ReportWire

Tag: Retail industry

  • China’s Shein denies U.S. IPO rumors

    China’s Shein denies U.S. IPO rumors

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    Two people hold two Shein bags after entering SHEIN’s first physical store in Madrid, Spain, June 2, 2022.

    Cezaro De Luca | Europa Press | Getty Images

    Chinese fast fashion giant Shein on Friday denied a Reuters report that said it has confidentially filed for an initial public offering in the U.S.

    “Shein denies these rumors,” a Shein spokesperson told CNBC.

    Reuters, citing sources familiar with the matter, reported the listing could happen before the end of the year.

    Founded in 2012 by Chris Xu, the brand rose to global prominence for its budget-friendly and trendy apparel. Shein was recently valued at $64 billion, according to Reuters.

    But Shein, as well as Pinduoduo’s budget e-commerce app Temu, have been accused of exploiting trade loopholes to import goods into the U.S. without paying duties or making shipments subject to human rights reviews, according to a report from a U.S. House committee.

    Shein told CNBC last week its policy is to “comply with the customs and import laws of the countries in which we operate” and that it will continue to “make import compliance a priority.”

    Reuters noted the listing could make Shein the most valuable Chinese company to go public in the U.S. since Didi Global.

    In 2021, the ride-hailing giant listed on the New York stock exchange at a $68 billion valuation, but de-listed less than 6 months later due to pressure and data security concerns from Chinese regulators.

    In May, U.S. lawmakers urged the SEC to crack down on Shein for allegedly selling clothes made by forced labor in Xinjiang, China.

    “We have zero tolerance for forced labor,” a Shein spokesperson had told CNBC in May.

    Shein recently hosted a group of influencers at its facilities in Guangzhou, China. While the influencers posted videos praising the company, dismissing allegations of forced labor, many viewers criticized the creators for repeating “propaganda.”

    — CNBC’s Penny Chen contributed to this report.

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  • Nike beats sales expectations, misses on earnings as margins drop

    Nike beats sales expectations, misses on earnings as margins drop

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    A customer enters a Nike store along the Magnificent Mile shopping district on December 21, 2022 in Chicago, Illinois. 

    Scott Olson | Getty Images

    Nike reported mixed fiscal fourth-quarter earnings on Thursday, as lower margins weighed on profits.

    Here’s how the sneaker giant performed during the quarter compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:

    • Earnings per share: 66 cents vs. 67 cents expected
    • Revenue: $12.83 billion vs. $12.59 billion expected

    The company’s reported net income for the three-month period that ended May 31 was $1.03 billion, or 66 cents per share, compared with $1.44 billion, or 90 cents a share, a year earlier. 

    Sales rose to $12.83 billion, up about 5% from $12.23 billion a year earlier.

    Investors have been eager to see if Nike managed to improve its bloated inventory levels, which have weighed on its margins. 

    Nike’s margins fell again this quarter, this time by 1.4 percentage points to 43.6%. The company attributed the drop to higher product input costs, elevated freight and logistics costs, an uptick in promotions and unfavorable currency exchange rates.

    Other retailers that reported earnings recently noted freight and logistics costs had gone done for them and proved to be a boon for their margins.

    Inventories came in at $8.5 billion, flat compared with the prior-year period.

    In March, executives said on a call with analysts they were “increasingly confident” the company would be able to exit the fiscal year with healthy inventory levels. They noted sales momentum could lead to “even leaner inventory” than anticipated. 

    Nike has been relying on its wholesale partners to reduce inventory levels. The push boosted its wholesale revenue over the past few quarters, but didn’t help its margins much.

    The company said in March that it expects revenue from that segment to moderate moving forward. Still, Nike recently restored some of the wholesale relationships that it cut when it first began focusing on its direct-to-consumer strategy in 2020.

    Both DSW and Macy’s will start selling a range of Nike merchandise again in October, the retailers both announced in June. 

    Macy’s hasn’t received a shipment from Nike since December 2021, but will now resume selling its apparel, including plus size women’s, big and tall men’s, kid’s, bags and other gear, the department store told analysts during an earnings call. Nike’s more premium offerings appear to be off the table for sale at Macy’s.

    The decision to bring Macy’s and DSW back under the Nike fold has left some investors wondering if the company is moving away from its direct-to-consumer strategy. 

    Investors have also been curious to see how sales have rebounded in China following Covid lockdowns. During Nike’s holiday quarter, China sales came in below estimates. The country overall has since seen an uneven path of economic recovery.

    In April, retail sales in China rose 18.4% but came in lower than economists’ forecast of 21%.

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  • Overstock.com will change website name to Bed Bath & Beyond as deal closes

    Overstock.com will change website name to Bed Bath & Beyond as deal closes

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    A United Parcel Service worker loads orders onto a truck in the shipping area at the Overstock.com distribution center in Salt Lake City, Utah.

    Ken James | Bloomberg | Getty Images

    Overstock.com is going all in on failed retailer Bed Bath & Beyond.

    The e-commerce home goods retailer will no longer go by its eponymous name online and will instead move under the Bed Bath & Beyond domain name in the coming weeks after acquiring the bankrupt rival’s intellectual property, Overstock announced Wednesday.

    It will relaunch the Bed Bath & Beyond website in Canada within the next week, followed by a rollout of a website, mobile app and loyalty program in the U.S. “weeks later.”

    Overstock announced the moves as it completed its $21.5 million acquisition of Bed Bath’s intellectual property and digital assets. The company hopes the brand name will help to lift sagging sales.

    “Bed Bath & Beyond is an iconic consumer brand, well-known in the home retail marketplace,” Overstock CEO Jonathan Johnson said in a statement. “The combination of our winning asset-light business model and the high awareness and loyalty of the Bed Bath & Beyond brand will improve the customer experience and position the Company for accelerated market share growth.”

    Despite declining sales, Overstock’s stock has surged nearly 32% this year. Overstock shares jumped nearly 5% in extended trading Wednesday and also popped when it was first revealed that it successfully won the auction for Bed Bath’s assets.

    In its first-quarter results in April, Overstock reported $381 million in revenue, a 29% drop from the prior-year period. The e-commerce retailer posted a net loss of $10 million. Still, the retailer’s results came in ahead of some estimates, according to Street Account.

    Overstock will not acquire any brick-and-mortar Bed Bath stores as part of the deal. The failed home goods retailer has been hosting a series of auctions for its myriad assets, including its store leases and assets from its Buy Buy Baby banner.

    A number of bidders have expressed interest in Buy Buy Baby’s stores but it remains unclear if any will be bought and kept open.

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  • Fanatics increases its offer to $225 million to acquire PointsBet’s U.S. assets

    Fanatics increases its offer to $225 million to acquire PointsBet’s U.S. assets

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    Fanatics founder and CEO Michael Rubin at his office in New York.

    The Washington Post | Getty Images

    Fanatics has raised the stakes as it looks to acquire PointsBet’s U.S. business.

    The sports platform company increased its offering by 50% to $225 million in an effort to outbid DraftKings, which made a non-binding offer of $195 million earlier this month.

    PointsBet shareholders will formally vote on the new offer Thursday night.

    “The Board unanimously supports the improved proposal from Fanatics Betting and Gaming, which provides a superior price plus certainty,” PointsBet Chairman Brett Paton said in a statement.

    PointsBet gave DraftKings until 6 p.m. on Tuesday (Melbourne time) to make a binding offer and they failed to do so.

    DraftKings CEO Jason Robins previously told CNBC that while the deal wouldn’t have been transformative for DraftKings, it would allow the company to grow market share.

    If the deal is formally approved by PointsBet shareholders and regulators, it will give Fanatics much needed U.S. real estate in the 15 U.S. states where they operate. PointsBet is the seventh-largest U.S. sports betting operator.

    “Our U.S. team will have a strong future as part of the Fanatics Betting and Gaming group and PointsBet will build on the opportunities in Australia and Canada underpinned by a strong balance sheet,” Paton said.

    Fanatics CEO Michael Rubin told CNBC after the DraftKings announcement that he was highly skeptical of their proposed offer, which he viewed as DraftKings attempting to slow Fanatics down.

