December 3, 2025 • 24 mins
Watch Scarlet and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Intelligence hosted by Paul Sweeney and Norah Mulinda
-Anurag Rana, Bloomberg Intelligence Technology Analyst, discusses Microsoft shares sliding after the Information reported that the software maker has lowered expectations for getting business customers to spend money on the cloud unit’s marketplace for artificial intelligence models and agents.
-Mary Ross Gilbert, Bloomberg Intelligence, Senior Equity Analyst, Covering Retail, discusses Macy's earnings. Macy’s Inc. shares declined after its profit forecast for the current quarter disappointed investors, overshadowing a solid lead-up to the holiday shopping season.
-Lily Meier, Bloomberg Retail Reporter, discusses Dollar Tree earnings. Dollar Tree reported better-than-expected profit and raised its full-year earnings outlook, a sign the discount retailer is capturing more spending from stretched shoppers.
-Deborah Aitken, Bloomberg Intelligence Luxury Goods Analyst, discusses her outlook for luxury in 2026. According to Bloomberg Intelligence: Luxury-goods makers' recovery in 2026 hinges on limited price increases and a shift toward volume-led growth as tariff-linked hikes are largely absorbed and inflation eases.
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Episode Transcript
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Speaker 1 (00:02):
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Listen on demand wherever you get your podcasts, or watch
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Speaker 2 (00:23):
A lot of tech stories out there, including the one
here Microsoft here. The question is I guess the information
was out earlier that multiple Microsoft divisions lowered how much
salespeople are supposed to grow their sales of certain air
products after many missed sales goals in the fiscal year
and in June. That's what the Information Reporter earlier. Today,
Microsoft though, has not lowered sales quotas and targets for salespeople.
(00:48):
That's according to CNBC. They reported that on air, siting
an emailed statement for Microsoft. So I don't know what's
going on out there. Microsoft stocks down a little bit
here on a Rod Rana, technology analyst to Bloomberg Intelligence
joins this year just kind of put that information reporting
the CNBC kind of rebutting it. I mean, just give
us a sense of kind of AI sales how this
(01:09):
thing is kind of progressing, because I can't imagine there's
any material slowdown in AI from what I've heard.
Speaker 3 (01:15):
Yeah, Aulso when you look at there are two different
elements of it. One is the AI infrastructure piece of it. Well,
there is no slowdown in Microsoft at that point in fact,
that Microsoft is capacity constraints right now. But to be honest,
that's not the sales quota somebody is looking at it.
That just comes in because you're hosting somebody's model, or
you're trying to get you're hosting chat GPT. The sales
(01:36):
quotas would be for products such as you know, Microsoft Copilot,
Office Copilot, Getthub Copilot, all those products. And you know
that's not the same for everything. There are certain products
that sell better than the others because of the use
case of it. Kittub Copilot, for example, because it's a
coding software platform. The Microsoft Office Copilot is a good
(01:57):
piece of software or copilot, but it's very expensive. It's
I think thirty dollars per use of per month, so
it's not an Apple set of apples comparison throughout the board.
One of the things that we've been talking about is
even when you look at the broader tech spending, there
is a big slowdown when you exclude AI. So that
could be one reason that enterprise are not comfortable spending
(02:18):
that level of money right now on those individual software pieces.
The second piece could be the implementation part of it.
Because you're buying these sometimes there's data products that you
have to include in your core software or your core applications,
and that may take time. So there is a lot
to be digest from a macro piece. I don't think
there is any slowdown.
Speaker 4 (02:40):
Honor on how is Microsoft tracking against its competitors in
terms of AI software.
Speaker 3 (02:46):
It is doing much better than everybody else. But again
with the caveat because they host chatchipt. This is when
they invested in chat GPT, you know, I don't know
six seven years ago. That is part of that thing
was when you're running that application, it runs on their cloud.
So when you see that, you know, within a three
year period you have what five hundred and six million
(03:06):
users out there when we use chat GPT, a large
portion of that revenue flows into Microsoft Cloud. So when
they are the ones that have seen the first phase
of the big benefit of AI. But as we have said,
you know many times before, all the other vendors will
see that down the road. When adoption grows in other
areas of the ecosystem.
Speaker 2 (03:27):
Salesforce reports after the close here what should we expect
from them?
Speaker 3 (03:32):
Yeah, it goes back to the first piece of what
I said was enterprise spending is week when you're looking
at Fortune two thousand companies, they're not hiding at that
same pace that they used to and we will exclude
AI companies from it. And that is that weighs on
the sales of somebody like a salesforce, somebody like a
workday because they build on a per head basis. So
(03:55):
when these companies are not hiding at that same rate,
Salesforce has a tough time to grow their subscription base.
And you know, we think it is going to be
very much in line with what they had last time,
somewhere around at nine ten percent, which is not bad,
but it's not very exciting as well.
Speaker 2 (04:11):
I mean, is that enough for the stock to be
down as much as it is here to date?
Speaker 4 (04:16):
I mean it just seems like thirty percent down.
Speaker 2 (04:18):
You're exactly down thirty percent for this is a company
that just has has been such a great growth story.
Speaker 3 (04:24):
Yeah, so when you and you know, when you look
at last year, there was a lot of excitement when
they launched a product called Agent Force, which was their
answer or the AI answer to the rest of the universe.
But what happened was the adoption rate has not been
as strong as the initial you could say the demo
was so if you look at the stock price, it
kind of went out quite a bit of when they
(04:45):
first launched that particular product. Now this year it's not
showing up in the numbers, and this is one of
the reasons you're not seeing the stock recovering from that.
