good thursday morning. i'm sara eisen with david faber. what a treat. setting the agenda, an exclusive with the ceo of kroger the grocer finally seeing relief in the supply chain. we'll talk the consumer and inflation and the latest on its deal to buy albertsons. investors ingest the hawkish pause from the fed why there may be more downside risk out there.

ian bremmer, his take on the global rules and regulations needed for ai and why it all may come down to china's relationship with the u.s. first, let's give you a quick look at the markets. we are having a nice move with the dow leading. don't like to mention that typically but the s&p is up 0.50% and the nasdaq is still up some 30-plus percent this year is lagging but up 0.4% >> they're digesting the data. we got a lot of data digesting the fed meeting. of course, the ecb one place i look when it comes to how the market is interpreting some of these central banks is the dollar, of course, because it reflects not just the fed expectations but the european central bank, which is out today raising interest rates and the dollar is weakening. it weakened yesterday after the news conference from fed chair powell it's not buying the hawkishness around the pause. >> the euro stronger in part - >> she was much more explicit,

christine lagarde and said july is firmly on the table and we have more work to do and we're going to continue. are we done? no it was a more clear signal they are focused on raising rates to deal with inflation. yes, weaker dollar and potentially supporting u.s. stocks here if the fed actually is done, which is a lot of wall street strategists and economists out this morning say they are if not, maybe one more in july, that's what goldman says. >> i like to go to sara eisen for that where are you? >> i don't know. we need to see more inflation data and evidence. it's good to see imports come down today, good to see the cpi and ppi but their still way higher than they need to be. let's continue to monitor the data on that as the fed chair said he was. i don't think they know really there are some members that want to keep going. we'll have to see how hot the inflation numbers get and how hot the claims elevated again

for second week in a row at 2021 levels is a signal the labor market may be starting to crack. still historically low numbers, but something to watch, no question about it. there's the jobless claims higher, 262, second week in a row. let's continue the conversation with our next guest who believes the fed will not cut rates this year and says there's likely more downside risk in stocks joining us is wells fargo head of fixed income strategist brian railing. what's your take on where the fed goes from here >> i think the fed has to go further. inflation is a problem the consumer still feels too good i don't see any widespread evidence that people are concerned about their jobs some of the weekly claims are a little higher so there is some weakening. as long as people feel good, as long as their 401(k)s are nice and high, they feel wealthy, they'll spend. the fed has to do more to bring inflation down to their target is their goal and i really believe it this narrative in the market

that the fed is going to be okay with 3% inflation or high 2s, i don't buy it i think the market's wrong. >> you expect more than july hike >> so, our targets just have the july hike, but i think it is definitely a possibility that there's upside risk to that, absolutely >> until what, until the labor market cracks month are? >> i think so. the consumer is driving this every airplane you get on is packed people feel good about their jobs i think the consumer has to crack. we're a consumer-driven economy. you are seeing weakness in other parts of the economy, but until the consumer feels bad and stops spending, i have a hard time believing inflation is going to come down to the fed's level we'll see improvement in inflation because of the base effect, but i think the fed has to be really careful here as inflation comes down, does it start to reaccelerate again? that's what we've seen in other periods of high inflation.

it goes up really fast, comes down really fast, and you have to make sure the fed is not -- >> has it been coming down really fast? do we think that's the case? >> i think so. and i think it's going to come down pretty dramatically over the next couple of months. at least from a headline number. those core numbers and getting down to that fed target, going to be much more difficult. >> as head of global fixed income strategy, tell our viewers when it comes to fixed income, where should they actually be focused? >> the easy place is to hang out in short term, generate some yield. we've been very aggressive we were back in october and we will be again if we see those long-term rates hit 4, 4.25, lock it in if the fed does follow through and they hit that 2% mandate where their target is, locking in rates at 4, 4.25 is going to look really good in the long term. >> how high do you expect the ten-year to get? if you expect for rate hikes - >> we should we've seen the curve steepen -

