Loading summary
Transcript49 lines
- [00:01]
A
Toast the holidays in a new way and raise a glass of Rumchata, a delicious creamy blend of horchata with rum. Enjoy it over ice or in your coffee. Rumchata. Your holiday cocktails just got sweeter. Tap or click the banner for more. Drink responsibly. Caribbean rum with real dairy cream Natural and artificial flavors. Alcohol 13.75% by volume 27.5 proof. Copyright 2025, Agave Loco Brands, Pojoaquee, Wisconsin. All rights reserved.
- [00:30]
Is Macy's revamp resonating with shoppers? What the earnings report reveals about the company's turnaround The Buyback Bonanza why are buybacks overtaking dividends in cash sent back to shareholders? We answer one listener's question and the latest hit to EVs. We look at the latest for auto stocks for Wednesday, December 3rd. It's Brew Markets Daily and I'm Ann Barry.
- [00:59]
More market details to come. But first, representatives from Ford, General Motors and Stellantis have emerged late this afternoon from the White House as the Trump administration announced that it's rolling back standards laid out by former President Joe Biden, which required that passenger cars and light trucks have a fuel efficiency of about 50 miles per gallon by 2031. That sounds like a lot of detail, but here's the punchline. The Biden fuel efficiency standards were expected to stimulate U S sales of electric vehic, which is a sector that has been squarely in President Trump's sights for removal of federal support. Now, most notably since taking office, the White House has seen the early termination of tax credits for EV purchases, though ceased on September 30th, much, much sooner than the original expiration date of 2032. Now, since this administration took office, most traditional auto manufacturers, both domestic and international, have delayed or reversed the launch of new EV models in the let's just go over some of them. In January, Volkswagen announced it was scrapping plans to bring the ID7 electric sedan to the US market. General Motors announced in October that the electric Chevrolet Bright Drop vans have been discontinued. That same month, Dodge reportedly canceled development of a high performance electric charger model. Kia confirmed that its US launch of the EV4 sedan was delayed indefinitely. And in September, Ram, which is owned by Stellantis, canceled plans for an electric truck. And there's even more. Nissan ceased production of its Ariya SUV for the US Market, and Ford's next generation full size electric pickup has been delayed to 2028. I can't tell you how many car blogs I went and looked at over the course of today to put Together this list and it gets even longer. Now the actual manufacturing of electric vehicles has challenged automakers even while these brands have been doing well. And they've been doing well even in the face of tariff costs. Now let's take Ford's latest earnings as one example, which were very strong. The reported record revenue of over $50 billion for the third quarter, well past expectations. But losses did widen in its Model E division. General Motors saw its share price, saw 15% on the back of its earnings beats in October. But the company did take a 1.6 billion dollar impairment charge related to adjustments to its EV capacity which included by the way, a 400 million dollar cash hit for canceling EV related contracts and investments. Now I've got the White House announcement in front of me. It literally went up 3:30 this afternoon. And it's very much positioning that its reversal of these Biden era fuel efficiency regulations as a real attempt to try to help Americans with the cost of living. Specifically, the White House says that had those Biden era regulations gone forward, they would have raised the average cost of a new car by nearly $11,000 compared to President Trump's position. And it also claims that Trump's actions will now save American families 109 billion. So look, this is a meaningful step. In June, just to recap, President Trump had signed a joint resolution to end the California EV mandate specifically. And so this is just another step in trying to get basically traditional motor cars getting back on the road and sold in greater volumes here in the United States. Ford, GM and Stellantis stocks had all nudged up over the course of today, nipping on up even more just before this announcement came out and afterwards. General Motors, by the way, up nearly 40% its stock year to date. Ford up over 30%. This is a really big reversal in an entire sector we're going to keep watching. And of course, as we move through this administration's term, we'll see if some of those delays get reversed themselves later in the show. Macy's marches on up. But pure storage tanks, we break down. Why? And I'll answer a question from the audience on why share buybacks are booming.
- [05:01]
B
@Blinds.Com it's not just about window treatments. It's about you. Your style, your space, your way. Whether you DIY or want the pros to handle it all, you'll have the confidence of knowing it's done right. From free expert design help to our 100% satisfaction guarantee, everything we do is made to fit your life and your windows. Because@blinds.com, the only thing we treat better than Windows is you. It's your last chance to score Cyber Monday Megadeals shop up to 50% off plus a free professional measure right now@blinds.com rules and restrictions apply. Now.
