WEBVTT - Ukraine Struggles to Get ‘War Bonds’ 0:00:01.800 --> 0:00:04.440 This is Bloomberg Business Week. I'm Karl Masser and I'm 0:00:04.480 --> 0:00:07.280 Bloomberg Quick Takes Tim Stanovk. We're here every day bringing 0:00:07.320 --> 0:00:09.840 you the latest news from the world to business and finance, 0:00:09.840 --> 0:00:13.680 plus technology, politics, economics, all purtnising the power of Business 0:00:13.680 --> 0:00:17.159 Week reporters and editors, not to mention our journalists and 0:00:17.160 --> 0:00:20.000 analyst in more than one twenty countries. You can download 0:00:20.000 --> 0:00:23.239 Bloomberg Business Week and iTunes, SoundCloud, or Bloomberg dot Com. 0:00:23.400 --> 0:00:25.200 You can also listen to our radio show at two 0:00:25.200 --> 0:00:27.880 pm Eastern Time on Bloomberg Radio, or watch us on 0:00:27.920 --> 0:00:31.680 YouTube search Bloomberg Global News. Well, the EU set to 0:00:31.760 --> 0:00:33.720 unveil a plan as soon as this week to jointly 0:00:33.760 --> 0:00:36.680 issue bonds on a potentially massive scale to finance energy 0:00:36.680 --> 0:00:39.360 and defense spending. As the block coops with the fallout 0:00:39.360 --> 0:00:42.279 from Russia's invasion of Ukraine. We know that there is 0:00:42.320 --> 0:00:44.920 a lot going on, and we thought we needed to 0:00:44.920 --> 0:00:47.480 get an update from someone who's been a great source 0:00:47.479 --> 0:00:50.360 for us here at Bloomberg. That's Roz Mathison, Executive editor 0:00:50.400 --> 0:00:53.320 for International Government at Bloomberg News. Roz joins us on 0:00:53.360 --> 0:00:56.160 the phone from London. Ros a lot of quick moving 0:00:56.200 --> 0:00:58.640 parts here, especially if we look at the way that 0:00:58.680 --> 0:01:01.960 we you know, we see that things are changing every day, 0:01:02.000 --> 0:01:06.440 talks on, talks off, in comments from President Zawinski as well. 0:01:06.520 --> 0:01:08.240 What's the most important thing that we need to focus 0:01:08.240 --> 0:01:10.600 on when it comes to the latest development in Russia's 0:01:10.640 --> 0:01:15.600 invasion of Ukraine. Well, in terms of the actual conflict itself, 0:01:15.680 --> 0:01:20.400 it's been relatively calm today. But what we're seeing is 0:01:20.480 --> 0:01:23.760 efforts by the Russian military to really regroup itself on 0:01:23.800 --> 0:01:26.240 the ground after being a bit bogged down, particularly in 0:01:26.280 --> 0:01:30.280 their effort to move towards the capital Kiev. And so 0:01:30.440 --> 0:01:33.039 what we're expecting as a result is an escalation in 0:01:33.080 --> 0:01:37.000 the aerial campaign against key cities in Ukraine. You can 0:01:37.040 --> 0:01:41.160 see that that shelling has continued unabated. Certainly you can 0:01:41.160 --> 0:01:44.039 imagine the Russian president is probably getting frustrated with how 0:01:44.040 --> 0:01:46.720 long it's taking to achieve what he would see as 0:01:46.800 --> 0:01:49.720 his goals on the ground, and that could lead the 0:01:49.760 --> 0:01:53.520 military to really pick up in terms of shelling, bombardment 0:01:53.560 --> 0:01:56.680 of cities, meeting to take key infrastructure, and certainly to 0:01:56.680 --> 0:01:59.840 get control of the railway networks in the country, which 0:01:59.840 --> 0:02:02.880 they struggled to do so far. So you can imagine 0:02:02.880 --> 0:02:05.680 we're going to see any escalation in their tactics in 0:02:05.720 --> 0:02:08.079 the coming days, a sense of frustration at what they 0:02:08.120 --> 0:02:10.520 see as their lack of progress so far. As a 0:02:10.600 --> 0:02:13.160 chance of talks between Ukraine and Russia, is that just 0:02:13.320 --> 0:02:15.880 off the table at this point. I know the Ukraine 0:02:15.880 --> 0:02:18.960 president says he's not ready to meet Vladimir Putin's demands, 0:02:19.000 --> 0:02:22.799 which include a rewrite of Ukraine's constitution to declare specific 0:02:22.880 --> 0:02:28.320 territories independent. So talks off the table at this point. Well, 0:02:28.320 --> 0:02:31.359 there have been lower level talks with lower level officials 0:02:31.400 --> 0:02:34.200 that have happened three times now. They've