Fed Minutes Show Officials Saw Two-Sided Risks From Iran War

22:42Carol Massar:They also say the entree of an intruding drone into Iran airspace, which was destroyed in the city of Lar in Fars province in a clear violation of the clause prohibiting any further violation of Iran airspace. Denial of Iran's right to enrichment, which was included in the sixth clause of the framework. They say now the very workable basis on which to negotiate has been openly and clearly violated even before the negotiations began. In such a situation, a bilateral ceasefire negotiation is unreasonable. We have said many times the devil is in the details, but curious to see what our next guest has to say.

23:17Dr. Ed Hussain is senior fellow at the Council on Foreign Relations focused on U.S. foreign policy toward the Middle East generally. He's a professor at the School of Foreign Service at Georgetown University, where he teaches classes on global security, Arab-Israeli peace and the shared intellectual roots of the West and Islam. Dr. Hussain joins us from Abu Dhabi. Dr. Hussain, just your reaction to the latest headlines and the fragile nature of this ceasefire. Fragile nature is exactly the right phrase. I woke up this morning here in Abu Dhabi with signal alerts going off on my phone and then throughout the day we've had attacks from Iran on Dubai.

23:54As late as 45 minutes ago there were attacks or drone attacks, interceptions from Iran into Dubai. So here in the region especially on this side of the Strait of Hormuz it didn't feel like a day in which there haven't been violations, but there's been not much coverage of that. Now, Al-Ibaaf, the Speaker of the Parliament, calling this unreasonable, it doesn't seem like an outright rejection. My question to the audience and for all of us thinking people is, why does Iran care about Lebanon? And that's part of the problem, that Iran hasn't given up its imperial ambitions, that violation in Lebanon, which means Israel's counterterrorism measures, that wasn't a violation of Iranian sovereign space.

24:43And yet it still harbors these ambitions that it's trying to exert pressure on Lebanon and Israel's efforts there. So I think that's something for us to think about, that it's not just Iran's concerns about Iran. Iran still has these ambitions around the region, which was one of the reasons why October 7th happened three years ago. And this is downstream from that terror attack that Hamas instigated with Iranian government support that continues to ricochet around the region and the world.

25:09Carol Massar:I'm glad you went there, Dr. Hussain, because I think one of the things we're trying to figure out too, because Israel has continued its ambitions, right? It seems like, and its attacks on Lebanon. So are you saying that Iran still has bigger ambitions by being concerned about that. And so I guess I think we were trying to say, well, Israel has to stop. So help us understand, you understand this region, the dynamics between all of these players and what their missions are, and how it might not coincide with what the US ambitions are. Because I thought this was about, you know, the nuclear ambitions of Iran.

25:51Yes, I mean, you're absolutely right. The nuclear ambitions are linked to having an Iran that is surrounding Israel with proxies, which was previously the Syrian government, the Lebanese government led by Hezbollah. And in Yemen, there are Houthi attacks that are anti-Israeli and supporting movements inside Saudi Arabia, inside Bahrain. So these are all movements outside of Iran. And now we have a situation that Iran is trying to negotiate control of the Straits of Hormuz, which it didn't have previously. Now, all of that, and you're right to ask the question about Israel, plays to Israel's existential angst.

26:36Israel and Jewish people writ large, as we know, are traumatized people coming out of the Holocaust, And October 7th pressed that wound, which means we survived since the rise of the Iranian regime, the mullahs in Iran since 1979, by more or less trying to accept that the Iranians will have forces parked all around our borders and will try and do a peace deal. October 7th made the Israelis realize we can't have that world again, and we don't trust Iranian intentions, and they will support Hamas and Hezbollah attack our people again. Therefore, we'll go after them everywhere, including Iranian nuclear ambitions.

27:19And I'm afraid to say this, but it's the truth, and we can't shy away from the truth. For as long as Israel feels it's not safe, it will continue to attack Iran and its allies. And the biggest mistake Iran makes in response to this is rather than fight with Israel, it begins to attack countries such as where I'm sat here in the Arabian Peninsula, in Abu Dhabi, Dubai, Kuwait, Bahrain, Saudi Arabia, Jordan. And I think that's the danger of the Iranian regime, that it wants to more or less draw in the rest of the world in its war with Israel. And in that, and I think the good news is countries here now feel closer to America than they've done in the last 15 to 20 years.