- [05:31]
A
Over the past several weeks, we've been enjoying digging into the quarterly earnings, the reports, the calls of some familiar companies. But we've also had a ton of fun learning about some that aren't household names, at least not yet. So today we've got one stock that we all know and another one many of you may not have heard of. So let's start with the one that was suggested by a YouTube viewer who commented, quote, earnings aren't for a few weeks. This is at the time that this person wrote, but would love to hear Anne's thoughts on Macy's post earnings. Been fascinated by the turnaround story and the pivot to luxury. Yes, that turnaround narrative was front and center today. So we're going to dig right into that with our producer John.
- [06:13]
B
That's right. And Macy's has one of those, as you would say, Beyonce tickers, which is just the single M. Yes. Known by one. Yes by one letter. Market cap of $6 billion. And it's the parent company of Macy's, Bloomingdale's and the Blue Mercury brands. And this is one where the market took some time today to digest the full earnings picture. Shares were down 5% pre market in the morning. There was a lot of talk about softness for the for the holiday. I keep saying the upcoming holiday. We're here and in throughout the day. The shares were up about 2% and they ended about flat.
- [06:46]
A
Well, the turnaround was something that people have been waiting to hear about and I'm going to really communicate clearly here. I had a bias. I have long had a question mark over Macy's reasons for existing. I've had a long question mark about department stores in general and their ability to weather the storm of specialty retail, continuing to go online, the convenience of shopping online versus going to a curated center of merchandise. So I've been watching this one somewhat with bated breath. Now CEO Tony Spring, great name by the way, joined the company last year, sprung into action straight away, pledging to close underperforming locations and to invest in the shopping experience for consumers. And yes, one of the pillars of his turnaround strategy was to gain share in the luxury market, which historically has held up pretty well because if you could get the wealthier demographic, they were always going to spend something on luxury, almost irrespective of what the broader macro outlook looked like. Well, so far Macy's Corporation has quote, reimagined 125 locations. We're going to talk about that with the goal of revamping 200 more in coming years. So just to hit the highlights on earnings, net sales of $4.7 billion. The Macy's Hallmark brand saw 2% sales growth, which was pretty good after a long period of decline and a bit of a roller coaster. Now Macy's Reimagine125 locations had a 2.3% increase in same store sales. Bloomingdale is an 8.8% increase in same same store sales, the highest in over three years. And the company did this magic thing that everyone's been waiting for, which is raise its sales guidance for the full year. And the CEO, Tony Spring had some interesting quotes sort of explaining why.
- [08:31]
B
Yeah, he summed it up by saying our third quarter sales were the strongest in 13 quarters, reflecting the acceleration of our bold new chapter strategy and demonstrating that the meaningful enterprise wide changes we've made are resonating with customers. And one of those changes that he highlighted was brand curation. And this is something and we talked about when we looked at the success of Dillard's department store. Spring said on the call that the company is carving out floor space to leverage new trends. And he mentioned the success of having newer or more fashionable products from brands like Rod and Gun, Reiss and Prada Beauty. I've never heard of Rod and Gun, which sounds like a hunting thing, but apparently it's not.
- [09:09]
A
It's Ro shooting and fishing is what it sounds like.
- [09:11]
B
I would think so. There's two Ds in rod and two N in gun. I'll have to look that up. But yes, they're looking out for this turnaround. And also just one more thing, we're talking about branding. When I went to the website, the investor relations website and what color do you think of when you think of Macy?
- [09:27]
A
Red and white.
- [09:28]
B
It's a lot of gold.
- [09:30]
A
Oh, but it is also the festive season. I mean, I give. Do they get a bit of a pass for being the holidays or you're just.
- [09:35]
B
I think they're leaning into the Bloomingdale's gold luxury. That was just my assessment.
- [09:41]
A
That was your assessment. I got to tell you, when producer John Crouch gets cynical, you're not in a good spot because you are. Well, you're one of the least cynical people I have ever worked with. It just to your point on luxury. So Reese is not a brand this is Reiss, originally from the uk, that I would put in the truly sort of luxury category. It's definitely premium, it's definitely got price points that are further up there. But this is not the sort of European sort of luxury couture houses that we're talking about here. The other thing I would say is when you actually take a look at this reimagine strategy, reimagine to me has this very heavy connotation of we're going to tear up the playbook and do something really dramatically different. But when you break down the summary of this, they're talking about modernizing the physical store, by which they mean they're reorganizing the actual space within the four walls, they're updating it, they're cleaner, there's more modern visual representation. The product assortment we've just talked about, it feels more relevant, it feels fresh. But this is not a reimagining, John.
- [10:42]
B
Right.
