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All right, let's get to the bond market for a moment. It's been a really interesting a couple of days. So yesterday you had a lot of buying on the front end, and you had some selling on the back end. Today buying pretty much across the board. It's really that Bull Flattner that we're seeing joining us now as Ira Jersey. He's chief US interest rate strategist over at Bloomberg Intelligence.
First question goes back to yesterday. Was the long end selling a reaction to like needing to liquidate to cover shorts in the end?
Well, I don't know if it was only the en it was also that a lot of people wanted to get into the front end because of the idea that you know, we'd see deeper interest rate cuts and and because of that, you have to if you're a real money investor, you have to raise that money from somewhere because you might not have all of the all of that in cash, so you have to sell something to
to fund your your purchases in the front end. I think part of it too was you had a decent, a decent five year auction, and so you had some people who were saying, you know, again buying the belly and the front end and you know, selling the back end. And then secondly, and this was really interesting, is that there were some people who maybe were hoping and dealers who were hoping to get rid of some inventory into the a treasury buyback that occurred yesterday, and the Treasury
didn't buy anything. They were you know, people were expecting them maybe to buy about a billion dollars worth of seven to ten year notes and they didn't buy any because I guess that sector was rich. So when you didn't have that, dealers have more more inventory than they thought and basically had to you know, back up their prices and that means higher yields.
I right, we had that really strong GDP print this morning. Tom Kane was making the point earlier this morning that how can a FED cut into something like that? Economy doesn't need it right now? What do you think?
Yeah, Well, it's it's a momentum issue, right, because keep in mind that that the third quarter, the second quarter GDP report was for April, May and June. So April and May, we know were reasonably strong, and and you know, clearly you know June wasn't terrible by any stretch of the imagination. Economic momentum is slowing, so at some point
the Federal Reserve might cut interest rates. But I agree with the idea that you know that, And we've always been skeptical about the about a September cut being the first one, And again I don't really care. I think, big picture, if it's the September's the first cut, in November's the first cut, doesn't really matter at least unless you're trading instruments that it happened to mature in those months.
So yeah, I think I think it is difficult, and it just shows and what this report shows is that the economy, while it's not where it was a year ago, it's still not weak. And and that's the that's the challenge that the Fed has is how can they cut while the until the economy is actually weak, And you just don't see that very much, even with four point one percent unemployment that's not crazy high end employment by any stretch of the imagination.
So based on that, what what kind of curve do we expect, as in, is it going to be buying the front end or is it going to be selling the long end?
Well, eventually it's going to be I think a bull steepener. So that means that front end yields are going to go down much faster than longer term yields. But it's you know, that's it that's going to come and fits and starts because of the same reason that we've seen it the last couple of quarters quite frankly, and that's what we don't know when the fed's going to start. And once the FED starts, then the question is how
how fast do they go? And we've been on the opinion at at b I rates that we're that the longer the FED waits to cut, the deeper.
It's going to have to cut.
And and and we do think that you know, they are going to cut probably once this year, maybe twice. Once they do, they'll keep on going and keep cutting at least one hundred and fifty or two hundred basis points in a pont over over the course of a year, and as that occurs, that's when you see the front end really start to gain some traction. But keep in mind, you know, we yesterday was interesting because the curves steepened
ten basis points. It only had steepened eighteen basis points the whole year, right, So you're talking about a massive move in terms of of you know, just this relative to how much we'd moved this year in terms of the two versus ten year curve.
All right, looking at that two year word four forty, we weren't you know, five percent just recently. Is that sixty basis point moved? Is that a reasonable kind of move in that timeframe or is this a market? But that's been moving pretty quickly.
It's not that unusual. If you go back in time and you don't include the twenty twelve to twenty eighteen period, it's usually the range of ten year treasury yields is is somewhere around one hundred basis point a year. So yeah, you know, seeing moves of forty to sixty basis points over six month period is not that unusual. In fact, we've had three of them just in the last two years. You know, you go back to the last October. You know, we went from in August we were you know, near
four percent. In October we were near five percent, and then we've rallied all the way back down to under four percent. Right, So so you're talking about one hundred bases point range that we're in, an now we're headed towards the lower end of that. I think ultimately we will see by the end of the year a more substantial and obvious slowdown in the economy. So that's where you can see ten year yields actually fall below four
percent once again. But it's not what It's going to be choppy, it's not going to be one way straight. It's not one trade that's going to.
