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First Move with Julia Chatterley
Retails Sales Plunging In The United States As Customers Cut Back Amid The Lockdown; The U.S. Government Works To Block Supplies To China's Tech Giant, Huawei; Sanofi, The Drug Giant Now Saying The U.S. Won't Get Vaccine Priority. Aired 9-10a ET
Aired May 15, 2020 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:01]
JULIA CHATTERLEY, CNN BUSINESS ANCHOR: Live from New York, I am Julia Chatterley. This is FIRST MOVE and here is your need to know.
Retailing row. Sales plunging in the United States as customers cut back amid the lockdown.
No way Huawei. The U.S. government works to block supplies to China's tech giant.
And Sanofi standoff. The drug giant now saying the U.S. won't get vaccine priority.
It is Friday. Let's make a move.
Welcome as always to FIRST MOVE on this Friday. It is great to be with you and the good news from Wall Street to begin is that the big board is back
on board. What am I talking about?
Well, the New York Stock Exchange announcing that some workers will be allowed back on to world famous trading floor after next. It follows two
months of working remotely. A powerful symbol, I think of resiliency and the path to recovery, however long it is during these challenging times.
And I'll tell you what, challenging is the word for many reasons. First up, data this morning showing U.S. retail sales falling more than 16 percent in
April, that is the biggest drop on record during a month where we saw the biggest ever spike in job losses, too.
Remember, retail, key here in the United States. In particular, consumer spending makes up some 70 percent of GDP, but it is a global story.
Take a look at China, too. Retail sales fell again in April and urban unemployment hit some six percent.
Now, you know my feelings on this data. It is pretty impossible to do a comparison with other nations, but it is a reminder that turning economies
back on following a shutdown is a pretty gradual process.
Take a look at what we saw for Asia markets, too. We've got Hong Kong reporting a nine percent plunge in growth in the first quarter. That in
fact, the biggest decline on record.
In Europe, too. Germany, now officially in recession. We have got all of the details on those numbers coming up as well, but for now, take a look at
U.S. futures. We are lower, this coming after the U.S. Commerce Department signaled a ratcheting up of pressure on China's Huawei.
Let's get to the drivers with all the details on what we're seeing this morning, and we begin with record retail sales drop some 16.4 percent in
April.
Clare Sebastian joins us on this. Clare, I am stumbling over the numbers. They are so huge. Perhaps, it is no surprise because of course it came amid
a lockdown. Is this the worst? I think that is the key here, too.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: I think it is possible that it is, Julia. I mean, this is -- April was the month where pretty much
everyone was on lockdown. In May, we're starting to see some small number of stores opening up.
I think the big question is with unemployment at 14.7 percent or maybe even much higher than that. Will people actually want to spend? And what will
happen to the stores that have been closed for so long?
I think, you know, we're seeing with news around J. Crew and Neiman Marcus, rumors of a JCPenney bankruptcy filing coming. There is collateral damage
from this especially for retailers who weren't particularly strong going into this crisis.
But I want to pull up some of the numbers that we got from this report today. Just about the worse was clothing and accessories. That was down 78
percent month on month. Department stores down some 29 percent month on month.
Interestingly, grocery was also down 13 percent from the previous month. I think some of the stockpiling might have actually abated now.
Although it was up 13 percent from the previous year. But e-commerce, I know the other thing, Julia, this is one area where we have seen increases,
still increasing, actually accelerating. That was up eight percent month on month, 21.6 percent year-on-year. And so that continues to be resilient.
And that begs the question, while these stores have been closed, many of the high street stores, what is happening to that market share and will
this shift be permanent?
CHATTERLEY: It's such an important point. And to your point as well, even as we start to see stores reopen and we'll be discussing this later on in
the show, do consumers have the confidence to come back? It takes time. Clare Sebastian, thank you so much for that.
Now, to rising tensions between the U.S. and China. The U.S. moving to restrict Huawei's access to chip suppliers, Beijing could retaliate by
targeting U.S. companies including Apple, Boeing -- that according Chinese state media.
Christine Romans joins us now. Christine, it is almost like a deja vu from about a year ago and back we are again.
CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT: Yes.
CHATTERLEY: Is it likely that we see the United States ratcheting up the pressure once again on China? The noise is there. The question is, did they
do it amid an economic slowdown as we were just discussing?
ROMANS: It is amazing the timing, you're absolutely right. And what you can see, I think from this administration is it wants to be tough on China and
this is something that is important to the re-election prospects for the President of the United States. That is according to Greg Valliere and some
of the political economists -- political strategists who watch this.
