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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am.

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Speaker 1: He's done on Apple, Cocklay and Android Auto with the

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Speaker 1: Bloomberg Business App. Listen on demand wherever you get your podcasts,

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Speaker 1: or watch us live on.

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Speaker 2: YouTube through SpaceX, the startup founded by Elon Musk, the billionaire,

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Speaker 2: has filed confidentially for an IPO. This is according to

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Speaker 2: people familiar with the matter. Anthony Hughes is one of

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Speaker 2: our reporters here at Bloomberg. He covers US equity capital

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Speaker 2: Markets and he joins US now. So when a company

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Speaker 2: files confidentially for an IPO, what exactly does that mean

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Speaker 2: and where does that leave us in terms of when

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Speaker 2: this company, SpaceX will go public and actually.

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Speaker 3: List Yes, Well, really, there's a lot of steps along

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Speaker 3: the way to going public, and for a company like SpaceX,

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Speaker 3: which has been around for quite a long time, that

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Speaker 3: it's been along road, but this is really the most

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Speaker 3: definitive step you could argue in terms of going public,

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Speaker 3: because it means that they've gone they're serious in the

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Speaker 3: sense that they've filed a hefty document with the SEC.

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Speaker 3: We don't get to see it yet hopefully we might

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Speaker 3: hear about some of the things that are in it.

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Speaker 3: But this really suggests that the deal is going full

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Speaker 3: steam ahead, and I think all the body language we've

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Speaker 3: seen in recent even in just the last two or

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Speaker 3: three days, we've seen a number of stories about different

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Speaker 3: things that are happening around the deal, and it's really

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Speaker 3: sort of indicated that it's full steam ahead and everyone's

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Speaker 3: pretty confident they can get this done actually by June.

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Speaker 3: Now June is a few months away, so a lot

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Speaker 3: of things, different things that happen. We're in a world

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Speaker 3: where different things can change, so you know, it's worth

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Speaker 3: being a little bit wary about how easy it's going

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Speaker 3: to be to achieve this. But it's a monster deal

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Speaker 3: and in some it's somewhat unprecedented in many aspects of

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Speaker 3: this deal, so you have to take that into account.

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Speaker 4: And the company is considering i dual class share structure

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Speaker 4: in the IPO that would potentially give insiders such as

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Speaker 4: elin Must extra voting power that dominique decision making. Bloomberg

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Speaker 4: News has reported is that something that they're going to

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Speaker 4: go to the regulators and get some feedback on because

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Speaker 4: we've seen other media companies. Tech companies have this duor

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Speaker 4: class stock.

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Speaker 3: Yeah, so that would be very prominent in the document.

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Speaker 3: We'll be mentioned on the cover of the document. Likely

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Speaker 3: that would be something that would be not unexpected in

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Speaker 3: this situation, especially when you have an IPO which is

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Speaker 3: going to be of a is going to be very

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Speaker 3: highly sought by investors. You tend to find that founders

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Speaker 3: of tech companies that are large and fast growing do

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Speaker 3: have the ability to dictate such terms, and that's been

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Speaker 3: my experience. It's not uncommon. It's not something that corporate

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Speaker 3: governance purists love because it means that if things go wrong,

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Speaker 3: investors may not get to, say, have a huge say

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Speaker 3: in any changes that they would like to see. But

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Speaker 3: it's not surprising that that's something that would happen. And

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Speaker 3: for Elin it might For Elon Musk, it might allow

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Speaker 3: him to consolidate his empire somewhat.

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Speaker 4: I'm just looking at Tesla. Thees spring for Tesla does

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Speaker 4: not have a dual class.

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Speaker 2: Yeah, so maybe he learned from the first time. And

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Speaker 2: of course it's not unusual for founders to launch.

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Speaker 5: An IPO like this.

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Speaker 2: Meta has this dual class structure as well, and it's

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Speaker 2: fittingly that we're getting this confidential IPO on the day

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Speaker 2: that NASA set to launch astronauts to the Moon for

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Speaker 2: the first time in fifty years. Anthony, one thing that

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Speaker 2: we do know about SpaceX is that it acquired Xai,

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Speaker 2: which is Elon Musk's ai startup, you know, earlier this year.

