WEBVTT - Nike Sinks After China Sales Plunge, Delaying Turnaround 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 --> 0:00:17.239 He's done on Apple, Cocklay and Android Auto with the 0:00:17.280 --> 0:00:21.040 Bloomberg Business App. Listen on demand wherever you get your podcasts, 0:00:21.360 --> 0:00:23.080 or watch us live on YouTube. 0:00:24.360 --> 0:00:26.800 One of the big losers in today's sessions so far 0:00:27.080 --> 0:00:30.440 is Nike, down nine and a half percent right now. 0:00:30.880 --> 0:00:32.519 Quite a bit going on there, so let's bring in 0:00:32.560 --> 0:00:35.159 put inm. Goyel, the senior US e commerce and retail 0:00:35.200 --> 0:00:36.880 analyst at Bloomberg Intelligence. 0:00:38.280 --> 0:00:39.680 Nike is in turnaround mode. 0:00:39.960 --> 0:00:42.640 Elliott Hill is no longer a new CEO, He's just 0:00:42.800 --> 0:00:44.560 the CEO because he's been there for about a year. 0:00:45.120 --> 0:00:48.599 How is his effort to turn this company around shaping up? 0:00:50.080 --> 0:00:52.600 I think his efforts to turn the US businesses shaping 0:00:52.680 --> 0:00:55.760 up quite nicely. We are seeing momentum rebuild it in 0:00:55.800 --> 0:00:58.840 the US. The issue is outside of the United States 0:00:58.960 --> 0:01:03.319 and China US to where sales have really plunged, and 0:01:03.640 --> 0:01:06.840 we don't think that they can, you know, quickly rebound 0:01:06.840 --> 0:01:10.720 those sales anytime soon. It may be a twenty twenty 0:01:10.720 --> 0:01:14.600 seven story to see any resurgence in China. 0:01:14.680 --> 0:01:18.040 If that, what is the issue in China? Is it 0:01:18.080 --> 0:01:21.080 their brand specific? Is it the Chinese consumer? What's going 0:01:21.120 --> 0:01:21.479 on there? 0:01:23.000 --> 0:01:26.319 I think the biggest issue is brand specific. So unlike 0:01:26.400 --> 0:01:30.120 in the US, the Nike brand isn't perceived as a 0:01:30.240 --> 0:01:33.600 higher and athletic brand. In fact, it's way too much 0:01:33.600 --> 0:01:37.120 an off price and at discount. So the brand needs 0:01:37.160 --> 0:01:40.000 to build brand momentum and brand heat. And yes, the 0:01:40.080 --> 0:01:44.360 Chinese consumer isn't particularly you know, on its best feet 0:01:44.440 --> 0:01:47.000 right now. But if you compare what's happening in China 0:01:47.040 --> 0:01:49.440 and you look at Liulle Lemon, Liulle Lemon has had 0:01:49.560 --> 0:01:53.000 outstanding results in China, much smaller, but you know, they've 0:01:53.000 --> 0:01:55.160 been able to do really well there. So Nike really 0:01:55.240 --> 0:01:58.480 just needs to get stuff together when it comes to product, 0:01:58.600 --> 0:02:00.680 branding and marketing in that region. 0:02:01.920 --> 0:02:04.920 What is the playbook for that? Have they detailed, have 0:02:05.000 --> 0:02:08.239 they outlined something that sounds reasonable or is it kind 0:02:08.240 --> 0:02:09.960 of still throwing things at the wall. 0:02:12.040 --> 0:02:14.280 I think the playbook will be similar to what they 0:02:14.280 --> 0:02:16.480 did in the US. The first thing that they've done 0:02:16.560 --> 0:02:19.200 so far and we'll see how that works out, is 0:02:19.320 --> 0:02:23.959 changed the reporting structure, so now all regions report directly 0:02:24.040 --> 0:02:26.440 into Elliott Hill, so I guess he just has more 0:02:26.919 --> 0:02:30.840 authority over those regions, seeing things you know firsthand. The 0:02:30.919 --> 0:02:32.520 other thing that they're going to try to do is 0:02:32.560 --> 0:02:34.840 just clean house there, right. They have to get rid 0:02:34.880 --> 0:02:38.799 of the inventory that's just not speaking to the customers 0:02:38.840 --> 0:02:41.480 and has been aged for some time. They have to 0:02:41.520 --> 0:02:44.119 get out of off price, and they have to stop discounting. 