Power Lunch - Econ Recon! 6/1/23

Episode Date: June 1, 2023

Investors received some important economic headlines today. ADP data came in above expectations, while manufacturing activity contracted. There’s also a big jobs report is on deck tomorrow. While Fed officials like Patrick Harker are indicating a rate “skip” could be in the cards.Because of all that, we wanted to perform some “Econ Recon” across key industries to get a better sense of the economy.We’ll explore retail, real estate, supply chains with the CEO of Prologis, and restaurants with famed chef & restaurateur Wolfgang Puck. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good Thursday afternoon to you, everybody. Welcome to Power Lunch alongside Kelly Evans. I'm Tyler Matheson. We've got some huge economic headlines out today. ADP data above expectations, manufacturing activity, contracting a bit, and a big jobs report on deck for tomorrow. All while Fed officials like Patrick Harker indicate a rate skip could be in the cards a couple of weeks from now. So we want to perform a little econ recon across some key industries to get a better sense of how the economy is doing. We're going to explore retail, real estate, the supply chain with the CEO of Prologis, and restaurants with famed chef, Wolfgang Puck. But before we dive in there, let's get a quick check on the markets, which have seen a pretty sizable swing today, about 200 points,

and we're near those session highs with the Dow up 200. The S&P up a percent to 422, and the NASDAQ up 1.3% to back over 13,000. Now, we begin our econ recon recon with retail. Macy's and Dollar General both flashing some warning signs in their reports. Dollar General down. 18% its worst day ever. Walmart also in play, hosting its shareholder meeting and weighing in on the consumer. Melissa, Repco covering all of these stories for us. Melissa, it's good to see you. Let's start with Macy's really slashing guidance. Stock's holding up okay now. What do you see

going on here? Hey, Kelly, I spoke to CEO Jeff Gennett earlier today, and he said that they saw weaker sales, and that continued into April. And the other dynamic that they saw as, you know, as shares are down hitting their 52 week low today, now recovering somewhat, is that they spoke about seeing a pullback even among Bloomingdale shoppers. And those shoppers were some people who were buying luxury goods when they had that extra stimulus dollars, those extra stimulus dollars in their pocket. But he said one silver lining could be the signs of life that they're seeing in May. They are seeing a bit of a pop. He just doesn't know if that's going to be lasting or if people are just buying things for the spring. Similar story, Melissa from Dollar General. It's

one of its worst days that I can recall, a company citing the macro environment coming a week after Dollar Trees disappointing outlook. What's the report there, Dollar General? Yes, the Dollar General also is reflecting a major pullback with its shares, also hitting a 52-week low today. It missed on the top and bottom line, and it cut its forecast for the full year. It's seeing weaker sales than expected, and it's seeing especially less discretionary spending.

So things like seasonal items, home goods, and clothing are just not being purchased by shoppers like they used to be. Instead, those shoppers are buying things like food and food has lower margins. They've also pulled back quite a bit with their plans for store expansion this year. And interestingly, one area where they're cutting growth is with Pop Shelf, a new store brand that skews toward that discretionary merchandise that's under pressure. Yeah, well, you're at a Walmart, Melissa, in Arkansas, probably right near the headquarters for the, company shareholder meeting and Walmart seems to be the one company that's holding up okay in this environment maybe stealing share back from the dollar stores and from everybody else right now or maybe it just hasn't caught up to them yet. It's an interesting time with what we're seeing with

Walmart Kelly. As you mentioned, it's really been an outlier here in a lot of different ways. It both beat expectations and it raised its outlook for the year. It's seen a couple of different dynamics that have helped it. It's seen an opportunity as consumers are more focused on value, it's actually drawing a lot of higher income consumers to its stores, households that make over $100,000 per year. It's also seeing a huge boom in e-commerce. Its e-commerce was up 27% year-over-year for Walmart U.S., and that's really striking compared to what we've seen from other retailers, including Macy's, that have seen a tremendous amount of pullback across the board, not just at stores, but especially online. But that being said, you know, Doug McMillan, the CEO of Walmart,

has spoken about food inflation and how that is pressuring consumers. But again, it is starting to see gains, even in a tougher environment, perhaps because it's known for offering everyday low prices that are attracting enough shoppers, even as its customers also pull back on discretionary, Kelly. All right, Melissa, thank you very much. We appreciate the reporting there. So what does the recent commentary from retailers tell us about the overall economy and maybe the state of the consumer in particular?

