Raphael Stevens

Target cut its full-year sales and profit forecast as it tries to win over shoppers who are watching their wallets.
The retailer’s second-quarter earnings beat expectations, while its sales fell short of estimates.
Target said backlash to its Pride month collection contributed to weaker sales.

Target on Wednesday missed quarterly sales expectations and slashed its full-year forecast, as it again had trouble convincing shoppers to buy more than necessities.
The big-box retailer cut both its full-year sales and profit expectations. Target offered a gloomier outlook even as some top economists have scrapped calls for a recession and government data shows signs inflation is cooling.

The company said it now expects comparable sales to decline by about mid single digits for the full fiscal year and earnings per share to range from $7 to $8. It previously anticipated comparable sales would range from a low single-digit decline to a low single-digit increase, and earnings per share would come in between $7.75 and $8.75.
Target’s struggling shares surged in premarket trading despite the soft forecast, as its fiscal second-quarter earnings topped expectations and inventory levels improved. Investors also have had low expectations for the company, reflected in a sharp drop in its share price this year heading into Wednesday.
CEO Brian Cornell said Target’s sales and store traffic improved in July. Yet he said the company is wary about trends in the second half of the year including rising interest rates, the return of student loan payments this fall and still elevated prices of everyday items.
“As we look at the consumer landscape today, we recognize the consumer is still challenged by the levels of inflation that they’re seeing in food and beverage and household essentials,” he said on a call with reporters. “So that’s absorbing a much bigger portion of their budget.”
Here’s what Target reported for the three-month period that ended July 29, compared with Refinitiv consensus estimates:

Earnings per share: $1.80 vs. $1.39 expected
Revenue: $24.77 billion vs. $25.16 billion expected

Sales slide after Covid bump

Target, which saw enormous sales gains during the Covid pandemic, has tried to bounce back from about a year of disappointing results. Excess inventory and higher levels of markdowns hit profits last year. Its merchandise mix, which includes many fun and impulse-driven items, has become a liability as consumers focus on needs rather than wants and put discretionary dollars toward vacations and concerts.
Groceries account for only about 20% of Target’s annual revenue compared with more than half of Walmart’s annual revenue.
Target’s struggles to win over shoppers in the face of inflation have dragged down the company’s stock. As of Tuesday’s close, its shares had fallen 16% this year, even as the S&P 500 had risen by 15%. Its stock price touched a 52-week low of $124.96 on Tuesday, nearly cut in half from its pandemic highs.
Target’s challenges continued in the most recent three-month period. Total revenue dropped about 5% from $26.04 billion a year ago.
Comparable sales, a key metric that tracks sales online and at stores open at least 13 months, declined 5.4%. That’s a sharper fall than the 3.7% drop that analysts expected, according to consensus estimates from StreetAccount. 
For stores, comparable sales declined 4.3%. Digital comparable sales dropped 10.5%
Sales softened in the second half of May and into June before recovering in July, Cornell said. He said the Fourth of July holiday and Target Circle Week, its competing sale during Amazon Prime Day, helped lift results.
Chief Financial Officer Michael Fiddelke said on the call with reporters that it is hard to quantify which factors most contributed to Target’s slower sales. Among them, customers continued to buy less clothing, home decor and other nonessential items while paying more for food, energy and rent. The company’s sales tailed off compared with the year-ago period when sharp markdowns helped clear through a glut of inventory and drove purchases. 
And Target faced backlash in late May over its collection of merchandise celebrating Pride month, including some items it later pulled after threats to employees. The decision to remove certain items sparked more criticism. 
Cornell said “negative reaction” to Target’s Pride collection had a material impact on sales. But he defended the company’s response and said after Target removed some items in June out of concern for employee and customer safety, it “saw things normalize.” He said it will continue to have a collection for Pride month and other heritage months.

