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When the holidays start to feel a bit repetitive, reach for a Sprite Winter Spiced Cranberry and put your twist on tradition. A bold cranberry and winter spice flavor fusion Sprite Winter Spice Cranberry is a refreshing way to shake things up this sipping season and only for a limited time. Sprite obey your thirst. 2025 brought controversy in the form of quote, good jeans, Uncle Herschel and bags that don't fly free. Which brands took hit this year, which covered and which are still finding their way? New developments in Paramount hostile bid for Warner Brothers discovery Larry Ellison says he's good for the money and a Santa Claus rally. What is it exactly and will we get one? We break it down here for Monday, December 22nd. It's blue markets Daily. And I'm Ann Berry. More market details to come. But first, it's the time of year where we keep hearing about a Santa Claus rally. So what is it and will we get one? Well, the Santa Claus rally is a term that describes a historical tendency for markets to rise during the final days of December and the very beginning of January. Specifically, it usually refers to the last five trading days of the year. So we're hitting that time imminently on Christmas Eve. Plus it includes the first two trading days of the brand new year. Now during that narrow window, stocks and particularly the major indices have often delivered positive returns. The term was coined back in the 1970s. And over the decades, market data has shown that this period has leaned bullish more often than not, 79 of the time since 1950, in fact, with the S P 500 averaging a 1.3% gain in that seven day trading window. So that's not every single year, but it's certainly often enough that investors pay attention. So the question is, why does this happen? Well, there are a few theories. First, holiday optimism. Investors just tend to be more upbeat around year end and that positive sentiment can translate into buying. Second, lighter trading volume. Many large institutional investors are already out on vacation, which can make it easier for smaller amounts of buying to push prices higher. Third year end portfolio adjustments. Some investors sell losing stocks earlier in December for tax reasons. That's a phenomenon that's called tax loss harvesting we've talked about here on the show. And then they buy back into the market as the new year begins. And finally, there's sort of psychology or self fulfilling prophecies. That's when people expect a rally because they look at the historical trend for there to be one, for example, and that helps their actions create the actual outcome itself. Now, again, A Santa Claus rally is not guaranteed. Some years it doesn't happen at all, especially during periods of high inflation, recession fears or major global uncertainty. In fact, market watchers sometimes say that when Santa doesn't show up, it can be a warning sign for a tougher year ahead. Although last year there was a Santa Claus sell off with the major indices dropping around half a percent. And yet look at the year we have had since. So the Santa Claus rally isn't magic and Santa doesn't always deliver. But Wall street still checks the chimney every year. Coming up, American Eagle's denim ad campaign had everyone talking. This year we explore if the stock thought it was worth the backlash. And Paramount's hostile bid just got personal, where billionaire Larry Ellison put his own money on the line. But first, a word from our sponsor, Vanguard. Just John, which do you prefer, steady or high risk? High rewards approaches.
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I'm like the tortoise. Give me steady any day.
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Vanguard Marketing Corporation Distributor it's nearing the.
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End of the year, so we thought it would be interesting to take a look back at some public companies that saw their brands take a public hit in 2025. We're going to look at four specific businesses that faced backlash, but for very different reasons, be it policy changes, logo changes or just old fashioned bad pr. So was the buzz ultimately good or bad for their share prices? Well, let's start with Southwest Airline. That's ticker Love Luv. And actually we had a quick look back at some of these tickers. Remember that that ticker exists because Southwest started operations out of Dallas Love Field Airport. That's the reason for that ticker.
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Yes, love that one. And famously, Southwest is where bags fly free. And it's also where famously, you didn't get an assigned seat.
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Yeah.
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B
You know, have you flown south?
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I have Southwest. So it's actually I found Southwest to be fantastic for some specific point to point routes. And so I have actually been one of those people rushing to stand in line behind the number of my group, trying not to get crushed because I'm quite small, but with my elbows out trying to get as close to the front of the queue as possible.
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And the only time I flew with my wife, she had never been on Southwest. And so I left her behind because I knew I was going to get on and get a seat for her. But it caused some, some stress because she didn't know the system.
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I was. Did you tell her in advance that you were going to rush off and leave her?
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I said it from a distance as I was leaving.
