Power Lunch - Inflation Nation, Pharmacy Shakeup 8/17/23

Episode Date: August 17, 2023

Walmart says consumers are hunting for bargains as inflation squeezes their wallets. But how about the high-end consumer? We’ll talk to the heads of Equinox & Christie’s about that.Plus, a California insurer is making a big move in the pharmacy space. We’ll explore what it means for both stocks and drug prices. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Hi, everybody, and welcome to Power Lunch alongside Courtney Reagan. I'm Tyler Mathis, and glad you could join us here on a Thursday. Coming up, Walmart consumers are hunting for bargains as inflation squeezes their wallets. The stock falling, however, even after the company top results. The Walmart shoppers fears inflation. And how about the high-end consumer? What about that high-end consumer? We'll talk to the heads of Equinox and Christie's to see how their customer's behavior has changed as inflation goes. Hi, Courtney. But first, let's give you a check on the markets. The stocks are lower here, but the Dow Jones Industrial average down just about a third of a percent. Walmart, of course, is in that index.

S&P 500 down 2 tenths of a percent, and the NASDAQ pulling up the rear here down about a half a percent. United Health is also weighing on the Dow. It's one of several healthcare names getting hit by a decision from Blue Shield of California to partner with Amazon Pharmacy and Mark Cubans Cost Plus pharmacy. More on that tie-up is coming up. But as Tyler mentioned, of course, Walmart shares are trading lower, despite beating on the top and the bottom line for its second quarter. The retailer also raising its full-year earnings forecast fueled by growth in grocery and online sales. Earlier on Squawk on the Street, I spoke exclusively with the company's CFO, John David Rainey, to talk about the strong quarter.

It's one of the exciting things about our performance this quarter is the share gains that we had. And it was broadly across all categories. We've seen for four or five quarters here now that we've been. in gaining share in food and grocery, but we also expanded that into general merchandise and consumables in the latest quarter. And it really demonstrates that our value proposition is resonating with customers. Let's get some reaction from Greg Mellick. He's retail analyst at Evercore ISI. He has an outperform on Walmart and a $175 price target. Greg, you know, look, when you look at the quarter, there's a lot to like here if you're bullish on the stock,

but the stock is lower here in the session, even if just modestly so. Is this a sell on the news because expectations were so high going into this quarter? I think you nailed it. Look, Target has been losing some share and Walmart's been gaining some share. And I think people were positioned into this quarter very much in that direction. So this is a little bit of an unwind-up for both stocks, frankly, yesterday and today. I would say for Walmart, what we were really impressed with was that consistent and actually slightly accelerating traffic growth.

And as they get those new customers and they come more frequently, that's how they can reinforce them. So to me, that was the real underpinning positive out of the Walmart print today. And Greg, it just seems to me that to that point, grocery is just really is what going to make the difference here in many cases to get that guest traffic frequenting the store more and then hoping to move into some of these other categories because discretionary was still soft for them like Target. But unlike Target, they saw it increase, at least from the prior quarter. I think you hit the nail on the head. If you've got the customers, if you have track fit, it's always better to have a chance to at least keep it. And so, yes, general merchandise might be down for everybody right now. But if you're winning more customers and you're winning on not just value,

and I think you're a great interview with John David before, he also mentioned convenience. It's not just value anymore that Walmart 20 knots convenience. So as they broaden their e-commerce offering, as it gets better, as delivery speeds get better, as they add sellers to the marketplace, they're finding that customers are willing to shop with them and more than just grocery. Now, right now, cyclically, that might not be great, but you're building it for when it comes, whenever that recovery is there. And then that that could give them that extra boost in sales and profitability. Greg, you mentioned earlier that Walmart is attracting some, quote, new customers. Who are those new customers? It's not as though Walmart hasn't been around for a while.

Yeah, it's a great question. And I think what it is is they spent upwards of five or ten years now really doing a lot of the underpinnings to make their Omnichannel offering really differentiated. And it's coming together now at a point where as consumers are searching for value, you've always had that at Walmart. But as they're getting the rest of the e-com system working well, consumers want to go there. They realize that the assortment's great. The delivery times are getting better and better. And the beauty about e-commerce, and we've liked Amazon for a long time, is that it does unlock you to a different customer base. So Walmart has 90% of American shopping there at least once a year, but they have very few super centers

in a lot of more densely populated areas or even suburban areas in California. in the Northeast. And as you start to develop e-commerce, you can unlock new markets that are effectively white space. Very interesting. So in other words, it's that e-commerce customer, who is the new customer, maybe in the New York metro area, maybe in New York City, where there aren't so many

