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Tesla’s EV Sales Top Estimates With Car Business Stabilizing · Bloomberg Intelligence

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  Speaker 5: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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  Speaker 1: Let's talk a little Tesla.
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  Speaker 2: It's been a while since we talked about Tesla. It's
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  Speaker 2: almost like it's fallen a little bit out of the zeitgeist,
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  Speaker 2: as Tom Keen would say. Maybe it's because it's been
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  Speaker 2: eclipsed by, if you want to talk about Elon Musk,
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  Speaker 2: you talk about SpaceX. But Tesla delivered some better than
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  Speaker 2: expected results. cars during the most recent period. Stock's up 5% today,
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  Speaker 2: but it's down about 17% year to date. So they
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  Speaker 2: reported better than expected sales for the third quarter, delivering
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  Speaker 2: 486,500 vehicles worldwide. Craig Trudell, Global Auto's editor. It's front
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  Speaker 2: and center for him at Bloomberg News. He joins us
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  Speaker 2: live here in our Bloomberg Interactive Broker Studio. Craig, so
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  Speaker 2: they had a pretty good quarter in terms of deliveries.
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  Speaker 2: There used to be a time when that was the
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  Speaker 2: number everybody really hung on here. What's going on at
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  Speaker 2: Tesla these days?
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  Speaker 6: Yeah, it is difficult to cover because it feels like
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  Speaker 6: Groundhog Day a little bit, where this is a company
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  Speaker 6: where people increasingly care less about the here and now
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  Speaker 6: business and care much more about the future. Can Elon
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  Speaker 6: make good on all of this hype that he's built
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  Speaker 6: for humanoid robots and the AI business? In the meantime,
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  Speaker 6: they're still in the business of making and selling cars.
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  Speaker 6: And it's also not a whole lot going on there
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  Speaker 6: in terms of dramatic moves, at least in the last
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  Speaker 6: couple of quarters. You have had much better expected deliveries,
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  Speaker 6: but it is a company that's kind of in a
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  Speaker 6: holding pattern where when they do have a good quarter,
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  Speaker 6: it's roughly 500,000 units, but they've yet to crack that threshold.
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  Speaker 6: And that's happened now kind of repeatedly just the last
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  Speaker 6: three years, Colin.
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  Speaker 7: Yeah, it just feels like there's not a whole lot
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  Speaker 7: of excitement when it comes to Tesla vehicles. They only
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  Speaker 7: have three consumer models now, Model Y and Model 3
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  Speaker 7: and the Cybertruck, if you're into that. If you're into
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  Speaker 7: driving a car that looks like it's from the Minecraft movie.
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  Speaker 1: But in any case.
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  Speaker 7: Um, the car sales are still really, really important to Tesla,
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  Speaker 7: the company, right?
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  Speaker 2: Hugely.
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  Speaker 8: Yeah.
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  Speaker 6: And, and, uh, they do have an energy business that, uh,
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  Speaker 6: is important and, uh, is kind of an AI play, right? Uh,
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  Speaker 6: you know, and they've, they've been selling an awful lot of, uh, uh,
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  Speaker 6: battery storage, uh, systems actually to Elon's, uh, other companies, SpaceX. Uh,
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  Speaker 6: so it's a little bit of, uh, you know, uh,
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  Speaker 6: from one hand, uh, of Elon's empire to the other. Um, That,
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  Speaker 6: of course, though, is still a fraction of the amount
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  Speaker 6: of revenue in the business that they bring in.
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  Speaker 1: I mean, it generates cash flow. That's what they need.
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  Speaker 9: Absolutely.
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  Speaker 6: And this is a company that I think is benefiting
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  Speaker 6: from the fact that there's been some pullback in terms
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  Speaker 6: of competition here in the U.S. market where Ford and Stellantis,
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  Speaker 6: I would say in particular, really sort of have rethought
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  Speaker 6: electric vehicle plans in light of the Trump administration pulling
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  Speaker 6: support and incentives a year ago. So there's maybe a
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  Speaker 6: little bit more room to breathe, but also a shrinking
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  Speaker 6: market for EVs in the U.S. Things are also just
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  Speaker 6: getting more and more intense by the day in China.
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  Speaker 6: And even the very competitive Chinese manufacturers are having a
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  Speaker 6: hard time there this year, which is, I think, maybe
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  Speaker 6: an underappreciated story.
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  Speaker 3: All right.
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  Speaker 2: Talk to us about Tesla and its presence in China.
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  Speaker 2: Where are we now? Where did it come from? What's
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  Speaker 2: the future for this thing?
