WEBVTT - Under Armour Cuts Sales View on Softer Demand Around the World 0:00:02.720 --> 0:00:10.559 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.600 --> 0:00:14.560 Bloomberg Intelligence podcast. Catch us live weekdays at ten am 0:00:14.600 --> 0:00:17.880 Eastern on Apple, Cocklay and Android Auto with the Bloomberg 0:00:17.920 --> 0:00:21.040 Business App. Listen on demand wherever you get your podcasts, 0:00:21.360 --> 0:00:23.080 or watch us live on YouTube. 0:00:23.920 --> 0:00:25.960 All right, well, let's talk about one of the big 0:00:26.000 --> 0:00:29.240 businesses or one that aspires me a big business, and 0:00:29.240 --> 0:00:31.600 that would be under Armour. It's the ath leisure company 0:00:31.600 --> 0:00:33.760 Athletic where company maybe at Leisure is pushing it a 0:00:33.840 --> 0:00:37.200 little bit. Punam Goyela's senior US e commerce and retail 0:00:37.240 --> 0:00:41.600 analysts here at Bloomberg Intelligence, and Pam under Armour. It 0:00:41.640 --> 0:00:46.320 feels like it's been this reorganization restructuring story for a while. 0:00:46.440 --> 0:00:46.680 Now. 0:00:46.920 --> 0:00:47.599 Where are we. 0:00:47.600 --> 0:00:52.000 In that reorganization restructuring story for under Armorth because the 0:00:52.000 --> 0:00:54.520 stock performance today shows that there's still some way to go. 0:00:58.680 --> 0:01:02.400 I've been through this turnaround story several times over the 0:01:02.400 --> 0:01:07.360 past two decades, so clearly it's happening once again. Now, 0:01:07.360 --> 0:01:09.120 what I'd say for them, you know, I think they 0:01:09.200 --> 0:01:11.880 are focused on the right things the question as well. 0:01:11.920 --> 0:01:15.360 The consumer respond right sizing. Inventory is down just three 0:01:15.400 --> 0:01:18.800 percent in line with the sales decline is a positive sign. 0:01:19.200 --> 0:01:21.920 That said, it was interesting that they called out that 0:01:21.959 --> 0:01:25.840 the consumer is actually weak because when I look at competitors, 0:01:25.840 --> 0:01:28.680 some of the larger ones like Atiightos and Nike, they're 0:01:28.680 --> 0:01:32.320 actually doing pretty fine in North America, and I think 0:01:32.360 --> 0:01:34.959 that may have to do with just their bigger boat 0:01:35.160 --> 0:01:37.720 and also the World's Cup and their bigger presence there. 0:01:38.680 --> 0:01:41.679 Yeah, I was wondering about why demand was softening with 0:01:41.840 --> 0:01:43.800 under Armour. I know under Armours kind of a middle 0:01:43.800 --> 0:01:46.600 of the market brand, is part of what's happening here. 0:01:46.640 --> 0:01:49.360 Maybe that the demand for kind of middle of the 0:01:49.480 --> 0:01:53.960 road brands is softening. Well, maybe demand for higher end 0:01:54.080 --> 0:01:59.240 brands is gaining ground, or is it something else entirely, Yeah. 0:01:59.040 --> 0:02:01.240 I think it's it's a mix a few things. So first, 0:02:01.280 --> 0:02:03.360 I do think that it has to do with the 0:02:03.480 --> 0:02:06.600 higher end customer is doing better than the midd or 0:02:06.640 --> 0:02:09.200 the Laurent. So we do see that across the spectrum. 0:02:09.360 --> 0:02:12.600 That said, under Armour, while it is middle of the class, 0:02:12.639 --> 0:02:15.359 you know, it's not Nike Adidas, but it is still 0:02:15.400 --> 0:02:19.560 a strong brand when you think of at leisure, especially 0:02:19.600 --> 0:02:21.880 compared to like some of the other brands that are 0:02:21.919 --> 0:02:24.480 up and coming. I think under Armoured does still in 0:02:24.520 --> 0:02:28.200 North America have across the board, not just in Metro 0:02:28.280 --> 0:02:31.600 City's a name. That said, I do think the last 0:02:31.680 --> 0:02:35.480 quarter weakness does stem a little from just when you 0:02:35.480 --> 0:02:37.639 think about what was going on, especially in the US, 0:02:37.720 --> 0:02:40.520 it is all about the World Cup, and under Armoured 0:02:40.760 --> 0:02:44.920 doesn't really have a meaningful presence there, so when consumers 0:02:44.919 --> 0:02:48.120 are shopping the stores, when they're going online, it's just 0:02:48.160 --> 0:02:51.160 not the brand that comes front and center. That said, 0:02:51.360 --> 0:02:54.959 under Armour is largely apparel, right with the exit of 0:02:55.000 --> 0:02:58.040 Steph Curry, so that different sheets it from our Nike 0:02:58.120 --> 0:03:02.000 and Aditas, which are predominantly footwear brands with an apparel offering. 