Latest / Bloomberg Intelligence / GM Slides as CEO Barra Warns of ‘Intensifying’ Challenges

Transcript

GM Slides as CEO Barra Warns of ‘Intensifying’ Challenges · Bloomberg Intelligence

• 0:02
  Speaker 1: Bloomberg Audio Studios.
• 0:04
  Speaker 2: Podcasts.
• 0:05
  Speaker 3: Radio. News.
• 0:09
  Speaker 4: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 0:13
  Speaker 4: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
• 0:16
  Speaker 4: Auto with the Bloomberg Business app. Listen on demand wherever
• 0:19
  Speaker 4: you get your podcasts or watch us live on YouTube.
• 0:24
  Speaker 5: Well, General Motors narrowed its full year profit forecast and
• 0:27
  Speaker 5: said it will buy back another $ 20 billion in stock.
• 0:31
  Speaker 5: This reflects strong cash flows, even as the carmaker's sales
• 0:35
  Speaker 5: are softening. Earlier, General Motors CFO Paul Jacobson gave his
• 0:39
  Speaker 5: thoughts about quarterly earnings on Bloomberg Television.
• 0:42
  Speaker 1: Take a listen.
• 0:43
  Speaker 3: When we look at the fourth quarter, you know, I
• 0:45
  Speaker 3: think sell side, you know, I think missed a couple
• 0:48
  Speaker 3: of things that we've talked about. When you look at
• 0:49
  Speaker 3: the year in review, we've taken guidance up twice on
• 0:53
  Speaker 3: the underlying business and IEPA tariff refunds. So all in all,
• 0:57
  Speaker 3: I think the business continues to perform very, very well.
• 1:00
  Speaker 3: And we're looking forward to an exciting 2027.
• 1:02
  Speaker 4: All right.
• 1:02
  Speaker 5: That was General Motors CFO Paul Jacobson speaking to Bloomberg Television.
• 1:06
  Speaker 5: Let's bring in Craig Trudell, Global Autos Editor for Bloomberg News.
• 1:10
  Speaker 5: He's live here in our Bloomberg Interactive Broker Studio. Craig,
• 1:12
  Speaker 5: talk to us about GM. What did they kind of
• 1:15
  Speaker 5: get across on the earnings call? What may be your
• 1:17
  Speaker 5: Maybe some investors concerned about here. I see the stock
• 1:19
  Speaker 5: trading down about 5%, 6% today.
• 1:21
  Speaker 6: Yeah, the stock isn't liking it, and that may have
• 1:24
  Speaker 6: something to do with the fact that the sort of
• 1:26
  Speaker 6: top end of their forecast range was taken down a
• 1:29
  Speaker 6: little bit. They did bring up the bottom end, so
• 1:31
  Speaker 6: it was a case of narrowing. But I think the
• 1:34
  Speaker 6: commentary from Mary Barr, the CEO, also may not have helped,
• 1:38
  Speaker 6: where it did seem like she went into this call
• 1:41
  Speaker 6: with an intent to kind of signal that there are,
• 1:44
  Speaker 6: in her words, external headwinds that are intensifying. She also
• 1:50
  Speaker 6: talked about the path forward being challenging. This is a
• 1:53
  Speaker 6: company that has been able to kind of beat and
• 1:56
  Speaker 6: raise pretty routinely and has been executing quite well. And
• 2:00
  Speaker 6: so for them to kind of have a bit of
• 2:01
  Speaker 6: a change in tone is likely sort of where you
• 2:05
  Speaker 6: get this stock reaction this morning.
• 2:07
  Speaker 7: So let's talk about those external headwinds because it has
• 2:10
  Speaker 7: to do with the fact that the average price of
• 2:12
  Speaker 7: a new car is now more than $ 50, 000. And that
• 2:15
  Speaker 7: means a lot of consumers can't afford to buy a
• 2:17
  Speaker 7: new car. They're just kind of locked out of the market.
• 2:20
  Speaker 7: This is a strategy that the automakers pursued diligently during
• 2:24
  Speaker 7: the pandemic and after the pandemic.
• 2:26
  Speaker 1: And now is it starting to bite?
