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    GameStop stock soars after retailer posts first quarterly profit in two years

    GameStop posted a quarterly profit for the first time in two years.
    The company slashed its inventory levels and costs from a year earlier.
    GameStop plans more cost cuts this year.

    GameStop on Tuesday posted a quarterly profit for the first time in two years, finishing out its fiscal year on a high note in the holiday quarter after grappling with sales declines, inventory woes and cash flow pressure.
    Shares of the company soared more than 45% during after-hours trading.

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    7 months ago

    For the quarter ended Jan. 28, net sales dropped slightly to $2.23 billion from $2.25 billion in last year’s fourth quarter. The video game retailer also posted a profit of $48.2 million, or 16 cents a share, compared to a loss of $147.5 million, or 49 cents, a year ago.
    GameStop did not provide financial guidance and has not done so since the early days of the pandemic. Its results can’t be compared with Wall Street estimates because too few analysts cover the company.
    The retailer had been working to steer itself back to profitability, and got there in part by cutting costs. Selling, general and administrative expenses came in at $453.4 million for the quarter, or 20.4% of sales, compared to $538.9 million, or 23.9% of sales, in the year-earlier period.

    A GameStop store operates in a strip mall on March 16, 2023 in Chicago, Illinois.
    Scott Olson | Getty Images

    CEO Matt Furlong said on an investor call the company is going into 2023 with further plans to cut excess costs including in European markets, where it has already exited and begun to pull out of some countries. He said that GameStop is also considering bolstering its business with higher margin categories such as toys.
    GameStop had previously been riding some short-term, meme-stock momentum, but that has since leveled out and the company has made progress in right-sizing its business by cleaning up its inventory levels and reworking its cost structure.

    The stock closed trading on Tuesday at around $18 per share, down dramatically from its 52-week high of nearly $50 about a year ago.
    GameStop’s turnaround plan was reinvigorated by a leadership shake-up in 2021 that put Furlong, an Amazon veteran, at the helm and added Ryan Cohen, Chewy founder and former Bed Bath & Beyond activist investor, as board chair. The company also laid off staff and replaced its chief financial officer.
    The retailer has been working to revamp its real estate portfolio and increase its online business as the video game industry heads in that direction.
    For the full fiscal year, GameStop saw $5.93 billion in sales, down slightly from $6.01 billion in fiscal 2021, and saw increased revenues from its collectibles category, which the retailer is banking will promote long-term growth.
    Like many retailers, GameStop experienced supply chain delays that left it with a backlog of inventory after it previously tried to meet high demand. The company is still hanging on to $682.9 million in inventory, which is down from $915 million a year ago, according to its fourth-quarter balance sheet.
    As part of its revival strategy, GameStop also has been trying to improve its cash balance. This quarter, its cash and cash equivalents were $1.39 billion.
    While managing the burdens of its brick-and-mortar presence, the company has also been working to find its digital identity. So far, those experiments have come with a few missteps.
    In September, it launched an ill-fated partnership with the now-bankrupt crypto exchange FTX. The companies had planned to collaborate on e-commerce marketing and GameStop was going to sell FTX gift cards in its stores. Two months later, GameStop tweeted that it would be “winding down” the partnership and refunding anyone who had purchased an FTX gift card in its stores.
    In addition, the company has been experimenting with an NFT marketplace since July. That launch came amid chatter of a “crypto winter” as cryptocurrencies experienced a widespread cooldown from their 2021 rallies. The marketplace saw an initial volume surge but has since leveled off and may not be the ticket to a stable digital presence the company had hoped it would be.
    Still, Furlong said on a call with investors that compared to 2021, when many “predicted we were heading for bankruptcy,” the company is better positioned.
    “GameStop is a much healthier business today than it was at the start of 2021,” he said.

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    Nike’s holiday quarter plagued by bloated inventory, weak China sales

    Nike beat Wall Street’s expectations for its fiscal third-quarter earnings and revenue.
    The retailer has been contending with a glut of inventory and soft sales in China as the region recovers from the Covid pandemic.
    Nike said it is taking a “cautious approach” to planning, given worries about the consumer and the economy.

