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Media Mayhem, Earnings Expectations and Sportswear Surge 10/21/25
00:44:07
Warner Bros. Discovery is up for sale... we break down potential buyers and what it means for media. Earnings season continues as markets rally. Plus, how Dick's Sporting Goods is expanding their brick and mortar presence.
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This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com MarketUpdatePodcast or find Schwab Market Update. Wherever you get your podcasts. CNBC Sport on the Record, your front row seat to sports and business. From commissioners and owners to media executives and top athletes, these are Rembrandts. I'm telling you. These franchises on the Record, all news Saturdays, 3 Eastern.
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You're listening to the Exchange. Here's today's show.
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Welcome to the Exchange. I'm John Fort in for Kelly Evans. And the Dow is higher today, hitting a fresh intraday record. The S and P and Nasdaq are flattish, both less than 1% from their highs. Consumer discretionary industrials and financials leading today. Utilities and comm services are lagging. Some big moves in commodities. Meantime, gold was down 5% at session lows, which would be its worst day since 2013. Silver falling more than 6%. That's just its worst day since April. And earnings in the spotlight today with everything from autos to defense and soda. Reporting. Coke the best performer in the Dow after saying demand is improving. GM's leading the S and P after raising full year guidance and RTX up nearly 10% on a strong beat. The big earnings name after the belt today is Netflix. Shares are having a great run this year, up nearly 40%. In Focus, advertising updates, pricing, content, spending and any commentary on subscriber growth now that Netflix isn't breaking those numbers out. Now for more, let's bring in our Julia Boorstin and Oppenheimer's Jason Halstein. Jason demon hunters. I mean, it's got to come up. Is there any way they can talk about that without talking about both the viewing time and perhaps the number of people drawn to the platform? And maybe we get some subscriber growth ish numbers. I mean it's probably optimistic. I mean I think the question is like how big of a franchise this could become over time, you know, sequels, other, other other things you can do with it. But I wouldn't imagine they're going to give you a specific number. They may tell you like in its most watched shows ever, where it ranks. But yeah, you're, you're probably not going to get a ton of detail there. But I mean look, we have third party data for the and it's up 20% versus the plus 10% in the second quarter. So I think everybody knows that this was a very good viewing quarter for Netflix. Julia Netflix is at a half a trillion dollars in market cap now at a time when it's fair to say the rest of media is in turmoil, like we like to say markets are sometimes. There was a time about five years ago when the idea was everybody chasing Netflix and trying to do the streaming thing that they're doing. Are they now sort of in a tier, in a class of their own?
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I would say they're definitely the leader. And it's interesting because for so long everyone was chasing Netflix and looking to emulate the streaming model. And more recently we've seen Netflix take a page from some other media companies with the investment in ad supported as well as live content, which is of course a departure from the bread and butter which of Netflix which is streaming. But I think this raises the question is whether Netflix is going to be interested in the assets that are now on the block. With Warner Brothers Discovery saying today that as it moves towards that spin, it is also entertaining offers for all or some of the company. So Warner Brothers Discovery assets may fit in somewhere in Netflix. Netflix does say traditionally that they're builders rather than buyers. But as they are so much bigger than their rivals, I think the size, size and scale of Netflix actually helps the likes of a Paramount Skydance looking to acquire those WBD rights because they could, they could say it's not anti competitive when we're up against this giant rival.
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Jason I almost think that buying something from a traditional media company makes people think about Netflix in that context, which might be bad. I mean Disney's market cap is 200 billion and Netflix's is more than 500 billion. I mean just the scale is sort of mind blowing here. What exactly do they have to prove in this narrative to keep that, that valuation justification running? Sure. So I think one of the debates is are they going to guide for next year? They did guide for, for a year out in the third quarter last year because they were taking away the subscriber metrics. I mean I think the view is it's flip a coin. They may or may not guide for next year. I think once people know that the growth next year is 13 to 14% and you're looking at a minimum of 150 basis points of margin improvement, which would be conservative, like that's probably what's held investors back. This was clearly like an outperformer stock, right? During the kind of tariff period. And then, you know, it's still up quite nicely, but recently it's underperformed. And, you know, I just think investors need to see what the company thinks the baseline for growth is next year. Julia, what do you think this stock is kind of reacting to trading on at this point? I know you look across a wide range of analysts opinions and the chatter out there. For a while we were talking about international growth and then it was sort of the gaming stuff and then, you know, the commercials. But I don't know that any of that stuff has really blown out. But the stock has performed so well anyway.
