Bloomberg Audio Studios, podcasts, radio news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Applecarplay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
City investigates HR complaints against wealth heead Andy Sieg. City Group has hired law firm Paul Weiss to investigate complaints about the behavior the bank's wealth management chief, Andy Sieg, who was brought on by a chief executive officer, Jane Fraser as a high profile hire to drive a key part.
Of her turnaround plan.
And one of the reporters on this story joints us now on our Bloomberg Interactive Broker studio Todd Gillespie Bloomberg financi reporter Todd talk to us about what's happening over at City Group with their wealth management chief.
Andy might pronuncient direction is correct? Yeah, yeah, exactly.
I mean, well, what we do know is that you know at to Andy c you know Rand Meryll for a Bank of America's wire house for six years, came on in twenty twenty three to turn around the wealth business at City Group, which was ailing, was a key priority for Jane Fraser's turnaround of you know, Wall Streets, one of the least profitable, profitable banks on Wall Street.
He has been there for just under two years, but in that time he has drawn several, you know, we know from at least six managing directors complaints about his behavior, particularly his treatment of senior female executives, including Ida lu
who left the bank after eighteen years in January. Some of you might remember that it was quite a sudden departure, and also towards one of the current his behavior towards one of the current direct reports who runs the Wealth at Work business there, a woman named Kristin Bitterly.
Now, which tipment behavior, It's just it's not from what I'm reading in your story. It's more just the way he speaks to them, or maybe speaks of them, or just his it's not necessarily any sexual type of things as far as we know now.
It's just more of his management style.
Perhaps precisely, Yeah, we call it. There's intimidating behavior. They're expletive filled rants, which there you know, we know about him reducing a male managing director to tears after berating him in front of colleagues, calling people's work pathetic in
meetings with that person present and their colleagues present. So and also undermining Idelu in particular and his COO, a man called Valentine Valderbano, directing a managing director to exclude her from correspondence that was important to her business in the months before she departed the bank.
Well, let's talk about just his performance business wise, right, I mean, under his tenure, the unit reached record levels, improved returns.
What was his what was his style if you will, under that wealth division?
Yeah, absolutely, And it is important to note that, you know, City Group appeared to be standing by him, you know, they do note, you know that he's really improved profitability
at the bank. The second quarter revenue, you know, was a record and he's really done that by essentially moving the unit's focus away from what was quite a lending intensive balance sheet heavy private bank focus towards I guess more of a wire house style, you might say, like Merrill, like Merrill Lynch, where he you know, basically grew up in the business and you know, he's focused on attracting investment assets into the business and reducing that dependence, you know,
on the balance sheet at the bank, and that seems to have have reaped dividends.
Stay with us. More from Bloomberg Intelligence coming up after this.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Applecarplay and Android Otto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Target tough numbers, that's one thing. I mean, the results were not great. I didn't think, but what I know?
And then CEO, you keep an insider there? I think maybe the street wanted an outsiders. John was suggesting stock down seven and a half percent.
I don't know.
If I were this guy, I would take it personally. Let's see if Jenn Bartash just takes it personally. She's a senior retail analyst to Bloomberg Intelligence. She covers Target and all these names. Jen, let's start first with the CEO.
News here.
What do you make of this person and should they maybe have gone outside the company?
Good morning? Yeah, it's an interesting choice, and I think there are investors for a little while and now I have been interested in seeing a CEO change. Brian Cornell has done a great job during his tenure, at least initially in terms of really driving growth for Target. But an internal choice really implies much of the same strategy, and I think there was some hopes that there would be something a little different and maybe shake things up and bring something new to the company.
You know, I'm wondering if Target is going through an existential crisis right for this identity crime, because you feel like, I don't know about you Uponda, the last time you went into a Target. Sure, but you feel like they've lost their mojo, Jennifer, because the last time I was in there, the store shelves were not stocked very well, felt disorganized, couldn't find a sales associate to help me. What does this new CEO have to do to help this.
Company get back on track. Well, you know, it's very interesting. He's highlighted three priorities, but they're not really new priorities. But if they can bring focus to it, maybe that will help. And that's you know, re energizing the assortment, bringing back some of that style and you know value that people crave. It's about having a very good, consistent in store execution and experience, which is what you were actually just talking about having things in stock, having you know,
associates available. And then the third is an acceleration in the deployment of technology to maybe you know, make processes faster, improve efficiency, that sort of thing. So we'll see if that, you know, if that happens. But it's really about getting back to what is it that consumers loved about Target and how do you get them back in that frame of mind so that they come to stores and spend there.
