In short
A weekly Bloomberg Intelligence roundup covering NVIDIA earnings and AI-chip demand concerns, FCC/DOJ antitrust outlook for media mergers, consumer and retail M&A/earnings (Keurig Dr Pepper/J.D. Peet’s, Williams-Sonoma, Kohl’s, Abercrombie), Eli Lilly’s obesity-pill trial update, and telecom spectrum deal news (EchoStar/AT&T).
Guests and backgrounds
Kujan Sabani (Bloomberg Intelligence Senior Semiconductor Analyst) on semiconductors; Jennifer Rhee (Senior Litigation Analyst) on FCC/antitrust; Ken Shea (Senior Consumer Products Analyst) on beverages/commodities; Sam Fizzelli (Director of Research, Senior Pharmaceuticals Analyst) on Eli Lilly; Lindsay Dutch (Consumer Hardline Senior Analyst) on retail; John Butler (Senior Telecom Analyst) on telecom; Mary Ross Gilbert (Senior Equity Analyst covering retail).
Key claims
NVIDIA’s guide was “lukewarm” despite beats; networking and Blackwell ramp strong; China revenue depends on a China-approved Blackwell chip and geopolitics. FCC rules may clear the Nextar-Tegna deal; DOJ is more willing to settle with remedies than sue. Keurig Dr Pepper buys J.D. Peet’s to fix lagging U.S. coffee/K-cups amid higher Brazil coffee costs and tariffs. Lilly’s second trial in obese diabetics shows ~10% weight loss with a pill (manufacturable, easier than injectables). Williams-Sonoma held margins flat despite tariffs; Kohl’s shows improving comps via private brands but still declining; Abercrombie’s Hollister strength offsets Abercrombie brand hiccups. EchoStar’s $23B Spectrum sale to AT&T eases debt and boosts AT&T capacity.
Notable examples
NVIDIA networking beat; China H20 revenue guidance $2–$5B; Nextar-Tegna $3.5B; Keurig Dr Pepper/J.D. Peet’s coffee unit split; Lilly ~10% loss; EchoStar Spectrum licenses $23B all-cash; Kohl’s July sales flat; Abercrombie comp sales down ~11%; Williams-Sonoma tariff rate doubled to 28%.
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Chapters
Tap a time to open that second in VONVIDIA Earnings Insights
0:15 to 0:45
Analysis of NVIDIA's recent earnings report and market expectations.
“For midsize and large companies, risk can affect multiple parts of the organization at once, from property and liability to cyber and regulatory challenges.”
NVIDIA Earnings Insights
2:15 to 2:58
Analysis of NVIDIA's recent earnings report and market expectations.
“Each and every week, we provide in-depth research and data on some of the 2 ,000 companies and 130 industries our analysts cover worldwide.”
China's Impact on NVIDIA
2:58 to 5:25
Discussion on NVIDIA's sales potential in China and geopolitical challenges.
“We first asked Kujan for his take on NVIDIA's results.”
Competitive Landscape for GPUs
5:25 to 7:49
Exploration of the competition in the GPU market and R&D dynamics.
“What's a competitive landscape here for these chip companies vis-a-vis NVIDIA and just kind of positioning for AI?”
Transitioning to Antitrust Topics
7:49 to 8:01
Introduction to the next topic on antitrust developments in media.
“Our thanks to Kunjan Sobani, Bloomberg Intelligence Senior Semiconductor Analyst.”
Nextar-Tegna Deal Analysis
8:01 to 14:00
In-depth discussion on the approval prospects for the Nextar-Tegna merger.
“As antitrust enforcement policies of President Donald Trump's administration take shape, dealmakers and large businesses could see a glimmer of hope in some areas.”
Tech Minute: Airline Pricing Strategies
16:06 to 16:42
Discussion on how AI is changing airline pricing strategies.
“Amazon Pharmacy presents Painful Thoughts.”
M&A News: Keurig Dr Pepper Acquisition
16:54 to 22:02
Analysis of Keurig Dr Pepper's acquisition of J.D.E. Peet's.
“This week, the beverage company Keurig Dr.”
Biotech Update: Eli Lilly Obesity Trial
22:04 to 25:57
Insights into Eli Lilly's recent obesity pill trial results.
“This week, the pharmaceutical company Eli Lilly said its second obesity pill trial helped patients lose almost 10 % of their body weight.”
Retail Insights: Williams-Sonoma's Performance
25:58 to 28:00
Overview of Williams-Sonoma's strong earnings and market challenges.
“We move next to news from the consumer retail company, Williams-Sonoma.”
Show all 15 chapters
Williams-Sonoma Brand Performance
28:00 to 29:10
Learn about the strong demand and sales growth of Williams-Sonoma and its brands.
“And the fact that demand is showing momentum, you know, that's a positive sign that they can execute those price increases successfully and continue to get a good margin on those products.”
Introduction to Tech Minute
29:10 to 29:31
A brief introduction to news on airfare pricing changes due to AI.
“You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in-depth research and data on 2 ,000 companies and 130 industries.”
EchoStar and AT&T Spectrum Deal
32:19 to 37:51
A deep dive into the significance of EchoStar selling spectrum licenses to AT&T.