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The stock has performed well over time. But John, it's pretty much flat with where the stock was the last time Netflix reported earnings in July. And I think if you look at why the stock has been flat over that three month period, it really comes down to the fact that there has had been so much in terms of gains before then. And this question of what's going to be the next accelerated the stock. What I'm hearing from analysts is it's really going to be advertising. One analyst out today saying that advertising will be responsible for 30% of all growth in terms of revenue between now and 2030. And that's why engagement matters. That's why it matters that people are watching K Pop Demon Hunters not just once, but over and over and over. Because it's that engagement that is now far more important than the subscriber number because that's how they really turn ad revenue into that growth driver.
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I only watched it once so far. Julia Boorstin, Jason Helston, Me too.
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Just once.
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Meantime, we got breaking news out of Washington. Amyn Jabbers has the story. Hey, John. That's right. President Trump is speaking now to a group of Republican lawmakers in the Rose Garden. I just want to flag this comment for you. It's a bit of an eyebrow raiser for now, but you might want to put a pin in this one because it may indicate some kind of an issue behind the scenes. The president speaking, you can see him there speaking now in the Rose Garden, was talking about his meeting next week with Xi Jinping of China in South Korea. That's expected to happen at the end of the week, next week. But the president raised the prospect that this meeting actually won't happen. He said maybe it won't happen, maybe it won't happen. Things can happen where, for instance, somebody will say I don't want to meet, it's too nasty. But it's really not nasty. It's just business, and we're going to do a good job representing you people. So the president there kind of suggesting that Xi Jinping might pull out of the meeting because the tone of the relationship between the United States and China has been too nasty over the past couple of weeks with all the back and forth over rare earths and other issues. But the president seemed to indicate that the meeting was still set. So, you know, maybe just put a pin in that one, John. Maybe the president's alluding to something he knows behind the scenes in terms of difficulty with setting that meeting, or maybe he's just raising the prospect. Hard to tell at this juncture, but wanted to flag it for you. Yeah. Eamon, I wonder whether you might be interpreting this in a way clearly more sophisticated than I would, but this is a president who negotiates out in the open a bit more than we've seen lately. I was really struck last week by that meeting with Zelinsky when he sort of invited the press to press Zelensky on a number of topics out in the open that you would have thought they would have discussed behind closed doors. I mean, is this a president who perhaps is using that public open calibration to push the person on the other side of the table? Yeah, no, I think that's absolutely right, John. I mean, this is a president. You know, the thing about covering President Trump is he'll tell you what he thinks. Right. He's available to the press all the time. He brings the press into the Oval Office all the time. You know, he says the quiet part out loud often. And that's why I wanted to flag this one, because this is different than what we've heard him say before. He's been very optimistic in recent days about that meeting with China over the past, you know, say, week or so, saying that, you know, there's a lot to be decided. He's got a lot of respect for Xi Jinping. Everyone's looking forward to the meeting here. He then raises the prospect that the meeting could get canceled. Why is he raising that prospect? Why is that on his mind? You know, we don't know for sure. We'll try to work that out with some aides and some officials here. But I think you're right. Some of that could be him negotiating. And you could interpret it another way, John. You could interpret it as Trump threatening to walk back and say, well, maybe I won't go to this meeting because of what China's been doing in terms of rare earths, and that's too nasty. So you know, is this a saber rattle? I don't know, but it's different than what we've heard before. Yeah, he's telling us what he thinks. But what he thinks can change quickly as Putin and Zelensky are both finding Eamon. Thank you. Well, lots of big names reporting earnings this week. Tesla and IBM on deck tomorrow. Intel and American Airlines out on Thursday. Positive results from GM and Coke today helping to extend yesterday's massive gains. The Dow hitting a fresh intraday high. So will earnings continue to keep the rally going? Let's ask Tim Seymour, CIO of Seymour Asset Management and a CNBC contributor. Tim. Hey John, we need good earnings to keep the market going at these valuations. Is this enough? Is this encouraging? Well, we're hearing from industrial companies and take GE, take GM, take 3M. I mean the companies are controlling what they can control. And what's I think notable about this earnings season is that the margin profile, the definitely the earnings resiliency is really there. I mean gm, this is a company that no one ever seems to believe they're running this company differently. I'm long GM so I'm thrilled to see it. I'm not surprised to see it. So suddenly you have the out year that's being pushed up after a 25% beat to consensus that in the industrial space is kind of what's going on. And of course all we've really been talking about is AI and the infrastructure build out. So it's nice to see the industrial companies who eventually are the beneficiaries of this actually showing margin accretion now. Well, when I think about GM and the like, I think about, boy, that contract from the United Auto Workers and then these tariffs so much on the cost side at a time when EVs out of China, there seem to be a lot of competition, perhaps copying, capping what they can charge at the top end. What's the way for them to get around that? Well, I think they're showing that first of all they have some pricing