Target Will Benefit Most From Retailer Bankruptcies (Podcast)

was grossly exaggerated. Coal shares that climbing more than seven percent almost eight percent now after reporting better than expected earnings. Target also rallying. Joining us here to talk about that in your Bloomberg Interactive Broker Studios is Burt Flickinger, Managing director for Strategic Resource Group, So Bird. It seems like certainly Target and Coals and a number of others have surprised to the upside. Is this a sign that US consumers are in good shape and that retail is coming

back in brick and mortar form? Or is this a case of good management in a select number of cases? Lisa, to your point, good management always always wins, particularly for the well capitalized companies that investing in technology, digital, retail and really having what consumers want at the best possible prices. So iss you and Paul have reported off prices winning, UH targets winning, Walmart's winning, while a lot of the

rest of the retails losing. So looking through the Coals earning statement, one of the things that was interesting is they they called out there, I guess the partnership with Amazon as being you know, a contributor to growth. What what actually are they doing with Jim? What does that

joint venture or that partnership it's a joint venture. Interestingly, Paul's something that Target dot Com tried with Amazon for seven years and it didn't work out, but for because Amazon essentially got the Target Target quote unquote guest database, and UH they migrated a lot of those shoppers over to Amazon. But with Coal's not have invested significantly sufficiently in digital. UH. The Amazon partnership in terms of cross platform similar to what Richard Baker's doing with Huts and

Hudson Bay, Sacks and the operating companies to UH. It provides a customer base from combined companies and helps both increase units customer counts, sell through whether it's digital as well as fulfillment and so so if if I have a return from an Amazon, I can bring it to a coal store. You can bring it to a coal store. And his Bran Cornell pointed out with Bloomberg earlier this morning, seventy five cent of all UM targets digital sales are

fulfilled in store. So UH to your point, advantage Coals and advantage Target to how much is the rally that we're seeing in the positive forecasts for the year from Coals and Target? How much is that a result of the bankruptcies of a number of retailers that we've seen from Jim Boree, etcetera. Lisa important point in in targets home markets, everything from her Burger's and Carson's division of the Bontan Company, pay Less on Deck, UH and with Boys are us in a number of other key retailers

of affecting UH shifting shoppers. The bankruptcies have have been half of targets increase in our estimation, and that makes Cole's one percent same store comparison sales okay, but not not really that good. This is really fascinating to me. This, to me is a really important story. We're finally slowly starting to see the denue mall of some of these struggling retailers going out of business, and this is helping the healthier retailers survive and thrive. Where are we in

the cycle of bankruptcies for retailers? Can we finally see the regrowth of this industry? Lisa, We're about three fifths of the way through. So Target will benefit the most from the bankruptcies of a lot of food and drug retailers were hoping for the best, fearing for the worst. With right aid, obviously, Target is going to be the big beneficiary there, and from the mid tier to moderate department stores and sears Kmart which actually had fairly good

soft soft goods, uh, Targets still the big beneficiary. So Targets still a little bit further than halftime and benefiting, But targets biggest benefit is really marketing, merchandizing value, branding, own label, and with the political elections taking media costs to unprecedented proportions in nineteen and the year twenty twenty, Target has some of the most effective ads, digital, connective, social, outdoor, radio, TV,

as as does Walmart. And the effectiveness and the great copy and the creative with Target as well as Walmart's really helping both win. And it gets to what you guys were saying, management leadership wins every time. Essentially, I like that the concept that three fists of the way through kind of dealing with this consolidation of the industry. Does that also relate to the number of stores the

global the US footprint stores? Are we three fists the way through rationalizing just the number of stores and in the footprint we're probably only two fists of the way through, right from about overstored to about But Paul, what you and Tom Keane and Arthur Levitt we're talking about on surveillance and you, Lisa and Carol masser Uh and Jason Sweeney we're talking about later for retail with medical marijuana.

Arthur Levitt was saying, the sales tax in Denver was thirty two million, so obviously the sales are a huge multiple of that. So medical marijuana may actually drive customer counts into the pharmacies of the target CVS. Insular pharmacies won't help coals help time. Paul, just can't help yourself when they legalize marijuana. That's just gonna make right age shares surge. Right might not say soon enough. Well, I guess that, you know. I'm just wondering what's taking so long?

What will what will hurry the cycle up and allow retail to kind of get its bearings and grow again. The for them to really grow, they have to do what targets doing. Target, to the company's credit, has the greatest gender UH social social diversity across its management groups, so arguably one of the best leadership teams in retail worldwide.

