Latest / Bloomberg Intelligence / Wolfe's Mushkin Sees AMZN Becoming Horizontal Monopoly (Audio)

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Wolfe's Mushkin Sees AMZN Becoming Horizontal Monopoly (Audio) · Bloomberg Intelligence

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  Speaker 1: Broadcasting live to New York Bloomberg eleventh Rio to Washington,
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  Speaker 1: d C, Bloomberg to Boston, Bloomberg Well under Its to
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  Speaker 1: San Francisco, Bloomberg n to the Country series ETAM General
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  Speaker 1: one nineteen and around the globe the Bloomberg Radio plus
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  Speaker 1: Appen Bloomberg dot com. This is taking stock in a
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  Speaker 1: world of retail doom and gloom. Walmart suddenly shines like
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  Speaker 1: a bright star. Its share price up nine percent today,
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  Speaker 1: in fact, shares up the most and more than seven years.
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  Speaker 1: First quarter results beat analysts estimates. PIM. We're going to
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  Speaker 1: find out what's driving Walmart and if it's particular to them,
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  Speaker 1: or if maybe the retail industry overall is doing better
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  Speaker 1: than other retailers would have indicated. Yes, well, we've got
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  Speaker 1: results from American Eagle Outfitters as well as Perry Ellis International,
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  Speaker 1: both shares rallying today after topping first quarter earnings estimates.
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  Speaker 1: Right now, let's go to Charlie Pelligan the Bloomberg news
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  Speaker 1: room for a Burger business LA and I thank you him,
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  Speaker 1: thank you, Kathleen. Let us begin with retail, because a
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  Speaker 1: lot going on there today. You mentioned Walmart up nine percent, right, now,
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  Speaker 1: American Eagles surging eighteen point eight percent, Urban outfitters up
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  Speaker 1: thirteen and a half percent. Perry Ellis International it is
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  Speaker 1: up now by fifteen point one percent. This solid day,
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  Speaker 1: when the rest of the market is declining, stocks have
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  Speaker 1: paired declines as anxiety eases over the potential for higher
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  Speaker 1: rates as soon as next month. Commodity producers erasing losses,
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  Speaker 1: consumer shares extending their advance. Rick Reader is global chief
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  Speaker 1: investment Officer for fixed income at black Rock, and on
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  Speaker 1: Bloomberg Television this morning, he told us July is a
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  Speaker 1: better bet than June for the next interest rate increase
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  Speaker 1: from the Federal Reserve. You've got between now and June,
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  Speaker 1: you have really the big piece of data, and arguably
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  Speaker 1: the only piece of data of major significance as a
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  Speaker 1: papal report. So you gotta watch that. Part of why
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  Speaker 1: I think July is more logical. Get through Brexit, then
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  Speaker 1: you get CPI data, then you get core PIEC, you
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  Speaker 1: get a series of retail sales, and you a good
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  Speaker 1: number of data prints, which is where I think it
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  Speaker 1: makes sense to wait a respectful effact. There's no press
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  Speaker 1: conference in July. They like to go into the press countings.
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  Speaker 1: I don't think they've said it before. Non press conference
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  Speaker 1: meetings are live. Church and Dwight denying that it is
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  Speaker 1: engaged in talks with potential acquires, robutting reports that had
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  Speaker 1: sent the shares surging over the past couple of days. Today,
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  Speaker 1: Church and Dwight is up one point eight percent SMP
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  Speaker 1: down nine now a drop of five tenths of one
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  Speaker 1: percent to down down Night He wanted to decline also
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  Speaker 1: of five tenths of one percent, and has stack down
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  Speaker 1: seven tenths of one percent. Gold down eight ounces to
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  Speaker 1: drop of one and a half percent to thirty two
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  Speaker 1: on Wall Street. Now we'll look at other news from
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  Speaker 1: around the world on Bloomberg Radio. Charlie, thank you from
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  Speaker 1: the Bloomberg news Room. I'm Mark Crumpton. Egypt Civil Aviation
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  Speaker 1: Ministry says life jackets and plastic items have been found
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  Speaker 1: in the sea off Greece, close to the suspected side
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  Speaker 1: of today's Egypt airplane crash. Uh Met A l is
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  Speaker 1: Vice President of Egypt Are we have found the wreckage.
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  Speaker 1: We confirmed that the wreckage has been found and the
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  Speaker 1: search and rescue teams are now. Uh it's turning into
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  Speaker 1: a search and recovery. French President Francois Olan, speaking to
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  Speaker 1: the media in Paris through a translator, said his government
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  Speaker 1: is sending planes and ships to support the search efforts.
