# Caesars Agrees to Be Taken Over by Fertitta in $5.7 Billion Deal

An episode of [Bloomberg Intelligence](https://invisiblenetwork.ai/podcast/326301337), 28 May 2026, 23 min.

Audio: https://podtrac.com/pts/redirect.mp3/tracking.swap.fm/track/UVBrz8bN8aM2Xe47PEPu/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/7f534b8c-9e91-429a-b102-ae3c00090c6d/fa56adf1-bd1d-45ac-beb8-b45801148f3c/audio.mp3?utm_source=Podcast&in_playlist=0ad812bf-fd15-4012-a18c-ae3c00090c76

Watch Paul and Scarlet LIVE every day on YouTube: http://bit.ly/3vTiACF. Bloomberg Intelligence hosted by Paul Sweeney and Scarlet Fu -Jody Lurie, Bloomberg Intelligence Credit Analyst, discusses Tilman Fertitta's firm striking a $5.7 billion, all-cash deal for Caesars Entertainment that will add some 52 casinos in the US to his entertainment empire. -Caroline Hyde, BTech Co-Anchor, discusses Snowflake giving a stronger-than-expected annual outlook and signing a $6 billion multiyear agreement to use Amazon.com Inc.’s cloud services and chips. -Anurag Rana, Bloomberg Intelligence Technology Analyst, recaps Salesforce earnings. Salesforce gave a revenue outlook for the current period that fell just short of analysts’ estimates, with revenue expected to be about $11.3 billion in the fiscal second quarter. -Mary Ross Gilbert, Bloomberg Intelligence, Senior Equity Analyst, Covering Retail, discusses Kohl’s earnings. Kohl’s reported stronger-than-expected sales, as the department chain’s turnaround under Chief Executive Officer Michael Bender begins See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. You're listening to the
[0:10] Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am
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[0:23] Speaker 2: All right, it's Thursday, but there's still some MNA deals
[0:26] Speaker 2: to talk about. It's a fairly sizable one, if not
[0:29] Speaker 2: one that we had anticipated for a while.
[0:31] Speaker 3: Yeah, and I'm glad we have our next guest because
[0:34] Speaker 3: it's all about that side of the balanchie.
[0:36] Speaker 4: All right, let's talk to Jody Lorii.
[0:38] Speaker 2: Jody Lorii is one of our credit analysts here and
[0:41] Speaker 2: she covers the travel and leisure sector for us here
[0:45] Speaker 2: at Bloomberg Intelligence. And it's about Caesar's agreeing to buy
[0:48] Speaker 2: i should say, being taken over by Tomyan Fertita. Fertida
[0:52] Speaker 2: Entertainment is paying Caesar's shareholders thirty one dollars a share
[0:55] Speaker 2: in cash. But in order to pay that cash, they're
[0:58] Speaker 2: going to have to take out some debt. So, Jody,
[1:01] Speaker 2: this is something that you know, feels like it's a
[1:04] Speaker 2: long time coming because till and Fertida has been working
[1:06] Speaker 2: on this for a while, right.
[1:08] Speaker 5: Right, so, Scarlett, I mean, I think you know this
[1:10] Speaker 5: has been rumored about since actually around the time of
[1:13] Speaker 5: the IDEs of March. I was super excited that the
[1:15] Speaker 5: announcement would happen on the eides of March, just for
[1:18] Speaker 5: all the references with Caesar's. Unfortunately we had to wait
[1:20] Speaker 5: another couple months. That said, I think, you know, it's
[1:23] Speaker 5: been so compelling about this story, and I think what
[1:25] Speaker 5: sort of brings up a lot of uncomfortableness in the
[1:28] Speaker 5: bond market is the history with the name. Now, mind you,
[1:32] Speaker 5: the Caesars now is actually El Dorado that bought Caesars
[1:35] Speaker 5: out of bankruptcy, and that's not the same Caesars that
[1:40] Speaker 5: we're talking about. That was the leverage buyout that went
[1:43] Speaker 5: through the restructuring. And even so, I think a lot
[1:47] Speaker 5: of bondholders, for good reason, are a little bit uncomfortableable
[1:52] Speaker 5: by this story in general.
