Raphael Stevens

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    European banks are making heady profits in Russia

    Days after Vladimir Putin’s invasion of Ukraine, Raiffeisen, an Austrian bank, said it was considering selling its business in Russia. Twenty-seven months later, the lender’s unit in the country is doing rather well. Its staff has grown to nearly 10,000, a 7% rise since 2022. Last year its profit reached €1.8bn ($2bn)—more than any of the bank’s other subsidiaries and a tripling since 2021. Raiffeisen is one of a dozen lenders that Russia deems “systemically” important to its economy. The bank also matters to the Kremlin’s own finances, since it paid the equivalent of half a billion dollars in tax last year.Raiffeisen is the biggest Western bank in Russia, but not the only one. The combined profits of the five EU banks with the largest Russian operations have tripled, reaching nearly €3bn in 2023. Success makes the banks a target. In May America threatened to curb Raiffeisen’s access to its financial system because of the bank’s Russian dealings. On June 10th, in an attempt to placate critics, the lender plans to stop making dollar transfers out of the country. Russia, for its part, is starting to seize the assets of Western banks it deems “unfriendly”. Western lenders’ Russian paper profits are at risk of turning to ash. More

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    Why global GDP might be $7trn bigger than everyone thought

    Many people have experienced the joy of finding some spare change down the back of the sofa. On May 30th the World Bank experienced something similar, if on a grander scale. After rooting around in 176 countries, it discovered almost $7trn in extra global GDP—equivalent to an extra France and a Mexico.In fact, there may be a better analogy. What the World Bank discovered was not additional money to spend, but the equivalent of a discount voucher, which cuts 4% off the price of every good and service the world buys in a year. That means global spending can stretch further than previously thought. More

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    in Finance

    Payhawk, a $1 billion corporate card startup, plans M&A shopping spree after 86% sales growth

    Bulgarian-founded corporate card startup Payhawk said it is searching for startups in the world of corporate spend management to acquire.
    Payhawk’s acquisition drive comes after considerable growth for the fintech, which said it saw an 86% increase in revenue in the first quarter.

    Saravutvanset | Room | Getty Images

    AMSTERDAM, Netherlands — Corporate payments startup Payhawk told CNBC it is planning mergers and acquisitions to grow its footprint in the corporate spend management world and take on big players like SAP.
    The startup said it is looking to acquire a company or companies at the series A stage of their development, referring to early-stage startups that have already raised a significant round of funding.

    In an interview with CNBC, Hristo Borisov, Payhawk’s CEO and co-founder, said he thinks his firm has a better “product-market fit” than its rivals, which have gained multibillion-dollar valuations by handing out free corporate cards to other startups.
    “We see an opportunity to have much better unit economics in this business,” Borisov told CNBC at the Money 20/20 conference in Amsterdam, Netherlands, this week. “We believe companies like Brex and Ramp still haven’t found strong product market fit for what this potential market is going to be.”
    Payhawk is a corporate spend management platform that issues smart cards for clients’ employees to make payments and keep track of their expenses. Decathlon and Vinted are among its customers.

    Consolidation the name of the game

    Payhawk recorded huge growth in the first quarter, the company told CNBC. It revealed that revenue climbed 86% globally year-over-year, and sales jumped 127% in the U.K. — a market that now makes up 27% of overall revenue.
    Payhawk’s growth came off the back of a significant increase in clients. The firm said it saw a 58% increase in customers year-over-year in the three months ending March, with the U.K., again, a major driver.

    Now, Payhawk wants to build on that growth — with M&A key to unlocking future opportunities, according to Borisov.
    “Many businesses that got funded in last two or three years are now in a position where they’re looking at strategic options,” Borisov said. “This is something we’re actively doing. We’re looking for companies to buy.”
    “Our vision is to be able to provide a single platform that provides a homogeneous environment your corporate expense needs with a single provider,” Borisov said. “There is going to be some market consolidation.”
    Borisov isn’t looking for companies in the U.S. market to acquire, Borisov said, adding that in the U.S., Payhawk is partnered with American Express under the credit card giant’s Sync Commercial Partner Program.

    Goal to become a public company

    Asked whether his firm was looking to raise new venture funding to achieve its objectives, Borisov said that Payhawk is always in fundraising conversations.

