little bit longer. But you know, this is an incredibly

180
00:09:17,320 --> 00:09:21,120
Speaker 7: volatile market and it's ultimately dictated by crop prices and

181
00:09:21,160 --> 00:09:25,840
Speaker 7: farmer profitability. So the crop outlooks do have a significant

182
00:09:25,840 --> 00:09:28,480
Speaker 7: impact here in terms of what farmers are willing and

183
00:09:28,600 --> 00:09:29,400
Speaker 7: able to spend.

184
00:09:31,000 --> 00:09:34,360
Speaker 5: And it looks like Deer relies on the US for

185
00:09:34,800 --> 00:09:37,840
Speaker 5: a huge part of its revenue, if not half. What

186
00:09:38,000 --> 00:09:41,800
Speaker 5: is it doing in terms of growing its business overseas

187
00:09:42,280 --> 00:09:46,240
Speaker 5: does it? Is it just kind of a trajectory of

188
00:09:46,280 --> 00:09:48,880
Speaker 5: growth there that is similar to what it sees in

189
00:09:48,920 --> 00:09:51,280
Speaker 5: the US, or is it competing against some established players.

190
00:09:52,400 --> 00:09:55,600
Speaker 7: Yeah, so they're regional markets, but in terms of what

191
00:09:55,679 --> 00:09:59,840
Speaker 7: markets matter for Deer, it's North America and now South

192
00:10:00,320 --> 00:10:03,880
Speaker 7: is becoming more important. Reason being those are you know,

193
00:10:03,960 --> 00:10:08,760
Speaker 7: typically the bigger producers of road crops, corn, soybeans. They're

194
00:10:08,840 --> 00:10:13,040
Speaker 7: larger farms, they utilize more, the larger equipment that you know,

195
00:10:13,160 --> 00:10:16,199
Speaker 7: is more conducive to some of the precision technologies which

196
00:10:16,240 --> 00:10:19,240
Speaker 7: which come in at a higher margin. Europe tends to

197
00:10:19,320 --> 00:10:21,400
Speaker 7: be a little bit more stable, They get a lot

198
00:10:21,440 --> 00:10:23,960
Speaker 7: of government support, so I think of that market as

199
00:10:24,080 --> 00:10:29,760
Speaker 7: less less cyclical. You know, lower peaks, higher troughs. Those

200
00:10:29,800 --> 00:10:32,040
Speaker 7: are really kind of the three big growth engines. If

201
00:10:32,040 --> 00:10:34,280
Speaker 7: you think about Deer's geographic exposure.

202
00:10:35,160 --> 00:10:38,240
Speaker 3: So what is Deer saying about the US farmer these days?

203
00:10:39,960 --> 00:10:41,439
Speaker 6: Listen, things are still challenging.

204
00:10:41,600 --> 00:10:44,880
Speaker 7: Let's let's not understate that, you know, crop prices really

205
00:10:44,920 --> 00:10:48,480
Speaker 7: haven't moved that much and still under tremendous pressure. As

206
00:10:48,520 --> 00:10:51,040
Speaker 7: we look at another year of you know, near record production,

207
00:10:52,440 --> 00:10:56,000
Speaker 7: they are seeing some signs of stability, I would say,

208
00:10:56,040 --> 00:10:57,960
Speaker 7: And like I mentioned earlier, I think we're starting to

209
00:10:57,960 --> 00:11:01,640
Speaker 7: see some early signs of improved activity again, albeit off

210
00:11:01,679 --> 00:11:04,640
Speaker 7: a very low base, and a lot of that's predicated

211
00:11:04,679 --> 00:11:06,280
Speaker 7: on you know, we're starting to see a little bit

212
00:11:06,280 --> 00:11:11,080
Speaker 7: more exports going to China, you have a continued government support,

213
00:11:11,880 --> 00:11:14,439
Speaker 7: and then also you know, there's certainly a need for replacement.

