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    China doubles down on national security, expanding its state secrets law

    China is beefing up national security measures by expanding its protections of state secrets to include a broad category of “work secrets.”
    The new rules, set to take effect May 1, describe how precautions taken for state secrets should also apply to unclassified information known as work secrets.
    That article on work secrets “is the most problematic,” said Jeremy Daum, a senior fellow at Yale Law School’s Paul Tsai China Center, noting “there is a risk that individual departments will overzealously identify matters as ‘work secrets.'”

    A Chinese flag flutters on top of the Great Hall of the People ahead of the opening ceremony of the Belt and Road Forum (BRF), to mark 10th anniversary of the Belt and Road Initiative, in Beijing, China October 18, 2023.
    Edgar Su | Reuters

    BEIJING — China is beefing up national security measures by expanding its protections of state secrets to include a broad category of “work secrets.”
    Chinese President Xi Jinping on Tuesday signed an order to formally adopt revisions to a law on “Guarding State Secrets,” according to state media, which reported that legislators passed the updated law at a meeting earlier that day.

    The new rules, set to take effect May 1, describe how precautions taken for state secrets should also apply to unclassified information known as work secrets. The law broadly defines work secrets as information that would result in an “adverse impact” if leaked, and said specific measures would be released separately.
    That article on work secrets is “the most problematic,” said Jeremy Daum, a senior fellow at Yale Law School’s Paul Tsai China Center.
    “There is a risk that individual departments will overzealously identify matters as ‘work secrets,'” Daum said. He also founded the website China Law Translate, which published an unofficial English translation of the new rules.
    “This limits the public right to know and also exposes people to potential liability.”

    For foreign businesses, it’s the lack of clarity that will remain an unquantified risk to doing business in China.

    Jeremy Daum
    Yale Law School’s Paul Tsai China Center

    While China regularly discloses a certain amount of information about government plans and economic data, the country is often considered more opaque relative to many developed countries.

    For example, high-level officials in China have disappeared from public view without formal explanation. Policies, even those that support businesses, don’t always come with specific implementation dates.
    Last year, new Chinese laws on espionage and foreign policy included catch-all phrases such as “state secrets” that were left open to interpretation by authorities. Separate rules on what kinds of data foreign businesses in China can send out of the country have yet to provide formal clarity on what qualifies as “important data” and thus subject to export restrictions.

    “For foreign businesses, it’s the lack of clarity that will remain an unquantified risk to doing business in China,” Daum said.
    “The addition of work secrets, and mention of information that becomes secret only after being aggregated with other information, all creates concern that one might accidentally infringe secret information,” he said.
    “In practice however, protection of state secrets has previously been stretched to encompass seemingly benign situations, and foreign businesses have still remained.”

    Growing national security concerns

    The updated state secrets law comes as Beijing and Washington increasingly cite national security risks when announcing new restrictions for business.
    “The new law will add to a general sense among the foreign business community that the Chinese leadership’s preoccupation with national security has made the country’s operating environment more difficult,” said Gabriel Wildau, managing director at consulting firm Teneo.
    “China’s economic growth outlook remains the key factor influencing foreign investment decisions, but the secrets law adds another disincentive at the margin,” he said.

    The rules designate state secrets as information that, if leaked, “might harm” China’s security and interests in politics, economics, national defense, foreign affairs, technology and other fields, according to China Law Translate.
    The law also retained restrictions for overseas travel by people currently or recently working with state secrets.
    “I don’t know that their coverage will be meaningfully expanded by the revisions, but the holistic view of national security, a theme running through this law and other recent security laws, has generally placed some barriers on travel,” Daum said.
    “A document on counter-espionage precautions released a few years back, required a wide range of persons traveling in their professional capacity to have briefings on security prior to departure.”

