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Through the Starbucks reported some pretty darn good numbers today. Mike tell us about what's going on in Starbucks.
You know, the turnaround plans are starting to really take a whole take a hold right now, and results really improved, rising, you know, four percent system wide same store sales US as well.
China was up seven percent.
You know here in the US, it's you know, mainly about better operations, right. They rolled out new operating standards late last year, and that they seem to be really boosting the speed of service, which is creating happier customers that come back more frequently.
Right.
Some food innovation including protein cold foam seems to be hitting the mark, right, and they're doing a better job on the marketing side. So all those are driving drove better same Star sales than expected.
Yeah, I don't know the one I go to the Starbucks route thirty five all Township, New Jersey. They do a great job for me, and I've noticed the change. I mean, you know, little things like you know, writing your name back on the cup like they used to back in the early days. As in addition to that sticker which was a little antiseptic. I guess talk us back costs there. Are they looking at their costs as well.
Yeah, they've identified two billion dollars in annual costs that they want to get after over the next one to two years.
You know, right now, margins have been impacted.
They've gotten those same star sales and traffic numbers up by adding labor to the stores, right, and so they're seeing margin compression still. So now that they got people coming back to the stores, now that the operations are more dialed in, you know, CEO Brian Nichol said, they're not quite where they need to be throughout the day.
They're great at peak, but they have some improvement still to do.
But you know, now that people are coming back to the stores, they're gonna you know, focus a little bit more on where they can save some money because you know, it was a smart move real reallocating labor into the stores.
But Costley talk just about the competitive environment because you go to like, I don't know, small towns, seems like there's a coffee joint on every corner of these days. What's the competitive landscape for Starbucks these days.
Well, you know, it's as it's as competitive as it's ever been. You know, you have some of these younger chains that seem to do really well with gen z like Dutch Bros. And Seven Brew, and they're they're opening up these drive through cans, you know, throughout the suburbs across America, you know, in the cities. You know, there's a lot of competition with these you know, very high end coffee shops that are you know, using very you know, very high quality coffee and and elevate and offering an
elevated food experience. So competition is tough, and that's why you know Starbucks is is making some changes. You know, they're focusing on on health and wellness, right They're looking to improve the food in the bake case, They're looking to improve the food or throughout the day they're looking into some new innovative drink offerings to boost that that
afternoon day part. And so you know, this this is just the beginning of what Starbucks, you know, things they need to do for long term continued same Star sales growth.
Also, Brinker International, another big restaurant holding company here, boosted its full year profit. Outlook what's going on in Brinker.
More of the same.
And you know CEO Kevin Hawkman worked at Young Brands with Brian Nickels, so it shouldn't be a surprise that they have had similar turnaround plans. Obviously, Kevin started his a little bit earlier than Brian's, but it was about operations, then improving the marketing. Right now, it's about continuing to work on the food and the food quality.
So they started by.
You know, taking menu items off of the menu to make it easier to execute, make sure people are getting their food hot and fast. But now this year, the story is really about improving the quality and the portions. Nacho sales jumped one hundred and seventy percent on a relaunch.
They improved the bacon. Bacon burger sales are up thirty or forty percent. They had a caso relaunch.
You know, those sales are up twenty percent, right so so you know they're the money that they're spending, which is going to impact their cost of sales negatively. You know, customers are seeing the improvement and they're there. It's resulting in higher satisfaction and customers are coming back.
And that's a great story. Man.
They did a you know, eight plus percent same stor sales comp at Chili's comping over a thirty plus percent.
You know, I've never seen this in the restaurant business. I saw incredible.
I saw the company did call out the Chili's All right, thirty seconds left, Cracker Barrel. My favorites up eighteen percent year to date. We got a little bit of life there.
Listen.
I think there's life throughout the restaurant industry. I think same star sales are going to increase. They were strong in January up until winter Storm Fern. But I think I think, you know, tax relief and cheaper gas prices and just a better economy are and less inflation are all going to help restaurants spending this year.
