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This Christmas. Will they say he went to Jarrett? We break down Signet's taglines, its earnings and the signs for consumer holiday spend. Costco is suing the Trump administration for tariff refunds. We check it out and quote two drunks propping each other up on a lamp post. For our merger moment this week, why the Omnicom IPG combination has been so described for Tuesday, December 2, it's free markets Daily and I'm Ann Barry Foreign. More market details to come. But first, advertising. The omnipresent industry whose products we absorb literally all the time, is estimated that the average American consumer is exposed to as many as 10,000 adverts every single day. It's an extraordinary number. Well, given the sector's astonishing reach, coverage is actually surprisingly thin. Which is why the merger between Omnicom Group and Public Group, or IPG for short, caught our eye and we decided to dig in. Well, it's been a whole year in the making and the 13.5 billion dollar all stock deal officially closed last week, folding together two major public companies into just Omnicom, which remains trading on the New York Stock Exchange with the ticker omc. Well, this consolidation of decades old agencies creates the world's largest advertising and marketing services holding company, expected to generate more than $25 billion in revenue and $3.3 billion in cash flow annually. Omnicom's executives say that enhanced scale will strengthen its negotiating power with media partners and drive efficiency in global operations. And they specifically point to $750 million of expected synergies. And the added deal rationales include unified audience insights, CRISPR performance measurement and an in house database of 2.6 billion verified IDs to ensure that ads reach real human beings. Essential, by the way, in a marketplace increasingly shaped by digital platforms and AI, where brands want to know that their spend is truly getting their names in front of human eyeballs. Now, all of this deal rationale makes sense on paper, but when it comes to execution, the industry is already aflame with rumors of integration, turbulence which I couldn't help digging in to read over this Thanksgiving weekend. And this turbulence is the reason for that damning comparison with, quote, two drunks propping up each other on a lamppost. In a an interview with Storyboard18 by the advertising tycoon turned commentator Martin Sorel, who's been watching the drama unfold, his description of the industry succinctly sets the stage for why this merger has happened in the first place. It's a trillion dollar market growing at 5 to 6% per year, which sounds pretty healthy, but when you unpack it, there are two distinct worlds that sit inside it. About $700 billion sits with digital media and it's growing at a fast clip, 10 to 20% led by the likes of Google and Meta. The rest the remaining $300 billion going to traditional media is in steep decline, leaving legacy players like Omnicom and IPG competing for a shrinking pie despite their efforts to diversify into digital. So motivating their merger is the desire to take out legacy quote capacity, but the market just is not convinced it will work. Omnicom share price when I took a look at it today, down over 30% since this deal was announced a year ago. Now there's a lot at risk if the integration goes wrong. Omnicom Group's clients include titans like Apple, McDonald's, PepsiCo, Nike, L', Oreal, while IPGS, which has been acquired has General Motors, Johnson and Johnson, Microsoft, American Express and Netflix. These are major, major advertisers with massive budgets who are likely to have very limited patience for any post merger infighting, which is reportedly already happening. And there are competing service providers that these folks can go to, like Publicist, the French multinational with a $25 billion market cap. Now Omnicom's restructuring has already begun. They're moving very quickly. The company moved to eliminate 4,000 out of its 127,000 strong combined workforce since the deal closed only five days ago. But to hit its synergy target, more may come with headcount likely needing to fall by another 10,000. And just yesterday came the announcement that several long standing agencies which have historically operated independently within the Omnicom and IPG Group, something that's usual actually with creative industries are actually being folded into other others, displacing a number of long standing leaders and reshuffling their client accounts. Now January will be a massive month for the enlarged Omnicom, which plans to use the annual Las Vegas Carnival that is the Consumer Electronics show for an official debut of the combined organization with More details to come on its next gen strategy and February's earnings to update investors on that nervously anticipated integration process. We are going to keep watching this one. It's easy to forget just how big these industries really are. Meanwhile, Omnicom coming in now at just under 23 billion doll in market cap. Coming up, we see how Signet is turning to lab grown diamonds to prop up this holiday shopping season. And Costco is heading to court on tariffs. But First Brew Markets daily is sponsored by Public. And before the show today, our producer John mentioned a feature he recently found on Public.
