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Bloomberg Intelligence Podcast Episode Summary Episode Title: Nike’s Comeback Is Taking Shape as Sports Focus Pays Off Hosts: Paul Sweeney and Scarlet Fu Date: [Insert Date Here]
Episode Overview In this episode, the hosts discuss recent developments concerning Nike’s financial performance, the IPO of Neptune Flood Insurance, and insights into the energy sector, particularly nuclear power, in relation to the rising demand from AI technologies.
Key Discussions
- Nike's Earnings and Turnaround Efforts
- Performance Overview:
- Nike reported earnings that exceeded expectations, leading to a stock increase of nearly 5%, although the stock remains down approximately 3% year-to-date.
- Poonam Goyal, a senior analyst at Bloomberg Intelligence, highlighted:
- Sales were up 1%.
- Inventories decreased by 2%, aligning better with sales.
- Revenue Breakdown:
- Direct Revenue: Decreased by 4% primarily due to a 12% drop in digital sales, attributed to clearing excess inventory.
- Wholesale Revenue: Increased by 7%, indicating successful partnerships and a recovery in sales channels.
- Notable partnerships with Foot Locker and presence on Amazon were emphasized as key factors in growth.
- Challenges in China:
- Concerns about sluggish demand in China and its impact on inventory levels.
- No significant anti-American sentiment affecting sales noted, but product availability is a concern.
- Profitability Insights:
- Gross margins declined due to higher discounts and increased tariffs, with current margins at 42.2%, down from over 45% previously.
- Efforts to achieve double-digit EBIT margins are ongoing, although a return to historical margins may take time.
- Nike is strategically managing price increases on higher-end products to absorb tariff costs.
- Competitor Landscape:
- Goyal compared Nike's performance to that of Adidas and other competitors, noting that running shoes are regaining popularity.
- Neptune Flood Insurance IPO
- Company Overview:
- Trevor Burgess, CEO of Neptune, discussed the company’s IPO and its unique business model focused on flood insurance.
- Neptune utilizes AI for underwriting flood risk, providing coverage that extends beyond traditional limits.
- Challenges with Federal Flood Insurance Program (NFIP):
- Burgess pointed out the NFIP's inefficiencies and limitations, citing a nearly $40 billion loss over its history.
- Neptune offers more comprehensive coverage options, including higher limits and short-term accommodations for flood victims.
- Growth Potential:
- Expanding market education on the necessity of flood insurance is a key growth strategy for Neptune.
- The current climate crisis is increasing the frequency and severity of flooding, suggesting a growing need for flood insurance.
- Energy Sector Insights: AI and Nuclear Power Demand
- Energy Demand Surge:
- Scott Levine, Senior Energy Services Analyst, presented findings indicating that AI-driven power demand could initiate a $350 billion investment cycle in nuclear energy.
- Nuclear power is viewed as a vital, emissions-free solution for continuous energy supply to data centers.
- Future Projections:
- Current nuclear energy contributes about 20% to the U.S. power grid, with expectations to maintain this level while adding substantial capacity by 2050.
- Introduction of small modular reactors (SMRs) was discussed as a flexible solution for decentralized energy needs, although these technologies are still emerging.
- Policy Support:
- The current administration shows positive support for nuclear energy initiatives, aiming for expedited licensing processes and construction of new reactors.
Key Takeaways
- Nike's Strategy: Focus on innovation, rebuilding wholesale partnerships, and managing inventory effectively is crucial for recovery.
- Neptune as a Game Changer: The company is positioned to disrupt the flood insurance market by leveraging AI and offering tailored solutions that meet consumer demands.
- Nuclear Energy's Future: As AI technologies expand, the shift towards nuclear energy shows promise for meeting increasing power demands while addressing climate change.
Conclusion This episode of Bloomberg Intelligence delves into the financial and operational strategies employed by Nike to navigate market challenges, the innovative approach of Neptune in the flood insurance sector, and the pivotal role of nuclear energy in meeting future power demands driven by advancements in AI technology.
For detailed financial insights and expert analysis, listeners can tune in to the Bloomberg Intelligence Podcast live on weekdays or find episodes on various podcast platforms.
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Transcript
Automatic transcript. May contain errors.0:00Paul Sweeney:Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real, lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. At Vanguard, institutional quality isn't a tagline. It's a commitment to your clients. We're talking top-grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at Vanguard.com slash audio.
0:41Paul Sweeney:That's Vanguard.com slash audio. All investing and subject to risk, Vanguard Marketing Corporation Distributor.
