Nike earnings, McCormick & Co. CEO: Market Domination Overtime

On the second-to-last trading day of June 2024, stocks (^DJI, ^IXIC, ^GSPC) appear muted ahead of Friday's highly anticipated Personal Consumption Expenditures (PCE) index. Market Domination Overtime Hosts Josh Lipton and Alexandra Canal take investors through the closing bell and beyond.

Yahoo Finance Executive Editor Brian Sozzi sits down with McCormick & Company (MKC) CEO Brendan Foley on how the food company plans to capitalize on value-seeking consumers.

Nike's (NKE) fiscal third-quarter earnings results came out mixed, reporting a revenue miss after Thursday's close. Morningstar Senior Equity Analyst discusses what it may take to reignite sales momentum for the popular activewear brand.

This post was written by Luke Carberry Mogan.

Video transcript

That is the closing bell on Wall Street and now it's market domination over time.

Let's see where the major averages ended up here.

Ali, I'm gonna use the word muted.

I feel comfortable using that word the dow.

We're up about 36 points.

The S and P basically flat tag down about five points there.

The NASDAQ leads your way.

It's up about 3/10 of a percent.

Of course, tomorrow, Ali we do have some important inflation data on, on tap.

We got May's core P ce we know that is the Fed's preferred inflation gauge.

Investors would like to see a good print there, maybe increase the chances that the Jay Powell and his policymakers do lower rates later this year.

But we shall see, you know, we we shall see and like we're seeing on our screen now, the NASDAQ the leader here.

And that's where I wanna pick up this next conversation because as the quarter comes to a close, we're seeing the concentration and big tech fueling a lot of those market gains with Amazon hitting two trillion.

And in video continuing to defy expectations for more.

We bring to show you that market strategist for Black Rocks target allocation business to show.

Thank you so much for joining us.

As we were just saying, there's been a lot of concentration when it comes to big tech.

What are the potential risks there?

We don't see that broadening out of the market in the second half of the year.

Yeah.

Listen, we can focus a lot on the risks.

I, I think that's, you know, again, uh tough for a lot of people because uh most people came into the year expecting some kind of broadening out.

Maybe that whine that you're hearing is the noise of everyone complaining about the fact that we haven't had that so far.

Listen, the market is doing its job, it is chasing higher fundamentals and where you're getting higher fundamentals are in those pockets of the market that are driving earnings growth by no surprise that happens to be tech or we like to call the tech plus including some of those uh consumers, uh the communication services names uh that often get lumped in with that mag seven as you're showing on the graphic uh uh as well as the growth names and in our target allocation portfolios which you know, any advisor can follow on Blackrock's Advisor Center and you could see what we're uh you know, looking at, buying and selling in our portfolios.

We've been very heavily overweight this theme.

Uh and part of the reason has been because earnings have given us no reason to move off of it.

Uh, and that's happened in the last season.

It's been happening in the last few seasons that we've been seeing.

It certainly isn't likely to continue into perpetuity.

But until we see some sort of broadening in earnings, it's unlikely you're going to see some sort of broadening in the market and absent some kind of major market macro catalyst.

Uh, you're not gonna have that happen And just, you know, as, as a sort of footnote to that a market catalyst, that's a big sort of major macro driver of stocks is also going to be uniform condition for the growth names and for the tech names just like it hurt them in 2022.

So, you know, for us, that's a reason to stay bullish and stay bullish in this particular area, the market where we're seeing above average earnings growth where we're seeing, uh you know, those pockets of the market really driving the market higher and the market's doing its job in prices, reflecting the reality that we're seeing in those stocks.

You know, it's interesting because you, you hit on one theme, you'll hear a lot about and, and it certainly investors are focused on this, this idea.

Well, we've had this rally but it, it's been so narrow and, and we've had any number of strategists come on that they, they throw a yellow flag at that tou sure gets them a little nervous.

The other theme I do wanna get your take on it is you'll hear folks kind of talking about the economic data and we got more today and, and now whether you know, is that calling into question on the soft landing scenario?

And maybe folks getting a little bit more skeptical.

Ho how are you feeling about that tar?

Are, are you in that soft, softish landing camp?

Well, we've soft landed at this point in time.

II, I think, you know, talking about what type of landing we're gonna have was a very 2022 2023 conversation maybe.

Uh I, I think you should have to look at the reality.

Uh You know, the, the last federal reserve rate hike was, you know, far, far in the past at this point in time.

