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Again.
We've been calling out crude oil Brent crude oil up three point nine percent today, seventy six dollars seventy seven cents, big big move hire over the last several days to the Mid East tensions. Here Daboca Krishna Kumar Joints, so she's a Bloomberg Oil Markets reporter. Debica, thanks so much for joining us. What's the latest that's moving markets today?
Hi, thanks for having me today. The big question now is whether Israel's retort to Israel to Ron's missile strikes will involve oil targets or not. We just had moments ago comments from President Biden saying that that's currently being discussed.
Now.
The market's obviously on edge because oil infrastructure is critical when it comes to determining supply and demand going forward. Iran produces over three million barrels a day, so any attack on their main export facilities or energy infrastructure could have significant ripple effects across the market, which is why we're seeing now prices rise for a third straight day, because markets are very much on edge about how this is going to play out.
And just looking at your reporting, you side a City Group analyst saying that a major strike could take one and a half million barrels of daily supply off the market, whereas a minor infrastructure strike on downstream assets would be closer to three hundred thousand to four hundred and fifty thousand barrels a day of output. He just put that into context and what that means for the energy space and for oil.
Yeah, yeah, of course, we are actually in an interesting market right now because some people like to call it an artificial prop up because OPEC members and allies are
basically curtailing production. They were supposed to return supplies to the market in October, but they took a look at the market and how demand was looking kind of shaky because of questions about economic growth in the US and China, the two biggest economies in the world, and they thought, well, maybe we should pause and maybe we should kind of rethink returning supplies to the market. So now the current plan is to return supplies to the market in December.
So in the market looks at this broadly, the reason we're not actually seeing more talk about one hundred dollars oil or an insane spike in prices is because the market is where that OPEC members like Saudi Arabia, UAE other Middle Eastern producers could quickly bring on supplies should we face a major shortage. And obviously there's also the sense that you know, we need we need to understand
how demand's going to play out. There's still worries about the economy, both in the US and China, and bear in mind China is actually a big buyer of Iranian CREWD so even if we had, even if this doesn't descend into further missile strikes an all out war, we might see more tighter economic sanctions, and that's kind of interesting to see. It'll be interesting to see how that plays out as well, because it's you could only target financial components of that trade, and that may not necessarily
result in loss of supply. So in the broad context of things, there are several moving parts here, and the market really needs to understand how each component is going to play out. And it's happening in real time, which is why we're seeing the volatility and prices.
Devika, thank you so much for your reporting. Really appreciate getting a few minutes of your time. Devica Krishna Kumar. She is part of the team that covers a global crude oil for Bloomberg News and they have a good reporting out this morning. To check it out on the Bloomberg Terminal and on Bloomberg dot Com.
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I'm Paul Swing.
You're live here on our Bloomberg Interactive Broker Studio or streaming live on YouTube. To check us out there and go Bloomberg Live Radio. That's what I did yesterday that got me right to where I wanted to go. Networked just just fine.
Here Bailer gets some ism data came out today. It looks like better than expected. Here looks better than expected.
We see the SMP right now down call it two points, but major averages pairing losses, if not gains.
Looking at the.
Two year right now at three spot seven percent, So se markets move, all right.
Let's get the breakdown of the ISM data.
Steve Miller joins as he's the chairman for the Institute for Supply Management, joining us via that zoom thing. So Steve, seems like pretty good numbers. Again, fifty four point nine was the headline number they consent. This was fifty one point seven and last period was fIF fifty one point five.
Pretty solid, Yeah, very solid.
We saw over a six percent increase in both the business activity and the new orders indexes, and that's really what drove drove the change in the PMI this month.
And see when I'm looking at our Bloomberg headline expand in September at the fastest pace since February twenty twenty three, reading too much into that that it's a bullish indicator.
So I'd say it's a bullish indicator because what we saw is an increase in kind of the broadening of the expansionary activity, both in business activity as well as new orders. But putting that in context, you know, we're ending kind of a lackluster Q three. If you look at the average PMI for this Q three, it's really
the lowest average since two thousand and nine. So although we're seeing it was a great number for this month, but you know, fingers crossed that with the port activity and such, we'll be able to see that continued growth.
