Restaurants are set to become the biggest winners of a holiday season that could turn out to be the most normalized since the onset of the pandemic.
That’s according to a new Mastercard SpendingPulse survey released on Monday, which showed spending at dining establishments surging 15.1% over the 2021 holiday period. Total retail expenditures for the Nov. 1–to–Dec. 24 period in 2022 rose 7.6%, with in-store spending up 6.8% and online spending up 10.6%.
Restaurant spending beat out several other categories, such as apparel, where spending was up 4.4% from 2021, and electronics and jewelry, where a respective 5.3% and 5.4% less were spent, and department stores, which saw spending rise 1%.
“This holiday retail season looked different than years past,” said Steve Sadove, senior adviser for Mastercard and former CEO and chairman of Saks Inc. “Retailers discounted heavily but consumers diversified their holiday spending to accommodate rising prices and an appetite for experiences and festive gatherings postpandemic.”
Government data for November showed consumer spending was up just 0.1%, reflecting cautiousness among households and price cutting by retailers to lure those hesitant shoppers in. But the data also showed more spending on holiday recreation and travel, expected to go in the books as a busy season even if deadly winter storm may have wreaked havoc on the plans of many Americans over the Christmas weekend.
Of course, even as some merrymakers felt confident enough to make more plans and see more friends and family this year, the virus of course continues to cause illness and death. The U.S. reported 70,000 newly diagnosed cases for the first time since September on Thursday, while 422 people died of COVID-19 on Wednesday.
The Mastercard SpendingPulse data measure in-store and online retail sales for all payment forms and are not inflation-adjusted.
As for the companies that might be benefiting from that increased traffic, the year-end cheer probably won’t be enough to make a dent in what has been a difficult year with would-be consumers juggling worries over inflation, rising interest rates and a war in Europe.
The Invesco Dynamic Leisure & Entertainment exchange-traded fund PEJ, +0.79%,
whose holdings include Chipotle Mexican Grill CMG, +0.32%,
McDonald’s MCD, +0.68%
and First Watch Restaurant Group FWRG, +0.42%,
has gained 6.5% to date in the fourth quarter and is down 20% for the year as of Thursday. The broad benchmark S&P 500 SPX, +0.59%
is poised for a nearly 20% loss in 2022.
Cheesecake Factory appears to be “running the same play,” wrote J.P. Morgan analyst John Ivankoe in a recent restaurant industry outlook. I don’t think he meant it as a compliment—the stock, he noted, trades where it did in 2004, adjusted for splits.
Why the long stall-out? My first thought was that maybe hitting the mall for a hypercaloric sit-down meal off a menu the size of a Gutenberg Bible has fallen out of favor over the years. But no: Sales have bounced back and then some from the Covid pandemic, with plenty of takeout business and dessert orders. The average
Cheesecake Factory
(ticker: CAKE) restaurant does more than $10 million in yearly sales, or twice as much as an Olive Garden.
COVID-19 cases are once again rising in the U.S., but how prepared are we for the next pandemic?
That’s a question worth asking. The $1.7 trillion omnibus spending bill presented by lawmakers on Tuesday includes a pandemic preparedness package, which has provisions that aim to build up the stockpile of drugs and medical supplies, strengthen how the U.S. can predict, model and forecast infectious disease threats, and test out a loan repayment plan for workers with expertise in infectious diseases and emergency preparedness.
The package does not include a task force that would investigate the origins of SARS-CoV-2 or the $9 billion that President Joe Biden requested to address the ongoing pandemic.
“We are not fixing the things that led to a bad response over COVID, and we’re facing a serious possibility that new variants of concern could arise in China,” Dr. Zeke Emanuel, vice provost of global initiatives at the University of Pennsylvania, told Axios.
COVID news to know:
Masks are coming back. Oakland is now requiring masks in government buildings, reports the San Francisco Chronicle, while New York City Mayor Eric Adams wore a mask on Tuesday during a press briefing telling New Yorkers to take precautions against circulating viruses. “The mayor is signaling to you that it is the socially conscious thing to do right now,” he said, according to the New York Times.
Germany sending COVID shots to China. Germany said Wednesday that it has shipped doses of the vaccine developed by BioNTech BNTX, +1.44%
and Pfizer PFE, +0.74%
to China, to be administered to Germans who live there, according to the Associated Press. The vaccine is not authorized for use in China.
At least 67,000 people in the U.S. are testing positive every day. That’s 24% higher than it was two weeks ago, according to a New York Times tracker. COVID hospitalization and deaths continue to increase, as well, with about 40,000 people in the hospital and 407 people dying every day. At the beginning of December, about 250 deaths were reported every day.
Few seniors in the U.S. are getting a booster. Nearly 95% of all Americans who are 65 years old and older got the primary series of COVID shots. But only 36% have opted to get the new bivalent boosters, which equally protect against the original strain of the virus and the BA.4/BA.5 subvariants. The rationale? They aren’t sure it works, can’t find it, or didn’t know it was available, according to the New York Times.
Nike Inc.’s stock spiked more than 13% in extended trading Tuesday after the sporting-goods retailer reported early holiday earnings and sales are tracking solidly higher than Wall Street expected, though inventories remain high and a forecast could still loom.
Nike NKE, +0.16%
reported fiscal second-quarter net earnings of $1.33 billion, or 85 cents a share, compared with net earnings of 83 cents a share in the year-ago quarter. Revenue was $13.32 billion, up 17% from $11.36 billion a year ago for the sneaker maker in the quarter, which ended Nov. 30.
Analysts surveyed by FactSet had expected on average net earnings of 64 cents a share on revenue of $12.58 billion.
Nike executives did not provide a third-quarter forecast in their announcement, though Chief Financial Officer Matthew Friend said in a conference call he expects annual revenue grow in the the “low teens.” In an earlier statement, Chief Executive John Donahoe said the results “give us confidence in delivering the year as our competitive advantages continue to fuel our momentum,” while Friend added, “We are on track to deliver on our operational and financial goals.”