And in a declining birth rate, declining family formation, targets getting more of the parents with young children and with a pet population with dogs and cat adoptions growing four times faster than the birth rate for people. Targets getting babies, pets, and lifetime loyalty from consumers of all languages and all United Nations of consumer constituency. I gotta be honest with

that with you, Paul. I mean, when I was dealing with babies, Target was amazing because you could get the diapers, you could get clothes that weren't going to cost you a crazy amount, all in the same place, and you could get shampooon conditioner. That was actually a very very positive development. I think Purchase gave us the stat of the day with the pets four times the growth rate

of the human population. I didn't know that. Really. Yeah, the people actually are adopting more pets now than than having children year. Well, there's gotta be an investment play there. So you go to the stores that have the biggest pet departments. I guess yeah, And it gets to your your leadership point. Paul is pet Smart is on Moody's list of seventeen retailers that could go bankrupt this year.

Uh less capable, undercapitalized, where Target Walmart. Even though they're not category dominant and pet is a soul source destination, they're still winning with pets more than pet smart. Is really interesting to you have a pet uh son, Nick and wife actually have to rescue pets Reggie and Bow. And look at Popper west Siders dot com for Dick's pet blog on rescue pets. I didn't know this was gonna turn into a discussion of pets, but you never know.

We're retails, retail retail increasingly. This is actually a sign of the times. Take this too heart. This has been the transformation. People would rather have a dog than a kid. Three point four million pet adoptions every year. Oh that's all right, another Saturday, Bert flicking sure, thank you so much. Bert is the managing director Strategic Resource Resource Group. He joined us here in our Bloomberg Interactive Broker Studio. This

maybe the year of Unicorn initial public offerings. We are expecting Lift to start their road show and get their initial public offering off, the off off off, and get this on track. A question here is how active will this year be and how much will these companies be valued at? Joining us now to answer some of those questions at Data, chief executive officer of equity Zen based

in New York. Equity Zen is a fascinating company that basicly enables from getting this right, enables individuals to transact in private shares ahead of these i p o s. Is that correct? Yeah, that's that's right. Look, we're not inventing anything that didn't exist a hundred years ago. Effectively, what we're doing is taking something that was only available for people that could write a ten million dollar check. It's a private company. I know the company. I wanna

you know everyone. I know us as this company. I'd like to invest before the I p o. Uh. If you don't have ten million bucks, it's really hard for you to get a seat at the table. Uh. Through Equisence platform, qualified investors can purchase the shares before the company goes public. So is this basically a price discovery mechanism whereby companies can figure out, huh, now might be the time to go public. That's definitely a very you know,

big value offering that companies get. The other thing that a lot of companies benefit from by using a platform like equities and is Hey, look, you know, we thought Q four was going to be a great time to go public, but guess what, the markets turn volatile, So we're gonna wait another or six twelve months to go public. But I told all my employees that we're gonna go

public in twenty eighteen. So let me allow the secondary platform to give them a little bit of liquidity and basically fine tune exactly when I'm going to go public, keep the employees happy, get outside shareholder shareholders excited. Uh, and me as a company, I didn't have to take any delusion in order to conduct a secondary Trains is going to be presumably a huge year for tech I p O S and for you know your company as well. We've got Lift, We've got Uber, we've got Airbnb. Presumably,

let's focus on Lift. You know, we saw the prospectives come out last week. I think they had trailing revs of about two point two billion. Yet they want to raise twenty to twenty five billion dollars. Is that kind of evaluation? Ten times revenue or twelve times revenue? Is that reasonable in this market? Well, you know, if you take a look at lifts only competitor, which is a private company Uber, Uh, It's it's not even uh you know,

a fair comparison. Uber is this goliath, you know, eleven billion dollars in revenue, It's in over half the country is out there, It's it's got Uber Eats, It's got five other business lines. Lift is a pure play ride hill company focused on US and Canada. There's got a lot of growth that Lift is able to demonstrate a year every year. Uh. It's got shrinking net lost margins, which is always nice to see for tech company to

go public. I think it's got a pretty exciting valuation for a company that many of us, especially here in the US and Canada, um have on our phones, if not of at least seen friends use it teach. There has been an argument made that fewer companies in the US are filing for initial public offerings. They're waiting longer to do so. That's sort of the idea of US public equities is being a way to access the dynamism of the U S economy is sort of fading as

