Uber CEO Dara Khosrowshahi says he expects Uber and Lyft will be easing off their price-slashing battle soon. Richard Drew/AP hide caption
For most companies, losing $1 billion in a quarter would be a big disappointment. But Uber's first report as a publicly traded company was actually better than it had warned investors to expect.
The ride-hailing and food-delivery giant brought in more than $3 billion in revenue in the first three months of 2019 — a 20% jump from the same quarter a year earlier.
Before going public earlier this month, Uber had told investors to be prepared for an even larger loss in the first quarter. Now, it's telling them it expects the price-cutting competition that has hurt its profits to ease up soon.
Uber has burned through money for years by spending heavily on growth — offering financial incentives to attract new riders and drivers, and taking on the costs of expanding into new markets around the world. So far, that growth has never translated into profits.
Uber's IPO did not go well. Despite pricing its shares relatively conservatively, at least compared with early expectations, the company saw its stock drop immediately, and it finished day one lower than it started. Since then, Uber shares have never sold at the value set for the initial offering.
Wall Street liked what it saw in Uber's first earnings report. Its stock was up more than 1% in early trading Friday.
Uber's earnings report shows the company continues to expand rapidly, especially in Uber Eats, its food delivery branch. In South America, however, the company saw revenue shrink as it faces intense competition from rival Didi.
In the U.S., meanwhile, Uber is facing off with its smaller competitor Lyft.
Around the world, competition in ride-hailing is driving down prices and contributing to Uber's losses. In the earnings call on Thursday, Uber CEO Dara Khosrowshahi said he expects Uber and Lyft, at least, will be easing off their price-slashing battle soon.
"The competition is going to be more healthy," he said. "It's going to be based on brand and product and technology, which we think is the right way to compete, versus throwing money at the problem."
He also acknowledged that Uber has faced headwinds in the U.S. due in part to the tremendous damage to the brand over the past few years — marked by sexual harassment allegations, reports of illegal business practices, data breaches and other scandals.
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Uber's earnings print inspires new bull Seeking AlphaAtlantic Equities upgrades Uber (UBER) from Neutral to Overweight after the first post-IPO earnings report but trims the PT from $55 to $52, implying a 31%
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© Reuters. Traders work on the floor at the NYSE in New York
By Amy Caren Daniel
(Reuters) - U.S. stocks inched higher for the first time this week on Thursday, as President Donald Trump said trade talks with China were going well, offering a glimmer of hope to markets roiled by worries that a protracted dispute would slow global growth.
A senior Chinese diplomat said provoking trade disputes is "naked economic terrorism", even as Trump said Beijing wanted to make a deal with Washington.
The escalating dispute has weighed heavily on Wall Street this month, putting its main indexes on track for losses of at least 5% in May. The benchmark is now 5.8% away from its all-time high of 2,954.13 hit on May 1.
"We're seeing just a little bit of a relief to markets after the selling over the past couple of days, whether it morphs into something more than that it's hard to say," said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago
"Markets are focused on trade talks, or lack there of. We're starting to see more and more signs that the economy is looking more recessionary that expansionary."
U.S. treasury yields fell on Thursday and hovered near 20-month lows as investors sought safety in government bonds. [US/]
The yield curve between three-month bills and 10-year notes remained inverted, with money markets pricing in roughly two U.S. rate cuts by the start of next year.
Interest-rate sensitive bank stocks fell 0.55%, while the broader financial sector declined 0.10%.
Technology stocks, among the worst performing S&P sectors this month, rose 0.60% and boosted markets.
The sector was helped by a 11.7% jump in Keysight Technologies after the electronic measurement equipment maker reported better-than-expected quarterly results and announced a $500 million share buyback plan.
Apple Inc (NASDAQ:), Microsoft Corp (NASDAQ:) and Intel Corp (NASDAQ:) also rose and offered support.
Also helping sentiment was data that confirmed domestic economic growth accelerated in the first quarter, but there were signs that the temporary boost from exports and inventory accumulation was already fading.
At 12:52 p.m. ET the was up 81.69 points, or 0.33%, at 25,208.10. The S&P 500 was up 9.62 points, or 0.35%, at 2,792.64 and the was up 31.00 points, or 0.41%, at 7,578.31.
The energy sector fell 0.85%, the most among the four major S&P sectors trading lower.
Among other stocks, Dollar General Corp (NYSE:) jumped 7.9% after the discount retailer's same-store sales and profit topped expectations.
Viacom Inc climbed 6.1% after report that CBS Corp (NYSE:) is preparing for merger talks with the media company. CBS rose 3.6%.
PVH Corp (NYSE:) plunged 14.2%, the most among S&P companies, after the Calvin Klein owner cut its annual profit forecast as it grapples with tariffs and slowing retail growth.
Advancing issues outnumbered decliners by a 1.51-to-1 ratio on the NYSE and by a 1.35-to-1 ratio on the Nasdaq.
The S&P index recorded one new 52-week high and 23 new lows, while the Nasdaq recorded 22 new highs and 96 new lows.
