WEBVTT - SRG's Flickinger: More Trouble Ahead in Athletic Retail (Audio)

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<v Speaker 1>let's head over to the First Word Breaking news desk

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<v Speaker 1>for today's afternoon call. Here he is Bill Maloney. Good afternoon, Charlie.

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<v Speaker 1>Turnaround for U S stocks after a week open Dallas

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<v Speaker 1>currently hired by ten points. S SPEs Game three in

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<v Speaker 1>NAZAC rises six at one point to Dallas down a

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<v Speaker 1>hundred and twenty two. The small cap six hundred rises

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<v Speaker 1>four points US ten yield at one point eight five

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<v Speaker 1>per cent. Six out of tennis B sectors are higher,

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<v Speaker 1>led by gains in staples, healthcare, and the financials. Telecom

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<v Speaker 1>and consumer discretionary led to the downside down Transports drop

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<v Speaker 1>thirty one as a by text gain twenty two and

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<v Speaker 1>the VIX is higher by one percent. Down Leaders to

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<v Speaker 1>the downside included Verizon, Apple and Disney, DuPont and Proctor

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<v Speaker 1>and Gamble led Michael Cores gained seven percent after earnings,

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<v Speaker 1>Hull Foods Are Always five percent was upgraded over at

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<v Speaker 1>Traded Sweez, while under Armour fell as much as six

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<v Speaker 1>point three percent after cutting its net revenue outlook live

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<v Speaker 1>in the first Breaking news desk on Bill Maloney, Charlotte,

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<v Speaker 1>all right, hey, thank you very much, Bill Maloney. We've

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<v Speaker 1>got a nup date for stocks to hear live breaking

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<v Speaker 1>news over your Bloomberg type squawk sq you a w

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<v Speaker 1>K on your terminal. I'm Charlie Pellets and that's a

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<v Speaker 1>Bloomberg business flash. This is taking stock with Kathleen Hayes

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<v Speaker 1>and Pim Fox on Bloomberg Radio. The bankruptcy of a

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<v Speaker 1>retailer words authority is not only affecting that company, it's

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<v Speaker 1>reverberating throughout the market for footwear and other kinds of

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<v Speaker 1>athletic apparel. Because today under Armour cut its annual forecast,

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<v Speaker 1>signing the demise of one of its largest customers. And

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<v Speaker 1>now Nike was downgraded by Morgan Stanley and Bank of

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<v Speaker 1>America Merrill Lynch. So the troubles are piling on. We

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<v Speaker 1>see those stocks lower today, Nike downpoint four at about

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<v Speaker 1>fifty four dollars in ninety eight cents a share, with

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<v Speaker 1>under Armour losing three point seven percent, trading at thirty

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<v Speaker 1>six dollars and change. So what's next. Bert Flickinger joins

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<v Speaker 1>us now he's managing director at Strategic Resource Group here

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<v Speaker 1>in New York City. Uh. Were you anticipating something like

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<v Speaker 1>this for the likes of under Armour and Nike? Definitely, Kathleen,

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<v Speaker 1>because the profit margins and the prices are too high,

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<v Speaker 1>that demands too low, and it goes far beyond the

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<v Speaker 1>bankruptcy sports authority. So is sports authorities bankruptcy and under

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<v Speaker 1>Armor cutting it's annual forecast. Actually that happened day yesterday.

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<v Speaker 1>Citing the bankruptcy of sports authorities. That just an excuse

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<v Speaker 1>on under ours part. It's an excuse. It's retail reality,

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<v Speaker 1>but it's it's also Uh, there's a real issue in

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<v Speaker 1>terms of lack of breakthrough marketing. If you if you

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<v Speaker 1>look at the history of the big sports brands, when

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<v Speaker 1>you had Jim Mullen and Paul Silverman doing breakthrough advertising

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<v Speaker 1>for Reebok, Dan Widen Wide and Kennedy working with Liz

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<v Speaker 1>Dolan and Joe McCarthy and Phil Knight doing the same

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<v Speaker 1>for Nike and i Q and Jay doing the same

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<v Speaker 1>thing for a converse. That created a lot of excitement,

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<v Speaker 1>And now that excitement is there because the agencies are

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<v Speaker 1>really struggling to create consumer demand. And with all the

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<v Speaker 1>scandals and sports UH, fewer, fewer people are watching sports

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<v Speaker 1>UH and unfortunately more people are eating UH and playing

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<v Speaker 1>with their mobile devices than participate hating in sports. And

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<v Speaker 1>when less sports participation comes less demand for under Armour, Nike,

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<v Speaker 1>and the category dominant sports retailers starting with a sports

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<v Speaker 1>authority Eastern Mountain Sports and Sports ul A, which Bloomberg's

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<v Speaker 1>All reported a filed for bankruptcy during the last fifty days.

