May 28, 2025 • 21 mins
Watch Alix and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Intelligence hosted by Paul Sweeney and Alix Steel
Today’s Podcast Features are:
Ben Elliott, Bloomberg Intelligence Consumer Finance Analyst, discusses President Donald Trump stating that the US government will retain guarantees and an oversight role over Fannie Mae and Freddie Mac even if they are taken public.
Meera Pandit, Executive Director, Global Market Strategist, at JP Morgan Asset Management, discusses her outlook for the markets. Wall Street's rebound halted ahead of Nvidia's highly anticipated earnings report, with the S&P 500 retreating and the options market implying a post-results move of about 6% in either direction for the chipmaker.
Mary Ross Gilbert, Bloomberg Intelligence, Senior Equity Analyst, Covering Retail, discusses earnings from Macy’s and Abercrombie & Fitch. Macy's posted better-than-expected quarterly results, with comparable-store sales falling less than analysts had anticipated and revenue of $4.6 billion surpassing the average estimate. -Abercrombie & Fitch shares rose sharply after the retailer upped its full-year outlook.
Steve Man, Bloomberg Intelligence Global Autos and Industrials Research Manager, discusses Stellantis appointing Antonio Filosa as its new CEO, effective June 23, to turn around the company after former boss Carlos Tavares was forced out.
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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 (00:23):
One of the headlines was Fannie May now saying that
it will keep its US guarantee as a public firm.
I should say President Trump has said that Fanny May
May keep its US guarantee as a public firm. Ben
Elliott is consumer finance analyst for Bloomberg Intelligence. Joins US
from Washington, DC. So does this imply that there should
be then no change to people's mortgages and the rates.
Speaker 3 (00:44):
Well, it's interesting because while President Trump is confirmed that
he'd like to keep the US government involved with Fanny
and Freddy, and that's a big deal, we still have
new details on sort of the contours of the guarantee
and the way that that plays out eventually could have
an impact on the mortgage market.
Speaker 4 (00:59):
Ben tells, just refresh our memory, because I'm going to
speak for everyone in our audience. I have no idea
how this ownership thing is a Fanny and Freddie. Cand
you just refresh who owns what? And what's President Trump
thinking about here?
Speaker 3 (01:11):
Yeah, so the federal government owns a senior class of
shares that has varying sort of levels of valuation applied
to it, but it's probably worth hundreds of billions of dollars.
And then the federal government also owns warrants to purchase
seventy nine point nine percent of the common stock, and
so the remaining common stock still trades, but it has
no voting power and it has limited sort of economic
(01:33):
claims on the businesses.
Speaker 2 (01:36):
So if that's the case, what would ownership or still
a backstop by the government to Fanny, But public ownership mean, like,
what is that? That doesn't make any sense to me.
Speaker 3 (01:49):
Yeah, So the way the companies are governed right now,
something called the Preferred Stock Purchase Agreement is in place
that dates back to two thousand and eight, and there's
still about two hundred and seventy billion dollars of liquid
that Treasury has pledged to the enterprises individually. Actually, so
there's different amounts pledged to each company. So presumably what
(02:09):
the president is talking about is maintaining the PSPA guarantees,
but charging the enterprises some sort of fee in exchange
for that liquidity going forward.
Speaker 4 (02:19):
So Ben, you know, as a citizen and a taxpayer,
I don't think I want my government really in the
loan business to this degree. So isn't the I mean,
don't people want them to get out of this business
sell down?
Speaker 3 (02:35):
That's interesting? So if any and Freddie actually work extremely
well under the status quo, you know, in some ways,
I think you might want the government to be in
this business. If you look across the globe, the US
is really the only country that has this level of
liquidity in the mortgage market. The thirty year fixed rate
(02:55):
note is something of a unique sort of financial instrument
available to US home buyers, and as a result, US
home ownership rates are higher than many other nations across
the globe. So there is a reason for the US
government to be involved. But to your point, they shouldn't
be too involved. And we learned that lesson in two
thousand and eight, and that was actually so it's interesting
(03:17):
the President treated, he tweeted, he wanted to keep the
implicit guarantee, which is what existed prior to two thousand
and eight, when basically everyone agreed that that Treasury would
be on the hook if something happened. We saw that
something did happen and Treasury was on the hook. So
I think what people would like to see going forward
is the government say sort of set some strong, some
(03:37):
strong guardrails around this and say, you know, we're going
to backstop this, but only in a very sort of
narrow explicit way.
Speaker 4 (03:44):
All I know is if I have a Fig banker
financial institutions group, I'm a Fig banker on Wall Street,
I'm pitching this deal hard. I think how big this
awfering would be.
Speaker 2 (03:53):
I mean interesting.
Speaker 1 (03:53):
He's all about fees.
Speaker 4 (03:55):
All about fear. You got to get paid.
Speaker 2 (03:56):
You can take the banker out of the location. But whatever,
something along those lines.
Speaker 4 (04:01):
My partnership evaluation at Salmer Brothers. The best thing was
he's not afraid to ask.
Speaker 5 (04:06):
For the ticket.
