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First Move with Julia Chatterley
The Tech Giant, Apple Forecasting Weaker Sales Due To The Coronavirus Outbreak; Looming Layoffs From Banking Giant, HSBC Announcing 35,000 Job Cuts, Walmart Wobbles With Q4 Earnings Disappointing After Slower Sales In December. Aired 9-10a ET
Aired February 18, 2020 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:11]
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR, FIRST MOVE: ... stock Exchange. I'm Julia Chatterley. This is FIRST MOVE and here is your need to
know.
Apple's alarm: The tech giant forecasting weaker sales due to the coronavirus outbreak.
Looming layoffs. Banking giant, HSBC announcing 35,000 job cuts.
And Walmart's wobble. Q4 earnings disappointing after slower sales in December.
It's Tuesday. Let's make a move.
A warm welcome once again to FIRST MOVE. Great to have you with us. I want to start with Apple this morning. What's that phrase? One bad apple can
spoil the barrel.
Well, I can tell you if the global sentiment right now is a barrel, Apple has forecasted slower sales. It is certainly spoiling it.
U.S. futures are lower at this moment. It's the first trading day of the week, of course, following the long weekend. Softer earning numbers from
the retail giant Walmart perhaps also having a little bit of an impact on sentiment.
Now, I'm just watching the stock premarket and I think it's now a touch higher. We'll dig through the numbers in a second. We've got to remember
here, the S&P and the NASDAQ finishing last week at record highs. We are vulnerable. We have to be vulnerable to a news -- bad news -- from big
corporate giants. So I'm not sure we should be surprised in light of what we're seeing over in Asia.
European stocks under pressure here as well. The tech stocks bearing the brunt. German stocks, though, some of the key underperformance. German
economic sentiment plunging this month on those coronavirus fears.
What about Asia? A mixed bag. I'll give you the good news first. China stocks gaining here. The Shanghai Composite up almost three percent over
the last five trading sessions. The country announcing it will waive tariffs on almost 700 U.S. imports. That the largest tariff exemption to
date.
On the downside though, Hong Kong stocks weaker amid really weak data on activity, specifically at Hong Kong ports in January. Remember that's long
before the coronavirus outbreak hit.
Japanese stocks, meanwhile, also adding to the week's losses. Recession fears as we've discussed already this week front and center, though,
today's big losers in Japan include some of the big Apple suppliers like TDK, Tokyo Electron -- all hit by that Apple sales forecast warning.
Shares of chip giant Taiwan Semiconductor falling almost three percent. Apple is that company's largest customer.
Let's get to the core of the drivers today because we're going to start with Apple.
Shares down two percent premarket warning that they will miss guidance this quarter due to the coronavirus outbreak. Clare Sebastian joins us now.
They've got supply chain constraints. We know stores have been closed over a period. It's Chinese consumer demand. I have to say I'm not surprised by
this, Clare. I'm kind of surprised investors are.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, Julia, this I think we can see with the disruption that we saw throughout last week, even as
factories and workers were supposed to return that this was perhaps to be expected.
A couple of key lines here from the Apple release on this, they say that their plans are back up and running, but it is a slower return to normal
conditions than they had anticipated.
This shows that what we've seen across the board, there's a patchwork of local regulations that are impacting this as workers are trying to return
due to sort of travel and transport restrictions. So that's clearly impacting Apple.
And the other thing, Julia, which is crucial for consumers is, worldwide iPhone supply will be temporarily constrained, not could be -- will be
temporarily constrained.
Now, we're not seeing it yet. I had a quick look at the Apple store in the U.S., there's no real delay for shipments of iPhones. But that could happen
if this persists.
And as you say, this is also a demand side story for Apple. Their stores remain disrupted in China. Again, I had a quick look at the website in
Beijing that the five stores there are open, but operating shorter hours. There are a couple of stores still closed in Shanghai.
Now, this could mean that some of the demands shifts online. Apple's the online store, of course, operates in China, and it could of course mean
that pent up demand shifts in the coming quarters.
A lot of analysts say that this will be a temporary factor as Apple itself says, and they will see that coming in the quarters to follow, but I think
it's interesting to note, Apple did not issue new guidance, which just shows there's still a level of uncertainty here.
SEBASTIAN: Yes, and they already had a wide level of guidance before because they said look, we're uncertain about what the forecast is going to
be here.
I have to say though, Clare, when I when I saw this; one, and I've already raised the point, I thought, we kind of should have been expecting this.
But my second point was, it cast my mind back to January of 2019 when they said, look, we're really concerned about Chinese demand.
When we finally got the numbers, they were a lot better than expected.
[09:05:10]
CHATTERLEY: Conservatism. This is a company that tends to err on the side of cautiousness about their forecasts anyway.
SEBASTIAN: Yes, I think given the track record of this company and you know, beating to the upside, they certainly want to try to continue that.
And last year of course, yes, this was a China related story as well. I think China had critical, but also somewhat fragile link in the chain for
Apple.
And Julia, you're absolutely right. If you look at Apple's performance since then, of course, the warning last year was about potential for
slowing demand for iPhones in China.