Bring us there, all right, Ira, The men's Olympic soccer team lost three nil, See what I did there? Three nil to France. What do you make of that game? And what are your expectations for the US team?
Well, I have to so keep in mind on the men's side, this is it. The the Olympic team is the under twenty threes and we don't And a lot of our best players are actually under twenty three and not at the Olympics because they play in the first team and they played in Copa America earlier this year. So it just shows you that the depth of talent in the US versus some of the other big countries like France. You know, France has very deep talent pool that and they have a lot of under twenty threes
who are who are outstanding players. And for US, we have some players that are outstanding at under twenty three.
But the talent that that there's a talent.
Gap there from the top to the bottom in the US clearly in that age group.
And how and again why do they play before the Olympic opening games? They're just too many?
Is that?
Is that the thing? And like if you play earlier, do you not get to go to the Olympic opening ceremony or not?
World I mean the.
No, no, they used to be until the World Cup came around in uh, you know, one hundred or so years ago, just about one hundred years ago.
The one of the.
Reasons that the Olympics soccer starts early is because you can only only have two games a week, so and the Olympics itself is only two weeks. So unless you want, unless you had eight teams only going to the Olympics it'd be hard to finish the tournament before that, So that's why you have you know, if you have sixteen teams like they do.
I think it's sixteen.
If memory serves you know, you basically have to start a week before or a couple of days before the actual opening.
Ceremony, adding more more value every day. Irid Jersey with a soccer talk. He's also has a side gig chief US indust rate strategist for a Bloomberg Intelligence.
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Let's stay on earnings and things for a moment. Southwest airlines up by over three percent and they are changing their open seat is huge. This is huge.
I never really flew Southwest that much, and I don't know the reason behind the open seating, but I know that people like it.
Yeah yeah, and also then you can pay for like where you stand online and stuff right right.
Lets like the fact that you can get on an airplane, then you have to scramble.
I don't I don't know budgeting then yeah, maybe that would be something. But they are keeping their bags for fly for free policy. But George Ferguson is Boomberg Intelligence and your aerospace defense and airlines analysts and joining us. Now, what did you make of them scrapping this open seating policy.
Yeah, it's all about revenue generation, right, So I think they're trying to put a little more distance on themselves and the low cost and ultra low cost carriers, you know, Frontier and Spirit. I agree with you. I don't know that all of us enjoy sort of scrambling for a seat when we jump on an airplane. So customers maybe will take this better than scrapping bags fly free or no change fees, you know. So to me, it seems
like could be a good evolution in the strategy. Makes them look more like their full service competitor, you know, Brethren, United American and Delta. And again they need to generate some more revenue, so they're going to sell you aisle seats, window seats, exit row seats, premium seats. Yeah, they're starting to look like their big airlines are starting to look more like the other big airlines.
And Alex I note from the YouTube video that George is in our Queen Victoria Street offices which are just spectaculum, because he was at the Farnborough air Show slash boondoggle in London this week. So good for George. Hey George, every plane I got on, I don't worry. I won't tell them because they're not in the office your management team. The reason I go onto a plane every seat is full. So that implies to me that demand is there. That implies to me that the airlines would have pricing power.
But I keep reading that they're not getting good yields and that the fact that the fares are coming down. Can you explain how this economics works?
Yeah, well, so I think this economics is the airlines put too much capacity in the marketplace, and this business is one where you don't let an airplane roll down the runway without it being eighty five percent or more full. Nowadays, the revenue generation officers, they just keep selling tickets as long as it's covering the marginal costs. Right, And so just because you saw all that volume didn't mean you were seeing all that You know, revenue is as good
as it should have been. Now, look, they're all at record levels of revenue, and that's because they got to find a way to pay for higher pilot wages. They're not anywhere near record levels of profit. So again, I think, you know, they were kind of counting on an even stronger revenue environment, you know, as they might say. We saw yields at American down six percent, you know, which is that's pretty so, I mean, yields look like they're nosing over and that's a lot about the concern here.
