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    Another activist takes aim at Macy’s, seeking spending cuts and real estate restructuring

    Barington Capital has partnered with private equity firm Thor Equities to mount an activist push at struggling department store operator Macy’s.
    The dissidents are looking for the company to trim capital expenditures, beef up buybacks and take a hard look at options for its luxury brands and real estate portfolio.
    It’s the fourth activist push at the company in the last decade.

    People walk past the Macy’s Herald Square flagship store in New York City, Nov. 29, 2024.
    David Dee Delgado | Getty Images

    Activist investor Barington Capital revealed Monday it has a position in Macy’s and wants the company to cut spending, explore selling its luxury brands and take a hard look at its real estate portfolio.
    It marks the fourth activist push at the struggling department store in the last decade.

    Macy’s shares rose roughly 3% on the news in premarket trading. The activist has partnered with private equity firm Thor Equities in its push, according to a Barington presentation. The two investors did not disclose the size of its stake.
    The activist said it believes Macy’s can trim back its inventory and sales and administrative costs, according to a slide deck the firm provided. Barington said in the presentation that while the business continues to generate cash, management has chosen to spend nearly $10 billion on capital expenditures while neglecting buybacks or dividends.
    Macy’s shares have underperformed the S&P 500 and Retail Select indexes over the last 10 years.
    In a statement Monday, Macy’s stood by its plans to close struggling namesake stores and invest in the stronger parts of its business.
    “We remain confident in our Bold New Chapter strategy,” Macy’s said in the statement. “We look forward to engaging with our shareholders, including Barington and Thor.”

    The department store operator announced in February that it would shut about 150 – or nearly a third – of its namesake stores by early 2027. It plans to invest in the roughly 350 locations that remain and invest in its stronger chains, higher-end department store Bloomingdale’s and beauty retailer Bluemercury.
    Barington wants Macy’s to beef up its share buybacks and consider selling off its Bluemercury and Bloomingdale’s brands.
    Barington, like other activists that have preceded it, also believes that Macy’s should take a fresh look at its real estate portfolio. Barington values it at anywhere from $5 billion to $9 billion, echoing analyses done by other activist investors. Barington said Macy’s should create a separate subsidiary, which could in turn charge rent to Macy’s parent company while the subsidiary’s management assessed how to maximize value from those assets.
    Barington pointed to smaller department store operator Dillard’s, where it also criticized management, as an example of effective capital allocation. Dillard’s has a market cap of more than $7 billion and says it operates 273 stores in the U.S.
    Macy’s has become an activist target again as sales at the company’s namesake stores decline and it continues to close many of the mall anchors.
    In the most recent quarter, which ended Nov. 2, Macy’s said the company’s sales fell 2.4% to $4.74 billion. Comparable sales for its owned and licensed businesses, plus its online marketplace, dropped 1.3%.
    Macy’s postponed releasing full results for the quarter as it faces scrutiny for another reason. The company said it is investigating after it discovered an employee intentionally hid up to $154 million in delivery expenses on its accounting books for nearly three years. It said it plans to share full results and its outlook by Dec. 11.
    Selling real estate as Macy’s closes stores could free up cash for the business. Macy’s owns many of its mall-anchor stores, but has not said which locations it has sold. In late November, it said asset sale gains in the most recent quarter totaled $66 million and were higher than its expectations.
    In recent quarters, Macy’s has started to report the sales performance of stores that will remain open once it closes the latest round of namesake locations. That cuts out some mall stores that are struggling. At the Macy’s stores that will remain open beyond early 2027, comparable sales were down 0.9% on an owned-plus-licensed basis, including the third-party marketplace.
    Barington has mounted campaigns at other big consumer names, including Mattel, The Children’s Place, Hanes and Steve Madden. Thor Equities is a retail-focused private equity firm and was part of the buyout group that acquired Hurley several years ago.
    Correction: A previous version of this article misnamed the private equity firm that Barington Capital has partnered with. It is Thor Equities. More

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    AI’s growth is just getting started, BlackRock’s thematic ETF head says

    BlackRock expects infrastructure and cybersecurity plays to shine in 2025.
    Jay Jacobs, the firm’s U.S. head of thematic and active ETFs, cites the artificial intelligence boom as a major catalyst.