Speaker 4 (04:54):
What about Oracle, It seems like there's some worries around
artificial intelligence there as well. We're looking at a credit
risk game and reaching as high as since two thousand
and nine.
Speaker 3 (05:02):
Yeah, and that is why I think the very very
valid question is what happens to Oracle. When you look
at this entire AI bubble narrative or the framework, you know,
you have the big cloud providers that are spending the
most amount of money. We say, when you look at
somebody like an Amazon, Microsoft, and Google, they are spending
quite a bit, but they have real, you know, awesome
(05:23):
cash flow that's coming in. Plus they have businesses, so
even if they overbuild, they will have capacity to use it.
The bigger question is what happens to open ai oracle relationship.
Open Ai has said that they have given Oracle, you
could say, a contract of about three hundred billion dollars
to bleed in terms of sales over the next several years.
They're going to first build some massive data centers and
(05:45):
then they're going to use Oracle as a cloud provider.
The big question is where is opening IM going to
get money from, And that's really what's weighing on that
particular part of the equation. And to be very honest,
there is genuine reason to figure out, like how is
wi is going to raise that money and how are
they going to spend So there is some reason to
be consumed, but not so much on the credit de
(06:07):
false side of it, but so much more as the
estimates that are out there for the opious.
Speaker 2 (06:14):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (06:20):
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 (06:34):
All right, let's talk a little retail Macy's at with
some numbers. I thought the numbers were pretty good. Stocks
off one point seven percent, So what do I know?
Mary Ross Gilbert Senior Echody Allen, she covers the retailer.
She's the expert for Bloomberg Intelligence. She's based out there
in la Mary talks us about Macy's. What do we
hear from them today with the results.
Speaker 5 (06:55):
So, Paul, we saw, actually, I think great results coming
out of Macy's this morning, you see, And so when
you think about it, the stock is off, but that's
because the company put out conservative fourth quarter guidance and
that's really what they always do.
Speaker 3 (07:10):
They seek to beat.
Speaker 5 (07:11):
Their numbers, and so that guidance came in very close,
you know, at the high end. It's right around where
analysts are because they already saw strong results come in
from other retailers. But we think, when we think about it,
we think there's upside here. So we really view the
results as look Macy's name plate because of all the
(07:32):
changes that they're making, and what that means is they're
bringing in more relevant brands that are resonating with their consumer.
Not only that, but the stores look brighter. There's really
kind of exciting music in the stores, the store associates
are more engaged with the customer. We've noticed that on
our channel texts, particularly on Black Friday, we saw more
(07:55):
traffic in the store than we've seen in years past.
So we think that the change is that CEO Tony
Sprain is making and he's really taking his cues from
what he's done at Bloomingdale's. It's resonating, it's working, and
so we think this momentum is building and we certainly
saw it in the third quarter numbers with comp sales
(08:16):
two point seven percent for the Go Forward stores, and
so with that, I mean that's a big improvement sequentially,
and so we think that's building going into the fourth
quarter and just with the constant improvement that we're seeing there.
Speaker 4 (08:31):
So when most people think about the retail space right now,
a lot of people think about the transition to e commerce,
but it sounds as though from what you're explaining, a
lot of people are going there in person. I mean,
I'm looking at Coohal's, I'm looking at Dillard's. All of
these stocks are up pretty substantially on the year, alongside Macy's.
What are they doing in particular that's really attracting customers
to come through the doors. Is it also collaborations with
(08:53):
celebrities by chance?
Speaker 5 (08:56):
Yes, you raised a valid point, and it is. It
does include collaborations. So for example, they Aqua, you know,
they're under their Bloomingdale's brand, currently has a collab going
out with a designer out of Lawn and so yes,
these collaborations also even you know, they'll have some events.
(09:17):
But all of that is is certainly drawing in new customers,
and I think Macy's nameplate could certainly do more on
that end. They had their first collab with their on
thirty fourth brand this year, but we think we're going
to see more next year because if you look at
what Dillard's has been doing over the last few years,
and they have a different business model than Macy's does.
(09:38):
They're not really promotional. For example, for Black Friday, they
just had clearance sales and it was pretty comparable to
last year, so that didn't mean that the rest of
the merchandise was on sale. Macy's the you know, as
far more promotional. But by doing collaborations, you know, by
getting celebrities involved. So for example, for the holiday, they
(10:00):
have Jennifer Hudson that's you know, fronting their campaign for
the holiday, and they're also engaging with social influencers. So yes,
all of that is resonating. We're seeing it with other brands,
like for example, with American Eagle, which just tapped Martha
Stewart and that that's appealing to gen z.
Speaker 4 (10:22):
Oh wow.
Speaker 2 (10:22):
So one.
Speaker 5 (10:25):
Yeah, So these bold campaigns that these brands are doing,
Macy's is also getting involved there and they're dipping their
to I would say they're dipping their toe in the water.
But I think we're going to see that increase, you know,
and build as we get into twenty twenty six. And
when you talk about the digital business, because of course
you're always hearing, let's say, stronger growth on digital. For example,
(10:48):
when we looked at Black Friday, you know, over the
weekend through Cyber Monday, the sale strength was really led
by digital. Digital was up double digits versus you know,
load to mid single digits for in the store, So
I think that's really positive there. So when we look
at Macy's, a third of their sales come from digital,
(11:10):
so still in store is very big, but it's also
omni channel well, the ability to buy online, take back
in store or buy online, pick up in store.
