WEBVTT - BI Weekend: Nike Turnaround, Airlines Outlook, AWS Growth 0:00:00.240 --> 0:00:11.480 Bloomberg Audio, Studios, podcasts, radio news. This is Bloomberg Intelligence 0:00:11.560 --> 0:00:13.640 with Scarletfoo and Paul Sweeney. 0:00:13.720 --> 0:00:15.800 How do you think the FED is looking at tariffs? 0:00:15.960 --> 0:00:17.160 The uncertainty of terriffs. 0:00:17.280 --> 0:00:19.240 Let's take a look at the sectors and how they 0:00:19.320 --> 0:00:21.800 performed a lot of investors getting whipsaled every day by 0:00:21.840 --> 0:00:24.520 news events, breaking market headlines. 0:00:24.000 --> 0:00:26.239 And corporate news from across the globe. 0:00:26.280 --> 0:00:28.800 Could we see a market disruption of market event? 0:00:28.960 --> 0:00:31.000 So people just too exuberant out there? 0:00:31.120 --> 0:00:33.640 You see some so called low quality stocks driving this 0:00:33.760 --> 0:00:34.520 short term rally. 0:00:34.560 --> 0:00:39.360 Bloomberg Intelligence with Scarletfoo and Paul Sweeney on Bloomberg Radio, 0:00:39.520 --> 0:00:41.440 YouTube and Bloomberg Originals. 0:00:42.320 --> 0:00:44.599 On today's Bloomberg Intelligence Show, we dig inside the big 0:00:44.600 --> 0:00:46.920 business story is impacting Wall Street and the global markets. 0:00:47.120 --> 0:00:49.400 Each and every week we provide in depth research and 0:00:49.479 --> 0:00:51.319 data on some of the two thousand companies and one 0:00:51.400 --> 0:00:54.240 hundred and thirty industries are analysts cover worldwide today? 0:00:54.280 --> 0:00:56.240 Well, look at why you turnaround at the footwear giant 0:00:56.320 --> 0:00:58.560 Nike is beginning to take hold in North America. 0:00:58.600 --> 0:01:00.920 Plus a look at why Amazon cloud sales may get 0:01:00.920 --> 0:01:02.720 a push from AI in twenty twenty six. 0:01:02.960 --> 0:01:07.000 But first recently on Bloomberg Intelligence, we discussed HBO show Industry. 0:01:07.160 --> 0:01:10.280 Industry is a high six drama following young graduates competing 0:01:10.280 --> 0:01:12.960 for careers in a prestigious London investment bank. 0:01:13.160 --> 0:01:15.760 Now in season four, this year the bank has folded 0:01:15.840 --> 0:01:18.000 and some of these junior bankers have become power players 0:01:18.000 --> 0:01:19.920 in finance, business and politics. 0:01:19.959 --> 0:01:21.840 For more on the show, we sat down with Mickey 0:01:21.880 --> 0:01:25.360 Down and Conrad k co creators, writers and executive producers 0:01:25.400 --> 0:01:28.959 of the HBO show Industry. We began by asking Mickey 0:01:28.959 --> 0:01:31.200 Down about the theme for season four. 0:01:31.520 --> 0:01:34.680 Wow, what a big question. I think the theme season 0:01:34.680 --> 0:01:37.559 four is as you said, you know, these kindacters didn't 0:01:37.600 --> 0:01:39.520 have power, and it was about the recruing power. Now 0:01:39.520 --> 0:01:41.280 they have power, what do they decide to do with it? 0:01:41.560 --> 0:01:44.680 And how does it corrupt them? How does it mutate them? 0:01:44.800 --> 0:01:48.080 And is there a way out of this institution, this life, 0:01:48.240 --> 0:01:49.520 this industry. 0:01:49.640 --> 0:01:52.320 You know, I spent thirty five years on Wall Street, 0:01:52.320 --> 0:01:53.920 you and the many years on a trading desk. You 0:01:53.960 --> 0:01:56.040 guys get it. I mean you got it. I don't 0:01:56.040 --> 0:01:57.880 know how you guys did that. Did you guys work 0:01:57.920 --> 0:01:59.640 on in the financial services before? 0:01:59.680 --> 0:02:00.280 Conrade? I did? 0:02:00.400 --> 0:02:00.600 Yeah? 0:02:00.600 --> 0:02:03.000 After I graduated college. I was. I was a US 0:02:03.120 --> 0:02:07.680 equity sales guy Morgan Stanley for three years and I 0:02:07.720 --> 0:02:09.480 was famously when my boss let me go, he said 0:02:09.480 --> 0:02:10.639 I was the worst salesman he'd. 0:02:10.480 --> 0:02:11.440 Ever met Wall Street. 