Bloomberg Businessweek Weekend - December 5th, 2025

24:28So then how do investors know what they should invest in and what they should stay away from? Yeah, I think one of the things to look out for is one of the questions I think that we all talk about are valuation marks. Is there transparency? Is there not transparency? I always tell people to ask them, what is your valuation methodology? How often are you looking at your valuation? Because in the end, we are in a private illiquid market. There's no mark to market. There is no market. And so there is a subjectiveness and a judgment on the manager. And I think a lot of it is, do they mark their investments aggressively or are they conservative?

25:04Right. How do you know? I think you have to ask your questions of what methodology to do. Do you use discounted cash flow? How much does current deals matter? But this is where I think about, Christina, that a firm, whether it's Oak Tree or somebody else, right? If you're playing games in terms of valuations or not being so transparent or whatever for your investors, the deals aren't going to pay off, right? And investors are not going to give you any more money. So is that kind of a checks and balance in some way in terms of ensuring you guys are doing the work, like they trust a manager? Yeah.

25:39And that you guys are making sure you have the transparency before you go into a deal. Exactly. Because if you are way too aggressive and all your marks are overinflated, you will have a really hard time with your investors. Right. Right. That is reputation risk. and also just inherently as a creditor, you are always worried about kind of what's next, what's the next risk, because your upside is getting what's contractually due to you. So a lot of, just inherently as a credit investor, you tend to be conservative. Because that's why some, you know, and some of the conversations we've had in trying to figure out, like, are there more cockroaches out there that maybe some of what some have said is smaller players that maybe don't do as much homework or something, that's where we might see some problems.

26:25Talk to us about the market overall, where you guys are finding opportunities right now and what kind of opportunities. And I'm curious if it tells you kind of what this investment environment, is it a healthy one? Is it a stressed one? Like, I'm just curious. I would say right now it is, there's a supply demand imbalance. So what does that mean? It's very competitive. If you think about the first nine months of the year with the tariffs, right? With all of the uncertainty, M &A went to a screeching halt for the most part. Now M &A has kind of come back after Labor Day. And so now you're seeing what I call a little bit of FOMO, where you're seeing a lot of lenders rush to get deals done.

27:04And I think this is the time that you want to be very selective. You want to be a credit picker because the terms are getting more aggressive. Leverage is going up. Pricing is going down. And so from Oak Tree's philosophy standpoint is you really need to be selective. It's a yellow light. proceed with caution. You're not going to stop investing, but you've got to pick and choose your spots. Do you think this type of asset class will end up in the 401ks of many Americans? I think that is, I call it the next frontier. I think from a technology standpoint, if you think about private credit, it's a relative, I'm talking about more sponsored direct lending.

27:40It's a pretty mature asset class at this point. And I think where you're going to see innovation is what I call technologies on reaching new investors or fund construction. And so I do think 401ks will be the next horizon, but that's also where private equity is also going into, right? And so will that help a little bit with the supply demand balance? Yes, right. Whether people want it or not in their 401ks, I don't know. Well, it does though. It creates another demand, right? For what's going on there. Just got about a minute left. Can you share with us, I don't know, an interesting deal that you recently did?

28:14I don't know how specific you can get, but just give us an idea in terms of maybe the type of deal terms or whatever you can share. Just not about a specific deal, but just what we're seeing in the market right now is it's counterintuitive, but as the interest rates go lower, you're seeing leverage creep up because borrowers can actually make their interest charges now. And so before when interest rates were say 4 % on SOFR, you didn't really see deals go over six times because otherwise a borrower couldn't pay their interest. Now it's actually going the other way where you're getting lower yields, but higher leverage.

28:47And that just notes the level of competition. So we're hoping that 2026, there will be a little bit more balance in deals. Yeah. But that's what we're seeing in the moment. So does this assume too that you think the Fed will continue to cut rates even into 2026? I think it all depends on who gets appointed.

29:06What about Kevin Hassett? So yeah, do you think, is it a dumb thing that if it's Kevin Hassett, that you can assume that there'll be lower rates? Just got about 30 seconds. I'm not going to make an assumption around it, but we all have an understanding of what the administration wants is lower rates, right? Interesting times, right? And we'll see where the underlying economy also says, but hopefully we'll also dictate where the rates inevitably land. Right. That the Fed sticks to the mandate and what needs to be done. Thank you so much. Really appreciate it. Christina Lee, Managing Director and Co-Portfolio Manager for U.S.

29:37Private Debt Strategy over at Oaktree Capital Management, joining us right here in our Bloomberg Interactive Broker Studio. This is the Bloomberg Business Week Daily Podcast. Listen live each weekday starting at 2 p.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa, play Bloomberg 1130. This past week, we got an update about the Trump administration ending a pay incentive program intended to hire and retain experts in the federal government's primary civilian cybersecurity agency.

30:13which has already been depleted by firings, resignations, and reassignments. Now the program, known as the Cybersecurity Retention Incentive Program, will be eliminated in 2026 and replaced with a different incentive program called the Cybersecurity Talent Management System. Cybersecurity experts warn that ending the extra pay will lead to more departures at the agency, further weakening the federal government's defenses against cyber attacks, with some employees facing a significant pay cut of as much as 25%. That story on the Bloomberg. We know that cybersecurity experts have warned for years now that the rise of artificial intelligence and large language models will radically transform the way hackers operate and make devastating breaches easier to pull off, whether it's in the private or public sectors.