of the super centers as compared with maybe Virginia or North Carolina. Those are the new people who are coming in. There are certainly a big portion of that. I don't want to say it's exclusively that. Right, right, right. But I think what it's showing you is that it looked at another way. If Walmart's market share in U.S. retail sales is 10% nationwide, those states where they have

their best supercenters, their market share might be 15, 16, 17%, and these other parts of the country, their share might only be four or five. All right. And so as you get e-commerce growing, I think it was 26% in this quarter, that's almost more than double overall U.S. e-commerce growth. I think that shows you right there. how they're getting it. They're always compared with Target. What's what's Target need to do to close the gap, let's say? Well, it was funny. I just look at the numbers. The four-year comps now for Walmart are

up 30 and for Target up 31. So I think what you saw this quarter is what had been a gap of about a thousand basis points where Target had won so many new customers during COVID. What you saw was this year so far, a lot of that, if you will, going back, if you want to look at that. simply. More importantly, I think what they're doing is they're getting the whole Omni Channel right, which is you're focused on value, you're focused on assortment. And I think for Target, it's really more of an issue of, frankly, they've had their own merchandising met patch that they've talked about. And I think that's hurt them. You know, not having the right product and the right stores that your guests want doesn't help your traffic. Yeah. And obviously, the stocks are

diverging here as these results are starting to differ pretty markedly, at least this quarter. Greg Mellick, thank you very much for joining us. Thanks, Courtney. All right, Target becoming the latest brand to report a hit in sales after a social media backlash. This one involving Pride Month merchandise, what it was, how and where it was displayed, et cetera. And Bud Light famously became a target of anger and boycotts following its partnership with a transgender influencer. Today, analysts at Bernstein writing about how companies should hand the tough situations that emerge when brands get involved in social issues. Joining us now is Nadine Sarwatt, Bernstein analysts covering European and American alcoholic beverages.

Nadine, welcome. Good to have you with us. I guess the key question is, how can companies thread the needle between trying to attract customers who may be members of minority groups, just to use a broad? term, that whose membership in that group may not be popular with, for example, their core customer. How do they thread the needle? I think you nailed it on the head right there. So if we take the Bud Light example, blow it out, look at Beer more generally.

I mean, this isn't the first time that we've seen companies miss out on a core demographic and it actually coming back to bite them. So, for example, if we go back 20 years, diversity, inclusion, ESG, perhaps less part of the mainstream discussion, but beer missing out on appealing to female consumers is actually one of the reasons it's losing share today. So what we can take away from that experience is that diversity and inclusion from that angle of ESG actually has real financial consequences. So if we apply that to the butt-light scenario today, and if we look at the demographic

splits of, let's say, LGBTQIA plus community for this Bud Light example in particular, one can understand why ABI would want to appeal to that type of consumer, especially seeing as Bud Light has been declining for years. But crucially, you know, what can we learn for CPG brands more generally in America today? Is that you simply cannot move faster than your core consumer. If we look at Nielsen scanner data, we see that Bud Light, is disproportionately consumed on a per capita basis by men in Republican-leaning states. And then if we also look at research, for example, by the Pew Research Center, we also then know that Republican-leaning Americans view greater social acceptance of transgender

individuals more negatively than their Democratic counterpart. So regardless of your personal opinion here, choosing something that does not gel with your core consumer, you are absolutely right, is a challenge. I hear you on that, and I hear you saying very, very clearly to brand managers at whatever companies, never forget who your core customer is, and remember that their sensitivities and sensibilities may be of a certain type, and you don't want to alienate them. But let me ask you this.

In the case of Target, we had on Jan Niffin, yes, she was a retail specialist. And he pointed out that Target, which, as Courtney reported, mentioned the backlash over their LGBTQ Plus and transgender merchandise. Jan Niffin pointed out that Target has been carrying and celebrating these kinds of days for a decade or more. Why did it bite them this time today? What's changed in the culture or in what tariff? did to cause the backlash that they received? Well, I think, you know, more broadly, when we look at these issues or situations, whether that's Target, whether that's Bud Light, there are two pretty big things that are a little

bit different nowadays. The first is the huge presence of social media. You know, when we look at the Bud Light scenario and very similar for Target, what happened was the incident occurred. the partnership with an Instagram influencer, or a TikTok influencer, I should say, or a display and Target was picked up by consumers and blown up by celebrities before even management decided to step in, comment, and clear up the situation. So I'd say that's the first difference.