    The final version of “Guarding State Secrets” has been under government discussion for months.
    The revised law provides a “strong legal guarantee for better protecting national sovereignty, security and development interests,” Li Zhaozong, director of the Central Security Office and the National Administration for the Protection of State Secrets, wrote Wednesday in an article published by People’s Daily, the Chinese Communist Party’s official newspaper. That’s according to a CNBC translation.
    Li noted how it’s important to disclose information that should be made public, while ensuring confidentiality as needed. The article did not mention work secrets.
    China’s National People’s Congress Standing Committee passed the final version of the updated state secrets law after considering a round of revisions in October. The law was initially adopted in 1988.
    Daum pointed out that many of the changes in the new rules are “updates for new technology and style changes.”
    “The law offers clarity in a few areas, limiting liability of leadership in some instances, and providing compensation for persons whose rights have been limited due to secrecy requirements,” he added.
    The National People’s Congress is set to kick off its annual meeting next week, during which the country’s top leadership will release its economic plans and outlook, as well as outline key policies. More

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    Baylor University outperformed the Ivy League in university endowment performance rankings. Here’s how

    Monday – Friday, 12:00 – 1:00 PM ET

    Halftime Report Podcast

    Watch out, Ivies, there’s a new endowment performer in town.
    Baylor University’s $2 billion endowment — a fraction of those in the Ivy League — generated a 6.4% return for the fiscal year that ended June 30, outperforming the entire conference. Harvard’s endowment, the largest at $50.7 billion, returned 2.9%.

    What’s more, Baylor’s annualized return of 10.9% over the past five years outperformed all Ivy League colleges except for Brown University, which recorded a return of 13.3% during that same period, according to the Wall Street Journal. Brown’s endowment in fiscal 2023 was more than three times higher than Baylor’s at $6.6 billion.
    The key to Baylor’s endowment success, according to Chief Investment Officer David Morehead, is taking advantage of dislocations in the market.
    “It’s really driven by the managers, and then if we, on the edges, are seeing … a dislocation, we could allocate more money into high yield, allocate more money into [emerging markets] — something like that,” the former trader told CNBC’s “Halftime Report” last week. “We’re really allocators.”
    Morehead joined the university in 2011, and since fiscal 2012, Baylor’s endowment has more than doubled.

    This increase comes as endowment returns have rebounded nationally. Endowment returns were up 7.7% in fiscal 2023, per the latest study by the National Association of College and University Business Officers and Commonfund. By contrast, returns fell 8% in fiscal 2022.

    The latest gain, however, still comes up short of the returns seen in fiscal 2021, which was 30.6%. That’s the second-highest average return ever recorded since the NACUBO study began in 1974. The study’s highest return to date occurred in fiscal 1983 at 41.3%.
    Morehead said that he and his investment team of four others focus on their portfolio’s liquidity as part of their strategy. Assessing those needs in advance, he explains, is what allows the team to take advantage of market dislocations as they happen.
    In a statement to CNBC, Morehead noted that initial allocations into or away from a segment of the market are triggered by a move of 20% or more in either direction.
    “We don’t care at all if the market is up or down 1-2% in a day — we’re long-term investors,” he said in the statement.
    He also revealed to CNBC that his team is betting on helium, along with biotech and small caps, for the medium term.
    The commodity, which is used for chip manufacturing and rocket launches, has faced supply shortages in recent years. With the semiconductor industry’s growth and the number of rocket launches at an all-time high, Morehead predicts demand will continue to rise and send helium prices higher.
    “Our broader expectation is that the major tech companies will start to develop their own chips so as not to be beholden to Nvidia going forward,” he added.

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    Rocket Lab says contract backlog tops $1 billion, outlines Neutron progress toward first launch

    Rocket Lab is making steady progress on the development of its Neutron vehicle.
    The company reported fourth-quarter results that saw its contract backlog soar above $1 billion, driven by a major Pentagon satellite deal.
    The space company reported a net loss of $50.5 million, or 10 cents per share, for the quarter.

    An Electron rocket launches the Baby Come Back mission from New Zealand on July 17, 2023.
    Rocket Lab

    Rocket Lab is making steady progress on the development of its Neutron vehicle, as the company reported fourth-quarter results that saw its contract backlog soar above $1 billion.
    The space company reported a net loss of $50.5 million, or 10 cents per share, for the quarter. Year over year, Rocket Lab’s fourth-quarter net loss widened by about 36% as the company continues to spend heavily to create its Neutron rocket. Its full-year loss widened by a similar amount, to $182.6 million, or 38 cents per share.

