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tv   Squawk Alley  CNBC  November 23, 2018 11:00am-12:00pm EST

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good friday morning. i am carl quintanilla with morgan brennan jon fortt has the morning off. in a moment, we talk with jcpenney ceo and apple former head of retail ron johnson as retail is a huge story today along with oil which is down more than 3.5 bucks. >> the nasdaq is on pace for the worst week since march firmly in correction territory the s&p in correction. and the dow two hours from capping a three day losing streak, all of this as oil which carl mentioned hits the lowest level since 2017 bring in washington crossing
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adviser senior portfolio manager devin karen. happy black friday david, you have the dow on pace for the worst performance since 2010 what should we make of that? >> i think we have a rough week, all things considered, starting monday felt pretty good i think last week, week before with powell speaking, giving the bottom market cushion, and then
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we had them in '97, bigger in '99
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they happen during bull markets. we had two of them this year, a little more than usual maybe that is as we come closer to the end of things than the beginning but i don't think we're in any immediate end. >> kevin, how worried should investors be about the selloff in stocks? >> i think investors need to pay attention to it. basically this has been a harder year than last last year was a lot of confirmation of a bullish case we had global growth improving, not deteriorating, had a great story in terms of a tax cut that last year wasn't going to happen and then ended up happening. and investor enthusiasm for this was fantastic coming into the year sentiment as good as you could possibly see as we went through the year, we have cross currents, overseas growth is not great, united states looks good. those are at cross purposes with one another. ultimately i think you have a more complicated situation these days, and the interest rates
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where they are, even if the fed does one more in december and stops, the return on risk free investment like cash is becoming more competitive versus what's available in equities. i think all of it creates more choppiness that we have seen through the year does it signal an end? i wouldn't say that. i think you're later in the cycle and investors ought to be looking at moving up the quality spectrum in portfolios at this point. >> interesting got a big macro call they say cash yields are higher than dividends for the s&p 500 they see the vix doubling in three years, sort of things you're talking about, but nothing dramatic 2900 for year end. >> yeah. i mean, it is still, things are okay on the macro side, and the fed will not be uber aggressive. we learned that. that's an important feature of
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the last two weeks we have kind of a hangover after a 10% correction that's got people very nervous at a very illiquid point in the year. >> wouldn't you want to hear powell say our work, efforts are bearing fruit? >> i think the latter definitely i think you want to get to december and hear something soothing on the tariff side, even if we were to get something good on china, he is going straight to europe to go after cars in germany. it is not like trade is going away in the end, look, i tried to save trade, every time you get nervous on trade, something pulls us back to a normal outcome and it is art of the deal negotiations which we're getting used to. i would get bent out of shape about a hawkish fed and one that thought we were a long way from neutral. powell didn't necessarily walk it back completely but didn't
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reiterate it, and the fact he didn't reiterate it should be comforting ten note yields are almost become below 3%. >> thank you for the discussion. black friday obviously in full swing as adobe predicts a record year for online shopping. julia boorstin is at target in north ridge, california. good morning again, julia. >> reporter: good morning to you, carl. i was just in this target behind me it was very quiet. it felt empty. there was no crowds or lines at the cash registers the company did get a head start on black friday by opening stores on thanksgiving from 5:00 p.m. to 1:00 a.m. today, target shares are down more than 2%, after tumbling 13% between tuesday and wednesday on earnings that fell short of expectations the company maintained a full year forecast, pointing to concerns that digital growth can expand beyond target's capacity
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and the company may need to invest more. sales strategy this season is about integrating digital tools with brick and mortar stores, distinguish it from amazon first time, target offers driveup, free same day service, enabling guests to have items they ordered that day brought to their car in the parking lot, and skip the line technology allows you to check out with the tarl target employee with a mobile device and they're holding more toys. 2500 new and exclusive toys, double the number last year, and featuring 15 tvs under $300 and half off select video games. they're stepping up competition with amazon with free two day shipping on thousands of items with the option of same day delivery through a startup called shipt for target stock, black friday to year end since 2010, target had an average return of a half
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percent, less than groupon with 7% return. but more than amazon which falls on average 1.5% over that time period back to you. >> thank you earlier we talked to macy's chief who sounded positive about strategy to take on the competition. >> we work on flexibility of our organization we have less layers, we have -- and bringing inventory closer into need. we're ready to respond if there's dropoff in the overall market what we are focused on at macy's is taking margt share. we have business where we are taking market share from competitors and others are not we are narrowing the gap. >> wishful thing or do online retailers have a fair shot with me, former j.c. penney chief ron johnson. welcome back