    “It’s a move to delay our ability to enter the market,” Rubin said. “I guess they are more concerned about us than I would have thought.”

    DraftKings and Fanatics both declined to comment on the news.

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  • Beauty and tech company Oddity, which runs Il Makiage, files to go public

    Beauty and tech company Oddity, which runs Il Makiage, files to go public

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    Beauty and tech company Oddity, which runs the Il Makiage and Spoiled Child brands, filed to go public Friday as the once-frozen IPO market warms up. 

    The Israel-based company plans to trade on the Nasdaq using the ticker ODD. The company didn’t immediately disclose how the offering would be priced in regulatory filings and declined comment when asked when the numbers would be released.

    “The number of shares to be offered and the price range for the proposed offering have not yet been determined. The offering is subject to market conditions, and there can be no assurance as to whether or when the offering may be completed, or as to the actual size or terms of the offering,” Oddity said in a press release.

    Launched in 2018 by brother and sister duo Oran Holtzman and Shiran Holtzman-Erel, Oddity uses data and AI to develop brands and make tailored product recommendations for customers.

    The business is seeking to disrupt a market long dominated by legacy retailers by replacing the in-store experience with product recommendations driven by AI and data. At the heart of its business model is its proprietary technology — including tech developed by a former Israeli defense official — and the billions of data points it has collected from its millions of users.

    In the three months that ended March 31, the company saw $165.65 million in revenue, up from $90.41 million in the year-ago period. It reported a net income of $19.59 million, or $5.34 a share, compared with $3.01 million, or 82 cents a share, a year earlier.

    Numbers revealed in its regulatory filing show the direct-to-consumer retailer has been profitable on an annual basis since at least 2020.

    In fiscal 2022, Oddity brought in $324.52 million in sales and saw a net income of $21.73 million, or $5.94 a share. In the year prior, the retailer saw $222.56 million in revenue and a net income of $13.92 million, or $4.01 a share.

    In 2020, it saw $110.64 million in sales and a net income of $11.71 million, or $3.45 a share.

    By comparison, when E.L.F. Beauty filed to go public in August 2016, its profits and sales were lower than Oddity’s. E.L.F., a multibrand beauty company, saw $144.94 million in sales in fiscal 2014 and a net loss of $2.88 million. The following year, it saw $191.41 million in sales and a net income of $4.36 million. 

    In fiscal 2016, it brought in $229.57 million in sales and a net income of $5.31 million. 

    Since going public, E.L.F.’s sales and profits have climbed. During its most recent fiscal year, which ended March 31, it saw $578.84 million in sales and a net income of $61.53 million. 

    As a direct-to-consumer retailer, Oddity is seeing the high margins that come along with the strategy. In the three months that ended March 31, its gross margins were 71%, up 4 percentage points from 67% in the year-ago period. Its annual margins have slipped each year since 2020 as the company has made acquisitions and invested in growing the business.

    In 2020, Oddity had an annual gross margin of 70%, and in 2021, it dropped 1 percentage point to 69%. In 2022, the retailer’s annual gross margin was 67%, down 2 percentage points from the year-ago period.

    As of March 31, the company had more than 4 million active customers, which it defines as a unique customer account that made at least one purchase in the preceding 12-month period.

    “We bring visitors to our website, turn visitors into users by asking questions and learning about them, and then leverage the data we have across the platform to convert them into paying customers,” a regulatory filing says.

    Oddity has launched internationally, and sales from those markets accounted for about 26% and 27% of its net revenue in fiscal 2022 and 2021, respectively. As of Friday, Oddity has launched in the U.S., Canada, U.K., continental Europe and Australia. It noted it has plans to keep growing that footprint.

    The company plans to use proceeds from the IPO to develop and launch new brands. It will also use the funds for working capital, other general corporate purposes and potentially for acquisitions and other investments.

    During an interview earlier this year, the company’s global chief financial officer, Lindsay Drucker Mann, a former Goldman Sachs executive, told CNBC that Oddity is making money and growing — even against a tough macroeconomic environment that has proven increasingly risky for purely digital retailers. 

    On average, Oddity’s gross sales have doubled each year since 2018, the company has said.

    In Spoiled Child’s first year on the market, the new brand brought in $48 million in gross sales, which does not include returns. 

    In a regulatory filing, Holtzman, the company’s CEO and co-founder, said the company recruits from the Israeli Defense Forces’ best technology units. Technologists comprise over 40% of its global head count.

    “As industry outsiders, we saw many shortcomings in the status quo approach. The empires that incumbents had built over decades had not evolved with the times, resulting in a significant lag in online adoption,” Holtzman wrote in a founder’s letter enclosed in a securities filing.

    “Their underinvestment in technology left the category behind the digital curve, despite a consumer who is inherently primed to buy online — spending significant time on social media for beauty content and rapidly shifting dollars online in other categories.”

    Beyond developing new products and brands, Oddity is also trying to make beauty products more effective, the company has said. 

    In late April, it announced it was investing more than $100 million to acquire biotech startup Revela and open a U.S.-based lab.

    The merger brought to Oddity a team of scientists tasked with creating brand-new molecules, using artificial intelligence, that can be used in its cosmetics brands and future lines.

    In 2021, Oddity acquired Voyage81, a deep tech AI-based computational imaging startup founded in 2019 by Niv Price, the former head of research and development for one of the Israeli Defense Forces’ elite technological units, along with Dr. Boaz Arad, Dr. Rafi Gidron and Omer Shwartz.

    The technology is capable of mapping and analyzing skin and hair features, detecting facial blood flows, and creating melanin and hemoglobin maps using a regular smartphone camera.

    The filing comes after a year and a half of a drought in the initial public offering market, which is just beginning to open up and show signs of green shoots. 

    Earlier this month, Mediterranean restaurant chain Cava went public, and its shares soared as much as 117% in its market debut. 

    “[In 2022] investors didn’t want to go anywhere near IPOs but now that they’re making money again, and with issuers seeing that they can achieve close to decent valuations, I think that’s bringing the people back into the market,” said Matt Kennedy, a senior IPO market strategist for Renaissance Capital.

    “The consumer sector does lend itself to these periods where investors can see a business model that they understand, a business that they might be familiar with and also one that is typically profitable or near profitable, preferably that has growth.”

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  • Bank of America says Amazon shares follow a clear upward pattern heading into Prime Day

    Bank of America says Amazon shares follow a clear upward pattern heading into Prime Day

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  • Alibaba announces Eddie Wu to succeed Daniel Zhang as CEO in surprise move

    Alibaba announces Eddie Wu to succeed Daniel Zhang as CEO in surprise move

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    The logo of the Alibaba office building is seen in downtown Huangpu District in Shanghai, China, June 16, 2023.

    Costfoto | Nurphoto | Getty Images

    Eddie Wu will succeed Daniel Zhang as chief executive of Alibaba Group, while Joe Tsai will take Zhang’s place as the group’s chairman, China’s largest e-commerce company announced Tuesday.

    Wu is one of Alibaba’s co-founders and currently chairman of Taobao and Tmall Group. Brooklyn Nets owner Tsai is currently Alibaba’s executive vice chairman.

    Zhang will continue to lead the Alibaba Cloud Intelligence Group as chairman and chief executive after this change, which the company said will take effect Sept. 10.

    This surprise succession announcement comes after Alibaba said in March it will split its company into six business groups. The company explained at that time that this will allow each business group to raise outside funding and go public in the most significant reorganization in the Chinese e-commerce giant’s history.

    Wu has held a multitude of roles in his time at the company, including heading technology at Alibaba’s inception, as well as chief technology officer at Alipay and Taobao. He was also director of Alibaba Health Information Technology and founded Vision Plus Capital, a venture capital firm focused on investing in advanced technologies, enterprise services and digital healthcare.

    This is breaking news. Please check back for updates.

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  • Here’s what an overbought market and endless negativity tell me to do this week

    Here’s what an overbought market and endless negativity tell me to do this week

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    Jim Cramer on Squawk on the Street, June 30, 2022.

    Virginia Sherwood | CNBC

    Not a great setup. There are too many articles and postings about how we are overdoing artificial intelligence, and how there’s not enough substance to justify recent market moves.