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That's right. I know it's the investing platform for those who take it seriously and I'm serious about getting more interest on my cash. I recently discovered that you can access industry leading yields with their suite of fixed income products.
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With Public's High Yield Cash Account, you can earn a 3.6% APY on your cash with no fees or minimums. And you can lock in a 5% or higher yield with a diversified portfolio of corporate bonds with Public's bond account to get started at public.com brewmarkets that's public.com brewmarkets paid for by Public Investing.
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Full disclosures and podcast description well, let's.
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Talk a little bit of luxury or at least sparkle with Signet Jewelers which says it is quote the world's largest retailer of diamond jewelry. The company reported earnings this morning and provided a sneak peek into what the holiday shopping season is looking like. It's shaping up up into. We're going to get into that. But first John, some background on Signet. You hit the numbers because I want to talk about the sparkle.
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Okay. Well I'm going to start with it's ticker Sig Stock exchange market cap near $4 billion and the shares are up 15% year to date, up 211 over the past five years. And just to get a sense of how big the the size is, they operate 2600 stores and I didn't understand this primarily under K Zales Jared. We know they're ubiquitous marketing talking about advertising first thing with their. Yeah, he went to Jared. Every kiss begins with K. I mean that's what I'm thinking about. But even this Blue Nile, they acquired Blue Nile and three years ago for $360 million.
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Yeah, Blue Nile, do you remember that coming out? I remember that launching and they did two things I thought was very clever. So number one, you are able to use Blue Nile on your phone and there was a sort of virtual try on. So if you wanted to Try on a ring or a piece of jewelry. Do you remember this?
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Oh, absolutely.
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And people started saying, actually, this is a head of the curve in augmented reality in helping people to try and visualize such an expensive purchase. The other thing I remember is Blue Nile got a lot of kudos for really persuading folks to make big, big purchases on consumer products online. I mean, Amazon sort of got us there for E commerce, but Blue Nile sort of gave us a kick in terms of the actual price tag we're willing to pony up for.
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Yeah, for folks my age, it was definitely, this is a cool place to buy jewelry for all the reasons you're talking about because you could do it online.
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And then also just one other thing too. So, as you mentioned, Signet Jewelers has lots of different ban. They've got Kay, they've got Zales, they've got Jared. They've also got the Piercing Pagoda, now called Banter by Piercing Pagoda. Can you explain to me why is it called Banter? Do we have any idea?
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I looked and I couldn't figure it out other than maybe a refresh. Because I think of the Piercing Pagoda just for myself as a punchline growing up. Like, oh, you went to the mall. Did you get an Orange Julius? Did you stop by the Piercing Pagoda?
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I was trying to remember where I got my ears pierced and I actually remembered it was actually Claire's Accessories. I didn't get them done at the Piercing Pagoda. Well, earnings reported this morning as we set up the top sales of 1.4 billion billion did beat estimates up 3% year over year. So people are buying their bling. Earnings per share of $0.63 doubled estimates. The fourth quarterly earnings beat in a row is really the punchline and the same store. Sales growth at magic metric up 3% year over year, up the third consecutive quarter. So it's interesting in a world where we've had conflicting signals over the health of the consumer, from things like buying their lunch at a carver of a sweetgreen to whether or not they're going to spend on furniture for their homes, one thing that seems to be holding up is that people are going to buy their sparkle no matter what the stock. Nevertheless dropping today. It was down 4% this morning. And it sounds as though it came from the outlook, which has been a recurring theme through these earnings. It's not just how good the sort of latest report has been because it was the prior three months, it's what's the outlook for this year. And there was a quote from the earnings call that's worth just focusing on, quote, potential continued softness in consumer confidence. That word continued really struck me. We believe it prudent to have a cautious approach to guidance. And given we've seen softer traffic in the past five weeks, particularly among brands with more exposure to lower to middle income households. So John, that's pretty consistent with what we've been hearing from retailers like Target and Walmart. Right. Who've also been pointing to middle income households and households with lower incomes and actually feeling more squeezed than everybody else.
