Latest / Bloomberg Intelligence / P&L: The Restaurant Industry Is in a Perfect Storm of Problems

Transcript

P&L: The Restaurant Industry Is in a Perfect Storm of Problems · Bloomberg Intelligence

0:04
Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim
0:07
Speaker 1: Fox along with my co host Lisa Abramowitz. Each day
0:11
Speaker 1: we bring you the most important, noteworthy, and useful interviews
0:14
Speaker 1: for you and your money, whether at the grocery store
0:16
Speaker 1: or the trading floor. Find the Bloomberg P L Podcast
0:20
Speaker 1: on iTunes, SoundCloud and at Bloomberg dot com. I want
0:29
Speaker 1: to take a deeper look at what the potential on
0:33
Speaker 1: the ground implications are regardless of who wins this election.
0:38
Speaker 1: It is my honor to bring in Jonathan Seagal, founder
0:40
Speaker 1: and CEO of the One Groom and St. K restaurants. Um,
0:44
Speaker 1: this is you can find them uh in the meatpacking
0:47
Speaker 1: district and uh, you know, across the country. Uh. Jonathan,
0:50
Speaker 1: are you expecting to see any kind of meaningful change
0:55
Speaker 1: either in your customers or the amount of money people
0:58
Speaker 1: are willing to spend um in your restaurants or other Well,
1:02
Speaker 1: good morning to you, good money. I certainly think there's
1:04
Speaker 1: been a change up until now with the election, people
1:09
Speaker 1: tend to be a little bit more cautious about going
1:10
Speaker 1: out and spending money, and I think, I think, to
1:14
Speaker 1: be honest, people are going to wait and see what happens.
1:16
Speaker 1: Can you back up because a lot of people have
1:18
Speaker 1: said this, A lot of companies have said that people
1:20
Speaker 1: have been more cautious. Really, people don't go out to
1:22
Speaker 1: eat because of the election. I think people it becomes
1:25
Speaker 1: it becomes a mainstream event that people are focused on
1:28
Speaker 1: amongst themselves, and they tend to become more isolated, and
1:31
Speaker 1: they're more focused on what's going on. And whenever any
1:33
Speaker 1: major event happens, whether it's a sport event and the Olympics,
1:38
Speaker 1: World Series, anything that's major that really embraces the a
1:43
Speaker 1: great many people, it has an impact on people's expenditure
1:46
Speaker 1: because they also become aware of the implications of the results.
1:49
Speaker 1: And that's also part of what affects their decision to
1:52
Speaker 1: spend money. Do they think the economy is going to boom,
1:55
Speaker 1: they think it's not going to boom. Do they need
1:56
Speaker 1: to save more money? Is look what's happened this morning.
1:59
Speaker 1: Obviously the small in the market things that Clinton is
2:01
Speaker 1: gonna win, and and the markets up two hundred fifty
2:03
Speaker 1: seven points. So there's absolutely a correlation between economics and
2:07
Speaker 1: spenditure and investment and and and obviously uh election results.
2:13
Speaker 1: You know, I can tell by your accent that you
2:15
Speaker 1: come from the heartland of America in the center. How
2:18
Speaker 1: how did you did you call the brexit? I mean,
2:21
Speaker 1: you know, so I have connected the completely got the
2:25
Speaker 1: Brexit wrong. I thought that we would stay um And
2:29
Speaker 1: what is unbelievably interesting now that seems to have been
2:32
Speaker 1: washed over is what occurred last Friday in London where
2:36
Speaker 1: the part of the High Court ruled that there has
2:39
Speaker 1: to be an Act of Parliament in order to exit
2:42
Speaker 1: to enforce Article forty. You think that we washed over
2:45
Speaker 1: that were bloomberg. So this is an unbelievable constitutional will
2:51
Speaker 1: that affect your business? With that affect you because I know,
2:54
Speaker 1: for example, you've got projects in the lands. You've got
2:56
Speaker 1: business in London, Toronto, or land on Miami, Chica. I mean,
3:00
Speaker 1: I want you to tell people about some of these places.
3:02
Speaker 1: So let's just talk about that for a minute, because
3:04
Speaker 1: this is a great question in the Again, in the
3:06
Speaker 1: lead up to the Brexit, our business was impacted. Following
3:10
Speaker 1: the Brexit, our business returned to where it was. It's
3:14
Speaker 1: uncertainty that creates cautiousness. Once that uncertainty has gone, it
3:18
Speaker 1: doesn't necessarily have to gone the way you wanted it.
3:20
Speaker 1: To go. But once that uncertainty has past us, people
3:24
Speaker 1: become a little bit more relaxed. If you look at
3:25
Speaker 1: our businesses, particularly in the United Kingdom where we operate
3:29
Speaker 1: seven facilities, seven venues in two facilities. In the lead
3:33
Speaker 1: up to Brexit, we were impacted and post Brexit business
3:36
Speaker 1: to kind of return and in fact is up and
3:38
Speaker 1: where it was at this time last year. Restaurant, we
3:41
Speaker 1: just gotta make sure food restaurant hospitality, right, I just
3:45
Speaker 1: giving example some people understand. So so we have a
3:48
Speaker 1: number of venues in England we operate as part of
3:51
Speaker 1: our business we go into hotels and run their entire
3:53
Speaker 1: food and beverage. So we do that in the Mere
3:55
Speaker 1: Hotel in London. We also have an STK restaurant. We
3:58
Speaker 1: also have a rooftop bar, and then we have a
4:01
Speaker 1: facility in the Hippodrome casino. So really in our London
4:05
Speaker 1: is a snapshot of what we do globally as a company.