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Speaker 2: What does that have to do with this IPO. Why

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Speaker 2: was that kind of a necessary step towards this IPO.

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Speaker 3: Well, I think people have different theories on that. I

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Speaker 3: think it probably makes sense for the funding needs of

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Speaker 3: their business to bring it into SpaceX. I think some

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Speaker 3: people felt that that wasn't great for It's made the

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Speaker 3: business not as attractive as a whole. But you know,

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Speaker 3: at the end of the day, I think people are

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Speaker 3: backing Elon Musk because of his track record.

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Speaker 6: It's interesting you mentioned Tesla.

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Speaker 3: I mean, that's it's just an extraordinary that we could

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Speaker 3: go back to twenty ten when Tesla went public, it

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Speaker 3: was I think it was a few hundred million dollar

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Speaker 3: IPO of a company worth a couple of billion dollars.

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Speaker 3: I mean, we're talking about such larger numbers now. But

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Speaker 3: you know, I think Xai is you know, we're going

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Speaker 3: to see some numbers there.

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Speaker 6: I mean from all reports, it's.

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Speaker 3: Been burning cash, so it's not adding to the profitability

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Speaker 3: of the overall business, so that that is a concern.

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Speaker 3: But I think because you know, we also expected to

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Speaker 3: see possibly anthropic and open AI go public this year,

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Speaker 3: I mean, there is an arms race for growing the

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Speaker 3: AI aspects, you know, growing these businesses, and you know,

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Speaker 3: I think SpaceX is going to be part of that.

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Speaker 3: And you know that's obviously as a growth element to

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Speaker 3: the business as well, but it does probably make the

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Speaker 3: financials not look as good in the short term.

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Speaker 5: But getting there first.

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Speaker 6: Yeah, exactly right.

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Speaker 4: There's been reporting that Elon may be considering kind of

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Speaker 4: rolling up all his stuff, you know, SpaceX, maybe acquiring

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Speaker 4: tes Love for example X. Yeah, I mean he's already

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Speaker 4: done that. I mean, what do we know about that?

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Speaker 4: He is Elon said anything about that?

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Speaker 3: Well, I think there's a lot of speculation about that.

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Speaker 3: But I think what we're seeing here is that Spasics

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Speaker 3: is going to go public before that happens, most likely.

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Speaker 3: I think, you know, there could be a change of plans.

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Speaker 3: You never know, but it doesn't there's sort of there

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Speaker 3: does seem to be there could be some industrial logic

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Speaker 3: in Elon Musk having all of his businesses in one

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Speaker 3: listed entity. But you know it may be for different

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Speaker 3: reasons because of the way the different these businesses are

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Speaker 3: developing and the value. You know, obviously, you know most

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Speaker 3: companies looking to go public or always trying to maximize

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Speaker 3: valuation and make sure they can have access to capital.

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Speaker 3: I mean, the thing about these businesses being so large

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Speaker 3: is they have almost I mean, for all the ups

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Speaker 3: and downs of Tesla over the years, Elon Musk has

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Speaker 3: demonstrated he's has unlimited access to capital. And this business

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Speaker 3: is going to have a good access to capital, which

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Speaker 3: is going to allow allow them to do many things.

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Speaker 6: That's the benefit of size and scale.

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Speaker 2: I know that you always look at the banks that

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Speaker 2: get signed on to do this. SpaceX has lined up

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Speaker 2: Bank of America, City Group, Golden Sacks, Japing, Morgan, and

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Speaker 2: Morgan Stanley basically the five biggest bold rocket firms, the.

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Speaker 4: Big five, So they and they're going to have dozens

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Speaker 4: and dozens of banks around the world helping them sell

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Speaker 4: this thing. All I know is I'm if I'm buying

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Speaker 4: space I'm thinking that the shareholder bass is going to

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Speaker 4: be a big overlap the people who kind of are

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Speaker 4: in the Elon camp, they're already on test of my senses,

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Speaker 4: they're going to be a very high crossover there between

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Speaker 4: Tesla and SpaceX. So at some point down the road,

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Speaker 4: particularly he has voting super voting shot shares, he might

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Speaker 4: be able to put the companies together.