30:59Just last month, AI developer Anthropix said that it disrupted what it described as a highly sophisticated AI-led espionage campaign from China that used the company's clawed chatbot. Thwarting cyber risks of all kinds is the world of cloud security company Zscaler. The company released its operating results for its fiscal 2026 first quarter, which revealed accelerating revenue growth on the back of soaring demand for its products. However, the stock is still down roughly 30 % from its 2021 record high when it reached what some analysts call an unsustainable valuation during a frenzy in the tech market.

31:34For more on the company, the outlook in the world of cybersecurity, we caught up with Zscaler CEO Jay Chaudhary. Also joining our conversation, Bloomberg Intelligence Global Head of Technology Research, Mandeep Singh. We had an outstanding quarter. Our ARR growth, 26%. Revenue growth, 26%. 56%, free cash flow margin 52%, operating margin 22%. We beat all the metrics that Wall Street was looking for. In fact, if you take our free cash flow margin and add it to our revenue growth, that's 78%. That beats the rule of 40 that many investors look for very, very well. And this is at scale of$3 billion or higher.

32:19There are only about five pure play enterprise SaaS companies that are in that unique class. So we've done extremely well. We are very proud of what we delivered and we passed a meaningful beat with it and raised our annual target. So I think we're very pleased with it. I think investors get it wrong from time to time. This is one of those times. That's what I was going to ask. You know, you think investors just got it wrong? Because, I mean, 13 % is a pretty big hit. So you think, I mean, that's not like them wavering at all. They really wanted more from you guys. I mean, the expectations were certainly high.

32:58Look, markets do what they do. I have one focus, keep on innovating and serving our customers. And those innovations started with zero-trust architecture, which has changed the world of old-school firewalls and VPNs. And now as AI security is coming, AI security is becoming a big concern. and zero trust that we pioneered is the foundation of it. So we have amazing interest from our customers. That's why we're able to deliver these strong numbers. Over 45 % Fortune 500 companies trust us, depend upon us. So I'm very bullish about our future. So Jay, talking about AI security, I mean, you have a business model that's reliant on companies hiring more people, and you have a seed-based model.

33:47How does that change with AI security? Because AI, what we are seeing out there is more consumption-based. So how does that impact you and your business? It's a good question. So we started out with bringing zero trust for users so users can access applications without being on the company network. And natural pricing for that is user-based. Then we move the model to the architecture, the next thing. How about zero trust communication for workloads, cloud workloads? That's actually based on number of workloads and actually amount of traffic. So it's not just user based. If you think about AI security, there are many facets of AI security.

34:33What one of the biggest thing our customers look for is, as every company starts using a lot of agents, these agents are somewhat like people. They need to access certain applications. They need to talk to other agents. So we are extending our zero trust exchange that are designed for users and workloads and branches now to agentic exchange so that right agent can talk to right agent and right application. So obviously there's an opportunity for us to secure that communication. Yes, the number of users may not grow significantly, But I believe every company will have scores of agents for every single employee and they need to be secured.

35:18And we are extremely well positioned to handle that. And talking about agents, it sounds like one of your biggest competitors is doubling down on observability and identity, especially on the browser side, as an area of focus for agent tech AI. Is that something you feel is very important to roll out, agents? So some companies try to go and buy many companies to create a collection of things. We are very focused on what we want. We will focus on zero trust and then we focused on AI. Regarding observability, we actually do observability for the areas that matter to our customers. We sit between the user and the application.

36:07So today we have a sizable business, hundreds of millions of dollar business with a product we call Zscaler Digital Experience where we can tell our customers if any user is having any performance issues as they try to access those applications. It's integrated with our platform. While many companies have many point products and they are separate, we like to have integrated platform that serves our customers. So we not only provide secure and reliable experience, we make sure that it is fast and you can troubleshoot those things. But I'm not going into broad observability which has become a broad area.

36:49We are focused on the areas that are relevant to our customers. And identity, is that something you care about, the identity on the browser? Identity is important. Think about identity for users. We have been working from day one with all leading ID providers for users, whether it's Microsoft and Okta and others. Now when it comes to identity of agents, I believe there will be many contenders. Microsoft, Google, AWS, Octos of the world. Our philosophy is to federate those identity providers, use that identity, and we are the zero trust exchange or switchboard to make sure the right AI agent talks to the right agent.

37:36In this world, I do not need to own everything. I need to do some of the things I do the best and integrate with partners with proper API integration so our customers get the biggest benefit. We believe in doing a few things but do them extremely well and partner with others. So I do feel like we're all learning as we go and of course Mandeep and Jay you guys are ahead of us in a big way but when they talk Mandeep about zero trust this never trust always verify I think about digital touch points thinking that there are threats within an organization and outside and you've got to make sure there's security everywhere.

