1
00:00:02,759 --> 00:00:10,600
Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

2
00:00:10,640 --> 00:00:14,600
Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am

3
00:00:14,640 --> 00:00:17,880
Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg

4
00:00:17,960 --> 00:00:21,080
Speaker 1: Business App. Listen on demand wherever you get your podcasts,

5
00:00:21,400 --> 00:00:23,560
Speaker 1: or watch us live on YouTube.

6
00:00:24,360 --> 00:00:27,760
Speaker 2: Chip stocks are heading for their best quarter ever, driven

7
00:00:27,800 --> 00:00:31,320
Speaker 2: by demand for artificial intelligence equipment, but investors are wondering

8
00:00:31,320 --> 00:00:33,599
Speaker 2: how much further the rally can go. So let's put

9
00:00:33,600 --> 00:00:35,280
Speaker 2: it to an expert. Man Deep Sing, global head of

10
00:00:35,280 --> 00:00:38,640
Speaker 2: tech research for Bloomberg Intelligence Joints, is here. I mean,

11
00:00:40,040 --> 00:00:41,479
Speaker 2: what's going on with the world chips.

12
00:00:42,440 --> 00:00:43,040
Speaker 3: I don't get it.

13
00:00:43,080 --> 00:00:45,880
Speaker 2: I mean, is it just a supplying demand and there's

14
00:00:45,920 --> 00:00:48,760
Speaker 2: not enough supply and so anybody who's got them and

15
00:00:49,479 --> 00:00:51,600
Speaker 2: is in the driver's seat in terms of pricing.

16
00:00:52,159 --> 00:00:55,840
Speaker 4: I mean more so, I would characterize it as a

17
00:00:55,840 --> 00:00:59,960
Speaker 4: lot of these companies have huge backlog numbers, notably in video,

18
00:01:00,360 --> 00:01:03,080
Speaker 4: which is said they have, you know, up to a

19
00:01:03,120 --> 00:01:07,479
Speaker 4: trillion dollars in revenue visibility through the next six seven quarters.

20
00:01:07,520 --> 00:01:11,840
Speaker 4: So when you have companies guiding like that and all

21
00:01:11,880 --> 00:01:15,760
Speaker 4: the hyperscalers which are spending money on these chips, they

22
00:01:15,760 --> 00:01:21,240
Speaker 4: have an aggregate backlog of two trillion. Now, when Jensen

23
00:01:21,319 --> 00:01:24,920
Speaker 4: says we will have three to four trillion dollars in

24
00:01:25,000 --> 00:01:28,720
Speaker 4: spend by twenty thirty, I think, you know, when you

25
00:01:28,760 --> 00:01:31,680
Speaker 4: look at that backlog number, you start to believe that

26
00:01:31,760 --> 00:01:35,640
Speaker 4: may actually come true. And video is at the forefront

27
00:01:35,720 --> 00:01:39,640
Speaker 4: of monetizing that sort of demand. So there is no

28
00:01:39,800 --> 00:01:43,440
Speaker 4: doubt that AI has had an inflection point in terms

29
00:01:43,440 --> 00:01:46,920
Speaker 4: of usage and inference. Demand has been off the charts.

30
00:01:47,440 --> 00:01:51,480
Speaker 4: But how quickly it's realizing into top line growth for

31
00:01:51,520 --> 00:01:53,919
Speaker 4: some of these companies. I think that's where the market

32
00:01:53,960 --> 00:01:57,640
Speaker 4: has been positively surprised, and that's why you see estimates

33
00:01:57,640 --> 00:01:58,600
Speaker 4: continue to go up.

34
00:01:59,040 --> 00:02:03,960
Speaker 5: The Philly Stock Change Semiconductor Index up ninety nine percent

35
00:02:04,400 --> 00:02:07,720
Speaker 5: year to date. Is there any don't mean to put

36
00:02:07,720 --> 00:02:09,360
Speaker 5: you on the spot here many, but if anybody's going

37
00:02:09,400 --> 00:02:11,560
Speaker 5: to know what it's you. Is there any company here

38
00:02:11,600 --> 00:02:14,520
Speaker 5: that's not participating in this chip party?

39
00:02:15,560 --> 00:02:20,160
Speaker 4: I mean a lot of the hyperscaler stocks haven't done well. Microsoft,

40
00:02:20,360 --> 00:02:25,320
Speaker 4: even I would say Meta, Google, and look, some of

41
00:02:25,360 --> 00:02:27,720
Speaker 4: it is because these are the companies that are actually

42
00:02:27,760 --> 00:02:31,080
Speaker 4: spending the money. Even though I cited that backlog number,

43
00:02:31,639 --> 00:02:34,280
Speaker 4: the market is still not giving them the credit for

44
00:02:34,320 --> 00:02:37,320
Speaker 4: that backlog because they want to see real revenues. Who

45
00:02:37,320 --> 00:02:41,519
Speaker 4: has real revenues. It's your in videos, the you know, tsmcs,

46
00:02:41,639 --> 00:02:46,240
Speaker 4: the semicap guys. And so from that perspective, that picks

47
00:02:46,240 --> 00:02:50,680
Speaker 4: and shovels straight has worked phenomenally well over the past

48
00:02:50,680 --> 00:02:53,239
Speaker 4: two years, and it continues to do well just because

49
00:02:53,240 --> 00:02:56,720
Speaker 4: of the duration of this cycle, and you know how

50
00:02:56,760 --> 00:03:01,079
Speaker 4: big this technology cycle is proving to be. At some point,

51
00:03:01,360 --> 00:03:04,560
Speaker 4: I don't think this memory price increases that we just

52
00:03:04,680 --> 00:03:09,680
Speaker 4: saw from Micron or sustainable. In fact, Samsung and Eskhiiniz

53
00:03:09,720 --> 00:03:14,320
Speaker 4: talked about investing, you know, eight hundred billion plus in Korea,

54
00:03:14,760 --> 00:03:17,679
Speaker 4: so there is talks about adding more supply and then

55
00:03:17,800 --> 00:03:20,960
Speaker 4: doing those long term agreements to cap the pricing. So

56
00:03:21,040 --> 00:03:24,120
Speaker 4: I feel that pricing lift is not sustainable and it's

57
00:03:24,120 --> 00:03:27,320
Speaker 4: a matter of a quarter or two before we start

58
00:03:27,360 --> 00:03:29,720
Speaker 4: to see you know, some tapering of that.

