Transcripts For CNBC Squawk On The Street 20160722

Where are we . Around there. As you can see. Hanging around 44. 50 on wti and you see brent as well. Our road map this morning starts where you expect it to, donald trump, taking an ominous tone in his acceptance speech at the Republican National convention. We will bring you the highlights live from cleveland. And we have a parade of earnings this morning, stocks moving on those results, everything you need know about the reports. Ge, starbucks, at t, honeywell and a lot more. Roger ailes is out at fox. What happens next . And what it means for the entire media landscape. In his acceptance speech last night at the Republican National convention gop nominee donald trump set in the tone for a battle against Hillary Clinton. Amon javers is in cleveland and brings us more. Good morning. Good morning, david. It was a Family Affair at the Republican National convention in cleveland last flight. Donald trumps daughter ivanka introducing him to the crowd. A lot of americans will have seen ivankas picture but the first opportunity for many to hear her speak. She introduced herself as a millennial and dont see myself as a democrat or republican in particular. Thats a scandalous thing to say at a Republican National convention but she introduced her father in a warm way, the advice he gave her growing up and a little bit of what she had to say. To people all over america, i say, when you have my father in your corner, you will never again have to worry about being let down. He will fight for you all the time, all the way, every time. Now in the nominee himself took to the stage to begin his remarks, he spoke for quite a long time and delivered his remarks off the teleprompter something he hasnt really been doing on the stump very much this year. That caused it to be a little longer and more drawn out speech, but trump really positioning himself here as the voice of the forgotten men. Heres some of trumps comments last night. I have visited the laid off factory workers and the communities crushed by our horrible and unfair trade deals. These are the forgotten men and women of our country and they are forgotten. But theyre not going to be forgotten long. These are people who work hard, but know no longer have a voice. I am yours voice. So trump there making it very, very personal and guys, we got a lot of political news here in cleveland this week, but we may still have more political news left in the week. This friday morning, we may be about to hear Hillary Clintons pick for her Vice President ial nomination going into the democratic National Convention in philadelphia next week. A lot of buzz and speculation about tim kaine and other names on that list. They leaked this week that cory booker from new jersey was being vetsds as a possible candidate for the vice presidency. Well have to see what democrats do to steal the show from the republicans in cleveland. Simon, back over to you. For the moment thank you very much. Joining us at post nine for analysis, former Clinton White house aide turned Columbia University adjunct professor keith boykin, assistant adjunct professor and back from cleveland politicos chief economic correspondent and cnbc contributor ben white. Good morning to you. Good morning. Ben, why do you think this could propel trump ahead in the polls . Well, i think generally candidates get a bump from their Convention Speeches and i think it will excite trumps base, a lot of the stuff he talked about, this america under siege, under attack, in the big cities. I think the facts dont bear out a lot of what he said. I think he misconstrued a lot of the data, but there are a lot of people who will hear that particularly forgotten people and say this is my guy. This is my voice. Particularly blue collar white voters. I think he gained a temporarily bounce. What he needed to do in cleveland is broaden his appeal beyond that base and from that perspective i dont think he succeeded. I think this is a shortterm bounce from base excitement not a longterm gain from him. A powerful message, i am your voice, which, of course, makes it to the front of the New York Post and other papers around the nation today. Keith, it was obviously a speech that was honed to the faithful, to primary voters and then repeated on the stage. How successful do you think it will pb . I think it was very successful as ben said in terms of reaching out to his base of white, middle class or working class voters. And males in particular. I dont think it will be very effective. As ben pointed out in broadening that base, his two most effective lines, one was the i am your voice line, but the other line he made that i think he should have worked up more, hillary says im with her, thats her tag line, but my tag line, im with you. I think thats a very effective line to contradict what Hillary Clinton is saying. Unfortunately, he didnt push that. He spent most of the ti time pushing his very fearful message. And the message unfortunately had very few facts and very few specifics. Yeah. I mean you mentioned the appealing to males in particular. Right. What about the use of the family here on the softening of the image. Do you think that will further the disadvantage he has with women . That will help some. Ivanka will help. She tried to appeal to women who make less than men. That was a powerful part of her address, was that she would work on gender equality issues, Wage Equality issues. What people will remember is the trump speech and i think of it as nixon silent majority without the optimism. Angry speech, knicks ownen in its picture of america on fire in decline. Thats not happening in america. So i think or previous positive vision and he didnt do that. Previous gop candidates Ronald Reagan notably. Mourning in america. Shining on a hill or george w. Bush passionate conservative. You can say these are what i see as the problems with america, there are problems with Law Enforcement being shot, recently although overall statistics are down, but say i have a vision for a better america where wages are rising because of these reasons. He didnt present that. Thats why i dont think he made the sale towards people who would not be inclined towards him anyway. Some of the gloomy statements he makes about the economy and wages, are resonating, which is interesting, given the fact that Unemployment Rate has come down a lot and we have seen job improvement. The stock market is at a record high and the u. S. Economy in what is a sort of sluggish Global Economy is actually looking pretty decent. I think thats reflected in the reason why president obamas poll numbers started to rise. We see unemployment is down below 5 . We see the stock market has doubled under his administration, and the Energy Production has increased dramatically in his administration and none of those things were discussed in trumps speech. All trying to create this image of america and i dont think that thats effective in reaching out to people who know better. But it does reach his message, despite everything you say, is working for him. Yeah. I think thats right. Why is that . Because wages havent moved up very much. Because we have lost some manufacturing jobs. Although the counter to that is, a lot of low wage manufacturing jobs are never coming backp we need better education to jobs that require more skills. He could have talked about that and how were going to move people up. Trump says those jobs are coming back but didnt tell us how. He makes it sound as though all these things are easy. Hes going to create new jobs, going to help the coal miners but doesnt tell us specifics of how he will do any of these things. Thats the most economic terrorism somehow. Thats the most troubling part of the speech. No specificity in anything he said. Maybe it will come to that. Hes a late entrant to politics, there may be a delay but a common criticism there isnt enough meat on the bone. I want to ask you with the dnc next week, if clinton this afternoon does name her Vice President pick and it is senator tim kaine of virginia, what you feel about that, a lot is being made of the idea hes spanish speaking. Why well that means nothing. But it is said that, the commentary seems to be thats an attempt to improve or to bolster the support that she has amongst latinos. My question to you is why do that if you are at a 74 favorable rating with that community . I dont think the reason for picking tim kaine because he speaks spanish. That may be a an asset i dont know for whom. The Vice President ial pick doesnt make a huge difference in terms of the president. What does matter is either youre going to make a decision to excite your base and try to broaden your base. Who she picks will give us an indication of where she is going to go. I dont think tim kaine is an exciting candidate. A safe reliable choice, but doesnt excite the base in any way in the Democratic Party. I would agree. If she wanted to excite the base she would pick Elizabeth Warren fire up the Bernie Sanders voters. Two women. Shes not going to do it. If she wanted to do that. I dont think she feels they need to do that. Cory booker. A more exciting pick, incredibly intelligent and skilled. I dont think she wants to take a risk here. The democrats think theyre going to win this thing, probably going to win it solidly, dont take big risks, dont roll the dice on any Vice President ial pick. One thing back to trump, and that he did effectively is talk about Hillary Clinton as controlled by her donors, controlled by wall street, when you talk to democrats and in that campaign, thats what they worry about. When trump talks about hillary they worry, when he talks about himself they dont. Well see what clinton camp does this afternoon. Keith boykin and ben white. To earnings, a lot of them to talk about today. General electric falling in premarket action despite better than expected Quarterly Results including a 15 rise in revenue. Starbucks quarterly revenues were in line but samestore sales did miss. Global and u. S. Comps rising 4 coming in a bit short of street estimates. A live interview with starbucks chairman and Ceo Howard Schultz coming up later in the hour. Starbucks still posting better than industry comps but investors have been trained to expect this 5 plus samestore sales number which starbucks has posted last 25 quarters. Got below that. But to managements credit they said it was an anomaly because of whats going on in the world. Changing with the Loyalty Program and overlapping confluence with the frappuccino happy hour they have may have stymied them to a certain extent in achieving 5 Comp Store Sales. China was pretty strong. On the Conference Call interesting comments from mr. Schultz about the environment overall. Which certainly were looking forward to discussing with him. On ge he said didnt he say in 24 years in starbucks 24 years of public life i cant recall a quarter like this. Terrorism and disruption. The anxiety around terrorism. External as far as hes concerned. You have an interview. We will be speaking to him 20 minutes from now. We will ask him more about that. Ge looks down a bit. Overall ge the 51 cent number ahead of treatment estimates. Want street estimates. The organic growth rate down 1 . Same as the last two quarter. Cash flow for the industrial businesses was seen as weak. That stock by the way much of this year was a laggard but has really been strong over lets call it the last couple months, perhaps as a result of the yield and also just momentum in the Broader Market giving a bit of it back now. Also the ge capital getting desiffied was a key moment. They then said, there was a discussion it would appear with analysts and others whether they might borrow 20 billion in order to return the cash to shareholders and you see the stock has put on i think 3 since that, so its 9, 10 since that moment. Whats interesting they are still sticking by, despite softness as david mentioned there, the Industrial Operating guidance for the full year, at 2 to 4 . They are anticipating some sort of rebound clearly in the second half of the year to get there, maybe as high as 8 in order to make up that ground. Whether that has to do with the timing of the air show in gentle well see. Yeah. Certainly oil and gas and transportation. To be the weak spots in this report. 