Trump Urges World Leaders to Seize Momentum for Gaza Peace

Summary

Bloomberg Businessweek Podcast Summary

Episode: Trump Urges World Leaders to Seize Momentum for Gaza Peace

Date: October 13, 2025
Hosts: Carol Massar & Tim Stenovec (with co-host Bailey Reutzel)
Guests: Mona Yakubi (Middle East Analyst), Mandeep Singh (Tech Research), Dan Florence (Fastenal CEO), Harmeet Singh (Levi Strauss CFO)

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Episode Overview

This Bloomberg Businessweek episode dives into the international response and the future outlook following the announcement of a ceasefire and hostage release in Gaza, with former President Trump urging global leaders to seize the moment for broader peace. In addition, the episode explores tech sector developments—focusing on AI and semiconductor strategy—provides industrial sector updates with Fastenal’s CEO, and unpacks the tariff-driven dynamics shaping Levi Strauss’s supply chain and consumer strategies.

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Key Segments & Discussions

1. Gaza Ceasefire and Trump’s Peace Push (01:58–08:31)

Guest: Mona Yakubi, Director, Middle East Program, Center for Strategic and International Studies

Main Points:

• Trump’s Role & Premature Optimism:
  • President Trump has reasons to celebrate—hostage release, cessation of hostilities, increased aid flow.
    • “The President does deserve to take a victory lap… However, I think the President is perhaps premature in saying the war is over.”
      —Mona Yakubi (02:13)
• Skepticism About Lasting Peace:
  • The 20-point plan is notable, but practical implementation remains uncertain, especially the disarming of Hamas and establishing an international stabilization force.
    • “The agreement itself is very short on details… Not at all clear how that’s going to happen.” —Mona Yakubi (03:10)
• The Fate of Hamas and Governance Challenges:
  • Disarming Hamas is not the same as its destruction; as Israelis withdraw, Hamas is reasserting itself in Gaza.
    • “This agreement… calls for the disarming of Hamas. It does not call for the destruction of Hamas, as Prime Minister Netanyahu has called for.” —Mona Yakubi (04:46)
  • Governance and the formation of a technocratic committee (overseen by Tony Blair) are key unknowns.
• Long-term Outlook:
  • Technical and political complexities—disarmament, power transfer, rebuilding, governance—are unresolved and will shape the next steps.
    • “There are so many details that have yet to be ironed out, let alone implemented.” —Mona Yakubi (03:58)

Notable Quotes:

• “What will distinguish what happened today from ceasefires in the past is if the various points that are laid down in President Trump’s 20 point plan are in fact implemented.” —Mona Yakubi (03:10)
• “As Israeli troops withdraw from limited areas of Gaza, … Hamas is filling in and is taking over.” —Mona Yakubi (05:39)

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2. OpenAI, AI Hardware Deals, and the Semiconductor Market (11:02–17:17)

Guest: Mandeep Singh, Global Head of Tech Research, Bloomberg Intelligence

Main Points:

• OpenAI’s Strategic Chip Sourcing:
  • OpenAI’s deal with Broadcom for custom AI chips and networking gear illustrates its push to diversify beyond Nvidia and lower its compute costs.
    • “They are really going after… data center capacity by diversifying their supplier base, not just relying on Nvidia.” —Mandeep Singh (11:59)
  • Custom silicon is tailored for proprietary AI models, akin to Google’s TPUs.
• AI Power & Cost Constraints:
  • The cost and power usage per data center are now a limiting factor.
    • “The real constraint right now is power. ... Nvidia gives you 5 to 10x more performance per watt than the nearest competitor.” —Mandeep Singh (13:36)
• Industry Implications:
  • OpenAI is over-provisioning capacity to grab market share, potentially shutting out competitors through scale.
  • Other companies like XAI and Anthropic are also investing in supply, but OpenAI’s scale dwarfs them (“We’re talking 500 billion, not 20 billion anymore.” —15:35)
• Profitability and Scale:
  • Despite massive investments, OpenAI’s margins are challenged by training costs; comparisons drawn to Google’s more efficient infrastructure.

Notable Quotes:

• “OpenAI is not looking to sell its own chips to compete with Nvidia… It’s looking to use its chips for its own ChatGPT app…” —Mandeep Singh (12:12)
• “If they get market share… then they will be able to monetize and probably drive some companies out of competing with them because of the scale…” —Mandeep Singh (14:41)
• “OpenAI’s compute costs are probably north of 20 billion right now. And if they’re adding 26 gigawatt more capacity, we’re talking… to multiply at least 25 fold.” —Mandeep Singh (16:18)

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3. Industrial Sector Read: Fastenal Earnings, Tariffs, and Supply Chain (17:17–27:46)

Guest: Dan Florence, CEO, Fastenal

Main Points:

• Earnings & Pricing Pressures:
  • Fastenal posted strong revenue growth but faces pricing pressure due to fluid tariff environments.
    • “We had a really good quarter… Double digit growth. … But the most important aspect is on a price cost basis we are neutral and that’s what we aspire to be.” —Dan Florence (18:31)
• Supply Chain Diversification:
  • Fastenal is actively diversifying supply away from high-risk regions like China and Taiwan, shifting routes and suppliers to mitigate geopolitical and financial risk.
    • “It’s reducing our customers’ exposure to any market, … that are on the receiving end of some of the political winds…” —Dan Florence (23:48)
• Tariffs and Mitigation:
  • Ongoing global supply shifts, splitting sourcing across Asia and the Americas to bypass tariffs.
    • “We have a sourcing team in Shanghai, … Bangkok, we have a sourcing team in Northern India.” —Dan Florence (22:07)
• Economic Sluggishness & Adaptation:
  • The industrial sector has been “sluggish” since late 2022; Fastenal focuses on executing at a high level to stay above the broader slowdown.
• AI Trends:
  • AI/data center construction is a net positive for Fastenal’s product mix; the company is adopting AI internally to optimize processes.

