Raphael Stevens

Warner Bros. Discovery reported second-quarter earnings after the bell.
The media company booked a $9.1 billion non-cash goodwill impairment charge on its TV networks business.
The company also missed analyst expectations for quarterly revenue.

A sign outside of the Warner Brothers Discovery Techwood Turner Broadcasting campus is seen on June 26, 2024 in Atlanta, Georgia. 
Kevin Dietsch | Getty Images

Warner Bros. Discovery’s stock dropped Wednesday after it reported a $9.1 billion write-down on its TV networks and missed analyst estimates on revenue.
Here is how Warner Bros. Discovery performed, based on a survey of analysts by LSEG:

Loss per share: 36 cents vs. a loss of 22 cents expected
Revenue: $9.7 billion vs. $10.07 billion expected

The company’s shares were down roughly 9% in aftermarket trading.
Warner Bros. Discovery on Wednesday reported the non-cash goodwill impairment charge, which was triggered by the reevaluation of the book value of the TV networks segment. The book value was higher than the market value as traditional TV networks continue to see customers flee and advertisers are opting to spend on digital and streaming instead.
“While I am certainly not dismissive of the magnitude of this impairment, I believe it’s equally important to recognize that the flip side of this reflects the value shift across business models,” said CFO Gunnar Wiedenfels on Wednesday’s earnings call, adding that the company is focusing on growth in the studios and streaming units.
He said Warner Bros. Discovery’s balance sheet carries a significant amount of goodwill stemming from mergers and acquisitions, namely the combination of Warner Bros. and Discovery in 2022.
“It’s fair to say that even two years ago market valuations and prevailing conditions for legacy media companies were quite different than they are today, and this impairment acknowledges this and better aligns our carrying values with our future outlook,” CEO David Zaslav said on Wednesday’s call.

Executives highlighted Warner Bros. Discovery’s continued mission of paying down debt, much of which stems from the 2022 merger. During the second quarter the company paid down $1.8 billion in debt. As of June 30, it had $41.4 billion in gross debt and $3.6 billion cash on hand.
The company also noted uncertainty surrounding future sports rights renewals, including the NBA. Warner Bros. Discovery sued the NBA in July, looking to forcibly invoke its matching rights on a package of games earmarked for Amazon’s Prime Video as part of the league’s new media rights deal.
Revenue for Warner Bros. Discovery’s TV networks — a portfolio that includes TBS, TNT, Discovery and TLC — was down 8% to $5.27 billion during the second quarter, with both distribution and advertising revenue down in the segment.
However, the company’s streaming business, centered around the platform Max, was a bright spot.
The company said Wednesday it added 3.6 million subscribers during the quarter ended June 30, bringing its total number of global streaming customers to 103.3 million.
The international expansion lifting subscriber growth, as well as increased ad spending on streaming, is propelling its streaming business toward profitability, executives said Wednesday, with the expectation that it would continue.
Zaslav also touted the streaming bundles Warner Bros. Discovery is forming — an entertainment pairing with Disney’s Disney+ and Hulu — and a sports bundle with Disney’s ESPN and Fox set to launch this fall.
Still, direct-to-consumer streaming revenue decreased 5% to $2.57 billion, driven by content revenue dropping 70% due to a lower volume of third-party licensing deals. Yet advertising revenue for streaming was up 99%, the company said, driven by higher domestic engagement on Max, and ad-supported subscriber growth. Global revenue also increased 4% driven by the ad tier.
Total revenue for the quarter was down 6% to $9.7 billion. Total adjusted earnings before interest, taxes, depreciation and amortization decreased 15% to $1.8 billion.
Correction: This article has been updated to reflect that Warner Bros. Discovery’s revenue was $9.7 billion for the quarter. More

Walmart, McDonald’s and Kroger are among the companies that have found themselves in the political debate over higher prices or other moves that could hit Americans’ wallets.
On the campaign trail, politicians have tapped into consumers’ frustration with high prices, but Republicans and Democrats have blamed it on different causes.
Promising to tackle higher everyday costs is a safe bet during contentious times, particularly for politicians in swing states, said Cait Lamberton, a professor of marketing at University of Pennsylvania’s Wharton School.

Kroger, Walmart, and McDonald’s.
Beata Zawrzel | Nurphoto | Brandon Bell | Getty Images | Kamil Krzaczynski | Reuters

Expensive Big Mac meals and fears of surge pricing at grocery stores have put food chains and consumer product companies in politicians’ crosshairs.
Walmart, McDonald’s and Kroger are just a few of the companies that have found themselves in the debate over high inflation in the 2024 election.

