Latest / Bloomberg Intelligence / Google Dodges Chrome Sale in Antitrust Case, Must Share Data

Transcript

Google Dodges Chrome Sale in Antitrust Case, Must Share Data · Bloomberg Intelligence

• 0:02
  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
• 0:10
  Speaker 1: Bloomberg Intelligence podcast. Catch US Live weekdays at ten am
• 0:14
  Speaker 1: easterne on Apple Cocklay and Android Auto with the Bloomberg
• 0:17
  Speaker 1: Business App. Listen on demand wherever you get your podcasts,
• 0:21
  Speaker 1: or watch US live on YouTube.
• 0:23
  Speaker 2: Big news in a text bak Big news for Google
• 0:26
  Speaker 2: and Apple on others. The US government proposal to break
• 0:29
  Speaker 2: up Google did not get the support of the courts. Here,
• 0:32
  Speaker 2: let's talk to an expert on this stuff. Jennifer Reed
• 0:34
  Speaker 2: joins US here Senior Litigation. Now she covers all the
• 0:37
  Speaker 2: antitrust stuff for Bloomberg Intelligence.
• 0:39
  Speaker 3: It looks like this. Well, first of all, Jen, what
• 0:42
  Speaker 3: did the court's rule?
• 0:44
  Speaker 4: You know, really, the court aligned much more so with
• 0:47
  Speaker 4: what Google proposed than what the Department of Justice proposed.
• 0:50
  Speaker 4: No divestiture of Chrome or contingent divesture of Android because
• 0:53
  Speaker 4: that was in there. Some data sharing, no exclusive agreements,
• 0:58
  Speaker 4: some search syndication meaning search engine can basically provide results
• 1:02
  Speaker 4: that just come straight from Google. Right, They're mimicking Google.
• 1:05
  Speaker 4: The surprising thing though, here, and what was great for Apple,
• 1:09
  Speaker 4: is that the judge said Google can could continue to
• 1:11
  Speaker 4: pay for search default positions.
• 1:13
  Speaker 3: That's with Apple.
• 1:14
  Speaker 4: With Mozilla, it pays some OEMs to pre install Google
• 1:17
  Speaker 4: Search on the Android phones that they group that they manufacture,
• 1:20
  Speaker 4: and that I think was a really big surprise.
• 1:23
  Speaker 5: How is this remedy consistent with the original ruling, with
• 1:26
  Speaker 5: the original finding of the court.
• 1:28
  Speaker 3: You know, I actually have a.
• 1:29
  Speaker 4: Really big problem with aligning those two things because I
• 1:32
  Speaker 4: don't think that it is. In terms of no chrome divestiture.
• 1:35
  Speaker 4: I think it's very consistent. And Paul, you know, I've
• 1:37
  Speaker 4: been on this show before and I've been saying for
• 1:39
  Speaker 4: two years that there would not be a chrome divestiture
• 1:42
  Speaker 4: ordered here. But where it's inconsistent is with this default position.
• 1:45
  Speaker 4: Because having a monopoly is not illegal, but it's the
• 1:49
  Speaker 4: conduct that maintains the monopoly that's exclusionary that is illegal.
• 1:52
  Speaker 4: And what the judge found in that liability decision that
• 1:55
  Speaker 4: the conduct that was illegal were the default agreements. Right,
• 1:58
  Speaker 4: This was exclusionary. This kept other search engines from being
• 2:01
  Speaker 4: able to grow and scale and get better. He's allowing
• 2:04
  Speaker 4: those default positions to stay in place. Now it's a
• 2:07
  Speaker 4: shorter term. It's only for one year. Theoretically, in one
• 2:10
  Speaker 4: year or one year after that, other search engines that
• 2:13
  Speaker 4: have improved can compete for that contract. But it's still
• 2:16
  Speaker 4: odd to me that what is found to be legal
• 2:18
  Speaker 4: is allowed to continue.
• 2:20
  Speaker 3: Well, the stock market likes it.
• 2:22
  Speaker 2: This is a company, it's got two point eight trillion
• 2:25
  Speaker 2: dollars in market capital, it's up nine percent today. You
• 2:27
  Speaker 2: just don't see that very often here. So what does
• 2:32
  Speaker 2: this mean for just Silicon Valley in general? Can I
• 2:35
  Speaker 2: sit back if I'm a CEO in Silicon Valiant saying, Hm,
• 2:39
  Speaker 2: the courts are maybe a little bit more aligned with
• 2:41
  Speaker 2: our industry how we think about the world than maybe
• 2:45
  Speaker 2: the government.