Notable Quotes:

• “We’ve been in a sluggish economy for a long time. … Once you get through that downshifting, now even if your customers are at a subdued level, you can grow in that kind of environment.” —Dan Florence (24:38)
• “It’s just so damn fluid and there’s so many things… that occur from week to week, month to month that are outside the norm. But the fundamentals still work.” —Dan Florence (27:30)

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4. Levi Strauss: Tariffs, Resilience, and Evolving Consumer Tastes (30:13–45:03)

Guest: Harmeet Singh, Chief Financial & Growth Officer, Levi Strauss

Main Points:

• Strong Quarter, But Tariffs Bite:
  • Solid business momentum, international growth, direct-to-consumer gains, and strong product segmentation—all offsetting tariff headwinds (especially from China and elsewhere).
    • “We had a real strong quarter… [with] record gross margins… The consumer is largely being resilient.” —Harmeet Singh (31:10)
• Supply Chain Diversification:
  • About 1% sourced from China, majority from Southeast Asia (Bangladesh, Pakistan, Vietnam); the company is highly diversified to absorb tariff shocks.
• Margin Management:
  • Record gross margins in Q3; Q4 margins might dip due to tariffs, but year as a whole still expected to be strong.
    • “We’re able to offset tariffs because we’ve got other things working for us… We have a product pipeline that has never been fuller.” —Harmeet Singh (35:13)
• Price Strategy & Consumer Segmentation:
  • Prices are kept stable for signature (less affluent) consumers, innovation-led growth for premium segments. The company balances price with value and innovation, especially for Walmart shoppers (lower income).
    • “We’ve been very thoughtful about pricing. We’re leading with product innovation rather than price.” —Harmeet Singh (37:11)
• Growth Targets & Future Focus:
  • Mid-11% EBIT margins, with aspirations to hit 15% margin before $10B in revenue. China remains underpenetrated but offers long-term growth potential.
• Fashion and Culture:
  • Levi’s rides the wave of casualization, with new fits/styles driving interest across all age groups.
• Global Markets:
  • China is just 2–3% of Levi's business, slow for now but brand equity remains strong; targeting core and premium consumers in Asia.

Notable Quotes:

• “If you think in EBIT margins, this year we land about mid-elevens… Our view is we probably get to the 15% faster than we get to the $10 billion.” —Harmeet Singh (38:51)
• “The company that we are building… is steadily delivering mid single digit growth in a category that probably grows a little south of that.” —Harmeet Singh (39:30)
• “The good news for us is they [Chinese consumers] love the brand… There is a high end consumer as well as the mid-market consumer we call the core products.” —Harmeet Singh (40:59)

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Memorable Moments / Quotes

1. Mona Yakubi on Gaza:
   • “There are so many details that have yet to be ironed out, let alone implemented. And I think these are the key potential sticking points in the coming days and weeks and likely months.” (03:58)
2. Mandeep Singh on OpenAI:
   • “Inferencing wise, yes, they [OpenAI] are making some money. But clearly, if you include everything… their compute costs are probably north of 20 billion right now.” (16:12)
3. Dan Florence on Industrial Fluidity:
   • “Odd with the fact of it’s just so damn fluid and there’s so many things that occur from week to week, month to month that are outside the norm.” (27:30)
4. Harmeet Singh on Pricing:
   • “We’ve been very thoughtful about pricing. We’re leading with product innovation rather than price…” (37:11)

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Timestamps for Major Topics

• Gaza Ceasefire Analysis with Mona Yakubi: 01:58–08:31
• AI Chips & OpenAI Supply Chain with Mandeep Singh: 11:02–17:17
• Fastenal Earnings & Industrial Macro Trends with Dan Florence: 17:46–27:46
• Levi Strauss Tariffs, Margins, & Fashion Strategy with Harmeet Singh: 30:13–45:03

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Episode Tone & Style

The conversation is analytical, direct, and business-focused, with a measured optimism about strategic adaptation in turbulent times. Guests provide substantive, nuanced takes, avoiding sensationalism and focusing on economic and operational realities. The hosts inject warmth and relatability, especially in the consumer segment.

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Summary Takeaway

This episode captures a world in transition: a tentative step toward Middle East peace, high-stakes bets on AI hardware shaping global tech, industrial manufacturers navigating supply chain storms, and iconic brands like Levi’s flexing resilience through consumer and geopolitical disruptions. The perspectives provided offer a roadmap for leaders and investors seeking to understand what’s next in today’s complex economic and political landscape.

Transcript

[Carol Massar]

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[Podcast Narrator]

For an inside look at the global.

