Latest / Bloomberg Intelligence / Memory Chip Frenzy Sends SK Hynix, Micron Intro $1 Trillion Club

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Memory Chip Frenzy Sends SK Hynix, Micron Intro $1 Trillion Club · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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• 0:23
  Speaker 2: Let's get back to tech stocks. Semiconductor stocks in particular,
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  Speaker 2: they are just ripping. I mean, we've got million trillion
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  Speaker 2: dollar market caps from Micron Technology.
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  Speaker 3: What's going on out there? I mean, they're not enough chips.
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  Speaker 2: I guess I don't know. Let's turn to somebody who
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  Speaker 2: knows what's going on out there. Jake Silverman, semiconductor analysts
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  Speaker 2: for Bloomberg Intelligence. He joins us here in studio, Jake,
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  Speaker 2: what's going on with your world here today?
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  Speaker 3: Why are there not enough chips?
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  Speaker 2: Yeah?
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  Speaker 3: Just make more chips.
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  Speaker 4: I wish it was so simple, but then they wouldn't
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  Speaker 4: be getting those press right.
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  Speaker 2: Yeah.
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  Speaker 4: Yeah, So really, I think, I guess focusing on on
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  Speaker 4: the value, we're in a particularly strong upcycle. I think
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  Speaker 4: the argument around why the stock should be worth a
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  Speaker 4: trillion dollars is that Micron and the other memory makers
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  Speaker 4: are no longer really in a cyclical situation, it's possible
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  Speaker 4: what we're seeing is a structural change in the memory
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  Speaker 4: market where it may be more the earnings may be
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  Speaker 4: more sustainable through the cycle over the at least the
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  Speaker 4: next three to five years. And so if you argue
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  Speaker 4: in that, if you argue that, what you're arguing for
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  Speaker 4: is that maybe the valuation multiple has to expand beyond
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  Speaker 4: what we're seeing today. I mean, we're already at around
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  Speaker 4: ten x. I guess a little bit below that I
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  Speaker 4: think forward earnings, and so maybe some people are thinking
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  Speaker 4: it could go up to fifteen x or more, and
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  Speaker 4: that's what they're betting on right now.
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  Speaker 5: Jake, it's really incredible to see these milestone numbers every
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  Speaker 5: day from the sector, and I think the segment is
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  Speaker 5: up something like eighty percent this year, and most people
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  Speaker 5: have pointed to the facts that the earnings have been
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  Speaker 5: parabolic too. How much further do you think that we
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  Speaker 5: have to go before the market enthusiasm is starting to
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  Speaker 5: outpace earnings?
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  Speaker 3: Yeah, it's interesting.
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  Speaker 4: So I think one of the things you look at is,
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  Speaker 4: first of all, it's the earnings are very real, right,
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  Speaker 4: and so it's not like the socks just seeing tons
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  Speaker 4: and tons of multiple expansion purely out of speculation that
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  Speaker 4: earnings are going to eventually reach that point or we're
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  Speaker 4: actually seeing is real earnings growth.
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  Speaker 3: And so the.
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  Speaker 4: Multiple when you compare say the forward pe multiple for
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  Speaker 4: the Socks Index compared to the s and P five
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  Speaker 4: hundred isn't as much of a gap as what we've
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  Speaker 4: seen before in the past. A peak at the peak
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  Speaker 4: of the valuation for the Socks Index, you typically see
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  Speaker 4: something like seven to eight x in terms of a difference.
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  Speaker 4: Right now, I think we're on five or six. So
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  Speaker 4: you know, some of the exuberants is you know, there's
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  Speaker 4: certain stocks maybe that are a little bit more stretched,
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  Speaker 4: but the earnings are real. We're seeing that with memory,
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  Speaker 4: You're seeing that with a lot of the AI stocks
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  Speaker 4: that do the CPUs and GPUs and networking. So yeah,
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  Speaker 4: there's a few gives and takes within that bucket, and
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  Speaker 4: the socks is a broad bucket includes a lot of names.