mostly focused on 0:02:34.200 --> 0:02:38.200 trying to get agreement on sea spars, humanitarian corridors to 0:02:38.240 --> 0:02:41.000 allow civilians who are living in the areas where the 0:02:41.120 --> 0:02:43.959 fighting is the worst safe passage to leave, and we've 0:02:44.000 --> 0:02:46.720 seen at least four efforts so far to get those 0:02:46.760 --> 0:02:51.200 corridors going without success. They tend to fall apart within hours, 0:02:51.600 --> 0:02:54.640 and Russian Ukraine they both say they will continue to talk, 0:02:54.680 --> 0:02:57.240 but there's no set date for a further meeting on 0:02:57.280 --> 0:03:00.520 that front. What's interesting, of course, that the Russian Ukraine 0:03:00.560 --> 0:03:03.480 foreign ministers are both going to be in Turkey on 0:03:03.520 --> 0:03:06.000 Thursday and we'll be crossing paths there at least in 0:03:06.080 --> 0:03:08.600 some kind of interaction, and that would be the highest 0:03:08.680 --> 0:03:12.360 level conversation between officials of the country since the war began. 0:03:12.480 --> 0:03:15.160 So that's one to watch very closely in terms of 0:03:15.200 --> 0:03:19.240 any tangible conversations about what kind of things could come 0:03:19.240 --> 0:03:21.880 on the table, perhaps as a solution to the conflict. 0:03:22.160 --> 0:03:25.560 Her To that end, I'm wondering about some Zelinsky's comments 0:03:25.600 --> 0:03:28.280 to ABC News about NATO. Here's what he said in 0:03:28.280 --> 0:03:30.640 an interview with ABC News. Quote regarding NATO, I have 0:03:30.720 --> 0:03:33.200 cooled down regarding this question a long time ago after 0:03:33.240 --> 0:03:36.000 we understood that NATO is not prepared to accept Ukraine. 0:03:36.760 --> 0:03:38.680 I never wanted to be a country that is begging 0:03:38.800 --> 0:03:40.760 something on its knees, and we're not going to be 0:03:40.800 --> 0:03:42.800 that country, and I don't want to be that president. 0:03:43.240 --> 0:03:48.160 Is that indication to you that, uh, perhaps Ukraine could 0:03:48.920 --> 0:03:52.640 uh see to some of Russia's demands, which include not 0:03:53.080 --> 0:03:57.040 becoming part of NATO. You can certain see a lot 0:03:57.080 --> 0:04:00.600 of pressure coming on the Ukrainian president to to see 0:04:00.640 --> 0:04:04.600 some ground here, to avoid perhaps even an escalation of 0:04:04.720 --> 0:04:09.000 fighting and conflict and the horrible toll that takes on 0:04:09.200 --> 0:04:11.920 his people. You can also see a very strong sense 0:04:11.920 --> 0:04:14.800 of frustration that NATO. He's called repeatedly for a no 0:04:14.960 --> 0:04:19.080 fly zone over Ukraine, which is very difficult to do, impossible, 0:04:19.240 --> 0:04:21.479 NATO says, because it would would draw it into the 0:04:21.520 --> 0:04:26.280 conflict proper against Russia. The reality is that NATO has 0:04:26.320 --> 0:04:29.200 been very clear that while it has an open door policy, 0:04:29.839 --> 0:04:32.880 there's no chance of Ukraine joining in the foreseeable future. 0:04:32.880 --> 0:04:35.920 And by that we're talking, you know, years, possibly longer. 0:04:36.240 --> 0:04:39.640 The obstacles are very severe for becoming a member. And 0:04:39.960 --> 0:04:43.760 that's more an expression really a frustration at that rather 0:04:43.839 --> 0:04:47.560 than perhaps Lynsky's saying that he's abandoning his desire to 0:04:47.640 --> 0:04:51.640 join NATO. It's more he's angry, it's clear at the alliance, 0:04:51.680 --> 0:04:54.920 and he's expressing his frustration in those comments. Here is 0:04:55.000 --> 0:04:57.719 one thing I think you know in this war, in 0:04:57.760 --> 0:05:01.200 this Russian invasion of Ukraine, we are learning about Ukraine, 0:05:01.320 --> 0:05:06.000 whether it's I T, whether it's wheat, whether it's semiconductors, 0:05:06.080 --> 0:05:09.000 Russia of course, the energy needs and more, we're understanding 0:05:09.000 --> 0:05:11.839 more about the global economy and where we get stuff from. 0:05:11.880 --> 0:05:13.880 If the EU, as I mentioned on the lead in 0:05:13.920 --> 0:05:16.520 that they're getting ready to unveil a plan to jointly 0:05:16.520 --> 0:05:18.840 issue bonds, and