Business

Target said it will take a short-term hit to profits as it cancels orders and marks down unwanted merchandise.
CEO Brian Cornell said the big-box retailer wants to clear room for the merchandise including groceries and back-to-school supplies.
Target anticipates its operating margin rate for the second quarter will be around 2%. That’s lower than the outlook it gave less than three weeks ago.
The company also reiterated its forecast for sales growth and said margins will look healthier in the back half of the year.

Shoppers walk in front of a Target store at the Lycoming Crossing shopping plaza in Muncy, Pennsylvania.
Sopa Images | Lightrocket | Getty Images

Target warned investors Tuesday that its profits will take a short-term hit, as it marks down unwanted items, cancels orders and takes aggressive steps to get rid of extra inventory.
The retailer slashed its profit margin expectations for the fiscal second quarter to account for a wave of goods winding up deeply discounted or on the clearance rack. Shares fell about 7% in premarket trading following the news.

“We thought it was prudent for us to be decisive, act quickly, get out in front of this, address and optimize our inventory in the second quarter — take those actions necessary to remove the excess inventory and set ourselves up to continue to be guest relevant with our assortment,” CEO Brian Cornell said in an interview with CNBC.
By taking swift action, Cornell said Target can fend off further pain and make room for merchandise that customers do want, such as groceries, beauty items, household essentials and seasonal categories like back-to-school supplies. He said the company’s stores and website are seeing strong traffic and “a very resilient customer,” but one who no longer shops popular Covid pandemic categories.
“We want to make sure that we continue to lean into those categories that are relevant today,” he said.
Target anticipates its operating margin rate for the second quarter will be around 2%. That’s lower than the outlook it gave less than three weeks ago, when it anticipated its operating margin rate would be roughly around its first-quarter operating margin rate of 5.3%.
In the back half of the year, Target anticipates profit margins will be in a range around 6% — better than its average performance for the fall season in the years before the pandemic began. The company said it still expects revenue growth to be in the low to mid single digits for the full year and to maintain or gain market share in 2022.

Retailers from Walmart to Gap face a glut of inventory as inflation-pinched shoppers skip over categories that were popular during the first two years of the pandemic. Gap, for instance, said customers want party dresses and office clothes instead of the many fleece hoodies and active clothes the company has. Walmart said some families are making fewer discretionary purchases as the prices of gas and groceries rise. Abercrombie & Fitch and American Eagle Outfitters both reported a steep jump in inventory levels, up 46% and 45%, respectively, from a year ago from a mix of items not selling and supply chain delays easing.
The extreme shift in consumers’ spending habits comes as retailers start to get back to healthy in-stock levels. That means some have an abundance of sweatpants, throw pillows and pajamas just as consumers search for swimsuits and suitcases. Plus, some shoppers are trimming back on spending due to inflation or putting more of their dollars toward experiences like dining out and traveling.
Cornell said Target decided to roll out its new inventory plan after hearing retail competitors had similar woes. He said the company also wanted to get ahead of key sales seasons, such as back-to-school and the holidays, when stale merchandise could clutter stores and drive away customers.
Target said it had nearly $15.1 billion of inventory as of April 30, the end of the fiscal first quarter. That’s about 43% higher than in the year-ago period.
Target shocked Wall Street on May 18 with a wide earnings miss for the fiscal first quarter, as it got hit by fuel and freight costs, higher levels of discounting, and a rotation away from items like TVs, small kitchen appliances and bicycles. Its shares fell nearly 25%, marking the company’s worst day on Wall Street in 35 years.
Walmart missed earnings expectations, too. Its inventory levels were up about 33% compared with a year ago. Walmart U.S. CEO John Furner said at an investor event on Friday that about 20% of that is merchandise the retailer wishes it did not have. Roughly a third is additional inventory to help the retailer restock key items. He said it will be “a couple of quarters to get back to where we want to be.”
That company’s shares also fell after Target’s announcement on Tuesday. Walmart’s shares were down about 3% in premarket trading.
Cornell said Target is sorting through its inventory, deciding in some cases to pack away merchandise to sell at full price in the future and in other cases to promote or come up with ways to sell through it now.
For instance, he said, Target had a big sales event over Memorial Day weekend to clear bulky outdoor items like patio furniture out of its backrooms. It also got additional space near U.S. ports to hold merchandise, so it has a place to move goods — some of which are arriving too early or too late.
– CNBC’s Lauren Thomas contributed to this report.

