Latest / Bloomberg Intelligence / BI Weekend: Novo Pill, Retail Earnings, Restaurant Sales

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BI Weekend: Novo Pill, Retail Earnings, Restaurant Sales · Bloomberg Intelligence

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Speaker 2: On today's Bloomberg Intelligence Show, we dig inside the big
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Speaker 3: Each and every week we provide in depth research and
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Speaker 3: data on some of the two thousand companies and one
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Speaker 3: hundred and thirty industries are analysts cover worldwide Today?
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Speaker 2: Well, look at why the retailer coals rates is full
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Speaker 2: year outlook for the second straight quarter.
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Speaker 3: Plus a look at why travelers may be eyeing similar
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Speaker 3: spending for vacations in twenty twenty six.
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Speaker 2: First, we move next to some news in the biotech space.
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Speaker 3: This week, we heard that a pill version of Danish
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Speaker 3: drug maker Novo Nordisk's ozempic failed to slow the progression
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Speaker 3: of Alzheimer's in a pair of studies.
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Speaker 2: Nova said this was based on a cognitive assessment for
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Speaker 2: patients who took the medicine. The drug maker will now
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Speaker 2: discontinue a plan one year extension of the studies.
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Speaker 3: As a result, Novastock plummeted to its lowest in more
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Speaker 3: than four years. We were joined by Sam Fazzelli, Bloomberg Intelligence,
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Speaker 3: Director of Research for Global Industries and senior pharmaceuticals analysts.
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Speaker 2: We first asked Sam to break down Nova's recent studies.
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Speaker 4: Is not about OBCD. It's about a drug, semaglutide in
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Speaker 4: a pill form that they've tested in Alzheimer's disease. And
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Speaker 4: the theory was, and there was some evidence that people
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Speaker 4: who were taking the very first version of the GLP
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Speaker 4: one brug so victosa or liro glue tide, they had
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Speaker 4: a lower risk of developing Alzheimer's when you looked at
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Speaker 4: historic or rect prospective data and there's animal models, et cetera.
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Speaker 4: So they thought that it's worth a try and it
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Speaker 4: didn't work out. They said that they're seeing some impacts
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Speaker 4: in some biomarkers, et cetera. And we'll find out next
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Speaker 4: week what biomarkers. But the trial didn't work out. And
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Speaker 4: the question here is was the theory wrong or is
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Speaker 4: the drug not good enough? Is it pill enough? And
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Speaker 4: we know the pill doesn't do as well in obesity
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Speaker 4: as the injection. Should they have tested the injection?
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Speaker 3: That's a good question. And you mentioned that the ingredient
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Speaker 3: here that we're paying attention to is some maglitude, which
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Speaker 3: I hope I'm pronouncing correctly there. Does that mean that
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Speaker 3: this ingredient and Alzheimer's are just a no go from
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Speaker 3: here on out? Or does there need to be more
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Speaker 3: testing before we can determine that?
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Speaker 4: Yeah, there needs to be more testing, But who's going
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Speaker 4: to do that? I mean, having failed, now, who's going
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Speaker 4: to put the money into test it? Now? Linly does
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Speaker 4: have an Alzheimer's business in a completely different with different
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Speaker 4: set of drugs, and they have a more party product
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Speaker 4: once weekly with a relatively easily administered pen that would
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Speaker 4: be interested to see whether that helps, and you know,
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Speaker 4: so that you get more much more drug in the
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Speaker 4: body or maybe redesign it a bit. So it really
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Speaker 4: does depend on how much appetite for risk these companies have.
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Speaker 4: And literally now with just over literally just over trillion
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Speaker 4: dollar market cap, maybe they should give it a go.
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Speaker 4: You know, it would be magic if this thing, It
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Speaker 4: literally would be magic if this thing just helped so
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Speaker 4: many different diseases.
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Speaker 2: Sam talk to us about just the market for dementia.
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Speaker 2: Alzheimer's is one one part of it. I would think
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Speaker 2: that's a it's a big market and be it. It's
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Speaker 2: got to be a growing market with people living longer.
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Speaker 2: How do you guys think about it and and how
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Speaker 2: do you play it?
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Speaker 4: If you're an investor, Yeah, it's it's it is a
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Speaker 4: significant societal issue, number one. And you know, I think
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Speaker 4: there are many, not many families who would say that
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Speaker 4: they haven't experienced it. They have all the people in
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Speaker 4: their in their extended family. So the market has humongous potential.
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Speaker 4: But you need drugs that actually treat the disease. Remember,
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Speaker 4: by the time you have Alzheimer's, I eat a full
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Speaker 4: blown dementia of the Alzheimer's it's a bit late. That
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Speaker 4: means that a lot that's already happened, So you need
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Speaker 4: to go early, long expensive trials, and Lily is doing
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Speaker 4: that with their assets, So fingers crossed, we'll find out
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Speaker 4: in the next two or three years where they're going
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Speaker 4: early with these assets. Russia is doing it too. It
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Speaker 4: would be a beneficial right, I.
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Speaker 3: Mean, the tests with the pillar form of ozambic was
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Speaker 3: definitely a lottery ticket. If it worked, great, If not,
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Speaker 3: we're back to the drawing board. Are there any effective
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Speaker 3: treatments right now against dementia or Alzheimer's?
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Speaker 4: Well, by effective, I mean it's tough to say, but
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Speaker 4: there are drugs that lower this thing that is viewed
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Speaker 4: as a critical part of the Alzheimer's disease, which amyloid
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Speaker 4: plaques in your brain. If they do lower it, Lily's
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Speaker 4: got that drug, Biogen's got an equivalent drug, or she's
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Speaker 4: trying a similar approach, and you do slow down the degeneration.
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Speaker 4: You don't stop it, you slow it down. So what
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Speaker 4: we really want is to stop people getting to that degeneration.
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Speaker 4: Try and get them before they have full grown Alzheimer's
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Speaker 4: or dementia, so that's called mild cognitive impairerment. Try and
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Speaker 4: slow that down to give them another ten, twelve, twenty
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Speaker 4: years of dignified life.
