tv Bloomberg Bottom Line Bloomberg November 4, 2014 2:00pm-3:01pm EST
>> from bloomberg world headquarters in new york, i'm mark crumpton. this is "bottom line," the intersection of business and economics with a mainstream perspective. to our viewers here in the united states, and to those of you joining us from around the world, welcome. we have full coverage of the stocks in stories making headlines today. erik schatzker is las vegas for the money 20/20 conference. we're concentrating on to of the biggest races in today's u.s. midterm elections.
stephanie ruhle, and her extended conversation with the cfo of herbalife. >> john, thank you for joining us today. i want to start with hershey square has been saying for the last year the you have been miss marking your venezuelan exposure, and you made a correction. why is that? a correction.ake sachsen circumstances drove the weight we used in venezuela. every company use the same rate of 6.1. venezuela is an unusual market. it introduced alternate exchange rates in the first quarter. we moved to seek at one, which is what the median market did. a few more moved to seek at two. 30th? do it sometime or 30th?ptember
>> we signed a supply agreement in october with a local manufacturer to produce our second largest product in venezuela. they will start producing next year. opportunitytes the to get see cad one. >> if you had done it in june, how much worse would your financials look? cadf we had gone to see two in the first quarter, we would've had an 8% impact. -- 18% impact. >> industry to the chairman of your credit committee is resigning? >> he's a great board member. he has been a mentor to me since i came on board. he led us through the reorganization process last year. at the 10 year mark, he is retiring from our company.
he is doing so with appropriate notice, and staying on board to the filing of the in february. >> he's not retiring completely. there's other endeavors he's involved with. he's only walking away from herbalife. why? audit committee takes a lot of time. but audit committees in general take a lot of time. he is moving on to other things after 10 years. >> could we see other top executives at herbalife simply get burnt out and walk away, given what you had to go through through the bill ackman attacks to half years ago? you have to assume people in your position might be sick of it, others might want to walk out. ever. as engaged as i'm committed to herbalife as much as i've ever been committed. i think you see that across the management team. we have been able to attract a couple of seasoned senior executives to join the company and the last behemoth, including a former ftc commissioner. >> you mentioned the fcc commissioner. some press reports of said you
are close to some sort of settlor with the ftc. you've said that herbalife will be completely exonerated. where do you stand? >> we are confident in our business model and our members. inquiry is confidential. we respect the integrity of the inquiry. we are not going to comment quickly until that inquiry is over. why salesalk about are down. specifically in china and south america. obesity is at an all-time high. you have a nutrition supplement company. why are sales down? >> sales are up. the growth rate has declined. but we are still growing. the sales growth in the third quarter is a record sales number for third-quarter sales. actually 2.5%, excluding venezuela which is a unique market, we would be up 7%. we are still growing, just at a rate below what we have historically grown. that is temporary. >> what do you attribute that to, specifically in china?
the manage decline? >> china's of 23% in this quarter. >> that's less than you thought it would be. >> china's not less than we thought it would be. to year growth rates are online with a were last quarter. if you look at last year, second quarter of 2013, china was up 15%. in the third quarter, up 17%. those, chinaine still growing tremendously strong, and right on track with expectations. what i think people are misunderstanding in china is what we did in china with new members -- new sales reps, we suspended the introduction of new members for one month. that didn't impact the business, sales in china are strong, with a strong consumer base. >> why do you think you have seen growth rates low? -- slow? is it because of the new policies? made a lot of changes, and
accelerated changes over the last two years. wethe last three months, accelerated further, changes that really helped members become sales leaders over greater. period of time. we've one-month pathway, to of pathway, and a 12 month caf au lait. -- 12 monthin pathway. we are moving toward systemic changes that help members migrate to that longer development. >> you were having more supervisor turnover than ever. what do you mean more are being retained? >> our retention rate will be higher than last year. we are north of 50%. we were 52% in sales retention last year. we will be somewhere north of that by the end of this year. >> is that because you have lowered the standards to become a supervisor? >> not at all. >> you have lowered the amount of product those new supervisors have to buy.
