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https://www.barrons.com/articles/kenvue-jnj-stock-price-exchange-offer-e85c3c90
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Shares of Alibaba Group Holding Ltd. were rallying more than 2% in Thursday’s premarket trading after the Chinese e-commerce giant topped expectations with its latest revenue and earnings.
The company notched fiscal first-quarter net income of RMB34.3 billion ($4.6 billion), or RMB13.30 per American depositary share, compared with net income of RMB22.7 billion, or RMB8.51 per ADS, in the year-before period.
On an adjusted basis, Alibaba
BABA,
earned RMB17.37 per ADS, while the FactSet consensus was RMB14.59 per share. Revenue rose to RMB234.2 billion from RMB205.6 billion, where analysts had been modeling RMB224.7 billion.
Chief Executive Daniel Zhang said the company’s reorganization was “beginning to unleash new energy across our businesses.” Alibaba recently realigned into six units with their own CEOs and boards of directors, and the ability to pursue independent fundraising.
“Through this self-driven transformation, we aim to catalyze innovation, promote vitality in our organization and enable businesses to focus on long-term growth,” Zhang continued. “We look forward to positive impacts on our business, including strengthening competitiveness, sustainable growth and shareholder value creation.”
See also (from June): Alibaba’s Zhang to step down as CEO, chairman amid business shakeup
Overall revenue for the company’s Taobao and Tmall Group, which represents the company’s core e-commerce marketplaces in China, rose to RMB115.0 billion from RMB102.5 billion.
Within that group, customer management revenue was up 10% to RMB79.7 billion, “primarily due to the increase in merchant’s willingness to invest in advertising” and an increase in the volume of online physical goods generated on the platforms.
The company’s cloud group saw revenue increase to RMB25.1 billion from RMB24.1 billion. Alibaba previously announced plans to spin out that business.
Alibaba bought back $3.1 billion worth of ADRs during the June quarter, “which is supported by our continuous generation of strong free cash flow,” Chief Financial Officer Toby Xu said in the release. Free cash flow was RMB39.1 billion in the quarter, up 76% from a year earlier.
U.S.-listed shares of Alibaba are up about 8% so far this year.
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Walt Disney Co.’s stock dipped in after-hours trading Wednesday after the company posted mixed quarterly results roughly in line with analysts’ expectations amid a cost-cutting frenzy.
Separately, Disney said it is hiking prices on almost all of its streaming packages in an aggressive push to boost its bottom line. Commercial-free Disney+ will cost $13.99 per month, a 27% increase, beginning Oct. 12. Ad-free Hulu will increase 20% to $17.99 per month. A new Disney+ and Hulu Bundle ad-free plan launches Sept. 6 for $19.99.
Read more: Disney is raising prices on Hulu and Disney+ again. Here’s how much you’ll soon pay.
The media giant
DIS,
reported a fiscal third-quarter loss of $460 million, or 25 cents a share, mostly because of restructuring and impairment charges. After adjusting for restructuring costs and other effects, Disney reported earnings of $1.03 a share. Revenue grew 4% to $22.3 billion from $21.5 billion a year ago.
Analysts surveyed by FactSet had on average expected adjusted earnings of 96 cents a share on revenue of $22.5 billion. Disney shares declined about 3% in after-hours trading immediately following the release of the report, after dropping 0.7% to $87.52 in the regular session.
“Our results this quarter are reflective of what we’ve accomplished through the unprecedented transformation we’re undertaking at Disney to restructure the company, improve efficiencies and restore creativity to the center of our business,” Disney Chief Executive Robert Iger said in a statement announcing the results. Disney is in the midst of a $5.5 billion cost-cutting plan overseen by Iger, who returned to the CEO position to right the ship in late 2022.
Direct-to-consumer (DTC) sales, which includes streaming services and some international products, hauled in $5.5 billion, compared with analysts’ forecast of $5.7 billion on average and last year’s total of $5.05 billion. The division did reduce its quarterly losses to $512 million, compared with $1.06 billion a year ago. Analysts were expecting a loss of $758 million.
Still, the company has lost more than $10 billion in its DTC segment since launching Disney+ in late 2019. Disney had told investors for three years it expects Disney+ to be profitable by September 2024. During a conference call with analysts late Thursday, Iger said Disney is “actively exploring” options to crack down on account sharing when the company updates subscriber agreements later this year and will “roll out tactics to drive monetization” in 2024.
The company’s iconic theme parks around the world and product-sales business increased to $8.3 billion in revenue from $7.4 billion a year ago. The average analyst estimate was $8.1 billion.
Disney’s largest business segment, media and entertainment distribution, raked in $14 billion during the quarter, down from $14.1 billion a year ago. Analysts on average predicted $14.3 billion, according to FactSet.
Disney’s television networks generated sales of $6.7 billion, while analysts’ average estimates called for $6.74 billion. Content sales and licensing, a category that includes Disney’s film business, reported revenue of $2.1 billion, compared with analysts’ expectations of about $2.15 billion.
In the weeks leading up to Disney’s results, there has been a whirlwind of fear and doubt over the current state of the company’s streaming services — including ESPN — as well as linear-TV ad sales, the actors’ and writers’ strikes that have shut down Hollywood, Disney’s theme parks and its legal and political battle with Florida Gov. Ron DeSantis.
Front and center is the health of Disney+ as it battles streaming rivals like Apple Inc.
AAPL,
Netflix Inc.
NFLX,
Amazon.com Inc.
AMZN,
Warner Bros. Discovery Inc.
WBD,
and Comcast Corp.
CMCSA,
Macquarie Equity Research analyst Tim Nollen believes in Disney’s streaming services over the long term but said “we see too many near-term issues to overcome to support a more constructive view.”