    “It’s still very early in the AI adoption cycle,” he told CNBC’s “ETF Edge” this week.
    According to Jacobs, AI companies need to build out their data centers. Plus, keeping that data safe is also a sound investment play for the new year.
    “If you think about your data, you want to spend more on cybersecurity as it gets more valuable,” he said. “We think this is really going to benefit the cybersecurity [and the] software community which is seeing very rapid revenue growth based off of this AI.”
    Jacobs also sees a wider impact in terms of the supporting infrastructure.
    “I think what people forget is kind of, magical as technology is, there’s real physical things on the ground that run that technology, whether it’s power, whether it’s data centers and real estate, whether it’s chips. It’s not just something that lives in the ether, in the cloud, there’s real physical things that have to happen, and that means energy, that means more materials like copper, that means more real estate. You really have to think about kind of the physical infrastructure that underlies it,” he added.

    So, for Jacobs, the theme is widening one’s investment scope.
    “It’s not just about megacap tech names. There’s other semiconductor companies, there’s other data center companies, there’s other software companies that are benefiting from the rise of this theme,” he said.
    Jacobs cited BlackRock’s iShares Future AI & Tech ETF (ARTY) and iShares AI Innovation and Tech Active ETF (BAI) as potential ways to benefit from the rise in AI. The iShares Future AI & Tech ETF is up around 13% for the year so far, while the iShares AI Innovation and Tech Active ETF is up around 13% since its Oct. 21 launch as of Friday’s close.

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    ‘This was preventable’: Corporate world shudders at new risks after slaying of UnitedHealthcare CEO

    The fatal shooting of UnitedHealthcare CEO Brian Thompson in New York City is forcing companies to rethink the risks in routine aspects of executive responsibilities.
    Threats against corporations have been rising for years, but Thompson’s slaying is the highest profile such incident in decades.
    If Thompson had had a security detail, several key factors would have been different on his way to his company’s investor event on Wednesday.

    Closed circuit screenshots of a person of interest in the UnitedHealthcare CEO killing.
    Source: NYPD

    UnitedHealthcare CEO Brian Thompson was fatally shot Wednesday doing something countless other American executives routinely do: Walking unaccompanied to an investor event held by his company.
    But Thompson’s death this week in the heart of corporate America’s capital has sent shockwaves throughout the business world, forcing companies to rethink the risks in even the most routine executive responsibilities.

    “Everyone’s scrambling to say, ‘Are we safe?'” said Chuck Randolph, chief security officer for Ontic, an Austin, Texas-based provider of threat management software. “This is an inflection point where the idea of executive protection is now raised to the board level. Everyone I know in the industry is feeling this.”
    Threats against corporations have been rising for years, fueled in part by the echo chamber of social media and a more polarized political environment, according to security professionals. But the slaying on a Manhattan sidewalk of Thompson, head of the largest private health insurer in the U.S., is the highest profile such incident in decades.
    Companies now worry their leaders face greater risk of being targets of violence, especially as they hold more public investor events in New York in the coming weeks.
    The gunman is still at large, and his motivation isn’t known. Words written on the shell casings found at the scene may offer hints about what incited the shooter.
    One question from security experts not involved in the case was whether the shooter demonstrated grievances against UnitedHealthcare in online forums and searched for information about the investor event. Several health-care companies have reacted by pulling photos of executives from websites, and health insurer Centene made an investor meeting virtual after the killing.

    Thompson didn’t have a security detail with him on Wednesday morning, despite known threats against him, according to NYPD officials. None of the executives of UnitedHealth received personal security benefits, according to the company’s filings.

