September 25, 2025 • 17 mins
Watch Scarlet and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Intelligence hosted by Paul Sweeney and Scarlet Fu
- Spencer Soper, Bloomberg Tech Reporter, discusses Amazon.com agreeing to pay $2.5 billion in penalties and refunds and change its process for how to cancel its Prime subscription to settle a lawsuit by the US Federal Trade Commission.
- Michael Halen, Bloomberg Intelligence Senior Restaurant and Foodservice Analyst, discusses Starbucks saying it will close 1% of its stores in the US and Canada and cut 900 jobs as part of its turnaround plan.
- Steve Man, Bloomberg Intelligence Global Autos and Industrials Research Analyst, discusses CarMax reporting significant earnings per share and sales shortfalls for the second quarter.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. You're listening to the
Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
Eastern on Apple Coarclay and Android Auto with the Bloomberg
Business App. Listen on demand wherever you get your podcasts,
or watch us live on YouTube.
Speaker 2 (00:24):
Regulatory news coming out for our friends at Amazon, Amazon
and the Federal Trade Commission. They reached the two and
a half billion dollar deal in that prime subscription case.
Let's bringing Spencer Soper. He is a Bloomberg Tech reporter.
Spencer remind us of what this case is and then
what the settlement does.
Speaker 3 (00:44):
Yees.
Speaker 4 (00:44):
So this this is about Amazon making, you know, kind
of duping consumers into paying for Prime memberships. So the
FTC alleged that, you know, they trick people into signing
up through free trials and then made it difficult for
them to.
Speaker 3 (01:01):
Cancel their Prime memberships.
Speaker 4 (01:02):
If they wanted to. Internally at Amazon, they even had
a term for this cancelation process called the iliad, which
kind of referred to Homer's epic odyssey. So there was
some pretty damning findings about how Amazon handled this. The
settlement is two point five billion dollars one billion dollars
(01:23):
will go to the US Treasury, and one point five
billion dollars is for consumer refunds. People will be refunded
automatically if it was found they were affected by this case.
And you're looking at about fifty bucks per affected consumer.
So it's no huge windfall for consumers, and even for
Amazon two and a half billion dollars. It's probably like
(01:44):
a parking ticket for you and me. But it puts
this thing to bed and prevents Amazon from going to
a trial, which probably would have been pretty embarrassing.
Speaker 3 (01:54):
Okay, so that's what they want to avoid.
Speaker 5 (01:56):
Just give us some context here about how valuable the
Prime program Prime membership is to Amazon. I know that
they don't always give a lot of numbers. The numbers
that we do get have to do with how much
it costs members, but in terms of the actual number
of members and the amount that they spend, aside from
knowing that they spend more than regular Amazon customers, we
(02:17):
don't have a sense of how much they contribute to
margins for instance.
Speaker 4 (02:22):
Well, it's a huge part of Amazon, and the financial
nitty gritty I really don't have. But you know, you're
talking huge penetration in the US. You know, more people
are living a home that has a Prime membership that don't,
you know, so they've got a majority of the country.
And then to your point, if you have a Prime membership,
(02:44):
you're paying Amazon one hundred and forty dollars a year
or fifteen dollars a month, and so you're more likely
to buy things on Amazon. And so Prime members spend
about twice as much on Amazon as non Prime members.
So it's a critical part of the success. It's also
very stick. People tend not to cancel, which is why
this uh uh. I don't see this as being a
(03:06):
huge deal, this settlement. It's kind of like Amazon puts
it to bed. But by and large, most people who
join Prime are happy with it and stay with it.
This was this was just kind of more of an
embarrassment for them.
Speaker 3 (03:17):
Yeah, I think it's a I don't we find it
a huge value in our home.
Speaker 2 (03:21):
President Trump is still speaking with President Edwin in their
bilateral meeting there in the Oval Office of the White House.
We will bring you headlines and the red headline just
across the Bloomberg terminal here. According to President Trump, Trump,
we want Arawan to stop buying oil from Russia. So
that's consistent with what the President has said.
Speaker 3 (03:41):
And we'll bring you more reporting on that. Spencer. What's
the what else is in front of Amazon? Just in
terms of some of.
Speaker 2 (03:47):
The regulatory issues facing it, It's really hard to keep
track of what's going on with some of these big
tech companies and the regulative headwinds.
Speaker 4 (03:56):
Yeah, that's that's a that's a good point and people
should know this is this is an FTC case against Amazon.