28:03So there's a lot to play with in terms of enhancing U.S. influence and relationships with countries here in the Aragon Peninsula.

28:10Carol Massar:Just quickly to get your thoughts, though, isn't this about Israel's existentialist or existential angst versus Iran's existential angst? I'm just, I mean, is that what's kind of, like, how do you, if you've got that going on? Come on, you tell me how you end that. You know, it's a battle of different willpowers, different wills. And the Israelis will have stronger willpower for all kinds of reasons. They have 3 ,000 years to back that. And the Iranians also have strong willpower and have 3 ,000 years to back that. The rest of us are caught up in that. And the way you end that is by making sure that Iran and the Iranian government, as it stands now, focuses on normalizing Iran's economy as the Japanese did and the South Koreans did, rather than Iran's ambitions being regional and global and shouting every Friday, death to America, death to Israel, and attacking Arab neighbors and allies who have not attacked Iran.

29:06Even to this day, they, we here are in a defensive posture. And the way you end that is by ensuring that Iran's government is not centralized, that Iran's government is decentralized, that there is an Iran that's an Iran of federations, that minorities inside Iran, the Azeris, the Baluchis, the Arabs, the Haziris, the Persians, have greater rights. Dr. Hussein, is that realistic? Is that realistic in your view? Could that actually happen after 47 years of rule from, you know, under the Ayatollah, an Islamic Republic and an IRGC that is so powerful? It may not happen next month. It may not happen the month after the US and Israeli attacks on Iran have consolidated the government's nationalist appeal for unity.

29:51But if we look at the Iranian population, since the Green Movement during President Obama's time to now, every two or three years, there's an uprising against this government. This government now is weaker than it's ever been before in terms of its air force, naval force, and ability to produce missiles. But one of the reasons why President Trump tried to support the popular uprising inside Iran was to diminish the government's outreach. But the mistake is now the government is stronger domestically. But there will inevitably be uprisings inside Iran. And I think this government at some time will fall.

30:29And we in the West with our Arabian allies need to have a perception of what a federalized Iran looks like, where there isn't a centralized control by the IRGC. And that's where I think all of us are failing. We just don't have an alternative vision for Iran without disrupting, without causing refugee flows, without causing further conflict, that all of these minorities inside Iran, I mean, Azeria is 25 % of the country, close to Azerbaijan, Turkic population, the Kurdish population, huge inside Iran. How do we decentralize power with these minorities that are actually pro-Israel, pro-Arabs, pro-America, rather than the Mullah regime trying to take us back to a messianic world order that continues to support forces against Arabia as well as against America and Israel.

31:16Carol Massar:You know, our Dan Williams, who's in Jerusalem, had sent us and shared with us a post he did earlier this morning. He said, when the all clear sound, when the all clear sounded after the last Iranian missile launch in the early hours of the morning and the ceasefire took call, my neighbors filed out of the communal bomb shelter, smiling wearily and wishing one other, well, quote, until we meet again in two weeks time. I mean, that's, that's, you know, I don't know the reality, like you talk about this federalized Iran, what that might look like and having the ability or having the trouble kind of figuring that out.

31:51Is that because it's, it's impossible.

31:53Carol Massar:I've had conversations with folks about the region, informed people and just saying, you know, this, it is existential. There's something in the, you know, in the culture of Iran, you know, that they are preparing for. And so you can't just get rid of that overnight. So it makes me wonder, can there be a federalized Iran? Well, we haven't made the argument. I've been thinking about a federalized Iran over the last two or three years. And you look at the history, you start to see that Iran was always a federalized entity. But as in ethnically composed, different ethnic compositions of the country now want to have greater rights.

32:32And we haven't recognized that. For example, Azerbaijan and Azeris have a strong relationship. We haven't focused on that. We have ability from Turkey and our NATO ally to project power into Iran that terrifies Iran because they have a long war with the Turks going back to the 1550s. It's another existential battle. But the point that you made is fundamentally true that Iran has this long willpower to fight. The Iranians or the Persians rather famously fought the Romans for 700 years, from 7 AD onwards. They have a long strategic vision. We on our side, our Arabian American and our Israeli allies, haven't really cast a long range vision back into Iran that we don't want to see an Islamist regime that threatens both Arabs and Jews and Americans both in the region and around the world.

