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On Today's Bloomberg Intelligence Show, we dig inside the big business stories impacting Wall Street and the global markets.
Each and every week we're going to provide you in that research and data on some of the two thousand companies and one hundred and thirty industries our analysts cover worldwide.
Today will look at why Capital Ones bid for Discover will likely face a rigorous anti trust review by the US Justice Department.
Plus we'll discuss how shrinking advertising on traditional TV channels is impacting sales at Paramount Global.
But first we dive into the retail space. This week, Macy's said it plans to close almost a third of its US locations. And this comes despite Macy's reporting fourth quarter revenue and earnings that exceeded low analyst expectations.
All right, for more, we're joined now by Mary ross Gilbert, senior equity analyst who covers retail for Bloomberg Intelligence. And we first asked Mary about her take on Macy's most recent quarter.
The focus really wasn't on how they did in the fourth quarter. It's really their new plan that was the big focus. The new plan and their guidance for the year. So their guidance came in softer than consensus, and I guess it's just no surprise just thinking about how department stores are under pressure, and we've seen it across the board with you know, again, Dillard's showed some weakness. We're
seeing it with Macy's in their outlook. But Macy's has a plan to address the department store model in shuddering one hundred and fifty underperforming stores, and then they're going to invest in the three hundred and fifty remaining and those are going to be primarily an A and A plus plus plus malls and what they're going to do is increase the service levels. Beauty has been something they've been investing in almost every year and expanding the floor
space dedicated to beauty. You'll see that they have expanded the space and who knows, they could expand it again this year. We've been seeing it for the last five years that that space has been expanded. So there's a lot of details in what Macy's is doing. It's something
they need to do. They really need to up their game, and that's exactly how they started their presentation, and that includes really making the assortments a lot better than they are because if you look at the inline store performance at malls, the ones that are executing, such as the Abercrombies, the Urban Outfitters, they're outperforming.
So Mary I was kind of surprised to see this number of stores one p fifty because I kind of thought that this decade plus long shrinkage of department store footprints across the country by a lot of different companies, that was more or less kind of we're done that, or we're at near the finish line. So to see another big round of closings that kind of surprised me. Did it surprise the market at all, or is this something that analyst and investors have been asking for.
What Macie's had said is, we don't need to close stores except for the usual stores that you close every year, which is maybe less than ten per year. But the reason that they've decided to close them is because these stores were underperforming, but they were still profitable on a four wall basis, so historically that their thought was, well, if it's still profitable and we're still generating cash, we'll keep it open.
And this time what they.
Did is they took a more holistic approach and said, Okay, even though it's four wall profitable, we could do a lot better with the funds that we could generate closing these stores, selling the real estate and redeploying it back into the existing store base. And for all the initiatives that they have going forward, it makes a lot of sense because we really need to rethink the department store model. It has to evolve.
Mary.
Does this do enough to get activist investors off Macy's back?
That is a good question.
I think it may.
I think board has made it very clear that they are supporting this plan. Could they enhance the board with additional directors. That could be a possibility, so learn more about that in the coming months. But I think that this plan is it's been decided that this is the
move forward. And when you think about what's happening with the activists, it usually involves the real estate, and what we have seen in past transactions is the real estate is usually milked and it can be to the detriment of the retail operations.
Talk to us about that, like a relative performance between like a Macy's store and a comparable Bloomingdale store. Is the Bloomingdale store maturely more profitable?
I guess yes, they don't disclose the profitability on Bloomingdale's versus Macy's, but Bloomingdale's outperforms, as does bloom Mercury. This year, their comp sales were down one point six percent because the aspirational luxury consumer is spending less and we've been, you know, hearing about the overall luxury business being impacted, especially after we came off the post pandemic spending from stimulus checks that really had that aspirational customer going after luxury.
So now that that's kind of falling back, we're seeing more of a normalization. This is something Nordstrom Asco slided, so their sales were just down one point six percent, but they think that could probably stabilize and go higher next year. And of course, you know what the beauty side on luxury, you know that's posting positive comp sales.