this is to help it, you know, 0:05:19.600 --> 0:05:23.320 scale finance, energy and defense spending right as it tries 0:05:23.360 --> 0:05:27.200 to really figure out its way forward and maybe not 0:05:27.279 --> 0:05:30.440 be so dependent on Russia. If indeed that moves forward 0:05:30.440 --> 0:05:33.120 and there's no going back in terms of relationships with Russia, 0:05:33.279 --> 0:05:36.039 how crushing will that be for Russia in terms of 0:05:36.080 --> 0:05:39.440 its economic might, if you will, and just kind of 0:05:39.400 --> 0:05:42.840 about forty seconds, well, you can see the extensive pressure 0:05:42.880 --> 0:05:45.800 that's coming on the Russian economy. These are unprecedented sanctions 0:05:45.839 --> 0:05:48.800 across the board, targeting all sectors of the economy and 0:05:48.839 --> 0:05:52.039 also particularly the Russian consumer. But what you're also seeing 0:05:52.120 --> 0:05:55.320 is very nascent efforts by Russia to get around those 0:05:55.360 --> 0:06:01.000 sanctions by using China perhaps for the payment systems, by 0:06:01.000 --> 0:06:04.279 selling its gas and oil to other countries that be 0:06:04.320 --> 0:06:06.640 willing to take it. So you can't discount the fact 0:06:06.680 --> 0:06:09.719 that Russia might find some ways through to poke holes 0:06:09.720 --> 0:06:11.960 with these sanctions and trying to find some resilience in 0:06:12.000 --> 0:06:15.120 its economy, although admittedly right now it's under extreme pressure. 0:06:15.400 --> 0:06:17.240 All Right, we're gonna leave it there. Thank you so much, 0:06:17.320 --> 0:06:21.039 really appreciate it. Rosalind Matheson, Executive editor for International Government 0:06:21.080 --> 0:06:23.799 at Bloomberg News, on the phone from London, her reporting 0:06:24.240 --> 0:06:27.320 and many of our team who are covering it day in, 0:06:27.400 --> 0:06:30.760 day out, our in, our out, just keeping us up 0:06:30.760 --> 0:06:33.280 to date on what's going on. Yeah, we certainly appreciate that. 0:06:33.400 --> 0:06:37.400 This is Bloomberg Business Week with Carol Masser and Bloomberg 0:06:37.480 --> 0:06:41.320 Quick Takes Tim Stinovic on Bloomberg Radio. All Right, the 0:06:41.320 --> 0:06:43.719 new issue of Bloomberg business Week magazine do out later 0:06:43.760 --> 0:06:46.440 this week. Ongoing coverage, of course, of the Russian invasion 0:06:46.440 --> 0:06:49.440 of Ukraine and how Ukraine is struggling to get war 0:06:49.520 --> 0:06:53.039 bonds to retail investors, not just domestic ones, but out 0:06:53.040 --> 0:06:56.719 more broadly. The story by Priscilla as A Vedo roacha 0:06:56.839 --> 0:06:59.640 credit reporter for Bloomberg News, who joined this now on 0:06:59.680 --> 0:07:02.200 the phone from London. Carol, as you mentioned, this story 0:07:02.200 --> 0:07:04.599 featured in the upcoming issue of Business Week magazine, though 0:07:04.640 --> 0:07:06.240 you can read it now like I did on the 0:07:06.240 --> 0:07:09.800 Bloomberg terminal also at Bloomberg dot com slash business Week. Priscilla, 0:07:09.840 --> 0:07:14.640 let's talk a little bit about about war bonds. Um Initially, Uh, 0:07:14.680 --> 0:07:16.960 this is this is the type of of product that 0:07:17.240 --> 0:07:20.160 is not available to the everyday investor, right, this is 0:07:20.200 --> 0:07:24.960 available to institutions and and and larger pension funds. Um 0:07:25.120 --> 0:07:30.720 is that something that Ukrainians can actually change and pretty 0:07:30.720 --> 0:07:34.760 easily so retail investors can have access to these Hi, Tim, 0:07:34.880 --> 0:07:38.200 Hi Carol, goodnight or a good afternoon there, thank you 0:07:38.280 --> 0:07:43.000 for having me. Uh So, basically it depends war bonds 0:07:43.040 --> 0:07:46.520 can be sold to different investors for different purposes, right, 0:07:46.800 --> 0:07:49.119 Like we've seen that in the U S serving World 0:07:49.200 --> 0:07:52.760 War One, they sold bonds that actually the people could 0:07:52.760 --> 0:07:56.240 buy to support the war efforts. But in the particular 0:07:56.280 --> 0:07:59.360 case of Ukraine is a bit treatier because what the 0:07:59.400 --> 0:08:04.440 sovereign it. They took the