Clawing back to higher profits

Even as sales lagged, the retailer’s profits rebounded. Target’s fiscal second-quarter net income rose to $835 million, or $1.80 per share, from $183 million, or 39 cents per share, a year earlier. That beat analysts’ expectations.
In the year-ago quarter, the retailer’s quarterly profit had plummeted by nearly 90% as it coped with a glut of unsold items. It took aggressive steps to cancel orders, mark down prices and clear inventory as customers bought fewer popular pandemic categories and became more frugal because of inflation.
Fiddelke emphasized Target’s success in turning around some of those trends.
“We had talked about this year being a really important year in terms of building back the profitability of the business, and for the team to take a big step forward in the second quarter in spite of softer-than-expected sales is really great progress on that journey,” he said.
Along with company-specific actions, the discounter said it also benefited from lower markdowns, cheaper freight costs, reduced supply chain and online fulfillment expenses, and increased retail prices. But it said higher shrink, in part due to organized retail crime, hurt profits.
Inventory at the end of the quarter fell 17% compared with the year-ago period. Target said that lower inventory also reflects a 25% year-over-year drop in discretionary categories.
Over the past year, Target has shaken up its product mix to lean into high-frequency categories like groceries and household essentials. The company said growth in those areas helped offset declines in discretionary categories during the fiscal second quarter.
Target’s chief growth officer, Christina Hennington, said some items are still persuading customers to open up their wallets, such as brightly colored Stanley tumblers, Barbie-themed merchandise and a Taylor Swift vinyl exclusive to the retailer.
Beauty is also driving revenue. Sales at Ulta Beauty at Target, mini shops inside of its stores, more than doubled compared with a year ago, she said. Sales of other beauty items rose by double digits. And snacks, candy and beverages fueled growth in Target’s food and beverage category.
As Target tries to buoy sales for the rest of the year, she said the retailer is focused on offering affordable prices, stocking up on frequently purchased items and capitalizing on major seasons like back-to-school.
“We’re gonna play the long game,” she said on the call with reporters. “We don’t carry our assortment for a moment in time, but we’re going to lean into the kinds of things that have made Target Target.” More

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 7.16% from 7.09%.
Mortgage demand from homebuyers was 26% lower than the same week one year ago.
Applications to refinance a home loan fell 2% for the week and were 35% lower than the same week one year ago.

A real estate agent shows a home to a prospective buyer in Miami.
Getty Images

Mortgage rates rose for the third straight week last week, matching a 22-year high. As a result, mortgage demand dropped as well.
Total mortgage application volume was 29% lower than the same week one year ago, according to the Mortgage Banker’s Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 7.16% from 7.09%, with points decreasing to 0.68 from 0.70 (including the origination fee) for loans with a 20% down payment. That was the third straight weekly increase and the highest level since October 2022, which also matches a high level seen in 2001.
“Treasury rates were elevated again last week following mixed data on inflation and more indication of resiliency in the economy, which may pose a challenge to the Federal Reserve’s efforts to lower inflation,” said Joel Kan, an MBA economist, in a release.
As a result, mortgage demand from homebuyers was essentially flat week to week and 26% lower than the same week one year ago. The adjustable-rate share of these applications did rise slightly, as ARM loans offer slightly lower rates, and buyers are looking for a break where they can find it.
Applications to refinance a home loan fell 2% for the week and were 35% lower than the same week one year ago. Last year the 30-year fixed was 5.45%, but the year before it was in the 3% range, so there are very few borrowers who can now benefit from a refinance.
While overall mortgage demand is dropping, applications for a mortgage to purchase a newly built home are rising, up 35.5% in July year over year, according to a separate MBA report released Tuesday. The Federal Housing Administration share of those applications hit the highest level since May 2020 and has increased in four of the last five months. FHA loans offer low down payment options and are thus popular with first-time homebuyers.

“This increasing trend in the FHA share is indicative of more first-time buyers looking to new homes as an option, given the lack of for-sale inventory among existing homes and challenging affordability conditions,” added Kan.
Mortgage rates continued to climb this week. On Tuesday, the average rate on the 30-year fixed hit 7.26%, according to Mortgage News Daily, the highest since last November. More

GM is leading a $60 million investment round in Mitra Chem, a California startup working on cheaper EV batteries.
Mitra Chem is aiming to develop low-cost lithium iron phosphate batteries that can hold more power than current versions.
If it’s successful, its batteries could appear in GM’s EVs later this decade.