33:23and I think that's the task for all of us to see in Iran that's different yeah that is decentralized and it's not about the Razashar Pahlavi coming into power or his family but genuinely bottom upwards representing the rights of the people.

33:38Carol Massar:Dr. Hussain thank you so much be well be safe um so appreciate your time take care this is Bloomberg. Stay with us more from Bloomberg Businessweek Daily coming up after this.

33:53You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 p.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business App. Or watch us live on YouTube.

34:06Carol Massar:Well, thank you, Harry. Thank you, Hulu. Thank you, FX. Thank you, Love Story and more. We want to talk about Levi, Strauss, and Gubbe. Company's latest results really knocking the socks off investors. The stock is up the most in one year as the company raised its projections for the year after reporting better than expected quarterly results. They cited strong demand in all regions as the denim brand steers shoppers to its own stores and website. We're going to talk about that a lot. Company reporting revenues of$1.7 billion in the fiscal quarter that exceeded the average of analyst estimates.

34:35Carol Massar:Earnings per share also, excluding some items, surpassing expectations. The stock now up about 7 % year to date and has gained nearly 80 % in the past 12 months. Yep, for those watching right now, it is up more than 11%, Tim, in today's session. With us is the president and CEO of Levi Strauss & Co. She's also a member of the company's board. She's former CEO of Kohl's. She spent close to 17 years, too, at Starbucks. We've got Michelle Goss here in the studio. Welcome. It's good to see you. The stock soaring. Investors are liking what they see. Where did the momentum come from, and what's really working right now?

35:08Carol Massar:First, thanks for having me, and I'm really excited to talk about how we started the year. We are seeing momentum across the board, which is around our strategies really picking up and accelerating. So we delivered 9 % organic growth, 14 % on a reported basis. We are seeing this across geographies. We're seeing this across categories. We're seeing it across genders. Why? We're seeing it across channels. Why is this happening? Well, you know, it's the brand, it's the product, and it's the execution. And all of those things are working. And I got to tell you, the team is doing a phenomenal job. We're coming off of a solid year last year, and it's accelerating right into 2026.

35:48Carol Massar:Michelle, denim, though, is such a crowded category. Like, I won't go to certain department stores because it's just too much for me. But I do go to Levi's. Well, thank you for that. You're welcome. You're welcome. And I said to you coming in, my 23-year-old, she's wearing them. That's where she wants to go. You talked about your wife. Like, you are hitting a lot of different demographics. How do you do that? How do you appeal to so many? Yeah. Well, I would say it does start with the brand. And we like to say that Levi's operates at the center of culture. and we're hitting a new stride with the brand.

36:20Carol Massar:I mean, the brand has been strong for a long time. Last year, it went up a notch. We had this fantastic partnership with Beyonce. That moved into a partnership with Shibuzi. And this year, we launched our brand campaign at the Super Bowl. And it was the perfect time because Levi's Stadium was hosting the Super Bowl and we hadn't been on the Super Bowl in over 20 years. But it wasn't about launching an ad for the Super Bowl. It was about launching our campaign. We call it Behind Every Original, which is a global campaign and leans in to what Levi's does best across sports, across fashion and music.

36:57Carol Massar:And so if you've seen the ad, it really does bring that to life and has artists like Doshi or SGA. We're showing some of this. Great. And and Rosie. And I like to talk about Rosie because here is this. She was part of Blackpink. 90 million followers and growing. And we're rolling that right into a collaboration with her in Asia. So that is taking off as we speak. And so this is about launching, like I said, a campaign for the year. Looking ahead, we've got World Cup coming up that the stadium is, Levi's Stadium is hosting. We have collaborations. You know, we had our collaboration with Nike and Jordan a couple months ago.

