Target Names Former Intern as CEO & Labubu Fever Shrinks…Literally?

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0:35Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Anne Berry. Today, Target thinks it's found its comeback kid, hiring a former intern as its new CEO. And ESPN goes direct to consumer. What does it mean in the war of the streamers? It's Thursday, August 21st. Let's ride.

0:54and it is so great to have you as my co-pilot today and thank you for carving out the time you are a busy busy person this week your new podcast brew markets launched giving people headlines and analysis from the day in the stock market for everyone who just thought to themselves uh yeah that sounds like something i'd be interested in brew markets is released every afternoon around 4 20 p.m eastern time including a fresh episode later today and i'm about to ask you the question everyone dreads during icebreaker but i know you'll have a good answer to this what is a fun fact about yourself okay so i've had many lives right i've been and this is the premise of the podcast i've been an investor i've been a ceo but if you asked me when i was growing up what did i want to be i wanted to be indiana jones i wanted to be an archaeologist and what happened i did not do that how did you end up behind this mic well many lives but you know one thing i actually did go to petri you know there's a famous scene where he horse rides i think it was a temple of doom i ended up going there and I had this moment.

1:48I'm like, wow, that's what it feels like. This is it. I've done it. That's we all live vicariously through Hollywood. Well, thanks again for joining us. And I'm pumped for the show. And now a word from our sponsor, LinkedIn ads. And would you say ads are better here or in the UK? Well, you all have a lot fewer ads for gravy. So I'm going to have to say in the UK. That is crazy. I thought we had the gravy market cornered. Why aren't these ads reaching me? Probably because gravy marketers aren't utilizing LinkedIn ads. They can help you stop wasting resources like money, time and effort, like 71 % of B2B ads.

2:21They can link you with the right audience for your brand. So check out LinkedIn ads. LinkedIn will even give you a$100 credit on your next campaign so you can try it for yourself. Just go to linkedin.com slash mbd. That's linkedin.com slash mbd. Terms and conditions apply only on LinkedIn ads. Target named a new CEO to lead its turnaround. And in a move that's going to set LinkedIn on fire, it was a former intern. Michael Fidelke, who interned at Target in 2003 before working his way up the food chain, was announced as the company's CEO, replacing Brian Cornell, who served 11 years in the role.

2:54It's a big bet that a company insider, not an outsider, will have the secret sauce to bring Target back to relevance and financial health. Because right now, Target is throwing up bricks. In its earnings report yesterday, it said that same store sales declined 1.9 % last quarter, which was better than expectations, but also not growing. And that's been a theme for Target, not growing. For the past 11 quarters, almost three years, Target sales have been flat or falling. There's a lot of stuff going wrong over in Minneapolis, from disorganized stores to culture war boycotts to unexciting merchandise.

3:28And rivals Amazon and Walmart have taken advantage. So can Fidelke turn this ship around? Investors don't seem to think so. Sending the stock down 6 % following the announcement. It's clear they wanted an outsider to look at things with fresh eyes. not a company man who's been there for 20 plus years. Still, Fidelke described his experience as an asset, having seen Target at its worst, but also at its best. And what do you think of the hire? Okay. Well, first of all, there's the issue that he's not a hire and it's a promotion, right? And that's the issue number one. Issue number two, his boss isn't going anywhere, right?

4:02So Brian Cornell, who's the outgoing CEO, is becoming executive chair of the board. So I just want to double down on this. And I talked about this on the Brew Market Show. When you're a CEO, you report to your board. So can you imagine this conversation? You're Fidelke. You're going to a board meeting. You're fresh in your seat. And you're giving your assessment of what went wrong while your old boss is sitting there listening to you. And you still report to him. I think it's super awkward. I don't think this is going to make any change at all. So you're wondering why Target didn't completely kick Brian Cornell to the curb.

4:33and they have him in this maybe Bob Iger role or the Starbucks guy, whatever his name is, looking down from above and sort of managing the strings and not allowing Fidelke to implement the changes that he wants. And even more so than that, Fidelke also has been a target for 20 plus years. I mean, if you look at his LinkedIn, it is kind of wild. You don't see anything like this anymore. It says finance intern from 2003 to 2003 and then just works his way up at the same exact company till now where he becomes the CEO. In one sense, it's a great growth story, but maybe investors are thinking this is not the type of person that Target needs right now because its sales are falling.

