👟 Nike's New Playbook

+ FedEx Divides and Conquers with $30B Freight Spinoff

December 19, 2024

Good afternoon! Liquid Death’s latest stunt, the $75 “Pit Diaper,” is giving concertgoers an unusual way to stay in the action without making pit stops. This faux-leather diaper, complete with spikes and chains, sold out within 24 hours of launch. Inspired by fans who’ll do anything to avoid long bathroom lines, the collab with Depend has turned heads—and sparked debates—after a viral incident involving a fan at a Sabrina Carpenter concert.

Whether it’s a practical joke or a genuine solution, the Pit Diaper is undeniably on-brand for Liquid Death, which thrives on bold marketing moves. As concert culture embraces extremes, this product taps into a growing trend of fans prioritizing their spot in the crowd over everything else—even common sense.

MARKETS

  • The Dow finally ended its 10-day losing streak—the longest since 1974—with a barely-there gain of 15 points. Early optimism fizzled as the S&P 500 dipped 0.1%, and the Nasdaq followed suit. Seven of the S&P’s 11 sectors finished in the red, underscoring the market’s cautious mood.

  • Investors are still grappling with Wednesday’s Fed update, which tempered rate cut hopes for 2025 and warned of stickier-than-expected inflation. The modest gains weren’t enough to shake off the uncertainty, leaving markets in a holding pattern as the year’s final stretch looms.

STOCKS
Winners & Losers

What’s up 📈

  • Darden Restaurants rose 14.74% thanks to impressive same-store sales at Olive Garden and LongHorn Steakhouse. The company also raised its full-year revenue guidance. ($DRI)

  • Innodata soared 16.29% after Wedbush initiated coverage with a "buy" rating, highlighting the company’s strong offerings in custom large language models. ($INOD)

  • Accenture gained 7.06% after announcing a beat-and-raise quarter, citing strong AI-related bookings. ($ACN)

  • CarMax climbed 3.45% after the used car retailer exceeded earnings expectations and reported its first sales increase in two years. ($KMX)

  • Palantir Technologies rose 3.78% after the company extended its U.S. Army partnership, securing a deal valued at $400.7 million, with a potential ceiling of $618.9 million. ($PLTR)

What’s down 📉

  • Lamb Weston plunged 20.10% after disappointing quarterly results and a downward revision of fiscal 2025 guidance. The frozen foods maker also announced a new CEO amid pressure from activist investors. ($LW)

  • Vertex Pharmaceuticals tumbled 11.37% after reporting Phase 2 trial results for a pain management drug that failed to outperform the placebo. ($VRTX)

  • Hims & Hers Health dropped 7.67% as the FDA announced that active ingredients in rival Eli Lilly's weight-loss drugs are no longer in shortage, potentially impacting demand for GLP-1 injections. ($HIMS)

  • Lennar sank 5.16% after the homebuilder missed earnings estimates and projected lower profits due to rising mortgage rates. ($LEN)

  • Quantum Computing stocks took a major hit: Quantum Computing fell 41.04% ($QUBT), D-Wave Quantum dropped 28.91% ($QBTS), and Quantum Corporation sank 39.97% ($QMCO) due to valuation fears and profit-taking.

EARNINGS
Nike's Earnings Reveal — CEO Hill's Plan to Fix the Swoosh

Nike CEO Elliott Hill has laced up and hit the ground running. Tasked with undoing years of overproduction and poor strategy, Hill is steering the world’s largest sportswear brand back toward its sporty roots—but don’t expect quick wins.

Hitting Reset

Hill’s strategy is clear: scale back on mass-market shoes like Dunks and Air Force 1s, which have lost their cachet, and refocus on performance sports gear. That shift comes with a cost. Last quarter, revenue fell 8% to $12.35 billion, while profits dropped to $1.16 billion. Expect an even steeper decline next quarter as Nike clears excess inventory to restore some exclusivity.

The goal? Create more demand than supply—a classic Nike move that hasn’t been executed well lately.

Mending Fences

Wholesale partners like Foot Locker and JD Sports are finally getting some love after being sidelined by Hill’s predecessor. Foot Locker is already expanding its Nike-backed Home Court sections globally, signaling a fresh start in rebuilding trust. But the hard work isn’t over. Wholesale revenue was still down 3% last quarter, reflecting the uphill climb.