22 . Up in the last 12 months. Ge shares. Trading at 20 times earnings. I mean in many sense its achieved where he wanted to go. The highest share price, right. It is the highest share price in a decade, those of us doing this for a long time and owners at one point can remember 59 right before late 01 or the 40s before the financial crisis. Yes, the stock certainlies a been stronger over the last year. To your point the multiple is getting up there and its an Industrial Company now. I did want to move on to yahoo this morning. Of Course Company weve been covering closely here, as it continues to await a sale of its core business. Can give you news this morning in terms of that sale. Of course earlier this week, i think this week, reported that there were five bidders in the final round but appears according to people familiar with the situation that yahoo s advisors, its board that has been selected to handle these negotiation for the sale of the core business are solely dealing with one bidder and that is verizon. They are close to a potential deal under which verizon would buy the core business of yahoo . These sources tell me. And verizon would be buying the real estate, but not the intellectual property portfolio. Heard a number of things on price, dont want to go there at this point not certain on where that is and they have negotiating to do but they are pointing to perhaps an announcement as soon as early next week for yahoo to announce the sale of it core business to again what appears to be verizon based on the fact that they are focused on that sole bidder after five bids were received in the final round. Guys, whats most important here really will be the end game here. Every billion dollars for yahoo s core business only amounts after tax to about 70 cents in the share price. What really will matter is, the stake in alibaba and the discount that trades to alibaba when all this is said and done, and what they do with the yahoo japan stake. Not to mention shareholders want to know what will you do with all the cash, the cash you received from the sale of the core business and 7 billion on your books at yahoo . A lot of questions still to come. This could take six to nine months is what im hearing before close. The announcement could come stew could negotiate a brexit sooner than na. You announce the deal but all the regulatory you know how long until the close. The the announcement. Early next week. No price. Maybe well have it before the end of the show although im leaving early. Snee roger ailes departure from the fox news empire he created and what the future holds for 21st century fox. An exclusive with lieu lu lemon ceo as the company is locked in a battle with nike and under armour. Another look at futures this morning. A lot more squawk on the street live from post nine after this. Ose new glasses . They are. Do i look smarter . Yeah, a little. Youre making money now, are you investing . Well, ive been doing some research. Let me introduce you to our broker. How much does he charge . I dont know. Okay. Uh, do you get your fees back if youre not happy . dad laughs wow, youre laughing. Thats not the way the world works. Well, the worlds changing. Are you asking enough questions about the way your wealth is managed . Wealth management, at charles schwab. [chains dragging] [eerie music playing] [crickets chirping] [owl hoots] announcer if you dont fix them, sparks from dragging tow chains can cause a wildfire. And that could be scary. Bye, smokey only you can prevent wildfires. Roger ailes at fox news the network he helped to build over the last 20 years. The news being delivered by Rupert Murdoch of the man who founded news corp which then was split into news corp and 21st century fox and mr. Murdoch will take over the duties mr. Ailes had as ceo of fox news networks. Not unexpected given the reporting and speculation over the last few days after charges of Sexual Harassment were leveled at mr. Ailes by a former employee. But still, nonetheless stunning in both substance and in speed, in terms of how quickly in some ways, given the review that was ongoing by paul weiss in terms of his behavior has not concluded but appears some of the things they found along the way were enough to motivate Lackland Murdoch and his father James Murdoch the younger of the two, as the ceo, to say now is the time for mr. Ailes to depart. But he returned in person, cutting the holiday short on the south of france with jerry hall to be there in the newsroom yesterday and tell everybody what was happening. 40 million i think is the figure on the buyout for the contract. At least it appears in terms of his exit package. Of course, say its a reason why you want to get equity when you start these things given the value of fox news doing 1. 6 billion in ebitda, some say put a multiple on that and if he had 10 of it, its a lot of money dont get me wrong, but he does and is credited with being the driving force with creating what culturally has been an important network. Thats an important question, should investors be concerned this is going to impact the channels profitability . You know, that will be a key question and i dont know that well know it until some time has passed. Lachlan murdoch and James Murdoch do not share necessarily the same views as their father and certainly as mr. Ailes when it comes to politics but they are not stupid in terms of changing the programming of something that has proved to be so incredibly popular and productive from an earnings standpoint no and cushioned in an election year. No doubt the reports are theyve got bumper revenues at the moment, given where everybody is going in cable news and the position that they occupy and, therefore, its going to last you through until january, do you then become were trump to win, kind of a special relationship there . The question will be certainly interesting to watch who replaces mr. Murdoch is stepping in as the acting ceo, but, obviously, will not be in that role too long. The question most likely internal candidates what im hearing will be taking the top job. Committee for some time. But well see. They had to have some sort of contingency plan. Roger ailes is 76 years old. Why does it seem like this is all so its funny. I got different answers this week when doing the reporting. Some said yes, theyve had a success plan in place and others said not really. Not really. We will see. Its the murdoch empire. Meantime lululemon shares have outperformed this year. Nike, under armour and broader retail, lululemon up 45 in 2016 and now, for the First Time Since taking over in early 2014, the companys ceo is speaking out to cnbc in an exclusive sit down i had with him at the Flagship Store in Lower Manhattan and spoke about the turnaround story and asked him whether this industry beating sales growth is sustainable. Listen. See, as long as we innovate i think its very sustainable. Look at the trend of take athleisure out and the lifestyle of being athletic and mindful, that trend is going to continue to grow for a long long time with mens and womens around the world. You dont see it as a fashion fad . Athleisure or that bubble will pop and the people that are not in it for the right reasons will go away and the trend of or the lifestyle of being athletic and mindful will stay. Thats the market that we lead and that were really passionate about. Youve also focused and youve mentioned it a few times now on improving the profitability of the company. How much more scope is there for that . Weve done its been a huge body of work for the past couple of years. We still have about, you know, probably like 80 of the way through, but weve started seeing margin expand and profitability growth so the last two years have really been very strong period of investment while weve been focused on the guest, Product Innovation and quality, and now were actually seeing the benefits of our work with Margin Expansion and profitability exsnoongs expansion. Why do you think its a Battle Ground stock . Its an emotionally charged brand. People love to love the brand. And i think thats really all there is. Its a unique brand. People also love to hate it. There is a bear thesis that continues to creep into the story, guys, that is, its prices, price points are premium relative to some competitors, has run up strongly with the 8 Comp Store Sales growth, that is beating the rest of the industry. We saw that in the first quarter. Saw that in the holiday period quarter as well. Whether it can continue and expand into other categories beyond owe go and beyond training which is what it does like a nike or under armour. Equally the point, the 45 gain youve had in the stock so far this year. So that people have made a lot of money on the rebound and the knocking out of the short stock. Jim cramer has been a fan, loves this stock right now. We also, guys did talk about the chip wilson saga, the founder making noises for Board Changes. Wait until you hear what he has to say about that. Next hour of the show. Starbucks misses on earnings and stock. A live interview with the chairman and Ceo Howard Schultz on the show. David will take that. Another look on futures as we count you down to the open five minutes and counting. Also squawk on the street, after this break. I we worked with pg eof to save energy because wenie. Wanted to help the school. They would put these signs on the door to let the teacher know you didnt cut off the light. The teachers, they would call us the energy patrol. So they would be like, here they come, turn off your lights those three young ladies were teaching the whole school about energy efficiency. We actually saved 50,000. And thats just one school, two semesters, three girls. Together, were building a better california. An ordinary experience into an extraordinary one. Get great offers at the lexus golden opportunity sales event. Lease the 2016 es 350 for 329 a month for 36 months and well make your first months payment. See your lexus dealer. Youre watching cnbc squawk on the street live from the Financial Capital of the world. Opening bell ringing in less than two minutes. Im curious, of course, we havent talked currencies or Broader Market. I know you always like to bring data points to bear as we end another strong week. The big mover in currencies is the british pound under pressure. The first postbrexit indication this will weigh on the brib economy. Pmi surveys out of britain showing both manufacturing and services are going to have a hit. In fact it was a dramatic drop, lowest level for this pmi survey since 2009. The british pound weakening below the 1. 