Yeah, Mary, I was going to ask about then the inventory. Macy's notoriously last year struggled with inventory. The last quarter we saw they really got it together. What did we learn this quarter about their inventory?
Yeah, so even though inventory it was up two percent year every year, it's still down over twenty percent versus twenty nineteen. So they've really done a great job reducing their inventory, and that means that they're having less clearance activity. This is something that's going to affect their first quarter because last year they had more clearance and this year less.
So they're doing a great job overall. They've just been improving their execution with data technology, logistics, and they're going to be even employing some generative AI. They've already been employing machine learning, so we'll see more. And they're going to be streamlining operations. We didn't talk about that, but they're going to be consolidating some of their facilities, so they've really and they've reduced layers within the management structure,
so overall simplifying the operations. So all of these things could restore positive growth in twenty twenty five.
Our thanks to Mary Ross Gilbert, senior equity analysts who covers retail for Bloomberg and Eligence.
We moved now to the auto industry.
You know, we were told earlier in the week that Apple is canceling a decade long effort to build an.
EV For more on this in the current state of the electric vehicle industry, we were joined by David Welch, Bloomberg Detroit Bureau chief. We first asked for his take on this week's news.
Look, really, take the airplane up about twenty thousand feet on Apple's decision. Their margins are what thirty or forty percent, and gross margins for Tesla and General motors about the same in these days at about sixteen percent, and you have to spend billions of dollars to make this vehicle. Why would they do that? So I think that's really
what this is about. They were looking at an electric vehicle that was going to be about one hundred thousand dollars, So this was going to be a luxury Apple EV and we're you know, we see Rivian, we see Lucid. Yeah, you know that's rare.
Frid Air.
That's a tough sell. There's just they're just don't that many people who can afford one hundred thousand dollars vehicle. And then one other thing I'd like to bring up with Apple is they talked about Apple TV for a long time and everyone thought we were going to have this Apple TV hanging on the wall. But eaking television just allows you high capital the bow marching business kind of like automobiles. And then they gave us a box with content.
So you know, Apple supplies car plator automakers. You know, they may still have an auto play with some kind of content sort of thing in their vehicles. But I think they looked at the capital side of this and said, you know, that's not what they do. They create cool stuff and contract someone else to make it. The business just never made a lot of sense.
Hey, David, what's the feeling in Detroit these days as to kind of how this EV thing is going to evolve going forward? I mean, it seems to have hit kind of a lull here in terms of the enthusiasm, and I guess a lot of folks are trying to get a sense of Is it because the costs is just too high? Is it because people just don't like evs? Is it because there's not enough choice, there's not enough charging stations. What's the feeling in Detroit is how this thing will evolve?
It's all of that, but I would say especially choice and price. I mean, look, there's one EV on the US market that sells for less than forty thousand dollars. Now it's a Nissan a Lead. It's a compact hatchback, which Americans hate, that gets about two hundred miles of range, and so everything else is much more expensive than that, and for most Americans that doesn't cut it, particularly when the charging network is bad. It's all these things are
sort of related. But I think the carmakers are now really cautiously watching this and in the vehicle to watch in the next year is General Motors is going to sell an electric Chevy Equinox. So the Equinox is a small crossover reshuerv. It's that's kind of the new family car because no one buys Sedanze and they're going to sell that EV for thirty five thousand dollars and it'll go three hundred and twenty miles on a charge, which
is pretty good. And that will kind of tell us if the mass market is ready to go electric, because right now, a lot of the people who buy evs, they're not just early adopters and rich people. They are early adopters and rich people with three or four other cars in the garage. So if they need to drive on a long run trip, they pull the land rover around, gass it up, and go. And so can the industry sell evs to people who have one car in their gage?
And we'll see. So that's going to tell us a lot about what's going to happen with this market and how flat the middle of this S curve is in order to get to the next.
Way, David, I'm also wondering just the mood, I mean, to Paul's point, the mood in.