Since then the stock has basically almost doubled. Just let that sink in for a second for a company Apple's size. The company has launched new
iPhones, which have been well received. They have Air Pods. They have watches. Services is a growing part of the business.
And in the last earnings quarter, they hit a record and said that iPhone demand was actually now recovering. So this is a company that is really
firing on all cylinders at the moment. If there was ever perhaps a time that it could weather a black swan event like this, then perhaps that's
now.
And as I said, a lot of analysts do expect this to be a temporary sort of disruption for the company.
CHATTERLEY: Yes, I couldn't agree more, actually. And I stand corrected, Clare Sebastian, given the importance of China to this company. They are
only down two percent premarket.
Clare Sebastian, thank you so much for that.
All right. Let's move on to our next driver. HSBC announcing a major shakeup earlier today. The bank planning to cut 35,000 jobs over the next
three years. We're talking 15 percent of the global workforce. It's also set to shed $100 billion in assets and scale back operations in the U.S.
and Europe.
Anna Stewart joins us now on this story. That's a significant operation that we're talking about here, an Asia pivot in terms of their operations
and thousands and thousands of job cuts. Tough challenge here -- Anna.
ANNA STEWART, CNN REPORTER: Very tough. Dramatic headline figures, perhaps not that surprising, though, such a big price tag, too, this big
restructuring plan. Over $7 billion, and that's why we're seeing profit plunging around a third last year from the year before.
As you've said, though, the human cost is the one that really worries people -- 35,000 jobs being cut, some 15 percent of the company, and the
plan also includes closing one in three retail branches in the U.S., shrinking investment bank.
You mentioned shedding $100 billion worth of assets and just a major simplification actually of the whole structure.
The question is, is it enough? That's always the big question when these plans are announced. Looking at the share price at the moment, down some
six percent suggests investors aren't that convinced, although I have to say the two-year suspension of share buybacks isn't doing much for investor
sentiment either -- Julia.
CHATTERLEY: Yes, and that's a great point, I think as well when you're talking about a company that's going to knock out a third of its retail
network, halve its trading operations in the United States and sell that kind of assets. You've got to find a buyer here for these assets, too.
Who is going to run this ship, Anna? That's my question. There was speculation that perhaps Mr. Quinn would stay on, the interim CEO. Now,
there is speculation he won't. This is a supertanker to turn around. Who leads?
STEWART: It's a highly unusual sort of event really, when you think about it. They ousted their last CEO last summer - that is so normal before you
do a big restructuring plan. But usually you would have a permanent CEO in place by now.
And Noel Quinn has been there for many, many years. He's the interim chief exec. The fact that he hasn't been confirmed is suggesting perhaps he won't
get that title ultimately.
Now, that undermines confidence in the plan itself. Will a new CEO take it in a different direction? Will they execute this plan as it's been
announced? Also it just suggests maybe a weak or divided board, lots of speculation there and I think that's why we're seeing that share price
looking a little bit wobbly as well.
Some analysts suggesting that perhaps they wanted to test out the market on the plan. Well, that hasn't gone well this morning, I'd say. More skeptical
still, perhaps he is a scapegoat, you know, announcing 35,000 job cuts. Perhaps a new CEO, then takes up the mantle and has a clean slate.
The Chairman does say that they will get a new CEO in place within the original timeframe, which is between now and August -- Julia.
CHATTERLEY: Yes, proof will be in the pudding, a British word between two Brits. Anna Stewart, thank you so much for that.
All right, we're going to move on and talk about Walmart's numbers now because those earnings disappointed, too, on weaker than expected December
sales.
E-commerce sales however, rocketing a net 35 percent, slightly softer than the last quarter, but that's still some monster numbers.
Paul La Monica joins me. Paul, what do you make of these numbers?
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, I think Walmart had good numbers Julia, but they weren't fantastic. And I think that's the problem,
potentially for Wall Street, although at last check Walmart shares, were actually trading a little bit higher premarket despite that Apple warning
that might be dragging down the rest of the market.
What's interesting here is that, yes, 35 percent growth in e-commerce is stellar. But that's down from about 43 percent in the holidays a year ago.
So we are seeing a bit of a deceleration.
Obviously, Walmart competes with not just Amazon, but Target which has been resurgent as of late.
So slightly disappointing, and the holidays, I think there are some potential, you know, warning signs here. Toy sales were not that great,
clothing, video games. So I think that there are some worrisome signs for the retail industry writ large as a result of these Walmart numbers.
CHATTERLEY: Yes, it's funny, I couldn't agree more with you. And then I look at the same store sales and they still managed to knock out 1.9
percent growth. Yes, it's only that, but in this kind of environment and the challenges as you've pointed out, I kind of would argue that's not bad.
What worries me about this, no forecast, no adjustments being made at this stage for the impact of the coronavirus outbreak, should we be more worried
about that?
LA MONICA: I agree. I think it's a bit puzzling that Walmart is saying at this point, they are obviously keeping an eye on supply chain issues in
China, but that there is no reason to adjust their outlook because of the coronavirus just yet.
