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Tag: Retail industry

  • Bed Bath & Beyond looks for capital infusion, buyer ahead of likely bankruptcy filing

    Bed Bath & Beyond looks for capital infusion, buyer ahead of likely bankruptcy filing

    Bed Bath & Beyond has been in discussions with prospective buyers and lenders as it works to keep its business afloat during a likely bankruptcy filing, according to people familiar with the matter.

    The retailer is in the midst a sale process in hopes of finding a buyer that would keep the doors open for both of its major chains, its namesake banner and Buybuy Baby, said the people, who weren’t authorized to discuss the matter publicly.

    At the same time, Bed Bath has also been looking for a lender to provide financing that would keep the company going if it were to file for bankruptcy protection in the coming weeks, the people said.

    A Bed Bath spokeswoman said Wednesday the company doesn’t comment on specific relationships but has been working with strategic advisers to evaluate all paths to regain market share and enhance liquidity.

    “Multiple paths are being explored and we are determining our next steps thoroughly, and in a timely manner,” the spokeswoman said, declining to comment further.

    A representative for AlixPartners, which CNBC recently reported was hired as the company’s advisor, declined to comment.

    Earlier this month Bed Bath warned it may need to file for bankruptcy after its turnaround plans failed to substantially boost sales and repair its balance sheet. The company reported net losses that exceed $1.12 billion for the first nine months of the fiscal year. It’s blown through its liquidity in recent months, shouldered a heavy debt load, and faced strained relationships with its suppliers.

    Comparable sales declined 32% year over year in the most recent fiscal quarter, ended Nov. 26. Company leaders said the company has had a harder time keeping shelves stocked, as vendors change payment terms or decide not to ship merchandise because of the retailer’s financial challenges.

    Last week, CNBC reported Bed Bath had begun another round of layoffs in an attempt to further cut costs. The company had about 32,000 employees as of Feb. 26, 2022, according to public filings.

    The company has been working to find a route that sees its chains survive, the people added. A day before Bed Bath issued a “going concern” warning, it announced in an employee memo that it had hired Shawn Hummell, a former Macy’s executive, to lead its namesake brand’s retail, store operations and merchandising operations as senior vice president of stores. Prior to his time at Macy’s, Hummell worked for Abercrombie & Fitch, another retailer that underwent a turnaround.

    One possible buyer circling Bed Bath is private equity firm Sycamore Partners, according to the people familiar with the discussions. Sycamore is particularly interested in Buybuy Baby, Bed Bath’s banner for infants and toddlers, which has outperformed the broader company. Buybuy Baby has been deemed most likely to survive going forward, the people said.

    Still, a sale of Bed Bath as a whole remains on the table — albeit with a much smaller footprint of stores than it currently has, the people said.

    Sycamore is known for acquiring retailers, like women’s apparel chain Talbots, including distressed companies that have sought bankruptcy attention like Ascena’s Ann Taylor. A Sycamore Partners spokesperson declined to comment. Dealbook previously reported Sycamore’s interest in Buybuy Baby.

    Bed Bath has also drawn interest from companies that acquire the intellectual property, or brands, of companies, particularly those under distress, the people said. Authentic Brands, which has frequented many bankruptcy-run sales for retailers like Forever 21, has also been looking at Bed Bath, the people said. A representative for Authentic Brands didn’t immediately respond to comment.

    Short of a sale, the company and its advisors have been looking to nail down additional financing for a bankruptcy filing, which could occur in the coming weeks, the people said. The company’s advisors are looking for a loan of at least $100 million, one of the people said.

    Last year, Bed Bath received $375 million in new funding from lender Sixth Street Partners, which has provided financing to other retailers like J.C. Penney and Designer Brands.

    Sixth Street’s facility could be converted into bankruptcy financing, the people said, or the lender or others could convert their debt to equity and become Bed Bath’s owner. A representative for Sixth Street didn’t immediately respond to comment.

    Bed Bath’s financing strategy comes as fellow retailer Party City sought Chapter 11 protection this week. Also with a hefty debt load, Party City is looking to restructure its balance sheet and move forward with a smaller footprint.

    Bankruptcy attorney Eric Snyder from law firm Wilk Auslander said a sale was unrealistic for Bed Bath due to its declining sales and inventory, as well as its expanded losses.

    “They don’t have the availability to right the ship, and they don’t have the cash to continue to operate,” Snyder said. “I just don’t see any other option other than a bankruptcy and a liquidation.”

    —CNBC’s Melissa Repko contributed to this report.

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  • Gen Z is driving luxury sales as wealthy shoppers get younger

    Gen Z is driving luxury sales as wealthy shoppers get younger

    Peter Cade | Stone | Getty Images

    Luxury shoppers are getting wealthier and younger, with purchases by some of the newest consumers expected to grow three times faster than older generations over the next decade, according to a new report.

    Generation Y, also known as millennials, and Generation Z accounted for all of the luxury market’s growth last year, according to a report from Bain & Co. Spending by Gen Z and the even younger Generation Alpha, or those under 13, is expected to make up a third of the luxury market through 2030, reflecting “a more precocious attitude toward luxury” among the younger ranks than older generations, the report said.

    Gen Z consumers are starting to buy luxury goods — everything from designer handbags and shoes, to watches, jewelry, apparel and beauty products — at age 15, three to five years earlier than millennials did, the report said.

    “By 2030, younger generations (Generations Y, Z, and Alpha) will become the biggest buyers of luxury by far, representing 80% of global purchases,” it said.

    Luxury sales have so far been largely immune to rising interest rates, a slowing economy and high inflation. Bain estimates that global sales of personal luxury goods sales surged 22% in 2022, to 353 billion euros, or roughly $381 billion.

    This year, luxury sales are expected to grow between 3% and 8%, depending on China’s recovery and the economies in the U.S. and Europe.

    The U.S. regained the top spot for luxury sales in 2022, surpassing China, with 25% sales growth and total sales of 113 billion euros, or about $121 billion. China’s luxury sales dropped 1% due largely to Covid lockdowns. Europe also saw strong growth, at 27%, helped in large part by American tourists spending on luxury goods in Europe over the summer.

    Accessories, led by handbags, led the growth in 2022 and are expected to continue driving luxury goods sales in the coming years.

    Sales of leather goods soared 23% to 25% last year, and were up over 40% from pre-Covid levels. While new models and “hero products” accounted for some of that growth, the biggest driver of growth came from price increases — such as the Chanel small Classic Flap bag, which is now priced over 60% higher than before the pandemic. Bain estimates that 70% of sales growth in leather goods in 2022 came from price increases.

    Analysts and luxury executives say the appeal of luxury brands to ever-younger consumers is tied to a surge in wealth creation over the past few years, along with social media.

    “What has changed is the affluence level of the U.S. customer, and the prevalence of social media that tells the customer what is cool, ” said Jan Rogers Kniffen, CEO of retail consulting firm J Rogers Kniffen WWE. “The generation before the Z’s pushed the age of first luxury purchase to 18 to 20. Wasn’t 15 to 17 the next logical stop? Is that the bottom? Probably not.”

    Buying luxury shoes and handbags online has become much more accessible in recent years as luxury companies have embraced online sales and a host of secondhand luxury good websites have emerged.

    Bain said Web 3.0, including the metaverse and NFTs — a type of digital asset called nonfungible tokens — will help future luxury sales to younger consumers even further.