Detroit, Like, how do the workers feel about all of this? Right?
I mean, we know the shift to evs eventually, when you're just making EV's, you need less workers, et cetera.
And I'm just wondering, kind.
Of, yeah, like how do they feel right now?
So I'm not totally convinced by the way that it's going to need fewer workers. I think over a long period of time maybe, but that's a different issue that the union worker does think that, and they also think that the engine and transmission jobs will be gone and batteries will come in from someplace else.
And they won't be the ones making them.
So there is a lot of fear, and I think they're breathing some kind of a side of relief that maybe a lot of these workers are a bit older, they'll be retired before this is a real issue. And so I think if you're the union, you're looking at this transition as being longer and slower than everybody thought probably two years ago, and so to be more manageable, you know that the you know, the attrition can be just done by retirements and people want to lose their jobs and be left with nothing.
It'll just But it is the commitment from the car companies still there, David, because I could make an argument I think half of this country will never go electric for reasons other than economics, other than powertrain.
Was it like, look or what politics?
I'm not going green?
That's interesting. I've sort of thought for a long time that Elon Musk has gone conservative for two reasons. One, he's been fighting with the government, so he hates regulators. Democrats get pinned with regulation, so he went conservative. I think the other is that guy's a brilliant marketer. It's the most underrated thing about Elon Musk. He knows that EV's have been politicized, he knows conservatives don't like them, and so I think he went conservative because maybe they'll
buy evs from their guy. Right, He's the guy on Twitter letting them say whatever they want. And I've always sort of thought, with no evidence, that maybe that's what he's doing. But eventually everyone's going to go EV because that'll just be the powertrain available. Question is how long does it take to get there?
Our thanks to David Welch, Bloomberg Detroit Bureau Chief.
All right, coming up, we're going to break down why a Capital One discovered deal will likely fase a rigorous antitrust review by the DOJ.
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I'll Paul Sweeney and Am alex deal, and this is Bloomberg.
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Next, we take a look at the anti trust base.
So it's likely the Capital Ones bid for Discover will face a rigorous anti trust review by the DOJ. And this comes as the proposed thirty five point three billion dollar mega merger would create the largest credit card lender in the US.
To discuss this and other deals that are facing scrutiny, we were joined by Jennifer Ree, Bloomberg Intelligence Senior litigation analyst. We first asked Jennifer for her Capital One Discover prediction.
This one is such a tough one, you know. I think that the Department of Justice is kind of in a conundrum with this one, right because they're under a directive to get tougher on deals, and in particular get tougher on bank deals. I mean, this is come from back in twenty twenty one when President Biden issued an executive order saying, look, you know, we can't just rubber stamp these bank deals. We've got these huge banks. We've had problems with banking, and we need to get more aggressive.
And the Department of Justice is on board with that, you know, we've heard their statement saying that they're on board with that. But we also have a market that simply hasn't been competitive for many, many, many years, and that's in credit card processing.
Right.
We really have just two biggies, Visa and MasterCard, and this deal provides an opportunity to really bolster competition in an area that's been problematic ever since. I can remember when I started anti trust, the very first lawsuit I worked on was the Department of Justice versus Visa and MasterCard, alleging that they were engaging in conduct that was blocking
out Discover and American Express. And ever since then, we've had allegations of or private litigation public litigation against those two companies for anti trust violations, and we've had regulation. So this deal does have these strong pro competitive benefits,
but you've also seen massive political reaction against it. So you really have two very strong opposing sides, and I think it's just going to come down to the investigation and how the Department of Justice views the credit card issuing market and the overlaps in the credit card issuing market between these two companies, and how out any potential for harm it might find against this this pro competitive aspect.
So, but it seems like a reasonable argument that putting Capital One and Discovered together does in fact create a viable competitor to Visa master Card. Otherwise there will never be a viable competitor.