Nike’s international scoreboard isn’t exactly lighting up. China revenue slumped 8% to $1.71 billion, North America fell 8% to $5.18 billion, and even Converse tripped with a 17% decline. But there’s a silver lining: gross margins held at 43.6%, slightly better than expected, thanks to tighter control over markdowns.

A Few Wins in the Playbook

Nike scored major points off the field, locking in its NFL uniform deal through 2038—cementing its partnerships with the NFL, NBA, and MLB. These wins showcase Nike’s dominance in sports, even as its market share in sneakers takes a hit from competitors like On Running and Hoka.

Nike’s stock has slipped 27% this year, but Hill’s pivot to performance and tighter inventory controls could breathe new life into the brand. For now, though, it’s a waiting game—because turning around a giant takes time.

NEWS
Market Movements

  • 📞 OpenAI open for calls: OpenAI introduced 1-800-CHATGPT, offering U.S. users 15 free minutes of monthly phone access to ChatGPT. This follows the company's $157B valuation.

  • 🚚 Amazon workers strike: Approximately 10,000 Amazon workers, supported by the Teamsters, plan to strike Thursday, demanding higher pay, safer conditions, and longer breaks during the holiday season. ($AMZN)

  • 💳 Affirm's loan partnership: Affirm inked a $4B deal with Sixth Street to sell loans over three years, leveraging private credit demand. Affirm aims to scale GMV to $50B, with $7.6B GMV recorded in Q3, up 35% YoY. ($AFRM)

  • 🤝 Global M&A activity: Global M&A activity is forecasted to surpass $4T in 2025, supported by President-elect Trump’s pro-business policies. Deal volumes rose 15% to $3.45T in 2024, with tech sector deals totaling $534B.

  • ⚖️ T-Mobile faces hidden fee lawsuit: A class action lawsuit claims T-Mobile disguised its "Regulatory Programs and Telco Recovery Fee" as a government charge since 2004. The complaint alleges the fee, now $3.49 per line, is deceptive and designed to boost revenue. ($TMUS)

  • 📉 Micron falls on weak guidance: Micron shares dropped 16% after weak Q2 guidance, projecting $7.9B in revenue versus $8.98B expected and EPS of $1.43, below the $1.91 forecast. Q1 earnings beat at $1.79/share, with revenue at $8.71B. ($MU)

  • 💊 Merck’s weight loss drug: Merck secured global rights to Hansoh Pharma’s experimental GLP-1 oral drug for weight loss in a deal worth up to $2B, including a $112M upfront payment. ($MRK)

  • ⚙️ Volkswagen-union talks: Volkswagen and unions continue negotiations on cost-cutting measures, entering the fourth day of talks with no agreements reached despite 50 hours of discussions this week. ($VWAGY)

  • 🛍️ Etsy leadership change: Etsy named Charles Baker as CFO effective Jan. 1, with Kruti Patel Goyal taking on the roles of president and chief growth officer. ($ETSY)

TRANSPORT
FedEx Divides and Conquers with $30B Freight Spinoff

FedEx is making big moves, spinning off its freight division into a standalone public company. The freight unit—valued at over $30 billion—will fly solo within 18 months, setting the stage for FedEx to double down on its core package delivery business. Investors were thrilled, sending shares up 10% in after-hours trading.

Breaking Down the Breakup

FedEx Freight, the heavyweight of U.S. less-than-truckload shipping, pulls in $9.4 billion annually by hauling shipments for multiple customers on shared trucks. Spinning it off doesn’t just streamline FedEx’s structure—it could unlock up to $20 billion in shareholder value. Analysts are buzzing that Freight's independence could mirror the stock surges seen by rivals like Old Dominion Freight Line.

CEO Raj Subramaniam is all about focus, calling the move a chance for each company to sharpen its competitive edge. And while Freight gets a clean slate, FedEx plans to use this moment to rethink its package delivery strategy, merging its Express and Ground units.

