Kohl’s Skyrockets as Stock Becomes Traders’ Latest Meme Darling

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2:01Mary Ross Gilbert:Polls, their shares surged as much as 105 % in early trading. Now their shares, well, they're up about 36%. It's just a record move. A lot of mentions by retail traders on social media. Let's bring in someone who knows a little bit more about this. Let's bring in Mary Ross Gilbert. She's Bloomberg Intelligence Senior Equity Analyst covering all things retail. So, Mary, can you tell us, is this a meme stock? Well, it's acting like a meme stock. That's for sure, Lisa. And as you pointed out, it was on social media. It looked like midday yesterday there was a post saying, showing a Bloomberg chart and showing the short interest.

2:39Mary Ross Gilbert:And if you look at the number of shares or the shares borrowed versus the total float, it was about 49%, which is pretty high. And it's near a historic high, at least over the last couple of years. And so the post sort of circled that and then it identified and noted, hey, how can you be short this stock and sleep well at night? And then apparently that kind of triggered other posts throughout, I guess, into the evening yesterday. And so, of course, in pre-market, we saw the share surge, as you pointed out, over 100 percent. And yesterday the stock was up about 8 percent. We saw retail stocks on the move yesterday as well.

3:22Mary Ross Gilbert:And so it could be, you know, as one of your earlier commentators discussed, you know, with such a strong market overall, this is a sector that has been beaten down largely with tariffs and then, of course, with execution issues when we're talking about coals. Mary, has the company said anything either last evening or today in response to the stock movement? Absolutely not. There are no releases from the company. So, I mean, is this something, I mean, what are you hearing from, you know, the clients that you talk to, institutional investors that you talk to? How are they, are they selling into this?

3:56What are they doing?

3:58Mary Ross Gilbert:Yeah, I'm not hearing anyone discussing exactly what their activity is. But you can imagine that there's probably a fair amount of hedge funds involved. And so when you think about it, the company is highly levered. they have bonds. And hedge funds typically will take a position, let's say, in certain bonds, and then they'll go short the stock. So I think we do have some of that activity, and that's how they're positioned. And of course, there could have been a short squeeze that was triggered with this activity. This is usually what we'll see in a situation like this. So I think that's kind of what we're seeing in the activity in the shares.

4:38Mary Ross Gilbert:And, Mayor, before all this news came out, how was the stock doing before? How was Kohl's performing before all this? Oh, it's been atrocious. I mean, the stock is, you can look at three years, two years, five years, year to date, and the stock has been off significantly. And that's due to falling revenues. I mean, if you look at the revenues over the last few years, it's down over$2 billion. And really, when you look at the core business, it's down even more. And that's even with adding, you know,$1.8 billion in revenues from Sephora. So it shows that there is trouble in the core business. And, of course, they've rotated through several CEOs.

5:17Mary Ross Gilbert:And they're on an interim CEO as they hunt for a permanent. They're fifth CEO in just over two years. Oh, boy. All right, Mary, that explains it all. Mary Ross Gilbert, thank you so much for joining us. Mary Ross Gilbert, she covers the retailers for Bloomberg Intelligence. She's based out there in our Los Angeles Bureau. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. General Motors, that's what we want to get to, took a big hit from President Trump's tariffs.

5:54Mary Ross Gilbert:Are you ready for this, Paul? OK, one point one billion dollar profit hit. So what kind of impact is that going to have for the company? Well, we want to hear from the expert about all this. So let's find out and let's go to David Welch. He's Bloomberg Detroit bureau chief. He's joining us live from Detroit. So, David, were you surprised with that figure one point one billion dollars? I mean, we heard from Stellantis to kind of saying something similar yesterday. No, not surprised at all. GM said they were going to take a$4-5 billion hit, or at least that they had$4-5 billion in exposure this year to tariffs and that they would only be able to offset about 30 % of it.

6:31And the measures they're using to offset that, you really won't see until the second half. I thought there would be a pretty big hit to it. I don't think the street was surprised either because the forecast for GM's earnings were for a pretty big drop off of the second quarter of last year already. GM did better than that because they did have some things, better profits in China than we saw a year ago, and better sales in the U.S. that helped them. But overall, pretty tough quarter, and it really shows that the car companies are going to have a tough time getting anything close to pre-tariff profits going forward because there's just no easy way to get around them.

7:09So, I mean, is what we're to take away from the Stellantis numbers yesterday in the GM numbers today is that the auto manufacturers, for whatever reason, maybe they're just not able to or they chose not to pass along the bulk of their cost increases to consumers. Is that a policy or is that just an economic reality? It's an economic reality. And look, Stoantis has a lot of other issues. They're going to do some pretty heavy restructuring, which they talked about yesterday. But look, we're at a period right now where interest rates are at pretty high levels. You have historically, not record, but pretty close to record new vehicle prices in the U.S.