Disney+ had 146.1 million subscribers globally, 7% fewer than the 157.8 million it had in the previous quarter. The decline mostly came from India, where Disney lost the rights to stream a popular cricket league last year.
Disney and DeSantis, who is running for the 2024 Republican presidential nomination, have filed dueling lawsuits that stem from the company’s criticism last year of a Florida law that bans classroom discussion of sexuality and gender identity with younger children. Earlier this week, a group of mostly former Republican high-level government officials called DeSantis’s takeover of Disney World’s governing district “severely damaging to the political, social, and economic fabric” of Florida.
The somber vibe prompted Deutsche Bank analysts on Tuesday to lower their price target on Disney shares 8% to $120, with “lower advertising revenue, underperformance at the box office, and lighter parks attendance in Orlando” chief among their concerns.
“This is Iger’s most important earnings call since returning to Disney late last year. He came in with a punch list that was too long to realistically knock off in two years,” Rick Munarriz, an analyst at the Motley Fool, said in an email. “Now the board has given him four years, and every word he uses during Thursday afternoon’s earnings call has to carry some serious heft.”
Disney’s call was to start at 4:30 p.m. Eastern.
Shares of Disney have inched up 0.7% this year, while the S&P 500
SPX
has climbed 16%.
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WeWork Inc. disclosed Tuesday that there’s “substantial doubt” about its ability to continue operating, as the company seeks to improve its financial positioning.
Shares of the company, which provides co-working spaces, were down 33% in Tuesday’s after-hours trading.
WeWork
WE,
lost $397 million in the second quarter and has $680 million of liquidity. In light of its losses and expected cash needs, “substantial doubt exists about the company’s ability to continue as a going concern,” WeWork said in its second-quarter earnings release.
Its ability to continue “is contingent upon successful execution of management’s plan to improve liquidity and profitability over the next 12 months.”
See also: Proterra stock craters as electric-bus maker files for Chapter 11 bankruptcy
As part of that liquidity planning, WeWork will aim to cut its rent and tenancy costs through restructuring as a renegotiation of lease terms. The company is also looking to boost revenue by lowering member churn, and it will try to rein in expenses and capital expenditures. Finally, WeWork is seeking additional capital through the issuance of debt or equity, or via asset divestitures.
The company was a hot technology player before the pandemic, enabling businesses to obtain flexible arrangements for workspaces, but it’s struggled to find its footing again now that companies and employees have become more comfortable with remote work.
WeWork’s losses narrowed in the latest quarter, though they were still sizable, as the company logged a net loss of $397 million, or 21 cents a share, compared with a loss of $635 million, or 76 cents a share, in the year-prior period. The FactSet consensus was for a 12-cent loss per share, based on three estimates.
The company also managed to grow revenue in its latest quarter, bringing in an $844 million haul on the top line, up from $815 million a year earlier, though analysts had been looking for $850 million.
“The company’s transformation continues at pace, with a laser focus on member retention and growth, doubling down on our real-estate portfolio optimization efforts, and maintaining a disciplined approach to reducing operating costs,” Interim Chief Executive David Tolley said in a release.
The company’s prior CEO stepped down in May.
See more: WeWork bonds sink after top executives resign from cash-burning company
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Tupperware Brands Corp.’s stock climbed more than 90% in extended trading Thursday after the beleaguered maker of iconic food containers announced a debt restructuring agreement.
The surge sent the stock hurtling toward a nine-month high. In a statement released after market close, Tupperware
TUP,
said that it has finalized an agreement with its lenders to restructure its existing debt obligations. The agreement will improve the company’s overall financial position by amending certain credit obligations and extending the maturity of certain debt facilities to allow it to continue with its turnaround efforts, Tupperware said.
The agreement provides for the reduction/reallocation of $150 million in interest and fees, and an extension of the stated maturity of approximately $348 million of principal and reallocated interest and fees to fiscal year 2027 with payment-in-kind, or PIK, interest.
Related: Tupperware and Yellow have skyrocketed, but don’t confuse them with meme stocks
Tupperware also announced the reduction of amortization payments required to be paid through fiscal year 2025 by approximately $55 million, and immediate access to a revolving borrowing capacity of approximately $21 million.
“I am confident that this agreement provides us with the financial flexibility to continue executing on our near-term turnaround efforts as well as our long-term strategy to create a global omni-channel consumer brand,” Tupperware CFO Mariela Matute said in the statement. “We are committed to making ongoing progress in improving liquidity and strengthening our capital structure. We appreciate the support of our lenders, who share in our strategy, as we move forward.”
Related: How ‘left-for-dead’ Tupperware became a buzzy trading play
In April, Tupperware issued a going-concern warning, essentially cautioning that it could go bust. The beleaguered company also announced the hiring of financial advisers to help it navigate its near-term challenges. On July 7, Tupperware said that it had entered a waiver agreement with some of its creditors.
Also on Thursday, Tupperware said that its second-quarter earnings report will be filed late. In an SEC filing, Tupperware explained that it is unable to file its report for the quarter ended July 1 by the prescribed due date. Tupperware cited “the time and effort” required to complete its consolidated financial statements for its Form 10-K annual report for the fiscal year ended Dec. 31, 2022 and the Form 10-Q for the quarter ended April 1, 2023. “The company will be unable, without unreasonable effort or expense, to complete and file the Q2 Form 10-Q within the prescribed time period,” it said. “As previously disclosed on its Form 8-K on April 7, 2023, the Company is continuing its restatement of previously issued financial statements and the financial statement close process for the year ended December 31, 2022.”
