Power Lunch - Countdown to jobs report, travel troubles and Falling Gas Prices 8/4/22

Episode Date: August 4, 2022

Ahead of the big July jobs report we hear from the CEOs of Adidas and Ethan Allen about the state of the economy. There were big expectations for the summer travel season, but so far earnings from travel companies haven’t lived up to the hype. Why not? Plus, 50 days of falling gas prices. How much lower could gas prices go? Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch. I'm Courtney Reagan, along with John Forty's joining in just a second. Here's with the head on the show today. We are less than 24 hours away from a huge jobs report for the markets. Everyone wants to know the real estate of the economy. We're here from two CEOs on what they're seeing on inflation, the supply chain, and especially the consumer. And the summer of 2022 was supposed to be when we all started getting back out there. But results from travel companies have disappointed the markets and now Expedia's on deck. We'll get into that and more. But first, let's get over to John. He's got a check on the markets for us. Hi, John.

Hey, yeah, I took a little walk. Thanks, Courtney. Markets giving up early gains, but the losses are small. Walmart is the worst performer on the Dow. The company announcing job cuts, laying off hundreds of corporate workers as part of her restructuring. Last week, Walmart lowered its profit forecast. Remember that.

Energy is the weakest sector today as oil falls below 90 bucks a barrel. Coming up, we're going to look at how that's affecting gas prices. And, whoa, check out Coinbase. Coinbase, yeah, still up more than 11%. Partnering with BlackRock on ways to make it easier for institutional investors to trade Bitcoin. Well off the highs of the day, but still, I mean, come on. Coinbase has doubled since the beginning of July. Still down 60% though, Courtney, for the year.

Oh, Bitcoin, John. I know we're going to talk more about that. Well, some on Wall Street would argue, given the current environment, that the market wants growth stocks. Our next guess says, nope, investing in value. Earnings and cash flow, that matters more than ever. So let's go value hunting with Surat. Sethi. He's a managing partner at DCLA. He's also a CNBC contributor. All right, Sarad, to lay the groundwork for us. Why does the thesis make sense to you right now that value is just better than growth in this market?

So I think given the uncertainty of where interest rates are going to be, cash flow is really important. And I think investors are going to look at companies, especially when you look at discount rates and if rates are going to go up, you want more certainty. We've had so much volatility over the last six months to a year. If you can find companies that are undervalued, have good cash flow growing solid balance sheets and a growing dividend, I think at least for the next couple of years, if you get anything from a five to seven percent earnings growth with three to five percent dividend yields, you're looking at 10 percent. And 10 percent in this market's pretty good. What would you consider good cash flow right now? So let me give me an example.

steel case. Steel case, so you might look in and go, wait a second, why do we want to be an area that has office furniture? But you're looking at a company that is pre-pendemic levels, inflationary pressure, and you've got now demand improving. So people are remodeling their offices, not just to come back, but also for the new kind of hybrid. So demand is there. Steel case is now raising prices. Inflationary pressure is coming off. The stock trades at nine times earnings has a five and a half percent dividend yield with a very solid balance sheet. And they expect earnings to grow, you know, anywhere from 8 to 10 percent. So if you have that for the next three to five years, you're looking at a higher than, you know, 12 percent return with a company that has some of the wind at its back.

That is an interesting one. I have to admit, I was a little surprised when you suggested a company that makes office furniture with all the discussion of potentially hybrid being more permanent. What about Edison International, a utility stock, really? Yeah. So if utilities are done really well, but Edison's kind of last. They're 15 times earnings and they're a distribution and transmission company. So they're not in the generation part. So they actually have the ability because of regulatory reasons to control kind of what their earnings are. So if you look at kind of what their earnings and expectations, which are anywhere from 6 to 7 percent,

and you have close to a 4 percent dividend yield, that's a pretty good return in a market that, again, you know, is not giving investors too much. But what I like about Edison is that it's been over almost four years since they've had a fire there. And investors are still penalizing a company like Edison for that because they were actually responsible for that. So they really cleaned up their act. They're working with California. They're much more green than they were before. And I think, you know, here's a company that is a really good space.

So I want to go back to Steelecase for just a second because it's funny, you know, office furniture. We got Ethan Allen coming up in just a couple minutes. You know, furniture all over the place seems to be doing well. But how durable is that? Is that just perhaps an aftershock of the pandemic where some people are going back to the office and you need some new furniture, but not over a long period of time? So, you know, what we're looking at is the remodeling. It's companies coming back and, you know, we're doing it. We talk to other clients who are doing it.