    Read more on the Brian Thompson shooting

    Cups mark the location of shell casings found at the scene where the CEO of United Healthcare Brian Thompson was reportedly shot and killed in Midtown Manhattan, in New York City, US, December 4, 2024.
    Shannon Stapleton | Reuters

    If Thompson had, several key factors would have been different. Personnel would have gone to the hotel before his arrival to detect threats; he also would have been accompanied by armed security who may have used an alternate hotel entrance, said Scott Stewart, a vice president of TorchStone Global.
    “This was preventable,” said Stewart, who said he had nearly four decades in the industry.  “I’ve never seen an executive with a comprehensive security program ever be victimized like that.”
    Still, before this week’s shocking events, it wasn’t unusual for executives to decline security because of the disruption to their lives, or the image it may give, several security veterans said.
    “Not every CEO needs heavy duty protection,” said the security chief of a technology firm who wasn’t given permission to speak to the press. “Senior executives are subject to threats all day long, you need a platform to” examine them and determine whether they are credible and timely, he said.

    ‘Guns, guards and gates’

    Since Thompson’s killing, a wide spectrum of companies have sought extra protection for executives, Matthew Dumpert, managing director at Kroll Enterprise Security Risk Management, told CNBC.
    In the coming weeks, there are several financial conferences in New York with CEOs scheduled to attend in person. Until now, the major concern for these events has been disruption by environmental activists or other protestors, said a manager at large bank.
    “Everybody is taking a look and thinking through security for their senior people,” said an executive at a major Wall Street firm who declined to be identified out of concern it would draw attention.
    Some corporate security veterans vented that they are seen as a cost center whose leaders are “buried too deeply in an organization to be listened to.”
    “The bias is, security is a pain in people’s butts, and not that important,” said the person, who asked for anonymity to speak candidly.
    “I hope this opens their eyes,” he said. “Risk intel and assessment is important, and security is about much more than just guns, guards and gates.”
    — CNBC’s Jordan Novet, Bertha Coombs and Dan Mangan contributed to this report More

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    CFPB sues Comerica Bank, alleging it failed to administer federal benefits program

    The Consumer Financial Protection Bureau filed a complaint against Comerica Bank, accusing it of failing to administer a federal benefits program that uses prepaid debit cards.
    The lawsuit claims Comerica Bank “intentionally terminated” more than 24 million customer service calls, charged more than 1 million cardholders ATM fees they didn’t owe and mishandled fraud complaints.
    The Direct Express program is a prepaid card that beneficiaries, many of whom are older and disabled, can use to pay for expenses including groceries and gas.

    A Comerica Bank sign on a building in Walnut Creek, California, March 30, 2023.
    Smith Collection/gado | Archive Photos | Getty Images

    The Consumer Financial Protection Bureau filed a complaint Friday against Comerica Bank, accusing the regional bank of failing to administer a federal benefits program that uses prepaid debit cards.
    The lawsuit claims Comerica Bank “intentionally terminated” more than 24 million customer service calls, charged more than 1 million cardholders ATM fees they didn’t owe and mishandled fraud complaints while providing federal benefits through the Direct Express prepaid debit card program.

    “By deliberately disconnecting millions of calls and harvesting illegal junk fees, Comerica boosted its bottom line at the expense of Americans living on a fixed income,” CFPB Director Rohit Chopra said.
    The Direct Express program is a prepaid card that beneficiaries of Social Security and other federal programs can use to pay for expenses including groceries and gas. Comerica has been contracted with the Department of the Treasury since 2008 to administer the program and handle customer service for the millions of Americans using the prepaid card, many of whom are disabled and older and don’t have a bank.
    While the Direct Express website advertises 24/7 customer service, the CFPB alleges that “when people had problems with their accounts, it was often impossible to talk to someone who would help.”
    Comerica filed an earlier complaint against the CFPB on Nov. 8, arguing the bureau had overreached in its handling of the case and “has failed to acknowledge that, as Financial Agent of the Direct Express program, Comerica generally acted with the oversight and knowledge or approval of the federal government,” the suit reads.
    “Throughout the CFPB’s investigation, we have cooperated by sharing information and data to illustrate the unique nature of this program and the fact that we operate with the oversight of the Fiscal Service,” said Louis Mora, Comerica vice president of media relations. “Despite our good faith efforts to provide this critical context, the CFPB has consistently ignored our arguments and documentation.”

