Albertsons CEO on IPO

Week on iTunes, SoundCloud, bl Bloomberg dot com. You can also listen to our radio show at two pm Eastern on Bloomberg Radio every weekday, or watch us on YouTube by searching Bloomberg Global News. Let's get into where we are, because Texas is closing bars. They are coping with a record number of new cases really around the country, is

what we're seeing. So let's get into with Dr Ian LUs Beata, clinical Associate Professor of Medicine at n y U Landgo Medical Center, on the phone from New York City. I'm kind of jumbled too, because I'm trying to keep track, to be quite honest, in of all the headlines that have come down just on this Friday, alone own. Um, Florida's governor says alcohol suspended at ours, So how do you make sense of kind of where we are is the rest of the country kind of where New York

was back in March. Yeah, I think that's a pretty good analysis. By a happy Friday, Carol and Jason by the way, and thanks for having me of course. Um yeah, And by the way, Jason had been in the office every day since January. So it is a shock. But some of us have been slogging through it. I know. And I have to say I before you answer, like I have such huge I have renewed admiration for everybody who has been going in our team included, um, just given what it feels like, and I know it feels

better than it did uh two months ago. So I really it's remarkable what what you guys have done dealing

with this. And I think that's one of the reasons, if I may editorialize for a second, why I think Carol and I are a little upset seeing what's going on, uh in the rest of the country, given everything we know from talking to you know, friends and colleagues like you, You've you've been doing it been through right, So I think the task force, like you, is concerned about the dramatic, really spike in cases across the Sun Belt, and and they all Um vice Version and Pense and Dr burkeson FACCY,

I think really had sort of a fairly uniform expression of concern, which is that we're really having, um this paradigm shift from previously just testing people who seem to have symptoms or or being ill to really asymptomatic testing now, and as that's happening, we're really seeing a spike in the number of cases. And I think the press conference today was really focused on enlisting young people to really

have more social responsibility. As much as they want to go out, as everyone wants to go out and have fun, there really is a social responsibility to continue to flatten the curve, which I think, Um, the Northeastern states did you know reasonably well, it certainly is not zero by any means, but it certainly did flatten the cases. And part of that is to prevent this hospital surge where you overwhelm the ability of the hospitals to take care

of people. You may not necessarily reduce the total number of cases. We don't have. Medications are vaccine to prevent cases, but even if you slow the spread, you're able to kind of protect hospitals so that when God forbid, when people need ventilators or need access, you know, that's available.

And I think that was their emphasis today and I think it it makes a lot of sense because we are seeing such a spike in cases and part of that are asymptomatic young people, as they say, under forty under thirty five who are carrying and transmitting uh COVID nineteen source CoV two uh and feel perfectly fine. And

that really is the conundrum that's put you. You know, I have to say, you know, we kind of had a little bit of a run in this weekend with a younger individual who was not wearing a mask, you know, and repeatedly kind of reminding um as we were kind of out and about um, you know, in a social situation. And it's just interesting, UM And I think they make a good point. I do also want to bring up something or Vince and Neerella um Dr les Better brought

up at the top of our show. You know, how do we what are the numbers that we really need to focus? Is it cases? Is it hospitalizations? Like what is it that either tells us we're getting back to where we were in New York in March, or it's a little bit different and maybe perhaps a little better, or you know, I don't know how you quantify it

or qualify it right. Well, as as Dr Fauchi said, this is a protean disease and he's never seen it, and we've never seen it a disease where you can have, uh, fortunately, the majority of people, it seems with really minimal or asymptomatic disease all the way to life threatening disease where people die, and before that there are a month or two on a on a respirator. So it is very hard to process and somewhat hard to predict which people will crash and burn and which people will have very

mild cases. And because of this, we have to be extra cautious in trying to prevent that. Because although we know risk factors and they outline that type one diabetes, obesity, you know, hypertension, lung disease, age, we're still seeing young people who get sick, and certainly in New York we've seen young people who unfortunately die, So we don't really have the full picture, and therefore everyone has to really be on much more guard hopefully go back to work cautiously.