Was that was specifically against prime membership. There's still this
whole question this big antitrust lawsuit against Amazon, which is
basically saying, you know what, this company is so big
and has so much control and so much power that
(04:19):
it's impossible for for other companies to compete. That's still
that's still pending, and that's really the big threat to Amazon.
And that's a holdover from from the Biden administration. So
a lot in terms of the regulatory framework. The significance
of this Prime settlement is largely like a lot of
people are wondering, Okay, President Trump took office and there
(04:41):
are a lot of these FTC cases pending against big
tech companies like Amazon. You know, from from the Biden administration.
What does the new administration mean for these cases? And
so that that's really the big question here that we're
still wondering about. Is Amazon was able to put this
this kind of smaller prime investigation to and pay a
little fine. But what is the you know, what is
(05:04):
the outlook on these bigger cases that are that are
more of an existential threat to Amazon?
Speaker 2 (05:09):
So what is kind of the what's the feeling out
there and out there in the west there with the
Silicon Valley up there in Seattle area.
Speaker 3 (05:15):
About this administration?
Speaker 2 (05:17):
Is this administration that can ultimately be continue the light
regulatory touch that the tech industry is always enjoyed, or
maybe they.
Speaker 3 (05:27):
Won't be able to deliver on that.
Speaker 2 (05:28):
How concerned is greater Technology, greater Silicon Valley about the
regulatory environment.
Speaker 4 (05:34):
Well, I think that they're all trying to very delicately
figure out how to finesse their way through this administration.
I guess I. I I think if there if, if, if
Trump is anything, he's unpredictable. So I don't think that
they take anything for granted. And uh, you know that
that that is a good question, and I wish I
(05:55):
had a nice simple answer for you.
Speaker 3 (05:57):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (06:04):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple, cocklay and Android
Auto with the Bloomberg Business app. Listen on demand wherever
you get your podcasts, or watch us live on YouTube
through Starbucks.
Speaker 5 (06:19):
And this is round two of layoffs under new CEO
Brian Nicol. Although can we still call him new? No?
Speaker 3 (06:25):
I don't know. No, he's like one. He owns it.
Speaker 5 (06:28):
Okay, he owns it. So let's bring in Michael Halen,
who owns the restaurant and news coverage for us here
at Bloomberg Intelligence. He is our senior research and food
service analyst.
Speaker 3 (06:36):
Michael.
Speaker 5 (06:37):
When you hear the news about Starbucks closing stores, cutting jobs,
nine hundred jobs, one billion dollar restructuring effort, it feels
like deja vous.
Speaker 6 (06:47):
Yeah, but you know what, this was very clearly communicated
to the street back in April on their fiscal call,
Management said that, you know, we expect more restructuring charges.
We're going to continue to evaluate our store base. Really,
management wanted new ce CFO Kathy Smith to be involved
in the process, so this was not a surprise. If
(07:10):
we hear about some more store closures and restructuring, you know,
than then maybe you'll see a bigger reaction in the stock.
Speaker 2 (07:16):
All right, A shout out to my Starbucks on Route
thirty five in Wall Township, New Jersey. They do a
great job, great folks, very efficient, very good Mike. What
does this company need to do? What do they say
is on their to do list to turn this company around?
What are you looking for?
Speaker 6 (07:32):
Yeah, it's more operations in marketing, and we're starting to
see things kind of inflect here. We think fiscal twenty
six should be a nice back bounce back year. So
you know, first it's with the operations, right, so it's
eliminating menu items, increasing labor, which baristas. We're very happy about,
(07:55):
creating a smart queue for mobile orders, right, so, so
the stores aren't as chaotic and baristas aren't serving you know,
mobile orders for somebody thirty miles away before helping someone
inside the store. And then service standards, right, they're rolling
out these green Apron service standards this year. It's a
big investment on training and really nailing the consumer experience
(08:21):
in the store. And then from there it's the marketing
and marketing seems to be working. They pulled back on
discounts and what they're doing is more marketing. You'll see
some TV ads right. They're doing more digital marketing, and
we think that's a smart move. It seems to be
paying early dividends. Starbucks non rewards member transactions are up.
(08:41):
Non discounted rewards members transactions are up, and we think
these are a sign that sales are going to inflect
higher in the coming months.
Speaker 5 (08:50):
Okay, but this is taking a while. Paul and I
were just saying that Brian Nickel owns this. Now he's
been CEO for a year and they're still in turnaround mode.