59
00:03:30,600 --> 00:03:33,520
Speaker 2: Microsoft down twenty three and a half percent year to date.

60
00:03:35,000 --> 00:03:37,320
Speaker 2: What's the street what's the street call on this? Why

61
00:03:37,400 --> 00:03:39,000
Speaker 2: is this street marking this one down?

62
00:03:39,720 --> 00:03:44,160
Speaker 4: Well, because Microsoft had that exclusive tie up with open ai,

63
00:03:44,280 --> 00:03:47,400
Speaker 4: which is not there anymore. Open Ai, as you know,

64
00:03:47,840 --> 00:03:51,600
Speaker 4: is now on Amazon. They really partnering with any and everyone,

65
00:03:52,040 --> 00:03:55,200
Speaker 4: and open Eye is not the leading model anymore. So

66
00:03:55,280 --> 00:04:01,840
Speaker 4: it's entropic, and entropic was predominantly Google and Amazon, and

67
00:04:01,880 --> 00:04:05,920
Speaker 4: now they have started to use Nvidia. So from that perspective,

68
00:04:06,560 --> 00:04:10,720
Speaker 4: Microsoft not having their own LLM like Google, which has

69
00:04:10,760 --> 00:04:14,400
Speaker 4: got Gemini, has put them at a disadvantage. And the

70
00:04:14,520 --> 00:04:18,080
Speaker 4: narrative right now is the cloud. Azure growth is also

71
00:04:18,240 --> 00:04:22,400
Speaker 4: trailing Google Cloud, and so they seem to be slipping

72
00:04:22,440 --> 00:04:26,640
Speaker 4: behind when it comes to the hyperscalers. Now, I think,

73
00:04:26,920 --> 00:04:29,359
Speaker 4: you know, for a company of Microsoft size to grow

74
00:04:29,480 --> 00:04:32,840
Speaker 4: high teens, that twenty percent is still phenomenal growth. And

75
00:04:32,880 --> 00:04:35,440
Speaker 4: you still have office three sixty five that will be

76
00:04:35,520 --> 00:04:41,000
Speaker 4: a net beneficiary of Agent Takai. So look, narratives get formed.

77
00:04:41,040 --> 00:04:44,960
Speaker 4: That's where we had the SaaS pockellips. Microsoft was caught

78
00:04:45,000 --> 00:04:48,200
Speaker 4: into the ald as well, and come the earning season

79
00:04:48,760 --> 00:04:52,400
Speaker 4: they'll probably prove the naysayer's wrong in terms of you know,

80
00:04:52,440 --> 00:04:53,560
Speaker 4: their top line momentum.

81
00:04:53,640 --> 00:04:55,599
Speaker 5: Now are you talking about a two point seven trillion

82
00:04:55,640 --> 00:04:58,279
Speaker 5: dollar company when you're talking about Microsoft? So what's the

83
00:04:58,320 --> 00:05:00,000
Speaker 5: word on the street at about three hundred and seve

84
00:05:00,320 --> 00:05:02,800
Speaker 5: bucks is there value here, you know, getting in at

85
00:05:02,800 --> 00:05:04,000
Speaker 5: this level with Microsoft?

86
00:05:04,080 --> 00:05:08,039
Speaker 4: I mean from a valuation perspective, all these hyperscalers are

87
00:05:08,120 --> 00:05:13,039
Speaker 4: trading at probably below their average multiples that they've traded

88
00:05:13,080 --> 00:05:16,680
Speaker 4: over the last three years. So from that perspective, if

89
00:05:16,720 --> 00:05:20,039
Speaker 4: you factor that backlog number in for someone like Microsoft,

90
00:05:20,080 --> 00:05:22,799
Speaker 4: which has a five hundred billion dollar plus backlog number

91
00:05:22,839 --> 00:05:26,760
Speaker 4: for their cloud, if that backlog translates into revenue growth,

92
00:05:27,040 --> 00:05:30,560
Speaker 4: you know, nice, this company will be much bigger in

93
00:05:30,680 --> 00:05:34,640
Speaker 4: revenue than it currently is and probably surpassing five hundred

94
00:05:34,680 --> 00:05:37,440
Speaker 4: billion dollars in revenue at some point. So if you

95
00:05:37,600 --> 00:05:40,800
Speaker 4: believe in that growth story, then yes, the multiple is cheap.

96
00:05:40,800 --> 00:05:43,760
Speaker 4: But if you think and Tropic and open Ai are

97
00:05:43,760 --> 00:05:47,520
Speaker 4: going to take a share of Microsoft's on prem revenue

98
00:05:47,680 --> 00:05:50,960
Speaker 4: and you know, disrupt cause a much bigger disruption, then

99
00:05:51,400 --> 00:05:54,240
Speaker 4: I think that's where you model for the downside.

100
00:05:54,480 --> 00:05:55,120
Speaker 1: Stay with us.

101
00:05:55,160 --> 00:05:57,360
Speaker 2: More from Bloomberg Intelligence coming up after this.

102
00:06:01,160 --> 00:06:04,880
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

103
00:06:04,960 --> 00:06:08,039
Speaker 1: weekdays at ten am Eastern on Apple Cocklay and Android

104
00:06:08,040 --> 00:06:11,359
Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever

105
00:06:11,400 --> 00:06:14,960
Speaker 1: you get your podcasts, or watch us live on YouTube.