It's a real balancing act between damaging and economy and having some potential risk to your population. That's a tough needle to thread, and that's really what everyone is trying to grapple with because we don't have recent history of this. Nineteen it was a long time ago and they didn't have these issues. All right, We're gonna continue our conversation with Dr Ian Lesbater giving us some great context about

where we are in the virus. And I think, uh, probably alongside with us, you know, watching this, uh with with a little bit of caution, and I dare say, I don't want to put words in his mouth, maybe a little frustration of you know, what's going on in the rest of the world, because we have lived this, we know, and he's lived in far far more intimately than we have, Carol and really seen people suffering from this disease, and you really would hope that, you know,

people have learned from what unfortunately we had to go through here in the New York metro area in particular, and you would hope that it would not be as bad or at least headed in that direction. So I guess time will tell, Jason, but it certainly is jarring the tone that we are feeling really throughout the week, to be quite honest, and then of course to see that task force back. You are listening to Bloomberg Business Week,

Jason Kelly and Carol Master here with you. We're back with Dr Ian Lesbier, clinical Associate Professor of Medicine for ny US Lango and Medical Center, on the phone from New York City. So I I have to ask you, you know, we're a little bit doom and gloom, maybe rightly so about the rest of the country, but we're looking at Phase three potentially it's scheduled for July six in New York City. How are you feeling about that, especially as you see what's going on in the rest

of the country. Uh, you know, I'm optimistic. I do think. Um, from what I see, most people are wearing masks and social distancing. We're seeing that, uh in our waiting room. Hopefully businesses have had time to prepare and figure out ways to bring people back. It's a challenge. We really don't know what will happen. It looks as if, at least in the Northeast people will be able to return

using good judgment. Uh. And that's not to disparage people perhaps in the sun Belt who felt more comfortable because they really were unaware. Are of the number of cases, we are probably only diagnosing you know, one in five or one in ten uh percent of cases, so the total number is almost you have to think of this perhaps as ten times more. We have two point five million cases. Probably there are twenty five million people who

are infected, fortunately most asymptomatic. Uh. It may be less than that, but certainly we can't be shocked if you know, if those numbers grow. And I think people have been feeling very confident. You know, there's more treatment. You hear less about deaths. But even though many of these things like convalescent plasma and deaths of metasone from desiviere don't seem to help a bit. But by no means are

they cures. They they are reducing the death rate. Uh, but by no means are we out of the woods. But I do Ian, let me ask you a question just on that exact point. So if it's ten times or or you know, if it's like, should that make us feel better? Well? I think it should make us feel better as we see the number of cases going up. And that goes back to your question, what are we going to measure or what what are we go going

to be concerned about. I think we are going to see more cases going up, and that's why the number of hospitalizations and why the death rate or case fatality rate may be UM somewhat more useful. But I put that number out and that's a publicly available UM, you know, just so that we're not shocked at seeing more and more cases. But it is a reminder that we do need to again have that community involvement, as Dr Fauci said, with young people being very aware because they're the main

uh kind of Petrie dish. At this point, there there are a big reservoir of asymptomatic disease. When we first started out, we were only testing sick people. Now we really have the ability, fortunately to test asymptomatic people. So I think we should go through with Phase three. We

do have more testing available. We're seeing in New York at least a high serio prevalence rate, probably twenty maybe even so that many antibodies antibodies exactly, and we think those are preventive antibodies, how long they will last, how long they'll prevent recurrence. We don't really know again will the virus mutate in the second waiver in the fall, But certainly I think based on what we are seeing now, cautiously going back makes sense here. But this is very regional.

Obviously there are areas where it's still rising dramatically. So so I'm just saying about our audience listening to this and how the week's been and the task force came out, so ian you know, is it just a case if we start to see hospitalizations go up a lot, is that when we all have to say we'll wait a minute, we've really got to slow this down. Is that the number that we've got to be kind of glued to.