0:48Scarlet Fu:Hello, I'm Stephen Carroll. I'm in Brussels, where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London. We're the hosts of the Bloomberg Daybreak Europe podcast. We're up early every weekday, keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled, and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break.
1:25Scarlet Fu:So whether it's geopolitics, energy, tech or markets, you're hearing it while it happens. It's smart, calm and to the point. And it fits into your morning. You can find new episodes of the Bloomberg Daybreak Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris. On Apple, Spotify, YouTube, or wherever you get your podcasts.
1:50Scarlet Fu: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.
2:12Paul Sweeney:Nike reported some numbers, a better expected number stocks up almost 5%, although it's still down about 3 % year to date. But maybe a little bit of a turnaround there, working through the inventory, as some smart folks have told me about the Nike story. One of those is Poonam Goyal. She's a senior U.S. e-commerce and retail analyst for Bloomberg Intelligence. Poonam, is the turnaround at Nike, is it kind of turning? Is it working?
2:36Trevor Burgess:it's working uh i think yesterday was the first sign that nike is able to pick up momentum sales on a reported basis were up one percent inventories were down two percent this is exactly what we wanted to see we wanted to see inventories align with sales so while the work isn't done and it's not over and it's not a straight line up we do see momentum building what they're doing is working, the new products, the innovation, the focus on wholesale, it's all coming together. There are still some pitfalls. China is still sluggish and we'll need to wait and see what happens there as well as with its Converse brand.
3:16Scarlet Fu:Okay, so China's definitely an issue. Converse is a work in progress. When I look at the revenue line, the top line, what I see is direct revenue fell 4%, wholesale revenue rose 7%. Just break that down for us in terms of what that means, direct revenue versus wholesale revenue? Sure.
3:32Trevor Burgess:So direct revenue composes of stores, which were actually up 1%. So that shows us that the innovation and the new products which are flowing through their own stores is working. What made the DTC revenue go down 4 % was that digital was down 12%. No surprise here. This is where they're clearing all that excess inventory. So this channel will be pressured for a couple of quarters still. Wholesale up 7%, a great, great number. I mean, it just shows that coming back into partnerships with Foot Locker in a more meaningful way, getting on Amazon.com, all these efforts are paying off and they're where the customer is.
4:08Trevor Burgess:They're gaining their shelf space back and the customers are responding favorably.
4:13Paul Sweeney:You know, the Nike brand is such a powerful, powerful brand. I think of it like Coca-Cola or Apple. It's so powerful. Yet some of those American brands in China under pressure. And I'm wondering just with the geopolitics, is Nike a brand where that might be feeling some anti-American sentiment from consumers?
4:32Trevor Burgess:So that has happened in the past. There have been boycotts against, you know, U.S. American brands. We don't think that's the issue yet from what we're hearing, but we do think that the issue is more product at Nike in China. So they do need to ramp up the product and they do have a lot of excess inventory there, more so than they do in the U.S. today. So that's also a work in progress that they need to get through.
4:54Scarlet Fu:Let's talk about profitability. Margins declined due to higher discounts and then also the higher tariffs in North America. I look at gross margin 42.2 percent last year at this time. It was more than 45 percent. Now, the 42.2 percent was better than estimated. How long is it going to take for Nike to turn that around?
5:13Trevor Burgess:I think we have quite some time to get back up to historical margins. In fact, you know, on the call yesterday, they said that they do still aspire to reach double digit EBIT margin. EBIT margins in the quarter that they just reported was only at 7.1%. So that's a long runway. We don't think it's anytime soon. And the hit from tariffs is building, not reducing. They had expected a billion dollars the last time they spoke to us. And yesterday that went to$1.5 billion in excess costs from tariffs.
5:45Paul Sweeney:How much are they passing along to the retailer versus taking that in their margin? Because I mean, Nike is probably just a great example of how companies are trying to deal with the tariffs.
5:56Trevor Burgess:Yes, I think they're doing this actually very smartly. They're not increasing prices on products that are under$100, but they are taking prices up on sneakers that are above that price point. So if you think about moving prices up, it's very easy to say the price of milk went up from$3 to$3.50. But when you're looking at a pair of sneakers, especially a new launch, you have no comparison. So you can go ahead and price up your new innovation and the customer may not even recognize that there was a material price increase. And that customer has a little bit more flexibility to stretch their wallets at that price point.
6:30Scarlet Fu:Poonam, if you are heading up on holdings or Adidas or Skechers or, you know, any of the Hoka, What would you be thinking looking at this set of results?