>> the first cap was 4000 volume points. or 5000 over two months, or 5000 over 12 months. four or five,from to be five plus. it takes the incentive away from people who do a one-month pathway. for requalification, which is what we haven't made any changes. the retention is the same as it has been for the last five years. >> do you feel you have lost momentum? and analyst to is covered herbalife -- who covered herbalife says the constant battle between bill ackman and herbalife may be half -- hampering your growth. >> some of the changes we are making is moderating growth. it's building a stronger foundation with which to build from what this pipeline gets run through. once the salesforce gets assimilated to the changes. >> is the new normal. and the new normal is slower
than where you once were? >> i think it's a short-term moderation. then we go back to what we consider long-term growth rates. >> do you feel the bill ackman's attack is affected your growth? >> i think what we've done is making us a better company. >> i will ask you one more time. bill ackman. do you think his attack, his very public short against herbalife, has for your company? -- has hurt your company? >> i think everything going on is helping our customers -- and company. i think with every thing going on in the changes we have accelerated -- >> you are not answering my question. >> you are describing it to one individual. >> i would like you to answer that question. bill ackman's very a public short -- do you think it has hurt your company?
>> i'm saying we are a stronger company today than we were a quarter before he came out with that. our policies are stronger, our migration to this extended new sales leader approach is stronger. our gold standard, with 100% return policy and 12 month buyback is the strongest in the industry. those are elements we would have gone to any way. but we have accelerated changes as a result of the environment we live in. we are a better company today than we were two years ago. >> we are coming off halloween, thanks giving is coming. i need to lose 10 pounds, it's the right time to get nutrition supplements. john, thank you for joining us. i know this battle continues. it is not easy. john is the ceo of herbalife. thank you. >> stephanie, thank you so much. up next, american voters head to the polls in today's midterm elections. the roundtable discussion includes reports from kentucky, colorado, and washington, d.c.. bottom line continues in a
>> we turn now to comprehensive coverage of election 2014. voters head to local polling stations around the united states. some are casting ballots for republicans in hopes that it will mean more jobs. others worry that electing more republicans to congress will only add to gridlock in washington. we have a roundtable discussion ready to go in louisville, kentucky. ande -- peter cook colorado, and in washington, cory bowles. gentlemen, thank you. your group predicted last month it democrats will narrowly maintain control of the senate. is that still the case on election day? >> we have not changed our view. obviously, it is very close out there. there is still a pathway to democrats maintaining the
southern majority. there is still a path that democrats could pick up one or two republican held seats currently. i think we will know pretty early on whether or not that is the case. some of the most competitive seats are among those polls closing first. , one of the most closely watched senate races in kentucky. senate minority leader mitch mcconnell is facing democrat allyson m grimes. the vote there really about president obama, who lost the commonwealth by over 20 points? >> president obama has been a huge issue in this campaign. mitch mcconnell saying if you vote for rhymes, you will get more of president obama's policies. she has run away from president obama at the same time challenging mitch mcconnell, making the case that he is a
guardian of gridlock. the republican player on capitol hill who is standing in the way of progress on a whole host of key issues. president obama played a central role here. at the end of the day, there is a lot of personality. is 35 years old. a lot voters to consider. is anotherlorado state that could decide the balance of power in the senate. iner just spoke about age kentucky. will the age difference between the candidates and colorado be a determining factor? mark udall is 64 years old. his republican challenger is 40 years old. it may be in the sense that cory gardner is a very young, charismatic, captivating candidate. age itself hasn't really been an issue. positivity, his ability to present himself as
something different than the prickly washington republicans that voters seem to be tired of really has been a big leg up. it surprised a lot of democrats, who thought that you'd all -- l might have a better chance at reelection. >> you just spoke a few minutes ago about what will happen if there's a shift in our in the senate. most voters will go to bed tonight, will they know who is in control of the senate by midnight? >> it's highly unlikely that we know who controls the senate next year by midnight tonight. it democrats are able to maintain some of the early closing seats, new hampshire and north carolina specifically, there is still a chance that the alaskan polls don't even close until midnight. it seems logical that we won't know till wednesday were thursday given the disparate population in that state.