Interest rate policy is right where it should be considering the current state of the U.S. economy, though that could change if conditions weaken, Federal Reserve Vice Chairman Richard Clarida said Thursday.
Clarida gave generally high marks to the U.S. economy and he reiterated the Fed's broader position that it will base policy on data as it unfolds.
He did, however, outline the conditions under which he might consider cutting rates, which the market is expecting and President Donald Trump is demanding.
"If the incoming data were to show a persistent shortfall in inflation below our 2 percent objective or were it to indicate that global economic and financial developments present a material downside risk to our baseline outlook, then these are developments that the [Federal Open Market Committee] would take into account in assessing the appropriate stance for monetary policy," Clarida said during a speech at the Economic Club of New York.
As things stand, he indicated policy is appropriate as unemployment remains low, inflation is around the Fed's 2% target and rates are near where the central bank considers neutral, or neither restrictive nor stimulative.
"Midway through the second quarter of 2019, the U.S. economy is in a good place," the central bank official said. "By most estimates, fiscal policy played an important role in boosting growth in 2018, and I expect that fiscal policies will continue to support growth in 2019."
The Fed's benchmark funds rate, which banks charge to each other for overnight lending and which forms a basis for most consumer rates, is targeted between 2.25% and 2.5%. That's right where the current economic variables suggest it should be, Clarida said.
Markets differ with the assessment — futures trading, which can be volatile, is currently pricing in two rate cuts by January. Fed officials, by contrast, say they are content with taking a "patient" approach, and they have forecast no moves in either direction at least through the end of 2019.
Recent signs are showing that the economy is slowing after GDP rose 3.1% in the first quarter. Worries are mounting that the U.S.-China trade war will have an impact on investment and demand, though the issue seemed to receive little attention at the most recent Fed meeting.
According to minutes released last week, central bank officials said they see rates remaining unchanged "for some time" amid an economy that continues to grow but with tame inflation.
Mark Zuckerberg, Facebook's CEO and chairman.Reuters
Mark Zuckerberg is heading for a showdown with investors on Thursday, as the Facebook boss faces a vote on whether he should remain as both CEO and chairman.
At Facebook's annual shareholder meeting in Silicon Valley, investors will vote on two proposals: to hire an independent chairman above Zuckerberg, and to rip up the firm's dual-class share structure.
The former idea, to oust Zuckerberg as chairman, was put forward by activist shareholder Trillium Asset Management, and the firm's senior vice president, Jonas Kron, will read out a message in support of his proposal during today's meeting.
With Zuckerberg in the room, Kron will make the case that Zuckerberg's enormous power has exacerbated Facebook's problems over the past two years, such as the Cambridge Analytica scandal and election meddling on the social network.
"We have watched with growing dismay as that list of controversial and damaging social impacts grew very long. And as rigorous reporting from the New York Times has shown us, having a unified chair and CEO severely limited the board's ability to provide the company the oversight it needed," he will tell Zuckerberg and the Facebook board, according to a statement sent to Business Insider.
"It is unwise to have so much power concentrated in one person," he will add, as he bids to drum up support from fellow investors. "Let us not miss this opportunity to make a simple, yet powerful change that would go a long way towards creating a successful future."
Facebook has always maintained that hiring an independent chairman would not be a good idea. "We do not believe that requiring the Chair to be independent will provide appreciably better direction and performance, and instead could cause inefficiency in board and management function and relations," it said in a filing last month.
The chance of Trillium's proposal becoming a reality is extremely slim, despite it being backed by investors that control around $3 billion of Facebook stock. A similar proposal in 2017 was popular among independent investors but was crushed because of Zuckerberg's voting power.
This is because of Facebook's dual-class share structure. Class B shares have 10 times the voting power of class A shares, and it just so happens that Zuckerberg owns more than 75% of class B stock. It means he has more than half of the voting power at Facebook.
Good morning Mr. Chairman, members of the board, fellow shareholders. My name is Jonas Kron and I am here on behalf of Trillium Asset Management and the Park Foundation to hereby move Item Number 6, seeking an independent board chair policy for Facebook.
This proposal has been co-filed by the New York City Comptroller, the Treasurers of Illinois, Rhode Island, Connecticut, and Oregon, and a multitude of smaller and faith based investors.
At its core this shareholder proposal is about the risk of concentrating too much power in one person – any person.
As proxy advisory firm Glass Lewis put it in its report supporting this shareholder proposal - "vesting a single person with both executive and board leadership concentrates too much responsibility in a single person and inhibits independent board oversight of executives …"
Facebook is incredibly powerful - with wide ranging and difficult to understand, let alone control, social impacts. Over the last two years we have watched with growing dismay as that list of controversial and damaging social impacts grew very long. And as rigorous reporting from the New York Times has shown us, having a unified Chair and CEO severely limited the board's ability to provide the company the oversight it needed.
It is these very facts about power and impact – responsibility and accountability - which highlight why a unified chair and CEO is such a misguided idea – it is unwise to have so much power concentrated in one person.