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Yeah, we will have a conversation about that another time. We've got a plan for that. Well, in March, Southwest began charging 35 bucks for the first bag and $45 for an additional bag. Just to put that in context, Southwest is known for having cheaper ticket prices. You know, I've flown on southwest for under 100 bucks. You know, I've flown on it for 60 something dollars. So when you think about again, $35 for the first bag, $45 for an additional bag to check it in, that is a pretty chunky proportion of the actual ticket price that you're now having to pony up to get your bags onto the jet.
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Absolutely.
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Well, we cover this on on the October's earnings call when CEO Bob Jordan insisted that Southwest Net Promoter Score had returned to levels from before announcing the policy change. And just to nerd out a little bit and explain for those of you not in marketing what that means. A net prom motor score is a way that a company measures how much you or I, John, as passengers, for example, would be willing to advocate for the brand, to recommend it, I. E. To promote the brand to somebody else. And it's an important measure that marketers and companies often use as a way of understanding client satisfaction and brand awareness and whether it's getting the kind of traction that it wants to get with respect to being a trusted brand.
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And Bob Jordan was saying, forget what you've heard, forget all the grumblings, forget your friends, forget Reddit. People love Southwest.
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Yes.
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But it turns out the data was a little murky.
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Yes, go on.
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As part of the assigned seat change, they're, they're rolling out planes that have different kinds of seating in them, that have extra legroom, for example.
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Well, you need that because you're tall.
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That's perfect. So some people are happy about that. But those seats don't go on sale until next year. Those when you can start paying for extra legroom seats. So there's been several months where there have been lucky folks that just get on a Southwest plane. They played paid for a normal ticket and they happen to have extra leg room. And so that's going to help your brand score a little bit.
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I think that's completely right. And then also just something to think about. Assigned seating, which we are so used to on other airlines, has been a hallmark of Southwest for so long. It turns out that Southwest faithfuls, really regular flyers on their airline aren't particularly excited about it. It's proven to be quite unpopular with the most dedicated Southwest faithfuls. The company nevertheless is expecting a billion dollars in revenue from those seat sales next year. Well, while all of this may have had a negative impact on Southwest brand differentiation, there's two things to think about here. Number one is the context of what is going on with the airlines more broadly. And it feels as though whether it's the launch of lounges, whether it's the push to get fancier snacks on these planes, all of the airlines at the moment are jostling to try to get the premium traveler. And it feels as though Southwest is gravitating up in its own value proposition relative to where it's been in the past. The second thing to look at is, despite all of this, despite the noise, despite the fact that folks are complaining about these bag charges, the revenue is up. Nevertheless, the numbers are showing that it is working. And the share price is up as well, up 25% this year, including a bump after the baggage announcement in March. At the end of the day, the market just likes new revenue streams as long as the attrition in the customer base doesn't offset it completely. That was my reading on that one. Well, the next brand that we're going to look at was really a very public debacle and it involved all of the things that create that are the ingredients for juicy stories this days. It means a lot of social media presence. It means a lot of retail investor activity. It means a lot of CEO mayor culping. Right. Those are the things I think of. And this was all encapsulated in the story of Cracker Barrel and its attempted rebrand emphasis. Attempted ticker for this one is cbrl. Now, in August, Cracker Barrel switched out its logo that was of a man leaning on a barrel next to the name Cracker Barrel and wanted to move towards a more minimalistic version that removed the leaning man and just read Cracker Barrel. Now, there was immediate backlash. Some folks took to social media, took to contacting the company, saying that the change is quote, woke or quote un American. So there was a very visceral reaction to this.
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And of all the brand backlash, this one made it all the way to the top of the government. With President Trump posting on Truth Social, Cracker Barrels should go back to the old logo, admit a mistake based on customer response, the ultimate pole, and manage the company better than ever before. And the share price dropped immediately after. And after initially defending the change, the change reverted, the chain reverted back to the old man logo, who we learned is named Herschel.
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Yes, Uncle Herschel, I think is what you said. So literally, just to sort of dig into this, the company did, in fact follow President Trump's suggestion. It did go back to the old logo. It did admit that it was a mistake. It did that on the earnings call, it did that in public releases. And it has been attempting to manage the company better than ever before, but not without a couple of steps that haven't been met quite so warmly. Let's just go back to the restaurant itself. If you actually walked into those four walls, you saw Cracker Barrel was trying to get rid of some of its old timey props, which it had around. Something you've been to with your family in Virginia, John, I remember you talking about this. I haven't been to a Cracker Barrel yet, but I very much want to. And then there was the food. You noticed a change in the food.
