Dick’s Falls Most Ever With Chairman Saying More Pain to Come

0:00Looking for more investing options? Meet SIBO, the exchange that pioneered options trading. With exclusive trading products like VIX and SPX options, SIBO can help you trade in any market environment. There are risks associated with SIBO company products. Review the disclosures and disclaimers at SIBO.com slash US underscore disclaimers. Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work.

0:32It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro plans. Healthcare doesn't always work great. If you've ever waited on a refill or couldn't schedule an appointment, you get it. That's the kind of stuff Optum is changing. They're using data and technology to integrate patient care, pharmacy, and everything else.

1:11So healthcare is connected, not complicated. What's that look like? Cheaper prescriptions that are easier to get and care that looks at the whole person, how you need it. Optum is helping make healthcare work as one for everyone. Learn more at business.optum.com.

1:29Bloomberg Audio Studios, podcasts, radio, news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Let's go back to corporate news because it is retailers earning season. John Tucker and Dick's Sporting Goods is down 25 % this morning. Yeah, pretty painful if you are a shareholder of Dick's Sporting Goods. And this could be because the Foot Locker acquisition has not really done a whole lot for its financials.

2:09Lindsay Dutch is our Consumer Hardline's senior analyst, joining us now from Princeton. Is this the verdict of that Foot Locker acquisition that it really isn't doing it for Dick's Sporting Goods? Or is this kind of a broader trend of people not spending on recreational footwear? Hi, Scarlett. Thanks for having me. I think it's a bit of both. So Dick's, you know, announced his Foot Locker deal in May of last year, closed on it almost a year ago. They had an aggressive plan to bring Foot Locker, you know, turn that business around, bring it back to sales group with their brand relationships, fixing the assortment.

2:46everything was going good, you know, until we got the results this morning. And this was really the time that Dick's had to prove that buying Flocker was the right move. And there was a lot of investor skepticism about the deal. And that stock is down over 20 percent because, you know, everyone is very disappointed that that turnaround is not coming to fruition so far. I'm trying to count the number of retailers who are in a, you know, a position of a turnaround. Where do they go from here? Yeah, so, I mean, Dick's management is steadfast on, you know, they believe that the acquisition is a good long-term opportunity.

3:27I will say that I think there was a pretty abrupt pullback in that lifestyle footwear market and a pullback in the discussionary spend in that category specifically. That's why we saw Foot Locker see same store sales decline 3.6 percent. But the legacy Dick's business was really up 4.9 percent. So there's a big gap between those two businesses. And so, you know, Dick's doing this deal, that's what everyone was worried about, is now you're subject to this lifestyle demand, which can have this rapid swing. And they have to figure out how to get the assortment right and reduce that volatility. Talk a little bit more about the legacy business at Dick's that's working, that's working well, in fact, and whether Dick's can do more to invest in that part of the business.

4:19Right. Yeah. So the legacy business is more based in sports. So it's whether, you know, kids or adults are trying recreational sports, you know, and getting the clothes, the equipment, the shoes for that. Or, you know, if you're a big fan, the major league teams, you know, they carry all of the branded apparel for those teams. And World Cup was an advantage in the second quarter for that legacy business. You know, that demand has been a little bit more steady than sort of lifestyle. And same-store sales is slowing down a bit just because they've had strong comps. But Dix is still obviously seeing growth there.

5:02And I think they can continue leaning into sports moments. You know, they're a big sponsor of the L.A. Olympics in 28. So we have lots of events to look forward to to fuel that business going forward. Hey, I just want to look at the balance sheet there in terms of free cash flow, debt. What does that look like at this point? Yeah, so the Dix business had to go through their own turnaround several years ago. and they were successful in doing that, shoring up the balance sheet, getting all the financial metrics in better shape. Foot Locker, the addition of that business adds some pressure. It was already a lower profitability business.

5:41So we were expecting, you know, pressure on, you know, the overall consolidated results for the back half of this year, even going into next year. But I think that the results today say that the pressure on profitability for that Foot Locker business, you know, could extend a lot longer than expected. It could be worse than expected. And that that's going to be something that Dix is going to have to figure out, you know, where they're investing in CapEx. Do they have to pull back? You know, how do they get the return on their investments? Very quickly, Lindsay, is managing management vulnerable in any way here because of this acquisition and how how it's not going as smoothly as they had hoped in terms of turnover.