And when you see what Apple said last night about the coronavirus and what's happening to that stock as a result, I think a lot of people are
perplexed that Walmart still wouldn't be willing or able to share some more color about the potential negative impact from the coronavirus on its
sales.
And you know, obviously not just a supply chain issue, but also China is becoming a bigger market for Walmart through a partnership with JD.com.
CHATTERLEY: You know, it's interesting and I want to get back to one of the points that you made about delivery and the infrastructure and the
challenges of some of the other big players, I think we could argue what sets Walmart apart here is their delivery infrastructure that allows them
to challenge the likes of Amazon and Kroger specifically with grocery delivery and grocery shopping where they've made this big push.
And it's a tiny fraction of online sales, I think it's around two to three percent in the United States. Back home in the U.K., that's 15 percent.
What do we think about this opportunity for Walmart?
LA MONICA: Yes, Walmart has done a phenomenal job, Julia, of expanding its grocery business both in the retail stores themselves, as well as digital
offerings, and click and collect is another kind of buzzword in the retail industry right now where you buy online and then go pick it up actually at
the store instead of having it delivered.
So Walmart, clearly doing very well despite competition from Target which has a big grocery business; Amazon which of course owns Whole Foods, and
then Kroger. We can't forget the traditional supermarket chains because guess who hasn't forgotten Kroger? Warren Buffett.
Kroger shares are up this morning because late Friday, Berkshire Hathaway disclosed it has a very significant stake in Kroger. So that is something
that I think is going to be another interesting wrinkle in the grocery wars.
CHATTERLEY: Wow. Paul La Monica, all over the retail sector today. Thank you so much for that update there. Now, one man who is very conscious of
his delivery network and the carbon footprint that that creates is Jeff Bezos weighing in on climate change.
He says he is devoting $10 billion, and that's just to start with to help fight climate change. John Defterios joins us on this story. That's a lot
of money, John and can definitely make a difference.
What more do we know about Jeff Bezos's plans for this climate tackling fund?
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Well, we can get to his plans in a second, but think about it, eight percent of his net worth
is about $10 billion of 130. So it is the biggest input in terms of the climate change war by a single individual right now.
He says the fund initially, he could put more into it as to help scientists, the organizations, even the activists and the ultimate goal
which is often forgotten, Julia as you know, to keep the globe from warming up to more than two degrees centigrade by 2050. The idea is to keep it
below.
We also have to recognize, though that there's a lot of internal pressure from some of his 800,000 employees. Now, they applauded the move by Bezos
today in the philanthropy, but for example, he says when it comes to Amazon Web Services, why is he still working with oil and gas companies that use
those services right now? And it is a carbon intensive business.
You have the delivery trucks that you were talking about, the gigantic warehouses, but also the Web Services eat up a lot of energy.
And what I think is fascinating about Amazon when the workers were talking about going on to big walkout back in September, the day before, he said he
would go to net zero emissions by 2040 and also bring in 100,000 electric vehicles.
So we have the environmental activists, but also the employee activists right now, which is really changing the narrative within the large
companies that suck up energy particularly in the tech sector.
[09:15:07]
CHATTERLEY: He makes a great point though about the Cloud business, the Cloud Web Services business in particular. I mean, can we make any
comparison with some of the other big Cloud players here?
Because your mind doesn't immediately go to that as being a carbon creator on a relative basis versus the delivery network, which perhaps is easier to
point out here.
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: No, in fact, you never really think about all the data and the energy you're using with the
mobile phone, right, Julia?
And in fact, Amazon was saying they're going to go 50 percent to renewable energy. They have to hit the target and set that in 2018, but they've been
pretty quiet about when they can get to 100 percent.
We saw the announcement from Microsoft on January 20th to go to 100 percent renewable by 2030. The new CEO of BP, Bernard Looney last week said they
would go net zero as an oil company that's trying to shift to an energy company by 2050.
And back in the autumn, I was in California shooting, looking at the energy transition and you have Apple investing in huge solar farms, and they say
in their current activities at the headquarters and the stores, they are 100 percent renewable and get this, even in China with their suppliers,
Julia, they're pledging to get to 100 percent renewable.
But they have not set a date for that effort yet, but again, because of the consumer pressure, employee pressure, and folks like Greta, the activist,
you see major companies around the world almost on a weekly basis, making an announcement whether it's 2030, 2040 or energy companies at 2050.
CHATTERLEY: John, we thought a phrase for it, stakeholder capitalism. Hop back to our conversations in Davos.
DEFTERIOS: It's true.
CHATTERLEY: It would be interesting to see how quickly he puts his money to work. $10 billion is a lot of money. But when do those grants get made
and for how much?
DEFTERIOS: A lot of money. A lot of money.
CHATTERLEY: Yes, we'll see. John Defterios. Thank you so much for that.
All right, let me bring you up to speed now with some of the other stories that we are following around the world.
The Chinese government has ordered reviews by CNN show 780 million people currently have their movements restricted with authorities battling to
contain the coronavirus outbreak. Millions living near the epicenter have been ordered to stay in their homes.