0:02:44.520 --> 0:02:46.560 And then once you get a new product to flow in, 0:02:46.680 --> 0:02:49.720 you get the right brand message across. It's retail playbook 0:02:49.760 --> 0:02:52.359 one oh one. They just need to execute. So execution 0:02:52.560 --> 0:02:53.200 is huge here. 0:02:53.800 --> 0:02:56.440 Talk to us about the Converse brand within the Nike 0:02:57.160 --> 0:02:58.600 household there, so. 0:02:58.600 --> 0:03:02.360 The yes, you know, the commerce brand, Yes, it's struggling, 0:03:02.440 --> 0:03:05.239 but to me, it's less of a concern than China. 0:03:05.639 --> 0:03:07.880 The brand is less than ten percent of their total 0:03:07.919 --> 0:03:11.960 revenues from what we see, and while sales are down, 0:03:12.000 --> 0:03:14.840 and while it is a brand that we'd like Nike 0:03:14.960 --> 0:03:17.600 to see step up, especially when it comes to lifestyle, 0:03:17.720 --> 0:03:21.560 other companies have done particularly well there. We'd say the focus. 0:03:21.600 --> 0:03:23.320 You know, if I needed them to put focus on 0:03:23.320 --> 0:03:25.600 one thing first, it would be China right now, Converse 0:03:25.639 --> 0:03:28.080 after that, And that's what we're looking for. 0:03:28.880 --> 0:03:30.880 And I know that there's been a lot of discussion 0:03:30.880 --> 0:03:35.280 between performance and lifestyle over at Nike. What is the 0:03:35.440 --> 0:03:39.120 path forward for Nike? I mean, has it chosen performance 0:03:39.160 --> 0:03:42.160 across all of its markets or are some markets better 0:03:42.240 --> 0:03:44.560 for performance versus lifestyle. 0:03:45.880 --> 0:03:48.600 So they're sticking to performance, and I think that's the 0:03:48.720 --> 0:03:52.120 right choice because performance is what Nike is about. It 0:03:52.160 --> 0:03:54.720 is what drives the sports momentum. What we'd like to 0:03:54.760 --> 0:03:57.880 see happen is that performance turns into lifestyle. So a 0:03:57.920 --> 0:04:00.520 lot of shoes that are worn for the sport, for 0:04:00.680 --> 0:04:04.200 the game have become lifestyle shoes too. So that's the 0:04:04.320 --> 0:04:06.440 natural shift that we'd like to see with the new 0:04:06.480 --> 0:04:07.960 innovation that Nike is launching. 0:04:09.160 --> 0:04:12.080 So we have some experience now nine months, ten months, 0:04:12.120 --> 0:04:15.000 eleven months of just teriff discussion. 0:04:15.320 --> 0:04:15.600 Woon. 0:04:15.720 --> 0:04:17.200 I think you were one of the first analysts we 0:04:17.279 --> 0:04:19.039 talked to to say, oh boy, what's this going to 0:04:19.080 --> 0:04:21.600 mean for various industries? What does it mean for the 0:04:22.120 --> 0:04:24.920 at your business, the ath leisure business, kind of the 0:04:25.640 --> 0:04:28.040 Nikes of the world, the Adidas is of the world. 0:04:28.960 --> 0:04:32.320 Yeah, so footwear is largely important into the US, and 0:04:32.360 --> 0:04:35.440 so are the peril When you think the athletic work space, 0:04:35.560 --> 0:04:38.960 notably the footwear. It's predominantly made in Vietnam, and the 0:04:39.000 --> 0:04:42.280 current tariff there is twenty percent. It will have an 0:04:42.279 --> 0:04:45.400 impact on margins. In fact, Nike's gross margin if you 0:04:45.400 --> 0:04:48.120 look at it, even what was recently reported, more than 0:04:48.160 --> 0:04:50.640 half of it was due to tariffs and saying with 0:04:50.680 --> 0:04:55.000 their guidance, So I think twenty percent exposure. They are 0:04:55.080 --> 0:04:59.719 increasing prices selectively. They probably will have more efforts and 0:04:59.760 --> 0:05:02.560 play in twenty twenty six, that's calendar twenty twenty six 0:05:02.640 --> 0:05:05.400 to mitigate some of this, but it's not going entirely away. 0:05:05.560 --> 0:05:07.280 It is a headband to margin. 