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This episode is brought to you by State Farm. Listening to this podcast Smart move Being financially savvy Smart move Another smart move having State Farm help you create a competitive price when you choose to bundle home and auto bundling. Just another way to save with a personal price plan like a good neighbor, State Farm is there. Prices are based on rating plans that vary by state. Coverage options are selected by the customer. Availability, amount of discounts and savings and eligibility vary by state.
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Smuckers Banks on a billion dollar frozen sandwich and Footlocker tries to tame the shoe wall. We break down earnings plus Abercrombie soars while TSMC nudges down. We take a look at why and Nvidia batting away comparisons with Enron we go behind the extraordinary move for Tuesday, November 25th it's Brewmarkets Daily and I'm Annberry. More market details to come. But first, it's a choppy moment for chip giant Nvidia. One headline that the darling of the AI trade could not possibly have envisioned came from Barron's yesterday, starting with the words Nvidia says It's Not Enron in Private memo well, for some context, Enron was a major American energy, commodities and services company that collapsed in 2001 as a result of massive accounting fraud. Just the year before, it was the world's biggest energy trader with revenues of over $100 billion. And yes, it was publicly traded on the New York Stock Exchange. Now when Enron filed for bankruptcy, it was the largest in U.S. history at the time and its scale was so shocking that it prompted new legislation such as the 2002 Sabanes Oxley act to improve corporate governance and accountability and protect shareholders. So no company, and I mean none, and especially not a public one, wants to see its name in the same sentence as Enron. So what prompted this one? Well, famed hedge fund manager Michael Burry, who predicted the 2008 collapse of the housing market, has been posting on social media about his concern that the useful life of high end GPUs like Nvidia's is being overstated. Burry wrote on X that he estimates chips will have a two to three year life cycle, not the roughly six years firms anticipate in their financial statements and that as a result, depreciation expense, which is a non cash cost, is being understated. Now the result of that is, if it's true, is that asset values are being overstated. Now, given all the money being spent by clients of Nvidia and buying its chips, the company felt compelled to write a note To Wall street analysts to to say, quote, Nvidia does not resemble historical accounting frauds because Nvidia's underlying business is economically sound. Our reporting is complete and transparent and we care about our reputation for integrity. Hedge funder Barry by the way wrote in response, quote, I am not claiming Nvidia is Enron. It is clearly Cisco. Well, let's talk about Cisco, the systems network company who did not suffer from fraud or accounting irregularities or even the need for Internet networking disappearing after the company went public in 1990. Cisco stock surged more than a thousand times over to hit a high of $80 on 3-27-2000. The company was hailed as the king of the Internet. But when the dot com bubble burst the share price plunged nearly 90% and took decades to recover. So no fun. And there was more in that Nvidia memo this week including a response to concerns about so called circular investments into its clients. The memo stated that quote, strategic investments represent a small share of Nvidia's revenue and an even smaller share of approximately $1 trillion raised each year across global private capital markets. And went on to say that quote, the companies and Nvidia's strategic investment portfolio predominantly generate revenue from third party customers. Look, this is the same company whose CEO Jensen Huang went out of his way in the recent earnings call to reassure investors that that there is not an AI bubble. Meanwhile, news broke today that Meta is in talks to buy billions of dollars of Google's TPUs for metadata centers starting in 2027 while renting TPU capacity from Google cloud from as early as next year. All signs to the market, at least in the eyes of some, that competitors are stepping it up. Nvidia Stock was down 4% on this news. Coming up was Dick's wise to purchase Footlocker? Look for signs in today's earnings report and what's going on at smuckers. 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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Full disclosures in Podcast description Well, we're.
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Wrapping up earnings season. I feel like we've been saying that for a while now, but it's been tapering on down. And we thought we'd take a look at two big names reporting today, some of which we actually forget in terms of just how big they actually are. And let's start with that one, which is the food conglomerate with a folksy name, Smuckers, which actually to me sounded onomatopoeic. I'm just gonna say that it sounded like the eating of food. Well, John, give us some background on the company.
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Yeah, like maybe you're smacking your lips.
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Exactly. That's exactly what I was thinking. Exactly.
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The J.M. smucker Company ticker SJM and that name. I grew up with ads saying with a name like Smucker's, it has to be good. That was their slogan for decades. The company was founded in 1897 and went public in 1959. It's been around a long time. And Mark Smucker, the great, great grandson of the founder, currently serves as the chair of the board, president and CEO. So there's still family running the business there.
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Interesting.
