Market close, Ralph Lauren CEO talks consumers: Market Domination Overtime

US equities (^GSPC, ^DJI, ^IXIC) reverse course and close Wednesday's session in negative territory. The Nasdaq Composite (^IXIC) and Russell 2000 (^RUT) both fell by over 1% as markets attempted to rebound from a large sell-off seen on Monday.

Shares of Warner Bros. Discovery (WBD) began plunging in after-hours trading after writing down its linear TV networks in a $9.1 billion impairment charge. Third Bridge Group sector analyst Jamie Lumley speaks on the consumer challenges WBD faces across its brands, especially as it becomes more likely it will be outbid for the NBA's streaming rights after this season.

Ralph Lauren (RL) CEO Patrice Louvet sat down with Yahoo Finance executive editor Brian Sozzi to discuss the fashion company's results from its first quarter. Louvet affirmed his belief that the best way to retain customers was consistency and to be "true to the brand and its values".

For more expert insight and the latest market action, click here.

This post was written by Nicholas Jacobino

Video Transcript

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

Let's see where the major averages ended the session here in the red is the short answer after continuing their rally for a rebound.

For the first part of the session, we saw the dow start its head lower.

Actually, that's not even today.

This is today.

Here we go.

We saw them had lower perhaps tied to the results of a weak bond auction perhaps.

But seeing that roll over happen sort of midday here, the S and P finishing lower by three quarters of a percent and the NASDAQ down by more than a percent as Josh pointed out earlier than Russell 2000 with small caps also feeling more pain today and we did see volatility sort of tick up, but then come back down and we're still at around 28 or so.

It is higher than it has been as of late absent the spike that we saw earlier in the week.

And then if you look at what's going on sector wise by the end of the day, consumer discretionary and tech leading the selling, I do want to check on large cap tech here and really seeing a more of a mixed picture here in video off by more than 5%.

And we did have uh S MC I Super micro computer coming out with results compressed margins and making some commentary about when the Blackwell chip made by video might get delayed.

So maybe fanning the flames of some of the concerns over delays there.

So that's something else that we were continuing to watch with the Dow week as well.

Interesting to note Wal Mart, one of the stand outs to the downside that company is going to report in a couple of weeks and will give us more insight into what is going on with the consumer here.

Josh, thank you, Julie joining us now with more on the market is Eric Friedman, us Bank Asset Management Group, Chief Investment Officer, Eric.

It is good to see you so early in the session.

We, we did have some green uh Eric.

Now I just, I got nothing but red on my screen.

I'm interested, you know, Eric, what, what you make of these markets?

What do you, what is your advice to your clients right now?

You're telling them, listen, don't do anything.

Get into a defensive crouch, maybe, maybe, you know, listen, put new money to work.

Yeah, Josh, there's a lot, lot going on and your team has done a nice job covering it.

I'll just give you a couple of highlights of what we're emphasizing for clients.

Number one is that we still think this is a glass half full opportunity set for investors.

This is not, we think the start of a major turn in the business cycle, excuse me, nor a you know, a major turn in in, in corporate profits.

So, you know, ultimately, this is an environment that's really been liquidity driven and, and so that often presents opportunities for patient investors.

And so this is a chance that we think is probably a chance to get involved in, in places like the equal weighted S and P. That's a spot that we think is again up in quality gives you a broad set of, of exposures across sectors.

And so we really emphasize that.

So now we're really not in that defensive crouch.

We also have to respect though a couple of key levels, you know, 5119 that the Intraday low on Monday, that's really where risk came out of the system most aggressively on Monday in the S and P, we'd be weary below that level.

We'd be more wary if we actually broke the 200 a day.

You know, today's volatility is probably a function of both liquidity but also a failure at the S and P 100 day.

That to us is key.

It's gonna be a toggle point between the Monday low and that 100 day to see who wins out.

So we're still optimistic, but we be cautious below those levels, I just mentioned.

So aside from the levels, Eric, talk to me more about why you're not in the defensive crouch, why you're confident here that say even an S and P equal weight can continue to perform here?

Why do you think sort of these fears of a sharp slowdown might not be realized?