• 2:28
  Speaker 6: I think for the Detroit manufacturers in particular, the fact
• 2:31
  Speaker 6: that they're so overweight, big pickups and SUVs, that makes
• 2:35
  Speaker 6: them vulnerable in this environment of higher rates when you
• 2:38
  Speaker 6: do have not only 50,000 plus average cost of a
• 2:43
  Speaker 6: new vehicle, but financing those purchases is tricky and increasingly so.
• 2:50
  Speaker 6: Your dealers also have to finance that. The cost of
• 2:52
  Speaker 6: all that is going up. That could mean some pressure
• 2:56
  Speaker 6: on GM to have to subsidize there in the form
• 3:00
  Speaker 6: of incentives on either end of that spectrum. I also
• 3:05
  Speaker 6: think that there's an interesting kind of thought experiment to
• 3:09
  Speaker 6: do here where had GM invested a bit more in
• 3:12
  Speaker 6: hybrids as opposed to fully electric vehicles, that might have
• 3:16
  Speaker 6: been really helpful because they're clearly losing share to Toyota
• 3:21
  Speaker 6: and I would say even Hyundai too.
• 3:22
  Speaker 1: Do they have any hybrids? It's limited.
• 3:25
  Speaker 6: They had much more of a view that we should
• 3:29
  Speaker 6: go fully electric, that that is the sort of way
• 3:31
  Speaker 6: of the future. They had the policy to sort of
• 3:34
  Speaker 6: back that up during the Biden administration. And then there's,
• 3:37
  Speaker 6: of course, been quite an abrupt sort of rug pull.
• 3:40
  Speaker 1: U-turn.
• 3:41
  Speaker 2: Yes.
• 3:42
  Speaker 1: And that's really hurt them.
• 3:45
  Speaker 6: I do think that they got further along in terms
• 3:48
  Speaker 6: of making that business work than we saw Ford get,
• 3:51
  Speaker 6: where they out and out decided, you know what, forget it.
• 3:55
  Speaker 6: We're going to pull the F-150 Lightning off the market
• 3:57
  Speaker 6: entirely because Ford was losing too much money on that bet.
• 4:03
  Speaker 6: GM has done much more to insource batteries, and that's
• 4:08
  Speaker 6: been helpful. But the fact that you don't have the
• 4:12
  Speaker 6: $ 7, 500 tax credits for new vehicle purchases, that really stings
• 4:16
  Speaker 6: and completely changes the dynamics of this market. We have
• 4:20
  Speaker 6: not seen the U.S. consumer sort of recover from that
• 4:24
  Speaker 6: support being pulled.
• 4:25
  Speaker 5: So what is the GM kind of strategy here in
• 4:28
  Speaker 5: terms of allocating its investment capital between traditional.
• 4:34
  Speaker 5: Internal combustion engines versus other.
• 4:37
  Speaker 6: Yeah, we've heard Mary Barra talk about that fully electric
• 4:41
  Speaker 6: vehicles is still the way of the future. And I
• 4:44
  Speaker 6: think she's used the phrase, that's their North Star, right?
• 4:47
  Speaker 6: I do think that the company has pulled back that
• 4:49
  Speaker 6: being said, and that it is the case that we
• 4:52
  Speaker 6: just don't have the demand in this market and they
• 4:55
  Speaker 6: are so reliant on on the U.S. They're doing some
• 4:59
  Speaker 6: work to try and bring the consumer along. I think
• 5:02
  Speaker 6: they also have to bring their dealers along to a
• 5:04
  Speaker 6: degree and sort of get them to believe. And that's,
• 5:06
  Speaker 6: of course, challenging when you don't have Uncle Sam kind
• 5:10
  Speaker 6: of kicking in some support. But they clearly have some
• 5:15
  Speaker 6: things working in their favor perversely in the form of
• 5:18
  Speaker 6: fuel prices, right? Where it is the case that a So,
• 5:26
  Speaker 6: do we see some sort of reconsideration and at least
• 5:29
  Speaker 6: a little bit of green shoots in terms of the
• 5:32
  Speaker 6: consumer giving the EV another look? That sort of remains
• 5:35
  Speaker 6: to be seen. I haven't seen huge or super optimistic
• 5:39
  Speaker 6: indications that that's happening.
• 5:41
  Speaker 1: But the hope is there.
