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Airbus says the Zero Emission Development Centre in Filton, Bristol, has already begun working on technology development.
The ZEDC in the U.K. will join other similar sites in Spain, Germany and France.
The environmental footprint of aviation is significant, with the World Wildlife Fund describing it as “one of the fastest-growing sources of the greenhouse gas emissions driving global climate change.”

A model of one of Airbus’ ZEROe concept planes, photographed in November 2021. The firm has said it wants to develop “zero-emission commercial aircraft” by the year 2035.
Giuseppe Cacace | Afp | Getty Images

Airbus is launching a U.K.-based facility focused on hydrogen technologies, a move which represents the firm’s latest attempt to support the design of its next generation of aircraft.
In a statement Wednesday, Airbus said the Zero Emission Development Centre in Filton, Bristol, had already begun working on the development of the tech.

One of the site’s main goals will center around work on what Airbus called a “cost-competitive cryogenic fuel system” that its ZEROe aircraft will need.
Details of three zero-emission, “hybrid-hydrogen” concept planes under the ZEROe moniker were released back in Sept. 2020. Airbus has said it wants to develop “zero-emission commercial aircraft” by the year 2035.

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The ZEDC in the U.K. will join other similar sites in Spain, Germany and France. “All Airbus ZEDCs are expected to be fully operational and ready for ground testing with the first fully functional cryogenic hydrogen tank during 2023, and with flight testing starting in 2026,” the company said.
The environmental footprint of aviation is significant, with the World Wildlife Fund describing it as “one of the fastest-growing sources of the greenhouse gas emissions driving global climate change.” The WWF also says air travel is “currently the most carbon intensive activity an individual can make.”
Just this week, environmental groups launched legal action against KLM, saying the Dutch aviation giant was misleading the public over the sustainability of flying.

KLM was notified of the lawsuit on the same day as the firm’s annual general meeting. A spokesperson confirmed the group had received the letter and said it would study its contents.
Hopes for hydrogen
In an interview with CNBC earlier this year, Airbus CEO Guillaume Faury said aviation would “potentially face significant hurdles if we don’t manage to decarbonize at the right pace.”
Faury, who was speaking to CNBC’s Rosanna Lockwood, laid out a number of areas his firm was focusing on. These included ensuring planes burned less fuel and emitted less carbon dioxide.
In addition, the aircraft the company was delivering now had a certified capacity for 50% sustainable aviation fuel in their tanks.

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“We need to see the SAF industry moving forwards, being developed, being grown to serve airlines and to be able to use that capacity of 50% of SAF,” he said. “We’ll go to 100% by the end of the decade.”
The above represented a “very important part of what we’re doing” Faury explained. “The next one is looking at the mid-term and long-term future to bring to the market the hydrogen plane because this is really the ultimate solution,” he said, noting that a lot of engineering, research and capital commitments would be required.

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Described by the International Energy Agency as a “versatile energy carrier,” hydrogen has a diverse range of applications and can be deployed in a wide range of industries.
It can be produced in a number of ways. One method includes using electrolysis, with an electric current splitting water into oxygen and hydrogen.
If the electricity used in this process comes from a renewable source such as wind or solar then some call it green or renewable hydrogen. The vast majority of hydrogen generation is currently based on fossil fuels.
Airbus is not the only company looking at using hydrogen in aviation. Last October, plans to operate commercial hydrogen-electric flights between London and Rotterdam were announced, with those behind the project hoping it will take to the skies in 2024.
At the time, aviation firm ZeroAvia said it was developing a 19-seater aircraft that would “fly entirely on hydrogen.” In September 2020, a six-seater hydrogen fuel cell plane from the company completed its maiden flight.
—CNBC’s Sam Meredith contributed to this report More

A recent monkeypox outbreak across the U.S., Europe, Australia and the Middle East has baffled health experts and is raising concerns of a wider outbreak.
The majority of cases so far have spread through sex, with a particular concentration among gay and bisexual men. However, anyone could be at risk of catching monkeypox.
Practicing good hygiene and safe sex are among some of the precautions you can take to reduce your risk of contracting the virus.