106
00:06:15,640 --> 00:06:18,080
Speaker 2: Let's talk about Nike. They're going to be reporting some

107
00:06:18,600 --> 00:06:22,360
Speaker 2: earnings here. They've got to turn around. I think it's

108
00:06:22,400 --> 00:06:26,000
Speaker 2: been a lot bumpier than they thought than a lot

109
00:06:26,000 --> 00:06:28,880
Speaker 2: of investors thought. I'm a Nike, you know, endorser. I

110
00:06:28,960 --> 00:06:31,560
Speaker 2: wear my Nike's all over the place. But apparently there's

111
00:06:31,600 --> 00:06:33,560
Speaker 2: a lot more competition out there. Put them Goyle joins

112
00:06:33,600 --> 00:06:36,400
Speaker 2: us senior US E e Commerce and retail analysts at

113
00:06:36,400 --> 00:06:41,040
Speaker 2: Bloomberg Intelligence put give us the latest on the Nike story.

114
00:06:41,080 --> 00:06:42,560
Speaker 2: Where is the company these days?

115
00:06:43,640 --> 00:06:46,839
Speaker 6: The company is still under a turnaround. North America is

116
00:06:46,880 --> 00:06:49,560
Speaker 6: back on its feet. We're expecting positive sales when they

117
00:06:49,600 --> 00:06:53,520
Speaker 6: report this evening. However, the rest of the world is not,

118
00:06:53,520 --> 00:06:57,359
Speaker 6: notably China, where we're expecting a high teens sales decline

119
00:06:57,400 --> 00:07:01,920
Speaker 6: when they report. The China focus is the largest focus

120
00:07:02,080 --> 00:07:05,520
Speaker 6: Monday report earnings. When will China turn is the biggest question.

121
00:07:06,080 --> 00:07:08,400
Speaker 6: We don't think it'll turn any time soon, but we

122
00:07:08,520 --> 00:07:11,440
Speaker 6: do think that they'll make progress over their fiscal twenty

123
00:07:11,520 --> 00:07:15,080
Speaker 6: twenty seven year and hopefully in twelve months it will

124
00:07:15,120 --> 00:07:17,520
Speaker 6: be in the same place as North America is today.

125
00:07:18,600 --> 00:07:22,400
Speaker 5: Talk to us about Nike as it pertains to the

126
00:07:22,440 --> 00:07:24,960
Speaker 5: World Cup. Are they still sort of the force they

127
00:07:25,000 --> 00:07:28,000
Speaker 5: once were when it comes to the sport?

128
00:07:28,640 --> 00:07:31,040
Speaker 6: So they are, you know, I'd say they're on equal

129
00:07:31,120 --> 00:07:34,800
Speaker 6: grounds with Adidas with the exception that Adidas has the ball,

130
00:07:35,240 --> 00:07:39,280
Speaker 6: so they do have some elevation to Nike when it

131
00:07:39,320 --> 00:07:41,160
Speaker 6: comes to the World Cup. You know, when you think

132
00:07:41,200 --> 00:07:45,920
Speaker 6: of Nike, World Cup has become more adjacent to when

133
00:07:45,920 --> 00:07:47,600
Speaker 6: you think of Nike. Then I'd say it wasn't the

134
00:07:47,640 --> 00:07:51,480
Speaker 6: past where you would associate Nike more with basketball. Aditas

135
00:07:51,520 --> 00:07:55,360
Speaker 6: has definitely lost some share over the prior years before

136
00:07:55,400 --> 00:07:58,880
Speaker 6: the current CEO to Nike right now, I'd say their

137
00:07:58,920 --> 00:08:00,920
Speaker 6: neck and neck and they're definitely still in the game.

138
00:08:02,400 --> 00:08:07,520
Speaker 2: What is the issue for Nike in China? What was

139
00:08:07,680 --> 00:08:08,520
Speaker 2: what's going on over there?

140
00:08:08,960 --> 00:08:11,120
Speaker 6: So there's a lot happening in China that they need

141
00:08:11,160 --> 00:08:13,160
Speaker 6: to fix. The first thing that they need to fix

142
00:08:13,240 --> 00:08:15,920
Speaker 6: is the inventory. There's too much inventory on the floor

143
00:08:15,960 --> 00:08:18,600
Speaker 6: in China. They need to do exactly what they did

144
00:08:18,600 --> 00:08:21,080
Speaker 6: in the US, which is clear that inventory, get it

145
00:08:21,080 --> 00:08:24,040
Speaker 6: out of the market, and then bring in more new

146
00:08:24,080 --> 00:08:27,920
Speaker 6: inventory that resonates with the consumer that's seen to be

147
00:08:28,240 --> 00:08:31,680
Speaker 6: more what the consumer wants. How they do that in

148
00:08:31,720 --> 00:08:33,520
Speaker 6: the US. When they did that, they did it more

149
00:08:33,559 --> 00:08:36,160
Speaker 6: through their direct to consumer channels, which is probably the

150
00:08:36,240 --> 00:08:38,840
Speaker 6: right approach. And the second thing that they need to

151
00:08:38,880 --> 00:08:41,679
Speaker 6: do is cut back on the discounting. For the longest

152
00:08:41,720 --> 00:08:45,360
Speaker 6: time in China, Nike has been seen as a discount brand,

153
00:08:45,480 --> 00:08:48,079
Speaker 6: and that's not the case here. When we think of Nike,

154
00:08:48,200 --> 00:08:50,720
Speaker 6: we do not think of a discount at leisure brand.