• 5:43
  Speaker 7: GM is also doing something else that's interesting. It's making
• 5:46
  Speaker 7: parts for Lockheed Martin's missiles. So it's getting into the
• 5:50
  Speaker 7: defense contracting business.
• 5:51
  Speaker 6: Yeah, it's very interesting to me because Detroit was sort
• 5:55
  Speaker 6: of known as the arsenal of democracy, right? And there
• 5:58
  Speaker 6: was a sort of taking down of assembly lines across
• 6:02
  Speaker 6: Detroit and across the Midwest to sort of rise to
• 6:06
  Speaker 6: the occasion, right? more than half a century ago, long
• 6:10
  Speaker 6: time ago. To see GM get on somewhat of a
• 6:16
  Speaker 6: war footing, I think we do have to quantify here
• 6:18
  Speaker 6: that they're not out and out taking plants down and
• 6:20
  Speaker 6: reconverting them. It seems to be more of a case
• 6:23
  Speaker 6: of kind of playing an advisory role for some defense
• 6:26
  Speaker 6: contractors because they're really having some trouble sort of meeting
• 6:31
  Speaker 6: the demands of, you know, just how much the U.S.
• 6:34
  Speaker 6: is going through stockpiles of some key weapons. And so
• 6:37
  Speaker 6: for them to play a part still is quite interesting
• 6:40
  Speaker 6: and something for us to watch in the months to come.
• 6:43
  Speaker 1: Stay with us.
• 6:44
  Speaker 5: More from Bloomberg Intelligence coming up after this.
• 6:50
  Speaker 4: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 6:54
  Speaker 4: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
• 6:57
  Speaker 4: Auto with the Bloomberg Business App. Listen on demand wherever
• 7:00
  Speaker 4: you get your podcasts or watch us live on YouTube.
• 7:05
  Speaker 1: M & A.
• 7:05
  Speaker 5: Trade in the tech space today I thought was pretty interesting.
• 7:08
  Speaker 5: Salesforce has agreed to buy artificial intelligence powered platform for marketers.
• 7:14
  Speaker 5: The company is called Braze for almost $ 5. 7 billion in
• 7:16
  Speaker 5: enterprise value. Anurag Rana joins us here. He is a
• 7:21
  Speaker 5: senior technology analyst for Bloomberg Intelligence.
• 7:23
  Speaker 1: Anurag, talk to us.
• 7:24
  Speaker 5: What is Braze and why is Salesforce buying it?
• 7:29
  Speaker 8: Yeah, so Braze is one of the software provider that
• 7:31
  Speaker 8: does marketing related emails or marketing software that helps people
• 7:36
  Speaker 8: with real-time emails and try to get you to buy
• 7:39
  Speaker 8: some stuff. If you go into a shopping cart and
• 7:41
  Speaker 8: you drop it there and not come back, they will
• 7:43
  Speaker 8: send you an email saying, hey, you forgot something in
• 7:45
  Speaker 8: that shopping cart. Now, the reason why they're buying is, frankly,
• 7:49
  Speaker 8: I would say a lot of these smaller cap names,
• 7:51
  Speaker 8: or I wouldn't say smaller cap, but smaller names compared
• 7:54
  Speaker 8: to the software space. have been absolutely crushed in the
• 7:57
  Speaker 8: last 12 months. So when you look at the valuations,
• 8:00
  Speaker 8: I mean, stocks jumped quite a bit, but they're buying
• 8:03
  Speaker 8: at about 5.7 times forward price to sales. I mean,
• 8:06
  Speaker 8: that is nothing compared to what we used to pay
• 8:08
  Speaker 8: for assets just a few years ago that we used
• 8:11
  Speaker 8: to be in double digits. So I think they're buying
• 8:13
  Speaker 8: it at the cheap. I think a lot of people
• 8:15
  Speaker 8: were surprised, including us, that they are actually buying something
• 8:18
  Speaker 8: that's not AI-related or not agentic-related, but a very traditional
• 8:22
  Speaker 8: software bucket. And that was used to be the case
• 8:25
  Speaker 8: for Salesforce a while ago. And it looks like given
• 8:28
  Speaker 8: the valuations, they are back in the market.
• 8:30
  Speaker 4: Yeah.