• 2:46
  Speaker 4: I would say that the way Silicon Valley can think
• 2:49
  Speaker 4: about it is that this judge was cautious. And this
• 2:51
  Speaker 4: judge did talk about needing to apply caution when you're
• 2:54
  Speaker 4: dealing with tech markets and Silicon Valley companies because judges
• 2:58
  Speaker 4: don't understand it want to impact the route, the innovation
• 3:02
  Speaker 4: and the natural course of the industry, right, they don't
• 3:05
  Speaker 4: want to distort that. And so it does suggest that
• 3:08
  Speaker 4: it's more likely a judge is going to be cautious
• 3:10
  Speaker 4: in future remedies for other cases. But what I think
• 3:14
  Speaker 4: everybody has to keep in mind, because I've seen people
• 3:16
  Speaker 4: talking about the fact that there's read through for some
• 3:18
  Speaker 4: of these other monopolization cases. I don't really think that
• 3:21
  Speaker 4: there is, because the facts are entirely different case by case,
• 3:25
  Speaker 4: the markets are entirely different, and what made a divestitor
• 3:28
  Speaker 4: remedy inappropriate here doesn't necessarily exist as a fact pattern.
• 3:32
  Speaker 4: Let's say an FTCV Meta or usdojb Apple or the
• 3:35
  Speaker 4: other DOJ case against Google in the ad tech space.
• 3:38
  Speaker 4: Those are different cases with different facts, and I don't
• 3:40
  Speaker 4: think that there's necessarily a read through that companies are
• 3:44
  Speaker 4: safe from divestiture orders because of this one.
• 3:46
  Speaker 5: Do we think that AI, the quickness and how it's
• 3:50
  Speaker 5: developing played any kind of role in the judge's decision here?
• 3:54
  Speaker 6: Oh?
• 3:54
  Speaker 4: Absolutely. The judge even observed that in the liability hearing,
• 3:59
  Speaker 4: which was now a year and a half or so ago,
• 4:01
  Speaker 4: that AI barely came up at all other than by Google,
• 4:04
  Speaker 4: it barely came up. But in the remedies hearing it
• 4:06
  Speaker 4: was all about AI, and the witnesses were all AI,
• 4:08
  Speaker 4: and he says it just shows in a year a
• 4:10
  Speaker 4: year and a half how much things have changed, and
• 4:12
  Speaker 4: the fact that you now have real competition to general
• 4:15
  Speaker 4: search other than other general search engines, and I think
• 4:18
  Speaker 4: that impacted him a lot.
• 4:20
  Speaker 3: Stay with us.
• 4:21
  Speaker 2: More from Bloomberg Intelligence coming up after this.
• 4:25
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 4:29
  Speaker 1: weekdays at ten am Eastern on Apple, Corplay and Android
• 4:32
  Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever
• 4:35
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 4:39
  Speaker 2: So in Bloomberg News, Scarlett, I think if you get
• 4:41
  Speaker 2: a b a green Bee nextra story, that means it's
• 4:45
  Speaker 2: like an exclusive or breaking news.
• 4:46
  Speaker 5: Yeah, great, a scoop.
• 4:47
  Speaker 3: Okay, so that's a good thing, right that.
• 4:51
  Speaker 2: It's a very good thing, you know, Yeah, reporter, you
• 4:53
  Speaker 2: know who gets a lot of those green Bee things.
• 4:55
  Speaker 3: He's walking to the Sucio Stuve.
• 4:57
  Speaker 2: Mark Germy and it's usually about like textuff Apple particular stuff.
• 5:03
  Speaker 3: And he's got another one today. I don't know.
• 5:06
  Speaker 2: Apple's lead artificial intelligence researcher for robotics has departed the
• 5:10
  Speaker 2: company to join the meta platforms. I feel like I've
• 5:13
  Speaker 2: read this kind of piece from Mark almost on a
• 5:17
  Speaker 2: weekly basis.
• 5:18
  Speaker 5: Over you mean Apple losing on AI.
• 5:20
  Speaker 2: Yeah, I mean people kind of walking out the door.
• 5:22
  Speaker 3: At some point, it's got to be a problem even
• 5:23
  Speaker 3: for the apples of the word.
• 5:24
  Speaker 2: Mark Irmont juines is he's a managing editor for Global
• 5:27
  Speaker 2: Consumer Technology Bloomberg News. He's usually out there in LA.