Well, you're the expert here, like I don't have a sense of what people go to Target for.
What do you think they go to Target for?
Well, what they traditionally have gone to Target for was that sense of discovery. Right, you had a couple of things on your list, you got in and you were inspired. You saw home decoration items that you just were like, oh, that would look great in my living room. Or you would go through apparel and you would see something very stylish and you know value that you thought, oh, that's a great thing to add to my basket. And so
that's what's a little bit missing. And part of that may be because of just the rise in digital orders. It's a less conducive to those impromptu purchases, but it's also inspired by the assortment and by what people experience when they're in the stores, and that's really where they have to focus to get to get that magic back.
And Jennifer correct me if I'm wrong. I think Target has more exposure to tariffs than say, Walmart because of its mix of products. It doesn't have as much exposure to groceries as Walmart does, but it gets a lot of its products from overseas places that are getting hit by these tariffs. How did that play out in this quarter and how will it play out going forward.
Yeah, it's a great question, and it is one of the things that's sort of been bogging down Target ever
since we've had very high food inflation. The willingness to spend on discretionary categories has been a little bit more limited, and that's really the area that Target has always excelled, things like apparel and electronics and toys and home decor and so you know, right now, the company is saying they're doing a pretty good job of mitigating tariffs, but they are more exposed because of the merchandise mix that
they have. So they said they've done some right sizing they've paid off kind of the one time cancellation charges they had while they were waiting on the terra verdicts. We'll see what unfolds in third quarter, and especially because it's back to school, which is a really important quarter for Target.
It's always well.
I guess what's recently in the last ten fifteen years really amaze me about Walmart is it how's effective their digital strategy was, and they actually went toe to toe with Amazon, and I think they more than hold their own. Not just about Target and their digital strategy, how's that performing?
Overall?
Target's digital strategy has been doing pretty well. They've been a They've made a conscious decision to not go head to head with Walmart and Target. So, for example, in their marketplace, it's not just an endless aisle of sellers. They have a very close criteria of who they let onto their platform and that's worked well for them because it helps keep the product selection closer to what people
expect from Target. Their digital sales were up in terms of same star sales this quarter, well uppaced the visit visits to stores, and so they've been executing pretty well there. It's just a matter of how do they marry the two parts of the business to grow simultaneously.
I want to look.
Ahead tomorrow because we get Walmart. They may strike a more cautious tone here. I'm curious if they're going to actually say the word tariffs Paul and Jennifer tomorrow, because last time when they did, Trump told them to eat the tariffs because they said they were blaming the tariffs on having to raise prices. What do you think we're gonna hear from Walmart tomorrow.
Jennifer, Well, I think I think tomorrow with Walmart, it's going to be more about the value seeking behavior of customers. You know, I think that any of these retailers they're holding price increases back to the last possible resort. With regards to mitigating tariffs. Walmart will certainly be asked about it. They certainly won't disclose any specific information about, you know, the cost of tariffs on their business or the specifics
of how they're mitigating them. But I think they will remain very cautious, and they have warned that there could be volatility from quarter to quarter, especially with regards to their margins, and we may see a little bit of that play out tomorrow.
Thirty second, Sten, what's the holiday look like? Do you think so far? What's the early take.
With regards to holiday season. I think the retailers have good strategies to have streamlined inventory in place. It's really going to come down to how confident is the consumer and how much are they willing to spend.
Stay with us. More from Bloomberg Intelligence coming up after this.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
All right, let's get back to these markets. Low's is a stock that's in the news today. They reported some pretty decent numbers and also made a big acquisition, buying a company called what is this called Foundation Building?
Never heard of it?
Eight point eight billion dollars cash deal, transformational.
Deal some analysts on Wall Street or calling it. So let's break it down.
When you're reading Bloomberg Intelligence, US home building analysts, Drew first talk to us about this acquisition that Low's made. What is the company and what's the upside for lows here?
Yeah, this is a pretty big story today when we weren't necessarily expecting, they announced that they're going to acquire foundation building Materials.