[1:54] Speaker 3: So I've got a net det the EBATA and I
[1:56] Speaker 3: went through the Chase Manhattan Bank credit training program way
[1:58] Speaker 3: back in the nice nice to do that, But I've
[2:01] Speaker 3: got EBATHA of only like three points. I got north
[2:03] Speaker 3: of six times on the leverage basis. Thirty people like you.
[2:06] Speaker 3: You guys don't like that.
[2:08] Speaker 4: No, no, we don't, Paul.
[2:09] Speaker 5: And to make matters worse, the big question that we're
[2:13] Speaker 5: grappling with is whether or not the change of control
[2:15] Speaker 5: provision gets executed. Not to go into too much detail,
[2:19] Speaker 5: but to make it as simple as possible. In the
[2:21] Speaker 5: course of a transaction, there's some bond terms that allow
[2:25] Speaker 5: bondholders to put the bonds back to the company, and
[2:29] Speaker 5: so in those instances you get one hundred and one
[2:32] Speaker 5: percent of par and that's not potentially happening here. We're
[2:36] Speaker 5: not sure at the moment. And what we're seeing though,
[2:40] Speaker 5: is that if you look at the bonds, they're not
[2:42] Speaker 5: trading like they would be put back at one hundred
[2:45] Speaker 5: and one percent of par. So every indication we're seeing
[2:48] Speaker 5: is that perhaps that's not going to get executed, which
[2:51] Speaker 5: means that is only you know, about a six billion
[2:53] Speaker 5: dollar price tag in terms of borrowing as opposed to
[2:56] Speaker 5: an eighteen billion dollar price price tag in terms of borrow.
[3:00] Speaker 5: So that's a big nut to sort of rapple with.
[3:04] Speaker 5: Is whether they have to refinance all that almost twelve
[3:06] Speaker 5: billion dollars of debt or if they just have to
[3:09] Speaker 5: issue new debt. And lever up the balance sheet further,
[3:12] Speaker 5: and bond holders are along for the ride.
[3:14] Speaker 2: Okay, So anyway you look at it, there's gonna be
[3:16] Speaker 2: a lot of moving parts here in order to get
[3:19] Speaker 2: this deal done. Jody, you mentioned that there's some discomfort
[3:22] Speaker 2: here for Caesar's bondholders. Is this going to get in
[3:26] Speaker 2: the way of there being enough demand? I mean, is
[3:29] Speaker 2: this going to affect pricing and the concessions that might
[3:32] Speaker 2: need to be made?
[3:34] Speaker 5: I think Scarlett, it really depends on timing. It depends
[3:37] Speaker 5: on the communication. We've been really sort of surprised over
[3:42] Speaker 5: and again by the appetite of bondholders and potential creditors
[3:47] Speaker 5: out there.
[3:48] Speaker 1: Now.
[3:48] Speaker 5: Will they have to pay up for it? It's very possible,
[3:52] Speaker 5: And I think that that creates the sort of interesting
[3:55] Speaker 5: component too, is that if you're talking about a company
[3:58] Speaker 5: that is already having issue US from a profitability perspective,
[4:02] Speaker 5: CASHUW hasn't been where it wants to be. Management was
[4:04] Speaker 5: focused up until Icon got involved last year. They were
[4:08] Speaker 5: actually focused on deleveraging, but they weren't getting ebadah up.
[4:11] Speaker 5: So they were bringing down debt and they were refinancing debt,
[4:13] Speaker 5: and they were improving the capital structure. But Ebidah wasn't budging.
[4:16] Speaker 5: So now we're in a scenario where we say, okay,
[4:19] Speaker 5: we're going to, you know, lever up the company further
[4:24] Speaker 5: from a net profit a cashlow standpoint, What does that
[4:26] Speaker 5: necessarily mean if you know they're going to be paying
[4:29] Speaker 5: up on an interest basis. So it's really a complicated conversation,
[4:34] Speaker 5: and I think it's one where nobody's going to be
[4:37] Speaker 5: looking at this lighthearted when they're when they if and
[4:40] Speaker 5: when the deal goes through and if and when they
[4:41] Speaker 5: do issue debt.
[4:43] Speaker 4: I think there's going to be a.
[4:44] Speaker 5: Lot of people calling over many documents to decide if
[4:47] Speaker 5: it makes sense for them.