I think so. And you know there's always that delay, right so as you're diagnosing cases, hospitalizations and saddly deaths will be delayed two, three, four weeks down the line. So we haven't really seen that surge and hospitalizations because you're just seeing cases diagnosed now, So there will be a delay in and that in some ways gives the

localities time to prepare. But many community hospitals really don't have the resources if there's really a big surge, and that was the whole rationale to try and you know, flatten the curve. I don't want to say it's too late, but there may be areas where that we're not as careful and we're seeing more cases, and I think we have to expect more hospitalizations and saddling more deaths in the next few weeks, because that's just the kind of

how the numbers go in this scenario. Yeah, it's a it's a tricky time, to say the least, in a worrisome time. I think, uh as well, all right, Dr Ian less Vader, It's always good to end up the week with you because I feel like I go into the weekend smarter, knowing what I should be thinking about, and you know, candidly, when people from a social distance asked me what I think is going on, I just

quote doctor unless better no, I do. I really feel like we take everything that's been going on in the week, and this day was full of so much and it just makes sense out of all of it. So um, yeah, I really always appreciate he being one of our go two voices when it comes to the virus. You're listening to Bloomberg Business Week with Carol Messer and Jason Kelly on Bloomberg Radio. As we mentioned earlier, we did have

an IPO today. America's second largest supermarket operator, Albertson is once again a public company, and the stock right now trading at fifteen dollars seventy cents a share. That's below it's sixteen dollar a share IPO price. Let's get into it with the company's president and CEO, the VACS anchor in he joins us on the phone from Boise, Idaho, VCS.

So nice to have you here with us. Congratulations. Um, it wasn't an easy necessarily I p O to do, considering kind of the market backdrop and just kind of the world at large. Oh, Carol, you're right, it's um. You know, it's so hard to predict what happens to the market ever, but we as a company, we've been so ready preparing the company, strengthening it for this day. We feel so confident about what we're going to do

in the future. So, but I talked to us about the world we're living in right now, even outside of the financial markets. When it comes to your stores, you've obviously had to do some some retrofitting, some remodeling, like everyone else has had to do. Where are you in that process? So we did. We started out very early in February and March Perplexi Glass, Dickcales, new cleaning procedures,

one way ailes, et cetera. One of the things we've learned is you can never stop innovating on that front, right, you can never get complacent, never stopped innovating, and we continue to look for new ideas. Sometimes it's a new technology that might count the number of people coming into a store and exiting the store. Sometimes it's about new thermoscan reading temperatures as people come into our factories. So we're always innovating. So what do you do with something

like a salad and soup bar? Do you just get rid of it? Yeah? For now we have, Right, it's what we do. Instead you you were able to go to a salad bar and make your own salad or pick the pick the half a dozen chicken wings you wanted. Now we package it and a lot and provide it. We still provide it for our customers, and customers still want it. They can't customize it like they did before. Right, it will come over time, but I don't think it's

the right time yet. So I think, if I've got my numbers right, only about a quarter of your stores feature online order pick up, well below many of your peers. So how do you play catch up with your rival, especially when it comes to e commerce because folks have had to do it because of the shutdown, and a lot of people are saying, even those who hadn't done it before, I like it and are probably going to continue in the future. So how do you play catch up?

You're so right we were building it. This last few months have been an incredible catalyst for us to go even faster and and and the fact that we don't have it in so much of our footprint is so much upside for us. I can tell you this though. Every time we opened it in a new store, we get a whole set of new customers starting to shop with us. And the customers are already shopping with us

shop even more. And I think it's because we we provide such a fabulous, fresh assortment and a more complete assortment than many um and so so I just think customers say, I've got a great store, and I now have the convenience of omnichannel with it. So in terms of catching up, is it just because you guys are going to focus on it and just ramp up your

efforts to catch up or what? Yes? That is And we're also catching up in different ways, you know, we're we're we've got new technologies that we're putting in place that that can enable faster picking in stores. So we're doing it in different ways, and we're adapting to some new stuff that's coming from the coming onto the market.

And So when you think about the competitive landscape EVCT, even beyond e commerce from a pricing perspective, what do you see in terms of pressure from some of the you know, lower price or the so called hard discount formats I'm thinking about like Aldi and others, and and even with the dollar stores who are pushing deeper into grocery. How do you combat that side of the equation. Yeah, you know, the way I see it is competition is a wonderful thing. It keeps us all sharper. We learn

from things, We learn from them all the time. Uh, and we play the game a little differently. Right, you can go to some of those stores and you won't get the full assortment you want to come to our store, you get the full assortment you want. And the great thing about our country is there's you can Different customers want different choices, UM. And and so the key is to find a way to compete that's different and right for our customer. And we believe we do that very well.