power, that they are eating some piece of the margin. I think the market much in the same way that they were punished on the headlines. And we still don't really even know where a lot of this settles through. And we've seen that GM is, you know, much in the way that I think this president likes to find the companies that are seen as the American national champion companies, GM is one of them. And whether it's in battery partnership and rare earths as they affect the auto industry, I think GM is in a position where if anything they get a multiple enhancement from that relationship with what's going on with the uncertainty and again back to their core. Their core operations have never been more efficient and I think the focus on the parts of the business, the regions they've, they've cut out regions that no longer make sense seven times, you know, less than seven times trailing and probably will look close to under eight times on a forward basis after the analyst community follow through here. How do you feel about outside the U.S. i mean if you look at the all country World index, ex US been doing pretty well. We're talking about Europe again this year after the stock action there have been pretty moribund for a while. Does that continue to have legs any particular countries you're watching? Yeah, I think it does and so I definitely like it. I'm managing an international etf. I devo this is focused on, you know, MSCI all world but to the extent that you can lean into places where we actually think there are opportunities and whether that has been gold mining or nuclear but in different parts of the world, whether there are parts of the China tech, that makes sense. But you know what we've seen out of Japan over the last couple of days, the story in Japan is interesting because again here's a place where you have mega cap core tech companies and certainly an industrial power looking to maybe be more aligned with the US but you have trading 30% cheap to US. Cheap has never been a reason to go out and buy international. But I think we're in an environment here where the margin profile, the fact that some of these companies are in some of the same strategic industries but are very focused on tech, you know, we're overweight. Japan and ideo. I like the Japanese banks. I think if the, if the yen next week doesn't rally too much on a BoJ BoJ indicating either. I don't think they're going to hike next week, but I think they could hike before the end of the year and I think that would be something that would be an issue for exporters in Japan. Like Japan, like Europe. I think European banks look interesting here to gold. What do you like better, the metal or the miners? And why, if gold's running, you want the miners. But much in the same way we saw gold react today to just overbought conditions, miners are going to also, you know, we see the beta on the way up is about two times on the way down. It's probably three and a half after the kind of move we've had today. You don't run from the gold trade today. And I've been investing in gold for 20 years. So I, you know, this is my view. I think we're going to have 6,000 gold. I think we're going up 7,000 gold as we get out to 2030. I think the dynamics that are not just dollarization, it's an asset class. And if you look at the PGMs across the group, it's not just gold. Look at the move. And it's not just silver. Look at platinum, look at palladium. So I think it's a dynamic of all the macro, some of the uncertainty. I think it's purely an asset class story. Institutions are investing in gold in a way they never have. It's not just the Chinese central bank, even though they've had a lot to do with this. Well, as long as you've been in it, if we have 3,000 gold, you won't sweat it. You're not a timmy come. Well, that's right. And even a 7% move, sorry, even after I move today, gold still up 7% in October after doing nothing for four years. So it was overdone. Tim Seymour, thank you. Well, we've got a news alert on OpenAI. Mackenzie Segalos has that story. Mac.
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Hey there John. So OpenAI is announcing live right now that it is launching ChatGPT Atlas, an AI powered web browser. And we've known that Sam Altman wanted to take on Google Chrome and now he is. So OpenAI wants to be your front door to the Internet and if they own the browser they can theoretically cut Google out entirely. This is OpenAI's first full browser product. In January it debuted a browser based agent called Operator, but that was just a demo. Atlas, it is standalone and it's launching Globally today on iOS, Windows, iOS and Android. Coming soon as designed John Atlas goes head to head with both Google and Perplexity who are already battling it out for AI browser dominance. Earlier this month, Perplexity released its free comment browser, designed to act like a personal assistant, search shop, organize tabs, even draft emails. And of course, Google has been ramping up Gemini, integrating it directly into Chrome since September to help users navigate tabs, understand pages and even schedule meetings. So these browser wars are officially back with AI at the center. Investors are paying attention. You got shares of Alphabet down 3% Tuesday on the news. And John, one thing I will say in terms of this extra functionality of the new browser, Chat CBT can stay on as a sidebar across the web. It's got Personalized browser memory and agent capabilities. They can take actions on behalf of the user. And they also are offering a lot of integration with Google products in the demo, integrating it with your Gmail. So.
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Well, this is interesting, Mackenzie, because, I mean, some of these AI players were salivating at the prospect of Google being forced to spin out Chrome as part of some kind of an antitrust settlement. That isn't happening. But we've seen this kind of thing along various stages of technology development. For a while it was about email and, you know, companies jumping out there to keep people engaged on email as a way to sell them ads. And it became more based in the browser, not just in extensions. Mobile, though, is another question and issue. Apple has a lot of power there. Perhaps Open Air coming out with a browser increases its bargaining position versus others that it might have to do some kind of deal with in order to get placement.