[4:49] Speaker 2: Stay with us more from Bloomberg Intelligence coming up after this.
[4:56] Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
[5:00] Speaker 1: weekdays at ten am. He's done on Apple, Coarclay, and
[5:02] Speaker 1: Android Auto with the Bloomberg Business app. Listen on demand
[5:06] Speaker 1: wherever you get your podcasts, or watch us live on YouTube.
[5:10] Speaker 3: Scarlet Film Paul Sweeney live here in our Bloomberg Interactive
[5:13] Speaker 3: Broker's studio, streaming live on YouTube as well a lot
[5:16] Speaker 3: of tech news as always, and so fortunately we have
[5:19] Speaker 3: an expert that can help us out here. Caroline Hyde,
[5:21] Speaker 3: b Tech co anchor.
[5:23] Speaker 4: For Bloomberg News.
[5:24] Speaker 3: Journey us here in our studio, Caroline, let's start with Snowflake.
[5:27] Speaker 3: There's a software company that said we're doing just fine,
[5:32] Speaker 3: thank you, and the stock is up like thirty percent
[5:34] Speaker 3: or something crazy.
[5:35] Speaker 6: It is adding twenty two.
[5:37] Speaker 7: Billion dollars to its market cat on the day it
[5:39] Speaker 7: is surging thirty five percent because its product revenue is
[5:42] Speaker 7: up thirty four percent, and it guided that that's the
[5:44] Speaker 7: kind of rate you should be expecting. This growth rate
[5:47] Speaker 7: is going to be about thirty one percent for the
[5:48] Speaker 7: full year, and it's all about AI.
[5:50] Speaker 6: Being intertwined into this business.
[5:52] Speaker 7: They've got Cortex, which is their coding tool, more than
[5:55] Speaker 7: seven thousand subscriptions to that already, and it's just adding
[5:58] Speaker 7: to the annual revenue run rate where you can see
[6:01] Speaker 7: monetization of generative AI. And also look, they're striking big
[6:05] Speaker 7: deals with Amazon, which seems to be a bit of
[6:06] Speaker 7: a win win. Yes, Amazon gets six billion dollars of
[6:09] Speaker 7: Snowflakes for infrastructure and chips, but Snowflake in return gets
[6:12] Speaker 7: more deeply intertwined into Amazon's business model.
[6:15] Speaker 6: They can build out to yet more customers.
[6:17] Speaker 7: And also they get more efficient, cheaper chips, so the
[6:19] Speaker 7: ideas they bring down their own computing costs.
[6:21] Speaker 2: Okay, so that's the kind of news that investors want
[6:24] Speaker 2: to see.
[6:25] Speaker 4: Marvel is a.
[6:26] Speaker 2: Chip maker, right it is, and the stack is down,
[6:29] Speaker 2: but the headlines sound pretty positive.
[6:31] Speaker 7: Yeah, Like this is a company that's many had been
[6:34] Speaker 7: excited running into. Like it was up about one hundred
[6:37] Speaker 7: percent so far yet today and the rally had been
[6:40] Speaker 7: extending overnight.
[6:41] Speaker 6: Maybe we pull back a bit today.
[6:42] Speaker 7: Maybe there is profit taking, but shares initially postmarket had
[6:46] Speaker 7: been in the pre market had been higher.
[6:48] Speaker 6: Is the results of the outlo look pretty good.
[6:50] Speaker 7: It's all about again AI, It's all about a six,
[6:53] Speaker 7: It's about custom chips being built. This is about the
[6:55] Speaker 7: future of how we're not just in video as the
[6:58] Speaker 7: only key winner. Look with Amazon and Striking, it's deal
[7:00] Speaker 7: with Snowflake. It's seeing its graviton chips being used a
[7:03] Speaker 7: little bit more, maybe replacing an Intel and Bloomberg Intelligence
[7:06] Speaker 7: is saying around Marvel that that they're raising the fiscal
[7:08] Speaker 7: twenty twenty seven twenty eight sales outlooked by about five
[7:12] Speaker 7: percent ten percent. Stronger data center demand is really what's
[7:15] Speaker 7: driving this as accelerating growth. This is what investors want
[7:18] Speaker 7: to see, a reacceleration of growth, organic acceleration of growth,
[7:23] Speaker 7: and that is coming in the back of whether it's
[7:25] Speaker 7: AI adoption, whether it's AI infrastructure, no matter how you
[7:28] Speaker 7: cut it.
