Latest / Bloomberg Intelligence / Microsoft, Nvidia to Invest Up to $15 Billion in Anthropic

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Microsoft, Nvidia to Invest Up to $15 Billion in Anthropic · Bloomberg Intelligence

• 0:02
  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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  Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am.
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  Speaker 2: There's a lot of commitments going on out there in
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  Speaker 2: the technology world, Scarlett Nvidia is committed to investing up
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  Speaker 2: to ten billion dollars in Entropic. Microsoft is also committed
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  Speaker 2: to invest up to five billion dollars in Entropic and
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  Speaker 2: Anthropic for its silent, It's committed to buy thirty billion
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  Speaker 2: dollars of Azure compute capacity.
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  Speaker 3: So we just talking about these tens of billions of
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  Speaker 3: dollars like it's nothing, right.
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  Speaker 2: I don't get it. It's just the circular stuff we see.
• 0:49
  Speaker 2: But people tell me not to worry. Coming up right here,
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  Speaker 2: the best dressed man on Wall Street, his turbine matches
• 0:55
  Speaker 2: is tie every day, no accident. I mean, nice job.
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  Speaker 2: MANYEP saying he's a senior tech dude. It Bloomberg Intelligence
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  Speaker 2: and I have a lot of big companies making some
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  Speaker 2: big commitments in Anthropic. What is nthropic again?
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  Speaker 4: Well, Nthropic is one of the five frontier lms that
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  Speaker 4: are remaining I mean, and they are leading the charge
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  Speaker 4: when it comes to generative AI. So it's one of
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  Speaker 4: the five. The other one are Google, Open Ai, Meta
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  Speaker 4: and Xai. And so look, when it comes to these commitments,
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  Speaker 4: it's pretty obvious that OpenAI has raised the bar by
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  Speaker 4: announcing they're going to spend one point four trillion. So
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  Speaker 4: the question is what are the other LLM companies going
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  Speaker 4: to do? And Entropic is also a pure play LLM,
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  Speaker 4: and in their case, they don't have the funding, I mean,
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  Speaker 4: they don't have the balance sheet like Google or Meta have,
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  Speaker 4: so they have to raise the money either in the
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  Speaker 4: private markets or from someone like Nvidia, or get into
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  Speaker 4: an agreement with Microsoft, which also has an agreement with
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  Speaker 4: open Ai. So that's where you know LM's need compute.
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  Speaker 4: That's how you serve billion plus users, and that's where
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  Speaker 4: you know the numbers get bigger and bigger when it
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  Speaker 4: comes to the tie up with cloud provider.
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  Speaker 3: This is like the popular click in high school where
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  Speaker 3: everyone knows each other and everyone's messing around with each other.
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  Speaker 3: Just give us a little bit of background here on
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  Speaker 3: Anthropic because My understanding is that it was founded by
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  Speaker 3: folks who used to work at open ai and some
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  Speaker 3: of the early investors like big stakeholders include Alphabet and
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  Speaker 3: include Amazon, and now you've got Microsoft in there. I mean,
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  Speaker 3: is there anyone who's not part of Anthropic and not
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  Speaker 3: committed to investing in this company?
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  Speaker 4: Well, you could say Meta, they're doing things, We're doing
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  Speaker 4: their own thing. They are doing their own thing in
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  Speaker 4: terms of you know, using the computer internally, and they
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  Speaker 4: don't have a cloud business.
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  Speaker 3: Is that a problem for them that metas out there
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  Speaker 3: on its own. I know, it doesn't have its own
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  Speaker 3: cloud business, but it's not buying stakes or committed to
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  Speaker 3: invest up to five billion or ten billion in any
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  Speaker 3: of these AI companies.
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  Speaker 4: I mean, so far, just to go to Meta, it
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  Speaker 4: feels like, you know, investors were okay with them using
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  Speaker 4: the GPU compute for their own family of apps. But
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  Speaker 4: the fact that they're talking about one hundred billion plus
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  Speaker 4: in capex for next year without having a substantial ROI.
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  Speaker 4: And what I mean by rois in the case of Microsoft,
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  Speaker 4: yes they are raising their capex two hundred and twenty billion,
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  Speaker 4: but they're winning deals like the one with Nthropic thirty
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  Speaker 4: billion dollar in commitment from Entropic, so somebody is paying
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  Speaker 4: for that compute. In the case of Microsoft, you don't
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  Speaker 4: have that with a meta How are you generating ROI
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  Speaker 4: outside of your family of apps? And over there you
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  Speaker 4: have to show a really substantial increase in engagement to
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  Speaker 4: convince investors it's worth hundred billion plus in capex.
