This is Bloomberg business Week Inside from the reporters and editors who bring you America's most trusted business magazine, plus gloom O Business Finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Crowns.
The eleven Meet joke gets to the right here. I have Saga in the medal of You.
Well, just an absolutely perfect guest, kind of really given our conversation that we just had with our TV team Jennifer about the consumer and inflation, because the theme of the past two months or so and kind of feels like the theme of my life because it's all I talk about every single day is that inflation has moderated. After all, financial markets are betting that the tough part of the Fed's job is behind it, and the FED
is going to cut rates six times next year. All that said, our next guest says, middle income families are still feeling the squeeze. Glenn Jay Williams is CEO of the financial services company Primerica. It's a firm that specializes in serving middle income households in the US, Canada and more. The companies out with a new report called Perception Versus Reality examining Middle Income Households Financial Outlook heading into twenty
twenty four. Good to have you with us, Glenn. How are you doing great?
Tam? How about you?
Yeah, we're doing really well. Thanks so much for joining us today. Before we get to the report, just give us an idea of that. The types of households that you serve at Primerica, you call them middle income households, But how do you define that?
We do, Tim.
We define those households as having household incomes between about thirty and one hundred and thirty thousand dollars a year. That takes up about fifty six percent of US households. So it's a pretty it's a pretty wide cut. Clearly, there are households that are earning less than that and.
Struggling even more.
We deal with a few of those, and we deal with quite a number above one hundred and thirty thousand mark. But the vast majority of the families that we're advising or are in that thirty to one hundred and thirty thousand a year range.
And what's so important about this? These tens of millions of households, these tons of millions of families, these customers that you have is that inflation hits these folks harder than it hits people who make more money because a larger portion of what these people earn goes to gas, goes to food, goes to childcare. So talk to me a little bit about what you're seeing going into next year,
given that we are seeing actually inflation moderate. But as Steve Williams told us earlier in the day, you know, if you're still paying more, you know, twenty or thirty percent more for something than you did in twenty nineteen, it doesn't really feel like prices are coming down.
That is the challenge, Tim, As you've described it, these families have every dollar in play at all times, and traditionally, because they have smaller amounts to invest, smaller to purchase financial service is with they tend to be somewhat ignored by the industry, who by and large has moved up scale. And so we feel a special responsibility to these families because we can access them, we can serve them, and they are under stress.
They don't have extra dollars.
In the best of times, much less in times like these, And as you point out, it's the compounding effective inflation over time. You know, our studies and the household Budget Index indicates that the average middle income family has a deficit from the last of twenty thirty months of almost twenty five hundred dollars. And so while maybe the whole is not getting any deeper, they're down there pretty deep already and we've got to help get them out.
And that's the challenge these families face.
What can you tell us about what their spending habits are starting to look like over the Christmas holidays and what are the concerns that they're expressing to you, Because i mean, Tim makes a really good point that you know, we've seen that inflation's moderating, but it's still going to
feel pretty hard for consumers. And so by the same token, it sounds like perhaps some of these folks they've still got their jobs, they might still have a little bit of investment to look at, and it looks like there's some good feeling there with a lot of green in the stock market over this year. So what's your take on how they're feeling about this holiday season and spending going into next year.
Give Jennifer, you're right, there are some positives going on. Clearly employment strong, more people do have their jobs. We're seeing incomes in freesome as well as well as the slowing of inflation. So there's some positive things happening as well,
but by and large, most families are struggling. They're pretty scarred financially and in some cases emotionally by what they've been through the last couple of years, and so we are seeing them reporting slowing down their spending this holiday versus past holidays, but in reality that's very difficult to do.
And what's really concerning is that we're seeing more and more families that are relying on credit cards and even withdrawals from those savings that you mentioned to take care of months to month expenses in normal months, particularly when expenses go.
Up due to the holidays.
And of course, overuse of credit and taking money out of savings that's designed for long term goals like retirement just has a terrible impact over time. They lose the time value of money, the compounding of returns on their investments. The opposite is happening if they're using credit cards with very high interest rates and if they're not paying their balances, those are compounding, and so the alternatives to cutting back spending are very difficult from middle income families, and that's
why they're struggling. And that's why in many cases we see in our surveys are are qualitative surveys that they're struggling financially and emotionally at the same.