a promise. And I'm just wondering if these if these unicorns can access private capital and can even offer their employees liquidity on a secondary market for their shares before an I p O. Why go public? Why public? That's a great question. Look, I think there's still the vast majority of the world that cannot access these private markets. You know, you have to be an accredited investor, the secs some guidelines. These are risky investments at the end

of the day. So still the vast majority of the world can access it. And LIFT and many other consumer companies. Spotify is a great example last year where you know it's got tens of millions of people using it, but if the vast majority of its client base can't even buy its own stock, well, then there's a little bit of a disconnect, right And a lot of these companies, LIFT included our mission driven companies, decent amount of its s. One is talking about how the founder's letter and the

founders mission. Uh, they really want to be able to maintain that brand image. Not only is it a rite of passage to go public these days, but guess what you as a public company can qualify for a lot of these institutional long term investors, these pension funds and mutual funds, anchor investors that look at ten year horizons,

not you know, Monday through Thursday. Well, the big issue I think that both right hailing companies might have love to get your opinion, is they're not even remotely close to profitable. List I mean, Lift lost almost I guess nine million dollars on two point to million of revenues. Uber is not profitable. And I think one of the big issues that investors have not had to deal with before, whether it's Facebook or Google, is the subsidies that they're

paying to these drivers for market share. Do you have a sense of when when these companies think they will be a profit, Well, they are driving closer and closer towards profitability. I think in this day and age, a lot of folks are almost accepting of high growth companies who are willing to lose capital in order to grow market share um. What they're going to have to continue

showing these companies is a path to sustainable profitability. Like Lift had a two income margin two years ago, senetic margin with the negative sixty last year, it's down to forty and change forty three percent this year, uh uber has gone down to thirty. So I think they are

moving towards profitability. But look, there's only one you know, I think the Lifts Perspectives said only one percent of all miles driven in the US are actually using one of these ride hill services, So there's clearly a long way to go, and I think there are no hurry to try and capture the share. Twenty seconds, what's your

estimate for I p o s this year? We think there's going to be uh five blockbuster I p o s and they're all available on you know, equities and I p oh outlook, but we're not going to see the record number of I p o s. They're gonna be the names that everyone's been waiting for for the last ten years and they're gonna be huge. They're gonna be this It's gonna be a great year I think for I p O. Bankers on Wall Street, a Dove dot chief executive officer of Equities and joining us in

our Bloomberg eleven three O studios. Thank you so much for joining us again. You know, I think it's uh this lift. The deal is going to be very important um for the tech markets to start off the year right and to get a good trade going. So we'll have to see how it goes, and then of course Uber will follow it up, and then Airbnb and some

others well equity investors, what to do? We've had about a thirty seven percent round trip from that December decline back up to the our performance we've had here in nineteen with the SMP up about eleven year to date. The question is what to do. So to help us answer some of those questions is Sean Matthews, chief executive officer from Hondia's Capital Management. Sean is also the former CEO of Cantor Fitzgerald. Shawn, thanks for being in our

studios once again. He's in our Bloomberg eleven three O studios here in New York with us. So is it time to take money off the table? So, okay, okay, if you're if you have a shorter term view, so if you've got a twenty year view stocks make sense, and it's perfectly fine. But if you have a year or less view, certainly taking trips off the table make a lot of sense. Here right now. We came into the year long risk ass us and thought it was

a great opportunity. But once you got to a deal or a quasideal that's coming out right now with China, it makes sense just a de risk. Sean, can we talk about Hondia's capital management because I've known you for years, um really as the CEO of Cancer to fitz Geralds, and you've been at brokerages for years and then you went off in last year to start your own hedge fund has been going, it's going well. Look, the markets

are interesting opportunities. So if you look at the opportunity sets for the typical hedge fund with zero interest rates and correlated assets, they were very low. And going forward the next five years, you're going to see the coupling of assets. You're gonna see central banks changing their stances certainly going back and forth, which creates interesting opportunity. So you're going from two opportunities a year to kind of

six or seven or eight opportunities a year. But we were listening to Bill Gross who was speaking on Bloomberg Television earlier. He was retiring, of course from Janice and the famed bond investor for Pimco. He was saying he thinks that the era of generating alpha, true alpha is kind of coming to an end, which I think that's a misnomer. So there's always gonna be alpha out there. The machines have taken some of that away, but you have to understand how to trade against the machines as well,