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  Speaker 2: Any of these open ais anthropics are they going to
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  Speaker 2: ever come public? Do you think?
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  Speaker 4: I mean, in the case of Entropic, look, I know
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  Speaker 4: the numbers are getting big, but their gross margins at
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  Speaker 4: this point are probably better than open ai, which is
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  Speaker 4: doing too many things. I mean, the biggest risk I
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  Speaker 4: see for open aiy is they feel they can get
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  Speaker 4: into any business, whether it's chip business, whether it's you know,
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  Speaker 4: obviously l M is their turf, any type of applications,
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  Speaker 4: and that's where there's a possibility of a misstep. You
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  Speaker 4: can end up wasting time because you just don't have,
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  Speaker 4: you know, the capability. Yeah, the focus there Entropic is
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  Speaker 4: more focused.
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  Speaker 2: Dumb question of the day. Yeah, these US companies, Entropic
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  Speaker 2: opening are they base? Where are they? Good question? Okay,
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  Speaker 2: So I'm going to go out there visit my son
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  Speaker 2: at Santa Clara. They're in the backyard right there. I
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  Speaker 2: can go knock on the door of Chatch.
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  Speaker 3: They're not incorporated in Dublin or you know, some some islands.
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  Speaker 4: Look, it's a nonprofit looking to have a profitable and
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  Speaker 4: so all that could happen.
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  Speaker 5: But look at the end of.
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  Speaker 4: The day, these llms are showing constant improvement, which is
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  Speaker 4: what's driving you know, companies like Microsoft to partner with Entropic.
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  Speaker 4: They have that exclusive partnership with Opening Eye, but now
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  Speaker 4: they are diversifying.
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  Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
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  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live
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  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
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• 5:34
  Speaker 1: you get your podcasts, or watch us live on YouTube
• 5:38
  Speaker 1: home depot.
• 5:39
  Speaker 2: They cut their forecast on week remodeling demands off the
• 5:43
  Speaker 2: check in with John Tucker to see if that is
• 5:44
  Speaker 2: in fact the case, because he is like the do
• 5:47
  Speaker 2: it yourself kind of guy.
• 5:48
  Speaker 3: Really, what has he done in his house?
• 5:50
  Speaker 2: It does everything, and like big jobs that take a
• 5:53
  Speaker 2: long time, Like he doesn't ream out in the bathroom
• 5:55
  Speaker 2: and he does plumbing, he does all this stuff. Oh,
• 5:58
  Speaker 2: hes about lumber that he can't get quality the lumbers
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  Speaker 2: He's got to go to. He's got a guy.
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  Speaker 3: Then he's like their model customer.
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  Speaker 2: Yes, exactly right, he's the guy. So let's check in
• 6:07
  Speaker 2: with that Drew reading. He covers all the homebuilders, he
• 6:09
  Speaker 2: covers all the stores that cater to the homebowners, like
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  Speaker 2: home depot. Drew, thanks so much for joining us here.
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  Speaker 2: What did the home depots say about their customers?
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  Speaker 6: So they came in with the same store sales growth
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  Speaker 6: of about zero point two percent, which misconsensus this quarter.
• 6:25
  Speaker 6: That was largely due to whether last year they had
• 6:29
  Speaker 6: pretty significant gains from storms. This year that wasn't replicated,
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  Speaker 6: so that had about an eighty basis point impact on
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  Speaker 6: the comp And that's important because if you back that out,
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  Speaker 6: the underlying business has been relatively stable with about a
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  Speaker 6: one percent comp you know, so underlying trends still pretty stable.
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  Speaker 6: I think the bigger problem is that last quarter they
• 6:50
  Speaker 6: said that they had expected to see an acceleration in
• 6:53
  Speaker 6: demand in the second half, and that hasn't materialized. We
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  Speaker 6: have gotten the pullback in rates, but that hasn't translated
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  Speaker 6: into housing activity.
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  Speaker 3: Yeah, and the problem there is that customers are deferring
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  Speaker 3: their large purchases. Demand has remained steady, but it's definitely
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  Speaker 3: not picking up at the same time. So when people
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  Speaker 3: are undertaking some kind of home renovation projects, they're just
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  Speaker 3: doing it at a smaller scale. Does home depot still
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  Speaker 3: benefit from those customers.