They're saying, look, the office of the past is going to be different from the office of the future. So what do we need to do that? Do we need to have more places where people can have Zoom calls? Can we have more places where people can do hoteling? All that requires different type of furniture. and that furniture, not just in the office, but you're going to have it in the home office, too. Because now as people say, I'm going to spend one, two, whatever days it is in my home, my second home, all that is going to be demand that wasn't there before.

And it's incremental new demand that's going to be recurring in nature. Okay. Yeah, I can see that. Surat Sati, thank you. Thank you. It was supposed to be the summer of travel after two years of COVID restrictions, but signs are emerging that the travel trade is over, both booking holdings and Airbus. and B reporting earnings that were not quite as good as forecast. Travel stocks slumping this year with booking and Airbnb down 20% or more.

Expedia is down 43%. Despite the poor numbers, our next guest says booking's well positioned to weather a possible recession. Joining us now is Jed Kelly, senior analyst at Oppenheimer. Jed, why? I mean, I understand the pent-up demand for travel, but the consumer, there's some signs that the consumer might be getting tapped out, savings rate coming down, credit going up. They're going to keep traveling? Yeah. I mean, I think what we've seen, right, is inflationary pressures right now aren't affecting the affluent consumer. And what we think will happen next year is, you know, if we do go into

recession, people are still going to travel, they'll just probably trade down, right? They probably go to a cheaper hotel, cheaper ADRs. And our view on booking being able to handle the recession is what we saw in the 0809 recession, they were able to gain share. Typically the aggregators with a lot of supply, such as booking, will get more traffic to their site on people comparison shopping. And by the way, booking is strong as a strong balance sheet, which allow them to buy back stock and they have strong marketing efficiency. So that's our call. Okay. So there will be demand for travel, you argue.

Will the supply hold up? And by supply, I'm mainly thinking about the airlines, many of which are cutting flights. We've heard all about these labor troubles and whatnot. Is that going to have a trickle-down effect onto the bookings of the world? Well, we think will happen next year, right, when the airlines are able to train their staff, when they'll have, you know, looking at the fall, they should have more employees, more people will be up to speed on training. We think they'll eventually be able to be able to handle their capacity issues.

If you actually listen to what the major U.S. airlines said, they're calling for a 15% increase in capacity next year. So we think that bolds well in terms of them having enough employees to meet demand. And it was interesting with booking, unlike Airbnb, they didn't call out airline cancellations as having an impact. They actually said the second half of July was better, and they haven't seen the impact that Airbnb had from airlines. I want to pick up on that point, Jed, on Airbnb. I believe that's in your coverage universe as well. Sort of a mixed report there from them, some highlights, but certainly some low lights. What do you make of the longer term potential for an Airbnb as the world continues to change around us, how we travel, how we live?

Oh, they're executing fallously. I mean, the reason we like booking right here more than Airbnb is just on the valuation. Airbnb still trades at 23 times our next year's EBIT on. We see risk of a multiple compression. But Airbnb is well positioned as well. I mean, what you typically see is we actually think they'll get more supplies as well on more people running out. their second homes or, you know, more people renting out their homes to gain more economic, to gain more income, right? We got to remember, Airbnb was founded out of the 0809 recession. So we think they bowed well especially. And we actually think Airbnb will get some uplift. If the stronger dollar occurs of more U.S. citizens traveling abroad to Europe next year because their dollar will go more. And that was sort of the thread that I wanted to pull on next.

As we think about what's going on internationally, I know a lot of the retailers that I cover I have said, look, we haven't seen that pick up in international travel quite yet, not exactly to the levels that we were before. So as you look at the world around us changing different levels of COVID lockdowns and restrictions and ability for citizens or desire to travel, which of these names in your coverage would be most at risk and which might be most sort of in the positive seat to benefit as international travel begins to return. Well, it's mixed, right? I mean, I would say this. Booking has the most exposure to Europe. So they're probably most negatively impacted. Expedia stands to benefit the most from long-haul international travel from U.S. citizens going to Europe.

So Expedia, we expect some uplift. And then Airbnb, I think, would be more mixed. They sort of have equal penetration in Europe and the U.S. So I think it goes Expedia, Airbnb then booking. And just to really, because I was going to ask something similar, The strong dollar play then is Expedia. You're saying if people who are in that luxury segment that's holding up pretty well consumer-wise want their dollars to go further, Expedia is the one most likely to benefit? Yes, they have the largest North American customer base.