0:03:02.680 --> 0:03:04.880 I'm so glad you brought up Steph Curry because I 0:03:04.880 --> 0:03:08.600 feel like that's how a lot of people encountered under 0:03:08.680 --> 0:03:11.480 Armour if they weren't wearing, you know, the cold Tech 0:03:11.560 --> 0:03:15.040 or heat tech shirts that the company made. What do 0:03:15.080 --> 0:03:18.760 we know about what happened there and how under Armours 0:03:18.760 --> 0:03:22.720 thinking about maybe replacing or finding another celebrity endorser or 0:03:22.760 --> 0:03:24.720 celebrity partner to work with it. 0:03:25.840 --> 0:03:29.000 So I think replacing Steph Curry isn't an easy task 0:03:29.080 --> 0:03:31.800 because when they signed Steph Curry, Steph Curry wasn't the 0:03:31.800 --> 0:03:34.359 Steph Curry that we know today, right. It was a 0:03:34.400 --> 0:03:38.480 younger talent and it was also probably more in line 0:03:38.520 --> 0:03:40.840 with what they could afford, as Nike and Adidas have 0:03:40.920 --> 0:03:43.960 deeper pockets and under armour to support some of these 0:03:44.000 --> 0:03:47.600 brand collaborations. That said, I think the focus now is 0:03:47.600 --> 0:03:50.320 on just developing the right product. If they're going back 0:03:50.360 --> 0:03:52.800 to their DNA, they're going back to the basics, which is, 0:03:52.880 --> 0:03:55.800 can we develop a product that speaks for itself and 0:03:55.840 --> 0:03:58.320 it doesn't need a brand a master. It's a hard 0:03:58.400 --> 0:04:00.800 task and yes you can do that for some things, 0:04:01.160 --> 0:04:05.040 but in at leisure, you do need that brand endorsement, 0:04:05.160 --> 0:04:10.840 that athlete credibility to really rise further along for them. 0:04:10.920 --> 0:04:12.840 I think the one product that they've been talking a 0:04:12.840 --> 0:04:15.120 lot about, they actually talked about it several times on 0:04:15.160 --> 0:04:18.600 the call, was a bouncy T shirt, which is an 0:04:19.080 --> 0:04:21.360 it's a really cool product that they've developed and it's 0:04:21.360 --> 0:04:24.160 innovative where you can wear this T shirt. You can 0:04:24.200 --> 0:04:26.080 wear it to the gym, you can wear it to 0:04:26.120 --> 0:04:28.320 the bar, and you can wear it every day and 0:04:28.600 --> 0:04:31.760 it kind of fits the whole spectrum of your lifestyle. 0:04:32.120 --> 0:04:34.360 So that T shirt is doing really well and they're 0:04:34.400 --> 0:04:38.400 looking to use that as a stepping board to kind 0:04:38.440 --> 0:04:41.720 of launch more products and really drive customer interest. 0:04:42.160 --> 0:04:45.040 Okay, the bouncy T shirt, I'm looking online sixty five 0:04:45.160 --> 0:04:48.960 dollars and it has a four point nine star rating. 0:04:50.160 --> 0:04:52.120 This is just a plain T shirt that you know, 0:04:52.200 --> 0:04:53.240 looks good enough to wear. 0:04:53.320 --> 0:04:54.080 The bounces. 