“And I'm Scarlett Fu filling in on Bloomberg Intelligence.”
Kohl's Earnings Analysis
37:51 to 41:51
An analysis of Kohl's earnings report and its implications for the company.
“This week, Kohl's shares surging after the company offered a more optimistic full-year sales outlook.”
Retail Earnings Analysis
42:00 to 44:15
A discussion on recent retail earnings, focusing on inventory management and sales performance.
“When we saw that article, we said, what?”
Transcript
Automatic transcript. May contain errors.0:00Looking for more investing options? Meet SIBO, the exchange that pioneered options trading. With exclusive trading products like VIX and SPX options, SIBO can help you trade in any market environment. There are risks associated with SIBO company products. Review the disclosures and disclaimers at SIBO.com slash US underscore disclaimers. When you're running a business, the best days are the ones where priorities stay on track. For midsize and large companies, risk can affect multiple parts of the organization at once, from property and liability to cyber and regulatory challenges. At that level, managing risk becomes an ongoing discipline.
0:31At the Hartford, the focus is on helping businesses manage risk before it turns into something more disruptive. And when losses do happen, that work is paired with insurance coverage shaped by years of underwriting, risk engineering, and claims experience. Learn more at thehartford.com slash risk mitigation. Policies provided by Hartford Fire Insurance Company and its property and casualty affiliates, Hartford, Connecticut. Amazon Health AI presents Painful Thoughts. Why did I search the internet for answers to my cold sore problem? Now I'm stuck down a rabbit hole filled with images of alarmingly graphic sores in various stages of ooze.
1:11I can clear my search history, but I can never unsee that. Don't go down the rabbit hole. Amazon Health AI gets you the right care fast. Health care just got less painful. Bloomberg Audio Studios. Podcasts, radio, news. This is Bloomberg Intelligence with Paul Sweeney. The real our performance has been the U.S. corporate high yield. These are two big-time blue-chip companies. One person's chaos is another person's animal spirits. Breaking market headlines. And corporate news from across the globe. Our view is that the economy is slowing down. There is the possibility of a death spiral. Post-pronometing and AI are going to power the future.
1:58People are just buying everything with tax.
2:00Jennifer Rie:Bloomberg Intelligence. With Paul Sweeney. On Bloomberg Radio, YouTube, and Bloomberg Originals. I'm Paul Sweeney. And I'm Scarlett Fu filling in on Bloomberg Intelligence. On today's Bloomberg Intelligence show, we dig inside the big business stories impacting Wall Street and the global markets. Each and every week, we provide in-depth research and data on some of the 2 ,000 companies and 130 industries our analysts cover worldwide. Today, we'll take a look at how the beverage maker Keurig Dr. Pepper's looking to strengthen its struggling coffee business. Plus, EchoStar agrees to sell Spectrum licenses to AT &T.
2:31We'll discuss what the deal means for the telecommunications companies. But first, we begin with earnings from the chip giant, NVIDIA. This week, the world's most valuable publicly traded company reported second quarter earnings that beat analysts' expectations. But investors were disappointed after NVIDIA gave a lukewarm revenue forecast for the current quarter. And this is fueling concerns. A massive run-up in artificial intelligence spending is slowing. For more, Scarlett and I were joined by Kujan Sabani, Bloomberg Intelligence Senior Semiconductor Analyst. We first asked Kujan for his take on NVIDIA's results.
3:02Yeah, like you said, it was once again a solid sprinting guide. It checked all the fundamental key boxes. But as has been the case with this name, the expectations always run higher. And maybe not all the numbers were able to clear that high hurdle of expectations. Specifically, the data center compute numbers in 2Q, we would have liked to see that come in a little bit high. But there were still a lot of strong positive underlines. One, the networking was a significant beat, which shows the strength and the attachment rate that they are getting from their networking switches and chips in the Blackwell ramp.
3:38Second, like you mentioned, the 3Q consensus had China included, and they still beat their 3Q guide without China. If you add in the China guide of$2 to$5 billion, they would have handsomely beaten the 3Q numbers. So that noisy sort of consensus shadowed the goodness that is coming out of the guide of NVIDIA. All right. So what's the company telling us now about China? Because quite frankly, I'm reading the press. I don't know whether they're going to be able to sell stuff into China or when or whether they're going to have to give a 15 percent cut to the U.S. government. How's that going to play out?
4:12Yeah. So China still remains, you know, after learning sort of that overhang in terms of uncertainty. The company did guide to a two to five billion revenues from the H20 in China next quarter, which is positive. That means they feel confident that they'll be at least be able to ship some and get get some of the revenues back. But yes, the spark here for the China story will not appear until we have a clarity and we believe until they have a Blackwell version of a China chip, which they get approval from the government. That will really open up a massive amount of revenues coming from China. And there's a lot of hurdles you need to clear.
4:52There's the government which has nothing to do with NVIDIA. The U.S.-China relationship needs to get sorted out because now even China can put in a roadblock from NVIDIA selling or allowing the companies in China from buying NVIDIA chips. So there is work to be done. As you mentioned, the 15 percent cut is not ironed out in terms of laws. We have heard news stories about potential lawsuits. So those two, government and geopolitical angle needs to be cleared before we can start seeing billions of dollars of data center China revenue coming in. What's a competitive landscape here for these chip companies vis-a-vis NVIDIA and just kind of positioning for AI?