Time, Glenn, does all of this, taken together at all, paint a picture of a recession next year? Is this recessionary to you?
I think for these families it feels like it.
You know, that's a tough question We've been trying to get the answer to for a number of years now, but I think these families feel like that.
You know, relief is not just around the corner.
But the reason I ask is is because if consumers pull back on spending, and consumer spending powers this economy, and the families that you serve account for more than half of the households in this country, if they're pulling back to a certain extent, does that mean the economy is going to go into recession?
I believe we're certainly close to the age.
It's you know, we've seen spending be unusually strong overall, and we've had a lot of discussions about the consumer spending that hasn't slowed as much as we would expect. Doesn't sound consistent with what we're hearing and seeing in the middle market.
So maybe it's being driven outside the middle market.
But we're clearly seeing these families slow down, and enough of that will lead to recessionary pressure if it continues long enough.
I wonder if you think policy makers and indeed Wall Street traders are really alive to the risks here of recession, because there's just so much talk about a soft landing. And then we were talking earlier on the program about the last few holdouts on Wall Street, the bare case for the United States, And I wonder if you do start seeing a real pullback and spending from the kinds of consumers you serve, if this will just pass the
rest of the economy. I mean what I mean by that is the wealthier part of the economy, if it'll pass them right by, because the macro numbers will hold up because their spending will continue.
Well, there's always a danger that Wall Street is disconnected from Main Street, for sure.
But I don't know the answer that.
I don't know whether the middle income challenges are going to be large enough long enough to overwhelm the other pressures maybe that are moving in a more positive direction. It's clearly a tug of war going on, and the longer it continues, the risk here it gets. I think those that are planning for the future should clearly be taking this possibility into consideration and their planning, because there is a reasonable enough possibility of it that you've got
to plan around it. You've got to say, what happens if the spending slows so much, so rapidly, for so long that it starts to send us in the drain of a recession. And those that are planning for their finances for both families and for the rest of our country certainly need to keep that in the back of their mind. I don't know where it's going to go yet. I don't think anyone does, but it's clearly a risk.
Hey, I just wanted to starry interrupt, Jennifer. I just wanted to let our audience know that shares of Nike are bouncing around the after hours, moving higher and then moving lower after the company reported its results just a couple of minutes ago. Earnings per share for the second quarter came in way above estimates at a dollar and three cents per share versus that stimates of eighty five cents a share once again, though shares in the after hours are kind of bouncing around a little bit.
Glenn, thanks so much, just real quick, I just want to get back to you on one point about the kinds of customers that you do serve. Do you see that there's a big difference between the top end and the bottom end? Is it really quite tight for people at the lower end, but maybe at the top end it's a little bit easier. And part of the reason why I asked that is because maybe at the top end they've got a little bit more wiggle room to cope in case the Fed delays it's move on the rate cuts.
Absolutely, the thirty two, one hundred and thirty thousand is a wide range, and so we do see families with tighter buzz budget, smaller incomes at the lower end struggling more. At the same time, you hear more and more every day about people that are making six figures in their household and they feel like they're.
Living paycheck to paycheck.
So yes, absolutely, it is more severe at the lower end of the range, but there's a lot of pressure throughout the range from thirty to one thirty.
Hey, Glenn, really appreciate you joining us. You got to come back in the early part of next year because this is a really, really fascinating report that you and the team over at Primerica have put together. Once again, it's the Perception Versus Reality report that examines middle income households financial outlook heading into twenty twenty four. That's Glenn Jay Williams, CEO of the financial services company Primerica, joining
us on Zoom from Duluth, Georgia. Shares a Nike right now moving lower by about three point eight percent in the after hours. The company says it's stream streamlining the organization. It sees pre tax charges of between four hundred million and four hundred and fifty million dollars. The company also says that looking ahead to a softer second half revenue outlook, we're going to continue our coverage with Nike. And in just a few minutes, you're listening to watching Bloomberg BusinessWeek.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app or watch us live on YouTube.
