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- [00:02]
Ann Barry
Hear that?
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John Cartel
That's me in Tokyo learning to make sushi from a master. How did I get here? I invested wisely. Now the only thing I worry about is using too much wasabi. Get where you're going with spy, the world's most traded etf. Getting there starts here with State Street Investment Management. Before investing, consider the fund's investment objectives,
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Ann Barry
risks, charges and expenses.
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John Cartel
Visit state street.comim for prospectus containing this and other information. Read it carefully.
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Ann Barry
Spy subject to risks similar to those of stocks.
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John Cartel
All ETFs are subject to risk, including
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Ann Barry
possible loss of principal.
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John Cartel
Alps Distributors Inc.
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Ann Barry
Distributor, Bath and Body Works, Abercrombie and Fitch. We survey earnings results from some classically odoriferous retail brands. Bitcoin rebounds, pulling shares and crypto exchanges up along with it. We've got the latest in the digital currency saga. And South Korea's stock market had its worst day in its history today. Why this links to Iran and what it means for the trade. We break it all down Wednesday, March 4th. It's free markets Daily. And I'm Ann Barry.
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John Cartel
Thank you, thank you, thank you.
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Ann Barry
More market details to come, but first, why the conflict in Iran and South Korea's market wipeout today may show us the real risks to AI. Well, first, some context. South Korea is one of the largest economies in the world. Its equity market is now even bigger than Germany's, thanks to the jet fuel that has been AI empowering its stock market performance. Well, South Korea is, after all, famous for major tech businesses, including Samsung Market Cap $785 billion plus electronics brand LG, the semiconductor memory chip player SK Hynix, Auto leaders like Hyundai and Kia, and the likes of Hanwha in aerospace and defense. These are vital global companies in a big economy, which is why it caught our eye today when the Kospi Composite, which is South Korea's benchmark stock index, plunged in its worst day ever, with nearly $270 billion wiped off the market's value, while the COPSE dropped 12%, the most since its establishment in 1985. And that historical context is particularly profound for stocks like Hyundai Motor, which saw its biggest drop in two decades. And it shows just how critical. The Strait of Hormuz is effectively closed right now following strikes on Iran and its counter strikes on its Gulf state neighbors, disrupting the flow of nearly 20% of the world's oil movements and especially hitting South Korea, which relies almost entirely on imports for its fossil fuel needs. About 70% of its crude oil requirements are sourced from the Middle East. And here's why that hits the AI supply chain and why we will feel it here over time. Modern AI systems depend on powerful chips, of course, such as those of Nvidia, which train AI models and run massive data centers. But those processors need extremely fast memory to feed them data, and that memory is largely produced in South Korea. Samsung and SK Hynix together control about 67%, 2/3 of the world's DRAM memory. Nearly 80% of high bandwidth memory revenue comes from there. And manufacturing that memory takes right now a lot of energy, fueled by oil and liquefied natural gas, which is why the situation in the Middle east and the Strait of Hormuz is so critical for the sector. Well, analysts estimate there's only about two to three weeks of supply in global DRAM inventories sitting today and just a little bit more Runway when it comes to NAND Flash. And this question of how long there is left in terms of key product inventories impacted by the conflict in the Middle east provides some explanation of why the US market response, at least so far, has been relatively and surprisingly relaxed. It signals that the US markets, at least as of now, though that could be wobbling. Maybe it was today a little think that the conflict and disruption will be short lived, something which has actually surprised some experts, including David Solomon, the CEO of Goldman Sachs. Well, the banking leader said in an interview this week, quote, I'm actually surprised. I think the market reaction has been more benign given the magnitude of this than you might think. I think it's going to take a couple of weeks for markets to really digest the implications of what's happened, but growth in the short term or in the medium term. So that's real insight there from someone with a vantage point of literally seeing it all. And that couple of weeks that Solomon mentioned is exactly the same time frame that drawdowns and critical industrial inventories will become glaringly and maybe frighteningly clear. We're going to keep on watching. Well, coming up, we dive into earnings from some iconic 2000s brands including Bath and Body Works, home of the famous three Wick candle. And we survey the newest device making headlines out of Apple's product event. But first, a word from our sponsor, Charles Schwab. Trading at Schwab is powered by Ameritrade, bringing you an expanding library of education with even more ways to sharpen your trading skills, access new online courses, insightful webcasts, articles, engaging videos and more, all curated just for traders.
