WEBVTT - Middle-Income Families Facing Financial Challenges 0:00:01.360 --> 0:00:05.720 This is Bloomberg business Week Inside from the reporters and 0:00:05.880 --> 0:00:09.440 editors who bring you America's most trusted business magazine, plus 0:00:09.520 --> 0:00:13.440 gloom O Business Finance and tech news. The Bloomberg Business 0:00:13.440 --> 0:00:19.760 Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:21.640 --> 0:00:22.240 Crowns. 0:00:22.320 --> 0:00:25.400 The eleven Meet joke gets to the right here. I 0:00:25.520 --> 0:00:27.440 have Saga in the medal of You. 0:00:32.560 --> 0:00:37.320 Well, just an absolutely perfect guest, kind of really given 0:00:37.320 --> 0:00:39.879 our conversation that we just had with our TV team 0:00:40.000 --> 0:00:44.320 Jennifer about the consumer and inflation, because the theme of 0:00:44.360 --> 0:00:47.200 the past two months or so and kind of feels 0:00:47.200 --> 0:00:48.720 like the theme of my life because it's all I 0:00:48.760 --> 0:00:52.400 talk about every single day is that inflation has moderated. 0:00:52.720 --> 0:00:55.000 After all, financial markets are betting that the tough part 0:00:55.000 --> 0:00:57.680 of the Fed's job is behind it, and the FED 0:00:57.760 --> 0:01:00.800 is going to cut rates six times next year. All 0:01:00.800 --> 0:01:04.200 that said, our next guest says, middle income families are 0:01:04.240 --> 0:01:08.120 still feeling the squeeze. Glenn Jay Williams is CEO of 0:01:08.200 --> 0:01:11.480 the financial services company Primerica. It's a firm that specializes 0:01:11.520 --> 0:01:15.520 in serving middle income households in the US, Canada and more. 0:01:15.720 --> 0:01:18.440 The companies out with a new report called Perception Versus 0:01:18.440 --> 0:01:23.240 Reality examining Middle Income Households Financial Outlook heading into twenty 0:01:23.280 --> 0:01:25.760 twenty four. Good to have you with us, Glenn. How 0:01:25.800 --> 0:01:27.560 are you doing great? 0:01:27.560 --> 0:01:28.160 Tam? How about you? 0:01:28.360 --> 0:01:30.600 Yeah, we're doing really well. Thanks so much for joining 0:01:30.680 --> 0:01:32.880 us today. Before we get to the report, just give 0:01:32.959 --> 0:01:35.480 us an idea of that. The types of households that 0:01:35.520 --> 0:01:38.319 you serve at Primerica, you call them middle income households, 0:01:38.319 --> 0:01:39.160 But how do you define that? 0:01:40.360 --> 0:01:41.280 We do, Tim. 0:01:41.319 --> 0:01:45.240 We define those households as having household incomes between about 0:01:45.240 --> 0:01:47.600 thirty and one hundred and thirty thousand dollars a year. 0:01:48.240 --> 0:01:51.400 That takes up about fifty six percent of US households. 0:01:51.840 --> 0:01:54.560 So it's a pretty it's a pretty wide cut. Clearly, 0:01:54.600 --> 0:01:57.400 there are households that are earning less than that and. 0:01:57.280 --> 0:01:58.200 Struggling even more. 0:01:58.200 --> 0:01:59.560 We deal with a few of those, and we deal 0:01:59.600 --> 0:02:01.920 with quite a number above one hundred and thirty thousand mark. 0:02:02.200 --> 0:02:04.520 But the vast majority of the families that we're advising 0:02:04.600 --> 0:02:06.640 or are in that thirty to one hundred and thirty 0:02:06.640 --> 0:02:07.520 thousand a year range. 0:02:07.560 --> 0:02:10.560 And what's so important about this? These tens of millions 0:02:10.560 --> 0:02:13.160 of households, these tons of millions of families, these customers 0:02:13.160 --> 0:02:16.840 that you have is that inflation hits these folks harder 0:02:16.880 --> 0:02:20.000 than it hits people who make more money because a 0:02:20.160 --> 0:02:23.440 larger portion of what these people earn goes to gas, 0:02:23.760 --> 0:02:28.320 goes to food, goes to childcare. So talk to me 0:02:28.360 --> 0:02:31.960 a little bit about what you're seeing going into next year, 0:02:32.440 --> 0:02:34.920 given that we are seeing actually inflation moderate. But as 0:02:34.919 --> 0:02:40.920 Steve Williams