0:02:11.919 --> 0:02:13.440 So it was like, go and do something else because 0:02:13.440 --> 0:02:14.400 you're pretty useless of this. 0:02:14.840 --> 0:02:16.679 Well that's a true Wall Street career, yet kind of 0:02:16.720 --> 0:02:18.480 Wall Street career until you've been fired from Wall Street. 0:02:19.080 --> 0:02:24.360 That's what I've been there myself. You guys, what's the 0:02:24.440 --> 0:02:26.799 state of the industry in London these states? I mean, 0:02:26.800 --> 0:02:28.760 how are people how are the young people feeling in 0:02:28.800 --> 0:02:31.680 the industry, Because you guys reflect that with your show 0:02:31.880 --> 0:02:32.280 very well. 0:02:32.480 --> 0:02:34.959 Well, I think I'll show is a reflection of almost 0:02:35.160 --> 0:02:37.000 like ten years ago when we were in it, and 0:02:37.040 --> 0:02:39.040 I feel like people like me and Cornell would never 0:02:39.040 --> 0:02:39.920 have been all out in the industry. 0:02:39.919 --> 0:02:40.079 Now. 0:02:40.080 --> 0:02:42.320 I think it's become a lot more technocratic. We both 0:02:42.360 --> 0:02:43.280 did art subjects. 0:02:43.280 --> 0:02:46.160 It's so underqualified you don't believe we were. 0:02:47.120 --> 0:02:50.560 I'm not a great mathematician, but you speaking to a 0:02:50.600 --> 0:02:52.640 literature graduate and a theologian. 0:02:52.160 --> 0:02:55.600 So derivetis exalted. 0:02:55.639 --> 0:02:58.200 Derivatives were not strong in England? Is that allowed? 0:02:58.960 --> 0:03:01.760 So there's no room for the arts majors on Global 0:03:01.800 --> 0:03:03.919 Wall Street anymore. And what's apparent is the show has 0:03:03.960 --> 0:03:07.000 become less about banking and more about wealth and resources 0:03:07.760 --> 0:03:08.720 and the leveraging of that. 0:03:08.800 --> 0:03:11.440 So, sure, Comrad, what are you saying about. 0:03:11.200 --> 0:03:14.200 Capitalism and how it interacts with politics with media? 0:03:14.200 --> 0:03:15.840 I don't know. I mean the thing is that as 0:03:15.840 --> 0:03:17.720 we've written the show, we've realized that more and more 0:03:17.760 --> 0:03:20.280 we're writing really about the class system in the UK. 0:03:20.520 --> 0:03:23.680 Who has power, who doesn't have power, who's born into power, 0:03:23.680 --> 0:03:26.480 and the sort of relative different class ceilings people face. 0:03:26.600 --> 0:03:28.600 Like I think season one was a kind of experiment 0:03:28.680 --> 0:03:31.240 because they were the main characters were from such different 0:03:31.240 --> 0:03:34.200 socioeconomic backgrounds that they were always bumping up against different 0:03:34.960 --> 0:03:36.800 different ceilings. And then in terms of like me and 0:03:36.840 --> 0:03:39.160 Mickey never set out every season to say something, did 0:03:39.200 --> 0:03:41.720 I take about capitalism? Like I think the show is, 0:03:42.280 --> 0:03:44.560 the show has something to say if you're looking underneath 0:03:44.560 --> 0:03:46.600 it. It has like a very strong subtext. But like we 0:03:46.640 --> 0:03:48.480 set out to make eight hours and the most entertaining 0:03:48.520 --> 0:03:51.600 thing we can, like nine pm on HBO really means something. Still, 0:03:52.120 --> 0:03:53.720 all we care about is entertaining an audience. 0:03:53.760 --> 0:03:56.680 Really, how was it getting a show on the air. 0:03:56.720 --> 0:04:00.240 Of these days, there's so many different platforms to be 0:04:00.320 --> 0:04:02.920 pitched to a handful of networks and hope for the best. 0:04:03.000 --> 0:04:05.320 Now you can go anywhere on these streaming platforms. How 0:04:05.360 --> 0:04:08.160 does that impact from the creator's perspective. 