All right. Jed Kelly with Oppenheimer. Thank you. Thank you. Well, coming up, time to get the pulse of the economy from two CEOs focused on different areas of the consumer. So we're going to hear what Adidas is seeing in the U.S. and around the world, and Ethan Allen, up 10% today after reporting earnings that blew away street estimates. We'll talk to Ethan Allen's CEO right after this break.

Welcome back to Power Lunch. I'm Bertha Coombs. U.S. health officials are expected to declare monkeypox of public health emergency imminently. sources tell NBC News. Cases nationally have soared to more than 6,600, according to the CDC, with the majority concentrated in California, New York, which have all declared public health emergencies in those states. HHS Secretary Javier Bacera is expected to hold a briefing at this hour within minutes, along with the White House's new National Monkey Pox Response Coordinator. As you can see, a number of the stocks related to the disease are moving higher on that news. Courtney?

Thank you very much, Bertha. That is an important update. Welcome back to Power Lunch. Shares of Home Furnishing Retailer, Ethan Allen, jumping today following record, fourth quarter, full year results. The stock is also up 25% just this month. So here to weigh in on the strong quarter. Inflation, the consumer and more is Faru Kavari. He's CEO, chairman, and president of Ethan Allen. Thank you so much for joining us here today. You know, some pretty strong results here. And I see that your retail sales, your consolidated net sales, up almost 29%. Can you talk us through

a little of the details in that number? How much of that is inflation? Have you had to increase prices because of what you're faced with as a business? or is it pure demand from consumers? Well, first of all, good to be on the call. And yes, it's a number of factors. First is, of course, you've got to be in a position where you're able to do it, which is you've got to have the right offerings.

You've got to have the ability to have the right people. In our case, we are a vertically integrated company from manufacturing to retail to interior design. design, a lot of technology. All of those factors have helped. So I believe that another important factor has been, for all of us, that there has been a tremendous amount of focus in the home in the last two years

that helped us develop strong backlogs. And as we were able to make the products, keep in mind, 75% of the products we make in North America, in our workshops, that's a great, great advantage. All of those factors helped us in making this happen. Look here. We have got 1,500 interior designers in-house, and they are the ones who made it possible to work with clients. Today, their personal service, combined with technology, made it happen. So, in short, it is a combination of the fact of consumer demand. It's a combination

of our ability to have this interior design network, our ability to manufacture, to deliver, Also, you're right, there has been inflationary pressures that has helped increase some prices. But for most of what you have seen today, those inflationary prices have not impacted this delivery as yet. And you brought up a point there in your answer that I actually think is really key here with everything else that we've talked about through the last several years of the difficulties that retailers have faced, not the least of which is the supply chain, but three quarters of your manufacturing is done here right in North America. So can you explain to me how then you have this backlog of orders if I assume that you're not as trapped in this global supply chain as some other competitors might be? So what's going on with the backlog? Well, first of all, you're to have the 75% manufacturing in North America is not being easy.

You know, I had 20 years back I decided that we would consolidate our manufacturing in North America. we had at that time 27 manufacturing plants many of our competitors went offshore. We said no we will maintain in North America we went to Vermont which is of course our home base and from

there we went to North Carolina we were all these places but that was not enough so we went about 20 years back to south of the border to Mexico then we went to Honduras when you combine all of this it gives us a great opportunity on the supply side And that was tremendously important.

Now, having said this, we still had issues. For instance, there were issues of getting parts. There were issues of lumber, even though we go to the forests ourselves in Vermont, and we have our own sawmills and lumber yards. But still, there were challenges. So there were challenges of transportation. And especially, while this was taking place, we had exceedingly. high demand from customers. So all of that combined did create a backlog. We still have it,

but the fact is if we did not have this manufacturing in North America, and keep in mind, 75% of our products are made custom. Right. So that's a very different business model. So, yeah, that is very different. And I wonder what you're doing with retail storefronts. Given that, you've got no debt, you've got more than $100 million in cash. There is some movement to reinvest in malls. And I believe you tend to be near malls, but not necessarily in them. Are you investing in that kind of growth, or are you more trying to get more efficiency out of your existing locations? Well, I think is a good question. We are doing both. In the last 15 years, 65% of 175 locations have been relocated. We, you know, we started in the retail

about 50, 60 years back. We are celebrating 90 years of existence this year. So we, in the, I was involved myself. We had, we took over retail that was in freestanding locations all of the country. 65% of them relocated, but we did not go into mall. We went close to them. And that process is continuing today that our retail locations are smaller, very, very important. We just opened