Where would you like to see that that headline number, that fifty four point nine Again, it seems pretty good relative to the last period and relative to consensus. Where would you like to see that?
Yeah, absolutely so if we if we saw consistency fifty three fifty five range, that would be really that'd be really healthy improvement coming off of a couple of fifty ones and then actually contraction before that. We're you know, we're on the right trajectory. Hopefully we can hold it all right, Very.
Good, Steve, Thanks so much for joining us for a few minutes there, Steve Miller, chairman for the Institute for Supply Management.
That's im to us. Cool kids there, Billy.
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Right now, let's go to market.
Betell, Senior portfolio Managered Offspring Global Investments. Margo, We're going to get a big jobs print tomorrow, which will be presumably pretty informative for.
This Federal Reserve.
How are you thinking about the markets these days given all the economic data that we have had over the past several weeks.
Well, I think it shows the economy is still growing. We had a great GDP number, three percent, which is better I think a lot of people thought, and I think it says a where to continue to move along at modest growth rates, probably less than three percent because some of the numbers, especially for labors next so still positive, no recession, no boomy upswing in GDP, so a little more of the same and a little pressure probably on revenues and profit margins going forward.
And Mary, now that we have the first FED cut in the rear view mirror and at least the swaps market pricing in a string through the first half of next year, how are you positioning in this market, especially given the expectation that the Fed can navigate us off landing.
Well, we think some things are out of control of the FED, which is the economy. But I do think that we'll see another two quarter point reductions in the FED funds rate over the next few months, which would be modestly helpful over the long return for the economy. But basically we think that, as I said, the economy is growing, it's a sustainable level, but more modest than
perhaps you might like to see. So we think that says that return some equity will be maybe mid single digit going forward, as opposed to the double digit types of rates we've had so far. Is here, So no changes in the portfolio or outlonger.
So Margan, I'm looking at then GO function of the Bloomberg Index browser, and I see across the US fixed income everything's in the green here, solid mid single digit returns for fixed income investors share. The highlight, though, is US corporate high yield. How do you think about that the high yield market? Is there any value left there?
Well, yes, there is this modest value. But actually, ever since the had began to raise short rates a couple of years ago, the best performing part of the high old market has been the fixed income market has been yield because it just simply pushioned those treasury rate rises with the extra yield do you get so right now in double B bonds you get a little over two hundred basis points two percentage points for single baes, say three percentage points, But with a backdrop of the economy
growing and defaults looking like they're going to be under two percent over the next year, that says you're still getting a bargain for the risk you're taken by being in below investment grade. So we think it's still attractive, but modest. Certainly, we're not looking for double digit returns going forward, mid single digits, just basically the coupon.
And so does that impact kind of your allocation to risk of your debt or how are you thinking about that?
Well, with your spread so narrow and dollar prices pretty high in the high yeld market, most bonds are trading pretty close to their face value, maybe ninety eight ninety cents on the dollar, we think that you pretty much have gotten rid of the extra risk premium that was in the high yeld market when the Fed had rates or high. So we don't think there's a lot of capital appreciation room. So really, if you're looking realistically in return and say over the next year five six, maybe
seven percent. That says to me that the market really is going to favor stocks where I think we should at least get that much and maybe even a little bit more if we have growth to stay around that one two percent level. So basically, low volatility, modest coupon, and modest return is how we see fixed income in the high old market right now.
And Margie, I guess this month of September it was a record month for new issuance.
What is that?
Is that good for the market.
Yes, it's excellent because the problem with the high old market is there simply has not been enough supply for all the demand by investors for that extra yield. In fact, we actually had about a year ago or so the market actually shrink because we had new issuance drop off, we had maturities and bond calls, so the whole high old market actually shrunk. So it would be very good
to have a big supply. There's a lot of demands that will match that, and to have the high old market grow a bit would add to the liquidity, give investors more choices of names Dubai, So I think more supply would be very positive. There's a saying supply creates and some demand in the bottom market.