7:45right now. Average monthly payment, well over$700 a month. We have a record number of people, I think, paying more than$1 ,000 a month for their monthly payment. Cars are expensive. So, you know, you can go out there and say, hey, I'm going to pass this tariff cost on to consumers or even some of it. But if consumers don't pay it, then you just lose the sales. And you haven't seen huge price increases. You've seen small ones. You've seen companies sneak in some bigger fees for transporting the vehicle, for example, things like that. But it's just not, they just don't really have the ability to push in big price increases to pass on, in GM's case, a billion dollars' worth of tariffs on a quarter.

8:25Mary Ross Gilbert:And it's not just tariffs. What else affected profits for GM? I mean, how's their inventory for electric vehicles? They built that up in the quarter, and since the vehicles lose money, they have to account for that. That cost them, I think it was$600 million in the quarter. They had$300 million because they've had a big engine recall, so they've had higher warranty costs. It wasn't just because of that recall. They've had other issues, and they're working on that. Some of these quality issues you're seeing that are costing companies more in warranty and recall-type costs are all the software that goes into electric vehicles.

9:00These are kind of first times out with new software, new infotainment systems, power management systems in these vehicles. And it's just tough for them to go out there and not be buggy, right? Think about how many times there's something on your smartphone that needs an update, and fixing that with a car is often more expensive. So some of it was related to that, and actually they saw pricing go down with some of their fleet customers. There's a lot of competition out there for the corporate and fleet business. And they actually saw some downward price pressure there, too. And that cost them a couple hundred million dollars.

9:39So a lot of things in the quarter that push profits down. But tariffs are the real story here. David, you're out there in Detroit. You live and breathe this stuff every day. What's the feeling in Detroit as it relates to this evolution to EVs? And how will the tariff and the tariff impact on profitability? Is that going to slow this down even more, do you think? I do. I think everything the Trump administration is doing is really going to slow the EV transition. First of all, the obvious one is come September they're going to be getting rid of the$7 ,500 tax break for qualifying electric vehicles.

10:17But with tariffs, you've got battery components, electronic components, wiring harnesses. There's more wiring in an EV than in a conventional vehicle. All that stuff adds to the cost of vehicles that already lose money. Some of them are actually built overseas. In the case of Hyundai, they make some of theirs overseas. GM makes a couple of its EVs in Mexico. They do qualify for USMCA, but there are still some parts component tariffs that they can be hit with on some of these vehicles. And so you add cost to vehicles that are already pretty expensive, and you can't pass it on if you do. Even fewer people will buy them.

10:58Companies may have less incentive to build and sell them if they lose even more money on these. So that's going to hurt as well. And then, of course, Trump's rhetoric for people who are politically right of center and pretty far right is that EVs are a dumb purchase and they don't work for you. And I think that hurts sales as well. So all of this is just not good for the momentum that EVs had in the U.S. before Trump got in office.

11:25Mary Ross Gilbert:Yeah, so David, last month the company said it would shift some production to the U.S. from Mexico. So what other changes can we expect to see from the company, like in the last minute or so we have left? You know, I think you'll see them try to bring more parts, more of the parts they buy into the U.S. So they'll be encouraging their suppliers to do what they're doing, which is move some production to the United States, and that'll take time. And, you know, you may see them make some more production-related moves. What they've done is pretty big, so I'm not anticipating any big announcements.

11:56But, you know, as they look at this and they find other ways to do it, you might see more vehicles, more parts built here in the U.S.

12:03Mary Ross Gilbert:Thank you so much, David Welch, Bloomberg Detroit Bureau Chief, talking about GM earnings and so much more. I'm looking at GM right here. If you go GM Equity FA, just brings up the financial statements. Their net income margin is 5%. Okay. That's it. They got like no margin, no profit margin. Anything goes wrong for these auto companies and they get screwed. You always say, I never understand the auto companies. I just don't get it. And oh, by the way, my top line's flat. I mean, you know, I just, it's such a tough business. A high volume, low margin business. We'll make it up on volume, I guess.

12:38It's one of those business. So it's just a tough, tough business. And then you throw on top of it tariffs. And then, oh, by the way, I have to change my entire industry that I've built up over the last hundred years to go electric. Yeah, I'll invest in that. Yeah. I don't know.

12:53Mary Ross Gilbert:We got a shift production, U.S. to Mexico. It's never ending for them. 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. Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done.

13:34ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro plans. This is Matt Rogers from Las Culture East.

14:12That's with Matt Rogers and Bowen Yang. This is Bowen Yang from Las Culture East. That's with Matt Rogers and Bowen Yang. You know when people try on new food and suddenly it's like, wait. That's the reaction a lot of people are having when they first try Kewpie mayo. It's the one with the red cap and the little baby on the bottle. You've probably seen it in the grocery store before. And if you've ever just walked past it, some people would say that's a huge mistake. Because this mayo is different. Most mayonnaise uses whole eggs. Kewpie only uses egg yolks, which gives it this rich umami flavor.

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15:19Listen on demand wherever you get your podcasts. Or watch us live on YouTube.