Let's bring in our retail panel. Joining us is Sandra Campos, former DVF CEO and a CNBC contributor, and Brian Gildenberg, managing director at Retail Cities and the host of the CPG podcast network. Welcome to both of you. Brian, let me begin with you. As you look down the commentary from companies from Dollar General, Macy's, Capri, American Eagle, Big Lots, A Foot Locker, on and on and on. You keep seeing the same kinds of phrases, weakening, fewer tailwinds, softball. demand, shares of pressured consumer. How worried should retailers be, Brian? Well, I think the other word that has repeatedly come up as discretionary, and I think that's probably the most important thing to keep in mind, which is that shoppers are clearly pulling back on discretionary purchases and non-essential purchases right now as they look to

recalibrate and rebalance their budgets. So retailers that are particularly reliance on those discretionary purchases, either for volume or for margin, as Melissa was just talking out with Dollar General are certainly under pressure. I think when you look at Walmart here, Walmart is benefiting from a couple of key things, first of which is clearly their position as a really strong value-based brochure. The other piece is that people keep forgetting that the SNAP benefits for consumers that are working but making low income to be set in March, and Walmart seems to do disproportionately well out of shoppers that need to recalibrate and reprioritize what they're spending on.

So Dollar General softness, as a, for instance, not surprising, given the pressure that shopper is under, given the pressure that the shopper is probably under, to consolidate trips at Walmart. I know there's an idea that Dollar General does better during an economic downturn, but in reality, DG really doesn't. They struggle just as much as any other retailer and are often really badly hurt by consumers who are under pressure. And also, I would think that their market, which aims at the middle to lower income individual, those are the individuals who probably suffer the most from inflation and other macro, macro pressures. Sandra, why are consumers recalibrating, particularly with respect to discretionary items?

Is it because of inflation? Is it because food prices have risen so much? Because rents have risen so much? And they just don't have extra money to spend? It's all of the above. And, you know, we still have a hangover from the pandemic. And during the pandemic, the discretionary was what was actually advantageous for retailers, right? The discretionary income that people had, they were the beneficiary.

So, you know, if we look at what the consumer is, the consumer still today, 70% of the country still makes $100,000 or under. And of that, 60% of that population actually has $10,000 more in debt than they had pre-pandemic. So we're still having that hangover. You know, we still definitely have inflation, higher gas prices. We have higher food costs, as everybody has said as well. And so they're being more selective. They have to be more selective because they're stressed financially. And so the consumer behavior is changing.

And to what others have said recently as well, they're looking at trade downs where they can. Going to Walmart, Walmart's going to be a beneficiary of that as well. Target will be also. But I think also we have to look at where retailers have placed their inventory and where they've focused on some of the upgrades in technology and creating a better experience for the consumers as well. So maybe a promotional activity, Brian, starts to pick up again. Not great news for the retailers, not great news for profit margins, but maybe it'll get consumers back in stores. Well, I think it's, I think that's certainly true. And yes, I think that you're going to see more

promotional activity. I mean, if you look at 2022, which is sort of the year you're copying against, retailers just didn't have any products, so there's nothing to promote. So I think now you're going to see a much more promotional environment as retailers look to recover lost sales and lost traffic. This, I think, will have a very interesting impact, not just on retail, but on the economy in general. I've always thought that the impact of promotional dynamics in the retail ecosystem

and basically Walmart's response to them have had a lot more to do with controlling inflation in the United States over the last 20 years than people give it credit for and maybe even more than the Fed. A more promotional environment will trigger more competitive response in the retail ecosystem. And it wouldn't surprise me if it actually brought the CPI down faster than people are expecting, as a result of the retailers competing with one another on newly established lower promotional pricing.

So I think there's some interesting implications, not just for shoppers, but for the economy at large as well. Sandra, you said that the percentage of the population that makes less than $100,000 a year now have $10,000 more dollars in debt than they did at the beginning of the pandemic. where has that debt come from? How have they piled it on so fast? Is it by now pay later schemes or what? Buy now pay later absolutely has a part of it. We've seen an increase in terms of grocery spend with by now pay later as well. So people don't have the cash and they're using that credit even to buy their groceries at this point. So it absolutely is going to be impacting debt overall. And the other piece of that, of course, is with credit card payments as interest rates go up. What that does is it raises everyone's minimum payments per month so that the shoppers that are struggling to get by are now having to deploy more of their available cash flow to cover a higher minimum payment because of the higher interest rates that they have on the credit. Very interesting.

Okay, folks. Thank you very much. Sandra Compos and Brian Gildenberg. We appreciate it. Coming up, we'll continue to do some recon on the economy. After the break, we'll explore real estate. Mortgage demand slipping as rates and prices remain high. Deutsche Bank initiating coverage on the home builders.