    “We will continue to vigorously defend our record as the financial agent for the Direct Express program and remain committed to serving our cardholders,” Mora continued.
    The CFPB has taken action against banks for mishandling benefits in the past, including in 2022 when the bureau fined Bank of America $100 million for mishandling state unemployment benefits in 2020 and 2021. The Office of the Comptroller of the Currency also fined the bank $125 million in a separate order.
    — NBC News’ Steve Kopack contributed to this report More

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    UniCredit’s Orcel could still sweeten his bid and take on a double M&A offensive

    Analysts say that UniCredit could sweeten its spurned all-stock proposal to acquire Italian domestic peer Banco BPM by tacking on a cash component.
    UniCredit is “more exposed to changes in interest rates due to its relatively limited presence in asset management and bancassurance,” Scope Ratings’ Alessandro Boratti said. Takeover targets Commerzbank and Banco BPM could both hedge this exposure.
    Orcel may need to decide between going big abroad or staying home, with analysts pointing to high integration costs and an extensive toll on management time if UniCredit attempts to absorb both of the banks it courts.

    Andrea Orcel, chief executive officer of Unicredit, in London, UK, on Thursday, Nov. 23, 2023. 
    Bloomberg | Bloomberg | Getty Images

    Divided between two takeover courtships, UniCredit’s Andrea Orcel still has room to sweeten his bid for Italy’s Banco BPM, analysts say, while political turmoil stalls a deal with Germany’s Commerzbank. 
    Once a key architect in the controversial 2007 takeover and later break-up of Dutch bank ABN Amro, Orcel revisited his ambitions for cross-border consolidation with the September announcement of a surprise stake build in Commerzbank. Until recently, the latter had been the subject of speculation as a potential merger partner for Germany’s largest lender, Deutsche Bank.

    Amid resistance from the German government — and turbulence in Chancellor Olaf Scholz’s ruling coalition — UniCredit also last month turned its eye to Banco BPM, with a 10 billion-euro ($10.5 billion) offer that the Italian peer said was delivered on “unusual terms” and does not reflect its profitability and growth potential.
    Along the way, Orcel drew frowns from the Italian administration, with Economy Minister Giancarlo Giorgetti warning that “the safest way to lose a war is engaging on two fronts,” according to Italian newswire Ansa.
    Analysts say that the spurned UniCredit — whose CET1 ratio, reflecting the bank’s financial strength and resilience, stood above 16% in the first three quarters of this year — can still improve its domestic bid.  
    “There is scope for increasing the [Banco BPM] offer,” Johann Scholtz, senior equity analyst and Morningstar, told CNBC.
    However, he warned of “limited” room to do so. “Think more than 10% [increase], you are probably going to dilute shareholder earnings.”

    UniCredit’s starting proposal was for an all-stock deal that would merge two of Italy’s largest lenders, but offered just 6.657 euros for each share.
    Both Scholtz and Filippo Alloatti, senior credit analyst at Federated Hermes, said that UniCredit could sweeten the proposition by tacking on a cash component.
    “Remember, that’s the second attempt from Orcel to buy [Banco] BPM … I don’t think there’ll be a third attempt. I think that either they close [the deal] now, or probably he walks. So I believe a cash component could be on the table,” Alloatti told CNBC. Orcel last month labeled Banco BPM as a “historical target” — stoking the flames of media reports that UniCredit had previously sought a domestic union back in 2022.
    The Italian stage was primed for M&A activity early last month, after Banco BPM acquired a 5% holding in Monte dei Paschi —  the world’s oldest lender and another former takeover target of UniCredit, until talks collapsed in 2021 — when Rome sought to reduce its stake in the bailed-out bank.
    Critically, Scholtz noted, UniCredit’s offer “puts [Banco] BPM into a difficult position,” triggering a passivity rule that impedes it from any action that might hinder the bid without shareholder approval — and could stifle Banco BPM’s own early-November ambitions to acquire control of fund manager Anima Holding, which also owns a 4% stake in Monte dei Paschi.

