1 00:00:01,400 --> 00:00:04,880 Speaker 1: Hello, Welcome to the Bloomberg Business of Sports podcast, where 2 00:00:04,920 --> 00:00:06,800 Speaker 1: we explore some of the big money issues in the 3 00:00:06,800 --> 00:00:09,200 Speaker 1: world of sports. On Michael Barn I'm Scarlett pH and 4 00:00:09,280 --> 00:00:12,719 Speaker 1: I'm damiense Hour and we have a man to lay 5 00:00:12,760 --> 00:00:17,000 Speaker 1: some knowledge on us, Kimbasing our own to talk about Nike. 6 00:00:18,440 --> 00:00:21,680 Speaker 1: Let's just put it bluntly, Uh, Kim, I'm sure a 7 00:00:21,680 --> 00:00:24,119 Speaker 1: lot of people at Nike are saying, what in the 8 00:00:24,200 --> 00:00:28,000 Speaker 1: hell just happened? Because we the stock has gone down, 9 00:00:28,040 --> 00:00:31,479 Speaker 1: and it's gone down the most in about twenty years. Why, yeah, Yeah, 10 00:00:31,480 --> 00:00:34,320 Speaker 1: it's a problem alright. So there's a there's a huge 11 00:00:34,400 --> 00:00:37,680 Speaker 1: pile of inventory, uh facing Nick right now. That's their 12 00:00:37,680 --> 00:00:40,560 Speaker 1: biggest issue, especially in North America. So inventory was a 13 00:00:40,840 --> 00:00:45,519 Speaker 1: sixty five in the quarter in North America with overall, 14 00:00:46,600 --> 00:00:49,680 Speaker 1: these are enormous jumps, and that means they'll have to 15 00:00:49,760 --> 00:00:51,919 Speaker 1: discount merchandise in order to get rid of all of 16 00:00:51,960 --> 00:00:56,520 Speaker 1: that unsold stuff, which seems to be mostly mostly apparel. 17 00:00:56,520 --> 00:00:58,560 Speaker 1: So Wall Street is now worried about margins, right, So 18 00:00:58,720 --> 00:01:00,400 Speaker 1: too much inventory means you gotta get rid of it. 19 00:01:00,600 --> 00:01:04,000 Speaker 1: How do you do that? Sales for motions, discounts, clearances, 20 00:01:04,000 --> 00:01:05,960 Speaker 1: whatever you want to call them. It's it's that's what's 21 00:01:06,000 --> 00:01:08,319 Speaker 1: gonna happen, and things that don't help the brand because 22 00:01:08,400 --> 00:01:11,560 Speaker 1: then people get used to seeing discounted Nike wear or 23 00:01:11,640 --> 00:01:14,720 Speaker 1: Nike shirts or anything else. What happened here? Did Nike 24 00:01:14,880 --> 00:01:18,400 Speaker 1: just miscalculate or did the overall economic environment change so 25 00:01:18,520 --> 00:01:21,520 Speaker 1: quickly on Nike that it was caught by surprise. Not 26 00:01:21,640 --> 00:01:24,600 Speaker 1: just so quickly, but for so many changes happened for 27 00:01:24,640 --> 00:01:27,200 Speaker 1: several years now, So this all this all goes back to. 28 00:01:28,160 --> 00:01:32,520 Speaker 1: There were factory shutdowns in Vietnam due to COVID during 29 00:01:32,560 --> 00:01:35,720 Speaker 1: that time, like shipping costs where we're rising, shipping time 30 00:01:35,760 --> 00:01:40,160 Speaker 1: was rising, there were container shortages, port congestion, labor issues, 31 00:01:40,280 --> 00:01:43,880 Speaker 1: and on and on and on. This happened for for years, right, 32 00:01:44,280 --> 00:01:47,240 Speaker 1: so everyone was rushing to get as much inventory as 33 00:01:47,280 --> 00:01:51,680 Speaker 1: possible through all these these log jams. But lately demands 34 00:01:51,680 --> 00:01:55,160 Speaker 1: softened a little bit in in various places including North America, 35 00:01:55,320 --> 00:02:00,840 Speaker 1: but issues in China piled up to the zero COVID lockdowns, 36 00:02:00,920 --> 00:02:04,240 Speaker 1: lads of less sales there. And you know, with all 37 00:02:04,360 --> 00:02:07,680 Speaker 1: these moving parts, sometimes you just miscalculate. You know, I'm curious, 38 00:02:07,680 --> 00:02:09,680 Speaker 1: you know, I mean, didn't didn't the market see this coming? 