The analyst joins us next. Plus, going head on, meta announcing a new VR headset, front-running Apple's big product announcement on Monday. We'll talk about the competitive pressures there. And as we had to break a quick power check, Nvidia up again today, 5.5% hit that trillion-dollar mark earlier this week at nearly 405 a share. The chip space in general seeing some pretty strong gains. On the negative side is cloud named Salesforce, raising guidance, but seeing pressure as customers

begin to back away from big consulting deals, those shares down 4%. PowerLedge will be right back. Welcome back. It's already June, but the U.S. home buying season hasn't quite warmed up. Inventory is super low, prices in rates super high, the 30-year fixed mortgage rate hovering around 7%

and hurting mortgage apps, which are down 30% from the same time last year. But Doeusia Bank out with a new note today, saying this could still be an opportunity for the home builders to fill the supply and see some meaningful gains. Joining us now is the analyst behind that call. Deutsche's Joe Arlarsmeyer.

He's a research analyst along with Skyler Olson, chief economist at Zillow. Welcome to both of you. Joe, I'll start with you so you can maybe correct your last name for me. But in all seriousness, the homebuilders have been on a great run. What powers them from here? Sure. And it's Joe Allersmeyer.

Appreciate that, Kelly. It's nice to be here. And like you said, we initiated coverage on the home builders last night. The report was titled Rise of the Machines. And maybe it's all the discussion lately about AI that had us thinking about Terminator, but really this report was about how the public home builders have a business model built around generating targeted returns on investment and have also had

a lot of success scaling their business on a national and local level. So even in softer markets overall, but especially in stable and stronger markets, these companies can gain share within the industry, but also demonstrate more resilience relative to the overall housing market. Before I bring in Skyler, why is it that Lenar and NVR would be a couple names that you actually have sell ratings on? Sure. So when we think about our framework, really what we're trying to do is think about who has the best return on inventory prospects and who's going to grow book value. So we do expect Lenard to deliver 20% more homes next year than in 2019 and with similar margins and at higher prices. No question they're in a better absolute position as a company than they were before the pandemic. But why the cell rating? The valuation framework that we're applying really values higher returns on inventory better. And we expect to also see better growth at peers like. like D.R. Horton and Meritage. Community count is lower at Linar than before the pandemic. Starts in the last couple of quarters, really still haven't ramped like they have at Horton.

We'll see if that changes when they report in a few weeks. But in our view, growth is just going to be a little bit slower at Linar in the near term. And returns are going to drift back down a little bit? Schuyler, what have 7% mortgage rates done to the market generally? And in what parts of the country are houses still appreciating at sort of above trend rates? and in what areas may they be slipping backward just a bit? Yeah, absolutely. I mean, mortgage rates mean a lot for the housing market right now. I think we're in so many ways driven for those mortgage rates.

And to think about what's happening to prices right now, I think it's really important or more intuitive to think not as mortgage rates as a buyer problem, which it absolutely is. The problem is that 70% of an existing seller, So an existing homeowner that might sell an existing home, so not those new construction homes. 70% of them are also buyers. So we've seen a dramatic pullback in the number of new listings. That has returned home value appreciation almost across the country, even those kind of harder hit and more expensive Western markets.

Some of them have drifted back to the top of the market in terms of the fastest appreciators. But otherwise, you know, we're seeing still a lot more interest in home. homes in, say, the Midwest, where affordability is still an option, at least relative to other places, despite high mortgage rates. But more than that, it's places like, you know, the Midwest and the South that were drawing so much migration, even pre-pendemic. And we saw that continue throughout the pandemic and a lot of interest and pressure in those kind of areas. So, Skyler, the question, I guess, is, you know, will the, we can ask about the housing market itself, but we all are a little familiar with the dynamics right now. I wonder for the broader economy, do we interpret this as, you know,

price pressures going back and putting upward pressure on inflation? Or, you know, should we be really looking at inflation X shelter for the time being? Yeah, I think, you know, when we think about just the crystal ball in it and looking forward, the mortgage rates have lifted, I think, in many ways from two things, right, that PCE showing of core inflation just coming in more than expected. So, you know, continues to have general inflation. And if we look at our rental numbers, you know, we're also starting to see some pressure come back up on rent, still softer than pre-pendemic. And here I am talking about those asking rents and not just the full, you know, releases that the Fed is also very concerned about. So there we see still continued pressure on