For eight point eight billion.
They're basically distributor of drywall, ceiling tiles, metal framing, insulation to builders and remodelers. What's interesting is if you think about how Lows has traditionally attacked the professional contractor segment, it's really been through small and medium sized contractors.
That's really been their bread and butter.
What this deal does is gives them access to larger scale projects. It's really the area that Home Depot has been going over the last couple of years. But now it puts Lows firmly in that lane and really opens up a new growth opportunity for them.
Yeah, and didn't Lows by another sort of pro type business earlier in the year. I know Home Depot did something similar. They got they bought GMS for over four billion. I wonder though, what this means drew for people like us who want to di Wyatt. Are we going to not be as catered to at the Lows and Home Depots of the world.
So you're right, Lows did just recently close on the acquisition of artists and design group who's a distributor of internal finishes for things like countertops, flooring, and things along those lines. So now Lows is really able to go to large scale contractors and builders and really provide an entire product suite on the interior of the business. In terms of DIY, I mean, Di Wells, why is still seventy percent of the business for Lows. That'll remain core
to their strategy. But what I think this speaks to is the relative weakness in that segment and the need for them to look for new avenues of growth, you know, out over the next several years.
When we think.
About how the market is likely to unfold, and Lows alluded to this today during the call, we think a lot of the growth is going to come from big ticket spending that's been pent up over the last several years, and this gives them an entrance into that market somewhere that where they didn't have that type of penetration before.
This may surprise you, Drew, but I'm probably the least DIY guy you'll ever find.
I have people for that, Drew. But so I don't really know much about the whole Lows thing. Tell me about how their earnings were at this quarter.
Yeah, so the earnings were really a non event.
Comps were up one percent, pretty much in line. The cadence of comps to the quarter was pretty much similar to what we heard from Home Depot. They exited at a four point seven percent cop and that really had to do with how weather evolved throughout the quarter. Obviously wouldn't be a retailer call if we didn't mention the weather. We did see an improvement in big ticket spending, which was encouraging and I think investors were pleased to see that despite a still.
Challenging market out there.
They maintained their guidance for same store sales for twenty twenty five, which calls for flat to up one percent, so you know they did mention the environment still tough.
We think that the big ticket.
DIY discussionary categories that require financing, as we discussed with its Home Depot.
Are still relative areas of weakness.
But we think both of these retailers are executing well in a challenging market.
So drew as our home building analysts, I just want to broaden this out for a moment and get your thoughts on this.
So we saw that.
We saw that the gauge of future construction right new building permits down more than five and a half percent versus last year. But what we're seeing is sort of a divergence in the industry. Right apartment construction is steadily climbing and not keeping pace with single family homes. What's driving that?
So a lot of it has to do with affordability.
I mean, with the rise and home prices over the last five years up more than fifty percent, rates hovering at six and a half percent, there's a lot of people that simply can't afford to buy in this market. We looked at some data last quarter on household growth and really what that showed is that all the new household hold formations have been in the renter market at the expense of you know, owner occupied units, and it really goes back to affordability.
So I think you're right. If we look at building permits, they were.
Actually down eight and a half percent on the single family side compared to last year. You know, there was a little bit of a surprise on starts, which tend to be volatile month to month, But what we're hearing from the builders is that they're not going to keep pushing new units into a soft demand environment. We think they're going to continue to pull back on starts through the remainder of the year and then too next year as they look to work through the existing inventory that's
out there in the market. If you look at the new home inventory, we're at two thousand and seven levels, so that's requiring builders to have to lean on incentives to a greater extent in order to clear that. And we think until we get through some more of that inventory, you're going to see further weakness in single family construction.
Stay with us more from Bloomberg Intelligence coming up after this.
You're listening to the Bloomberg Intelligence podcast. Catch us Live weekdays at tenn on appleclock Lay and Android Auto with the Bluemberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Tj Max TJX, owner of tj Max, raised it's fully your guidance earnings for share outlook after better than expected results, citing shoppers turning to discounters due to economic uncertainty. I look at the stock. It's up three point three percent today, it's up fifteen percent year to date. Fifty two week hi seems like always good at TJX. Let's break it down with Mary Ross, Gilbert Cheese's senior ecodanalys. She covers the retail space for Bloomberg Intelligence. She's based out there
in our Los Angeles bureau. Mary looks like TJX is doing pretty well here what you hear from the company, Yes.
