Aurelia Butler

NEW YORK (Reuters) – Walmart (NYSE:WMT) is set to raise its full-year earnings forecast on Thursday when it reports quarterly results, as U.S. shoppers continue to buy essentials even as borrowing costs rise, lending standards tighten and the employment picture weakens.The world’s largest retailer, as measured by sales, will offer a glimpse into demand for back-to-school products. A monthly survey conducted by brokerage Stifel in August showed that more people intend to shop at Walmart compared to Costco (NASDAQ:COST) and Target, even as they planned to spend 16% less on back-to-school purchases this year compared to a year ago.”We find the anticipated lower spending notable and a watch-point, as it suggests continued weakness in general merchandise categories,” Stifel analyst Mark Astrachan said.Walmart is in a sweet spot among retailers as broader economic stresses push more people to shop for essentials such as groceries, its core business. Selling toilet paper, beans, pasta and toothpaste brings people into its stores, giving Walmart opportunities to cross sell more profitable merchandise including pens, notepads and backpacks.With more and more shoppers visiting Walmart’s Supercenters, Neighborhood Markets and its online website for their daily needs, the retailer issued upbeat second-quarter forecasts and raised profit and sales estimates for its fiscal year ending Jan. 31, 2024. Rival Target, which reports results on Wednesday, in contrast expects a dour second-quarter and a drop in sales for its fiscal year. Target has a smaller grocery business than Walmart’s and has focused on selling clothes, electronics and beauty products to inflation-squeezed Americans. Many are instead spending more on dining out, hobbies and sporting equipment, as demonstrated by the latest U.S. retail sales data on Tuesday. Home Depot (NYSE:HD) on Tuesday reiterated its muted forecast for the year after it said it saw continued caution on the part of consumers towards big ticket items and discretionary categories.Walmart, which is known for its low prices, drew in shoppers earning more than $100,000 a year during peak inflation in 2022.Walmart CEO Doug McMillon in May cautioned that stubborn inflation, especially in food, was “one of the key factors creating uncertainty for us in the back half of the year.” Since then, food inflation has eased, however. And in July, Walmart announced that it would sell 14 of the most popular items on school supply lists, including Pen + Gear Composition notebooks and 24-count Crayola Crayons, at the same prices as last year.”As a retail bellwether Walmart’s comments on back to school trends will be a market mover as well as a preview of potential holiday trends,” D.A. Davidson analyst Michael Baker said, adding that back-to-school trends have led the direction of holiday sales in 23 of the last 29 years. UBS, Credit Suisse, Telsey Advisory Group and CFRA Research are among brokerages that expect Walmart to raise its full-year forecast for the second time this year.Walmart in May forecast net sales would rise about 3.5% this fiscal year, up from its prior outlook in February of a 2.5% to 3% rise, in part due to higher prices. It also raised its earnings forecast. Capital Wealth Planning, a Walmart investor, owns $258 million in Walmart shares after raising its stake in the company in June.The firm’s founder Kevin Simpson said he is hesitant to buy more stock unless the retailer can show it is able to expand margins without solely relying on inflation-driven price hikes. Walmart trades at 24.2 times 12-month forward earnings compared to 14.9 times for Target and 19.9 times for the S&P 500 Consumer Staples index, according to Refinitiv DataStream. Simpson characterized Walmart’s current multiple as “high.””I need to see earnings increasing more than anything else because that’s the only thing that can justify a higher stock price over time,” Simpson told Reuters. More

Milei, a far-right libertarian who earlier told local radio about the approach, took the most votes in the primary election over the weekend, while Bullrich, a hard-line conservative, won the internal contest of the main opposition party, which received the second-largest amount votes.Current Economy Minister Sergio Massa, who has met with fund staff and officials in the past, rounds up the top three contenders in the October election.The IMF said through an official, without naming Milei or Bullrich, that it regularly engages with a range of stakeholders, and “in the case of presidential candidates, these engagements also allow staff to better understand key aspects of future potential economic policies.”Argentina, the largest debtor with the IMF after years of economic crisis, has seen inflation hit triple-digits as savers have lost faith in the currency, pushing almost four-in-ten people below the poverty line.The Argentine peso on Tuesday hit a record low of 720 per dollar in parallel exchanges, more than double the official rate of 350. More