4:07
Speaker 1: And it's also training across the board of people that
4:10
Speaker 1: are at all different levels of disposable income. We're sitting
4:13
Speaker 1: with someone who lives much better than I do. I
4:15
Speaker 1: am sure with all of the food and the entertainment
4:18
Speaker 1: and the beautiful hotels that you can go visit. One
4:21
Speaker 1: thing I am wondering once the uncertainty settles, there are
4:27
Speaker 1: some policies that could make a big difference. Another word
4:30
Speaker 1: for one, in particular minimum wage. Do you think that
4:33
Speaker 1: if a minimum wage was lifted in the US that
4:37
Speaker 1: would affect your business at all? So it definitely affects
4:39
Speaker 1: our business, and and part of the problem that's driving
4:42
Speaker 1: this minimum wage issue is a very complex arena. Part
4:46
Speaker 1: of the problem. For first, you have to split out
4:48
Speaker 1: the beneficiaries of it. People that earn money in fast
4:52
Speaker 1: casual or in fast food restaurants are not benefits of
4:55
Speaker 1: the tip structure, so minimum wage is a really important
4:58
Speaker 1: asset for them. The people that work in in casual
5:01
Speaker 1: or in fine dining our benefit from the tip structure.
5:05
Speaker 1: So you have situations where as you systematically increase minimum wage,
5:10
Speaker 1: you're still you're paying your waste weight staff more. And
5:13
Speaker 1: whilst tipping still exists, they're still going to twenty percent tipping.
5:16
Speaker 1: Do you think that the tipping structure should go away? Well,
5:19
Speaker 1: tipping needs to change. One of the ways. It either
5:21
Speaker 1: needs to change or the laws that impact it need
5:24
Speaker 1: to change. The biggest problem with the tipping sits and
5:26
Speaker 1: which is I don't understand why the authorities haven't really
5:29
Speaker 1: worked out because it doesn't take a brain surgeon to
5:32
Speaker 1: work it out. The rules require that the only people
5:35
Speaker 1: that can benefit from the tips and the people that
5:37
Speaker 1: actually touched the consumer, So the the the servers, the
5:41
Speaker 1: bar staff, et cetera. But if you work in the kitchen,
5:44
Speaker 1: or if you work in the back of house, or
5:46
Speaker 1: if you work at any other areas where you don't
5:48
Speaker 1: impact the guest, you don't actually get to share in
5:50
Speaker 1: the tip pole. Now, the truth is you can't sit
5:52
Speaker 1: and arrest on and have a meal and this there's
5:54
Speaker 1: a kitchen cook in it. But because we can't share
5:56
Speaker 1: the tips round amongst everybody, you have this terrible imbalance.
6:00
Speaker 1: So certainly at the fine dining and the casual dining
6:02
Speaker 1: in arena, one of the areas to fix the the
6:05
Speaker 1: split or the or the differential between the back of
6:08
Speaker 1: house and front house is just enable everybody down for
6:11
Speaker 1: managers to share in the tip pole. That one little
6:13
Speaker 1: fix will change that whole category of income, and then
6:17
Speaker 1: you can really start to focus on people that are
6:20
Speaker 1: not necessarily in a tip pool in the in the
6:22
Speaker 1: in the fast food restaurant, where obviously people are entitled
6:25
Speaker 1: and should should earn a living wage. The cost of
6:29
Speaker 1: doing business. Maybe speak a little bit about that, whether
6:31
Speaker 1: it's the input costs, or the real estate costs, or
6:34
Speaker 1: just the cost and the risk of going bus Because
6:36
Speaker 1: the restaurant industry, as I heard, well not a short thing. No, no,
6:39
Speaker 1: Well listen, the restaurant industries in recession at the moment.
6:42
Speaker 1: There's no question of doubt about that. And it's it's
6:45
Speaker 1: based on all that. It's we're in the perfect storm.