[7:28] Speaker 6: But maybe with.
[7:29] Speaker 7: Some of these stocks, they have just run so far
[7:31] Speaker 7: so fast. Remember, like the likes of Snowflake have been
[7:32] Speaker 7: pretty been nut running into these Now it's.
[7:34] Speaker 3: Interesting you mentioned, like with Snowflake, if you put up
[7:37] Speaker 3: the numbers, and that's what a lot of like Agrana
[7:39] Speaker 3: was saying, Hey, these software companies, they've been beaten up,
[7:42] Speaker 3: so the only recourse you have is to put.
[7:44] Speaker 8: Up the numbers.
[7:44] Speaker 3: Snowflake did. I thought Salesforce did last night as well,
[7:48] Speaker 3: but stocks only up like one percent and their guidance
[7:50] Speaker 3: was a little tipid relative to expectations. So agreed, Maybe
[7:54] Speaker 3: they didn't get the convincing job that they needed.
[7:56] Speaker 7: I mean, what more can Mark Benioff say apart from
[7:58] Speaker 7: repeating that it was a record quarter and is record
[8:00] Speaker 7: sales and record cash pile. But people really want to
[8:03] Speaker 7: see this acceleration of organic growth. Now we know that
[8:06] Speaker 7: mar Benioff has been very good at acquisitions over the years,
[8:09] Speaker 7: and Informatica was helping with this latest quarter and we
[8:12] Speaker 7: saw an addition of revenue there. But how much of
[8:14] Speaker 7: this is actually Salesforce's bread and butter, more subscriptions, more
[8:18] Speaker 7: bums on seats is kind of the way they're still
[8:21] Speaker 7: currently asking for to be paid here and with Anna
[8:24] Speaker 7: Agran has done such great work from Bloomberg Intelligence side,
[8:27] Speaker 7: saying like there.
[8:28] Speaker 6: Is still actually apart from AI.
[8:30] Speaker 7: There is a reticence in it spending right now. We
[8:32] Speaker 7: are nervous about the macro, so is Agent Force going.
[8:36] Speaker 6: To make up for that? The annual revenue run rate
[8:38] Speaker 6: there is going to be one point two billion dollars.
[8:40] Speaker 6: That's nothing to be sniffed at.
[8:41] Speaker 7: But in the grandest scheme of revenues for Sniff, for CRM,
[8:44] Speaker 7: for Salesforce, it's.
[8:46] Speaker 6: Only a few percentage points. We need to see more
[8:48] Speaker 6: addition there.
[8:49] Speaker 2: I think great context and Caroline, before we let you go,
[8:52] Speaker 2: I understand that you were part of a team that
[8:54] Speaker 2: won an Emmy.
[8:55] Speaker 7: We did little tired today because the Emmy's first time.
[9:00] Speaker 6: Going, and yeah we won for Primer.
[9:02] Speaker 7: We do on Bloomberg Originals, we do a really interesting
[9:06] Speaker 7: twenty minute primer on anything to do with technology. Really
[9:09] Speaker 7: we've had it was our first series that was up
[9:11] Speaker 7: for the award, and then all about magnets and how
[9:14] Speaker 7: important geopolitically they are, why China versus us?
[9:17] Speaker 2: What?
[9:18] Speaker 6: And these things keep coming back. We've got the latest we.
[9:20] Speaker 7: Just finished the latest series series too, where it's about
[9:22] Speaker 7: nuclear it's about semiconductors, it's about things that you're hearing
[9:25] Speaker 7: about time and time again. How can you get an evergreen,
[9:29] Speaker 7: non hyped view on what this technology really means? Cut
[9:32] Speaker 7: through the jargon and we won an Emmy.
[9:33] Speaker 6: And so excited. Well, they're back being like etched into.
[9:37] Speaker 6: Apparently they're quite expensive.
[9:39] Speaker 7: You get one for free, which Alan Jefferies has got,
[9:42] Speaker 7: who's the amazing producer on the show.