inflation. And I don't know the market is wildly confident, or rather the Fed is wildly confident that inflation will come down very quickly here. So I think expecting, yes, continued upward pressure on mortgage rates, maybe not up to 7%. We did see in the last couple of days that come down. That might have been a bit of, you know, risk from the debt ceiling as well. That might have a little bit of room to come back down still a bit, but I wouldn't expect a lot of relief. We still have to get to the other side of our inflation challenge. And I think what we've learned over the past couple of weeks as that's recovery is being pushed out. All right. Guys got to leave it there. Thank you both. Skyler Olson and Joe Allers Meyer. We really appreciate it. And coming up, we will continue our

econ recon theme today with a look at restaurants. The summer is usually a big boost for the industry, but some indicators pointing to a bit of a slowdown. We will talk to the famed chef and restaurant tour, Wolfgang Buck. Power lunch will be right back. Welcome back tons of econ data out today. How are bond traders reacting? What do they think is most important? Let's ask Rick Santelli. Hi, Rick. Hi, Kelly. Yes, it was another session of a one-two pop in the Treasury complex. The first pop was two-year-note yields around 815 Eastern. Look at the intraday chart. And you can see that pop. 278,000 for our May read on ADP jobs doesn't include government hiring much better than expected. Then, well, about 40 minutes later, we see a drop. And the drop was started by, week PMIs, but then at the top of the 10, ISM prices paid came out at the lowest level of the year, and that indeed put the bottom in for the session. Now, when we consider that tomorrow, wages are going to be one of the key components. Many of my sources and trading buddies have been

sending me charts of the current trend in year-over-year average hourly earnings, and there definitely is a downward bias towards that. So we want to pay particularly close attention the 4.2% mark. And also on technicals, let's go to the whiteboard. Here's 10-year-no-heels. 1, 2, 3, 424, the high in September, 405. And the recent distortion due to debt ceiling issues at 382, the traders have really been doing well.

They have over 20 basis points on that trade already, and they will be looking potentially to add to positions at profit from dropping yields. That's the mode they seem to be. And Tyler, back to you. Rick, thank you very much. get a check on oil. Pippa Stevens has the numbers. Hi, Pippa. Hey, well, they are bouncing back after posting the worst month since November of 2021, and the market really is on tenter hooks here ahead of OPEC's big meeting this coming weekend. The energy stocks are the best group today on the

back of oil's outperformance. There were a couple of notable analyst calls, RBC upgraded shares of Chevron to outperform, citing a Fortress balance sheet while downgrading Exxon, noting its outperformed relative to peers. T.D. Cowan upgraded Phillips 66, pointing to higher refining margins. But we're seeing the biggest gains in another area of the energy ecosystem, and that's uranium stocks. The URA and the URNM are both outperforming today. You can see up 8%. So the Senate Environment and Public Works Committee yesterday passed a bill that would limit, put restrictions on uranium imports from Russia and China. Now, we have seen legislation like that before.

It's failed to gain any widespread support. But every time that happens, it does encourage utilities to begin self-sanctioning. And already this year, we've seen 107 million pounds of uranium purchased. That's against an annual average of 70 million over the past decade. So that is driving up uranium prices and then leading to these gains in uranium stocks. But it makes sense because all along they've said, why are we sanctioning all this Russian energy, but still using its uranium or that fuel for our nuclear? Now you could say because we have to, but it's still not a great position to be in.

Yeah. And I think that that's what we're seeing is that utilities are now saying this is a risk if you are using a lot of, you know, Russian uranium, and they control about 40% of the global uranium enrichment market, and about 14% of U.S. uranium comes from Russia. And so, you know, the European Union hasn't targeted that because, to your point, they just can't at the moment. But as the war continues, you know, it's kind of the next thing you can look to, and it's really a risk for utilities that have to keep their reactors running. Be nice if we could build it out here while we're building everything else too. Pippa thanks. Thanks. Pippa Stevens. Let's get to Bertha Cooms now for a CNBC News update.

Okay, Tyler, thanks very much. Here's what's happening. Three residents of a six-story apartment building in Davenport, Iowa remain missing today after the building partially collapsed over the weekend. A structural engineer report issued just days before it happened indicated a wall of the century-old structure was at imminent risk of crumbling. However, officials did not order residents to leave. Plans to demolish the building have now been put on hold. The families of two transgender teens in Idaho filed that, lawsuit today to block that state's ban on gender-affirming medical care for minors. They say the ban, signed into law in April by Governor Brad Little, violates the federal constitutional guarantee of equal protection for teens and due process for their parents. They also claim Little ignored testimony that the ban will harm children. And teen birth rates reached another record low last year. A new CDC report shows they fell another 3% in 2022. This is a smaller annual decline than previous recent years, but experts think that seems to indicate the U.S. may be reaching a plateau in teen birth rate numbers, thanks to years of progress in talking to teens about that. But Kelly,