6:47
Speaker 1: We have rising rents. You know, every year our rent
6:50
Speaker 1: to go up three five, the landlords do not put
6:52
Speaker 1: them up. We have increased food costs and we now
6:55
Speaker 1: have increased labor costs. We have uncertainty, we have increased petition,
7:00
Speaker 1: We have competition from disruptors. You know, you have situations
7:03
Speaker 1: with the seamless and the internet food delivery service that
7:06
Speaker 1: impact what's going on in the actual restaurant. Sure that
7:08
Speaker 1: those that will argue to say, well, you're still getting
7:10
Speaker 1: you're selling a meal if you sell it through seamless,
7:13
Speaker 1: if you sell it in store. But the truth is
7:15
Speaker 1: you're not getting the liquor sales that help to add
7:17
Speaker 1: to the profitability of the company, of the of the business,
7:20
Speaker 1: and therefore, as a result, we're in a perfect storm,
7:22
Speaker 1: in a perfect storm of problems. And the and the
7:25
Speaker 1: authorities need to wake up to this because if you
7:27
Speaker 1: start to to marginalize the restaurant industry that has overwhelming
7:32
Speaker 1: imployments are mostly self inflicted. Yes and no, the rents
7:37
Speaker 1: certainly are not. Food costs are certainly not. Um I
7:40
Speaker 1: think you know, the let the register, the the legislation
7:43
Speaker 1: that we work under, and the and all the enforcement
7:46
Speaker 1: rules are crazy. I mean, if you're sitting and understand,
7:48
Speaker 1: here's a crazy enforcement law. How about this, It's going
7:50
Speaker 1: to give you a five seconds. Okay, if you don't
7:52
Speaker 1: see your patios the way they're supposed to be seen,
7:55
Speaker 1: but move them to put two fours together, you're breaking
7:57
Speaker 1: the law. Charlathan Siegal, thank you very much, Founder, chief
8:00
Speaker 1: executive the One Group and S t K Restaurants. This
8:04
Speaker 1: is Bloomberg, all right. Thirteen hours, seven minutes and fifty
8:19
Speaker 1: six seconds until the first poles open in the clearly
8:25
Speaker 1: three towns in New Hampshire are set to vote at midnight.
8:30
Speaker 1: So Lisa Brahmins, I think he'll be staying up quite
8:33
Speaker 1: a late night, and I think that Mark Niquett also
8:36
Speaker 1: better it gets some sleep in the afternoon because he'll
8:38
Speaker 1: be spending the night watching. He's our politics and national
8:42
Speaker 1: government reporter. Normally he joins us from Columbus, Ohio, but
8:45
Speaker 1: he joins us here in our studios in our global
8:48
Speaker 1: headquarters in New York. Thank you very much for being here. Mark.
8:51
Speaker 1: So what are we supposed to take What's going to
8:53
Speaker 1: happen in the next thirteen hours that is going to
8:56
Speaker 1: matter to the outcome of the election. Well, we're gonna
8:58
Speaker 1: see sort of the final push by the campaigns. We
9:00
Speaker 1: have Hillary Clinton with rallies all the way up to midnight,
9:04
Speaker 1: her last rallies in Raleigh, North Carolina at midnight. Donald
9:08
Speaker 1: Trump will be doing the same and this is sort
9:10
Speaker 1: of the last push to get you know, the final late, late,
9:13
Speaker 1: late deciders, the people who are actually going to the
9:15
Speaker 1: polls tomorrow who haven't already early voted, you know, maybe
9:18
Speaker 1: sway just the last few folks that could make a
9:21
Speaker 1: difference in some of these key battleground states that could
9:23
Speaker 1: decide the election. So you wrote a story basically saying
9:27
Speaker 1: that even though James Comey, the FBI director, came out
9:31
Speaker 1: and said that he wasn't going to charge any charge
9:35
Speaker 1: Hillary Clinton with any crime and that the new review
9:38
Speaker 1: of emails did not change the FBI's deliberations. This clears
9:42
Speaker 1: the cloud. But you're saying the damage is done. Yeah,
9:44
Speaker 1: on a couple of levels. I mean, one, you've had
9:46
Speaker 1: millions of people casting early votes at a time this
9:50
Speaker 1: cloud was sort of hanging over her head, and to
9:52
Speaker 1: the extent that it affected votes, you know, there's no
9:55
Speaker 1: way to change those, of course, but I think fundamentally
9:57
Speaker 1: it really did change that, you know, the trajectory of
9:59
Speaker 1: the race. You know, think about before the first um
10:03
Speaker 1: FBI letter came out from Director came Um, I was
10:06
Speaker 1: actually was aboard the Clinton campaign plane, you know, when
10:10
Speaker 1: that news broke. We were in mid air and they
10:11
Speaker 1: were doing a press conference on the plane talking about
10:14
Speaker 1: how we can't be complacent, you know, complacencies our enemy.
10:17
Speaker 1: Because the polls at that time looked like she was
10:19
Speaker 1: headed toward victory and maybe a decisive victory, and that
10:22
Speaker 1: you know, letters just sort of reset the race where
10:24
Speaker 1: it reinforced you know, questions that people might have had
10:27
Speaker 1: about her use of emails. It gave Donald Trump, you know,
10:31
Speaker 1: something to to talk about on his campaign rallies. And
10:34
Speaker 1: it also you know, what we're seeing is maybe affected
10:37
Speaker 1: independence or you know, even Republican leaning independence or um
10:42
Speaker 1: suburban women who you know, maybe weren't enamored of Trump,
10:45
Speaker 1: but we're you know, unsure about Hillary Clinton, and this
10:48
Speaker 1: sort of made them pause about supporting her. So it
10:50
Speaker 1: made the race tighten, no question. But why wouldn't they
10:52
Speaker 1: reverse that. I mean, if it had such a big
10:54
Speaker 1: effect in the other way, why wouldn't people say, all right, this,
10:56
Speaker 1: there's nothing to see here. Well, I think the people
10:58
Speaker 1: were talking to say it will have some of that
11:00
Speaker 1: effect that Again, these are late, late deciders, you know,
11:03
Speaker 1: who may have had concerns about Clinton. Maybe this removes
11:06
Speaker 1: that cloud and they go ahead and vote for her.