georgia, two of the other most closely contested races, it is looking likely if not certain in the case of louisiana, that we are headed for runoffs. those don't occur for one or two months in the future. if republicans gain control of the u.s. senate, it's not just about legislation. all of the committee chairmanships would change hands. would mitch mcconnell be a dealmaker as majority leader? >> that is an open question right now. there are a lot of questions about what mitch mcconnell would do if he actually rises to this position that he has coveted for so long. you can make the case that we are looking at gridlock on steroids. but i've spoken with democratic lawmakers here today. knows mcconnell well. he is convinced the mcconnell would be a dealmaker, reaching across the aisle to solidify his legacy if he rises to majority leader. a whole host of things would change. you were talking about key
committees affecting the business community, banking, the environment, major changes there. an entire seachange on capitol hill. >> you mentioned that if senator mcconnell does decide to be the dealbreaker, will he get out frank -- outflanked from his right? don't see party members want him to not negotiate with the president on anything? >> you have highlighted what will play out most likely. they may think mitch mcconnell has interest in being a dealmaker, but it will be hard giving conservatives in the house and within his own senate rank -- very difficult for mitch mcconnell to be able to orchestrate those kind of deals when he has ted cruz looking over his shoulder. that will be the balancing act that mitch mcconnell will have to walk in. he is being very coy about not spelling out which direction he will head. >> josh, let's talk more about
what we are seeing with some democrats. they seem to be running away from president obama. because of his low cruel ratings. they are discussing their independent streaks, and their willingness to disagree with the white house if necessary. -- much of you seen that have you seen that? >> the president is a huge political liability and colorado. there is a poll that has his approval rating at about 35%. remember, this is a state that obama won both times most recently in 2012 by over five points. his popularity has plummeted, and democrats in colorado unpopularityma's to the struggles of their candidate in the house, senate, and the governor running for reelection. it has been a big problem. you see on the television ads that are just bombarding voters here that nearly every republican ad seeks to tie the
candidate to president obama. that has had an effect. >> josh, does that mean that otherr udall, like democrats running for office, are they trying to display their independent streak by talking about more local issues as opposed to national issues? >> a little bit. strategy hasl's not been to localize the election but to turn it into one about abortion and birth control. they think that the way to beat the republican cory gardner is to disqualify him as too extreme. gardner is a member of the house, he is one of the most conservative members of the house. the democratic strategy was to treat him as too extreme for colorado. this is a strategy that worked for democrats in 2010, when michael bennett one a narrow reelection in what we all remove or was a tea party year. colorado gop has had a hard time over the last decade.
what is interesting about this election, and the reason why both parties think it will go so late, is that gardner is not successfully branded as extremists. >> what is corporate america going to be looking for tonight, regardless of which party controls the senate? >> we think the markets have already priced into a large extent a republican victory. once it is known with the outcome is, in terms of the senate majority next year, if dems do maintain a majority, i wouldn't be surprised if we saw a selloff in financials and energy stocks. perhaps not an enduring one, but a reaction to the surprise result. in terms of next year under republican control, there is next dictation that republicans will pursue tax reform at the corporate level. and also advances in trade. >> cory bowles, joining us from washington.
peter cook joining us from louisville, kentucky. and from littleton, colorado, josh green of bloomberg businessweek. gentlemen, thank you. -- you can watch this on bloomberg tv for copperheads of election ash comprehensive election results. we have extended coverage of the results starting at 7:00 new york time it. mightd the election all or through midnight, at least it could go all my long. "bottom line," continues in a moment.