    Nike easily beat Wall Street’s estimates for its holiday quarter earnings and revenue, although its bloated inventory continued to weigh on its margins and sales in China fell short of expectations.
    Nike, like other retailers, has been in the process of offloading a glut of inventory brought on by supply chain disruptions and shifting consumer demands that’s been weighing on its margins.

    Gross margin fell to 43.3% for the quarter, a decrease of 3.3 percentage points, due to higher markdowns and promotions the company used to liquidate its inventory.
    While Nike CEO John Donahoe told investors last quarter he believes the company is past its inventory peak, the company warned gross margins were expected to take a hit during the holiday quarter.
    Inventories were up 16% compared with the year ago period at $8.9 billion, which the company attributed to higher product input costs and elevated freight expenses. During an earnings call with investors Tuesday, executives said they’re “increasingly confident” Nike will exit the fiscal year with healthy inventory levels. They also expect to see “even leaner inventory” than they’d anticipated given sales momentum, the executives added.
    Here’s how the sneaker giant performed in its third fiscal quarter of 2023 compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:

    Earnings per share: 79 cents vs. 55 cents expected
    Revenue: $12.39 billion vs. $11.47 billion expected

    The company’s reported net income for the three-month period that ended Feb. 28 was $1.2 billion, or 79 cents per share, compared with $1.4 billion, or 87 cents per share, a year earlier.

    Sales rose to $12.39 billion from $10.87 billion a year earlier.

    The road to recovery in China

    Nike has been looking for a sales rebound in China, its third-biggest market by revenue, as the region recovers from the Covid pandemic. But those hopes have failed to materialize.
    Sales in the region fell 8% during the third quarter to $1.99 billion, despite the end of the country’s zero-Covid policy that had weighed on operations.
    Wall Street analysts had anticipated sales in the region of $2.09 billion, according to StreetAccount estimates.
    Sales in China have been soft as consumers contended with sweeping lockdowns and rising infections. While some activity has begun to pick up, consumers aren’t back to pre-pandemic shopping levels just yet, according to a Citi research note.
    When asked about its outlook on China’s recovery, Nike CEO John Donahoe said the company feels good about its momentum in the region and saw growth “really pick up” in the second month of the quarter after lockdowns ended.
    “The fundamentals of this market are good, right? It is a very large market that’s growing. Sport and wellness is a key trend and tailwind there. There’s a desire for innovation and style. And the key to winning in this market is simply put: having great innovation and connecting with Chinese consumers in a locally relevant way,” Donahoe said.
    Outside China, Nike saw double-digit sales increases in all of its other markets. Sales in North America were up 27% and in Europe, Middle East and Africa, revenue jumped 17% compared with the year-ago period. In Asia Pacific and Latin America, sales were up 10%.
    Citing its strong performance in the quarter, Nike now expects fiscal year revenue to grow by high single digits, compared to mid single digit guidance it gave in the prior quarter. It expects gross margins to decline by 2.5 percentage points, which is the low end of the previous guidance range given and reflects Nike’s ongoing efforts to liquidate excess inventory, along with other costs.
    In the next quarter, Nike expects flat to low single digit revenue growth. Finance chief Matthew Friend said the company is taking a “cautious approach” to planning, given uncertainty about consumer confidence and the economy.
    “We have managed through cycles like this before and we will be well prepared for the volatility that is in font of us,” he said. 

    DTC vs wholesale

    People wearing protective face masks walk past the closed Nike store on 5th Avenue, during the outbreak of the coronavirus disease (COVID-19), in New York City, May 11, 2020.
    Mike Segar | Reuters

    For the last several years, Nike has been working to build out its direct-to-consumer sales and has invested heavily in the channel by building out experiential stores, developing its loyalty program and growing its e-commerce sales.
    The investments into its DTC channel has come at a cost, but sales have continued to grow. Nike Direct sales were up 17% during the holiday quarter to $5.3 billion and Nike digital sales jumped 20%. Digital sales represented 27% of sales, up from 9% at the end of fiscal 2019.
    Selling and administrative expenses were up 15% to $4 billion, the bulk of which was related to wage-related expenses and Nike Direct costs. The company expects full year expenses to be up 10%.
    Nike has, over the last two quarters, relied on partnerships with wholesalers to offload inventory. Wholesale revenues were up 12% in the quarter, following 19% growth during the previous quarter.
    On Monday, Foot Locker CEO Mary Dillon touted a “renewed” and revitalized relationship with Nike, its biggest brand partner.
    However, the company said it reduced its inventory commitments for spring and summer so it can work through its excess inventories. It expects wholesale revenue to “moderate” for the next few quarters.

