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Microsoft Slips on Report of Lower Demand for Some AI Tools · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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  Speaker 2: A lot of tech stories out there, including the one
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  Speaker 2: here Microsoft here. The question is I guess the information
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  Speaker 2: was out earlier that multiple Microsoft divisions lowered how much
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  Speaker 2: salespeople are supposed to grow their sales of certain air
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  Speaker 2: products after many missed sales goals in the fiscal year
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  Speaker 2: and in June. That's what the Information Reporter earlier. Today,
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  Speaker 2: Microsoft though, has not lowered sales quotas and targets for salespeople.
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  Speaker 2: That's according to CNBC. They reported that on air, siting
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  Speaker 2: an emailed statement for Microsoft. So I don't know what's
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  Speaker 2: going on out there. Microsoft stocks down a little bit
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  Speaker 2: here on a Rod Rana, technology analyst to Bloomberg Intelligence
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  Speaker 2: joins this year just kind of put that information reporting
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  Speaker 2: the CNBC kind of rebutting it. I mean, just give
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  Speaker 2: us a sense of kind of AI sales how this
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  Speaker 2: thing is kind of progressing, because I can't imagine there's
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  Speaker 2: any material slowdown in AI from what I've heard.
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  Speaker 3: Yeah, Aulso when you look at there are two different
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  Speaker 3: elements of it. One is the AI infrastructure piece of it. Well,
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  Speaker 3: there is no slowdown in Microsoft at that point in fact,
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  Speaker 3: that Microsoft is capacity constraints right now. But to be honest,
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  Speaker 3: that's not the sales quota somebody is looking at it.
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  Speaker 3: That just comes in because you're hosting somebody's model, or
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  Speaker 3: you're trying to get you're hosting chat GPT. The sales
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  Speaker 3: quotas would be for products such as you know, Microsoft Copilot,
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  Speaker 3: Office Copilot, Getthub Copilot, all those products. And you know
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  Speaker 3: that's not the same for everything. There are certain products
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  Speaker 3: that sell better than the others because of the use
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  Speaker 3: case of it. Kittub Copilot, for example, because it's a
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  Speaker 3: coding software platform. The Microsoft Office Copilot is a good
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  Speaker 3: piece of software or copilot, but it's very expensive. It's
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  Speaker 3: I think thirty dollars per use of per month, so
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  Speaker 3: it's not an Apple set of apples comparison throughout the board.
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  Speaker 3: One of the things that we've been talking about is
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  Speaker 3: even when you look at the broader tech spending, there
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  Speaker 3: is a big slowdown when you exclude AI. So that
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  Speaker 3: could be one reason that enterprise are not comfortable spending
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  Speaker 3: that level of money right now on those individual software pieces.
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  Speaker 3: The second piece could be the implementation part of it.
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  Speaker 3: Because you're buying these sometimes there's data products that you
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  Speaker 3: have to include in your core software or your core applications,
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  Speaker 3: and that may take time. So there is a lot
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  Speaker 3: to be digest from a macro piece. I don't think
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  Speaker 3: there is any slowdown.
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  Speaker 4: Honor on how is Microsoft tracking against its competitors in
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  Speaker 4: terms of AI software.
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  Speaker 3: It is doing much better than everybody else. But again
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  Speaker 3: with the caveat because they host chatchipt. This is when
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  Speaker 3: they invested in chat GPT, you know, I don't know
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  Speaker 3: six seven years ago. That is part of that thing
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  Speaker 3: was when you're running that application, it runs on their cloud.
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  Speaker 3: So when you see that, you know, within a three
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  Speaker 3: year period you have what five hundred and six million
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  Speaker 3: users out there when we use chat GPT, a large
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  Speaker 3: portion of that revenue flows into Microsoft Cloud. So when
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  Speaker 3: they are the ones that have seen the first phase
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  Speaker 3: of the big benefit of AI. But as we have said,
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  Speaker 3: you know many times before, all the other vendors will
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  Speaker 3: see that down the road. When adoption grows in other
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  Speaker 3: areas of the ecosystem.
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  Speaker 2: Salesforce reports after the close here what should we expect
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  Speaker 2: from them?