Actly Yeah, No, that's exactly right. And that's why this is an unusual deal, because you know, all companies with deals come in and say, oh, there are all sorts of pro competitive benefits that are going to benefit consumers and innovation, et cetera. And usually sometimes they're kind of lawyer created. Sometimes they're really you know, it's unclear whether they're going to come to fruition. And most of the time the Department of Justice or Federal Trade Commission are
going to be very skeptical about those claims. They say they don't really ever bear fruit. But in this case, it's a much stronger claim, and it is kind of obvious to see how there really truly could be a very significant pro competitive benefit here, and so it could be one of these unique deals where that aspect is given more weight than usual by the Department of Justice and possibly be considered important enough to allow the deal to go through even if there might be some other issues.
Jen couldn't I have made the same argument with say Spirit and Jet Blue, and that definitely didn't work out.
You know, it's so interesting you bring that up, because I see so many parallels between that case and this case,
even though completely different industries. Because there was a very strong argument that those two combined could have bolstered competition against the legacy airlines Delta, United, etc. But the problem there was that there was a small set of consumers that really depended on the unbundled low fares that were offered by Spirit and we're going to lose out where jet Blue took over those routes and retrofitted the planes and created more space but raised fares and a weird way,
you kind of have the same dynamic here. You can create a lot more competition as against the incumbents, the big legacies Visa and MasterCard, but you might have some sort of a negative effect on underserved consumers. Because Capital wanted to discover when they issue credit they tend to focus more on underserved populations then do some of the other big issuers of credit, so people who are new to credit, people who carry a revolving balance, subprime borrowers.
And it may be that there's a view that this impacts a smaller group of subprime borrowers, and in Jet Blue and Spirit at the end of the day, that one out the DOJ one because of that harmful impact on a small set of particular consumers. You have the same thing here, but what you might have here is a stronger argument on the pro competitive side than you had in that case.
Is there an argument you made for some of these potential deals that are getting a hard time from the DJ or FTC to kind of bide time till the number six of this.
Year absolutely went off the.
Clock, Like is this part of a strategy?
I mean absolutely, And look at Capital one and discover they very well are probably going to bleed into the next administration, whether it's Democrat or Republican, there is no doubt, Alex. I mean, historically Republican administrations have the reputation in the merger world of being more business friendly and also being far less skeptical of claims of efficiencies, giving them a lot more weight, and that's going to be important. As I mentioned, in this deal. Right now, it's a little
bit of a wildcard. It used to be ten years ago that whoever came in to run the FTC, if we had a Republican president, whoever got appointed as chair, the Republican majority there, and whoever came in on the DOJ side, we're likely to be more business friendly or likely to look at efficiencies in a more friendly manner. Right now, though, we have kind of two different kinds
of Republicans. You have sort of a Josh Holly type and that you guys may have seen in the news that he's already come out and complained about this deal, said the Department of Justice should block it. And then you kind of have the Joe Simon's type, who was the chair of the FTC in the previous Trump administration, a little bit more traditional in the way we think
of Republicans in the antitrust world. And so I think to some extent it might depend on who you get at the DOJ, but I would still say that it ticks higher. The chances of getting cleared probably tick higher if we have a change of administrations next year.
Our thanks to Jennifer Ree, Bloomberg Intelligence senior litigation analysts.
All right, let's go to big tech, Paul, because Amazon dot Com finally joined the famous Dow Jones Industrial Average. So this week the e commerce giant replaced Walgreens Boots Alliance in the thirty stockage.
Yes, Amazon's inclusion in the Dow is another milestone and the retailer's rapid expansion. The company already sells goods of all kinds and runs the world's largest cloud computing business. But Amazon is still working on ongoing initiatives to boost market share and profits.
So discuss all things Amazon and the ladies in the retail space were joined now by Punham Goyle, senior US e Commerce and retail analysts at Bloomberg Intelligence. We first asked her why people are getting so excited about Amazon.