[09:05:08]
ROMANS: If you listened to Peter Navarro, one of the President's top China hawks and a trade adviser, he was just on CNN just a few moments ago
calling it the China virus again, and saying that because the Communist elites in China kept the virus there under wraps for so many weeks, it
directly resulted in the deaths of American citizens.
So, you can see this sort of China rhetoric, this China to blame rhetoric is coming back and this on the same day that the Commerce Secretary said
that they were going to be tough and we are going to move to try to keep some of this technology out of the hands of the Chinese to use for
manufacturing in some of their industries.
So, it is a fascinating moment here. It was just a few months ago, really six months ago where the U.S. government and the Chinese were heralding
this trade deal, right, and now this trade deal certainly seems to be moving backwards.
CHATTERLEY: I mean, this is the problem with what we've seen over the past few weeks as well with the President suggesting even as late as last night
perhaps cutting off relations with China.
Yet at the same time, you get a statement from the Treasury and from negotiators in China saying, look, we're still on track as far as the Phase
1 Trade Deal is concerned.
The rhetoric is one thing. Action such as a step up in tariffs is quite another when your economy is in free fall and we don't know what recovery
looks like. It is a gamble.
ROMANS: Business groups -- oh yes -- and plenty of business groups, they have been saying they would like to see those tariffs pulled off as a way
to stimulate the U.S. government -- or the U.S. economy, right, because it is American importers who pay for those tariffs, and they have been asking
for weeks now that the President consider that.
But the President instead, you are right, his rhetoric is quite the contrary.
CHATTERLEY: Yes. We shall see. Christine Romans, thank you so much for that.
Now, prior to this, China of course calling a return for stable relations with the United States after President Trump said that he might cut ties
with Beijing completely as I just mentioned there.
Ivan Watson is live in Hong Kong. Ivan, I have to say, for our viewers that were watching us yesterday, I spoke too soon and I take it back.
The Scold War is back with steroids, and yet, the message even a few hours ago seemed to be from China that they were calling for calm and they wanted
to be careful about the verbal handling of what the President said.
IVAN WATSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: Look, this is a back and forth. There is some kind of dialogue here and there are different
actors at play here.
The message was conciliatory coming out of the Foreign Ministry of China, but you also have publications like "The Global Times" which has always
taken a much, much harder view against the U.S. and we have to keep in mind that both governments play to their own domestic audiences at times.
And both governments, I think are guilty of bashing their rivals at times as well. But make no mistake, this is also the two biggest economies in the
world.
They are intertwined, they do depend on each other, and trying to make sense of the threats and the bluster and then the conciliatory messages, it
is quite difficult to do at times like this.
I'll make a pivot right now because of course, we're still dealing with the pandemic and we're still dealing with new cases of coronavirus that are
taking place in China.
In some other East Asian countries that we are seeing some success and breathing a tentative sigh of relief is that the worst of the -- the first
wave of this pandemic was behind them.
Take a look at this report, please.
(BEGIN VIDEOTAPE)
WATSON (voice-over): After a five-week closure, the bars in Hong Kong are back open.
(BEGIN VIDEO CLIP)
WATSON (on camera): Oh, that's good. This is my first beer in a bar in more than a month.
You know, this city has done surprisingly well with the first wave of this deadly pandemic. And now, after the partial shutdown, Hong Kong is trying
to open back up.
(END VIDEO CLIP)
WATSON (voice-over): In the Asia-Pacific region, South Korea, Japan, Thailand, Australia, and New Zealand have all had far lower numbers of
confirmed infections and fatalities compared to countries in much of the rest of the world.
In fact, these five countries combined suffered a fraction of the death toll seen in the U.S. State of New Jersey since the pandemic began.
And now, these countries are starting to reopen, but the virus continues to present challenges.
South Korea never imposed a nation or even citywide lockdown and only recorded 260 coronavirus deaths.
But now, it is frantically contact tracing and testing tens of thousands of people after an outbreak in several nightclubs in the capital, Seoul.
The South Korean President issuing a fresh warning to the people.
[09:10:11]
MOON JAE-IN, SOUTH KOREAN PRESIDENT (through translator): It's not over until it's over. We must never lower our guard regarding epidemic
prevention.
(END VIDEO CLIP)
WATSON (voice-over): In Mainland China, the country where the coronavirus was first detected back in December, Shanghai Disney reopened this week
with visitors wearing masks and the park requiring new social distancing measures for added safety.
But after discovering six new coronavirus cases in the original epicenter city of Wuhan, authorities vowed to test all 11 million residents for the
disease.