Paul, you're absolutely right. TJX is hitting it out of the park. This is a company that just executes seamlessly and consistently, something in retail that's very, very difficult to do. They saw strength across all categories, across all income groups, all age groups, and they know how to get the merchandise right by store, by region, so they have a terrific planning and allocation. They sort of emphasize that and another key point because they raise their guidance not only
for sales but also on the margin side. And there was such a huge fear with tariffs. They only source probably less than ten percent of their sales come for their merchandise is something they directly source. They were able
to buy better, which means they got better deals. That means there's so much availability out there, and it's something we've observed in our channel checks and when you look at the shopping halls on television, on a YouTube, and you see the incredible brands that are available, and they really are across good, better and best. So you can get anything from Puma, Audi, Doos, Nike all the way
up to Eve, Saint Laurent and Gucci. So it's and TJX really really wins across all that, so strength across you know, all their channels and internationally, I mean Canada was up nine percent comp sales. I want to ask you about a possible headwind though, because it seems like they're firing on all cylinders. But I know that TJX mentioned in the past about a key demographic, the Hispanic customer. They were concerned that maybe immigration policy was going to
keep them home or not spend as much. Did they mention anything about that on the earnings call. Yeah, well, you know, the earnings call wasn't quite finished when you know, I came in here, so I missed the point that it was a question that was brought up. I didn't see it. I don't think they saw any weakness as.
A result of that.
I know it's been a big concern, not only for TJX, as you brought up Alexai, but also for Ross and for Burlington, and probably even more so for Burlington because they really skewed to a lower income consumer and they're due to report next week, and so we should learn more on that.
Mary.
I always think the job of a retail analyst like you was really tough because not only do you have to do the regular stuff as an analyst, like get the earnings estimates kind of right and on the financial analysis, but you kind of have to have an opinion on like who's good at picking out the right fashion to even put in the store in the first place.
What is TJX doing so well? Do you think? Well, they have.
The most amazing buying team, and so they spend they have sort of like a buying academy where they teach their buyers. You know, they have to go through you know, I think it's like three years, maybe even up to seven years of work that they do with these buyers. So the pricing that they work on and the product that they're buying is really something that is steeped in
experience history. They also invest in systems, you know, so that means technology logistics to make sure that they can get this all right, because you can imagine that if they're shipping multiple merchandise, you got to have fresh drops because these customers will shop multiple times a week because it's that freshness that brings them in. So yes, TJX is the leader, though the largest in the world. I mean, they'll probably hit sixty billion in revenues this year, up
from fifty six billion last year. And they keep increasing the number of potential store openings they see. Previously they said we think we have another twelve hundred stores to open. Now they're saying it's another eighteen hundred stores to open around the country, just around the globe in their existing markets. So yes, this company really has the expertise in doing
it right. Is there a digital strategy here because I remember I'm sure you do too, Mary, when you would go online to try to find out what tj MAX had and there was nothing there because you always had to go in the store to find out what they had. I think they had a step up their game right because of Amazon and others online. But what is the digital strategy, if anything, at TJX and TJX Alexa.
That's a good question.
So actually TJX has a digital strategy. It's across all their brands except for home goods, and so it's about I think it's I think it's just under five percent of sales, so it's very small. But they also saw strength in this quarter on their e comm business. So they do have an e comm business. You can go on it and you can shop anything you want on there. Now you can't say that you want to shop by brand,
but you can select. Let's say, let's say that you want to just buy the ultra luxe you know, merchandise that they have there, and you'll see Christian d or sunglasses. You'll see you know, like I mentioned, you know, on the handbag size balan Chiaga. So you will be able to find what you want on the high end, also on the low end, but you'll have to do it by price points, by sorting that way because they're not allowed to necessarily have that ability to sort by brands.
So you will see they have a robust online business, you know, and it's around the globe. Now, the key is that they're a key differentiated in that regard. Remember that it's still very small and that the vast majority of their sales, you know, more like ninety six percent or so are being generated in store, but nobody else in off price other than the rack. The Nordstorm rack has e commerce capabilities. All the rest it's strictly a bricks and mortar model.
This is the Bloomberg Intelligence podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, ten am to noon Eastern on Bloomberg dot com, 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