Raphael Stevens

Netflix added 5.9 million subscribers in the quarter and forecast a similar gain next quarter.
The company hardly mentions its fledgling video game business at all in its shareholder note.
Netflix boosted its yearly free cash flow estimate to $5 billion.

LOS ANGELES, CALIFORNIA – JUNE 12: CEO of Netflix Ted Sarandos attends Netflix’s FYSEE event for “Squid Game” at Raleigh Studios Hollywood on June 12, 2022 in Los Angeles, California. (Photo by Charley Gallay/Getty Images for Netflix)
Charley Gallay | Getty Images Entertainment | Getty Images

The main takeaway from Netflix’s second quarter earnings is business is … good.
That’s right. A large media and entertainment company’s fundamental business is just fine.

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Netflix added 5.9 million subscribers in the quarter, a sign that its two primary 2023 initiatives — cracking down on password sharing and launching a cheaper $6.99 per month advertising tier — are bringing in new subscribers. Netflix added 1.2 million subscribers in the United States and Canada in the quarter — its largest regional quarterly gain since 2021.
This is not the story for the rest of the media industry. Disney and Warner Bros. Discovery have spent the year slashing content from its streaming services to avoid paying residuals and saving on licensing fees. Both companies have laid off thousands of employees over the past 12 months to boost free cash flow. Paramount Global and Comcast’s NBCUniversal both said 2023 will be the biggest annual loss ever for their streaming businesses.
Meanwhile, Netflix boosted its free cash flow estimate to $5 billion for the year. Previously, the company had estimated it would have $3.5 billion, but the actors and writers strikes will cut down on content spend. That means Netflix will actually have even more cash than it previously expected.
Next quarter, Netflix forecast subscriber gains will be about 6 million again. The company said revenue will accelerate in the second half of the year as it sees “the full benefits” of its password-sharing crackdown and steady growth in its ad-supported plan.

Back on track

Last year, Netflix’s valuation dropped by 60% as streaming subscriber growth came to a halt. The company spent ample time on earnings conference calls focusing and explaining its new video game business, introduced in the middle of 2021, to help start a new growth narrative.

This quarter’s shareholder letter barely even addresses video games.
Why? Because unlike the rest of the media industry, Netflix doesn’t need a new narrative. The old one still works. Streaming is growing. Cash piles are rising. Advertising has investors excited. Netflix has a steady pipeline of international content and a deep library to weather an extended writers and actors strike.
“The lack of references to video games in its shareholder’s letter suggests advertising is the shiny object that most commands the company’s focus,” said Ross Benes, an analyst at research firm Insider Intelligence.
Netflix shares dropped 5% after hours. That’s more a symptom of profit taking after Netflix’s big gains this year (up more than 62% as of Wednesday’s close) than anything to be angry about in its initial quarterly numbers.
After a precipitous fall last year, the company is back on track. And it didn’t even need to switch trains.
Disclosure: Comcast’s NBCUniversal is the parent company of CNBC.
– CNBC’s Lillian Rizzo contributed to this article. More

Pfizer on Wednesday said its experimental vaccine targeting the potentially deadly bacterial disease Group B Streptococcus returned strong mid-stage clinical trial results.
The pharmaceutical company’s single-dose shot is administered to expectant mothers, who pass vaccine-induced antibodies to fetuses that may provide meaningful protection against the disease after they’re born. 
Pfizer is among several drugmakers racing to develop the world’s first shot targeting Group B strep disease, which is linked to nearly 150,000 infant deaths worldwide each year. 

Streptococcus agalactiae bacteria, responsible for vaginal and urinary tract infections and newborn infections including meningitis and septicemia. Optical microscopy view.
Cavallini James | BSIP | Universal Images Group | Getty Images

Pfizer on Wednesday said its experimental vaccine targeting the potentially deadly bacterial disease Group B Streptococcus returned strong mid-stage clinical trial results, a promising step as the drug inches toward potential approval.
Pfizer is among several drugmakers racing to develop the world’s first shot targeting Group B strep disease, which is linked to nearly 150,000 infant deaths worldwide each year, especially in lower-income countries.