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Speaker 2: So where do you think we are on a time
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Speaker 2: frame for something like that, sam Is that measured in
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Speaker 2: a couple of years or more than that?
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Speaker 4: Well, so Lily is literally trying that and we'll find
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Speaker 4: out whether and they have the better rug in this space.
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Speaker 4: So we'll find out whether in the next two or
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Speaker 4: three years. Do you remember, these things are trials that
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Speaker 4: need to be run until you start seeing a difference.
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Speaker 4: They get that to that point, and of course then
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Speaker 4: society has to decide, well, how we're going to pay
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Speaker 4: for this. How many people because there's a lot our market, right,
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Speaker 4: how many people are we going to want to treat
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Speaker 4: with the prices of these drugs whatever they are, even
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Speaker 4: if it's ten thousand dollars a year, right, and they
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Speaker 4: are on their way to becoming worse, and we want
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Speaker 4: to slow that down. You have ten million people, I mean,
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Speaker 4: this could be similar in terms of value to the
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Speaker 4: obesity market. But you need the drug to do that.
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Speaker 4: So let's wait and see. And RASH has got a
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Speaker 4: new way of trying to do it, and they're going
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Speaker 4: to go again and also to phase three to test
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Speaker 4: that out.
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Speaker 3: Our thanks to Sam Fazelli, Bloomberg Intelligence, director of Research
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Speaker 3: for Global Industries and senior pharmaceuticals analysts.
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Speaker 2: We move next to the restaurant industry.
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Speaker 3: Bloomberg Intelligence will release data for November restaurant sales in
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Speaker 3: early December, and according to bi US, restaurant same store
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Speaker 3: sales rose seven tens of one percent in October but
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Speaker 3: could drop in November because of the government shutdown.
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Speaker 2: For more on the industry, I was joined by Michael Halen,
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Speaker 2: Bloomberg Intelligence, Senior restaurant and food service analyst. I first
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Speaker 2: asked Michael to talk to us about how restaurants are
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Speaker 2: doing and whether it depends on the segment of the
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Speaker 2: market they're targeting.
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Speaker 5: That's definitely part of it.
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Speaker 6: We saw that in last month's data find dining had
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Speaker 6: a really nice rebound, and I think part of it
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Speaker 6: is because they're catering to hire income consumers who own
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Speaker 6: assets and are feeling pretty good about things moving forward.
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Speaker 6: Right now, you know November is going to be a
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Speaker 6: tough month. There's no doubt about it. The government shut
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Speaker 6: down has definitely impacted sales and traffic for the chains
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Speaker 6: we cover, especially in the DMV area as well as
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Speaker 6: in the South where there's a lot of government workers. Also,
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Speaker 6: last November restaurant sales had a nice boost from the election,
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Speaker 6: and so we're going to.
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Speaker 5: Be lapping tough comps.
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Speaker 6: So November is not looking great, but things should bounce
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Speaker 6: back a little bit here in December. And we're not
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Speaker 6: crazy bullish, but we're more bullish about the first half
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Speaker 6: of next year.
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Speaker 2: Let's start with quick quick service dining. Talk to just
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Speaker 2: about that marketplace. I think back to McDonald's of the
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Speaker 2: world and so on, how's that varing.
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Speaker 5: Quick service had a really difficult first half of the year.
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Speaker 6: They were lapping strong comps and they and they kind
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Speaker 6: of lost their way when it came to value, right.
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Speaker 5: They just had implemented too big of.
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Speaker 6: Price increases over the last few years, and customers started
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Speaker 6: to push back, especially low income consumers who have been
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Speaker 6: you know, who are really impacted by inflation to a
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Speaker 6: much greater degree than middle and higher income consumers. So
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Speaker 6: the first half was difficult, but here in the second
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Speaker 6: half of the year, things have gotten better, largely because
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Speaker 6: they've re established their value propositions. You know, McDonald's has
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Speaker 6: revamped its dollar menu this year. They also reintroduced snack
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Speaker 6: wraps out a three dollars price point, which have boosted
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Speaker 6: checks by you know, people adding them on to their orders,
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Speaker 6: as well as bringing in some low income consumer traffic.
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Speaker 5: But you know, low income consumers are pulling back at
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Speaker 5: a pretty big rate.
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Speaker 6: You know, we think part of that is the snap
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Speaker 6: benefit pullback.
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Speaker 5: But they've been able to.
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Speaker 6: Bring in some higher income consumers and middle income consumers.
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Speaker 5: So things are starting to look better.
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Speaker 6: McDonald's especially, I mean McDonald's is going to be lapping
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Speaker 6: the eat Coli or right now is lapping the eat
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Speaker 6: colip about them from last year, and so you know,
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Speaker 6: they're the eight hundred pound gorilla. And I think good
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Speaker 6: results out of McDonald's over the next few quarters should
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Speaker 6: boost the entire category.
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Speaker 2: How about the cost of beef, which you know consumers
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Speaker 2: complain about across the board. I know companies are dealing
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Speaker 2: with it, and what I understand is we're not going
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Speaker 2: to see a material improvement in the cattle herd till
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Speaker 2: maybe twenty twenty eight. So how does that factor into
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Speaker 2: the profit margins of all these restaurants.
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Speaker 6: The restaurants that are impacted the most are you know,
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Speaker 6: burger chains like Shakeshack, or steakhouses like Texas Roadhouse that
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Speaker 6: own and operate all of their stores. You know, to
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Speaker 6: your point, beef inflation for these chains is going to
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Speaker 6: be in the mid teens in the fourth quarter, so yeah.
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Speaker 5: Yeah, very high.
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Speaker 6: So definitely a lot of margin pressure for those chains.
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Speaker 2: You know.
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Speaker 6: Luckily, those two chains have driven traffic as of late
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Speaker 6: into the stores which you know, and driven higher sales
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Speaker 6: and been able to pass along price increases and that
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Speaker 6: has kind of helped their operating leverage, which has helped
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Speaker 6: offset the higher costs.