I think it's all about profits. For a long time, Amazon was all about marketshare, and today the story is really a profit story. It's the profitability that's about to unfold at Amazon that's really getting people excited and interested. We wrote about this a few months ago, where you know, if you look at their most lucrative businesses and everyone knows of the cloud, which generates thirty percent bit margins, which we think can go to forty percent. That could
be a two hundred billion dollar business. So you're looking at sixty to eighty billion dollars in profits in the coming years. But then if you add advertising to then, Paul, you know the space, well, they have fifty percent ebit margins and we can see advertising growing to one hundred billion dollars in just a few years. So you're talking about fifty billion in advertising, plus if you add another sixty seventy of cloud, you're talking a big profit number here,
and I think that's what's getting people excited. Aside from that, retail is growing, and part of the reason that advertising is doing so well is because people go into Amazon as if it was a search engine. Right, You go in and you search for something. But the difference with Amazon versus a search engine is you go with the purchase intent. People go into Amazon looking for something and
to Colleck that buy button. They already know they want it, They just want to find it and get it there in two days or less.
That is such a good point, and this is a great example of this story of Amazon replacing one So I was talking to an anchor who's been struggling with feeling sick and feels like that winter, like you're just sick all the time. And I was telling about Airborne, which you take if you feel a coming on of a cold.
She's like, oh, where do I buy it?
Amazon? And I'm like, no, go to your local drug store. It's two blocks away. But that idea, right, like walking those two blocks isn't going to happen. And I have to go to Amazon to buy the thing because it'll come in two days.
And I'm not even worried about it. Where is the downside?
Though?
Who know?
I mean, you laid out a pretty convincing case, So how do I I don't know what do I worry about?
So I think you know the downside? If we enter a consumer recession, clearly Amazon will be impacted, right, so we'll the rest of retail. But I think that's near term, and as we've seen in past cycles, what goes down comes up eventually. Amazon is one of those places where we think if you view it for the longer term, there's just a lot of opportunity across all its businesses. We can't control the macro, but with the logistics platform
in place, and even this example that you gave. You know, you need cold medicine, or you need anything, and you have to go to CBS or somewhere else because you need it. Now you can't wait six hours, twelve hours, twenty four hours for it. But I'll tell you that Amazon's delivery has gotten much faster. I mean I'm seeing stuff at my door that I ordered in less than twenty four hours, sometimes eight to twelve hours. And that's
pretty incredible. And that's really a part due to their realignment of their distribution centers, which they're able to infuse an even faster delivery.
See it now, I have a general idea where Punham and our family live. It's literally amongst or very close to, like I think all these distribution centers in Central Jersey. It's unbelievable. I think we've got to be like the Central we have to be like the distribution hub of the East Coast.
It seems like I feel like a Jersey primo.
Oh yeah, wh yeah, I am. So when I see the Gove, I tell them, you know, so put them let's backway from Amazon talk to us about just retail in general. Here how's the consumer doing out there? What are you hearing from your companies?
I think the consumer is very focused on value today. If you're seeing the retailers that are actually being able to drive the share gains, you'll see that they offer some sort of value in their proposition, whether it was from Walmart, you know, that's doing well. But then we hear from the other retailers, the more discretionary ones, and they're struggling. Even the at leisure companies. We heard, you know,
from Puma and Adidas. We heard from some of the other companies where they may have done well in four Q because holiday was really strong last year, but when they look out for their guidance, it's been conservative for the most part from most of the retailers that I've heard from, And I think that just goes to show you that you have to have what the consumer wants, and you have to have it at the price that the consumer wants for you to actually succeed in today's environment.
You know, we talk about inflation. Punum prices buy and large in the supermarket don't come down after they shot up. However, many per percent here, that's just the inflation rate of growth is slowing. How about for like Adidas, do they ever cut the price of a shoe because inflation's declining?
That No, they had discounts, right, So if you want to bring prices down, retailers use discounts as a medium to do that. But once prices go up, they don't come down.
See that's a problem with inflation. That's why inflation is insidious.
Yeah.
But so to kind of Paul's question, but really to my question, are we going to see a lot of discounting from retailers?
