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There's more to investing than stocks and bonds. With Ibid, you can broaden your investment mix and get Bitcoin exposure. Learn more about ibid with iShares by BlackRock. The market is yours.
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Nike hit the wall this week with shares falling to a decade low. Survey what's rattling investors Delay D E L A Y Potentially a wordle answer well, soon you'll be able to play on your seat back monitor. We have on the newly inked airline deal and in the midst of merger mania, a question from the audience. Just what happens when shareholders aren't buying the deal on the table? We break it down in our answer for Thursday, April 2nd. It's blue markets Daily and I'm Ann Berry. More market details to come. But first, we've covered a lot of major deals on the show so far this year and we've barely even started. You've got Paramount Skydance on track to buy Warner Brothers Discovery, Estee Lauder in merger talks with pooch McCormack likely tying up with Unilever Foods. The decision to merge is a massive step, particularly for public companies, and it's one that places a lot of pressure on boards to do their homework before recommending to shareholders that they vote for a deal to go ahead. Well, that pressure comes often from reputational risk. No one wants to be that board member who advocated for a dude deal. Equally, no one wants to be on the board that turned down a merger just to see a competitor swoop in, scoop up the same asset and go do a really good job with it. Well, board members are selected and elected for their sound judgment, and merger decisions are a major test of just how sound their judgment is when it comes to avoiding missed opportunities or going off to bad ones. The pressure also comes from the more practical specter of legal action. Shareholders frequently sue boards over mergers, often filing class action or derivative alleging breach of fiduciary duty. That's the responsibility to maximize shareholder value. These lawsuits, common in most large public company M and A deals, challenge inadequate prices, conflicts of interest or insufficient disclosures. Which is why I was thrilled to get this question from Sam in New York, who emailed over the following Just yesterday, Sam wrote, I'm reading his email you mentioned. The McCormick deal was approved by the board and was now pending shareholder and regulatory approval. I get these ballots from companies like Berkshire Hathaway all the time and typically vote with the board. But have you ever seen shareholders vote against the board's recommendation for something like a big merger where everyone in the company was on board except the shareholders. Well, Sam, the short answer is that votes against board merger recommendations really don't happen very often. So infrequently in fact, that I thought I'd shine a light on just two instances that spring to mind and then one near miss. All the way back in 2009, insurer AIG planned to sell its Asian unit to prudential for over $35 billion. This was in the wake of the great financial crisis, so it really was a big deal, both in terms of size and timing. And Prudential's shareholders rebelled against the deal. They didn't want it, forcing renegotiation of the terms, but ultimately leading to the deal's collapse, leaving AIG to get out of the Asian asset through an IPO of it instead of. Then 2011, the London Stock Exchange Group wanted to buy TMW, a Canadian financial services company, for just over $4 billion. Well, this time the seller's shareholders weren't up for it. 2/3 of TMX shareholders needed to vote yes. And instead TMX wound up pursuing an offer from a consortium of Canadian financial firms known as Maple group. Instead, in 2014, here's that near miss. Eleven months earlier, publicist Group and Omnicom Group agreed to a $35 billion merger of equals to create the world largest ad firm. It was designed as a 50:50 partnership, with the publicist CEO and Omnicom CEO slated to act as co chiefs for 30 months after the combination. But the equal status became unmanageable, turning into a battle for control over key executive positions, particularly over which company would get to keep their chief financial officer in place. So ultimately, the boards decided not to take the deal to a vote. They saw the writing on the wall because investor concern was just so great that shareholders were unlikely to vote it through. And the deal was instead called off before it got that far to avoid embarrassment. So it doesn't often happen that boards recommend mergers and shareholders vote against that recommendation. It's why the lucrative merger advisory industry exists. In investment banks, boards are willing to pay millions, sometimes tens of millions of dollars to make sure they have the best advisors doing the homework to ensure that they make a defensible recommendation. Well, merger activity is all over the news. It's all over the markets. I don't think it's subsiding anytime soon. 2026, clearly already the year of the deal. We're going to keep on watching and please keep those questions coming. We love to get them. Coming up, Nike is running on fumes after a tough week. That's even left the CEO quote so tired. And Bed Bath and Beyond is getting its affairs in order by purchasing the Container Store. We break down details of the deal, 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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Plus, guided learning paths with content designed to fit your unique interests. And no sifting to find exactly what you need so you can spend your time learning to trade brilliantly. Learn more@schwab.com trading well, it's been a
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brutal week for Nike. In fact, you can choose your own sports metaphor for the company's hamstrung marathon turnaround story. It's hit the wall. It's running on fumes. The agony of defeat is upon it because after the company reported earnings on Tuesday, its stock dropped a whopping 16%, closing at its lowest level since 2014. So, John, we're going to get into all the details, including some candid words that Nike's CEO had for employees this week. So we'll crack on with the numbers. It's going to shine a light on just how exhausting this is.