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Speaker 5: For the burger chains.
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Speaker 6: They there's less impact for the chains that we cover
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Speaker 6: for McDonald's, Wendy's, Jack in the Box because they're largely franchised,
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Speaker 6: so that the franchisees are the ones footing the bill
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Speaker 6: for the higher beef costs.
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Speaker 2: Why, like, why do not all changs do like the
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Speaker 2: McDonald's franchise e model. What's the benefits of franchising or
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Speaker 2: what's the benefit of owning versus a franchise. I think
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Speaker 2: I thought I would. I saw the movie. I think
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Speaker 2: I understand the economics and franchising. It seems pretty good.
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Speaker 6: Listen, the franchise business, that's a great business, you know,
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Speaker 6: and from where I sit as an analyst, you know,
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Speaker 6: we love it. It's easier to predict the earnings and
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Speaker 6: the free cash flow. It's it's a much more steady
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Speaker 6: business model. Franchising eliminates a lot of the operating leverage
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Speaker 6: and thus the risk to your margins out of the business.
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Speaker 5: Right. But if you are.
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Speaker 6: Running a full service restaurant chain where operations is very
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Speaker 6: core to your business, think Darden, think Texas Roadhouse, you
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Speaker 6: want to own and operate your source because you want
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Speaker 6: to have control over those operations.
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Speaker 5: You want to make sure.
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Speaker 6: People are getting a good experience, and they're just much
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Speaker 6: harder to run than a McDonald's or a Wendy's. And
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Speaker 6: then I'd say, on the last case would be somebody
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Speaker 6: like shake Shack or wink Stop or Cava. You know,
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Speaker 6: when your cash on cash returns are forty fifty sixty percent,
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Speaker 6: we don't think it's a bad thing to be greedy
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Speaker 6: and you want to open up as many stores as
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Speaker 6: possible are.
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Speaker 3: Thanks to Michael Helen, who covers restaurants and food services
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Speaker 3: for Bloomberg Intelligence. Coming up, look at why the tech
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Speaker 3: company Cisco maybe on a Goldilocks growth path.
12:02
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
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Speaker 2: depth research and data on two thousand companies and one
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Speaker 2: hundred and thirty industries.
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Speaker 3: You can access Bloomberg Intelligence via Bigo on the terminal.
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Speaker 3: I'm Scarlett Foo.
12:12
Speaker 2: And I'm Paul Sweeney, and this is Bloomberg.
12:20
Speaker 1: This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney
12:25
Speaker 1: on Bloomberg Radio.
12:27
Speaker 2: We moved next to more earnings in the retail sector
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Speaker 2: this week. We got third quarter earnings from Cohle's and
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Speaker 2: Abercrombing and Finch Coles raised its full year outlook for
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Speaker 2: the second straight quarter. It's a signed the chief executive officer,
12:38
Speaker 2: Michael Bender, is helping to stabilize performance at the struggling retailer.
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Speaker 3: Separately, Abercromi and Fitch raised the low end of its
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Speaker 3: full year sales outlook as its Hollister brand continue to
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Speaker 3: gain momentum. We are joined by Mary Ross Gilbert Bloomberg Intelligence,
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Speaker 3: senior equity analyst covering retail.
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Speaker 2: We first asked Mary for her take on Cohle's most
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Speaker 2: recent earnings report.
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Speaker 7: They've kind of gone back to the basics. What's something
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Speaker 7: something that clos has always been known for SO One
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Speaker 7: is their private brand. So if you think about some
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Speaker 7: of the brands like SO and Juniors, Lauren Conrad for women,
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Speaker 7: and they brought those brands back because they actually sacrifice
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Speaker 7: some of those brands under the prior leadership and replace
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Speaker 7: them with some more name brands like Madden Girl, trying
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Speaker 7: to really attract the junior shopper there. And now that
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Speaker 7: they've brought the private brands back, they brought back petite sizing,
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Speaker 7: which was really important to their customer base. Now they're
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Speaker 7: really starting to see a recovery. But they're not out
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Speaker 7: of the woods yet, Scarlett, as you pointed out, I mean,
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Speaker 7: they're really cycling three years of declines, but we are
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Speaker 7: seeing encouraging results and given that they actually turned positive
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Speaker 7: in the latest month, it looks like they could actually
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Speaker 7: reach a break even in the fourth quarter, even though
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Speaker 7: they're guiding to a one point seven percent comp sales decline.
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Speaker 7: So it's very encouraging to see with Cohle's again not
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Speaker 7: out of the woods. And when you look at what's
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Speaker 7: going on with SO For, it's now a two billion
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Speaker 7: dollar business and as you were sort of highlighting, that
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Speaker 7: means they really lost you know, over the last four
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Speaker 7: years something like four to five billion in other categories,
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Speaker 7: so they have lost market share. We think they're losing
14:17
Speaker 7: it to off price and some of the value players
14:20
Speaker 7: in the specialty space such as Old. Maybe you know
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Speaker 7: a gap brand.
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Speaker 3: Mary, I will also want to ask you about Abercomie
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Speaker 3: and Fitch. It was the Darling two years ago because
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Speaker 3: the new CEO found a way to make the brand
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Speaker 3: relevant to a new audience. It was no longer targeting
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Speaker 3: teenage boys, for instance, and really targeting young working women.
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Speaker 3: But it's had a brutal twenty twenty five, a lot
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Speaker 3: of concerns about tariffs perhaps and maybe even a lack
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Speaker 3: of fresh ideas in terms of its offerings. What's the
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Speaker 3: narrative with Abercomie and Fitch right now?
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Speaker 7: Yeah, so Scarlett with Abercrombie and Fitch, their numbers came
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Speaker 7: in better than expected. So the namesake brand, as you
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Speaker 7: pointed out, I mean that had been double digit increases
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Speaker 7: over the last three years, so they're cycling those increases
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Speaker 7: and that's why their sales are coming in less than expected.
