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GE, Trump Tax Fight, Fashion Industry · Bloomberg Intelligence

0:02
Speaker 1: Welcome to the Bloomberg PENL podcast. I'm Paul swing you.
0:05
Speaker 1: Along with my co host Lisa Brahma wits. Each day
0:07
Speaker 1: we bring you the most noteworthy and useful interviews for
0:10
Speaker 1: you and your money, whether at the grocery store or
0:12
Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
0:15
Speaker 1: Podcast or wherever you listen to podcasts, as well as
0:17
Speaker 1: at Bloomberg dot com. Well General Electric continues to focus
0:22
Speaker 1: on reducing its debt heavy balance sheet, today announcing that
0:25
Speaker 1: the company is going to freeze pension benefits from more
0:28
Speaker 1: than twenty thou US employees. To get a sense of
0:30
Speaker 1: what this means for the company and for its balance sheet,
0:33
Speaker 1: we welcome Joel Levington, Senior credit analyst for Bloomberg Intelligence.
0:36
Speaker 1: Joel joins us here in our Bloomberg and Reactor Broker studio. Joel,
0:39
Speaker 1: thanks so much for joining us. So freezing penchion benefits
0:42
Speaker 1: for twenty thou employees, How's that going to help the
0:45
Speaker 1: balance sheet? Sure? Well? The rating agencies usually look at
0:48
Speaker 1: adjusted leverage, which includes underfunded pension liabilities. Gee has the
0:53
Speaker 1: largest underfunded pension plan in the SMP five hundred, and
0:56
Speaker 1: it was going to go up about seven billion dollars
0:58
Speaker 1: this year. So the and that they're taking will alleviate that, uh,
1:03
Speaker 1: the incremental edition that they were going to have this year.
1:07
Speaker 1: So it says UH in a story looking at this
1:10
Speaker 1: issue that GE could potentially reduce the pension short five
1:14
Speaker 1: fall by as much as eight billion dollars. I'm just
1:16
Speaker 1: trying to understand whether this was basically expected or whether
1:20
Speaker 1: this is a surprise. I view it as a surprise
1:24
Speaker 1: and a pleasant surprise. If I look at a bigger
1:26
Speaker 1: picture for GE in terms of their debt, they need
1:29
Speaker 1: to reduce their debt liabilities by about thirty billion dollars
1:32
Speaker 1: this year to hit their leverage target. They have about
1:35
Speaker 1: thirty billion dollars worth of asset sales happening this year.
1:38
Speaker 1: So this is the first slug to help attack the
1:41
Speaker 1: liabilities that they need to reduce. So gees CEO Larry Cope,
1:46
Speaker 1: I think he's been in the job, you know, a
1:47
Speaker 1: little more than a year. So what's the reading after
1:50
Speaker 1: a year on his tenure? Because I know one of
1:53
Speaker 1: the big issues he said was I'm going to get
1:55
Speaker 1: the balance sheet under controlled. Is he Is he doing
1:57
Speaker 1: a good job? You think? Yeah? No, that's a great question, Paul.
1:59
Speaker 1: And you know I was on a year ago, a
2:01
Speaker 1: little over a year ago on the on the TV
2:04
Speaker 1: saying that I think he's the best person for the spot,
2:06
Speaker 1: and I still do a year later. He is addressing
2:09
Speaker 1: the issues, and there's two main issues. One is really
2:11
Speaker 1: attacking the liability structure, which is happening through the asset
2:14
Speaker 1: sales that they've announced. Uh. The second is really cost
2:17
Speaker 1: cutting and restructuring the power business and making that a
2:21
Speaker 1: business which had generated over seven billion dollars of operating
2:24
Speaker 1: profit in is now losing money. Uh, you know, four years,
2:28
Speaker 1: three years later. So really making it less worse will
2:31
Speaker 1: be the other driver of of getting their credit back together.
2:35
Speaker 1: So if this is a positive surprise, why are the
2:37
Speaker 1: shares down well? Because for a shareholder, you're seeing capital
2:41
Speaker 1: go towards a risk management of it. It's not a
2:44
Speaker 1: share buy back, it's not an acquisition, it's not improving
2:47
Speaker 1: the business, but it is reducing risk. So you have
2:50
Speaker 1: seen the bonds tighten on the news although the stock
2:53
Speaker 1: is off. So basically just to give you a sense
2:55
Speaker 1: of what the issue here for the stock is, it's
2:59
Speaker 1: the pre fund daying Also of the pensions as part
3:02
Speaker 1: of this deal, right, I mean they're putting some money aside, uh,
3:05
Speaker 1: in addition to see seeing some of the payments. Right. Oh,
3:08
Speaker 1: you're totally rightly say. And I think our equity analysts
3:11
Speaker 1: that Karen O Wilhart will tell you that the multi industrials,
3:15
Speaker 1: they are looked at in terms of free cash flow,
3:17
Speaker 1: and so for this there's no positive or negative free
3:20
Speaker 1: cash flow implication implications for this year. But as we
3:23
Speaker 1: think about next year and gees hope that it will
3:25
Speaker 1: be free cash flow positive, this will help alleviate that
3:29
Speaker 1: issue because they won't have additional pension funding to to pursue.