>> how high? >> i think we could test the highs, 4.25, i think that's possible. >> what about on the corporate side and/or even on high-yield, subinvestment grade, are there opportunities there? >> not right now spreads are really tight really well behaved, doesn't feel like a recession, doesn't feel like an inverted yield curve. i don't see the value in adding a lot of high yield or credit. i think there will be opportunities later this year. once markets, i think, catch up to the reality that things are going to soften and the fed's going to make things soften, but today i don't think a lot of value there. >> your bottom line is the bond market hasn't gotten the message yet that the fed is going to be more restrictive, hike more and neither has the equity market? >> i think the bond market has gotten the message a little bit, at least with the inverted yield curve. you've seen that inversion increase since the meeting but definitely not the markets

the markets have a bit of a summer fling here, i would call it. >> like the equity markets. >> yeah. good news is good news i don't know how you look at that meeting yesterday if you're a risk-on investor and equity investor coming away doing high-fives but sure enough, the market -- the market doesn't care every piece of news is good news. >> the one key question fed chair powell should have been asked is how he's thinking about ai in the short term what it's doing is keeping financial conditions looser than they otherwise would be, right? you're seeing these dramatic increases in stock prices in the nasdaq in the long term, major implications for productivity, deflationary, growth he didn't answer that. but i do think it matters, doesn't it >> it matters over the long term, absolutely. >> even near term. look at what's happening with the market. >> ai isn't new. chatgpt came out - >> generative ai but not ai in general. >> ai in general is not new.

the market's gotten ahead of itself it's super excited about ai and the generative models, like you said it's not reality those increases in productivity are not going to come that quickly. they'll come over time it will be a benefit but, you know, not this quick. >> my point s what comes quick is the nasdaq 100 being up 40% year to date. >> good news is good news, bad news is good news. >> brian, thank you. appreciate it, brian rehling from wells fargo. speaking of good news, the cava ipo we're awaiting the first trade at the nyc where are we 42.44. kate rogers covers the restaurant beat for us and leslie joins us. 22 is where it's priced so we're looking at a potential double here on the open >> that would be a double on the

open looking at about $5 billion market cap for cava. that's pretty remarkable especially since we've had such a dearth in ipo activity i think that's partly what we're seeing here, the supply dynamic. you have a large portion of the book, and i know you've been reporting on this as well, covered by some long onlys which leaves very little stock for everybody else you have people clamoring in the current process to try to get access to this one that's why you're seeing a potential doubling at the open >> obviously it's a strong indication of demand if you see a big pop at the open like this, but then what? as we've been saying with some of the restaurant stocks, kate, sweet green, they had amazing pops in their ipos and are well off the highs. >> they certainly are, sara. if you look at year-to-date performance for two comps we've been kind of taking into consideration for cava, chipotle is up 50% on the year, sweet green is up 30% but well off its

ipo performance and past highs something i asked analysts about is why now it's not only cava, there are other restaurant names waiting in the wings to see how today goes pa panera and fat brands, twin peaks, they have indicated they want to go public. we haven't seen a huge consumer pullback consumers are still spending money at restaurants cava does have strong performance there. >> kate, i'm just curious given your beat, you know, is there a name in particular that you would equate cava with that isn't already in the public markets? some would love to think it's the nextchipotle, but what makes sense to you >> david, you are hearing a lot of chipotle, but the most common thing is sweet green in terms of a consumer experience, i'm not talking market cap, but chipotle and cava do kind of get compared a lot and sweet green. you go in, the digital is a big part of the story. there's that make line, you

create your own bowls, drive-throughs in certain locations. cava is focused a lot on suburban growth, about 80% of its locations there and a lot on dinner time. a lot of people fled to the big office centers and cities during the pandemic that was a nice growth area for them it's a bit of a unique story for cava for sure. >> kate, leslie, thanks. we'll continue to watch right behind us as the indications move north ahead of the opening trade. thank you. stand by by the way, this wasn't supposed to happen either in a tightening cycle. ipo enthusiasm and euphoria. it's reminiscent of -- >> well, we haven't really had any ipos. >> 100%. the market rally is expanding. it's not necessarily what you think if a fed is trying to crush inflation by sinking the economy in a recession it's not happening it's great that it is and maybe they can achieve this soft landing and get away with it and also bring inflation down. >> the market is certainly doing