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Right. And I mean, it was just two weeks ago that OpenAI had their developers day, which is really a play at the larger coder ecosystem trying to create this rival to the Apple App store. But for AI generated players, OpenAI has had designs to be the WeChat of the US where you download their one app and then you go into that and it becomes the Apple App Store. Now they're taking aim at Google Chrome. I was at a dinner with Sam Altman and other journalists where he squarely said that he would be interested in buying Chrome. That was before that DOJ overhang was cleared. But it goes to this larger conversation around monetization. And that's what a lot of investors want to understand, how a company like OpenAI will ultimately make money. And they're not looking to replicate what we saw with Google Search. It's very much about E commerce. And that's been a big play here too. Agentic agents built into a browser built into the chat stream and earning merchant fees as part of that integration.
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Yeah, they'd rather be a landlord than a tenant for obvious reasons. Mackenzie Segalos, thank you. Well, coming up, Warner Brothers Discovery is up for sale. Media giant says it's received unsolicited interest from multiple parties and will now review all options. So who will be the buyer and what could it mean for the larger media industry? We'll discuss. Plus, it's almost time to start decking the halls. But one analyst warns it won't be too happy of a holiday season for the retailers. Well, that's what's got him so bearish. Grinch ahead. Exchange back right after this. This is the exchange on CNBC and now a next level moment from AT&T business. Say you've sent out a gigantic shipment of pillows and they need to be there in time for International Sleep day. You've got AT and T5G so you're fully confident, but the vendor isn't responding. And International Sleep Day is tomorrow. Luckily, AT&T 5G lets you deal with any issues with ease, so the pillow will get delivered and everyone can sleep soundly, especially you. AT&T 5G requires a compatible plan and device. Coverage not available everywhere. Learn more@att.com 5G Network CNBC, sport on the Record, your front row seat to sports and business. From commissioners and owners to media executives and top athletes. These are Rembrandts. I'm telling you, these franchises on the Record. All news Saturdays, 3 Eastern. Welcome back to the Exchange. Warner Brothers discovery surging 11% today after saying it's open to a sale. Earlier this year, WBD announced plans to split into two separate entities, but now it's reviewing all options after receiving unsolicited interest from multiple parties. Earlier today, our own David Faber reported that Netflix and Comcast may be among those most interested in wbd. So what does this all mean in the media space? Let's bring in the Ankler founder and CEO Janice Min. Janice, welcome. We seem to be in this period where there's this swing between bundling and unbundling, not just in content but in corporate structures. You've got Comcast breaking apart, but maybe looking at adding something. Versant, which CNBC is a part of, is talking about trying to add some things, various companies doing various things, Netflix sitting pretty. What's the significance of Warner Brothers Discovery in all this?
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Well, we're kind of in a Goldilocks moment with these studios and streamers. Everyone is looking to find the right, the right way to build out the greatest value in their company. But I think what we're really seeing now is the shakeout in that everyone has presumed was coming for at least since the streaming wars began in earnest with everyone chasing Netflix, that not everyone could survive. And as a result of that, you had companies like Warner Brothers Discovery taking on staggering amounts of debt when they merged not that long ago, $36 billion in debt. And now it seems like we're going to probably end up in a universe of Disney, Netflix, Amazon. And the fourth player remains to be seen. I don't think David Ellison at Paramount Skydance was looking to become the seventh biggest player. I presume he assumes he's going to have that fourth seat. Also Think that this was the greatest gift that ever happened to David Zaslav, to be able to have it leak out that Paramount had a lowball offer and suddenly here we are today. This asset that kind of had no way out except to split now has created a market and a lot of interest gift.
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I mean, it could have been a gift to himself. Who knows how these things leak, you know, Happy birthday to me. Well, what is the holy grail in this media environment? That is, five years ago, these companies, a lot of them were chasing scale. Look across Disney, Peacock, others spending on programming, on content, thinking that was going to get them bigger. But then profitability concerns hit. So what is it? Is it ip? What is it that's really the key asset here?
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Well, you could make yourself crazy here trying to figure out what the goal is. So the number one goal is profitability. The number two goal is survival. Right? And I, like you, had a segment just now about Open AI, for example. And when you think about where the headwinds of Entertainment are going, YouTube is now the biggest single streamer on living room TVs. You have OpenAI, which introduced Sora too, which creates an enclosed entertainment system using a lot of IP that from Hollywood and Hollywood studios. So these companies, I would say the end game, the goal keeps changing. I would say one of the goals right now is to be big enough to compete in a universe where there is, you know, people call it Internet sludge everywhere, and to have enduring Internet intellectual property, enduring titles, the best in class. And I will say Warner Brothers Discovery, Warner Brothers in particular has some of the most storied brands in history. On the television side, you know, from Friends to ER to Big Bang Theory. On the movie side, Harry Potter, which is now getting translated into tv. Hbo, which is remains incredibly, in this environment, the crown jewel of television. So if you can imagine, you know, a Netflix, for example, which has seen North American growth stall, which is across the board in streaming, and HBO Max continues to grow internationally. These are brands that can take you around the world and to be able to demonstrate that kind of value to the consumer. And more importantly, as they've entered into advertising to produce safe, brand friendly content that is of high quality. It's a dream.