Yeah, very good at across all of fixed income. A really really busy September four new issue. And so Margia Btel, thanks so much for joining us market. Bettel is a senior portfolio manager all Spring Global Investment. She's based up there in Boston. Joining us via Zooming.
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All right, that port strike. It is still ever day three here, and it's starting to get serious here, and you don't get a sense that there is, you know, a lot of discussion going on here. So the questions one is going to really start the impact this economy? And to what degree? Dristic a critical joins is. She's a chief scientist at Workplace Culture. The company is called Culture Partners. Joining us via Sacramento via that Zoom thing. Jessica,
talk about this strike. How do you kind of envision this strike from both sides perspective, what's what's going on.
Here and where could there be movement? Maybe?
Well, this strike comes down to ultimately two issues. It's about wages and it's about automation. So Harold Daggett, who's the president of the ISLA, has said, not only are they wanting seventy seven percent increase, which is significant, they've already been offered fifty percent. They're going to seventy seven, but they also want to create air tight language quote unquote, air tight language that removes the ability for the ports
to use automation or semi automation. And it's downright archaic what they're asking for. If you want to understand what kind of automation they're saying they refuse to allow. It's not some complicated, new fancy AI technology. We're just talking parking gates going up and down. They're not okay with that kind of automation. They're not okay with time card
stamping automation. In fact, right now they have people who are employed as schedulers to write down who is there, when they arrived and when they left, which allows for inaccuracy and time reporting. So they're really holding the port hostage with these demands, and that is why we're at a standstill. I think we could easily get there at the wages. The ports are doing very well. They have the financial capacity to meet the needs of seventy seven percent.
But it's really the automation that is the sticking point.
Is that just a fear of automation becoming a slippery slope from your understanding.
I don't think it's a fear. I think it's a strategy. They have said, quote, I will cripple you are words that have come from the president of the union's mouth. He is intentionally trying to cripple the American economy in an effort to get what they want and to maintain the job security. And it is downright an American. I mean, I believe that we all, every industry has the ability to implement basic technology, basic automations in order to advance
and progress as a society. And what's interesting here is if you look at what they're doing, they're actually making the argument for why we need these ports to implement automation, because if they were automated, we wouldn't be being held hostage by this union and the effects of the economy and the American consumer are going to be felt soon and it is going to be widespread. There will be panic.
There already is panic. There's already been a run on toilet paper and paper towels, which is completely unrelated to the imports from these ports. So it's interesting that's really just psychological in nature. We're remembering when toilet paper wasn't available at COVID and so people are going to stockpile toilet paper now. But what else will they stockpile? And who else is going to be affected by this and lose their jobs because supplies that they need to do
their jobs haven't arrived. It's really going to be devastating if this doesn't get resolved soon.
So Jessco, what has anyone on either side quantified the job potential job loss from automation? How big of an issue is this in reality?
Do we know?
There are a lot of analysts making estimates on the cost that this strike will have and the ranges are significantly wide, so it's unclear and the job costs we can only speak right now philosophically, as construction materials don't arrive, when construction workers are not going to be able to do their jobs, and so they will be laid off or temporarily furloughed, and that impact will be devastating on
those workers. So if you think about the union, workers are being very selfish right now, and they do want the American worker and consumer to feel the pain. They're counting on it, they're looking forward to that, and I think one of the devastating things here is that they're saying and don't blame us, blame them, So they're not
taking accountability for the strategy. And I also don't think it's very logical because the American worker and consumer is going to become outraged and say, you know what, that we want them to automate because this is a danger to the American culture, society, workplace, labor market, all.
Of it Protisica. In terms of the actual dock workers about twenty five thousand at the East Coast and Gulf Coast ports. What percentage or number of those workers would be at risk of losing their jobs if automation were to be implemented at a grand scale.
It all depends on what we're talking about with regards to automation. So the schedulers will lose their job if we implement time cards. Right now, there is already some automation if you think about it. I was listening to an interview with one of the union strikers yesterday and he said, you know, decades ago, we were literally offloading one hundred and twenty five pounds of sugar with our hands. So that's not happening anymore. That's because of automation, and
I'm sure that they celebrate it. So the where automation is allowed and where automation isn't allowed is exactly what's under negotiation. There is already in their current contract language that prevents new automation. They're not saying that they're okay with that language though, they're wanting to go backwards. They're wanting to remove automation that's already been implemented, and so that's really regressive and not progressive at all.