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  Speaker 2: So I've been pitched chip stocks for forty years and
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  Speaker 2: what I and that you gotts say the same thing
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  Speaker 2: every time, which makes sense to me.
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  Speaker 3: Hey, it's a cyclical business. You got to get the
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  Speaker 3: cycle right.
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  Speaker 2: Okay, But now you're mentioning just earlier that may be changing.
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  Speaker 2: So when you talk to longtime tech investors, how do
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  Speaker 2: they get their head around rethinking this sector, maybe rerating
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  Speaker 2: the sector as not so sickle go anymore.
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  Speaker 3: Yeah, it's so.
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  Speaker 4: I still think we're probably going to see cycles and semiconductors.
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  Speaker 4: I think what we're really seeing is a structural tailwind
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  Speaker 4: if you're betting on semiconductors today. For the most part,
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  Speaker 4: even the more boring analog names that you've seen, like
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  Speaker 4: Analog Devices and Texas Instruments, they're all starting to catch
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  Speaker 4: these AI tailwinds. But I think what people are trying
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  Speaker 4: to really understand is what is the do we still
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  Speaker 4: see upward revisions and capex based on investor models? How
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  Speaker 4: long does the cycle continue? But when you think about memory,
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  Speaker 4: one of the things that makes it a little bit
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  Speaker 4: more different than some of the other semiconductor companies is
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  Speaker 4: because they are still integrated device manufacturers IMS. They still
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  Speaker 4: manufacture the chips that they then sell, so they're doing
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  Speaker 4: the design and the manufacturing. And one of the things
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  Speaker 4: is that in the past we saw an under investment
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  Speaker 4: in the amount of capacity, and so now as we
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  Speaker 4: have a structural tail end, we need to actually expand
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  Speaker 4: the capacity, and you're.
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  Speaker 3: Seeing this with TSMC two.
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  Speaker 4: There's not enough there's not enough capacity in their fabs
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  Speaker 4: to meet the demand that we're seeing. And so now
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  Speaker 4: we're looking at these long term agreements because we've seen
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  Speaker 4: billions of dollars burned in prior down cycles for memory makers,
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  Speaker 4: and so they want reassurances that, look, if we're going
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  Speaker 4: to spend billions of dollars on these fabs, we want
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  Speaker 4: to get the ROI for them. And so these structural
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  Speaker 4: agreements potentially change the cyclicality in the future, but are
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  Speaker 4: also while allowing to get them some visibility and potentially
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  Speaker 4: reduce that risk that maybe this is potentially a little
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  Speaker 4: bit of a bubble and even if it's not going
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  Speaker 4: to just burst like dot Com, at the same time,
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  Speaker 4: you know, maybe there are losses to be had in
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  Speaker 4: the future if they don't sign these agreements.
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  Speaker 5: Who do you see right now is the most formidable
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  Speaker 5: competitor to Nvidio or competitors if there are any.
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  Speaker 4: Yeah, I think Broadcom is probably one of the best positions,
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  Speaker 4: just because they have such a strong relationship with Google
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  Speaker 4: designing their TPU. But you know, I think Marvel is
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  Speaker 4: definitely a company you shouldn't sleep on as well, because
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  Speaker 4: they've worked with Trainium, they have several different deals. But
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  Speaker 4: I mean, you know, even AMD is going to probably
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  Speaker 4: gain some share, and a lot of these a lot
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  Speaker 4: of these hyperscalers and neoscalers that maybe want to design
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  Speaker 4: their own chips are probably thinking about how do we
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  Speaker 4: reduce the cost per GIGWOTT in our data centers? And
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  Speaker 4: so Nvidia definitely has some competition, but you know, it's
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  Speaker 4: always a situation where in video always evolves and adapts
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  Speaker 4: to meet the challenges, and you know it's hard to
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  Speaker 4: bet against them.
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  Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.