3:32
Speaker 1: All right, So from the credit perspective, this is good news.
3:35
Speaker 1: The CEO is doing a good job in terms of
3:37
Speaker 1: dealing with the pension cutting costs. At some point, though,
3:41
Speaker 1: this company really has to get back on a growth track.
3:44
Speaker 1: Is that something that making money things? Yes, that whole
3:46
Speaker 1: making money thing is there? What is your outlook as
3:50
Speaker 1: to kind of the core operating businesses here? Do they
3:54
Speaker 1: have the capital structure that can support that the growth
3:56
Speaker 1: in the turnaround of those businesses. Yeah, no, that's a
3:58
Speaker 1: great question. And underneath their businesses they have two real
4:02
Speaker 1: franchises with which is aerospace and healthcare. What you really
4:06
Speaker 1: have a problem with is your power and renewables businesses.
4:10
Speaker 1: Those are struggling, those will continue to struggle one because
4:13
Speaker 1: the fundamentals are so weak. But what they can do
4:15
Speaker 1: is really reshape the cost structure there where they were
4:18
Speaker 1: built for almost a fifty bigger market than what they
4:20
Speaker 1: have today. And so that's why I say that it
4:22
Speaker 1: will be less worse. But I think it's going to
4:24
Speaker 1: be a very gradual, multi year process before they make
4:27
Speaker 1: money in the power business. How much more upste is
4:29
Speaker 1: there and the G bonds, I know you can't make
4:31
Speaker 1: a call, but make a call, I mean, like theoretically,
4:35
Speaker 1: given the fact that they're taking more aggressive steps earlier
4:39
Speaker 1: in the process, is that currently being baked into the
4:41
Speaker 1: bond prices. Well, I think what the Opportunity said is
4:44
Speaker 1: something like this. Their their bonds are rated in the
4:46
Speaker 1: triple B tire. If I look at a mid triple
4:48
Speaker 1: B industrial there they trade about sixty basis points wider
4:52
Speaker 1: the G E bonds. So if they could get if
4:54
Speaker 1: they could right size themselves, there's at least sixty points
4:56
Speaker 1: of upside. Should uh, you know, like should they get
5:00
Speaker 1: their profile to look more akin to what a triple
5:02
Speaker 1: be should look like. I don't think that will happen
5:04
Speaker 1: until maybe twenty two at the earliest. So are our
5:08
Speaker 1: asset sales are we kind of have you seen all
5:11
Speaker 1: that you need to see or do we still have
5:12
Speaker 1: some more news coming in terms of assets sales? Well? Well,
5:14
Speaker 1: I think there's still more potential opportunities in here, and
5:17
Speaker 1: in particular, I think it's very interesting that they set
5:20
Speaker 1: up a health care analyst day in December. Uh. If
5:23
Speaker 1: you recall about a year ago, they were looking to
5:26
Speaker 1: I p O that business, and our analysis tells us
5:29
Speaker 1: that if they did an i p O akin to
5:31
Speaker 1: what Siemens did their peer with their healthcare excuse me,
5:35
Speaker 1: with their health care business, that would be worth somewhere
5:36
Speaker 1: between ten and twelve billion dollars for GE, which would
5:40
Speaker 1: be another lever to attack their liabilities. Joel Lovington, thank
5:44
Speaker 1: you so much for being here. General Electric is such
5:46
Speaker 1: an interesting story and frankly has been a boon over
5:49
Speaker 1: the past few months for the bond investors and anyone
5:51
Speaker 1: who got in early. So definitely an interesting place to
5:55
Speaker 1: continue to watch. Joel Lovingtons, your credit analyst for Bloomberg
5:58
Speaker 1: Intelligence joining us here in our Berg Interactive Broker Studios. Well,
6:16
Speaker 1: the economic data we've seen recently sending I think financial
6:19
Speaker 1: markets mixed messages at best. Are we heading to a recession?
6:23
Speaker 1: If so, when, If not, is it just lower growth
6:26
Speaker 1: for longer? And what does that mean for financial markets?
6:29
Speaker 1: Our next guests can help us kind of dig through that.