38:15Yeah, no matter where you are, and that's where, you know, sassy is a term that gets thrown a lot, and Zscaler is in the leading position in that magic quadrant. So I have one other question, Jay, for you. So given the amount of data in the world of security and, you know, you guys generate trillions of data points, will the security world have its own LLM? Yes, the answer is yes. we are actually working on building our security focused LLM. And I do not need to have the large, large language model. Security is very focused set of high quality data. With over 8 ,000 customers and 45 % of Fortune 500 companies, we generate over half a trillion transaction logs a day.

39:05Those logs are anonymized. but they can give us an idea of where the threats are coming from. We can find a needle in a high stack and help all of our customers. So AI is only as good as the data that powers it, and we have the best data, and we believe we can help identify some of these threats in almost near real time and provide a closed-loop system so that the threats can't really exploit our customers and provide them benefit at a much faster ways. That's why we are focused on AI-powered security operations. And our acquisition of Red Canary is part of the strategy because they built some very, very good agentic AI technology that we're integrating with our platform.

39:54The use of AI to make the system more robust certainly makes sense, but the concern about how AI has made the attackers just more robust and the attacks more robust. Can you point to specific instances where hackers have actually used AI to enhance their attacks and did it work? Yes, there are many, many examples. Let me give you a few simple ones. Every attack starts by finding your attack surface where you are. And public IP address is the starting point. Every firewall, every VPN, every application portal is an attack surface. In the past, a hacker may have taken weeks to identify it. Now you can go to chat GPT and say, tell me all the firewalls and VPNs that have vulnerabilities and give it to me in a nice tabular format.

40:48Under 60 seconds you can get that. Now, the second part hackers would do is these phishing emails. Now they can ask AI to say, write an email that looks like a CFO's writing style, No typos make it very targeted. That's number two. Third, hackers are using automation that AI provides. Once they are on the network, automation can find the key applications and try to encrypt that data. A lot of that is happening. What does Zscaler do in this case? Number one, we hide your attack surface. Your applications are hidden behind our cloud. Bad guys can't even find you. They can't find you. They can't attack you.

41:31And the second is own the network. The biggest problem with firewalls and VPNs is, they're trying to protect the castle and we actually make it zero trust. Jay, we've got to run. This was so informative and so enlightening in terms of AI security. We so appreciate it. Jay Chaudhry, he's founder, chairman, CEO of Zscaler, and of course our own Mandeep Singh of BI.

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45:43We have a great glimpse of the world around us from real estate to retail, including, yeah, it's shopping's biggest season. So what does Target need to do to turn its business around? Plus, break out the hot chocolate. We catch up with the founder and global CEO of the UK-based chocolatier, Hotel Chocolat, this company taking on the U.S. First up this hour, a lot happening with New York real estate this past week. New York Mets owner Steve Cohen won approval to operate a casino next to Citi Field in Queens. as one of three projects selected for gambling licenses right here in New York City. Two other projects were also selected.

46:19Genting Group's Resorts World, which proposes to expand a casino next to the Aqueduct Racetrack in Queens, and Bally's Corp, which plans to operate a gaming facility at the site of a Bronx golf course. We spoke with Ron Eliasaf. He is founder and managing director of Northwind Group. It's a real estate private equity firm in Manhattan that has transacted over$5.6 billion of debt and equity investments in residential, commercial, senior living, and healthcare properties. It was a long wait, I think, for a lot of the observers and the companies who put in bids for these licenses. I'm just wondering how you view this in terms of changing the real estate landscape.

46:58This one is not in Midtown, where one of the other licenses could have gone. But how do you view it? I think in general it's a positive thing for New York City. I think it was given it's not going to be in Manhattan. And I think to support growth in communities in Queens and Bronx, it's overall a positive thing. It will create jobs, opportunities, increase tourism and attraction. I think the hard rock bid together with Stevie Cohen is going to make great things for a city feel there. It's great for transportation. I don't think anybody wants a casino in Times Square or anywhere in the city. Agreed.

47:33And overall, it's going to be, if you look at the three projects that are almost there, right? They're still final stage to get it done. It's going to be total over$20 billion invested in developing the real estate around it, hotels, tourist attractions, concert venues, music. It's a good thing. On the casino side, though, the thing that's puzzling to me is that we all have casinos in our pockets with our phones nowadays, it seems like. And the rise of prediction markets, the rise of online sports betting and doing it through apps, it means like. It's not the same experience. No, you don't have to go to Vegas or Atlantic City.

48:08I don't gamble personally, but I think casinos are not what you do on your phone. It's exactly what Carol is saying. It's a touristic attraction. You go there for the experience. It's coupled with great dining, with shows, Cirque du Soleil or whatever it is. And I think it will overall increase tourism to New York. Interesting, interesting. Take a big picture right now. How do you see real estate in New York right now? I think right now everybody's bracing for the Mamdani taking office in January and what will come next. I think there has been positive signs. Tisch staying on as a commissioner seems something that, at least for the real estate community, is perceived as a positive thing.

48:49I think public safety is on top of everybody's mind. But with that said, there are some pretty aggressive legislation looming. Recently, City Council is pushing a COPAC community offer to purchase. It's not sponsored by MomDani per se, but it's definitely something that you see as a left-wing agenda. It basically means that anybody that owns a multifamily building will have to first give a right-to-first offer to nonprofits and community organizations to purchase. It basically could potentially stall selling real estate, multifamily. Those multifamily buildings aren't moving anyway, though, right?