    Offense-defense

    A consolidation offensive could be UniCredit’s best defense in an environment of easing interest rates.
    “Multi-year long restructuring, balance sheet de-risking and materially improved loss absorption capacity” propelled UniCredit to a BBB+ long-term debt rating from Fitch Ratings in October, above that of Italy’s own sovereign bonds.
    But the lender must now contend with an environment of loosening monetary policy, where it is “more exposed to changes in interest rates due to its relatively limited presence in asset management and bancassurance,” Alessandro Boratti, analyst at Scope Ratings, wrote last month.
    Both takeover prospects hedge some of that exposure. A Commerzbank union in Germany, where UniCredit operates through its HypoVereinsbank division, could create synergies in capital markets, advisors, payments and trade finance activity, JPMorgan analysts signaled in a November note. They added that such a union would produce a “limited” advantage in funding, as the two banks’ spreads already trade closely.
    Closer to home, Scholtz notes, Banco BPM offers complementary strength in asset management. Alloatti said that absorbing a domestic peer is also one of the Italian lender’s only remaining options to take a leading role on the home stage.
    “There really isn’t much they can buy in Italy to bridge the gap with [Italy’s largest bank] Intesa. Probably Banco BPM … that’s why they looked at it in the past,” Alloatti said. “Banco BPM is the only bank they could potentially buy to get somewhat closer to Intesa.” Intesa Sanpaolo is currently Italy’s largest bank by total assets.
    Approaching Banco BPM, KBW Analyst Hugo Cruz told CNBC in emailed comments, also has the “added value” of signaling to German shareholders that UniCredit has other M&A options available to it. He nevertheless stressed that the domestic acquisition bid is likely “mainly a reaction to the acceleration of the consolidation process in the Italian banking system,” triggered by Banco BPM’s acquisition of its Monte dei Paschi interest.
    Orcel may need to decide between going big abroad or staying home, with analysts pointing to high integration costs and an extensive toll on management time if UniCredit attempts to absorb both of its takeover targets.
    Ultimately, KBW’s Cruz said, the Italian lender — which notched its 15th consecutive quarter of growth this fall and has seen a roughly 61% hike in its share price in the year to date — can choose to stand alone.
    “I don’t think Mr. Orcel has to do a bank acquisition. He already stated that any acquisition will need to add value compared to [UniCredit]’s standalone strategy, and if no acquisition the bank will continue with the same strategy which already included a high level of capital distribution for shareholders and which targeted the usage of excess capital by end of 2027,” he said, noting that the Italian lender abstained from bids previously “because it was still under restructuring and did not have the acquisition currency.”
    “We would hope that they would have the discipline to walk away from both deals” if they do not generate return to shareholders, Morningstar’s Scholtz added. More

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    Ulta Beauty shares pop as retailer beats earnings expectations despite demand fears

    Ulta Beauty beat Wall Street’s revenue and sales expectations for the fiscal third quarter.
    The retailer fended off fears of heightened competition with rivals and cooling demand for makeup and skin-care items.
    The company hiked its full-year outlook slightly to reflect better-than-anticipated results.

    Beauty products on the shelves at Ulta Beauty.
    Brian Cassella | Tribune News Service | Getty Images

    Ulta Beauty on Thursday beat Wall Street’s fiscal third-quarter expectations, fending off fears of fiercer competition and slowing demand for makeup and skin care.
    The retailer hiked its full-year outlook slightly to reflect the better-than-expected results. For the fiscal year, it said it now expects net sales to range from $11.1 billion to $11.2 billion, compared with its previous guidance for $11 billion to $11.2 billion.

