Raphael Stevens

More stories

  • 150 Shares119 Views

    in Finance

    China’s EV price war is heating up. What’s behind the big discounts?

    Industry giant BYD announced a slew of discounts — some of nearly 30% or more – on selected models.
    The average car price has fallen by around 19% over the past two years in China to around 165,000 yuan ($22,900).
    Rather than reflecting market expansion, double-digit growth of new energy vehicles sales in China is just eating into internal combustion engine cars’ slice of the pie, Ying Wang, Fitch managing director, APAC Corporate ratings, told reporters Tuesday.

    Customers look at BYD electric cars at an auto show in Yantai, in eastern China’s Shandong province on April 10, 2025.
    Stringer | Afp | Getty Images

    BEIJING — Competition in China’s electric car market just got fiercer with consequences for the domestic economy and even the global auto market.
    Industry giant BYD last week announced a slew of discounts — some of nearly 30% or more — across several of its lower-end battery-only and hybrid models. The budget-friendly Seagull compact car saw its price drop to 55,800 yuan ($7,750).

    Other major Chinese automakers have begun following suit.
    “BYD’s action this time has made the industry rather nervous,” Zhong Shi, an analyst with the China Automobile Dealers Association, said in Mandarin, translated by CNBC.
    “The industry is in [a state of] relatively large shock,” he said, noting smaller automakers are now more worried about their ability to compete.
    The industry has been a rare bright spot in an economy that has been seeing slower growth and lackluster consumer demand. Part of Beijing’s latest attempt to spur consumption included subsidies for new energy vehicles, a category that includes battery-only and hybrid-powered cars.
    “The latest car price competition underscores how supply-demand imbalance continues to fuel deflation,” Morgan Stanley’s Chief China Economist Robin Xing said in a report Wednesday.

    “There is growing rhetoric about the need for rebalancing [to more consumption], but recent developments suggest the old supply-driven model remains intact,” he said. “Thus, reflation is likely to remain elusive.”

    China’s electric car market has already been in a price war for the last two years, partly fueled by Tesla.
    But this time, traditional automakers, including state-owned ones, are feeling significant heat as the share of new energy vehicles has come to account for about half of new passenger cars sold in China.
    Last week, Great Wall Motors Chairman Wei Jianjun warned of an “Evergrande” in China’s auto industry that had yet to explode, comparing the fast-growing EV industry to the country’s bloated real estate sector. The outspoken private sector autos executive was speaking to Chinese media outlet Sina in an interview posted on May 23.
    Once China’s real estate giant, Evergrande defaulted on its debt in late 2021 as the property market slumped after Beijing cracked down on the company’s high debt levels. Demand for homes also fell following tighter government regulations, leaving the developer struggling to finance the remaining construction of pre-sold units.
    As Chinese media scrutiny on automakers’ financial situation rose, BYD on Wednesday refuted reports that it excessively pressured one of its dealers on cash flow. The dealer, Jinan Qiansheng in the eastern province of Shandong, did not immediately respond to a CNBC request for comment. BYD referred CNBC to its statement to Chinese media.
    In the early years of China’s state-supported efforts to become a global leader in the emerging electric vehicle industry, the Ministry of Finance said it found at least five companies cheated the government of over 1 billion yuan ($140 million). The high-level policy encouraged a flood of startups, of which only a handful survived.

    A 19% price drop over two years

    In China, the average car retail price has fallen by around 19% over the past two years to around 165,000 yuan ($22,900), according to a Nomura report this week, citing industry data from Autohome Research Institute.
    Price cuts were far steeper for hybrid or range-extension vehicles, at 27% over the last two years, while battery-only cars saw prices slashed by 21%, the report said. It noted that traditional fuel-powered cars saw a below-average 18% price cut.
    In contrast, the average price of a new car in the U.S. was $48,699 in April, up nearly 1% from two years earlier, according to CNBC calculations of data from Cox Automotive. The average electric car price last month was an even higher $59,255.
    BYD’s latest round of price cuts didn’t include the company’s higher-end models priced around 200,000 yuan, such as its flagship Han electric sedan. Reuters pointed out the newest model of the Han released in February was about 10% cheaper than its previous version, according to its calculations.
    The Chinese auto giant, which was backed by Warren Buffett in its early years, has rapidly captured market share in China with its wide range of cars at various price points. The company reported a net profit increase of 49% to 14.17 billion yuan last year. Total current liabilities rose by more than 60% to 57.15 billion yuan. Cash and cash equivalents fell slightly to 102.26 billion yuan.