31 level. It is continuing to get hit. Interestingly, thats been sort of helpful to the ftse 100 the british stock market because a lot of those names are multinational, they benefit from exports which we also saw in the survey look better because of the weaker weak you are pound, almost all of them are. Not necessarily great barometer for the damage done by brexit. When weve spoken to people about it, recently speaking to james gorman the chairman and ceo of Morgan Stanley this week, he indicated what so many others have told me in private or public who run companies which is its simply too early to understand the full ramificat n ramifications. He said five to ten years. The next couple years as they negotiate the exit. He had clearly been briefed by the British Government to say that in contrast to jpmorgan and jamie dimon. You hear the applause building as we get ready to start the day to end trading for the week. There it is, the opening bell at the New York Stock Exchange this morning. The realtime exchange back at hq. Well see kind of a mixed bag. We did look like we had more of a positive opening than not. Over here at the big board, Global Medical reit celebrating its recent listing at the nasdaq, China Lending corporation, a nonbank direct lender in china, a number of the companies weve talked about are ge has given up about 2. 5 . Did not mention at t yet this morning. And perhaps because its not really doing much of anything. Did report earnings after the bell yesterday and for the most part, the market seems to be reacting the way you might have anticipated with not much. They are still struggling to find growth at the company. This a note from moffit nathanson, wire subscriber metrics in line against relatively soft expectations, a loss of 180,000 post paid phone subscribers what they say is a string of negative quarters and whats interesting and may have implications for apple people seem to be holding on to their handsets longer. The advent of the installment plans, installment equipment plans, where you pay over time and then you stop paying after a couple of years and you own the phone, may be leading people to keep their phones longer. Suddenly your bill goes down and if your phone is still working why replace it. So thats something that is when weve seen some of the reports weighed a bit on apple, the idea bug that upgrade sickle which seemed to be every two years may not be as frequent. American airlines one of the gainers, we havent mentioned them. They came through with figures. A Deutsche Bank report here. Complicated set of result. The 1. 77 earnings per share. They say thats greater than their own forecast and greater than 1. 55 that they had previously estimated. The pretax margin is rising as well. So after weakness clearly that weve had within the airlines you see american at the lead towards the leader board at the open today. Lets get to starbucks out with earnings. We discussed earlier, they were matching estimates, but the sales number has the stock under pressure. Shares have climbed back to unchanged in early trading, of course. Starbucks getting the benefit of the doubt, certainly given its history. Joining us exclusively is howard schultz, starbucks chairman and ceo joins us on the phone from seattle. Always nice to have you howard, thanks for dialing in. Thanks, david. Thanks so much for having me. I would love to come to the some of the comments you made on the call last night that have gotten the most attention. I think you said you talked about the current environment in terms of the uncertainty, of course, around the election, domestic civil unrest with regard to race issues around terror that created a level of anxiety, going on to say this is quite unusual, its unsettling, unnerving. Is it resulting, though, in fewer people going to starbucks . Well, i think what i tried to say, david, was that not unlike weather, we dont want to use the Current Situation and the uncertainty in the pressure on the consumer as an excuse but theres no doubt that we are navigating through a very unusual time of a confluence of social and political turmoil at home, weakening Consumer Confidence and clearly increasing global uncertainty and you have a very unusual president ial election cycle. All of that i think has created pressure on the consumer. I dont know if people are going less to starbucks as a result of it, but i think the operating environment is different. It puts more pressure for us to be as innovative and ent entrepreneurial as possible. Despite the fact we had slower u. S. Comps it was a our first nonholiday quarter of 1 billion of operating and a significant stunning response in china where we had 7 comp. So overall, it was an interesting quarter we met our eps but disappointed on the u. S. Comps. We were very i think confident in expressing to the street that if you look at 25 consecutive quarters of 5 or greater this quarter was an anomaly because of the confluence of issues and we will bounce back next quarter and the stock price is emblematic of the confidence people have in our ability to navigate through this. Yeah. I think that would probably be true. Judging from your comments and, of course, the reaction to them. I would love, though, to understand a bit more in terms of Consumer Confidence right now, be you really believe it is being impacted by the environment youre describing . I mean certainly it is an unsettling time, but it is not as though we have not been through times like this in the past. Youre seeing Consumer Behavior impacted by it, howard . Yes. I speak to on a regular basis a number of people within our peer group who are running and operating Consumer Brands and brick and Mortar Retail businesses and i think by and large what were seeing is that there is a tremendous amount of pressure on consumer and Consumer Behavior being affected by this. Having said that, we are were here to navigate through this, not use it as an excuse and were very confident that the plans we have for fiscal 17 and beyond are going to be very bullish for our company and well continue to do the things weve always done, that is meet and hopefully exceed the expectations of our customers despite the environment. Make no mistake this is a tough environment to operate . Yeah. Well specific to the quarter itself you did say on the call we didnt execute as well as we could have in the u. S. In the Third Quarter and you did make specific note of i think these overlapping promotions or should say the frappuccino happy hour promoti promotion, which has been quite successful and the changes in your Loyalty Program. Can you explain why exactly that may have resulted in fewer people buying coffee . Sure. And once again, what i tried to do on the call was not make an excu excuse, but most importantly was transparency and humility tell people exactly what happened. But we wanted to shift our program from a frequencybased program to a spend program which we believe more fair for our customers. Unfortunately, after months and months of planning this w he made an error in executing it exactly at the same time where we have our annual frappuccino promotion which has been successful last year alone a 30 increase over the year before. As a result of the interdependence of those two promotions at once the mind share of our people and i think the distraction on the customer we did not execute it well. We own that. Thats why it was an anomaly. Not only a onetime event but one time in a decade event in terms of the change in the program. This program, by the way, is over 12 million active members, its growing at 18 year over year, and clearly is the kind of the fly wheel and the reason why our comps have been so strong over the last couple years and only better in fiscal 17 as we get personalization and leveraging the equity of the brand in ways we will only be able to do as a result of change of the program. You added 300,000 net new members in the Third Quarter as well. Im curious, thats a pretty good number. Are you expecting that to actually accelerate in future quarters . Yeah. I think this program will continue to see big numbers just like that and those numbers are just the u. S. Numbers. You know, we have this program now in many markets around the world and millions of people are signing up and, you know, we didnt speak a lot about china on the call but with almost 2300 stores in over 100 cities now, were opening more than a store a day, the equity of the brand in china is probably as strong as any western brand. 