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John Cartel
Plus guided learning paths with content designed to fit your unique interests. No more sifting to find exactly what you need so you can spend your time learning to trade brilliantly. Learn more@schwab.com trading well, we remain in
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Ann Barry
the heart of earnings season. It's easy to forget given all the geopolitical news, but here we are, and we're starting to see themes emerge across specific sectors. While lots of big names, some big by size, others big by just reputation or share of imagination, are reporting this week, and in a moment, we'll get to results of one of those, Archer Aviation, that's captured more imagination than revenue so far. But we'll do that after covering retail giants Target and Best Buy yesterday. We're going to now check instead first on earnings from retail brands more associated with the mall, starting with Bath and Body Works. Well, Bath and Body Works, which calls itself the global leader in personal care and home fragrance, has 1900 stores in North America and over 500 international locations. It's pretty ubiquitous. So, John, let's crack into the earnings on this one.
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John Cartel
That's right, Ticker BBWI on the New York Stock Exchange with a market cap of $4.8 billion. For the quarter, they reported net sales of $2.7 billion, which was down 2% year over year. And for year, net sales of $6.3 billion, down 0.2% year over year. The share price is down 47% over the last five years. And this morning, CEO Daniel Heave saying we have moved with urgency to refresh and monetize our brand. We're making progress, but transformations of the scale take time.
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Ann Barry
So can we just talk a bit about my first encounter with Bath and Body Works? I moved to the United States in 2006 and I was in Boston was the first city that I lived in. And I remember running to Bath and Body Works to and just stack up on everything that was sort of needed for the sort of dorm that I was living in. And I remember, you know, the doors opening and I'm like fresh here from London. And this overwhelming smell of vanilla just hit me in ways. Is that yours? Is that that's kind of the defining feature of bath and body work. Absolutely pungent vanilla.
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John Cartel
That's the vanilla smell. And they even on their website say that they're known for scents. They're the global leader in home fragrance. So whether that's coming off your skin or off of candles or other features
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Ann Barry
or that that three wick candle it's become so well known for, well, just to look a little bit at the background of the CEO, Daniel Heath, he was appointed the CEO in May of last year. He'd previously been a top executive at Nike. Although we can talk about, you know, Nike, frankly had been sort of struggling. So we can talk about, you know, his background there. But he was appointed because it's been clear for such a long time, but the Bath and Body Works needed to sort of catch up to the modern era. And so he comes along and, and he has said consistently that he is focused on what he calls a consumer first strategy. So we talked yesterday, John, about Target leaning into a more curated shopping experience. Everyone's leaning into experiential about the store being a place that's exciting to go, it's a destination for discovery. And it sounds as though Bath and Body Works is trying to use a very similar playbook. If you look at what the company said in November, it admitted that it had neglected its most popular product categories and has sort of gone off on these tangents to pursue sales in new areas, which it's now decided it's going to get out of. It's going to leave behind things like hair care and men's grooming. And I just want to talk about this for a moment because I spend a lot of time in beauty. I'm on two boards of beauty companies and haircare and men's grooming are actually some of the fastest growing categories. So they're still saying even though those are fast growing spaces, we're going to get on out of them.
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John Cartel
Right. It might be working for other companies, but it's just not.
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Ann Barry
That's exactly right. Well, Bath and Body Works also said that the company's body care business, and this is really what it's known for, in addition to home fragrances, struggled in the fourth quarter, quote, driven by underperformance and seasonal collections. And they've done a bunch of consumer research that has signaled to them that their body care offerings have become too predictable, which I find interesting. I also have this vision in my mind of them having lots of pumpkin Halloween things as well.