    Price war to continue

    Rather than reflecting market expansion, double-digit growth of new energy vehicles sales in China is just eating into internal combustion engine cars’ slice of the pie, Ying Wang, Fitch managing director, APAC Corporate ratings, told reporters Tuesday. She noted how the country’s auto market hasn’t grown much since 2018, and expects autos retail sales to only increase by low single digits this year.
    Automakers will keep on using price cuts to gain market share in China this year, she said. Wang pointed out another option is for companies to include more features, such as advanced driver-assist systems, for free instead of asking consumers to pay more for them as an add-on.
    Geely-backed Zeekr in March said it was releasing its advanced driver-assist system for free, while Tesla has attempted to charge its customers for a similar feature. A month earlier, BYD announced it was rolling out driver-assist capabilities to more than 20 of its car models.

    Weekly analysis and insights from Asia’s largest economy in your inboxSubscribe now

    In the last several months, China’s top leaders have increasingly called for efforts to address non-productive business competition, known as “involution.” The term was mentioned in the premier’s annual work report in March and in the market regulator’s meeting last week which called for “comprehensively rectifying ‘involutionary’ competition.”
    However, the massive effort to produce lower-cost electric cars in China, and the automakers’ subsequent move to expand into other markets, has increased worries about the impact on other countries’ auto industries.
    The European Union slapped tariffs on imports of China-made electric cars after probing the companies over the use of government subsidies in their manufacture. The U.S. also imposed duties of 100% on China-made electric cars, quashing hopes that the vehicles might enter the world’s second-largest auto market.
    But in the EU, tariffs have had limited effect. In April, BYD outsold Tesla in Europe for the first time, according to JATO Dynamics. Tesla’s Europe sales plunged by 49% that month, according to the European Automobile Manufacturers’ Association.
    — CNBC’s Bernice Ooi contributed to this report More

  • 200 Shares199 Views

    in Business

    E.l.f. Beauty to acquire Hailey Bieber skincare brand Rhode in deal valued up to $1 billion

    E.l.f. Beauty is acquiring Hailey Bieber’s skincare brand Rhode for $1 billion.
    The deal will build on E.l.f’s efforts to expand further into skincare and reach a higher-income consumer.
    “I’ve been in the consumer space 34 years, and I’ve been blown away by seeing this brand over time. In less than three years, they’ve gone from zero to $212 million in net sales, direct-to-consumer only, with only 10 products. I didn’t think that was possible,” CEO Tarang Amin told CNBC in an interview.

    Hailey Bieber attends the Rhode UK launch party with Hailey Bieber at Chiltern Firehouse on May 17, 2023 in London, England. 
    Dave Benett | Dave Benett Collection | Getty Images

    E.l.f. Beauty announced on Wednesday plans to acquire Hailey Bieber’s beauty brand Rhode in a deal worth up to $1 billion as the cosmetics company looks to expand further into skincare. 
    The acquisition – E.l.f.’s biggest ever, according to FactSet – is comprised of $800 million in cash and stock, plus an additional potential $200 million payout based on Rhode’s performance over the next three years. The deal is expected to close in the second quarter of the company’s fiscal 2026 — or later this year.

