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Warner Bros. Says Paramount’s New $31 Offer May Top Netflix · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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  Speaker 2: Let's get to a little m and a in the
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  Speaker 2: media space. That Warner Brothers Discovery deal, the never ending
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  Speaker 2: deal seems like it's moving a little bit forward.
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  Speaker 3: Here.
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  Speaker 4: We got a higher bid from Paramount.
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  Speaker 2: We want to check in Withkeetha rong Anath and she
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  Speaker 2: covers all the media stocks for Bloomberg Intelligence. So Keitha talk,
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  Speaker 2: give us the latest on this Warner Brothers Discovery sale process.
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  Speaker 4: Where are we right now?
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  Speaker 5: Yeah, so, Paul, we got the higher number from Paramount.
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  Speaker 5: It's thirty one dollars. So they upted from thirty dollars
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  Speaker 5: per share for the entire company. Now, what that has
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  Speaker 5: forced the Warner Brothers Discovery board to do is to
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  Speaker 5: go back to the drawing board kind of re gauge
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  Speaker 5: with Paramount see exactly what number they can come up with.
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  Speaker 5: But ultimately they have to deem whether this is a
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  Speaker 5: superior proposal or not. So far, they have two offers
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  Speaker 5: on the table, this one from Paramount and the twenty
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  Speaker 5: seven dollars and seventy five cents per share from Netflix,
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  Speaker 5: but that is only for part of the business. That's
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  Speaker 5: only for the studio and the streaming acids. So they're
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  Speaker 5: still in the process of making a determination about which
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  Speaker 5: offer is superior. But the minute that they you know,
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  Speaker 5: that they make that determination and they call the Paramount
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  Speaker 5: offers superior, then the clock starts sticking. For Netflix, they
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  Speaker 5: have four days to come up with their own enhanced
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  Speaker 5: offer so to match the Paramount offer, and then you know,
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  Speaker 5: we'll kind of see where the chips fall after that.
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  Speaker 6: Yeah, well, Gika, you know, I recall the word Brother's
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  Speaker 6: board really did not like some of the financing terms
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  Speaker 6: for the Paramount bid initially, right, So does this new
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  Speaker 6: improved offer improve upon some of those sticking points in
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  Speaker 6: the earlier deal in does that really de risk the
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  Speaker 6: transit action? And now that they've come up with another
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  Speaker 6: offer here.
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  Speaker 5: They have all of the points that Warner Brothers had
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  Speaker 5: initially raised. They have the Paramount management team has proposed remedies.
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  Speaker 5: So one of the big things that they have kind
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  Speaker 5: of come up with is that they're going to cover
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  Speaker 5: the financing costs and the termination fee if Netflix exits
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  Speaker 5: this process. They actually upped their own termination free from
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  Speaker 5: five point nine billion to seven billion dollars. They are
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  Speaker 5: going to pay something called a ticking fee, which is
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  Speaker 5: twenty five cents per share per quarter for every quarter
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  Speaker 5: that the transaction does not close beyond September. So they've
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  Speaker 5: offered a lot of different things, including kind of backstopping
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  Speaker 5: the whole equity portion of the deal as well as
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  Speaker 5: providing guarantees for the debt financing. So a lot of
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  Speaker 5: the points that Warner Brothers had initially raised. Your absolutely right, Christine.
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  Speaker 5: You know, Paramount has kind of come out and addressed
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  Speaker 5: that so definitely provide a lot more comfort to the
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  Speaker 5: Warner Brothers Discovery board.
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  Speaker 4: Yeah, Githa, you're right.
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  Speaker 2: It seems like Paramount's really stepped up and really said
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  Speaker 2: we're going to be really credible here. Meanwhile, Netflix has
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  Speaker 2: been quietly waiting on the sidelines, not really doing anything,
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  Speaker 2: but it now seems like now's the time for them to,
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  Speaker 2: you know, really make a decision, step up with a bigger,
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  Speaker 2: better offer, different offer. I'm not sure, what do you
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  Speaker 2: think the options are for Netflix.