Right We're seeing negative yields at all the airlines, and that's the concern that there's just too much supply. Consumers kind of is tighter and not willing to pay anything to go to, you know, go on vacation, and that's a challenge here.
You got to hop in like thirty seconds. But American Airlines stock is now up over two percent. So what led that to the upside?
Now, Yeah, so some of the guides I'm seeing is increases of two to three percent of capacity in three Q. This could be the beginning of getting the capacity growth in the right area. I don't think it's going to be a great quarter three Q but it could be better than we all expect.
All right, thanks so much, George, appreciate you. George Fergus and Boomerg Intelligence Senior Aerospace, Defense and Airlines analyst joining us on Southwest as well as American.
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Let's get back to earnings here Astrosenica. That stock over in London is now down by almost two percent. The company did report earnings that were pretty solid. The company came in with core earnings per share at one point nine to eight cents one dollar ninety eight cents. Let's say it that way. Operating profit coming in about four point ten billion dollars. So we want to check in with the chief financial officer, Aradna Saran over at Astrosenica
on this. It's great to get your perspective. We always appreciate the busy day that you have on earnings. Thank you very much for joining us. Give us some clarity on that top line growth and the upgrade that you had, you're raising that revenue, what is driving it in terms of product sales and how much of that's collaboration income, So actually all.
The upgrade is being driven by product revenue. This year we had this quarter was actually a record quarter twelve point nine billion in revenue, and it was driven across the board with record revenues in all our therapeutic areas.
So oncology, which is about forty one percent of our business five point three billion in revenue, growing nineteen percent, cardiovascular medicines growing twenty two percent, Respiratory and immunology growing twenty six percent, and our rare disease business, which is about a two point one billion dollar business, growing fourteen percent.
And same geographically, you know, we're seeing very strong growth in the US, double digital growth, also in emerging markets and in China both growing around eighteen percent, Europe twenty four percent. So it's really demand for all our innovative
medicines across different geographies and across different therapeutic areas. So we raised our guidance for the year both on revenue and EPs to now mid teens and it's almost in some ways you could consider a double raise, because we also said that we would meet these guidance without any increase in collaboration revenue that we were anticipating earlier in the year. So it's really driven by fundamental underlying growth.
So doctor, I know, I'm just looking at the Bloomberg terminal here. So you have a run rate revenue of about fifty billion right now, and you guys have said that you're targeting eighty billion in sales in twenty thirty. What's going to bridge the gap, what's going to get you there? What should we be keeping an.
Eye on, So you know, there's a lot going on in the pipeline. What's the ambition that we set for twenty thirty of eighty billion is driven by I would say three different elements. The first element is the products that we have today and the indications we have today and growth in those and that's sort of sort of
what you see in the quarterly performance today. The second element is the current products that are on the market, but what we call life cycle extension, so entering into for example, additional indications or expanding indications and other tumer types c that's a second element. And then the third
element is new molecular entities. So these are brand new molecules which you know we've discovered we're working on that are in phase two or phase three clinical studies and hope that will be successful in them and will launch them by twenty thirty. We have set an ambition of achieving this revenue but also launching twenty new molecular entities by twenty thirty, having twenty five blockbusters, so that's products over a billion dollars in revenues in the year by
twenty thirty. And you know what's going to bridge the gap. If you look at the studies we have ongoing, we will have probably about forty studies in the next eighteen months, so I end up twenty twenty five that we hope to read out and that will give us more confidence with the trajectory that we're on on achieving that twenty thirty ambition. So you know, this is a it's a
risk business. Obviously, we take risk every day. We invest twenty two percent of our R and D of our revenue in R and D, so it's a very R and D heavy business. And you know, we hope that you know, our studies are successful to achieve those goals.
Our governments your friend or foe right now in terms of the UK being an unfavorable or favorable environment. There's also the threats of IRA potentially being rolled back under President Trump. How do you guys sort of think about government interaction with your company?