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  Speaker 3: Yeah, it goes back to the first piece of what
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  Speaker 3: I said was enterprise spending is week when you're looking
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  Speaker 3: at Fortune two thousand companies, they're not hiding at that
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  Speaker 3: same pace that they used to and we will exclude
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  Speaker 3: AI companies from it. And that is that weighs on
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  Speaker 3: the sales of somebody like a salesforce, somebody like a
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  Speaker 3: workday because they build on a per head basis. So
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  Speaker 3: when these companies are not hiding at that same rate,
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  Speaker 3: Salesforce has a tough time to grow their subscription base.
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  Speaker 3: And you know, we think it is going to be
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  Speaker 3: very much in line with what they had last time,
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  Speaker 3: somewhere around at nine ten percent, which is not bad,
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  Speaker 3: but it's not very exciting as well.
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  Speaker 2: I mean, is that enough for the stock to be
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  Speaker 2: down as much as it is here to date?
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  Speaker 4: I mean it just seems like thirty percent down.
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  Speaker 2: You're exactly down thirty percent for this is a company
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  Speaker 2: that just has has been such a great growth story.
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  Speaker 3: Yeah, so when you and you know, when you look
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  Speaker 3: at last year, there was a lot of excitement when
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  Speaker 3: they launched a product called Agent Force, which was their
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  Speaker 3: answer or the AI answer to the rest of the universe.
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  Speaker 3: But what happened was the adoption rate has not been
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  Speaker 3: as strong as the initial you could say the demo
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  Speaker 3: was so if you look at the stock price, it
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  Speaker 3: kind of went out quite a bit of when they
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  Speaker 3: first launched that particular product. Now this year it's not
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  Speaker 3: showing up in the numbers, and this is one of
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  Speaker 3: the reasons you're not seeing the stock recovering from that.
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  Speaker 4: What about Oracle, It seems like there's some worries around
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  Speaker 4: artificial intelligence there as well. We're looking at a credit
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  Speaker 4: risk game and reaching as high as since two thousand
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  Speaker 4: and nine.
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  Speaker 3: Yeah, and that is why I think the very very
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  Speaker 3: valid question is what happens to Oracle. When you look
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  Speaker 3: at this entire AI bubble narrative or the framework, you know,
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  Speaker 3: you have the big cloud providers that are spending the
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  Speaker 3: most amount of money. We say, when you look at
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  Speaker 3: somebody like an Amazon, Microsoft, and Google, they are spending
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  Speaker 3: quite a bit, but they have real, you know, awesome
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  Speaker 3: cash flow that's coming in. Plus they have businesses, so
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  Speaker 3: even if they overbuild, they will have capacity to use it.
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  Speaker 3: The bigger question is what happens to open ai oracle relationship.
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  Speaker 3: Open Ai has said that they have given Oracle, you
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  Speaker 3: could say, a contract of about three hundred billion dollars
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  Speaker 3: to bleed in terms of sales over the next several years.
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  Speaker 3: They're going to first build some massive data centers and
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  Speaker 3: then they're going to use Oracle as a cloud provider.
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  Speaker 3: The big question is where is opening IM going to
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  Speaker 3: get money from, And that's really what's weighing on that
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  Speaker 3: particular part of the equation. And to be very honest,
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  Speaker 3: there is genuine reason to figure out, like how is
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  Speaker 3: wi is going to raise that money and how are
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  Speaker 3: they going to spend So there is some reason to
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  Speaker 3: be consumed, but not so much on the credit de
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  Speaker 3: false side of it, but so much more as the
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  Speaker 3: estimates that are out there for the opious.
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  Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
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  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 2: All right, let's talk a little retail Macy's at with
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  Speaker 2: some numbers. I thought the numbers were pretty good. Stocks
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  Speaker 2: off one point seven percent, So what do I know?
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  Speaker 2: Mary Ross Gilbert Senior Echody Allen, she covers the retailer.
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  Speaker 2: She's the expert for Bloomberg Intelligence. She's based out there
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  Speaker 2: in la Mary talks us about Macy's. What do we
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  Speaker 2: hear from them today with the results.
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  Speaker 5: So, Paul, we saw, actually, I think great results coming
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  Speaker 5: out of Macy's this morning, you see, And so when
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  Speaker 5: you think about it, the stock is off, but that's
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  Speaker 5: because the company put out conservative fourth quarter guidance and
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  Speaker 5: that's really what they always do.
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  Speaker 3: They seek to beat.