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  • Adidas says Berlin Fashion Week launch and co-CEO announcements are fake

    Adidas says Berlin Fashion Week launch and co-CEO announcements are fake

    Pedestrians walk by a large Adidas logo inside the German multinational sportswear shop.

    Miguel Candela | SOPA Images | LightRocket via Getty Images

    Several press releases allegedly sent from Adidas about a Berlin Fashion Week launch, its treatment of workers abroad and other topics related to its business structure were fake, according to the company.

    “We’re not commenting on these fake emails/releases,” said Claudia Lange, the retailer’s vice president of external communication, in an email to CNBC.

    One faked release said that Vay Ya Nak Phoan, who was described as a former Cambodian factory worker and union leader, had been appointed co-CEO to ensure ethical compliance in manufacturing.

    The Yes Men, an activist group that has a history of creating spoofs to draw attention to how corporations respond to social issues, confirmed to CNBC it was behind the releases along with other groups. The groups hope Adidas signs onto the Pay Your Workers labor agreement, which advocates for garment worker pay and the right to organize.

    “In the wake of several scandals, it seems like it would be a great thing for them to turn over a new leaf,” said a member of The Yes Men identified as Mike Bonanno.

    Two of the faked press releases claimed Adidas was launching new clothing called REALITYWEAR from celebrities Pharrell Williams, Bad Bunny and Philllllthy. The hoax release announcing the Berlin Fashion Week debut on Jan. 16 claimed it was part of a push for a renewed focus on workers’ rights and material sourcing.

    Adidas outlines its stance on workers’ rights on a “Workplace Standards” page dedicated to the issue, spelling out its code of conduct for worker health, safety, pay and “responsible sourcing.”

    The Guardian first reported that The Yes Men were behind the campaign.

    The multi-layered Yes Men campaign also referenced the now-ended partnership with Ye, the rapper formerly known as Kanye West who has come under fire in recent months for anti-Semitic statements, and included a “response” from the company, providing fabricated responses to points raised in the first releases.

    — CNBC’s Gabrielle Fonrouge contributed reporting

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  • China’s reopening is set to boost Hong Kong’s property market as retail leads the recovery: Colliers

    China’s reopening is set to boost Hong Kong’s property market as retail leads the recovery: Colliers

    In light of China’s reopening and easing of Covid rules, Hong Kong’s property market will be on a path to recovery in 2023, according to property consultancy Colliers Hong Kong.  

    The retail market in particular will reap the “best benefit,” Hannah Jeong, Colliers’ head of valuation and advisory services, told CNBC’s “Squawk Box Asia” on Thursday.

    However, there are still some potential headwinds this year that may undercut Hong Kong’s recovery, Colliers said in its latest report. Those include continued geopolitical tension and a potential global recession.

    “We are looking at a more cautiously optimistic view for 2023,” Jeong added.

    “There will be different uncertainties from external factors but borders opening is surely the one of the booster[s] for many other sectors within the property market.” 

    Retail to be ‘first runner’

    According to Colliers, the retail sector — especially the high street shop segment — will be the “first runner” in the post-Covid recovery in 2023 with both rents and prices. 

    “We are looking at about an 8% increase year-on-year, in terms of the retail rental performance,” Jeong added. 

    She said, however, this is still about 25% to 30% lower than pre-Covid levels.

    Collier added in its report that despite China’s reopening, local consumption will remain “an important driver” for Hong Kong’s retail market in the next 12 months.

    Hong Kong's retail market is gradually 'gaining composure,' says Sunlight Reit

    “The shifted shopping pattern of the Mainlanders over the last three years may paint a new picture to the new retail market sentiment,” it added. 

    In the office sector, Grade A office rents will bounce back by 3% this year, said Colliers — thanks to “pent-up demand from Chinese and overseas companies.” 

    Even so, Jeong said that Hong Kong’s office market still has a high vacancy rate, at 14.7%.

    “But it’s not it’s not the end of the world because … compared with other peer cities, 8% to 10% is a generally reasonable number,” she added. 

    Residential market demand to dampen 

    Hong Kong’s home prices plunged to a five-year low in October as interest rates hikes pushed up borrowing costs. 

    This resulted in a “softening of investment demand,” said Jeong, but the demand from homebuyers still exists. 

    “Homebuyers … [have been] utilizing this time when market is softening, they can snatch the cheaper flats,” she added. 

    We're no longer expecting a 'huge drop' in Hong Kong property prices, MIB Securities says

    “But in 2023, I think the interest rate … will continue to go up. We are looking at stabilization at least in the second half of this year.”

    Just last month, Hong Kong raised interest rates by 50 basis points to 4.75%, following the U.S. Federal Reserve.

    High costs of borrowing will dampen residential market demand and a “negative 5% to 10% downward adjustment” should hence be expected this year, Jeong said. 

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  • Starbucks CEO Howard Schultz tells corporate workers to return to the office 3 days a week

    Starbucks CEO Howard Schultz tells corporate workers to return to the office 3 days a week

    Howard Schultz

    David Ryder | Reuters

    Starbucks corporate employees will be returning to the office at least three days a week by the end of the month.

    Starting Jan. 30, employees within commuting distance will be required to report to the coffee giant’s Seattle headquarters on Tuesdays, Wednesdays and a third day decided on by their teams. The memo didn’t specify what qualified as commuting distance.

    Workers closer to regional offices will also be required to come in three days a week, although the specific days aren’t mandated.

    The coffee giant’s corporate workforce has been working remotely since the start of the pandemic. In September, Starbucks asked those workers to work from the office one to two days a week. But CEO Howard Schultz wrote in a memo to employees on Wednesday that badging data showed employees weren’t adhering to that directive.

    The new policy is meant to “rebuild our connection to each other and synchronize teams and efforts,” said the memo from Schultz, who is departing the company this spring. He also compared corporate workers’ continued remote work to baristas, who have never had that option.

    Schultz stepped in as interim chief executive in April after former CEO Kevin Johnson retired. In his third stint at the company, he has announced a $450 million plan to reinvent Starbucks and fix what he called “self-induced mistakes.”

    Starbucks isn’t the only company that has recently mandated a stricter return-to-office policy. CEO Bob Iger, who has returned for his second leadership stint at Disney, told employees on Monday that they must return to the office.

    Elon Musk set even higher expectations for in-office attendance at Twitter after he acquired the social media company. And Apple mandated employees return to work three days a week back in September.

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  • McDonald’s plans reorganization, job cuts as it accelerates restaurant openings

    McDonald’s plans reorganization, job cuts as it accelerates restaurant openings

    Noam Galai | Getty Images Entertainment | Getty Images

    McDonald’s is planning job cuts and a reorganization as the company refocuses its priorities to accelerate restaurant expansion, CEO Chris Kempczinski told employees Friday.

    The fast-food giant said the job cuts aren’t a cost-cutting measure but are instead intended to help the company innovate faster and work more efficiently. As part of the reorganization, the company will be deprioritizing and halting certain initiatives, according to a company-wide memo from Kempczinski. It’s unclear what those projects are.

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    “Today, we’re divided into silos with a center, segments, and markets,” Kempczinski wrote. “This approach is outdated and self-limiting – we are trying to solve the same problems multiple times, aren’t always sharing ideas and can be slow to innovate.”

