Power Lunch - Stocks rally on possible China trade truce 10/ 27/25

Episode Date: October 27, 2025

The U.S. and China have agreed to the framework for a trade deal. KBW downgrades Berkshire Hathaway. And could Lululemon's new partnership with the NFL help boost the stock? It's all here on Power Lunch.  Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch. I'm Courtney Reagan filling in today for Brian Sullivan. The markets and new records as we kick off a crucial week for your money, fueling the optimism, a likely rate cut at the Fed and cooling trade tensions between the U.S. and China. This says President's Donald Trump and Xi Jinping are set to meet in person on Thursday. We'll get more insights from Washington Insider Joe LaVonia. That's in just a moment. Plus, it is the busiest week for earnings, about a third of the S&P and the Dow reporting results, including five of the Meg seven names. Our market's guests not seeing a broad bubble yet, but is concerned about seven. some AI-related companies and that they will struggle to deliver on growth expectations. And we know it's only Halloween, but we have to talk Christmas. I'm here anyway, with tariff rates now at 30% for imported goods from China, could it be the Grinch to steal Christmas? We will speak with a market leader of artificial Christmas trees to get his outlook for the holidays. But we begin with the latest headlines around trade as we count down to the crucial meeting between President Trump and President Xi Jinping this week.

Treasury Secretary Scott Besson saying over the weekend the two countries hashed out a, quote, substantial framework for a trade deal. Let's head over to Washington, D.C., where Amin Jabbers is monitoring the latest. Framework is one thing. Details are another, right, Amon? Yeah, that's exactly right. Courtney, President Trump arrived in Japan this morning after a whirlwind weekend in Malaysia where he reached trade and mineral deals with Malaysia and Cambodia

and set up frameworks for trade agreements with Thailand and Vietnam. And in Tokyo, the president began with a handshake and a courtesy visit with the emperor, and he's later going to have a meeting with the new job. Japanese prime minister, Sana Takaichi, who was the first woman to hold that role. On Air Force One, President Trump spoke extensively with reporters, but he said he didn't want to share the details of what officials are calling a framework economic agreement between the U.S. and China that could be signed by President Trump and Chinese President Xi Jinping later this week. I don't want to tell you what the understanding is because what we understood yesterday or two days ago

or even today is not going to be necessarily what it's going to be in two days. We're going to have a great talk. I have a lot of respect for presidency. I like him a lot. He likes me a lot, I believe, and respects me. And I think he respects our country. So you get the sense it's somewhat of a moving target behind closed doors there. And speaking to NBC's Kristen Welker, Treasury Secretary Scott Besant yesterday,

sounded an optimistic note on these China negotiations, arguing that the president's tariff threat has helped to get toward a deal. President Trump gave me a great deal of negotiating leverage with the threat of the 100% tariffs on November 1st. And I believe we've reached a very substantial framework that will avoid that and allow us to discuss many other things with the Chinese. So it's still nighttime in Asia, but in addition to his meetings with political leaders in Japan today, later this evening, the president is expected to attend a dinner with business leaders over there. The White House has not provided us a list of attendees, but we are expecting it to be a who's who of the Asian business elite.

There's a lot of details to follow here, Amin. I mean, China is, of course, front and center. We know that's a very big trading partner for the United States. But Vietnam also, of course I'm going to come at this from a retail perspective, but so much manufacturing was shifted at some point from China to Vietnam over the years. I mean, I think we want a little bit more details in what we're. we could get from there too. Do you expect that at all as well? Yeah, I mean, one of the things that we saw with all these agreements that were signed over the weekend or announced over the weekend anyway was that there seems to be a transshipment element to each of them. The idea here is that the

U.S. is very wary of China getting around tariffs by funneling goods through all those Asian countries, Vietnam, of course, prime among them. And so each of these deals that were hashed out through the weekend does include some language or a measure designed to prevent that kind of transshipment. So there is an effort here to kind of contain China economically as the president gets set for that Xi Jinping meeting later this week. Got it. Thank you very much. Amen Javars. Appreciate all of those details. And we're going to hear now from a Washington insider who has direct access to Secretary Bessent. So joining us now for more, Joe LaVornia. He's counselor to the Treasury Secretary. Joe, it's so nice to have you here as

always. Thank you. What can you shed more life? on for us right now where we sit with all of the meetings that the Treasury Secretary is having, the meetings that we believe that the President Trump himself is going to be having. I mean, do you expect a real deal with real details that the American public will actually know about when those meetings commence? Thank you again for having me. As the Secretary mentioned this weekend, they've made a very good progress. I believe it's the fifth meeting they've he's had with his Chinese counterparts.