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  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 1: get your podcasts, or watch us live on YouTube.
• 6:33
  Speaker 2: Big day for Boeing here, I think Boeing wins FAA
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  Speaker 2: approval to increase seven three seven max production rate, which
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  Speaker 2: is big news because that's the cash cow for this company,
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  Speaker 2: and that's kind of been If you pick one thing
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  Speaker 2: you want to see Boeing get right it's a seven
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  Speaker 2: three seven Max production there.
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  Speaker 3: So that's a good thing. Sit full of joints.
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  Speaker 2: He covers all that stuff for a Bloomberg News to
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  Speaker 2: us about Boeing what's going on there.
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  Speaker 6: So for Boeing, this is a very important step because
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  Speaker 6: ramping up seventy seven Max production has been their key
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  Speaker 6: target since the FA cap production back in twenty twenty four.
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  Speaker 6: So they've been talking about raising production from thirty eight
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  Speaker 6: to forty two the last fall. Now they're looking at
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  Speaker 6: raising the forty seven in this summer and then getting
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  Speaker 6: to fifty two. And so as Boeing ramps up production,
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  Speaker 6: they can sort of deliver more planes and generate more
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  Speaker 6: cash for themselves, and that's sort of key to paying
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  Speaker 6: down their huge debt and also generating free cash flow
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  Speaker 6: for the company. And so this is one of the
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  Speaker 6: key steps for the company as it looks to sort
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  Speaker 6: of transition from its last few years of crisis to
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  Speaker 6: sort of a more cash generating, profitable enterprise.
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  Speaker 5: Said, Boeing has had so many victories since President Trump
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  Speaker 5: returned to the White House. This completion with the FAA.
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  Speaker 5: You also mentioned in your story all of the orders
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  Speaker 5: that it's gotten from trade agreements. How much of this
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  Speaker 5: has to do with the fact that they have a
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  Speaker 5: favorable relationship with the administration.
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  Speaker 6: So Boeing has increasingly sort of I mean, Boeing famously
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  Speaker 6: gave President Trump a Salesman of the Decade the Century award,
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  Speaker 6: and they basically sort of said that he's been key
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  Speaker 6: to unlocking lots of agreements and lots of sales, and
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  Speaker 6: Boeing has sort of won, including last week when they
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  Speaker 6: went to China, when President Trump went to China and
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  Speaker 6: Boeing won that two hundred plane commitment. It is smaller
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  Speaker 6: than what analysts we're expecting, I mean analysts we're expecting
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  Speaker 6: over five hundred planes. But the CEO today talked about
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  Speaker 6: how that the two hundred plane order is a key
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  Speaker 6: step towards getting those bigger plane orders because China's market
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  Speaker 6: is the world's second largest market and Boeing has been
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  Speaker 6: shut out of it for the last decade, and so
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  Speaker 6: this is a sort of key step towards unlocking that
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  Speaker 6: market and getting that back again.
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  Speaker 3: Bowing CEO Kelly orst Ortberg.
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  Speaker 2: He's speaking at a Bernstein Strategic Decision conference in New York.
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  Speaker 2: He says he met with President Trump on the knee
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  Speaker 2: ramp up weapons out but calling the demand for weapons
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  Speaker 2: system quote through the roof, talk to us up. We
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  Speaker 2: don't talk about the military side, the defense side.
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  Speaker 3: Of Boeing on talk to us about that business for.