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  Speaker 6: I mean, they really had the red carpet rolled out
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  Speaker 6: for them. I think there was a sort of view
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  Speaker 6: that on the part of the CCP, if we bring
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  Speaker 6: in this really competitive company from outside, that kind of
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  Speaker 6: gets everybody motivated to move faster and be much more competitive.
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  Speaker 6: It might raise the game for the domestic industry. That
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  Speaker 6: really proved to be a great strategy because Tesla, it
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  Speaker 6: was a win-win for Tesla and China. You saw the
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  Speaker 6: rise of the likes of BYD. Geely is now much
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  Speaker 6: more relevant on a global stage. You've also seen kind
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  Speaker 6: of even in the tech space, some EV noise being made.
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  Speaker 6: But it is absolutely the case that a lot of
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  Speaker 6: those domestic players have kind of.
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  Speaker 2: Surpassed Tesla, both in that market.
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  Speaker 6: And even in Europe where you've seen real traction on
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  Speaker 6: the part of those domestic manufacturers.
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  Speaker 7: So pick up on what you were just saying about
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  Speaker 7: how the EV market in China is slowing down quite
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  Speaker 7: a bit. And even the Chinese manufacturers are now struggling
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  Speaker 7: to keep up the pace of sales.
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  Speaker 6: Yeah, it's a little bit has to do with some
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  Speaker 6: incremental pullback in state incentives. I think it also has
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  Speaker 6: to do with kind of the property market and some
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  Speaker 6: of the pressures that we've seen. I think just in general,
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  Speaker 6: there's a little bit of head scratching going on because
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  Speaker 6: maybe some of those factors understandably would lead to some pressure.
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  Speaker 6: But we've been seeing on the order of 20% month
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  Speaker 6: after month of year over year decline And that's really
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  Speaker 6: substantial for a car market the size of China. It is,
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  Speaker 6: you know, far and away bigger than anywhere else in
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  Speaker 6: the world. And so to see, you know, this industry
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  Speaker 6: with so many companies that rely on that market for
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  Speaker 6: volume move that substantially, I think it's actually reverberating, you know,
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  Speaker 6: I think especially for like a Volkswagen and is a
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  Speaker 6: major factor in why they're having so much issues.
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  Speaker 2: You are my Michigan State contact. I have two Michigan
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  Speaker 2: State contacts. Can you guys ever be relevant in the
• 5:53
  Speaker 2: Big Ten football again? It's not just you guys.
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  Speaker 1: It's Rutgers.
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  Speaker 2: It's Maryland. I don't know. I miss Mark D'Antonio.
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  Speaker 6: Those were the days. We had a single year with Tucker,
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  Speaker 6: Mel Tucker, who faded fast.
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  Speaker 2: But it's just a question of resources.
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  Speaker 6: Is Michigan.
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  Speaker 2: state can they do it.
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  Speaker 6: I think it it helps to have uh you know
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  Speaker 6: a former walk-on basketball player who now runs a mortgage
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  Speaker 6: company uh cutting checks but that seems to be working
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  Speaker 6: much better for the basketball program than the football program.
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  Speaker 7: Point in question paul can ever be relevant well craig
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  Speaker 7: can take the big questions absolutely exactly.
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  Speaker 2: But again i'm of the opinion that of all the
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  Speaker 2: big four power conferences there's three or four teams four
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  Speaker 2: And then everybody else is just an also rent.
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  Speaker 1: That's it.
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  Speaker 6: But Indiana, of course, was a big exception last year.
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  Speaker 2: That's exactly right. Why can't Michigan State do an Indiana?
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  Speaker 2: Why can't Mark Cuban do an Indiana?
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  Speaker 1: Stay with us.
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  Speaker 5: More from Bloomberg Intelligence coming up after this. You're listening
• 6:57
  Speaker 5: to the Bloomberg Intelligence Podcast. Catch us live weekdays at
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  Speaker 5: 10 a.m. Eastern on Apple CarPlay and Android Auto with
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  Speaker 5: the Bloomberg Business App. Listen on demand wherever you get
• 7:07
  Speaker 5: your podcasts or watch us live on YouTube.
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  Speaker 7: Let's talk a little bit about what's going on with
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  Speaker 7: consumer-facing companies. We know that consumers aren't feeling great about
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  Speaker 7: the economy right now. The consumer confidence data showed that.
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  Speaker 7: But do we spend? Do we not spend in that environment?
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  Speaker 7: It kind of depends. And you look at a company
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  Speaker 7: like Nike, which is very much dependent on consumer sentiment.
