Gen Z Goes Shopping & Treasury Triples Buyback Plans

SPEAKER_1 (0:00)

This episode is brought to you by Charles Schwab. Timing the market, fighting inflation, managing risk? Financial decisions can be tricky. Investing isn't just math, it's psychology. Your neurons are playing favorites, and the market doesn't care. Financial Decoder, an original podcast from Charles Schwab, can help.

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Listen at schwab.com/financialdecoder.

Hanna Horvath (0:33)

The mall might be back. We'll take a look at how Gen Z, nostalgia and a more selective consumer are reshaping retail.

Dylan Lewis (0:39)

We'll get into how $6 billion is a lot, except in the bond market.

Hanna Horvath (0:42)

For Thursday, September 10th, it's Brew Markets Daily. I'm Hanna Horvath.

Dylan Lewis (0:45)

I'm Dylan Lewis. Let's get moving and grooving.

All right, we're kicking off today's show with a big move from a little-known name. Shares of Cooper Companies down 13% today. This is the parent company of contact lens brands like Proclear, Biofinity and My Day. Their vision segment makes billions of contact lenses every year. The company makes billions of dollars making those lenses. All to say, they are a huge player in the space, but results have not been great so far.

When the company dropped earnings, revenue was essentially flat, but the reason for today's sell-off seems to be the company's surgical division, which focuses on reproductive health like IVF and women's health products like IUDs. It currently makes up 30% of company's overall revenue, and Cooper Companies had been planning to sell this division off and focus more on its vision operations. The company was going through a strategic review to get a sense of interest, valuation and potential buyers, but today the board announced that they are opting not to sell the segment. Management explained that after talking to several interested buyers, several factors influenced valuation, and late in the process that valuation started to come down. The result, according to management, a temporary disconnect between Cooper Surgical's intrinsic value and offers received, resulting in proposals that did not adequately reflect the full value and long term potential of the business. Hanna, this seems like management speak for we could not get the price we wanted.

Hanna Horvath (2:17)

Yeah, 100%. And I think that's what makes us so frustrating for investors. You know, Cooper launched a strategic review late last year. The idea was selling the surgical business, and it was viewed pretty positively, right? And the thinking that is like, okay, it'll simplify the company. It lets management focus on those bigger visions and potentially bring in a significant amount of cash. And now management, like you said, it's kind of manager speak, but they're basically saying, we still think this business is valuable. We just can't get anyone to pay us what we think it's worth. And the timing is absolutely not helping here. I think the two big reasons why buyers might be assigning it a lower value.

One, there's new competition in the IUD market. And two, Cooper also recently paid a 270 million dollar settlement tied to a defective IVF product. So I think investors are kind of getting the worst combination here. You're not getting the big payout from a sale. You're still left owning the business that made potential buyers nervous in the first place.

But it doesn't sound like management has completely closed the door on selling it eventually. But for now, they're just asking investors, like, be patient with us, trust that we can get a better price later. But judging by the stock today, investors are not interested in waiting.

Dylan Lewis (3:22)

Yeah, and it seems like a big reaction for what is essentially no news. But estimates had pegged that surgical division at a four billion dollar valuation. Overall, Cooper Companies is a ten billion dollar company. So waiting means waiting longer for what would be a pretty meaningful payout. I think the combination of the lackluster earnings and no deal also led to some downgrades from analysts over at William Blair and Bank of America. So that is also weighing on the stock today.

All right. Up next, we've got a retail roundup and some sweet reminiscing about the smell of Cinnabon and tween rebellion strolling at hop topic. But first, this episode is brought to you by Charles Schwab.

Time in the market, fighting inflation, balancing risk. No one says financial decisions are easy. In fact, it's the exact opposite. Financial decisions can be really tricky, and often it's your own thinking that can lead you astray. Financial Decoder and original podcast from Charles Schwab can help.

Hanna Horvath (4:12)

Join hose Mark Reapy, head of Schwab Center for Financial Research, as he offers modern strategies to combat the weight what in your head. Mental traps like overconfidence, loss aversion, and recency bias may cloud your investing decisions. When you understand these patterns, you can take steps to make better informed financial decisions. Listen at schwab.com/financialdecoder or wherever you get your podcasts. That's schwab.com/financialdecoder.