WEBVTT - Banks, Kroger, and Retail Sales (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.040 at Bloomberg dot com slash podcast. Kathan Hagary in DC, 0:00:22.520 --> 0:00:25.000 Paul Sweeney here in New York on a Bloomberg Interactive 0:00:25.000 --> 0:00:28.360 broker studio Busy Danny earnings fun. Particularly for the big banks, 0:00:28.360 --> 0:00:30.000 we had a mix of some of the yeah, what 0:00:30.080 --> 0:00:32.360 I kind of consider the pure investment banks like Morgan 0:00:32.400 --> 0:00:36.120 Stanley and some of the more maybe mainstream banks, commercial banks, 0:00:36.159 --> 0:00:39.559 Corporate Bank, City Wells Fargo. We have Allison Williams here 0:00:39.560 --> 0:00:41.720 in our studios here giving us a sense of kind 0:00:41.720 --> 0:00:45.360 of what's going down here. So it's been a really 0:00:45.440 --> 0:00:49.040 choppy year, Allison. From a capital markets perspective, that's a problem. 0:00:49.040 --> 0:00:51.879 I would think, I don't know, um, but we have 0:00:51.920 --> 0:00:53.880 a you know, we've got interest rates going up and 0:00:53.920 --> 0:00:56.840 that means net interest margin. That's a good thing. So 0:00:57.200 --> 0:00:58.840 when you put it all together, what did you see 0:00:59.000 --> 0:01:02.160 so far in some of the earning today. So to 0:01:02.280 --> 0:01:06.640 your point, net interest income very strong in fact, um, 0:01:06.800 --> 0:01:08.399 you know, we sort of had a sense that it 0:01:08.440 --> 0:01:10.520 was going to come in better than expected, came in 0:01:10.600 --> 0:01:14.560 even better than that, and banks are guiding up for 0:01:14.600 --> 0:01:17.000 the near term. But as we know, a lot of 0:01:17.040 --> 0:01:22.280 the thoughts are turning towards three and um, there there 0:01:22.440 --> 0:01:27.319 was higher than expected provisions related to we think banks 0:01:27.319 --> 0:01:30.240 getting more conservative on the economic outlook. UM. Of course 0:01:30.280 --> 0:01:35.000 that that remains fluid. On the capital market side of things, 0:01:35.080 --> 0:01:39.520 fixed income trading the highlight of the quarter that was expected, 0:01:39.560 --> 0:01:42.200 but again coming in a little bit better. Equities trading 0:01:42.240 --> 0:01:46.319 week fees, as we know, very very weak. But what 0:01:46.400 --> 0:01:49.680 we're seeing in and you're seeing it in the stocks today, um, 0:01:49.920 --> 0:01:53.440 main Street is really the business that's outperforming for this quarter, 0:01:54.200 --> 0:01:56.880 and you're seeing that lift um for companies like well 0:01:56.880 --> 0:02:01.120 it's Fargo, even though they took two billion dollars charge 0:02:01.160 --> 0:02:05.200 related to some hysterical historical issues. Now raises a lot 0:02:05.200 --> 0:02:08.640 of questions about how long net interest income can stay 0:02:08.680 --> 0:02:13.120 elevated and how long the consumer can stay resilient. When 0:02:13.320 --> 0:02:17.280 we are continuing to hear from FED officials even this morning, 0:02:17.760 --> 0:02:21.480 that interest rates are staying higher for longer. I think 0:02:21.520 --> 0:02:25.239 that is the question, um just in terms of things 0:02:25.280 --> 0:02:27.560 are much better if this quarter they look really good 0:02:27.600 --> 0:02:33.639 for next quarter, but um again provisions are rising. That 0:02:33.680 --> 0:02:37.040 really relates to the expectations for next year because the 0:02:37.040 --> 0:02:40.640 current trends actually are coming in more positive than expected. 0:02:41.200 --> 0:02:44.360 And then in terms of higher rates, great for the 0:02:44.400 --> 0:02:47.080 margin right now, but at what point does that start 0:02:47.120 --> 0:02:50.679 to more dramatically slow loan growth and at what point, 0:02:50.760 --> 0:02:53.760 due to pause the costs start to rise more meaningfully, 0:02:53.800 --> 0:02:57.639 which will cut into that. It's October and Allison that 0:02:57.680 --> 0:02:59.680 time year. This is just bread into me. Even though 0:02:59.680 --> 0:03:01.600 I haven't worked on the street for fifteen years, I'm 0:03:01.600 --> 0:03:05.880 already thinking bonus time. What are the big investment banks? 