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All about the geopolitics front and center here, But there are earnings. Companies reporting earnings, and one of the companies we want to focus on here is Target because it goes to the consumer. Here Emily con joins his consumer team leader for Bloomberg News. Target reporters cenumbers is some better than expected profit for the full year.
What you learn from the Target and what's the management saying?
So on management, it's important to remember this is a new CEO, Michael Fidelki's first earnings call, and there's some optimism here. There's an upbeat forecast on the coming years and tease talking about this improving the store experience and bringing shoppers back with that cheap chic appeal that the that the stores have definitely lost in recent years. So the stock is responding quite positively.
I love the term cheap chic. I do agree that when I go to Target, I find some quirky fines and I'm like, is this really this cheap? But how does Target plant to differentiate itself from competitors like Walmart and Amazon, especially as consumers remain price sensitive and their spending is shifting towards more essential so not anymore they're random things that.
Totally find Yeah, you nailed it. I mean what we What Target used to do really well is you'd go in for some rolls of toilet paper and you'd come out with sweatshirts and sweatpants and fun things that you didn't know you needed. That was that tarje appeal. It attracted wealthier clients to Target. That was its advantage over Walmart for many years. It's lost that appeal. A big part of it is partnership. So we heard Fidelki just now speaking about increasing the pace of partnerships. They have
a partnership with Roller Rabbit and more to come. That's part of it, bringing in brands that you know and love into Target at a at a good price point. They have a partnership with other partnerships with other brands coming out over the course of the year. I think that's part of the way they want to differentiate themselves for sure. Food and beverage we heard about this morning too.
What do they really compete against day to day do you think?
I mean, I think it's obviously Walmart and Amazon. I think one of the reasons Target is struggling right now is because they haven't invested as much in grocery as Walmart has. So one of the reasons that Walmart is seeing higher income shoppers come to Walmart increasingly is because they've made their grocery section a lot more appealing. There's you can find organic there, you can find a lot of fresh products. You go to Target, it it's just
not there. So I think with you're going to increasingly see Target try to get more competitive in the grocery aisles, which would put it up against lots of other grocery companies.
So does Target then plan to expand their food and essential assortments to I don't know, maybe stabilized traffic or do you think it'll double down on more discretionary or style lad categories.
Yeah, I think we'll see, we'll see a bit of both. I think that they called out beauty and food and beverage this morning as some bright spots, and I think we'd expect to see.
More of that.
So what's Target saying about their consumer? How's their consumer behaving?
Yeah, I mean the word of the you know that we're still seeing like very picky consumers who aren't spending as much in the discretionary categories. So I think Target is focusing on what it can do to bring people back. The CEO just said that they're going to be investing in hiring more workers and raising pay. That's pretty key to making the stores more enjoyable to shop in.
Because that's what Alexis Christophers was saying earlier about her Target experiences.
Not enough help on the floors.
That's something that's a shared concern among this company aware that kind of is.
It sounded like it. I mean raising pay is key. I think you know, there's going to spend a billion dollars on making the stores more pleasant. I think they laid off a lot of corporate employees to you know, perhaps that investment is going into making the stores better. So, yeah, that is a problem. Slow lines, lots of things locked up in cages when you.
Try to don't get Matt Miller started all the stuff, gosh.
I know.
So then with a new CEO, any cultural or operational changes that signaled that the company truly turning a page after recent challenges, because you have probably skeptic saying maybe this is a one off.
Yeah, I mean, we've seen he's been in the job for a month, we've seen a reshuffling in leadership, we've seen some layoffs. But where you know, the company is hosting its investor day later today, so we're hoping to learn more about what that turnaround strategy is and any specifics on new initiatives. How big are these investments and stores. Those are the things we're looking for later today with the event that's kicking off shortly.
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This military conflict in the Mid East cannot be good for logistics, the global supply chain, all that kind of stuff. We learned about this. Every time there's something wrong in the world, it impacts global trade, which means we need to check in with Lee Glasgow, Senior transport Logistics and shipping analysts for Bloomberg Intelligence.
Lee, what do you make here of what we're.
Seeing in the Middle East and how it may impact global trade? How are you thinking about it?