the one right here in Westport, Connecticut. We just opened one in San Francisco and others. Keep in mind that 50% less space than we had 20 years back or even 10 years back. More efficient technology and interior design

service is that is the difference. So less space, more business. Before we run out of time here for just very quickly, what are you seeing when it comes to the consumer? To be fair, your consumer likely has more disposable income than many other consumers. What are you seeing? Well, we are seeing certainly consumers are more cautious. I think that in the last two years, consumers spend a lot of

time in their homes. Then in the last six, seven months, they started traveling. They're spending money in other areas. Having said this, but still, there is a fair amount of interest in the home. You just have to be in a position to be able to service it. You've got to have the right products. We are interior design combined with technology. Yes, it is somewhat softer from this high, very high demand we add, but the demand is still there. And I believe that those of us who are in a position to service a customer, I think they will continue to benefit. Makes sense. Faruq Kathari, thank you very much for being with us today on Power Lunch.

And by the way, Courtney, we went to NYU Business School together. You went a little bit later than me. Oh, that's wonderful. Hey, a fellow Stern alum. Thanks again. Exactly. Take care, Courtney. Up next, social media engineering new research, identifying an ongoing social media campaign

that is spreading inauthentic news sources aligned with the Chinese government. That's specifically regarding its stance on Taiwan. Those details are next. Plus, running up that hill, Adidas posting a massive profit decline despite increasing sales. What's keeping the stock stuck in the mud? Power lunch will be right back. Welcome back. Tensions between the U.S. and China heating up this week over Speaker Pelosi's visit to Taiwan. China engaging in military exercises as a show of strength, but it's what China's doing behind the scenes that could have an even bigger impact.

Amen Javers looking into the latest cyber tactics. Amen. Hey John, the cybersecurity firm Mandian is releasing new research this morning that they say shows the Chinese government is likely behind an enormous network of phony news sites and bogus accounts on social. media that are pumping out the government's message. And they've even faked the words of a prominent U.S. Senator. That effort, they say, includes 72 news sites the company suspects of being inauthentic, as well as phony characters on Twitter who amplify and comment on the content on these sites, all of it going out to the world in 11 different languages. That's according to Mandia. Now, this week, the fake news sites turn their attention to Nancy Pelosi's visit to Taiwan, publishing articles urging the American Speaker of the House to stay away from the

Ireland nation that China regards as its own territory. Mandian says it alerted U.S. social media companies to the campaign, and they've been removing some of these accounts. Mandiant's John Holkwisk says the secret Chinese effort is designed to obscure ties to the Chinese government, which is not something it can do in its public government-owned media outlets. Take a listen. They're essentially trying to create a vision of reality that reflects, you know, that benefits them. What's really great about this is this, these, these, tools don't have their fingerprints all over them. So one example of just how aggressive all of this is.

At one point, Mandian says, the Chinese effort posted fake letters purportedly from United States Senator Marco Rubio in an effort to push back on criticism of the Chinese government. In a statement, Rubio told CNBC that it's no surprise the Chinese would try that. He says it's important to expose these networks. Even sloppy efforts can cause confusion. So the big question here, guys, is just how effective this elaborate effort has been in shaping the global debate. John Holkowitz says the propaganda effort is still nascent. You know, and China's isn't as powerful as some of the other countries that are active here like Russia and Iran, but they are

working on it, he says, guys. Huh. Amon, are the big social media companies, let's just say Facebook meta, Twitter, for example, getting any more nimble at addressing this quickly? You know, if you look at some of these accounts today, you'll see that they have been taken down. So Twitter clearly responding, John Holkowitz, said, yeah, they are responding. If you effectively to this, but the volume of it, as you can imagine, is just enormous, right? Because this is a global problem. These things are embedded all around the world and broadcasting in 11 different languages out there. So you can imagine the scale of the whack-a-mole that these social media companies have to play to try to knock all this stuff down when they see it.

Our aim and javers, thank you. You back. Let's get over to Contessa Brewer for the CNBC News Update at this hour. Hi, Contessa. Hi there, Courtney. Here it is. Well, we have a pair of Democrats in the Senate introducing new legislation to help bridge the gap in reproductive health care access for people with disabilities in the wake of the Supreme Court's reversal of Roe v. Wade. Polio has been found in wastewater samples taken from two counties outside New York City, indicating potential community spread, according to state health officials. Wastewater samples taken from two different locations in Orange County during June and July tested positive for the virus,

and polio was also found in Rockland County, wastewater samples. These are counties just outside of New York City. An unvaccinated adult in Rockland County contracted polio, suffered paralysis, and had to be hospitalized last month. And at least 73 million people are under heat alerts today in the United States. Temperatures soared into the upper 90s from the mid-Atlantic to Maine in what's forecast to be the hottest day of the week. Listen, folks, there's a reason they call this the dog days of summer, Courtney. It is so hot. It's like hard to be outside.