49:24They are. They are. They're moving. I'm not a rent-stabilized building. This will, if it passes, which they got a pretty overwhelming initial vote. So this goes for rent-stabilized and non-rent-stabilized too? Any multifamily? Any multifamily above certain unit count, which is pretty overwhelming. Again, it hasn't passed yet, but this sort of agenda will scare investors potentially and will make people pause. The city, you asked about the city. In general, the city is facing a supply shortage that's unbelievable. But what would this do for a supply shortage, though? This will hurt it. Because people, you will think twice before buying.

50:00I think that's what's so puzzling to us. And I'm going to speak for Carol a little bit. Because we talk about the supply-demand challenge with multifamily real estate and with real estate in New York City anyway. The prices won't come down unless you build more housing. This sort of legislation will do the exact opposite of what... And I'm not taking a political position here. I mean, this is what... This is not a political position. This is supply-demand. This is supply-demand in economics. If the city council or the mayor wants to reduce pricing, what they have to do is push more supply. You push more supply by providing subsidies, by endorsing legislation that makes it easier to build.

50:34Changing zoning. Less effective. Increase up zone. Not limiting someone's ability to sell their own property, rent their own property. So this will have a negative effect, not a positive effect. I mean, what are the rules? I mean, I don't understand why when a developer is building a building that there isn't either a certain percentage that's always put aside for people who maybe don't make as much money. Well, there have been certain programs, right? Certain programs. But why? I mean, I've seen. Well, the full affordable kind of subsidies have been tapped out. They've maximized in the budget.

51:11So then there was 421A that tapered off and died. Then 48, 485X. Those have built-in 20%, 25 % affordable components in it. For every new construction? Yes, if you qualify, right? And then now with... What do you mean if you qualify? There are certain ground... Well, 421A has expired, but 485X, you have to qualify with pricing and how much you do. But then if you build ground up and you've done it in the timeframe that the legislation existed, you would have to build 25 % or provide 25 % affordable. So why do you think, is it just zoning that we don't have enough affordable housing here in New York City?

51:45I mean... Or any major city? The issue in the city is it is... The land is limited. Yeah. Right? Manhattan is an island. Right. Cost of land is very high. Cost of construction is very high. It's not like building somewhere in the middle of Texas. You can just bring your trucks in. You have to stop traffic. You have to build. The cost of labor is more expensive. So everything costs more to build. So the end product costs more. So for you as a developer, it has to be more profitable to justify it. Right. But the city has done a few things right. If you look at City of Yes, it was a great program.

52:14It is still a great program. The 467M tax abatement, which basically said if you convert an office building to resi and set aside affordable, you get a tax incentive, property tax incentive. Those have been positive, I think, examples of how the city has done it right. This specific bill on the table is a very bad example, and I hope it doesn't pass. I think people could also point to something closer to my neighborhood, like Gowanus rezoning. I mean, if you go to along 4th Avenue in Brooklyn and, you know, the Gowanus area that has been that was rezoned, there's just like huge buildings and thousands of units that are going up there.

52:52I completely agree with you. Upzoning is the right way to go because in the long term, the city will benefit from more property tax eventually on more units being built. I would personally upzone the entire Midtown district that connects to Hudson Yards. Right now we have these meat block garment district buildings. What is up zoning? Giving more property rights. You have a building right now you can build 12 times more than what your land lot size is. Double it. So you can go higher essentially? You can go higher. Go higher. I mean the city, we have plenty of sky rises here. I think one of the challenges would be transportation to move all the additional people.

53:29And I think about that a lot. It gets dense. It does get dense. And it's not like you can add more, you can't add more cars to the subway. you can't always increase frequency of subway trains coming because some of these trains share tracks. It has to come with investment in infrastructure. So this is upzoning is not something you press a button. You have to plan 10 years ahead and it has to come with additional infrastructure for public transportation for sure. So in places in Queens and Midtown, you have to plan on building more public transportation. I think eventually you're going to see also eventually these driverless cars coming in.

54:03That will have a huge impact on traffic over time. In a positive way? I think in a positive way, definitely. When do you think they'll arrive? I've seen them driving around the city. I'm so in love. I've tried it in the West Coast, in LA. It was one of the best experiences. I've never met anyone who tried it and didn't like it. It's like unbelievable. The rate environment. If indeed we get, it's expected that the Fed's going to cut rates next week when it meets. How is that impacting deals, valuations, opportunities right now? I think it's pretty priced in right now. I think if you look at the forward curve, its pricing in this reduction.

54:36It expects it. I think we're very close to being in kind of a neutral state. I don't think we're going to see another significant decrease in rate, maybe another 50 bps over the next year, but not more than that. That's what the market is pricing. And you're seeing more liquidity flow into the real estate market in general, both from the lending side, from the credit. We've seen spreads come in and more loans available and equities back and people are making investments. They feel more comfortable now that there's more predictability. Our thanks to Ron Eliasoff. He is founder and managing director of Northwind Group.