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  Speaker 6: Them, so Boeing has been focused on a number of
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  Speaker 6: there's a number of pieces to it, including the F
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  Speaker 6: fifteen jet, the F forty seven, which is the new
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  Speaker 6: generation fighter jet, the KC forty six tankers, and so
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  Speaker 6: Boeing has been sort of trying to move away from
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  Speaker 6: those fixed fixed price contracts that they were sort of
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  Speaker 6: famous for to sort of more the bigger sort of
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  Speaker 6: contracts that are more sort of free wheeling and allowing
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  Speaker 6: them to sort of ramp up costs if they sort
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  Speaker 6: of the cost go up. The company is also sort
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  Speaker 6: of poised to gain from their replenishment of munitions and
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  Speaker 6: maintenance because of the war in Iran. So essentially the
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  Speaker 6: longer the war goes on, the more munitions they will
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  Speaker 6: sort of get stand to gain from, as well as
• 9:55
  Speaker 6: the aircraft that are being deployed will have to go
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  Speaker 6: through interone cycles and other sort of overhauls, and that
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  Speaker 6: will also unlock some cash. So for Boeing, the defense business.
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  Speaker 6: The CEO today talked about low basically single digit margins
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  Speaker 6: and going back to those levels, and so that's again
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  Speaker 6: a key turnaround for that defense unit.
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  Speaker 5: Boeing had been struggling with its reputation after a series
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  Speaker 5: of fatal crashes. Do you think that at this point,
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  Speaker 5: you know, people have kind of moved on from this
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  Speaker 5: in terms of public perception. Have they done enough to
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  Speaker 5: mitigate that is?
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  Speaker 6: I mean, obviously there is still Boeing still has to
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  Speaker 6: deal with the pr from those fatal crashes. At the
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  Speaker 6: same time, I mean, airlines have been ordering planes. I mean,
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  Speaker 6: Boeing's talking today talked about how their decade the backlog
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  Speaker 6: for the the commercial aircraft stretches well into the next decade.
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  Speaker 6: So airlines seem to have moved on from that. Airlines
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  Speaker 6: are ordering lots of Boeing planes and are looking to
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  Speaker 6: get those Boeing planes. And the FA has given more
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  Speaker 6: authority to Boeing, and so that's a sign that the
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  Speaker 6: FA trusts the company more and we look to see
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  Speaker 6: if that sort of continues as time momentum continues. I mean,
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  Speaker 6: some crucial things we're looking out for is a certification
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  Speaker 6: of the smallest and the largest variants of the sevent
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  Speaker 6: three seven, so the Max seven and the Max tent,
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  Speaker 6: which are still uncertified, the long delayed. The company today
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  Speaker 6: talked about how we're in the final stage of the
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  Speaker 6: certification of that jet and we will see deliveries to
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  Speaker 6: customers next year, and that again is a key step
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  Speaker 6: towards unlocking those orders because seven, the Max ten competes
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  Speaker 6: against the eight through twenty one Neo, which is basically
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  Speaker 6: Airbus is most profitable, best selling plane, and so that
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  Speaker 6: will give Boing another sort of quiver, and it's arrow
• 11:42
  Speaker 6: like an arrow, and it's quiver to be able to
• 11:44
  Speaker 6: sort of take on that challenge and take some more
• 11:47
  Speaker 6: sort of market share from Air of Us.
• 11:49
  Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.
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  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us a
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  Speaker 1: lot weekdays at ten am Eastern on appleclock Lay and
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• 12:10
  Speaker 2: All right, we got earnings coming out of the retailers
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  Speaker 2: of Abercrombie fitched one of them better than feared results,
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  Speaker 2: I guess is the way to think about it. Mary
• 12:18
  Speaker 2: Ross Gilbert Joins is senior Eca equity analysts covering the
• 12:21
  Speaker 2: retail space for Bloomberg Intelligency space out there in La Mary,
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  Speaker 2: thanks for joining us here. Talk to us about Abercrombie
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  Speaker 2: and Fitch. What did they do?
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  Speaker 3: What's going on? I see the stock trading higher today.
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  Speaker 7: Yes, so, Paul, what's going on with Abercrombie and Fitch.
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  Speaker 7: I think that's probably a good tagline, better than feared.
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  Speaker 7: I mean, look, they missed on the comp sales line.