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happy black friday i love your thoughts on current retail environment it sounds like you think maybe not department stores but other physical retailers actually have a hand to play for the first time in a long time. >> my sense is this is the first time in nearly two decades that the physical stores have the upper hand heading into the holiday. you see it at target take away current stock price performance the past few days. they turned stores from what they thought was an anchor into the engine of the omni channel strategy i was in one of the stores last night, it was a wonderful experience everything was operating smoothly, even at the same time people can order from home, have it delivered they can pick up in store. there are so many ways to shop, they have a great competitive weapon >> you mentioned target but in general, looking across the retail sector, who do you think is doing this right? >> i think big ones doing it well, walmart and target, big
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general merchants have had to compete with amazon more than anybody. amazon has reinvented how we shopped the past few decades they started in electronics, best buy had to battle back. best buy stock is near all-time high, has been in the past year. they learned to compete with amazon walmart and target have figured that out that's a big challenge for amazon as we all know, last quarter target's online sales grew 49%, while same store sales grew 5% walmart grew 40% amazon is in the single digits e-commerce growth. that means it will take seven years for amazon to double e-commerce growth while target and walmart are doubling every 18 months. so the world that changed. physical stores have learned how to compete >> the amazon bulls would say wait until people start searching beginning their
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shopping searches on amazon itself that will change the dynamic again. you don't agree? >> no. i think people start at amazon that's one of google's big challenges, people used to search on google amazon has become the go to. they capture nearly 50% of e-commerce sales amazon will continue to do that. i'm just saying the growth rates at amazon are going to slow dramatically as the physical stores learn to catch up it is all about competing. they carry a lot of the same products, offer a lot of the same prices, but the physical stores have the magic of convenience because you can go to the store or have the store come to you. that's a real asset. these physical stores are basically warehouses that fuel e-commerce strategies. amazon doesn't have that infrastructure target has over a thousand stores shipping miles to people's homes. it is a real asset that's been
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m misunderstood. >> i want your thoughts on jcpenney, earnings have not been good this year the stock is moving dangerously close to penny stock territory are we going to be talking about, consumers still shopping at jcpenney a year from now? >> i hope they are there are a lot of great people. i feel for people working in the stores there are a lot of people working hard all holiday i hope the new ceo has a winning strategy that allows them to compete to survive and flourish, but it is a tough road ahead >> ron, if you were running a large say department store and you were having to game out this tariff issue, trade issues, inventory, post january, what do you do who has any edge on this >> well, i listened to your interview with jeff earlier. i think that strategy is right you have to compete category by category macy's, for example, has beautiful locations in some of the top malls throughout the
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country. they had to make stores smaller and edit edit merchandise. but they compete well. you have to shorten lead times and people learned to do it. the retail industry will go on and on and it is a good business for survivors. as we go through this restructuring with fewer malls, fewer competitors, the ones that survive will compete really well, and they're going to have great omni channel strategies, use technology in the right way, manage inventory well, and they'll become better merchants again. biggest thing i saw with target in the store last night, they have the target back the categories that appeal to young families from babies and kids and toys, they're doing a really good job at retail is retail you have to compete with great merchandise, great prices, great
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service. >> ron, i want to get your thoughts before i let you go on apple both because you used to work there and because of your new company, your current company, enjoy that you founded. given all of the reports we have gotten that suppliers to the company have cut forecasts, that production is expected to be lower and sales lower than expected, is that just noise or investors right to be concerned? >> i don't know, apple is a great company with amazing products the challenge is the upgrade cycle. products have become so good now, like iphone x you may have bought last year, need to upgrade gets harder and harder apple, most of what they do is on the inside of phones, not on the outside. there's amazing technology, amazing cameras, improvement in speed, but the upgrade cycle has slowed apple has to predict it every year as they do the forecasting, and it is not uncommon this time
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of year there are adjustments. some years they're getting more, some years they're pairing back. they have to manage the supply chain carefully. i am long apple, it is a great company, stores are doing well they will continue to compete at the top of their game. >> investors love to react to supply chain stories regarding apple, as much as we say to take some with a grain of salt, ron >> that's what i think, too. >> see you throughout the holiday season >> look forward to it. facebook fessing up. and steve sadove has his outlook for the holiday shopping season. apple on pace for the worst week since april, 2016 and the hits keep coming more "squawk alley" after this
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♪ ♪ i'm all for my neighborhood. i'm all for backing the community that's made me who i am. i'm all for my theatre, my barbershop and my friends. because the community doesn't just have small businesses, it is small businesses. and that's why american express founded small business saturday. so, tomorrow, november 24th, let's all get up, get out, and shop small. i got croissant. small business saturday. a small way to make a big difference.