39 00:02:09,680 --> 00:02:12,400 Speaker 1: I mean, I know the Nike website had been selling 40 00:02:12,560 --> 00:02:14,600 Speaker 1: you know, like, for example, the Nike Kyrie Eates you know, 41 00:02:14,680 --> 00:02:16,760 Speaker 1: Kyrie irvring signature shoe, which came out over the summer. 42 00:02:16,800 --> 00:02:18,840 Speaker 1: They're going for less on the Nike website and they 43 00:02:18,880 --> 00:02:21,560 Speaker 1: are retail I'm just curious, did anyone really kind of 44 00:02:21,680 --> 00:02:23,919 Speaker 1: see this coming? Or is this kind of new news? 45 00:02:24,720 --> 00:02:27,800 Speaker 1: I do think so. But executives have chosen to just 46 00:02:27,880 --> 00:02:30,120 Speaker 1: fully rip the band aid off right now instead of 47 00:02:30,160 --> 00:02:34,720 Speaker 1: letting this problem settle and linger for for years. Maybe 48 00:02:35,000 --> 00:02:36,680 Speaker 1: they said in the coming months that there will be 49 00:02:36,720 --> 00:02:41,280 Speaker 1: aggressively marking down that excess inventory, especially in North America 50 00:02:41,360 --> 00:02:44,440 Speaker 1: in the US, to get rid of this out of season, 51 00:02:44,560 --> 00:02:48,200 Speaker 1: like old season product that is not necessarily as desirable 52 00:02:48,840 --> 00:02:54,600 Speaker 1: anymore because it's been stuck in in transit for four months. Uh, 53 00:02:54,639 --> 00:02:57,560 Speaker 1: and and replace that old product with with new stuff 54 00:02:57,680 --> 00:03:04,239 Speaker 1: another word. You know we're talking about, Michael, We're talking 55 00:03:04,240 --> 00:03:06,320 Speaker 1: about the Kyrie's here. I mean, the Kyries are going 56 00:03:06,360 --> 00:03:08,239 Speaker 1: for less. They just came out. I mean, I'm wonder 57 00:03:08,280 --> 00:03:10,519 Speaker 1: if that has anything to do with Kyrie's position on COVID. 58 00:03:10,560 --> 00:03:14,240 Speaker 1: But nevertheless, I mean, it's still pretty unbelievable. Kyrie's contracts 59 00:03:14,240 --> 00:03:17,040 Speaker 1: coming up to next year. We'll see what if Nike 60 00:03:17,280 --> 00:03:20,440 Speaker 1: decides to bring him back in his shoe line. Well, 61 00:03:20,560 --> 00:03:23,200 Speaker 1: this is a weird situation. And and and you mentioned 62 00:03:23,200 --> 00:03:27,320 Speaker 1: it earlier. Ordinarily we'd be talking about supply issues. It's like, oh, 63 00:03:27,360 --> 00:03:28,840 Speaker 1: how can I get this? How can I get that? 64 00:03:29,120 --> 00:03:31,760 Speaker 1: All of a sudden Nike and and I mean you 65 00:03:31,840 --> 00:03:34,120 Speaker 1: got guy said it. It's like, well, how did you 66 00:03:34,120 --> 00:03:37,960 Speaker 1: see this problem when you have a super surplus of 67 00:03:38,200 --> 00:03:41,200 Speaker 1: supply that this wasn't going to happen. I mean, demand 68 00:03:41,280 --> 00:03:43,720 Speaker 1: also doesn't seem to be the issue here. Like in fact, 69 00:03:43,720 --> 00:03:45,960 Speaker 1: the performance in their home market of North America has 70 00:03:46,000 --> 00:03:49,320 Speaker 1: been propping up the whole business despite all these logistic 71 00:03:49,360 --> 00:03:52,480 Speaker 1: issues weakness in China, like Nike is still cool, marketing 72 00:03:52,520 --> 00:03:56,960 Speaker 1: still strong. You see people lining up for for sneaker drops. 