6:31
Speaker 1: Hugh Johnson's chairman and chief investment officer of Hugh Johnson Advisers,
6:34
Speaker 1: based in Albany, New York. Hugh, thanks so much for
6:37
Speaker 1: joining us. I know, investors really over the last week
6:39
Speaker 1: or so, I've had a lot of data to digest,
6:42
Speaker 1: whether it's manufacturing, I s M data, UH, consumer confidence, jobs.
6:47
Speaker 1: What is your view of kind of the current economic
6:50
Speaker 1: outlook and what that means for financial markets. It's a
6:53
Speaker 1: great question, and the problem is that we don't have
6:56
Speaker 1: any easy answers. And you see that the markets have
6:59
Speaker 1: become ex sdreamely news sensitive show we say so, we
7:03
Speaker 1: had very sharp declines, Paul, and as a result of
7:07
Speaker 1: the AI s M manufacturing reports, suggesting that the manufacturing
7:11
Speaker 1: sector the economy is contracting and protect perhaps can contracting
7:15
Speaker 1: quite a bit, as well as the services sector, which
7:18
Speaker 1: looked like the manufacturing sector was beginning to let's say,
7:21
Speaker 1: contaminate the services sector. At the same time, UH one
7:25
Speaker 1: or two days later, we get an employment report, which
7:28
Speaker 1: in my judgment was very encouraging, and the markets reflected
7:31
Speaker 1: that by going up. So the markets have become extremely
7:35
Speaker 1: new sensitive. If you were to ask me whether it's
7:39
Speaker 1: going to be a recession or hard landing, or whether
7:41
Speaker 1: it's going to be a soft landing when we get
7:43
Speaker 1: to two thousand twenty, I'd say, first of all, it's
7:46
Speaker 1: important to recognize it's a very close call. Um, we
7:49
Speaker 1: can make a good case for a hard landing, we
7:51
Speaker 1: can make a really good case, I think for soft landing.
7:54
Speaker 1: And if I were to make a guess, and that's
7:57
Speaker 1: probably all it could be, I'd say it's going to
7:58
Speaker 1: be a soft landing or the econ him. He is
8:00
Speaker 1: going to continue to expand through two thousand twenty, but
8:03
Speaker 1: at a very very slow pace, a slower pace than
8:06
Speaker 1: two thousand nineteen. You and I when I talked to
8:09
Speaker 1: investors not on radio, they often tell me, here's our thinking.
8:13
Speaker 1: Things will be fine. Heading into elections. President Trump will
8:17
Speaker 1: try to make the economy look really good. If Elizabeth
8:20
Speaker 1: Warren wins. If she wins the Democratic nomination and then
8:24
Speaker 1: she wins the presidency, all bets are off. The market's
8:26
Speaker 1: going to tank. This morning, OURBC coming out with a
8:29
Speaker 1: research note saying, maybe it's not so bad. Are you
8:33
Speaker 1: even looking at this at that At this point, I'm
8:37
Speaker 1: not looking at it every day, And I said, of
8:39
Speaker 1: a hard, hard basis, but it's certainly in the back
8:42
Speaker 1: of my mind, and it's certainly I think with every
8:44
Speaker 1: old strategist, economists are thinking about it. What's it going
8:48
Speaker 1: to represent or mean? So if Elizabeth Warren, who now
8:51
Speaker 1: looks like she's heading into the a little bit into
8:54
Speaker 1: the lead, and what's it gonna mean, especially because there's
8:58
Speaker 1: the concern about the show to the left, concern about
9:01
Speaker 1: obviously more regulation, concerned about higher taxes, what's that going
9:06
Speaker 1: to mean for the markets, the economy, in the markets.
9:09
Speaker 1: I think the common sense approach might be that it's
9:12
Speaker 1: probably not going to be very good news when we
9:14
Speaker 1: have that shift to the left for the economy and
9:17
Speaker 1: the markets. But believe me, there's a case that could
9:19
Speaker 1: be made that it might be very good for the market.
9:22
Speaker 1: So it's like it's one that I don't focus on
9:25
Speaker 1: on a day to day basis, but it's certainly in
9:27
Speaker 1: the back of my mind. And as we get closer
9:29
Speaker 1: to two thousand, the election in two thousand twenty, we're
9:32
Speaker 1: gonna be thinking a lot about it. Right now, it's
9:35
Speaker 1: not the number one issue. Well, I'm guessing, Hugh. One
9:38
Speaker 1: of the issues that is top of mind for you
9:40
Speaker 1: is the Federal Reserve and to what extent the FED
9:43
Speaker 1: can help, you know, support this economy which appears to
9:47
Speaker 1: be slowing. So what do you expect from the Fed
9:50
Speaker 1: and how effective do you think the Fed will be? Well,
9:52
Speaker 1: I take my queue from the markets, and I looked
9:54
Speaker 1: at the markets last week, and I look at the
9:56
Speaker 1: markets today, and I asked myself the simple question, what
9:59
Speaker 1: the the financial markets, the yield on a ten year
10:02
Speaker 1: treasury as well as the level of stock prices tell
10:05
Speaker 1: us statistically as to what the Federal Reserve is gonna do.
