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When did making plans get this complicated? It's time to streamline with WhatsApp, the secure messaging app that brings the whole group together. Use polls to settle dinner plans, send event invites and pin messages so no one forgets mom 60th and never miss a meme or milestone. All protected with end to end encryption. It's time for WhatsApp message privately with everyone. Learn more at WhatsApp.com Nike the latest.
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On the CEO's turnaround plan and whether the athletic wear giant is just doing it. Gold hits record highs. We answer your question on where to find it and the government shutdown. Where does the market go from here? For Wednesday, October 1, it's blue markets Daily and I'm Ann Berry. More market details, details to come. But first, we are now in the thick of a government shutdown after Congress failed to reach a deal on federal funding. Attempts made by the Republican controlled Senate to secure a temporary spending bill failed last night as disagreement continued on negotiating an extension of health care tax credits for millions of Americans. The market is holding up so far, signaling that traders expect a somewhat shorter shutdown of perhaps just one, maybe two weeks. But there are real repercussions both during and after. And we're just going to touch on a couple of them now. With an estimated 750,000 federal employees now furloughed deemed quote, non essential, one consequence is that key economic data will likely not be published with their regular cadence. This includes the Bureau of Labor Statistics monthly employment report, which is due on Friday. And if the shutdown continues, the next Consumer Price Index inflation report due October 15, will likely also be delayed. So look, here's why this matters. These are two key indicators that the Federal Reserve uses to decide whether or not to cut interest rates. And the next decision point is just three short weeks away. Which leaves the question, will the Fed make a move with information missing, or will it be forced to wait another month to have all the data it wants, right as the market has gotten excited that those rate cuts are finally here? Now there are alternative measures of economic activity, but none match the reach of the federal government, which surveys tens of thousands of households and businesses every month. Now let's also talk about essential federal services. Employees in areas like air traffic control and Veterans affairs health services are still at work, but they are doing so unpaid until the government reopens and catches their paychecks back up. Now, this usually means that for sectors like airlines and hospitality to look at sectors we're familiar with in the market, for example, it is not business as usual for these sectors. Now, when this last unpaid period happened in 2018 and spilled over to the beginning of 2019 with a 34 day shutdown, air traffic control workers increasingly began to call in sick, leading to delays that had a ripple effect across the United States. States. And we've seen the airline stocks have nudged down somewhat over the past week. Look, this is going to continue to develop live. We're going to keep watching this one and keep coming back to you on where the markets think this is going. Here's what's very interesting. The markets didn't really do much other than nudge upwards to round out September, continue to nudge upwards overall today. But that may change as the situation unfolds and as a shutdown looks like it may become protracted. We're going to keep seeing if that is the case. One area though, that the federal government is continuing full throttle collecting tariffs. Coming up, one year in, we grade the Nike CEO and a listener asks us how to buy into gold. But first, a word from our sponsor, Capital Client Group. Now our producer John and I were talking about some other podcasts that we both listened to.
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That's right, you know, and advice has the power to change your path.
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Well, now the turnaround of Nike, the company that brought sneakers to the masses. Now this one, as we all know, is an iconic brand, but it has had an unicornic share price performance over the last five years to set the stage. Nike today at just under $110 billion market cap company, it is still a giant in the retail and branded consumer world. But it has seen a more than 40% drop in its share price over the past five years, which reflects its consistent loss of category share when we look at running shoes. Now, Nike brought in a new CEO, Elliot Hill, last October to write the ship. And there has been some progress already with the stock price coming on up 13% in the past six months, including a 5% 5% bump today alone, indicating that the market liked what it saw in the company's most recent earnings report, which came out yesterday. So let's get into it. One year on the job. It's Elliot Hill's anniversary. John, how do we think he's doing?
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Well, we're going to get to how we think he's doing. I'm going to tell you how he got there. Hill was with Nike for 32 years and he retired in 2020. At that time he was the president of consumer and marketplace division. And he was brought back, like you said, to be president and CEO just last year. And at that Nike stock was down almost 50% from its Covid peak. And at that time, if we think back, the company was doing a ton of direct to consumer sales, a lot of online through the Nike website and that has declined. Nike started losing market share for running shoes to competitors like Hoka, you mentioned that. And Hill has come in to reinvigorate the brand.