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    America’s banks are missing hundreds of billions of dollars

    It is easy to understand how money gets destroyed in a traditional bank run. Picture the men in top hats yelling at clerks in “Mary Poppins”. The crowds want their cash and bank tellers are trying to provide it. But when customers flee, staff cannot satisfy all comers before the institution topples. The remaining debts (which, for banks, include deposits) are wiped out.This is not what happens in the digital age. The depositors fleeing Silicon Valley Bank (svb) did not ask for notes and coins. They wanted their balances wired elsewhere. Nor were deposits written off when the bank went under. Instead, regulators promised to make svb’s clients whole. Although the failure of the institution was bad news for shareholders, it should not have reduced the aggregate amount of deposits in the banking system.The odd thing is that deposits in American banks are nevertheless falling. Over the past year those in commercial banks have sunk by half a trillion dollars, a fall of nearly 3%. This makes the financial system more fragile, since banks must shrink to repay their deposits. Where is the money going?The answer begins with money-market funds, low-risk investment vehicles that park money in short-term government and corporate debt. Such funds, which yield only slightly more than a bank account, saw inflows of $121bn last week as svb failed. According to the Investment Company Institute, an industry outfit, in March they had $5.3trn of assets, up from $5.1trn a year before.But money does not actually flow into these funds, for they are unable to take deposits. Instead, cash leaving a bank for a money-market fund is credited to the fund’s bank account, from which it is used to purchase the commercial paper or short-term debt in which the fund wants to invest. When the fund uses the cash in this way, it then flows into the bank account of whichever institution sells the asset. Inflows to money-market funds should thus shuffle deposits around the banking system, not force them out.And that is what used to happen. Yet there is one new way in which money-market funds may suck deposits from the banking system: the Federal Reserve’s reverse-repo facility, which was introduced in 2013. The scheme was a seemingly innocuous change to the financial system’s plumbing that may, just under a decade later, be having a profoundly destabilising impact on banks. In a usual repo transaction a bank borrows from competitors or the central bank and deposits collateral in exchange. A reverse repo does the opposite. A shadow bank, such as a money-market fund, instructs its custodian bank to deposit reserves at the Fed in return for securities. The scheme was meant to aid the Fed’s exit from ultra-low rates by putting a floor on the cost of borrowing in the interbank market. After all, why would a bank or shadow bank ever lend to its peers at a lower rate than is available from the Fed? But use of the facility has jumped in recent years, owing to vast quantitative easing (qe) during covid-19 and regulatory tweaks which left banks laden with cash. qe creates deposits: when the Fed buys a bond from an investment fund, a bank must intermediate the transaction. The fund’s bank account swells; so does the bank’s reserve account at the Fed. From the start of qe in 2020 to its end two years later, deposits in commercial banks rose by $4.5trn, roughly equal to the growth in the Fed’s own balance-sheet. For a while the banks could cope with the inflows because the Fed eased a rule known as the “Supplementary Leverage Ratio” (slr) at the start of covid. This stopped the growth in commercial banks’ balance-sheets from forcing them to raise more capital, allowing them to safely use the inflow of deposits to increase holdings of Treasury bonds and cash. Banks duly did so, buying $1.5trn of Treasury and agency bonds. Then in March 2021 the Fed let the exemption from the slr lapse. Banks found themselves swimming in unwanted cash. They shrank by cutting their borrowing from money-market funds, which instead parked cash at the Fed. By 2022 the funds had $1.7trn deposited overnight in the Fed’s reverse-repo facility, compared with a few billion a year earlier. After svb’s fall, America’s smaller banks fear deposit losses. Monetary tightening has made them even more likely. Use of money-market funds rises along with rates, as Gara Afonso and colleagues at the Federal Reserve Bank of New York find, since returns adjust faster than bank deposits. Indeed, the Fed has raised the rate on overnight-reverse-repo transactions from 0.05% in February 2022 to 4.55%, making it far more alluring than the going rate on bank deposits of 0.4%. The amount money-market funds parked at the Fed in the reverse-repo facility—and thus outside the banks—jumped by half a trillion dollars in the same period. A licence to print moneyFor those lacking a banking licence, leaving money at the repo facility is a better bet than leaving it in a bank. Not only is the yield higher, but there is no reason to worry about the Fed going bust. Money-market funds could in effect become “narrow banks”: institutions that back consumer deposits with central-bank reserves, rather than higher-return but riskier assets. A narrow bank cannot make loans to firms or write mortgages. Nor can it go bust. The Fed has long been sceptical of such institutions, fretting that they would undermine banks. In 2019 officials denied tnb usa, a startup aiming to create a narrow bank, a licence. A similar concern has been raised about opening the Fed’s balance-sheet to money-market funds. When the reverse-repo facility was set up, Bill Dudley, president of the New York Fed at the time, worried it could lead to the “disintermediation of the financial system”. During a financial crisis it could exacerbate instability with funds running out of riskier assets and onto the Fed’s balance-sheet. There is no sign yet of a dramatic rush. For now, the banking system is dealing with a slow bleed. But deposits are growing scarcer as the system is squeezed—and America’s small and mid-sized banks could pay the price. ■ More