[9:44] Speaker 6: And apparently we've got to wait a few weeks for ours.
[9:46] Speaker 2: You have to order the rest.
[9:47] Speaker 6: You've got to order the rest. I see, Yeah, just
[9:49] Speaker 6: walk around.
[9:51] Speaker 7: I've got a lot of photo I'm just gonna I'm
[9:52] Speaker 7: gonna throw photos you way.
[9:53] Speaker 2: We can dine out on that one while stay with us.
[9:57] Speaker 2: More from Boomberg Intelligence coming up after this.
[10:01] Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
[10:05] Speaker 1: weekdays at ten am Eastern on Applecarclay and Android Auto
[10:08] Speaker 1: with the Bloomberg Business app. Listen on demand wherever you
[10:12] Speaker 1: get your podcasts, or watch us live on YouTube.
[10:15] Speaker 3: Well, one of the derivative plays of the growth of
[10:18] Speaker 3: AI has been who's going to potentially lose in an
[10:21] Speaker 3: AI world? And a lot of folks were calling out,
[10:23] Speaker 3: you know, earlier this year software stocks, particular software as
[10:26] Speaker 3: services stocks, YEP names we've kind of all thought of
[10:30] Speaker 3: as kind of teflon names like a Salesforce dot Com.
[10:33] Speaker 3: Salesforce reported numbers last night. I don't know, the numbers
[10:36] Speaker 3: looked really good to me. The stocks up one percent,
[10:38] Speaker 3: But they got to convince the street that they can
[10:41] Speaker 3: continue to grow in a world of AI. So did
[10:43] Speaker 3: they get it done last night? An rog Rana joins
[10:45] Speaker 3: this technology analysts for Bloomberg Intelligence, Honra, What did you
[10:49] Speaker 3: hear from CRM Salesforce from their quarter?
[10:55] Speaker 8: So one of the most important things we learned yesterday
[10:58] Speaker 8: was they are actually pivoting very strongly towards AI and
[11:02] Speaker 8: you know, instead of subscription but usage based products. And
[11:06] Speaker 8: the momentum is high. But what happens is whenever you
[11:09] Speaker 8: go through this transition. When you don't grow seats, you
[11:12] Speaker 8: will see a little bit of blip in terms of
[11:14] Speaker 8: the bookings growth. So organically, if you take out Informatica acquisition,
[11:19] Speaker 8: we are still looking at you know, soft eight nine,
[11:22] Speaker 8: ten percent or so booking growth at this point. And
[11:25] Speaker 8: I think that's where some of the concerns are. On
[11:28] Speaker 8: the positive side, as I said there, usage of token
[11:31] Speaker 8: is actually skyrocketed, and the company actually was very confident
[11:35] Speaker 8: in calling out a second half rebound in organic sales growth,
[11:39] Speaker 8: and I think we're all trying to figure out whether
[11:41] Speaker 8: that will happen or not, right.
[11:42] Speaker 2: And of course, Salesforce's own AI tool is called Agent Force,
[11:46] Speaker 2: and that's something that has actually seen a revenue pick
[11:49] Speaker 2: up over the past couple of months and years. Anraj,
[11:52] Speaker 2: you had mentioned the Informatica purchase. Does the advent of
[11:56] Speaker 2: AI and the threat of it taking over software copanies
[12:00] Speaker 2: are taking over the roles of software companies mean that
[12:03] Speaker 2: Salesforce needs to do more M and A.
[12:07] Speaker 8: So I think the problem you know, the company like Informatica,
[12:10] Speaker 8: which is a company that does software for data management.
[12:13] Speaker 8: I think this is where the biggest difference is going
[12:15] Speaker 8: to be between consumer AI and enterprise AI because data
[12:20] Speaker 8: is the biggest differentiator for enterprise AI. So company needs
[12:23] Speaker 8: to all the companies in the world need to figure
[12:25] Speaker 8: out what is their data strategy. How are they going
[12:27] Speaker 8: to take a look at their internal data, whether that's
[12:30] Speaker 8: finance data, customer service data, how are they going to
[12:33] Speaker 8: pull all of that together, and then they're going to
[12:36] Speaker 8: train that or find you that with a a large
[12:39] Speaker 8: language model. And that's where Informatica comes in. So to
[12:42] Speaker 8: your broader questions, salesforce should be doing more acquisitions, but
[12:46] Speaker 8: frankly speaking, yesterday we saw a massive buyback and I
[12:49] Speaker 8: think that's what I like more at this point, given
[12:51] Speaker 8: where the stock is, rather than acquisitions.