If there was some transmission mechanism that we were gonna see an economic impact, we should have seen it by now and, and I think we are seeing it in some pockets of the data and it goes back to this broadening out, sorry to keep harping on, you know, where the challenge flags are coming from.

Um, or, or the yellow flags that are coming from.

You know, I'll throw a challenge flag on it and say, look, it's all related to some degree.

Uh uh uh and unfortunately part pockets of the market that rely on financing costs that rely on the ability to have sort of, uh you know, projects shovels in the ground.

Things that are, uh you know, gonna be dependent on the cost to finance those projects.

They're gonna struggle and they have been struggling.

Uh I think other areas of the market where you're seeing revenue in the door, you're seeing orders in the door and you're seeing sort of strong economic activity are not.

And the econom economy as a whole, I beg your pardon?

I, I is, is an amalgamation of all of that and, you know, some pockets of the market and the consumer have ex uh remained extremely strong.

Uh some pockets of the market, certainly on the industrial side.

Uh And, you know, next week we'll see that continuation, maybe on the manufacturing and industrial sort of data that's coming through have not.

Uh and it is an unequal economy, it is an unequal economy for those respects.

I think if we sort of detach ourselves from worrying about how we define what the economic cycle has looked like for the last, you know, six months to a year and just sort of reflect the incoming data continues to remain strong, but there is weakening at the margin.

I think that informs us for how we wanna look going forward, which is that, you know, we see a Federal reserve that is on the precipice of having to sort of make maintenance cuts or, or, or, or look at uh uh cutting rates.

Certainly comments from uh Raffel boss just before I, you know, we started this segment reflect a lot of that reality, which is that higher rates have bitten the portion of the market that they were going to bite.

Uh, but as a whole, the economy, um, ha has ma managed to sort of weather that storm and has landed quite softly overall.

All too short.

Thank you so much for joining us, my friend.

That was a great discussion.

I appreciate it.

Thanks for having me shares of mccormick Higher today.

It's after the seasonings maker easily beat quarterly estimates for earnings and sales.

Yahoo Finance's executive editor, Brian Sozzi is standing by with the CEO of mccormick Brendan Foley to discuss the most recent quarter.

So you take it away.

All right.

Thanks so much, Josh.

I appreciate it.

Yes, man, of the hour here, Brendan Foley, a couple of hours from, uh from his earnings call.

Thanks for joining us here on Ya.

Finance.

Great, thanks.

Uh, so tell us a little bit about the, the state of the consumer when they entered that supermarket.

What is your data show?

They're doing well.

We're seeing our consumer business grow right now and, and a lot of it is we, we're meeting the consumer where they are, what we're seeing though is they're definitely, you know, the consumer is definitely showing a lot and exhibiting a lot of value seeking behavior.

They're being really more selective on price points and, and we definitely see that throughout the store.

Uh, what we're seeing though in the perimeter is that we're seeing more shopping going on to the perimeter.

Um People are looking and when they usually do that, they're doing it because they're saving money or they're not eating out as much.

And so that definitely gives an indication of where the trends are.

Uh, spices and seasonings are doing well in that environment and they tend to do well because people want a way to flavor their proteins or their vegetables or whatever it might be.

And that's just an opportunity for us.

We're, we're definitely seeing a lot of growth from that and we, we're winning because of it in terms of unum, are you having to become more promotional in the items?

You get to get them out of the perimeter into the center of the store?

Well, you think about our, a lot of our products, with the exception of one or two of our brands are in the center of store.

We actually have some brands also in the perimeter too that are doing really well because of that traffic.

It's Gourmet Garden is one of the brands that we have there.

But what we're seeing, I think from a price point standpoint is uh you know, parts of our portfolio, we took a hard look at them and make sure, you know, are these at the right place right now to make sure that we're gonna grow volume with the consumer meet them where they are.

So we did a little bit of, you know, uh taking a look at some price points, make sure they were sharp enough to make sure they could grow volume.

But it's also about driving more brand investment.

We're doing a lot more brand marketing right now and we're also launching a lot more innovation.

There's a big focus around that.

Isn't this the perfect environment for your brands?

Uh The fast food companies, like you mentioned, traffic challenges.

Isn't this the point?

People just hunker down in their homes and say I'm not going to spend $15 for a value menu at mcdonald's.

I'm gonna cook a chicken breast at my barbecue.

Well, we serve all segments in food service and it's a really diverse, you know, area from quick serve restaurants all the way to independent restaurants and colleges and universities and we're seeing part of our business.