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    Rapper Bad Bunny sued for $40 million over ex-girlfriend’s voice recording

    Puerto Rican rapper Bad Bunny is being sued by his ex-girlfriend for at least $40 million over claims he used a recording of her voice without permission or compensation.
    The voice recording can be heard on two of Bad Bunny’s hit songs: “Pa Ti” and “Dos Mil 16.”
    Bad Bunny was the most-streamed artist on Spotify for the past three years and is set to headline the 2023 Coachella music festival next month.

    Bad Bunny performs during the 65th Annual Grammy Awards in Los Angeles, California, February 5, 2023.
    Mario Anzuoni | Reuters

    Puerto Rican rapper Bad Bunny is being sued by his ex-girlfriend for $40 million over claims he used a recording of her voice without permission or compensation.
    Carliz De La Cruz Hernández claims that in 2015, prior to her split with Bad Bunny — whose real name is Benito Antonio Martinez Ocasio — and before his rise to international fame, she recorded the phrase “Bad Bunny baby” on her phone.

    That voice recording, she says, has been used on two of the Grammy-award winning artist’s songs, his 2017 single “Pa Ti” and the 2022 song “Dos Mil 16.” Both tracks have more than 200 million plays each on Spotify and the latter appears on the chart-topping album “Un Verano Sin Ti.”
    According to court documents filed in Puerto Rico earlier this month, De La Cruz said she came up with the phrase and her “distinguishable voice” is being used without her permission. Her lawyers argue Bad Bunny’s use violates Puerto Rico’s “law of the right to own image.”
    “Thousands of people have commented directly on Carliz’s social media networks, as well as every time she goes to a public place, about ‘Bad Bunny baby,'” the lawsuit states. “This has caused, and currently causes, De La Cruz to feel worried, anguished, intimidated, overwhelmed and anxious.” 
    De la Cruz and Bad Bunny dated on and off starting in 2011, according to the lawsuit. She alleges in the court documents that Bad Bunny offered her $2,000 to buy the recording in 2022 but she declined. A deal was never reached and he then went ahead and used the recording without her express permission, according to the lawsuit.
    De la Cruz is now seeking at least $40 million.

    Bad Bunny, 29, has not publicly addressed the lawsuit. His label, Rimas Entertainment, and his manager, Noah Kamil Assad Byrne, are also named in the suit. CNBC reached out to Rimas Entertainment for comment.
    Bad Bunny rose to prominence in 2018 after being featured on the Cardi B chart-topper “I Like It.” He’s since become one of the most prolific hit makers in Latin music and was the most-streamed artist on Spotify for the past three years.
    Bad Bunny is set to headline the 2023 Coachella music festival next month.

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    A lot of money is on the line for women’s pro soccer in the U.S.

    The National Women’s Soccer League kicks off its season Saturday.
    The league is expected to sign a new media deal this season.
    The league has grown a great deal as it looks to change the narrative of professional women’s soccer.

