Bloomberg Audio Studios, Podcasts, radio news.
This is Bloomberg business Week inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast. Yes, it's a big weekend Super Bowl fifty eight usher in the halftime show and betting on whether or not Taylor will be mentioned in the MVP speech, Assuming Tim of course it goes to her boyfriend Travis Kelsey of the Kansas City Chiefs, who we all know are playing the San Francisco forty nine ers in the Big Game. I mean, there's a lot of betting going on it.
I'm making a lot of assumptions here, Carol, like, you know who wins. Who's there?
MVP said? If?
Okay? Said if okay, okay, okay. So we'll talk all about that beat on the Big Game. Of course, we're going to do that in the next hour with bet mgm CEO Adam Greenblatt. Also, because we're not done with earning season yet, we had quite a bit this week. We heard from Uber Win, got upside surprises from Disney Ford, a blockbuster surprise from arm Holdings. Check out all the details at Bloomberg dot com and of course on the Bloomberg terminal, and got to.
Say they were coming fast and furious. We thought we were at the end of earning season, but not quite yet. And we also heard from a space that we all like to talk about food because you like to eat a lot.
Tim, Yeah, all that talk of food makes me hungry.
Surprise surprise, well, Tim, Like I said, we did get results from players in the fast casual and fast food space this week. McDonald's Young Brands and Chipotle Mexican Grill, also from a big healthcare name and from the maker of Barbie and hot wheels. And so we're going to kick off this hour with Chipotle Mexican Grill. The stocks storing to a record high, a lot of analysts upgrading their price targets following their quarterly update. It was a big report.
It was a big report. I also had a hard time focusing because all I was thinking about was eating like a burrito bowl.
Wait, wait up, the press is Tim is hungry again? All right?
Fourth quarter sales and profit beat expectations as both transactions and check sizes rose, defying fears of waning consumer sentiment. Same store sales growth it's a gauge that tracks restaurants open for more than a year. That came into eight point four percent, whereas analysts expected seven point one percent, So a beat there as well. Revenue came in above expectations at two point five to two billion dollars.
Yeah, investors like those numbers. Brian Nickel, chairman and CEO of Chipotle, dropped in again, joining from the company's headquarters in Newport Beach, California.
Look, I think what we believe is happening is our operation is executing better than we ever have and frankly, we've just been on a journey to get back to executing this business to Chipotle standard. So you know, we feel great about our staffing, we feel great about our culinary, we feel great about our speed, and I think that's
why we're being rewarded with customers coming in. And you saw the comp that we delivered that was driven by transaction growth, right, that eight percent plus com was driven by seven point four percent transaction growth, And I think that's a testament to what our teams are doing in our restaurants on all those areas that I just mentioned.
Brian, great to be talking with you again. Dig a little bit deeper for us. First of all, that same story of sales growth really blown away analyst expectations. Is that sustainable you think in the current quarter and maybe throughout the year to see that kind of growth.
You know, what we've guided is mid single digits for the year in twenty twenty four. And you know, the way we take this approach is we want to make sure we've got a strong value proposition, which based on all our data, we continue get feedback that the value proposition is really strong. And then we want to make sure that when customers come in, they get the experience
that they want. And so what we've seen over the fourth quarter and as we walked into the first quarter is people are telling us they like what they see.
You know, our teams are in position, our.
Food is ready to go, the culinary is dialed in, it tastes delicious, and we're working really hard on the speed aspect so that people don't have to stand in line too long, so they get down the line, get to the business of enjoying their breed over bowl. I think we stay focused on that will continue to deliver really good results.
You know, I'm curious. You know, others in the space, something like a McDonald's, they've talked about low income consumers pulling back on their spending. You guys, your consumer base, what do you expect in terms of us consumer behavior this year? What can you tell us about how the consumer is doing and how they are spending? Because you do talk about transactions up check size is rising, but what more can you give us in terms of how the consumer.
Is Yeah, you know, so we look at this very closely as well. And first we start with what are people's perceptions of our brand? And the perceptions are really strong right now. You know, people are getting the idea that we're all about fresh food, we're all about food with integrity. They're getting the idea that, hey, this is a great value when I think about what I pay for,
what I get, the customization, the speed. Okay, And so when we look at this among different income cohorts, so less than forty thousand, between forty thousand, one hundred thousand, over one hundred thousand, we're seeing we're making progress in every and so we've seen sales gains with every income group.
One thing that I think is.
Happening is especially the lowering consumer, they are saying, hey, we're going to be really choosy with the money that we choose to spend. You've got to give us what we want on our terms. And one of the things that's really great is Chipotle's able to do that.
Right.
We can get you the exact food experience that you want, hopefully at a speed that delights you, and then when you walk away, you feel like you know that was money well spent and I'm going to come do it again.
Well, let me go back to comp sales in terms of your outlook that you guys put Brian, why do you think you see growth though continuing but at a slower slightly slower space I mean pace? Excuse you?
I think, yeah, yeah, I Look.
The way we think about this is we want to continue to focus on executing the basics. Obviously, January we had to deal with some bad weather across the country. The good news is the days where we haven't seen bad weather, the businesses strengthen right back up, and so we're optimist sick about where we can get to You know, we've switched back to what our pre pandemic practice was was just guiding for the full year. You know, Hopefully
what happens is we're able to beat those expectations. That's always our goal, and we'll see how it all unfolds over the course of the year. But we're set up very well to open a lot of restaurants deliver I think, really strong in store experiences and digital experiences, which hopefully we'll build on the momentum that we've achieved thus far.
Hey, Brian, let's talk more when it comes to labor. Fifteen percent of your restaurants are in California. You're joining us from Newport Beach right now. We saw California minimum wage raised this year to sixteen dollars per hour. It's going to continue to rise this year and over the next few years. How else, apart from raising prices, is Chipotle going to cope with California's new minimum wage law.
Yeah.
Look, I mean we're always working hard on what can we do to be more efficient so that we don't have to pull the pricing lever.
You know, you've heard us talk about things.
Like Autocato, where we're automating how we cut core scoop avocados.
We're working on some things automating our digital make line. We're also exploring.
Things on how we could potentially cut our onions peppers in the restaurants in a more efficient fashion. So we're going to invest in those things. The unfortunate fact is the wage increases moving much faster than these efficiencies that we're going to be able to find, So price will be part of the puzzle in order to handle the inflation that's looming. But we're going to do everything we can to avoid having to pull that pricing lever.
And you know, you'll continue to see us.
Innovate on what we're calling cobotics, so hopefully we can make the job more efficient, more effective.
Team members like it and it gives.
The great culinary output that our customers have come to expect.
Totally get it. Other costs, other input costs, coren avocados, the cost of ingredients. What are we seeing on that front? Are you seeing prices actually going down or increases not as significant as they were before? What can you tell us there?
Yeah, yeah, that's right.
We're not seeing any deflation, but we've definitely seen a slowdown in the inflation. You know, it's more in the load to mid single digits. There's a couple of pockets where we're still watching things like on beef. We're always careful with where the avocado market might be moving. But for the most part, that's I would say started to normalize, with exception of a few pockets of inflation.
That we're still dealing with.
Brian, do you see yourself raising prices this year?
You know, we always try to wait till we get to about the end of the year to assess what we think we need to do. You know, obviously this California minimum wage movement, we'll have to assess how that it really impacts the business and we'll take action accordingly.
But for the bulk of the business, we usually wait till around the end of the year, see where all the inflation lands, see where our growth lands, see where our productivity lands, and then if we need to retake pricing, usually in that one two to three percent range.
Hey, one thing I'm thinking about also, and we saw it play out with some others about the impact of the Middle East East conflict. You guys last year talked about entering Kuwait and the UAE this year. Has the conflict in the Middle East Brian impacted that timeline at all.
Yeah, not yet.
Our partner over there is the Alshinty Group, and they're a terrific operator. They have a lot of brands and a lot of experience of operating over there. So as of right now, we're still on schedule to open this year. Obviously, they will be the first ones to tell us that if we need to change that timeline. The good news
is we think they're a great partner. We think they're a great operator, and I think the folks are going to love Chipotle when we're able to finally open our restaurant in that part of the world.
Speaking of timelines, I've got two quick questions for you. You have been at the company for almost I think you're coming up on your six year anniversary. How are you thinking about that timeline? I mean, investors are happy stock is up almost one thousand percent in that time, So how are you thinking about kind of the next leg of that timeline for you? Because I've got to imagine there are people knocking at your door saying can you come do what you did for jibotlet for us?
And I'm also curious if there's any timeline for stock split because it's an expensive stock.
Yeah, yeah, sure.
Look, what I hope is the next six years are like what these last six years were from a total performance standpoint. I could do without some of the macro shots. But you know, it's been a tremendous honor leading this brand. We've got wonderful people, We've got a terrific purpose and product that we provide, and I couldn't be happier to be leading this company.
And I'm really excited about all the growth that's in front of us.
You know, we're going to go from thirty five hundred restaurants to seven thousand restaurants. We're going after four million average unit volumes, so there's just tremendous growth in front of us, which I'm super excited about. Yeah, you know, everybody asked us about the stock split.
We'll have to wait and see what city rated.
It's now like a street high over three thou to get for you to split.