0:05:09.560 --> 0:05:12.640 Stay with us. More from Bloomberg Intelligence coming up after this. 0:05:16.240 --> 0:05:19.960 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:05:20.040 --> 0:05:23.400 weekdays at ten am Eastern on Applecarplay and Android Auto 0:05:23.520 --> 0:05:26.599 with the Bloomberg Business app. Listen on demand wherever you 0:05:26.640 --> 0:05:30.000 get your podcasts, or watch us live on YouTube. 0:05:30.560 --> 0:05:33.359 All right, a bell Weather for some including myself, for 0:05:33.440 --> 0:05:37.400 the US economy is FedEx f d X is the 0:05:37.480 --> 0:05:41.080 ticker they reported some numbers stock trading a little bit 0:05:41.120 --> 0:05:44.320 lower here. They have some issues with some of their aircraft, 0:05:44.400 --> 0:05:46.200 but I don't know. I kind of think it's just 0:05:46.360 --> 0:05:50.040 an awesome company. The stock is up about that's about 0:05:50.040 --> 0:05:51.840 flat this year. Hasn't really done anything here, but it's 0:05:51.839 --> 0:05:53.640 got a market cap of sixty seven billion dollars. I've 0:05:53.680 --> 0:05:56.760 always been a big fan of FedEx. The MD eleven 0:05:57.400 --> 0:05:59.440 is a great aircraft, but it's an old aircraft and 0:05:59.440 --> 0:06:02.040 they have and reliance on that. Leek Clasgow does this 0:06:02.080 --> 0:06:05.120 stuff for a living, Senior Transport Logistics and Chipping analys 0:06:05.160 --> 0:06:06.520 for Bloomberg Intelligence Lee. 0:06:06.680 --> 0:06:08.960 Now, FedEx reported some numbers. What did you learn? 0:06:11.000 --> 0:06:14.080 Well, I mean their second quarter they performed pretty well, 0:06:14.800 --> 0:06:17.080 and you know, they gave us some color about the 0:06:17.080 --> 0:06:22.080 peak season peak season from an average daily volume growth, 0:06:22.120 --> 0:06:25.960 they're looking at mid single digits that could increase too 0:06:26.040 --> 0:06:29.160 high single digits because there's one extra operating day in 0:06:29.200 --> 0:06:31.160 the quarter or during a peak. 0:06:30.960 --> 0:06:31.920 Season, I should say. 0:06:32.560 --> 0:06:35.039 So, you know, they seem to be executing on their 0:06:35.080 --> 0:06:38.479 restructuring plan. The problem is is that in their second 0:06:38.560 --> 0:06:41.000 half they're going to be having a lot of headwinds 0:06:41.040 --> 0:06:42.800 that they're going to have to deal with. And those 0:06:42.839 --> 0:06:49.599 headwinds relate to, you know, higher variable compensation expenses and 0:06:49.839 --> 0:06:52.720 a less than truckload market. Which they're the biggest player 0:06:52.720 --> 0:06:56.360 in that market that has been pretty depressed over the 0:06:56.440 --> 0:06:57.880 last couple of quarters. 0:06:57.480 --> 0:06:59.560 And it's can probably continue to be depressed. 0:07:00.080 --> 0:07:02.000 And then you have, as you mentioned, the grounding of 0:07:02.040 --> 0:07:07.000 their MD eleven fleet following the tragic accident of a 0:07:07.279 --> 0:07:08.520 UPS plane. 0:07:08.320 --> 0:07:09.360 A couple of weeks ago. 0:07:09.760 --> 0:07:12.960 So you know, you add those three things up plus 0:07:13.080 --> 0:07:16.600 some other things, it's about a six hundred million headwind 0:07:16.640 --> 0:07:18.840 to its earning. So they have to deal with that 0:07:18.880 --> 0:07:22.000 in some of the restructuring that they've done. Probably you know, 0:07:22.040 --> 0:07:24.440 you're probably not going to see hit the bottom line 0:07:25.040 --> 0:07:28.600 at least really directly until they're twenty twenty seven. 0:07:29.120 --> 0:07:33.000 So the six hundred million dollar charge clearly not impressing investors, 0:07:33.920 --> 0:07:37.800 even with the beat in the quarter that ended. Is 0:07:37.840 --> 0:07:39.520 this a one time thing or is this something that 0:07:39.560 --> 0:07:42.000 could drag out beyond the second half of this year 0:07:42.360 --> 0:07:42.720 next year? 0:07:42.760 --> 0:07:43.280 Excuse me? 0:07:44.200 --> 0:07:47.600 Yeah, So on the MD elevens, I think expectations are, 0:07:47.680 --> 0:07:50.560 you know, they should be back in service sometime. 