Business

When your columnist first started writing Schumpeter in early 2019, he had a romantic idea of travelling the world and sending “postcards” back from faraway places that chronicled trends in business, big and small. In his first few weeks, he reported from China, where a company was using automation to make fancy white shirts; Germany, where forest-dwellers were protesting against a coal mine; and Japan, where a female activist was making a ninja-like assault on corporate governance. All fun, but small-bore stuff. Readers, his editors advised him, turn to this column not for its generous travel budget but for its take on the main business stories of the day. So he pivoted, adopting what he called the Linda Evangelista approach. From then on, he declared, he would not get out of bed for companies worth less than $100bn. More

To become a millionaire, start with a billion dollars and launch an airline. Usually attributed to Richard Branson, a British entrepreneur, the line gets at the truth that the aviation business is capital-hungry and failure-prone. Still, that did not deter Rahul Bhatia, a travel agent, and Rakesh Gangwal, a former airline chief. They started as mere millionaires, and today are among the richest 500 people in the world, with a combined net worth of $13.3bn, according to Forbes, a compiler of lists. More

Paramount’s special committee on Wednesday said it would extend by 15 days an agreed-upon “go shop” period of its merger agreement with Skydance as it reviews a competing offer from Edgar Bronfman Jr.
The committee said that during the initial “go shop” period it contacted more than 50 third parties to gauge potential acquisition interest.
The Skydance buying consortium, which also includes private equity firms RedBird Capital Partners and KKR, agreed to invest more than $8 billion into Paramount and to acquire National Amusements.

Edgar Bronfman, Jr.
Cameron Costa | CNBC

The future of Paramount Global is still uncertain.
Paramount’s special committee on Wednesday said it would extend by 15 days an agreed-upon “go shop” period of its merger agreement with Skydance as it reviews a competing offer from Edgar Bronfman Jr.

Bronfman initially offered $4.3 billion late Monday for Shari Redstone’s National Amusements, the controlling shareholder of Paramount, according to a person familiar with the bid. As part of the bid, Bronfman would acquire a minority stake in Paramount. However, after placing the bid, Bronfman raised more funds to support a higher bid, said the person, who asked to remain anonymous to speak about specifics of the offer.
On Wednesday, Bronfman upped the bid and submitted a revised offer of $6 billion, the person said.
The offer looks to supersede Paramount’s merger agreement with Skydance Media, which came in early July and capped off a monthslong negotiation process. The agreement included a 45-day “go shop” period during which Paramount could solicit other offers.
A representative for Bronfman declined to comment.
The special committee on Wednesday confirmed “the receipt of an acquisition proposal from Edgar Bronfman, Jr., on behalf of a consortium of investors.”

“As a result, the ‘go shop’ period is extended for the Bronfman Consortium until September 5, 2024, pursuant to the transaction agreement to which the Company remains subject,” the committee said in a statement. “There can be no assurance this process will result in a Superior Proposal. The Company does not intend to disclose further developments unless and until it determines such disclosure is appropriate or is otherwise required.”
The committee added that during the initial “go shop” period it contacted more than 50 third parties to gauge potential acquisition interest. The go-shop period will still expire before midnight Wednesday for all other parties, the committee said.
The Skydance buying consortium, which also includes private equity firms RedBird Capital Partners and KKR, agreed to invest more than $8 billion into Paramount and to acquire National Amusements. The deal gives National Amusements an enterprise value of $2.4 billion, including $1.75 billion in equity.
As part of the Skydance deal, Paramount’s class A shareholders would receive $23 apiece in cash or stock, and class B shareholders would receive $15 per share, equating to a cash consideration totaling $4.5 billion available to public shareholders. Skydance also agreed to inject $1.5 billion of capital into Paramount’s balance sheet.
National Amusements owns 77% of Paramount’s class A shares, and 5% of class B shares. If the Skydance transaction were to close, it would wholly own class A Paramount shares, and 69% of the outstanding class B shares.
Bronfman’s initial bid proposed buying National Amusements in an equity deal valued at $1.75 billion. That offer included a $1.5 billion investment into Paramount’s balance sheet, like the Skydance deal, and also included covering the $400 million breakup fee that Paramount would owe Skydance if it walked away from the deal, according to the person familiar.
The sweetened bid made on Wednesday now includes $1.7 billion for a tender offer that would give non-Redstone, nonvoting Paramount shareholders the option to receive $16 a share, the person added.
Bronfman previously ran Warner Music and liquor company Seagram and has also served as executive chairman of Fubo TV since 2020. Details of his bid were first reported by The Wall Street Journal.
The merger agreement between Paramount and Skydance has drawn scrutiny from shareholders. Money manager Mario Gabelli reportedly filed a lawsuit looking for Paramount to turn over its books related to the Skydance deal — a possible first step toward a lawsuit challenging the deal. Investor Scott Baker reportedly sued to block the deal, arguing it would cost shareholders $1.65 billion. More