0:04:08.280 --> 0:04:11.000 Well, I think there's there are fewer options than there 0:04:11.040 --> 0:04:13.080 were at least five years ago. I think there's been 0:04:13.080 --> 0:04:15.200 a massive contraction in the industry. I think it's actually 0:04:15.280 --> 0:04:17.000 much harder to get something on TV than it was 0:04:17.080 --> 0:04:20.080 when we started. You know, we were two guys x financiers, 0:04:20.160 --> 0:04:23.840 grandiose term who were given an opportunity to make something 0:04:23.839 --> 0:04:26.159 on a relatively small budget by the biggest network, most 0:04:26.160 --> 0:04:28.560 prestigious network. I just think that wouldn't happen now. I 0:04:28.560 --> 0:04:31.120 think we were No, it's an original show. It's it's 0:04:31.120 --> 0:04:34.040 not IP driven. We don't have any fat fans to surface, 0:04:34.120 --> 0:04:36.159 it's not a comic book. That kind of show is 0:04:36.240 --> 0:04:39.279 just they're few in part between now and there are 0:04:39.320 --> 0:04:41.880 lots of different training platforms and not different outlets. But 0:04:41.880 --> 0:04:43.760 I think actually we're just making a lot less stuff. 0:04:43.760 --> 0:04:44.960 We were really in the right place at the right 0:04:45.000 --> 0:04:46.880 time when we started developing the show about ten years ago, 0:04:46.880 --> 0:04:48.440 because it was the real goal rush of team Yeah 0:04:48.440 --> 0:04:50.039 in terms of the amount of content getting created. 0:04:50.080 --> 0:04:51.000 Netflix came in. 0:04:51.320 --> 0:04:54.479 Disrupted the whole model by flooding, flooding the zone with 0:04:54.560 --> 0:04:57.599 cash and quantity, and we were just in the right 0:04:57.640 --> 0:04:58.400 place at the right time. 0:04:58.520 --> 0:05:00.920 Someone you know, Season four is rolling out right when 0:05:01.040 --> 0:05:03.840 HBO's parent company, Warner Brothers, is in the middle of 0:05:03.880 --> 0:05:06.120 a drawn out bidding war, something that Paul and I 0:05:06.120 --> 0:05:08.480 have joked about would make a really worthy Sunday Night 0:05:08.560 --> 0:05:11.279 series of its own. Were you ever tempted to draw 0:05:11.320 --> 0:05:14.080 any parallels between the show and the real life drama 0:05:14.120 --> 0:05:17.520 that's going on to your corporate parent I. 0:05:17.520 --> 0:05:18.880 Think another HBO show what he did? 0:05:19.120 --> 0:05:21.960 Yeah, very successful one more emmy than us. 0:05:22.400 --> 0:05:23.160 Will leave it to them. 0:05:23.320 --> 0:05:24.880 Yeah, but you know, you could have made it really matter. 0:05:24.960 --> 0:05:27.920 For instance, for sure, surprisingly they don't consult on something 0:05:27.960 --> 0:05:30.200 in the other maybe I should. 0:05:30.360 --> 0:05:32.239 The other thing that I noticed is that you introduced 0:05:32.240 --> 0:05:34.480 a lot of new characters this season played by American 0:05:34.520 --> 0:05:38.600 actors Kieran and Shipka, formerly of Mad Men maximin Gilla. 0:05:38.600 --> 0:05:40.720 He's English, but he plays an American character. Why do 0:05:40.800 --> 0:05:43.080 you put so much of a focus on Americans? In London, 0:05:43.720 --> 0:05:45.480 given that you're both British, I mean, and it takes 0:05:45.480 --> 0:05:46.200 place in London. 0:05:46.320 --> 0:05:48.159 It's interesting, Well, finance. 0:05:47.920 --> 0:05:50.560 Is a global industry. I think obviously there's a lot 0:05:50.560 --> 0:05:53.200 of you know, international people who finance was my experience 0:05:53.200 --> 0:05:56.560 working in the financial services industry. And the show was 0:05:56.680 --> 0:05:59.719 originally conceived as a kind of outside the status show. 0:05:59.760 --> 0:06:02.279 It was about someone coming into an inside world, and 0:06:02.400 --> 0:06:04.880 you know, that was encapsulated by Harper, who's a black 0:06:04.920 --> 0:06:08.000 American woman from coming into the UK, which is obviously 0:06:08.040 --> 0:06:11.200 rigidly class based, and that felt really interesting. We just 0:06:11.320 --> 0:06:13.120 like to I know, we like a mishmash of voices. 