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  Speaker 5: The best option in my view of Paul, for Netflix,
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  Speaker 5: and I think majority of you know It's investors would
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  Speaker 5: also agree to just walk away pocket the two point
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  Speaker 5: eight billion that you get in termination fees, just walk
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  Speaker 5: away and just focus on just focus on your core business,
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  Speaker 5: because they do have a very strong core business. You know,
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  Speaker 5: as we've said many times, Paul and you agree that this,
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  Speaker 5: you know, Warner Brothers is a great asset, There's absolutely
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  Speaker 5: no doubt about it. But it is really just a
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  Speaker 5: nice to have, not a must have for Netflix. So
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  Speaker 5: it could end up actually becoming a distraction. So you know,
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  Speaker 5: in many cases. I mean, I think the way that
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  Speaker 5: you know, the street almost perceives it is that Netflix
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  Speaker 5: is a winner if they lose this whole bidding process.
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  Speaker 5: But that said, I mean, they do have a lot
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  Speaker 5: of financial firepower. If they did have to increase their
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  Speaker 5: bid up it by about one two dollars, they absolutely
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  Speaker 5: can do that. The only thing is once they go
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  Speaker 5: beyond that, then they kind of risk over paying for
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  Speaker 5: the asset. They risk their leverage profile really kind of
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  Speaker 5: getting a little bit dangerous. I would say, I mean,
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  Speaker 5: the gross stut is going to be well above one
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  Speaker 5: hundred billion dollars, leverage could be at four times. They're
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  Speaker 5: at zero points six times right now, so you know,
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  Speaker 5: all of those things start kind of coming into question.
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  Speaker 5: But of course they have a great free cash flow profile,
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  Speaker 5: so deleveraging wouldn't be an issue. That said, there still
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  Speaker 5: are you know, integration and execution risks always with any
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  Speaker 5: MNA deal.
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  Speaker 7: Yeah.
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  Speaker 6: Well, so if Paramount does indeed win the deal, does
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  Speaker 6: that present stronger competition for Netflix at least in the
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  Speaker 6: streaming space.
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  Speaker 5: I mean, it definitely will to some extent, But I
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  Speaker 5: think what Netflix and everybody else is banking on is
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  Speaker 5: that average is just going to be so high for
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  Speaker 5: the combined Paramount Warner Brothers Discovery that you know, at
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  Speaker 5: least for the first couple of years. I think they're
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  Speaker 5: just going to be really focused on kind of driving
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  Speaker 5: costs down, hitting their synergy targets, not really being able
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  Speaker 5: to invest in the business. But again, it's you know,
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  Speaker 5: it all comes down to exactly what the number is
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  Speaker 5: going to be. But you're right, they definitely will be
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  Speaker 5: a stronger competitor, although I don't think it's going to
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  Speaker 5: be a make or break for Netflix at all.
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  Speaker 4: 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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• 5:51
  Speaker 6: All right, let's move on there to John Tucker. What
• 5:54
  Speaker 6: are John Talker's favorite stocks? And that is low reporting results,
• 5:59
  Speaker 6: and I'll say.
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  Speaker 8: The difference between Low's and Home Depot. I find more
• 6:04
  Speaker 8: women at Low's than Home Depot. Used to know. Yeah,
• 6:08
  Speaker 8: I wasn't saying that. I'm just like saying just my observation.
• 6:12
  Speaker 4: Okay, why is it? I wonder it's more like.
• 6:15
  Speaker 8: Non professional Yeah, yeah, I guess we're d y. But
• 6:19
  Speaker 8: apparently Paul is going there to pick people up.
• 6:21
  Speaker 6: So can I just say that the demographic demographic of
• 6:25
  Speaker 6: women might not be interested in you, Paul?
• 6:26
  Speaker 4: Okay, yeah, no surprise.
• 6:28
  Speaker 2: And John Tucker, speaking of do it yourself, he just
• 6:30
  Speaker 2: fixed our microphone here in our studio.
• 6:32
  Speaker 4: Folks, we had a professional commenter, Johnson. Now I got it. Yeah,
• 6:35
  Speaker 4: that's okay.
• 6:37
  Speaker 8: We do it all year.
• 6:38
  Speaker 4: Don't worry, Anthony. We got it very much.
• 6:40
  Speaker 6: A product of Low's e y. But all right, well,
• 6:43
  Speaker 6: so let's get to Lowe's. What is the preview there?
• 6:46
  Speaker 6: And with that, let's bring in Drew Redding, who is
• 6:48
  Speaker 6: the Boomer intelligence US home a building analyst, Drew, what
• 6:53
  Speaker 6: is going to be the takeaway?