More than 73,000 people worldwide have been diagnosed now with the infection, and 1,800 people have lost their lives.
The Boy Scouts of America is filing for bankruptcy. The move comes as the organization faces hundreds of sexual abuse lawsuits, thousands of alleged
victims and dwindling membership.
The bankruptcy filing suspends the civil lawsuits.
Michael Bloomberg has qualified for Wednesday's Democratic presidential debate in Las Vegas. This, after scoring above 10 percent in a national
poll for the fourth time. It will be Bloomberg's first time on the debate stage with other candidates vying for the presidency. We'll have much more
on this later on in the show.
Much more and other things as well. Still to come, Santa's stumble. Walmart joins the retailers reporting an unhappy holiday season. More analysis on
that.
And Michael Bloomberg makes it onto the Democratic debate stage in Nevada, despite not being on the ballot there. What kind of showing will he give?
Stay with us. We're back after this.
(COMMERCIAL BREAK)
[09:21:26]
CHATTERLEY: Welcome back to FIRST MOVE live from the New York Stock Exchange where we are expecting a softer open for U.S. stocks. The first
trading day of this holiday shortened week here in the United States.
Tech stocks looks set to take the biggest hits after Apple's revenue warning for the current quarter. Risk off feels like the name of the game
today. Ten-year U.S. Treasury yields ticking lower hereto at 1.55 percent. Remember, they were above 1.8 percent not too long ago. So we've talked a
lot about this adjustment in the bond market.
Crude oil, also lower for the first time in around the week and safe haven gold remains close to two-week highs. What are we seeing here?
Lisa Shalett, the Chief Investment Officer at Morgan Stanley Wealth Management joins us now.
Lisa, great to have you on the show.
LISA SHALETT, CHIEF INVESTMENT OFFICER, MORGAN STANLEY WEALTH MANAGEMENT: Good morning, Julia.
CHATTERLEY: We can talk more broadly, but I do want to talk about the Apple announcement that took place last night and I was gently making the
comment earlier on the show that shouldn't we have expected this and continue to see it from corporates?
SHALETT: Absolutely. I don't think that the supply chain disruptions should be viewed by the market as some big surprise. Clearly, there have
been signals, you know, from the Chinese that there's disruption.
We know that this has gone on a bit longer than we originally thought. So I think we're going to continue to see this kind of thing throughout the
quarter.
CHATTERLEY: It's tough to forecast. I mean --
SHALETT: Impossible.
CHATTERLEY: Impossible and to your point, I mean, about a week into this, I think I clearly remember Goldman Sachs coming out and anticipating a 0.1
best case or a 0.3 percent hit to global growth as a result of the coronavirus.
SHALETT: I don't think we know yet. You know, I think we're really in the camp that says that ultimately, history suggests that these types of things
are one offs. That the demand tends to be delayed, not denied.
And so that ultimately on the other side of this, whether that comes in March, April, June, July, you can get a V-shaped recovery. So we've kind of
held our guns at Morgan Stanley.
But look, it remains to be seen.
CHATTERLEY: But you're still comfortable with the idea of delayed not denied.
SHALETT: Yes.
CHATTERLEY: So there will be a demand pick us once we get through the worst part.
SHALETT: Yes.
CHATTERLEY: And obviously, we have to feel sorry for the people involved. So I don't want to focus too much on the money versus anything else, to
your point, but you also raise a good point about the U.S. consumer and actually lower oil prices, lower rates here as I was just pointing out have
a benefit for the U.S. consumer.
SHALETT: Yes. So today, we were out with a report on talking about the fact that the U.S. consumer, we believe is actually getting a little bit of
a dividend here from this global disruption.
So to your point, U.S. consumers are benefiting from much lower oil prices, much lower gasoline prices, much lower commodity prices. The U.S. dollar
has materially strengthened.
CHATTERLEY: Yes.
SHALETT: Which of course, helps American purchasing power for imports for consumption. So we believe that in the very short term, there's some
flattering of the consumer data.
And in fact, you know, I know we saw some disappointing news out of Walmart. But I would not be surprised if Walmart got a little bit of a
pickup in the second quarter from some of these dynamics.
CHATTERLEY: This has an impact on mortgage rates as well. I mean, those rates have come right down as well.
SHALETT: Yes. Exactly.
CHATTERLEY: With the longer term rates.
SHALETT: Exactly. As we've seen, the U.S. stock market benefit from lower rates. The U.S. consumer has certainly benefited from the fact that that
30-year Treasury is flirting with two percent.
[09:25:10]
SHALETT: So our mortgage rates are at three-year lows right now.
CHATTERLEY: One of the things we have pointed out, we keep talking about fresh record highs being made is that the rally that we're seeing in stocks
is narrowing. It is defensive.
There's a question over to what extent it is passive versus active investment, which is also a critical factor.
SHALETT: Absolutely.
CHATTERLEY: What's your view on this?