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Speaker 7: But this quarter the comp sales declined. There was about
15:11
Speaker 7: three point three percent, so that was better than expected.
15:15
Speaker 7: And when you look at Hollister, though, Hollister has been
15:19
Speaker 7: coming in ahead of expectations and they've been posting double
15:22
Speaker 7: digit increases. So as you were talking about sort of
15:27
Speaker 7: the millennial women who really love and also the men,
15:30
Speaker 7: but it does tend to favor more of the women
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Speaker 7: on the Abercrombie side, on the Hollister side, which really
15:38
Speaker 7: caters to gen Z that has been on fire, and
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Speaker 7: so that's what's helping to kind of overcome the weakness
15:45
Speaker 7: that they're seeing at Abercrombie. But also it's looking like
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Speaker 7: Abercrombie could turn positive in the fourth quarter with a
15:52
Speaker 7: number of the initiatives that they have in place going
15:55
Speaker 7: into the holiday quarter, even though they're cycling some pretty
15:58
Speaker 7: strong gains in the prior year and the year before that.
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Speaker 3: Are Thanks to Mary Ross Gilbert, Bloomberg Intelligence, senior equity
16:04
Speaker 3: analyst who covers retail, we.
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Speaker 2: Moved next to some research from Bloomberg Intelligence in the
16:08
Speaker 2: tech space. It's titled Cisco and a Golden Locks growth path.
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Speaker 3: According to Cisco mayc twenty twenty six, sales above the
16:15
Speaker 3: top end of its five to seven percent target, and
16:18
Speaker 3: this comes as the company balances strong AI growth with
16:21
Speaker 3: networking gains.
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Speaker 2: For more on this, we were joined by Wouchinho, Bloomberg
16:24
Speaker 2: Intelligence senior technology analyst.
16:26
Speaker 3: We began by asking Wooje to break down why Cisco's
16:28
Speaker 3: shares have had a good run this year.
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Speaker 8: So there's a couple of things driving it. That they're
16:32
Speaker 8: actually a massive forty three billion dollar a product upgrade
16:38
Speaker 8: cycle that Cisco will potentially benefit from, which is going
16:41
Speaker 8: to give them outsize growth in their core networking business.
16:44
Speaker 8: But their AI store has actually been a lot better
16:47
Speaker 8: than I thought. AI is going to be about three
16:49
Speaker 8: billion dollars of sales tripling or three billion dollars in
16:54
Speaker 8: sales in fiscal twenty twenty six tripling out of twenty
16:56
Speaker 8: twenty five. So there are this goldly locks of good
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Speaker 8: AI store as well as an upgrade cycle tailwind.
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Speaker 3: Paul was asking Michael Casper earlier about a lot of
17:06
Speaker 3: the tech companies issuing debt to pay for their AI buildout.
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Speaker 3: What does Cisco's debt profile look like and will it
17:13
Speaker 3: also need to sell bonds to fund everything that's doing?
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Speaker 8: Yeah, hey' Carlo. So that's one of the great stories
17:21
Speaker 8: about about Cisco. I mean, they have roughly about twenty
17:25
Speaker 8: billion dollars in debt and roughly thirty billion dollars in cash,
17:30
Speaker 8: so look their net cash positive, they don't need to
17:34
Speaker 8: take on debt. If anything, they've been very active buyers
17:37
Speaker 8: of their stock, very good stewards of the cash, strong
17:41
Speaker 8: cash flow profile, and if anything, they're using their cash
17:45
Speaker 8: as levers to build up the inventory for the AI
17:48
Speaker 8: opportunity that's ahead of them.
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Speaker 2: So talk to us about just kind of the growth
17:52
Speaker 2: drivers for this company, which what is he looked at
17:55
Speaker 2: twenty twenty six, what kind of underpins their top line growth?
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Speaker 8: They got it to roughly the top of the top
18:03
Speaker 8: end of their four to six percent growth. I think
18:06
Speaker 8: they're going to do roughly about seven to eight percent
18:08
Speaker 8: growth for this year. So if we think about the
18:11
Speaker 8: AI story itself trippling from one billion to three billion,
18:15
Speaker 8: that's going to be the incremental growth that gets you
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Speaker 8: above to the top end of their revenue growth guidance.
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Speaker 8: You know, the way I have networking flashed out right now,
18:24
Speaker 8: the networking business, you know, Xai is growing roughly around
18:28
Speaker 8: four percent, and that's probably towards the low end and
18:31
Speaker 8: quite frankly, if the upgrade's coming stronger than a lot
18:33
Speaker 8: better than we think. There's a little bit of upside.
18:36
Speaker 8: Now there is a little bit of drag. The security
18:39
Speaker 8: business hasn't panned out as as strongly as they hoped,
18:42
Speaker 8: primarily because it is going through this business model transition.
18:46
Speaker 8: But you know, it would have been a story at
18:48
Speaker 8: another time. But the two stories AI as well as
18:52
Speaker 8: a core networking upgrade cycle. I mean, that's doing very
18:55
Speaker 8: very well in twenty six and if anything, I would
18:57
Speaker 8: argue we'd probably be better in twenty twenty seven.
19:00
Speaker 3: Is Cisco part of this whole circular deal making, circular
19:03
Speaker 3: funding concern that has investors worried that if one company
19:08
Speaker 3: in this link stops spending or maybe slows down spending,
19:11
Speaker 3: everyone else will get affected.
19:13
Speaker 4: To some degree.
19:14
Speaker 8: Yeah, Scarlett, And that's why I think if you look
19:18
Speaker 8: at some of the AI stories there, it's one of
19:20
Speaker 8: the safe bets, right. They are exposed to some of
19:24
Speaker 8: the I would say the hyperscale names, but a very
19:26
Speaker 8: small exposure to it, as well as some of the
19:31
Speaker 8: neo clouds. They do sell some routing products and some
19:34
Speaker 8: of the sovereigns. Now, if that business disappears, you know,
19:39
Speaker 8: the cashflow story is still well intact. Right, If I
19:42
Speaker 8: calculate the amount of AI revenue relative their total total
19:46
Speaker 8: revenue base. We're only talking about, you know, six to
19:49
Speaker 8: seven percent of total sales, right, So if the AI
19:53
Speaker 8: story collapse, I mean, AI evaporates, they're still in very
19:57
Speaker 8: good standing.