    Currently, McDonald’s organization is divided into three segments: the U.S., international operated markets and international developmental licensed markets. The company operates in 169 markets across the world.

    Additionally, McDonald’s said Friday it will speed up its development plans for new restaurants.

    “We must accelerate the pace of our restaurant openings to fully capture the increased demand we’ve driven over the past few years,” Kempczinski said in the memo.

    McDonald’s hadn’t previously released a forecast for how many new restaurants it plans to build in 2023, but the company said in November that new units would contribute about 1.5% to system-wide sales growth in 2022.

    The company has not decided how many new restaurants it will build yet nor how many jobs will be eliminated as part of the reorganization. Kempczinski said that the company will finalize and begin to communicate decisions on the layoffs by April 3.

    Kempczinski also announced a handful of internal promotions, effective Feb. 1, to help the company carry out its new strategy. Global Chief Marketing Officer Morgan Flatley will also oversee new business ventures. Skye Anderson will move from McDonald’s U.S. west zone to global business services. Andrew Gregory’s role as global franchising officer will also include leading global development, and Spero Droulias will transition from CFO of McDonald’s USA to the company’s chief transformation officer.

    Shares of McDonald’s were up more than 2% in late trading Friday. The company is expected to report its fourth-quarter earnings on Jan. 31.

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  • Fanatics is divesting its 60% stake in NFT company Candy Digital

    Fanatics is divesting its 60% stake in NFT company Candy Digital

    Michael Rubin’s sports platform company Fanatics is divesting its 60% stake in NFT company Candy Digital, according to an internal email obtained by CNBC.

    Fanatics, who previously held the majority share of Candy Digital, will be selling its interest to an investor group led by Galaxy Digital, the crypto merchant bank led by Mike Novogratz, which was the other original founding shareholder, according to the email.

    Fanatics declined to comment.

    Candy Digital was founded in June 2021 in the middle of the sports NFT boom, competing with companies like Dapper Labs in the digital sports collectible space. One of its first efforts came out of a multiyear licensing agreement with MLB to produce nonfungible tokens, which included an exclusive Lou Gehrig NFT. It also released digital collectibles with Netflix‘s Stranger Things, WWE, and several Nascar teams.

    However, akin to the broader NFT market, sports NFTs also saw a decline amid the ‘crypto winter’ that has seen the value of nearly all digital assets plummet. Dapper Labs, the company behind NBA Top Shot and NFL All Day digital trading platforms that ranked No. 9 on last year’s CNBC Disruptor 50 list, laid off 22% of its company in November.

    Candy Digital had raised a $100 million Series A round in October 2021, valuing it at $1.5 billion at the time. Investors in that round included SoftBank‘s Vision Fund 2, Insight Partners, and Pro Football Hall of Famer Peyton Manning, according to previous CNBC reporting.

    It is unclear what Fanatics received for its stake in the company, but Rubin wrote “Divesting our ownership stake at this time allowed us to ensure investors were able to recoup most of their investment via cash or additional shares in Fanatics – a favorable outcome for investors, especially in an imploding NFT market that has seen precipitous drops in both transaction volumes and prices for standalone NFTs.”

    Rubin cited several factors for Fanatics’ divesture in the email, which he wrote was a “rather straightforward and easy decision for us to make for several reasons.”

    “Over the past year, it has become clear that NFTs are unlikely to be sustainable or profitable as a standalone business,” Rubin wrote. “Aside from physical collectibles (trading cards) driving 99% of the business, we believe digital products will have more value and utility when connected to physical collectibles to create the best experience for collectors.”

    In January 2022, Fanatics acquired Topps trading cards for roughly $500 million after also acquiring the rights to produce MLB trading cards, severing a nearly 70-year partnership between Topps and baseball’s top league.

    Fanatics raised $700 million in fresh capital in December, aiming to use that new money to focus on potential merger and acquisition opportunities across its collectibles, betting and gaming businesses. It also pushed the company’s valuation to $31 billion.

    The company, which started as an e-commerce platform selling team merchandise to sports fans, has looked to expand across the entire sports ecosystem. The company is also weighing an initial public offering, and Rubin recently met with more than 90 internet, retail and gaming analysts from various Wall Street firms, where he spoke of Fanatics’ growth plans, according to previous CNBC reporting.

    Fanatics, a three-time CNBC Disruptor 50 company, was ranked No. 21 on last year’s list.

    Here’s the full email Rubin sent to Fanatics staff on Wednesday:

    Team Fanatics –

    Happy New Year. I hope everyone had a chance to recharge and spend quality time with family and friends during the holidays, and that your 2023 is off to a great start.

    As we’re getting back into the swing of things, I wanted to share some news with all of you. Effective immediately, Fanatics has divested our approximately 60% stake in Candy Digital. We have sold our interest in the NFT company to an investor group led by Galaxy Digital, the other original founding shareholder. When we looked at all the factors on the table, this was a rather straightforward and easy decision for us to make for several reasons.

    Business Model – NFTs will most likely emerge as an integrated product/feature and not as a standalone business: Over the past year, it has become clear that NFTs are unlikely to be sustainable or profitable as a standalone business. Aside from physical collectibles (trading cards) driving 99% of the business, we believe digital products will have more value and utility when connected to physical collectibles to create the best experience for collectors. To that end, we already hold a broader and more significant set of NFT and digital collectibles rights within our Fanatics Collectibles business that came with our trading cards rights (NFL, MLB, NBA and more), which we are seamlessly integrating with the world-class physical collectibles rights we currently have. Ultimately, our goal is to grow the number of sports collectors. Connectivity between physical and digital collectibles will be the most powerful way to create an emotional resonance and enduring success for NFTs and their collectors.

    Investor Relationships: Taking this immediate action not only makes sense for the strategic direction of Fanatics, but also allows us to maintain the integrity of the relationships with our investors. The investors in Candy bought into the vision not because of NFTs or Candy itself, but because of our track record at Fanatics. This proven track record is a result of your hard work and our alignment on the mission to build the leading global digital sports platform. Therefore, it was imperative to us to protect their investment as the market and financial environment changed. Divesting our ownership stake at this time allowed us to ensure investors were able to recoup most of their investment via cash or additional shares in Fanatics – a favorable outcome for investors, especially in an imploding NFT market that has seen precipitous drops in both transaction volumes and prices for standalone NFTs.

    Cultural Integration: Similar to how quickly we mobilize when the right strategic acquisition or partnership presents itself, we move even quicker when we realize things aren’t working. One of our core values – One Fanatics…Win As A Team – is integral to our success and only works when we can leverage the collective intelligence and expertise of all of our teams and colleagues. Unfortunately, we never achieved full integration of Candy within the Fanatics environment or culture due to shareholders with competing objectives and goals. Our culture of building, growing and winning as a team is what makes this company special, and we were not willing to compromise on this front.

    We are 100% confident that this was the best long-term decision for Fanatics and our partners and we look forward to growing our digital and trading cards business together under Fanatics Collectibles with the incredible rights we have across the NFL, MLB, NBA, NCAA, WWE, UFC, F1, UEFA, Disney and more.

    Happy New Year to all,

    Michael Rubin

    CEO, Fanatics

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  • China’s plans to scrap Covid quarantine rules is a win for key Club holdings

    China’s plans to scrap Covid quarantine rules is a win for key Club holdings

    People use their smartphones to take photographs outside The Wynn Macau casino resort, operated by Wynn Resorts Ltd., in Macao, China, on Tuesday, Jan. 30, 2018.