214
00:11:14,480 --> 00:11:15,960
Speaker 7: The age of the fleet is as old as it's

215
00:11:15,960 --> 00:11:19,080
Speaker 7: been in a number of years. So as farmers get

216
00:11:19,080 --> 00:11:21,200
Speaker 7: more money, you start to see some stability on the

217
00:11:21,240 --> 00:11:22,040
Speaker 7: crop price front.

218
00:11:22,080 --> 00:11:24,439
Speaker 6: That should, you know, unlock some pent up demand.

219
00:11:25,440 --> 00:11:27,640
Speaker 5: Yeah, I'm just looking at the stock price trading. It

220
00:11:27,679 --> 00:11:29,800
Speaker 5: at a record high, but it really has gone on

221
00:11:29,840 --> 00:11:33,280
Speaker 5: a tear over the past three weeks or two weeks.

222
00:11:34,240 --> 00:11:37,160
Speaker 5: What accounts for that? Was it anticipation of this report

223
00:11:37,240 --> 00:11:38,160
Speaker 5: or was it something else?

224
00:11:39,440 --> 00:11:40,560
Speaker 6: A combination of things.

225
00:11:40,600 --> 00:11:43,880
Speaker 7: You know, I think, you know, it's pretty well understood

226
00:11:43,920 --> 00:11:46,120
Speaker 7: now that we this year will be the trough of

227
00:11:46,160 --> 00:11:48,960
Speaker 7: the cycle. So I think there's some positioning ahead of that.

228
00:11:49,080 --> 00:11:51,120
Speaker 7: And you know, a lot of these heavy machinery companies

229
00:11:51,120 --> 00:11:53,800
Speaker 7: typically do well in early in the rate cut environment.

230
00:11:54,080 --> 00:11:57,960
Speaker 7: So the anticipation of lower rates stronger growth environment not

231
00:11:58,000 --> 00:12:00,360
Speaker 7: only in the ag business but also construction, and I

232
00:12:00,440 --> 00:12:04,120
Speaker 7: think that sometimes get over gets overlooked. They're completely refreshing

233
00:12:04,160 --> 00:12:07,640
Speaker 7: their excavator product lineup. They have a pretty strong position

234
00:12:07,720 --> 00:12:11,600
Speaker 7: in construction equipment, and I think the growth dynamics there

235
00:12:11,679 --> 00:12:14,760
Speaker 7: moving for twenty six and twenty seven are still quite favorable.

236
00:12:15,600 --> 00:12:16,199
Speaker 6: Stay with us.

237
00:12:16,360 --> 00:12:18,760
Speaker 3: More from Bloomberg Intelligence coming up after this.

238
00:12:22,640 --> 00:12:26,320
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

239
00:12:26,400 --> 00:12:29,520
Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

240
00:12:29,520 --> 00:12:32,840
Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever

241
00:12:32,880 --> 00:12:36,400
Speaker 1: you get your podcasts, or watch us live on YouTube.

242
00:12:36,880 --> 00:12:40,560
Speaker 2: Six Flags Great Adventure, my first amusement and next second

243
00:12:40,600 --> 00:12:41,080
Speaker 2: amusement park.

244
00:12:41,120 --> 00:12:42,280
Speaker 3: The first one is Hershey Park.

245
00:12:42,679 --> 00:12:44,840
Speaker 5: Okay, yeah, that's a good starter.

246
00:12:45,000 --> 00:12:45,720
Speaker 6: Amusement park.

247
00:12:45,800 --> 00:12:47,280
Speaker 3: Yeah, yeah, that was a good one. Then you go

248
00:12:47,320 --> 00:12:49,480
Speaker 3: to then you step up to six Flags. Great adventure.

249
00:12:49,600 --> 00:12:51,880
Speaker 3: That's some serious park there.

250
00:12:52,000 --> 00:12:52,240
Speaker 6: Yeah.

251
00:12:52,360 --> 00:12:54,199
Speaker 5: Well we have to be ready to kind of be

252
00:12:54,440 --> 00:12:58,120
Speaker 5: you know, have trouble standing because of the roller coaster

253
00:12:58,200 --> 00:12:59,320
Speaker 5: rise being super aggressive.

254
00:12:59,400 --> 00:12:59,559
Speaker 8: Yep.