Yeah, briefly, is there a level?
You know what?
We never have a defined level, but it's something we talk about and if it makes sense to do.
We'll do.
That was Brian nic Old chairman and CEO of Chipotle Mexican Grill. Other names and restaurants reporting recently include McDonald's and Young Brands. That was this last week, and we got Starbucks last week, and you can check it all out at Bloomberg dot com or on the Bloomberg terminal. Michelle Cosmos, CEO of the National Restaurant Association. It's the business group that represents the industry and includes about a
million restaurant in food service outlets among its members. She's stopped by as well with an update on the overall restaurant industry.
It's exciting actually in the restaurant industry right now. What we're looking at in our State of the Industry report for twenty twenty four is that the sales numbers should be above one point one trillion dollars, so a huge economic driver if you look at sales in the restaurant industry, which everybody's very excited about. Of course, the sales numbers don't tell the whole story correct much to what you're talking about.
And we see and when you throw it at number like one point one trillion, is that above pre pandemic? Like give us a number a loan, But give us right.
We are now above pre pandemic. Last year was the beginning of coming back to pre pandemic numbers, and so it's great to see that kind of growth in the restaurant industry. But again it's sales numbers that.
We're talking about here.
Is that because of higher prices, higher prices and of course we also see higher expenses.
Well, I want to talk about that a little bit specifically when it comes to wages, because California, for example, is sixteen dollars minimum wage right now. A large portion of your members are working in restaurants or have restaurants where minimum wage is par For the course, what is your position when it comes to a national minimum wage and the increase that we're seeing in a lot of different states where there is a higher standard of living.
At the National Restaurant Association, we really love to be engaged in that wage conversation because it's so important to our members because they're trying to find great workers at a great workforce. And part of how you do that is find that nice balance between trying to ensure profitability in an industry that has tremendously low margins three to five percent on average and then also trying to attract
great workforce. And so what we found is that the wage question is really one that happens and the conversation happens at a local level, more at the state level, at the local level than at the federal level, without a doubt. And anytime you're in a place where you want to talk about what's going on with the minimum wage at the federal level or at the state local level, we want to be in that conversation.
Is it problematic? Though? When it gets to twenty dollars an hour, I'm looking at that's what eight hundred dollars a week, right, that's thirty two hundred dollars a month. I mean we're not talking about you know, if you bring it out to the annual level, most folks would say, wow, that's just somebody maybe getting by barely. And if you have kids or something, it's going to be even more problematic.
So I do wonder, you know, restaurants used to be kids in high school and kids you know, who weren't supporting families, that kind of thing. It's changed dramatically, So is that part of their thinking about the type of workers that they are essentially hiring, Like who are they.
Well, it's interesting. We'd love to have more and more of those kids learning how to work in the restaurant industry. But the other thing that's true in the restaurant industry is people tend not to be in those minimum wage jobs very long. What we find is there's a lot of mobility. So if people are in the jobs that are the types that are at the lower wage levels, they usually are in those jobs because they like the convenience of the schedule. There's something else about that particular
position that appeals to them. But those that have any kind of longevity in the industry will see those those individuals kind of go into other management types of roles where they are bringing in more money. And depending on the restaurant. If you look at a full service restaurant, especially in an environment where there's tipping, you can have very well compensated employees across the restaurant.
What about when it comes to other expenses that we've seen rise over the last couple of years, inputs like dairy, inputs like meat, other food costs that have gone up. What are you hearing from members? Is that stabilized at this point?
It's stabilized what's interesting about the varying food cost increases is that it's never consistent. So you see dairy prices or egg prices that will go up, meat prices that will go up, and they will often come back down. They chicken prices of chicken prices yep, have come down. So those things will vary over time depending on what
those larger macro pressures are. But what they've found then, for a restaurant is that it's really important for them to be tremendously agile in the way that they're managing their food costs and the way that they're thinking about the menu that they're putting together for their customers.
So they change the menu, they change the menu to it to either cut the costs right, the input costs right yep, And so they do that. That's interesting. Well, go back to McDonald's though for a moment, because you know, they specifically had warned about some of the concerns in the Middle East. They've been a target and some would say rightfully so, but nonetheless it hasn't had an impact on the bottom line, but growth in some of their other regions we can as well. We talked a little
bit about the US market overall. Are people any of your members you sound very upbeat, Are any of them talking recession or slow down? In consumers? Consumers trading down?
So what we hear about consumers is a desire for value, and we see that in trading town. It's not necessarily trading down. What they're interested in is a deal in many cases. So when we do our consumer surveys, what we found is that seven out of ten of consumers are looking for some kind of value. And you'll notice that a lot of restaurants now will use apps and loyalty programs where you get discounts in those apps and
among those loyalty programs. And that's part of how restaurants are trying to appeal to consumers to come back to their restaurant time and again. Because we know that even though consumers are concerned about the bottom line and concerned about what's in their pocketbook, they still want to enjoy restaurants. And so the question is how do we want to make sure that they're coming into your particular restaurants.
So how do restaurants do that? I mean, on one end, you have employees who are about to get paid twenty dollars an hour minimum wage in California in just a few months. On the other side, you want customers who want value, so they want their dollar to go further. Where does that leave your members?
I think you figured out why the restaurant business is a tough business to manage. What our members are really doing is trying to balance bringing people in for that value and then knowing that there still has to be profitability in that menu. And so you're going to see You're going to see that change in pricing. But the other thing you're going to see is a change in
technology coming to solve a lot of this problem. What we see is more and more restaurant operators using technology to solve both their operational efficiency.
I was just going to say, right to like, we're kind of obsessed.
I think that's part of it. I mean the other part that I think is when you walk into a fast food a fast food restaurant and you don't see people at the cash register, you see a screen that you take your order yourself.
Right, It's a tough balance because everybody wants a smiling face. When you walk into a restaurant, you want to be greeted by a smiling face and there's no doubt that that's what we want. But we also want an affordable meal, and so there's a balance between having a technology that can provide really consistent, really quick service and having that
hospitality that greets you. And even in the places where you see technology, with the kiosks coming in, you usually find that they're delivering your meal to your table, so you're getting a little bit more service, even though that first experience of the order may have been much more of a technological experience.
All right, So if you think about we started with the overall view, just got ten seconds here. I mean a couple of words, is it glass half full? Glass half empty? A couple words to describe the industry and the outlook twelve months out.
Always glass half full in the restaurant industry. This is an industry made up of entrepreneurs who are forever optimistic. And I think that the big story for us is that growth and driven by a desire for takeout and consumer demand.
That's Michelle korsmo CEO the National Restaurant Association.
Coming up, we stay on earnings at another stock that pop following its financial update this past week, a company that's dealing with rising medical costs, retail shrinkage, and safety at store.
You're listening to the Bloomberg Business Week podcast. Catch us Live weekday afternoons from two to five pm Eastern Listen on Apple car Play and then Auto with a Bloomberg Business Act or warn't us Live on YouTube.
Another earnings related stock move this week came from CBS Health. Shares moved higher after the pharmacy chain and health insurer reported better fourth quarter results than Wall Street expected, relieving investor concerns about the impact of rising care expenses and It's ATNA insurance unit.
As for the outlook, the drugstore chain now expects annual adjusted earnings at at least eight dollars and thirty cents a share, down from at least eight to fifty a share. Cash Flow from operations will be at least twelve billion dollars, down from an earlier outlook at least twelve point five billion dollars.
You know, so, Tim, after the results, we just wanted to know more, and so we headed to CBS headquarters in Woonsocket, Rhode Island, and Karen Lynch, president and CEO of CVS Health.
Yeah, in the fourth quarter, you know, we had strong results in our pharmacy benefit management company. We had very strong results in our pharmacy and Consumer Wellness segment, which essentially is our stores, and you know, we'd continue to demonstrate growth in our atina health and business. Where we had challenges in the quarter is really at the end of the year, we saw elevated trends in our medicare advantage business, where we saw you know, trends in outpatient
services you know, think hips and knees. We also saw an increase in utilization and dental and vision. But overall, as you said, you know, we ended the year strong. We delivered on our financial commitments. We grew revenues of eleven and a half percent, and you know, we delivered EPs of eight point eight seventy four, which was a really strong result.
Yeah, investors, kudos because they have set your stock hire today. The results really do suggest that your insurance unit, you were able to manage those costs and drive the quarterly results. Can you continue to do so? Talk to us about kind of the stress and strain from doing that.
You know, obviously, you know, we have programs in place, whether it's the benefit designs that we put in place, whether it's our you know, care coordination programs that we have in place, you know, whether how we contract with our network and our physicians, so you.
Know, you know, we we feel very confident.
That we can continue to navigate this environment as we move into twenty twenty four. We haven't seen anything unusual in the early part of twenty twenty four, but things are you know, still emerging and will monitor it throughout the year.
What was unusual about last quarter? You said hips and knees really dragged on the quarter at the end of the year. What was unusual about that and why why can't you really model for that moving forward?
Yeah, well, we just what.
We saw was just an elevated utilization and you know, we you know, I think part of it is, you know, there is there's been some pent up demand over a period of time. What we've also seen is more capacity in the healthcare system, so you know, more outpatients. Clinics are staffed now, so they can have more you know, they have more.