And President Trump has a very good relationship with President Xi. And I can't go into details. We can't get ahead of ourselves on that, but I think is the framework that Amon mentioned is very important. In other words, there's very strong, constructive discussions going on. And I'm optimistic that we're going to see something in the coming days and weeks that certainly people will have a little more details on. Certainly the financial markets are forward-looking, Courtney. They're at a record high today. And I think the markets rightly understand that the administration has leverage and the Chinese want to work with us to do. what's best for everyone. I mean, I think many of us that are hopeful for the markets think that or at least hope that that is true, but I also think the markets have had to sort of do their own due diligence and figure out ways to digest through some of these headlines before we really have some of those details. I mean, are there things that China has suggested that they can give us that the American people would actually be happy with in an actual negotiation? Well, obviously the administration wants access to the rare earths.

And we do have export controls in place to make sure we protect national security. Right now, the hope and desire, President Trump wants to reinvigorate and reindustrialize the manufacturing base in the U.S. And tariffs are a key instrument in that. We're running, it looks like October might be a record all-time month in terms of tariff duties, well over $30 billion, over $360 billion in an annual rate, maybe $400 billion. And China is paying a substantial portion of that. The key point here is that both sides are talking and there's progress being made and given the connectivity and the supply chains and all the other things that Secretary Besson is dealing with Courtney. I mean, these aren't just things that can be settled very quickly, but there's been progress being made. And in the interim, we're generating a tremendous amount of revenue at the same time.

We've got a lot of commitments to come into the U.S. from other places because it's not just what's happening with China. You know, President Trump has initiated a peace accord between Cambodia and Thailand, that is historic. We're making tremendous progress with the South Koreans on a trade deal. So despite the government being closed, the administration is working tirelessly to really deliver on all its economic plans. And to your point about the commitments, I think that is something that is hopeful, but we hope that commitments actually turn into real deals, real investment, things that really move the ball forward in a way, frankly, that can be measured. Because I know sometimes there's big talk, but is it actually going to happen? And I understand it's complicated, but, you know, so-called Liberation Day was April 2nd. Here we are. It's almost November.

It is. But, again, you know, when the markets were worried about selling of U.S. assets, you've got 10-year yields down 50 basis points. You've had a record recovery, historic recovery off of a 15 percent correction in the S&P. You've got GDP in the second quarter, excluding the government, was up 4.5 percent. Q3 GDP looks like it probably also grew at 4 percent. Unfortunately, the Democrat-induced shutdown is hurting the economy. we could be losing upwards of two-tenths of GDP per week, and hopefully we'll get that back. But, you know, the longer we go without key government data

to make decisions, whether it's the Fed, or whether it's businesses planning, Courtney, that's going to be a problem. But, you know, as you talk about the details, just want to say something. Now, these things take time. On the one big, beautiful bill, the Office of Tax Policy and IRS are working on guidelines

for the full expensing of factories. That's a unique, novel approach. That needs to be done. This government needs to be reopened. The Democrats have to help us, on this so that this can get done by year-end because they're going to get a huge industrial building boom in 26. Well, obviously, speaking of the shutdown, I think we do need to discuss that. I mean, here we are going on close to a month that we've seen the government shut down.

We are looking potentially at some snap benefits, lapsing for many Americans that count on it, frankly, to be able to eat. Obviously, Secretary Besson has a lot on his plate. Internationally, of course, but what about right here at home domestically? I understand your call asking the Democrats to come the table, but we have Republicans, too. it doesn't seem like either side is moving very close on this. Well, there's just, if I'm not in a mistake, it's just one Republican. And, you know, we've had a few Democrats that have come over. We don't have the 60 votes.

So, you know, we need the Democrats to come on board. Right now, Treasury is very proud of the fact that the budget deficit in 25 was about $41 billion lower, Courtney, than it was the year before. Nearly three quarters of the deficit occurred when Biden was still in office. We've made tremendous progress. We don't want to count out to these demands to lift spending one and a half. trillion dollars, which is what the Democrats want. There'll be a time to relitigate that, if you will, but not holding the government hostage in the short term is the way to do it. We don't have the 60 votes. So we're sitting and waiting. And as the president and the secretary

have been working literally 24-7, you know, the government's shut and it's not helping anybody. It's not a good look for us. And it's not our fault, unfortunately. Okay, so last question here before we go. We obviously have a Fed meeting this week. We also know that we could be looking at a change for the head of the Fed. I understand the Besson has been narrowing down the list. What can you tell us about the final contenders and or when we may be hearing who will be the next to leave the Federal Reserve?