0:07:50.440 --> 0:07:52.800 Early next year. I don't really know. 0:07:52.760 --> 0:07:55.280 Exactly when that's going to happen, but so you could 0:07:55.360 --> 0:08:00.920 view that as a kind of a year term headwindable compensation. 0:08:01.800 --> 0:08:05.840 You know that also is against difficult comparisons, so that's 0:08:05.880 --> 0:08:09.920 also short term in nature and not something that can continue. 0:08:10.160 --> 0:08:12.760 The biggest unknown for me, at least is the less 0:08:12.760 --> 0:08:16.720 than truckload demand. The ISM Manufacturing index, which has been 0:08:16.840 --> 0:08:20.800 contraction territory for thirty five at the last thirty seven months, 0:08:21.720 --> 0:08:24.800 is indicating that less than truckload demand, which is mostly 0:08:24.840 --> 0:08:29.600 industrial manufacturing, is going to continue to be weak in 0:08:29.640 --> 0:08:34.520 the coming months ahead because that index, the ISM index, 0:08:34.600 --> 0:08:38.480 is really a bell weather to an early indicator of 0:08:38.520 --> 0:08:40.120 where LTL demand is heading. 0:08:40.720 --> 0:08:41.040 Lee. 0:08:41.080 --> 0:08:43.920 As you know, I am an expert on trucking. I 0:08:43.960 --> 0:08:46.560 know what LTL means and TL means. I was I 0:08:46.600 --> 0:08:49.800 had no idea that FedEx was the largest LTL provider. 0:08:50.240 --> 0:08:52.199 Do you like them that they're in that business or 0:08:52.200 --> 0:08:54.120 would you rather them farm it out to somebody. 0:08:54.880 --> 0:08:57.480 Well that's a great question, Paul, because they're planning on 0:08:57.520 --> 0:08:58.079 spinning that. 0:08:58.040 --> 0:09:01.800 Out in June of next year. Uh yeah, there you go. 0:09:02.920 --> 0:09:07.080 You know. They the argument always was that, you know, 0:09:07.160 --> 0:09:10.600 maybe they could cross L their lt L and get 0:09:10.640 --> 0:09:17.560 more profitable parcel business. That model really might have not 0:09:17.679 --> 0:09:21.000 played out as much as as as they hoped, and 0:09:21.040 --> 0:09:23.760 so they also hope to get a better valuation because 0:09:23.760 --> 0:09:27.920 that lt L business, while it's been pretty depressed, they 0:09:27.960 --> 0:09:31.280 it does trade at a higher higher multiples, uh, and 0:09:31.320 --> 0:09:33.439 so they're trying to unlock kind of some. 0:09:33.440 --> 0:09:34.520 Of the value there. 0:09:34.880 --> 0:09:37.600 So you know, it'll be pretty interesting to see how 0:09:37.640 --> 0:09:41.240 that company operates as a standalone provider. That industry is 0:09:41.280 --> 0:09:44.280 pretty consolidated and has a lot of pricing discipline, and 0:09:44.360 --> 0:09:46.520 we just hope that, you know, once FedEx Freight gets 0:09:46.559 --> 0:09:48.560 out there and they're on their own, they're not going 0:09:48.640 --> 0:09:51.920 to try to use pricing to to you know, gain share. 0:09:52.160 --> 0:09:53.200 But we would note they. 0:09:53.080 --> 0:09:55.280 Are still the largest player, so it's not like they're 0:09:55.360 --> 0:09:58.040 looking to uh to gain a lot of share anyway. 0:09:58.120 --> 0:10:00.200 So but you know, it will be an interest thing 0:10:00.800 --> 0:10:03.679 to see once that once that gets spun. 0:10:03.480 --> 0:10:04.360 Out in June. 0:10:04.880 --> 0:10:08.440 You know, I'm looking Paul, excuse me, Lee and looking 0:10:08.480 --> 0:10:11.360 at Paul and talking to Lee. In the past six months, 0:10:11.440 --> 0:10:15.720 FedEx chairs up about twenty nine percent total return versus 0:10:15.800 --> 0:10:19.800 ups up up almost six percent. Can you compare and 0:10:19.840 --> 0:10:23.319 contrast their approach to some of the macro challenges that 0:10:23.320 --> 0:10:25.079 faces the industry. 