10:09
Speaker 1: And the answer to that question is, statistically, the markets
10:13
Speaker 1: are telling us that the Fed has one more rate cut.
10:15
Speaker 1: I don't know if it's this month, I doubt it,
10:18
Speaker 1: or December, but I think there's one more rate cut
10:21
Speaker 1: and possibly another rate cut in the near future. And
10:24
Speaker 1: that to me is important. And the reason it's important
10:28
Speaker 1: is because if we're talking one more rate cut, let's
10:30
Speaker 1: call it December, maybe even as late as as March,
10:34
Speaker 1: but also December, that's consistent with the view that we'll
10:37
Speaker 1: have a soft landing. If we're gonna have a hard landing,
10:40
Speaker 1: you'd have the markets telling you or discounting more rate
10:43
Speaker 1: cuts than just one cut from one eight seven to
10:46
Speaker 1: one point six two. So one theme of the year
10:50
Speaker 1: has really been a rotation within the equity space away
10:54
Speaker 1: from some of the typical growth and momentum stocks into
10:57
Speaker 1: the havens, utilities, the reads. Do you think that that
11:00
Speaker 1: trade has been overplayed at this point, Yeah, that's a
11:04
Speaker 1: great question. Obviously, you have to worry about valuation, Lisa.
11:08
Speaker 1: It's it's valuation of the sort of traditional safe havens,
11:13
Speaker 1: the safe havens of course of the consumer staples and
11:16
Speaker 1: utilities which have had a big move to the upside.
11:18
Speaker 1: I don't think it's over I think you should have
11:21
Speaker 1: some of that so called defense in your portfolio. You
11:24
Speaker 1: should also, and I don't think this is overplayed, make
11:27
Speaker 1: sure you have value stocks in your portfolio. Value stocks
11:31
Speaker 1: play a pay a higher dividend than than growth stocks,
11:34
Speaker 1: so that that's helpful if indeed we do go to
11:37
Speaker 1: hard landing in a recession. And let's not forget they're
11:40
Speaker 1: out there. There's some managers and and there are many
11:43
Speaker 1: of them that have dividends strategies and strategies which offer
11:47
Speaker 1: dividends yields in the equity component of a portfolio of
11:50
Speaker 1: two percent to three percent and a rising dividend yield.
11:54
Speaker 1: That's really a good idea in this current market environment.
11:57
Speaker 1: What I'm simply saying is every invest they're given the
12:00
Speaker 1: close call that I'm talking about, should build a little
12:03
Speaker 1: bit of defense into their portfolios. That's a really sensible
12:06
Speaker 1: thing to do. So here we have we can't forget
12:10
Speaker 1: about trade. That continues to be a big driver of
12:12
Speaker 1: the market. And we have the Chinese delegation arriving in Washington,
12:15
Speaker 1: d C. This week for negotiations. What is your view
12:19
Speaker 1: on how trade is gonna, has impacted and will impact
12:22
Speaker 1: the market going forward. It's a it's a big issue,
12:25
Speaker 1: and it's a big issue affecting the manufacturing sector economy. Now.
12:29
Speaker 1: Quite frankly, the trade numbers, the export numbers have suggested
12:32
Speaker 1: that indeed trade is not affecting the manufacturing sector as yet,
12:36
Speaker 1: but it's an important issue. I've said all along, and
12:39
Speaker 1: I've said for a long number that the Chinese are
12:41
Speaker 1: really in the driver's seat because they know how important
12:45
Speaker 1: it is for for for Trump to do a deal,
12:47
Speaker 1: and to do a deal that's gonna in revive shall
12:50
Speaker 1: we say, agricultural exports because he needs the farm vote.
