BI Weekend: NYC Casinos, Macy’s, Salesforce Earnings

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1:32quality stocks driving this short-term rally. Bloomberg Intelligence with Scarlet Foo and Paul Sweeney on Bloomberg Radio, YouTube, and Bloomberg Originals. I'm Paul Sweeney. And I'm Mara Melinda filling in for Scarlet Foo. 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 look at why the cloud-based software company Salesforce gave a strong outlook for sales in the current quarter plus we'll dive into why shares of the aerospace company airbus plunged and how this might affect the delivery of its newly produced jets but first we begin with some news in the casino and gaming space this week new york mets owner steve cohen won approval to operate a casino next to city fields in queens it's one of the three projects selected for gambling licenses in new york city and this was done by the state gaming commission's facility location board cohen the hedge fund mogul submitted an eight billion dollar casino proposal with partner Hard Rock International and was picked alongside Genting Groups, Resorts World, and Bally's.

2:36These three projects are expected to generate significant revenue and create thousands of jobs. For more on all of this, guest host Alex Seminova and I were joined by Brian Egger, Bloomberg Intelligence Senior Gaming and Lodging Analyst. We first asked Brian to talk about what the licenses represent and where we go from here. So this is a fairly protracted process involving ultimately the selection of three recipients. By the way, the only three left in the running after a few others were eliminated and dropped out. And really, it authorized resort casinos for the downstate New York area, mostly New York City.

3:09And as it turns out, the three qualified casino applicants, if you will, really are in New York City, but outside the borough of Manhattan itself. Brian, just looking at your note on these license approvals, you write that they face a narrow path to decent returns on investment. Can you please talk to us a little bit more about that idea? Sure. So what we assume for these resorts is they will get what I would call a gaming revenue premium and room rate premium of 10, 20 percent to other kind of high-end urban area resorts such as the Burgad in Atlantic City, Winds Encore in Boston. However, our concern in terms of the return prospects are that development costs are quite high and perhaps some of the targeted non-gaming contribution elements might be a bit ambitious.

3:58So for that reason, when we worked the numbers, we came up with something like a 10 % return on investment, which is certainly a bit less than most operators would expect to attain in these regional markets. So I'm thinking here, I mean, again, I'm just thinking about Steve Cohen's. I was looking at his plans in conjunction with his Citi Field. Obviously, he owns the Mets. Citi Field is out there, the National Tennis Center's out there, we've had the World's Fair situation, so there's a ton of opportunity out there. It seems like these are going to be more retail, hotel than casino. How do you think the mix of revenue is going to be there?

4:37So there certainly is. I think when we work the numbers, we assume that with respect to either food and beverage or retail entertainment revenue, those will be fairly sizable chunks of the overall revenue pie, probably cumulatively close to half, which is true of many kind of gaming resorts in attractive environments where you get a lot of non-gaming revenue. I think the same will be true here. The question is, will it be enough and will the margins, which we take to be about 30%, be sufficient to get a good return? But certainly, you know, the logic of having it next to Citi Field makes a lot of sense.

5:15You know, the other locations, Bally's at a golf course in the Bronx, you know, the resorts world in Queens, pretty much expanding an existing facility all have their merit. The question is, will it be enough to get a decent return? But certainly some of these locations have rational prospects. What does this victory for these three companies mean for their competitors like Sands, MGM, Wynn? Where do they go from here? So to be clear, you know, Sands exited this process back in April. Wynn exited in May. It's Hudson Yards project because of community opposition and MGM in October because of the license terms.

5:53But bear in mind that they do have other prospects. You know, Wynn is developing a UAE resort of its own. MGM is building in Osaka, Japan. They all can buy back their own stock. So I think they're weighing this particular opportunity relative to other development prospects. So we're going to get the licenses by year end. And what's the timetable? Have any of these three licensed winners laid out a timetable for getting a shovel in the ground and maybe even opening the doors? So I think it'll vary by operator, but the expectation is that these resorts will generally open by 2030 or so. It'll take a few years to develop.

6:32There's always the possibility of construction challenges, but that's the target. And, of course, our related concern, since you mentioned MGM, was MGM, Bally's, Caesars all operate casinos in Atlantic City. And, you know, the proximity to Atlantic City of resorts with casino elements of this caliber certainly presents a potential competitive challenge to Atlantic City itself. A-Seek, that's tough. That is tough. Because I always see, you know, on the parkway, Brian, I know you see it too. For years, for 20, 30 years, we've seen the limousines from New York City going down the parkway to AC. That's going to get impacted, isn't it?

