Alphabet Earnings, Untuckit Launch, PE Creating Jobs

live blog. Let's understand what's behind those numbers. For that, we bring in Tender World, senior Internet and consumer products analysts for Bloomberg Intelligence, joining us on the phone from San Francisco, and bab o'donald, president in chief analysts for Technolysis Research, on the phone from not too far from our San Francisco beer down in Foster City, California. J Tender, I want to start with you what's driving these shares down? So basically, it's a cost that's really wing wing on

the company right now. So you know it's going to cost them to play in cloud. The marketing spending is up nine sent are and these up. So what we're seeing over here is they are finding success in enterprise cloud, certainly as the Google other segment is continuing to report strong revenue growth but it will cost to play um and then then that's what sort of is is you're

seeing in terms of their expenses going up. But as far as the core business is concerned, I mean there's an interesting dynamic that's happening wherein the ad pricing imp is improving why, whereas the number of our ad volumes is decreasing. So what you're seeing over here is, you know, as search gets more and more crowded, it's becoming more and more valuable in terms of cost per click. And that's what's driving the top line. So top line is fine.

I think it's the expenses while they push into cloud and invest in machine learning. That's uh, that's affecting this quarter and potentially common quarter as well. And I'm looking at a live blog on the Alphabet earnings too. They talk about advertising revenue growth up seventeen point two a year over year last quarter was up only our mark German Um, adding to the blog saying in an interview with Blueberg News, Alphabet CFO report attributed two main negative

impacts and results. It's a legal settlement with France for one billion dollar related to taxes and unspecified losses from venture investments. So a lot of things, and they are apparently declining to comment on what poor at called rumors surrounding a Google bid for a fitbit. So, um, let's talk to bab O'Donnell. What do you make of the

quarter and all the news surrounding Google alphabets. Well, you know exactly right what your Tayver said in terms of it's it's going to cost them to get into these businesses. It's good to see Google called growing. We saw strength from Microsoft on the Azure side, we saw it from um Amazon on AWS, but at a slightly slower rate. Google is actually sort of the up and comer in

the cloud business. Uh. And the Google Cloud business is actually doing pretty well for them, And I think you're going to see them start to grab some share in the market that continues to grow, but it's slowing down a bit. I think will see their rate of growth probably continue for a while because they're they're building from a smaller base, so I think that's important. I do think as well this you know, if you look at I quickly looked through right as the numbers came out,

this other income thing. They took a big hit on equity securities, a big loss and so that seems to be a big part of the number that caused that earnings miss um in terms of the earnings for the quarter. But we'll see obviously as they provide more details behind that well. And tender also interesting sort of stat that came out that their head count increasing to one fourteen thousand in the past twelve months from nine four thousand. That's a pretty meaningful jump. You know, obviously it's a

growing economy, but they're they're bringing to people on board. Yeah, So basically, uh, the cloud business is you know, a very primary focus at Google right now, and it's going to be the sort of the deciding factor for the next year as well. Uh. You they give you a revenue run rate of eight billion plus. I think you know, the growth is going to continue there, but that growth is sort of driving the headcount but also investing a

lot in infrastructure. You know, with machine learning. You're seeing some results in YouTube in terms of engagement. Uh, and then the revenue growth there. And let's not forget the regulatory issues impacting Internet in general, where you know, compliance costs are going up, so you need more people for that as well. So I think it's a combination of pushing for growth, but also you know headcount um impacted by regulations. So what do you want to know from

the company right now? Well, I want to obviously we want to get a better understanding of the details of this equity thing, which seems to have been a surprise, a bit of a surprise. Also, the click rates were seems as have been down much lower than people expected than to be. So you know what's driving that click rate uh decrease um. Yes, they're maintaining strong growth on the revenue side, but it sounds like it's getting tougher

and tougher uh per click um. Like again, I think the overhang of regulatory issues are going to be concerned. I don't know that they can address that, but I think explaining a little bit better more around what happened with that click rate UM is going to be important. And of course obviously a little bit more color on exactly what happened with Google Cloud is if the other big thing I'd like to see well, and interestingly just reiterate something on paid clicks only up about eighteen percent.