Since the 8-K filing, Tupperware has “identified additional prior period misstatements and additional material weaknesses in internal control over financial reporting,” the company said. The April 7 8-K filing also disclosed the company’s “substantial doubt” about Tupperware’s ability to continue as a going concern. “While the Company is still completing its second-quarter 2023 financial close process, it expects that its Q2 Form 10-Q will reflect a material decline in revenues for the quarter ended July 1, 2023 as compared to the quarter ended June 25, 2022,” Tupperware said in the filing. “The Company believes that its preliminary estimated revenue results for the quarter ended July 1, 2023 will be within the range of $260-$270 million.”
Related: Tupperware stock skyrockets to a record 434% gain in July
Tupperware’s stock has skyrocketed recently, despite a dearth of fresh news. Nonetheless, Tupperware should not be confused with a meme stock, according to Samantha LaDuc, founder of LaDucTrading.com. Tupperware’s recent trading activity is also reminiscent of spikes in other names also recently seen as “left for dead,” as LaDuc put it to MarketWatch last week.
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Microsoft Corp. easily topped profit and revenue expectations for its latest quarter, though its shares were moving more than 3% lower in extended trading Tuesday after the company discussed the year ahead.
The technology giant has won favor on Wall Street for its positioning in the artificial-intelligence revolution, though Chief Financial Officer Amy Hood said on Tuesday’s earnings call that “even with strong demand and a leadership position,” Microsoft’s
MSFT,
“growth from our AI services will be gradual.” Microsoft’s AI for its Azure cloud-computing business needs to ramp, and the company is working toward the general availability of its Copilot productivity product.
Microsoft’s AI revenue impacts will thus be weighted toward the second half of the new fiscal year that just began, she continued. Meanwhile, she expects that Microsoft’s capital expenditures will rise sequentially each quarter “as we scale to meet demand signals.”
Hood’s commentary came as Microsoft posted fiscal fourth-quarter results Tuesday afternoon that showed a 15% jump in revenue for the company’s cloud-computing segment, which it calls Intelligent Cloud. Revenue for the segment came in at $24.0 billion, while analysts had been anticipating $23.8 billion. The growth rate was 17% on a currency-neutral basis.
The company said revenue for Azure and other cloud services was up 26%, or 27% in constant currency. Microsoft’s forecast had been for 26% to 27% in constant-currency Azure sales growth, while the company posted 31% constant-currency growth on the metric in the March period. The FactSet consensus was for 27% growth in constant currency.
“While we believe the Street was hoping for Azure growth more in the ~28% range, we believe the consumption part of the business held up well,” Evercore ISI analyst Kirk Materne said in a note to clients.
For the September quarter, Microsoft anticipates 25% to 26% in constant-currency Azure growth.
The cloud migration is still in the “early innings,” Chief Executive Satya Nadella said on the call, while also highlighting a “new world of AI driving a set of new workloads.”
“We think of that, again, being pretty expansive from a TAM [total addressable market] opportunity and we’ll play it out,” he continued, though the company is also up against the “law of large numbers” given the massive scale of its cloud business.
The company generated fiscal fourth-quarter net income of $20.1 billion, or $2.69 a share, compared with $16.7 billion, or $2.23 a share, in the year-earlier period. Analysts tracked by FactSet were modeling $2.55 a share.
Overall revenue for Microsoft climbed to $56.2 billion from $51.9 billion, whereas analysts had been expecting $55.5 billion.
See also: Microsoft bulls are excited as company reveals pricing for AI offering
Microsoft logged $18.3 billion in revenue for its productivity and business processes unit, up 10% from a year before, or up 12% in constant currency. That part of the business includes LinkedIn and both commercial and consumer versions of Office. Analysts had been looking for $18.1 billion.
Revenue for the More Personal Computing segment, which includes Windows and Xbox content and services, dropped 4% to $13.9 billion and was off 3% on a constant-currency basis. The FactSet consensus was for $13.6 billion.
Nadella, meanwhile, expressed optimism about the eventual opportunities brought upon by Microsoft’s Copilot offerings.
“I do think people are going to look at how can they complement their [operating-expense] spend with essentially these Copilots in order to drive more efficiency and, quite frankly, even reduce the burden and drudgery of work on their OpEx and their people and so on,” he said.
Evercore’s Materne called the overall results “solid” amid “a lot of macro headwinds.” Microsoft’s investment story “gets stronger in [the second half of the calendar year] as some optical headwinds reverse and [comparisons] soften, and Microsoft’s position in the enterprise market continues to get stronger as customers look to consolidate spending,” he wrote.
Read: Amazon finally is nearing a bottom on this key measure, analyst says
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“We want to build something huge.”
That’s Lindsay Drucker Mann, chief financial officer of Oddity Tech, the Israeli digital consumer technology platform for the beauty and wellness market that started trading on Nasdaq on Wednesday.
The stock
ODD,
soared 38% out of the gate after the company’s initial public offering priced above its proposed range. The deal was also upsized in another sign of strong demand.
“We’ve unlocked online one of the most attractive and lucrative TAMs on the planet,” said the CFO, referring to the sector’s total addressable market. The beauty industry is worth an estimated $600 billion and is still dominated by bricks-and-mortar retailers.
“The encumbents are amazing megacap businesses that have built so much value over time,” said Drucker Mann. “But we believe the consumer has moved on and that we’re building the future of the category.”
The company, which was founded by Israeli sister-brother team Oran Holtzman, who is chief executive, and Shiran Holtzman-Erel, who is chief product officer, is confident its high-tech approach to the beauty business gives it a strong advantage.
For more, see: Il Makiage parent Oddity Tech is going public: 5 things to know about the Israeli digital beauty company
Oddity harnesses data science, machine learning and computer vision and artificial intelligence to allow its customers identify the correct products, formulations and shades, and it owns patented software that allows them to do it using their smartphones.