So the bec I do wonder? So you are you guys are now, as we said at the top, a publicly held company trading on the New York Stock has changed. This is after fourteen years of private ownership by Cerberus Capital. UM. I do wonder, though, are you disappointed with the I p O? Sixteen dollars was below and expected range? There was talk of you know, you guys raising more than a billion dollars in this I p O. Are you disappointed, Carol?

You know, we are actually elated that we could conduct an IPO in one of the most difficult environments we have all seen in our lifetimes, UM, in so many different ways, and that so many investors had confidence to put their money with us. And and we are always long term oriented. You said it, our owner, Our investors have been with us since two thousand and six. Okay, and uh, it's a long term orientation and that's what we have every day here and so that when you

think about your employees too, and the workforce. I mean, what a change it has been from an incredibly tight labor market that we had earlier in the year to record unemployment. Now, tell us about your workforce and how you see that changing, growing, shrinking in the short and midterm. Yeah, we've had to add so many people to our stores. Distribution centers are omni channel business. So in the last the first few months, we recruited more than fifty thou people.

We had a base of two seventy people. You know, our workforce, Um, there's there's so many who have been with us for so long and who are so service oriented, in service centric that you know, we we celebrate our workforce and we spent a lot of time keeping them safe, making sure they're paid right, especially through this crisis, and we think this will continue for a while, that we'd

be able to we need this level of workforce. Um. And I don't know how things changed how so hard to predict it, but but you know we are on a good trend on that front. So I've got to just quickly ask you what's going to be the relationship with Cerberus going forward. They still have a sizeable steake in you guys, and you still have a fair amount of debt. I think it was eight point seven billion at the end of the last fiscal year. How do you get rid of it? And just got about a

minute left. Yes, it's it's a lot lower now, it's only two point five times. I read a little shift of seven billion dollars and and we recognized the Cerberus and four other investors who have been with us. They'll continue to stay with us. They've been fabulous. They've invested in this company to make it stronger, and we've decided that there they continue to stay with us. All right,

We're gonna leave it there. They ve center and thank you so much, President, CEO of Albertson's newly public certainly accompany to watch. Can I say one personal thing, Carol about Albertson's please. They owned the Randall's Garcia Searchain. My first job in East Texas, the rand Randall's flagship. If Debbie Kelly is listening, she would check out. You know what I wanted to be a because this was a it was a fancy grocery store in uh In the neighborhood where we lived in Houston, and so you took

people's groceries out to the car. And even though it was Houston and it was hot as all get out, that was the job you wanted because you got tipped. I couldn't get one of those jobs. Those were all tickets, So I was a cashier instead. Um pinstriped apron. It's like, would you like would you like your eggs on the bottom? Yeah, exactly, But you know you had to worry about like your speed and all that. You're listening to Bloomberg Business Week

with Carol Masser and Jason Kelly on Bloomberg Radio. We are obviously tracking so closely what's happening with the virus, especially outside of New York City and the rest of the country. The headlines are troubling, to say the least, and the numbers even more so. Michelle Cortez, health Science and Medical Technology reporter is with us from Bloomberg. She joins us on the phone from Minneapoli, and Michelle, before we talked to you, I want to hear a little

bit from Dr Anthony Fauci. He spoke earlier today, specifically about his advice to young people. Anyone who gets infected or is at risk have been getting infected to a greater or lesson degree, is part of the dynamic process of the outbreak. And I know because I can understand when I was at a stage in my life when I said, well, I'm invulnerable, so I'm going to take

a risk. I think what we're missing in this is something that we've never faced before, is that a risk for you is not just isolated to you, because if you get infected, you apart innocently or inadvertently of propagating the dynamic process of a pandemic. All right, of course, Dr Anthony Fauci, member of the White House Coronavirus Task Force. They are back in action and we heard from them

earlier today. So let's bring in Michelle Cortezes Jason said Bloomberg News Health Science and medical reporter on the phone from Minneapolis. So, Michelle, it's really been a different week again, I feel like, and the tone certainly today from the task force a bit confusing at times. Um, how do you add it all up right now? Where we are in terms of a nation when it comes to the virus,

these things are unusual and hard to follow. So the task Force was trying to portray it as a positive situation because in fact, we are seeing a decline in death rates. Fewer people right now are dying from coronavirus then we're dying from it back in April, when we were seeing, you know, thousands of people die every day. There were a couple of days this week where we had fewer than three hundred people die. That being said,

