Nike CEO Abruptly Steps Down After Struggling Sales & 23andMe in Turmoil
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Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, how Netflix could help Olympic gymnast Jordan Childs get her bronze medal back. Then Nike is losing its CEO, but it could be exactly what it needs to get back to winning ways. It's Friday, September 20th. Let's ride. Let's ride.

What a night in Major League Baseball. Los Angeles Dodgers superstar Shohei Otani became the first player ever to record 50 home runs and 50 stolen bases in a single season. No other player has posted more than 42 homers and 42 steals. The milestone was part of a mind-boggling 6-for-6 championship.

Three homer, two steal, 10 RBI game for Otani. That amounted to one of the greatest performances in sports history. Toby, ahead of this season, the Dodgers signed Otani to a record-setting $700 million contract. They might have underpaid.

Neil, I am trying to put this into business terms, and honestly, I got nothing. It's like Warren Buffett's Berkshire Hathaway reaching a $1 trillion valuation, but then him also founding another company in the same year that also reaches a trillion dollars. It truly is mind-boggling. The only thing I can do simultaneously at a high level is rub my tummy and pat my head, and even that I'm not so good at. No, you're doing well. The best thing for baseball fans here is that

Otani had been on a pretty bad team for the early part of his career. And last night, the Dodgers won. They won by a ton of runs. And he's going to be in the postseason for the first time. So we all get to watch him in the playoffs and compete in some actually intense games that we hadn't seen before. So kudos to Otani, just a remarkable player. And we're excited to watch you in the playoffs.

Now let's take a moment to hear from our sponsor, Wise Business, the app for doing things in other currencies. Neil, we're a little removed from the Olympics, but it got me thinking about the logistics of running such a massive event across multiple countries, which also got me thinking about running a business across borders, payments flying everywhere, multiple currencies involved. Some say that running a business across borders is harder than competing in the Olympics. Well, no, but why is it?

Makes it easier than it should be. Whether you're paying suppliers or getting paid by clients in different currencies, Wise makes it simple. No hidden fees, no inflated exchange rates, just fast, transparent international payments. You need to get over the Olympics, by the way, Toby. We're on to football season. Don't you ever compare the Olympics to football ever again. All right, all right. If you want to take control of your international finances, head to wise.com slash business. That's wise.com slash business.

For a company named after the Greek goddess of victory, Nike has sure done a lot of losing recently. It's been losing market share, losing customers, and as of yesterday, it just lost its CEO. John Donahoe, Nike's beleaguered chief executive, is on the outs, announcing plans to retire yesterday.

But that might be exactly what the company needs to turn things around. Bloomberg published a piece titled The Man Who Made Nike Uncool that dug into where Nike went wrong under Donahoe in recent quarters. The core issues was that Donahoe came from a consulting background, choosing to optimize server-side infrastructure and cloud storage elasticity, as Bloomberg put it, with little knowledge about what makes Nike shoes cool.

It led to decisions that seemed to make sense at the time, like flooding the market with older and popular models or the choice to prioritize its online and D2C sales over wholesale. Both worked in the short term but hurt them in the long term. Those older models became less cool over time, and decades-old relationships with key wholesalers

fail to the wayside. But now Donahoe's reign is coming to an end with an insider, Elliot Hill, who had a 30-year career at Nike taking his place. But Neil, what went wrong under Donahoe? I mean, when you say retire, you got to put that in quotes. This was being pushed out because the last couple of years at Nike have been a total disaster. It started with this

June earnings report where they posted sales of just 1% and forecasted lower guidance for the year. That sent its stock crashing 20% in a single day, which was its worst day in stock market history. A lot went wrong for Donahoe, but it started out really well. It kind of masked the overall problems. He grew revenue 25% over the first couple of years during the pandemic. That push to direct sales

customers from retailers toward the online Nike store was working really well. The online biz jumped from 30% to 44% over four years from 2019 to 2023. And then 2023 came, 2024 came, and it just

all fell apart. People started shopping in stores again. The competition from Hoka and Ahn completely obliterated them in the athletic running space. And it was just the writing on the wall after that June earnings report that the pressure mounted on Donahoe. It felt like there was a mutiny within Nike's workforce

as well, and it was just a matter of time before he had to step aside. It was almost he was a victim of circumstances because Donahoe was brought in to kind of bring that consultant mentality to modernize Nike's business. Nike thought it was too reliant on its just brick-and-mortar wholesale partners. They're like, come on, Donahoe. You spent some time at eBay. You spent some time at Bain, and you...