0:03:05.919 --> 0:03:08.400 What's the world on the street about, given it's been 0:03:08.440 --> 0:03:10.720 such a bad year or tough year for the for 0:03:10.760 --> 0:03:15.040 the markets, what's the expectation for compensation this year? So? Uh, 0:03:15.280 --> 0:03:19.400 you know, last year was a huge year for fees 0:03:19.440 --> 0:03:24.640 and trading. We saw compensation um rise accordingly we saw 0:03:24.919 --> 0:03:30.079 coming into the year, I would say, very intense pressure 0:03:30.160 --> 0:03:33.280 in terms of pay um. But we are hearing more 0:03:33.320 --> 0:03:37.280 about lower compensation um. And if you look at sort 0:03:37.280 --> 0:03:39.880 of Golden Jackson Morgan Stanley. Their compensation is the most 0:03:39.920 --> 0:03:42.880 hyped to capital markets. It looks like the declines are 0:03:42.920 --> 0:03:46.640 similar to revenue. UM. We're also going to be looking 0:03:46.680 --> 0:03:50.280 to see what banks are doing on headcount. UM. We're 0:03:50.280 --> 0:03:52.960 seeing growth in the quarter that relates to campus hires. 0:03:52.960 --> 0:03:56.400 As you know, UM tends to grow in the third quarter. UM. 0:03:56.440 --> 0:03:58.720 Morgan Stanley was just speaking on their call and said, 0:03:58.800 --> 0:04:01.520 you know, they're they're not looking at any dramatic cuts yet, 0:04:01.560 --> 0:04:03.440 but obviously these are things they're going to be looking 0:04:03.440 --> 0:04:05.760 at in the fourth quarter. You know, this is something 0:04:05.800 --> 0:04:08.320 Paul Sweeney looks at real closely, from someone to take 0:04:08.400 --> 0:04:12.000 a rug out from under him, whether the workers that 0:04:12.200 --> 0:04:16.200 do stick around, depending on how headcount works out, whether 0:04:16.240 --> 0:04:19.599 they're going to be coming back into the office. So 0:04:19.640 --> 0:04:22.720 I think that you know, we've seen mixed trends, so 0:04:23.400 --> 0:04:27.159 banks like JP Morgan and Goldman Sachs taking a harder 0:04:27.200 --> 0:04:29.280 line on things, and then some other banks sort of 0:04:29.400 --> 0:04:32.960 using that as a way to compete in providing more flexibility. 0:04:33.680 --> 0:04:36.320 As we know, think things remain a little bit influx, 0:04:36.360 --> 0:04:38.400 and I think we're all curious to see what the 0:04:38.440 --> 0:04:43.400 backdrop starts to look like going into UM. But I 0:04:43.440 --> 0:04:47.200 would also say it's a tougher revenue environment. And my 0:04:47.320 --> 0:04:51.000 guess is when you're thinking about things like compensation cuts 0:04:51.080 --> 0:04:56.159 and staff changes, people are probably going to want to 0:04:56.200 --> 0:05:00.599 be in the office more often and you know, again 0:05:00.640 --> 0:05:02.560 hopefully on the road. If you're a banker trying to 0:05:02.560 --> 0:05:06.120 get more business, Hey Elson, on a global scale, is 0:05:06.120 --> 0:05:09.720 there can these European banks? Can they ever be competitive? 0:05:09.880 --> 0:05:13.680 I mean really competitive? I think Deutsche Bank, Anna Barkley's, 0:05:14.320 --> 0:05:17.400 the Swiss banks, it just seems like they just they 0:05:17.640 --> 0:05:19.920 will never have the scale unless the rules change over 0:05:19.960 --> 0:05:21.719 the in terms of cross border m and A that 0:05:21.760 --> 0:05:24.479 they can compete with the big banks in US. Yeah, 0:05:24.520 --> 0:05:27.240 I think, And I think part of it is, you know, 0:05:27.279 --> 0:05:29.800 we're sort of a decade long now of sort of 0:05:29.800 --> 0:05:32.760 a virtuous cycle for the US banks and you know 0:05:32.839 --> 0:05:35.839 the opposite for the Europeans. U S banks got issues 0:05:35.880 --> 0:05:40.520 behind them. Sooner they moved past the legatory, regulatory and 0:05:40.600 --> 0:05:44.640 legal issues, sooner they had a good economy. They had 0:05:44.800 --> 0:05:46.920 they had a period of higher rates before they came 0:05:46.960 --> 0:05:50.400 down and now coming back again, and that all allowed 0:05:50.440 --> 0:05:53.040 them to