The Food and Drug Administration in September granted breakthrough therapy designation to Pfizer’s vaccine, which is intended to expedite the development and review of the shot. 
Pfizer’s single-dose shot generated antibodies that may provide infants with meaningful protection against the disease, according to the data released Wednesday from a phase two clinical trial.
The jab is administered to expectant mothers, who pass vaccine-induced antibodies to their fetuses. One of the company’s vaccines targeting respiratory syncytial virus also uses that maternal vaccination method. 
Pfizer’s encouraging phase two trial results provide hope that maternal vaccination against the disease, also known as GBS, could help prevent thousands of cases in babies. 
The results will also help the company plan its phase three clinical trials on the shot, which are typically required before the FDA approves a drug.

The Bill & Melinda Gates Foundation, which supported the phase two trial, provided an additional $100 million grant to Pfizer last year that will fund late-stage trials and help facilitate the delivery of shots to lower-income countries following a potential approval.

GBS risk

GBS disease is caused by a common and usually harmless bacteria that many adults carry in their bodies.
But an expectant mother can pass that bacteria to a newborn during labor and delivery, which can cause severe infections during the baby’s first few weeks or months of life.  
About 1 out of every 4 women carries GBS bacteria, according to the Centers for Disease Control and Prevention. 
Infants with GBS infections can experience symptoms including fever and difficulty breathing.
Some infants can experience invasive GBS infections, which cause more serious complications such as pneumonia, infections in the bloodstream, and meningitis, or the inflammation of tissues surrounding the brain and spinal cord.
There are 10 different GBS serotypes, meaning distinct variations of the bacteria that causes the disease. Pfizer’s vaccine targets six of the most prominent serotypes, which collectively account for 98% of GBS disease cases worldwide. 

Trial results and safety

Pfizer’s trial followed 360 healthy pregnant individuals in South Africa. The mothers were randomly assigned to receive a single shot at three different dosage levels, with or without a specific adjuvant, or a placebo. 
The trial found that Pfizer’s shot generated robust antibodies against the six GBS serotypes in mothers. Those antibodies were “efficiently transferred” to infants at ratios between 0.4 and 1.3, depending on the dose. 
That means some infants received only a fraction of antibodies from their mothers, while others received higher antibody levels than even what their mothers had. 
Pfizer said those antibody transfer levels are associated with a reduced risk of GBS disease. That conclusion was based on a parallel natural history conducted in South Africa.
The safety profile for both mothers and infants appeared to be similar between the vaccine and placebo groups, according to the trial results, suggesting that the shot was generally well tolerated during the phase two trial.
Reactions among mothers following vaccination were generally mild or moderate and short in duration. Between 2% to 8% of participants who received the shot reported fever, compared with 5% in the placebo group, according to the results. 

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Around 45% to 70% of pregnant individuals who received the vaccine experienced more adverse reactions such as headache and vomiting. But the placebo group wasn’t much different, with more than 60% of expectant mothers experiencing those adverse events. 
About 62% to 75% of infants in the vaccine group and 74% of those in the placebo group experienced adverse events, including upper respiratory tract infection. There were three infant deaths in the vaccine group and two in the placebo group.
The study authors determined that no adverse events or deaths among infants were related to the vaccine.
The results come as Pfizer braces for a continued decline in Covid-related sales this year. 
Pfizer also faces a patent cliff, or the loss of market exclusivity for several blockbuster drugs like cancer medicines Xtandi and Ibrance. That is expected to deal an additional blow to Pfizer annual revenues by 2030.
To counteract a sharp fall in sales, the company is shifting its focus toward a new drug pipeline and M&A.  More

United’s second-quarter earnings and revenue topped analysts’ expectations.
Shares rose roughly 3% in extended trading following the report.
United executives will hold a call with analysts and media at 10:30 a.m. ET Thursday.

A United Airlines airplane flies in front of the Empire State Building and One Vanderbilt in New York City as it comes in for a landing at Newark Liberty International Airport in Newark, New Jersey, Dec. 3, 2021.
Gary Hershorn | Corbis News | Getty Images

United Airlines on Wednesday posted record quarterly earnings and forecast a strong third quarter due to an unrelenting travel boom, led by a return of international travel.
The airline lost some of its capacity during the second quarter because of flight disruptions at its Newark, New Jersey, hub. But its quarterly results and forecast still surpassed analysts’ estimates due to strong demand.