• 8:31
  Speaker 7: I'm glad you mentioned that because Salesforce once upon a
• 8:33
  Speaker 7: time was a serial acquirer in the same way that
• 8:36
  Speaker 7: Oracle was a serial acquirer. It used to make lots
• 8:38
  Speaker 7: and lots of acquisitions and integrate them. And of course
• 8:41
  Speaker 7: it stopped for a while and activist investors came in
• 8:44
  Speaker 7: and were pressuring Salesforce to get its numbers back up,
• 8:46
  Speaker 7: its growth back up.
• 8:48
  Speaker 1: Does this market return.
• 8:49
  Speaker 7: To, you know, its profile as a serial acquirer?
• 8:52
  Speaker 8: Do you think? No, I think it does, because you're
• 8:55
  Speaker 8: absolutely right. I mean, there was a time when Mark
• 8:57
  Speaker 8: Benioff was doing so many deals that he really got,
• 9:01
  Speaker 8: you know, you could say, pressured by the activists to
• 9:04
  Speaker 8: stop doing that. And that was after the Slack deal
• 9:06
  Speaker 8: a few years ago, which was very expensive. But in
• 9:09
  Speaker 8: the last, you could say, 12 to 18 months, we
• 9:11
  Speaker 8: have started to see them slowly get into it. They
• 9:14
  Speaker 8: bought Informatica, then they bought a company called Finns, which
• 9:16
  Speaker 8: was more AI-related. But today is a bit of a
• 9:20
  Speaker 8: surprise because this is a very traditional software vendor. So
• 9:23
  Speaker 8: I think you're absolutely right. You know, the software consolidation
• 9:26
  Speaker 8: or the M & A theme is back on.
• 9:28
  Speaker 5: That's kind of where I wanted to go because, you know,
• 9:30
  Speaker 5: back in my M & A days, if I saw
• 9:32
  Speaker 5: an unusual deal or unexpected deal, I'd get my guys
• 9:36
  Speaker 5: on the horn talking to every software client they had saying, hey,
• 9:39
  Speaker 5: you want to buy, you want to sell? Are we
• 9:40
  Speaker 5: going to see more of this?
• 9:42
  Speaker 8: I think it's very likely because, as I said, the
• 9:45
  Speaker 8: math right now is if you look at the small
• 9:47
  Speaker 8: and medium-sized software companies, their valuation has just been crushed
• 9:51
  Speaker 8: at this point. And I think we just discussed this
• 9:53
  Speaker 8: on radio a few months ago. There was a big
• 9:56
  Speaker 8: rumor that Workday may be going private. And, you know,
• 9:59
  Speaker 8: so I think they're all part of the same deal.
• 10:01
  Speaker 8: People are trying to figure out which software companies will
• 10:03
  Speaker 8: exist a few years from now. And you see a
• 10:06
  Speaker 8: lot more interest by both private equity as well as,
• 10:09
  Speaker 8: you know, you have business cases also or strategic buyers.
• 10:16
  Speaker 7: What do you anticipate... Salesforce's rivals to do to kind
• 10:20
  Speaker 7: of match this? I mean, are they going to come
• 10:22
  Speaker 7: in and do something similar, do you think? Or is
• 10:24
  Speaker 7: this kind of a Salesforce specific kind of trend?
• 10:28
  Speaker 8: Now, the funny thing is that there are a handful
• 10:30
  Speaker 8: of larger competitors. Now, let's examine them. For example, Oracle.
• 10:34
  Speaker 8: I don't think they can do a deal right now
• 10:36
  Speaker 8: because they are struggling a lot with, you know, raising
• 10:38
  Speaker 8: capital for their data center needs. So that's one issue.
• 10:41
  Speaker 8: You look at Adobe, they just had a management change.
• 10:44
  Speaker 8: They also, their stock's just been crushed. So I think
• 10:48
  Speaker 8: that's going to be very unusual. SAP could be the
• 10:50
  Speaker 8: one where we could see some deal activity because their,
• 10:54
  Speaker 8: I think, financial strength is a little bit better than
• 10:56
  Speaker 8: the others. And they are also not facing the same
• 10:58
  Speaker 8: kind of multiple compression.
• 11:01
  Speaker 1: Stay with us.