[12:55] Speaker 4: Anna Rad talk to us.
[12:56] Speaker 3: About how these software companies typically generate the revenue interested
[13:00] Speaker 3: in them in the seat, the per seat model, how
[13:03] Speaker 3: that works, and how AI may disrupt that, because that's
[13:07] Speaker 3: what I'm understanding, is maybe a risk point.
[13:10] Speaker 8: That is single biggest important factor right now. In fact,
[13:13] Speaker 8: that's the reason we are not so polished in terms
[13:16] Speaker 8: of the organic growth rate of software right now because
[13:19] Speaker 8: the number of seats are not growing, people are not
[13:21] Speaker 8: hiring at that same pace they were. In fact, you
[13:24] Speaker 8: see layoffs right now. So when you see that, you know,
[13:26] Speaker 8: whether you're selling HR software or software to salespeople, you're
[13:30] Speaker 8: going to see a decline in that. What Microsoft is
[13:34] Speaker 8: basically telling people is it's not going to be just
[13:36] Speaker 8: a subscription based model anywhere. It's going to be subscription
[13:39] Speaker 8: and a usage based models, which is just because you
[13:42] Speaker 8: have a subscription to Gemini or a Copilot, that doesn't
[13:45] Speaker 8: mean you can just burn all the tokens that you want.
[13:48] Speaker 8: You will get up till a certain amount tokens to burn,
[13:51] Speaker 8: and after that you're going to be charged or metered
[13:54] Speaker 8: for that use. We see that in coding tools right now.
[13:57] Speaker 8: We see that with cloud computing services that's on AWS infrastructure,
[14:01] Speaker 8: and I think a lot of that model comes to
[14:03] Speaker 8: the SaaS model that instead of just being seat based,
[14:07] Speaker 8: it's going to be either entirely consumption based or a
[14:09] Speaker 8: combination of consumption and subscription.
[14:12] Speaker 2: Is that something that investors have priced in already on
[14:15] Speaker 2: RUG or is that something they're still working out.
[14:18] Speaker 8: I think one of the negative things about the software
[14:21] Speaker 8: industry is that because of that disruption in the model,
[14:24] Speaker 8: they will not be as profitable at this point. And
[14:26] Speaker 8: that's partially the reason why the valuations are going down.
[14:30] Speaker 8: A lot of these companies are making slow pivot to
[14:32] Speaker 8: that shift because on the buyers side, you really don't
[14:36] Speaker 8: want to sign up Fork for an unlimited plan without
[14:39] Speaker 8: knowing what your token bill will be by the end
[14:42] Speaker 8: of the month or the end of the quarter. At
[14:44] Speaker 8: the same time, the software company does not want to
[14:47] Speaker 8: give up that nucrative, very high margin seat based business.
[14:51] Speaker 8: So I think what we are seeing is a little
[14:52] Speaker 8: bit of both. Companies are experimenting with pricing models that
[14:56] Speaker 8: are consumption based, the buyers are doing the same thing.
[15:00] Speaker 8: I think we will it will take I think two
[15:02] Speaker 8: to three years before we finally figured out what combination
[15:05] Speaker 8: of seed based and consumption based model wins. We think
[15:09] Speaker 8: it's going to be more of an enterprise agreement where
[15:12] Speaker 8: somebody like a salesforce or a microsoftware tele company, you
[15:16] Speaker 8: spend this much money with me every month, and we're
[15:19] Speaker 8: going to give you all these products that go with it.
[15:23] Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
[15:30] Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live
[15:34] Speaker 1: weekdays at ten am Eastern on Apple Coplay and Android
[15:37] Speaker 1: Auto with the Bloomberg Business App listen on demand wherever
[15:40] Speaker 1: you get your podcasts, or watch us live on YouTube.
[15:44] Speaker 2: Cool shares are up sixteen percent on better than expected results.