    Billy H.C. Kwok | Bloomberg | Getty Images

    China’s latest move to roll back its zero-Covid policy by scrapping quarantine restrictions for international travelers is the last leg of recovery we’ve been waiting for to help bolster Club holdings that have been weighed down by three years of stringent pandemic rules.

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  • Nike stock surges after earnings and revenue top expectations

    Nike stock surges after earnings and revenue top expectations

    People walk past a store of the sporting goods retailer Nike Inc. at a shopping complex in Beijing, China March 25, 2021.

    Florence Lo | Reuters

    Nike on Tuesday reported quarterly results that easily topped Wall Street’s expectations, even as higher costs squeezed the company’s margins.

    Shares of Nike rose more than 12% after hours Tuesday.

    Here’s how Nike did in its second fiscal quarter compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:

    • Earnings per share: 85 cents vs. 64 cents expected
    • Revenue: $13.32 billion vs. $12.57 billion expected

    The company reported net income for the three-month period ended November 30 of $1.33 billion, or 85 cents per share, compared with $1.34 billion, or 83 cents per share, a year earlier.

    Nike reported revenue of $13.32 billion, up 17% from $11.36 billion a year earlier.

    Over the past three quarters, Nike has beaten Wall Street’s expectations, but like other retailers, has struggled with inflated inventory levels that arose from supply chain disruptions, rising consumer demand and unpredictable in-transit shipping times.

    Inventories were up 43% to $9.3 billion in the quarter, compared to last year. The merchandise glut led to aggressive markdowns, which helped reduce Nike’s gross margin to 42.9% from 45.9% a year ago. However, inventories declined from $9.7 billion in the previous quarter.

    The company also saw a 10% year-over-year uptick in selling and administrative expenses to $4.1 billion, mostly led by advertising and marketing costs and investment in Nike Direct as the company continues to move away from wholesalers.

    While the focus on Nike Direct was largely to blame for the increased administrative expenses, the investment has paid off. Nike Direct sales were up 16% for the quarter at $5.4 billion and digital sales were up 25%. For the last several quarters, wholesale revenue has been effectively flat but was up 19% for the quarter.

    Nike’s sales in China, its third biggest market by revenue, dropped by 3% compared to last year, continuing a trend the retailer has been contending with as the country deals with lingering Covid lockdowns and a slowdown in retail spending. Overall retail sales in the country fell by 5.9% in November compared to a year ago and clothes and shoe sales plunged by 15.6%, according to the National Bureau of Statistics of China.

    After earnings from Nike’s fiscal first quarter were released in September, executives said the company’s inventory had grown 65% over the last year in North America alone and as a result, the company enacted an aggressive promotional strategy to liquidate the merchandise and make way for new products.

    The plan was a key part of Nike’s strategy to shift its sales directly to consumers and away from wholesalers by improving the in-store experience and enticing customers to shop directly from the company online.

    On Friday, Nike announced its new “Jordan World of Flight Milan” store located on Via Torino, a famed shopping district in the Italian locale well known for its designer shoe stores.

    The initiative reflects the steps Nike is taking to grow the company as a direct-to-consumer brand.

    The store, called a “first-of-its-kind retail experience” by the company in a news release, has a built-in members lounge and will include interactive shopping experiences tailored to fans of the renowned sneaker brand.

    Read the company’s earnings release here.

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  • FedEx earnings sink as soft demand persists

    FedEx earnings sink as soft demand persists

    FedEx Cargo Plane

    Leslie Josephs | CNBC

    FedEx said Tuesday that its quarterly earnings and sales fell from a year ago and warned of ongoing weakened demand, but said its “aggressive” cost-cutting measures were softening the blow.

    The package delivery giant’s net income fell to $788 million in the three months ended Nov. 30 from $1.04 billion a year earlier. Sales fell to $22.8 billion in that period, down from $23.5 billion a year earlier, falling short of estimates.

    Adjusting for one-time items, FedEx posted per share earnings of $3.18, ahead of analyst estimates but below the $4.83 a share it reported during the same period of last year.

    FedEx forecast earnings-per-share of between $13 and $14, shy of analysts’ expectations for $14.08 per share for the fiscal year.

    Here’s how FedEx performed in its fiscal second quarter of 2023 based on Refinitiv consensus estimates:

    • Earnings per share: $3.18 adjusted vs. $2.82 expected
    • Revenue: $22.8 billion vs. $23.74 billion expected

    In September, FedEx announced cost-cutting measures that included parking planes and closing some offices. It also raised package-delivery rates. The company at the time withdrew guidance, and CEO Raj Subramaniam said he expects the economy to enter a “worldwide recession.” 

    “Our teams have an unwavering focus on rapidly implementing cost savings to improve profitability,” FedEx’s CFO Michael Lenz said in an earnings release. “As we look to the second half of our fiscal year, we are accelerating our progress on cost actions, helping to offset continued global volume softness.”

    FedEx shares are down about 36% for the year as of Tuesday’s close, compared with the S&P 500’s roughly 20% decline.

    FedEx executives will hold a call with analysts to discuss results at 5:30 p.m. ET. They are likely to face questions about the global economy, holiday travel demand and reliability, and its costs for the coming year.

    This is breaking news. Check back for updates.

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  • Costco CEO’s cautious consumer outlook justifies our near-term view on the stock

    Costco CEO’s cautious consumer outlook justifies our near-term view on the stock

    A shopper wearing a protective mask looks at a television for sale inside a Costco store in San Francisco, California, on Wednesday, March 3, 2021.

    David Paul Morris | Bloomberg | Getty Images

    Craig Jelinek, chief executive officer of Club holding Costco (COST), said Monday he sees a more-vigilant consumer this holiday shopping season and potentially beyond. However, he also said inflation is generally trending in the right direction, a development that’s good for the U.S. economy over the long term.

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  • Amazon workers will go on formal strike for the first time in the UK

    Amazon workers will go on formal strike for the first time in the UK

    Amazon packages move on a conveyer belt at a fulfillment center in England.

    Nathan Stirk | Getty Images

    Hundreds of Amazon workers will go on strike, Britain’s GMB union said Friday, marking a first for the company’s employees in the U.K.

    Employees at Amazon’s Coventry warehouse in central England voted Friday to go on strike, with the walkout likely to happen in January 2023. Roughly 1,000 people work at the Coventry facility.

    The workers are unhappy with a pay increase of 3%, or 50 pence per hour, Amazon introduced in the summer, which they say fails to match the rising cost of living. They want Amazon to pay a minimum of £15 an hour.

    Inflation has soared due to increased energy costs and supply chain disruptions, with consumer prices currently at a 41-year high. The Bank of England hiked interest rates on Thursday in an effort to slow inflation.

    Though Amazon workers in the U.K. have previously stopped working in August and on Black Friday in November in protest over the summer pay increase, these were spontaneous, unsanctioned withdrawals of labor.

    This will be the first legally mandated strike to take place in the U.K.

    Amanda Gearing, senior organizer at GMB, said the Coventry workers “should be applauded for their grit and determination.”

    “The fact that they are being forced to go on strike to win a decent rate of pay from one of the world’s most valuable companies should be a badge of shame for Amazon,” Gearing said in a statement.