its part. >> there's little animal spirits. >> feels that way, particularly when you see a double in a name like this. $42.43, they're tightening the range. >> what does that mean >> means we're getting closer to an open. ian bremmer is on the other side of this break his take on how the world should respond to the ai revolution and what happens if we don't. plus, we're keeping an eye on shares of lennar. the company did beat and raise shares are up. executive chairman stewart miller joined us he spoke about the move higher in rates and the impact that's having on demand >> there was a great deal of sticker shock as interest rates adjusted rather aggressively i think that the buying public has become used to what i think of as a new normal in interest rates. people need a place to live. and demand is starting to come back to market, but affordability remains an issue,

so while at the same time we have a housing shortage, demand strong, but only as people can afford to buy. ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪ ♪

a lot has been made of the practical benefits of ai our next guest is calling out the risks and ways to address them in a new op-ed saying the best way to manage concerns over bad actors, job destruction and more starts with common sense cooperation between key countries, the u.s. and china. joining us is eurasia group

founder and president, ian bremmer. that doesn't sound realistic, does it? >> no, and we even see it in the nuclear space, china going from 500 to 1500 nuclear warheads with enriched uranium coming from russia. they have zero engagement in terms of nuclear arms control. with tony blinken heading over to beijing right now and with biden likely to meet xi jinping for a very significant summit with apec, it's critically important that both of those issues are on the agenda they can't just be talking about taiwan and semiconductors. we'll be in a lot of trouble if that's all they discuss. >> call me skeptical, i find it hard that governments can corral this technology in an effective way, even if they are asked to by the very creators. >> i'm not sure if they're really being asked to. i think the very creators are spending 99% of their time and resource and head space just on

building it as fast as they can and making sure they're in a better position than their competitors. it's such a dog eat dog entrepr entrepreneurial, creative, destructive environment. i want to make sure every head of state, every cabinet minister i speak with six months ago were not discussing or asking about ai now they all are >> do any of them understand it? by the way, sam altman did go to capitol hill a few times musk will talk about it. there is at least some -- you don't typically see this from technology executives saying, help us, help us regulate. >> well, zuckerberg in principle did the same thing a few years ago. i'm not sure how much he actually wanted the help and he's like look at the hand, don't look at what's over here if i look at senator warner, when i've spoken to at length about these issues, i think he's getting up to speed. i think there are heads of state. i was engaging with the norwegian prime minister this morning on this topic. he really cares.

a number of the europeans are focused. they're getting up to speed. my point is we don't have the expertise, we don't have the regulations, we don't have the institutions for the next one to three years there's no question all the driving in the space is going to be done by technology companies. more importantly, by a small amount of men actually in charge of the companies driving ai. but that's going to lead to various crises it will lead to disinformation crises both in elections and in the market space it will lead to massive malware and targeted spear phishing that governments need to react to you want them to develop this expertise early so the reaction isn't stupid and knee-jerk that's basically what i'm saying. >> i'm trying to think of other -- we've had our share of -- we have our share of issues that could use global coordination and cooperation look at the pandemic it just did not happen, especially between the u.s. and

china. climate change is there any example where they can do this right? >> yes, climate change is an example where they can do it right. pandemic is an example where they're doing it wrong the pandemic, even in the united states, the cdc is less credible and less legitimate after the pandemic than before, which is absurd, but does show the level of incredible politicalization and tribalism in the united states right now, not to mention the disinformation space now, climate change, i mean, over the course of the last couple decades, we all agree there's 420 parts per million of carbon in the atmosphere we all agree there's 1.2 degrees of warming as a consequence, you have the iea coming out today saying peak oil use is coming faster than you think because there's so much investment from every country in the world, from every part of the private sector into transition, bridging and post-carbon energy that's a success because we built those institutions, we

made those investments the question is, are we going to do that in ai or is this going to be like we responded to the pandemic because the consequences for all of us, if it's like the pandemic, are vastly greater than what we experienced in covid not even close. >> ian, finally, the election. you kind of hit this for a second there, but what are your expectations in terms of the use of ai to forge what are, you know, things people will not simply recognize as fact or fiction? >> i don't know how you keep your democracy when majorities of the population do not understand or accept fundamental truths about the political system and society and i don't like the fact that we are testing these algorithms by experimenting on our kids and citizens if i can wave a magic wand and make one regulatory change in the united states today, it would be you have to actually test these things out. even on vaccines

