Business

Ferrari topped Wall Street’s top- and bottom-line earnings expectations for the fourth quarter to finish off a record year of profits.
Ferrari’s revenue last year increased 17% to 5.97 billion euros, or $6.46 billion, including an 11% increase in the fourth quarter.
The automaker reported a net profit of 1.26 billion euros, or $1.36 billion, for 2023, including 294 million euros, or $317.9 million, in the fourth quarter.

Car key for the Ferrari Purosangue SUV.
Adam Jeffery | CNBC

Luxury sports car manufacturer Ferrari topped Wall Street’s top- and bottom-line earnings expectations for the fourth quarter to finish off a record year of profits.
The automaker reported a net profit of 1.26 billion euros, or $1.36 billion, for 2023, including 294 million euros, or $317.9 million, during the fourth quarter. Its adjusted earnings before interest and taxes, or EBIT, was 1.62 billion euros, or $1.75 billion, for the year, including 372 million euros, or $402.3 million, in the last quarter. Both were yearly records for the company.

Ferrari’s revenue last year increased 17% to 5.97 billion euros, or $6.46 billion, including an 11% increase in the fourth quarter from 1.37 billion euros a year earlier in 2022.
Such records are expected to be short-lived, as Ferrari is forecasting to top many of those results in 2024. The company’s forecast for this year calls for revenue of more than 6.4 billion euros, or $6.9 billion, and adjusted per share profit of at least 7.50 euros, with an adjusted EBIT margin of at least 38%. Its adjusted profit margins are expected to be in line or slightly lower than 2023.
Shares of Ferrari reached a new 52-week high Thursday, gaining roughly 12% to nearly $390 a share on the New York Stock Exchange. The company’s previous 52-week high of $372.42 occurred on Dec. 11.
Here’s how the company performed in the fourth quarter, compared to average estimates compiled by LSEG, formerly known as Refinitiv:

Earnings per share: 1.62 euros adjusted vs. 1.50 euros expected
Revenue: 1.523 billion euros vs. 1.506 billion expected

Ferrari shipments were up 3% last year to 13,663 vehicles in 2023, including 3,245 units in the fourth quarter.

“We now have a very important year ahead of us in the execution of our business plan, which continues on schedule along its carefully planned path,” Ferrari CEO Benedetto Vigna said in a release. “The record 2023 results, the ambitions that we have on 2024, together with the exceptional visibility on our order book allow us to look at the high-end of 2026 targets with stronger confidence.”
Separately, in other Ferrari news, multiple media outlets reported that Formula 1 star Lewis Hamilton is on the brink of making a surprising move from Mercedes over to the Ferrari racing team for the 2025 season. More

Small business owners are more optimistic about their operations and the overall economy at the start of 2024, according to a survey by Goldman Sachs 10,000 Small Business Voices.
The survey adds to a recent string of data showing consumers and businesses have started to grow more confident about the economy.
Small business owners are still worried about inflation and their ability to access capital.

U.S. President Joe Biden speaks during a Rose Garden event at the White House to mark National Small Business Week on May 1, 2023 in Washington, DC.
Alex Wong | Getty Images

Small business owners are more optimistic to start the year, even as they face persistent inflation and lending concerns, a new poll released Thursday found.
Seventy-five percent of small business owners are optimistic about their financial trajectory in 2024, up from 68% a year earlier, according to a survey by Goldman Sachs 10,000 Small Business Voices, a policy advocate for small business owners.

Meanwhile, 28% of respondents rated the economy as good or excellent, up 9% from a quarter ago.
More than half of small business owners surveyed said they expect to create jobs this year, and 62% reported they anticipate profits will increase.
The survey adds to a recent string of data showing consumers and businesses have started to grow more confident about the economy after a stretch where inflation was stubborn and borrowing became tougher.
“The fact that 75% of small business owners are optimistic is a remarkably high number, considering inflation continues to plague them, they continue to face access to capital challenges and workforce-related issues … all of those challenges have been very sticky for the last few years with no real progress,” Joe Wall, managing director of government affairs at Goldman Sachs, told CNBC.
The survey was conducted nationally in mid-January among more than 1,400 small business owners.

