Business

Boeing’s first-quarter sales and revenue missed analysts’ estimates.
The manufacturer says it is pausing 777X production and that it doesn’t expect deliveries to start until 2025.
The company said it’s ramping up 737 Max output to 31 a month in the second quarter.

A Boeing Co. Dreamliner 787 plane with AirEuropa livery moves past the company’s final assembly facility in North Charleston, South Carolina, U.S., on Tuesday, Dec. 6, 2016.
Travis Dove | Bloomberg | Getty Images

Boeing reported a wider adjusted quarterly loss and lower revenue than analysts expected as the company faced higher costs on both commercial and defense aircraft and charges tied to the war in Ukraine.
The manufacturer said it will pause production of its 777X plane, which has not yet been certified by U.S. regulators, through 2023, a plan the company says will create $1.5 billion in abnormal costs starting in the second quarter.

Boeing also doesn’t expect deliveries of the plane to start until 2025, more than a year later than it previously forecast. Its shares were down more than 4% in premarket trading after reporting results Wednesday morning.
Boeing has enjoyed a resurgence in demand for its 737 Max plane, which returned to service in late 2020 after two fatal crashes. But production problems and certification delays have hampered other aircraft programs.
“Through our first-quarter results, you’ll see we still have more work to do; but I remain encouraged with our trajectory, and we are on track to generate positive cash flow for 2022,” Boeing CEO David Calhoun said in a note to employees Wednesday. “We are a long-cycle business, and the success of our efforts will be measured over years and decades; not quarters.”
Boeing said it submitted its Dreamliner certification plan to the Federal Aviation Administration, a step toward getting regulators to sign off on resuming deliveries of the wide-body jets. Those handovers to customers have been suspended for most of the last 18 months, and buyers like American Airlines said they scaled back some international flying in response.
The company posted a net loss of $1.2 billion in the first quarter, wider than the $561 million loss it posted a year earlier. Revenue of $13.99 billion fell 8% from the first quarter of 2021 and short of analysts’ estimates.

The company recorded a host of charges, including $212 million pretax tied to the Ukraine war. It also reported a $660 million charge on delays and higher costs for the Air Force One program and $367 million on the T-7A Red Hawk program.
Here’s how Boeing performed in the first quarter compared with analysts’ estimates compiled by Refinitiv:

Adjusted results: A core loss of $2.75 a share vs. an expected loss of 27 cents a share.
Revenue: $13.99 billion vs. $16.02 billion, expected.

The company said it’s ramping up 737 Max output to 31 a month in the second quarter. It delivered 95 planes in the first quarter, up from 77 in the same period last year, but revenue in its commercial aircraft unit fell 3% from last year to $4.16 billion as 787 Dreamliner deliveries remained halted.
Boeing reported negative operating cash flow for the quarter, but still expects to be cash flow positive in 2022.
Shares of Boeing are down 17% so far this year through Tuesday’s close, outpacing the S&P 500’s 12.4% drop.
The manufacturer’s executives will hold a call with analysts at 10:30 a.m. ET.

WATCH LIVEWATCH IN THE APP More

Sustainable Energy

Sustainable Energy
TV Shows

Bill Winters acknowledges most people would subscribe to a “just transition.”
“The idea that we can turn off the taps and end fossil fuels tomorrow, it’s obviously ridiculous and naive,” Winters says.
“First of all, it’s not going to happen and secondly, it would be very disruptive,” he adds.

Fossil fuels are ingrained in the global energy mix and companies continue to discover and develop oil and gas fields at locations around the world.
Imaginima | E+ | Getty Images

LONDON — The CEO of Standard Chartered believes it’s “ridiculous and naive” to think fossil fuel production can be immediately halted without any consequences, stating that while it might be good for the climate, it would have other negative effects.  
In comments made during an interview with CNBC’s Geoff Cutmore at the City Week forum in London on Monday, Bill Winters acknowledged most people would subscribe to what he called a “just transition.”

