BI Weekend: Kraft Heinz Split, Macy’s Earnings

21:49Scarlet Fu:So why haven't they done any of those things so far? Why are they waiting? What's the holdup? Well, you know, Apple, unfortunately for them, they're very tied to a couple cycles, right? They have their spring cycle and then they have their fall cycle. The fall cycle has been set for some time. There's really no changing that. That's locked and loaded. You'll see the introduction of those products and those software features next Tuesday. at the iPhone 17 launch event. The spring is really the next opportunity for there to be major new features, right? That's when they're going to roll out a pretty big update to iOS 26 called iOS 26.4.

22:25At that time, I expect them to release an overhauled version of Siri that are going to fix a lot of these issues. That's a long time from now, though. It is a long time. Yeah, it is a long time. And the truth of the matter is that the AI space runs far more quickly than even the mobile space. You saw a lot of innovation in the smartphone space over the last two decades. AI is moving 10 times as fast as that. And they're aware of that. They're smart people. I guess they've made the decision that they're comfortable with their timing. Did they run the risk of making a fundamental error in their judgment of that timing?

22:59I don't think they're comfortable with the timing. I think that the timing was actually even further out. I wasn't expecting a major new version of Siri with incredible enhancements for consumers, probably not until the end of 26 or sometime, even at the tail end of 2027. So this is going to be happening at least six to 12 months sooner than Apple had originally planned. They are probably one or two years away, if they did nothing, of starting to bleed share to competing smartphones with major AI features. Right now, to tell you the truth, we talk about AI all day, every day. It's very important to the market.

23:34It's very important for the current technology age. Nobody's buying phones because of AI or not because of AI. But we are moving towards that. And that is going to happen. It's one or two years away. And so if they're not in good shape by then, they're going to start being impacted, not only in terms of what we talk about, not only on Wall Street in the stock market, but in actual purchasing decisions by consumers. Because right now, consumers only care about a few things when they buy new phones. They want to fix their broken screen. Yep. They want a better camera.

24:02Scarlet Fu:That was Mark Gurman, Bloomberg News Managing Editor for Global Consumer Tech. We move next to earnings in the retail space. This week, the department store chain Macy's raised its annual outlook and reported its best comparable sales growth in three years. This comes despite new tariffs and moderation in consumer spending. Meanwhile, the discount retail company Dollar Tree raised its annual sales guidance. However, it disappointed investors, stating the benefit from price hikes would disappear. For more on these companies, Scarlett and I were joined by Emily Cohn, Bloomberg Consumer Team Leader.

24:33We first asked Emily for her key takeaways from Macy's most recent quarter. I think this falls in line with what we've heard from other retailers. Shoppers are still shopping. They're being precise about what they're spending on being choosy. They called out home furnishings and apparel as strong sellers, also citing high demand for fine watches, jewelry, mattresses. So they are shopping. I think the main question I have is, how long will this last? How promotional are some of these retailers? How promotional do they have to be? Because I know that goes right to the margin. Yeah, I mean, that's an interesting segue into Dollar Tree.

25:10I think Dollar Tree raised prices so far this year to offset the cost of tariffs, and shoppers felt that, and that has a limit. There's only so far you can raise prices, and I think that is starting to eat away at their bottom line. They can't really raise prices that much anymore. I think these retailers are in a difficult spot. They want to keep prices low because of how the consumers is feeling, but also their costs are up on account of tariffs.

25:39Scarlet Fu:I would imagine Dollar Tree has a lot less cushion, as you say, to raise prices given who they're targeting and given how they're seeing a lot of higher end consumers trade down to Dollar Tree than a Macy's. Macy's did say explicitly that price increases are on the way, didn't they? Yes, they said that they have already started and that they're coming, but their sales are strong. And I think, you know, they're in the midst of a turnaround. There were signs that Tony's Spring Strategy is taking hold. Comp sales rose more at his reimagined stores than they did overall. What's different about a quote-unquote reimagined store?

26:15Good question. I think that is a really good question. I think these are the stores where they believe that they can have the greatest edge. So they're doing a lot to reinvigorate sales. They're redesigning the stores. They're rethinking their assortment. And these are the stores that they say we should really watch. This is the future of Macy's.