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  Speaker 7: Comps were down one percent and when you look at
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  Speaker 7: and the estimate was for a slight increase almost flat
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  Speaker 7: for the quarter. But they did have a couple of
• 12:52
  Speaker 7: things going on. One they had the implementation or the
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  Speaker 7: upgrade of their ERP system that cost him about fifty
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  Speaker 7: points in the top line. But I don't think that
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  Speaker 7: really affected the comp because it was really third party
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  Speaker 7: sales there. So think about sales that are made to Nordstrom,
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  Speaker 7: you know, for the Abercrombie brand as an example. And
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  Speaker 7: then what we saw with Hollister. So Hollister comps were
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  Speaker 7: down two percent, but they were also impacted mainly in
• 13:22
  Speaker 7: the in the Middle East where we saw weakness there
• 13:26
  Speaker 7: and other parts of Europe. They didn't get into specifics
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  Speaker 7: on those other parts except highlighting their largest market in
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  Speaker 7: the UK, which they indicated had strong sales. So we're
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  Speaker 7: still seeing I think when you look at the guidance
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  Speaker 7: for the second quarter, maintaining guidance for the full year.
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  Speaker 7: So guidance for the second quarter is at the high
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  Speaker 7: end of consensus estimates for about a four percent growth,
• 13:49
  Speaker 7: and there's likely upside to that. And so I think
• 13:52
  Speaker 7: seeing overall strength, you know, strong sell through of their
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  Speaker 7: collaboration with Sperry in the quarter and their files, you
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  Speaker 7: know how they're broadening the categories, going after more categories
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  Speaker 7: and that's what the consumer wants, and I think those
• 14:08
  Speaker 7: are all very very encouraging for the brand, and that's
• 14:11
  Speaker 7: the reason why you're seeing strength. We think they're in
• 14:14
  Speaker 7: the shares.
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  Speaker 5: Mary, We're hearing time and time again consumers becoming more selective,
• 14:20
  Speaker 5: trading down to cheaper items. But Abercrombie has been kind
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  Speaker 5: of a standout. What are they doing to outperform peers
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  Speaker 5: and are of the are any of the markdowns and
• 14:29
  Speaker 5: promotions that they're putting out kind of starting to pressure
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  Speaker 5: margins at all?
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  Speaker 7: Yeah, we're not seeing the pressure. I think what's happening
• 14:37
  Speaker 7: is they're raising prices to help, you know, mitigate the
• 14:41
  Speaker 7: impact from tariffs, and so some of those are coming through.
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  Speaker 7: But we did notice, and I think other analysts noticed
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  Speaker 7: as well, there were more promotions this year, or I
• 14:50
  Speaker 7: should say not necessarily more, but the magnitude of the
• 14:53
  Speaker 7: promotions were a little bit higher, meaning the discount was
• 14:57
  Speaker 7: higher than it was let's say, a year ago. Though
• 15:00
  Speaker 7: the company indicated that their promo activities were absolutely on
• 15:04
  Speaker 7: plan for the quarter, but that doesn't mean that, you know,
• 15:08
  Speaker 7: it was. It definitely seemed higher than the rate of
• 15:13
  Speaker 7: discounts for the first quarter. But generally, I think they're
• 15:17
  Speaker 7: seeing some real resilience. And let's when you look at
• 15:20
  Speaker 7: their cohort. So for the Abercrombian Fitch brand, that's the
• 15:25
  Speaker 7: millennial customer, but they're a higher income customer, so they
• 15:28
  Speaker 7: tend to earn over one hundred thousand, probably you know,
• 15:31
  Speaker 7: one hundred to two hundred. And then when you look
• 15:34
  Speaker 7: at the Hollister brand, and that's a little more value oriented,
• 15:37
  Speaker 7: and there they did have some discounting going on there,
• 15:41
  Speaker 7: but that is really hits the gen Z. So kind
• 15:45
  Speaker 7: of think about your high school age consumer. So I
• 15:49
  Speaker 7: think that they're really hitting the mark on styles, collaborations
• 15:54
  Speaker 7: and their marketing campaigns, and that's something they plan to
• 15:56
  Speaker 7: invest more. That's where you're seeing the hit on margin
• 16:00
  Speaker 7: is really the marketing investment and then also the effect
• 16:03
  Speaker 7: of tariffs. And then they are concerned of course that
• 16:07
  Speaker 7: on the back half they will have a freight headwind.
