John More (4:21)

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Ann Berry (4:41)

Well, the markets are on an absolute tear today, so let's take a spin through some of the companies that have been making headlines, starting with Disney, one of our favorites. Shares in the Magic Kingdom's maker ticket dis, up over 7% today. That's after the company reported quarterly results that beat expectations. Operating income for Disney's theme park segment rose 5% from a year ago to over $2.6 billion. Showing the strength of international because this is despite a 1% drop in attendance at domestic park blamed on geopolitical tensions reducing the number of would be international visitors to the United States. Disney's streaming business was also a standout. The Direct to consumer unit, which includes Disney plus, reached a double digit profit margin for the first time. Revenue for Disney Entertainment, which includes the company's movie studios streaming service, climbed 10%.

John More (5:33)

Now the high price of sports rights continues to be a challenge for the company. Along with all broadcasters operating income at Disney's flagship sports operation, ESPN slid 5% in the quarter and and that's something Disney's new CEO Josh Tomorrow is going to have to figure out. Recently he said that Disney is not looking to spin out or sell ESPN. Disney stock price is still down around 12% this year. Meanwhile, shares in Uber Ticker Uber are up over 9% throughout the day despite the company missing first quarter revenue estimates. The revenue miss was due to a miss in the ride hailing business, which company reps attributed to geopolitical tensions, gas price volatility and yes, weather disruptions.

Ann Berry (6:18)

Good old weather disruptions for some of these numbers not going out where they wanted to be. Well, despite the revenue miss, the stock has been buoyed by better than expected guidance, including confidence in Uber's delivery segment which is the fastest growing part of the business. It recorded 34% revenue growth in the latest quarter and the company CEO said, quote, the consumer is spending, they're spending locally and we don't see any signs of that weakening at this point. Well, the earnings highlights continue Today I actually shifted from coffee to Matcha to keep me going. Shares in CVS Health Ticker CVS gained around 8% after blowing past earnings expectations across its business segments. The healthcare giant also raised its 2026 guidance with the CVS CFO attributing that increase to the tailwinds for its insurance arm Aetna, whose operating income came in at up 52%.

John More (7:09)

Also a win for CVS's multi year restructuring efforts. The company has cut $2 billion in costs, closed underperforming stores and reshuffled leadership over the past year. I do miss the CVS that was in my neighborhood and I realized as you were talking in the first segment and it was replaced by a Burger King. That is true.

Ann Berry (7:27)

And the burgers I bet you not behind those Perspex plastic shelf protectors that you see in cvs you've got a more open flow in your burger store Burger King store experience I bet than used to have in your neighborhood. Marmarcy.

John More (7:39)

Exactly. You don't have to call an associate over to get a cr.

Ann Berry (7:41)

Exactly.

John More (7:42)

Well over to one final earnings highlight. Shares in Compass Ticker C O M P were up as much as 30% today as the nation's largest real estate broker reported a surprise profit in the latest quarter. Earlier this year, Compass finished its acquisition of Anywhere, whose portfolio includes brands like Corcoran, Century 21 and Caldwell Banker.

Ann Berry (8:00)

Compass said the company was quote, maniacally focused. Good turn of phrase there on integrating Anywhere and had already seen $250 million in net cost savings Synergies pretty quick to realize Those happening just 82 days after closing on that deal. Looking ahead, Compass expects that the combination will allow the company to achieve durable profitability despite a flat housing market with upside if that housing market does recover. Well. Even with today's boost, though, shares of Compass still down about 12% for the year. Well, let's take a quick break and when we come back, Victoria's Secret stock prices up 50% over the past six months. We're going to take a look at why and why an activist investor is nevertheless agitating for a board seat. We break it down. Let's face it, major medical might not have been designed to cover everything. And unfortunately, sometimes all it takes is an unexpected medical or dental bill to throw your carefully curated financial world into disarray.

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Ann Berry (9:51)

Well, we do love a good corporate drama story and so we're turning now to the story of one that's playing out over at Lingerie OG Victoria's Secretary Secret. The retailer is in a full on proxy fight with one of its biggest shareholders. But this is a little different from other activist investor stories that we've covered because the agitation isn't coming from a hedge fund. Instead, it's coming from a retail billionaire who's actually built businesses in the exact same category and who wants a seat on the board. We're going to get into the details of all that drama and what it means for next month's annual shareholder meeting. But, John, start us off with some context about Victoria's Secret.