• 11:01
  Speaker 5: More from Bloomberg Intelligence coming up after this.
• 11:08
  Speaker 4: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 11:11
  Speaker 4: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
• 11:15
  Speaker 4: Auto with the Bloomberg Business App. Listen on demand wherever
• 11:18
  Speaker 4: you get your podcasts or watch us live on YouTube.
• 11:22
  Speaker 5: Another deal potentially in the AI space and scale, Anthropic
• 11:29
  Speaker 5: in talks for a $ 45 billion AI computing deal. Is
• 11:34
  Speaker 5: this circular, non-circular? I don't know what's going on here.
• 11:36
  Speaker 5: Billy Lipschultz, Bloomberg News, senior equities reporter. Billy, can you
• 11:39
  Speaker 5: explain what's going on here?
• 11:41
  Speaker 2: Okay, so Nscale is a neocloud, similar to Coreweave. So
• 11:45
  Speaker 2: we've all been talking about Coreweave ad nauseum. Nscale is
• 11:47
  Speaker 2: a private company. They're working on building out this project
• 11:52
  Speaker 2: called Monarch. It's in West Virginia. Monarch is going to
• 11:56
  Speaker 2: have three buildings.
• 11:57
  Speaker 1: Monarch is a data center. Monarch is a data center.
• 11:59
  Speaker 1: It's going to have three buildings.
• 12:01
  Speaker 2: The first building, they struck a pact with N scale
• 12:04
  Speaker 2: for computing for up to about $ 45 billion.
• 12:08
  Speaker 1: That happened in August.
• 12:09
  Speaker 2: What we broke yesterday is that they're in talks for
• 12:11
  Speaker 2: the second building. which would be worth another $ 45 billion.
• 12:15
  Speaker 2: And that Anthropic also has right of first refusal for
• 12:18
  Speaker 2: the third building. So really just kind of leaning into A,
• 12:22
  Speaker 2: accessing computing power, computing capabilities, and B, a further tie
• 12:26
  Speaker 2: up with N scale. Again, you have to remember Anthropic,
• 12:30
  Speaker 2: as far as we know, has been trying to strike
• 12:32
  Speaker 2: really as many deals as they can over the last year.
• 12:34
  Speaker 2: $ 50 billion pact with FluidStack, $ 45 billion pact with SpaceX.
• 12:39
  Speaker 2: You're really trying to diversify and acquire as much access
• 12:43
  Speaker 2: to compute as possible, just given the broader pitch and
• 12:46
  Speaker 2: theme that in 2030, maybe none of us actually work anymore.
• 12:49
  Speaker 1: Anthropic does everything for us.
• 12:50
  Speaker 9: Okay.
• 12:51
  Speaker 7: No scaremongering here allowed on Bloomberg Intelligence. Paul asked about
• 12:55
  Speaker 7: circular financing. Nscale is backed by NVIDIA, right?
• 12:58
  Speaker 3: Yeah.
• 12:59
  Speaker 1: They all are. I say that facetiously, but they all are.
• 13:03
  Speaker 1: That's actually really good that you put it that way.
• 13:05
  Speaker 7: So how much circularity is there in this particular potential deal?
• 13:12
  Speaker 2: Well, so the way to think about it is Nscale
• 13:14
  Speaker 2: is leaning on Vera Rubin, one of the more advanced
• 13:18
  Speaker 2: NVIDIA chips. So they're obviously an acquirer. You kind of
• 13:22
  Speaker 2: have to think about it in the easiest way to
• 13:25
  Speaker 2: think about it. Again, you can't help but get into
• 13:27
  Speaker 2: the circularity of it. NVIDIA backs N-scale. NVIDIA sells chips
• 13:34
  Speaker 2: to N-scale. Anthropic buys computing power from N-scale. The circularity
• 13:41
  Speaker 2: is there, but it's not necessarily that NVIDIA is.
• 13:47
  Speaker 1: It's not quite a bridge that far, if that makes sense.
• 13:49
  Speaker 2: This is more conventional, actually. It's relatively conventional. Again, I mean,
• 13:53
  Speaker 2: if you look at the pie chart, it's still not
• 13:55
  Speaker 2: great optically. NVIDIA is an investor in Anthropic. We expect,
• 14:00
  Speaker 2: for all intents and purposes, NVIDIA to participate in Anthropic's IPO.
