WEBVTT - Zuckerberg Plans to Cut Metaverse Group's Budget Up to 30% 0:00:00.240 --> 0:00:10.559 Bloomberg Audio Studios, Podcasts, radio news. You're listening to the 0:00:10.600 --> 0:00:14.560 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.600 --> 0:00:17.880 Eastern on Apple Coarcklay and Android Auto with the Bloomberg 0:00:17.920 --> 0:00:21.040 Business App. Listen on demand wherever you get your podcasts, 0:00:21.360 --> 0:00:23.600 or watch us live on YouTube. 0:00:24.040 --> 0:00:27.120 And one of the bigger I think stock news stories 0:00:27.160 --> 0:00:30.920 today Kurt Wagner Bloomberg News breaking the story that the 0:00:30.960 --> 0:00:34.040 folks at Meta cutting back some of their spending on 0:00:34.200 --> 0:00:37.200 the Metaverse, in particular by as much as thirty percent, 0:00:37.240 --> 0:00:41.080 which is a big number because remember, folks, this company pivoted, 0:00:41.840 --> 0:00:44.560 pivoted hard to the metaverse several years ago, to the 0:00:44.560 --> 0:00:47.280 point where they changed their name from Facebook to Metaverse. 0:00:47.360 --> 0:00:50.280 This was a big, big pivot for Mark Zuckerberg and 0:00:50.320 --> 0:00:52.040 now kind of dialing it back a little bit. 0:00:52.080 --> 0:00:53.400 So we want to get some more reporting on that. 0:00:53.400 --> 0:00:55.760 We turned to Caroline I'd she joins us here in 0:00:55.760 --> 0:00:58.000 study Bloomberg Tech co anchor. 0:00:58.400 --> 0:01:00.840 So this is kind of a big I think from 0:01:00.840 --> 0:01:02.360 mister Zuckerberg, don't you, Carolyn. 0:01:02.920 --> 0:01:03.680 It's a signal. 0:01:03.800 --> 0:01:06.360 And what's interesting about it is, as usual as they 0:01:06.400 --> 0:01:08.440 think about the budget for twenty twenty six, they're going 0:01:08.520 --> 0:01:09.080 to make layoffs. 0:01:09.080 --> 0:01:11.240 They're going to cut about ten percent across the entire business. 0:01:11.280 --> 0:01:13.399 That tends to be what happens at this time of year. 0:01:13.440 --> 0:01:15.840 But he gathered his top executives in his house in 0:01:15.880 --> 0:01:18.800 Hawaii to discuss, Okay, where should most of the resources be 0:01:18.800 --> 0:01:21.920 coming from, because remember they're spending a ton on AI 0:01:21.959 --> 0:01:23.360 and people have been worried about that. 0:01:23.800 --> 0:01:25.240 How can he offset that? 0:01:25.280 --> 0:01:29.360 Well, thirty percent more cuts therefore going to this particular 0:01:29.440 --> 0:01:32.119 part of reality labs. Now, Reality Labs are still going 0:01:32.120 --> 0:01:34.679 to be making your ray bound meta glasses. They've seen 0:01:34.760 --> 0:01:39.240 real interest in the AI use in augmented reality, but 0:01:39.319 --> 0:01:41.119 virtual reality, we're not living in it yet. He really 0:01:41.120 --> 0:01:43.000 thought we'd all be doing our workouts there, would be 0:01:43.080 --> 0:01:45.360 working there, and it just hasn't caught on in the 0:01:45.400 --> 0:01:47.520 way that was expected. So of course, pull out resources 0:01:47.520 --> 0:01:50.520 from there, reallocate them, and I do think that it's interesting. 0:01:50.520 --> 0:01:53.040 Of course they rebranded under this name for now it's 0:01:53.040 --> 0:01:56.640 becoming sort of a metaverse of AI and augmented reality 0:01:56.760 --> 0:01:58.880 rather than virtual reality right here right now. 0:01:58.760 --> 0:02:01.520 So was meta just to earlier? Were not ready for 0:02:01.640 --> 0:02:02.520 a virtual reality? 0:02:02.720 --> 0:02:03.400 Or we are? 0:02:03.760 --> 0:02:05.080 Okay, I mean, are you using it. 0:02:05.360 --> 0:02:07.840 I'm I mean, my husband loved getting He got the 0:02:08.280 --> 0:02:11.400 one of the original sort of Ocunus versions of the headset, 0:02:11.440 --> 0:02:12.679 and yeah, he was doing workouts. 