7 comps. Were opening a store a day. So were building the kind of business in china thats going to rival the u. S. And probably one day perhaps be bigger. Right. Couple that with our Consumer Products business and i think, you know, this is a very good time for us, despite the fact that we have concerns about the u. S. Business, but i think its going to come back. Yeah. Well, to china before we get back to those concerns, as you said, 183 million on a gap bases in terms of quarterly operating income in china asia pacific. Up 22 year over year. Do you think you can maintain those kinds of growth rates when it comes to that number . Yes. In fact, we said on the call, that despite the fact that weve opened almost 2,000 stores in the last 12 months or so, we will accelerate the growth in u. S. And around the world. But its tough to open more than one new store a day in china at this point. But the size of the business in asia is only going to get larger. We have 100 stores in india. Our Japan Business is doing well. So that part of the world i think is a lot of wide space for the company and launching our business which ready to drink frappuccino in that market as well towards the end the year. So if you look at all those things, i think our dependence on the u. S. Business over the next couple of years will be less because the Growth Development and profitability of asia and specifically china. People have become accustomed to you putting up as you said at least those 5 Comp Store Sales numbers, not this quarter. Specific again to your comment about the environment and im talking socially as much as anything, your comment, certainly those from mr. Trump last night at the Republican National convention not going to do anything to make people feel necessarily better or safer but you always describe starbucks, howard, as a community. You did it again yesterday. You talk about offering a sense of community, the longing for human connection, a safe place and an affordable luxury. I would think in this environment you might benefit from people wanting those things . I think thats true and i wouldnt use one quarter as a litmus test when weve had 25 consecutive quarters of 5 or greater. I think youre right. I think we feel were in a very unique position, despite, you know, what mr. Trump described last night and, obviously, the issues facing america and the concern that people have, were in a good position to leverage the equity of the brand, the experience, sense of community and humanity of the company. So and the other issue i think that we pointed out yesterday is the investments were making in our people. The increase in wages, the 30 million bonus for the field, all those things i think we feel very strongly that we have to share our success with our people and recognize that what we do every day is an experience base and that experience comes to life with our people. We got to take care of them in this environment and i think people need to understand that, that building a business like starbucks was almost 23,000 stores around the world and 300,000 people we have to do everything we can on multiple levels, the shareholder, the customer and in this case our people. Yeah. Im curious, you, of course, shown no youve not been shy about offering your thoughts in terms of some political issues and certainly weighing in on some social issues. What did you think of mr. Trumps remarks and speech last night . I didnt see it live, so, you know, i just what i read this morning sounded pretty dark to me and painted a picture of not the kind of picture and optimism and aspiration that i think the American People need and what i specifically on a personal level am looking for. You once considered running for president. I know you wont admit, but you had thought about it. Do you regret it, not having tried . No. David, i never considered running for president. I think there were other people who were maybe mentioning my name. I feel very good in the position im in at starbucks and thats where i belong. Well howard, we always appreciate your willingness to come on and talk to us. Good quarter or bad. Howard schultz, starbucks chairman and ceo. Thank you, david. It is a very busy day for corporate reporting. Courtney reagan is on the floor with more of whats moving. Now 12 minutes into trading. Good morning to you. Right now just the first several minutes into trade as you mentioned, the Dow Jones Industrial average down about 9 points. Call it flat. S p 500 also down just ever so slightly. Equities break the positive run that weve had going yesterday. The dow snapping a ninesession positive streak. Some investors taking some profits here and many traders i spoke to said it is probably prudent, considering the nice run in rally that we have had. Well see if the indices can close positive going into the end of the week. The dow and s p just barely clinging on to gains for the week before we began trade this morning. Now Global Markets were mixed overnight. Asian markets lower. The nikkei down about 1 after ratcheting down in expectations for policy stimulus. Europe mostly flat. But its worth noting that the german pmi number did come in better than expected. Perhaps a bit more insulated from negative effects of brexit than some had feared. Now there are lots and lots of earnings today and remember, traders and investors really like to look at these Big Multinational Companies and glean many clues as to whats going on both domestically and abroad in the Global Economy. Honeywell did beat on profit, revenue miss. Raising the lower end of the guidance but then cutting the sales forecast, also saying it will split automation and control solutions unit. Their shares down almost 5 . General electric shares also down despite a beat on profit and revenue. The company ceo saying they were affected by the volatile and slow growth economy and remember shares have had a tremendous run there for general electric. Take a look real quickly at aerospace, tech beating on profit and revenue. Boeing announcing three charges for the Second Quarter earnings that equal more than 2 billion yesterday and just ending quickly on appliance and tools. Take a look the at whirl pool and Stanley Black and decker. Stanley black and decker putting a Strong Quarter up. Whirlpool, both beating by a wide margin on the bottom line. Sales stronger than expected and Stanley Black and decker announcing its ceo John Lundgren will retire july 31st. President and coo james laurie takes over at that point. Sara, back over to you. Lot of earnings to keep track of. Courtney reagan, thank you. When we come back pulitzerprize winning columnist jim stewart hear to weigh in on roger ailes departure from fox news. Where, in all of this, is the stuff that matters . The stakes are so high, your finances, your future. How do you solve this . You dont. You partner with a firm that advises governments and the fortune 500, and, can deliver insight person to person, on what matters to you. Morgan stanley. Using 60,000 points from my chase ink card i bought all the framework. Wire. And plants needed to give my shop. A face. No one will forget. See what the power of points can do for your business. Learn more at chase. Com ink stockholder stocks modestly lower. How about oil prices . Hi, sara, with the strong dollar today, we are seeing Oil Prices Hit 2 1 2 months lows. The concern is supply. Is there had been some feeling that this market was starting to come in balance in terms of production, coming down particularly here in the u. S. And supplies, but we continue to see weekly inventories, despite a drop again this week, there are concerns about the products, in particular, gasoline. Gasoline has been up here in the u. S. Four out of the last five weeks which is not a great indicator when it comes to the peak summer driving season. Gasoline futures are modestly lower for the week, but that is going to be a concern and something that people will watch Going Forward because its not just here, its in europe and china as well. Nat gas today is bucking the trend. The forecast for very warm weather here and elsewhere is one of the things that is bullish for power generation. Squawk on the street will be right back. Es goes up. Smart devices are up. Cloud is up. Analytics is up. Seems like everything is up except your budget. Introducing comcast Business Enterprise solutions. With a different kind of network that delivers the bandwidth you need without the high cost. Because you cant build the business of tomorrow on the network of yesterday. Because you cant build the business of tomorrow romantic moments can happen spontaneously, so w pause to take a pill . Or stop to find a bathroom . 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Contact your health plan for the latest information. Markets flat overall. The bottom of the s p 500 paypal has lost today despite beating earnings expectations last night. This seems to revolve around the deal with visa that will ultimately enable them to challenge google and apple pay in stores. You will be able to pay via visa with paypal in a store, massive expansion for them into bricks and mortar. What the analysts are saying, sun trust and the like, you may have a higher volume in store and lower interchange fees, but the question becomes, the greater extent to which the margins for paypal are going to be hit by the wider deal that theyve done with visa. And as a result, there is some question over the 2017 earnings. Thats the thats what the analyst is saying today. As i said yesterday or last night they actually beat earnings expectations. Paypal Ceo Dan Schulman will be a guest on squawk alley on tuesday at 11 00 a. M. Eastern. Meantime markets are flat overall. Do you want to mention chipotle . Chipotle . Well do it after a quick break. Talk about it after that. Hey gary, what are you doing . Oh hey john, im connecting our brains so we can share our amazing trading knowledge. Thats a great idea, but why dont you just go to thinkorswims chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders . I know. Your brain told my brain before you told my face. Mmm, blueberry . Tap into the knowledge of other traders on thinkorswim. Only at td ameritrade. Announcer are your children in the right car seat for their age and size . It may be too late to check when youre on the road. [blaring car horn and skidding] fortunately, youre on the couch. But i keep it growing by making every dollar count. Thats why i have the spark cash card from capital one. With it, i earn unlimited 2 cash back on all of my purchasing. 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So perhaps a slight uptick in traffic and in samestore sales growth from chipotle but it is going to be an uphill battle to win back customer trust. Morgan stanley had a note to that effect this week saying 25 of those that they surveyed consumers are either not likely or very hesitant to come back. Whats interesting is, of course, they introduced the loyalty scheme, so both of our key Consumer Reports today, starbucks and chipotle, have have trouble with their loyalty scheme or at least in chipotles case, it hasnt worked as well as they envisioned, though it is early days. Chipotle for a long time said they wouldnt have a loyalty scheme, really an indication of the difference in which they find themselves they would do that. Fresh details on the tracking of some of the Food Ingredients which is an expensive phenomenon in itself. The stock hasnt gained. All could be weighing on their margins which was so exciting during the growth period, profit down 8 . The Third Straight quarter of declines. Potential lay little improvement, but analysts are saying it could take years for this company to come back. Win back the customers. When we come back more of the exclusive interview with Lululemon Ceo. The dow down about 24 points. On squawk on the street. Hey there. Hi, im looking for a deal on an iphone. I was thinking, something along these lines. Oh, okay. Well, how about this . Heres my answer. Is this you with a dinosaur body . Its just me with happy hands. It just means ill take it. Right now, buy an iphone and get another one free when you add a second line. Good morning. And welcome back to squawk on the street. Im sara eisen here with simon hobbs live from post nine at the New York Stock Exchange. Take a look at markets. We broke the nineday winning session for the dow yesterday and looks like the selling is continuing this morning, though. Fractional declines across the major averages. The dow down about 20 points. S p 500 really flat. The nasdaq barely positive. Wti crude, though, continues to weaken. It is now down 1. 