regular Tuesday auctions loot and 0:08:04.520 --> 0:08:09.200 they turned and turned it into like a military bond 0:08:09.640 --> 0:08:13.560 fundraising effort. So they used the mechanism that they already 0:08:13.600 --> 0:08:18.880 had in place, which was dedicated to institutional investors, central 0:08:18.920 --> 0:08:24.440 bank extension funds and more sophisticated as like asset managers, 0:08:24.520 --> 0:08:30.560 and use these vehicle to put together this war effort fundraising. Well, 0:08:30.600 --> 0:08:33.079 and let's just remind everybody an auction did happened today 0:08:33.200 --> 0:08:36.199 and Ukraine raising twenty nine million in a second war 0:08:36.280 --> 0:08:39.839 bond auction UH, and they are using this U to 0:08:40.040 --> 0:08:43.800 fund its military UH and resistance to Russia's invasion. According 0:08:43.840 --> 0:08:47.400 to the country's Ministry of Finance, what's interesting, UM I 0:08:47.440 --> 0:08:49.360 was trying to find it. How difficult though is it 0:08:49.400 --> 0:08:53.319 for it to go beyond the domestic home front? In 0:08:53.400 --> 0:08:57.640 terms of selling, it is very hard because you need 0:08:57.679 --> 0:09:01.000 to put a lot of legal protection in place, So 0:09:01.200 --> 0:09:03.960 you need to to put the prospect us together for 0:09:04.000 --> 0:09:07.360 those who are not very familiar, prospectives is a legal 0:09:07.440 --> 0:09:11.240 document that will detail the risks of the bond, the 0:09:11.320 --> 0:09:14.599 conditions in terms of payments. Who are the banks involved 0:09:14.720 --> 0:09:18.520 in everything? So UH, for them to do such a 0:09:18.600 --> 0:09:23.680 thing under war is extremely hard because the conditions are 0:09:23.720 --> 0:09:27.000 not very favorable for them, not favorable at all. And 0:09:27.080 --> 0:09:31.440 it's something that also requires being fully integrated in the 0:09:31.520 --> 0:09:35.600 market right right well, But in terms of international demand, 0:09:35.600 --> 0:09:38.560 I do think about international investors who are maybe looking 0:09:38.600 --> 0:09:41.120 to lend a helping hand in some way. There is 0:09:41.120 --> 0:09:45.720 the demand for it. There is demand, and you could 0:09:45.760 --> 0:09:48.760 go like on the Ministry of Finance Twitter page or 0:09:48.800 --> 0:09:51.840 in a LinkedIn page and you see tons of comments 0:09:51.840 --> 0:09:54.280 of people saying how can I buye those bonds from 0:09:54.320 --> 0:09:57.400 the US, from the UK and things like that. But 0:09:57.920 --> 0:10:01.760 right now, because those are domestic bonds and they're denominated 0:10:01.800 --> 0:10:05.400 in local currency, they're not in US dollars or euro 0:10:06.040 --> 0:10:08.960 you have to go to the primary dealer. The primary 0:10:09.000 --> 0:10:13.200 dealer is the bank that the solvers like. It's um 0:10:13.240 --> 0:10:16.079 it's a bank that works for the sovereign and sells 0:10:16.120 --> 0:10:18.720 that to investors. In the case of Ukraine, there are 0:10:18.800 --> 0:10:23.400 specific eleven banks. They're the sovereign primary dealers, and those 0:10:23.440 --> 0:10:26.959 banks sell to investors, so they do the deals. So 0:10:27.160 --> 0:10:29.440 it's meet, Priscilla, I want to buy those bonds, I 0:10:29.520 --> 0:10:32.840 need to either a call broker or a private bank 0:10:33.000 --> 0:10:35.760 or someone who has a connection to the trading desk 0:10:35.880 --> 0:10:38.360 of one of those banks that could place the order 0:10:38.400 --> 0:10:41.319 on my behalf. So it's not something straightforward, it's something 0:10:41.360 --> 0:10:44.600 for very sophisticated investors. Now, at what point, though, could 0:10:44.800 --> 0:10:48.080 UH an investor actually get access to this through a 0:10:48.160 --> 0:10:53.920 retail trading platform if ever, in this case, I don't 0:10:53.920 --> 0:10:56.360 think so. I don't think it's possible. I think they 0:10:56.360 --> 0:10:59.679 need to develop a new product that would allow retail 0:10:59.720 --> 0:11:02.760 and the stors to participate. They are working on it. 0:11:02.840 --> 0:11:06.280 They're indicating that they're trying to do their best, but 0:11:06.840 --> 