“Those are two really important words … just means fair, it also means implementable,” he said. “And transition means transition — it means it takes some time.”
“The idea that we can turn off the taps and end fossil fuels tomorrow, it’s obviously ridiculous and naive,” Winters said. “Well, first of all, it’s not going to happen and secondly, it would be very disruptive.”
It would be good for climate change, Winters went on to state, but “bad for wars, revolutions and human life because you’d have … havoc.” The “ultimate divestment option” needed to be taken off the table, he argued.
Winters’ comments come at a time when use of the term “just transition” has become increasingly common in discussions related to climate change, energy, the environment and sustainability.
The topic is a complex one and the term itself has been defined in a number of ways. The environmental group Greenpeace, for example, has described it as “moving to a more sustainable economy in a way that’s fair to everyone — including people working in polluting industries.”

Read more about clean energy from CNBC Pro

A major bank with a presence in 59 markets, Standard Chartered is listed in London and Hong Kong. It has laid out plans to hit net-zero carbon emissions from its financed activity by the middle of the century.
According to Standard Chartered, its total on and off balance sheet net exposure to the oil and gas industry was just over $20.65 billion in 2021.
From A to B
Achieving any sort of meaningful change in the planet’s energy mix represents a huge task.
Fossil fuels play a crucial role in developed and emerging economies and companies continue to discover and develop oil and gas fields at locations around the world.
Any transition to an energy system and economy centered around renewables and low-carbon technologies will require a vast amount of money.
Alongside the huge levels of expenditure required, this kind of shift will also radically transform the way billions of people live and work.
For his part, Winters said “we’ve got to transition” but posed the question of how this could be best achieved.
“How do you balance that,” he said. “What’s the … best way to get from point A to point B while ensuring that you’re bringing as many of the emitters of the world along with you?”  
It did no good to “put a system in place where people just check out,” he said, going on to explain how he viewed the reality of the situation on the ground.

More from CNBC Climate:

“In many of the markets, in emerging markets that Standard Chartered serves, if we tell them that … one, we’re about to screw you and [two] you’re going to have to pay for it well, they’re going to say fine … we’re not going to be part of that system.”
This served nothing, Winters said. “Rather, we … need to bring them along in the most constructive way — oil companies are part of that.”
“Some of the biggest funders of both the technology changes that we’re talking about and the protection of existing carbon sinks are the existing fossil fuel producers,” he said.
“Why would we not allow them to redeploy some of their shareholder capital — and in fact, a lot of their shareholder capital — into the things that can make a big difference? I for one would support that at every opportunity.”
A big debate
Winters’ remarks will raise eyebrows and provoke disquiet from climate activists and campaign groups who are pushing for an abrupt end to the fossil fuel era.
They also come as high-profile bodies such as the International Energy Agency are addressing the role fossil fuels should play going forward.
In 2021, the Paris-based organization said there should be “no investment in new fossil fuel supply projects, and no further final investment decisions for new unabated coal plants.”Alongside the IEA, the United Nations’ Intergovernmental Panel on Climate Change’s latest report has also weighed in on the subject of fossil fuels.
“Limiting global warming will require major transitions in the energy sector,” the IPCC said in a news release accompanying its publication.
“This will involve a substantial reduction in fossil fuel use, widespread electrification, improved energy efficiency, and use of alternative fuels (such as hydrogen),” the IPCC said.
Commenting on the report, U.N. Secretary General Antonio Guterres pulled no punches.
“Climate activists are sometimes depicted as dangerous radicals,” he said. “But the truly dangerous radicals are the countries that are increasing the production of fossil fuels.”
“Investing in new fossil fuels infrastructure is moral and economic madness,” Guterres said. 
“Such investments will soon be stranded assets — a blot on the landscape and a blight on investment portfolios.” More

Credit Suisse has told CNBC that U.S. authorities will “absolutely not” find any evidence of wrongdoing as it faces a probe on its compliance with sanctions on Russian oligarchs.
The Swiss bank allegedly asked investors to “destroy and permanently erase” documents related to a portfolio of loans backed by yachts and jets potentially belonging to Putin’s inner circle.
“[It] has nothing to do with destroying materials related to sanctions,” Gottstein told Geoff Cutmore.