6:23Yeah. I think we would have to wait and see. I mean, I think for now, you know, it was just one quarter. It was a very important quarter because the turnaround of that footlocker business had been promised for back to school season. But I think that, you know, we do have to give some time. It has been less than a year since the deal was done. And there is long-term opportunity. So we just have to see them more aggressively bring the results from that. Stay with us. More from Bloomberg Intelligence coming up after this.

7:20associated with SIBO Company products. Review the disclosures and disclaimers at SIBO.com slash US underscore disclaimers. Some people treat ChatGPT like some kind of smart search engine and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials briefs and scattered information that you have to grind through to turn into something useful can just become something useful.

7:57Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com by selecting work mode available on plus and pro plans. Everyone's talking about how AI is transforming work, especially in sales. While the landscape shifts, one thing remains the same, the thrill of closing a deal. Whether it's a gong or a confetti machine, every team has its celebration rituals. Adio is designed for that moment. It's the agentic CRM that turns customer signals into actionable insights, helping you close deals faster with revenue agents and automations working around the clock. You'll have everything you need to scale your go-to market efforts.

8:34Elevate your wins with Adio. Start your free trial at adio.com slash iHeart. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. We want to talk a little bit about what's going on with United Airlines because they fly out of Newark. Well, that's their hub, right? Their major hub. That is their hub. Although, don't they do a lot in Chicago as well? I don't know. Do they have regional hubs? Is that what's happening?

9:09Maybe our guest would know. OK, let's check in with Sid Philip. He is our chief correspondent for Global Aviation. Sid, United is expanding a long haul network with a fleet of Airbus XLR jets. How significant is this? I mean, United has a hub in Newark. We know that United had some issues. Was it earlier this year or late last year? You know, it's been it's been for a couple of months. Yeah, well, it's been it's been a while. Yeah. Yeah. And, you know, even with additional capacity, the issues at airports like Newark have kind of cast a bad light on airlines that are based out of there. So talk to us about what United is doing here.

9:49So United is basically expanding their international network. They're making a bet that Americans will want to travel overseas. And so that's where the big growth for the industry is going to come from. And so, Newark is betting, United is betting on Newark, and they're sort of expanding their international longhorn network from Newark, as well as other airports in the US. But given the fact that Newark is obviously one of their biggest international hubs, this is a significant moment for them. And what they're actually doing is they're using an aircraft called the A321XLR, which gives you the economics of a narrowbody aircraft.

10:23So, think of the aircraft that typically you fly domestically, and that's the aircraft they're going to use. But instead, this aircraft can fly for eight hours over the ocean and essentially offer you the same sort of economics that you would get on a narrow body aircraft without having the risk of having to fill up a big wide body jet like the 777 or the 787 that they typically fly. So American is betting that Americans will want to travel overseas at a time when the rate of inflation is rising, when airfares are rising, when the economic outlook is uncertain. Is that a good bet? So United has a bet on the fact that there is a huge demand for premium as well as leisure travelers who are sort of well-heeled.

11:07I mean, they've talked about how the average income for their typical customers is much higher than the typical US airlines. And so United has sort of always bet on these high-paying, sort of more affluent customers. And that bet has paid off because they, along with Delta, are the two most profitable airlines in the industry. And that's the sort of bet that United is looking at, where you can sort of add more international routes, sort of get that FOMO traveler, the traveler who wants to go travel to exotic destinations like Valencia and Ibiza in Spain from America. And that's the customer that they're targeting.

11:44And with the A321XLR, you have a much smaller plane, so you can fill up that plane much more easily versus a much larger plane. Is United going to cut back at all on what it offers domestically? as it provides more options for people who want to leave the country, to travel out of the country? So they said they will not reduce their domestic frequencies as they expand internationally. They're getting these new aircraft like the A321XLR, which will allow them to increase both the U.S. network as well as expand internationally. But they talk about how the significant growth to their network will come from international.