19:58
Speaker 3: Not to mention the fact that they out a dividend too.
20:00
Speaker 3: I mean it's not a huge one, but a tech
20:02
Speaker 3: company with a two percent dividend yield to something and
20:05
Speaker 3: they've been steadying.
20:06
Speaker 4: The sock was lower. Yeah, the soccer just to be three.
20:09
Speaker 8: So yeah, there we go. I mean, it's not the
20:11
Speaker 8: like stock bog backs and a dividendil and an a
20:14
Speaker 8: story if it works out.
20:15
Speaker 2: Our thanks to Wou Jinho, Bloomberg Intelligence senior technology analyst.
20:19
Speaker 2: We move next to the news in the media space.
20:21
Speaker 2: US President Donald Trump recently said in a social media
20:24
Speaker 2: post that no television networks should be able to expand.
20:27
Speaker 3: Trump cited the potential growth of what he considers left
20:30
Speaker 3: wing news outlets. Trump's post was in response to a
20:32
Speaker 3: NEWSMAC story that said the FCC head Brendan Carr is
20:35
Speaker 3: moving to give television networks massive reach and push through
20:39
Speaker 3: a merger of Next Our Media Group and TAGNA for
20:41
Speaker 3: more on this.
20:42
Speaker 2: We were joined by Matthew Shuttenhelm, Bloomberg Intelligence media litigation analyst.
20:46
Speaker 3: We began by asking Matthew if he was surprised about
20:48
Speaker 3: President Trump's recent comments.
20:50
Speaker 9: It's a moderate surprise, So it's it's not a complete
20:53
Speaker 9: surprise because Newsmax has participated before the FCC and had
21:00
Speaker 9: it has been one of the few voices that said,
21:02
Speaker 9: don't do this, don't deregulate this space. And what you
21:07
Speaker 9: really see here is President Trump latching on to an
21:10
Speaker 9: article written on Newsmax's platform opposing the easing of this
21:15
Speaker 9: national ownership cap. What's in play here is that there's
21:19
Speaker 9: current FCC regulation says no company can reach more than
21:24
Speaker 9: thirty nine percent of US households, and companies like Nextstar
21:30
Speaker 9: and Sinclair want to go way beyond thirty nine percent.
21:33
Speaker 9: In fact, Nextstar has a pending deal before the FCC.
21:36
Speaker 9: They just filed their application last week to acquire Tegna
21:41
Speaker 9: that would take them to seventy eighty percent of the country,
21:44
Speaker 9: and it depends on the FCC deregulating in this space.
21:48
Speaker 9: So Trump latching on to Newsmax's opposition because he's concerned
21:54
Speaker 9: about the TV networks growing larger is a concern. It's
21:59
Speaker 9: a real risk. I'm not convinced yet that it's going
22:01
Speaker 9: to lead to real FCC policy. I think this FCC
22:04
Speaker 9: wants to deregulate in this space, and I think there's
22:07
Speaker 9: going to be a pushback against Trump's view on this.
22:10
Speaker 3: Okay, so the FCC is headed by Brendan Carr, who's
22:13
Speaker 3: been very active in making sure that he's out there
22:16
Speaker 3: doing the president's bidding. Are you saying that Brendan Carr
22:19
Speaker 3: is going to defy President Trump?
22:21
Speaker 9: Yeah, So that's the big question here. The FCC used
22:25
Speaker 9: to operate as an independent agency, meaning even if the
22:29
Speaker 9: President had a view on something, the FCC could could
22:32
Speaker 9: chart its own course. That doesn't that's not going to
22:35
Speaker 9: work anymore the way this FCC is operating. If the
22:38
Speaker 9: President takes a firm view on something, the FCC is
22:43
Speaker 9: not going to defy it because effectively, the President can
22:46
Speaker 9: fire the FCC chairman then and you know, there's no
22:50
Speaker 9: no future job prospect if you defy the president. What
22:53
Speaker 9: I'm not convinced about is, you know, this was one
22:56
Speaker 9: social media post from President Trump, and you know, talk
23:00
Speaker 9: about concerns about letting the broadcast networks ABC, CBS, Fox
23:04
Speaker 9: get bigger. What I think there could be now in
23:07
Speaker 9: you know, on in back channels, is some education from
23:10
Speaker 9: the FCC to the White House that says, hey, easing
23:13
Speaker 9: the national ownership cap, it would let Sinclair Next Star
23:16
Speaker 9: get bigger, probably, but it doesn't necessarily mean the broadcast
23:19
Speaker 9: networks will get bigger. There's still an independent check on
23:23
Speaker 9: that even if we ease this this cap. So ultimately,
23:27
Speaker 9: if Trump is against this, the SEC is not going
23:30
Speaker 9: ahead with it in my view, But I think there's
23:33
Speaker 9: still room for Trump's position to evolve on this.
23:36
Speaker 2: So, I mean, the reality is, I mean, this is
23:39
Speaker 2: an industry, the broadcast television industry that is arguably on
23:42
Speaker 2: life support visa VI. Forget about cable television, which itself
23:46
Speaker 2: is on life support. They survive that on slot. Now
23:49
Speaker 2: it's just all about digital and social media. And I
23:52
Speaker 2: would think the industry would have an open would have
23:56
Speaker 2: an effective argument not just to the DJ but to
23:58
Speaker 2: the President as well.