So?
I don't know if you guys know this.
Have we talked about alex as a counter indicator?
No?
I only shop on sale, Okay, so where I'm shopping, you should be shorting the stocks. So this is a joke that winds up happening because I'm shopping there because their inventory is bloated and because the sales are so good. So am I going to be going to Bluemy's in the next couple of weeks or they finally have their pricing power and inventory in check?
I think inventory is getting more in check as we move into the spring. So I was in stored. The discounts were pretty reasonable. They weren't too aggressive. There were some clearance wracks across them all, but I can tell
you the stores were quiet. So it's it's interesting because there's new inventory that's flown in for the spring, and as stores put this new inventory out, they're going to be a little careful with their discounting and we could see more discounts come in in April on the spring inventory before now they're being steady and careful with them.
Our thanks to put them. Goyle, Senior US e Commerce and retail analyst at Bloomberg Intelligence.
Coming up on the program a conversation with Mark Hoplomasian President and CEO of Hyatt Hotels in the state of the hotel industry.
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We moved out of the hotel industry, so Highed Hotels recently reported net income for the fourth quarter and full year twenty twenty three that surpassed analyst expectations.
For more on this and the state of the hotel industry, we were joined by Mark Hopplomasian President and chief executive officer of Hia Hotels. When we first asked them about Hyatt's most recent quarterly results and the messaging the company is trying to get across.
The clear message was really centered around the fact that the transformation of the company to asset lighter platform has now shown up in the numbers in a very material way. We had the highest pre cash flow that in the company's history. We also had the mix of our asset light earnings to our total earnings went up to seventy six percent five years ago. That was in the mid forties.
Hey Mark described first, what your asset light strategy is is I'm relying more on franchisees.
Yeah, so it's not really I wouldn't call it an asset light strategy. I would call it an asset light program where we were selling down we had we had two major drivers of our earnings. One was from real estate that we own hotels, and the other ones from management franchising hotels across the world. We're primarily a management business, not a franchise business, but those are the two businesses. So as we sell down real estate, the proportion that's
coming from real estate sourced earnings has been dropping. We've concurrently reinvested in buying new platforms and new brands over the last five years, and that has driven up our management and franchising fees at the same time, so the mix has shifted to much more in the management and franchise fee driven business, which is very low capital intensivity and high margin and high free cash floaks inversion. So
that was probably the key message. The other thing that we did is we simplified our financial presentation because we have a business that's a subscription model membership business called Unlimited Ucation Club, and we sold the majority interest in that business to a third party, which helped us simplify how we report our earnings, and that was very well received by investors.
So Mark, that's you and the c suite managing all of that. What about the demand side of the business, What kind of pricing power do you have per room, and what's the demand situation like.
We think about three different demand drivers. One is leisure, which has been the leader of the recovery through post COVID period. We think about group business, which is big meetings and conventions and things like that, and we also have business travel individual business travel. All three are showing
signs of great momentum and positive outlooks. So starting with leisure, in the first quarter of this year, our pace meeting our bookings are up eleven percent for our all inclusive resorts in the Pervian and also up for our resorts in the Americas. But leisure travel has been really, really solid in China. We had a record year for Lunar New Year. The spending amongst Chinese, both inside of China and other destinations in Asia was at them all time high.
So that's leisure in group Our pace into this year, that is forward bookings are up eight percent and so we're looking at another solid year of growth in meetings. And I think corporations are increasingly resolved to make sure that they prioritize those meetings, and then on business transient the US is lagging, but the overall business transient category demand around the world is about seven percent the low where it was pre pandemic, so we're getting closer and
closer to being a parody. Europe is fully recovered, and then some China is fully recovered, and then some the United States is still lagging, and we're seeing positive signs of business transient travel increasing. So I would say across all three major categories, we're seeing positive trends into twenty.
Four Mark, did you talked to us about M and A and kind of growth via acquisition? How does that figure into your growth plans? What are you guys messaging to the street about your willingness to engage in em Anda, because I know you had to buy out recently of the Apple Leisure Group. I want to see kind of your appetite is going forward.