In a conference call late Tuesday, Donahoe noted a rebound of business in China and improving inventory levels because of strong consumer demand.
Nike announced the results amid a daunting confluence of slackening consumer spending, foreign-exchange headwinds and an elevated promotional environment, Jefferies says in a research note. In September, Nike shares tumbled after executives said markdowns on the retailer’s products would squeeze margins, and they expected clothing competitors to keep slicing prices through at least the end of the year.
With consumers buying fewer clothes, Nike and other retailers have shouldered swelling inventories, though executives at Nike insist the level of excess goods likely peaked in North America this summer. In Tuesday’s report, Nike reported inventories of $9.3 billion, up 43% from the same quarter a year ago. Analysts on average were projecting inventories of $8.83 billion, according to FactSet.
“The market is focused on progress to resolution of FY23 inventory issues as a set up to a strong margin recovery” in fiscal 2024, Stifel analysts said in a note last week.
Shares of Nike have declined 38% this year, while the broader S&P 500 index SPX, +0.10%
is down 20%.
LONDON — Elon Musk’s controversial Twitter firing spree is sending workers into the arms of organized labor, according to the new head of Britain’s Trades Union Congress.
“Elon Musk is a perfect recruitment tool for the trade union movement,” Paul Nowak told POLITICO. Since the Tesla billionaire took over the social media platform in October, Prospect, one of the trade union federation’s 48 affiliates, “has seen its membership in Twitter go up tenfold,” he said.
The influx is “precisely in response” to Musk, argued Nowak, who “thinks he can issue a directive from San Francisco that somehow just happens all around the world with no regard to employment law.”
Musk has fired roughly 3,700 employees — nearly half of Twitter’s workforce — in a round of mass layoffs since buying the company.
U.K. Twitter employees earmarked for an exit received an email saying their job would be “potentially” impacted or “at risk,” because, under British law, firms are required to consult with staff over mass redundancies.
In November, Musk meanwhile gave staff an email ultimatum to either go “extremely hardcore” by “working long hours at high intensity” or quit the company.
Musk’s behavior is, Nowak said, “a great recruiting tool for us.”
“If I was a young worker in tech, I’d be thinking that being a union member might be a good investment at the moment,” he said. “If it can happen at Twitter, it can happen anywhere.”
Unions have in recent years ramped up their activity in another part of the tech world: the gig economy. Uber and food delivery service Deliveroo recently signed agreements with unions, while some Apple stores have voted for union recognition. Last year also saw the first-ever industrial action ballots at a U.K. Amazon warehouse.
Organized labor is “beginning to make inroads” in tech, Nowak said — but it still needs “to step up that work.” Twitter had not responded to a request for comment by the time of publication.
Strikes
Nowak takes the helm at the TUC at a time of major industrial unrest in the U.K, as employees in a host of sectors rail against stagnant wages amid soaring inflation.
U.K. Twitter employees earmarked for an exit received an email saying their job would be “potentially” impacted or “at risk” | Justin Sullivan/Getty Images
“It doesn’t matter whether it’s railway workers, postal workers, nurses, paramedics, our members aren’t on strike for the sake of it,” he said.
Since the financial crisis in 2008, the median income in Britain has fallen behind neighboring countries in Europe. An analysis by the TUC shows workers are £20,000 poorer, on average, since 2008 because pay has failed to keep up with inflation. By 2025 the union group expects that gap to increase to £24,000, with even larger gulfs for frontline healthcare staff who are striking.
Britain’s Retail Price Index measure inflation reached 14 percent last year, and economists forecast inflation — in part spurred by the pandemic and Russia’s invasion of Ukraine — will persist longer in the U.K. than among its G7 partners.
“Households can’t afford as much as they have been able to in the past,” said Josie Dent, managing economist at the Centre for Economics and Business Research. “Naturally that creates weaker demand.”
Against that backdrop, Novak said he wants the British government to stimulate domestic demand by putting more pay in workers’ pockets. The government argues boosting public sector pay will further fuel inflation and push its already shaky public finances further into the red.
“What do our members do when our members get paid and get decent pay rises? They go and spend that money in local shops, hotels, restaurants,” said Nowak, and “they don’t squirrel it away in offshore bank accounts, or save it away for a rainy day.”
“You have to create demand internally in the economy as well,” he added. “We’ve had the government sort of turn that common sense on its head.”
World soccer’s governing body FIFA rebuffed an offer from Ukrainian President Volodymyr Zelensky to share a message of world peace at the World Cup final, according to a CNN report.
Citing an unnamed source, CNN reported that Zelensky’s office offered an appearance via video link prior to kickoff at Sunday’s final. Defending World Cup champion France takes on Argentina in the match at Lusail Stadium, several miles north of the Qatari capital Doha.
The source told CNN that Zelensky’s office was surprised by the negative response. It’s unclear if the message was to be delivered live, or taped, the report said. “We thought FIFA wanted to use its platform for the greater good,” the source was quoted as having told CNN, reportedly adding that talks between Ukraine and FIFA are ongoing.
MarketWatch has reached out to FIFA and Zelensky’s office with requests for comment.
Since Russia launched its full-scale invasion of Ukraine on Feb. 24, Zelensky has used high-profile video addresses to rally international support for his embattled nation. These have included addresses to the U.N. General Assembly, the U.S. Congress, Britain’s House of Commons, the German Bundestag, the European Parliament and a G-20 summit, as well as video-link appearances at the Grammys and the Cannes Film Festival.
The last World Cup was held in Russia, with Russian President Vladimir Putin in attendance as France defeated Croatia 4-2 in the final. (FIFA, controversially, announced its host-country selections for 2018 and 2022 — Russia and Qatar — on the same December day in 2010.)
The 2022 tournament is perhaps the most controversial in World Cup history, with Qatar facing a barrage of criticism over its treatment of migrant workers and its approach to LGBTQ+ rights in the country.