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  Speaker 7: The stock is down 5%. And, Paul, this all ties
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  Speaker 7: back to this restructuring that has taken a while to
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  Speaker 7: get through.
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  Speaker 2: Yeah, and it's really testing Wall Street's, I think, patience here.
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  Speaker 4: Absolutely.
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  Speaker 7: The CEO is a lifer from Nike. I think he
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  Speaker 7: started off there as an intern and he was supposed
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  Speaker 7: to turn this ship around. And the verdict right now
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  Speaker 7: is that it's not happening as quickly as people would like.
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  Speaker 7: Poonam Goyal is our senior U.S. e-commerce and retail analyst
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  Speaker 7: at BI here. And she's going to help us understand
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  Speaker 7: what's going on with Nike. How much of this, Poonam,
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  Speaker 7: is stuff that Elliot Hill inherited versus things that he
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  Speaker 7: did not fix once he inherited?
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  Speaker 4: I think it's a combination of both. So Nike started
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  Speaker 4: to slow down before Elliot Hill had come into the equation.
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  Speaker 4: That said, since he's come on board, what he has
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  Speaker 4: fixed is.
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  Speaker 8: North America and performance.
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  Speaker 4: So we do give him credit for that.
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  Speaker 8: Though there's so much more to fix.
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  Speaker 4: Sportswear, roughly 50% of Nike's business is still down. Jordan
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  Speaker 4: is down. And China is plunging as we speak. It
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  Speaker 4: was down 26% in the latest quarter. And things will
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  Speaker 4: probably get worse before they get better. So the fix
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  Speaker 4: isn't over. It's going to take more than 12 months
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  Speaker 4: in our view. And we don't know what steps they're
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  Speaker 4: going to take exactly and what will work from here.
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  Speaker 4: So waiting to hear more at the analyst meeting in November.
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  Speaker 4: But there's a lot of things that Nike still needs
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  Speaker 4: to fix to get this ship on board again.
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  Speaker 2: So there's a reporting on the Bloomberg that, you know,
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  Speaker 2: probably some investors are starting to get a little impatient
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  Speaker 2: with this management team here. Where are we on that?
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  Speaker 2: Is there any expectation for any changes at the top here?
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  Speaker 2: Because one could argue that this is an execution issue.
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  Speaker 4: Yeah, you know, I would say it's an execution issue
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  Speaker 4: if nothing was working. I do give Elliot credit for
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  Speaker 4: performance and the improvement that he's brought there. Performance grew
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  Speaker 4: high single digits in the latest fiscal quarter. In fact,
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  Speaker 4: you know, a couple of years ago, we were talking
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  Speaker 4: about running and how Nike just has lost all the
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  Speaker 4: momentum in running.
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  Speaker 8: And it's no longer that that's the case.
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  Speaker 4: Nike's running was actually up and it continues to be
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  Speaker 4: gaining market share. So they have done some things right.
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  Speaker 4: Where they're not doing well, is it an execution issue?
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  Speaker 4: I think it's a matter of prioritizing. It's a big business.
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  Speaker 4: It is the largest sportswear brand in the world. You
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  Speaker 4: can't turn everything at once. They focused on the biggest region,
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  Speaker 4: North America. They focused on the performance business. which is
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  Speaker 4: what Nike is known for. And I think those were
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  Speaker 4: the right steps to take here. So I wouldn't necessarily
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  Speaker 4: blame Elliott Hill for all the things that aren't still
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  Speaker 4: turned yet.
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  Speaker 7: It feels like Nike is kind of in the perfect
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  Speaker 7: position for an activist takeover, activist investor to come in
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  Speaker 7: and demand all kinds of things.
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  Speaker 1: Are we likely to see that with Nike, do you think?
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  Speaker 4: No, I'd say if an activist were to come in,
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  Speaker 4: what is it that they would do? How would they
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  Speaker 4: fix Nike from what the current strategy is today? Do
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  Speaker 4: they clean house by restructuring? Nike's already doing that. They
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  Speaker 4: have a pace plan in place, $ 2. 5 billion in cost
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  Speaker 4: savings through the plan with $ 1 billion in restructuring costs.
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  Speaker 4: So that's kind of taken care of. The next is
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  Speaker 4: how do you fix sportswear? How do you fix Jordan?
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  Speaker 4: How do you fix the business that's not performing? And
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  Speaker 4: that is all product-led. So I think Elliott has the
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  Speaker 4: team that is product-focused and product-led to fix that, if anyone.