37:35Carol Massar:We had people lining out the doors to get this special collab. Michelle, when you talk about these partnerships with celebrities, with the artists, I know each one of them is different. But in general, are they coming to you or are you identifying them and you're going to them? How organic is it? It's all of the above. Well, so and it happens organically. I mean, literally what? Just at the Brits, we had Harry Styles dancers all wearing 501s. I mean, this is about being at the center of culture. And the Beyonce partnership, that started because she wrote a song called Levi's Jeans. but we've been friends with Beyonce for decades back in back to the 90s or Carolyn Bessette were the 517s and you know in Love Story it's heavily featured and sales are up like 25 percent.

38:21Carol Massar:Did that surprise you like or when did you first all of a sudden notice like we've talked about this on air the impact of this. Yeah well the 90s we've known about the 90s trend for a long time and in fact when you go into our stores online go into our wholesale partners I mean that 90s trend is Levi's is all over it from top to bottom. I mean, one of the things we talk about when you ask about what's working, we talk about our two key strategies, which is about becoming a more DTC forward company and also evolving the brand from being about jeans to head to toe. We say denim lifestyle. What does that mean?

38:55Carol Massar:It means that we want to give you the whole wardrobe. It starts with the jeans, but tops, button downs, jackets, outerwear, dresses all through the lens of Levi's. but we're playing now in the total apparel space. Michelle, hang on for a second. Forgive us. This is the world we live in. You live in it too. We all do. We do have some headlines crossing the Bloomberg terminal. This is coming in involving the war, U.S. war with Iran. Iranian parliament speaker posting a violation statement saying that the ceasefire deal with the United States has been violated. So again, this is just crossing the Bloomberg terminal.

39:30Carol Massar:And let me just take a quick check on the market trade. We are seeing stocks just dip a little bit lower on that, but we're still seeing quite a rally across the board and a quick check on what we're seeing in terms of yields. They, too, are just taking up a little bit, just a hair. So we're going to need a little bit of clarification. But, folks, this is the world we live in, and this is what we said, that even with the headlines last night into this morning, that the details are going to be really, really crucial. Emerging market currencies index, trimming gains, as Iran says, the ceasefire violates.

40:05Carol Massar:So forgive us. That's our environment. We're speaking with Michelle Goss, the CEO of Levi Strauss. Michelle, perhaps that's a good segue to talk about the macroeconomic environment and potential disruptions or disruptions you've seen from higher transportation costs as a result of bringing these products from overseas into the U.S. and indeed around the world. What has this macroeconomic backdrop over the last five, six weeks done for your business? Yeah, well, I mean... Or the last year when I think about tariffs. It's been a really uncertain time. You know, I take a step back. You think about the company, Ellis & Co.

40:36Carol Massar:We've been around for 170 years. We've weathered lots of storms and navigated. And it goes back to who we are as a brand. During times like this, people do. We have to deliver. We have to execute. But they really do go to brands that they trust, that they love. We offer quality. We offer great value. We offer durability. To date, our consumer has proven resilient. I mean, you see that in our numbers. We are bringing them a lot of innovation. I think if pressures come on the consumer, when the wallets get tighter, we have to up our game, right? Wallets get tighter, we have to work harder. And that's what we're doing.

41:10Carol Massar:We offer great red tab right down the middle. We offer Signature by Levi Strauss, which is an awesome value. That business was up 16%. It's in the$20,$25 range. And then we offer blue tab, premium Japanese denim. And, you know, you can buy a pair of jeans from Levi's now at like$200. So we're serving every customer need. But know that we are constantly just making sure that we can address the needs of the consumer in the moment, whatever that moment might be. Love talking fashion. Love talking the collaborations. I also, though, do love the nitty gritty of like supply chains and what a company like you that has been around for so long and seen a lot of different market cycles.

41:48Carol Massar:What is your supply chain? And have you kind of spread it around based on what we've seen, not just in the last year, but even coming off the pandemic that reminded us that supply chains can be impacted dramatically when they're focused in one area? Yeah, that's right. We have a robust, very diversified supply chain across many, many countries. We have a really strong team that is agile and responsive. And so and these these relationships with our suppliers go back decades and decades. So we have tremendous partnerships. And as we've navigated things like tariffs, everybody has stepped up to help us, you know, determine what the next steps are there.