11:07
Speaker 1: But I think the feeling was the race was already
11:09
Speaker 1: tightening with Republicans coming home is what they say. You know,
11:12
Speaker 1: if you're a Republican and maybe you're not sure about
11:15
Speaker 1: Donald Trump, but you're not sure about her either, you
11:16
Speaker 1: still vote Republican. So this could help on the margins
11:20
Speaker 1: with you know, a really really close race, but you know,
11:22
Speaker 1: the feeling is a lot of it's already baked in.
11:24
Speaker 1: If you cared about this issue or didn't care about
11:27
Speaker 1: this issue, you know this isn't gonna change your opinion.
11:30
Speaker 1: Mark Niquette, the use of polling data and projections. Uh.
11:35
Speaker 1: Major news organizations do not call elections until after the
11:39
Speaker 1: polls have closed, but using projections during the election day
11:45
Speaker 1: is something that apparently is gonna gonna happen. There's a
11:48
Speaker 1: something called vote Caster, and they're going to team up
11:51
Speaker 1: with Slate and Vice, I believe, and they're gonna be
11:54
Speaker 1: giving information out about the polling while the election is
11:59
Speaker 1: still taking place. Right, And traditionally we've also had exit polling.
12:03
Speaker 1: This is somewhat similar to that, where you know, they
12:06
Speaker 1: take a slice of the electorate coming off the you know,
12:09
Speaker 1: from from voting and get a sense of, wow, the
12:11
Speaker 1: vote's going to break down. Uh. And it is always
12:13
Speaker 1: a little bit you know, dicey, from the standpoint of
12:15
Speaker 1: people are still voting, and like you say, there's sort
12:18
Speaker 1: of a tradition it might discourage people. It might discourage
12:20
Speaker 1: people from actually going to the polls if they think
12:22
Speaker 1: that their vote doesn't matter because of these early estimates.
12:26
Speaker 1: For example, Right, and you've got people on the West
12:28
Speaker 1: Coast voting after you know the race has been called
12:30
Speaker 1: or some states have already come in, And you know
12:32
Speaker 1: that that's always been a sort of attention in terms of,
12:35
Speaker 1: you know, we want to get the information as quickly
12:37
Speaker 1: as we can, and we want to see what the
12:39
Speaker 1: trends are. But you know, ultimately all that matters is
12:42
Speaker 1: what's the final vote count when you know when all
12:45
Speaker 1: the ballots are counted. So since I want to get
12:47
Speaker 1: a sense of who's winning and I wanted the information, Now,
12:49
Speaker 1: what are the early polls saying, Well, the polls suggests
12:53
Speaker 1: that the race has stabilized, that you know, Hillary Clinton
12:56
Speaker 1: still has a structural advantage. What about the actual early voting, Well,
12:59
Speaker 1: the early vot voting. Again, I think the the early
13:01
Speaker 1: voting suggests that you know, Clinton had an advantage there,
13:04
Speaker 1: but she had to have an advantage, I mean the
13:06
Speaker 1: way that traditionally works, as Republicans are better at election
13:09
Speaker 1: day turnout. You know, even if you know Republican like
13:12
Speaker 1: Mitt Romney and twelve loses the election, he'll often win
13:16
Speaker 1: in terms of the vote that actually comes out on
13:17
Speaker 1: election day. So the idea for Democrats has been and
13:20
Speaker 1: certainly the last three cycles. Bank your votes early, get
13:23
Speaker 1: your supporters to cast their ballots early, and sort of
13:26
Speaker 1: build up a lead that can't be overcome on election day.
13:29
Speaker 1: And that's what you're seeing in states like Nevada, where
13:31
Speaker 1: the Clinton campaign, for example, estimates Donald Trump would have
13:34
Speaker 1: to get ten percent of all of the ten percentage
13:38
Speaker 1: points of all the election day votes to overcome the
13:40
Speaker 1: lead that Clinton has built with early voting. Mark Niquette,
13:44
Speaker 1: thank you so much for joining. I just ask, where's Hill?
13:47
Speaker 1: Where's Hillary Clinton going to vote? Yeah, that's a good question.
13:50
Speaker 1: I haven't seen any announcement. I'm assuming it's New York,
13:53
Speaker 1: but also Donald Trump obviously New Yorkers. Mark Niquette, Limberg
13:58
Speaker 1: Politics reporter, thank you so much for joining us. Market
14:00
Speaker 1: cat has a full party ready to go just to
14:03
Speaker 1: celebrate the end of the election season. He cannot wait.
14:06
Speaker 1: An Lisa bram Waits. I am here with Tim Fox.