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Speaker 6: Yeah, I think it's a realm. Yeah, I think it's

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Speaker 6: a reasonable theory. What's next here? So we when do

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Speaker 6: we actually get to see some of the numbers?

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Speaker 7: Do you think?

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Speaker 6: Well?

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Speaker 3: So, typically what happens is the filing will become public.

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Speaker 3: Typically that you know, there'll be a strategic decision about

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Speaker 3: when that is. But if you know, if it's the

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Speaker 3: case that the IPO was on track to actually the

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Speaker 3: company stocks actually on track to deabuts perhaps in late June,

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Speaker 3: which is you know, get in.

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Speaker 6: Before the before the before the summer, before the.

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Speaker 2: File confidentially, then why not just make it public?

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Speaker 3: Well, because confidentiality was originally as when it was first

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Speaker 3: that that sec crewd the ability for companies to file confidentially,

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Speaker 3: it was really for small companies to help you know,

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Speaker 3: small companies go public, but it's over time it was

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Speaker 3: extended to every company. So it was just something that

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Speaker 3: was available to all companies. So it's something you would use.

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Speaker 3: But yeah, and this in this case, you know it,

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Speaker 3: it doesn't matter that much in this situation because Spaceally.

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Speaker 3: All happen is SpaceX will now be able to go

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Speaker 3: out and start meeting investors, and they'll be able to

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Speaker 3: use information in that filing when they're talking to investors,

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Speaker 3: still in a confidential way that's not really you know, public,

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Speaker 3: but the filing of the document will allow SpaceX to

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Speaker 3: say say lots of things to investors that they wouldn't

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Speaker 3: otherwise be able to say. That's our understanding of the

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Speaker 3: legal legal position there, and so you know, it's it's

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Speaker 3: really they'll be doing a lot of testing the waters meetings.

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Speaker 3: The meetings is supposedly starting next week and so then

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Speaker 3: it's really full steam.

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Speaker 6: Head here Stee with us.

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Speaker 5: More from Boomerick Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

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Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 2: Shares of Nike down almost fourteen percent after its latest

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Speaker 2: earnings report. The last quarter was fine. It's the outlook

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Speaker 2: that has people a little bit concerned. Lily Meyer is

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Speaker 2: our retail reporter, and she joins us.

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Speaker 5: Actually, is she here?

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Speaker 6: Don't she is?

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Speaker 2: Okay, I'm sorry. I thought she was gonna be in studio,

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Speaker 2: but I was wrong. Okay, Lily, great to speak with you.

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Speaker 2: What is it specifically that Nike said that got people

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Speaker 2: concerned because we've been conditioned to really understand that Nike

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Speaker 2: is in turnaround mode, so it's not going to be

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Speaker 2: a straight line up.

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Speaker 5: Yeah, exactly, and I think they're still still fair to

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Speaker 5: say there and turn around. What really spooked investors was

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Speaker 5: they shared that the outlook for revenue for the year

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Speaker 5: is just much lower than the street expected. They're still

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Speaker 5: having challenges with Converse. They're now seeing some challenges in

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Speaker 5: EMEYA and that's offset some of the gains in North

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Speaker 5: America and in the running category.

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Speaker 4: Lily talk to us about the inventories, because I know

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Speaker 4: that was a big issue for this company. Hey, let

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Speaker 4: us just kind of get through weaning down our inventory

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Speaker 4: and then we'll be in good shape. I thought they

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Speaker 4: were making progress there, and I think I probably I'm

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Speaker 4: probably representing the market here because the market, I guess

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Speaker 4: was surprised here talk to us about inventory.

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Speaker 6: Yeah.

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Speaker 5: So one place that inventories came up this quarter that

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Speaker 5: was interesting is they said that they're seeing some elevated

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Speaker 5: inventories in EMEA, in Europe, in the Middle East, and

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Speaker 5: they're also seeing some traffic disruption there from the war.

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Speaker 2: What is it specifically with China that's been an issue

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Speaker 2: because inventories has been a problem there, But it goes

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Speaker 2: beyond that. I mean, it goes to a weakness in

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Speaker 2: consumer spending and rising competition. But Nike has been really

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Speaker 2: struggling to get its China business. It's Greater China business

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Speaker 2: back to what it.