2 . Telecom and utilities are in the lead. Our road map for the hour, begins with donald trump. Officially accepting the republican nomination for president as the rnc comes to a close. Live to cleveland for the latest. Ailes is out. The fox news head is leaving the company amid the Sexual Harassment allegations. What it means for the state of media and the possible successor ahead. A rare and exclusive interview with the ceo of lululemon. Why he says consumers will pay a higher price tag for his leggings. His thoughts on former ceo and founder chip wilson and much more. Thats all coming a little later in the hour. But as we watch the opening trades here, simon, for the markets, looks like we are back to a period where telecom and utilities, which are the two best performing groups so far this year, are back on top. Industrials and technology down in a session. We have a lot of earnings movers beneath the hood. Meantime the rnc coming to a close with donald trump accepting the republican nomination for president. Our own eamon javers is there and joins us after a long night in cleveland. Take it away. Yeah, good morning, simon. As of this morning it is officially Donald Trumps Republican Party and thats got a whole host of ramifications down the line of policy positions that the Republican Party has traditionally held, that its not necessarily going to be holding in the future from Foreign Policy to the economy. Were also talking about trade. Trade is an issue that donald trump has. Campaigning on, made a centerpiece of his campaign throughout the year. Hes sort of agitating the chamber of commerce types who dont like to sees this deviation from particular republican free trade orthodoxy. The way donald trump put this last night. I have a different vision for our workers. It begins with a new fair trade policy that protects our jobs, and stands up to countries that cheat, of which there are many. Its been a signature message of my campaign from day one and it will be a signature feature of my presidency from the moment i take the oath of office. Reporter one of the most striking moments to me in Donald Trumps speech last night is when he made an explicit call out to Bernie Sanders supporters on the left wing of the Democratic Party who are upset about trade and its impact on jobs and manufacturing here inside the United States. Trump saying to those folks, basically, if you are with bernie on trade, you can feel safe to come with me on trade as well. He said that he expects millions of democrats will peel away from Hillary Clinton and go with the Republican Party on this new take that its got on trade policy going into november. Well see if that works. Simon, it presents a big challenge for Hillary Clinton as well. She has sort of waffled on tpp, the Transpacific Partnership over the past year or so in terms of her evolving positions, pressure from the left from Bernie Sanders, were going to have to see going into the democratic National Convention next week where he lands on trade and how much of that rhetoric we will see from the democrats as well in philadelphia. Emon, for the moment, thank you very much. The focus does shift to the democratic Convention Next week and Hillary Clintons imminent Vice President ial pick. It is suggested that she may actually this afternoon via text come through declaring who of the three that we believe shes considering, going for. It could be senator corey booker, also a suggestion that the agriculture secretary could be in there or, indeed, most likely senator tim kaine. In the meantime for the certainly for the gop, the question is whether trump last night struck the right tone to give his campaign, of course, the lift that it now needs through november. Joining us is cnbc senior contributor larry kudlow, informal adviser to the trump campaign. Welcome to the program. We should point out, of course, not only an informal adviser, you had a cameo role last night in the videotape that led up to trump taking the stage, which is an honor in itself, and were lucky really to have your perspective on that. Do you think he delivered, sir . Oh, i think he gave a very good speech. For a bunch of reasons, simon. Let me start at the top. This whole idea of representing the middle class, the forgotten middle class, is a big winner. I think he said it a bunch of times with much sincerity. I think thats a terrific winner. I dont think the other party is anywhere near on that point. He had a lot of Economic Growth, which is my area. He talked about tax cuts and deregulation and unleashing energy and getting the burden of obama care off. Very strong Economic Growth section. And one last point, you know, the way i read it, watching it and then later on reading the copy, im going to call this trump american revivalism. He wants america to be great again. I think theres a revivalism theme here, the country has been in the decline for quite some time, and hes basically saying look, i will fix it and im your voice. I like that. I think thats going to sell very well. I am your voice is clearly its clearly cutting through, you see it on the front pages this morning. I think for a lot of people in business and the markets the question, though, larry, whether there was sufficient detail you might expect at a Convention Like this on the policy . It is light. I mean objectively its light on the detail as to how hes going to achieve those things and thats led some people to suggest that, you know, maybe the bench is a little bit thin, maybe there arent the teams of advisors behind him. Maybe for very practical reasons, as it may be, at this stage of the game . Well, simon, look, i think its a good point. I just think, you know, ive been to all these conventions and worked on Convention Speeches. Its really thematic. Its not blueprint policy. Now, i know there are unanticipated questions. I think your point is a good one. So Campaign Sources have said to me, that theyre looking towards maybe a Detroit Economics Club speech in the next couple weeks, which will go into a lot of detail on taxes, for example, on regulations, on budget matters. I think that kind of detailed blueprint is coming. I think, you know, the acceptance speech, its really, it should be more thematic, not detail. The question is the degree of flux that you have here. You are actually quoted in a reuters article today, apparent sdli a couple panels with steve moore, and its reported that the conversation between you and the audience went like this. Isnt mr. Trump bad on trade someone asked. Yes, but were going to fix it. Dont worry. But isnt his tax plan a problem. Its going to lose 12 trillion. Yes but well fix it, dont worry. Are you in a sense having to push the candidate into positions that he doesnt yet occupy, almost a uturn arguably on his state policies . No uturn. No uturn at all. Regarding the issue of the tax cuts and the budget deficit, there are tweaks going on as ive said for many weeks, more growth, lower deficits, there will also be a spending restraint piece to go along with it. I think frankly, the Economic Growth package can be virtually revenue neutral. On trade, i think you asked me about trade. I did. Let me say two things. Number one, mr. Trump emphasized heavily last night that our trading partners have to play by the rules. Okay. Im a free trader. I believe that. Theres no reason why they shouldnt play by the rules and we have to act strongly to defend american interests. On the other hand, if i could wave a magic wand, i would have liked to hear mr. Trump say, trade is good, trade produces a lot of benefits for the country. I heard him say that in washington when he met with the Republican House and senate. Didnt quite get it in last night. I know he believes in trade, but it has to be fair. It cant be stealing our intellectual property rights. That was really his message. You know, larry, if there is one issue that could upset the markets if trump looks like hes going to win as we get through to november its clearly trade. Thats what people focused on, almost regardless of where they are in business. I wonder since the campaign is evolving and youre playing a central role in an advisory sense as we go through that, whether its possible to more explicitly lay out where the candidate is and what the processes might be so that people dont fear that theres going to be sudden retaliations. I tell you this, first of all i appreciate your kindness. Im a one feather indian. Believe me. Who weighs in sometimes. I think he will clarify trade and again, i think its a twofer here. He i for trade, understands the benefits for consumers and businesses but as he said last night, he wants this to be fair. You got to play by the rules. If you make a deal, and you keep breaking a deal and china is very guilty of this, getting worse, not better, we in the United States have to do something about it. Now, you dont hear any talk about acrosstheboard 45 tariff. You dont hear that kind of talk. So hes digging in on enforcement measures. The United States has the authority to have what i call tiny targeted tariffs, on companies or an industry, but you dont hear the acrosstheboard 45 tariff. I would be opposed to that myself. So i think its a work in progress. As i said, im sure in detroit, if its an Economic Club there, he will say there are a lot of benefits to trade, but we must all sit down and plu ay by the rules. One last quick point, simon, in my view one of the ways to boost real, fair, free trade is to have stable currencies. A stable dollar. The g20 needs to sit down and hammer out some currency cooperation which we havent done in i dont know how many years, and i know mr. Trump is very sympathetic to stable currency. Larry, final question to wrap it up. Its a political one. You know the read on the speech seems to be, he ar tick clatsds his message and themes well, but he appealed to those that are already