They're still in kind of like let's figure out our
path forward. Investors, please be patient. Are investor is going
to continue to be patient for another six months to
one year.
Speaker 6 (09:08):
I don't think they're going to be patient for six
months to one year In terms of the stock price.
I think Brian Nichols job is very much safe. You know,
you can't turn around an aircraft carrier on a dime, right,
This is a massive organization. Eighteen thousand stores just here
in North America, over forty thousand globally. So yes, this
is taking longer than a lot anticipated, you know, myself included.
(09:32):
You know, our investor is going to be happy if
they don't see same store sales inflect here in the
first quarter of fiscal twenty six. No, they're not going
to be happy, and you're going to see it reflected
in the share price, right. So, yeah, I mean I
think they're they're making the right moves. This has been
a longer turnaround than most had expected. But you know,
(09:54):
I think Brian Nichols pressing all the right buttons right now.
Speaker 2 (09:56):
Yeah, I just got back from some vacation time in Italy.
I don't think I saw too many Starbucks is in Italy.
Speaker 5 (10:02):
I think they have a Starbucks reserve somewhere. It looks
different than.
Speaker 3 (10:05):
The Starbucks store, all right.
Speaker 2 (10:07):
So, Mike, I mean you said they have forty thousand
stores on this planet.
Speaker 3 (10:11):
Is that enough for it? Are they still going to
be putting more out there?
Speaker 6 (10:16):
They're still going to be building, you know, I think
they need to. You know, they're going to have to
nail this US operation and remodel, and they're going to
spend a little bit less on building stores in the
US a little bit more on renovating them. Okay, and
then China. They really want to get that market nailed
(10:38):
before they accelerate accelerate growth. So those are their two
main markets for growth. They've been the company's to major
markets for growth for growth for.
Speaker 3 (10:47):
A long time.
Speaker 6 (10:48):
But management's doing the right thing. They pulled back on
growth to kind of nail the operations marketing. Once they
get same star sales and traffic trending back up strongly again,
you'll see reaccelerate development.
Speaker 3 (11:01):
Stay with us more from Bloomberg Intelligence coming up after this.
Speaker 1 (11:09):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple, Coarcklay, and Android
Auto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 2 (11:23):
Boy, so big news today if you're in the used
car business. Carmacks, Richmond, Virginia based company, stock down twenty
percent today. Some disappointing results and guidance here. Let's get
the bottom line here, what's going on? Steve Mann, Bloomberg Intelligence,
Global Autos and Industrials Research Channels joins us here. Steve
(11:43):
just tell us what's going on with CarMax is stock
down twenty percent today.
Speaker 3 (11:47):
What's the news.
Speaker 7 (11:48):
Yeah, significantly down today for a couple of reason. One
is the auto sales used car sales wasn't as good
as expected in the second quarter. And then second, it's
really on the uh right down on some of their loans.
And the first item is, actually it's not that surprising
because there's been a lot of poll for demand. Remember
(12:12):
in the first quarter when Trump announced uh these taroffs
on autos, a lot of the consumers actually went ahead
and bought by a lot of cars, uh in you know,
concern that prices will go up. So the pull for
demand really dent it second quarter sales.
Speaker 2 (12:29):
Then talk to us about the other side of the equation,
kind of the rate office. Some of these auto loans
are is that ax?
Speaker 1 (12:38):
Uh?
Speaker 7 (12:38):
Well, I mean this is because this is on the
back of the Tricolor Holdings bankruptcy if you remember, you know,
they actually went bankrupt because they wrote a lot of
subprime loans that potentially undocumented the allegedly undocumented UH buyers.
But this seems to be more of a unique for
(13:00):
tri Color Holdings. So the right down is a little
bit kind of special given the coincidence that's with the tricolor.
But it's not really out of the ordinary for these
auto companies to actually write down some of the loans.
The interest rate has been high, right, I think the
(13:22):
bright spot now is that the interest rates are coming down,
so we don't actually see that is an industry issue,
but it does cost for concern. It's not a red flag,
I would say, it's more of a yellow yellow light,
yellow flag.
Speaker 3 (13:38):
Talk to us, just let's step back a little bit.
Speaker 2 (13:39):
Talk to us about where we are in the auto
business with just how many cars are being produced these
days in the US and what does that mean for
the used car market, like the car Maxes of the world.
