Business

THE ROLE of Kweichow Moutai in Chinese society is complex. The state-owned company’s fiery, translucent baijiu is by far China’s favourite booze. It is one of the country’s oldest brands—a rare corporate survivor of the worst days of Maoism. Vintage cases fetch tens of thousands of dollars. In 2021 it was briefly worth a throat-scorching $500bn and in 2022 it eclipsed Tencent, a digital giant, to become for a time the most valuable Chinese listed company.Today its market capitalisation is half that. Some of the decline has to do with President Xi Jinping’s crackdown on graft, before which prized bottles of the sorghum-based firewater would often change hands in place of cash. When in 2020 state TV accused Moutai of benefiting from bribery, $25bn instantly evaporated from its market capitalisation. More

Walgreens reported fiscal third-quarter earnings that fell short of expectations and slashed its full-year adjusted profit outlook due to a “challenging” environment for pharmacies and U.S. consumers. 
The company topped revenue estimates for the quarter on strong performance in its health-care segment.
The results come as Walgreens works to slash costs by closing underperforming U.S. stores, among other efforts.

In an aerial view, a customer enters a Walgreens store on January 04, 2024 in San Pablo, California. 
Justin Sullivan | Getty Images

Shares of Walgreens plunged more than 14% on Thursday after the company reported fiscal third-quarter earnings that fell short of expectations and slashed its full-year adjusted profit outlook, citing a “challenging” environment for pharmacies and U.S. consumers.
The retail pharmacy giant now expects fiscal 2024 adjusted earnings of $2.80 to $2.95 per share. That compares with the company’s previous outlook of between $3.20 and $3.35 per share.

“‘We assumed … in the second half that the consumer would get somewhat stronger” but “that is not the case,” Walgreens CEO Tim Wentworth told CNBC. 
He added that “the consumer is absolutely stunned by the absolute prices of things, and the fact that some of them may not be inflating doesn’t actually change their resistance to the current pricing. So we’ve had to get really keen, particularly in discretionary things.” 
Still, Walgreens topped revenue estimates for the quarter on strong performance in its health-care segment. The company views that business division as critical to its ongoing push to transform from a major drugstore chain into a large health-care company. 
The results come as Walgreens works to slash costs after a rocky last year marked by low pharmacy reimbursement rates, weakening demand for Covid products and a challenging macroeconomic environment. 
The company on Friday said it is simplifying its U.S. health-care portfolio and finalizing plans to close underperforming U.S. stores over multiple years, among other ongoing cost-cutting efforts. 

“Seventy-five percent of our stores drive 100% of our profitability today,” Wentworth said. “What that means is the others we take a hard look at, we are going to finalize a number that we will close.”
Here’s what Walgreens reported for the three-month period ended May 31 compared with what Wall Street was expecting, based on a survey of analysts by LSEG:

Earnings per share: 63 cents adjusted vs. 68 cents expected
Revenue: $36.4 billion vs. $35.94 billion expected

Walgreens booked sales of $36.4 billion for the quarter, up 2.6% from the same period a year ago. 
The company reported net income of $344 million, or 40 cents per share, for the quarter. That compares with net income of $118 million, or 14 cents per share, for the same period a year ago.
Excluding certain items, adjusted earnings were 63 cents per share for the quarter. 
Walgreens did not provide a new revenue forecast for the fiscal year. The company has not offered that guidance since October, when it said it expected $141 billion to $145 billion in sales. 

Strong performance in health-care division 

Walgreens reported growth across its three business divisions in the fiscal third quarter. But the company’s U.S. health-care unit stood out, as sales jumped 7.6% compared with the same period a year ago. 
Revenue for the segment came in at $2.13 billion. Analysts had expected sales of $2.08 billion, according to estimates compiled by FactSet. 
The company said the higher sales reflect primary care provider VillageMD and specialty pharmacy company, Shields Health Solutions. Shields saw sales jump 24% during the period, driven by growth within existing partnerships.
Specialty pharmacies are designed to deliver medications with unique handling, storage and distribution requirements, often for patients with complex conditions such as cancer and rheumatoid arthritis.