24:00
Speaker 9: I mean, that's the case that the National Association of
24:02
Speaker 9: Broadcasters has made to the FCC that these ownership restrictions,
24:08
Speaker 9: you know, which come from the nineteen seventies or even
24:10
Speaker 9: earlier than that really make no sense in the world
24:13
Speaker 9: we live in today, where where so much video that
24:17
Speaker 9: is consumed doesn't come from from broadcast, it comes over
24:21
Speaker 9: the Internet, and there are no artificial caps on how
24:25
Speaker 9: much those companies can reach, and broadcasters are left to
24:30
Speaker 9: try to fight with one hand tied behind their back
24:33
Speaker 9: with these these you know, ancient FCC rules on the books,
24:37
Speaker 9: and the Republicans at the FCC, Brendan Carr included, strongly
24:41
Speaker 9: agree with that message. And so it's it's going to
24:46
Speaker 9: be I think a little bit of a communication effort
24:48
Speaker 9: that needs to happen between the FCC and the White
24:51
Speaker 9: House too, and the real question will be how does
24:54
Speaker 9: that play out. Does Trump's social media post actually translate
24:58
Speaker 9: to real policy. I'm not convinced that it will yet.
25:02
Speaker 2: Our thanks to Matthew Schultenhelm, Bloomberg Intelligence media litigation Analyst.
25:06
Speaker 3: Coming up, we'll break down corporate earnings at the retailers,
25:09
Speaker 3: Calls and Abercrome and Fitch.
25:10
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
25:13
Speaker 2: depth research and data on two thousand companies and one
25:15
Speaker 2: hundred and thirty industries.
25:16
Speaker 3: You can access Bloomberg Intelligence through Bigo on the terminal.
25:19
Speaker 3: I'm Scarlett Foe.
25:20
Speaker 2: And I'm Paul Sweeney, and this is Bloomberg.
25:30
Speaker 1: This is Bloomberg Intelligence. With Scarlett Foo and Paul Sweeney
25:35
Speaker 1: on Bloomberg Radio.
25:37
Speaker 2: We move next to more earnings in the retail sector.
25:39
Speaker 2: This week we got third quarter earning some Dick Sporting
25:41
Speaker 2: Goods and best Buy. Dick Sporting Goods raised its outlook again, However,
25:45
Speaker 2: investors were disappointed by costs related to turning around the
25:48
Speaker 2: foot locker chain it recently acquired.
25:50
Speaker 3: Separately, best Buy raised its guidance for the current fiscal
25:53
Speaker 3: year as demand for the latest consumer tech drove revenue
25:56
Speaker 3: and profit last quarter.
25:57
Speaker 2: For more on this, we were joined by Lindsay Dutch
25:59
Speaker 2: Bloomberg Intelligence Consumer Hardlines senior analysts. Let's start with Dick's
26:03
Speaker 2: Sporting Goods. They raised their outlook again, but I guess
26:06
Speaker 2: investors are focused on I guess some of the costs
26:09
Speaker 2: trying to turn around foot locker. Talk to us about
26:11
Speaker 2: Dick Sporting Goods at Lindsay.
26:13
Speaker 10: The legacy business remained very strong in the third quarter,
26:17
Speaker 10: strong back to school, clear demand momentum heading into the
26:21
Speaker 10: fourth quarter. That's where the raised outlook came, it was
26:24
Speaker 10: really for the legacy business. But when we look at
26:27
Speaker 10: foot Locker, you know, the deal closed early September. The
26:30
Speaker 10: outlook for the fourth quarter is mid to high single
26:33
Speaker 10: digit same source sales decline. Dix is also looking to
26:38
Speaker 10: expedite the turnaround there, which means offloading old inventory steep
26:42
Speaker 10: markdowns in that fourth quarter, which is going to really
26:45
Speaker 10: hurt the margin as well. So foot Locker, you know,
26:49
Speaker 10: needs a lot of work. Fourth quarter is going to
26:51
Speaker 10: be weak, and investors are really looking to see how
26:54
Speaker 10: quickly they can turn that business around.
26:56
Speaker 3: Yeah, and probably they'll need to put some money into
26:58
Speaker 3: it as well to reorganize stores and freshen up the display.
27:03
Speaker 3: How much of this deal Dick's buying foot Locker was
27:07
Speaker 3: predicated on Nike and what it was doing with this
27:10
Speaker 3: shift back to its wholesale channels and away from solely
27:14
Speaker 3: relying on its direct to consumer offerings and its own stores.
27:17
Speaker 10: So full Looker was, I would argue, over exposed to Nike.
27:21
Speaker 10: You know, several years ago they had been working that
27:24
Speaker 10: exposure down. I think Dix will remain focused on being diversified,
27:29
Speaker 10: just given that their own assortment where they're leaning into
27:33
Speaker 10: lots of other brands, new up and coming brands like
27:36
Speaker 10: Hoca and on. They did discuss though, that Footlocker will
27:40
Speaker 10: sort of remain sort of a hub for basketball, and
27:43
Speaker 10: Nike does have a stronghold in the basketball market, so
27:47
Speaker 10: I expect Nike to be, you know, a strong vendor
27:50
Speaker 10: with foot Locker, but Dix is looking to make sure
27:53
Speaker 10: that they have that right assortment, the newest stuff, the
27:56
Speaker 10: hottest lines coming from Nike and others.
28:00
Speaker 2: What is Di saying about tariffs in their business, so.
28:05
Speaker 10: They are going to feel higher costs in this back
28:09
Speaker 10: half of the year and even into next year. Dix
28:13
Speaker 10: has since the pandemic, since they've been able to see
28:16
Speaker 10: sort of an increase in demand for their premium assortment.
28:19
Speaker 10: They're not really a huge discounter for the holiday. They
28:23
Speaker 10: like to sell their product fully through, so I don't
28:28
Speaker 10: expect them to sort of discount and they have taken
28:30
Speaker 10: prices up selectively but certainly not across the board, and
28:35
Speaker 10: their higher income consumer is sort of accepting those increases.