• 14:04
  Speaker 1: But if you step a little bit to the side
• 14:07
  Speaker 1: and say.
• 14:09
  Speaker 2: NVIDIA makes the chips that in this circumstance best fit
• 14:12
  Speaker 2: a project and scale needs to buy them from NVIDIA.
• 14:16
  Speaker 2: Like that's more of where your circularity risk, I would argue,
• 14:19
  Speaker 2: my understanding is versus... the ultimate anthropic end game.
• 14:23
  Speaker 5: All right. Well, while we have you here in studio,
• 14:25
  Speaker 5: where is this IPO?
• 14:27
  Speaker 1: N scale or anthropic? We're in on both. Is N
• 14:30
  Speaker 1: scale looking to go public? N scale is filed publicly
• 14:32
  Speaker 1: to go. But it's a neocloud. And neoclouds are kind
• 14:35
  Speaker 1: of for.
• 14:35
  Speaker 5: Out of favor at the moment.
• 14:36
  Speaker 1: Stranger danger.
• 14:37
  Speaker 2: So we broke over the weekend that a cohort of
• 14:42
  Speaker 2: investors are encouraging N scale to consider a $ 16 to
• 14:45
  Speaker 2: $ 19 billion valuation.
• 14:47
  Speaker 1: What does the company expect?
• 14:49
  Speaker 2: Our understanding is they've been targeting 30 billion.
• 14:51
  Speaker 1: Oh, big difference.
• 14:53
  Speaker 2: So small potatoes, as it were. Again, that was before
• 14:57
  Speaker 2: this potential second pact with Anthropic. But as you mentioned,
• 15:01
  Speaker 2: our reporting again over the weekend, you step back and
• 15:04
  Speaker 2: say over the two weeks ending on Friday. Nebius is
• 15:09
  Speaker 2: down 32% or something like that. CoreWeave is down 30%.
• 15:12
  Speaker 2: It's really hard to encourage investors to want to step
• 15:16
  Speaker 2: into a new public.
• 15:16
  Speaker 7: And you had this IPO in Asia that didn't do well.
• 15:20
  Speaker 1: I may be the only person who's downplaying it.
• 15:22
  Speaker 5: They raised 150 million bucks. I also point out that I,
• 15:26
  Speaker 5: I believe it was a local IPO, local underwriters. There
• 15:30
  Speaker 5: were no us underwriters here. It was not a global offering.
• 15:33
  Speaker 1: So again, it's not great.
• 15:35
  Speaker 5: It's not great.
• 15:36
  Speaker 1: It's not great, but like, it's not what you want,
• 15:37
  Speaker 1: but exactly.
• 15:38
  Speaker 2: But to say that like this morning, the Neo clouds
• 15:40
  Speaker 2: were selling off because a small deal, in my opinion,
• 15:42
  Speaker 2: no one really had heard of before in South Korea
• 15:46
  Speaker 2: was the driver of All right, so your story today, N-scale, anthropic,
• 15:50
  Speaker 2: and talks for $ 45 billion AI computing deal.
• 15:53
  Speaker 5: It has a green B next to it. Can you
• 15:54
  Speaker 5: explain to our listeners and viewers what a green B means?
• 15:57
  Speaker 1: Oh, man.
• 15:58
  Speaker 5: Well.
• 15:58
  Speaker 1: To your own horn, Bailey.
• 16:00
  Speaker 2: I mean, it's higher profile breaking news that other people follow.
• 16:04
  Speaker 2: Breaking news. So Financial Times followed us.
• 16:06
  Speaker 1: I believe CNBC followed the reporting. Bailey broke news. Getting
• 16:09
  Speaker 1: it to you first on the Bloomberg terminal. Nowhere else.
• 16:13
  Speaker 1: Stay with us.
• 16:14
  Speaker 5: More from Bloomberg Intelligence coming up after this.
• 16:20
  Speaker 4: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 16:24
  Speaker 4: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
• 16:27
  Speaker 4: Auto with the Bloomberg Business App. Listen on demand wherever
• 16:31
  Speaker 4: you get your podcasts or watch us live on YouTube.
• 16:35
  Speaker 5: Scarlett, most of all my kids, all my kids are grown.