    “I’ve been in the consumer space 34 years, and I’ve been blown away by seeing this brand over time. In less than three years, they’ve gone from zero to $212 million in net sales, direct-to-consumer only, with only 10 products. I didn’t think that was possible,” CEO Tarang Amin told CNBC in an interview. “So that level of disruption definitely caught our attention.”
    In a news release, Bieber said she’s excited to partner with E.l.f. to bring her brand to “more faces, places, and spaces.” 
    “From day one, my vision for rhode has been to make essential skin care and hybrid makeup you can use every day,” said Bieber. “Just three years into this journey, our partnership with e.l.f. Beauty marks an incredible opportunity to elevate and accelerate our ability to reach more of our community with even more innovative products and widen our distribution globally.” 
    E.l.f. shares dropped about 4% in extended trading after the company announced the acquisition and released results for its fiscal fourth quarter. The company topped Wall Street’s quarterly estimates, but did not offer guidance due to the Trump administration’s changing tariff policy. E.l.f. gets a disproportionate amount of its products from China.

    Why E.l.f. is betting on Rhode

    Launched in 2022, Rhode has more than doubled its customer base over the past year and generated $212 million in revenue in the 12 months ended March 31. The company’s growth has primarily come through its website, but it plans to launch in Sephora stores throughout North America and the U.K. before the end of the year. 

    As part of the acquisition, Bieber will serve as Rhode’s chief creative officer and head of innovation, overseeing creative, product innovation and marketing. The brand was launched alongside two co-founders, Michael and Lauren Ratner, but it was Bieber’s influence and name that turned it into a billion-dollar brand. 
    Under her direction, Rhode last year became the No. 1 skincare brand in earned media value — or exposure through methods other than paid advertising — with 367% year-over-year growth.
    Rhode is a solid match for E.l.f., which has seen growth skyrocket in recent years in large part to its digital prowess. The company has legions of online fans and is known for TikTok marketing that feels more natural to consumers.
    The company is also looking to dig deeper into skincare, which has become more popular with all age groups, particularly E.l.f’s younger, core consumer. In 2023, it acquired skincare brand Naturium for $355 million. Its acquisition of Rhode will allow it to build on its skincare growth and reach a higher income consumer.
    “E.l.f. cosmetics is about $6.50 in its core entry price point, Rhode, on average, is in the high 20s, so I’d say it does bring us a different consumer set to the company overall, but the same approach in terms of how we engage and entertain them,” said Amin.
    The deal makes sense for E.l.f., and it was a competitive move to snag the brand before rivals did, but it comes at an uncertain and difficult time for the company. Even with expected price increases, China tariffs will likely reduce E.l.f.’s profits over time, and it’s funding $600 million of the deal with debt at a time of high interest rates.
    The acquisition is a bet that consumers will keep spending on high-end skincare, even during a potential economic slowdown or recession.

    E.l.f. beats earnings estimates

    E.l.f. made the announcement as it posted fiscal fourth quarter results, which beat Wall Street’s expectations on the top and bottom lines. 
    Here’s how the beauty retailer performed compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

    Earnings per share: 78 cents adjusted vs. 72 cents expected
    Revenue: $333 million vs. $328 million expected

    The company’s reported net income for the three-month period that ended March 31 was $28.3 million, or 49 cents per share, compared with $14.5 million, or 25 cents per share, a year earlier. Sales rose to $332.7 million, up about 4% from $321.1 million. 
    E.l.f.’s sales have increased rapidly in recent years, but investors have grown concerned as that growth started to slow and the threat of tariffs began weighing on its business. The company sources about 75% of its products from China, which currently faces a 30% duty on exports to the U.S. Last week, it announced plans to raise prices by $1 to offset higher costs from tariffs beginning on Aug. 1.
    While U.S. duties on Chinese imports are 30% now, that could change as President Donald Trump negotiates with Beijing. As a result, E.l.f. said it isn’t providing a fiscal 2026 outlook “due to the wide range of potential outcomes related to tariffs.”
    Amin said E.l.f. paid more than 145% in duties before Trump agreed to slash the levies on Chinese goods, but those costs didn’t come through during the quarter and will show up when the company reports its fiscal 2026 first-quarter earnings.