Estimates there had been as high as thirty two percent, So as you say, it's coming a lot harder in terms of getting paid for people clicking through. All right, we're gonna leave it there. Bob o'donnald, President and chief analyst for Technolysis Research. He joined us on the phone from Foster City, California, and to tender war. All senior Internet and consumer products analysts for Bloomberg Intelligence joining us on the phone from our San Francisco bureau, giving us

that instant analysis. Uh, those numbers and shares still down will be interesting to see, you know how people sort of synthesize what Ruth Porrett is saying in interviews as well as what we hear from the company as they talked to investors, and they're saying that Fitbit closed hired by trimming some of that game after hours and down about one point six percent, So one can assume, of course, not getting any kind of commented confirmation, although you wouldn't

expect it. Yeah, we're doing it. Yeah, it's not how it happens. How have we been doing this? Yeah? All right, shares of alphabet Google's parents down two point three percently after our certainly one of the names we'll be watching in the Tuesday trade. Alright, So we talked a lot about fashion, apparel retail here on this program, Carol Masster, and so we're delighted to have Chris Rickabono here with us. He's the founder of untucked. You've probably seen their ads,

you've probably seen their shirts. You might have seen their store here in New York City, and you're about to see it in the UK. Here's here with us in our Bloomberg Interactor Broker studio. Chris, great to have you here. Thanks for having me. All right, so tell us about I mean, let's go back to the beginning, if we can, just briefly, so to the creation, the creation story, the creation myth. It's always interesting here. You are a corporate guy,

you're a Columbia business school guy. How do you get into the shirt business? It was the greatest idea that an entrepreneur can have, is that I needed it to solve my personal problem. All my shirts were too long. I remember going to Las Vegas and I had three shirts and I wore the same one every single day because it was the only one that fit me at the right length, and it seemed to be an issue for everyone I talked to. And the rest is history.

I mean, it was as simple as that. Right, solve a problem, but tell me about it, because I'm just trying to imagine the pitch to either investors or something. They're like, yeah, we don't need that. The pitch to investors was almost impossible because I would go to all my dad's friends and people who typically invest in things. This is ten years ago, and when I went in and said, they said, you're gonna make a shorter shirt and you want me to invest, you know, And I said,

all right, I'm gonna do it. I'm gonna do it with the without you. And so how do you find? Clearly the market is there, You've got a couple dozen now a few dozen retail stores, but how did you find the market? And maybe how did you find how to get to that market? So we launched eCOM only in two thousand and eleven, and at that time most people said brick and mortar was going to slowly go away.

We found out right away that was not the case, especially because our demographic is twenty five to seven years old. It's massive and the older you are, you want to touch and feel the product. So we opened up a pop up in Soho in September two fifteen and the response was just amazing. Um, everyone who had heard our ads over and over but never went online to bias would walk by the store and come in excited. So we opened up twenty two thirty stores the following year,

twenty five the following year after that, so really fast expansion. Um, we're profitable. Uh, the long term value of the customer goes up when they come into a store, they get more attached to the brand. And um, so the brick and mortars slash eCOM omni experience is what has worked for us. It's men and women, right, men and women. We were men only, and when we had about fifty stores, women would come in with your boyfriend or husband and say,

what are we supposed to look at? So we came out with a women's line and it's actually one of our fastest growing segments. So wait, so dig into the numbers a little bit. I'd love to know if how much you can share with us in terms of growth rate, you're profitable, I'm assuming we're We've been profitable since day one, which is much different than than the typical brand the next because we didn't have a choice, we had we raised a hundred thousand dollars friends and family money. We

had to be profitable. UM, so it kind of became our d n A. We have eighty six plus stores. We are doing we will do north of two hundred million dollars this year. Um going into we have five stores in Canada which have done very well and now we're going into the UK. All right, So how much do you worry about sort of the trend going away from you? You know this notion that everybody's been like, you know what, I'm thinking of my parents when I was groat tuck in your shirt? You don't you look sloppy?