[Mona Yakubi]

Connections that help businesses succeed, search for Turning Point brought to you by Bloomberg Media Studios and HSBC.

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[Harmeet Singh]

Bloomberg.

[Podcast Narrator]

Audio Studios Podcasts Radio News this is Bloomberg businessweek Daily reporting from the magazine that helps global leaders stay ahead with insight on the people, companies and trends shaping today's complex economy. Plus global business, finance and tech news as it happens. The Bloomberg Business Week Daily podcast with Carol Massar and Tim Stanweck on Bloomberg Radio.

[Carol Massar]

All right, we want to stay on this story. Joining us right now is Mona Yakubi and she's Director and Senior Advisor, Middle East Program at the center for Strategic and International Studies. She joins us from Washington, D.C. mona, should President Trump be taking a victory lap here?

[Mona Yakubi]

I think the President does deserve to take a victory lap considering what has been accomplished today. The release of the last 20 remaining hostages who were alive are alive in Gaza, the cessation of hostilities for now, the flowing in of much needed assistance into Gaza. These are important milestones. However, I think the President is perhaps premature in saying the war is over. The difficult steps ahead are the ones that we will have to watch closely to see if in fact his aspirations become reality.

[Bailey Reutzel]

And Mona, how does that play out? If you were going to say that this is presumably some form of a stopgap and not necessarily conclusion and marking a next chapter, what plays out? How does this play out and kind of what's your view on that?

[Mona Yakubi]

Well, what will distinguish what happened today from ceasefires in the past is if the various points that are laid down In President Trump's 20 point plan are in fact implemented. Critical among them is the disarming of Hamas. Hard to know how exactly that's going to happen. The agreement itself is very short on details. There's also the envisioning of an international stabilization force that would surge into Gaza and be responsible for security. Not at all clear how that's going to happen. And of course, questions around governance. And the constituting of a committee of Palestinian technocrats to be overseen by former British Prime Minister Tony Blair. I mean, there is, there are so many details that have yet to be ironed out, let alone implemented. And I think these are the key potential sticking points in the coming days and weeks and likely months, Mona.

[Carol Massar]

And I think it's fair to say, right, a conflict like this that has gone on not just in the last two years of a war, but it's been. Been going on for a long time between Israel and Gaza and Hamas. What is Hamas, though, in a world where there is no conflict between Hamas and Israel? I mean, they have been designated terrorist groups. I'm just curious, what is Hamas potentially going forward in if there's real peace in this region?

[Mona Yakubi]

Well, I think you point to a really important issue here. I mean, Hamas's raison d' etre is resistance, resistance against Israel and against Israeli occupation. Now, presumably, if all of the various elements that would bring actual peace between Israelis and Palestinians come into fruition, then that would indeed sort of, I think, dramatically undermine the rationale for Hamas to continue to exist. But I do think it's really important, Carol, to note this agreement talks about and calls for the disarming of Hamas. It does not call for the destruction of Hamas, as Prime Minister Netanyahu has called for and made a centerpiece of his policies on Gaza.

[Carol Massar]

So, okay, so that's an important distinction, correct?

[Mona Yakubi]

Very much so. I mean, we're already seeing reporting that as Israeli troops withdraw from limited areas of Gaza, there is reporting that Hamas is filling in and is taking over. And so again, this just gives you a sense of how daunting this challenge is going to be going forward.

[Bailey Reutzel]

And Mona, you have about, you have more than 30 years of experience in the Middle east and North Africa. With that in mind, what do the next weeks and months, years look like?

[Mona Yakubi]

Well, I think immediately what's going to need to happen is more meat on the bones of exactly how it is that this agreement that all of these various leaders just signed off on in Sharm El Sheikh, how will those, how will those points actually be implemented? So I think the first order of the day is going to be figuring out how to establish security on the ground as Israeli troops withdraw. And not at all clear how that's going to happen. What are the mechanisms by which Hamas is going to be disarmed and to whom, whom will they give their arms to? And then of course, the other key element of any post conflict stabilization is governance. You've got to have governance, you've got to have authorities on the ground. Who will they be? How will that structure be set up? Those are really critical questions and we're a long ways from understanding what the details are that will govern those various arrangements.

[Carol Massar]

There's a disarmed Hamas just to kind of tie this up. Do they want a Gaza, a Palestinian state that actually thrives?

[Mona Yakubi]

Presumably they have called and would be in agreement with that. But as always, the devil is in the details. For example, they are saying that Israel must withdraw 100% from Gaza. That is not envisioned by the plan. And ultimately, what does a Palestinian state look like? Is there a way to actually build a Palestinian state from the current set of circumstances that we see on the ground? That is also going to be extraordinarily difficult as long as these questions remain. There will be space for resistance. There will be space for groups like Hamas or its successor to cause trouble.

[Carol Massar]

Yeah, it's fascinating, right? And you talk about, you know, the building of a Palestinian state and then there's just the actual build of a land that has just been debt devastated. So much more to come. And I know we'll lean on you in the future because I'm sure there'll be more to come. Mona Yakubian, she's director and senior advisor, Middle East Program at the center for Strategic and International Studies. Stay with us. More from Bloomberg businessweek Daily coming up after this.