You know, governments are a very important stakeholder for us, you know, in the US as well as outside the US. You know, many many systems, healthcare systems are single payer systems,
so we do work very closely with governments. You know, the most important thing for US is to make sure that we have you know, once we've spent the money and developed innovative medicines, whether it's for cardiovastlar disease or oncology, that patients actually get access to those medicines, you know, and we can make an impact in their lives and
you know, from from diseases they're suffering from. And in that way, we need to be able to demonstrate that these drugs have value and are bringing value to the patients and to the healthcare system. And we work very closely with with governments and with systems to make sure we get access to those medicines.
Doctor Saron, you know, I always joke on the show that when I come back in the next life, I want to be a healthcare M and a banker, because it seems every Monday we come in and there's another deal out there. How does how do you and your company think about M and A to kind of drive top line growth versus the R and D that you've already talked about.
So the ambition that we set for twenty thirty, the eighty billion does not include any major M and A. You know, we are always looking from a scientific standpoint, not only within our own labs and identifying what could be the next most promising molecule, but also looking outside and science that is happening in universities and biotech companies
and so forth. Over the last year and a half, we've invested close to seven billion in doing licensing transactions and partnerships and smaller M and A transactions that you know, keep help to build our pipeline and really you know, fit very well strategically with us in terms of the ambition that we have, and particularly in new therapy areas where you know we've made some investment, but it can
help us leap frog into the field. For example, in the case of cell therapies or in the case of radio pharmaceuticals, and accelerate the investments that we're already making. So you know, we're always looking for those types of partnerships.
So this is a really uncfo question to ask you, what's the coolest drug that you guys are working on right now, the one thing that you're most excited about and a potential breakthrough there.
That's a I don't know if it's an un pool or maybe it's unfair. You know, it's hard to pick from pick from your children, right, so there are just so many exciting things happening and every you know, every few weeks, we we get some new data that makes us excited. So it's really hard to pick a favorite child.
But you know, there's a there's a lot going on, and you know, we live in very exciting times where not only is you know, what we do in astrosenic is important, but science is evolving so quickly and technology is evolving quickly, and you know we're we're sort of at the forefront of that innovation.
All right, Thank you so much. We truly appreciate it. A Radne Sarah and chief financial officer over at AstraZeneca, joining us on earnings. Really appreciate that. Now I'm an only child and I only have one daughter.
Okay, but I'm always.
Assuming that as a parent you have a favorite. Where does that not work like that?
Well, you have multiple kids. My kid, my four kids are youngest has always told us that he is the favorite. And this is when he's a little little boy, because he gives the best presence in the best hugs. So I'll stick with He's now twenty years old, but I'm gonna stick with that.
It's amazing.
I still get a grief from the two saying, well, you have more pictures of him than me.
Okay, so you may not actually pick a favorite, but they think you do.
Yeah, I like the way you put that.
So drugs are incentient being that once I graduate college, they're done, you know, so they're on their own. So that's equal opportunity.
Equal opportunity to tough love from Paulsmeeny.
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All right, Alex Deelauls when you were live here in our Bloomberg Interactive Brokers studio. We're streaming live on YouTube as well, so head over there and check us out on the video side. One of the topics that Alex and I love to focus on, we think it's really important is commercial real estate. The opportunities, the risks out there and the risk are are big time. We talk about that a lot. Today we're going to focus on I think that the hotel business, the hospitality business, the
resort business. Great guest in our studio today, Sean harr He's a principal and managing partner Trinity Investments. The office is in Honolulu, Los Angeles, London. I don't see Cleveland here. He's based in Miami, A good place to be with everybody else in financial services. Sean, thanks so much for coming into our studio here. Let's start with the pandemic because your industry literally shut its doors locked and through
away the key here. Tell us about what happened in your business and maybe opportunities coming out.
Sure, thank you and thank you so much for having me today. So i'd say, the start of the pandemic was which was truly devastating. We typically own brand managed hotels that are four hundred rooms and larger, and typically in the smile states of Florida, Texas, Arizona, California, Hawaii, Carbo and we had to close all of these properties. And I've likened it to stopping a super tanker mid
stream trying to close these hotels. But we used that time to really complete renovation work to accelerate repositioning of the assets. We also use that time to raise our first commingled fund, which was a GP fund and became one of the largest most active buyers of hotels in the US during that time. I will say that all of these properties that were closed during the pandemic have come roaring back. They're are renovated, they're seeing in credible demand,
having record months of a month performance. So we've come out of it well. But it was scary at the start of the pandemic.