But the second big difference, let's bear in mind, we're headed into an election year. And at least when it comes to these hot button topics, that means that you're going to get politicians getting involved with Bud Light. We had Senator Ted Cruz. We had Governor Ron DeSantis all waiting into the debate, and I think that makes the situation also different. Nadine, you bring up a lot of interesting points, and I just keep thinking about some of these companies that maybe are going out with what they believe are very good intentions to help bring in customers that maybe didn't feel as included before. But then when they switch sort of mid-campaign, Target has told us, Brian Cornell told me yesterday that they made adjustments and that once they moved the merchandise or removed some of it in some stores that they saw business normalize, both in sales and traffic. So then doesn't that sort of send the reverse message?

Well, here's when it comes to the cost of switching. If I'm used to going and doing my weekly, monthly shopping at Target because it's close to me and it's convenient, switching to another retailer is actually far more costly, whether in terms of time or my preferences, than just showing up at the beer aisle and saying, you know what, instead of Bud Light, I'm going to go for Coorslight. And so I think that's the key difference here. Switching beers is far easier a decision than switching retailers. This is a fascinating conversation. I want to leave with one final question in that is this.

Do you think that the experiences that Target has had and that Bud Light has had will make other companies more hesitant, let me put it that way, to feature products or do marketing that is aimed to attract people from so-called minority or marginalized or other controversial segments of the, sometimes controversial. of the population? I mean, give you the typical analyst answer was that it depends. If you are doing those initiatives that lean into those either minority or underrepresented groups, and that is part of your brand identity, that can actually drive better performance. So, you know, a classic example, Absute Vodka has been leaning into LGBTQIA plus community initiatives for years. That's never been a negative for them because it's part of their brand identity.

So you have to ensure it always comes back. You cannot move faster than your core consumer. Interesting. So in some cases, it's not going to affect them at all because it's become such a part of the brand identity. In other cases, it may not be part of the brand identity. And there, the corporate management has to be a little more savvy, a little more subtle, a little more nuanced, perhaps. Nadine, fascinating conversation. I hope we get to have you back soon.

Thanks for having me. Yeah, that's certainly not the end of that conversation. And it's one worth having, I think, again. Former Bed Bath and Beyond sister brand, Bye Bye Bye Baby. Well, it's getting a new lease on life. CNBC has learned that the group that bought the rights to the name plans to reopen 11 of the stores as soon as this fall, with many more, potentially at least, to come.

Joining us now is the reporter behind the story, CNBC.com's Gabrielle Fon Rouge. Gabrielle, it's great to have you here with us. So give us a little bit of a synopsis of what you've learned, and of course we'll drive folks to our website to read the full report. Yeah, absolutely. So the operators that bought the buy-bye baby trademark at auction, they realized that doing it online only isn't really going to work. You know, it's going to be really hard to differentiate themselves against all of the other

retailers online, Amazon, Walmart, Target that all sell baby goods. So once they had finished up the closing, got the trademark, got all the data, they decided we're going to start with reopening 11 stores. They had secured 11 leases that By-Biby had during another lease auction. There's a lot of auctions during this bankruptcy process. And now they want to get up to 100 to 120 stores over the next one to three years, which is a really ambitious plan. If you're a consumer that previously shopped at Buy Buy Baby and you go into the new stores, do you have a sense of what may be the same or what may be different, what their strategy is? Yeah, absolutely. So in the 11 stores where they are

going to be reopening, those are former Buy Buy Buy Baby location. So they're going to be about the same size. And locations to come, they're leaning into a bit of a smaller model. They don't need to be as large. If they're opening up one in Manhattan, it's going to be a bit smaller. And they're also going to lean a lot more into experiences, experiential product displays, events. They want to do registry events. Instead of just walking in and trying out a product and walking out, they wanted to be kind of a community building space, which is really integral for this market and for the new parents that are going to be coming in there. And it's also so important from a competitive standpoint. You know, people can walk into Target and to Walmart, buy a stroller and walk out. But what they're going to be

going into Buy By Baby for us for that expertise, that community, that knowledge, that kind of space where it's just for new parents. Very interesting. And this is, of course, after Babies R Us reopens under new owners, at least one location at the American Dream Mall. So sort of a reemergence of these baby brands and retailers. Gabrielle, thank you for joining us. And if you want to read the full story, please go to CNBC.com to read her entire report. I have to say I miss stores like Bye Bye Baby because it was a point in time in your life. I know. You go in and you're going to miss this.

I'm going to miss it. You're going to miss this. I know. I know. It's already going too fast. My daughter's not even walking yet. Yeah. The baseball bats got a lot more expensive than Mr. Olvers, man. All right.