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Speaker 5: Yeah, exactly, So I would say it's you know, a

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Speaker 5: lot of increased competition there. And this quarter they did

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Speaker 5: show some improvement in Greater China. I think, you know,

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Speaker 5: things turned around a little bit more than was expected,

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Speaker 5: but still not enough to excite investors.

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Speaker 2: And one area that's really been weak for Nike is converse.

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Speaker 2: I don't know about you, but I love Converse sinkers,

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Speaker 2: but I also yep exactly, and Converse sales fell more than expected.

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Speaker 2: I think you have something like a fifteen year low

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Speaker 2: in your stories. What is going on there because it

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Speaker 2: has attracted some interest.

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Speaker 5: Yeah, so Converse has been one of the most stubborn

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Speaker 5: parts of the business to turn around under Elliott Hill.

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Speaker 5: So I think, you know, Nik has really relied on

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Speaker 5: Converse for the Chuck Taylor but has struggled to diversify

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Speaker 5: outside of that. So they're trying to make a basketball push,

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Speaker 5: but you know, we're not seeing a lot of progress

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Speaker 5: in that area. And you know, we reported yesterday that they,

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Speaker 5: you know, Authentic Brands has expressed some interest in Converse,

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Speaker 5: so we'll see what happens there. Nike has said, you know,

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Speaker 5: they're still invested in Converse, but it hasn't it hasn't

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Speaker 5: turned around yet.

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Speaker 4: You know, it's literally just for Nike overall. When I

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Speaker 4: think of them, I think of them as just one

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Speaker 4: of the great consumer product brands with just the you know,

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Speaker 4: the coolest, cutting edge, leading edge kind of products. It

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Speaker 4: feels like maybe they've they've lost that is I mean,

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Speaker 4: how concerned are people that they just kind of lost

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Speaker 4: the feel for the market.

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Speaker 5: Yeah, I mean I think innovation was definitely a concern

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Speaker 5: prior to Elliott joining. So under John Donna. One of

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Speaker 5: the biggest concerns was there was a lack of innovation.

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Speaker 5: Nike was relying too much on some of their lifestyle products,

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Speaker 5: so on the Dunks, the Air Jordan ones, the Air

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Speaker 5: Force ones. Elliott has really refocused the business around sport

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Speaker 5: and he's been trying to innovate in that category. Nike

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Speaker 5: had some new product come out around the Olympics, so

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Speaker 5: I think that's an area to watch closely, you know,

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Speaker 5: seeing how much innovation they're able to pump out.

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Speaker 2: And speaking of Elliot Hill, he's been on the job

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Speaker 2: for now one and a half years. Is does he

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Speaker 2: own everything that's happened or does he still get a

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Speaker 2: little bit of a pass. I mean, I imagine that

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Speaker 2: it's frustrating for investors, is frustrating for him as well

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Speaker 2: to kind of see this stop and start progress.

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Speaker 5: Yeah, so I think that In one of our stories today,

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Speaker 5: we said that shares are down more than thirty five

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Speaker 5: percent since he started, despite him executing a new strategy.

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Speaker 5: He you know, on a call with employees, you know,

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Speaker 5: said he was taught so tired, you know, talking about

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Speaker 5: fixing the business. I think he's definitely starting. It seems

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Speaker 5: like he's starting to feel some of the frustration there

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Speaker 5: the business not turning around.

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Speaker 6: Stay with us.

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Speaker 4: More from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

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Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 2: All right, let's switch gears and look at some other

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Speaker 2: companies that are on the move. And I'm paying attention

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Speaker 2: to our H Restoration Hardware. The stock is plunging. It's

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Speaker 2: down a quarter today, a quarter of its market value

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Speaker 2: lost just this morning. Lindsay Dutch is our consumer Hardlines

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Speaker 2: senior analyst at Bloomberg Intelligence and she joins us now.

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Speaker 2: So this is very much a play on the consumer

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Speaker 2: and a higher end consumer as well. Lindsay, what do

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Speaker 2: we know about our H and the outlook it's given?