7:12It will. I think, you know, some operators, Bergada, for example, Hard Rock may hold up better than others. But there's always a challenge when you've got this much additional gaming capacity with resort elements opening up in relative close proximity to a key Atlantic City feeder market. Our thanks to Brian Egger, Bloomberg Intelligence Senior Gaming and Lodging Analyst. We move now to the retail space. This week, the department store chain's Macy's posted better than expected results last quarter. However, shares dropped if the company pointed to potential for soft demand from low income shoppers for the current quarter.

7:46For more, Noor and I were joined by Mary Ross Gilbert, Bloomberg Intelligence Senior Equity Analyst covering retail. We first asked Mary to break down Macy's most recent quarter. We saw actually, I think, great results coming out of Macy's. But the company put out conservative fourth quarter guidance. And that's really what they always do. They seek to beat their numbers. And so that guidance came in very close. At the high end, it's right around where analysts are because they already saw strong results come in from other retailers. But we think when we think about it, we think there's upside here.

8:22So we really view the results as, look, Macy's nameplate because of all the changes that they're making. And what that means is they're bringing in more relevant brands that are resonating with their consumer. Not only that, but the stores look brighter. There's really kind of exciting music in the stores. The store associates are more engaged with the customer. We've noticed that on our channel text, particularly on Black Friday. We saw more traffic in the store than we've seen in years past. So we think that the changes that CEO Tony Spring is making, and he's really taking his cues from what he's done at Bloomingdale's, it's resonating.

9:03It's working. And so we think this momentum is building. And we certainly saw it in the third quarter numbers with comp sales, 2.7 % for the go forward stores. And so with that, I mean, that's a big improvement sequentially. And so we think that's building, you know, going into the fourth quarter and just with, you know, the constant improvement that we're seeing there. So when most people think about the retail space right now, a lot of people think about the transition to e-commerce. But it sounds as though from what you're explaining, a lot of people are going there in person. I mean, I'm looking at Kohl's.

9:36I'm looking at Dillard's. What are they doing in particular that's really attracting customers to come through the doors? is it also collaborations with celebrities by chance? Yes, you raised a valid point. And it does include collaborations. So for example, Aqua, they're under their Bloomingdale's brand, currently has a collab going out with a designer out of Milan. And so yes, these collaborations also even, they'll have some events, but all of that is certainly drawing in new customers. And I think Macy's nameplate could certainly do more on that end. They had their first collab with their On 34th brand this year.

10:18But we think we're going to see more next year. Because if you look at what Dillard's has been doing over the last few years, and they have a different business model than Macy's does, they're not really promotional. For example, for Black Friday, they just had clearance sales. And it was pretty comparable to last year. So that didn't mean that the rest of the merchandise was on sale. Macy's is far more promotional. But by doing collaborations, by getting celebrities involved. So, for example, for the holiday, they have Jennifer Hudson that's fronting their campaign for the holiday. And they're also engaging with social influencers.

11:00So, yes, all of that is resonating. We're seeing it with other brands, like, for example, with American Eagle, which just tapped Martha Stewart. And that's appealing to Gen Z. Oh, wow. So, yeah. I missed that one. Yeah. So these bold campaigns that these brands are doing, Macy's is also getting involved there. And they're dipping their toe. I would say they're dipping their toe in the water. But I think we're going to see that increase, you know, and build as we get into 2026. And when you talk about the digital business, because, of course, you're always hearing, let's say, stronger growth on digital.

11:37For example, when we looked at Black Friday, you know, over the weekend through Cyber Monday, the sales strength was really led by digital. Digital was up double digits versus, you know, low to mid single digits for in-store. So I think that's really positive there. But so when you look at Macy's, a third of their sales come from digital. So still in-store is very big, but it's also omni-channel. the ability to buy online, take back in store, or buy online, pick up in store. Just real quick, 30 seconds. What's Macy saying about the consumer out there? Yeah, so they're saying that the lower end consumer is really feeling pinched.

12:17And that's where they're seeing some challenges on some of the price increases on their lower price point items. But the higher middle income and the higher income consumer is resilient. And they haven't flashed or batted an eye with higher prices that they took to offset tariffs and they're still buying. Our thanks to Mary Ross Gilbert, Bloomberg Intelligence Senior Equity Analyst covering retail. Coming up, we continue in the retail space and look at earnings from the discount retailer Dollar Tree. You're listening to Bloomberg Intelligence on Bloomberg Radio, providing end-depth research and data on 2 ,000 companies and 130 industries.

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14:03This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney on Bloomberg Radio. I'm Paul Sweeney. And I'm Norma Linda, filling in for Scarlet Foo. We continue in the retail space. This week, Dollar Tree reported better than expected profit and raised its full year outlook. It's a sign that the discount retailer is capturing more spending from stretch shoppers. For more on this, Paul and I were joined by Lily Meyer, Bloomberg retail reporter. We first asked Lily to break down Dollar Tree's most recent quarter. Yeah, so Dollar Tree did well this quarter. It met expectations on revenue and same-store sales, and it raised its profit outlook for the year.