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  Speaker 1: We should express our sordidarity with trick to the families
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  Speaker 1: and also to find out the cause of the catastrophe.
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  Speaker 1: Flight eight oh four and Airbus A three twenty with
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  Speaker 1: sixties six people aboard, crashed into the Mediterranean early today
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  Speaker 1: while in the route to Cairo from Paris. France's lower
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  Speaker 1: House of Parliament has approved the two month extension of
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  Speaker 1: the state of emergency that was declared after last falls
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  Speaker 1: deadly terror attacks in Paris. The measure is aimed at
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  Speaker 1: covering the European Championship soccer tournament and the Tour de France.
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  Speaker 1: Police have been given more powers to make arrests and
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  Speaker 1: authorities than restrict movement of people or vehicles. One of
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  Speaker 1: two men who killed the New York City violinist insider
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  Speaker 1: Upstate summer home in has been sentenced to twenty five
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  Speaker 1: years to life in state prison. Forty year old Jonathan
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  Speaker 1: Conklin was sentenced yesterday in Chautuckwack County. In November, he
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  Speaker 1: pleaded guilty to a second degree murder charge in the
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  Speaker 1: slaying of Mary Whittaker. Global News twenty four hours a day,
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  Speaker 1: That's I N S I T E SI dot com
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  Speaker 1: recapping Stock's lawer SMP down ten a drop of five
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  Speaker 1: tenths of one percent. I'm Charlie Pellaton. That's a Bloomberg
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  Speaker 1: business flash. You're listening to taking Stock with Lee Mays
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  Speaker 1: and Pox on Bluebird Radio. Walmart beating analysts estimates Walmart
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  Speaker 1: getting good results from its grocery sales its neighborhood market stores.
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  Speaker 1: Is Walmart uh fighting its way back to being a
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  Speaker 1: big winner in the retail space, or is the struggle
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  Speaker 1: to boost its online sales ultimately going to stand in
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  Speaker 1: its way. Scott Mushkin joins us now. He's senior retail
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  Speaker 1: and staples analysts at Wolf Research to weigh in not
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  Speaker 1: only on Walmart, but we hope also on urban outfitters
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  Speaker 1: and more. Thank you for joining us, Scott Hey, thanks
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  Speaker 1: for having me appreciate it. So, Walmart, what is what
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  Speaker 1: is the takeaway here? What's what are the key points
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  Speaker 1: that everyone should know about Walmart from this earnings report?
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  Speaker 1: I mean, I think they're they're they're too really. One
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  Speaker 1: is it's been a dreadful a couple of weeks in
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  Speaker 1: retail land. Most companies have had significant earnings misses. Um.
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  Speaker 1: And so I think the idea that you have a
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  Speaker 1: company here that's doing okay, now, earnings were still down
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  Speaker 1: here over here, they were just you know, down less
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  Speaker 1: than people anticipated. So so I think that that's good. UM.
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  Speaker 1: And I also think there's this idea that maybe, um,
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  Speaker 1: maybe that the company is finding its footing. We have
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  Speaker 1: deep concerns on that and we don't think that's really
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  Speaker 1: the case if you kind of look through some of
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  Speaker 1: the numbers. UM. But Greg Foreign, who's the U S
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  Speaker 1: head now, has been has been here for about a year.
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  Speaker 1: He's clearly doing a much better job running this company,
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  Speaker 1: and it's showing up. I mean, their in store conditions
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  Speaker 1: are better, the sales are a little stronger. UM. So
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  Speaker 1: I think right now Walmart is getting a lot of
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  Speaker 1: credit given the environment we're in. Hey, Scot, I'm wondering
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  Speaker 1: if you could give us a little detail, a little
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  Speaker 1: color on your concerns. So when I think, if you
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  Speaker 1: you know kind of both medium term and long term.
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  Speaker 1: So as we look at at the back half of
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  Speaker 1: the year of him Walmart, like I said, Greg's done
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  Speaker 1: a good job here. He came in about a year
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  Speaker 1: ago and it's really got his hands around these operations.
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  Speaker 1: They had terrible in stock situation, uh not enough aduct
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  Speaker 1: on the shelf. UM. So he's he's done a good
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  Speaker 1: job fixing that. They've had to throw a lot of
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  Speaker 1: store labor to get it fixed. Also took inventories down
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  Speaker 1: for store they were terribly overstocked, particularly in their back rooms.
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  Speaker 1: As we get to the third quarter of this year,
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  Speaker 1: they're going to start cycling through some of these benefits.