told us earlier in the day, you know, 0:02:41.400 --> 0:02:43.799 if you're still paying more, you know, twenty or thirty 0:02:43.840 --> 0:02:45.560 percent more for something than you did in twenty nineteen, 0:02:45.720 --> 0:02:47.880 it doesn't really feel like prices are coming down. 0:02:49.600 --> 0:02:52.160 That is the challenge, Tim, As you've described it, these 0:02:52.200 --> 0:02:56.160 families have every dollar in play at all times, and traditionally, 0:02:56.200 --> 0:02:59.320 because they have smaller amounts to invest, smaller to purchase 0:02:59.320 --> 0:03:02.200 financial service is with they tend to be somewhat ignored 0:03:02.240 --> 0:03:05.280 by the industry, who by and large has moved up scale. 0:03:05.720 --> 0:03:08.920 And so we feel a special responsibility to these families 0:03:09.000 --> 0:03:11.720 because we can access them, we can serve them, and 0:03:11.760 --> 0:03:13.160 they are under stress. 0:03:13.560 --> 0:03:15.440 They don't have extra dollars. 0:03:15.120 --> 0:03:17.959 In the best of times, much less in times like these, 0:03:18.000 --> 0:03:21.600 And as you point out, it's the compounding effective inflation 0:03:21.760 --> 0:03:24.840 over time. You know, our studies and the household Budget 0:03:24.840 --> 0:03:27.960 Index indicates that the average middle income family has a 0:03:28.120 --> 0:03:31.600 deficit from the last of twenty thirty months of almost 0:03:31.600 --> 0:03:34.760 twenty five hundred dollars. And so while maybe the whole 0:03:34.920 --> 0:03:37.320 is not getting any deeper, they're down there pretty deep 0:03:37.360 --> 0:03:39.040 already and we've got to help get them out. 0:03:39.320 --> 0:03:41.240 And that's the challenge these families face. 0:03:41.880 --> 0:03:45.040 What can you tell us about what their spending habits 0:03:45.040 --> 0:03:47.560 are starting to look like over the Christmas holidays and 0:03:47.880 --> 0:03:50.080 what are the concerns that they're expressing to you, Because 0:03:50.160 --> 0:03:52.080 i mean, Tim makes a really good point that you know, 0:03:52.080 --> 0:03:55.640 we've seen that inflation's moderating, but it's still going to 0:03:55.640 --> 0:03:58.880 feel pretty hard for consumers. And so by the same token, 0:03:58.920 --> 0:04:01.760 it sounds like perhaps some of these folks they've still 0:04:01.760 --> 0:04:04.360 got their jobs, they might still have a little bit 0:04:04.360 --> 0:04:06.280 of investment to look at, and it looks like there's 0:04:06.520 --> 0:04:08.120 some good feeling there with a lot of green in 0:04:08.160 --> 0:04:11.280 the stock market over this year. So what's your take 0:04:11.360 --> 0:04:13.720 on how they're feeling about this holiday season and spending 0:04:13.800 --> 0:04:14.680 going into next year. 0:04:16.320 --> 0:04:19.240 Give Jennifer, you're right, there are some positives going on. 0:04:19.440 --> 0:04:23.760 Clearly employment strong, more people do have their jobs. We're 0:04:23.760 --> 0:04:26.800 seeing incomes in freesome as well as well as the 0:04:26.839 --> 0:04:30.320 slowing of inflation. So there's some positive things happening as well, 0:04:30.680 --> 0:04:33.159 but by and large, most families are struggling. They're pretty 0:04:33.160 --> 0:04:36.160 scarred financially and in some cases emotionally by what they've 0:04:36.160 --> 0:04:38.880 been through the last couple of years, and so we 0:04:38.920 --> 0:04:41.719 are seeing them reporting slowing down their spending this holiday 0:04:41.800 --> 0:04:45.800 versus past holidays, but in reality that's very difficult to do. 0:04:45.960 --> 0:04:48.120 And what's really concerning is that we're seeing more and 0:04:48.160 --> 0:04:51.080 more families that are relying on credit cards and even 0:04:51.120 --> 0:04:54.360 withdrawals from those savings that you mentioned to take care 0:04:54.400 --> 0:04:57.400 of months to month expenses in normal months, particularly when 0:04:57.560 --> 0:04:58.200 expenses go. 0:04:58.200 --> 0:04:59.480 Up due to the holidays. 0:05:00.000 --> 0:05:03.240 And of course, overuse of credit and taking money out 0:05:03.279 --> 0:05:06.000 of savings that's designed for long term goals like retirement 0:05:06.680 --> 0:05:08.960 just has a terrible impact over time. They lose the 0:05:09.360 --> 0:05:13.040 time value of money, the compounding of returns on their investments. 0:05:14.040 --> 0:05:16.520 The opposite is happening if they're using credit cards with 0:05:16.920 --> 0:05:19.520 very high interest rates and if they're not paying their balances, 0:05:19.560 --> 0:05:23.080 those are compounding, and so the alternatives to cutting back 0:05:23.120 --> 0:05:26.640 spending are very difficult from middle income families, and that's 0:05:26.680 --> 0:05:29.360 why they're struggling. And that's why in many cases we 0:05:29.400 --> 0:05:32.800 see in our surveys are are qualitative surveys that they're 0:05:32.839 --> 0:05:35.400 struggling financially and emotionally at the same. 0:05:35.200 --> 0:05:39.360 Time, Glenn, does all of this, taken together at all, 0:05:39.520 --> 0:05:42.200 paint a picture of a recession next year? Is this 0:05:42.240 --> 0:05:43.160 recessionary to you? 0:05:45.560 --> 0:05:47.360 I think for these families it feels like it. 0:05:47.640 --> 0:05:49.360 You know, that's a tough question We've been trying to 0:05:49.400 --> 0:05:51.320 get the answer to for a number of years now, 0:05:52.080 --> 0:05:54.760 but I think these families feel like that. 0:05:55.680 --> 0:05:57.640 You know, relief is not just around the corner. 0:05:57.720 --> 0:06:01.520 But the reason I ask is is because if consumers 0:06:01.560 --> 0:06:04.880 pull back on spending, and consumer spending powers this economy, 0:06:05.360 --> 0:06:08.440 and the families that you serve account for more than 0:06:08.480 --> 0:06:12.400 half of the households in this country, if they're pulling 0:06:12.480 --> 0:06:14.920 back to a certain extent, does that mean the economy 0:06:14.960 --> 0:06:16.000 is going to go into recession? 0:06:18.279 --> 0:06:19.919 I believe we're certainly close to the age. 0:06:20.880 --> 0:06:24.880 It's you know, we've seen spending be unusually strong overall, 0:06:24.920 --> 0:06:27.279 and we've had a lot of discussions about the consumer 0:06:27.320 --> 0:06:29.800 spending that hasn't slowed as much as we would expect. 0:06:30.640 --> 0:06:33.080 Doesn't sound consistent with what we're hearing and seeing in 0:06:33.120 --> 0:06:33.719 the middle market. 0:06:33.760 --> 0:06:36.080 So maybe it's being driven outside the middle market. 0:06:36.160 --> 0:06:39.480 But we're clearly seeing these families slow down, and enough 0:06:39.520 --> 0:06:42.680 of that will lead to recessionary pressure if it continues 0:06:42.720 --> 0:06:43.239 long enough. 0:06:43.760 --> 0:06:47.400 I wonder if you think policy makers and indeed Wall 0:06:47.400 --> 0:06:51.120 Street traders are really alive to the risks here of recession, 0:06:51.160 --> 0:06:54.920 because there's just so much talk about a soft landing. 0:06:55.000 --> 0:06:57.800 And then we were talking earlier on the program about 0:06:57.839 --> 0:07:00.839 the last few holdouts on Wall Street, the bare case 0:07:00.880 --> 0:07:03.719 for the United States, And I wonder if you do 0:07:03.880 --> 0:07:07.159 start seeing a real pullback and spending from the kinds 0:07:07.160 --> 0:07:10.280 of consumers you serve, if this will just pass the 0:07:10.280 --> 0:07:12.120 rest of the economy. I mean what I mean by 0:07:12.120 --> 0:07:14.520 that is the wealthier part of the economy, if it'll 0:07:14.520 --> 0:07:17.680 pass them right by, because the macro numbers will hold 0:07:17.760 --> 0:07:19.960 up because their spending will continue. 0:07:21.160 --> 0:07:23.720 Well, there's always a danger that Wall Street is disconnected 0:07:23.720 --> 0:07:25.200 from Main Street, for sure. 0:07:26.320 --> 0:07:27.440 But I don't know the answer that. 0:07:27.520 --> 0:07:30.520 I don't know whether the middle income challenges are going 0:07:30.600 --> 0:07:33.360 to be large enough long enough to overwhelm the other 0:07:33.400 --> 0:07:36.120 pressures maybe that are moving in a more positive direction. 0:07:36.840 --> 0:07:39.000 It's clearly a tug of war going on, and the 0:07:39.040 --> 0:07:41.880 longer it continues, the risk here it gets. I think 0:07:41.920 --> 0:07:44.240 those that are planning for the future should clearly be 0:07:44.680 --> 0:07:48.840 taking this possibility into consideration and their planning, because there 0:07:48.920 --> 0:07:52.320 is a reasonable enough possibility of it that you've got 0:07:52.360 --> 0:07:54.400 to plan around it. You've got to say, what happens 0:07:54.760 --> 0:07:57.960 if the spending slows so much, so rapidly, for so 0:07:58.080 --> 0:07:59.960 long that it starts to send us in the drain 0:08:00.160 --> 0:08:02.840 of a recession. And those that are planning for their 0:08:02.880 --> 0:08:06.520 finances for both families and for the rest of our 0:08:06.560 --> 0:08:08.920 country certainly need to keep that in the back of 0:08:08.960 --> 0:08:10.480 their mind. I don't know where it's going to go yet. 0:08:10.520 --> 0:08:12.880 I don't think anyone does, but it's clearly a risk. 0:08:13.360 --> 0:08:15.600 Hey, I just wanted to starry interrupt, Jennifer. I just 0:08:15.640 --> 0:08:18.360 wanted to let our audience know that shares of Nike 0:08:18.400 --> 0:08:21.000 are bouncing around the after hours, moving higher and then 0:08:21.000 --> 0:08:24.280 moving lower after the company reported its results just a 0:08:24.280 --> 0:08:27.600 couple of minutes ago. Earnings per share for the second 0:08:27.640 --> 0:08:29.760 quarter came in way above estimates at a dollar and 0:08:29.800 --> 0:08:32.040 three cents per share versus that stimates of eighty five 0:08:32.120 --> 0:08:34.520 cents a share once again, though shares in the after 0:08:34.600 --> 0:08:36.559 hours are kind of bouncing around a little bit. 0:08:37.360 --> 0:08:39.839 Glenn, thanks so much, just real quick, I just want 0:08:39.880 --> 0:08:41.360 to get back to you on one point about the 0:08:41.440 --> 0:08:43.920 kinds of customers that you do serve. Do you see 0:08:43.960 --> 0:08:45.880 that there's a big difference between the top end and 0:08:45.920 --> 0:08:48.120 the bottom end? Is it really quite tight for people 0:08:48.160 --> 0:08:49.880 at the lower end, but maybe at the top end 0:08:50.080 --> 0:08:51.800 it's a little bit easier. And part of the reason 0:08:51.840 --> 0:08:54.280 why I asked that is because maybe at the top 0:08:54.360 --> 0:08:56.920 end they've got a little bit more wiggle room to 0:08:57.120 --> 0:08:59.440 cope in case the Fed delays it's move on the 0:08:59.480 --> 0:09:00.319 rate cuts. 0:09:01.679 --> 0:09:04.480 Absolutely, the thirty two, one hundred and thirty thousand is 0:09:04.559 --> 0:09:07.600 a wide range, and so we do see families with 0:09:07.760 --> 0:09:11.760 tighter buzz budget, smaller incomes at the lower end struggling more. 0:09:12.320 --> 0:09:14.480 At the same time, you hear more and more every 0:09:14.520 --> 0:09:16.679 day about people that are making six figures in their 0:09:16.720 --> 0:09:18.559 household and they feel like they're. 0:09:18.400 --> 0:09:19.640 Living paycheck to paycheck. 0:09:19.760 --> 0:09:22.600 So yes, absolutely, it is more severe at the lower 0:09:22.679 --> 0:09:24.720 end of the range, but there's a lot of pressure 0:09:24.760 --> 0:09:26.600 throughout the range from thirty to one thirty. 0:09:27.040 --> 0:09:29.560 Hey, Glenn, really appreciate you joining us. You got to 0:09:29.559 --> 0:09:31.760 come back in the early part of next year because 0:09:31.960 --> 0:09:35.080 this is a really, really fascinating report that you and 0:09:35.120 --> 0:09:38.560 the team over at Primerica have put together. Once again, 0:09:38.600 --> 0:09:41.480 it's the Perception Versus Reality report that examines middle income 0:09:41.520 --> 0:09:44.800 households financial outlook heading into twenty twenty four. That's Glenn 0:09:44.840 --> 0:09:48.160 Jay Williams, CEO of the financial services company Primerica, joining 0:09:48.240 --> 0:09:51.199 us on Zoom from Duluth, Georgia. Shares a Nike right 0:09:51.240 --> 0:09:54.760 now moving lower by about three point eight percent in 0:09:54.800 --> 0:09:58.880 the after hours. The company says it's stream streamlining the organization. 0:09:59.320 --> 0:10:01.800 It sees pre tax charges of between four hundred million 0:10:01.840 --> 0:10:05.360 and four hundred and fifty million dollars. The company also 0:10:05.800 --> 0:10:08.880 says that looking ahead to a softer second half revenue outlook, 0:10:08.880 --> 0:10:11.280 we're going to continue our coverage with Nike. And in 0:10:11.400 --> 0:10:14.599 just a few minutes, you're listening to watching Bloomberg BusinessWeek. 0:10:16.840 --> 0:10:20.400 You're listening to the Bloomberg Business Week podcast. Catch us 0:10:20.440 --> 0:10:23.800 live weekday afternoons from three to six Eastern Listen on 0:10:23.840 --> 0:10:27.560 Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business 0:10:27.600 --> 0:10:30.400 app or watch us live on YouTube. 0:10:30.559 --> 0:10:35.240 We're continuing with Nike and our coverage around Nike's latest 0:10:35.400 --> 0:10:38.520 quarterly report. Shares, as Charlie just mentioned, down about four 0:10:38.559 --> 0:10:41.440 point seven percent in the after hours worth repeating some 0:10:41.480 --> 0:10:43.439 of these headlines. Certainly, the company is saying that it's 0:10:43.440 --> 0:10:46.520 streamlining in the organization and sees pre tax charges of 0:10:46.559 --> 0:10:49.480 between four hundred and four hundred and fifty million dollars. 0:10:49.880 --> 0:10:53.079 The company says that charges are to be likely recognized 0:10:53.120 --> 0:10:56.520 in the third quarter of fiscal year twenty twenty four. 0:10:57.000 --> 0:10:59.880 For more, let's go to Bloomberg News Earnings reporter Red Brown. 0:10:59.880 --> 0:11:02.280 He joins us on Zoom from New York City. He's 0:11:02.480 --> 0:11:04.880 had about ten minutes to look at these numbers. 0:11:04.920 --> 0:11:05.160 Read. 0:11:05.320 --> 0:11:07.800 We're seeing the way that investors are reacting in the 0:11:07.840 --> 0:11:10.240 after hour, sending shares down about four and a half 0:11:10.240 --> 0:11:12.720 percent as we speak. What sticks out to you about 0:11:12.800 --> 0:11:13.600 Nike's report. 0:11:14.960 --> 0:11:16.920 I think that the number that's really jumping off the 0:11:16.960 --> 0:11:19.720 page for me is the results in China. So they 0:11:19.760 --> 0:11:23.440 missed sales there, reporting around one point eight billion when 0:11:24.280 --> 0:11:26.800 Wall Street was expecting somewhere closer to two billion. Actually, 0:11:27.640 --> 0:11:30.920 and the reason I think that this number is so important. 0:11:31.080 --> 0:11:33.680 Is that Nike's been kind of playing this dangerous game, 0:11:33.720 --> 0:11:36.679 if you will, where a lot of their growth is 0:11:36.720 --> 0:11:41.600 really heavily reliant on on China, when their sales in Europe, 0:11:41.640 --> 0:11:45.040 their sales in America, their bigger markets have really slowed down. 0:11:45.240 --> 0:11:48.560 So with those sales numbers in China coming in a 0:11:48.559 --> 0:11:52.080 little bit below expectations, I think that is a little 0:11:52.080 --> 0:11:54.600 bit of a worry for the company when they do 0:11:54.679 --> 0:11:59.720 have such an outsized importance for Nike, there. 0:11:59.679 --> 0:12:02.120 Is there the prospect for those numbers to turn around 0:12:02.160 --> 0:12:04.520 in China or is it better for Nike to think 0:12:04.559 --> 0:12:06.880 a little bit more and focusing on the US in Europe, 0:12:06.880 --> 0:12:09.320 where we've got the prospect at least in the US 0:12:09.360 --> 0:12:12.880 of lower borrowing costs potentially spurring some consumer spending there. 0:12:14.040 --> 0:12:18.200 No, I think it's a it's a good point just 0:12:18.200 --> 0:12:21.640 because of the volatility of the Chinese economy. Obviously that's 0:12:21.720 --> 0:12:26.440 well outside of Nike's control, and there might be a 0:12:26.480 --> 0:12:28.840 potential for them to want to shift their focus back 0:12:28.880 --> 0:12:32.080 to these markets where, you know, I don't want to 0:12:32.440 --> 0:12:34.000 go too far on a limb here, but maybe the 0:12:34.000 --> 0:12:36.559 economic picture is starting to clarify a little bit more, 0:12:36.640 --> 0:12:40.560 especially here in America. So I think that could be 0:12:40.559 --> 0:12:42.360 something that we might want to get a little bit 0:12:42.360 --> 0:12:44.720 more clarity from the company on during the earning's call. 0:12:44.920 --> 0:12:46.320 Hey, speaking of clarity, I do want to make a 0:12:46.360 --> 0:12:50.360 quick correction to something I said earlier. Revenue missed the 0:12:50.400 --> 0:12:54.240 average analyst estimate just slightly came in at thirteen point 0:12:54.320 --> 0:12:57.880 three nine billion dollars, which was up zero point five 0:12:57.920 --> 0:12:59.719 percent year of a year. The estimates that were for 0:12:59.800 --> 0:13:03.200 three teen point four to six billion dollars. Okay, red, 0:13:03.240 --> 0:13:07.280 We talked about China, but it also seems like what's 0:13:07.280 --> 0:13:09.720 getting a lot of attention right now is the company 0:13:09.720 --> 0:13:14.600 announcing this reorg, this two billion dollars in cost savings 0:13:14.600 --> 0:13:18.040 that they're looking to find. They said that they're going 0:13:18.080 --> 0:13:20.920 to be pre tax costs around four hundred to four 0:13:21.000 --> 0:13:23.200 hundred and fifty million. When it comes to employee severance, 0:13:23.920 --> 0:13:26.400 i e. They're doing a reorg, they're gonna have to 0:13:26.400 --> 0:13:29.080 pay out employees who they end up firing or laying 0:13:29.080 --> 0:13:32.840 off as a result of this big picture what's going 0:13:32.880 --> 0:13:33.760 on at Nike right now. 0:13:35.200 --> 0:13:38.160 I mean, I think Nike is not immune to a 0:13:38.160 --> 0:13:40.400 lot of the pressures that retail has been going through 0:13:40.920 --> 0:13:43.040 over the past few years. As we're coming out of 0:13:43.040 --> 0:13:45.839 the pandemic still, I think it's the effects of that 0:13:45.920 --> 0:13:50.280 sort of you know, real shock to retailers is still 0:13:50.320 --> 0:13:54.040 something that they're working through. So if you look in 0:13:54.320 --> 0:13:57.360 recent orders over the past about two years, Nike has 0:13:57.480 --> 0:14:01.080 been seeing some pretty significant slow down in their earnings 0:14:01.160 --> 0:14:05.520 for share numbers. So strategic shift has kind of been 0:14:06.480 --> 0:14:08.520 been coming. I guess you could say for them, while 0:14:08.600 --> 0:14:11.839 they need to find some way to improve their margins, 0:14:12.280 --> 0:14:14.880 they can't keep offering the promotions that they have been 0:14:14.920 --> 0:14:17.480 in the past to continue to kind of juice the 0:14:17.480 --> 0:14:22.760 top line, So they're looking for new ways and significant 0:14:22.760 --> 0:14:25.800 ways to continue to kind of get more out of 0:14:25.800 --> 0:14:27.320 their business model, you know. 0:14:27.600 --> 0:14:29.840 Just to follow up on that point in the statement, 0:14:30.320 --> 0:14:34.320 Nike pointed out that some areas of potential savings include 0:14:34.840 --> 0:14:38.600 increasing automation and use of technology. Can you talk a 0:14:38.600 --> 0:14:41.440 little bit about what Nike's play there is in terms 0:14:41.480 --> 0:14:42.400 of the technology. 0:14:44.440 --> 0:14:47.520 I'm a little bit unfamiliar with what they could do, 0:14:47.600 --> 0:14:52.360 but you know a lot of retailers will will point 0:14:52.360 --> 0:14:54.760 to things like that if there's anywhere in their supply 0:14:54.880 --> 0:14:57.040 chain that they can maybe automate a little bit more 0:14:57.080 --> 0:14:59.800 anything in their warehousing that they can make a little 0:14:59.840 --> 0:15:04.680 bit more advanced technologically, that's obviously an option for them, 0:15:05.320 --> 0:15:09.120 especially as we see some supply chains starting to shrink down. 0:15:09.200 --> 0:15:13.160 Could be another area for them to maybe shave a 0:15:13.200 --> 0:15:15.480 few points. I'm going to add a few points to 0:15:15.520 --> 0:15:16.680 their margins. 0:15:16.520 --> 0:15:18.000 Red I always like to take a look at what's 0:15:18.040 --> 0:15:21.440 going on with foot Locker when Nike reports, and indeed 0:15:21.440 --> 0:15:24.080 we're seeing shares a Footlocker down about three percent in 0:15:24.120 --> 0:15:28.160 the after hours. Because Nike is such an important company 0:15:28.200 --> 0:15:32.440 for foot Locker and vice versa Footlocker and important sales 0:15:32.520 --> 0:15:36.560 channel for Nike, how should investors in Footlocker read into 0:15:36.600 --> 0:15:37.160 these results. 0:15:38.800 --> 0:15:41.640 Well, just to take a step back from that, we 0:15:41.720 --> 0:15:45.200 did hear from Nike last quarter during their call that 0:15:45.240 --> 0:15:49.440 they're working to kind of reset that relationship. One thing 0:15:49.480 --> 0:15:51.280 to key in on on this report still while we're 0:15:51.320 --> 0:15:53.520 still waiting to hear some more color on the call, 0:15:53.600 --> 0:15:57.840 is that their wholesale channel sales in general declined this quarter. 0:15:57.880 --> 0:16:00.840 That's the third quarter in a row. So I think 0:16:02.200 --> 0:16:06.120 what locker investors are probably reacting to that number to 0:16:06.480 --> 0:16:10.240 seeing a further slow down within that channel in general 0:16:11.120 --> 0:16:13.640 is I think probably a little bit got them, got 0:16:13.680 --> 0:16:14.560 them a little bit scared. 0:16:14.720 --> 0:16:17.920 Well, we know Nike has done a really good job 0:16:18.320 --> 0:16:21.320 over the last decade in building out its relationship with 0:16:21.360 --> 0:16:25.200 individual consumers and getting people to buy stuff directly from 0:16:25.400 --> 0:16:28.560 its website at Nike dot Com. So is it okay 0:16:29.240 --> 0:16:34.480 that wholesale is declining if a direct sales relationship is 0:16:34.520 --> 0:16:35.640 higher margin for Nike? 0:16:37.560 --> 0:16:39.480 Uh, you know, it's it's kind of hard to say. 0:16:39.520 --> 0:16:41.760 It's it's it does seem like, you know, like like 0:16:41.800 --> 0:16:44.200 to your point, they have been really emphasizing Nike dot 0:16:44.240 --> 0:16:49.040 Com and the gap between those two sales channels continues 0:16:49.080 --> 0:16:51.760 to get smaller and smaller. But I think the other 0:16:51.840 --> 0:16:54.440 side of that coin for Nike is we have seen 0:16:54.760 --> 0:16:58.280 consumers behavior shifting back to in person shopping to prefer 0:16:58.360 --> 0:17:02.560 that experience still, so I think that's the sort of 0:17:02.640 --> 0:17:04.920 the balance for Nike. I don't think they're going to 0:17:05.000 --> 0:17:08.919 be able to just fullsale, ditch brick and mortar and 0:17:08.920 --> 0:17:11.520 stop investing in those relationships as well with people like 0:17:11.880 --> 0:17:15.199 retailers like foot Locker. So it's still kind of a 0:17:15.200 --> 0:17:18.199 little bit too soon to say. Maybe for Nike in 0:17:18.280 --> 0:17:21.320 terms of the long term vision of which sales channel 0:17:21.320 --> 0:17:23.400 maybe is a higher priority for them. 0:17:23.840 --> 0:17:26.159 Oh interesting, I mean, getting away from the point of 0:17:26.160 --> 0:17:29.120 the sales channel and looking at its various product lines, 0:17:29.160 --> 0:17:30.840 are you able to give us any kind of a 0:17:30.880 --> 0:17:35.040 big picture story about what is the winner and loser 0:17:35.080 --> 0:17:36.960 here for Nike at this point? 0:17:38.440 --> 0:17:40.160 I do think it's interesting that we know we're kind 0:17:40.160 --> 0:17:45.159 of just on the cusp of Christmas shopping right the 0:17:45.680 --> 0:17:48.639 period ended at the end of November, and it doesn't 0:17:48.640 --> 0:17:50.960 seem like there's really an area of strength besides their 0:17:50.960 --> 0:17:54.800 equipment in terms of actual growth. Both apparel and footwear, 0:17:54.800 --> 0:18:00.119 which would probably be the more likely categories for holiday shopping, 0:18:01.440 --> 0:18:05.280 are really kind of tepid in terms of growth. So yeah, 0:18:05.320 --> 0:18:07.800 I don't know how much of a driver equipment sales 0:18:07.880 --> 0:18:09.879 is going to be for the company going forward. A 0:18:09.880 --> 0:18:11.720 lot more of their business does come from those other 0:18:11.760 --> 0:18:14.720 two categories, So yeah, again, I think this is just 0:18:14.760 --> 0:18:18.000 an overall sort of a little bit of a negative 0:18:18.080 --> 0:18:20.879 picture for Nike, and I think the sale excuse me, 0:18:20.920 --> 0:18:22.600 the shares are kind of reflecting that at the moment. 0:18:22.720 --> 0:18:24.320 Yeah, I think that's a really good point, right, Hey, Red, 0:18:24.320 --> 0:18:25.639 I want to let you catch your breath and look 0:18:25.640 --> 0:18:27.400 at your screen for a minute while I go through 0:18:27.400 --> 0:18:29.159 the press release and read a couple of quotes from 0:18:29.200 --> 0:18:31.679 John Donaho, the president and CEO of Nike. In addition 0:18:31.760 --> 0:18:35.280 to that, just a little more color on these cost savings. 0:18:35.640 --> 0:18:37.920 H Johnahoe saying in a statement that the quarter showed 0:18:38.000 --> 0:18:40.520 strong execution by our team as we focus on our 0:18:40.560 --> 0:18:46.480 winning formula of innovative product, distinctive storytelling, and differentiated marketplace experiences. 0:18:46.760 --> 0:18:50.800 He said that the second quarter results showed that the 0:18:50.840 --> 0:18:54.119 company is getting back on their front foot. The company 0:18:54.119 --> 0:18:56.879 also saying in a statement that it's identifying opportunities to 0:18:56.920 --> 0:18:59.840 deliver up to two billion dollars in cumulative cost savings 0:18:59.840 --> 0:19:03.800 of the next three years, simplifying product assortment, increasing automation 0:19:03.960 --> 0:19:06.760 and the use of tech, and streamlining the organization. Read 0:19:06.800 --> 0:19:08.399 I want to give you the last word here and 0:19:08.440 --> 0:19:11.679 just give us your takeaways as we As you continue 0:19:11.720 --> 0:19:14.160 to and wait for the call, what would you ask 0:19:14.400 --> 0:19:15.760 on the earnings call today if you could. 0:19:17.160 --> 0:19:19.159 I mean, I think we've kind of covered the major topics. 0:19:19.200 --> 0:19:22.639 I think one thing that has been a topic of 0:19:22.680 --> 0:19:25.159 interest for me with Nike is the increasing amount of 0:19:25.160 --> 0:19:29.359 competition that they're facing in in their sort of bread 0:19:29.359 --> 0:19:32.200 and butter product line is running shoes. You know, that's 0:19:32.240 --> 0:19:36.360 kind of where Nike came from. We saw a kind 0:19:36.359 --> 0:19:38.840 of a small analysis coming out of Morgan Stanley earlier 0:19:38.840 --> 0:19:41.920 this month where they just did a small sample just 0:19:41.960 --> 0:19:43.800 here in New York City of what shoes people were wearing, 0:19:43.840 --> 0:19:45.840 and it was you know, these alternative brands are really 0:19:45.880 --> 0:19:48.760 gaining a lot of ground on Nike. So I would 0:19:49.160 --> 0:19:51.680 want to know kind of what the company's plans are 0:19:51.840 --> 0:19:55.360 to combat that there's eroding and their rooting market shop. 0:19:55.440 --> 0:19:57.479 Yeah, I remember that report. It's like Hoka and on 0:19:57.600 --> 0:19:59.880 running hey shares a Nike down about five point six 0:20:00.040 --> 0:20:01.160 percent is wait for this call. 0:20:03.200 --> 0:20:06.800 You're listening to the Bloomberg Business Week podcast. Catch us 0:20:06.840 --> 0:20:10.840