As he screeches around corners at wildly unsafe speeds, one of the designers of the Jidu Robocar 07 calmly talks your correspondent through how the electric vehicle (EV) works. An alluring feature is its entertainment system—on which he is competing in a race-car game (thankfully, the actual car is stationary). Many of the EV’s features are controlled by voice command and there are almost no buttons or knobs. It has autonomous-driving functions, a sporty design and, its maker claims, can travel 900km on a single charge that takes 12 minutes. When it goes on sale in early September, it is expected to cost just 220,000 yuan ($30,850). “It’s the future of driving,” the designer says, right as he smashes his virtual race car into a railing. More

Peloton and Planet Fitness are expanding their investments in strength over cardio equipment as more women and young people opt for weights at the gym.
Planet Fitness changed its gyms up to focus on strength workouts and noted that strength equipment tends to be less expensive.
Peloton is now testing whether strength training could be part of its way forward with a new beta app.

Shauntil Cox lifts weights with the help of her trainer, Deano Troost, at a Planet Fitness in New Caney, Texas, on Sept. 19, 2023.
Jason Fochtman | Houston Chronicle | Hearst Newspapers | Getty Images

A growing share of gym users is looking to build muscle, leading major fitness companies to refocus their efforts beyond cardio workouts.
In fact, building muscle was the No. 1 goal for 2024, ahead of weight loss and general movement, according to Life Time’s annual survey of 3,000 respondents.

Now, both Peloton and Planet Fitness are expanding their investments in strength.
Planet Fitness changed its mix of equipment and, earlier this month, Peloton launched testing for an app dedicated to strength workout plans called Peloton Strength+.
Finding that members over the past year consistently sought more strength and less cardio equipment, Planet Fitness shifted its fitness supply to meet interests, especially for its Gen Z patrons, who make up 25% of the company’s base, according to the company’s earnings conference call from the third quarter of 2023.
“Gen Z clearly seems to prefer strength and functional workouts versus cardio,” Chief Financial Officer Thomas Fitzgerald said. “Treadmills still get about the same use, but things like elliptical and bikes are getting far less use.”
Planet Fitness beat revenue expectations in its second-quarter earnings, and an emphasis on strength workouts helped the company get there. Fitzgerald said strength equipment costs less than cardio equipment, and areas for strength workouts tend to have more space for additional members to work out.

New York City-based strength-focused personal trainer Miriam Fried has noted a similar shift among women. She said a lot of her clients are women who previously did cardio or group fitness classes but have an interest in getting stronger.
“Over the last 10 years, since I’ve been a part of the fitness industry, I would say it’s definitely become a little more common for women to be strength training,” Fried said.

A Peloton exercise bike is seen after the ringing of the opening bell for the company’s initial public offering at the Nasdaq MarketSite in New York City, New York, on Sept. 26, 2019.
Shannon Stapleton | Reuters

Peloton is also testing whether strength training could be part of its way forward, as the company has faced growing concerns.
Peloton has previously said demand for its fitness equipment has been sluggish as consumers pull back on big-ticket items. The company has also said its strength training content, not its cycling or running classes, is the most popular type of class for digital members and the No. 2 among those who have Peloton hardware.
The company’s new app, Peloton Strength+, is designed for strength workouts at the gym rather than Peloton studios and will feature custom, instructor-led programming, according to the company.
Peloton will likely weigh in on that effort when the company reports earnings on Thursday.
Peloton’s new mobile strategy mirrors that of fitness app Ladder, which has delivered personalized strength training since 2020. CEO Greg Stewart said that although the company’s mobile workout subscription service launched in the middle of the Covid-19 pandemic, it has seen its “most explosive” growth in the past couple of years.
As a mobile-first product that focuses on strength training, Stewart said Ladder’s users are mostly women and people who invest in gym memberships to access equipment.
“We’re 70% women members in our app, so as strength training has become more popular and in demand, we’ve certainly benefited from that,” Stewart said.
According to Stewart, 65% of Ladder’s users are taking the app to the gym weekly to use the equipment there. While products during the pandemic focused on home fitness consumers, he said gymgoers are now an untapped potential in the industry.
“Most companies in our space haven’t really focused on that user, even though it’s a huge audience, 65 million in gym memberships in the U.S. … It’s a big, meaningful audience that’s motivated and excited and committed financially to their workout routine,” Stewart said.