• 16:11
  Speaker 7: But in the first quarter it was a tailwind and
• 16:15
  Speaker 7: there is going to be a small tailwind I think
• 16:17
  Speaker 7: that they expect in the second quarter.
• 16:19
  Speaker 2: So Mary, what are your companies, the retail companies you follow,
• 16:22
  Speaker 2: What are they saying about inflation, particularly for their consumers
• 16:26
  Speaker 2: that are paying more at the gas pump, and how
• 16:28
  Speaker 2: that may be impacting spending.
• 16:30
  Speaker 7: Paul Sweeny, That is a great question, and what we've
• 16:33
  Speaker 7: seen so far looking at off Price is that they
• 16:37
  Speaker 7: are definitely drawing in more consumers. And when you really
• 16:40
  Speaker 7: go after the business like Rossted, then you get a
• 16:45
  Speaker 7: huge beat. I mean, the comp sales that they reported
• 16:48
  Speaker 7: double digit was just wow, off the chart at seventeen percent,
• 16:52
  Speaker 7: but they were very aggressive, transitioning to spring much faster
• 16:57
  Speaker 7: and really going after that demand. So and I think
• 17:01
  Speaker 7: they are getting trade down. They're also bringing in more
• 17:05
  Speaker 7: higher end brands, for example Mark Jacobs, and that is
• 17:09
  Speaker 7: drawing more of a higher end consumer that you usually
• 17:11
  Speaker 7: see it at TJX. So I think we're going to
• 17:14
  Speaker 7: get more from the value side when American Eagle reports
• 17:17
  Speaker 7: on Thursday, and also from Gap. And we think that
• 17:19
  Speaker 7: Old Navy, you know, should also have some good results
• 17:22
  Speaker 7: there on the value side because they just continue to
• 17:26
  Speaker 7: innovate with great styles, new categories, performance, you know, with
• 17:32
  Speaker 7: their athletic wear, and they're just getting great traction.
• 17:38
  Speaker 3: Stay with us. More from Bloomberg Intelligence coming up.
• 17:44
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• 17:51
  Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
• 17:55
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• 17:59
  Speaker 3: More retail numbers coming out today.
• 18:01
  Speaker 2: Dick's sporting goods sales were higher, but margin fresher stock
• 18:07
  Speaker 2: trading down a little bit.
• 18:09
  Speaker 3: They bought this foot locker thing. I think they need to,
• 18:11
  Speaker 3: you know, kind of get that going.
• 18:13
  Speaker 2: Lindsay Dutch, she follows this company, all the consumer hardlines companies.
• 18:17
  Speaker 2: She's a senior an don't still there a Bloomberg Intelligence. So, Linda,
• 18:19
  Speaker 2: what'd you learn from Dick's Sports.
• 18:23
  Speaker 8: Hey, Paul, thanks for having me. My read on the
• 18:26
  Speaker 8: corner was it was a solid quarter, especially for the
• 18:28
  Speaker 8: legacy business and even progress on that foot Locker deal
• 18:32
  Speaker 8: that you were mentioning. I think the disappointment is really
• 18:36
  Speaker 8: in the guidance rating and there wasn't a big enough
• 18:40
  Speaker 8: boost based on the performance of the legacy business, which
• 18:43
  Speaker 8: was outstanding in the first quarter.
• 18:45
  Speaker 5: Lindsay, consumers have been pulling back on some of their
• 18:48
  Speaker 5: discretionary spending. Why is sporting goods with Dick's Sporting Goods
• 18:53
  Speaker 5: still holding up relatively Well.