Yeah, so, I mean, at the end of the day, it's going to put upward pressure on rates because there's now a premium on capacity, especially as it relates to the tanker industry. We've seen tanker rates get closed to almost five hundred thousand dollars a day. That is just being driven by the fact that people want oil, they're
going to have to pay to get it. And the ripple effect really for my world because you know, I cover marine shipping, air freight guys, and also the folks here in the US, the railroads and trucking companies, the biggest impact is going to be the inflationary aspect and the higher decail prices. When diesel prices rise significantly, it tends to weigh on margins because there is a lag effect on the fuel search charges that they charge their customers.
So you're going to see margins getting pressed. And also the you know, the one two punch from that is going to be if consumers have less discritionary money to spend on goods. That means it's going to be less stuff shipped around. So you know, there's really kind of a ripple effect going on with the events unfolding in the Middle East.
If disruptions persist, do you think we could see supply chain bottlenecks similar to twenty twenty one to twenty two And if so, which sectors do you see will be falling first or will be affected first?
I don't think you're going to see what we saw during the pandemic, because at the end of the day, the biggest impact really is the crude and energy markets. So you know, container aligners that are leaving Asia are still going to go to southern California to unload their goods. You know, the only time it's going to become a problem is that if you know, this is really prolonged and just people just don't have the energy to manufacture stuff. But let's hope you don't get there.
What about vessels with vessels stalled and re routing around choke points? How sharply are fright and tanker rates going to rise? In your view?
You know, my colleague ken Low out of Singapore, you just put out a note on the Blueberg terminal earlier today and he was calling for over five hundred thousand dollars a day and time traiter rates.
Again.
You know what, it's not so much the diversion, it's the kind of the demand. So people are willing to pay up high. A lot of insurance companies are no longer insuring in the region. So, uh, the you know, the straight of her Moves is pretty much you know, the right the Persian Gulf and the strade of her Moves is pretty much shut down no matter what the Iranians do.
Solely, if I'm a FedEx pilot, I'm not flying anywhere near that airspace, so I'm gonna fly around.
It is not going to raise costs for everybody.
Yeah, and so like the ripple effect, you know, after the the ocean markets, probably the air markets are most impacted. A lot of the airspace and the Middle East has been shut down. A lot of commercial flights are no longer going in and out. And you know what the commercial airlines do is, you know, where we put our luggage, they also take cargo, so that that capacity is not available, and you know, it is going to impact FedEx UPS and DHL. DHL is more exposed to the Middle East
than the other two. But you know, I think right now it's kind of a deminomous impact to UPS and FedEx. The real question is is how long does this go for? You know, is it going to be days, weeks or months? You know, if it's just going to be weeks, the impact earnings probably won't be that that significant for the FedEx is and the UPS is the world and slightly
more for DHL. All right then, and then also, you know a lot of a lot of these businesses, they have forwarder freightforwarding businesses as well, and when you have these supply chains disruptions, shippers will lean heavily on the freightfowarders and help them navigate these new situations. So you might see, you know, the freightfowarders also could benefit. They can benefit from a higher rates and be also getting more customs business.
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The US Israeli war on Iran has entered its fourth day, with oil and gas prices surging in.
The world adjusting to a conflict.
The President Donald Trump says has no fixed timeline, and now we're see other countries in the region being pulled into the conflict, with Iranian response.
Hitting a number of countries in the region.
Our next guest has twenty years experience working in at the Middle East through various forms of the US government and private practice. Kirsten Fontain Rose joins his heare senior Fellow at the Atlantic Council, joining us via zoom from Washington, DC. Kirston, what do you make of the US action against Iran here? Just from your experience in the State Department in other areas.
If the question is why are we doing this now or why is the US getting involved, there are two answers. One is that during the talks that people were tracking on the nuclearphile, the US team assessed that Iran was not actually making concessions. We heard encouraging things about movement being made, but the reality is what Iran was offering
was not to enrich uranium. For three years, this time period is what the International Atomic Energy Agency, the IAEA told us same timeframe it would take Iran to restore their Uranian Richmond if no restrictions were placed on it. So the US team said, Iran is just toying with us. This is the same delay diplomacy they've been displaying for
several US administrations. This is a problem. Back in DC, the military and the National Security Council and the presidents and our team said when the regime revealed this, that they were not willing to truly make concessions on the nuclear file or on their missile file, even though the US had a massive military build up on their shores. It caused the US administration to say they intend to build out both programs to the point where the international
community would lose any leverage to negotiate with them. They would either build up their nuclear program to the extent that you could no longer safely go after their missile program kinetically, or they would build up their missile program to the extent that it made it too risky to destroy any of their nuclear facilities. So if the current on their borders was not enough, nothing would be, and
therefore the time was now or never. The other pressure that was in was the US got signals from Israel that they were going to strike potentially unilaterally because of their own feeling of this being a small window of opportunity and being an existential threat. The US knew that that would mean that the US would be receiving attacks, our bases would be on the receiving end, because the Iranian regime had made it clear that any strike by Israel would also be considered a strike by the US.