The criticism of Qatar, the first Arab nation to host a World Cup, reached a crescendo before the tournament kicked off last month. During a press conference on the eve of the opening game, FIFA’s president, Gianni Infantino, launched into a lengthy defense of the decision to hold the tournamentin Qatar and accused the West of “hypocrisy.”
This World Cup is also the first to take place during the northern hemisphere’s winter. Traditionally, the tournament takes place in June and July, but this year’s tournament was moved to minimize the impact of Qatar’s searing heat.
Branding experts have observed that this controversial World Cup poses challenges for the big-name corporations involved in the event. FIFA’s list of partners includes U.S. corporate titans Coca-Cola Co. KO, -0.57%
and Visa Inc. V, -0.49%,
who are both involved in the Qatar event. McDonald’s Corp. MCD, -2.06%
and Crypto.com are also World Cup sponsors.
The tournament’s beer sponsor, Budweiser, an Anheuser-Busch InBev BUD, -0.18%
brand, has had a particularly eventful several weeks in Qatar. In an abrupt reversal just two days before the soccer showpiece kicked, Qatar organizers banned beer sales in the tournament’s eight stadiums.
The reversal of that decision appeared to take Budweiser by surprise, with the company tweeting “Well, this is awkward …” before deleting the post. Budweiser quickly shrugged off the beer ban and promised a huge victory party for the country that wins the soccer showpiece.
Fox Sports, which is owned by Fox Corp. FOX, -0.21%,
a sister company of MarketWatch publisher Dow Jones’s parent company, News Corp NWSA, +0.28%,
holds English-language broadcast rights in the U.S. to the Qatar World Cup.
“The finance team will not report the news,” says Macy’s Inc. CFO Adrian V. Mitchell. “The finance team is going to help shape outcomes with our partners across the enterprise. That mindset shift was quite critical.”
As we head into 2023, I followed up with Mitchell about the progress of Macy’s transformation to a digitally-led business. He says the finance, planning, merchandising, and supply chain teams are working together to modernize the retailer, which has been in business for more than 150 years.
“Much of the modern department store ambition is about retooling Macy’s by building new capabilities, exiting legacy capabilities, and showing up for the customer,” he says.
Macy’s Inc. CFO Adrian V. Mitchell / Courtesy of Macy’s Inc.
By streamlining its supply chain, Macy’s improved inventory turnover by 15% compared to before the pandemic, the company reported in its Q3 earnings. A big part of supply chain and inventory management has to do with analytic capabilities using tools like machine learning and demand forecasting, Mitchell says.
With a deep focus on the supply chain in 2021, “We were able to get the vast majority of our inventory in time for the holiday, and very little [of 2021 goods] actually spilled into 2022,” he says. “In 2022, we’ve seen the supply chain loosen up. The fill rates continue to improve every month, and every quarter this year. So we’ve adjusted and we’re watching confirmed orders.”
He continues, “So if you think about the 2022 holiday, we had 55% newness, which is 30 percentage points higher than 2019. We’re coming into the season with a lot of newness as a fashion retailer, and we can actually adjust in season based on the demand profile.”
Location-level pricing is an area where Macy’s uses machine learning, Mitchell says. For example, they can look at the velocity of a particular item like a black Polo sweater, its inventory availability in specific locations, and availability for the digital business “Then we can predict for that black Polo sweater what the appropriate markdown magnitude and timing should be,” on a case basis, he explains. This is different from the past when looking at the sell-through rate and then making decisions on markdowns that would apply to every store in a particular region, he says.
“Pricing analytics continue to pay dividends for us,” Mitchell says.
Mitchell has replaced manual processes with technology that includes enterprise reporting “that’s one truth for how the entire leadership team and their managerial teams talk about performance,” he says. “We talk about inventory, sales, margin, credit business, marketplace business, all on one sheet of data and information.”
Macy’s reported net sales in Q3 were $5.2 billion, down 3.9% compared to the same time last year. However, the retailer beat estimates. “We’re pleased to be on the higher end of our sales expectations,” Mitchell says. “We were able to beat the bottom line handily relative to expectations.”
“Our stores were ready for the holiday in mid-October,” he says. “This year, we believe the holiday pattern is very much a pre-pandemic pattern.” The demand is on Black Friday, Cyber Monday, cyber week, and the 10 to 12 days leading up to Christmas, he says.
“The consumer remains under pressure,” Mitchell says. “We do recognize that in dollars things are more expensive on the nondiscretionary side. So we have to continue to delight the customer.” The company will be able to share more data in January, he says.
For Mitchell’s finance team, getting a 360-degree view of the business is critical, and you can’t just do that from your desk. “My finance leaders and their teams are now going to [distribution centers], they’re going to stores, they’re sitting in working sessions with business partners to understand the levers that we need to pull in order to drive the financial outcomes,” he explains.
Accenture’s new report, “Payments Gets Personal,” explores the consumer transaction journey and provides insight on future payment innovations. Globally, 66% of consumers surveyed use cash for payments at least five times a month. By region, North America had the lowest percentage of consumers (59%) that use cash frequently. Debit card came in second as the most frequent form of pay globally (64%). And more than half (56%) of respondents use a digital wallet. Biometrics payments is the authentication of physical characteristics such as retinas, fingerprints, and faces. Forty-two percent of respondents believe biometrics are likely to be widely used by 2025. In addition, 9% said they would be willing to use it as their in-person primary method of payment, if available, by 2025. The findings are based on a survey of more than 16,000 consumers in 13 countries across Asia, Europe, Latin America, and North America.
Courtesy of Accenture
Going deeper
Amazon Web Services (AWS), Amazon’s cloud computing services, the company’s “best performing and least recognized business, is cutting few, if any jobs,” and may even add headcount next year, writes Fortune’s Geoff Colvin. For his piece, “The CEO of Amazon Web Services likes to hire people who are ‘restless and dissatisfied.’ Here’s why,” Colvin sat down with Adam Selipsky to talk about the culture of AWS and how he chooses team members.