Speaker 4 (04:07):
You gotta get paid. Yeah, talk all you want, ben Elly,
Thank you so much. Consumer finance analysts at Bloomberg Intelligence.
Speaker 1 (04:15):
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.
Speaker 2 (04:29):
Happy Wednesday, Everybody, Happy Home Day, and Alexian alongside Paul
sween Need. This is Bloomberg Intelligence Radio. We bring you
all the top news, business, economics, politics and finance. There
are lens of our Bloomberg Intelligence folks. They cover two
thousand companies and in one hundred and thirty industries all
around the world. Retail not having a terrible day today.
Macy stock is up by over one percent after posting
better than expected quarterly results. Com sales are falling less
(04:51):
than analysts had anticipated, so not as bad as always
the win when it comes for earnings. Let's get more
on this with Mary Ross, Gilbert Bloomberg Intelligence and your
equity analysts covers retail. All right, let's start with Macy's
less bad than feared. What are the green shoots here?
Speaker 6 (05:07):
Yeah, so, I think the green shoots here is that
Macy's is showing some traction here with their refresh strategy.
When you look at their one hundred and twenty five
stores that they've refreshed, and they've expanded that to include
some additional stores. Their comp sales were down about two percent.
About one point nine is the figure that they're using.
(05:27):
And you know, look, Dillard's outperformed because they were down
one percent, so they're getting better. But where they really
need to improve is on the service levels. Where you
also saw strength here is really on the luxury side,
and that's Bloomingdale's. Bloomingdale's was up three point eight percent
and Blue Mercury, which is their beauty specialty beauty growth concept,
(05:50):
and that was up one and a half percent. So
that's where you're really seeing strength. But it's such a
small piece of the business. It's really all about the
Macy's name plate, and we still need to see better
traction there, but it's getting better and better. And with
regard to the tariff hits, it's going to be about
twenty to forty.
Speaker 5 (06:07):
Basis point, so very manageable.
Speaker 6 (06:09):
They directly source about you know, we estimate that their
private label business is about thirteen to fourteen percent. That's
on a consolidated basis of sales, and so they're sourcing
about twenty seven percent from China directly. So they have
a number of initiatives that are helping them to offset
the full effect of tariffs, which you'll see the biggest
(06:32):
hit in the second quarter.
Speaker 5 (06:33):
But for the full year.
Speaker 6 (06:34):
It's very manageable, you know, in that twenty to forty
basis point impact.
Speaker 4 (06:39):
Mary for Macy's, are they comfortable with their store footprint
these days?
Speaker 6 (06:46):
So, Paul, they're reducing their store frontprint with the Macy's
name plate. With some of the stores that they're closing.
They've already closed sixty four. The total that they plan
to close is one hundred and fifty, So they sort
of feel like the go forward store base is about
three hundred and fifty stores.
Speaker 5 (07:05):
But right now there's a little bit of.
Speaker 6 (07:06):
A pause, you know, just because of the real estate
market and some of the store closures that they have
planned for this year. But yes, no, they need to
take that store base down.
Speaker 7 (07:16):
All right.
Speaker 2 (07:16):
Let's go to the other one. The highlight here Abercrombie
and Fisch. I'm kind of floored by this, Like we
saw it with Urban, we saw it with American Eagle.
Like these specialty stores, they seem to be somewhat cyclical
in nature, and they're crushing it right now.
Speaker 5 (07:31):
Yeah.
Speaker 6 (07:32):
I mean, you can say Abercrombie is crushing it. They
kind of are. But I mean, if you look at
the namesake brand, the Abercrombie and Fitch brand that was
actually down ten percent on a comp sales basis, But
in all fairness, they were going against a twenty nine
percent increase in the prior year first quarter.
Speaker 5 (07:49):
In a way you'd say, look, that's no excuse.
Speaker 6 (07:52):
And certainly they were impacted in the quarter by lower
average unit retailed. That was because they had some carryover
inventory from the way season and also it looks like
they had a little bit of a miss on their bridle,
you know, the wedding business. But where they did have
some strength was in swim They really chased after it.
So they've really got a good sort of summer shop
(08:15):
going and they expect that Abercrombie will inflect back to
positive in the second half of the year.
Speaker 5 (08:20):
Where you really saw the strength was Hollister.
Speaker 6 (08:23):
So Hollister turned in a nice twenty three percent comp
sales gain and that was on top of a double digit.
Speaker 5 (08:29):
Gain last year. So they're really hitting.
Speaker 6 (08:32):
It out of the ballpark, you know, with the team
gen Z retailer retail customer there.
Speaker 4 (08:39):
So I mean, I look at the stock for Abercrombie.
The good news it's up twenty four percent year to today.
The bad newsiness is down thirty five percent this year.
Speaker 5 (08:47):
Hey, Mary, what are this?
Speaker 4 (08:49):
What are the Macy's and the Ambercrombies of the world,
What are they saying about the consumer right now?