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Absolutely. So we're talking about Nike ticker nke on the New York Stock Exchange market cap of $66 billion. Q3 earnings numbers from earlier this week. And Nike beat on the top and bottom line. Shouldn't that be the headline? Earnings per share $0.35 beat by $0.07. And revenue of 11.3 billion, while down 3% year over year, was better than expected. So why did shares plummet? It's the outlook.
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Always the outlook. It's always the guidance. Yeah.
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Nike expects sales for its current fiscal fourth quarter to drop between 2 and 4%, which is even worse than what Wall street was predicting.
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So the big reason behind this is China. And this isn't new news. The fact that China has been challenging for Nike, but it's getting real orders of magnitude around it that seems to be spooking investors at the moment. The Nike CEO had previously called China, quote, the longest road ahead in the company's efforts to revive growth. The problem is at N, Nike has now experienced, John, sales declines in China for seven straight quarters. And the company warned that sales could drop by as much as 20% for the quarter that we're in at the moment. So for the upcoming results, which is an incredibly chunky number. So things are just not turning around the way the investors hoped would happen. And don't forget, the CEO was brought back into this business to try and get things moving again. So this is not an auspicious start to 2020 calendar year. 2026.
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Absolutely. And more about him in a moment. But let's look at some numbers around how the Greater China region stuck Yi's books this last quarter. Looking at earnings report and breaking it down. Revenue by region. North America up 3%. Europe, Middle east and Africa up 2%. Asia Pacific and Latin America up 1%. So that was up. Then we go to Greater China. Footwear down 7%. Apparel down 4%. Equipment down 21%. Total revenue for Greater China down 7% last quarter. And that. That equates to $120 million of lost revenue.
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Well, it's similar to other pullbacks that we've seen in the Chinese market. And this actually took me back to a conversation that I had. Gosh, I think it was about two years ago, and I was moderating at a summit in Singapore. It was hosted by salt, which is founded by Anthony Scaramucci, who's been a guest on the show. And I was asked to interview a gentleman who'd founded Banyan Tree, which is an Asian hospitality company. And the crux of the conversation was, will consumers in South Asia and China and other Asian markets start pulling back from American brands which have tended to set the standard for innovation in consumer products and actually start instead substituting towards homegrown Asian brands? And the reason that sparked, the reason the memory was sparked was there was an article today in the Wall Street Journal, and the title was, american Brands Used to Be Sexy in China, no Longer. And basically, the article lists American companies that have struggled with a similar phenomenon. California clothing brand Gas just closed down all of its stores in China. Starbucks agreed to sell a majority stake in its business to a Chinese company. And that's after it had seen years of losing share to Luck in Coffee, which, by the way, is now planting flags here in the US With a couple of stores in New York. Restaurant Brands International sold a majority stake, 83% in its Chinese arm of its Burger King business to a Chinese private equity firm. They just found that they weren't able to keep the magic alive. And we're seeing this with Nike. It's very much the same phenomenon. And the reason I bring up Luckin Coffee again, to go back to that conversation I had with KP Ho, who's the founder of Banyan Tree, you are seeing substitution towards, again, Chinese native brands, where the American process was always seen as, you know, really being the gold star, the sort of banner for actual consumer brands.
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Yes, exactly. And apparently Nike just hasn't been able to keep up with evolving tastes in China. The other thing that I read in that article is that running is taking off in China and Nike was pushing more into sports gear.
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Right.
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Basketball shots, for example.
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That's a great point.
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And so speaking of basketball shoes, another underperformer in the Nike line is Converse.
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I love Converse. I'm such a Chuck Taylor fan. We've talked about this. I love it.
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Oh, good. So Nike acquired Converse in 2003. Sales are nearing a 15 year low for the line. And last year Elliot Hill, the CEO of Nike, fired the head of Converse. And this last quarter Converse revenue was down 37% year over year.
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I hope they don't discontinue my Chuck Taylor's as a result. I hope they there isn't portfolio rationalization happening because I'm quite maybe to go and like stock up on a whole bunch of them just in case.
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Well, Ann, I don't know that they're going to close it down, but there have been investors circling.
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Oh, tell me. Yes.
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So Authentic Brands, the owner of Reebok and Champion has expressed interest in buying Converse. If it's put up for sale, it
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needs to be rescued.