SHALETT: So our view is that this makes a lot of sense. From the perspective of that, right now, the market is responding to the Feds
dovishness, not only low rates, the Feds participation in the repo market, the Feds willingness to signal potentially further cuts if this global
crisis continues.
And so that is really allowing the market to "do more of the same" and more of the same is rewarding those defensive growth oriented, long duration
assets that we've seen for the past 11 years.
So, you know, we're getting one more leg out of this tray.
CHATTERLEY: And so you're saying to clients, you can stick with it at this stage.
SHALETT: We're saying stick with it, but you're in the bottom of the 11th inning.
CHATTERLEY: Yes, the last -- yes, that inning could take a long time. That's the key. Lisa, fantastic to have you on.
SHALETT: All right.
CHATTERLEY: Thank you so much for that.
SHALETT: Good to talk to you, Julia.
CHATTERLEY: Lisa Shalett, the Chief Investment Officer at Morgan Stanley Wealth Management.
We are counting down to the opening bell this morning. I can give you a quick look once again at futures. We are expecting to see a slightly softer
open, as you can see, losing some half a percent here from the record highs actually that we finished at Friday session for the S&P 500 and for the
NASDAQ.
Stay with us. Plenty more FIRST MOVE after this. The market open is next.
(COMMERCIAL BREAK)
[09:30:00]
CHATTERLEY: I was wondering if that bell was going to stop ringing there. Welcome back to FIRST MOVE live from the New York Stock Exchange and the
opening bell for the first time in this holiday shortened week.
We were expecting to see a bit of weakness at the open this morning and that is indeed what we are seeing. The NASDAQ and the S&P 500 falling from
record highs hit at the final session last week on Friday. This of course of the Apple's revenue warning late last night.
Reports that the Trump administration is also looking to further limit Chinese access to U.S. chip technology, I think also not helping sentiment
in the tech sector as well.
We have seen though as the majors rising for two weeks straight amid hopes that the global economy will snap back fast from the coronavirus outbreak
as Lisa Shalett there was just saying, a V-shaped recovery and I think general consensus is that. The question is, is that too optimistic?
Before today, the major markets had risen some four percent or more for February so far.
Meanwhile, economists at Moody's have the latest to downgrade their global growth forecasts due to the coronavirus outbreak. Interestingly, Moody says
India will be one of the hardest hit nations with 2020 growth expected to slow to its weakest level in 11 years.
All right, let's walk you through our Global Movers today. Shares of asset management firm Legg Mason our rallying. Rival firm, Franklin Resources is
buying the company for some four and a half billion dollars. The deal creating an investment giant with more than $1.5 trillion worth of assets.
Apple, of course, as we've been discussing on the show, opening lower after its revenue warning. Shares of U.S. firms that get a lot of their business
from Apple are also under pressure, too as we discussed as well, not giving any forward guidance on Q2 for revenues here due to the sheer level of
uncertainty.
Chip firm, Skywork Solutions and Lam Research both falling in early trading, too. Skyworks getting about half of its sales from Apple.
And what about Walmart as well? Rising after posting the weaker than expected profits and revenues. Disappointing holiday sales were to blame.
The company's fiscal 2021 outlook also coming in a little bit on the soft side here.
Let's talk this through. Charlie O'Shea is Moody's Retail Analyst and joins us now.
Thank you for bearing with me. Wow. I'm sick of my own voice there. What do you make of Walmart's numbers?
CHARLIE O'SHEA, RETAIL ANALYST, MOODY'S: It's -- they're pretty good.
CHATTERLEY: Really.
O'SHEA: The holiday was tough for everybody. Amazon grew revenue, but took a big margin hit. Margin dropped 150 basis points year-over-year in the
fourth quarter.
We saw Target sales results, some softness, some strength. Walmart some strengths and some softness. Waiting to see Best Buy next week. Costco came
out with some really good sales numbers for November and December.
So it's going to be a mixed bag. The question is, how much did you cut prices to generate those sales? And that's the key thing.
CHATTERLEY: There were six fewer shopping days. So we already knew that the comparable here were going to be a little bit tough, but you could
argue with the analyst there who got this wrong.
What is your concern? And do you have concerns about that sort of margin compression here for the sector more broadly?
O'SHEA: Not really, because it's due to investments rather than any crazy promotions. At least at the top end of the rating scale, you know, the
Walmart's, Amazon's, Costco's Targets, Best Buys, TJX -- those guys.
At the lower end, those are the folks that have to worry and they're being exploited by guys at the higher end because they've got more flexibility.
You look at balance sheets for those companies I just named, they're all bulletproof. They've got lots of cash, lots of liquidity, so they can do
the things they need to do and they can afford to invest in price to grow market share and squeeze the smaller guys, not to death, but they can
really hurt them from a performance perspective.
CHATTERLEY: I mean, the key with Walmart here, as well as that they had a bricks and mortar business. They've been shifting into e-commerce, better
margins, whereas some of the other competitors like the Amazon is trying to go the other way, face the lower margin business and breaking into that and
trying to monopolize that part of the business.
What do you make of what Walmart's managing to achieve here, particularly with grocery because I was talking earlier on the show about their
infrastructure and the superior nature of the infrastructure delivery network that they've managed to achieve here.
