Latest / Bloomberg Intelligence / FedEx Warns of Pain Ahead With Tariffs Weighing on Demand

Transcript

FedEx Warns of Pain Ahead With Tariffs Weighing on Demand · 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: Eastern on Applecarplay and Android Auto with the Bloomberg Business App.
• 0:18
  Speaker 1: Listen on demand wherever you get your podcasts, or watch
• 0:21
  Speaker 1: us live on YouTube.
• 0:23
  Speaker 2: FedEx reported some numbers. Le's get back to the corporate
• 0:25
  Speaker 2: earnings disappointing. They're saying tariffs are having an impact on
• 0:29
  Speaker 2: their core shipping business. Let's get the latest on that.
• 0:32
  Speaker 2: Lee Clascow, Bloomberg Intelligence Senior Transport Logistics and shipping analysts
• 0:36
  Speaker 2: and host Bloomberg Intelligence, Taking Transports podcast. If you like railroads,
• 0:42
  Speaker 2: trained trust, he is a big pot.
• 0:46
  Speaker 3: He's joining the cool kids now he is.
• 0:47
  Speaker 2: And if you're into all that logistics transportation stuff, this
• 0:52
  Speaker 2: Talking Transports podcast is the place for you to go.
• 0:54
  Speaker 2: Check it out, Lee, FedEx. What are they tell on
• 0:58
  Speaker 2: the street today?
• 1:00
  Speaker 4: So their last quarter was a decent quarter, but the
• 1:04
  Speaker 4: quarter uh looking forward to their first physical quarter is
• 1:09
  Speaker 4: not going to be a great quarter. And that's really
• 1:11
  Speaker 4: just given the uncertainty that is being driven by the tariffs.
• 1:16
  Speaker 4: So you know they're seeing weakness in their B to
• 1:19
  Speaker 4: B business they're seeing weakness in their industrial kind of
• 1:23
  Speaker 4: end markets, and they're obviously seeing some weakness for volumes
• 1:27
  Speaker 4: that are coming out of China into.
• 1:29
  Speaker 5: The United States.
• 1:30
  Speaker 4: So, you know, these are kind of the headwinds that
• 1:32
  Speaker 4: they're facing. You know, FedEx is doing what it can.
• 1:35
  Speaker 4: It has a couple of initiatives where it's trying to
• 1:38
  Speaker 4: take permanent cost out of its network. But at the
• 1:41
  Speaker 4: end of the day, the company is transitioning from one
• 1:44
  Speaker 4: that used to be B to B business to business
• 1:47
  Speaker 4: is now is.
• 1:47
  Speaker 5: Mostly you know, the growth really is B two C,
• 1:50
  Speaker 5: so that.
• 1:51
  Speaker 4: E commerce business, which is more expensive to deliver, so
• 1:55
  Speaker 4: that what they're trying to do is create a more
• 1:57
  Speaker 4: efficient network. And unfortunately for them, it doesn't happen overnight.
• 2:02
  Speaker 4: It takes a long time, and this is a kind
• 2:04
  Speaker 4: of a journey that they've been going through for the
• 2:07
  Speaker 4: last couple of years.
• 2:08
  Speaker 3: Here here's what was confusing to me is that UPS
• 2:11
  Speaker 3: did the same thing like in the last quarter, like
• 2:14
  Speaker 3: they didn't. They were like, it's uncertain, we don't know
• 2:15
  Speaker 3: what's gonna happen. FedEx said the same thing, but the
• 2:17
  Speaker 3: stock got really punished in afterwhere hours. And I appreciate
• 2:20
  Speaker 3: it's just down two percent now, But why wasn't this
• 2:23
  Speaker 3: already baked into the stock?
• 2:25
  Speaker 5: You know, that's that's a good question.
• 2:28
  Speaker 4: You know, I was thinking about got an uncertain tattoo
• 2:30
  Speaker 4: to my forehead because I'll.
• 2:31
  Speaker 3: Say it so much, but it don't do that.
• 2:34
  Speaker 6: That's gonna hurt.
• 2:36
  Speaker 5: Or probably spell it wrong too.