Do you foresee that kind of demand continuing. We've just been trying to figure out what that leisure travel budget winds up looking like for those that have budgets and for those that don't.
I just read a statistic today alex That said that in June, luxury demand was up for hotels nine percent, and I think there's a two percent decrease in demand for the economy segment. What we're seeing with the work from home phenomenon in the US is that every weekend is now a three or four day weekends, so people
are traveling more. At the same time, with the companies having to shrink their office space, they can't hold off sites and their offices anymore, so they're holding more off site meetings to bring their teams together in the types of hotels that we own, so we're seeing compression between the leisure traveler and these off site group, corporate type travelers. So it's baded well for our properties.
If you wanted to go out and buy a property, or if you wanted to refinance a property today, or the bankers pick up your phone calls, I mean, are the banks lending here.
We've been fortunate, I'd say our business more and more relies on relationships, and fortunately for us, we have tremendous relationships in the lending market and in the you know, the private equity A lot of our partners are large private equity funds, We've completed well over two billion dollars of financings and refinancings over the last eleven twelve months.
So we see it robust.
There has been more of a shift towards CNBS or SASBY loans, but we've had loans as large as one hundred and fifty million all the way up to seven hundred and fifty million that we've been able to execute in the last twelve months.
And are you getting that from banks or is it private credit? Like where do you go for that?
So it's a mixture of sasby and then non bank banks is SASBY.
I'm sure it's.
The CNBS market, so single asset, single bar CNBS market, and so yeah, with that market is very active right now. We just refinanced our Diplomat resort in Hollywood, Florida. There was a five hundred and seventy five million dollar transaction about two months ago. We bought a resort for that a Core, which is a non bank bank. They financed us in Scottsdale, Arizona. But it's all down to relationships.
You recently expanded into Europe. Tell us about that.
We're very excited about Europe. So Ryan Don, one of our partners, moved to London about a year ago, really at the request of some of our joint venture partners who wanted an operating partner like Trinity in Europe. We
completed our first acquisition about two months ago. We bought the Parkhayatt hotel in Zurich in partnership with oak Tree and Ubs and Ryan now is the core team of a head of development, acquisitions, asset management, etc. So we're we're very excited about the prospects in Europe.
Who are your competitors? Is that a really silly question?
We definitely we compete with all of the private equity funds, but they tend to be our joint venture partners as well. So we've done a lot of business with oak Tree, We've done a lot of business with Partners Group, with UBS, with Elliott Management, and so we partner with these groups. They rely on us for our in house expertise. We have forty five professionals who live, breathe, and sleep hospitality.
That's what they do. We're hospitality real estate experts and fortunately our competitors also collaborate with us.
What's a typical property that you guys that screens well, for you guys, in terms of an acquisition, what do you guys really look for, whether it's size or location or capital structure, how do you screen that?
In the US, we typically focus on brand managed so mainly Hilton married or Hyatt, and we typically focused on properties that are four hundred rooms and larger, that are more destination type properties. And these tend to be in Florida, Texas, Arizona, California, and Hawaii.
So you would own the property, but Hilton would manage it correct, Okay.
And we were so fortunate with the relationships we have with the brands who really trust us with the assets, and we also buy from the brand. So we've we've bought three assets from Hyatt as they've you know, gone on an asset light strategy. So Zurich was one, Greenwich, Connecticut was another one, and then Indian Wells and California was a third one.
But yeah, I'm not here in Cleveland here, I'm not hearing des Moines.
Do you want to go to DesMoines? And of course, I mean, like sure, but I mean from what you're saying these are I'm not dissing the places. I'm dissing the location for hotels in that if I'm going to go to a destination and I'm going to extend it and I'm gonna send a work trip or something, I'm not gonna go to Des Moines. I'm going to go to a place where i can soak up sun and be in a pool and that kind of stuff.
Well, what we've learned is that you need multiple levers because things do happen like COVID that are unforeseen. So when you have one of these destination type properties, you have multiple levers between group, corporate, leisure, meeting space, et cetera that you can that you can play with to induce demand to the assets.
So are you guys net buyers today? Are you net sellers.
All of the above?