5:32I assume NVIDIA's position A, who's kind of B and C? Yeah, so, you know, the space is divided into two categories. One is the merchant GPUs, which is what NVIDIA sells and dominates that landscape. The sort of second competitor there or the B is AMD, which is a very far distant, you know, NVIDIA today has about over 90 percent in terms of revenue share. And the remaining is going to a very small to AMD. But there's other piece, which is we call what we call ASICs, which is what these big hyperscalers and cloud providers like Amazon and Google design their own chips. So that's sort of the other competitive landscape where there's a risk of the ASICs taking sort of share away from merchant GPUs, even though they don't compete directly for the same socket, they could take away the wallet share.
6:22And so does that mean companies like NVIDIA have to pour money into R &D for that next chip to stay on front? Because I know in your business, technology changes quickly. Yeah, definitely. I mean, look, Nvidia has been, even before the AI event happened, Nvidia has been the biggest R &D spender. They have continued, and this is what really got them to this stage of being ahead of everyone else. And they have to continue spending, outspending everyone else to sort of keep that lead. Their roadmap for the next two and a half years does suggest that they should be able to keep this lead handsomely.
6:57And for that, it will definitely require high R &D spending. So this name to me, who I'm used to stocks trading in much lower multiples in my world, but this seems like a stock that can actually earn its way, and we have seen it, earn its way into its multiple. I mean, you can make an argument, this is not an expensive stock. You're right. I mean, if you look at from a historical perspective, it's actually, the multiple is much more lower than what we have seen in media trade in the past two years. So, given that fact, and also when we look at the relative comparison, when you think about a company growing at 50 % and making revenue in the hundreds of billions, that is unprecedented, especially growing with gross margins of 70, mid or low 70%.
7:43I mean, you're talking about a financial profile of a software company, not a semiconductor company here. So, definitely when you take those two things into account, it does seem that it might not be really highly valued. Our thanks to Kunjan Sobani, Bloomberg Intelligence Senior Semiconductor Analyst. We move next to the antitrust space. As antitrust enforcement policies of President Donald Trump's administration take shape, dealmakers and large businesses could see a glimmer of hope in some areas. And one area is media. Last week, Nextar Media agreed to buy the TV station operator Tegna for$3.5 billion.
8:16And this deal will likely win FCC approval, according to Bloomberg Intelligence. For more, guest host Alexis Christophorus and I were joined by Jennifer Rhee, Bloomberg Intelligence Senior Litigation Analyst. We first asked Jen if the Nextar-Tegna deal will be approved by the FCC.
8:32Jennifer Rie:I think in the end, yes, because the timing was right. You know, this isn't a deal, I think, that these companies could have gotten through a few years ago during the Biden administration. But both of the rules that the FCC has that would get in the way are in the process of being changed as we speak. And Republican commissioners have for a long time wanted to change these rules. So the first one is the 39 % ownership cap, you know, that one company can't own or operate TV stations that reach more than 39 % of U.S. households. These companies say they'll reach 80%. So it's just clear on its face that there's a problem there.
9:05Jennifer Rie:But the FCC is in a rulemaking process. They'll probably have this rule, get rid of it, vacate it. We think by the end of the year, my colleague Matt Schettenhelm is an expert on the FCC, and we've talked about this quite a bit. That's probably going to clear out of their way. There could be litigation, of course, but we do think the rule will move out of the way. The other issue is owning more than one of what's called the big four broadcast stations, ABC, CBS, NBC, Fox. That rule would also get in the way here, probably in a number of local areas, called designated market areas by Nielsen. That rule has also been vacated by the Eighth Circuit Court of Appeals.
9:45Jennifer Rie:It will also probably be in litigation, but it seems like the road is clearing for the FCC there. It's a whole new world. Yes, it's a whole new world. But we have Department of Justice also. And so we can't forget that. Right. And we always think about the FCC. The Department of Justice is going to be looking at this too. But I do think they can probably get it cleared through that agency as well. All we really care about is President Trump. Has he voiced any opinion one way or the other about this type of deal or these types of deals? You know, I haven't heard anything from him. You know, it would be reported in the news.
10:17Jennifer Rie:I haven't heard him say anything about these deals. We are beginning to see a trend, though, in the merger world, Paul, where if the companies do and say the right things for the Trump administration, they're getting assistance in getting their deal through. And they're all pretty well aware of that. So as long as they do and say the right things, hey, we won't block political ads. will be neutral in, you know, our censorship of content, things like that, that resonate with Trump, that's going to help them. Sinclair did come in here with an 11th hour deal, did they not? Yeah, I think so. But, you know, they rebuffed what it seemed like on a per share basis, it was better than the next star deal for Tegna.
10:55So why rebuff it?