5:13It hasn't grown in three years. Yeah, and let's talk about that, right? Because you're exactly right. Fidelke's been there for what feels like forever. And he's had big jobs. So if we think about prior to today, he's the chief operating officer. He has been for over a year. He's in the C-suite. He's an adult. He's part of the decision-making process. Before that, he was the chief financial officer for nearly five years. Now, in the last five years, Target's share price has dropped over 30%. Your CFO is part of the problem. So the very guy who was part of the issues we're trying to solve has actually been rewarded for all this.

5:46He's promoted to the big job. I found this baffling, if I'm really honest. So Fidelke has heard your criticism. He watched the stock price, just like all of us yesterday, fall down 6%. He said that his experience is an asset. He wants Target to get his swagger back. He's got three big priorities that he wants to tackle at Target in order to return to sales growth. He said he wants to, number one, reestablish Target's reputation as a retailer with chic merchandise. That is what it was known for. And then now that has fallen flat. People are just not finding the cool stuff that they want there. The pillar number two for the turnaround, provide a more consistent customer experience.

6:20I think that has to do with sort of the disorganization at stores. And then finally, the third pillar is using technology to more effectively run the business. So technology, improving the store experience and getting some cooler merchandise in there. Do you think that's a recipe for success? Well, all three of those are really expensive ways to start revving up that growth engine again. And I think let's talk about better merchandise, right? He's going to have to hire a new team. That special source, that ability to pick stuff, products that you're going to get really excited about. That's not his superpower.

6:52He's been the CFO. So let's see if he actually brings in some fresh blood to rejuvenate that merchandising team. That's the first thing I'd be looking out for. When it comes to making it a more tech savvy business, it hasn't done it so far. And I think what Target's done is just try and throw money at it to see what sticks. So let's see if he goes higher, goes to hire a really compelling new chief technology officer. Let's see him get that talent in. And then when it comes to the store experience, lots of retailers have struggled with this. And they've done everything from trying to hire, you know, Apple talent.

7:22You go to Apple stores, right? Great design. So again, I think a little bit of creativity. If he turns around three months from now and he doesn't have a plan, if he gets into the seat in February and he does not pretty quickly afterwards say, I've got a fresh slate of talent, I think Target share price is in for a rougher ride. All right, we have to move on. Speaking of new eras beginning, the standalone ESPN app launches today and a milestone for both its parent company, Disney, and the media industry writ large. For the first time in history, all of ESPN content from live sports to studio shows will be available to customers without a cable or satellite TV subscription.

7:58The app simply called ESPN will cost 29 bucks a month. Now here's why it's such a big deal. For decades, ESPN was Disney's profit machine running what the athletic called the greatest business model in media history. During cable's peak in 2011, ESPN had more than 100 million subscribers because it was included in the lowest basic cable tier. Even if you weren't a sports fan, if you had cable, you paid Disney for ESPN. And this thing was an absolute money printer. Even now, with cable in serious decline, ESPN brings in about$1 billion in revenue each month from TV subscriptions. And that's not including any advertising sales.

8:36But like I said, cable is going the way of the dodo. So Disney execs are taking the nuclear option and going direct to consumer in a huge bet on streaming that's been eight years in the making. And ESPN going DTC is perhaps the clearest sign yet. we're at an inflection point in the TV business. Yeah, and this is so long-awaited, right, Neil, because sports has been the last bastion of profitable television. These live events, the fandom, the excitement of people sort of going to battle on the playing field, it's the last reason people have been returning to cable. And I think, you know, letting people cut the cord on that last bastion, this feels really rough.

9:10Did you see, actually, Fox 1's app launches today, so the two big sports broadcasters going head-to-head direct-to-consumer. It's going to get messy out there. ESPN doesn't think there's a competition with Fox 1. It's been spending$80 billion over the past seven years bulking up this live rights portfolio in order to make sure that it has the best content. They have a Super Bowl coming in February 2027. They also inked that big deal with NFL. NFL is taking a 10 % equity stake in ESPN. And the NFL of live sports is the king right there. So they're getting probably the best content that people want to watch anywhere on television.