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  Speaker 6: Sure, and that's what's driving a lot of the demand
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  Speaker 6: for the home improvement retailers. It's smaller ticket projects, you know,
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  Speaker 6: maintenance oriented type stuff, which is a huge part of
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  Speaker 6: their business. But to your point, to really see I
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  Speaker 6: guess the turn and growth, what you want to see
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  Speaker 6: as a resurgence in those big ticket categories. Now, big
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  Speaker 6: ticket spending was up two point three percent in the quarter,
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  Speaker 6: but that's morally more reflective of single item purchases to
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  Speaker 6: think about things like appliances, power tools, gypsum. They also
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  Speaker 6: are taking share in the larger pro market, which is
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  Speaker 6: aiding the mix a little bit, but it really doesn't
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  Speaker 6: reflect an increase as you mentioned, in big ticket projects
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  Speaker 6: such as kitchen and bath three models or flooring projects.
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  Speaker 6: And that's really what we want to see turn and
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  Speaker 6: will likely drive the next leg of growth next year.
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  Speaker 3: So I ask about that big ticket items versus smaller
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  Speaker 3: projects because I wonder what this means for competitor Lows.
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  Speaker 3: Low's shares are down today, but only by about one
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  Speaker 3: point three percent versus Home Depots four percent, and I
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  Speaker 3: wonder how much you can extrapolate from Home Depot to Lows,
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  Speaker 3: which will be reporting on the nineteenth before the market open,
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  Speaker 3: so that is tomorrow morning.
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  Speaker 6: Yeah, so for loaws, we're expecting to hear pretty similar
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  Speaker 6: commentary that we heard from Home Depot today. They're operating
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  Speaker 6: in the same environment with a weak housing backdrop, more
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  Speaker 6: cautious consumers. The main difference between the two businesses would
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  Speaker 6: be Home depots greater exposure to the professional contractor, which
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  Speaker 6: is fifty percent or more of sales compared to Lows
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  Speaker 6: at about thirty percent. So we have seen on a
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  Speaker 6: relative basis more weakness among the DIY category with particular
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  Speaker 6: strength and pros. Really that would be the only difference.
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  Speaker 6: But I think by and large, the sentiment is going
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  Speaker 6: to be that consumers are taking on more caution because
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  Speaker 6: they're increasingly worried about the outlook for the economy, the
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  Speaker 6: outlook for their job, and that's causing them to defer
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  Speaker 6: spending on discretionary categories.
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  Speaker 2: How about tariffs. What are the companies saying about tariffs
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  Speaker 2: at Low's and Home Depot like tariffs on wood hammers.
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  Speaker 2: I guess I don't know.
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  Speaker 6: Sure, so not a whole lot of discussion this quarter.
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  Speaker 6: I think, you know, given home Depot and low scale,
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  Speaker 6: I think they're relatively well positioned to kind of navigate
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  Speaker 6: this environment with their suppliers. That being said, they're certainly
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  Speaker 6: not entirely immune. They kind of shifted their stance on
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  Speaker 6: their pricing strategy. Earlier in the year, they said that
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  Speaker 6: they wouldn't be raising prices, but as a situation in
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  Speaker 6: the landscape continue to evolve, they said they would be
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  Speaker 6: raising prices selectively. We did see that, I think a
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  Speaker 6: little bit in the average ticket this quarter, the growth
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  Speaker 6: in that, but we don't really know at this point
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  Speaker 6: what the demand impact has been. There was a lot
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  Speaker 6: of noise in the quarter, as I mentioned, with the weather,
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  Speaker 6: so arish will certainly be something to watch, particularly since
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  Speaker 6: we just heard some new terraffs being introduced on lumber
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  Speaker 6: imports and as well as kitchen and bath cabinets, which
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  Speaker 6: increase significantly as we get into next year, so not
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  Speaker 6: a huge impact to this point, but certainly something to
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  Speaker 6: keep an eye on.
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  Speaker 3: Okay, definitely, I'm curious how much does Home Depot and
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  Speaker 3: Low's mirror what's happening in the housing market, because when
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  Speaker 3: it comes to housing, of course, the affordability crisis is
• 10:30
  Speaker 3: you know, the big thing that's keeping it frozen. Mortgage
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  Speaker 3: rates have come down, but they're still really elevated compared
• 10:36
  Speaker 3: to where they were during the pandemic. Inflation is capping
• 10:40
  Speaker 3: spending on big projects, and overall home prices remain really
• 10:44
  Speaker 3: really high, so people just can't move and they're stuck
• 10:47
  Speaker 3: in place, and they don't necessarily want to spend more
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  Speaker 3: than they can afford.