Leaderboard
Christina Zamarro was promoted to EVP and CFO at The Goodyear Tire & Rubber Company (Nasdaq: GT), effective Jan. 1. Zamarro will succeed Darren R. Wells, who will become EVP and chief administrative officer. Zamarro joined Goodyear in 2007 after several years working for Ford Motor Company. She’s currently VP of finance and treasurer at Goodyear. For more than 15 years with the company, Zamarro has played key roles in financial strategy, treasury, and investor relations functions.
James M. Moses was named vice chairman and CFO of First Hawaiian Bank and its parent company First Hawaiian, Inc. (Nasdaq: FHB), effective Jan. 3. Moses has more than 20 years of experience in the banking field. He joins the company from First Bank in St. Louis, Missouri, where he served as EVP and CFO. His previous experience includes serving as EVP and CFO of Berkshire Hills Bancorp, and SVP and manager of Asset Liability Management at Webster Bank.
Overheard
“We still have some ways to go.”
—Federal Reserve Chair Jerome Powell said at a press conference on Wednesday that officials were not close to ending their campaign of interest-rate increases to tame inflation. Powell’s statement followed the central bank’s announcement of a 0.50 percentage point interest rate hike, which is smaller than the four previous hikes of 0.75 percentage points. Officials also signaled borrowing costs would head higher than expected next year, Fortune reported.
Following a sharp and sustained rise in interest rates, U.S. stocks have taken a broad beating this year.
But 2023 may bring very different circumstances.
Below are lists of analysts’ favorite stocks among the benchmark S&P 500 SPX,
the S&P 400 Mid Cap Index MID
and the S&P Small Cap 600 Index SML
that are expected to rise the most over the next year. Those lists are followed by a summary of opinions of all 30 stocks in the Dow Jones Industrial Average DJIA.
Stocks rallied on Dec. 13 when the November CPI report showed a much slower inflation pace than economists had expected. Investors were also anticipating the Federal Open Market Committee’s next monetary policy announcement on Dec. 14. The consensus among economists polled by FactSet is for the Federal Reserve to raise the federal funds rate by 0.50% to a target range of 4.50% to 4.75%.
A 0.50% increase would be a slowdown from the four previous increases of 0.75%. The rate began 2022 in a range of zero to 0.25%, where it had sat since March 2020.
A pivot for the Fed Reserve and the possibility that the federal funds rate will reach its “terminal” rate (the highest for this cycle) in the near term could set the stage for a broad rally for stocks in 2023.
Wall Street’s large-cap favorites
Among the S&P 500, 92 stocks are rated “buy” or the equivalent by at least 75% of analysts working for brokerage firms. That number itself is interesting — at the end of 2021, 93 of the S&P 500 had this distinction. Meanwhile, the S&P 500 has declined 16% in 2022, with all sectors down except for energy, which has risen 53%, and the utilities sector, which his risen 1% (both excluding dividends).
Here are the 20 stocks in the S&P 500 with at least 75% “buy” or equivalent ratings that analysts expect to rise the most over the next year, based on consensus price targets:
Most of the companies on the S&P 500 list expected to soar in 2023 have seen large declines in 2022. But the company at the top of the list, EQT Corp. EQT,
is an exception. The stock has risen 69% in 2022 and is expected to add another 62% over the next 12 months. Analysts expect the company’s earnings per share to double during 2023 (in part from its expected acquisition of THQ), after nearly a four-fold EPS increase in 2022.
Shares of Amazon.com Inc. AMZN
are expected to soar 50% over the next year, following a decline of 46% so far in 2022. If the shares were to rise 50% from here to the price target of $136.02, they would still be 18% below their closing price of 166.72 at the end of 2021.
You can see the earnings estimates and more for any stock in this article by clicking on its ticker.
Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.
Mid-cap stocks expected to rise the most
The lists of favored stocks are limited to those covered by at least five analysts polled by FactSet.
Among components of the S&P 400 Mid Cap Index, there are 84 stocks with at least 75% “buy” ratings. Here at the 20 expected to rise the most over the next year:
Among companies in the S&P Small Cap 600 Index, 91 are rated “buy” or the equivalent by at least 75% of analysts. Here are the 20 with the highest 12-month upside potential indicated by consensus price targets:
A growing chorus of voices is questioning why there is no concerted effort to persuade Americans to wear face masks in public settings again as COVID cases, hospitalizations, fatalities and test-positivity rates rise across the nation.
The Centers for Disease Control and Prevention continues to encourage people to keep up with vaccines and boosters and to urge others to do so too. But for now, there is no push for face masks or social distancing, the public safety measures that helped contain the spread of the virus at the peak of the pandemic.
The daily average for new cases stood at 65,528 on Monday, according to a New York Times tracker, up 56% from two weeks ago. Cases are climbing in 47 states, led by Mississippi, where they are up 356% from two weeks ago.
The average for hospitalizations is up 24% to 38,331. Hospitalizations are climbing in 44 states, led by Vermont, where they are up 83% from two weeks ago.
The number of COVID deaths is up 48% to a daily average of 468, a disappointing reversal of the declining trend seen over the past several months. The test-positivity rate has climbed 25% to 12%.
New York City and New York state have emerged as hot spots, with an average of 6,405 new cases a day in the state in the last week, the tracker shows. Cases are up 74% from two weeks ago.
The omicron strains called BQ.1 and BQ.1.1 have become dominant in the Empire State, replacing BA.5. Both are sublineages of BA.5 but are more infectious than the original variant, meaning they can spread faster and more easily.
Meanwhile, other respiratory illnesses including flu, RSV and strep throat are also circulating, adding to the burden on healthcare systems.
Children are having an especially rough winter so far amid shortages of medicines to treat common childhood illnesses such as flu, ear infections and sore throats, CNN reported.
“Right now, we are having severe shortages of medications. There’s no Tamiflu for children. There’s barely any Tamiflu for adults. And this is brand-name and generic,” Renae Kraft, a relief pharmacist in Oklahoma City, told the network. Additionally, she said, “as far as antibiotics go, there’s not a whole lot.”