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Janice, what's the lesson? The takeaway from Paramount buying the Free Press for, what was it, $150 million when it comes to these niche media outfits and the influence that they or their leadership might have over this moment, sure.
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I think that legacy media is struggling and I think you're seeing that, you know, not A not an hour goes by where we don't hear about layoffs at a legacy media outlet. And this is, this is his swing, David Ellison swing to try putting in charge someone who has harnessed a new corner of the Internet, a direct to consumer relationship and seeing if some of that energy can translate. Of course, this is getting hotly watched. Lots of leaks, but it's a news story at least. I think people at least can appreciate an investment in news instead of only the cutback story.
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All right, Janice Min from the anchor, thank you.
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Thank you.
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Coming up, strong iPhone sales pushing Apple to new highs this week. Our technician says if one key level holds, the stock could rally to more than $290 a share. She's going to break down the indicators you need to watch ahead. And now a next level moment from AT&T business. Say you've sent out a gigantic shipment of pillows and they need to be there in time for International Sleep day. You've got AT and T5G so you're fully confident, but the vendor isn't responding. And International Sleep Day is tomorrow. Luckily, AT&T 5G lets you deal with any issues with ease. So the pillows will get delivered and everyone can sleep soundly, especially you. AT&T 5G requires a compatible plan and device coverage not available everywhere. Learn more@att.com 5G Network CNBC's Changemakers 2026.
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List spotlighting women who innovate, lead boldly and are transforming business.
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Do you know someone who is rewriting the future? Nominate them now@cnbc.com changemakers. Welcome back to the Exchange. Stocks are a little bit mixed. The Dow continues to be higher. The S and P is right about flat. The NASDAQ slightly lower. Dom, choose here with a closer look at the day's biggest move. All right, so John, I'm going to tell you exactly why the Dow is outperform earnings mover. One of the big reasons for that outperformance in the Dow is right now 3M shares up over 5%, almost 6%. Amid the action, the manufacturing company that makes everything from post it notes to ace medical bandages and industrial filtration products reported better than expected quarterly profits and revenues and then raised its full year guidance. So 3M shares up five and a half percent. Next up, let's go lower into the market. Cap spectrum shares of Beyond Meat right now are up 83% and that's by the way off session highs. This is the third day in a row of massive moves. It now makes the maker of plant based alternative Meat products. It's a mouthful, but it's worth over a billion dollars in market value now. So the recent Meme stock trading frenzy was also fueled more so today by its inclusion into an exchange traded fund that tracks Meme stocks. So another reason for that 400% jump in the shares over the last three sessions has been that high short interest. The large number of people betting on a share price fall that has led to now stop the stock closing out, closing, losing positions here. So beyond meat shares are up 83% in that so called short squeeze. We'll cap things off with a check on shares of Capri Holdings. This is the parent company of upscale clothing brands like Jimmy Choo and Versace. Getting some help from analysts at Raymond James. They've upgraded the stock to an outperform from market perform. They say their channel checks show sequential improvement and they believe the setup in the shares provides a good risk reward. So keep an eye on Capri holdings, up four and a quarter percent. For more on those and other top calls of the day, just head over to CNBC.com pro subscribers. Get all the access to the detail and context John around those calls. I'll send these back over to you. So interesting, Dom. Especially 3M that had been suffering so much. It still hasn't reached those peak levels of four and a half years ago, but it's up 34% year to date. Finally living up to that ticker. Mmm. There you go. Delicious, Tom, Thanks. You got it. Now to Kate Rogers for a CNBC news update.
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John. President Trump's nominee to run the Office of Special Counsel appears to be in jeopardy. Politico reported on a series of racist texts allegedly sent by Paul in Gracia, including one where he said he had a quote, nazi streak. At least four Republicans, including Senate Majority Leader John Thune, have signaled opposition. Thune says it would be a mistake for Ingrazia to appear at his confirmation hearing Thursday because he doesn't have the votes. The Trump administration is reportedly Planning to buy 1 million barrels of oil for the Strategic Plan Petroleum Reserve. Bloomberg reports the White House is doing it now to take advantage of lower oil prices which are down about 30% since January. And the Women's Professional Baseball League announced today that New York, Boston, Louisiana and San Francisco will be the first four cities in the league's inaugural season. Next year when it debuts, it will be the first women's pro league since the All American Girls Professional Baseball League made famous by the movie elite League of Their Own. A great one. Back over to you.