Shares rose roughly 3% in extended trading following the report.
United is the second U.S. carrier to report results for the recent quarter, echoing Delta Air Lines’ upbeat travel demand outlook. American Airlines reports earnings before the market opens Thursday.
United and other carriers have been expanding their international service to capitalize on strong bookings after a years-long pandemic slump. The airline’s revenue for international flights made up about 40% of its total sales but is growing faster than domestic sales.
Here’s what United reported for the second quarter compared with what Wall Street expected, based on average estimates compiled by Refinitiv:

Adjusted earnings per share: $5.03 vs. an expected $4.03
Total revenue: $14.18 billion vs. an expected $13.91 billion

United reported net income of $1.08 billion or $3.24 per share, compared with $329 million, or $1 per share, during the same period last year. Adjusting for items, including a pilot bonus as part of a new preliminary labor deal, the company earned $1.67 billion, or $5.03 per share.

A 26% lower fuel bill helped boost United’s bottom line.
Meanwhile, revenue per available seat mile dropped 0.4% from a year earlier. Capacity was up 17.5% from the second quarter of 2022, a percentage point below what United planned to fly, before the Newark disruptions.
United’s CEO Scott Kirby earlier this month said the company will have to reduce flights at Newark Liberty International Airport. A series of early-summer thunderstorms derailed United’s operation at the airport, disrupting thousands of flights and displacing passengers and crews.
“The United team persevered through an unprecedented series of events at the end of last month,” Kirby said in an earnings release Wednesday. “They are the best in the business, and we’re focused on the important changes we can make, especially in Newark, to serve our customers even better.”
Kirby said earlier this month that the airline will have to cut back on flying at the hub, which serves the New York City area, to avoid disruptions when flights get backed up at the congested airport.
Still, United expects to grow capacity in the three months ending Sept. 30 about 16% over last year and with estimated revenue growth of as much as 13% during the same period in 2022. United expects to post adjusted earnings per share of between $3.85 and $4.35 for the third quarter, far above analysts’ estimates of $3.70 a share, according to Refinitiv.
Separately over the weekend, United and its pilots’ union said they reached a preliminary labor deal that would give pilots raises of as much as 40% over four years, a deal that comes after years of talks.
The union estimates the deal is worth $10 billion. It still needs to be ratified by United’s 16,000 pilots but could end years of negotiations as United seeks to increase its pilot ranks amid a shortage of aviators.
The airline’s executives will hold a call with analysts at 10:30 a.m. ET on Thursday, when they are likely to face questions on both topics. More

Oddity Tech closed at $47.53 per share, giving it an approximate market valuation of $2.7 billion. 
The shares priced at $35 per share, above a previously given range of $32 to $34.
Oddity and its shareholders, which include L Catterton, raised about $424 million in the offering.

Courtesy: Oddity

Oddity Tech, the beauty and wellness company that uses AI to develop cosmetics and has former Israeli defense officials on staff, debuted on the public markets with a 35% pop Wednesday as the IPO market heats up. 
The direct-to-consumer platform behind the Il Makiage and Spoiled Child brands saw its stock close at $47.53 per share after pricing its IPO at $35 per share Tuesday night. That was above a previously set range of $32 to $34 per share.

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The company sold 12.1 million shares and as of end of trading Wednesday had an approximate market valuation of $2.7 billion. 
Oddity and its shareholders, which include private equity powerhouse L Catterton, raised about $424 million in the deal. 
The stock trades on the Nasdaq under the ticker symbol “ODD.” 
“We are taking the company public because I want to build something huge, otherwise I would sell the company. So this is just another milestone,” co-founder and CEO Oran Holtzman told CNBC. “Meeting so many investors in the past two weeks and … seeing them getting what we do and connecting to our vision after so much hard work, I think that’s what makes me so happy and so grateful.” 
Launched in 2018 by Holtzman and his sister Shiran Holtzman-Erel, Oddity aims to disrupt the legacy beauty market and replace the in-store experience by using data and artificial intelligence to develop brands and make tailored product recommendations.