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  Speaker 5: Their numbers, and so that guidance came in very close,
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  Speaker 5: you know, at the high end. It's right around where
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  Speaker 5: analysts are because they already saw strong results come in
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  Speaker 5: from other retailers. But we think, when we think about it,
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  Speaker 5: we think there's upside here. So we really view the
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  Speaker 5: results as look Macy's name plate because of all the
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  Speaker 5: changes that they're making, and what that means is they're
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  Speaker 5: bringing in more relevant brands that are resonating with their consumer.
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  Speaker 5: Not only that, but the stores look brighter. There's really
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  Speaker 5: kind of exciting music in the stores, the store associates
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  Speaker 5: are more engaged with the customer. We've noticed that on
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  Speaker 5: our channel texts, particularly on Black Friday, we saw more
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  Speaker 5: traffic in the store than we've seen in years past.
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  Speaker 5: So we think that the change is that CEO Tony
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  Speaker 5: Sprain is making and he's really taking his cues from
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  Speaker 5: what he's done at Bloomingdale's. It's resonating, it's working, and
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  Speaker 5: so we think this momentum is building and we certainly
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  Speaker 5: saw it in the third quarter numbers with comp sales
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  Speaker 5: two point seven percent for the Go Forward stores, and
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  Speaker 5: so with that, I mean that's a big improvement sequentially,
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  Speaker 5: and so we think that's building going into the fourth
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  Speaker 5: quarter and just with the constant improvement that we're seeing there.
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  Speaker 4: So when most people think about the retail space right now,
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  Speaker 4: a lot of people think about the transition to e commerce,
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  Speaker 4: but it sounds as though from what you're explaining, a
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  Speaker 4: lot of people are going there in person. I mean,
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  Speaker 4: I'm looking at Coohal's, I'm looking at Dillard's. All of
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  Speaker 4: these stocks are up pretty substantially on the year, alongside Macy's.
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  Speaker 4: What are they doing in particular that's really attracting customers
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  Speaker 4: to come through the doors. Is it also collaborations with
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  Speaker 4: celebrities by chance?
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  Speaker 5: Yes, you raised a valid point, and it is. It
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  Speaker 5: does include collaborations. So for example, they Aqua, you know,
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  Speaker 5: they're under their Bloomingdale's brand, currently has a collab going
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  Speaker 5: out with a designer out of Lawn and so yes,
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  Speaker 5: these collaborations also even you know, they'll have some events.
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  Speaker 5: But all of that is is certainly drawing in new customers,
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  Speaker 5: and I think Macy's nameplate could certainly do more on
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  Speaker 5: that end. They had their first collab with their on
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  Speaker 5: thirty fourth brand this year, but we think we're going
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  Speaker 5: to see more next year because if you look at
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  Speaker 5: what Dillard's has been doing over the last few years,
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  Speaker 5: and they have a different business model than Macy's does.
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  Speaker 5: They're not really promotional. For example, for Black Friday, they
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  Speaker 5: just had clearance sales and it was pretty comparable to
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  Speaker 5: last year, so that didn't mean that the rest of
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  Speaker 5: the merchandise was on sale. Macy's the you know, as
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  Speaker 5: far more promotional. But by doing collaborations, you know, by
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  Speaker 5: getting celebrities involved. So for example, for the holiday, they
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  Speaker 5: have Jennifer Hudson that's you know, fronting their campaign for
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  Speaker 5: the holiday, and they're also engaging with social influencers. So yes,
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  Speaker 5: all of that is resonating. We're seeing it with other brands,
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  Speaker 5: like for example, with American Eagle, which just tapped Martha
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  Speaker 5: Stewart and that that's appealing to gen z.
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  Speaker 4: Oh wow.
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  Speaker 2: So one.
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  Speaker 5: Yeah, So these bold campaigns that these brands are doing,
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  Speaker 5: Macy's is also getting involved there and they're dipping their
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  Speaker 5: to I would say they're dipping their toe in the water.
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  Speaker 5: But I think we're going to see that increase, you know,
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  Speaker 5: and build as we get into twenty twenty six. And
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  Speaker 5: when you talk about the digital business, because of course
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  Speaker 5: you're always hearing, let's say, stronger growth on digital. For example,
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  Speaker 5: when we looked at Black Friday, you know, over the
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  Speaker 5: weekend through Cyber Monday, the sale strength was really led
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  Speaker 5: by digital. Digital was up double digits versus you know,
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  Speaker 5: load to mid single digits for in the store, So
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  Speaker 5: I think that's really positive there. So when we look
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  Speaker 5: at Macy's, a third of their sales come from digital,
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  Speaker 5: so still in store is very big, but it's also
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  Speaker 5: omni channel well, the ability to buy online, take back
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  Speaker 5: in store or buy online, pick up in store.