So there are five great contenders. All have a lot of great things to offer, and the president said he's going to make a decision by the end of the year, so we'll wait and see what happens. The markets are discounting a 25 basis point cut. The Fed itself, Jay Powell, the chair, has talked, Courtney, about rates being in restrictive territory. So I'm hopeful that the Fed will lower rates.

You know, again, we need that data. The government needs to reopen. The Democrats have to reopen it. And we need that data so the Fed can make informed decisions. Because if it looks like the labor market, which, by the way, was not very great when President Trump got it, we had 2 million fewer jobs in the last two years than what was officially reported. Maybe the Fed should be cutting rates more. But, you know, they can't make the best decisions.

They don't have data because the Democrats don't want to reopen the government. That's true. And if you have further reductions in force, that's also not great for the labor market. needs all of that data. Thank you very much. Joe Livorneum. Thank you, Courtney. Well, coming up next next next next, in the market for a new spot to park some money. Your next guest says this high-flying mystery stock is more room to run where you think it is. We'll reveal the name when Power Lunch returns. Welcome back. It's time for a quick power check. Shares of Qualcomm. Soaring higher today after the company announced it will release new artificial intelligence chips to compete with AMD and

NVIDIA. Broadcom is also getting a boost this afternoon. And your next guest owns a stock and considers it one of his top picks. So let's talk more about that with Tom. Hewlett key is the CEO at strategy asset managers. Tom, thank you so much for being here. There's so much to talk about in the chip space, but we'll just sort of keep it simple. What do you like about Broadcom specifically? Well, thank you for having me, Courtney. We've done very well with Broadcom this year. Broadcom makes semiconductors. They also do software for the hyperscalers. Why this is important is because they make application-specific integrated circuits in comparison to a GPU, which is a graphic processing unit. You can compare

an application-specific integrated circuit to a scalpel in comparison to a GPU would be a Swiss Army knife. So you're trying to get very specific with a chip to increase efficiency, to reduce power consumption, and also the speed. Broadcom is in this area, and we really like them lot. And so the specificity of that scalpel versus the Swiss Army knife is what you like about this chip name in particular over others. Okay. That's correct. They've done quite well with their revenues. It's one of our top picks as a separately managed account manager. We like to put people in sectors that we like technology, but specifically in the chip sector and also in the software area, Broadcom is doing very well. Before we move on, there's a lot of focus often on valuation

in the tech names. What do you advise? your clients when you're looking at valuation and when it might be important to trim some of the gains potentially in the chip area? Well, it's important to know what not to own as well, what to own. Specifically, if you look at the chip sector, we like Broadcom because they are supplying chips to the hyperscalers, let's say meta, Google, Amazon. You can also take a look at the partnership that they have with OpenAI. This is something that's going to be very important for their revenue growth going into 2026 and beyond.

Okay. So let's stick with the analogy in healthcare and actually move on to Eli Lilly. Is the story here all about the GLP Wands? I think so. I think that if you look at a company like Lilly that has a great pipeline in place, one of the drugs that is currently in phase three trials that specifically for those people with A1C issues is called Retta True Tide. Reddictrutide. That has kind of the next generation GLP drug that's out there that not only reduces fat, but also does not decrease muscle in your body. That's one of the issues that they're improving upon right now in the GLP sector. But this has a broad stroke across the health for thousands and millions of people. Forty percent of the people out there could be considered obese.

This is a drug that's going to really help them out. And then beyond just helping out Eli Lilly, you think it could also help reduce the budget deficit of the United States? I do. You know, the United States spent $2 trillion on health care last year. If you think about reducing the amount of health care spending that's out there, somebody like a Lilly is going to take advantage of that. And if you can reduce obesity and potentially even help in other areas such as maybe an anti-inflammation area, that can significantly make an impact on GDP in the long run. It's fascinating stuff. And then the last name sort of ties up almost two themes in one. So intuitive surgical.

Obviously, health care played to a degree, but also play with artificial intelligence in addition to the robotics that the surgery is known for, or the robots are known for performing the surgery. Explain how AI is playing into intuitive surgical. Well, I think AI touches a lot of things, including the robotics area. But intuitive surgical people remember they have the Da Vinci robot. And the Da Vinci robot has created efficiencies in surgery. greater precision, less room for error, less room for infection out there. I think ISRG is going to be more prevalent in the next 10 years, where we could possibly see even 100% of the procedures out there using a robot at some point.

This is important to know, and so we tell our clients we want to be into sectors that are going to evolve over time, and specifically we like Intuitive Surgical. My father-in-law is a... former, I should say, retiring urologist. They use it in their practices. And we think that this is a great company to own down the long run. Wow. Thanks for some good ideas here.