0:02:12.680 --> 0:02:15.320 And then he sold it in a Gara set. 0:02:15.440 --> 0:02:17.079 Because I think and it got to a point where 0:02:17.080 --> 0:02:19.639 it's like, what are the applications of this. I love 0:02:19.720 --> 0:02:22.560 the idea of when I'm in working abroad and I 0:02:22.680 --> 0:02:25.040 need to not have I need access to lots of screens, 0:02:25.080 --> 0:02:27.040 but I can't have just lots of screens. It was 0:02:27.120 --> 0:02:29.680 great to see how that could have been used, but 0:02:30.320 --> 0:02:32.200 I wasn't going to spend that many thousands on the. 0:02:32.160 --> 0:02:32.680 Piece of hardware. 0:02:32.720 --> 0:02:34.920 They've really got to understand the integration here. That's kind 0:02:34.960 --> 0:02:36.600 of why it's so interesting. It comes at that time. 0:02:36.680 --> 0:02:40.160 We've also understand Aland from Apple. One of the key 0:02:40.800 --> 0:02:43.560 interface design team leads the person who's been behind the 0:02:43.600 --> 0:02:46.919 iPhone X and behind the operating system, behind the applications 0:02:46.960 --> 0:02:47.400 of Apple. 0:02:47.639 --> 0:02:48.799 He's jumping ship to Meta. 0:02:48.880 --> 0:02:50.919 This is a huge coup. He's going to be thinking 0:02:50.919 --> 0:02:52.600 about the design of these things in the future. 0:02:53.280 --> 0:02:55.280 You bring that up about the Apple thing I seen. 0:02:55.440 --> 0:02:58.600 That's not the first person we've seen Leu the Apple 0:02:58.639 --> 0:03:00.840 AI stream going on there. 0:03:01.000 --> 0:03:02.799 Yeah, they've really been shutting people in many ways. 0:03:02.880 --> 0:03:05.160 This is tied more back to Johnny I's departure back 0:03:05.200 --> 0:03:06.880 in twenty nineteen and they lost a lot of their 0:03:06.880 --> 0:03:10.440 design prowess people. Then this is also turning of the guard. 0:03:10.600 --> 0:03:11.880 A lot of these people have in an Apple for 0:03:11.919 --> 0:03:14.160 a very long time. And we think about Tim Cook 0:03:14.240 --> 0:03:16.520 himself coming to an age where he might be retiring. 0:03:16.800 --> 0:03:19.320 Many are wondering how executives shift. But you're right, the 0:03:19.360 --> 0:03:22.560 real deluge, the real loss has been in the AI area, 0:03:22.560 --> 0:03:24.960 particularly in the large language model department, where they've just 0:03:25.000 --> 0:03:27.760 taken so many hits in terms of morale because look, 0:03:27.760 --> 0:03:30.079 they might have been turning to Google for its large 0:03:30.160 --> 0:03:32.280 language model rather than building in house, and they've been 0:03:32.320 --> 0:03:36.240 recently losing out or sort of waving goodbye to John 0:03:36.720 --> 0:03:37.480 Jian Andrea. 0:03:37.640 --> 0:03:40.120 That's the main lead of the. 0:03:40.120 --> 0:03:43.320 Issuers at the assumption that they're going to farm this 0:03:43.520 --> 0:03:48.560 their AI out to Google. Perhaps, And that's perhaps. And 0:03:48.600 --> 0:03:50.720 I think we'll talk to Anna k Gran in just 0:03:50.720 --> 0:03:53.240 a moment. He'll say, from a stock perspective, that's what 0:03:53.280 --> 0:03:55.360 investors kind of want. Yeah, I mean it's well, why 0:03:55.400 --> 0:03:58.600 spend a good jillion dollars to be just what you 0:03:58.640 --> 0:03:59.600 do a search. 0:03:59.480 --> 0:04:01.840 And it's been self limiting for Apple in many ways 0:04:01.880 --> 0:04:03.680 because they're all about safety on the phone. 0:04:03.880 --> 0:04:06.080 This is all about edjai. It's not about. 0:04:05.840 --> 0:04:08.800 Therefore sending all your data into the cloud and doing 0:04:09.000 --> 0:04:12.120 enormous amounts of data analysis and therefore feeding it through 0:04:12.200 --> 0:04:13.080 large language models. 0:04:13.080 --> 0:04:14.160 There they want. 0:04:14.000 --> 0:04:16.200 To be secure. That means you have to only be 0:04:16.240 --> 0:04:20.159 able to really do the compute on your own phone. 