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  Speaker 2: Well, when I walked to Penn Station today, I'm going
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  Speaker 2: to walk past Macy's as I always do, but today
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  Speaker 2: I'm going to go in. Okay, I'm going to do
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  Speaker 2: a store walk. Is what the kid? What the retail
• 11:29
  Speaker 2: anamals call it a store walk? And I'm going to
• 11:31
  Speaker 2: check if John Tucker's would an escalator.
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  Speaker 4: Still there, We're counting on you.
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  Speaker 2: Okay, report back, Mary, just real quick, thirty seconds. What's
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  Speaker 2: macy saying about the consumer out there?
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  Speaker 5: Yeah, so they're saying that the lower end consumer is
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  Speaker 5: really feeling pinched and that's where they're seeing some challenges
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  Speaker 5: on some of the price increases on their lower price
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  Speaker 5: point items. But the higher middle income, in the higher
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  Speaker 5: income consumer is resilient and they haven't lashed or battered
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  Speaker 5: and I with higher prices that they took to offset
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  Speaker 5: tariffs and they're still buying.
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  Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
• 12:13
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 12:17
  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
• 12:20
  Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever
• 12:24
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 12:27
  Speaker 2: We continue to get some earnings from the retailers. Today,
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  Speaker 2: Dollar Tree came out with some numbers, pretty good numbers.
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  Speaker 2: The street likes that. The stock's up three point four
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  Speaker 2: percent today. Dollar Tree is up fifty percent year to date,
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  Speaker 2: So a great move for that company, that stock. Let's
• 12:44
  Speaker 2: turn to Lily Meyer here, Bloomberg Deals reporter for Bloomberg News.
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  Speaker 2: She covers all the retail companies out there. Talk to
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  Speaker 2: us about Dollar Tree. What did they say here in
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  Speaker 2: the latest earnings.
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  Speaker 6: Yeah, so dollar Tree did well this quarter at matt
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  Speaker 6: expectations on revenue and same store sale, and it raised
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  Speaker 6: its profit outlook for the year. I think they really
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  Speaker 6: have hit a niche in being able to capture consumers,
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  Speaker 6: both lower end consumers who need cheaper goods and then
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  Speaker 6: high income consumers who are looking to trade down.
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  Speaker 4: So, I mean, what do we think about elasticity of
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  Speaker 4: the lower end consumer right now? Because I mean, if
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  Speaker 4: you think about Walmart, I used to think of this
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  Speaker 4: as a company that you know, was a cheaper place
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  Speaker 4: to shop, but it seems as though it's appealing to
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  Speaker 4: multiple consumer types. But it seems as though Dollar Tree
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  Speaker 4: really is a great place for the lower end consumer.
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  Speaker 6: Yeah, and actually recently Dollar Tree has been looking to
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  Speaker 6: kind of break into that higher income shopper as well.
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  Speaker 6: So it has this pricing strategy, so it has some
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  Speaker 6: products that are still cheaper, but then it has some
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  Speaker 6: it's getting more products that are more expensive.
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  Speaker 2: What is Dollar Tree saying about its core consumer out there?
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  Speaker 2: Who is that core consumer and how are they behaving?
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  Speaker 7: Yeah?
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  Speaker 6: So I think it's core consumer is still a lower
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  Speaker 6: income shopper. Eighty five percent of their products are two
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  Speaker 6: dollars an under, so they really still have a lot
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  Speaker 6: of value. So they're seeing those shoppers continue to go in.
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  Speaker 6: But this quarter they saw traffic down and they attributed
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  Speaker 6: that to tariff increases.
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  Speaker 4: See I missed when things were actually a dollar, a
• 14:14
  Speaker 4: dollar Tree, a dollar general.
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  Speaker 2: Did you say two dollars? I remember? Should we change
• 14:19
  Speaker 2: the name? And I remember it? John, and I remember
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  Speaker 2: the five and dime and Penny can do it yep, exactly,
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  Speaker 2: dating ourselves ourselves, all.
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  Speaker 4: Right, So what's the takeaway in terms of the outlook.
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  Speaker 4: I mean, you talked about tariff still being a drag here.