55:05You're listening to Bloomberg Businessweek. Coming up, off of the back of retail earnings and Black Friday, we take a deep dive into Target and the uphill climb for its incoming CEO. And speaking of earnings, Macy's reported this past week, posting better than expected results. But the retailer warned that it may be seeing softer demand to come in the future. For details, our Romain Bostic caught up with the CEO of Macy's, Tony Spring, for a pen and pad interview and joined Bloomberg's Danny Berger and Matt Miller to talk about it. I mean, I did ask him a lot about what foot traffic was. Was there an actual increase?

55:39He did say he was happy with foot traffic, but he also seemed to imply here that a lot of the revenue gains that they've seen in this most recent quarter was people buying more. So basically bigger tickets, bigger receipts, if you will, rather than actually more people going in there. But this is also a company that is, you know, he's doing the conference call now, He's been asked a lot about how strong this holiday season is going to be. And one of the reasons why you see the shares down a little bit here is the comp sales growth, while certainly an improvement over previous years, is still kind of lagging what you would have seen at a company like Macy's in holiday seasons of past.

56:14Remember, this is going to be or supposed to be their best quarter of the year, their fiscal fourth quarter. You know, going to a physical store seems like a quaint idea, but a strange thing to do, right? I mean, most of us buy all of our stuff online. How are they doing with that? Well, I mean, first of all, the average age of a Macy's shopper is over 40. It's like, you know, late 40s, I think, is the average age. So that gives you a sense of one of the challenges that they're going. I know, Madden, you're still in your 30s. But it would get to this idea here that there is still a cohort of boomers out there that do want that physical experience.

56:46Macy's obviously is now trying to make sure that their younger generation of Gen Z and beyond, that they are actually engaged in the physical stories and trying to make them more experiential. That's the long-term story, you know, and that's what he's doing. He's basically taking 350 Macy's stores, basically going to revamp all of these stores to make them more experiential. He's only done about 125, 150 so far. They're going to get to the rest over the next year and a half, two years. It feels like we're in this bizarre world where the retailers who do well, it's because you've got like Sidney Sweeney to do your campaign or Cat's Eye or some sort of celebrity.

57:17I mean, Macy's isn't doing that, but it feels like we're in this weird era of collabs and influencers. Well, it's interesting. And you bring up, you know, obviously what we're seeing with American Eagle, their shares on fire. I think when they open, they're going to be having their best day in a couple of months. But it gets to this idea that's a singular brand, right? And Macy's is a multi-brand retailer in an era where a lot of us go directly to the brands themselves. We connect with those brands either because, you know, Matt salivates over Sidney Sweeney in that ad or something else. And the question is, how does Macy's sort of, you know, get that fire?

57:45They've had a lot of collabs with Wicked and other things like that that do get people into the stores. But it's a much bigger challenge, Danny. That's Bloomberg's Romain Bostic, Danny Berger and Matt Miller. Just ahead on Bloomberg Business Week, more in the retail space and a look inside the inner workings of Target. I'm Carol Masser, and this is Bloomberg. This is the Bloomberg Business Week Daily Podcast. Listen live each weekday starting at 2 p.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station.

58:19Just say, Alexa, play Bloomberg 1130. Target has had a tough couple of years. While it's almost 2 ,000 stores still sell a ton of stuff and the company remains profitable, some observers say it has long had a culture of high self-regard, which can be dangerous in an industry as rapidly evolving as retail. Yeah, sometimes you got to be humble. The ailing retailer has lost its cheap, chic appeal. Can a new CEO get it back on feet with his old boss next door? I always think about that when there's a new CEO and yet the old CEO is kind of, you know, somewhere as executive chair or something. That's the question, though, at the heart of J.

59:00Wan Kang and Devin Leonard's profile for Bloomberg Businessweek. You can check out the story. It's on the terminal and also at Bloomberg.com. Devin joining us right here in our Bloomberg studio. Got it. Devin, by the way, senior global business writer. Just want to get your title out there. Hey, Target is a retailer we all know and have probably loved at different times. I have been one of those people when they did those fashion combinations and I wanted to be there. I thought you were going to say the tea kettle. No, not the tea kettle. That's a big star of the profile. But I've lined up, you know, because I wanted to, you know, get a piece of some fashion folk, you know, and their combination or their collaboration with Target.

59:41Talk to us about how you wanted to approach this one because they've been going through a tough time for a while here. I don't know. I mean, it's just this company that at its good times, people have just really loved it, been really passionate about it. And my wife, my daughter, we're really into it. My daughter as a teenager spent just hanging out there. And that was her whole thing. They'd be selling Anna Sue handbags. but at a price that my daughter, who's like 16, could afford. And so this whole thing of kind of like bringing design, bringing fashion to the masses, to teenagers, it's this huge, huge achievement.

1:00:25And yet things have been really tough, and sales have been declining. They peaked during the pandemic, and they just haven't been able to get the groove back. And there have been a lot of missteps, But, you know, we wanted to sort of delve into that and look at that and go talk to them about that. And so we did in early September and, you know, spent a lot of time researching, going back to them. But, I mean, no, it's kind of a tragic story at this point. I mean, maybe they can turn it around, but, you know, they're in rough shape. Well, you got to attend this pep rally for that. That was kind of the culmination of the most recent CEO's time at Target, Brian Cornell.