Speaker 6 (08:54):
Yeah, so Macy's is taking a very cautious perspective on
the consumer. We think the consumer is pretty resilient. I mean,
clearly at the higher end they're more resilient than at
the lower end, and there's some caution in there, but generally,
I would say, you know, when we have employment levels,
you know, in that sort of unemployment levels, in that
sort of four percent range, that's really full employment. And
(09:17):
when you're employed, you feel good about spending money. So
we really think it's holding up. We think there's retailers
are taking a cautious conservative approach, hoping to be able
to beat and we think they probably can, particularly as
we get into the back half of the year and
they're able to alay more of the tariff impact as well.
Speaker 2 (09:36):
Before you let you go, how are inventories across the
board in retail? Have they managed them well enough to
avoid a massive discounting round?
Speaker 6 (09:44):
Yeah, so that's a good point. I mean with Macy's,
there are some carryover inventory that they are going to
be flowing through the second quarter, and that's going to
take a hit on margin, say again saying with Abercrombie,
there's going to be a little bit of effect. They're
in some of their inventory in the second quarter, but
(10:04):
generally they are doing a much better job. They've invested
in systems, data analytics, and they're also using generative AI
and that's making them more efficient. So we think that
inventory levels generally are much better than they were years ago.
But yes, they're doing a good job.
Speaker 2 (10:24):
All right, Mary, thanks lot, really appreciating Mary alk Gilbert
joining us. She covers a retail a senior equity analyst
over at Bloomberg Intelligence. Do you like how I asked
that inventory question, which is really a discount question, which
is really where it is, Alex, and you did not
get the answer that you I really didn't like. Good
job for retailers, were not good for Alex's shopping.
Speaker 1 (10:42):
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.
Speaker 2 (10:56):
Let's get back to the market here total wait and
see when it comes to say earnings, let's start there
with mirapandit executive director, a global market strategist at JP
Morgan Asset Management. We can take VideA and stride, but
I wonder what we're going to learn about the US
exceptionalism trade slash theme once in Vidia comes out.
Speaker 8 (11:14):
It does feel like markets are getting a little bit
over their head, a little bit beyond their skis here.
If you think about Friday's selloff with some of the
tariff announcements of about seven tens of a percent relative
to the reaction when things reversed out by Monday when
markets were up excuse me, Tuesday when markets were up
two percent, it does feel like we are overweighting the
(11:34):
good news over the bad news.
Speaker 7 (11:36):
And while the high.
Speaker 8 (11:37):
Water mark for volatility from April is probably in, there
are still a number of catalysts that could push markets downward.
If we think about earnings at nine percent expectations right
now looking pretty unrealistic. The fact that valuations are almost
back to where they started the year, or the fact
that we've seen to find a new home at around
four and a half percent on the ten year treasure yield.
(11:58):
All of these things could start to weigh on markets
over time.
Speaker 4 (12:02):
So Mira, one of the underpinnings of this market has
to be earnings, and we saw a lot of companies
pull their earnings guidance, and our earnings have come down.
I guess the question is have they come down enough?
Do you still think there's earnings risk in this market?
Speaker 8 (12:17):
If we're going to see potentially slow growth this year.
Recession is no longer our base case, but even slow growth,
it's going to be very difficult to achieve what some
of the analysts expect in terms of profit growth. So
it is still a risk. And although we had an
incredibly robust first quarter where we had essentially seven percentage
points higher on year over year growth than we would
have expected coming into earning season, that is reflective of
(12:40):
the situation we were in, not the situation we may
be in. And when we think about tariffs in particular,
although the tariff rate has potentially come down quite a bit,
we're not out of the woods and it's still going
to be a lot higher than it was last year.
So that means domestically and from foreign sources, revenue could slow.
And when we think about margins, someone's going to pay
for those higher prices. Partially it could be the consumer,
(13:03):
Partially it could be companies that are therefore compressing margins,
So we do have to be mindful of that. In
light of tonight's earnings releases, I would also highlight, prior
to this final MAG seven reporting, we have seen upward
earnings revisions in terms of expectations to the MAG seven
with the reporters so far, relative to downward revisions for
the rest of the index. So is it going to
(13:25):
continue to be profits exceptionalism of the MAG seven? That
is their big question for the year around profits.
Speaker 2 (13:30):
Absolutely, which then also brings us to other assets in
terms of say the long end of the bond market
and the dollar as well. What are we going to
learn about those assets after the Nvidia earnings.
Speaker 8 (13:42):
It looks like from a treasury market perspective, and when
we think about rates, we've somewhat found this resistance level
at four and a half percent on the tenure and
perhaps around five percent further out on the curve, even
though the risks are still skewed to the upside. When
it comes to yields, we have less of that downside
pressure from potential slow and growth. Although inflation hasn't really
(14:04):
caused much of the uptick and yields so far this year,
it is still that term premium question mark, which has
nothing to do with profits and what specific US companies
are doing, and everything to do with debt deficits, who's
buying up bonds and whether they're less more price sensitive
than perhaps they were in the past when the FED
was a big buyer. Some of these weak auctions continue
(14:26):
to push up bond yields as well, So overall that
environment of rising term premium.
Speaker 5 (14:31):
Skews risks to the upside.