14:40I think they really have hit a niche in being able to capture consumers, both lower-end consumers who need cheaper goods and then high-income consumers who are looking to trade down. So, I mean, what do we think about elasticity of the lower end consumer right now? Because, I mean, if you think about Walmart, I used to think of this as a company that, you know, was a cheaper place to shop, but it seems as though it's appealing to multiple consumer types. But it seems as though Dollar Tree really is a great place for the lower end consumer. Yeah. And actually, recently, Dollar Tree has been looking to kind of break into that higher income shopper as well.

15:13So it has this pricing strategy. So it has some products that are still cheaper, but then it has some. it's getting more products that are more expensive. What is Dollar Tree saying about its core consumer out there? Who is that core consumer and how are they behaving? Yeah, so I think its core consumer is still a lower income shopper. 85 % of their products are $2 and under. So they really still have a lot of value. So they're seeing those shoppers continue to go in. But this quarter, they saw traffic down and they attributed that to tariff increases. So what's the takeaway in terms of the outlook?

15:49I mean, you talked about tariffs still being a drag here. Yeah, so tariffs were really dragged this quarter. They said that's going to lessen. So I think this was the quarter where we're really seeing the biggest tariff impact. It'll be really interesting to see what they predict for consumers next year. I'm interested to hear about that and also what they see for holiday if they continue to see higher income shoppers trading down for gifts. Do dollar stores, do they see a surge in sales, seasonal surge in sales from holiday sales? Do they see that like a department store would? Yeah, I don't know if it's the same surge, but they sell a lot of gift wrapping and gift bags and some of those smaller gifts, stocking stuffers.

16:28So I think they see a lot of that around the holidays. So what are we seeing in terms of just the broader read on the retail space? This kind of gives us a picture of the lower end consumer, but what are you seeing across the board? So broadly, we're really still seeing consumers spend. So there hasn't been that massive pullback that I think some of us were imagining might happen. We're still seeing consumer spend, but they're really value driven. So they're looking for the best deals they can get. They're trading down when they need to. They're stocking up on essentials. How promotional are retailers right now?

17:00Because I mean, I know talking to Poonam Goyal, the retail analyst at Bloomberg Intelligence, he says, you know, the more promotions you see out there, that's going to be, that goes right to the margins, the profit margins of some of these retailers. What are we seeing this season? That's a good question. So this season, we've actually seen some retailers pull back on deals to protect their margin. So some companies are doing that as part of a broader strategy, and then some are having to do that because of tariff. So for Black Friday, typically they'd offer big discounts, and some are pulling back or not offering discounts at all.

17:30So consumers have still been broadly spending in the retail space. What are they spending on? Are we spending money on essentials right now, skipping the splurging? Yeah, yeah, that's exactly it. So Black Friday, we talked to a lot of folks who were saying they're going to just get essentials this Black Friday. So instead of buying, you know, a Le Creuset Dutch oven, we talked to someone who instead was going to buy like three bags of 40-pound dog food. Oh, that sounds exciting. So really using, you know, deals to get things that they need for themselves rather than getting that big ticket item they waited for.

18:06What I learned from talking to retail folks is omni-channel retail, which is you use both the online and the bricks and mortar. Maybe you look at something online, but then you want to go touch and feel it, or maybe you order it, then you pick it up at the store. Omni-channel, is that still a thing? Yeah, yeah. So we were out there on Black Friday in some of the stores, and while a lot of people have switched their holiday shopping to be online, We still saw a ton of people in stores, especially at stores with really good deals and stores that appealed to young shoppers. So brands like Addicted and Princess Polly that are in malls were really flooded with young people.

18:43Our thanks to Lily Meyer, Bloomberg Retail Reporter. We move next to quarterly earnings from the cloud-based software company Salesforce. This week, the company reported third-quarter earnings that beat analysts' expectations. Salesforce also gave an outlook for revenue in the current quarter that topped Wall Street estimates. This suggests that the software company is persuading customers to buy its AI tools. For more on this, Noor Knight, we're joined by Anurag Rana, Bloomberg Intelligence Technology Analyst. We first asked Anurag for his take on the most recent earnings report from Salesforce.

19:10Yeah, the results did come in, I mean, almost in line with how we were looking at it in terms of that the core business is still struggling. But when it comes to some of their AI products, that has started to do well. They've gained momentum. But when you look at somebody like a sales force, when you have a revenue base of$41 billion, it takes a lot to move the needle. So even though these products are very small and, you know, growing triple digits, but they are not, you know, right there in order to take down what is happening on the core business, which is a decline in seed growth or the less addition of seeds because of macro IT spending.

