Raphael Stevens

Apollo and Sony have sent a letter to the Paramount board expressing formal interest in doing a $26 billion takeover of the company.
A Skydance consortium could hear from a Paramount special committee on a recommendation of next steps as soon as Thursday, according to people familiar with the matter.
Some Paramount investors have clamored for the board to engage with Apollo and Sony rather than take the Skydance deal, because all common shareholders would get a premium for their shares.

Shari Redstone, non-executive chairwoman of Paramount Global, attends the Allen & Co. Media and Technology Conference in Sun Valley, Idaho, July 11, 2023.
David A. Grogan | CNBC

Sony Pictures and private equity firm Apollo Global Management have sent a letter to the Paramount Global board expressing interest in acquiring the company for about $26 billion, according to people familiar with the matter.
The expression of formal interest comes as David Ellison’s Skydance Media, backed by private equity firms RedBird Capital and KKR, awaits word from Paramount’s special committee on whether the panel will recommend its bid to acquire the company to controlling shareholder Shari Redstone.

Skydance Media hasn’t heard anything from the special committee yet, though it expects to find out the special committee’s recommendations on next moves as early as Thursday, according to people familiar with the matter. Paramount’s panel could recommend approving Skydance’s offer or rejecting it, or it could come back to the Skydance consortium with alternatives or changes.
Spokespeople for Paramount, Redstone’s National Amusements, the special committee and Skydance declined to comment. Sony and Apollo did not immediately respond to requests for comment.

Paramount’s options

If the special committee wants to continue negotiating with Skydance, or Redstone wants more time to consider her options while still talking to Ellison’s company, the sides could extend an exclusivity window that ends Friday. It’s also possible Skydance could walk away from the deal, which it has been negotiating on for months.
If Skydance walks away, Redstone could turn her attention to negotiating a deal with Sony and Apollo, which would give all common shareholders a premium payout on their shares.
Paramount Global shares jumped more than 12% on the news that Sony and Apollo submitted a letter formalizing its interest, earlier reported by The New York Times and The Wall Street Journal.

Redstone initially rejected an offer by Apollo in favor of exclusive talks with Skydance. Redstone still prefers a deal that would keep Paramount together, as Skydance’s offer would, a person familiar with the matter said. A private equity firm would likely tear the company apart through a series of divestitures to extract value.
The Sony-Apollo offer would make the former the majority shareholder and the latter a minority holder, according to a person familiar with the letter. That could also assuage Redstone’s fears that a new buyer could break apart the company, because Sony is another large Hollywood player and the owner of Sony Pictures.
A $26 billion offer for Paramount Global values the company higher than the company’s current $22 billion enterprise value.
Still, the special committee would likely want to review details on financing and get assurances that there are no regulatory challenges in merging with Sony, a non-U.S. entity. To do this, the special committee would have to inform the Skydance consortium that it wants to end its exclusive talks, which would likely drive Skydance away as a bidder, according to people familiar with the matter.
That move would be applauded by a number of Class B shareholders, including Gamco, Matrix Asset Advisors and Aspen Sky Trust, who have all publicly expressed dismay about the Skydance transaction. Skydance’s “best and final” offer included merging its entertainment assets with Paramount, raising $3 billion to buy out common shareholders at about a 30% premium on an unaffected $11 per share price, and paying Redstone nearly $2 billion for her controlling stake.
Redstone could also argue she’s more comfortable with pushing forward at Paramount Global without a sale. Earlier this week, the board removed Bob Bakish as the company’s CEO. Installing a new CEO and giving investors a new plan forward would be essential to assuage a restless common shareholder base, who would likely argue the Apollo-Sony bid, if real, is in the best interest of shareholders.

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Wayfair’s sales fell in the first quarter, but the furniture retailer narrowed its losses by more than $100 million after cutting 13% of its staff.
The home goods company beat Wall Street’s expectations on the top and bottom lines and also saw active customers grow nearly 3% compared with the year-ago period. 
Like some of its other digitally native peers, Wayfair has implemented a series of layoffs after it saw sales boom during the pandemic and then shrink. 