0:04:54.800 --> 0:04:56.960 I don't understand how a T shirt can bounce. I'm 0:04:57.000 --> 0:04:59.599 not sure why it's called bouncecad you wear. 0:04:59.440 --> 0:05:00.839 That the fabric it doesn't stick to you. 0:05:01.360 --> 0:05:04.760 Does it like deal with your sweat or is it 0:05:04.880 --> 0:05:09.040 just that its style is such that. 0:05:09.000 --> 0:05:10.560 You could wear to the gym then out. 0:05:11.120 --> 0:05:12.400 Yeah, is this a performance wear? 0:05:14.000 --> 0:05:17.480 It's everything. It's performance, it's going out and it's every day, 0:05:17.520 --> 0:05:19.520 which is what makes us so versatile. And that's what 0:05:19.600 --> 0:05:21.800 the that's what they're basically saying that this is a 0:05:21.880 --> 0:05:24.200 versatile T shirt that you can go to the bar 0:05:24.279 --> 0:05:25.840 on Friday night, you can wake up and go to 0:05:25.920 --> 0:05:28.159 the gym Saturday morning, and then you could wear throughout 0:05:28.160 --> 0:05:31.320 the day. It works for everything, and it's done really 0:05:31.360 --> 0:05:33.760 really well for them. It is I would say, you 0:05:33.760 --> 0:05:36.279 know something that's working and if they continue to innovate 0:05:36.320 --> 0:05:40.720 in this manner more extensively, they could start to gain 0:05:40.800 --> 0:05:43.480 some traction. But that's not going to happen overnight. I 0:05:43.480 --> 0:05:45.680 think there's still, you know, to your original question, a 0:05:45.720 --> 0:05:48.440 long way to still go from here before we can 0:05:48.480 --> 0:05:51.679 say that we see a straight lineup. At this point, 0:05:51.960 --> 0:05:53.160 it's still very mixed. 0:05:53.839 --> 0:05:56.760 Stay with us. More from Bloomberg Intelligence coming up after this. 0:06:00.920 --> 0:06:04.599 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:06:04.680 --> 0:06:07.760 weekdays at ten am Eastern on Apple, Cocklay and Android 0:06:07.800 --> 0:06:11.080 Auto with the Blueberg Business App. Listen on demand wherever 0:06:11.160 --> 0:06:14.680 you get your podcasts, or watch us live on YouTube. 0:06:14.320 --> 0:06:16.479 Through Matt Shuttenham and Matt. 0:06:16.480 --> 0:06:19.880 You're joining us because the FCC has removed nationwide cap 0:06:20.200 --> 0:06:21.960 limiting local TV ownership. 0:06:22.000 --> 0:06:25.000 That's quite a headline. What does this mean in your world? 0:06:26.080 --> 0:06:29.880 Yeah, so the media environment has changed a lot over 0:06:30.040 --> 0:06:34.440 the past couple decades, but FCC rules haven't, and so 0:06:34.600 --> 0:06:39.840 broadcast TV station owners for years have been stuck with 0:06:39.920 --> 0:06:43.920 this limit on how big they can grow. The FCC 0:06:44.040 --> 0:06:47.760 rules said no company can can reach more than thirty 0:06:47.880 --> 0:06:52.200 nine percent of US households. And what the FCC did 0:06:52.320 --> 0:06:55.920 yesterday is scrap that rule and say, look, we're not 0:06:56.120 --> 0:07:00.400 going to have this numeric limit on companies. And more so, 0:07:00.480 --> 0:07:04.599 this presents a really big opportunity for companies like Nextstar 0:07:05.240 --> 0:07:09.600 Sinclair that own the TV stations across the US to 0:07:10.320 --> 0:07:14.320 grow larger because they're not, you know, hamstrung by this 0:07:14.320 --> 0:07:16.880 this long existing FCC rule anymore. 0:07:18.200 --> 0:07:20.560 What does this mean for media consolidation? I feel like 0:07:20.560 --> 0:07:23.000 there's always this statistic we hear that there are these 0:07:23.080 --> 0:07:26.800 six conglomerates that now control ninety percent of US media? 0:07:27.480 --> 0:07:29.160 Is that likely to get more extreme? 0:07:29.200 --> 0:07:31.720 I mean, that doesn't seem like necessarily a great thing 0:07:31.840 --> 0:07:34.400 for voters. 0:07:34.680 --> 0:07:37.480 Right So this, you know, when you listen to FCC 0:07:37.640 --> 0:07:42.040 Chairman Brendan Carr, he said, this is really about empowering 0:07:42.400 --> 0:07:46.200 local TV stations so they can compete with those big 0:07:46.360 --> 0:07:51.800 national media companies. Right now, those stations really have very 0:07:51.920 --> 0:07:57.240 little leverage when they negotiate with ABC, CBS, NBC and 0:07:57.320 --> 0:07:59.920 with cable companies when they have to get there their 0:08:00.120 --> 0:08:04.400 media distributed. So in Brendan Carr's view, this is about 0:08:04.440 --> 0:08:08.240 sort of empowering a new set of entities in that 0:08:08.400 --> 0:08:13.400 media ecosystem, the owners of these local stations that right now, 0:08:13.480 --> 0:08:17.080 are you know, they're they're limited or previously were limited 0:08:17.120 --> 0:08:19.400 by this FCC rule. They could only get so big, 0:08:19.680 --> 0:08:22.600 so they had no leverage. This gives them more of 0:08:22.640 --> 0:08:27.400 a voice, in Brendan Carr's view, against those national media companies. 