Test tubes labelled “Monkeypox virus positive and negative” are seen in this illustration taken May 23, 2022. 
Dado Ruvic | Reuters

A recent monkeypox outbreak across the U.S., Europe, Australia and the Middle East has baffled health experts and is raising concerns of a wider outbreak.
As of Wednesday, there were 346 confirmed and suspected cases in 22 countries outside of Africa, where the virus is endemic, according to Our World in Data.

It marks the first known community spread of the virus. Prior to this outbreak, cases had been linked to travel to regions where the virus is endemic or imported animals carrying the virus.
The majority of new cases have spread through sex, with a particular concentration among men who have sex with other men. However, the World Health Organization has cautioned that anyone could be at risk of contracting the virus. Children, pregnant woman and the immunocompromised are considered particularly at risk.
“Anyone who has close contact with someone who is infectious is at risk,” a release on the WHO’s website said Wednesday.
Monkeypox is a rare disease caused by the monkeypox virus, part of the same family as smallpox, although typically less severe. Smallpox vaccinations have proven 85% effective against monkeypox.
The WHO said Monday that it was unlikely mass vaccinations would be required to combat the outbreak. But, given the pace of the outbreak and the lack of clarity around its cause, the public health body urged people to practice good hygiene and safe sex to help control its spread.

Protecting yourself against monkeypox

While health experts agree the risks to the general public are low, there are several precautions you can take to reduce your risk of contracting the virus.
Recommendations from the U.S. Centers for Disease Control and Prevention, U.K.’s National Health Service and WHO include:

Avoid coming into contact with people recently diagnosed with the virus or those who may have been infected.

Wear a face mask if you are in close contact with someone who has symptoms.

Use condoms and keep an eye out for symptoms if you have recently changed sexual partners.

Avoid coming into contact with animals that could be carrying the virus. This includes sick or dead animals and particularly those with a history of infection, such as monkeys, rodents and prairie dogs.

Practice good hand hygiene, especially after coming into contact with infected — or suspected infected —animals or humans. For instance, wash your hands with soap and water or use an alcohol-based hand sanitizer.

Use personal protective equipment (PPE) when caring for patients with confirmed or suspected monkeypox infection.

This 2003 electron microscope image made available by the Centers for Disease Control and Prevention shows mature, oval-shaped monkeypox virions, left, and spherical immature virions, right, obtained from a sample of human skin associated with the 2003 prairie dog outbreak.
Cynthia S. Goldsmith, Russell Regner | CDC via AP

Monkeypox can also be transmitted via surfaces and materials, so it’s wise to avoid coming into contact with materials that have been in contact with a sick human or animal.
“This is a virus that is super stable outside the human host, so it can live on objects like blankets and things like that,” Dr. Scott Gottlieb said Monday.
“Good practice would be to regularly wash clothing and bedsheets at high temperature,” Emmanuel Andre, professor at medicine at Belgium’s Ku Leuven University, told CNBC Wednesday.

However, he said he did not think it would be necessary for the general public to start avoiding public areas, taxis, shopping and hotels.
“The general population don’t need to take many more precautions than we do in usual life,” he said. “If people are in the high-risk population, where they are aware they are in a high risk environment, then they should take extra precautions.”

What to do if you catch monkeypox

If you suspect that you may have contracted monkeypox, you should isolate yourself from physical contact with others and seek medical advice immediately.
Initial symptoms of monkeypox include fever, headaches, muscle ache, swelling and backpain. Rashes and lesions then typically emerge on the face, hands, feet, eyes, mouth or genitals within one to five days. Those rashes turn into raised bumps and then blisters, which may fill with white fluid before breaking and scabbing over.

In this Centers for Disease Control and Prevention handout graphic, symptoms of one of the first known cases of the monkeypox virus are shown on a patient’s hand May 27, 2003.
CDC | Getty Images

Many of the symptoms of the virus can be easily confused with other diseases, such as chickenpox, herpes or syphilis, however, so medical confirmation is important.
If you are diagnosed with monkeypox, you will need to isolate until the virus has passed. The illness is typically mild and most people recover within 2 to 4 weeks.
While medical advice currently varies across countries, the U.K.’s National Health Service (NHS) notes that you may need to stay in a specialist hospital to prevent infection spreading to other people.

