Lululemon Shares Sink to eight Year Low on Disappointing Outlook

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1:20So you can focus on the future. When you need a partner trusted by millions, there's one platform for all business. PayPal Open. Grow today at PayPalOpen.com. Loan subject to approval in available locations. Bloomberg 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. You mentioned Lululemon and I'm a big fan. Are you? Yes. Have you? What have you bought from Lululemon?

2:02No, it's not that I wear them. I appreciate them on other people. Oh, I see. Okay. So you have been a buyer probably as gifts. Yeah. But when I talk to buyers or prospective buyers like you or Lisa Mateo or Alexis Christoffers, the theme is really good products, but boy, they're expensive. Yeah. Yeah, they were kind of the first mover on really good products. But then a lot of copycats came around. And guess what? They've all figured out how to do it pretty well, too, for a lower price. Poonam Goyal is our senior U.S. e-commerce and retail analyst here at Bloomberg Intelligence. And she joins us now with more on Lululemon.

2:35And this has been kind of the challenge for Lululemon for a while now. This is not a new problem that there's so much competition out there and that the quality that Lululemon is known for, you're now seeing at other companies. What has been the response? because I feel like they haven't figured that out yet. No, they haven't. You know, the problem continues to linger, but the problem is more than just competition. Competition is one thing. Lululemon's had competition for years. The issue is really the product at its core and the product in North America, especially across the women's business.

3:07They don't have a good lineup of product. The product that they're introducing isn't fully resonating with shoppers. It's a hit or miss in most cases. The pipeline to bring new product to market is very long and they need to shorten that. So this is more, in my eyes, a product execution mess than competition. Competition does play a part in it, but I think not having the right product just adds more to the tension and the downside. And Putum, you've covered retail for years and years and years, and you've seen companies struggle with product and product innovation. How do you fix that kind of thing?

3:44Is it just hiring the right person or is it changing your process? How do you do that? Right. So I think there's two ways to think about it. When a company like Lululemon or even a Nike, they have such great brand equity and heat that they can use that to their advantage. What they need is a product led person. They need innovation and product. So they need the execution on the product side. And once they have that, because they have the brand heat, because they have the brand loyalty, people do come back. So I don't think it's women are not wanting to shop Lululemon, they don't have what they want there.

4:21It's no longer providing it innovation fast enough and others are coming into the picture. So I do think when Heidi comes on board in September, you know, there's a lot of, I guess there are a lot of people who are critical of her appointment, but I think the one thing that she does come with is a product-led background. And should she be able to improve just speed to market and the product lineup, I think that's a step forward for Lululemon. The rest of it is still uncertain, but I think that will give them a leg up. But I don't expect to see that until mid-2027. She comes in in September, and things are sliding as we speak into the year with sales expected to be down at the midpoint.

5:04So it's going to take time. And you mentioned that the selection, the product selection, is a challenge here in North America. But we've seen that Lululemon does fairly well overseas. Why is that? Is it because the competition just isn't there? There's still a freshness factor with the brand over there? So the brand is much smaller internationally, right? So that makes the difference. Also, the competition, yes, you could argue that, you know, when you're talking about the aloes of the world and others, it's probably more competitive here than it is in China for them. But it really comes down to the base.

5:37Lululemon's biggest business is in North America. And while China is still up 30%, it's off a much smaller base. What are they saying about China here? Because they're one of the companies that you covered that, or one of the many companies you covered that do have exposure there. So Lululemon is actually doing better than the other athleisure competitors in China. However, in the quarter, there was a little hiccup. Given the negative backlash that they had in the news, China sales did trail a little in the quarter, but since have recovered. So we think China will be OK. But China is also sensitive to product quality news and other news that Lululemon has to face from consumers.

6:21What about the role of Chip Wilson? He's the founder of Lululemon and he's been agitating for changes. It feels like he's in conflict with the current management and they're kind of trying to work with him because obviously he has hit upon some some soft points for the company and they recognize that that his criticism is valid. Is there a path forward for them to work together? It's already in place. The last announcement we heard from Chip Wilson was that some of the members he is appointing to the board are of his choice. So that should help tensions resolved between Lululemon and Chip Wilson.

6:57And he will have access to Heidi when she joins in September. So there will be dialogue in how to move Lululemon forward and really get it out of this dump that it's in. And hopefully as they work together, he is the founder. He is the visionary behind Lululemon. So I do think he'll have a lot to add to the conversation. And as they take his input, bring their own input into place, they could start to lead a turnaround. But once again, it's all about the execution. And we won't know more until the end of this year, until we hear from Heidi, hear her plans, hear her vision. And then to execute that is another six to 12 months.