0:06:13.160 --> 0:06:14.800 I mean, there was some people complain about the show 0:06:14.960 --> 0:06:17.160 and his accents and an amount of different accents that 0:06:17.200 --> 0:06:18.360 are in the show, but we just love. 0:06:18.680 --> 0:06:21.119 I think I'm just thinking of giving an American audience 0:06:21.120 --> 0:06:22.680 and access point to the show because, as Mickey said, 0:06:22.680 --> 0:06:25.719 it's very jarg and heavy show. It's loaded with Britishism, slag, 0:06:25.800 --> 0:06:28.719 British slang, British codes of conduct. We wanted to give 0:06:28.800 --> 0:06:30.719 Americans a bit of a foothold into what we're trying 0:06:30.720 --> 0:06:31.360 to do. 0:06:31.400 --> 0:06:33.840 Just real quickly, who's your audience like what's a typical 0:06:33.960 --> 0:06:35.080 viewer of your show. 0:06:35.400 --> 0:06:39.600 I'm talking very wide, very wide in terms of demographically, 0:06:39.600 --> 0:06:41.760 in terms of age. I mean, i'd say Casus to 0:06:41.800 --> 0:06:43.560 everyone from eighteen to eighty. 0:06:43.520 --> 0:06:44.360 Really really does. 0:06:44.600 --> 0:06:46.120 My ninety four year old grandmother loves it. 0:06:46.920 --> 0:06:50.560 You guys, email you guys all the time. What's the 0:06:50.760 --> 0:06:51.600 number one feedback? 0:06:52.480 --> 0:06:53.400 You're getting us wrong? 0:06:53.880 --> 0:06:56.880 Or ride or you're getting your ride I could do better. 0:06:57.360 --> 0:07:00.320 Or it's really become a bit of a recruitment tool. 0:07:00.480 --> 0:07:01.720 If people was saying that that's the reason they go 0:07:01.760 --> 0:07:03.520 into wool Street reach, Oh my gosh, that's actually what 0:07:03.520 --> 0:07:03.840 I wanted. 0:07:04.360 --> 0:07:07.680 My mine was Wall Street with Michael Douglas. 0:07:08.080 --> 0:07:09.240 That was mine as well. 0:07:10.280 --> 0:07:13.320 Our thanks to Mickey Down and Conrad k co creators, writers, 0:07:13.320 --> 0:07:16.000 and executive producers of the HBO show industry. 0:07:16.280 --> 0:07:17.880 We move next to the world of sports. With the 0:07:17.920 --> 0:07:20.240 Super Bowl less than five weeks away, the run up 0:07:20.280 --> 0:07:22.160 to the Big Game on February eighth could be a 0:07:22.240 --> 0:07:25.120 key window for sports spreading companies like Draft Kings and FanDuel. 0:07:25.320 --> 0:07:28.200 According to Bloomberg Intelligence, this time period could allow the 0:07:28.200 --> 0:07:31.560 companies to expand distribution of the new prediction markets apps 0:07:31.760 --> 0:07:33.160 available in seventeen States. 0:07:33.160 --> 0:07:36.120 We're joined by Brian Egger, Bloomberg Intelligence senior gaming and 0:07:36.160 --> 0:07:37.000 lodging analysts. 0:07:37.320 --> 0:07:39.760 We first asked Brian about how DraftKings and Fandel have 0:07:39.840 --> 0:07:42.160 been positioning themselves for the NFL playoffs. 0:07:42.560 --> 0:07:42.760 Yeah. 0:07:42.800 --> 0:07:45.720 So, DraftKings and FanDuel, among other things, recently rolled out 0:07:45.800 --> 0:07:48.840 these prediction market apps which are separate from their sports books. 0:07:48.920 --> 0:07:51.240 And this is really to could peep our head on 0:07:51.320 --> 0:07:54.440 against kle Shee and Robinhood and other of these financial 0:07:54.480 --> 0:07:57.560 firms that offer these event contracts in a number of states. 0:07:57.800 --> 0:07:59.520 How big is I'm hearing more and more about this 0:07:59.560 --> 0:08:02.520 prediction market market. How big is this thing? 0:08:02.560 --> 0:08:04.880 I mean, this is potentially really large. I don't have 0:08:04.960 --> 0:08:06.600 numbers in front of me, But the key thing is 0:08:06.600 --> 0:08:08.520 that call she and Robin ad are trying to do 0:08:08.600 --> 0:08:11.560 this in all fifty states. They're about a dozen states 0:08:11.600 --> 0:08:15.680 that either told them cease and desist because they effectively 0:08:15.680 --> 0:08:18.160 are engaging in illegal sports betting according to the states, 0:08:18.760 --> 0:08:21.440 or a couple of states have warned DraftKings, fandle don't 0:08:21.480 --> 0:08:23.440 do the same thing if you've got a sports book license. 