1:01:14And you spent some time with him and his successor. Soon to be successor. Soon to be, yeah. Incoming, right. Pending. I was like looking for the word incoming. I know it's confusing. How does he look at his time and sort of the arc of this narrative? Because there's a little bit of a disconnect. Yeah, no, totally, Tim. Because, I mean, that was the thing. It was this huge event, 14 ,000, sorry, upper level Target employees in this 8 o 'clock in the morning in the Target Center. The music's booming. Red lights everywhere. And then Brian Cornell, the current CEO, has been CEO since 2014, comes out.

1:01:58And basically, it's going to be his last time at Target together as CEO. And it's a big look back at the highlights and basically emphasizing that when he came in, he did a really good job. And the company did Turning Around then. He did that. He pulled it out of Canada where they were losing money. He rebooted a bunch of stores. and rebooted a lot of the store brands. The company peaked, though, in 2022. And he didn't really talk about what happened after that, except we didn't really grow. And there's all kinds of things that happened in the last couple of years that contributed to the decline of their stock and the decline of their sales.

1:02:41They've had some big political controversies. They ticked off conservatives. They ticked off liberals with their abandonment of DEI. So they're kind of like all purposes offender. And then their stores haven't been operated. Their stores have been kind of a mess. Anyway, he sort of ignores all that. And then he bursts into tears on the stage. And it's kind of like, well, wait a minute. He's announced that he's stepping down. He's not leaving, though, until January. and then his replacement and his right-hand man who's an insider. That's not to say that, you know, maybe he won't, that's not to say he won't work out, but it's not what investors wanted.

1:03:24The stock dropped. And it was this moment kind of like, you know, he was kind of milking this moment on stage in front of all these folks when his last couple of years have been kind of a disaster. If he'd left in 2022, he could have gone out in history as a great retail CEO, but he stuck around. Well, they waived the mandatory retirement age for him a couple of times, right? Well, once was enough, Carol, I think. Oh, was it once? Yeah, well, still. But I think what's fascinating, and you see this over and over again with companies, and they are in a hard place trying to figure out their way forward, and then they just top somebody who's been at the company for another 20, who's been there for 20 years.

1:04:07And I know sometimes folks are like, well, it's good. You have an insider who knows it. But a lot of times what you need is an outsider. Well, actually, and we're neglecting something here because it's one thing to basically ignore investors and appoint, you know, consummate insiders. Some guy's been there for 22 years, but we're neglecting to mention that on top of that, Brian Cornell, the guy who a lot of people think is responsible for, you know, who presided over, you know, the sort of catastrophe over the last couple of years, he's not going anywhere. He's sticking around as executive chairman.

1:04:39And I think there are instances where, like, Jeff Bezos, you know, when it's time to, you know, his replacement, Andrew Jacey, I mean, he sticks around as the executive chairman. It's kind of like, well, you know, he's the founder. He's responsible for a lot of the company's success. If he wants to stick around and kind of keep an eye on things and, you know, lead the strategy, fine. But when you're somebody who's had a really terrible record in the last couple of years, why are you sticking around? And why is the board? Allowing it. Yeah, yeah. Of course, he's the chairman of the board, but it just seems to speak to kind of a larger problem at Target.

1:05:12The thing you mentioned at the beginning about a lack of urgency in addressing problems, and sometimes even acknowledging they have problems. Right. So when Cornell came in a little more than a decade ago, he pulled the plug on the Canada stores, which was seen as a pretty big move. They were all losing money. They were all losing money. Yeah, 133. But they hadn't been in Canada for that long. Right, right, right. And there were just a lot of, as you point out in the piece, a lot of execution issues. Right, supply chain issues. Yeah. At what point, like the target that you describe and that Carol describes and, you know, the taking out all the ads, like the takeover of the New Yorker.

1:05:50No, all that stuff is, and I remember all that stuff. Yeah. What was sort of the end of that? Like, why did that era decline? Well, all of that stuff happened, certainly for the most part, happened under, I guess, the CEO, Bob Ulrich, who became CEO of Target in 1987. They just had about 300-plus stores. It was part of Dayton Hudson, sort of a department store company. But he basically decided that to compete with Walmart, we have to have kind of cooler style or products. We have to have cleaner, more well-lit stores. The execution has to be better. But he kicked off this whole thing that sort of, I won't say culminated, but it really, really started with the Michael Graves partnership, and that was in 1999.

1:06:43That resulted in the famous tea kettle, which, of course, we can't stop talking about it. He couldn't mention enough times in the story because it's just sort of like, it was incredible. It was a piece of art that people could buy for$34.99. But in any case, he steps down because of the retirement age limit in 2008. He's replaced by Greg Steinhoffel, who was his number two, his right-hand man. And that just didn't really work out. Even Bob Ulrich says in the story, he thinks that's the biggest mistake he ever made. But they never really... He's probably the worst decision in my God blank life, is what he said.

1:07:24I fell in the... Steinhoffel did not respond to requests for content. No, no. Right. But... So Brian Cornell comes in in 2014 after Steinhoffel was ousted. And by the way, that follows the hack. You know, on target in 2013. And the funny thing is, like, that's something that's happened in a lot of companies since. But at the time, it was kind of a first and it blew everybody's minds. Yeah. And he took responsibility for it kind of lost his job. But so Brian Cornell came in and fixed a lot of that stuff. But I think in terms of maintaining that stylistic edge, the edge on design, I think that kind of started to wane.