    There’s no question that the market, particularly the Nasdaq, has rallied endlessly on what amounts to the same information: Nvidia (NVDA) makes great cards; Adobe‘s (ADBE) putting them to use; so is Meta Platforms (META) but we don’t know how; as are Microsoft (MSFT), Alphabet‘s (GOOGL) Google and, most importantly, Oracle (ORCL); but don’t forget Broadcom (AVGO) and Marvell (MVRL).

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  • Consumption soft even amid deep discounts during major China shopping festival, analysts say

    Consumption soft even amid deep discounts during major China shopping festival, analysts say

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    JD.com has become the latest Chinese tech giant to announced plans for a ChatGPT-style product, joining the hype around the chatbot technology.

    Qilai Shen | Bloomberg | Getty Images

    Chinese consumers snapped up billions worth of items in China’s first major online shopping festival after emerging from the pandemic as merchants slashed prices, but analysts say that consumer confidence still remains weak.

    Chinese merchants offered customers steep discounts during the 618 shopping festival, which ran on China’s major shopping platforms from the end of May until June 18, in the hopes of shoring up sales amid a weaker-than-expected recovery in consumption.

    Major shopping festivals, like e-commerce retailer JD.com’s 618 and Alibaba’s Singles’ Day, are typically barometers of consumption in China, and Chinese e-commerce platforms often participate by offering discounts and incentives to consumers.

    Analysts say that consumption remains soft this year as China emerges from the pandemic, even as platforms including JD.com, Tmall, Taobao and Pinduoduo offered billions in subsidies.

    “Chinese consumer confidence remains weak due to a mix of geopolitics, continued weakness from Covid-19 and domestic Chinese politics,” said Shaun Rein, founder and managing director of the China Market Research Group in Shanghai.

    Rein said that consumers were less likely to spend more during 618 as merchants had already been discounting heavily for years because of the pandemic, and deals were not that much better compared to previous months.

    In March, JD.com launched a “10 billion yuan subsidies” program to compete with rival Pinduoduo, which is known for its low-priced goods. The CEO of Alibaba’s e-commerce business unit, Trudy Dai, also previously pledged to make “huge, historic” investments to attract users to its platforms.

    “For months, Chinese consumers have been price-conscious, looking for deals and trading down across most product categories,” Rein said.

    This year, for the first time, JD.com did not reveal its total sales numbers for the 618 event, despite saying in a blog post that the 2023 shopping extravaganza had “exceeded expectations, setting a new record.”

    Last year, neither Alibaba nor JD.com unveiled final numbers for Singles’ Day in November, amid muted festivities during Covid-19 and an expected slowdown in growth.

    JD.com said in a blog post that during the 618 shopping festival, consumers snapped up 10 times the number of products that were eligible under its “10 billion yuan subsidies” program, compared to March.

    Despite overall soft consumption, categories like cosmetics and luxury goods saw a bigger uptick in sales compared to the previous quarter, according to Jacob Cooke, CEO of e-commerce consultancy WPIC.

    For this year’s 618 event, more luxury brands took part as they sought to boost sales in China after the sector in 2022 declined for the first time in five years amid China’s strict “zero-Covid” policies and lockdowns that hammered retail spending.

    Brands like Moncler and Lemaire took part in 618 on Tmall for the first time.

    Many luxury brands also took the opportunity to launch new products online, with some offering rare discounts and other incentives such as interest-free payments in installments over 12 months.

    Brands like Burberry, Chloe and Miu Miu’s sales in the first 30 minutes of the 618 festival at the end of May had exceeded its total sales during the shopping festival a year ago, according to Tmall data.

    “Luxury coming back online is a big trend, because that’s the category that’s been hit really hard over Covid-19,” said Cooke. “Some brands may see up to a 10-fold increase in sales over last year.”

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  • Nike’s approach to solving the biggest problem for girls in sports

    Nike’s approach to solving the biggest problem for girls in sports

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    Portland Press Herald | Portland Press Herald | Getty Images

    In recent decades, data from sports researchers revealed an encouraging trend: young girls were participating in sports in greater numbers. But the research also uncovered a big missed opportunity. Girls drop out of sports at “alarming rates,” specifically when they hit puberty.

    There is one obvious solution that sports retail giant Nike CEO John Donahoe, and many others, think can make a big difference: more female coaches.

    In the historically male-dominated world of sports, girls and women have always had to fight for their right to compete and to be viewed as competitive athletes. The sexism that has prevented girls from competing in sports has also prevented women from becoming youth coaches.

    “I think league administrators are kind of trained to look for dads to coach and think more often the dads are going to be the ones to step up and do it. I think sometimes they may not even be trying to recruit females,” said Mary Fry, professor and director of the University of Kansas Sport & Exercise Psychology Lab.

    Nearly 75% of youth head coaches are men, according to Aspen Institute’s Project Play. Even when women are offered the opportunity to coach, they are fearful that they’re not good enough to take on such a position because of the sexist stereotypes society often promotes.

    When Jen Welter, the first-ever female NFL coach and a two-time gold medalist in Olympic football, was offered the opportunity to coach football for the first time, she recalled instinctively thinking “girls don’t do that.”

    “When you don’t see it, it’s really hard to say, ‘You know what, I can do that,’” Welter said.

    “Most young people rarely, if ever, get the opportunity to be coached by a woman. This is a miss for all,” said Vanessa Garcia-Brito, Nike vice president, and chief social and community impact officer. “To get girls active and invite them into a lifetime of sport, they have to see it to believe it – and that starts with more female coaches.”

    In March, Nike launched Coaching HER in a partnership with the University of Minnesota’s Tucker Center for Research on Girls & Women in Sport. The digital coaching resource is designed to help coaches of all genders improve their understanding of gendered bias and discrimination in sports.

    Puberty changes girls’ relationship with sport

    Female coaches are not just important in terms of giving young girls a positive role model – they also offer a safe space to discuss and process the difficulties that can come with a young woman’s changing body and mind. Even for girls who grew up loving sports, puberty shifts girls’ relationship with sports and very often results in them disengaging with physical activity.

    The data related to this critical period in a girl’s life is clear. One in three girls participate in a sport from age 6-12, according to the Aspen Institute. But nearly one in two girls will quit sports during puberty, according to menstrual product manufacturer Always.

    Research from a 2018 report by Tucker Center, Nike’s partner, gathered data globally and found that the highest rate of drop-off from girls in sports often occurs between the ages of 11 to 17, “the range when girls feel the most pressured to conform to identities shaped by their peers and adults — which includes coaches,” its report states, and it concluded that how girls feels about their coaches is a determining factor in whether they continue to play organized sports.

    The Women’s Sports Foundation, created by Billie Jean King, has found that 40% of teen girls are not actively participating in a sport.

    “For boys, that moving through puberty can be kind of a plus, you gain more muscle mass, and you get taller, stronger. For girls, it’s just not always the same case,” Fry said. “They’re kind of in survival mode in middle school.”

    There are both physical and psychological dimensions to the problem, namely, periods and low body confidence as barriers preventing girls from continuing in sports, according to Youth Sport Trust CEO Alison Oliver. As girls’ bodies change throughout puberty, they become increasingly insecure and physical activity begins to feel different. The charity Women in Sport found that 65% of girls don’t like others watching them during sports, as it makes them feel self-conscious, vulnerable, and objectified. What’s more, seven in 10 girls avoid being active when on their period.

    Coaches are critical agents that impact girls’ experiences in sports, according to the Women’s Sports Foundation, and if a girl isn’t properly supported or understood by their coach in a time as daunting as puberty, they’re going to be discouraged to compete. For example, most of the time, girls are not educated on or fitted for proper sports bras, making participating in sports painful.

    “If you started to feel uncomfortable as a female athlete … it’d be pretty tough to go to a male coach about some of those things,” Welter said.

    A June 2019 Nike event in London when it took over iconic recreational sports park Hackney Marshes for a football festival to celebrate the women’s game, hosting more than 1,000 women and girls, with 79 teams taking part in the tournament, across different age groups.

    Kate Mcshane | Getty Images Sport | Getty Images

    “These bonds that develop between a coach or a mentor and the kids is just so much bigger than just the physical activity part of it,” Fry said. “They have women in their lives they can bounce things off of, they can trust.”