0:08:23.920 --> 0:08:26.760 So what DraftKings of Fandal did was try to go 0:08:26.800 --> 0:08:30.320 into states with this product where they don't operate sports books, 0:08:30.360 --> 0:08:33.920 they can do prediction markets on politics or entertainment events 0:08:34.200 --> 0:08:37.680 in any state, but the real issue is with respective sports. 0:08:37.960 --> 0:08:39.240 That's where they limit themselves. 0:08:40.440 --> 0:08:42.280 Let me ask you dumb question, and maybe we don't 0:08:42.320 --> 0:08:44.880 know the answer to this yet. Who is the target 0:08:45.000 --> 0:08:48.320 audience for a contract and in production market setting versus 0:08:48.720 --> 0:08:51.800 you know, just a regular parlay or some bet in. 0:08:52.200 --> 0:08:54.400 Resources of the type of person in terms of the 0:08:54.440 --> 0:08:56.439 type of area or territory. 0:08:56.600 --> 0:08:56.920 Uh huh. 0:08:57.040 --> 0:08:59.360 Think about the fact that you've got mobile sports books 0:08:59.360 --> 0:09:02.839 in almost thirty states, thirty some odd states, draftings Fandel 0:09:02.880 --> 0:09:05.680 and twenty five of them other states, big states like 0:09:05.720 --> 0:09:08.839 Texas and California, they don't have legal sports books and 0:09:08.880 --> 0:09:12.800 sports betting. That's a logical market for call She and 0:09:13.400 --> 0:09:15.480 Robinhood to go in there and say you can do 0:09:15.520 --> 0:09:18.720 these prediction markets and engage in that even though sports 0:09:18.760 --> 0:09:21.560 betting isn't active and legal in the state. That's really 0:09:21.559 --> 0:09:22.319 the big. 0:09:22.559 --> 0:09:24.800 So what Texas and Florida say about that? 0:09:24.880 --> 0:09:25.040 Right? 0:09:25.120 --> 0:09:28.520 So, without going through every state, they're about a dozen 0:09:28.559 --> 0:09:31.920 states that either specifically told cal She and poly Market 0:09:32.400 --> 0:09:35.520 or Robinhood season Assist don't do this a few others 0:09:35.520 --> 0:09:39.480 have issued Wetter's warning. Draftings of Fandel do not offer 0:09:39.520 --> 0:09:41.920 a sports prediction market in a state where you've got 0:09:41.960 --> 0:09:44.840 a sports bet license. So what Fando and Draftings did 0:09:44.920 --> 0:09:47.960 is you know, seventeen states for Draftings five or Fandel. 0:09:48.679 --> 0:09:51.320 They're offering this product in states where they don't have 0:09:51.320 --> 0:09:53.839 sports books and where sports betting isn't quote legal. 0:09:54.840 --> 0:09:57.640 Who regulates the sports markets? So it's confused. 0:09:57.679 --> 0:10:00.800 It's very confusing because the sports book are regulated by 0:10:00.800 --> 0:10:04.400 state gaming regulatory authorities. The prediction markets are regulated by 0:10:04.400 --> 0:10:08.000 the CFTC, so it's state versus federal And that's been 0:10:08.000 --> 0:10:10.480 the argument of Kolch that you know, we're a financial 0:10:10.600 --> 0:10:14.640 futures contract, we're not sports betting. We are federally regulated. 0:10:14.920 --> 0:10:16.760 The states have pushed back and said no, this is 0:10:16.800 --> 0:10:20.280 a form of effectively on licened sports betting, and ultimately 0:10:20.280 --> 0:10:22.240 I think this heads to the Supreme Court. That's certainly 0:10:22.240 --> 0:10:24.560 in the view of Elia Steine or litigation analyst. 