Speaker 8 (14:33):
But the question mark is when we think about what's
priced in in the bond market, is a lot of
this risk already priced in and we're finding some of
that ceiling from a yield perspective, I mean, despite a
lot of the episodes of rising yields we've seen so
far this year, most areas of the bond market, with
the exception of areas like the thirty year or municipals,
are actually positive this year. So we tend to lose.
Speaker 4 (14:53):
Sight of that are you taking credit risk in this market?
Speaker 8 (14:57):
MIRA, Credit risk is actually not a bad place to
be because you are getting good yield in credit, but
you're also sort of recession proofing a little bit. I mean,
if we don't have a recession and we just have
slow growth, you are going to be able to get
access to company balance sheets, to company profits without taking
on that same risk of the equity market. Of course,
(15:18):
if we do head the recession, we could start to
see a little bit more chopping is there. But overall,
right now, it seems like a nice balance between equity
market risk but being overly conservative in the bond market
because you're getting that income and access to the health
thus far of companies.
Speaker 4 (15:35):
All right, mere, thank you so much for joining us.
Really appreciate it. Mirror Pandit, Executive director, Global market Strategist
at JP Morgan Asset Management.
Speaker 1 (15:44):
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 Up. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 4 (15:58):
Let's turn to the auto business. Stillantos was in the
news today. Looks like they're getting new CEO. The guy
who's running the America's is going to go over and
run the whole shebang here. Steve Mann joins us here.
He's a Bloomberg Intelligence Global autos analyst. We never talk
about Stalantis. Can you remind us who Stalantis is?
Speaker 7 (16:17):
Well? Stalantis is an amalgamation of a number of brands
European and US, but mostly best known for owning jeep
in Ram Drugs, old Chrysler, Old Chrysler, that's right, and
Fiat right, Fiat, that's it.
Speaker 4 (16:33):
Okay, and that's kind of the that's and they came
up with Stalantis. Okay, they got a new CEO. A
what happened to the old CEO? And what do we
know about the new guy?
Speaker 7 (16:43):
Well, the old CEO resigned.
Speaker 5 (16:45):
Okay.
Speaker 7 (16:46):
Part of it is because, you know, earnings were pretty
bad and it may not be one hundred percent of
his fault. The market was the auto market was weakening.
So we have a new CEO. Uh, based on what
we're seeing with the stock price, and I don't think
the market is to throw about it. He does have
a lot of experience in the auto industry. He's been
(17:06):
with Stialentis since nineteen ninety nine, so it's been a while.
Like you said, the last stint he was at was
in managing the North American business for a few months,
and prior to that he was at cheap But you know,
it took a number of months for them to identify
someone new. But I think the market is just pretty
surprised that they went with somebody internal and not somebody external.
Speaker 2 (17:31):
So what do we learn about that? Because so many
of the problems that are hitting carmakers are in some
ways completely out of their control. Yes, in terms of trade,
supply chains, sort of the war on evs here in
the US, right, So do we learn that, like, Hey,
we don't think it's very fixable, so we're not gonna
worry about something from the outside or is it like, look,
the US is in turmoil. We need someone who knows
that market.
Speaker 5 (17:51):
Like what do we learn?
Speaker 7 (17:52):
So there's you know, they do have issues that's not
in their control, but there's a lot of issues that
they are in control. So you know, quality is an issue.
You know, I think a lot of American buyers thinks
Jeep has kind of fallen off in the quality side.
And interestingly, the new CEO, Antonio, actually managed Jeep for
(18:14):
about two years, so you know, I think you know,
the investor will take that as probably a negative. And
then the other issues is morale. You know, over the
past few years, sales have been weakening, They've been closing
a lot of plants as a result. Dealers are not
very happy with some pricing issues since COVID. So there's
(18:39):
a lot of issues that you know, the new CEO
will have to kind of address and hopefully you can
turn that a rep.
Speaker 4 (18:45):
All right, So for the big three US automakers in general,
what is the consensus on tariffs and how much it
will impact their business?
Speaker 7 (18:54):
Well, interestingly, Trump has been giving a lot of reprieves
and reliefs to you know, various countries and regions and
a certain sector, but he hasn't really done much for
the auto industry. There was some relief, a two year relief,
but I think he's you know, going full full ahead
with these auto tariffs and a lot of companies still
(19:16):
don't know where the impact how big of the impact is.
GM actually announced they're going to be a four to
five billion impact this year. Toyota said, you know, over
between May and March and April the impact was one
point three to one point five billion. So given these numbers,
is going to be huge.
Speaker 2 (19:37):
What about EV's. Is it possible that EV's in the
US go the way that EV's went one hundred years ago.
Speaker 7 (19:45):
It could, It could. That's not immateial, I think, you know,
there's a number of issues that's facing the EV market.
Infrastructure is a big one. It's just not as convenient
as people would like it to beat. The other thing
is the cost. You know, I still think that you know,
(20:05):
EV has a place in the marketplace. It's not going
to be fifty percent market share by twenty thirty. We
think it's more like half of that twenty to twenty
five percent. And then look there is a risk to
to to a lower number because of the tariffs and affordability.
