WEBVTT - SpaceX Said to File Confidentially for IPO Before AI Rivals 

0:00:02.720 --> 0:00:10.600
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. You're listening to the

0:00:10.600 --> 0:00:14.560
<v Speaker 1>Bloomberg Intelligence podcast. Catch us live weekdays at ten am.

0:00:14.600 --> 0:00:17.239
<v Speaker 1>He's done on Apple, Cocklay and Android Auto with the

0:00:17.280 --> 0:00:21.040
<v Speaker 1>Bloomberg Business App. Listen on demand wherever you get your podcasts,

0:00:21.360 --> 0:00:22.760
<v Speaker 1>or watch us live on.

0:00:22.640 --> 0:00:28.360
<v Speaker 2>YouTube through SpaceX, the startup founded by Elon Musk, the billionaire,

0:00:28.440 --> 0:00:31.520
<v Speaker 2>has filed confidentially for an IPO. This is according to

0:00:31.920 --> 0:00:34.839
<v Speaker 2>people familiar with the matter. Anthony Hughes is one of

0:00:34.840 --> 0:00:38.440
<v Speaker 2>our reporters here at Bloomberg. He covers US equity capital

0:00:38.479 --> 0:00:40.960
<v Speaker 2>Markets and he joins US now. So when a company

0:00:40.960 --> 0:00:43.680
<v Speaker 2>files confidentially for an IPO, what exactly does that mean

0:00:43.680 --> 0:00:46.320
<v Speaker 2>and where does that leave us in terms of when

0:00:46.360 --> 0:00:49.120
<v Speaker 2>this company, SpaceX will go public and actually.

0:00:48.800 --> 0:00:51.480
<v Speaker 3>List Yes, Well, really, there's a lot of steps along

0:00:51.520 --> 0:00:53.800
<v Speaker 3>the way to going public, and for a company like SpaceX,

0:00:53.800 --> 0:00:55.400
<v Speaker 3>which has been around for quite a long time, that

0:00:55.440 --> 0:00:57.800
<v Speaker 3>it's been along road, but this is really the most

0:00:57.800 --> 0:01:01.520
<v Speaker 3>definitive step you could argue in terms of going public,

0:01:01.560 --> 0:01:04.319
<v Speaker 3>because it means that they've gone they're serious in the

0:01:04.360 --> 0:01:07.679
<v Speaker 3>sense that they've filed a hefty document with the SEC.

0:01:07.800 --> 0:01:10.440
<v Speaker 3>We don't get to see it yet hopefully we might

0:01:10.520 --> 0:01:12.119
<v Speaker 3>hear about some of the things that are in it.

0:01:12.480 --> 0:01:17.240
<v Speaker 3>But this really suggests that the deal is going full

0:01:17.280 --> 0:01:19.520
<v Speaker 3>steam ahead, and I think all the body language we've

0:01:19.520 --> 0:01:21.440
<v Speaker 3>seen in recent even in just the last two or

0:01:21.440 --> 0:01:23.480
<v Speaker 3>three days, we've seen a number of stories about different

0:01:23.760 --> 0:01:26.240
<v Speaker 3>things that are happening around the deal, and it's really

0:01:26.520 --> 0:01:29.040
<v Speaker 3>sort of indicated that it's full steam ahead and everyone's

0:01:29.040 --> 0:01:31.560
<v Speaker 3>pretty confident they can get this done actually by June.

0:01:31.680 --> 0:01:35.120
<v Speaker 3>Now June is a few months away, so a lot

0:01:35.160 --> 0:01:36.680
<v Speaker 3>of things, different things that happen. We're in a world

0:01:36.680 --> 0:01:39.520
<v Speaker 3>where different things can change, so you know, it's worth

0:01:39.560 --> 0:01:43.000
<v Speaker 3>being a little bit wary about how easy it's going

0:01:43.040 --> 0:01:45.399
<v Speaker 3>to be to achieve this. But it's a monster deal

0:01:45.440 --> 0:01:49.960
<v Speaker 3>and in some it's somewhat unprecedented in many aspects of

0:01:49.960 --> 0:01:52.120
<v Speaker 3>this deal, so you have to take that into account.

0:01:52.960 --> 0:01:56.840
<v Speaker 4>And the company is considering i dual class share structure

0:01:57.120 --> 0:01:59.320
<v Speaker 4>in the IPO that would potentially give insiders such as

0:01:59.360 --> 0:02:03.400
<v Speaker 4>elin Must extra voting power that dominique decision making. Bloomberg

0:02:03.440 --> 0:02:06.240
<v Speaker 4>News has reported is that something that they're going to

0:02:06.240 --> 0:02:08.360
<v Speaker 4>go to the regulators and get some feedback on because

0:02:08.360 --> 0:02:12.720
<v Speaker 4>we've seen other media companies. Tech companies have this duor

0:02:12.800 --> 0:02:13.400
<v Speaker 4>class stock.

0:02:14.040 --> 0:02:17.200
<v Speaker 3>Yeah, so that would be very prominent in the document.