The Wayfair app on a smartphone arranged in Hastings-on-Hudson, New York.
Tiffany Hagler-Geard | Bloomberg | Getty Images

Wayfair’s sales slid during its first quarter, but the online furniture retailer reduced its losses after cutting 13% of its workforce at the start of the year, the company announced Thursday. 
Wayfair beat Wall Street’s expectations on the top and bottom lines and saw active customers grow nearly 3% compared with the year-ago period. 

Here’s how Wayfair did compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

Loss per share: 32 cents adjusted vs. a loss of 44 cents expected
Revenue: $2.73 billion vs. $2.64 billion expected

Wayfair shares surged more than 17% in premarket trading Thursday.
The company’s reported net loss for the three-month period that ended March 31 was $248 million, or $2.06 per share, compared with a loss of $355 million, or $3.22 per share, a year earlier. Excluding one-time items, the company lost 32 cents per share.  
Sales fell to $2.73 billion, down more than 1% from $2.77 billion a year earlier. The steepest drop-off came from Wayfair’s international segment, where sales declined nearly 6% to $338 million compared with the year-ago period.
Despite the sales drop, co-founder and CEO Niraj Shah struck a positive note in a news release, saying the quarter “ended on an upswing.” 

“Shoppers are increasingly choosing Wayfair, with year-over-year active customer growth once again positive and accelerating compared to last quarter,” Shah said. 
“For the first time since pre-pandemic, we’re seeing suppliers introducing large groups of new products into their catalogs as they look to build momentum for the next stage of growth,” he added.
Like some of its other digitally native peers, Wayfair implemented a series of layoffs after it saw sales boom during the pandemic and then shrink when consumers started trading new couches and shelves for dinners out and travel after the Covid-19 pandemic ended. 
In January, it announced plans to cut 13% of its global workforce, or around 1,650 employees, so it could trim its structure and reduce costs after it went “overboard” with corporate hiring during the pandemic, the company said previously. The restructuring – the third Wayfair implemented since summer 2022 – was expected to save the company about $280 million, it said previously. 
Wayfair is still charting its path to profitability, but it reduced its losses by $107 million during the first quarter after implementing the latest round of job cuts. It also grew its active customer count at a time when the home goods sector faces pressure as high interest rates and a sluggish housing market weigh on sales. 
During the quarter, Wayfair’s active customers grew 2.8% to 22.3 million, slightly ahead of the 22.1 million that analysts had expected, according to StreetAccount.
On average, orders were valued at $285 during the quarter, compared with the $275.07 that analysts had expected, according to StreetAccount. While average orders were higher than Wall Street’s expectations, they fell slightly from the year-ago period, when the average order value was $287. That’s because of changes in Wayfair’s unit prices, which were inflated in 2021 and 2022 and started to come down last year, the company said.
Read the full earnings release here.

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Moderna posted a narrower-than-expected loss for the first quarter as the company’s cost-cutting efforts took hold and sales of its Covid vaccine topped estimates. 
The results come as Moderna inches closer to having another product on the market, which it badly needs as demand for its Covid shots plunges worldwide.
The company reiterated its full-year 2024 sales guidance of roughly $4 billion, which includes revenue from the expected launch of its RSV vaccine.

Nikos Pekiaridis | Nurphoto | Getty Images

Moderna on Thursday posted a narrower-than-expected loss for the first quarter as the company’s cost-cutting efforts took hold and sales of its Covid vaccine, its only commercially available product, topped estimates. 
The results come as Moderna inches closer to putting another product on the market, which it badly needs as demand for Covid shots plunges worldwide. The biotech company expects U.S. approval for its vaccine against respiratory syncytial virus on May 12. If cleared, that shot is expected to launch in the third quarter.