in the middle of a pandemic, you don't release them until you've tested them. how is it that we don't do that on ai, at least with kids under 18 that has to change >> you worried about the election, though, and what will be all these deep fakes conceivably being used by one side or the other to make people believe things aren't true >> i am. i'm worried about the fact we continue to have unprecedented things happening in our political system almost on a daily basis. none of them are positive. they are all corrosive, they all erode our political institutions, and the disinformation that comes from artificial intelligence will accelerate that tendency >> that is terrifying. he's on your level, david, of worry. >> we didn't even get to the actual threat to humanity. >> i'm not there i'm 58% on threat to humanity. i'm not with the ceos who think we'll blow ourselves up. a survey came out and 42% of american ceos think ai was going

to destroy us within five to ten years. i'm not with the 42% i want to make that clear. >> well, maybe not five to ten but 10 to 15. >> 10 to 15. >> 10 to 15. >> maybe you need to see more movies or something, ian thank you. thank you for joining us interesting op-ed. later this hour, ceo of kroger joins us in an exclusive after reporting results reaffirming full-year guidance but the stock is in the red. some focusing on a revenue miss. overall market, though, continues to build on its gains. the dow is now up about 350 points s&p is at the high of the day. we've made new intraday 52-week high

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you need to hire. i need indeed. indeed you do. indeed instant match instantly delivers quality candidates matching your job description. visit indeed.com/hire european markets set to close in a moment with stocks lower after the ecb raises its benchmark interest rate by 25 basis points as expected president christine lagarde warning inflation journey is

nowhere near finished and july, a hike there is, quote, very likely here's lagarde earlier on how wage pressures are factoring into the equation. >> wage pressures partly reflecting one of payments are becoming an increasingly important source of inflation. compensation per employee rose by 5.2% in the first quarter of the year and negotiated wages by 4.3% >> clearly an area of focus of concern, both for the ecb and, of course, for the u.s. as well. the story abroad we really want to talk about today is the weaker economic data in china. lack of economic recovery really in termsof what the bulls were hoping for our eunice yoon is live from beijing. what did you take away from some of the data today? i thought it was interesting the market rose because the chinese central bank cut rates and promising stimulus so what's happening in the economy? >> reporter: yeah, that's right. well, in terms of the stimulus,

a lot of investors were excited about it that's one of the reasons we saw the rally in the stock markets however, in terms of the main takeaway here, i think what we are seeing is authorities growing more concerned that the post-zero covid rebound doesn't look as though it has a whole lot of momentum. the numbers today really reflected that it's unclear as to exactly what is going to propel this economy forward. a retail sales and consumption supposed to be the big driver where people were going to come out in force and have revenge spending well, it looks as though that's not happening. it's moderating quite a bit. still higher than last year but that's compared to a year when a lot of people were hold up in their homes because of pandemic concerns the global demand for chinese products is weakening.

the investment figures also disappointed, especially on the private side private investment actually contracted so, that tells us that the private sector isn't really feeling like investing a whole lot. and then the property sector, which is traditionally a major driver in china, well, the imprints there were all lower for the most part. so, that really is a big concern for the policymakers here. one of the reasons why we did see the central bank move to cut a medium-term lending rate, and why there's all this talk now that we could see more rate cuts to come. one orbit of data, though, sara, that was really quite disconcerting was the youth unemployment figure. it hit a fresh record of 20.8% for may. that means companies in this environment are feeling really uncertain, not wanting to hire.

>> eunice, that's what i was going to ask about, youth unemployment i guess, what was, perhaps, misunderstood then in terms of the expectations of coming out of covid and the vigor with which people at least expected the economy to sort of reassert itself with -- that hasn't shown up >> reporter: well, i think the big debate here was exactly how people are going to spend and how wealthy they're going to feel and how quickly things were going to bounce back after the zero covid lockdowns there were several people here who thought that this was going to come back we've seen it in other countries, such as the united states, where people want to get back to their lives, want to get back to business and things would be opening up on force on the other hand, there were three years of lost income here. unlike in the u.s., people were really locked into their homes they couldn't do a lot of work you know, if you're, say, somebody who cuts hair for a

living, those haircuts you might have done over the course of three years, you know, you weren't really able to do a whole lot of that when you're hold up in your own home so, people are feeling quite poor i think that's what we're seeing here, is that people are feeling much more uncertain about the future and then in that period, of course, there have been all these different regulatory changes. it just seems like not only week to week but sometimes day to day you're not exactly sure how these regulations are going to play themselves out. that's another factor in the equation >> yeah. kind of a different mentality when you're locked up for so long, i guess. thank you, eunice. up next, target hiking its dividend and bernstein says now is the time to buy the stock why the analysts think the stock can rally 37% from here.

