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| Happy Insiders!! Today’s Business newsletter covers: - 🛒 Target to close nine stores in major cities due to crime
- 🕵️♂️ Deep Dive: Companies hesitant to admit paying hackers
- 💹 Costco Q4 earnings beat expectations
If you enjoy reading this newsletter, please share it with your friends and colleagues. Make sure to continue reading for Quick Hits and the Knowledge Hub. Thank you!! Shriram
p/Shriram | |
| 1 | | Nine Target locations are scheduled to close in major American cities like New York City, Seattle, San Francisco, and Portland due to safety concerns over theft, violence, and organized retail crime. The closures, effective from Oct. 21, are explicitly attributed to security threats affecting the well-being of employees and customers, with organized retail crime contributing to reduced profitability. More: - Although Target CEO Brian Cornell has previously voiced reluctance to liquidate locations, he emphasized the significance of staff and customer safety.
- The business favors legal changes to fight organized retail crime, like the Combating Organized Retail Crime Act.
- Store closings have partly persuaded legislators to address the problem of organized retail crime.
- Beyond security concerns, Target has experienced difficulties such as unsold inventory, opposition to goods collections, and decreased consumer spending on discretionary items.
- According to the National Retail Security Survey, retail shrinkage hit over $112B in 2022, accounting for 1.57% of all sales, within the industry's typical range.
Q: How can retailers balance security and profitability in today's landscape? Join the conversation here. |     | |
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What the numbers say: While the percentage of ransom payments made by businesses has decreased — from 79% in 2019 to 34% in Q2 2023 — the average ransom sum has increased, reaching $740,144 by the end of Q2 2023, a 126% rise over the previous quarter. Relevance: To minimize potential legal and reputational repercussions, businesses frequently avoid reporting ransom payments made during hacks. These difficulties line up with regulatory initiatives, such as the SEC's recent approval of regulations requiring publicly traded companies to report information about significant breaches, including the possibility of ransom payments. More data: Even while the FBI warns against such payments due to the risk of inciting future assaults and probable sanctions breaches, the SEC's guidelines could result in more ransom payments by firms being reported. Businesses can make Ransom payments covertly to prevent public embarrassment, legal problems, and reputational damage. Decisions involving ransom payments are particularly difficult for industries like healthcare and entertainment. | | | |
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| 3 | | With earnings per share of $4.86 (against an expectation of $4.79) and revenue of $78.9B (expected $77.9B), Costco has disclosed Q4 earnings that outperformed Wall Street projections. The company's net income for the quarter reached $2.2B, or $4.86 per share, compared to $1.87B, or $4.20 per share, in the previous year, while comparable sales increased by 1.1% YoY, with a 0.2% rise in the U.S. Excluding changes in gas prices, the metric rose by 3.8% overall and 3.1% in the U.S. More: - The company's membership base expanded; by the end of the quarter, there were 71 million paying household members, an 8% increase over the previous quarter.
- Over 32.3 million customers, comprising more than 45% of all paid memberships, have chosen Costco's more expensive Executive Membership, contributing to about 73% of the company's global sales.
- As consumer preferences have changed away from specific online product categories, Costco's digital sales have decreased by 0.8% YoY.
- Costco's sales are driven by grocery purchases, while demand is declining for some luxuries, notably online.
- Costco anticipates raising membership fees and wants to open 10 additional locations in the next three months, nine of which will be in the U.S. and one in Canada.
Zoom Out: - With the company's stock ending Tuesday at $552.96, down 1%, Costco's shares had risen by around 21% YTD, outpacing the S&P 500's 11% gain.
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| 4 | | A $5B private credit fund focused on midsize American companies has been developed by Wells Fargo and asset management Centerbridge. As part of Wells Fargo's efforts to access the burgeoning $1.5T private loan market, they seek to secure pledges totaling $2.5B in equity, with the Abu Dhabi Investment Authority and British Columbia Investment Management having previously contributed $2B. More: - Due to the dominance of alternative asset managers like Apollo, Ares, and Blackstone in the private credit market, traditional lenders are considering their position in the industry.
- These alternative money managers have increased lending to more prominent companies, infringing on banks' market share for corporate loans.
- Companies are increasingly drawn to private finance, some using it as a funding source due to unstable public markets.
- As part of its efforts to better serve its customers and compete in the private lending market, Wells Fargo has partnered with Centerbridge.
- With Wells Fargo helping with borrower sourcing, the fund, named Overland Advisors, will function as a business development company and focus on loans between $200M and $400M.
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| 5 | | In September, U.S. consumer confidence hit a four-month low at 103.0, reflecting worries about rising prices, a possible recession, increased interest rates, and political uncertainties. This marks the second consecutive monthly decline in consumer confidence, affecting all age groups, particularly those with annual incomes exceeding $50,000. More: - Despite evidence of inflation slowing down, consumer morale continued to be affected by the fall in confidence, driven mainly by lower expectations, which may have resulted from concerns about a government shutdown and political unrest.
- The Federal Reserve kept its benchmark interest rate unchanged and predicted another rate increase by year's end, which added to consumers' worries about rising interest rates.
- Due in part to increased mortgage rates that made new homes less affordable for potential buyers, new home sales decreased by 8.7% in August to a seasonally adjusted annual rate of 675,000 units.
- The housing market was kept afloat despite the drop in new home sales due to the scarcity of available pre-owned properties.
- House prices rose 4.6% YoY in July for the second consecutive month, which may impact inflation and the Federal Reserve's monetary policy decisions.
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| 6 | | Snap Inc. is closing its recently launched augmented reality (AR) division for businesses, AR Enterprise Services (ARES), leading to the loss of around 170 jobs. With the introduction of ARES in March, Snap aimed to diversify its revenue sources beyond digital advertising. More: - Snap made the decision to shut down ARES because expanding its enterprise offering for retailers would require a sizable extra investment that the firm now cannot afford.
- ARES, however, struggled to acquire traction and encountered difficulties expanding.
- Snap's CEO, Evan Spiegel, mentioned the growing popularity of generative AI as a cause that made it difficult for Snap to stand out with its augmented reality technology.
- Last year, Snap outlined several initiatives to enhance sales and its core advertising business, including a 20% employee reduction and project closures.
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- President Joe Biden showed solidarity with striking autoworkers in Michigan, endorsing their demand for a 40% pay increase and asserting that they should receive considerably more compensation.
- Peloton's Chief Product Officer Tom Cortese is leaving after nearly 12 years, and Nick Caldwell, a Silicon Valley veteran with experience at Twitter, Google, and Microsoft, will replace him.
- UPS plans to employ over 100,000 seasonal workers during the holiday shipping rush, offering them hourly wages ranging from $21 to $23 due to a recently ratified Teamsters agreement.
- The FTC has filed a major lawsuit against Amazon, alleging that the online retailer is abusing its monopoly power to harm consumers, competitors, and sellers, marking a significant test of regulator Lina Khan's efforts to challenge Big Tech's influence.
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Term of the Day Current ratio: The current ratio, calculated by dividing a company’s assets by liabilities, shows a company’s ability to pay its short-term debts with its assets. Question of the Week Do you share details about your salary with your coworkers? Join the conversation |
INSIDE BUSINESS LEADERBOARD (7 DAYS) |
 | Freelance Writer | | Shriram is pursuing Master’s in Business with Marketing at Warwick Business School. He worked as a Senior Consultant in Tech and Political Consultancies before his Masters. He is passionate about Tech, Marketing, Strategy, Anthropology and Politics. He is also the Postgraduate Ambassador for Warwick Business School. | | This newsletter was edited by Aaron Crutchfield | |
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