73 00:03:58,120 --> 00:04:01,440 Speaker 1: The CEO, John Donahoe, his new streategy has been too 74 00:04:01,800 --> 00:04:05,960 Speaker 1: cut wholesale partners in favor of Nike's own d d C, 75 00:04:06,240 --> 00:04:11,200 Speaker 1: DTC channels, and that means trying to successfully move shoppers 76 00:04:11,280 --> 00:04:14,440 Speaker 1: over from from the the old the old sneaker stores 77 00:04:14,440 --> 00:04:17,040 Speaker 1: in the mall to to Nike's own own shops, and 78 00:04:17,120 --> 00:04:19,320 Speaker 1: this seems to be working here. All of that seems 79 00:04:19,360 --> 00:04:23,560 Speaker 1: to be working. It's just a heavy miscalculation that that's 80 00:04:23,600 --> 00:04:26,480 Speaker 1: happened here. What is Nike doing right when it comes 81 00:04:26,520 --> 00:04:30,280 Speaker 1: to its long term strategy? Obviously, it's got these incredible 82 00:04:30,400 --> 00:04:34,160 Speaker 1: partnerships with athletes. I think about the Michael Jordan collaboration 83 00:04:34,200 --> 00:04:37,120 Speaker 1: from the eighties and how it I mean, no one 84 00:04:37,160 --> 00:04:39,600 Speaker 1: has been able to do that in quite the same 85 00:04:39,640 --> 00:04:43,040 Speaker 1: way that Nike did. How's it doing in those aspects? 86 00:04:43,400 --> 00:04:47,479 Speaker 1: They've created enormous franchises that are not just like the 87 00:04:47,640 --> 00:04:50,479 Speaker 1: Nike swoosh brand, and that is very difficult to do. 88 00:04:50,720 --> 00:04:53,200 Speaker 1: Jordan's the best example of that. It's been around for 89 00:04:53,440 --> 00:04:56,600 Speaker 1: decades now, uh, and it's still relevant even though Michael 90 00:04:56,640 --> 00:05:00,920 Speaker 1: Jordan retired so so long ago. Um, we have Lebron 91 00:05:01,120 --> 00:05:04,279 Speaker 1: is the face of Nike now that uh that mj 92 00:05:05,320 --> 00:05:08,400 Speaker 1: is is long gone, and they've created a whole franchise 93 00:05:08,440 --> 00:05:11,600 Speaker 1: around him as well. But the Lebron shoes are one 94 00:05:11,640 --> 00:05:15,760 Speaker 1: of the main the main franchises for for Nike. There's 95 00:05:15,800 --> 00:05:19,000 Speaker 1: a way that they've been able to create brands within 96 00:05:19,560 --> 00:05:23,240 Speaker 1: this This already the largest sportswear brand in the world 97 00:05:23,760 --> 00:05:25,760 Speaker 1: has been remarkable and it seems to still be working. 98 00:05:25,760 --> 00:05:27,880 Speaker 1: They're looking for more. They're always looking for the next 99 00:05:28,279 --> 00:05:31,920 Speaker 1: huge franchise, like billion dollar thing that that that will 100 00:05:31,960 --> 00:05:34,960 Speaker 1: work for Nike. Well, we know Nike's a global company, 101 00:05:35,040 --> 00:05:36,680 Speaker 1: right and their sales come from abroad. I mean, I'm 102 00:05:36,680 --> 00:05:39,599 Speaker 1: curious what your thoughts are. What's the contribution to a 103 00:05:39,640 --> 00:05:42,440 Speaker 1: week or foreign currencies stronger dollars? I mean, how much 104 00:05:42,480 --> 00:05:45,279 Speaker 1: of this is due to you know, King dollar And 105 00:05:45,360 --> 00:05:47,440 Speaker 1: you know the fact that all these other commentcies are declining, 106 00:05:47,440 --> 00:05:50,120 Speaker 1: and so sales you know abroad are are declining as well. Yeah, 107 00:05:50,200 --> 00:05:52,359 