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Consumer Health Amid Continued Rate Hikes · Bloomberg Intelligence

• 0:00
  Speaker 1: I tell you, when you want to talk retail, there
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  Speaker 1: is no better voice to chat with than Dana Telsey.
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  Speaker 1: She's a Chief Research Officer and CEO of Telsey Advisory Group.
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  Speaker 1: Just an outstanding firm. She created really focusing on the
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  Speaker 1: consumer and on all things retail. She's built a great
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  Speaker 1: team there. It's a great success story for a lot
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  Speaker 1: of these boutique research firms. I just hold up Dana's
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  Speaker 1: firm is one of the best out there. Dana, thanks
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  Speaker 1: so much for joining us here. You know there's a
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  Speaker 1: lot to talk about, but you know, having read your
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  Speaker 1: research over the years, I know I got to focus
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  Speaker 1: on a few key seasons. One of them is back
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  Speaker 1: to school. Yes, I know it's not even May, but
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  Speaker 1: back to school is probably the next big season for retailers.
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  Speaker 1: And we've got inflation out there, We've got an uncertain
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  Speaker 1: economic environment. How should I be thinking about back to school?
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  Speaker 1: How are the retailers prepared?
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  Speaker 2: I think the retailer. First of all, thank you so
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  Speaker 2: much for having me, and thank you so much for
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  Speaker 2: your kind words. I always very much enjoy partnering with
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  Speaker 2: you in Bloomberg. I would say, when I think about
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  Speaker 2: this season coming up for back to school and what's happening.
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  Speaker 2: It's filled with uncertainty. The one thing we know is
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  Speaker 2: that retailers are cleaning out their inventory, so they're going
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  Speaker 2: to be lean on goods, which is encouraging. The uncertainty
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  Speaker 2: with the top line, given the levels of consumer demand
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  Speaker 2: is where there definitely is caution. You're seeing the end
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  Speaker 2: of snap benefits, the lower tax refunds by a double
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  Speaker 2: digit amount, the volatility the stock market with the bank
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  Speaker 2: failures that are out there, and that's leading to that
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  Speaker 2: uncertainty where even the luxury goods companies have seen a
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  Speaker 2: moderation and growth still positive, but a moderation. And thinking
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  Speaker 2: about back to school, I think we're going to focus
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  Speaker 2: on the essentials. I think we're going to focus on
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  Speaker 2: it off price. I think we're still going to have
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  Speaker 2: the discounters being able to win for back to school.
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  Speaker 3: That's exactly what I wanted to ask about because I
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  Speaker 3: noticed a bifurcation in for example, the auto industry. Right
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  Speaker 3: if you want something that's high end or high dollar,
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  Speaker 3: you're going to have to wait if you can get
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  Speaker 3: it at all, Whereas if you want something that's affordable.
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  Speaker 3: Although in cars right now that's kind of a silly
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  Speaker 3: term to use, but you can get it. So demand
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  Speaker 3: is outstripping supply on the higher end. But in terms
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  Speaker 3: of you know, those who don't earn as much, they're
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  Speaker 3: able to still get you know, what they need. Is
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  Speaker 3: that Is that true in terms of a sort of
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  Speaker 3: a cross retail.
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  Speaker 2: Yes, you can get what you need. And we're no
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  Speaker 2: longer seeing what you saw in twenty twenty one and
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  Speaker 2: a bit of twenty two. Price increases are no longer
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  Speaker 2: are no longer happening out there. And the real question
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  Speaker 2: mark is what is the direction of consumer demand? And
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  Speaker 2: given what all companies have guided to many have guided
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  Speaker 2: to improvement in the back half of twenty three, is
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  Speaker 2: that really going to happen given the uncertainty of the macro.
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  Speaker 1: Hey, Dana, you know, having read your research over the years,
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  Speaker 1: you know you've been so up out front on the
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  Speaker 1: theme of right sizing the industry for the number of stores.
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  Speaker 1: And we've seen really our the last day Gate, plus
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  Speaker 1: so many of the department stores in particulars you know,
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  Speaker 1: closed stores to try to right size the inventory's more
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  Speaker 1: and more shopping goes online. Are we there yet? Is
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  Speaker 1: the industry kind of right sized itself?
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  Speaker 2: It has right size to a great degree. I can
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  Speaker 2: tell you that these bed Bath and Beyond locations that
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  Speaker 2: are becoming available, I think there's arm wrestling going on
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  Speaker 2: by the retailers in order to capture those boxes. The
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  Speaker 2: locations that they have, the adjacencies that they have, and
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  Speaker 2: the fact that there's a lack of new development, and
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  Speaker 2: whether it's the dollar stores, the off price retailers, some
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  Speaker 2: of the department stores, and other constituencies, whether it's arts
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  Speaker 2: and crafts retailers are home, those Bed Bath and Beyond
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  Speaker 2: locations will be gobbled up fast.
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  Speaker 3: Are you looking at other big box stores that could
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  Speaker 3: be headed the same way. I'm not sure how it
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  Speaker 3: is across the country, but when I go into the
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  Speaker 3: best Buy near me, it looks an awful lot like
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  Speaker 3: bed Bath and Beyond in terms of hardly anyone's there
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  Speaker 3: to help me. The shelves aren't stocked. I don't even
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  Speaker 3: know if the lights are on in the entire store.
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  Speaker 3: So can they pull through.