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India has embarked on an ambitious plan to cut dependence on China for key raw materials as it seeks to become self-sufficient in its quest to be the “pharmacy of the world.”
However, India’s $42 billion pharmaceutical sector is heavily dependent on China for key active pharmaceutical ingredients or API — chemicals that are responsible for the therapeutic effect of drugs.
Estimates put India’s dependence on China at as much as 90% for certain drugs.

India emerged as a large supplier of Covid-19 vaccines, supplying to 75 countries, including Indonesia, where a medical officer injects the vaccine AstraZeneca into a recipient in Bintan island on July 2, 2021.
(Photo credit Yuli Seperi / Sijori images/Future Publishing via Getty Images

India has embarked on an ambitious plan to cut dependence on China for key raw materials as it seeks to become self-sufficient in its quest to be the “pharmacy of the world.”
Already the world’s third-largest manufacturer of medicines by volume, India has one of the lowest manufacturing costs globally. About one in three pills consumed in the U.S. and one in four in the U.K. are made in India.

However, India’s $42 billion pharmaceutical sector is heavily dependent on China for key active pharmaceutical ingredients or API — chemicals that are responsible for the therapeutic effect of drugs. 
According to a government report, India imports about 68% of its APIs from China as it’s a cheaper option than manufacturing them domestically.
However, an estimate by the Trade Promotion Council, a government supported organization, puts the figure of API dependence on China at about 85%. Another independent study carried out in 2021 points out that while India’s API imports from China are at nearly 70%, its dependence on China for “certain life-saving antibiotics” is around 90%. Some drugs that are highly dependent on Chinese APIs include penicillin, cephalosporins and azithromycin, the report said.
That may be starting to change.
Under a government scheme launched two years ago, 35 APIs began to be produced at 32 plants across India in March. This is expected to reduce dependence on China by up to 35% before the end of the decade, according to an estimate by ratings firm ICRA Limited, the Indian affiliate of Moody’s.

The production linked incentive scheme was first launched in mid-2020, when military tensions with China were at a high. The PLI program aims to incentivize companies across all sectors to boost domestic manufacturing by $520 billion by 2025.
For the pharma sector,  the government has earmarked over $2 billion worth of incentives for both private Indian companies and foreign players to start producing 53 APIs that India  relies heavily on China for. 
Some of India’s biggest pharmaceutical companies are involved in the scheme. They include Sun Pharmaceutical Industries, Aurobindo Pharma, Dr. Reddy’s Laboratories, Lupin and Cipla. 
A total of 34 products were approved in the first phase of the scheme — and distributed amongst 49 players, according to assistant vice president at ICRA Limited, Deepak Jotwani. 
“The first phase will result in reduction in imports from China by about 25-35% by 2029,” Jotwani estimated. 
India’s role in the pandemic
The government hopes to drive the pharmaceutical sector — currently valued at roughly $42 billion — up to $65 billion by 2024. Its goal is to double that target to between $120 billion to $130 billion by 2030.
India has also emerged as a key player in worldwide efforts to combat the pandemic. 
According to the government, India has supplied over 201 million doses to about 100 countries across Southeast Asia, South America, Europe, Africa and the Middle East as of May 9.

India has been exporting vaccines through both government-funded initiatives and under the Covax platform.
The country had to briefly stop exports in April 2021 when domestic cases surged and it needed more vaccines at home. It resumed exports in October that year.
Significantly, over 80% of the antiretroviral drugs used globally to combat AIDS are also supplied by Indian pharmaceutical firms, according to the government.
India was not always this dependent on China for essential ingredients for its drugs.

Reducing import dependence is important for reducing disruptions in India’s pharma supply chain.

Amitendu Palit
senior research fellow, Institute of South Asian Studies in NUS

In 1991, India imported only 1% of its APIs from China, according to PWC consulting group.
That changed when China ramped up API manufacturing in the 1990s across its 7,000 drug parks with infrastructure such as effluent treatment plants, subsidized power and water. Production costs in China fell sharply and drove Indian companies out of the API market.
Long road to self-sufficiency
It will be a “long time” before local production becomes large enough to satisfy the demand of India’s pharmaceutical producers, senior research fellow at the Institute of South Asian Studies at the National University of Singapore, Amitendu Palit told CNBC.
“Till then, India will need to import APIs substantially from China. Reducing import dependence is important for reducing disruptions in India’s pharma supply chain,” Palit said.
Founder of Mumbai-based Somerset Indus Capital Partners, which operates a private equity fund in health care, Mayur Sirdesai, said the production-linked incentive scheme’s focus could be narrower. 
“We will probably do better with low volume, by focusing on niche APIs than with high volume ones,” he said, adding that a lot of other chemical processes in the manufacturing cycle would also have to be moved to India to cut costs in the long run. 