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No Crying in baseball. Kate, thanks. Coming up, much has been made about the death of the mall, but Dick's Sporting Goods is doubling down on physical locations. Our Courtney Reagan is in Pittsburgh, Pennsylvania at a House of Sport. Courtney.
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Hi, John. Well, Dick's Sporting Goods is taking experience in retail to a whole new level with its House of Sport concept. You can try out a few equipment here in these sports cages. It's also three times the size of a typical Dick's Sporting Goods. Executive Chairman Ed Stack says it is just as productive, if not more so. We'll explain how it's part of Dick's strategy for the future, coming up on the Exchange.
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Welcome back to the exchange. Retail ETF XRT up 8% this year, but the athletic apparel names are in a slump. Nike down 9%. Lululemon down more than 50. And Dick's Sporting Goods is flat despite 12 straight quarters of sales growth. It just bought Foot Locker and is going big when the others are playing small. Courtney Reagan is live at a Dick's House of Sport in Pittsburgh. Courtney, I have to give you credit. You were doing a live tease a bit ago while swinging at pitches there and you actually connected. As Derek Jeter's nephew would say, respect.
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I mean, you know, you do what you can, but definitely not batting a thousand. But I do appreciate. Thank you very much, John. Yeah, I mean, look, youth Sports is a $40 billion annual market in the United States. Spending per child is up 46% since 2019. It's four times the size of the domestic box office. And this is a colorful example. This baseball area in Dick's Sporting Goods House of Sport, that shows how Dick's has really been able to dominate this. As you mentioned, we were in the sport cage. Not only can you try out equipment, but it also gives you real time stats. All of this together, this house of sport concept is part of Dick's Sporting Goods plan for the future. It's what Ed Stack, the executive chairman and son of the founder, sees as the manifestation of what's to come.
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We need to build the concept that will kill Dick's Sporting Goods. We need to build the concept that if somebody else built the store across the street from us, we're out of business. And that's exactly what we did.
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Not all House of Sport are identical, but they share the same DNA. Usually 120 to 150,000 square feet, often two stories, with three times more shoes than a typical Dick's store. There's sport cages, there's a field, golf simulators, a climbing wall, and Premium brands and merchandise like Ugg, Johnny O, Air Jordan and Ferrity sold only at House of Sports stores. Now most are also mall anchor stores, many in old department stores. This one used to be a Sears. Wall street was skeptical about the retailer going big when most other retailers were shrinking store count and square footage stack wasn't dissuaded.
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Mall developers love having us do this now that they understand what we're doing because usually in the Sears wing or a wing that has a vacant department store for a while, that wing of the mall is not usually leased very well for the developers. So the developers have been very aggressive on enticing us to come in and do this because not only does it bring traffic to the mall, but it helps them lease the wing of the mall that maybe have been under leased in the past.
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A typical house of sport, Ed Sack Sundays, does around $35 million in sales and thanks to in part to favorable lease terms, about 20% EBITDA. Now the first one opened in 2021. There'll be about 35 by the end of this year and up to 100 by 2027.
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John Courtney, this reminds me of the Apple Store approach of having this experiential space. But it seems in this case, unlike Apple, which went after these premium spaces because they were selling this really high margin product, this is partly about the, the downfall of the mall before making the commercial real estate owners, the landlords willing to cut favorable deals that make the numbers work now.
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Yeah, I mean that is a really, really big part of it. So not only do they do a lot in sales, but to your point, because of those favorable lease terms, they can be pretty profitable. You know, didn't give us exact numbers on how it compares to a traditional Dixon sporting goods store. But if they're going to spend all of this money to build these stores and the expansion is up to 100 by 2027, you have to imagine it makes a lot of financial sense for Dick's Sporting Goods. And as we mentioned, the mall also benefits. There's a lot of co tenancy clauses in retailers leases that if an anchor store leaves, it sort of gets a get out of jail free card to some degree to the other smaller retailers. And so once you bring someone back in, you sort of lose that and it makes everything a little bit better for everyone else.