‘Growth opportunities’ despite challenges

Jill Bommarito, CEO of Detroit-based Ethel’s Baking Company, said she has seen solid consumer spending, and noted that supply-chain issues and inflation are easing. The wholesale baking company, which launched in 2011 and now has 26 employees, specializes in dessert bars and sells in Whole Foods, Target and Costco.
“There’s growth opportunities. It doesn’t mean we’re not up against headwinds … there’s no question about that. However, the demand for real, authentic brands and services is there, and more so than ever,” said Bommarito, a graduate of the Goldman Sachs 10,000 Small Businesses program, which provides business education and support services.
The survey also asked respondents to rank the difficulty of the last four years. Interestingly, small business owners found 2023 nearly as hard as 2020 — the peak of the pandemic and a time when many companies could not operate. Thirty-five percent of respondents said 2020 was their most challenging year, while 33% picked 2023.
“I don’t think most people appreciate the fact that last year was, for a third of small businesses, they would say that was the toughest year they’ve had,” Wall said, citing the inflation and supply-chain issues owners faced.
Inflation is still a major concern for business owners, even as the rate of price increases falls. Seventy-one percent of those surveyed reported inflationary pressures had increased over the last three months.
Rising prices jumped to the top of the list of small business concerns in the National Federation of Independent Business’ monthly read on sentiment in December, outpacing labor woes and regulations.
Some of the economic optimism in Goldman’s data could be due to expected rate cuts from the Federal Reserve in the year to come, Wall said. On Wednesday, the Fed left interest rates unchanged and signaled it would not start trimming rates yet.

Main Street is also focused on the lending environment amid high interest rates. About three-fourths, or 77%, of respondents to Goldman’s survey said they are concerned about their ability to access capital.
The poll also asked about Basel III Endgame plans, which will increase capital holding requirements for larger and regional banks. The survey found that 86% of respondents said their growth forecast would take a hit if it continues to get harder to access capital.
Goldman Sachs has come out against the Basel III Endgame proposal.
In addition, just about one-third of owners polled said they believe they can afford to take out a loan. Of the 35% of those surveyed who applied for a loan in the last year, nearly 80% found it difficult to access affordable capital. And 40% received all of the funding they requested.
In addition, 28% of respondents who applied for loans said they’d taken out a loan or line of credit with payment terms they found to be predatory.
The NFIB’s recent polling also found business owners were paying high interest rates, as the average rate paid on short-term loans hit 9.8% in December, up from 7.6% in January 2023.
Bommarito said access to working capital is her top issue for 2024.
“We’re the foundation of this economy,” she said of small businesses like hers. “In general, we are just considered the riskier bet.”
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Lululemon will debut its first men’s footwear line and will soon offer a new casual and performance sneaker designed specifically for men.
The athletic apparel retailer, best known for its “belt bags” and yoga pants, is looking to double its men’s business and grow revenue to $12.5 billion by 2026.
The launch comes as Lululemon grows at a slower rate than it has in the past, and competition from both legacy players and newer entrants heats up.

Canadian sportswear clothing band, Lululemon store in Hong Kong.
Budrul Chukrut | Lightrocket | Getty Images

Lululemon is launching its first men’s footwear line and casual sneaker as the retailer looks for new avenues of growth in the increasingly crowded athletic apparel space, the company announced Thursday. 
The retailer is debuting its first casual sneaker, dubbed “cityverse,” along with two new running shoes that will all come in both men’s and women’s styles for the first time. Cityverse will launch Feb. 13, while the new running models will debut in March and May. 

Lululemon’s foray into men’s footwear is part of a larger strategy the company announced in April 2022 to double its men’s business and grow revenue to $12.5 billion by 2026.
“Doubling the men’s business is absolutely a key growth pillar for us, and while footwear is a relatively small category for us and we’re early in our footwear journey, we’re excited by the prospect of just the role it plays in offering him more choice,” Lululemon’s chief brand officer, Nikki Neuburger, told CNBC in an interview.
Still, the launch is just “icing on the cake and a bonus” for Lululemon because the company’s growth strategy “isn’t reliant on footwear,” said Neuburger.