1:08:07And then in the pandemic, they themselves admit that they weren't really staying in touch with the consumer. People were working from home and they weren't doing all the things they do, was going out to consumers' homes and looking through their makeup bags and all that stuff. They're kind of trying to do that now and trying to make up for that. But they really lost the edge. So to answer your question, though, it's happened slowly. And then the pandemic, post-pandemic, it accelerated really rapidly. This would decline. I mean, I have to say, when my daughter was younger, I mean, I lived in Target.

1:08:45I was there all the time. And sometimes I've gone back for her even today, and she's not a little one anymore. So what do folks say needs to be done? Because I've got to say, when it was in its groove, it was a pretty cool retail place. I know, I know. They're really successful. Yeah, super successful. And everybody talked about Target, right? It was kind of cool. So what do outsiders or folks say needs to be done? Well, I mean, they need to get their edge back in style and design. They say they're doing it. I mean, of course, the question is, they really got there in the first place in a very different kind of media, retail environment.

1:09:28So it's a bit of a challenge to recreate the success that they had. I mean, you can't just take over, I guess you could take over the New Yorker now. I don't think it would be quite the same thing. But they have that. They still have operational problems at their stores. I mean, you know, you can go to really nice stores in the suburbs. We went to a very nice one in Edina, you know, Minnesota, right outside of Target, where it turns out quite a few of the top Target executives, including one Michael Fidelke shop. So, of course, that place was fantastic. Or you can go to the Target down the street from where I live in Washington Heights on 181st Street.

1:10:03Is everything locked up? Yeah, and it's just a mess. So how do you really, and I think there's kind of in between sort of, you know, my target and the target we went to, but they have to fix all that stuff. They have a bunch of unhappy employees. They have to do something there. But a lot of it is just executing at the level, you know, that they used to execute. And they've kind of let that slide. And, you know, can they do it in, you know, 2025, 2026? you know it's a different world than it was in the arts so we'll see well it's a cool deep dive another one you always do these stories where you're just kind of like into so much detail um you learn a lot devin thank you really appreciate devin leonard he's senior global business writer at bloomberg business week check out his story jaywan king and devin leonard doing it for bloomberg business week yeah no no no what a good reporter yeah very very always awesome when you join us thanks

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1:15:06I knew you were going to say that. Cut to the chase. Well, you know, it's funny that you say that. It's funny that you say that because our Bloomberg News team is out with the ultimate foodie gifts for anyone who likes to cook and eat. Did you see this at the terminal? No, nice job. The word chocolate, it's mentioned 10 times in the gift guide. Say no more. Okay, it's all for good reason, because it's the time of year where we like to indulge, and that often includes, at least for me, and I know for Carol Masser, eating our share of chocolate. Has to be really good chocolate. With us here in the Bloomberg Interactive Brokers Studio is Angus Thurwell.

1:15:36He's honor and global CEO of Hotel Chocolat. It's the UK-based chocolatier that has more than 150 cafes in the UK. You'll remember, this was bought by Mars for more than$660 million. That deal closed at the beginning of 2024. So it's been almost two years since you've been under the Mars umbrella. Almost two years. Yeah, and we've been really busy since then. Thank you. I mean, the whole rationale of combining with Mars was to strap rocket launches onto the Hotez Chocolat brand. And we already knew from previous entrees into the American market that the brand resonated with people. The playfulness and the contemporary design coupled with a really strong approach on more cocoa, less sugar.

1:16:27Yeah. So even with milk chocolate and white chocolate, dialing up the cocoa so it's not overloaded with too much sugar. We can. You're speaking my language right now, like more cocoa, less sugar. Yeah, totally. I'm talking like 95 % dark is like, you know. Well, yeah. That's what I like. Well, you're almost at my level here. What's your level? 100%. I love that. Okay. Yeah, I take it as a drink every morning. We have a drinking chocolate machine called a Velvetizer, which enables families at home to make barista-grade drinking chocolate really effortlessly. A Velveteer? A Velvetizer. What is drinking chocolate comprised of?

1:17:12Well, I mean, if we step back and consider the history of humans and cocoa together, the history in the drinkable version is 5 ,000 years, according to the latest archaeological digs where they found ceramic fragments of drinking goblets with little traces of cocoa on. And the edible version is only just over 200 years of history. So the drinkable version has way more heritage. And basically what you do is you take the cocoa bean and grind it up and then dissolve it into either a water base, which is the early civilization's way, or the way we prefer in a velvetizer, put it onto your preferred milk, either dairy or plant, and it makes the most amazing, rich, deep, wholesome chocolate drink.

1:18:07And this is sugar-free? You can go sugar-free, so you don't need to add any sugar. It's either already in there to a very restrained level or, as I'm hoping to get you on, we can take you all the way to 100%. Not a single scintilla of sugar there. Angus, let's do it. I'm ready. But it's fascinating that you say that because I think the views around chocolate, certainly maybe globally, but I know certainly in the United States has changed in terms of looking at the amount of cocoa or chocolate that's in something and that I think Americans are changing their preference. Tell us about the American market and what your experience has been since you guys have been moving into it.