We're continuing with Nike and our coverage around Nike's latest quarterly report. Shares, as Charlie just mentioned, down about four point seven percent in the after hours worth repeating some of these headlines. Certainly, the company is saying that it's streamlining in the organization and sees pre tax charges of between four hundred and four hundred and fifty million dollars. The company says that charges are to be likely recognized in the third quarter of fiscal year twenty twenty four.
For more, let's go to Bloomberg News Earnings reporter Red Brown. He joins us on Zoom from New York City. He's had about ten minutes to look at these numbers.
Read.
We're seeing the way that investors are reacting in the after hour, sending shares down about four and a half percent as we speak. What sticks out to you about Nike's report.
I think that the number that's really jumping off the page for me is the results in China. So they missed sales there, reporting around one point eight billion when Wall Street was expecting somewhere closer to two billion. Actually, and the reason I think that this number is so important.
Is that Nike's been kind of playing this dangerous game, if you will, where a lot of their growth is really heavily reliant on on China, when their sales in Europe, their sales in America, their bigger markets have really slowed down. So with those sales numbers in China coming in a little bit below expectations, I think that is a little bit of a worry for the company when they do have such an outsized importance for Nike, there.
Is there the prospect for those numbers to turn around in China or is it better for Nike to think a little bit more and focusing on the US in Europe, where we've got the prospect at least in the US of lower borrowing costs potentially spurring some consumer spending there.
No, I think it's a it's a good point just because of the volatility of the Chinese economy. Obviously that's well outside of Nike's control, and there might be a potential for them to want to shift their focus back to these markets where, you know, I don't want to go too far on a limb here, but maybe the economic picture is starting to clarify a little bit more,
especially here in America. So I think that could be something that we might want to get a little bit more clarity from the company on during the earning's call.
Hey, speaking of clarity, I do want to make a quick correction to something I said earlier. Revenue missed the average analyst estimate just slightly came in at thirteen point three nine billion dollars, which was up zero point five percent year of a year. The estimates that were for
three teen point four to six billion dollars. Okay, red, We talked about China, but it also seems like what's getting a lot of attention right now is the company announcing this reorg, this two billion dollars in cost savings that they're looking to find. They said that they're going to be pre tax costs around four hundred to four
hundred and fifty million. When it comes to employee severance, i e. They're doing a reorg, they're gonna have to pay out employees who they end up firing or laying off as a result of this big picture what's going on at Nike right now.
I mean, I think Nike is not immune to a lot of the pressures that retail has been going through over the past few years. As we're coming out of the pandemic still, I think it's the effects of that sort of you know, real shock to retailers is still something that they're working through. So if you look in recent orders over the past about two years, Nike has been seeing some pretty significant slow down in their earnings for share numbers. So strategic shift has kind of been
been coming. I guess you could say for them, while they need to find some way to improve their margins, they can't keep offering the promotions that they have been in the past to continue to kind of juice the top line, So they're looking for new ways and significant ways to continue to kind of get more out of their business model, you know.
Just to follow up on that point in the statement, Nike pointed out that some areas of potential savings include increasing automation and use of technology. Can you talk a little bit about what Nike's play there is in terms of the technology.
I'm a little bit unfamiliar with what they could do, but you know a lot of retailers will will point to things like that if there's anywhere in their supply chain that they can maybe automate a little bit more anything in their warehousing that they can make a little bit more advanced technologically, that's obviously an option for them, especially as we see some supply chains starting to shrink down. Could be another area for them to maybe shave a
few points. I'm going to add a few points to their margins.
Red I always like to take a look at what's going on with foot Locker when Nike reports, and indeed we're seeing shares a Footlocker down about three percent in the after hours. Because Nike is such an important company for foot Locker and vice versa Footlocker and important sales channel for Nike, how should investors in Footlocker read into these results.
Well, just to take a step back from that, we did hear from Nike last quarter during their call that they're working to kind of reset that relationship. One thing to key in on on this report still while we're still waiting to hear some more color on the call, is that their wholesale channel sales in general declined this quarter.
That's the third quarter in a row. So I think what locker investors are probably reacting to that number to seeing a further slow down within that channel in general is I think probably a little bit got them, got them a little bit scared.