    Don’t miss these insights from CNBC PRO More

  • 163 Shares159 Views

    in Finance

    Fed worried it could face ‘difficult tradeoffs’ if tariffs reaggravate inflation, minutes show

    The summary Wednesday of the May 6-7 meeting of the Federal Open Market Committee reflected ongoing misgivings about the direction of fiscal and trade policy.
    “Participants noted that the Committee might face difficult tradeoffs if inflation proves to be more persistent while the outlooks for growth and employment weaken,” the minutes said.
    As it has done since the last cut in December, the FOMC kept its benchmark federal funds rate in a target between 4.25%-4.5%, with officials saying policy is well positioned against the current risks.

    Federal Reserve officials at their meeting earlier this month worried that tariffs could aggravate inflation and create a difficult quandary with interest rate policy, minutes released Wednesday show.
    The summary of the May 6-7 meeting of the Federal Open Market Committee reflected ongoing misgivings about the direction of fiscal and trade policy, with officials ultimately deciding the best course was to keep rates steady.

    “Participants agreed that uncertainty about the economic outlook had increased further, making it appropriate to take a cautious approach until the net economic effects of the array of changes to government policies become clearer,” the minutes said. “Participants noted that the Committee might face difficult tradeoffs if inflation proves to be more persistent while the outlooks for growth and employment weaken.”
    Though policymakers expressed concern about the direction of inflation and the vagaries of trade policy, they nevertheless said that economic growth was “solid,” the labor market is “broadly in balance” though risks were growing that it could weaken, and consumers were continuing to spend.
    As it has done since the last cut in December, the FOMC kept its benchmark federal funds rate in a target between 4.25%-4.5%.
    “In considering the outlook for monetary policy, participants agreed that with economic growth and the labor market still solid and current monetary policy moderately restrictive, the Committee was well positioned to wait for more clarity on the outlooks for inflation and economic activity,” the summary said.
    The post-meeting statement noted that “uncertainty about the economic outlook has increased further.” Also, the committee said meeting its dual goals of full employment and low inflation have been complicated due to policy uncertainty.

    Since the meeting, officials have repeated that they will wait until there’s more clarity about fiscal and trade policy before they will consider lowering rates again. Market expectations have responded in kind, with futures traders now pricing in virtually no chance of a cut until the Fed’s September meeting.
    Trade policy also has evolved since the Fed last gathered.
    Tariffs and ongoing saber-rattling between the U.S. and China eased a few days after the central bank meeting, with both sides agreeing to drop the most onerous duties against each pending a 90-day negotiation period. That in turn helped kindle a rally on Wall Street, though bond yields continue to climb, something President Donald Trump has sought to contain.
    Amid the trade war and signs that inflation is slowly coming in toward the Fed’s 2% target, Trump has hectored central bank officials to lower rates. Fed Chair Jerome Powell, though, has said the Fed won’t be swayed by political interference.
    The meeting also featured discussion about the Fed’s five-year policy framework.
    When officials last visited their long-range policy, they devised what became known as “flexible average inflation targeting,” which essentially asserted that officials could allow inflation to run above their 2% target for a while in the interest of promoting more inclusive labor market gains.
    In their discussion, officials noted that the strategy “has diminished benefits in an environment with a substantial risk of large inflationary shocks” or rates aren’t near zero, where they had been in the years after the 2008 financial crisis. The Fed held interest rates near the lower boundary despite inflation surging following the Covid pandemic, forcing them into aggressive hikes later.
    The minutes noted a desire for policy that is “robust to a wide variety of economic environments.” Officials also said they have no intention on altering the inflation goal.

    Don’t miss these insights from CNBC PRO More

  • 100 Shares129 Views

    in Finance

    Shareholders face a big new problem: currency risk

    Imagine someone who found secondary-school maths difficult being grilled about logarithms. That is how a lot of equity investors look if you ask them about currency risk. It is not because the question is novel: any client can spot that the share price of an overseas firm, or one doing business across borders, ought to depend on foreign-exchange (FX) rates. It is because it is easy to pose, but maddeningly hard to answer. Forecasting earnings is already a pain. It becomes much worse when the task is to make forecasts for each company in a portfolio, before splitting costs and revenues by perhaps a dozen currencies, and then netting it all off against hedging arrangements made years ago by a now-retired treasurer. Unsurprisingly, such analysis is often dumped in the “too hard” bucket. More