John More (10:30)

That's right, Victoria's Secret ticker VSCO on the New York Stock Exchange market cap of about $4 billion. And like so many of the retailers associated with the mall, Victoria's Secret struggled and is in the middle of a turnaround. The company was spun off from Bath and body works in 2021. That's when it became publicly listed. And in September 2024, the company bought in a new CEO, Hilary Super. She previously was the CEO of Rihanna's lingerie brand, a direct competitor to Victoria's Secret. So it was seen as a bit of a score. And her solution was clear. Let's get back to selling bras, calling them, quote, the emotional heartbeat of our business. And at the time, Wall street was hopeful as well. The stock popped 15% on the announcement of her appointment.

Ann Berry (11:12)

Well, this one's been a really interesting story because Victoria's Secret, John, has had a long standing identity crisis. It's tried to move away from the sort of very sexy brand that it has been in the past. Right in the early 2000s, we have images of the iconic Victoria's Secret fashion show, which featured supermodels in angel wings and lingerie. And that was put on hiatus in 2019. I mean, there are real concerns about ownership and sort of misbehavior in this business. And also there's just a move away from this sort of very stereotypical visions of women with certain body types. And a real concern that it wasn't inclusive or fully representative. We've also seen other brands come to the fore that have been built on slightly more, quote, unquote, authentic brand positioning. So we've seen celebrity brands like Rihanna's Savage by Fenty, and we've also seen Kim Kardashian skims starting to take market share. So where we've actually seen Victoria's Secret win over time has been in a category extension that's actually been in beauty. So lotions and mists. And that's actually started to become the best performing part of the Victoria Secret portfolio over the years. So again, moving away from lingerie into other categories and particularly ones that are more inclusive.

John More (12:26)

And that was part of the conundrum because Hillary super wants to bring it back to bras. And a year after she signed on, and we're talking fall of last year, the share price settled back down. Investors started laying blame on super and the board for the company's lack of growth.

Ann Berry (12:43)

So with all this going on, enter stage left Brett Blundy. And this is his firm, BBRC International, which owns about 13% of Victoria's Secret. So this makes Blundy and BBRC the second largest shareholder, just behind BlackRock, which is the biggest shareholder with around 15%. So here's the rub. This is why Brett Blundy is not your typical activist. He's an Australian billionaire. He's been a successful entrepreneur, and he's made his money building in exactly the same sector, global fashion brands and specifically a banner called bras and things. You guessed it, a lingerie retailer. Slap bang in the same category the Victoria's Secret competes in. Well, Blundy's been building his position in Victoria's Secret since 2022. So that's the year after the spin out. And he's been pushing privately for changes since 2024 and increasingly been getting his concerns voiced much more publicly. He's been criticizing the board as being over tenured, so sitting there for too long and as having a stale perspective. And he's also reportedly pushed for removing the longtime chair, Donna James, who's been in that seat for over two decades.

John More (13:55)

And so it's been years of private back and forth. Apparently now it's coming to a public head. Victoria Secret said it has engaged extensively with Blundy over the years, promising compromises, including adding a mutually agreed to director. Victoria's Secret said, Unfortunately, Mr. Blundy refused to meaningfully engage on a resolution that did not include his appointment to the board. That is the issue. In March, super herself, the CEO, said we need the time and resources to focus on our strategic plan without a lot of outside distraction. She thinks that she and the board are doing a good job. And in the latest quarter, international sales for Victoria's Secret were up 43% year over year and the share price has been up 50% over the last six months. So there has been some positive movement from this leadership.

Ann Berry (14:41)

So let's talk a bit more about Blundy's profile. He's put himself forward twice as a candidate to join the board. Both times he's been rejected with the company saying that his appointment would introduce, quote, serious reputational, legal, conflict of interest and governance risks. And I want to talk about this conflict of interest piece. This reminds me of one investor, Sardar Biglari, who repeatedly tried to join the board of Cracker Barrel. Do you remember this?

John More (15:07)

Yes.

Ann Berry (15:07)

Right. And big Larry himself and his firm owned a bunch of restaurants.

John More (15:12)

Right.