Physicians are reporting high numbers of respiratory illnesses like RSV and the flu earlier than the typical winter peak. WSJ’s Brianna Abbott explains what the early surge means for the winter months. Photo illustration: Kaitlyn Wang
Families have taken to social media to highlight their hunt for oseltamivir, the generic for Tamiflu, as well as for the antibiotics amoxicillin and augmentin, said CNN. And there is also a shortage of the inhaler albuterol, which helps open airways in the lungs, according to the American Society of Health-System Pharmacists.
• Some two years after they were first introduced, COVID vaccines have prevented more than 3 million additional deaths and about 18 million additional hospitalizations in the U.S., according to a new study from the Commonwealth Fund. More than 655 million doses of vaccine have been administered in the U.S., and 80% of the overall population has had at least one dose. “The swift development of the vaccine, emergency authorization to distribute widely, and rapid rollout have been instrumental in curbing hospitalization and death, while mitigating socioeconomic repercussions of the pandemic,” the authors wrote.
• Chinese universities say they will allow students to finish the semester from home in hopes of reducing the potential for a large COVID-19 outbreak during the January Lunar New Year travel period, the AP reported. It wasn’t clear how many schools were participating, but universities in Shanghai and nearby cities said students would be given the option of returning home early or staying on campus and undergoing testing every 48 hours. The Lunar New Year, which falls on Jan. 22, is traditionally China’s busiest travel season.
Some movie theaters in China reopened and COVID-testing booths were dismantled ahead of an announcement by authorities on Wednesday to scrap most testing and quarantine requirements. The changes come after nationwide protests against Beijing’s zero-COVID policy. Photo: Ng Han Guan/Associated Press
• The Nasdaq-listed 111 Inc. YI, +4.80%
has started retail sales of Pfizer’s PFE, +1.74%
oral COVID-19 treatment pill in China, according to the healthcare platform’s website, Dow Jones Newswires reported. The sales page for the Chinese platform on Tuesday showed it is now offering Paxlovid, the COVID medication that Beijing approved in February, for customers with positive results from polymerase chain reaction or antigen tests. Paxlovid has been used by medical practitioners to treat patients in China since March, when Shanghai was hit by a COVID outbreak, according to local media reports.
The U.S. leads the world with 99.5 million cases and 1,084,766 fatalities.
The Centers for Disease Control and Prevention’s tracker shows that 228.6 million people living in the U.S., equal to 68.9% of the total population, are fully vaccinated, meaning they have had their primary shots.
So far, just 42 million Americans have had the updated COVID booster that targets the original virus and the omicron variants, equal to 13.5% of the overall population.
How income inequality will affect fashion in 2023 Economic stress is impacting consumers differently depending on income levels when it comes to spending on fashion. Economists predict that lower-income households will feel the greater impact of economic turbulence and try to manage their finances accordingly. Many of these shoppers have been seeking discounts from their favorite stores or paying for products in installments. {Business of Fashion}
The après-ski takeover in luxury As the market for ski jackets alone is projected to reach $2.26 billion in the next few years, many luxury brands are diving into the gainful winter sportswear category. Jarah Burke, fashion account director at marketing firm Power Digital says, “Aside from travel opening up, the rise of combining a pastime or a hobby with a specific style can also be attributed to people not only finding joy in dressing the part, but also being able to document it for socials […] The ‘vibification’ of activities can be a way for a brand to bring new people into its fold in an aspirational manner.” {Glossy}
These are the stories making headlines in fashion on Monday.
How brands are finding new customers As independent brands look to establish themselves in an oversaturated market, they are looking to word-of-mouth, trunk shows and small networking events to build their customer base, in lieu of traditional advertising. Le Majordome, a Zurich-based shoe brand that opened a store in Midtown last fall, has relied heavily on encouraging the stores next door to refer their customers to them and hosts happy hour events for all their retail neighbors to help with brand recognition. {Business of Fashion}
Max Mara’s trend-free world For Harper’s Bazaar, Rachel Tashjian invites readers into the label-less and trend-free universe of Max Mara. Citing the brand’s unique connections with powerful figures, such as Angelina Jolie, Meghan Markle and Nancy Pelosi, Tashjian emphasizes the significance of the brand’s commitment to understatement and “to putting the woman before the clothes.” Ian Griffiths, Max Mara’s creative director, says, “There is a sea of ideas out there, which is overwhelming. And I always think of Max Mara as being a rock in the sea. It represents lasting value. It’s clinging to something with meaning.” {Harper’s Bazaar}
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Christopher John Rogers and Dries Van Noten in conversation For The New York Times, designers Christopher John Rogers and Dries Van Noten spoke for the first time via video call about their respective brands, unique use of color, design process and more. On staying inspired, Rogers asks, “When you feel like you want to take your work in a divergent direction from what is expected of you, how do you cope with that?” In response, Van Noten shares, “I try really to start with a blank page in front of me for every collection […] We always say if it sold very well last season, everybody has it, so we have to surprise them with something else.” {The New York Times}
The beauty industry needs to talk about Hijabi hair care For Allure, Hajar Mohammad discusses the lack of representation in the beauty industry for Hijabi hair. She brings up common concerns such as “hijab alopecia,” which describes hair loss from the friction of one’s hijab. “When your hair is in a bun for most of the day and rubbing against the fabric of your hijab, it’s inevitable to have hair concerns like thinning, a receding hairline, and breakage,” Mohammad says. When it comes to brand marketing, she shares that brands like Briogeo and Dae have been receptive to open dialogue about how to include Hibjabi influencers in their campaigns, and says even these small steps can have positive impacts. {Allure}
Nomination Honors Licensing Executives That Have Driven Change in Brand Licensing
Press Release –
Dec 12, 2022 07:00 EST
WEST PALM BEACH, Fla., December 12, 2022 (Newswire.com)
– USPA Global Licensing (USPAGL), the exclusive worldwide licensor and company that oversees the U.S. Polo Assn. brand, is pleased to announce the nomination of Molly Robbins, Senior Vice President of Global Licensing and Business Development for USPA Global Licensing, for License Global’s annual feature, ‘The Influentials.’ This nomination honors those who have driven change and made an impact in the business of brand licensing.