12:53
Speaker 1: He's gonna that will get put on the hold of
12:56
Speaker 1: of of the automobile tariffs that are coming out of China,
13:00
Speaker 1: as he needs that Midwest vote. And they know that,
13:03
Speaker 1: and that's why they're limiting what they're talking about when
13:05
Speaker 1: they come to Washington this week. There's not much room here,
13:09
Speaker 1: but boy, they know they're in the driver's seat, and
13:12
Speaker 1: they know Trump needs a deal, and they're very aware
13:15
Speaker 1: of that, and they're gonna drive extremely hard. Pucket. It's
13:17
Speaker 1: gonna I think we'll reach a deal and it will
13:20
Speaker 1: look like a reasonably good deal, but I don't think
13:23
Speaker 1: it's going to be all that the Trump administration and Lightheiser,
13:26
Speaker 1: who's a really good negotiator, really want. Hugh Johnson, thank
13:29
Speaker 1: you so much for joining us today. Hugh Johnson, Chairman
13:32
Speaker 1: and Chief Investment Officer, and Hugh Johnson adviser is coming
13:35
Speaker 1: to us from Albany, New York. Well, it has been
13:55
Speaker 1: a very busy morning for President Donald Trump and his
13:58
Speaker 1: legal team as they can continue to fight to keep
14:01
Speaker 1: his tax returns private. Lots of rulings from various courts
14:04
Speaker 1: this morning. To get the latest and to help us
14:07
Speaker 1: clear all this up, is Bob Van Voors, legal reporter
14:09
Speaker 1: for Bloomberg, joining us on the phone from New York. Bob,
14:12
Speaker 1: thanks so much for joining us again. We've had a
14:14
Speaker 1: couple of rulings this morning. Just give us a summary
14:17
Speaker 1: of what happened. Well, early this morning, federal judge here
14:21
Speaker 1: in Manhattan ruled that President Trump can't stop his accountants
14:25
Speaker 1: from turning over eight years of taxes and other financial
14:28
Speaker 1: documents to Manhattan District Attorney Cyrus Vans Jr. Vance's office
14:34
Speaker 1: is investigating whether the Trump organization falsified business records UH
14:39
Speaker 1: tied to the hush money payments that were allegedly made
14:42
Speaker 1: to Storey Daniels and Karen McDougall. As I'm sure you remember,
14:47
Speaker 1: those are two women who claimed they had affairs with
14:49
Speaker 1: Trump before he became president. Um last year, Trump's personal lawyer,
14:55
Speaker 1: Michael Cohen pleaded guilty to, among other things, facilitating these
15:01
Speaker 1: payments uh, and fled guilty to a campaign finance UH violation.
15:08
Speaker 1: So within minutes this morning, Trump's side appealed the ruling.
15:15
Speaker 1: Um and Uh, an appeals court has granted a temporary
15:18
Speaker 1: stay that puts off what would have been at one
15:22
Speaker 1: o'clock PM deadline for his accountants to turn over his
15:28
Speaker 1: taxes and all of these other records to to vance. Okay,
15:33
Speaker 1: so he won this, Uh, this sort of emergency stay.
15:39
Speaker 1: What sort of the main event that everyone's waiting for
15:43
Speaker 1: to determine whether he will have to turn over the
15:47
Speaker 1: documents or not? At this point, Well, here's what's going
15:49
Speaker 1: to happen. Trump lost the ruling this morning. Uh. The
15:53
Speaker 1: appeals court just granted the state to delay things very
15:57
Speaker 1: for a very short time while it gives X diet
16:00
Speaker 1: of consideration. So, uh, the focus of attention shifts to
16:04
Speaker 1: the appeals court to decide whether the judge who made
16:08
Speaker 1: the ruling this morning, his name is Victor Marrero, whether
16:11
Speaker 1: Marrero's ruling was correct or not. Barrero said this case
16:15
Speaker 1: shouldn't have been in federal court at all. This is
16:17
Speaker 1: something that the state courts should have tried to figure out,
16:20
Speaker 1: and he also said that the president's broad claims that
16:25
Speaker 1: he can't be investigated at all, that his associates can't
16:28
Speaker 1: be investigated, and that his businesses can't be investigated. He
16:32
Speaker 1: called it quote repugnant to the nation's governmental structure and
16:36
Speaker 1: continent constitutional values. Um, so we're going to be waiting
16:41
Speaker 1: to hear from the appeals court on an expedited basis,
16:45
Speaker 1: will probably know by the end of today exactly when
16:48
Speaker 1: they're going to hear this case. Okay, So let's assume
16:52
Speaker 1: they hear the case. Give us a sense of kind
16:55
Speaker 1: of what we can expect next and over what time frame. Um, well,
16:59
Speaker 1: we can very shortly to find out exactly what the
17:03
Speaker 1: timeframe is going to be. But then the court will
17:06
Speaker 1: uh set up a schedule for the for both sides
17:10
Speaker 1: to submit briefs to come in and argue. Trump's side
17:14