7:35Stay with us. More from Bloomberg Intelligence coming up after this. at Brookfield we invest in the thing behind the thing behind the next big thing our focus across infrastructure energy real estate private equity and credit is helping build the backbone of the global economy we combine deep operational expertise with disciplined long-term investing uncovering value and partnering alongside clients to shape tomorrow's economy today Brookfield. Own what's next. Learn more at brookfield.com. This is not an offer to sell or investment advice. Investing involves risks, including loss of capital. We believe in starting with your financial goals, not a formula.

8:18At Oppenheimer, we put the full strength of our longstanding expertise to work, understanding your life and your ambitions, and designing the precise strategies that build and protect your wealth with confidence across this generation and the next. Put the power of Oppenheimer thinking to work for you. Wealth management, capital markets, investment banking. Every business has an ambition. PayPal Open is the platform designed to help you grow into yours with access to business loans so you can expand and hundreds of millions of PayPal customers worldwide. Your customers can pay all the ways they want today with PayPal, Venmo, Pay Later, and all major cards so you can focus on the future.

9:02When you need a partner trusted by millions, there's one platform for all business. PayPal Open. Grow today at paypalopen.com. Loan subject to approval in available locations. 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 get back to the world of technology. Technology taking it on the chin here today. The Philly Semi Index down about 5%, bringing it down. The overall NASDAQ down about 2.2 % here.

9:40But let's be honest, these things have been just ripping forever here. Let's check in with somebody who does this stuff for a living, Matthew Bloxham. He covers all the TMT stuff for Bloomberg Intelligence. He's based in London here. So rough day for the semis here, Matt. What's going on out there in the world of technology when you talk to tech investors? Because this AI trade just seems like it's got so much legs left in it. Yeah, and, you know, obviously it's had a great run for the last few weeks and months. We've been talking about that a little bit here, actually, at the desk. And, you know, I think at least to some degree you have to think that people are making a little bit of room for the SpaceX IPO and what they hope will be a location.

10:24You know, because you kind of feel, I mean, who knows where people are going to get the money from, but you would think that it's going to come from some of the other big tech holdings, which are probably bigger holdings and more liquid. So that's our sense that, at least to some degree, it's a little bit of liquidity for that. Yeah, well, now, of course, Broadcom in the news this week, because even though it was a solid set of results, It was still disappointing because such high expectations for all of these chip companies here. But, you know, one of the details that we got is that the CEO saying AI growth is so strong, they're not even looking at acquisitions.

11:02They're thinking that it's a distraction. Where does that tell you where we are in terms of the AI infrastructure spending cycle? Are we still in the early innings here, given that view? Yeah, I think so. And I think it also talks to the fact that they feel like they're executing well against their plan. And actually, when you look at the numbers, the numbers will tell you they are, because you'll see that the big part of the plan is to pivot towards AI. In the quarter they reported that AI sales were up 143%. And if I've remembered it correctly, for the forward quarter guide, they're talking about a more than 200 % increase in AI revenue.

11:42So, yeah, that forward guide was a little bit shy of where the market was,$16 billion of revenue versus$17 billion. But, you know, that's a huge, huge growth rate. And so I think it tells you that they're comfortable, that they've got all the assets and capabilities they need to deliver on the plan. Matt, you mentioned SpaceX. And, of course, they started their show yesterday. and I think they're in New York today and maybe a couple more dates here in the US. Do you know if SpaceX is coming to London? I don't know, actually, for sure. I mean, I guess it's certainly a possibility, but I've not seen any specific plans.

12:24What's the when you when you talk to folks, what's the feeling about SpaceX? Because obviously it's if you're looking for a pure play on Elon Musk, which has got a space component to it, kind of a telecoms component to it, and as well as an AI component. What are the discussions you're having with your clients? It's incredibly polarized, maybe not that surprisingly. I mean, I think the opportunity and ambition they set out in the S1 filing is almost overwhelming. There's so many parts to it. And it's so big, you know, this$28.5 trillion market opportunity they talk about. And, you know, when you see some of the components that go into that, particularly things like the orbital data center strategy, you know, the ambition they have for the Starship rocket launch platform.

13:19I think some people kind of find it a little bit hard to grasp. But at the other end, some of these things could be really quite profound in how they shake up existing markets, the data center infrastructure market, the big AI players like Anthropoc and OpenAI. So this has really quite significant implications for all the big parts of the market. And yet it's really, really spilling people right down the middle. Some people are just kind of very much bought into the Elon Musk drinking that Kool-Aid. And at the other end, you just got people thinking, you know, this isn't going to play out the way the market thinks.

14:04And I think certainly, obviously, we've seen some numbers today in terms of what the lead banks are pitching in terms of the revenue growth opportunity. We're talking about adding$400 billion of revenue in five years and continuing to grow beyond that. A$450 to$500 billion revenue number, we put them in the top 10 listed companies by sales in the world. There's only really Amazon and Walmart that would be substantially bigger than that. So it's an enormous task to kind of scale your business quite that quickly. And to do that, you need a huge amount of infrastructure. And I guess one of the questions would be, can they really deploy enough infrastructure, even if the market is there?