    Fry co-founded the Strong Girls program at the University of Kansas, where young girls are assigned a female college student as their mentor. Half of the program focuses on participating in sports together, while the other half concentrates on positive youth development. The program typically attracts girls who tend to be less athletic and creates a safe environment where they feel encouraged by female mentors to participate in sports that they normally wouldn’t pursue.

    “Girls and women can’t have enough strong women in their lives. We just benefit from that,” said Fry, who is director of the program.

    Female coaches were fundamental to both the success and enjoyment of sports for Christina Collins, a former youth athlete who later became a coach. “I had female coaches, as well as male, of course, and it [had] such an impact on me to realize that it was an option for me to grow up and do that. And I felt like I definitely connected with them at a deeper level than I might have [with] male coaches that I had,” said Collins, who is now a physical education and health teacher in Westchester County, and a professor in the physical education masters program at Manhattanville College.  

    Female coaches, she says, can offer unique insight based upon their own personal experiences as women. “[My identity] has impacted the way in which I deliver all coaching. It is meant to increase first and foremost the child’s confidence, then second, their performance ability,” said Collins, who also is founder and owner of NeverStopMoving365, a company that seeks to use sports and physical activity to promote confidence and teach life lessons. 

    She says this approach isn’t only benefit to girls, but extends to youth athletes of all genders, and female coaches as well. 

    Nike’s 20,000 female coach goal

    Nike is one of the few major companies directly addressing this issue. Corporations from Target to Disney and Bank of America are being targeted for taking a stand on social issues in the current divisive political climate. Donahoe, who made his comments on the issue of girls’ sports participation rate at the recent CNBC CEO Council Summit in Santa Barbara, California, said that he believes Disney CEO Bob Iger is handling the feud with Florida Governor Ron DeSantis properly, and he pointed to Nike’s efforts in girls’ youth sports as another example of how a company can focus on social issues that are core to its values and integral to its brand.

    “We’re trying to train 20,000 female coaches, moms and other former athletes to be coaches to promote youth,” Donahoe said. “So that’s less of a controversial issue, but it’s one we care about as a value,” he said. 

    Nike also has an aim to achieve 50% girl participation in the sport-based community programs it supports by 2025.

    As a former athlete, Collins says there are lifelong benefits that come when young women and girls remain involved with sports and feel supported.  

    “I don’t use the actual sports as my primary form of fitness, or just the sports skills in general at all. But I pull from my toolkit of life lessons that athletics taught me,” she said. 

    Coaching HER encourages all coaches, regardless of gender, to give girls the chance to continue developing their character and learning life lessons from sport, and offers detailed training for coaches on how to lead girls and young women in sports.

    “It’s not just women, for women. It’s women and men working together to elevate girls. That’s one of the key components. How do we work better together?” Welter said.

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  • Retailers are gamifying shopping with virtual storefronts to boost engagement, loyalty

    Retailers are gamifying shopping with virtual storefronts to boost engagement, loyalty

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    J. Crew virtual beach house.

    Courtesy: J. Crew

    In a brown shingled beach house tucked behind stalks of reed grass, J. Crew customers encounter a new shopping experience. 

    Just beyond a set of wood steps and a wraparound porch, shoppers can explore a series of white-paneled rooms, a boathouse and a secret lighthouse that highlight the brand’s history and some of its most popular apparel. 

    Inside the rooms, shoppers can browse barn jackets, rollneck sweaters and rugby shirts. Outside on the porch, bathing suits are displayed on a clothesline.

    While customers can select and purchase items as they would in any J. Crew store, the beach house comes with one key difference: It’s entirely virtual. 

    To mark J. Crew’s 40th anniversary, the brand is launching its first immersive shopping experience Friday with e-commerce platform Obsess, which creates 3D, virtual stores for retailers that customers can access from their phones or laptops. 

    Derek Yarbrough, the chief marketing officer of J. Crew and Madewell, told CNBC the company is planning a series of events to celebrate the brand’s anniversary. But they tend to be in places such as New York and Los Angeles, which limits the number of people who can attend, he said.

    “With Obsess, we were really looking to have an exciting activation that we could execute for a larger audience and reach more of the people who love the brand in a bigger way,” Yarbrough said in an interview. “We really wanted this to be a passport to explore the world of J. Crew … and as the team brainstormed on it, it was a little bit of a no-brainer to take the form of a beach house.” 

    J. Crew virtual beach house.

    Courtesy: J. Crew

    Obsess was launched in 2017 by its CEO, Neha Singh, a former Google software engineer. It aims to transform traditional online shopping into something more immersive, so shoppers remain engaged rather than lose interest as they endlessly scroll for their next purchase. 

    In Obsess’ virtual storefronts, customers can create their own avatars. Depending on the retailer, they can also play games that can unlock more content, promotions or other bonuses that keep them in the virtual stores for longer, the company said. 

    “What our platform does is it enables brands to create that much richer and more immersive digital experience that borrows the interface from gaming,” said Singh. “Today, the experience is so generic. Other than font and color, there’s really no differentiation between brands’ digital presence, but their physical retail presence is so different. So how can we bring some of those elements into online?”

    Virtual storefronts on the rise

    Many retailers saw the metaverse, a virtual world that offered another possible platform to sell products, as the hot new technology throughout last year. Many of those same companies have now largely forgotten it, as strides in artificial intelligence have surged to the top of business leaders’ minds a year later.

    While the metaverse may be dead — for now — virtual storefronts are growing. Obsess is now powering more than 200 virtual stores that tens of millions of shoppers have visited and bought products in. 

    The company’s clients include American Girl, Elizabeth Arden, Dior, Ralph Lauren, Corona, Laneige, Crocs, Coach, Mattel, Maybelline, Johnson & Johnson and even NBCUniversal, among others. 

    The virtual storefronts allow retailers to bring a version of the metaverse to their customers, without the need for pricey headgear or other steep barriers to entry.

    J. Crew virtual beach house.

    Courtesy: J. Crew

    “Technology never stops, and it’s going to keep progressing, but it has to be something that’s user-friendly, right? And parts of [the metaverse] are not user-friendly yet,” said Singh. “We launched the company before metaverse was a buzzy topic, and it really was just about: How can we use the latest technology to actually create a better customer experience?” 

    When e-commerce was born in the 1990s, Amazon led the way in its online bookstore, which featured a white background and icons of books with text describing them.

    Since then, little has changed when it comes to the basic interface of online shopping.

    “If you think about e-commerce, the typical sort of interface today, it’s a grid of thumbnails on a white background; whether you’re shopping for fashion, or beauty or home, it’s really all the same,” Singh said. “The interface looks like a database that really hasn’t changed in 25 years [since] it was first created.” 

    Gamifying shopping, boosting engagement 

    Shoppers headed to J. Crew’s virtual store can access a series of interactive games, including a scavenger hunt and a quiz on catalog covers, where customers will be asked to guess what year they were published. 

    Once they go through all the rooms and complete the quests, shoppers gain access to the secret lighthouse.

    J. Crew virtual beach house.

    Courtesy: J. Crew

    “We see actually a 10-times-higher add-to-cart rate if people engage and complete the game. So typically now in all of our virtual stores there’s some element of gamification, and it’s very kind of naturally embedded into the flow of the store,” said Singh. 

    “The more interesting you can make the experience and keep people engaged and give them content and give them games, the more they shop,” she said.

    Some companies offer discounts or promotions as a “prize” for completing a game, which could contribute to boosted checkout rates. 

    Obsess said one of its customers, a luxury jewelry brand, said the average order value in its virtual store was 111% higher than on its traditional e-commerce site. 

    However, J. Crew’s Yarbrough said he is most excited about how long the virtual store could keep customers engaged. 

    J. Crew virtual beach house.

    Courtesy: J. Crew

    For example, on American Girl’s virtual store, shoppers spend six to 10 minutes on average per session, which is 1,000% longer than the average time spent for all shoppers on the company’s website, Obsess said. 