All right, Well, have to see how this plays out where day three and again the tensions are mounting, the risks are mounting for the economy. Jessica Kregel, thank you so much for joining us. We really appreciate getting your thoughts of perspective. Jessica Kriegel. She's a chief scientist of workplace culture on the firm is called Culture Partners. They're based in Sacramento, California, and she's joining us via zoom.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern 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 Play Bloomberg eleven thirty.
Billy Lipscholtz sitting in for Alex Steele on Paulswuni. We live here on a Bloomberg and Arctive Brookers studio, which on Tucker We're assell streaming live on YouTube dot com. You can find us over there just search Bloomberg Live Radio.
You know, we're a little bit.
Of a sell off here today, A lot of just kind of mixed trading here, all within one or two percent of the all time highs.
I mean why not? I mean, I guess you got a.
Fed cutting rates, you got decent earnings. I guess that's a pretty constructive look for this market. I want to how the technicals look. Our next guest, I think can help us a little bit there. Francis Stacy chairwoman of the Global Digital Finance Committee, joining us from Tampa, Florida via zoom. Francis Again, you look at this charge kind of up into the right here. What are the technicals tell you about this market? Anything concerning you?
Yeah, So it's very interesting because the technicals actually look quite toppy. And I do think that if the S ANDP gains any kind of momentum and a bit of a sellof which is you know, could be news driven. We've got a big jobs number coming out tomorrow, you know. I think fifty six twenty five is the initial stop for support to indicate that the upward trend is as well in play, and there's nothing that's coming on the horizon. As far as calculating an additional risk, I agree with you.
The FED is obviously changed its modality into an easing mode, and that's happening globally. I mean, the global money supply is up seven point three trillion as of September, and just globally we're getting a lot of simultaneous rate cutting and that supports the reacceleration and global growth type mindset. I do think we'll see a little bit more softening in the growth and labor markets here in the US, and we just have to see if there's a catalyst that would indicate a recession, Well, how.
Much is that recession risk being priced in. I'm just looking at the swaps market, and at least as it relates to the FED, we're at an implied rate at a round three and a half percent by May of next year. In VideA is kind of the S and P one, if you will, and is seemingly talking up demand. Apple and Microsoftware are relatively bullish as well.
Kind of what do you make of those dynamics.
Yeah, so absolutely there's no indication and the markets are not pricing in an indication of a recession, which makes this rate cutting and a regressive rate cutting, I would argue globally very interesting. I mean, I think they're cutting rates globally on the orders of magnitude that they did during the you know, the global financial crisis. Without that catalyst in place. It's just basically looking at the yield
curve and potential. You know what happens when you have a prolonged and yield curve inversion that is, you know, pretty severe and you have the resteepening quinte essentially that has been an indicator mechanically of an imminent recession. However, there was always a catalyst. You know, in the nineties you had the invasion, you know, the Kuwait situation, and the two thousands you had the tech bubble bursting, and then of course with the GFC you had the housing
bubble burst that sort of tipped that domino effect. Right now, there's nothing in the system, and certainly, as you say, not being priced in that that domino effect is ready to be tipped. But you know, sometimes these things happen slowly and then all at once.
So overall, I mean here it's it seems like again the backdrop for a lot of the the bull seems pretty simple. I've got decer earnings growth, I got of interest rates coming down. Is the recession risk something that could really be upset that kind of foundation.