Winners in nine categories were selected by an expert judging panel and voted on by members in the licensing industry at large. The categories from ‘The Influentials’ encompass all scopes of contributions from individuals that are advancing the quality and sophistication of the more than $315 billion licensing business. Robbins was nominated under the category ‘The Brand Builder.’ This recognition highlights her efforts behind U.S. Polo Assn.’s global partnerships that have garnered an increased consumer reach, revenue growth and ongoing licensing opportunities for the brand. She was in good company, alongside peers from influential licensing titans at BarkBox, Accutime, Crayola and Hasbro, to name a few.
“Congratulations to Molly on her well-deserved nomination as ‘The Brand Builder,’ for License Global’s annual feature, ‘The Influentials.’ Molly’s contributions toward U.S. Polo Assn.’s international expansion plans are critical in our successful growth strategy,” says J. Michael Prince, President and CEO of USPAGL, the company which manages the multi-billion-dollar U.S. Polo Assn. brand.
The U.S. Polo Assn. brand continues to expand its reach into more than 190 countries worldwide with some 1,200 stores and 40 total brand sites in 17 languages, and in addition, has 7 million social media followers. In 2022, in conjunction with their global partners, U.S. Polo Assn. opened approximately 100 stores, including the first store in São Paulo, Brazil, as well as stores in Morumbi Mall, the Cheshire Oaks Designer Outlet store in London, England and a 6,000 sq. ft. store in Bergen Town Center in Paramus, New Jersey, which is one of our largest stores globally. The multi-billion-dollar U.S. Polo Assn. brand’s authentic connection to the sport of polo has continued to reach consumers and sports fans around the world.
“I am honored to have received this nomination from License Global, which highlights my leadership position’s work surrounding U.S. Polo Assn.’s growth in both revenue and brand awareness globally,” says Molly Robbins, SVP of Global Licensing and Business Development for the U.S. Polo Assn. brand. “We are always looking for new opportunities to expand into new categories and global markets through our classic, sport-inspired brand.”
License Global is the licensing industry’s thought leader, and ‘The Influentials’ list highlights the best and brightest within specific categories. For more information, visit licenseglobal.com.
About U.S. Polo Assn. and USPA Global Licensing Inc. (USPAGL) U.S. Polo Assn. is the official brand of the United States Polo Association (USPA), the nonprofit governing body for the sport of polo in the United States and one of the oldest sports governing bodies, having been founded in 1890. With a multi-billion-dollar global footprint and worldwide distribution through some 1,200 U.S. Polo Assn. retail stores and thousands of department stores, as well as sporting goods channels, independent retailers and e-commerce, U.S. Polo Assn. offers apparel for men, women, and children, as well as accessories and footwear in 190 countries worldwide. Today, U.S. Polo Assn. is ranked the 28th largest licensor in the world and within the top five sports licensors, according to License Global’s 2022 list of “Top Global Licensors.” Visit uspoloassnglobal.com.
USPA Global Licensing Inc. (USPAGL) is the for-profit subsidiary of the USPA and its exclusive worldwide licensor. USPAGL manages the global, multi-billion-dollar U.S. Polo Assn. brand and is the steward of the USPA’s intellectual properties, providing the sport with a long-term source of revenue. Through its subsidiary, Global Polo Entertainment (GPE), USPAGL also manages Global Polo TV, the world’s leading digital platform with polo and lifestyle content. In addition, USPAGL partners with ESPN and beIN Sports globally to share the sport of polo broadcasts on television and on-demand to millions of viewers around the world. For more polo content, visit globalpolo.com.
Struggling online fashion retailer Asos Plc and its lenders are discussing whether to hire a restructuring expert following the departure of its chief financial officer.
A number of turnaround professionals held informal talks about a role, which would sit below executive level, but no decision has been made, according to people familiar with the matter.
Asos’s lenders include Barclays, HSBC and Lloyds Banking Group. The banks are being advised by AlixPartners and Clifford Chance. Any appointment could potentially provide further support to Asos as it seeks to revive its fortunes after a steep drop in performance since the pandemic.
Asos, advised by PJT Partners Inc. and EY, is experiencing a tumultuous period as consumer demand is waning and costs are rising, thanks to a spike in wages and energy. Product returns are also surging.
AlixPartners and Asos declined to comment.
Asos has installed a new chairman and chief executive in the last 18 months and its chief operating and chief financial officer, recently left. Interim finance head Katy Mecklenburgh resigned about a week ago and will join Softcat in the spring. The talks with Asos’s lenders were prompted after Mecklenburgh’s departure was announced, and continued into last week.
Although the retailer successfully renegotiated the terms of its £350 million ($429 million) revolving credit facility in October, the extension only lasts until 2024 and Asos will need to renew discussions with lenders on the loan again next year.
Chief Executive Officer Jose Antonio Ramos Calamonte said in October that free cash flow this fiscal year would be zero at best and that the company would report a loss in the first half. Asos said its international operations were lagging expectations and cited problems with its supply chain. It also pledged to “strengthen” its leadership team.
In response to its challenges, the company is writing off as much as £130 million of stock, cutting costs and slowing automation in its warehouses. The retailer is also trying to drive the better performing parts of its business, such as its popular Topshop brand whose sales rose 105% in fiscal 2022.
It is relatively common for lenders to seek to bolster the financial department of companies in the event of a refinance.
Founded in north London in 2000 by Nick Robertson and his brother with a small amount of seed capital, Asos was for many years a stock market darling amid rising sales and profits. That has changed, however, with the stock losing nearly 76% since the start of this year.