Coming up, a shake-up at the pharmacy, a big move by a California insurer, what it means for the stocks and for drug prices. Plus, shares of Hawaiian Electric falling sharply once again today, why one analyst says this latest. incident should change the way investors look at investing in similar companies, those stories coming up on Power Lines. Shares of CVS Health plunging today, news of Blue Cross of California, you're going to drop the company, drop it as its pharmacy benefits manager,

and turning to two pharmacy disruptors to save on drug costs. This is big news. Bertha Coombs has it. Bertha. Yeah, it's part of the trend that we're seeing. Nonprofit insurer Blue Shield of California has used CBS, care mark as its pharmacy benefits managers for years and the pharmacy networks for nearly 20 years. But now it is shifting to low-cost players to help its 4.8 million members save money.

They're signing with Mark Cuban's Cost Plus Drug Company, the 20-month-old online pharmacy, which sells drugs at 15% over wholesale, and Amazon Pharmacy, which this week launched a $35 insulin program. Blue Shield CEO Paul Markovich says it will save the, it will save customers money in the transition will start in 2025. I expect we're going to, when this ramps up completely, we're going to be saving $500 million a year. And I think if you apply that, we spend more than $600 billion a year as a country on drugs. So if this were to be applied across the country, the savings could reach easily $100 billion. What's interesting is that Amazon has signed with about half a dozen

Blue Cross Blue Shield companies. Blue Shield in California is just the second health insurer to sign with cost plus. I asked Mark Cuban how hard it is to win them over. And he told me there are a lot of bad habits they need to break, but payers now realize that cost plus has made the price of medications transparent, with doctors and patients seeing what prices should be, and the industry will have to adjust. Blue Shield will continue to use CVS for specialty drugs, which account for about 50% of drug spending,

but shift to prime therapeutics for the benefit side of the contracts. An analysts estimate that losing that will represent a two to six cent hit on CVS earnings in 2020. 25, which is not a significant amount, but you also have to know that CVS already lost a major account in Centine starting next year. Rival, Cigna and Express Scripts are taking that, and that's three times. If you start to see some erosion here, a pattern, then the 2 to 6 cents isn't just 2 to 6 cents. Yeah, 20204 is going to be a bigger hit for them. But overall, the pharmacy benefit managers, and when you look at the big three, it's CVS Health,

which owns CVS Caremark, then you've got Cigna, which now owns Express Scripts, and then you have United Health, which owns Optum RX. They handle 75 to 80% of all prescriptions. They're sort of the middlemen there, and there's a lot of pushback

from smaller players like this trying to find better prices. And in Congress, there are three bills in the Senate trying to get at their business models for them to be more transparent, not take as much of a cut and to pass on the savings directly to the consumers. Can I ask really quickly that Mark Cuban's Cost Plus is usually generic drugs,

and the whole, I thought, business model was that we are cheaper than what the cost of drugs are with insurance. So how does this change the price? It will just pass on those prices to those customers, and so if you can buy it with your insurance, then it goes toward your deductible. So even if you might have a generic that could still be $300. which would be a lot less than buying at some of the other drug stores. But if that goes towards your deductible, that's a lot more helpful than if you're just doing it in cash and you can't put it towards your deductible. Okay, so it doesn't necessarily lower the price even further.

It just goes towards the deductible. Good for me to know, too. Bertha, thank you very much. Bertha Coombs reporting. Well, coming up, Hawaii's biggest power utility accused of years of mismanagement, which may have led to those devastating wildfires on the island of Maui. We will get the latest details on Power Launcher turns. The 10-year yield rising to the highest level since October.

Rick Santelli joins us now with more. And October was a multi-year high as well, wasn't it, Rick? Absolutely. And we're talking intraday, because if we're looking at closing, which most technicians consider the priority with respect to inputs on their charts, we're potentially looking at the highest yield close in 16 years. Let's start at the beginning, shall we? Let's look at a chart of the S&P 500 on top of 10-year note yields.

And what I found interesting all session today is, as we continue to move higher and hit key levels when it popped above 430 or when it popped above 432, you can see the damage it continues to do to some of the equity side of the equation. And if we look at just the chart of 10-year note yields referenced by Tyler to that October 24th level, you could clearly see there that we have moved higher. Now let's zoom, zoom, zoom to the closing issues I referenced. We are now comping back 16 years, basically the fall of 2007 should we close at current levels. And what's really fascinating, of course, is that the inversion and the yield curve that was caused by short maturities doing exactly what long maturities are doing now.