0:10:26.000 --> 0:10:29.319 Yeah, so they're both in the process of restructuring their 0:10:29.360 --> 0:10:32.120 networks to deal with the new realities that you know, 0:10:32.240 --> 0:10:34.760 B two C or e commerce is really where the 0:10:34.760 --> 0:10:37.640 growth is going to come from. And these networks were 0:10:37.679 --> 0:10:40.480 created a long, long time ago with the idea that 0:10:40.760 --> 0:10:44.160 you know, a carrier would go to a lawyer's office 0:10:44.160 --> 0:10:47.040 with one hundred envelopes, drop off those envelopes and pick 0:10:47.120 --> 0:10:51.200 up fifty envelopes, and that density really can drive profitability 0:10:51.480 --> 0:10:53.680 where you know, as you know, if you get like 0:10:54.280 --> 0:10:58.120 you know, if you order rubber bands from Amazon, that 0:10:58.240 --> 0:11:01.240 one package that goes to your doorstep is a lot 0:11:01.320 --> 0:11:04.800 more expensive to deliver. So they're just dealing with that 0:11:04.920 --> 0:11:08.160 reality and they've been slow to kind of change their networks. 0:11:08.440 --> 0:11:12.080 And UPS and FedEx are both in that process. You know, 0:11:12.280 --> 0:11:15.440 UPS has done things a little earlier, I would say, 0:11:15.480 --> 0:11:19.160 and you know whether it is you they spun out 0:11:19.240 --> 0:11:22.480 or I should say, sold their less than truckloaw business, 0:11:22.559 --> 0:11:25.559 the TFI, a Canadian provider, you know. 0:11:25.520 --> 0:11:27.600 A couple of years ago. 0:11:27.679 --> 0:11:30.920 They're all looking to try to gain more share of 0:11:30.960 --> 0:11:35.079 the small and medium size shippers and get away from 0:11:35.080 --> 0:11:38.720 the large shippers like Amazon, which really aren't that profitable. 0:11:39.280 --> 0:11:41.680 Stay with us. More from Bloomberg Intelligence coming up. 0:11:41.960 --> 0:11:49.440 After this, you're listening to the Bloomberg Intelligence podcast. Catch 0:11:49.520 --> 0:11:52.640 us live weekdays at ten am Eastern on Apple, Cocklay 0:11:52.640 --> 0:11:55.600 and Android Auto with the Bloomberg Business App. Listen on 0:11:55.679 --> 0:11:58.920 demand wherever you get your podcasts, or watch us live 0:11:59.000 --> 0:12:00.120 on YouTube. 0:12:00.440 --> 0:12:03.600 Scarlette, I have breaking news. You may want to get 0:12:03.640 --> 0:12:05.120 the red headline ready for this one. 0:12:05.160 --> 0:12:06.400 Okay, tell me today. 0:12:06.880 --> 0:12:09.959 I put a deposit down on my first cruise ever. 0:12:10.200 --> 0:12:11.360 What called to this? 0:12:11.800 --> 0:12:14.800 Well, my partner, my girlfriend, she's we're going, we're. 0:12:14.600 --> 0:12:17.319 Doing it in Fallwell, I just told you Viking Cruise. Yeah, basically, 0:12:17.400 --> 0:12:20.600 Viking Cruise is your France in the fall. 0:12:20.840 --> 0:12:22.079 And how are you feeling about this? 0:12:22.160 --> 0:12:22.960 I'm a little nervous. 0:12:23.000 --> 0:12:25.040 But it's baby steps, she says. It's not like a 0:12:25.040 --> 0:12:27.200 big carnival cruise. We got like five thousand people on. 0:12:27.240 --> 0:12:29.000 It's a little riverboat, you know, kind of cruise. 0:12:29.040 --> 0:12:30.800 Okay, so in two years we should look for you 0:12:30.800 --> 0:12:31.920 on a carnival crue could. 0:12:31.760 --> 0:12:33.920 Be, could be. But that brings us to our next guest. 0:12:34.000 --> 0:12:34.760 I mean, Brian Egger. 0:12:35.040 --> 0:12:37.319 He's writing the research note right now as we speak. 0:12:37.360 --> 0:12:39.800 Sweeney in the cruise business. Brian Eigger, he's a senior 0:12:39.800 --> 0:12:42.400 gaming and lodging analysts for Bloomberg Intelligence, Brian, we had 0:12:42.400 --> 0:12:44.360 Carnival Cruise Lines reported some numbers today. 0:12:44.360 --> 0:12:46.960 What did they have to say? 0:12:47.080 --> 0:12:49.200 Yeah, So, I mean the fourth quarter, the fiscal fourth 0:12:49.280 --> 0:12:52.360 quarter editor Vember three, was a pretty decent quarter in 0:12:52.400 --> 0:12:55.199 truth of yeel growth. And I think more importantly, going 0:12:55.200 --> 0:12:58.560 to next year, they are expecting to see about two 0:12:59.120 --> 0:13:02.240 percent the yield growth or so with good cost control. 