you are this e-comm wizard, let's juice our direct to consumer sales. And he did that, but I think he just got too high on his own supply where he would release these really popular older models. Like the thing that was emblematic is he, these Nike Panda Dunks, which were these black and white pair of Dunks Nike shoes. And

for a while, they were the hottest things in the street. Everyone was wearing them. So what Nike did was just kept releasing them on its app, kept pushing it, and people were buying them and everyone loved it. But then over time, it just inherently becomes less cool whenever you just flood a market with supply. So I think you just misunderstood sneaker culture at its core. And that led to just this over-reliance on these

heritage names, these heritage brands within Nike's portfolio and not enough innovation. And by going back to Hill, who was a long time Nike vet, he started there as an intern. I think Nike realizes that they have sort of a cult going on there in Beaverton, Oregon, and they shouldn't tap an outsider to lead the company anymore because, uh,

Donahoe was only the second outsider to ever lead Nike. He knew nothing about sneakers, and it was kind of a total disaster. So I think they're just saying, man, we've produced some really good talent, management talent within our ranks. Let's just keep it within the family. And I think one of his underdogs

major one of Hill's major initiatives right now is to repair relationships with retailers. Don Ho obliterated relationships with Foot Locker, DSW, Macy's, all of these places where you could typically find Nike shoes. He took them out and who filled the space but Crocs, Hot Oak,

Yeah. I mean, Crocs is doing well. Crocs, Hoka's, On's, Adidas, Puma, all these other brands filled the space. And Nike just wasn't there where customers were. And I'm only I'm thinking back to when Starbucks CEO left, because what happened then? The stock jumped a ton and Nike CEO just stepped down. The stock jumped 10 percent after hours yesterday. So you never like to see that when you leave a company and their stock goes up.

It does mirror, too, because Starbucks brought in this kind of consultant-minded person with a background in consulting. Right. Then replaced him with an industry insider. Same thing's happening at Nike here, and we're seeing the market react positively to that. Do you think Nike can turn it around? I think so. Do they have the brand? They still got the brand, and...

They just need to innovate a little bit more. I'd love to see a little bit more innovation coming, especially out of the running department. Toby thinks it's so easy. You can just like sprinkle some innovation. That's all you need. But yeah, I think they have what it takes to turn it around. Okay, 23andMe just became 16andMe after all seven of its independent directors quit the board on Tuesday, plunging the DNA testing company further into crisis.

Valued at more than $6 billion three years ago, the once-hot Silicon Valley startup is now worth just 3% of that, less than $200 million, and it's fighting to survive past next year. The mass resignations from the board stem from a disagreement over 23andMe's future. Earlier this year, CEO Ann Wojcicki hatched a plan to take the company private herself by buying out the 51% of remaining shares she doesn't control. But the board...

in an unusually harsh resignation letter, said this wasn't a serious offer. They said Wojcicki didn't present a credible proposal with financing sources, and they haven't seen any movement in the past five months that leads them to believe a more credible offer is coming. Big picture, they said they disagree with Wojcicki about the strategic direction of

the company. The drama only escalated from there when Wojcicki told employees she was surprised and disappointed by the board's mass resignation while emphasizing her commitment to taking her company private. But time is running out. 23andMe has enough cash to last it just 12 more months, while its 33-cent stock price could soon get it delisted from the Nasdaq.

I mean, you said it's like 16 of me now. It's almost just me at this point because Ann is really the only one left. It is just this awkward relationship because at most company, a CEO works for the board of directors. The board of directors works for shareholders. In 23andMe's case, Wojcicki is the CEO, but she's also a controlling shareholder. She owned 49% of the company. So technically, the board of directors worked for her even as she worked for them. So it created a lot of this just inherent tension as a result. So-

Who was in the right here? It's hard to know because who knows what A&M's vision for the company is. It has shifted a lot in recent years. Remember, 23andMe used to just be like a place where you could see your genetic lineage and trace your genetic history, see where grandpa was from, but then they tried to turn it into much more of a

juggernaut leveraging their big pool of genetic data to develop drugs. But that went to the wayside. Now they're tossing out ideas like selling GLP-1 class of drugs. So they're searching for something here because they never quite nailed the business model. They are throwing spaghetti at the wall and seeing what sticks. You're right. They tried drug development because they have a trove of DNA data. But drug development is so

so expensive. You try all of these early stage trials and out of 50, maybe two will hit, but that takes 10 years and it's very, very capital intensive. So last month they shut down this drug development operation and said, nope, actually we're going into GLP ones. And they bought this company lemonade telehealth service. And they're saying, we're going to ship you GLP one drugs like what go V O Zempic, et cetera. Uh,

through this telehealth service, but it doesn't seem, when the board said we don't have the same strategic direction, it doesn't seem like there is a strategic direction for 23andMe and their core service, which is this DNA testing thing, you only need to do once, and it's not...