    “Amazon can afford to do better. It’s not too late to avoid strike action; get round the table with GMB to improve the pay and conditions of workers.”

    Around 98% of the workers who turned out to vote opted to go on strike on a turnout of more than 63%.

    In an emailed statement to CNBC, an Amazon spokesperson said: “We appreciate the great work our teams do throughout the year and we’re proud to offer competitive pay which starts at a minimum of between £10.50 and £11.45 per hour, depending on location.”

    “This represents a 29 per cent increase in the minimum hourly wage paid to Amazon employees since 2018. Employees are also offered comprehensive benefits that are worth thousands more — including private medical insurance, life assurance, subsidised meals and an employee discount, to name a few.”

    “On top of this, we’re pleased to have announced that full-time, part-time and seasonal frontline employees will receive an additional one-time special payment of up to £500 as an extra thank you,” the spokesperson added.

    Amazon has long been criticized for labor shortcomings, with the company often accused of poor working conditions in its warehouses and delivery operations. In April, staff at the company’s Staten Island warehouse in New York became the first group in the U.S. to vote in favor of joining a union.

    The walkout will add to the wave of industrial action happening across the country. In recent weeks, upcoming strike actions have been announced by nurses, rail workers, postal workers, ambulance workers, airport staff, Border Force agents, highway workers, Eurostar staff, civil servants, bus drivers, firefighters, charity workers, meteorologists and offshore workers.

    – CNBC’s Elliot Smith contributed to this report

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  • Lululemon shares fall after company offers weak fourth quarter guidance

    Lululemon shares fall after company offers weak fourth quarter guidance

    People line up to enter a store during Black Friday shopping at Fashion Outlets of Chicago in Rosemont of Greater Chicago Area, Illinois, the United States, on Nov. 26, 2021.

    Joel Lerner | Xinhua News Agency | Getty Images

    Lululemon on Thursday reported sales and profit that topped estimates, but the company offered softer guidance than expected for the fourth quarter.

    Shares of the company fell more than 8% after hours.

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

    • Earnings per share: $2, adjusted, vs. $1.97 expected
    • Revenue: $1.86 billion vs. $1.81 billion expected

    The athletic apparel retailer is a popular mall destination that’s known for its trendy — and pricey — workout apparel and loungewear. Even as inflation hits Americans’ wallets and people dress up again, investors have bet that the brand can keep drawing shoppers and getting them to spend.

    Lululemon’s third-quarter net income rose to $255.5 million, or $2 per share, from $187.8 million, or $1.44 per share a year ago.

    The company’s guidance for the holiday quarter came in weaker than analysts had projected. Lululemon sees fourth quarter per-share earnings of $4.20 to $4.30, compared to estimates of $4.30. It expects revenue of between $2.605 billion to $2.655 billion, versus a projected $2.649 billion.

    The retailer raised its forecast in September, saying it expects 2022 revenue of between $7.865 billion and $7.940 billion, up from the range of $7.610 billion to $7.710 billion it stated last quarter. It also raised its adjusted earnings per share outlook to a range of $9.75 to $9.90, from last quarter’s guidance of $9.35 to $9.50 adjusted.

    Shares of the company are down more than 4% so far this year. The stock has outperformed the S&P 500 Index, which is down about 17% during the same period. It closed Thursday at $374.51, bringing the market cap to $47.75 billion.

    We haven't seen a drop in demand over inflation concerns, says Ledbury CEO

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  • Nike parts ways with Kyrie Irving following antisemitism controversy

    Nike parts ways with Kyrie Irving following antisemitism controversy

    BROOKLYN, NY – DECEMBER 2: Kyrie Irving #11 of the Brooklyn Nets prepares to shoot a free throw during the game against the Toronto Raptors on December 2, 2022 at Barclays Center in Brooklyn, New York. NOTE TO USER: User expressly acknowledges and agrees that, by downloading and or using this Photograph, user is consenting to the terms and conditions of the Getty Images License Agreement. Mandatory Copyright Notice: Copyright 2022 NBAE (Photo by Nathaniel S. Butler/NBAE via Getty Images)

    Nathaniel S. Butler | National Basketball Association | Getty Images

    Nike has officially cut ties with Kyrie Irving, the company said Monday.

    The Brooklyn Nets star is no longer under contract with the footwear giant after Irving shared antisemitic content on social media and then refused for a time to say he was against antisemitism.

    A Nike spokesperson didn’t immediately make any additional comment about the decision. Representatives for Irving didn’t immediately comment.

    The decision to sever ties to Irving comes just a month after Nike suspended its agreement with the longtime guard and announced it wouldn’t be releasing the latest version of his sneakers, the Kyrie 8.

    “At Nike, we believe there is no place for hate speech and we condemn any form of antisemitism,” the company said in a statement at the time.

    Nike founder Phil Knight told CNBC in an interview last month that he believed Irving stepped over the line.

    The Kyrie 8 was slated to be released in late November. Irving has been under contract with Nike since 2014.

    The Brooklyn Nets, where Irving has played since 2019, suspended Irving for at least five games without pay after he tweeted the antisemitic video and then failed to “unequivocally say he has no antisemitic beliefs.”

    NBA Commissioner Adam Silver had sought an apology from Irving and when one didn’t come, he said the athlete is “currently unfit to be associated with the Brooklyn Nets.”

    The two later met and Irving issued an apology on his Instagram page. He later told reporters he doesn’t “stand for anything close to hate speech or antisemitism or anything that is going against the human race.”

    “I feel like we all should have an opportunity to speak for ourselves when things are assumed about us and I feel it was necessary for me to stand in this place and take accountability for my actions, because there was a way I should have handled all this and as I look back and reflect when I had the opportunity to offer my deep regrets to anyone that felt threatened or felt hurt by what I posted, that wasn’t my intent at all,” Irving said in late November.

    Irving returned to the Nets on Nov. 20 after he missed eight games. The Nets are in eighth place in the NBA’s Eastern Conference, at 13-12.

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  • California lawmakers to meet, eye big oil’s high gas prices

    California lawmakers to meet, eye big oil’s high gas prices

    SACRAMENTO, Calif. — Furious about oil companies’ supersized profits after a summer of record-high gas prices, California Gov. Gavin Newsom on Monday will formally start his campaign to punish big producers by asking the Legislature to fine them and give the money back to drivers.

    State lawmakers will briefly return to the state Capitol on Monday to swear in new members and elect leaders for the 2023 legislative session. But this year, Newsom also has called lawmakers into a special session for the purpose of approving a penalty for oil companies when their profits pass a certain threshold.

    It’s bound to be a popular proposal with voters, who have been paying more than $6 per gallon of gasoline for much of the year. But the big question is how the measure will be received by California lawmakers, especially since the oil industry is one of the state’s top lobbyists and campaign donors.

    Adding to the uncertainty is an unusually high number of new members who will take seats in the Legislature for the first time. More than a quarter of the Legislature’s 120 members could be new, depending on the outcome of a few close races where county officials are still counting votes.

    “It’s kind of like the first day of school and you get this big ethics test about a job that you’ve never had,” said Jamie Court, president of Consumer Watchdog, an advocacy group that has partnered with the Newsom administration to back the gas proposal.