Here’s what Moderna reported for the first quarter compared with what Wall Street was expecting, based on a survey of analysts by LSEG:

Loss per share: $3.07 vs. loss of $3.58 expected
Revenue: $167 million vs. $97.5 million expected

“On the [operating expenses] side of a company, we’ve made great progress,” Moderna CEO Stéphane Bancel said of the cost cuts Thursday on CNBC’s “Squawk Box.” He added that the biotech company’s team “has done a great job resizing the company.”
Moderna booked first-quarter sales of $167 million, with revenue from its Covid shot dropping roughly 90% from the same period a year ago. The company reported $1.86 billion in revenue in the prior-year period.
Around $100 million came from the U.S., while $67 million came from international markets, primarily in Latin America, Moderna CFO Jamey Mock told CNBC in an interview. 
The company said the revenue decline came in part from an expected transition to a seasonal Covid vaccine market, where patients typically take their shots in the fall and winter.

Moderna posted a net loss of $1.18 billion, or $3.07 per share, for the first quarter. That compares with net income of $79 million, or 19 cents per share, reported for the year-ago period.
The company reiterated its full-year 2024 sales guidance of roughly $4 billion, which includes revenue from its RSV vaccine. Notably, Moderna expects only $300 million of those sales to come in during the first half of the year since the season for respiratory viruses is typically in the latter half of the year. 
Moderna has said it expects to return to sales growth in 2025 and to break even by 2026, with the launch of new products. 
For the first quarter, Mock said the company is “more encouraged by what we’re seeing from a productivity perspective” than the higher sales of its Covid vaccine. 
Cost of sales was $96 million for the first quarter, down 88% from the same period a year ago. That includes $30 million in write-downs of unused doses of the Covid vaccine and $27 million in charges related to the company’s efforts to scale back its manufacturing footprint, among other costs. 
Research and development expenses for the first quarter decreased by 6% to $1.1 billion compared with the same period in 2023. That decline was primarily due to fewer payments to partners in 2024 and lower clinical development and manufacturing expenses, including decreased spending on clinical trials for the company’s Covid, RSV and seasonal flu shots. 
Meanwhile, selling, general and administrative expenses for the period fell by 10% to $274 million compared with the first quarter of 2023. SG&A expenses usually include the costs of promoting, selling and delivering a company’s products and services.
The company said the reduction is in part due to its investments in “digital commercial capabilities” and increased focus on using AI technologies to streamline operations.

More CNBC health coverage

Last month, Moderna announced a partnership with artificial intelligence heavyweight OpenAI that aims to automate nearly every business process at the biotechnology company. 
Mock told CNBC that Moderna has been working with OpenAI for the past year. He added that 60% to 70% of the company currently uses an AI chatbot to do work. 
Moderna has so far managed to shore up investor sentiment about its path forward after Covid. Its shares are up more than 10% this year on increasing confidence around its pipeline and messenger RNA platform, which is the technology used in its Covid shot. 
The biotech company currently has 45 products in development, several of which are in late-stage trials. They include its combination shot targeting Covid and the flu, which could win approval as early as 2025.
Moderna is also developing a stand-alone flu shot, a personalized cancer vaccine with Merck and shots for latent viruses, among other products.
Correction: Moderna’s cost of sales was $96 million for the first quarter. An earlier version misstated the time period.

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Shares of Carvana popped more than 30% during after-hours trading Wednesday after the automaker reported record results and turned a profit during the first quarter.
The company’s gross profit per unit, or GPU, which is closely watched by investors, was $6,432. Carvana’s adjusted EBITDA profit margin for the quarter was 7.7%.
The results follow a major restructuring over the past two years to focus on profitability rather than growth after bankruptcy concerns in 2022.