28:38
Speaker 10: I think Footlocker is a little bit of a different story,
28:42
Speaker 10: and you might see that impact a little bit bigger
28:45
Speaker 10: on that business, just because they don't have those premium products,
28:49
Speaker 10: and they're already going to need to offload older inventory
28:53
Speaker 10: with steep discounts, so you sort of have that turnaround
28:57
Speaker 10: compounded with these rising costs into the next year. Something
29:02
Speaker 10: for them to work on.
29:03
Speaker 3: Lindsy, I also want to ask you about best Buy
29:05
Speaker 3: consumer electronics retailer, how to beat and raise quarter. It
29:08
Speaker 3: looks pretty good and it looks like it's on the
29:10
Speaker 3: usual strains sales of mobile phones and sales of computer equipment.
29:15
Speaker 10: Yeah, so best Buy had a strong third quarter, better
29:18
Speaker 10: as better than expected, as you mentioned. I think, you know,
29:21
Speaker 10: the stock isn't getting a full bump because there is
29:24
Speaker 10: definitely some conservatism and a low guide for the fourth quarter,
29:28
Speaker 10: and investors are trying to figure out, you know, is
29:31
Speaker 10: it just conservatism, are they just worried about the consumer,
29:34
Speaker 10: or is there something really there that there's going to
29:36
Speaker 10: be a slowdown in that fourth quarter. But the business
29:39
Speaker 10: looks good. Demand looks strong, as you mentioned, computing, phones,
29:44
Speaker 10: gaming all looking solid, and they're also seeing an improvement
29:47
Speaker 10: in home theater, which is really big because that has
29:49
Speaker 10: been a weaker category for the last couple of years.
29:52
Speaker 10: So if that comes to fruition, I definitely think there
29:55
Speaker 10: will be strength in the fourth quarter.
29:57
Speaker 2: So you think about a best Buy, I mean some
29:59
Speaker 2: of the those are big ticket items here, and that
30:03
Speaker 2: would suggest that they go to a part of the
30:05
Speaker 2: case shaped economy made me that is doing better. Is
30:08
Speaker 2: that a typical best Buy customer.
30:11
Speaker 10: So bez buy. Definitely, promotions are going to be a
30:15
Speaker 10: big piece of the fourth quarter. They're sort of leaning
30:17
Speaker 10: into those promotional events. That's what worked last year, and
30:21
Speaker 10: I think they're trying to lean into the things that
30:24
Speaker 10: worked last year for this year. And I do think
30:26
Speaker 10: the consumer backshop is quite similar when we do that compare.
30:32
Speaker 10: I also, they also recently launched a marketplace and they
30:35
Speaker 10: seem to have a stronger focus on marketing and advertising,
30:38
Speaker 10: and so they're really trying to meet the consumer where
30:41
Speaker 10: they are and make sure that best Buy is top
30:44
Speaker 10: of mind when you're shopping for a wide array of things,
30:48
Speaker 10: not just those big ticket items like TVs or appliances.
30:53
Speaker 10: So they're trying to have a bigger wallet share with
30:56
Speaker 10: consumers across the board, and they're leaning on that marketplace
30:59
Speaker 10: and advertise to do it and then hopefully get you
31:01
Speaker 10: into the store and that's where they can bring their
31:04
Speaker 10: customer service and experience as well.
31:06
Speaker 3: That was Lindsay Dutch, Bloomberg Intelligence Consumer Hardlines Senior Analyst.
31:10
Speaker 2: We move next to the travel and leisure sector. We
31:12
Speaker 2: recently took a look at a survey from Bloomberg Intelligence
31:15
Speaker 2: entitled Consumers Maintain Vacation Budgets in twenty twenty six.
31:19
Speaker 3: According to the survey, over two thirds of respondents to
31:22
Speaker 3: bi's proprietary Travel survey said that they will spend more
31:25
Speaker 3: to go places in twenty twenty six, about the same
31:27
Speaker 3: as last year. And this comes even with rising economic concerns.
31:30
Speaker 2: For more on this, we were joined by Jody Lorie,
31:32
Speaker 2: Bloomberg Intelligence, Senior Credit Analyst. We first asked Jody to
31:35
Speaker 2: break down what she learned from BI survey.
31:38
Speaker 5: So we do the.
31:38
Speaker 11: Survey every half a year and so we just got
31:41
Speaker 11: the results out for the most recent one. And what's
31:44
Speaker 11: interesting is that we're seeing more people planning on keeping
31:48
Speaker 11: their budgets the same. But what's more interesting is that
31:52
Speaker 11: if costs succeed budgets, fewer people than last year said
31:56
Speaker 11: they'd increase their budget. And that's on the back of
31:59
Speaker 11: them knowing that inflation is a much higher risk for
32:02
Speaker 11: them for their portfolio.
32:03
Speaker 3: So in other words, people are making room for time off,
32:06
Speaker 3: but they're going to have to scrimp more in order
32:09
Speaker 3: to make it happen because their money is not going
32:13
Speaker 3: to take them as far as it used to correct.
32:16
Speaker 11: And Scarlett, I mean, I think to piggyback on that,
32:19
Speaker 11: if you look the eating out, anticipation of spending is
32:24
Speaker 11: higher this year than last year, and I think that's
32:26
Speaker 11: lesser reflection of people wanting to eat out, but more
32:28
Speaker 11: that they're expecting eating out is going to be more expensive.
32:32
Speaker 11: And so even though we're seeing people want to spend
32:35
Speaker 11: on paid activities and experiences.
32:37
Speaker 12: Which could bode well for the cruise.
32:38
Speaker 11: Lines and the theme parks, at the end of the day,
32:42
Speaker 11: when cost succeed budgets, more people this year over last
32:45
Speaker 11: year are planning on cutting and looking at free options.
32:49
Speaker 11: So going to the free museums, going to low cost.
32:51
Speaker 3: Options, well, now that the government is open, DC is
32:54
Speaker 3: an option once again. How about in terms of destination,
32:58
Speaker 3: maybe staying closer to home, maybe not going quite as
33:01
Speaker 3: far Internationally.
33:02
Speaker 11: Yes, and staying closer to home is very very much key.