“Queen K,” a luxury yacht owned by Oleg Deripaska, one of a number of Russian oligarchs who reportedly had to terminate private jet leases with Credit Suisse amid previous U.S. sanctions.
Anadolu Agency | Anadolu Agency | Getty Images

Credit Suisse told CNBC Wednesday that U.S. authorities will “absolutely not” find any evidence of wrongdoing as it faces a probe on its compliance with sanctions on Russian oligarchs.
The Swiss bank is under investigation by the House Oversight Committee over allegations that it asked investors to “destroy and permanently erase” documents related to a portfolio of loans backed by yachts and private jets potentially owned by sanctioned Russian oligarchs.

Credit Suisse allegedly sent the request to investors following a report first surfaced by the Financial Times that it had offloaded the risks relating to $2 billion of loans to a group of hedge funds.
CEO Thomas Gottstein said Wednesday that the letter received by investors had “nothing to do” with sanctions or loans belonging to members of President Vladimir Putin’s inner circle.
“[It] has nothing to do with destroying materials related to sanctions,” Gottstein told CNBC’s Geoff Cutmore.
“This was a one-off transaction, which was very much a continuation of three other securitized transactions we did before,” he continued.

“It was part of our dealing with private placement investors, institutional investors, and there were absolutely no materials in there that were relevant from a sanctions perspective.”

Asked whether the bank had any case to answer, Gottstein said “absolutely not.”
According to the FT, the request letters were sent during a week in which the U.S., U.K. and EU launched a fresh wave of sanctions against Russia over its unprovoked invasion of Ukraine.

Russian business

Gottstein also defended the bank’s position on Russian business, saying that like other major Wall Street and European banks it was winding down its operations there in the wake of the war.
“As everybody else, we are winding down our Russia business,” he said, reiterating an announcement made last month.

A sign above the entrance to the Credit Suisse Group AG headquarters in Zurich, Switzerland, on Monday, Nov. 1, 2021.
Thi My Lien Nguyen | Bloomberg | Getty Images

Going forward, Gottstein said the bank would not be taking on “any new business, any new clients” from Russia, while also continuing to wind down its exposure to existing Russian clients.
“Our total exposure to Russian clients — that includes Russian clients all over the world, not only the Russian clients in Russia — and we have been reducing this by 56% in terms of our credit exposure,” he said.
The remarks follow the release of Credit Suisse’s first quarter 2022 financial results Wednesday, in which it reported a net loss of 273 million Swiss francs ($283.5 million).
Russia-related losses accounted for 206 million Swiss francs of the losses, while the bank also took a hit of 155 million Swiss francs related to the Archegos scandal.
Gottstein has previously stated that roughly 4% of the assets the bank manages in its core wealth management business belong to Russian clients.
“We have roughly 4% of our assets under management in wealth management with Russian clients, be they Russian-domiciled or Russian nationals who live in the West,” Gottstein said, according to Reuters. That figure has not changed significantly since, the bank said in an update Wednesday.

WATCH LIVEWATCH IN THE APP More

You are looking to make a purchase, such as a new cellphone or a car, but you need some time to be able to pay the full amount. Or you might be taking out a new credit card, with no single purchase in mind. In both these situations, there’s one constant: your credit score. Think of it as that three-digit number that follows you everywhere you go.
“Your credit score is essentially a metric that financial institutions and other lenders use to evaluate how responsible you have been at borrowing money,” explains Priya Malani, founder and chief executive officer of Stash Wealth.

Your credit score comes into play when qualifying for credit cards, mortgages and personal loan rates. Credit scores are calculated using different scoring models (FICO vs. VantageScore) and by different credit companies such as Experian, Equifax and TransUnion. Most credit scores range between 300 and 850 — and the higher the number the lower your interest rate will be on your borrowings.
If you are looking to improve your score, there are a number of ways to move it higher. Watch the video above to learn more.
More from Invest in You:Here’s what your credit score means and how it impacts youHere’s a simple way to make a monthly budget and start saving money81% of U.S. adults are worried about a recession hitting this year, survey finds
SIGN UP: Money 101 is an 8-week learning course to financial freedom, delivered weekly to your inbox. For the Spanish version Dinero 101, click here.
CHECK OUT: How the Savvy Couple brings in $35,000/month or more in mostly passive income: ‘Last year, we did $425,000 in revenue’ with Acorns+CNBC
Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns. More

SpaceX launched a group of astronauts for NASA early Wednesday morning.
Crew Dragon capsule Freedom — carrying NASA astronauts Kjell Lindgren, Bob Hines, Jessica Watkins and Italian astronaut Samantha Cristoforetti — is on its way to the International Space Station.
Elon Musk’s company has now sent 26 people to orbit in less than two years.