255
00:12:59,559 --> 00:13:03,240
Speaker 2: Absolutely, And they're still there, cars going in, packing in

256
00:13:03,320 --> 00:13:05,520
Speaker 2: all the time down there in Jackson, New Jersey. They're

257
00:13:05,520 --> 00:13:07,400
Speaker 2: all around the country. They reported some earnings here today.

258
00:13:07,440 --> 00:13:09,520
Speaker 2: Let's get down to it with Jody Lourie. She's a

259
00:13:09,520 --> 00:13:12,560
Speaker 2: credit analyst. She covers all the leisure companies, including six

260
00:13:12,600 --> 00:13:15,960
Speaker 2: Flags Entertainment. Jody, thanks so much for joining us. What

261
00:13:16,000 --> 00:13:18,640
Speaker 2: did you hear from six Flags today with their earnings?

262
00:13:19,760 --> 00:13:22,439
Speaker 9: So I think what's interesting, Paul, is that we're seeing

263
00:13:22,520 --> 00:13:25,600
Speaker 9: that some of what six Flags said, oddly was similar

264
00:13:25,640 --> 00:13:29,520
Speaker 9: to what we saw on APHIS's call. And both companies

265
00:13:29,880 --> 00:13:33,280
Speaker 9: had these large impairment charges to boost ebada, but it

266
00:13:33,280 --> 00:13:37,280
Speaker 9: didn't necessarily equate to cash generation, And both companies are

267
00:13:37,280 --> 00:13:40,559
Speaker 9: focused on improving their debt load and also just the

268
00:13:40,600 --> 00:13:44,040
Speaker 9: core of the business, the operational side, adding an AI

269
00:13:44,360 --> 00:13:47,360
Speaker 9: to boost the business and figuring out ways to turn around,

270
00:13:47,360 --> 00:13:49,880
Speaker 9: and both companies are dealing with new CEOs. So it's

271
00:13:49,920 --> 00:13:53,480
Speaker 9: just like a weird sort of compare contrast scenario that

272
00:13:53,800 --> 00:13:56,280
Speaker 9: I've been toying with my head all morning.

273
00:13:58,200 --> 00:14:00,520
Speaker 5: I mean, Paul was talking about how Hershey was his

274
00:14:00,559 --> 00:14:04,080
Speaker 5: first amusement park, and then we're obviously the big one

275
00:14:04,160 --> 00:14:07,000
Speaker 5: would be Disney, yep or Universal.

276
00:14:07,360 --> 00:14:07,959
Speaker 6: Have you been there?

277
00:14:08,440 --> 00:14:08,640
Speaker 3: No?

278
00:14:08,760 --> 00:14:10,080
Speaker 5: Okay, that's a pretty good one.

279
00:14:10,160 --> 00:14:11,439
Speaker 3: Yeah.

280
00:14:11,559 --> 00:14:14,240
Speaker 5: Is that the competition for six Flags or does it

281
00:14:14,240 --> 00:14:15,959
Speaker 5: work on a different level than those?

282
00:14:16,400 --> 00:14:19,080
Speaker 9: It is and it isn't the competition Scarlett. I mean,

283
00:14:19,080 --> 00:14:22,000
Speaker 9: I think you know, six Flags likes to compare itself

284
00:14:22,040 --> 00:14:26,160
Speaker 9: more to alternatives in leisure and entertainment. There was a

285
00:14:26,200 --> 00:14:30,520
Speaker 9: great slide that they provided that that showcase the value

286
00:14:30,560 --> 00:14:34,120
Speaker 9: proposition if you compare it to like concert tickets or

287
00:14:34,960 --> 00:14:37,560
Speaker 9: you know, in cert sporting event. The amount of time

288
00:14:37,600 --> 00:14:41,000
Speaker 9: that you spend at six Flags, in theory is all day, right,

289
00:14:41,080 --> 00:14:44,080
Speaker 9: So the cost to enter and the cost for the

290
00:14:44,560 --> 00:14:46,800
Speaker 9: you know, all the sort of concessions is much lower

291
00:14:46,840 --> 00:14:48,320
Speaker 9: than what you would pay to go to like a

292
00:14:48,360 --> 00:14:51,480
Speaker 9: Taylor Swift concert. Now that said, I mean, I think

293
00:14:51,520 --> 00:14:54,640
Speaker 9: what's so interesting is is when the company combined, there

294
00:14:54,720 --> 00:14:57,200
Speaker 9: was this image that they could create like an all

295
00:14:57,320 --> 00:15:00,680
Speaker 9: pass promotion, right that you can end in all parks.