10:57Jennifer Rie:You know, I can't speak to that. But you know, that's much more Tegna and Tegna strategy. Maybe they think from an antitrust perspective. There's less overlap here. I mean, it is 35 of 51 of their DMAs. That's what Tecna says. But in those 35, depending on what stations they own, that overlap may not be problematic. It may only be problematic in a few. They may still have to divest some stations in order to get Department of Justice approval. I haven't done that comparison analysis, but it may be that they have to divest fewer stations for this deal, perhaps in a different one. Yeah. How is the Department of justice, looking at mergers and acquisitions, it's generally defined.
11:33Has it materially changed under the Trump administration versus the Biden administration?
11:36Jennifer Rie:You know, it's so interesting. The rhetoric at the beginning was that it wouldn't change, that there would be this read-through, and that there was more commonality with the Biden administrators than differences. But it has changed. You know, they have gone back to settling problematic deals with, you know, structural, even one behavioral remedy, that was Omnicom Interpublic, with divestitures. This is something that wasn't happening during the Biden administration. They just said, if a deal's problematic, we're going to sue. This DOJ and this FTC has said, no, we're going to work it out. If we have problems, we'll work out the problems with a fix.
12:07Jennifer Rie:We'll have a settlement and we'll allow the broader deal to close. And that's a big difference. What does this deal tell you, though, just about the larger landscape of television, especially local TV, which we know has been losing revenue share? They're struggling just because there are too many places the eyeballs can go, right? And they're competing with streaming and with the big guys. So is this really a merger of necessity for these local TV stations? You know, I would think it is. And I think we're going to see more. You know, that kind of consolidation has slowly, there's been quite a bit of consolidation, actually, over the years.
12:39Jennifer Rie:It kind of slowed down during the Biden administration. But, you know, I think it's going to pick back up again, because they are so challenged by cord cutters, by people who never, you know, younger people who never watch TV at all. You know, What's that? What is cable? Exactly. So looking broader here, I mean, over the next year or two, do you expect to see more deal activity just because companies and boards and private and all the forces out in the marketplace feel like this is the time to do it? This is an administration that will support deals? I think so. And I think it would have already picked up if we didn't have so much tariff uncertainty.
13:13Jennifer Rie:I think that has slowed things down. But as those things sort of work themselves out, I think we're going to see a lot more deal activity because you can see a path to getting these deals done without having to go to court and without dragging it out for two years. So this is sort of a litmus test then, isn't it? This Nextar-Tegna deal for the rest of the industry, really? Yeah, I think we have a few litmus tests out there. You know, the Google Whiz deal that's pending is a litmus test for sure to see what this administration will do with a big tech platform merger. I think this Nextar-Tegna deal is a litmus test because they're breaking all these old rules that were the orthodoxy for years.
13:47Jennifer Rie:We're going to see where that goes. And then, you know, you have Dick's Foot Locker and you've got Charter Cox. And there are a lot of big deals pending right now. And I think they all are deals that would have had trouble during the Biden administration, but I think can get cleared now. Our thanks to Jennifer Reeve, Bloomberg Intelligence Senior Litigation Analyst. Coming up, we'll look at the results of a second obesity pill trial for the pharmaceutical giant, Eli Lilly. You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in-depth research and data on 2 ,000 companies and 130 industries.
14:16You can access Bloomberg Intelligence via BI Go on the terminal. I'm Scarlett Fu. I'm Paul Sweeney, and this is Bloomberg. When your options are limited, so are your opportunities. At SIBO, the global exchange that pioneered options trading, we offer more ways to move with the market. From VIX and SPX options to global market data solutions, SIBO helps investors diversify, manage risk, and stay ahead of whatever the market does next. SIBO. Life is better with options. Your investments could be too. There are risks associated with SIBO company products. Review the disclosures and disclaimers at SIBO.com slash US underscore disclaimers.
14:55This is the Bloomberg Tech Minute brought to you by ChachiPT. Now with ChachiPT work. I'm Carol Masser. Globetrotters hunting for airfare bargains are in for a rude awakening as the days of stumbling across a cheap seat on a popular flight could soon disappear. Bloomberg's Juan Ha reports that airlines from Delta to Virgin Atlantic are adopting artificial intelligence to change seat prices more quickly by weighing dozens of variables in real time, helping capture more revenue while shrinking pricing gaps that once allowed travelers to find bargain fares. Machine learning models can more accurately forecast demand by analyzing historical booking patterns, seat inventory, and seasonal trends, while also continuously tracking competitors' fares and capacity changes to update prices in near real time.
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16:10Amazon Pharmacy presents Painful Thoughts. It's been a long bumpy road dealing with yet another bladder infection. And driving to the pharmacy to pick up meds, I went over a pothole and a little pee came out. So now I get to stand in line with pee-pee pants. Next time, skip the pain and get fast free delivery with Amazon Pharmacy. Health care just got less painful.
16:41You're listening to Bloomberg Intelligence with Paul Sweeney on Bloomberg Radio. I'm Paul Sweeney. And I'm Scarlett Fu filling in on Bloomberg Intelligence. We move next to some M &A news in the consumer space. This week, the beverage company Keurig Dr. Pepper announced it would buy the coffee and tea company J.D.E. Pete. The goal is for Keurig Dr. Pepper to strengthen its struggling coffee business. The company also says it plans to separate its coffee and soft drinks unit into two independent U.S.-listed companies next year once the deal is completed. For more on all of this, guest host Alexis Christophorus and I are joined by Ken Shea, Bloomberg Intelligence Senior Consumer Products Analyst.