the number of new cases is skyrocketing. We hit a new piece just today with more than forty thousand people infected, and we know that deaths do follow um, so that's a trailing indicator. So we did have deaths increasing. Also, since we're doing a better job of capturing these cases than finding them early, it might take longer for people to get really sick or die, or perhaps we're just

finding more people who ultimately won't die. So it depends on the framing how you're looking at the outbreak, all right, So the framing, I guess Michelle sitting here in New York is important. And yet there is a sense of sort of like gloom and dread that I feel, at least looking at these numbers either validate that feeling or

tell me that I shouldn't be feeling it. Well, I think that again, you're hitting it exactly on the head because you have to remember that you're sitting there in New York and you probably know someone who was infected with coronavirus. Many might have done somebody who got very sick. Right, So in many, many parts of the country and in many parts of the world, people don't know anyone. I don't know anyone who's had coronavirus. I don't know anyone

who knows anyone who's had coronavirus. And in Minneapolis, and so I think that that's the difference. And another thing that they talked about at the briefing today is that this is really very regional and not regional by state by regional by county. There are some areas that are incredibly hard hit, and those people are panicked by these numbers. That's like people in New York City. You have lived

this and you know how bad it can be. But other people don't understand it, and they think that it's maybe not as serious a problem and certainly not a problem for them. But across the South now more people are sadly joining your club and realizing how dangerous this might be. So how do we I don't know, you know, here we are, We've got you know, we continue to reopen, certainly here on the East Coast, you know, and other states are reopening. And yet you have those number of

cases going up. Michelle, So I don't know, You've been smack in the middle of this. How do you what? What do you what's your anticipation of kind of what comes next? Well, the bottom line is that this is this virus is not stopping we Most viruses are seasonal. We should have seen a decline in the summer. We're not seeing a decline. We know that they're seasonal, they increase in the fall, so likely we will see an

increase from these higher numbers. We know from the prology tests that only a tiny fraction of Americans have been infected. So this virus is going to be with us and be with us and be with us until we get a successful vaccine. I when it comes to vaccines and a show, don't tell person, I want to see results. We don't even have any phase run results from any of these trials yet, so I don't think you can count on that. We can hope for it, but we

can't count on it. What about the Jason and I've talked a lot this week about Maderna and the CEO coming out and saying I think they're going into phase three right or soon? I mean is does that give you any optimism in terms of a vaccine. Well, that gives me optimism that if there is a successful vaccine, if there's a successful trial, which is a huge if, we will have product at the end of it. But you have to remember that most clinical trials, at least

initially are not successful. Again, we don't have phase one data. We don't have any firm evidence of whether this approach is going to work or not. And there are no vaccines that work the way this vaccine works. So all the science suggests that it's going to be great. All the early laboratory work person man numbers, they all look good, but we don't have any scientific proup yet. So we're we're betting a lot on the fact that, you know, all the numbers add up, and now let's go try

it in the person and see if it's stands. And I'm just I'm just you know, show don't tell I. I need to actually see the evidence. But What does work is masks and social distancing and everyone they see doing that and it's just one Again, if you've never been personally affected, it's not in your community. You think you're crazy for wearing a mask, like an imposter syndrome. But people need to embrace it. Alright, Michelle Cortez, you're

preaching to the choir. Here are award winning journalist Space in Minneapolis covering this coronavirus. She's a must read. I said, like Tom Keene, it's like raid Michelle Cortez everything she writes, but it's totally true. But she explained so much about this. But she explained so much right because it you know, those people who are in states like I don't know anybody I'm okay, versus US who we know lots of people, um who have also lost their lives. So it's it's

not something to play around with. It is time for the drive to the close back with us. As Ernesto or most he leads the portfolio management and research teams for all equity strategies over at Demo Global Asset Management in the US. He's got or the firm, I should say, has two hundred seventy seven billion in assets under management. Ernesta joining us once again on the phone in Chicago, Ernesto, good to have you here with us. UM. Curious about

the last week. We've certainly felt like a tone when it a tone has changed in terms of concerns once again about the virus. We've had some trade concerns throughout the week, and we've seen a plane at play out certainly in the equity markets. How do you see it? Well, there's no shortage, for sure of things to worry about in the equiti market. And the important thing is not so much what the absolute level of worrying is. It's