Walgreens and VillageMD
Source: Walgreens

Those results come one quarter after Walgreens posted a steep net loss as it recorded a hefty nearly $6 billion charge related to the decline in value of its investment in VillageMD. The company now plans to shutter 160 VillageMD clinics, executives announced during the company’s fiscal second-quarter earnings call in March. 
“We are working with their management team to ultimately still be an investor, but meaningfully reduce our investment as well as gain some liquidity so that we can invest back in the retail pharmacy business that represents our future,” Wentworth told CNBC of the company’s investment in VillageMD.
Walgreens’ U.S. retail pharmacy segment generated $28.5 billion in sales in the fiscal third quarter, an increase of 2.3% from the same period last year. Analysts had expected sales of $28.34 billion, according to estimates compiled by FactSet. 
That segment operates more than 8,000 drugstores across the U.S., which sell prescription and nonprescription drugs as well as health and wellness, beauty, personal care, and food products.  
The company said that sales growth came entirely from comparable pharmacy sales and was partially offset by a decline in retail revenue.
Walgreens said pharmacy sales for the quarter rose 4.4% and comparable pharmacy sales increased 5.7% compared with the year-earlier period due to price inflation in brand medications and prescription growth. 
Total prescriptions filled in the quarter including vaccines totaled 306.4 million, a 0.5% increase from the same period a year ago. 

More CNBC health coverage

Retail sales for the quarter fell 4% from the prior-year quarter, and comparable retail sales declined 2.3%. The company pointed to a “challenging” retail environment, among other factors. 
Walgreens’ international segment, which operates more than 3,000 retail stores abroad, posted $5.73 billion in sales in the fiscal third quarter. That’s an increase of 2.8% from the year-ago period.
The company said sales from its U.K.-based drugstore chain, Boots, grew 1.6%.
Walgreens reportedly scrapped plans for a potential initial public offering of the subsidiary and is in informal talks with potential buyers, including private equity firms, Bloomberg News reported earlier this month.
But Wentworth said Walgreens has no plans to sell the chain.
“Right now, there’s no question Boots is a major contributor to us,” he told CNBC.
— CNBC’s Bertha Coombs contributed to this report.

Don’t miss these insights from CNBC PRO More

Private label wars have heated up as consumers look for value and unique items.
Walmart-owned Sam’s Club is trying to raise the quality of its private brand, Member’s Mark.
Chief rival Costco has a strong fan following of its own brand, Kirkland Signature.

Stuck at home during the Covid pandemic, Megan Crozier needed a way to keep her two young children entertained. She bought an inflatable pool from Sam’s Club.
The pool began leaking air after just a few uses.

For Crozier, chief merchant of the Walmart-owned membership club, that trashed pool — and the disappointment that came with it — helped kickstart a years-long effort to catch up with chief rival Costco and the popularity of its private brand, Kirkland Signature.
As Sam’s Club opens more locations, it is trying to raise the bar for its own brand, Member’s Mark. The label’s makeover has become critical for Sam’s Club as it aims to close the gap with Costco, which has roughly the same number of U.S. clubs but about twice as much annual revenue. Net sales for Sam’s Club totaled $86.2 billion in its most recent fiscal year, compared with $176.63 billion for Costco’s U.S. clubs.
Sam’s Club CEO Chris Nicholas told CNBC the brand’s revamp was inspired, in part, by the retailer’s chief rival.
“The club model survives because you have brilliant merchants focusing on creating or buying exceptional items,” he said in an interview. “Costco did such a great job of that over the years with Kirkland and we saw that be successful.”
The success of Member’s Mark will help determine how Sam’s Club fares as its expands, with plans to open more than 30 stores over the next four years. At least some stores will be in regions where potential customers belong to a competing club like Costco or B.J.’s Wholesale, or in areas where customers may need convincing to pay an annual membership to be able to shop.

Overtaking Costco and its beloved private label won’t be easy for Sam’s Club, said Michael Baker, a retail analyst for D.A. Davidson.
“Never say never,” he said. “Who knows? But I think it’s going to take a long time.”
But he added Costco’s success with Kirkland Signature created a formula that Sam’s Club can follow.
The popularity of Kirkland’s brand, which includes a diverse range of items like vodka, batteries and dress shirts, has helped to drive membership sign-ups and renewals. It is one of the features that Costco highlights when the retailer’s pitch to members.

In this photo illustration, Sam’s Club’s private label Member’s Mark is seen versus Costco’s Kirkland Signature label.
Natalie Rice | CNBC

Private label wars heat up

Sam’s Club has more reasons than its rivalry with Costco to step up its private label game.
The brands’ stigma of inferior quality or cheaper knockoffs of national name brands has faded as retailers including Kroger, Target and Walmart have introduced their own labels with unique flavors and exclusive items.
Baker credits Kirkland for helping with that since Costco launched the brand in 1995.
“They didn’t invent the idea of private label,” he said. “But I think what they changed or made revolutionary is that it can be a high quality product.”