    It said it now expects full-year earnings per year to range from $23.20 to $23.75, up from $22.60 to $23.50. For the full year, the comparable sales forecast ranges from a decline of 1% to flat. The comparable sales metric tracks sales at Ulta stores open at least 14 months, along with online sales.
    Despite the raised outlook, the company expects holiday-quarter comparable sales to decline by the low single digits.
    In a news release, CEO Dave Kimbell said he’s “proud of the progress” the company’s made and “encouraged by early signs that our efforts to reinforce our market position and drive improved performance are gaining traction.”
    Here’s what the beauty retailer reported for the three-month period ended Nov. 2 compared with what Wall Street was expecting, based on a survey of analysts by LSEG:

    Earnings per share: $5.14 vs. $4.54 expected
    Revenue: $2.53 billion vs. $2.50 billion expected

    Ulta shares rose more than 10% in after-hours trading.

    Beauty has been a strong category for many retailers, holding up over the past couple of years even as inflation stretched families’ budgets and many shoppers pulled back on discretionary purchases. The category’s resilience caused companies including Target, Walmart, Kohl’s and Macy’s to expand their offerings of makeup and skin-care products.
    Yet Ulta began to hint at potential troubles in April, with Kimbell warning of cooling beauty demand at an investor conference.
    In recent quarters, Ulta’s results have reflected discerning shoppers and heightened competition. The company missed earnings results and cut its full-year outlook in August after a drop in same-store sales. It marked the first time that the retailer missed Wall Street’s expectations in about four years.
    Shares of the company have fallen, too. As of Thursday’s close, Ulta’s stock is down about 19% so far this year, trailing the S&P 500’s approximately 28% gains during the same period.
    For the fiscal third quarter, the retailer reported net income of $242.2 million, or $5.14 per share, compared with $249.5 million, or $5.07 per share, during the year-ago quarter.
    Revenue rose from $2.49 billion in the year-ago period.
    Comparable sales increased 0.6% year over year, as the retailer saw a tiny uptick in traffic and average ticket.
    Customer transactions across its website and stores grew 0.5% year over year, and average ticket, the amount spent by shoppers during those visits, rose 0.1% year over year.
    On the company’s earnings call, Kimbell said the launch of new brands, rollout of digital tools and in-store events helped drive Ulta’s better performance in the quarter.
    For example, he said, Ulta is selling an exclusive line of makeup tied to the release of Universal’s “Wicked” movie. It also added new features for online, including virtual try-on enhancements and new digital buying guides. And it had in-store events, including workshops where customers received coaching from Ulta’s stylists on how to get “salon-worthy blowouts.”
    For beauty retailers, including Ulta, the holidays are a critical time of year. Kimbell said the company is “encouraged by our performance through Cyber Monday.”
    However, he hinted of a still-challenging backdrop. He said the company is ready for the shopping season, even as “our insights suggest that economic concerns are driving a greater focus on value.”
    On the earnings call, CFO Paula Oyibo said the company continues to take a “cautious view of the consumer and operating environment” and factored that into its forecast. She said the compressed holiday season, which has five fewer days between Thanksgiving and Christmas, could also hurt sales.
    Disclosure: Comcast is the parent company of NBCUniversal and CNBC. NBCUniversal is the distributor of “Wicked.” More

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    Lululemon stock jumps as international growth helps to offset slowing U.S. sales

    Lululemon beat Wall Street’s expectations on the top and bottom lines.
    The athletic apparel retailer, best known for its yoga pants and belt bags, offered holiday guidance that was in line with expectations.
    The company’s sales have started to slow in the Americas, its largest market, but are growing internationally.

    A customer exits a Lululemon store in New York on Aug. 22, 2024.
    Yuki Iwamura | Bloomberg | Getty Images

    Lululemon’s U.S. growth is continuing to slow, but the athletic apparel retailer is making big gains abroad, leading to a 9% increase in sales year over year.
    The yoga pants company on Thursday beat Wall Street’s expectations on the top and bottom lines and said it’s “pleased” with the start to the holiday season. Still, on a call with analysts, CEO Calvin McDonald took a cautious tone when discussing the company’s fourth quarter outlook.