Mike Ashley’s Frasers Group Plc, which has bought a number of smaller retailers this year, including tailor Gieves & Hawkes, has increased its stake in Asos to just above 5%.
–With assistance from Irene García Pérez.
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Sabah Meddings, Lucca de Paoli, Katie Linsell, Bloomberg
Omicron subvariants continued to account for more new cases of COVID-19 in the U.S. in the latest week than did BA.5, according to the latest data from the Centers for Disease Control and Prevention.
BQ.1 and BQ.1.1, which are sublineages of BA.5, accounted for 67.9% of cases in the week through Dec. 10, while BA.5 accounted for 11.5%, the data show.
Last week, BQ.1.1 and BQ.1 accounted for 62.8% of all cases in the U.S., while BA.5 accounted for 13.8%.
In the New York region, which includes New Jersey, Puerto Rico and the U.S. Virgin Islands, the numbers were even higher, with BQ.1 and BQ.1.1 accounting for 73.3% of new cases, compared with 10% for BA.5.
In the previous week, BQ.1 and BQ.1.1 accounted for 72.4% of all cases, compared with 6.9% for BA.5.
New York City is again emerging as a hot spot for COVID, according to a New York Times tracker, which shows cases up about 60% in recent weeks and hospitalizations at their highest level since February.
The test-positivity rate in New York City stood at 13% on Thursday, the tracker shows.
Overall, known U.S. cases are up 53% from two weeks ago. The daily average for hospitalizations is up 30% at 37,066, while the daily average for deaths is up 35% to 460.
For now, the numbers remain far below the peaks seen last winter, when omicron first hit, but with flu and other respiratory infections currently sweeping the country and affecting young children, experts are warning people to take precautions.
• A rash of COVID-19 cases in schools and businesses was reported by social-media users Friday in areas across China. This comes after the ruling Communist Party loosened its antivirus rules as it tries to reverse a deepening economic slump, the Associated Press reported. Official data showed a fall in new cases, but after the government on Wednesday ended mandatory testing for many people, those data no longer cover large parts of the population. That was among the dramatic changes aimed at gradually emerging from the zero-COVID restrictions that have confined millions of people to their homes and sparked protests and demands for President Xi Jinping to resign.
• U.S.-listed shares of China Jo-Jo Drugstores Inc. CJJD, +51.20%
rallied on Friday as the stores filled with customers buying cold medicines after COVID restrictions were eased, MarketWatch’s Jaimy Lee reported. The stock was up 22%. The company, which is based in Hangzhou, China, operates drugstores and an online pharmacy in China. It is also a wholesale distributor of pharmacy products and grows and sells herbs used in traditional Chinese medicine.
Some movie theaters in China reopened and COVID-testing booths were dismantled ahead of an announcement by authorities on Wednesday that will scrap most testing and quarantine requirements. The changes come after nationwide protests against Beijing’s zero-COVID policy. Photo: Ng Han Guan/Associated Press
• Pfizer PFE, -0.12%
and German partner BioNTech BNTX, -0.88%
have received fast-track designation from the U.S. Food and Drug Administration for a single-dose mRNA-based vaccine candidate targeting both COVID and flu. The companies have already announced that they are in early-stage trials to review the safety and immunogenicity of their combined vaccine in healthy adults. The vaccine will target the BA.4 and BA.5 omicron sublineages, which have become dominant globally, as well as four different flu strains recommended for use in the Northern Hemisphere by the World Health Organization. If approved, the vaccine would be the first to target both COVID and flu.
• A bill to rescind the COVID vaccine mandate for members of the U.S. military and to provide nearly $858 billion for national defense was passed by the House on Thursday as lawmakers scratch one of the final items off their yearly to-do list, the AP reported. The bill provides about $45 billion more for defense programs than President Joe Biden requested, the second consecutive year Congress has significantly exceeded his request, as lawmakers seek to boost the nation’s military competitiveness with China and Russia. The bill is expected to easily pass the Senate and then be signed into law by Biden.
The U.S. leads the world with 99.4 million cases and 1,084,236 fatalities.
The Centers for Disease Control and Prevention’s tracker shows that 228.6 million people living in the U.S., equal to 68.9% of the total population, are fully vaccinated, meaning they have had their primary shots.
So far, just 42 million Americans have had the updated COVID booster that targets the original virus and the omicron variants, equal to 13.5% of the overall population.
The numbers: The University of Michigan’s gauge of consumer sentiment rose to a preliminary December reading of 59.1 from a November reading of 56.8.
Economists polled by the Wall Street Journal had expected a December reading of 56.5.
Inflation expectations over the next year fell to 4.6% from 4.9% last month. It is the lowest since September 2021. Five-year inflation expectations remained steady at 3%.
Key details: A gauge of consumer’s views of current conditions rose to 60.2 in December from 58.8 in November, while an indicator of expectations for the next six months rose to 58.4 from 55.6 last month.
Big picture: Economists think falling gasoline prices are behind the improvement in confidence.
The national average retail price for a gallon of gas is now $3.33, down $1.69 from June, according to White House data.
Still, high inflation has consumers remain in a relatively dour mood. The index is only marginally above the record low of 50 in June. By comparison, the consumer sentiment index was 101 in February of 2020.
Looking ahead: “High prices coupled with ongoing aggressive rate hikes will be a headwind for consumers and sentiment going forward,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.
SPX, -0.73%
were higher on Friday on the back of hotter-than-expected wholesale inflation in November. The yield on the 10-year Treasury note TMUBMUSD10Y, 3.583%
rose to 3.54%.
Lululemon Athletica Inc. stock fell more than 10% in the extended session Thursday after the athleisure-wear maker reported mixed quarterly results and saw inventories soar.
Lululemon LULU, +0.59%
earned $735 million, or $2 a share, in the third quarter, compared with $541 million, or $1.44 a share, in the same quarter last year. Adjusted for one-time items, Lululemon LULU, +0.59%
earned $1.62 a share.
Revenue rose 28% to $1.9 billion, the company said. Same-store sales were up 22%.