Lululemon’s expanded footwear collection
Courtesy: Lululemon

The launch comes as Lululemon grows at a slower rate than it has in the past, and competition from both legacy players like Nike and newer entrants such as On Running heats up. In the three months ended Oct. 29, Lululemon posted a 19% jump in sales, down from a 28% spike in the year-ago quarter.
Most of Wall Street still considers Lululemon a best-in-class retailer, but some firms are expecting its growth to moderate more as the company matures and demand across the sector slows. Last week, HSBC downgraded Lululemon to hold from a previous buy rating, because it expects its strong performance compared with other retailers to narrow as demand slows. 

Neuburger said apparel will still be the “juggernaut” and “core” of Lululemon’s overall business. However, its expansion into men’s footwear will give the retailer an edge when competing with the likes of Nike, Adidas, Hoka and On Running, which have all made men’s footwear central to their core offering. 
In December, Lululemon CEO Calvin McDonald told analysts on the company’s third-quarter earnings call that its brand awareness among men remains low, at about 13% in the U.S.,12% in Australia and single digits everywhere else outside of North America. He said the figures show it has room to grow in the category.  
In order to stand out from the competition, Lululemon aims to set itself apart with innovation and a strong brand name, Neuberger said.
“The innovative approach we take into design and our proprietary technologies … that is not something that other brands are offering across all of their models in their assortment,” said Neuberger. More

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Nearly two years into Barry McCarthy’s tenure as Peloton’s CEO, the company has made some progress in its turnaround plan, but still hasn’t managed to return to growth.
The fitness company, best known for its Bike, Tread and online fitness classes, delivered mixed results for its holiday quarter.
Peloton now expects sales growth by the end of the current fiscal year in June.

A Peloton Bike inside a showroom in New York, US, on Wednesday, Nov. 1, 2023. Peloton Interactive Inc. is scheduled to release earnings figures on November 2.
Michael Nagle | Bloomberg | Getty Images

Peloton managed to turn a gross profit off of its pricey connected fitness products for a second quarter in a row, but the company said Thursday it expects more challenges ahead after it failed to reach a number of goals CEO Barry McCarthy outlined a year ago. 
The retailer delivered mixed results for its holiday quarter, as it lost slightly more money per share than Wall Street expected but beat sales estimates.

Here’s how Peloton did in its second fiscal quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG, formerly known as Refinitiv:

Loss per share: 54 cents vs. 53 cents expected  
Revenue: $743.6 million vs. $733.5 million expected 

The company reported a net loss for the three-month period that ended December 31 of $194.9 million, or 54 cents per share, compared with a loss of $335.4 million, or 98 cents per share, a year earlier. 
Sales dropped to $743.6 million, down from $792.7 million a year earlier. 
The company issued dismal guidance for the current quarter and a tepid full-year sales outlook. 
For its fiscal third quarter, Peloton expects sales to be between $700 million and $725 million, compared to a Wall Street estimate of $754 million, according to LSEG. The company expects its adjusted EBITDA loss to be between $20 million and $30 million, compared to analyst estimates of a loss of $2 million, according to StreetAccount. 