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Truly an anchor. Courtney Reagan, thank you. Well, sticking with sports, my next guest says Dick's acquisition of Foot Locker is going to be key to the turnaround of a major name out there, Nike. Joining me now to discuss is Ike Borachow, senior analyst at Wells Fargo Securities. Ike, first of all, what do you make of what's happening in this third party retail space such as it is an area that Nike overlooked to its peril a few years ago. Yeah, and you know, thanks for having me. No, I think that what Nike's doing is they're 12 months into this with Elliot Hill. You know, Q1 they just reported was a blowout on the revenue line is starting to see some signs of a turnaround there. They've got a lot of classics cleanup they're going through but they're non classics footwear is working and what they've really done to reinvigorate revenue to an extent is re engage the wholesale channel, especially in North America. And that includes partners like Dick's, like Footlocker, et cetera. And it's kind of going back to, you know, right. Sizing some of the mistakes that prior leadership made and you can kind of see some green shoots starting to grow. So what is the place of that third party experiential retail that really the peak against it was Covid when you couldn't really go out and have that experience. And so many leaned into direct. Just click this link and you'll get it from us and we'll get maximum profit. That seems to have to some degree falling apart. Yeah, I mean especially if you're a brand like Nike, you can't sell everything on your own. The brand was built on having high quality partnerships across the globe, not just North America. And I think the prior leadership kind of lost sight of that. And what the new team is doing and what Elliot Hill is doing is they're very clearly re engaging that channel. They were taking inventory back last year. They were giving allowance dollars. They were doing their to set their partners up for success, clean the channel out and you can really see it's like a marriage kind of coming back together. Nike needs the wholesale channel, but remember the wholesale channel needs them. You know, Dick's Foot Locker specifically. If Nike is going to struggle, then they're going to struggle. And you can kind of see what Dick's is doing and what its stock is doing is this is a bet on Elliot Hill. You know, if you can buy Foot Locker at trough fundamentals at a trough multiple with the expectation that Nike is in fact going to make a comeback, that's probably going to end up making being a good deal for them. So the holiday season look iffy at the start. Why I think you have to put it in the context of what the stocks are telling you. The groups up almost 20% since summer were 2X, the S and P multiples are high. And look, we're going to learn a lot more on Q3 earnings. But demand trends look like they're slowing ever since back to school, which was very strong. Foot traffic has slowed, spending is slowed, tariffs and pricing are going up. And I think what leaves us kind of concerned here is where the stocks are if things are in fact slowing. Inventory is starting to build, your tougher compares are starting to come up against you. And guess what? When you hit Black Friday, if demand isn't there and inventory starting to build, that's when we start to see markdowns, some marginal risk. And so that, that's really the context that I want to make sure you appreciate. It's really the setup that we don't like. It's not these businesses are doing poorly. It's just this isn't really a good time to buy. I'd be a little bit patient overall. Yeah, I got you. I borrow chow from Wells Fargo Securities. Thank you. Thanks. Coming up, cryptocurrencies under pressure recently, but industries ranging from finance to fine art are adopting tokenization now. Real estate getting in on the action. That's next when the exchange comes right back. Welcome back to the Exchange. Blockchain technology has already disrupted several industries and now the real estate market is waking up to its possibilities, starting in residential but now quickly moving to commercial. Diana Olek joins us now with more in this week's property. Well, John, earlier this year, Fannie Mae and Freddie Mac were ordered to count.
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A borrower's cryptocurrency holdings as assets to qualify for a loan.
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Some lenders like Propy are already doing crypto backed mortgages for both residential and commercial property loans. I spoke with Tony Giordano, a crypto and blockchain disruptor in the real estate.
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Space, about that evolution.
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If somebody comes to me now and says I want to buy a house using bitcoin, my question is why? Why on earth would you trade an asset that's going to go up 20 more times than that house will in the next 20 years? So now you have have all of these new private equity firms giving you a loan against your Bitcoin assets so you don't have to get rid of it and now you can just go buy the house.
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Traditionally, even more important, Giordano says, is real estate moving to the blockchain. A recent report from Deloitte said industry players now realize that blockchain based smart contracts can play a much larger role.
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In cre, potentially transforming core CRE operations.
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Such as property transactions, purchase sale, financing, lease and management.
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I don't see how the entire real estate industry will not be on the blockchain within 10 years. It's the most secure platform and technology to do it. So 10 years. I'd be surprised if it takes 10.
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Years because it saves money.
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It saves money, it saves time. Everything is instantaneous.
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Companies are now tokenizing real estate assets in order to sell them in pieces like cmbs.
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Some are putting land records on the.
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Blockchain to protect properties from being stolen.
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Or altered by cybercriminals. Now there's much more on this in.
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Today'S Property Play newsletter and video podcast with Tony Giordano.
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If you haven't signed up already, use.
- [39:28]
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That qr code or cnbc.com propertyplay John Diana, thank you.
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A
Well, coming up, how Anthropic got caught in a culture clash and what it means for AI regulations next. And the exchange comes from right back. Welcome back to the Exchange Anthropic dividing Silicon Valley over its stance on AI regulation, with big names like David Sachs and Reid Hoffman clashing over the issue. Mackenzie Segalos is back with the story in today's Tech Check.