    Revenue grew 16% year over year in the fourth quarter to $60 million, up from $51.8 million. Its launch business made up just $8.5 million of that, as the company is coming off a multimonth hiatus in Electron missions, and its space systems made up the bulk, at $51.5 million.
    Rocket Lab’s fourth-quarter revenue was just shy of the $62.9 million Wall Street expected, according to analysts surveyed by LSEG, formerly known as Refinitiv, while the net loss of 10 cents per share was in line with estimates.

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    The company’s backlog of orders more than doubled year over year, bolstered significantly by a $515 million satellite contract from the Pentagon’s Space Development Agency. Rocket Lab CEO Peter Beck noted in a press release that 2023 was “a record year for securing Electron” launch deals, with the company adding 25 contracts. Launches make up $248 million of Rocket Lab’s backlog, with the remainder representing its growing space systems business.
    Shares of Rocket Lab slipped 5% in after-hours trading from its close at $4.71.
    Rocket Lab forecast first-quarter revenue between $92 million and $98 million.

    Neutron progress and expanded spacecraft lineup

    Rocket Lab

    Rocket Lab gave multiple updates on the progress it’s making in developing its next-generation Neutron rocket, which aims to compete with the likes of SpaceX. Since unveiling its plans for Neutron in 2021, Rocket Lab has been spending heavily to debut the vehicle in the next year or so.
    The company’s fourth-quarter investor presentation detailed several of the Neutron milestones achieved so far, including the beginning of production of rocket parts for the first launch, software simulations of launches and the completion of early testing of the Archimedes engines that will power the rocket.
    Rocket Lab also detailed milestones coming up this year for Neutron, including Archimedes engine testing and structural testing of the Neutron rocket’s nose cone.
    Additionally, Rocket Lab announced the expansion of its line of spacecraft products. Building upon the success of its Photon satellite bus, the company unveiled three additional spacecraft, called Lightning, Pioneer and Explorer, for a variety of customer missions, from low Earth orbit communications satellites to scientific deep space exploration of other planetary bodies.Don’t miss these stories from CNBC PRO: More

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    Starbucks to hike wages for union workers as it thaws relationship with Workers United

    Starbucks and Workers United said they found a “constructive path forward” during mediation discussions last week.
    The news signals a major step forward after a protracted standoff between the coffee giant and the union representing some baristas.
    Starbucks will hike wages for unionized workers and allow credit card tipping at their cafes.

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

    Starbucks workers at unionized cafes will receive the pay hikes that their nonunion coworkers first collected in May 2022, a key step as the coffee giant and the union representing some baristas signaled Tuesday that they are working toward breaking a standoff over bargaining.
    The wage increases are a sign of good faith from Starbucks toward Workers United, an affiliate of the Service Employees International Union that has organized more than 300 company-owned Starbucks locations.

    The parties jointly announced Tuesday afternoon that they found a “constructive path forward” during mediation discussions last week. The talks were part of litigation over Workers United’s use of Starbucks’ branding, sparked by a post on social media site X from the union’s account in support of Palestinians.
    Starbucks and Workers United said they have agreed to start discussions “on a foundational framework” on how to reach collective bargaining agreements for stores. The announcement marks the most noticeable thawing in the two parties’ relationship since the first Starbucks location unionized in December 2021.
    If Starbucks follows through on its pledge to hike wages for union cafes, employees who have been with the company between two years and five years will receive either a 5% increase or get paid 5% above the market’s start rate, earning whichever is higher. Workers with more than five years of tenure will get a 7% increase or earn 10% more than the market’s start rate, whichever is higher.
    The coffee chain implemented the wage hikes in May 2022 under the leadership of former CEO Howard Schultz, who waged an aggressive campaign against the union and faced backlash from the organization, politicians and customers for the strategy. Current CEO Laxman Narasimhan has been in the role for nearly a year.
    Starbucks also said Tuesday that it would provide unionized cafes with credit card tipping, a benefit that has been available in nonunion stores for more than a year.Don’t miss these stories from CNBC PRO: More

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    Cava stock pops after blunder leads to early earnings release

    Cava released its fourth-quarter earnings report a day early after the results appeared in news reports shortly after the market close Monday.
    The Mediterranean restaurant chain topped Wall Street’s estimates for both its earnings and revenue.
    Cava’s same-store sales climbed 11.4% in the fourth quarter.