We're actually seeing growth in our branded food service business and there are segments in there that are actually doing quite well.

And so, uh for us, it's been a growth area.

I mean, if you go to AAA fast casual restaurant right now and you, you might see Cholula there on the table top or Frank's Red Hot and that's opportunities for us.

We're doing limited time offers with, with a lot of, you know, uh restaurant partners.

Uh one that we have like with Wendy's, they're, they launched the Breakfast Burrito.

I'm a big Wendy's fan.

They paired it with Cholula, you know, and so these are opportunities for us to continue growing and expanding our brands.

Talk a little bit about on the earnings call.

Uh Brendan's some weakness in, in the fast food channel and I guess packaged foods is that is the packaged food weakness is that Pepsico and because of the slowdown in snacks, what we're seeing broadly, I think in, in center of store is, is just slightly softer volumes of where people would wanna be right now.

And we're also like you just said, saw it in the QSR channel as well.

Um But broadly, when we take a look at our flavor solutions part of our, our business and that's what uh you're mentioning there.

You know, we're working a lot with our customers on innovation, what their plans are for the balance of the year.

And we feel we're a little bit more optimistic about where that will go because people are focusing on where they can, you know, meet the consumer and um you know, where they are and we're seeing a little bit more activity there, any relief and inflation coming for, for households.

I I think right now it's hard for me to tell what inflation is gonna be in 2025.

But certainly it came down, I think broadly for everyone as we think about input costs.

Uh but still, you know, this is something that consumers are really worried about, there's a compounding impact of inflation out there.

And definitely, you know, that's been, I think uh uh still slowing down.

I think the overall growth that we see our business though, we're starting to really, you know, grow volume.

We're doing really well in the Americas region, in the US.

We're doing well in the EME A, I think we're finding a way to make sure that we, we work through that with consumers and it's a whole holistic program that we got in terms of just increased investment, innovation, brand, marketing, thinking about price points in the right way, we're finding a way to win.

This is a real interesting time for pa the packaged food industry there has started being be the return of of some deal activity.

You your brand has been known to make big deals.

Is there an acquisition to be had out there that drives more growth at mccormick MN A has been a part of our growth algorithm for for some time.

So that's definitely something that we always continue to look at.

Um Having said that it's also a priority for us to pay down debt, make sure we're returning cash to shareholders.

But M and A remains a key part of our strategy.

We're always looking at opportunities.

I would be uh I I can't neglect mentioning some of these products on the table grilling season.

These are all things creamy dill pickle mustard spread.

I I'm unsure where that product came from.

But maybe you could tell us and what has been the start to grilling season for your brand.

What are you seeing with consumers?

Are they opening up their check or pocketbooks to, uh, grill up their meat?

We're seeing a great start to the grilling season.

It's exciting as we go here next week, it's gonna, we're gonna, a lot of people are gonna be grilling.

I'm gonna be grilling.

I know you're gonna be grilling and, and we see a lot of opportunity right now just in terms of all the brands that we have that really address kind of that summer grilling occasion.

Frank's Red Hot.

It's also gonna be the French's brand grill mates.

Montreal Steak is a great favorite for everyone.

You know, the, the dill pickle sauce right there.

You know, that's a little that's an indication of spread, sir, it spreads, but it's that creamy dill pickle.

That is an example of where we're seeing trends move.

So we probably identified that trend a couple of years ago.

It didn't come mainstream yet.

And now it is lastly, you have an Investor Day and I'm sure you don't wanna divulge everything that's going to be talked about there.

But what should investors expect in terms of innovation in packaging and where can you see this, this brand going when you think about the mccormick brand we're already leading with packaging innovation just in our core herbs and spices portfolio right now, if we, we started a big renovation in that part of our business uh last year and it's now fully on shelf or almost completely on shelf.

And what's great about it is it's delivering more benefits to the consumer and even simple things like printing the spice name on the cap with the best.

Yeah, I never actually realized that.

Yeah.

So these are simple things, but we're also doing it so that we're creating packaging technology that leaves the product fresher uh you know, before you get it.

And that's a really key priority for consumers.

So having fresher product fresher, you know, spices and herbs is, is something that we built into this packaging innovation.

We'll continue to look at packaging innovation.

It's also about sustainability though.

So in that particular package is 50% post consumer recyclable.

We have new Frank's uh bottles in restaurants now and it's gonna be colored red.