Which is why we should look to the examples of highly successful companies such as Alphabet, Apple, Autodesk, and Microsoft – to name just a few – which all have independent board chairs.
We recognize that Facebook has a lead independent director. And we acknowledge that the board has recently taken steps to articulate more clearly her powers and responsibilities. However, these recent changes are fundamentally insufficient to meet the task at hand because a lead independent director does not command the same authority as an independent board chair.
This question comes to shareholders at a critical moment. Facebook is embarking on a privacy pivot which leadership has described as requiring a completely new platform. At a time when there is little public trust in Facebook, it is navigating a regulatory landscape that is changing quickly. In this difficult and challenging environment it is important to stop and consider that the CEO position is the most demanding job in corporate America and the responsibilities of a Chairman of the Board are enormously time consuming. We need different people in these two distinctly different leadership positions.
Let us not miss this opportunity to make a simple, yet powerful change that would go a long way towards creating a successful future, not only for Facebook and its employees and its shareholders, but for individuals, families, and communities around the world.
Thank you for your time and attention – and for your support for an independent board chair.
© Reuters. Traders work on the floor at the NYSE in New York
By Amy Caren Daniel
(Reuters) - U.S. stocks rose for the first time this week on Thursday, as President Donald Trump said trade talks with China were going well, offering a glimmer of hope to markets roiled by worries that a protracted dispute would slow economic growth.
A senior Chinese diplomat said provoking trade disputes is "naked economic terrorism", even as Trump said Beijing wanted to make a deal with Washington.
The escalating dispute has weighed heavily on Wall Street this month, putting its main indexes on track for losses of more than 5% in May. The benchmark is now 5.9% away from its all-time high of 2,954.13 hit on May 1.
"The positivity in markets is very muted today, there are fractional gains," said Peter Kenny, founder of Kenny's Commentary LLC in New York.
"Uncertainty is still the primary driver on the trade front. We have increasingly seen the fear of uncertainty being priced into the market, and that is all about trade and the prospect of a slowdown."
Despite a tick up in U.S. treasury yields on Thursday, they still hovered near 20-month lows as investors sought safety in government bonds. [US/]
The yield curve between three-month bills and 10-year notes remained inverted, with money markets pricing in roughly two U.S. rate cuts by the start of next year.
Interest-rate sensitive bank stocks fell 0.54%, while the broader financial sector declined 0.24%.
Technology stocks, among the worst performing S&P sectors this month, rose 0.38% and boosted markets.
The sector was helped by a 9.6% jump in Keysight Technologies after the electronic measurement equipment maker reported better-than-expected quarterly results and announced a $500 million share buyback plan.
Apple Inc (NASDAQ:), Microsoft Corp (NASDAQ:) and Intel Corp (NASDAQ:) also rose and offered support.
Also helping sentiment was data that confirmed domestic economic growth accelerated in the first quarter, but there were signs that the temporary boost from exports and inventory accumulation was already fading.
At 11:10 a.m. ET the was up 6.11 points, or 0.02%, at 25,132.52. The S&P 500 was up 5.54 points, or 0.20%, at 2,788.56 and the was up 19.47 points, or 0.26%, at 7,566.78.
The energy sector fell 1.1%, the most among the four major S&P sectors trading lower.
Among other stocks, Dollar General Corp (NYSE:) jumped 6.8% after the discount retailer's same-store sales and profit topped expectations.
Viacom Inc climbed 4.8% after report that CBS Corp (NYSE:) is preparing for merger talks with the media company. CBS rose 2.7%.
PVH Corp (NYSE:) tumbled 14.3%, the most among S&P companies, after the Calvin Klein owner cut its annual profit forecast as it grapples with tariffs and slowing retail growth.
Advancing issues outnumbered decliners by a 1.45-to-1 ratio on the NYSE and by a 1.28-to-1 ratio on the Nasdaq.
The S&P index recorded one new 52-week high and 13 new lows, while the Nasdaq recorded 18 new highs and 69 new lows.
© Reuters. Traders work on the floor at the NYSE in New York
By Amy Caren Daniel
(Reuters) - U.S. stocks rose for the first time this week on Thursday, as President Donald Trump said trade talks with China are doing well, offering a glimmer of hope to markets roiled by trade tensions.
A senior Chinese diplomat said that provoking trade disputes is "naked economic terrorism", even as Trump said Beijing wanted to make a deal with Washington.
The escalating trade war has weighed heavily on Wall Street, putting its main indexes on track for a monthly loss of more than 5% in May. The benchmark is now 5.7% away from its all-time high of 2954.13 hit on May 1.
"People are trying to figure out how much of the bad news is already priced in. The trade war looks like it might dampen growth but not enough to throw us into a recession," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.
"There has been talk about the Fed possibly cutting rates and that is a little bit positive for the stock market."
Despite a tick up in U.S. treasury yields on Thursday, they were still at 20-month lows as investors sought safety in government bonds.
The yield curve between three-month bills and 10-year notes also remained inverted and money markets were pricing in roughly two U.S. rate cuts by the start of next year. [US/]
The technology sector, among the worst performing S&P sectors this month, rose 0.60%, and provided the biggest boost to markets.