It just almost hurts. Thank you, Contessa. We'll head on power lunch. Reading the gas gauge. Price is down for the past 50 days in a row. Hey, that's good news for consumers. So is the pain at the pump finally over? Less beyond the pump.

Evie brand lucid tanking as it slashes 2020 guidance. We're going to hit that and more. And today's three stock lunch. Just under 90 minutes left in the trading day. So we want to get you caught up on the markets. Stocks, bonds. commodities including gas prices long, slow decline. Let's begin with Bob Pizani at the New York Stock Exchange.

Bob. John, we peaked into positive territory on the S&P four times today. We are trying to establish a new trading range, a higher trading range, around 4150 to 4,200. This is the highest levels we've seen since early June. We'll see NASDAQ yesterday, highest level since early May. It's hard to do it without the tech stocks. That's what's led the way in the last couple of weeks, really. So we had good numbers this morning.

AMD, nice numbers overall, maintaining their full year guidance. Nvidia's been on a tear. Microsoft's been up recently, highest level since May. Apple was at the highest level since early May yesterday, flattish today. And that speculative tech stuff, boy, Kathy Woods on its hair. Roku just had a terrible earnings report dropped dramatically. It's back almost where it was a week ago before the earnings report came out. Block's been up.

I think that's seven straight days. Tesla, six out of seven straight days. turned to the upside today. So nice little run in some of those Kathy Woodstocks. What people don't want is those energy stocks. We were at $90 just today on West Texas Intermediate. We went down to 87 or so today. Can't seem to hold right now. And those big technology names, they've been out of favor really since oil topped out. And that was in the early part of June, big declines today, even though great earnings report. We're about 80% through earnings season. So most of the big company has reported nice earnings report from ICE, Intercontinental Exchange. That's the

owner of the New York Stock Exchange. They had a nice beat on the top and the bottom line. See them up 5% here. Their exchange business did good. The fixed income did well. And the data business, they have a big data business also did very well. John, back to you. All right. Thanks, Bob. Now to the bond market yields heading back down to the four-month lows we hit earlier this week. Rick Santelli is in Chicago for us. Rick? Yes, John, indeed. And this is in front of the big jobs number tomorrow. And let's not forget. Initial claims at 260,000? Well, they're not as high as the recent 261,000, but we are definitely awfully closed to the highest level in eight months going back to the November 12th era. And why is that important? Because of course, as initial claims move higher, it gives us a very real-time read on employment and layoffs.

And we, of course, know that tomorrow's number is more of a lagging indicator, which means at some point, if we see jobs roll over, it's going to have an, outsize effect on the market, even though it might be a dated piece of data. Now, if you look at a week to date, you can clearly see Tuesday was the big day. We had an intraday low down at 2.51% for a 10 year, but everything reversed that day. That was a tough Fed Talk day, closed at 2 and 3 quarters, which means if you open the chart up, that it was the first Monday's 257 yield settlement that was the lowest going back to April 5th. And a week today, the three months versus tens shows you what a volatile week it's been

and how the Fed is not happy with the markets. Because that big move that we saw down to 251 also gave the real recession spread a big move down to eight basis points. Look at how it's plowed back up. But it does show us how quickly it could possibly invert on a weak jobs number tomorrow. And finally, here's the one many people like Tuesday's tens. It's on its way to a fifth session where it's been the most inverted in 22 years. John Fort, back to you.

All right. I'm riding on that jobs number. Rick, thank you. Now oil closing for the day. Back below 90 bucks a barrel, Pippa Stevens at the commodity desk. Pippa. Hey, John. Well, this dip below $90 for WTI is notable because it's the first time the contract has dropped below that level

since Russia invaded Ukraine at the end of February. At the lows of the day, WTI hit 8755, a price last seen six months ago on February 3rd. Now, this all comes down to demand, control. The latest inventory report showed that gasoline supplied over the last four weeks has dropped nearly 9% compared to last year. And that follows weak data out of China as well as growing recession fears. Now the price difference between WTI and global benchmark Brent crude is now the greatest in more than two years. In the U.S., we do have some supply coming back online as well as the ongoing SPR releases over in Europe. The market remains ultra tight.