  • 175 Shares119 Views

    in Finance

    Palantir teams up with Fannie Mae in AI push to sniff out mortgage fraud

    An early test showed that Palantir’s technology, which includes elements of artificial intelligence, could identify fraud in seconds that took human investigators two months, Fannie Mae CEO Priscilla Almodovar said.
    Shares of Palantir have jumped more than 140% since President Donald Trump’s election win in November.
    The announcement comes as there is a push to potentially bring Fannie Mae and Freddie Mac out of conservatorship.

    Alex Karp, CEO of Palantir Technologies, speaks during the Digital X event in Cologne, Germany, on Sept. 7, 2021.
    Andreas Rentz | Getty Images

    Quasi-governmental financial firm Fannie Mae on Wednesday announced a partnership with defense tech player Palantir to detect mortgage fraud, deepening ties between the federal government and a company that has been a big winner in the second Trump administration.
    Priscilla Almodovar, Fannie Mae CEO, said Wednesday at a press event that the goal is for the firm to “identify fraud more proactively” with the help of Palantir, starting with its multi-family housing business. An early test showed that Palantir’s technology, which includes elements of artificial intelligence, could identify fraud in seconds that took human investigators two months to find, she said.

    Shares of Palantir have jumped more than 140% since President Donald Trump’s election win in November. The technology stock has roles in both modernizing the U.S. military and helping to cut costs in government, making it a seemingly strong fit for the administration’s stated priorities. CEO Alex Karp said Wednesday that the mortgage fraud detection can be done in a way that “protects the underlying data and protects the privacy of the people submitting their forms.”

    Stock chart icon

    Shares of Palantir have dramatically outperformed the broader stock market since the November election.

    Fannie Mae and Freddie Mac are government-sponsored enterprises that have been under the conservatorship of the Federal Housing Financing Agency since 2008. The official names of the two enterprises are the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, respectively.
    FHFA director William Pulte said Wednesday the Palantir program could be expanded to Freddie Mac in the future and that the agency is also talking to Elon Musk’s xAI firm about a potential partnership.
    “The sky’s the limit. We’re not just limited to fraud. If there are ways to pull cost out of the system, we want to do it,” Pulte said.
    The press release did not include a dollar amount that Fannie Mae would pay to Palantir for this service.

    The announcement comes as there is a push to potentially bring Fannie and Freddie out of conservatorship and re-establish them as something closer to independent companies.
    “Our great Mortgage Agencies, Fannie Mae and Freddie Mac, provide a vital service to our Nation by helping hardworking Americans reach the American Dream — Home Ownership,” Trump said in a Truth Social post on Tuesday. “I am working on TAKING THESE AMAZING COMPANIES PUBLIC, but I want to be clear, the U.S. Government will keep its implicit GUARANTEES, and I will stay strong in my position on overseeing them as President. These Agencies are now doing very well, and will help us to, MAKE AMERICA GREAT AGAIN!”
    The “implicit guarantee” mentioned by Trump refers to the idea among investors that the government won’t let Fannie and Freddie default on their mortgage-backed securities. That concept is not legally binding but does help that massive market function and, in theory, lead to lower mortgage rates by reducing the perceived risk to investors in the housing market.

    Pulte, who is the grandson of the founder of homebuilding firm PulteGroup, said on CNBC’s “Money Movers” that an exact plan for bringing Fannie and Freddie public is still undetermined and could even involve the companies remaining in conservatorship.
    “Whether the president decides to sell a small piece, or what have you, that’s entirely up to the president,” he said.
    There are equity shares of the two firms that trade over the counter, and those shareholders could conceivably see a large profit if Fannie and Freddie are taken public. One such shareholder is Bill Ackman’s Pershing Square, and the hedge fund manager has publicly called for IPOs of the two firms. More

  • 113 Shares119 Views

    in Business

    Auto giant Stellantis appoints Antonio Filosa as new CEO

    Stellantis on Wednesday appointed North American Chief Operating Officer Antonio Filosa as its new chief executive.
    The appointment means Filosa will succeed Carlos Tavares, who unexpectedly resigned in December after a sharp drop in profit, falling sales and problems in the U.S.
    Stellantis said John Elkann, who had led an interim executive committee since Tavares’ resignation, will continue in his role as executive chairman.