155
00:08:51,080 --> 00:08:53,360
Speaker 6: So they need to turn that image and they need

156
00:08:53,400 --> 00:08:58,160
Speaker 6: to use local endorsers, local athletes, local celebrities to bring

157
00:08:58,240 --> 00:09:01,480
Speaker 6: the brand heat back into the China marketplace with the

158
00:09:01,520 --> 00:09:02,720
Speaker 6: new products that they launch.

159
00:09:03,600 --> 00:09:05,640
Speaker 5: I'm looking at year to date numbers for Nike and

160
00:09:05,679 --> 00:09:09,240
Speaker 5: they're not pretty down thirty six percent, one year return

161
00:09:09,360 --> 00:09:11,719
Speaker 5: down forty two percent. The stock is down more than

162
00:09:11,800 --> 00:09:13,840
Speaker 5: one percent here ahead of its earnings after the bell.

163
00:09:14,000 --> 00:09:17,560
Speaker 5: What do investors need to hear from this company to

164
00:09:17,640 --> 00:09:20,160
Speaker 5: start to turn the stock around and get people to

165
00:09:20,200 --> 00:09:20,959
Speaker 5: want to buy again.

166
00:09:21,920 --> 00:09:23,800
Speaker 6: I think China. It's a China story.

167
00:09:24,000 --> 00:09:24,160
Speaker 4: You know.

168
00:09:24,200 --> 00:09:27,199
Speaker 6: The turnaround is taking a lot longer than anyone has expected.

169
00:09:27,600 --> 00:09:29,960
Speaker 6: It is true that they turned the biggest ship around,

170
00:09:30,040 --> 00:09:33,439
Speaker 6: which is North America, but China is their most profitable

171
00:09:33,440 --> 00:09:37,000
Speaker 6: region and there is no line in sight on one

172
00:09:37,160 --> 00:09:40,680
Speaker 6: China will improve. It's still very early days. We're awaiting

173
00:09:40,720 --> 00:09:43,240
Speaker 6: their investorday in the fall to really get a better

174
00:09:43,320 --> 00:09:47,400
Speaker 6: idea of their own outline for the next three to

175
00:09:47,440 --> 00:09:50,360
Speaker 6: five years. I think right now the question is will

176
00:09:50,400 --> 00:09:52,920
Speaker 6: they still have that investorday. So there's two things that

177
00:09:52,960 --> 00:09:56,080
Speaker 6: I'm looking for when they report today, update on China

178
00:09:56,160 --> 00:09:59,240
Speaker 6: and an update on their investorday. They just hired a

179
00:09:59,320 --> 00:10:03,480
Speaker 6: new c so while that, you know, investries are asking,

180
00:10:03,559 --> 00:10:04,840
Speaker 6: well they still have their analyst.

181
00:10:05,960 --> 00:10:10,640
Speaker 2: Has Nike lost its mojo in terms of product development,

182
00:10:10,720 --> 00:10:13,679
Speaker 2: knowing what's hit, what will sell, all that kind of

183
00:10:13,720 --> 00:10:15,800
Speaker 2: stuff that I think a lot of people associate with

184
00:10:15,880 --> 00:10:16,320
Speaker 2: the brand.

185
00:10:17,400 --> 00:10:19,960
Speaker 6: I don't think it's that Nike's lost its mojua. I

186
00:10:19,960 --> 00:10:23,240
Speaker 6: think that like Nike has allowed competition to encrypten their

187
00:10:23,280 --> 00:10:26,080
Speaker 6: space and now they have to win it back, whereas

188
00:10:26,120 --> 00:10:29,160
Speaker 6: before they just had it. So they definitely are pressing

189
00:10:29,160 --> 00:10:31,760
Speaker 6: the pedal on innovation. We do see that what they're

190
00:10:31,840 --> 00:10:34,560
Speaker 6: launching is working and it's doing really well. They just

191
00:10:34,640 --> 00:10:35,600
Speaker 6: have to move faster.

192
00:10:36,679 --> 00:10:40,120
Speaker 5: Who are some of their biggest endorse who do they

193
00:10:40,120 --> 00:10:42,160
Speaker 5: have deals with right now? In terms of endorsements?

194
00:10:42,280 --> 00:10:44,920
Speaker 6: Nike, do you know, so they have you know, the

195
00:10:44,960 --> 00:10:48,400
Speaker 6: biggest Their biggest franchise is still the Jordan franchise, right,

196
00:10:48,840 --> 00:10:51,679
Speaker 6: so we know we know that's the biggest. Caitlin Clark,

197
00:10:51,800 --> 00:10:53,880
Speaker 6: I think it's the one name that's new to them,

198
00:10:54,200 --> 00:10:56,360
Speaker 6: and I think it's an interesting one because it helps

199
00:10:56,360 --> 00:10:59,160
Speaker 6: them gain momentum in the women's category. So when you

200
00:10:59,200 --> 00:11:03,120
Speaker 6: think of Nike, it's profoundly been a men's business, seen

201
00:11:03,240 --> 00:11:06,600
Speaker 6: lots of endorsers across the men's line up, basketball, et cetera.

202
00:11:07,040 --> 00:11:09,640
Speaker 6: So having Caitlin Clark added to their roster, I think

203
00:11:09,720 --> 00:11:12,360
Speaker 6: is a nice win for them. Also, Kim Kardashian right

204
00:11:12,400 --> 00:11:14,760
Speaker 6: with the Skims brand, so that line that they partnered

205
00:11:14,840 --> 00:11:17,520
Speaker 6: with Nike on. I think these are some new and

206
00:11:17,800 --> 00:11:20,920
Speaker 6: great partnerships that will help them not just gain visibility

207
00:11:21,200 --> 00:11:24,080
Speaker 6: in the sports rare market, but also with women, an

208
00:11:24,160 --> 00:11:27,559
Speaker 6: area where there is no large lead the Nike has

209
00:11:27,640 --> 00:11:28,960
Speaker 6: like it has in the men's world.