Let's check on prices. WTI down 2.5% at 88.43, brand crude at $94 for a loss of 3%. And check out gasoline futures down another 4% today and dropping more than 20% this week. John? All right. Thanks, Pippa. Yeah, you mentioned gas futures. Let's stay with energy and talk gas prices as the U.S. sees its 50th straight day of declines. Or is it 49? Let's see. The national average for regular gas is now sitting at four bucks and 14 cents a gallon, according to AAA. That's 67 cents lower than a month ago, nearly 90 cents lower than the June peak of $5.2. But still, prices are almost a dollar higher than this time last year. Our next guest says he's expecting prices to fall below four bucks a gallon in the next week or so, maybe even sub three bucks a gallon in some states.

Let's bring in Patrick DeHan, he's head of petroleum analysis at gas buddy. Patrick, we expect a drop this fast and how much longer could we get it? Well, John, I think in the next probably 100 hours or so, maybe even sooner than that, the national average will breach that $4 gallon mark for the first time in months. I think March 5th is the last time we saw a free handle on the national average. We're already at 409. So just 10 cents away. and I tweeted out something about $2.99 gas, and lo and behold, within an hour, two stations now in Oklahoma City are already at that $2.99 mark. And keep in mind, we've seen those sub-3-dollar prices happen during price wars. But this would be the first time it appears a legitimate profit margin still at these stations in Oklahoma City. Now, very few motors are going to see that. But what most other motors are going to see is that sub-4-dollar price happening on the West Coast, a little bit of a lagger. but areas are falling back under $5. Even California is likely to fall under that $5 gallon mark in the weeks ahead.

Why did it drop so fast? I think a lot of it is still what PIPA had mentioned, concerns over consumption. We are coming into the closing innings at the summer driving season. The EIA implied demand metric, clearly disappointing, though gas buddy data doesn't really agree with the decline that we saw. I think there are growing concerns that heading into a slowdown in the fall, you have economic gasoline, probably the unwanted hydrocarbon going into winter being preferred is diesel and jet fuel. But that's the discussion of the demand. And of course, the other side of that is supply. And we keep hearing about how supply is so tight. We did a whole segment on I think it was yesterday, potentially right here on this show on power lunch. So why is that not playing into the price of gasoline at the pump right now? Well, if you parse out with the hydrocarbons, gasoline, diesel, and jet fuel, it's really distillates, diesel and jet fuel that are seeing very, very tight inventories. Gasoline has moderately improved. In fact, it's just a little bit below where it was a year ago. So certainly a much different fate here for lighter hydrocarbons like gasoline that appear plentiful. And again, recessionary levels would dictate more of a declining gasoline consumption. And that's why there's still a lot of.

pressure on diesel distillate jet fuel prices. And that will likely stay, especially as we approach winter areas of the northeast are going to start to fill up with heating oil ahead of the colder weather. And of course, Europe's challenges abound in terms of heavy oil as it heads into colder months as well. We're often talking about hurricanes this time of year. We really haven't had any major hurricanes hit anywhere near sort of the big refining regions. Is that a risk, though, that we need to be aware of potentially that could cause some kind of a price spike or a, price shock, at least in the short term? Without a doubt, as we're getting close to here, about two weeks away from the peak,

the start of the peak of hurricane season, that is absolutely a challenge that still could push prices back up. In fact, earlier today, forecasters at Colorado State University, prestigious for hurricane forecasting did lower expectations slightly. This is not, we're all clear. There still could be a major hurricane. Of course, they're forecasting for major hurricanes. to hit the U.S. category of three or stronger. If one of those storms ventures into the Gulf of Mexico at a time that refining capacity is still constrained compared to 2019, oil production, we really still need every barrel. If there is a shutdown from a hurricane, we could still go up in dramatic fashion. Is the price of gas right now, based on supply being where it is, is it moving mostly

on demand. Is it a decent gauge mostly of consumer demand or is it bigger than that? You know, if anything, it seems like, and it feels like gasoline may be a little bit oversold given the fact that we still have three months left before the summer driving season wraps up. Now, some of the numbers have been shockingly low from the EIA, and I think there's a lot of weight being put on that. We just saw implied gasoline demand go from 9.25 million barrels in the previous week. all the way down into the mid-Aids. That's a pretty big plummet.