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John Cartel
Yes, exactly. And so the company said it's going to simplify its in store experience, reducing different items by 10%. So they went hard in directions that don't serve them and they may have neglected the areas that have done them well in the past. They're looking to turn that around. I kept hearing the term easier to shop earnings call. And part of that is an overhaul of its website, which hasn't happened yet, but it's been indicated. I went to the website today, Ann, and I know that I am not their customer. As we're saying, men's grooming is not where they're looking. But I have to say it was confusing. They had categories, body care candles, but then also wallflowers and diffusers, which, that sounds like a fragrance category, but they also have room spray in a different category. Hand soaps and sanitizer and then men's care and laundry care are down at the bottom. And so just visualizing all of that, I couldn't quite figure out where those categories land. And then we also talked about this, that under Heath, they've launched a store on Amazon.com so I went to Amazon.com today, I typed in Bath Body Works. I was not brought to their store on Amazon. I was shown lots of competitors. You know, if you like this kind of spray, here's a competitor spray.
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Ann Barry
Oh dear.
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John Cartel
I eventually navigated my way to the Bath and Body Works store, but it wasn't simple. So I can see where their goals lie ahead. And one more thing is that they're looking to revamp their brand image by collaborating with content creators to reach a younger audience.
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Ann Barry
So as you were saying that I was just typing quickly, so my head was down in my laptop because I typed. I went onto the Bath and Body Works website and so I literally just scroll down to the first set of products on display. And the subtitle here is Seek the Sun. That's what they say, Seek the sun. And they've got a lineup of four products side by side. One is called Dreaming of Rio, a fine fragrance mist. So I guess that's Brazil in the sun. That's the tangent. Then there is a warm summer east evening candle. Okay, we're kinda get that. Then there is a Mango Papaya paradise foaming hand soap. I have no idea why that relates to the sun. And then the next thing you've got is Aviva Brazil body butter. Right. So to your point, right, they're sort of lining up totally different categories side by side and they're trying to find a thread, in this case the sun. And it's not completely obvious.
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John Cartel
And a bit of a callback. This sounds like the kava reward levels that we heard at the restaurant.
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Ann Barry
Yes. When it was called Oasis. I'm like, why is that? The Oasis is in the desert, not in the Mediterranean, but never mind. Well, it's that point that you just raised about also collaborating with content creators to reach younger audience really does tie into your experience almost on Amazon. Amazon, absolutely. Doubling down on live shopping work when creators to do sort of big sort of unboxing events and then having people be able to go and actually purchase while watching creators interact with different kinds of products. So this is a little bit of the same as others strategy, but at least they're trying to do it, having not done it before. And the company just said, actually it did admit that the strategy overhaul is going to take time. And you and I have talked on the show a lot about the fact that turnarounds are very difficult, very public, very public, no place to hide. And they're always, always time consuming. And we had a conversation, do you remember this, with the CEO of Build a Bear, Sharon Price, who actually crushed it when she came to turning that around. And it's all about the devil in the detail and the discipline in the execution and the patience of investors. And this is what I thought was interesting. The company did say Bath and Body Works that its annual sales are unlikely to return growth until 2027. So they've given fair warning. They're saying be patient. And investors have rewarded the company by saying, look, you've told us what we think is the truth. You've told us to wait. And so shares are up three and a half percent today.
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John Cartel
Right. Even on a weak earnings, the shares were up.
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Ann Barry
Yeah, exactly. So being rewarded not only for not as bad as expected results, but also for the kind of communication and clear communication that people can understand that frankly, the best CEOs are very good at. Well, let's look at another mall stock. We're on a roll.
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John Cartel
Yes.
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Ann Barry
So let's do it. Let's go take a look at Abercrombie and Fitch, which operates over 780 stores worldwide. And I gotta tell you, when I was growing up, it was so amazing. I remember the first time I came to America, I was so excited to go to an Abercrombie and Fitch because they didn't exist in the UK at the time. And all we associated it with was like models. Models. And this very specific scent.
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John Cartel
Yes.