17:18We first asked Ken to explain what this deal would do for Keurig Dr. Pepper. This two-step deal basically addresses a lagging division they've had, the Keurig coffee business. You know, it's cold beverage business, namely Dr. Pepper, Mott's, Canada Dry is doing really well. Whereas the Cura Coffee business really has been a laggard over the last couple of years. Now that you have higher green coffee costs, you have 50 % tariffs coming in from Brazil, namely coffee beans. slow demand for at-home, you know, pod business, you know, the ubiquitous K-cups. And it really has painted a dismal picture for that division in the second half.
18:04So rather than try to sell it, and I don't know if they tried to do that, but rather than try to do that at a low multiple, what they're trying to do cleverly is team it up with J.D.E. Peets, which is the number two coffee producer in the world behind only Nestle, but mostly big in Europe. And, you know, attach the U.S., essentially U.S. business, the K-Cup business together, and you have a pretty good entity. You know what struck me when I was reading about this deal, guys? Dr. Pepper was the second most popular soda in the U.S. last year. Is that right? Behind Coke and ahead of Pepsi. I did not know that.
18:42I can't remember the last time I drank a Dr. Pepper. Well, if you're in Texas, that's like the state drink. Is it now? All right. Yep. So, but Ken, the question here is, talk to me about the beverage side, the soda side here, because I know bottled water has sort of been eating their lunch, the overall industry, right, for years now, outpacing the sales of soda. So what's the health of that side of the business? Oh, it's doing very well, Alexis. The cold beverage side is doing really well, whether it's Coke or Pepsi or Cure Dr. Pepper, particularly those three companies, because distribution is everything.
19:16These three companies have national footprints, so they can reach all the outlets, whether it's fountain drinks or traditional supermarkets, vending, whatever. They can reach it, and they all have powerful brands. As you said, Dr. Pepper has really been coming on strong over the last couple of years, and they have other powerful brands. Unfortunately, their somewhat mini-conglomerate business structure is being dragged down by Keurig, the coffee business. So that business is doing really well. Well, Keurig has shown that it's also flexible and willing to pivot to fast-growing niche cold beverages.
19:53You know, it's a business that continually changes with consumer tastes. Over the last year or so, for instance, energy drinks have taken off. So what did they do? They went out and bought Ghost Energy, you know, for even a younger demographic that typically drinks energy beverages. They are bigger into the sports drink category. They talked about on the last call a few weeks ago to get stronger in the protein space. Everybody wants protein. You know, the GLP-1 folks need protein replenishment. So they've shown a willingness to branch out and tap into anywhere where fast-growing cold beverages are, you know, doing well.
20:32So I look on my global commodity screen and I see the price of coffee is up like 25 % this year. I mean, what's going on with that? Talk to us about coffee and just the cost of the beans and all that kind of stuff. Well, you know, coffee beans are essentially sourced from Brazil. So to some degree, the roasters are hostage to good crops. And over the last year or so, you really haven't had great crops. I think some of the sellers in Brazil are also holding back knowing that tariffs are coming and they're not going to get what they would like to get. And that's exacerbating the run-up that you've seen over the past six months, a year in coffee beans.
21:14If you went back over the last couple of years, two or three years, you would see that the retail price of coffee, whether it's rated drink or hot coffee at your local coffee shop, have increased faster than most other beverages, soft drinks I'm talking about. So you're even seeing some consumers or switching from, say, like cold brew, cold coffee, to move to energy drinks. It's more cost effective. So the coffee producers have a conundrum. Do they continue to raise prices and get flat or lower volumes, or do they eat that margin? And so what Keurig has decided to do is kind of divest it in a tax-efficient way.
21:58Our thanks to Ken Shea, Bloomberg Intelligence Senior Consumer Products Analyst. We move next to the biotech space. This week, the pharmaceutical company Eli Lilly said its second obesity pill trial helped patients lose almost 10 % of their body weight. And the success of this weight loss trial moves Eli Lilly one step closer to the potential approval of its weight loss pill. From more on this, guest hosts Lisa Matteo and Alexis Christophoris were joined by Sam Fizzelli, Bloomberg Intelligence Director of Research for Global Industries and Senior Pharmaceuticals Analysts. They first asked Sam how the most recent Eli Liddy obesity pill trial is different.
Read the full transcript
22:31This is a large trial in diabetic patients, but obese diabetic patients. So they're looking at the impact in that population. That population tends to have less of a weight loss for a variety of reasons, but it's come out exactly where we thought it would come out. actually maybe a little bit better than people's lowered expectations after that first trial read out a couple of weeks ago if you remember when the stock got hit severely uh lily's stock and so we're seeing about 10 weight loss and um still the same high levels of discontinuations this is a long trial so you even find a whole bunch of people on placebo discontinue because they get bored, they want to go and get weight loss from another drug.