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social network taking responsibility for hiring a washington based lobbying group that pushed negative stories about its critics, including george soros now calling for them to review the social media giant let's dig in on facebook the soros element, "the washington post" has a head line zuckerberg rejected a request to testify in front of seven countries' lawmakers how long can the drip last >> the news keeps getting worse. i think that ultimately most of our clients are still waiting until mid next year to buy the stock because they don't believe that the news flow on the negative side will end you're not going to see inflection in financials until 2020, they highlighted 2019 is another transition year so i think short term there's still short term pain but i think
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ultimately the stock is getting more attractive gif enthe pull back we're down 40% from peak there's nothing but bad news, every day you wake up there's negative headlines on the story. we think a lot of that is embedded in the stock, but most clients are waiting on the sidelines before they get back in >> tom, your thoughts on apple, especially given the selloff recently is this a buy, a hold? where do you stand on it >> apple is absolutely a buy if you think about the story in apple for the last 12 months, it was their ability to raise average selling price that made them let dependent on selling more units you look at recent pressure on shares, a lot of anxiety, unit sales are weaker than anticipated. if you look at the 10 r, least expensive of new phones, 7 po.5 more expensive than the 8. i think it is a compelling buy.
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>> i know there's a lot of focus on facebook, i get that a lot of it is company specific, but is there a point in time the critical lens and all of the investigative reports start to set sights on google as well >> google, everyone is under the same level of duress i think he was talking about the same regulation in europe coming to the u.s we think beginning of the year, the number one concern nfor investors is fear of on-going regulation we think google has done a good job of addressing some concerns. and the biggest unknown is are we going to see legislation in the u.s. like in europe with gdpr, and ultimately i think big platforms will be able to weather the storm better than others that we cover we think google is in a good
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position and they've done very well in europe, even despite limb allegati limitation of gdpr i think once the rule book is in place, it is up to them to outperform we don't believe anything is going to change as relates to big platforms, they're just going to be in better position, even if increasing regulation came clearly that will impact multiples, faang down 25% from the peak we like google a lot think it is one of the most atracktive atracktively -- attractively priced >> tom, on amazon you've got regulation mixed in. obviously we're talking e-commerce a lot today, but r regarding other names, all this
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talk around 1500 what's the narrative that moves this name in three to six months >> what moved amazon was their fast growing aws business. they re-invent that big conference in vegas next week. the fastest growing business was the highest margin the interesting thing with amazon is the stock has been under pressure, despite blowout profitability quarters for two quarters to the extent their engine remains aws, and that's the profit engine, and to the extent they're well positioned for a strong holiday, both physical with the addition of whole foods, what moves it is continued strength in cloud computing business that's the fastest growing effort >> i want to put this question to you both. if you had to choose one stock to put in your stocking this holiday season, what would it be >> we like google here we think there's incredible
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durable business and call option on all of the interesting trends you can't get that call option through amazon and facebook through that vehicle >> tom >> within faang, definitely amazon again, i think the story has been less revenue growth, more on profitability if you want to shop outside of faang, the journal had an article on overstock, how their business is for sale that's compelling as well. a lot of up side from here >> good stuff. brent, tom, have a good weekend. still to come, not so happy holidays at amazon warehouses across europe. why workers are walking out and striking that's coming up. and look at the top three percentage gainers in the nasdaq 100 so far in today's shortened trading session. american airlines, biogen and
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align tech more "squawk alley" ahead. rebekkah: opioids has taken everything and everyone i've ever loved away from me. everything. i blew my ankle out and i got prescribed pain pills by my doctor. if making my detox public is gonna help somebody i'm all for it. i just wish i would've had a warning.