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That's right. And the company is thinking there'll be a softer Christmas season. And I learned that that's the company's biggest season. It's even bigger than Valentine's Day. Wow. And on the call, an analyst ask, well, what did you glean from Black Friday sales? How did.
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Yeah.
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And the CEO said, well, that doesn't really correlate to how our, our quarter or our year is going to go because most of our sales are made in the 10 days before Christmas leading up to the big event. And so they're looking forward to that. And they're trying to plan, they're saying better than they did last year where they're trying to get that lower income traffic.
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Yeah.
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And so they're making more items available that are lower priced. And so they have eight times as much inventory in the sub 500 to sub $1,000 area than they did last year.
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It's interesting, many different industries are really now catering towards making sure that they've got specific merchandise or specific items for specific demographics. I know it's a completely different industry, but McDonald's, do you remember this saying that they're coming out, they're really snack wrap. Exactly. Specifically trying to meet consumers where they are in their purchasing capabilities. So interesting to see similar threads, whether it's in quick service restaurants or whether it's in retail. We should also talk about lab grown because this was fascinating. Again, going from food, we had a conversation about lab grown chicken last week in Campbell Soup with Signet talking about lab grown diamonds, which has seen a real uptick in demand, folks saying, I want to get my bling, I want to get my diamonds, but I'm going to get the version that's less expensive. We're going to get the version that's been lab grown, not mined.
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That's right. That's where they're meeting consumers in this way. And the CEO from the call said we continue to see Runway in the fashion category, particularly in lab Growned diamonds or LGDs. That was throughout the call. LGD now, that's what they're called now, which expanded penetration to 15% of fashion sales this quarter, roughly double last year's rate. And so people are buying these lab grown diamond items at twice the rate.
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Price point too, actually below $1,000 compared to last holiday. I'm always really curious about diamonds. And lab Growned diamonds or LGDs have had a lot of conflicting coverage, John. And one case you've got folks saying, well, this is great. Now it's more accessible. Something that has been really only available to the very wealthy, which is this particular category of jewelry is now becoming much more widely available. Lots of questions around ethical mining or unethical mining and concerns about that. And folks saying, I'd rather get something that's lab grown where I can be, you know, very sure that there hasn't been misuse of labor, for example. The flip side of that has been it takes a lot of energy to grow these. And so there is a sort of environmental concern about it, even if it's not about mining for them. So this question about what a diamond is worth, I'm curious, I mean, have you bought diamonds for anybody? What's your purchasing situation?
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I recently bought a diamond engagement ring.
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Yes.
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And so I went into that world and I made a decision to buy one that isn't lab grown.
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Yeah.
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But the other part of that is the gold that is part of the band.
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Yes.
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And the CEO pointed out that consumers are still buying gold jewelry because they understand its value.
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Interesting.
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And I was thinking about that. You know, if you see the price of gold making headlines going up and up.
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Yeah.
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If you can afford it, you might think of it as an investment. You know, it's something as opposed to a diamond, say, where we've been told that maybe it doesn't hold its value, doesn't have a resale value, it might not even be rare, whereas gold. I had this experience where when I went in to buy some of the wedding jewelry, my wife brought in an old broken gold brooch from her great aunt and we got some money back for it that we applied towards our jewelry because it was gold and it was valuable. Even though it was sort of ugly and broken, it still had value and we were very grateful for it to help out with the purchase.
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It's all the shiny stuff. There was another. This is like a bit of a non sequitur, but also not really. There was a really high profile case of gold fetching a ton of money recently. So did you read about this Klimt painting that sold at Sotheby's recently and it was the second highest valued painting ever sold at auction. And I was very lucky because I queued around the block to go to the broyer here in New York to go and see what Sotheby's was auctioning off. It's like going to a museum. It was just, it's free. You walked in, you just wanted to stand in the queue. One of the pieces sold in that same auction, I'm such a nerd. I live streamed it. It is a market after all, folks, of a different, of a different form, a gold, a solid gold toilet. So do you see this piece of art also sold at the same auction? And the way in which it was teed up by the auctioneer was fascinating. They the starting price for that auction was literally the price of the toilet. Weight in gold.