A SpaceX Falcon 9 rocket carrying the company’s Crew Dragon spacecraft Freedom launches the Crew-4 mission from NASA’s Kennedy Space Center in Florida on April 27, 2022.
Aubrey Gemignani | NASA

SpaceX launched a group of astronauts for NASA early Wednesday morning, with Elon Musk’s company now having sent 26 people to orbit in less than two years.
The Crew-4 mission, the company’s seventh human spaceflight to date and fourth operational crew launch for NASA, reached orbit after launching from the agency’s Kennedy Space Center in Florida at 3:52 a.m. ET. A SpaceX Falcon 9 rocket carried the four astronauts to space in the company’s Crew Dragon spacecraft named Freedom.

“The SpaceX team executed beautifully,” Kathy Lueders, NASA associate administrator, said at a news conference after the launch.
SpaceX’s capsule — carrying NASA astronauts Kjell Lindgren, Bob Hines, Jessica Watkins and Italian astronaut Samantha Cristoforetti — is on its way to the International Space Station. This is the first spaceflight for Hines and Watkins, while it is the second for both Lindgren and Cristoforetti. SpaceX’s Freedom is scheduled to dock with the ISS about 16 hours after launch, at around 8:15 p.m. ET.

The Crew-4 astronauts, from left: Jessica Watkins, mission specialist; Bob Hines, pilot; Kjell Lindgren, commander; and Samantha Cristoforetti, mission specialist.
Kim Shiflett | NASA

The Crew-4 team will perform a full-duration mission on the ISS, spending about six months on board. The four will join the Crew-3 astronauts, who launched in November, briefly before the latter team’s Crew Dragon capsule Endurance undocks and returns to Earth.
Musk’s company launched Crew-4 less than 39 hours after returning the private astronaut crew of Axiom’s Ax-1, which splashed down in the Crew Dragon capsule Endeavour on Monday.
After the launch, SpaceX also landed the booster of its Falcon 9 rocket, which is the large, lower section of the rocket. This Falcon 9 rocket booster previously launched three missions, making this its fourth completed to date, and SpaceX plans to continue using it to launch future missions.

SpaceX developed its Crew Dragon spacecraft and fine-tuned its Falcon 9 rocket under NASA’s Commercial Crew Program, which provided the company with more than $3 billion to develop the system and launch six operational missions.
Commercial Crew is a competitive program. NASA also awarded Boeing $4.8 billion in contracts to develop its Starliner spacecraft — but that capsule remains in development due to an uncrewed flight test in December 2019 that experienced significant challenges.
NASA emphasizes that, in addition to giving the U.S. a way to send astronauts to space, SpaceX offers the agency a cost-saving option. The agency expects to pay $55 million per astronaut to fly with Crew Dragon, as opposed to $86 million per astronaut to fly with the Russians. NASA in 2020 estimated that having two private companies compete for contracts saved the agency $20 billion to $30 billion in development costs.

WATCH LIVEWATCH IN THE APP More

Japan has detected its first probable case of a mysterious liver disease that has so far affected over 170 children, largely in Britain.
Health experts are exploring its possible links to Covid-19 or a common virus known as adenovirus.
Of those infected, one child has died and 17 have required liver transplants.

Health experts are investigating the likely cause of a new children’s liver disease, which was first reported in the U.K. in January 2022, and whether it bears any connection to the coronavirus.
Fs Productions | Tetra Images | Getty Images

Japan has detected its first probable case of a mysterious liver disease that has so far affected over 170 children, largely in Britain, as health experts explore its possible links to Covid-19.
Japan’s Health Ministry said Tuesday that a child had been hospitalized with an unidentified type of severe acute hepatitis — or liver inflammation — in what is thought to be the first reported case in Asia.