0:11:10.920 under the circumstances they are not fully integrated to international 0:11:11.000 --> 0:11:14.240 capital markets, right, and they used that they current offer 0:11:15.040 --> 0:11:18.080 is not in line to all the emerging markets. And 0:11:18.120 --> 0:11:21.440 they also had their their sovereign ratings downgraded because of 0:11:21.480 --> 0:11:24.360 the war and the risks that the war represent to 0:11:24.520 --> 0:11:28.000 the sovereignty of the country. That's a really good point, right, 0:11:28.040 --> 0:11:30.240 Like you think about it, like what happens on the 0:11:30.280 --> 0:11:32.640 other side. So if you know, international investors get in, 0:11:32.640 --> 0:11:36.280 our investors get in. We don't unfortunately know the outcome. 0:11:36.360 --> 0:11:39.320 Then it could be that Ukraine remains independent and a 0:11:39.360 --> 0:11:43.880 sovereign nation right with its own debt markets and sovereign markets, 0:11:44.040 --> 0:11:47.560 or if it becomes part of Russia. T him like 0:11:47.600 --> 0:11:50.319 it's a it's a different story potentially, what would that story? 0:11:50.360 --> 0:11:53.840 I mean, you know, I don't want you to speculate, though, Priscilla, 0:11:53.880 --> 0:11:55.679 but this is this is kind of what's priced in 0:11:55.679 --> 0:12:00.200 in terms of coupon though, right that risk? Yes, that's right. 0:12:00.440 --> 0:12:04.720 So if Ukraine, if the outcome of the war, you 0:12:04.840 --> 0:12:08.800 end up with a most call backed government in kievs uh, 0:12:08.920 --> 0:12:12.240 then you have questions like will this government honor its 0:12:12.280 --> 0:12:16.480 commitments to international creditors. Uh, it's just going to be 0:12:16.520 --> 0:12:20.480 sanctioned by US, the UK, the European Union. So you 0:12:20.559 --> 0:12:23.760 have all those questions that you need to assess when 0:12:23.760 --> 0:12:27.920 you get involved into something like that. UM, should we 0:12:27.960 --> 0:12:32.040 anticipate that there will be another raise by Ukraine, another auction? 0:12:34.280 --> 0:12:38.120 It is hard to say. They do conduct auctions every Tuesday. 0:12:38.240 --> 0:12:41.080 But by saying that they will conduct more options to 0:12:41.160 --> 0:12:43.640 fund the military is saying that they believe that this 0:12:43.920 --> 0:12:46.800 war is going to go ahead for further weeks, so 0:12:46.920 --> 0:12:50.480 they will continue with their fundraising efforts as a sovereign nation. 0:12:51.040 --> 0:12:53.320 But if those ponds are going to be dedicated to 0:12:53.360 --> 0:12:56.079 the military or if they're going to be just general 0:12:56.080 --> 0:12:59.760 budgetary purposes, that is a different story and we have 0:12:59.840 --> 0:13:02.160 to wait and see, like closer to the end of 0:13:02.160 --> 0:13:06.280 the week. Well, it's interesting, uh, and certainly something we're tracking, 0:13:06.320 --> 0:13:09.360 and it's a result of the current situation that war 0:13:09.840 --> 0:13:12.400 that we are in. UM really appreciate it. A big 0:13:12.400 --> 0:13:14.800 thank you to Priscilla as A Vedo Roacheck, credit reporter 0:13:14.840 --> 0:13:17.040 for Bloomberg News. Check out her story. It's featuring the 0:13:17.080 --> 0:13:19.480 upcoming issue of Bloomberg Business Week. You can read it 0:13:19.520 --> 0:13:21.880 now on the Bloomberg terminal also at Bloomberg dot com 0:13:21.880 --> 0:13:25.920 slash business Week. You're listening to Bloomberg Business Week with 0:13:26.000 --> 0:13:30.840 Carol Masser and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. 