Scheduling available to them. So there's a number of.
Factors that you know that we wouldn't have seen that you know, started that elevated trend in the latter half of December.
Actually, hey, Karen, some other health insurers Humanity United Health for instance, who obviously are in this field as well, they have worn that these rising costs will mean raising prices to increase profit margins. Will you have to do the same.
Well, I think it all depends on the business that we're in. So for medicare, you know, CMS essentially sets the rates, and so we received our first rate notice this past week, and so what we said is, you know, we it was in line with expectations, relatively flat flat,
but it didn't cover the overall rising medical trends. So we have the opportunity to go back to CMS and you know, give them comments, which we'll be doing in the upcoming weeks so that that price is really set, and then we design the benefits around the price that's set by CMS. So we'll be you know, modifying the benefits as we go, as we learn more about the
final rate notice that comes out in April. And then in our commercial business, we obviously have the ability to adjust prices to rising trends and we've been doing that all along through twenty three and into twenty four.
So this takes into account because I know you guys had warned. I think it was at the JP Morgan Healthcare conference that your medical benefit ratio could be higher than expected in the fourth quarter. So I'm just wondering. So you're feeling like that you'll be able to manage that in the in the rest of the year or this year specifically.
Yeah, So yeah, so, Carol, in the fourth quarter, you know, we saw some of this emerging trend with medical benefit ratio. So as you saw, we were we expected original guideance it was eighty six percent at the end of the year, which we've just reported today was eighty six point two percent, so it was a little bit higher, but we had
anticipated and talked about it at JP Morgan. As we turn the corner into twenty twenty four, we're watching these trends and we'll you know, well, we have lots of tools and techniques that we use to help people get the care they need when they need it, at the right at the right levels, at the appropriate sites of care, and you know, we help people navigate, you know, and coordinate their care.
Hey, Karen, I want to talk about a different part of the business, the second biggest part of the business, that's the pharmacy and consumer wellness segment. Talk to us a little bit about how the retail environment is right now. What you're seeing out there from the consumer, is the consumer healthy? You have a great view on the American consumer, so share with us those thoughts.
Yeah.
So, well, first of all, you know, stepping back, those stores are really another avenue for healthcare delivery. When consumers are coming into CBS, more likely than not, they're coming in to fill a prescription.
So we have seen an increase in.
Our script volume over the course of twenty three and starting in twenty twenty four, we built an immunization franchise, so people are coming to our stores for their RS feed vaccine, for their COVID vaccines, for their flu vaccines, for their shingle vaccines. That's really creating, you know, additional revenue streams for us, an additional value to the consumer because it offers a convenient place for people to get their immunizations. It's right usually right around the corner from
your home. We've built digital assets so that you have the ability to schedule online, so we've made it very convenient for those individuals. And what we're seeing in the front of the store, you know, we're obviously seeing consumer behavior. People are making choices for lower prices. We're seeing more of the CBS brand where so people are cost you know, just cost comparison, and we are starting to see people kind of leveraging the CBS brand products.
Okay, so going to generics a little bit, it sounds like, hey, let's talk about shrinkage. It's a huge, a huge problem over the last couple of years.
We all want products to be taken out of jail. But yeah, it's so frustrating retail.
Jo it's crazy. Is it getting any better? Is it still a huge issue? Is there any improvement?
Yeah, I would say it's a concern for ours and first and foremost, we're very concerned about the safety of our colleagues, and we put a number of measures in place to make sure that our colleagues are safe.
And as you.
Pointed out, we lock things up so that we can deter some of the thieves from coming into our stores and stealing our products. And you know, we've seen it somewhat moderate, but we're working very closely with attorney generals with local law enforcement to really have people prosecuted when there are stealing from our stores. And this is not just a CVS Health prom This is a retail problem, and you know, we all are coordinated to really work with law enforcement so that you know, we can deter
the theft. It is very costly to us, and my you know, my big concern is making sure that our colleagues are safe in our stores.
Totally get it, and I'm just curious. It sounds like you've answered her, but I want to ask you about pharmacist specifically walking out. How are you addressing those concerns and also just concerned about not having enough staff those pharmacists that have you know, talked about overlap and are not having enough overlap or just talking about burnout. How do you address that specifically because that's gonna be a big issue.
Yeah.
You know what I say is, you know, there's a lot of media coverage on the pharmacy walkouts. We actually didn't really have pharmacy walkouts. We didn't close any stores.
We we're able to staff all the stores.
But what you know, what we have been doing is making sure that you know, we and the pharmacists you know, have one common goal, and that's to make sure that we are caring for our patients and they're getting the prescriptions that they need. We have been investing, you know,
a fair amount of wage investment for our pharmacies. We have also improved our technology, so we're making it more efficient and the operations more efficient, so the pharmacy pharmacists can actually do what they do best, and that's.
Caring for the patients.
We've been investing in recruiting and skill upskilling and skill development, and we've actually seen a reduction in overall you know, attrition for our pharmacists. So I think, you know, we've been making really good progress over the course of the latter half of last year.
Karen, I feel like I'd be remiss if I didn't ask. You talked about script volume being up earlier. Is some of that because of the new weight loss the new class of weight loss drugs? I mean, what impact are you seeing kind of the activity are people paying for itself? Is it mostly be covered by insurers?
And yeah, the weight loss drugs, you know, we have seen a lot of volume and the weight weight loss drugs. We know that they are effective for diabetes and.
For weight management.
There is a shortage and we're managing through those shortages, but they are you know, we are seeing you know some of the volume coming from the weight loss drugs across our entire business.
Karen, a great snapshot of so much that is important to the economy. So thank you so much for carving some time out for us, really really appreciated. Karen Lynch, President, chief executive Officer CVS Health, joining us from company headquarters in Rhode Island. The stock still up about two point three percent.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on Apple car Play and Androyd Auto with the Bloomberg Business And you can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven thirty.
Come Barbie, Let's go party. All right, folks, we are talking about Home of Barbie and so much more. Mattel. The stock bouncing around today, up as high as nearly three percent, lower fractually as we speak, actually pretty flat now, the home of Barbie, hot wheels, and as we said, so much more. Reported sales as well as a just earnings per share for the fourth quarter did miss the average analyst estimate, but adjusted gross margin for the year it did be the analyst estament.
Yeah, sales were up sixteen percent in the fourth quarter. Let's get to it with Enon Christ, chairman and CEO of Mattel. He joins us from El Segundo, California. Enon, good to see you. I got to tell you sometimes when we interview you, I just expect, like Will Ferrell to show up right there and it's not Enon Christ. But we are happy to see you this afternoon. How are you doing? How is you know? We heard from
you guys yesterday. Stock bouncing around a little bit. Sales were up, but a couple things did not come in line with analyst estimates. How are you thinking about the quarter and in the year.
Yeah, well, thank you for inviting me again. It's always good to be here with you. It was a very strong fourth quarter for Mattel, with double digit growth in top and bottom line with significant margin expansion. The year as a whole was a milestone year for the company. In addition to the incredible success of the Barbie Movie, which we could not be more proud of, we extended our leadership in key toy categories and gained significant share
overall and continue to strengthen our financial position. You know, we talked on the call about the fact that we generated over seven hundred million dollars free cash flow, more than two and a half times of last year. We achieved an investment grade rating in the year, balance sheet is in the strongest we've had in years, and we just announced a one billion dollar share repurchase program and believe we're in an excellent position to continue to execute our strategy.
So what else do you do with that strong cash flow and all that money? Where else do you want to invest it? Investors love when you give it back, but where else can you kind of invest it back in the business.
Well, in terms of capital a, location priorities, the number one area that we focus on is organic growth, and we're looking to continue to invest in areas that can create value and position the company for long term, sustainable, profitable growth. We also look to maintain our investment grad uating and keep our leverage ratio between two to two and a half times that to Ibida, and of course there are m and a opportunities that we're looking to
look at and consider. Will be very disciplined. We will make sure that whatever we do is thoughtful, strategic, and accreative to the company and continue to be in line with our strategy for value creation.
All right in and you know as well, you say M and A opportunities are ears per cup So what might be some of those M and A opportunities? How are you thinking about it? Because who would I think maybe ten years ago, fifteen years ago that you guys would be creating content and creating a movie that was the highest in terms of gross buildings for twenty twenty three.
So here you are. So when you think about M and A opportunities, where do you go or where should we be thinking when it comes to you guys.
Or we can't be to early to be specific about opportunity.
You could, but.
Too early, too early. But as I said, you know we we have been very disciplined in the way we manage our balance sheet over the years, and and we remain very thoughtful and very strategic about any choice that we might make when it comes to capital deployment and
on MINA opportunities. That said, we have the capital, we have the strength, we have a very strong platform that is scalable, and we would look for opportunities that would accelerate our strategy without putting the company under any any risk, uh, and make sure that it's a creative and strategic to the direction what we're heading if we.
Can follow there. Is it more akin to an acquisition that gives you another toy to play with and build content off of it, or is it more on the content creation side that you guys in terms of M and A opportunities might be most interested in.