210
00:11:29,200 --> 00:11:29,400
Speaker 4: Right.

211
00:11:29,679 --> 00:11:32,400
Speaker 5: You know, you were talking about letting the competition sort

212
00:11:32,400 --> 00:11:34,720
Speaker 5: of encroach, and Paul, you and I were talking about

213
00:11:34,920 --> 00:11:38,360
Speaker 5: og An Andovi on the knicks wearing sketchers that during

214
00:11:38,360 --> 00:11:40,400
Speaker 5: that pivotal moment, right and came four. I mean, now

215
00:11:40,400 --> 00:11:42,480
Speaker 5: you've got another brand in there. I guess put him that.

216
00:11:42,760 --> 00:11:45,439
Speaker 5: Maybe Nike wasn't you know, didn't see coming. Oh boy,

217
00:11:45,480 --> 00:11:46,960
Speaker 5: now we have to compete against Sketchers.

218
00:11:47,760 --> 00:11:50,640
Speaker 6: I'll tell you I definitely didn't see that coming. It was.

219
00:11:50,679 --> 00:11:53,000
Speaker 6: It was definitely. When I saw that, I thought, Wow,

220
00:11:53,679 --> 00:11:57,120
Speaker 6: Sketchers did it. I think, Look, I think Sketchers is

221
00:11:57,160 --> 00:12:00,000
Speaker 6: in the value lineup right, So when you think of Sketchers,

222
00:12:00,400 --> 00:12:04,200
Speaker 6: I'd say it competes with Nike's shoes that are priced

223
00:12:04,280 --> 00:12:06,520
Speaker 6: under one hundred dollars. But when you think of the

224
00:12:06,600 --> 00:12:10,880
Speaker 6: Nike's premium line like the Pegasus Premium and others, they

225
00:12:10,920 --> 00:12:13,960
Speaker 6: do have a stronger foot there. And I do think

226
00:12:14,040 --> 00:12:18,080
Speaker 6: that as long as they continue to push innovation and

227
00:12:18,160 --> 00:12:20,400
Speaker 6: not fall back like they did in the past, I

228
00:12:20,440 --> 00:12:24,760
Speaker 6: think Nike still has mind share amongst the consumers. When

229
00:12:24,800 --> 00:12:28,760
Speaker 6: we run our biannual survey on sneakers, Nike is still

230
00:12:28,960 --> 00:12:32,839
Speaker 6: the top preferred sneaker brand of choice amongst consumers.

231
00:12:33,720 --> 00:12:37,040
Speaker 2: So, you know, we don't talk to much about anymore Punum,

232
00:12:37,080 --> 00:12:38,400
Speaker 2: and we used to talk to you a lot about

233
00:12:38,400 --> 00:12:42,000
Speaker 2: it is tariffs. Is that just in the rear room

234
00:12:42,040 --> 00:12:44,600
Speaker 2: mirror for your retailers that they've kind of just figured

235
00:12:44,600 --> 00:12:46,480
Speaker 2: it out and it's all kind of in the soup right.

236
00:12:46,400 --> 00:12:49,600
Speaker 6: Now, so they figured it out. But the nice thing, Paul,

237
00:12:49,679 --> 00:12:52,600
Speaker 6: and what we're watching for in earnings is the refunds,

238
00:12:52,920 --> 00:12:55,640
Speaker 6: So the refins, they're starting to come in, and Nike

239
00:12:55,960 --> 00:12:59,319
Speaker 6: quietly and its CFO announcement also announced that it'll get

240
00:12:59,320 --> 00:13:02,720
Speaker 6: a benefit from refunds, a one time benefit. We don't

241
00:13:02,720 --> 00:13:04,920
Speaker 6: know the amount yet, so that's another thing that we'll

242
00:13:04,920 --> 00:13:08,600
Speaker 6: be watching for. But we do expect retailers in the

243
00:13:08,640 --> 00:13:12,320
Speaker 6: back half to start talking about these apa refunds and

244
00:13:12,480 --> 00:13:14,960
Speaker 6: what they plan to do with that cash. Are they

245
00:13:14,960 --> 00:13:17,720
Speaker 6: going to reinvest it in the business. Are they going to

246
00:13:17,960 --> 00:13:20,040
Speaker 6: give it back to the consumers, because as we know,

247
00:13:20,160 --> 00:13:23,440
Speaker 6: Nike did raise prices due to tariffs, So do the

248
00:13:23,480 --> 00:13:25,520
Speaker 6: prices go back to the consumer or do they get

249
00:13:25,559 --> 00:13:26,679
Speaker 6: reinvested in innovation.

250
00:13:27,600 --> 00:13:30,480
Speaker 1: Stay with us more from Bloomberg Intelligence coming up after this.

251
00:13:34,360 --> 00:13:38,000
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

252
00:13:38,080 --> 00:13:40,720
Speaker 1: weekdays at ten am. E's durned on Apple, Cocklay and

253
00:13:40,720 --> 00:13:44,000
Speaker 1: Android Auto with the Bloomberg Business app. Listen on demand

254
00:13:44,040 --> 00:13:47,560
Speaker 1: wherever you get your podcasts or watch us live on YouTube.

255
00:13:48,440 --> 00:13:51,600
Speaker 2: Earnings continue to kind of trickle in here coming up

256
00:13:51,640 --> 00:13:55,760
Speaker 2: there for the close today. Constellation Brands, I think beverages,

257
00:13:55,840 --> 00:13:57,920
Speaker 2: think booze, all that kind of good stuff. They're reporting

258
00:13:57,920 --> 00:14:01,520
Speaker 2: after the close today. Stocks off a couple of percent today, flat.

259
00:14:01,200 --> 00:14:01,880
Speaker 7: On the year.