26:37Scarlet Fu:Let's put this into context, what we heard from Macy's, what we heard from Dollar Train, of course, Dollar General earlier in the month, or was it this month or last week, in any case. What are we hearing from retailers overall? Because investors are punishing some and rewarding others, even though the message, I would say is fairly consistent that consumers are spending. They're just being really, really weary and careful. I think you nailed it. I think retailers continue to point to strong sales momentum. People are shopping, even in the face of tariffs and threats of inflation. I think the question I have is knowing that retailers stock up months ahead of time.

27:16They had their inventory that they sold through now months ago, perhaps even before tariffs. I don't think we've really seen the full paths through of the cost of tariffs yet. And I think we'll continue to see that in the coming months, and especially during the all-important holiday shopping season. Let's go there. Is there a consensus building to how the holiday season may shape up? It's still early. I think the outlook isn't great so far. Although Tony Spring did say that the back-to-school shopping season. He used the word good, and he said that back-to-school is generally a good bellwether for the holiday shopping season.

27:58So there was a slight note of optimism there, but not totally bullish.

28:03Scarlet Fu:That was Emily Cohn, Bloomberg Consumer Team Leader. Coming up, a look at how the Trump administration is impacting the clean energy transition. You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in-depth research and data on 2 ,000 companies and 130 industries. You can access Bloomberg Intelligence via BI Go on the terminal. I'm Scarlett Foo. And I'm Paul Sweeney. This is Bloomberg.

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29:37Scarlet Fu:Technology designed to help doctors spend less time on busy work and more time with their patients. And those prescriptions, Optum is working to bring costs down, save patients money, and make it easier to get refills. Little by little, Optum is helping make healthcare work as one for everyone. Head to business.optum.com to see how. As industries evolve faster than ever, companies need an environment that accelerates strategic growth. And Michigan delivers on that promise. From emerging startups to global enterprises, Michigan offers what executives value most, a resilient, innovative ecosystem, diverse communities that attract top talent, and a quality of life that supports work-life balance.

30:18Scarlet Fu:With our unified Team Michigan approach, businesses scale faster and compete at the highest level. Michigan, pure opportunity. Seize your opportunity at michiganbusiness.org. This is Bloomberg Intelligence with Scarlett Foo and Paul Sweeney. On Bloomberg Radio. On Bloomberg Intelligence, we often look at research from Bloomberg NEF, previously known as New Energy Finance. They're the team at Bloomberg that tracks and analyzes the energy transition from commodities to power, transport, industries, buildings, and agriculture sectors. And this week, we took a look at how the Trump administration is impacting the clean energy transition.

30:56For more, Scarlett and I were joined by Antoine Wagner-Jones, Bloomberg BNEF Head of Trade and Supply Chains. We first asked Antoine to explain how the Trump administration is now impacting the transition to cleaner energy. There's a few things that have happened that are quite dramatic in recent months. There's been a bill that has been passed by the Trump administration, which seeks to reverse a lot of what was brought in under Biden under the Inflation Reduction Act, which was this big climate bill that gave all of this federal money, mostly in the form of tax credits for clean energy. A lot of that's being cut.

31:28So there was a really big high profile tax credit for electric vehicles. that's going to be gone as of this month and a lot of the other stuff is made much harder to access so this is a big problem for many of the manufacturers who have led to over 110 billion dollars of announcements for factories in the United States there's a lot of question marks about the face of those factories and the business case under the current environment.

31:53Scarlet Fu:Does the current administration want a transition to clean energy to green energy? The current administration is focused on a number of different things, such as when it comes to energy, load increasing due to data centers is one. A nuclear revival for the United States is another. When it comes to clean energy, when it comes to electric vehicles, those are things that are being actively diminished in terms of their rollout and support at a federal level. So the answer is no, they are pushing against it. So how are companies within the entire supply chain, how are they reacting? They're waiting and seeing for, for example, there's a number of different things that are happening where it's just not clear what the outcome is going to be.

32:36One of the things is that in the most recent bill that's been passed by the Trump administration, there's a number of rules around whether or not you can have any kind of Chinese involvement in a factory project at any real level. It seems incredibly expansive beyond what was done under the Biden administration. and the guidance for that isn't out yet and that's just one of the things where uncertainty is just continuing we're still waiting for clarifications on that specific rule and then if you zoom out again the tariff situation the volatility there we've had recent news around you know the ultimate supreme court decision which will likely impact many of the so-called reciprocal tariffs um is going to be you know something that we are waiting for early next year and that's just one example of how even with the tariff situation, things are changing by the day.