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  Speaker 3: So Low's reporter earlier this morning, and overall it was,
• 6:57
  Speaker 3: you know, a solid quarter. They had a nice beat
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  Speaker 3: on on same store sales really due to the strength
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  Speaker 3: of their professional customers and their e commerce channel. They
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  Speaker 3: had about a fifty basis point lift from recent storms.
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  Speaker 3: You know, you see the stock is down about four
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  Speaker 3: to five percent. There's a couple of things going on there.
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  Speaker 3: They guided the same store sales for twenty twenty six
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  Speaker 3: being about flat to up two percent. While that's exactly
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  Speaker 3: you know, in line with what we heard from home
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  Speaker 3: depot consensus was on the higher end of that. We
• 7:26
  Speaker 3: think there could be a little bit of conservatism in there,
• 7:29
  Speaker 3: which rightfully so, given where we are with housing. Also,
• 7:34
  Speaker 3: there's a modest earnings reset for the company. You know,
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  Speaker 3: the midport of their guidance was about four percent below
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  Speaker 3: the street and really that's a reflection of weaker that
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  Speaker 3: expected operating margins and that's largely due to some of
• 7:46
  Speaker 3: the acquisitions they've made over the last couple of years.
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  Speaker 3: So there's a little bit of company specific noise in there.
• 7:53
  Speaker 3: The other thing that's going on with the stock and really,
• 7:55
  Speaker 3: if you look across the housing space as a whole,
• 7:57
  Speaker 3: whether you're talking about the builders, that building product, manufacturers, developers,
• 8:02
  Speaker 3: really anyone, they're all read across the board. And I
• 8:05
  Speaker 3: think that has to do with the lack of dialogue
• 8:08
  Speaker 3: around housing policy. During the State of the Union address
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  Speaker 3: last night, you know, we heard a victory lap on
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  Speaker 3: mortgage rates, which has certainly come down, but it was
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  Speaker 3: really just a reiteration of the administration's planned to ban
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  Speaker 3: institutional parts is So, I think a lot of investors,
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  Speaker 3: you know, across the housing landscape, including home improvement retailer,
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  Speaker 3: we're hoping for some policy that could really stoke the
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  Speaker 3: housing market.
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  Speaker 2: So I'm looking at the Mortgage Bankers Association thirty year
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  Speaker 2: fixed mortgage six point zero nine percent.
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  Speaker 4: That's as low as it's been in a long time.
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  Speaker 2: Is it low enough to get folks out of their homes,
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  Speaker 2: you know, and free up the existing home buyer market.
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  Speaker 3: Yeah, you're right, we're about one hundred basis points below
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  Speaker 3: where we were just a year ago, and certainly every
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  Speaker 3: you know, every tike lower and mortgage rates is going
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  Speaker 3: to help bring that incremental buyer off the fence. Typically,
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  Speaker 3: what we hear is that's something in that five and
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  Speaker 3: a half percent range is kind of that magic number.
• 9:06
  Speaker 3: Now that being said, you know, as we've as we've
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  Speaker 3: said for a long time, it's not just about mortgage rates.
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  Speaker 3: They've certainly helped affordability. They've brought monthly payments down, but
• 9:15
  Speaker 3: home prices continue to rise through up more than fifty
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  Speaker 3: percent since twenty nineteen. So when you look at, you know,
• 9:21
  Speaker 3: a more holistic view of housing affordability, it's still really constrained.
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  Speaker 3: You know. The other thing that we continue to hear,
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  Speaker 3: whether it's from the retailers or from the builders, is that,
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  Speaker 3: you know, buyers are increasingly concerned about the economy. They're
• 9:35
  Speaker 3: increasingly concerned about the outlook for the labor market. So
• 9:38
  Speaker 3: there's a lack of urgency out there. You know, you
• 9:41
  Speaker 3: also have a lot of people maybe sitting on the
• 9:43
  Speaker 3: fence because you know, they're saying to themselves, look, maybe
• 9:46
  Speaker 3: home prices are going to come down, maybe rates are
• 9:48
  Speaker 3: going to come down further and maybe I should wait
• 9:50
  Speaker 3: before making such a big purchasing decision.
• 9:52
  Speaker 7: Yeah.