Speaker 2 (11:20):
Well, when I walked to Penn Station today, I'm going
to walk past Macy's as I always do, but today
I'm going to go in. Okay, I'm going to do
a store walk. Is what the kid? What the retail
anamals call it a store walk? And I'm going to
check if John Tucker's would an escalator.
Speaker 4 (11:33):
Still there, We're counting on you.
Speaker 2 (11:35):
Okay, report back, Mary, just real quick, thirty seconds. What's
macy saying about the consumer out there?
Speaker 5 (11:42):
Yeah, so they're saying that the lower end consumer is
really feeling pinched and that's where they're seeing some challenges
on some of the price increases on their lower price
point items. But the higher middle income, in the higher
income consumer is resilient and they haven't lashed or battered
and I with higher prices that they took to offset
(12:04):
tariffs and they're still buying.
Speaker 2 (12:06):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (12:13):
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 (12:27):
We continue to get some earnings from the retailers. Today,
Dollar Tree came out with some numbers, pretty good numbers.
The street likes that. The stock's up three point four
percent today. Dollar Tree is up fifty percent year to date,
So a great move for that company, that stock. Let's
turn to Lily Meyer here, Bloomberg Deals reporter for Bloomberg News.
She covers all the retail companies out there. Talk to
(12:51):
us about Dollar Tree. What did they say here in
the latest earnings.
Speaker 6 (12:54):
Yeah, so dollar Tree did well this quarter at matt
expectations on revenue and same store sale, and it raised
its profit outlook for the year. I think they really
have hit a niche in being able to capture consumers,
both lower end consumers who need cheaper goods and then
high income consumers who are looking to trade down.
Speaker 4 (13:15):
So, I mean, what do we think about elasticity of
the lower end consumer right now? Because I mean, if
you think about Walmart, I used to think of this
as a company that you know, was a cheaper place
to shop, but it seems as though it's appealing to
multiple consumer types. But it seems as though Dollar Tree
really is a great place for the lower end consumer.
Speaker 6 (13:31):
Yeah, and actually recently Dollar Tree has been looking to
kind of break into that higher income shopper as well.
So it has this pricing strategy, so it has some
products that are still cheaper, but then it has some
it's getting more products that are more expensive.
Speaker 2 (13:48):
What is Dollar Tree saying about its core consumer out there?
Who is that core consumer and how are they behaving?
Speaker 7 (13:55):
Yeah?
Speaker 6 (13:55):
So I think it's core consumer is still a lower
income shopper. Eighty five percent of their products are two
dollars an under, so they really still have a lot
of value. So they're seeing those shoppers continue to go in.
But this quarter they saw traffic down and they attributed
that to tariff increases.
Speaker 4 (14:12):
See I missed when things were actually a dollar, a
dollar Tree, a dollar general.
Speaker 2 (14:15):
Did you say two dollars? I remember? Should we change
the name? And I remember it? John, and I remember
the five and dime and Penny can do it yep, exactly,
dating ourselves ourselves, all.
Speaker 4 (14:28):
Right, So what's the takeaway in terms of the outlook.
I mean, you talked about tariff still being a drag here.
Speaker 6 (14:33):
Yeah, so tariffs will really dragged this quarter. They said
that's gonna lessen. So I think this was the quarter
where we're really seeing the biggest tariff impact. It'll be
really interesting to see what they predict for consumers next year.
I'm interested to hear about that and also what they
see for holiday if they continue to see high income
shoppers trading down for gifts?
Speaker 2 (14:53):
Is dollar stores do they see a surgeon sales seasonal
surge and sales from holiday sales? Is that? Do they
see that like a department store would.
Speaker 6 (15:02):
Yeah, I don't know if it's the same surge, but
you know, they sell a lot of gift wrapping and
gift bags and some of those smaller gifts stocking stuffers,
so I think they see a lot of that around
the holidays.
Speaker 4 (15:12):
So what are we seeing in terms of just the
broader read on the retail space. This kind of gives
us a picture of the lower end consumer, But what
are you seeing across the board?
Speaker 6 (15:19):
So broadly, we're really still seeing consumer spend. So there
hasn't been that massive pullback that I think some of
us were imagining might happen. We're still seeing consumer spend,
but they're really value driven, so they're looking for the
best deals they can get. They're trading down when they
need to. They're stocking up on essentials.
Speaker 2 (15:37):
How promotional are retailers right now? Because I mean, I know,
talking to Punam Gooyle, the retail analysts of Bloomberg Intelligence,
he says, you know, the more promotions you see out there,
that's going to be that goes right to the margins,
the profit margins of some of these retailers. What are
we seeing this season, that's a good question.
Speaker 6 (15:54):
So this season, we've actually seen some retailers pull back
on deals to protect their margin. So companies are doing
that as part of a broader strategy, and then some
are having to do that because of tariff. So you know,
for Black Friday, typically they'd offer big discounts and some
are pulling back or not offering discounts at all.
Speaker 4 (16:11):
So consumers have still been broadly spending in the retail space.
What are they spending on?
Speaker 5 (16:16):
Is it?
Speaker 4 (16:16):
You know, are we spending money on essentials right now,
skipping this lurging?
Speaker 6 (16:21):
Yeah, yeah, that's exactly it. So this Black Friday, we
talked to a lot of folks who were saying they're
going to just get essentials this Black Friday, so instead
of buying you know, a Lake Crusette, Dutch oven they were.