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  Speaker 6: Yeah, so tariffs will really dragged this quarter. They said
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  Speaker 6: that's gonna lessen. So I think this was the quarter
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  Speaker 6: where we're really seeing the biggest tariff impact. It'll be
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  Speaker 6: really interesting to see what they predict for consumers next year.
• 14:46
  Speaker 6: I'm interested to hear about that and also what they
• 14:49
  Speaker 6: see for holiday if they continue to see high income
• 14:51
  Speaker 6: shoppers trading down for gifts?
• 14:53
  Speaker 2: Is dollar stores do they see a surgeon sales seasonal
• 14:58
  Speaker 2: surge and sales from holiday sales? Is that? Do they
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  Speaker 2: see that like a department store would.
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  Speaker 6: Yeah, I don't know if it's the same surge, but
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  Speaker 6: you know, they sell a lot of gift wrapping and
• 15:06
  Speaker 6: gift bags and some of those smaller gifts stocking stuffers,
• 15:09
  Speaker 6: so I think they see a lot of that around
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  Speaker 6: the holidays.
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  Speaker 4: So what are we seeing in terms of just the
• 15:14
  Speaker 4: broader read on the retail space. This kind of gives
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  Speaker 4: us a picture of the lower end consumer, But what
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  Speaker 4: are you seeing across the board?
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  Speaker 6: So broadly, we're really still seeing consumer spend. So there
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  Speaker 6: hasn't been that massive pullback that I think some of
• 15:25
  Speaker 6: us were imagining might happen. We're still seeing consumer spend,
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  Speaker 6: but they're really value driven, so they're looking for the
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  Speaker 6: best deals they can get. They're trading down when they
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  Speaker 6: need to. They're stocking up on essentials.
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  Speaker 2: How promotional are retailers right now? Because I mean, I know,
• 15:42
  Speaker 2: talking to Punam Gooyle, the retail analysts of Bloomberg Intelligence,
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  Speaker 2: he says, you know, the more promotions you see out there,
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  Speaker 2: that's going to be that goes right to the margins,
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  Speaker 2: the profit margins of some of these retailers. What are
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  Speaker 2: we seeing this season, that's a good question.
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  Speaker 6: So this season, we've actually seen some retailers pull back
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  Speaker 6: on deals to protect their margin. So companies are doing
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  Speaker 6: that as part of a broader strategy, and then some
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  Speaker 6: are having to do that because of tariff. So you know,
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  Speaker 6: for Black Friday, typically they'd offer big discounts and some
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  Speaker 6: are pulling back or not offering discounts at all.
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  Speaker 4: So consumers have still been broadly spending in the retail space.
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  Speaker 4: What are they spending on?
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  Speaker 5: Is it?
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  Speaker 4: You know, are we spending money on essentials right now,
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  Speaker 4: skipping this lurging?
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  Speaker 6: Yeah, yeah, that's exactly it. So this Black Friday, we
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  Speaker 6: talked to a lot of folks who were saying they're
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  Speaker 6: going to just get essentials this Black Friday, so instead
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  Speaker 6: of buying you know, a Lake Crusette, Dutch oven they were.
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  Speaker 6: We talked to someone who instead was going to buy
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  Speaker 6: like three bags of forty pound dog food.
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  Speaker 2: Oh okay, yeah, I don't have a dog for them,
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  Speaker 2: right yeah.
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  Speaker 6: Dot Com so really using you know, deals to get
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  Speaker 6: things that they need for themselves rather than getting that
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  Speaker 6: big ticket item they waited for.
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  Speaker 2: What I learned from talking to retail folks is omni
• 16:57
  Speaker 2: channel retail, which is you use both the online and
• 17:02
  Speaker 2: the bricks and mortar and maybe you look at something
• 17:04
  Speaker 2: online then you want to go touch and feel it,
• 17:06
  Speaker 2: or maybe you order it then you pick it up
• 17:07
  Speaker 2: at the store. Omni channels that still a thing.
• 17:10
  Speaker 6: Yeah, yeah, So we were out there on Black Friday
• 17:13
  Speaker 6: and some of the stores, and you know, while a
• 17:15
  Speaker 6: lot of people have switched their holiday shopping to be online,
• 17:18
  Speaker 6: we still saw a ton of people in stores, especially
• 17:21
  Speaker 6: at stores with really good deals and stores that appear
• 17:24
  Speaker 6: appealed to young shoppers. So brands like Addicted and Princess
• 17:28
  Speaker 6: Polly that are in malls were really flooded with young people.