As of April 23, at least 169 cases of the disease have been detected in 11 countries globally, according to the World Health Organization. The vast majority of those have been in the U.K. (114), followed by Spain (13), Israel (12) and the U.S. (9). The addition of Japan marks the 12th country to identify a case.
Of those infected, one child has died and 17 have required liver transplants.
The WHO said it is “very likely more cases will be detected before the cause can be confirmed.”

Health experts explore Covid links

Children aged five years old or younger have so far been the most widely affected by the disease, though cases have been detected in children aged one month to 16 years.
Common symptoms including gastroenteritis — diarrhea and nausea — followed by jaundice or yellowing of the skin and eyes.

Health experts are now investigating the likely cause of the outbreak, which was first reported in the U.K. in January 2022, and whether it bears any connection to the coronavirus.
Specifically, they are exploring if a lack of prior exposure to common viruses known as adenoviruses during coronavirus restrictions, or a previous infection with Covid-19, may be related. Alternatively, the genetic make-up of hepatitis may have mutated, resulting in an easier triggering of liver inflammation.
Crucially, experts say there is no known link to the Covid-19 vaccine.

Typically, children gain exposure — and immunity — to adenoviruses and other common illnesses during their early childhood years. However, pandemic restrictions largely limited that early exposure.
Eric Lalmand | Afp | Getty Images

A strain of adenovirus called F41 is so far looking like the most probable cause, according to the U.K. Health Security Agency.
“Information gathered through our investigations increasingly suggests that this rise in sudden onset hepatitis in children is linked to adenovirus infection. However, we are thoroughly investigating other potential causes,” Meera Chand, UKHSA’s director of clinical and emerging infections, said.
Adenovirus was the most common pathogen detected in 40 of 53 (75%) of confirmed cases tested in the U.K. Globally, that number was 74.
Covid (SARS-CoV-2) was identified in 20 cases of those tested globally. Adenovirus and Covid-19 co-infection was detected in 19 cases.
The new case from Japan tested negative for adenovirus and the coronavirus, though officials have not revealed other details.

What are the symptoms and how worried should we be?

Typically, children gain exposure — and immunity — to adenoviruses and other common illnesses during their early childhood years. However, pandemic restrictions largely limited that early exposure, leading to more serious immune responses in some.
Adenoviruses, which present cold-like symptoms such as fever and sore throat, are generally mild. However, some strains can display liver tropism, or a favoring of liver tissue, which can lead to more serious consequences like liver damage.
Just how serious this latest outbreak will be is not yet clear and will depend largely on how much it spreads over the coming months, according Dr. Amy Edwards, an assistant professor of pediatrics at the Case Western Reserve School of Medicine.

“Adenovirus is a ubiquitous virus and it’s not seasonal. If this is a more severe form of adenovirus that causes liver disease in children, that’s very concerning. But right now it’s isolated enough and few enough cases not to jump to conclusions,” she told CNBC.
Edwards said health authorities had been placed on alert and would be monitoring the situation.
In the meantime, parents and guardians should be alert to common signs of hepatitis, including jaundice, dark urine, itchy skin and stomach pain, and contact a health care professional if they are concerned.
“Normal hygiene measures such as thorough handwashing (including supervising children) and good thorough respiratory hygiene, help to reduce the spread of many common infections, including adenovirus,” UKHSA’s Chand said.
“Children experiencing symptoms of a gastrointestinal infection including vomiting and diarrhoea should stay at home and not return to school or nursery until 48 hours after the symptoms have stopped,” she added.

WATCH LIVEWATCH IN THE APP More

Cheaper gas is one of the perks Walmart is dangling to get customers to sign up for Walmart+.
The membership program already included a gas discount, but Walmart has doubled the savings per gallon and expanded the number of gas stations to more than 14,000.
The big-box retailer is flexing its low prices as a competitive advantage with inflation driving up the price of food and fuel.

The Walmart+ home screen on a laptop computer in Brooklyn, New York on Wednesday, Nov. 18, 2020.
Gabby Jones | Bloomberg | Getty Images

As prices climb at the grocery store and gas station, Walmart said Wednesday that it will offer deeper discounts on fuel to nudge more customers to join and renew Walmart+.
Chris Cracchiolo, senior vice president and general manager of the subscription service Walmart+, said the everyday expense is on the minds of many shoppers, “especially in this very high inflationary environment.” He said the retailer recently surveyed customers and about half said they were changing their behavior because of pricier fuel.