Sales of the sub-$30,000 Chevy Bolt, being assembled here in Orion Township, Michigan, allowed GM to recently pass Ford as a distant No. 2 behind Tesla in EVs. Future low-cost GM EVs could benefit from the batteries being developed by Mitra Chem.
Joe White | Reuters

General Motors said on Wednesday it’s leading a $60 million financing round in Mitra Chem, a California-based startup working to develop lower-cost batteries for electric vehicles.
Mitra Chem, founded by veterans of Tesla and Toyota, is working to develop new types of batteries based on lithium iron phosphate chemistry. The batteries, abbreviated LFP based on the elements’ chemical symbols, are of great interest to EV makers because they do without expensive minerals like cobalt and nickel, meaning they cost less than standard lithium-ion cells.

Tesla, Rivian and Ford Motor are among the automakers using LFP cells in their more affordable models.
LFP cells have proven to be quite durable in EVs. But they have a disadvantage: Their power density is lower than standard cells. That means an EV needs more LFP battery cells, and thus more weight, to match the range of a similar model powered by conventional batteries.
In addition, most LFP cells that are currently available are made by Chinese companies — presenting a challenge for automakers aiming to build EVs that qualify for U.S. subsidies.
Mitra Chem is working on a variation of the LFP battery chemistry that adds manganese to the batteries’ cathodes, in a bid to increase the battery cells’ power density while retaining the LFP cost advantage. The company is using what it calls an “AI-powered platform” that, it says, greatly accelerates the process of trying new battery chemistries as it aims to hit just the right formula.
“Our battery materials R&D facility can synthesize and test thousands of cathode designs monthly, ranging in size from grams to kilograms,” said Mitra Chem CEO Vivas Kumar in a press conference ahead of the announcement. “These processes drive significantly shorten learning cycles, enabling shorter time to market for new battery cell formulas.”

Gil Golan, a GM vice president charged with speeding up the process of bringing new EV technologies to market, said that the auto giant is stepping up its focus on potential breakthroughs in battery technologies.
“Mitra Chem’s labs, methods and talent will fit well with our own R&D team’s work,” Golan said.
Golan said that if Mitra Chem is successful, its batteries could appear in GM’s vehicles later in this decade.
The specifics of GM’s investment in Mitra Chem weren’t disclosed. More

The Tuscan-style mega villa that sits 2,000 feet above Malibu is back on the market for $44.5 million.
The residence, known as Malibu Rocky Oaks, sits on 37 acres at an elevation of 2,000 feet in the Santa Monica Mountains.
The French limestone-clad villa’s more recent history includes being featured on reality TV and film.

The Tuscan-style mega villa that sits high atop Malibu has just been put back on the market with a $44.5 million price tag.
The residence, known as Malibu Rocky Oaks, sits on 37 acres at an elevation of 2,000 feet in the Santa Monica Mountains. At that altitude, under certain weather conditions, the house often sits above the clouds.

“If you have a God complex, this is the house for you,” listing agent Shawn Elliott of Nest Seekers International told CNBC on a recent tour of the property.

The view at 2,000 feet sometimes puts the villa high above the clouds.
Nest Seekers International

The property also includes a 10-acre vineyard with more than 10,000 grape vines sprouting across the estate’s sun-soaked hillside.
“To me, this is like the eighth wonder of the world,” Elliott said.

A view of the stone-clad villa’s sundeck and infinity pool.
Studio 910

But Elliott, who is the latest in a long list of brokers that has tried to sell the estate, admits it hasn’t been easy to price it to sell. In fact, prior to Elliott coming on board, public records show the home has been on and off the market for about 14 years at a wide range of prices. Back in 2009, it was first listed for $65 million, the home’s all-time high asking price. By 2013, the asking price dropped to $36 million, the lowest list price so far. 

The home’s tiered stone deck and infinity pool at sunset.
Studio 910

Last August, the on-again-off-again listing came back on the market, with a $49.5 million asking price. But after just five months with no takers, it was once again pulled off the market. This week, almost exactly a year later, it debuts again with a new price tag and a broker who is looking to finally nail the number and close the deal. 

“We’re doing a $5 million price reduction because I really think that’s going to be the number that’s going to drive buyers,” said Elliott.