In the past five years, we've invested about three point eight billion dollars in acquisitions, the biggest one being Apple Leisure Group at two point seven billion, and it's been tremendously beneficial to us because we've been able to expand our customer base and highest growth and most relevant to US categories, which is leisure, lifestyle, and luxury, and so we've really done this in a very deliberate way to
move the company in that direction. In the fourth quarter, I think we had fifty seven percent of our total rooms revenue around the world was leisure focused, which is up twenty points from the mid thirties to the mid fifties pre pandemics on now, so the mix in the company has tremendously shifted, but they're also been very profitable
and high value acquisitions. The fees per room that we are earning are materially higher than they were five years ago before we made these acquisitions and evolved the company. Even as we have grown our select service brands, so we are expanding in lower price points, but our overall feed growth per room has been growing, which is really I think part of the equation of actually driving share
holder value on an accelerated basis. I think there will be more opportunities for MNA in the future, but probably smaller scale.
Talk to me about how expensive it is to run your business, like where costs coming down, where costs going up?
First of all, let's start with the biggest cost category, which is people.
Yeah, at our hotels in.
Twenty twenty one non union markets, which is primarily in the South, the sun Belt, the smile of the United States. Our wage rates went up by twenty percent over the course of that year, and that started to mitigate or ameliorate in twenty twenty two and twenty twenty three. But we experienced a massively ac situation in terms of supply of labor.
That's evened out.
We were in the mid teams.
That's evened out in that because we also talked about didn't we pall about cleaning services like not staffing housekeeping because it just can't find the workers. So do you feel like you're at the right spot?
I would say that there are pockets where we still have shortages, and I think part of that has to do with the nature of the workforce at this point. So we've got a lot of the byproduct of not having a really advanced immigration policy in the United States and HTB VISA program, is that for at times, especially over the summer, where you have peat demand, we don't have the right type of labor that's willing to take those jobs and be happy to start their careers in
those jobs. So I think they go together a lot of the HTB people that come in on an HDB visa, which is a temporary work visa. They come and they leave. For the incidence of immigration that allows us to hire people who are coming into the workforce in the United States for the first time has been under some pressure now. Having said that, overall, our vacancy rates have gone from mid teens to mid single digits, so down ten points, which is extraordinary, and that's over the last eighteen months.
So we are having a better time finding labor, but they're definitely pockets of constraints, all right.
Thanks to Mark Copplomaisian president and CEO of Hyatt Hotels.
We now turn to the media and entertainment space. This week, Paramount Global, the paramount of CBS, MTV and other networks, reported fourth quarter sales below analyst expectations. This is largely the result of shrinking advertising on traditional TV channels.
I heard that before. Still Paramount said it sees profit for Paramount Plus domestically in twenty twenty five. So for more, we're joined by guitamranghanad than Bloomberg intelligence analyst on US media, and we ask Gita about her takeaway on Paramount's earnings results.
Streaming was definitely a key positive, and subscriber numbers those came in slightly ahead of estimates. The bigger positive was the RPOO trends. So remember Wall Street has now kind of shifted its focus away from subscriber growth to revenue growth as well as profitability, and they kind of scored
pretty well on the revenue growth metrics as well. So arpoo increased about thirty percent through the year, and that's on the back of a price increase, and then the next thing, of course you look at was profitability and their narrowed, so they're obviously taking a step in the
right direction. I think what investors are kind of really cheering though, is that they did articulate some kind of strategy to kind of get to profitability, and they outlined a timeframe as well, so twenty twenty five is when they're expecting paramount plus profitability, which is definitely I think good news. The question is, I'm not sure whether it's enough.
What does the ownership here want to do with the company, And it appears by all accounts that they're just not big enough to compete against some of these big technology companies. Some of these big media companies like a Netflix, like a Disney, and boy, there's a lot of speculation around Paramount. Did they address that at all?