0:10:25.480 --> 0:10:29.200 So what are the casino companies say these days are 0:10:29.400 --> 0:10:31.840 what do they say? Does that impact their sports book 0:10:31.880 --> 0:10:32.920 and their sports betting and. 0:10:32.960 --> 0:10:36.200 On the margin to the extent that MGM and Caesars 0:10:36.200 --> 0:10:39.000 have mobile products. It's very possible to look into this 0:10:39.080 --> 0:10:42.240 type of product as well. Again in those states where 0:10:42.280 --> 0:10:44.440 sports betting is at legal, so everyone's going to be 0:10:44.440 --> 0:10:47.160 thick about it. And the real other other wrinkle is 0:10:47.840 --> 0:10:50.920 Texas and California once they realize we may not have 0:10:51.080 --> 0:10:53.520 sports betting. What we have effectively sports betters. If you 0:10:53.559 --> 0:10:55.880 believe that's what prediction markets are, we might as well 0:10:56.000 --> 0:10:59.760 legalize it. And so there's a whole bunch of ram 0:10:59.800 --> 0:11:00.840 of cations to this. 0:11:01.040 --> 0:11:05.440 What about Native American tribes in states like California in Connecticut, 0:11:05.720 --> 0:11:06.840 where do they fit it? 0:11:07.240 --> 0:11:11.240 I mean in California, although sports betting isn't legal in California, 0:11:11.679 --> 0:11:16.480 the tribes have themselves challenged and through legally the Whites 0:11:16.480 --> 0:11:18.760 of call She and Robin Hood I don't remember which one. 0:11:19.200 --> 0:11:21.920 So you know to the extent that tribes have opportunities 0:11:21.960 --> 0:11:25.440 to operate sports books, which effectively Florida has the Seminole 0:11:25.480 --> 0:11:30.079 Tribe operating operating hard rock betting site even though draftings 0:11:30.280 --> 0:11:32.920 and or are not involved. So the tribes very much 0:11:33.000 --> 0:11:36.360 will care to the extent that this is effectively a 0:11:36.400 --> 0:11:39.120 competing product as consumers might perceive it. 0:11:39.960 --> 0:11:43.160 So is betting just going crazy the total dollar amount. 0:11:43.600 --> 0:11:48.760 I see kids, high school kids having conversations in detail, 0:11:49.040 --> 0:11:53.280 showing a level of expertise which really blows me away. 0:11:53.480 --> 0:11:57.040 Kids high school kids, and I don't know, it just 0:11:57.040 --> 0:11:58.240 doesn't feel it's surprising. 0:11:58.280 --> 0:12:01.280 And it's also gets very problem at when you have college. 0:12:01.000 --> 0:12:02.359 Kids college games. 0:12:02.720 --> 0:12:06.480 Yep, college players. So but yeah, there's a big national 0:12:06.559 --> 0:12:09.160 draw to that draw to this, and I think the 0:12:09.200 --> 0:12:13.000 real I don't think draftings of find will get as 0:12:13.400 --> 0:12:16.600 affected as some might fear in states where they've got 0:12:16.640 --> 0:12:18.839 a sports book, but in states where they can't operate 0:12:18.880 --> 0:12:22.559 a sports book. But Kyle she and Robinhood and Polymarket 0:12:22.559 --> 0:12:25.320 others whore offering prediction markets. That's where I think they 0:12:25.400 --> 0:12:28.520 see risk as well as opportunity. 0:12:28.200 --> 0:12:31.600 Are Thanks to Brian Egger, bi's senior Gaming and Lodging analyst, 0:12:31.800 --> 0:12:34.280 coming up a look at Bloomberg Intelligence's outlook for North 0:12:34.280 --> 0:12:36.080 American airlines in twenty twenty six. 0:12:36.280 --> 0:12:39.120 You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 0:12:39.160 --> 0:12:41.280 depth research and data on two thousand companies and one 0:12:41.360 --> 0:12:42.440 hundred and thirty industries. 0:12:42.559 --> 0:12:45.600 You can access Bloomberg Intelligence via BI go on the terminal. 0:12:45.679 --> 0:12:46.839 I'm Scarlett Foo and. 0:12:46.800 --> 0:12:48.800 I'm Paul Sweeney and this is Bloomberg. 0:12:53.720 --> 0:12:58.240 This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney 0:12:58.559 --> 0:13:00.079 on Bloomberg Radio. 0:13:00.720 --> 0:13:03.559 We move next to research Bloomberg Intelligence recently put out 0:13:03.559 --> 0:13:04.720 on the floor Giant Nike. 0:13:04.920 --> 0:13:08.160 According to BI, Nike's turnaround is beginning to take hold, 0:13:08.280 --> 0:13:11.560 notably in North America, but China remains a challenge for more. 0:13:11.640 --> 0:13:14.160 We were joined by Punam Goyle, senior US e Commerce 0:13:14.160 --> 0:13:16.000 and retail analyst at Bloomberg Intelligence. 