14:50Can they deploy the infrastructure quickly enough to kind of get the revenue flywheel going so quickly? Stay with us. More from Bloomberg Intelligence coming up after this. The world is transforming faster than ever. And standing still isn't an option. At Oppenheimer, we're working at the forefront of the innovation economy to invest where progress begins, finding opportunities that build and protect wealth for individuals and institutions that want a seat at the edge of tomorrow. Put the power of Oppenheimer Thinking to work for you. Wealth Management, Capital Markets, Investment Banking. Every business has an ambition.

15:34PayPal Open is the platform designed to help you grow into yours, with access to business loans so you can expand, and hundreds of millions of PayPal customers worldwide. Your customers can pay all the ways they want today, with PayPal, Venmo, Pay Later, and all major cards, so you can focus on the future. When you need a partner trusted by millions, there's one platform for all business. PayPal Open. Grow today at paypalopen.com. Loan subject to approval in available locations. Ryan Reynolds here from Mint Mobile, with a message for everyone paying big wireless way too much. Please, for the love of everything good in this world, stop.

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16:47SpaceX is on the road. They started the roadshow yesterday. They're scheduled to price this IPO, the$75 billion IPO, next Thursday after the close to trade on Friday. So that is the schedule. Let's get the latest reporting there. Billy Lipschultz, senior equities reporter for Bloomberg News, joins us here. So, Billy, it looks like they kicked it off yesterday. What did we know? What did we hear? Anything new? Not much new. We did have yesterday evening Jamie Dimon interviewed Elon Musk for about a half hour. That was streamed on X. That was broadcast to, I believe, about 90. JPMorgan branches, a number of high net worth individuals attended here in New York, attended around the country.

17:27Not really anything groundbreaking from Elon from that conversation, but certainly got people pretty jacked up that the man himself was was kind of participating in this conversation with Jamie Dimon. But we did break about an hour ago, I believe, that they have officially called the book oversubscribed. So they have officially had more than seventy five billion dollars of orders placed, which is a pretty quick turn, though. Not completely unsurprising, just given how these deals are going to go. Yeah. Well, what's the word industry? I mean, mega, mega IPO, big size, but any concerns at all that the market is not going to be able to handle this in terms of digesting it or really everyone's just let's go buy in?

18:06Well, I think that the debate is, do you believe in Elon Musk? Yes or no is kind of the first start. I think when you talk to investors, yes, there are a number of caveats around the deal in particular, but like Google able to raise about 80 billion dollars north of 80 billion dollars kind of assured a lot of people that there's plenty of cash. either on the sideline or can be pulled out of things like Bitcoin and other assets. So it doesn't seem like there's any concern about the ability to have investors show up in size for$75 billion. You add on the green shoe north of$80 billion. I think the big question will be, A, how does it trade after that?

18:38And B, how are these bankers thinking about allocation? Are we going to see the PIFs of the world, these big funds showing up in size for$5, $10,$15 billion orders? Or is retail actually going to take down 30 % of this deal like we had reported was kind of the ceiling, because you do the math, that's north of$20 billion going just to individual investors, which is something we have never seen before. We were talking to Matthew Bloxham, TNT analyst for Bloomberg Intelligence in London. He was saying that he's talked to some clients about the today's sell-off in the NASDAQ and the Philly stock exchange semi-index is down about 6 % today.

19:14Maybe that's a little selling to raise some capital to invest in SpaceX coming up and maybe even some of the other AI ones coming around. Is that something you're hearing? Yes and no. I think when I talk to people who manage a lot of money, this has been the worst kept secret of all time. They've been meeting with SpaceX management since January and taking these trips. This targeted range and targeted size has been discussed for six months at this point. I just want to call out, yes, that's a good point. The SOX is down 6%. It's up 81 % this year. So I don't think, at least from my conversation, anyone is saying weakness on Thursday and Friday is because people need to clear capacity.

19:54One other interesting news point for SpaceX, I guess some of the other AI ideas coming is the S &P has said they're not going to fast track entrance into the index. What does that mean? So S &P was reviewing a rule change that would add some of these companies in six months instead of 12 months. We saw NASDAQ cut their timeline down to 15 days. Some of the FTSEs kind of exchanges are now like five days so even shorter i think the bigger news point in that lack of a change from the s p 500 is not the shorter timeline six months 12 months when i talk to people who cares they were considering waving that you needed to be net income positive for 12 months so you say what does that mean for spacex well they were negative they wouldn't be eligible anyway if this rule change doesn't happen and the bigger question from there is anthropic and open ai high they can pull some accounting levers but these are two companies that people do not expect to be net income positive for quite some time does that mean anthropico ipos later this year but it's not in the s &p 500 until 2031 i mean that's a pure speculation but when you look at s &p at least for now sticking firm to those rules these are companies that are not going to be the s &p 500 they will be in the nasdaq 100 if they choose to list on nasdaq much more quickly how does that change how we market watch and how does that evolve?