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Yes, absolutely. The biscuits tasted different and we weren't crazy to think that those of us who have eaten it turned out that they had changed what was going on in the kitchens. And they were pre making the biscuits, freezing them, reheating them the next day. And fans noticed it.
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There was backlash, fans noticed it.
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So, you know, it made me think this logo was the lightning rod. But it opened up a conversation of like, what's really happening there?
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Interesting.
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Yeah.
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It shone the light. And it does sort of raise the question, would they have been able to make their changes in a slightly more stealth fashion?
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Right.
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Would you have paid much attention to the taste of the biscuits if Cracker Barrel hadn't been top of your mind?
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It's a question for you to answer your question. Yes. Already decided that I wasn't going back there. And so maybe the logo was a good thing to force the company to listen to its customers.
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Customers. Some more interesting. Well, in the most recent earnings, we did see the impact of all of this on the numbers. Same store, restaurant sales did decline 4.7% year over year. So growth not just down, but actually negative in response to all of this. And the CEO, I mean, from a personal perspective, from a career perspective, this could have really been a moment that could have knocked her off course. Right.
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We talked about there being activist investors. They're trying to get her out of there. But Julie Messino, the CEO, she fought off calls to leave. She said in the most recent earnings call that she is eliminated a layer of management. They're getting lean, they're listening to customers, and they're trying to get kitchen operations back to what people like.
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Well, shares are down 50% this year. They're down nearly 70% since the logo debacle and the rebrand project. And so, you know, we'll have to keep watching this one because Cracker Barrel needs to figure something out. 70% down. In a year where the market's been so strong, even compared to other quick service restaurants, this one has really just been a stonker in the wrong direction. Well, let's move on to Duolingo Ticker D U O L In April 2025, an internal memo from the CEO, Luis von Ahn was leaked, and it announced that the company was going to shift to an AI first strategy, increasingly relying on generative AI to create content. And this is work that had previously been done by human contractors. So in terms of brand and the association of Duolingo with helping humans learn new skills, this was a moment where it said, we're going to do that by turning away from some human input into how we go about it.
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Absolutely. And there was a big backlash. I remember the circulating on LinkedIn. People were sharing the CEO's internal memo. And Duolingo had been an early poster child for AI taking jobs. That was the first. You know, we've been talking about it for months now, but that was AI's taking our jobs. And amid the backlash, Duolingo temporarily deleted its TikTok and Instagram accounts, which that backfired as well because they had such a reputation for being silly and fun with that owl. And so the fact that they went silent felt conspicuous.
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And the owl, if you just remember, is the green owl. Right. Which hounds you. It's this passive aggressive owl that tries to nag you into doing your homework. It was at sunset, the owl was sort of retired. And do you remember Dua Lipa? Dua Lipa went out there and said, I'm going to miss the owl. I mean, this mascot really was iconic. In terms of this business and synonymous with this business. So even moving the owl away seemed to be bad news. The thing that struck me about this, John, is sort of looking back at this now in December and this instance of the memo being leaked happened in April. I do wonder if this happened today, whether it get the same reaction because I feel as though we've been hearing nothing but Amazon talking about job reduction, JP Morgan talking about the dangers of AI. So many companies since then have come out and said very openly, look, we are going to replace certain jobs with AI. We may create more jobs than others. Duolingo felt like it had the misfortune of being amongst the first to actually be, you know, unwittingly vocal about it. I'm sure it didn't plan to have its memo leaked, but it was absolutely.
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They became the poster child and then they got rid of the owl, which they've now said they're bringing back. So it seemed like in the moment they were reacting, they didn't know how to take it. I think if it had happened today like you said, it would be very different. And on the November earnings call, the CEO said the company we to be returning to its Unhinged ads.
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I love that they're owning Unhinged. They're just saying it's calling it what it is. The company also in that same earnings call again, this was in November, delivered some good Numbers. Revenue actually grew 41 over $270 million. Active daily users up 36%. Nevertheless, the share price of Duolingo continues to fall. It's down 42% on the year. That share price chart really in the red. And this is so indicative of what's happening not only to Duolingo but to some other software companies. Whether it's B2B or whether it's B2C, we look at things like Adobe or Salesforce. The narrative they cannot shake off is that AI is ultimately going to eat them alive. And there is no more prevalent fear of that than in the education sector. So we've talked about Chegg, we've talked about Coursera and Udemy merging partly to try and figure out their way with AI. So Duolingo @ the moment, both software and education, it's just a double whammy for this.