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Put it on a scale.
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Put it on a scale. And so that's how that thing took off. So to your point, in every shape or form, whether it's a broken brooch, whether it's a piece of art in the form of a solid gold toilet, we are seeing the price of gold holding up something that we've also covered. Now Signet, just to go back to it for a moment, was in the news this summer and I remember you and I touched on this in one of our conversations when Taylor Swift got engaged and there was a lot of focus on the engagement ring that she got and it was cushion cut. Do you remember this? Even though it wasn't from Signet, it was actually from an independent jewelry designer, which I thought was kind of cool. Signet shares rose nearly 10% in the following days and it did eventually settle. Not quite that high, but still up 3% relative to the pre Swifty level. Just because there was this anticipation that more women would want to go and get a cushion cut diamond ring at some point in their purchase.
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Love is in the air Love is.
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In the air and the power of Taylor Swift did not get a call that she did not get a call out on the earnings call though Taylor Swift, it is true.
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I was listening to the early earnings call and they didn't mention her. But in one point they said leaders are acting swiftly. I thought, oh, are they going to talk about Taylor Swift? But they were talking about moving towards brand equity.
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Oh, their own brand equity. Much less interesting than Taylor Swift. Let's talk about Costco because we always love to talk about Costco, one of our absolute favorites. And it's been a while since we talked specifically about the impact of Tariffs on some of the big retailers. There's been a lot of conversation over this earnings season how folks have figured out a way to sort of navigate it. Either they've passed on prices to consumers, they've absorbed it in margins. There was, though, a recent Supreme Court hearing for the arguments regarding the legality of some of the tariffs that had been invoked under emergency powers by the Trump administration. And one thing that came top of mind as a result of that over the past few months, the first past few months, is people, people talking about the possibility that companies would sue the Trump administration. One, to try to argue that the tariff should not have been implemented in the first place, and two, to argue that if the Supreme Court does, in fact, rule that these duties are illegal, to make sure that they've lodged their complaints. So that these companies actually get a cut of any tariff refunds if they end up happening.
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Yes. If they imagine that there's this pool of tariffs, I don't know if that's still magically sitting there, that they're getting in line to claim theirs. And so Costco is one of the biggest companies so far to get in that line, so to speak. It joins companies like Revlon, Bumblebee and Kawasaki Motors.
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Well, we're still going to wait to hear what happens as a result of those Supreme Court hearings. Again, those happened in November. There is a chance that before the end of this year, the court will strike them down. That would be moving, I think, pretty quickly. Six weeks, ish, had been sort of the anticipated timeline to get that done. The argument that was made to the Supreme Court is that Congress, not the president, has the authority to set tariffs and that the president had exceeded the authority granted to him by the International Emergency Economic Powers Act. There are, though, lots of other pieces of legislation that folks like Lutnick had pointed to and said, look, even if this specific piece of legislation doesn't allow us to pursue these tariffs, we are going to be turning over every rock to find another way to make.
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And then they could even turn it over to Congress to say, all right, well, if it is in Congress's power, then maybe Congress can. So lots of steps. And from what I read, it's uneven, unclear if the money would be refunded.
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Right.
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If this was overturned, it's up to the court to decide how the policy would be unwound.
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Well, look, Costco not taking any chances. They're still looking to mitigate tariffs in the event that these don't get revoked first. And on its last earnings call, the CFO talking about the company's efforts to mitigate through moving country of sourcing, so changing its production sourcing and also selective price increases. And look, lots of conversation. We've heard AutoZone and Adidas talk about putting through price increases as a result of these tariffs. We've heard GM taking a billion dollars off its earnings outlook. We've talked, you know, Apple looking at reconfiguring its supply chain. So look, this tariff piece, it's not been top of the headlines lately, but it's certainly not going away. So definitely a topic that we are going to keep on watch. We're going to take a quick break, but when we come back, Boeing shares take off and instacarts don't quite deliver. A quick sprint through some of the headlines that move the markets today.