0:08:27.440 --> 0:08:31.360 So maybe it leads to a little more competition in 0:08:31.400 --> 0:08:32.000 that space. 0:08:32.840 --> 0:08:36.120 So this is deregulation essentially, and the broadcast industry has 0:08:36.120 --> 0:08:38.920 been waiting for it for a long time. Which companies 0:08:39.160 --> 0:08:41.400 are going to jump on this and make a move. 0:08:42.280 --> 0:08:46.160 So Nextstar has already jumped on it with its acquisition 0:08:46.600 --> 0:08:49.559 of Tegna, but there was sort of a legal cloud 0:08:50.040 --> 0:08:53.319 around whether they could do that. You know, by acquiring Tegna, 0:08:53.400 --> 0:08:56.600 they went way beyond the thirty nine percent US ownership 0:08:56.640 --> 0:08:59.079 cap and the FCC at the staff level set up, 0:08:59.440 --> 0:09:02.800 you know, will that requirement. Don't worry about it. That 0:09:02.920 --> 0:09:05.800 was sort of legally questionable. This is the right way 0:09:05.920 --> 0:09:08.800 to do it, to do it through a rule making, 0:09:08.840 --> 0:09:13.040 to actually change the rule. So it's an opportunity for 0:09:13.120 --> 0:09:16.679 Next Star to get past legal hurdles on its Tegna acquisition. 0:09:17.000 --> 0:09:19.640 Company like Sinclair could could also look at this. It 0:09:19.679 --> 0:09:23.599 featured prominently in the company's earnings call a couple of 0:09:23.640 --> 0:09:27.480 days ago. There could be opportunities to grow much larger, 0:09:27.520 --> 0:09:30.240 go way beyond the thirty nine percent. But one big 0:09:30.280 --> 0:09:33.520 and important footnote, there's going to be a legal challenge 0:09:33.559 --> 0:09:36.559 to all of this that's coming next. It's not totally 0:09:36.600 --> 0:09:39.920 clear the FCC can do what it did or whether 0:09:40.120 --> 0:09:42.240 only Congress can do it. That's going to be the 0:09:42.240 --> 0:09:43.640 fight that plays out next. 0:09:44.280 --> 0:09:46.040 What is the legal challenge exactly? 0:09:47.320 --> 0:09:51.040 So, in two thousand and four, Congress told the FCC, 0:09:52.000 --> 0:09:55.720 let's set that limit, that ownership limit at thirty nine percent, 0:09:56.000 --> 0:09:58.240 and it said, FCC, change your rule to make it 0:09:58.280 --> 0:10:01.920 thirty nine percent. Question is when Congress did that in 0:10:01.960 --> 0:10:04.760 two thousand and four, did it mean that the FCC 0:10:04.840 --> 0:10:09.440 can't update that rule later? Is it only Congress's call? 0:10:09.760 --> 0:10:13.560 And there are strong arguments on both sides that, you know, 0:10:13.600 --> 0:10:15.920 the FCC says, look, we still have our power to 0:10:15.960 --> 0:10:18.480 modify our rules. Congress didn't take that away. The other 0:10:18.559 --> 0:10:21.439 side said no. Congress was pretty clear, we want thirty 0:10:21.520 --> 0:10:24.760 nine and it said that five times in its statute 0:10:24.800 --> 0:10:27.600 thirty nine percent. So it's not clear that the FCC 0:10:27.679 --> 0:10:31.040 can use its general modification power. That's going to have 0:10:31.080 --> 0:10:33.440 to play out in appeals court and in the Supreme Court. 0:10:33.760 --> 0:10:37.360 Did Congress give the FCC its general discretion to update 0:10:37.360 --> 0:10:40.680 its rules or was this a call that Congress reserved 0:10:40.679 --> 0:10:41.280 for itself. 0:10:42.679 --> 0:10:44.719 All right, Matt, one final question before we let you 0:10:44.760 --> 0:10:48.319 go from where you sit Paramounts Guide Ence, Warner Brothers Discovery. 