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  Speaker 2: Talk to us about the competitive environment out there, because
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  Speaker 2: I don't know anything about it. This is how I
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  Speaker 2: buy a pair of sneakers. I go into the store,
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  Speaker 2: I go over to the Nike section, and I just
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  Speaker 2: pick out whatever one kind of looks good to me.
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  Speaker 2: That's how I do it. But there's a lot of
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  Speaker 2: other brands out there that I think are probably a
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  Speaker 2: fundamental challenge for this company.
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  Speaker 8: Yeah, absolutely.
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  Speaker 4: Look, when you went into the store six years ago,
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  Speaker 4: you probably saw Nike across the store. Today, when you
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  Speaker 4: walk into a store, there's a section on Nike, there's
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  Speaker 4: a section on On, there's Hoka, there's Brooks, there's Asics.
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  Speaker 4: The list goes on. So the customer has choices and
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  Speaker 4: they have choices wherever they go, whether it's online or in-store.
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  Speaker 4: And that's made it difficult for Nike to pick up
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  Speaker 4: the momentum as fast as it would have maybe 10
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  Speaker 4: years ago.
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  Speaker 7: I think that brings up a good point. I mean,
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  Speaker 7: at the end of the day, consumers want new things.
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  Speaker 7: They want a refreshed lineup of offerings. Nike was dominant
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  Speaker 7: in the 80s and for most of the 90s. And so,
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  Speaker 7: you know, tastes change. And so people don't want to
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  Speaker 7: be wearing Nikes anymore. I mean, is this just part
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  Speaker 7: of the natural rhythm of branding that, you know, at
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  Speaker 7: some points you have a moment of extreme popularity and
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  Speaker 7: then you have to go away for a little bit
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  Speaker 7: and then come back later on?
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  Speaker 4: I think it's not essentially that because Nike still has
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  Speaker 4: very high brand popularity. In fact, we run a survey
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  Speaker 4: twice a year on sneakers and we ask consumers, what
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  Speaker 4: is your most preferred brand when you think about sneaker shopping?
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  Speaker 4: Nike's still number one. So we don't think it's a
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  Speaker 4: brand perception issue here. We really think it's a product issue.
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  Speaker 4: When Nike brings new product, product that performs, product at
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  Speaker 4: the right price point, product that screams innovation, it does well.
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  Speaker 4: And we've seen that through Vomero, through Pegasus, through its
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  Speaker 4: cushioning and performance shoes that it's launched. It's the shoes
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  Speaker 4: that you just want to put a swish on and
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  Speaker 4: put out and you think they'll sell.
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  Speaker 8: That's not going to happen. You have to give the
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  Speaker 8: customer something.
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  Speaker 7: Once upon a time, that was the Jordan line. And
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  Speaker 7: Jordans are now suffering.
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  Speaker 1: What happened?
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  Speaker 7: What went wrong with how Nike protected this part of
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  Speaker 7: its brand?
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  Speaker 4: Yeah, so Jordan is a 13, Jordan's 13% of Nike sales.
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  Speaker 4: It's a $ 7 billion business. So it is definitely a
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  Speaker 4: big business. What went wrong here is that they kind
• 13:16
  Speaker 4: of just started flooding the marketplace with a bunch of
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  Speaker 4: different retro product. And the one thing about Jordan that
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  Speaker 4: makes it work is exclusivity, it's selection and it's scarcity.
• 13:27
  Speaker 8: So you need to have all three. And all of
• 13:30
  Speaker 8: that kind of disappeared over the past few years. So
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  Speaker 8: Nike is trying to bring that back.
• 13:34
  Speaker 4: And we think that if they get the right product
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  Speaker 4: in front of customers and they don't put too much
• 13:39
  Speaker 4: of it out, Jordan can come back to life. Basketball
• 13:42
  Speaker 4: is still a very, very well regarded and played sport.
• 13:45
  Speaker 4: They have a lot of the leaders endorsing that sport
• 13:48
  Speaker 4: from the players to even ambassadors on the field. So
• 13:51
  Speaker 4: we do think that Jordan is about product.
• 13:54
  Speaker 2: Let's just step back real quick before we let you go.
• 13:56
  Speaker 2: Christmas back to the holiday season. How's that shaping up
• 13:59
  Speaker 2: for retail this year?
• 14:01
  Speaker 4: I think if you have the right product, you will
• 14:03
  Speaker 4: get the sales. The consumer, despite all the economic data
• 14:06
  Speaker 4: that we're seeing, is spending, but they're spending on what
• 14:08
  Speaker 4: they want and where they want.