- [10:42]
A
Of the retail experience. This is just doing what they should have done, which is refresh, you know, modernize a little bit. I think of reimagining as something like let's have virtual fitting rooms and we have sort of robots coming around or let's serv champagne as you walk around with a personal shopper. So what some would argue, I would argue this feels to me a bit like tweaking around the edges versus really doing something truly transformational. All of that being said, to Macy's credit, they have been focusing on trying to make sure that the impact they're having is measurable. And so one of the things that they did point out in their earnings today was a measure of the customer experience. Macy's achieved its highest third quarter Net Promoter score on record. For nerds like me, the npc, the Net Promoter score, you hear it called the nps, is a way of understanding if your consumers would recommend your brand to other people. So that seems to be going quite well. The one other thing I would say is that the CEO Spring did say on the call, quote, customer emails serve as another valuable form of feedback. And I read every one I receive. And he went on to go read a long customer email. Just as a side note, we read every email that we receive here at the markets, every comment on YouTube, every comment that's left on Spotify, every comment that's left on Apple. And I really do appreciate him doing that because it is one of the most effective ways to understand if things are landing with the audience you're trying to reach.
- [12:06]
B
It's why we're talking About Macy's.
- [12:08]
A
In fact, why we talked about Macy's. That is exactly right. This did remind me a little bit. John, you told me a story once of how you sort of annoyingly emailed the CEO of Wayfair.
- [12:17]
B
Yes, I got a TV stand shipped to me from Wayfair. Some parts were missing. I went through their customer service experience and it wasn't good. I wasn't getting any resolution. I sent an email to the CEO and within 36 hours the Chief of staff had gotten back to me with a customer code where I could repurchase the product.
- [12:33]
A
Yeah, you were that guy. So take note everybody. Well, look, in terms of luxury, let's talk a little bit more about Bloomingdale's, which is the brand that we more freely associate with the higher income shopper. More of the K shaped economy discussion came in here. Bloomingdale, same store sales were up, as we said, at the top four times the rate of growth as the Macy's brand. And fine jewelry, watches, handbags and men's sort of professional wear outperformed the overall Macy's growth rate. So again, even within the Macy's merchandising portfolio, we are seeing that very high end piece do a lot better.
- [13:08]
B
And so in terms of the stock price going up and down today. Yeah, I think there was a thought, okay, this turnaround is working in terms of the same store sales going up. But what are we looking at for the holiday shopping and is it going to be a little bit soft? The CEO did say on the call that the company expects a more choiceful consumer in the fourth quarter. And so I think they're not sure how the spending is going to look for the holidays. But a note for the holiday shopping season, the Macy's Thanksgiving Day parade was the most watched live event in seven years and the second most watched event of 2025, only behind the Super Bowl.
- [13:44]
A
I find that stunning. Stunning is that I, I this needs to be trusted. But verified. I find this absolutely, absolutely stunning. Second most watched event of 25, only behind the Super Bowl. I'm sure Ultimate Fight Club will have something.
- [13:59]
B
It's one of those things you can verify. But also what is an entertainment event?
- [14:04]
The category is sort of broad.
- [14:05]
A
To me it is broad. Well, from Macy's, which is absolutely a household name. We're going to talk about one that first of all, another great name, Pure Storage and caught our eye and this is why we actually got a phone call from Pure Storage and the team asked if we would like to interview the CEO of the company. Here or on one of our sister podcasts, which we are in fact going to do. But Pure Storage Ticker PS T G, which John has an opinion on, is one that we want to dig into because you may not have heard of it, you probably will. And its share price performance today was absolutely shocking.
- [14:41]
B
Right? Yesterday when we looked at the market cap, it was 30 billion. And today shares were down over 25% after the company reported earnings and so put its market cap closer to 22 billion. Revenue was 965 million, which was up 16% year over year, surpassing estimates. Adjusted earnings per share of 58 cents was in line with estimates, and subscription service revenue was up 14% year over year.
- [15:06]
A
So let's just talk about this company self describes itself as, quote, the IT pioneer that delivers the world's most advanced data storage technologies and services. And it's basically saying that it's all flash storage and the software that runs it is an alternative to traditional hard disk drives or really hard disk drives on absolute steroids. Right now, the company does have some large customers like Meta. It has shipped actually a large amount of storage, 2 exabytes of storage to hyperscalers. That's a lot, by the way. It's a lot, but it represents less than 1% of the total market for data storage. And this is an interesting moment in time because there is a debate going on around how much companies want to store data in the cloud, how much do they want to have on premise, or if not on premise, do they want to have in physical locations? And so this is a company, Pure Storage, that's sort of playing around in this particular space. Now, it did say on its earnings call that it's not going to provide expectations for hyperscaler deliveries for the fiscal year 2027. So if you want to get to the core of why has this company, which had a $30 billion market cap yesterday, dropped 25% today? Analysts said this lack of clarity on scaling is keeping them on the sidelines. And it's worth just remembering this is a point in time where any lack of clarity from the hyperscalers who really are the engine of capex spend, particularly on AI right now. Any sign that there is lack of clarity on what they're doing with their cash is getting people on tenterhooks.