Too early to be specific. And it's not to say that we don't have exciting organic opportunities. You know, we have a portfolio that proving itself within the toy side, and of course now we have template and showcase for
what we can do outside of the toy isle. And you know, some of the important takeaways from the year was how our brands resonate outside of the toy isle, and that is a key part of our strategy to be successful within the toy part of the company and continue to evolve and grow in entertainment other verticals highly accreative and adjacent to the toy industry, but where we can create value from organic growth.
Hey, you know, I want to talk a little bit about the twenty twenty four outlook we learned from you yesterday, and I think that some might say it's a little conservative because it calls for a third straight year of flat sales growth. How conservative are you being here?
Well, we do expect the industry to be down in the year, and in that context, we expect to gain share and be ahead of the industry and continue the momentum that we have already with very strong gain market share gain in twenty twenty three. Our priority for twenty twenty four is on growth in profitability, expanding our growth margin and generate a strong cash flow, and this is
something we've done successfully in twenty twenty three. We believe that we will grow in twenty twenty five both top and bottom line and with a strong market share gain and overall strong performance broad based performance within the toy industry. We see multiple drivers that will continue to put the company on the front foot as we execute our strategy in and I.
Think though you know, I guess we're all wondering. You know, you guys do get a great vantage point when it comes to the consumer. I think a lot of us would say, if we want to, you know, get something for one of our kids, like that is a priority. So in terms of consumer and consumption spending, what are you seeing how would you describe the consumer from your.
Perspective, Well, what we saw in twenty twenty three is a shift in consumer spending towards experiences and services, and we see it moderating. It will continue to moderate in twenty twenty four, and beyond twenty four, we believe that those trends will further improve in that the industry will return to growth and continue to grow over the long term. The toy industry as a whole has very strong fundamentals. It's an important part of consumers lives. It's a fundamental
core human behavior. The toy isle is a strategic liver for retailers. It's experiential, it drives food traffic. Items are affordable, and especially when it comes to quality product and trusted brands, parents will always prioritize spending money on their children and and and and and cut on other things rather than quality toys for for their for their children.
If you're just joining us, we're speaking right now to Eon Christ chairman and CEO of Mattel, joining us from El Segundo, California. You know, and I want to talk about specific brands and segments within Mittel's portfolio, specifically Fisher Price the brand had a great fourth quarter. Do you believe you can extend the momentum here? Do you expect to gain share when it comes to infant toddler in preschool market this year?
Yes, Fisher Price did have a great quarter. It was up double digit, It was number one in the category and gain more share for the full year within Fisher Price, Little People form particularly strongly and expanded into a doubt collector line with some great product for the super Bowl. So look out for that.
Okay, what about when it comes to Hot Wheel?
Oh wait, go ahead, wait, so wait, how big? How much demand is there? Give us an idea?
No, as you can imagine. Of course, it's in high demand. And Little People is such a great brand, and this is where we touch culture. This is our expertise and something we do so well. You have a product that is ever green. But here you know, we have moments and opportunities to touch societal moments like the super Bowl and create a special offering for this.
Is there a tailor swift Little People? That's what we want to know.
Anything is possible for people watch that space.
All I know is my daughter likes to eat the Little People. Okay, what about Hot Wheels because it reached just one point six billion dollars in gross billing for twenty twenty three, surpassing Barbie. Do you see Hot Wheels staying the number one brand for this four future?
Hot Wells is such an incredible brand. It's a huge canvas of ideas and innovation and product and opportunities. Hot Wells was up sixteen percent in the quarter. For the full year, it was sixteen percent for the full year, and it was the sixth consecutive record year for the brand after over fifty years of existence, so it's been on a real, real growth momentum. We gained almost three
hundred basis points in the category. We have by far the largest market chare on record, and Hotwells continues to be the number one brand globally in vehicles per Circana. In twenty four we expect our vehicles category to grow driven by Hot Wheels and Hot Waves will grow yet
again seven consecutive record year for the brand. And don't forget that we have a movie in development with the jj Abrams at Warner Brothers for Hot Wheels and another movie a Matchbooks movie with Skydance that produced Mission Impossible in TOPGA. So two of the most successful filmmakers in Hollywood are working on two very exciting brands as part of our vehicles portfolio.
How profitable is that area becoming for you? You know, we talked about Barbie Heist grossing film of twenty twenty three generating and I hope I have this number right, something like one point four billion or so, give or take a little bit. What ultimately was the impact on Mittel's bottom line as a result of that movie. I'm just curious.
Yes, we were happy to share that the Barbie movie generated for Mattel in twenty twenty three. Just that, just twenty twenty three, one hundred and fifty million dollars of revenue and about ninety million of operating income directly related to the movie. This is box office plus toys and consumer product directly associated with the movie. So this is
one brand, one movie in one year. And the reason we share that is to illustrate the potential that we can that we can generate out of our growing entertainment business. And while we're not saying that every movie will be the next Barbie in the aggregate, this could become a meaningful part of our business. Our entertainment offering that includes film, television,
live events, consumer product and merchandise, digital music. Location based entertainment in the aggregate across our portfolio can be an important business for Mattel and clearly we are on that path to capture that value. And the Barbie movie is really a showcase or a template to illustrate that.
Well, it's a success story, right, I've got to imagine, you know, you talked about a couple of movies already based on Mattel products, toys, if you will, intellectual property, whatever you want to call it. But I do wonder how many people were knocking on your door after the success of Barbie, where many would probably have thought it never could happen, and it did. Are a lot of studios streaming and what have you knocking on your door about future collaborations.
Well, you can imagine what the movie did in terms of showing that our brands resonate outside of the toy isle. And this was something that was not obvious before and clearly the Barbie Movie showed that with the right creative vision, with when you work with the best filmmakers in the world like Greta Gerway, Go Mango, Robbie Ryan Gosling. Great things happen, and perhaps the biggest evolution for us as a company was to realize that people who buy our
product are not just consumer rumors. They're fans, right and in the aggregate, fans become an audience. And that's when you realize that you're actually speaking to an audience. That's where you see. That's when opportunities open up and you can capture and create significant value in other in other verticals.
Hey, listen, twenty seconds last twenty five? Is it going to be a Barbie two? Does Alan get a movie? Does Can get a movie? You can make news right here with us.
You know.
We we always said we're looking to create and build and develop film franchises. We're not talking specifically about Barbie, but we have an incredible portfolio and we're looking to continue to excite and delight fans all over the world.
I'm just going to say, Barbie's a doctor, an astronaut, president. She can be a tent pole.
You know. In terms of Carol loved the movie, and Casey didn't know that by now. I think it's the second quarter in a row of interview, you know, and she's talked about how much she was.
I thought Barbie, Barbie and merchandise alone.
Carol, Thank you, Carol, thank you, thank you.
You be well appreciate it. In on Christ He's chairman and chief executive Officer Mitchel Joenning usan zoom from Elskindo, California. You're listening and watching Bloomberg Business Week.
You're listening to the Bloomberg Business Week podcast. Catch us Live weekday afternoons from two to five pm Eastern. Listen on Apple car Play and ed Broyight Auto with a Bloomberg Business app, or want us live on YouTube.
Plenty ahead in our second hour of the weekend edition of Bloomberg Business Week, including no joint bank accounts, husband and wife are partner and partner spreadsheets, student debt okay if it's Harvard or Stanford, and when it comes to investing basics, the one thing everyone must know about and our Bloomberg audience definitely does. For sure, We'll tell you what that is. We've got tips on how you can live a stress free financial life and build wealth for
the future. This is something you and I both were like, where was this in high school? I needed it?
Well, it's really unconventional. I think That's why it was so interesting, because it's not just about skipping that daily coffee run to save a few bucks. In fact, our next guest says, don't skip that daily coffee run. We're talking about Jared Dillion. He's the author of How to Live a Stress Free Financial Life. We're going to hear from him a little bit later in the program. Plus, speaking of stress, Carol from stress free to well actually
stressful for high school students. At least the SAT and Act are making a comeback.
Yeah, we knew they would.
We knew Boo.
Plus bet mgmco Adam Greenblatt on Super Bowl betting ahead of Sunday's big game.
And hey, world, Valentine's Day is this Wednesday. US consumers are expected to spend nearly twenty six billion dollars this year on the holiday. The founder of farm Girl Flowers on the all important Valentine's Day flower rush and shifting supply chains and paying up for workers.
Turns out tim making bouquets. It's a lot of work.
Those flowers got to come from somewhere, they.
Do, and sometimes it's overseas, sometimes it's in your own backyard. All right, First up, this hour We begin with our Bloomberg Business We cover story, the latest issue out on newsstands, now online and on the Bloomberg terminal and tim This story has a feel of Indiana Jones meets National Treasure.
Yeah, though with less dangerous traps and fewer people chasing after you, although it does involve having access to ancient writings that could completely rewrite the history of key periods of the ancient world.
These ancient writings include some two thousand year old scrolls that were buried by the same volcanic eruption in seventy nine AD that froze POMPEII in time. So how do we get to unlock? What they say Artificial intelligence? And thanks to AI, these ones illegible scrolls are now potentially legible.
For more, we turned to the authors of the story, Bloomberg News Tech writer Ellen Hewitt and Bloomberg BusinessWeek features writer Ashley Vance, who begins by telling us how he came across these ancient scrolls.