0:13:02.240 --> 0:13:06.600 And that's encouraging because there were some concerns that industry 0:13:06.640 --> 0:13:10.360 growth of supply, particularly in the Caribbean, not by Carnival 0:13:10.760 --> 0:13:14.320 but by its competitors, might dampen your growth going to 0:13:14.400 --> 0:13:18.040 next year. So while there's still some uncertainty, I think overall, 0:13:18.080 --> 0:13:21.000 the takeaway was fairly encouraging on that front. 0:13:22.960 --> 0:13:25.840 How much of their business depends on converting people like 0:13:25.920 --> 0:13:28.520 Paul Sweeney from a never cruiser to a maybe cruiser 0:13:28.559 --> 0:13:33.800 to a you know, a reliable cruiser, basically increasing their 0:13:33.800 --> 0:13:36.079 market share with bringing in new customers. 0:13:36.720 --> 0:13:39.680 Yeah, Historically it's been a big factor in North America, 0:13:39.800 --> 0:13:42.679 trying to track that first time cruise customer. It's far 0:13:42.760 --> 0:13:47.160 less penetrated than other forms of vacationing. That's even more 0:13:47.160 --> 0:13:49.160 true if you go into other parts of the world 0:13:49.280 --> 0:13:51.960 like Europe and Asia, but it's definitely part of that 0:13:51.960 --> 0:13:54.319 that first time customer. On the other hand, you know 0:13:54.400 --> 0:13:57.319 much what they do depends on loyalty programs and getting 0:13:57.400 --> 0:13:58.520 repeat business as well. 0:13:59.400 --> 0:14:03.960 So Brian give us that the consumer's kind of wavering 0:14:04.000 --> 0:14:05.960 a little bit there. I mean, the ke shaped economy. 0:14:07.679 --> 0:14:10.160 How does a cruise industry deal with that? Because I 0:14:10.200 --> 0:14:13.360 know there's different tiers of cruising out there. How do 0:14:13.400 --> 0:14:15.240 you see that in the cruise business? 0:14:15.800 --> 0:14:16.439 I mean, if you go. 0:14:16.440 --> 0:14:21.720 Back historically, the cruise industry is moderate recyclical who probably 0:14:22.320 --> 0:14:25.280 yield to be more resilient than for example, business travel 0:14:25.280 --> 0:14:29.640 oriented hotel room rates. So you know, there was some 0:14:30.080 --> 0:14:34.000 obviously some vulnerability. But that being said, the leisure consumer, 0:14:34.120 --> 0:14:37.560 the leisure consumer of travel, has been really resilient. It 0:14:37.640 --> 0:14:42.680 held up extremely well throughout this period of economic uncertainty. Historically, 0:14:43.040 --> 0:14:45.600 passenger growth has kept up with supply. I mean, the 0:14:45.600 --> 0:14:48.240 goodness for Carnival, they've only looking at about one percent 0:14:48.240 --> 0:14:51.840 supply growth in twenty twenty six. There's certainly more coming 0:14:51.880 --> 0:14:55.240 from their competitors, but you know that's ply out for 0:14:55.320 --> 0:14:58.440 them specifically, is a healthy backdrop even if we do 0:14:58.480 --> 0:14:59.960 see a step back and consumer spend. 0:15:01.000 --> 0:15:03.720 Speaking of their competitors, I'm just looking at a comparison chart 0:15:03.800 --> 0:15:07.360 of all the big cruise operators, and Paul's Viking is 0:15:07.760 --> 0:15:11.160 up about sixty four percent so far this year, Carnival 0:15:11.320 --> 0:15:14.640 up about twenty three percent, Norwegian Cruise Line down eleven percent, 0:15:14.680 --> 0:15:16.560 and roll Career being up thirty percent. 0:15:17.280 --> 0:15:18.560 How are their strategies different? 0:15:18.560 --> 0:15:20.560 I mean, for those who don't cruise, it might seem 0:15:20.600 --> 0:15:21.760 like they're all one and the same. 0:15:22.480 --> 0:15:25.200 Yeah, I think there are different ways you could interpret 0:15:25.240 --> 0:15:27.640 those disparities in stock price performance. But I think the 0:15:27.680 --> 0:15:30.400 way I think about it is Viking is certainly very 0:15:30.400 --> 0:15:33.000 focused on the luxury kind of niche cruz segment. 