• 2:38
  Speaker 4: And you know what, you know, you know, what the
• 2:41
  Speaker 4: reality is is the stop and go and go and
• 2:43
  Speaker 4: stop with the tariffs are making it very difficult for
• 2:47
  Speaker 4: not only businesses to operate, but consumers. You know, you
• 2:50
  Speaker 4: saw the other day consumer confidence came in below expectations.
• 2:55
  Speaker 5: So the tariffs are.
• 2:56
  Speaker 4: Really having an impact on volumes. You know, once we
• 3:00
  Speaker 4: get more I think really what businesses really need to
• 3:02
  Speaker 4: know is kind of what are the rules of the road,
• 3:05
  Speaker 4: and then they can operate within those rules.
• 3:07
  Speaker 5: But the stop and go aspects.
• 3:09
  Speaker 4: Of the tariffs can be really confusing and disruptive to
• 3:12
  Speaker 4: supply chains, which is obviously you know FedEx and ups
• 3:16
  Speaker 4: their their core to to move that freight around the world.
• 3:20
  Speaker 2: What's there when you look at FedEx businesses, what's their
• 3:24
  Speaker 2: exposure to China? How are they exposed at China? Uh?
• 3:27
  Speaker 5: Well, they're exposed on there.
• 3:29
  Speaker 4: They're express businesses, so you know, they fly things from
• 3:33
  Speaker 4: all around Asia and Chrivzi China is the largest aspect
• 3:36
  Speaker 4: of that to the United States. You know, it's it
• 3:39
  Speaker 4: could be anything from commercial goods to consumer goods, so
• 3:44
  Speaker 4: you know, they do have a decent exposure.
• 3:46
  Speaker 5: You know.
• 3:47
  Speaker 4: One of the other things that FedEx does is they're
• 3:49
  Speaker 4: in the less than truckload business, which also came in
• 3:52
  Speaker 4: a little below expectations, and that's been a tough business
• 3:56
  Speaker 4: that's really kind of geared towards that that industrial economy.
• 4:01
  Speaker 4: So when you see the ism being in contraction territory
• 4:04
  Speaker 4: for twenty nine in the last thirty one months, that's
• 4:07
  Speaker 4: really weighing on that business. And FedEx does plan on
• 4:10
  Speaker 4: spending out that business sometime, you know, next year.
• 4:15
  Speaker 3: So what's the right question then to be asking for
• 4:18
  Speaker 3: a FedEx and a UPS at this point because you know,
• 4:21
  Speaker 3: the as you point out rightly, the uncertainty trade for
• 4:25
  Speaker 3: transports is definitely front and center, like no one's going
• 4:27
  Speaker 3: to have a firm outlook, So what's the next question.
• 4:30
  Speaker 4: I guess the next question is how are you restructuring
• 4:33
  Speaker 4: your networks to be able to handle the more expensive
• 4:37
  Speaker 4: home deliveries that we're all accustomed to. So, you know,
• 4:40
  Speaker 4: we're all accustomed to free shipping. You know, when you
• 4:43
  Speaker 4: order something online, how are they going to facilitate that
• 4:46
  Speaker 4: at They're at the lowest cost they possibly can because
• 4:49
  Speaker 4: they're you know, they face competition to FedEx and the
• 4:52
  Speaker 4: UPS is the world. They fed face competition from local players,
• 4:55
  Speaker 4: from gig economies, from the US Postal Service, and so
• 4:59
  Speaker 4: they they need to know bend that cost curve lower
• 5:03
  Speaker 4: to be able to drive better margins.
• 5:06
  Speaker 5: And you know, UPS N FedEx have been again.
• 5:09
  Speaker 4: Trying to restructure their networks. And I guess the real
• 5:12
  Speaker 4: question is when is it going to end and when
• 5:14
  Speaker 4: can we see margins start improving. But I don't think
• 5:17
  Speaker 4: that's going to be a twenty twenty five calendar year story.
• 5:21
  Speaker 4: I think that might be more of a twenty twenty
• 5:23
  Speaker 4: sixth story. And you know, as things normalize and buying
• 5:26
  Speaker 4: begins to grow again, I think that should really generate
• 5:30
  Speaker 4: pretty good margins in these types of businesses.