1:18:48Yeah, so we're based in Chicago now and we've spent pretty much all of 2025 trying to win over the city of Chicago by opening five amazing locations and taking really careful note of the way people are interacting with our chocolate. And what we're seeing is that our neon sign that's in every store that says, more cocoa, less sugar. People are doing Instagram pics against it, and they're really loving that. The drinking chocolate, which we serve, over-indexes as a mix compared to our UK model. so that's telling us that the American consumer is very open to experimenting with if you like composed and original drinks and you don't have to go far we love our drinks I know if you if you look at the New York culture the LA culture you know the drink drinks are an art form is it hot cold both like both of those plus ice okay yeah and we also have a version where we combine it with our own soft serve as well, if you want to go, you know, like really all the way.

1:20:00So we really notice those dimensions. And we've also noticed that the preference for amongst affluent Americans is dark. And they start off saying, I'm a dark person, don't even show me any milk. But there's a way to do milk chocolate well, which is, can be very creamy and still loaded up with loads of cocoa. And so that's been a bit of an eye-opener, we think, for the Chicagoans to taste really high-end milk. You mentioned the idea with the Mars partnership and Mars acquiring you a couple of years ago was to strap this rocket ship on expansion. Certainly the idea of distribution is incredibly helpful with a global company such as Mars, but also about sourcing and getting the actual ingredients.

1:20:50Are you able to get ingredients, the same ingredients you were getting as an independent company, now for cheaper as a result of being part of Mars? Yeah, in some cases, yeah. I mean, if we put cocoa to one side where we willingly spend more than the market price, and I'll come on to that if you'll permit me a bit later, but when we're looking at other things like hazelnuts, were able to use the buying power of the group and the financial strength of Mars as well. I mean, you know, as an independent business, we could offer a certain security over our trading relationship with our favourite hazelnut supplier.

1:21:35But when we're part of Mars, suddenly our credit rating is much higher and that can get reflected in better terms. It's how the world goes around. So yes, they're some of the synergies. But the combination was more about growth, not really about a cost-based play. Yes, we'll collect those along the way to try and be a more efficient business and reinvest the proceeds into more development and more growth. I'm still obsessed with the Velvetizer. I'm just going to say. I know what I'm getting for Christmas. Exactly. So talk to us about the U.S. market, the growth that you've seen, and tell us what it's like.

1:22:10So you mentioned Chicago. tell us about expansion and what you've seen since you've been here. Yeah. Well, I mean, if we look at our domestic market first, which is the UK market, there's loads of headroom left there. And we've opened about 20, 25 locations in the UK over the last 12 months. Yeah. And here in the US, we very much a standing start, but already five open. and they're spread across different neighborhoods in Chicago and also on a magnificent mile as well. So we're going into the holiday season all guns blazing with an amazing offer. What is the growth market for you guys? Do you see the United States as being a bigger and bigger part of the business?

1:22:56Yes, very much. I mean, the U.S. is the world's biggest consumer market, as we know. It's the leading media and culture center for the world. I mean. Social media plays a role in, right? Like expanding the brand. Hugely, yeah. I mean, it's, you know, the way we built it in the UK was word of mouth. We didn't spend any money on above the line advertising. It's amazing. It was all PR and word of mouth and reviews. And we very much want to focus on similar tactics in America. We know we've got a story to tell. We know we're differentiated. and yeah and america is our total focus we for growth we we know that um if we win in america we can then you know win everywhere as frank sinatra said almost well so what's the expansion plan in new york and los angeles and other parts of the country um yes we're you know you won't be surprised that we've scoped out already um you know the next three to five years and we're clearly looking at New York and California and, you know, the other kind of interesting states.

1:24:06So, I mean, there's a wealth of headroom available for us to grow into. But the key thing I bring is an insistence on quality growth. We're not just trying to rack up, you know, like numbers of stores. Most important thing is to hold on to that quality, the way our team interacts. they need training, they need to know everything about cocoa and chocolate and that gives the confidence to be able to engage and have a proper conversation and our supply chain which Mars will help on hugely the logistics, the things like filing patents, getting permits which are different state by state So all those things are pretty difficult for Brits to understand, where it's one homogenous country.

1:24:58It's like one set of planning laws. Right, right. But in America, it's such a vast market that you've got to crack the code for California when you've just learned it for Illinois. Some people live in New Jersey and work in New York and have to pay taxes in both places. It's not fun. You do get some of it back a little bit later on. Just final thoughts in terms of where you hope this business is, I don't know, two years? What's a fair timeline that you're thinking about? I just got about a minute left here. I think, I mean, in the UK, it took us 10 years to become a household name brand. In America, we're hoping to do it in half the time.

1:25:38That's no pressure. Well, come back, please. Just going to say, I'm a person who leaves my office. And I'm going to just tell you, there's another chocolate place that's down below. But I will actually buy chocolate on my way home. So hopefully you guys will be in the neighborhood soon so I can do that. Of full intention. Angus, thank you so much. Happy holidays. Thank you. And thanks for coming in. Angus Thurwell, he's founder and global CEO at Hotel Chocolat, joining us right here in studio. This is the Bloomberg Businessweek Daily Podcast. Available on Apple, Spotify, and anywhere else you get your podcasts.

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