Clouds on the Horizon

Of course, not everything’s rosy. FedEx reported a 1% dip in revenue and an 18% profit slide for the second quarter, thanks to weaker package demand and sluggish freight activity. Oh, and it trimmed its full-year earnings outlook to $19-$20 per share, down from $20-$21. Blame the economy, the loss of a key U.S. Postal Service contract, and customers opting for cheaper, slower delivery options.

Still, investors and analysts are hopeful. The spinoff could give FedEx the focus it needs to fix its package game, while Freight gets a chance to thrive on its own. It’s a bold move, and all eyes are on FedEx to deliver.

Calendar
On The Horizon

Tomorrow

Tomorrow’s big-ticket economic drop: the Personal Consumption Expenditures (PCE) price index, aka the Fed’s inflation crystal ball. It’s the last major data point of 2024 before the markets swap trading floors for holiday cheer. The spotlight is on Core PCE, which ditches food and energy volatility to focus on the stickier parts of inflation.

Last month, PCE rose 2.3% year-over-year, while Core PCE climbed 2.8%—exactly as economists called it. This time, forecasts peg overall PCE at 2.5% and Core at 2.9%. A cooler-than-expected report might mean a drama-free finish to the year, but if inflation overshoots, you’ll see Wall Street traders sweating through their eggnog.

Before Market Open:

  • Carnival Corp. is cruising into 2025 on smooth seas, with analysts expecting another stellar year for the industry. As higher consumer discretionary spending sets sail, Carnival is primed to cash in. Despite historically high booking prices, travelers are locking in summer cruises at record rates. With demand buoyed by resilient spending and a strong post-pandemic rebound, Carnival’s outlook seems unsinkable. The cruise giant is set to report consensus earnings of $0.07 per share on $5.91 billion in revenue, keeping its momentum full steam ahead. ($CCL)

NEWS
The Daily Rundown

  • 📉 Fewer Rate Cuts Ahead as Inflation Sticks Around: The Fed announced a quarter-point rate cut, its third consecutive reduction, but trimmed its 2025 projection to just two cuts due to persistent inflation and a strong job market. Incoming Trump administration policies may further complicate the Fed’s balancing act.

  • 🚫 TikTok Faces Supreme Court Showdown: The Supreme Court will hear arguments on January 10 regarding the law requiring ByteDance to sell TikTok or face a U.S. ban. TikTok calls the law unconstitutional, but Congress insists it’s a matter of national security. President-elect Trump’s wavering stance adds uncertainty.

  • 🐦 Bird Flu Hits U.S. with First Severe Case: The CDC confirmed the first severe U.S. bird flu case in Louisiana, following an outbreak that has killed millions of poultry since 2022. Officials say the risk to the general population remains low despite concerns over its spread to backyard flocks.

  • 🏢 Return-to-Office Mandates Could Be a Brain Drain: Companies enforcing strict in-office policies are seeing slower workforce growth and higher turnover, according to new studies. Despite this, firms like AT&T and Sweetgreen are mandating more in-office days for 2025, bucking the hybrid trend.

  • 🎥 MrBeast Takes YouTube Magic to Amazon: MrBeast's "Beast Games," a $100M "Squid Game"-inspired game show, premiered on Amazon Prime Video. The show, which features 1,000 contestants competing for a $5M prize, has faced controversy over contestant conditions but aims to replicate MrBeast’s YouTube success.

  • 🏈 Weddings Take a Timeout for College Football: A study shows wedding planners avoid scheduling ceremonies on Saturdays when local college football teams are playing. Bye weeks see a wedding spike, with regions like SEC markets reflecting the nation’s passion for the sport.

    🏎️ Sergio Pérez Departs Red Bull: Formula 1 driver Sergio Pérez announced he’s leaving Red Bull, creating a high-profile vacancy alongside Max Verstappen for the upcoming season.

  • ⚖️ NCAA Seeks to Ban College Sports Prop Bets: NCAA President Charlie Baker urged Congress to ban prop bets in college sports during a Capitol Hill hearing, citing concerns over game integrity and athlete well-being.

  • 🎶 Lil Wayne and Covid Relief Spending: Wealthy musicians like Lil Wayne reportedly used a little-known Covid relief program to fund extravagant luxury purchases, raising questions about oversight of pandemic aid.

RESOURCES
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