backing him, the party base, the Republican National convention audience, the faithful. And he needs to go broader at this point to get the swing voters. Do you agree . Thats a fair point. A fair point. Let me quickly raise a couple things. Mr. Trumps Economic Growth message, his representation of the middle class, hard hats, we used to call them reagan democrats, hes reaching out to that group and i think hes going to get at least 20 of democrats. Second point, trump made a reference to gays, lesbians, and so forth. It was a kind reference, an equal opportunity in front of the law reference. I dont believe a republican candidate has ever done that before. And number three, his daughter ivanka in her speech, which i thought was terrific, she talked a lot about the trump companies, treating women well and fairly on pay, on stay at home, on child care and things of that sort. So i think she was reaching out on the women. I think mr. Trump is reaching out to the hard hats. I think mr. Trump is reaching out to the Gay Community. Very large Gay Community in the Republican Party. Yes. And we need to talk more to them. We need to talk more to them. Though, i think it would be stretching the truth to suggest that the platform is prolbgt, as laid out by the party. More importantly in this instance, larry, i want to ask you about the tone trump set last night. Howard schultz, of starbucks, was on the network a half hour ago, said it was nowhere near as positive and optimistic as he might have hoped from the leader of the gop and if you look back at the type of things that Ronald Reagan said on these occasion or george w. Bush its not its a very negative, its a very dour, scary message trump is coming out with and i wonder where that fits in the history of the Republican Party with so many elders still not supporting him . Well look, in regards to the speech itself there were some moments in there that were very positive. I mean hes saying to people, look, i can do this job. I can turn things around. Thats pretty good optimism. I would have, perhaps, liked to have seen maybe a little more visionary at the end of the speech, maybe a little more hope and optimism, but i can just tell you, look im not a trump intimate but i know the time ive spent with him, he believes he can fix this country at home and abroad. He is himself a great optimist. So over time, maybe better speeches will have a little more soaring reagantype rhetoric, well see, but i dont think last night was all dark at all. It was tough, it was tough, but i think at the end of the day hes saying, i can do this. Thats an important message. Have a safe journey back, larry. See you next week. Larry kudlow joining us at the end of the rnc. Coming up on the show, roger ailes officially out as Rupert Murdoch steps up to the plate. Who will become ailes successor and when . Well speak with pull police zer prize winning New York Times columnist jim stewart next. A rare interview with the ceo of lululemon. Laurent potdevin his thoughts on whats driving the stock up 45 this year. The innovation. Stay with us. The dow down 20 points. At the beginning of the 21st century, the earth needed to find a new way to keep up with the data from over 30 billion connected devices. Just 30 billion . A bold group of researchers and computer scientists in silicon valley, had a breakthrough they called. The machine. It changed computing forever. And its been part of every new technology for the last 250 years. Everything . Everything this year, Hewlett Packard enterprise will preview the machine and accelerate the future. See star trek beyond. Roger ailes out, resigning from fox news amid Sexual Harassment allegations. Our own Julia Boorstin has been following the story for us and joins us with more. Good morning, julia. Good morning to you, sara. Roger ailes pushed out in the wake of the Sexual Harassment suit filed by former fox news anchor gretchen carlson. Ailes is reportedly walking away with more than 40 million. The equivalent of the rest of his salary through the duration of his contract which went through 2018. Now ailes is barred from starting a rival to fox news and will be a consultant through Rupert Murdoch. 85yearold murdoch who stepped down as ceo of 21st century fox last summer is now chairman and acting ceo of Fox News Channel and fox business network. Murdoch stressing his focus on maintaining continuity with ailes editorial vision. Murdoch praised ailes in a release yesterday with no mention of the range of Sexual Harassment allegation sallegati. We continue our commitment to continuing a Work Environment based on trust and respect. Sources tell me the pushing out of the 76yearold ailes is indicative of some of the generational shift that james and Lachlan Murdoch have pushed over the past year running the company. Last month they announced the replacement of foxs movie studio chief with stacy snyder and reorganized the companys tv channels and pushed for more direct to consumer tv distribution. James and Lachlan Murdoch unlikely to make editorial changes at fox news, as the model is working so well for the company. Its responsible for about 20 of the media giants revenue and earnings. Sara . That is the question for investors, julia thank you. For more on how this may impact the company we are joined now at post nine with pulitzerprize winning New York Times columnist and cnbc contributor jim stewart. Good to see you. We talked to you a few days ago, this was circulating. Now it is official that he is out. Any idea who might ultimately replace him . Well, you know, its interesting that they clearly had no successor ready to step in. Theyre going to be, i suppose, during a search. You hear this guy bill shine inside, is very competent, has been playing a more active role, but if you look at the model of roger ailes himself, first of all i think the most important thing about him for the network perspective, he had this burning intensity. This network was his life, this work was his life. He had the fire burning in his belly every day and thats not an easy quality to find and replace. They will be looking for that. Secondly he came out of the political world. He was a stride both media and politics. He used them, they brought politicians on to the network. It wouldnt shock me if theyre looking for somebody like that. And, you know, maybe a fairly prominent man. Someone beyond just the media world. That is purely speculative. Somebody like a gingrich. I know he has the ambition to do Something Like that. Or the management skills. But hes got that ideological fervor and he has a clear strong point of view that would appeal to fox. Speaks to what kind of power fox news has had with the Republican Party and politics. Its an enormous influence. On every other network, by redefining, you know, what conservative was it moved everybody else over in that direction as well. So i dont think you can overestimate that influence. I think from a business perspective they are going to keep the conservative line, they will keep the working for them, as we pointed out, longer term what i think the murdoch sons have to look at is the aging audience. Traez true of fox. An aging audience. The biggest Demographic Group in the country now are not watching nearly as much, not watching tv as much and theyre not as maybe theyll change. Dont seem to be as conservative. Theyre not rallying to trump. They like Bernie Sanders. We were talking earlier looking at the stock, 21st century fox, are you surprised theres not more of a sniff re negative reaction given how you described roger ailes and concerns about maintaining the channels profitability which we know reportedly to be more than a billion dollars . No, im not that surprised. I dont see any near term threat because of him. They handled this quite well. You know, the predictable fox reaction to this would have been, like to say oh, my god the liberal media is driving him out. We havent heard a word of this. Its been a clean break. They didnt let the guy come back into the office. Perhaps roger ailes would have had to formulate a that as the argument. Maybe he was form lathing i dont know. Hes out, taken out tuesday night and couldnt come back to the office wednesday. Murdoch steps in, he doesnt talk about that was he there yesterday . He was physically in the newsroom yesterday. Came back early from the holiday with jer hi hall. Murdoch. But ailes not allowed back in. Pushed out. The statements were dignified but not effusive in his praise. They want a clean break with this guy and i think that is reassuring to investors. They have to look at this from a corporate perspective. To this day and age you cant tolerate this behavior in a publicly traded corporation. The column this weekend, changing tacts slightly, the legacy of lehman and how that affected the rnc this week. Absolutely. To me, trump, you can draw a Straight Line from trump to the disaffection and anger from the financial crisis to the t. A. R. P. Bailout caused by the collapse of lehman. Incredible paper i was writing about four years of research where a respected economist at Johns Hopkins said the feds could have saved lehman. They didnt want to do it but they could have. The idea they didnt have the authority and was illegal he blows that away. Thank you. Sure. Read the column this week. James stewart of the New York Times. A check of where we are with the markets, relatively flat. That has been increasingly over the last couple sessions where we are. Youre getting a less and less of a range every day as we trade now into the summer and as the volumes, the volumes peter out to a certain extent. The news flow and price action on individual stocks is in some cases quite stunning. More after this break. Amongst the Earnings Releases starbucks, the stock is bouncing back after dropping 4 in the afterhours trading last night. You will be aware that for the first time in six and a half years global sales or samestore sales around the world fell below 5 and that missed wall street expectations. We spoke with the Ceo Howard Schultz earlier on the show and asked him for his perspective on the quarter. Take a listen. It was an interesting quarter where we met our eps but disappointed on the u. S. Comps, but you were very confident in expressing to the street that if you look at 25 consecutive quarters, of 5 or greater, this quarter was an anomaly because of the confluence of issues and were going to bounce back next quarter and i think the stock price is em me mattic of the confidence people have in our ability to navigate through this. So its geopolitical effects and slowing economies and a question about the reward schemes and changed they have that clashed with some of the incentives in the company, which he was honest and said we made a mistake. We also, of