overall, birth rates continue to be low, although women in their 30s, so a little bit of an uptick last. Yeah, 40s 2, I think, is that just continues to shift higher. Bertha, thanks. Appreciate it. Ahead on Power Lunch, Reiths having a rough go in 2023, but one key name bucking that trend is Prologis. The supply chain and logistics giant up about 9% this year. We'll check in with the CEO. Our econ recon continues after the break. Welcome back. Lots of concern over the reet space this year. But one sector that's performing well, industrial reits, Prologis, which is actually the largest in the world at over $100 billion in market cap is up made percent this year. They stand at a critical part of the supply chain, counting Amazon, Home Depot, and FedEx among their top customers.

And right as econ watchers like Torsten Slocke over at Apollo are declaring an end to the COVID-induced supply chain snarls, Prologis is banking on continued growth in e-commerce, limited new warehouse development, and boosted inventory buffers among corporate America to further drive growth. Joining us on the 40th anniversary of the founding of the company is Hamid Mogadam. is the CEO. I mean, it's great to have you here. Welcome. Nice to be here with you. Thank you. An incredible, I mean, you know, we just have to take a step back here and acknowledge what an incredible company you've built and, you know, to have weathered COVID and all the rest

of it. Maybe you can help explain to us what's going on with the economy right now because it's a little hard to tell. We have freight recession, terrible ISM manufacturing data. Other parts seem of it seem okay. What's your assessment? Well, I find them I only go to unemployment. and it's hovering in the mid to high threes, and that's unprecedented. And ultimately, that level of employment drives consumption, which ultimately drives our business. So the freight recession is real, was real, particularly in the context of how euphoric the freight market had been of late. So anything compared to the COVID period is going to feel slower.

Pricing is definitely lower. But the warehouses are full, and the construction that's coming online is not enough to keep up with demand, particularly as we go into next year and construction slows down. So we expect a very tight market for our product for the foreseeable future. Who are your biggest customers, and what are they telling you about their businesses? Yeah, we have a very diversified customer list. Our top 25 customers account for about under 20% of our income. largest one is Amazon at about 5%. And after that, it's Home Depot at about just under 2%.

So it's a very, very diversified customer picture. They're all at different places. I would say Amazon is doing better than it was probably four or five months ago when they were announcing a slowdown. I would say Home Depot's business, as they reported recently, is a little bit softer. But remember, they are trying to build out their e-com. distribution channels. And they started many of them from zero only a couple of years ago. So that continues to be a big driver of demand for our products. Some of them are very mature in that

buildup like Amazon, but others are just starting. I'm curious, Hamid, if we kind of, you know, talk about some of the risks to the picture here. As you look at the summer months, do you see a big slowdown coming? I mean, I think you guys said recently you're trying to be a little conservative about that? What does that look like? I mean, maybe compare this with other cycles you've been through, obviously 40 years in the business. You were through the great recession. You know, you were through the dot-com crisis. Maybe this feels more like that. I don't know. No, it really feels different than all of them. First of all, we never went into a downturn being 98% occupied. This level of occupancy in logistics real estate is unprecedented. Rental growth

last year was about 30%. This year, we think it's going to be about 10%. We have almost a 70% mark to market between where our leases are and where market rents are. So we've got quite a bit of cushion in terms of our ability to be able to capture those higher rents as these leases roll over. So we feel really good about the business. Is it as strong as it was in 21 or 22? Probably not. Is it stronger than any other period in my career? Absolutely. It's fascinating. You know, as an aside, we were just talking about nuclear. And you guys, with all of your real estate, what do we say you have? There's 2.7 trillion in goods flowing through your warehouse is almost 3% of global GDP, 1.1 million employees under your roofs. And on top

of those roofs, some solar panels to talk about. Tell us more about this. And are you taking advantage of Investment and Inflation Act tax credits or how is that working in that deployment? Sure. We've been in the solar business for over a decade. And currently in the U.S., we produce over 400 megawatts of power from our roofs, that places us as the number two producer of solar power, rooftop solar power in the country. We're going to be number one before the end of the year. That business is going to be one megawatt by 2025, and I think the potential is seven or eight, sorry, gigawatts by 2025 and seven or eight gigawatts ultimately. You mentioned nuclear. We are actually looking at some of these micro nuclear technologies. It's too early to tell whether we would actually

take advantage of that. But I think increasingly we're going to find ourselves in the energy, in the renewable energy business, and in the decarbonized energy business. And it's actually a really great business opportunity. It's not something we're doing because we have to. We're doing it because it's good business. And frankly, we're doing it a long time before the IRA. And this will just supercharge our level of activity. Very interesting. Fascinating. I would say ESG play, but you call whatever you want,

but nevertheless becoming increasingly important. Absolutely. You know, I don't think ES and G actually go together. We're in the business of business. And if we can do anything that is good for our customers, makes them stickier, makes them appreciate our product over other product, and because it's decarbonized or whether it offers more energy efficiency, all of those things are good for the bottom line. So call it what you will.