[Mona Yakubi]

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[Carol Massar]

Well, big AI is a big market story as well today once again driving the trade pushing semi as a Group Semiconductors that is higher today led by Broadcom whose stock jumped after OpenAI agreed to buy the company's custom chips and networking equipment in a multi year deal, part of an ambitious plan by the startup to add AI infrastructure. So we wanted to just dig a little bit deeper into it. Amy talked about it. We certainly are seeing it playing out in the market. Got a great voice though Bailey to walk us through it.

[Bailey Reutzel]

One of my favorite people, I will say.

[Carol Massar]

Billy must have said Mandeep's name about five times on the call this morning.

[Bailey Reutzel]

Immediately was like we need to get him in studio. So perfect timing and that's why we're joined now by Bloomberg Intelligence Global head of technology research, Mandeep Singh here in the studio. Mandeep, walk us through this deal. Because it feels like every other day OpenAI has a new agreement with some chip manufacturer and the terms are slightly different, whether it's an ownership stake or front buying chips. What's up with this broad compact?

[Mandeep Singh]

I mean, they are really going after, you know, data center capacity right now. And the way they are doing it is by diversifying their supplier base. So it's not just relying on Nvidia, which everyone does right now for compute, but really leveraging Broadcom, which is a custom silicon maker. So think about, you know, Nvidia giving you a generic chip where you can run your AI workloads, whether it's training or inferencing. Custom silicon is used just for, you know, the specific workload that OpenAI has to run for its proprietary model. So no one else has any benefit of using a custom silicon. Because OpenAI is not looking to sell its own chips to compete with Nvidia. It's looking to use its chips for its own ChatGPT app or any other custom app that it has developed in house. And Google is a prime example of what a custom silicon looks like because they have their own TPUs, which when you compare it to Nvidia GPUs, is more customized in nature. But it does a terrific job of running YouTube or any other AI workloads that Google wants to run on its chips. So that's what OpenAI is doing. And it has a tremendous cost advantage because it costs a lot lower than the Nvidia price tag of $30,000 on.

[Carol Massar]

An average for a GPU TPU tensor processing unit. I make sure I understand. What's interesting though is I do feel like there's this move trend to get chips that maybe don't cost as much, maybe don't use as much power, but do exactly what we need. Is that fair? Yeah.

[Mandeep Singh]

I mean, look, one smart, one gigawatt requires up to 500 to 600,000 accelerator chips. So we're talking point five to 0.6 million chips for one gigawatt data center. Imagine if you can save up to $5,000. How it multiplies in terms of cost savings. The real constraint right now is power. It's not as if you get a cheaper chip and you are all good. You still need the performance per watt, which is why Nvidia is so good, because it gives you 5 to 10x more performance per Watt than the nearest competitor. Right, Exactly.

[Carol Massar]

I want to show there's a graphic and one of our producers made it, Elizabeth Sedron. And I think we've all been looking at this. It's about OpenAI and all of the companies that they're doing deals with. And it's not even been a month, but they have done deals with Nvidia, Oracle, Core Weave, amd, now Broadcom, and again, it's just late September to mid October. So is that what this is, is just giving them a smarter supply chain and having access to what they need? Is it as simple as that?

[Mandeep Singh]

Well, it's not as simple because they're going across the stacks. Think of, you know, how AI applications are deployed. You need the chip, you need the infrastructure, you need the cloud, because that's where you're doing your inferencing. So they've cut deals with different parts of the stack here, not just the chip makers, not just the power guys, also the cloud guys. So from that perspective, the Core weave. Right, Core weave, exactly. And look, I mean, to my mind, they are going aggressive in terms of adding more capacity than they probably need because they think if they get market share, they get the companies or users to use their product, then they will be able to monetize and probably drive some companies out of, you know, competing with them because of the scale involved here.

[Bailey Reutzel]

Well, are X, AI and anthropic striking similar deals, or is this the OpenAI show?

[Mandeep Singh]

I think right now XAI must be thinking, and they are doing a $20 billion deal with some private financing. But look, when OpenAI announces a 10 gigawatt deal, we're talking 500 billion, not 20 billion anymore. So it's. The numbers are getting bigger and bigger.

[Bailey Reutzel]

Well, is OpenAI, in this moment in time, on October 13th, the most important company in the world?

[Mandeep Singh]

Well, when I look at Mag7, your Broadcom is not in Mag7. It's a $1.6 trillion company. You know, OpenAI probably, you know, it's.

[Bailey Reutzel]

And they're up 10% because of this. I mean, also the whole space sold off on Friday, so don't want to downplay that too much.

[Carol Massar]

But, like, they're not even public, they're not even profitable as much as we know. Right?

[Mandeep Singh]

No, I mean, look, so right now their gross margins would be negative if you factor in the training costs. Inferencing wise, yes, they are making some money. But clearly, if you include everything. And just to compare it with Google, Google has an annual cost of revenue of around 100 billion. That powers all of their apps, you know, Google, YouTube, everything that they run. OpenAI's compute costs are probably north of 20 billion right now. And if they're adding 26 gigawatt more capacity, we are talking, you know, compute cost to multiply at least 25 fold. So from that perspective, you have to ask yourself how much incremental revenue do you want to see from OpenAI to justify this? You know, 1 trillion, potentially $1 trillion in compute infrastructure spend. And that's where Google's infrastructure is so efficient because just less than 5 gigawatt of compute gets you to over 400 billion in revenue.