(BEGIN VIDEO CLIP)
WATSON (on camera): It feels a little bit like two steps forward, one step back. The infection curve flattens, places start to reopen, and then
unexpected clusters of coronavirus pop up again.
(END VIDEO CLIP)
WATSON (voice-over): While some Asian countries are gradually reopening schools, shopping malls, and movie theaters, international travel is still
largely paralyzed. But that could change.
Australia and New Zealand, two countries on the Tasman Sea, are discussing the possibility of creating a bilateral coronavirus-free travel bubble.
(BEGIN VIDEO CLIP)
JACINDA ARDEN, PRIME MINISTER OF NEW ZEALAND: I would note, such a discussion has only been possible as a result of the world-leading results
on both sides of the Tasman to keep the virus under control.
(END VIDEO CLIP)
WATSON (voice-over): In countries that, so far, escaped the worst of the pandemic, we may be getting a glimpse of what the new normal will look like
in the age of coronavirus.
(END VIDEOTAPE)
WATSON: So Julia, even countries like South Korea which have had success against the coronavirus that many American states could only dream of is
now struggling with an outbreak linked to night clubs in Seoul, 153 new cases in the last week or so.
And they have had to roll back some of their advances, delay the reopening of schools by a week, shut down night clubs and that is kind of part of the
new normal that we're seeing.
Even countries that have done well, they are involved in phased reopening and they are having to calibrate those reopening depending on what kind of
risk assessment they feel from new outbreaks -- Julia.
CHATTERLEY: Absolutely. You have to be so ready to recalibrate and switch things if you see virus adjustments and case adjustments here. There are
many lessons in that, Ivan. Thank you so much for bringing that to us. Ivan Watson there. Have a good weekend.
All right, let's move on, Europe's largest economy just had its worst quarter in more than a decade. Germany's GDP shrinking by 2.2 percent in
the first quarter confirming that it is in technical recession, and that was before the full impact of the coronavirus on economic activity hit.
Frederik Pleitgen is live at the German-Austrian border. Fred, great to have you with us. As I just mentioned there, as bad as this is, we know the
month after likely worse. This is the challenge that many countries are facing and now Germany is officially in recession.
FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Yes, and I think Germany especially faces that challenge because of course, Germany is not
only, Julia, a very large economy, but is also such an export-based economy as well.
A lot of these German companies are now noticing that while they have overcome the first phase of the pandemic and some can go back online and
start producing again, there is not necessarily very big markets for the products that they are trying to export.
One of the companies as you know that we visited was Volkswagen and they were very happy to be able to start up their factories again and be able to
put output there again, and now they have actually had to scale back production once again because demand for new cars is simply so low, not
just in Germany, but in other places around the world as well.
And that is something that lot of these large German companies are now finding out. The automotive sector of course is one of them. The machine
tool sector is another one.
A lot of big construction projects around the world, they use German machinery and that is something that is also in very low demand around the
world as well.
And then you have large German companies like for instance, Lufthansa who are still flying at very low capacity. They want to increase that, but a
lot of them say, they are uncertain when they will be able to get back to levels that are at least similar are to what they saw before.
So the German government has said that it is not surprised that the economy is still in a lot of trouble. The German government actually yesterday put
out new numbers as to how much taxes they think they are going to take in and they think that they are going to miss their target by about 100
billion euros. That is a very, very big number.
And it comes at a time where the German economy is already on life support. One of the interesting things about Germany is that the unemployment rate
hasn't really substantially gone up very much, but that is because the German government is essentially paying a lot of companies to keep people
employed so then they are ready to go when the economy does come back.
[09:15:04]
PLEITGEN: But now, with the economy in recession, it really seems very difficult to determine when exactly that is going to be and how fast the
comeback is actually going to be -- Julia.
CHATTERLEY: It is such an important question. And you asked many of them there. But it is interesting to hear you describe Germany on life support
when if I look at some of the other nations in Europe, their situation is actually far worse in terms of caseloads of what they have seen and a lack
of ability to provide the financial firepower to support the economy that Germany has.
What about tourism, very quickly, because I know this is something that you are looking at and you've looked to all sorts of segments of the economy.
How are they going to fair in this regard?
PLEITGEN: As far as tourism is concerned?
CHATTERLEY: Yes.
PLEITGEN: Yes, look, that is one of the huge issues not just here in Germany, but of course Europe-wide, and we've heard in the past couple of
days from the European Union that they are really desperate to try and find ways to get tourism back on this continent going again.
Right now, all the borders are closed, obviously, or most of the borders are closed and they are trying to find ways to get people to be able to
cross the border in ways that are safe so the pandemic doesn't spread.