Speaker 7 (13:50):
Where are we today, Yeah, I mean it's about the
annual sales in the auto industry today. In the US
it's around sixteen million, and if you include Canada, Mexico
is around eighteen nineteen million. The used car markets actually
bigger than the new car market. Is very vibrant market.
Speaker 3 (14:12):
And look, it's.
Speaker 7 (14:15):
It's an interesting market. There are a lot of used
cars that's coming back from leases. I remember during the
COVID era, you know, we had quite a bit of
a vehicle sales, you know, and prices were really high
and so there's quite a few used car used cars
coming back in the market, and that's impacting prices as well.
(14:39):
So even with lower prices, used car sales was down
the second quarter, but then again it's a function of
the pre buy that happened in the first quarter. So
I actually feel that we're probably near the trough, given
that interest rates are actually coming down.
Speaker 2 (14:57):
So, you know, we talked about this SAR, the season
adjusted rate of sixteen million. I remember back in the day,
seventeen seventeen million was kind of the norm. Here, is
this a new lower normal level of production from the
US OEMs.
Speaker 7 (15:11):
Yeah, you're absolutely right. We haven't really gotten back to
the pre COVID days of you know, seventeen million stars,
but I think this is a new normal of sixteen million. Look,
the average price for a vehicle has actually gone up
quite a bit today. It's about forty eight thousand dollars
(15:32):
per vehicle. You know, before COVID, I think we were
you know, around forty so significant increase since then. So
there is some concerns about affordability. You've seen financing terms
being extended. Car buyers actually can get loans for seventy
two month loans up to eighty four months loans just
(15:54):
to make the vehicles more affordable. So I do believe
this is a new normal. I don't see prices coming
back down. Prices don't usually come back down once they
go once they're increased. So I think this is going
to be the new normal.
Speaker 2 (16:11):
So does that mean people are staying in their cars
longer because the affordability of getting a new car is
that much more difficult.
Speaker 7 (16:21):
Yeah, that's a great question. I think they are going
to stay in their cars a little bit longer. Look,
the cars today are much more reliable, much more durable
than they have in the past, so they do last
a little bit longer. And if you throw in evs right, EV's,
it's probably around six, you know, four or five percent
(16:41):
of the total fleet today. Those you know require those
lasts also a lot longer with less moving parts. So
what who really benefits are actually the aftermarket retailers like
O'Reilly and AutoZone. You know, as people keep their cars
a little bit longer, they were gonna do probably gonna
(17:01):
either you go get it repaired by the dealer or
the mom and pop shop, or they do it themselves.
Speaker 1 (17:08):
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Eastern on Apple Coarclay and Android Auto with the Bloomberg
Business App. Listen on demand wherever you get your podcasts,
or watch us live on YouTube.
Speaker 2 (00:24):
Regulatory news coming out for our friends at Amazon, Amazon
and the Federal Trade Commission. They reached the two and
a half billion dollar deal in that prime subscription case.
Let's bringing Spencer Soper. He is a Bloomberg Tech reporter.
Spencer remind us of what this case is and then
what the settlement does.
Speaker 3 (00:44):
Yees.
Speaker 4 (00:44):
So this this is about Amazon making, you know, kind
of duping consumers into paying for Prime memberships. So the
FTC alleged that, you know, they trick people into signing
up through free trials and then made it difficult for
them to.
Speaker 3 (01:01):
Cancel their Prime memberships.
Speaker 4 (01:02):
If they wanted to. Internally at Amazon, they even had
a term for this cancelation process called the iliad, which
kind of referred to Homer's epic odyssey. So there was
some pretty damning findings about how Amazon handled this. The
settlement is two point five billion dollars one billion dollars
(01:23):
will go to the US Treasury, and one point five
billion dollars is for consumer refunds. People will be refunded
automatically if it was found they were affected by this case.
And you're looking at about fifty bucks per affected consumer.
So it's no huge windfall for consumers, and even for
Amazon two and a half billion dollars. It's probably like
(01:44):
a parking ticket for you and me. But it puts
this thing to bed and prevents Amazon from going to
a trial, which probably would have been pretty embarrassing.
Speaker 3 (01:54):
Okay, so that's what they want to avoid.
Speaker 5 (01:56):
Just give us some context here about how valuable the
Prime program Prime membership is to Amazon. I know that
they don't always give a lot of numbers. The numbers
that we do get have to do with how much
it costs members, but in terms of the actual number
of members and the amount that they spend, aside from
knowing that they spend more than regular Amazon customers, we
(02:17):
don't have a sense of how much they contribute to
margins for instance.