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Speaker 7: Hi, Paul, Hi Scarlett, thanks for having me. Yeah. So

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Speaker 7: our AH miss both on the top and the bottom

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Speaker 7: line when we looked at fourth quarter earnings. But I

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Speaker 7: think worse is when we.

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Speaker 5: Look at this year.

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Speaker 7: The outlook was well below expectations, including expecting a sales

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Speaker 7: decline in the first quarter. That kind of tells me

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Speaker 7: between the miss and the bad look for first quarter

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Speaker 7: that demand has really dropped and they're really going to

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Speaker 7: count on a big spike in the back half of

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Speaker 7: the year with a new collection coming to sort of

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Speaker 7: drive that growth heading into twenty seven. But the first

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Speaker 7: half of the year certainly looks challenged.

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Speaker 4: DA how much of this You know, when we talk

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Speaker 4: to you about your companies that one of the questions

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Speaker 4: I always have is how much of this is industry

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Speaker 4: wide versus company specific?

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Speaker 5: Year?

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Speaker 7: Yeah, so for our age, I do think that it

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Speaker 7: is a company specific story.

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Speaker 5: When we look back at last year. They did grow.

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Speaker 7: Sales eight percent. That's pretty impressive in the environment that

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Speaker 7: they were playing in. That is above the peer average.

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Speaker 7: But they do play to a very niche customer and

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Speaker 7: they are striving to be a luxury brand, and they're

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Speaker 7: moves to make waves in that space. You know, do

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Speaker 7: cost a lot of money. They're investing very heavily. They're

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Speaker 7: they're opening galleries all over the globe, and I I

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Speaker 7: think that there was just a lot of disappointment in

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Speaker 7: this coming year that growth might slow again and their

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Speaker 7: long term targets are well out of.

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Speaker 5: Reach, and I'm just looking at Wayfair.

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Speaker 2: Those stocks are modestly lower, Ethan Allen Interiors modestly higher.

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Speaker 2: So I'm not sure there's much of a read through

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Speaker 2: to some of the other furniture companies that are out there.

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Speaker 2: But lindsay, how much are tariffs are part of this

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Speaker 2: story for our h.

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Speaker 7: Yeah, so tariffs have played a piece here. They cost

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Speaker 7: about one hundred and ninety basis points in margin in

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Speaker 7: the fourth quarter. Their guidance is kind of including a

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Speaker 7: similar hit for this coming year. The bigger thing for

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Speaker 7: this year, as I mentioned, is you know, tremendous investment

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Speaker 7: going into the business. They're expecting contra erosion in their

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Speaker 7: margin again this year. You know, investors aren't liking that.

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Speaker 7: They've kind of missed their profit goals for the past

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Speaker 7: year or so, and we're looking at another year of

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Speaker 7: heavy investment pressure on them margin, even if we see

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Speaker 7: some of that tariff costs come down a bit, but

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Speaker 7: it's definitely a factor. They've also talked about, you know,

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Speaker 7: significantly moving their sourcing around, which is part of the

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Speaker 7: slowdown in that first quarter, you know, reworking that and

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Speaker 7: they might have a little bit of a less product

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Speaker 7: to sell until we get later into the year.

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Speaker 6: Lindsay, what are they doing with e commerce?

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Speaker 1: Have a thing.

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Speaker 4: If I'm going to buy a sofa, I want to

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Speaker 4: go into the store and see it, sit on it,

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Speaker 4: that kind of stuff. Talk to us about their e

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Speaker 4: commerce strategy. How's that played?

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Speaker 7: Yeah, so e commerce is a very small piece of

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Speaker 7: their business and the openings that they're they're looking at doing,

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Speaker 7: you know in Paris and Milan. You know, they are

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Speaker 7: really leaning into that experiential vibe and wanting people to

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Speaker 7: come see their product in person, feel it, and really

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Speaker 7: understand the quality. So they are leaning into expansion. We

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Speaker 7: actually see their peer Williams Sonoma is also expanding store

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Speaker 7: yours for the first time in almost ten years. So

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Speaker 7: we're seeing some of these bigger furniture companies. You know,

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Speaker 7: even though they are focused on growing that online presence,

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Speaker 7: they really much want their customer to come into the

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Speaker 7: store and see the product, and they're willing to invest

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Speaker 7: to do that.

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