The company acquired Voyage 81 in 2021, a company that has developed software that can provide hyperspectral information.
Simply put, the eye can only see three colors — red, green and blue — but there are many more colors on smaller wavelength bands that remain invisible. Technology developed by NASA can extract that information but the hardware is expensive at a cost of $20,000 or more.
The Voyage81 software can extract the same information and bring it to all devices, allowing consumers to see more colors.
“We can analyze skin and hair features, detect facial blood flows and more. We’re building a whole new suite of tools to harness that power,” said Drucker Mann.
The results are impressive. The company’s first brand, Il Makiage, which was launched in 2018, was the fastest-growing global beauty direct-to-consumer platform from 2020 through 2022, says the prospectus, citing trade magazine Women’s Wear Daily.
Il Makiage was also the fastest-growing digital, direct-to-consumer beauty brand in the U.S. through 2021, says the IPO prospectus, citing data from Digital Commerce 360, which is its most recent available.
The second brand, SpoiledChild, launched in 2022 with the goal of disrupting the wellness category online, and is scaling even faster, said Drucker Mann.
The company now has more than 40 million users on the platform that have generated more than 1 billion data points on their beauty preferences. As of end-March, Oddity had more 4 million active customers, or customers that had made at least one purchase in the last year.
“Our business is unique in that it’s a company that’s growing and as young as we are and in tech, we’re profitable from very early on,” said Drucker Mann. “We have generated significant Ebitda margins and cash flow and so we have more than $100 million of cash on our balance sheet from earnings, and not from a capital raise.”
The company plans to use the proceeds from today’s deal to develop new products and expand into new markets. Some of those products will come out of Oddity Labs, which it set up in April to bring AI-based molecule discovery to beauty and wellness.
Brands three and four are in the works, although Drucker Mann is unable to offer details just yet.
“There are so many pain points that consumers have told us about so we’re developing products to address those,” she said.
The executive’s background as a Goldman Sachs banker made her passionate about companies and consumer products, understanding how a company works and what makes a business succeed.
“Getting global capital markets behind us when the business has never been stronger is making us excited as we look at 2024 and beyond,” she said.
The Renaissance IPO ETF
IPO,
has gained 45% in the year to date, while the S&P 500
SPX,
has gained 19%.
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Yahoo, an early trailblazer of the Internet boom, is “very profitable,” and ready to return to public markets via an initial public offering.
That’s according to Chief Executive Jim Lanzone, who made the comment in an interview with the Financial Times published Tuesday. Yahoo soared to prominence in the 1990s, rising in the public consciousness alongside its share price — under the ticker symbol “YHOO” — during the dot-com boom.
Apollo Funds purchased the Yahoo business from Verizon Communications Inc.
VZ,
in 2021.
The web services provider, which competes with the likes of Google parent Alphabet Inc.
GOOGL,
and Facebook parent Meta Platforms Inc.
META,
said earlier this year that more than 20% of its workforce would be laid off. At the time, Lanzone reportedly said that the cuts would be made in an unprofitable area of its business but that they would be “tremendously beneficial” to the company overall.
“Whether it’s finance, or sports or news, that’s still what we do, and why we’re No. 1, or No. 2, in all these important categories all these years later,” Lanzone reportedly told the FT. “While the company has had struggles [at] different points in time, we’re still huge in traffic, and we have our best days ahead of us productwise.”
He said Yahoo would be aggressively looking at the chance to build businesses in related sectors via M&A — it recently bought Wagr, a sports-betting app. While Yahoo is still “too small” to take on Google and Microsoft’s
MSFT,
search engine Bing, Lanzone said he’s optimistic, and also sees AI offering up new opportunities for the company.
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Opinions expressed by Entrepreneur contributors are their own.
The “will it… won’t it?” recession has been on just about every business owner’s mind for the better part of the past year. And if you’ve been keeping up with downturn-related news, you’ve likely seen countless articles on how companies and their operations and logistics professionals are preparing. Many of these focus on cutting costs, and perhaps for good reason. During a recession, consumers tend to have less spending money, of course, and when sales decrease, profits do, too. To counter this, the classic move is to scale back expenses, but there are critical factors to consider first.
Break out that general ledger, drill down into your expenses, and see exactly where the money is going. According to a study by Motley Fool’s The Ascent, if you’re like four-fifths of Americans, you waste more money than you should.
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Mike Kappel
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Atmus Filtration Technologies Inc.’s stock soared 14% Friday in its trading debut, after the Cummins Inc. spinoff priced its initial public offering in the middle of its proposed price range.
The Nashville, Tenn.-based company sold 14.1 million shares priced at $19.50 each to raise $275 million. With 83.3 million shares to be outstanding after the deal, the company’s valuation is $1.6 billion.
The stock
ATMU,
is trading on the New York Stock Exchange under the ticker ATMU. Goldman Sachs and JPMorgan Chase were lead book-running managers on the deal, with 10 other banks acting as co-managers.
Although the company is issuing primary shares, Atmus will not receive any of the IPO proceeds; all of the proceeds will go to debt-for-equity exchange parties, namely underwriters Goldman Sachs and JPMorgan, and will indirectly pay down parent Cummins’
CMI,
debt, according to the filing documents.
Atmus makes products for on-highway commercial vehicles and off-highway agriculture, construction, mining and power-generation vehicles and equipment, mostly under the Fleetguard brand. The company had pro forma net income of $34.9 million in the first quarter on sales of $418.6 million.
About 16% of its 2022 sales went to original-equipment manufacturers, where its filters are used for new vehicles and equipment, and about 84% were aftermarket sales.
The company was created by Cummins, a maker of diesel and natural-gas engines, in 1958.