• 5:33
  Speaker 2: And Lee, let's pivot just here at the end. Here
• 5:36
  Speaker 2: you also cover the big ocean shipping companies. What are
• 5:39
  Speaker 2: they seeing in terms of freight and cargo and all
• 5:43
  Speaker 2: that kind of stuff again in a world where we're
• 5:45
  Speaker 2: operating with some uncertain terrorf levels.
• 5:48
  Speaker 4: Yeah, well they're they're enjoying the disruptions that are created,
• 5:51
  Speaker 4: the geopolitical disruptions because those are pushing rates higher than
• 5:55
  Speaker 4: they probably need to be.
• 5:56
  Speaker 5: So that's for them and that positive.
• 5:58
  Speaker 4: Then that negative, to your point, is on the volume side,
• 6:01
  Speaker 4: we are seeing a surge of freight that's going to
• 6:03
  Speaker 4: be heading to southern California in the weeks to come,
• 6:07
  Speaker 4: and so that's that is an incremental positive. But the
• 6:10
  Speaker 4: problem is that these surges in freight demand could create
• 6:14
  Speaker 4: air pockets and much tougher to second half comparisons when
• 6:19
  Speaker 4: it comes to volumes, So you could have strong volumes
• 6:22
  Speaker 4: near term, but kind of weaker volumes with the months
• 6:26
  Speaker 4: heading months further out.
• 6:29
  Speaker 3: All right, Ley, it's a pleasure. Thank you so much
• 6:30
  Speaker 3: to Klasical. He joins us from Bloomberg Intelligence. He covers
• 6:34
  Speaker 3: all the transports. There a senior transport logistics and shipping analysts.
• 6:37
  Speaker 3: He's doing the podcast train there's a Bloomberg Intelligence talking
• 6:40
  Speaker 3: transports podcast. I thought we were the only BI podcast.
• 6:44
  Speaker 2: No, he's look at that.
• 6:45
  Speaker 3: A lot of them out there, all right, all right,
• 6:49
  Speaker 3: you know.
• 6:51
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 6:55
  Speaker 1: weekdays at ten am Eastern on Apple Corplay and Android
• 6:58
  Speaker 1: Auto with the Bloomberg This Up. Listen on demand wherever
• 7:01
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 7:05
  Speaker 2: Alex Steal Paul Sweeney live here in our Bloomberg INTERACTI
• 7:08
  Speaker 2: broker studio, streaming live on YouTube as well. All right,
• 7:11
  Speaker 2: up at the pantry on the sixth floor here, I
• 7:13
  Speaker 2: start every morning around six am with the bowl of
• 7:16
  Speaker 2: honey nut cheerios, and that is a General Mills product.
• 7:21
  Speaker 2: They had some numbers that weren't very good. The company
• 7:23
  Speaker 2: expects adjusted earnings per share to decline as much as
• 7:27
  Speaker 2: fifteen percent a constant currency basis this year. That's tough.
• 7:32
  Speaker 2: Let's go to Diana Recital Pain. Yes, she's a consumer
• 7:34
  Speaker 2: staples analyst Bloomberg Intelligence, joining us live here in our
• 7:37
  Speaker 2: Bloomberg Interactive Broker Studio. So Diana General Mills week earnings
• 7:42
  Speaker 2: outlook talk to us about what's going on in their business.
• 7:44
  Speaker 7: So it's pretty much what is happening across the package
• 7:48
  Speaker 7: food industry. Volumes are not coming in and they're going
• 7:52
  Speaker 7: to have to invest more in pricing, some cutting prices
• 7:55
  Speaker 7: as well as weak volume. It is basically flat. It's
• 8:00
  Speaker 7: to negative organic growth and that is obviously with a
• 8:04
  Speaker 7: negative product mix, is probably going to go down the
• 8:06
  Speaker 7: P and L.
• 8:08
  Speaker 3: But why, Like, we still got to eat so and
• 8:10
  Speaker 3: these are staples, right, So what's the problem.