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Ann Barry
Hiding behind these dark doors. Right. These store doors, which is very, very dark. And then they would sor. Come apart and then this sort of scent would hit you.
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John Cartel
Yes. I knew a woman who bragged, well, you know, when I was in high school, I dated an Abercrombie.
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Ann Barry
Yeah. People would date, say that.
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John Cartel
And I said, wow, that's impressive. And she said, no, I couldn't stand the smell, you know, it's nauseating.
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Ann Barry
Yeah, it's a lot.
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John Cartel
That was back then. I'm not trying to disparage the brand now. Ticker an F market cap, $4.4 billion. Reported revenue of 1.7 billion, which was up 5 and a half percent year over year in line with expectations. Adjusted earnings per share of $3.68 basically beat by 12 cents. And here's an interesting detail.
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Ann Barry
Yeah.
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John Cartel
Same store sales rose across all brands by 1%, which was lower than what analysts were expecting, 2.8%. But specifically, Hollister saved the brand on this one. Slightly younger, more affordable. Same store sales at Hollister were up 3%, while Abercrombie in general was down 1%. And so we saw that with American Eagle last year, where American Eagle was saying that their same store sales were up, but we saw that it was driven specifically in that case by Aerie the Intimates.
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Ann Barry
That's right. Really about. It's funny when you've got these companies that are named after the headline brand. Yeah. Right. So it's. The company is Abercrombie and Fitch, and we all immediately think of the actual Abercrombie four walls. Right. But to your point, they've got Hollister in that portfolio that's done incredibly well. And this story is amazing because Abercrombie was kind of dead. Right. It had all these issues. Lots of lawsuits, reputationally have been absolutely hammered. And then somehow, some way, it managed to get its price points back to a place that were more accessible. They kept the sort of preppy vibe, but they looked at people like Reformation, which was very well, and said, we're going to sort of broaden our merchandise to have broader appeal and get a little bit edgier again. And they actually staged a pretty impressive turnaround. And now they're sort of not a favorite again. Right. These things go in waves, and Hollister's sort of surfaced as the hero within that portfolio. The other thing that the company has been impacted by, of course, is tariffs, which has hit the apparel sector. In this instance, the company expecting a $40 million tariff impact. The company's chief financial officer did say they have a plan. They're moving, sourcing, they're negotiating with suppliers and will raise prices on the spring rollout. And just to that point, Secretary Bessett was today talking about how those 15% global tariffs likely to kick in this week and how he thought that, you know, come August, some of the old tariff levels that were struck down by the Supreme Court, he seems to think are going to be back by the end of the summer.
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John Cartel
That's right. And also remembering that this is an international company and they have operations in Asia. And they said on the report today that they're rethinking some of of those operations. I looked it up, I saw headlines that Abercrombie closed its Hong Kong flagship in 2016, reopened it in 2024, and that may be one of the many overseas locations that they're considering shutting down for low performance.
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Ann Barry
Yeah, I'm really talking about sort of this, this wave that we'd seen of huge success with American brands going over to the Chinese market. Nike, for example, is one that, that is top of mind. And seeing that, that just that growth hasn't been sustained and lots of promises were made. Hugo Boss was another one that was doing it so well and then it didn't play out. So that China consumer piece of it impacting a lot of these big brands. Shares were down over 3% today in Abercrombie and Fitch really suffering year to date, down 25%. Well, let's switch gears a little bit and take to these skies because last week we had a lot of fun covering earnings that were out from Joby. And that was in response to Bella, one of our listeners who'd written in and said, I want to understand Job versus Archer. So we started there. Now, Joby, which is the electric vertical takeoff and landing aircraft maker similar to large drones, we call them flying cars or air taxis, I call them glorified electric helicopters without blades. Joby had said that its first FAA conforming aircraft was set to fly shortly under the TIA status. And TIA stands for Type Inspection Authority. And it's basically the long awaited final design and testing phase for FA approval. Now, Joby had reported it had about $2.6 billion in liquidity, so a decent amount of Runway to provide a buffer against its cash burn rate and was looking for its first commercial flight. So we heard though finally this week from Archer Aviation. So now we can compare the two.