0:02:17.680 --> 0:02:19.640
<v Speaker 3>We'll be mentioned on the cover of the document. Likely

0:02:20.280 --> 0:02:22.640
<v Speaker 3>that would be something that would be not unexpected in

0:02:22.639 --> 0:02:25.640
<v Speaker 3>this situation, especially when you have an IPO which is

0:02:25.680 --> 0:02:28.280
<v Speaker 3>going to be of a is going to be very

0:02:28.360 --> 0:02:31.560
<v Speaker 3>highly sought by investors. You tend to find that founders

0:02:31.560 --> 0:02:35.720
<v Speaker 3>of tech companies that are large and fast growing do

0:02:35.800 --> 0:02:38.919
<v Speaker 3>have the ability to dictate such terms, and that's been

0:02:38.919 --> 0:02:42.000
<v Speaker 3>my experience. It's not uncommon. It's not something that corporate

0:02:42.000 --> 0:02:45.760
<v Speaker 3>governance purists love because it means that if things go wrong,

0:02:46.760 --> 0:02:50.400
<v Speaker 3>investors may not get to, say, have a huge say

0:02:50.400 --> 0:02:53.280
<v Speaker 3>in any changes that they would like to see. But

0:02:53.800 --> 0:02:56.560
<v Speaker 3>it's not surprising that that's something that would happen. And

0:02:57.080 --> 0:03:00.520
<v Speaker 3>for Elin it might For Elon Musk, it might allow

0:03:00.639 --> 0:03:02.880
<v Speaker 3>him to consolidate his empire somewhat.

0:03:03.240 --> 0:03:06.239
<v Speaker 4>I'm just looking at Tesla. Thees spring for Tesla does

0:03:06.280 --> 0:03:07.400
<v Speaker 4>not have a dual class.

0:03:07.720 --> 0:03:09.680
<v Speaker 2>Yeah, so maybe he learned from the first time. And

0:03:09.720 --> 0:03:12.959
<v Speaker 2>of course it's not unusual for founders to launch.

0:03:12.720 --> 0:03:13.320
<v Speaker 5>An IPO like this.

0:03:13.440 --> 0:03:15.560
<v Speaker 2>Meta has this dual class structure as well, and it's

0:03:15.600 --> 0:03:19.280
<v Speaker 2>fittingly that we're getting this confidential IPO on the day

0:03:19.320 --> 0:03:21.560
<v Speaker 2>that NASA set to launch astronauts to the Moon for

0:03:21.600 --> 0:03:25.360
<v Speaker 2>the first time in fifty years. Anthony, one thing that

0:03:25.400 --> 0:03:28.560
<v Speaker 2>we do know about SpaceX is that it acquired Xai,

0:03:28.600 --> 0:03:32.480
<v Speaker 2>which is Elon Musk's ai startup, you know, earlier this year.

0:03:32.760 --> 0:03:35.360
<v Speaker 2>What does that have to do with this IPO. Why

0:03:35.480 --> 0:03:38.520
<v Speaker 2>was that kind of a necessary step towards this IPO.

0:03:39.240 --> 0:03:41.880
<v Speaker 3>Well, I think people have different theories on that. I

0:03:41.880 --> 0:03:45.600
<v Speaker 3>think it probably makes sense for the funding needs of

0:03:45.600 --> 0:03:48.160
<v Speaker 3>their business to bring it into SpaceX. I think some

0:03:48.160 --> 0:03:53.360
<v Speaker 3>people felt that that wasn't great for It's made the

0:03:53.400 --> 0:03:56.000
<v Speaker 3>business not as attractive as a whole. But you know,

0:03:56.120 --> 0:03:57.760
<v Speaker 3>at the end of the day, I think people are

0:03:57.920 --> 0:03:59.880
<v Speaker 3>backing Elon Musk because of his track record.

0:04:00.040 --> 0:04:01.680
<v Speaker 6>It's interesting you mentioned Tesla.

0:04:01.760 --> 0:04:04.440
<v Speaker 3>I mean, that's it's just an extraordinary that we could

0:04:04.440 --> 0:04:07.640
<v Speaker 3>go back to twenty ten when Tesla went public, it

0:04:07.680 --> 0:04:09.560
<v Speaker 3>was I think it was a few hundred million dollar

0:04:09.600 --> 0:04:11.800
<v Speaker 3>IPO of a company worth a couple of billion dollars.

0:04:11.840 --> 0:04:14.160
<v Speaker 3>I mean, we're talking about such larger numbers now. But

0:04:14.480 --> 0:04:17.440
<v Speaker 3>you know, I think Xai is you know, we're going

0:04:17.520 --> 0:04:18.760
<v Speaker 3>to see some numbers there.

0:04:18.800 --> 0:04:20.480
<v Speaker 6>I mean from all reports, it's.

0:04:20.320 --> 0:04:23.520
<v Speaker 3>Been burning cash, so it's not adding to the profitability

0:04:23.640 --> 0:04:26.160
<v Speaker 3>of the overall business, so that that is a concern.