make these long term investments. So like you're 0:05:53.080 --> 0:05:56.520 looking at JP Morgan. You know, they're equity trading. Last 0:05:56.680 --> 0:05:58.919 last quarter is more than anybody, and that was a 0:05:58.960 --> 0:06:02.080 business that you know, as you know, cash equities was 0:06:02.080 --> 0:06:05.119 was sort of the laggard for them, and now they're there, 0:06:05.640 --> 0:06:08.880 whereas on the Europeans it's it's sort of been the opposite. Um, 0:06:08.920 --> 0:06:11.720 they've struggled with revenue, they haven't had the money to invest, 0:06:11.760 --> 0:06:15.680 they've done restructuring after restructuring, credits. We know has some 0:06:15.760 --> 0:06:20.000 big risk management issues. Um. So it does seem like, 0:06:20.839 --> 0:06:23.000 you know, it's one of those things on paper, would 0:06:23.000 --> 0:06:26.560 make sense for a couple of these to get together. Um, 0:06:26.600 --> 0:06:29.040 but there's also issues, right, everyone wants to be the buyer. 0:06:29.120 --> 0:06:32.679 No one wants to be the seller exactly. And it's political, 0:06:32.760 --> 0:06:34.920 it's cultural, I know, but it just you see how 0:06:34.960 --> 0:06:37.159 the market shares are going, you just gotta say, boy, 0:06:37.200 --> 0:06:39.760 at some point they're just going to be competed almost 0:06:39.760 --> 0:06:43.000 out of business and made so almost irrelevant. Its crazy 0:06:43.040 --> 0:06:45.479 to see how that's evolved, all right. Alison Williams, senior 0:06:45.600 --> 0:06:50.640 banking analysts for a Bloomberg Intelligence, also co director of 0:06:50.680 --> 0:06:59.840 Research for the America's for Bloomberg Intelligence in the pandemic 0:07:00.040 --> 0:07:06.120 of our go to voices for really scientific based analysis 0:07:06.200 --> 0:07:10.280 of the virus, of the you know, the treatments and 0:07:10.320 --> 0:07:13.840 of the vaccines with Sam Fazelli, head of European Research 0:07:13.880 --> 0:07:17.720 and pharmaceutical analysts for Bloomberg and Intelligence. Now that we've 0:07:18.080 --> 0:07:21.160 essentially for most people in the world have kind of 0:07:21.200 --> 0:07:22.840 put this in the review mirror, we can actually let 0:07:22.880 --> 0:07:26.760 him get back to doing what he does, just extend 0:07:26.760 --> 0:07:30.040 the emergency over at the White House. I saw that. Yeah, 0:07:30.120 --> 0:07:32.440 so it depends on how you view what I guess. 0:07:32.440 --> 0:07:36.560 But Sam, you know, there is another booster out in 0:07:36.640 --> 0:07:40.680 the marketplace and I'm getting it in a couple of weeks, Um, 0:07:40.800 --> 0:07:44.560 what's your view of I guess these periodic boosters h 0:07:44.840 --> 0:07:51.640 for COVID nineteen the hilt. So the issue is that 0:07:51.680 --> 0:07:55.640 we've never really done this before, right, Everything about this 0:07:55.680 --> 0:07:58.600 pandemic has been clearly one of the first time I've 0:07:58.760 --> 0:08:01.640 been through this kind of thing us in a hundred years. 0:08:01.720 --> 0:08:05.360 So it's difficult to be a hundred percent sure about anything, 0:08:05.600 --> 0:08:06.920 and I think that's one of the things that I 0:08:06.920 --> 0:08:08.920 think has surprised people about the science. But in this 0:08:09.000 --> 0:08:11.960 particular case, people are being asked to take it by 0:08:12.040 --> 0:08:15.760 Vail and Booster that's more properly fully tested in in 0:08:15.800 --> 0:08:20.080 folks as regardless efficacy, And the thing that I've been 0:08:20.080 --> 0:08:22.720 saying all along, I'm a little bit worried pushing this 0:08:22.920 --> 0:08:25.960 to the broad population. Let's put a science folks that 0:08:26.000 --> 0:08:28.520 are perhaps as old as me or have got some 0:08:28.560 --> 0:08:32.080 issues with the immunity, etcetera. Certainly for those folks, but 0:08:32.240 --> 0:08:34.640 to push it out broader, and we don't even know 0:08:34.679 --> 0:08:37.280 how well it does against the current variants that are 0:08:37.320 --> 0:08:40.720 all sorts of flavors of record. Now, I think it's 0:08:40.720 --> 0:08:44.439 gonna