They didn't. I mean the one thing though, that you know, I think Bob Bkish got out of the way was they are going to do something that is good for all shareholders. He kind of underlined that because there has been this constant, you know, question about whether you know, Sherry Redstone is kind of just going to cash out and leave everybody else hanging, and so he wanted to, you know, kind of get that out of the way. But again, you know, I think the focus is going
to come, you know, the M and A options. Paul and we've discussed this seem to be shrinking at this point. You know, Warner Brothers, Discovery obviously said they're no longer interested. Other firms have kind of come taken a look. Apollo being one of them, said not interested. The only interested party right now is sky Dance, controlled by David Ellison. But again, there's really no natural buyer for all of the assets. He's not interested in controlling some TV networks.
He's only really looking at the studio. So again, I'm not sure that Paramount Management necessarily wants to do kind of parts sale here, so I think they're going to kind of go back and focus on fundamentals. I think some of the realistic m ANDA expectations are kind of going to subside a little bit. We're going to go back to fundamentals, I think for the time being.
Well to that point, then did they buy themselves some time? Because I could make an argument that, Okay, well the slowing and AD sales and maybe that's then industry wide thing. Okay, other players are getting hit. They did as a streaming subscribers, so they have some time now.
Is that a real statement or no?
I think so. I definitely think so, because with streaming, what we're going to see is we're going to see some sustained momentum in those ARPO increases, so they're doing more, you know, international price increases. They've kind of integrated showtime into Paramount and with that they've been able to take some price increases. So we're going to kind of see that play out so pretty much most of twenty twenty four.
The question is what happens after twenty twenty four, But they definitely have bought themselves sometime.
What is the outlook for the studio here at Gita Studio.
Unfortunately, for twenty twenty four looks really really bleak. So the big movie, of course that everybody was kind of looking at, was Mission Impossible. That's been pushed out to twenty twenty five. We do have a few movies here and there. I mean, you have Quiet Plays that's coming out in June. There's obviously some anticipation building there. But again, in general, Paul, the box office outlook for twenty twenty four is just pretty weak, and that's just because of
all of those Hollywood strikes. Has pushed out a lot of movies into twenty twenty five. It's kind of going to shave off I think at least two billion dollars off the box office.
So presumably we're going to look through that, right, I mean, presumably they're going to recoup that and they'll be pent up in twenty twenty five.
That is the big question, right. Yes, we've seen kind of box office demand and you know, in general kind of come back, but it's still about twenty percent below pre pandemic level. So the big question is, Okay, when all of those big titles kind of hit the screens in twenty twenty five, are we kind of going to see a bigger resurgence.
The jury is still out.
I think yes, it's definitely going to be better than twenty twenty four. Is it going to be as good as it was? You know, and it's heyday, I'm not so sure.
Githa.
How about the CBS television network and the Viacom cable networks, you know, one point that was such a big part of this company. Here, talk to us about the advertising the television advertising market. What's kind of the forecast for the next several years. Is it a growing business? Is it a declining business?
It's a melting ice cube ul just like you know, just like the whole PayTV ecosystem. So you know, this is this used to be back in the day about a sixty billion market. It's shrunk. It's going to probably hit about forty five billion by the end of next year. And really, you know, this is just kind of a
progression of where all the eyeballs are moving. So they're moving away from the linear TV networks to streaming, and so we're seeing kind of those ad dollars follow those eyeballs and going from you know, the TV medium to what is now called connected TV, which is really all the streaming platforms and you know, you're using all your connected TV devices, the rokus and the Google Sticks and all of that to kind of watch television, and that's
where all of the advertising is moving as well. Unfortunately, Paramount doesn't have too much of a presence there. Yes, they do have, you know, Pluto TV, which is their solution, but it's not going to be able to kind of offset the leakage that we're seeing in the television ecosystem and that is really a problem for all of these media companies, for Paramount a little bit more so.
All right, Thanks to geta Maganathan, Bloomberg Intelligence analyst on US media.
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