We talked to someone who instead was going to buy
like three bags of forty pound dog food.
Speaker 2 (16:38):
Oh okay, yeah, I don't have a dog for them,
right yeah.
Speaker 6 (16:45):
Dot Com so really using you know, deals to get
things that they need for themselves rather than getting that
big ticket item they waited for.
Speaker 2 (16:54):
What I learned from talking to retail folks is omni
channel retail, which is you use both the online and
the bricks and mortar and maybe you look at something
online then you want to go touch and feel it,
or maybe you order it then you pick it up
at the store. Omni channels that still a thing.
Speaker 6 (17:10):
Yeah, yeah, So we were out there on Black Friday
and some of the stores, and you know, while a
lot of people have switched their holiday shopping to be online,
we still saw a ton of people in stores, especially
at stores with really good deals and stores that appear
appealed to young shoppers. So brands like Addicted and Princess
Polly that are in malls were really flooded with young people.
Speaker 2 (17:31):
Stay with us more from Bloomberg Intelligence coming up after this.
Speaker 1 (17:38):
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 (17:52):
Let's talk a little luxury here. That's right down John
Tucker's alley. Here, Debi, and she's the expert luxury goods
analyst of Bloomberg Intelligence. She's based in London. There, just
give us some kind of a post mortem. How was
twenty twenty five for the luxury companies and maybe what's
the oulok for twenty six?
Speaker 7 (18:12):
Hi. Yeah, So we started out twenty twenty five with
an expectation that we'd moved back to growth, and that
certainly didn't materialize through the first half of the year,
but we seem to be ending at around three to
four percent growth as we exit twenty twenty five. Now,
(18:32):
the US has been robust, Middle East doing very well,
but particularly in the first half the year, it was
China which was the drag. And what we've noticed is
we end the year. We've actually just heard on a
fireside chat over the last few days from Laurel where
they're mentioning high end beauty doing very well out of
the US, but also in China too, so they're adding
(18:56):
to what we've heard from the luxury companies where we've
seen two thirds of luxury companies and most of the
top ten switching to growth in China in Q three
from a low base from negatives a year ago. But
actually that we're calling green shoots into the end of year.
Speaker 4 (19:15):
How are these companies holding up as it re leads
to tariff overhangs.
Speaker 7 (19:20):
Yeah, so we did a lot of work around May
time and again through July and August with the different
tariff rates moving around, and what we've actually seen it
was less detrimental overall in our numbers. We probably think
that EPs won't be pulled as much as was expected
because there have been some cost savings and the biggest
(19:42):
companies and those that were where brands were really in
favor have managed to pass on price and generally because
these companies operate on high gross margin, the cost into
the US, they've moved around two to FOXX and on
additional price into the US as well well as two
three percent from the beginning of the year, So some
(20:03):
of those brands have absorbed passing through six seven percent
pricing to the US consumer. And we think into twenty
twenty six that moves nearer to two to three percent overall,
so it should be less intimidating for the consumer overall
twenty twenty six. So it's one of our drivers for
the year ahead.
Speaker 2 (20:22):
DEV talk to us about the Chinese consumer. We don't
see the Chinese consumer here. I'm going to walk the
Penn station today, walk down Fifth Avenue, Madison Avenue. I'll
see a lot of Europeans. I see a lot of
American tours. I won't see many from Asia. Are they
not traveling? So is that an impact for New York
and London and Paris and things like that.
Speaker 7 (20:42):
We actually have a survey out of our Asia office
that we've just incorporated into a travel document which will
be producing. But this piece of work has already produced
and actually on October versus May. The China consumer is
looking to travel more into Europe to start with. So
(21:03):
that's the first big positive. I think part of that
is just on the way the tariff situation has gone maybe,
so that would be the first time that we're looking
for them to come back so versus three months ago.
They're looking to traveling outside of Asia. But overall, what
we call the China cohort that's actually really operate in
(21:24):
more avidly across the Asia region. We're not seeing so
much travel from Chinese into Japan, and of course we
know that there are there's some political commentary there as well,
so we wouldn't expect that to pick up next year.
But we are seeing Korea, Singapore, Australia and others being
positive and the first move to Europe should hopefully indicate
(21:46):
that towards the end of the year, and as tariffs
settle more in twenty twenty six, that we see some
of that return to the US as well.
Speaker 4 (21:54):
And sticking with China, how are we thinking about supply
chain operations as it leads to a lot of these
luxury for especially stemming from China.
Speaker 7 (22:04):
Yeah, so if we think about maybe if we look
at it from some of the aspirational or entry level
luxury companies, then they will have some production moving around
the Asia region. But if we think about the heritage
traditional higher end luxury companies, then most of their production
(22:27):
is France, Italy, some Portugal, some parts of southern Spain.
Not so much going on in the Asia region, and
so they've been able to manage on the twenty percent
tariff from made in Europe over to the US more
so than some of the peer group. For example, one
of our entry level that we call branded affordable jewelry
(22:49):
Pandora producers out of Thailand. It's really suffered in terms
of share price this year versus some of the Asian
retail jewelers who've done very very well on the price
of goal.
Speaker 2 (23:02):
So you got to explain this whole handbag thing to me.
Deb I was in Italy in September towards some place factories,
f artists and shops where they make these handbags and
they sell them for tens of thousands of dollars in euros.
What is going on there? Who buys that?