    He added that its renewed growth over the past year had garnered interest from external investors, after a tougher 2022 and early 2023.
    “Fundraising is everyday,” he said. “It’s not because we need money. The worst time to fundraise is when you need the money.”
    “We’re speaking to investors daily, understanding where the market is,” Borisov added. “Partners who do believe in that vision see the same way.”
    Payhawk may look to raise a new venture round either this year or next year, Borisov added. The firm, backed by venture firms Lightspeed, Greenoaks, and Earlybird, has raised $240 million to date.
    He said his ultimate goal is for Payhawk to become a publicly listed company, though there’s no date yet for the firm to launch a public market debut.
    “Our ultimate goal is to IPO the company, this is something we’re focused on,” Borisov said. “This really depends on the market conditions and market realities.” More

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    Lululemon shares pop 10% despite lackluster earnings report and guidance

    Lululemon beat Wall Street’s earnings and revenue estimates, but issued weak second-quarter guidance as it contends with a slowdown in the Americas, its largest market.
    Last quarter, the company fumbled when it did not have the right sizes or colors in U.S. stores, which hit sales.
    CEO Calvin McDonald touted Lululemon’s international growth and signaled that it has more work to do in the Americas.

    A staff member holds a thermometer to measure the temperature of a customer at an entrance to a Lululemon store, following the Covid-19 outbreak, in Shanghai, China, on June 21, 2022.
    Aly Song | Reuters

    Lululemon’s growth in the Americas, its largest market, appears to be stalling after the retailer on Wednesday reported flat comparable sales in the region and weak guidance for the current quarter. 
    The athletic apparel retailer handily beat Wall Street’s earnings estimates, but only narrowly topped revenue expectations. Lululemon’s full fiscal-year guidance suggests the company is betting conditions will improve in the back half of the year. 

    Here is how Lululemon did in its first fiscal quarter compared to what Wall Street was anticipating, based on a survey of analysts by LSEG:

    Earnings per share: $2.54 vs. $2.38 expected
    Revenue: $2.21 billion vs. $2.19 billion expected

    Despite the tepid growth, Lululemon’s stock jumped 10% in extended trading Wednesday. The company also announced it would add $1 billion to its stock buyback program.
    The company’s reported net income for the three-month period that ended April 28 was $321 million, or $2.54 per share, compared to $290 million, or $2.28 per share, a year earlier.  
    Sales rose to $2.21 billion, up about 10% from $2 billion a year earlier.
    In a news release, CEO Calvin McDonald touted the “strong momentum” the company is seeing in its international markets and hinted that it needs to do more work in the Americas to grow in the region again.

    “We are pleased by the progress we are making to optimize our U.S. product assortment,” said McDonald. “Looking ahead, we continue to have a significant runway for growth and are confident in our team’s ability to powerfully deliver.” 
    Last quarter, McDonald said the company was seeing consumer dynamics change in the Americas, but also noted Lululemon fumbled by not having the right sizes and colors in its stores, which hit sales. During a call with analysts on Wednesday, McDonald said those issues continued during the fiscal first quarter.
    He said Lululemon’s color assortment was too narrow in leggings, and the company was once again out of stock of the sizes its customers wanted. McDonald added the company did not buy enough of the items that were landing with consumers, leading to products being out of stock. He said he expects the company to be in a better inventory position in the second half of the year.
    Lululemon is still growing in the Americas, but at a much slower pace than last year. During the first quarter of this year, sales in the Americas increased 3%, versus a 17% jump in the year-ago period. Comparable sales were flat from last year.
    Across the business, Lululemon’s comparable sales grew 6%, below the 7% uptick that analysts had expected, according to StreetAccount. 
    As growth in the Americas slows, Lululemon issued weak guidance for the current quarter. It expects revenue to be between $2.40 billion and $2.42 billion, just below estimates of $2.45 billion, according to LSEG. It guided earnings per share to be between $2.92 and $2.97, compared to estimates of $3.02, according to LSEG. 
    The company appears to be expecting conditions to improve in the second half of the year. For the full year, Lululemon expects earnings per share to be between $14.27 and $14.47, ahead of the $14.11 that analysts had expected. It is expecting revenue to be between $10.7 billion and $10.8 billion, which is in line with expectations, according to LSEG. 
    Lululemon, still widely considered to be a best-in-class retailer and a market leader, has hit a bit of a rough patch as of late. Its stock is down 40% year to date as of Wednesday’s close, as investors become concerned about its growth prospects. 
    It recently announced that its longtime Chief Product Officer Sun Choe would be resigning, which caused shares to fall. Lululemon could also soon find itself on the other side of trends. Denim is having a major moment with consumers, and investors have been concerned that shoppers could be swapping athleisure for jeans, which could hit Lululemon’s topline. 
    Read the full earnings release here.