really a compelling result outside of cocktail conversations because it rarely gives you life-changing medical information. Right. There's only a few amount of people that do have this life-changing diseases lurking in their genetic code. So how can you really sell a subscription service once you know your genes? Like they're not really changing over time that much. So it was tough. This used to be a very buzzy, very hot startup, but now it is down literally 99.9% from its peak.

previous high. All right, Toby, I asked you if Nike could turn around for 23andMe. No, I'm not. I'm usually a bullish person, but I'm not going on record that 23andMe can turn it around.

Well, it's been a minute, but Stock of the Week, Dog of the Week is finally back because Jerome Powell cut rates. There was a veritable buffet of options to choose from. But since I beat Neil in the pre-show My Little Pony naming contest, I got first dib. So my Stock of the Week is Olive Garden owner Darden Restaurants.

Its stock jumped around 8% yesterday after it announced an exclusive two-year delivery partnership with Uber to ferry its delicious selections of breadsticks and pasta to your doorstep. It is a major shift from Olive Garden's usual approach to delivery because for a long time, third-party delivery companies like Uber were not allowed in its Garden of Eden. While other chains embraced delivery, Olive Garden shunned it, saying it led to slim margins and poor guest experience.

But there's nothing like a 1.1% drop in same-store sales this quarter, along with missed profit expectations to change your mind. Now Olive Garden is relying on Uber's logistics network to be its knight in shining Alfredo and offer an on-demand delivery to turn things around.

Ooh, nothing sounds more appetizing than ordering Alfredo delivery. This entire sector is in the dumps right now. I mean, people this summer did not go to fast casual chains. They weren't going to Olive Garden. They weren't going to Applebee's. They were doing other stuff. They were spending their money elsewhere. Same store traffic for the entire sector was down 4.5%.

this year for casual dining restaurants. That's even worse than the entire restaurant industry's drop of 3.3%. You mentioned that Darden, its parent, had a drop in one, a 1% drop. Olive Garden saw a lot fewer people too. So they're just trying something new. Every other restaurant has virtually partnered with Uber Eats or a third-party delivery service. So they said, hey, why not? We think people will order online for delivery and pay that set, they said, the average cost

delivery fee, which is going to be $7. But they're like, okay, if you're ordering for your family, maybe you'll pay those $7 for the convenience. So they're just trying something new to try to turn around sales that are slumping right now. It did remind me of another story you might remember us talking about on this podcast, which was when Domino's struck a similar deal with Uber Eats. Domino's was similarly protected

of its brand. It had that pizza tracking app, so it didn't want to hand control over to a third party like Uber. But then times got tough, sales fell, so you open up the business a little bit, let people within your own walled garden to try to just get people back ordering your food. They are also bringing back its never-ending pasta bowl later this month. I'm having shades of...

A red lobster. Exactly. I know. They are saying they're not red lobstering themselves, or I hope they're not red lobstering themselves. But again, this is like their version of the pumpkin spice latte, I feel like. Just offer something up to get people back in the door. And never ending possible does sound quite compelling, I might add. Now, Neil's got a dog of the week coming up next.

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What do Mattel, Banana Republic, ButcherBox, and Glossier all have in common? They power their businesses with Shopify. Shopify is the most innovative and scaled commerce platform on the planet that also happens to have the best converting checkout on the planet. And that's no industry secret. That's Shopify. Learn more at shopify.com slash enterprise.

Our dog of the week is Trump Media and Technology Group, the owner of the social media platform Truth Social, which is down bad and now faces a moment of truth. Yesterday, after the market closed, the lockup period for Truth Social insiders expired, meaning former President Trump and other major shareholders can sell their stakes. They were blocked from doing so for six months after the company went public via Spam.

which is common for these type of deals. You don't want major investors heading for the exits right after a company goes public. Now that Trump is clear to sell his shares, he is faced with a nearly $2 billion question. He owns 57% of the company's outstanding stock worth $1.8 billion. So that's some paper money he could convert to cash. It's a lot. It's about

half of his overall net worth. But last week, Trump told reporters that he wouldn't sell his shares and that he was sticking with his social media company, Ride or Die. Recently, it's been more of the latter. The stock that bears Trump's initials, DJT, has fallen nearly 9% this week to a record low and is down 78% from its March peak. Trump selling any of his shares could drive that price down even more.