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Ben & Jerry’s jumping into the latest national debate on guns comes after business leaders have come forward to insist on changes to firearm laws since last month’s mass shootings.
The House of Representatives is set to vote this week on a gun safety bill.
The ice cream maker also plans to cut ties with vendors who have worked with the firearms industry.

Ben & Jerry’s brand ice cream sits in a supermarket freezer. 
Bloomberg | Bloomberg | Getty Images

Ice cream giant Ben & Jerry’s is galvanizing its millions of customers in a new lobbying push for tougher gun safety measures after last month’s mass shootings in Uvalde, Texas, and Buffalo, New York.
Christopher Miller, the head of global activism at the ice cream company, told CNBC in an interview that the company has called on its 8 million Facebook fans and 515,000 Twitter followers to lobby lawmakers for stronger gun safety laws.

Ben & Jerry’s activism on guns comes as business leaders press Congress for changes to firearm laws following multiple mass shootings, including one that took the lives of 19 children and two teachers at a school in Uvalde, Texas. Billionaire Elon Musk told CNBC he wants “tight” gun background checks. In an open letter published in the Dallas Morning News, other Texas-based business leaders have called for more background checks, red flag laws and to raise the minimum age to purchase a gun to 21.
Ben & Jerry’s was founded by Ben Cohen and Jerry Greenfield in the late 1970s, and is headquartered in Vermont with store locations around the world. Since then, Cohen and Greenfield have been vocal political advocates on a wide range of policies, including gun laws, voting rights and health care. Unilever is their parent company. Financier Nelson Peltz, a Republican backer, recently joined its board.
When “legislation comes to the floor, we will certainly encourage our fans to contact their policymakers to support [gun safety] legislation,” Miller told CNBC in explaining the company’s plans to back the gun proposals being discussed in Congress.
The House of Representatives is set to vote this week on a gun safety bill that lifts the purchasing age for semiautomatic rifles from 18 to 21, limits the size of gun ammunition magazines and provides standards for safe gun storage. Senate Majority Leader Chuck Schumer, D-N.Y., has yet to set a vote on gun safety legislation.
Miller also said the ice cream maker plans to cut ties with vendors who have worked with the firearms industry.

“We’ll make sure moving forward we’re not working with enablers of the industry,” Miller said after being asked about one of its outside law firms, Shook, Hardy & Bacon, that has a large tobacco, alcohol and firearms practice. “I think we certainly will be more thoughtful on the kind of service providers that we work with going forward.”
Representatives for Shook, Hardy & Bacon did not return requests for comment. After reaching out to the law firm about its work for Ben & Jerry’s, sections of its website showing previous work for the Vermont company and details of its larger tobacco, alcohol and firearms practice appeared to have been removed.
Ben & Jerry’s publicly criticized lawmakers for inaction after the deadly shootings in Uvalde and Buffalo.
“This kind of gun violence in America must be stopped. But our leaders are more responsive to the gun lobby than to the grieving families of countless victims. Their inaction to address gun violence is, itself, an action and an act of violence,” the company’s statement said after the Uvalde shooting. The shooting in Buffalo left 10 dead and three wounded.
Ben & Jerry’s called on customers to contact their “congressperson and demand action to stop gun violence,” and encouraged them to ask lawmakers to support a ban on assault-style military weapons and high capacity magazines, according to the statement. The company plans to keep up the lobbying pressure online as bills and solutions are debated in Congress, Miller said.
“We have a digital action platform that allows people to make calls to Capitol Hill. That allows them to send emails to their governors, their state legislators and members of Congress. It allows people to tweet at and post messages on social to their elected officials,” Miller said.
This isn’t the first time that Ben & Jerry’s has gotten political in its fight for stronger gun laws.
Miller told CNBC the company supported the gun laws passed by Vermont state legislators in 2018. At the time, Republican Gov. Phil Scott signed into law measures that tighten Vermont’s firearm laws, including buyers having to pass required background checks.
The company’s political activism has come with some costs.
After Ben & Jerry’s decided to stop selling ice cream in the Israeli-occupied Palestinian territories, Florida Republican Gov. Ron DeSantis and his administration moved to stop contracting with parent company Unilever and its subsidiaries.