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Right. So let's take a look at what reinvigorate the brand means. Right? So Hill comes back, he's been gone for 32 years. He, he's retired. He was there during the go go days of Nike. He was also there when some of the lack of innovation was starting to kick in. So he comes back into his seat a year ago and he launches a turnaround strategy called WIN now, very simple, two word strategy brand. Here to rejuvenate the brand, here to clear out outdated, outmoded inventory and here to get back into wholesale and retail partnerships like Amazon had been booted by his predecessor. So let's take a look at what has happened since so far. We'll take a peek at the numbers. Wholesale revenue was up 7% to just under $7 billion. Back in May, Nike started selling again on Amazon for the first time since 2019. Overall revenue up 1% to $11.7 billion. Gross profit down 6%. And just as a side note, Nike did actually say it's facing a 1.5 billion dollar hit from tariffs. Somewhat to be expected, also somewhat to be expected to see gross profit come down when you're selling old inventory. That's pretty normal for a turnaround plan. And then the last bit of news that came out yesterday from Nike, just in terms of numbers, before we get to the fun stuff, 23 consecutive years of increasing the dividend payout, that also continued yesterday. John. But the really fun stuff is around what exactly in detail is going on with the running shoes.
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Right? And I did not realize until I looked at the earnings report where it broke out revenue for Converse, which was down 27% in the last quarter. I didn't know that Nike owned Converse and sneakerheads listening are going to hold that against me. But they bought Converse in 2003, so it hasn't even been recently. The company has three brands Nike, Jordan and Converse.
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So just before we go into. I love Converse, by the way, and Chuck Taylor's are my favorite sneakers to sort of run around in. So just as a side note. Well, look, here's the part of the turnaround that caught my eye. And listening to Hill on that earnings call yesterday, he said that he is reorienting 8,000 Nike company employees to execute on a new way of Nike going to market. And that is a program that he is calling the sport offense. And what that means is rather than wading your way through the Nike store right now and trying to figure out Converse in one corner, Nike's in another corner. The idea is how you walk into a store and actually you see everything organized on the shoe side by sport. And it's actually sounds very simple, but it's a pretty differentiated way of starting to reorganize a company as big as Nike. Let's hear what CEO Hill actually had to say about it in his own words in yesterday's earnings call.
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In the marketplace, organizing by sport gives us a much clearer point of view. The House of Innovation in New York is a great example where we redesign a retail experience by sporting. I walked the floors in early September and we're now able to take a consumer into a world of Jordan, a world of Nike running, or a world of Nike Global Football. It's an immersive sport experience. And the refresh has already led to double digit revenue increases.
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You know, and I can say that that's something important to do because I went to that Nike location in New York a year ago to buy some running shoes. It's up on fifth Avenue. It's a big beautiful glass building, sort of like going to the Apple Store. But it didn't feel like it was a place for athletes. I felt like maybe it was a place for collectors or people looking to get cool sneakers, but I left without getting running shoes. And I can see that this reorientation is good for athletes who just want.
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Some equipment, they want to go transact. And it's interesting, we've talked on the show before about which of the retailers, which of the brands actually do well. And it's the ones where the consumers are not at all confused about why it is they go there and what their experience is going to be like. And one other example we talked about was William Sonoma, right? Do you remember that conversation? We said you could go to Pottery Barn, you go to West Elm, you walk in the door, you know what the merchandise is going to look like, what the style is going to be what the price, what the price point is going to be. And I think what Hill is pointing to is our consumers did not have that clarity. And I'm going to start giving them that clarity because consumers who are clear are less likely to be disappointed when it comes to their experience. Now, the actual translation of all this into the numbers, Nike Running has been an early bright spot in this turnaround strategy. 20% gross increase over the last quarter. And what Nike's doing, John, is not only streamlining the experience of the consumer walking through the store, they're streamlining the types of running shoes that are actually available. They're doubling down on the best product lines.
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Right. It's just clear for, for my whole life I knew what Nike was and then it seemed like for a while we lost sight of that, that Nike did. So I have a question then, Ann. They're introducing Skims. Nike partnered with the Skims company and they are coming out with 50 different silhouette brands. And we've famous people modeling them over the last week. To me, that seems a little bit confusing to what we're talking about a focus on, on sports and athletes. What do you think about it?
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Right. And I can see where you could say it's different because what we heard Eric Hill say was you've got a world of Jordan, which is a world of basketball, a world of Nike running. It's about the sport. Nike Skims is more about trying to resonate with women specifically. And here's what I think about it. I think it's actually a clever collaboration. And just to give some context, Kim Kardashian is the co founder of Skims. It's a performance wear, sort of intimate wear apparel brand for women. And the idea of Nike Skims coming together on this collaboration is to help Nike compete with Lululemon and Aloe and Viori, because Athleisure and sort of fashion forward tailored Athleisure for women is a growing category. And Nike, which I think always had a right to win in anything, Athleisure was just sort of nowhere when it came to this. And one thing again that you and I have talked about and this I love about looking at the markets, you can find inspiration for success in industries outside your own. When I look at this, I think of another story you and I have talked about, John, which is meta partnering with Ray Ban Smart glasses. And you said something really interesting in that conversation. Meta partnering with a brand that's already trusted for vision. Where is a smart way to get people to adopt this New product. Right. Smart glasses. I think Nike collaborating with a trusted apparel brand like Skims is a clever way to get people to go and adopt or re embracing Nike in the world of women's apparel.