O'SHEA: They have got 5,400 stores in the U.S. That's a staggering number of physical locations. They can ship from them. They're shipping from about
a third of them now. They can do online grocery order and then pick up. They're doing that at about 60 percent of those stores. Both those numbers
are going to grow.
So we're going to face this scenario over time, where Walmart has over 5,000 locations where you can order online and pick up in store groceries
where you pull up into the parking lot and they put the stuff in your trunk. That's big for families. It's big for --
I can remember when my kids were younger, taking them to the grocery store, it's easier to keep them in the car, you put stuff in the car than just to
walk out.
CHATTERLEY: Than let them loose.
O'SHEA: Yes. So I think what we're seeing with Walmart is, they're going to use food as the engine to grow everything else.
And one of the things that came up in the meeting this morning, was Doug McMillan filling, saying, we want to be able to do more pickup of general
merchandise along with those grocery orders and that's coming.
So Walmart's really unleashing the juggernaut of that brick and mortar network and it's going to make the competitive environment really hard in
food for anybody else.
CHATTERLEY: You know, another point that I was making earlier was that if I look at food delivery in the U.K. and in South Korea is another great
example. It's around 15 percent of the market; in the United States, two to three percent max.
O'SHEA: Yes.
CHATTERLEY: How much bigger can that be?
O'SHEA: That's really the open question because --
CHATTERLEY: It's a big country.
O'SHEA: Yes, well, if it's free, yes, it is really big. If it's not free, how big will it get? And where does it scale? It scales in big cities like
this. It scales in the U.K. because you've got a dense population in a smaller geography.
In the U.S., it works in cities. Is it going to work in the Midwest? Is it going to work in Kansas and Missouri and places like that? Likely not.
But the question for the retailers is, how much do I invest in the capability? And what do I do if I over invest? And that's kind of the dance
that we're in right now.
CHATTERLEY: Yes, the balancing tightrope walk that they're all trying to find here. What we didn't see in the forecasts that Walmart gave and it
stood out to me was any impact, any adjustment lower for coronavirus? Supply chain? Did you hear anything at the meeting today?
O'SHEA: Same thing in the meeting. They're not guiding to any corona impact because they really don't know and I don't know that anybody really
knows.
CHATTERLEY: No.
O'SHEA: It's kind of a similar phenomena; although much more serious that when retailers faced with tariffs, where they didn't know how long they
were going to last. They didn't know if they were even going to be put in place. So you kind of have to take a wait and see attitude.
From Walmart's perspective, they are seeing shorter store hours with a lot of the stores in China, and they're really focused on, you know, the things
they ought to be focused on, which is employee health, customer health, et cetera, but they have to balance that with customers needing the stores.
So they're going through that right now.
CHATTERLEY: Yes, you make a great point, the human impact here and dealing with that first is more important than forecasts, quite frankly.
O'SHEA: Right.
CHATTERLEY: Charlie, great to have you with us.
O'SHEA: Great to be back, Julia. Thank you.
CHATTERLEY: Charlie O'Shea. Yes. Great to have you on the show.
All right. Now, if you think Walmart stockholders are feeling a little down, meet Charlene. She works at a Walmart in Maryland and poses with
various products on the store's Facebook page.
Thanks to that one of a kind expression, she has gone viral, and now has legions of fans.
Hello, Charlene. Great face.
All right, we're going to take a quick break here on FIRST MOVE, but coming up, Lolli, Lolli, Lolli, get your Bitcoin here. Okay. Maybe not the old
Grammar School song, but you can earn Bitcoin while you shop. Find out how, next on FIRST MOVE.
(COMMERCIAL BREAK)
[09:41:08]
CHATTERLEY: It still makes me laugh. Take a look at Bitcoin inching closer to the key psychological level of $10,000.00. Right now we're trading
around $9,700.00 as you can see. They are just shy of that.
Now, I caught up once again with the CEO of Lolli. It's a Bitcoin reward system that literally gives you cash back in the form of the
cryptocurrency, Bitcoin, when you make purchases with their retail partners. Take a listen.
(BEGIN VIDEOTAPE)
ALEX ADELMAN, CEO AND CO-FOUNDER, LOLLI: What we're trying to do is create the easiest way for people to get into Bitcoin, and we've done so through a
cashback model.
We partner with merchants, and then those merchants pay us when our users shop their site, and then we send people free Bitcoin to their Lolli
wallets.
And so what we've seen is a lot of people -- Lolli is their first Bitcoin wallet and their first experience in crypto as a whole.
CHATTERLEY: It's Bitcoin back base just basically.
ADELMAN: Yes.
CHATTERLEY: So cash back, but crypto back on other purchases. So in the last few months since we spoke to you, talk to me about user growth. Talk
to me about the merchants that you're signing on because do you have some big names on board with this.
ADELMAN: We do. I mean, everyone from like Priceline to Glossier to Expedia. We have like 900 -- over 950 merchants. We're almost at a
thousand.
CHATTERLEY: Wow.