    OL Reign forward Sofia Huerta (11) and Portland Thorns FC forward Sophia Smith (9) battle for the ball during a NWSL match between the Portland Thorns and the OL Reign on March 18, 2022 at Lumen Field in Seattle, WA.
    Jeff Halstead | Icon Sportswire | Getty Images

    The National Women’s Soccer League’s eleventh season kicks off Saturday, and investors will be paying close attention to the league to see whether it can capitalize on all of the changes that Commissioner Jessica Berman made during her first year on the job.
    Last year was transformative for women’s professional soccer, as Berman took the helm of an organization that had been plagued with problems ranging from accusations of emotional and sexual abuse and sexism, and an overall lack of confidence in the league.

    The NWSL hired Berman, who was a labor lawyer at Proskauer Rose for 13 years, in March 2022, from her role as deputy commissioner of the Premier Lacrosse League. Her biggest priorities? Restore faith in women’s soccer and grow the business.
    Since then, the commissioner has made changes to not only drastically transform the culture of the league but also supersize the business through its infrastructure, staffing and rules. Sports Business Journal named her the “Best Hire of the Year” for 2022. 
    It’s all led to a pivotal moment for the league, as it looks to add more teams and its media deal is up for grabs. Then, this summer, the FIFA Women’s World Cup will put the league’s talent on display – about 25% to 30% of NWSL’s players will travel to Australia and New Zealand for the tournament.
    At the moment, the league has momentum. Berman told reporters Tuesday that business is strong and ticket sales are rising.
    “Attendance and ticket sales are really the rocket fuel that will grow this league,” she said. “We’re up 20% in season ticket holders on a league-wide basis.”

    Building on a strong year

    More than 1 million fans attended matches last year, the league said, as nearly every market grew following the pandemic. Attendance was up about 80% in 2022, while ticketing revenue grew more than 125%, according to NWSL.
    Sponsorship revenue also surged 87% last year, Berman said. The league averaged 37 sponsorship deals per team, which is more than any other women’s sport, according to sports data and intelligence platform Sponsor United. The league also plans to expand to 14 teams from 12 beginning next year.
    The NWSL just signed a deal to bring soccer back to Utah with a new ownership group in a deal reportedly worth between $2 million and $5 million, a major bargain that had been part of a deal negotiated in 2020, before team valuations started to soar.
    The league is also in advanced discussions to further expand in San Francisco for 2024, followed by Boston, which is launching “later,” both with a whopping $50 million franchise tag, according to The Wall Street Journal.
    Women’s pro soccer valuations are also soaring. It used to take a few million dollars to get in on the league. Today, Angel City FC, based in Los Angeles, is valued at $100 million, according to Sportico.

    NWSL commissioner Jessica Berman speaks during the 2023 NWSL Draft at the Pennsylvania Convention Center on January 12, 2023 in Philadelphia, Pennsylvania. (Photo by Tim Nwachukwu/Getty Images)
    Tim Nwachukwu | Getty Images Sport | Getty Images

    Athletes, celebrities and investors all want a piece of the action. Big name investors include everyone from Eli Manning, Kevin Durant, Sue Bird, Natalie Portman and Jennifer Garner.
    “I think, if anything that we’ve learned in the last 11 months, which is that the market will tell us our value so long as we give it the appropriate opportunity to produce that value. And everything that I’ve seen, has validated that,” Berman said.
    The league is busy looking for new ownership groups in Chicago and Portland after a yearlong investigation. Portland Thorns owner Merritt Paulson and Chicago Red Stars owner Arnim Whisler both announced in December, they would be selling their teams.
    Berman said the vetting stages for new ownership groups in Chicago and Portland are in “advanced stages,” and they aren’t going to set an “artificial deadline.” She said it’s about putting the right person in place who is not just well resourced but also willing to invest in the club to provide a professional environment.
    “The old ways of doing business are probably no longer applicable,” Berman said. “We’re not going to close deals in 30 to 60 days. We’re dealing with really sophisticated people who appropriately have questions,” she added.
    Berman says they are not looking for the quick win when it comes to ownership, rather finding the right partner.
    “We’re looking to go from a mentality of surviving to thriving,” she said. “I think all of that requires a changes in mentality, culture and expectations.”
    As part of that transformation, Berman and the league are investing heavily.
    The league recently moved its headquarters to Madison Avenue in New York from Chicago. It is also beefing up staff, doubling the number of people in the league office in order to support all the new initiatives they are working on. Berman said multiple teams have doubled or tripled their investment into staffing as well.
    “These little things actually matter in terms of having people feel professional and valued,” she said.
    In January, ahead of the NWSL draft, Berman outlined major updates to the salary cap. Each team will see a 25% increase from $1.1 million per year in 2022 to $1.375 million in 2023.