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The company has a market cap of $11 billion. Just to put that in context, other food conglomerates, General Mills is about twice that at 25 billion. And Kraft Heinz is at about $30 billion market cap. And for Smucker's five segments, got the coffee segment, Frozen Handheld and spreads, pet food, sweet baked snacks. That's Hostess, the home of the Twinkie Egg and International.
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We'll get to Frozen Handheld in a moment. Can I just talk about Twinkie for a second? Because when I first moved to the United States, I was, you know, learning about traditions here in the US You've got amazing things here. Like, I think it's amazing singing the national anthem at the start of even high school games. We didn't have that in the uk. I thought that was very interesting. Fascinating things like homecoming and proms, we didn't have those across the Atlantic either. And then I discovered this thing called Twinkie eating competitions. And that to me was as eye opening as keg stands, which we also did not have in the United Kingdom. So I just want you to know that Smuckers, without me realizing it, was an instrumental part of my onboarding into life in the United States.
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Welcome to Gluttony.
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Thank you. Well, let's talk about coffee. With respect to this earnings report and the brands here include Folgers and Dunkin retail brands, as we know. I'm a massive fan of Dunkin Donuts coffee. It's the best concoction of sweet stuff that I enjoy consuming. Well, in response to tariffs, Smuckers raised prices last quarter, which led to an increase in sales of over 20%. But prices were down, sort of offsetting that for a bit. And profits in the coffee sector dipped as a result, which is. Which was pretty meaningful. Now, last week, John, tariffs of 40% were removed from Brazilian coffee beans. And Smucker's CEO said that as a result, the company doesn't expect to raise prices again this winter. Does still think there's going to be about $75 million though in costs related to those tariffs nevertheless.
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That's right. Back in August, they had suggested that they thought there would have to be more increases in addition to the two they already did this fall. But looking that they're going to absorb it with the reduction in tariffs going forward. Net sales across over all sectors, $2.3 billion, that was up 3% year over year, beat expectations. But costs were up 5% and gross profit decreased 16 billion. About 2%.
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Yeah.
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And the company narrowed its guidance for the fiscal year 2026.
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Yeah, narrowed guidance. Isn't down guidance, just sort of bringing that range in a little bit more tightly. Let's talk about as well, because that was down. That's Milk Bone and Meow Mix brands. What on earth is Milk Bone?
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Milk Bone is a popular legacy. Maybe less popular than it used to be. Dog Treat brand.
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Interesting.
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And on the call, they point out that the innovation of Peanut Buttery Bites, which is a new Milk Bone product, has been very successful. So they're making a Milk Bone Treat with Smucker's Own Jif peanut butter, which I thought was some clever synergy. And Ann, let's talk about uncrustables. Have you had one of those?
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No, I haven't done it yet, but I want to run out and go and try one now. I must have excited. Just as a side note, in response to that, I gotta tell you, Peanut Buttery Bites. They are making pet food snacks that sound more delicious than even some sort of human snacks at this point. These names are amazing.
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Yeah, absolutely. They're making you think that the dog has the same palate.
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Oh, yeah, Humanization. That's been going on for a long time. Yeah. So anyway, tell me about encrustables.
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So I didn't understand that they were so popular. That product came out in my lifetime. I've Seen toddlers walking around with them from time to time. But I saw articles saying that they're very popular in the NFL. They've been mentioned on the Travis Brothers podcast. And Smucker's is expanding the line featuring more proteins beyond just the peanut butter and jelly that it started. They're also expanding into convenience stores. But here's the point. This came up many times on the call. Executives expect uncrustable sales to accelerate to a double digit growth rate for the remainder of the fiscal year and to.
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Top $1 billion in sales for a frozen handheld sandwich. That's amazing.
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A very specific one.
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Oh, okay. Yeah. Well, that's the, that's the peanut butter and jelly one. No. Or it's all of the flavors specific.
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That they are the ones that make this uncrustable brand. And that leads to the Trader Joe's lawsuit that came.
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Oh, yes, that's right. Well, Smuckers. Yes, that's right. Sued Trader Joe's accusing it of copying its trademark design, which it described as, quote, a round pie like shape with distinct peripheral undulated crimping. Sort of poetic description. Let's say that again. Distinct peripheral undulated crimping. I told you there was onomatopoeia in and around this, this Smuckers situation. Well, Smuckers claims in the filing that it spent over a billion dollars developing crustables. Uncrustables, excuse me. And the goodwill associated with them, which is the brand equity was at risk as a result of Trader Joe, you know, supposedly copying its trademark design. So the case is currently pending in federal court. Never a dull moment in food. There's always something going on. Just one last note for investors looking at this. This is a dividend yielding stock. Smuckers has increased its dividends consecutive years despite that dividend situation. Shares down 3% throughout the day, down 7% year to date. Look, it's just been tough for food generally. And this one, when I look at some of these brands, these aren't exactly the cutting edge, sort of super healthy bougie snacks and, and food categories that we've seen. Sort of more growth and these have tended to be much more legacy products.