Jordan Vonderhaar | Bloomberg | Getty Images

Other factors have turned the tide. Consumers experimented with new brands during the Covid pandemic when they couldn’t find their typical purchases on shelves. Some fast-growing grocers, including Trader Joe’s, Aldi and Lidl, have fueled growth almost entirely through their own brands. And stubborn inflation also pushed more consumers to buy a store’s own brand to save some bucks.
Sales of private label increased 34% between 2019 and 2023 to $236.3 billion, according to the annual report by the Private Label Manufacturers Association, which is conducted by market research firm Circana.
Exclusive offerings, such as products you can’t find anywhere else, are even more essential for clubs, which require shoppers to pay a membership fee. Annual fees cost $60 at Costco and $50 at Sam’s Club. Each also has a higher-tier membership: $120 at Costco and $110 at Sam’s Club. (Costco is widely expected to raise its annual fee soon, based on its history of doing so.)
At Sam’s Club, Member’s Mark accounts for roughly 30% of sales in terms of dollars and more than one-third of sales in terms of units. Kirkland accounts for about 28% of Costco’s annual sales.
Costco declined interview requests for this story.

Sam’s Club is trying to raise the quality of Member’s Mark. It showed off apparel, food and other items from the private brand to investors and reporters in early June at an event near its Bentonville, Ark. headquarters.
Melissa Repko | CNBC

A makeover for Member’s Mark

Over the past several years, Sam’s Club has consolidated its private labels from more than 20 different brands into a single one: Member’s Mark. It announced new goals for food and merchandise standards that it aims to reach in 2025, such as switching to antibiotic-free poultry and fair trade certified coffee beans.
And it recently launched a program that allows customers to help co-create Member’s Mark items by giving feedback on flavors, design and more before the retailer green lights an item for the shelf.
Nicholas said customers don’t hold back. “They are exacting, like, ‘Hey, this seam is not good enough or the stitching here needs to be better or this needs to be double stitched or you haven’t got enough lobster in your lobster mac [and cheese],'” he said.
Myron Frazier, Sam’s Club senior vice president of private brands and sourcing, said the company wants to turn Member’s Mark into a well-respected lifestyle brand. He said the store brand plans to go deeper in home categories, such as offering more indoor furniture and making its own line of small appliances.
To come up with popular items, he said merchants have sought out products that solve customers’ problems, such as easy meals like chicken rotisserie bites and mix-and-match kids’ clothing sets that can help parents on a hectic morning before school.

Like Costco’s Kirkland Signature, Sam’s Club has a private brand that cuts across categories including grocery, home decor and apparel. Its private brand, Member’s Mark, also carries seasonal items like patio sets and beach towels.
Melissa Repko | CNBC

Some signs indicate the moves are paying off. Sam’s Club does not share its membership number, but it has reported a record number of members in each consecutive quarter for more than a year.
Customer transactions rose 5.4% and the average ticket declined about 1% in the most recent quarter, which could point to shoppers opting more for Member’s Mark items. The products tend to cost less than national brands.
Nicholas said sales growth of the private brand has outpaced the rest of the store. He added that as its items gain popularity, the club gains leverage to push suppliers to lower prices or step up innovation.
On an earnings call last month, Walmart finance chief John David Rainey credited Member’s Mark for driving the quarter’s high single-digit growth and said it is “a growing reason why members join and renew.”
Product quality will help to determine whether the growth continues.
Since 2020, the year when Crozier’s pool broke, Member’s Mark has launched, tweaked and upgraded more than 1,200 items.
One of those reformulated items? Its inflatable pool.
Crozier said it works well now. And she added that Sam’s Club sells a lot of them.

Don’t miss these insights from CNBC PRO More

NASA will have a spacecraft from Elon Musk’s SpaceX guide the International Space Station’s destruction after its retirement in 2030.
The agency awarded an $843 million contract to SpaceX to build the so-called “U.S. Deorbit Vehicle.”
The SpaceX-built vehicle will effectively destroy the ISS by pushing the station into reentry from orbit.