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So John, this debate around AI safety is fracturing Silicon Valley with Anthropic at the center of the dividend. One investor in the company told me that Anthropic stance on responsible R and D is valid but easily interpreted as a regulatory capture. The company has hired senior Biden administration officials, helping turn that idea of safety into a politically charged signal. Now part of the backlash is also coming from VCs who are not in on the deal. David Sachs, Trump's a czar and a backer of competitors like Xai, has not invested in Anthropic through his firm, Craft Ventures. He has accused the company of styling itself as a resistance group, opposing President Trump and trying to backdoor woke AI regulation through Democrat controlled states like California. Anthropic's defenders, they say it's being consistent, cautious on frontier risks and selective about what products it's willing to ship. LinkedIn founder Reid Hoffman, a major Democratic donor and investor in both OpenAI and Anthropic, is publicly defending Anthropic as one of the good guys. CEO Dario Amade in a statement this morning saying that he believes Anthropic, the administration and leaders across the political spectrum want the same thing. Because, John, this isn't just about safety protocols anymore. It's a power struggle over who defines responsible AI and who gets to write the rules for what comes next?
- [41:23]
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Indeed. Mac, thanks. Coming up, stocks extending yesterday's gains. But our technician says the rally won't last the week. What does she see that you don't find out next. Welcome back to the Exchange. Apple hitting an all time intraday high after closing out a record yesterday. My next guest says if it stays here for two consecutive weeks, it will confirm a breakout. Joining me now is Katie Stockton, founder and managing partner of Fairlead Strategies. Katie, that seems like a tall order, but it had to climb a bit of a mountain to get here. No, it did.
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Believe it or not, the Stock is up 30% since the beginning of August, which is pretty remarkable, especially, especially considering that the other mega caps have really faltered since then. Nvidia by comparison is up only 4%. So it's a really big up move from Apple, big outperformance. It's differentiated itself positively and now has this breakout pending confirmation. We always wait for confirmation because there are these whipsaws all the time on the chart. So we want to make sure it not only gets above a level which is 260 as final resistance, but stays there for a week or two to confirm that breakout.
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A
Now why is this rally going to have such trouble lasting the week?
- [42:44]
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Well, we don't know, honestly. But when we look from a top down perspective, it does look a little bit fragile to us. And that's based in part on market breadth. We've seen a real pullback in market breadth and of course we have seen a downtick in momentum. A lot of the 20 day moving averages are rolling over and we're using those as one of our primary risk metrics. We've seen a breakout in the Vix as well. So for the S&P 500 below its 50 day moving average, we would expect risk to increase and that's really not that far away. So, so we're a little, you know, sort of suspicious of the sustainability of the uptrend at this stage without a consolidation phase. And we are seeing some macro shifts of course as well. Gold and silver are down very sharply right now and they've been positively correlated to the S&P 500 doing very well, acting very much like risk assets.
- [43:38]
A
What's been negatively correlated that perhaps investors should start paying closer attention to if all these levels don't hold well, when.
- [43:47]
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You look at the sector relative strength, that's where you see the negative correlation. So anything that isn't technology for the most part has done very, very poorly relative to the broader market. And that's of course driven in part by the mega caps and you could expand that to growth versus value. So any of the relatively oversold sectors or segments of the market should do better. That would include things like consumer staples, real estate or REITs, which are actually starting to perk up a little bit here in absolute terms as well. So that's where we're seeing it. But in reality, when you do see consolidation from a top down perspective, very few stocks are immune to that. So even though the relative performance should be pretty good from the likes of consumer staples and health care areas that have underperformed, it doesn't necessarily mean that these stocks are running away from us.
- [44:39]
A
Did you take anything away from looking at the charts on the regional bank recovery?
- [44:46]
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Well, it's not enough to fix the damage that's been done. If you look at the KRE etf, it has an overbought downturn and a pretty significant loss of intermediate term momentum. So the relative performance there has really suffered. We are currently underweight in our near term recommendation for banks in particular, and that's just simply because the ratios have been trending lower. So we'd wait to see some signs of downside exhaustion there that are more meaningful. And for us that comes in terms of support, discovery, oversold, upturns, things of that nature.
- [45:23]
A
All right, real quick, how do the small caps look better?
- [45:27]
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We have relative improvement there. So when you look at Russell 2000 versus the S&P 500, certainly some improvement. The ratio has come off of its lows over the past few weeks in absolute terms. Just like Apple, the Russell has resistance in play.
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Katie Stockton, Fairlead Strategies. Thank you.
- [45:46]
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Of course.
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Well, you can catch Katie Stockton at our next CNBC Pro Live event at the New York stock exchange. That's January 15th. She and the other experts will host a series of interactive clinics to help you invest, chart and trade like a pro. Tickets are on sale now and are limited. You can scan the QR code there on the screen or visit cnbc events.com proliferation for more info. That's it for us. Thanks for watching the Exchange. Power Lunch starts now.
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You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place.
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