as a risk that it would cause us even 0:08:44.520 --> 0:08:48.000 more lots of confidence in vaccines in general if it 0:08:48.080 --> 0:08:51.440 doesn't work so well. That's what I'm worried about. Well, Sam, 0:08:51.520 --> 0:08:54.840 we did just get some guidance from Fiser just this 0:08:54.920 --> 0:08:58.520 week that the by Valent vaccine that's targeted on the 0:08:58.640 --> 0:09:04.400 CRON shows strong results in boosting neutralizing antibodies. I mean 0:09:04.840 --> 0:09:09.439 that has to count for something, doesn't it? Uh Normally, 0:09:09.600 --> 0:09:11.840 Nat and I would say yes, But did you see 0:09:11.840 --> 0:09:18.679 a single number in that did we point take in? No? No, 0:09:18.760 --> 0:09:21.960 But it was against to be a five of variants. 0:09:22.320 --> 0:09:25.120 What are we dealing with? Nine? New York before six 0:09:25.640 --> 0:09:32.240 b Q one one simple five happens number when you 0:09:32.320 --> 0:09:35.199 talk to these PhD types, Nathan, that's what happens. But 0:09:35.280 --> 0:09:36.920 we are all about the numbers. There was a lot 0:09:36.960 --> 0:09:41.720 of numbers just now saying it's all about numbers. I know, 0:09:41.880 --> 0:09:44.319 I know that's the backbone of Bloomberg intelligence research and 0:09:44.400 --> 0:09:46.640 that that data. All right, let's talk about the stock 0:09:46.880 --> 0:09:49.960 um Fiser. I look at the f A function, which 0:09:50.000 --> 0:09:52.400 is financial analysis. I look at kind of the revenue trends. 0:09:52.760 --> 0:09:55.120 All right, So in they had forty two billion of 0:09:55.200 --> 0:09:59.880 revenue and then boom, it doubled in eighty one billion, 0:10:00.200 --> 0:10:03.840 and it's looking to add another or I guess go 0:10:03.920 --> 0:10:07.840 to about a hundred billion this year consensus, but then 0:10:07.880 --> 0:10:11.800 it drops down to like seventy nine of revenue. How 0:10:11.800 --> 0:10:16.840 does the stock perform with that kind of crazy changes 0:10:17.040 --> 0:10:19.439 in revenue? And yes, it was all COVID nineteen related 0:10:19.520 --> 0:10:21.920 or mostly, but how does the stock perform? How do 0:10:22.040 --> 0:10:25.480 investors look at the stock like visor U during this 0:10:25.559 --> 0:10:30.120 COVID in post COVID period. Yeah, I know, you know. 0:10:30.120 --> 0:10:32.240 The first thing I want to say is hots off 0:10:32.240 --> 0:10:35.600 to them for really absolutely so hard and I think 0:10:36.080 --> 0:10:38.520 to get this faccine out because it has made a 0:10:38.600 --> 0:10:41.160 huge difference to the way that people are reacted to 0:10:41.200 --> 0:10:44.760 this virus data side. As you know, investors tend to 0:10:44.760 --> 0:10:47.760 look forward, and when you look forward, it's very difficult 0:10:47.760 --> 0:10:51.319 to know where this boost campaigns and how many more 0:10:51.360 --> 0:10:54.199 of these shots were gonna need. If you take away 0:10:54.520 --> 0:10:57.720 you know, the COVID vaccine had more things than the 0:10:57.800 --> 0:11:01.880 rest of fightser together. So that's what I think investors 0:11:01.880 --> 0:11:04.559 are a little bit not worried about. But what's the 0:11:04.640 --> 0:11:07.920 company going to do with this massive windfall? Can it 0:11:08.280 --> 0:11:12.520 converted into more nuggets to drive that long term growth? 0:11:12.800 --> 0:11:15.280 And that's what everyone's hanging on to see. If you 0:11:15.320 --> 0:11:17.760 look at the stock price, you see that it hasn't 0:11:17.760 --> 0:11:21.160 really performed that particularly well over the past six months. 