0:13:31.160 --> 0:13:33.920 Chairs of PETC. They are rallying. I'm meant to bring 0:13:33.920 --> 0:13:36.240 it up nine point four percent. Thank you very much, 0:13:36.240 --> 0:13:38.920 Tim Stanovic. They are up more than nine percent, company 0:13:38.960 --> 0:13:40.920 beating on both the top and bottom line for the 0:13:41.000 --> 0:13:43.679 last quarter and upping its fiscal year outlook for adjusted 0:13:43.679 --> 0:13:47.240 earnings and revenues. Uh. Pets all the rage during the pandemic, 0:13:47.280 --> 0:13:50.560 and they are apparently so too post pandemic. I get 0:13:50.600 --> 0:13:55.920 a second. Dogs, you're like, you know, the walking example 0:13:56.120 --> 0:13:59.120 of this. Uh. It's always great to speak with Ron Coglan, 0:13:59.200 --> 0:14:01.720 the CEO of pet He's with us once again in 0:14:01.760 --> 0:14:04.760 the Blueberrick Interactive Broker Studio. Ron. Good to have you 0:14:04.800 --> 0:14:07.480 back in New York. Have you back in person with us? Um, 0:14:07.520 --> 0:14:10.280 it's been a quarter. How are you. It's great to 0:14:10.280 --> 0:14:13.440 be here. I am really really good. Uh and um, 0:14:13.720 --> 0:14:16.160 this is more importantly in my thirteen year old Yummy dog. 0:14:16.240 --> 0:14:18.959 Yummy is really good and business is really good we taught. 0:14:19.000 --> 0:14:22.760 We announced the seventh consecutive quarter of double digit growth. 0:14:23.320 --> 0:14:26.880 Of the fifty top retailers, there's only three companies have 0:14:27.000 --> 0:14:30.040 done seven consecutive quarters of double digit grow, So something 0:14:30.080 --> 0:14:32.320 we're really proud of. With margin expansion, how are you 0:14:32.360 --> 0:14:35.880 doing it? Yeah, we're executing against our strategy. So you know, 0:14:38.040 --> 0:14:40.360 I'm coming upon my fourth year and we made a 0:14:40.400 --> 0:14:42.120 big bet. We made a big bet that we were 0:14:42.120 --> 0:14:46.440 going to develop an ecosystem of that's the full offering 0:14:46.480 --> 0:14:49.200 that pet parents want. So we have our own vets, 0:14:49.280 --> 0:14:52.520 we have grooming, we have training, we have supplies, we 0:14:52.600 --> 0:14:54.920 have food, and we do it in stores. We also 0:14:55.040 --> 0:14:57.680 do it digitally, and that was a big bet versus 0:14:57.680 --> 0:14:59.520 trying to be expert at one part of the thing, 0:14:59.560 --> 0:15:03.760 which is what basically everyone else does. Um parents say 0:15:03.800 --> 0:15:06.240 that's what they want. They want a partner to manage 0:15:06.280 --> 0:15:08.000 their pet libs. I'm sure it's not easy for you. 0:15:08.040 --> 0:15:09.400 I used to go to one place for a vet, 0:15:09.400 --> 0:15:11.840 one place for grooming, one place where food. My hunches. 0:15:11.880 --> 0:15:13.680 You probably do that right now, kind of still do. 0:15:14.920 --> 0:15:18.000 But I do a lot online in terms of products 0:15:18.040 --> 0:15:20.480 like and that simplifies my world. Yeah, but if you 0:15:20.480 --> 0:15:22.240 could do it all in one place, and then that 0:15:22.280 --> 0:15:25.000 company knows you and knows your data, and the groomer 0:15:25.000 --> 0:15:26.840 knows the same thing that the vet knows. We take 0:15:26.880 --> 0:15:29.480 better care of you. And so that strategy is working. 0:15:29.560 --> 0:15:33.680 The second thing that's working is our omni channel strategy. UM. 0:15:33.720 --> 0:15:37.240 Eight percent of our online orders get fulfilled through a 0:15:37.280 --> 0:15:39.880 pet care centers we call the micro distribution centers. That 0:15:39.920 --> 0:15:43.040 means there's faster the customer and lower costs. Does that 0:15:43.080 --> 0:15:46.360 mean they walk into or no, it's separate distribution center. 0:15:46.400 --> 0:15:50.440 So there's three. It's your local, your local pet co. Right, 0:15:50.720 --> 0:15:53.320 it had three different versions. One we might ship from 0:15:53.400 --> 0:15:56.120 that store to you if you order it online too, 0:15:56.320 --> 0:15:58.640 you could same day delivery what you can't do online. 0:15:58.960 --> 0:16:00.840 Or three you might go and pick it up if 0:16:00.880 --> 0:16:02.560 you're short on order. Oh I need to get food 0:16:02.560 --> 0:16:04.400 and on my way home and you you know, bopus, 0:16:04.480 --> 0:16:06.480 it's just like you you order a head on your 0:16:06.520 --> 0:16:10.320 Starbucks as an example. UM, So that's really working for us. 0:16:10.760 --> 0:16:13.000 And then our vet business is working. And we had 0:16:13.040 --> 0:16:15.880 a big announcement last week. We we had a joint 0:16:15.920 --> 0:16:19.120 venture with a VET partner and we bought them out. 0:16:19.600 --> 0:16:22.520 Last week we announced it and so we're bringing eight 0:16:22.600 --> 0:16:25.760 hundred veterinary professionals