0:13:16.040 --> 0:13:18.520 We began by asking Poonam to break down Bei's most 0:13:18.520 --> 0:13:19.280 recent research. 0:13:19.840 --> 0:13:23.800 Basically, we think that Nike turnaround is possible. We see 0:13:23.880 --> 0:13:26.600 finally some light at the end of the tunnel. Their 0:13:26.679 --> 0:13:31.000 North America business has improved and is going to improve 0:13:31.040 --> 0:13:35.720 as they rationalize inventories. The issue still is China and 0:13:35.960 --> 0:13:39.760 the struggle in China we don't think will end anytime soon. 0:13:40.320 --> 0:13:43.400 In my mind, it's a one to two year turnaround. 0:13:43.840 --> 0:13:46.839 But that said, if they can get everything else right, 0:13:46.920 --> 0:13:49.760 which I think they are doing, and we'll get to 0:13:50.440 --> 0:13:53.040 I do think that Nike's turnaround as well under way 0:13:53.200 --> 0:13:55.400 and investors will begin to appreciate it. 0:13:55.880 --> 0:13:58.240 So let's dig into the struggles in China. I mean, 0:13:58.240 --> 0:14:01.120 you're talking about a long time frame here for things 0:14:01.200 --> 0:14:03.840 to turn around. Is it just that Nike has lost 0:14:04.040 --> 0:14:08.360 its appeal to the Chinese consumer? Is it competition that's 0:14:08.400 --> 0:14:11.040 really stepped up in the last couple of years. 0:14:12.000 --> 0:14:15.160 So it's a few things. Number One, Nike in the 0:14:15.280 --> 0:14:18.000 US and other parts of the world is perceived as 0:14:18.440 --> 0:14:22.320 a more affluent at leisure brand. In China, it is not. 0:14:22.880 --> 0:14:25.560 What's been happening in China is that Nike has been 0:14:25.600 --> 0:14:30.040 selling at a discount to clear inventory as the vicious 0:14:30.120 --> 0:14:34.080 cycle of weaker sales has led to more discounting. So 0:14:34.120 --> 0:14:36.840 it's more seen as an off price brand that needs 0:14:36.880 --> 0:14:39.320 to change. They know that needs to change. I think 0:14:39.320 --> 0:14:42.040 that's the first step in solving the problem. And I 0:14:42.080 --> 0:14:44.560 think what they will do now and what they've said 0:14:44.600 --> 0:14:46.360 that they do, and I do believe they will because 0:14:46.360 --> 0:14:48.360 they did it in the US, is they will clean 0:14:48.400 --> 0:14:51.720 out that aged inventory. But as we know, that will 0:14:51.720 --> 0:14:54.440 take time. In the US alone, in the last year, 0:14:54.480 --> 0:14:57.640 we've seen that it takes anywhere from twelve to eighteen months. 0:14:57.640 --> 0:15:00.320 The US is finally in a place where in the 0:15:00.360 --> 0:15:03.360 next three to six months they should be clean. So 0:15:03.480 --> 0:15:05.840 which is why we think you'll take eighteen months. Once 0:15:05.880 --> 0:15:08.560 they can do that, the new pipeline of products that 0:15:08.600 --> 0:15:12.160 they're building, I do think will resonate with shoppers and 0:15:12.200 --> 0:15:14.800 it will sell at full price. But once again, it's 0:15:14.800 --> 0:15:17.920 an eighteen to twenty four month turnaround in China in my. 0:15:18.000 --> 0:15:21.000 View, talk to us about you know, new product development 0:15:21.040 --> 0:15:24.160 and new product introduction. Are there certain verticals that they're targeting, 0:15:24.200 --> 0:15:27.280 whether it's running or lifestyle or you know, other types 0:15:27.320 --> 0:15:27.920 of activities. 0:15:28.480 --> 0:15:31.280 So running is a core category that they're focused on. 0:15:31.640 --> 0:15:35.080 They have launched a new innovation in running. Running actually 0:15:35.080 --> 0:15:39.240 with their new pipeline, has done very well in the US. 0:15:39.320 --> 0:15:42.720 We saw that running was up nicely, whereas the rest 0:15:42.720 --> 0:15:45.400 of the business was down slightly to up slightly depending 0:15:45.440 --> 0:15:47.240 on the quarter that you look at over the last 0:15:47.600 --> 0:15:50.640 twelve months. We also think that they're focused on sport. 