    A banner for the Mediterranean restaurant chain Cava is displayed outside of the New York Stock Exchange (NYSE) as the company goes public on June 15, 2023 in New York City.
    Spencer Platt | Getty Images

    Cava’s stock climbed as much as 15% on Tuesday after the Mediterranean restaurant chain released its earnings report a day early.
    Investors were expecting Cava to announce its earnings after the bell Tuesday afternoon, but the company issued its press release Monday evening instead after early versions of the results appeared in news reports shortly after the market close.

    Cava’s shares closed up 12% on Tuesday.
    The company reported fourth-quarter net income of $2.05 million, or 2 cents per share, swinging from a net loss of $18.85 million, or $13.72 per share, a year earlier. Wall Street analysts surveyed by LSEG, formerly known as Refinitiv, were expecting the company to break even for the quarter.
    The chain’s revenue soared 36% to $177.1 million, topping analysts’ expectations of $174 million. Cava’s same-store sales climbed 11.4%, crushing expectations of 5.9% growth, according to StreetAccount estimates.
    For 2024, Cava is planning to open between 48 and 52 new locations, adding to its footprint of 309 restaurants, as of Dec. 31. The company is forecasting same-store sales growth of 3% to 5% and adjusted earnings before interest, taxes, depreciation and amortization of $86 million to $92 million.
    Cava’s shares have soared 158% since its initial public offering in June. Including Tuesday’s stock move, the restaurant chain has a market value of $6.44 billion.

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    Norwegian Cruise Line reports first profitable year since 2019

    Norwegian Cruise Line Holdings on Tuesday reported its first profitable year since 2019 as fourth-quarter losses narrowed dramatically.
    For the full year 2024, the company expects an adjusted profit of about $635 million, or $1.23 per share.
    Norwegian shares surged Tuesday, along with shares of Royal Caribbean and Carnival.

    The Norwegian Viva is docked at PortMiami’s Terminal B ahead of its christening ceremony in Miami on Nov. 29, 2023.
    Richard Tribou | Tribune News Service | Getty Images

    Norwegian Cruise Line Holdings on Tuesday reported its first profitable year since 2019 as fourth-quarter losses narrowed dramatically.
    The cruise company reported strong growth and ticket demand with an encouraging 2024 forecast. Shares of the company surged nearly 20% following the report.

    Here’s how Norwegian performed in the fourth quarter compared with estimates from LSEG, formerly known as Refinitiv:

    Loss per share: 18 cents vs. 14 cents expected
    Revenue: $1.99 billion vs. $1.97 billion expected

    For the last three months of 2023, Norwegian reported a net loss of $106.5 million, an improvement from a loss of $482.5 million in the year-ago period. The company’s loss per share narrowed to 25 cents from $1.14 the prior year. Adjusting for one-time items, Norwegian reported a loss per share of 18 cents.
    For the full year, the company generated total revenue of $8.55 billion, a 32% increase from 2019, with a net income of $166.2 million. In 2022, Norwegian lost $2.27 billion.
    The company saw 102.9% occupancy for the year. Total revenue per passenger per day increased 17% from pre-pandemic levels.
    The company said it received robust demand for most of its cruises except those traveling through the Middle East, which were canceled due to the violence in Gaza. The cancellations only caused a slight dip in occupancy in the fourth quarter to 99.2%, the company said.

    “Norwegian Cruise Line Holding experienced a momentous year of growth and achievement in 2023,” CEO Harry Sommer said in a statement. “We successfully took delivery of three new ships, one for each of our brands, representing the most deliveries in a single year in our Company’s 57-year history. This important milestone showcases our dedication to innovation and commitment to providing exceptional vacation experiences for our guests.”
    The company said it’s currently at record-high booking levels due to “healthy consumer demand” across the fourth quarter and full year.
    For the full year 2024, the company expects an adjusted profit of about $635 million, or $1.23 per share, and an occupancy rate of about 105%. Analysts polled by LSEG had anticipated 2024 earnings per share of $1.21.
    Shares of other cruise companies, including Royal Caribbean Cruises and Carnival Corp., also rose Tuesday morning. More

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    Viking Therapeutics stock jumps 120% after positive weight loss drug trial results

    Shares of Viking Therapeutics soared after the company’s experimental weight loss drug showed promising initial results in a mid-stage trial. 
    Viking Therapeutics is one of several small obesity drugmakers hoping to enter the budding weight loss drug industry, which analysts say could grow into a $100 billion market by the end of the decade. 
    Analysts have suggested that larger pharmaceutical companies could potentially move to acquire a company like Viking Therapeutics. 