0:10:49.440 --> 0:10:51.480 Is anything going to happen in the next couple of weeks? 0:10:52.840 --> 0:10:55.840 Yeah, I mean so so. Lots of moving pieces on 0:10:55.880 --> 0:10:59.240 that on the anti trust side, and jenre is really 0:10:59.240 --> 0:11:03.080 our go to on all of those questions, so, you know, 0:11:03.320 --> 0:11:08.520 really interesting questions there as state antitrust enforcers have stepped 0:11:08.600 --> 0:11:11.520 up when the federal regulators have taken more of this 0:11:11.600 --> 0:11:12.800 deregulatory approach. 0:11:13.520 --> 0:11:16.439 Stay with us. More from Bloomberg Intelligence coming up after this. 0:11:20.720 --> 0:11:24.439 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:11:24.520 --> 0:11:27.600 weekdays at ten am Eastern on Apple, Cocklay and Android 0:11:27.640 --> 0:11:30.920 Auto with the Bloomberg Business app. Listen on demand wherever 0:11:31.000 --> 0:11:34.080 you get your podcasts, or watch us live on YouTube. 0:11:34.960 --> 0:11:37.520 All right, Stacey, you know a thing or two about 0:11:38.120 --> 0:11:41.080 Grand Theft Auto the video game franchise, right. 0:11:41.120 --> 0:11:43.319 Yeah, yeah, I mean I know, it's really huge. 0:11:43.360 --> 0:11:45.800 I actually had a cousin who sold a song to 0:11:46.160 --> 0:11:47.920 Grand Theft Auto, So it was one of the songs 0:11:47.920 --> 0:11:50.280 that you might hear on the radio in a car 0:11:50.360 --> 0:11:52.559 inside of the game, and it was a really big 0:11:52.600 --> 0:11:54.360 deal for them. They actually make quite a bit of money. 0:11:54.440 --> 0:11:57.080 It's a huge, very wealthy universe. 0:11:57.160 --> 0:12:01.880 Yeah, it's a cultural I mean totally basically, so many 0:12:01.880 --> 0:12:04.400 people live in that universe, and we're going to get 0:12:04.440 --> 0:12:07.280 a new update Grand theftdot of six GTA six for 0:12:07.320 --> 0:12:09.520 those in the know at some point. Nathan I do 0:12:09.640 --> 0:12:13.120 is Bloomberg Intelligence technology research analyst, and Nathan I say, 0:12:13.120 --> 0:12:15.200 at some point, because it feels like we've been waiting 0:12:15.240 --> 0:12:18.920 for the release of GTA six for months, if not 0:12:19.120 --> 0:12:19.520 a year. 0:12:19.720 --> 0:12:22.920 I remember talking about this quarter after quarter after quarter. 0:12:24.480 --> 0:12:27.760 Yeah. Actually, people have been waiting, especially fans. You say 0:12:28.200 --> 0:12:30.640 cultural totem, I think it's more like a cult at 0:12:30.640 --> 0:12:33.920 this point. People fans have been waiting for thirteen years. 0:12:34.200 --> 0:12:37.840 That was how long ago the GTA five was released, 0:12:37.840 --> 0:12:42.000 and there's such a strong pand up demand for this franchise. Yeah, exactly, 0:12:42.520 --> 0:12:46.280 And even in the last thirteen years, still eighteen million 0:12:46.320 --> 0:12:50.480 people played every single month across PC and console, and 0:12:50.520 --> 0:12:53.920 it remains the third most played game of all time 0:12:54.240 --> 0:12:56.640 as of March. This just tells you how much there 0:12:56.720 --> 0:12:58.520 is a demand, and you can see the shares of 0:12:58.600 --> 0:13:01.720 take to the parent company actually is training up today, 0:13:02.040 --> 0:13:04.440 and that tells you that even though the guidance, which 0:13:04.440 --> 0:13:08.040 we think is on the conservative side, peoples to believe 0:13:08.080 --> 0:13:10.680 that the games might actually perform better than what the 0:13:10.720 --> 0:13:11.520 company is saying. 0:13:12.559 --> 0:13:15.000 So this might sound like a naive question, but why 0:13:15.000 --> 0:13:17.120 did it take them so long to get this new 0:13:17.200 --> 0:13:18.400 version of the game ready? 0:13:18.559 --> 0:13:19.680 I am seeing here. 0:13:19.520 --> 0:13:22.520 That the CEO has said that the expectations around this 0:13:22.600 --> 0:13:24.000 are quote terrifying. 