A satellite image shows an overview of the International Space Station with the Boeing Starliner spacecraft, June 7, 2024.
Maxar Technologies | Via Reuters

NASA will have a spacecraft from Elon Musk’s SpaceX guide the International Space Station’s destruction later this decade, the agency announced Wednesday.
The National Aeronautics and Space Administration awarded an $843 million contract to SpaceX to build the so-called “U.S. Deorbit Vehicle.” The spacecraft will be designed to guide the football-field-sized research laboratory back into the Earth’s atmosphere after retiring in 2030.

The SpaceX-built vehicle will effectively destroy the ISS by pushing the station into reentry from orbit.
“It is crucial to prepare for the safe and responsible deorbit of the International Space Station in a controlled manner,” NASA said in a press release, with the U.S. Deorbit Vehicle needed to “ensure avoidance of risk to populated areas.”

SpaceX’s Dragon crew capsule “Endeavour” seen from the International Space Station on May 2, 2024.

NASA did not specify whether SpaceX’s design for the U.S. Deorbit Vehicle will be based on one of the company’s existing spacecraft, such as its Dragon capsules. SpaceX and NASA did not immediately respond to CNBC’s request for comment on the design.

Sign up here to receive weekly editions of CNBC’s Investing in Space newsletter.

The U.S. – along with four international partner agencies representing Russia, Europe, Canada, and Japan – has been preparing for the eventual end of the ISS, which has been crewed since 2000. The ISS, primarily created as a crewed research laboratory, has seen more than 3,300 experiments conducted in microgravity. That includes research not possible on Earth such as medical sciences and technology demonstrations.

Aging ISS

But the ISS is aging, with NASA and its lead partner Roscosmos, unable to solve a worsening problem of microscopic leaks on the station.

NASA published a study on Wednesday with analysis of why it decided to intentionally destroy the ISS in a controlled reentry. The agency evaluated a variety of alternatives, including disassembling the station in orbit or trying to raise the ISS to a higher orbit with a large spacecraft like SpaceX’s Starship.
“The space station is a unique artifact whose historical value cannot be overstated. NASA considered this when determining if any part of the station could be salvaged for historical preservation or technical analysis,” the agency wrote.
Ultimately, the agency study determined that any attempts to preserve or reuse the ISS were technically or economically infeasible. NASA noted the possibility the ISS’ operational lifetime could be extended beyond 2030, but that is yet to be determined and requires agreement with its international partner agencies.
NASA is planning to replace the ISS through private space stations and is helping fund U.S. companies’ development through the Commercial LEO Destinations (CLD) program.
The ISS totaled about $150 billion to develop and build and costs NASA about $4 billion each year to operate, so the agency sees privately built space stations as a way to replace the ISS at a fraction of the cost. More

Levi Strauss narrowly missed Wall Street’s sales expectations as denim surges in popularity.
Levi’s chief financial officer warned that consumers have been “generally cautious” and aren’t spending a lot on discretionary items.
The denim maker has been working to reduce its reliance on department stores by building out its own website and stores, but the strategy can come with unexpected hurdles.

A shopper leaves the American clothing company brand, Levi´s (Levis) store, and logo in Spain.
Xavi Lopez | Lightrocket | Getty Images

Denim is having a moment with consumers, but it hasn’t led to a major sales boost at Levi Strauss. 
The jeans creator on Wednesday posted fiscal second-quarter revenue that fell just short of Wall Street’s expectations at a time when shoppers are stocking their wardrobes with denim dresses, skirts and ultra low-rise baggy pants. 

Levi’s posted better-than-expected earnings as its direct sales to consumers and cost cutting continue to bear fruit. The company raised its dividend by 8% to 13 cents per share, its first increase in six quarters.
Still, shares fell about 12% in extended trading.
Here’s how Levi’s performed during the quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

Earnings per share: 16 cents adjusted vs. 11 cents expected
Revenue: $1.44 billion vs. $1.45 billion expected

The company’s reported net income for the three-month period that ended May 26 was $18 million, or 4 cents per share, compared with a loss of $1.6 million, or zero cents a share, a year earlier. Excluding one-time items, Levi’s posted earnings of $66 million, or 16 cents per share. 
Sales rose to $1.44 billion, up about 8% from $1.34 billion a year earlier. However, the sales jump was coming off of an easier comparison.