0:04:26.200 --> 0:04:29.600
<v Speaker 3>But I think because you know, we also expected to

0:04:29.600 --> 0:04:34.120
<v Speaker 3>see possibly anthropic and open AI go public this year,

0:04:34.160 --> 0:04:37.080
<v Speaker 3>I mean, there is an arms race for growing the

0:04:37.120 --> 0:04:40.320
<v Speaker 3>AI aspects, you know, growing these businesses, and you know,

0:04:40.360 --> 0:04:42.680
<v Speaker 3>I think SpaceX is going to be part of that.

0:04:42.920 --> 0:04:45.640
<v Speaker 3>And you know that's obviously as a growth element to

0:04:45.680 --> 0:04:48.560
<v Speaker 3>the business as well, but it does probably make the

0:04:48.600 --> 0:04:50.400
<v Speaker 3>financials not look as good in the short term.

0:04:50.400 --> 0:04:51.520
<v Speaker 5>But getting there first.

0:04:51.480 --> 0:04:52.680
<v Speaker 6>Yeah, exactly right.

0:04:52.920 --> 0:04:56.159
<v Speaker 4>There's been reporting that Elon may be considering kind of

0:04:56.200 --> 0:04:59.520
<v Speaker 4>rolling up all his stuff, you know, SpaceX, maybe acquiring

0:04:59.720 --> 0:05:03.440
<v Speaker 4>tes Love for example X. Yeah, I mean he's already

0:05:03.440 --> 0:05:05.279
<v Speaker 4>done that. I mean, what do we know about that?

0:05:05.480 --> 0:05:06.880
<v Speaker 4>He is Elon said anything about that?

0:05:07.040 --> 0:05:08.840
<v Speaker 3>Well, I think there's a lot of speculation about that.

0:05:09.240 --> 0:05:11.160
<v Speaker 3>But I think what we're seeing here is that Spasics

0:05:11.240 --> 0:05:14.440
<v Speaker 3>is going to go public before that happens, most likely.

0:05:15.200 --> 0:05:16.839
<v Speaker 3>I think, you know, there could be a change of plans.

0:05:16.839 --> 0:05:19.440
<v Speaker 3>You never know, but it doesn't there's sort of there

0:05:19.720 --> 0:05:22.200
<v Speaker 3>does seem to be there could be some industrial logic

0:05:22.279 --> 0:05:25.000
<v Speaker 3>in Elon Musk having all of his businesses in one

0:05:25.080 --> 0:05:28.320
<v Speaker 3>listed entity. But you know it may be for different

0:05:28.320 --> 0:05:30.560
<v Speaker 3>reasons because of the way the different these businesses are

0:05:30.600 --> 0:05:34.520
<v Speaker 3>developing and the value. You know, obviously, you know most

0:05:34.560 --> 0:05:36.680
<v Speaker 3>companies looking to go public or always trying to maximize

0:05:36.720 --> 0:05:39.520
<v Speaker 3>valuation and make sure they can have access to capital.

0:05:39.560 --> 0:05:41.640
<v Speaker 3>I mean, the thing about these businesses being so large

0:05:41.680 --> 0:05:44.880
<v Speaker 3>is they have almost I mean, for all the ups

0:05:44.880 --> 0:05:47.280
<v Speaker 3>and downs of Tesla over the years, Elon Musk has

0:05:47.279 --> 0:05:50.240
<v Speaker 3>demonstrated he's has unlimited access to capital. And this business

0:05:50.279 --> 0:05:52.240
<v Speaker 3>is going to have a good access to capital, which

0:05:52.279 --> 0:05:54.159
<v Speaker 3>is going to allow allow them to do many things.

0:05:54.640 --> 0:05:56.120
<v Speaker 6>That's the benefit of size and scale.

0:05:56.279 --> 0:05:58.280
<v Speaker 2>I know that you always look at the banks that

0:05:58.320 --> 0:06:01.200
<v Speaker 2>get signed on to do this. SpaceX has lined up

0:06:01.240 --> 0:06:04.000
<v Speaker 2>Bank of America, City Group, Golden Sacks, Japing, Morgan, and

0:06:04.040 --> 0:06:07.040
<v Speaker 2>Morgan Stanley basically the five biggest bold rocket firms, the.

0:06:06.960 --> 0:06:09.520
<v Speaker 4>Big five, So they and they're going to have dozens

0:06:09.560 --> 0:06:11.320
<v Speaker 4>and dozens of banks around the world helping them sell

0:06:11.320 --> 0:06:14.359
<v Speaker 4>this thing. All I know is I'm if I'm buying

0:06:14.400 --> 0:06:16.480
<v Speaker 4>space I'm thinking that the shareholder bass is going to

0:06:16.480 --> 0:06:18.479
<v Speaker 4>be a big overlap the people who kind of are

0:06:18.560 --> 0:06:21.080
<v Speaker 4>in the Elon camp, they're already on test of my senses,

0:06:21.120 --> 0:06:23.440
<v Speaker 4>they're going to be a very high crossover there between

0:06:23.680 --> 0:06:25.719
<v Speaker 4>Tesla and SpaceX. So at some point down the road,

0:06:25.800 --> 0:06:28.720
<v Speaker 4>particularly he has voting super voting shot shares, he might

0:06:28.760 --> 0:06:29.919
<v Speaker 4>be able to put the companies together.