So you don't have to see through the bottle, but it's 100% post consumer recyclable plastic.

So every time we touch a package, we're also looking for sustainability opportunities.

It's innovation.

Uh You can believe in sir uh mccormick Co, Brendan Foley.

Good to see you.

Uh Good luck grilling season.

I hope you uh do not burn your meat like I will probably will I appreciate it.

All right.

Uh Do stay uh stay tuned to Yahoo Finance.

We uh have Nike earnings analysis uh coming out very very shortly.

Nike's fourth quarter results are just crossing the wire wire right now.

Let's let's give those to you Q four eps 99 cents versus 66 cents.

So that is a beat on the bottom.

Q four revenue comes in light though 12.61 billion that is versus estimates of uh 12.86 billion Q four gross margins it looks like also did come in light again, relative to expectations, 44.6 versus what was expected.

45.3 greater China revenue though that does look better than expected just coming in better than expected.

1.86 billion forecast on the street alley is 1.83 billion.

Yeah, it's interesting to see the reaction to shares right now now they were positive but now we're seeing them dip.

Uh we did see like you mentioned that margin miss that revenue miss.

Although the EPSB and I think the China story actually wanted to focus on because China has been a region that Nike has really struggled in.

But I think what's going to be really important here is for looking guidance the outlook and I did see something that fourth quarter challenges is leading to an update to fiscal 2025 outlook there.

And I'm not seeing exactly what the forecast is right now, but that tells me that it's not good.

Right.

Let me just correct.

One thing I said, uh uh Q four eps 99 cents.

The estimate was actually 85 cents.

I just wanna make sure I, I got that right.

That's still a beat on the, on the bottom.

I just wanna make sure I got that correction in there.

Uh interest.

The initial reaction here.

Not great.

We're down about 4% and the stock had already underperformed, heading into this print.

Remember, I mean, year to date, it was already down about 13%.

So it's initially here, some disappointment, obviously, questions for investors uh about that top line, I think will be front and center.

What are the puts and takes?

What, what did analysts not see coming?

Um perhaps and then broader questions, you know, product innovation, China Olympics, right?

It's really about the future here, right?

What can Nike do to reinvigorate itself, especially amid all of this intense competition?

What new products can we come up with?

How can we best position this company for future growth?

Now that being said Nike has done some cost management which has been positive on the street but but for now, it seems like investors aren't that impressed, but we want to break down these results that are crossing the wire again, beating estimates on earnings per share of revenue coming in light of estimates.

And here to dive a little bit deeper into this print is David Swartz, senior equity analyst at Morning Star Research.

David.

Thank you so much for joining the program.

What sticks out to you here.

It seems like we got a bit of a mixed bag but shares are down more than five.

Right.

Right.

Around 5%.

Yeah, I think the sales number is, is pretty weak down 2%.

So I was looking for a 1% sales growth number for the quarter.

So the sales were light.

I think that's probably the, the main concern, as you mentioned, the EPS was above estimates.

Uh I was at uh 88 cents and and 90 reported 99 cents.

That's really been common though Nike has consistently uh beaten EPS estimates in recent quarters.

So probably people expected that although some analysts have lowered their EPS numbers, it looks like mainly that the performance was due to lower operating costs.

Are you surprised by these, these uh the greater China numbers, David, it looks like 1.86 billion that does just beat the estimates 1.83 billion.

What, what are the puts and takes in that market for Nike?

I think that the China numbers are still pretty low compared to what Nike should be doing and and can do in China.

Um You know, I think Nike can get back to double digit sales growth in China.

We haven't seen that recently.

Um So I think that people are still concerned that Nike uh is still not really performing that well in China.

Now, Nike just opened up a big uh house of Flight store in Beijing.

Uh Nike's been doing a huge amount of marketing in China.

So it's certainly a big focus to the company, but it does seem that Nike's um recovery there is taking a little bit longer than people probably hoped.

So, David, how can Nike re reignite and reinvigorate this sales group?

Does it all come down to that product innovation?

That's certainly a big part of it.

Uh We do have a lot of Nike products coming out later this year, Nike held a big marketing event in Paris recently ahead of the Olympics.

Nike will be releasing a lot of products around the Olympics.

They also be doing a lot of marketing and also a lot of new products in the following winter seasons.

Most likely, we won't see a big impact on sales from the new products until fiscal 2025 probably late in the year, uh late in the fiscal year.