They were leading the charge, but that's all reversed. And as you look at this chart, we're the least inverted on. on twos to tens in three months. That's a three-month chart at minus 66 basis points. And finally, listen, there's a lot of things I could put up that are showing prices and inflationary pressures within the economy that may have a channel into 10-year-note yields or treasury yields in general.

This one is Arbop, the gasoline, on top of 10-year-note yields for three months. They're definitely shadow-boxing each other. There's a lot of moving parts here, but all prices seem to lead to higher rates because we see so many parts of the economy that are stubbornly moving higher in prices from energy all the way out to the service side. Courtney, back to you. Interesting stuff. The least inverted that we've seen in a while. Thank you, Rick. Well, as the death toll from the Hawaii wildfire

continues to rise, Hawaiians are trying to understand what went wrong. And increasingly, they're looking at the local power company, Hawaiian Electric for answers. Pippa Stevens joins us now with more on the story. I know it's developing, and this is a tough one, but what have you learned here? Well, Courtney, so the fallout four, Hawaiian Electric is continuing with shares now down 65% this week. Now, though the fire's cost has not yet been determined, indications that the company's power lines may have been involved have already led to multiple lawsuits.

Hawaiian Electric is now reportedly in talks with restructuring firms as it explores options to address financial and legal challenges. That's according to the Wall Street Journal. Now, Hawaiian Electric declined to comment. Amid heavy losses, analysts at Guggenheim said the stock is now untouchable, adding, quote, there is simply little way to build a bull bear case with so much evidentiary and legal uncertainty. Meantime, Barclay said the company's bonds could be cut to junk in the near future. Now, taking a step back, analysts over at Wells Fargo noted this is the latest example of risks around operating electric utilities in wildfire-prone areas,

particularly with aging infrastructure. In the last few years, utilities in California, Oregon and Colorado have been implicated in wildfires. which the firm said could ultimately lead to investors embedding liability risk for utilities that operate in high-risk areas. Wells Fargo said Edison International, Sempera, Northwestern Corp, and Excell Energy are among the utilities that are most exposed. Wow. What are these lawsuits alleging? So I spoke to Michael Watts over at Wattsgar, which is one of the firms that is filing the case, and it alleges gross negligence, specifically around failure to upgrade their equipment, upgrade their poles, berry lines, things like that, essentially to harden their grid when they knew that this was going to happen.

Now, that's one of the lawsuits. Other ones allege that Hawaiian Electric should have dramatically cut the power when they knew these high winds were coming amid very dry conditions. Now, Hawaiian Electric declined to comment on that to NBC News saying that they don't, that it would violate their internal policy. So we have yet to hear from them on that front. All right, Pippa, thank you very much. Pippa Stevens. Let's get to Julia Borson now for the CNBC News Update, Julia. That's right. I'm Julie Borson. Here's your CNBC News update at this hour. House Judiciary Committee Chairman Jim Jordan issuing a subpoena today to Citibank. In the subpoena which was obtained

exclusively by CNBC, he's demanding to know whether the bank turned over to law enforcement any information about customer transactions in the days surrounding January 6th. A source familiar with the investigation says several other big banks voluntarily complied, but City did not. Hawaii's governor is vowing to protect landowners in Maui from being victimized. Governor Josh Greem saying he'll announce a moratorium tomorrow, one which would put a long-term ban on the sale of land that does not benefit local people. He says he's going ahead despite the potential for legal challenges. A small team of tree experts working every day in Lahaina to help save the 150-year-old Banyan tree.

The state's lead arborist says he sees good indications from the tree, and we'll know more in three to six months. But he says ultimately, a tree is a tree and the focus should be on all the people of Lahaina. Tyler, back over to you. All right, Julia, thank you very much. Now, we already discussed how inflation is squeezing customers, maybe especially the Walmart customer, but what about luxury consumers? What better place to find out than the Hamptons will take you there for a live report when power lunch returns. Are we in a rich session? Cost cuts and layoffs seem to have largely hit big tech and banking, so are luxury consumers holding tighter to their crocodile skin

wallets? Where better to look than out in the Hamptons, out east, eastern end of Long Island. Morgan Brennan is there sitting down with Equinox Group Chairman Harvey Spivak and Christie's America's president, Bonnie Brennan. Morgan, take it away. That's right. Thanks, Tyler. That's right. You can call this CNBC out east. I am joined by Harvey and Bonnie. Thanks so much for being here. I should note no relation, but a great last. name Bonnie Brennan. So I do want to start in a week where the consumer is particularly in focus, as we do talk about the stronger than expected data that's been coming out for the economy, just sort of get your sense, both of you, your sense on the health of the consumer,

particularly the higher-end consumer, which I know both of you service with your company. So Harvey, maybe you can start with you on the services side in Equinox. So we see no slowdown. I mean, despite, you know, the data is strong, but we actually are seeing record performance. So the first six months of the year, We had our best six months in terms of new membership sales in the history of the company. And July was our best month ever by 25%. So in the last day of July was our best single day in the history of the company. So we're seeing absolutely no slowdown, and there's nothing from our perspective that would suggest that there's going to be slowed down.