• 8:13
  Speaker 7: Well, basically there's a greater private label penetration. People are
• 8:17
  Speaker 7: being more strategic with their spending and they're not.
• 8:20
  Speaker 3: So private labels like three sixty five from Whole Foods
• 8:23
  Speaker 3: or something.
• 8:23
  Speaker 7: Right, Za's exactly. And in the past few years, retailers
• 8:27
  Speaker 7: have invested a lot on private label brands. So the
• 8:30
  Speaker 7: competition has become more fears and it seems that the equity,
• 8:35
  Speaker 7: the brand equity that these companies used to.
• 8:37
  Speaker 2: Have is not hidden anymore.
• 8:39
  Speaker 7: Like people are just not buying their products.
• 8:42
  Speaker 2: I'm one of them. I mean, before the pandemic and
• 8:44
  Speaker 2: the inflation, I don't think I've bought one private label
• 8:47
  Speaker 2: thing ever. In fact, you know, I felt strongly about brands,
• 8:52
  Speaker 2: but now I'm like, screw it, And so we buy
• 8:54
  Speaker 2: so many private label products now versus and I don't.
• 8:58
  Speaker 7: Know, and you're not the only one we're seeing, like
• 9:01
  Speaker 7: across all age groups, particularly for gen zs, they're less
• 9:05
  Speaker 7: dedicated to brands that the older generations.
• 9:09
  Speaker 2: What do you do about that?
• 9:10
  Speaker 3: Yeah, then we have to make your own private Well,
• 9:14
  Speaker 3: you know.
• 9:14
  Speaker 7: Some of these companies do have some private label, but
• 9:17
  Speaker 7: it doesn't it obviously, they don't break it down and
• 9:19
  Speaker 7: they're trying to make it not as evident. And obviously
• 9:23
  Speaker 7: they want to invest, they want to increase marketing. They're
• 9:27
  Speaker 7: gonna probably cut prices, which is which is why you
• 9:32
  Speaker 7: see adjusted operating income probably gonna decline in fifteen percent
• 9:37
  Speaker 7: over the next fiscal year.
• 9:39
  Speaker 3: Can they invest in their own private label brand or
• 9:41
  Speaker 3: is that market so saturated? No, it's not necessarily like
• 9:46
  Speaker 3: in the marketing side.
• 9:47
  Speaker 7: That will fall on the retailer side to invest in
• 9:50
  Speaker 7: their private label. But I'm meaning more unlike this Cereal,
• 9:55
  Speaker 7: the brand Cereal branded Cereal.
• 9:56
  Speaker 2: All right, I'm asking for a friend who may or
• 9:59
  Speaker 2: may not be getting his first pet ever in his
• 10:01
  Speaker 2: lifetime on July sixteenth, a dog, Australian labradoodle. Not just
• 10:05
  Speaker 2: about the pet food business. What's that like?
• 10:08
  Speaker 7: So they have been it seems that that part of
• 10:11
  Speaker 7: their business stabilizing a little bit. They are now and
• 10:15
  Speaker 7: you probably will see Fresh Pet declining I believe four
• 10:19
  Speaker 7: to five percent today because they're start they're extending the
• 10:22
  Speaker 7: Blue Buffalo brand into fresh Pets.
• 10:27
  Speaker 2: Who's doing what well?
• 10:29
  Speaker 7: So General Mills is expanding Blue Buffalo into fresh food
• 10:35
  Speaker 7: fresh pet food, but Fresh Pet has like ninety percent
• 10:39
  Speaker 7: of the market share, so obviously you know that intrusion
• 10:42
  Speaker 7: is probably hitting them. We're not necessarily that convinced. They
• 10:47
  Speaker 7: weren't very forthcoming in terms of like the type of distribution. Obviously,
• 10:52
  Speaker 7: this is more refrigerated food that needs a little bit
• 10:55
  Speaker 7: different than like the boxes of cereal that they are
• 10:57
  Speaker 7: used to. So we're we're still you know, taking a
• 11:02
  Speaker 7: look how they're going to distribute that and how they
• 11:04
  Speaker 7: they're gonna kind of get share from Fresh Pet, which
• 11:07
  Speaker 7: has like their own fridges and stuff.