so there will be interesting opportunities. So the last five years there was no alpha. Certainly next five years, I think there's gonna be interesting opportunity in real alpha that's out there. That's gonna be generated because pricing, and look we look at typical assets. Pricing has been very benigns because volatility has been low. As volatility picks up, you're gonna have large discrepancies in pricing. You don't have enough

capital sitting in the middle. So the typical Wall Street firms had plenty of capital to be a true middleman and create orderly markets. That's gone. So there's gonna be less capital there because the return of equity for those firms has gone down substantially over the last five to ten years, So someone's gonna have to step in and take advantage. So where do you think you're gonna be playing in the next two or three years in terms of the fixing coming equity markets? Maybe pushing out on

the risk curve to e M or something like that. Yeah, I think you have to be opportunistic. And if we look at the global macro picture, you're starting to see some clear delineation of what's going on out there. So Europe's in a funk. I think the next thirty years that it's gonna be in a funk that's got real problems. But you start to look at Asia, especially after the tariff deal, is gonna be interesting opportunities there. You look

at the US as well. I mean, I think if as a trader you look at the marketplace right now, you'd probably want to be short equities here at some point in time for a short term trade, not a long term trade, but short term. Okay, So if you go short equities, are you going short individual names? Are you're going short broad indexes? So you look at broad INDEXUS, right, because you know, getting down to that level of each individual stock. That takes a lot of analysis and understanding.

You really understand what are liquidity going on thirty feet, what's going on in the marketplace from a high level, and then working your way down. All right, So Sean Matthews, what are you looking for as the sort of the trigger time to short stocks here? And then what are you looking for to say, okay, there we go again? I think the market is right now going to look at earnings going forward and look at global growth. And

right now no one knows really what's going on. So earnings, if you talk to any particular person, you can range from zero to ten percent this year. Right, That's an amazing number if you think about it. How why the distribution is of that? So I think you have to get to a point of looking at where the market is, where global growth is going to be, and then make that determination. Right now, we've run up twelve percent in the SMP so far this year. I mean you look

at European stocks, they're up huge. Why so going into they're going to in a recession. Half of Europe is going to be in a recession, you know in two thousand twenty. So what happened in December was that just a bad dream for the marketplaces or there's should we be pulling out some nuggets of real truth out of that? December Swim, I think you have the algorithms actually, kid right.

So again, when we look at liquidity characteristics of the market, they have changed because the market is not going to be as orderly as it has been in the past. And when there's zero interest rates and everyone is looking at it saying, okay, we can stay long risk assets for as long as possible, it makes a lot of sense to continue to stay long. Once you get to a point where there's fear in the marketplace, you're going

to see large price discrepancies. And Wall Street used to be great as a as a middleman and really an orderly market participant. And once that leaves, the whole marketplace starts to look very different. And I think the next five years will look very different than the last five. How how has fundraising ben for you? We can't talk about that, no, no no, no, But in terms of when you go to clients, are they looking for alternatives? Are they're looking for you know, what are they looking for

from hedge funds? I think they're looking for people who are going to drive alpha, right, So there's been so little alpha out there that they're now looking at opportunities to not just be a market participant. And let's face it, if you look at the hedge fund community, they've probably steered more towards trying to keep their management fee in place then actually drive alpha. So that that change, I

think it's going to happen as well. The reason why I ask is because we're actually getting some indications that flows have stabilized after years of outflows from hedge funds, and that you're actually starting to see some inflows again and certainly redemptions have stopped, and that was sort of I'm just wondering if that drives with your experience that the people who are still looking for alternatives, uh, you know what what the ups and downs are absolutely Uh,

everyone is right now trying to figure out we probably live in a mid single digit equity world going forward the next five or ten years. That's drastically different than the last ten. So in a low return environment, everyone is looking for ways to drive higher returns. So I know Bill Gross was mentioning that he thinks, you know, the hedge funds will have to really be creative in terms of maybe infrastructure infrastructure, investing hard commodities, buying timber,

for example. Do you share the view that you're gonna need more tools in a toolbox for the average hedge fund manager, I think, depending on what your mission is, certainly more tools are better than less. Um. I think the markets have always looked for opportunities, and hedge funds have always looked for opportunities. You know, they may come in different forms, but it's not just about buying queue SIPs at some point in time. It's also about looking

for other things. Sean twenty seconds, what's the next move for a treasury yields? Up or down? Big move? I think the long end of the curve actually goes up um not not big. I mean it's probably fifty basis points. Uh So you can see a three sixty seventy long bond um, which in the grand scheme of things isn't

a big move at all. And and I think the fixed income market, and certainly the guvy space, has been really cautious about what's going on in the world and looking at global growth and saying this is a tough environment. So I think you'll start to see steeping the yolkurbs interesting. Sean Matthews, Thank you so much for being here. Sean Matthews, see Yo of Hondya's Capital Management, former chief executive officer of Cantor Fitzgerald joining us here in our Bloomberg Interactive