0:11:21.280 --> 0:11:24.920 And that's why, well to some extent, Fighter might want 0:11:25.240 --> 0:11:29.439 there to be annual boosters so they can keep getting 0:11:29.440 --> 0:11:32.000 these shots into people. It wouldn't that help a little 0:11:32.000 --> 0:11:37.800 bit if if they got a annual booster campaign going. Yeah, 0:11:37.840 --> 0:11:39.920 I think even one of the competitors would like its 0:11:40.080 --> 0:11:44.360 bi annually every every every six months. That the company 0:11:44.400 --> 0:11:46.720 may want that, but the question is to people need it. 0:11:47.200 --> 0:11:49.080 I think if you think about people over the age 0:11:49.080 --> 0:11:52.120 of sixty seventy, those who are not able to keep 0:11:52.160 --> 0:11:57.120 the immune system in in ship shape to fight the virus, 0:11:57.200 --> 0:11:59.840 and also those who are unfortunately in you know, come 0:12:00.000 --> 0:12:02.000 wise or com mobilities of wish. There are a lot 0:12:02.000 --> 0:12:05.120 of people may require a shot every six months, every 0:12:05.120 --> 0:12:08.320 twelve months, but the broader folks over the age of twelve, 0:12:08.440 --> 0:12:11.760 you know, those who are fifty, forty thirty, do they 0:12:11.800 --> 0:12:15.360 really needed And I think that this boost the campaign 0:12:15.400 --> 0:12:19.120 is going to potentially show us that that we we are. 0:12:19.520 --> 0:12:22.880 It's a difficult battle to trans stop infections with this accent. 0:12:23.160 --> 0:12:25.079 All right, Sam, let's step back a little bit. You've 0:12:25.080 --> 0:12:28.520 been covering the pharma and the biotech industries for decades. 0:12:28.920 --> 0:12:32.120 As we step away a little bit from focus on COVID. 0:12:32.760 --> 0:12:36.880 Are your industries biotech farmer? You know, are they going? 0:12:37.040 --> 0:12:38.800 Is there anything we can learn from this m r 0:12:39.000 --> 0:12:43.120 N a technology that might help with I don't know, cancer, Alzheimer's, 0:12:43.120 --> 0:12:45.920 some of the other big issues that you know, the 0:12:45.960 --> 0:12:50.720 health care industries focused on. Yes, So, Paul, Only two 0:12:50.800 --> 0:12:54.080 days ago, I think Madonna had an update about a 0:12:54.120 --> 0:12:56.600 deal that deal, the pact that they have with LURK 0:12:56.880 --> 0:13:00.640 of the US in using m orny as a vaccine 0:13:00.640 --> 0:13:05.080 against counter and the theory is great because you can 0:13:05.120 --> 0:13:08.480 try and dice to divert the immune system, push the 0:13:08.480 --> 0:13:13.280 immune system to recognize special markers on cancer cells that 0:13:13.320 --> 0:13:16.440 you introduce using the m R an a technology that's great. 0:13:16.840 --> 0:13:20.000 Fingers crossed. It will show some strong benefits. A lot 0:13:20.000 --> 0:13:21.960 more detail needed, so at least in that front, I 0:13:21.960 --> 0:13:24.120 think you've seen some of that. Pushing it out to 0:13:24.880 --> 0:13:28.599 neuro neuropsychiatric diseases, etcetera. All of those things need to 0:13:28.640 --> 0:13:31.120 be proven. Well. One thing we've learned during the pandemic, 0:13:31.720 --> 0:13:36.480 science can really deliver if it's let a lot, if 0:13:36.480 --> 0:13:38.880 it's left alone to do his job well. And I 0:13:38.920 --> 0:13:42.120 think this was exactly what we've seen with regards to 0:13:43.080 --> 0:13:45.760 the m R and a technology which many people didn't 0:13:45.760 --> 0:13:48.920 believe in, but enough people did to finance it and 0:13:48.920 --> 0:13:53.080 get it to help us get through this problem. Sam, 0:13:53.160 --> 0:13:55.480 you're and and I know you're in France. Give us 0:13:55.520 --> 0:13:57.640 just third thirty seconds. How are people in France thinking 0:13:57.640 --> 0:13:59.719 about the pandemic? Is it completely in the rear view 0:13:59.760 --> 0:14:04.520 mirror or is it still kind of front and center? Yeah? No, 0:14:04.600 --> 0:14:06.800 I mean everybody knows it's there. We have some friends 0:14:06.800 --> 0:14:08.560 who were supposed to go and help us this weekend 0:14:08.600 --> 0:14:10.719 to be moving house, and they both got COVID. They're 0:14:10.720 --> 0:14:13.360 sitting at home. But people don't think about it like 0:14:13.400 --> 0:14:17.199 that anymore. Life is absolutely back to normal here. No 0:14:17.640 --> 0:14:20.600 different to New York, no different to London. Okay, moved on, 0:14:20.760 --> 0:14:25.440 all right? Good stuff. Sam Fazli, Yes, and he's uh. 0:14:25.560 --> 0:14:28.400 He lives in France. He works in London. Occasionally he 0:14:28.440 --> 0:14:30.400 shows up in New York. I