into our system. And one of the 0:16:25.800 --> 0:16:28.160 biggest questions I get from investors is can you hire 0:16:28.280 --> 0:16:31.400 enough vets? And you might have hired my vet who 0:16:31.440 --> 0:16:33.640 we loved and adored and he became part of a 0:16:33.640 --> 0:16:38.840 bigger practice and then is gone. Our investors seeing the 0:16:38.880 --> 0:16:41.360 story though, though are they hearing this story? Because the 0:16:41.400 --> 0:16:43.560 stock is doing well today, but it did hit a 0:16:43.640 --> 0:16:46.480 hit a record low in late February. It's down thirty 0:16:46.480 --> 0:16:49.600 percent from its highs of last year. What are investors 0:16:49.600 --> 0:16:51.840 missing here? Yeah? I mean we got caught in some 0:16:51.920 --> 0:16:55.080 of the market downturn um that that happened, and we 0:16:55.120 --> 0:16:56.640 just need to prove it over time. And that's why 0:16:56.640 --> 0:16:58.400 I'm so proud of the seven quarters of a double 0:16:58.440 --> 0:17:02.600 digit growth with margin expansion. And also our bullishists was 0:17:02.640 --> 0:17:06.280 evidenced by our guide, which was above consensus. There were 0:17:06.280 --> 0:17:08.600 people who questioned whether we could grow in the second 0:17:08.640 --> 0:17:11.040 half of the year. We did so at double digit rate. 0:17:11.320 --> 0:17:14.720 There are people who question whether we can lap next year. Uh, 0:17:14.720 --> 0:17:17.240 And we showed a big you know, a nice guide 0:17:17.320 --> 0:17:19.640 going forward that people appreciate, and I think that's why 0:17:19.640 --> 0:17:22.800 the stock is responding in addition to the fact that 0:17:23.160 --> 0:17:25.800 I think that there is a premium for companies that 0:17:25.880 --> 0:17:30.800 can execute in these times, whether it's the labor issues, um, 0:17:30.880 --> 0:17:34.800 whether it's the different economic issues. People who can execute 0:17:34.800 --> 0:17:36.879 are getting a premium. Right now, what second of your 0:17:36.880 --> 0:17:38.800 business sees the biggest growth? Because you talked about a 0:17:38.800 --> 0:17:40.840 couple of different things, and I'm you know, there's a channel, 0:17:40.840 --> 0:17:43.679 there's digital, there's in the store, there's you know, the 0:17:43.760 --> 0:17:46.159 vet services they're selling, pats. What is it? What is 0:17:46.200 --> 0:17:49.800 it that really juices the top and bottom line and profitability? Uh? 0:17:50.320 --> 0:17:53.680 I love all my kids and uh that's not my 0:17:53.800 --> 0:17:57.000 love a little bit more. Um. The truth is, are 0:17:57.040 --> 0:18:00.000 all growing. But if you look at our digital business, yeah, 0:18:00.080 --> 0:18:03.040 we grew a hundred and forty on a two year basis. 0:18:03.080 --> 0:18:06.280 We more than doubled our digital business in the last 0:18:06.320 --> 0:18:08.600 two years. I mean that's astounding. How much How often 0:18:08.640 --> 0:18:10.840 do you more than double the business that already had 0:18:10.960 --> 0:18:15.160 scale in two years? We did last quarter. We picked 0:18:15.200 --> 0:18:18.920 up eight hundred thousand customers this past quarter. So it's 0:18:18.960 --> 0:18:21.600 truly remarkable. What's going on? So how much of revenues 0:18:21.720 --> 0:18:26.240 is digital? Purely digital? Digital is between fift and how 0:18:26.320 --> 0:18:29.320 much of somebody who is digital then walked into store, Like, 0:18:29.359 --> 0:18:31.600 what are you looking for when you're your omni channel? 0:18:31.760 --> 0:18:34.000 I was just talking to Chippotle their omni channel, right, 0:18:34.000 --> 0:18:36.199 they have chippot Land. You're digital only, you can go 0:18:36.240 --> 0:18:38.439 to the store, you can use the app. There's all 0:18:38.440 --> 0:18:42.359 these different things. How many like how many people are 0:18:42.600 --> 0:18:45.760 going to the stores buying online? Like you want somebody 0:18:45.800 --> 0:18:47.760 who's all in. That's the way the world is going. 