Geopolitical considerations were behind the decision to reduce dependence on China, said Pavan Choudhary, chairman and secretary general of the Medical Technology Association of India, a non-profit organization.
“Blind offshoring is now becoming ‘friendshoring,'” Choudhary said, explaining “friendshoring″ to mean the outsourcing of business operations to countries that have a similar political system, and with whom there is a “history of peace”.
He also India was reflecting recent attempts by a number of countries to diversify supply chains away from China.Choudhury — an influential voice in shaping policy in the pharmaceutical industry — estimated that apart from APIs, India also imports $1.5 billion of medical equipment from China in imaging technology or machines to perform magnetic resonance imaging and other types of sophisticated scans.

He said reducing dependence on China for medical equipment would take longer than for APIs.
“APIs are dependent on a chemical ecosystem which already exists in India,” he said, adding that there was more “technological complexity” in medical devices. 
“It will take a little longer to cut this dependence,” he said.

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About 200 confirmed cases and more than 100 suspected cases of monkeypox have been detected outside of countries where it usually circulates, according to the World Health Organization.
The European Union has confirmed 118 cases of monkeypox; the United Kingdom has confirmed 90 case; and the U.S. has confirmed 9 cases.
A milder West African strain of the virus is driving the outbreaks and most patients recover in a few weeks. No deaths have been reported so far.

RT: Maria Van Kerkhove, Head a.i. Emerging Diseases and Zoonosis at the World Health Organization (WHO), speaks during a news conference on the situation of the coronavirus at the United Nations in Geneva, Switzerland, January 29, 2020.
Denis Balibouse | Reuters

The World Health Organization on Thursday said the monkeypox virus has spread to more than 20 countries, urging nations to increase surveillance of the infectious disease as outbreaks grow. 
About 200 confirmed cases and more than 100 suspected cases of monkeypox have been detected outside of countries where it usually circulates, according to Maria Van Kerkhove, the WHO’s Covid-19 technical lead. She said more cases of the rare viral illness will likely be reported as surveillance expands, but added that the recent spread is containable.

“We expect more cases to be detected. We are asking countries to increase surveillance,” Van Kerkhove said during a Q&A on the global health agency’s social media platforms. “This is a containable situation. It will be difficult, but it’s a containable situation in the non-endemic countries,” she said.
Monkeypox has spread to North America and Europe in recent weeks, generating outbreaks in countries outside of Central and West Africa where the virus has circulated at low levels over the past four decades. A milder West African strain of the virus is driving the outbreaks and most patients recover in a few weeks. No deaths have been reported so far.

The European Union has confirmed 118 cases of monkeypox, according to the European Centre for Disease Prevention and Control. Spain and Portugal have reported the largest outbreaks in the EU with 51 and 37 cases respectively. The United Kingdom has confirmed 90 cases of the virus, according to the U.K. Health Security Agency.
In North America, the U.S. has identified nine cases of monkeypox across seven states, according to the Centers for Disease Control and Prevention. Canadian health officials confirmed 16 cases of monkeypox, all detected in the province of Quebec.
CDC Director Dr. Rochelle Walensky said on Thursday some patients in the U.S. haven’t traveled to countries with active outbreaks, suggesting that the virus is spreading domestically. Walensky said the CDC is conducting contact tracing and trying to break chains of transmission in the U.S.