Broker's studios. Well trying to remains aggressive in trying to support its economy via fiscal stimulus, while at the same time also lowering its outlook for growth to six six to six and a half percent range. The question is can they do both? To answer that question, we bring in Brendan Ahearn, chief investment officer for Crane Shares based in New York City, joins us on the phone. Brendan,

thanks so much for joining us. So China clearly is remaining aggressive using the fiscal fiscal stimulus tool in its toolbox. How successful do you think they will be? Well point I did you believe that things are thus far as showing we're seeing those green shoots. We're seeing the stimulus solely trickled down into some of the economic releases. We've probably not completely bottomed on from an economic or corporate

earnings perspective. At the same time, equity markets are forward looking and I think the market is anticipating that the positive effect is stimulus, both fiscal and monetary, will be a good thing for the economy over for the for the economy over the course of this year, and markets are rallying on that news. Brendon, does no one care about leverage anymore? I think they still do care about leverage. I think the Chinese, particularly you know, had pivoted to

a domestic agenda in seventeen that was focused on deleveraging. However, the trade war they've had to backburner that effort. Going forward, we're going to see more targeted credit growth, trying to get credit to small medium enterprises, private companies as opposed to the big est state owned enterprises. So how important, Brendan are success full trade negotiations with the US to

supporting what the Chinese government wants for its economy. I think for from an economic perspective, you know, China, there's parts of China that are a going through a boom time right now. Um, you know, like shen Zen. Um, no different than you know, I was just out in San Francisco last week. Uh, there's parts of China that are are doing poorly. Uh, No different than here in the United States. So so, I think export driven manufacturers

are facing a very very difficult, challenging environment. UM. So they need to do support that really addresses the big, big geography, big economy that they have. Well, how about that, you know one of the things when you I was just looking at the Ali Baba's recent results and boy, the consumer, the Chinese consumer seems quite strong, and it's maybe stronger than one would expect. What is your sense

about the Chinese consumer and consumer buying power? I think the rumors on the death of the Chinese consumer have been greatly exaggerated. Um. If one looks at the say service p M I UM, we see it's an expansion. We see this from the company themselves. Ce Trip reported um after the market closes, having a very very large rally today. Right this is uh Um online travel company in China. So so, I think where where where we

want as investors be focused on this domestic consumption. That's where a lot of the stimulus and support for the economy has taken place. They want to raise domestic consumption, push on that gas pedal. At the same time, if you look at multinationals such as like a Caterpillar that's geared to the element of China's economy that's slowing, and

I think investors want to avoid that aspect. How much has the trade skirmish or trade disagreement, trade war, whatever you wanna call it, how much has that affected the Chinese economy. So it's certainly affected an element of China's economy. Remember China's economy UHI is the service sector today about ten agriculture. So you do have a big element of

China that is geared to export driven manufacturing UM. Aggregate exports the United States is less than twenty percent of China's overall exports, but obviously that that's a very big percentage and that has been very much hampered. At the same time, China is trying to support domestic consumption to offset the weakness in one element of the economy, and so it has had an effect on specific geographic areas an element of China's economy UM, but not not the

whole economy. And that's what something investors missed. So I'm just wondering from the p m I perspective and manufacturing data, the slowdown that we've seen there, which has been disproportionate uh, for well, hasn't been disproportionate because of the trade issues. So so, certainly manufacturing p m I s are um Both the you know, the the official as well as the cash in a are are in negative terror territory

there below fifty, which is the acceleration. At the same time, the non manufacturing or the service p m I s are still in expansion territory. What's interesting, Lisa's using Google trends. If you type China manufacturing p m I, you get a whole slew of results. You type China service p m I no results. That literally it says there's no data to input that. So I think in general investors still view China's this export driven manufacturing engine. That's not

that's not necessarily the reality today. Brenden Ahern, thank you so much for being with us. Brennan is chief investment officer at Crane Shares in New York talking to us about China. Thanks for listening to the Bloomberg pm L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa Bramwo. It's I'm

on Twitter at Lisa Bramwoit's one before the podcast. You can always catch us worldwide on Bloomberg Radio