• 5:30
  Speaker 2: But something's going on there because Mark Herman's here in
• 5:32
  Speaker 2: New York. Who was the other dude we had on
• 5:36
  Speaker 2: the entertainment Dude Shaw he was. He's in New York.
• 5:40
  Speaker 2: So I don't know what's going on out there in LA.
• 5:41
  Speaker 2: Maybe they're cleaning offices or something.
• 5:43
  Speaker 7: No, we both have both have colleagues here, are all right?
• 5:46
  Speaker 3: All right? Mark talked to us about Apple.
• 5:48
  Speaker 2: Is it a problem that they're losing some of their
• 5:51
  Speaker 2: AI folks, the robotics folks, that kind of thing.
• 5:54
  Speaker 3: You don't typically see that too often.
• 5:56
  Speaker 7: It's only a problem if it impacts the consumer. And
• 6:01
  Speaker 7: right now, Apple's AI efforts are impacting the consumer because
• 6:05
  Speaker 7: Apple Intelligence and Siri lag very much in comparison to
• 6:10
  Speaker 7: competing products on other platforms. Now, this can all be
• 6:14
  Speaker 7: turned around, right You've got the ability for Apple to
• 6:17
  Speaker 7: do partnerships. I predict there'll be some sort of big
• 6:20
  Speaker 7: AI partnership for Apple. I've reported that they're in talks
• 6:23
  Speaker 7: with Google and an AI partnership I've reported they've been in
• 6:26
  Speaker 7: talks with Anthropic and Open Ai on potential AI partnerships.
• 6:30
  Speaker 7: They get one of those done, it's a different ballgame.
• 6:33
  Speaker 7: They buy a company I reported first reported over the
• 6:35
  Speaker 7: summer that they've talked to Mistral reported that they talk
• 6:38
  Speaker 7: to Perplexity. I don't expect either of those deals to
• 6:41
  Speaker 7: get done, but that certainly shows you where.
• 6:43
  Speaker 3: Their head's at.
• 6:44
  Speaker 7: Okay, if this all gets turned around with a major
• 6:47
  Speaker 7: new version of Siri next year, if they get the
• 6:50
  Speaker 7: Apple Intelligence pipeline heading in the right direction, if they
• 6:54
  Speaker 7: buy and hire the right LLLM people, they could be
• 6:57
  Speaker 7: in pretty good shape. Don't forget. Apple has the best
• 6:59
  Speaker 7: ECO system, they have the best hardware, and they're able
• 7:03
  Speaker 7: to deploy new features and operating system upgrades faster than
• 7:05
  Speaker 7: any other company. And so at the end of the day,
• 7:09
  Speaker 7: this is still their game to lose because there are
• 7:12
  Speaker 7: so many levers they can pull, especially with their cash balance,
• 7:15
  Speaker 7: to turn this thing around.
• 7:16
  Speaker 5: So why haven't they done any of those things so far?
• 7:18
  Speaker 5: Why are they waiting? What's the hold up?
• 7:21
  Speaker 7: Well, you know Apple, Unfortunately for them, they're very tied
• 7:26
  Speaker 7: to a couple cycles, right. They have their spring cycle,
• 7:30
  Speaker 7: and then they have their fall cycle. The fall cycle
• 7:32
  Speaker 7: has been set for some time. There's really no changing that.
• 7:35
  Speaker 7: That's locked and loaded. You'll see the introduction of those
• 7:38
  Speaker 7: products and those software features next Tuesday at the iPhone
• 7:41
  Speaker 7: seventeen launch event. The spring is really the next opportunity
• 7:45
  Speaker 7: for there to be major new features, right, that's when
• 7:48
  Speaker 7: they're going to roll out pretty big update to iOS
• 7:50
  Speaker 7: twenty six called iOS twenty six point four. At that time,
• 7:53
  Speaker 7: I expect them to release an overhauled version of Siri
• 7:56
  Speaker 7: that are going to fix a lot of these issues.
• 7:58
  Speaker 7: That's a lot total now though it is a long time. Yeah,
• 8:01
  Speaker 7: it is a long time. And the truth of the
• 8:03
  Speaker 7: matter is is that the AI space runs far more
• 8:06
  Speaker 7: quickly than even the mobile space. You saw a lot
• 8:08
  Speaker 7: of innovation in the smartphone space in the last two decades.
• 8:11
  Speaker 7: AI is moving ten times as fast as.