Speaker 4 (02:22):
Well, it's a huge part of Amazon, and the financial
nitty gritty I really don't have. But you know, you're
talking huge penetration in the US. You know, more people
are living a home that has a Prime membership that don't,
you know, so they've got a majority of the country.
And then to your point, if you have a Prime membership,
(02:44):
you're paying Amazon one hundred and forty dollars a year
or fifteen dollars a month, and so you're more likely
to buy things on Amazon. And so Prime members spend
about twice as much on Amazon as non Prime members.
So it's a critical part of the success. It's also
very stick. People tend not to cancel, which is why
this uh uh. I don't see this as being a
(03:06):
huge deal, this settlement. It's kind of like Amazon puts
it to bed. But by and large, most people who
join Prime are happy with it and stay with it.
This was this was just kind of more of an
embarrassment for them.
Speaker 3 (03:17):
Yeah, I think it's a I don't we find it
a huge value in our home.
Speaker 2 (03:21):
President Trump is still speaking with President Edwin in their
bilateral meeting there in the Oval Office of the White House.
We will bring you headlines and the red headline just
across the Bloomberg terminal here. According to President Trump, Trump,
we want Arawan to stop buying oil from Russia. So
that's consistent with what the President has said.
Speaker 3 (03:41):
And we'll bring you more reporting on that. Spencer. What's
the what else is in front of Amazon? Just in
terms of some of.
Speaker 2 (03:47):
The regulatory issues facing it, It's really hard to keep
track of what's going on with some of these big
tech companies and the regulative headwinds.
Speaker 4 (03:56):
Yeah, that's that's a that's a good point and people
should know this is this is an FTC case against Amazon.
Was that was specifically against prime membership. There's still this
whole question this big antitrust lawsuit against Amazon, which is
basically saying, you know what, this company is so big
and has so much control and so much power that
(04:19):
it's impossible for for other companies to compete. That's still
that's still pending, and that's really the big threat to Amazon.
And that's a holdover from from the Biden administration. So
a lot in terms of the regulatory framework. The significance
of this Prime settlement is largely like a lot of
people are wondering, Okay, President Trump took office and there
(04:41):
are a lot of these FTC cases pending against big
tech companies like Amazon. You know, from from the Biden administration.
What does the new administration mean for these cases? And
so that that's really the big question here that we're
still wondering about. Is Amazon was able to put this
this kind of smaller prime investigation to and pay a
little fine. But what is the you know, what is
(05:04):
the outlook on these bigger cases that are that are
more of an existential threat to Amazon?
Speaker 2 (05:09):
So what is kind of the what's the feeling out
there and out there in the west there with the
Silicon Valley up there in Seattle area.
Speaker 3 (05:15):
About this administration?
Speaker 2 (05:17):
Is this administration that can ultimately be continue the light
regulatory touch that the tech industry is always enjoyed, or
maybe they.
Speaker 3 (05:27):
Won't be able to deliver on that.
Speaker 2 (05:28):
How concerned is greater Technology, greater Silicon Valley about the
regulatory environment.
Speaker 4 (05:34):
Well, I think that they're all trying to very delicately
figure out how to finesse their way through this administration.
I guess I. I I think if there if, if, if
Trump is anything, he's unpredictable. So I don't think that
they take anything for granted. And uh, you know that
that that is a good question, and I wish I
(05:55):
had a nice simple answer for you.
Speaker 3 (05:57):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (06:04):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple, cocklay and Android
Auto with the Bloomberg Business app. Listen on demand wherever
you get your podcasts, or watch us live on YouTube
through Starbucks.
Speaker 5 (06:19):
And this is round two of layoffs under new CEO
Brian Nicol. Although can we still call him new? No?
Speaker 3 (06:25):
I don't know. No, he's like one. He owns it.
Speaker 5 (06:28):
Okay, he owns it. So let's bring in Michael Halen,
who owns the restaurant and news coverage for us here
at Bloomberg Intelligence. He is our senior research and food
service analyst.
Speaker 3 (06:36):
Michael.
Speaker 5 (06:37):
When you hear the news about Starbucks closing stores, cutting jobs,
nine hundred jobs, one billion dollar restructuring effort, it feels
like deja vous.