We think of it as a huge business opportunity going forward. Hamid Mogadam, the CEO of Prologis. Thanks for joining us. We really appreciate it. Interesting way to think about it, sort of in a more holistic way as opposed to in a sort of a silo. All right, coming up, Meta versus Meta, unveiling a new VR headset months before it's even available to consume. and upstaging Apple's VR announcement in the process that expected next week. All you need to know about this brewing hardware battle, get your goggles ready when power lunch returns.

Welcome back, everybody. Meta trying to steal a little bit of Apple's headset thunder, months before it will actually ship. Meta unveiling its Quest 3 VR headset today, just days before Apple is set to reveal its competing product at the Worldwide Developer Conference. shares of both META and Apple are up today. Shares of META, by the way, hitting a new 52-week high, and up close to 125 percent this year. Here to discuss our own Julia Borsden and Steve Kovac. So, Steve, talk to me about what META is doing, bringing out or unveiling a headset that won't even be available for several months. Yeah, and just to be clear, Tyler, we're not expecting the Apple headset to be available for a few more months either, even though they're going to announce it on Monday. But it's very obvious what's going on here, Zuckerberg, trying to get ahead of this announcement of Apple,

because these are the two companies that are going to compete the heaviest in this space. There are a slew of headsets that have come out in the last several years. Most of them from meta. Meta is the market leader, but it is an entirely incredibly niche market and a very small market. And so Apple is going to have to kind of make its case on Monday saying, we figured out why this is a thing, basically, and come up with a business. compelling use case that people like meta really haven't had a chance to do yet. Julia, we just showed the competing stock charts of Apple and meta and they're not close.

Apple hasn't had a bad year. It's up nearly 40% year to date. But meta has more than doubled. It's not really on the strength of these VR headsets, though, is it? No, it's not on the strength of these VR headsets. I mean, what meta has been doing is selling these headsets ultimately, for the most part, at a loss, with the idea that they want to gain market share and they want to create a market share and they want to create a vibrant ecosystem. They want to convince people that everybody needs to have a VR headset. Yes,

it's for gamers, but it's not just for gamers. And they're hoping that this new headset when it launches in the fall will really help it hit this next level of consumer adoption. I mean, think about this headset as sort of being in a similar price point as some of these gaming consoles and the idea of maybe going after a similar market. But that's why today they unveiled a lot of games. They just had this presentation unveiling the new lineup of games and the quest. 3 is going to be compatible with all the games from the Quest 2. But I think the question here is whether Apple is playing the same game as Meta is. You know, meta wants to control its ecosystem because for so long, it's been at the whim of what Apple does in its app store. But the question is,

is Apple going after a higher end user? Are they going to be trying to do a much more expensive device? Or are they going to be competing closer to the same price point? But I think this idea that we're going to see a new headset war. A new phase in this headset war is kickoff in the fall is probably pretty likely. But we know that Apple and meta have long time been rivals. Steve, we're a little bit light on time here. Julia mentioned that they hope that this headset or that headsets in general will appeal to more than gamers. Tell me what I would want a headset for if I'm not a gamer, number one. And number two, separate question. I can't imagine that Apple envisions this headset to be the kind of blockbuster product that we're accustomed to seeing from Apple, whether it is the Apple

watch or the Apple phone or the iPad even. Yeah, and I'll just point to what on that last point that you made, Tyler, what analyst Ming Ching Quo has said about the expectations for this device. He's very plugged into the supply chain and said Apple doesn't isn't producing enough to ship maybe more than two or 300,000. Now, to put that in perspective, Apple sells more than 200, million iPhones every year. So it's going to be a long way before this could even catch up. And again, as far as use cases, beyond gaming, you know, it's going to be, we'll have to see what Apple has to offer. But some of the early reports that we've been seeing, it's going to focus a lot on entertainment. It's going to focus a lot on communication. It sounds like they have a new

version of FaceTime that works, I guess, literally on your face this time. And also things like using your Mac within this environment on your face. Facebook, by the way, or meta, rather, their headset does something similar. You can kind of mirror the screen of your computer. I've tried it. I'm not sure it's really compelling of a use case, but that seems to be something these companies think we want to do. On your face, in your face.