deepened -- price cuts deep into selloff. global demand growth slowed and supplies swelled from producers outside opec, with united states pumping out the fastest pace in more than 30 years. that's a look at one of the top stories we're following on this tuesday. ♪ >> a quiet day on the equity markets on this election day, 2014. most u.s. stocks falling, pulling the s&p down from a near record. reachedlumped once oil a three-year low. let's take a quick look at the numbers. the s&p 500 is down about a third of a percent at 2011. the dow jones industrial average on this tuesday -- the dow is up fractionally right now. it's at 13,000 379. the nasdaq composite index is down about 4/10 of a percent at
app to solve a problem we all have. there is a problem where cash is under serving tipping today. people are carrying less cash today. the fact is, tippers, they are fumbling for cash while in the line, they just don't have cash to we don't even have the right to nomination -- they don't have cash. or they don't have the right to nomination. we do not want to be a jerk. .e want to tip especially in las vegas, they live on tips. what we have on, is we have looked at the tip scenario, and there is a problem with the tipping ross us today. -- process today. i have had this problem
countless times. i like to walk out of the house with a phone in one pocket and a couple of cards in the other rocket, with my identification. i never carry cash. mes happens to frequently. so you build an app. explain how it works, and i'm going to do it for you. >> you are going to tip me? >> i downloaded the app. it should recognize you. >> i have never heard of this before, and somebody walks up to me and says i would like to tip you with this, i will say fantastic. you take a >> photo of my face -- you take a photo of my face. send, and the need can
tip receipt. >> two problems. are you on there? >> i am registered on there. to servers, and it is matched on the backend. it is automated matching, and then a process that can go back and match faces as well. >> so for people to get the money i want to give them, be have to sign up? >> ultimately. they don't have to sign up during the tip transaction -- to the out,go on
it register their face, and will deposit the money into their account. >> i feel like there are two kinds of tipping. there is the one where you are recognizing somebody were worked done, and the other also because they are in the service industry, they make you would hopend to be rewarded for good service with generous tips. then there is this other kind. this is the cabana boy at the all, before you get the service. him the $50hand bill and look them in the eye, because you want to make sure you have the choice seats by the pool. you want to make sure that the a's bucket is full all -- ice or
get his hole all day long. bucket is full all day long. this app is a person to person interaction. scenario that you had, it re-creates that. >> how quickly can it go into his wallet? >> as likely as up to the next day. but he will get the tip receipt shown to him. we are running on the rails that exist today. we always looking for more innovative solutions. >> how do you get paid? >> it is a free application to
so we have a transaction fee every time they go to the atm. >> thank you for sharing north door. -- your story. there are a lot of cashless innovations happening here at money 2020. >> coming up, we will examine how to build a lasting brand in the high-end market. that is coming up on "bottom line." ♪
>> welcome back. it is time for today's latin america report. doctors say the yard to team you argentinian president is suffering from an olon.mmation of the c she is stable, undergoing antibiotic treatment, and will remain in the clinic while more test are carried out. brazil's output unexpectedly raise rates to combat above target inflation. possible power rationing could be another drag on manufacturing that is already starting to be heard why water shortages -- hur t by water shortages.
can watch allyou of bloomberg tvs election night coverage anywhere, on your mobile device, or you're connected tv for free. you can watch the live stream on oid, or fire tv. of shopping is still done and good old-fashioned physical stores. and that is why retailers are creating new tools to keep customers coming back. one of the new technologies that can track you while you shop. williamsburg, brooklyn is a launchpad for trend, when it
comes to fashion. home to the urban outfitters concept store. bea are called con. move through the store you can get guidance on your location. a little racy. not for work. >> i could wear this. >> the range can be specified to notified designated shoppers of the different areas. here the shoppers are encouraged to be social. this is a very popular thing to do.