[Carol Massar]

That's pretty cool to say the least in a non financial analysis terminology. Mandeep, thank you. Always a gem. Bloomberg Intelligence Global Head of Technology Research Mandeep Singh AI spend in the build out is one read on the US economy and certainly the tech economy. Now to another great read, Bailey, on U.S. economic activity activity and we're talking about the industrial supplier Fastenal which reported earnings earlier this morning and shares, I think they were the worst performing the s and P500 at one point.

[Bailey Reutzel]

Yeah, right now down about 6%. And keep in mind this is a $50 billion company. So this is no small, small fish in the again in the industrial space. One of the first reads we get every quarterly earnings season. Missing Wall street views, broadly speaking. So interesting. What's driving that?

[Carol Massar]

Well, let's ask the CEO. Daniel Florness is with us. He is chief executive officer of Fastenal. He joins us from Winona, Minnesota. Dan, it is great to have you back with us. Talk to us about the quarter because it does seem like analysts were noting that the pricing during the quarter was weaker than expected and marks the second straight quarter of softer pricing. And maybe that's why we're seeing the stock down. What do you want to say to investors?

[Dan Florence]

Well, part of the reason our stock's down is it's priced to perfection if you look at what it's done year to date and where the multiple has gone. But you know, we had a really good quarter. We had, we had a double digit quarter. We hadn't seen that for a couple years. Double digit growth. Sorry. And pleased with the outcome. One of the challenges we had this year was there's a lot of fluidity around tariffs and what it means for pricing and we will raise price to address costs in our customer supply chain. We, we really don't want to raise more than that because we believe it impairs our ability to grow as fast as we'd like and you know, coming into the quarter we estimated, you know, X for, for impact of pricing came in a little bit less. We lowered our number for the fourth quarter, fourth quarter. But the most important aspect is on a price cost basis we are neutral and that's what we aspire to be. We'd rather just grow.

[Bailey Reutzel]

And Dan, to your point, Fastenal, even with the pullback today, returning 22% year to date, so outperforming the S&P 500 and comparable stocks in the industrial space. But just one more question on pricing in terms of expectations, would you want to raise pricing? Like do you get the sense that consumers and customers would push back just given how you've been shifting into bigger customers spending much more money?

[Dan Florence]

Yeah, customers always push back on pricing. Doesn't matter the size customer. We will, we, we are having conversations with our customer. We will be doing some price increases in Q4. I suspect we'll be doing some price increases as we move into 2026. But again our first discussion with the customer, they understand it, they're willing to move on price. Our first discussion is always what are alternatives to this product. That maybe doesn't mean we have to raise your prices 5%. Maybe it means it only has to be 2. And read we'd rather go to 2 because that's what, that's what a supply chain partner does.

[Bailey Reutzel]

Well then how do tariffs fit into this? Just given that according to analysts across the street, when we look at certain industries now is when we're going to see tariffs showing up in the third quarter in guidance as it go as it relates to 2026, what are you seeing and how are you kind of attacking or addressing any pressures from tariffs?

[Dan Florence]

Yeah, so for us, tariffs have been in the, in the equation since the, you know, early part of the second quarter, a little bit of the first quarter. I think in the individual that handles pricing historically, he will provide us an update once a month. He'd gotten to the point where he was not only providing us updates, he, he was up to video number 14 as of July that he was serving out to the field, giving them guidance into what we were seeing in our supply chain. And, and so we've been adding price as we've gone through the year and these have been discussions with customers and I hope that answers your question.

[Bailey Reutzel]

No, I think it does. But I think the big thing is are you mitigating the impact of tariffs? Are you shifting your supply chain? Is the expectation that you can have of knock on effect as it relates to Pricing. If we do continue to see threats from the President going after countries like China or others, we are going to talk to one of the members of Levi's management team and they called out that they had to dial up their expectations for the impact of tariffs from other countries. So how is that impacting when you look at your supply chain and when you look at the potential for pricing impacts in 2026?

[Dan Florence]

We've been moving supply chain around the planet in earnest since 2017, 2018 timeframe, as our name would imply. We sell a lot of fasters and most of the fasteners in North America come from either mainland China or Taiwan. And the automotive industry took the production there back in the 50s and 60s, actually took it to Japan and South Korea, and it migrated from there. If I look at our resources, we now have a sourcing team in Shanghai, but we have a sourcing team in Bangkok, we have a sourcing team in Northern India. And we have worked to diversify our supplier base around the planet and a little bit more in North America, but really around the planet. So to have diversity in supply so you're not caught off guard by some price change or, or a tariff change. In addition to that, we've taken supply chains coming in North America, which traditionally came in through the west coast United States, and then we would redistribute from there. We have moved supply chains so they're bringing product directly into the west coast of Canada or the west coast of Mexico because those two countries represent about 14% of our revenue. Now. You bypass the tariff, however, it's more expensive to break shipments down over in Asia and bring them in, but it's a lot less than a tariff.

[Carol Massar]

One of the things I want to ask you, you know, you talk about supply chains is the end game. Dan. We're talking with Dan Florence. He's chief Executive officer, Fastenal. Is it about, though largely reducing your exposure to China, which has been a pretty big one.