6:43Trevor Burgess:So Skechers, I think, is in a different league than Nike. It's a little bit different. It's a value play. And I think they don't compete directly like an Adidas or an On or a Hoka would with them. Adidas is doing really well on its franchise lifestyle shoes. And I think Nike, what you heard yesterday, was doing well in performance. So two still very distinct categories. Though for On and Hoka, I think it's a little bit of a different story because what I heard from that call yesterday was that running was back on. It's doing phenomenally well. And that is where Hoka and Anon both took share from Nike.
7:20Trevor Burgess:So I would be just, you know, a little concerned and just make sure that I keep my game on when it comes to innovation, because at the end of the day, product is what's going to drive how sales momentum will go moving forward.
7:32Paul Sweeney:Stay with us. More from Bloomberg Intelligence coming up after this. Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real. Lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. At Vanguard, institutional quality isn't a tagline. It's a commitment to your clients. We're talking top-grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders.
8:08Paul Sweeney:These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at vanguard.com slash audio. That's vanguard.com slash audio. All investing and subject to risk, Vanguard Marketing Corporation Distributor.
8:26Scarlet Fu:This is Caroline Hyde. And I'm Ed Ludlow, inviting you to join us for Bloomberg Tech, a daily podcast focusing exclusively on technology, innovation and the future of business. Every weekday, we bring you the top headlines from the world's biggest tech companies. From finance to defence, AI to entertainment and from startups to the magnificent seven. We highlight the latest stories of the people and companies pushing the tech sector to new frontiers and the politics that shape global tech markets. We do this all every weekday, then bring you the most important conversations and analysis in our podcast.
8:59Scarlet Fu:Search for Bloomberg Tech on YouTube, Apple, Spotify, or anywhere else you listen. Join us every afternoon on your commute home and stay ahead of the tech news cycle. That's the Bloomberg Tech Podcast. I'm Caroline Hyde in New York. And I'm Ed Ludlow in San Francisco. Subscribe today, wherever you get your podcasts.
9:29Scarlet Fu:and wherever you get your podcasts, or watch us live on YouTube.
9:34Paul Sweeney:Another IPO priced here, Neptune Flood Insurance, NP is the ticker. And joining us from the New York Stock Exchange floor is Trevor Burgess. He's the CEO. Trevor, thanks so much for joining us here. Congratulations on the IPO. It's priced at$20. I'm looking at the Bloomberg terminal now. We've got a bid of$22.5 and the ask of$22.75, so maybe they'll finally get this thing opened. And if I were running your deal, Trevor, I would have had this open at 1030, no later. Trevor, talk to us about your business model. Flood insurance. You guys have exposure to Florida. Nobody provides insurance in Florida.
10:09Paul Sweeney:What's your business model?
10:11Poonam Goyal:Yeah, so Neptune is an artificial intelligence company that does a really good job at underwriting flood risk for global insurance and reinsurance companies. So we don't actually take the risk. We build technology that does a really good job at analyzing that risk and making sure it's something that the global insurance markets want to take on, which makes us the largest competitor to the National Flood Insurance Program, which is the federal government's program, which was the only way to buy flood insurance for a long time until Neptune came along. It happens to be that the government's closed today, so Neptune is the only game in town right now, which is exciting for us, obviously, because we want to help those 1 ,300 consumers who are trying to buy their house today and who need flood insurance.
10:57Poonam Goyal:We're the solution.
10:59Scarlet Fu:So, Trevor, let me ask you, there's been a lot of complaints about the federal flood insurance program. What is broken with it? Why is it something that people are not on board with or people can't get when they need?
11:11Poonam Goyal:Well, there are a couple of ways to look at the NFIP's problems, but the biggest one is that they've lost nearly$40 billion in their history. They're paying millions of dollars a day in debt payments to the U.S. Treasury. So it's just an unsustainable program, and it doesn't offer a product that consumers want. They only go up to$250 ,000 of coverage on your house. Neptune offers up to$7 million of coverage. We'll also cover your Airbnb or your hotel if you're flooded out of your room. If you are with the NFIP, you're just out of luck. If you have a flooding, there's no money for that hotel.
11:49Paul Sweeney:So who are your clients, Trevor? Are they the insurance companies and reinsurers themselves?
11:57Poonam Goyal:We get to have two clients. We serve those global insurers and reinsurers who are looking to put money to work in the flood insurance space. And importantly, our customer is the American homeowner and business owner. We provide residential and commercial policies to protect your home. We compete with the NFIP every day that they're open. Today, they happen to be closed.