0:04:20.360 --> 0:04:22.200 That's very limiting at the moment. So you're just not 0:04:22.240 --> 0:04:24.200 getting the parameters that you need to have a really 0:04:24.200 --> 0:04:26.760 effective large language model. So therefore maybe they do have 0:04:26.800 --> 0:04:29.680 to shift to a part third party at least while 0:04:29.720 --> 0:04:30.960 they get their ducks in a row. 0:04:31.279 --> 0:04:33.719 So how are we thinking about how Meta is scaling 0:04:33.760 --> 0:04:35.760 against a lot of its competitors right now as we 0:04:35.800 --> 0:04:37.120 think about this AI race. 0:04:37.120 --> 0:04:39.920 Why isn't it interesting all dogtails together in the same way. 0:04:40.520 --> 0:04:44.080 For many Meta is showing that it's putting AI first. 0:04:44.160 --> 0:04:46.760 And we've understand the impact because everyone loves these ray 0:04:46.760 --> 0:04:48.000 band metaglasses. 0:04:48.000 --> 0:04:49.279 They've been selling very well. 0:04:49.560 --> 0:04:53.160 We've seen that people have really seen the revenue streams 0:04:53.200 --> 0:04:56.840 galvanize the advertising offering. The market is loving how they've 0:04:56.920 --> 0:04:59.599 used generator of AI within the product. We're all getting 0:04:59.600 --> 0:05:02.320 fed a content more specific to us that's going to 0:05:02.320 --> 0:05:04.520 be the help of Generator AI. But are we really 0:05:04.560 --> 0:05:07.480 downloading Meta AI's own individual AI app. 0:05:08.000 --> 0:05:09.839 I haven't. I'm using it more in WhatsApp. 0:05:09.880 --> 0:05:12.159 But then we've also got the EU worrying about how 0:05:12.560 --> 0:05:16.280 they're fending off competition in WhatsApp because they're saying, look, 0:05:16.360 --> 0:05:19.280 chatchbt even though you can put your chatchybut within your 0:05:19.360 --> 0:05:23.400 meta and WhatsApp at the moment, they're making it too difficult. 0:05:23.400 --> 0:05:25.120 They don't want to be straining their own APIs. 0:05:25.160 --> 0:05:28.159 Yeah, they don't want to be basically marketing Open AI's chatchibt. 0:05:28.240 --> 0:05:31.280 They're only marketing well co pilot for Microsoft. They want 0:05:31.320 --> 0:05:33.400 you to use Meta AI. So I think they've still 0:05:33.440 --> 0:05:34.880 got to show that they're the place that you're going 0:05:34.920 --> 0:05:36.640 to use large aguage models. They're the place you're going 0:05:36.680 --> 0:05:38.600 to come from a chatbot, and I think more broadly, 0:05:38.640 --> 0:05:40.760 they're the place that all of this ends up working 0:05:40.760 --> 0:05:42.920 from a capital EXPENDITSHI perspective. So I think for many 0:05:42.960 --> 0:05:44.560 over at BI they love the idea that they're going 0:05:44.560 --> 0:05:47.400 to maybe use Google's TPUs because that's a cost saving Yeah. 0:05:47.480 --> 0:05:50.039 Absolutely, Carolin, Hi, thank you so much for joinings. Caroline Hyde, 0:05:50.120 --> 0:05:52.839 b Tech co anchor along with Ed Ludlow Bloomberg News. 0:05:52.880 --> 0:05:55.200 They are on top of everything happening out there in 0:05:55.240 --> 0:05:57.680 the world of technology in a Silicon valley. You appreciate 0:05:57.920 --> 0:05:59.760 getting a few minutes of Caroline's time here. 0:06:00.680 --> 0:06:03.840 Stay with us. More from Bloomberg Intelligence coming up after this. 0:06:07.960 --> 0:06:11.679 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:06:11.760 --> 0:06:15.119 weekdays at ten am Eastern on Applecarplay and Android Auto 0:06:15.240 --> 0:06:18.320 with the Bloomberg Business App. Listen on demand wherever you 0:06:18.360 --> 0:06:21.320 get your podcasts, or watch us live on YouTube. 