Health officials in Europe, the U.K. and the U.S. have said a majority the patients are gay or bisexual men, with the virus spreading in many cases through sex. However, the officials emphasized that monkeypox can spread to anyone through close physical contact regardless of sexual orientation. Van Kerkhove said it is important to raise awareness about who faces an elevated risk right now without stigmatizing anyone.
Monkeypox is not a sexually transmitted disease. The virus can spread through any kind of sustained skin-to-skin contact with an infected person who has a lesion. It can also spread through body fluids, contaminated bedsheets and clothing, or respiratory droplets if a person has a lesion in their mouth.
The virus usually begins with symptoms similar to the flu such as fever, muscle aches, chills, headaches, exhaustion and swollen lymph nodes. It then progresses to body rashes characterized by raised bumps that turn into puss-filled blisters which eventually dry out and fall off.
Van Kerhkove urged health-care professionals to consider monkeypox a diagnosis for patients with rash illnesses that present at sexual health clinics, emergency departments, infectious disease clinics, primary-care physicians and dermatologists. 
“It doesn’t mean that anyone with a rash will have monkeypox but we need to raise awareness about what monkeypox is and isn’t, and we need to ensure that countries have the capacity to test and provide the right information,” she said. 

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Texas Democratic Rep. Joaquin Castro asked the FBI to investigate the timeline of the Uvalde elementary school massacre and the police response to it as controversy grew over how law enforcement officials responded to the scene.
“The people of Uvalde, of Texas, and of the nation deserve an accurate account of what transpired,” Castro wrote FBI Director Christopher Wray.
The letter came as a top Texas law enforcement official contradicted earlier police reports, and said Salvador Ramos was not confronted by an armed school police officer before he entered Robb Elementary School and began firing.

Rep. Joaquin Castro (D-TX) speaks at a press conference on immigration on Capitol Hill on November 18, 2021 in Washington, DC.
Anna Moneymaker | Getty Images

Texas Democratic Rep. Joaquin Castro on Thursday asked the FBI to investigate the timeline of the Uvalde elementary school massacre and the police response to it as controversy grew over how law enforcement officials responded to the scene.
“The people of Uvalde, of Texas, and of the nation deserve an accurate account of what transpired,” Castro wrote FBI Director Christopher Wray. “State officials have provided conflicting accounts that are at odds with those provided by witnesses.”

“Your agency must ensure that the American people have a complete and comprehensive account of how this tragedy occurred,” wrote Castro, who represents a district encompassing parts of San Antonio, less than 90 miles from Uvalde.
The congressperson’s letter came as a top Texas law enforcement official contradicted earlier police reports, and said rifle-toting 18-year-old Salvador Ramos had not encountered an armed school police officer before he entered Robb Elementary School on Tuesday morning and began firing with an AR-15-style rifle.
While police responded to the school within four minutes, authorities waited for an hour to enter the school, when a tactical team from the U.S. Border Patrol arrived and went in and killed Ramos, Texas Department of Public Safety (DPS) Regional Director Victor Escalon said.
Ramos had killed 19 children in the school, along with two teachers.

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Castro, in his letter to Wray, referred to multiple reports that have said, “Onlookers allege that parents unsuccessfully urged law enforcement to enter the building during this time.” Some reports have said cops stopped parents from entering the school.
“I urge the FBI to use its maximum authority to thoroughly examine the timeline of events and the lawenforcement response and to produce a full, timely, and transparent report on your findings,” Castro wrote.

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The supply of homes for sale jumped 9% last week compared with the same week one year ago, according to Realtor.com.
Real estate brokerage Redfin also reported that new listings rose nearly twice as fast in the four weeks ended May 15 as they did during the same period a year ago.
Pending home sales, a measure of signed contracts on existing homes, dropped nearly 4% in April, month to month and were down just over 9% from April 2021, according to the National Association of Realtors.

Sharply higher mortgage rates have caused a sudden pullback in home sales, and now sellers are rushing to get in before the red-hot market cools off dramatically.
The supply of homes for sale jumped 9% last week compared with the same period a year ago, according to Realtor.com. That is the biggest annual gain the company has recorded since it began tracking the metric in 2017.

Real estate brokerage Redfin also reported that new listings rose nearly twice as fast in the four weeks ended May 15 as they did during the same period a year ago.