14:09
Speaker 1: This is Bloomberg. You know who we call on when
14:24
Speaker 1: we want to know everything about the retail industry, our
14:26
Speaker 1: own pun. I'm Goyal, senior US retail analyst for Bloomberg Intelligence.
14:32
Speaker 1: Great to have you with us. Tell us about the
14:34
Speaker 1: big department stores and they're upcoming all important holiday selling season.
14:40
Speaker 1: So the department stores have been struggling, as you know,
14:43
Speaker 1: at least to most of them, are many of them,
14:45
Speaker 1: and I don't think there will be any different this
14:47
Speaker 1: holiday season. Um. They're all slated to report earnings this week,
14:50
Speaker 1: beginning Thursday with Macy's North German Cold and then UM
14:55
Speaker 1: we have DC Penny reporting on Friday. Now, what I
14:58
Speaker 1: can tell you here is that sales likely suffered for
15:02
Speaker 1: many of them UM in third quarter, and that's not
15:05
Speaker 1: a good sign heading into holidays because it shows the
15:08
Speaker 1: lack of customer interest in big box retailing and the
15:12
Speaker 1: lack of desire to go to a mall. That said,
15:16
Speaker 1: we think margins will likely hold up better because they
15:19
Speaker 1: are managing their inventory well, and from what I can
15:22
Speaker 1: see in the space, the promotional cadence has somewhat moderated.
15:27
Speaker 1: Now that doesn't mean that there aren't any more promotions,
15:30
Speaker 1: but they're being very strategic with them and they're more planned. Held.
15:34
Speaker 1: One second, when you say that you're talking about how
15:36
Speaker 1: much discounts they're giving. That is right. So you know,
15:40
Speaker 1: typically you've seen sixty seventy percent clearance racks and many
15:43
Speaker 1: of these retailers, and that's largely because of lots of
15:47
Speaker 1: inventory left over. So they're watching their inventory, they're keeping
15:51
Speaker 1: an eye on how much they're selling, and they're cutting
15:53
Speaker 1: back orders just to make sure that they don't get
15:56
Speaker 1: into that position they did last year where they had
15:59
Speaker 1: way too much, couldn't sell it and had to discount
16:02
Speaker 1: it aggressively to make room for new merchandise. Right. Well,
16:06
Speaker 1: these are not all the same either. I mean, Nordstrom
16:08
Speaker 1: usually caters to a higher end UH clients help were
16:12
Speaker 1: whereas Coals is more um of sort of middle or
16:15
Speaker 1: lower h tier of shoppers. Correct, I mean there's there
16:20
Speaker 1: there is a split here. So which do you which
16:22
Speaker 1: do you expect to do better? So for a third quarter,
16:24
Speaker 1: I think nord Storm will do, but better only because
16:27
Speaker 1: they have that one week of their anniversary sale moving
16:29
Speaker 1: into the third quarter, and even in general. You know,
16:32
Speaker 1: the problem that Nordstrom has right now is tourism and
16:35
Speaker 1: just that the luxury consumer that's coming from abroad isn't
16:39
Speaker 1: hitting those key tourist areas, whether it's Miami, New York City,
16:42
Speaker 1: Los Angeles, or so forth. If that starts to come back,
16:46
Speaker 1: I think they'll do better. But when you look at
16:48
Speaker 1: the Macy's, the Colds, the Dillards, the more mid tier
16:51
Speaker 1: retailers that are essentially overstored. I mean I feel like
16:54
Speaker 1: a Macy's they have a hundred stores. Coals has over
16:57
Speaker 1: a thousand. Too many stores. Uh, no real place of
17:01
Speaker 1: why I should come here. I mean, there's little differentiation,
17:05
Speaker 1: so consumers are just opting to go elsewhere. T j X,
17:10
Speaker 1: Ross Stores, Burlington's stores, these are the thrifty retailers. Fort
17:18
Speaker 1: off retail prices. Are they going to benefit Absolutely, They've
17:22
Speaker 1: been benefiting for the last at say seven eight years,
17:25
Speaker 1: and they continue to do so. And it's not so
17:27
Speaker 1: much about the discount Well, the discounts great, it's not
17:30
Speaker 1: when you walk in there, you'll always find something new.
17:33
Speaker 1: So customers like that element of surprise when I walk in,
17:37
Speaker 1: I grab it. If I don't get it, it may
17:39
Speaker 1: not be here. And that's really what's been helping these retailers.
17:42
Speaker 1: These retailers don't have an online presence. T j X
17:45
Speaker 1: is very small, so all the business that they're doing
17:48
Speaker 1: is in the store and they're getting customers to come
17:50
Speaker 1: to that store. So we've heard a lot of excuses
17:53
Speaker 1: over the quarter as We've heard about whether that was
17:56
Speaker 1: too warm, We've heard about whether that was too cold.
17:59
Speaker 1: We've heard recently about the election and how that's crimping
18:01
Speaker 1: people's expenditures. What do you expect to be the excuse
18:05
Speaker 1: this time around and maybe whether again, um, you know,
18:08
Speaker 1: it's it's very important, as much as we'd like to
18:11
Speaker 1: call it an excuse, but apparel retailers needed to get
18:14
Speaker 1: cold and for key to self sweaters and cold weather accessories.