The IPO comes in a thin year for deals. There have been just 44 IPOs this year to raise $7.3 billion in proceeds, according to Renaissance Capital, a provider of IPO exchange-traded funds and institutional research.
That’s up 29.4% from the same period in 2022, when deal flow slowed to its lightest in decades.
“Deal flow started at a decent pace but failed to pick back up after the February lull, as hawkish signals from the Fed, renewed recession fears, and turmoil within the banking industry caused a spike in volatility,” Renaissance wrote in April commentary.
The biggest deal of the year to date was that of Kenvue Inc.
KVUE,
a spinoff from Johnson & Johnson
JNJ,
which is parent to a number of household brands, including Tylenol, Band-Aid, Listerine and Benadryl.
For more, see: Kenvue stock cheered in Wall Street debut, as Tylenol and Band-Aid brand parent is valued at $48 billion
Kenvue raised $3.8 billion after pricing above range and achieving a valuation of $41 billion.
The Renaissance IPO ETF
IPO,
has gained 18% in the year to date, while the S&P 500
SPX,
has gained 9%.
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By Joe Hoppe
Cineworld Group said Thursday that its proposed restructuring has the backing of lenders controlling almost all of its legacy credit lines and most of the outstanding debt under its debtor-in-possession facility.
The London-based cinema company–which owns Regal Cinemas–said more lenders under its term loans due in 2025 and 2026 and revolving credit line due this year, have agreed to amended and restated versions of the restructuring support agreement and the backstop commitment agreement, first filed in early April in the U.S. Bankruptcy Court.
Now, the proposed restructuring has support of those holding and controlling 99% of the legacy credit lines and at least 69% of the outstanding indebtedness under the debtor-in-possession facility, the company said.
The proposed restructuring is expected to reduce indebtedness by around $4.53 billion, raise $800 million and provide $1.46 billion in new debt financing, the company said on April 3. The proposed restructuring doesn’t provide for any recovery for holders of Cineworld’s existing equity interests.
Cineworld now expects to emerge from Chapter 11 bankruptcy in July. During the restructuring, the company has continued to operate its business and cinemas as usual, it said.
Cineworld entered into Chapter 11 in September, with around $1.94 billion of debt, and had been in talks with stakeholders since then to develop a reorganization plan to maximize value. The company’s shares fell in late February after it said it had received a number of proposals from potential parties to buy some or all of its business, but none involve an all-cash bid for the entire company, leaving shareholders empty handed
During its bankruptcy process, AMC Entertainment held discussions regarding a potential strategic acquisition of theaters and talks about reviving a previously scrapped merger with Cineplex were also held
In early April, Cineworld said it had entered a restructuring support agreement and a backstop commitment agreement with some lenders. At the same time, Cineworld said the marketing process in the U.S., the U.K. and Ireland will be terminated. Proposals for the rest of the world business–outside of the U.S., the U.K. and Ireland–continued to be considered, it said.
Write to Joe Hoppe at joseph.hoppe@wsj.com
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Opinions expressed by Entrepreneur contributors are their own.
In today’s ever-changing business environment, business owners, entrepreneurs and franchise owners need to be prepared for the unexpected. Contingency planning is a critical component of business growth, enabling organizations to minimize disruptions and recover quickly from unforeseen events.
In this article, we will discuss the importance of contingency planning, the key elements of a comprehensive plan and how to implement a contingency plan effectively. By taking proactive steps to prepare for potential challenges, businesses can build resilience and ensure continued growth and success.
Related: 4 Ways to Prepare Now so Your Business Survives the Unexpected Later
Disruptions can come in many forms, from natural disasters to cybersecurity breaches, equipment failures or even changes in the competitive landscape. Without proper planning, these events can have a devastating impact on a business’s operations, finances and reputation. Contingency planning helps businesses minimize the impact of disruptions, maintain operational continuity and recover more quickly from setbacks. This resilience is crucial for business growth, as it enables organizations to adapt to changing conditions and capitalize on new opportunities.
Developing an effective contingency plan involves several key steps:
Step 1: Identify potential risks and vulnerabilities
The first step in creating a contingency plan is to identify potential risks and vulnerabilities that could impact your business. This includes both internal and external factors, such as natural disasters, equipment or network failures, supply chain disruptions, cybersecurity breaches, changes in the landscape or the loss of key personnel. By identifying potential threats, businesses can better understand their exposure and develop targeted strategies to address these risks.
Step 2: Develop response strategies
Once potential risks have been identified, businesses should develop response strategies to mitigate the impact of these events. This may involve developing alternative suppliers, establishing backup systems or processes or implementing new security measures. Response strategies should be tailored to the specific risks faced by the business and should take into account factors such as the likelihood of the event occurring, the potential impact on operations and the resources required to implement the strategy.
Step 3: Establish a communication plan
In the event of a disruption, clear communication is essential to ensure that all stakeholders, including employees, customers and suppliers, are aware of the situation and know what steps are being taken to address the issue. A comprehensive communication plan should outline how the information will be shared, who will be responsible for providing updates and what channels will be used to communicate with different stakeholders.
Step 4: Train employees and build awareness
For a contingency plan to be effective, employees need to be aware of the potential risks facing the business and understand their roles and responsibilities in the event of a disruption. This may involve training employees in new processes or procedures, providing guidance on emergency response protocols or conducting regular drills to ensure that all team members are prepared to act quickly and effectively in the event of a crisis.
Step 5: Review and update the plan regularly
As the business environment continues to evolve, it is essential that contingency plans are regularly reviewed and updated to reflect changes in the company’s operations, industry dynamics or the broader economic landscape. This may involve conducting periodic risk assessments, updating response strategies or refining communication protocols to ensure that the plan remains relevant and effective.