    Among the state Senate’s new members is Angelique Ashby, a Democrat who narrowly won her seat following an intense campaign. The oil industry spent hundreds of thousands of dollars on radio and TV ads supporting Ashby’s campaign, a trend noticed by critics who tried to use it against her.

    In an interview, Ashby said she hasn’t been approached lobbyists or others from the oil industry asking how she would vote on a potential penalty for oil companies. She noted the oil industry spent the money as “independent expenditures,” meaning she had no control over that spending during the campaign.

    “Campaigns are not legislation, and the campaign slogans and strategies of my opponent are a thing of the past,” said Ashby, whose district includes Sacramento. “I’m fixated on the people of Senate District 8 and I will make my decision based on what is in their best interest.”

    As of Sunday night, Newsom had not yet revealed his legislation and legislative leaders said they likely won’t begin deliberations on any proposal until January.

    But the battle has already begun. Last week, the California Energy Commission held a public hearing about why the state’s gas prices are so high. California prices spiked over the summer, but so did the rest of the country — mostly in response to a crude oil price surge after Russia’s invasion of Ukraine.

    California’s prices spiked again in October, even while the price of crude oil dropped. In the first week of October, the average price of a gallon of gas in California was $2.61 higher than the national average — the biggest gap ever. Since then, oil companies reported billions of dollars in profits.

    Regulators had hoped to question the state’s five big oil refineries: Marathon, Valero, Phillips 66, PBF Energy and Chevron. But no company officials attended the hearing, with most saying that sharing information could violate anti-trust laws.

    Newsom sought to shame those companies publicly, posting a video to his Twitter account of their empty seats during Thursday’s hearing.

    “Big oil is ripping Californians off, and the deafening silence from the industry (at the public hearing) is the latest proof that a price gouging penalty is needed to hold them accountable for profiteering at the expense of California families,” Newsom said in a news release announcing the special session.

    Catherine Reheis-Boyd, president of the Western States Petroleum Association, said the oil industry is volatile, pointing to billions of dollars in losses during the pandemic when demand for gasoline dropped sharply as many people worked from home and canceled travel plans.

    During Thursday’s hearing, she blamed the state’s taxes and regulations for driving up gas prices.

    “The governor and the Legislature should focus efforts on removing policy hurdles being imposed on the energy industry so we can focus on providing affordable, reliable and lower carbon energy to all Californians,” Reheis-Boyd said.

    Severin Borenstein, a University of California-Berkeley professor, said the problem isn’t at the oil refinery level, but at the retail level where gasoline is sold to drivers.

    California’s gasoline market is dominated by name-brand gasoline, which is more expensive, and the state’s gas prices have been consistently higher than the rest of the country since 2015, Borenstein said.

    “We just don’t have the competition and discipline from those off-brand stations,” he said.

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  • Las Vegas Strip’s biggest property owner in deal to take full ownership of two casinos

    Las Vegas Strip’s biggest property owner in deal to take full ownership of two casinos

    The largest property owner on the Las Vegas Strip is doubling down and taking full ownership of the MGM Grand Las Vegas and Mandalay Bay, which the deal values at $5.5 billion.

    VICI Properties, a real estate investment trust based in New York, has agreed to buy Blackstone’s 49.9% stake in the two Las Vegas casino resorts. VICI currently owns a 50.1% stake in the property, which it acquired when it bought MGM Growth properties in May.

    The transaction is expected to close in early 2023.

    Appearing on CNBC’s Power Lunch, VICI Properties CEO Ed Pitoniak said Blackstone approached him just a couple weeks ago, and that the deal came together quickly.

    “We were very excited about the opportunity. Obviously it simplifies our structure, but it gives us total ownership of two of the most iconic assets on the Las Vegas strip the MGM Grand and Mandalay Bay,” Pitoniak said.

    Blackstone Real Estate Investment Trust, known as BREIT, said Thursday that it decided to limit withdrawals after it saw redemptions in October that exceed their monthly limits. Blackstone shares dropped almost 10% on the news.

    But what was a problem for Blackstone may be a piece of good luck for VICI.

    “We like the deal as it simplifies VICI’s structure and highlights VICI’s multiple paths for growth despite the company’s larger base and a rising interest rate environment,” Truist analyst Barry Jonas wrote in a client note.

    Gaming REITS such as VICI own the buildings and the land of casinos and resorts. Gambling companies, such as Caesars and MGM Resorts − both tenants of VICI − own the operations.

    MGM Grand Las Vegas and Mandalay Bay, located on the south end of the Strip, include more than 11,000 hotel rooms, 321,000 square feet of gaming floor, and 3 million square feet of meeting facilities.

    VICI is putting in more than a $1 billion in cash, and assuming more than $3 billion of Blackstone debt at a 3.56% rate through 2032. Pitoniak called that a good deal at a time when VICI might have expected to pay 6%.

    VICI’s CEO says he’s bullish on Las Vegas’s continued growth, pointing to a packed convention and entertainment calendar next year, and attention-getting sports events including F1 in November 2023.

    Despite the sale, Blackstone COO Jay Gray said Las Vegas continues to be a high conviction market for Blackstone, which also owns the physical property of the Cosmopolitan and Bellagio.

    Many analysts and investors are also bullish on the opportunities for growth in Las Vegas.

    October marked the 20th straight month of $1 billion or more in state gaming revenue, according to figures released by the Nevada Gaming Control Board.

    Strip casinos are seeing a 20% surge in revenue through October to $6.8 billion in gaming revenue from a year ago.

    Las Vegas is also attracting a record number of visitors. Harry Reid International saw more than 5 million passengers for the first time ever in October.

    “It’s further evidence that Las Vegas remains amongst the most in-demand destinations in the world,” said Rosemary Vassiliadis, Clark County’s director of aviation.

    And hotel revenue in Las Vegas was up 51% in October compared with October 2019, before the pandemic, according to the Las Vegas Convention and Visitors Authority.

    Deutsche Bank, which has a “buy” rating on the stock, raised its price target to $38 following news of the transaction.

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  • Kroger, Albertsons CEOs defend grocery tie-up, say deal won’t hurt competition

    Kroger, Albertsons CEOs defend grocery tie-up, say deal won’t hurt competition

    Albertsons and Kroger supermarkets

    Bridget Bennett | Bloomberg | Getty Images; Brandon Bell | Getty Images

    The battle over whether grocery giants Kroger and Albertsons should be allowed to combine is heating up.

    On Tuesday, leaders of the two companies defended their proposed merger at a congressional hearing in Washington, where they faced a series of questions about how the deal could shake up the competitive landscape — and potentially the prices that consumers pay at the store.

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    “I just don’t see less competition going forward,” Kroger CEO Rodney McMullen said at the hearing by the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights. “It’s easy for customers to make a right turn or a left turn.”

    Kroger announced plans in October to acquire Albertsons in a deal valued at $24.6 billion. The Cincinnati-based company is the second-largest grocer by market share in the United States, behind Walmart, and Albertsons is fourth, after Costco, according to market researcher Numerator. Together, Kroger and Albertsons would be a closer second to Walmart.

    At the hearing Tuesday, McMullen said that the combined company could help lower food prices and improve the customer experience, especially at a time when grocers are racing to adapt to changes like online shopping. He said retailers have to keep reinventing themselves to stay relevant and convince customers to drive to their stores.

