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| Here's your daily business briefing. - 👟 Nike shares fall on weak outlook, China sales dip
- 🔍 Deep Dive: U.S. ESG hiring surge slowing down
- 🛍️ Lululemon shares dive 18% on guidance, North America slowdown
Thanks for reading! Shriram
p/Shriram | |
| 1 | | Nike's ($NKE) shares initially surged 5% following its third-quarter earnings report, which exceeded analyst expectations, but later plummeted by up to 7%. The company reported earnings per share of $0.77 (estimated $0.74) and revenue of $12.43B (estimated $12.28B) for fiscal 2024 Q3, slightly surpassing estimates. More: - North American sales surpassed estimates, reaching $5.07B, while Chinese sales slightly missed expectations, growing to $2.08B, a 5% increase.
- Yet, sales in Asia Pacific, Latin America, the Middle East, and Africa fell short of projections.
- Nike expects revenue growth to be somewhat lower than analysts' projections, which caused its shares to drop in response to their guidance for the current quarter and fiscal 2025.
- To bolster profits and preserve margins amid weakened demand, the company is instituting cost-saving initiatives targeting a $2B expense reduction over the next three years.
- Nike's strategic pricing initiatives and reduced logistics costs drove a 1.5 percentage point increase in the company's gross margin to 44.8%; higher input costs and restructuring charges somewhat offset this growth.
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What the numbers say: In December 2023, ESG job departures exceeded arrivals, reversing a multiyear trend, with 3,071 departures compared to 2,897 arrivals. While ESG hiring had been increasing since 2018, reaching a peak in late 2021, the momentum slowed notably in 2023, although 92% of chief executives still supported their ESG programs, according to a December survey. Relevance: The slowdown in ESG hiring mirrors a shift in U.S. companies' priorities toward cost-cutting and quicker investment returns, influenced by investor pushback and political pressure. This trend also entails reevaluating ESG efforts, with companies integrating ESG responsibilities into existing roles and emphasizing finance-related ESG positions, reflecting changes in corporate sustainability strategies. More data: Departures from ESG roles in tech, finance, and consulting sectors mirror sector-wide cutbacks, while compliance burdens from new regulations shape hiring patterns within the ESG sector. This reflects a broader trend toward integrating ESG principles into core business operations. | | | |
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| 3 | | Lululemon ($LULU) shares tumbled 18% following disappointing guidance and flat growth in North America, despite fourth-quarter earnings per share of $5.29, beating expectations of $5.00, and revenue slightly exceeding estimates at $3.21B versus $3.19B. Full-year sales are forecast to range from $10.7B to $10.8B, with diluted earnings per share expected to be between $14 and $14.20. More: - Sales increased by 16% to $3.21B compared to $2.77B the previous year, with comparable sales rising 12%, slightly underperforming analysts' anticipated 12.3% growth.
- Sales in North America rose by 9%, compared to a 29% surge the year before.
- CEO Calvin McDonald observed decreased U.S. traffic and conversions, citing insufficient availability of sizes zero to four and a lack of colorful items as contributing factors.
- Additionally, the Canadian-American multinational athletic apparel retailer reported that overseas sales increased by 54%, with 78% of growth occurring in China and 36% in other countries.
- The firm anticipates net revenue for the current quarter of $2.18B to $2.20B and diluted earnings per share of $2.35 to $2.40.
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| 4 | | Darden Restaurants Inc. ($DRI), which operates Olive Garden and LongHorn Steakhouse, faces reduced spending from lower-income consumers due to adverse weather conditions in January and consumer weakness in February, resulting in sales below analyst projections. Consequently, Darden has adjusted its 2024 same-store sales growth forecast, anticipating a negative to 1% growth rate for the upcoming quarter. More: - Compared to the prior year, more transactions came from households with incomes over $150,000, with fine-dining brands seeing particularly strong sales growth.
- CEO Rick Cardenas reported a significant decrease in transactions from households making less than $75,000 compared to the prior year.
- Sales at Capital Grille and Ruth's Chris Steak House increased by 58% compared to the previous year, surpassing the company's 7% sales growth.
- High credit card debt and delinquencies have hurt low- and middle-income consumers, while soaring stock, cryptocurrency, and real estate values have helped the wealthiest customers.
- The American multi-brand restaurant operator intends to keep prices below inflation to entice customers while steering clear of aggressive promotional tactics.
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| 5 | | Chewy ($CHWY) posted a 4.2% YoY rise in fourth-quarter net sales, reaching $2.83B, accompanied by a 10 basis points increase in gross margin to 28.2%. Fourth-quarter net income skyrocketed by 370% YoY to $31.9M, despite a decrease in active customers, which fell to 20.1 million, down 1.6% from the previous year. More: - Net sales for the year increased by 10.2% to $11.1B, net income decreased by 20.6% to $39.6M, and gross margin increased by 40 basis points to 28.4%.
- Chewy has maintained its resiliency in economic volatility by concentrating on non-discretionary consumables and health categories, which account for 85% of its sales.
- With a target market size of $40B, the firm opened the first Chewy Vet Care veterinary clinics and aims to add four to eight more in 2024.
- The American online retailer of pet food's Autoship subscription program encouraged recurring business, generating $8.5B in total client sales for the year — a 14.7% rise over 2022.
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| 6 | | About 10% of U.S. workers are in jobs most exposed to AI, with those in lower-income brackets and possessing lower education levels facing heightened risk. The Council of Economic Advisers' Economic Report of the President highlights AI's impact on the workforce and provides recommendations for policymakers to address its implications. More: - White House officials are in talks with labor unions, particularly those in the service and manufacturing sectors, to address AI preparedness.
- According to White House economists, about 20% of people are employed in 16 high-exposure AI employment activities.
- A Pew Research Center study found that in 2022, 19% of American workers were in positions highly susceptible to AI, aligning with the current analysis.
- AI disruption could increase economic inequality because it puts women and lower-class jobs in greater danger of being replaced.
- The White House emphasizes the need for proactive measures to reduce the possibility that AI may aggravate inequality and displace employment.
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 | 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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