• 17:31
  Speaker 2: Stay with us more from Bloomberg Intelligence coming up after this.
• 17:38
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live
• 17:42
  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
• 17:45
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• 17:49
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• 17:52
  Speaker 2: Let's talk a little luxury here. That's right down John
• 17:55
  Speaker 2: Tucker's alley. Here, Debi, and she's the expert luxury goods
• 17:58
  Speaker 2: analyst of Bloomberg Intelligence. She's based in London. There, just
• 18:03
  Speaker 2: give us some kind of a post mortem. How was
• 18:05
  Speaker 2: twenty twenty five for the luxury companies and maybe what's
• 18:09
  Speaker 2: the oulok for twenty six?
• 18:12
  Speaker 7: Hi. Yeah, So we started out twenty twenty five with
• 18:17
  Speaker 7: an expectation that we'd moved back to growth, and that
• 18:20
  Speaker 7: certainly didn't materialize through the first half of the year,
• 18:25
  Speaker 7: but we seem to be ending at around three to
• 18:28
  Speaker 7: four percent growth as we exit twenty twenty five. Now,
• 18:32
  Speaker 7: the US has been robust, Middle East doing very well,
• 18:36
  Speaker 7: but particularly in the first half the year, it was
• 18:39
  Speaker 7: China which was the drag. And what we've noticed is
• 18:42
  Speaker 7: we end the year. We've actually just heard on a
• 18:45
  Speaker 7: fireside chat over the last few days from Laurel where
• 18:49
  Speaker 7: they're mentioning high end beauty doing very well out of
• 18:52
  Speaker 7: the US, but also in China too, so they're adding
• 18:56
  Speaker 7: to what we've heard from the luxury companies where we've
• 18:59
  Speaker 7: seen two thirds of luxury companies and most of the
• 19:04
  Speaker 7: top ten switching to growth in China in Q three
• 19:07
  Speaker 7: from a low base from negatives a year ago. But
• 19:10
  Speaker 7: actually that we're calling green shoots into the end of year.
• 19:15
  Speaker 4: How are these companies holding up as it re leads
• 19:17
  Speaker 4: to tariff overhangs.
• 19:20
  Speaker 7: Yeah, so we did a lot of work around May
• 19:23
  Speaker 7: time and again through July and August with the different
• 19:26
  Speaker 7: tariff rates moving around, and what we've actually seen it
• 19:30
  Speaker 7: was less detrimental overall in our numbers. We probably think
• 19:36
  Speaker 7: that EPs won't be pulled as much as was expected
• 19:39
  Speaker 7: because there have been some cost savings and the biggest
• 19:42
  Speaker 7: companies and those that were where brands were really in
• 19:46
  Speaker 7: favor have managed to pass on price and generally because
• 19:50
  Speaker 7: these companies operate on high gross margin, the cost into
• 19:54
  Speaker 7: the US, they've moved around two to FOXX and on
• 19:57
  Speaker 7: additional price into the US as well well as two
• 20:00
  Speaker 7: three percent from the beginning of the year, So some
• 20:03
  Speaker 7: of those brands have absorbed passing through six seven percent
• 20:06
  Speaker 7: pricing to the US consumer. And we think into twenty
• 20:10
  Speaker 7: twenty six that moves nearer to two to three percent overall,
• 20:13
  Speaker 7: so it should be less intimidating for the consumer overall
• 20:17
  Speaker 7: twenty twenty six. So it's one of our drivers for
• 20:20
  Speaker 7: the year ahead.
• 20:22
  Speaker 2: DEV talk to us about the Chinese consumer. We don't
• 20:25
  Speaker 2: see the Chinese consumer here. I'm going to walk the
• 20:27
  Speaker 2: Penn station today, walk down Fifth Avenue, Madison Avenue. I'll
• 20:30
  Speaker 2: see a lot of Europeans. I see a lot of
• 20:32
  Speaker 2: American tours. I won't see many from Asia. Are they
• 20:36
  Speaker 2: not traveling? So is that an impact for New York
• 20:39
  Speaker 2: and London and Paris and things like that.