33:06
Speaker 12: If we see the.
33:07
Speaker 11: Data, the international trend is to Canada. Canada bumped up
33:12
Speaker 11: to the second spot. So we saw that in the midyear,
33:15
Speaker 11: and it was pretty curious for US, particularly because when
33:18
Speaker 11: you look at it the opposite way, and we did
33:21
Speaker 11: this analys a few months ago. Canada is not coming
33:24
Speaker 11: to the US. They don't want to come to the US.
33:26
Speaker 11: It's too expensive for them, they don't really like the
33:28
Speaker 11: current government situation. And on top of it, I think
33:31
Speaker 11: they're scared about crossing the border and what it means
33:34
Speaker 11: for immigration.
33:35
Speaker 12: So we're seeing Canadians not.
33:37
Speaker 11: Come to the US, and we're seeing a lot of
33:39
Speaker 11: companies comment on that. But we are seeing a lot
33:42
Speaker 11: of Americans go to Canada. And I am curious how much,
33:44
Speaker 11: and this is going to come in further reports, how
33:47
Speaker 11: much of the Canada move is a reflection of the
33:50
Speaker 11: World Cup next year. There's a lot of people going
33:52
Speaker 11: to Vancouver, for instance, for the World Cup. I'll actually
33:54
Speaker 11: be there during the World Cup, but not going to
33:56
Speaker 11: the World Cup.
33:57
Speaker 2: Why people are going to be there.
34:01
Speaker 12: We might be.
34:01
Speaker 11: Doing a very family friendly cruise to Alaska.
34:04
Speaker 5: Nice.
34:05
Speaker 12: It just works out that that's the same time as
34:07
Speaker 12: it was bad timing.
34:08
Speaker 2: It's bad time, all right, talk to me. This is
34:12
Speaker 2: when I go to Aruba, we go to an all inclusive.
34:16
Speaker 2: How come I didn't know about this all inclusive thing
34:18
Speaker 2: when I had four little kids?
34:19
Speaker 12: I mean, were they were they a thing back then?
34:22
Speaker 2: I don't know, But I mean I would get the
34:24
Speaker 2: bill which would be five inches thick with like smoothies
34:27
Speaker 2: and chicken fingers and all that kind of crap that
34:29
Speaker 2: they'd eat throughout the day four kids. Man, if I had,
34:31
Speaker 2: if I knew about the all inclusive, that would have
34:33
Speaker 2: been a savior for me. What are people doing when
34:36
Speaker 2: they are they willing to still pay it for travel?
34:38
Speaker 2: Because I still here people going to Europe and stuff
34:42
Speaker 2: like that. I mean they're not going to Poughkeepsie, They're
34:44
Speaker 2: going to Parish and things.
34:46
Speaker 11: Yeah, I mean Japan is certainly a popular destination. Strong
34:49
Speaker 11: dollar there, yeah, very much increased.
34:51
Speaker 12: Italy has increased.
34:53
Speaker 11: We're seeing among the upper income level, you know, Portugal
34:56
Speaker 11: and Spain as popular destinations. And I think probably it's
35:00
Speaker 11: even more interesting is onboard spending for cruises is still
35:03
Speaker 11: continuing to have momentum. At the moment, I think where
35:06
Speaker 11: we're watching is when that onboard spending shifts and then
35:10
Speaker 11: the cruise lines, for example, don't get that gravy for
35:13
Speaker 11: cash flow. And to your point, Paul, I mean, even
35:16
Speaker 11: though you have something called all inclusives, even though you
35:18
Speaker 11: have the cruise lines, that they all are considered these
35:21
Speaker 11: package deal what every company is doing, and we're talking
35:24
Speaker 11: the rental car companies. You know, Abus is doing this too, obviously,
35:27
Speaker 11: the airlines is they're all doing these premium products.
35:30
Speaker 12: These you know, you do different tiers.
35:32
Speaker 11: Of products, so the add on so you can get
35:34
Speaker 11: the base level, which is really the skeleton package. But
35:37
Speaker 11: anyone from cruise lines to you know, theme parks to
35:41
Speaker 11: some extent, to the all inclusives, to the airlines, to
35:44
Speaker 11: the rental car companies are all segmenting to give you know,
35:47
Speaker 11: the lower income consumer the.
35:48
Speaker 12: Ability to say that they traveled and.
35:50
Speaker 11: The higher income consumer the ability to travel luxury.
35:53
Speaker 3: And in terms of the add ons, what are these
35:55
Speaker 3: add ons are they? You know, things that they used
35:58
Speaker 3: to offer for free and now charge.
36:00
Speaker 12: You for for some of it.
36:01
Speaker 11: It is so you know, a good example I have
36:04
Speaker 11: is anecdotally, I know that some of the cruise lines
36:07
Speaker 11: that used to not charge to get people into the
36:10
Speaker 11: center of a city, say in Europe, you're on European Cruise,
36:13
Speaker 11: they used to get that for free. Now they say no,
36:15
Speaker 11: you have to be a part of one of our
36:17
Speaker 11: you know, expeditions, one of our one of our excursions
36:20
Speaker 11: in order to get that for free. Otherwise we charge
36:22
Speaker 11: you twenty dollars to get into the center's clown in
36:24
Speaker 11: you know, Czechoslovakia and not Czechosvakia.
36:27
Speaker 12: Check republic.
36:27
Speaker 3: He our Thanks to Jody Lorie, Bloomberg Intelligence Senior credit Analyst.
36:31
Speaker 2: That's this week's edition of Bloomberg Intelligence on Bloomberg Radio,
36:34
Speaker 2: providing in depth research and data on two thousand companies
36:36
Speaker 2: and one hundred and thirty industries.
36:38
Speaker 3: And remember you can access Bloomberg Intelligence YEA, B I
36:40
Speaker 3: go on the terminal. I'm Scarlett Foo and.
36:42
Speaker 2: I'm Paul Sweeney. Stay with us. Today's top stories and
36:45
Speaker 2: global business headlines are coming up right now