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It is earning season as well, and AT and T has reported earnings. It's revenue beat estimates thanks to broadband strength. Let's bring in John Butler. He is our go to guy when it comes to the telecom's names. He's our senior telecom analyst on Bloomberg Intelligence covering AT and T,
covering Verizon, covering te Mobile. Where does AT and T stand relative to its competitors, Because as much as it's getting a boost from customers who subscribe to its broadband services, this is a saturated market and it's competing against big players and small players alike.
Yeah, it's a great question. Scorelet you know, post the earnings call, they held a breakout session with the mester relations with the cell side, and there were a lot of questions about how broadband or how competition is now shifting from wireless over to broadband. I actually think AT and T is in a great position relative to their competitors because they're the fiber leader and they're about to buy Luhmann's fiber business and add another million fiber subscribers there.
So in terms of their ability to sell what are called converged packages or wireless together with broadband. They're in a great position there because they have both fiber and they have a smaller fixed wireless access business, which is that wireless broadband product.
John, this is a coup of AT and T that spends twenty twenty two billion dollars in capex every year.
What does that capex for?
Typically a lot of it, Paul is going towards wireless network upgrades as well as the deployment of fibers. So this year, for example, they're going to add five million new fiber homes, but it costs about two thousand dollars maybe twice that in some markets to build a new what's called the fiber homes pass. So a lot of capital is getting spent this year, next year, and maybe to a little bit of a lesser degree in twenty eight. That's sort of laying the foundation to build out that
fiber network and that five G wireless network. Beyond that, AT and T has said, we're going to cut our cap backs, we're going to lower our capital intensity, and you're going to see a lot more free cash flow flow through and they're going to be able to fund hopefully some dividend growth after that and increase the share buyback. Yeah.
I'm looking at the dividend yield for AT and T four point six percent. For Verizon, it's almost seven percent. For Team Mobile a little bit less at two point nineteen percent. John, Where did the telecom stand when it comes to this rotation out of big tech looking for some cyclicals, looking for parts of the market that haven't been overbought.
So it's a good question.
Scorelet I always say telecoms, particularly the dividend payers like AT and T and Verizon, are are bond proxies to a degree. I think sentiment has been pushed around a little bit by the fact that we have new CEOs at both Verizon and T Mobile, and these guys are going to be looking to make their mark. Verizon on Friday is going to set out a new strategy set by Dan Shulman.
Who is the new CEO there.
So there's been a little bit of concern, or more than a little bit of concern that the competitive intensity and wireless is going to pick up as these new CEOs look to make their mark, and I think that has led to some of the pressure, particularly on AT and T. Though again this morning. I think they put a lot of those concerns to rest with their by reiterating their fiber plans and laying out new free cash flow guidance.
John.
On the competitive land front, where are the cable companies these days?
They're struggling, Paul, I mean they're at a technology disadvantage in that they're offering broadband over those legacy coaxial cable networks. They're doing what they can to upgrade the technology and increase speeds on those networks, but at the end of the day, fiber really is a superior product to everything else on the market, and fixed wireless access, which has been offered by the telcos, has been a very popular
choice given the fact that it's an easy setup. It's over the air, so there's very little problems with it. It's pretty much problem free. As broadband goes over time, it sort of has a headroom problem. It can't offer the same speeds as fiber. But through it all, cable is sort of flying underneath those two products, sort of, you know, trying to compete with what is a legacy product in the market.
John, did we learn anything from AT and t's results regarding iPhones and you know consumers signing on for the latest version of the iPhone.
So great question. It's very interesting at and T over indexes to the iPhone. They have a lot more users than Verizon or T Mobile because they had an early exclusivity deal when the iPhone first launched. They were asked about the foldable iPhone that's rumored to be coming out next year and whether that's really going to move the
dial for them. Their answer to me was interesting, I didn't expect it, which is they've been tracking the performance and the sales of the foldables that they have available on the network today on the Android side, and their expectation is that we won't see a huge bump in iPhone sales next year with a foldable model model. I think time will tell. I actually think foldables are going to resonate well with people, and Android.