    Stellantis North America Chief Operating Officer and former Jeep CEO Antonio Filosa speaks during the Stellantis press conference at the Automobility LA 2024 car show at Los Angeles Convention Center in Los Angeles on Nov. 21, 2024.
    Etienne Laurent | Afp | Getty Images

    Auto giant Stellantis on Wednesday appointed North American Chief Operating Officer Antonio Filosa as its new chief executive, ending a monthslong campaign to fill the firm’s leadership void.
    The multinational conglomerate, which owns household names including Jeep, Dodge, Fiat, Chrysler and Peugeot, said it would hold an extraordinary shareholder meeting in the coming days for Filosa to be elected to the board to serve as an executive director.

    Stellantis said Filosa would assume CEO powers effective June 23. He will succeed Carlos Tavares, who unexpectedly resigned in December after a sharp drop in profit, falling sales and problems in the U.S.
    “It is my great honor to be named the CEO of this fantastic Company,” Filosa said in a statement, noting he takes over at a “pivotal time for our industry.”
    Filosa, in an internal memo to employees Wednesday, said his “essential” focus as CEO will be “strengthening the bonds and trust we have with our partners — our dealers, suppliers, unions and communities.”
    Mending relationships has been a priority for Filosa for much of the past year following a divide between many of Stellantis’ partners under Tavares, especially in the U.S.
    A 25-year veteran of the company, Filosa previously served as Jeep brand CEO before being named North America COO in October 2024 and chief quality officer in January this year.

    In addition to mending bonds, Filosa will need to balance the company’s investments in internal combustion engines and electric vehicles, while attempting to get the company’s finances back on track.
    Stellantis recently reported a 14% year-on-year downturn in first-quarter net revenues and withdrew its full-year financial guidance due to uncertainties regarding the impact of U.S. President Donald Trump’s back-and-forth trade policy.
    Uncertainty over trade tariffs is expected to profoundly affect the car industry, particularly given the high globalization of supply chains and the heavy reliance on manufacturing operations across North America.
    Stellantis said John Elkann, who had led an interim executive committee since Tavares’ resignation, will continue in his role as executive chairman. Elkann is scion of Europe’s prominent Agnelli family that founded Italian carmaker Fiat more than a century ago.
    “Antonio’s deep understanding of our Company, including its people who he views as our core strength, and of our industry equip him perfectly for the role of Chief Executive Officer in this next and crucial phase of Stellantis’ development,” Elkann said.
    Shares of Milan-listed Stellantis are down nearly 27% year to date.
    Filosa was among a short list of potential CEO candidates that also included three external candidates and Stellantis head of procurement Maxime Picat, Reuters reported last month.
    Filosa plans to travel to Stellantis’ plants and offices across the world in the days and weeks ahead, according to the internal memo.
    “I have always found strength in connecting and working closely with colleagues. That will be more important than ever. I look forward to our work together and the successes this will bring going forward,” he said in the memo.
    Michael Bettenhausen, a dealer in Illinois and chair of the Stellantis U.S. dealer council, said there is still a lot of work to get done regarding new products and sales.
    “Today it’s about recognizing Antonio but tomorrow we’ve got a lot of heavy lifting to do,” he said Wednesday. “We need to mutually work together and dive into all the issues here in the North American operations, and we look forward to Antonio still being a part of those discussions.”
    Bettenhausen described Filosa as a “very smart, retail centric operator” who understands the business, including the need for new products to improve the company’s embattled U.S. sales. More

  • 150 Shares159 Views

    in Business

    Dick’s Sporting Goods stands by full-year guidance — even with tariffs looming

    Dick’s Sporting Goods was able to stand by its full-year guidance, even while taking tariffs into effect.
    The retailer said it’s still expecting fiscal 2025 profit to be between $13.80 and $14.40 per share, in line with what analysts expected, according to LSEG.
    Dick’s recently announced plans to acquire its longtime rival Foot Locker.