    “While we feel good about the start of the holiday season, we still have large volume weeks in front of us,” said McDonald. “Given the shorter holiday shopping season, we continue to be thoughtful in our planning for quarter four overall.”
    Here’s how Lululemon performed in its fiscal third quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

    Earnings per share: $2.87 vs. $2.69 expected
    Revenue: $2.40 billion vs. $2.36 billion expected

    Shares climbed about 8% in extended trading Thursday.
    The company’s reported net income for the three-month period that ended Oct. 27 was $352 million, or $2.87 per share, compared with $249 million, or $1.96 per share, a year earlier
    Sales rose to $2.40 billion, up about 9% from $2.20 billion a year earlier.

    For the all-important holiday shopping quarter, Lululemon is expecting revenue to be between $3.48 billion and $3.51 billion, representing growth of 8% to 10% from the prior year. Analysts were expecting revenue of $3.50 billion, or growth of 9.1%, which is roughly in line with the midpoint of the guidance, according to LSEG.
    It’s expecting earnings per share to be between $5.56 and $5.64, the high end of which is ahead of the $5.59 analysts had expected, according to LSEG.
    On a call with analysts, finance chief Meghan Frank said the company is planning the business “prudently” given the shortened holiday shopping season and the “uncertain macro environment.”
    For the full year, Lululemon tightened its revenue guidance and raised it by just a hair. It now expects fiscal 2024 revenue to come in between $10.45 billion and $10.49 billion, compared to previous guidance of between $10.38 billion and $10.48 billion. The outlook would top the $10.44 billion that Wall Street had expected, according to LSG
    It’s expecting earnings per share to be between $14.08 and $14.16, ahead of the $13.97 that analysts had expected.
    Lululemon has hit a rough patch over the last year. It’s still growing, but at a slower pace than it was previously, and the competitive environment has gotten more intense. Lululemon has always competed with legacy giants like Nike, Gap’s Athleta and Levi’s Beyond Yoga, but newer disrupters such as Vuori and Alo Yoga are also taking share from the Canadian retailer. 
    The company has turned to China for growth, which so far is lifting sales across the overall business. Company-wide comparable sales grew 4% during the quarter, ahead of the 3.2% growth Wall Street was anticipating, according to StreetAccount.
    Behind that number is a 2% slowdown in comparable sales in the U.S., but a 25% increase internationally. Overall revenue grew 2% in the Americas during the quarter and 33% internationally. Still, the Americas remains Lululemon’s largest market, and international is still a fraction of its overall revenue. 
    Lululemon has also had a few self-inflicted challenges. It fumbled a high-profile product launch earlier this year and missed out on sales in the U.S. when it failed to offer the colors and sizes that its core customers desired.
    When the company reported earnings in August, McDonald insisted that the brand remains strong in the U.S., but its women’s business had slowed because it didn’t have enough new styles to entice customers. 
    All of these issues coincided with the departure of Lululemon’s longtime chief product office Sun Choe, who resigned in May and joined V.F. Corp. In the wake of her departure, McDonald unveiled a new reporting structure on the product side of the house that merges together Lululemon’s brand and merchandising teams under chief brand and product activation officer Nikki Neuburger. McDonald said the new structure makes the company more efficient and said it’s “on track” to increase new product releases in time for the spring selling season.
    “Our teams have been agile and have been chasing into seasonal colors, prints and patterns. I’m sure you’ve seen several examples across our key franchises,” said McDonald. “These efforts have contributed to the sequential improvement in newness within our assortment in the back half of the year … we continue to see significant potential for growth in the U.S.”
    In a note, GlobalData managing director Neil Saunders said it looks like Lululemon’s product struggles are behind it.
    “Across the third quarter the women’s range felt fresh and interesting and there was more than enough to grab the attention of shoppers,” the retail analyst said. “This both improved the conversion rate and helped with average basket sizes. In our view, Lululemon deserves praise for the quick course correction which underlines that it is a merchant-led organization.”
    Lululemon’s struggles also came at a time when consumers, reeling from persistent inflation and an economy that feels worse than perhaps it actually is, are choosier than ever and less forgiving when a brand makes a mistake. 
    Amid its rough patch, Lululemon has turned to stock buybacks to keep Wall Street happy. It approved a $1 billion increase to its stock repurchase program this month. As of Thursday, it had approximately $1.8 billion remaining in the program.
    Lululemon has also focused on boosting profitability amid uncertain demand. During the third quarter, gross margin grew more than expected, increasing by 1.5 percentage points to 58.5%, ahead of the 57.5% that analysts had expected, according to StreetAccount. More