• 18:56
  Speaker 8: Yeah, so Dick sort of reiterated they're not seeing customers
• 18:59
  Speaker 8: shooting trade down at all in their assortment. They're continuing
• 19:03
  Speaker 8: to go after premium sports footwear, apparel and the hardline's goods.
• 19:09
  Speaker 8: They're seeing strengthen that business. A six percent same store
• 19:12
  Speaker 8: sales growth, you know, really outstanding in the quarter. And
• 19:16
  Speaker 8: then even for foot Locker, you know, we saw a
• 19:18
  Speaker 8: positive same store sales gain first time in two years
• 19:21
  Speaker 8: for that business. Dix acquired it last year and that's
• 19:26
  Speaker 8: more of a lifestyle brand and they're seeing momentum there
• 19:29
  Speaker 8: as well.
• 19:30
  Speaker 2: What was the problem should remind us for foot Locker,
• 19:33
  Speaker 2: because I think every one of our listeners and viewers
• 19:35
  Speaker 2: spent quite a bit of time and money at Footlocker
• 19:38
  Speaker 2: over the years.
• 19:40
  Speaker 8: Yeah, so, I think what Dicks really brings the table
• 19:42
  Speaker 8: for foot Locker is brand relationships. So they have very
• 19:45
  Speaker 8: strong brand relationships with players like Nike, but also many
• 19:49
  Speaker 8: other brands in that f leisure space. They're they're keeping
• 19:53
  Speaker 8: Footlocker a lifestyle stores, so not going to match the
• 19:58
  Speaker 8: sports focus that they have, and they're like a S
• 20:00
  Speaker 8: stores are going after lifestyle customers basketball. So and they've
• 20:05
  Speaker 8: really done a lot of work refreshing stores and making
• 20:09
  Speaker 8: the stores better to shop, and their assortment with their
• 20:13
  Speaker 8: new relationship ties is really going to show in the
• 20:15
  Speaker 8: second half of this year, and they're expecting a meaningful
• 20:18
  Speaker 8: acceleration in that business.
• 20:20
  Speaker 5: We're seeing promotions becoming increasingly prevalent across the retail sector again,
• 20:25
  Speaker 5: our margins becoming a bigger risk for consumer companies.
• 20:30
  Speaker 8: I agree, I've seen elevated promotion across the board. I think,
• 20:35
  Speaker 8: you know, Dick since COVID and the spike in demand
• 20:37
  Speaker 8: that we saw forth leisure they have really tried to
• 20:40
  Speaker 8: be strategic and keep promotions limited. They are are continuing
• 20:45
  Speaker 8: to try to do that this year, but we did
• 20:47
  Speaker 8: see some gross margin pressure in the first quarter that
• 20:50
  Speaker 8: was a little bit unexpected. Part of that is investments
• 20:53
  Speaker 8: in the business, and part of it is also elevated
• 20:55
  Speaker 8: fuel costs. Dix is not necessarily increasing those promotions, it
• 21:00
  Speaker 8: certainly makes it harder to get that customer in the
• 21:04
  Speaker 8: door and to spend with them.
• 21:06
  Speaker 2: So John Tucker's trying to get me all fired up
• 21:09
  Speaker 2: about the World Cup here, I'm just not there yet,
• 21:11
  Speaker 2: but I've got a couple of weeks to build the momentum.
• 21:13
  Speaker 3: Here. What's somebody like a Dick spoorting goods?
• 21:17
  Speaker 2: What are they saying about the world cub zet drive sales.
• 21:22
  Speaker 8: I think it is a positive potential catalyst, you know,
• 21:25
  Speaker 8: for this summer selling season and right before back to school.
• 21:29
  Speaker 8: You know, maybe it'll get new customers in the store
• 21:31
  Speaker 8: that will then then shop back to school with Dix.