    One luxury fashion brand said the amount of time people spent in its virtual store was 74% higher than time spent on its traditional e-commerce site, according to Obsess. Overall, introducing avatars increases time spent by an average 73%, and when customers create an avatar, they’re on average 184% more likely to proceed to checkout, Obsess said. 

    “In today’s landscape, it’s so hard to not only get but keep people’s attention — you usually get a few seconds,” Yarbrough said. “So, if I can actually get someone to engage with an experience for several minutes or even longer, oh my God, that’s such a rich opportunity to really get someone hooked.” 

    Disclosure: NBCUniversal is the parent company of CNBC.

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  • Boycotts hit stocks hard. Here’s what might be next for Bud, Target and others caught in the anti-Pride backlash

    Boycotts hit stocks hard. Here’s what might be next for Bud, Target and others caught in the anti-Pride backlash

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    Pride Month merchandise is displayed at a Target store on May 31, 2023 in San Francisco, California. 

    Justin Sullivan | Getty Images

    Even before Pride month was underway, it seems as if it was open season on companies celebrating the LGBTQ community.

    One by one, companies have come under an expanding attack. Anheuser-Busch, Target, Kohl’s and VF Corp.’s North Face brand have all felt the vitriol of this latest push from the right. And the list keeps growing. These companies have been branded as “woke capitalists” — and worse — as critics urged boycotts of these companies’ products. Bud Light came into the crosshairs after it struck a partnership with trans influencer Dylan Mulvaney, while North Face received backlash for an ad featuring drag queen Pattie Gonia. Target and Kohl’s have been criticized for Pride-themed clothing.

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    While it’s too early to say how successful these efforts will be in lowering sales at the companies recently drawn into this attack, damage has been done to the stocks already. And some on Wall Street expect that to continue with analysts recently downgrading Target’s and Anheuser-Bush’s ratings, citing in part the ongoing controversy.

    “The main reason boycotts generally are effective is because they threaten the reputation of the company by putting the company in a negative media spotlight, and companies don’t want to have negative attention of any kind drawn to them,” said Brayden King, a professor of management and organizations, who has studied how boycotts impact company stock prices, in an interview.

    King’s research focused on 133 separate boycotts launched between 1990 and 2005, in a study that was published in 2011. About a quarter of the 177 companies targeted by these actions offered a concession to protestors.

    “They often concede to boycotter’s demands, not because they feel that there’s sales pressure on them, but rather because they don’t want to continue to be a target of negative media attention,” he said.

    King’s research found that the stock of a company will fall about 1% each day of national print media coverage. But once the issue falls out of the daily news cycle, the stock generally recovers.

    Why Bud Light is an outlier

    King sees Anheuser-Busch’s situation as an outlier because the controversy has harmed its sales. The company has been under fire for more than two months. Over that time, its stock is down more than 18%.

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    Anheuser-Busch InBev shares hit a 52-week high of $67.09 on March 31.

    “With 7 weeks of data, the consumer backlash at Bud Light seems quite durable,” said Cowen analyst Vivien Azer, in a research note Friday. “This is not a surprise to us, given how violent the responses were to Bud Light on social media. Indeed, in each of the last five weeks, we have seen Miller Lite and Coors Light gain over 200 bps of market share from Bud Light (where market share fell 390 bps most recently).”

    Cowen’s consumer research suggests Molson Coors will be able to maintain the market share it’s gaining.

    “Relative to Miller Lite and Coors Light, the Bud Light brand seems to skew to white consumers, men, younger consumers and lower-income consumers. The income bias toward Bud Light, we believe, is a key factor in driving the durable market share gains to TAP,” Azer explained.

    Molson Coors shares are up 24% over the past two months, as analysts have spotlighted the market share gains it’s making.

    Bud Light has tried to win back customers with a $15 off rebate program on Budweiser, Bud Light, Bud Select and Bud Select 55. While shoppers will need to put out money for the purchases on the front end, once the rebate is processed, the product is essentially free, according to Azer.

    Will this be enough to soothe angry consumers? She’s unconvinced.

    “Recall there were consumers that were happy to destroy beer they had already purchased,” she said.

    Budweiser beer in the brewery section at a Walmart Supercenter on March 02, 2023 in Austin, Texas. 

    Brandon Bell | Getty Images

    There are several factors contributing to the impact the Bud Light boycott is having on sales that are specific to the beer category, according to King. He said, the first is that a bar, restaurant or music venue could remove the product, which takes the decision away from consumer. Then, there is the social nature of drinking.

    “When you’re purchasing something in private, there’s nobody looking over your shoulder to hold you accountable,” King said. However, beer may be purchased to drink with friends so there could be more social pressure, he said.

    Companies on edge

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    Target’s stock hit a 52-week low on Thursday.

    Target’s stock has fallen about 10% since news broke on May 24. But shares were already trending lower after the retailer’s earnings report showed weakness in parts of its business.

    Meanwhile, both VF Corp. and Kohl’s shares seemed to be bouncing back on Friday. After recovering some lost ground, the North Face parent is down about 9% since it launched its “Summer of Pride” ad on May 23. Kohl’s shares rose nearly 12% on Friday, recouping nearly all of the ground it lost. But the stock sank as low as $17.89 on Thursday, its lowest level since May 22, 2020.

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    VF Corp. shares traded as low as $16.77 on Thursday.

    Target’s stock sank to a 52-week low of $126.75 on Thursday, following a downgrade by JPMorgan to neutral. While analyst Christopher Horvers cited a weakening consumer as the primary reason that he expects tougher times ahead for the discount retailer, the recent controversies were mentioned as a factor in the decision. Horvers slashed his price target to $144 from $182.

    Meanwhile, Wells Fargo analyst Edward Kelly said the recent pullback in the stock’s price might have been seen as a buying opportunity prior to this issue.

    “The current stock price could have been a good entry point, but it’s hard to step in front of the current uncertainty,” Kelly wrote in a research note Thursday.

    Kelly said that he has seen “early evidence of some near-term financial impact.” Among the factors he cited was Placer.ai data that showed foot traffic at Target stores was soft in the week ended May 28.

    “Traffic has been a key bright spot for TGT as it struggled with margin issues, and a slowdown would be negative. It remains to be seen how long any impact would last,” Kelly said.

    Issues give brands ‘powerful gravitational pull’

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    Kohl’s shares on Thursday hit a low of $17.89, the stock’s lowest level since May 22, 2020, when it traded as low as $17.19.

    “So a bit of … why it is so attractive to align with purpose and these sorts of issues is that … it gives you an opportunity to link more deeply with consumers,” Reed said. Even though it can go awry, the upside can be powerful because the connection “has powerful gravitational pull,” he said.

    In fact, those strong relationships are usually why boycotts fail to hurt a company’s sales longer term, according to King. He said research has shown that for every consumer that stops buying a product another shopper will begin a “buycott” by purchasing items to show their support for the opposite side of the issue.

    Still, with threats coming from both sides of the issue, and stocks suffering sharp selloffs, companies may proceed a bit more cautiously.

    “They may internally continue to embrace those values as important to their culture and identity, but externally they may be more risk adverse in terms of how they communicate those values,” King said.

    —CNBC’s Christopher Hayes contributed to this report.

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  • The rise of Albemarle, the world’s largest lithium producer

    The rise of Albemarle, the world’s largest lithium producer

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    Demand for lithium, a key component for electric vehicle batteries, is expected to surge, from 500,000 metric tons of lithium carbonate in 2021 to three to four million metric tons in less than a decade, according to McKinsey & Company.

    Albemarle, the world’s top producer of this critical metal and the operator of mines in Australia, Chile and the U.S., says it plans to bring another domestic lithium mine online by 2027 — Kings Mountain in North Carolina. It already operates Silver Peak in Nevada.

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    Albemarle is also building a $1.3 billion processing facility in South Carolina, where it will process battery-grade lithium hydroxide. The plant will support the manufacturing of 2.4 million electric vehicles annually and be able to process lithium from recycled batteries.

    Despite that growth, Albemarle faces a number of potential headwinds including a possible economic downturn that could slow the demand for EVs, new battery chemistries that could reduce the need for lithium, battery recycling and additional competitors. Tesla began construction of a lithium refinery in Texas in 2023.  