have no idea where 0:14:30.400 --> 0:14:33.560 this guy is most of the time. Sam, exactly ahead 0:14:33.560 --> 0:14:36.360 of European research. He's a pharmaceutical analyst, one of the 0:14:36.360 --> 0:14:39.000 absolute best in the city of London. He's been doing 0:14:39.040 --> 0:14:40.960 it for decades and he's been a great help to 0:14:41.040 --> 0:14:43.400 us a Bloomberg Radio television during his pandemic, giving us 0:14:43.400 --> 0:14:46.320 some you know, real fact based analysis there. He's a 0:14:46.360 --> 0:14:51.160 Bloomberg intelligence, so we appreciate getting his thoughts. All right, 0:14:51.200 --> 0:14:52.760 let's break down this with this big M and a 0:14:52.880 --> 0:14:55.760 trade here that again, Bloomberg News was broke a couple 0:14:55.800 --> 0:15:00.280 of days ago. It's been official today. Kroeger Albertson's nearly 0:15:00.280 --> 0:15:04.080 a billion dollar deal. Jenn bartashes she covers this sector 0:15:04.560 --> 0:15:06.680 like nobody else on Wall Street. She's a senior equity 0:15:06.680 --> 0:15:11.240 analyst for Bloomberg Intelligence. Hey, Jen, so we've kind of 0:15:11.640 --> 0:15:14.080 got the deal. It was again first reported by Bloomberg 0:15:14.080 --> 0:15:18.840 a couple days ago, now confirmed. My question is antitrust? 0:15:18.920 --> 0:15:22.520 Is this going to get approved by the regulators? Good morning, Paul. 0:15:22.600 --> 0:15:25.840 It's I think the question that's really top of mind. Um. 0:15:25.880 --> 0:15:29.040 It's clear that Kroger is trying to offset that concern 0:15:29.200 --> 0:15:31.920 by the structure that they've announced with a spin off 0:15:31.920 --> 0:15:34.440 company in some stores. But when you look at the 0:15:34.480 --> 0:15:38.640 actual map of coverage, it's there. There. There are areas 0:15:38.640 --> 0:15:40.280 where there's not a lot of overlap, but there are 0:15:40.320 --> 0:15:43.120 areas where there's significant overlap. And those happened to be 0:15:43.200 --> 0:15:48.160 in big urban areas like Seattle, like Los Angeles, San Diego, 0:15:48.640 --> 0:15:51.800 at Texas, in the Houston area. So this is where 0:15:51.800 --> 0:15:54.440 the concern comes in that the FTC, which has become 0:15:54.800 --> 0:15:59.680 increasingly critical of big of big mergers, may really push 0:15:59.720 --> 0:16:02.120 back and some of this. Yeah, a lot of folks 0:16:02.160 --> 0:16:04.120 on this side of the country might not be as 0:16:04.160 --> 0:16:06.840 familiar with Albertson's, but it is big out on the 0:16:06.840 --> 0:16:09.080 West Coast where I spent a little time as a kid, 0:16:09.160 --> 0:16:11.800 so I have vague memories of it. What are the 0:16:12.120 --> 0:16:17.080 struggles for Albertson's out West, Jen, Well, you know Albertson's. 0:16:17.120 --> 0:16:20.000 Albertson's has done a good job of improving their operations 0:16:20.000 --> 0:16:22.720 in the last couple of years. UM. But when you're 0:16:22.720 --> 0:16:27.960 talking about very dense markets where both Albertson's and Kuger operate, UM, 0:16:28.000 --> 0:16:30.080 there's there's going to have to be, you know, some 0:16:30.160 --> 0:16:33.760 sort of solution that's that's provided to avoid you know, 0:16:34.280 --> 0:16:37.320 market share ending up in the hands of just too 0:16:37.400 --> 0:16:40.960 few competitors. UM. And we've seen the Biden administration take 0:16:41.080 --> 0:16:43.400 a bigger stance on this kind of anti trust type 0:16:43.400 --> 0:16:46.680 thing with the meatpacking industry and other technology industry things 0:16:46.680 --> 0:16:50.200 like that. So that's that's one of the concerns um. 0:16:50.320 --> 0:16:52.840 And so you know, the other thing is that there's 0:16:52.880 --> 0:16:56.280 a long timeline before this deal is meant to close, 0:16:56.280 --> 0:16:58.960 which is the beginning of four There's a lot that 0:16:59.040 --> 0:17:01.280 can go wrong in such a long try and frame 0:17:01.800 --> 0:17:04.440 that could disrupt the current operations and make the success 0:17:04.440 --> 0:17:07.760 of the merger ultimately a little bit riskier. Hey, Jen, 0:17:07.880 --> 0:17:10.240 I you know, I kind of get it. Um you know, 0:17:10.359 --> 0:17:12.720 bigger's better, scale, all that kind of stuff and a 0:17:12.760 --> 0:17:16.560 relatively low low margin business. Give us a sensor. Just 0:17:16.920 --> 0:17:21.040 describe how Walmart has come into this business, the supermar 0:17:21.080 --> 0:17:24.159 market business, the food business, and how they've disrupted the business. 