    A sign is posted in front of a Dick’s Sporting Goods store on September 04, 2024 in Daly City, California. 
    Justin Sullivan | Getty Images

    Dick’s Sporting Goods said Wednesday it’s standing by its full-year guidance, which includes the expected impact from all tariffs currently in effect.
    The sporting goods giant said it’s expecting earnings per share to be between $13.80 and $14.40 in fiscal 2025 — in line with the $14.29 that analysts had expected, according to LSEG. 

    It’s projecting revenue to be between $13.6 billion and $13.9 billion, which is also in line with expectations of $13.9 billion, according to LSEG.
    “We are reaffirming our 2025 outlook, which reflects our strong start to the year and confidence in our strategies and operational strength while still acknowledging the dynamic macroeconomic environment,” CEO Lauren Hobart said in a news release. “Our performance demonstrates the momentum and strength of our long-term strategies and the consistency of our execution.” 
    Here’s how the company performed in its first fiscal quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

    Earnings per share: $3.37 adjusted. It wasn’t immediately clear if the results were comparable to estimates.
    Revenue: $3.17 billion vs. $3.13 billion 

    The company’s reported net income for the three-month period that ended May 3 was $264 million, or $3.24 per share, compared with $275 million, or $3.30 per share, a year earlier. Excluding one-time items related to its acquisition of Foot Locker, Dick’s posted earnings per share of $3.37. 
    Sales rose to $3.17 billion, up about 5% from $3.02 billion a year earlier. 

    For most investors, Dick’s results won’t come as a surprise because it preannounced some of its numbers about two weeks ago when it unveiled plans to acquire its longtime rival Foot Locker for $2.4 billion. So far, Dick’s has seen a mix of reactions to the proposed acquisition.
    On one hand, Dick’s deal for Foot Locker will allow it to enter international markets for the first time and reach a customer that’s crucial to the sneaker market and doesn’t typically shop in the retailer’s stores. On the other hand, Dick’s is acquiring a business that’s been struggling for years and some aren’t sure needs to exist due to its overlap with other wholesalers and the rise of brands selling directly to consumers. 
    While shares of Foot Locker initially soared more than 80% after the deal was announced, shares of Dick’s fell about 15%. 
    The transaction is expected to close in the second half of fiscal 2025 and, for now, Dick’s outlook doesn’t include acquisition-related costs or results from the acquisition. 
    In the first full fiscal year post-close, Dick’s expects the transaction to be accretive to earnings and deliver between $100 million and $125 million in cost synergies. 

    Don’t miss these insights from CNBC PRO More

  • 163 Shares199 Views

    in Business

    Macy’s CEO says retailer will hike some prices as tariffs cut into profits

    Macy’s cut its profit outlook for 2025, as President Donald Trump’s tariff hikes and higher promotions hit its bottom line.
    The department store operator beat Wall Street’s earnings and sales estimates for the first quarter.
    Macy’s in in the middle of a turnaround effort, as it moves to close roughly 150 of its namesake stores and lean into its stronger businesses, Bloomingdale’s and beauty chain Bluemercury.

    Macy’s logo is seen on a store in Manhattan, New York, United States of America, on July 5th, 2024. 
    Beata Zawrzel | Nurphoto | Getty Images

    Macy’s cut its full-year profit guidance on Wednesday even as it beat Wall Street’s quarterly earnings expectations, as the retailer’s CEO said it will hike prices of certain items to offset tariffs.
    In a news release, the department store operator said it reduced its earnings outlook because of higher tariffs, more promotions and “some moderation” in discretionary spending. Macy’s stuck by its full-year sales forecast, however. 