    Cr | Istock | Getty Images

    Shares of Viking Therapeutics closed more than 120% higher on Tuesday after the company’s experimental weight loss drug showed promising initial results in a mid-stage trial. 
    Viking Therapeutics is one of several small obesity drugmakers hoping to enter the budding weight loss drug industry, which analysts say could grow into a $100 billion market by the end of the decade. 

    But it may not join that space on its own: Analysts have suggested that larger pharmaceutical companies such as Pfizer, which scrapped two of its own weight loss drug candidates last year, could potentially move to partner with or acquire a company like Viking Therapeutics. Tuesday’s share move puts Viking Therapeutics’ market value at roughly $8.5 billion.
    The trial followed more than 170 patients with obesity or who are overweight, some of whom received different dose sizes of the injectable drug or a placebo.
    Those who received weekly doses of the treatment lost up to 14.7% of their body weight from baseline, or 13.1% when adjusted for placebo, after 13 weeks. 
    Up to 88% of patients who received the drug, known as VK2735, achieved at least 10% weight loss, compared with just 4% of those who didn’t receive the treatment. 
    Notably, there was no evidence of a plateau in weight reduction at week 13 for any dose of the drug, suggesting that “further weight loss might be achieved” by keeping patients on the treatment longer, Viking CEO Brian Lian said during a call with investors. 

    The drug demonstrated “encouraging” safety in patients following the 13-week trial period. Patients also appeared to tolerate the drug well. 
    Around 4% of patients who received any dose size of the treatment discontinued the study early compared with approximately 6% of those in the placebo group.

    More CNBC health coverage

    The majority of adverse events that patients experienced after starting the drug – also known as treatment-emergent adverse events – were mild or moderate in severity. Many of those events were gastrointestinal, which is commonly seen across all weight loss and diabetes treatments.
    That includes nausea, vomiting, diarrhea and constipation.
    Viking plans to present the full Phase 2 data at medical conferences. The company also said it plans to meet with the Food and Drug Administration to discuss further steps for the development of VK2735.
    Separately, the company said it expects to release early stage trial data on an oral version of its weight loss drug.
    Viking Therapeutics’ drug targets GLP-1 and another hormone called GIP. Those are the same hormones that Eli Lilly’s weight loss and diabetes drugs, Zepbound and Mounjaro, target.
    Deutsche Bank analysts said in a note Tuesday that Viking Therapeutics’ new data shows that the weight loss drug market could eventually be more than a “duopoly” of Novo Nordisk and Eli Lilly, which manufacture the most sought-after treatments.
    But the analysts added that manufacturing the treatments “at scale to meet outsized demand has proven to be no easy feat,” so that gives Novo Nordisk and Eli Lilly a “defensive moat.”
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    Macy’s will close about 150 department stores, but open new locations of better performing chains

    Macy’s will close about 150 of its namesake stores and invest in its roughly 350 remaining locations.
    It will also open new locations of its Bloomingdale’s and Bluemercury chains.
    The changes, announced as part of the retailer’s new growth strategy, reflect the brands that are performing the best at Macy’s.

    People shop at the Macy’s Herald Square store in New York City, Jan. 19, 2024.
    Michael M. Santiago | Getty Images News | Getty Images

    As Macy’s chases sales growth, the department store operator said Tuesday that it will close about 150 of its namesake stores and open more shops with better locations or that sell luxury goods.
    The changes reflect a focus on what’s working at Macy’s — higher-end department store Bloomingdale’s and beauty chain Bluemercury — and what’s not — its namesake stores, particularly the ones at struggling malls. In its holiday quarter results posted Tuesday, the retailer said its Macy’s department stores performed worse than both Bloomingdale’s and Bluemercury.