296
00:15:00,680 --> 00:15:03,400
Speaker 9: They've only finally started rolling out something that's our regional

297
00:15:03,440 --> 00:15:08,360
Speaker 9: pass recently, and I'm curious to see what could happen

298
00:15:08,480 --> 00:15:11,280
Speaker 9: with the company as they improve those sort of points

299
00:15:11,280 --> 00:15:13,200
Speaker 9: of it. Because what's funny is if you look at

300
00:15:13,240 --> 00:15:16,120
Speaker 9: it from a revenue perspective, it did actually pretty well

301
00:15:16,160 --> 00:15:18,000
Speaker 9: this year compared to twenty four, and twenty four was

302
00:15:18,040 --> 00:15:20,640
Speaker 9: a pretty strong year. Same thing with some of the

303
00:15:20,880 --> 00:15:25,120
Speaker 9: per cap spending pieces of it, right, the per cap component,

304
00:15:25,280 --> 00:15:28,040
Speaker 9: the admissions were down, but the in park spending was decent,

305
00:15:28,400 --> 00:15:30,840
Speaker 9: and so you say, what's going on, like why are

306
00:15:30,920 --> 00:15:33,000
Speaker 9: they having such issues? And it comes down to an

307
00:15:33,040 --> 00:15:35,320
Speaker 9: operational issue. It comes down to the fact that the

308
00:15:35,360 --> 00:15:38,440
Speaker 9: legacy six Flags assets, I think were in way worse

309
00:15:38,480 --> 00:15:41,480
Speaker 9: shape than Cedar Fair anticipated when they took on the company,

310
00:15:41,920 --> 00:15:43,760
Speaker 9: and they're saddled with a lot of debt. So it's

311
00:15:43,800 --> 00:15:45,840
Speaker 9: really a question of if the capital markets are going

312
00:15:45,920 --> 00:15:48,840
Speaker 9: to be encouraging enough to help them through. You know,

313
00:15:48,880 --> 00:15:51,080
Speaker 9: they helped them through in January with a new issue,

314
00:15:51,160 --> 00:15:54,160
Speaker 9: but really are they able to sort of support the

315
00:15:54,200 --> 00:15:55,560
Speaker 9: company through this transition.

316
00:15:55,920 --> 00:15:58,280
Speaker 5: That park past you mentioned sounds like a you know,

317
00:15:58,320 --> 00:16:00,840
Speaker 5: the amusement park version of an epic, which makes sense

318
00:16:00,920 --> 00:16:04,280
Speaker 5: if you're skier and you are chasing the weather around

319
00:16:04,280 --> 00:16:06,520
Speaker 5: the country. What doesn't make sense to go to the

320
00:16:06,520 --> 00:16:08,760
Speaker 5: West Coast for six Flags and then come back.

321
00:16:09,320 --> 00:16:12,320
Speaker 9: I don't know it could Scarlet. You don't talk to

322
00:16:12,440 --> 00:16:15,160
Speaker 9: Ira Jersey enough. Apparently, at least when it comes to

323
00:16:15,240 --> 00:16:17,720
Speaker 9: roller coasters. You probably talked him about interest rates. Next

324
00:16:17,720 --> 00:16:19,560
Speaker 9: time when you have him on, ask him about his

325
00:16:19,640 --> 00:16:24,600
Speaker 9: son's American Coasters Enthusiast card that he proudly can If

326
00:16:24,640 --> 00:16:29,120
Speaker 9: you are deep into the roller coaster dynamics and culture,

327
00:16:29,600 --> 00:16:31,880
Speaker 9: people will go to the end of this of the Earth.