12:24This is Airbus, not Boeing, right? This is the Airbus A321, yes. What's wrong with Boeing? Boeing doesn't really have a product that competes with the A321XLR in terms of being able to have that range that the A321XLR has. It does, Boeing obviously has a 737 MAX, the MAX 8, the MAX 9, the MAX 10. But obviously the MAX 10 hasn't yet been certified and it also doesn't have that same range that the XLR offers. And so there is this aircraft that Airbus has in a niche that doesn't really have a rival Boeing product. I mean, the 757 was the nearest competitor, but that was phased out years ago. And so there isn't really a direct competitor that Boeing currently offers to the market.

13:08So with United expanding these international offerings, do you expect a response from Delta, from American shortly? I mean, are they going to come out and use their offerings? So Americans already been flying the XLR and they've sort of talked about how they plan to fly that to more secondary cities in Europe. Delta hasn't made a bet on the XLR. They haven't sort of, they've expanded internationally. They've added new routes, but they haven't yet made some similar bet like the XLR. And so it remains to be seen where Delta sort of expands to in their network. Stay with us. More from Bloomberg Intelligence coming up after this.

13:49Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro plans.

14:32Everyone's talking about how AI is transforming work, especially in sales. While the landscape shifts, one thing remains the same. The thrill of closing a deal. Whether it's a gong or a confetti machine, every team has its celebration rituals. Adio is designed for that moment. It's the agentic CRM that turns customer signals into actionable insights, helping you close deals faster with revenue agents and automations working around the clock. You'll have everything you need to scale your go-to market efforts. Elevate your wins with Adio. Start your free trial at adio.com slash iHeart.

15:08Every sale comes down to a single second. The one between buy now and maybe later. PayPal is built to help your business win that moment. With a checkout experience that feels certain, reliable, and familiar. With a global two-sided network and hundreds of millions of buyers who already know us. All to keep you in control however buying happens next. New markets. New AI-powered selling services. A whole new agentic era where you decide how your business will show up and stand up. PayPal is built to help your business come out ahead. We're built for payments, built for growth, built for agentic.

15:52PayPal Open, built for all business. Visit paypalopen.com to get started. That's paypalopen.com.

16:04You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. One of the most widely read stories on the Bloomberg Terminal over the last day, John Tucker, is the story with the headline Elite Private Schools. And here we're talking about boarding schools, secondary schools, high schools offer financial aid to families making$500 ,000 a year. because they need it apparently um that's what we kind of want to dig into aaron hudson wrote the story she's our muni bond reporter because a lot of these schools do end up tapping the muni bond market and she's with us here in studio so do families that make five hundred thousand dollars need financial aid in order to send their kid to one of these private schools how much are they charging yes so part of this is a function of the price the cost of tuition at these elite private schools, the average across the country is 50 ,000 now.

17:08And at a boarding school, it's closer to 80 ,000. So that's really at a college level. And for secondary elementary school age kids, that's a hefty price. And there's a lot of families that that was always unaffordable, but it's increasingly unaffordable for even families that typically would consider themselves high earners. So the fact that they're doing this like giveaway, financial aid or whatever, indicates to me that these schools are growing desperate for students or what? Well, so the schools we spoke to, what they tell us is that they're noticing a change in their applicant pool. So they're noticing that they're getting applicants from either the children of very wealthy people who can afford these prices.

17:56Without blinking. Or they're getting kids from low-income backgrounds that need full tuition, full rides. And they're missing the middle. That's how schools are phrasing it. So they want to attract more families who are sort of in between. Maybe they can afford to pay something. They can't afford the full price. And in some cases, it's a talent war. And in other cases, it's a matter of boosting their enrollment because nationally speaking, there are fewer kids for these schools to recruit because of the drop in birth rate. There's all schools, public, private, are competing for students. So when you're charging$50 ,000 or$80 ,000 in tuition, offering a discount is a way that you can try and attract and retain some of those students who have increasing options to consider.

18:50Okay, so if you're going to make financial aid or grants available to families that are making$500 ,000 a year, how sustainable is this? I mean, it might work for a year or two years, but is this a solution that can last beyond a few years? Yeah, that's really the question. I mean, of course, for a lot of the schools that are offering some of the most generous offers, these are schools that have very large endowments. One of the schools we mentioned, Deerfield Academy, Massachusetts boarding school, their endowment's over a billion dollars. So obviously they've got the resources, but the average endowment across private schools in the U.S.