A For Sale sign is displayed in front of a house in Washington, DC.
Stefani Reynolds | Afp | Getty Images

“Rising mortgage rates have caused the housing market to shift, and now home sellers are in a hurry to find a buyer before demand weakens further,” said Redfin Chief Economist Daryl Fairweather.
Sellers clearly see the market softening. Pending home sales, a measure of signed contracts on existing homes, dropped nearly 4% in April from March. They were down just over 9% from April 2021, according to the National Association of Realtors. This index measures signed contracts on existing homes, not closings, so it is perhaps the most timely indicator of how buyers are reacting to higher mortgage rates. It marks the sixth straight month of sales declines and the slowest pace in nearly a decade.
April sales of newly built homes, also measured by signed contracts, dropped a much wider-than-expected 16% compared with March, according to the U.S. Census.
Sales are slowing because mortgage rates have risen sharply since the start of the year, with the biggest gains in April and early May. The average rate on the 30-year fixed mortgage started the year close to 3% and is now well over 5%.

“We used to get 10 to 15 offers on most houses,” said Lindsay Katz, a real estate broker at Redfin in the Los Angeles area. “Now I’m seeing between two and six offers on a house, a good house.”

Katz worked with Alexandra Stocker and her husband to sell their home. The Stockers were already worried that the red-hot housing market was suddenly chilling.
“We talked about that a lot. Like, are we making mistake here? Are we missing the boat? Is everything going to crash in the next three months and we’re going to kick ourselves for not selling our house earlier this year?” said Alexandra Stocker.
While home prices rose steadily during the first two years of the Covid pandemic, falling mortgage rates largely offset those increases.
For example: In May 2019, a buyer purchasing a $300,000 home with a 20% down payment and a 30-year fixed mortgage would get an average interest rate of around 4.33%. The monthly payment of principal and interest would be $1,192. In 2020, that same house was 5% more expensive, but mortgage rates fell to 3.41%, so the monthly payment actually dropped to $1,119.

Arrows pointing outwards

By 2021, the monthly payment was only up about $100. This month, with prices rising another 21%, and mortgage rates surging to around 5.5%, the monthly payment hit $1,991 – almost $800 a month more than it was in 2019.
While home sellers were in the driver’s seat barely six months ago, they are now seeing far less competition from buyers. A demand index from Redfin, which measures requests for home tours and other homebuying services, was down 8% year over year during the week ended May 15. This was the largest decline since April 2020, when the pandemic paused most homebuying activity.
“I met with sellers in February who are going to sell in June, and it’s a very different conversation in February than it will be in June because the market has completely changed,” said Katz.
The Stockers are thrilled they listed their home when they did. They are moving out of California and building a home in Washington state.
“We joke we might be getting out of here, you know, just at the right time,” said Alexandra Stocker. “I wouldn’t want to wait any longer.”
Correction: April sales of newly built homes, also measured by signed contracts, dropped a much wider-than-expected 16% compared with March, according to the U.S. Census. An earlier version misstated a month.

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Dollar Tree and Dollar General boosted their outlook for the year, as shoppers squeezed by inflation seek cheaper prices.
The companies are seeing people buying a different mix of merchandise than they were a year ago, when they had stimulus dollars in their pockets.
The dollar chains are also expanding while trying to strategize about ways to manage higher costs.

Dollar General and Dollar Tree stores
Getty Images

Shares of Dollar General and Dollar Tree popped Thursday, as the discounters beat Wall Street’s quarterly earnings expectations, raised outlooks for the coming year and spoke of consumers flocking to lower prices during inflationary times.
Dollar General shares rose 13.71% to close at $222.13 on Thursday. Dollar Tree shares jumped 21.87% to close at $162.80.

The two retailers said they see opportunity to grow as Americans weigh value more heavily in their purchasing decisions, whether buying groceries or seasonal decor.
“We’re already starting to see our core customers start to shop more intentionally,” Dollar General CEO Todd Vasos said on a call with analysts. “And we’re starting to see that next tier of customers start to shop with us a little bit more as well.”  
Dollar Tree Executive Chair Rick Dreiling listed the many challenges that consumers are facing, from the highest levels of inflation since the early 1980s to record high gas prices and uncertainty from current events such as the Ukraine war and the pandemic. He added that many consumers “are living paycheck to paycheck.”

“In tough times, value retail can be part of the solution to help families stretch their dollars to meet their evolving needs,” he said.
Dollar General and Dollar Tree beat expectations on fiscal first quarter earnings, revenue and same-store sales.