Yes, certainly if there's a catalyst, and we do have some potential catalysts in our geopolitical environment. I don't know sort of what volatility the election outcome could enter into the system. So we just you know, we just have to watch the catalyst. We have to, as you say, you know, watch the spreads, watch the swaps and see
if there's any sort of a reaction there. It's interesting because from the role of my new committee, and I've brought in John Degastino, who's very storied as my co chair, we are looking at the fiscal and debt dynamics around the world, and we are engaging countries and looking at the new prominence of global digital finance and what that
algorithm looks like. Because here's the thing. You put a record amount of monetary and fiscal stimulus and you know, pretty much globally, but the most in the US during COVID, and then you know, something like the mechanical implications of the yield curven version. We've seen an elongation of the seasons of these economic cycles, and so the question becomes, have the mechanics fundamentally changed post COVID or do we
have the same mechanics in place on a delay. And then also just looking at the liquidity dynamics around the world juxtaposed to the debt and looking at the potential a potential new algorithm for the managing of this, the managing of recession risk, you know, with the integration of the digital finance component, and certainly you know a potential for digital currencies as well.
So are you talking we're talking bitcoin?
Is that what you're kind of alluding to?
Bitcoin will never replace fiat because it has a finite supply and it cannot disrupt the function of the central banks. If it cannot do the function of the central banks. Central banks adjust mone you know, money supply, and you know, in the United States they have their dual mandate of price stability and full employment. They could never accomplish that
because they can't manage the supply of bitcoin. But you know, for instance, El Salvador has this hybrid approach between bitcoin and the US dollar, and I do think that it's kind of like trying to make an electric car talk to an internal combustion engine. They have different underlying mechanics, but there is potentially an algorithm possible that bridges that
gap and brings in a digital currency. I do think if we see digital currencies, you know, obviously Bitcoin is legal tender and El Salvador, but if we do see digital currencies widely adopted as legal tender, it's going to be the central banking digital currencies because those are the only things that can disrupt what the central bank is doing.
The Central Bank has been given all of the legal authority, has all of the legal precedent from Congress, and you know that's you're not likely to unmock that anytime soon. So I do think that there's going to be an opportunity coming up. But that's that's what we're really looking at systemically.
Very interesting.
Francis Stacey, thank you so much for joining us. Francis Stacey, she's a chairwoman of the Global Digital Finance Committee. Joining US FRO Tampa, Florida.
Via zoom you're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern 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.
Another big news in the tech spasis, some of the valuations they are coming back, it seems to think in a big ways, particularly if you have anything to do with AI. So if you have a company that's called open ai, that's a pretty good name to happen, a pretty good time to raise capital. OpenAI I just raised six point six billion dollars in the private markets and new funding, giving the artificial intelligence company a one hundred and fifty seven billion dollar valuation as a look to
build the world's leading generative AI technology. Check in with it somebody who knows this stuff really well. On a rock run of technology channels for Bloomberg Intelligence from the tech hub of Chicago, Illinois, anurag talks about open Ai.
Here.
These are some real numbers here on a rock, and there's some real investors investing in this company.
At this stage, what do we know?
Yeah, open air has really taken a lead over the last three years because of the launch of chat GPT and after that it has become to go to things even for enterprises. We recently did a CIO survey and open Ai Microsoft combination was far ahead than all the other large language models that was out there.
So that's on the enterprise side and consumer side.
We already know how well they are doing both on the app that they're selling along with the distribution that they what they won with Apple being part of CD when the software upgrade is going to come. So open ai in the world of large language models really at the top of the you know, the top of the mountain at this point, and this is one of the reasons you're getting these high valuations.
Yeah, I just want to put into perspective, at one hundred and fifty seven billion dollars, open AI would be larger than uber and at that six point six billion dollars in funding relative to IPOs, it would be the twelfth largest global IPO since twenty eighteen. So anorak, are we in a AI bubble as it relates to private markets?
I think, to be very frank with you, I can only answer that five years from now. But we just you know, updated our numbers looking at capital expenditures for the top five six companies. These companies, which includes Amazon, Microsoft, Meta, Oracle, et cetera. In twenty twenty three, they spend about one hundred and ten billion dollars in all the things what we call capital expenditures. In twenty twenty five, they're going
to spend about two hundred billion dollars. So that's a massive increase of ninety billion over a two year period.
You know, where is that money going to?
Expansion of data center, buying more GPUs, buying more hardware, expanding their own large language models. So it really feels real, frankly, as to the amount of money that the big guys are spending it over here, they won't be doing it if they didn't see the demand on the other side of the equation.