33:22And there's a lot of uncertainty there too. So in terms of new investments, very little is happening because people are waiting and seeing. And that's due to the volatility, not just in terms of federal support and the fate of those programs, but also in terms of trade policy.

33:37Scarlet Fu:And there was the one big beautiful bill as well. How did that change up the landscape? So that scrapped the electric vehicle tax credit, for example, that is gone. That has also brought a whole host of what's called foreign entity of concern rules around accessing many of those tax credits. Those rules were in place under the Biden administration, but in a much more restricted form. These are being expanded, be far beyond what they were. And the aim there is really interesting. Originally, there was a thought that the Trump administration, when it came to Chinese involvement, investments in the US would be much less ideological, much more, quote unquote, quote, transactional.

34:13That doesn't seem to be the case with this bill, where suddenly you have a new series of rules which are going to make it extremely hard for any project where there's any, you know, any kind of doubt as to some Chinese investment in the form of debt, financing inputs into a factory from going ahead and receiving tax credits. That's one big outcome from this bill. And we're still waiting on the guidance for that and how it's going to play out. I mean, does the US have the capability to be self-sufficient in you know transitioning to cleaner energy or does it need a global supply chain it needs a global supply chain so what we've done we've just published a huge report sort of detailing um uh the current installed capacity for lots of different sectors in terms of factories online in the united states we look at what's been announced we make a call as to what could come online and when it comes to some products like downstream products for things like solar modules so solar panels in their finished form when it comes to lithium-ion battery cells so that's batteries in their finished form the u.s actually has a pretty good shot at being self-sufficient by 2030 we think however and this is a big however when it comes to the inputs the components that go into those things so for a battery it's stuff like the cathode the anode you're going to have to rely on other trade partners if we suddenly have rules which shut out china from those supply chains that means that the mapping exercise that we've done suddenly becomes quite relevant, where you begin to say, oh, well, Japan has a surplus in separators that are used for making batteries.

35:38South Korea has a surplus in cathodes. And that's when you start having this sort of rejigging of all the different puzzle pieces and where procurement teams are going to be very busy over the next few months.

35:47Scarlet Fu:Can any of that be brought back to be made in the US onshore manufacturing? That's the aim. And under the Biden administration, where you had not just tariffs that were relatively stable, but you also had visibility in terms of future support. And you also had demand side policies, which meant that there'd be local demand for your product that was locked in. Even under those circumstances, still quite hard to do with the kind of price increases you see in the US. We've got a lot of announcements. We'll see whether those factories get built now. But in terms of that midstream, we haven't seen as much in the way of announced investments.

36:17And it's very unlikely that we're going to see anything in the short term under the current environment. So the short answer is no, not anytime soon. Is it, what are the capital markets like for any of this these days. I would think with the uncertainty that you've laid out for us, capital markets, are they dried up? Yeah. It's become a lot harder and we've seen a real fall in terms of VC funding, for example, for a lot of these projects. There's been a shift towards things like AI, defense spending, and there's also some big question marks about the suitability of some of these early stage funds for funding clean energy and climate technology in general.

36:54The returns profiles are very different to many other sectors. And that means that, yeah, that means that there's an increased relevance to the kind of policy changes we've been seeing recently. And actually, when it comes down to it, you really do need a lot of state support, even, you know, that needs to be qualified. When it comes to EVs, that might be the case. We're still going to see a lot of deployment of solar power, for example, and things like batteries, because costs have just gone down so dramatically that a lot of that will be built, even without the kind of federal support that we saw until recently.

37:26So there is a silver lining for some sectors, but for many sectors, we're going to see some real difficulties in terms of financing.

37:32Scarlet Fu:Our thanks to Antoine Wagner-Jones, Bloomberg BNEF, head of trade and supply chains. We move next to some recent research by Bloomberg Intelligence on environmental, social, and governance investing. Now, in simple terms, ESG is a framework used to evaluate a company's management of environmental, social, or governance risks. And since the war in Ukraine, roughly half of the ESG-registered equity funds in Europe have been allocating at least some capital to companies that manufacture, supply, or transport nuclear arms. Now, according to Bloomberg Intelligence, that number may only increase. This comes as recent guidance in an EU proposal leaves nuclear arms out of its definition of controversial weapons.