0:17:24.359 --> 0:17:29.920 Where's Walmart? And can this combined co compete with Walmart? Yeah, 0:17:30.040 --> 0:17:32.520 that's a great question call when you know, if you 0:17:32.520 --> 0:17:34.679 look at Walmart and you break down their revenue and 0:17:34.720 --> 0:17:36.720 you look at what the same goods that are sold 0:17:36.720 --> 0:17:40.159 at a grocery store versus everything a Walmart carries a 0:17:40.200 --> 0:17:42.680 little of our fifty of their revenue comes from what 0:17:42.920 --> 0:17:46.640 grocery market grocery stores sell. Um So it is a 0:17:46.680 --> 0:17:49.879 big It is a big competitor on a national scale. 0:17:49.920 --> 0:17:54.080 They hold about of all food retail or grocery market 0:17:54.119 --> 0:17:57.840 share um so, the combined entity of Kroger and Albertson's 0:17:58.200 --> 0:18:01.359 together would bring their mark get share up to you 0:18:01.560 --> 0:18:07.040 about just under So you know they can compete. And 0:18:07.119 --> 0:18:09.480 obviously scale will help them compete because they can be 0:18:09.560 --> 0:18:12.639 more competitive on pricing, they can procure goods at a 0:18:12.680 --> 0:18:16.240 lower cost. But it takes time to achieve that type 0:18:16.280 --> 0:18:19.560 of synergy. Um And in the meantime, Walmart will not 0:18:19.640 --> 0:18:22.440 take their foot off of the accelerator. Um. And so 0:18:22.640 --> 0:18:25.000 you know, yes, it will improve their ability to compete, 0:18:25.040 --> 0:18:27.960 but um, they're also going to be tied up with 0:18:28.000 --> 0:18:31.720 integration efforts, UM, which could delay their ability to continue 0:18:31.760 --> 0:18:35.040 to expand and remain competitive with Walmart during that time frame. 0:18:35.440 --> 0:18:37.320 It's not just Walmart. I think the last time we 0:18:37.400 --> 0:18:40.400 heard about a big grocery deal sort of like this 0:18:40.520 --> 0:18:44.320 was when Amazon purchased Whole Foods. I mean, how has 0:18:44.400 --> 0:18:49.159 the grocery market just more broadly shifted given all the 0:18:49.200 --> 0:18:52.520 different types of players that are in it now. It's 0:18:52.600 --> 0:18:54.840 it's been a huge change in the dynamic of the 0:18:54.880 --> 0:18:57.720 industry in the last couple of years. UM. And you 0:18:57.760 --> 0:19:00.600 know with with Amazon, you know, purchase of Foods, which 0:19:00.640 --> 0:19:04.600 is probably the most recent larger transaction out there. UM. Yeah, 0:19:04.640 --> 0:19:07.640 it really shook the industry up, especially from a technology 0:19:07.680 --> 0:19:13.480 perspective and a digital ordering type of perspective. Um. When 0:19:13.480 --> 0:19:17.680 you're looking at the traditional supermarket players, however, it's been 0:19:17.960 --> 0:19:21.880 a story about industry consolidation. UH. And we've seen smaller 0:19:21.920 --> 0:19:24.640 players go out of business or be scooped up. Um. 0:19:24.880 --> 0:19:28.280 And so what we're seeing in the industry now is 0:19:28.320 --> 0:19:33.800 we're having gale driven players UM, making it increasingly difficult 0:19:33.880 --> 0:19:37.520 for smaller regional players or local players to remain successful 0:19:37.520 --> 0:19:40.680 and competitive. UM. And that that then also is kind 0:19:40.680 --> 0:19:42.560 of a long term trend that we expect to see 0:19:42.560 --> 0:19:46.520 continue with regards to that that consolidation UM. And there 0:19:46.560 --> 0:19:50.080 are new pressures of having you know, being more technologically 0:19:50.160 --> 0:19:53.800 savvy and to create you know, higher revenue stream you know, 0:19:53.880 --> 0:19:56.760 higher margin revenue streams for these businesses as