Speaker 1: claims that, uh, that it's a constitutional violation, that it's
17:19
Speaker 1: that violates separation of powers and federal supremacy over the
17:23
Speaker 1: state for a state official to be looking into his
17:28
Speaker 1: affairs and getting his documents. Vance's side says, this is
17:32
Speaker 1: just a normal investigation. This is a normal uh, subpoena
17:37
Speaker 1: for somebody to turn over records. UH, and that's the
17:40
Speaker 1: argument they're going to make. We can expect them to
17:43
Speaker 1: do this as quickly as possible, UM, because the president
17:47
Speaker 1: is involved in because of the constitutional weight of these issues,
17:52
Speaker 1: which financial records are these just to get a sense
17:55
Speaker 1: of the scope that perhaps us will we'll get access
18:00
Speaker 1: to should President Trump lose the ultimate appeal, Well, we
18:04
Speaker 1: know they're asking for eight years of taxes. We know
18:08
Speaker 1: that they're also asking for records that are um connected
18:14
Speaker 1: to these payments. We don't know exactly what it is
18:17
Speaker 1: that UH is sitting in the files that the Trump
18:20
Speaker 1: organization that they are going to have to turn over,
18:23
Speaker 1: but it does have to do with the you know,
18:27
Speaker 1: whether the Trump organization tried to hide the payments by
18:32
Speaker 1: characterizing them as something that they that they weren't. So, Bob,
18:37
Speaker 1: just is there a consensus within the legal community how
18:39
Speaker 1: this will play at will Trump have to discloses handover statements? Well,
18:44
Speaker 1: I don't know that there's a consensus. But the judge
18:47
Speaker 1: who ruled today had a very strong ruling, had very
18:52
Speaker 1: strongly criticized UM the very very broad immunity that the
18:58
Speaker 1: president was arguing for um. So you know, if the
19:02
Speaker 1: appeals court takes a similar view, Uh, then the president
19:06
Speaker 1: will have to try to appeal to the Supreme Court. Uh.
19:10
Speaker 1: And if that fails, then he's going to be turning
19:12
Speaker 1: over those documents. But Van Voris, thank you so much
19:16
Speaker 1: for being with us today. Bloom Legal reporter discussing what
19:19
Speaker 1: we're seeing that's coming out of the trial. Uh. Sara's
19:24
Speaker 1: Fans Junior, the District attorney in the United for Uniteds
19:27
Speaker 1: in the state of New York, going after President Trump's
19:31
Speaker 1: financial records, winning around President Trump winning an emergency stay
19:50
Speaker 1: right now, let's shift our focus to the retail sector.
19:53
Speaker 1: A lot of questions swirling over exactly how tariffs could
19:57
Speaker 1: potentially affect this sector harder than others heading into the
20:02
Speaker 1: holiday season. We are so pleased to say we have
20:04
Speaker 1: with us Kenna Tory, president of the not Tory Company,
20:07
Speaker 1: also a Bloomberg Media alum, a reporter, also broadcaster. Uh
20:13
Speaker 1: A while ago, A long time ago, A long time ago.
20:16
Speaker 1: I miss it here great, I always love coming back.
20:18
Speaker 1: Well here you are, you're back, So welcome back here
20:21
Speaker 1: in our blog Gonna Active broker studio. So um Ken,
20:24
Speaker 1: can you just tell us a little bit about the company.
20:27
Speaker 1: First of all, sure, so we're a forty two year
20:29
Speaker 1: old family business women's fashion brand. We've mostly been known
20:33
Speaker 1: for high end women sleepwear and Broasen underwear, So you know,
20:36
Speaker 1: traditionally we've sold to the high end department stores Bergdorf,
20:39
Speaker 1: Neiman Marcus, Saxon, Nordstrom. I'd say over the last decade
20:43
Speaker 1: we have really transformed the company. So those department stores
20:46
Speaker 1: are still very key to our strategy, but we know,
20:49
Speaker 1: you know, everybody knows traffic foot traffic to those stores
20:51
Speaker 1: is declining, so we've really pivoted our strategy. They continue
20:55
Speaker 1: to be important clients, but we've invested heavily in our
20:57
Speaker 1: dot com, which we started early. We're in twelfth year
21:00
Speaker 1: of Notori dot com. We've expanded our brands so now
21:03
Speaker 1: instead of just being high end, we have some moderate
21:05
Speaker 1: brands that have helped with with distribution as well. And
21:09
Speaker 1: then we've also become we've really tried to become more
21:11
Speaker 1: of a lifestyle brand, so instead of just those core categories,
21:14
Speaker 1: we've developed clothing, betting, towels, legware, and here Today because
21:19
Speaker 1: we're announcing a new partnership as well in the fine
21:21
Speaker 1: jewelry space. So talk to us about your brand. You
21:24
Speaker 1: mentioned how do you you know, develop enhanced promote your brand.