Related: 5 Reasons Why You Should Create an Emergency Response Program for Your Business
With a comprehensive contingency plan in place, businesses can take steps to minimize the impact of disruptions and maintain operational continuity. Key steps in the implementation process include:
Developing an action plan
An action plan should outline the specific steps that will be taken to address each identified risk, including timelines, resources and responsibilities. This plan should be clear, concise and easily accessible to all team members, ensuring that everyone understands their role in the event of a disruption.
Allocating resources
Contingency planning may require the allocation of resources, such as budget, personnel or equipment, to implement response strategies effectively. Businesses should prioritize resources based on the likelihood and potential impact of each identified risk, ensuring that the most critical vulnerabilities are addressed first.
Testing and refining the plan
Once the plan has been developed, it is essential to test its effectiveness through simulation exercises, drills or other means. This will help identify any weaknesses or gaps in the plan and enable the business to refine its strategies accordingly. Regular testing also helps ensure that employees are familiar with the plan and prepared to act in the event of a disruption.
Monitoring the environment and adapting
Contingency planning is an ongoing process that requires businesses to monitor changes in their operating environment and adapt their strategies accordingly. This may involve updating the plan to address new risks, adjusting response strategies in light of changing circumstances, or reallocating resources as needed. By staying attuned to the evolving business landscape, organizations can remain agile and resilient in the face of uncertainty.
Contingency planning is a critical component of business growth, enabling organizations to navigate the unexpected and maintain operational continuity in the face of disruptions. By identifying potential risks, developing targeted response strategies and implementing a comprehensive plan, businesses can build resilience and drive continued success. As the business environment continues to evolve, contingency planning will remain a vital tool for business owners, entrepreneurs and franchise owners seeking to capitalize on new opportunities and protect their organizations from unforeseen challenges.
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Greg Davis
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Bed Bath & Beyond went from homeware powerhouse to the retail doghouse over the course of the last decade.
But its final push into Chapter 11 bankruptcy protection Sunday resulted from a mix of bad decisions and forces beyond its control, the company explained in a new court filing. In the 93-page document, Holly Etlin, chief restructuring officer and chief financial officer of Bed Bath & Beyond BBBY, tried to explain how things went so wrong. Here are the top five choices and moments that ultimately spelled the retailer’s…
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Opinions expressed by Entrepreneur contributors are their own.
In a fast-paced business world, it’s easy to fall into the trap of trying to do everything as quickly as possible. However, this can lead to a lack of clarity, direction and even burnout. The most successful entrepreneurs know the power of slowing down, taking a step back and implementing a strategic plan for their businesses.
Strategic planning is the process of defining your company’s direction and making decisions on allocating your resources to pursue that direction. It’s about setting goals, identifying your strengths and weaknesses and creating a roadmap to achieve your objectives. Here are six tips to help you slow down, create a strategic plan and achieve long-term success.
Related: How Strategic Planning Transforms Chaos Into Confidence
Identifying your company’s purpose is the first step in creating a strategic plan. This involves answering questions such as “Why does your business exist?” and “What problem does it solve?” Understanding your company’s purpose helps you create a clear direction and focus for your business. It also helps you create a mission statement that articulates your company’s values and purpose.
One example of a company that has a clear purpose is TOMS Shoes. The company’s purpose is to “improve lives through business.” TOMS Shoes accomplishes this by selling shoes and using the proceeds to donate shoes to children in need. By having a clear purpose, TOMS Shoes has been able to create a loyal customer base that supports its mission.
Related:
Analyzing your market is the second step in creating a strategic plan. This involves identifying your competitors, understanding their strengths and weaknesses and analyzing current trends in your industry. By doing so, you can identify opportunities and threats and create a plan that takes advantage of those opportunities while mitigating those threats.
For example, when Netflix started streaming movies and TV shows online, it disrupted the traditional video rental market. Netflix identified an opportunity to offer a more convenient and affordable way to watch movies and TV shows, and it successfully capitalized on that opportunity. By analyzing the market and identifying a need, Netflix was able to create a new business model that has revolutionized the entertainment industry.
Identifying your company’s strengths and weaknesses is the third step in creating a strategic plan. This involves analyzing your company’s internal operations and identifying areas where you excel and areas where you need to improve. By doing so, you can create a plan that leverages your strengths and addresses your weaknesses.
For example, Apple’s strength is its design and innovation capabilities. The company has consistently created products that are both aesthetically pleasing and technologically advanced. However, one of Apple’s weaknesses is its dependence on a single product, the iPhone. By identifying this weakness, Apple has been able to diversify its product portfolio and reduce its dependence on the iPhone.
Related: The Case Against Haste: Why Slowing Down Is Good for Business
Setting goals and objectives is the fourth step in creating a strategic plan. This involves defining what you want to achieve and when you want to achieve it. By setting specific, measurable, achievable, realistic and time-bound (SMART) goals, you can create a plan that is focused and effective.
For example, Google’s objective is to “organize the world’s information and make it universally accessible and useful.” To achieve this objective, Google has set specific goals, such as improving search results and expanding its product offerings. By setting clear goals and objectives, Google has been able to stay focused on its mission and achieve its objectives.
Creating a roadmap is the fifth step in creating a strategic plan. This involves outlining the steps you need to take to achieve your goals and objectives. A roadmap includes timelines, resources and responsibilities — and it ensures that everyone on your team is aligned and working towards the same goals.
For example, Amazon’s roadmap includes a focus on customer obsession, continuous innovation and operational excellence. To achieve these goals, Amazon has invested heavily in technology, logistics and customer service. By creating a roadmap that is aligned with its goals and objectives, Amazon has been able to grow into one of the world’s largest and most successful companies.