42:28Carol Massar:You know, just to just to put it out there on tariffs. I mean, everything that we've guided the street includes tariff assumptions on call it the original reciprocal tariffs at a higher rate at that 20 percent incremental rate. You know, there's been recent news of it going down back to 10 percent. We haven't baked that into our numbers yet. one could say that is upside there. It could mean up to$35 million in EBIT or seven cents of EPS. But we've held back just knowing that there still is uncertainty out there, as you were saying. One question we asked outgoing CFO Harmeet Singh in the last year in the wake of tariffs has been about moving production to the United States.

43:02He said, no way, that's not happening. Are you sticking by that?

43:05Carol Massar:We are sticking by that. Yeah, that is an industry that really has shifted overseas. And like I said, because we have these enduring long lasting relationships, I know we'll be able to navigate whatever's ahead on that front. All right. So I, you know, a company like you guys, our whole Bloomberg team is like, ask Michelle this, but we're curious about your prospects for reaching 10 billion in revenue, five years, seven years. How are you guys thinking about it? We have, we have not put a number out there or a date out there. But you've got some great momentum. Like, do you feel like you can take this momentum and how far can you carry it out?

43:37Carol Massar:Do you feel comfortable? Yeah, what I can say, and I think it's important to have bold goals, right? So we've put the 10 billion, we've put the 15 % EBIT. I think if you look at the progress over the last couple years, take revenue. We came off of 7 % growth last year. That was up from the prior year. This year, we're again guiding mid-single digits. We just had a blowout quarter at up 9%. So I think it's safe to say that you can count on consistent, sustainable growth. And then on EBIT, on profitability. We're making that March to 15%. Again, a few years ago, we were 9%, 10%. Last year, about 11 and a half.

44:11Carol Massar:We just said we're taking our guide up yesterday to 12%. So you see that sequential progress and keep doing that. We'll let you guys do the math, but we're confident. I mean, like I said, the exciting thing we are right now, the strategies are working. We've made some choices the last couple of years. We've sold the Dockers brand so that we could really focus on the Levi's brand. And there's so much opportunity. So certainly fashion is working in your favor right now, but we know the industry is fickle and consumers are fickle. What happens, or what do you do rather, to make sure that when the trends do change, you move with them?

44:48Carol Massar:Yeah, well, as the category leader in denim, let's start there. It's our responsibility to fuel the trends. You know, the denim category is growing. It's accelerating right now. I have more denim in my, no, seriously. But nowadays, I think a big part of it. that I haven't in a long, long time. And I keep buying more. But it's not always like that. But I would say though, but this evolution to denim lifestyle, or I'll say lifestyle, head to toe, that's not all denim, right? It is fine. If you're buying a rib cage, wide leg pair of jeans, what's the perfect top that goes with it? Which is going to be different than a low rise.

45:21Carol Massar:And so now that we're playing in this broader space, which basically increases our addressable market by 15X, We're playing in a 1 trillion market in apparel. That requires focus and discipline, but we've really up-leveled our capabilities to do that. And if you just take this last quarter, our Topps business was up 13%. It's only 20 % of our business. So when you think about all that upside, so we now, and 40 % of our business is non-denim. So it's not just denim anymore for Levi's. So what is the biggest opportunity or categories that are not yet tapped that could be big for you guys? Yeah, I would say a couple of things.

46:00Carol Massar:First, when we think about gender, women's is not quite 40 % of our business. Last I checked, women's has a big play in the apparel market. My closet's a lot bigger than my house. Just saying. But so there's still that should be at least half our business. So we're expecting tremendous growth there. I was just talking about head to toe. We always will be the leader in bottoms and denim bottoms, but tops. So in our business, we sell two bottoms to every top, which, by the way, that used to be like five bottoms to every top. That should be the other way around. Minimally one-to-one. That is all white space for us.

46:37Carol Massar:And then we have amazing growth ahead of us in expansion. There's still room to grow in the U.S., but you think about these international markets. In some cases, we're just getting started there. So as we look ahead and say, how are we going to go from six-point-something to$10 billion, we can chart that out. We feel very confident. Thank you. Thank you. forgive our distraction. We were dealing with some headlines on the Middle East, which is obviously so important to everybody's macro, but please come back soon. We would love it. Thank you. Well, thanks for having me. Yeah, we loved it. President and CEO of Levi Strauss and Company, of course, she is Michelle Goss joining us here in studio.

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