- [16:38]
B
And I think that was the main driver for the share price going down today. Also, things that were mentioned, concerns with the supply chain and expenses. When we talked about Dell Technologies last week, we touched on the increasing price of memory that's going to be a theme that keeps coming up with the AI buildout. And also there was a question about whether the stock was simply overvalued. Back in September, shares were up over 29% on the information on the deals with Meta and other suppliers and so this might be seen as a correction.
- [17:04]
A
Shares still up 14% year to date even despite the drop today. And just one more thing worth sharing which is the CEO Charles Giancarlo on the earnings call presented his overview of where he sees our point in the tech cycle right now and it's worth just reading this quote.
- [17:20]
B
Yes, I love this. This had a compelling prose for the time and place. Data, he says, is now increasingly vit because of the promise of AI and the requires customers to elevate its role in the technology architecture. While software may have been eating the world in the last decade, it appears that data will be eating the world and potentially even eat software in the next we believe the era of data being subservient to applications in data center architecture is ending.
- [17:48]
A
Yeah, that to me sounds like reimagining 125 locations. It was lots of nice words but slightly I mean there's a lot of lot of platitudes was sort of the way I read that one not surprising analysts will listen to that when that's no new information. We do appreciate it though when share when shareholder letters are well written, when there's lots of interesting literary references where there's an effort to try and write some real prose for some for some of these tech companies and make it more interesting. So look, at least John, he gets, you know, an effort, an effort medal for selling it. He's selling it. Well, there we go. We're going to take a quick break and when we come back, corporate buybacks are on a record setting pace. And I wanted to make sure that I answered a question from a listener who wrote in asking why. And now a word from our sponsor, Vanguard Financial Advisors. Listen up. Capturing value in fixed income is not easy. Bond markets are massive, murky and let's be real, lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard.
- [18:45]
B
Vanguard bonds are institutional quality. That means top grade products across the board.
- [18:49]
A
Some managers out there promise big returns, but those usually come with big risks. And that can mean a roller coaster ride for investors. Vanguard takes a steadier approach. They don't go all in on risky bets. Instead they focus on reliability and consistency.
- [19:01]
B
And consistency is key.
- [19:02]
A
So if you're looking to give your clients consistent results Year in and year out. Go see the record for yourself@vanguard.com audio. That's vanguard.com audio all investing is subject to risk. Vanguard Marketing Corporation Distributor the Uniswap wallet makes crypto easier and safer to own and use. Discover new tokens, research confidently, swap instantly and manage it all securely in one place. The Uniswap trading protocol has powered over $3 trillion in volume and it's trusted by millions worldwide. Buy your first crypto assets in a few taps and experience the freedom of decentralized finance with Uniswap. Tap the banner to get started.
- [19:44]
John, we have a question from the audience.
- [19:47]
B
That's right, Eric in Los Angeles wrote Ann, this earnings season there has been a lot of conversation about public returning cash to shareholders, some with dividends and some with share buybacks. Why would a company do one instead of the other?