• 11:10
  Speaker 3: What consumer staple brand is doing everything right?
• 11:15
  Speaker 7: Uh? I would say, uh wow, that is from what
• 11:21
  Speaker 7: I'm seeing probably, I mean, like yogurt, like you're thinking
• 11:27
  Speaker 7: about Chiavani, like those guys seem to be so.
• 11:29
  Speaker 3: Like a specialty Hell yes, sort of staple eat place exactly.
• 11:35
  Speaker 5: You have.
• 11:37
  Speaker 7: You know, high protein, like all the good attributes that
• 11:41
  Speaker 7: people are looking for. I think those are like the
• 11:44
  Speaker 7: ones that will probably benefit from from this, and.
• 11:47
  Speaker 2: I'll sell what I but I still buy the brand
• 11:49
  Speaker 2: Campbell soup. Maybe that's just a kid thing.
• 11:51
  Speaker 3: That's like, that's definitely a kid think, but I feel
• 11:53
  Speaker 3: that way about like generics. We talked about this at
• 11:55
  Speaker 3: drug stores, like you got to get the real band aids.
• 11:57
  Speaker 3: Like if you don't get the real band aids, they
• 11:59
  Speaker 3: just fall off.
• 12:00
  Speaker 2: It's just terrific.
• 12:00
  Speaker 3: It's very upsetting, all right, Dana, Thanks very much. Dianna
• 12:03
  Speaker 3: as their opinion. Bloomberg Intelligence consumer staples analysts. Joining us there.
• 12:08
  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 12:12
  Speaker 1: weekdays at ten am Eastern on Applecarclay, and Android Auto
• 12:15
  Speaker 1: with the Bloomberg Business App. Listen on demand wherever you
• 12:19
  Speaker 1: get your podcasts, or watch us live on YouTube.
• 12:22
  Speaker 3: Happy Wednesday, everybody. Alex Steal here alongside Paul Sweeney. This
• 12:25
  Speaker 3: is Bloomberg Intelligence Radio. We cover all the tap news
• 12:27
  Speaker 3: and business economics and finance through our lens of our
• 12:29
  Speaker 3: Bloomberg Intelligence folks take over two thousand companies and one
• 12:32
  Speaker 3: hundred and thirty industries all around the world. We talked
• 12:35
  Speaker 3: earlier about General mills and sort of the issues there
• 12:39
  Speaker 3: with the private label brands and store brands. Let's take
• 12:42
  Speaker 3: another look at consumer products, but look at it at
• 12:44
  Speaker 3: the lens of restaurants and restaurant valuations.
• 12:47
  Speaker 2: Kind of the haves and have nots.
• 12:49
  Speaker 3: Michael Hale and Bloomberg Intelligence senior restaurant and food service
• 12:52
  Speaker 3: analyst joins us now fresh at up a recent report.
• 12:55
  Speaker 3: So I asked Diana this, like, who's the winner in
• 12:58
  Speaker 3: the consumer staples? And she was like ooh, and it
• 13:00
  Speaker 3: like took her a while to get there because it's
• 13:02
  Speaker 3: really rough. Same question to you, who are the winners
• 13:04
  Speaker 3: in the restaurant is uh?
• 13:06
  Speaker 8: You know, the two of the names that we really
• 13:09
  Speaker 8: like this year are Cracker Barrel and Shake Shack.
• 13:11
  Speaker 6: They Cracker Bail.
• 13:12
  Speaker 3: I still got to go many the goals.
• 13:15
  Speaker 6: They hired new CEOs last year.
• 13:19
  Speaker 8: Uh, they're really focusing on improving the operations first and
• 13:23
  Speaker 8: then the marketing.
• 13:25
  Speaker 6: Uh there and so we're really excited about.
• 13:27
  Speaker 8: Some of the changes and some of the early results.
• 13:31
  Speaker 8: You know, both of them we expect to outperform pretty
• 13:34
  Speaker 8: significantly on the on the top line this year.