    DC AG Karl Racine sues Albertsons, Kroger over $4 billion dividend payout

    Yet the proposed merger has faced intense pushback from elected officials of both political parties and opposition from the United Food and Commercial Workers, a major grocery union that represents thousands of the grocers’ employees.

    Sen. Amy Klobuchar, a Democrat from Minnesota, led the hearing Tuesday along with Sen. Mike Lee, a Republican from Utah. Both challenged the companies on their actions, including Kroger’s $1 billion in share buybacks announced last year and plans to pay dividends to shareholders as well as previous deals, such as Albertsons’ acquisition of Safeway.

    They emphasized that the proposed deal comes at a time when groceries are taking up more of American families’ budgets. Food prices have surged as inflation hovers near four-decade highs. Prices of everyday items, including butter, eggs, poultry and milk have jumped by double-digits from the year-ago period as of October, according to the most recent federal data available.

    Skeptical senators, workers

    The hearing offers a preview of the bigger antitrust battle ahead.

    For Kroger and Albertsons, the argument is clear: combining will help them weather dramatic industry changes. Online grocery sales are eating into already thin margins. New players, such as deep discounters like Aldi and e-commerce players like Amazon, are also pressuring traditional grocers.

    “The marketplace for groceries over the past decade has completely transformed making the competition for consumers fierce,” said Albertsons CEO Vivek Sankaran said at the hearing. “The best way to compete with mega stores like Walmart and highly capitalized online companies like Amazon will be through a merger with Kroger.”

    He argued that even as a combined company, Kroger and Albertsons will still be small compared to Walmart, Costco and Amazon.

    Ahead of the hearing, members of the UCFW — which represents over 100,000 Kroger and Albertsons workers — shared their worries at a press conference on Capitol Hill. Their concerns ranged from the potential loss of their pension plans to higher food prices to job losses.

    Albertsons employees who belong to the union remembered the impact of past mergers. Judy Wood, a longtime cake decorator for the grocery giant, said she and her coworkers were shocked by the store closures that resulted after Safeway’s merger with Albertsons, which was announced in 2014.

    Union members also railed against the private equity firms that will benefit from the proposed $4 per share special dividend for Albertsons shareholders announced in conjunction with the deal. Cerberus Capital Management owns a 28.4% stake in Albertsons, according to Factset. For now, the dividend payout is on hold until at least Dec. 9 due to a ruling in Washington state court.

    McMullen said on Tuesday that the company does not plan to close stores or lay off employees, but said it will work with the Federal Trade Commission, if needed, to spin off stores for competitive reasons.

    As part of its original proposal, Kroger said it already had a plan to overcome concerns about the merger − divesting between 100 and 375 stores in a spinoff. Kroger and Albertsons would work together — and with the FTC — to decide which stores would be part of the spinoff company.

    On Tuesday, McMullen said the company is in “active conversations” with unions about the deal and what it means for its workforce. He said the deal would ultimately expand opportunities for employees. Kroger will also spend $1 billion on higher wages and better benefits for store employees after the deal closes, he said.

    “A successful business is what creates his job security,” he said. “And we believe we’ll have an incredibly successful business that creates job security.”

    Some grocery competitors and industry experts also opposed the deal at the hearing.

    Michael Needler, chief executive officer of Fresh Encounter, an independent grocery chain based in Northwest Ohio, said companies like Walmart and Amazon use their size to pressure suppliers for lower prices and better terms. Instead of creating an even playing field, he said, the Kroger-Albertsons deal would create yet another power player who makes it difficult — if not impossible — for smaller grocers to compete.

    For instance, he said, larger grocers have run predatory campaigns against his own chain by offering coupons for free groceries.

    “I don’t know any other way to point out predatory pricing than buying your competition,” he said.

    Sumit Sharma, a senior researcher who specializes in antitrust matters and competition at Consumer Reports, also said at the hearing that he does not see any benefits to combining the companies. Instead, he said retailers would have less reason to increase employee wages. Shoppers would have fewer choices and more sticker shock.

    “Even if they sell a few stores, that is going to take competition out of the market,” he said. “So prices will go up.”

    CNBC’s Amelia Lucas contributed to this report.

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  • Cyber Monday deals lure in consumers amid high inflation

    Cyber Monday deals lure in consumers amid high inflation

    NEW YORK — Days after flocking to stores on Black Friday, consumers are turning online for Cyber Monday to score more discounts on gifts and other items that have ballooned in price because of high inflation.

    Cyber Monday is expected to remain the year’s biggest online shopping day and rake in up to $11.6 billion in sales, according to Adobe Analytics, which tracks transactions at over 85 of the top 100 U.S. online stores. That forecast represents a jump from the $10.7 billion consumers spent last year.

    Adobe’s numbers are not adjusted for inflation, but the company says demand is growing even when inflation is factored in. Some analysts have said top line numbers will be boosted by higher prices and the amount of items consumers purchase could remain unchanged — or even fall — compared to prior years. Profit margins are also expected to be tight for retailers offering deeper discounts to attract budget-conscious consumers and clear out their bloated inventories.

    Shoppers spent a record $9.12 billion online on Black Friday, up 2.3% from last year, according to Adobe. E-commerce activity continued to be strong over the weekend, with $9.55 billion in online sales.

    Salesforce, which also tracks spending, said their estimates showed online sales in the U.S. hit $15 billion on Friday and $17.2 billion over the weekend, with an average discount rate of 30% on products. Electronics, active wear, toys and health and beauty items were among those that provided a big boost, the two groups said.

    CONSUMERS ARE SPENDING CAUTIOUSLY

    Mastercard SpendingPulse, which tracks spending across all types of payments including cash and credit card, said that overall sales on Black Friday rose 12% from the year-ago. Sales at physical stores rose 12%, while online sales were up 14%.

    RetailNext, which captures sales and traffic via cameras reported that store traffic rose 7% on Black Friday, while sales at physical stores improved 0.1% from a year ago. However, spending per customer dropped nearly 7% as cautious shoppers did more browsing than buying. Another company that tracks store traffic — Sensormatic Solutions — said store traffic was up 2.9% on Black Friday compared to a year ago.

    “Shoppers are being more thoughtful, but they are going to more than a few retailers to be able to make a determination of what they are going to buy this year,” said Brian Field, Sensormatic’s global leader of retail consulting and analytics.

    Danny Groner, a 39-year-old who lives in New York City, said he and his wife want to get a new TV to replace one they’ve had for about seven years. He spent some time on Monday searching for deals online and found some good discounts. Still, he says he wants to be intentional about what he buys and doesn’t mind spending a bit more for the right product.

    Overall, online spending has remained resilient in the past few weeks as eager shoppers buy more items on credit and embrace “buy now, pay later” services that lack interest charges but carry late fees.

    In the first three weeks of November, online sales were essentially flat compared with last year, according to Adobe. It said the modest uptick shows consumers have a strong appetite for holiday shopping amid uncertainty about the economy.

    Still, some major retailers are feeling a shift. Target, Macy’s and Kohl’s said this month they’ve seen a slowdown in consumer spending in the past few weeks. The exception was Walmart, which reported higher sales in its third quarter and raised its earnings outlook.

    “We’re seeing that inflation is starting to really hit the wallet and that consumers are starting to amass more debt at this point,” said Guru Hariharan, founder and CEO of retail e-commerce management firm CommerceIQ, adding there’s more pressure on consumers to purchase cheaper alternatives.