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  Speaker 6: No, it's a great point, and housing is extremely important
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  Speaker 6: to Home depot and Lows as you would expect, you know, housing,
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  Speaker 6: the housing market has been stagnant. We're running about a
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  Speaker 6: four million annuallyzed sales pace that's about twenty five percent
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  Speaker 6: below normalized levels. We know that when people list a
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  Speaker 6: home for sale or when they purchase new home, there
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  Speaker 6: tends to be increased spending. Movers tend to spend a
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  Speaker 6: lot more than people who are already in their house,
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  Speaker 6: so they're certainly losing that piece of the business. I
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  Speaker 6: think one of the interesting things to keep an eye
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  Speaker 6: on looking forward is home prices. Home deep on Lows
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  Speaker 6: have historically told us that that's probably the most important
• 11:30
  Speaker 6: aspect of the housing market to them, and you know,
• 11:33
  Speaker 6: as we well know, since twenty twenty, home prices are
• 11:35
  Speaker 6: up fifty percent or more depending on the market, so
• 11:39
  Speaker 6: owners have up a lot of equity. But what we're
• 11:41
  Speaker 6: starting to see now is prices rise at a much
• 11:43
  Speaker 6: slower pace, and in a lot of key housing markets
• 11:46
  Speaker 6: across the country, we're actually seeing year over year declines
• 11:48
  Speaker 6: in home prices. So when you start to get declining
• 11:51
  Speaker 6: home prices, that hits at that confidence aspect. If you
• 11:53
  Speaker 6: think the value of your property is falling, you're less
• 11:56
  Speaker 6: inclined to invest. So it's something they called out. It's
• 12:00
  Speaker 6: not necessarily something we've seen at the national level, but
• 12:02
  Speaker 6: if you look at particular markets around the country, it's
• 12:04
  Speaker 6: something that's starting to happen.
• 12:06
  Speaker 2: Stay with us more from Bloomberg Intelligence coming up after this.
• 12:13
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto
• 12:20
  Speaker 1: with the Bloomberg Business App. Listen on demand wherever you
• 12:24
  Speaker 1: get your podcasts, or watch us live on YouTube.
• 12:27
  Speaker 2: Way way back in the day at the Chase Manhattan
• 12:30
  Speaker 2: Bank credit training program exhausted program. At the end of it,
• 12:35
  Speaker 2: you had to do like a big project, pick a company,
• 12:37
  Speaker 2: and do like a detailed credit report on it. My
• 12:39
  Speaker 2: company was Medtronic.
• 12:42
  Speaker 3: The device maker, the medical device maker, exactly right.
• 12:45
  Speaker 2: So I knocked him dead. By the way, it was
• 12:47
  Speaker 2: just a killer.
• 12:49
  Speaker 5: AnyWho.
• 12:49
  Speaker 2: It stocks up four percent today, some good numbs, fifty
• 12:52
  Speaker 2: two week high. It's good to be in the medical
• 12:55
  Speaker 2: device business. I guess. I don't know, so we'll check
• 12:58
  Speaker 2: it out. Matt Hendrickson Hendrickson joints us here, senior medtech analyst.
• 13:02
  Speaker 2: He's based in Jersey. But you're in the big town today. Yeah,
• 13:06
  Speaker 2: commute in every day, you come in every day.
• 13:08
  Speaker 5: Yeah.
• 13:09
  Speaker 2: Nice, Good for you.
• 13:09
  Speaker 5: That's what I'm driving too. What Oh yeah, you drive
• 13:12
  Speaker 5: to where? Uh walking a lot right out.
• 13:15
  Speaker 7: There, dude, and you do the congestion pricing. I have
• 13:17
  Speaker 7: to Yeah, where do you drive from? Well, Ridgewood so
• 13:20
  Speaker 7: we have trains, dude, I know. But the Secaucus junction
• 13:24
  Speaker 7: it's always a mess.
• 13:25
  Speaker 2: Oh my God, what a knuckle ahead. All right, Matt,
• 13:28
  Speaker 2: thanks for joining us here. I as serious problems with
• 13:31
  Speaker 2: your committing strategy. Talk to us about Metron. What's going
• 13:34
  Speaker 2: on there?
• 13:35
  Speaker 5: Well, you know, let's take a step back.
• 13:37
  Speaker 8: Twelve months ago, they had a lot of promising products
• 13:40
  Speaker 8: in the pipeline. The question was execution, and what we're
• 13:44
  Speaker 8: seeing the last few quarters is you're starting to see
• 13:46
  Speaker 8: some of that execution. So when they raise their organic
• 13:50
  Speaker 8: revenue growth guidance by a fifty basis points today to
• 13:53
  Speaker 8: five and a half percent, that was driven a lot
• 13:56
  Speaker 8: by what they call is their cardiac ablation segment. This
• 13:59
  Speaker 8: is new technology that's being used to treat atrial fibrillation.