    To better understand how lithium, known as “White Gold,” is extracted, the challenges involved and where production is moving to next, CNBC got a behind-the-scenes look at Albemarle’s operations in Chile and the U.S.

    Watch the video to learn more.

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  • Five takeaways about the consumer from Walmart, other retailers after a big week of earnings

    Five takeaways about the consumer from Walmart, other retailers after a big week of earnings

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    A Target department store in North Miami Beach, Florida, May 17, 2023.

    Joe Raedle | Getty Images

    More grocery purchases, fewer ambitious do-it-yourself projects and last-minute splurges at the store.

    This week, some of the biggest retailers in the country reported earnings and described how their customers are shopping. As Home Depot, Target and Walmart reported their quarterly sales and shared full-year outlooks, the companies offered up the latest clues about the health of the American consumer and previewed what could be ahead for the economy.

    Some smaller retailers also offered warning signs for the current quarter and this year.

    Next week will give even more insight into the retail industry and economy. Best Buy, Lowe’s, Costco, Dollar Tree and Kohl’s are among the earnings on tap. Some mall retailers are also reporting earnings, including Gap, American Eagle and Abercrombie & Fitch.

    Here are some of the emerging themes.

    Sales trends have weakened

    So far, at least five retailers — Target, Walmart, Tapestry, Bath & Body Works and Foot Locker — have spoken about sales trends across the country getting worse.

    As the three-month period went on, shoppers spent less, especially on discretionary merchandise, Target CEO Brian Cornell said on a call with investors. Walmart noticed the same pattern.

    Both big-box retailers reported a sharp sales drop after February.

    Walmart’s Chief Financial Officer John David Rainey attributed the decline, in part, to the end of pandemic-related SNAP benefits and a decrease in tax refunds. 

    Cornell said headline-grabbing events could have shaken consumer confidence too. He pointed to the March banking crisis. Silicon Valley Bank collapsed that month, sparking fears of broader economic woes.

    Bath & Body Works saw sales fall off in March. Yet, sales recovered in April as the retailer turned to a common playbook: promotions. It got a boost as customers spent money at sales events toward the end of the quarter, CFO Wendy Arlin said on a Thursday earnings call.

    Foot Locker also said it may have to motivate shoppers with markdowns for the rest of the year. The company cut its full-year forecast Friday, as it reported earnings that missed expectations. CEO Mary Dillon said in a statement, “sales have since softened meaningfully given the tough macroeconomic backdrop.”

    On a call with investors Friday, Dillon said the sneaker seller’s sales got hurt by lower tax refunds and high inflation as customers spent more on food and services. While she said sales rebounded in April, “they did not improve nearly to the extent we expected, and that weakness has continued into May.”

    A few other retailers that reported earnings had specific factors working in their favor.

    When Tapestry, the parent company of Coach and Kate Spade, reported earnings last week, the company said sales softened as the quarter progressed and into April as consumers became more cautious.

    But it has a factor going for it that some other retailers don’t: A growing business in China and other international markets to offset some of those softer sales.

    Home Depot bucked the slowing sales trend, but that may have to do more with what it offers than consumer health.

    Spring is peak season for home improvement. The retailer’s comparable sales in the U.S. declined 4.6% in the quarter versus the year-ago period. In February, its comparable sales were down 2.8%. March was its weakest month of the quarter, as comparable sales fell nearly 8% year over year in the U.S.

    Home Depot’s trends were still negative in April but saw a slight improvement as comparable sales slid 3.7%, according to CFO Richard McPhail. Customers may have been buying more spring items such as potted plants.

    Inflation is still a key factor

    Inflation is easing, according to a Labor Department report this month. Yet, that’s cold comfort for shoppers who are still paying a lot more at the grocery store than they were a few years ago.

    Stubbornly high prices, especially for food, are a storm cloud that hangs over many families who shop at Walmart, and looms over the retail industry as a whole, the big-box giant’s CEO Doug McMillon said. On a call with investors Thursday, he called the persistent inflation “one of the key factors creating uncertainty for us in the back half of the year.”

    “We all need those prices to come down,” he said on the call. “The persistently high rates of inflation in these categories, lasting for such a long period of time, are weighing on some of the families we serve.”

    For example, he said general merchandise costs in the U.S. are lower than a year ago, but still higher than two years ago. In dry grocery and consumables categories, Walmart is seeing high single-digit to low double-digit cost inflation on items such as toilet paper or paper towels. For food, inflation has climbed more than 20% on a two-year basis, according to Walmart’s Rainey.

    A shopper browses the eggs section at a Walmart store in Santa Clarita, California.

    Mario Anzuoni | Reuters

    Walmart is feeling the inflation crunch even though it is better positioned to manage higher costs than other retailers. As the nation’s largest retailer and biggest grocer, Walmart can use its scale to manufacture private-label merchandise or negotiate with vendors over price.

    One rare item that dropped dramatically in price? Lumber. Home Depot cited the sharp price decrease as a factor that contributed to its fiscal first-quarter revenue miss.

    In plenty of other categories, however, inflation is still driving a higher average ticket for customers, Home Depot CEO Ted Decker said on an earnings call Tuesday.

    Consumers are spending on needs, not wants

    Target, Home Depot and Walmart all saw a noticeable pattern: fewer pricey and fun items in shopping carts.

    At Home Depot, customers bought fewer big-ticket items such as appliances and grills in the fiscal first quarter.

    Home projects got more modest, too, Decker said on an investor call. Contractors and other home professionals noticed a change from large-scale remodels to smaller renovations and repairs.

    Decker said consumers’ increased focus on value could be contributing to that shift, along with an uptick in spending on traveling, dining out and other services. He added some homeowners already tackled big projects and bought some high-priced home items during the early years of the Covid-19 pandemic, leaving less for them to do or to buy now.

    Oppenheimer's Brian Nagel on Home Depot Q1 earnings: This is a weak report

    The trend extended beyond home improvement.

    Customers at Walmart have become more selective when shopping for electronics, TVs, home items and apparel, Rainey told CNBC. The items have become a tougher sell and when customers do buy them, they often wait for a sale, he said.

    At Target, sales declined in some discretionary categories as much as low double-digits as customers bought less clothing and home decor, Chief Growth Officer Christina Hennington said on an investor call. Groceries and essentials drove a bigger portion of the retailer’s quarterly sales.

    One exception? Beauty. Hennington said Target’s beauty category was its strongest in the fiscal first quarter. Sales grew in the mid-teens year over year, showing shoppers are still willing to replenish the cosmetic case and get a new tube of lipstick.

    Weather dampened demand (literally)

    Weather has not worked in retailers’ favor, at least not yet.

    As the weather turns warm and sunnier, it can inspire shoppers to buy summer dresses, beach towels or gardening supplies.

    Yet, Home Depot said cooler and wetter weather in California and parts of the western U.S. hit its sales, contributing to its biggest revenue miss in more than 20 years.

    Walmart is eager for warmer weather too. Sam’s Club has noticed slower sales of patio sets, perhaps because of the later-to-hit spring weather, its CEO Kath McLay said on an investor call. Walmart has seen a sharp drop in air conditioner sales at its big-box stores, its CFO Rainey said.

    “We’re ready to get some spring or summer weather,” he said on a call with CNBC.

    Target noted it’s looking forward to another upcoming season: back-to-school.

    The discounter expects to get a sales boost in the back half of the year due to the big shopping season, Hennington said on an investor call. She said the return to classrooms and college dorms triggers sales across almost every department of its store, from lunch ingredients in the grocery aisles to new outfits in the kids’ clothing department.

    Shoppers have become more last-minute

    Retailers may be saying so long to the days of stockpiling and early shopping.

    Company leaders said there are signs shoppers are reverting to some of their old ways.

    At Walmart-owned Sam’s Club, McLay said shoppers are not just opting for lower price points. They’re also shopping later for seasonal items. For example, she said, customers used to buy patio furniture just as soon as it was set at the stores.

    “Now we’re seeing people wait a little bit later into the season,” she said.

    It saw a similar pattern with Mother’s Day sales, she said.

    McLay said that may indicate people have returned to shopping habits of 2018 and 2019. The trend could be fueled by shoppers’ reluctance to open their wallets or because they’re not as worried about out-of-stock items — or a combination.