Yeah, I think that there's a couple variables that we'd emphasize Julie number one is that we still think that the consumer while certainly slowing down is gonna remain in spend mode, there's clearly gonna be some differentiation.

You heard it from your prior guests in terms of quick serve restaurants, what we're seeing with with probably more of the lower income consumer versus the the higher income consumer that differential we think will be persistent.

So you know, that being said, we also think that in a in a real income basis again, net of inflation, which is coming down to some extent that consumers are still in a decent spots.

The first piece is consumers we think are gonna hang in there.

Number two is that corporate Capex and that corporate Capex cycle is is gonna also remain intact clearly.

We're seeing interest and maybe too much interest in things like A I.

But you know, the spend that we're seeing in terms of productivity centered in, in areas like cyber like big data uh and other considerations.

We think that continues.

So again, consumers plus corporate spending, we think are still decent.

Last thing I'd say is this, this is an environment where again, as we're waiting for more clarity around the election, as we're waiting for more clarity, you know, coming out of Jackson Hole that, that, you know, we're in a shorter period of data.

So there isn't a lot necessarily outside of the anecdotal earnings that we see from time to time to really emphasize.

But we still think that the bias for risk assets is higher, not lower.

So again, uh you know, we're in a little bit of an air pocket of news which is probably contributed to some level of volatility.

But we think the fundamentals are still intact for a decent for return environment.

So not much to there but, but some on the calendar.

So CP I Jackson O NVIDIA earnings later this month.

What could be some possible catalyst there?

Yeah, I think the biggest uh Josh is gonna be, you know, more liquidity based and can we hold those levels uh for the S and P again, 5119 and then a little above 5000 for the 200 day?

That is really key for us in terms of almost uh you know, being more important than, than fundamentals in the very, very near term.

We don't think that the full carry trade is unwound.

There's probably a little more, you know, gnashing of teeth that has to happen, but those would be key levels I do think that more signaling from banks are getting a positive out of Japan overnight in terms of them being at least aware of, of some level of, of volatility inherent in, in what they may decide to do from here with, with potential rate increases, that we think is a positive but probably more clear communication, not just from the fed about when they're going to start cutting, but also where do they see that more terminal level kick in where will interest rates normalize over time?

That's more important to us than when they start cutting.

So that we think the Jackson hole really important, probably more that macro shatter out of Japan will be important.

The labor data would be the last thing that we're emphasizing.

Again, we, we have some again, weekly data on Thursday that we see with respect to jobless claims and, and that's, that's gonna be being critical.

And obviously it's, it's a month away, but we have more jobs data to dissect as we get deeper into the summer.

So again, fed Japanese central bank, also some of the, the macro chatter, especially around labor.

That's what we're really focused on right now.

And um in terms of areas also to look for opportunity, I thought it was interesting, you highlighted real estate investment, trust that one stood out to me.

Why is that an area where you would be looking right now?

Yeah.

You know, Julie, it's really interesting.

That's an area that has been really out of favor for some time again, in absolute returns.

But then also to, of course, some of the uh the more concentrated uh parts of the S and P that have done quite well.

So where we would really expect to see more risk coming out of the system would be in two areas.

Number one would be if credit was rolling over, it's not, number two would be if there's a leg lower in real estate, not just on the, the commercial side, but also on the residential side.

So we're all aware of what's happening in office buildings.

We're all aware of what's happening within multi family.

Certainly, there could be some level of repricing left but the fact that that reeds are really hanging in there again, they have a uh an income component.

There's also a lot that's been priced in.

We think that's also an incremental positive.

So we're not saying get overly aggressive.

We would be more concerned if reeds were selling off.

If credit was selling off, they're not, they're really hanging there quite well.

So again, constructive on the path forward, Eric.

Thanks a lot.

Appreciate it.

Yeah, great to be here.

Take care.

Let's get you some breaking earnings.

Now, Robin Hood, we start there.

Second quarter numbers just crossing the wire down the stairs down 1.4% in reaction off of the gate out of the gate here.

A revenue coming in ahead of estimates here at $682 million.

$641.5 million is what had been estimated.