• 8:13
  Speaker 2: That, and they're aware of that. They're smart people. I
• 8:16
  Speaker 2: guess they've made the decision that they're comfortable with their timing.
• 8:20
  Speaker 2: Did they run the risk of making a fun fundamental
• 8:24
  Speaker 2: error in their judgment of that timing.
• 8:26
  Speaker 7: I don't think they're comfortable with the timing. I think
• 8:28
  Speaker 7: that the timing was actually even further out. I wasn't
• 8:31
  Speaker 7: expecting a major new version of SERI with incredible enhancements
• 8:36
  Speaker 7: for consumers, probably not until the end of twenty six
• 8:39
  Speaker 7: or sometime even at the tail end of twenty twenty seven.
• 8:42
  Speaker 7: So this is going to be happening at least six
• 8:44
  Speaker 7: to twelve months sooner than Apple had originally planned. They
• 8:48
  Speaker 7: are probably one or two years away if they did
• 8:51
  Speaker 7: nothing of starting to bleed share to competing smartphones with
• 8:55
  Speaker 7: major AI features right now. Let to tell you the truth.
• 8:58
  Speaker 7: We talk about AI all day every day. It's very
• 9:00
  Speaker 7: important to the market. It's very important for the current
• 9:02
  Speaker 7: technology age. Nobody's buying phones because of AI or not
• 9:06
  Speaker 7: because of AI, but we are moving towards that, and
• 9:09
  Speaker 7: that is going to happen. It's one or two years away,
• 9:12
  Speaker 7: and so if they're not in good shape by then,
• 9:14
  Speaker 7: they're going to start being impacted not only in terms
• 9:17
  Speaker 7: of what we talk about, not only on Wall Street
• 9:19
  Speaker 7: in the stock market, but in actual purchasing decisions by consumers,
• 9:23
  Speaker 7: because right now, consumers only care about a few things
• 9:24
  Speaker 7: when they buy new phones. They want to fix their
• 9:26
  Speaker 7: broken screen, they want a better.
• 9:29
  Speaker 5: Camera, and they don't want to pay too much for
• 9:31
  Speaker 5: it either. That's the other thing. I mean, we'll incorporating
• 9:33
  Speaker 5: all these AI g wiz factors bring up the price
• 9:37
  Speaker 5: to fifteen hundred dollars for your standard phone. That's something
• 9:41
  Speaker 5: that consumers may not stand for.
• 9:42
  Speaker 7: Well, to your point, it's a very good point. You
• 9:45
  Speaker 7: may see AI cost drivers increase because in many cases
• 9:50
  Speaker 7: it requires, especially on Apple's side, improve chips, more processing power,
• 9:55
  Speaker 7: improve battery life, improve cameras to take advantage of these things.
• 9:58
  Speaker 7: So you may see the core technologies in these devices
• 10:01
  Speaker 7: actually go up in price in order to enable these
• 10:04
  Speaker 7: next set of AI features. Because unlike Google and Open AI,
• 10:08
  Speaker 7: Apple's less reliant on the cloud. It's really a hybrid model.
• 10:12
  Speaker 7: So to your point that the core hard is very
• 10:14
  Speaker 7: important here too.
• 10:16
  Speaker 2: The Google legal announcement here the ruling obviously very positive
• 10:20
  Speaker 2: for Google, but also positive for Apple to stocks up.
• 10:22
  Speaker 7: Yeah, it's a big deal for Apple, and some people
• 10:25
  Speaker 7: have said this is a bigger deal for Apple than Google.
• 10:27
  Speaker 7: Is complete nonsense. To be honest with you, Google had
• 10:32
  Speaker 7: hundreds of billions of dollars at stake here.
• 10:34
  Speaker 3: They could have lost.
• 10:35
  Speaker 7: Their ability to strike search agreements at all, default search agreements.
• 10:40
  Speaker 7: They're basically giving up some data and pretty much nothing else.
• 10:43
  Speaker 7: So massive win for Google, big win for Apple, gigantic
• 10:49
  Speaker 7: win for the technology industry.
• 10:50
  Speaker 3: Because you ask you that, yeah, you have precedent.
• 10:52
  Speaker 7: Here is set now, so you know, Meta is probably
• 10:54
  Speaker 7: in better shape than they would have been otherwise. You know,
• 10:56
  Speaker 7: Apple has this DOJ trial too. You know that we've
• 10:59
  Speaker 7: Google just had its moment. Apple's going to have its
• 11:01
  Speaker 7: moment in a couple of years, and this sets a
• 11:03
  Speaker 7: lot of the precedent for that. So at this point
• 11:05
  Speaker 7: it's anyone's guess, but I would assume that Apple's going
• 11:07
  Speaker 7: to get off scott free.