• 9:53
  Speaker 6: Well, so if that sort of turned over a new
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  Speaker 6: housing buyers, that's still going to be stalled given the
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  Speaker 6: uncertainty in the macro environment with something like repair and
• 10:03
  Speaker 6: remodels spending, that segment of lowest customers, is that something
• 10:08
  Speaker 6: that's going to be enough to carry them through? And
• 10:10
  Speaker 6: I suppose for the rest of the house building sector.
• 10:14
  Speaker 3: Yeah. For the home improvement retailers specifically, I think demand
• 10:18
  Speaker 3: has been pretty stable, if not modestly improving. If you
• 10:21
  Speaker 3: look at compstore sales on a to your basis, there
• 10:24
  Speaker 3: was a little bit of an uptick this quarter, so
• 10:26
  Speaker 3: I think their customer has been pretty resilient. When you
• 10:30
  Speaker 3: think about what's holding back more robust growth in the sector,
• 10:33
  Speaker 3: it's really that big ticket discretionary spending. These are categories
• 10:38
  Speaker 3: like large scale kitchen and bathroom moodels, maybe a big
• 10:41
  Speaker 3: flooring project, you know, replacing all the doors and windows
• 10:44
  Speaker 3: in your house, and these are things that typically tend
• 10:47
  Speaker 3: to be financed. So with rates at an elevated level,
• 10:50
  Speaker 3: you've seen a pullback in that. And it also goes
• 10:52
  Speaker 3: back to what we've said on confidence. You know, with
• 10:55
  Speaker 3: less confidence in the home, the direction of home prices,
• 10:58
  Speaker 3: you have people who are maybe waiting to take on
• 11:00
  Speaker 3: those bigger ticket projects.
• 11:02
  Speaker 4: Stay with us. More from Bloomberg Intelligence coming up after this.
• 11:09
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 11:13
  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
• 11:16
  Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
• 11:20
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 11:23
  Speaker 6: We're going to be talking a little bit about retail
• 11:26
  Speaker 6: now and for that, let's bring in maryor Ross Gilbert
• 11:29
  Speaker 6: to Bloomberg Intelligence, senior equity analyst, joining us from a
• 11:32
  Speaker 6: sunny la very different from the weather that we're seeing
• 11:35
  Speaker 6: over here in New York. Mary, thank you so much
• 11:39
  Speaker 6: for joining us. Let's start with TJ Max because we
• 11:41
  Speaker 6: did get that disappointing outlook from them, and very surprising
• 11:45
  Speaker 6: right because they did have a strong holiday season, but
• 11:48
  Speaker 6: it seems like they're guiding expectations now for the future.
• 11:52
  Speaker 6: What's to take away from that is this whole customer's
• 11:55
  Speaker 6: trading down to more affordable goods. Is that flocks over
• 11:58
  Speaker 6: now for TJ Max?
• 12:00
  Speaker 9: Thank you, Christine, But actually TGX is known for providing
• 12:05
  Speaker 9: conservative guidance. So even though this guidance is coming in
• 12:08
  Speaker 9: below what analysts expect for the first quarter already, if
• 12:12
  Speaker 9: you look at the first quarter and the company said this,
• 12:14
  Speaker 9: they're off to a great start. When we looked at
• 12:17
  Speaker 9: the Bloomberg second Measure transaction data, we're seeing really robust sales.
• 12:22
  Speaker 9: So it looks like a huge beat right now. The
• 12:26
  Speaker 9: trend that we're seeing, it's very early in the first quarter,
• 12:29
  Speaker 9: but it's looking very, very strong. And I think when
• 12:31
  Speaker 9: you think about TGX, this company, the management team here
• 12:35
  Speaker 9: executes so seamlessly, and the brands that they have, which
• 12:40
  Speaker 9: include Stuart White Weitzmann's Jeweled sandals for example, you can
• 12:45
  Speaker 9: get rag and Bone attire and.
• 12:48
  Speaker 4: Consumers love it.
• 12:52
  Speaker 2: So I mean I am looking at the stock actually
• 12:54
  Speaker 2: is up about nine tens a one percent today at
• 12:56
  Speaker 2: a fifty two week high.
• 12:58
  Speaker 4: So good news there. Mary.