• 21:34
  Speaker 8: You know, nothing has been quantified, you know, they have,
• 21:37
  Speaker 8: you know, anecdotally mentioned that some of the World Cup
• 21:40
  Speaker 8: merchandise has done very well that they've had, So I
• 21:44
  Speaker 8: think it could be a positive momentum on growth going
• 21:48
  Speaker 8: into this second quarter. They already have a lot of
• 21:51
  Speaker 8: strength in the business, so it's just another tailwind, you know,
• 21:55
  Speaker 8: for that legacy brand.
• 21:57
  Speaker 5: Lindsay, we've been talking a lot on the show today
• 22:00
  Speaker 5: about this disconnect between high income consumers and lowing consumers.
• 22:04
  Speaker 5: Is there anything that you've seen across retailer earnings that
• 22:07
  Speaker 5: have kind of highlighted that that problem is getting worse.
• 22:12
  Speaker 8: I don't know about getting worse, but maybe definitely at
• 22:15
  Speaker 8: least stagnant and not improving. So Dix does cater towards
• 22:20
  Speaker 8: a higher income customer base, and you know, we did
• 22:23
  Speaker 8: see that strength in the first quarter. By contrast, Bath
• 22:25
  Speaker 8: and body Works also reported this morning they had a
• 22:29
  Speaker 8: sales decline. They were down about three percent, and that
• 22:32
  Speaker 8: was slightly better than expected. But when you think about
• 22:34
  Speaker 8: their customer base, they're much more exposed to a lower
• 22:38
  Speaker 8: income consumer, and it's been much harder for a Bath
• 22:40
  Speaker 8: and body Works as opposed to a Dix to draw
• 22:43
  Speaker 8: the customer in. You know, for their assortment, they saw
• 22:47
  Speaker 8: a mid teens decline and body care alone, So I
• 22:51
  Speaker 8: think that does really show that there's a wide gap
• 22:55
  Speaker 8: between a higher income and lower income consumer.
• 22:58
  Speaker 3: Right now, body Works did that go? Did it go
• 23:02
  Speaker 3: bankrupt at one point?
• 23:04
  Speaker 8: So they split out of L brands with Victoria's Secret
• 23:09
  Speaker 8: right yes, And so they split in twenty twenty one.
• 23:12
  Speaker 8: And obviously Bath and Body was you know, the gem,
• 23:16
  Speaker 8: the high growth business. Since twenty twenty two, we've seen
• 23:20
  Speaker 8: some challenges in that business. Demand still appears very soft
• 23:25
  Speaker 8: to start the year. I'm seeing very very high promotions
• 23:28
  Speaker 8: for that brand this year and then just trying to
• 23:32
  Speaker 8: draw that customer. And as I mentioned, sales were down
• 23:34
  Speaker 8: in the first quarter. They're expected to be down again
• 23:36
  Speaker 8: in the second quarter and possibly into second half.
• 23:40
  Speaker 5: I'm looking at chairs of Bath and Body up five
• 23:43
  Speaker 5: point six percent on results that were better than feared.
• 23:47
  Speaker 5: How low had expectations gotten, lindsay.
• 23:50
  Speaker 8: So the new management team there, they have been pretty
• 23:55
  Speaker 8: conservative with their expectations. So, you know, Back and Body
• 23:58
  Speaker 8: beat in the fourth quarter, they beat again today. I
• 24:02
  Speaker 8: think the beat, you know, is positive, but they're not
• 24:04
  Speaker 8: really showing signs at the turnaround that they're trying to
• 24:08
  Speaker 8: implement is really working. And I think, you know, they
• 24:11
  Speaker 8: keep anecdotally talking about positive proof points, but I think
• 24:16
  Speaker 8: a lot of investors are looking to see that in
• 24:17
  Speaker 8: the numbers as early as the second half, and so
• 24:21
  Speaker 8: there's optimism that the business will start to turn around
• 24:24
  Speaker 8: very soon. And I think it's going to be a
• 24:26
  Speaker 8: show me story when we get to the second half.
• 24:29
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