Speaker 1: and they seem to have adjusted for that in in 108 00:05:52,440 --> 00:05:56,360 Speaker 1: their guidance here. Uh. They they recognize that that this 109 00:05:56,400 --> 00:05:58,839 Speaker 1: is this is gonna be a problem across the world, 110 00:05:58,880 --> 00:06:00,920 Speaker 1: and as you like you at as a global company, 111 00:06:00,960 --> 00:06:04,159 Speaker 1: that these Nikes are sold everywhere, and and the problem 112 00:06:04,240 --> 00:06:07,880 Speaker 1: now in apparel with all this stuff, uh, is just 113 00:06:08,560 --> 00:06:10,680 Speaker 1: gonna gonna get worse unless they do something about it. 114 00:06:10,760 --> 00:06:14,919 Speaker 1: Right now, your beat is celebrity and athlete business deals. 115 00:06:15,200 --> 00:06:18,479 Speaker 1: And one story that's if you don't mind asking, that's 116 00:06:18,520 --> 00:06:22,400 Speaker 1: in the news right now. Kim Gardashian she's going to 117 00:06:22,440 --> 00:06:26,040 Speaker 1: have to pay one point three million dollars because she 118 00:06:26,240 --> 00:06:31,120 Speaker 1: got paid a quarter of a million dollars for trying 119 00:06:31,160 --> 00:06:37,960 Speaker 1: to uh tout uh the bitcoin type on her website. 120 00:06:38,640 --> 00:06:42,479 Speaker 1: Uh And the SEC has clearly said you cannot do 121 00:06:42,560 --> 00:06:45,360 Speaker 1: that and not reveal that you're getting paid for. I've 122 00:06:45,360 --> 00:06:48,880 Speaker 1: covered a lot of crypto celebrity deals over the past 123 00:06:49,040 --> 00:06:51,960 Speaker 1: year and a half, and it has been something that 124 00:06:52,640 --> 00:06:57,280 Speaker 1: really they spent so much money, these crypto firms on 125 00:06:57,279 --> 00:07:00,000 Speaker 1: on celebrities and and these kinds of like sports endorsed, 126 00:07:00,000 --> 00:07:03,240 Speaker 1: been celebrity endorsements. It's in the billions that they've promised 127 00:07:03,240 --> 00:07:08,279 Speaker 1: to to everybody. And the marketing surge that we saw 128 00:07:08,680 --> 00:07:13,080 Speaker 1: is essentially unprecedented, Like no, no industry has come out 129 00:07:13,080 --> 00:07:15,360 Speaker 1: of nowhere to pay so many people so much money 130 00:07:15,400 --> 00:07:18,760 Speaker 1: in such a small amount of time to sell something. Well, 131 00:07:18,760 --> 00:07:21,680 Speaker 1: where did emacs have this money? That's where I want 132 00:07:21,720 --> 00:07:25,440 Speaker 1: to know. Yeah, I'm clear about that. Well, I mean, 133 00:07:25,520 --> 00:07:28,040 Speaker 1: I mean, I'm sure. I guess if you're going to 134 00:07:28,120 --> 00:07:30,360 Speaker 1: call crypto first, i'd say sports books or second right, 135 00:07:30,400 --> 00:07:32,640 Speaker 1: DraftKings and pandal are paying athletes and awful lot of 136 00:07:32,640 --> 00:07:35,240 Speaker 1: money or an actors to market their services, So you know, 137 00:07:35,240 --> 00:07:37,000 Speaker 1: I wouldn't put them in a box. But you know, 138 00:07:37,040 --> 00:07:39,320 Speaker 1: you're absolutely right what happened with Kim Kardashian. I mean, 139 00:07:39,440 --> 00:07:41,560 Speaker 1: it's it's pretty unbelievable. And it was your social account. 