Germany and Austria, I wouldn't say are trailblazers, but are some of first nations that are easing some of these border restrictions. They fully want
to open the border again on June 15th.
But you know, I've been here in Salzburg in Austria throughout the entire course of the day and I've talked to people who own hotels, people who own
restaurants, restaurants for the first time today are allowed to open again.
It really is very slow going for the moment and they are not sure when exactly it is going to come back. So, that is going to be a very, very
difficult thing to do just to get that cross-border travel going again and just to give you an idea about how difficult it actually is, Julia --
Right now, between Germany and Austria, they can somewhat open the border once again because the two countries are very similar as to how the
coronavirus is playing out there.
Both have been doing well in containing it and keeping the death toll low, but if you look at the border between Italy and Austria, and there is a lot
of cross border traffic usually there as well, it is simply out of the question to try to open that anytime soon because of course Italy and
especially Northern Italy has been so hard hit.
It is a giant challenge for the European Union on an economic scale and then also of course on a political scale as well with countries like Italy
saying, look, you can't just open the borders between Germany and Austria and leave other countries out, because for them of course, tourism is such
a huge economic factor as well. It is going to be a giant challenge -- Julia.
CHATTERLEY: Yes. Again, not how the Eurozone was built and how the framework was meant to be applied, but these are unique times. Fred, great
to have you with us. Thank you for that. Fred Pleitgen in Salzburg there. It looks very pretty behind you. I have to say.
All right, we're going to take a break. Still to come, retail in ruins after the industry's worst month on record. The CEO of Coach handbag maker,
Tapestry joins us to talk about the road to recovery.
And the Sanofi standoff. The French drug maker in trouble with its own government after promising the United States their vaccine first. Stay with
us. That's coming up.
(COMMERCIAL BREAK)
[09:21:02]
CHATTERLEY: Welcome back to FIRST MOVE live from New York where we're headed for a pull back at the open on news that the U.S. is trying to block
global chip suppliers from selling to Chinese tech giant Huawei. That is the picture that we see right now.
The move likely to trigger fresh uncertainty for tech companies in particular. Of course, one of the supports of the broader markets.
Asian electronics giant Foxconn said today, earnings fell almost 90 percent in the first quarter as top client, Apple, reportedly pulled back their
production plans, all tying into what we're seeing for emerging markets, too suffering amid the global COVID-19 outbreak, too.
The MSCI Emerging Market Index falling more than 18 percent this year amid fears that the pandemic is only accelerating the trend of de-globalization.
Our next guest has spent years looking into those trends as well as the emergence of the virtual economy and the fracturing of the internet among
many things.
Ruchir Sharma is the Chief Global Strategist at Morgan Stanley Investment Management and he is also the author of "Democracy On The Road: A 25-Year
Journey Through India."
Ruchir, great to have you with us. The stories couldn't actually be more poignant, I think in light of all the things that you have been warning
about, many of the trends that we're seeing were already in place like trade restrictions and borders, barriers rising between nations. China and
U.S. again an illustration today.
RUCHIR SHARMA, CHIEF GLOBAL STRATEGIST, MORGAN STANLEY INVESTMENT MANAGEMENT: Yes, Julia, I think that has been the unique nature of in
crisis, that in the past when we look at crises, we always think about how the world is going to be turned on its head before the crisis and after the
crisis in terms of how the world looks.
I think what is unique about the nature of this crisis is that many of the trends that were already in play before this outbreak, those trends have
accelerated, whether it has got to do with de-globalization, it has got to do with digitization or even things like delta phobia.
I think these strains were in place after the global financial crisis of 2008 and they have been accelerated by this crisis. In a way what we
thought would play out over five or ten years has in some ways played out in five or six weeks.
You know digital traffic is up 50 to 70 percent for the reasons that we know. Similarly, we've seen a big increase in this rhetoric coming out for
de-globalization. You have countries in India where the word self-reliance is the new buzzword.
So, it is going to be interesting to see as to how these trends have just accelerated after this crisis.
CHATTERLEY: Some of this is a necessity to your point about the suggestion from India now that they want to have more self-reliance. We've seen issues
with things like PPP for nations going actually, we shouldn't be reliant on other countries at times of crisis.
But this avenue in particular slows the recovery, surely. It damages the recovery, and this is critical, too.
SHARMA: Yes, I think that has been in place since 2008, so you're correct about that that productivity growth of the global economy has been falling
despite the tech boom over the last ten years or so.
And I think that de-globalization has been one of the factors behind it. Remember, de-globalization really began after the 2008 financial crisis and
refers to not only the slowdown in the flow of goods and services, but also in capital flows and migrant flows.