0:18:48.000 --> 0:18:51.360 So if I go through the recent sequence two thousand 0:18:51.440 --> 0:18:54.600 twenty happened and everyone went online, right, even my father 0:18:54.640 --> 0:18:57.000 who loves going to stores, all of a sudden became 0:18:57.000 --> 0:19:00.119 an online customer for the first time. Then into one 0:19:00.240 --> 0:19:02.480 one people thought maybe they won't come back. They came 0:19:02.520 --> 0:19:05.440 back to our stores in droves and more and more. 0:19:05.480 --> 0:19:08.440 It is this omni channel customer. We call it retail 0:19:08.480 --> 0:19:10.920 three dita where you really bring this promise of omni 0:19:11.040 --> 0:19:13.639 channel that we've all been talking about for years together, 0:19:13.920 --> 0:19:17.439 not only for that experience, but also as fulfillment centers. 0:19:17.440 --> 0:19:20.959 You hear Target talking about using their targets as fulfillment centers, 0:19:20.960 --> 0:19:23.040 and we're very killer strategy. Got me to go to 0:19:23.080 --> 0:19:25.679 a Target store in a long time, very very and 0:19:25.760 --> 0:19:28.040 we truly believe we're one of the retail three ditto 0:19:28.240 --> 0:19:31.840 leaders in defining that. Combined with the services that we have, 0:19:32.320 --> 0:19:34.159 combined with the fact that we make a difference in 0:19:34.200 --> 0:19:37.760 the communities that we live in or operate in, to us, 0:19:37.800 --> 0:19:40.359 we're one of the definitional companies of retail three dita. 0:19:40.640 --> 0:19:43.480 Where are you seeing inflationary pressure beyond what every other 0:19:43.520 --> 0:19:47.320 business talks about transportation and wages? I mean, is it 0:19:47.600 --> 0:19:50.640 pet food going to get so much more expensive because 0:19:50.880 --> 0:19:53.960 of the rise in commodity costs, Fertilizer getting more expensive, 0:19:54.000 --> 0:19:57.080 meat getting more expensive, grain being shut off from so 0:19:57.160 --> 0:20:00.000 much of the world with Russia's invasion of Ukraine. Where 0:20:00.080 --> 0:20:03.560 concerned about inflationary pressure? Yeah? You never like to see 0:20:03.680 --> 0:20:06.760 inflationary pressure come at you as a retailer, and you 0:20:06.800 --> 0:20:09.680 don't like to pass it through. UM. There's been quite 0:20:09.680 --> 0:20:13.720 a bit in UM. We have the highest end customer 0:20:13.760 --> 0:20:17.840 in the category UM, so we've been able to pass 0:20:17.920 --> 0:20:20.560 that on. But at the same time, we're making sure 0:20:20.640 --> 0:20:23.520 that we provide options for customers. So whether that you know, 0:20:23.560 --> 0:20:25.480 all the way from the top end of fresh frozen 0:20:25.800 --> 0:20:30.040 too high end kibble to medium price wholehearted own brand 0:20:30.520 --> 0:20:33.439 UM to our vital care program that we actually announce 0:20:33.480 --> 0:20:36.400 an enhancement to today where for nineteen dollars a month 0:20:36.520 --> 0:20:40.120 you can get you know, grooming veterinary discounts on products 0:20:40.119 --> 0:20:43.320 and you can save two dollars. So yes, we're having 0:20:43.359 --> 0:20:45.960 to pass it through, but we're also coming up with 0:20:46.119 --> 0:20:49.280 options and ways for customers to save to offset some 0:20:49.359 --> 0:20:52.359 of that, so you're able to maintain margins. We're able to. 0:20:52.520 --> 0:20:55.840 We actually we we had sequential improvement in our margins 0:20:55.840 --> 0:20:59.560 this past quarter, and that can continue with those inflationary pressures. 0:20:59.560 --> 0:21:02.400 Whether it's food, whether it's labor, I mean trust, we're 0:21:02.400 --> 0:21:05.320 talking about energy, and that's a throughput for everything. So 0:21:05.400 --> 0:21:09.479 the guide that we provided had EBITDA margin expansion. We 0:21:09.520 --> 0:21:13.520 had margin expansion pretty much every quarter. How do you 0:21:13.560 --> 0:21:15.199 feel about the second half? And I think about the 0:21:15.200 --> 0:21:17.640 conversation we have with Gina Martin Adams earlier who covers 0:21:17.680 --> 0:21:20.719 the markets, and she said another month of maybe the 0:21:20.760 --> 0:21:24.680 war and things that I start to rethink, um, how 0:21:24.720 --> 0:21:26.680 the second half looks. In terms of the equity front. 0:21:26.680 --> 0:21:28.919 We have yet to hear companies taking down the revenue 0:21:29.000 --> 0:21:31.720