Speaker 6 (06:47):
Yeah, but you know what, this was very clearly communicated
to the street back in April on their fiscal call,
Management said that, you know, we expect more restructuring charges.
We're going to continue to evaluate our store base. Really,
management wanted new ce CFO Kathy Smith to be involved
in the process, so this was not a surprise. If
(07:10):
we hear about some more store closures and restructuring, you know,
than then maybe you'll see a bigger reaction in the stock.
Speaker 2 (07:16):
All right, A shout out to my Starbucks on Route
thirty five in Wall Township, New Jersey. They do a
great job, great folks, very efficient, very good Mike. What
does this company need to do? What do they say
is on their to do list to turn this company around?
What are you looking for?
Speaker 6 (07:32):
Yeah, it's more operations in marketing, and we're starting to
see things kind of inflect here. We think fiscal twenty
six should be a nice back bounce back year. So
you know, first it's with the operations, right, so it's
eliminating menu items, increasing labor, which baristas. We're very happy about,
(07:55):
creating a smart queue for mobile orders, right, so, so
the stores aren't as chaotic and baristas aren't serving you know,
mobile orders for somebody thirty miles away before helping someone
inside the store. And then service standards, right, they're rolling
out these green Apron service standards this year. It's a
big investment on training and really nailing the consumer experience
(08:21):
in the store. And then from there it's the marketing
and marketing seems to be working. They pulled back on
discounts and what they're doing is more marketing. You'll see
some TV ads right. They're doing more digital marketing, and
we think that's a smart move. It seems to be
paying early dividends. Starbucks non rewards member transactions are up.
(08:41):
Non discounted rewards members transactions are up, and we think
these are a sign that sales are going to inflect
higher in the coming months.
Speaker 5 (08:50):
Okay, but this is taking a while. Paul and I
were just saying that Brian Nickel owns this. Now he's
been CEO for a year and they're still in turnaround mode.
They're still in kind of like let's figure out our
path forward. Investors, please be patient. Are investor is going
to continue to be patient for another six months to
one year.
Speaker 6 (09:08):
I don't think they're going to be patient for six
months to one year In terms of the stock price.
I think Brian Nichols job is very much safe. You know,
you can't turn around an aircraft carrier on a dime, right,
This is a massive organization. Eighteen thousand stores just here
in North America, over forty thousand globally. So yes, this
is taking longer than a lot anticipated, you know, myself included.
(09:32):
You know, our investor is going to be happy if
they don't see same store sales inflect here in the
first quarter of fiscal twenty six. No, they're not going
to be happy, and you're going to see it reflected
in the share price, right. So, yeah, I mean I
think they're they're making the right moves. This has been
a longer turnaround than most had expected. But you know,
(09:54):
I think Brian Nichols pressing all the right buttons right now.
Speaker 2 (09:56):
Yeah, I just got back from some vacation time in Italy.
I don't think I saw too many Starbucks is in Italy.
Speaker 5 (10:02):
I think they have a Starbucks reserve somewhere. It looks
different than.
Speaker 3 (10:05):
The Starbucks store, all right.
Speaker 2 (10:07):
So, Mike, I mean you said they have forty thousand
stores on this planet.
Speaker 3 (10:11):
Is that enough for it? Are they still going to
be putting more out there?
Speaker 6 (10:16):
They're still going to be building, you know, I think
they need to. You know, they're going to have to
nail this US operation and remodel, and they're going to
spend a little bit less on building stores in the
US a little bit more on renovating them. Okay, and
then China. They really want to get that market nailed
(10:38):
before they accelerate accelerate growth. So those are their two
main markets for growth. They've been the company's to major
markets for growth for growth for.
Speaker 3 (10:47):
A long time.
Speaker 6 (10:48):
But management's doing the right thing. They pulled back on
growth to kind of nail the operations marketing. Once they
get same star sales and traffic trending back up strongly again,
you'll see reaccelerate development.
Speaker 3 (11:01):
Stay with us more from Bloomberg Intelligence coming up after this.
Speaker 1 (11:09):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple, Coarcklay, and Android
Auto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 2 (11:23):
Boy, so big news today if you're in the used
car business. Carmacks, Richmond, Virginia based company, stock down twenty
percent today. Some disappointing results and guidance here. Let's get
the bottom line here, what's going on? Steve Mann, Bloomberg Intelligence,
Global Autos and Industrials Research Channels joins us here. Steve
(11:43):
just tell us what's going on with CarMax is stock
down twenty percent today.