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    Boeing CEO to testify in Senate hearing June 18

    Departing Boeing CEO Dave Calhoun will face the Senate Permanent Subcommittee on Investigations on June 18.
    Calhoun will face questions about whistleblower safety allegations and quality controls of Boeing aircraft.
    The hearing comes after a company engineer alleged the assembly of Boeing’s 787 Dreamliners put excessive stress on the planes and reduce their lifespans, allegations Boeing called inaccurate.

    Boeing CEO Dave Calhoun speaks briefly with reporters as he arrives for a meeting at the office of Sen. Mark Warner, D-Va., on Capitol Hill in Washington, D.C., on Jan. 24, 2024.
    Drew Angerer | Getty Images

    Boeing CEO Dave Calhoun will testify before a Senate panel on June 18 to answer lawmaker questions about whistleblower allegations and quality control at the aircraft maker as it navigates a safety crisis.
    “I look forward to Mr. Calhoun’s testimony, which is a necessary step in meaningfully addressing Boeing’s failures, regaining public trust, and restoring the company’s central role in the American economy and national defense,” said Sen. Richard Blumenthal, D-Conn., chairman of the Senate Permanent Subcommittee on Investigations.

    “Years of putting profits ahead of safety, stock price ahead of quality, and production speed ahead of responsibility has brought Boeing to this moment of reckoning, and its hollow promises can no longer stand,” he said.
    The hearing comes after a company engineer alleged the assembly of Boeing’s 787 Dreamliners put excessive stress on the planes and reduce their lifespans, allegations Boeing called inaccurate. The  Federal Aviation Administration is investigating.
    “We welcome the opportunity to appear before the Subcommittee to share the actions we have taken, and will continue to take, to strengthen safety and quality and ensure that commercial air travel remains the safest form of transportation,” Boeing said in a statement. “We are committed to fostering a culture of accountability and transparency while upholding the highest standards of safety and quality.”
    Boeing has been trying to regain its footing in the wake of two deadly crashes of its bestselling 737 Max in 2018 and 2019. But a door plug that blew out of a nearly new 737 Max 9 during an Alaska Airlines flight in January put fresh scrutiny on the manufacturer from lawmakers and the FAA.
    Calhoun in March said he would step down by year’s end, part of a broad executive shake-up at the plane maker.

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    Dollar Tree is exploring a sale of its Family Dollar brand

    Dollar Tree is exploring a sale of its grocery-focused brand Family Dollar, after shuttering more than 500 stores in the past quarter
    The discounter reported first-quarter earnings that met expectations.
    Dollar stores are having a hard time with rising costs and a weary low-end consumer.

    An exterior view of a Dollar Tree store in Bloomsburg Pennsylvania. 
    Paul Weaver | Sopa Images | Lightrocket | Getty Images

    Dollar Tree announced Wednesday it is considering a sale of its more grocery-focused Family Dollar brand.
    The company had recently shared plans to close almost 1,000 Family Dollar stores in an attempt to revamp the struggling business. The discounter closed more than 500 locations during its fiscal first quarter, it said Wednesday.

    “We are already beginning to see progress in this targeted strategy in the streamlined Family Dollar banner,” the company said in a press release. “The unique needs of each banner at this time – transformation at Family Dollar and growth acceleration at Dollar Tree – lead us to the decision to conduct a thorough review of strategic alternatives for the Family Dollar business.”
    Dollar Tree bought Family Dollar in 2015 for almost $9 billion. The business has been struggling ever since to compete against its major rival, Dollar General.
    The company has not set a deadline or definitive timetable for the sale review process, and is working with JPMorgan and Davis Polk & Wardwell advisors in its review.
    Shares of Dollar Tree fell about 5% Wednesday.
    The update came alongside Dollar Tree’s fiscal first-quarter earnings report, in which Family Dollar lagged.