• 14:03
  Speaker 8: That segment alone grew seventy one percent year over year.
• 14:06
  Speaker 8: So having that as off a billion dollar revenue run
• 14:10
  Speaker 8: rate is what's driving that kind of growth, and is
• 14:13
  Speaker 8: what is expecting to accelerate that growth going into fiscal
• 14:16
  Speaker 8: twenty twenty.
• 14:17
  Speaker 3: Seventy one percent is going to get bigger.
• 14:19
  Speaker 8: Yes, they actually said that, and we actually in our
• 14:22
  Speaker 8: follow up questions with them, we asked just to confirm,
• 14:26
  Speaker 8: are you going to accelerate that seventy one percent growth
• 14:28
  Speaker 8: in their fiscal third quarter, which is the one coming up,
• 14:31
  Speaker 8: And they said yes, and it's basically the adoption of
• 14:34
  Speaker 8: without game two technical. It's called pulse field ablation and
• 14:37
  Speaker 8: it's a new way of ablating the heart to treat
• 14:41
  Speaker 8: atrial fibrillation.
• 14:43
  Speaker 3: Does it have a main competitor in this space?
• 14:45
  Speaker 8: Yeah, so it's kind of turned into a duopoly right
• 14:48
  Speaker 8: now between Metronic and Boston Scientific, the tickers BSX. And
• 14:53
  Speaker 8: what you saw this quarter is Boston Scientific was in
• 14:56
  Speaker 8: first and their growth in the quarter sixty percent. So
• 15:01
  Speaker 8: Metronic is highlighting that it was actually growing faster in
• 15:04
  Speaker 8: the quarter than Boston its main competitor.
• 15:07
  Speaker 2: Was how's in these medical device companies like Metronic and
• 15:13
  Speaker 2: how are they dealing with this administration in I don't know,
• 15:15
  Speaker 2: terriffs regulations. What's the backdrop for this for the sector
• 15:19
  Speaker 2: of the healthcare space.
• 15:20
  Speaker 8: Yeah, so if you look at broadly, it should be
• 15:23
  Speaker 8: more insulated than some of the other kind of import
• 15:26
  Speaker 8: export type of businesses. Procedure volumes remain steady. Devices that
• 15:33
  Speaker 8: are used in the US are mostly built in the US.
• 15:35
  Speaker 8: There's some caveats here and there, so it's overall relative
• 15:40
  Speaker 8: to the broader market minimal. Metronic highlighted that you know,
• 15:45
  Speaker 8: the worst quarter is going to be coming up this
• 15:47
  Speaker 8: their fiscal third quarter, which ends in January, a little
• 15:50
  Speaker 8: bit worse in the fourth quarter that ends in April,
• 15:53
  Speaker 8: and then you know, they haven't gotten too much into
• 15:55
  Speaker 8: fiscal twenty twenty seven, but they said it should be
• 15:57
  Speaker 8: incremental overall.
• 15:59
  Speaker 5: It should be about.
• 16:00
  Speaker 8: One hundred and eighty million to the overall net income
• 16:03
  Speaker 8: that you so, but that's talking about a company that's
• 16:06
  Speaker 8: making thirty billion plus in revenue per year.
• 16:08
  Speaker 3: What I noticed as well is that Medtronic has as
• 16:12
  Speaker 3: one of its biggest investors Elliott Investment Management, the activist investors,
• 16:15
  Speaker 3: And yeah, they've become one of the biggest shareholders earlier
• 16:19
  Speaker 3: this year, and they've made some changes, adding some folks
• 16:23
  Speaker 3: to its board as independent directors, presumably ones that Elliott
• 16:28
  Speaker 3: finds favorable. What does this mean for that relationship? Is
• 16:31
  Speaker 3: this an antagonistic relationship or is it something that's a
• 16:34
  Speaker 3: little bit friendlier.
• 16:35
  Speaker 8: I would to say more it's a friendlier type of relationship.
• 16:39
  Speaker 8: And I think it goes back to what I was
• 16:40
  Speaker 8: talking about twelve months ago, when we were looking at
• 16:42
  Speaker 8: a company that had all these massine developments in the
• 16:46
  Speaker 8: pipeline and they just couldn't get that revenue growth from
• 16:49
  Speaker 8: the four to five percent up to that five to
• 16:51
  Speaker 8: six percent where we're seeing now. Now, the question is
• 16:55
  Speaker 8: how much of that is behind the scenes Elliott is
• 16:57
  Speaker 8: making a push or just the fact that the management
• 16:59
  Speaker 8: team just needed that extra time to get that initial
• 17:03
  Speaker 8: acceleration of the growth just internally. But yeah, they came
• 17:07
  Speaker 8: in I mean honestly at the right time with kind
• 17:10
  Speaker 8: of at the when it was down, you know, more
• 17:13
  Speaker 8: than twenty percent.