0:06:30.120 --> 0:06:32.040
<v Speaker 6>Yeah, I think it's a realm. Yeah, I think it's

0:06:32.080 --> 0:06:35.960
<v Speaker 6>a reasonable theory. What's next here? So we when do

0:06:36.040 --> 0:06:37.840
<v Speaker 6>we actually get to see some of the numbers?

0:06:37.880 --> 0:06:38.400
<v Speaker 7>Do you think?

0:06:38.960 --> 0:06:39.200
<v Speaker 6>Well?

0:06:39.240 --> 0:06:41.800
<v Speaker 3>So, typically what happens is the filing will become public.

0:06:42.240 --> 0:06:45.200
<v Speaker 3>Typically that you know, there'll be a strategic decision about

0:06:45.200 --> 0:06:47.320
<v Speaker 3>when that is. But if you know, if it's the

0:06:47.360 --> 0:06:49.800
<v Speaker 3>case that the IPO was on track to actually the

0:06:49.839 --> 0:06:52.960
<v Speaker 3>company stocks actually on track to deabuts perhaps in late June,

0:06:53.080 --> 0:06:54.400
<v Speaker 3>which is you know, get in.

0:06:54.320 --> 0:06:56.920
<v Speaker 6>Before the before the before the summer, before the.

0:06:56.920 --> 0:06:59.520
<v Speaker 2>File confidentially, then why not just make it public?

0:06:59.760 --> 0:07:04.480
<v Speaker 3>Well, because confidentiality was originally as when it was first

0:07:05.200 --> 0:07:08.640
<v Speaker 3>that that sec crewd the ability for companies to file confidentially,

0:07:08.640 --> 0:07:10.400
<v Speaker 3>it was really for small companies to help you know,

0:07:10.440 --> 0:07:13.080
<v Speaker 3>small companies go public, but it's over time it was

0:07:13.080 --> 0:07:14.880
<v Speaker 3>extended to every company. So it was just something that

0:07:14.920 --> 0:07:17.640
<v Speaker 3>was available to all companies. So it's something you would use.

0:07:17.680 --> 0:07:21.640
<v Speaker 3>But yeah, and this in this case, you know it,

0:07:21.840 --> 0:07:25.120
<v Speaker 3>it doesn't matter that much in this situation because Spaceally.

0:07:25.160 --> 0:07:28.000
<v Speaker 3>All happen is SpaceX will now be able to go

0:07:28.040 --> 0:07:30.920
<v Speaker 3>out and start meeting investors, and they'll be able to

0:07:31.000 --> 0:07:33.640
<v Speaker 3>use information in that filing when they're talking to investors,

0:07:33.640 --> 0:07:36.840
<v Speaker 3>still in a confidential way that's not really you know, public,

0:07:36.960 --> 0:07:40.520
<v Speaker 3>but the filing of the document will allow SpaceX to

0:07:40.560 --> 0:07:42.760
<v Speaker 3>say say lots of things to investors that they wouldn't

0:07:42.760 --> 0:07:44.520
<v Speaker 3>otherwise be able to say. That's our understanding of the

0:07:44.640 --> 0:07:48.480
<v Speaker 3>legal legal position there, and so you know, it's it's

0:07:48.520 --> 0:07:50.480
<v Speaker 3>really they'll be doing a lot of testing the waters meetings.

0:07:50.960 --> 0:07:53.880
<v Speaker 3>The meetings is supposedly starting next week and so then

0:07:53.920 --> 0:07:54.760
<v Speaker 3>it's really full steam.

0:07:54.840 --> 0:07:56.600
<v Speaker 6>Head here Stee with us.

0:07:56.640 --> 0:07:58.800
<v Speaker 5>More from Boomerick Intelligence coming up after this.

0:08:02.520 --> 0:08:06.200
<v Speaker 1>You're listening to the Bloomberg Intelligence podcast. Catch us live

0:08:06.280 --> 0:08:09.360
<v Speaker 1>weekdays at ten am Eastern on Apple, Cocklay and Android

0:08:09.360 --> 0:08:12.679
<v Speaker 1>Auto with the Bloomberg Business app. Listen on demand wherever

0:08:12.760 --> 0:08:15.840
<v Speaker 1>you get your podcasts, or watch us live on YouTube.

0:08:16.600 --> 0:08:20.520
<v Speaker 2>Shares of Nike down almost fourteen percent after its latest

0:08:20.520 --> 0:08:23.480
<v Speaker 2>earnings report. The last quarter was fine. It's the outlook

0:08:23.520 --> 0:08:26.160
<v Speaker 2>that has people a little bit concerned. Lily Meyer is

0:08:26.160 --> 0:08:28.840
<v Speaker 2>our retail reporter, and she joins us.