18:17
Speaker 1: So as of right now, temperatures are i'd say, you know,
18:21
Speaker 1: have so many degrees here last week, so they're not
18:23
Speaker 1: that cold where it would prompt you to get a
18:24
Speaker 1: coat or a sweater. But if they don't turn cold,
18:28
Speaker 1: we will have another excuse, and it will be whether
18:30
Speaker 1: if temperatures do cool, though, I think they'll all be
18:33
Speaker 1: positioned for a very good fourth quarter because last year
18:36
Speaker 1: November was just very bleak. I don't think that the
18:40
Speaker 1: weather really affects anything in the cosmetic industry, or am
18:44
Speaker 1: I wrong? Maybe I'm wrong there. You know that's the
18:46
Speaker 1: one industry that's on fire. Okay, I want you to
18:48
Speaker 1: tell me about Alta salon. I want you to tell
18:50
Speaker 1: me about the details because there are all new ways
18:53
Speaker 1: that cosmetics are now being introduced into the marketplace, whether
18:57
Speaker 1: it is dry bars, whether it is all kinds of
19:00
Speaker 1: services combined with products. So I don't cover cosmetics closely
19:04
Speaker 1: outside of Sapphora, which is in J. C. Penny, but
19:06
Speaker 1: I can tell you our hardlines there. Analyst that does
19:08
Speaker 1: UM had just mentioned in our holiday preview that Alta
19:11
Speaker 1: us on fire growing um double digits for the last
19:15
Speaker 1: few years and will continue to do so. And that's
19:17
Speaker 1: largely because it kind of fits back into the experience.
19:21
Speaker 1: And you know, you want to dress up because you
19:23
Speaker 1: want to go out, you want to have nice makeup,
19:25
Speaker 1: you want to have your hair done, and you want
19:27
Speaker 1: to have the right products to do so. So the
19:29
Speaker 1: whole shift that we're seeing from buying things to spending
19:32
Speaker 1: money on experiences beauty just sits right into that. Well.
19:36
Speaker 1: They talk about things like salon services including hair, brow
19:39
Speaker 1: and skin bars, as well as prestige boutiques, and also
19:44
Speaker 1: the point is made that their share of the wallet
19:48
Speaker 1: and the shopping frequency at an ALTA salon sets them
19:51
Speaker 1: apart from their rivals. Yeah, I mean, speaking to ALTA,
19:55
Speaker 1: I don't follow it. Once again, I was closely, but
19:57
Speaker 1: I can tell you that, you know, it's cheaper right
20:00
Speaker 1: to go there, So it kind of fits into the
20:01
Speaker 1: discount the value chain, and that's something that the customer
20:05
Speaker 1: is looking for right now. So the more expansion that
20:07
Speaker 1: they can have, or the more bread that they can
20:09
Speaker 1: have in the types of seauty services they offer should
20:12
Speaker 1: continue to help them. So what about currency? Does the dollar?
20:16
Speaker 1: Are we going to hear anything about the dollar strengthening
20:18
Speaker 1: and the potential for that, especially as the Federal reserve
20:20
Speaker 1: hikes or is that sort of over? It's not over,
20:24
Speaker 1: it's still there. But given that we've seen a lot
20:26
Speaker 1: of the surge already with the dollar strengthing in the
20:29
Speaker 1: past twelve d eighteen months, I think the pressure is
20:32
Speaker 1: somewhat abate heading into four Q and next year. That said,
20:35
Speaker 1: if the dollar materially strengthens again, it's it's definitely a
20:38
Speaker 1: headwind at least for the retailers with international presence. What
20:43
Speaker 1: is your most contrarian belief Who do you think is
20:45
Speaker 1: going to outperform who everybody else is discounted or the
20:48
Speaker 1: other way around. You know, um, we don't give recommendations
20:52
Speaker 1: that I can tell you that J. C. Penny, which
20:53
Speaker 1: has been a turnaround story for some time has had
20:56
Speaker 1: mixed reviews on you know, whether they'll fall at prey
20:59
Speaker 1: to the h broader trends ever seeing in the department
21:02
Speaker 1: store space, which is lack of traffic, lack of disinterest
21:05
Speaker 1: in buying apparel, and I think they're doing interesting things
21:08
Speaker 1: up their stories, like adding appliance so as they are
21:10
Speaker 1: also focusing in on their InStyle boutiques, the centered core
21:14
Speaker 1: and differentiating themselves from the rust. So while still a
21:18
Speaker 1: department store, they're making a lot of headwind headway into
21:23
Speaker 1: getting the consumer back into their doors. Punamgoyle, thank you
21:26
Speaker 1: so much for joining us. Punamgoyle, senior US retail analyst
21:30
Speaker 1: breaking down earnings from Macy's, coals Nords from j C. Penny.