    At Target, shoppers have also embraced more procrastinator tendencies, especially for discretionary items such as apparel.

    “Guests are shifting to shop more just in time in these categories, as they wait until the last moments before key events to invest in new decor or wardrobe refreshes,” Hennington said on an earnings call.

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  • House China committee targets top clothing brands in forced labor inquiry

    House China committee targets top clothing brands in forced labor inquiry

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    A shopper carries a bag of Nike merchandise along the Magnificent Mile shopping district on December 21, 2022 in Chicago, Illinois. 

    Scott Olson | Getty Images

    WASHINGTON — A House committee examining the U.S. government’s economic relationship with China is asking some of the world’s largest clothing companies for information about the use of forced labor during production — a potential violation of U.S. trade law.

    Lawmakers asked retailers Temu, Shein, Nike and Adidas North America about the use of materials and labor sourced from the Xinjiang Uyghur Autonomous region of China, according to letters sent to company leaders on Tuesday. Such practices would constitute violations of the 2021 Uyghur Forced Labor Prevention Act, according to the lawmakers.

    Congress passed the UFLPA with bipartisan support after the State Department determined China is “committing genocide against Uyghurs and other minority groups in Xinjiang.”

    The letters were sent to Rupert Campbell, president of Adidas North America; Qin Sun, president of Temu; Chris Xu, CEO of Shein and John Donahoe, president and CEO of Nike, Inc. They were signed by Reps. Mike Gallagher, R-Wisc., chair of the House Select Committee on the Chinese Communist Party, and Ranking Member Raja Krishnamoorthi, D-Ill.

    “Using forced labor has been illegal for almost a hundred years—but despite knowing that their industries are implicated, too many companies look the other way hoping they don’t get caught, rather than cleaning up their supply chains. This is unacceptable,” Gallagher in a statement. “American businesses and companies selling in the American market have a moral and legal obligation to ensure they are not implicating themselves, their customers, or their shareholders in slave labor.”

    The inquiries also follow a March hearing of the committee that included an expert assessment finding that U.S. companies finance “state-sponsored forced labor programs in the Uyghur region.”

    The lawmakers requested responses to their questions, including the identity of materials suppliers, supply chain policies and audit measures for suppliers, by May 16.

    Representatives for the companies did not immediately respond to requests for comment from CNBC.

    The latest inquiries follow a separate bipartisan effort earlier this week urging the Securities and Exchange Commission to require Shein to certify it does not use Uyghur labor before the company can expand into the U.S. market. Shein has denied the accusation.

    Chinese brands Shein and Temu, which is owned by Chinese parent company PDD Holdings, are also accused of capitalizing on a 90-year-old loophole to avoid tariffs on many goods sold directly to U.S. consumers, the lawmakers said Tuesday.

    The lawmakers say Shein and Temu rely heavily on the de minimus provision of Section 321 of the Tariff Act of 1930 to waive import tariffs if the fair retail value of in the country of shipment does not exceed $800.

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  • Off-price retailers to get cheap inventory and real estate from Bed Bath & Beyond’s bust, BofA says

    Off-price retailers to get cheap inventory and real estate from Bed Bath & Beyond’s bust, BofA says

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  • What Home Depot’s billion-dollar pay raise may help prove about workers

    What Home Depot’s billion-dollar pay raise may help prove about workers

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    Workers walk through the garden center at a Home Depot store

    Scott Olson/Getty Images

    In its last quarterly earnings report, Home Depot forecast flat sales and lower profits for 2023, partly because consumers aren’t spending as much on home improvement products as they did during the pandemic, a boon period for the sector. Another hit to its bottom line, the company predicted, was the decision to invest $1 billion this year to increase hourly wages for every one of its frontline workers.

    Giving pay raises at the same time sales are slumping seems like an incongruous strategy, but Home Depot executives project that it will actually boost the big-box retailer’s industry-leading position. “We plan to continue to capture market share,” CFO Richard McPhail told analysts during the February earnings call. One reason, he said, is “the unique advantage that our orange-blooded associates give us over our competition,” alluding to Home Depot’s signature color and the term for its frontline employees.

    While Home Depot made a splash with the billion-dollar pay hike, it comes on the heels of similar moves by other major retailers that also espoused the benefits of investing in a well-paid workforce.

    A year ago February, Target set a new starting wage range from $15 to $24 an hour for its so-called team members and expanded access to health care benefits, at a cost of $300 million in 2022. “We know that those investments lead to a more engaged team and that team then builds greater guest trust and loyalty, which in turn continues to power our growth across the company,” said Melissa Kremer, chief human resources officer, last fall when Target was named 12th among Fortune’s 100 best companies to work for.

    In January, Walmart announced it was raising the minimum hourly wage for its store employees to $14 from $12 and up to $19 an hour, establishing an average wage of $17.50 an hour. “Retaining talent and establishing career opportunities for our associates remains a central objective to our growth ambitions,” CFO John David Rainey said at an investor meeting in April. “We are confident we can make the investments needed to remain competitive in a tight labor market while also growing our profitability.”

    Although it’s difficult to draw a straight line from the cost of labor to sales, profits and market share — and retailers are also making big investments in automation — retaining a loyal and satisfied workforce can be seen as a wise strategy amid an ongoing battle for talent, and even as persistent inflation and interest rate hikes are expected to further moderate what has been robust consumer spending.

    Irrespective of Home Depot’s strong track record on Wall Street, Morgan Stanley analyst Simeon Gutman said he was somewhat surprised by the $1-billion outlay. “The investment community largely thought Home Depot was already in prime position in terms of wage rates,” he said, noting a series of pay increases in recent years. And the fact that the company is anticipating less-than-rosy sales this year was another eyebrow-raiser. “The [home improvement] environment seems to be weakening, not accelerating, and therefore incremental wage investments at this time would open the door to more questions and surprise. But if you look at Home Depot over multiple years, you’re okay with it.”

    Ann-Marie Campbell, executive vice president of U.S. stores and international operations at Home Depot, says the increase in wages is just one component of the investment story in associates. “We know that the key to an engaged and committed workforce is investing in the person and in their development,” she said.

    The company also began the year with a new store leadership structure, creating new management positions and increasing the number of managers on the floor at any given time. “This is a meaningful investment that we believe will position us favorably in the marketplace,” she said.

    “Essentially what they’re doing is reinvesting in a key competitive advantage of their business model, which is service within their stores,” said Brian Nagel, an analyst with Oppenheimer.

    Market leaders such as Home Depot, Walmart and Target that have scale should be in better positions than mid-size competitors to invest in their labor force, Gutman said. “They’re behaving as they should given the tight labor market, showing leadership and not just thinking about a 12-month timeframe. They’re thinking about 12 to 36 months.”

    The efficiency wage theory

    The concept that maintaining a well-compensated, enthusiastic workforce is good for business is at the heart of what labor economists refer to as the efficiency wage theory, which postulates that paying employees higher than minimum wages increases productivity, retention rates and loyalty. That, in turn, is reflected in customer satisfaction and goodwill versus the competition.

    “Providing customers a compelling reason to shop at your stores requires giving them real value and good service, and that’s not possible without having motivated and empowered employees,” said Zeynep Ton, a professor at MIT Sloan School of Management in Cambridge, Massachusetts, who has studied retail operations for more than 20 years. “Any retailer that wants to win needs to make sure they attract and retain the right employees and design their jobs so they can be productive and serve their customers well. And in a tight labor market, it’s getting increasingly difficult to keep talent [if] you pay unlivable wages and [offer] few opportunities for growth and success.”

    In addition to the efficiency wage theory, there is significant empirical evidence that paying low wages hinders employees’ ability to focus on the job and be productive, said Ton, who expounds on this topic in her forthcoming book, “The Case for Good Jobs.”

    “It also drives turnover and attendance problems,” she said. “The bottom line is that employee turnover and low pay cost companies a lot more than executives may think, both financially and competitively.”

    It’s hard to say when, and if, Home Depot will see a demonstrable return on the monumental expenditure for its frontline workers. Regardless, CEO Ted Decker said during the February earnings call, “We harken back to … what our founders said: that if we take care of our associates, they take care of the customer and everything takes care of itself. That’s what this investment is all about.” 