0:06:22.080 --> 0:06:24.479 Piece of news coming out of the tech space is 0:06:24.520 --> 0:06:26.800 meta you know, stepping back a little bit from their 0:06:26.800 --> 0:06:30.480 investments in the metaverse, and as Lisa Mitaylo's just reporting, 0:06:30.520 --> 0:06:33.200 that's pushing a stock up four percent today, which is 0:06:33.240 --> 0:06:34.920 a pretty big move here there's talks only a bit 0:06:34.920 --> 0:06:36.839 about thirteen percent year to day. Let's check in with 0:06:36.839 --> 0:06:38.719 Honor rog Ran and we'll talk about a lot of 0:06:38.760 --> 0:06:40.800 tech issues out there. Honor rog Ron is a senior 0:06:40.839 --> 0:06:44.719 technology annls from Bloomberg Intelligence out there in Chicago. Honra, 0:06:44.839 --> 0:06:47.640 what do you make of this announcement or this report 0:06:47.640 --> 0:06:50.960 from Bloomberg News, Kurt Wagner's reporting that Meta may cut 0:06:51.000 --> 0:06:55.239 back investments on its metaverse by as much as thirty percent. 0:06:55.279 --> 0:06:55.839 What do you make of that? 0:06:57.000 --> 0:06:58.880 See, when you have to invest billions in the EI 0:06:59.040 --> 0:07:01.080 sight of it, you gotta find that money somewhere. I 0:07:01.080 --> 0:07:03.520 know they have good cash flow, but you know, right 0:07:03.560 --> 0:07:07.080 now everything is going towards building your AI infrastructure, So 0:07:07.120 --> 0:07:09.039 I think it makes sense for them to cut in 0:07:09.120 --> 0:07:12.800 other regions or areas to fund this particular project. 0:07:13.680 --> 0:07:16.040 It seems as though investors are clearly celebrating this. I 0:07:16.040 --> 0:07:19.080 mean we're seeing it up more than three point eight 0:07:19.080 --> 0:07:21.840 percent right now, and earlier a lot higher. What do 0:07:21.880 --> 0:07:24.120 you think about next steps from here? I mean, clearly 0:07:24.160 --> 0:07:27.840 they're trying to redistribute their funds into AI development. What 0:07:27.880 --> 0:07:29.240 are investors looking for from that? 0:07:30.520 --> 0:07:32.240 So the same way they were looking at you know, 0:07:32.320 --> 0:07:34.800 metaverse a few years ago, they want to see an ROI. 0:07:34.960 --> 0:07:37.400 They will ask, you know, the management team as to 0:07:37.640 --> 0:07:40.200 you're investing all these billions to create new data center 0:07:40.480 --> 0:07:44.040 super intelligence team. What do I have to c ine 0:07:44.120 --> 0:07:46.840 terms of the return on the core business? And I 0:07:46.840 --> 0:07:48.960 think that those questions are not just for meta but 0:07:49.080 --> 0:07:52.720 the entire ecosystem as to what is the net effect 0:07:52.760 --> 0:07:56.400 addition to your revenue or reduction to your expenses down 0:07:56.440 --> 0:07:58.440 the road. And I think that is not going to 0:07:58.560 --> 0:08:00.920 end anytime soon, all right. 0:08:00.880 --> 0:08:02.800 So I don't know, I'm just I think most shareholders 0:08:02.800 --> 0:08:05.440 are like, I don't really get the whole metaverse thing. 0:08:05.520 --> 0:08:07.400 So to the extent you can scale back investment there 0:08:07.440 --> 0:08:10.440 and put it anywhere else, that's probably a good thing. 0:08:10.520 --> 0:08:10.840 All right. 0:08:10.880 --> 0:08:14.920 We also had the salesforce reporting results. Talk to us 0:08:15.040 --> 0:08:17.880 about that name because that name's been under pressure I think, 0:08:18.000 --> 0:08:20.320 maybe potential threats from AI in general. 0:08:21.480 --> 0:08:23.680 Yeah, there's say the results did come in, I mean 0:08:23.760 --> 0:08:25.800 almost in line with how we were looking at it 0:08:25.800 --> 0:08:28.880 in terms of that the core business is still struggling, 0:08:29.080 --> 0:08:31.080 but when it comes to some of their AI products 0:08:31.080 --> 0:08:34.040 that has started to do well, they've gained momentum. But 0:08:34.080 --> 0:08:36.200 when you look at somebody like a Salesforce, when you 0:08:36.200 --> 0:08:39.200 have a revenue base of forty one billion dollars, it 0:08:39.280 --> 0:08:41.760 takes a lot to move the needle. So even though 0:08:41.760 --> 0:08:45.280 these products are very small and you know, growing triple digits, 0:08:45.400 --> 0:08:48.320 but they are not you know, right there in order 0:08:48.400 --> 0:08:50.960 to take down what is happening on the core business, 0:08:51.000 --> 0:08:55.160 which is a decline in seat growth or the less 0:08:55.200 --> 0:08:59.160 addition of seats because of macro it spending, and that 0:08:59.280 --> 0:09:01.640 is probably going to be the story at least for 0:09:01.720 --> 0:09:02.960 the near term. 0:09:03.240 --> 0:09:06.360 So it seems as though analysts are still generally positive 0:09:06.440 --> 0:09:08.800 on in terms of AI adoption trends when we think 0:09:08.800 --> 0:09:09.920 about this company though. 