Speaker 7 (23:18):
Yeah? It has I always say, if you bought a Ermez,
you have a just as good or a better correlation
than if you'd have held gold. So I think that
you know, these bags, particularly for sought after material, the
craftsmanship and the fact that they have continued value, are
(23:40):
seen as investment pieces, and so we have the middle ground.
You know, if we look over the last year and
one of the things that we think for twenty twenty
six bags from Tapestry, from Coach, Ralph Lauren others as
well as ready to wear have done very very well,
resonated with a consumer who's been a little bit more
skeptical on the consumer sentiment side and may be shopped
(24:02):
around one thousand dollars or so, but at the very
high end there hasn't been much of a move, so
we've seen ms Brunello, Kuchnelli and others doing very very
well at that high end.
Speaker 1 (24:15):
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Speaker 2 (00:23):
A lot of tech stories out there, including the one
here Microsoft here. The question is I guess the information
was out earlier that multiple Microsoft divisions lowered how much
salespeople are supposed to grow their sales of certain air
products after many missed sales goals in the fiscal year
and in June. That's what the Information Reporter earlier. Today,
Microsoft though, has not lowered sales quotas and targets for salespeople.
(00:48):
That's according to CNBC. They reported that on air, siting
an emailed statement for Microsoft. So I don't know what's
going on out there. Microsoft stocks down a little bit
here on a Rod Rana, technology analyst to Bloomberg Intelligence
joins this year just kind of put that information reporting
the CNBC kind of rebutting it. I mean, just give
us a sense of kind of AI sales how this
(01:09):
thing is kind of progressing, because I can't imagine there's
any material slowdown in AI from what I've heard.
Speaker 3 (01:15):
Yeah, Aulso when you look at there are two different
elements of it. One is the AI infrastructure piece of it. Well,
there is no slowdown in Microsoft at that point in fact,
that Microsoft is capacity constraints right now. But to be honest,
that's not the sales quota somebody is looking at it.
That just comes in because you're hosting somebody's model, or
you're trying to get you're hosting chat GPT. The sales
(01:36):
quotas would be for products such as you know, Microsoft Copilot,
Office Copilot, Getthub Copilot, all those products. And you know
that's not the same for everything. There are certain products
that sell better than the others because of the use
case of it. Kittub Copilot, for example, because it's a
coding software platform. The Microsoft Office Copilot is a good
(01:57):
piece of software or copilot, but it's very expensive. It's
I think thirty dollars per use of per month, so
it's not an Apple set of apples comparison throughout the board.
One of the things that we've been talking about is
even when you look at the broader tech spending, there
is a big slowdown when you exclude AI. So that
could be one reason that enterprise are not comfortable spending
(02:18):
that level of money right now on those individual software pieces.
The second piece could be the implementation part of it.
Because you're buying these sometimes there's data products that you
have to include in your core software or your core applications,
and that may take time. So there is a lot
to be digest from a macro piece. I don't think
there is any slowdown.
Speaker 4 (02:40):
Honor on how is Microsoft tracking against its competitors in
terms of AI software.
Speaker 3 (02:46):
It is doing much better than everybody else. But again
with the caveat because they host chatchipt. This is when
they invested in chat GPT, you know, I don't know
six seven years ago. That is part of that thing
was when you're running that application, it runs on their cloud.
So when you see that, you know, within a three
year period you have what five hundred and six million
(03:06):
users out there when we use chat GPT, a large
portion of that revenue flows into Microsoft Cloud. So when
they are the ones that have seen the first phase
of the big benefit of AI. But as we have said,
you know many times before, all the other vendors will
see that down the road. When adoption grows in other
areas of the ecosystem.
Speaker 2 (03:27):
Salesforce reports after the close here what should we expect
from them?
Speaker 3 (03:32):
Yeah, it goes back to the first piece of what
I said was enterprise spending is week when you're looking
at Fortune two thousand companies, they're not hiding at that
same pace that they used to and we will exclude
AI companies from it. And that is that weighs on
the sales of somebody like a salesforce, somebody like a
workday because they build on a per head basis. So
(03:55):
when these companies are not hiding at that same rate,
Salesforce has a tough time to grow their subscription base.
And you know, we think it is going to be
very much in line with what they had last time,
somewhere around at nine ten percent, which is not bad,
but it's not very exciting as well.
Speaker 2 (04:11):
I mean, is that enough for the stock to be
down as much as it is here to date?
Speaker 4 (04:16):
I mean it just seems like thirty percent down.
Speaker 2 (04:18):
You're exactly down thirty percent for this is a company
that just has has been such a great growth story.
Speaker 3 (04:24):
Yeah, so when you and you know, when you look
at last year, there was a lot of excitement when
they launched a product called Agent Force, which was their
answer or the AI answer to the rest of the universe.
But what happened was the adoption rate has not been
as strong as the initial you could say the demo
was so if you look at the stock price, it
kind of went out quite a bit of when they
(04:45):
first launched that particular product. Now this year it's not
showing up in the numbers, and this is one of
the reasons you're not seeing the stock recovering from that.
Speaker 4 (04:54):
What about Oracle, It seems like there's some worries around
artificial intelligence there as well. We're looking at a credit
risk game and reaching as high as since two thousand
and nine.
Speaker 3 (05:02):
Yeah, and that is why I think the very very
valid question is what happens to Oracle. When you look
at this entire AI bubble narrative or the framework, you know,
you have the big cloud providers that are spending the
most amount of money. We say, when you look at
somebody like an Amazon, Microsoft, and Google, they are spending
quite a bit, but they have real, you know, awesome
(05:23):
cash flow that's coming in. Plus they have businesses, so
even if they overbuild, they will have capacity to use it.