• 14:10
  Speaker 1: Stay with us. More from Bloomberg Intelligence coming up after this.
• 14:17
  Speaker 5: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 14:21
  Speaker 5: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
• 14:24
  Speaker 5: Auto with the Bloomberg Business App. Listen on demand wherever
• 14:27
  Speaker 5: you get your podcasts or watch us live on YouTube.
• 14:32
  Speaker 2: Tons of tech stuff, tons of technology, telecom media. And
• 14:37
  Speaker 2: to do that with an English accent, we have Matthew Bloxham,
• 14:40
  Speaker 2: senior media and tech analyst for Bloomberg Intelligence. He's based
• 14:42
  Speaker 2: over there in London, helping us run our Bloomberg Intelligence
• 14:46
  Speaker 2: London operation, covers all of Europe. but we got them
• 14:49
  Speaker 2: in New York this week, put them into work here. Matt,
• 14:52
  Speaker 2: I want to get the latest on the IPOs for
• 14:55
  Speaker 2: some of these big AI companies. I think Anthropix probably
• 14:58
  Speaker 2: scheduled to come first. I saw some reporting that they
• 15:01
  Speaker 2: like to get this thing done, you know, kind of
• 15:03
  Speaker 2: before Thanksgiving, the middle of November. Does that make sense
• 15:06
  Speaker 2: to you?
• 15:08
  Speaker 9: I think if you go in this year, it definitely
• 15:09
  Speaker 9: makes sense. I think realistically, yeah, anytime after Thanksgiving would be.
• 15:14
  Speaker 9: Pretty tricky to kind of deliver and then you obviously
• 15:16
  Speaker 9: then you're kind of then into the issues that well
• 15:18
  Speaker 9: then you have to kind of rewrite your S1 and
• 15:20
  Speaker 9: so it becomes an incremental amount of work. So you obviously,
• 15:23
  Speaker 9: you know, markets are, you know, rebounding after, you know,
• 15:27
  Speaker 9: they kind of pull back on all these concerns about
• 15:29
  Speaker 9: AI safety. You know, obviously a lot's happened in the
• 15:33
  Speaker 9: last week, not least the president's kind of gathering of
• 15:37
  Speaker 9: the great and the good from the industry.
• 15:39
  Speaker 2: Yeah.
• 15:39
  Speaker 9: To kind of come up with some kind of moral code.
• 15:42
  Speaker 9: So I think that helps give clarity. And I think
• 15:44
  Speaker 9: generally speaking, investors perceive this as almost strengthening the moat
• 15:49
  Speaker 9: for the likes of Anthropic, but it's going to make
• 15:52
  Speaker 9: it harder for people to catch up with them. Clearly
• 15:55
  Speaker 9: their revenue momentum is pretty good. I think OpenAI is
• 15:58
  Speaker 9: perhaps kind of closing that gap a little bit. So yeah,
• 16:01
  Speaker 9: I think all those things suggest that if they can
• 16:03
  Speaker 9: get it away, before Thanksgiving, then it would be a
• 16:07
  Speaker 9: good idea to do that.
• 16:08
  Speaker 2: Yeah, you mentioned we did have a little bit of
• 16:10
  Speaker 2: a pause in that AI momentum, stock price momentum here,
• 16:13
  Speaker 2: and caused in part by, as you mentioned, some of
• 16:16
  Speaker 2: the leaders of the industry, Sam Altman and Elon Musk
• 16:19
  Speaker 2: and some others saying, hey, maybe we should put some guardrails,
• 16:21
  Speaker 2: maybe we should slow it down. People kind of saw
• 16:23
  Speaker 2: that for what it might have been, which is, hey,
• 16:26
  Speaker 2: we've already established our leadership position, let's slow it all
• 16:28
  Speaker 2: down for everybody else.
• 16:29
  Speaker 1: Yeah.
• 16:30
  Speaker 2: But you think that meeting at the White House just
• 16:33
  Speaker 2: helped kind of allay some of those concerns?
• 16:35
  Speaker 9: Yeah, I think it was helpful just generally to get
• 16:38
  Speaker 9: all of those different perspectives out in the open. And,
• 16:41
  Speaker 9: you know, obviously a lot of the headlines made it
• 16:43
  Speaker 9: seem quite polarized, but certainly between President Trump and the
• 16:47
  Speaker 9: likes of Sam Altman. But I think, you know, actually
• 16:51
  Speaker 9: when you looked below the headlines, there was quite a
• 16:54
  Speaker 9: bit of common ground. And I think everybody acknowledged it.