The sector was helped by a 11% jump in shares of Keysight Technologies after the electronic measurement equipment maker's quarterly results topped estimates and the company announced a $500 million share buyback program.
Apple Inc (NASDAQ:), Microsoft Corp (NASDAQ:) and Intel Corp (NASDAQ:) rose between 0.3% and 1.3%, supporting the markets.
At 9:42 a.m. ET the was up 74.96 points, or 0.30%, at 25,201.37. The S&P 500 was up 12.02 points, or 0.43%, at 2,795.04 and the was up 32.96 points, or 0.44%, at 7,580.27.
Nine of the 11 major S&P sectors were trading higher, with only the energy and communication services sectors in the red.
Adding to the upbeat mood, the government confirmed domestic economic growth accelerated in the first quarter, but there are signs that the temporary boost from exports and inventory accumulation is already fading, and production at factories slowing.
Among other stocks, Citigroup Inc (NYSE:) rose 1.4% after Goldman Sachs (NYSE:) raised the bank's shares to "buy", as it expects the lender to achieve a higher return on equity in 2020.
Discount retailer Dollar General Corp (NYSE:) jumped 6.2% after the company reported quarterly same-store sales and profit above expectations.
PVH Corp (NYSE:) tumbled 12.1%, the most among S&P companies, after the Calvin Klein owner cut its annual profit forecast as it grapples with tariffs and slowing retail growth.
Advancing issues outnumbered decliners by a 3.25-to-1 ratio on the NYSE and by a 2.48-to-1 ratio on the Nasdaq.
The S&P index recorded no new 52-week high and six new lows, while the Nasdaq recorded eight new highs and 26 new lows.
Ships are the latest mode of transportation to see electric upgrades as the maritime industry faces increased pressure to reduce greenhouse gases, writes Axios Expert Voices contributor Maggie Teliska.
The big picture: Passenger ferries are ideal for electric propulsion using current battery technology, which can reduce water and air pollution while providing a quiet, vibration-free trip. Short routes with frequent stops along populated shorelines offer ample opportunities to charge the battery packs.
Where it stands: Globally, there were 185 battery-powered vessels operating or scheduled for delivery in 2018, 58 of which were passenger ferries. Norway introduced the first all-electric ferry, named the MF Ampere, in 2015 to shuttle passengers between villages in the fjords.
What's new: Maid of the Mist plans to launch 2 all-electric, zero-emission boats in September on the U.S. side of Niagara Falls — the first domestically built all-electric boats used for tourists in the U.S.
Teliska is a technical specialist at Caldwell Intellectual Property Law and CTO of Regent Power. She is also a member of GLG, a platform connecting businesses with industry experts.
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John Draper pours glyphosate into the tank of his sprayer at the University of Maryland's Wye Research and Education Center. Dan Charles/NPR hide caption
John Draper and I are sitting in the cab of a tractor on the research farm he manages for the University of Maryland, alongside the Chesapeake Bay. Behind us, there's a sprayer.
"So, away we go!" Draper says. He pushes a button, and we start to move. A fine mist emerges from nozzles on the arms of the sprayer.
We're spraying glyphosate, killing off this field's soil-building "cover crop" of rye before planting soybeans.
Farmers have been using this chemical, often under the trade name Roundup, for about four decades now.
But now it's under fierce attack, accused of causing cancer. In three civil cases so far, U.S. juries have ordered Roundup's inventor, Monsanto, now owned by Bayer, to pay enormous damages to cancer survivors. Thousands more lawsuits have been filed.
For this chemical, and for Monsanto, it's a stunning change in fortunes.
Farmers felt that they could spray glyphosate with a clear conscience. It doesn't persist in the environment as much as, say, DDT did. It doesn't build up in groundwater like another widely used herbicide, atrazine. And it's certainly less toxic than some alternatives.
"If we were spraying Gramoxone [the trade name for paraquat, another herbicide], even for you to be standing next to the sprayer, you'd have to have a respirator on. I'd have to wear a respirator even in the tractor, spraying," says Draper.
Monsanto started selling Roundup in 1974. For 20 years, it didn't attract much attention. That was Act 1 of the glyphosate drama: the quiet years.
Act 2 began in the late 1990s.
In 1996, Monsanto started selling genetically modified crops, or GMOs. They were modified so they could tolerate glyphosate. This meant that farmers could now spray this chemical right over their "Roundup Ready" soybeans, corn and cotton, and the crops would be fine but the weeds would all die.
It was a farming revolution built on glyphosate. Monsanto quickly became the world's biggest seed company. And farmers started spraying a lot more Roundup. Sales of the chemical increased more than ten-fold.
It all happened so fast that it scared a lot of people. There were anti-GMO protests around the world, and glyphosate came under increasing scrutiny.
A pedestrian walks past anti-glyphosate art in Popayán, Colombia. Glyphosate has been deployed in Colombia to wipe out coca and poppy crops. Dan Charles/NPR hide caption
The International Agency for Research on Cancer, part of the World Health Organization, decided to carry out a new assessment of glyphosate's risks.