9:47They have the NBA finals every season. They have the college football playoff every single year. They're also adjusting to deal with WWE for WrestleMania. So Jimmy Pataro, the president at ESPN, thinks that, you know, no one can compete with the amount of live sports that they have. And that's why they're rolling out this ESPN app and charging people around 30 bucks for it. Yeah, it's pretty expensive. I also saw that the app's going to have a bit of a refresh. Do you see that there's going to be sort of vertical content? There's going to be much more focus on interactivity, social media feeds.

10:17lots more engagement on the docket. So I hear you. I think, you know, ESPN still cream of the crop, but even then it's having to evolve its model. It's having to get next gen. And then thinking about Disney proper, I mean, they have ESPN is now only one of their stable of streaming services. They have Disney Plus, which is their biggest one and Hulu as well. They're doing this interesting thing where they're bundling ESPN, Disney Plus and Hulu together for $29.99 a month, which is exactly how much just ESPN alone costs. So they want people to go for this bundle. They think that the bundle customer is their most loyal customer, and they're trying to get people across all of their streaming ecosystems.

10:57So it's very, well, I mean, if you are trying to get this ESPN app and you don't have Disney +, why would you just get the ESPN app? When you get for the same price, you can get Disney +, Hulu, and ESPN. That's what they're hoping for in terms of the psychology. Now, the price is going to go up to like$35 a month after this year. But it's clear that bundling is a big part of this ESPN strategy. Yeah, it's working. I'm doing it. I'm going to go buy the bundle. I'm going to be the litmus test for it working. Just when you thought we've hit peak Libubu, those fiendish little elf dolls are only getting stronger.

11:28Popmart, the Chinese toy company that makes Libubu, reported financials on Wednesday that almost defy business logic. In the first six months of the year, sales were up more than 200 % and net profit soared nearly 400%. Outside of China, where Libubo has been making a big push, the numbers were even higher. In the Americas, revenue jumped 1 ,100%. In Europe and other regions, 729%. And in Asia, outside of China, 258%. And it's not taking its foot off the gas pedal. PopMart's CEO revealed that mini Libubo dolls are coming as soon as this week, ideal for clipping onto your phone. And that's sure to draw even more demand from Gen Z, who are obsessed with accessorizing their accessories.

12:10Plus, Popmart plans to grow its retail footprint, aggressively opening about three new stores per week, eventually topping 60 in the United States. Investors went loco for Libubo's growth plan, sending Popmart stock more than 12 % higher to a new record. Shares are up more than 650 % over the past year. And Libubo is being called the biggest international toy fad since the Beanie Babies in the 90s. Can it possibly sustain this growth? Oh, wow. The Beanie Babies. That's such a throwback. I will answer the question with my POV. But first, you have to tell me, do you have a Lububu? I do not have a Lububu.

12:42Each time I try to spring for one, I think to myself, well, it's not cool anymore. Like if Neil Freiman buys one, that means it's past its peak. And then I keep looking at these numbers and all of the celebrities that are continuing to show it off. Lisa, the K-pop star, just did it this past weekend. She has a custom Lububu that she showed off during her concert. So it seems like this craze is only swelling. So, you know, maybe, you know, maybe in the next few weeks I will spring for a Lububu. But it's not like you can find one. All right. Well, if Neil Fryman buys a Lububu, I will jump on the bandwagon.

13:11Can it sustain this kind of growth? I think the Beanie Baby example is a really fascinating analogy. And I really try to rack my brains, Neil, thinking what are there precedents for where this kind of fad did become a long term sustainable sort of icon for the consumer? And there are a couple I thought of. Pandora, right, the jewelry business has been huge in charms. Absolutely storming success when it comes to getting consumers to keep going back. Customers wanting to refresh their collections, to accessorize their accessories. The tongue twister that you successfully threw out there. And Pandora today is a$10 billion market cap company.

13:51Swatch, the watch company, got its virality from this idea that people wanted to collect the strap. So I think there are ways to do it. I think the troll doll alone may not be it, but there are ways brands have managed to achieve this kind of thing. Yeah, I mean, analysts have weighed in. They said that we think this is Jeff Zang at Morningstar. We think the longevity of popularity for Popmart's key IPs remain uncertain while sales growth of Libubu and other IPs remain robust. There is no guarantee that consumers will continue to favor them in the next five to 10 years as their preferences may change very fast.