well. So 0:19:56.800 --> 0:19:58.639 there are a lot of balls to juggle for for 0:19:58.680 --> 0:20:01.119 these retailers at the moment. All Right, jenn thanks so 0:20:01.160 --> 0:20:03.320 much for joining us. You are the experts, so we 0:20:03.320 --> 0:20:05.399 had to get you on to kind of talk about 0:20:05.440 --> 0:20:09.080 this deal, big deal billion bankers getting paid, which is 0:20:09.080 --> 0:20:12.320 the first thing I look at. New competitor potentially for 0:20:12.400 --> 0:20:15.240 the Walmarts of the world in the supermarket space. I'm 0:20:15.240 --> 0:20:17.640 still waiting for Piggy Wiggley to come to New Jersey, 0:20:17.680 --> 0:20:20.720 but we'll see. Jennifer Bartasha's senior equity research annelist for 0:20:20.720 --> 0:20:25.600 Bloomberg Intelligence, joins us there and again UM consolidation UH 0:20:25.600 --> 0:20:27.800 in the supermarket business. And his Nathan was talking about, 0:20:27.800 --> 0:20:29.679 I mean, you know, I got Amazon coming in with 0:20:29.720 --> 0:20:32.880 Whole Foods years ago really changed the landscape as well. 0:20:37.960 --> 0:20:40.320 We had to retail sales this morning. I don't know. 0:20:40.400 --> 0:20:44.439 The headline, flat month the month, that's a little bit 0:20:44.480 --> 0:20:47.199 weaker than the prior month, so that's not great. The 0:20:47.200 --> 0:20:49.159 control group, however, came in a little bit better and 0:20:49.200 --> 0:20:52.119 expected and better than last month. So let's call it mixed. 0:20:52.160 --> 0:20:54.119 I guess, but I don't know. What do I know? 0:20:54.280 --> 0:20:56.600 Mariy Shure, she knows what's going on. She's a senior 0:20:56.640 --> 0:20:59.800 equity also Columbia Thread Needle Investments. Before that, she was 0:21:00.040 --> 0:21:03.960 with some little shop downtown Goldman Sachs University of Pennsylvania, 0:21:04.040 --> 0:21:06.800 so she's uh, knows what she's talking about here. Mary, 0:21:06.880 --> 0:21:09.360 What did you take away from some of the retail 0:21:09.400 --> 0:21:11.440 sales data we we saw this morning? How's the consumer 0:21:11.440 --> 0:21:15.400 doing well? Thanks so much for having me. My reaction 0:21:15.440 --> 0:21:19.080 this morning was very similar to yours. More mixed. I 0:21:19.119 --> 0:21:23.000 would say two key takeaways for me. Number one, the 0:21:23.160 --> 0:21:28.640 flat month over month read um really implies negative real 0:21:29.119 --> 0:21:33.040 or unit demand given what we've seen with inflation, and 0:21:33.119 --> 0:21:37.359 that is very concerning, especially at a time when the 0:21:37.440 --> 0:21:41.280 companies have all really relied on pricing to drive sales, 0:21:41.960 --> 0:21:47.119 and with building inventories, it seems like pricing maybe less 0:21:47.200 --> 0:21:50.919 of a lever going forward, so the what happens with 0:21:50.960 --> 0:21:54.080 the unit demand will be even more key to watch. 0:21:55.080 --> 0:21:57.359 And then the other key takeaway would really just be 0:21:57.440 --> 0:22:01.920 the shift towards necessities. We saw categories like food, health, 0:22:01.960 --> 0:22:06.879 and personal care in general merchandise accelerate slightly month over month, 0:22:06.960 --> 0:22:11.919 while other discretionary category categories saw slow down, and for me, 0:22:12.040 --> 0:22:15.000 the real ones I was watching, we're furniture and consumer 0:22:15.040 --> 0:22:19.119 electronics UM that saw the greatest deceleration month over month. 0:22:19.600 --> 0:22:23.080 And I think that you know, those categories remain um 0:22:23.240 --> 0:22:27.920 at risk cutting into the holiday given building inventory and 0:22:28.040 --> 0:22:32.520 still slowing demand following following two very strong years. So 0:22:32.560 --> 0:22:35.680 are you starting then to see cracks in the resiliency 0:22:35.920 --> 0:22:38.760 that a lot of these bank CEOs you've been hearing 0:22:38.840 --> 0:22:44.120 from our saying that they still see in the consumer. Yeah, 0:22:44.280 --> 0:22:47.760 it's such a great question. We've been talking of this internally. 0:22:47.840 --> 0:22:50.760