Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am
Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg
Speaker 1: Business App. Listen on demand wherever you get your podcasts,
Speaker 1: or watch us live on YouTube.
Speaker 2: Thank you reporting.
Speaker 3: It's the numbers a better expect The number socks up
Speaker 3: almost five percent, although it's still down about three percent
Speaker 3: a year to date, but maybe a little bit of
Speaker 3: turnaround there working through the inventory is Some smart folks
Speaker 3: have told me about the niket you story. One of
Speaker 3: those is Punam Goyle. She's a senior US e commerce
Speaker 3: and retail analysts for Bloomberg Intelligence. Put them, is the
Speaker 3: turnaround at Nike?
Speaker 2: Is it kind of turning? Is it working?
Speaker 4: It's working. I think yesterday was the first sign that
Speaker 4: Nike is able to pick up momentum. Sales on a
Speaker 4: reported basis, we're up a one percent. Inventories we're down
Speaker 4: two percent. This is exactly what we wanted to see.
Speaker 4: We wanted to see inventories aligned with sales. So while
Speaker 4: the work isn't done and it's not over and it's
Speaker 4: not a straight lineup, we do see momentum building. What
Speaker 4: they're doing is working. The new products, the innovation, the
Speaker 4: focus on wholesale, it's all coming together. There are still
Speaker 4: some pitfalls. China is still sluggish, and we'll need to
Speaker 4: wait and see what happens there as well as with
Speaker 4: its Converse brand.
Speaker 5: Okay, so China's definitely an issue. Converse is work in progress.
Speaker 5: When I look at the revenue line, the top line,
Speaker 5: what I see is direct revenue fell four percent, wholesale
Speaker 5: revenue rose seven percent. Just break that down for us
Speaker 5: in terms of what that means direct revenue versus wholesale revenue.
Speaker 4: Sure, so direct revenue composers of stores which were actually
Speaker 4: up one percent. So that shows us that the innovation
Speaker 4: and the new products which are flowing through their own
Speaker 4: stores is working. What made the DTC revenue go down
Speaker 4: four percent was that digital was down twelve percent. No
Speaker 4: surprise here. This is where they're clearing all that excess inventory.
Speaker 4: So this channel will be pressured for a couple of quarters. Still,
Speaker 4: wholesale up seven percent a great, great number. I mean,
Speaker 4: it just shows that coming back into partnerships with foult
Speaker 4: Locker in a more meaningful way, getting on Amazon dot
Speaker 4: Com all these efforts are paying off, and they're where
Speaker 4: the customer is. They're gaining their shelf space back and
Speaker 4: the customers are responding favorably.
Speaker 3: You know that Nike brand is such a powerful and
Speaker 3: powerful brand.
Speaker 2: I think of it like Coca Cola or Apple. It's
Speaker 2: so powerful.
Speaker 3: Yet some of those American brands in China under pressure,
Speaker 3: and I'm wondering, just with the geopolitics, is Nike a
Speaker 3: brand where that might be feeling some anti American sentiment
Speaker 3: from consumers.
Speaker 4: So that has happened in the past, there have been
Speaker 4: boycotts against US American brands. We don't think that's the
Speaker 4: issue yet from what we're hearing, but we do think
Speaker 4: that the issue is more product at Nike in China,
Speaker 4: so they do need to ramp a product and they
Speaker 4: do have a lot of access inventory there, more so
Speaker 4: than they do in the US today. So that's also
Speaker 4: a work in progress that they need to get through.
Speaker 2: Let's talk about profitability.
Speaker 5: Margins declined due to higher discounts and then also the
Speaker 5: higher tariffs in North America. I look at gross margin
Speaker 5: forty two point two percent last year. At this time
Speaker 5: it was more than forty five percent. Now the forty
Speaker 5: two point two percent was better than estimated. How long
Speaker 5: is it going to take for Nike to turn that around.
Speaker 4: I think we have quite some time to get back
Speaker 4: up to historical margins. In fact, you know, on the
Speaker 4: call yesterday they said that they do still aspire to
Speaker 4: reach double digit EBIT margin. EBIT margins in the quarter
Speaker 4: that they just reported was only at seven point one percent,
Speaker 4: So that's a long runway. We don't think it's any
Speaker 4: time soon. And the hit from tariffs is building, not reducing.
Speaker 4: They had expected a billion dollars the last time they
Speaker 4: spoke to us, and yesterday that one to one point
Speaker 4: five billion dollars and access costs from tariffs.
Speaker 3: How much are they passing along to the retailer versus
Speaker 3: taking that in their margin, Because I mean, Nike is
Speaker 3: probably just a great example of how compans are trying
Speaker 3: to deal.
Speaker 2: With the tariffs.