• 16:56
  Speaker 9: I mean, it's hard not to acknowledge that there are
• 16:58
  Speaker 9: safety concerns with AI because, you know, all of these
• 17:00
  Speaker 9: kind of breaches that we've seen. And those do create,
• 17:04
  Speaker 9: you know, systemic risks for financial industry, for perhaps kind
• 17:08
  Speaker 9: of energy supply, all sorts of things. And so I
• 17:11
  Speaker 9: think having some clarity around that is kind of helpful
• 17:14
  Speaker 9: for the whole industry. And I'm sure that some of
• 17:17
  Speaker 9: this was brought together up to the surface, because probably
• 17:21
  Speaker 9: in some of these kind of pre-IPO investor meetings that
• 17:23
  Speaker 9: companies do, the feedback from the bank is, well, this
• 17:27
  Speaker 9: is an issue that you're going to get asked about
• 17:29
  Speaker 9: repeatedly through your roadshow. We need a clear answer about it.
• 17:32
  Speaker 9: And it's not something that one company on its own
• 17:34
  Speaker 9: could have a clear answer to. So I think it's
• 17:35
  Speaker 9: been helpful for the industry as a whole.
• 17:38
  Speaker 2: In terms of trying to regulate the industry, on the
• 17:40
  Speaker 2: one hand, I can't imagine my government has any capability
• 17:44
  Speaker 2: to do that whatsoever. Guys are still using BlackBerrys down
• 17:46
  Speaker 2: there in DC. They don't know what's going on. But
• 17:49
  Speaker 2: on the other hand, that whole self-regulating thing also has
• 17:53
  Speaker 2: a ton of risk. You know, can you really trust
• 17:56
  Speaker 2: these guys to do a good job? But the overarching
• 18:00
  Speaker 2: issue is, in the United States, one of the reasons
• 18:03
  Speaker 2: that the technology industry has been so successful is that
• 18:06
  Speaker 2: the government has generally taken a light touch from a
• 18:09
  Speaker 2: regulatory perspective. So how do you think this might play out?
• 18:12
  Speaker 9: Yeah, I think it's going to continue to be primarily self-regulation.
• 18:19
  Speaker 9: yeah i can't see why the u.s government would ever
• 18:21
  Speaker 9: think that moving away from a light touch approach is
• 18:24
  Speaker 9: a good idea and you know when you contrast that
• 18:26
  Speaker 9: with uh europe which has historically had an incredibly heavy
• 18:29
  Speaker 9: touch um uh you know you can see the benefits
• 18:32
  Speaker 9: of of how the u.s approach has kind of helped
• 18:34
  Speaker 9: the industry and you know even the best regulator or
• 18:39
  Speaker 9: best legislator in the world is going to struggle to
• 18:42
  Speaker 9: kind of get anywhere close to the kind of um
• 18:45
  Speaker 9: the speed of change in the industry and creating broad
• 18:48
  Speaker 9: frameworks for this stuff is incredibly difficult. So to some degree,
• 18:51
  Speaker 9: it's better to just rely on broad principles of legislation
• 18:54
  Speaker 9: and policy and make sure that industries are kind of
• 18:58
  Speaker 9: fitting within those kind of cross-sector guidelines.
• 19:00
  Speaker 2: To Europeans, not the companies, not the regulators, but just
• 19:03
  Speaker 2: Europeans on the street, how do they feel about the
• 19:05
  Speaker 2: fact that they did not participate in the technology wealth
• 19:10
  Speaker 2: creation in a sense of it all happened in the
• 19:13
  Speaker 2: US and in Asia, Europe, there's no real tech in Europe.
• 19:18
  Speaker 2: And did they look at that as a fundamental problem
• 19:20
  Speaker 2: or no?
• 19:22
  Speaker 9: I'm not sure if they kind of think about it
• 19:26
  Speaker 9: quite that deep. Certainly not your average kind of European citizen.
• 19:30
  Speaker 9: I mean, obviously, historically, Europe's been an incredibly kind of
• 19:34
  Speaker 9: industrial manufacturing-led economy. Germany is struggling with that. So I
• 19:38
  Speaker 9: think a lot of the kind of focuses a lot
• 19:40
  Speaker 9: more about what do we do to kind of protect
• 19:43
  Speaker 9: and kind of reignite momentum in that strong industrial base.