It's been a turbulent year for the company here. I know, last November the company's board fired and then quickly re hired the CEO, Sam Altman. Following months at a lot of key leaders leave, including the co founder, the chief technology officer. It seems like the market's kind of forgotten all about that, or maybe it's not a problem anymore. How's the market dealing with some of that turmoil we've seen over the last year.
I think people tend to forget that who's really behind a lot of backing of this particular company, and that's Microsoft, and you know they have the biggest distribution and among enterprises. So if they are basically telling people, if you want to create an enterprise application using some AI large language model, here is open a model and you can host it on our cloud platform, I think that is resonating very
well with customers. So as long as that continues for the next several years, open AI's revenue will continue to go up. And you know, then you can and you know, argue whether the valuations is high or not.
And just from the bloom we're reporting Tiger Global put in three hundred and fifty million dollars, Ultimeter putting in at least two hundred and fifty million dollars. But to your point, if Microsoft is able to write such large checks, how does that impact the funding environment for AI companies. I'm just thinking about the biggest competitors for open ai in Anthropic and Xai.
Yeah, I mean, Anthropic is backed by you know, Amazon Web Services at this point primarily, and almost all the others. The one thing we heard, you know, from reporting from Bloomberg News is that open ai is asking them not to back up you know, Elon's Xai or others. And I think that's partially the reason you see all the other plays coming in because and by the way, there's not going to be one winner, They're going to be multiple models. They're going to be multiple companies doing well here.
And there is no reason Anthropic don't thrive in this way, or Mistral or all the other large language model companies.
What do we know about open AI's financials, If anything.
It's I mean, I don't have a clear pick on it.
I've read as much as you have, and you know, we have seen projections out there for the next several years they can get to I don't know, five billion, ten billion or so forth. So I mean it's it's unless we see the s one when they go public, you know, up till at that point, you know, it's it's it's purely a guess work.
Do we have any sense of do they have an appetite to go public? Is it a sense of timing? What are their plans for going public if any?
See?
My personal view is they don't need to go public at all. They don't need the funding they will you know, the whoever is part of this particular ecosystem is getting
rich every day. I think they should figure out how to grab as much enterprise workloads as possible before they think about it, because one thing is for sure, even as they are doing this land grabbing right now, they're at a loss, and they will be at a loss for several years out because the cost of running these workloads is very high and it's going to you know,
you're not going to see any free cash flow. You're not going to see any But once you've got public, you know, you really go under the lens when it's about profitability and your margins.
Well about thirty seconds. But going back to a story that has been reported out recently in terms of giving Altman a stake in the company that could be worth more than ten billion dollars, what do you make of those conversations and what that could mean for the company and its ambitions.
Yeah, I mean he's always talked about how he is doing it for the greater good of the world. But but I guess when you get this much options, you change your mind on that.
But it's it is what it is.
It is what it is. We always fall back on that one.
I love it on a Ragranet technolog channels Bloomberg Intelligence joinings today talking about open Ai again. Just a huge, huge funding round six point six billion dollars raised and giving the company an evaluation of one hundred and fifty seven billion. That's just massive and impressive in and of itself. What's also impressive to me is who's going in there.
We're getting some big, big technology companies, including Nvidia, some seriously smart private equity money, private capital money including the Tiger and some others, and Fidelity as well. So a lot of what a lot of folks would call smart money getting in even at this value oation level. That gets your attention here, so we'll keep an eye on that.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecard 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 Play Bloomberg eleven.
Thirty Barely Lipsholtz sitting in for Alex Steele today, I'm Paul Suonier live.
Here in our Bloomberg Interactive Brokers studio.
Streaming live on YouTube's at headverd YouTube dot com search Bloomberg Live Radio on this where you will find us which s are from the CEO of Levi Strauss, Michelle Gost talking about the business. Let's do a little bit more retail here, Mary Ross Gilbert. She's a senior equity analyst for Bloomberg Intelligence covering the retail space. She's based out there in Los Angeles. Mary, what did you make
of We'll just start with the Levi's story. What did you make of their their quarter, their outlook and kind of maybe some of the reasoning for some of the weakness they're seeing.