There's a guy named Matt Friedman who I've known for a while. He used to be the CEO of GitHub, which Microsoft acquired a few years ago, and he seems to get interested in strange things, and he had heard that years ago we knew that there were all these ancient Roman and Greek scrolls, that they were buried by Vesuvius, and we hadn't been able to read them. We knew the scrolls were there, they were just charred to a crisp and so nobody could unroll them and read them.
And he heard about this, got obsessed with the Roman Empire and thought, well, maybe you know, somehow AI technology could read these scrolls, and so he last year he created a contest around this called the Vesuvious Challenge. And that's the heart of our story is following this contest over the last year and the astonishing results.
Yeah. So Ellen, talk to us a little bit about about some of those results. Has AI actually been able to solve this puzzle that for hundreds of years people have worked on trying to unscroll these scrolls?
Yeah, and it's been absolutely amazing because if you compare what we can see now to what people for hundreds of years have tried to get out of these scrolls, you know, doing things to the scrolls that I think has actually wrote in our story would make historians weep, you know, you know, in the seventeen hundreds. They tried to like unroll them an inch at a time, They cut them apart, they like try to you know, piece
together these like tiny fragments of scrolls. What we haven't said is, you know, technology that uses these very powerful scanners to scan the entire scroll untouched, and then to use you know, to sort of virtually unscroll them, and you end up with these big segments of images that are you know, impossible to read to the human eye, but which these very pioneering and hardworking volunteers have you been competing to try to build the right AI models
that can actually do ink detection and show the words that are on there. And yeah, the announcement is that there are there's a team that has won the grand prize of seven hundred thousand dollars for meeting the requirements of the contest, which was to have you know, a certain chunk of the script readable as deemed by this team of classicists and paparologists who have been looking at the results that the different teams have turned in.
It is so cool and it's so interesting, you guys, because we are trying to figure out you know, AI. We talk about it a lot, and what it could maybe do or not do. We're all trying to figure it out. And here's kind of real life proof of what it could do in terms of unlocking some of the world's history. Actually, come on back in. We've been showing pictures of the scrolls and they, to be quite honest, they do look like logs.
And I don't look like scrolls, okay, And I.
Can see how someone as people did in the past, where just toss them out.
Yeah, like this is like a burnt hot dog or something like. You know, these things do not look like they're ever going to be readable.
No, but how much information tell us little bit more about what we know about them so far?
Yeah, well, look, it could be astonishing. So the villa where these are found it belonged to Julius Caesar's father in law, and he was very wealthy and he had this huge villain and we've only excavated a tiny part of it. Basically, there's eight hundred scrolls that we found that come from a closet, and the thinking is that someone like this would have tens of thousands of more scrolls, and nobody's wanted to excavate them because we couldn't read
them and they always broke whenever we handled them. But just to be clear to everyone, you know, if there are more scrolls and we can continue to read them like this, we will almost certainly get new works by Arizotle, Sophocles, Escalists, Sappho. This would multiply, you know, our collection of knowledge many times.
What we found so far is text relating to this Epicurean name Philodemus, And what the contestants discovered was a writing about pleasure and how the stoics might be wrong and kind of boring and we should take joy in food and smell and senses in life.
Heyl And take us into the technology here and how exactly the team was able to actually do this and use AI use X ray technology to get to what is written on.
These right, So the underlying technology is similar to what you might find in medical imaging like CT scans, and they take these ultra powerful scans of the scrolls, and then there's all this work that has to happened before you can even start to try to apply these models to it. Basically, they have to flatten and segment the scroll.
So they take these images and do this work digitally to try to get pages segments of pages, where then the contestants can start trying to use different models that
they designed to try to figure out ink detection. The team that ended up winning the grand prize found this particular strategy that actually came from a different contestants unique insight, which was, you know, instead of just looking at you, instead of trying to build a model, he actually just spent time staring at the images of the pyrus and noticed at some point that there were these patterns, these very faint patterns that he called crackle, which are kind
of looked like dried up mud, and the idea is that maybe this is like some sort of indication of ink. Anyway, this crackle insight led to some of the other contestants using those crackle letters to start a model, which they then use to reveal other letters, which they said back into the model, which revealed more letters, and built this very kind of you know, bespoke model specifically for this need and ended up, yeah, being able to reveal vast swaths of letters. It's pretty incredible.
So actually, we know there are lots of scrolls that are yet to be unearthed at this point, or that's what we think. But what about this technology and this technique being used for other applications. How are analysts thinking about that?
Well, I think, you know, definitely, this kind of technology seems like it could be useful for a lot of ancient texts that we've thought were you know, just untouchable in the past. It is, to Allen's point, very specific
in this area. But I think the kind of cool thing is throughout this contest we've seen these kind of twenty something year old computer scientists, you know, teaming with these paparologists and classicists who tend to be a bit older, and there's just this like renewed excitement that wow, okay, this kind of technology could be applied to our field and maybe a lot of things that we thought just were impossible are now possible. And so I mean, I
think Ellen would agree. We just there was so much enthusiasm around this from these generations coming together and these two disparate fields colliding.
That's what I loved Ellen jump in on this because I thought, as I read this story, it's like folks watching YouTube vehicle videos to learn different things, and this idea of you know, there's a lot of criticism about everything that's out there in the world of social media,
and probably understandably so and fairly so. But this story shows when different generations, different people in different fields, different people around the world start tapping and working together, what can potentially what can be the outcome.
Yeah, I think it's just incredible. It's the story of you know, several different people just catching this bug where they became totally obsessed with the you know, the huge ramifications of maybe being able to read these scrolls and coming up with these innovative ideas of being like, Okay, we have this advanced technology, maybe we can do something that we really really.
Could not do before.
So Luke Ferreder, for example, was one of the three people in the winning team, talks to us about how, yeah, he was an intern at SpaceX happened to listen to a podcast in which Nat Freeman was describing the contest and he just had this thought like maybe I'm the one who could do this, and he's so enthusiastic about it, and he spent all this time and energy trying to work on it, you know, like sending images off to
his model. In the middle of it, he was at like a college party and like, you know, sent sent the images off to this model, and then checked back a few hours later and saw these letters that had been revealed, And you know, I think his enthusiasm, like for something that is just not you know what you would expect to apply AI to. I think that has just been really inspiring.
All Right, lots more to go, just about five percent of one scroll. They figured out there's a lot more work to be done, correct there.
Is, and there's a new contest coming. So the goals get from five percent to ninety percent of the scroll and then that's pretty determined to raise the rest of the site if we can.
Many thanks to Bloomberg BusinessWeek Features writer Ashley Vance and Bloomberg News Tech writer Ellen Hewitt for their work on this week's cover story. Ashley also the author of Elon Musk, Tesla, SpaceX and The Quest for a Fantastic Future and When the Heavens Went on Sale, The Misfits and Genius is Racing to put Space within reach.
You're listening to Bloomberg business Week coming up, how to Purge, the urge to splurge, tips on how to get your finances in better shape. Say that five times fast.
No, I'm gonna instead talk about the sat put your pencils down. Everybody, why standardized testing is coming back after their pandemic hiatus. This is Bloomberg.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on applecar Play and Android Auto with the Bloomberg Business Ad. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa Play Bloomberg eleven thirty.
Setting up a spreadsheet with your spouse or partner.
Not setting up a joint bank account with.
Them, Rocking up student debt okay, as long as it's Harvard, Stanford or another top tier school.
Okay.
Easier said than done, I guess. And definitely knowing what the Federal Reserve is up to, well, we know that Bloomberg listeners and viewers have that one down for sure. Do all of this and you may be on the way to living a stress free financial future.
So says our next guest, Jared Dillion. He is the editor and publisher of The Daily Dirt napp, a market newsletter for investment professionals, and a former Bloomberg opinion columnist.
His new book is entitled No Worries, How to live a stress free financial life, and in it, he outlines some pretty interesting strategies to get there, including how it's okay to buy that daily cup of coffee, don't sweat over it, okay, and when to worry, Well, it's the big purchases in your life. Oh, also who you marry, and keeping bank accounts separate when it comes to a relationship.
So typically when a man and woman get together and they get married and they combine their finances, they have joint accounts. People are still mentally keeping track of whose money is who's I think, well, I put in five hundred bucks and I put in three hundred bucks. And if somebody spends the other person's money, like in their mind, what is the other person's money, then it can lead
to arguments. And you know, I've known some couples, lots of couples that will get into knockdown, drag out fights over fifty bucks. And the easy solution to this is just keep your money separate. When I got married in nineteen ninety seven, I said to my wife, I was like, we are going to keep our money separate, and she agreed, And in twenty six years we have fought about a bunch of things. But we have never fought about money, and we basically just zell money back and forth to
each other like that's that, yeah, all the time. Basically our deal is I pay two thirds of the groceries because I eat two thirds of the food. So if she pays for one hundred and twenty bucks for groceries, I'll zell her eighty bucks. And we do this all the time. Before zell it was a little hard. We literally wrote checks back and forth to each other.
Okay, she loves you, right, yeah, okay, just making sure still there, I actually have somebody getting in touch right now saying does she love them?
Like you know?
Yeah? Okay, so confirment. Okay, you guys are in love.