And for us, it's probably a combination of things to focus on living a healthy lifestyle. We talk about as a high performance lifestyle. People focus on experience over a product. And so all of that, and they want communities. So when it all rolls up, I mean, so far we've seen just, strength throughout our business. Yeah, I mean, and if this is sort of more of the services side of the economy, I think of Christie's and collectibles and some of these alternative assets, it's more of the good side of the economy. What are you saying? You know, in our first half,

we had $3.2 billion in sales at Christie's. We, that's over five years. That's an increase. It's down a little bit, Oregon, from last year. But last year we had a record sale. You remember, we were talking about the collection of Paul Allen, which filled for $1.6 billion. So anything looks little smaller. When we see great growth is in luxury. We had our best first half year ever. We sold almost 600 million in luxury, which we consider watches, jewelry, wine, handbags. So that's a real growth area and collections. People love buying from a famous person, from an established collector. And there's really no slowdown there at all. Has the demographics shifted in terms of who's coming to Christie's to make purchases?

Absolutely. We've had, in this first half year, we have 31% of new buyers and almost 40% Our millennials are younger. Interesting. I mean, I think whether it's auctions or whether it's fitness and wellness, I mean, these are two industries that at least before the pandemic, I always thought is more brick and mortar

or more physical. And what's happened is the pandemic has forced both of these industries to become more digital in nature as well. I just wonder what the new normal is, and maybe starting with Equinox, what the new normal is in terms of that mix. So I think the new normal is more like the old normal

is people want in real life, they want to be with their community, they want to be with their favorite instructor with their trainer, and they want that inspiration. And so we see that. With that said, we do have something called Equinox Plus,

and we do tens of thousands of classes digitally. What's interesting, about a third of those are being done in club. So people are bringing in their phone or their tablets and streaming a class to use it inside our allocation. So that's obviously a shift, but generally speaking,

it's more of people want in real life. You're seeing that obviously in concerts and other ways in travel. Our Equinox Hotel at Hudson Yards is oftentimes the top luxury hotel in the city. So we're seeing it show up in many different ways more in real life than the digital offering. Interesting. And of course this is part of what is attracting millennials to Christie's as well. Yeah, we really had to change from sort of a theater in-person model to more of a TV-style model during COVID. And what we gained from that was a tremendous number of new buyers.

of new buyers. And so now we're trying to do a hybrid where we keep those new buyers, but we welcome people back as well. And as a result, we've had more and more people engaging with Christie's digitally. We had almost 7 million people use our online tools just in this first half. And 80% of our bids, Morgan, in the first half, came from people bidding through our online tools, which I think is a really exceptional staff. I mean, I think of fine art, I think of fashion when I think of Christies. But as you do see younger customers and younger bidders come to your platform and come to your company, are you thinking about what you're offering a little bit differently? I mean, like trading cards and comic books, for example, even sneakers seem to be having a moment right now.

How do you address that? Yeah, I think we always have to be what's relevant and interesting to the young consumer. You know, we have great heritage as we started in 1766, but we have to focus on innovation. You remember, we sold that Beeple for $69 million. dollars. That really, Christy's really launched the art world into selling NFTs and digital art. So we're doing that. That's got a tremendously young audience. But young people love luxury. They love watches. They love photography. It's another great entry point. So making sure that our sales are reflective of what people want. People want diverse artists. They want artists of color. They want to support

women artists. So we're really focused on changing our platform and giving sort of a global stage to those voices. Yeah, and of course Equinox is expanding, it has been expanding for a number of years now beyond just the gyms and the brick and mortar and the digital exercise platforms. You have the hotel in Hudson Yards and Manhattan. You have plans to develop more of them in other markets and other parts of the world as well right now. How does the wellness, service aspect of Equinox continue to grow? And what does that mean in an environment where you see a lot more hybrid work and work from home and office buildings that are emptier. So our goal is to have the most engaged community in the world.