Dollar Tree, which includes the Family Dollar banner, said it now expects net sales for the year to range from $27.76 billion to $28.14 billion compared with its previous expectations between $27.22 billion to $27.85 billion. 
Dollar General said it expects net sales growth of about 10% to 10.5% compared with its previous expectation of about 10%. It raised its same-store sales forecast to growth of approximately 3% to 3.5% compared with its previous expectation of 2.5%.
Here are three major takeaways from the two discounters fiscal first-quarter earnings reports:

A different merchandise mix

Shoppers are still coming to stores, but are buying different items. Food is a bigger part of baskets and drove sales for Dollar General and Dollar Tree in the fiscal first quarter.
A year ago, consumers had extra dollars from stimulus checks and child tax credits. That meant some sprang for impulse items or discretionary purchases. Those dollars have disappeared and other budget items, such as groceries and gas, have become pricier.
Vasos said same-store sales at Dollar General dropped in each of the seasonal, apparel and home products categories in the fiscal first quarter, but more consumables sold. Overall, same-store sales dropped 0.1% versus the year-ago period, besting the 1.3% decline anticipated by analysts, according to FactSet.
At Dollar Tree, carbonated beverages, salty snacks and cookies were some of the items that surged in popularity — especially as the retailer expanded its food and beverage assortment. The company is the parent of Family Dollar, a banner that skews more heavily to food compared with the namesake banner.
“We believe that’s a traffic driver and as the customers experience the items and appreciate the value we’re giving them, over time we believe that that will help drive traffic into the overall store, not just those categories,” Dollar Tree CEO Michael Witynski told analysts.
Sales patterns at the companies echoed those at Walmart and Target, two companies that also saw a shift toward groceries and away from general merchandise in the fiscal first quarter.

Seizing the moment

Even before inflation jumped to a four-decade high, Dollar Tree and Dollar General had plans for larger store footprints, expansion into new categories and strategies to woo more customers. The retailers doubled down on that on Thursday — saying the challenged economic backdrop makes the time right and the offerings more compelling.
Dollar General, which has more than 18,000 stores, will open 1,100 new locations this year. It will expand its new store concept, PopShelf, and press ahead with the addition of more health-related merchandise. And it will go global by opening up to 10 stores in Mexico by the end of this year.
The company is going bigger with its stores, too. About 800 of the new locations will be its larger format of 8,500 square feet, with extra aisles for health and beauty items and coolers that hold produce or other groceries, Chief Financial Officer John Garratt told analysts on the call.
Dollar General is adding more end caps and displays that emphasize its cheaper private label and its $1 items, Vasos said. He said the company has “seen an acceleration in our private brand business” in recent weeks.
Dollar Tree, which includes more than 15,500 stores, is opening 590 stores this year. It is adding a larger range of goods by raising the price of $1 items to $1.25 and adding merchandise with a $3 and $5 price tag. And it has brought in new executives to turn around its Family Dollar banner.

Managing higher costs

Dollar Tree and Dollar General weren’t immune to higher costs in the first quarter, and some investors have raised concerns about whether they can keep prices low without hurting profits.
So far, the retailers have managed to beat Wall Street’s earnings expectations despite higher prices of fuel, freight and more. That’s something that Walmart and Target did not do.
Vasos said Dollar General can trade to other items or trade down in sizes if particular goods rise in price. He said the company is closely managing inventory to avoid a high level of markdowns and excess items that don’t sell.
Dollar General has a few other cost-saving and profit-driving measures underway, too. It added self-checkout to more than 8,000 stores as of the end of the first quarter. It plans to turn about 200 stores into self-checkout only this year. It is more than doubling its private fleet of trucks from 2021, so they account for about 40% of its outbound transportation fleet by the end of the year. And it is carrying more health care products, such as cough and cold medication, which have better margins than food.
At Dollar Tree, a price hike has been a big boost for profitability. The retailer announced last year that it would raise the price of dollar items by a quarter. It is rolling out $3 and $5 items to more stores, too.
Witynski said that wider range of price points means new sales opportunities in key seasons, such as the holidays. He said Dollar General had strong sales around Easter and Valentine’s Day and anticipates a similar dynamic in the back half of the year with back-to-school, Halloween and the holiday season.