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One. And did the CEO the fox into the henhouse by saying by. By bringing AI in and then.
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Maybe it'll eat into the out. What's an owl house? What's the equivalent of an owl house? Well, will it shift? Will it weather a shift to investing in long term customer growth, the company is having to spend more money on that. Of course, rather is trying to sort of trying to stop pushing new news as to subscribe right away. So it's still actually leaning into this idea of free content as a way to bait people, to hook people in, to get them really excited about using the product and to hopefully keep them sticking around a bit longer or their attrition numbers down. 2026. I feel John's gonna be a really important year for Duolingo as it finds its way. We have to talk about this next one. Drum roll, please. It is Sydney Sweeney's ad for American Eagle ticker AEO. This is the biggie. That's.
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Right. That campaign launched July 23rd. It's the video we've probably all seen featuring Sydney Sweeney in all denim. And her line was, my body's composition is determined by my genesis. My jeans are blue. Referring to the blue jeans, Theoretically, yeah. But there was accusations of the brand promoting eugenics and being racist. It did not go over.
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Well. It didn't go over. American Eagle, though, stood by the ad. You may remember that President Trump weighed in on this one, too. Weighed in on crack. What? Weighed on here? In here. And it was a big advocate for Sydney Sweeney and for what American Eagle was doing. Last month. The Chief Marketing Officer, Craig Brummer said, quote, in our industry, the biggest enemy is boring. The biggest enemy right now is coming up with campaigns that literally look like nice wallpaper. They doubled down, by the way. They doubled down. Which we're going to talk about in just a.
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Moment. Yeah, in the earnings report, they did well. Net revenue was up 6%. Comparable sales up 4% year over year at American.
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Eagle. So it's a question of how much it was. Actually the ad, we're going to have to wait to see the actual numbers hit. But in terms of doubling down, Martha Stewart in her 80s, she's been a cover girl on Sports Illustrated, is the new woman in the denim outfit. They're still sticking with the good jeans tagline, so they haven't backed down on that. And then Travis Kelsey also now appear in ads for American Eagle. When you unpack the numbers, more of the growth, frankly, came from Aerie, which is sort of intimate wear and sleepwear, part of the American Eagle umbrella company. Those same store sales comps were up 11%. American Eagle much lower. Nevertheless, shares of American Eagle up 65% the year. They have almost tripled since the ad. That controversial ad first ran well, we like to look back and to see whether a certain themes, whether it's ad missteps or add successes to see what the long term effect is. So this is the kind of thing that we're looking out for. If there are brand themes or company themes that you think are interesting and you say, look, this caught my attention, drop us a note because we'll take a look to see what's happened down the road. We'll take a quick break and when we come back, the latest on Paramount's hostile bid for Warner Brothers Discovery. Toast the holidays in a new way and raise a glass of Rumchata, a delicious creamy blend of horchata with rum 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. This message may be shocking to many millennials. If you are one, you might want to sit down. Right now, loads of people are searching the following on low rise jeans, halter top velour tracksuit, hookah shell necklace, disc belt. You likely place these in the dark of your closet in 2004, never to be seen again. But if you can find it in yourself to dust them off, there are a lot of people who will give you money for them. Sell on Depop, where taste recognizes taste. Well, it's 4:00pm on the east Coast. There it is, the bell. The markets have closed for the day. We don't have a ticker tape, so we'll throw it over to our human.
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Ticker. John the S&P 500 finished up six tenths of a percent. The NASDAQ and the Dow both finished up half a percent. Some market Headlines There are updates pouring in on the Netflix and Paramount's bids to acquire Warner Brothers Discovery. You'll remember one outstanding hitch to Paramount's previous bids was the equity proportion was backstopped by the Ellison family Trust, not Larry Ellison.
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Personally. Well, there was a concession today and more disclosure of information than had previously been provided. The Oracle co founder Larry Ellison did now offer a personal guarantee of just over $40 billion of the equity financing for the offer to basically rebuff concerns that the money wasn't there. Paramount also agreed to publish records to confirm firm just how much money was sitting in this very important Ellison family trust and disclosed that that Trust owns approximately 1.16 billion shares of Oracle Common stock and also noted that the material liabilities of the Ellison family trust are publicly disclosed so that this is no longer shrouded in mystery. Something, by the way, that the Warner Brothers board had called out as one of the reasons it was in favor of the Netflix proposal instead of. Of. Instead of this one. Well, Oracle share price, just to give this some context, today was around 198 bucks, down from its peak closing level of nearly $328 a share in September. Nevertheless, at today's level, the trust stock holdings are worth in the region of $230 billion. So this is very much Paramount and the Ellison saying, look, you can't argue with the numbers. The money's there if we want to put it into buying Warner Brothers.