And the full vector is now to do with digital flows. The countries are much more keen to make sure that data is stored locally rather than crossing
borders.
So, we have seen this unique phenomenon where data flows are rising at an exponential pace within countries, but between countries, we have seen
walls come up as far as this is concerned.
So this new Cold War that is building up between the U.S. and China, particularly and relating to tech, these are all factors which are not that
great for productivity.
Now, of course, my hope is that one good thing that may come out of this crisis is the fact that there is a lot of refocus on the workforce and an
increased focus on automation, on robotics, trends which were in play before the crisis, but now, those are the ones to have been accelerated.
So, I am hoping that that offsets some of this negative feedback loop coming from the rising talk of de-globalization.
[09:25:37]
CHATTERLEY: In the short term though, we've seen governments step into provide stimulus, we've seen Central Banks step in to provide stimulus. The
lines between those two things have got incredibly blurred, I think, and I think you'd probably agree on this, too.
At the same time, you have shown a great chart and talked about this. Stock market in India and compared to the stock market in the United States, and
said actually if you look at the path, they are very similar. It is liquidity driven.
What does this mean? What is the message in there for investors at this moment?
SHARMA: Yes, there is a battle going on there between fundamentals and liquidity, which is that asset prices are propped up by cheap money,
something that was happening before the crisis and is happening even more now.
But because the Central Banks can print all the money they want, but they can't necessarily control where it goes.
And I think that that is what is going on, that the money keeps finding its way to the stock market and even within the stock market, in a very
concentrated way towards a few of these quality and growth companies out there.
So therefore, we are seeing this sort of complete disconnect that a lot of people can't wrap their heads around, which is that a deterioration in
economic fundamentals and yet, the stock markets especially in the U.S. holding up way above where other stock markets are in the world or where
the stocks are justified by fundamentals.
So, on a daily basis, these correlations are very high, which is what I sort of point out to you in that chart, but if you really step back and
look at it, the U.S. stock market has been the only game in town in the way over the last decade or so.
Emerging markets have had the worst stock market decade in post war history. This has been the worst decade for emerging market returns since
the Great Depression.
The U.S. stock market keeps firing ahead. The U.S. Stock market has tripled in value over the last decade. But it is so being led by half a dozen
companies, these marquee companies that we all know about which have become an asset class unto themselves.
All the Amazon, Apple, Google, Facebook, Netflix, Microsoft. These six companies have just become a completely different universe and the market
caps are so big now that the combined market caps of these companies today is over $6 trillion.
CHATTERLEY: Absolutely, I was about to say, some of the market caps of the individual tech companies are bigger than nation states quite frankly.
And to your point, where does this all lead? Tie all the threads together for me. Because one of the big pillars has been technology companies.
You're saying actually, one of the unfortunate but positive benefits of what we're going through is the advancement of technology. How should we be
investing, looking at the world from here on end? Challenges and positives.
SHARMA: Right. So you are completely correct, which is in fact, I think you, you know, this investing did big at the combined market cap of these
six companies is bigger than any stock market in the world except possibly China.
So, that's really how big they have become. The issue is what do we do going forward? Going forward, my own sort of recommendation is that we have
to look at beaten down quality names outside of this cohort because this cohort has this almost manic following and that has increased following
this crisis.
So, a lot of the good news is already in the price as far as these very large bigger cap companies are concerned.
And we now have to start looking at quality companies that have been beaten down because the rest of the world's stock markets outside of these six
companies have practically done nothing for the last five years in dollar terms.
So, we now have to start looking at quality companies and sectors such as energy and the more consumer oriented sectors, we have to start looking at
companies there to try to build more of a barbell portfolio rather than just put all our eggs in one basket and keep on following these very high
tech companies that have already done so well and that have even done better this year given the nature of this crisis.
So a lot of this is in the price of these very large mega cap companies.
CHATTERLEY: Yes, don't be confused. We've got to look through the short term and invest for the long term here with some of the opportunities.
Ruchir, great to have you with us as always.
Ruchir Sharma, the Chief Global Strategist for Morgan Stanley Investment Management there. Ruchir, stay safe and great to see you.
All right, we are counting down to the market open. Stay with us. That's next.
(COMMERCIAL BREAK)
[09:33:21]
CHATTERLEY: Welcome back to FIRST MOVE. U.S. stocks are up and running for the final session this week and we have a lower open across the board as
expected amid a flurry of negative news flow this morning.
Firstly, U.S. retail sales dropping more than 16 percent in April. That's the worst reading on record. Sales of clothing and accessories stores were
hardest hit. The numbers even worse when you strip out auto sales.