Interestingly, this coming on a lower active user base than had been estimated active users at 11.8 million last quarter, 13.2 million is what analysts had been looking for.

Um It does look like assets under custody at nearly $140 billion were a little bit better than had been estimated.

And the company leaving its full year operating expense forecast unchanged.

If you look at their statement here, Vlad Tenev, the CEO of the company talked about keeping up the pace with rapid rapid product launches and Robin Hood Gold, which is one of their newer products said it reached, uh they said it reached 2 million subscribers.

So they're focusing on that kind of growth.

Yeah, it's not just just stock trading anymore.

Um You know, they've expanded into retirement accounts and credit cards and crypto, you know, still in focus, remember in June, um they bought bit stamp that Cryptocurrency exchange Julie.

Right.

Exactly.

And, and to your point about doing other stuff, that's what that assets under custody number is as well.

Net deposits $13.2 billion.

So growing there as well.

And they also highlight that average revenue per user uh ticking up 35% year over year to 113.

So perhaps that monthly active user number, why the shares initially were down, although they're coming off the lows here.

So we'll see as people go through this, uh, what they end up making of it.

Yeah, there were those headlines earlier this week.

Uh, those were Robin Hood said there would be no 24 hour trading due to an issue at a third venue, which was interesting and we're gonna talk to an analyst later in the show.

So a lot of puts and takes, I'm also interested to see um what the opportunities are internationally and also what, you know, the analysts who cover this name, think, you know, post Gensler, what, what, what the crypto business could look like.

Yeah, we shall see what all that is about when we can also ask Blad 10 of himself about that.

You can tune into your finance tomorrow during wealth.

Uh Brad Smith will be interviewing the Robin Hood CEO in the 11 o'clock hour and coming up shares of Ralph Lauren closed the day in the red following their latest earnings report on the other side of the break.

Our own, Brian si sitting down with Ralph Lauren Ceo Patrice at, at their Manhattan showroom to discuss the latest quarter.

Stick around more market domination overtime.

Coming up.

Welcome back to Yahoo Finance.

We've been watching shares of Ralph Lauren all day, much better than expected quarter.

Uh Let's get really to, to the man of the hour.

Ralph Lauren co Patrice, Louve, Patrice.

Good to see you.

Thanks for we welcoming us to your Madison Avenue headquarters showroom.

Great to be here.

Welcome to our home.

Yeah, absolutely.

So, uh we're gonna get into the earnings numbers in a while, but just sitting in this room, I'm really reminded of the history and DNA of this company.

You're seven years into your, what tenure as CEO where are you at in bringing this iconic company into a whole new age?

Uh Listen, I think it's a never ending journey, but what's been really important to us is to go back to the roots of what Ralph created.

So Ralph started with the tie.

I think people lose sight of that, but he started with the tie and fundamentally, he launched this as a luxury company.

He reminded me recently that our ties were 2.5 times the price of Christian Dior T. So it gives you a sense of where the brand was positioned at the time.

The second thing is he was driven by a purpose that's has nothing really directly to do with fashion or apparel.

It was all about the dream and the American dream and our purpose is to inspire the dream of a better life through authenticity and timeless style.

And that's been the driving force honestly for the past 57 years, but we've doubled down on it over the past few years.

And then I think the the lifestyle world and that's why I said welcome to our home.

Because when we think of our store concepts, when we think of our office here, the whole idea is we invite you into Ralph's.

Ho Ralph Lauren's home and you get to have this unique experience.

And of course, we sell products but products are props as part of the bigger movie and movie set that we create.

Why do you think other luxury brands have been struggling?

I'm not gonna ask you to comment on them Patrice, but I look at a Burberry, I look at a lo uh LV.

Mh, they've been struggling in recent quarters, have companies like this lost touch with their consumer in this environment and secondarily in touch with their, their DNA and what they stand for.

Yeah, I'd say a few things, Brian and, and I would start with uh your last point.

Um consistency, understanding your consumer and, and staying fresh and evolving with the consumer.

So let's talk about consistency.

Interestingly, Ralph and I have lunch uh every week when we're both in this office.

Do you still get nervous or do you get nervous at all?

No, actually, I don't, maybe I should, I know you're reminding me, maybe I should get nervous.