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  Speaker 1: And they benefited both sales and margins um and so
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  Speaker 1: you know, we worry as they get to the third
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  Speaker 1: quarter when they had dirty plus basis points at gross
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  Speaker 1: margin improvement. In the fourth color, they had sixty nine
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  Speaker 1: basis points a gross margin improvement. Uh, and clearly some
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  Speaker 1: sales benefits that the cycling over some of these things
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  Speaker 1: is going to be pretty tough on the company. I
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  Speaker 1: think as we look longer term. Uh, it's the structure
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  Speaker 1: of the supercenter and it really goes to Amazon e
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  Speaker 1: commerce and just the changing preferences, shopping preferences and a
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  Speaker 1: lot of these everyday essentials that Walmart's known for. There's
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  Speaker 1: two challenges. Number one, they're not priced cheaper than anyone
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  Speaker 1: else anymore. And number two, the propensity to buy those
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  Speaker 1: on line is rising rapidly because let's face it, going
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  Speaker 1: to the store, going to a supercenter to buy paper towel,
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  Speaker 1: that's a chore. And Amazon also got a demographic issue, right,
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  Speaker 1: I mean, because your customer base is aging out at
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  Speaker 1: the top and new customers are coming in it are
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  Speaker 1: quite ready to order everything using their phone. Yeah. We
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  Speaker 1: had a Huger port out called the Amazon generation, talking
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  Speaker 1: about the millennials. Just what you're talking about, what you're
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  Speaker 1: speaking of, And yeah, they they want to buy online.
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  Speaker 1: They're used to it. That's what I called it, the
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  Speaker 1: Amazon generation. They don't want to spend their time going
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  Speaker 1: down to a supercenter. If Amazon is going to deliver
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  Speaker 1: it to their house. Um, and for busy household young
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  Speaker 1: households working a lot, Amazon's giving them their time back
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  Speaker 1: and that's incredibly valuable because they don't have to do
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  Speaker 1: that chore. They can go see Johnny's baseball game on
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  Speaker 1: the weekend. So incredible challenges for the supercenter format as
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  Speaker 1: we move forward over you know, over the next couple
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  Speaker 1: of years, at some point does Amazon's business model catch
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  Speaker 1: up with it? Though that can't crush everybody before. It
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  Speaker 1: has to somehow make it make more money doing what
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  Speaker 1: it basically does. I mean, they're starting to make make
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  Speaker 1: more money and um, so we're seeing that already and
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  Speaker 1: I think the and it's a little bit unknowable, but
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  Speaker 1: when you take some and I think this is a
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  Speaker 1: really important point I said it earlier. Is it when
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  Speaker 1: you take time and give it back to people As
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  Speaker 1: an old fashioned economics term, but utility, there's literally no utility.
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  Speaker 1: And going down to buy tied at a store, if
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  Speaker 1: someone's going to deliver that to you, um, they're giving
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  Speaker 1: you something so valuable back. They're giving you back your time.
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  Speaker 1: And Amazon, we think, is honest way to becoming a
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  Speaker 1: horizontal monopoly I'm not sure anything can stop it because
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  Speaker 1: those trends are so powerful. You have an outperform rating
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  Speaker 1: on the shares of Amazon. I just want to get
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  Speaker 1: your quick thoughts if I can. On Home Depot and Lows.
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  Speaker 1: They reported results this week. I mean both companies tremendous
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  Speaker 1: report um. You know Home Deepo in particular, we think
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  Speaker 1: it's gaining a lot of share. I think the question is,
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  Speaker 1: if we've slowed this economy down, can the housing market
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  Speaker 1: still outperformed. We think the answers yes, There's been a
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  Speaker 1: lot of under investment in the housing stock and the
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  Speaker 1: housing stock has aged a lot um. But I think
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  Speaker 1: that there's any concern around the sectors if we turn
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  Speaker 1: this economy down, do we you know, we see a pullback.
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  Speaker 1: We think Home Depot and Lows can continue to perform
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  Speaker 1: nicely given the consolidation in the industry and the dynamics
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  Speaker 1: behind the housing market right now. Thank you very much
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  Speaker 1: for joining us. Scott Mushkin, He's managing director and a
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  Speaker 1: senior staples retail analyst for Wolf Research. Taking a look
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  Speaker 1: right now, it's the shares of Walmart. They are up
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  Speaker 1: more than five dollars a share. Walmart stock is up
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  Speaker 1: more than nine trade against sixty. You're listening to Taking
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