And so what you're going to see from us, and we've done a lot of this, but we're now actually ramping up to be much more aggressive on the growth side, is you're going to see us building out our ecosystem for unique experiences. So that's the club. That's the digital offering. That's the hotel offering. And so you're going to see more and more of that through other programs, product, and services, you know, over time.

You know, the office piece is very interesting. So the Class A office buildings do very well. The corporate community has come to us and said, we need to create more lifestyle, more experience, and obviously taking care of their mental health issues, as well as other aspects of their life. Can you work with us? And so what's happening is a lot of these office buildings

are now coming to us and say, can you activate the lifestyle experience in the office buildings? So we actually think, not just in the Class A, which is like Hudson Yards, it's one of our most successful clubs in the history of the company, but we actually think there's a bigger opportunity in front of us to do more of that. And all of that, part of that's the community aspects. Every time we had lounge space, more people spend time and longer time.

Okay. Look forward to hearing how all of that evolves. Harvey Spivak and Bonnie Brennan, thanks so much for joining me. Tyler, I'll send it back over to you. All right. Thank you to all three of you, Mr. Spivak, Bonnie, and our own Morgan Brennan. We'll be watching later during overtime for more from Out East. Of course.

Well, still ahead of crash course on supply and demand. And college students are heading back to school to find prices for their off-campus rentals are through the roof. We'll explain why. And as we had to take a break, take a look at the Dow here, falling this afternoon right near Session Lowe's. Hope that's not on us. Power lunch will be right back. It's back to school time for college students across America. And for many, that means back to even more expensive off-campus housing as high demand pushes prices through the roof.

Diana Ollick is here with more. in the pun, Diana. That's okay, Cort. You may have heard that apartment rents overall are cooling off, but one type of apartment is doing just the opposite. That's off-campus student housing apartments, not dorms, but apartments built specifically for students by developers like American campus communities, Grey Star and Landmark. Student housing rent growth, depending on the region of the country, is anywhere from two to ten times multifamily rent growth. That, according to CBRE, up from 7% year-over-year in the Northeast, to nearly 13% in the Southwest.

The CEO of Landmark says it is all about supply and demand. If you look at the top 200 or so universities in the country, which are the universities in which we target, you know, you've seen very stable enrollment growth. At the same time, there's only a limited amount of land that's close to these universities that can be developed. There are significant barriers to entry. And the net result of this has been very consistent

and stable cash flows over a long period of time. One more barrier to entry right now, of course, is the cost of capital. Now, for investors looking to get in on the growth, there are no longer any publicly traded student housing reits. American campus was acquired by Blackstone last year, but both landmark and ACC are part of B-Reat, which is Blackstone's non-listed reet. Back to you guys. Diana, you showed a little bit of video there, and those look like pretty nice housing situations. Are there a lot of amenities that come with that? What are you getting for these much higher prices?

Well, you're getting everything from the granite countertops, the flat screen TVs, infinity pools, there are golf simulators, there are tanning studios. I mean, I don't even want to get into the ridiculous of it, but, you know, parents are willing to pay. They're very close to campus. It's what the students want, and if they can't afford it, they're going to do it. They've got to see the health spa up there, too. You've got all that nice stuff. Fuzball, all of it.

Wow. These students are going to get a little spoiled if they have a first apartment in New York City. My floor was slanted, 400 square feet, shared it with somebody else. This is a... My first storm was cinder blocks, so there you go. Right, exactly. Not to mention the other inhabitants, let's call them eight-legged inhabitants. Yeah, of those sorts, sure.

All right, Dye, thank you. It's good to be in college. We can all agree on that. Still ahead, crude oil, chips and the cloud. We're trading some big movers of the day in a fresh three-stock lunch. You don't want to miss it. We'll be right back. Time for today's three-stock lunch. First up, we've got Chesapeake Energy that will join the S&P mid-cap 400 index next week, replacing Mercury Systems. It also got a fresh price target increase from UBS that sees a potential upside of 21% for the stock. It's up about 5% on the session. Here with our trades is Danielle Shea, simpler trading VP of options. Danielle, what do you say on Chesapeake?