• 11:08
  Speaker 2: Also, I mean so, I mean again in Silicon Valley,
• 11:13
  Speaker 2: I got to think that this feels like a little
• 11:15
  Speaker 2: bit of a little bit of a reset on the
• 11:17
  Speaker 2: regulatory front, which was front and center.
• 11:19
  Speaker 3: A little bit of a reset.
• 11:20
  Speaker 7: You know, the European Union is still you know, going
• 11:23
  Speaker 7: fast and furious. But if you're a technology consumer, this
• 11:26
  Speaker 7: is amazing news. If you work at a technology company,
• 11:28
  Speaker 7: if you invest in a technology company, if you're into technology,
• 11:31
  Speaker 7: this is great news. These companies are going to be
• 11:33
  Speaker 7: able to innovate at the pace that they want to
• 11:37
  Speaker 7: and you know, move fast. And break things.
• 11:40
  Speaker 2: I guess stay with us. More from Bloomberg Intelligence coming
• 11:43
  Speaker 2: up after this.
• 11:46
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 11:50
  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
• 11:53
  Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
• 11:56
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 12:00
  Speaker 5: Macy's on earnings, the department store chain lifted its outlook,
• 12:04
  Speaker 5: but did take care to point out that the consumer
• 12:07
  Speaker 5: is still feeling pretty cautious. So for more, let's bring
• 12:10
  Speaker 5: in Emily Cohne. Emily is Bloomberg's consumer team leader, also
• 12:14
  Speaker 5: a Big Red alum, graduated from Cornell University and was
• 12:17
  Speaker 5: an editor at the Cornell Deli Sun to discuss Macy's
• 12:21
  Speaker 5: latest results. So it sounds like a good news bad
• 12:23
  Speaker 5: news kind of story, but investors are taking the good news.
• 12:26
  Speaker 6: Here, Thanks Carlett. Yeah, maybe I would say cautiously optimistic.
• 12:31
  Speaker 5: That's a favorite term of ou CEOs.
• 12:32
  Speaker 3: I think this falls in.
• 12:33
  Speaker 6: Line with what we've heard from other retailers. Shoppers are
• 12:36
  Speaker 6: still shopping. Tony Spring told us on a caller earlier
• 12:40
  Speaker 6: this morning. He used the word surgical, So they're being
• 12:42
  Speaker 6: precise about what they're spending on being choosy. They called
• 12:47
  Speaker 6: out home furnishings and apparel as strong sellers, also citing
• 12:51
  Speaker 6: high demand for fine watches, jewelry, mattresses, so they are shopping.
• 12:57
  Speaker 6: I think the main question I have is how long
• 12:59
  Speaker 6: will this last?
• 13:01
  Speaker 3: How promotional are some of these retailers. How promotions do
• 13:04
  Speaker 3: they have to be? Because I know that goes right to
• 13:06
  Speaker 3: the margin.
• 13:07
  Speaker 6: Yeah, I mean, that's an interesting segue into Dollar Tree.
• 13:10
  Speaker 6: I think Dollar Tree raised prices so far this year
• 13:14
  Speaker 6: to offset the cost of tariffs, and shoppers felt that
• 13:19
  Speaker 6: and that doesn't have that has a limit. There's only
• 13:22
  Speaker 6: so far you can raise prices, and I think that
• 13:25
  Speaker 6: is starting to eat away at their bottom line. They
• 13:27
  Speaker 6: can't really raise prices that much anymore. I think these
• 13:31
  Speaker 6: retailers are in a difficult spot. They want to keep
• 13:33
  Speaker 6: let prices low because of how the consumer is feeling,
• 13:37
  Speaker 6: but also their costs are up on account of tariffs.
• 13:40
  Speaker 5: I would imagine Dollar Tree has a lot less cushion,
• 13:43
  Speaker 5: as you say, to raise prices, given who they're targeting,
• 13:46
  Speaker 5: and given how they're seeing a lot of higher end
• 13:48
  Speaker 5: consumers trade down to Dollar Tree than a Macy's. Macy's
• 13:52
  Speaker 5: did say explicitly that price increases are on the way, didn't.
• 13:55
  Speaker 6: They Yes, they said that they've already started and that
• 13:57
  Speaker 6: they're coming. But their sales are strong, and I think
• 14:01
  Speaker 6: you know they're in the midst of a turnaround. There
• 14:03
  Speaker 6: were signs that Tony Springs strategy is taking hold.