0:09:10.880 --> 0:09:12.920 Yes, absolutely, and that's you know, one of the things. 0:09:12.920 --> 0:09:16.079 We saw really good numbers on both the data cloud 0:09:16.120 --> 0:09:18.480 side of Fate and also the agent force. But when 0:09:18.520 --> 0:09:20.480 you look at the stock reaction last night, you know, 0:09:20.480 --> 0:09:22.760 it was up five six percent. And finally people have 0:09:22.800 --> 0:09:26.080 when you really scrape the numbers and see that their 0:09:26.400 --> 0:09:29.760 commercial remaining performance obligations, which is the order book for 0:09:29.880 --> 0:09:32.880 next quarter, which they expect to grow about thirteen percent 0:09:32.920 --> 0:09:37.160 in constant currency. Four percentage of point of that is informatica. 0:09:37.240 --> 0:09:39.680 So when you strip that out, you will see that 0:09:39.679 --> 0:09:43.000 that particular backlock number goes from eleven percent this quarter 0:09:43.240 --> 0:09:45.280 to let's say nine or ten percent. So the core 0:09:45.360 --> 0:09:47.760 is still declining or the core is still under pressure. 0:09:48.679 --> 0:09:51.080 So the stock down twenty seven percent year to date 0:09:51.280 --> 0:09:53.600 on a rock is that does that reflect the fact 0:09:53.600 --> 0:09:57.400 that it's just it budgets are tight, or that AI 0:09:57.559 --> 0:10:02.239 poses an existential threat to certain providers like a Salesforce. 0:10:03.640 --> 0:10:05.839 I don't think that's the case, because it's going to 0:10:05.880 --> 0:10:09.480 be very difficult for an established Fortune two thousand company 0:10:09.679 --> 0:10:12.240 to get rid of their core system of record, you know, 0:10:12.240 --> 0:10:15.840 whether that's an HR sales customer service and just deploy 0:10:15.840 --> 0:10:18.080 a model in there. At least, we are not there yet. 0:10:18.160 --> 0:10:20.319 Maybe you know, five years down the road, we may 0:10:20.360 --> 0:10:23.240 see a scenario like this, but that's not really why 0:10:23.320 --> 0:10:26.600 Salesforce is struggling. It is basically, we are the largest 0:10:26.640 --> 0:10:30.240 provider of sales automation tool and customer service tool to 0:10:30.320 --> 0:10:33.520 Fortune two thousand companies. It's those companies that are not 0:10:33.640 --> 0:10:36.559 hiring at that same rate that they used to because 0:10:36.720 --> 0:10:40.160 outside of AI and AI infrastructure, everything else is still 0:10:40.160 --> 0:10:41.400 weak at this point. 0:10:41.920 --> 0:10:45.120 All right, Dona our good stuff as always, Honor Agrana. 0:10:45.160 --> 0:10:49.280 He is our senior technology analyst, Bloomberg Intelligence from the 0:10:49.320 --> 0:10:52.599 burgeoning tech hub of Chicago, Illinois. We appreciate gtting a 0:10:52.600 --> 0:10:54.800 few minutes of your time stay with us. More from 0:10:54.800 --> 0:10:56.840 Bloomberg Intelligence coming up after this. 0:11:00.760 --> 0:11:04.440 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:11:04.520 --> 0:11:07.640 weekdays at ten am Eastern on Apple, Cocklay and Android 0:11:07.640 --> 0:11:10.959 Auto with the Bloomberg Business Up. Listen on demand wherever 0:11:11.000 --> 0:11:14.280 you get your podcasts, or watch us live on YouTube. 0:11:14.720 --> 0:11:17.880 Dick Sporting Goods reported some numbers here the stocks off 0:11:17.880 --> 0:11:20.920 about one percent, but. 0:11:21.000 --> 0:11:22.720 Boy they put up I thought they were some pretty 0:11:22.720 --> 0:11:24.480 decent numbers. But what do I know about this stuff? 