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Exactly.
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John, do you consider what you wear to be an investment?
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I suppose.
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And like with any investment, you want to know it's a sound one, right?
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Naturally.
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Well, let's talk about Dick's Sporting Goods. Let's check in there because there's been a lot going on with this company over the last sort of six to nine months. And the last time that we had a chat about Dick's Sporting Goods on this show, which was in September, the company had just completed its two and a half billion dollar purchase of Footlocker. Well, Dick's has over 700 locations, market cap $19 billion. This is another one, folks. But remember how big it actually is. Now shares started down, it popped down 4%, climbed throughout the day, eventually ticking up around 2 1/2% this afternoon. And it looks as though this was a situation where the earnings came out this morning and the headlines didn't sit well. Right. But as the company took its time, had its earnings call and as the market dug in, really passed through the financials and listened to what the executive team had to say, it was clear that investors were really trying to get signs for how well that Footlocker acquisition is going, how the integration is forging ahead. Now, leadership started by acknowledging that the brand holistically needs a refresh and that's specifically at Dick's. So let's talk a little bit about that.
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So let's talk about the Dick's numbers. They were pretty Good. Revenue was $4.1 billion for the quarter and about a quarter of that was from Foot Locker. Total gross profit of $1.4 billion. Earnings per share of 278 beat estimates. And Dick's saw same store sales rise 5.7%, which beat expectations. And Dick's raised the forec comparable sales, raising the forecast.
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And again, that magic metric, same store sales growth just under 6%. Pretty healthy for, you know, discretionary consumer goods. Right? These, these are sure items that, you know, you would argue that Perhaps the footwear is necessary, but there are other items in the sports category that is definitely in discretionary space for Dick's. So Dick's had a strong quarter. Let's look at what's happening at Footlocker, because Dick's executive chairman Ed Stack said, quote, we are incredibly excited about our acquisition of Footlocker, which marks a bold, transformative step that expands our reach and creates a global platform at the intersection of sport and culture. And that's really an interesting point here. Foot Locker is a global brand. It's got 2, 400 stores. Dick's previously had just been in North America, so much more locally focused. And Footlocker, you said it up the top there, John brought in almost a billion dollars of revenue last quarter, about 25% of the total combined business. So it's a meaningful contributor. Which made it even more important that the Dick's team today really spelled out what it was doing to make sure that Footlocker was going to be accretive and additive in terms of creating value to Dick's and to its shareholders.
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And what they're going to do is clean out the garage.
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Let's talk about that.
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They're clearing out unproductive inventory. They're closing unproductive stores. And in addition, Stack pointed out that they've been testing changes in 11 stores by cutting products by more than 20% and changing the footwear wall. If you've ever been into a footlocker, you know there's just this wall of shoes. And here's the quote from him. If you'd walk into a Footlocker store before you looked at the footwear wall, it was nothing but a run on sentence. More poem.
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Yeah, that'd be good.
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It was just a whole bunch of shoes thrown up on the wall. And we took all of that down. We re merchandised it, focused on shoes we really wanted to sell. It's early on, but we're pretty enthusiastic about what we've done.
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I gotta tell you, I listen to that or I read it, and I just can't help thinking, and I don't mean to be cynical or snooty about it, but doesn't this seem a bit obvious that you'd be in a footlocker store if you own this business and the first thing you do is go and walk around, take stock, pun intended, of what's going on visually and if it's not landing, the idea that you'd actually rework the most visible part of your store seems fairly obvious. And the reason I bring this up is that Footlocker CEO was a rock star CEO. She'd done incredibly well at Ulta. She was brought into Footlocker to judge up the business. She's no, you know, she's not sort of sticking around. But this to me just seems so obvious. I'm surprised this was missed. I don't know if there was any more perspective on that. This, I wasn't really convinced by this, to be totally honest.
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And it's not just the visuals, of course, that's inventory.
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That's right.
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20% fewer, harder to ship, keep in the back. And they're cleaning it out.