Well, we know Nike has done a really good job over the last decade in building out its relationship with individual consumers and getting people to buy stuff directly from its website at Nike dot Com. So is it okay that wholesale is declining if a direct sales relationship is higher margin for Nike?
Uh, you know, it's it's kind of hard to say. It's it's it does seem like, you know, like like to your point, they have been really emphasizing Nike dot Com and the gap between those two sales channels continues to get smaller and smaller. But I think the other side of that coin for Nike is we have seen consumers behavior shifting back to in person shopping to prefer that experience still, so I think that's the sort of
the balance for Nike. I don't think they're going to be able to just fullsale, ditch brick and mortar and stop investing in those relationships as well with people like retailers like foot Locker. So it's still kind of a little bit too soon to say. Maybe for Nike in terms of the long term vision of which sales channel maybe is a higher priority for them.
Oh interesting, I mean, getting away from the point of the sales channel and looking at its various product lines, are you able to give us any kind of a big picture story about what is the winner and loser here for Nike at this point?
I do think it's interesting that we know we're kind of just on the cusp of Christmas shopping right the period ended at the end of November, and it doesn't seem like there's really an area of strength besides their equipment in terms of actual growth. Both apparel and footwear, which would probably be the more likely categories for holiday shopping, are really kind of tepid in terms of growth. So yeah, I don't know how much of a driver equipment sales
is going to be for the company going forward. A lot more of their business does come from those other two categories, So yeah, again, I think this is just an overall sort of a little bit of a negative picture for Nike, and I think the sale excuse me, the shares are kind of reflecting that at the moment.
Yeah, I think that's a really good point, right, Hey, Red, I want to let you catch your breath and look at your screen for a minute while I go through the press release and read a couple of quotes from John Donaho, the president and CEO of Nike. In addition to that, just a little more color on these cost savings.
H Johnahoe saying in a statement that the quarter showed strong execution by our team as we focus on our winning formula of innovative product, distinctive storytelling, and differentiated marketplace experiences. He said that the second quarter results showed that the
company is getting back on their front foot. The company also saying in a statement that it's identifying opportunities to deliver up to two billion dollars in cumulative cost savings of the next three years, simplifying product assortment, increasing automation
and the use of tech, and streamlining the organization. Read I want to give you the last word here and just give us your takeaways as we As you continue to and wait for the call, what would you ask on the earnings call today if you could.
I mean, I think we've kind of covered the major topics. I think one thing that has been a topic of interest for me with Nike is the increasing amount of competition that they're facing in in their sort of bread and butter product line is running shoes. You know, that's
kind of where Nike came from. We saw a kind of a small analysis coming out of Morgan Stanley earlier this month where they just did a small sample just here in New York City of what shoes people were wearing, and it was you know, these alternative brands are really gaining a lot of ground on Nike. So I would want to know kind of what the company's plans are to combat that there's eroding and their rooting market shop.
Yeah, I remember that report. It's like Hoka and on running hey shares a Nike down about five point six percent is wait for this call.
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Stay alive. That's apparently what we're going to be doing later and later, for longer and longer. Well, according to some models, half of today's five year olds in the wealthiest countries are projected to reach one hundred years old. That comes despite gun violence and epidemics of obesity, diabetes, and opioids, and it accounts for disparities when it comes to race, gender, and income. Life expectancy in the US
is still going up. Here's the problem, though, society is not set up to handle people living routinely into their eighties, nineties and beyond. We're not invested in technologies and therapies to help people stay healthy and independent as the age, and we haven't really considered how to adapt work so companies can make better use of the skills and experiences of older employees. Karen Breslau writes all about this in
the new issue of Bloomberg Business Week. It's on newstands now, already online at Bloomberg dot com, slash business Week and on the Bloomberg terminal. She joins us from California this afternoon. She's California Bureau Chief. Also here is the editor of Bloomberg Business Week, Joel Webber. He joins us on zoom from Brooklyn this afternoon. Joel, this is a really cool story, and it's one that's actually a couple years in the making give us kind of the backstory here.