0:11:24.840 --> 0:11:27.480 Lindsay Dutch Consumer Hardline senior analy She's the expert, and 0:11:27.520 --> 0:11:28.720 she's a Bloomberg Intelligence. 0:11:28.920 --> 0:11:29.760 She joins us here. 0:11:30.400 --> 0:11:32.400 Lindsay, talk to us about Dick's Sporting Goods. 0:11:32.440 --> 0:11:33.920 What did you learn with their earnings release? 0:11:34.400 --> 0:11:34.880 Positive? 0:11:35.000 --> 0:11:37.439 I think that there's, you know, continued strength in the 0:11:37.520 --> 0:11:41.000 legacy business, and sometimes that that's being overshadowed by their 0:11:41.040 --> 0:11:46.160 Footlocker acquisition, which close in early September. But there's certainly 0:11:46.200 --> 0:11:49.720 pressure on this retailer to execute a very quick turnaround 0:11:49.760 --> 0:11:55.040 at Footlocker, and they are already planning to aggressively offload 0:11:55.120 --> 0:11:58.720 some stale inventory and close some stores. And we even 0:11:58.720 --> 0:12:01.760 saw some of that change is already over the Black 0:12:01.800 --> 0:12:04.760 Friday and Cyber Monday shopping weekend. 0:12:05.040 --> 0:12:06.920 What's really in the focus, They were with foot Locker 0:12:06.960 --> 0:12:08.680 would have been the issues at play. 0:12:10.160 --> 0:12:12.079 So Footlocker is a little bit of a different animal 0:12:12.160 --> 0:12:16.200 for Dix. They have a lifestyle focus. They also have 0:12:16.320 --> 0:12:19.920 to be more on trend with their assortment and they 0:12:19.960 --> 0:12:21.800 really have to carry sort of the top of the 0:12:21.840 --> 0:12:26.480 line items, you know, across a variety of brands running 0:12:26.480 --> 0:12:30.760 shoes have been in lately. Dix does have expertise sort 0:12:30.760 --> 0:12:34.520 of in that more sports focused arena. And so you know, 0:12:34.600 --> 0:12:37.599 Dix is looking to bring its strong partnerships with a 0:12:37.679 --> 0:12:41.040 Nike for example, and other brands like that to elevate 0:12:41.120 --> 0:12:44.560 the assortment, which should help. They're also looking to bring 0:12:44.640 --> 0:12:46.800 in more apparel to the stores and I saw that 0:12:47.120 --> 0:12:48.559 when I was out on Black Friday. 0:12:48.600 --> 0:12:48.959 You know, my. 0:12:48.920 --> 0:12:51.800 Footlocker had a lot more apparel this year. They also 0:12:51.880 --> 0:12:56.160 had lots of other brands that were being highlighted, Crocs, Timberland, 0:12:56.679 --> 0:12:59.160 so all more doing a lot more than just Nike. 0:13:00.320 --> 0:13:04.360 Dick's calls the World Cup quote the biggest sports moment 0:13:04.559 --> 0:13:07.160 the US has ever had. What are they telling us 0:13:07.200 --> 0:13:10.559 about the World Cup and maybe how it might impact 0:13:10.600 --> 0:13:11.120 their company. 0:13:12.360 --> 0:13:15.679 Yeah, so they mentioned that at the Morgan Stanley conference yesterday. 0:13:16.400 --> 0:13:19.520 All of these sports moments have been really big for 0:13:19.640 --> 0:13:23.560 their legacy business. People are really leaning into sport. They 0:13:23.679 --> 0:13:29.200 saw over the shopping weekend interest in their products that 0:13:29.200 --> 0:13:32.400 were marketed for the World Cup, and that could be 0:13:32.480 --> 0:13:35.480 a key event to dry sales going forward. But they 0:13:35.600 --> 0:13:38.160 touch lots of aspect of sport. Their golf business is 0:13:38.200 --> 0:13:41.920 doing excellent this year. They also do very well in 0:13:42.040 --> 0:13:44.480 just team sports when you think about getting your NFL 0:13:44.559 --> 0:13:47.640 gear for your favorite teams and things like that. They're 0:13:47.679 --> 0:13:50.840 really seeing success across the board. But those big events 0:13:51.040 --> 0:13:54.040 just give them an opportunity to advertise and bring people 0:13:54.080 --> 0:13:54.880 into their store. 0:13:55.400 --> 0:13:57.439 Who are their main competitors right now? Who do you 0:13:57.520 --> 0:13:58.800 see within this landscape? 