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And for, for reference, Authentic bought Reebok from Adidas in 2022 for two and a half billion dollars. And since then, Authentic has increased reebok sales by 50%.
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So you can do it it and just Chuck Taylor's. By the way, it's 100-year-old brand. Yes. Which is pretty tough to do. Just to put that in context, Air Jordans, which is considered an OG, right. That's hit the market 40 years ago. So, you know, I'm hopeful that Converse stays alive and I'm hopeful that it gets a rejuvenation.
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And I had fun today with the team. I asked around. Who knows what a Chuck Taylor is? Some people did.
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Tarek.
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Tarek did because he's okay.
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Good man, Tarek. Thank you.
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No one knew who Chuck Taylor as a person was, so I looked him up. Charles Hollis Taylor was born in 1901. He was an American basketball player. Player who worked for Converse as a salesman and he would market the shoes by going and doing basketball clinics. In 1934, Converse added Taylor's signature to the ankle patch of those shoes, making it the first celebrity endorsed athletic shoe. So talking about Jordan's jump man on
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all those shoes, that logo, Chuck did it first Chuck did it first. I love it. Well, the Nike CEO Elliot Hill has said several times that Converse is not for sale. In an interview from the Milan Olympics, he said, I've heard the chatter and I've even received some of the phone calls. But we're committed to the Converse brand.
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Yes. And that's not all Hill has been saying this week. We've been teasing this throughout the run of the show. Hill of course was a Nike veteran who came out of retirement to take the job 18 months ago. He introduced his win now turnaround plan focusing on core sports like running. But Bloomberg News this was everywhere reported earlier this week that at a Nike all hands after earnings on Tuesday, Hill was reportedly said to his staff I am so tired and I know you are too of talking about fixing this business. Other quotes I want to move on to inspiring and driving growth and having fun. I hate to lose. We've got work to do in some of these places. So he's fired up and he's trying to fire up his staff.
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If you're going to fire people up that you can't start with the words I'm so tired. Right. Because it's just so open to being taken out of context. Well, let's take a look at how investors are feeling with or without the pep Talk. Nike shares down 2% today. Again that's off the back of a big dip just two days ago. Right. As those earnings came out. 33% decline in Nike shares year over year. 67% down over a five year period and down 75% from its Covid highs in late 2021. So we're going to keep watching this one because it's going to be I think a bellwether again to this phenomenon of whether US brands can continue to keep their foothold in key market like China. Of course Nike's also been hurt by tariffs. We've seen that hit the cost structure. I just want to go back John, just to go back to the top for a second when we talked about the results here in North America. Nike again for the quarter. North America revenues up 3%. Now if you bear in mind that inflation is sort of up there, that's telling you that the volumes aren't moving still. Right. So the generally flat, generally flat volume wise and Europe, Middle east and Africa up 2% that feels flattish on volume as well. So even the markets outside of China not making up for lost ground for this one. So we're going to keep on watching
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and I'll say personally down 75% from the COVID highs when I was new to investing and I was looking for brands. Oh, I know. Nike. I've bought Nike. And I bought at one of those highs thinking, well, it's Nike. And so I've been seeing it in my retirement and I'm looking for a turnaround.
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You're looking for a turnaround? It's that adage, I invest in what you know. But sometimes, sometimes it can be a little painful. Well, let's take a break. When we come back, we'll take a spin through the headlines that have been moving the markets today.
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So good, so good, so good.
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How did I not know Rack has Adidas?
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Well, it's 4:00pm on the east coast. There it is, the closing bell. The markets wrapping up for the day. We don't have a ticker tape, so we'll throw it over instead to our human ticker, our producer, John.
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All the major indices rose throughout the day after early morning lows. The S&P 500 and the NASDAQ both finished up a tenth of a percent. And the Dow ended the day down a tenth of a percent. Some other market headlines, shares in Bed, Bath and Beyond ticker BBBY drifted up throughout the day after word that the company has agreed to acquire storage and organization retailer the Container Store in a deal worth $150 million. The Container Store, where I, Jonatheau, worked for a summer in high school, has more than 100 locations which will be jointly branded as the Container Store and Bed, Bath and Beyond.
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That's a very long name. Yeah, it's too long. Okay. I just wanted to throw that out there. Yeah.
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And this is part of the journey for Bed, Bath and Beyond and name as the company declared bankruptcy in 2023, closed all its retail locations and sold off its intellectual property. The Container Store's home organization brands will serve as anchors for Bed, Bath and Beyond's home services business, moving it beyond product sales and into design, customization and installation.