15:24Mary Ross Gilbert:Hey, we're listening to Bloomberg Intelligence. I'm Lisa Mateo alongside Paul Sweeney. And we are in the thick of earnings season, right? Among those companies today, one of them, Coca-Cola. A beat on second quarter sales growth profit. But it's another headline that's getting some attention. They are launching a new Coke product that's made with cane sugar. So here to tell us more about it is Kenneth Chase, Bloomberg Intelligence Senior Consumer Products Analyst. Kenneth, thanks for joining us here from Princeton. How much of an impact did the president have on this decision from Coke? Hi, Lisa.

15:57Well, it's hard to say, but it certainly is in sync with what Coca-Cola has been doing for a long time. And that is keeping its pulse on what the consumer wants to do. It has a lot of assets at its disposal. And a cane sugar product is not novel to Coca-Cola. I mean, it's produced it in the U.S., largely more outside the U.S., but in the U.S. on a selected basis. So it's really just going to expand that. It may have been prompted to a degree by the president's tweets or whatever, but it's certainly in sync. Like I said, you know, there's an audience out there that prefers sugar-based as opposed to high fructose corn syrup-based full-calorie sodas.

16:39And they're going to play into that. Most likely it's going to be a brand Coke extension, and it's going to be selling a premium price in selected markets to give an aura of exclusivity, I'm guessing, to command those prices. And so it just has a little more excitement. It's one of many things Coke is doing now on the innovation front. So from Coca-Cola's economic perspective, do they care which ingredient they use? Well, it depends, Paul. It depends if they can capture the premium price they're going to price it at. Cane sugar costs more than high fructose corn syrup. Corn is a heavily, heavily subsidized crop in the U.S.

17:18They built their supply chain around HFCS because of that. And most consumers, they don't really notice the difference. Some do, but by and large, they've grown that franchise very well. um but i guess you know some tourists who go to mexico and they they taste the sugar uh cane sugar coke down there and they say you know what this is really good and they want to and they want to capture the same experience in the u.s i'm going to chipotle today and they do offer the mexican soda there can i give you the history of high fructose corn syrup it was in the 1970s with high inflation and high sugar prices president nixon said do something about this and his guy I said, well, we can make a sugary tasting stuff from corn from American farmers.

18:07And thus high fructose corn syrup, which most doctors say is like poison to your system. But there we go. John Tucker with the value added there. Let me ask. Let me shift gears here. What is a Zen patch?

18:24A Zen patch? I don't know what a patch. I think they made a pouch. A Zen pouch. It's a pouch, you know, it's an oral tobacco product. Actually, Zin doesn't even contain tobacco. It's a synthetic product that's laced with nicotine that is a facsimile for tobacco, which a lot of people will say causes harm, and a lot of people are right. So this is a product that, you know, people can get their nicotine buzz in a, you know, hands-off kind of way, doesn't emit smoke, doesn't offend your neighbor that you're working with, and it's done really, really well. So those are the Zin pouches that are doing really well.

19:03I thought it was Zinfandel, the wine. No kidding. I get that pouch. But, I mean, it's big enough a business, Ken, that Phil Morris would call it out? Oh, yeah. It's about 8 % of the sales, I believe, at this point. But it's growing at a 20%, 30 % rate as opposed to cigarettes, which are flat if not down. But, you know, ICOS is their smoke-free device segment, which is doing very well. But if the low-to-large numbers at some point, that's going to slow. And ZIN is filling the gap to keep the overall volumes at a positive trend. They price these things very high. There's not a lot of competition in this space.

19:45So, you know, one of the things investors would say about the world of tobacco is because it's so consolidated, they can pass on a very high pricing. And that's what really drives the top line and, you know, the cash flows and so on. And Zinn plays very, very well into that model.

20:00Mary Ross Gilbert:And how does it fare as far as we hear about e-cigarettes, vaping, things like that? How has Philip Morris been doing, competing with this category? So they have a product called Veeve, which is their e-vapor product, as opposed to what they call Heat Not Burn, which has actual tobacco in it. And they would say it's a more appealing alternative. for smokers who are trying to quit. It's a lower margin product. It's kind of seen by Philip Morris as a kind of an entry level product. For those who are trying to move away from combustible cigarettes, they can turn to e-cigarettes, a low cost method.

20:37And their hope is that, you know, even though it's a low margin product, their hope is that they can get that consumer maybe at some point to trade up to their heat not burn product, which is, you know, a more profitable product for them. All right. Good stuff. I mean, I learned about the Zin pouch today. How about that? It's not Zinfandel. OK. All right. Very good. So good stuff there. Ken Shea, thanks so much. Ken covers all those consumer products at companies for Bloomberg Intelligence. Appreciate getting a few minutes of his time. You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at 10 a.m.

21:16Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. Lisa Mateo, Paul Sweeney. We're live here in our Bloomberg Interactive Broker Studio. Let's talk about Lockheed Martin. Put out some numbers disappointing here. Took some losses here. Let's break it down with Will Lee, aerospace and defense analyst for Bloomberg Intelligence. Will, Lockheed Martin, I mean, they just do everything. What happened in the quarter? Yeah, so I mean, if you look at the quarter, the performance was modeled by this hefty$1.6 billion chart on program losses and then another$169 million of other charges.