0:13:59.760 --> 0:14:00.240 Yeah? 0:14:00.040 --> 0:14:03.960 Yeah, So that's a very difficult question, given that I 0:14:04.000 --> 0:14:05.960 think that they've done a really good job sort of 0:14:06.000 --> 0:14:11.040 breaking out of lifestyle and really focused on athletes, and 0:14:11.080 --> 0:14:13.320 that's what makes them different than a foot locker, than 0:14:13.360 --> 0:14:17.240 a JD Sport. I think one of their closer competitors 0:14:17.280 --> 0:14:23.000 could be Academy Sports and Outdoors. They're much smaller in size, 0:14:22.800 --> 0:14:26.600 but that retailer Academy, you know, does compete with Dix 0:14:26.640 --> 0:14:30.520 and is looking to more focus on athletes and bringing 0:14:30.560 --> 0:14:34.480 sort of that athletic assortment to their customer as well. 0:14:35.120 --> 0:14:37.440 Linda, what is Dix telling you? 0:14:37.440 --> 0:14:40.000 What are some of the other consumer hardlines companies telling 0:14:40.040 --> 0:14:42.440 you about the consumer right now? 0:14:44.120 --> 0:14:47.000 So Dix is also unique in that they typically cater 0:14:47.160 --> 0:14:50.280 to a higher income consumer, so you know, they have 0:14:50.400 --> 0:14:56.200 seen resilient demand. They have seen both ticket and transactions 0:14:56.240 --> 0:14:58.560 continue to rise, which is rather unique. A lot of 0:14:58.600 --> 0:15:01.880 other retailers are only seeing the transaction front rather than 0:15:01.920 --> 0:15:05.360 the ticket front. So it tells me that the demand 0:15:05.400 --> 0:15:08.680 from that higher income consumer you know, is steadied to strong. 0:15:09.360 --> 0:15:13.760 We do also see that demand for new products that's 0:15:13.800 --> 0:15:17.560 being rolled out. People are willing to pay a high 0:15:17.640 --> 0:15:20.400 price point for that. We also see that in footwear 0:15:20.480 --> 0:15:23.000 right like On has a very high price point they 0:15:23.000 --> 0:15:26.720 haven't discounted. Dix is also not discounting on those premium 0:15:26.720 --> 0:15:30.320 products and so that consumer is willing to splurge on 0:15:30.600 --> 0:15:32.920 those items. There is a little bit more pressure on 0:15:32.960 --> 0:15:36.920 the lower income consumer this year. I think that affects 0:15:36.960 --> 0:15:40.960 footlocker a little bit more. But the way Dix is 0:15:40.960 --> 0:15:44.480 approaching sort of the turnaround and offering greater discounts, it 0:15:44.560 --> 0:15:47.520 might be an opportunity, you know, to continue to cater 0:15:47.600 --> 0:15:49.360 to that customer this holiday season. 0:15:49.880 --> 0:15:52.280 How are you thinking about the discretionary space. I mean, 0:15:52.400 --> 0:15:55.000 I know Alta is reporting after the bell today. 0:15:55.520 --> 0:15:57.200 I assume maybe the beauty space. 0:15:57.240 --> 0:15:58.560 Can we call it discretionary? 0:15:59.000 --> 0:16:03.840 Some people might call it A said, yeah, I would agree. 0:16:04.120 --> 0:16:05.440 I think, you know ALTA is. 0:16:05.880 --> 0:16:07.840 There are a lot of connections I can draw between 0:16:07.920 --> 0:16:11.120 Alta and Dix. You know, both of them had you know, 0:16:11.360 --> 0:16:14.120 very conservative outlooks for the back half of the year, 0:16:14.560 --> 0:16:17.240 you know, baking in a lot of uncertainty about you know, 0:16:17.320 --> 0:16:20.960 where demand would go. So Alta, you know, better than 0:16:21.000 --> 0:16:23.800 expected results in the first half, very similar to Dicks. 0:16:24.040 --> 0:16:27.320 We get third quarter results later today, but that outlook 0:16:27.320 --> 0:16:30.240 again is very low, so there's a low bar for 0:16:30.280 --> 0:16:32.960 them to hit, at least on the top line. And 0:16:33.000 --> 0:16:36.000 they're coming off a two year best same store sales 0:16:36.040 --> 0:16:39.080 comp of almost seven percent growth in the second quarter, 0:16:39.680 --> 0:16:42.960 So I'm optimistic for some strong top line numbers there. 