    SHIFTING DEMAND

    This year’s Cyber Monday also comes amid a wider e-commerce slowdown affecting online retailers that saw a boom in sales during most of the COVID-19 pandemic. Consumers who feared leaving their homes and embraced e-commerce during the pandemic are heading back to physical stores in greater numbers this year as normalcy returns.

    The National Retail Federation said its recent survey showed a 3% uptick in the number of Black Friday shoppers planning to go to stores. It expects 63.9 million consumers to shop online during Cyber Monday, compared to 77 million last year.

    Amazon saw its retail business thrive during most of the pandemic, but much of the demand waned as the worst of the pandemic eased. To deal with the change, the company has been scaling back its warehouse expansion plans and is cutting costs by axing some of its projects. It’s also following in the steps of other tech companies and implementing mass layoffs in its corporate ranks. Amazon CEO Andy Jassy said the company will continue to cut jobs until early next year.

    Shopify, a company which helps businesses set up e-commerce websites and also offers offline software, laid off 10% of its staff this summer.

    The company said Monday that its merchants have surpassed $5.1 billion in global sales since the start of Black Friday in New Zealand. And spending per U.S. customer went up $5 compared to last year, said Shopify President Harley Finkelstein.

    Despite the bump, Finkelstein said shoppers were more intentional about their spending this year and waiting for discounts before making a purchase.

    ————

    AP Business Writer Anne D’Innocenzio contributed to this report.

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  • Cyber Monday deals lure in consumers amid high inflation

    Cyber Monday deals lure in consumers amid high inflation

    NEW YORK — Days after flocking to stores on Black Friday, consumers are turning online for Cyber Monday to score more discounts on gifts and other items that have ballooned in price because of high inflation.

    Cyber Monday is expected to remain the year’s biggest online shopping day and rake in up to $11.6 billion in sales, according to Adobe Analytics, which tracks transactions at over 85 of the top 100 U.S. online stores. That forecast represents a jump from the $10.7 billion consumers spent last year.

    Adobe’s numbers are not adjusted for inflation, but it says demand is growing even when inflation is factored in. Some analysts have said top line numbers will be boosted by higher prices and the amount of items consumers purchase could remain unchanged — or even fall — compared to prior years. Profit margins are also expected to be tight for retailers offering deeper discounts to attract budget-conscious consumers and clear out their bloated inventories.

    Shoppers spent a record $9.12 billion online on Black Friday, up 2.3% from last year, according to Adobe. E-commerce activity continued to be strong over the weekend, with $9.55 billion in online sales.

    Salesforce, which also tracks spending, said their estimates showed online sales in the U.S. hit $15 billion on Friday and $17.2 billion over the weekend, with an average discount rate of 30% on products. Electronics, active wear, toys and health and beauty items were among those that provided a big boost, the two groups said.

    Meanwhile, consumers who feared leaving their homes and embraced e-commerce during the pandemic are heading back to physical stores in greater numbers this year as normalcy returns. The National Retail Federation said its recent survey showed a 3% uptick in the number of Black Friday shoppers planning to go to stores. It expects 63.9 million consumers to shop online during Cyber Monday, compared to 77 million last year.

    CONSUMERS ARE SPENDING CAUTIOUSLY

    Mastercard SpendingPulse, which tracks spending across all types of payments including cash and credit card, said that overall sales on Black Friday rose 12% from the year-ago. Sales at physical stores rose 12%, while online sales were up 14%.

    RetailNext, which captures sales and traffic via sensors, reported that store traffic rose 7% on Black Friday, while sales at physical stores improved 0.1% from a year ago. However, spending per customer dropped nearly 7% as cautious shoppers did more browsing than buying. Another company that tracks store traffic — Sensormatic Solutions— said store traffic was up 2.9% on Black Friday compared to a year ago.

    “Shoppers are being more thoughtful, but they are going to more than a few retailers to be able to make a determination of what they are going to buy this year,” said Brian Field, Sensormatic’s global leader of retail consulting and analytics.

    Overall, online spending has remained resilient in the past few weeks as eager shoppers buy more items on credit and embrace “buy now, pay later” services that lack interest charges but carry late fees.

    In the first three weeks of November, online sales were essentially flat compared with last year, according to Adobe. It said the modest uptick shows consumers have a strong appetite for holiday shopping amid uncertainty about the economy.

    Still, some major retailers are feeling a shift. Target, Macy’s and Kohl’s said this month they’ve seen a slowdown in consumer spending in the past few weeks. The exception was Walmart, which reported higher sales in its third quarter and raised its earnings outlook.

    “We’re seeing that inflation is starting to really hit the wallet and that consumers are starting to amass more debt at this point,” said Guru Hariharan, founder and CEO of retail e-commerce management firm CommerceIQ, adding there’s more pressure on consumers to purchase cheaper alternatives.

    SHIFTING DEMAND

    This year’s Cyber Monday also comes amid a wider e-commerce slowdown affecting online retailers that saw a boom in sales during most of the COVID-19 pandemic. Amazon, for example, raked in record revenue but much of the demand has waned as the worst of the pandemic eased and consumers felt more comfortable shopping in stores.

    To deal with the change, the company has been scaling back its warehouse expansion plans and is cutting costs by axing some of its projects. It’s also following in the steps of other tech companies and implementing mass layoffs in its corporate ranks. Amazon CEO Andy Jassy said the company will continue to cut jobs until early next year.

    Shopify, another company which helps businesses set up e-commerce websites, laid off 10% of its staff this summer.

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  • Adidas employees raised concerns about Ye’s conduct for years, report says

    Adidas employees raised concerns about Ye’s conduct for years, report says

    Gilbert Carrasquillo | Getty

    The chief executive and other senior leaders at Adidas discussed the potential fallout from its relationship with Kanye West as far back as four years ago, according to a report from The Wall Street Journal.

    During a 2018 presentation to the Adidas executive board, a group of employees reportedly outlined the risks that they faced by interacting with West, who has legally changed his name to Ye. The presentation included a number of mitigation strategies that included cutting ties with the Yeezy creator, the report said.

    But Adidas executives did not sever ties when these concerns were raised, and instead continued to meet with Ye to try and hold onto the partnership, which made nearly $2 billion a year for Adidas, or 10% of its revenue, according to Morningstar analyst David Swartz. During one meeting in September of this year, the report said, Ye accused Adidas executives of stealing his designs and showed them a clip of an adult video.

    The German sportswear giant officially terminated its partnership with Ye in October after the musician made a series of offensive and antisemitic comments.

    “Adidas does not tolerate antisemitism and any other sort of hate speech,” the company said in a statement. “Ye’s recent comments and actions have been unacceptable, hateful and dangerous, and they violate the company’s values of diversity and inclusion, mutual respect and fairness.”

    A month later, Adidas announced that it is investigating accusations made by staff relating to Ye’s conduct after an anonymous letter alleged years of abuse.

    Ye’s alleged behavior was not new, according to employees who spoke to the Journal. Some of them had raised concerns about Ye to leaders and human resources at Adidas as far back as 2018.

    “It is currently not clear whether the accusations made in an anonymous letter are true,” Adidas said in a statement Thursday. “However, we take these allegations very seriously and have taken the decision to launch an independent investigation of the matter immediately to address the allegations.”

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