Broadcom, Eli Lee, Intuitive Surgical. Tom Heelick, thank you very much for being with us here today on Power Lunch. Massive Week for earnings this week. Morgan Stanley is out with the screener this morning, highlighting some names that it expects to surprise to the upside when they report. We're showing you just a handful of them here. United Healthcare, Bloom Energy. They both report tomorrow.

Microsoft, Meta, End Service Now. All three of these prints come out Wednesday and then Reddit. That reports on Thursday. We'll still ahead why KBW thinks Berkshire Hathaway's headwinds might be too much to overcome for the business and stock to handle right now, with shares on Pays'U for their worst year since 2022. Power lunch? We'll be right back. Welcome back. We want to highlight one of the most read stories on CNBC.com today.

Shears of Berkshire Hathaway lower following a downgrade at KBW. The firm slashing its rating on the Class A shares from neutral. to a sell and cutting its price target by 40,000 to an even 700,000, warning succession, risks, and, quote, many headwinds could weigh on its business and stock as well over the next year. So the analyst behind the call joined the exchange just last hour and laid out his bare case, including why insurance could be Berkshire's biggest headwind. It was really a matter of looking at the individual segments of Berkshire, which we try and do regularly because there's a lot going on there, saying, you know what, car insurance is

probably going to be much less profitable next year. Property catastrophe reinsurance will probably be less profitable next year, short-term interest rates and the investment income that they generate going down. So there were a number of concerns that seemed to, I don't want to say leap off the page, but seem to warrant a rethink of the appropriate rating for Berkshire. Again, shares of Berkshire Hathaway down today and down nearly 10% since Warren Buffett announced his retirement back in May. We should also note one Class A share is equal to $1,500 class B shares. So here, with his own take is our own Mike Santoli. Mike, obviously, you're a market watcher.

You've studied the market writ large, but of course, Warren Buffett and Berkshire Hathaway for a very, very long time. What do you make of this call and why readers are so interested in learning more? Well, first of all, it's pretty eye-catching when anybody says to sell Berkshire Hathaway

because it has been such a massive performer for decades at this point. I do think that the specifics of the Atlas call make a lot of sense, but they also essentially explain why Berkshire has already been such an underperformer this year, underperforming the S&P by 10 percentage points,

11 percentage points year to date. The insurance piece, absolutely huge, progressive, which is the direct competitor to GEICO and auto insurance. It's like 25% off its high. It's down for the year. So the market's very well aware of that. I would also point to a lot of the operating businesses within Berkshire are kind of tied one way or another to housing,

home services to real estate agent, Benjamin Moore, they own Clayton homes. So I think there's a lot of these macro pressures that have been exerting themselves on the valuation. And then you mentioned how the stock has performed poorly since Warren Buffett said that he would be stepping down as CEO after this year. Well, what happened before that point

was Berkshire ran up to an absolute huge run peak price and peak valuation the day before he said that. And I've always looked at it compared to the NASDAQ 100 because when people want non-tech quality and stability and defense, they buy Berkshire Hathaway. That's not what they want right now. They want tech mega-caf, and that's why it's traded inversely to the NASDAQ 100. That's really interesting, and obviously Berkshire out the way is this conglomerate,

and you went through sort of the different sectors or companies in which it owns, it operates. Can you take any glimmers from that? You're sort of saying, look, he's already talking about some of the headwinds those have already faced and then extrapolate into those sectors themselves, and then maybe what that call could mean more broadly. Sure. I mean, I think any comfort that the market gets with tariffs and maybe we're going to alleviate that pressure or maybe just anniversary next year is probably going to be a net help. Obviously, they own Burlington, Northern Santa Fe, the railroad there. Also, Berkshire is saying they're going to sit out this consolidation round in railroads, maybe not helping the stock as well.

I would just look to the broad valuation of the stock. It's down below one and a half times book value or right around one and a half times book. It was about 1.8 times back in April and May. And so right where we are now, it's still at the top end of its like 10-year range or roughly average among the last five years. It's not cheap. It's not super expensive. And I think you have to have an opinion about kind of how the company operates under the incoming CEO as opposed to just sort of looking at the sum of the parts today. It's going to be fascinating quite literally as we look at the next generation of Berkshire Hathaway. Mike Sintoli, thank you very much for joining us.