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  Speaker 2: What's the company saying about the consumer out there? You know,
• 13:04
  Speaker 2: we've got the K shaped economy. I'm not sure how
• 13:07
  Speaker 2: TGX kind of plays within that marketplace, but what are
• 13:10
  Speaker 2: they seeing?
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  Speaker 9: Yeah, so, Paul, you raise a valid point the K
• 13:15
  Speaker 9: shaped economy. The thing about TGX when you think about
• 13:20
  Speaker 9: all of the off price retailers, they're in the best
• 13:24
  Speaker 9: position to appeal to consumers across all income cohorts. So
• 13:29
  Speaker 9: they've got the brands that include Selene, Chloe, Gucci, Brunello, Cucinelli.
• 13:35
  Speaker 9: But then they'll have brands like Theory or Eli Tahari,
• 13:39
  Speaker 9: so they Nike Puma. So they really cover brands across
• 13:44
  Speaker 9: the spectrum that appeal to consumers across both the high
• 13:49
  Speaker 9: end all the way down to those consumers that are
• 13:52
  Speaker 9: really paycheck to paycheck. And so that's what makes them
• 13:56
  Speaker 9: in a great position and why they're business mind model
• 14:00
  Speaker 9: really works. And when you think about home goods, everybody
• 14:03
  Speaker 9: shops home goods. Whenever you go to a dinner party,
• 14:06
  Speaker 9: what you're seeing there on the table likely came from
• 14:09
  Speaker 9: home goods.
• 14:10
  Speaker 6: All very interesting us in the retail space. Kind of
• 14:13
  Speaker 6: the developments that we're seeing as a result of that
• 14:15
  Speaker 6: K shaped economy that Paul mentioned, because you know, in contrast,
• 14:19
  Speaker 6: we did have the Sax CEO, of course, on Bloomberg
• 14:22
  Speaker 6: TV yesterday talking about where they are in the chapter
• 14:26
  Speaker 6: eleven process. But they're also saying that, you know, hundreds
• 14:29
  Speaker 6: of luxury brands are shipping again, and then at the
• 14:32
  Speaker 6: same time, you know TJX holding a relatively Well, what
• 14:36
  Speaker 6: does this tell us about the state of consumers? You know,
• 14:39
  Speaker 6: are you seeing some kind of a bifurcation where these segments,
• 14:43
  Speaker 6: certain segments are doing better than others.
• 14:46
  Speaker 9: Yeah, So I would say that we're seeing strength across
• 14:51
  Speaker 9: all consumers really, and you see it with the consumer
• 14:54
  Speaker 9: confidence data. But most importantly, I think whenever you have
• 14:58
  Speaker 9: strong employment, which we have had for many years now,
• 15:02
  Speaker 9: and that really keeps the consumer resilience. So even if
• 15:05
  Speaker 9: you're sort of going paycheck to paycheck, when you're employed,
• 15:09
  Speaker 9: you feel really good and you might cut back on
• 15:12
  Speaker 9: some essentials just so that you can get something new
• 15:15
  Speaker 9: that makes you feel good. So I really see strength
• 15:19
  Speaker 9: across all consumer segments. It really comes down to the
• 15:23
  Speaker 9: retailer and their ability to execute. So when you see
• 15:27
  Speaker 9: companies that are outperforming, it's because they're executing. And that's
• 15:31
  Speaker 9: really the delineation that we see there.
• 15:34
  Speaker 2: Hey, Mary, the Supreme Court and our president just brought
• 15:37
  Speaker 2: terrrifs right back to the front burner again. I wonder
• 15:39
  Speaker 2: if the good folks a TGX had any thoughts about
• 15:42
  Speaker 2: what seems to be a new round or a renewed
• 15:44
  Speaker 2: interest in tariffs.
• 15:46
  Speaker 9: Yes, well, so the tariff question is going to be
• 15:49
  Speaker 9: top of mind with the fourth quarter earnings coming in.
• 15:52
  Speaker 9: And TJX though, because they buy primarily closeouts, like less
• 15:57
  Speaker 9: than ten percent, they're sourcing directly, so they're really not
• 16:02
  Speaker 9: that impacted by tariffs. It's so small for them because,
• 16:07
  Speaker 9: like I said, over ninety percent of the inventory that
• 16:09
  Speaker 9: they're sourcing is closeouts and they see tremendous availability of closeouts,
• 16:18
  Speaker 9: so they're not impacted. But we did have news out
• 16:21
  Speaker 9: today that Steve Madden decided not to provide margin guidance.