0:13:25.760 --> 0:13:29.640 Yeah, it's it is quite terrifying, because you know, there 0:13:29.679 --> 0:13:33.040 is a lot of estimates pointing to I mean as 0:13:33.160 --> 0:13:35.920 much as many as eighty five million unit sales at 0:13:35.920 --> 0:13:38.880 the top and based on salesize estimates. But I'm a 0:13:38.880 --> 0:13:42.920 lot more conservative on that front. And why it takes 0:13:42.920 --> 0:13:46.480 the company so long. It's a huge production. It takes 0:13:46.559 --> 0:13:49.240 more than a billion just to develop the game, and 0:13:49.880 --> 0:13:55.920 for contacts. I think a Star Wars or the Avengers 0:13:56.040 --> 0:14:00.400 movie like costs like half a billion. And it's it's long. 0:14:01.120 --> 0:14:04.000 There's a lot of aspects that go into the game. 0:14:04.120 --> 0:14:07.480 Is not just selling it upfront. It's also sustaining recurring 0:14:07.520 --> 0:14:10.720 sales for more than ten years. I mean because GTA 0:14:10.800 --> 0:14:13.800 five continued to perform in the last thirteen years, and 0:14:13.960 --> 0:14:17.360 every year it continued to turn out you know, three 0:14:17.440 --> 0:14:21.920 hundred to four hundred million in revenue to take to 0:14:22.120 --> 0:14:25.480 and rock Start, the maker of the game, even after 0:14:25.680 --> 0:14:29.400 upfront sales was captured in the first year. And GTA 0:14:29.520 --> 0:14:32.120 six should prove to be able to do the same. 0:14:32.520 --> 0:14:35.840 And actually we can see in the online mode of 0:14:35.920 --> 0:14:39.160 GTA five, which is the current version, like people still 0:14:39.240 --> 0:14:42.720 to spend about sixty bucks a month to play the game, 0:14:42.800 --> 0:14:46.040 and that's what context three x the standard ad free 0:14:46.120 --> 0:14:50.000 Netflix subscription. So there's actually photos who pay, there's a 0:14:50.040 --> 0:14:52.800 cut following, and people continue and it just can't get 0:14:52.920 --> 0:14:56.080 enough of this game, and you know, it's high budget, 0:14:56.960 --> 0:14:59.320 is I guess the company just want to make sure 0:14:59.320 --> 0:15:01.880 they get it right because it's literally the make up 0:15:01.880 --> 0:15:04.800 break game of the century. 0:15:05.040 --> 0:15:08.200 Nathan. We only have like twenty seconds left. But I'm curious. 0:15:08.200 --> 0:15:11.160 I'm sure they make this game available to reviewers. Do 0:15:11.240 --> 0:15:12.960 they make it available to analysts early? 0:15:14.960 --> 0:15:18.760 No, there's no early access, so you but there's pre 0:15:18.920 --> 0:15:22.840 orders momentum that we can engage some early wins. Yeah, yeah, 0:15:22.880 --> 0:15:26.640 there's pre orders, and preorders apparently is blowing past expectations, 0:15:26.680 --> 0:15:30.480 Like New Zoo is estimating that preorders is at two 0:15:30.560 --> 0:15:35.360 hundred or more million globally, and you know they're expecting 0:15:35.480 --> 0:15:40.120 upward of five billion by end of November in cross sales. 0:15:40.560 --> 0:15:43.080 I mean, Consensus is only pegging this at four billion 0:15:43.200 --> 0:15:46.560 or below. So that tells you how Consensus even is 0:15:46.600 --> 0:15:48.720 being a bit conservative on that front. 0:15:50.520 --> 0:15:53.440 Stay with us. More from Bloomberg Intelligence coming up after this. 0:15:57.520 --> 0:16:01.240 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:16:01.320 --> 0:16:04.360 weekdays at ten am Eastern on Apple, Cocklay and Android 0:16:04.400 --> 0:16:07.720 Auto with the Blueberg Business app. Listen on demand wherever 0:16:07.760 --> 0:16:11.360 you get your podcasts, or watch us live on YouTube. 0:16:12.040 --> 0:16:14.320 You know, on a day like today, what would be 0:16:14.320 --> 0:16:17.640 better than a Frosty very little? Have you ever had one? 0:16:17.840 --> 0:16:21.000 Of course, of course I've had Frosty's. 0:16:21.080 --> 0:16:24.240 You know what, nothing better frost the other day like today, 0:16:24.280 --> 0:16:26.280 But I might be the only one thinking that with 0:16:26.360 --> 0:16:28.760 Stacy and I might be the only ones thinking about that. 0:16:29.560 --> 0:16:34.680 Wendy's pulling us out, look also cutting their dividend. Dave 0:16:34.760 --> 0:16:36.400 Thomas is probably rolling in his grave. 