We just have to acknowledge what a conundrum this business is because it has a market cap of over $3 billion. But the underlying business is about the size of just a family business, a modest one at that too. Trump Media generated revenue of $836,000.

thousand dollars in the second quarter of 2024. It has lost around $344 million on revenue of less than $2 million in the first half of the year. So there's nothing here to really justify its valuation other than the fact that it bears Trump's name. The fundamentals of the stock, if you can call it that, is Trump's words and Trump's attitude at

and his chances of winning the election. So this is why this is such a big moment is he needs to say like, I'm not selling or else there is nothing else supporting the valuation other than just like his belief in the brand. Right, but this is so much money and he has bills to pay. So it would be surprising if he didn't try to take some of it off the table. There is an option where you don't have to sell the stock. You could potentially borrow against it, put it as collateral to take out a loan. So put it to work for you. So that is one sort of reason

1B option after selling it. But you have to disclose that. And if you don't, you get in a little bit of trouble. Last month, Carl Icahn got fined by the SEC one point five million dollars. There's a big fine for this particular infraction because he pledged vast amounts of his shares in his companies to secure personal loans, did not disclose that with the SEC. And then they slapped him with a pretty big fine. So either way, whether Trump sells it

any of his stock, or he pledges his shares as collateral to get some of that money like out of Trump media group, which you said is not a successful business besides its lofty share price. We'll know about it because he has to file these disclosures with the sec within two days of making these things because he is, uh,

making these actions because he owns 57% of the company. And if you own more than 10%, anytime you do something big, you have to file a disclosure and let the public know. You see that with Warren Buffett all the time. Right, he can't do anything in secret here.

When you look up into the night sky, you might see a shooting star, even the Big Dipper if you have a keen eye. But if you're an astronomer looking skyward, something is obstructing your view. Thousands upon thousands of satellites. Right now, the bane of astronomers' existence is one planet.

particular satellite, SpaceX's second generation Starlink. The newest Starlink model was found to have interference 32 times stronger than the first generation model, according to an international team of astronomers, which really puts a damper on attempts to observe the so-called invisible universe, stuff like black holes or faint dying stars.

astronomers rely on radio astronomy to detect faint radio signals emitted by celestial bodies. But space X is mega constellation of internet beaming satellites is blinding their instruments. You know, as the amount of satellites in orbit grows, so too does the difficulty of looking out into space. And there are lots of satellites up there now. I mean, the scientists in this paper called it a threat to the entirety of ground-based astronomy in every wavelength and in every

different ways. There's a fear soon that space observation might begin to look like a windshield of bugs, according to one scientist. So they are very fearful that the proliferation of satellites, so we can get to the numbers in just a sec, because they are astonishing, will forever dampen our understanding of the universe. And they, you know, this was my first thought. I was like, okay, well, Starlink does some cool stuff. Maybe we, uh,

find ways to get around that. And they were like, no, no, this isn't just science for science sake. We're not just doing science fair projects in eighth grade. Like this is very critical to our understanding of how the solar system works and could have a very big long-term implication. So take this seriously. And they're trying to work with SpaceX and,

to figure out a way so they're not getting blocked with all of this radiation coming. Right, and there's two ways that they're actually being affected by Starlink and satellites in general. One is that they are just bright. They say the streaks that satellites leave when they reflect the sunlight are around 10 million times brighter than the faintest light sources that astronomers study. So these things are reflecting the sun and blinding their instruments, but then also I'd said they use the...

they use radio astronomy to pick up on radio signals. So the electromagnetic signals that these satellites are emitting are also blinding that sort of astronomy as well. So they are just, the windshield of bugs is just an apt metaphor. They can't see out there. They can't see the objects that they... They can't see the aliens trying to talk

Right. Maybe they've been trying to get through, but we just have all these bugs in the way. But you're right. There are over 7,000 Starlink satellites in orbit. They have the capacity to launch 200 satellites per month at this point, SpaceX does. There's plans to launch 12,000, deploy 12,000 more satellites, possibly up to 34,000 at some point. There are projections that soon, by 2030, there could be 100,000

satellites in low earth orbit so a lot of bugs coming at our space windshield meanwhile

United Airlines just signed a deal with Starlink to bring free Wi-Fi to their airplanes. So that is, for lack of a better word, cool. It is an incredible product. It is beaming internet from the space. So again, with all of these things, you have to balance the need for innovation with the need to protect and utilize space for other experiments, like you were saying. Yeah, I mean, Starlink now will be in 2,500 planes offering free Wi-Fi to

I like free Wi-Fi. Okay. Here is a... I also like astronomy for what it's worth. Finally, here's a pretty crazy story to send you out on this Friday. U.S. gymnast Jordan Childs, who is fighting to reclaim her bronze medal that was eventually removed at the Paris Olympics, is getting some help from a Netflix documentary.