    Media deal up for grabs

    Viewership for NWSL matches also rose 30% last year on Paramount +.
    Last year’s championship, which aired in primetime thanks to sponsor Ally Financial upping its financial commitment, was the most-watched game in league history, with a 71% increase in viewership. Paramount+ said it was the most streamed NWSL matched ever, even though it was up against Game 1 of the World Series and a college football game between rivals Michigan and Michigan State.
    These metrics should come in handy as the league’s three-year, $4.5 million deal with Paramount Global, which also owns CBS, is set to expire at the end of the new season.
    Berman said she’s had robust conversations about the rights, and said there are several interested parties.
    “We think that there are some really interesting opportunities here and overseas to consider as we think about growing our brand globally and really claiming our space as the best league in the world,” she said.
    The league also announced a recent partnership with EA Sports to feature NWSL players and clubs in EA Sports FIFA game for the first time ahead of a new season.

    Culture change

    OL Reign forward Megan Rapinoe (15) scores on a penalty kick during the second half of the National Womens Soccer League game between NJ/NY Gotham FC and OL Reign on September 21, 2022 at Red Bull Arena in Harrison, New Jersey.
    Rich Graessle | Icon Sportswire | Getty Images

    The NWSL’s culture is under the microscope, as well.
    The league is implementing major reforms – from new mandatory training sessions, the addition of anonymous hotlines, player surveys, safety officers, mental health benefits and more.
    The league was involved in a yearlong investigation after two former players came forward and accused longtime coach Paul Riley of sexual harassment. Sally Yates, a former top Justice Department official, conducted her own investigation, as well. The reports confirmed the allegations of systemic abuse, sexual misconduct and found “widespread misconduct” in more than half of the league’s teams.
    Berman took swift action following the findings, making changes in personnel, putting new infrastructure in place to prevent future problems and issuing massive fines to the offending teams. The NWSL permanently banned Riley and three other coaches who were accused of misconduct. Riley has denied the accusations.
    “The teams are really welcoming of the increased focus and support in this area knowing that it is really sort of table stakes as we think about the growth of the league,” Berman said.
    Berman spent much of her first year as commissioner on a “listening tour,” meeting with players, coaches and executives to hear “first-hand experiences” and what needs to change.
    Today, Berman hopes the new changes and protections will position the league for success.
    Berman said she’s heard from players that they are tired from the burdens of having to carry some of weight of culture challenges and reforms.
    “I think it’s their hope that we the league and through ownership and management can really take on the burden and work behind the scenes to offer the playing environment that meets the standard that I’ve committed to, which is a place that makes the players proud to play,” Berman said.

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    Biden used first veto to save a 401(k) investment rule. Here’s what it does

    President Joe Biden on Monday used his first veto to preserve a recent U.S. Department of Labor rule about ESG funds in 401(k) plans.
    The Biden regulation unwound one issued by President Donald Trump’s administration, which effectively barred employers from considering “environmental, social and governance” funds.
    Experts are unsure whether the Biden veto will lead to more ESG uptake by employers.

    Photographer: Samuel Corum/Bloomberg via Getty Images

    Biden veto preserves Labor Department’s ESG rule

    Biden’s veto on Monday preserves his administration’s stance.

    It doesn’t appear there are enough congressional votes to override the veto. Doing so would require a two-thirds vote in both the House and Senate.
    ESG investing has grown more popular in recent years, occurring against the backdrop of growing political backlash, largely from Republican lawmakers who deride it as “woke” investing.
    Investors poured about $69 billion into the funds in 2021, an annual record and about triple the amount in 2019, according to Morningstar. However, inflows fell significantly in 2022 — to $3.1 billion — in a year when stocks and bonds got pummeled and the broad U.S. fund universe saw the largest investor exodus on record, Morningstar reported.