So, um that's probably a bit of a concern for investors that it could be a another couple of quarters before Nike sort of gets back to sales quote.

And, and David, what, what is in the, you talking about the product innovation, what's in the pipeline here that we know about that you think is gonna excite consumers and investors.

Well, like he has a lot of new running shoes out, new technologies, you know, new versions of air and, and its other main products.

Um We'll have to see exactly.

You know, whether any of them are big enough to drive sales.

It has been some years since, um, Nike put out uh vapor Max and, and other top selling products.

Uh We have, I haven't seen necessarily things recently that were too innovative in the sense that they drew customers away from competitors and we have seen competitors like on, especially, um, that have, have probably taken some share from Nike.

Um So we'll have to see.

Uh but definitely Nike is investing heavily in, in new shoe technology.

And how do you think the economic environment is playing into this when you think about discretionary spending, high inflation?

Is that something that you're seeing impact, not only Nike, but a lot of these competitive brands as well?

Yeah, definitely, you know, the sportswear market right now is pretty uneven.

Most of the companies in this industry have said that including Puma, Adidas, Under Armour and others.

Uh Now we have seen some that have performed well.

Uh Certainly, you know, dick sporting goods, for example, in the US has been doing fine.

Um Some other sporting goods stores haven't been doing quite as well.

Um So we we have seen kind of a mixed bag uh from both the manufacturers and retailers of athletic products.

But generally, I have to say that the economic conditions are not not entirely favorable.

We have seen a shift in spending and I think towards travel in a way from consumer goods and apparel and footwear specifically.

And we should know here, Dave that there is a statement by, by execs two here CFO talked about how their fourth quarter results highlighted challenges.

He says that have led us to update our fiscal 25 outlook.

Um I'm just trying to think about, you know, potential catalysts ahead, David.

You know, some folks point to the Olympics, of course, is that a potential tailwind for Nike, the Olympics itself probably does not generate a lot of significant sales for Nike more than it would normally do.

Uh but it is a marketing opportunity.

Um And Nike also will benefit from other major sporting events including the Euro Cup, which is currently going on right now.

Um But you know, it does provide Nike with a more stable uh product development cycle.

The last Olympic cycle was really messed up because of course, the Olympics were delayed by a year in summer Olympics and then there were no fans in the stands and it really did not work out uh you know, as normal.

So uh I think that Nike is excited to be back towards the normal uh athletic cycle and it does affect Nike's product cycle and its marketing plans.

Earnings call is right around the corner here.

What do you want to hear from management when it comes to this report?

Is there, is there anything management could say to alleviate some of the investor concern that we're seeing play out in the stock price right now.

Yeah, definitely the gross margin is not up to where it should be.

And, and Nike had told us that gross margins would start to recover.

So that's something that will, that will definitely come up on the call.

I also think that we'll hear some commentary about the sales outlook in the major uh regions, North America, Western Europe and China.

Um and we'll see, you know what they say about when those markets may be getting back to stronger numbers.

Uh certainly, uh you know, in terms of China's giving back to probably double the sales growth.

And in Western Europe and North America, it's, it's back to positive, you know, sales growth and maybe the mid single digits.

Um So we'll have to see if we get any guidance from Nike about how many quarters it may be before we start to see numbers like that.

David always appreciate your rapid fire response and reaction to these reports.

Thanks for joining us.

Thank you time now for to watch Friday, June 28th.

You going to start off on the economy, new personal consumption expenditures or PC data coming out in the morning, economists forecast total PC to cool down in May core PC also expected to decline compared to April the fed's preferred inflation gauge.

Providing another piece of the economic puzzle as the central bank continues to deliberate potential rate cuts.

Also coming in the morning.

The final consumer sentiment print for the month of June.

The common economists expecting that number to take up slightly to 66 compared to the previous June reading showing a little more optimism about how consumers feel about their finances.

And finally, we're going to be getting another round of said Richmond fed, President Tom Barkin will speak in Paris at a global interdependence conference early in the morning.

And then after the P ce data comes out, fed Governor Michelle Bowman and San Francisco fed President Mary Daly will speak Bowman suggested earlier today that she's not ready to cut rates, that'll do it for today's market domination over time and be sure to come back tomorrow at 3 p.m. Eastern for all of your coverage leading up to and after the closing bell.

But don't go anywhere on the other side of the break is asking for a trend.

I got you covered for the next half hour with the latest and greatest market moving stories.

You can get ahead of the themes affecting your money.

Stayed.