And obviously, when you talk about recession or economic slowdown, there's a lot of fields of 2008, 2009. And like I said, some improvement on gasoline inventories has also played into this as well. So keep in mind that a decline, it's held together by string. This is not a very, very concrete decline that's well-rooted in fundamentals. I think you're seeing a lot of money flow out of commodities and move elsewhere, and that could be a big reason for the huge sell-off in Arbob.

Well, string or no string, a lot of people who want to fill up, we'll take it. Patrick Dahan, thank you. That's right. Well, coming up, Adidas, posting a profit loss, what does this say about the state of the global economy? Sir Eisen bringing us her interview with the company's CEO. Plus, beyond meet results after the bell, it's been a rough run for the stock. As we discussed yesterday here on the show, will its cash burn continue? As we had to break, remember, you can now listen to Power Lunch on the go.

Look for us on your favorite podcast app. Follow and listen today. Welcome back to Power Lunch. We've been hearing from a lot of CEOs to try to get a picture of what the economy is really like. Are we in or are we headed for a recession or not? Sarah Eisen talking to the CEO of Adidas or Adidas about the strength of the U.S. consumer. I guess it all depends on who you're talking to and what part of the world you're talking about, Sarah. And what category?

Yes, Courtney, Adidas' latest earnings paint a pretty strong picture of the U.S. consumer. And CEO Kaspar-Rour said, saying demand in North America doesn't appear to be slowing down. Yet, headwinds from a slower-than-expected recovery in China and shutting down operations in Russia are weighing on the business, causing a 28% decline in operating profits. Here's what Adida CEO told me about. What are you seeing around the world from the consumer right now? It's the way we see the world.

It's really a divided world. We have 85% of our global business growing a combined, 14%. That's pretty much the highest growth we've seen from the last three to 40 years. We have North America or USA growing 21%. We have Latin America growing 37%. So you have a huge part of the world growing double digit in our business. And then we have China that is minus 35%, which is very much COVID-related. So you have two completely different dynamics that's going on from a domain standpoint.

Do you see that holding up particularly in the U.S. and Europe, where there are, increasing concerns about recession? We right now, the fastest growing sports brain in the U.S., and we opted the guidance for the rest of the year, so we continue to see very, very healthy demand for our products in the U.S., and that's also our expectation going through the end of the year. Whether it's in the store or digital, we grew more than 30% digitally in the U.S. In Europe, if you exclude Russia, you know, the war impact, we're growing double-digit, and we still expect a very solid business, maybe a slight, you know, slower in Europe,

but overall we see those two markets really being very, very healthy. No recession there. Another highlight, the Easy Brand, which continues to be up strong double digits and now has a, quote, tremendous impact on Adidas. Of course I asked Roystead about the brand's relationship with Kanye West, and we're going to have more on that, especially amid another recent controversy between the two later on in closing bell. Courtney and John.

I know that's always an interest point for you, Sarah, when it comes to Kanye West and his different consumer and retail partnerships and fashion lines. I'm wondering, you know, obviously, as he mentioned, their China, a soft point because of what's going on with the COVID restrictions. Is that really all he thinks is the issue there, meaning I guess when the restrictions ease up, that the things go back to normal for Adidas in the area? It is. I ask that exact question, Courtney. It is the primary headwind right now, and that is the Chinese demand side of things. They're dealing with these rolling shutdowns as it relates to COVID, and that's weighing on the business. Interestingly, he said it's not impacting the factories, which are up and running, and that the support. supply chain appears to be improving. But yes, China and then Russia, those are the big headwinds.

When they lowered guidance last week, interestingly, the company did put a line in there saying this takes into account the lowered guidance, any weakness we might see in the developed markets, which is why I was really curious to ask about that point today. But from our conversation, they're just not seeing it yet. They continue to see double-digit growth in places like the U.S. and demand remaining healthy. Got it, Sarah. Thank you so much. I finally caved and bought a pair

of those Adidas superstars. I think I'm like years behind everyone else. But now I've got them. I'm going to be a cool mom now. You're going to get those yeasies next. Then you'll be really cool. Yeah, that's next to my list. I'm like a yeezy demographic kind of girl wearing, right?

You never know. Biggest movers in today's market are next. We're going to get the trades in three stock lunch. It's time for today's three stock lunch. Today we are looking into Carvana, Lucid and Shake Shack. Carvana scheduled to a report after the bell today, currently down 85% for the year. Lucid Group cuts their production targets again, stating logistics challenges down 10% today. And Shake Shack shares slide this morning after falling short on their quarterly earnings.