21:12Especially when you think about micro strategy being in NASDAQ 100, but S &P saying, no, thanks, Michael Saylor, state it, whatever you're doing. Yeah, yeah. And what do you think is the driver for that decision? Is it kind of the S &P prioritizing market stability over the hype that some of these IPOs bring? We haven't heard firmly. There is a committee that makes this decision. When I've talked to people around kind of their view, and again, just their speculation, their reading of the tea leaves is S &P has an objective that they want to reach, and that is making sure the S &P 500 has companies that are liquid, companies that have a fair amount of free float and companies that kind of meet their bar.

21:50They didn't want to change that right now. Again, is this something that is reviewed in six months? Again, I do not know. I don't think anyone knows. But for this kind of point in time, they are sticking to their hurdles, their thresholds that they want to be met. and we're not kind of at least reconsidering similar to what we saw with NASDAQ 100, they're an exchange. They benefit from having SpaceX lists on their exchange. They make money from that. Stay with us. More from Bloomberg Intelligence coming up after this.

22:24Financial growth begins long before the first investment. It comes from understanding what you're building toward, what's at stake, and what success looks like for you. At Oppenheimer, we bring bold thinking guided by the full strength of our expertise to put capital to work building and protecting wealth that lasts generations. Put the power of Oppenheimer thinking to work for you. Wealth management, capital markets, investment banking. Every business has an ambition. PayPal Open is the platform designed to help you grow into yours. with access to business loans so you can expand and hundreds of millions of PayPal customers worldwide.

23:05Your customers can pay all the ways they want today with PayPal, Venmo, Pay Later, and all major cards so you can focus on the future. When you need a partner trusted by millions, there's one platform for all business. PayPal Open. Grow today at paypalopen.com. Loan subject to approval in available locations. Hey, it's Ryan Seacrest for Jewel Osco. For you, save days are here now through June 23rd. Find hot deals throughout the store and earn four times the points. Look for in-store tags to earn on eligible items from AngelSoft, Silk, All, Spam, Hormel, Planters, and Canada Dry. Then, clip the offer in the app for automatic event-long savings.

23:43Stack up those rewards to save even more. Enjoy savings on top of savings when you shop in-store or online for easy pickup or delivery. Restrictions apply. See the website for full terms and conditions. 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 get to the big take story here. We like to focus on the big take stories on the Bloomberg Terminal. These are the stories that are just really important stories.

24:18A lot of resources get invested in these stories. uh deep deep reporting deep deep sourcing oftentimes some really cool graphics which makes it good for me that that helps me understand a lot of stuff today's no different um talks about ebola uh the ebola exposes how aid cuts hollowed out global disease defenses a strain with no known treatment or vaccine is spreading fast and the international system built to contain outbreaks is in crisis let's learn more about this uh with one of the writers one of the reporters on the story, Jessica Nix, Bloomberg Health Reporter. What you find here, Jessica, is this is Ebola case over in Africa.

24:57It seems far away. It seems a little bit back burner for a lot of us here in the U.S. because we have the war with Iran. We have lots of other issues. What did your reporting find out? Well, there's a lot going on with this particular Ebola outbreak. This is the first time we've seen this strain really explode like it has because there's no vaccine, there's no treatment. And then compounded on top of that, the U.S. has largely left a lot of our global health partners And some other G7 countries, including the UK and Germany, have also pulled back on some of their global health funding as well.

25:27So because of a lot of these countries pulling back, this virus has been able to spread. A lot of the people on the ground in the NGO partners, mutual aid partners, a lot of those formal and even informal networks that would be doing contract tracing or surveillance, a lot of that has been dismantled as well. So that's why it's been exploding in this area. Now, the story paints Eastern Congo as one of the hardest places in the world to contain an outbreak. What about that region makes the response to this outbreak uniquely challenging? There's a lot of unique challenges to this one. The geography is very interesting, but also it is an area that's riddled with conflict right now.

26:02So that makes it even harder for some of these aid workers to be able to go into the area and talk to people about the dangers of this virus, about safe burial practices as well. Ebola is at its highest infection peak after a person has already died. And so in this area, people are in their burial practices really interact with dead bodies. And so that's why we're seeing it spread a lot, too, because they just don't know how to handle these these bodies, which is really sad. Well, we've seen President Trump and Elon Musk with those cut back on U.S. aid. How much has that impacted this situation or is it is this an area where maybe we didn't have a presence?