14:21I've talked about a lot of very fast moving trends on the show over the past couple of years. There was the Stanley Cup. There was the Trader Joe's tote bag. And while those are still probably quite popular, they didn't have the same velocity that Pop Mart is showing. And I think these executives kind of understand that they have something very special on their hands right now. And they're introducing new lines and different renditions on Lil' Boo Boo, like the Mini Lil' Boo Boo, in order to keep things top of mind. They also have this genius sort of distribution strategy with the blind boxes where you open something up.

14:54It's kind of like a pack of cards or Pokemon cards where you open up a blind this box and you don't know exactly which Lububu you're getting. So this element of surprise, it keeps you coming back for more. So, yeah, Lububu, I mean, it just can't be stopped right now. And also just to the point on cards, that collectible element, just adults, really massive, massive audience and consumer base for this product. We've seen that. It's sort of kid-old phenomenon. It's a name that's had controversial name, actually. it's had mixed response, but this idea that people, they really want that collectability of stuff right now.

15:25All right. We're taking a quick break, but don't go anywhere because Neil's Numbers is next. This episode is brought to you by Square. New York is a food lover's dream and that goes for your morning brew as well. Anytime I'm craving a coffee with a side of chill vibes, I head to Ralph's Coffee. There's a place for every mood and every craving. I swing by Bibble and Sip every time I'm in the neighborhood for a sweet treat and incredible service. all while supporting a small business. Those fave local spots need support as they grow. That's where Square comes in. What started as a little white card reader now powers the action behind the scenes.

16:01Whether you're expanding to new locations, treating loyal customers like us, or need to cover cash flow gaps, Square meets you there. Go to square.com slash go slash morningbrewdaily to learn more. That's S-Q-U-A-R-E dot com slash G-O slash morningbrewdaily. This message is a paid partnership with Apple Card. I'm a person who really appreciates simplicity. And when it comes to credit card rewards, the simpler, the better. That's one of the many reasons I have an Apple Card. The rewards are super straightforward. I earn up to 3 % daily cash back on my everyday purchases. There are no points to calculate, no limits or deadlines.

16:41Plus, it's super easy to access my card and make payments from the wallet app of my iPhone. If that sounds like the kind of simplicity you want in a credit card, apply for Apple Card in the Wallet app on your iPhone. Subject to credit approval, Apple Card issued by Goldman Sachs Bank USA Salt Lake City Brands. Terms and more at AppleCard.com. Welcome to Neil's Numbers, the segment where I share three stats from the week's news that will have you sounding more articulate than a West Wing character. My first number is the rise and fall of Atlanta as the Hollywood of the South. production spending in georgia has dropped by nearly half over the past three years the wall street journal reported last fiscal year 245 projects were shot in the state compared to 412 in fiscal 2022 the main reason for the drop-off is marvel in 2008 georgia unleashed one of the most generous tax incentives for film production anywhere in the world allowing producers to recoup almost a third of the money they spent that sparked a flood of film shoots including 22 Marvel movies and shows that created thousands of jobs and had some wondering whether Atlanta was on the verge of replacing Los Angeles as the top entertainment hub in the country.

17:48One man who worked as a grip on six Marvel projects refers to his Atlanta area home as the house the Avengers bought. But recently, the mood in Georgia has turned less peachy. Beginning with this summer's Fantastic Four, Marvel is shifting more production to the UK, which has a similar tax incentive to Georgia, but labor costs are lower across the board. And it's not just Georgia seeing film projects dry up. In 2024, almost 30 % fewer big budget movies and TV shows began filming in the United States compared to 2022. While in Britain, they've increased 16%. And Atlanta is seeing the pitfalls of betting the farm on a single industry.

18:24Yeah, look, I love Marvel. And obviously, I love Britain. So the two of them coming together a little bit more doesn't, you know, I actually find that quite encouraging. I know that's not the answer you may be looking for. It's kind of crazy to go down the line and see what was filmed in Georgia because it has been this massive production hub thanks to these super generous incentives. If you look in the background of these films, maybe you'll see, you know, some Georgia landscapes. But The Hunger Games was filmed there. The Fast and the Furious film franchises, Stranger Things, The Walking Dead.