140 00:07:41,560 --> 00:07:43,520 Speaker 1: It wasn't even her website if I'm not mistaken. I 141 00:07:43,520 --> 00:07:48,320 Speaker 1: mean all she did with tweet comfing out amazing Instagram. Yeah, 142 00:07:48,680 --> 00:07:50,800 Speaker 1: and of course as part of the settlement, she does 143 00:07:50,800 --> 00:07:55,200 Speaker 1: not admit or deny UH the SEC's allegations. She just 144 00:07:55,240 --> 00:07:58,000 Speaker 1: pays the one point three million dollars. Are you do 145 00:07:58,000 --> 00:07:59,160 Speaker 1: you think we're going to see a lot more of 146 00:07:59,200 --> 00:08:02,280 Speaker 1: these coming up? Probably? And and just because there were 147 00:08:02,320 --> 00:08:04,200 Speaker 1: there were so many deals happening with so many companies 148 00:08:04,200 --> 00:08:05,840 Speaker 1: that we don't that we don't know a whole lot 149 00:08:05,880 --> 00:08:09,160 Speaker 1: about that it seems inevitable. Yeah, and a million dollars 150 00:08:09,200 --> 00:08:10,600 Speaker 1: doesn't seem like a hell of a lot of money 151 00:08:10,600 --> 00:08:12,320 Speaker 1: to Kim Kardashian and some of the others who are 152 00:08:12,320 --> 00:08:14,080 Speaker 1: out there. But who am I to say? Well, we 153 00:08:14,080 --> 00:08:17,320 Speaker 1: should also mention the SEC in the past find Floyd 154 00:08:17,360 --> 00:08:20,680 Speaker 1: Mayweather and DJ Colored for failing to disclose payments that 155 00:08:20,760 --> 00:08:26,200 Speaker 1: they received for essentially hyping UH. These various crypto assets. 156 00:08:26,240 --> 00:08:28,520 Speaker 1: Let's put that little hashtag ad in the corner of 157 00:08:28,560 --> 00:08:31,160 Speaker 1: your that's all you need to do a few things 158 00:08:31,560 --> 00:08:36,280 Speaker 1: like ads on the the the FTC has also been 159 00:08:36,280 --> 00:08:38,960 Speaker 1: been on this for the best several years, as as 160 00:08:39,040 --> 00:08:42,800 Speaker 1: social advertising got got bigger and bigger and bigger, things 161 00:08:42,840 --> 00:08:45,439 Speaker 1: that our ads need to be shown as this is 162 00:08:45,480 --> 00:08:47,800 Speaker 1: an ad. But you know the hashtags, they they're usually 163 00:08:47,840 --> 00:08:50,960 Speaker 1: longer than the than the posting itself. Right, So like 164 00:08:50,960 --> 00:08:54,559 Speaker 1: if you just hide the hashtag and just say this 165 00:08:54,800 --> 00:08:58,400 Speaker 1: is no one's going to read it. No, they're not. 166 00:08:58,480 --> 00:09:01,440 Speaker 1: Don't read the fine hash all that stuff. No, no, no, no, 167 00:09:01,480 --> 00:09:04,319 Speaker 1: you don't need that before we let you go. Uh. 168 00:09:05,040 --> 00:09:07,839 Speaker 1: This story came out last week and we talk about 169 00:09:07,880 --> 00:09:12,560 Speaker 1: celebrities and sports athletes, and today's sports athlete, especially the 170 00:09:12,640 --> 00:09:16,800 Speaker 1: rich ones like Lebron. They are very savvy. And when 171 00:09:16,800 --> 00:09:19,040 Speaker 1: I read that Lebron is going to invest in a 172 00:09:19,080 --> 00:09:22,960 Speaker 1: pickle ball team, I'm like, wow, okay, it's uh. And 173 00:09:23,920 --> 00:09:28,760 Speaker 1: I never knew pickle ball was this hot until you 174 00:09:28,800 --> 00:09:31,679 Speaker 1: guys educated me on this about pickle ball, I still 175 00:09:31,720 --> 00:09:34,680 Speaker 1: don't understand what the game involves. It well, it involves 176 00:09:34,679 --> 00:09:40,160 Speaker 1: a pickle knock. It's like it's like small tennis. Yeah, 177 00:09:40,400 --> 00:09:43,839 Speaker 1: small Michael, Mike Michael's line. He has kneepads, he has 178 00:09:43,880 --> 00:09:46,400 Speaker 1: the goggles, He's got his own pickle ball racket. I 179 00:09:46,679 --> 00:09:49,720 Speaker 1: could see it