There's more questions we could ask, but we're not going to go there. What about things like college.
The reason you will pay anything to go to someplace like Harvard, it's not because of the education. It has zero to do with the education. It has to do with the people that you're with, the network, the connections. You are going to school with people who will be president. You will go to school with people who will be CEOs. Your rolodex will be full of these people. Your unemployment rate will be zero. If you go to a lower tier school that costs ninety thousand dollars a year, you
don't have those benefits. You're going to graduate with three hundred thousand dollars in debt and your earnings power won't be able to support the student loan payments.
Is any student loan debt okay in your view?
What I say in the book is that you should have no more unless you go to a top tier school. You should have no more than forty thousand dollars in debt. And the reason that is is.
Have you looked at how much school costs a year?
Oh yeah, right, you know, not to combination of scholarships and grants and stuff like that. If you owe more than forty thousand dollars, you have to be able to pay it off in five years. If you can't pay it off in five years, then you should go to a cheaper school, or maybe not even go at all.
And I mean, and you go into detail in the book about why student debt is so troubling for so many people, and a lot of it has to do with the government and the way that government handles those student loan payments.
Income based repayment plans are the worst thing in the world. This was passed in two thousand and nine, and basically the government means tests you and says, you know, you don't have to pay this twelve hundred dollars payment. You can pay this three hundred dollars payment. But then the balance is added to the back end of the loan. It's negatively amortizing. And that's why you have these people
that go on Twitter. They said, you know, I borrowed seventy thousand dollars, I paid my student loans for twenty years, and now I owe one hundred How is this fair?
By the way, in bankruptcy, it does not get a raise.
It does not get a raised.
Hey, a big takeaway that he died doesn't.
Get erased, like it goes off to somebody else.
Right, A big takeaway I had from your book is like conventional wisdom is okay, don't buy that Starbucks coffee every day, don't go out to lunch when you're at work, you argue, don't sweat the small stuff's stuff, Sweat the big stuff, sweat the house, sweat the car, sweat the partner, sweat college. Yep, don't worry about those small expenses.
It's literally just math. Okay. I get a Dunkin Donuts every day when I drive to work. I get a nice coffee, even in the winter. So I'm a psycho, right.
So but I think maybe people mightify you're a psycho with the spreadsheet and the marriage.
But anyway, it's three dollars and eighty cents. If I do that two hundred and twenty five days a year, it comes out to nine hundred dollars a year. If I do that for forty years, it's thirty six thousand dollars. Okay. If I get a house that's five hundred square feet bigger, I will pay an extra one hundred and twenty thousand dollars an interest on a mortgage. So one decision costs me one hundred and twenty thousand dollars in interest versus
thousands of decision costs me thirty six thousand dollars. The little things don't matter at all at all, And people can give up large luxuries. If you get a slightly smaller house, you're not sitting in the house saying this is terrible, I hate this house. But if you're forced to give up coffee every day for the rest of your life. It is miserable.
I feel like I want to go there because we talk so much about it, But you say you got investment basics. It's a chapter that's purely educationally. You want to begin with something that's pooring, but you say it's for your own good. That means for all of you who are watching and listening the Federal Reserve, perhaps you have heard of it. We talk about it all the time. Why is it so important that people understand about the FED. We have a very smart audience. They know what they do.
But why do you say generally it's important.
I mean, just think about like very recent history. The SMP was at forty one fifty and and Christopher Waller gave a speech where he was hinting at rate cuts. Now the SMP is at forty eight to fifty and the FED hasn't even cut rates. It was just on this slight change in stance from the Fed, where you it eased financial conditions and unleashed a tunnel liquidity. You know, the Fed really has a huge amount of control over
the stock market and the economy. So that's why I put that first in that chapter, because the average person on the street. They know who the president is, but they don't know who the chairman of the Federal Reserve is, And the chairman of the Fed has much more influence over their daily life than the president does. I tell people this all the time. I don't really you know, outside of like some huge change in tax rates, I don't really care who is president.
I care whose chairman of the Fed. Okay, we have thirty seconds left. Controversial to have twenty percent of your net worth in cash again, you say this is for stress free financial life, not to become wealthy in life. Talk about it. Set allocation, just in the last thirty seconds that we have.
You should be diversified across asset classes. If you invest in stocks, you're not diversified. If you invest in stocks and bonds, you're not diversified. You need to have a mix of financial assets and real assets. You need some commodities, real estate, and gold to be fully diversified.
All right, you were hesitant to write about gold in the book, he wrote, But you know, because you unleash the gold bugs when you do that.
It's super important.
Okay, I love this house is not an investment.
I know, scary stuff.
Listen, there's so much there. We scratched this.
Where was this when I was seventeen? When I was seventeen years old?
Skip the like small liberal arts school and just pick up this book and figure it out.
Jared, Thank you, Yeah, come back, Jared. This is a fun conversation. Jared Dillion is the author of No Worries, How to Live It a Stress Free Financial Life. That book, by the way, is out.
Now.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern. Listen on Apple Cardplay and then brout auto with a Bloomberg Business act or watching us live on YouTube.
Well, the most read story in the Bloomberg Today, but everyone's favorite topic not if you're a parent, your kids getting ready for college? Are a speaking about it? We're talking about standard or testing or if you even took the SATs or the ages. You know, I was kind of one of those people who actually liked kind of some of the standardized testing.
Are you joking?
Yeah, I'm a net king.
Are you joking?
Yeah?
No, I'm not. I'm not.
You like, okay, you like Saturday morning going to a classroom and taking out.
I don't know, it's a little weird.
I know.
Yeah, I'm a nerd, yes, Elizabeth, one of our producers. I'm a nerd. But it's also become like a business. Anyway, let's get to jen. Let's get to Jennet.
Yeah.
Jenna Lauren is higher education finance reporter for Bloomberg News. She's here in the Bloomberg Interactive broker's studio. We're talking about this because as of today, Dartmouth College comes out with a statement that says it's again going to require standardized testing for applicants following MIT. This is a big reversal from what happened just a couple of years ago.
Janet, Yes, it is a big reversal. During the pandemic, nobody could get.
To test sites.
They were closed, so everybody said, no, no testing is required. MIT two years ago about this time said we really need kids who can do well in.
Math, and they reinstated it.
And of course MIT has really difficult requirements. You know, two semesters of physics, two semesters of chemistry, lots of math.
So it makes sense.
So it was interesting when Dartmouth this morning said that they were they were also going that route, and you know, the chatter for decades has been the SAT is unfair, especially for low income students who can't afford test prep. And now you're hearing that is an argument to keep the dusk.
What we don't understand, So explain that.
So let's say you're in a school that is not familiar to Dartmouth. You know, of course they know the Scarsdale's and the Mamernicks and the New Treers of the world, but you know, they're trying to find kids. We did a story about rural recruiting. Perhaps high schools they don't really know well, and it helps them to know what their score is. It helps them to know what the high school is. So let's say you score twelve hundred in a high school where the average is a thousand.
You've done really well in that high school, but of course you're far below the median at Dartmouth. But the information that the test is giving is you've actually really exceeded expectations in that high school.
Oh sorry, I just no go go okay, this is just related to what Jenna said very briefly. I didn't know that schools could actually see that part of the data you're saying, they don't just see the raw score, they also see how you did compared to other folks at your school.
So every high school has their own profile, and it's a lot of information.
In tim This is a data world.
When we did the story about rural recruiting that we talked about, we mentioned a school in Wichita, Kansas where the majority of students are on free and reduced lunch. So that tells you you're dealing with a very low income population. So if you see a student who has rocked the SATs and most of their peers have not done well, it gives them some information in that context.
Jenna having said that, they still have parameters right of where they want you to hit in terms of score, like they're going to say, wow, tough environment, look what this individual did. Having said that an MIT where math is really important, right in that computational way of thinking, are they still going to have kind of minimums of like where they want someone to hit, you know what I mean? How they use it?
So it depends on where you're coming from. If you're applying from andover or again a really wealthy school district and you have a twelve hundred that's not going to cut it. But if you're coming from a place where most kids are not going to college again, they're trying to find socioeconomic diversity, which is great, and they're trying
to find you know, students. You know, Bill Fitzimmons, a dean of Harvard, you talk about the diamonds and the rough and that's why they mail to so many kids who might think of applying to Harvard, and that's they're trying to put it in that kind of context.
So is this just the beginning, like the domino start to fall? I mean, I feel like there's so many things coming off the pandemic. Work from home right, Like we're all just like, yeah, okay, get back to work, and oh guess what standardized testing we're going back to? It is it also part of I was thinking about these schools, especially once testing went away. We're getting so
many applications. It's got to be a difficult process to kind of go through them, especially if you don't have standardized testing to kind of help you and figure.
You just arrange it by how much your parents gave. That's how you do it. Assions I care love.
So Yes it is. Yes, they do get a lot of applications, and you can't really feel sorry for them, so because they did it to themselves.
And they make money off of them. They every application they do.
And they're also you know, they're also buying the names of of you know, kids who take the test to try to encourage them to apply. I mean that was our story like a decade ago, and believe it or not, nothing has changed.
So Carol us about the Domino's following, Is it just MIT at this point and Dartmouth that are requiring standardized.