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<v Speaker 1>Steph Curry has had a terrific series so far, going

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<v Speaker 1>into the NBA Finals the playoffs. That was that was

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<v Speaker 1>quite a move for the Warriors versus the Oklahoma City Thunder.

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<v Speaker 1>But you say he can't really save companies like under

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<v Speaker 1>Armour and Nike amid other stars scandals. Uh, Steph can't

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<v Speaker 1>do it by himself. He's tremendous young man on a

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<v Speaker 1>three sixty degree basis, just a superb person personally and professionally.

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<v Speaker 1>But on the other hand, UH, Nike's had scandals with

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<v Speaker 1>Johnny no NFL football Man's Elmanni Pack, Michael Vick, Oscar Victorious,

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<v Speaker 1>Ray Kao, Rice John Jones of the US see Maria

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<v Speaker 1>Sherpo in tennis, so Tiger Woods and golf. Uh So

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<v Speaker 1>it's almost in syriantum the number of scandals, and then

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<v Speaker 1>the team scandals with the Russian athletes. It's turning people

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<v Speaker 1>off for the Brazil Summer Olympics this summer. UH their

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<v Speaker 1>scandals associated with the World Cup and football or what

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<v Speaker 1>the US is called soccer UH and and its result,

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<v Speaker 1>you're you're you're seeing less interest, particularly amongst millennials, and

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<v Speaker 1>millennials are key to driving the future foundation for brands

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<v Speaker 1>like under Armours, Well it's Nike. And the less key

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<v Speaker 1>footnote is UH that Phil Knights almost like the UH

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<v Speaker 1>sports marketing reincarnation of Genghis Khan. He's laid waste to

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<v Speaker 1>every competitor from Converse to Umbro to Rebok and to

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<v Speaker 1>some extent Audi DA's and there's very little for Nike

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<v Speaker 1>and under Armour it's still conquer so with the climbing demand,

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<v Speaker 1>it's tough to get accelerating growth. Both companies still have

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<v Speaker 1>some growth, but it's not the double digit growth that

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<v Speaker 1>people had come to expect from both the market leaders.

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<v Speaker 1>But you see also this is part of the retail

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<v Speaker 1>ice age. It seems we've got two forces. The retail

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<v Speaker 1>ice age would you say will be done by But

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<v Speaker 1>then you're also talking about millennials not being into sports

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<v Speaker 1>as much and and not not participating as much because

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<v Speaker 1>of surprises me because I've got a millennial in my house.

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<v Speaker 1>She grew up playing a lot of sports. But where

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<v Speaker 1>does this leave these these big companies then, like under

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<v Speaker 1>Armour and Nike, which force predominates. And studies have been

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<v Speaker 1>published that millennials check their checks or her mobile devices

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<v Speaker 1>a hundred plus times a day to check on Facebook

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<v Speaker 1>and other digital social connective media. So while that's going on, UH,

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<v Speaker 1>fewer people are outdoors also with the cutbacks and public

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<v Speaker 1>funding and uh, community college and high school and and

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<v Speaker 1>can I jump in really quick at leisure, everybody sneakers

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<v Speaker 1>and they update them all the time. Stylish sneakers. That's

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<v Speaker 1>a big thing for millennials. Stylish sneakers are completely correct

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<v Speaker 1>athlete uh color colors are real breakthrough. That's that's why

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<v Speaker 1>Sketchers is done so spectacularly well in recent years. And

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<v Speaker 1>UT Cornell Institute for Fashion and Fiber Innovation, they're they're

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<v Speaker 1>working with Sketcher's, Nike, uh Umbro, Umbro and others. So

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<v Speaker 1>innovation and color will will drive demand. But overall the

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<v Speaker 1>trends are softening, and that's somewhat concerning. Bird Flickinger, Managing

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<v Speaker 1>director is Strategic Resource Group talking about Nike and under

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<v Speaker 1>Armer stocks getting hit by the Sports Authority bankruptcy. This

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