On March 20, 2015, IARC announced its conclusion: Glyphosate is "probably carcinogenic to humans."
That conclusion rests on three kinds of studies. First, IARC found "strong evidence" that glyphosate can damage DNA in cells. This kind of damage, inducing mutations, is the first step in causing cancer. Second, there are studies showing that when mice ate glyphosate, they got more tumors. Kate Guyton, a senior toxicologist at IARC, told reporters at a news conference that "these two studies gave sufficient evidence of cancer in animals."
Finally, IARC says there's "limited evidence" that people exposed to glyphosate had higher rates of a particular kind of cancer — non-Hodgkin lymphoma.
Guyton has been studying the causes of cancer for decades. Nothing she has ever done, she says, provoked as much of a reaction as the glyphosate announcement. "The Internet kind of exploded," she says.
Anti-GMO groups felt vindicated. Monsanto's top executives were furious and launched a public relations campaign attacking IARC and its report.
And in the small town of Orange, Va., a personal injury lawyer named Michael Miller started lining up clients — people with non-Hodgkin lymphoma who'd used Roundup. "I decided that these people needed a voice in the courtroom," he says.
The scientific picture got more complicated, though. Other government agencies, including the U.S. Environmental Protection Agency and the European Food Safety Authority, took a fresh look at glyphosate. And they concluded that it probably is not giving people cancer.
David Eastmond, a toxicologist from the University of California, Riverside, helped conduct one of these glyphosate reviews for another part of the World Health Organization, the Joint FAO/WHO Meeting on Pesticide Residues.
"From my reading of things, if glyphosate causes cancer, it's a pretty weak carcinogen, which means that you're going to need pretty high doses in order to cause it," he says.
Eastmond says that there are several reasons for this apparent disagreement between IARC and the other agencies.
First, IARC just looks at whether glyphosate can cause cancer; regulators, on the other hand, have to decide whether it actually will, considering how much of it people are exposed to.
Second — and most important, according to Eastmond — different agencies considered different evidence. Eastmond's committee and regulatory agencies like the EPA considered a large number of studies that aren't publicly available because Monsanto paid for them and submitted them to the agencies. "I have never seen a chemical with as many animal cancer studies as glyphosate," Eastmond says.
IARC, however, didn't look at most of this research because it accepts only studies that are publicly available. This allows any other scientist to see exactly what IARC's conclusions are based on.
Eastmond, for his part, thinks company-financed studies are credible and valuable, despite the potential conflict of interest for companies carrying out those studies. The labs, he says, have to follow strict guidelines.
Finally, scientists sometimes look at the same data and disagree about what it means. Eastmond says that he and Guyton had "animated discussions" about some of the data. "We just evaluated the evidence differently, but, you know, these are honest disagreements [among] people who I think are well-meaning," Eastmond says.
Then Act 3 arrived. Glyphosate went to court. There were three civil trials in or near San Francisco.
Lawyers for Bayer, which now owns Monsanto, repeatedly reminded jurors that regulatory agencies had concluded that glyphosate is not a cancer risk.
Lawyers for the cancer victims, though, suggested that those same regulators couldn't be trusted because they'd been manipulated or fooled by Monsanto.
Miller and his legal team showed the juries a whole collection of internal Monsanto emails. In one, company executives described phone calls with an official at the EPA. As Miller describes it, the official said, "I don't need to see any more studies. I'm going to declare Roundup safe, and I'm going to stop another agency from looking at it."
Another Monsanto executive discussed ghostwriting papers on glyphosate's safety that scientists could publish under their own names.
"I think the jury was rightfully offended," Miller says.
All three trials ended with resounding verdicts in favor of the cancer victims. The juries ordered Bayer to pay huge punitive damages. In the most recent case, the damages totaled $2 billion.
Bayer is appealing these verdicts — and the damages probably will be reduced. But more lawsuits are waiting. The total value of Bayer's stock has fallen $40 billion since the first verdict was announced.
Alexandra Lahav, a professor at the University of Connecticut School of Law, says that one lesson of this case so far is that attempts to get favorable decisions from regulators can backfire in court.
"They then open themselves up for the jury to say, 'Wait a minute — you're trying to convince the regulator not to regulate you, and now you want me to believe that the regulator is completely objective,' " Lahav says.
When regulators are seen as weak or ineffectual watchdogs, she says, their seal of approval also carries less weight with the public — and with juries.
The next glyphosate trial is set for August in St. Louis.
Customers exit an Abercrombie & Fitch store in San Francisco, California.
David Paul Morris | Bloomberg | Getty Images
Retail stocks are taking a beating Wednesday, hurt by a handful of poor earnings reports and the looming threat of tariffs on clothing imported from China.
Canada Goose shares lost more than a quarter of their value after the company said sales growth in the coming three years wouldn't be as robust as in the past. Abercrombie & Fitch shares were down nearly 25% as momentum cooled off at its Hollister brand during the latest quarter. That news also sent shares of rival teen apparel retailer American Eagle down about 5%. And Michael Kors owner Capri Holdings' stock fell about 10% as it's suffering from poor demand for its handbags.