[Dan Florence]

It's. It's reducing our customers exposure to any market, in this case China and or Taiwan, but to any market that are on the receiving end of some of the political winds and create an unstable supply base for our customer here. It happens to be China. Another month, it might be a different country. Another year, it might be a different country. It's diversifying your supply chain so your eggs are not all in one basket.

[Carol Massar]

Got to be ready. So, yeah, whichever way the winds blow. Hey, one of the things I want to ask you just big, broadly, the earnings update today, you talked about the Industrial environment sluggish. We've heard similar commentary on this persistent sluggishness elsewhere from manufacturers, as well as caution around project delays. At what point does this become something more worrying than just sluggishness?

[Dan Florence]

For us, it's been sluggish since November of 2022, when we really key on what the Industrial Institute for Supply Management puts out, the PMI index. And that's been sub 50, which really plays into our customer base. Other than January and February of this year, that's been sub 50 since November of 2022. So we've been in a sluggish economy for a long time. From our perspective, other than living through the first part of it where you had customers that were downshifting, reason our growth is shining through a different way. A, I think we're executing at a higher level, but B, once you get through that downshifting now you're just. Even if your customers are at a subdued level, you can grow in that kind of environment. And that's what's shining through in our numbers right now.

[Carol Massar]

All right, one thing I want to ask you because as you would imagine, I don't know how much of this is pervasive in your world, but AI is like the nonstop conversation that we are having. Certainly when it comes to activity and market impact, to what extent is AI maybe sucking up the oxygen in the economy? Are you seeing any signs of that or your world they're going to still need what you guys supply no matter what's going on with the AI spend and enthusiasm?

[Dan Florence]

Well, first off, we have a lot of we have a meaningful improvement in our revenue as it relates to things like data centers because we sell into a wide range of of customer needs and end market needs, whether that is the actual construction. I visited many data centers being built where we have people on site there after it's built, we're supplying into that facility with things like air handling and maintenance equipment. In the case of a customers that sell into that sector, that's actually a strong business for us right now. And then as an organization we're increasingly making use of AI in our own business and how we go to market and how we help our employees be more efficient in what they do.

[Bailey Reutzel]

And Dan, about 45 seconds here with in with keeping in mind data center construction, where are those products sourced from? Are those also heavily sourced from China and exposed to tariffs or are they different supply chain altogether?

[Dan Florence]

You know, they're, it's mostly a different supply source but it depends on the component. If it's facility maintenance types, products, they're coming from anywhere on the globe and so they're subject to the same type of issues any product would have. But a lot of the components I know a lot of the manufacturers that we sell into, I visited one about a year ago in Michigan where they were purposely avoiding China and they're selling directly into the data centers.

[Carol Massar]

You've been at Fastenal for a long time. You've seen different cycles. How do you describe this one? And again, just got about 20 seconds. If you could be very quickly, very quick.

[Dan Florence]

Oh, odd in the fact that you know similar we saw in 18, but odd with the fact of it's just so damn fluid and there's so many things that occur from week to week, month to month that are outside the norm. But the fundamentals still work.

[Carol Massar]

All right.

[Dan Florence]

So serve your customer at a high level. You grow your business.

[Carol Massar]

Love talking with you Dan Florence, he CEO of Fastenal. Stay with us. More from Bloomberg Businessweek Daily Coming up after this. How can you grow your business from idea to industry leader? Bring your vision to life with smart business buying tools and technology from Amazon Business. From fast free shipping to in depth buying insights and automated purchase approvals, they deliver everything you need to achieve your goals. It's not easy to stand out from the crowd. Simplify how you stock up to get ahead. Go to amazonbusiness.com for support.

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[Podcast Narrator]

You're listening to the Bloomberg Business Week daily podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.

[Carol Massar]

All right, folks, Levi Strauss shares, they are trading slightly lower today after dropping as much as 14% on Friday. This is after the company's upgraded earnings guidance still fell short of higher investor expectations following the stock's more than 40% rally. Heading into that earnings print now, one key disappointment, at least according to analysts out on the street, is earnings growth failing to match the pace of sales expansion due to tariff and distribution costs. Meantime, gotta say, Bailey, you did have TD Coin raising its price target on the stock to 26 from 22 a share and they've got their buy rating.

[Bailey Reutzel]

Yeah, staying bullish. And you look at the street, 13 analysts, 10 of them buys. So is it a sell the news event price to perfection. Mm, we see.

[Carol Massar]

It's a really good point. So let's see what one of the company's members of the C suite have to say. Harmit Singh is with us, Chief financial and Growth Officer at Levi Strauss. He joins us from our San Francisco bureau. Harmony, it's so good to have you here with us. How are you and how is the consumer doing?

[Harmeet Singh]

Well, thanks for having me, Carolyn Bailey, it's great to be here again. You know, we had a real strong quarter, four consecutive quarters of high single digit growth and record gross margins, as well as the fact that we were able to raise our full year guidance as well as gross margin and EPS expectations. Overall, as a company, we're a stronger and a higher performing company defined by accelerated growth, expanding margins and higher return on invested capital. To your question about the consumer, the consumer is largely being resilient. You know, our products are really well segmented. You know, we have Blue Tab, which we, which is our premium high pinnacle product and that's doing well. We've introduced that in the US So far, so good. We have a red Tap product that is basically marketed to consumers who earn between 100,000 and over. And that's, you know, based on our results, really done well. And then we have, you know, a signature product sold through Walmart that again had a banner quota and that's for, you know, lower income consumers. So consumer strength, really strong. That's where we were able to raise the full year guidance and our product pipeline hasn't been stronger. Now if you go outside the US International business was up in the high single digit. And so Asia had a strong quarter consumer. Strong. Europe had a decent quarter consumer in a better place and so is Latin America.