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Can we just not leave the Container Store quite yet? So before we move on to the next one, there is a store. There's a Container Store store here near the studio. That's right. So in preparation for today, I couldn't help but pop over and I roamed around and have you, when was the last time you went in there? Or have you? Since high school. You haven't been in since high school.
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I went to that enormous location by us right after the Christmas holidays looking for a caddy into which I could put rolls of wrapping paper so they wouldn't get destroyed before next year.
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That's incredibly organized. I had no idea that you are a wrapping paper organizing person. But it makes sense because our producer John is meticulous in all things organizational when it comes to the show. But I roamed around and I got to. I couldn't help but think that the Container Stores days are numbered. And I don't mean to be, you know, sort of a negative Nelly on this one, but everything I looked at, they should have much smaller square footage. Yes, it should just be a store where you just go in and there's a small amount of display items so you can feel it and touch it and then everything else should just be bought online. Yes, to me it should just be a storefront. And of course I went right out. Like when I moved home, I wanted to go make sure that my closets were sort of organized and I bought nice, nice hangers. You know, I did the thing I tried to hang on wooden hangers and I just bought everything on Amazon after checking out the brands.
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But I think, and that's what we're talking about with this partnership is that they're going into consultation. So instead of going in to buy a specific hook, you're going to go in and talk to a service member who might have some thoughts about how to organize your closet and even put in some custom gear, something that Williams
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Sonoma has done really well. We've seen that with their brands. Really trying to make sure that whether it's Pottery Barn or others, again, that design services is something to create some stickiness. It's just about, not just about people going in to buy price stuff. Well, moving on then to shares in the New York Times this time ticker NYT up around 1% today. That's after an Axios report that the publisher struck a multi year distribution partnership with Delta Airlines. The company is publicly traded, but it has been under family control since 1896. The deal will give Delta Sky Miles members access to the full suite of Times content from its core news platform to gain. And once a flyer logs in, once they're on board, they can keep access for up to 24 hours, extending well beyond the flight itself. Well, a Times executive told Axios the partnership is a way to, quote, expose our suite of products to people when they're in this really unique moment of their day. Basically a captive audience with limited options.
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You know what stuck out to me about that story is that you said that games will be available. And my experience with the New York Times subscription is I think I have the subscription, but then it doesn't include games. I think I have it, but then it doesn't include recipes. So I might have to take a Delta A flight and look up some new recipes.
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I also just want to sort of pause here a second and just talk about media because there was a big media story today that caught our eye and that is the fact that the podcast TB pn, which I watch, I follow, I think they've done a great job, has been acquired by OpenAI, the maker of Chat GPT. And the reason I'm flagging this is last week I was very lucky. I got to sit down with the CEO of Yahoo, Jim Landzone, which you may remember. They got Yahoo Finance and Yahoo Sports. And the question I asked him was, you, Yahoo, are owned by private equity. At some point you'll be put up for sale. Don't you think boom, OpenAI or someone like them could come by you? And so you're going to have to tune back in folks next Tuesday to listen to how he answered that. So we asked the question. We hypothesized this everyone before Open AI came out and actually bought a media asset.
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It's true, and it was a thoughtful answer that he gave.
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He gave a very, very thoughtful answer. But you'll have to come back if you want to know what it was.
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And finally to aerospace and a company we recently talked about on this show and that's intuitive Machines Ticker LUNR like Lunar saw shares jump 14% today after NASA successfully lifted off its Artemis 2 mission. Four astronauts took off last night for a voyage around the moon and NASA administrator said the launch was an opening act for subsequent missions including constructing a moon base to support the quote enduring presence were trying to create on the surface on a day otherwise in the red for most of the afternoon. The market took notice of the potential opportunities. Ast Space Mobile ASTS was up 5.5% today. Firefly Aerospace ticker fly was up 7% and Yorkspace Systems YSS up 10% for the day.
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Well, tomorrow the markets are closed. That's an observation of the Easter holiday. So we are not going to be with you tomorrow. We are though going to be back on Monday. What I'm going to do is I'm going to throw up a link on my Instagram account. Maybe we'll do it on Brew Markets, too, with a link to a recent interview, which is one of my absolute favorites of all time. That was with John McNeil, former president of Tesla. So you've got something to keep your company before we come back on Monday. That's it for today's Brew Markets Daily.
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Brew Markets Daily is hosted by Anne Barry and produced by John Carteau, Tarkab Delatif, Avenle Royal and Emily Miller. Brittany Dutaco is our audio engineer, booking by AB Silver. And the president of Morning Brew Inc. Is Devin Emery.
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The markets are closed again tomorrow for the holiday, so instead come back on Monday with a new episode of Brew Markets Daily. Same time, same place. Have a great long weekend. For those of you get it.