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there's a hush that has fallen over the crowd at the new york stock exchange as we await the opening of cava. there's bob pisani. >> it's like the old days. look at the crowd on the floor niece are just the traders there's 250 cava employees outside having lunch, waiting for the ipo to open. so, there's hundreds of people here on the floor. we talked about 22 pricing we are at $42 to $43 on cava that's not necessarily where it's going to open but when you get that close, dollar spread,

that's an indication that things are getting very tight here. let's talk to the man in charge, glenn with -- here with gps, which is the specialist. where are we, glenn? >> we're looking at high around $43, 1.1 million just align the book make sure we have our bids and offers in there so it's a smooth transition after we open up the stock. >> there's an old rule of thumb down here. you see 14.4 million shares. usually they like to open when it's about 10% of that volume, like 1.5 million or so are we anywhere mere >> we're right around there, 1.1 million or 1.2 million volume is good so we're happy. >> what about time >> a couple minutes or so and we'll be ready to go. >> within the next half hour, you think? >> oh, absolutely. >> the important thing, guys, this is the start of something cava is one thing. you see that price, that is not just cava.

that is a suppressed demand for ipos in general going back 18 months the greatest drought i've ever seen covering this in 25 years three things matter for the ipo market to open number one, a new stock market move to the upside s&p is at a my high. that's satisfied number two, stable or preferably lower rates. rates are stable right now third one, higher valuation. that's what this is. that's why this is a very important moment that is a much, much higher valuation than was anticipated the three elements necessary for the stock -- for the ipo market to get going are now present david, this is it. this is the ipo window and no excuses now. if we don't start hearing about many, many ipos announcing dates to go public in the next two months, something is very, very wrong. nobody's going to use july's -- you know, the specialist go away or the brokers go away in july that's not going to be an excuse this time. this is the moment to see the ipo market open. >> got it.

no excuses i haven't seen bob pisani that excited since 1999. >> are you okay? i feel you are also on pins and needles. >> the hush, it's very exciting. >> very dramatic it's been a while for us. >> and the way bob's beautiful gray hair twinkles in the light. >> the light of the yellow >> the whole thing is wonderful. >> bob, we'll come back to you any minute now. >> i'm waiting standing right here. >> right in the middle of the post. from restaurants to retail, one note grabbing our attention is a contrarian call on target up about 2% today. they note despite a similar selloff to bud, anheuser-busch following their own controversy, shares sold short are flat versus bud's up nearly two times. in other words, totally different case here. joining us to break it down, cnbc's retail reporter, gabrielle, it's good to have you on the show. first of all, welcome. >> thank you >> what is the case here for

target >> so, target seems to have a totally different situation than what happened with bud bud's stock fell way deeper, the short interest has continued to climb through may 31st, whereas target's is flat we're not sure why that is target stepped back from the pride merchandise a lot earlier. they pulled back some of the merchandise that was upsetting a lot of the public. they still managed to upset both the left and the right whereas with bud, that ire was directed from the right. what's going on but i think the stock tells us a big story. >> it's hard to tell because we don't know what the sale's impact has been on target. we see on the nielsen data with bud, you can kind of see dollar sales, market share sales. with target we haven't gotten an update yesterday there was a share holding meeting and the ceo addressed the issue but didn't give us any indication about what kind of challenge it is what are the analysts doing with

that are they guessing or - >> they're kind of not trusting the traffic data we're seeing. the traffic data is showing -- we already saw this. there was a slowdown in march that continued into april. what the traffic data is showing that continued into may and perhaps june traffic data, how much can you trust it credit card data is showing a slowdown in sales at target. bernstein is taking a different approach they're saying we haven't seen the credit card data it's something our clients are telling us about the long-term thesis at target remains strong their partnership with ulta beauty dominated, the highest performing category. that's going to continue shoppers are going to target for those things, nondiscretionary items, home essentials, food, things like that for bernstein, they think this is just a blip in the radar and target is going to be able to weather the storm. >> and they got the dividend hike today, which was a nice surprise for investors thank you. good to talk to you about target, which is up 2% now. >> my pleasure after the break, wall street

taking a show don't tell attitude when it comes to adobe's future getting ready to report after the bell the stock is up some 45% so far year to date