• 14:07
  Speaker 3: Comp sales rose more at.
• 14:08
  Speaker 6: His reimagined stores than they did overall. So I think
• 14:12
  Speaker 6: that that's a good reason behind the stock jump this morning.
• 14:18
  Speaker 3: What is a what's different about a quote unquote reimagine?
• 14:21
  Speaker 5: Good question?
• 14:23
  Speaker 6: I think that is a really good question. I think
• 14:25
  Speaker 6: these are the stores where they believe that they can
• 14:27
  Speaker 6: have the greatest edge. So they're they're doing a lot
• 14:30
  Speaker 6: to reinvigorate sales. They're redesigning the stores, they're rethinking their assortment,
• 14:38
  Speaker 6: and these are the stores that they say we should
• 14:41
  Speaker 6: really watch. This is the future of Macy's.
• 14:44
  Speaker 2: And Tony spring is also Cornell guy.
• 14:46
  Speaker 5: Oh there you go, not big red gathering here.
• 14:49
  Speaker 6: I didn't even know that.
• 14:51
  Speaker 5: Let's put this into context. What we heard from Macy's,
• 14:53
  Speaker 5: what we heard from Dollar Train, of course Dollar General
• 14:56
  Speaker 5: earlier in the month, or was it this month or
• 14:59
  Speaker 5: last last? In any case, what are we hearing from
• 15:03
  Speaker 5: retailers overall, because investors are punishing some and rewarding others.
• 15:07
  Speaker 5: Even though the message, I would say is fairly consistent
• 15:10
  Speaker 5: that consumers are spending, they're just being really, really weary
• 15:13
  Speaker 5: and careful. I think you nailed it.
• 15:15
  Speaker 6: I think retailers continue to point to strong sales momentum.
• 15:20
  Speaker 6: People are shopping even in the face of tariffs and
• 15:23
  Speaker 6: threats of inflation. I think the question I have is
• 15:27
  Speaker 6: knowing that retailers stock up months ahead of time, They
• 15:31
  Speaker 6: had their inventory that they sold through now months ago,
• 15:35
  Speaker 6: perhaps even before tariffs. I don't think we've really seen
• 15:38
  Speaker 6: the full paths through of the costs of tariffs yet,
• 15:41
  Speaker 6: and I think we'll continue to see that in the
• 15:44
  Speaker 6: coming months, and especially during the all important holiday shopping season.
• 15:49
  Speaker 3: Let's go there.
• 15:49
  Speaker 2: What's Is there a consensus building to how the holiday
• 15:52
  Speaker 2: season may shape up?
• 15:54
  Speaker 6: It's still early. I think the outlook isn't great so far.
• 16:01
  Speaker 6: Although Tony Spring did say that the back to school
• 16:04
  Speaker 6: shopping season was he used the word good, and he
• 16:07
  Speaker 6: said that back to school is generally a good bell
• 16:10
  Speaker 6: weather for the holiday shopping season, So there was a
• 16:13
  Speaker 6: slight note of optimism there, But not totally bullish.
• 16:18
  Speaker 5: Emi you cover the consumer team or the team leader
• 16:20
  Speaker 5: for this group, which company is most interesting is most
• 16:24
  Speaker 5: exciting right now? Like who is leading the way in
• 16:26
  Speaker 5: terms of being innovative and coming up with novel solutions
• 16:30
  Speaker 5: to the persistent challenges that this industry faces.
• 16:34
  Speaker 3: Yeah, for sure.
• 16:35
  Speaker 6: I mean I think that discount retailers are really the
• 16:37
  Speaker 6: ones to watch right now. So I'm really interested in
• 16:41
  Speaker 6: TJ Max, Marshals. These are the companies that people really
• 16:45
  Speaker 6: look to for deals. They have an interesting buying model
• 16:49
  Speaker 6: where they're buying like the extra inventory that other retailers
• 16:52
  Speaker 6: didn't sell, so they're a little bit isolated from the tariffs,
• 16:55
  Speaker 6: and they also are benefiting from the fact that a
• 16:58
  Speaker 6: lot of retailers bought a lot of stuff ahead of tariffs.
• 17:01
  Speaker 6: I'm also really interested in the dollar stores. Dollar stores,
• 17:05
  Speaker 6: you know, have a huge footprint there in these rural
• 17:08
  Speaker 6: parts of the country that traditionally the big retailers don't reach.