So combine those, then add in sprinkle in intelligence that told us that there would be clustered meetings of senior Iranian leadership almost too good to be true, and you wound up with the recipe for strikes when they happened.
So, with Iran signaling reddiness for a long war, where does that leave the US when it comes to reshaping their strategy. We have some people saying it'll be three, four or five weeks.
It's not really a reshaping. However, the US battle plan has been laid. You know, these can agencies have been on the shelf for quite some time, and of course they've been updated, massively updated. But the intent is to wipe out the military, wipe out the navy and prevent Iran from having a nuclear weapon and create a pathway for the Iranian people to govern themselves, to decide whether they want that to be someone new or to be levels three or four down within the regime. It's on them.
But this kind of operation to destroy an entire military, an entire navy, including underwater assets, all the ships, all the bases, any missile facilities, drawn facilities, factories, manufacturing stockpiles, the like.
It takes some time.
So the US and Israel started with those air defenses that would prevent Iran from being able to guard against these kinds of strikes, and it went then to long range, medium range ballistic missiles, things that would threaten our bases and Israel. And it's moving on then to leadership, to things like the short range ballistic missiles that Terran barely touched in the June war and is what we're seeing them fire along with drones onto their golf neighbors now.
So there's kind of a tiered hierarchy of places that were first priority to hit and now moving down. But the US operations won't finish until they hit all of their high value target list, some of those being individuals, but mostly being regime assets the ways they exert control.
So, given your experience at Kirsten, is this something that can be achieved in the space of four to five weeks, as President Trump was suggesting, or going to go perhaps even longer.
It depends on the state of Iran's air defenses, which right now we assess being pretty low, and then on intelligence, because we know Iran moves things around. So right now, satellite imagery, for instance, is helping our jets that are doing launcher hunting. They're literally scanning the air to look for launchers being moved from the places where they are secretly stored to the places where they are intended to launch, taking them out that way. How many of the stockpiles
underground can we reach? Is the leadership on that list moving around? Do we know where they are? So it's the battle plan is there. It's just whether or not intelligence shifts day to day that lays out whether or not the timeline stays solid or not. It also will depend on some geopolitical factors. How is the economy reacting around the world, What kind of damage is coming to golf partners. It's not that things like damage would cut
short US operations. In fact, if anything, it would probably speed them up.
What are the odds that Golf states like cut there or UAE will be pulled deeper into a direct confrontation.
Perhaps well, the US may not even want that. These Golf states have a lot of assets, They have standoff weaponry, they have great air defenses that the US is interoperable with. But you don't want to clutter the air space. You don't want more situations like we had in Kuwait. We're turning on Kuwait's air defenses wound up crashing three US fighter jets. So anything would have to be well coordinated.
The US has planned the battle plan around those territories and that airspace not being available, so it certainly won't be a message, hey, everybody, pitch in when you're ready. All of that would be integrated. The Golf also tends to have a lot of their air defenses on automode, so it expends quite a bit of interceptor stockpile on
perhaps one drone and its remnants and the like. So the US would want to say, before you get involved directly in anything offensive, let's really watch your defenses and make sure they're being well strategically expended. And then if we're going to use things like your standoff weapons, let's coordinate targeting. We want to really limit civilian casualties here. That's a big percentage of the planning has gone into
how to limit those civilian casualties. But when you look around, even them participating in air defense is a contribution, and now that you have their civilians being hit, they're much more likely to say we would like to participate on the offensive side. Saw Cutter already take down two jet fighters. That's more than just turning on a jammer, for instance.