• 16:37
  Speaker 5: They're out the door. I can't remember the last time
• 16:39
  Speaker 5: I was in a toy store. I don't know what's hot,
• 16:42
  Speaker 5: what's not, what's going on out there.
• 16:44
  Speaker 7: It's all on the Internet anyway.
• 16:45
  Speaker 5: I guess. I don't know. But, I mean, Hasbro just
• 16:47
  Speaker 5: reported some pretty darn good numbers. The stock's up 5%
• 16:51
  Speaker 5: today on the news, up 26% year-to-date, 52-week high. So
• 16:56
  Speaker 5: whatever they're doing in the toy biz, I think they're
• 16:58
  Speaker 5: doing it pretty well. Let's check in with our toy analyst,
• 17:01
  Speaker 5: Lindsay Dutch, Bloomberg Intelligence Consumer Hardlines analyst, senior analyst there
• 17:06
  Speaker 5: at Bloomberg Intelligence. Lindsay, Hasbro reported some results here. What
• 17:10
  Speaker 5: did we learn?
• 17:12
  Speaker 1: Hi, Paul.
• 17:13
  Speaker 10: Thanks for having me. I think what we learned is
• 17:17
  Speaker 10: Magic the Gathering, which is their strategic trading card game,
• 17:21
  Speaker 10: you know, just continues to sort of blow it out
• 17:25
  Speaker 10: of the water, you know, beating expectations, third quarter of
• 17:29
  Speaker 10: a really, really strong beat. And that's really what drove
• 17:33
  Speaker 10: the increase to guidance and.
• 17:36
  Speaker 9: The better outlook for the year. But I would say,
• 17:38
  Speaker 9: you specifically to that brand.
• 17:46
  Speaker 7: When it comes to Magic the Gathering, my kid used
• 17:47
  Speaker 7: to play this, and then I interviewed someone who had
• 17:50
  Speaker 7: a whole bunch of Magic the Gathering cards behind him
• 17:52
  Speaker 7: as a backdrop, and he was an adult. So I
• 17:55
  Speaker 7: don't know whether this is a kid's game or an
• 17:57
  Speaker 7: adult game.
• 17:58
  Speaker 9: Either way, it's kind of its own thing.
• 18:00
  Speaker 7: It's become this franchise. What is Hasbro doing to kind
• 18:03
  Speaker 7: of capitalize on its popularity, not just with kids, but
• 18:06
  Speaker 7: with adults as well?
• 18:09
  Speaker 1: Yeah, you're right, Scarlett.
• 18:10
  Speaker 10: So it is the average player, according to Hasbro, is
• 18:13
  Speaker 10: in their 30s. So it is really more of an
• 18:16
  Speaker 10: adult collector set. And what they've really done, you know,
• 18:21
  Speaker 10: this year they had, you know, a bunch of tentpole releases.
• 18:25
  Speaker 10: I think about six of them. I think they have
• 18:27
  Speaker 10: another six to seven coming next year. And they roll
• 18:30
  Speaker 10: out these new sets every with lots of related product, theme.
• 18:34
  Speaker 9: And each of.
• 18:36
  Speaker 10: These sets has done better than they expected or better
• 18:39
  Speaker 10: than the last.
• 18:41
  Speaker 9: So the strength has really come.
• 18:42
  Speaker 10: Through with these adult collectors looking to grab as many
• 18:46
  Speaker 10: of these sets as they can. And Hasbro is sort
• 18:49
  Speaker 10: of trying to time the releases, keep them selective, keep
• 18:54
  Speaker 10: them topical and appealing to the market.
• 18:57
  Speaker 5: So As I mentioned, Hasbro stock's up 26% a year today.
• 19:02
  Speaker 5: It's 52-week high. Mattel is actually down 14%. What's going
• 19:06
  Speaker 5: on with Mattel?
• 19:08
  Speaker 10: Yeah, so I think Hasbro, right now when we look
• 19:11
  Speaker 10: at their portfolio and we just look at toy growth overall,
• 19:15
  Speaker 10: the first half, toys in the U.S. is up 17%
• 19:19
  Speaker 10: on a dollar value. It's the best first half we've
• 19:21
  Speaker 10: had in six years. That's really being driven by just
• 19:25
  Speaker 10: a couple of categories, one of them being the trading
• 19:28
  Speaker 10: cards and other building sets and also games. If you
• 19:32
  Speaker 10: look at Hasbro's portfolio, they own Monopoly. Monopoly Go is
• 19:37
  Speaker 10: doing really well. So you have the games angle with Hasbro.