all happening right here, the high white 180 00:09:49,720 --> 00:09:52,360 Speaker 1: socks over the halfway through the calves, I could see it. 181 00:09:52,520 --> 00:09:55,920 Speaker 1: Yeah that it gives me that look. But the thing, 182 00:09:56,240 --> 00:10:00,120 Speaker 1: you know that I'm impressed about is pickle ball. This 183 00:10:00,200 --> 00:10:03,480 Speaker 1: is a pro team and and Lebron is trying to 184 00:10:03,520 --> 00:10:05,840 Speaker 1: think ahead. It's like, hey, I want to be on this. 185 00:10:06,160 --> 00:10:09,959 Speaker 1: These like these up and coming sports have really been 186 00:10:10,000 --> 00:10:12,439 Speaker 1: helped by the pandemic. So when there was no sports 187 00:10:12,440 --> 00:10:16,600 Speaker 1: going on in we suddenly saw, uh, you know ESPN 188 00:10:16,600 --> 00:10:20,240 Speaker 1: eight the O Show putting on weird sports like marble racing. Yeah, 189 00:10:21,720 --> 00:10:25,440 Speaker 1: oh yeah, but with the commentary it's so good. But 190 00:10:25,559 --> 00:10:28,400 Speaker 1: other things tech ball have you heard of that? It's 191 00:10:28,400 --> 00:10:31,559 Speaker 1: it's like curved ping pong. It's like a curve ping 192 00:10:31,600 --> 00:10:34,319 Speaker 1: pong table that you play soccer on. So you try 193 00:10:34,320 --> 00:10:35,679 Speaker 1: to hit the soccer ball back to the other side. 194 00:10:35,720 --> 00:10:38,760 Speaker 1: You get three hits, like in volleyball. They're they're trying 195 00:10:38,800 --> 00:10:42,040 Speaker 1: to expand here. World Chase Tag is on TV it's 196 00:10:42,080 --> 00:10:46,079 Speaker 1: like on ESPN now it's Core national tag with guys 197 00:10:46,800 --> 00:10:51,719 Speaker 1: so on the what the network is. It's open here 198 00:10:51,760 --> 00:10:53,960 Speaker 1: as we sit here and talk about these various quote 199 00:10:54,000 --> 00:10:57,560 Speaker 1: unquote sports. Well, I remember when when we went through 200 00:10:57,600 --> 00:10:59,760 Speaker 1: that and we were going through all of the stuff 201 00:10:59,800 --> 00:11:02,360 Speaker 1: with you know, COVID nineteen, all of a sudden the 202 00:11:02,400 --> 00:11:06,360 Speaker 1: e sports blew up because we were watching the sports Man. 203 00:11:06,480 --> 00:11:09,600 Speaker 1: It was conventional compared to what we were just man, 204 00:11:11,200 --> 00:11:14,200 Speaker 1: I know, Man, I feel I feel so geasery. Now 205 00:11:15,360 --> 00:11:19,480 Speaker 1: campassing our own Bloomberg Campasin dropping some knowledge on us 206 00:11:19,480 --> 00:11:21,760 Speaker 1: about Nike and many other topics. Kim, thank you so 207 00:11:21,840 --> 00:11:24,120 Speaker 1: much for joining us right here on the Bloomberg Business 208 00:11:24,120 --> 00:11:27,559 Speaker 1: and Sports. We appreciate it. This has Man the Bloomberg 209 00:11:27,559 --> 00:11:29,800 Speaker 1: Business of Sports podcast. We explore some of the big 210 00:11:29,800 --> 00:11:32,240 Speaker 1: money issues in the world of sports. Michael Barr, Hey, 211 00:11:32,440 --> 00:11:34,400 Speaker 1: you can follow me on Twitter at Big Bar Sports, 212 00:11:34,679 --> 00:11:37,720 Speaker 1: and I'm on Twitter at Scarlett Fou and I'm on 213 00:11:37,760 --> 00:11:41,280 Speaker 1: Twitter at the South Hour. You know what. Our podcast 214 00:11:41,559 --> 00:11:45,680 Speaker 1: they go over every Monday, Wednesday and Thursday and you 215 00:11:45,720 --> 00:11:48,280 Speaker 1: can download them wherever you get your podcast.