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And we've already seen athletes embracing it with Serena Williams being part of the Skims launch. And. Yeah, so clearly that's working now. It's been a year with this new CEO.
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Yeah.
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Do you want to give a grade?
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Well, but I do. But before we do, I want to just say we've talked about lots of good things. There aren't. It's not perfect. Let's talk about China.
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Great.
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So China is down, right. In terms of revenue and digital direct to consumer. Talk to me about your experience and direct to consumer with Nike right now.
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Well, that's the whole point is that they're trying to do wholesale so you can buy on Amazon like you mentioned, which makes it easier.
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They.
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There was a time when you'd go to nike.com and they wanted you to have a Nike ID and to design your own shoes. And it kind of made it difficult to just buy a pair of shoes. And so I feel like Nike is partnering now with Dick's and Footlocker to get their shoes more in wholesale. And so there might be a decline in digital direct to consumer sales.
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Right. We actually saw Digital revenues down 12% year over year in their earnings report yesterday. So to answer your question, now that we've got a sort of little bit of a portfolio answer, I give the Nike CEO an A. And here's the reason. It is actually really good progress, I think to see a turnaround, which is very difficult to do when you're as big as Nike, which is very difficult to do when you're a public company and everyone's staring at you every quarter to see your progress. He's actually delivering on the numbers. And I like the actual tangibility of the metrics and the performance that we're seeing. And it looks like he's getting his backyard in order. He's getting the US and North American order first. And then I hope that he's going to translate these learnings into getting China and direct to consumer on the same trajectory. What do you think about the grade here?
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Well, from the numbers side, that makes a lot of sense. And from the consumer side, as someone who grew up wearing Nikes, I'm into this new experience as a consumer to be able to go and buy a pair of shoes. So I give him an A.
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You know, I'm going to. I'm going to sort of. I'm going to grade inflate a little bit, so just bear with me. I'm going to give him an A with a teeny tiny plus next to it for the following reason. It is very difficult to be at a company for 32 years, which is as long as Eric Hill was before he retired, and actually come back with fresh perspective. And I actually want to give him some credit for the fact that he did retire in that period. He clearly got some fresh perspective and I kind of like the fact that he's come back. He's not doing the same old. He's kind of going back to basics, but I give him some credit for trying something new. Well, let's take a quick break. When we come back, the price of gold hit another all time high today. A lister wants to know where to find some brew. Markets Daily is sponsored by Public, the platform for those who take investing seriously. Public combines a wide range of asset classes with the tools you need to build and manage your wealth, whether it's with stocks, options, bonds or crypto.
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And if you have any questions about your investments, Public has Alpha, an AI powered research assistant that can help you find the answers you're looking for. In fact, AI is woven into the entire experience of Public, from portfolio insights to earnings call recaps. Public gives you smarter context at every touch point.
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This episode is brought to you by Jack Daniels Jack Daniels and music are made for each other. They share a rhythm in the craft of making something timeless while being a part of legendary nights. From backyard jams to sold out arenas, there's a song in every toast. Please drink responsibly. Responsibility.org Jack Daniels and Old no. 7 are registered trademarks. Tennessee Whiskey 40% alcohol by volume Jack Daniel Distillery, Lynchburg, Tennessee John, we have.
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A question from the audience.
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That's right, Arian in Ohio wrote, I've been listening to your podcast since it came out and it has helped me a lot in my portfolio, especially since I'm new to investing. I had a quick question. Since gold seems to be the safest option to invest in, how does someone invest in gold?