• 17:14
  Speaker 3: To seeing a potentially friendly relationship between Elliott and the
• 17:18
  Speaker 3: target companies at Targets.
• 17:20
  Speaker 2: Yeah, exactly good point. But maybe it's working this bit
• 17:22
  Speaker 2: to the case. Matt thinks so much for joining us.
• 17:24
  Speaker 2: Appreciated Matt Hendrickson. He's a senior medtech analyst Bloomberg Intelligence.
• 17:28
  Speaker 2: He of the questionable commuting strategy. We'll discuss that at
• 17:31
  Speaker 2: a little bit.
• 17:31
  Speaker 3: What would you do if you were him?
• 17:33
  Speaker 2: Oh, train, dude, I mean that's what I mean. Live
• 17:35
  Speaker 2: in New Jersey for that reason.
• 17:36
  Speaker 3: Is that New Jersey Transit or is that another one?
• 17:38
  Speaker 2: But he lives in Ridgid, which is beat for no
• 17:41
  Speaker 2: rail service, cause you got to you gotta go to.
• 17:43
  Speaker 5: You're kind of only supporting my thesis there.
• 17:45
  Speaker 2: Yeah, but you don't come into the city.
• 17:48
  Speaker 3: I mean that there's a real proba is with the
• 17:50
  Speaker 3: driving into midtown.
• 17:51
  Speaker 2: Yes, you go to Secaucus, you hop on a train,
• 17:54
  Speaker 2: you're in, and then you're done.
• 17:55
  Speaker 3: Drive to se Caucus.
• 17:56
  Speaker 5: No, or I do my five point thirty commute too.
• 18:00
  Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
• 18:07
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 18:11
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• 18:14
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• 18:17
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• 18:21
  Speaker 2: Amer Sports. That's Solomon. They got the Solomon best binding company, right,
• 18:26
  Speaker 2: best bindings in the world, I think I've had I've
• 18:28
  Speaker 2: been skied on Solomon Bindings for like forty years. But
• 18:31
  Speaker 2: they had lots of other stuff, Wilson's Sports and all
• 18:32
  Speaker 2: that kind of stuff. They's some pretty good numbers today.
• 18:35
  Speaker 2: I mean, you know, raising their guidance for the third
• 18:37
  Speaker 2: time this year. So I don't know the consumers seam.
• 18:40
  Speaker 3: I think in the shaped economy they serve the upper leg,
• 18:43
  Speaker 3: upper part.
• 18:43
  Speaker 4: Of the king.
• 18:43
  Speaker 2: All right, that's the place to be. Abigail good Martin
• 18:46
  Speaker 2: joins us here. She is a footwear and at leisure analyst.
• 18:48
  Speaker 2: I don't know what ath leisure is for Bloomberg Intelligence.
• 18:51
  Speaker 2: She is a proud spider University of Richmond spider.
• 18:54
  Speaker 3: Oh that's how I didn't know that that was the mass.
• 18:57
  Speaker 6: It is.
• 18:57
  Speaker 2: It's very unique, isn't it.
• 18:58
  Speaker 3: I ken't like most Sure looks like it's a big spider.
• 19:02
  Speaker 2: Yeah, we'll get you the Yeah, get We'll get one
• 19:04
  Speaker 2: for you. I got my fortieth anniversary, you know, rich
• 19:07
  Speaker 2: Richmond coming up this year. This are you going to go?
• 19:09
  Speaker 2: Damn right? I am going. I might actually joined forced
• 19:13
  Speaker 2: me to kind of go on the committee. I'm in charge.
• 19:15
  Speaker 2: I'll be dialing for dollars getting people to come. And
• 19:17
  Speaker 2: Abba goes she's a spial So talk to us about
• 19:20
  Speaker 2: a M E. R. Sports here. I don't think a
• 19:21
  Speaker 2: lot of people know them too.
• 19:23
  Speaker 9: Yeah no, because the brands underneath that. It is Arctics,
• 19:26
  Speaker 9: which is their outdoor performance brand, as well as Solomon
• 19:29
  Speaker 9: and Wilson are their three biggest so I think today
• 19:32
  Speaker 9: was a big day for them. They did really well,
• 19:35
  Speaker 9: you know, sales up thirty percent. Broad Based strength across regions,
• 19:38
  Speaker 9: across channels, and across brands. I think the key thing
• 19:42
  Speaker 9: people are looking for was China. Arcterics recently had some
• 19:46
  Speaker 9: controversy in China with fireworks display in the Himalayas.