NEW YORK (Reuters) – Private equity firm Bain Capital on Tuesday agreed to buy Fogo de Chão, in a deal people familiar with the matter said valued the Brazilian steakhouse chain at about $1.1 billion, including debt.The deal marks a win for private equity firm Rhone Capital, which took Fogo de Chão private for $560 million in 2018. Rhône made more than three times the money it invested in the restaurant operator, the sources said, requesting anonymity as the matter is confidential. Under Rhone’s ownership, Fogo de Chão’s financial performance improved and it has posted annual revenue growth of 15% since 2021. Prior to its sale, Rhone had explored re-listing Fogo de Chão’s shares on stock exchanges. The restaurant chain confidentially submitted paperwork for an initial public offering to regulators in late 2021, the sources said. However, it started exploring a sale instead as the U.S. IPO market collapsed in early 2021 and went through an arid spell that lasted a year and a half, forcing several companies to postpone their attempts to go public, the sources said. Rhône, Fogo de Chão and Bain declined to comment. Founded in Southern Brazil in 1979, Fogo has a presence in 76 locations worldwide. Bain Capital has a long history of investing in the restaurant industry and has backed several big names, including Burger King, Dunkin’ Brands Inc, Domino’s Pizza Inc and Bloomin’ Brands Inc. Fogo de Chão’s sale comes amid a recent uptick in dealmaking in the restaurant industry. Sandwich chain Subway has been exploring a sale that could be completed in the coming weeks, while Benihana Inc has also been working with advisers to sell itself. Earlier in August, the Pollo Tropical restaurant chain was sold to Authentic Restaurant Brands for $225 million. Bain arranged debt financing for the deal from Deutsche Bank (ETR:DBKGn), which is also serving as financial advisor to the firm. Kirkland & Ellis served as legal counsel to Bain. Morgan Stanley & Co LLC (NYSE:MS) is serving as financial adviser to Fogo de Chão and Rhône, while Sullivan & Cromwell served as legal counsel.(This story has been refiled to correct a syntax error in paragraph 11) More

More than a dozen UK banks and building societies are set to reduce rates on fixed mortgage deals this week, reflecting market expectations that inflation is falling.But brokers are not predicting dramatic price cuts, with the Bank of England forecast to raise interest rates later in the year after figures on Tuesday showed wages were growing at a record level. “Consumers shouldn’t get into the habit of expecting a rate reduction every week,” Nicholas Mendes, manager at broker John Charcol, warned. “I expect we’ll see a period where price cuts slow down before we see more lenders do more.”Barclays, Nottingham Building Society and Yorkshire Building Society dropped rates by as much as 0.61 percentage points on residential fixed rate mortgages on Tuesday, following news that Santander would trim offers by up to 0.29 percentage pointsThis is the fourth consecutive week that lenders have dropped mortgage prices, after inflation fell to a 15-month low in June. Mortgage providers base their prices on the swaps market that reflects expectations for future interest rates, which are forecast to rise next month. Mendes said swaps had risen off the back of record wage growth in the period from April to June, which reinforced central bank concerns over the pressures fuelling inflation. Swaps markets are now pricing in that UK interest rates will peak at close to 6 per cent by the end of the year, having fully priced in a peak of 6.5 per cent in early July.Economists polled by Reuters forecast that data due on Wednesday will signal a sharp slowdown in the rate of consumer price rises, from 7.9 per cent in June to 6.8 per cent in July.NatWest, which reduced its rates on Friday, is set to lower them further by as much as 0.45 percentage points on Wednesday, alongside Yorkshire Building Society’s Accord Mortgages. Mortgage lender Platform, part of the Co-operative Bank, also said it would reduce fixed-rate costs by as much as 0.29 percentage points from Thursday.“We have waited for quite some time for the lenders to start lowering their rates, and the improvements are getting more frequent,” said Aaron Strutt, a director at broker Trinity Financial.