Vehicles are seen on display at a Carvana dealership in Austin, Texas, on Feb. 20, 2023.
Brandon Bell | Getty Images

Shares of Carvana popped more than 30% during after-hours trading Wednesday after the automaker reported record results and turned a profit during the first quarter.
Here is how the company performed in the first quarter, compared with average estimates compiled by LSEG:

Earnings per share: 23 cents — it was not immediately clear if it was comparable to the loss of 74 cents expected
Revenue: $3.06 billion vs. $2.67 billion expected

Carvana reported record first-quarter net income of $49 million, compared to a $286 million loss during the prior-year period. It also posted an all-time-best adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, of $235 million, up from a $24 million loss a year earlier.
The company’s gross profit per unit, or GPU, which is closely watched by investors, was $6,432. Carvana’s adjusted EBITDA profit margin for the quarter was 7.7%.
Carvana’s net income included a roughly $75 million gain in the fair value of Carvana’s warrants to acquire Root Inc. common stock. This did not impact its GPU or adjusted EBITDA.
“In the first quarter, we delivered our best results in company history, validating our long-held belief that Carvana’s online retail model can drive industry-leading profitability while delivering industry-leading customer experiences,” Carvana CEO and Chairman Ernie Garcia III said in a release.
Garcia said the company’s performance was driven by efficiency gains in its operations, especially the reconditioning of vehicles for sale as well as selling, general, and administrative expenses, among other areas.

Carvana expects to continue to grow its adjusted EBITDA profit margin further as the company continues to grow, according to Garcia. He declined to disclose how much high the company believes it can grow those results.

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Carvana’s stock in 2024

“I really do think in terms of just a single quarter carrying meaning about what the future holds for us. If we execute properly, I think this is probably our biggest quarter and it feels awesome,” Garcia told CNBC during a phone interview Wednesday night.
The company anticipates further cost reductions or efficiency gains to increase profitability through areas such as advertising as well as overhead and operational expenses.
Garcia said Carvana also is working on increasing vehicle reconditioning and profitably rebuilding its vehicle inventory, which was nearing an all-time monthly low of 13 days’ supply in March. It has increased its reconditioning capacity of vehicles to prepare for sale by roughly 60% during the past year.
“Acquiring inventories, generally speaking, feel relatively straightforward to scale, but growing the recondition capacity is difficult,” he told CNBC. “Inventory today is certainly tighter than we would like for it to be. We’re working hard to build it back up, but we’re extremely well positioned to do it.”
The results follow a major restructuring by the company over the past two years to focus on profitability rather than growth, after bankruptcy concerns when Carvana’s stock lost nearly all of its value in 2022.
Shares of the company have recovered since then. They had climbed roughly 67% year to date before the company reported its first-quarter results. The stock closed Wednesday up about 5% at $87.09 per share.
A joint letter to shareholders from Garcia and finance chief Mark Jenkins said the company has prioritized growth, but doing so profitability.
“We are now focused on our long-term phase of driving profitable growth and pursuing our goal of becoming the largest and most profitable auto retailer and buying and selling millions of cars,” read the shareholder letter.
For the second quarter, the company said it expects a sequential increase in its year-over-year growth rate in retail units, and a sequential increase in adjusted earnings before interest, taxes, depreciation and amortization.

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Starbucks, Pizza Hut and KFC are among the chains that reported same-store sales declines this quarter.
McDonald’s said it’s adopting a “street-fighting mentality” to creating value to win over customers.
Outliers like Wingstop and Chipotle Mexican Grill show that customers will still order their favorite foods, even if they’re more expensive than they were a year ago.

A Starbucks logo is seen as members and supporters of Starbucks Workers United protest outside of a Starbucks store in Dupont Circle, Washington, D.C., on Nov. 16, 2023.
Kevin Dietsch | Getty Images

It’s finally here: the long-predicted consumer pullback.
Starbucks announced a surprise drop in same-store sales for its latest quarter, sending its shares down 17% on Wednesday. Pizza Hut and KFC also reported shrinking same-store sales. And even stalwart McDonald’s said it has adopted a “street-fighting mentality” to compete for value-minded diners.