In the year-ago period, sales were down 9% after Levi’s shifted its wholesale shipments from its fiscal second quarter into its fiscal first quarter. The shift reduced sales last year by about $100 million, the company said previously. Excluding the shift, as well as the exit of Levi’s Denizen business, sales would have been up by only about 1% in its most recent quarter compared to the year-ago period. 
Finance chief Harmit Singh attributed the sales miss to unfavorable foreign exchange conditions and weak sales at Docker’s. During the quarter, the khaki and chinos brand saw $82.4 million in sales, up 8.6% from $75.8 million in the year ago period. It’s not clear how sales at Docker’s were affected by the timing of Levi’s wholesale orders. 
“People are generally cautious,” Singh told CNBC in an interview. “It’s not necessarily an environment where people are buying a lot, people are cautious.”
While Levi’s posted a strong earnings beat, it only reaffirmed its full-year guidance, which was in line with estimates. The company continues to expect full-year earnings per share to be between $1.17 and $1.27, which now includes a 5-cent hit coming from the company’s new distribution and logistics strategy. 
Levi’s said it is transitioning from a primarily owned-and-operated distribution and logistics network in the U.S. and Europe to one that relies more on third parties. 
“In the near term, these changes require the parallel operation of new and old facilities for the rest of 2024, resulting in a transitory increase in distribution costs,” the company said. 
The change allows Levi’s to shift the responsibility of final mile delivery to third parties. The denim maker noted that it has new terms with its supplier that result in Levi’s taking ownership of inventory closer to the point of shipment rather than its eventual destination. Levi’s distribution network was built for a business that primarily sold to wholesalers, and now it needs to change into one that’s more focused on selling directly to consumers.
The changes are necessary because nearly half of Levi’s sales these days are coming from its own website and stores.
Direct-to-consumer sales jumped 8% during the quarter, representing 47% of overall sales. Online sales increased 19%.
“Our transformational pivot to operating as a DTC-first company is yielding positive results around the world, giving me great confidence that we will achieve accelerated, profitable growth for the rest of the year and beyond,” CEO Michelle Gass said in a statement. 
During the quarter, wholesale revenue grew 7%, but excluding the shift in timing of wholesale orders, sales in the channel decreased 4%. Singh noted that wholesale revenue improved on a sequential basis, but the company has a “conservative” view of the channel’s growth moving forward.
By building out its own direct channels, Levi’s enjoys higher profits, better data on its consumers and less reliance on shaky wholesalers like Macy’s and Kohl’s, which are continuing to shrink and fall out of favor with consumers. 
However, selling directly can also be more expensive, and can come with unexpected hiccups that can impact sales and drain profits. For example, when someone buys a pair of Levi’s from Macy’s and wants to return them, Macy’s typically bears that cost. Under a direct model, that responsibility, including the cost and logistics, would fall on Levi’s. 
Nike has come to be known as a cautionary tale for retailers long reliant on wholesalers that try to expand direct sales. 
For a while, Nike’s focus on direct sales boosted revenue and profits, but some critics said the strategy shift led to a slowdown in innovation, and ultimately, market share losses. 
Recently, the company acknowledged that it erred when it cut off so many of its wholesale partners and said it has since “corrected” that. 
Read the full earnings release here. 

Don’t miss these insights from CNBC PRO More

In recent years Paris has undergone an astonishing revival. Global businessmen, financiers and techies casually drop into conversation that they are spending more time in the City of Light. Wall Street banks have expanded their offices there; venture capitalists are signing more cheques for French startups. An annual investment summit, held in May at the Palace of Versailles, has become a fixture in chief executives’ calendars. This year, as they sipped champagne with President Emmanuel Macron, company bosses pledged investment projects worth €15bn ($16bn).The renaissance is part of Mr Macron’s ambition to make France more innovative and business-friendly. But the project is now in danger. After his centrist party suffered a drubbing in the elections to the European Parliament, Mr Macron called a snap national parliamentary election, the first round of which is due to be held on June 30th. Hard-right and hard-left parties are polling well ahead of Mr Macron’s group. Both have unsustainable spending plans that are spooking investors and are far from friendly to global business. Only a few weeks ago Paris, which is also due to host the 2024 Summer Olympics in July, was basking in the limelight. Now a cloud of uncertainty hangs over its great commercial revival. More

The Biden administration said it will impose inflation penalties on 64 prescription drugs for the third quarter of this year, lowering costs for certain older Americans enrolled in Medicare. 
President Joe Biden has made lowering U.S. drug prices a key pillar of his health-care agenda and reelection platform for 2024.
A provision of Biden’s Inflation Reduction Act requires drugmakers to pay rebates to Medicare if they hike the price of a medication faster than the rate of inflation. 