"This is not a space deemed to be very healthy in terms of long-term outlooks for investors," Wells Fargo retail analyst Ike Boruchow said. "You've got a group where the fundamentals are weakening."
Then you throw in the idea of 25% tariffs on apparel and footwear, as the White House has proposed in its ongoing trade war with China, "and that's a real earnings problem," he said.
Abercrombie CFO Scott Lipesky told analysts on a post-earnings conference call the retailer hasn't yet baked additional tariffs into its earnings outlook. Abercrombie imported about 25% of its merchandise receipts from China to the U.S. in fiscal 2018.
"We're still dealing in the world of hypothetical here," he said. "We remain very engaged with our sourcing partners. ... We have a playbook in place if the hypothetical becomes reality."
With all of the losses in the space, the S&P 500 Retail ETF (XRT) was down nearly 3% by Wednesday afternoon, on pace for its fifth consecutive day of declines for the first time since Nov. 20. This also makes an eight-day-long losing streak for the XRT and puts it on pace for its worst day since May 13, when it lost 3.76%.
Boruchow said there are less signs that consumers are pulling back but more that "parts of the industry" are weakening. High-end handbag makers are struggling as tourism drops off, for example, and some mall-based apparel retailers are seeing sales slow as more women opt to shop on platforms like Stitch Fix and Rent the Runway.
Department store chains Kohl's, J.C. Penney and Nordstrom recently showed they aren't immune to these trends, either, sparking a sell-off in the space just last week with their dismal quarterly earnings reports.
Dick's Sporting Goods was one bright spot of Wednesday morning, reporting fiscal first-quarter earnings that topped Wall Street estimates and raising its outlook for the full year. But its stock reversed course from earlier gains and was last down more than 5%, falling with the rest of the industry.
Looking at the 20 worst performing stock among the S&P 500 year to date, a whopping seven are retailers: Nordstrom shares are down 30%, Macy's stock has dropped 29.5%, Walgreens shares have lost 25.3%, Kohl's stock is down 23%, Foot Locker's stock has dropped 21.6%, CVS shares are down 20% and Gap shares have lost 19.3% so far this year.
— CNBC's Gina Francolla contributed to this reporting.
Abercrombie & Fitch’s latest decision to wave goodbye to hulking shrines to apparel is 110% right.
Although, Mr. Market may need some convincing on that one. Abercrombie & Fitch shares (ANF) declined about 20% on Wednesday as it revealed first quarter same-store sales at its namesake brand and Hollister that were slightly below many Wall Street forecasts. Gross profit margins of 60.5% also came in a shade short of the 60.6% analyst consensus.
The company delivered a net loss of 29 cents a share, better than the 43 cents a share analysts feared.
But it was Abercrombie’s disclosure that it will close three more flagship stores that also likely weighed on investor sentiment.
“Big flagship stores are not the future of the brand,” Abercrombie & Fitch CEO Fran Horowitz tells Yahoo Finance.
Abercrombie & Fitch said it will soon exit three flagship locations: a Hollister in New York City; an Abercrombie & Fitch in Fukuoka, Japan; and an Abercrombie & Fitch in Milan, Italy. All of these stores were opened (2009-2010) under the leadership of former controversial Abercrombie CEO Mike Jeffries, who bordered on obsessed with showing off the brand via massive flagship stores... even at the detriment of profits.
The three stores account for 140,000 in total square feet and according to Abercrombie & Fitch, have had below company average productivity.
The apparel retailer previously closed flagship stores in Hong Kong (first quarter 2017 closure) and Denmark (first quarter 2019 closure).
Investors probably read the news as the Abercrombie & Fitch brand will be less out in front of consumers globally. Less visibility, less sales potentially. Or that the brand itself no longer has the cache to keep flagships open, which may eventually hurt stores in malls.
But that cohort is probably missing the point — what attention-span light Snapchat-using teen wants to walk up five floors looking for clothes? Nowadays it’s all about mobile ordering and getting in and out of stores as quickly as possible wearing something cool to take a picture in for an Instagram post.
So if you are Abercrombie & Fitch, why not shutter some lagging flagships and redeploy capital to more productive uses. SW Retail Advisors Stacey Widlitz reminded me on Twitter that flagships are often “big money pits.” Abercrombie & Fitch Chief Financial Officer Scott Lipesky tells Yahoo Finance the latest flagship closures should help the bottom line over time.
Horowitz, who has been leading an aggressive shrinking of the company’s store fleet since joining in 2015 in a bid to preserve margins, says her team remains focused on smaller stores that better engage consumers. Horowitz says she continues to be a “big believer” in stores.
The company plans to open more stores than it closes in 2019, mostly smaller locations.
Brian Sozzi is an editor-at-large and co-host of ‘The First Trade’ at Yahoo Finance. Follow Brian Sozzi him on Twitter @BrianSozzi
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On Tuesday, Huawei filed a legal motion challenging a government ban on its equipment as unconstitutional. It’s the latest effort by the Chinese tech company to push back against policies limiting its global reach.