Now, as bad as today's numbers were, they were also expected. The latest flashpoint meanwhile between the United States and China unexpected. The
Commerce Department looking to block global chipmakers from selling to China's Huawei. The U.S. targeting chips that are the direct product of
U.S. software and technology.
Chinese state media says China could retaliate with possible measures against Apple, Boeing and other U.S. corporate giants. Heightened trade
tensions, the last thing needed as economies begin the road to recovery with some U.S. states currently in the process of easing lockdown
restrictions.
Global luxury brand, Tapestry has begun to reopen stores across the nation. The Coach handbag maker is one of the few retailers that did not furlough
fulltime employees as coronavirus ravaged the industry. It is paying salaries and benefits until the end of May.
Joining us now is Jide Zeitlin. He is the Chairman and CEO of Tapestry. Sir, fantastic to have you on the show.
JIDE ZEITLIN, CHAIRMAN AND CEO, TAPESTRY: It's good to be here with you.
CHATTERLEY: An important move, I think, a decision that you made as a company -- great to have you with us -- an important decision that you made
to retain workers, continue to pay them, your fulltime workers.
Talk to me about that decision first and what reopening stores looks like in practice.
[09:35:10]
ZEITLIN: So, we've been very focused all along on three key things, Julia. You know, one was we moved very quickly to fortify our financial position
and we think that that was a critical part in being able to think really long term about our people.
So, we moved to cut our inventories to reduce our CapEx to draw down our revolver and that's a never-ending process just to make sure that our
foundations financially are as strong as possible.
Two, we really focused on leading with our values when it comes to people, and that's our people. That's our consumer. And that's also broadly the
community, the communities that we're a part of, and we've done that, as you point out in terms of being really holding out.
You know, we realized, we're not immune to the laws of gravity, but we've held out longer than our peers in terms of protecting our people.
And then also in terms of contributing back to our communities, we've made a number of donations, one we're particularly proud of in New York, where
we were supporting -- we put up funds to support loans to small businesses here.
And we've done that in part because we've had the benefit of being able to leverage a global footprint. So, we saw the get, you know, the gathering
storm in China earlier with our very substantial operations in China and Asia more broadly and we've been able to take learnings, take key insights
from there and move those across the globe for maximum impact across our businesses and so feel very good about, you know, about that in what
clearly is a very challenging and sober, sober environment.
CHATTERLEY: Absolutely, and I think to your point, the fact that you had experience of what reopening looks like, what consumer behavior looks like
in China and of course in South Korea is pretty pivotal at this moment.
Talk to me about what kind of recovery you're seeing, because we just mentioned, Chinese retail sales data is still under pressure. Let's call it
that. What are you seeing from customers and what kind of recovery and how are they buying? Because I know there's a real online focus there, too.
ZEITLIN: Absolutely. And so one comment I'd make that we saw and are seeing in China is that the Chinese consumer is courageous. You know, they've
moved from fear to resilience in a relatively short period of time and that was a real insight for us, and it's something that we're watching closely
as we look around the globe.
But the real key learning was that there isn't this a-ha moment where you go -- you know, a light switch kind of moment where you go from all off to
all on. It's a gradual process. One consumer at a time.
And it's a process actually that because during the period of time that our stores in China and in South Korea, for example, were largely shut to today
where all of our 400 plus stores across China and South Korea are open is that when they were shut, you know, our focus in terms of engagement with
our consumer was on digital.
And so that transition across from digital to physical is key. China clearly is hugely innovative in terms of technology, social media
technology, consumer technology, and we saw that consumers in China wanted to stay engaged with our brands, digitally even when the stores were
closed, but as the stores opened, they stayed very engaged.
And so one of the things we loved seeing was with WeChat where we were live streaming with store associates and consumers who were sitting in their
living room often at times, we were showing them exciting new product. They were engaging with our people and our product. They purchase product. And
we would either ship it to them or early on as we started opening with curbside or storefront availability, they'd come and they'd pick it up.
So, we're encouraged. It's a gradual process. But it's one that we've seen whether it's in China that has come over time to where our productivity is
really at historical levels right now.
We've also noted, for example, in South Korea, where the consumer who does come back into the physical environment is somewhat younger than the
broader profile, and that's something that we're actually seeing.
You mentioned how, you know, we're excited by the end of this week, we'll have 300 stores open in North America. And we opened 40 about two weeks ago
here in North America and we saw some of the same trends there.
First of all, it's gradual. It's a step at a time, and then that blurring of the line between digital and physical is critical. And then a somewhat
younger consumer is initially those that that come out and wait out into a difficult world.