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good morning, everyone welcome back i am sue herera. here's your cnbc news update at this hour. from deep discounts to the deep freeze early bird shoppers braving unseasonably cold weather, waiting outside to take advantage of black friday deals. in the new york city area, the mercury was firmly in the teens. but it was worst in new england, the new hampshire, mount washington observatory recorded 25 degrees below the lowest temperature reading ever there for november. police are investigating a deadly shooting at a birmingham, alabama area mall. it happened after a fight broke out between two teenagers at the river chase galleria police officers confronted one
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of the teens and shot and killed him. two others, including a 12-year-old girl were injured. a developing story in minnesota where a house exploded near st. paul on a residential street this is early video of the aftermath, and there's no word yet on a cause of that explosion. and tiger woods and phil mickelson's big pay per view event goes under way they play one on one match at shadow creek the winner takes home 9 million bucks. can't wait to see that that's the news update this hour back downtown to you, carl >> sue, thank you very much. getting the european close, wilfred frost has some numbers for us. >> indeed. it is a calm but mixed end to what has been a negative week. the ftse slightly lower, little gains for italy and germany, france above the flat line most notable was data. pmis out this morning. composite has the lowest reading
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since 2014 we have those numbers coming out for you. 52.1, the consensus for 53 most of that miss from manufacturing, services side also slightly softer, slowing global demand cited as one of the reasons. individual movers to the down side are oil names you can see as oil prices have reignited the recent slide for the week as a whole, sharp declines, particularly for shell, emi and total bp, slight outperformer to the up side, but only today. renault, up 2.5% after what's been a terrible week, particularly monday on news about carlos ghosn sterling, crucial weekend for theresa may. she's going to brussels, come back sunday night with unanimous
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approval from eu 27 for her plan by no mean guaranteed but expected focus at getting the deal through. the pound still toward the bottom of a six month range. >> going to see you in a half hour >> lunchtime closing bell. looking forward to it. >> see you in about 30 minutes on this shortened trading day. coming up, steve sadove, and why a major bump in online shopping could lead to shipping delay. got to watch oil, continues ckft ts.er above 51. ba aerhi
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if you're a prime member, the first stop may be amazon for black friday deals we have been shopping around all morning. turns out the best deal may be elsewhere. ipad mini 4, similar pricing, although amazon has it and walmart for about $100 more than best buy and target. look at shipping as well
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there are somber deals to be had. best buy has the edge. look at amazon's echo spot home speaker. no surprise. amazon has the best deal in terms of price and shipping. what's interesting, no discount at walmart which has been beefing up its online presence, competing more directly with amazon look at the nintendo switch console. it is $299 the exact same at amazon, walmart and best buy the advantage goes to amazon for next day delivery. as always, you have to read fine print. if i want it from walmart delivered to my address in san francisco, it will cost $60 more, and won't arrive until december 4th here's the backdrop. traditional retailers are keeping online shopping competitive. the question is how much is it costing in terms of labor and logistics. that's something that investors have their eye on. retail shares have been hit on
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concerns that these investments will hit profits amazon 2, keep in mind, disappointed investors with weaker than expected fourth quarter holiday outlook. online shopping is not simply in the bag for them either. guys >> thank you amazon shares are flat now, keeping focus on broader retail sector, underperforming s&p 500 for the year, still optimism heading into one of the busiest shopping days of the holiday season for more, we're joined by senior research analyst oliver chen and steve sadoff happy black friday to you both steve, i want to start with you. given the report from deirdre, is it amazon versus everybody else in retail >> amazon is an important factor in the internet, about 50% of all shopping is done on amazon, but i don't think it is amazon against everybody else i think everybody is competing in this broad play against everybody in terms of getting
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the business everyone looking for a unique edge to compete with everyone else with big boxes and specialty players. >> steve, who is successful in that so far, who is well positioned coming into the holidays and who isn't >> master card forecast is 5% growth for the retail industry, so we have an industry that's healthy. i think the players that are playing in what i call omni channel space, the target, walmart, macy's doing a good job buying online, pick up in store, they're doing well this season there are a lot of specialty unique players killing it also >> oliver, when you look at the selloff in retail stocks in recent days and weeks, would you say that black friday and holiday season is baked into names and now investors are looking at 2019 or is there