• 19:50
  Speaker 3: That what fireworks display?
• 19:53
  Speaker 2: He displayed fireworks in the Himalayans.
• 19:55
  Speaker 9: Arctics for set off fireworks exactly. It was definitely missed
• 20:02
  Speaker 9: up for an outdoor brand that's really focused on sustainability,
• 20:05
  Speaker 9: and there was definitely some concern that there would be
• 20:07
  Speaker 9: a little backlash in China. There's definitely a lot of
• 20:10
  Speaker 9: people upset about it, and they were fined by the
• 20:13
  Speaker 9: Chinese government and working.
• 20:15
  Speaker 3: To restore the ecology there.
• 20:17
  Speaker 9: But Greater China was up forty seven percent, momentum is
• 20:20
  Speaker 9: continuing into four Q so I think that was really
• 20:23
  Speaker 9: a big takeaway, just quelling investors' concerns about potential backlash
• 20:28
  Speaker 9: in China, especially because they're the number one outdoor sports
• 20:31
  Speaker 9: brand in China.
• 20:32
  Speaker 3: Arctereric So I had no idea that they have such
• 20:36
  Speaker 3: strong brands. I mean, a mare Sports on its own,
• 20:38
  Speaker 3: it's kind of it doesn't it's not memorable the name,
• 20:41
  Speaker 3: the parent company name, right, but the brands of course,
• 20:43
  Speaker 3: are Solomon Arctic. So Wilson, as you mentioned, what does
• 20:47
  Speaker 3: the tariff picture look like for this company?
• 20:49
  Speaker 9: Yeah, I think it's very similar to most of the
• 20:51
  Speaker 9: other companies. I think for them, what benefits them as
• 20:56
  Speaker 9: their premium positioning. They're able to raise prices and they're
• 20:59
  Speaker 9: not seen any backlash from consumers or pullback. They're still
• 21:03
  Speaker 9: seeing very strong full price sell through, so they're able
• 21:06
  Speaker 9: to offset some of those tariff costs with that, which
• 21:09
  Speaker 9: I think is really helping. And we're seeing that with
• 21:11
  Speaker 9: a lot of more of the premium brands are able
• 21:13
  Speaker 9: to kind of navigate through the tariffs since their consumers
• 21:16
  Speaker 9: are willing to pay upper K, upper.
• 21:19
  Speaker 3: K of the K shaped economy.
• 21:20
  Speaker 2: I guess I know that's I guess where you want
• 21:22
  Speaker 2: to be there. Talk to us about the footwear market here.
• 21:27
  Speaker 2: I think you know, Nike, Adidas, all that kind of stuff.
• 21:29
  Speaker 2: What's going on there?
• 21:30
  Speaker 9: Yeah, I think you know, we're in store for a
• 21:33
  Speaker 9: very interesting holiday season. I think that we're going to
• 21:37
  Speaker 9: continue to see the premium brands continue to do well
• 21:39
  Speaker 9: on holdings recently just reported and did phenomenal and they
• 21:43
  Speaker 9: also said they're not seeing any backlash on raised prices
• 21:46
  Speaker 9: and they'll continue to do you know, limited discounting through
• 21:49
  Speaker 9: the holidays. So we may see some differences between the
• 21:53
  Speaker 9: two companies, but we just had our recent BI survey
• 21:56
  Speaker 9: and Nike continues to lete. I think there's been concerned
• 22:00
  Speaker 9: over Nike, but they still are the major shareholder and
• 22:03
  Speaker 9: still a favorite brand of millennials. Gen Z's everyone for
• 22:06
  Speaker 9: the holidays, so they should continue to do well too.
• 22:08
  Speaker 3: What is the Mayorsports distribution strategy? Do they have a
• 22:11
  Speaker 3: DTC offering or are they going through third party retailers.
• 22:15
  Speaker 9: Yeah, that's a great question, so it's a little different
• 22:17
  Speaker 9: for each brand. For Arctics, they're leaning a lot more
• 22:21
  Speaker 9: into DTC. They've changed their distribution strategy from basically nine
• 22:25
  Speaker 9: eighty percent wholesale to eighty percent DTC over the last
• 22:29
  Speaker 9: three years, and they're really focusing on growing their store
• 22:33
  Speaker 9: base because I think not a lot of people know
• 22:34
  Speaker 9: about Arctics. It's really going to help the brand awareness.