• 19:40
  Speaker 10: You have the trading cards with Hasbro. They've also done
• 19:43
  Speaker 10: really well in some action figures as well. On Mattel's portfolio,
• 19:48
  Speaker 10: their portfolio doesn't does bias a lot more towards kids' toys.
• 19:54
  Speaker 9: They're dominant in dolls.
• 19:56
  Speaker 10: They also do a really great job with their Hot
• 19:58
  Speaker 10: Wheels brand, which can be a collectible, but also generally
• 20:03
  Speaker 10: sold to children.
• 20:04
  Speaker 9: So Mattel's portfolio, you know, skews a little.
• 20:08
  Speaker 10: Bit more to some of the categories that have not
• 20:12
  Speaker 10: been outperforming this year.
• 20:14
  Speaker 9: And Mattel has.
• 20:15
  Speaker 10: Been, you know, under pressure for some time now to
• 20:18
  Speaker 10: figure out growth, expedite growth in Fisher Price, in Barbie,
• 20:22
  Speaker 10: and some of their key brands, which have been lagging.
• 20:26
  Speaker 7: Yeah, that Barbie tailwind has faded.
• 20:28
  Speaker 5: Oh, from the movie. Yeah, from the movie a few
• 20:30
  Speaker 5: years ago.
• 20:31
  Speaker 7: So, Lindsay, as we, I mean, you know, for the
• 20:34
  Speaker 7: toy makers, they were getting ready for the holiday season
• 20:36
  Speaker 7: months ago. But for consumers, we're just starting to think
• 20:39
  Speaker 7: about preparing for the holiday season now. How are these
• 20:42
  Speaker 7: companies telegraphing what things look like in the year end?
• 20:47
  Speaker 3: Right.
• 20:47
  Speaker 10: So this year is going to be an interesting year
• 20:51
  Speaker 10: just because last year, tariffs significantly changed the picture. So,
• 20:57
  Speaker 10: you know, historically, retailers like a Walmart or a Target,
• 21:00
  Speaker 10: they would start to take holiday orders, you know, in July,
• 21:04
  Speaker 10: in the summertime.
• 21:06
  Speaker 9: Last year, all of that got delayed.
• 21:08
  Speaker 10: You know, everyone's figuring out who's paying for tariffs, when
• 21:12
  Speaker 10: do we import these goods, and all of that kind
• 21:15
  Speaker 10: of thing. So the Last year, the orders were very
• 21:18
  Speaker 10: biased towards the back half of the year, especially.
• 21:21
  Speaker 9: The fourth quarter.
• 21:22
  Speaker 10: You know, this year, I think there's some creep where
• 21:25
  Speaker 10: like third quarter, you know, has a little bit more
• 21:28
  Speaker 10: maybe than last year. And then maybe fourth quarter will
• 21:31
  Speaker 10: be a little bit lighter. So that second half will
• 21:33
  Speaker 10: even out a bit. And so that's how we're thinking about,
• 21:37
  Speaker 10: you know, the toy business Hasbro's consumer products market. segment
• 21:42
  Speaker 10: was up four percent in the third quarter you know
• 21:44
  Speaker 10: there might be a modest deceleration in the fourth quarter
• 21:48
  Speaker 10: on those tough comparisons but kind of thinking across the
• 21:51
  Speaker 10: toy landscape is like that second half is pretty kind
• 21:54
  Speaker 10: of steady eddie with with what we've seen so.
• 21:56
  Speaker 4: Far This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,
• 22:03
  Speaker 4: and anywhere else you get your podcasts. Listen live each weekday,
• 22:06
  Speaker 4: 10 a.m. to noon Eastern on Bloomberg.com, the iHeartRadio app, TuneIn,
• 22:12
  Speaker 4: and the Bloomberg Business app. You can also watch us
• 22:15
  Speaker 4: live every weekday on YouTube and always on the Bloomberg Terminal.