| Here’s your daily business briefing. - ๐ Nike shares drop on outlook
- ๐ Deep Dive: McDonald’s and others target Sun Belt for growth
- ๐ Levi's shares fall 15% on disappointing sales
Thanks for reading! Shriram
p/Shriram | |
| 1 | | Nike cut its full-year guidance, anticipating a 10% sales drop this quarter due to weak sales in China and global trends, causing an 11% drop in shares after trading hours. Despite surpassing EPS expectations with $1.01 adjusted, Q4 revenue fell short at $12.61 billion, while net income rose to $1.5 billion despite a 2% YoY sales decline. More: - While North America's sales of $5.28B fell short of projections of $5.45B, Greater China's sales of $1.86B reached an all-time high.
- EMEA sales reached $3.29B, missing the $3.32B estimate, while Asia Pacific and Latin America sales were $1.71B, below the $1.77B forecast.
- Nike's wholesale revenues grew 5% to $7.1B, showing a deliberate shift back towards wholesalers, while its direct-to-consumer revenues decreased 8% to $5.1B.
- Converse's revenue declined 18% to $480M due to weak sales in North America and Western Europe.
- Nike, criticized for lagging in innovation, is refocusing on new product launches to address competition from brands like On Running and Hoka.
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What the numbers say: The Sun Belt, including Texas, Florida, and North Carolina, is experiencing significant population growth, with businesses like Portillo's, McDonald's, Friendly's, and Dutch Bros. expanding there due to robust sales. Portillo's Texas location earned $13M in its first year, and McDonald's plans to open 900 new U.S. restaurants by 2027, primarily in the Sun Belt. Relevance: The population shift to the Sun Belt offers restaurant chains a prime opportunity for sales growth, driven by the region's business-friendly environment with lower taxes and fewer regulations. This trend attracts large chains like McDonald's and smaller regional chains seeking national expansion. More data: Sun Belt states, favored for their sunny weather and rapid population growth, became more attractive during the COVID-19 pandemic due to more space and fewer restrictions. Business-friendly policies, including lower labor costs and less red tape, have led to significant expansions, such as Major Food Group's Carbone moving from New York to Miami and Dallas, and Texas hosting the most Fortune 500 companies for two consecutive years. | | | |
| 3 | | Levi Strauss reported fiscal Q2 revenue of $1.44B, slightly below Wall Street's $1.45B expectation, but exceeded earnings forecasts with $0.16 per share against the expected $0.11. The company posted a net income of $18M, up from a $1.6M loss last year, attributing the sales shortfall to unfavorable foreign exchange and weak performance at its Docker's brand. More: - Levi's posted strong earnings from direct sales and cost-cutting, raising its dividend by 8% to $0.13 per share, but shares fell 15% in extended trading.
- Sales rose 8% YoY, rebounding from a 9% decline last year caused by shifted wholesale shipments.
- Direct-to-consumer sales grew by 8%, making up 47% of Levi's total sales, with online sales rising by 19%.
- The American clothing company reaffirmed its full-year EPS guidance of $1.17 to $1.27, factoring in a 5-cent impact from its new distribution strategy.
- The company is shifting towards a third-party distribution model to streamline costs and enhance delivery logistics in response to evolving market conditions.
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| 4 | | Taco Bell has launched its greatest value meal deal, the "Luxe Cravings Box," which costs $7 and comes with four of its most popular dishes and a medium drink. The meal, with a Chalupa Supreme taco, beefy 5-layer burrito, double-stacked taco, chips with nacho cheese sauce, and a medium drink, offers a 55% discount on individual purchases. More: - This deal, available until September, demonstrates Taco Bell's strategy of catering to budget-conscious consumers amid economic pressures and reduced dining frequency.
- Starbucks, Burger King, and McDonald's have launched comparable value meal promotions to bolster consumer spending before their earnings announcements.
- Taco Bell's chief marketing officer, Taylor Montgomery, emphasized that the "Luxe Craving Box" offers full-sized favorites, setting it apart from competitors' smaller portioned value meals.
- Taco Bell's U.S. same-store sales rose 2% in the recent quarter, down from 11% the previous year, indicating consumer spending challenges.
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| 5 | | Walgreens Boots Alliance Inc. lowered its full-year adjusted earnings forecast to $2.80 to $2.95 per share due to challenging retail conditions. The stock dropped to 25%, the largest single-day decline since 1980, as new CEO Tim Wentworth plans significant store closures to boost profitability. More: - Quarterly adjusted earnings were $0.63 per share, below the expected $0.68, while operating income rose to $111M from a $477M loss last year, including a major write-down on the Boots business.
- Boots reported $5.7B in sales, 2.8% higher than the previous year, despite earlier talks about perhaps selling off or going public with the division.
- Walgreens' U.S. health-care unit, including VillageMD investments, grew revenue by 7.6% to $2.1B, while retail pharmacy revenue rose by 2.3% to $28.5B.
- Walgreens plans to close 160 clinics and recently took a $5.8B writedown on VillageMD, highlighting struggles in its health-care expansion strategy.
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| 6 | | Volkswagen intends to invest $5B in Rivian, beginning with an $1B initial investment through a convertible note. The remaining $4B will be invested by 2026, with $1B allocated annually in 2025 and 2026, and an extra $2B dedicated to a joint venture focusing on electrical architecture and software technology. More: - Rivian's stock skyrocketed over 50% in after-hours trading after the announcement, closing at $11.96 per share on Tuesday, despite being down about 49% for the year before the surge.
- The investment aims to help Rivian achieve profitability by financing the increased production of its R2 SUVs in Illinois, scheduled to begin in 2026.
- Rivian CEO RJ Scaringe emphasized the critical integration of network architecture, topology, V-CPUs, and software platforms to maximize the investment's impact.
- In the latter half of the decade, Volkswagen plans to use Rivian's electrical architecture and software in its vehicles, focusing on joint development excluding batteries and propulsion systems.
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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 Shriram Jeevakumar | |
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