And for more on the Berkshire Downgrade, do head over and read the full piece on CNBC.com. up next. The biggest week of earnings season is officially here. How should you position your portfolio for success? We'll help you to do some of that. Home markets coming up next. Welcome back. The major averages starting the week at fresh records on optimism for a trade deal between the U.S. and China. It's also a big week for earnings with five of the MagS. seven names set to report later this week. And we also get a Fed decision on interest rates on Wednesday, by the way. So how should investors position ahead of all of this? Drew Pettit is U.S. Equity strategist at city. He's maintaining his 6,600 year-end target on the S&P 500, which is below where we are now.

So, Drew, I guess I'll start there. Then you think things are going to look a little bit more bearish than bullish here as we move into year end. Always the beauty of being a strategist on Wall Street, right? Targets are never right. This is why we spent a lot of time on the bull and bear cases. But on 6600, the way we kind of spin this is this is fair value for what we see in visible growth if you discount it back to today. where we're getting proven wrong right now is the current earning season is actually started off better than we expected heading into the quarter. And on top of that, while we were pretty bullish on our earnings estimate for 2026, we're slowly seeing the consensus numbers creep up to

and almost surpassing our outlook for next year. So how you get more bullish from here, at least fundamentally, is growth, growth and more growth. Okay. And so then how do you factor in all sorts of macroeconomic pressures like tariffs. We're still hoping to see some negotiations, I suppose, out of these world leaders. We don't know exactly what we're going to get. There's a lot of discussion about the further bifurcation of the consumer as we head into a very important season for spending. Are you not thinking that the consumer can hold its weight going forward? So one part of that, consumers only, I would say a partial part of this story because we're

in a big investment cycle on the business side. So the S&P 500 just isn't acting and isn't really as aligned with Main Street as it used to be. The second part, on the tariff discussion, you have an offset from the OBBBABA. That's very, very important when we think about earnings going forward. And then we also have just structural efficiency gains by very large corporates with quality balance sheets. So again, kind of working off some of the macro pressure. And kind of the third point here, if Main Street slows down but doesn't go into full-on recession and the Fed is cutting, you're really going to get soft landing tailwinds. And that really supports growth.

So I think NASDAQ 100 and the S& and sorry, in the Russell 2000 combined over the S&P 500. So it's really barbelling beta at this point because you have two different catalysts here. Main Street not going into recession and the structural growth in. in large cap growth. And so you talked a little bit there about the Russell 2000. We touched on the NASDAQ 100 when you're looking at names like the MAG 7 or some of these AI heavy names, expectations into year end. So look, there is a lot priced in. I would say almost to perfection here on the structural side. So a little bit of choppiness and profit taking on, well, we jokingly say this just okay is probably not okay when it comes to earnings is healthy. So a little bit more

volatility there, but buying into those pullbacks is really important for the structural growth names. I would say longer term, why we're bullish here, productivity and investment is huge. We actually see the CAPEX growth in AI infrastructure coming in at 24, 25% for next year. And consensus is probably looking at more like 20% growth. So we think, there's tailwinds into next year, which is a lot priced in and some potential volatility and profit-taking nearer term. Okay, so longer term, it does sound like you're still obviously bullish on AI software, the CAPEX that it takes to sort of get there and support this growth, so you don't think that we're in some kind of a bubble for some of these tech names?

No, I don't think we're there yet. I think when we think about AI specifically, and we look across kind of our five valuation flags, there's only one that concerns us. there is a lot of pressure on structural growth to deliver. When we break down what's actually driving stock values today, normally you get half of that from your current earnings base. That's more like a third today. So again, a lot more pressure on growth to deliver over what the economy and GDP growth can be itself.

But on negative earners, not a lot there. We're still spending a lot out of free cash flow. I know circular financing and debt is starting to work into the conference, conversation now, but free cash flow and profitable companies are really the linchpin to the growth story here. Thank you very much. Drew Pettit of City has a 6,600 price target on the S&P 500, and holding on to that. We are also watching the credit markets, two big U.S. Treasury auctions today. Test investors' demand for the two-year and the five-year notes ahead of the Fed's next policy decision, which of course is later this week, as we mentioned. So Rick Santelli

joins us from Chicago with today's bond report. Hi, Rick. Hi, Courtney. Indeed. We had 60, billion two-year note yields at 1130 auctioned. I gave it a C. Demand was pretty good. Then at 1 o'clock Eastern we had 70 billion five years. That was a very solid auction. I gave it a B. Let's look at that five-year. How as you look at a six-hour chart, right around the time the auction was buttoning up around one Eastern is when we put in our low yields, and we've been hovering right about there. Keep in mind the two-year, three-year, the five-year yields are all slightly elevated, flattening the curve. Seven years virtually unchanged will have 44 billion