On Monday, Sens. Elizabeth Warren, D-Mass., and Bob Casey, D-Pa., sent a letter to Kroger CEO Rodney McMullen that questioned the grocer’s rollout of electronic shelf labels, arguing the technology could make it easier to increase the price of high-demand items. The letter also noted that the supermarket chain could become bigger, depending on whether it closes its pending $24.6 billion acquisition of rival Albertsons.
Democrats — particularly those like Casey who are trying to win races in competitive swing states — are trying to capitalize on frustration against companies over inflation. The moves follow years of Republican attempts to blame the price hikes on President Joe Biden, who has also criticized corporations for what he called greedy tactics.
For instance, an X account run by House Republican leadership criticized Biden’s economic policies in late May by listing some of the popular fast-food menu items that customers now pay more for at McDonald’s, Chick-fil-A and Taco Bell. (The source of the data is unclear, and McDonald’s has denied that its average prices have risen that much.)
On the presidential campaign trail now, both Democratic Vice President Kamala Harris and Republican former President Donald Trump have pledged to fight persistent inflation, while blaming different causes.
Harris has said during rallies that she’ll fight “price gouging” by companies. At his own rallies, Trump has criticized Biden administration policies and said he’ll end the “inflation nightmare.”

The fact that both parties have made fighting inflation a key campaign plank shows how much the cost of food, gas and shelter is on the minds of consumers across income levels, regions and political parties. The criticism could also add to the pressure companies face to show they can lower prices or offer value.
Inflation has cooled from decades-high levels, with groceries up about 1.1% year over year as of June, according to data from the U.S. Bureau of Labor Statistics. But food at home is up 26.2% since June 2019 and food away from home, which mostly includes restaurant meals, is up 27.2% in the same period.
Americans ranked inflation and prices as their most important issue in the latest The Economist/YouGov poll, which included a representative sample of roughly 1,600 U.S. adult citizens. That was ahead of other themes that have come up on the campaign trail, including immigration, climate change and health care.
Promising to tackle higher everyday costs is a safe campaign issue during contentious times, said Cait Lamberton, a professor of marketing at University of Pennsylvania’s Wharton School.
“There isn’t much we can agree on, right? But we can agree on that,” she said.
It’s often tricky to make a case for how a policy will affect voters’ lives. That’s not the case with the cost of necessities.
“There’s a very nice, easy, causal connection between voting for a person and believing my grocery bill can go down,” she said.

McDonald’s, Walmart face price criticism

Kroger was only the latest high-profile company named in political rhetoric around inflation.
McDonald’s found itself in a tough spot in late May. Several viral social media posts criticized the burger giant’s affordability, from an $18 Big Mac meal at a Connecticut location to charts that alleged the chain’s prices had more than doubled over the last five years.
Republicans latched onto the controversy, tying a jump in McDonald’s menu prices to Biden’s economic policy in a bid to win over voters fed up with inflation. The post on X did not criticize McDonald’s for the hikes.
In response to the uproar, McDonald’s U.S. President Joe Erlinger wrote an open letter and released fact sheets on the chain’s pricing. It was a big step for the company, which typically handles rumors or negative press with a succinct statement, not a 13-paragraph letter from a top executive.
McDonald’s said the actual average prices for a Big Mac or a 10-piece McNugget are up 21% and 28%, respectively, over the last five years — significant increases, but much less than described on social media.
“I fully expect the prices at your local McDonald’s to be an area of conversation and focus in the coming months,” Erlinger wrote, obliquely referring to the election cycle.
Several senators have also slammed Walmart, the nation’s largest grocer by annual revenue, and Kroger, the nation’s largest supermarket operator, for adopting technology that could make food even pricier.
In their letter sent on Monday, Warren and Casey said Kroger already has high profits and questioned why it needs electronic shelf labels, which allow “dynamic pricing,” a practice associated with airlines and Uber’s surge price increases based on high demand.
“It is outrageous that, as families continue to struggle to pay to put food on the table, grocery giants like Kroger continue to roll out surge pricing and other corporate profiteering schemes,” the senators wrote.
Sen. Sherrod Brown, D-Ohio, who is running for reelection in an increasingly red state, sent a similar letter to Walmart in May raising concerns about its own adoption of shelf labels that could make it easier to use dynamic pricing.
Casey, Brown and other senators in competitive races have also criticized snack makers for “shrinkflation,” decreasing the size of items but charging the same amount.
A Walmart spokesperson said the retailer won’t change its “everyday low price” approach and pointed to some of its back-to-school deals, including a basket of food that provides two weeks of kids’ lunches for about $2 per day.
Kroger did not say how it will use the electronic shelf labels, but the grocer said in a statement that keeping prices low “is the foundation of our strategy.”
“Lower prices attract more loyal customers who help us grow our business,” the company said.
Wharton’s Lamberton said to fend off criticism, companies must do a better job explaining why they have increased costs or renegotiate with vendors. They also have to tell their story better in ads, she said.
For example, as families get ready for the first day of school, Amazon and Walmart have advertised school supplies that start at 25 cents. Amazon has run TV commercials with cheeky messages that encourage parents to spend less on their kids.