Isn't always the best read through there.
I think it's a different kind of user that's on the Android phone versus iPhone.
But we'll have to see in the fall.
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Caroline Hydroints is here.
So there's just a lot going on in the world of tech and Caroline heidaz b tech co anchor. I'm gonna start with ASML some really big numbers over the night, Caroline, from this big chip maker that I guess that bodes well for folks that want to see continued momentum and AI spending if nothing else.
Might not bide well for fear their employees.
See a company put out such a strong earnings and then at the same time combine it with headcut something.
This is AI, folks, This is AI. This is efficiency, this is agility, as the CEO causes, it's actually shares that have now turned red, which is interesting. We're trying to delve into the reasoning why because they booked record all orders thirteen point two billion euros worth. In fact, they're trying to point us to the fact that orders aren't the big tell anymore and don't always look at our backlog. But more broadly, this is a company that has lit a far underneath European peers today, SMI is
up and awful. Lot B semon Conductor is up a lot. You've seen LAMB researcher in the United States of prime Materials, because this is the chip equipment maker to the world, in particular to China. In fact, most of its sales still go to China, even though I will tell you they sell their eighth generation lithography cup not even allow to ship lithography, but their chip equipment is so old. But still China needs that deprecated chip equipment manufacturing ability
because they want to make their own domestic chips. Now we're also seeing the fact that they're good in Taiwan. They're saying strength in the United States as we build out domestic chip manufacturing here as well. And that's why Intel has been so much higher to Dell as well, because it really is just to tell, like TSMC was, that this is an AI bubble, this is real orders
for real chip manufacturing. And the CEO had said, look, we've got a lot of clarity in the last three months, so much clarity in fact that they are making those seventeen hundred job cuts where they're trying to be more agile, where they're innovation and they're cutting out from the IT and the tech part of the business.
Okay, Well, speaking of job cuts, another big name announcing job cuts as Amazon sixteen thousand corporate jobs.
And that's thirty thousand in the last three months that they've announced. So this is a company that signaled this like Andy Jasse in his letter to his shareholders had said, I am going to make AI work for me. But what does that mean. I'm going to have a smaller
employee base. He's trying to strip out that layer of management and bureaucracy that built up during COVID where many would say big companies over hired in that period, and therefore we're starting to still see the area of being fixated on where they will rehire is areas of AI, of areas of AGI, and areas of LLM and all
the areas of growth for the business. So they are going to try over the ninety days find new homes for some of these laid off employees, but fourteen thousand of them, they're not going to find homes for all of those. But this is again about efficiency for the company.
Yep.
Absolutely, Soft Bank in talks to invest thirty billion dollars more into Open AI A. The numbers are just monsters, but the valuation, you know, about seven hundred and fifty billion dollars.
I mean SoftBank's all in on this AI, think yeah.
And Massa is really committing to open A in particular. Look, the number one holding for SoftBank as far has been arm and that is all about chip design in the future of artificial intelligence in that direction. But this would actually probably bring their number one exposure, their number one stake to being open AI if they put this thirty
billion into work. And this is why Massa has been selling down his Nvidia steake, has been trying to free up capital to get in on the gender to AI move that in many ways people would say you kind of missed from its own business model perspective, But he's really tried to late claim to betting on some of the biggest makers. Remember they just bought Ampere as well, which is another chip manufacturing company which was backed by Oracle previously. But Masa all in, you know, is a
guy who makes big bets. Sometimes they work really well, like Ali Baba. Sometimes they work less well like we work. But more broadly, he's a man in the.
Commitment stay with us more from Bloomberg Intelligence coming.
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LVMH kicking off some earnings here for luxury brands and not particularly good numbers, talking about a tough Christmas period, and that was kind of the tail to tape there. Andrea Felsta joined us Bloomberg Opinion Calmness from London, Andrew, what can you tell us from LVMH and their results?