• 13:37
  Speaker 2: Well, the Cracker Barrel, I mean I know my way
• 13:39
  Speaker 2: around at Cracker bar. I know where every little nud
• 13:41
  Speaker 2: nick is in every store. Every store is the same.
• 13:44
  Speaker 2: And then of course the same order the Country Boy breakfast.
• 13:47
  Speaker 3: But what'sn't that again, it's not like.
• 13:48
  Speaker 2: The Country Boy breakfast with the country ham okay, and
• 13:52
  Speaker 2: you get biscuits and gravy.
• 13:55
  Speaker 5: It's a whole thing.
• 13:55
  Speaker 3: It's a whole thing.
• 13:56
  Speaker 2: It's a whole thing. Unbuttoned yourself and sit right down. Yeah,
• 13:59
  Speaker 2: what did they changing here?
• 14:00
  Speaker 5: What is it?
• 14:00
  Speaker 2: Because that's kind of what they are. It seems like
• 14:02
  Speaker 2: their DNA is kind of that type of stuff.
• 14:05
  Speaker 6: Yeah.
• 14:05
  Speaker 8: So so one of the first things they did was
• 14:08
  Speaker 8: focus their menu right. There was a lot of items
• 14:11
  Speaker 8: on there that were not selling very good and also
• 14:15
  Speaker 8: bogging down the kitchen. That has made the experience better
• 14:20
  Speaker 8: for the employees. Employee turnover has plummeted. It was down,
• 14:25
  Speaker 8: you know, high.
• 14:25
  Speaker 6: Teens year over year in the last quarter.
• 14:28
  Speaker 8: So that saves them a lot of money on training
• 14:30
  Speaker 8: and things of that nature provide, you know, as the
• 14:33
  Speaker 8: longer your employees stay, obviously, the better experience your customers
• 14:36
  Speaker 8: get and then people come back.
• 14:38
  Speaker 6: They're also touching up the stores.
• 14:40
  Speaker 8: They're going to remodel the stores, lighting and paint are
• 14:44
  Speaker 8: some are some of the things that they're going to
• 14:46
  Speaker 8: do across all the stores. Some of the stores need
• 14:48
  Speaker 8: more work. They'll do the floors as well. That's something
• 14:51
  Speaker 8: they're starting to do. And then they're ramping up the marketing.
• 14:54
  Speaker 8: So now that the operations are running well, they're doing
• 14:58
  Speaker 8: more social media marketing talk, they're they they just had
• 15:03
  Speaker 8: their first NASCAR race and the Cracker Bar of four
• 15:06
  Speaker 8: hundred down in Tennessee, right Crystal, And they're advertising on
• 15:11
  Speaker 8: live sports as well as Bravo. There's a huge overlap
• 15:14
  Speaker 8: between casual dining fans and Bravo watchers, and so yes,
• 15:19
  Speaker 8: do not see that coming.
• 15:21
  Speaker 3: So on the other hand, what are some of the
• 15:23
  Speaker 3: companies that aren't doing so well?
• 15:25
  Speaker 8: Oh yeah, so you know some of the legacy casual
• 15:28
  Speaker 8: dining brands. Casual dining in general is having somewhat of
• 15:31
  Speaker 8: a renaissance. This year's casual Chili's is the one they've
• 15:37
  Speaker 8: Chili's is rocking it absolutely, and Applebee's is not. So
• 15:45
  Speaker 8: you got you got your preferences confused right now?
• 15:49
  Speaker 6: Backwards, I'd say so, yeah.
• 15:51
  Speaker 8: Dine Brands, which owns Applebee's and Ihop, they're having a
• 15:54
  Speaker 8: real real hard time resonating with younger consumers and and
• 15:58
  Speaker 8: haven't been able to bring those consumers into the brand.
• 16:01
  Speaker 8: They also have a large number of low income consumers
• 16:06
  Speaker 8: that visit those brands, and so that's really hurting their
• 16:10
  Speaker 8: hurting their results. And then blooming brands out Back Steakhouses
• 16:14
  Speaker 8: their biggest chain, they've same type of situation. They've struggled
• 16:18
  Speaker 8: to bring in younger consumers into the brands, and their pricing.