Ann Berry (15:12)

So I'm having sort of flashbacks to that. In a very similar dynamic, Big Larry had tried to get himself appointed to the board of Cracker Barrel. And the pushback was very similar to this situation, which was you're on the board of a competitor on the board and you own a competing restaurant. We can't get you behind the curtain and on the board of a public company. So very similar situation over here at Victoria's Secret. Earlier this week, Victoria's Secret said Blundy is seeking to withhold votes against two directors at the company's June 11 annual meeting. So Blundy really putting his foot down and saying, if I can't get on that board, I'm certainly not going to back keeping in place two directors who are on the slate.

John More (15:51)

So let's think that through. I would imagine that I would want someone on the board who has had great success. We talked about how Blundy has had great success building these companies. Would you not want someone like that on the board? I can understand the conflict of interest, but at that point, are you only sourcing board members who are outside of the world in which you're operating?

Ann Berry (16:11)

Well, I think it's a difference between trying to source somebody who comes from the industry and is actively engaged and potentially competing with you today versus someone who's been in the industry for a long time but isn't in a seat right now. That involves day to day coming at you. And it is sort of hand to hand combat in the world of retail at the moment. If you think about a recent situation we talked about, and that was in a completely different space. It was technology. We saw that the chief product officer of Anthropic step down from the board of Figma. And lo and behold, later that week we saw Anthropic unveil a competitive product. So the conflict of interest piece, at least to me, is very real. But it is about is this somebody who's currently in a position to be able to compete with you day to day?

John More (16:50)

So how is this different than an activist like Elliott Management, for example, who they recently got five new board members installed on Norwegian cruise lines. But they're not necessarily saying I want to be on the board or that this person represents themselves on the board. They put one of their proxies on the board.

Ann Berry (17:09)

Yeah. And I think it's also a little bit different because Elliott Management is not simultaneously owning and operating its own cruise line. Right. So that's that conflict of interest point. But yes, with the Elliott management for an activist. If you think about it, the core strength and the superpower of an activist fund like Elliott is looking at the financials, spotting the opportunity to put money to work, but then finding the best experts and executives to go and effect change at that company. So there's some self awareness that there's a difference between being a money manager and being an operator. And so what an Elliot management wants to do, again, they're managing a fund. Right. They don't want to be in the business or running businesses. They want to go pick the best people for the job, at least in theory. So a bit of a different model from actually putting themselves on a board and doing the doing themselves.

John More (17:53)

All right, so June 11, it's the annual investor day. This might come to a vote, this referendum, where what should we be thinking if we're shareholders in Victoria's Secret? Because you've got this person who's successful and he wants to have a quicker turnaround perhaps, or have his influence known, but the company has been doing well in a slow turnaround.

Ann Berry (18:14)

Yeah, I think it's going to be difficult to imagine that shareholders in general are going to vote against this existing slate of directors to put a potential competitor on the board. Um, so we're going to have to wait and see. Also, typically you'd want to hear what management has to say that's got real concrete plans around it. So we want to hear what is their outlook for 2026, what are they going to do specifically? It feels so Victoria Secret needs a good old fashioned investor day to get a fully fleshed out story out there with lots of detail around what the operating plan is and then at least that will give them a little bit of breathing room relative to Blundy coming after them with such a plum. We're going to keep on watching this one. Lots of drama and actually, you know, this whole topic of conflicts between certain kinds of shareholders, founders and other seasons operators. We're seeing it play out with Lululemon right now. Chip Wilson, the founder and former CEO, very unhappy with the board and its selection of a Nike executive to take the CEO seat. So I expect to see some drama for unfolding over there. Well, there it is, the closing bell. It's 4pm on the east Coast. The market's wrapping up for the day and we don't have a ticker tape, so instead we'll throw it over to our human ticker.

John More (19:20)

Our producer, John More record finishes today with all the major indices ending up in the green with the s and P.500, a new record, up one and a half percent for the day. The Dow finishing up over 600 points, up one and a quarter percent, and the Nasdaq hitting another record high, up 2% for the day.

Ann Berry (19:40)

That's it for today's Blue Markets Daily.

John More (19:42)

Brew Markets Daily is hosted by Amber and produced by John Gratto. Talk of Delatif, Avni laroya and Emily Millarn. Our technical director is General Brittany To Taco is our audio engineer. And the president of Morning Brew Inc. Is Devin Emery.

Ann Berry (19:54)

Wake up tomorrow with the Morning Brew newsletter and tune in to Neil and Toby on Morning Brew Daily. See you back here tomorrow. Same time, same place.

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