(20:27):
A lot of these some of these evs are actually
made in Mexico, sof just slap on tariffs that makes
it less affordable for consumers.
Speaker 2 (20:34):
It's just amazing how fast that part of the industry
has turned.
Speaker 4 (20:38):
Around turn negative. I mean, that's what I'm saying.
Speaker 2 (20:41):
That like just went from like yep, we're going this
direction that the pace is TVD and now it's like
will this actually survive?
Speaker 5 (20:48):
All right?
Speaker 2 (20:48):
Great to see Steve, Thanks very much, Steve Man, Bloomberg Intelligence,
Global Autos Industrials Research Manager.
Speaker 1 (20:55):
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Speaker 2 (00:23):
One of the headlines was Fannie May now saying that
it will keep its US guarantee as a public firm.
I should say President Trump has said that Fanny May
May keep its US guarantee as a public firm. Ben
Elliott is consumer finance analyst for Bloomberg Intelligence. Joins US
from Washington, DC. So does this imply that there should
be then no change to people's mortgages and the rates.
Speaker 3 (00:44):
Well, it's interesting because while President Trump is confirmed that
he'd like to keep the US government involved with Fanny
and Freddy, and that's a big deal, we still have
new details on sort of the contours of the guarantee
and the way that that plays out eventually could have
an impact on the mortgage market.
Speaker 4 (00:59):
Ben tells, just refresh our memory, because I'm going to
speak for everyone in our audience. I have no idea
how this ownership thing is a Fanny and Freddie. Cand
you just refresh who owns what? And what's President Trump
thinking about here?
Speaker 3 (01:11):
Yeah, so the federal government owns a senior class of
shares that has varying sort of levels of valuation applied
to it, but it's probably worth hundreds of billions of dollars.
And then the federal government also owns warrants to purchase
seventy nine point nine percent of the common stock, and
so the remaining common stock still trades, but it has
no voting power and it has limited sort of economic
(01:33):
claims on the businesses.
Speaker 2 (01:36):
So if that's the case, what would ownership or still
a backstop by the government to Fanny, But public ownership mean, like,
what is that? That doesn't make any sense to me.
Speaker 3 (01:49):
Yeah, So the way the companies are governed right now,
something called the Preferred Stock Purchase Agreement is in place
that dates back to two thousand and eight, and there's
still about two hundred and seventy billion dollars of liquid
that Treasury has pledged to the enterprises individually. Actually, so
there's different amounts pledged to each company. So presumably what
(02:09):
the president is talking about is maintaining the PSPA guarantees,
but charging the enterprises some sort of fee in exchange
for that liquidity going forward.
Speaker 4 (02:19):
So Ben, you know, as a citizen and a taxpayer,
I don't think I want my government really in the
loan business to this degree. So isn't the I mean,
don't people want them to get out of this business
sell down?
Speaker 3 (02:35):
That's interesting? So if any and Freddie actually work extremely
well under the status quo, you know, in some ways,
I think you might want the government to be in
this business. If you look across the globe, the US
is really the only country that has this level of
liquidity in the mortgage market. The thirty year fixed rate
(02:55):
note is something of a unique sort of financial instrument
available to US home buyers, and as a result, US
home ownership rates are higher than many other nations across
the globe. So there is a reason for the US
government to be involved. But to your point, they shouldn't
be too involved. And we learned that lesson in two
thousand and eight, and that was actually so it's interesting
(03:17):
the President treated, he tweeted, he wanted to keep the
implicit guarantee, which is what existed prior to two thousand
and eight, when basically everyone agreed that that Treasury would
be on the hook if something happened. We saw that
something did happen and Treasury was on the hook. So
I think what people would like to see going forward
is the government say sort of set some strong, some
(03:37):
strong guardrails around this and say, you know, we're going
to backstop this, but only in a very sort of
narrow explicit way.
Speaker 4 (03:44):
All I know is if I have a Fig banker
financial institutions group, I'm a Fig banker on Wall Street,
I'm pitching this deal hard. I think how big this
awfering would be.
Speaker 2 (03:53):
I mean interesting.
Speaker 1 (03:53):
He's all about fees.
Speaker 4 (03:55):
All about fear. You got to get paid.
Speaker 2 (03:56):
You can take the banker out of the location. But whatever,
something along those lines.
Speaker 4 (04:01):
My partnership evaluation at Salmer Brothers. The best thing was
he's not afraid to ask.
Speaker 5 (04:06):
For the ticket.
Speaker 4 (04:07):
You gotta get paid. Yeah, talk all you want, ben Elly,
Thank you so much. Consumer finance analysts at Bloomberg Intelligence.
Speaker 1 (04:15):
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.
Speaker 2 (04:29):
Happy Wednesday, Everybody, Happy Home Day, and Alexian alongside Paul
sween Need. This is Bloomberg Intelligence Radio. We bring you
all the top news, business, economics, politics and finance. There
are lens of our Bloomberg Intelligence folks. They cover two
thousand companies and in one hundred and thirty industries all
around the world. Retail not having a terrible day today.
Macy stock is up by over one percent after posting
better than expected quarterly results. Com sales are falling less
(04:51):
than analysts had anticipated, so not as bad as always
the win when it comes for earnings. Let's get more
on this with Mary Ross, Gilbert Bloomberg Intelligence and your
equity analysts covers retail. All right, let's start with Macy's
less bad than feared. What are the green shoots here?
Speaker 6 (05:07):
Yeah, so, I think the green shoots here is that
Macy's is showing some traction here with their refresh strategy.
When you look at their one hundred and twenty five
stores that they've refreshed, and they've expanded that to include
some additional stores. Their comp sales were down about two percent.
About one point nine is the figure that they're using.
(05:27):
And you know, look, Dillard's outperformed because they were down
one percent, so they're getting better. But where they really
need to improve is on the service levels. Where you
also saw strength here is really on the luxury side,
and that's Bloomingdale's. Bloomingdale's was up three point eight percent
and Blue Mercury, which is their beauty specialty beauty growth concept,
(05:50):
and that was up one and a half percent. So
that's where you're really seeing strength. But it's such a
small piece of the business. It's really all about the
Macy's name plate, and we still need to see better
traction there, but it's getting better and better. And with
regard to the tariff hits, it's going to be about
twenty to forty.
Speaker 5 (06:07):
Basis point, so very manageable.
Speaker 6 (06:09):
They directly source about you know, we estimate that their
private label business is about thirteen to fourteen percent. That's
on a consolidated basis of sales, and so they're sourcing
about twenty seven percent from China directly. So they have
a number of initiatives that are helping them to offset
the full effect of tariffs, which you'll see the biggest
(06:32):
hit in the second quarter.
Speaker 5 (06:33):
But for the full year.
Speaker 6 (06:34):
It's very manageable, you know, in that twenty to forty
basis point impact.
Speaker 4 (06:39):
Mary for Macy's, are they comfortable with their store footprint
these days?
Speaker 6 (06:46):
So, Paul, they're reducing their store frontprint with the Macy's
name plate. With some of the stores that they're closing.
They've already closed sixty four. The total that they plan
to close is one hundred and fifty, So they sort
of feel like the go forward store base is about
three hundred and fifty stores.
Speaker 5 (07:05):
But right now there's a little bit of.
Speaker 6 (07:06):
A pause, you know, just because of the real estate
market and some of the store closures that they have
planned for this year. But yes, no, they need to
take that store base down.
Speaker 7 (07:16):
All right.
Speaker 2 (07:16):
Let's go to the other one. The highlight here Abercrombie
and Fisch. I'm kind of floored by this, Like we
saw it with Urban, we saw it with American Eagle.
Like these specialty stores, they seem to be somewhat cyclical
in nature, and they're crushing it right now.
Speaker 5 (07:31):
Yeah.
Speaker 6 (07:32):
I mean, you can say Abercrombie is crushing it. They
kind of are. But I mean, if you look at
the namesake brand, the Abercrombie and Fitch brand that was
actually down ten percent on a comp sales basis, But
in all fairness, they were going against a twenty nine
percent increase in the prior year first quarter.
Speaker 5 (07:49):
In a way you'd say, look, that's no excuse.
Speaker 6 (07:52):
And certainly they were impacted in the quarter by lower
average unit retailed. That was because they had some carryover
inventory from the way season and also it looks like
they had a little bit of a miss on their bridle,
you know, the wedding business. But where they did have
some strength was in swim They really chased after it.
So they've really got a good sort of summer shop
(08:15):
going and they expect that Abercrombie will inflect back to
positive in the second half of the year.
Speaker 5 (08:20):
Where you really saw the strength was Hollister.
Speaker 6 (08:23):
So Hollister turned in a nice twenty three percent comp
sales gain and that was on top of a double digit.
Speaker 5 (08:29):
Gain last year. So they're really hitting.
Speaker 6 (08:32):
It out of the ballpark, you know, with the team
gen Z retailer retail customer there.
Speaker 4 (08:39):
So I mean, I look at the stock for Abercrombie.
The good news it's up twenty four percent year to today.
The bad newsiness is down thirty five percent this year.
Speaker 5 (08:47):
Hey, Mary, what are this?
Speaker 4 (08:49):
What are the Macy's and the Ambercrombies of the world,
What are they saying about the consumer right now?
Speaker 6 (08:54):
Yeah, so Macy's is taking a very cautious perspective on
the consumer. We think the consumer is pretty resilient. I mean,
clearly at the higher end they're more resilient than at
the lower end, and there's some caution in there, but generally,
I would say, you know, when we have employment levels,
you know, in that sort of unemployment levels, in that
sort of four percent range, that's really full employment. And
(09:17):
when you're employed, you feel good about spending money. So
we really think it's holding up. We think there's retailers
are taking a cautious conservative approach, hoping to be able
to beat and we think they probably can, particularly as
we get into the back half of the year and
they're able to alay more of the tariff impact as well.
Speaker 2 (09:36):
Before you let you go, how are inventories across the
board in retail? Have they managed them well enough to
avoid a massive discounting round?
Speaker 6 (09:44):
Yeah, so that's a good point. I mean with Macy's,
there are some carryover inventory that they are going to
be flowing through the second quarter, and that's going to
take a hit on margin, say again saying with Abercrombie,
there's going to be a little bit of effect. They're
in some of their inventory in the second quarter, but
(10:04):
generally they are doing a much better job. They've invested
in systems, data analytics, and they're also using generative AI
and that's making them more efficient. So we think that
inventory levels generally are much better than they were years ago.
But yes, they're doing a good job.
Speaker 2 (10:24):
All right, Mary, thanks lot, really appreciating Mary alk Gilbert
joining us. She covers a retail a senior equity analyst
over at Bloomberg Intelligence. Do you like how I asked
that inventory question, which is really a discount question, which
is really where it is, Alex, and you did not
get the answer that you I really didn't like. Good
job for retailers, were not good for Alex's shopping.
Speaker 1 (10:42):
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.
Speaker 2 (10:56):
Let's get back to the market here total wait and
see when it comes to say earnings, let's start there
with mirapandit executive director, a global market strategist at JP
Morgan Asset Management. We can take VideA and stride, but
I wonder what we're going to learn about the US
exceptionalism trade slash theme once in Vidia comes out.
Speaker 8 (11:14):
It does feel like markets are getting a little bit
over their head, a little bit beyond their skis here.
If you think about Friday's selloff with some of the
tariff announcements of about seven tens of a percent relative
to the reaction when things reversed out by Monday when
markets were up excuse me, Tuesday when markets were up
two percent, it does feel like we are overweighting the
(11:34):
good news over the bad news.
Speaker 7 (11:36):
And while the high.
Speaker 8 (11:37):
Water mark for volatility from April is probably in, there
are still a number of catalysts that could push markets downward.
If we think about earnings at nine percent expectations right
now looking pretty unrealistic. The fact that valuations are almost
back to where they started the year, or the fact
that we've seen to find a new home at around
four and a half percent on the ten year treasure yield.
(11:58):
All of these things could start to weigh on markets
over time.
Speaker 4 (12:02):
So Mira, one of the underpinnings of this market has
to be earnings, and we saw a lot of companies
pull their earnings guidance, and our earnings have come down.
I guess the question is have they come down enough?
Do you still think there's earnings risk in this market?
Speaker 8 (12:17):
If we're going to see potentially slow growth this year.
Recession is no longer our base case, but even slow growth,
it's going to be very difficult to achieve what some
of the analysts expect in terms of profit growth. So
it is still a risk. And although we had an
incredibly robust first quarter where we had essentially seven percentage
points higher on year over year growth than we would
have expected coming into earning season, that is reflective of
(12:40):
the situation we were in, not the situation we may
be in. And when we think about tariffs in particular,
although the tariff rate has potentially come down quite a bit,
we're not out of the woods and it's still going
to be a lot higher than it was last year.
So that means domestically and from foreign sources, revenue could slow.
And when we think about margins, someone's going to pay
for those higher prices. Partially it could be the consumer,
(13:03):
Partially it could be companies that are therefore compressing margins,
So we do have to be mindful of that. In
light of tonight's earnings releases, I would also highlight, prior
to this final MAG seven reporting, we have seen upward
earnings revisions in terms of expectations to the MAG seven
with the reporters so far, relative to downward revisions for
the rest of the index. So is it going to
(13:25):
continue to be profits exceptionalism of the MAG seven? That
is their big question for the year around profits.
Speaker 2 (13:30):
Absolutely, which then also brings us to other assets in
terms of say the long end of the bond market
and the dollar as well. What are we going to
learn about those assets after the Nvidia earnings.
Speaker 8 (13:42):
It looks like from a treasury market perspective, and when
we think about rates, we've somewhat found this resistance level
at four and a half percent on the tenure and
perhaps around five percent further out on the curve, even
though the risks are still skewed to the upside. When
it comes to yields, we have less of that downside
pressure from potential slow and growth. Although inflation hasn't really
(14:04):
caused much of the uptick and yields so far this year,
it is still that term premium question mark, which has
nothing to do with profits and what specific US companies
are doing, and everything to do with debt deficits, who's
buying up bonds and whether they're less more price sensitive
than perhaps they were in the past when the FED
was a big buyer. Some of these weak auctions continue
(14:26):
to push up bond yields as well, So overall that
environment of rising term premium.
Speaker 5 (14:31):
Skews risks to the upside.
Speaker 8 (14:33):
But the question mark is when we think about what's
priced in in the bond market, is a lot of
this risk already priced in and we're finding some of
that ceiling from a yield perspective, I mean, despite a
lot of the episodes of rising yields we've seen so
far this year, most areas of the bond market, with
the exception of areas like the thirty year or municipals,
are actually positive this year. So we tend to lose.
Speaker 4 (14:53):
Sight of that are you taking credit risk in this market?
Speaker 8 (14:57):
MIRA, Credit risk is actually not a bad place to
be because you are getting good yield in credit, but
you're also sort of recession proofing a little bit. I mean,
if we don't have a recession and we just have
slow growth, you are going to be able to get
access to company balance sheets, to company profits without taking
on that same risk of the equity market. Of course,
(15:18):
if we do head the recession, we could start to
see a little bit more chopping is there. But overall,
right now, it seems like a nice balance between equity
market risk but being overly conservative in the bond market
because you're getting that income and access to the health
thus far of companies.