and seven years auctioned at 1 o'clock Eastern tomorrow. And, well, let's look at tenure. If you look at the 10-year going back to exactly mid-October, here's what you're going to see on that chart. Basically, for the last two weeks, that chart's an intraday chart, the low yields, 394 to high-yields 405. We're basically circulating right around 4%. On a closing basis, the yields over the last couple weeks have been closing between 395 and 403,

even tighter range. And if you look at a month-to-day chart, Well, the left side chose some elevated yields, then it drops. What caused it to drop? Well, it's more about why it was elevated. The elevated yields were more about the Fed minutes that were released on the 8th of October. They still talked about how much negative aspects they were looking at regarding the labor market. That definitely pushed yields down as a good catalyst for an aggressive easing cycle.

And thus far, they seem to be correct. We've seen one ease who will most likely see another one this week. Courtney, back to you. Thank you, Rick. Yeah, it's interesting to watch the yield on the 10 years, sort of just sit right around 4% or hair under or over. Well, Halloween is this Friday, but is it already time to start planning for Christmas? Our next guest has been thinking about Christmas all year, especially because this company has to navigate tariffs with a very particular item. We'll be back right after this. Welcome back. Let's talk Christmas in October because ever since President Trump started his trade war with China back in April, some might argue several years ago,

tariff rates for imports have fluctuated. At one point, getting as high as 145 percent. And right now, that rate is reduced to 30 percent. Still, retailers and consumers are likely to get impacted this holiday season, as almost 90 percent of all Christmas decor is made in China, including 80 percent of the artificial trees designed and sold by my next guest company. So joining us now for more is Matt Carmen. He's founder and CEO of Balsam Brands, one of the leading artificial Christmas tree producers in the world. And Mac, it's so great to have you here. We, We're talking in the break how the artificial Christmas tree in some ways has become an iconic product to talk about tariffs, to measure the impact of tariffs, especially because of the holiday tie-in. Tell us a little bit about what tariffs you paid historically, because I think many people were surprised, to be honest, myself included, when President Trump was in office the first time that we've been paying tariffs on products since the 1930s, and now we just have additional layers of tariffs.

So where were you before, say, April 2nd? And then where did it sit? And where are you now when it comes to what you're paying for your tariff bill? Yeah. So tariffs last year for us as a business were a million dollars total across all our product categories. But that was zero percent on Christmas trees. So back in the first Trump administration, pre-lit Christmas trees, which have never been made in the United States, were put on the Section 30-1 tariffs. But they ended up getting moved to the 4B list, which has a zero percent tariff rate.

So a million dollars on all these other products that we carried, zero on credit. Christmas trees, if we had stuck at that 145% this year, we would have paid about $115 million of tariffs on what we imported this year. And I would not be sitting here today because there's no way we could have done that. You mean like you couldn't have operated your business? With those rates of tariffs, we wouldn't have been able to operate. I mean, that's many times our profit. Wow. So thankfully, the rates did come down. When I was last on, we talked about a pause on China. And that was when the tariffs went down to the 30 percent and have stayed there so far. We'll see what gets announced later this week. And so what did you do from a supply chain

perspective? Did you immediately try to import before those 145% tariffs went on, even just for that short period of time that they were? I mean, I think this is something we've been thinking about since the first Trump administration. I mean, we lived through that. We started diversifying our supply chain back then, and we followed the election very closely. And literally the day after the election, we started shipping as many products over for this Christmas. So in November of 24, that we were shipping for this Christmas to get products in before a potential day one tariff on inauguration day. On inauguration day, there wasn't a day one tariff. However, Liberation Day was created April 2nd, and so we worked to produce and ship as many Christmas trees as we could in before April 2nd.

And then there was the pause in the other parts of the world. We diversified our supply chain, so we do produce trees in other countries besides China. So we brought as many trees as we could in at the 10% rates. And that's really helped us mitigate the cost of these 10%. tariffs for Christmas 2025 is how much we brought in before the full rates of 20%, 30% hit. And so what is your average tariff right now if you've diversified your production and you're doing it in a number of countries? I mean, we're paying close to 30% because there's 30% from China, 20% from the other

countries where we import. But we brought so many goods in before those rates started at zero and 10%. So I don't know what the total number is across everything for this year. And honestly, it keeps changing. And maybe it was 100% extra as of a couple weeks ago that could have hit some of our tail. The shipments coming at the end of the season. And so we'll just, we'll see where it lands. But we expect to pay about $15 million this year in tariffs versus $1 million last year.