21:29
Speaker 1: How's that changed over the years with you know, social
21:32
Speaker 1: media and all those influencers and things things like that,
21:34
Speaker 1: It has changed a lot. So, you know, I left
21:37
Speaker 1: Wall Street twelve years ago to join the company, and
21:39
Speaker 1: at that time, the business is really simple. We basically
21:42
Speaker 1: invested in making product and the product kind of speaks
21:45
Speaker 1: for itself, and we sold that product to that small
21:47
Speaker 1: number of high end retailers and they sort of pushed
21:50
Speaker 1: and had that conversation with the end user, with the customer. Now,
21:54
Speaker 1: you know, it's not just about making products. If all
21:56
Speaker 1: you do is if any as any brand, If all
21:58
Speaker 1: you do is focus on product, that's not enough. You know,
22:01
Speaker 1: whether it's our social media, whether it's our website, whether
22:04
Speaker 1: it's creating a connection between the product and the people
22:07
Speaker 1: behind it. You know, I feel like we talk a
22:08
Speaker 1: lot about storytelling. Who are these people that are making
22:11
Speaker 1: the product? Where is it made? So really it's you know,
22:13
Speaker 1: while product really is still the most important thing we do,
22:16
Speaker 1: it's it's not nearly you know, all incumbentsing. There's so
22:19
Speaker 1: many different things we have to hit on to succeed today.
22:21
Speaker 1: So when I think about bras and underpants, I think
22:23
Speaker 1: that the story is changing, right, And I think that
22:25
Speaker 1: nothing really exemplifies that more than what we've seen with
22:30
Speaker 1: l brands and kind of struggling to understand what the
22:32
Speaker 1: identity of Victoria's Secret ought to be. What is uh
22:36
Speaker 1: the story for the modern woman when it comes to
22:39
Speaker 1: bra and under bras and underpants, right, So I think,
22:42
Speaker 1: you know, this story has definitely gotten a lot of
22:44
Speaker 1: focus over the last year, but really the story has
22:46
Speaker 1: been because it always got time Mariam exactly. But really,
22:50
Speaker 1: you know, over the last fifteen years, everybody in this space,
22:53
Speaker 1: we all knew, you know, Victoria's Secret just had incredible share.
22:57
Speaker 1: Like if you look at their market share compared to
22:59
Speaker 1: any other the big retailers in any other sector, like
23:01
Speaker 1: it didn't make sense. Brands like US have really gone
23:04
Speaker 1: after them aggressively over the last fifteen years. And I think,
23:07
Speaker 1: you know, other you know, startups, so old school brands
23:10
Speaker 1: have gone after Victoria's Secret, and now we've really seen
23:12
Speaker 1: a lot of directed consumer startups go after them as well.
23:15
Speaker 1: And clearly, you know, some of that market share had
23:17
Speaker 1: to go away. Some of that's natural, and then obviously
23:20
Speaker 1: there's been some other missteps um as well on on
23:22
Speaker 1: their part that's probably led to some success for other
23:25
Speaker 1: brands as well. So I think, you know, with all
23:28
Speaker 1: of these things, some of it's just sort of a
23:30
Speaker 1: natural degradation of market share. But also you know that customer,
23:35
Speaker 1: especially the millennial customer, trying to get through to her
23:38
Speaker 1: and what he or she wants in terms of her
23:40
Speaker 1: broas and underwear and sleepwear. It's a very evasive message.
23:43
Speaker 1: You know, our customer, to be honest, is um a
23:46
Speaker 1: little bit traditionally more on the older side or on
23:49
Speaker 1: the middle aged to older side, and we continue to
23:50
Speaker 1: market to that customer. In terms of that millennial, we
23:53
Speaker 1: have definitely gone more aggressively after it. But whether it's us,
23:57
Speaker 1: whether it's any of the directed consumer companies going after
24:00
Speaker 1: to it, uh, it's not. It's never an easy formula
24:02
Speaker 1: for for anybody in the space, the fickle millennial when
24:05
Speaker 1: it comes to even understands you've never heard of that
24:08
Speaker 1: before here or there, So just give us a sense, um,
24:11
Speaker 1: you know, we we think about we we we talk
24:13
Speaker 1: a lot on the show and on Bloomberg Media about
24:15
Speaker 1: the tariffs and what it means for the economy and
24:16
Speaker 1: so on and so forth. So for your business, how
24:19
Speaker 1: has it impacted your business? So we're fortunate, you know,
24:21
Speaker 1: like I said, we're a family owned business and for
24:23
Speaker 1: the sleepware, loungeware and ready to wear that we do ourselves.