• 19:48
  Speaker 9: Obviously countries like the UK have a much more service-led economy,
• 19:52
  Speaker 9: but it's much more around financial services and legal and consulting. And,
• 19:56
  Speaker 9: you know, clearly there are risks around that from AI. But, yeah,
• 20:00
  Speaker 9: it's not something that I think kind of really people
• 20:03
  Speaker 9: navel gaze about too much. There's kind of more pressing
• 20:06
  Speaker 9: concerns in Europe that they're kind of looking at.
• 20:09
  Speaker 1: Stay with us. More from Bloomberg Intelligence coming up after this.
• 20:16
  Speaker 5: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 20:20
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• 20:23
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• 20:26
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• 20:30
  Speaker 7: Let's now switch gears and talk about a company that
• 20:34
  Speaker 7: has gotten a lot of interest of late, and it's
• 20:36
  Speaker 7: the toy maker Mattel, the maker of Barbie. And it's
• 20:40
  Speaker 7: gotten some interest, some M & A interest. So let's
• 20:43
  Speaker 7: bring in Lindsay Dutch. She's our consumer hard lines and
• 20:45
  Speaker 7: beauty retail senior analyst to talk a little bit more
• 20:48
  Speaker 7: about this company. potential M & A interest. Lindsay, the
• 20:52
  Speaker 7: company that is looking into Mattel is Authentic Brands. This
• 20:56
  Speaker 7: is a asset-light company that just collects a lot of brands, right?
• 21:00
  Speaker 7: And Mattel is a powerful brand for Authentic, potentially.
• 21:04
  Speaker 8: Yeah.
• 21:04
  Speaker 1: Hi, Scarlett.
• 21:05
  Speaker 10: Thanks for having me.
• 21:07
  Speaker 3: And yes, Authentic has been scooping up brands left and
• 21:10
  Speaker 3: right over the past several years now.
• 21:12
  Speaker 10: And I think.
• 21:14
  Speaker 3: Mattel's Barbie and Hot Wheels brands are probably very appealing
• 21:19
  Speaker 3: for them. The Wall Street Journal reported that they're offering
• 21:22
  Speaker 3: over $ 20 a share. That's a 58% premium to the
• 21:25
  Speaker 3: close on September 30th. And we think that premium is
• 21:31
  Speaker 3: because Authentic probably sees some unique opportunity where they can
• 21:38
  Speaker 3: loop in Mattel's powerhouse brands, Barbie, you know, with some
• 21:43
  Speaker 3: of the other brands that.
• 21:44
  Speaker 10: They have purchased.
• 21:44
  Speaker 3: Like Reebok comes to mind doing some sort of cool collaboration.
• 21:48
  Speaker 10: And we know from the Barbie movie a few years.
• 21:51
  Speaker 3: Ago that those collabs and the Barbie brand is quite
• 21:56
  Speaker 3: powerful and it is quite lucrative.
• 21:58
  Speaker 1: Yeah.
• 21:59
  Speaker 2: I'm looking at Mattel stock here, you know, 14 and
• 22:02
  Speaker 2: change here. That's quite a discount from $ 20. Is there
• 22:05
  Speaker 2: a lot of skepticism, I think, in the marketplace here?
• 22:08
  Speaker 2: What has the company said? Has Mattel responded at all?
• 22:11
  Speaker 3: Yeah, so Mattel has not responded. The offer, you know,
• 22:15
  Speaker 3: does come at a very interesting time. Yanan Preetz, who
• 22:18
  Speaker 3: had been leading Mattel for about eight years, he had
• 22:21
  Speaker 3: the longest tenure, you know, in a while for Mattel,
• 22:25
  Speaker 3: drove a key turnaround for the toy maker. And We
• 22:29
  Speaker 3: just got word that he was stepping down, I think,
• 22:31
  Speaker 3: effective today. And the chairman of the board, Roger Lynch,
• 22:35
  Speaker 3: was stepping in to lead the company, effective immediately, essentially.
• 22:41
  Speaker 3: So it's coming at an interesting time, a change of
• 22:44
  Speaker 3: management for Mattel. There's also been pressure on Mattel from
• 22:47
  Speaker 3: several activist investors over the past couple of years. You know,
• 22:50
  Speaker 3: that's really, you know, Inan drove this great turnaround and
• 22:54
  Speaker 3: then growth kind of has tapered off in the past
• 22:57
  Speaker 3: year or two. You know, Barbie has been struggling since
• 23:00
  Speaker 3: the movie. Fisher Price, another Mattel brand, just really hasn't
• 23:05
  Speaker 3: come back and rebounded. So there's a pressure on the company,
• 23:08
  Speaker 3: you know, in multiple ways and this executive turnover. So
• 23:12
  Speaker 3: now this takeover offer is just really shaking things up
• 23:15
  Speaker 3: for this company.