328
00:16:31,920 --> 00:16:33,920
Speaker 9: And I am curious to see how the Middle East

329
00:16:33,920 --> 00:16:36,920
Speaker 9: traction for six Flags, for SeaWorld and for some of

330
00:16:36,920 --> 00:16:39,480
Speaker 9: the other parks that have expanded there, how that's going

331
00:16:39,520 --> 00:16:41,680
Speaker 9: to play out If you do see these park coaster

332
00:16:41,880 --> 00:16:44,680
Speaker 9: enthusiasts fly out to Saudi Area, fly out to the

333
00:16:44,680 --> 00:16:46,840
Speaker 9: Oe to ride certain coasters.

334
00:16:48,800 --> 00:16:51,200
Speaker 3: Stay with us. More from Bloomberg Intelligence coming up.

335
00:16:54,920 --> 00:16:58,640
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

336
00:16:58,720 --> 00:17:02,280
Speaker 1: weekdays at ten AM's on Applecarplay and Android Otto with

337
00:17:02,360 --> 00:17:05,480
Speaker 1: the Bluemberg Business app. Listen on demand wherever you get

338
00:17:05,480 --> 00:17:08,280
Speaker 1: your podcasts or watch us live on YouTube.

339
00:17:09,200 --> 00:17:12,480
Speaker 2: Our good friends over in Switzerland Nesley, a lot of

340
00:17:12,520 --> 00:17:16,440
Speaker 2: news coming out of them today. They're talking about maybe

341
00:17:16,480 --> 00:17:18,520
Speaker 2: backing away a little bit from the ice cream business.

342
00:17:18,600 --> 00:17:20,000
Speaker 3: How can you do that? I don't know.

343
00:17:20,520 --> 00:17:23,120
Speaker 2: But let's check out what's going on with Nesley with

344
00:17:23,160 --> 00:17:26,399
Speaker 2: our good friend Duncan Fox. He's Bloomberg Intelligence senior Consumer

345
00:17:26,440 --> 00:17:30,560
Speaker 2: Stables Analytis based over there in London. Duncan, what's going

346
00:17:30,600 --> 00:17:34,240
Speaker 2: on with Nestley. It seems like they considering some strategic

347
00:17:34,320 --> 00:17:34,840
Speaker 2: moves here.

348
00:17:36,720 --> 00:17:39,720
Speaker 8: Well, yes, I think it's such a large organization. I

349
00:17:39,840 --> 00:17:41,879
Speaker 8: spion it's quite a small part of their business, and

350
00:17:41,920 --> 00:17:44,760
Speaker 8: that it's already in it Well, I love it too,

351
00:17:44,840 --> 00:17:46,840
Speaker 8: but it's in a joint venture, well, most of it's

352
00:17:46,880 --> 00:17:49,960
Speaker 8: in a joint venture with fron Aire, and they took

353
00:17:49,960 --> 00:17:53,280
Speaker 8: a back two billion dollars out last year when from

354
00:17:53,320 --> 00:17:56,600
Speaker 8: Area did a raising capital. So I think it was

355
00:17:56,640 --> 00:18:00,080
Speaker 8: sort of set that the chance would be that they

356
00:18:00,119 --> 00:18:02,200
Speaker 8: would probably clean up their portfolio a little bit and

357
00:18:02,520 --> 00:18:06,240
Speaker 8: try and concentrate on really where they have huge market share.

358
00:18:06,480 --> 00:18:09,000
Speaker 8: I mean, as much as I love the ness, I scream,

359
00:18:09,000 --> 00:18:13,399
Speaker 8: it is not the global leader. Magnum is so and

360
00:18:13,440 --> 00:18:16,200
Speaker 8: it's well behind. It's sort of half the market share

361
00:18:16,240 --> 00:18:19,840
Speaker 8: globally that that Magnum's got, So it makes sense, I think,

362
00:18:19,840 --> 00:18:23,720
Speaker 8: to monetize that that stake and put it into areas

363
00:18:23,760 --> 00:18:26,320
Speaker 8: where they are global number one or number two, which

364
00:18:26,400 --> 00:18:29,920
Speaker 8: is coffee, pet food, and nutrition. So it does make sense.