    As it reported earnings, Macy’s shared its strategy for the future. The strategy shift comes weeks after former Bloomingdale’s CEO Tony Spring started as Macy’s CEO on Feb. 4.
    Macy’s had already announced in January that it would close five namesake stores and lay off more than 2,300 people.
    In a CNBC interview Tuesday, Spring said the company is shaking up its store footprint after taking a hard look at which stores are in the right spots and which are not.
    “We have some stores that are just underproductive or not as profitable, and we have to address that,” he said. “Conversely, we have stores that are highly productive and highly profitable. We have markets and stores and centers we’re not in today that we’d like to be in.”
    Here’s a closer look at Macy’s major store announcements, broken down by store brand.

    Macy’s

    A customer exits the Macy’s flagship department store at Herald Square in New York City, Dec. 11, 2023.
    Brendan Mcdermid | Reuters

    Sales at Macy’s namesake stores have lagged the most — and that business will see the biggest changes.
    The company plans to close about 150 stores, including 50 that will close by early 2025. It has not revealed those locations but said they are “unproductive.”
    One of the stores Macy’s plans to close is its mammoth 400,000-square foot flagship in the heart of San Francisco’s primary shopping district Union Square when it finds a buyer for the location, Marisa Rodriguez, CEO of the business group Union Square Alliance, told CNBC in a statement. However, Rodriguez noted that the Macy’s may remain open for months and through the holiday season — since its search for a buyer may not happen quickly.
    The stores that it had already said would be shuttered are located in Arlington, Virginia; San Leandro, California; Lihue, Hawaii; Simi Valley, California, and Tallahassee, Florida. The stores will close in early 2024.
    On the other hand, Macy’s said it will boost investments in the roughly 350 namesake locations that will remain open.
    For example, Spring said in an interview with CNBC that the company is testing how it can improve customer service at 50 of its stores. In the most recent quarter, it added or moved employees to different roles in those locations, such as by offering more support in the fitting room and shoe department.
    The company is also pressing ahead with its strategy of opening smaller Macy’s stores in suburban strip malls. Last year, it announced it would open up to 30 of the shops over the next two years. The locations are roughly one-fifth the size of its traditional mall stores.
    Spring told investors on an earnings call that there is a sharp difference between the Macy’s stores the company is closing and the ones that will remain open. The 150 stores that will shut represent 25% of Macy’s square footage, but less than 10% of its sales, he said.
    “They’re underproductive, and we have to focus on making sure that we have the best stores, not the largest number of stores,” he said on the earnings call.
    Along with considering the economics, he said a team at Macy’s spent about six or seven months evaluating stores based on other factors, including customer demographics, digital demand and the condition of the store or shopping center.
    As of Feb. 4, Macy’s had about 500 namesake stores. Most are its typical mall locations, but that total also includes some of its smaller shops and freestanding locations of Macy’s off-price banner, Backstage.

    Bloomingdale’s

    Bloomingdale’s, which has outperformed the Macy’s namesake stores, will soon have more shops.
    The retailer plans to open about 15 new Bloomingdale’s stores over the next three years. It has not announced the specific locations, but it said some will be in new markets.
    The higher-end department stores skew toward higher-income and fashion-forward shoppers, and carry many popular luxury brands.
    As with its sister brand Macy’s, Bloomingdale’s has been testing a smaller concept store, called Bloomie’s.
    At the end of the most recent fiscal year, Bloomingdale’s had 33 locations. There are also three Bloomie’s shops and 21 outlets.

    Bluemercury

    Bluemercury has been the brightest spot in the retailer’s performance: It was the only brand of the three to post comparable sales growth in the fourth quarter.
    The beauty chain will get bigger in the next few years, too. Parent company Macy’s said it will open at least 30 new Bluemercury stores over the next three years, some in new markets. It will also remodel about 30 existing stores during that time.
    Bluemercury has been testing a new store prototype, which includes more spa services. It’s rolled out the concept in two locations: New Canaan, Connecticut, and Bronxville, New York.
    Macy’s acquired Bluemercury for $210 million in 2015. As of Feb. 4, the beauty chain has 159 locations.
    — CNBC’s Gabrielle Fonrouge contributed to this report.
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