24:27
Speaker 1: We have our own factory in the Philippines, UM company owned.
24:29
Speaker 1: That's where my mother is from. It's been a very
24:31
Speaker 1: key part of our business. So for us, it's only
24:34
Speaker 1: about of what we do that's uh, that's in China
24:38
Speaker 1: and elsewhere. So in that sense, it hasn't been so bad.
24:41
Speaker 1: But I think for the people listening, what's really important
24:43
Speaker 1: to note is that it is um. You know, it
24:45
Speaker 1: still hurts that twenty to where we're paying the tariffs
24:48
Speaker 1: or negotiating to split the tariffs with our Chinese partners.
24:51
Speaker 1: It hurts. It really does hurt. I mean that's directly
24:53
Speaker 1: off your bottom line. But more so for brands in
24:55
Speaker 1: our space, it is so competitive out there, there is
24:58
Speaker 1: zero ability at least from where I sit, to pass
25:01
Speaker 1: that terror, to pass that increase on to the department
25:04
Speaker 1: stores that we sell to, Like they really don't want
25:06
Speaker 1: to hear about it, So it's not like you know,
25:07
Speaker 1: there's a lot of talk about it. It's going to
25:09
Speaker 1: affect the customer at the end of the day. For us,
25:11
Speaker 1: it's really just impacting us because our department stores really
25:15
Speaker 1: you know, there's there's no ability for us to pass
25:16
Speaker 1: those increased costs onto them. Is there any sort of
25:19
Speaker 1: read through message about the end client here in terms
25:24
Speaker 1: of how the consumer is doing right now and their
25:26
Speaker 1: confidence or is this just sort of the tough world
25:30
Speaker 1: right now of retail. I think it's a tough world
25:32
Speaker 1: right now. The question is I think we all in
25:33
Speaker 1: our head think this is going to go away relatively soon,
25:36
Speaker 1: we hope, but if not, at some point the conversation
25:38
Speaker 1: is going to be have to gonna have to be
25:39
Speaker 1: had and we're going to have to pass that I'm
25:41
Speaker 1: gonna have to pass that on. So um. So we'll see,
25:43
Speaker 1: and we're all hoping that something gets resolved soon. But
25:46
Speaker 1: I don't know. You guys know more than I do,
25:48
Speaker 1: So no, actually, just roll quickly. Just give us a
25:52
Speaker 1: sense of Amazon. How big it have they disrupted your business? Uh?
25:57
Speaker 1: You know, we were early adopters with them, so I
25:59
Speaker 1: think when they started to come on and tried to
26:01
Speaker 1: get into fashion. Years ago, we had said a lot
26:04
Speaker 1: of brand said we don't want to deal with it.
26:06
Speaker 1: I think we kind of knew that they were going
26:07
Speaker 1: to be big players, so we wanted to figure out
26:09
Speaker 1: how to how to partner with them. So we've sold
26:11
Speaker 1: direct to them for nine years. We have a third
26:13
Speaker 1: party strategy to get some other products on their site
26:16
Speaker 1: as well. And you know, clearly like if you're any
26:18
Speaker 1: kind of brand that doesn't have a uh, you're not
26:21
Speaker 1: incorporating Amazon in your future strategy. It's really difficult because
26:24
Speaker 1: you know, a lot of the other channels there aren't
26:26
Speaker 1: necessarily growing. Kenna Tory thanks very much for joining us
26:29
Speaker 1: to really appreciate it. Ken is the president of the
26:31
Speaker 1: not Tory company, joining us live here in our Bloomberg
26:33
Speaker 1: Interactive Broker studio. Ken is a radio and TV alam
26:36
Speaker 1: of Bloomberg from a few years back. We welcome him
26:39
Speaker 1: to back to Bloomberg. Really giving us a sense of
26:42
Speaker 1: kind of the the business of the women's lingerie business,
26:45
Speaker 1: the consumer tariffs, a lot of aspects of the business.
26:49
Speaker 1: Interesting to get these a lot of these smaller family
26:52
Speaker 1: owned companies in to discuss their businesses and kind of
26:54
Speaker 1: how the conditions are out in the marketplace, so we
26:56
Speaker 1: appreciate his comments. Thanks for listening to the Bloomberg P
26:59
Speaker 1: and L podcast. You can subscribe and listen to interviews
27:02
Speaker 1: at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney,
27:06
Speaker 1: I'm on Twitter at pt Sweeney. I'm Lisa abram Woyit's
27:08
Speaker 1: I'm on Twitter at Lisa abram Woits one before the podcast.
27:12
Speaker 1: You can always catch us worldwide on Bloomberg Radio.