[15:48] Speaker 2: When I say better, it just means compared to estimates,
[15:50] Speaker 2: because the numbers are still going in the wrong direction.
[15:53] Speaker 2: We're still looking at a loss for the bottom line,
[15:56] Speaker 2: and comparable sales continue to be in the negative rain
[16:00] Speaker 2: Mary Ross Gilbert is our senior equity analyst covering retail
[16:03] Speaker 2: and joins us now with more. Especially's let's start with
[16:06] Speaker 2: Coles because I mentioned comparable sales down one point one percent. Analysts,
[16:10] Speaker 2: we're looking for a drop of one point seven percent.
[16:13] Speaker 2: What is Coals doing differently to stem the tide?
[16:17] Speaker 9: Yeah, Scarlett, So what Coles is doing is they've really
[16:20] Speaker 9: ramped up their private brands. Those are the opening price
[16:24] Speaker 9: point items, and these are the things that their low core,
[16:27] Speaker 9: low income consumer really wants. And so they're seeing success
[16:33] Speaker 9: in women's particularly with their so Junior's line. So that's
[16:37] Speaker 9: their own proprietary brand, so Soo, and that was up
[16:41] Speaker 9: ten percent in the quarter. The overall proprietary brands was
[16:45] Speaker 9: up six percent. But remember that they're also cycling a
[16:48] Speaker 9: period in which private brands was you know, previously de emphasized,
[16:52] Speaker 9: and so with the current CEO, Michael Bender, when he
[16:56] Speaker 9: came on board, that was the first thing he did
[16:58] Speaker 9: was ramp up private and that's the reason why you're
[17:01] Speaker 9: starting to see sales lift there. But Scarlett, you raised
[17:05] Speaker 9: a valid point. Sales were still down. They were down
[17:08] Speaker 9: one point one percent. They were cycling four years of
[17:11] Speaker 9: stack declines, really three if you exclude twenty twenty one
[17:16] Speaker 9: when they were really benefiting from that sort of post
[17:19] Speaker 9: COVID lift. So you know, yeah, it's sales are not
[17:24] Speaker 9: in the right direction yet.
[17:25] Speaker 4: Could they get there by the fourth quarter?
[17:27] Speaker 9: Maybe all of the initiatives that they're doing with these
[17:30] Speaker 9: deal bars, you know, these are items that are priced
[17:33] Speaker 9: at like four ninety nine, five ninety nine, and you
[17:37] Speaker 9: know everything is under ten dollars. Same with the toy
[17:42] Speaker 9: towers that they have, and then also they have impulse
[17:45] Speaker 9: items and so all of those little things add to
[17:48] Speaker 9: the basket and that's helping to minimize the declines and sales.
[17:53] Speaker 9: But again they're cycling four years of stack declines going forward.
[17:58] Speaker 9: So that makes for an easy comparison. And when we
[18:00] Speaker 9: look at the data, we're seeing that the second quarter
[18:03] Speaker 9: is tracking in line to slightly better than consensus estimates
[18:07] Speaker 9: for one percent sales decline in the second quarter.
[18:11] Speaker 4: Is this how much of this is?
[18:13] Speaker 3: Kind of the market they're in the segment they're in
[18:16] Speaker 3: versus their own execution.
[18:19] Speaker 9: Well, actually, Paul, so it's really it's their own execution.
[18:24] Speaker 9: And so the current CEO, and he's like the fourth
[18:27] Speaker 9: that they've had in the last probably four years, it
[18:30] Speaker 9: seems like he's making the most progress. But again, you know,
[18:35] Speaker 9: we are coming from a long period of sales declines.
[18:39] Speaker 9: So but these little initiatives seem to make sense. They're
[18:44] Speaker 9: doing a better job with planning an allocation. So their
[18:47] Speaker 9: spring seasonal merchandise was up in the quarter, so that
[18:51] Speaker 9: was encouraging, and they learned that because they sort of
[18:53] Speaker 9: missed sales in the fall last year. The other thing
[18:56] Speaker 9: is they've right sided their promotional activity.
[18:59] Speaker 4: They stab on that during the crucial holiday period.