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Kohl’s said it has entered into exclusive negotiations with retail holding company Franchise Group, which is proposing to buy the retailer for $60 per share.
Such a price tag would value Kohl’s at roughly $8 billion.
Franchise Group is working with Oak Street Real Estate Capital to finance the deal mostly through real estate, according to a person familiar with the matter.

The Kohl’s logo is displayed on the exterior of a Kohl’s store on January 24, 2022 in San Rafael, California.
Justin Sullivan | Getty Images

Kohl’s said Monday that it has entered into exclusive negotiations with retail holding company Franchise Group, which is proposing to buy the retailer for $60 per share.
Such a price tag would value Kohl’s at roughly $8 billion.

Kohl’s shares closed Monday at $42.12, giving the retailer a market value of about $5.4 billion.
Franchise Group is working with Oak Street Real Estate Capital to finance the deal mostly through real estate, according to a person familiar with the matter. The person requested anonymity because the deal isn’t finalized.
A representative for Oak Street Real Estate declined to comment.
The transaction remains subject to approvals of both companies’ boards of directors, Kohl’s said in a press release. There’s no guarantee that any agreement will be reached, it said.
The exclusive period of three weeks will allow Franchise Group — which owns the Vitamin Shoppe and Buddy’s Home Furnishings, among other brands — and its financing partners to finalize due diligence and financing arrangements, and for the parties to complete the negotiation of binding documentation, Kohl’s said.

The retailer added that it will have no further comment until an agreement is reached or the discussions are terminated.
The saga at Kohl’s has been playing out for more than half a year.
The off-mall department store chain was first urged in early December 2021 by New York-based hedge fund Engine Capital to consider a sale or another alternative to boost its stock price. At the time, Kohl’s shares were trading around $48.45.
In mid-January, activist hedge fund Macellum Advisors then pressured Kohl’s to consider a sale. Macellum’s CEO, Jonathan Duskin, argued that executives were “materially mismanaging” the business. He also said Kohl’s had plenty of potential left to unlock with its real estate.
In early February, Kohl’s said it had brought on bankers at Goldman Sachs and PJT Partners to help the retailer field offers.
Last month, Kohl’s reported that its sales for the three-month period ended April 30 fell to $3.72 billion from $3.89 billion in 2021. The company also slashed its profit and revenue forecast for the full fiscal year, disappointing investors and muddying the picture for a potential deal.
Kohl’s shares hit a 52-week high of $64.38 in late January.

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It’s that time again! “Mad Money” host Jim Cramer rings the lightning round bell, which means he’s giving his answers to callers’ stock questions at rapid speed.

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Energy Transfer LP: “I thought I’d never say this, but ET, it’s time to come home. It’s worth owning, because that whole group is going up and going up big.”

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UWM Holdings Corp: “I’m going to have to say no to that one, even though it looks very cheap.”

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Peloton’s chief financial officer, Jill Woodworth, is leaving the company.
She will be replaced by Liz Coddington, an executive at Amazon Web Services, effective next week, the company announced Monday.
The handover marks another departure among the at-home fitness company’s top ranks.

A Peloton exercise bike is seen after the ringing of the opening bell for the company’s IPO at the Nasdaq Market site in New York City, New York, U.S., September 26, 2019.
Shannon Stapleton | Reuters

Peloton’s chief financial officer, Jill Woodworth, is leaving the company and will be replaced by Liz Coddington, an executive at Amazon Web Services, effective next week, the company announced Monday.
The handover marks another departure from the at-home fitness company’s top ranks. Peloton earlier this year appointed Barry McCarthy, formerly CFO at Netflix and Spotify, to the role of chief executive officer.

McCarthy took the helm from founder John Foley at a time of intense upheaval at the company, which has suffered from rising costs and waning demand. He’s launched the company on an aggressive cost-restructuring plan that in part emphasizes recurring subscription revenue.
“Liz is a deeply talented finance executive and will be an invaluable addition to Peloton’s leadership team,” McCarthy said in a release. “Having worked at some of the strongest and most recognizable technology brands, she not only brings the expertise needed to run our finance organization, but she has a critical understanding of what it takes to drive growth and operational excellence. I have seen her intellect, abilities, and leadership firsthand and am excited to work closely with her as we execute the next phase of Peloton’s journey.”
Coddington previously held roles at Walmart.com and Netflix. Woodworth had been at Peloton since 2018 and will serve the company as a consultant on an interim basis, according to the announcement.
Peloton has come under pressure in recent months from activist investor Blackwells Capital, which as recently as April urged the company to consider a sale.
The maker of connected bikes and treadmills has struggled to sustain its pandemic-era growth. In January, CNBC reported the company had walked back ambitious sales projections, and in February it laid off 2,800 employees.