A slowdown in the mortgage market has forced providers to cut their prices to compete for business, as borrowers have had to limit spending in the face of a difficult economic environment. The issue was raised in results calls by chief financial officers of both Lloyds and NatWest last month.Brokers warned off lenders undercutting each other. “If they did that, providers could cause a flurry of new buyers and push house prices up,” said Kylie-Ann Gatecliffe, director of broker KAG Financial. “They have to dip their toes in very carefully.” But despite the recent reduction in mortgage costs, borrowers are still facing higher rates than a year ago. The average cost of a two-year fixed mortgage is 6.79 per cent, according to Moneyfacts, down slightly from a 15-year peak in early August.“Most homeowners and buyers need rates to be at a more of an affordable level before they regain their financial confidence,” said Strutt. More

Argentina has long been famous for producing unwelcome economic and political shocks. National primary elections on Sunday were no exception. The big winner was Javier Milei, a maverick libertarian economist who favours dollarising the economy, slashing government spending, widening gun ownership and legalising the sale of human organs.An economics professor turned TV personality, Milei has no executive experience and less than two years in congress. His extreme anti-establishment message echoes that of other far-right populists such as Jair Bolsonaro and Donald Trump. It resonated with Argentine voters angry at persistent government failures. Their country has for decades failed to make the most of its abundant natural wealth and rich human capital.Milei won 30 per cent of ballots, well above the level suggested by recent polls and enough to secure first place in a vote that has traditionally acted as a dress rehearsal for October’s presidential, congressional and gubernatorial elections. The main centre-right opposition, Juntos por el Cambio (JxC), signally failed to capitalise on the national mood of anger, mustering only 28.3 per cent. The incumbent Peronist movement, which has dominated government since Argentina’s return to democracy in 1983, slumped to third place. Abstentions in what was officially a compulsory vote topped 30 per cent.The immediate shockwaves from the result forced economy minister Sergio Massa to devalue the wildly distorted official exchange rate by 18 per cent against the dollar and raise interest rates to 118 per cent. Massa, who is running as the Peronist presidential candidate, now faces an uphill struggle to prevent a full-blown economic collapse before the next government takes office in December. His pledge of no further pre-election devaluations lacks credibility after Monday’s panic move and local banks may balk at rolling over the government’s ever-growing mountain of domestic debt. The IMF’s board faces an unenviable choice this month: either it approves a further disbursement of $7.5bn to Argentina from a $44bn refinancing programme, despite Buenos Aires’ failure to meet some of the agreed goals, or it withholds the money and risks triggering an economic collapse.Amid so much gloom, optimism may be hopelessly misplaced. Yet some investors remain bullish about the South American nation’s medium-term prospects. They consider the collapse of the Peronist vote as evidence that Argentines are ready for deep and painful free-market reform. Two-thirds of electors on Sunday chose right or far-right parties who want to trim the bloated welfare state, remove artificial exchange controls, halt central bank money-printing and unshackle business.Flourishing lithium mining, fast-expanding shale oil and gas production and potent agribusiness exports underpin the case that Argentina’s economic fundamentals are strong. Optimists believe that JxC’s Patricia Bullrich stands a good chance of winning the presidency and even if the maverick Milei were to edge her, he would lack a congressional majority and would have to moderate policy in office.Yet Argentina’s path to economic stability and prosperity remains narrow and perilous. The risks of a disorderly devaluation, a lapse into hyperinflation or a government bankruptcy before the election are real. The presidential election victor faces the Herculean task of simultaneously restoring confidence in the economy, pushing through painful reforms, winning back investment and building a strong enough national consensus for change to avoid crippling social protests. That would be a tall order for the most skilful and experienced of politicians, let alone for a far-right populist with unorthodox economic views. More