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Gap dramatically slashed its profit outlook for the year as a steep decline in Old Navy sales weighed on results for the fiscal first quarter.
The lower-income consumer, which is Old Navy’s target customer, is starting to feel pinched by inflation, Gap Chief Executive Officer Sonia Syngal told CNBC.
“We’re dealing with really volatile consumer signals — whether it was last year in Covid, or this year’s post-Covid behaviors,” said Syngal.

A customer lifts a shopping bag at an Old Navy Inc. store in San Francisco.
David Paul Morris | Bloomberg | Getty Images

Gap Inc. on Thursday slashed its profit guidance for the full year as it reported a decline in fiscal first-quarter sales, which were dragged down by its Old Navy business.
Shares fell around 13% after hours, after closing the day up 4%.

An imbalanced mix of clothing sizes, ongoing inventory delays and an uptick in price-lowering promotions put a dent in Old Navy’s performance during the quarter.
The lower-income consumer, which is Old Navy’s target customer, is starting to feel pinched by inflation, Chief Executive Officer Sonia Syngal told CNBC. Shoppers also have quickly shifted from buying up active clothes and fleece hoodies — Old Navy’s “sweet spot” — to looking for party dresses and office clothes, she said in a phone interview.
“We’re dealing with really volatile consumer signals — whether it was last year in Covid, or this year’s post-Covid behaviors,” said Syngal. “Over time, we’ll see customer preference for product types balanced out.”
The results from Gap signal a bigger divergence that is shaping up in the retail industry between those companies that cater to Americans with plenty of cash in their wallets and those that sell to cost-conscious shoppers who are seeking out deals.
As inflation heats up, the latter have been hit the hardest and have already started to curtail certain purchases. Meantime, the wealthiest consumers continue to splurge on expensive outfits, jewelry and luggage for summer vacations at stores including Nordstrom, Bloomingdale’s and Ralph Lauren.

In late April, Gap had warned of obstacles within the Old Navy business when it announced the departure of the unit’s chief executive officer, Nancy Green. Syngal has been helping to lead the discount apparel brand in the interim, as the company looks for a successor to Green.
For the fiscal year 2022, Gap now expects to earn between 30 cents and 60 cents per share, on an adjusted basis. That’s down from a prior range of 1.85 and $2.05. And well below analysts’ expectations for $1.34 per share, based on Refinitiv data.
Chief Financial Officer Katrina O’Connell said that Gap revised its outlook to account for the “executional challenges” at Old Navy, an uncertain macroeconomic environment and inflationary cost pressures. Plus, a slowdown in China that is hurting Gap’s namesake brand.
Gap swung to a net loss in the three-month period ended April 30 of $162 million, or 44 cents per share, compared with net income of $166 million, or earnings of 43 cents a share, a year earlier.
Revenue fell roughly 13% to $3.48 billion from $3.99 billion a year earlier. That came in slightly ahead of expectations for $3.46 billion.
Gap said its sales figure was hit by an estimated 5 percentage points related to the retailer lapping a year-ago lift from stimulus checks, in addition to roughly 3 percentage points from divestitures, store closures and transitioning its European business to a partnership model.
Overall, same-store sales fell 14% from the prior year, more than the 12.2% drop that analysts had been looking for. Within that figure, Gap said its online sales declined 17% and in-store sales dropped 10% versus last year.
Here’s a breakdown of same-store sales performance, by brand:

Gap: Down 11% year over year
Old Navy: Down 22% year over year
Banana Republic: up 27% year over year
Athleta: down 7%

Gap’s executives also acknowledged Thursday that a recent push to sell more plus-size items at Old Navy resulted in the retailer not carrying enough of its core sizes for customers, and too much of the extended sizes that weren’t being purchased.
“Our hindsight is that maybe with the inclusive sizing launch, we had gotten away from really messaging, the core of what works for Old Navy, which is that value messaging,” CFO O’Connell told CNBC in a phone call. “We really are trying to go back to that.”
Gap’s total inventories as of April 30 were up 34% compared with the prior year.
Those levels will start to come down throughout the year, O’Connell said, but could remain elevated in the second quarter.
“Our inventory levels were significantly higher than we had hoped,” O’Connell said, adding that nearly half of the unwanted increase was due to prolonged transit times that she expects aren’t getting better anytime soon.

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