23:20So it's actually pretty decent data, because it's a small molecule pill. It's a pill you can take, relatively easily manufactured. And you can take without too much complications in terms of don't eat, do eat, take in the morning, take in the evening, that sort of stuff. And that's the key, Sam. And I'm wondering how much of a game changer this is, because it's not an injection, right? It's a pill. You're looking at an industry that by 2030 is projected to be$95 billion. So if this goes Eli Lilly's way, is it a game changer for the company? Yeah, I mean, it has gone their way. This is unless something shows up in the enormous number of files that they file to the FDA in terms of side effects or something.
24:02This is a drug that's likely to get approved. The question is, how do you use it? you've got the injectables once a week once a week not a big ask very fine needle people even tell me they don't even notice the needle going in and out but still you don't see the needle um so what does it sit 10 weight loss versus 20 odd percent weight loss so what is the right way forward here some people are needle phobic it's going to be helpful for those some people can't get access to the drug because it's hard to manufacture the other ones that are injectables sterile manufacturing. So there's lots of room for this.
24:37And of course, there's this other thing that I think a lot of people keep thinking about is you've got your big weight loss with your injectables, six months in, nine months in, 12 months in, switch to this and help you maintain. You might not even need the higher doses, which are causing some side effects. Maybe you can get away with a lower dose and maintain that weight loss. They would have to do a trial to prove that though. As you're talking, a question kind of popped into my head. You're talking about all the different advantages to it. What about, has there been any talk about price? Like how much could this pill cost compared to an injection?
25:11I mean, it would be an error for these companies to start competing with themselves on price with their products. If you find that actually you can go with the lower dose of this, your margins are a bit better, definitely because there's no device involved, but I don't know what the small molecule manufacturing, because not all small molecules are easy to make, right? It may be a small discount, perhaps. I don't know. But I doubt that this will come out at a level that's significantly lower. On the other hand, it does have lower weight loss. So maybe there is an opportunity to kind of, I say it pari, pasu, if that's the right phrase, in line with its weight loss that you're getting.
25:52Our thanks to Sam Vazelli, Bloomberg Intelligence Director of Research for Global Industries and Senior Pharmaceuticals Analyst. We move next to news from the consumer retail company, Williams-Sonoma. This week, the company raised its full year sales growth target after a strong second quarter showing across all its brands. However, Wall Street's reaction to this was mixed. Williams-Sonoma has seen its incremental tariff rate double to 28%. From all this guest host, Alexis Christoffers and I are joined by Lindsay Dutch, Bloomberg Intelligence Consumer Hardline Senior Analyst. We first asked Lindsay to break down Williams-Sonoma's earnings and how its business is doing.
26:25Williams-Sonoma had another really good quarter. We're seeing continued momentum in sales, which is a positive for them, especially given higher interest rates and new home sales being soft. And more importantly, they held the guidance for operating margin flat, even though they're facing tremendous cost headwinds from tariffs. Why not a better reaction from Wall Street? You know, I am also puzzled by that. I think that there's not much more that you can ask for from a company like this. You know, they are working on getting to some sales growth goals. They're showing progress there. They are leveraging their scale, negotiating with suppliers.
27:04They're basically mitigating all of the costs from the tariffs that they're experiencing this year, which was basically a doubling in the tariff rate than they were expecting from the first quarter. So it's a significant headwind. They're basically planning to offset all of it with all of their mitigation efforts. and they're going to continue to see some profit growth this year. Long-term goals are intact. So how are they mitigating it? So they're not going to pass anything along to consumers. How are they mitigating it? So they are doing select price increases. They have multiple levers that they are pulling.
27:42So they are negotiating with their suppliers, sort of managing the cost sort of on the supply side. They're shifting sourcing. You know, with the new threat of an additional tariff just on furniture imports, They're looking to increase U.S.-made inventory heading into next year. They are also increasing the prices. And the fact that demand is showing momentum, you know, that's a positive sign that they can execute those price increases successfully and continue to get a good margin on those products. So Williams-Sonoma is a company that also owns the Pottery Barn brand, West Elm. curious if there were strengths sort of across the board, across its brands?
28:24Yes. So this was the second consecutive quarter that we saw same-store sales growth across all brands. Pottery Barn and West Elm are the two big ones that we've been watching over the past, say, four to six quarters. And that's because there really has been a bit of a challenge when it comes to demand for furniture. Coming into this year, we saw some positive momentum in that business. Williams-Sonoma has continued to outperform. So we saw growth in those two brands again in this second quarter, while the industry was still down for the quarter. So they are seeing good demand with those two big brands, and they're saying that a lot of that is coming from the new products that they're launching.
29:04Our thanks to Lindsay Dutch, Bloomberg Intelligence Consumer Hardline's senior analyst. Coming up, a look at earnings from the retailers Kohl's and Abercrombie and Fitch. 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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30:18The technology could lead to higher fares on busy routes as airlines pack flights closer to capacity, but may also result in lower fares on off-peak and lower-demand routes. That's the Bloomberg Tech Minute brought to you by ChatGPT. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com today by selecting Work Mode. available on Plus and Pro Plans. Amazon Health AI presents Painful Thoughts. I, um, I can't stop scratching my downtown. Yeah, but I'm not itching to go downtown and tell a receptionist I'm here to talk about my downtown. Some things you'd rather type than say out loud.