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  Speaker 2: Given the fact that the offering of brands that they
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  Speaker 2: have it best Buy, and keep in mind, brands are
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  Speaker 2: part of the key at best Buy? What change would
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  Speaker 2: that Bath and Beyond they eliminated brands and one to
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  Speaker 2: more private label. I think the halo of brands is
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  Speaker 2: a differentiator for Best Buy.
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  Speaker 1: Hey, Dana, the pandemic impacted so many people in so
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  Speaker 1: many different ways and so many different businesses, and you know,
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  Speaker 1: certainly retail is right at the top of the list.
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  Speaker 1: How we shop and things like that. How do you
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  Speaker 1: put that into perspective? How is shopping the consumer behavior,
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  Speaker 1: retailer's response to that behavior. How's that changed over the
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  Speaker 1: last several years.
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  Speaker 2: I think one of the things that happened is the
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  Speaker 2: three elements that we're all talking about. Pre COVID, Amazon's
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  Speaker 2: going to take over retail didn't happen. You're going to
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  Speaker 2: have store so many retail stores need to close they
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  Speaker 2: did close. And you have bankruptcies. We had ninety six
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  Speaker 2: consumer bankruptcies during the pandemic. You're fast forward and here
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  Speaker 2: we are today. You have a cleaner landscape than you've
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  Speaker 2: had in the past. You have an appreciation both by
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  Speaker 2: the consumer, the retailers, and the landlords of just how
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  Speaker 2: important that physical experience is. And I think, if anything,
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  Speaker 2: stores are being invested in for multiple functionalities in terms
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  Speaker 2: of being able to service with buy online pickup service,
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  Speaker 2: with omni channel and service with experience. I think we're
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  Speaker 2: coming here, coming out of this with a new appreciation
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  Speaker 2: for the store in all categories, and investment in them
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  Speaker 2: is not only a nice to have, it's a must
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  Speaker 2: have to win and gain market share.
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  Speaker 3: How does the labor force look to you, Dana, because
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  Speaker 3: I know that going into or coming out of the
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  Speaker 3: holiday season, rather a lot of companies were slow to
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  Speaker 3: let go of seasonal workers, whereas in the past they
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  Speaker 3: would have just dropped them post Christmas. They were worried
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  Speaker 3: this year, at least to the start, about being able
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  Speaker 3: to get enough people, so they didn't do that. How
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  Speaker 3: does it look now?
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  Speaker 2: I think overall what we're hearing about labor, retailers will
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  Speaker 2: try to keep their full timers. They'll add on when
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  Speaker 2: they need to add on, but they're still being very
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  Speaker 2: cautious in terms of labor force in order to be
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  Speaker 2: able to meet demand and the expense pressures. The labor
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  Speaker 2: cost increases and the wage price increases, that is not
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  Speaker 2: going away, that is sticking, and retail is a mindful
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  Speaker 2: of what the expense expense allocation is into the store.
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  Speaker 2: But I agree with you, service everywhere needs to be improved.
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  Speaker 1: Daniel, are you one of the top retail analysts on
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  Speaker 1: the street. What's your top call right here?
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  Speaker 2: I think the top call right now overall that we
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  Speaker 2: have out there. I think we're going to win with
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  Speaker 2: off Price this year in twenty twenty three. I think
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  Speaker 2: they're going to be the differentiator.
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  Speaker 1: So what are some of the names in that category.
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  Speaker 2: You look at TJX, you look at Burlington, you look
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  Speaker 2: at Ross stores, and I think also on the lower
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  Speaker 2: income side, I'm watching what City Trends does very carefully interesting.
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  Speaker 3: Interesting. Is there anything else we should be watching out for?
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  Speaker 3: Any hot products, any hot brands that have caught your
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  Speaker 3: eye lately?
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  Speaker 2: I mean, I always think there's new neis out there.
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  Speaker 2: What you have going on with Hoka Onrun and on
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  Speaker 2: Running is very exciting, given the newness that that they offer.
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  Speaker 3: My mom just brought her second pair of Hokahs and
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  Speaker 3: she's seventy three. It's a shoe.
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  Speaker 2: Oh, it's nearing a billion in sales. It has great cushioning.
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  Speaker 2: And when you look on the streets, watch what's on
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  Speaker 2: people's feet.
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  Speaker 3: Good stuff.
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  Speaker 1: That's that's primary research.
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  Speaker 3: Katie Greifeld also she's like, oh, it's not about fashion. Apparently,
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  Speaker 3: it's just it's good for your joints. Okay, they're more cushioning.
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  Speaker 3: I don't know if it's all right.
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  Speaker 1: Dana, thanks so much for joining us. Really appreciate getting
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  Speaker 1: having you, bet Dana. Dana Telsey is a Chief Research
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  Speaker 1: Officer and CEO of Tells the Advisory Group. She's one
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  Speaker 1: of the top analysts on Wall Street flat out. And
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  Speaker 1: I'll tell you what. Some of the best analysts on
• 8:05
  Speaker 1: Wall Street research anals over the last thirty year came
• 8:07
  Speaker 1: from a firm that no longer exists called CJ Lawrence.
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  Speaker 1: Some of the top analysts, and she did a stint
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  Speaker 1: at CJ Lawrence. So it does not surprise me at all,
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  Speaker 1: Dana Telsey, this is Bloomberg