365
00:18:29,960 --> 00:18:31,639
Speaker 5: And it makes sense in the context of there's a

366
00:18:31,680 --> 00:18:34,119
Speaker 5: new CEO and he's kind of putting his stamp on

367
00:18:34,200 --> 00:18:38,520
Speaker 5: the company and setting out strategic direction for Nesley based

368
00:18:38,520 --> 00:18:40,840
Speaker 5: on what he's done so far, is he still in

369
00:18:40,880 --> 00:18:44,000
Speaker 5: the assessing stage of, you know, trying to figure out

370
00:18:44,280 --> 00:18:46,199
Speaker 5: what works, what doesn't work, or is he ready to

371
00:18:46,280 --> 00:18:47,560
Speaker 5: make actual moves.

372
00:18:49,200 --> 00:18:52,640
Speaker 8: It feels like it's ready to make those moves. I mean,

373
00:18:52,640 --> 00:18:55,640
Speaker 8: he's already sort of sharpened up the focus in sort

374
00:18:55,680 --> 00:18:59,880
Speaker 8: of making it much more of the four big core

375
00:19:00,080 --> 00:19:02,440
Speaker 8: acid bases, and you know, three of which are global,

376
00:19:02,600 --> 00:19:05,480
Speaker 8: so he's merging two sort of nutrition businesses into one.

377
00:19:05,560 --> 00:19:08,920
Speaker 8: So I actually get some cost savings which should then

378
00:19:09,000 --> 00:19:13,520
Speaker 8: be invested back into driving organic growth or particularly volume

379
00:19:13,560 --> 00:19:15,520
Speaker 8: in the case of Nessie, which is something that's been

380
00:19:15,600 --> 00:19:18,720
Speaker 8: a bit shy the last couple of years. So it

381
00:19:19,200 --> 00:19:23,719
Speaker 8: really feels that he's sort of focusing very much on

382
00:19:23,880 --> 00:19:28,080
Speaker 8: getting the volume moving forward on their core categories and

383
00:19:28,359 --> 00:19:31,320
Speaker 8: sort of I wouldn't say he's getting rid of everything else,

384
00:19:31,359 --> 00:19:35,600
Speaker 8: but he's de emphasizing that the importance of some of

385
00:19:35,640 --> 00:19:37,760
Speaker 8: the smaller parts of the business to make sure they

386
00:19:37,760 --> 00:19:41,720
Speaker 8: get the large parts right. And you know, if you

387
00:19:41,760 --> 00:19:43,879
Speaker 8: can do that, then maybe there'll be some other assets

388
00:19:43,880 --> 00:19:46,560
Speaker 8: to monetize over time. But he did say that in

389
00:19:46,600 --> 00:19:49,359
Speaker 8: the food businesses a lot of local assets there, things

390
00:19:49,400 --> 00:19:51,720
Speaker 8: like kick Kat, which which are very very big and

391
00:19:51,840 --> 00:19:55,800
Speaker 8: very cash generative. So you know, there are ways they've

392
00:19:55,800 --> 00:19:57,959
Speaker 8: got to make sure that they keep investing in some

393
00:19:58,000 --> 00:20:01,760
Speaker 8: of those, maybe smaller because they actually offer quite a

394
00:20:01,760 --> 00:20:04,399
Speaker 8: lot of cashloads of the business. But it's really about

395
00:20:04,440 --> 00:20:07,800
Speaker 8: focusing on the core areas where they can grow and

396
00:20:07,960 --> 00:20:10,440
Speaker 8: really shape the business moving forward. So it does look,

397
00:20:10,480 --> 00:20:12,520
Speaker 8: like you said, the ground running dunk and I.