0:08:29.520 --> 0:08:30.400
<v Speaker 5>Actually, is she here?

0:08:31.560 --> 0:08:32.199
<v Speaker 6>Don't she is?

0:08:32.240 --> 0:08:33.920
<v Speaker 2>Okay, I'm sorry. I thought she was gonna be in studio,

0:08:33.960 --> 0:08:36.360
<v Speaker 2>but I was wrong. Okay, Lily, great to speak with you.

0:08:37.360 --> 0:08:40.040
<v Speaker 2>What is it specifically that Nike said that got people

0:08:40.080 --> 0:08:44.600
<v Speaker 2>concerned because we've been conditioned to really understand that Nike

0:08:44.720 --> 0:08:46.440
<v Speaker 2>is in turnaround mode, so it's not going to be

0:08:46.440 --> 0:08:47.319
<v Speaker 2>a straight line up.

0:08:48.640 --> 0:08:51.079
<v Speaker 5>Yeah, exactly, and I think they're still still fair to

0:08:51.120 --> 0:08:54.120
<v Speaker 5>say there and turn around. What really spooked investors was

0:08:54.559 --> 0:08:57.240
<v Speaker 5>they shared that the outlook for revenue for the year

0:08:58.080 --> 0:09:01.560
<v Speaker 5>is just much lower than the street expected. They're still

0:09:01.600 --> 0:09:04.720
<v Speaker 5>having challenges with Converse. They're now seeing some challenges in

0:09:04.760 --> 0:09:07.720
<v Speaker 5>EMEYA and that's offset some of the gains in North

0:09:07.760 --> 0:09:09.640
<v Speaker 5>America and in the running category.

0:09:10.240 --> 0:09:12.160
<v Speaker 4>Lily talk to us about the inventories, because I know

0:09:12.240 --> 0:09:14.480
<v Speaker 4>that was a big issue for this company. Hey, let

0:09:14.520 --> 0:09:17.720
<v Speaker 4>us just kind of get through weaning down our inventory

0:09:17.720 --> 0:09:20.000
<v Speaker 4>and then we'll be in good shape. I thought they

0:09:20.040 --> 0:09:22.480
<v Speaker 4>were making progress there, and I think I probably I'm

0:09:22.480 --> 0:09:24.800
<v Speaker 4>probably representing the market here because the market, I guess

0:09:24.920 --> 0:09:26.720
<v Speaker 4>was surprised here talk to us about inventory.

0:09:27.559 --> 0:09:27.800
<v Speaker 6>Yeah.

0:09:27.840 --> 0:09:30.240
<v Speaker 5>So one place that inventories came up this quarter that

0:09:30.320 --> 0:09:32.680
<v Speaker 5>was interesting is they said that they're seeing some elevated

0:09:32.800 --> 0:09:36.880
<v Speaker 5>inventories in EMEA, in Europe, in the Middle East, and

0:09:36.920 --> 0:09:40.200
<v Speaker 5>they're also seeing some traffic disruption there from the war.

0:09:41.960 --> 0:09:44.600
<v Speaker 2>What is it specifically with China that's been an issue

0:09:44.600 --> 0:09:47.800
<v Speaker 2>because inventories has been a problem there, But it goes

0:09:47.840 --> 0:09:50.800
<v Speaker 2>beyond that. I mean, it goes to a weakness in

0:09:51.240 --> 0:09:55.800
<v Speaker 2>consumer spending and rising competition. But Nike has been really

0:09:55.800 --> 0:09:58.640
<v Speaker 2>struggling to get its China business. It's Greater China business

0:09:58.800 --> 0:09:59.959
<v Speaker 2>back to what it.

0:10:01.400 --> 0:10:03.360
<v Speaker 5>Yeah, exactly, So I would say it's you know, a

0:10:03.360 --> 0:10:07.360
<v Speaker 5>lot of increased competition there. And this quarter they did

0:10:07.400 --> 0:10:10.440
<v Speaker 5>show some improvement in Greater China. I think, you know,

0:10:10.559 --> 0:10:13.360
<v Speaker 5>things turned around a little bit more than was expected,

0:10:13.480 --> 0:10:17.319
<v Speaker 5>but still not enough to excite investors.

0:10:17.920 --> 0:10:22.400
<v Speaker 2>And one area that's really been weak for Nike is converse.

0:10:22.840 --> 0:10:24.800
<v Speaker 2>I don't know about you, but I love Converse sinkers,

0:10:24.800 --> 0:10:29.959
<v Speaker 2>but I also yep exactly, and Converse sales fell more than expected.

0:10:30.240 --> 0:10:32.360
<v Speaker 2>I think you have something like a fifteen year low

0:10:32.520 --> 0:10:35.360
<v Speaker 2>in your stories. What is going on there because it

0:10:35.440 --> 0:10:37.920
<v Speaker 2>has attracted some interest.