    Few 401(k) plans — about 5% — offer an ESG fund, according to PSCA survey data. Employers cited lack of regulatory clarity as one of the top reasons they haven’t offered one to workers.
    The Trump-era Labor Department rule doesn’t explicitly call out or forbid ESG funds in 401(k) plans. But experts say the rule stymied uptake due to a general requirement that employers only use “pecuniary factors” when choosing 401(k) funds for workers.
    Those factors restrict fund analysis to purely financial measures, such as fund fees, return and risk, experts said. Environmental, social and governance factors are generally “nonpecuniary,” however.
    “The Trump rule made it so harsh, so difficult, that it put a cold blanket over E, S and G factors,” said Philip Chao, founder and chief investment officer of Experiential Wealth, based in Cabin John, Maryland. “Whereas this one doesn’t really talk about ESG factors being right or wrong.
    “It returns power back to the fiduciary,” he added.

    The [Biden] rule doesn’t force you to consider ESG. It says ‘you may’ do that.

    Philip Chao
    chief investment officer of Experiential Wealth

    Employers serve as a fiduciary to their company 401(k) plans under the Employee Retirement Income Security Act of 1974.
    Broadly, that fiduciary duty means they must operate the plan — including investment choice — solely in workers’ best interests. Under the Biden rule, employers must still consider ESG factors within the context of what is in investors’ best interests.
    The Labor Department in November clarified that employers wouldn’t breach their legal duties by considering workers’ nonfinancial preferences in their final fund choice. Accommodating those preferences might encourage more plan participation and boost retirement security, for example, the agency said.
    “The [Biden] rule doesn’t force you to consider ESG,” Chao said. “It says ‘you may’ do that.”

    The veto may not change behavior much

    The Republican-controlled House of Representatives voted to kill the rule on Feb. 28. It did so using the Congressional Review Act, a mechanism that gives lawmakers a chance to overturn any regulations issued near the end of a congressional session.
    The Biden administration issued the final text of its investment rule in November, shortly before Republicans assumed control of the House.
    The Senate voted to undo the Biden-era rule on March 1. Two Democrats — Jon Tester of Montana and Joe Manchin of West Virginia — joined the Republican opposition.

    While the Biden administration’s rule is poised to remain intact, it’s unclear whether it will give employers peace of mind.
    The issue has been a political whiplash, subject to whims of new presidential administrations, and employers remain afraid of getting sued for their investment choices against the backdrop of regulatory uncertainty, Hansen said.
    “If anything, the CRA vote, the veto, made things more uncertain as to what they can do or should do,” Hansen said.

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    Satellite maker Terran Orbital sees annual revenue climb near $100 million

    Terran Orbital reported fourth-quarter results on Tuesday, posting annual revenue that more than doubled while the company continued to build its order backlog.
    The Irvine, California-based company reported that revenue grew to $31.9 million in the fourth quarter, up from $27.8 million in the third quarter.
    Terran Orbital delivered 19 satellites during the fourth quarter, including 10 under a contract through the Pentagon’s Space Development Agency.

    Terran Orbital

    Terran Orbital, a specialist in manufacturing small satellites, reported fourth-quarter results on Tuesday, with annual revenue nearing $100 million as it continued to build its order backlog.
    For the full year of 2022, Terran Orbital brought in $94.2 million in revenue – more than double its 2021 total.

    The Irvine, California-based company reported that revenue grew to $31.9 million in the fourth quarter, up from $27.8 million in the third quarter. Terran Orbital’s adjusted EBITDA loss doubled, however, both on a quarter-over-quarter and year-over-year basis, to $26.1 million, which the company attributed to an increase in expenses such as payroll, sales and marketing.
    Shares of Terran Orbital slipped about 8% Tuesday from the stock’s previous close at $1.73.

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    While Terran Orbital’s order backlog fell on a quarter-over-quarter basis, to $170.8 million in Q4 from $198 million in Q3, that number does not include its $2.4 billion deal with Rivada, announced in February. Terran Orbital’s year-end backlog was for about 60 satellites, with the Rivada contract adding around 300 to that total.
    Terran Orbital delivered 19 satellites during the fourth quarter, including 10 under a contract through the Pentagon’s Space Development Agency. The company is expanding its manufacturing facilities to be able to make up to 250 satellites a year.

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