21:34
Speaker 1: We're gonna get them all this week and we will
21:36
Speaker 1: be keeping track of the uh frankly somewhat beliegaled, beliaguered
21:41
Speaker 1: retail industry that has really been uh bearing the brunt
21:44
Speaker 1: of the lack of wage increase set is finally starting
21:48
Speaker 1: to take ups or perhaps we'll see some better earnings
21:50
Speaker 1: there coming from there. And Lisa Brahmoys, I'm here with
21:53
Speaker 1: my co host Pim Fox. This is Bloomberg. I want
22:09
Speaker 1: to take a look at what I think is probably
22:11
Speaker 1: the biggest casino UH in the past three days, and
22:14
Speaker 1: that is gold. I mean, gold has been bouncing around.
22:16
Speaker 1: First touch funds were piling in putting long bets on gold,
22:20
Speaker 1: UH to sort of offset the chance of a Trump victory.
22:24
Speaker 1: Now gold is falling the most in a month. I
22:27
Speaker 1: want to get some more insight on this, UH. Mike
22:30
Speaker 1: mclaughn commodity strategies from Bloomberg Intelligence. What's your take on
22:33
Speaker 1: all this? Well, I think today is a good example.
22:35
Speaker 1: It's with you know, the highest probability of events with
22:39
Speaker 1: a Trump election would be gold going up. So obviously
22:41
Speaker 1: we're seeing the opposite today with gold going down. You know,
22:44
Speaker 1: it seems unlikely it will happen. But the key thing
22:47
Speaker 1: to remember for gold is still on the year and
22:49
Speaker 1: why global interest rates negative interest rates US might be tightening.
22:53
Speaker 1: The dollar hasn't increased as much. So as far as
22:56
Speaker 1: an election relation, I think it's the highest probability in
22:58
Speaker 1: commodities that gold would go. But you know, knocking around today,
23:01
Speaker 1: I mean the news was pretty significant. Look at the
23:03
Speaker 1: stock markets up, it's up, the opposite of gold being down. Today.
23:06
Speaker 1: So it's kind of like are you Are you a
23:08
Speaker 1: popular guy now, because I mean, boy, you were not
23:11
Speaker 1: popular at the beginning of the year anything to do
23:13
Speaker 1: with commodities. Everyone wanted to stay about a hundred and
23:15
Speaker 1: fifty feet away if we wanted to be in your neighborhood.
23:18
Speaker 1: That is very true. And that's part of the reason
23:20
Speaker 1: I'm a Bloomberg is because I was at a firm
23:22
Speaker 1: name for the last three years and the commodity aum
23:25
Speaker 1: just went straight down and finally they hit their stop
23:26
Speaker 1: and I ended up in a better place. But I'm
23:28
Speaker 1: becoming more popular, I guess. And it's a discussion we
23:30
Speaker 1: had earlier. But you know, you look at gold a
23:33
Speaker 1: few years from now, and I you know, we all
23:34
Speaker 1: hope gold would be down because everything is doing better. Commanities,
23:37
Speaker 1: the commanity, the economy is doing better, and the Fed
23:39
Speaker 1: doesn't have to you know, we don't have to, like
23:41
Speaker 1: stock markets doing better. But gold is still the the
23:44
Speaker 1: attractive hedge, and partly you see it in negative interest rates.
23:47
Speaker 1: Now we can move on the other commodities for instance, Like,
23:49
Speaker 1: what's really would be a big problem I think if
23:52
Speaker 1: Trump were to be elected, is his anti trade status
23:56
Speaker 1: so you think of commandities that US really exports corn, wheat, soybeans,
24:00
Speaker 1: that would be a problem there because that extra it
24:02
Speaker 1: would kind of hurt that export market. Well, but wouldn't
24:04
Speaker 1: it be the same for Clinton because she's sort of
24:06
Speaker 1: taken an anti TPP stance as well. I think so,
24:10
Speaker 1: But it's already kind of factored in. Any Any type
24:14
Speaker 1: of anti trade for things we export will be bad,
24:16
Speaker 1: but Trump more so. Um well, okay, So going back
24:19
Speaker 1: to gold, I mean you said, you know it's up
24:21
Speaker 1: the year regardless of who wins. Do you think that
24:24
Speaker 1: there's a direction for gold? Uh, it's really independent of
24:28
Speaker 1: this latest bout of volatility, Yes, exactly, And um it's up. Well, good,
24:34
Speaker 1: it's up for now. But it's all commondities and gold
24:37
Speaker 1: has just been one of the leaders. It just got
24:39
Speaker 1: a little expensive relative of the commanities. But it's also
24:41
Speaker 1: look at the environment. Their interest rates are near negative
24:44
Speaker 1: and what's the next step If the central banks are
24:47
Speaker 1: successful in creating inflation, that's traditionally the best thing for gold.
24:51
Speaker 1: So so in other words, I didn't mean stay glad
24:54
Speaker 1: to hear it because I have one a bet one way.
24:58
Speaker 1: Um No, it's more just you know, generally up is
25:01
Speaker 1: a positive, but in this case it actually might be
25:02
Speaker 1: a negative with respect to the global economy. I mean,
25:05
Speaker 1: do you think that that the bets on gold and
25:08
Speaker 1: the and the gains that gold has has experienced really
25:11
Speaker 1: is a vote of of lack of confidence in the economy. Yeah, exactly.
