Nike Sees Weakness Persisting; US Decides Against Renewing USMCA

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2:07Scarlet Fu: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. People are looking for a turnaround in Nike, particularly in China. The stock's trading up slightly here today. So let's break down the numbers with Poonam Goyal, senior U.S. e-commerce and retail analyst for Bloomberg Intelligence. Poonam, you've been highlighting that, you know, Nike's in the middle of this turnaround here. Talk to us about what you learned from their earnings in a conference call. So there were a few things.

2:42You know, the turnaround is still very much underway, And it's not a full recovery yet or anywhere close to it as if they cut their forecast or I guess said that sales were going to deteriorate further in the first half of their fiscal year down by low to mid single digits in the first quarter and then down further in the second fiscal quarter. So that was a clear negative, but it was due to tougher comparisons from a year ago when they reentered wholesale in a more meaningful way and had higher digital promotions in EMEA. That said, on the quarter, and to answer the first part of your question, Paul, China was better than expected, but still down 17%.

3:21So what I would say is, you know, still a lot of work to be done in China, and it's not going to be an overnight fix. It will take 12 to 18 months.

3:33Scarlet Fu:12 to 18 months sounds like a long time. Is there anything that Nike can do or Elliott Hill can do to kind of change the narrative more dramatically? I think there's a lot of things that need to be done. If you think about the U.S. turnaround and what happened in the U.S., the first thing is to right-size inventory. And that takes time. It takes 12 months, sometimes longer, just to make sure that you can exit out of old inventory and bring in new product. The other thing is in China, they need to bring Nike back to being a premium brand and work with the local endorsers, the local market, to really create exclusive product for the China marketplace.

4:10So there is a lot of work to be done. I think at their analyst meeting in mid-November, they'll highlight a path to profitable growth in China. But once again, it's not going to be in the very near future that we see that happen. So from your perspective, Poonam, you've covered the company for a while. Have they kind of lost their feel for the market? Have they lost kind of their magic a little bit? Or is it just blocking and tackling? It's just blocking and tackling. They definitely haven't lost their magic. I think they're doing all the right things. I think it's a big ship to turn, and it just needs time.

4:47And I know investors are getting impatient, but I do think that they've worked on North America. It's working. China is next. And I do think they'll right-size China, too. It's just a matter of time. And things will start to move as long as they continue to push out innovation, which they're working on. So I think we just need to give them a little more time still.

5:08Scarlet Fu:How about the rest of the world? I mean, I see Nike's brand and discussion of Nike pickup now that it's the World Cup in North America. And I wonder if that is providing a bit of a tailwind for the brand around the rest of the world, given that the World Cup is such a global enterprise. Absolutely. You know, Nike is premiumly positioned in the World Cup, and I think it will get tailwinds from the World Cup. I also think that sports is an important moment for not just Nike, but for all athleisure brands. So their presence in the sports world at sporting events, not just for kit sales, but really going even beyond kit sales, really earns them the right to magnify sales and other verticals.

5:51So I do think the World Cup is a big opportunity for Nike. And, you know, Nike's like, it's like Coca-Cola. I mean, you find Nike and their branding and their logo in every single corner of the world. I don't care where you are. It's just amazing. Is there a way, do you think, do they think about ways to continue to broaden the monetization of their brand? Yeah, look, Nike is the largest sportswear brand in the world. And it has the large lead over most other peers. So I think you will continue to see Nike throughout the world. I think women's is a big opportunity for them. I think it's one area where you probably don't see Nike in as much of a lead as it has been for men's.

6:35So I do think that there's more opportunity to even make Nike bigger across the globe.

6:42Scarlet Fu:so when you look ahead how much can a company like under armor or these other brands that are trying to become global sports behemoths uh in the same way that nike has and perhaps um you know trying to regain um can learn from from the journey that nike's been on i mean it's it's been up it's been down and now it's kind of trying to climb its way back up again i think the biggest learning um learning that any company could have from Nike is you can't get too comfortable, right? You have to keep the pedal moving on innovation because the consumer is responding and they're able to discover more today than they ever were with the internet, with social media, et cetera.

7:24So to lead and to continue to lead, you have to remain on top of your game at all times. And innovation is key there.

7:33Scarlet Fu:Stay with us. More from Bloomberg Intelligence coming up after this. Never bet against American grit or American energy. Through innovation, Venture Global is not only building some of the largest energy facilities in the world right here in the United States, but delivering American energy at a fraction of the cost and a fraction of the time. So while others are busy talking, we're busy building. That's Venture Global. That's unstoppable energy.

8:08Support for the show comes from public.com. If you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge. On public, you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English. Like, if the VIX hits 25, buy a put option on the S &P 500. Or, if my cash balance goes above$20 ,000, move the excess into my direct index. You approve of the workflow and your agent handles the rest. Monitoring the market, watching for your conditions, and executing your strategies exactly as defined.