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another store to keep an eye on? >> as we look ahead, there are tough comparisons. expectations have been high. the amazon threat is real, and tariffs and labor. however, this morning we're out at 4:00 a.m. the consumer is back we think stores are restored shoppers were definitely working off turkey dinner in the mall. and we're impressed with what's happening at companies what we like is active wear trends in the marketplace. we think toys is a big deal, picked this up at kohl's, the fingerlings, big deal to get market share from toys r us, and mobile being the new mall. you are right. valuations, cautions, investor concerns in terms of a tough tuesday we had ahead of black friday, and we overall are very pleased with what we're seeing on black friday. >> steve, can you blame investors not wanting to play in the apparel space for the next ten days until we get something out of g 20, a little more
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clarity on whether or not the president and xi are near having an appetite to make a deal >> i think the reality is the consumer is healthy and they're shopping they're out there in the mall. the early read on the weekend is tracking to that plus 5% forecast that doesn't mean there aren't concerns as oliver was stating, whether it is tariffs or labor costs, whether it will be state of the economy as we go into 2019 clearing the g 20 is a fak to to be looking at but also look at sales for october where apparel was up 8%. strongestperforming category and best growth in the last half dozen years. you've got this dual competing factors and everyone is looking ahead to twien2019, but the herd now is pretty healthy and we're looking at a good holiday
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season >> we think inventory is in good control, consistent with what steven said. we are seeing growth in denim. nice place to be top stock calls, walmart and kohl's you think of walmart, it is a defensive retailer, with over half grocery we think they're well positioned what is a volatile overall environment, but the u.s. consumer is the strongest it has been in a long time. and stores are the most impressive we have seen them omni channel integration is key and supply chain and delivery and that's happening retailers are competing on their own terms versus amazon and integrating bricks and mobile. >> you took the question out of my mouth thank you for answering it thanks for joining us today. >> thanks. >> happy holidays. when we come back, why workers at amazon warehouses in europe are walking out this
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black friday watching shares of tesla move lower. the automaker cutting the price of cars because of tariffs price cuts ranging from 12 to 26%. dow avshing away losses. "squawk alley" back in a moment. when it might be time to buy or sell? with fidelity's real-time analytics, you'll get clear, actionable alerts about potential investment opportunities in real time. fidelity. open an account today. fidelity. there's a lot to there's also a lot to know. part a that's your hospital coverage, part b is all the doctor stuff... the most important thing to know? medicare doesn't pay for everything. and guess what that means...
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holiday season e-commerce is a major growth driver for the sector. joining us on the phone, mike parra, ceo of dhl express. thank you for joining us this black friday. >> good morning, morgan, good morning, carl. how are you doing? >> doing great, thanks what are you forecasting what are you forecasting in package volumes between introduce and year's end, and based on early activity you're seeing, does it support that >> absolutely. our forecast is calling for 17 to 18% higher pickup and delivery volume as we go into what we call peak season it is really a 41% jump in volume over the last prior months we're starting to see some strength as it is getting closer and closer here. >> how much of that is a reflection of state of the consumer here in the u.s. coming into the crucial shopping time and how much of that is reflection of the fact that dhl is expanding services.
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>> it is global driven when you're in 220 countries globally like we are and we expand across the globe, that helps us from that perspective a big portion of that push comes from the u.s. as well, as you can imagine. some early indications of what's happening in u.s. sales, online sales for yesterday, i'm hearing as high as 3.7 billion in online sales, and that's a 29% increase from 2017. >> i am glad you brought up that you're a global company. how are tariffs impacting trade flows through the dhl network now? >> you know, listen, we're used to tariffs when you think about the fact that you're in 220 countries like we are, we're used to that happening to us in dealing with changing rules and regulations what we do is bridge that helping customers understand how to navigate complexities across border trade it is nothing new for us
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we are used to it now for 49 years, being in business, and it is just something else we have to deal with >> mike, crude at 51 when do we start to see fuel surcharges get peeled off? >> you know, first of all, that was great news, that was music to my ears this morning, the futures on fuels were dropping that's a good thing. we're able to lower fuel surcharge to customers the challenge is that it is always two months in arrears so a drop in fuel today we won't see it until early february from that perspective, but all in all it is a positive sign if it holds. >> do you think it does hold >> well, it all depends. i think it will be market specific you know the market has been fragile at best, up and down every day. we're hoping it holds. i can tell you we would love to pass savings onto our customers.