Huawei is currently struggling with an existential threat to its business after the US Commerce Department blocked the company from contracting with US companies without government approval. The ban, instituted earlier this month, has already forced companies like Google to suspend work with the Chinese tech giant.
That order is just the latest effort by the US government to push Huawei out of the country. Before the wider ban, Congress passed a law barring Huawei products from use in the government, labeling them a potential security threat. That ban not only blocked government agencies from using the products, but any contractors hoping to score lucrative government contracts also had to drop Huawei equipment. Facing the ban, Huawei filed a lawsuit against the US in March, saying the action was unconstitutional.
That suit is still ongoing, and we now have more insight into Huawei’s legal argument through a motion filed last night, which sketches out why the company believes the government ban should be nullified. The motion asks a court to rule directly as a “summary judgment.”
As legal experts anticipated, Huawei is arguing that the government ban is “a bill of attainder.” Under the constitution, Congress is forbidden from passing laws that target specific people, and Huawei says the ban qualifies.
In the document filed by Huawei — which starts with a quote from James Madison — Huawei says Congress overstepped the law when it passed legislation that imposed the ban. Huawei was singled out by name in the defense budget, which included the ban, and the company says the measure “denies Huawei any procedure for providing rebuttal” to the decision. In soaring language, Huawei’s attorneys argue the legislation “produces the very tyranny which the Framers feared” and should therefore be ruled unconstitutional.
The US government has repeatedly argued that Huawei equipment could be used by the Chinese government to spy on American networks and that banning companies like Huawei is well within its national security powers. (Huawei has denied that its tech could be used to spy on the US.)
The company points to precedent reaching back to the Civil War and Cold War when the courts struck down actions against former Confederate soldiers and members of the Communist Party. The Huawei ban, the company says, is similarly “selective” and “punitive”: it “imposes the kind of permanent disability on serving the Government and/or pursuing the avocation of one’s choice that has historically been viewed as punishment.”
Huawei, the company says, has been branded “disloyal” through an act of legislation, rather than having an opportunity to make its case in the courts. This has also deprived it of due process under the law, it argues.
The company’s case faces a number of challenges. After concerns over cybersecurity, the US instituted a federal ban on software from Russia-based Kaspersky Lab, a clear precedent to the Huawei order. Kaspersky also filed a legal challenge, arguing that the government had created a bill of attainder, but the government prevailed in court. In general, the courts have given wide latitude to the government on national security issues, rendering Huawei's legal prospects uncertain.
The wider ban, which affects sales of American products to Huawei, raises its own set of legal issues. Whether Huawei will also take legal on that front remains to be seen, but this week's legal maneuvering gives some indication of what the arguments in that case could look like. (As trade negotiations with China continue, Trump has suggested the Huawei ban could be lifted as part of a deal, raising questions about the administration’s national security rationale.)
In a statement accompanying the motion, Huawei's chief legal officer said the continuing crackdown “sets a dangerous precedent.”
“Today it’s telecoms and Huawei,” he said. “Tomorrow it could be your industry, your company, your consumers.”
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When we first heard about The Who’s Left Merger, it was that Fiat Chrysler was pushing for it, and like all things FCA, we viewed it with as much skepticism as we would, say, our friend telling us they were getting a great deal on a Dodge Journey. But as the days roll on, things are looking increasingly serious. All that and more in The Morning Shift for May 29, 2019.
Here are three pieces of news rolled into one. The first is that Renault has gone to the trouble of flying to Japan to chat with longtime alliance partner Nissan about the latter’s possible merger with Fiat Chrysler. This can only mean one thing, as Bloomberg reports: Renault is down to clown.
B’Berg’s story ran today under the headline “Renault’s message to Nissan: Fiat deal is good for all of us” and here’s a little bit:
Renault SA Chairman Jean-Dominique Senard arrived in Tokyo with a crucial mission: to sell the proposed merger between Fiat Chrysler Automobiles NV and Renault SA to longtime partner Nissan Motor Co.
[...]
While neither party has disclosed what will be discussed, there will be plenty to talk about. Under the terms of the Fiat proposal, Nissan will gain voting rights of 7.5% in the new entity, compared with no voting rights attached to its cross-held shares in Renault. A merger would also dilute the French state’s control over Renault, and indirectly over Nissan, easing a concern the Japanese company has had for years.
Senard’s goal is to ensure that they all work well together. Although Nissan and Renault have been partners for two decades, the Japanese automaker isn’t in a position to block the deal. Nissan doesn’t own a controlling stake in the French company, and a merger wouldn’t breach their operating agreement.
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Bloomberg couldn’t get comment from Nissan for the story, but the Nikkei got some goss, as reported by Reuters today:
“We are not opposed,” the Nikkei quoted an unnamed Nissan source who had attended the meeting as saying. The person also said “many details need to be worked out” before the Japanese automaker solidifies its position on the issue, the Nikkei reported.