So, Tyler, I like this stock. I like the energy space in general. I like the way that crude has shifted off of the lows. And I think that positive momentum is going to carry us higher and especially, of course, the energy sector. Now, looking at Chesapeake, Chesapeake has broken up above some critical resistance zones, which is what I love to see for trend continuation. So with this one, I am eyeing a resistance zone around $90 a share and expecting a little

bit of pause at that point. But I think if we break through, we could trade up into one of one. Not far off at 87. Well, up next we have Cisco that posted Q4 earnings beating the street's expectations on both top and bottom lines. It's over. It's up over 3% today. So Danielle, what would you do with this stock? I like the stock here. I like the way that it's behaved over the course of the past several quarters. You know, we've had some really positive earnings beats and we've had positive moves post earnings as well. So with this one, it does have some resistance up at the $58 price point. But, you know, I think that if we can continue along with this upward momentum, especially due to the bullish weekly and monthly chart patterns, then we can see the stock trade up into about 64. Our final name today is the chipmaker Wolfspeed. It shares are tanking down about 16% after its earnings missed expectations on the bottom line.

Also disappointing guidance coming out of that company. What do you say, Danielle? So this one's on a downward trending spiral. Anytime you have a company fall post-earnings, four quarters in a row and very substantially as well. Most of these moves have been more than 11%. This is the kind of company that I like to look at for earnings destruction and continue trading it to new lows. Now, I will note that it has some high short interest. So you do need to be careful and have a tight stop because if there's any kind of positive news, you don't want to be caught on the

wrong end of a short squeeze. But I'm looking at this one to trade down into 38. And if we end up breaking 38, then 27 is going to be the next target. Interesting stuff right now sitting a little above 44, but down sharply on the day. Danielle Shay, thank you. All right. We have only two minutes left, Gordon. That's it. I'm going to be sad.

I know. We went by so fast. Got lots of stories to tell you about it's closing time when we return. Well, we have about four minutes left in the show and a bunch more stories that you need to know. So let's get right to it. Gas prices rising to a 10-month high, 388 per gallon. That's according to AAA. And now comes hurricane season.

Analyst's Citigroup writing about the possibility of two major hurricanes landing on U.S. shores with the potential to disrupt supplies for an extended period. Tyler, with the wild weather that we've seen across the country, I'm kind of surprised they're only predicting two. Yeah, and there's one thing that people judge inflation by, and that is gas, of all things. Always, always. And it's the one thing that they, you know, maybe it's not part of the core inflation rate, but it is core to people's budgets. It really is. People always know the price of gas, it seems. All right, we talked to GM CEO, Mary Bara, yesterday.

The automakers in the UAW are facing the possibility of a strike by roughly 150,000 workers. That would cost the economy $5 billion in just 10 days, according to a study by the Anderson Economic Group. We shall see what happens there. I believe Phil asked Mary Bara yesterday. The union's asking for a very substantial price wage increase. Yeah, we've seen a lot of union strikes and discords recently. It does seem. So I really wonder how this one is going to play out.

But the UPS one was settled ahead of a strike. Right. But look at the writers, look at the actors. They're still going on here too. Well, more proof that the rich session could be real. We talked about the shrinking number of millionaires in America yesterday. So now there's new data from B of A that shows workers earning at least $125,000 a year are currently being laid off at three times the rate of low and moderate income workers,

mostly in tech and finance. And they sort of are looking at their accounts, and that's how they're seeing it, a 70% increase versus a year ago in the number of sick-fired earners who were receiving unemployment benefits into their accounts. It's interesting. I was speaking to a person who is an executive, young executive in marketing for a major consumer products company. And her take was that the job market, in her band of earners and professionals, is not all that good that companies are laying on, because a lot of tech companies are laying A lot of financial companies are like, so if you're a young on the up swing middle manager type,

it's not as good an economy for you as it might be in health care or in hospitality or construction or some of the other areas. It always seems like it's kind of hard for the middle. We always talk about how it's hard for the middle income consumers too, or those stocks at least where you see strength at either end. And finally, you've heard about workers being concerned about AI taking their jobs, and now you can add managers to that list. A new survey from Harris' poll and the American Staffing Association found that 44% of workers in managerial roles believe that automation could easily replace their jobs.

Middle managers feeling a little bit insecure these days. Yeah, I guess so. I think that segment that Brian Sullivan did on last call where he interviewed himself via AI was so interesting. And every time I think about job replacement, I think about that segment. He was good but not as good as the real Brian Sullivan. Oh, the AI person was not as good. The AI Brian Sullivan. That's a good thing. Yeah, it was a real good thing. All right, folks,

thank you so much for watching Power Lunch. Interesting next hour ahead, the Dow moving towards those session lows, down 225 points are about two-thirds of a percent. Thanks for joining us today. Yeah, it's been really nice to be here. Consumer Discretionary is the lagging sector. It looks like those home builders are the lagging names within that group. Closing bell starts right now.