Speaker 4: Yes, I think they're doing this actually very smartly. They're
Speaker 4: not increasing prices on products that are under one hundred dollars,
Speaker 4: but they are taking prices up on sneakers that are
Speaker 4: above that price point. So if you think about moving
Speaker 4: prices up, it's very easy to say the price of
Speaker 4: milk went up from three dollars to three point fifty.
Speaker 4: But when you're looking at a pair of sneakers, especially
Speaker 4: a new launch, you have no comparison, So you can
Speaker 4: go ahead and price up your new innovation and the
Speaker 4: customer may not even recognize that there was a material
Speaker 4: price increase, and that customer has a little bit more
Speaker 4: flexibility to stretch their wallet's at that price point.
Speaker 5: Punam, if you are heading up on Holdings or Adidas
Speaker 5: or Sketchers or you know, any of the Hoka what
Speaker 5: would you be thinking looking at this set of results.
Speaker 4: So Sketchers, I think is in a different league than Nike.
Speaker 4: It's it's a little bit different. It's a value play,
Speaker 4: and I think they don't compete directly like an Adidas
Speaker 4: or an On or a Hokah would with them. Adidas
Speaker 4: is doing really well on its franchise lifestyle shoes, and
Speaker 4: I think Nike, what you heard yesterday, was doing well
Speaker 4: in performance. So two still very distinct categories. Though for
Speaker 4: On and hok I think it's a little bit of
Speaker 4: a different story because what I heard from that call
Speaker 4: yesterday was that running was back on. It's doing phenomenally well,
Speaker 4: and that is where hogaying on both took share from Nike,
Speaker 4: so I would be just, you know, a little concerned
Speaker 4: and just make sure that I keep my game on
Speaker 4: when it comes to innovation, because at the end of
Speaker 4: the day, product is what's going to drive how sales.
Speaker 4: Moment we'll go moving forward.
Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on applecar Play and Android
Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever
Speaker 1: you get your podcasts, or watch us live on YouTube.
Speaker 3: Another IPO priced here Neptune Flood Insurance NP is the
Speaker 3: ticker and joining us from.
Speaker 2: The New York stock Et chains forst Trevor Burgess. He's
Speaker 2: the CEO.
Speaker 3: Trevor, thanks so much for joining us, your congratulations on
Speaker 3: the ipo is a price at twenty dollars.
Speaker 2: I'm looking at the Bloomberg terminal now. Weve got a
Speaker 2: bid of.
Speaker 3: Twenty two and a half in the ask of twenty
Speaker 3: two and three quarters, so maybe they'll finally get this
Speaker 3: thing opened. If I were running your deal, Trevor, I
Speaker 3: would have had this open at ten thirty. No later, Trevor,
Speaker 3: talk to us about your business model flood insurance. You
Speaker 3: guys have exposure to Florida. Nobody provides insurance in Florida.
Speaker 3: What's your business model?
Speaker 6: Yeah, So Neptune is an artificial intelligence company that does
Speaker 6: a really good job at underwriting flood risk for global
Speaker 6: insurance and reinsurance company. So we don't actually take the risk.
Speaker 6: We build technology that does a really good job at
Speaker 6: analyzing that risk and making sure it's some thing that
Speaker 6: the global insurance markets want to take on. Which makes
Speaker 6: us the largest competitor to the National Flood Insurance Program,
Speaker 6: which is the federal government's program, which was the only
Speaker 6: way to buy flood insurance for a long time until
Speaker 6: Neptune came along. Happens to be that the government's closed today.
Speaker 6: So Neptune is the only game in town right now,
Speaker 6: which is exciting for us, obviously, because we want to
Speaker 6: help those thirteen hundred consumers who are trying to buy
Speaker 6: their house today and who need flood insurance.
Speaker 7: We're the solution.
Speaker 2: So, Trevor, let me ask you.
Speaker 5: There's been a lot of complaints about the federal flood
Speaker 5: insurance program.
Speaker 2: What is broken with it?
Speaker 5: Why is it something that people are not on board
Speaker 5: with or people can't get when they need.
Speaker 7: Well.
Speaker 6: There are a couple of ways to look at the
Speaker 6: NFIPECE problems, but the biggest one is that they've lost
Speaker 6: nearly forty billion dollars in their history. They're paying millions
Speaker 6: of dollars a day in debt payments to the US Treasury.
Speaker 6: So it's just an unsustainable program and it doesn't offer
Speaker 6: a product that consumers want. They only go up to
Speaker 6: two hundred and fifty thousand dollars of coverage on your house.
Speaker 6: Neptune offers up to seven million.
Speaker 7: Dollars of coverage. We'll also cover.
Speaker 6: Your Airbnb or your hotel if you're flooded out of
Speaker 6: your room. If you are with the NFIP, you're just
Speaker 6: out of luck. If you have a flooding, there's no
Speaker 6: money for that hotel.