0:10:38.640 --> 0:10:41.240
<v Speaker 5>Yeah, so Converse has been one of the most stubborn

0:10:41.440 --> 0:10:44.960
<v Speaker 5>parts of the business to turn around under Elliott Hill.

0:10:45.120 --> 0:10:48.360
<v Speaker 5>So I think, you know, Nik has really relied on

0:10:48.440 --> 0:10:51.840
<v Speaker 5>Converse for the Chuck Taylor but has struggled to diversify

0:10:51.880 --> 0:10:54.319
<v Speaker 5>outside of that. So they're trying to make a basketball push,

0:10:54.400 --> 0:10:56.800
<v Speaker 5>but you know, we're not seeing a lot of progress

0:10:56.880 --> 0:11:03.000
<v Speaker 5>in that area. And you know, we reported yesterday that they,

0:11:03.200 --> 0:11:06.040
<v Speaker 5>you know, Authentic Brands has expressed some interest in Converse,

0:11:06.080 --> 0:11:09.480
<v Speaker 5>so we'll see what happens there. Nike has said, you know,

0:11:09.720 --> 0:11:13.960
<v Speaker 5>they're still invested in Converse, but it hasn't it hasn't

0:11:13.960 --> 0:11:14.880
<v Speaker 5>turned around yet.

0:11:15.040 --> 0:11:17.560
<v Speaker 4>You know, it's literally just for Nike overall. When I

0:11:17.600 --> 0:11:19.000
<v Speaker 4>think of them, I think of them as just one

0:11:19.080 --> 0:11:22.800
<v Speaker 4>of the great consumer product brands with just the you know,

0:11:22.880 --> 0:11:28.000
<v Speaker 4>the coolest, cutting edge, leading edge kind of products. It

0:11:28.120 --> 0:11:30.959
<v Speaker 4>feels like maybe they've they've lost that is I mean,

0:11:31.160 --> 0:11:33.520
<v Speaker 4>how concerned are people that they just kind of lost

0:11:33.559 --> 0:11:34.480
<v Speaker 4>the feel for the market.

0:11:35.920 --> 0:11:39.120
<v Speaker 5>Yeah, I mean I think innovation was definitely a concern

0:11:39.760 --> 0:11:43.720
<v Speaker 5>prior to Elliott joining. So under John Donna. One of

0:11:43.760 --> 0:11:46.840
<v Speaker 5>the biggest concerns was there was a lack of innovation.

0:11:47.000 --> 0:11:49.880
<v Speaker 5>Nike was relying too much on some of their lifestyle products,

0:11:49.960 --> 0:11:52.559
<v Speaker 5>so on the Dunks, the Air Jordan ones, the Air

0:11:52.600 --> 0:11:56.960
<v Speaker 5>Force ones. Elliott has really refocused the business around sport

0:11:57.080 --> 0:11:59.480
<v Speaker 5>and he's been trying to innovate in that category. Nike

0:11:59.559 --> 0:12:02.240
<v Speaker 5>had some new product come out around the Olympics, so

0:12:02.440 --> 0:12:04.520
<v Speaker 5>I think that's an area to watch closely, you know,

0:12:04.559 --> 0:12:08.160
<v Speaker 5>seeing how much innovation they're able to pump out.

0:12:08.840 --> 0:12:11.040
<v Speaker 2>And speaking of Elliot Hill, he's been on the job

0:12:11.080 --> 0:12:13.400
<v Speaker 2>for now one and a half years. Is does he

0:12:13.480 --> 0:12:15.719
<v Speaker 2>own everything that's happened or does he still get a

0:12:15.760 --> 0:12:17.440
<v Speaker 2>little bit of a pass. I mean, I imagine that

0:12:17.520 --> 0:12:21.000
<v Speaker 2>it's frustrating for investors, is frustrating for him as well

0:12:21.080 --> 0:12:23.040
<v Speaker 2>to kind of see this stop and start progress.

0:12:24.600 --> 0:12:27.160
<v Speaker 5>Yeah, so I think that In one of our stories today,

0:12:27.200 --> 0:12:30.240
<v Speaker 5>we said that shares are down more than thirty five

0:12:30.360 --> 0:12:34.240
<v Speaker 5>percent since he started, despite him executing a new strategy.

0:12:34.679 --> 0:12:39.000
<v Speaker 5>He you know, on a call with employees, you know,

0:12:39.040 --> 0:12:42.200
<v Speaker 5>said he was taught so tired, you know, talking about

0:12:42.240 --> 0:12:45.600
<v Speaker 5>fixing the business. I think he's definitely starting. It seems

0:12:45.600 --> 0:12:47.480
<v Speaker 5>like he's starting to feel some of the frustration there

0:12:47.559 --> 0:12:49.319
<v Speaker 5>the business not turning around.

0:12:50.280 --> 0:12:50.880
<v Speaker 6>Stay with us.

0:12:51.040 --> 0:12:53.400
<v Speaker 4>More from Bloomberg Intelligence coming up after this.