0:15:50.960 --> 0:15:53.080 So when you think about Nike and if you compare 0:15:53.080 --> 0:15:55.000 it to audiit US, you know, I think there's a 0:15:55.040 --> 0:15:57.800 big difference in the way that they're approaching their businesses, 0:15:57.840 --> 0:16:01.560 which allows both of them to succeed. Nike is focused 0:16:01.640 --> 0:16:06.200 solely and most importantly on sports and performance, whereas Adidas 0:16:06.360 --> 0:16:10.720 has owned for the last few years the lifestyle category, 0:16:11.320 --> 0:16:14.120 and I do think that Nike's focus on sports is 0:16:14.120 --> 0:16:16.200 the right one and that is where they should be 0:16:16.240 --> 0:16:17.320 to drive this turnaround. 0:16:17.880 --> 0:16:22.240 What about TARIFFSNA terrafts is certainly something that affects Nike. 0:16:22.760 --> 0:16:25.080 I know that Vietnam and the US is research trade deal. 0:16:25.160 --> 0:16:28.120 Most of the footwear in this country is manufactured in Vietnam. 0:16:28.160 --> 0:16:31.000 But how is Nike managing through this headwind? 0:16:31.840 --> 0:16:33.800 So the headwind is here and it's here to stay. 0:16:34.160 --> 0:16:38.440 Nike has to selectively increased prices to combat the tariff impact. 0:16:38.720 --> 0:16:42.640 It's also negotiated supply relationships and found efficiencies internal. Just 0:16:42.680 --> 0:16:45.840 like the rest of the space, Nike isn't alone in 0:16:45.880 --> 0:16:49.520 the tariff situation. We do think that you know, tariffs 0:16:49.560 --> 0:16:53.000 will continue to impact margin in twenty twenty six, as 0:16:53.040 --> 0:16:56.800 well as the shift from DTC to wholesale. The wholesale 0:16:56.840 --> 0:16:59.480 business is doing better and Nike is more focused on 0:16:59.520 --> 0:17:02.880 it today because it had lost focus years ago, So 0:17:03.480 --> 0:17:07.000 that mixshift is negative. That said, as more full price 0:17:07.040 --> 0:17:10.520 selling takes hold, as we see signs of China improving 0:17:10.560 --> 0:17:13.560 over the next twelve to eighteen months, those are both 0:17:13.960 --> 0:17:18.320 areas where they can help to recover lost margin. Twenty 0:17:18.359 --> 0:17:21.280 twenty six calendar is not a margin story for Nike, 0:17:21.400 --> 0:17:24.120 It's a top line story. I think twenty twenty seven 0:17:24.160 --> 0:17:27.119 is where we can start to talk about margin expansion. 0:17:27.600 --> 0:17:30.879 Put on your discussions with Nike and other consumer products 0:17:30.920 --> 0:17:34.200 makers and peril makers. What's the consensus today about the consumer? 0:17:35.400 --> 0:17:38.960 The consumer is mixed. The luxury or the affluent consumer 0:17:39.000 --> 0:17:42.239 is clearly doing better than the low income consumer. And 0:17:42.320 --> 0:17:45.160 we do think the consumer will continue to make choices 0:17:45.200 --> 0:17:48.199 and where they shop. But we think the consumer is 0:17:48.240 --> 0:17:51.239 looking for fashion, it's looking for newness, it's looking for 0:17:51.280 --> 0:17:54.199 what's hot in the market. And as long as brands 0:17:54.240 --> 0:17:58.119 and retailers can be on trend, they will drive sales 0:17:58.160 --> 0:18:01.200 of those products because that is where the consumer is shopping. 0:18:01.400 --> 0:18:02.400 On trend product. 0:18:03.640 --> 0:18:09.680 How much rope Oar investors willing to give Elliott Hill. 0:18:08.720 --> 0:18:10.760 I mean, I think, like you do need to give 0:18:10.800 --> 0:18:13.240 him another year. We need to give him six to 0:18:13.280 --> 0:18:17.840 twelve months to start to see China inventory moderating and 0:18:17.880 --> 0:18:21.480 the situation beginning to unfold for the rest of the world. 0:18:21.560 --> 0:18:25.520