• 16:25
  Speaker 9: They did provide sales guidance, which was strong, but they
• 16:28
  Speaker 9: decided not to provide that guidance because they felt that
• 16:32
  Speaker 9: there was some uncertainty. But when you look at it,
• 16:34
  Speaker 9: we already know the tariffs that went into place prior
• 16:38
  Speaker 9: to the ten percent that went into effect, so you
• 16:40
  Speaker 9: know that you get at least of fifty percent savings
• 16:43
  Speaker 9: for one hundred and fifty days on new shipments, and
• 16:45
  Speaker 9: then once they issue the executive order for fifteen percent,
• 16:50
  Speaker 9: then you'll have a twenty five percent saving. So that's
• 16:52
  Speaker 9: really the best way to look at what the margin
• 16:55
  Speaker 9: impact could be and most of these companies are passing
• 16:59
  Speaker 9: on those pricing press and then they're also employing other
• 17:03
  Speaker 9: mitigation measures, including sharing with the suppliers.
• 17:06
  Speaker 4: Stay with us more from Bloomberg Intelligence coming.
• 17:09
  Speaker 2: Up there for this.
• 17:12
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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• 17:23
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• 17:27
  Speaker 2: Certainly, if you're a tech investor, you've been dealing with
• 17:29
  Speaker 2: the other side of AI, which is to what extent
• 17:32
  Speaker 2: is AI threat to my business? And that's been a
• 17:35
  Speaker 2: real big problem for a lot of sectors out there,
• 17:38
  Speaker 2: including software. Software as a service has certainly been dealing
• 17:42
  Speaker 2: with that over the last several weeks. We're gonna check
• 17:44
  Speaker 2: in with anurag Ruana and get the latest there on
• 17:47
  Speaker 2: our run as senior tech analyst covers all the tech
• 17:49
  Speaker 2: stuff for Bloomberg Intelligence, Honour, talk to us about the
• 17:53
  Speaker 2: conversations you're having with institutional investors these days, because you know,
• 17:56
  Speaker 2: several weeks ago solved just a big, big sell on
• 18:00
  Speaker 2: your whole software sector.
• 18:01
  Speaker 4: There where are we tay on that.
• 18:04
  Speaker 7: It's been okay the last two days, but and things
• 18:06
  Speaker 7: will probably change by the time next week comes around
• 18:09
  Speaker 7: because the you know, the discussion around here is not
• 18:12
  Speaker 7: so much about what's happening to the earnings power or
• 18:15
  Speaker 7: sales growth over the next twelve to twenty four months.
• 18:18
  Speaker 7: The big question is whether these guys will be relevant
• 18:20
  Speaker 7: five years from or not. And when you put a
• 18:23
  Speaker 7: question on somebody's terminal value, then you know there is
• 18:26
  Speaker 7: no argument.
• 18:27
  Speaker 4: It's a one out or zero.
• 18:28
  Speaker 7: So there are those that think that some of them
• 18:30
  Speaker 7: will be fine and maybe even grow stronger, and there
• 18:33
  Speaker 7: are certain companies that will be disrupted quite a bit.
• 18:36
  Speaker 7: So I think that's where the dilemma is. At this point,
• 18:39
  Speaker 7: people are just telling the entire index. They're not even
• 18:42
  Speaker 7: looking at some of the bigger ones or the better
• 18:44
  Speaker 7: ones at this point.
• 18:45
  Speaker 6: Yeah, well, Honuric, let's get into which ones are the
• 18:49
  Speaker 6: bigger ones and the better ones, right, because we've seen
• 18:51
  Speaker 6: so far the most vulnerable vulnerable names seem to be
• 18:55
  Speaker 6: companies in online travel or smaller software first, but then
• 18:58
  Speaker 6: meanwhile cybersecurity it seems to be relatively insulated from the
• 19:02
  Speaker 6: recent baout of caution that we've seen. You know, is
• 19:05
  Speaker 6: that a sector or a segment within this space that
• 19:09
  Speaker 6: could actually benefit from increased spending on security.
• 19:15
  Speaker 7: Yeah, I mean, we did publish a big report yesterday
• 19:17
  Speaker 7: and we have put out a framework where we have
• 19:20
  Speaker 7: looked at four or five different segments or different factors.