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John Cartel
That's right. Archer aviation ticker ACHR with a $5 billion market cap, reported earnings on Monday. And the company is essentially pre revenue that reported $300,000 and adjusted earnings per share of a loss of 26 cents was a little bit worse than analysts had expected. Archer closed the year with nearly $2 billion in liquidity, so similar to Joby's 2.6. And shares dropped 11% on Tuesday after the earnings announcement. And they're down 50% from their October high.
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Ann Barry
And the reason being that investors are not quite as confident that Archer is going to hit the timeline for FAA approval, that Joby is actually looking like it's going to hit with a bit more certainty and conviction. Now, Archer is set to launch an air taxi service in Dubai, something that Joby has also said is going to happen. The other thing I would just say to Joby had bought Blade, which we talked about. So Joby's already sort of got a plug and play set of terminals and infrastructure in the United States ready to go. Whereas Archer we saw I had just bought a terminal in Los Angeles. Do you remember reading in California? So they're not quite on the same par either when it comes to actually the infrastructure to support the rollout of commercial services. Well, Archer, specifically, let's look at that timing of its potential rollout. There have been reports of targeted short sellers who claim that Archer has paused its test flights and is working on multiple redesigns of its midnight aircraft, suggesting there's a real setback here. And then if you look at Archer's earnings and its press release, it says, quote, archer expects remaining certification plans with the FAA to be resolved in the coming quarters quarters, clearing the path for TIA activities to begin on its midnight program as soon as this year. But by saying multiple quarters, it's buying itself some wiggle room in terms of managing expectations around timing and some other
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John Cartel
language to parse from the press release. Archer is also on track for piloted VTOL operations in the UAE where it plans to deliver additional midnight aircraft. And Archer is targeting its first passenger carrying flights in 2026. This struck me because it said VTOL operations in the United Arab Emirates, not EVT toll. It's unclear where in the world these first passenger carrying flights will be because it started by saying it's going to be in Dubai in 2026. Now it's saying at some point in this year we expect passenger carrying flights. So it does seem like they're part like they're changing a little bit. What the goals are specifically hedging a little bit.
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Ann Barry
But Cantor Fitzgerald still positive? Some analysts are very positive.
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John Cartel
Yeah. Cantor Fitzgerald analyst Andre Shephard remains positive, calling things quite, quote, on track in a report that came out on Tuesday.
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Ann Barry
Now, there's also a piece sitting in here that is important. And I remember trying to dig into this. We were able to get the CEO of Archer, Adam Goldstein, to come in the show in October. It's a great conversation. And he was pretty transparent, actually. He was unafraid of direct questions, which I really appreciated. And I asked him about whether we could expect to see military partnerships and deployments before we could expect to see consumer commercial deployments. And he said, I remember this from memory. I remember him saying it was sort of possible. Right. He didn't shoot down the idea. Well, in the earnings press release out this week for Archer, it did say that its partnership with Anduril is at the core of its defense strategy and it continues to expand. The two companies are designing an autonomous hybrid electric VTOL aircraft built for dual use. Now Andre, just to paint the picture, is a private company. It just raised a bunch of money. It was founded by Palmer Lucky, who you may remember, it was over at Reality Labs. Oculus. He founded Oculus and it's Andrell is sort of one of these defense companies to jour at the moment, particularly just in light of what's going on in the Middle east. It's getting a lot of attention. So that partnership, you know, really, I do think it does actually have a bit of a halo effect around Archer. The Stock did rebound 2 1/2% today, but well worth watching because these are just two of the names, Joby and Archer that are getting a lot of attention in the EVT oil space, but particularly with the focus on defense. We'll see how the pan out in terms of does one lean into defense? Does one lean into passenger? And we'll see how the race to keep their liquidity up continues as well. A lot going on. Well, let's take a break and when we come back, we take a spin through the headlines. Moving the markets today. Vaneck believes gold is evolving into a more durable part of a portfolio. And with ongoing global uncertainty, the case for gold remains compelling.