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figma. that is the "techcheck" with deirdre bosa. >> ai, you said it before the break, it has gone from a tell me to show me story. that's in large part to nvidia, which is turning the promise of ai returns into actual revenue in earnings this year. next up is adobe, which reports tonight. to the bears, ai is an adobe killer programs can generate an image from scratch in ten seconds typically what takes hours on adobe. however, the bulls would argue, that's just impact on the nonprofessional business ai represents one of the best use cases or applications of ai so far and will lead to giant productivity gains so far adobe is winning over the bulls, the investors announcing fire fly, a generative ai co-pilot, that's what it calls it shares have run up 40% -- 45% this year, but 40% in the last month alone. that raises the bar for results tonight. and i want to point out, it could have been a bit of a warning. earlier this week there was a

tepid market response to that new ai chip suggesting that product launches, they aren't enough ai winners, they need to show real partnerships, real path to monetization so, adobe could do that by putting some expected numbers on a commercial version of fire fly, which it will charge for. let's not forget as well, the guy at the center of it all, narayen, his track record, he has transformed adobe before into a cloud-based subscription powerhouse few are skeptical he can do it again. there are still questions over adobe's figma acquisitions there was concern or skepticism on why a giant like adobe would pay so much for a competitor. >> got to go back over to the post. cava just opened for trading bob pisani is there. >> there it is, cava finally opened here. it opened $42.

$22 was the initial price. remember, we were talking about $17 to $19 on monday they upped it to $19 to $20 on monday they open at $42 there's brett schulman, the ceo, his mother and father, his family as well let me see if we can get lynn martin in here, president of the new york stock exchange. lynn, congratulations. congratulations to everybody here the question is very simple, is the ipo window finally opening >> this is an amazing sign for the ipo window look at that print congratulations to cava. we are thrilled to welcome them to our community >> do you think -- >> congratulations. >> do you think your phone's going to start ringing we've all been waiting it's been 18 months. the greatest drought anybody has seen in 20 years >> my phone is already ringing, so we're optimistic. great company. >> brett, the ceo of the company. i just met your mother and father this is one of the great things

about covering ipos, the families, great staff, all of the people from the senior staff and some of the junior staff from cava are here your thoughts? >> we're happy to celebrate with our team it's a tremendous validation of all the work they put into the last 12 years. >> $42, that is an amazing price for a stock that was priced at $22 and we were talking $17 to $19 on monday. is this because the valuation is much higher than people thought or is there some demand out there that -- from the ipo drought that we've seen the last 18 months? >> i think investors see the vision we see to really define the mediterranean category, bringing this unique cuisine across the country most importantly, we're focused on the long term we're not focused on today's price. we're focused on the next ten years of building this business. >> the question, of course, is other competitors out there are going to be in this business as well where do you see yourself positioned we already have companies out there that are somewhat working in this space already. what differentiates you?

>> we're defining a new category that's mediterranean my founder's heritage and culinary it's that unique cuisine where you have amazing flavor, satisfying food but healthy at the same time. you don't have to make compromises to eat better. within our 38 ingredients on the line, 17.4 billion combinations to meet anyone's dietary tastes or needs that translates to great -- we have 45% at dinner, 55% at lunch. we have two great day parts to drive our revenue growth from and meet the needs of consumers around the country. >> thank you very much, brett. congratulations. next step, of course, sara, getting in touch with lynn martin and finding out who's making the phone calls to her. we will find out who the next companies are going public back to you. >> you captured the moment beautifully, bob, and made news there. my headline is, my phone's already ringing. the head of the new york stock exchange when it comes to ipos look at that trade david, the other question is valuation for a company that is not profitable >> and won't be for some time, as brett schulman said in our

interview earlier, there was a line of sight to profitability but he would not give us specifics as to when he expects that this the proceeds of this ipo will go to their expansion as you say, they're largely suburban and they believe that is a sound approach for them when it comes to actual profitability, not revenue growth but profitability, it's very much unclear. >> now it is a full double from that $22 price says something about sentiment in this market and appetite for new listings straight ahead, kroger shares are moving lower today as sales come in below expectations and guidance is on the low end of estimates we'll talk exclusively with the ceo next ♪ ♪ every day, businesses everywhere are asking. is it possible? with comcast business...it is. is it possible to help keep our online platform