• 19:23
  Speaker 7: So if somebody has a very high market share, are
• 19:26
  Speaker 7: they selling into an enterprise or a smaller business, do
• 19:29
  Speaker 7: they have network effect? And are they a platform or
• 19:32
  Speaker 7: a point product company? So, you know, let's you mentioned cybersecurity.
• 19:36
  Speaker 7: This is an area that is doing better than the
• 19:39
  Speaker 7: others and in fact could even benefit down the road
• 19:42
  Speaker 7: if a lot of the agents that you know, people
• 19:44
  Speaker 7: will create would need to have their own identity, would
• 19:47
  Speaker 7: need to have their own safeguards around it. But you know,
• 19:51
  Speaker 7: there are certain places where we will see more disruptions.
• 19:53
  Speaker 4: Online travel is one area you.
• 19:55
  Speaker 7: Mentioned, and even the smaller software names, whether that's in HR,
• 19:59
  Speaker 7: whether it's since sales automation, I think they are the
• 20:03
  Speaker 7: most at risk of getting disrupted.
• 20:06
  Speaker 2: What are the companies saying here? Do they acknowledge that
• 20:09
  Speaker 2: AI is a threat to their business? Are they trying
• 20:12
  Speaker 2: to pivot? Are they ignoring it? What are you hearing
• 20:15
  Speaker 2: from the companies these days.
• 20:17
  Speaker 7: So everybody's pivoting at a very fast pace. I'll name
• 20:20
  Speaker 7: a couple of examples. You know, a company like Workday,
• 20:23
  Speaker 7: which is the de facto leader in HR software, they
• 20:26
  Speaker 7: are creating their own agents and down the road, when
• 20:29
  Speaker 7: you and I will interact with an HR software company,
• 20:32
  Speaker 7: it would be through a chat pok or could be conversational.
• 20:35
  Speaker 4: There is a company called Figma.
• 20:36
  Speaker 7: It has added more AI capabilities to its core software.
• 20:40
  Speaker 7: So when you're developing the software, you're actually giving prompts
• 20:43
  Speaker 7: to say this is what I want the design to
• 20:45
  Speaker 7: look like, and then it pops up something you know
• 20:48
  Speaker 7: on the system rather than doing it, you know, bit
• 20:51
  Speaker 7: by bit using the software. So there is a lot
• 20:54
  Speaker 7: of push by these companies. But you know, that's where
• 20:56
  Speaker 7: the question is whether it's going to lead to lower
• 20:59
  Speaker 7: margins because this is an expensive way to do things,
• 21:03
  Speaker 7: or whether it leads to the AI native company coming
• 21:06
  Speaker 7: and taking their market share.
• 21:08
  Speaker 6: Yeah, very interesting on that subject. Analog of you know,
• 21:10
  Speaker 6: some companies moving to create their own agents, as you mentioned,
• 21:14
  Speaker 6: because yeah, is that something that could potentially drive a
• 21:17
  Speaker 6: wedge also between these companies that are vulnerable to a
• 21:22
  Speaker 6: disruption We had Sarah Hunt earlier mentioning that if you're
• 21:25
  Speaker 6: a company that owns the tech, that owns the proprietary data,
• 21:28
  Speaker 6: you're fine. But maybe if you're leaning on somebody else
• 21:31
  Speaker 6: to provide that for you, maybe or not would you
• 21:33
  Speaker 6: agree with that?
• 21:34
  Speaker 7: Yeah, I mean, if you have your own data, that's fine.
• 21:37
  Speaker 7: But at the end of the day, it's customers data.
• 21:39
  Speaker 7: I mean, it's Bank of America's data, it's JP Morgan's data.
• 21:42
  Speaker 7: So if they decide to give access to an m
• 21:45
  Speaker 7: A or an anthropic or an open eye to that data,
• 21:48
  Speaker 7: so you know, it's up to them. Frankly, I understand
• 21:51
  Speaker 7: you can't log into somebody's software and try to get
• 21:54
  Speaker 7: that data out of it. So I understand a lot
• 21:56
  Speaker 7: of these arguments, but frankly speaking, when disruption happens, it
• 22:00
  Speaker 7: happens very fast.
• 22:01
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