At the heart of Oddity’s business model is its proprietary technology — including tools developed by a former Israeli defense official — and the billions of data points it has collected from its millions of users.
The company stands out compared with other direct-to-consumer retailers that went public in 2021 because it has grown while achieving a profit. 
“We are unlocking online for one of the most attractive and lucrative [total addressable markets] on the planet,” said Lindsay Drucker Mann, Oddity’s global CFO and a former Goldman Sachs executive. “We have delivered a playbook that supports a financial profile that has, up to this point, been elusive in direct-to-consumer and certainly elusive in beauty and wellness. It’s only enabled by our unique model, which has technology at the center and is based on data.”

Profits at IPO

Oddity stands out as a rare DTC brand with both impressive growth and profits already on the books. That’s been a key driver of investor interest as the IPO market rebounds from a lull.
When interest rates were at record lows two years ago, companies that could demonstrate hyper growth were able to win over investors even if they weren’t yet profitable. But as the macroeconomic backdrop has worsened, that’s no longer the case, and investors are laser-focused on earnings.
Michael Farello, a managing partner of L Catterton’s growth fund, said Oddity’s ability to achieve growth, scale and profitability is what made the company a unique and attractive investment.
“They still have tremendously high growth so yes, it’s profitable, but they’ve really demonstrated that they can do both, it hasn’t been a trade off of one versus the other,” Farello, whose firm first invested in Oddity in 2017, told CNBC. “They’ve been growing at extraordinary clips and the fastest in the category online. At the same time as that, they’ve been profitable from a very early stage and that message resonated extraordinarily well with investors.”
In the three months ended March 31, the company saw $165.7 million in revenue, up from $90.4 million in the year-ago period. It reported net income of $19.6 million, or 35 cents a share, compared with about $3 million, or 5 cents a share, a year earlier.
In fiscal 2022, Oddity brought in $324.5 million in sales and saw net income of $21.7 million, or 39 cents a share. In the year prior, the retailer saw $222.6 million in revenue and net income of $13.9 million, or 26 cents a share.
In 2020, it saw $110.6 million in sales and net income of $11.7 million, or 22 cents a share.
In the three months that ended March 31, its gross margins were 71%, up 4 percentage points from 67% in the year-ago period. 
On average, Oddity’s gross sales have doubled each year since 2018, the company has said.
In a regulatory filing, Holtzman touted the company’s workforce and said 40% of its global head count is comprised of technologists, many of whom were recruited from the Israeli Defense Forces’ best technology units.
In late April, Oddity announced it was investing more than $100 million to acquire biotech startup Revela and open a U.S.-based lab so it could create brand-new molecules, using AI, that it can use in its cosmetics brands and future lines.
Looking ahead, Oddity plans to launch more brands and will use the proceeds from its offering to invest more into its data and technology and create products it says are backed by science.  More

Macy’s plans to launch private brands, make over some existing brands and ditch others.
The department store chain, which has cut its financial expectations for the year, unveiled its new brand as its stock struggles.
As part of a turnaround plan, Macy’s has sought to steady the ship in recent years.

Macy’s launch event for its new private brand, On 34th, also marked one of the first public appearances by Tony Spring (left) since he was named incoming CEO. Spring is CEO of the company’s higher-end department store chain, Bloomingdale’s. He will succeed Jeff Gennette (right) in February.
Melissa Repko | CNBC

NEW YORK — Macy’s, the 165-year-old department store chain, is looking for ways to keep up with the newer kids on the block.
The retailer faces slumping sales, and its stock has struggled in a good year for the market. Now, it’s banking on a wave of new and refreshed private brands to attract shoppers, especially as some flee to popular direct-to-consumer brands, online giants like Shein and Amazon, and big-box players like Target.