18:53And they really poured so much money into this industry and employed tens of thousands of people. But like so much film production in the United States, it's not just Georgia. Los Angeles is dealing with this too. They just doubled their tax incentive to$750 million earlier this year to keep production in the United States. The question is, is that enough? Because labor costs are just so much higher here than they are in the UK, in Australia, and in Canada, where a lot of film production has moved. For my next number, let's head up I-95 from Georgia to New York City, which just hit a real estate milestone.

19:26For the first time since COVID, the number of people heading back to the office was higher than pre-pandemic levels. According to Placer.ai, which tracks foot traffic, July office visits in New York City were 1.3 % higher than July 2019 levels. It is the only major metro area that has returned to growth. Miami isn't far behind, down 0.1 % from 2019, but no other city comes close. For instance, Dallas office visits have fallen 15%, Chicago 34%, and Denver 40%. New York City's busy offices are vindication for those who argue the city would bounce back from COVID, including none other than J.P. Morgan CEO Jamie Dimon.

20:05Later this month, the bank will start bringing in employees to its brand new headquarters, a 60-story, 2.5 million square foot behemoth on Park Avenue that cost about$3 billion. The project was announced in 2018, and not once did Dimon consider pulling the plug, even when many declared the city dead in 2020. He's been on the forefront of the return to work movement, with J.P. Morgan being one of the few employers, along with Goldman Sachs, ordering their employees back to the office five days a week. And this new tower is a statement. New York City physically, economically, is dominated by finance.

20:36And in finance, we work from the office. We do. I was really hoping you were going to play the tape of Jamie Dimon's profanity-laden request that everyone come back. It was such a new... It's a kid show. We can't quite do that. We can't do that. You know, walking around Midtown Manhattan for the longest time, I don't know if you found this, Neil. It just felt like a ghost town. It's like eerily quiet. And I'm just really excited to see people are back. It means that the coffee shops are open again. The bagel vans are back. And just that vibrancy, it's so important. And yeah, I think New York City is resilient.

21:04For my final number, when was the last time you read something just for the heck of it? Because it would be fun. If you can't remember it, you're in good company. Reading for pleasure in the US has plunged by more than 40 % over the past 20 years. That's according to a new study from researchers at the University of Florida and University College London, who analyzed data from the government's time use survey to learn how people spend their day. They found that the proportion of Americans who read for pleasure on an average day fell from 28 % in 2003 to just 16 % in 2023. That includes eBooks and audio books, as well as traditional books, newspapers, and magazines.

21:39Jill Sonke at the University of Florida is raising the alarm saying, this is not just a small dip. It's a sustained decline of about 3 % per year. It's significant and deeply concerning. So why aren't people reading anymore? The first thing you might blame is the phones. And Sanki acknowledges our digital culture is certainly part of the story. She also said that more structural issues like the lack of availability of reading materials, economic insecurity, and the decline in leisure time were also part of the story. And this is going to light a fire in me to finish the book I've been working on for months.

22:06Wait, which is it? It is the third novel in the Elena Ferrante series about two Neapolitan friends. Oh, good. That's my beach read. Well, you know, one thing I saw, it caught my eye, and it made me feel kind of sad to see this for two reasons, is the number of parents reading to their kids is low too. And the real irony here is I read about that on Instagram. And what's funny, you know, what's not funny, but ironic, it's at the same time, these book companies, book publishers are doing quite well. There's just the article about how Waterstones, which is the British Barnes & Noble, I guess you could say, is opening 10 new stores a year.

22:44Their revenue was up 5%. And then Barnes & Noble is planning on opening 60 stores a year here in the United States. So these booksellers are doing quite well. And there seems to be a swell around book talk and talking about books and book clubs. But at the same time, maybe that's just all, you know, fake and people just aren't reading according to the American Time Use survey, which tracks literally every second of what you do during your day. All right, let's sprint to the finish with some final headlines. President Trump escalated his pressure campaign against the Federal Reserve, demanding an official resign over alleged mortgage fraud.