[Carol Massar]

Well, I'm just going to lay it out for you. I think I bought my first pair of Levi's in a long time just a couple of months ago. My daughter, who's 22, so much younger than me, has been buying Levi's for a while. So Billy, I mean, they're back. I go into the store in downtown in, in the village and yeah, it's packed.

[Bailey Reutzel]

Well, you get a partnership with Beyonce. All the marketing you guys are spending in terms of targeting both young and older generations. But Harmeet, I want to ask about tariffs. So Levi expects tariffs from China about 30% but increase expectations to 20% from the rest of the world. Where are you sourcing your jeans materials? Is it more, are you more exposed to that doubling in terms of, are you getting materials from Vietnam in place of China?

[Harmeet Singh]

Yeah. So overall we're taking a holistic approach as we are able to offset the tariff impact. You know, as you think about this year, we raised guidance in the top line and the bottom line and gross margin. So you know, we've been able to withstand that. To your specific question, Bailey, we source about 1%. We import into the US from China, a little over a percent from India, most of, and Vietnam is in the mid to high single digits. So most of our imports are from the Southeast Asian countries. Think Bangladesh, think Pakistan and, and the rest of Asia. The way we think about our supply chain is fairly well diversified. We import from about 20 countries into the U.S. 60% of our business is outside the U.S. and so, so we are well positioned to mitigate and offset tariffs. And the way we are thinking about the holistic approach given that volume is driving a big piece of our revenue momentum and we have tenured vendor relationships, we're working with our vendors, we're looking at different cost efficiencies across our organization as well as being very thoughtful about prices, pricing.

[Carol Massar]

So let me just ask you though, you guys did you know, you mentioned you raised your full year outlook. You did warn that tariffs are starting to bite. Profit, profitability to measure by gross margins improve. So these are the good stuff. But again, that tariffs are starting to bite. Hermit, can you tell us what that means? What the bite of tariffs when, when, how much, you know, any color around that.

[Harmeet Singh]

Sure. So, you know, overall, you know, we were able to raise top line and bottom line guidance despite absorbing tariffs. And so we are able to mitigate it. To the question about tariffs, you know, tariffs were introduced on Liberation Day. We normally buy our products, you know, six months in advance. And so, you know, we are working through, you know, our efforts and we've got different levers to kind of position it. So you take quarter three, the quarter we just reported. Gross margins are record. So we're able to offset tariffs because we've got other things working for us, you know, as we grow our women's business, our direct to consumer business and international, all of which are accretive to gross margins and allow us to, you know, mitigate and offset some of the tariff exposure. Quarter four, we did guide gross margins to be slightly down versus a year ago. And had it not been for tariffs, you know, we would have grown gross margins. But overall, as we think about the year, we'll report again another year of record gross margin. So we're working on levers for 2026. The good news is we'll end the year stronger and we believe we're well positioned to have another strong year in 2020 26.

[Bailey Reutzel]

And Carol, we've talked with a good friend Peter Atwater for quite some time about that K shaped recovery where people who are well off are doing much better than those really in the bottom quintile Harmeet when you look at your goods, when you look at the ability to raise prices from the impact of tariffs, which products are you able to more easily raise prices where you aren't going to see consumers push away. And how are you thinking about that strategy as it relates to say the jeans that you do sell through a Wal Mart where you don't have that gross margin going direct to consumer and you do have likely, at least when we look at the data consumer who's feeling the pinch of inflation, broadly speaking.

[Harmeet Singh]

Yeah. And so the first thing Bailey to your question is our products are well segmented depending on the income profile of different consumers. I talk blue tab, red tab and signature. Signature is what's sold into the lower income consumer. We've been very thoughtful about pricing. We're leading with product innovation rather than price and so we're doing what we can to maintain a price point. It was evident in quarter three. Signature, for example, I think is up in the low double digits for the year. As we think about, you know, our other products, the good news for us is our product pipeline has never been stronger. You know, leading with loose and baggy while at the same time selling a lot of slim and skinny, both for him and her. You know, we've got wonderful, you know, waist up product. I think trucker jackets, think linen shirts, etc. Etc. And so as a company, we're making this pivot to be more of a denim lifestyle retailer going forward. Our past was all about denim. Our future is going to be about denim lifestyle.

[Carol Massar]

I just want to know, do you really have a pair of baggy barrel jeans? I can't get my head around them. I'm trying, I'm trying. I'm just, I haven't done it. I haven't done it. Harmeet, what I do want to ask you too is you guys have had kind of a mission, a goal to get to 10 billion in sales by 2027. I think you may have adjusted a little bit. I think also a 15% EBIT margin. Could you reach 15% in the next few years even if sales have not hit that 10 billion? You know, talk to us a little bit about that mission.