• 17:13
  Speaker 6: That has given them a big advantage. Now Amazon and
• 17:16
  Speaker 6: Walmart are coming for those dollars from e commerce in
• 17:19
  Speaker 6: a really big way. So I'm really interested in how
• 17:23
  Speaker 6: these value retailers do.
• 17:26
  Speaker 5: Any of those companies have a large online presence.
• 17:31
  Speaker 6: While they are doing things like partnering with Uber Eats
• 17:34
  Speaker 6: and delivery delivery services like that. But I think the
• 17:39
  Speaker 6: main draw is like, if you're living in a rural
• 17:41
  Speaker 6: part of the country, like the place that you go
• 17:43
  Speaker 6: to buy a gallon of milk at the end of
• 17:45
  Speaker 6: the day is your Dollar General, Like that's the store
• 17:48
  Speaker 6: that you have. But increasingly Walmart and Amazon are looking
• 17:52
  Speaker 6: to these rural areas as their last frontier.
• 17:55
  Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.
• 18:00
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 18:04
  Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto
• 18:08
  Speaker 1: with the Bloomberg Business app. Listen on demand wherever you
• 18:11
  Speaker 1: get your podcasts, or watch us live on YouTube.
• 18:15
  Speaker 2: Dollar Tree profit outlook disappoints investors. Here let's go to
• 18:20
  Speaker 2: Jen Bartash's Bloomberg Intelligence senior al. She covers a lot
• 18:23
  Speaker 2: of the retail names for Bloomberg Intelligence. Jen, what did
• 18:26
  Speaker 2: you learn from Dollar Tree?
• 18:29
  Speaker 8: Yeah, it's an interesting It's an interesting takeaway from Dollar
• 18:33
  Speaker 8: Tree because a lot of what they talked about was
• 18:35
  Speaker 8: bringing in hire income households. That's an echoing of what
• 18:39
  Speaker 8: we've heard from a couple of the retailers, most notably Walmart.
• 18:43
  Speaker 8: But at the same time, they're staying super conservative and so,
• 18:46
  Speaker 8: you know, although they had a much stronger than expected quarter,
• 18:50
  Speaker 8: I think there's a lot of anticipation that the second
• 18:52
  Speaker 8: half of the year might be a lot harder for them.
• 18:55
  Speaker 5: Right The outlook for this quarter on its own kind
• 18:58
  Speaker 5: of underwhelmed investor, and a lot of that, the company
• 19:01
  Speaker 5: says is tied to terror related costs.
• 19:05
  Speaker 8: Exactly Scarlett and what they're talking about, and this is
• 19:08
  Speaker 8: something that we're seeing across the retail sector broadly, is
• 19:12
  Speaker 8: that the costs of tariffs have started to come in,
• 19:16
  Speaker 8: but they really haven't fully hit yet. A lot of
• 19:18
  Speaker 8: retailers are selling through inventory they bought when tariffs were
• 19:22
  Speaker 8: at a different rate were not there, and as they're
• 19:25
  Speaker 8: replenishing that inventory, it's becoming more expensive. It's getting harder
• 19:28
  Speaker 8: to mitigate those costs, and they're starting to see some
• 19:31
  Speaker 8: targeted price increases being passed through to consumers. We think
• 19:34
  Speaker 8: that's only going to accelerate as we get into the
• 19:36
  Speaker 8: second half of the year.
• 19:38
  Speaker 2: So have you is there any consensus building at jenas
• 19:42
  Speaker 2: to how much retailers are going to pass through terror
• 19:45
  Speaker 2: related cost increases to consumers are kind of a rule
• 19:48
  Speaker 2: of thumb being created.
• 19:51
  Speaker 8: You know, I think for the most part, we're looking at,
• 19:54
  Speaker 8: you know, between eighty and ninety percent can be mitigated
• 19:58
  Speaker 8: by retailers at this point in time. Now, that does
• 20:02
  Speaker 8: change whenever the tariff landscape changes. So when tariffs for
• 20:05
  Speaker 8: China are you know, or for India, we're at ten percent,
• 20:08
  Speaker 8: that was easy to forecast. When they jump to fifty percent,
• 20:12
  Speaker 8: that gets a lot harder. And we still don't have
• 20:14
  Speaker 8: a final number for China, and so there's still some
• 20:18
  Speaker 8: uncertainty out there, but there's there's pretty good confidence that
• 20:21
  Speaker 8: between negotiating with suppliers, diversifying sources and things like that,
• 20:25
  Speaker 8: that they can mitigate a large portion of the cost.