[19:03] Speaker 9: So now they've really ramped that up because let's face it,
[19:06] Speaker 9: in the first quarter, there was a two point six
[19:10] Speaker 9: billion dollar gain just in off price sales just from
[19:14] Speaker 9: the Big three, So they're continuing to lose share to
[19:18] Speaker 9: the Big three and off price you know, we just
[19:21] Speaker 9: had Burlington's numbers out today.
[19:23] Speaker 4: Their comparable sales were up six percent.
[19:26] Speaker 2: Yeah, and then let's not even get into the tjx's
[19:29] Speaker 2: of the world, which are kind of into their own category.
[19:31] Speaker 2: I want to get your take on a more traditional retailer,
[19:34] Speaker 2: kind of a legacy retailer, and that's GAP. GAP will
[19:37] Speaker 2: be reporting results as well. It's got a number of
[19:39] Speaker 2: different brands, Old Navy, Banana, Republic, and of course the
[19:42] Speaker 2: I guess they call it just the blue brand Gap. Overall,
[19:46] Speaker 2: I think about Gap and how it's really picked up
[19:49] Speaker 2: a lot of cachet of late. There's a collaboration with
[19:52] Speaker 2: I think Victoria Beckham, was.
[19:53] Speaker 4: It absolutely yeah?
[19:55] Speaker 2: And things like that get people's attention. I don't know
[19:58] Speaker 2: if it's translating into sales though, is it.
[20:01] Speaker 4: Oh, it absolutely is translating into sale. I mean sales.
[20:05] Speaker 9: When you look at their comparable sales gains, they've been
[20:07] Speaker 9: higher than that of Old Navy. Old Navy is their
[20:10] Speaker 9: largest brand's about fifty six percent of revenues. Gap is
[20:14] Speaker 9: the next largest brand, and that's you know, almost thirty
[20:17] Speaker 9: percent somewhere around there. And so no, they've been experiencing
[20:21] Speaker 9: very strong comp gains there. I think what they're looking
[20:25] Speaker 9: for in the quarter is, you know, somewhere around that
[20:28] Speaker 9: three to four percent for the Gap brand.
[20:31] Speaker 4: So you're right, you're seeing some strength.
[20:33] Speaker 9: And I think that these collaborations, the campaigns all create
[20:38] Speaker 9: a wonderful halo. And when you speak to millennials and
[20:42] Speaker 9: gen z, you will hear them talk about Gap. So
[20:46] Speaker 9: in fact, I'm wearing a collab from last year. This
[20:50] Speaker 9: is Gap ex Melbourne. It's a favorite golf brand and
[20:55] Speaker 9: I really like it and I hope they come out
[20:57] Speaker 9: with another one that one and then Dohan like the
[21:00] Speaker 9: Doan collab as well.
[21:01] Speaker 4: So it does work, by it does work.
[21:06] Speaker 3: So what are your companies Mary, What are they saying
[21:09] Speaker 3: just about the consumer in general these days?
[21:12] Speaker 9: Paul, What we're finding out is that the consumer, even
[21:16] Speaker 9: at the very low end, is really proving resilient. So
[21:21] Speaker 9: in fact, that was something that Burlington noted that they
[21:24] Speaker 9: haven't seen any signs of weakness. And of course in
[21:28] Speaker 9: the off price their customer base, most of their customers
[21:32] Speaker 9: are really at the very low end. They go paycheck
[21:34] Speaker 9: to paycheck, and Coles is sort of similarly positioned in
[21:39] Speaker 9: terms of their core customer so same sort of thing,
[21:43] Speaker 9: except it's hard with Coles because there's other issues going
[21:46] Speaker 9: on in terms of execution. But generally, with all the
[21:49] Speaker 9: retailers that have reported so far, we're not seeing any
[21:53] Speaker 9: pushback or signs of hesitancy on the consumer part. So
[22:00] Speaker 9: I still think that if there's some fresh newness or
[22:04] Speaker 9: something that's exciting and they have to have it, maybe
[22:07] Speaker 9: they might pass up on buying a favorite food brand
[22:10] Speaker 9: in the grocery store or cut back there. But if
[22:13] Speaker 9: there's something that really makes them happy, I think they're
[22:16] Speaker 9: going to make that discretionary purchase, particularly since really with
[22:21] Speaker 9: a low unemployment rate, when you have a job, you
[22:24] Speaker 9: feel pretty good.
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