A private driveway ascends the vine-covered hillside and delivers visitors to the villa’s stone courtyard and three-car garage.
Studio 910

At 9,000 square feet, the home’s new asking price puts the price per square foot just under $5,000, or almost three and a half times more than the average price per square foot achieved in Malibu’s second quarter, which was just under $1,500, but still well below the almost $7,500 average price per square foot achieved for the town’s beachfront properties, according to the Elliman Report.
Real estate comps are tough to come by for the high-altitude 37-acre estate, with a 9,000 square foot residence and its own vineyard that currently produces 15,000 bottles of wine a year according to Elliott.
“That generates about $300,000 a year,” Elliott told CNBC. 

The villa’s sundeck and infinity pool.
Studio 910

Its size alone is an outlier in Malibu where the average home sold in the second quarter was just 3,200 square feet with a median sales price of just over $4.4 million, down almost 2% over last year.
Even the pricier beachfront properties that have sold recently pale in comparison with an average size of just over 3,000 square feet and a median price of $10.5 million — that’s up 13.9% over last year according to the Elliman Report.
Public records show the estate was purchased back in 2005 for $3.5 million by entrepreneur and real estate investor Howard Leight Sr. Construction was completed on the giant Tuscan manor, designed by architect Bob Easton in 2009. Leight made his fortune in the hearing protection product industry and sold his eponymous company for a reported $125 million.   

The great room features a 35-foot ceiling and an interior balcony off the primary bedroom that overlooks the living area from the second level.
Studio 910

The French limestone-clad villa’s more recent history includes being featured on reality TV and film. The Kardashians visited in 2014 for an episode of their show on E!, the reality show “The Bachelorette” was shot there in 2013 and in the same year, the high-end real estate was featured in the film, “The Hangover Part III.” 
Today, Leight’s son, Howard Leight Jr., is the face of the villa-vineyard combo and its Instagram account. The property is currently made available for rent by the night and for events. Elliott told CNBC the going rate for an overnight stay during the high season is $15,000, or $105,000 per week, but the estate is also marketed on Airbnb where depending on dates, the rates can drop below $2,500 a night.
Here’s a look around the Malibu Rocky Oaks Estate.

The dining room of the villa.
Studio 910

The dining room opens to outdoor stone terraces on two sides and arches in a stone wall lead to the great room.

The primary suite.
Studio 910

The primary suite includes vaulted ceilings and two balconies, plus a wraparound terrace.

A terrace off the primary suite with a fireplace and views of the Santa Monica Mountains.
Studio 910

The view from the primary bedroom’s interior balcony.
Studio 910

The primary suite’s third interior balcony overlooks the great room where 35-foot ceilings are clad in walnut wood.

The primary suite’s marble-clad bathroom and arched ceilings.
Studio 910

The villa spans three levels with five bedrooms and five bathrooms.

One of the home’s ensuite guest bedrooms.
Studio 910

The kitchen.
Studio 910

The commercial-grade kitchen includes stainless-steel appliances, stone countertops and hardwood floors with an arched window that can open to the dining room.
Grapevines can be seen on the hillside just below the infinity pool. The most popular varietals of the vineyard’s 10 grapes are cabernet, merlot, syrah and chardonnay.

Outdoor seating area with a stone fireplace.
Studio 910

A dusk view of the estate’s grapevine lined hilltop.
Studio 910 More

Young people are at risk of experiencing significant respiratory symptoms, including bronchitis and shortness of breath, after just 30 days of electronic cigarette use, according to a new study.
Researchers reached the conclusion using four years of data from online surveys.
Drug regulators should consider the findings and work to minimize the negative impact of e-cigarette use on young people, the researchers said.

A man uses a Juul vaporizer in Atlanta, Georgia, Sept. 26, 2019.
Elijah Nouvelage | Reuters

Young people are at risk of experiencing significant respiratory symptoms, including bronchitis and shortness of breath, after just 30 days of electronic cigarette use, according to a new study released Tuesday. 
Researchers from the Center for Tobacco Research at The Ohio State University Comprehensive Cancer Center and the Southern California Keck School of Medicine used four years of data from online surveys to examine the health impact of e-cigarettes — which create a vapor containing nicotine and other harmful substances — on teens and young adults. 