Speaker 3 (11:47):
What's the news.
Speaker 7 (11:48):
Yeah, significantly down today for a couple of reason. One
is the auto sales used car sales wasn't as good
as expected in the second quarter. And then second, it's
really on the uh right down on some of their loans.
And the first item is, actually it's not that surprising
because there's been a lot of poll for demand. Remember
(12:12):
in the first quarter when Trump announced uh these taroffs
on autos, a lot of the consumers actually went ahead
and bought by a lot of cars, uh in you know,
concern that prices will go up. So the pull for
demand really dent it second quarter sales.
Speaker 2 (12:29):
Then talk to us about the other side of the equation,
kind of the rate office. Some of these auto loans
are is that ax?
Speaker 1 (12:38):
Uh?
Speaker 7 (12:38):
Well, I mean this is because this is on the
back of the Tricolor Holdings bankruptcy if you remember, you know,
they actually went bankrupt because they wrote a lot of
subprime loans that potentially undocumented the allegedly undocumented UH buyers.
But this seems to be more of a unique for
(13:00):
tri Color Holdings. So the right down is a little
bit kind of special given the coincidence that's with the tricolor.
But it's not really out of the ordinary for these
auto companies to actually write down some of the loans.
The interest rate has been high, right, I think the
(13:22):
bright spot now is that the interest rates are coming down,
so we don't actually see that is an industry issue,
but it does cost for concern. It's not a red flag,
I would say, it's more of a yellow yellow light,
yellow flag.
Speaker 3 (13:38):
Talk to us, just let's step back a little bit.
Speaker 2 (13:39):
Talk to us about where we are in the auto
business with just how many cars are being produced these
days in the US and what does that mean for
the used car market, like the car Maxes of the world.
Speaker 7 (13:50):
Where are we today, Yeah, I mean it's about the
annual sales in the auto industry today. In the US
it's around sixteen million, and if you include Canada, Mexico
is around eighteen nineteen million. The used car markets actually
bigger than the new car market. Is very vibrant market.
Speaker 3 (14:12):
And look, it's.
Speaker 7 (14:15):
It's an interesting market. There are a lot of used
cars that's coming back from leases. I remember during the
COVID era, you know, we had quite a bit of
a vehicle sales, you know, and prices were really high
and so there's quite a few used car used cars
coming back in the market, and that's impacting prices as well.
(14:39):
So even with lower prices, used car sales was down
the second quarter, but then again it's a function of
the pre buy that happened in the first quarter. So
I actually feel that we're probably near the trough, given
that interest rates are actually coming down.
Speaker 2 (14:57):
So, you know, we talked about this SAR, the season
adjusted rate of sixteen million. I remember back in the day,
seventeen seventeen million was kind of the norm. Here, is
this a new lower normal level of production from the
US OEMs.
Speaker 7 (15:11):
Yeah, you're absolutely right. We haven't really gotten back to
the pre COVID days of you know, seventeen million stars,
but I think this is a new normal of sixteen million. Look,
the average price for a vehicle has actually gone up
quite a bit today. It's about forty eight thousand dollars
(15:32):
per vehicle. You know, before COVID, I think we were
you know, around forty so significant increase since then. So
there is some concerns about affordability. You've seen financing terms
being extended. Car buyers actually can get loans for seventy
two month loans up to eighty four months loans just
(15:54):
to make the vehicles more affordable. So I do believe
this is a new normal. I don't see prices coming
back down. Prices don't usually come back down once they
go once they're increased. So I think this is going
to be the new normal.
Speaker 2 (16:11):
So does that mean people are staying in their cars
longer because the affordability of getting a new car is
that much more difficult.
Speaker 7 (16:21):
Yeah, that's a great question. I think they are going
to stay in their cars a little bit longer. Look,
the cars today are much more reliable, much more durable
than they have in the past, so they do last
a little bit longer. And if you throw in evs right, EV's,
it's probably around six, you know, four or five percent
(16:41):
of the total fleet today. Those you know require those
lasts also a lot longer with less moving parts. So
what who really benefits are actually the aftermarket retailers like
O'Reilly and AutoZone. You know, as people keep their cars
a little bit longer, they were gonna do probably gonna
(17:01):
either you go get it repaired by the dealer or
the mom and pop shop, or they do it themselves.
Speaker 1 (17:08):
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