McCarthy said during his first earnings conference call after taking over that he was surprised to learn just how discombobulated the supply chain was and how quickly the company’s cash coffers were shrinking.
In May, the company signed a binding commitment letter with JPMorgan and Goldman Sachs to borrow $750 million in five-year term debt in an effort to return the business to free cash flow positive.
—CNBC’s Lauren Thomas contributed to this report.

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ServiceNow Chief Executive Bill McDermott told CNBC’s Jim Cramer on Monday that he doesn’t expect the current economy to undergo a market downturn like the 2008 financial crisis.
“This is not even close to 2008. In 2008, I was with a company where we lost a billion euros in pipeline in a day. That was a crisis,” McDermott said in an interview on “Mad Money.”

ServiceNow Chief Executive Bill McDermott told CNBC’s Jim Cramer on Monday that he doesn’t expect the current economy to undergo a market downturn like the 2008 financial crisis.
“This is not even close to 2008. In 2008, I was with a company where we lost a billion euros in pipeline in a day. That was a crisis. This is not a crisis,” McDermott said in an interview on “Mad Money.”

“If anything, this is a crisis of opportunity. The digital transformation market is $11 trillion in the next three years, okay. If you’re going to fight inflation, you’re going to keep your employees inspired, no matter where they work from. … You’re going to connect to your customers,” he added.
McDermott’s comments come as the Federal Reserve plans to tighten its balance sheet and raise interest rates to control inflation, intensifying concerns on Wall Street that the actions could spark a recession and slow down an economy recovering from the height of the Covid pandemic.
The cloud-based software company CEO also stated that companies that wish to make it through difficult economic conditions ahead need to invest in digital innovation now. McDermott noted that not a single firm in the top 30 companies in the S&P 500 in 1989 is on the same list today, as measured by market cap.
“If you don’t change, and you don’t transform your businesses, and you don’t hit the accelerator now when headlines are down, you might not be on any list in 30 years,” he said.
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The CNBC Supply Chain Heat Map for China, which is gradually easing Covid lockdowns, is showing several hot spots slowing down trade flow in recent days.
China’s “zero Covid” measures on trucking and cross-city transport limitations continue to slow down manufacturing and logistics.
Once the backlog in China clears, ports in Europe and the United States will feel a rush of shipments.

Arrows pointing outwards

Source: CNBC

The CNBC Supply Chain Heat Map for China, which is gradually easing Covid lockdowns, is showing several hot spots slowing down trade flow in recent days.
China’s “zero Covid” measures on trucking and cross-city transport limitations continue to slow down manufacturing and logistics. The decrease in completed manufactured goods is reflected in the decrease in exports leaving Shanghai bound for the United States. The city is not expected to fully reopen until mid-to late June.

To make up time, ocean carriers are increasing their canceled sailings or skipping ports. But schedule reliability is not improving. According to Sea-Intelligence, vessels are seven days late on average. This has created a cloudy picture for logistics managers as they try to plan ahead. Crane Worldwide Logistics said it is advising clients to build in three to four weeks of advance notice to request vessel space.

“Congestion is constantly on the move based on the actions American importers seeking ways around the West Coast labor negotiations,” said Peter Sand, chief analyst at Xeneta. “This has resulted in the U.S. East Coast ports moving record-high imports and congesting facilities. While spot prices are down, they are still historically high. Long-term contract rates have soared, up 150% up year-on-year.”
The surge in containers comes at a pivotal time for the West Coast ports. Labor negotiations between the Pacific Maritime Association and the International Longshore and Warehouse Union are reportedly set to resume after a break.
Logistics costs are historically passed on to the shipper and then passed on to the consumer. Fuel surcharges are also contributing to inflationary pressures.

