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| Here's your daily business briefing. - 🌐 Microsoft exceeded Q2 earnings and revenue expectations, with earnings at $2.93 per share and revenue of $62.02B.
- 🛍️ Deep Dive: Retailers estimated $101B in fraudulent returns in 2023, per a survey by Appriss Retail and the NRF.
- 📈 Alphabet exceeded revenue and profit expectations in Q4, but ad revenue fell below analysts' projections.
Thanks for reading! Shriram
p/Shriram | |
| 1 | | Microsoft ($MSFT) exceeded Q2 earnings and revenue expectations, with earnings at $2.93 per share (vs. expected $2.78) and revenue of $62.02B (vs. expected $61.12B). However, the company offered a cautious Q3 revenue outlook, anticipating between $60B and $61B. More: - Revenue from the Intelligent Cloud business, which includes Azure cloud infrastructure, SQL Server, Windows Server, Nuance, GitHub, and enterprise services, increased by 20% to $25.88B.
- The revenue generated by Azure and other cloud services increased by 30%, exceeding the projected rise of 27.7%.
- Approximately one-third of Microsoft's 53,000 Azure AI users are new users who joined within the last year.
- With Office, LinkedIn, and Dynamics included, the Productivity and Business Processes unit saw a 13% increase in revenue to $19.25B.
- The More Personal Computing segment, which includes Windows, Surface, Bing, and Xbox, generated approximately $16.89B in revenue, marking a nearly 19% increase.
Zoom Out: - Microsoft's largest-ever acquisition, the purchase of video game publisher Activision Blizzard, was finalized during the fiscal second quarter.
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What the numbers say: According to a survey by Appriss Retail and the National Retail Federation, retailers estimated $101B, or 13.7%, of returns were fraudulent last year, contributing to the already high processing costs averaging 21% of an order's value. A survey indicates that during the peak holiday season in 2024, 16.5% of returns, valued at $24.5B, are expected to be fraudulent. Relevance: Fraudulent returns have emerged as retailers' foremost concern, surpassing other challenges, contributing to the high costs of processing online returns and further eroding profit margins. Return fraud encompasses tactics such as returning different items, claiming non-delivery, and even stealing and returning products. More data: Saks' CEO notes a notable rise in fraudulent "merchandise not received" complaints recently, with common tactics including shipping empty boxes, returning stolen goods, and engaging in price arbitrage. "Wardrobing," involving consumers buying and using items before returning them, is a prevalent form of return abuse, leading retailers to adopt stricter policies and employ AI and personalized approaches to combat fraud. Amazon utilizes advanced machine learning models for proactive detection and prevention. | | | |
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| 3 | | Alphabet's ($GOOG) Q4 2023 earnings per share were $1.64, exceeding the expected $1.59, and its revenue reached $86.31B, slightly surpassing the anticipated $85.33B. While the company reported its fastest quarter for revenue growth since early 2022, ad revenue of $65.52B fell short of analysts' estimates of $65.94B, according to StreetAccount. More: - YouTube's Q4 ads revenue was $9.2B, slightly below the expected $9.21B, with traffic acquisition costs at $13.9B, slightly lower than the anticipated $14.1B.
- In Q4, Google Cloud revenue reached $9.19B, surpassing the expected $8.94B, marking a 26% expansion compared to last year.
- Other business units, including Waymo and Verily, reported revenue of $657M, up from $226M YoY.
- The technology firm reported that it incurred $2.1B in severance and related expenditures for 2023 due to last year's personnel reductions.
- Alphabet shares, which have surged 56% in the past year, experienced a more than 6% decline in extended trading on Tuesday.
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| 4 | | Starbucks ($SBUX) reported Q1 earnings per share at $0.90, missing the expected $0.93, with revenue of $9.43B falling short of the anticipated $9.59B. CEO Laxman Narasimhan attributed the performance to "headwinds," including a U.S. boycott and increased discounting by rivals in China. More: - Global same-store sales grew by 5%, less than the 7.2% StreetAccount predicted.
- Starbucks cited "misperceptions" about its stance on the Israel-Hamas war as a factor in the lagging U.S. traffic despite a 5% rise in North American same-store sales.
- International same-store sales growth fell short of expectations at 7%, with the war impacting Middle East sales.
- In China, the second-largest market, same-store sales grew 10%, but the average ticket at Chinese stores fell 9% as consumers exercised caution.
- Starbucks lowered its prior prediction of 10% to 12% revenue growth to 7% to 10% in its revised full-year sales projection.
Zoom Out: | | | |
| 5 | | Barcelona-based fashion group Mango introduced its virtual store on the Roblox platform, situated within the Outfit Shopping Mall. Players can acquire Mango Teen digital clothing and products for their avatars, with exclusive designs featured during special events on Roblox. More: - Mango's foray into the metaverse comes after its 2022 participation at Metaverse Fashion Week, where it showcased wearables and NFT artworks.
- Mango's plan to engage clients in the virtual world includes the Roblox virtual store.
- By 2026, Mango intends to open 500 new physical stores in the U.S., Spain, France, Italy, the U.K., India, and Canada.
- On the Roblox platform, other businesses like Pacsun, Maybelline, Walmart, and Adidas have also opened virtual stores.
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| 6 | | Retailers are testing the "Freedom Case," a security tool allowing customers to use their cell phones to unlock products on locked shelves. This addresses customer dissatisfaction with locked displays and the inconvenience of seeking assistance as retailers intensify security due to increased theft concerns since the pandemic. More: - The Freedom Case lets customers use their cell phone, retailer's app, or loyalty card to unlock a display case and receive a text with a four-digit code to access merchandise.
- The security case by Indyme is said to reduce sales by up to 20% when items are locked up while also increasing labor costs as employees spend extra time unlocking and locking cases.
- Currently, 26 retailers have tested or used the Freedom Case, including Safeway, Lowe's, Kroger, and Schnucks.
- Privacy concerns may arise as customers provide phone numbers to use the security tool, but the CEO assures them that it's solely for accessing merchandise.
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- Renault has opted to cancel the initial public offering of its electric-car unit Ampere, citing, in part, unfavorable equity-market conditions.
- Walmart declared a 3-for-1 stock split, with split-adjusted trading starting on Feb. 26.
- Elon Musk, founder of Neuralink, announced on Sunday that the brain-chip startup successfully implanted its first device into a human patient, who is reportedly recovering well.
- Universal Music Group may remove its music from TikTok, impacting over 1 billion users and restricting access to popular artists like Taylor Swift and Ariana Grande, due to a royalty dispute.
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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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