• 22:37
  Speaker 9: So even in the US, they're looking to double their
• 22:40
  Speaker 9: store a count by twenty thirty. So that's that Solomon
• 22:44
  Speaker 9: continues to be wholesale, especially for footwear. We're seeing this
• 22:48
  Speaker 9: holiday season consumers strap for cash they're wanting to go
• 22:52
  Speaker 9: into the stores and try on their shoes and make
• 22:55
  Speaker 9: sure it's the right fit and buy them versus you know,
• 22:57
  Speaker 9: buy five pairs and return them.
• 22:59
  Speaker 6: Yeah.
• 22:59
  Speaker 9: So the wholesale distribution for Solomon and is really key,
• 23:03
  Speaker 9: and they're in a lot of key premium partners, I
• 23:06
  Speaker 9: would say, and you know the running specialty stores as well.
• 23:09
  Speaker 2: I mean, I'm looking at your report here, research your
• 23:11
  Speaker 2: reportal on the sneaker business. I didn't know there were
• 23:14
  Speaker 2: so many shoe manufacturers. I mean, Nike's the dominant one,
• 23:17
  Speaker 2: as you said, but there's like fourteen in your survey here.
• 23:20
  Speaker 4: Yeah.
• 23:21
  Speaker 3: Yeah, those are.
• 23:21
  Speaker 2: A competitive marketplace.
• 23:24
  Speaker 9: Definitely, it's getting even more competitive as consumers with AI technology,
• 23:29
  Speaker 9: you know, there's just such more of a breath of discovery.
• 23:33
  Speaker 9: So that's where product is really coming into play this
• 23:36
  Speaker 9: holiday season. I think, you know, the innovation, product and style.
• 23:40
  Speaker 3: If there's one thing to be worried about when it
• 23:43
  Speaker 3: comes to a mare sports, what would it be? I mean,
• 23:45
  Speaker 3: what's an area that they're not executing on?
• 23:49
  Speaker 9: So I think the China thing was the one uncertainty
• 23:52
  Speaker 9: for this quarter that we were Definitely it could have
• 23:54
  Speaker 9: gone either way, So that would be the biggest thing.
• 23:57
  Speaker 9: But honestly, they're executing on most of their things. Their
• 24:00
  Speaker 9: biggest drivers are DTC, Women's and China, and all of
• 24:04
  Speaker 9: those were up double digits and more. And they're really
• 24:07
  Speaker 9: gaining share in women's which I think is a big
• 24:09
  Speaker 9: new opportunity for them as more women joined the outdoor market.
• 24:13
  Speaker 2: All right, which have you purchased in the last twelve months?
• 24:16
  Speaker 2: Sneaker brands for baby boomers? Sketchers?
• 24:21
  Speaker 6: Yeah?
• 24:21
  Speaker 3: What what Sketches continues to win?
• 24:25
  Speaker 9: It's honestly, they're so comfortable, they're like the price point,
• 24:29
  Speaker 9: the quality, I know, I know, I know, I.
• 24:33
  Speaker 3: Know, but that is not something that they market out there,
• 24:36
  Speaker 3: that they put out there.
• 24:37
  Speaker 9: No, and they're the third largest footwear brand totally. Really yeah,
• 24:41
  Speaker 9: I think right behind Adidas.
• 24:43
  Speaker 3: Next you're going to tell me that, you know, the
• 24:44
  Speaker 3: boomers are using the shoes with the little wheel in
• 24:47
  Speaker 3: the back of.
• 24:47
  Speaker 2: Them, the wheelers, the wheels.
• 24:49
  Speaker 3: Yeah, no, they're doing the step ins. You don't even
• 24:51
  Speaker 3: have to bend down your shoe.
• 24:53
  Speaker 5: Is that's it?
• 24:54
  Speaker 2: That's what I think it is.
• 24:55
  Speaker 6: Ye.
• 24:55
  Speaker 2: I think you're right, all right, I mean, yeah, there
• 24:56
  Speaker 2: you go. I mean the kids, the gen Z the millennials,
• 25:00
  Speaker 2: they're still in that Nike brand Yeah brand still.
• 25:03
  Speaker 9: Or hokahs yeah, hokah, hokah and on are gaining, but
• 25:07
  Speaker 9: they're you know, they're still small, and I think people
• 25:10
  Speaker 9: don't realize that just because there's been such a big boom.
• 25:12
  Speaker 3: They're still very like.
• 25:13
  Speaker 9: West Coast East Coast oriented, you know, they still have
• 25:17
  Speaker 9: a lot more room to grow brand awareness in the US,
• 25:19
  Speaker 9: especially in the middle of America. So yeah, Nike continue
• 25:23
  Speaker 9: and their higher price points right if not everyone can
• 25:25
  Speaker 9: afford them.
• 25:27
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