Tests again, Well, we'll see.
You know, other schools have have not you know, are still requiring them, like Georgia Tech. There's a bunch of SEC schools.
The other schools they didn't remove them.
I think pretty much everybody at the height of the pandemic didn't didn't require them, but well because you couldn't get to the testing sites. But you know, like the University of Florida, University of Georgia, they've still required them because they give away scholarship money based on your test score and they give you know, if you are a Georgia resident or Florida and you and you do well and you hit the parameters, you you can go for practically free.
And I will say anecdotally during the pandemic, individuals who did file test scores did see like scholarships had you come yeah versus not? It's really interesting and just it was totally optional, and and a lot of advisors in high schools like, why would you do it? Why would you put it in even if you did good or even better than good? Right now, it's just interesting.
But also keep in mind, so we've had a couple of years of them being optional. Who's going to submit the score?
We did well, people who didn't, So what does that do? The average raises the average? All right, math, you know I.
Should have done very well on my quantitative based on your questions just now that e chanet I should have done well on quantitative.
I did not?
I did? Okay, do you want to do anything more because there's more stories idea?
Yeah, go ahead, all right.
So you've got a couple of the story about Harvard's top governing board picks. Also though about governments looking to maybe tax endowments go where you want? Will we will bow to your brain and where you want to go here?
Okay, So Harvard is a big target with fifty one billion dollars. It already pays taxes to the federal government. That happened in twenty seventeen with the Trump tax bill, and now Massachusetts is eyeing it. They would like a little piece of it too. There's two bills that may move forward this week. One would have a two point five percent excise tax on the value of the entire
fund the federal. One is on the investment returns, and that could bring in Are you sitting a billion dollars in the state of Massachusetts and that would fund free college for everybody in almost thirty campuses.
What a great thing.
You can't move to Florida, Harvard?
What great? That's good one the Florida.
Answer to so much I can't do it?
Is that likely going to go through?
I don't know, but you know there's one thing that Harvard has done is it's in some ways the Republicans and Democrats are very upset with what's been going on anti Semitism on campus. I mean, what, what who would have expected that Harvard could in some way unify lawmakers?
Yeah, that's really like It's like Harvard and social media companies, great are the things that unify members of Congress yeah, and China. Yeah, in China, so we'll.
See if they go forward. The second one would would is also a tax for schools that have legacy admissions. In Massachusetts MIT does not, and that would but that would give money towards a community colleges.
It just means you have to come back. It's already busy year for you. Not going on all right. Janet Lauren, thank you, Thank you. Higher education financial putter at Bloomberg News. Check her out on Twitter x at Janet Lauren and then Appleloomberg dot com.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Easter on applecar Play and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station just say Alexa playing Bloomberg eleven thirty.
Well, you know, the big game is this week, and we're talking, of course, about the fifty eighth Super Bowl between the Kansas City Chiefs and the San Francisco forty nine Ers. The game held in the gambling capital of the United States, Las Vegas. Betting companies pushing out lots of ads ahead of the game, including this one from Bett MGM.
BEDAMGM is for everyone that loves sports betting, everyone but Tom Brady.
Wait, what did I do?
The truth is you've won too much time. We let others have their turn.
What if I be in game?
Parley is and I'm not Tom Brady? You're of dog meat?
All right?
Well, MGM is for everyone that loves sports betting, everyone but Tom Brady. Way, what did I do here? All right? The truth is you want too much. It's just funny like you just kind of go through what they said. These are, though, the ads that we're seeing roll out ahead of it.
I mean, it makes sense that we're seeing these ads because big money is expected to trade hands this year. According to the Gambling Industry National Trade Association, about twenty six percent of American adults are expected to place a wager on the Super Bowl. It's a thirty five percent increase from last year's Super Bowl. Bet is estimated to place wagers totally up to twenty three point one billion dollars, which is a seven billion dollar increase from twenty twenty three.
We've got with us Adam mcgreen Blatt. He's the CEO of bet MGM, joining us now from Las Vegas. BETMGM is the sports betting operator jointly owned by MGM Resorts and the Isle of Man based gambling Company and Taine Adam. Good to have you, Good to see you. Give us an idea of what you're seeing on bettma GM's platform right now ahead of the Super Bowl this weekend.
Firstie, thanks for having me. We are seeing interest that we've never seen before, cross section of wages, We're seeing the growth in prop bets, We're seeing the swift defect. We are seeing, as I say, a lot of interest. I think also because the event is taking place in Vegas, which really is is home to for us, so swift effect.
Does that mean more women are stepping up and betting on the platform?
Well, actually we're seeing It's what we're noticing is the nature of the bets that are being sought out has changed. So, for example, we now offer in Ontario, we now offer the likelihood of Taylor Swift being mentioned in the MVP speech, and that's an interestingly popular bet. We're also seeing a lot of support for Travis Kelcey's MVP and I think that's how the swiftffect is manifesting.
Well, that's what I wonder too, Adam, is the kinds of bets that are being placed, the majority of bets that are being placed ahead of the big game. Is it just? Is it basically who wins ultimately? Or give us some idea because you really can now dice and slice in terms of how you bet on anything.
So just to set the context, Betamgen will be offering more than a thousand different things to bet on come game day. In fact, the majority are available now. Historically, the majority of bets and majority of volume, we're behind what we call the six pack, which is really the bet fore and against who will win the game? The money line spread, so by what margin will the winner win?
And total the total points. What we're seeing now is a shift, so sixty two percent of bets are not on that, so more than half the bets are on things called player props. The most popular player prop at the moment is a win that the Chiefs will win by seven to twelve points.
Okay, hey, Adam, is this the way that you differentiate yourself from the competitors out there? Because there is no shortage of places to make bets, especially for the Super Bowl. I mean, we got DraftKings, we got FanDuel, we got Caesars. The list certainly goes on, how do you differentiate yourself in a crowded market?
Well, look, the market's been crowded since the beginning, and I think we have betmgms proven that we know what it takes to win, and we continue to be a market leader. We have seventeen percent market share in online sports betting and eye gaming across North America, and so this puts us firmly in the top tier of competitors. And one of the things that is particularly in our favor this year is that the two leaders that we share the podium with are actually not available in the
state of Nevada because of regulation. So this really is our moment to shine bed MGMs on home turf, leaning into what we call our omnichannel strategy, and given that we are by far and away the premier choice in town, we're expecting to see tremendous volume.
All right, but how would you characterize, adam, the level of promotional competition in the online sports betting industry now compared to a year ago, It's got to be somewhat fierce. But tell us how you would characterize it.
Well, it's interesting, that's what we're actually seeing. And I'm not sure whether it's as a result of some of the minnows, some of the smaller players actually leaving the market, leaving the market because the power and effectiveness of the leaders has become overwhelming. But we're actually seeing a rational recruitment environment. Our CPAs are cost to acquire a player are actually down a year on you over the last few weeks.
Hey, I'm wondering about growth here because you're live right now in twenty eight different markets in North America. You mentioned the market share. You have access to just under half of the adult population in North America. When is a time that you think you will have access to every adult in North America.
Well, that's an important question because that's about the you know, when does the music stop? And the good news is the music is not going to stop for a while. Our TAM our total Addressable Market anticipates that in the fullness of time. And there's a question mark on you know what that means, of course, but in the fullness of time, we expect fully eighty percent of the US adult population to have access to some form of sports betting.
What do you think are the next two states to legalize or markets set to legalize over the next one or two years.
Well, the first one I can answer with authority, because we're looking forward to launching in the state of North Carolina in the next four weeks. Okay, after that, it's less certain. We're seeing some positive movements from a number of states. I think the most like next one as we look at it today is the state of Georgia. But ultimately these become legislative decisions and subject to all the vagaries that go along with those.
Would you say that the space is getting a bit crowded and that we're going to see some kind of additional maybe consolidation or more consolidation.
But that we I think you're referring to a couple of the more recognized brands that have joined the space recently. I think there's probably space for three or four, maybe five. If we look at more mature international markets, perhaps the UK, Italy, the bigger markets, there's generally space for four or five
leading major online players. In the US, it is more concentrated. Actually, to your question, is there space for consolidation potentially, But one of the factors weighing against consolidation in the US particularly. It's just the complexity of the operating environment, given that every state is its own regulated environment. So for a merger in the US, it's like an European operator that operates in all the European countries.
Merging with another.
Hey, Adam, we're figuring out the regulation that goes along with it.
That's true.
We only have about twenty seconds left. But are you looking to make any acquisitions?
Gosh, straight for it. We're very, very happy with the tools, the assets, the relationships that we have. We believe we have what it takes to win, So we're not considering actively any acquisitions at this point.
All right, twenty seconds so important that in terms of we talk about sports addiction, gambling addiction, you guys are thinking about that, and just really quickly about ten seconds here.
This is a real issue. This is an issue of sustainability of our sector. We're making great strides individually as BEDMGM, but also in twenty twenty four and we'll see collective action in this regard.
Adam, thank you so much. This is Bloomberg.
You're listening to the Bloomberg Business Week podcast. Catch us Live weekday afternoons from two to five pm Eastern Listen on Apple car Play and then Brout Auto with a Bloomberg business app or want us Live on YouTube.