The bigger question is what happens to open ai oracle relationship.
Open Ai has said that they have given Oracle, you
could say, a contract of about three hundred billion dollars
to bleed in terms of sales over the next several years.
They're going to first build some massive data centers and
(05:45):
then they're going to use Oracle as a cloud provider.
The big question is where is opening IM going to
get money from, And that's really what's weighing on that
particular part of the equation. And to be very honest,
there is genuine reason to figure out, like how is
wi is going to raise that money and how are
they going to spend So there is some reason to
be consumed, but not so much on the credit de
(06:07):
false side of it, but so much more as the
estimates that are out there for the opious.
Speaker 2 (06:14):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (06:20):
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 (06:34):
All right, let's talk a little retail Macy's at with
some numbers. I thought the numbers were pretty good. Stocks
off one point seven percent, So what do I know?
Mary Ross Gilbert Senior Echody Allen, she covers the retailer.
She's the expert for Bloomberg Intelligence. She's based out there
in la Mary talks us about Macy's. What do we
hear from them today with the results.
Speaker 5 (06:55):
So, Paul, we saw, actually, I think great results coming
out of Macy's this morning, you see, And so when
you think about it, the stock is off, but that's
because the company put out conservative fourth quarter guidance and
that's really what they always do.
Speaker 3 (07:10):
They seek to beat.
Speaker 5 (07:11):
Their numbers, and so that guidance came in very close,
you know, at the high end. It's right around where
analysts are because they already saw strong results come in
from other retailers. But we think, when we think about it,
we think there's upside here. So we really view the
results as look Macy's name plate because of all the
(07:32):
changes that they're making, and what that means is they're
bringing in more relevant brands that are resonating with their consumer.
Not only that, but the stores look brighter. There's really
kind of exciting music in the stores, the store associates
are more engaged with the customer. We've noticed that on
our channel texts, particularly on Black Friday, we saw more
(07:55):
traffic in the store than we've seen in years past.
So we think that the change is that CEO Tony
Sprain is making and he's really taking his cues from
what he's done at Bloomingdale's. It's resonating, it's working, and
so we think this momentum is building and we certainly
saw it in the third quarter numbers with comp sales
(08:16):
two point seven percent for the Go Forward stores, and
so with that, I mean that's a big improvement sequentially,
and so we think that's building going into the fourth
quarter and just with the constant improvement that we're seeing there.
Speaker 4 (08:31):
So when most people think about the retail space right now,
a lot of people think about the transition to e commerce,
but it sounds as though from what you're explaining, a
lot of people are going there in person. I mean,
I'm looking at Coohal's, I'm looking at Dillard's. All of
these stocks are up pretty substantially on the year, alongside Macy's.
What are they doing in particular that's really attracting customers
to come through the doors. Is it also collaborations with
(08:53):
celebrities by chance?
Speaker 5 (08:56):
Yes, you raised a valid point, and it is. It
does include collaborations. So for example, they Aqua, you know,
they're under their Bloomingdale's brand, currently has a collab going
out with a designer out of Lawn and so yes,
these collaborations also even you know, they'll have some events.
(09:17):
But all of that is is certainly drawing in new customers,
and I think Macy's nameplate could certainly do more on
that end. They had their first collab with their on
thirty fourth brand this year, but we think we're going
to see more next year because if you look at
what Dillard's has been doing over the last few years,
and they have a different business model than Macy's does.
(09:38):
They're not really promotional. For example, for Black Friday, they
just had clearance sales and it was pretty comparable to
last year, so that didn't mean that the rest of
the merchandise was on sale. Macy's the you know, as
far more promotional. But by doing collaborations, you know, by
getting celebrities involved. So for example, for the holiday, they
(10:00):
have Jennifer Hudson that's you know, fronting their campaign for
the holiday, and they're also engaging with social influencers. So yes,
all of that is resonating. We're seeing it with other brands,
like for example, with American Eagle, which just tapped Martha
Stewart and that that's appealing to gen z.
Speaker 4 (10:22):
Oh wow.
Speaker 2 (10:22):
So one.
Speaker 5 (10:25):
Yeah, So these bold campaigns that these brands are doing,
Macy's is also getting involved there and they're dipping their
to I would say they're dipping their toe in the water.
But I think we're going to see that increase, you know,
and build as we get into twenty twenty six. And
when you talk about the digital business, because of course
you're always hearing, let's say, stronger growth on digital. For example,
(10:48):
when we looked at Black Friday, you know, over the
weekend through Cyber Monday, the sale strength was really led
by digital. Digital was up double digits versus you know,
load to mid single digits for in the store, So
I think that's really positive there. So when we look
at Macy's, a third of their sales come from digital,
(11:10):
so still in store is very big, but it's also
omni channel well, the ability to buy online, take back
in store or buy online, pick up in store.
Speaker 2 (11:20):
Well, when I walked to Penn Station today, I'm going
to walk past Macy's as I always do, but today
I'm going to go in. Okay, I'm going to do
a store walk. Is what the kid? What the retail
anamals call it a store walk? And I'm going to
check if John Tucker's would an escalator.
Speaker 4 (11:33):
Still there, We're counting on you.
Speaker 2 (11:35):
Okay, report back, Mary, just real quick, thirty seconds. What's
macy saying about the consumer out there?
Speaker 5 (11:42):
Yeah, so they're saying that the lower end consumer is
really feeling pinched and that's where they're seeing some challenges
on some of the price increases on their lower price
point items. But the higher middle income, in the higher
income consumer is resilient and they haven't lashed or battered
and I with higher prices that they took to offset
(12:04):
tariffs and they're still buying.
Speaker 2 (12:06):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (12:13):
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 (12:27):
We continue to get some earnings from the retailers. Today,
Dollar Tree came out with some numbers, pretty good numbers.
The street likes that. The stock's up three point four
percent today. Dollar Tree is up fifty percent year to date,
So a great move for that company, that stock. Let's
turn to Lily Meyer here, Bloomberg Deals reporter for Bloomberg News.
She covers all the retail companies out there. Talk to
(12:51):
us about Dollar Tree. What did they say here in
the latest earnings.
Speaker 6 (12:54):
Yeah, so dollar Tree did well this quarter at matt
expectations on revenue and same store sale, and it raised
its profit outlook for the year. I think they really
have hit a niche in being able to capture consumers,
both lower end consumers who need cheaper goods and then
high income consumers who are looking to trade down.
Speaker 4 (13:15):
So, I mean, what do we think about elasticity of
the lower end consumer right now? Because I mean, if
you think about Walmart, I used to think of this
as a company that you know, was a cheaper place
to shop, but it seems as though it's appealing to
multiple consumer types. But it seems as though Dollar Tree
really is a great place for the lower end consumer.
Speaker 6 (13:31):
Yeah, and actually recently Dollar Tree has been looking to
kind of break into that higher income shopper as well.
So it has this pricing strategy, so it has some
products that are still cheaper, but then it has some
it's getting more products that are more expensive.
Speaker 2 (13:48):
What is Dollar Tree saying about its core consumer out there?
Who is that core consumer and how are they behaving?
Speaker 7 (13:55):
Yeah?
Speaker 6 (13:55):
So I think it's core consumer is still a lower
income shopper. Eighty five percent of their products are two
dollars an under, so they really still have a lot
of value. So they're seeing those shoppers continue to go in.
But this quarter they saw traffic down and they attributed
that to tariff increases.
Speaker 4 (14:12):
See I missed when things were actually a dollar, a
dollar Tree, a dollar general.
Speaker 2 (14:15):
Did you say two dollars? I remember? Should we change
the name? And I remember it? John, and I remember
the five and dime and Penny can do it yep, exactly,
dating ourselves ourselves, all.
Speaker 4 (14:28):
Right, So what's the takeaway in terms of the outlook.
I mean, you talked about tariff still being a drag here.
Speaker 6 (14:33):
Yeah, so tariffs will really dragged this quarter. They said
that's gonna lessen. So I think this was the quarter
where we're really seeing the biggest tariff impact. It'll be
really interesting to see what they predict for consumers next year.
I'm interested to hear about that and also what they
see for holiday if they continue to see high income
shoppers trading down for gifts?
Speaker 2 (14:53):
Is dollar stores do they see a surgeon sales seasonal
surge and sales from holiday sales? Is that? Do they
see that like a department store would.
Speaker 6 (15:02):
Yeah, I don't know if it's the same surge, but
you know, they sell a lot of gift wrapping and
gift bags and some of those smaller gifts stocking stuffers,
so I think they see a lot of that around
the holidays.
Speaker 4 (15:12):
So what are we seeing in terms of just the
broader read on the retail space. This kind of gives
us a picture of the lower end consumer, But what
are you seeing across the board?
Speaker 6 (15:19):
So broadly, we're really still seeing consumer spend. So there
hasn't been that massive pullback that I think some of
us were imagining might happen. We're still seeing consumer spend,
but they're really value driven, so they're looking for the
best deals they can get. They're trading down when they
need to. They're stocking up on essentials.
Speaker 2 (15:37):
How promotional are retailers right now? Because I mean, I know,
talking to Punam Gooyle, the retail analysts of Bloomberg Intelligence,
he says, you know, the more promotions you see out there,
that's going to be that goes right to the margins,
the profit margins of some of these retailers. What are
we seeing this season, that's a good question.
Speaker 6 (15:54):
So this season, we've actually seen some retailers pull back
on deals to protect their margin. So companies are doing
that as part of a broader strategy, and then some
are having to do that because of tariff. So you know,
for Black Friday, typically they'd offer big discounts and some
are pulling back or not offering discounts at all.
Speaker 4 (16:11):
So consumers have still been broadly spending in the retail space.
What are they spending on?
Speaker 5 (16:16):
Is it?
Speaker 4 (16:16):
You know, are we spending money on essentials right now,
skipping this lurging?
Speaker 6 (16:21):
Yeah, yeah, that's exactly it. So this Black Friday, we
talked to a lot of folks who were saying they're
going to just get essentials this Black Friday, so instead
of buying you know, a Lake Crusette, Dutch oven they were.
We talked to someone who instead was going to buy
like three bags of forty pound dog food.
Speaker 2 (16:38):
Oh okay, yeah, I don't have a dog for them,
right yeah.
Speaker 6 (16:45):
Dot Com so really using you know, deals to get
things that they need for themselves rather than getting that
big ticket item they waited for.
Speaker 2 (16:54):
What I learned from talking to retail folks is omni
channel retail, which is you use both the online and
the bricks and mortar and maybe you look at something
online then you want to go touch and feel it,
or maybe you order it then you pick it up
at the store. Omni channels that still a thing.
Speaker 6 (17:10):
Yeah, yeah, So we were out there on Black Friday
and some of the stores, and you know, while a
lot of people have switched their holiday shopping to be online,
we still saw a ton of people in stores, especially
at stores with really good deals and stores that appear
appealed to young shoppers. So brands like Addicted and Princess
Polly that are in malls were really flooded with young people.
Speaker 2 (17:31):
Stay with us more from Bloomberg Intelligence coming up after this.
Speaker 1 (17:38):
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 (17:52):
Let's talk a little luxury here. That's right down John
Tucker's alley. Here, Debi, and she's the expert luxury goods
analyst of Bloomberg Intelligence. She's based in London. There, just
give us some kind of a post mortem. How was
twenty twenty five for the luxury companies and maybe what's
the oulok for twenty six?
Speaker 7 (18:12):
Hi. Yeah, So we started out twenty twenty five with
an expectation that we'd moved back to growth, and that
certainly didn't materialize through the first half of the year,
but we seem to be ending at around three to
four percent growth as we exit twenty twenty five. Now,
(18:32):
the US has been robust, Middle East doing very well,
but particularly in the first half the year, it was
China which was the drag. And what we've noticed is
we end the year. We've actually just heard on a
fireside chat over the last few days from Laurel where
they're mentioning high end beauty doing very well out of
the US, but also in China too, so they're adding
(18:56):
to what we've heard from the luxury companies where we've
seen two thirds of luxury companies and most of the
top ten switching to growth in China in Q three
from a low base from negatives a year ago. But
actually that we're calling green shoots into the end of year.
Speaker 4 (19:15):
How are these companies holding up as it re leads
to tariff overhangs.
Speaker 7 (19:20):
Yeah, so we did a lot of work around May
time and again through July and August with the different
tariff rates moving around, and what we've actually seen it
was less detrimental overall in our numbers. We probably think
that EPs won't be pulled as much as was expected
because there have been some cost savings and the biggest
(19:42):
companies and those that were where brands were really in
favor have managed to pass on price and generally because
these companies operate on high gross margin, the cost into
the US, they've moved around two to FOXX and on
additional price into the US as well well as two
three percent from the beginning of the year, So some
(20:03):
of those brands have absorbed passing through six seven percent
pricing to the US consumer. And we think into twenty
twenty six that moves nearer to two to three percent overall,
so it should be less intimidating for the consumer overall
twenty twenty six. So it's one of our drivers for
the year ahead.
Speaker 2 (20:22):
DEV talk to us about the Chinese consumer. We don't
see the Chinese consumer here. I'm going to walk the
Penn station today, walk down Fifth Avenue, Madison Avenue. I'll
see a lot of Europeans. I see a lot of
American tours. I won't see many from Asia. Are they
not traveling? So is that an impact for New York
and London and Paris and things like that.
Speaker 7 (20:42):
We actually have a survey out of our Asia office
that we've just incorporated into a travel document which will
be producing. But this piece of work has already produced
and actually on October versus May. The China consumer is
looking to travel more into Europe to start with. So
(21:03):
that's the first big positive. I think part of that
is just on the way the tariff situation has gone maybe,
so that would be the first time that we're looking
for them to come back so versus three months ago.
They're looking to traveling outside of Asia. But overall, what
we call the China cohort that's actually really operate in
(21:24):
more avidly across the Asia region. We're not seeing so
much travel from Chinese into Japan, and of course we
know that there are there's some political commentary there as well,
so we wouldn't expect that to pick up next year.
But we are seeing Korea, Singapore, Australia and others being
positive and the first move to Europe should hopefully indicate
(21:46):
that towards the end of the year, and as tariffs
settle more in twenty twenty six, that we see some
of that return to the US as well.
Speaker 4 (21:54):
And sticking with China, how are we thinking about supply
chain operations as it leads to a lot of these
luxury for especially stemming from China.
Speaker 7 (22:04):
Yeah, so if we think about maybe if we look
at it from some of the aspirational or entry level
luxury companies, then they will have some production moving around
the Asia region. But if we think about the heritage
traditional higher end luxury companies, then most of their production
(22:27):
is France, Italy, some Portugal, some parts of southern Spain.
Not so much going on in the Asia region, and
so they've been able to manage on the twenty percent
tariff from made in Europe over to the US more
so than some of the peer group. For example, one
of our entry level that we call branded affordable jewelry
(22:49):
Pandora producers out of Thailand. It's really suffered in terms
of share price this year versus some of the Asian
retail jewelers who've done very very well on the price
of goal.
Speaker 2 (23:02):
So you got to explain this whole handbag thing to me.
Deb I was in Italy in September towards some place factories,
f artists and shops where they make these handbags and
they sell them for tens of thousands of dollars in euros.
What is going on there? Who buys that?
Speaker 7 (23:18):
Yeah? It has I always say, if you bought a Ermez,
you have a just as good or a better correlation
than if you'd have held gold. So I think that
you know, these bags, particularly for sought after material, the
craftsmanship and the fact that they have continued value, are
(23:40):
seen as investment pieces, and so we have the middle ground.
You know, if we look over the last year and
one of the things that we think for twenty twenty
six bags from Tapestry, from Coach, Ralph Lauren others as
well as ready to wear have done very very well,
resonated with a consumer who's been a little bit more
skeptical on the consumer sentiment side and may be shopped
(24:02):
around one thousand dollars or so, but at the very
high end there hasn't been much of a move, so
we've seen ms Brunello, Kuchnelli and others doing very very
well at that high end.
Speaker 1 (24:15):
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