Well, this issue was one that we became really interested in doing earlier in the year, especially off of some other recording that we had done that clearly struck a chord because the reader appetite for anything about longevity. We
just noticed that it it was insatiable. So as we started to kind of sketch together what this longevity issue that Business Week published this week could look like, we put out our typical kind of feelers throughout the newsroom, and one that came back was really interesting because I wasn't expecting it.
I had met.
Karen Breslaw, who had recently started at Bloomberg, and it turned out that prior to working at Bloomberg, she worked at the Stanford Center on Longevity. And we were like, Karen, what did you learn while you.
Worked That's what I meant by a couple of years, and that's what I meant by a couple of years in the making.
By the way, yeah exactly so.
So so Karen, back back to you, what did you learn at the Stanford Center on Longevity while you while you worked there?
Well, I've I learned so much, Joe, it's hard to sum it all up. One of the first things I learned is that, you know, longer life spans are happening. It is a trend that started in the twentieth century. And you know, sant patient medical advances, universal primary education for children, when kids go to school instead of factories
low and behold, they live longer. But one of the first things I learned was to distinguish between aging, which is this cellular process that we're all obsessed with, and longevity, which looks at the entire lifespan. It looks at the entire human experience. And the folks there at the center said the founder or Carsonsen, said, you know, we're a center on longevity, not a center for longevity. We're not
promoting you know, this therapy or that potion. What we're promoting is a way of looking at life and really redefining our culture to so that people can live these long lives and thrive and you know, be vital and engaged and productive for much longer than they are now. So it was a was a head shift, It was a mind shift.
The other thing that I think it's worth mentioning is how how the physical magazine issue kind of came together and how we structured it, so we put Karen's story as the the introduction to the whole issue, because ultimately, what Tim, I think you said there at the top was you take a bunch of five year olds that are alive today. They're going to be living probably longer, more of them past one hundred than you know, any
generation ever before. And as I think, Karen, you get to it's you know, the world's not ready for that. But Tim, just in the structure of the book and Jennifer like this came first and then it culminates later at the end of the book with stories that are more geared towards end of life. So we sort of had a cradle to grave approach. But let's stick with
the cradle part for just a second longer. Karen, when when you were working there, you know, talk to us more about these five year olds and what this will distinguish them and what they will probably encounter in their lifetime.
Well, first of all, those five year olds are going to have options. The lucky half, the lucky one half, the fortunate one half are going to have options that really have never existed before for humans. I mean, for you know, most of our lives are front loaded because with education, with entering the workforce, with family formation, because people just didn't live that long even you know, in nineteen hundred, life span was around forty seven and then
it left in the twentieth century to about seventy. So these kindergarteners are going to have several careers. They may not have a front loaded formal education which sees them either entering the workforce at twenty or twenty one or you know, getting their diploma. They may dip in and out of the workforce. They may dip in and out of earning and non earning years. It's not going to be just this linear three after progression of education, work retirement.
It's it's going to be a very curvy road of life. And at Stanford, at the Center Longevity, they called it the New Map of Life, which includes lifelong learning. I mean, the emphasis is on lifelong learning. You cannot front load and education in twenty or twenty two years for someone who may still be in the workforce at eighty And I don't mean you're going to be you know, sitting in the toll booth or you know, doing a job.
You know that existed in the twentieth century. You know, for knowledge workers, there there are going to be so many chapters and decades of work, and so there have to be ways for people to dip in and out of learning chapters and upskilling. And about something called midlife ships. You know, internships are not only for you know, for for the young, they're for people in midlife and and
even in the you know, senior workers. But to see seventy and eighty year olds who are productive, who are alert, who are great problem solvers, have high emotional intelligence, bring a lot to the workplace, you know, things that we just simply can't imagine today. We just discount the older workers as dead, would I mean that, which is really inaccurate and will become more so. So they are going to be great shifts in education, in lifelong learning, and in the workplace.
Can we dig in a little bit on this turnt you're making about education, because I mean, the story is fascinating and I'm particularly taken with this idea of a mid life shift. And as you're talking about knowledge workers, but you're also talking about how society isn't set up to handle the changes that need to be made in order to reflect the fact that we're going to be living to one hundreds. So can you put these two things together for me? What is it that society is
not getting about the mid life shift? Is it something that knowledge workers can't afford because of the way lending and retirements plans are structured. What's the problem there?