US President Joe Biden speaks during an event at the National Institutes of Health (NIH) in Bethesda, Maryland, US, on Thursday, Dec. 14 2023. 
Chris Kleponis | Bloomberg | Getty Images

The Biden administration on Wednesday said it will impose inflation penalties on 64 prescription drugs for the third quarter of this year, lowering costs for certain older Americans enrolled in Medicare. 
President Joe Biden has made lowering U.S. drug prices a key pillar of his health-care agenda and reelection platform for 2024. A provision of Biden’s Inflation Reduction Act requires drugmakers to pay rebates to Medicare, the federal health program for Americans over age 65, if they hike the price of a medication faster than the rate of inflation. 

It is separate from another provision under the law that allows Medicare to negotiate lower prescription drug prices with manufacturers. On average, Americans pay two to three times more than patients in other developed nations for prescription drugs, according to the Biden administration.
Some patients will pay a lower coinsurance rate for the 64 drugs covered under Wednesday’s announcement, which fall under Medicare Part B, for the period from July 1 to Sept. 30 “since each drug company raised prices faster than the rate of inflation,” according to a release from the administration.
Some Medicare Part B patients may save as much as $4,593 per day if they use those drugs during the quarter, the release added.  
More than 750,000 Medicare patients use the drugs each year, according to the release. The medications treat conditions such as cancer, certain infections and a bone disease called osteoporosis.
The list includes Bristol Myers Squibb’s Abecma, a cell therapy for multiple myeloma; and Pfizer’s targeted cancer treatment for certain lymphomas called Adectris. It also includes Astellas Pharma and Pfizer’s Padcev, a targeted cancer treatment for advanced bladder cancer.

The Biden administration said Padcev’s price has increased faster than inflation every quarter since the Medicare inflation rebate program went into effect last year.

More CNBC health coverage

“Without the Inflation Reduction Act, seniors were completely exposed to Big Pharma’s price hikes. Not anymore,” Neera Tanden, White House domestic policy advisor, said in the release.
The Centers for Medicare & Medicaid Services plans to send the first invoices to drugmakers in 2025 for the rebates owed to the program.
In December, Biden released a list of 48 prescription drugs that would be subject to inflation penalties during the first quarter of 2024.

Don’t miss these insights from CNBC PRO More

Southwest cut its second-quarter revenue forecast, citing changing booking patterns.
The airline also said its unit expenses, excluding fuel, would be up as much as 7.5% over the year-earlier period.
The company said it still expects record quarterly operating revenue in the second quarter.

A Southwest Airlines jet is parked Ellison Onizuka Kona International Airport at Kehole awaiting passengers on January 20, 2024 in Kailua-Kona, Hawaii.
Kevin Carter | Getty Images

Southwest Airlines shares fell roughly 4% in premarket trading Wednesday after the carrier cut its second-quarter revenue forecast, citing changing booking patterns.
Southwest expects revenue per available seat mile, the amount the airline brings in for every seat it flies one mile, will fall between 4% and 4.5% in the second quarter over last year, after previously estimating a 1.5% to 3.5% decline.

It also said its unit expenses, excluding fuel, would be up as much as 7.5% over the year-earlier period, after previously expecting no change.
It said its capacity would rise as much as 9% instead of the flat growth it had previously expected in how much it flies.
Southwest still expects record quarterly operating revenue in the second quarter.
Airlines are raking in record numbers of passengers but higher costs and growth in capacity have weighed on fares and profits.
“The reduction in the Company’s RASM [revenue per available seat mile] expectations was driven primarily by complexities in adapting its revenue management to current booking patterns in this dynamic environment,” Southwest said in a filing.

Other carriers like Delta and United, meanwhile, have been enjoying passengers’ return to international travel and have invested heavily in travelers’ willingness to pay more for roomier seats.
Southwest is under activist investor pressure from hedge fund Elliott Management, which has called for CEO Bob Jordan and Chairman Gary Kelly to be replaced, saying the company is underperforming and needs a change at the top.
The Dallas-based airline has expressed confidence in its leadership and reiterated that it is considering revenue initiatives like seating assignments or premium seating, which would be massive changes to the company’s simple business model that has been profitable for most of the last five decades.
“We will adapt as our customers’ needs adapt,” Jordan said at an industry event hosted by Politico earlier this month.

Don’t miss these insights from CNBC PRO More