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B
Well, it is definitely a timely question because gold hit another record high today of just under $3,900 an ounce and I don't know if it's the safest asset out there is not how I'd characterize it, but it's certainly a, quote, safe haven asset. And it's seen its price rally this year on the back of global uncertainty, both geopolitical and the tariffs, and with sticky inflation. And now again with the government shutdown actually here in the United States. So, how to invest in gold? And just bear in mind, we're not necessarily advocating for any one of these, but we do want to make sure we answer the question when the audience sends it in. First of all, the most straightforward way is to buy physical gold coins, bars, or even jewelry. It's tangible, but you'll need secure storage. And insurance premiums can sometimes make it even more expensive to hold it than to pay the market price. Now, gold bars can be bought from certain banks, licensed online retailers, and even from Costco. But getting the precious metal in hand should only be pursued with an abundance of caution, as scams relating to grade and authenticity do happen. Second, you can buy gold ETFs. Their share prices are designed to track the spot price of gold minus the fund's operating expenses. Now, physically backed gold ETFs buy and hold gold bullion in secure vaults. And one of the oldest and largest physically backed gold ETFs is the SPDR Gold Shares Ticker GLD ETF. Now, a few weeks ago, we spoke with John Chompalia at Sprott Asset Management about why gold was hitting record highs. Check out that full episode. I'll repost the link after the show. Meanwhile, let's listen to what he had to say about investing in some of these ETFs.
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Yeah, the last 20 years or so, the most popular way for investors to gain access to gold in their portfolios have been through exchange traded listings. And if you take a look at the collective assets globally of those kinds of vehicles, we're at $350 billion US so they have grown to an enormous amount. And it's an easy way for investors to obviously trade gold intraday through many, many different funds through the, through the stock exchange. And you don't obviously have to go and buy it and it insure it and worry about, you know, it's a chain of custody because all the bars are London good delivery certified.
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Now, note that the tax treatment of gold ETFs actually varies by country. And in some jurisdictions, gold ETFs are treated as collectibles, which may result in higher capital gains tax rates when investors decide to sell. Now a final thought on this. There are ways to invest in areas close to or that or the derivatives of gold without investing in the shiny stuff itself. This includes investing in mining stocks, but the performance of those reflect factors other than the price of gold itself, including the specific risks of company management, labor costs and energy prices. Then there are futures and options where investors will look ahead to what might happen in terms of potential moves in the price of gold. These are typically for more experienced traders because there's leverage attached to these, which can cut both ways, meaning you can amplify wins, but you can also lose a lot more more quickly.
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So if you're starting out investing, you can consider these many options while keeping in mind that gold isn't necessarily the safest option. And to be honest, Ann, the last time I was struck this strongly by gold was Michael Phelps was cleaning up at the Olympics. And if you have a question for Ann, send an email or voice memo.
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To brewmarketshoworningbrew.com well, it's 4:00pm on the east Coast. The markets have closed. There's the bell. It's wrapping on up now. We don't have a ticker tape, so we'll throw it over to our human ticker, our producer John, to take us.
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Through how the market wrapped right the market wrapped up. The S&P 500 marched toward another record high, finishing up a third of a percent. The Dow was up a tenth of a percent, and the Nasdaq finished up nearly half a percent. Some market headlines Shares in the online community Reddit were down as much as 10% today on reports that ChatGPT is sourcing less content from the site. And we've discussed this on the show, the tightrope that Reddit has been walking as it aims to license content from the site while also making sure that AI and search don't diminish community engagement. Investors are keeping an eye on the site's daily active users to assess the impact a shift from search to AI may have. And shares in Peloton fell over 7% today after an announcement that the company is raising membership prices and rolling out new commercial equipment for gyms and hotels, as well as AI enabled software. And it seems investors don't seem that these changes are triggering the turnaround. The company is looking for lots of.
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Turnaround stories right now, John, and just very different outcomes to be depending on the sector, depending on the management team, most importantly. Well, just a final thought and very quick update. Intel. We have covered it a lot in recent weeks because there has been just so much going on with that business. With Softbank Investing, the US Government investing. Nvidia Investing. There's one key thing the market has been looking for. Intel pursued a strategy when it comes to foundries or actually making the chips themselves. They decided to build the foundries and and then assume that the customers would come. Well, guess what? They didn't. However, today, some breaking news. It's a rumor. Waiting to hear if it's confirmed that intel is in early talks with AMD to manufacture chips in its foundry business. Finally, if it's correct, showing some signs that client volume is going to start popping on up. We're going to keep following that. We're also going to keep following, of course, what's going on with the government shutdown. That's it, folks. For today's Blue Markets Daily and Brew.
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Markets Daily is hosted by Anne Barry and produced by John Crateau and Tarkabatif and Emily Milian. Our technical director is Denise Rivera. Audio assistance by Brittany De Taco. And the president of Morning Brew, Inc. Is Devin Emery.
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Wake up tomorrow with the Morning Brew newsletter and tune in to Neil and Toby on Morning Brew Daily. I'll see you back here tomorrow. Same time, same place. And Doug, here we have the Limu.
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Customize their car insurance and save hundreds with Liberty Mutual. Fascinating. It's accompanied by his natural ally, Doug.
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