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Target CEO Brian Cornell said there’s no room for price gouging in the competitive retail landscape.
Cornell was asked whether the tactic boosted Target’s profits, after Democratic presidential candidate Kamala Harris outlined a plan to stop price gouging.
He spoke to CNBC after Target beat quarterly earnings expectations.

There’s no room for price gouging in a ultra-competitive business like retail, Target CEO Brian Cornell said on Wednesday.
In an interview on CNBC’s “Squawk Box,” the retail chief disputed campaign talking points accusing grocers of inflating prices. He said retailers have to be responsive to customers or risk losing business.

He was asked by CNBC’s Joe Kernen, who referred to comments by Democratic presidential candidate Vice President Kamala Harris and asked if Target or its competitors ever benefit from price gouging. Harris last week proposed the first-ever federal ban on “corporate price-gouging in the food and grocery industries,” saying some companies are charging excessively and fueling household inflation.
“We’re in a penny business,” Cornell responded, noting the small profit margins in the retail industry. He described the many places that customers can turn to check for lower prices or to find merchandise elsewhere, from going to stores to browsing on their phones to compare the prices of a gallon of milk at different retailers.
Target’s retail chief made the comments after the discounter beat Wall Street’s expectations for earnings and revenue on Wednesday, but struck a cautious note with its full-year guidance. It said it expects comparable sales, which take out the impact of store openings and closures, to be on the lower side of its range of flat to up 2%. Yet it raised its profit guidance, saying it expects adjusted earnings per share to range from $9 to $9.70, up from the previous outlook of $8.60 and $9.60.
Inflation and consumers’ outrage about high prices has continued to loom large for companies like Target. A wide range of retailers, including Home Depot, Walmart and Macy’s, have reported over the past two weeks that cautious consumers are being picky about where they’re spending.
Cornell said on “Squawk Box” that the retailer is trying to appeal to “a consumer who is managing their budget carefully” and said “value is in our DNA.”

Target is one of the consumer brands that has responded to shoppers’ concerns by lowering prices. It cut prices on about 5,000 everyday items, such as diapers and peanut butter, to try to drive higher traffic and sales. Others, such as McDonald’s, have debuted value meals.
So far, those discounts have shown signs of resonating at Target: In the quarter, customer traffic across Target’s stores and website rose 3% — even as shoppers put a little less in their shopping carts than they did a year ago.
Walmart CEO Doug McMillon said last week that prices have come down in many merchandise categories, but said that inflation “has been more stubborn” in the aisles that carry dry groceries and processed foods.
On an earnings call with investors, he said some brands “are still talking about cost increases, and we’re fighting back on that aggressively because we think prices need to come down.” More

Vehicle production at the new plant in Tennessee was initially expected to begin next year.
The company said it still expects to begin battery cell production at the site in 2025.
Ford CFO John Lawler said the shifts are meant to better deliver a capital-efficient, profitable electric vehicle business.

DETROIT – Ford Motor is delaying production of a new plant in Tennessee to produce a next-generation all-electric pickup truck and canceling plans for a three-row electric SUV, the company said Wednesday.
Instead, Ford said it will prioritize the development of hybrid models, as well as electric commercial vehicles such as a new electric commercial van in 2026, followed by two EV pickup trucks in 2027.

The pickups are expected to be a full-size truck, which will be produced at the Tennessee plant that’s currently under construction in 2027, and a new midsize pickup.
The actions are meant to better deliver a capital-efficient, profitable electric vehicle business, said Ford CFO John Lawler. But, in the short-term, they will cost the company.
Ford said it will incur a special non-cash charge of about $400 million for the write-down of certain product-specific manufacturing assets, including the cancellation of the three-row SUV.
The company said the changes may also result in additional expenses and cash expenditures of up to $1.5 billion. Ford will reflect those in the quarter in which they are incurred, as a special item.
Vehicle production at the new $5.6 billion Tennessee site was initially expected to begin next year. The company said it still expects to begin battery cell production at the site in 2025.

The changes are the latest for Ford amid slower-than-expected adoption of EVs as well as automakers not being able to profitably produce the vehicles.
The new plans come roughly five months after Ford said it would delay production of the three-row SUV and next-generation pickup, codenamed “T3.”
This is breaking news. Please check back for additional updates. More

Macy’s beat quarterly earnings expectations but it cut its sales forecast for the full year.
The company is trying to turn around its business as it closes about 150 namesake stores.
Beauty brand Bluemercury was once again Macy’s best performing segment.