So still a very significant cost for a small business. And you also had to pay the cost of storage. We've had to pay the cost of storage. When you brought them in almost a year early, where'd you put them? Exactly. We pay for the cost of storage with warehouse partners. Some of that's in our facilities, but that's a real cost. We've had to finance those trees for longer because once they ship from Asia, then we are financing them.

So we've paid more interest to our bank. So there's been other costs that have occurred as well. Yeah, I don't think we talk about sort of the knock-on costs as much as we do the tariffs themselves. And so then it comes to the selling price for consumers. I mean, your trees are nice trees. They're not inexpensive. But maybe you're not buying an artificial tree every year. So maybe, as a customer, you're a little less price sensitive.

How much have you raised prices? and has the consumer taken it? Well, I hope that that's the case. I hope that everyone keeps buying. We've raised prices. We've tried really hard to keep the prices down like all retailers have, and so we waited as long as we could,

but we've raised prices on average a little more than 10%. And that's what we've had to do to stay in business this year. Most of what we absorbed, we did through bringing those goods in earlier at lower tariffs, we cut costs, we sadly let some of our team go.

There's other things that we've done to mitigate that cost and try and absorb it. So far, it's very interesting, actually, because we sell all over the world. And all of our businesses around the world, Europe, Canada, Australia, they are all up double digits this year. We introduced our new line of more sustainable trees that are made with recycled plastic or plant-based plastic, and they've been very well received.

The U.S., however, we're down a little bit from last year. And I think that's just kind of this drag from consumers not being sure if they want to open their wallets and spend. Okay, so just so I understand you're down a little bit. that in the other areas of the world, did you have to raise prices when you said double digits, but you raised prices 10%. No. So in the other areas of the world, we didn't make any changes because there's no tariffs in those markets. Okay, got it. And those markets are all doing great. Although I really think

it's not so much the pricing as it is the innovation. Okay. Interesting. And so you're not seeing people wanting to put up those trees right after Halloween and already buying them. Because Cole said they have already been selling artificial Christmas trees. We start selling lots of trees in July and it keeps rolling. And so we are seeing consumers respond. We're seeing, and you We've seen this with some of the other retailers you cover. We're seeing retailers respond to events. But they're just like, we can watch it because we're mostly an online retailer. So we can see people put things in their cart.

And then they sit there and they wait till the last hours of the sale to pull the trigger. So there's just more hesitancy this year from the consumer than there has been in years past. Love that. Love that consumer insight data. Thanks so much, Mack for bringing that to us. Oh, H, by the way. Matt Carvin, CEO of Baltimore Hill. We've got a news alert on Amazon.

Dom Chu is in the newsroom with the D. details. Don, what do you have for us? All right. So Courtney, what we have are Reuters headlines coming out right now affecting Amazon. Those shares are up about one and a half percent. Right now, Amazon, according to Reuters, Amazon is planning a possible round of layoffs that could amount to around 30,000 corporate jobs and could begin later on this week. That's according to multiple people familiar with the matter. It roughly equates to about 10% of their corporate workforce. Again, they have about one and a half plus million employees overall, but working in warehouses, delivery and everything else.

These are specifically for the corporate jobs. It would be the largest round of job cuts possibly since 2022 when they laid off around 27,000 of those jobs. But we're keeping a close on whether or not we do see any more kind of movement on that front from Amazon. Those are the headlines right now. Courtney, we have reached out to Amazon for a comment. We will bring you those responses in due course. Courtney, I'll send things back over to you guys. Very Dom.

It seems very much, Dom. That is an important update there. Of course, as we're watching the labor market very carefully as well. Let's get over to Bartha Coombs. She has a CNBC news update. Hi, Bertha. Courtney, Hamas says it will hand over the body of another Israeli hostage later today after Egypt deployed a group of experts and heavy equipment to help retrieve the 13 remaining

bodies. It comes as President Trump pressed the militant group to return all of the deceased hostages or face action from nations involved in the Gaza ceasefire plan. Hamas has repeatedly said efforts to retrieve remains have been complicated by the destruction in Gaza. A Minnesota man is facing charges after allegedly offering a $45,000 bounty for Attorney General Pam Bondi in a TikTok video. The FBI traced the account to Tyler Adelos, a 30-year-old in St. Paul, Minnesota. He made an initial appearance earlier this month and was released pending trial. The TV producer behind hit shows Yellowstone and Landman is leaving Paramount.

According to multiple reports, showrunner Taylor Sheridan is heading to our sister company NBC Universal when his contract expires at the end of 2008. The financial terms of the deal were not immediately clear. Courtney, back over to you. Thank you very much, Bertha. Well, the NFL is partnering up with this retailer for new lines of merchandise. Which won right after this. From the yoga mat to the gridiron. Lulu Lemon is teaming up with the NFL and fanatics on a new line of apparel and accessories for all 32 teams.