Back at the competition in August, Childs was given, then stripped of, a bronze medal in the floor exercise, which would have been the UCLA gymnast's first individual Olympic medal. What happened in the arena has caused major controversy in the gymnastics community. Childs originally landed in fifth place, but her coach Cecile Landy made an inquiry with the judges to boost her score, which they accepted and awarded Childs the bronze.

But days later, Romanian officials said that the coach's inquiry did not come within the required one-minute time limit after the score posted and that their gymnast should place above Childs. The Court of Arbitration for Sport sided with Romania and gave Childs' bronze medal to a Romanian gymnast instead.

Childs and her coach have not given up the fight. And this week they filed an appeal with new evidence from a Netflix documentary. Turns out production company Religion of Sport was in the arena that day filming a docuseries on Childs' teammate, none other than Simone Biles. And their cameras got everything on tape, including proof that shows Childs' coach,

making the inquiry within the one-minute time limit. Toby, did Netflix provide the smoking gun in the case? I mean, there are so many parts of this that are just insane, from the fact that you have only exactly one minute to file an inquiry to the fact that there just happened to be a Netflix crew filming here, not just filming, but had special access to film in the arena. They had three different cameras, and they had audio from Landy, the coach, so you can literally triangulate the point to the second that she...

actually verbally expressed that they wanted to file an inquiry. And you can hear her very clearly at 49 seconds. She comes over and says inquiry for Jordan. She also repeats it another time before the 60-second deadline. So a lot of people are looking at this and saying, hey, court of the CAS, this arbitration court saying, you guys did not

consider this evidence. You really should. Like, it says it clearly, but they're trying to say that, no, we made our ruling, so we cannot accept this video evidence. But this is absolutely the smoking gun in this case. Yeah, and Childs is going above the Court of Arbitration for support. They're going to the Federal Supreme Court of Switzerland. So it's kind of like

let's say the Jets got angry about deflating with the Patriots. And instead of taking it up with the NFL, they're literally going to Congress or the Supreme Court to manage to figure out what's going on here or to settle their dispute. But it is interesting to ponder whether this could create a precedent for documentaries that have not yet been released on

to the public, but are recording a lot of things. We know there have been so many documentaries that Netflix has commissioned out in various sports leagues, F1, tennis, golf, all these other sports, and they're collecting so much footage. They're micing up everyone, so they might have information to settle disputes.

for, you know, for movies that haven't been released yet. So we'll see. I mean, maybe like, you know, yeah, let's go back to the NFL. All these coaches are mic'd up. Maybe they called a timeout before a field goal was kicked and they have to settle this dispute. And we'll see whether maybe this will set a precedent, whether these types of content can be used in a court of law. It is interesting too, though, because the way you think about documentaries is that they are

a proof of record. They are documenting something that happened in the past and then here it is trying to change an outcome of something that is happening technically in the future to this outcome will. So it is just throwing time and space into a different sort of kind of continuum here. This appeal could take months though. There's not going to be a quick resolution here. If it does wind up being successful, it is huge for Childs. She has come out and said like, that was really hard for me. Like getting...

feeling like I lost getting the medal then getting it taken away again she says like it was part of my identity I've been stripped away so you do hope that it does seem like the right thing here is that they filed the inquiry on time hopefully she is rewarded with the medal that she earned yeah I think it's fair to say we want her to get that medal I mean we do

Okay, that is all the time we have. Thanks so much for starting your morning with us and have a wonderful Friday and an even better weekend. For any feedback, questions, or comments on the show, send an email to morningbrewdailyatmorningbrew.com. And don't forget to share Morning Brew Daily with your friends, family, and coworkers so you can gossip about all the 23andMe drama together. If you need some inspo, Toby has you covered.

I want you to share today's pod with someone named Henry because today, September 20th, just so happens to be my brother Henry's birthday. So in honor of my Henry, share it with a Henry in your life. - Love that. Happy birthday, Henry. Let's roll the credits. Emily Milliron is our executive producer.

Raymond Liu is our producer. Olivia Graham is our associate producer. Uchenua Ogu is our technical director. Billy Menino is on audio. Hair and Makeup is ordering breadsticks for delivery. Devin Emery is our chief content officer, and our show is a production of Morning Brew. Great show, Daniel. I wish you all well.