260
00:14:02,360 --> 00:14:04,199
Speaker 2: It's got a market cap about twenty three and a

261
00:14:04,240 --> 00:14:07,000
Speaker 2: half billion dollars. Ken Shay joins us here, senior at

262
00:14:07,040 --> 00:14:10,199
Speaker 2: Consumer Products analyst at Bloomberg Intelligence. Ken remind us of

263
00:14:10,200 --> 00:14:12,640
Speaker 2: what Constellation Brands is and kind of what are you

264
00:14:12,679 --> 00:14:14,240
Speaker 2: expecting after the close today?

265
00:14:14,960 --> 00:14:17,880
Speaker 7: Yeah, hi, Paul, Well, Constellation Brands is best known for

266
00:14:17,960 --> 00:14:22,400
Speaker 7: its family of Medello Corona beers. Yeah, they've been slowly

267
00:14:22,440 --> 00:14:25,960
Speaker 7: downsizing their one of spirits division, Beer now comprised about

268
00:14:26,040 --> 00:14:29,000
Speaker 7: ninety three percent of their sales. So it's all about

269
00:14:29,000 --> 00:14:30,920
Speaker 7: beer right now for this company.

270
00:14:31,760 --> 00:14:33,560
Speaker 5: It's so funny. We were just talking this morning on

271
00:14:33,600 --> 00:14:37,280
Speaker 5: surveillance about beer sales going through the roof in places

272
00:14:37,320 --> 00:14:40,240
Speaker 5: like Massachusetts because of the World Cup. So I have

273
00:14:40,320 --> 00:14:41,960
Speaker 5: to think that's you know, that's a good thing for

274
00:14:42,000 --> 00:14:45,920
Speaker 5: some of these beer companies. But overall, is Constellation Brands

275
00:14:45,960 --> 00:14:48,240
Speaker 5: suffering from I think what a lot of these alcohol

276
00:14:48,280 --> 00:14:51,440
Speaker 5: companies are suffering from. Is just a change in consumer behavior,

277
00:14:51,760 --> 00:14:55,240
Speaker 5: especially younger folks just not drinking as much as we've

278
00:14:55,280 --> 00:14:56,440
Speaker 5: seen other generations do.

279
00:14:57,520 --> 00:14:59,600
Speaker 7: Yeah, I think you're right, Alexi. So that's certainly a

280
00:14:59,600 --> 00:15:01,880
Speaker 7: big piece of it. It's hard to quantify how much

281
00:15:01,880 --> 00:15:04,880
Speaker 7: of it is, but I think the companies are slowly

282
00:15:05,000 --> 00:15:09,160
Speaker 7: conceding that demographic changes are occurring in this country. You know,

283
00:15:09,200 --> 00:15:11,240
Speaker 7: gen z is not drinking as much as their parents.

284
00:15:12,760 --> 00:15:17,520
Speaker 7: Illegal cannabis is now easily available from in most places

285
00:15:17,560 --> 00:15:21,960
Speaker 7: around the country, you know, a zepic and the GLP

286
00:15:22,120 --> 00:15:25,800
Speaker 7: one drugs users have cut back. All those things continue

287
00:15:25,840 --> 00:15:29,720
Speaker 7: to pressure this industry. But also yet, can't you can't

288
00:15:29,720 --> 00:15:32,560
Speaker 7: forget also the cumative effective inflation. I mean, the beer

289
00:15:32,600 --> 00:15:36,000
Speaker 7: prices have gone pretty significantly over the last few years,

290
00:15:36,040 --> 00:15:38,440
Speaker 7: to the point where a lot of beer drinkers are

291
00:15:38,440 --> 00:15:40,520
Speaker 7: getting sticker shock when they go to pick up a

292
00:15:40,560 --> 00:15:42,480
Speaker 7: six pack or a twelve pack or whatever. All those

293
00:15:42,480 --> 00:15:46,080
Speaker 7: things are conspiring to put pressure on this industry, and

294
00:15:46,120 --> 00:15:48,120
Speaker 7: we think this is going to be a quarter with

295
00:15:48,240 --> 00:15:50,920
Speaker 7: a company will say, you know, we're dealt with a

296
00:15:51,040 --> 00:15:54,240
Speaker 7: challenging industry. We're doing well within this, you know, tough group,

297
00:15:54,600 --> 00:15:58,160
Speaker 7: But nevertheless, it's hard to overcome those kind of pressures.

298
00:15:59,360 --> 00:16:03,520
Speaker 2: Modello and some of those beer brands at appeal to

299
00:16:04,720 --> 00:16:07,960
Speaker 2: minority Hispanic community. How's that being impacted by the change

300
00:16:07,960 --> 00:16:08,560
Speaker 2: in immigration.

301
00:16:09,720 --> 00:16:11,880
Speaker 7: Well, we're going to get a good barometer of that today.

302
00:16:12,240 --> 00:16:15,280
Speaker 7: Over the last year or so, you know, the immigration

303
00:16:15,360 --> 00:16:18,920
Speaker 7: crackdowns and a lot of these communities have put a

304
00:16:18,960 --> 00:16:24,000
Speaker 7: real damper on you know, that group's willingness to socialize,

305
00:16:24,040 --> 00:16:26,520
Speaker 7: and beer is a big part of that. But now

306
00:16:26,520 --> 00:16:30,200
Speaker 7: we're facing comparisons versus that last year. I think probably

307
00:16:30,240 --> 00:16:34,040
Speaker 7: on a comp basis, well probably it's almost less of

308
00:16:34,080 --> 00:16:36,440
Speaker 7: a factor. I think more of a factor will be

309
00:16:36,520 --> 00:16:39,200
Speaker 7: some of the items that I mentioned before. Also, we

310
00:16:39,240 --> 00:16:43,640
Speaker 7: see the Hispanic demographic employment rates have improved over the

311
00:16:43,680 --> 00:16:47,320
Speaker 7: last few months and quarters, so I don't think that's

312
00:16:47,320 --> 00:16:49,600
Speaker 7: going to be as much of a drag as the

313
00:16:49,680 --> 00:16:50,760
Speaker 7: last few quarters.