12:23Scarlet Fu:Fair enough. Fair enough. In terms of which states are most affected, Paul mentioned, obviously Florida, but is there, I mean, floods seem to happen. Yes. Floods seem to happen to every state, including those that are inland. Is there any area in the country that is, you know, more relatively shielded from flood risk?
12:42Poonam Goyal:Not really. If it can rain where you live, then it can flood. And we saw that in the month of July, they were major floods in 23 states in this nation. That means that everyone is really at risk and needs to have flood insurance. But unfortunately, because of the government's program, only 4 % of Americans have coverage today. Neptune is trying to change that. We want to get many, many more Americans protected from this most dangerous peril. You've seen these hurricanes when they hit, the tragic flooding that took place in North Carolina and in Texas recently. Neptune is here to make sure all of those homes are protected.
13:21Paul Sweeney:Trevor, is flooding, is that a risk that is going up in frequency and in damage?
13:27Poonam Goyal:And if so, why is that happening? It's happening. The answer is yes. And it's happening because the climate is changing. It's undeniable that the sea level in Key West, Florida is nearly a foot higher than when I was born. The temperature in the Gulf and in the Atlantic is warmer than it was 10 years ago. That added heat is energy, and that leads to more frequent and severe storms.
13:54Paul Sweeney:So what's the growth story for Neptune? Is it more markets? Is it more policies? Is it driving rates higher? How are you guys pulling those levers?
14:05Poonam Goyal:The growth story for Neptune is helping educate the American consumer that their homeowner's policy does not cover the risk of flooding and that they need to buy a separate policy to protect their most valuable asset. If we can just help educate people on that fact, Neptune's going to do a great job at growing.
14:24Scarlet Fu:We should mention that Neptune is going public after a bunch of specialty insurance companies have gone public this year. Accelerant Holdings, Aspen Insurance, American Integrity Insurance, Slide Insurance. What do you think it is about the current environment that makes it so welcoming for insurance companies to tap the public market?
14:46Poonam Goyal:it's nice to have the market open and it's nice that pricing and insurance you know makes sense we want to make sure that that consumer is finding value that the agent is doing well that Neptune's making money and it's sustainable for the global insurance and reinsurance community I think we have some good equilibrium in the industry right now and that's why you're seeing
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15:07Paul Sweeney:so many companies come to market stay with us more from Bloomberg Intelligence coming up after this
15:15Scarlet Fu:Hello, I'm Michelle Hussain. And for more than 20 years, I was at the BBC. Military withdrawal from Afghanistan. But all the time I was delivering the headlines, I wanted to go further than the news of the day. To spend more time with the people shaping our world. And that's what I'm doing here on this podcast. Speaking to people from Nigel Farage. This is love you trying ever so hard. Russia needs to be taught a lesson.
15:39Trevor Burgess:This is love you trying ever so hard.
15:40Scarlet Fu:To tech journalist Cara Swisher. And the tech industry is running wild. You know, they've gotten what they wanted and they've seen a huge run up in their stock prices. This will be a place where every weekend you can count on one essential conversation to help make sense of the world. So please join me, listen and subscribe to The Michelle Hussain Show from Bloomberg Weekend, wherever you get your podcasts.
16:07Paul Sweeney:You certainly ask interesting questions.
16:14Scarlet Fu: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.
16:28Paul Sweeney:Again, we've been talking a lot about AI. So has everybody in the marketplace really for the last two or three years. And now you've been looking for derivative plays. And a lot of the derivative plays have focused on who's going to power all these data centers. And that focuses on energy, fossil fuel energy, new energy, and even including nuclear energy. So everything seems to be on the table as these data center providers think about how they're actually going to power this stuff going forward. Scott Levine joins us. He looks at the energy business for Bloomberg Intelligence. He put together a global team and put out a huge report here and a really good report on nuclear power.
17:03Paul Sweeney:2026 outlook uh he's saying ai driven power demand is set to spark 350 billion dollar build cycle scott thanks so much for joining us here i love the big round numbers here talk to us about from an energy perspective what the industry's doing to kind of prepare for what seems to be the
17:20Poonam Goyal:sensational demand for power yeah so um uh nuclear really has uh two very big uh positives going for it. Number one, it's a emissions-free power source. And the hyperscalers that are really behind the investments care about that deeply, right? And so they've favored more renewable sources heretofore, like wind and solar. But what those lack are 24 by 7 baseload characteristics. And for a data center to be up 24-7, that's not going to do it, right? So nuclear checks both of those boxes. And those are two very big positives. And the reasons that you're seeing folks like Microsoft and Meta come out in favor of nuclear power.
18:10Poonam Goyal:And yeah.