We're definitely net buyers. You know, I think we're going to see the debt market stabilized. While we've been successful in them, you do need a more robust debt market to induce buyers. I think the minute we see hopefully an interest rate cut, you'll see a lot of demand coming back into the market. So we do have assets that are approaching stabilization and in the right conditions we will sell.
Well, you know, Alex and I often when we talk about commercial rule stay, we just think about here the third Avenue of Manhattan, and we're hearing from experts that when these things trade on the third Avenue Manhattan, their b office kind of properties thirty forty cents on the dollar. Yeah, if you go out and make an acquisition tidy of a hotel, are you think you're getting You're not getting
a discount, are you? I mean, there are these things trading about where they were trading or are they trading at a discount of pre pandemic.
I would normally walk into a convention or a conference as the hotel guy, and you know, you'd be sort of the afterthought in terms of an asset class for real estate, what we've proven in coming out of COVID is that a we've been able to stay ahead of inflation because you essentially reprice on a nightly basis, so you can reprice your rooms, your food, and beverage. The other side is that we typically trade at wider cap rates.
So if we're buying at a seven cap and we're financing at an eight percent all in interest rate, there's slight negative leverage and it's a value add investment that we normally do. So we work our way into positive
territory pretty quickly. If you're predicated on buying the other real estate ASCID classes at a four percent cap rate, which used to need a three percent interest rate to make it work, you're way under water in terms of that spread between whether cap rates and the interest rates are now interesting.
Go ahead, and I'm just fascinating stuff. There's so many different areas in little tranches and slices of the.
Yeah, it is really interesting. Sean, thank you so much. I really appreciate it. Sean Air is principal managing a managing partner at Trinity Investments, talking a lot about the state of commercial real estate when it comes to luxury hotels. I don't remember the last time I feel like I've traveled. It's been so long.
We were down in the Nashville. Yeah, we were were the Lord I mean Operland Resort.
I mean I clocked like fourteen thousand steps one day, just like being a person walking around that hotel.
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And here we go. One of my favorite stories of the last forty eight hours is what's happening in luxury retail or? MEZ is going to be reporting after the closing bell in Europe, so that's after eleven thirty Eastern our time. We had the likes of all the other guys. Who are the other guys now? Richmond not doing really well, Gucci sales disappointed, and that wound up hurting, carrying their parent company LVMH also struggling. I mean it's grim out there.
Debora Aigan is Boomberg Intelligence Luxury Goods analyst and she joins us on this topic. Deborah, how much of the weakness is a China problem versus a broader problem?
Hi, Yes, some of the weakness is a China problem, but I would say it's around ten percent of the problem at the moment, because we were already against a difficult base last year where we saw only the market only open in January last year doing well until it took a while for stores to build again in China, and then we saw a drop off May June picked up a little bit more. By September three, December it contracted again, and I would say that into Q two were actually probably flat in China.
Year on year.
But what we have is actually some of the Chinese cohort some travel to Europe, but especially and particularly travel to Japan, and that is skewing numbers. And there's there's more into that that we can talk about.
So, I mean, I guess the question is what are these luxury brands? I mean, they've had a good run. Is this just kind of getting back to maybe a more normalized spending pattern by typical luxury consumers or is there something else going on here? Because I can get a Gucci Jackie nineteen sixty one medium shoulder bag for thirty nine hundred bucks?
Would you want you?
What?
How about?
What just happened here? Did you look up luxury retime?
I'm looking at the Gucci site here, the Gucci Jackie nineteen sixty one medium shoulder bag. Tom Keen was looking at this this morning, thirty nine hundred bucks. So what happens here?
Right? So probably two stories here. So well, let's tooch on Gucci afterwards, but let me just run through some numbers to put what's happening in this quarter and this half year into contact. So we started twenty twenty four by saying this would very much be a tale of two halves, and so I want to remind about what that means, because in the first half of twenty twenty three, the luxury marker grew twenty percent twenty percent in Q one and nineteen and a half percent in Q two.