I don't know. It's too much. It's too much. Julia, Steve, appreciate it. Thank you. I was going to say an about face. Nearly a third of consumers say they plan to dine out less, according to a news. survey. As inflation persists, could that spoil the summer surge for America's eateries?

We'll ask celebrity chef Wolfgang Puck about that and much more when Power Lunch returns. Welcome back to Power Lunch. The summer, usually a boost for restaurants, but there are concerns of a slowdown as consumers slow their spending. According to a recent survey, nearly a third of Americans, plan to dine out less over the next month. And Torsten Sloc, the chief economist at Apollo Global, says restaurant booking demand is slowing. in states like New York and California. Let's get some more insight on all of this from Wolfgang Puck, a celebrity chef and a restaurant tour.

Welcome back, Wolfgang. We're so glad to have you back with us. Let's talk. I want to start by asking you about inflation and how it is affecting you. Where is it biting hardest? And how is it affecting how you have to price your meals? Well, you know, inflation is here.

It's reality. Everything has gone up over the last. years since the pandemic ended, you know, we have less workers, people don't back to work yet, food prices have gone up, liquor prices have gone up, meat prices have gone up, so we really have to be smart and engineer our menu so that way people still perceive a value when they come to our restaurant. And at the end of the day, in the upscale restaurants, we are not just selling food, we are selling an experience, you know, you don't get that eating at home, making your own pasta or grilling your steak or whatever.

So that's a big difference. And I really believe you're going to get a lot of people from Europe coming to California, New York, and so far. People will eat out. It's hard to, I know it's a hard question to answer because it's different, certainly in different cities. And you have different price points in your restaurant. But the average ticket, what was it three years ago?

and what is it today for a person dining at one of your establishments? Well, I think the average ticket has not actually gotten up as much. When I look at cut, for example, our steak restaurant, you know, meat prices have gone up 20% at least. We did not raise 20%. We just engineered the menu a little smarter, not just to have the expensive cuts of meats like a ribai or a filet or things like that. but also maybe to make a great bolognese or maybe make some braised meat. So that way we can get a better price and customers can get the value because we want people to feel good once they eat in our restaurant

because they say, wow, the food, the service, the ammions are great, but also we made them feel good at the end. And I think that's what we really try to do. We want people to feel good when they eat at our restaurants. When they leave and say, we want to come back. Yes, it's expensive. We are not cheap. Unless you go to our restaurants at the airports, you know where it's really convenient.

You know you're going to get a working pack pizza or a Caesar salad or a Chinoa chicken salad for a reasonable price. But in the upscale dining, you know, it's the most difficult, the most labor-intensive, generally in the most expensive locations. So you have all the top lines which are very high. Let's talk a little bit about business in general and how bookings are going. Are you seeing a strong demand? Is it leveling off a little bit? What? Well, I think in a lot of our restaurants, people don't book more than two weeks, three weeks ahead.

So I don't know yet in summer, in July, August, how it will affect. We have to look a little bit at the hotels, how they are booking, because we get a lot of foreigners coming to New York. We get a lot of foreigners coming to Los Angeles and so forth. So if the hotels are busy, there's people in hotels have to go out. For example, Las Vegas, probably gonna have one of the best summers next to last year probably.

And the booking seem very solid and people go to our restaurants. So if it's cut or Spago or any of the places, or for example, at the Pendry Hotel, Meurr was seem to be booking up really well and it's really busy. And Spago is known all over the world. So I think we have the least to worry probably. People just want to come to Spago when they come to L.A.

Absolutely. Wolfgang, always good to see you. Thank you for your insight and a little glimpse at the restaurant business right now. Wolfgang Puck, thanks. Thank you. Bon Appetit. Thank you. On that note, still to come, why your summer barbecue is about to actually get more expensive

and some trouble brewing for Starbucks worker unions, that and more when Power Lunch returns. Welcome back, everybody. Wow, five and a half minutes, a plethora of riches and a plethora of stories you need to know about, so let's get right to it here. Senate Majority Leader Chuck Schumer is attempting to fast-track the debt-sealing bill through the Senate today. This despite objections from senators on both sides of the aisle. Schumer saying the Senate will remain in session until it sends a bill to President Biden's desk, adding time as luxury lawmakers don't have if they want to avoid a default by the June 5th deadline. The Fiscal Responsibility Act negotiated by President. Biden and Speaker McCarthy was voted through the House with bipartisan, pretty overwhelming bipartisan support last night, by the way. If passed, it raises the limit for two years and caps federal spending. Interesting. I think one of the stumbling blocks is Senator Tim Cain of Virginia's objection to including in the bill,