314
00:16:51,720 --> 00:16:55,600
Speaker 5: Ken what about tariffs? Are they a story for constellation brands?

315
00:16:56,840 --> 00:16:59,400
Speaker 7: You know it had been up until about April six

316
00:16:59,600 --> 00:17:02,880
Speaker 7: was the day that they no longer apply. Now this

317
00:17:02,960 --> 00:17:05,679
Speaker 7: quarter ends May thirty first, so they're not going to

318
00:17:05,680 --> 00:17:08,280
Speaker 7: get the full benefit of the end of those aluminum

319
00:17:08,280 --> 00:17:12,160
Speaker 7: can tariffs. But it will be better than a year ago.

320
00:17:12,640 --> 00:17:14,879
Speaker 7: I want to look at it that way. Unfortunately, though,

321
00:17:15,760 --> 00:17:19,480
Speaker 7: to a degree, you know, their big new brewery down

322
00:17:19,480 --> 00:17:22,879
Speaker 7: in Mexico of Avera Cruz is going to take up

323
00:17:23,080 --> 00:17:26,639
Speaker 7: higher depreciation charges. Siver an accounting sense, you're going to

324
00:17:26,640 --> 00:17:29,760
Speaker 7: get higher depreciation charges off setting a lot of the

325
00:17:29,800 --> 00:17:32,920
Speaker 7: benefit of the tariff costs. So it's going to be

326
00:17:32,960 --> 00:17:35,720
Speaker 7: a lot of mixed messages in this quarter. But when

327
00:17:35,760 --> 00:17:37,840
Speaker 7: the dust settles, I think you're they're going to eke

328
00:17:37,880 --> 00:17:41,280
Speaker 7: out of modest margin improvement in this quarter, which I

329
00:17:41,320 --> 00:17:43,320
Speaker 7: think will be perceived positively.

330
00:17:43,560 --> 00:17:45,679
Speaker 2: Ken We've seen a lot of consolidation in the beer business.

331
00:17:45,680 --> 00:17:47,200
Speaker 2: Is Constellation potential target?

332
00:17:48,920 --> 00:17:51,160
Speaker 7: I don't think they are, Paul. You've seen so much

333
00:17:51,240 --> 00:17:54,760
Speaker 7: consolidation in the beer market to the point where I

334
00:17:54,800 --> 00:17:58,120
Speaker 7: don't really envision it going forward in a big way.

335
00:17:58,119 --> 00:17:59,120
Speaker 7: I don't think this is going to be a play.

336
00:17:59,160 --> 00:18:01,600
Speaker 7: This is the number two and a number two company.

337
00:18:01,640 --> 00:18:04,720
Speaker 7: They have twenty almost twenty three percent dollars share of

338
00:18:04,720 --> 00:18:08,719
Speaker 7: the beer markets, behind only anheusard Bush's thirty three percent,

339
00:18:10,000 --> 00:18:13,200
Speaker 7: So I don't see it's already pretty consolidated.

340
00:18:13,560 --> 00:18:14,200
Speaker 1: Stay with us.

341
00:18:14,240 --> 00:18:16,439
Speaker 2: More from Bloomberg Intelligence coming up after this.

342
00:18:20,640 --> 00:18:24,320
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

343
00:18:24,400 --> 00:18:27,520
Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

344
00:18:27,520 --> 00:18:30,840
Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever

345
00:18:30,880 --> 00:18:34,480
Speaker 1: you get your podcasts, or watch us live on YouTube.

346
00:18:35,600 --> 00:18:37,600
Speaker 2: Let's go to this economic data. The Conference Board came

347
00:18:37,600 --> 00:18:41,919
Speaker 2: out Confidence ninety one point two was the reading. The

348
00:18:41,960 --> 00:18:45,560
Speaker 2: consentus was ninety four point four, so that's a little

349
00:18:45,560 --> 00:18:48,320
Speaker 2: bit disappointment, but it's better than last month, which was

350
00:18:48,359 --> 00:18:51,520
Speaker 2: revised down to ninety point six here, so maybe or

351
00:18:51,640 --> 00:18:54,480
Speaker 2: gas help there. Aaron McLaughlin, she's a senior Condoms at

352
00:18:54,480 --> 00:18:56,520
Speaker 2: the Conference Board. Aaron, what do you make of some

353
00:18:56,560 --> 00:18:59,760
Speaker 2: of the data you guys put out today?

354
00:19:00,160 --> 00:19:03,640
Speaker 3: Paul, Well, you know it is tacked up a little

355
00:19:03,640 --> 00:19:08,120
Speaker 3: bit consumer confidence of zero point six percent, and we're

356
00:19:08,160 --> 00:19:12,320
Speaker 3: really thinking that the consumer was feeling some optimism because

357
00:19:12,359 --> 00:19:16,320
Speaker 3: gas prices have been trending down for six weeks. Our

358
00:19:16,440 --> 00:19:20,200
Speaker 3: consumer confidence survey was taken June first through twenty third,

359
00:19:20,320 --> 00:19:24,320
Speaker 3: so they felt some optimism with the Iran war perhaps

360
00:19:24,359 --> 00:19:27,760
Speaker 3: getting a deal coming to the end. So we think

361
00:19:27,800 --> 00:19:30,800
Speaker 3: that that's really what helped the survey.