0:16:36.760 --> 0:16:39.600 Oh I loved those ads. He was great. 0:16:39.760 --> 0:16:41.720 What was the other one? Where's the beef? 0:16:42.120 --> 0:16:42.320 Oh? 0:16:42.320 --> 0:16:43.120 Where's the beef? 0:16:43.640 --> 0:16:47.160 Michael Hanlon Bloomberg Intelligence Senior Restaurant and Food service handles 0:16:47.240 --> 0:16:50.120 joining us. Now where's the beef? Or no, what's the beef? 0:16:50.200 --> 0:16:50.920 With Wendy's. 0:16:52.520 --> 0:16:54.800 Listen, I'm going to take the other side of that trade. 0:16:54.880 --> 0:16:55.440 I bet you. 0:16:56.880 --> 0:17:00.600 Dave Smith is somewhere smiling and Dave tom wasn't it. 0:17:01.080 --> 0:17:04.280 I'm sorry, Dave Thomas. Yeah, it's some up there somewhere smiling. 0:17:04.400 --> 0:17:10.359 Because new CEO Bob Wright, who had previously worked for 0:17:10.960 --> 0:17:13.720 Wendy's for quite some time, you know, has a really 0:17:13.760 --> 0:17:16.600 good plan to bring this brand back to glory. And 0:17:16.680 --> 0:17:20.280 he and his new CFO Steve cerulis that they did 0:17:20.280 --> 0:17:24.200 a phenomenal job turning around pot Bellies, and I think 0:17:24.240 --> 0:17:27.040 it was a great first call for both of them. Yeah, sure, 0:17:27.119 --> 0:17:31.400 they cut the dividend and they you know, retracted twenty 0:17:31.440 --> 0:17:33.960 twenty six guidance, but that's really just to give them 0:17:33.960 --> 0:17:37.639 some time for their turnaround plants to start gaining some traction. 0:17:38.320 --> 0:17:39.880 So what is the turnaround plan? 0:17:39.960 --> 0:17:41.879 Because I feel like this is such a tough moment 0:17:41.920 --> 0:17:44.959 for food companies, I mean beyond just cyclospora, but you know, 0:17:45.480 --> 0:17:49.119 prices are going up, margins are getting thin, consumers are 0:17:49.119 --> 0:17:49.840 getting pickier. 0:17:50.800 --> 0:17:51.600 What is the plan. 0:17:53.000 --> 0:17:55.520 Yeah, that there's a lot of low hanging fruit here 0:17:55.560 --> 0:17:59.520 because this brand has been severely mismanaged for some time. 0:17:59.640 --> 0:18:02.840 And so number one is going to be revamping the 0:18:02.880 --> 0:18:06.200 menu and making sure that there's everyday value on that menu. 0:18:06.280 --> 0:18:08.720 And what I mean by value isn't necessarily price. It's 0:18:08.760 --> 0:18:10.359 what you get for what you pay. 0:18:10.840 --> 0:18:11.040 You know. 0:18:11.119 --> 0:18:13.520 Bob right on the call mentioned that, you know, people 0:18:13.880 --> 0:18:17.359 come away feeling from feeling that the experience was worth it, 0:18:17.640 --> 0:18:20.280 you know, and being happy about their overall experience when 0:18:20.280 --> 0:18:24.400 they leave a Wendy's restaurant or drive through. There's also 0:18:24.440 --> 0:18:26.840 a lot of low hanging fruit in terms of operations. 0:18:26.880 --> 0:18:29.879 Operations have slipped. We see this when chains are struggling, right, 0:18:29.920 --> 0:18:34.000 When franchises aren't making money in a restaurant, you know, 0:18:34.080 --> 0:18:37.320 they're gonna pull labor and then this ends up causing 0:18:37.560 --> 0:18:40.320 you know, operations to slip further, right, and so there's 0:18:40.320 --> 0:18:43.679 an opportunity here for some retraining, adding labor back to 0:18:43.720 --> 0:18:47.960 the to the to the restaurants and marketing. I mean, 0:18:48.000 --> 0:18:51.720 this chain was had done such a good job with 0:18:51.920 --> 0:18:54.480 marketing for so long. You know, to your point, you're 0:18:54.520 --> 0:18:57.440 talking about the old where's the beef ads, but even 0:18:57.520 --> 0:19:01.000 you know, more recently, like