    For fiscal 2025, Macy’s now expects adjusted earnings per share of $1.60 to $2, down from its previous forecast of $2.05 to $2.25. It reaffirmed its full-year sales guidance of between $21 billion and $21.4 billion, which would be a decline from $22.29 billion in the most recent full year. 
    About 15 cents to 40 cents per share of the guidance cut is due to tariffs, CEO Tony Spring told CNBC. He said about 20% of the company’s merchandise comes from China.
    Macy’s will raise some prices and stop carrying certain items to mitigate the hit from tariffs, he added.
    “You’re dealing with it on both the demand side as well as the increased cost side. And so navigating that, we have a series of different scenarios to try to figure out kind of what will be the reality, and we want our guidance to reflect the flexibility of that uncertainty, so that we can react in real time to how we serve or better serve the consumer,” Spring said.
    Spring said the company will be “surgical” about its pricing approach.

    “It’s not a one-size-fits-all kind of approach,” he said. “There are going to be items that are the same price as they were a year ago. There is going to be, selectively, items that may be more expensive, and there are items that we might not carry because the pricing doesn’t merit the quality or the perceived value by the consumer.”
    Here’s how Macy’s did during its fiscal first quarter, compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

    Earnings per share: 16 cents adjusted vs. 14 cents expected
    Revenue: $4.60 billion vs. $4.50 billion expected

    In the three-month period that ended May 3, the company’s net income was $38 million, or 13 cents per share, compared with $62 million, or 22 cents per share, in the year-ago period. Sales dropped from $4.85 billion in the year-ago quarter. Excluding some one-time charges including restructuring charges, adjusted earnings per share were 16 cents.
    Though the company cut its profit outlook, its shares climbed more than 3% in premarket trading.
    Economic uncertainty – including President Donald Trump’s on-again, off-again tariff announcements – has complicated Macy’s turnaround plans. The New York City-based legacy retailer is more than a year into a three-year effort to become a smaller, but healthier business. It’s shuttering weaker stores and investing in stronger parts of the company, including luxury department store Bloomingdale’s and beauty chain Bluemercury. It has also tried to improve the customer experience, including by speeding up online deliveries and adding staff to stores. 
    Macy’s plans to close about 150 underperforming namesake stores across the country by early 2027.
    In the fiscal first quarter, Macy’s namesake brand remained its weakest. Comparable sales across Macy’s owned and licensed business, plus its online marketplace, declined 2.1% year over year. 
    When Macy’s took out the stores that it plans to shutter, however, trends looked slightly better. Comparable sales of its go-forward business, including its owned and licensed business and online marketplace, declined 1.9%
    On the other hand, comparable sales at Bloomingdale’s rose 3.8% year over year, including its owned, licensed and marketplace businesses. Comparable sales at Bluemercury climbed 1.5% year over year.
    To try to turn its namesake stores around, Macy’s has invested in 50 locations – dubbed the “First 50” – with more staffing, sharper displays and changes to its mix of merchandise. It has expanded that initiative to 75 additional stores, bringing the total to 125 locations that have gotten increased attention. That’s a little over a third of the 350 namesake locations that Macy’s plans to keep open.
    Those 125 locations performed better than the overall Macy’s brand. Comparable sales among those revamped stores owned and licensed by Macy’s were down 0.8% compared with the year-ago period.
    On Macy’s earnings call in March – before Trump made several sudden tariff moves that baffled companies and investors – Spring said the company’s guidance “assumes a certain level of uncertainty” about the economic outlook. He said even Macy’s affluent customer “is just as uncertain and as confused and concerned by what’s transpiring.”
    Earlier this spring, Macy’s announced a few key leadership changes – including a new chief financial officer. Macy’s new CFO, Thomas Edwards, will begin on June 22. He previously served as the chief financial officer and chief operating officer of Capri Holdings, the parent company of Michael Kors. He will succeed Adrian Mitchell, who is leaving Macy’s.
    As of Tuesday’s close, Macy’s shares are down about 29% so far this year. That trails the S&P 500’s nearly 1% gains during the same period. Macy’s stock closed on Tuesday at $12.04 per share, bringing the retailer’s market value to $3.35 billion.

    Don’t miss these insights from CNBC PRO More