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    Court rejects Boeing plea deal in deadly 737 Max crashes, citing concerns with Justice Department’s DEI policies

    A federal judge rejected Boeing’s agreement to plead guilty to a criminal fraud charge tied to two crashes of its 737 Max aircraft, citing concerns the Justice Department’s diversity, equity and inclusion policies would affect the selection of an independent monitor.
    Boeing agreed to plead guilty over the summer after the DOJ said the manufacturer violated an earlier agreement.
    Lawyers for victims’ family members had criticized the earlier agreement and sought more input in the selection of a monitor.

    Nadia Milleron, whose daughter Samya Stumo was killed in the crash of Ethiopian Airlines Flight 302, holds a sign with photos of the crash victims during a Senate Commerce, Science and Transportation Committee hearing on aviation safety and the future of the Boeing 737 Max aircraft, in the Hart Building in Washington, D.C., Oct. 29, 2019.
    Tom Williams | CQ-Roll Call, Inc. | Getty Images

    A federal judge on Thursday rejected Boeing’s plea deal tied to a criminal fraud charge stemming from fatal crashes of the manufacturer’s 737 Max aircraft.
    U.S. District Judge Reed O’Connor of the U.S. District Court for the Northern District of Texas expressed concern in his decision that the selection process for a government-appointed monitor, a condition of the plea deal, would be affected by diversity, equity and inclusion policies.

    He wrote that “the Court is not convinced in light of the foregoing that the Government will not choose a monitor without race-based considerations and thus will not act in a nondiscriminatory manner. In a case of this magnitude, it is in the utmost interest of justice that the public is confident this monitor selection is done based solely on competency.”
    In October, O’Connor ordered Boeing and the Justice Department to provide details on DEI policies that might affect the selection of the monitor.
    The court gave Boeing and the Justice Department 30 days to decide how to proceed, according to a court document filed Thursday.
    In July, Boeing agreed to plead guilty to a criminal charge of conspiring to defraud the U.S. government by misleading regulators about its inclusion of a flight-control system on the Max that was later implicated in the two crashes — a Lion Air flight in October 2018 and an Ethiopian Airlines flight in March 2019. All 346 people on the flights were killed.
    Boeing and the Justice Department didn’t immediately comment.

    Victims’ family members had taken issue with a government-appointed monitor as a condition of the plea agreement, which they called a “sweetheart deal,” and sought to provide more input on the monitor’s selection.
    Erin Applebaum, an attorney representing one of the victims’ family members, applauded the deal. “We anticipate a significant renegotiation of the plea deal that incorporates terms truly commensurate with the gravity of Boeing’s crimes,” Applebaum said in a statement. “It’s time for the DOJ to end its lenient treatment of Boeing and demand real accountability.”
    The deal was set to allow Boeing to avoid a trial just as it was trying to get the company back on solid footing after a door panel on a 737 Max 9 blew out in midair during an Alaska Airlines flight on Jan. 5.
    The new plea deal arose after the Justice Department said in May that Boeing violated a previous plea agreement, which was set to expire days after the door panel incident.
    O’Connor said in his decision Thursday that it “is not clear what all Boeing has done to breach the Deferred Prosecution Agreement.”
    Under the new plea agreement, Boeing was set to face a fine of up to $487.2 million. However, the Justice Department recommended that the court credit Boeing with half that amount it paid under a previous agreement, resulting in a fine of $243.6 million. More