course, the morning after the night before as far as the rnc is concerned, asked him about the speech last night by the president ial nominee for the gop, donald trump. This what is mr. Schultz had to say. What i read this morning, sounded pretty dark to me and painted a picture of not the kind of picture and optimism and aspiration the American People need and what i specifically on a personal level am looking for. Of course within the last ten minutes, larry kudlow on the show has suggested maybe the optimism is implicit with donald trump that he believes he can actually right the wrongs hes addressing on the platform and there will be more optimism from the candidate moving forward. Sara . Up next on the show, the exclusive interview with Lululemon Ceo, hell break down the companys International Expansion plan. Why he thinks its a battleground stock and how the former founder chip wilson, former ceo, is impacting the brand. Much more ahead, stay with us, youre watching squawk on the street. In a world held back by compromise, businesses need the agility to do one thing another. Only at t has the network, people, and partners to help companies be. Local global. Open secure. Because no one knows like at t. Your Business Needs Better Technology to drive better performance. So you need it to be reliable and fast. Really fast. Introducing the comcast business Summer Savings event. Fast Internet Speed to drive performance, plus cutting edge wifi for your employees and customers, and voice mobility so your calls find you wherever you are. Get some of our most advanced products at a great price with over 500 in savings. Call today and ask how to get these savings plus a 250 prepaid card. Comcast business. Built for business. Good morning. Here is your cnbc news update at this hour. Frances top court has ruled that International Monetary fund chief Christine Lagarde must stand trial over a 2008 arbitration ruling that handed 400 Million Euros to a politically connected business magnet. Lagarde is accused of negligence. An Irish Navy Ship rescued 453 migrants crammed into a metal boat off the coast of libya. The rescuers also recovered 16 bodies. That ship is headed to the Italian Point where it will arrive tomorrow morning. Florida Health Officials are looking into a possible second case of nontravel related zika. Neither of the infected patients appear to have traveled to a zika affected country and the virus does not appear to have spread sexually in either case. If you think its hot palm desert, california, been there many times, the thermometer hit 117 degrees on thursday. The mercury is expected to get up to 118 degrees today. Quite a heat wave. One of the hottest places on earth. Thats the cnbc news update. Back down to you. Yep. Hot here as well. Not 117. Thank you, sue. A battleground stock, a product people love to hate, outspoken founder calling for change, we discussed it all with Lululemon Ceo in a rare and exclusive interview yesterday, a frequent topic of debate when it comes to the stock an this company. That premium price point which mkm, for instance, estimates as more than 20 above its competitors on average. So we started with why the ceo thinks the customer will continue to pay up. Have a listen. As long as we believe in innovati innovation, as long as we deliver value to the guest and solve a problem and allow them to perform with no detraction weve never seen resistance on pricing. It goes back to the craftsmanship, the construction, and really the Raw Materials we use that are differentiated. Doesnt it worry you were in a economy where t. J. Maxx and roth stores are best performers in terms of results of retail. These leggings are 98, i just checked. If youre in the lifestyle apparel youre a commodity, but i look at it as a technical brand. Technical brand that sits at the high end and we invest heavily in innovation and people value that quality and innovation and allows them to live the lifestyle they love. What about mens . That has been a key part of your story. How much more of a growth driver is that in the coming year . We see the mens category as we see it as a billion dollar franchise. We know that when the guys try our product on they love it. Goes right back to the quality of the product. And were really anchoring our mens business in the sweat category. So whether its our [ inaudible ] thats the product we want the guys to know us for. More abc pants. You got to love your abc pants. You can get on the red eye, its functional, two way stretch, moisture wicking, get on the red eye, wake up in the morning, not being wrinkled and go to work. Or ride your bike to work. What about the International Expansion which is another sort of key part of your strategy . They are doing fantastic. You know, the ifc store in hong kong, right across from apple is doing close to 7,000 a square foot. So doubledigit growth internationally. Yes . Are you still on target aiming for a quarter of the business . Were on target with our fiveyear plan, absolutely. Weve declared that within the next five years well double our revenue and more than double our profitability and international will be a big part of that equation. Some people love to hate the product, though, and theyll say, perhaps they can only do yoga and training, they might not be able to expand into our categories. Well i was just reading a statistic that was really interesting, and i dont quite remember what the [ inaudible ] was but a much higher percentage of runners at the Boston Marathon finishing under three hours wearing our product. Those are pretty good runners. Do you have ambitions to go into other categories or are we going to see lululemon one day in the nfl like some of your competitors do . I dont think youll see us in the nfl any time soon. Despite the fact that nfl and nfl players love our product and live in it. But, you know, we Just Launched our partnership with the kennedy and mens and womens team for Beach Volleyball on the way to rio and build the most innovative kit and supporting the mens team out of Huntington Beach on their way to rio. You will see us growing in different categories, always focused on innovation and really starting at the highend of the market. What is chip wilson trying to do right now. You will have to ask him. He had a contentious interview with jim cramer repeatedly on our air where jim was defending you and your comps and he was arguing that lululemon has lost its way and should be valued at double under armor. I would argue that actually lululemon has found new ways, you know, and chip hasnt been involved with the company in any way, shape, or form for over two years now. And as the founder and as a shareholder hes certainly entitled to his own opinions but we strongly disagree. Weve put out a plan of doubling revenues by 2020 and more than doubling profitability. Weve reignited innovation. We have an international strategy. Building a digital culture. And were very much on track to deliver on those targets. With an engagement in a Work Force Engagement im so proud of. Were seeing the lowest employee turnover that the company has ever seen since 1998. But is that a distraction to have a founder who still owns 14 of shares outstanding making noise like this and trying to get Board Changes . Again, i mean i go back to the fact hes had no involvement for over two years, so its noise and i wouldnt call it a distraction. There are been questions about the board and some of the board members, your longest serving member, the street. Com was chasing for a long time and didnt find much. What can you tell me about her and her future on this board . I mean, ive known her three years. She was a big part of bringing me on board. And shes been the chair of our meeting and Governance Committee and a deep understanding of our culture and been a great support in building the Management Team that i was able to build over the past two years. I think the inside, the intuition, that you have on people, combined with deep understanding of the culture, was an asset for me and im really grateful for that impact. She stays despite the mystery and controversy surrounding her identity and experience . Absolutely. Thanks to laurent potdevin, the ceo of lululemon. That was the first time he was on the record about chip wilson and some of the noises, he called noise, that is about the stock and some of the questions about the board as well. It isnt helpful to have the founder criticizing you in public. Absolutely. But as he makes a point he hasnt been here in a few years, but it was also interesting to get his take on whether the sales growth can continue because that really is the stock question right now, a stock that has run up 45 so far this year and is valued, you know, richly even for a retailer that has outperformed. He talks a lot about international, a lot about mens. I did an informal little poll on line on twitter today asking about the mens business because this is a subject of hot can debate right now. Men do prefer nike, under armour, lululemon or other. Nike is in the lead, under armour a close second, lululemon more male brands. And probably widely available as well and more discounted. Stock. Or sale which is to the point of lululemon. Designs. Which do you prefer . Nike. Or adidas. Coming up on the program, chipotle earnings out today. Signaling the promotions werent enough to lure back consumers after food safety problems. The stock extremely volatile after hours. Last night and today has actually made some gains. We will discuss the future of chipotle ahead. Coming up, tuesday on squawk alley, paypal Ceo Dan Schulman will be a guest at 11 00 a. M. Eastern. Paypal one of the top losers today as questions remain over its new deal with visa. Two unlikely stocks have soared this year more than doubling in value. What are they and can their run continue . Find out on trading nation at cnbc. Com. More squawk on the street coming up. Theres a lot of places you never want to see 7. 95. [ beep ] but youll be glad to see it here. Fidelity where smarter investors will always be. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. Youre looking at a live satellite feed from cleveland, ohio where donald trump and his running mate mike pence are holding a rally to thank campaign supporters. We will monitor what mr. Trump says and bring you headlines as they develop in the wake of his keynote last night which many are still talking about. Tons of earnings as well as far as were concerned on this channel this morning. Our dom chu has been digging through the reports and the market action. Hi, dom. Good morning, simon. Look at first of all watching Stanley Black and decker. Sales and profit rose due to more sales of its dewalt tool line, raised the full year forecast as volume growth increases and Profit Margins expands. John lundgren will retire july 31st to be replaced by james loree, shares trading by alltime highs. First increase in sales in almost two years during the Second Quarter thanks to increasing demand for video game and graphics chips. The chipmaker given strong Third Quarter guidance stock hitting a fouryear high up by about 7 in the early trade. Watching sketchers, secondquarter profits fell missing forecasts as the shoe maker hurt by a shift in brazzon taxes and a fire at one of the malaysian warehouses and foreign currency headwinds, shares down 22 . Paypal, Second Quarter earnings rose matching forecasts, sales there increased 15 on strong growth in its online payments business. Paypal also struck a partnership with visa to make it easier for customers to use visa cards for transactions and paypal in brick and mortar stores, the stock down 8 . Vf corp trimming its outlook, maker of north face, nautica, other items reported sluggish Revenue Growth below expectations, challenging environment with mixed economic and currency conditions around the world for its quarterly police. Shares off by about 2 or so in the early trade today. Guys, back over to you. Dom, thank you very much. Lets continue with earnings and focus on chipotle in particular. Those shares highly volatile last night after hours when the company came through missing analyst estimates though they are higher now. The food freebies and promotions failing to lure customers to the extent management hoped as they struggle to recover from the food safety problems. Joining us Steven Anderson senior restaurant and consumer analyst, at maxum group and nick, whose is a restaurant analyst at bush securities. Both of you are downbeat about what youre seeing at the moment. Nick you are comparatively bullish of the two. What did you make of what you heard last night . I dont know if i am bullish. To me the bottom line, were having to delay the trajectory of the recovery consistently now, you know, with every single incremental data point. Im not sure when it stops. Inca pit tulation as capitulation happens towards q4 when we dont get the visibility we need into a recovery in 17, at least 2. 2 to 2. 3 million in 2017 and it doesnt really seem like were going to get there and i think well find that out in q4 and thats when you see the capitulation in chipotle shares. As we talk to you now im watching the stock climb up 3. 5 , down after hours, 2 , thats a 5 , 6 turnaround on the stock today. Do you know why that might be . What are people focusing on that is driving the stock higher here . It does seem to be Short Covering. If you are short going into the [ inaudible ] theres nothing youre playing for now. A lot of Short Covering going on today. I described you both as bears at the beginning and suggested that you were the more bullish of the twos because your price target is 400 which is below where were trading now. Steven, your price target is 300 which would imply that stock would fall more than a third from where it currently is. Why are you so bearish . Well, as nick mentioned every incre mental data point out of chipotle seems to be below consensus for the quarter to date, july comp so far down 21 , thats almost 800 basis points, 8 , although where the street is expecting. Theres really no good news coming from last nights report. The only the incremental data point from management last night was that the potentially will be slowing down new development. Thats been a part of the growth thesis for this name and with no clear path toward low teen, mid teen percent unit growth weve seen in the past decade thats shifting and with that we do think that multiples will need to get compressed. Steven, i wonder what the damage is going to be to margins from their strategy to win back customers even if it does work, the fact that they are giving out freebies, the word simon used, and all sorts of investments when it comes to their Loyalty Program and on their ingredients and marketing and awareness, whats that going to do to the cost line . Thats going to take a large hit to margins. Margins are down more than 1,000 basis points from what theyve been at the peak. I want to mention, too, that the one silver line that chipotle has right now commodity costs are relatively low, particularly for proteins. Once that starts to reverse, i think chipotle will get hit harder than the peers because much of what chipotle purchases because of the nature of the antibiotic free proteins and organic ingredients are purchased in shortterm markets not on longterm contracts. If commodities go up, chipotle gets hit harder. Nick, theres a difference between you two guys and arguably people watching at home here at the moment. I mean on the one happened, youve got to be driven by what you see and as we heard from steven, the incremental data points. There may be people sitting at home on the sheer belief a franchise of this scale will come back, would buy the stock even if that isnt immediately evident now. What would you say to those people who might be considering pulling the trigger . You know, this is not actually it is its not dissimilar from mcdonalds, it is in many senses, but we saw the mcdonalds franchise come back strongly from its problems and people made a lot of money. What makes you think it might be too soon, nick, to do that now . Well, you know, you have to differentiate between a good stock and good business. Chipotle and i think even the most bearish guys in the world, were all assuming theyre going to get their sales back. Whether its in 2018 or 2019 or 2020. They will get their sales back. The problem is, the margin structure is going to look extremely different coming out of this crisis than going in. You know, to me the economics are going to, at best, look 18 to 20 when going in, it was 26, 27 . So, you know, in that scenario given the valuation where the stock is trading today, in my opinion, opinion, needs to go lower. So even if we do believe that the sales will recover, you dont necessarily want to buy the stock yet. Okay. Guys, thank you for the advice. Have a good weekend, both of you. Nick and stephen joining us from maxim. Coming up, hamptons housing. Taking a hit. Sales slumps 21 in the Second Quarter alone. Is it a signal the highend Housing Market is about to pop . Well tell you, next. Its here, but its going by fast. The opportunity of the year is back the mercedesbenz summer event. Get to your dealer today for incredible onceaseason offers, and start firing up those grilles. Lease the c300 for 379 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. Thank you. Ordering chinese food is a very predictable experience. I order b14. I get b14. No surprises. Buying business internet, on the other hand, can be a roller coaster White Knuckle thrill ride. Youre promised one speed. But do you consistently get it . You do with comcast business. Its reliable. Just like kung pao fish. Thank you, ping. Reliably fast internet starts at 59. 95 a month. Comcast business. Built for business. Turns out hamptons Real Estate Sales are slumping. Our own robert frank joins us now to explain why. Good morning. Good morning. A conversion in real estate. High end, weakest segment, hitting the hamptons and other vacation towns especially hard. Sales falling 21 in the Second Quarter. Low nest three years. Average sale prices falling 11 from the previous quarter, and though the average price in the hamptons is still high at a whopping 1. 7 million, they are drifting downward. Homes sitting on the market longer. The more expensive the home the worse the market. The top 10 of the market in the hamptons had biggest deline cli and sitting in the market over a year. Same in aspen, sales crashed from a year ago. Inventory in aspen up 14 . Palm beach, malibu, all of these billionaire beach towns seen declines in the years the wealthy pulled back on buying because of volatile stock markets and elections and overseas. 20,000 square foot mansion, eight bedrooms, 11 bath, stand wine cellar, mope, gym and price tag, 29 million. Now, looking for something more affordable . Heres a threebedroom, two bath in easthampton. About 2,400 square foot. A pool, screened in porch and barbecue. What more do you need for a summer place . 1. 25 million. Guys, back to you. A bargain, robert. Thats right. So how indicative is the hamptons of the broader Real Estate Market either for new york or for luxury housing in general . Or is it its own kind of thing. It moves in lockstep with new york. Were seeing the exact same thing in new york city. Second quarter was weak. Particularly the high end, but were seeing throughout the country all of these luxury markets are taking the biggest hit. Whereas, the broader Housing Market is now gaining strength in part because of Interest Rates and stronger jobs. Its really this sudden flip in the housing where the highend which did well for so many years, is now the weakest segment. Yeah. Kind of a coronation to the wall street main street weve seen. Exactly. Thank you. Meantime, one more. The nba is moving next yearal allstar game out of charlotte due to the transgender bathroom law. The decision comes less than a month after state legislators e revisited the law and chose to leave it largely unchanged. They hope to announce a new location soon and could reschedule if there is a resolution to the matter. Charlotte Officials Say it could cost them 100 million. Expecting in terms of economic benefit. Remember when we interviewed the Lieutenant Governor at the time saying all noise from business. It wont have any impact at all materially on our state. Here we go. Over to jon fortt for a look on whats coming up on todays squawk alley. So happens peter thiel brought that up as well saying, who cares . Apparently the nba does. Well talk about that and, of course, Donald Trumps speech last night. Also paypal had earnings and big news about a partnership with visa. Paypal trading down this morning. Well talk about why and facebook and twitter under pressure ahead of earnings next week. Room to run . All that and more coming up on squawk alley. Bend me shape me, any wayou want me as long as you love me, its alright shape the best sleep of your life. Sleep number beds with Sleepiq Technology adjt an. The bed that moves you. On aa sleep number store. Good morning, it is 58 00 a. M. At paypal in california and 11 00 a. M. Here on wall street and squawk alley is live. Im thinking when you going to ring it, when you going to ring it ive been thinking about my doorbell, oh, well good friday morning and thanks for joining us on squawk alley. Jon fortt and i here at post nine. Carl making his way back from that cleveland. Top story today, the 2016 election. Hillary clinton expected to announce her Vice President ial pick as early as today. Nbc news reporting