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welcome back look at shares of kroger under pressure post earnings profit beats expectations, revenue comes up a tad short the company did note its gross margin rate improved joining us in an exclusive interview kroger ceo, rodney, thank you for taking the time after the call >> thanks for the invite, sara appreciate it. >> sales were a little bit light. i guess you maybe conditioned them to expect guidance raises and you just reaffirmed. what are you hearing >> we're pretty much hearing the same thing, the first time we haven't raised guidance in a couple of years. given the uncertainty in the

economy and what's going on, we just didn't think this early in the year it was a good reason to do that. the one area that we did increase guidance was on our free cash flow we had very strong free cash flow in the first quarter and would expect the year to finish stronger on a cash flow basis. overall we're connecting with the customer, making progress, and we're making progress with the upscale customer and mainstream customer which is good for the business long term as well. what about the low-income con consumer you've been warning about this about the increased use of coupons, tradedowns, what are you seeing on that front >> we're still continuing to see the same thing if you look at s.n.a.p., emergency s.n.a.p. dollars ended in pretty much all of the markets. it's down about 30% overall. that customer is under a lot of

strain what we're finding is that customer wants an entry price point item we're helping stretch their budget and not have to compromise, but a few months ago we introduced smart way and that's an example of an entry price point item and the customer is downloading of coupons and other promotions as well, doing everything they could to stretch their budget which we're trying to support. >> is it getting worse, and are you seeing a broadening out of the consumer pain? we're trying to figure out what is going on with the consumer. >> it's a great question the mainstream and upscale customer continues to behave as they have been if you look at our upscale products, wine, starbucks, that customer is continuing to behave exactly the

way before we are seeing good growth in that customer segment from specialty retailers so they're coming to us the customer on a budget is more constrained because of the continued pressure of inflation, from all-around standpoint and snap that we mentioned it's variant across customer segments >> what is happening with food inflation? is it moderating and by how much >> it ismoderating we would expect by the end of the year it would be 1% to 3%, something like that. and, as you know, we've talked several times. we've always expected inflation to moderate as you go through the year part of that is because of cycling such high inflation from a year ago part of it is if you look at the supply chain challenges and things it's starting to get back

to normal. if you look at eggs on the front page of the newspaper six months ago, significant reduction in egg costs, things like that. you're beginning to see the moderation we've expected for the last six or nine months, but it is coming to fruition and we are starting to see pickups as costs moderate as well >> we saw supply chain costs moderate how help follow is that for profitability and against a rising wage environment? >> our team has done a great job taking on more of the responsibility for the supply chain to our stores, process change and using technology and data we see that as a long-term trend that our team will be able to continue to take advantage of and the other thing that to me

is super exciting about it, they reduce the number of days in our supply chain for fresh products, it improves freshness for our customers. it helps the customer, it simplifies the supply chain and saves money. we would expect to see that through the year >> why do you think th sentiment has been so sour around grocery stocks in particular does it go back to this idea it was the best of times, covid, post covid, people eating at home, all helpful for profitability and that's coming down >> i think that's part of it i think there's fear of deflation. we want our investors to understand we've been able to be

successful in all markets. when you look at deflation it's been for very short periods of time it's not a surprise, but it's one of the things we know at the end of the day as long as we continue to focus on our customers, giving them great value, supporting our associates, when you look at all those things together you'll earn the customer spending money with you we're focused on what's best for the next five and ten years. >> one told us they look at the hamburger/steak spread, then the consumer is in trouble is that something that's happening really quickly >> we are seeing certain customers go to hamburger, chicken, some of those things and then beef prices will probably be under a lot of pressure later in the year from

a supply standpoint. >> rodney, appreciate the color and talking us through earnings and the stock move ceo of kroger. cava is up the market is up post-fed meeting, all is good. they signal more hikes are on the way. with that we'll let scott wapner pick up things with the "the halftime report" time from post nine sara, thank you very much. i'm scott wapner front and center the rally why stocks are jumping despite the fed's message. the investment committee debating your next more. josh brown, bryn talkington, with us. the fifth positive week in a row. it's on its longest daily winning streak rob, to you first, it was a hawkish pause. whether the fed