Tuck in your shirt? How do you sort of not only against that? Yes, the first thing I did was pull out old pictures of my father when I launched back into the six season seventies, and guess what everyone's shirts were on tuck. The difference where they were floral patterns right with huge lapels and so it's a different style. But you can only wear your shirt one way or the other. There's about I don't know, five to ten percent of men who just simply will not on tuck.

But at the end of the day, when there's only two ways to do it, you're gonna be doing it. Either on the weekend or during at some point, and now everything looks so much nicer. Clothing in general. You can wear really high end jeans, high end sneakers, a sports jacket, and an untucked shirt and go into the best restaurant in Manhattan and fit in. I gotta ask you, because we talk a lot about this, We were talking

about it earlier in the show. This this backlash which I think is good against fast fashion the way things are made, uh, bad for the environment, labor laws, etcetera. What's your story there and and how do you think about making the product in a way that appeals to those who care about sustainability, who care about where it comes from. Sustain Ability is huge for I mean, in order to exist these days, you have to be focused on that. We only luckly, we only work with the

best factories in the world. And I say luckily because we happened to come into the business when retail was struggling, right, so as we grew, everyone wanted to work with us. I always think about, what donce we came in and and retail was humming. Would we even have been able to get into these factories? So we kind of get to choose which factories want to work with manufacturing I'm assuming overseas as Yeah, we're in We're in China, We're

in Vietnam, We're in Mauritius, we're in Peru. We have a small factory that we do work that we work within the US, So we are everywhere and obviously now we need as many options as possible. But our factories are we check them, we visit them, they're they're the best that there are. Chris, just thirty seconds. Is the trade war impacting you, guys? Impacting in the fact that we just have to be more strategic and we are moving stuff around into different countries outside of China just

to be prepared. But it's not going to have a major impact on us. But you do you believe you'll stay in China or is there a day where you'll be out of China? Potentially I think there could be a day we'll be out of China. Okay, all right, you'll have to come back and talk to us again. This was great to catch up with you. A great story and a product well known and clearly fast growing

into the UK, most notably in the near future. Chris Ricabona is the founder of untucked here with us in New York City today, idea, but I end up just tying them, as you know, and I travel. That's right. Yeah, I'm not sure this this exact thing would work for you. Try it. I might try, all right. So we've been talking a lot about private equity here on this program here at Bloomberg. We've been talking a lot about private equity across the country. And you know who else has

been talking about private equity. A lot of Democratic candidates for president. Our next guest, he talks about it a lot too. He's Drew Maloney, presidency of the American Investment Council, the top guy for the industry in Washington, talking to lawmakers, regulators and all of them. Drew, Great to have you with us, Great to be with you this afternoon. All right.

So let's get to a new study that was just released, because you guys are clearly hoping to get the message out about the role that private equity plays in terms of employment in the United States. What you find, Well, it was a great study, as you said, that we just put out last week, and I think the highlights are that private equity supports more than twenty six million US jobs and if you look at that and you break it down, it's eight point eight million in direct jobs.

And then we also looked at the indirect jobs and related consumer spending, and if you add that up to get you another seventeen million jobs. I would say that the other point of the two points of the study is it shows a diversity of investment. I mean, we're investing and everything from personal services, business services, manufacturing, information, construction.

We invest across the entire economy, and I think that's a very important point that we're trying to make to policy makers, as well as the last point, which is the federal, state and tax revenue numbers that were contributing um. I think that final number was a hundred and seventy four billion dollars in tax revenue that private equity contributes.

So in terms of net net, I mean there are some jobs lost right as a result of private equity buying up firms, maybe in like industries, and consolidating them and then ultimately selling them again. So there's that argument. It's safe to say that there are some jobs though that get lost in the process. Now, I mean, I think you have to look at it as the whole, and I think a recent study looked at this and said it depends what kind of what kind of companies

that you're buying. If you're buying more mature public companies, there may be some initial downsizing and restructuring of the company in the first couple of years, but over time those jobs grow. And if you're buying growth companies, you know they're starting at a at a at a at a smaller number and they're growing over time, or you're adding other companies to it. Alright, So, Drew, you are

a veteran of Washington. You understand the way the town works, You understand politics, you understand policy, and the all important third pe, you understand perception. Why is this not resonating? Why are people not really in as it sounds like you're saying, sort of fully understanding the economic and especially the job picture here because you are, I think it's safe to say, right in the crosshairs of Elizabeth Warren and a number of others who are running for president.