twitter handle has been used almost 50,000 times. are alreadyhat they on their phones. when they walk into ours work, store, it- into our sends you a welcome message. we can also push in-store events, which is something that is very cool. i can see that ponchos are 50% off and that there is a band playing tonight? >> exactly. numbers installed in stores is expected to go from zero to 3 million in two years. we send customer messages, we are seeing 70%
aggregated engagement rate. and is all about opening that beaconegin message -- message. >> what is the conversion rate into sales? where we are targeting the transaction, the redemption rate is between 30% and 35%. longchamp has been around for six decades. a man who owned a tobacco shop wanted to expand his business into leather covered items for his customers. now it has grown into a global brand. thank you for your time. clear thatde it other luxury brands are changing their strategies, but you are not in wha.
how does that create opportunities for you? a family company we tend to be very stable in our strategies and policies. we are totally private. we are not listed. we are not the slave of quarterly publications, so we can pick our time and implement strategies at our runs beat. -- our own speed. >> does that help you to make gains? usually our customers will have one thing in common, that they move around a lot braver they move around the city, they travel, they are very act of. ive. there is a lot of energy within the brand, and our customers are full of energy. have six production sites in france, two company own
ed locations outside of france. do you plan to outsource more? >> we know our job inside out. i think it is important to stress that because it is not that common anymore that a brand makes products. it gives our products a lot of authenticity. i think our customer can rest denies that -- can recognize that. it is a lot of weight on what the brand is. >> let's talk about the global picture. forecast slower growth in europe, and the central bank is undertaking its version of stimulus measures. what impact is this having on your business? >> it is very soft at the time. fortunately, our company has diversified out of europe for a a while. we were one of the first year european brands to be sold
in japan. we have a strong international foothold. we can manage to do rather well does right the difficulties in europe -- despite the difficulties in europe. tourist'sd that continue to go into your stores, but that has not been the case for some other luxury brands. to get tourists to browsing your stores and make purchases? >> the product. s thehing that count most is the product. we are not a marketing brand, we are product oriented. it is the products that drives them into the store. reliableood, product. how do lecture retailers
fight counterfeiters? -- luxury retailers fight counterfeiters? >> counterfeiting has become a huge issue. now it is not a straight problem. it is now the internet and the counterfeiters have gone online. counterfeitsrder from the comfort of your home. it has changed things quite a lot and we spend a lot of time and energy all year round to fight against counterfeiting. >> we mentioned the family-owned aspect. what does that mean to you personally? we're talking about second and third generations still at the helm of the company, and the benefits of being a family-run company versus being part of a conglomerate. >> it gives us the luxury of time. it takes time to establish a brand, and when you start in a
new country, it takes a little bit of time before the brand is recognized. being a family company, we think more for the next generation. we have the liberty to take our time. there is a lot of stability in the way we work and i think it is much more comfortable for all the stakeholders in the company, whether it is clients or suppliers or employees. i think everybody enjoys the fact that we know where we are going and we do not change direction every minute. >> sir, it is a pleasure. thank you. another check of the markets is on the other side of the break. ♪
past the hour which means that we are on the markets. just an hour to the close. board.ows across the the s&p down a third of 1%. the reason the s&p is down, reallyhe dow is up is the energy stocks putting a weight on the index. weeks, naturalew gas has been doing rather well. oil is the others worry for sure. you can see a big drop, and intraday trading is down as well. oil has been on a drowned word trend.rd
more on energy prices i am joined by the senior oil and gas analyst for bloomberg industries. thank you for joining us. talk first about the gas.ral talkingt of people are about it, and we have seen a gain over the past couple of .eeks and >> we ar >> we are heading into the traditional start of the winter heating season. haitians thatct -- expectations that heating demand will be lower in the winter this year than last year. on top of that, you have a production cadence that is quite
strong coming into the winter season. in have this demand supply balance coming into the winter season, but over the last several days you have started to see some incremental demand because of the weather in the northeast. >> and got very cold, and the price shot of him -- up in the last few days. >> what you will need to see over the next several is a sustained cold snap to support the natural gas. >> let's talk about what is going on with oil. a lot of analyst the last few days saved will not go much lower, but it continues to drop. $77 a barrel is relatively low. -- >> you take supply demand