They said the study, partly funded by the National Institutes of Health, contributes to existing evidence that e-cigarette use is associated with an increased risk of respiratory symptoms. Drug regulators should consider the findings and work to minimize the negative health impact of e-cigarette use on young people, the researchers added. 
E-cigarettes have hooked a new generation on nicotine in less than a decade, putting the health of millions of children, teens and young adults at risk while threatening years of progress in reducing youth tobacco use. 
E-cigarette usage is now substantially higher among youths and young adults than it is among adults overall in the U.S., according to the Centers for Disease Control and Prevention. Sales of e-cigarettes jumped nearly 50% during the first two years of the Covid pandemic, mainly driven by disposable products in sweet and fruity flavors that have long been popular among teens.
That surge in sales came despite a federal crackdown that placed more restrictions on the marketing and flavors of tobacco products. 
Manufacturers are still flooding the market with thousands of addictive products that are often sold illegally. Brands such as Puff Bar, Elf Bar and Breeze Smoke are not approved by the Food and Drug Administration, and some have surpassed vaping pioneer Juul in popularity. 

“An important point for consumers is just that e-cigarettes are not risk-free,” Alayna Tackett, a pediatric psychologist and researcher at the Center for Tobacco Research. “We absolutely want to eliminate the initiation and use of e-cigarettes among young people. I think that’s a critical public health goal.” 
She noted that the study examines only teens and young adults, and that in the demographic of all adults, people “often switch from using cigarettes to using e-cigarettes with likely fewer risks.” 
“I think we need to be thoughtful about policies to protect those young people, while also supporting adults who are interested in choosing a potentially less harmful alternative to cigarettes,” Tackett added. 

What does the data say?

Researchers followed more than 2,000 young people with an average age of 17.3 years from the Southern California Children’s Health Study. 
In 2014, they asked the participants to complete an online survey about their respiratory symptoms and e-cigarette, traditional cigarette and cannabis use. Around 23% of participants reported a history of asthma at the time of the initial survey. 
Researchers collected follow-up data from the majority of those participants during three additional survey waves, in 2015, 2017 and 2018. 
Participants were specifically asked if they had ever used each of the three products. If they indicated yes, they were asked about the number of days they had used a product in the past 30-day period. 
Those who had never tried a product were classified as “never users,” while participants who had used a product on at least one of the past 30 days were classified as “past 30-day” users.
Past 30-day e-cigarette users were at an 81% higher risk of experiencing a symptom called wheeze than never users after accounting for survey wave, age, sex, race and parental education. Wheeze was defined as wheezing or whistling in the chest in the previous 12 months. 
Past 30-day users were also at a 78% increased risk of experiencing shortness of breath and a 50% higher risk of experiencing symptoms of bronchitis, an infection of the main lung airways that causes them to become irritated and inflamed. 

A saleswoman helps a customer as she shops for an electronic cigarette at the Vapor Shark store  in Miami.
Joe Raedle | Getty Images

The link between e-cigarette use and respiratory symptoms was slightly weaker when researchers accounted for two factors: co-use of e-cigarettes with traditional cigarettes or cannabis, and secondhand exposure to any of the three products. 
For example, past 30-day e-cigarette users were at a 41% higher risk of experiencing wheeze than never users if they also used traditional cigarettes or cannabis at the same time or experienced secondhand exposure to any of the products. 
“Wheeze was no longer significantly related to the respiratory symptoms associated with e-cigarette use when we controlled for co-use of cigarettes and cannabis,” Tackett said. But she noted that bronchitis symptoms and shortness of breath remained significant. 
The link between e-cigarette use and respiratory symptoms was persistent in a sub-analysis that excluded participants with a history of asthma. That indicates that the negative health effects of e-cigarette use were present in all participants, not just those with asthma, according to the study. 
Tackett noted that there are limitations to the study that future research could address. 
Additional studies could more objectively measure respiratory symptoms and product use instead of using surveys that participants filled out themselves, according to Tackett. 
She added that future studies, including one she’s currently working on, could further assess the “complex relationship” between the use of e-cigarettes and traditional cigarettes or cannabis.
— CNBC’s Stefan Sykes contributed to this report. More