Reviewing and adapting your plan is the final step in creating a strategic plan. A strategic plan is not set in stone, and it needs to be reviewed and adapted regularly to ensure that it remains relevant and effective. As your business evolves, your plan may need to change, and it’s important to be flexible.
Related: How To Create A High-Performing Strategic Plan
In today’s fast-paced business environment, it’s easy to get caught up in the urgency of the moment and overlook the importance of strategic planning. However, taking the time to slow down, analyze your business and create a well-defined roadmap can set you up for long-term success. By following the six tips outlined in this article, you can identify your company’s purpose, analyze your market, identify your strengths and weaknesses, set goals and objectives, create a roadmap and review and adapt your plan regularly. Remember, strategic planning is not a one-time event, but an ongoing process that can help your business stay on track and adapt to changing circumstances. With a solid strategic plan in place, you’ll be well-equipped to tackle challenges and opportunities with confidence and clarity.
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Yan Katcharovski
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Silvergate Capital Corp.
SI,
shares plunged more than 30% in after-hours trading Wednesday after the company said it intended to wind down operations and voluntarily liquidate its subsidiary Silvergate Bank, a crypto-friendly lender.
The stock’s plunge would take it to a record low if losses hold through regular trading Thursday.
The La Jolla, Calif.-based lender made the announcement after it said last week in a regulatory filing that it was at risk of “being less than well-capitalized,” and discontinued its crypto-payments network.
As one of the few crypto-friendly banks, the liquidation of Silvergate Bank points to uncertainty in the future relationships between crypto companies and banks, who play an essential role in the conversion of fiat currencies into crypto.
Read: Crypto traders may lean toward stablecoins after Silvergate ceases crypto payments network
Silvergate Bank’s liquidation plan includes full repayment of all deposits, according to a statement Wednesday.
The company is considering the best way to resolve claims and preserve the residual value of its assets, Silvergate Capital said. All of the company’s other deposit-related services remain operational, it said.
Silvergate also said it hired Centerview Partners as financial adviser and Cravath, Swaine & Moore LLP as legal adviser.
Several crypto companies, such as Coinbase Global Inc.
COIN,
Galaxy Digital, Paxos and Circle, said last week that they would cease some or all payment transactions with Silvergate Bank.
Representatives at Silvergate didn’t immediately respond to a request seeking comment.
Signature Bank
SBNY,
another crypto-friendly lender, saw its shares slide 3.7% in after-hours trading Wednesday.
Major cryptocurrencies were steady Wednesday. Bitcoin
BTCUSD,
lost 0.3% to around $21,981, while ether
ETHUSD,
gained 0.2% to about $1,550, according to CoindDesk data.
Read: Here’s the real challenge facing Silvergate and other ‘crypto banks,’ says this short seller
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Bed Bath & Beyond Inc.’s Canadian division will shut down its stores under court protection after the company received an unusual lifeline earlier this week to save its U.S. operations from bankruptcy.
The troubled retailer filed its Canadian division for protection under the Companies’ Creditors Arrangement Act, Canada’s rough equivalent of chapter 11 bankruptcy. Bed Bath & Beyond has “reluctantly concluded” that even with the lifeline of its recent equity raise, there isn’t enough capital available both to restructure its U.S. business and bring the Canadian business to profitability, the company said in filings with an Ontario court.
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This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.
https://www.barrons.com/articles/ge-larry-culp-investors-annual-letter-83f4e20b
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Opinions expressed by Entrepreneur contributors are their own.
“Everybody has a plan ’till they get punched in the mouth,” Mike Tyson famously said in 1987. History teaches us that we will face conflict when we don’t plan and often when we do. Over 60 years ago, President Dwight D. Eisenhower said, “Plans are worthless, but planning is everything.” We learn valuable information during the exercise of planning and not just the understanding that even the best plans can and will change.
When planning for your business battles, do you ever really know what is ahead, and most importantly, what to do? Strategic planning can help create mechanisms and mindsets to allow you to respond to the battles ahead, but it is not a one-time thing or a “set it and forget it” activity.
It is a plan that shows the way forward for your business, spelling out your company’s goals and why they are important. It can also guide you by outlining things to consider when responding to opportunities and challenges.
Related: Why Having a Strategic Plan for Your Business Is Essential
I believe in one- and three-year strategic plans and re-establishing them each year. Just keep in mind that a strategic plan is a roadmap for a company to achieve its goals. It’s also a tool to unite your teams, motivating them with clarity, direction and focus.
Not that you wouldn’t want to have a list of items you want to achieve long-term (I do have one), but because we live in a world that is changing faster and faster, we must adapt our plans in an agile way and harness the power of technology and systems to help us.
Companies need to be fluid and mobile. In a changing world, the future is no longer easy to predict based solely on the past. What we need is a strategy that breaks away from the old three-ring binder plan already starting to gather dust on the shelf and instead devises one that is adaptive and directive.
This is why the one-to-three-year timeframe helps and why a 10-year timeframe is obsolete before it even begins.
Related: 5 Actionable Strategic-Planning Tips To Boost Business Efficiency
If strategic goals are your long-term objectives, operational goals — or, as we call them, lead measures — are the daily milestones that have to be reached to achieve them.
While aligning your business goals with your strategic goals can be hard to do every year, we must make an effort. Don’t forget that the actions you take each day should mostly roll up to achieving your goals.
For our franchise brands and us, our three main goals each year are franchisee success, revenue and profit. Each brand determines success, but revenue and profit numbers change each year. What’s important is to have your main strategic goals supported by lead measures — actionable items you will do each day and week that will lead to accomplishing the goal.
So, for example, if you are a salesperson and have a goal of $XXX sales this year (revenue), what do you need to do to make those sales?