Yeah, so, Paul, the Levi's earnings out yesterday, I think there was too much focus on some of the negativity, so for example, weakness in China. China is only two percent of the business and still the growth prospects there are tremendous, but we have been hearing that there has been some weakness generally with the consumer. But also I
think there's some execution opportunities there. So they did bring in a new leader, so I think we could see things shift, but frankly, it's really really small if you look at what's happening in the bigger parts of the business. The overall Levi's business on a currency neutral basis was up, and if you look at direct to consumer and that's about forty four percent of the business, that was up
twelve percent. The USDTC was up twelve percent, Europe was up nine percent, and also the European wholesale business turned positive and comped up four percent, and then they have a strong order book for the fourth quarter. US wholesale though is still you know, trending negative. It's improving, but still noative. So you do have a little bit of headwinds there, but like I said, the big focus is
really on DTC, it's on women's. The women's business is about thirty five percent of sales, but that could be half the business that was also of double digits with strong performance you know, across bottoms and tops there. So I think there's some real strong points here. And then the news about the sale of Dockers. That's great news.
They've tried to sell this company in the year is passed, and it will be great to get rid of it and really focus on the strength of the Levi's brand and also expanding beyond yoga.
Mary, you sound really bullish and the stocks down eight percent, So why is it getting beat so badly? I mean, it's it's returned over the last twelve months fifty one percent. Does it sell the news or is it just that uncertainty From a macro perspective.
I don't think so. I think sometimes there's volatility around earnings that don't necessarily reflect the true fundamentals. So I think there there was a miss on the top line, you know, on the revenue miss versus consensus, but of course they beat on the bottom line. But I think the real focus was okay, they said net revenues. Previously the guidance was net revenues to rise one to three percent. Now it's going to be just up one percent. I don't really if anything, I view that as an opportunity
to beat. We do have the port strike, of course that's making headlines, but Levi's and a lot of other apparel companies have shifted more of their shipments over to the West Coast and so and when you think about holiday, most of that is already in. They start shipping in July or the ports start the West coast ports start receiving in July, and it goes all the way through September, and September was quite busy for the West coast ports. I checked in with the Port of Los Angeles yesterday
on that. So I think there's going to be some impact. Obviously, it really has to do with how long the strike lasts. But I think that Levi's, Macy's and other companies have mitigation measures in place.
What does it mean as it relates to the port out and cheer on margins, I mean, presumably their cost will be hired to get some product that was East Coast bound to get it now to the West coast.
What does that do to their margins? Of companies given in guidance.
Yeah, there's a couple of companies that have indicated, not all of them, so for example, Oxford Industry, so that's the Tommy Bahama, Lily Pulitzer brands. So what they did say is that they expect a freight negative freight impact in the second half of about fifteen to twenty basis points, and in that they did incorporate what they think might be the impact from a possible because again their earnings call was before the strike which just hit this week
on Tuesday. They said that that does incorporate that impact, but once again it depends on the duration and just looking back and in previous disruptions with regard to the port, we sort of estimate it could be in that sort of ten to twenty basis points impact on margin, But again it depends on the duration and then also any other mitigation factors that will help offset some of those costs if they're able to.
And Mary, you mentioned the duration. How long does this strike have to last for it to start to show up and impact some of these businesses.
That is a really good question. When I think about some of the other disruptions and the duration, and of course the last one that happened back in the seventies, I was sixty days, I can imagine the damage must have been pretty extensive, and even just thinking of you know,
let's say eight days. Going back to twenty fifteen when the West Coast ports had some you know, shutdowns, so it wasn't actually a strike, but they were called shutdowns at that time, and that that did last for days, but there was an impact that lasted months after that. So there was an impact on margin because if you have a delay in getting your apparel, then once it does arrive, you have to promptly mark it down. And
that's exactly what happened with Macy's on off price. They tend to be less impacted to a certain extent because they can just pack it away and bring it out, you know, when the season is right.
All right, Mary, thank you so much for joining us. Mary Ross Gilbert, she's a senior equity analysts covering the retail space for Bloomberg Intelligence. To space that Bloomberg's Los Angeles office, joining us of via that zoom thing.
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