0:15:33.320 --> 0:15:34.440 Paul fancy. 0:15:35.560 --> 0:15:40.080 Good good for Paul, and I think generally speaking that 0:15:40.120 --> 0:15:42.040 part of the business is held up well. You know, 0:15:42.160 --> 0:15:48.600 Carnival probably is maybe gained some note because it's done 0:15:48.640 --> 0:15:51.440 a good job at achieving its return on investment capital goals, 0:15:52.000 --> 0:15:54.960 done so sooner to get to that twelve percent range 0:15:54.960 --> 0:15:58.160 than they expected, and because they've got so little supply growth, 0:15:58.200 --> 0:16:01.280 that does provide a little bit more conservativism. But you know, 0:16:01.320 --> 0:16:05.400 there are certainly some differences across the brands. 0:16:06.120 --> 0:16:08.560 All right, Brian, how are my friends on the strip 0:16:08.640 --> 0:16:10.120 in Vegas doing these days? 0:16:10.880 --> 0:16:12.800 Yeah, I mean Vegas is finishing up the year with 0:16:13.440 --> 0:16:16.280 modest growth, but it's been a tough It was a 0:16:16.320 --> 0:16:19.440 tough summer period in Las Vegas, particularly kind of the 0:16:20.160 --> 0:16:24.280 mid market segment. Much like I said about cruising, the 0:16:24.360 --> 0:16:29.640 high end business, high end hotel business, what oriented demand 0:16:29.720 --> 0:16:33.320 is held up better, but the mid market, midweek demand 0:16:34.280 --> 0:16:37.880 during kind of shoulder periods, and the mid market has 0:16:38.360 --> 0:16:42.240 experienced some disruption, probably because of construction, probably because of 0:16:42.240 --> 0:16:45.760 difficult comparisons, probably because we are saying that luxury into 0:16:45.800 --> 0:16:47.320 the market holding up a bit better. 0:16:48.520 --> 0:16:51.880 So is everyone then going to double down on chasing 0:16:51.920 --> 0:16:53.120 after the luxury customer. 0:16:54.600 --> 0:16:58.440 It really depends on what part of the business companies 0:16:58.440 --> 0:17:00.680 are in. On balance win, which is more high end 0:17:01.480 --> 0:17:04.880 has performed better in terms of its rep part, let's say, 0:17:04.880 --> 0:17:07.280 in Las Vegas, than some of its rivals. But you 0:17:07.280 --> 0:17:11.199 know those are these Obviously these trends shift. But I 0:17:11.240 --> 0:17:15.240 think that's been notable across the leisure travel sector is 0:17:15.280 --> 0:17:19.600 the relative out performance of luxury high end with perhaps 0:17:19.600 --> 0:17:23.600 a little bit more challenging comparisons and difficult conditions for 0:17:24.400 --> 0:17:28.280 kind of the the mass market or those dependent on 0:17:29.040 --> 0:17:30.199 other sources of business. 0:17:30.400 --> 0:17:33.000 And we know that these gaming companies, these casino companies 0:17:33.040 --> 0:17:35.399 rely a lot more on China than they do on 0:17:35.440 --> 0:17:37.760 the strip. Overall, how's Macau looking for them? 0:17:38.600 --> 0:17:41.240 So, I mean mcaw has been recovering, you know, the 0:17:41.600 --> 0:17:44.280 particularly the what we call kind of the mass business 0:17:44.359 --> 0:17:48.600 in Macau that has some mantle ory effect on Lallas 0:17:48.720 --> 0:17:53.080 Vegas as well, although you know, low luck levels and 0:17:53.480 --> 0:17:56.200 back right in Vegas have been a bit bit soft 0:17:56.240 --> 0:17:58.800 in some periods this year. But you know that business 0:17:58.840 --> 0:18:02.720 is certainly coming back in Macow. It's coming back a 0:18:02.720 --> 0:18:07.040 lot after obviously the pandemic. It's a different type of business. 0:18:07.760 --> 0:18:10.919 Stay with us. More from Bloomberg Intelligence coming up after this. 0:18:14.800 --> 0:18:18.520 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:18:18.600 --> 0:18:21.680 weekdays at ten am Eastern on Apple, Corplay and Android 0:18:21.680 --> 0:18:25.000 Auto with the Bloomberg Business app. Listen on demand wherever 0:18:25.040 --> 0:18:28.160 you get your podcasts, or watch us live on YouTube. 