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32:12Wasabi, the AI storage cloud. Proud partner of the iHeart Podcast Network. You're listening to Bloomberg Intelligence with Paul Sweeney on Bloomberg Radio. I'm Paul Sweeney. And I'm Scarlett Fu filling in on Bloomberg Intelligence. We move next to news on the telecommunications companies EchoStar and AT &T. This week, EchoStar agreed to sell Spectrum licenses to AT &T for about$23 billion in an all cash transactions. The sale will expand AT &T's network. It'll also help EchoStar stay out of bankruptcy and fend off regulatory concerns about its airwave use. The deal is expected to close by mid-2026, pending regulatory approval.
32:51For more, guest hosts Lisa Mateo and Alexis Christophoris were joined by John Butler, Bloomberg Intelligence Senior Telecom Analyst. They first asked John what this EchoStar AT &T deal means. It is huge for EchoStar, And I think at issue for them is they have they've been trying to build their own 5G network to compete with the big guys. And they have the spectrum to do it, but they didn't have the capital to do it. They really have an outsized debt load that they've really been struggling to service. And the FCC intervened here and they've been pressuring the head of Echo Star, Charlie Ergen, to either use the spectrum and start to fill those airwaves or to sell it.
33:37And so I think this is maybe the first of maybe even more moves to sell more spectrum on the part of the company. But given the price tag, it alleviates that capital crunch. And so any risk of default here, I think, is minimized now in the wake of this deal. And so investors are breathing a big sigh of relief. Talk to me a little bit, John, about this price,$23 billion,$9 billion more than EchoStar paid for the spectrum,$5 billion more than the appraised value. Is AT &T getting value out of this$23 billion deal, or are they grossly overpaying? So I'll say Spectrum is like houses on Nantucket. The price just continues to go up over the years, particularly with the advent of AI now and the need for more capacity to carry that added traffic.
34:39It's really not a concern on my part as to whether or not AT &T is going to get a good return on this investment. And again, all kidding aside, I go back to that analogy that really spectrum tends to increase in value over time. It's a very illiquid market, so it's hard to really get a good feel for fair value of different frequencies. But I have no doubt that at the end of the day, even expensive is going to prove cheap here for them. Hey, John, can you dig a little bit into how this is going to expand AT &T's network? So if you look at the spectrum holdings of Verizon, T-Mobile, and AT &T, and spectrum, I'll just take a step back for listeners that don't know.
35:28When you're making a call or transmitting data over the air, you're doing it using spectrum. And the more you have, think of it like the width of a pipe, the more you have the fatter the pipe, the faster the download speeds. And so AT &T intends to put this spectrum to use almost immediately to really enhance the download speeds of the network. And so network quality gets better. Word gets around. People begin to say AT &T has a better network. So from a branding standpoint, there's a real benefit here. And then longer term, again, as AI continues to scale up and inferencing those queries that we make and the answers we get back, a lot of that's going to be done at the edge of the network where you need that big fat pipe to support that traffic.
36:20So I think in their minds, those are the two things thereafter, improving the network quality and the brand image and having the pipes to move the traffic that's coming down the road here. On a call with investors, AT &T's CEO, Stanky, said that regulators shouldn't be concerned that this transaction was going to put too much wireless spectrum, I guess, in the hands of one of the largest telecom carriers. That's what he told investors. But do you think regulators are going to balk at this? No, I think regulators have been behind prompting the sale, if that's the right way to put it. So again, the FCC was really on EchoStar to sell some of that spectrum.
37:05They're educated and well-educated in wireless as regulators to know that it was probably going to be one of the big guys that would step up and buy it. If I look at AT &T spectrum holdings, they had a competitive disadvantage or less holdings in the band or the frequencies that they purchased from Echo Star here. So I don't think there's any sort of regulatory argument against the deal here. But I would defer to our legislative analysts in Washington to really make the call there. But I'm not concerned. Our thanks to John Butler, Bloomberg Intelligence Senior Telecom Analyst. We move next to earnings from the retailers Kohl's and Abercrombie & Fitch.
37:54This week, Kohl's shares surging after the company offered a more optimistic full-year sales outlook. The company now expects comparable sales to fall no more than 5 % this year. Its prior forecast was 6%. Separately, Abercrombie & Fitch raised its full-year sales guidance following a stronger than expected quarter at its teen-focused Hollister brand. For more on all of this, guest host Alexis Christophorus and I were joined by Mary Ross Gilbert Bloomberg Intelligence, senior equity analyst who covers retail. We first asked Mary for her key takeaways on Kohl's earnings. Kohl's, OK, look, they reported comp sales down still.
38:28And as you pointed out, 14 consecutive quarters of declines, or another way to look at it, over the past three years, they're cycling three years of declines. So but what really we're looking at in the in the news that came out with Kohl's, One is that on the call, the company said July sales were flat. That was really encouraging. And when you look at the third quarter and the guidance for the third quarter, again, still looking for declines for the balance of the year, down 4 % to 5 % on a comp sales basis. But for the third quarter, they're going to cycle a 9.3 % decline last year. So that means the comparisons are easier and they're off to a good start.