0:16:43.000 --> 0:16:45.120 But I do think the number to watch for Alta 0:16:45.160 --> 0:16:47.640 today is going to be on the profit line. They 0:16:47.680 --> 0:16:51.560 already have some pressure on profit within reinvesting in the business, 0:16:51.840 --> 0:16:54.520 and we've seen some of the retailer stocks even if 0:16:54.560 --> 0:16:57.240 you know the quarter was good. If that profit line 0:16:57.280 --> 0:16:59.760 is missing, you know, investors aren't really liking that. 0:17:00.920 --> 0:17:04.639 Lindsay, we're not hearing a whole lot about tariffs this quarter. 0:17:05.480 --> 0:17:06.600 What are your companies saying? 0:17:08.160 --> 0:17:12.160 So, most of my companies have low direct exposure, meaning 0:17:12.160 --> 0:17:15.840 they weren't directly importing a lot of goods, so the 0:17:16.080 --> 0:17:20.520 direct impact on them is low. They're working with suppliers 0:17:21.080 --> 0:17:24.720 and raising prices where they need to to manage that. 0:17:25.200 --> 0:17:27.960 You know, the biggest company in MySpace that that's most 0:17:27.960 --> 0:17:30.800 exposed would be elf Beauty, so also in the beauty space, 0:17:31.359 --> 0:17:33.840 seventy five percent of their product, at least their namesake 0:17:33.920 --> 0:17:38.280 product is made in China, so highly exposed there to 0:17:38.359 --> 0:17:41.160 the China tariffs. But we'll have to wait and see 0:17:41.200 --> 0:17:44.160 because you know, there are some legal action out there, 0:17:44.359 --> 0:17:48.320 you know, looking to get those costs back on the 0:17:48.400 --> 0:17:51.639 retailer side. But you're right, earnings calls have sort of 0:17:51.720 --> 0:17:55.440 left that topic mostly out of the third quarter commentary. 0:17:55.880 --> 0:17:57.679 What are the top major trends that you're keeping an 0:17:57.720 --> 0:17:59.360 eye on as we head into the next year. 0:18:00.880 --> 0:18:03.359 So I do think costs in general, you know, still 0:18:03.400 --> 0:18:07.000 are facing some upward pressure going into next year and 0:18:07.119 --> 0:18:10.040 discretionary as a whole. You know, demand has been quite 0:18:10.119 --> 0:18:13.359 soft since the back half of twenty two, so you 0:18:13.400 --> 0:18:15.639 know we're looking to see, you know, when is that 0:18:15.680 --> 0:18:18.200 going to turn. When are we going to see stronger 0:18:18.440 --> 0:18:20.919 discretionary demand across the board. And that will help a 0:18:20.960 --> 0:18:24.320 lot of these, you know, more secondary retailers in the space, 0:18:24.480 --> 0:18:27.560 someone like an academy who's sort of struggling to see growth. 0:18:28.600 --> 0:18:30.679 We can see a lot stronger of a year, you know, 0:18:30.720 --> 0:18:32.679 with a pickup in that discretionary spend. 0:18:32.960 --> 0:18:35.320 All right, Lindsay, thanks so much, appreciate it. Lindsay Dutch 0:18:35.840 --> 0:18:39.400 Consumer Hardlines. She's a senior analyst at Bloomberg Intelligence down 0:18:39.440 --> 0:18:42.160 there in our Princeton office talking to us about Dick 0:18:42.200 --> 0:18:44.320 Sporting Goods has some pretty decent numbers. 0:18:44.720 --> 0:18:47.800 Stay with us. More from Bloomberg Intelligence coming up after this. 0:18:51.480 --> 0:18:55.160 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:18:55.240 --> 0:18:58.360 weekdays at ten am easterne on Apple, Cocklay and Android 0:18:58.359 --> 0:19:01.800 Auto with the Bloomberg Business Listen on demand wherever you 0:19:01.840 --> 0:19:05.280 get your podcasts, or watch us live on YouTube. 0:19:06.000 --> 0:19:09.320 Well, there's a lot going on in the world of media. 0:19:09.400 --> 0:19:11.119 I mean, we're waiting for a big m and a 0:19:11.280 --> 0:19:14.840 trade to happen. We've also got a lot of streaming 0:19:15.320 --> 0:19:20.119 services jocking for competitive position relative to Netflix. We've got 0:19:20.240 --> 0:19:22.920