Walmart has looked to the subscription service, which launched about 18 months ago, as a way to expand its e-commerce business and encourage customers to boost store and website spending. It has also served as Walmart’s answer to Amazon Prime.
Walmart+ costs $98 per year, or $12.95 per month. It includes free shipping of online purchases, free grocery deliveries to the home for orders of at least $35, prescription discounts and other benefits.
With inflation at a four-decade high, Walmart is flexing its low prices as a competitive advantage. Walmart CEO Doug McMillon told CNBC late last year that the company would use inflation as an opportunity to win customers. Early this month, the company aired a new TV commercial that stressed Walmart as the place to find value at a time when “every day seems to get more and more expensive.”
That strategy carries over into Walmart+.
Starting Wednesday, Walmart+ members will be able to save up to 10 cents per gallon at more than 14,000 gas stations. The retailer already offered a fuel discount, but it has doubled the savings and increased the eligible gas stations more than sixfold through a partnership with Exxon Mobil.

Other companies, including Walmart-owned Sam’s Club, BJ’s Wholesale and Krispy Kreme, have also rolled out fuel-related discounts.
The national average for a gallon of regular gas cost $4.13 on Tuesday, according to AAA. That’s up more than 43% from the year-earlier pump price of $2.89.
Cracchiolo, who previously spent nearly two decades at American Express, said Walmart decided to expand that perk after looking at members’ fuel usage and hearing from both them and prospective members about the importance of that particular benefit.
Walmart does not share membership data publicly, but Cracchiolo said members are more lucrative and frequent shoppers than its nonsubscriber customers. What’s more, Walmart+ members spend more than twice as much with the company as the typical Walmart shopper, since they shop both online and in stores.
“We know Walmart+ customers are more loyal to Walmart,” he said. “They’re giving us a higher share of their overall wallet. They transact with us more frequently and spend more on average than nonmembers, and that behavior is really because we’ve developed that trust and they see value in the program.”
He added that the grocery part of the business is “at the core of how members shop with us.”
Over the past year, Walmart has added more perks to entice customers. It gave members first dibs on deals and exclusive access to coveted gaming consoles during the holiday season. It also threw a members-only sales event, and started offering high-demand delivery time slots, such as on weekend mornings, to members only. And, in March, it tossed in a free six months of Spotify Premium to Walmart+ members.
Walmart also announced last month that all store and warehouse workers would get free membership as an employee benefit, allowing them to share feedback and have personal experience when recommending Walmart+ to customers.
Scot Ciccarelli, a retail analyst at Truist Securities, said Walmart, the nation’s largest grocer, has an natural advantage over other companies with membership programs. He said consumers are less likely to cancel a program at a food retailer than they would for, say, a streaming service.
He said Amazon has shown the power of subscription services and how they drive purchases by making them fast and easy.
“The No. 1 thing you get from a subscription service if you get people to sign up is stickiness,” Ciccarelli said. “You’re kind of locked in. You’ve made the investment, you might as well use the service. Someone who was shopping with me two times a month, now maybe they’re shopping with me four or five times a month.”

WATCH LIVEWATCH IN THE APP More

The total number of consumer and retail deals in the first quarter of 2022 fell 31.9% from the prior period, global consultancy KPMG said in a report released Wednesday. Deal volume dropped 39.8%.
That marks somewhat of a stark reversal from recent trends, when the number of deals involving U.S.-based consumer and retail companies nearly matched pre-pandemic levels.
Kevin Martin, who heads KPMG’s U.S. Consumer and Retail division, tells CNBC that more businesses are setting their sights on 2023 to make their big move.

People shop at a grocery store in Monterey Park, California, on April 12, 2022. 
Frederic J. Brown | AFP | Getty Images

Supply chain headaches, surging interest rates and the war in Ukraine have combined to stifle IPOs and deal-making in the consumer and retail sectors so far this year.
The total number of consumer and retail deals in the first quarter tumbled 31.9% from the prior period, global consultancy KPMG said in a report released Wednesday. Deal volume shrank 39.8%.