0:18:29.000 --> 0:18:30.919 A news story that's got a lot of people's attention, 0:18:31.040 --> 0:18:34.200 like my kids are paying attention. TikTok is being bought 0:18:34.200 --> 0:18:36.639 by a group of buyers led by Oracle Corporation, with 0:18:36.760 --> 0:18:40.560 the company and byte Dance signing binding agreements to create 0:18:40.600 --> 0:18:44.400 a US joint venture. I don't care, but a lot 0:18:44.400 --> 0:18:46.560 of people do. Man Deeve Sing, senior tech analysts for 0:18:46.560 --> 0:18:49.440 Bloomberg Intelligence, joins us Mandy talk to us about. 0:18:49.240 --> 0:18:49.879 This structure here. 0:18:49.920 --> 0:18:52.600 I know that the government was either to bite Dance, 0:18:52.640 --> 0:18:55.520 which the Chinese company either sell this sing or shut 0:18:55.520 --> 0:18:59.440 it down. Does this is satisfying kind of the requirement here? 0:19:01.000 --> 0:19:03.640 I think so. And look, the main point of contention 0:19:03.960 --> 0:19:07.800 was the algorithm, so clearly you know there is a 0:19:07.880 --> 0:19:11.879 decoupling of that versus the app. And you know, in 0:19:11.960 --> 0:19:16.760 terms of the ownership, Oracle was the most likely sort 0:19:16.760 --> 0:19:21.040 of candidate when it comes to leading this joint venture, 0:19:21.200 --> 0:19:24.720 and that turned out to be the case. So from 0:19:24.720 --> 0:19:28.840 that perspective, I do think this should be palatable to 0:19:28.920 --> 0:19:31.720 both the US and the Chinese government. 0:19:32.160 --> 0:19:35.560 Although we don't know if the Chinese regulators will definitely 0:19:35.720 --> 0:19:37.560 prove it right. They have yet to say whether they'll 0:19:37.720 --> 0:19:38.600 be this transaction. 0:19:39.280 --> 0:19:42.040 I mean, we've seen that many times a lut can 0:19:42.119 --> 0:19:45.960 go wrong, but in this case, at least, you know, 0:19:47.000 --> 0:19:50.480 the joint venture that was formed here had the blessing 0:19:50.680 --> 0:19:54.280 of the US government. So it sounds like, you know, 0:19:55.680 --> 0:19:59.040 this was the intended proposal, and that's how it turned 0:19:59.080 --> 0:20:01.520 out to be in terms of by dance, you know, 0:20:02.359 --> 0:20:06.080 agreeing to sell the app to this joint venture. 0:20:06.280 --> 0:20:08.600 What I like about this is it includes silver Like 0:20:08.640 --> 0:20:12.080 and from my money, the baseball my career, the smartest 0:20:12.080 --> 0:20:14.880 technology pe money out there by far is Silverlake. 0:20:14.960 --> 0:20:17.440 Some really smart folks there, So if they're involved, it's 0:20:17.440 --> 0:20:18.640 got to be a good deal. That's how I look 0:20:18.680 --> 0:20:18.919 at it. 0:20:19.480 --> 0:20:22.040 Mandy talk to us about like what the competitors are 0:20:22.160 --> 0:20:27.119 thinking here. Is TikTok still as formidable going forward? Do 0:20:27.200 --> 0:20:28.480 you think as it has been? 0:20:30.200 --> 0:20:32.359 Not really? I mean, if you look at the rund 0:20:32.440 --> 0:20:37.320 rate of Instagram reels, they have surpassed fifty billion dollars 0:20:37.320 --> 0:20:41.280 in run rate. That would have been unimaginable given the 0:20:41.400 --> 0:20:46.320 kind of lead TikTok had over Instagram, and Instagram reels 0:20:46.320 --> 0:20:49.200 came from behind, and now they have a fifty billion 0:20:49.240 --> 0:20:53.800 dollar rundrate. Same thing with YouTube shorts. They have an 0:20:53.800 --> 0:20:59.400 engagement share that's almost surpassed TikTok at this point of time. So, 0:21:00.560 --> 0:21:04.840 you know, the last couple of years, TikTok seems to 0:21:04.920 --> 0:21:08.000 have lost them when it comes to the pace at 0:21:08.040 --> 0:21:11.160 which they were adding users and the engagement growth, et cetera. 0:21:11.680 --> 0:21:15.119