    Same-store sales for the company’s Dollar Tree brand rose 1.7% while Family Dollar sales climbed only 0.1%. Enterprise sales rose 1%.
    Revenue rose to $7.63 billion, up about 4% from $7.32 billion a year earlier.
    The company said it expects sales for the second quarter will range from $7.3 billion to $7.6 billion, with sales growth for the Dollar Tree banner of between 2% and 4% and sales for the Family Dollar segment approximately flat.
    Here’s how the discounter did in its fiscal first quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

    Earnings per share: $1.43 cents vs. $1.42 expected
    Revenue: $7.63 billion vs. $7.63 billion expected

    The company’s reported net income for the three-month period that ended May 4 was $300.1 million, or $1.38 cents per share, compared with $299 million, or $1.35 per share, a year earlier. Adjusting for one-time items, including the cost of store closures, the company reported earnings of $1.43 per share.
    The company also mentioned that it incurred losses totaling $117 million as of early May, after a tornado destroyed the company’s distribution center in Marietta, Oklahoma, on April 28. The facility sustained significant damage, and the inventory in the facility as well as the facility itself are not salvageable, Dollar Tree said in the report.
    The company said it expects the incurred losses to be offset by insurance recoveries.
    The dollar store segment is going through tough times as lower-end consumers pull back in the face of higher costs. Although a shift to cost-cutting efforts sounds like it would have benefited dollar stores, the discounters are increasingly losing market share to value retailers like Walmart and e-commerce retailers like Temu.
    Dollar Tree fell short of expectations for holiday-quarter sales in its fourth-quarter earnings report, meanwhile its main competitor Dollar General surpassed estimates.
    Dollar Tree has been in the midst of a broader turnaround effort since current CEO and former Dollar General CEO Richard Dreiling took the helm in early 2023.
    Shares of the company have pulled back roughly 15% in 2024.

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    American Airlines offers flight attendants 17% raises as contract talks drag on

    American Airlines offered flight attendants a 17% immediate pay hike as contract talks drag on with no deal.
    “There’s still a good deal of work to be done” despite the wage increase offer, CEO Robert Isom said.
    American faces a flight attendant strike if the two sides don’t reach a deal with federal mediators.

    American Airlines flight attendants demonstrate outside the White House in Washington, May 9, 2024.
    Drew Angerer | AFP | Getty Images

    American Airlines CEO Robert Isom offered flight attendants immediate 17% wage increases on Wednesday as contract talks continue without a deal, bringing the prospect of a strike closer.
    The airline and the Association of Professional Flight Attendants have struggled to reach a new contract agreement, differing on major issues, such as pay. Flight attendants haven’t received contract raises since before the pandemic.

    “We have made progress in a number of key areas, but there is still a good deal of work to be done,” Isom said in a video message to flight attendants.
    The union said the two sides are scheduled to meet with federal mediators next week for a “last-ditch” effort to get a deal done, adding that flight attendants were told to prepare for a strike.
    Strikes are extremely rare among airline employees. The last took place in 2010 among Spirit Airlines pilots. If the two parties can’t reach a deal, a release by federal mediators would be triggered, a process that would take several weeks.
    “So, to get you more money now, we presented APFA with a proposal that offers immediate wage increases of 17% and a new formula that would increase your profit sharing,” Isom said Wednesday. “This means we’ve offered increased pay for all flight attendants and are not asking your union for anything in return. This is unusual, but these are unusual times.”
    APFA’s board will discuss the proposal later on Wednesday, according to Julie Hedrick, the union’s national president. She added that the airline’s focus should be on preparing a longer-term deal with the flight attendants.

    “This is not that,” she said.
    Also on Wednesday, the union said it opened a “strike command center” with dedicated phone lines and other resources to answer cabin crew questions.
    U.S. airline pilots largely locked in new labor deals last year, while flight attendants at American, United Airlines and Alaska Airlines are still negotiating.
    Last month, a bipartisan group of more than 160 House representatives wrote to the National Mediation Board, urging it to help complete deals with airlines and flight attendants.

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    Should you buy pricey stocks like Nvidia?

    On June 7th each share in Nvidia will become many. In one sense such stock splits ought not to matter much: they merely lower the share price, usually returning it to somewhere near $100, in order to make small trades easier. Yet for the company and its long-time backers this administrative exercise is cause to pop the champagne. For a split to be necessary in the first place, the share price must have multiplied, commonly by two or three, prompting each share to be divided by the same factor. Each Nvidia share, however, will become ten. Two years ago both Alphabet and Amazon split each of their shares into 20. Investors in big tech have had plenty of opportunities to let the corks fly.All three firms have made traditional valuation measures look hopelessly outdated. Dividend yields, for instance, were once a popular tool for assessing prospective returns. But Amazon has never made such a payout and Alphabet will make its first ever on June 17th (of 20 cents per $175 share). Nvidia’s quarterly dividend after the split will be just one cent per share, each priced at around $116. Plainly, there is no stretch of the imagination by which these payouts explain the stocks’ spectacular returns. More