Goodness knows I did my part this quarter. Let's bring in Quint Tatro. He is founder and president of Jewel Financial to help us trade them. Okay, first up is Carvana. I believe new constructs has this on their one to watch for possible bankrupt. what do you make of it? Yeah, that's, that's extreme, but, you know, potentially there. I mean, the company is set to lose about $2 a share. That's the reports, at least that's estimated, and they only have $3.75 a share in cash. They already have a tremendous amount of debt. What's interesting about this one, Courtney, is it's 37% sold short. So any, any subtle hint of good news whatsoever could create a decent squeeze out of this name, but that's not enough for me to go long this stock. If you happen to be long the stock, I would sell into any strength and I would

avoid this lemon. Okay. Next up, Lucid. Quint, how long do they have to get this turned around and start really churning out vehicles? That's a good question. They've got $4.6 billion in cash, John, so it's a long time. But as an investor, do you really want to wait that long? The reality is that everybody wants to find the next Tesla. My contention is just own Tesla. I mean, every time you think this company is really doing something, they come out. Again, they cut production. They've got supply chain issues.

Again, it's just not something that I want to touch at all. They do have a lot of cash, so they're going to have a long time. But you can wait until the real turnaround begins in the stock price, and you won't miss much upside. All right. The final name is Shake. Shaq, what do you make of this one? Love the burgers, miss the fair shake. Yeah, Courtney, this is the only one that I have down is along on the list today. And I think you can buy the weakness. I mean, the report is out of the way. It was not great. They cited

what you'd expect, right? Slower consumer demand. They're facing inflationary pressure. But let's not forget. This is a company that is still in growth mode. They're going to be continuing to open new stores. And at this moment, they only have six drive-thru. operations. That's going to be a game changer for them. So we think with this company, about $10 a share in cash, trading three-time sales, schools coming back in session. Again, this is one, I think, was stop at lows because we're looking at it as a trade, which is a pretty good clip from here, 20% or so. You could go along this name on this weakness here. Okay. Yeah, it is down about 7% here today. Quint Tatro, Jewel Financial. Thank you very much for joining us for

our three-stock lunch. Come Beyond Meat reporting after the bell. Details when Power Lunch returns. Welcome back to Power Lunch. Shares of Beyond Meat down 6% today, 50% so far this year. Yesterday on Power Lunch, we heard from David Traynor, who thinks it could be heading for bankruptcy if it doesn't make drastic changes. Today, we hear from the company.

Kate Rogers joins us ahead of those earnings. Kate? Hey there, John. Analyst looking for a loss of $1.18 on revenues of $149.7 million for the second quarter. Retail estimates in supermarkets and stores 99 million, while food service in restaurants is at 40.1 million for this quarter. The company had touted 2022 as a big year for partnerships with McDonald's, Young Brands, and PepsiCo. Last quarter, the jerky product that it rolled down with Pepsi was successful, but expensive, and it weighed heavily on margins. That should change this quarter CEO Ethan Brown had said in May, with production becoming more efficient in the second half of the year.

Then there's the McPplant. McDonald's confirming last week the McPlan test with Beyond had come. concluded as planned, there have not been any announcements for a nationwide launch or further testing. BTIG's Peter Saleh reported back in June that the franchisee reaction to the product was somewhat lackluster and at the low end of projections. The two brands announced a three-year partnership in 2021. It also has a deal with Young Brands, which had a successful limited time offering of Beyond Fried Chicken at KFC as well as Pizza Hot, but you're not seeing these progress to many permanent offerings on the menu nationwide at this point. The partnerships and rollouts get a lot of

but the analysts say that the McDonald's partnership in particular was important for revenue growth for the company this year. So we'll have to see what happens after the bell and moving ahead. Back over to you guys. Yeah, Kate, what's more important? Restaurants for them or grocery stores? Oh, both. Well, food service revenue, John, declined last quarter. Grocery did see growth due to the jerky, but then if you took out the jerky product, that also declined. The company's CEO has talked about the amount of competition that they're just facing in the plant-based meat space. something he hadn't talked about so bluntly before. There's just so many new entrants. Some are bigger.

They may be better capitalized. They may be able to produce more quickly. So there's more competition than ever before. But the restaurant partnerships get a lot of press for sure. Yeah, they absolutely do. Okay, beyond is such an interesting company to me. Well, thank you all for watching Power Lunch. I guess that's it.

That show went fast. Yeah. Quick. Yeah, it was fun. Good to be with you.