18:11Paul Sweeney:So what's the how much does nuclear provide today in the U.S. versus where you think it might be in 25 years?
18:17Poonam Goyal:Yeah. So today it's a little bit below 20 percent of the grid, which we're saying will return to about in our, you know, base case scenario, 20 percent of the grid by 2050. That may not seem like much to percentage points, right? But it will equate to or amount to a$350 billion investment to get there. So those are big numbers. And in addition to that, we're talking about adding 60-some-odd gigawatts to the grid. And you can think about each full-size Nuke being one gigawatt. So that's basically building 60 generating units as our base case. So those are big numbers to get you from 18 to 20 percent over a 25 year period of time.
19:00Paul Sweeney:I tell you, I went in this report that you and your team put together, Section 5, small modular reactors. That's where I wanted to go to because I have that. We've had some people come into the studio over the last few years and just talk to us about the science and the engineering and the possibilities of these small modular reactors. Tell us what they are and what role they could play going forward.
19:18Poonam Goyal:Yeah. So really, these are and none of these have been built in the U.S. yet. So this is very much an emerging technology play. But basically what you're talking about is taking a full-size nuke, you're driving down the highway, you see a big cooling tower, a bunch of smoke coming out the top of it. These are much, much smaller. And so the idea here would be that these are much more flexible. And so if you have more disparate data centers located throughout the country, you can power these ostensibly with these smaller units. right and we're talking about you know some of these are smaller versions of what's already in operation today which is a light water reactor and then some of these types of units are different types of of technologies you have gas cooled reactors as opposed to water you have molten salt cooled reactors as opposed to water and these use different types of technologies different types of fuels still remain to be licensed and proven.
20:17Poonam Goyal:So a lot of it's very much on the come. But the technology in each of those areas holds promise. So we'll see. And each of them has pros and cons, right? And so we'll see over the next five years, the technology shake out and see which ones end up being at the top of the stack for the US. But each of them have a lot of money behind them and a lot of support from a lot of depocketed players.
20:42Paul Sweeney:Talk to us about this Trump administration. What is its view on nuclear fuel as an option?
20:48Poonam Goyal:Okay, so firstly, very positive. They came out with a bunch of executive orders in May where they have clear support. They're trying to streamline the licensing process. So these things can, they basically want to see 10 reactors in construction by 2030.
21:06Paul Sweeney:Okay, wow.
21:07Poonam Goyal:Okay, so yeah. And that's five years from now. It seems like a long time. But in a nuclear world where it takes 10, even 15 years to build a reactor, which is what it took to build. The only reactor that's been built in the US in the last 30 years took 15 years to build. That is not that long a period of time.
21:28Scarlet Fu:This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, 10 a.m. to noon Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.
21:55This is Special Agent Regal, Special Agent Bradley Hall. The time is approximately 11.15 a.m.
22:05Scarlet Fu:about to start a consensual telephone call with Dr. Daiwa Zhang. China's Ministry of State Security is one of the most mysterious and powerful spy agencies in the world.
22:20Paul Sweeney:But in 2017, the FBI got inside.
22:29Hello? Hello, sir.
22:36Poonam Goyal:I've never seen that much evidence in my entire career, and I don't think we'll ever see that much evidence again. I now have several terabytes of an MSS officer, no doubt, no question, of his life. And that's a unicorn. This is a story of the inner workings of the MSS
22:54Scarlet Fu:and how one man's ambition and mistakes opened its vault of secrets. Listen to The Sixth Bureau from Bloomberg Podcasts starting on February 13th on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.
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Watch Scarlet and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Intelligence hosted by Paul Sweeney and Scarlet Fu
-Poonam Goyal, Senior U.S. E-Commerce and Retail Analyst at Bloomberg Intelligence, discusses Nike earnings. Nike’s turnaround efforts are starting to pay off as the world’s largest sportswear company realigns the business around sports such as running and basketball.
-Trevor Burgess, CEO of Neptune, discusses the company’s IPO beginning trading on 10/21/25. It’s listing on the NYSE. Neptune uses proprietary AI and advanced data science to provide residentially and commercial flood insurance across the U.S. Neptune does not use human underwriters, which streamlines underwriting, pricing, and policy issuance.
-Scott Levine, Bloomberg Intelligence Senior Energy Services Analyst, discusses his research: “Deep Dive: AI Power Demand Fuels $350 Billion Build Cycle.” According to BI: demand for power to support AI computing could spark a resurgence in nuclear energy that leads to a 60% increase in US reactor capacity by 2050, yet we don’t expect new plants to enter service until 2035.
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