Analysts polled by FactSet expected Lululemon to earn $1.97 a share on revenue of $1.81 billion. Same-store sales were expected to rise 19.1%.
“We are proud to have delivered another quarter of strong sales and earnings growth, despite an operating environment that remains dynamic,” Chief Financial Officer Meghan Frank said in a statement.
The retailer said inventories ended the quarter up 85% to $1.7 billion, compared with $900 million at the end of the third quarter of 2021.
“The company believes its inventories are well-positioned to support its expected revenue growth in the fourth quarter,” it said.
Lululemon guided for fourth-quarter revenue between $2.605 billion and $2.655 billion, and adjusted EPS between $4.20 and $4.30.
For the full year, the company expects revenue between $7.944 billion and $7.994 billion, and adjusted EPS between $9.87 and $9.97. FactSet consensus calls for EPS of $9.92 on sales of $7.935 billion.
Analysts were relatively upbeat about Lululemon heading into the results, saying the company was able to keep its prices higher, even as other retailers cut their prices.
Retailers have slashed prices on clothing in an effort to clear shelves and entice customers, following an inflation-induced shift in consumer spending to necessities. But Raymond James analysts, in a note this week, said they found that Lululemon “didn’t have broad-based promotions” in the third quarter, or the fourth quarter so far.
They said that the company leaned on its “We Made Too Much” section to iron out its inventories. And they noted a jump in downloads for Lululemon’s app. However, they said business in China “could be a curveball” amid that nation’s COVID-19 restrictions.
Piper Sandler analysts, in October, also said that Lululemon remained more insulated than other clothing retailers from big markdowns.
Lululemon stock is down 4% so far this year. The S&P 500 Index SPX, +0.75%,
by comparison, has slid 17% over that time.
Claudia Assis in San Francisco contributed to this report.
What worked well during the years-long bull market through 2021 — a focus on growth, regardless of price — has ground to a halt this year. The rebirth of the value style of investing — and modest valuations overall — has taken hold.
The approach taken by the Invesco S&P 500 GARP ETF has paid off through both bull and bear markets.
Let’s begin with a 10-year chart comparing total returns with dividends reinvested for the Invesco S&P 500 GARP ETF SPGP, +0.67%
and the SPDR S&P 500 ETF Trust SPY, +0.78%,
which tracks the benchmark S&P 500:
FactSet
So far this year, SPGP is down 12%, while SPY is down 16%. But the long-term chart shows significant and consistent outperformance for SPGP, even during the bull market.
The S&P 500 GARP Index
GARP stands for “growth at a reasonable price.” SPGP tracks the S&P 500 GARP Index, which is reconstituted and rebalanced twice a year, on the third Fridays of June and December. The next change occurs Dec. 16.
S&P Dow Jones Indices assigns a growth score to each component of the S&P 500 by averaging the three-year compound annual growth rate (CAGR) for earnings and sales per share.
The top 150 components of the S&P 500 by growth score are eligible for inclusion in the GARP index. Those 150 are ranked by “quality/value composite score,” which is the average of these three ratios:
Financial leverage — total debt to book value.
Return on equity — trailing 12 months’ earnings per share divided by book value per share.
Earnings-to-price — 12 months’ earnings per share divided by the share price.
The top 75 of the 150 by QV rankings are then included in the GARP index and weighted by the growth score, with portfolio weightings ranging from 0.5% to 5%.
There is a weighting limitation of 40% to any one of the 11 S&P sectors.
Addressing concentration risk
The benchmark S&P 500 Index SPX, +0.75%
is weighted by market capitalization, which means it is more heavily concentrated than you might expect — success is rewarded, with rising stocks more heavily weighted over time.
That can backfire during a bear market, with Amazon.com Inc. AMZN, +2.14%
down 47% and Tesla Inc. TSLA, -0.34%
down 51% this year, to name two prominent examples.
Looking at the SPDR S&P 500 ETF Trust SPY, +0.78%,
which is the first and largest exchange traded fund and tracks the benchmark index by holding all of its components, six companies (Apple Inc. AAPL, +1.21%,
Microsoft Corp. MSFT, +1.24%,
Amazon, both common share classes of Alphabet Inc. GOOGL, -1.30%
That percentage has come down this year, but a lot of risk remains concentrated in a handful of companies. (Apple alone makes up 6.4% of the SPY portfolio. Tesla is now the ninth-largest holding, making up 1.4% of the portfolio.)
One way to address high concentration in an index fund is to use an equal-weighted approach, which Mark Hulbert recently discussed.
For the Invesco S&P 500 GARP ETF, the underlying index’s selection methodology has resulted in much less portfolio concentration than we see in SPY, with the top five holdings making up 10.9% of the portfolio.
Photo: Kris Connor/Getty Images for NYX Professional Makeup
These are the stories making headlines in fashion on Thursday.
Thirteen Lune to open first retail store Thirteen Lune, the beauty e-commerce, site is set to open its first physical retail location in Los Angeles, Calif. in early 2023. Per a statement from the brand, the store will “serve as a hub for discovering BIPOC and ally-founded beauty brands in real life.” {Fashionista inbox}
Beauty incubator-backed brands are pushing back For Business of Fashion, Rachel Strugatz writes about the evolving issue with beauty incubators like Morphe and Maesa. A beauty incubator is a “centralized entity that exists to bring new brands to market,” per Strugatz, but some of those brand founders are growing dissatisfied. The founders of Playa and Kristin Ess Hair, for instance, are suing the beauty incubators that they are owned by for not supporting them fully, making business decisions without consulting the brand owners and more. {Business of Fashion}
Why Christian Dior’s couture is canon to the art form For Town and Country, Bridget Foley explores the history of Christian Dior designs and explains why the French house, specifically, is canon to the history of haute couture. Maria Grazia Chiuri, creative director of women’s at the label, says, “We are not to forget that couture was born in France […] And immediately it became a part of their nationality, their culture.” {Town and Country}