39:10So it's encouraging. And what we're finding is that they're bringing back the core private brands that are really resonating. And their core consumer, which is that sort of low to low middle income consumer, they're really pressed by inflation still. And so they are really looking for the value. And as they brought that back in and they brought back fashion jewelry and, you know, they're working on refining fine jewelry. but that's all resonating now with the customer. And so that's where they're seeing some strength. And so we're seeing encouraging signs there, but they're not out of the woods yet, right?
39:48Because, you know, again, three years of sales declines and, you know, their sales are still declining. So we'll see if they actually reach stabilization by the end of the year. They're saying, no, we're not, but we're thinking they're providing conservative guidance so that they can beat. Hey, Mary, what are Kohl's and some of the other companies saying about, I don't know, their strategies for dealing with tariffs in terms of, A, passing along to consumers, B, taking it maybe near their margin, or C, I don't know, kind of pushing back on some of the suppliers? Is there a consensus building about how some of these retailers are dealing with it?
40:27Yeah, Paul, that's a really good question because tariffs is absolutely top of mind. And with Kohl's, Kohl's really sources most of their product from other brands and companies. They do have their own private brand business. It's probably somewhere around a third of the business. You know, they're getting it back in order because, of course, they went too low last year. And what they're finding is they're sharing with their vendors. This is what we're finding across the board. And they're finding an ability to raise prices on select items. So with Kohl's, we did see a margin improvement in the quarter.
41:03And so because the private brands do deliver a higher margin on an overall basis versus the third-party brands, they're getting that benefit, and that's helping to offset a bit of the tariffs. And again, they're less impacted versus some of the specialty apparel brands like Abercrombie and PVH and those companies reporting, which they did disclose what kind of exposure they have. But we are seeing across the board that there is sharing. It's usually about 50 % where the suppliers will say, we'll absorb 50 % of the cost. And then the other 50 % is taken by that brand. Then they will do strategic price increases on certain items that they feel will be less noticeable to the consumer.
41:46Mary, before we get to Abercrombie, one more question here on Kohl's. Bloomberg News is reporting that Kohl's is having trouble paying its vendors on time. What do we know about that? Alexis, I'm really glad you brought that up because that was never brought up on the call. Nothing came up in that conversation. When we saw that article, we said, what? I mean, that's kind of like a warning sign. And it basically says, look, they're just trying to manage their working capital needs because we're in a period right now where they're taking in all of the inventory for the holiday season. That's coming in right now.
42:23And so that's a big cash use. And that's kind of where we are in the third quarter is where they're going to have to, you know, raise their revolver borrowings to fund those needs. And so there was a bit of a concern, but nobody on the earnings call brought that up with the company. But we kind of we're watching that closely. Like I said, Kohl's is not out of the woods yet. All right. Amber Crombie, what's the story there? So on Abercrombie, generally they beat, but, okay, and it was all led by Hollister, which we could see in the transaction data, and it was something that we saw in the first quarter.
43:01And they're cycling some big comparable sales increases in the prior year period for their namesake Abercrombie brand. But the decline in comp sales, you know, is down about 11%, was way worse than what analysts were looking for. They were looking for a decline of something like down 7%. The reason for that is they had some carryover inventory at lower average price points that they were selling through in the quarter, and that's what really took the comp sales down. But they were very optimistic about third quarter start with their denim program, with their NFL collaboration. And so they feel like that's going to really benefit all of the initiatives that they have to benefit the Abercrombie brand.
43:47going forward. So they feel like, no, this is just a little bit of a hiccup, nothing to be alarmed about. And I think what we're seeing generally when we think about all these earnings reports so far is that the consumer is resilient. We have the lower income being a little more strained and being very careful and choosing what they're going to buy. But when they see the value, they're spending. And then, of course, when you get the consumer that's in a better position, they're definitely spending. Our thanks to Mary Ross Gilbert, Bloomberg Intelligence Senior Equity Analyst for Retail. 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.
44:26And of course, as always, you can access Bloomberg Intelligence via B.I. 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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From the publisher
Watch Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Hosts: Paul Sweeney and Scarlet Fu
On this podcast:
- Kunjan Sobhani, Bloomberg Intelligence Senior Semiconductor Analyst, recaps Nvidia earnings.
- Jennifer Rie, Bloomberg Intelligence Senior Litigation Analyst, discusses the Nexstar, Tegna merger and antitrust issues.
- Kenneth Shea, Bloomberg Intelligence Senior Consumer Products Analyst, discusses Keurig Dr Pepper agreeing to buy JDE Peet’s.
- Sam Fazeli, Bloomberg Intelligence, Director of Research for Global Industries and Senior Pharmaceuticals, discusses Eli Lilly’s latest obesity pill trial.
- Lindsay Dutch, Bloomberg Intelligence Consumer Hardlines Senior Analyst, discusses Williams Sonoma earnings.
- John Butler, Bloomberg Intelligence Senior Telecom Analyst, discusses AT&T agreeing to buy EchoStar spectrum licenses for about $23 billion.
- Mary Ross Gilbert, Bloomberg Intelligence, Senior Equity Analyst, Covering Retail, discusses Kohl's and Abercrombie earnings.
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