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9:18Scarlet Fu:When you own your own business, you own every decision. Now own the card that rewards you for it. The Chase Sapphire Reserve for Business card brings the best Sapphire Reserve benefits to business owners who expect hardworking rewards. Designed to meet the needs of business owners at scale, this pay-in-full card elevates your travel experience and offers premium benefits and value toward business services that will take your business to the next level. Fuel your business and maximize rewards with 8x points on all purchases through Chase Travel, 3x points on social media and search engine advertising, annual partnership credits, and more.

9:53Scarlet Fu:Make every journey more rewarding with a$300 annual travel credit and access to a network of airport lounges, whether you're looking for pre-flight productivity or time to rest and recharge. Chase Sapphire Reserve for Business. It's the card that gives back all you put in. Learn more at chase.com forward slash reserve business. Chase for Business. Make more of what's yours. Accounts subject to credit approval. Restrictions and limitations apply. Cards are issued by JPMorgan Chase Bank N.A., member FDIC. 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.

10:33Scarlet Fu:Listen on demand wherever you get your podcasts or watch us live on YouTube. Let's talk about the global energy markets. We do that with Ellen Wald, senior fellow at the Atlantic Council and president of Transversal Consulting. Now, what Tom Keene likes to do is he'll see somebody says, oh, you went to Princeton. Did you study under so-and-so and so-and-so? I have no idea. When I see somebody who went to Princeton, I say, Ellen, what was your go-to sandwich at Hoagie Haven?

11:00Well, since I generally vegetarian, so you did not. Lettuce sandwich. Yeah, exactly. Lettuce sandwich. But some people are on that hill about their favorite sandwich there. What are we talking about oil here? Is all the risk out of oil at this point? I'm looking at WTI crude oil, Ellen, below$69 a barrel. We're kind of getting back to where we were? We're kind of getting back to where we were, but the market doesn't actually look like that. It's just the futures prices. If you look at what's going on in not just in the United States, but around the world, we're not seeing anywhere near normal tanker volume.

11:39Yes, some oil is getting out of the straight and form moves, but it's nowhere near normal. We're also seeing a lot of gaps in U.S. products. We've been doing a huge amount of exporting during this time. And so now we're seeing, yes, futures prices are down, but refineries are running out at full tilt. Our inventories are extraordinarily low. There was a slight build in the Cushing inventories in Oklahoma, but overall our oil inventories are way, way, way down. And that really eliminates the kind of cushion that we've had in the event of, say, any kind of outage. So we're really kind of, I would say, running on the edge here.

12:20But it also doesn't look good for U.S. crude oil drillers because they put in more rigs. We have production has actually grown and yet prices are now down. So they've brought more rigs online only to find that the price has now dropped. So we're in kind of a very odd situation where we're trying to normalize and yet we can't. And so some things have normalized, like futures prices, but everything else is still way out of whack. Okay.

12:48Scarlet Fu:So the point remains, though, that the president is pushing gasoline retailers to do more, to bring down gas prices for John Tucker when he does drive into the city. What can the White House really do at this point? Essentially, unless they want to institute price controls, nothing. And they definitely shouldn't institute price controls. The point is this happens every time we have some kind of a price spike. Prices immediately go up in gasoline and they're slower to come down. And part of this has to do with just the way things work. And part of it also has to do with the fact that while futures prices have come down, that's not necessarily reflective of the price that all of the people that make the gasoline are paying for the components and what they have to do to get them to your car.

13:36And so it's not the price of a barrel of oil does not automatically translate to the price of a gallon of gasoline. And so there's a lag between that. Yes, we should expect it to come down, assuming that our refineries continue to run unobstructed. We may have outages. It's extraordinarily it's going to be extraordinarily hot in some parts of the country. And that can also put pressure on refineries. They may not be able to operate at full capacity. So prices will come down, but it's going to be a slower process. So President Trump took the social media to kind of put some blame on the gasoline retailers for not charging, you know, not dropping their prices with the price of oil here.

14:18But my Phillips 66 station that I go to in Route 35, is that retailer a price setter or a price taker? Good question. That's a good question. So some, you know, some retailers are, you know, components of a larger, you know, oil organization and some are more independent. And so it really it really varies. And I would say that right now it's just that there is a very, there's just a large gap in terms of what retailers might be paying for a barrel of oil and then what they can hint on for gasoline. And so that will normalize. It's just a little bit higher now. However, it might not normalize if we go back to war with Iran, for example, which is something that they have been discussing, at least we've heard from Vice President J.D.

15:06Vance that there's definitely, it seems like there's a mindset of let's kind of take this breather and refill, but this conflict is not over. And that certainly sends a message to refineries. It sends a message to producers. It sends a message to everyone along that supply chain of, you know, the danger is not over. You need to continue to prepare for outages, shortages, and we're definitely not in that position. So it could cause some higher prices to remain. It could cause some stickiness simply because, you know, retailers want to make sure, hey, we want to make sure we can get those barrels.

15:41We're going to, you know, store them instead of putting them on the market, for example.