Macy’s logo is seen on a store in Manhattan, New York, United States of America, on July 5th, 2024. 
Beata Zawrzel | Nurphoto | Getty Images

Macy’s cut its full-year sales forecast Wednesday, as the department store operator said it is contending with selective shoppers and more promotions.
The retailer posted a mixed quarter, as it topped Wall Street’s earnings expectations but missed on revenue.

Macy’s said it now anticipates net sales of between $22.1 billion and $22.4 billion, which is lower than the $22.3 billion to $22.9 billion range it had previously anticipated. That also would be a year-over-year decline from the $23.09 billion it reported in fiscal 2023.
Macy’s expects comparable sales, which take out the impact of store openings and closures, to range from a decrease of about 2% to a decline of about 0.5%. It had previously expected comparable sales to range from a decline of about 1% to a gain of 1.5%. That metric includes owned and licensed sales, which encompasses merchandise that Macy’s owns and items from brands that pay for space within its stores, along with Macy’s third-party online marketplace.
The department store operator said in a news release that the new outlook range “gives the flexibility to address the ongoing uncertainty in the discretionary consumer market.”
In an interview with CNBC, CEO Tony Spring said customers aren’t spending as freely across all of Macy’s brands — even higher-end department store Bloomingdale’s.
“We see that there is definitely a softness, a carefulness, a delay in the conversion of purchasing,” he said. “And people on the things that they want, the things that are priced sharply, on the newness, they’re responding, but even the affluent consumer is not spending like they were a year ago.”

He said “there’s a lot of noise out there,” which is distracting customers or causing them to hold off on spending, including higher interest rates, inconsistent weather patterns and a busy news cycle.
Here’s what Macy’s reported for the fiscal second quarter compared with what Wall Street expected, based on a survey of analysts by LSEG:

Earnings per share: 53 cents adjusted vs. 30 cents expected
Revenue: $4.94 billion vs. $5.12 billion expected

Shares fell about 8% in premarket trading.
The iconic department store is pushing to get back to steadier footing and sustained growth. Spring announced in February that the retailer would shutter about 150 – or nearly a third – of its namesake stores and invest in the roughly 350 locations that remain. It plans to close the locations by early 2027. 
It is also opening new, smaller Macy’s stores in suburban strip malls and adding new locations of its better-performing brands, Bloomingdale’s and Bluemercury.
Yet Macy’s results in the recent quarter revealed its struggles to pull off that comeback at a time when consumers have been pickier about purchases – especially items that are wants rather than needs. 
Net sales fell from $5.13 billion in the year-ago period.
The namesake Macy’s brand continued to be the company’s weakest performer. Comparable sales fell 3.6% on an owned-plus-licensed basis, including the third-party marketplace. 
At Bloomingdale’s, comparable sales declined 1.4% on an owned-plus-licensed basis, including the third-party marketplace. And Bluemercury comparable sales rose 2%, marking the 14th consecutive quarter of comparable sales growth for the beauty brand.
In the three-month period that ended Aug. 3, Macy’s net income was $150 million, or 53 cents per share, compared with a loss of $22 million, or 8 cents per share, in the year-ago period.
Yet even when excluding the weaker stores that Macy’s is shutting, sales were lackluster. Comparable sales for its go-forward namesake brand – which includes the Macy’s stores that will remain open and online sales – declined 3.3% on an owned-plus-licensed basis, including the third-party marketplace. 
Macy’s stressed it has made progress in its turnaround plan, which it unveiled in February soon after Spring stepped into the company’s top role. At the first 50 of its stores to get additional investment, comparable sales were up 1% on an owned-plus-licensed basis. It marked the second consecutive quarter of positive comparable sales at those stores since the plan started.
Spring said those 50 stores have outperformed Macy’s other locations, even in hard-hit categories like handbags. He said the company will share its plans for expanding the strategy beyond those stores in the fourth quarter, but it’s already decided it will bulk up staffing in the women’s shoes and handbags departments at more of its locations because of the customer response.
Along with a choppy sales environment, Macy’s leaders had also faced a bid by an activist group to take the company private. Macy’s said last month that its board had unanimously decided to end negotiations with Arkhouse Management and Brigade Capital.
Shares of Macy’s closed on Tuesday at $17.74, bringing the company’s market cap to $4.9 billion. As of Tuesday’s close, the company’s stock is down about 12% so far this year. That trails behind the approximately 17% gains of the S&P 500 during the same period.
This is breaking news. Please check back for updates. More