As you know, in Washington, there is a lot of volume and a lot of noise, and I think one of the things what we've found is that we have to be a contributor to that conversation. So members of Congress, members of the administration, every different industry is trying to make their their cases to each of these different policymakers. And that's why it's incumbent upon us to do a better job of telling our story. And that's I think exactly what we're doing with this e Y report that

just came out this week. And it's also a reason why before every one of the presidential debate we put out on social media we highlight the jobs, the investment, and the pension returns in those states right before the debates. Yeah, and to be fair, I was just doing some research. Um.

You know in Harvard Business School did a paper. Um. I think they looked at target companies acquired from five and they found that did destroy jobs initially, um, and that they find that over the longer term, Um, the net effect is that job losses are ultimately less than a one percent of initial employment. So they are showing that it's not as negative. UM. Okay, So you've got

this report you're putting out. I have to say, to be fair, I feel like, you know, folks are gonna say, okay, yeah, it's private equity putting out one of their own reports saying hey, we saved jobs. How do you how do you I don't know, you know, change that conversation even more so that there are other entities, you know, looking at the industry and really kind of telling the story. Well,

I would say two things. One, that's why we partnered with e Y because they did the analysis to determine the number of jobs and across what industries that were supporting and looked at what the tax revenue base would be. And I would say back to your Harvard study, that was only one piece of the study, and that was the piece that looked at the large public companies that went private, and that's when you had some initial job loss because as we all know, when those companies are

usually in a more distressed situation. If you look at the rest of the study, when you're buying, you know, taking private companies and you're and you're selling in private to private, you saw job gains and the other interesting aspect of it. Even with those big, large public companies that needed to be restructured, you saw eight percent productivity

gains once they were owned by private equity. And so, Drew, do you feel like you're starting to sort of get some audiences that are that are changing minds because I think back to just last week, you know, a really terrific investigation by Bloomberger, chilling investigation in many ways into home healthcare, where it really paints a picture of sort of profits over people. And we're at this time where folks are starting to say, look, I want companies to

make money. I want to make money as an investor. But even the Business Roundtable is saying, we have to think more holistically about this. How do you get that message across that this is the approach, if indeed it is that that private equity is ultimately taking well, I would say that, um, you know, one of the aspects and you wrote about it in your book is everywhere

you look there is private equity investment around you. But I think that the channel with that is most policy makers have no idea that private equity owns the Popeyees, or private equity owns the Hearties, or private equity owned a Hilton, which is now that you know, one of the number one places in America to work. So I think it's incumbent upon us to tell those stories because you're right, you're always going to have a handful of sensational stories and antidotes that paint a brush that's not

really true of the industry across the board. So, Drue, I mean, have you had to sit down with Senator Warren, you know, her criticism and the rules that she did, the new rules she wants to impose on PE. Just got about forty five seconds left. Have you had to sit down with her to really talk about the industry. Well, as you know, she's fairly busy on the presidential trail right now, so uh, probably not a whole lot of

time to speak with us, um. But I think the concern about her plan is that it would hurt jobs, workers and retirees. And I think, as that Harvard study you reference said, one size fits all legislation doesn't work for private equity because of the diversity of our investment. All right, we will continue this conversation in the future. I know we will, Drew Maloney, we really appreciate it. Good to catch up with you, President, CEO of the

American Investment Council. As we said, really on the front lines there in a very important politics, political and policy debate there in Washington and beyond. And I will say the universe as well, as some other investors can take a distress property and put the money in to revitalize it and ultimately prevent a company from shutting down. Is important. Is a great example of that. All right for Jason Kelly.

I'm Carol Master. This is Bloomberg Business Week, and you've been listening to Bloomberg Radio.