25:16
Speaker 1: Gold is generally the inversion of the U. S. Dow.
25:19
Speaker 1: It's it's the inversion of the stock market. Gold really
25:22
Speaker 1: stopped going up and started going down in two thousand
25:24
Speaker 1: and fourteen when the stock market started making new highs,
25:27
Speaker 1: and you know, and it's it's done the opposite there.
25:29
Speaker 1: This year it's done well even though the stock market
25:32
Speaker 1: has gone up. So it's still it's the ultimate quintus.
25:35
Speaker 1: I guess you could say the diversified acid, you know,
25:39
Speaker 1: the the free, the the the clear asset that you
25:44
Speaker 1: can use to diverse it your but your other your
25:47
Speaker 1: other other other investments. Still is I want to just
25:51
Speaker 1: go through a bunch of commodities. Give me the bullet
25:53
Speaker 1: bear case and that, you know, give you five seconds,
25:55
Speaker 1: because I want to get through a bunch of them.
25:57
Speaker 1: Silver best performing assets so far this year thirty one
26:00
Speaker 1: percent gain year today, Silver bullish bush bullish. Why it's
26:05
Speaker 1: um down from the highest and the supply demand turns
26:07
Speaker 1: are very positive. All right, we did go that's up
26:09
Speaker 1: more than Tell me what's going on with things like
26:12
Speaker 1: palladium and platinum. I always here that they're tied to
26:15
Speaker 1: the auto somewhat different. Palladium definitely much more tied to
26:18
Speaker 1: gasoline vehicles. Demand is still picking up, most notably from China,
26:22
Speaker 1: So still somewhat bullish. Platinum a little different, more focused
26:26
Speaker 1: on diesel vehicles and what happened with Volkswagen is pressuring it.
26:29
Speaker 1: But although platinum is still three still less than gold
26:32
Speaker 1: historically it's very cheap. Tell me about soft commodities, things
26:35
Speaker 1: like corn weed. I know we've got a big ethanol
26:38
Speaker 1: issue having to do with corn, and we've got a
26:41
Speaker 1: lot of well, we had a good harvest corn and
26:45
Speaker 1: wheat just made ten year lows and because of that,
26:48
Speaker 1: demand is really picking up. So they've been down for
26:50
Speaker 1: quite a while. It's just how sustainable are these trends.
26:53
Speaker 1: Demand is quite strung, specifically in wheat, corn, soybeans. Soft commodities,
26:58
Speaker 1: if you want a specific soft command to speak of, sugar,
27:01
Speaker 1: and sugar is up in the air, coffee, also coffee
27:04
Speaker 1: to which we have to drink. But the thing about sugar,
27:06
Speaker 1: it's a direct relationship to corn because of ethanol, so
27:09
Speaker 1: it might pull corn prices up. Anything that you want
27:12
Speaker 1: to tell us about the energy complex that we need
27:14
Speaker 1: to know, natural gas, heating oil, gasoline, overall glut. We
27:19
Speaker 1: still have a glut. Range trading. It got a little expensive,
27:22
Speaker 1: little bit, a little bit overweight above fifty when crude
27:25
Speaker 1: oil is fifty recently, but getting near forty it might
27:27
Speaker 1: do the opposite. Was stuck in a range, still a glut,
27:30
Speaker 1: and at some point that was going to change. But
27:32
Speaker 1: you talked about technology earlier, and that's the key thing
27:34
Speaker 1: that's impacting energy conservation more supply, and it's the opposite,
27:38
Speaker 1: and things like silver word technology is creating more demand
27:41
Speaker 1: and not increase in supply. I was going to get
27:43
Speaker 1: that for Lisa. I was going to get it as
27:45
Speaker 1: a gift. Always just gonna ask real quick, what is
27:49
Speaker 1: the one commodity that we're gonna be talking about most
27:50
Speaker 1: next year? Good question. I still I still think it's silver,
27:55
Speaker 1: partly because it's not really widely watched and this supplied
27:59
Speaker 1: to mentor the supply demand trends are very positive. Mike McLoone,
28:03
Speaker 1: thank you so much for joining us. Mike McLoone, Commodity
28:06
Speaker 1: strategist for Bloomberg Intelligence and All Things Commodities. We got
28:11
Speaker 1: a lots, We got a lot there, Pim, I like that,
28:13
Speaker 1: I like the list. This is Bloomberg. Thanks for listening
28:23
Speaker 1: to the Bloomberg pen L podcast. You can subscribe and
28:26
Speaker 1: listen to interviews at iTunes, SoundCloud, or whatever podcast platform
28:32
Speaker 1: you prefer. I'm Pim Fox. I'm out there on Twitter
28:34
Speaker 1: at pim Fox. I'm out there on Twitter at Lisa Abramo.
28:38
Speaker 1: It's one before the podcast. You can always catch us
28:41
Speaker 1: worldwide on Bloomberg Radio. Thank