they had a great online 0:19:01.040 --> 0:19:05.760 presence with social media, very snarky Twitter account that that 0:19:05.800 --> 0:19:08.919 got a lot of attention. You know, I remember some 0:19:09.040 --> 0:19:12.080 years ago when when Fortnite was in its heyday, they 0:19:12.320 --> 0:19:16.640 had a collaboration with Fortnite and they had the Wendy's 0:19:17.480 --> 0:19:20.439 you know, a Wendy character in the game that you 0:19:20.440 --> 0:19:24.320 could find in the kitchen of a restaurant and all 0:19:24.359 --> 0:19:27.720 sorts of cool stuff that and and that's really falling off, right, 0:19:27.840 --> 0:19:28.160 and so. 0:19:29.680 --> 0:19:30.560 You know, there's there's a. 0:19:30.520 --> 0:19:34.480 Lot you know, digital improving, the digital marketing and the 0:19:34.600 --> 0:19:37.639 and the digital experience. Loyalty things like that are going 0:19:37.720 --> 0:19:39.880 to be another point of ethicism. And then the last 0:19:39.920 --> 0:19:43.240 one is like making the franchisese money, right, you have 0:19:43.320 --> 0:19:46.280 to make your franchisese money so that they're motivated to 0:19:46.280 --> 0:19:47.520 build no news stores. 0:19:47.560 --> 0:19:48.640 So those are the. 0:19:48.640 --> 0:19:51.200 Five primary points for this turnaround plan. 0:19:51.440 --> 0:19:54.240 Okay, so they're telling the franchisees at this point be patient. 0:19:54.400 --> 0:19:57.719 I guess that's the same message to investors. At this point, 0:19:58.760 --> 0:20:01.200 when does it start to take How patient do they 0:20:01.200 --> 0:20:01.560 have to be? 0:20:02.320 --> 0:20:05.520 Well, listen, first of all, you know, I don't know. 0:20:05.600 --> 0:20:09.600 I bet you franchisees that listened into that call were 0:20:09.720 --> 0:20:12.520 very happy with it, right, Like what Bob said was, 0:20:13.520 --> 0:20:17.440 you know, this chain is not run by private equity groups. 0:20:18.520 --> 0:20:22.640 The franchisees are family owned people that he knows personally, right, 0:20:22.680 --> 0:20:25.600 And so what he said was turning this brand around 0:20:25.640 --> 0:20:29.879 was personal to him, right, And so you know, I 0:20:30.160 --> 0:20:32.280 think the energy that the franchise e base is going 0:20:32.359 --> 0:20:35.280 to be energized, right by having a guy in there 0:20:35.359 --> 0:20:38.160 that they know that has had a lot of success 0:20:38.280 --> 0:20:41.520 turning around Pop Belly, that did a great job when 0:20:41.560 --> 0:20:45.040 he was with Wendy's. When Wendy's was, you know, a 0:20:45.080 --> 0:20:48.000 pretty solid competitor in the quick service space. So I 0:20:48.040 --> 0:20:51.200 think franchisees are happy with the change at the top. 0:20:51.280 --> 0:20:52.880 You know, how long is it going to take. It's 0:20:52.920 --> 0:20:55.280 going to take time. The good thing is they're lapping 0:20:55.480 --> 0:20:59.200 really really weak comps in the second half. So management 0:20:59.280 --> 0:21:02.199 said that Saintstar sales are going to be down similar 0:21:02.240 --> 0:21:04.200 to what they've been down, which was down about six 0:21:04.280 --> 0:21:07.040 percent plus in the first half in the US. We 0:21:07.080 --> 0:21:09.600 think they're sandbagging in a little bit because comparisons are 0:21:09.600 --> 0:21:12.120 going to get easier through your end, and we think 0:21:12.760 --> 0:21:15.920 as a result, results are going to go from bad 0:21:16.000 --> 0:21:20.400 to less bad, you know, but the real turnaround will 0:21:20.440 --> 0:21:22.560 probably kick in sometime in twenty twenty seven. 0:21:23.040 --> 0:21:25.720 Another company we've been hearing a lot about this morning 0:21:25.760 --> 0:21:26.440 is Sweet Green. 0:21:27.760 --> 0:21:29.440 They've just been getting hammered. 0:21:29.480 --> 0:21:31.800 Apparently sales are way down a lot because of the 0:21:31.800 --> 0:21:33.000 cyclospora outbreak. 0:21:33.520 --> 0:21:35.680