Speaker 4 (15:35):
All right, mere, thank you so much for joining us.
Really appreciate it. Mirror Pandit, Executive director, Global market Strategist
at JP Morgan Asset Management.
Speaker 1 (15:44):
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 Up. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 4 (15:58):
Let's turn to the auto business. Stillantos was in the
news today. Looks like they're getting new CEO. The guy
who's running the America's is going to go over and
run the whole shebang here. Steve Mann joins us here.
He's a Bloomberg Intelligence Global autos analyst. We never talk
about Stalantis. Can you remind us who Stalantis is?
Speaker 7 (16:17):
Well? Stalantis is an amalgamation of a number of brands
European and US, but mostly best known for owning jeep
in Ram Drugs, old Chrysler, Old Chrysler, that's right, and
Fiat right, Fiat, that's it.
Speaker 4 (16:33):
Okay, and that's kind of the that's and they came
up with Stalantis. Okay, they got a new CEO. A
what happened to the old CEO? And what do we
know about the new guy?
Speaker 7 (16:43):
Well, the old CEO resigned.
Speaker 5 (16:45):
Okay.
Speaker 7 (16:46):
Part of it is because, you know, earnings were pretty
bad and it may not be one hundred percent of
his fault. The market was the auto market was weakening.
So we have a new CEO. Uh, based on what
we're seeing with the stock price, and I don't think
the market is to throw about it. He does have
a lot of experience in the auto industry. He's been
(17:06):
with Stialentis since nineteen ninety nine, so it's been a while.
Like you said, the last stint he was at was
in managing the North American business for a few months,
and prior to that he was at cheap But you know,
it took a number of months for them to identify
someone new. But I think the market is just pretty
surprised that they went with somebody internal and not somebody external.
Speaker 2 (17:31):
So what do we learn about that? Because so many
of the problems that are hitting carmakers are in some
ways completely out of their control. Yes, in terms of trade,
supply chains, sort of the war on evs here in
the US, right, So do we learn that, like, Hey,
we don't think it's very fixable, so we're not gonna
worry about something from the outside or is it like, look,
the US is in turmoil. We need someone who knows
that market.
Speaker 5 (17:51):
Like what do we learn?
Speaker 7 (17:52):
So there's you know, they do have issues that's not
in their control, but there's a lot of issues that
they are in control. So you know, quality is an issue.
You know, I think a lot of American buyers thinks
Jeep has kind of fallen off in the quality side.
And interestingly, the new CEO, Antonio, actually managed Jeep for
(18:14):
about two years, so you know, I think you know,
the investor will take that as probably a negative. And
then the other issues is morale. You know, over the
past few years, sales have been weakening, They've been closing
a lot of plants as a result. Dealers are not
very happy with some pricing issues since COVID. So there's
(18:39):
a lot of issues that you know, the new CEO
will have to kind of address and hopefully you can
turn that a rep.
Speaker 4 (18:45):
All right, So for the big three US automakers in general,
what is the consensus on tariffs and how much it
will impact their business?
Speaker 7 (18:54):
Well, interestingly, Trump has been giving a lot of reprieves
and reliefs to you know, various countries and regions and
a certain sector, but he hasn't really done much for
the auto industry. There was some relief, a two year relief,
but I think he's you know, going full full ahead
with these auto tariffs and a lot of companies still
(19:16):
don't know where the impact how big of the impact is.
GM actually announced they're going to be a four to
five billion impact this year. Toyota said, you know, over
between May and March and April the impact was one
point three to one point five billion. So given these numbers,
is going to be huge.
Speaker 2 (19:37):
What about EV's. Is it possible that EV's in the
US go the way that EV's went one hundred years ago.
Speaker 7 (19:45):
It could, It could. That's not immateial, I think, you know,
there's a number of issues that's facing the EV market.
Infrastructure is a big one. It's just not as convenient
as people would like it to beat. The other thing
is the cost. You know, I still think that you know,
(20:05):
EV has a place in the marketplace. It's not going
to be fifty percent market share by twenty thirty. We
think it's more like half of that twenty to twenty
five percent. And then look there is a risk to
to to a lower number because of the tariffs and affordability.
(20:27):
A lot of these some of these evs are actually
made in Mexico, sof just slap on tariffs that makes
it less affordable for consumers.
Speaker 2 (20:34):
It's just amazing how fast that part of the industry
has turned.
Speaker 4 (20:38):
Around turn negative. I mean, that's what I'm saying.
Speaker 2 (20:41):
That like just went from like yep, we're going this
direction that the pace is TVD and now it's like
will this actually survive?
Speaker 5 (20:48):
All right?
Speaker 2 (20:48):
Great to see Steve, Thanks very much, Steve Man, Bloomberg Intelligence,
Global Autos Industrials Research Manager.
Speaker 1 (20:55):
This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,
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ten am to noon Eastern on Bloomberg dot com, the
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