[09:40:08]
CHATTERLEY: The young and the fearless. It's funny when I'm listening to you speaking, it's just the profile of a consumer is so different in the
United States, the handling of the caseloads and the testing and the tracing is so different, too.
Jide, just explain to me what decisions you're making and how quickly over how many staff you'll need beyond the end of this month, and how quickly
you'll make decisions? And are you negotiating rent? Because you have power in terms of store footprint to push rents down or force rents down to help
you with the money here? Talk to me about those two things. Tough conversation.
ZEITLIN: Absolutely, Julia. Absolutely. So with respect to reopening, we're really back to leading with our values and taking the cue from our people.
And so you know, we're very focused fully on regulatory openings, but above and beyond the regulatory authority to open, we're focusing on where our
people are comfortable coming back in, where our consumers are telling us that they want that physical interaction, in addition to the digital
interaction that they've had for so long. And then we're doing it in a very graduated way.
Again, this is not a light switch. It's a gradual process. But it's a process that has an inevitable in our view arc to it both through what
we've seen with our global footprint and then what we've seen over time, historically, because we've clearly, you know, in over 80 -- in roughly 80
years of existence, we've navigated storms, not quite as large as this one, but our take away from that is that with a -- that where our brands are
positioned, you know, we're very well-positioned as consumers come back in because we see in this era, particularly this kind of Covidien area that
consumers are very focused on value and values.
And our products provide and deliver tremendous value, high quality, beautiful products at reasonable prices, and are the values of our brands
from the Coach, Kate Spade, Stuart Weitzman perspective are very in line with where consumers, particularly millennials, and Gen Z's are going
today.
CHATTERLEY: We'll see -- and rent? You didn't mention rent. Was that an oversight? Are you still working on the rent? And then I have to go.
ZEITLIN: That's -- yes, very much of a work in progress. But one we feel it's inevitable to find that right balance between brick and mortar and
digital.
CHATTERLEY: Yes. See as you go. Jide, great to have you with us. Thank you so much. And stay in touch please and we'll see how our consumers come
back, particularly the young and the fearless. The Chairman and CEO of Tapestry there.
ZEITLIN: Thank you, Julia.
CHATTERLEY: Thank you.
ZEITLIN: Real pleasure to meet you.
CHATTERLEY: Great chat. Thank you. All right, coming up on FIRST MOVE, the bus stop between the pharmaceutical giant and the French government, why
the CEO of Sanofi is being summoned to see President Macron. After this.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. A row always simmering between the Elysee Palace and one of the world's biggest pharmaceutical companies.
French President Emmanuel Macron is summoning the CEO of Sanofi to a meeting after the Paris-based company suggested that the U.S. would have
priority access if it succeeds in finding a coronavirus vaccine.
Cyril Vanier joins us with the details. This is fascinating for me, Cyril, the challenges of taking funding for research, prioritizing, therefore, who
gets the product if you manage to succeed, and who actually buys it in the end. Talk us through the details on this one.
CYRIL VANIER, CNN CORRESPONDENT: Yes. Absolutely, Julia, and I'll tell you, Sanofi managed to really get under the French government's skin with this
one.
Normally, Sanofi, a French pharmaceutical lab is lauded as a French industrial giant here. But when they announced and when the CEO of Sanofi
announced on Thursday that the U.S. would get to order vaccines as a matter of priority, if and when this vaccine ends up being developed a year and a
half to two years from now, the government just went ballistic. There's no other way to put it.
So the Prime Minister immediately called the President of Sanofi, reminded them that France believes in equal access to the vaccine for all and then
the President said that he believes the vaccine should be a universal common good and should not be subjected to the laws of the free markets.
And that's exactly what had happened. Because the reason Sanofi was ready to prioritize the U.S. is because the U.S. has actually put money on the
table to the tune of tens of millions of dollars to help them develop and fund their research into this vaccine.
Well, since then, Sanofi has changed their messaging a little bit. They have said that the vaccine would be available for all, that they're also
developing the vaccine here in Europe. Having said that, the substance of the matter hasn't changed that much because Sanofi is encouraging nudging
the European Union to do what the U.S. has done, which is to put money on the table as well and help them with the development of this vaccine.
The last thing I'll say, Julia, is that developing a vaccine like this cost hundreds of millions of dollars. It is a risk for a pharmaceutical lab,
like Sanofi especially when you don't know if the vaccine will work.
CHATTERLEY: It's so true. Someone has to pay for the research. It's a global good right now. Everyone is on the race. In fact, there should be a
global amount of pot of money going towards this research, quite frankly. But that's a whole different story.