- [19:59]
A
Well, thank you for the question, eric, because yes, 2025 has been flush with dividend increases and buyback programs. You've been hearing about both of those all earnings season. But it's become pretty clear that companies have been trending towards favoring buybacks. So just to lay out the biggest share repurchases of this year, they've been led by big tech and these numbers are huge. Apple at $100 billion, Alphabet at 70 billion, Nvidia at 60 billion. And then big banks are the other major babe buyback players right now. That's JP Morgan Chase at a 50 billion dollar program, and then Goldman Sachs, Wells Fargo and Bank of America each having announced 40 billion dollar buyback programs. That's just a sample, just a little bit of the menu, because U. S aggregate buyback dollars for 2025 are now on track for a record $1 trillion, exceeding dividend dollars of around 750 million for the fifth consecutive year. So here is why. When a public company repurchases its shares, it reduces the number of shares in circulation, which means that each one left remaining out there becomes more valuable. You've got the same earnings essentially divided amongst fewer owners, and as a result, the stock price, all things being equal, typically goes up. So here's where there's an advantage from a shareholder perspective compared to receiving dividends. Investors do not pay tax on that gain unless they decide to sell. And when they do, they even get the benefit potentially of long term capital gains tax rates that can be lower than income tax rates. Now, in contrast, dividends received by investors are taxed as income and taxed as that cash actually comes, comes in. Now, on the flip side, investors do take the risk that share prices fall after a buyback, and so if they don't sell at that before then, they may miss the window to actually monetize again. Now, from a company's perspective, dividend regimes tend to be more rigid because once dividends are set in motion, investors usually expect them to continue. And markets have a tendency to bucket dividend paying stocks together and then to compare them with growth or value stocks as other examples of kinds of investments. So if you're a company, switching away from paying a dividend once you've started can actually have tough consequences for a stock's valuation because it can be seen as a sign that your recurring cash flow is at risk. Buybacks, on the other hand, are generally acknowledged to be flexible. A company can ramp them up when times are good, with executives often framing them as a signal of confidence, a way of saying we believe our stock is undervalued. Although cynics do point out the buybacks can also be used to inflate stock based compensation or to paper over weak earnings per share growth. And because buybacks are not burdened with the expectation of continuity, companies can quietly scale them back in when there are leaner years or during times that are more capex heavy without signaling distress. All of which is why buybacks have, for this year at least, been the tool of choice for returning money to shareholders.
- [23:01]
B
And if you have a question for Ann, send an email or voice memo to brewmarketshoworningbrew.com well, it's 4:00pm on the East Coast.
- [23:08]
A
The market's closing. There's the bell wrapping up the trading day. We don't have a ticker tape, but let's throw it over to our human ticker, our producer John.
- [23:16]
B
That's right, the major indices all ticked up as the day went on, with the S&P 500 nearing a record high, closing up a third of a percent. The Nasdaq finished up nearly 0.2% and the Dow was up 9.10 of a percent. A few market headlines Sharon American Eagle surged 15% after the retailer reported record sales and better than expected earnings in its fiscal third quarter. Comparable sales were up 4% year over year. And we've got to think that reflects the success of recent marketing campaigns featuring Sydney Sweeney and Travis Kelsey. Denim on denim on denim.
- [23:49]
A
You've been wanting. You actually want to sing it. John loves that set of lyrics, so I just want to sort of throw a bit of a wrench into this one. It feels as though people want to say that American Eagle Eagle's stellar results today were the direct result of the Travis Kelsey and Sydney Sweeney campaigns. But actually, when you're a nerd like me and can't help yourself, I actually dug in and most of the growth, yes, American Eagle, the flagship brand, was up, but most of the growth, John, came from Aerie, which is a sort of sub brand inside the American Eagle parent company, which focuses on lingerie and pajamas and intimate wear. So just a nugget there about digging into the details, because I know the headlines have been very, very focused on that Sydney Sweeney campaign.
- [24:30]
B
That's right. And I'm going to wait for the L Intimates on Intimates on Intimates.
- [24:33]
A
And for Martha Stewart, by the way, is the new poster child for all this. So lots going on over there.
- [24:39]
B
And another story, Ann, we've been following the storylines over at Netflix today. Netflix stock was down nearly 5% after report that co founder Reed Hastings recently sold over $40 million in company shares. And it may be a sign that the market doesn't want to see Netflix win the bid to acquire Warner Brothers Discovery. It seems that as each day goes by, folks are increasingly seeing Netflix as more of a contender and not just a spoil sport in the bidd.
- [25:03]
A
We're going to keep on watching that one here. So here's what's going on with the Warner Brothers bids at the moment. We are waiting to see the details come out for each of the bids that are in play. We know that Netflix is in the mix. We've been hearing a lot of rumors about Comcast being into the mix as well. We know that Paramount is out there with a combination of sovereign wealth and private equity money potentially supporting their bid as well. So lots of things are leaking to the press at the moment. There are some official statements going out there. Once there is a full slew of data, we're going to be combing through it all to come back to you with a holistic view on how that merger may be going. That's it for today's Brew Markets Daily.
- [25:39]
B
And Brew Markets Daily is hosted by Anne Barry and produced by Giancarlo Tarka, Bella Teef and Emily Milian. Our Tentacle director is Uchenawa Ogu, Brittany Dotako is our audio engineer and the president of Morning Brew Inc. Is Devin Emery.
- [25:51]
A
Wake up tomorrow with the Morning Brew newsletter and tune in to Neil and Toby on Morning Brew Daily. We'll see you back here tomorrow, same time, same place.