By Q three and Q four because of the skew year on yure it grew ten percent average. So as we head into the second half, we'll be looking at it facing ten percent rather than twenty percent which are faced in the first In the first half of this year, and so in Q on this year it came through with almost seven percent growth. In Q two, we've only got six numbers so far, six of the big reporters,
and they're at one percent. So that's what you're referring to when you say, you know, Richmond's only a one percent ALVIU majors of one percent, because they're up against nineteen percent and seventeen percent respectively four quarters ago. So that's the issue there. The second thing on China, so we know that China numbers are about flat where double digit year on year, but about flat, and that we're seeing actually the Chinese cohort a lot of that spend elsewhere.
And then if we think about Gucci, Gucci, I'm going to put that aligned to a Burbery which is also very difficult, or a Ferragamo which comes out next week, where it's about really rebuilding and elevating the brand. And for me, Birbery, you have got it most wrong. And Gucci could do something by Q three Q four with new product in the marketplace, but it's a difficult area when you're trying to persuade not your own retail stores
but the wholesale store. So a boutique could department store to take the risk of new, untested design on board at a time when there's real uncertainty about new designers and whether they've made it or not.
It's such a good that makes sense. It does make sense. The one outlier, though, has been our maz has continued to deliver, albeit maybe at a slower pace. They're going to report earnings in it's about fifteen minutes, give or take. What do you think we're going to see there?
I think much of the same from MS, there will be some slight slowdown I think in things like accessories for example, silks for example, maybe a little bit in perfumes and cosmetics. It depends on where they are. You're on your category by category with growth rates. But there's another one too which we can use to add some confidence for MS. That would be Brunello Cucinelli, which was one of the first to report and it came through with twelve percent growth of twenty eight percent last year.
So it's very high end. So anything that's high end. The consumer at the very high end is not so worried by prices having gone up eight to ten percent over the last couple of years. They're not so worried by monthly income coming in. Those with high spend and power, they're still looking for, you know, to treat themselves for that luxury feel, and that's what's holding out. We also saw the rich Monozoni up, as we said, one percent
in this quarter. If you look behind those numbers, Cartier was still very strong and Van Kleef and Arpels very strong. It was more their accessories and fashion side of things that saw more of a dip, you know, not so strong growth because the middle ground is just contested. There's uncertainty there around elections, the macro view, it's all tying together. But second half structurally becomes a lot easier for these companies.
When I was back in my tiwering days, I was at RMEZ type person that was my go to super solid brand. Yeah, saw that's a Wall Street standard back in the day.
And then you know there's another thing that runs on this because I'm going to I think, be like really focusing on what happens on operations. Some of these companies have forty percent margin down to twenty five percent average across the sector. I think where we're getting a lot more of Asian you know, Asia and overall is around a third of the luxury market, and we're getting a
lot more of that spend into Japan. And if you think about the translation of these big euro companies, Euro based companies, the end being so week has kind of given you an equivalent one to one eurot yen in terms of pricing, whereas if you were buying in China in Hong Kong, you were getting one point two, so the conversion was one point two. So that also hits the top line in terms of value growth.
Yeah, back in the day, Hey rock Quicks, how about like Saudi Arabia, United Arab Emirates do buy that part of the world. It seems like there's lots of cash there is that a big, big market for luxury.
If we bring it, if we bring it all together, it's probably moving towards six to seven percent, So you would say it's one of the bigger or just above the biggest European contingent. But it's certainly growing. A huge amount of investment moving into their more so money coming in from from Russia, from a different parts of Eastern Europe, from parts of Middle East into into where you know
where they can't spend in particular areas. So there's a lot of infrastr actually taking place in a lot of new joint ventures and others being written in those areas too, which I see has been strong over the next three to five years. Similarly, we'll be looking five years on India as well as an upcoming market.
All right, thanks so much for joining us. That making Bloomberg Intelligence covers all the luxury brands for us. I'm looking on Themez site pre pandemic. When I was wearing ties two hundred dollars for now they're to sixty. So's too, mach no, and I think any last you know, for amount time, Yeah, they're good, and you know it's but that's you know. But I'm just looking at the inflation because again I was at two hundred. John's laughing.
I mean, I'm looking at Bruno Cucinelli. Where you're gonna pay two grand for a man Cardigan. I mean, really, that just blows my tiny brain. I just don't get it.
You're luxury.
I'm like, I don't know. Magic.
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