• 20:42
  Speaker 7: We actually have a survey out of our Asia office
• 20:45
  Speaker 7: that we've just incorporated into a travel document which will
• 20:50
  Speaker 7: be producing. But this piece of work has already produced
• 20:53
  Speaker 7: and actually on October versus May. The China consumer is
• 20:59
  Speaker 7: looking to travel more into Europe to start with. So
• 21:03
  Speaker 7: that's the first big positive. I think part of that
• 21:07
  Speaker 7: is just on the way the tariff situation has gone maybe,
• 21:10
  Speaker 7: so that would be the first time that we're looking
• 21:12
  Speaker 7: for them to come back so versus three months ago.
• 21:15
  Speaker 7: They're looking to traveling outside of Asia. But overall, what
• 21:18
  Speaker 7: we call the China cohort that's actually really operate in
• 21:24
  Speaker 7: more avidly across the Asia region. We're not seeing so
• 21:28
  Speaker 7: much travel from Chinese into Japan, and of course we
• 21:31
  Speaker 7: know that there are there's some political commentary there as well,
• 21:35
  Speaker 7: so we wouldn't expect that to pick up next year.
• 21:38
  Speaker 7: But we are seeing Korea, Singapore, Australia and others being
• 21:43
  Speaker 7: positive and the first move to Europe should hopefully indicate
• 21:46
  Speaker 7: that towards the end of the year, and as tariffs
• 21:48
  Speaker 7: settle more in twenty twenty six, that we see some
• 21:51
  Speaker 7: of that return to the US as well.
• 21:54
  Speaker 4: And sticking with China, how are we thinking about supply
• 21:56
  Speaker 4: chain operations as it leads to a lot of these
• 21:59
  Speaker 4: luxury for especially stemming from China.
• 22:04
  Speaker 7: Yeah, so if we think about maybe if we look
• 22:09
  Speaker 7: at it from some of the aspirational or entry level
• 22:13
  Speaker 7: luxury companies, then they will have some production moving around
• 22:20
  Speaker 7: the Asia region. But if we think about the heritage
• 22:23
  Speaker 7: traditional higher end luxury companies, then most of their production
• 22:27
  Speaker 7: is France, Italy, some Portugal, some parts of southern Spain.
• 22:32
  Speaker 7: Not so much going on in the Asia region, and
• 22:34
  Speaker 7: so they've been able to manage on the twenty percent
• 22:39
  Speaker 7: tariff from made in Europe over to the US more
• 22:42
  Speaker 7: so than some of the peer group. For example, one
• 22:46
  Speaker 7: of our entry level that we call branded affordable jewelry
• 22:49
  Speaker 7: Pandora producers out of Thailand. It's really suffered in terms
• 22:53
  Speaker 7: of share price this year versus some of the Asian
• 22:56
  Speaker 7: retail jewelers who've done very very well on the price
• 22:59
  Speaker 7: of goal.
• 23:02
  Speaker 2: So you got to explain this whole handbag thing to me.
• 23:05
  Speaker 2: Deb I was in Italy in September towards some place factories,
• 23:09
  Speaker 2: f artists and shops where they make these handbags and
• 23:11
  Speaker 2: they sell them for tens of thousands of dollars in euros.
• 23:14
  Speaker 2: What is going on there? Who buys that?
• 23:18
  Speaker 7: Yeah? It has I always say, if you bought a Ermez,
• 23:22
  Speaker 7: you have a just as good or a better correlation
• 23:26
  Speaker 7: than if you'd have held gold. So I think that
• 23:30
  Speaker 7: you know, these bags, particularly for sought after material, the
• 23:36
  Speaker 7: craftsmanship and the fact that they have continued value, are
• 23:40
  Speaker 7: seen as investment pieces, and so we have the middle ground.
• 23:44
  Speaker 7: You know, if we look over the last year and
• 23:47
  Speaker 7: one of the things that we think for twenty twenty
• 23:48
  Speaker 7: six bags from Tapestry, from Coach, Ralph Lauren others as
• 23:53
  Speaker 7: well as ready to wear have done very very well,
• 23:56
  Speaker 7: resonated with a consumer who's been a little bit more
• 23:58
  Speaker 7: skeptical on the consumer sentiment side and may be shopped
• 24:02
  Speaker 7: around one thousand dollars or so, but at the very
• 24:06
  Speaker 7: high end there hasn't been much of a move, so
• 24:09
  Speaker 7: we've seen ms Brunello, Kuchnelli and others doing very very
• 24:13
  Speaker 7: well at that high end.
• 24:15
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• 24:23
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