362
00:19:30,920 --> 00:19:33,840
Speaker 5: Yeap gas price is down twelve percent in just the

363
00:19:33,880 --> 00:19:37,720
Speaker 5: past month now at around three eighty five. I believe

364
00:19:37,760 --> 00:19:40,439
Speaker 5: a gallon for a gallon of unleaded very good. So

365
00:19:40,680 --> 00:19:43,480
Speaker 5: after you know, spending quite a bit of time above

366
00:19:43,600 --> 00:19:46,960
Speaker 5: four dollars a gallon, Aaron, tell us about how folks

367
00:19:47,000 --> 00:19:50,639
Speaker 5: are feeling when it comes to six months from now,

368
00:19:50,680 --> 00:19:53,320
Speaker 5: because I know you also look at expectations for what's

369
00:19:53,320 --> 00:19:55,760
Speaker 5: happening in the not too distant future. Are people feeling

370
00:19:55,800 --> 00:19:58,040
Speaker 5: more optimistic about the future.

371
00:19:58,400 --> 00:20:02,159
Speaker 3: They are, so ourations index it went up three percent,

372
00:20:02,560 --> 00:20:04,840
Speaker 3: and that is looking you know, asking consumers to look

373
00:20:04,880 --> 00:20:08,960
Speaker 3: forward six percent, I'm sorry, six months from now, and

374
00:20:09,240 --> 00:20:11,879
Speaker 3: you know, I think that they really speaks to the

375
00:20:11,920 --> 00:20:16,320
Speaker 3: consumer being very, very resilient and they don't imagine that

376
00:20:16,359 --> 00:20:19,119
Speaker 3: things are going to get worse perhaps in six months,

377
00:20:19,480 --> 00:20:22,880
Speaker 3: and so we don't anticipate any big changes of that.

378
00:20:22,920 --> 00:20:27,119
Speaker 3: And overall, you know, the what we saw in the

379
00:20:27,160 --> 00:20:30,280
Speaker 3: consumer confidence index is typical to what has been the

380
00:20:30,359 --> 00:20:33,560
Speaker 3: last year or so overall.

381
00:20:33,800 --> 00:20:36,240
Speaker 2: So when you think about consumer confidence, what are the

382
00:20:36,320 --> 00:20:37,520
Speaker 2: key key drivers there?

383
00:20:37,560 --> 00:20:37,840
Speaker 7: Aaron?

384
00:20:38,160 --> 00:20:41,160
Speaker 2: For your model as it relates to maybe employment, inflation,

385
00:20:41,200 --> 00:20:42,000
Speaker 2: outlooks things like that.

386
00:20:42,400 --> 00:20:45,400
Speaker 6: Right, So with the present situation.

387
00:20:45,800 --> 00:20:49,520
Speaker 3: They are sort of measuring business and labor market conditions

388
00:20:50,160 --> 00:20:52,680
Speaker 3: and same thing for themselves when they think about their

389
00:20:52,720 --> 00:20:55,200
Speaker 3: own employment. And I will say that's really the only

390
00:20:55,240 --> 00:20:59,240
Speaker 3: sort of negative that's coming up is that consumers are

391
00:20:59,359 --> 00:21:01,920
Speaker 3: thinking that the labor market that maybe there aren't as

392
00:21:01,960 --> 00:21:04,480
Speaker 3: many jobs that are going to be open in the future.

393
00:21:04,560 --> 00:21:06,640
Speaker 3: It might be a little bit more difficult to get

394
00:21:06,680 --> 00:21:09,560
Speaker 3: a job. So that is sort of the negative that's

395
00:21:09,600 --> 00:21:10,639
Speaker 3: sort of coming through.

396
00:21:11,600 --> 00:21:13,600
Speaker 5: Because yeah, I mean, are you were just talking about

397
00:21:13,720 --> 00:21:17,040
Speaker 5: your measure of expectations actually rising three percent. I think

398
00:21:17,080 --> 00:21:19,800
Speaker 5: that's pretty that's a pretty big jump, but the indicator

399
00:21:19,880 --> 00:21:23,720
Speaker 5: of present conditions actually fell. And is it concern over

400
00:21:23,840 --> 00:21:25,240
Speaker 5: jobs that sort of led that.

401
00:21:25,200 --> 00:21:30,720
Speaker 3: Drop, Yes, it is so consumers felt, you know, that

402
00:21:30,840 --> 00:21:35,520
Speaker 3: they see that business conditions and labor market conditions are

403
00:21:35,560 --> 00:21:38,320
Speaker 3: a little bit weaker, and that could be them speaking

404
00:21:38,359 --> 00:21:42,920
Speaker 3: to higher prices and also labor market conditions. Is also

405
00:21:43,040 --> 00:21:47,760
Speaker 3: interesting to see that consumers do expect higher interest rates

406
00:21:47,800 --> 00:21:50,480
Speaker 3: over the next twelve months, and that is something that

407
00:21:50,520 --> 00:21:53,560
Speaker 3: we ask and so that's sixty one and a half

408
00:21:53,600 --> 00:21:56,719
Speaker 3: percent expect in twelve months that interest rates could be higher.

409
00:21:56,760 --> 00:21:59,960
Speaker 3: So I think the consumers know that inflation is persist

410
00:22:00,320 --> 00:22:02,439
Speaker 3: they hear that, they understand it, and they see it

411
00:22:02,480 --> 00:22:05,040
Speaker 3: themselves at the grocery store, at the gas pump, and

412
00:22:05,119 --> 00:22:06,480
Speaker 3: with their own utilities.

413
00:22:07,840 --> 00:22:12,520
Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,

414
00:22:12,720 --> 00:22:16,680
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,

415
00:22:16,880 --> 00:22:20,159
Speaker 1: ten am to noon Eastern on Bloomberg dot com, the

416
00:22:20,240 --> 00:22:24,119
Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You

417
00:22:24,160 --> 00:22:27,439
Speaker 1: can also watch us live every weekday on YouTube and

418
00:22:27,680 --> 00:22:29,600
Speaker 1: always on the Bloomberg terminal