Well, this was kind of There were two reasons I think for the really strong share price reaction we've had today. One is, you know, these weren't really there was nothing really terrible about these results, apart from the drink's division, which was much worse. But investors, after being far too gloomy about luxury sort of in the first half middle of last year, they thought no one was ever going
to buy luxury goods again, which was ridiculous. But now they sort of came back last fall and they started to get really excited about luxury and they pushed one of the indexes up thirty percent between you know, August and earlier in January, and that was just like a head of where we are. So where we are at the moment is China has stabilized, but it's not it's
not a V shaped recovery. The US is pretty good thanks to stock markets, but the US compared with the period a year ago, which was also pretty good before we had the tariff trauma. After the election, there was a real boom in luxury goods after the elections unleashed a lot of spending. So you've got the numbers that weren't, you know, great, but weren't terrible. But investors had got far too excited about luxuries of anything other than a B a big earnings upgrade that they were always going
to be disappointed. And Richmont, which owned Cartio, which is absolutely on fire at the moment, they had some pretty good numbers a couple of weeks ago, but they weren't, you know, they weren't any better than anyways. Did we knew they were going to be good, so they were going to be good, and they were good. The shares failed wearing a very funny sort of environment at the moment.
I really like the way you put that the tariff trauma, because I'm sure that's a big, big problem for these lundury purveyors.
Three of the five division.
Said LVMH missed estimates and what is traditionally the strongest period, So that does not help either. Which divisions, which part of the LVMH empire are doing well? Which one are really liking? You mentioned wines and spirits. We know that's kind of you know, been a problem child all along now. But what's doing well? What's not doing so well?
Jewelry is absolutely sparkling. There's a few reasons for that. So over the over the past five years, handbags particularly have gone up in price. So you know, a large flap chanel bag you are looking at around ten thousand dollars. Most nice handbags are about three thousand pounds plus. I'm not sure what that is dollars.
Maybe you know too much, you want that out too.
Much exactly so.
But actually jewelry, which everyone alas thought is really expensive because those leather goods have gone up so much. So something like a Cartier love bangle that you can wear a gain and again and again, and it's made of gold. It's got receidure value that's actually seen as better value for money than a handbag. Plus, you know, the luxury industry's really matured. You know, twenty years ago we were all buying our first git bag. Now you know many people have got a wardrobe full of it bags and
they've moved on to jewelry. There's been a democratization of jewelry, a shift from unbranded jewelry to Tiffany, Kartier, Bogari, and that's really helped the jewelry sector.
Andrew, what is the company saying about the Chinese consumer these days? Are they buying on mainland? Are they going to Japan to buy? Are they coming to Europe or the US? What's going on?
They were going to Japan and then they came back to China. Now, with the currency moves, I wouldn't be surprised if they went back to Japan again. Now, the thing about Japan is really interesting.
It's not a great.
Economics of selling in Japan aren't great. It tends to be less profitable. So if we do get that big Japan tried, that's not going to be great for profitability going forwards.
Okay, we also have the dispute between China and Japan certainly not helping things either with you know, Chinese tourists going to Japan to buy luxury goods. Nevertheless, if you wanted to, you know, are of the currency difference that that possibility exists.
What about American consumers?
You mentioned the stock market doing well, and certainly that helps the one percent and the zero point one percent. Where are we seeing the American consumer pickup slack?
Well?
The US consumer has picked up sack all the way through, while China has been in the doll rubs. US luxury demand tends to be very correlated with stock markets and also bitcoin, and I know we've had a wobble on bitcoin, but the fact that you know, we're testing new highs on markets that is very good for luxury demand. Now, where it's where we're really seeing is those very wealthy consumers, the middle class customers. You know, they felt more pressure
from inflation, from tariffs, perhaps the weakening job market. That is the sector where you know, we would written the indust you would really like to see them come back. And they were also the segment of the market that was probably priced out the most by those pricing raaces so you know, luxury really needed middle class customers back.
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