This comes after the company signed deals with the NHL, Formula One star Lewis Hamilton, and other major athletes. Shares of Lulu Lemon are higher following the announcement. This was our mystery chart, though, by the NFL. the way. And the stock has done its own version of the downward dog, dropping about 50% this year alone. That's partly due to the impact of tariffs and other shifting consumer trends. So will Lulu's NFL deal help lift shares as it is today? Beyond today, our next guest is calling it a Hail Mary. Joining us is Jeffrey's research analyst Randy Koenick. He's

currently at an underperform rating on Lulu. And Randy, you've been negative on this name for a while. It wasn't just this announcement today. You sort of feel like Lulu's lost its cool. It's lost its way, right? Yeah, thanks, Courtney, for having me on. They've lost their core is really the there you go. So if you think about the core customer, the core customer has moved on that wealthy woman, has gone to Allo and Viori. That's a big problem. So as the company started to see themselves losing the core customer, what did they do? They tried to court non-core customers, teenagers, tweens with a belt bag. That's a problem because if you lose the core, the one that's spending the most money per year, and they're going elsewhere, you kind of just, you start to go down

a slippery slope of losing market share and revenues go down. I mean, obviously we talk about fashion all the time being fickle. I mean, how often do you have a company that can sort of maintain that number one position in the market, even if they were the first one to innovate in that space? I mean, doesn't it just happen eventually over time? There's a reason why there's thousands and thousands of apparel companies around the world. Why? It's a very easy product to make.

It's lightweight, not a lot of sizes, and has high initial margins. That's great until it's not. What's not is there's a very competitive factor here. Think about Under Armour. Under Armour was Lulu Lemon from 2005 to 2015. It grew dramatically from $300 million of revenue to a $5 billion business on the income statement of $10 billion brand if you adjust for retail prices. That business of Under Armour got taken away, that brand strength by Lulu Lemon itself from 2015.

to 2025. So, you know, we see these cycles where if you're a great company, maybe a decade of dominance is where you sit and that's where Lulu Lemon was for the last 10 years. But it's hard to last forever and it hasn't for Lulu. So is there anything they can do to get back there? I mean, this NFL deal and mirror, I mean, in the grand scheme of things, that huge bets on the business, right? I mean, is there anything that can be done? Well, the problem is what they're trying to do is throw gum against the wall. Try to do a partnership with the NFL. As you said, the mirror before, they just posted or did a partnership with American Express for the Platinum card to give basically free money to consumers $75 for a card holder per quarter. That's ridiculous.

So what the company needs to do is actually just take a step back. And we think to take a step back, you're going to have an earnings implosion that actually happen next year. So the streets mismodeling this company with flat earnings for 2006 and sales growth of 5% for 20%. for 2026 as well. We actually think earnings will go down to near $9 next year, which is a huge collapse. And we actually think revenues will be down 5%. And the problem is this company needs to have a hard reset because they're losing more and more market share as they go away from the core with their product assortment. They need to stop doing that. So what is aloe Viori, Varley recently I saw being sold in the Dick Sporting Goods House of Sport? And what are they grabbing at that Lulu Lemon is missing?

because the merchandise to me looks fairly similar on First Blush. You know what they have is they've kept their identity the same. If you walk into a Viori store or an Allo store, it has a feel, right? And that feel or that connection hasn't changed over the years. If you go into a Lulu Lemon store today selling sweaters, Little House on the Prairie skirts down to your ankles, I don't know what that is. But, you know, that's something you didn't see a decade ago from the company. You saw leggings and sports bras.

right? That's the problem here is the company's going away from what they did best and it's not going to get better. But then again, we always talk about how important innovation is. How are you supposed to figure it out in retail? Thank you for keeping everybody honest. Randy, we'll have you back on the short. Thank you. Well, the party is just now getting started. Let's take a look, or just not getting started, I guess, in the case here. So take a look at Airbnb's anti-party detection system. Sorry for parting. It's right now. Halloween is just days away. But if you're thinking about renting a home or apartment for that costume party. Actually, may want to think twice because Airbnb is again cracking down on Halloween parties this year.

The company says it's deploying what it calls advanced anti-party technology to look for signs of a potential party risk. That's scary. Last year, about 38,000 people in the U.S. were blocked or redirected from booking an Airbnb over the Halloween weekend. Anyway, Airbnb shares have been flat in 2025. In fact, they're on pace for their first ever. back to back negative years. Thank you so much for watching Power Lunch. Closing bell starts right now.