In a statement, the alliance members confirmed that they had “an open and transparent discussion” on the proposal. The deal looks designed to tackle the costs of far-reaching technological and regulatory changes, including the drive toward electric vehicles.
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In any case, the two sides are meeting on Monday, as the Financial Times reports. I wish them all well in this definitely well-thought-out merger that makes sense to everyone and doesn’t seem like desperation.
Wall Street never met a budget it couldn’t slash, and unsurprisingly it is loving the prospect of trimming the fat on five carmakers at once, as The Detroit News reports today:
A potential merger between Fiat Chrysler Automobiles NV and Renault SA would create a massive global company, but it’s the cost cuts proposed by FCA that has investment analysts optimistic about the deal.
The proposed 50-50 merger between the Italian-American Fiat Chrysler and France’s Renault would create the third-largest automaker in terms of sales, behind Volkswagen AG and Toyota Motor Corp. It’s a move that would also save some $5.6 billion (5 billion euros) annually for the companies as they find ways to cut costs in manufacturing, purchasing and R&D.
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Hold on, wait, there’s a better quote in here, from Moody’s, which just upgraded FCA to its highest level of junk status, as the Detroit News notes. Take in this fantastic line, which says in as many words as possible that this is going to be a giant mess but they’ll slash costs and we’ll make out like bandits:
“Combining Fiat Chrysler and Renault would be credit-positive in general as it makes strategic sense and could create a substantial amount of synergies,” Falk Frey, senior vice president and auto analyst at Moody’s, said in a Tuesday note. “However, we’ll also consider significant execution risks of such a large scale transaction given the complexity of the two group’s businesses’ operations, particularly in view of Renault’s existing alliance with Nissan Motor Co. Ltd and Mitsubishi Motors Corporation.”
Now, there was some nice analysis from automotive journalist and friend of Jalopnik John Voelker, who noted that, yes, it sounds evil to salivate about “a substantial amount of synergies,” but there really is still a lot of pointless fat in the auto industry today:
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Personally I would love to see the auto industry as it stands today change entirely, moving from these giant silo’d giants into tons of tiny manufacturers, all putting together different combinations of licensed engines or electric modules on widely available skateboard chassis, like we had over a hundred years ago.
I’m going to be completely honest, I totally forgot this happened.
For some reason Carlos Ghosn moved Infiniti’s headquarters to Hong Kong back in 2012 in an effort to make it more in his image, I mean, more international. Anyway, with Ghosn gone, Infinti is packing up its pencils once more, as Bloomberg elaborates in a wire report:
Ghosn in 2012 planned to more than triple Infiniti’s annual sales to 500,000 units within five years to raise its share of the global luxury car market to 10%. The brand sold less than half of the target last year.
Hurt by slumping U.S. sales, aging vehicle models and an out-of-sync product cycle, Nissan reported its lowest annual profit in a decade for the fiscal year through March. Chief Executive Officer Hiroto Saikawa is working on reviving profits, pledging to lift Nissan out of a “rock bottom” in two years. Infiniti currently has 180 employees based in Hong Kong, mostly in management, sales and marketing positions.
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The report further noted that Infinti is planning on dumping its diesels and focusing on EVs and China, which is what you could also call the “doing what Tesla has been trying to do for years now” plan of action.
China has been somewhat vocal in saying it’s rolling back on subsidizing its budding electric car hegemony, but apparently someone in power didn’t get the message, as noted in a Bloomberg wire report today:
China is scaling back subsidies on EV purchases and plans to phase them out completely after 2020 amid concerns that automakers have become overly reliant on them at the expense of developing new technologies. The funding offered on purchases will be diverted to develop charging infrastructure, industry minister Miao Wei said in March.
China, which has about 960,000 charging poles for its 2.31 million electric vehicles, is working to upgrade the network. The new standards will boost the capacities of facilities about sixfold to more than 350 kilowatts, making re-charging as efficient as a filling a regular fuel tank, Liu [Kai, a director with the Information and Certification Department of the China Electric Vehicle Charging Infrastructure Promotion Alliance] said.
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There’s a part of me that worries about this. I don’t love the idea that the fate of EVs may hinge upon a government program, one that could change at any time, but any little bit helps and it’s not like consumers are any less fickle, buying gas guzzlers the moment fuel prices drop.
I love everything about this incredibly obvious analysis from The Washington Post, which seems to have just now woken up to realize Detroit has been slashing jobs while budgets have been fat, and Trump hasn’t been helping anything:
[T]here’s another pillar of Trump’s base — the auto industry, which he promised to transform into the engine of a manufacturing revival — that is stalling at an inopportune moment for the president.
Layoffs in the industry this year are at their highest since the economic crisis a decade ago[.]
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The piece focuses on Trump not fulfilling his promises of helping out the auto industry, which, ha, but I think you can’t look at this without putting a great deal of blame on companies like GM for shutting down whole factories when we’re not even in a recession.
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Is it the Who’s Left Merger? Is it the Merger To Restore Balance, as with one new auto company entering the fray (Tesla) another must presumably be absorbed? Is It The Merger Of Equals But For Real This Time? Your thoughts are welcome.