Well, small businesses the backbone of the US economy. Government data shows that these companies account for two of every three jobs that have been added in the past twenty five years.
Yeah, it's important and the most reading or the most recent reading, i should say, on the small business community. It found that US small business optimism ticked up to a five month high in December, largely reflecting less pessimism around sales, earnings trends and economic expectations. That reading just about one month ago. We're going to get another read a US small business optimism about one week from today. But we actually are going to get one in just about five seconds.
That's because our next guest is a member of that all important engine of the US economy. Very pleased to at back with us. Christina Stembele's under farm Girl Flowers. It's a business that if you're a listener of viewer of the program, you certainly know it well. It's also a business that she bootstrapped some twelve years ago and is built into a thirty million dollar business. She's joining us here in the Bloomberg Interactive Broker's studio. Christina, Welcome back to New York.
Thanks thanks for having me. I love talking about business, the business of flowers.
Well, how is he here?
How is the business of flowers? How is your world right now?
Yeah?
I mean we're gearing up for Valentine's Day, which is always a lot of pressure. You know, it's the second largest holiday of the year for us, so there's a lot of anticipation.
Remind us what percentage of your revenue comes from just Valentine's Day.
It's lower than you think. It's about fifteen percent, but Mother's Day goes up to about twenty percent.
Okay, so that's five thirty five percent of all of your revenue from two different days.
Yes, in two weeks. Basically, are those the two biggest holidays?
Yes?
Absolutely? All right, So okay, a favor like back out the holiday stuff because right there's expectations around that. But in general, when you look at the US consumer, how have they been ordering just kind of on every other day or just normal days, if you will.
Normal days are down. I wish I had the optimism that the reports are showing right now, and I think I think I'm optimistic about next year, So I think maybe that's where someone's coming from. Like, you know, after COVID, post COVID, I think that there's been so much change constantly, and like, you know, where are we going to settle out? And I think, you know the economy right now, we're in a gifting market, so the gifting holidays are especially
important for us. We have to do really well in those gifting holidays because the everyday consumer isn't isn't consuming as much, they aren't sending as many gifts since we're in the gifting space.
When did you notice this change?
I mean twenty twenty one. I mean we've been going since twenty twenty one on this, so you know, we were just.
In size finding since twenty twenty one, Yes.
We have, but intentionally so we could still intentional intentionally we're focusing. You know, I'm really excited to see the market change a bit from growth at all costs. You know, all like small businesses, startups, everything they arey was all about growth at all costs. Just have those top line revenue numbers grow exceedingly fast. And now we're focused on profitability. So and I feel like everybody's kind of changed the way a little bit since we're bootstrapped.
What is it?
Wait, what is it that Zuckerberg says the Year of efficiency?
Yeah, but I mean it's carrying, it's bleeding into this definitely with layoffs you see still happening, you know, at a pretty rapid rate. People are you know, it's it's you have to be efficient. You have to run very efficiently to make you know, make any profit this year.
Remind us about your staffing and your supply chain, Like, give us an idea of what that picture is.
Our supply chain has changed four times since twenty twenty, so we are constantly changing it to adapt with what the market demands are and supply chain availability is. So twenty twenty we had a boom. You know, we're over sixty million, and twenty twenty is you know I.
Send flowers during the pandemic.
Yes, yeah, yeah, and we all probably did, and people to send you know, I know, you can.
Make send flower bread, wait, bake bread.
Baked bread, drink wine and send flowers wine, soured ough and flowers. It was kind of that was the year, right, So I think you know there was that, but supply chain was really hard, so then you have to shift and go closer to the flowers. We're buying a lot more in North America at that time. Now we still are buying more North America closer to home.
Was that because planes weren't coming, so they're not These are not planes that are exclusively filled with flowers. These are planes that sometimes have people on them. Yes, and it's hard to ship this stuff if those planes aren't flying.
Absolutely so unless you're going to charter a plane from Europe, you know, when there weren't as many planes going twenty twenty, you would have to figure out other ways to get flowers, you know, So we were literally in box trucks picking up flowers that time, you know.
And then you know things have shifted.
Supply chain's gotten better, but everything's gotten more expensive, so then you're also you know, outbound transportation, you know, went from about twenty six percent of our revenue to forty one percent spiked really just you know, I would let you know, I guess I don't know if I should say those, but I think it's also linked to stock prices for those companies in twenty twenty. If you look at those for you to.
Go there, because I've got stations with some publicly held companies as well, and just talking about prices like why are they still so high, and smart people scratching their head and just wondering where their folk are keeping prices high because they can.
I mean, I think that things have gotten more expensive. Labor is a lot more expensive, so I mean I know that personally for our company, so I can imagine at the transporation companies it's the same when you're paying a lot more than you were a couple of years ago, where you know, wages have inflated much quicker than they did in previous you know, decades, so you know that has to be reflected. And I think, you know, American consumers have been taught by certain large companies that shipping
should be free, but it's not free. And you know that that good good has to pass a lot of people's hands and a lot of trucks and a lot of planes and all.
Of gas, especially if you're shipping something that's perishable and that has to get to a destination within a certain amount of time or else it's not going to look or smell as good.
Labor market can you find all the workers you want.
No, you know I should say yes, but you pay more. You pay a lot more for the same same job.
How much have wages gone up as a cost of doing business for you guys, I would say.
About thirty percent Okay, you know, twenty five to thirty.
Percent since twenty twenty.
I think, yeah, it.
Started in twenty twenty and it's continued to rise. I also think professional labor has gone up as well. It's not just wage level that's gone up in prices. Also, working from home, I think productivity is in question sometimes.
A little bit.
It's harder.
It's just not that you know, people aren't working, it's just really it's not efficient. You have to have six meetings to get things done that would take one.
Is that what you're doing at Farm Grow Flowers? Are you hybrid? Are you remote?
We are remote mostly. I mean in facilities people are working, but remote for a professional level.
Okay, oh go ahead.
I'm just gonna say, while we're talking higher cost, how much of pricing or the pricing pressures you are feeling as a business owner, how much can you pass on to consumers or are you are you kind of swallowing a lot of it. It both.
So we have raised our prices in some things, you know, our core product offerings. We haven't raised those prices in three years. We're probably going to need to because our margins are just so tight. But American consumers also, you know, they're hurting right now. When you it's eight dollars for a dozen eggs, you know they can't spend as much. So it's also making sure you don't.
Price crisis have gone down the Yeah, okay.
Seven ninety nine, but oh you got to stop somewhere else.
Yeah, maybe the free range thing. I don't know.
Yah, yeah, in the area I'm in Washington. Okay, eggs that were in prison. Like I'm just kidding, quitting Joe. I don't want the email that I'm going to get.
Okay, now, okay, so let's talk a little bit about we were talking about your supply chain here, fast forward to twenty twenty four. Where are you getting your flowers now?
All over North America, South America, Europe mostly. I would say I need to do an audit to see what the percentage is. I would say it's over fifty percent US, but slightly so, it's about half and half probably so you.
Think just like kind of I mean, we talk about this with everybody, this idea of kind of pushing back against globalization or just having kind of near shoring unshoring. It makes sense and probably will continue. Do you think or if all of a sudden it makes sense to buy outside you will absolutely.
I mean, you know, you can't get enough flowers in the US of all the type varieties you need, So it's just there's a sourcingne shortage of certain varieties. Also, you know, gas prices heating greenhouses in certain areas, especially you know on the East Coast, the heat of greenhouse is way more expensive than importing those flowers, and so the farmers know that and they just don't heat them through you know, certain months, and so you have to subsidize certain times of year.
Hey, real quick, you bootstrapped this company. You have funded at yourself, partly because a lot of vcs passed on this company. What's the exit plan for you?
That's a good question. We should talk about that for a lot of time. You know, I built it to sell. I don't know that that's the trajectory anymore for us. So we'll see, you know, building a long term sustainable business. There's nothing wrong with that though, and we don't talk about that. It's like the sexy, cool thing to talk about in all the magazines.
But that's I think that's because so many of these businesses are venture backed and they have investors breathing down their neck saying, you know, we need our return.
Absolutely. I actually feel like we're extremely fortunate right now to not have that happening. You know, a lot of my friends that are CEOs that have that same story. You know, they are being forced to show some growth numbers or at least a flat year, and our goal is a flat year this year with profit, you know,
but there's no path to profitability. Like overnight, they were like expected to make mom jeans and the low writers again like right, you can't do that, right, and so they're like, you know, growth at all costs, growth at all costs. Now profitability, Well, you know, we've always had to be profit was it the.
Owner of roone that we talked about that kind of had investor money come in and then kind of the business got away and then he got back yeah checks, well, nay check, it's more involved in it. So well, when you know or whatever or whatever, the next stage.
Just come back, Yeah, come back to New York.
I mean we might be a long term business. I might get here from many minutes, and I would say your workers and your supply chain would appreciate that, no doubt about it. Good luck on this Valentine's Day. Thank you, thank you so much, so appreciate it. Christina's Dempel, founder and CEO of Barn Girl Flowers.
This is the Bloomberg Business Week Podcast Apple and Spotify and anywhere else you hit your podcast. Listen live week day afternoons from two to five pm Easter Bloomberg, the iHeartRadio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal