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Speaker 2: All right, well, let's talk about one of the big
Speaker 2: businesses or one that aspires me a big business, and
Speaker 2: that would be under Armour. It's the ath leisure company
Speaker 2: Athletic where company maybe at Leisure is pushing it a
Speaker 2: little bit. Punam Goyela's senior US e commerce and retail
Speaker 2: analysts here at Bloomberg Intelligence, and Pam under Armour. It
Speaker 2: feels like it's been this reorganization restructuring story for a while.
Speaker 1: Now.
Speaker 3: Where are we.
Speaker 2: In that reorganization restructuring story for under Armorth because the
Speaker 2: stock performance today shows that there's still some way to go.
Speaker 4: I've been through this turnaround story several times over the
Speaker 4: past two decades, so clearly it's happening once again. Now,
Speaker 4: what I'd say for them, you know, I think they
Speaker 4: are focused on the right things the question as well.
Speaker 4: The consumer respond right sizing. Inventory is down just three
Speaker 4: percent in line with the sales decline is a positive sign.
Speaker 4: That said, it was interesting that they called out that
Speaker 4: the consumer is actually weak because when I look at competitors,
Speaker 4: some of the larger ones like Atiightos and Nike, they're
Speaker 4: actually doing pretty fine in North America, and I think
Speaker 4: that may have to do with just their bigger boat
Speaker 4: and also the World's Cup and their bigger presence there.
Speaker 5: Yeah, I was wondering about why demand was softening with
Speaker 5: under Armour. I know under Armours kind of a middle
Speaker 5: of the market brand, is part of what's happening here.
Speaker 5: Maybe that the demand for kind of middle of the
Speaker 5: road brands is softening. Well, maybe demand for higher end
Speaker 5: brands is gaining ground, or is it something else entirely, Yeah.
Speaker 4: I think it's it's a mix a few things. So first,
Speaker 4: I do think that it has to do with the
Speaker 4: higher end customer is doing better than the midd or
Speaker 4: the Laurent. So we do see that across the spectrum.
Speaker 4: That said, under Armour, while it is middle of the class,
Speaker 4: you know, it's not Nike Adidas, but it is still
Speaker 4: a strong brand when you think of at leisure, especially
Speaker 4: compared to like some of the other brands that are
Speaker 4: up and coming. I think under Armoured does still in
Speaker 4: North America have across the board, not just in Metro
Speaker 4: City's a name. That said, I do think the last
Speaker 4: quarter weakness does stem a little from just when you
Speaker 4: think about what was going on, especially in the US,
Speaker 4: it is all about the World Cup, and under Armoured
Speaker 4: doesn't really have a meaningful presence there, so when consumers
Speaker 4: are shopping the stores, when they're going online, it's just
Speaker 4: not the brand that comes front and center. That said,
Speaker 4: under Armour is largely apparel, right with the exit of
Speaker 4: Steph Curry, so that different sheets it from our Nike
Speaker 4: and Aditas, which are predominantly footwear brands with an apparel offering.
Speaker 2: I'm so glad you brought up Steph Curry because I
Speaker 2: feel like that's how a lot of people encountered under
Speaker 2: Armour if they weren't wearing, you know, the cold Tech
Speaker 2: or heat tech shirts that the company made. What do
Speaker 2: we know about what happened there and how under Armours
Speaker 2: thinking about maybe replacing or finding another celebrity endorser or
Speaker 2: celebrity partner to work with it.
Speaker 4: So I think replacing Steph Curry isn't an easy task
Speaker 4: because when they signed Steph Curry, Steph Curry wasn't the
Speaker 4: Steph Curry that we know today, right. It was a
Speaker 4: younger talent and it was also probably more in line
Speaker 4: with what they could afford, as Nike and Adidas have
Speaker 4: deeper pockets and under armour to support some of these
Speaker 4: brand collaborations. That said, I think the focus now is
Speaker 4: on just developing the right product. If they're going back
Speaker 4: to their DNA, they're going back to the basics, which is,
Speaker 4: can we develop a product that speaks for itself and
Speaker 4: it doesn't need a brand a master. It's a hard
Speaker 4: task and yes you can do that for some things,
Speaker 4: but in at leisure, you do need that brand endorsement,
Speaker 4: that athlete credibility to really rise further along for them.
Speaker 4: I think the one product that they've been talking a
Speaker 4: lot about, they actually talked about it several times on
Speaker 4: the call, was a bouncy T shirt, which is an
Speaker 4: it's a really cool product that they've developed and it's
Speaker 4: innovative where you can wear this T shirt. You can
Speaker 4: wear it to the gym, you can wear it to
Speaker 4: the bar, and you can wear it every day and
Speaker 4: it kind of fits the whole spectrum of your lifestyle.
Speaker 4: So that T shirt is doing really well and they're
Speaker 4: looking to use that as a stepping board to kind
Speaker 4: of launch more products and really drive customer interest.
Speaker 2: Okay, the bouncy T shirt, I'm looking online sixty five
Speaker 2: dollars and it has a four point nine star rating.
Speaker 2: This is just a plain T shirt that you know,
Speaker 2: looks good enough to wear.
Speaker 6: The bounces.
Speaker 2: I don't understand how a T shirt can bounce. I'm
Speaker 2: not sure why it's called bouncecad you wear.
Speaker 4: That the fabric it doesn't stick to you.
Speaker 5: Does it like deal with your sweat or is it
Speaker 5: just that its style is such that.
Speaker 7: You could wear to the gym then out.
Speaker 3: Yeah, is this a performance wear?
Speaker 4: It's everything. It's performance, it's going out and it's every day,
Speaker 4: which is what makes us so versatile. And that's what
Speaker 4: the that's what they're basically saying that this is a
Speaker 4: versatile T shirt that you can go to the bar
Speaker 4: on Friday night, you can wake up and go to
Speaker 4: the gym Saturday morning, and then you could wear throughout
Speaker 4: the day. It works for everything, and it's done really
Speaker 4: really well for them. It is I would say, you
Speaker 4: know something that's working and if they continue to innovate
Speaker 4: in this manner more extensively, they could start to gain
Speaker 4: some traction. But that's not going to happen overnight. I
Speaker 4: think there's still, you know, to your original question, a
Speaker 4: long way to still go from here before we can
Speaker 4: say that we see a straight lineup. At this point,
Speaker 4: it's still very mixed.
Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.
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Speaker 3: Through Matt Shuttenham and Matt.
Speaker 2: You're joining us because the FCC has removed nationwide cap
Speaker 2: limiting local TV ownership.
Speaker 3: That's quite a headline. What does this mean in your world?
Speaker 8: Yeah, so the media environment has changed a lot over
Speaker 8: the past couple decades, but FCC rules haven't, and so
Speaker 8: broadcast TV station owners for years have been stuck with
Speaker 8: this limit on how big they can grow. The FCC
Speaker 8: rules said no company can can reach more than thirty
Speaker 8: nine percent of US households. And what the FCC did
Speaker 8: yesterday is scrap that rule and say, look, we're not
Speaker 8: going to have this numeric limit on companies. And more so,
Speaker 8: this presents a really big opportunity for companies like Nextstar
Speaker 8: Sinclair that own the TV stations across the US to
Speaker 8: grow larger because they're not, you know, hamstrung by this
Speaker 8: this long existing FCC rule anymore.
Speaker 5: What does this mean for media consolidation? I feel like
Speaker 5: there's always this statistic we hear that there are these
Speaker 5: six conglomerates that now control ninety percent of US media?
Speaker 7: Is that likely to get more extreme?
Speaker 5: I mean, that doesn't seem like necessarily a great thing
Speaker 5: for voters.
Speaker 8: Right So this, you know, when you listen to FCC
Speaker 8: Chairman Brendan Carr, he said, this is really about empowering
Speaker 8: local TV stations so they can compete with those big
Speaker 8: national media companies. Right now, those stations really have very
Speaker 8: little leverage when they negotiate with ABC, CBS, NBC and
Speaker 8: with cable companies when they have to get there their
Speaker 8: media distributed. So in Brendan Carr's view, this is about
Speaker 8: sort of empowering a new set of entities in that
Speaker 8: media ecosystem, the owners of these local stations that right now,
Speaker 8: are you know, they're they're limited or previously were limited
Speaker 8: by this FCC rule. They could only get so big,
Speaker 8: so they had no leverage. This gives them more of
Speaker 8: a voice, in Brendan Carr's view, against those national media companies.
Speaker 8: So maybe it leads to a little more competition in
Speaker 8: that space.
Speaker 2: So this is deregulation essentially, and the broadcast industry has
Speaker 2: been waiting for it for a long time. Which companies
Speaker 2: are going to jump on this and make a move.
Speaker 8: So Nextstar has already jumped on it with its acquisition
Speaker 8: of Tegna, but there was sort of a legal cloud
Speaker 8: around whether they could do that. You know, by acquiring Tegna,
Speaker 8: they went way beyond the thirty nine percent US ownership
Speaker 8: cap and the FCC at the staff level set up,
Speaker 8: you know, will that requirement. Don't worry about it. That
Speaker 8: was sort of legally questionable. This is the right way
Speaker 8: to do it, to do it through a rule making,
Speaker 8: to actually change the rule. So it's an opportunity for
Speaker 8: Next Star to get past legal hurdles on its Tegna acquisition.
Speaker 8: Company like Sinclair could could also look at this. It
Speaker 8: featured prominently in the company's earnings call a couple of
Speaker 8: days ago. There could be opportunities to grow much larger,
Speaker 8: go way beyond the thirty nine percent. But one big
Speaker 8: and important footnote, there's going to be a legal challenge
Speaker 8: to all of this that's coming next. It's not totally
Speaker 8: clear the FCC can do what it did or whether
Speaker 8: only Congress can do it. That's going to be the
Speaker 8: fight that plays out next.
Speaker 5: What is the legal challenge exactly?
Speaker 8: So, in two thousand and four, Congress told the FCC,
Speaker 8: let's set that limit, that ownership limit at thirty nine percent,
Speaker 8: and it said, FCC, change your rule to make it
Speaker 8: thirty nine percent. Question is when Congress did that in
Speaker 8: two thousand and four, did it mean that the FCC
Speaker 8: can't update that rule later? Is it only Congress's call?
Speaker 8: And there are strong arguments on both sides that, you know,
Speaker 8: the FCC says, look, we still have our power to
Speaker 8: modify our rules. Congress didn't take that away. The other
Speaker 8: side said no. Congress was pretty clear, we want thirty
Speaker 8: nine and it said that five times in its statute
Speaker 8: thirty nine percent. So it's not clear that the FCC
Speaker 8: can use its general modification power. That's going to have
Speaker 8: to play out in appeals court and in the Supreme Court.
Speaker 8: Did Congress give the FCC its general discretion to update
Speaker 8: its rules or was this a call that Congress reserved
Speaker 8: for itself.
Speaker 2: All right, Matt, one final question before we let you
Speaker 2: go from where you sit Paramounts Guide Ence, Warner Brothers Discovery.
Speaker 3: Is anything going to happen in the next couple of weeks?
Speaker 8: Yeah, I mean so so. Lots of moving pieces on
Speaker 8: that on the anti trust side, and jenre is really
Speaker 8: our go to on all of those questions, so, you know,
Speaker 8: really interesting questions there as state antitrust enforcers have stepped
Speaker 8: up when the federal regulators have taken more of this
Speaker 8: deregulatory approach.
Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.
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Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever
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Speaker 2: All right, Stacey, you know a thing or two about
Speaker 2: Grand Theft Auto the video game franchise, right.
Speaker 7: Yeah, yeah, I mean I know, it's really huge.
Speaker 5: I actually had a cousin who sold a song to
Speaker 5: Grand Theft Auto, So it was one of the songs
Speaker 5: that you might hear on the radio in a car
Speaker 5: inside of the game, and it was a really big
Speaker 5: deal for them. They actually make quite a bit of money.
Speaker 5: It's a huge, very wealthy universe.
Speaker 2: Yeah, it's a cultural I mean totally basically, so many
Speaker 2: people live in that universe, and we're going to get
Speaker 2: a new update Grand theftdot of six GTA six for
Speaker 2: those in the know at some point. Nathan I do
Speaker 2: is Bloomberg Intelligence technology research analyst, and Nathan I say,
Speaker 2: at some point, because it feels like we've been waiting
Speaker 2: for the release of GTA six for months, if not
Speaker 2: a year.
Speaker 3: I remember talking about this quarter after quarter after quarter.
Speaker 9: Yeah. Actually, people have been waiting, especially fans. You say
Speaker 9: cultural totem, I think it's more like a cult at
Speaker 9: this point. People fans have been waiting for thirteen years.
Speaker 9: That was how long ago the GTA five was released,
Speaker 9: and there's such a strong pand up demand for this franchise. Yeah, exactly,
Speaker 9: And even in the last thirteen years, still eighteen million
Speaker 9: people played every single month across PC and console, and
Speaker 9: it remains the third most played game of all time
Speaker 9: as of March. This just tells you how much there
Speaker 9: is a demand, and you can see the shares of
Speaker 9: take to the parent company actually is training up today,
Speaker 9: and that tells you that even though the guidance, which
Speaker 9: we think is on the conservative side, peoples to believe
Speaker 9: that the games might actually perform better than what the
Speaker 9: company is saying.
Speaker 5: So this might sound like a naive question, but why
Speaker 5: did it take them so long to get this new
Speaker 5: version of the game ready?
Speaker 7: I am seeing here.
Speaker 5: That the CEO has said that the expectations around this
Speaker 5: are quote terrifying.
Speaker 9: Yeah, it's it is quite terrifying, because you know, there
Speaker 9: is a lot of estimates pointing to I mean as
Speaker 9: much as many as eighty five million unit sales at
Speaker 9: the top and based on salesize estimates. But I'm a
Speaker 9: lot more conservative on that front. And why it takes
Speaker 9: the company so long. It's a huge production. It takes
Speaker 9: more than a billion just to develop the game, and
Speaker 9: for contacts. I think a Star Wars or the Avengers
Speaker 9: movie like costs like half a billion. And it's it's long.
Speaker 9: There's a lot of aspects that go into the game.
Speaker 9: Is not just selling it upfront. It's also sustaining recurring
Speaker 9: sales for more than ten years. I mean because GTA
Speaker 9: five continued to perform in the last thirteen years, and
Speaker 9: every year it continued to turn out you know, three
Speaker 9: hundred to four hundred million in revenue to take to
Speaker 9: and rock Start, the maker of the game, even after
Speaker 9: upfront sales was captured in the first year. And GTA
Speaker 9: six should prove to be able to do the same.
Speaker 9: And actually we can see in the online mode of
Speaker 9: GTA five, which is the current version, like people still
Speaker 9: to spend about sixty bucks a month to play the game,
Speaker 9: and that's what context three x the standard ad free
Speaker 9: Netflix subscription. So there's actually photos who pay, there's a
Speaker 9: cut following, and people continue and it just can't get
Speaker 9: enough of this game, and you know, it's high budget,
Speaker 9: is I guess the company just want to make sure
Speaker 9: they get it right because it's literally the make up
Speaker 9: break game of the century.
Speaker 3: Nathan. We only have like twenty seconds left. But I'm curious.
Speaker 2: I'm sure they make this game available to reviewers. Do
Speaker 2: they make it available to analysts early?
Speaker 9: No, there's no early access, so you but there's pre
Speaker 9: orders momentum that we can engage some early wins. Yeah, yeah,
Speaker 9: there's pre orders, and preorders apparently is blowing past expectations,
Speaker 9: Like New Zoo is estimating that preorders is at two
Speaker 9: hundred or more million globally, and you know they're expecting
Speaker 9: upward of five billion by end of November in cross sales.
Speaker 9: I mean, Consensus is only pegging this at four billion
Speaker 9: or below. So that tells you how Consensus even is
Speaker 9: being a bit conservative on that front.
Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.
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Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
Speaker 1: Auto with the Blueberg Business app. Listen on demand wherever
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Speaker 6: You know, on a day like today, what would be
Speaker 6: better than a Frosty very little? Have you ever had one?
Speaker 5: Of course, of course I've had Frosty's.
Speaker 6: You know what, nothing better frost the other day like today,
Speaker 6: But I might be the only one thinking that with
Speaker 6: Stacy and I might be the only ones thinking about that.
Speaker 6: Wendy's pulling us out, look also cutting their dividend. Dave
Speaker 6: Thomas is probably rolling in his grave.
Speaker 7: Oh I loved those ads. He was great.
Speaker 6: What was the other one? Where's the beef?
Speaker 9: Oh?
Speaker 7: Where's the beef?
Speaker 6: Michael Hanlon Bloomberg Intelligence Senior Restaurant and Food service handles
Speaker 6: joining us. Now where's the beef? Or no, what's the beef?
Speaker 6: With Wendy's.
Speaker 10: Listen, I'm going to take the other side of that trade.
Speaker 9: I bet you.
Speaker 10: Dave Smith is somewhere smiling and Dave tom wasn't it.
Speaker 10: I'm sorry, Dave Thomas. Yeah, it's some up there somewhere smiling.
Speaker 10: Because new CEO Bob Wright, who had previously worked for
Speaker 10: Wendy's for quite some time, you know, has a really
Speaker 10: good plan to bring this brand back to glory. And
Speaker 10: he and his new CFO Steve cerulis that they did
Speaker 10: a phenomenal job turning around pot Bellies, and I think
Speaker 10: it was a great first call for both of them. Yeah, sure,
Speaker 10: they cut the dividend and they you know, retracted twenty
Speaker 10: twenty six guidance, but that's really just to give them
Speaker 10: some time for their turnaround plants to start gaining some traction.
Speaker 7: So what is the turnaround plan?
Speaker 5: Because I feel like this is such a tough moment
Speaker 5: for food companies, I mean beyond just cyclospora, but you know,
Speaker 5: prices are going up, margins are getting thin, consumers are
Speaker 5: getting pickier.
Speaker 7: What is the plan.
Speaker 10: Yeah, that there's a lot of low hanging fruit here
Speaker 10: because this brand has been severely mismanaged for some time.
Speaker 10: And so number one is going to be revamping the
Speaker 10: menu and making sure that there's everyday value on that menu.
Speaker 10: And what I mean by value isn't necessarily price. It's
Speaker 10: what you get for what you pay.
Speaker 9: You know.
Speaker 10: Bob right on the call mentioned that, you know, people
Speaker 10: come away feeling from feeling that the experience was worth it,
Speaker 10: you know, and being happy about their overall experience when
Speaker 10: they leave a Wendy's restaurant or drive through. There's also
Speaker 10: a lot of low hanging fruit in terms of operations.
Speaker 10: Operations have slipped. We see this when chains are struggling, right,
Speaker 10: When franchises aren't making money in a restaurant, you know,
Speaker 10: they're gonna pull labor and then this ends up causing
Speaker 10: you know, operations to slip further, right, and so there's
Speaker 10: an opportunity here for some retraining, adding labor back to
Speaker 10: the to the to the restaurants and marketing. I mean,
Speaker 10: this chain was had done such a good job with
Speaker 10: marketing for so long. You know, to your point, you're
Speaker 10: talking about the old where's the beef ads, but even
Speaker 10: you know, more recently, like they had a great online
Speaker 10: presence with social media, very snarky Twitter account that that
Speaker 10: got a lot of attention. You know, I remember some
Speaker 10: years ago when when Fortnite was in its heyday, they
Speaker 10: had a collaboration with Fortnite and they had the Wendy's
Speaker 10: you know, a Wendy character in the game that you
Speaker 10: could find in the kitchen of a restaurant and all
Speaker 10: sorts of cool stuff that and and that's really falling off, right,
Speaker 10: and so.
Speaker 3: You know, there's there's a.
Speaker 10: Lot you know, digital improving, the digital marketing and the
Speaker 10: and the digital experience. Loyalty things like that are going
Speaker 10: to be another point of ethicism. And then the last
Speaker 10: one is like making the franchisese money, right, you have
Speaker 10: to make your franchisese money so that they're motivated to
Speaker 10: build no news stores.
Speaker 3: So those are the.
Speaker 10: Five primary points for this turnaround plan.
Speaker 6: Okay, so they're telling the franchisees at this point be patient.
Speaker 6: I guess that's the same message to investors. At this point,
Speaker 6: when does it start to take How patient do they
Speaker 6: have to be?
Speaker 10: Well, listen, first of all, you know, I don't know.
Speaker 10: I bet you franchisees that listened into that call were
Speaker 10: very happy with it, right, Like what Bob said was,
Speaker 10: you know, this chain is not run by private equity groups.
Speaker 10: The franchisees are family owned people that he knows personally, right,
Speaker 10: And so what he said was turning this brand around
Speaker 10: was personal to him, right, And so you know, I
Speaker 10: think the energy that the franchise e base is going
Speaker 10: to be energized, right by having a guy in there
Speaker 10: that they know that has had a lot of success
Speaker 10: turning around Pop Belly, that did a great job when
Speaker 10: he was with Wendy's. When Wendy's was, you know, a
Speaker 10: pretty solid competitor in the quick service space. So I
Speaker 10: think franchisees are happy with the change at the top.
Speaker 10: You know, how long is it going to take. It's
Speaker 10: going to take time. The good thing is they're lapping
Speaker 10: really really weak comps in the second half. So management
Speaker 10: said that Saintstar sales are going to be down similar
Speaker 10: to what they've been down, which was down about six
Speaker 10: percent plus in the first half in the US. We
Speaker 10: think they're sandbagging in a little bit because comparisons are
Speaker 10: going to get easier through your end, and we think
Speaker 10: as a result, results are going to go from bad
Speaker 10: to less bad, you know, but the real turnaround will
Speaker 10: probably kick in sometime in twenty twenty seven.
Speaker 5: Another company we've been hearing a lot about this morning
Speaker 5: is Sweet Green.
Speaker 7: They've just been getting hammered.
Speaker 5: Apparently sales are way down a lot because of the
Speaker 5: cyclospora outbreak.
Speaker 7: What are you thinking for them?
Speaker 6: And say in the twenty seconds, because that's all we have.
Speaker 10: Yeah, listen, that company was in dire straits prior to cyclospora.
Speaker 10: Obviously this impacts them a lot more than everybody else
Speaker 10: because they sell a lot of salad, but they had
Speaker 10: their issues heading into this outbreak.
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