ADELMAN: And these merchants are coming on board because it is the easiest way for the merchants to get into Bitcoin as well.
So it's not just the consumers that we've created an easy on ramp. We're getting mass merchant adoption, and I think some of the biggest merchants
in the world have already joined us today.
CHATTERLEY: So can you use your Bitcoin points, your Lolli wallet to buy things on Expedia, for example? Is it that sophisticated yet? Or is this
simply cash back rewards. You're accruing Bitcoin and you become an owner of a portfolio of crypto assets.
ADELMAN: That's a great way of looking at it. A lot of our users treat it as an investment, I think so, the data right now is over 90 percent of our
users just hold it as an investment. Very few actually exchange it out.
And I think that's a sign that people are treating it as an investment account. They're treating it as a savings technology, which is I think
Bitcoin's biggest feature right now.
Things are happening --
CHATTERLEY: It's a store of value potentially.
ADELMAN: Exactly. It's a store of value for most people, and the data supports that.
CHATTERLEY: But could it also be about the fact that for some of these merchants, they simply don't accept Bitcoin as a way to purchase their
goods. So there's a block there, at least for now. Is that some part of the story, too?
ADELMAN: It is.
CHATTERLEY: How many of the merchants that you're talking to --
ADELMAN: Very few.
CHATTERLEY: Yes.
ADELMAN: About -- I would say about 10 to 15 of our merchants out of 950 accept it and I think that's like -- one of the only ways we like to look
at the future is people right now don't want to spend their Bitcoin and rightfully so.
Since we launched, it's gone up two to three X -- yes, about two to three X today, and so we don't think that people actually want to spend something
that is historically for them going up in value.
CHATTERLEY: What is the average Bitcoin back that your users are achieving here by using the app? Or at least the function at all.
ADELMAN: So our users have earned -- so our users can earn seven percent back across all of our different merchants and upwards of --
CHATTERLEY: That's an average.
ADELMAN: An average, yes. And then the actual, it's about 30 percent, I think is our highest today back that you can earn.
So some of our merchants are very generous, and they want to give Bitcoin back. They want to give cash back to incentivize these sales.
CHATTERLEY: Thirty percent of the value of the purchase that users are making. I mean, how big are these purchases?
ADELMAN: So it varies. I mean --
CHATTERLEY: I need to start shopping.
ADELMAN: If you think about it, a lot of these digital products have next to no cost for distribution, and their margins are very high.
And so when we negotiate with those merchants, we ask them if they can go higher to convert more sales. Because ultimately we're driving incremental
sales for our merchants.
CHATTERLEY: You recently tweeted that it's now a hundred days, less than a hundred days to the halving. What do you mean by halving? Because we've
talked about this on the show before.
Again, I want to remind our viewers. What is the halving?
[09:45:19]
ADELMAN: So the way that people actually -- at its core, the way that people actually are getting Bitcoin is through mining. And mining is a very
difficult operation. It takes a lot of computing power, and most people are never going to touch mining.
It's sort of like, you know, we pump gas every day, but we don't have to go -- we don't have to be, you know, on the rig and like, you know, mining the
actual oil.
So there's a whole network of miners out there that are actually getting the Bitcoin for us. And when they get it, there is a block reward that
their computers are solving this very complex algorithm that they're solving and every 10 minutes, they get that reward if they have solved this
algorithm.
That reward is going to go in half. Meaning that it's going to be harder for them to get it, meaning that like all of Bitcoin hypothetically,
because there will be less supply with the same amount of demand, hypothetically, it should go up in value, less supply more demand. And
that's the idea behind halving.
CHATTERLEY: More relative demand. You know, every traditional investor that invests in traditional products here will be shouting at the
television going the whole point about financial markets and the way these things work is the moment you know something is going to happen. The price
adjusts.
So if it's less than a hundred days, the moment that halving was mentioned and everyone understood what it was, the price will adjust.
Is the halving already in the price? The impact of it already in the price in your mind?
ADELMAN: I personally don't think so.
CHATTERLEY: Why?
ADELMAN: Because there's so many -- Bitcoin has only reached a tiny percent of the population.
CHATTERLEY: People don't understand it yet.
ADELMAN: People understand it, and I think that the institutional capital is still being set up. Like you know, when I talked to my friends on the
other side, like we're on the consumer side, we're making the easiest on ramp.
But when I talk to my friends that are in the deep institutional side that have the billion dollar hedge funds, they're still like waiting. They're
still like deploying, like ready to deploy capital. And I just don't think that it has been priced in yet. I think people want to see what is first
halving.
Because this is the first halving after the run up in 2017. We've never -- we have no context of what happens when the masses now understand what the
halving is.
So potentially in like, the one in four years, we might see something more priced in. Right now, I just don't think that there's enough savvy
investors out there that really understand what is priced in and what's not and what it actually means.
(END VIDEOTAPE)
CHATTERLEY: The Lolli CEO there. All right, we're going to take a break.
Up next, a surge in opinion polls means Michael Bloomberg now qualifies for the Democratic debate in Las Vegas. What kind of show will that mean? We
will discuss after this.