    Tight labor market will push inflation higher, says Citi global chief economist

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  • Chipotle Mexican Grill’s restaurant traffic grows as the chain proves its pricing power

    Chipotle Mexican Grill’s restaurant traffic grows as the chain proves its pricing power

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    Chipotle Mexican Grill on Tuesday reported quarterly earnings and revenue that topped analysts’ expectations, fueled by better than expected same-store sales growth.

    Like McDonald’s, Chipotle said traffic to its restaurants grew during the first quarter despite higher menu items. Chipotle’s menu prices are up roughly 10% from a year earlier. CEO Brian Niccol said the chain has demonstrated that it has pricing power.

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    “We don’t want to be in front of the inflationary environment, but we also don’t want to fall behind,” he said on the company’s conference call.

    Pedestrians wearing protective masks walk in front of a Chipotle restaurant in San Francisco, California, April 19, 2021.

    David Paul Morris | Bloomberg | Getty Images

    For now, Chipotle is pausing price increases, Niccol said on CNBC’s “Closing Bell.”

    Shares of the company rose more than 7% in extended trading.

    Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

    • Earnings per share: $10.50 vs. $8.92 expected
    • Revenue: $2.37 billion vs. $2.34 billion expected

    Chipotle reported first-quarter net income of $291.6 million, or $10.50 per share, up from $158.3 million, or $5.59 per share, a year earlier. The company’s menu price hikes and lower avocado prices helped improve profit margins compared with the year-ago period.

    Revenue climbed 17.2%, to $2.37 billion, from $2 billion during the year-earlier period. Same-store sales rose 10.9%, topping StreetAccount estimates of 8.6%. 

    Niccol said that higher-income consumers are returning to restaurants more frequently. Even lower-income diners are visiting more often than they were in the prior six months, although their traffic remains down from a year ago. Overall, traffic rose roughly 4% in the quarter, reversing last quarter’s decline.

    In February, executives said January’s same-store sales grew by double digits. A year earlier, the company saw sluggish sales as the omicron Covid outbreak put pressure on staffing and caused some temporary store closures.

    Chipotle’s chicken al pastor is on track to be the chain’s most popular limited-time protein option ever, Niccol said on the company’s conference call. The company launched it in mid-March.

    Digital orders accounted for nearly 40% of sales during the quarter. Chipotle customers have been ordering their burritos and tacos more in person compared with the year-ago period.

    Executives also outlined changes coming to restaurants to improve speed of service and accuracy. The chain has been testing new grills that cook faster and more consistently. It has also been experimenting with how to staff its two make lines to keep up with demand from both in-person diners and digital orders.

    The company opened 41 new locations during the quarter, 34 of which included its drive-thru lanes reserved for digital order pickup.

    Looking to the rest of the year, Chipotle is anticipating same-store sales growth in the mid-to-high single digits. It’s expecting the same range for its second-quarter same-store sales growth, roughly in line with StreetAccount estimates of 5.8%.

    The company reiterated its plans to open between 255 to 285 new restaurants during 2023.

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  • Bed Bath & Beyond files for bankruptcy protection

    Bed Bath & Beyond files for bankruptcy protection

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    A “Store Closing” banner on a Bed Bath & Beyond store in Farmingdale, New York, on Friday, Jan. 6, 2023.

    Johnny Milano | Bloomberg | Getty Images

    Bed Bath & Beyond on Sunday filed for Chapter 11 bankruptcy protection after a series of last-ditch efforts to raise enough equity to keep the business alive failed at the eleventh hour.

    The struggling home goods retailer has been warning of a potential bankruptcy since early January, when it issued a “going concern” notice that it may not have the cash to cover expenses after a dismal holiday season

    “Bed Bath & Beyond Inc.today announced that it and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of New Jersey to implement an orderly wind down of its businesses while conducting a limited marketing process to solicit interest in one or more sales of some or all of its assets,” a statement Sunday read.

    “The Company’s 360 Bed Bath & Beyond and 120 buybuy BABY stores and websites will remain open and continue serving customers as the Company begins its efforts to effectuate the closure of its retail locations.”

    Bed Bath has been hanging on by a thread ever since but has refused to go down without a fight. It secured what was then-considered a Hail Mary stock offering in early February that was expected to infuse more than $1 billion in equity into Bed Bath, but the plan faltered and brought in only $360 million, the company said.

    At the end of March, Bed Bath announced another stock offering it hoped would bring in $300 million, but that news sent the share price tumbling and it struggled to raise the funds it hoped the offering would provide. As of April 10, the company had sold approximately 100.1 million shares and raised only $48.5 million.

    In filings, the company warned if it didn’t raise the anticipated proceeds from the offering, it would likely have to file for bankruptcy protection.

    Days after the second stock offering was announced, Bed Bath said it had partnered with liquidator Hilco Global to boost its inventory levels. Under the agreement, Hilco subsidiary ReStore Capital agreed to buy up to $120 million in merchandise from the company’s key suppliers after relationships with Bed Bath’s vendors soured because of its liquidity issues.

    However, the plans ultimately proved futile and weren’t enough to keep the lights on.

    The retailer has struggled to maintain relationships with its vendors and has been grappling with low inventory levels, lagging sales and a rapidly dwindling cash pile. 

    Going into the holiday season, Bed Bath had difficulty keeping its shelves stocked and because of its liquidity issues, some vendors began asking for prepayments, the company said in securities filings. 

    CEO Sue Grove had been leading the company through an attempted turnaround she hoped could save the business, but those efforts coincided with high inflation that affected consumer spending while rising interest rates slowed the housing market. 

    Plus, consumers who had spent 2020 and 2021 staying at home and updating their living spaces amid the pandemic were now spending on travel, eating out and other out-of-home experiences. 

    In mid-January, the company was looking to find a buyer willing to keep it afloat with an infusion of cash. Soon, though, Bed Bath revealed in a securities filing that it didn’t have enough cash to pay its debts and had defaulted on its credit line with JPMorgan. 

    The company was able to make its interest payments using funding gained from the first stock offering, but at the time it warned it would “likely” have to file for bankruptcy and see its assets liquidated if the deal didn’t go as planned.

    The company had loans with JPMorgan and lender Sixth Street that were reduced in late March after its second stock offering was announced. At the time, its total revolving commitment decreased from $565 million to $300 million and its revolving credit facility was reduced from $225 million to $175 million. Under the reduced credit agreements, Bed Bath was on the hook for monthly interest payments.

    The company said it was attempting to lower costs by reducing capital expenditures, closing stores and negotiating lease deals but warned in filings the efforts “may not be successful.” 

    At a popular Bed Bath outpost in New York City, a since laid-off staffer recently told CNBC that workers were standing around not knowing what to do after the company suddenly cut off in-store pickup and deliveries at the location. The worker was told liquidators would be coming the following day and soon learned employees wouldn’t receive severance after more than two decades with the company.

    “It was just so fast,” the worker said. 

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  • How A.I.-powered robots are changing retail

    How A.I.-powered robots are changing retail

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    Eager to boost sales, relieve workers from mundane tasks and respond to the ongoing labor shortage, retailers and supermarkets are adding robots to their store aisles.

    Outfitted with cameras and sensors, autonomous inventory robots that can verify price signs and look for out-of-stock items are being deployed at big box stores like BJ’s Wholesale and Walmart-owned Sam’s Club.

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    Inventory is one of the biggest challenges retailers face. Missed sales from empty shelves and out-of-stock items cost U.S. retailers $82 billion in 2021, according to NielsenIQ.   

    “Retailers are spending a lot of money to know what’s coming into their stores through their inventory systems and through their point of sale systems,” said Jarad Cannon, chief technology officer at inventory robot maker Brain Corp. “But in their stores on a daily basis, they don’t have a very good model of what’s actually happening on their shelves.”

    Other companies in the space include Simbe Robotics and Bossa Nova Robotics.

    So what impact will inventory robots have on U.S. retailers and the livelihood of its workers? CNBC got a behind-the-scenes look at Brain Corp. to find out.

    Watch the video to learn more.

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