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There's the closing bell, 4pm on the east Coast. The market's wrapping up for the day. I got to tell you, I flew back from London this morning. It feels like it's nine o' clock for me. So I'm pretty excited that we made it here. Well, we don't have a ticker tape, but we're going to throw it over to our human ticket, our producer John on to see how the day rounded out.
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That's right, all the major indices finished up today. The S&P 500 was up a quarter of a percent, the NASDAQ finished up 6.10 of a percent and the Dow was up 4.10 of a percent. Some market headlines, shares in Boeing were up nearly 10% today on the news that the company won a $104 million contract with the U.S. navy to repair displays on some aircrafts. And at an investor conference this morning, Boeing CFO Jay Maloney, who joined three months ago, offered an optimistic outlook for next year, saying the company would see positive cash flow in 2026. And Ann, you just mentioned for Thanksgiving you traveled on a Boeing 777 widebody twin engine jet aircraft. While the CFO also detailed plans to Deliver more widebody787 and narrowbody737 max jets to customers next year as Boeing's production rates recover. Multiple headlines today concerning Maple Bear, the parent company of Instacart Ticker Cart shares were down 4% this morning after competitor Amazon said it's testing, quote, ultra fast delivery of groceries in Seattle and Philadelphia delivered in 30 minutes or less. And then also today, Instacart sued New York City to block enforcement of five laws affecting grocery delivery, including rules governing minimum pay for app based workers and disclosures to customers about tipping.
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Amazon absolutely going after that grocery delivery market. We've talked about that. With respect to Walmart, we're going to have to come back to that, I think, because it's just the gift that keeps on giving. Well, speaking of gifts. So final thought, thought for today. We talked last week about the rise of Dell's share price so far this year, up significantly year to date. Company now hitting a market cap of about $91 billion. And as a result, founder Michael Dell has seen his net worth jump up and he's in the top 10 of the most wealthy globally. And so one question had been what do you do when you have a fortune like that? We talked about the fact that Michael Dell actually has quite a famous family office that does in private companies and different asset classes. And today we've got a window into how he thinks about philanthropy. Michael Dell and his wife Susan unveiled a pledge today for a 6.25 billion dollar donation to provide 25 million American children under the age of 10 with basically a deposit into a savings account which will be invested into the US Stock market through an index fund. And this is basically to fund what's been called Trump accounts, which was part of the administration's initiative to, to make sure that young children are getting exposure to investments in the stock market. So just to do a quick rundown of this, the Trump accounts are available to any American child under 18 with a Social Security number. Those contributions must be invested again in an index fund that tracks the overall stock market. And when the child turns 18, they'll be able to withdraw the funds to put towards starting a home, buying a home or starting a new business. Now, what the Dells will do with this major gift is put money into the accounts of children 10 and young younger who live in zip codes with a median family income of $150,000 or less and who won't get the thousand dollar seed money from the Treasury. So it's really try to filling in the gaps here. The reason I wanted to bring this up is I actually was back in London as I mentioned for Thanksgiving and I have a young niece and nephew and one of the things I was talking to my family about doing is gifting to them an investment some small amount into the US Stock market. Because I am a big believer that investing, investing in US equities is a path if we invest and hold over term to being able to create a bit of a nest egg for young people. So just one that landed for me personally and hopefully means we have a new generation of young people interested in the markets, what makes them tick and perhaps being listeners at some point to us here at Brew Markets. That's it for today's Brew Markets daily.
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Brew Markets Daily is hosted by Anne Barry and produced by Jacques Ritto, Tarka Bellatief and Emily Millar. Our Technical director is Lonnie Fiskis, Jim Orso is our audio engineer and the President of Morning Brewer Inc. Is Devin Emery.
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We love to hear from you, so if you have any feedback, a company you'd like us to cover, perhaps some concept you want us to explain, send us an email or a voice memo to brewmarketshoworning brew.com meanwhile, 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.
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