(COMMERCIAL BREAK)
[09:50:08]
CHATTERLEY: Welcome back to FIRST MOVE with a look at today's Boardroom Brief. The CEO of Nissan telling shareholders they should sack him if he
can't pull the company out of its current slump.
Makoto Uchida is trying to arrest falling profits and move on from the ongoing Carlos Ghosn scandal. He told the auto giant shareholder meeting,
if circumstances remain uncertain, you can find me immediately.
The American home furnishings retail Pier 1 has filed for bankruptcy. The troubled Texas based firm will try to find a buyer, around 400 stores have
already closed or started closing down sales.
Tesla's CEO, Elon Musk took at a shot at his fellow billionaire, Bill Gates and his conversations with the Microsoft founder have been "underwhelming."
Gates on the other hand, just praised Tesla for leading the car industry's conversion to electric power.
So what's riling Musk? Possibly the fact that Gates new car isn't a Tesla, but the latest electric Porsche Taycan. Ouch.
And what could ultimately result in another battle of the billionaires -- millionaire, sorry, Michael Bloomberg is qualified for Wednesday's
Democratic debates. The appearance in Nevada will begin his first on the stage with his 2020 rivals.
CNN political analyst, Catherine Rampell joins me now. Getting a bit overexcited there between millionaires and billionaires. Catherine, great
to have you on the show.
Speaking of millions, though, I do suppose we should really be that surprised given the sheer scale of advertising spending that the Bloomberg
campaign has undergone? What do you make of this latest poll?
CATHERINE RAMPELL, CNN POLITICAL COMMENTATOR: Well, it certainly suggests that Bloomberg ad blitz today has been effective. I think he spent
something like $400 million on political advertising at this point, which is more than double what his next rival has spent. It was another
billionaire in the race, Tom Steyer.
So certainly that has been helpful to him. He's been able to control the narrative around him, he's been able to tell his story. He hasn't exactly
been battle tested at least on a national stage to date because he was a late entrant.
Up until recently, the other candidates in the race had not been paying a lot of attention to him; up until recently, the media had not been giving
him the full scrutiny that some of the other front runners had been subject to.
So we'll have to see whether that lead persists or whether those strong numbers rather persist once he takes the debate stage and once he is
subject to more scrutiny.
CHATTERLEY: He had a tough weekend in the press for people in the United States that have read articles dating back to the 80s and the 90s boardie -
- boorish -- let's call it behavior. How popular is he going to be if we are talking on a national scale with those on the more extreme left of the
party, the anti-billionaire movement; women, perhaps, those of color given the stop and frisk? What are your thoughts here?
RAMPELL: So I do think he has quite a bit of baggage to deal with. And as you pointed out, it's recently gotten a little bit more attention, partly
because he has been doing better in the polls. Comments that he has made about women, comments that he has made about African-Americans, and in
particular, the effects of his stop and frisk policy which predated him, but he ramped up as mayor of New York City.
You know, surveillance of masks, things like that. So he has quite a bit of baggage, and the question is, will Democrats be willing to ignore that?
Will they say, well, we don't like that stuff, but he's the lesser of two evils or will, you know, people on the left in particular, say this is just
not acceptable as a standard bearer for our party and we won't support him or if he ends up becoming the nominee, we won't come out to vote.
So there's a real question here. He does have some appeal based on some of his policies, unrelated to the stuff we're talking about amongst
Republicans that that could pit him as an effective contender against Trump. But he also has a lot of other baggage that will weigh him down.
CHATTERLEY: Now, someone who certainly has attentions being caught here is President Trump, to your point he actually tweeted this morning, "The
crooked D.N.C." the Democratic National Convention, " ... working overtime to take the Democratic nomination away from Bernie again. Watch what
happens to the super delegates in round two. A rigged convention."
Catherine, is President Trump afraid of meeting Mike Bloomberg head on here?
RAMPELL: I think he very well might be. Bloomberg has certainly been good at pushing Trump's buttons on Twitter and elsewhere talking about the size
of his fortune, talking about his reputation within New York City, things like that.
So Bloomberg has been effective at getting under Trump's skin, again whether he would actually be, you know, the most competitive general
election nominee for the Democrats is a little bit hard to know at this point, but Trump certainly doesn't like dealing with him.
And I think in that tweet that you just showed, Trump in addition to whatever feelings he has about Bloomberg, Trump is also clearly trying to
rile up the base of -- the leftwing base of the Democratic Party that was quite unhappy about how the 2016 Democratic primary was handled.
And they may be -- they may continue to be unhappy if they think that Sanders has somehow been robbed of his rightful claim to the nomination,
and it goes of course to a billionaire whom Sanders has spent basically his career running against.
[09:55:48]
CHATTERLEY: That's about that, too. Naughty. Catherine great to have you on. Catherine Rampell, CNN political commentator.
That just about wraps up the show. You've been watching FIRST MOVE. Time to go make yours. Have a great Tuesday.
(COMMERCIAL BREAK)
[10:00:00]
END
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