Look at your sales funnel to determine the steps and the quantity of each step you need to make your goal: how many leads or prospects; how many points of contact, calls, presentations, discovery days and follow-up calls; or how many applications?
Related: How to Fall in Love With Strategic Planning
One recipe for disaster is never doing the most important things and always doing the urgent things. While balancing them, you should stay focused on the most important goals.
It’s not about “to-do” lists or checklists — it’s about your goals. The only thing worse than not having goals is having too many goals. I believe that three primary goals per year and two to three lead measures for each are good.
While there are set goals and trackable lead measures, don’t forget that there’s never only one way to get something done; there are multiple ways.
So, encourage your team members to do what they feel is right. Find out what they want to do rather than just telling them what you would do to achieve it. Weaving that strategy into your planning together will help you get better results.
In The Power of Positive Leadership, author Jon Gordon famously advised us not to focus on the numbers. We must trust the process, and when we keep doing things the right way, the numbers will eventually rise, those wins will come, and the desired outcomes will occur.
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Ray Titus
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Meta Platforms Inc. shares soared in after-hours trading Wednesday despite an earnings miss, as the Facebook parent company guided for potentially more revenue than Wall Street expected in the new year and promised more share repurchases amid cost cuts.
Meta
META,
said it hauled in $32.17 billion in fourth-quarter revenue, down from $33.67 billion a year ago but stronger than expectations. Earnings were $4.65 billion, or $1.76 a share, compared with $10.3 billion, or $3.67 a share, last year.
Analysts polled by FactSet expected Meta to post fourth-quarter revenue of $31.55 billion on earnings of $2.26 a share, and the beat on sales coincided with a revenue forecast that also met or exceeded expectations. Facebook Chief Financial Officer Susan Li projected first-quarter sales of $26 billion to $28.5 billion, while analysts on average were projecting first-quarter sales of $27.2 billion.
Shares jumped more than 19% in after-hours trading immediately following the release of the results, after closing with a 2.8% gain at $153.12.
Alphabet Inc.’s
GOOGL,
GOOG,
Google and Pinterest Inc.
PINS,
benefited from Meta’s results, with shares for each company rising more than 4% in extended trading Wednesday.
“Our community continues to grow and I’m pleased with the strong engagement across our apps. Facebook just reached the milestone of 2 billion daily actives,” Meta Chief Executive Mark Zuckerberg said in a statement announcing the results. “The progress we’re making on our AI discovery engine and Reels are major drivers of this. Beyond this, our management theme for 2023 is the ‘Year of Efficiency’ and we’re focused on becoming a stronger and more nimble organization.”
Read more: Snap suffers worst sales growth yet in holiday quarter, stock plunges after earnings miss
Facebook’s 2 billion-user milestone was slightly better than analysts expected for user growth on Meta’s core social network. Daily active users across all of Facebook’s apps neared, but did not crest, another round number, reaching 2.96 billion, up 5% from a year ago.
Meta has been navigating choppy ad waters as it copes with increasing competition from TikTok and fallout from changes in Apple Inc.’s
AAPL,
ad-tracking system in 2021 that punitively harmed Meta, costing it potentially billions of dollars in advertising sales. Meta has invested heavily in artificial-intelligence tools to rev up its ad-targeting systems and making better recommendations for users of its short-video product Reels, but it laid off thousands of workers after profit and revenue shrunk in recent quarters.
The cost cuts seemed to pay off Wednesday. While Facebook missed on its earnings, it noted that the costs of its layoffs and other restructuring totaled $4.2 billion and reduced the number by roughly $1.24 a share.
Meta executives said they now expect operating expenses to be $89 billion to $95 billion this year based on slower salary growth, cost of revenue, and $1 billion in savings from facilities consolidation — down from previous guidance for $94 billion to $100 billion. Capital expenditures are expected to be $30 billion to $33 billion, down from previous guidance of $34 billion to $37 billion, as Meta cancels multiple data-center projects.
In a conference call with analysts late Wednesday, Zuckerberg called 2023 the “year of efficiency” after 18 years of unbridled growth. He recommitted to Meta’s emphasis on AI and the metaverse, a platform for “better social experiences” than the phone, he said.
“The reduced outlook reflects our updated plans for lower data-center construction spend in 2023 as we shift to a new data-center architecture that is more cost efficient and can support both AI and non-AI workloads,” Li said in her outlook commentary included in the release.
Meta expects to increase its spending on its own stock. The company’s board approved a $40 billion increase in its share-repurchase authorization; Meta spent nearly $28 billion on its own shares in 2022, and still had nearly $11 billion available for buybacks before that increase.
“Investors are cheering Meta’s plans to return more capital to shareholders despite worries over rising costs related to its metaverse spending,” said Jesse Cohen, senior analyst at Investing.com.
“At first glance…Meta getting its mojo back,” Baird Equity Research analyst Colin Sebastian said in a note late Wednesday. “Results and guidance look particularly solid after Snap’s dismal report; however, further cuts to operating and capital expenditures announced this afternoon were perhaps the biggest surprise.”
UBS analyst Lloyd Walmsley said he anticipates double-digit revenue growth exiting 2023 and strong growth in earnings and free cash flow.
The results came a day after Snap Inc.
SNAP,
posted fourth-quarter revenue of $1.3 billion, flat from a year ago and the worst year-over-year sales growth Snap has ever reported. But they also arrived on the same day Facebook scored a major win in a California court. The company successfully fended off the Federal Trade Commission bid to win a preliminary injunction to block Meta’s planned acquisition of VR startup Within Unlimited.
Read more: Meta wins bid to buy VR startup Within Unlimited, beating U.S. FTC in court: report
Meta shares have plunged 53% over the past 12 months, while the broader S&P 500 index
SPX,
has tumbled 10% the past year.
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