For months, economists have been predicting that consumers would cut back on their spending in response to higher prices and interest rates. But it’s taken a while for fast-food chains to see their sales actually shrink, despite several quarters of warnings to investors that low-income consumers were weakening and other diners were trading down from pricier options.
Many restaurant companies also offered other reasons for their weak results this quarter. Starbucks said bad weather dragged its same-store sales lower. Yum Brands, the parent company of Pizza Hut, KFC and Taco Bell, blamed January’s snowstorms and tough comparisons to a strong first quarter last year for its brands’ poor performance.
But those excuses don’t fully explain the weak quarterly results. Instead, it looks like the competition for a smaller pool of customers has grown fiercer as the diners still looking to buy a burger or cold brew become pickier with their cash.
The cost of eating out at quick-service restaurants has climbed faster than that of eating at home. Prices for limited-service restaurants rose 5% in March compared with the year-ago period, while prices for groceries have been increasing more slowly, according to the Bureau of Labor Statistics.
“Clearly everybody’s fighting for fewer consumers or consumers that are certainly visiting less frequently, and we’ve got to make sure we’ve got that street-fighting mentality to win, irregardless of the context around us,” McDonald’s CFO Ian Borden said on the company’s conference call on Tuesday.

Outliers show that customers will still order their favorite foods, even if they’re more expensive than they were a year ago. Wingstop, Wall Street’s favorite restaurant chain, reported its U.S. same-store sales soared 21.6% in the first quarter. Chipotle Mexican Grill, whose customer base is predominantly higher income, saw traffic rise 5.4% in its first quarter. And Restaurant Brands International’s Popeyes reported same-store sales growth of 5.7%.
“What we’ve seen with the consumer is, if they are feeling pressure, they have a tendency to pull back on more high-frequency [quick-service restaurant] occasions,” Wingstop CEO Michael Skipworth told CNBC.
He added that the average Wingstop customer visits just once a month, using the chain’s chicken sandwich and wings as an opportunity to treat themselves rather than a routine that can easily be cut due to budget concerns. Skipworth also said that Wingstop’s low-income consumers are actually returning more frequently these days.
Even so, many companies in the restaurant sector and beyond it have warned consumer pressures could persist. McDonald’s CEO Chris Kempczinski told analysts the spending caution extends worldwide.
“It’s worth noting that in [the first quarter], industry traffic was flat-to-declining in the U.S., Australia, Canada, Germany, Japan and the U.K.,” he said.
Two of the chains that struggled in the first quarter cited value as a factor. Starbucks CEO Laxman Narasimhan said occasional customers weren’t buying the chain’s coffee because they wanted more variety and value.
“In this environment, many customers have been more exacting about where and how they choose to spend their money, particularly with stimulus savings mostly spent,” Narasimhan said on the company’s Tuesday call.
Yum CEO David Gibbs noted that rivals’ value deals for chicken menu items hurt KFC’s U.S. sales. But he said the shift to value should benefit Taco Bell, which accounts for three-quarters of Yum’s domestic operating profit.
“We know from the industry data that value is more important and that others are struggling with value, and Taco Bell is a value leader. You’re seeing some low-income consumers fall off in the industry. We’re not seeing that at Taco Bell,” he said on Wednesday.
It’s unclear how long it will take fast-food chains’ sales to bounce back, although executives provided optimistic timelines and plans to get sales back on track. For example, Yum said its first quarter will be the weakest of the year.
For its part, McDonald’s plans to create a nationwide value menu that will appeal to thrifty customers. But the burger giant could face pushback from its franchisees, who have become more outspoken in recent years. While deals drive sales, they pressure operators’ profits, particularly in markets where it is already expensive to operate.
Still, losing ground to the competition could motivate McDonald’s franchisees. This marks the second consecutive quarter that Burger King reported stronger U.S. same-store sales growth than McDonald’s. The Restaurant Brands chain has been in turnaround mode over the last two years and spending heavily on advertising.
Starbucks is also betting on deals. The coffee chain is gearing up to release an upgrade of its app that allows all customers — not just loyalty members – to order, pay and get discounts. Narasimhan also touted the success of its new lavender drink line that launched in March, although business was still sluggish in April.

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