• 20:29
  Speaker 8: But it's just a question of how long they consistain
• 20:32
  Speaker 8: that mitigation before inevitably they start having to pass a
• 20:35
  Speaker 8: little bit of price through.
• 20:36
  Speaker 5: And a lot of that is kind of unanswerable right
• 20:38
  Speaker 5: now until they go through the whole process. Jen remind
• 20:42
  Speaker 5: us of where Dollar Tree is at with the divestitu
• 20:45
  Speaker 5: or the shedding of the family dollar chain that did
• 20:48
  Speaker 5: not work out as planned, is that completely off its books?
• 20:51
  Speaker 3: Now it is.
• 20:53
  Speaker 8: They completed the transaction on July fifth, so it's completely
• 20:57
  Speaker 8: off the books. It gives them a lot of liberty
• 20:59
  Speaker 8: to really focus on the business and really drive growth
• 21:03
  Speaker 8: and what's always been the bigger part of their business.
• 21:05
  Speaker 8: And there's a lot of opportunity out there. You know,
• 21:07
  Speaker 8: they talk about gaining share and there there have been
• 21:11
  Speaker 8: some retailers that have gone under in the last you know,
• 21:13
  Speaker 8: year and a half that that makes it a great
• 21:16
  Speaker 8: opportunity for them, as a more focused organization to take
• 21:19
  Speaker 8: advantage of that. And that would be Party City to
• 21:22
  Speaker 8: a lesser extent, Joan Fabrics. You know, these these create
• 21:25
  Speaker 8: present opportunities for Dollar Tree to really execute on their
• 21:29
  Speaker 8: strategy and hopefully continue driving some top line growth.
• 21:33
  Speaker 2: So what's the what's kind of the expectation here for
• 21:37
  Speaker 2: for just kind of the holiday season broadly defined?
• 21:39
  Speaker 8: Jen, Yeah, for for the holidays, I think, you know,
• 21:44
  Speaker 8: the retailers all say that they're pretty well prepared. You know,
• 21:47
  Speaker 8: consumers I think will be ready to spend, but they'll
• 21:50
  Speaker 8: be selective. We're we're expecting that once inventory is sold out,
• 21:55
  Speaker 8: there won't be a lot of reordering. So this is
• 21:57
  Speaker 8: a holiday season where if there's something special if you
• 22:00
  Speaker 8: want to get you might want to get it because
• 22:02
  Speaker 8: once it's gone, it might not get replenished or replenished
• 22:06
  Speaker 8: quickly or at the same price. So sorry you seeking
• 22:11
  Speaker 8: that sort of behavior.
• 22:13
  Speaker 5: So the takeaway for this holiday season is you see it,
• 22:16
  Speaker 5: you snap it up because it may not come back.
• 22:18
  Speaker 5: Will it ever come back? I mean, you have the
• 22:21
  Speaker 5: removal of the Deminimus exemption, So consumers are losing a
• 22:25
  Speaker 5: lot of their DTC access that they once counted on,
• 22:29
  Speaker 5: and these retailers need to think very carefully about how
• 22:32
  Speaker 5: they're going to restock and rebuild their inventory. That's that's
• 22:36
  Speaker 5: again I hate to use the word sobering again, but
• 22:39
  Speaker 5: it's a whole new mindset for consumers.
• 22:42
  Speaker 8: It is. It's a new mindset for retailers as well,
• 22:44
  Speaker 8: where we've already seen them kind of scale back on
• 22:47
  Speaker 8: some of their ordering. They had a lot of orders
• 22:49
  Speaker 8: that were canceled waiting on tariffs. Now they've kind of
• 22:51
  Speaker 8: put some through. But what we're hearing is that they're
• 22:55
  Speaker 8: very closely managing their inventory. And so you know, if
• 22:57
  Speaker 8: a hot new toy sells out, you know, like early November,
• 23:02
  Speaker 8: you know they may or may not be getting more
• 23:04
  Speaker 8: in It's gonna be an interesting holiday season this year,
• 23:07
  Speaker 8: for sure.
• 23:08
  Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,
• 23:13
  Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,
• 23:17
  Speaker 1: ten am to noon Eastern on Bloomberg dot com, the
• 23:20
  Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You
• 23:24
  Speaker 1: can also watch us live every weekday on YouTube and
• 23:28
  Speaker 1: always on the Bloomberg terminal