That marks somewhat of a stark reversal from recent trends, when the number of deals involving U.S.-based consumer and retail companies nearly matched pre-pandemic levels.
The boom last year was fueled, in large part, by e-commerce growth in retail and a focus on health and wellness trends, KPMG said. In 2021, Levi Strauss & Co. bought Beyond Yoga, Wolverine World Wide acquired Sweaty Betty, and Crocs purchased Hey Dude. Retailers such as Allbirds, Warby Parker, On Running, Lulu’s, Brilliant Earth, ThredUp, Rent the Runway and A.K.A Brands — just to name a few — all started trading on public exchanges.
At the start of the year, consumer and retail industries had been poised to see a continued rapid expansion in deals and initial public offerings, said Kevin Martin, who heads KPMG’s U.S. Consumer and Retail division. But a volatile stock market and uncertainty about near-term consumer spending have given executives and investors pause, as has a span of underperformance from so-called direct-to-consumer darlings’ stocks relative to the broader market, including those of Warby Parker and Allbirds.
While Martin doesn’t predict deal activity is poised to pick up rapidly this year, he does see more consumer brands, retailers and private equity businesses setting their sights on 2023 instead. He expects the pet category, including pet-food makers, to be a focal point, along with the consumer alcohol sector.
Some retailers, meanwhile, could be pressured to sell off parts of their businesses. A few highly watched deals could come sooner rather than later. For example, home goods retailer Bed Bath & Beyond is reportedly in the midst of considering offers for its BuyBuy Baby business, including one from the private equity firm Cerberus Capital Management. Calls also are increasing for Gap to split its faster-growing Athleta division from its other brands.

“Companies are still pressing ahead as is — pedal to the metal in some cases — with the idea that by the time 2023 rolls around some of the concerns that we’re observing now globally will be moved on from them,” Martin said. “There will be pent-up demand.”
Retail and consumer businesses that have been reported to be pursuing an IPO include the online sneaker exchange StockX, Rihanna’s Savage X Fenty lingerie line, yogurt maker Chobani, e-commerce marketplace Zazzle and furniture brand Serena & Lily. Consumer private equity giant L Catterton also is reportedly considering an IPO.
Representatives from these businesses didn’t immediately respond to CNBC’s request for comment.

Inflation and supply chains are top of mind

Given the rapid rise in prices, Martin thinks one of the most realistic opportunities for deals, at least for the remainder of this year, could be tied to private-label food brands.
“It’s unclear how much of consumers’ disposable income or savings are going to be absorbed by the higher prices going forward,” he said. “So there are a lot of large consumer food-and-beverage companies that will look to either sell their private labels or acquire private labels,” in order to offer shoppers a less expensive option in grocery stores, he said.
A second opportunity for deal growth surrounds the supply chain problem, he said, as many businesses are still grappling with delayed shipments of either finished goods or materials from overseas coupled with sky-high transportation costs.
“Do you build something, or do you buy something in order to have a more local supply chain for your customer base? That’s going to be a driver of M&A activity and something that will accelerate over the rest of 2022,” he said.
In this vein, clothing retailer American Eagle Outfitters last year acquired two companies — one focused on distribution centers, the other on trucking — to help it build out a vertically integrated supply chain business that it’s now opening up to other retailers.
A third trend could stem from an amplified focus on ESG, or environmental social governance, said Martin, citing Win Brands Group’s recent acquisition of Love Your Melon, an outdoor lifestyle brand that gives 50% of its net income to nonprofits that fight pediatric cancer.
Notably, private equity deals were off the most in the first quarter, KPMG found, falling 51% from the fourth quarter of 2021. The Federal Reserve’s more aggressive approach to interest rates has proven to be one key deterrent, Martin said.
“The higher cost of capital impacts strategics or corporates in a big way,” he said. “And that does feed into their decision matrix around the types of return they’re going to get for an asset. And similarly, it impacts private equity … sometimes even in a bigger way.”
To be sure, Martin said there is still plenty of “dry powder” in the hands of consumer-focused private equity firms; they’re just taking time to seek out the best assets in a post-pandemic landscape. In addition to L Catterton, some firms that play in this space include Sycamore Partners, Bain Capital, Ares Management and Leonard Green & Partners.

WATCH LIVEWATCH IN THE APP More