Companies lean into value

Over the next two weeks, many of the country’s biggest retailers including Walmart, Home Depot and Target will report earnings. They may also defend their prices and stress the ways they are creating value — following in the steps of some restaurants.
For example, on Chipotle’s earnings call in late July, CEO Brian Niccol denied that the chain had told workers to put less in burrito bowls, but said the company would reemphasize generous. Like McDonald’s, Chipotle was targeted by social media furor — but over portion sizes rather than prices.
For its part, McDonald’s is extending its $5 value meal in most U.S. markets. It debuted the promotion in June, soon after it faced social media criticism, which underscored consumer perception that its prices were too high.
Other fast-food chains, like Wendy’s and Taco Bell, have also introduced or revived their own $5 value meals. While the primary purpose of the deals is to boost sales, they have an added bonus of keeping heat off their brands in case politicians look for another “greedflation” target.
Those deals have been prompted, in part, by business realities: Consumers broadly have pulled back their restaurant spending in recent months. More

“Wardrobing,” in which a shopper buys an expensive item, wears it with the tags on, and then returns the item for a refund, picks up as shoppers bolster their closets for summer vacations.
According to an Optoro returns survey, 30% of shoppers admitted to buying an item for a specific event only to return it after the event ended.
The challenge for retailers is handling the items when they came back upstream.

Westend61 | Westend61 | Getty Images

A particular type of retail fraud soars during the summer season.
“Wardrobing,” in which a shopper buys an expensive item, wears it with the tags on, and then returns the product for a refund, picks up as shoppers bolster their closets for summer vacations, according to returns management software company Optoro.

“During the summer and cruise season, from July to September, we see wardrobing and overall return rates spike by two-to-three times, with swimwear alone making up between 5% and 15% of returns,” said Amena Ali, CEO of Optoro. “This highlights the fine line between habitual returners and fraudsters.”
Forty percent of 18-to-29-year-olds wardrobe, according to Optoro data.
In a November 2023 Optoro returns survey, 30% of shoppers admitted to buying an item for a specific event, only to return it after the occasion ended.
The challenge for retailers is handling the items when they get them back.
“For seasonal items like cruisewear and swimwear, quick, yet thorough, inspection and restocking are imperative to retain as much value as possible before the season ends,” Ali said. “Time sensitivity is crucial in this fight – ideally, you catch fraud in the moment, or better yet, before it happens.”

Ali warned if products linger in the return process, the delay can lead to significant markdowns or the need to send items to secondary retail channels such as stores like TJ Maxx, discounters, or liquidators.
Ali told CNBC that when a wardrobed item returns to a store or warehouse, the best course of action depends on its value and condition.
“A $10 swim coverup returned in poor condition might not be worth the cost to clean or repair, and would likely instead be routed through recommerce, donations or recycling channels,” said Ali. “It’s imperative that items clearly worn for a summer vacation and returned don’t slip through the cracks to the next customer — protecting brand perception and customer loyalty is paramount.”
Scot Case, executive director of the Center for Retail Sustainability at the National Retail Federation, said wardrobing can drive up costs and waste for retailers if the product can no longer be resold. So retailers are taking action.
“Some retailers are addressing the issue by reducing the amount of time consumers have to return items, by eliminating free returns or by requiring consumers to return items in-store where an employee can examine the item before a consumer receives a refund,” said Case.
Companies like Best Buy, Gap and American Eagle Outfitters use Optoro’s reverse logistics artificial intelligence software to swiftly manage their returns, identify fraud and quickly restock products on store shelves to avoid discounting.
“Time is literally money,” Ali said. “The more quickly you can turn the product, the less likely you will need to discount it. Having a smart disposition system can recover costs and maximize profitability.
Stephen Lamar, CEO of the American Apparel and Footwear Association told CNBC that returns, whether due to wardrobing or other reasons, have become a key focus for retailers and brands, especially in the era of e-commerce.
“Supply chain technology, powered by AI, is increasingly being deployed so that consumers can find and enjoy the fashion they want at the right price, the right quality, and the right time,” Lamar said. “As companies build and integrate take back programs to repair and resell used items, returns take on a new role, fueling a new circular market.”
According to Optoro, 30% of the cost associated with a return is transportation. Strategies such as third-party drop-off locations and box-less, label-less returns are being used to cut down these costs.
“AI and software can reduce the number of touches on a returned product by 50%,” Ali said.
Ali said using AI in an end-to-end digitized return system can also help a retailer identify a trusted shopper and get the like-new goods identified and restocked at full price.
Optoro data shows approximately 95% of the goods that cannot return to resale go to a secondary channel. Five percent of products head to a landfill or for donation.
“We see a wide range of numbers in terms of recovery, between improvement of 5% to 45% in certain categories, depending on the brand, but this is significant money when talking to enterprise retailers,” said Ali. “A global shoe manufacturer that was sending a large portion of returned inventory to destroy/recycle, was able to increase their re-commerce to the secondary channels with an improved overall recovery for that segment by 45%.” 
Optoro customers’ top three categories returned were kitchen and dining, men’s shoes and women’s clothing.
Return rates vary both in category and by brand or retailer. Some clients see as high as 40% return rates. Clothing leads the return category at a 25% rate, followed by bags, accessories and shoes at 18%, miscellaneous accessories at 13% and consumer electronics at 12%, according to Statista.
The average value of a returned item for Optoro’s customers is $85. The highest item value reported as returned in the survey was $200.
Correction: This story was updated to correct the spelling of Stephen Lamar’s name. A previous version misspelled it. More