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On Wednesday, it showed off its newest private brand, On 34th, at its Macy’s Herald Square flagship. The brand, named after the legacy store’s Manhattan location, is made of up of women’s clothing and accessories. The brand is designed for women ranging from 30 to 50 who want modern, versatile and easy-to-wear looks.
The new brand is hitting store shelves and Macy’s website at a challenging time for the company and much of the retail industry. Consumers have cut back on discretionary spending at stores as they’re pinched by steeper grocery bills and rent, while they spend on experiences like concerts and summer vacations. The department store operator cut its full-year outlook last month, after seeing consumers pull back on purchases of clothing and other items.
On 34th is the first of four new private brands that Macy’s plans to launch by the end of 2025. It also plans to refresh some existing labels and phase out others.
Macy’s Chief Merchandising Officer Nata Dvir said On 34th’s debut comes after more than two years of customer research.
“They cared about fit, quality and value and had a tremendous amount of passion around what they were putting on every single day,” she said. “And they deserved better.”

The kickoff event previewed another piece of Macy’s future, too: It marked one of the first public appearances of Tony Spring, since he was named its next CEO. Spring, who currently leads the parent company’s higher-end department store Bloomingdale’s, will succeed Jeff Gennette in February.
Gennette said Wednesday that consumers’ financial stress continues to show up in the company’s sales trends.
Macy’s significantly cut its financial expectations in June. The department store operator, which includes Bloomingdale’s and beauty chain Bluemercury, said it expects comparable owned-plus-licensed sales to drop by 6% to 7.5% for the year. It expects earnings per share of $2.70 to $3.20 for the year.
Shares of Macy’s have reflected investors’ concerns. Macy’s stock was down more than 20% so far this year as of Wednesday. The S&P 500, by comparison, is up 19% this year.
Some of Wall Street’s worries are company-specific, as investors question whether the legacy department store can keep up with shoppers’ changing tastes.
Macy’s has sought to steady the ship in recent years while battered by other fast-changing dynamics. Led by Gennette, the department store kicked off a three-year turnaround plan in February 2020, about a month before the start of the Covid pandemic. It called for shuttering lagging stores, investing in its higher performing locations and stepping up online growth.

Macy’s is leaning into private brands to drive growth. Its newest brand, On 34th, is designed to be both fashion-forward and easy to wear. It ranges in price from $19.50 for a tank top to $299.50 for a leather jacket.
Melissa Repko | CNBC

Private brands are a common way that retailers offer lower-priced and exclusive merchandise to customers. The labels tend to be more profitable, since the companies have direct control, fewer middlemen and scale when making the items. Plus, since the items can’t be found anywhere else, the retailer isn’t going head to head on price with a competitor.
Macy’s sells a mix of private brands and national brands, including Ralph Lauren, Calvin Klein and Levi Strauss. It has about 25 private brands that cut across categories like apparel and home goods, including On 34th.
In the most recent fiscal year, private brands drove approximately 16% of sales. Yet Macy’s would like to get that closer to about 20%, a level that it hit in the past.
But the strategy comes with risks. Target is the poster child of private label success, after hatching and expanding many billion-dollar brands including children’s apparel brand, Cat & Jack, and activewear brand, All in Motion. On the other hand, some investors have pinned the downfall of now-bankrupt Bed Bath & Beyond in part to its expensive and aggressive rollout of private brands that customers didn’t want.
Gennette said Macy’s has been thoughtful about the push. It’s gathering customer input while developing the apparel and even made tweaks in recent weeks while testing the brand with customers at two New Jersey stores. Plus, he added, Macy’s has had years of experience selling private brands with a following, such as women’s apparel brand I.N.C. and home goods brand Hotel Collection.
The company has poached talent from retailers known for strong brands, too, including Emily Erusha-Hilleque, a 23-year veteran of Target, as its senior vice president of private brands. It also hired Bryan Riviere, previously of Gap-owned Banana Republic, Levi Strauss, Lululemon and Nike, as its senior vice president of private brand sourcing, product development and production.
Along with providing fresh looks, Macy’s wanted to step up the quality and fit of its clothing. Over the past three years, it has cut the number of factories and mills that it works with by about half, Riviere said. By working with fewer partners, it has the scale to negotiate better prices, savings to invest in better fabrics and knits and more buy-in from the factories that it works with.
It also worked with a technology company to standardize sizing across all Macy’s private brands. Universal sizing makes shopping less of a guessing game for customers and returns less likely, Erusha-Hilleque said.
On 34th will officially debut in mid-August with about 750 items that range from a basic tank top at $19.50 to a leather jacket for $299.50. Its shoe collection will launch in spring 2024. More