I'll ask Rish, I should be nervous.

No, actually, you know, we have an incredible partnership.

Uh We have very common ambition for this company, very similar values.

Uh and, and we work together wonderfully well and the thing that we talk about consistently is the pun intended is, are we true to who we are?

And are we staying?

Uh I think loyal and true to, to what this, this company represents, this is an industry that's very much driven by trends, trends come and go.

And Ralph often says I don't wanna be too hot and I don't wanna be too cold.

And I think that characterizes our philosophy, which is stay consistent with what, what we represent, who we are grounded in our values of authenticity, timelessness.

Um This general uh aspirational dimension, execute along those values and our and the purpose I mentioned earlier and then keep it fresh.

Keep it engaging.

You see right now, we have a rolling thunder of marketing activations, right?

Olympics Fashion Show, Olympics, Wimbledon, uh Salon de La Mob.

Pretty soon we're gonna transition to the US open, then we have another show.

So consistency is one.

The second is just, this sounds obvious.

So I apologize for the the obvious nature of the comment but being clear on who your consumer is, what matters to them.

Now, what is their frame of mind?

Where do they wanna engage with the brain?

How do they wanna engage with the brain?

Listen, we our consumer ranges from newborns to the silent generation, right?

And having a segmented targeted approach I think is critical and then the final point is just freshness, freshness in a way that is consistent with who you are, but bring this level of excitement and interest that enables the consumers to come back and, and uh you know, always find something unique and interesting.

My day started, we were talking a little bit off camera, Patrice talking to Disney CFO Hugh Johnston.

Uh who I know you are familiar with?

He told me consumers are watching every penny and that the theme park business for Disney is slowing down.

Are you seeing the Consumers Act or start to act in a recessionary way?

I look in the back half of the year, I see an election.

I think it's still dealing with inflation.

Anything that gives you concern?

Well, I think uh it's pretty clear wherever you look at the, the overall consumer is being pressured by the cumulative effects of, of inflationary pressures and, and interest rates as far as our core consumers concerned, Brian, we actually find them to be very resilient and that's true in New York.

That's true in Miami.

That's true in Shanghai.

And that's true in Paris.

Um You know, we brought in 1.3 million new consumers this past quarter.

These are younger consumers, higher value consumers.

Uh Our net promoter scores have grown quite significantly.

Our search online is up 25%.

Uh So the brand has got really good energy and I think ultimately, it's about value perception, right?

And I think that's relevant for Disney and all companies in uh in, in this broader space, which is, is the consumer seeing unique value in what you have to offer.

And there are a lot of conversations around pricing and so on.

But fundamentally your brand story, the quality of your products, the experience you get when you're shopping, whether it's online or in stores, does that roll up to something that's worth the price?

And we constantly ask ourselves, are we providing the right value for the consumer?

What happens?

So you've really been focused on exiting unproductive doors in department stores?

Where are you at in that journey?

And what is the ultimate end game for the department store sector?

Because the way I see it, I mean, I go to these giant hulking stores, I'm not going to name names.

There's two floors, mostly nobody's in them.

I mean, what happens here?

I mean, you're losing doors but is it a, is it a good thing?

What happens to the stores themselves?

I have no idea.

Yeah.

So maybe three things, Brian, first of all, uh our direction of travel as a company is direct to consumer today, it's about two thirds of the business when we meet again in the coming months or years, that number will increase.

Why?

Because we have the ability to showcase the brand in, in the way that's, that's most true to our point of view.

And we have the ability to connect with the consumer directly.

The second point though is we do believe in quality wholesale wholesale is an amazing environment for brand discovery and there's nothing that really replaces it.

So quality brick and mortar, quality digital.

The third point though is we, we're gonna show up where we can really reflect the positioning of the brand and obviously where it's financially attractive.

This has led us as you know to do a massive reset 34 years ago, uh closing thousands of doors, particularly in the us, Most of the heavy lifting is now complete, but we will continue to assess every single door.

And I expect us to continue to prune the doors if they don't meet these two criteria of, can we show up in a way that's consistent with the image we wanna build?

And is it financially attractive?