Speaker 3: So who are your clients, Trevor. Are they the insurance
Speaker 3: companies and reinsurans themselves.
Speaker 7: We get to have two clients.
Speaker 6: We serve those global insurans and reinsurans who are looking
Speaker 6: to put money to work in the flood insurance space.
Speaker 6: And importantly, our customer is the American homeowner and business owner.
Speaker 6: We provide residential and commercial policies to protect your home.
Speaker 6: We compete with the NFIP every day that they're open.
Speaker 6: Today they happen to be closed fair enough.
Speaker 5: Fair enough in terms of which states are most affected,
Speaker 5: Paul mentioned obviously Flora, But is there, I mean, floods.
Speaker 2: Seem to happen.
Speaker 5: Yes, flood seemed to happen to every state, including those
Speaker 5: that are inland. Is there any area in the country
Speaker 5: that is more relatively shielded from flood risk?
Speaker 6: Not really. If it can rain where you live, then
Speaker 6: it can flood. And we saw that in the month
Speaker 6: of July. They were major floods in twenty three states
Speaker 6: in this nation. That means that everyone is really at
Speaker 6: risk and needs to have flood insurance. But unfortunately, because
Speaker 6: of the government's program, only four percent of Americans have
Speaker 6: coverage today. Neptune is trying to change that. We want
Speaker 6: to get many, many more Americans protected from this most
Speaker 6: dangerous peril. You've seen these hurricanes when they hit, the
Speaker 6: tragic flooding that took place in North Carolina and in
Speaker 6: Texas recently. Neptune is here to make sure all of
Speaker 6: those homes are protected.
Speaker 2: Trevor is flooding.
Speaker 3: Is that a risk that is going up in frequency
Speaker 3: and in damage? And if so, why is it happen.
Speaker 7: It's happening.
Speaker 6: The answer is yes, and it's happening because the climate
Speaker 6: is changing. It's undeniable that the sea level in Key West,
Speaker 6: Florida is nearly a foot higher than when I was born.
Speaker 6: The temperature in the Gulf and in the Atlantic is
Speaker 6: warmer than it was ten years ago. That added heat
Speaker 6: is energy, and that leads to more frequent and severe storms.
Speaker 3: So what's the growth story for Neptune? Is it more markets?
Speaker 3: Is it more policies? Is you driving rates higher? How
Speaker 3: are you guys pulling those lovers growth?
Speaker 6: The growth story for Neptune is helping educate the American
Speaker 6: consumer that their homeowner's policy does not cover the risk
Speaker 6: of flooding and that they need to buy a separate
Speaker 6: policy to protect.
Speaker 7: Their most valuable asset.
Speaker 6: If we can just help educate people on that fact,
Speaker 6: Neptune's going to do a great job at growing.
Speaker 5: We should mention that Neptune is going public after a
Speaker 5: bunch of specialty insurance companies have gone public this year,
Speaker 5: Accelerant Holdings, Aspen Insurance, American integrity insurance, slide insurance. What
Speaker 5: do you think it is about the current environment that
Speaker 5: makes it so welcoming for insurance companies to tap the
Speaker 5: public market.
Speaker 6: It's nice to have the market open, and it's nice
Speaker 6: that pricing and insurance makes sense. We want to make
Speaker 6: sure that that consumer is finding value, that the agent
Speaker 6: is doing well, that Neptune's making money, and it's sustainable
Speaker 6: for the global.
Speaker 7: Insurance and reinsurance community.
Speaker 6: I think we have some good equilibrium in the industry
Speaker 6: right now, and that's why you're seeing so many companies
Speaker 6: come to market.
Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever
Speaker 1: you get your podcasts, or watch us live on YouTube.
Speaker 3: Again, we've been talking a lot about AISO is everybody
Speaker 3: in the marketplace really for the last two or three years,
Speaker 3: and now you've been looking for derivative plays, and a
Speaker 3: lot of the deliverative plays have focused on who's going
Speaker 3: to power all these data centers, and that focuses on
Speaker 3: energy fossil fuel, energy, new energy, and even including nuclear energy.
Speaker 3: So everything seems to be on the table as these
Speaker 3: data center providers think about how they're actually going to
Speaker 3: power this stuff going forward.
Speaker 2: Scott Levine joined us.
Speaker 3: He looks at the energy business for Bloomberg Intelligence. He
Speaker 3: put together a global team and put out a huge
Speaker 3: report here, and a really good report on nuclear power
Speaker 3: twenty twenty six outlook. He's saying, AI driven power demand
Speaker 3: set to spark three hundred and fifty billion dollar build cycle.
Speaker 2: Scott to thanks so much for joining us here. I
Speaker 2: love the big round numbers here.