38:10Scarlet Fu:For more, guest hosts Lisa Matteo and Alexis Christoffers spoke with Shaheen Contractor, Bloomberg Intelligence' senior ESG strategist. They first asked Shaheen to break down how ESG funds are tied to nuclear arms. Traditionally, I mean, ESG funds defense, this whole thing has been quite controversial. So historically, ESG funds tend to exclude such sectors, such weapons, I guess. Now, the companies I analyze are part of Nordisk Bank's exclusion list, you know, biggest, one of the biggest asset owners, things that are excluded. So what's happened now is that the EU in a new rule, it's defined controversial weapons, but it's left nuclear weapons out.

38:50So it now defines it as cluster ammunition, landmines, things like that. So it's now explicitly not, for the lack of better words, controversial, according to the EU. But doesn't that sit in direct conflict with what these ESG funds are supposed to be about, like ethically and morally? Or is this really about following the money at the end of the day? So it's, I guess, traditionally, ESG has been about, you know, socially responsible investing, values investing. Actually, those are two separate things. So if you want to go based on your values, your ethics, then yes. But ESG now, or the way we analyze it, it's following the money.

39:28It's financially material metrics that lead to outperformance. It's funny how it all leads there, because, I mean, initially it was do no harm, right? Do no significant harm. And so it's hard to make the argument that nuclear weapons may not do significant harm. So I would say a lot of these values things, they're so subjective. I'm not saying that they do say significant harm, but I'm just saying it's so subjective and ever-changing. That's the point, I guess. That is true. But it could boost returns if defense continues to outperform. Correct, correct. So there are two things. It could boost returns, but at the same time, some values-based investors might, you know, it might go against their mandates.

40:03So I guess the point is we cannot assume that these funds now no longer have such exposures. It would lead to greater fund scrutiny. That's the point of this. You have to examine the fund. So who's going to be driving this push into these ESG funds, sort of focusing or including now nuclear weapons? So driving the push, it's always been Europe. If you're talking about, you know, who's investing into this, it's always been Europe. North America, I would say, is seeing a bit of a pause when it comes to these kinds of investments. It has been for a while. And when you look into that, I was looking at some of the numbers that you put.

40:38You said five ESG funds have 7 % or more of their portfolio invested in companies excluded. How significant is that figure? So 7 % of your portfolio in such companies, it's quite substantial. It's concentrated. Now, the number behind that, that five ESG funds, it's not that much. I think contrary to what people might think, you know, historically, exposure to such companies that are involved in nuclear weapons like Safran, Jacob Solutions, it hasn't increased. So before the war, the Russia-Ukraine war, people might have hoped. It increased, but actually it didn't, but it could going forward. Russia's invasion of Ukraine, did it push money into these ESG funds for the inclusion of nuclear weapons?

41:24So it did not push ESG funds to increase allocation into these companies. That's the point. And it's interesting because you would expect that it did. But I think Norgous Bank, you know, being on Norgous Bank's exclusion list has such a like stigma to it historically that it didn't. And that being said, that could change now. So I'm still confused. So why does the EU want to change things? Don't know. Why do the EU want to change things? It's about the returns, right? I guess. So let me. So historically, the EU defined controversial weapons as, you know, according to international treaties and UN principles.

42:04So it was always up in the air as to whether what was included. So some asset managers excluded nuclear weapons. summed in. So it was always a gray area. It was never defined. Now it's explicitly defined as not being included, if that makes sense. It does. It does. But what do they risk pushing away value-based investors? Yes. So that's the point. You know, it could boost returns, but then you have this conflict for people where this does not align with their value. So it's that dual conflict. So again, the point is funds might need additional scrutiny. If that doesn't align with my values, I can't assume that those companies are not in the fund.

42:42And sort of the next generation of investors are doing that, because you're talking about younger investors, where those things sort of matter in a way they maybe didn't for the prior generation. Yes. I mean, surveys show that. A lot of research shows that. How this pans out, we'd have to see as the younger generation takes on this challenge. Well, that's how I was going to ask. Where does this go from here? I think, where does this go from here? So I think if we continue to focus on ESG as sort of risk and returns, I think that's where we go from here. these values-based things are very subjective.

43:12Scarlet Fu:Our thanks to Shaheen Contractor, Bloomberg Intelligence Senior ESG Strategist. That's this week's edition of Bloomberg Intelligence on Bloomberg Radio, providing in-depth research and data on 2 ,000 companies and 130 industries. And remember, you can access Bloomberg Intelligence via BI Go on the terminal. I'm Scarlett Fu. And I'm Paul Sweeney. Stay with us. Today's top stories and global business headlines are coming up right now.

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