So we've, we've basically guided that this year, we will close about 45 doors in total.

I think over the next two or three years, we'll probably close 100 and 50 doors in the, the accounts that you've talked about.

But, you know, we're really clear that we're working for the long term.

We're working to make sure that this brand comes through in all the touch points consistent with Ralph's vision.

And we have, we apply a pretty rigorous filter to where we show up and how we show up.

Uh We have to leave it there for now, but I will say this.

Well, thank you for inviting us into your home.

Uh And you definitely beat me on the tie game.

I mean, you just, you, you killed her.

I'm not gonna tell you who I'm wearing tickets.

You might kick me out of the building.

Give you an address where you can expand your portfolio of time.

I'm sure you could.

All right, we'll leave it there.

Patrice.

Uh Lu Ralph Lauren co thanks for making time for us.

We appreciate it.

Thank you.

All right guys back to you in our home.

Yahoo, find its home uh in New York City.

Thank you, sa appreciate it.

Well, let's get to Warner Brothers discovery earnings uh coming out and the shares down a quick 7% here.

That's because the numbers uh were disappointing compared with estimates here.

So let's go through the numbers, total subscriber growth.

Not bad here.

103.3 million.

That's the total subscribers a little bit ahead of estimates here.

Um And if you look at some of the other numbers, you've got studios revenue that fell short of estimates of $2.45 billion network advertising revenue also short of re of of um of estimates here, excuse me.

Um And if you look across direct to consumer revenue, $2.57 billion missing estimate.

So largely here we the revenue number overall missing estimates because of those individual shortfalls in the various divisions.

The second quarter loss per share, $4.07 which is much, much deeper than estimated and that's because the company included a $9.1 billion impairment charge.

So that's what is going on there with that huge loss that the company experienced.

Yeah, Ceo David Zaslav, trying to sound an optimistic tone here, talking about another strong quarter of growth with uh he mentions 3.6 million net ads.

Uh talks about international expansion investments they're making in content, uh talks about existing linear partnerships pursuing new bundling opportunities, but at least the immediate reaction here.

Not good.

Yeah, I mean, so basically what they have done here is writing down or taking a charge of $9.1 billion because the value of the traditional TV networks has fallen to such an extent that David Zaslav, the CEO thought that this was necessary step.

Now, remember the context for this is that the NBA dropped Warner Brothers as its broadcast partner.

Um The $76 billion media rights deal instead got awarded to Disney Comcast and Amazon.

So it's unclear if this is tied, right?

It's unclear if this is right down the site tied solely to that or just a large to that.

But however way you slice it uh this right down.

Not welcome news for investors.

All right, let's get more perspective on this.

For more on Warner Brothers Discovery earning is joining us now is Jamie Lumley, third bridge group sector analyst, Jamie, always good to see you.

So uh let's get your take on the on this report, obviously investors disappointed uh Jamie stocks at about 7% in the after hours.

Yeah, so first take on this earnings report, you look really at every single operating segment of Warner Brothers Discovery and there aren't really a lot of bright spots here.

If we look over at the studio segment, not really uh very strong performance for this summer, certainly uh weaker performance versus a year ago period.

The network segment where there was, as you've highlighted that really steep, write down continuing to face really strong pressure on both the advertising and distribution front as this really continues to be a really challenged area of the business and direct to consumer.

Although there is that overall growth in subscriber totals, it is worth noting that is basically exclusively internationally domestically, they actually lost subscribers and certainly the ARP U are much higher domestically.

So that doesn't necessarily drive as much growth for the company.

So really if we think about where the business is today, it has a lot of challenges.

Uh Jamie, is this right down a surprise this way of sort of um accounting for the the loss of that NBA agreement.

So if we think about it, certainly an eye popping number, I mean, anything which is getting close to $10 billion will ever will always have someone take a step back if we think about the network business and how important sports are to Warner Brothers Discovery and this segment in particular, it's not necessarily a massive shock considering just how important those real uh prime time marquee sports properties are for the traditional TV ecosystem.

It's worth remembering.

Of course, that TNT still does have another season of the NBA.

It's not necessarily official that they're fully losing the NBA.