19:48And that is probably going to be the story, at least for the near term. So it seems as though analysts are still generally positive on in terms of AI adoption trends when we think about this company, though. Yes, absolutely. And that's, you know, one of the things we saw really good numbers on both the data cloud side of it and also the agent force. But when you look at the stock reaction, and finally people have, when you really scrape the numbers and see that their commercial remaining performance obligations, which is the order book for next quarter, which they expect to grow about 13 % in constant currency, full percentage of point of that is Informatica.

20:24So when you strip that out, you will see that that particular backlog number goes from 11 % this quarter to, let's say, 9 % or 10%. So the core is still declining or the core is still under pressure. So the stock down 27 % year to date, Anurag, does that reflect the fact that it's just IT budgets are tight or that AI poses an existential threat to certain providers like a Salesforce? I don't think that's the case because it's going to be very difficult for an established Fortune 2000 company to get rid of their core system of record, whether that's an HR, sales, customer service, and just deploy a model in there.

21:04At least we are not there yet. Maybe, you know, five years down the road, we may see a scenario like this. But that's not really why Salesforce is struggling. It is basically they are the largest provider of sales automation tool and customer service tool to Fortune 2000 companies. It's those companies that are not hiring at that same rate that they used to. Because outside of AI and AI infrastructure, everything else is still weak at this point. Our thanks to Anurag Rana, Bloomberg Intelligence Technology Analyst. We move to some news in the aerospace. sector. This week, shares of the aerospace company Airbus plunged after revealed a quality issue on some fuselage panels of its A320 airliner.

21:42This came just days after Airbus flagged a software glitch on about 6 ,000 jets. As a result, Airbus must inspect hundreds of its best-selling A320 jets for potential quality flaws in the aircraft's body, and this could risk slowing down delivery of newly produced jets. For more on this, guest host Alex Seminova and I were joined by George Ferguson, Bloomberg Intelligence Senior Aerospace, Defense, and Airlines Analyst. We first asked George, to talk to us about why it seems Airbus has been able to fly under the radar until just recently. I think they've also had their challenges in the supply chain along the way.

22:15Just Boeing's challenges were so much greater that they stole the spotlight, if you will. But I mean, look, the aerospace supply chain is a bit thin, right? It doesn't have the same redundancy as like you'd get in an auto supply chain. And so when you just have some little problem at one of your suppliers, you know, it can really interrupt your ability to deliver airplanes. And I think right now what you're seeing is that Airbus already has a really tall order to meet the something like 820 airplane guidance or delivery guidance they've got for this year. We don't think they're going to make it.

22:50I think they need 70 plus A320s in the last two months of the year, November, December. We think that's pretty hard given they've kind of delivered 55-ish most months in the last couple months. And so I think a quality problem here probably really places in doubt their ability to make that guidance. And that's going to hurt their profitability for the year. George, you mentioned that really ambitious target for 820 aircraft deliveries by the end of this year. How disappointed could investors get if it fails to meet that target on top of the headwinds that this company is already facing? Well, I mean, so I think you're starting to see the disappointment here.

23:35Again, I'd be surprised if most investors weren't already concerned that the target was too high. I think Airbus has really put out a bunch of very ambitious build rate targets. I think our latest number in A320 is that we would be going to something like 75 a month, and that's consistently throughout the entire year, right, by the end of 2026, which to us just seems far too high. And I feel like Airbus keeps trying to lead the supplier base by pushing these higher numbers out and trying to pull the supplier base along, and then over time lowers some of these expectations. So look, I think anything they miss now isn't going away.

24:18It gets pushed into the next year and the next year. And again, I think the bigger challenge here is investors have to ask themselves, are a lot of these Airbus targets for delivery rates, are they just too ambitious? And don't we have to sort of knock them down when we build our consensus for what we think the company is going to be able to do? Because George, I mean, a number like 70 seems really high to me because when we talk about Boeing, it's like, gee, I hope they can get the 40. maybe to 50 um is that does boeing typically run that far behind on a production schedule than a airbus so i would say that if you would consider normal the end of the last decade when both were building and boeing wasn't having the problems with mcas uh airbus was up in the in the higher 60s and boeing was in the higher 50s and so we have traditionally seen airbus be able to put out more airplanes than Boeing.

25:14I think their supply base may be a little bit more robust, and I think they have sort of multiple final assembly areas around the world. I think those are some of the reasons why Airbus just has the infrastructure to put out more airplanes, more narrow-body airplanes per month. Our thanks to George Ferguson, Bloomberg Intelligence Senior Aerospace Defense and Airlines Analyst. Coming up, we'll take a look at U.S. data-centered power demand and just how quickly the sector is expanding. You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in-depth research and data on 2 ,000 companies and 130 industries.