Arrows pointing outwards

Source: CNBC

European exporters are faced with a declining number of empty containers to be used for export, but there are worries about a strike in the Port of Hamburg, Germany’s largest seaport by volume, Andreas Braun, EMEA ocean freight product director at Crane Worldwide Logistics, told CNBC.

“The threat of a strike by the Hamburg Terminal Operator’s Union is slowing down the port,” said Braun. “Vessels are sitting on waiting position in the German bay for discharge in Hamburg. The coordination between terminal operators and intermodal operators is getting worse, and we expect further worsening in the ports of Germany to come.”
Congestion will get worse and containers will become less available once the backlog in China is cleared, Braun said, adding that shipping lines already have problems planning exports based on containers coming in on the import side of things.
Rail freight services are also disrupted. “Limited train operations will persist until further notice,” the German port warned.

Arrows pointing outwards

Source: CNBC

The Port of New York and New Jersey expects to experience a “hockey stick-style surge” beginning approximately six to eight weeks after the reopening in China, according to Bethann Rooney, director at the port.
“Import containers originating in China represent 29.6% of our total imports, which pales in comparison to the China market share in the combined Ports of Los Angeles and Long Beach, where it is more than twice as much,” she said. “If we are unable to reduce the amount of long-dwelling imports and empties in the next several weeks, the surge will be very difficult to handle.” 

All East Coast ports are seeing an increase in vessels. Officials at the Port of Savannah told CNBC they are seeing unscheduled vessels and anticipating historic volume this month.
“Savannah is witnessing significant congestion,” said Alex Charvalias, supply chain in-transit visibility lead at MarineTraffic. “The situation is worsening. Shippers can expect the turnaround days to reach even 10 days.”

The CNBC Supply Chain Heat Map data providers are global freight booking platform Freightos, creator of the Freightos Baltic Dry Index; logistics provider OL USA; supply-chain intelligence platform FreightWaves; supply chain platform Blume Global; third party logistics provider Orient Star Group; marine analytics firm MarineTraffic; maritime visibility data company Project44; maritime transport data company MDS Transmodal UK; ocean and air freight benchmarking an analytics firm Xeneta; leading provider of Research & Analysis firm Sea-Intelligence ApS; Crane Worldwide Logistics, and air and freight logistics provider SEKO Logistics.
— CNBC’s Gabriel Cortes contributed to this article.

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Solid Power said it has begun pilot manufacturing of solid-state EV batteries for internal testing.
The company will begin supplying batteries to Ford and BMW for testing later this year.
If all goes well, mass production could begin as soon as 2024.

Solid Power’s 22-layer, 20Ah all solid-state lithium metal cell compared to the company’s first-generation 10-layer, 2Ah cell.
Solid Power

Solid Power, a Colorado-based battery start-up backed by BMW and Ford Motor, said it has begun pilot production of an innovative solid-state battery cell that promises to offer electric-vehicle owners more range and shorter recharging times at lower cost.
Solid-state batteries are so called because they do away with the liquid or gel electrolyte found in current lithium-ion batteries. In electric vehicles, they have the potential to offer more range, shorter recharging times and a lower risk of fires than lithium-ion batteries — all compelling benefits that have drawn big investments from automakers over the last several years.

But a solid-state battery design that can stand up to years of use in an electric vehicle — and that can be mass-produced at reasonable cost — has eluded researchers for decades. That’s expected to change within a couple of years.
Solid Power’s effort is one of several underway that aims to bring solid-state battery cells to market for use in electric vehicles. Its rivals range from public companies such as QuantumScape to private efforts funded by giants such as Toyota.
Solid Power’s advantage might be unique: While at least some rivals’ designs will require costly specialized factories, Solid Power said its batteries can be produced using the tooling and processes already in place in current factories making lithium-ion battery cells.
Solid Power’s pilot production line will produce batteries in small numbers for internal testing, as it works to refine its battery design and fine-tune its manufacturing approach.
The company expects to begin shipping batteries to its automotive partners, BMW and Ford, for testing in prototype vehicles by the end of this year, CEO Doug Campbell said — a key step in the “validation” process needed to supply batteries to automakers at scale.

Campbell told CNBC that if all goes well, he expects the automakers to sign off on Solid Power’s battery design sometime in the first half of 2024.
The company would then hand off its design to an existing battery manufacturer for mass production, suggesting the first vehicles to use Solid Power’s innovative batteries could be available within a few years.

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