• 16:20
  Speaker 6: Got way ahead of itself.
• 16:22
  Speaker 8: So if you compare them to Texas Roadhouse, it's a
• 16:24
  Speaker 8: way more expensive experience and yet maybe not a better product,
• 16:29
  Speaker 8: not a better experience for the consumer, definitely not better service.
• 16:34
  Speaker 2: Your coverage is a great reflection of the consumer. What
• 16:39
  Speaker 2: are your takeaways? How is the consumer out there? What
• 16:40
  Speaker 2: are the restaurants telling you?
• 16:41
  Speaker 8: They're doing all right? They're doing alright. Last year was
• 16:44
  Speaker 8: a restaurant session. This year results are better, and we
• 16:47
  Speaker 8: expect them to get better in the second half. You know,
• 16:51
  Speaker 8: first quarter there was some consternation, but it was a
• 16:54
  Speaker 8: lot of bad weather. There was a bad flu season.
• 16:57
  Speaker 8: There was some pullback by low and middle income consumers
• 16:59
  Speaker 8: in March, but they seem to have rebound results have
• 17:01
  Speaker 8: been pretty strong thus far, and we and the economic
• 17:05
  Speaker 8: indicators that we watch are starting to get a little
• 17:07
  Speaker 8: bit better.
• 17:08
  Speaker 3: So unvalued appropriately for the conditions right now.
• 17:13
  Speaker 8: Well, you know me personally, I don't look at historical
• 17:16
  Speaker 8: valuations because the market cycles change so much.
• 17:19
  Speaker 6: I'm looking at it on a relative basis, right, and
• 17:24
  Speaker 6: relative to the peer group. Okay, yeah, and so I see.
• 17:27
  Speaker 8: And so it depends on the name, right, It definitely
• 17:30
  Speaker 8: depends on the name. But you know, I think restaurants
• 17:33
  Speaker 8: are set up for a nice strong second half. We
• 17:35
  Speaker 8: also have we are going to have that tailwind of
• 17:37
  Speaker 8: tax cuts, and so I think just getting that, having
• 17:39
  Speaker 8: that and be the narrative versus tariffs and war and
• 17:43
  Speaker 8: whatever else, I think it's going to help shift consumer
• 17:46
  Speaker 8: sentiment and spending.
• 17:48
  Speaker 2: Just the quick service restaurants, which otherwise is fast food.
• 17:50
  Speaker 2: How are they doing?
• 17:52
  Speaker 8: Fast food is struggling. Number one, they're lapping harder comparisons
• 17:56
  Speaker 8: from last year. Number two, they have more exposure to
• 18:00
  Speaker 8: income consumers, which continue to be hurt by the inflation
• 18:02
  Speaker 8: that we've.
• 18:03
  Speaker 6: Seen, right.
• 18:04
  Speaker 8: And number three, they've overbuilt so since the since the pandemic,
• 18:11
  Speaker 8: full service chains, casual dying chains, kind of pulled back
• 18:13
  Speaker 8: on their development.
• 18:15
  Speaker 6: They closed stores. Fast Food has.
• 18:16
  Speaker 8: Just been full steam ahead of opening stores, so supplying
• 18:19
  Speaker 8: de Man has gotten out.
• 18:20
  Speaker 3: Of whack, all right, Michael, thanks a lot, Really appreciate it,
• 18:22
  Speaker 3: really good stuff.
• 18:23
  Speaker 2: I still going to make it.
• 18:24
  Speaker 6: To crack a barrel.
• 18:25
  Speaker 3: Michael hallin the Brig Intelligence senior restaurant and food service analysts,
• 18:29
  Speaker 3: joining us on the winters and losers of a restaurant valuations.
• 18:33
  Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,
• 18:38
  Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,
• 18:42
  Speaker 1: ten am to noon Eastern on Bloomberg dot com, the
• 18:45
  Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You
• 18:49
  Speaker 1: can also watch us live every weekday on YouTube and
• 18:53
  Speaker 1: always on the Bloomberg terminal