There are many problems, but most of them are systemic, and they you know, if we look at our if we look at our entitlement programs, if you look at Social Security or medicare these all assume you know, a one way progression through the three chapters into retirement or disability. Very often workers will enter a phase of life, perhaps in their fifties or sixties, where there are there may be temporary health setback, or more likely there are caregiving obligations,
often for very elderly parents. And these are people who just need They might need a few months, they might need a period to adjust or to arrange for a care plan or to give care. And what happens is there's just not en a flexibility in and out of the workforce, in and out of the paid workforce. So yeah,
there will have to be policy changes. They're going to need to be new financial products that allow people to save not only for retirement, you know, through a four to one K, but for a midlife transition or several transitions. We might see more glide paths to retirement where it isn't you just flip off the switch and you go from being you know, employed full time to mallwalking or you know, playing pick a ball. But you may become an older person, an older worker may become a consultant,
They may become a workplace sage and elder. They may become a mentor somebody may have great contributions to make for twenty or twenty five hours a week rather than forty or fifty. And so some of the workplace shortages, some of the labor shortages that we're seeing among the labor among the knowledge worker pool, could be alleviated by creating more options for these older workers. Now, if you're talking about people who who work in a very demanding
physical occupation. If you if you like, are a pile driver, if you operate a jackhammer, if you are a construction worker, or if you are a you know, a first responder, you know, those are jobs obviously where people can't be asked to remain you know, you know, in tip top you know, strength and agility and reflexes you know, into their seventeen eighties. But they may be great trainers, they
may have several more careers in them. We need to normalize those kinds of shifts through uh, you know periods of life, you know, basically gap years for grown ups.
Karen, I want to ask you, you know, in addition to the challenges, one challenge that you know we face a journalists when we cover anything around longevity is how things can turn into science fiction real quick, right, and we have to kind of approach the field with a
certain amount of skepticism. And I'm just curious, like, as you worked in this, and you have that great sort of preface about how the Center approached longevity, but I'm curious, like what already feels like a swing and a miss based on what you've got to observe and where things have already started to head.
Well, I think one of the most promising work is and Ashley Advance, you know, writes about this and the issue is is cellular reprogramming we really can? I mean, there are just great advances in decoupling the progression of disease in cells. Right, So we so often we assume aging itself is a disease.
It isn't.
It's a natural biological process that happens to you know, correspond you know to there are correlations with all kinds of age related diseases, neuro degenerate diseases or heart disease. We can actually uh you know, there are therapies that can that can re engineer cells, and so that is real, it's happening. I think, I think the miss is that is uh is the notion, uh, you know, of of immortality. You know, life has a beginning and an end, and and nobody at the center of longevity. Uh, you know,
advocated for changing that that progression. It you know, the the notion of immortality. It's it's tantalizing, you know, it's mythic, but you know, reality is that, you know, life, life does have an end. And one of the things, one of the curious phrases that stuck in my mind while I was I was working there was the compression of morbidity,
which basically means live long, live well, and die fast. Uh, so that there aren't years of infirmity, pain and loss of mobility and engagement and dignity that you really you just you just live full on until you don't. And and that was I thought that was a great model. And I think it is entirely within reach that people will live longer and fuller and healthier lives. And uh, you know, the notion of a health span is vitally important, and it does start at birth, and it starts with
those kindergarteners. You know, are they out playing, are they eating good food? Are they exposed to toxic stress? What? What is their climate? You know, what are the climate conditions for their lives? So so that those are really lifespan issues that have nothing to do with immortality, but they have a lot to do with life.
Well, it's a great story, Karen. I encourage everybody to check it out. It's in the new issue of Bloomberg Business Week. It's the Longevity Issue. It's on newstands now. It's already online at Bloomberg dot com, slash Business Weekend on the Bloomberg terminal. Karen Breslaus, California br chief for Bloomberg News, joining us from San Francisco. Joe Weber is the editor of Bloomberg Business Week, joining us from Brooklyn.
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