And now that Saudi has had embassy's hit in their capital, they made their rethinking the Saudis prior to any engagement message to the your on nimes very clearly we're not allowing the US to use this as a base for launches, but if you do anything that strikes civilian architecture, we will consider it an act of war. And everything's on the table then, so we could be seeing the golf being drawn in.
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Congressional warpower votes aimed at blocking President Donald Trump from further military action in Iran will likely fail.
That is the assessment of our next.
Guest, Nathan Dee, senior policy analyst the Bloomberg intelligencies down.
There in DC. I mean this is just for show, isn't it, Nathan.
I mean that Congress has given up a whole you know, war power thing a long time ago to this to our US presidency, haven't they.
Yeah?
Absolutely. I mean this is essentially a symbolic vote here. I mean, in order to get this through law, you would have to have both chambers pass it, and you'd have to have pass it in a way to get a veto proof majority, because President Trump would obviously vetoed this measured. So I think what you know Senator Tim Kaine, who is the sponsor of this legislation or this resolution, and he did something very similar to Venezuela is aiming to do, is essentially just put people on record ahead
of the US midterms. Because current bully suggests that sixty percent of Americans are not on board with President Trump's strategy in Iran, and you know, as you can do in an election year, people like to play politics, and so this is something that I think just generally is more so about political aspects as we get closer and closer to November.
But even if passed, resolutions would need a super majority to override Trump's veto, and so that leaves them, to Paul's points, something largely symbolics. So what is the ideal situation in your view?
Yeah, so there's two reasons why Senator Tim Tim Kane is pushing this. The first is Congress doesn't like it when presidents start conflicts. And then you don't even have to have a Republican president or a Democratic president, you go all the way back, you know, over the last fifty sixty years. Congress doesn't like when president starts conflicts without going for congressional authorization. So this is the first reason.
The second reason is is that, you know, just going back to my point about politics, all four hundred and thirty five members of the House representatives in one third of the Senate are running in November, and this could be a situation where Senator Keane wants to put people on the record, so that if that's sixty percent of the American populace isn't on board with President Trump's I RAN strategy grows larger. You can have some very difficult conversations.
I mean, this is not going to change President Trump's, you know, strategy. When he says that he doesn't need to even think of the polling numbers, he's correct, But you know, he's also not running on the ticket in November. You know, there are going to be some Republicans on the other hand, who are looking at this and looking at the chances the Democrats take the House in November.
And I'm not going to say there going to speak in opposition to this, but they certainly would be a little bit more wary or at least their uneasiness would rise as a result of this vote.
Nathan realistically is the Senate up for play here in the midterms.
So right now, the prediction markets have it about a forty percent chance, and the Democrats are going to take the Senate, and a lot of it hinges on today, specifically what's happening here primary day in Texas. Now, you have two reasons. You have the Republican race and the Democratic race. On the Republican race, you have Ken Pax and the Attorney General, who, according to the prediction markets, has an eighty five percent chance of beating the incumbent
Senator John Cornyn. On the Democratic side, a similar number eighty two percent, suggests that James tallerco the moderate Democrat, has a good chance of beating Jasmine Crockett, the Progressive on that is the ticket that the Democrats want to see if they have a chance of beating the taking the Texas race. But again, you know, like I think most people, at least according to the prediction markets here in Washington, are sort of just taking into account as
their scenario. The Democrats are have a really decent chance to take in the House about eighty to eighty five percent according to the prediction markets. The Senate is still going to be very difficult despite what happens today.
What's the most likely geopolitical scenario your sources are telling you say, in the next thirty days, what are they preparing for maybe best case or worst case scenarios? Best case depending on the view you're taking.
Yeah, you know, obviously, I think it's the timeline of Iran. I mean, our colleague from the Worgo economic expector. Wasser has been looking at this, Our colleague Queen Sanders has been looking at this, and there's this idea if you look at the prediction markets again in terms of where this is going to end. CALCI has a contract here. It essentially says the majority of folks think that this
is going to be over this month. That's very different to this idea of the geopolitical risk will continue for months, especially in terms of like the trait of war moves and all that other stuff. So I think that's the number one thing here to keep in mind from the
geopolitical perspective. But I would also just say from the US domestic perspective, keep in mind that there's going to be a rush to push legislation out this month and next month because Congress, like I said, is going to really focus on the midterm elections and then generally stopped them for passing legislation.
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