whether we're actually seeing things improved. And granted, things were improving at a batchlor pace, and this week they took a hit because of of coronavirus, because of trade. Uh. But we still think that things will be are on the on the upswing here in terms of the economic growth and the reopening, even though it may be a little bit less uh, a little bit more bumpy, a

little bit less smooth. Um. So in our particular, in our portfolios, we are choosing to stay focused on higher quality, strong balance sheet companies, companies that can can withstand a little bit more of the lower growth and perhaps bumpy route that we're that's in front of us, but still deliver exposure to equity markets because at the end of the day, equity markets right now have I've seen an incredibly strong policy response from from the Fed and and

UH fiscal from the Treasury on the fiscal side. So that is a very important component of our bullish on equities and call for the US bullish bottom line, bullish bottom line bullish yet, but you want to say a little bit more on the defensive side, such as the stocks and our BEMO Low Voltility Equity Fund which today is is down, but is down almost eighty basis points, are point eight percent less than the market as a whole, simply because of the defensive nature of the stocks and

the portfolio itself, protecting our clients on the downside, where you know, Carol and I love talking about names, and one of the names we definitely wanted to talk to you about was Kroger. We spoke earlier with the sea of Albertson's newly public as you know, talk to us about Kroger and the supermarket business. I mean, talk about UH, a place that's been important but also disrupted and and

all sorts of things. Talk about that name well, I mean two of the three picks that I sent over to you guys, with Kroger and the other one Sprous Farmer's Market. They're both are in the supermarket business. They're both benefiting from stay at home UH and and UH they managed to adapt their businesses to pick ups and delivery. So so these are companies they're gonna do well in this environment, and we're doing necessarily as well in terms of the stock price in a much more risk on

type environment. On on risk on days they lack. But on the day like today, I'm pretty sure Sprouts is still up. I'm not sure about Kroger's whether it's that that was up a little bit, but not as much as Asprout. But this is the exact nature of the stocks like that are defensive like this UH that they are performing on downdeds and provide a counterweight to the to the rest of the portfolio which might not be doing as well. So so that's that's why we like

the like them. We like them for the particular stressful tens as we're in. We have stable and and and defensive, resilient businesses and so and just going down to level on that particular sector of that particular business. Why Sprouts and Kroger, what do you get sort of having both of them, Well, we own all the kind of consumer staples, so that's not that those are not our only two.

So so the way we built our portfolio is we look at the potential return of every stock in the university's about thousand stocks, and then we and these stocks wearing in the top of our of our of our attractiveness, and that is a composite that we create out of how stronger the fundamentals of the company, and how much are you paying for those fundamentals, and finally, what's the

sentiment around the stock? And and those those three large categories of of of metrics are aggregated from one final score. These three companies have relatively strong fundamentals and they trade cheaply enough that they make it into the portfolio. And then we also build a portfolio with a very strong focus and minimizing the risk on the downside. And and that's that's also a very critical part of it. So these companies have enough attractiveness to make it into a portfolio.

But most importantly, and this is the reason that we're in the portfolio they are they're low risk stocks, stocks that will protect you on days when the market is down like uh like today for example. Well, and I do want to point out Sprouts is up about two point two today, it's up so far this year. Krueger is down about one third of one percent, so just a little bit lower, but it's so far this year. So Albertson's which one public today second largest operator of

supermarkets in the US. Do you are you interested? Are

you going to look to maybe buy? We we don't own it, and uh we we will buy according to what I just told you, And off the top of my head, I can't tell you what the ranking of any start in the thousand universe is right now, but when the time comes to take a look at um rebalancing, as we call it, our portfolio was definitely pay attention to see if if Albertson's coming into the mix interesting All right, Well, look forward to catching up with you

in the future. An Esto Ramos is portfolio manager for Demo Global Asset Management, joining us on the phone from Chicago. Have a nice weekend, Thanks so much for listening to Bloomberg Business week, download the podcast on iTunes, South Cloud, flooberg dot com, but wherever you get your podcasts, and of course you can always listen to our radio show at two pm Eastern on Bloomberg Radio or watch us on YouTube by searching Bloomberg Global spe