• 23:16
  Speaker 7: Yeah, the timing is so interesting that it all kind
• 23:18
  Speaker 7: of happens at once.
• 23:19
  Speaker 2: Yeah, very interesting.
• 23:21
  Speaker 7: How does Matt Mattel compare against Hasbro, the other big
• 23:25
  Speaker 7: toy maker in the US? Yeah, so Hasbro is the
• 23:29
  Speaker 7: nearest peer, and some of the activist letters that have
• 23:33
  Speaker 7: sent to Mattel are really encouraging sort of a merger between.
• 23:36
  Speaker 8: The two of them.
• 23:37
  Speaker 3: Hasbro, though, has gone through its own transformation over the
• 23:42
  Speaker 3: past couple of years, and they're really moving in.
• 23:45
  Speaker 10: They want to be known for digital gaming.
• 23:47
  Speaker 3: They own the Magic the Gathering strategic trading card game,
• 23:52
  Speaker 3: and that is really huge for them.
• 23:53
  Speaker 10: That's really what's driving growth.
• 23:56
  Speaker 3: So I see it very unlikely for there to be
• 24:00
  Speaker 3: some sort of competing bid, especially from Hasbro. You know,
• 24:04
  Speaker 3: I think Hasbro really wants to focus on those growth
• 24:06
  Speaker 3: areas that they have paved.
• 24:08
  Speaker 10: The way for themselves.
• 24:10
  Speaker 3: And Mattel's portfolio really skews more to classic toy categories, dolls.
• 24:16
  Speaker 10: Hot Wheels being vehicles.
• 24:17
  Speaker 3: And then, like we said, the Fisher-Price infant-toddler preschool category.
• 24:22
  Speaker 10: Those categories have been really slow growth as of late.
• 24:25
  Speaker 3: And I don't quite see Hasbro wanting to lean more
• 24:28
  Speaker 3: heavily into those, you know, rather than the growth categories
• 24:32
  Speaker 3: that they're really going after.
• 24:33
  Speaker 2: Talk to us about just the toy industry these days.
• 24:37
  Speaker 2: Are parents still running out there to buy their kid
• 24:40
  Speaker 2: the G.I. Joe with the Kung Fu Grip? What's the
• 24:41
  Speaker 2: growth story there?
• 24:44
  Speaker 3: I'm glad you asked that. So I was just looking
• 24:46
  Speaker 3: at some Circona data. And so the toy industry actually
• 24:50
  Speaker 3: had its best first half in six years.
• 24:53
  Speaker 1: The U.S.
• 24:54
  Speaker 3: Dollar sales were up 17 percent, globally up 14 percent.
• 24:59
  Speaker 8: That's huge.
• 25:00
  Speaker 3: The thing is, it's only being driven by a couple
• 25:03
  Speaker 3: of categories, one of them being trading cards, the second
• 25:08
  Speaker 3: games and puzzles, and then also building sets, which is
• 25:12
  Speaker 3: largely Lego.
• 25:14
  Speaker 10: And not only is it just.
• 25:15
  Speaker 3: These three categories, it's also really being driven by adult
• 25:21
  Speaker 3: and teen demand. So it's not really demand coming from
• 25:26
  Speaker 3: kids and sort of the classic demand driver that we
• 25:29
  Speaker 3: would think about for toys. So it's a very interesting dynamic,
• 25:33
  Speaker 3: especially heading into holiday. I think when demand does skew
• 25:38
  Speaker 3: a little bit more towards those classic drivers, it's a
• 25:42
  Speaker 3: very interesting setup. And again, when we come back to
• 25:46
  Speaker 3: Mattel's portfolio, instead of that double-digit growth, which the industry
• 25:50
  Speaker 3: has seen in the first half, you know, they're only
• 25:54
  Speaker 3: expecting a low to mid single digit growth for sales
• 25:57
  Speaker 3: for the year. And that's really reflecting the fact that
• 26:00
  Speaker 3: they don't, they aren't in trading cards. They have some
• 26:04
  Speaker 3: building sets, but it's really not quite competitive with Lego
• 26:07
  Speaker 3: and they're not really in collectibles. So it's really the
• 26:10
  Speaker 3: industry is being driven by these pieces, these new emerging
• 26:14
  Speaker 3: pieces of the business. And that doesn't quite line up
• 26:17
  Speaker 3: with some of these legacy toy maker portfolios.
• 26:20
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