But of course, it's basically the writings on the wall.

There is this lawsuit, but based off the conversations we're having with our experts, it seems all but certain that they will lose the NBA next season.

Uh It is definitely a number of factors here to lead to some challenges and certainly Warner's tried to replace the lost NBA rights.

There's of course a deal with DS PN to get some of those college football games.

But at the end of the day, it's, it's not the same, it's gonna be really challenging to replace that programming.

If you look around the industry, there are no easy fixes to really rebuilding this network business, Jamie, I'm just curious what, what you think the future of this company really is at this point.

You know, some, some of your colleagues on the street have you kind of laying out some different scenarios and, and some analysts have said, well, maybe you really see the company uh split digital streaming and studio businesses from, from linear.

What do you think, Jamie?

So if we think about the future, there's definitely been a lot of speculation on M and A and the really the give and take here is although it might improve some business segments, if there were some assets spun off or a bit of a divide, it is really challenging to separate out the different divisions of this company.

There's the pipeline of the content production over towards the linear side and also streaming.

It's not really easy to separate that out because then there's also the big piece where this is still a company with over $40 billion in debt after the most recent quarter and where that ends up ultimately will be a huge burden on whichever segment has it.

So if we think about that, there aren't any easy moves for Warner, what we've been hearing from our experts is that really what Warner should focus on outside of M and A is this company does have a lot of brand equity.

HBO is one of the most well respected uh you know, content production engines uh in the world.

So if it can find the right way to really approach the creative side, well, this could be helpful and actually make the transition to direct consumer a bit stronger as what we've seen over the last two years since the Warner Discovery Merger was completed, is that the content engine has not been firing all cylinders.

There certainly have been been some hits.

Let's not forget Barbie last year, I think House of The Dragon has been pretty good by most people's reviews so far, but it does really need to uh focus on continuing to have strong relationships with consumers as it manages some of these overall business challenges.

As right now, it seems to have lost the plot on both fronts.

I mean, is this, is Warner Brothers an attractive investment at this point or does it need to, you know, does it need to do too much work to get back to that place where you're talking about where it's make consistently making better content and just operating better overall.

So if we think about where the business is today, there certainly are so many challenges ahead of it.

But it is worth mentioning that the this company has a lot of history.

It has some incredibly successive or successful shows and movies that's produced over the years, we've seen what Warner can do when it is firing all cylinders.

The question is just executing to an extent that it can make this transition from the old world to the new when it comes to media.

If we think about it today, it's a very tough road.

Uh It seems that leadership is going to have to get creative that that wants to find a way to make this business work because right now, we've seen a lot of stagnation on the directives, consumer side.

If we look across the industry, the promise has been that that's going to be the big growth driver from a revenue and profitability perspective is a TV ecosystem continues to face pressure.

And right now, it does definitely need to find some way to really drive growth at both the top and bottom line.

Because also if you look over at the direct consumer segment, it shifted back to a loss this quarter of $100 million or so after last year, noticeably being profitable.

So it does definitely need to make some changes, Jamie.

Great to have you on the show.

Thank you for joining us.

Thank you time now for to watch Thursday, August 8.

Starting off on earnings.

We're going to hear from Eli Lilly Paramount and take two Paramount announcing second quarter results after the close drama continues with the National Amusement subsidiary with Sony Today out ruling today, ruling out a renewed offer for the company, analysts will be listening closely for any more info on the pending deal with Sky Dance Media which is expected to close in the third quarter of 2025.

Taking a look at the economy weekly initial jobless claims data coming out in the morning, economists forecast that number will take down to 240,000 and it's getting more attention given the heightened awareness around economic data right now.

And we'll get a little bit of fed commentary tomorrow from Richmond fed, President Tom Barkin is coming after San Francisco fed President Mary Daly says she isn't worried about the Weak Jobs report and is more confident that us inflation is indeed headed toward the Fed's 2% goal.

Finally keep an eye on chairs of micro strategy.

The company 10 for one stop split goes into effect.

It did have to close today and it'll start trading on a post split basis on Thursday.

That's going to do it for today's market domination over time.

But don't go anywhere on the other side of the break.

It's asking for a trend.