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>> question for you, mike, on amazon friend or foe? >> absolute friend we get asked that question every single week. they're an important customer of ours we do a lot with amazon. we partner with them and we've got high degree of focus on them as well as all of our large customers across the world, but an absolute friend >> and just to bring this full circle in terms of volume increases you're expecting for the peak shipping season, how have you been preparing the network for that and what's the role technology is playing >> thank you for that. look, we're looking for big pickup is monday, the 26th of november that's the peak pickup day peak delivery day, monday december 17th. we started to plan for peak four months ago this is with sessions with top customers across the globe we do all of our hiring in the
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month of june and july for peak. we do a lot of training. we source our resources. and also a push around facilities we did expansion of facilities, tucson, baltimore, new gateway in chicago, new flights to vancouver, canada, columbia, peru, and we pride ourselves on being customer centric as an organization and we have been working a lot on robotic process automation, chat bots, voice bots launched the ability to track a package on alexa or google in the next week, you can track a package on what's app. we chat if you're in asia. we are trying to provide customers with a menu of options and that ability of comfort to find or track a dhl, locate a location, track the package. and that's key when you start to think about this
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80% of active customers today are micro, small, medium sized enterprises, and they're all really playing in the e-commerce space. that's what we have been doing >> mike, when you look at the 2019, given what have been in many given what would have beenn many cases record numbers in terms of freight rates, do you expect them to stay elevated next year or come off? >> i think they're going to hold i don't think we'll sigh a massive elevation. i think some of the challenge in '19 you may have saw in '18 was a slowdown on the capacity on intercon, we saw a bit of that drying up. we've been continuing to add to that we just announced two months ago we just purchased 14 777 wide bodies from boeing we're working to aim to add that capacity into our network. we expect continued growth in
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2019 the fact that you're a global company like we are in 220 countries, you're able to balance out the highs and lows as they come. >> on rail carloads, which for weeks and weeks and weeks seemed unable to go down. we've had two negative weeks, i know it's high-frisk sit data, but does that suggest anything at all >> we're explaining so inin ini something that we are closely watching. >> mike parra, thask you for joining us today >> happy holidays from all of us here at dhl, morgan and carl why hundreds of workers are walking out across europe and take a listen to the ceo of
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macy's who was with us earlier. >> i think it's a favorable consumer spending environment. record low unemployment. consumer confidence remains high clearly the customer on out there shopping we're going up against a positive comp in the fourth quarter of last year, as many of my competitors are, and i think everybody is ready for that. this isn't just any moving day.
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protesting the way the company treats its warehouse-based workers. the union is calling the warehouse conditions inhumane. workers plan to strike for 24 hours or more. the company responds, quote, amazon has created in the uk more than 25,000 good jobs with a minimum of 9.5 pounds per hour, and in the london area 10.50 an hour, on top of opportunities. all of our sites are safe places to work. one more headache to dealwith on black friday. >> warehouse work is not exactly -- it's difficult to begin with, but that we have seen that news, they're looking to raise minimum wage both in the u.s. and in the uk >> the criticism over the working conditions is not a u.s.-only dynamic. as we go to the break, just over an hour left on this shortened
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trading session, apple down another 2%, threatening 173 now, "squawk alley" is back in a couple minutes
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welcome back there's a look at faang today. obviously it's a big name for the holiday season, one that even jeff gennette of macy's said was a bright spot. >> the dow is down about 4% for the week, which says something it's usually a strong time of the year >> i think i saw it at 50 1/2, obviously more signals that we are literally awash with supply, even though the ceo of totale suggested wield see a significant cut in december. g-20 next week probably a big market mover, a few more retailer earnings, but yeah, in general, carl, it's children's day here at the new york stock exchange, so we just want to wish everybody a happy black friday, a happy start to
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the holiday. we actually have my rugrat here, too. >> are you ready for christmas yeah >> that's something we'll watch closely. guys, have a great thanksgiving weekend. we'll see you on monday. one or left in this holiday shortened trading day. it is time for a special "black friday" edition of the "closing bell. can santa claus, also known as father christmas in the uk, save the rally? plus today is gearing up, but are consumers out in droves always wait fog cybermonday? instead a closer look at retail shopping trends. >> i'm sara eisen in for kellie evans. apple oofrg

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