Speaker 3: Talk to us about from an energy perspective, what the
Speaker 3: industry's doing to kind of prepare for what seems to
Speaker 3: be this insatiable demand for power.
Speaker 8: Yeah, so nuclear has two very big positives going for it.
Speaker 8: Number One, it's a emissions free power source, and the
Speaker 8: hyperscillers that are really behind the investments care about that deeply, right,
Speaker 8: and so they've favored you know, more renewable sources here too.
Speaker 8: Four like wind and solar. But what those lack are
Speaker 8: you know, twenty four by seven base load characteristics and
Speaker 8: for a data center to be up twenty four to
Speaker 8: seven that's not going to do it right. So nuclear
Speaker 8: checks both of those boxes, and those are two very
Speaker 8: big positives and the reasons that you're seeing folks like
Speaker 8: Microsoft and Meta come out in favor of nuclear power.
Speaker 2: And yeah, so what's.
Speaker 3: The how much does nuclear provide today in the US
Speaker 3: versus where you think it might be in twenty five years.
Speaker 8: Yeah, so today it's a little bit below twenty percent
Speaker 8: of the grid, OK, which we're saying we'll return to
Speaker 8: about in our you know, base case scenario twenty percent
Speaker 8: of the grid by twenty fifty. That may not seem
Speaker 8: like much two percentage points, right, but it you know,
Speaker 8: will equate to or amount to a three hundred and
Speaker 8: fifty billion dollar investment to get there.
Speaker 7: So those are big numbers.
Speaker 8: And in addition that we're talking about adding sixty some
Speaker 8: odd gigawatts to the grid, and you can think about
Speaker 8: each full sized nuke being one gigawatts. That's basically building
Speaker 8: sixty generating units as our base case.
Speaker 2: So those are big numbers to get.
Speaker 8: You from eighteen to twenty percent over a twenty five
Speaker 8: period of time.
Speaker 3: I tell you, I went in this report that you
Speaker 3: and your team put together. Section five, small modular reactors.
Speaker 3: That's where I wanted to go to because I had
Speaker 3: think we've had some people come into the studio over
Speaker 3: the last few years and just talk to us about
Speaker 3: the science and engineering and the possibilities of these small
Speaker 3: modular reactors.
Speaker 2: Tell us what they are and what role they could
Speaker 2: play going forward.
Speaker 8: Yeah, so really these are and none of these have
Speaker 8: been built in the US yet, right, So this is
Speaker 8: very much an emerging technology play. But basically you're talking
Speaker 8: about is taking a full sized nuke. You're driving on
Speaker 8: the highway, you see a big coolin tower, a bunch
Speaker 8: of smoke coming out the top of it. These are
Speaker 8: much much smaller, right, and so the idea here would
Speaker 8: be that these are much more flexible, and so if
Speaker 8: you have more disparate data centers located throughout the country,
Speaker 8: you can power these ostensibly with these smaller units.
Speaker 7: Right.
Speaker 8: And we're talking about you know, some of these are
Speaker 8: smaller versions of what's already in operation today, which is
Speaker 8: a light water reactor. And then some of these types
Speaker 8: of units are different types of technologies. You have gas
Speaker 8: cooled reactors as opposed to water.
Speaker 7: You have molten.
Speaker 8: Salt cooled reactors as opposed to water, and these use
Speaker 8: different types of technologies, different types of fuels still remain
Speaker 8: to be licensed improven, So a lot of it's are
Speaker 8: very much on the com But the technology in each
Speaker 8: of those areas holds promise, so we'll see and each
Speaker 8: of them has pros and cons right, and so we'll
Speaker 8: see over the next five years the technology shakeout and
Speaker 8: see which ones end up being at the top of
Speaker 8: the stack for the US. But each of them have
Speaker 8: a lot of money behind them and a lot of
Speaker 8: support from a lot of depocketed players.
Speaker 3: Talk to us about this Trump administration, what is its
Speaker 3: view on nuclear fuel as an option?
Speaker 8: Okay, so firstly, very positive. They came out with a
Speaker 8: bunch of executive orders in May where they have clear support.
Speaker 8: They're trying to streamline the licensing process, so these things.
Speaker 8: They basically want to see ten reactors in construction by.
Speaker 2: Twenty thirty Okay, so.
Speaker 8: Yeah, and that's five years from now. It seems like
Speaker 8: a long time, but in nuclear world where it takes
Speaker 8: ten even fifteen years to build a reactor, which is
Speaker 8: what it took to build the only reactor that's been
Speaker 8: built in the US in the last thirty years took
Speaker 8: fifteen years to build. That is not that long a
Speaker 8: period of time.
Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,
Speaker 1: ten am to noon Eastern on Bloomberg dot com, the
Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You
Speaker 1: can also watch us live every weekday on YouTube and
Speaker 1: always on the Bloomberg terminal