398
00:20:12,480 --> 00:20:14,639
Speaker 2: Know that part of the Nestle story is a cost

399
00:20:14,680 --> 00:20:17,200
Speaker 2: cutting story. Give us a sense of kind of what

400
00:20:17,320 --> 00:20:20,440
Speaker 2: costs they're looking to cut and kind of how far

401
00:20:20,480 --> 00:20:23,040
Speaker 2: along in their plans.

402
00:20:23,600 --> 00:20:26,200
Speaker 8: Well, I suspect they'll always be looking to costs. It's

403
00:20:26,240 --> 00:20:29,760
Speaker 8: such a huge organization. I mean, I think it was October,

404
00:20:29,800 --> 00:20:33,400
Speaker 8: they said they're getting in red of sixteen thousand employees,

405
00:20:33,440 --> 00:20:36,760
Speaker 8: which is a bit shy eight percent of the global workforce.

406
00:20:36,800 --> 00:20:39,040
Speaker 8: So I think there's probably quite a lot of middle

407
00:20:39,040 --> 00:20:44,399
Speaker 8: managers in the business that could potentially be moved and

408
00:20:44,560 --> 00:20:48,080
Speaker 8: moved out. I mean, they've got to keep the local

409
00:20:48,119 --> 00:20:51,159
Speaker 8: salesforce moving in the right direction. But it's quite clear

410
00:20:51,240 --> 00:20:54,320
Speaker 8: that maybe the decision making was a little bit fuzzy

411
00:20:54,840 --> 00:20:56,920
Speaker 8: in the past in that there were too many competing

412
00:20:57,080 --> 00:21:01,240
Speaker 8: people trying to push the runs in one way or

413
00:21:01,240 --> 00:21:03,159
Speaker 8: the other. So it does feel that they're going to

414
00:21:03,160 --> 00:21:05,960
Speaker 8: be taking the costs out of there. They've got about

415
00:21:06,080 --> 00:21:09,640
Speaker 8: three two billion to three billion to take out by

416
00:21:10,160 --> 00:21:13,360
Speaker 8: twenty twenty seven twenty twenty eight, so I think that

417
00:21:13,400 --> 00:21:17,440
Speaker 8: they're well on the track on that. After that, merging

418
00:21:17,480 --> 00:21:21,440
Speaker 8: the two nutrition businesses together could generate a little bit

419
00:21:21,440 --> 00:21:24,640
Speaker 8: more sewing assets as well. You end up with some

420
00:21:24,680 --> 00:21:28,119
Speaker 8: sort of stranded overhead which will presumably give them a

421
00:21:28,160 --> 00:21:30,400
Speaker 8: little bit more to take out as and when those

422
00:21:30,440 --> 00:21:32,560
Speaker 8: assets are sold. So I think this is going to

423
00:21:32,560 --> 00:21:35,520
Speaker 8: be an ongoing story, but it won't be as big

424
00:21:35,560 --> 00:21:38,080
Speaker 8: as the sort of a three billion that they've got

425
00:21:38,200 --> 00:21:43,120
Speaker 8: out there. Over the next sort of few years, so yeah,

426
00:21:43,200 --> 00:21:46,200
Speaker 8: it'll be probably sort of Most company seems to say

427
00:21:46,200 --> 00:21:49,680
Speaker 8: half a percent percent of sales wishing Nessles's case, ninety

428
00:21:49,680 --> 00:21:52,840
Speaker 8: billion of ninety billions with frant to sales is quite

429
00:21:52,840 --> 00:21:55,240
Speaker 8: a chunk coming out on an annual basis. Break.

430
00:21:55,400 --> 00:22:01,399
Speaker 1: Basically, this is the Bloomberg Intelligence podcast, available on Apple, Spotify,

431
00:22:01,560 --> 00:22:05,040
Speaker 1: and anywhere else you get your podcasts. Listen live each

432
00:22:05,080 --> 00:22:08,840
Speaker 1: weekday ten am to noon Eastern on Bloomberg dot com,

433
00:22:08,960 --> 00:22:12,480
Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app.

434
00:22:12,920 --> 00:22:15,800
Speaker 1: You can also watch us live every weekday on YouTube

435
00:22:16,240 --> 00:22:18,480
Speaker 1: and always on the Bloomberg terminal