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Harder, harder to fix. Well, look, shares In Dick's down 7 1/2% year to date. If you go back and look at when the deal was announced, when Dick's let the market know it was going to buy Footlocker, really interesting moment that day. I remember this so clearly. I can almost see the share price graphs in my head. Footlocker's stock absolutely went through the roof. Dicks and comparison came down. Clearly the market was saying, oh, big sigh of relief for Footlocker shareholders. They're sort of being put out of their misery. Someone's turned up to buy them and take the work off their hands. But for Dick's not so convinced that this is going to be a good outcome. So there's still going to be more to come on that one. Well, let's wrap up the show today with a few headlines that caught our eye because there are a couple of stunners out there, actually, and we're going to start with Abercrombie and Fitch and the return of the preppy brand. Now, when I was trying tracking the markets over the course of today, this headline was Incredible. Flashed across CNBC, Abercrombie shares saw 30%. Now, that was on Hollister Growth and a strong earnings beat. And I think it's worth just touching on some of the headlines here. Abercrombie and Fitch is a very interesting brand. It's been plagued with issues over time. There have been accusations that it's not been a representative or inclusive brand. There's been some lawsuits around it. And it was really funny because as we were preparing for today's show, we were chatting to our video producer, Tariq, and he goes, oh, Abercrombie, is that. That's still around now. Abercrombie and Fitch has actually been working on repositioning its brand. It's been refreshing its merchandise. And what used to be the bastion of super, super preppy, sort of college Wear has been finding its way to pretty strong performance under new leadership over recent quarters. There has, of course, been tariff trade, but in terms of the brand repositioning, there's been a heck of a lot going on with this company. While shares of Abercrombie and Fitch saw 30% in trading this morning because the company showed investors it's set to keep growing even though that namesake brand. So Abercrombie itself saw its sales fall 2% for the third quarter. At least for the third quarter in a row. Its sibling brand within this portfolio, Hollister, has been doing incredibly well, with sales climbing 16%. And CEO Fran Horowitz, who's really been at the helm of resuscitating this company, said that Abercrombie, the namesake brand, expected to be flat in the current quarter, but that Hollister is expected to continue to do pretty well during the company's holiday shopping season. So overall, sales rose 7% for the entire company, beating expectations and earnings per share, beating expectations as a result. So again, 30% share price reaction soaring in response to this strong growth in the top line.
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Incredible. I also didn't know they were there. When you say Abercrombie. Yes, I can smell that store.
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Oh, the scent. That's right. You know, when I first moved to New York, I remember I would walk past the store on Fifth Avenue. You're right. The doors would open and there'd be this waft of scent coming out of it. Well, in less fragrant news, John, let's talk about what happened today at tsmc.
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That's right. Perhaps all is fair in love and the Chips war. Tsmc, the Taiwan semiconductor manufacturing company, filed a lawsuit today against former Senior Vice President Wei Yen Lo, accusing him of leaking confidential information to Intel. Low had been with TSMC for 21 years before he went to intel back in July. And last week, when reports of the alleged transfer of trade secrets began to surface, Intel CEO Lip Bhutan said that the company respects intellectual property rights and denied all wrongdoing. So we'll see how this is going to work out. Shares and TSMC finished down nearly a percent today, and shares in intel were about flat.
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Well, just to give folks insight into how we decide what to talk about, this was an interesting one because I saw this headline flash along and John and I were deciding, you know, who was going to dig into which story. And I said to John, if you're not finding it interesting, I'll take it. He goes, no, no, I'm into it. I'm into it. So it's actually, see this kind of drama, this sort of industrial espionage. Exactly. Is really intriguing. And the thing that's interesting here is if you remember when the Intel CEO Lit Bhutan took office, do you remember there was noises from the White House saying, well, we're not entirely comfortable with all of Lip Bhutan's investments in Chinese technology companies. That brouhaha has since very much died down. And so the noise has gone away. But it, it is, you know, top of mind when it comes to these chips. When it comes to the sector which is now being acknowledged as such a cool part of security considerations, the level of intensity of looking at what's going on, making sure that intellectual property is being protected has got a whole new connotation now in this day and age. Well, lots going on, even in these few days leading up to Turkey Day. Never a dull moment. But for today, that's it for today's Brew Markets Daily.
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And Brew Markets Daily is hosted by Anne Barry and produced by John Cotto. Talk of De Latif and Emily Milliron. Our identical director is Denise Rivera, and the president of Morning Brew Inc. Is Devin Emerson.
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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.