15:46Scarlet Fu:Ellen, when it comes to the Strait of Hormuz, is that waterway open or not? Iran said a foreign container ship ran aground while sailing through the strait through a so-called unauthorized route. Are there unauthorized routes and authorized routes? I'm confused as to whether this thing is open or not. I think everyone is a bit confused. I guess I would say the answer to that question depends on what open is and what your definition of open is. If you're talking about open as in the way things were before the war, the answer is absolutely not. Apparently, that waterway, which actually has a defined traffic separation scheme, apparently has potentially a high number of mines in it.

16:27And so ships really need to avoid that. So there's the upper route, the northern route, which goes basically through Iranian waters. That's the so-called authorized route that the IRGC is policing and monitoring and all that. And then there's the lower route, which goes through Omani waters, which seems to be a route that the U.S. military is using to escort ships out of the Strait of Hormuz. It's unclear how many have come back in that route, maybe some, but the Iranians do not want that lower route to be used. The Omanis have been giving a lot of conflicting information. They say, yes, it's open.

17:03We're not going to charge tolls. And they go and they say the Iranians, yes, we're working with the Iranians to set up this system to charge. It's really, I think, a very fluid situation. It depends on who's got the ships, who's got the fire, you know, the air cover. We don't really know. It's kind of the Wild West out there.

17:20Scarlet Fu:Stay with us. More from Bloomberg Intelligence coming up after this. Never bet against American grit or American energy. Through innovation, Venture Global is not only building some of the largest energy facilities in the world right here in the United States, but delivering American energy at a fraction of the cost and a fraction of the time. So while others are busy talking, we're busy building. That's Venture Global. That's unstoppable energy.

17:54Support for the show comes from public.com. If you're actively involved in your portfolio, you probably catch yourself repeating the same actions, buying the dip, manually sweeping idle cash, putting on a hedge. On public, you can now create AI agents that handle all of these tasks on your behalf. Just describe what you want to do in plain English. Like if the VIX hits 25, buy a put option on the S &P 500. Or if my cash balance goes above$20 ,000, move the excess into my direct index. You approve of the workflow and your agent handles the rest. Monitoring the market, watching for your conditions and executing your strategies exactly as defined.

18:33An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com slash market and fund your account in five minutes or less. That's public.com slash market. Paid for by Public Investing. Brokered services by Open to the Public Investing, Inc., member FINRA, and SIPC. Advisory services by Public Advisors, LLC, SEC Registered Advisor. Complete disclosures available at public.com slash disclosures.

19:04Scarlet Fu:When you own your own business, you own every decision. Now own the card that rewards you for it. The Chase Sapphire Reserve for Business card brings the best Sapphire Reserve benefits to business owners who expect hardworking rewards. Designed to meet the needs of business owners at scale, this pay-in-full card elevates your travel experience and offers premium benefits and value toward business services that will take your business to the next level. Fuel your business and maximize rewards with 8x points on all purchases through Chase Travel, 3x points on social media and search engine advertising, annual partnership credits, and more.

19:39Scarlet Fu:Make every journey more rewarding with a$300 annual travel credit and access to a network of airport lounges, whether you're looking for pre-flight productivity or time to rest and recharge. Chase Sapphire Reserve for Business. It's the card that gives back all you put in. Learn more at chase.com forward slash reserve business. Chase for Business. Make more of what's yours. Accounts subject to credit approval. Restrictions and limitations apply. Cards are issued by JPMorgan Chase Bank N.A., member FDIC. 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.

20:20Scarlet Fu:Listen on demand wherever you get your podcasts or watch us live on YouTube. Looking at gasoline here, three dollars and eighty five cents is the daily national average gasoline prices for regular, which is what I use. Matt Miller is very upset with me. I'm supposed to be using like the really good stuff. With the premium? Yeah. Only only car heads like Matt Miller pay premium. I know. But so but everyone else gets the cheapest unleaded. Yeah, it does. I don't know. But then if you go to electric, maybe it doesn't even matter anymore. Or hybrid where you don't have to fill up as often. Yes. And that's what we have for offspring number four who goes to school in California.

20:53And they pay like a gajillion dollars a gallon there. So it made sense. Let's check in with Andrew Grant, Bloomberg, NEF, head of intelligent mobility and get his thoughts on what's going on there with the electric vehicle business going forward. Andrew, electric vehicles, I think it's safe, from my perspective at least, the narrative has been the industry maybe got a little bit too far out over its skis and trying to convert from ICE to EV. Where are we now, do you think, as an industry? Great. Thank you. Good time for that question. Just two weeks ago, we've published our annual flagship electric vehicle outlook, so lots of data to share on that front.

21:31The outlook this year is less exuberant than previous years, as you were kind of alluding to there. But generally speaking, the charts still go up into the right. This is the second year that we've had to cut both our near-term and long-term outlook for EV adoption. But that really varies by market as you go from different geography to geography. The biggest negative is in the U.S., where there's been lots of regulatory setbacks, weaker fuel economy rules, California losing its ability to set its own air quality standards and subsequently automakers have pushed back a lot of their launch plans for electric vehicles.