Disney’s combined streaming businesses turned a quarterly profit for the first time ever.
Disney’s “Inside Out 2” and “Deadpool & Wolverine” have led the studio to become the first to top $3 billion in worldwide ticket sales in 2024.
Meanwhile, the parks unit disappointed with a “moderation” in consumer demand.

A scene from Disney and Pixar’s film “Inside Out 2.”
Courtesy: 2024 Disney | Pixar

Here’s a surprise: Disney’s media business isn’t weighing down the company anymore.
The primary Disney investor narrative since 2022 has been how streaming losses, combined with a declining traditional pay TV business and a string of box office failures, have been anchoring surging sales and profits at the company’s theme parks and resorts. The result has been a company whose shares have fallen about 24% in the past two years, while the S&P 500 has gained 28% in the same period.

The company’s second-quarter results suggest a shift is happening. Disney’s combined streaming businesses — Disney+, Hulu and ESPN+ — turned a quarterly profit for the first time ever, making $47 million. That’s a significant improvement from losing $512 million in the same quarter a year ago.
Disney’s theatrical unit is also on a hot streak. “Inside Out 2” became the highest-grossing animated film of all time in recent weeks. “Deadpool & Wolverine” has taken in $824 million after two weeks of global release. Disney has become the first studio in 2024 to top $3 billion in worldwide ticket sales.
Meanwhile, Disney saw a “moderation of consumer demand towards the end of [fiscal] Q3 that exceeded our previous expectations” for its theme parks division. That caused shares to slump about 3% in early trading.
Disney Chief Executive Officer Bob Iger said during his company’s earnings conference call that he expects the momentum for the media business will only gain steam. That’s music to the ears of Wall Street, which wants both growth and profitability.
“We feel very bullish about the future of this business,” Iger said in reference to streaming. “You can expect that it’s going to grow nicely in fiscal 2025.”

Iger referenced a planned crackdown on password sharing, which will begin “in earnest” in September, as a tool that will help generate new subscribers and added revenue for the company. A similar effort from Netflix has helped the world’s largest streamer add new customers during the past year.
Disney is also raising prices for its streaming services in mid-October. Most plans for Disney+, Hulu and ESPN+ will cost $1 to $2 more per month.
Iger rattled off a list of movie titles that Disney hasn’t yet released to emphasize the studio’s solid positioning for the rest of 2024 and beyond.
“Let me just read to you the movies that we’ll be making and releasing in the next almost two years,” Iger said. “We have ‘Moana,’ ‘Mufasa,’ ‘Captain America,’ ‘Snow White,’ ‘Thunderbolts,’ ‘Fantastic Four,’ ‘Zootopia,’ ‘Avatar,’ ‘Avengers,’ ‘Mandalorian’ and ‘Toy Story,’ just to name a few. When you think about not only the potential of those in box office but the potential of those to drive global streaming value, I think there’s a reason to be bullish about where we’re headed.”
Disney isn’t de-emphasizing the parks. The company said last year it plans to invest $60 billion in its theme parks and cruise lines in the next decade. But it’s undoubtedly healthier for the company to persuade investors that the media units aren’t weighing down the share price.
Disney shares dropped Wednesday, likely because investors were focused on the parks. The next step is for shares to rise during a quarterly earnings report because investors are excited about the media units.
WATCH: Watch CNBC’s full interview with Disney CFO Hugh Johnson after earnings results More