the finishing of a pipeline that Senator Mansion has been a strong booster. Does it go through Virginia? It begins, I believe, in West Virginia in one of the shale areas, and then Carrier. through Virginia, and it had been something that I gather Senator Cain of Virginia had opposed for a long time. I think also holding out Senator Lee of Utah and Rand Paul of Kentucky, I think they're going to let them propose amendments under the provision or the assumption that all of those amendments will fail and the bill will then move through cleanly. Because they need 60. And it also, I mean, everyone feels like this is the only legislation that gets done this year.

There's an effort to kind of get things in it that they desperately need. Yeah. Or don't want. We will see. It went through with more Democrats voting for it in the House than Republicans voting for it in the House, but it was bipartisan about 149 Republicans, as I recall, voted in favor. All right. Next up, where's the beef? Ranchers are shrinking cattle herds because of headwinds from droughts and rising operating costs.

That means less supply of beef on hand, with production expected to drop by more than 2 billion pounds in 2020. That's the biggest decline in more than 40 years. Experts warn that that could push prices for steaks and burgers to record highs just as barbecue season kicks off. Wolfgang Puck mentioning the very same thing that some of the more prime cuts of beef are costing so much more that he's turning to other cuts of beef and maybe... The rigatoni bolognese sauce as a way to get that protein in there. I think I told you this.

I went to our local grocery a week ago. My wife was going to see Taylor Swift. So I said, I'm going to treat myself. She's going to Taylor Swift. I'm going to treat myself to a steak. I go and I get a rib eye, a 0.9 pound ribai. It costs me $29. I should have gone to Wolfgang's store and had a nice meal served. We would have happily come over for a bite for that.

It was good, but $29 a pound, man. I still wonder if a lot of this is more in the rearview mirror than looking forward. And it also kind of goes to the point Costco was making about how consumers are already trading down from beef to pork and to canned goods in some cases like tuna. They usually only see that in a receipt. It was Taco Night. I had a lot of beans in that. Don't torture me.

Don't do it. Oh, good. It was good. With all the food offerings at the Matheson House. And finally, unionization efforts are underway at Starbucks. But they're hitting a bit of a speed bump. And guess who's in the house? Cade Rogers is here in New York.

Who better to de... Explain what's going on here, Kate. It's great to see you. Yeah, great to see you. So workers at five stores at different Starbucks locations did file petitions to decertify the union, which you can do after a year if enough progress is not being made. Now, the NLRB dismissed several of these petitions.

So the decertification process is still potentially underway at one location, but the others have gone away for varying reasons, unfair labor practice charges being some of them, some of the timeline for filing was off. At the root of all of this is that there still is not a contract in place for the unions and Starbucks. This has been going on for more than a year now. A contract between the unions and Starbucks.

Exactly. The unions at individual locations that had voted to unionize. Yes, because they voted at individual stores. And as you remember, Howard Schultz was at Capitol Hill, testifying, Bernie Sanders says, I want you to come back here and tell us that you've got a contract in place, but Starbucks is negotiating with the union on an individual store-by-store basis, because that's how the union decided to file. The two parties do have to bargain in good faith. They don't necessarily have to agree on a contract. Some of the union stores don't have access to some of the newer benefits

that have been put in place. So that could be what's behind the decertification effort, but if you take a listen to Starbucks Workers United, they say they're really continuing the fight. What is great about this movement is that there always seem to be 10 workers stepping in for every worker that has gotten tired, you know, or has gone on to fight some other fight. Now, for its part, Starbucks is saying at every store where our partners are choosing to pursue union representation, we want to make sure that their voices are heard. We want the NLRB and workers united to let this go forward. A lot of back and forth here. I think the big takeaway, though, the union movement is still very much alive and well for the first. half of the year. Petitions at all locations, not just Starbucks, Trader Joe's, REI, every other

store we're hearing about are still up 1,200 for the first half of the year so far. So people are still looking to unionize, but Starbucks really started at all and the contract isn't there yet. And they're kind of playing hardball a little bit. For sure. They are. It's really great to see you. Great to see you. Nice to have you, bye. Yeah, yeah. She had a good time. I bet she did. It was three and a half hours. I thought she wouldn't get home until one that she got home pretty quickly. It's amazing. All right. Thanks, everybody, for watching Power Launch. We appreciate it.