0:12:57.280 --> 0:13:00.960
<v Speaker 1>You're listening to the Bloomberg Intelligence podcast. Catch us live

0:13:01.040 --> 0:13:04.160
<v Speaker 1>weekdays at ten am Eastern on Apple, Cocklay and Android

0:13:04.160 --> 0:13:07.480
<v Speaker 1>Auto with the Bloomberg Business App. Listen on demand wherever

0:13:07.520 --> 0:13:10.640
<v Speaker 1>you get your podcasts, or watch us live on YouTube.

0:13:11.520 --> 0:13:14.360
<v Speaker 2>All right, let's switch gears and look at some other

0:13:14.400 --> 0:13:16.679
<v Speaker 2>companies that are on the move. And I'm paying attention

0:13:16.760 --> 0:13:20.480
<v Speaker 2>to our H Restoration Hardware. The stock is plunging. It's

0:13:20.520 --> 0:13:23.160
<v Speaker 2>down a quarter today, a quarter of its market value

0:13:23.240 --> 0:13:27.200
<v Speaker 2>lost just this morning. Lindsay Dutch is our consumer Hardlines

0:13:27.280 --> 0:13:30.319
<v Speaker 2>senior analyst at Bloomberg Intelligence and she joins us now.

0:13:30.360 --> 0:13:33.120
<v Speaker 2>So this is very much a play on the consumer

0:13:33.200 --> 0:13:36.400
<v Speaker 2>and a higher end consumer as well. Lindsay, what do

0:13:36.440 --> 0:13:39.040
<v Speaker 2>we know about our H and the outlook it's given?

0:13:40.360 --> 0:13:43.720
<v Speaker 7>Hi, Paul, Hi Scarlett, thanks for having me. Yeah. So

0:13:43.800 --> 0:13:46.200
<v Speaker 7>our AH miss both on the top and the bottom

0:13:46.280 --> 0:13:49.240
<v Speaker 7>line when we looked at fourth quarter earnings. But I

0:13:49.280 --> 0:13:50.920
<v Speaker 7>think worse is when we.

0:13:50.840 --> 0:13:52.280
<v Speaker 5>Look at this year.

0:13:52.960 --> 0:13:57.880
<v Speaker 7>The outlook was well below expectations, including expecting a sales

0:13:57.960 --> 0:14:01.720
<v Speaker 7>decline in the first quarter. That kind of tells me

0:14:02.000 --> 0:14:05.160
<v Speaker 7>between the miss and the bad look for first quarter

0:14:05.679 --> 0:14:09.000
<v Speaker 7>that demand has really dropped and they're really going to

0:14:09.080 --> 0:14:11.880
<v Speaker 7>count on a big spike in the back half of

0:14:11.920 --> 0:14:14.880
<v Speaker 7>the year with a new collection coming to sort of

0:14:14.960 --> 0:14:17.720
<v Speaker 7>drive that growth heading into twenty seven. But the first

0:14:17.720 --> 0:14:19.600
<v Speaker 7>half of the year certainly looks challenged.

0:14:20.240 --> 0:14:22.240
<v Speaker 4>DA how much of this You know, when we talk

0:14:22.320 --> 0:14:24.000
<v Speaker 4>to you about your companies that one of the questions

0:14:24.040 --> 0:14:25.760
<v Speaker 4>I always have is how much of this is industry

0:14:25.760 --> 0:14:27.800
<v Speaker 4>wide versus company specific?

0:14:27.880 --> 0:14:28.040
<v Speaker 5>Year?

0:14:28.960 --> 0:14:30.960
<v Speaker 7>Yeah, so for our age, I do think that it

0:14:31.120 --> 0:14:32.880
<v Speaker 7>is a company specific story.

0:14:33.480 --> 0:14:35.680
<v Speaker 5>When we look back at last year. They did grow.

0:14:35.560 --> 0:14:38.800
<v Speaker 7>Sales eight percent. That's pretty impressive in the environment that

0:14:38.840 --> 0:14:42.240
<v Speaker 7>they were playing in. That is above the peer average.

0:14:42.280 --> 0:14:45.680
<v Speaker 7>But they do play to a very niche customer and

0:14:45.720 --> 0:14:49.520
<v Speaker 7>they are striving to be a luxury brand, and they're

0:14:49.560 --> 0:14:53.120
<v Speaker 7>moves to make waves in that space. You know, do

0:14:53.320 --> 0:14:56.160
<v Speaker 7>cost a lot of money. They're investing very heavily. They're

0:14:56.280 --> 0:15:00.040
<v Speaker 7>they're opening galleries all over the globe, and I I

0:15:00.080 --> 0:15:02.400
<v Speaker 7>think that there was just a lot of disappointment in

0:15:02.760 --> 0:15:07.800
<v Speaker 7>this coming year that growth might slow again and their

0:15:07.840 --> 0:15:10.080
<v Speaker 7>long term targets are well out of.

0:15:09.960 --> 0:15:12.320
<v Speaker 5>Reach, and I'm just looking at Wayfair.

0:15:12.400 --> 0:15:16.000
<v Speaker 2>Those stocks are modestly lower, Ethan Allen Interiors modestly higher.