[Harmeet Singh]

Yeah, no, you know, we gave out the expectation of 10 billion and 15% on our investor day in the middle of June 2022. Since then, you know, there's been a lot of change and a lot of uncertainty as a company we have kind of, you know, navigated our way through uncertainty. We haven't given a new date on the 10 billion and the 20 and the, and the 15%. Our thinking is probably do that sometime next year. But to your question, the company that we are building and the company that has got the foundation given where we're ending this year, so you take 2025, we'll end about 6% organic growth. Last year it was 3%. The year before that it was flat. If you think in EBIT margins this year we land about mid elevens. Last year it was in the mid 10s. The previous year it was about 9%. So we've seen a steady progress and our view is we probably get to the 15% faster than we get to the 10 billion. But, but really a company that is steadily delivering mid single digit growth in a category that probably grows a little south of that. So our view is that we will be a market leaders now in the US number one in men's, number one in women's, and really resonating with the youth. And so the question is if you're able to stay at, you know, and implement our strategies, our view is we can continue to be market leader and probably pick up a little bit of share, especially because the denim category is accelerating. We've seen the acceleration in the U.S. we've seen the acceleration outside and that's largely driven by the world becoming more casual.

[Carol Massar]

Yeah, I have more jeans in my wardrobe than I've ever had in like since high school. Like it's really kind of wild. Anyway, Billy, I know you've got another.

[Bailey Reutzel]

Question I was just going to ask. In terms of geographic expansion, when you think about China, what's going on with China? And also what products do the Chinese consumers want? Is it that high end good or is it more of a bargain purchase?

[Harmeet Singh]

Yeah. So China for us is still underpenetrated. China represents about 2 or 3% of our business. You know, our business in China has been slow and soft. The Chinese consumer right now is going through a bit of a macro uncertain climate. But the good news for us is the they love the brand. Brand equity scores are really solid. We think China can be, you know, a business that grows double digit over the long term. But your specific question, the Chinese consumer is fairly discerning on the brands he or she gravitate to. There is a high end consumer as well as a consumer that lies the mid market consumer, what we call the core products. So if you think about our Asia strategy, we really, you know, our products are relevant for the mid market consumer while we also offer products for the higher premium end consumer. 30% of the Asian denim category is premium and you know, premium, for example, our highest pinnacle product is largely Japanese, you know, fabric, Japanese denim and inspired by sell vision. So that's what we are selling. And I think over time we'll be able to start growing our China business back in the low double digit range.

[Dan Florence]

Yeah.

[Bailey Reutzel]

Interesting. Seth, I will say, Carol, I know you mentioned you have more jeans than ever. I have been buying the Sherpa jackets, the denim jackets like crazy. I don't know why. I have three of them in different colors.

[Carol Massar]

I bought a bunch of denim jackets.

[Bailey Reutzel]

That's what I'm in. I'm like, I don't wear jeans, I wear chinos. But I wear the denim jackets like crazy.

[Carol Massar]

I know. I just, I don't know. I love it. I love it. It's like everybody I work, I walk with jeans every morning.

[Harmeet Singh]

Yeah. And Bailey and Carol, now we've got the blue tab. It's, it's, it's fuller jacket. You can Definitely wear it to office, depending on the, on the, on the, you know, dress environment at Bloomberg. I walked in here fairly casual, so, you know, something that we are not beginning to offer. We should make your wardrobe at some stage.

[Carol Massar]

Hey, one last question. Does it feel like God, I mean, the, it's been a crazy year and a lot of stuff coming at everybody, investors, the world at large. Does it feel like things are starting to calm down on a day when we've talked about what seems like progress in a cease fire between Israel and Hamas?

[Harmeet Singh]

Yeah. You know, as I mentioned earlier, you know, we have lived through uncertainty. You know, the good news for us is the category strong. We have real business momentum. The brand's never been stronger, and we have a product pipeline that is never been fuller, especially as we head towards holiday. You know, our focus right now is making sure our product is on the floor. On the floor when. Because of what we have seen, Carol, is consumers gravitate to newness and gravitate to what's relevant. And, you know, and you know, our view is if we can offer the right product and build a brand experience, and that's where we've got real focus on our direct to consumer business while complementing growth with our wholesale business. So this quarter, you know, both DDC and wholesale was up in the US Five consecutive quarters of high growth. And it's fueled by both the channels.

[Carol Massar]

All right, well, Harmeet, when you talk with your design team, I like high waist buttons, kind of slim through the legs and then a little flare. I'm just going to put it out there. A little stretch in there, too. It's kind of my favorite, my favorite, my favorite. And you were a gem. Thank you.

[Harmeet Singh]

Yeah, and I'll take that feedback, Karen, you know, I sincerely believe feedback is a, is a gift. And getting feedback from consumers like yourself is something that I'll take upon myself to feedback to our designers.

[Carol Massar]

All right, I'm going to hold you to it.

[Harmeet Singh]

All right.

[Carol Massar]

Good stuff, Harmeet. Thank you so much. Harmeet Singh, chief financial and growth officer over at Levi Strauss, joining us from our bureau in San Francisco.

[Podcast Narrator]

This is the Bloomberg businessweek daily podcast, available on Apple, Spotify and anywhere else you get your podcasts. Listen live weekday afternoons from 2 to 5pm eastern on bloomberg.com the iHeartRadio applause tune in. And the Bloomberg Business app. You can also watch us live Every weekday on YouTube and always on the Bloomberg terminal.

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