Cyril Vanier, thank you so much for joining us on that story.
All right, the CEO of Dubai Airport says restarting travel depends on getting a vaccine. About 86 million people went through the Dubai
International Airport last year. And in an interview with our John Defterios, the CEO explains what passengers can now expect.
(BEGIN VIDEOTAPE)
PAUL GRIFFITHS, CEO DUBAI AIRPORTS: What we've had to do is reconfigure the airport to conform to all the social distancing rules. So, the check-in has
been segregated. We've now got barriers separating people.
We've got stickers on the floor, to make sure that people don't breach the social distancing distances, and of course, we'll have our staff protected
in masks and various hazmat accessories to make sure that they can direct people.
Plexiglas screens in front of check-in desks, and all the way through the entire airport process, people will have to observe those social distances.
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: You didn't mention on site testing. The false negative results are scaring people. It doesn't
rebuild confidence. You're not confident in them.
GRIFFITHS: Well, I think the thing is, there are two problems with it. The false negatives and the reliability of it, and also the time it takes and
whether it's scalable.
[09:50:02]
GRIFFITHS: The difficulty is you might be able to operate some form of pre- flight testing using the current techniques with a limited number of passengers, but if each of those passengers needs to wait 10 minutes before
the result is there, again that is something that limits on our capacity.
I think there are techniques being developed which will take that pre- flight testing to a much, much quicker result. Now if we get that and it's not so intrusive, that actually might be quite a good way to go.
(END VIDEOTAPE)
CHATTERLEY: We're going to take a break here on FIRST MOVE, but coming up, the TikTok takeover. Our guide to the video sharing app. We'll see. All of
the details next.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. In life under lockdown, social media has become a staple to help us connect with one another and sometimes
just blow off steam.
The hottest app right now, TikTok, and if you don't know about it, don't worry because we have got you covered.
It's owned by Chinese internet tech company, ByteDance, TikTok is a short form video app and it's become the place to dance and lip sync your way to
internet stardom.
It originally was considered an app for teens, but hey, now it's a big kid, too. Hundreds of millions of people have downloaded it from the millennials
all the way to the boomers. And luckily, our own Max Foster is pretty TikTok famous and has this guide to the latest trends.
(BEGIN VIDEOTAPE)
MAX FOSTER, CNN CORRESPONDENT (voice over): When a guy drops off shopping for his grandmother during lockdown, he asked her to do a TikTok dance with
him.
The same dance has been done many times before, but the secret to Tik- Toking is making it your own, and if the lockdown had an anthem on the platform, this is it.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Bored in the house and I'm in a house bored.
(END VIDEO CLIP)
FOSTER (voice over): The platform's biggest star, American teenager, Charlie Damelio garnering eight million likes with her take on the sound.
Damelio's profile reveals she has an astonishing 55 million followers and getting on for four billion likes on her videos dwarfing any of the
celebrities that joined the platform after her.
Liked Damelio, Australian Dante Moeller found stardom dancing and lip synching in his bedroom. His mother getting in on the act in this video,
which has been viewed nearly five million times.
(BEGIN VIDEO CLIP)
DANTE MOELLER, TIKTOK STAR: Beforehand, I think everyone was kind of just doing it for fun, and now it's kind of like a way to escape, but now I
think everyone is doing it, everyone and grandma -- just because they're always sitting at home, so I think they might as well do something
creative.
(END VIDEO CLIP)
FOSTER (voice over): And the power of the platform lies in the fact that anyone can go viral if they hit the right vibe.
British psychologist Julie Smith has gained hundreds of thousands of followers with educational videos like this.
[09:55:07]
(BEGIN VIDEO CLIP)
DR. JULIE SMITH, BRITISH PSYCHOLOGIST: Your brain can read a word faster than it can label a color.
It is a lovely, lighthearted platform, and that's partly what drew me to it in the first place is things that just give you that little lift that just
bring you a moment's joy or make you laugh for a moment.
So, you know, those little moments aren't to be, you know, dismissed because that can help you to get through a day.
(BEGIN VIDEO CLIP)
FOSTER (ON TIKTOK VIDEO): Girl don't do it. It's not worth it.
(END VIDEO CLIP)
FOSTER (voice over): Even journalists are finding the joy on TikTok, trying to make sense of lock down like everyone else.
Max Foster CNN, in social media's Wild West.
(END VIDEOTAPE)
CHATTERLEY: I may be bias, but I think Max is best.
That's it for the show. I'm Julia Chatterley. Stay safe this weekend, and we'll see you next week.
(COMMERCIAL BREAK)
[10:00:00]
END