- [22:09]
John Cartel
Gold miners can offer greater sensitivity to a rising in gold price. As gold rises, miners revenues may grow faster than the operating costs, potentially expanding margins.
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Ann Barry
To capture that, check out GDX, the Van Eck Gold Miners ETF. VanEck launched the very first gold equity fund back in 1968. Now GDX has an impressive 20 year track record and is a simple way to get diversified exposure to the world's top miners.
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John Cartel
Learn more@vaneck.com brewgdx that's vaneck.com brew gdp x read fun Disclosures in Podcast Description this episode is brought to you by Ebay. On ebay, behind every car and part is a story waiting to be shared. I read about this guy who bought a nearly scrapped 2020 Porsche Cayman. He rebuilt the whole thing, all with parts he found on ebay. And now that Cayman is out tearing up the track. From Toyota to Ashton Martin's, ebay has thousands of cars, cars and the largest online selection of vehicle parts and accessories. Ebay Things People love well, it's 4:00pm
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Ann Barry
on the east Coast. There it is, the closing bell. The markets are wrapping up for the day. We don't have a ticker tape, but we'll throw it over instead to our human digger, our producer John.
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John Cartel
That's right. The S&P 500 finished up three quarters of a percent. The Dow finished up half a percent and the NASDAQ finished up nearly one and a third percent. Oil prices pulled back for the first time since the strikes on Iran, down to $81 a barrel. President Trump said the US would provide insurance to tankers in the Gulf region to help get maritime traffic moving again through the Strait of Hormuz. He said the United States Navy could begin escorting tankers through the Strait if needed. Dubai and Abu Dhabi markets reopened today after a two day shutdown. Dubai's benchmark index slid 4.7%, its worst day since 2022. And Abu Dhabi's main index closed nearly 2% lower. Bitcoin reached 74,000 today, its first time above $70,000 in weeks. Shares in digital asset firms and crypto exchanges were up across the board today. Strategy Ticker MSTR was up over 11%. Circle Internet Group ticker CRCL up nearly 5%, Robinhood ticker hood up 8% and Coinbase ticker coin up over 15% today.
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Ann Barry
And all of that a little bit in the thesis that bitcoin sort of seen as a safe haven asset like a digital gold. So a bit of a delayed reaction there in bitcoin, but seeing it up sort of finally in response to the volatility that we're seeing given the situation in the Middle East. Well, yesterday we talked about Best Buy looking to cash in on an upgrade cycle for customers who bought PCs and laptops in the pandemic and who are now shopping for a replacement. Well, today on the final day of Apple's new product event, the company unveiled its most affordable laptop ever, and that is the MacBook Neo. Apple was able to push the price down as the laptop is powered by an iPhone chip, which is sort of amazing actually. Where shares in Apple were down around half a percent today, the market wasn't as enthused as you might think. And there was a little bit of chatter over the course of the day just watching the news on this one where folks were asking, is this a sign that Apple has to go cheaper to try to persuade consumers to continue on expanding into Apple product lines? Well, finally, Tesla stock rose over three and a half percent. That's after bank of America resumed coverage of the company with a buy rating, saying that Tesla is, quote, at the forefront of autonomous driving, supported by, by a camera only approach that's technically harder but much cheaper than the multi sensor systems widely used in the industry. There had been a chatter that that was going to calm some Nvidia chatter as well that that technology was on the way. So seeing it emerge there, pushing Tesla up. That's it for today's Brew Markets Daily.
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John Cartel
Brew Markets Daily is hosted by Anne Barry and produced by John Cartel, Tarkab Delatif and Emily Millarn. Technical direction by Uchenawa Ogu. Brittany De Taco is our audio engineer. The President of Morning Brew Inc. Is Devin Emmeline. If you have any feedback or company you'd like us to COVID leave a comment or send an email to BrewMarketShoworning Bukom.
- [26:05]
Ann Barry
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, with a very special guest.