19:30is about nine million. So it's a very different story for a lot of schools. And we did have a rare situation last year here in Manhattan where a school, Manhattan Country School, had to close down after it was known for offering sliding scale tuition. And after losing too many full paying families, it did ultimately have to shut down. Yeah, I got to wonder if it's just like if you're offering that, then does your elite status sort of evaporate? Good question. Yeah. I mean, these schools all feast off of their elite status. Sort of self-defeating. Yeah. I mean, for a lot of these schools, and this is what's so interesting, they are really being transparent.

20:07They're publishing this on their website, their income thresholds. And for them, they say it's about making sure that the best are coming to their schools. And this is a little bit echoing what you see at the college level. increasingly elite colleges are saying we have these you know income thresholds where promising certain levels of tuition not going above a certain level offering calculators because they're basically saying and we mentioned some families in our story who said you know we just we know we can't afford it so we're not going to even apply right and these schools are trying to ensure that all families do apply all students do apply if they're interested and then if they get in so they can pick the best ones yes now scarlett mentioned uh a lot of these schools do go to the community market uh that's right to issue pay to raise money uh what's the reaction in the market in terms of investor reaction when one of the schools is doing this?

21:14Yeah, it is. I mean, the discount rate of the amount of financial aid compared to full-paying families or the school's operating income, these are metrics that investors watch very closely. The private schools that borrow in the muni market, these deals are very niche, very specialized. And so investors really do apply a lot of scrutiny to them because of that, because they are so special. So it's something that for sure these schools will or these investors will watch closely depending on how it might impact applications. Right. you know, it's really going to matter the specific school and the enrollment and the demand for that school.

22:08I know every time you write about a school that's borrowing money, I notice how you include stats like the acceptance rate and the enrollment rate, because these matter to muni investors. It kind of tells the story of demand for this school and therefore whether it's a good credit risk right? Totally yeah yeah and you know if as long as students want to go to that school and families are are paying to go to that school you know then that's a good credit in a lot of ways but you know what's going on in independent schools is is following in a lot of ways what's going on with college college levels and sort of level of pressures we see there.

22:49Stay with us more from Bloomberg Intelligence coming up after this. Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects.

23:30Get started at ChatGPT.com by selecting work mode, available on plus and pro plans. Everyone's talking about how AI is transforming work, especially in sales. While the landscape shifts, one thing remains the same, The thrill of closing a deal. Whether it's a gong or a confetti machine, every team has its celebration rituals. Adio is designed for that moment. It's the agentic CRM that turns customer signals into actionable insights, helping you close deals faster with revenue agents and automations working around the clock. You'll have everything you need to scale your go-to market efforts. Elevate your wins with Adio.

24:05Start your free trial at adio.com slash iHeart.

24:13Every sale comes down to a single second. The one between buy now and maybe later. PayPal is built to help your business win that moment. With a checkout experience that feels certain, reliable, and familiar. With a global two-sided network and hundreds of millions of buyers who already know us. All to keep you in control however buying happens next. New markets. New AI-powered selling services. A whole new agentic era where you decide how your business will show up and stand up. PayPal is built to help your business come out ahead. We're built for payments, built for growth, built for agentic.

24:57PayPal Open, built for all business. Visit paypalopen.com to get started. That's paypalopen.com.

25:09You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Bailey Lipschel is sitting down in the studio talking about initial public offerings. Some of the companies that are coming to market. And the interesting thing about these companies that we're talking about right now is that they're not listing in Europe. And they are European companies, Bailey. Who are we talking about? We're talking about Agreco, Glasgow-based power and equipment service firm.

25:49So when you have like a big event, you'll see Agreco's trailers there, the generators, you know, powering up your event. Powering your event. They like kind of have, they made their name working at the Glasgow Festival, but they also worked at the 2018 Winter Olympics in South Korea. They, at least at one of the F1 events, were using their equipment to power it. So Glasgow-based company. expected to go public here. They filed publicly yesterday. Could be valued at$15 billion, excuse me. So one of the examples of European companies coming here alongside Finnish smart ring startup Aura Health. Oh, okay.