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Discovery. This was notable too. Paramount also raised its breakup fee from $5 billion to $5.8 billion, which matches.
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Netflix. Netflix, though, is sending out the signal saying it's still expecting a deal to happen. It actually confirmed today that restructured some of its debt in anticipation of buying Warner Brothers Discovery. We're going to keep watching this one. This is one person's view. This is just, you know me with not a real crystal ball. It's sort of foggy in there on this deal. I do think Paramount is possibly gearing up to try and increase its bids. So we're going to keep on watching this. We're hearing that sort of muttering in the markets as well. So everyone is watching that Paramount and Warner Brothers share price as well as Netflixes right now. Well onto another merger moment that's a little bit less glamorous, but to me, frankly is more baffling and therefore even more intriguing. And that is Janice Henderson. The global investor with over $480 billion of assets under management and is listed on the New York Stock Exchange is actually being taken private. This is in an acquisition where the buyers are a very, to me unusual couple. You've got the activist Nelson Peltz's Try and Fund Management and then the venture capital firm General Catalysts. Now Peltz, just to set the scene, is a massive personality. He's very well known on Wall Street. He's a very visible and vocal hedge hedge fund guy. He famously engaged in a lengthy fight to replace the Disney CEO Bob Iger and the company's board, arguing that Disney had overpaid for assets like 21st Century Fox, that it had mismanaged CEO succession. Don't forget Iger came back and oversaw a decline in creative quality. Now, Peltz eventually lost shareholder vote in April 2024. He was pretty aggressive, but he reportedly made a billion dollar profit on the stake that Tryon had taken in Disney in order to get the battle going. Now Procter and Gamble and Wendy's others have also been subject to Peltz's shakeups and to try and turning up taking stakes and rattling their.
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Sabers. And try and in general, catalyst will pay $49 per share in cash, valuing Janice at about $7.4 billion in a 6 1/2% premium to Janice's Friday close. Trian has been an investor in janus since late 2020. In that time the stock has roughly doubled and Trian also has two representatives on the company's.
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Board. So just to come back to the reason this caught our eye, other than the fact that sneaking in a deal right before the holidays is pretty bold gold. It's unusual to see an activist hedge fund investor taking public company stakes tie up with a venture capital firm that's known most for early stage investing in private companies. Which begs the question why are they teaming up here? Well, a part of the thesis is that General Catalyst, which is obviously very tech savvy, sees an opportunity to get Janus to use AI to cut costs and transform operations. So I think the move here is really to try and have a tech enabled financing platform. Platform. Then there's also the fact that the combined network of Tryon and General Catalyst is not to be underestimated. These are stalwarts. They raised a lot of money and it shows in this deal because their consortium includes Qatar Investment Authority and the Hong Kong based financial giant Sun Hong Kai and co. To me one person's view indicating a plan that once this thing goes private they are going to level up Janice's access to global capital and get the benefits of even more scale where Jana shares ticked up more than 3% on that news. Again, deal making going right into the holidays. We've got tomorrow left until we hit Christmas Eve and things really do quieten down. But we're going to be here back tomorrow. That's it for today's Blue Markets.
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Daily. Brew Markets Daily is hosted by Anne Barry and produced by John Crisseau, Tarka Delatif and Emily Milian. Our Technical director is Lonnie Fiskus, our audio engineer is Brittany De Taco and the President of Morning Brew Inc. Is Devin Emery. We'd love to hear from you. If you have any feedback or a company you'd like us to COVID leave a comment or send an email to.
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Brewmarketshoworningbrew.Com. back here tomorrow, same time, same.
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Place. And Doug, here we have the Limu Emu in its natural habitat, helping people customize their car insurance and save hundreds of hundreds with Liberty Mutual. Fascinating. It's accompanied by his natural ally.
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Doug. Limu is that guy with the binoculars watching.
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Us. Cut the camera. They see us. Only pay for what you need@libertymutual.com. liberty. Liberty. Liberty. Liberty Savings. Very underwritten by Liberty Mutual Insurance Company.
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Affiliates. Excludes.