0:15:16.080 --> 0:15:17.720
<v Speaker 2>So I'm not sure there's much of a read through

0:15:17.760 --> 0:15:21.920
<v Speaker 2>to some of the other furniture companies that are out there.

0:15:22.040 --> 0:15:24.440
<v Speaker 2>But lindsay, how much are tariffs are part of this

0:15:24.520 --> 0:15:25.720
<v Speaker 2>story for our h.

0:15:26.840 --> 0:15:30.280
<v Speaker 7>Yeah, so tariffs have played a piece here. They cost

0:15:30.280 --> 0:15:33.280
<v Speaker 7>about one hundred and ninety basis points in margin in

0:15:33.360 --> 0:15:37.640
<v Speaker 7>the fourth quarter. Their guidance is kind of including a

0:15:37.680 --> 0:15:41.240
<v Speaker 7>similar hit for this coming year. The bigger thing for

0:15:41.320 --> 0:15:44.360
<v Speaker 7>this year, as I mentioned, is you know, tremendous investment

0:15:44.480 --> 0:15:48.640
<v Speaker 7>going into the business. They're expecting contra erosion in their

0:15:48.680 --> 0:15:52.080
<v Speaker 7>margin again this year. You know, investors aren't liking that.

0:15:52.120 --> 0:15:55.240
<v Speaker 7>They've kind of missed their profit goals for the past

0:15:55.320 --> 0:15:57.800
<v Speaker 7>year or so, and we're looking at another year of

0:15:57.880 --> 0:16:01.520
<v Speaker 7>heavy investment pressure on them margin, even if we see

0:16:01.520 --> 0:16:05.080
<v Speaker 7>some of that tariff costs come down a bit, but

0:16:05.120 --> 0:16:07.920
<v Speaker 7>it's definitely a factor. They've also talked about, you know,

0:16:08.200 --> 0:16:11.960
<v Speaker 7>significantly moving their sourcing around, which is part of the

0:16:12.040 --> 0:16:15.640
<v Speaker 7>slowdown in that first quarter, you know, reworking that and

0:16:15.680 --> 0:16:17.280
<v Speaker 7>they might have a little bit of a less product

0:16:17.360 --> 0:16:19.720
<v Speaker 7>to sell until we get later into the year.

0:16:20.640 --> 0:16:22.720
<v Speaker 6>Lindsay, what are they doing with e commerce?

0:16:23.000 --> 0:16:23.320
<v Speaker 1>Have a thing.

0:16:23.360 --> 0:16:24.720
<v Speaker 4>If I'm going to buy a sofa, I want to

0:16:24.760 --> 0:16:26.560
<v Speaker 4>go into the store and see it, sit on it,

0:16:26.600 --> 0:16:28.800
<v Speaker 4>that kind of stuff. Talk to us about their e

0:16:28.840 --> 0:16:30.280
<v Speaker 4>commerce strategy. How's that played?

0:16:30.960 --> 0:16:33.240
<v Speaker 7>Yeah, so e commerce is a very small piece of

0:16:33.280 --> 0:16:37.640
<v Speaker 7>their business and the openings that they're they're looking at doing,

0:16:38.760 --> 0:16:41.520
<v Speaker 7>you know in Paris and Milan. You know, they are

0:16:41.560 --> 0:16:48.280
<v Speaker 7>really leaning into that experiential vibe and wanting people to

0:16:48.320 --> 0:16:51.640
<v Speaker 7>come see their product in person, feel it, and really

0:16:51.720 --> 0:16:55.720
<v Speaker 7>understand the quality. So they are leaning into expansion. We

0:16:55.800 --> 0:17:00.000
<v Speaker 7>actually see their peer Williams Sonoma is also expanding store

0:17:00.040 --> 0:17:02.800
<v Speaker 7>yours for the first time in almost ten years. So

0:17:02.840 --> 0:17:06.439
<v Speaker 7>we're seeing some of these bigger furniture companies. You know,

0:17:06.520 --> 0:17:09.879
<v Speaker 7>even though they are focused on growing that online presence,

0:17:10.080 --> 0:17:13.080
<v Speaker 7>they really much want their customer to come into the

0:17:13.119 --> 0:17:16.560
<v Speaker 7>store and see the product, and they're willing to invest

0:17:16.640 --> 0:17:17.119
<v Speaker 7>to do that.

0:17:18.480 --> 0:17:23.159
<v Speaker 1>This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,

0:17:23.359 --> 0:17:26.840
<v Speaker 1>and anywhere else you get your podcasts. Listen live each

0:17:26.880 --> 0:17:30.600
<v Speaker 1>weekday ten am to noon Eastern on Bloomberg dot Com.

0:17:30.720 --> 0:17:34.280
<v Speaker 1>The iHeartRadio app tune In, and the Bloomberg Business app.

0:17:34.680 --> 0:17:37.640
<v Speaker 1>You can also watch us live every weekday on YouTube

0:17:38.000 --> 0:17:40.240
<v Speaker 1>and always on the Bloomberg terminal