“Our outlook is tempered by uncertainty surrounding our ability to efficiently grow Paid App subscribers and the performance of other new initiatives, as well as an uncertain macroeconomic outlook,” finance chief Liz Coddington wrote in a letter to shareholders. 
Peloton’s connected fitness subscription guidance came in higher than expected. The company also said it saw strong sales at retail partners like Dick’s Sporting Goods and Amazon, and demand for its Tread+ came in “significantly stronger” than expected. 
For the second quarter in a row, Peloton managed to eke out a gross profit on its connected fitness products, which have long been a money losing business. Peloton’s gross margin for its connected fitness products came in at 4.3%, compared with a Wall Street estimate of 3.4%, according to StreetAccount. 
Nearly two years into McCarthy’s tenure as CEO, Peloton is showing some signs of progress, but is still falling short on his key targets.
In a letter to shareholders last February, McCarthy set a goal of returning the company to revenue growth within a year but Peloton fell short of that. The company now expects to reach that milestone in June at the end of the current fiscal year. 
McCarthy also set a goal of reaching sustained positive adjusted EBITDA within a year, which also failed to happen. He now expects that Peloton will generate positive free cash flow during its fiscal fourth quarter, which concludes at the end of June. 
However, Peloton reached a number of other goals that McCarthy set for it, including expanding its corporate wellness and commercial partnerships, selling its Ohio manufacturing facility and restructuring its retail store footprint.
In a letter to shareholders, McCarthy outlined a series of initiatives he spearheaded since taking the helm and explained which ones were working, and which ones weren’t. 
On the positive side, McCarthy said Peloton’s retail partnerships with companies like Dick’s Sporting Goods and Amazon were performing well. 
“We saw exceptionally strong sales growth through these channels this holiday season, with Y/Y unit growth of 74% in Q2,” McCarthy said. “Our key learning from these holiday results is that we can better optimize our sales and marketing tactics going forward so that sales from these partners are even more incremental, yielding a better margin mix for Peloton.” 
The top executive said Peloton’s Bike rental program was also performing well, and the company is forecasting 100% year-over-year revenue growth for it in fiscal 2024.
“The underlying economics continue to be attractive, given the current churn and buyout rates for Bike and Bike+. The Bike rental program is attracting a more diverse, more female, and younger customer than it was 6 months ago,” McCarthy said. “Bike rental is growing quickly with attractive economics, and we are leaning into new opportunities aggressively to drive that growth.” 
Demand has also been strong for its Tread+, which was recalled in 2021. Sales for the entry level Tread have also outperformed the company’s expectations. 
“The overall treadmill market is about 2x larger than the stationary bike market. So our newly found momentum in the treadmill category, and the diversification of our hardware sales beyond Bike/Bike+, is good news for Peloton’s future growth, provided we sustain our momentum,” McCarthy said. 
McCarthy added that if the company isn’t failing on some projects, “we’re not being aggressive enough testing new initiatives.” 
Over the summer, Peloton announced a partnership with the University of Michigan that included selling co-branded Bikes in the school’s colors, but sales to alumni and boosters came in far lower than expected. Peloton had planned to roll out similar initiatives with other universities, but now expects to end the program.
Peloton also came up short on improving customer service, another goal that McCarthy had set for the company last year. 
“This past holiday season was particularly taxing for Members. The Member Support experience has tarnished our brand, and we simply must do better,” McCarthy wrote. “The team is currently in the middle of a reboot. New leadership. New systems. New third party vendors. New training. New staff. I’m confident we’re on the right path this time. I’m confident in the new leadership, and I’m confident that in the next few months our Members will be receiving the level of service they deserve and expect and that we can be proud of.”
Read the full earnings release here. More

Merck reported fourth-quarter revenue and adjusted earnings that topped estimates as it saw strong demand for its blockbuster cancer drug Keytruda and HPV vaccine Gardasil. 
The pharmaceutical giant posted a quarterly loss, however, due to previously announced charges associated with its cancer drug collaboration deal with Daiichi Sankyo.
The company also issued its full-year 2024 guidance, which was generally in line with Wall Street’s expectations.

The logo for Merck & Co. is displayed on a screen at the New York Stock Exchange (NYSE) in New York City, New York, U.S., November 17, 2021. 
Andrew Kelly | Reuters

Merck on Thursday reported fourth-quarter revenue and adjusted earnings that topped estimates as it saw strong demand for its blockbuster cancer drug Keytruda and HPV vaccine Gardasil. 
The pharmaceutical giant posted a net quarterly loss, however, due to previously announced charges associated with a deal the company struck in October with the Japanese drugmaker Daiichi Sankyo to co-develop three highly sought-after cancer treatments.

Here’s what Merck reported for the fourth quarter compared with what Wall Street was expecting, based on a survey of analysts by LSEG, formerly known as Refinitiv:

Earnings per share: 3 cents adjusted vs. a loss of 11 cents per share expected
Revenue: $14.63 billion vs. $14.50 billion expected

The company posted a net loss of $1.23 billion, or 48 cents per share, for the quarter. That compares to a net income of $3.02 billion, or $1.18 per share, during the year-earlier period. 
Excluding acquisition and restructuring costs, Merck earned 3 cents per share for the fourth quarter. The company’s results include a charge of $1.69 per share related to the Daiichi Sankyo deal. 
Merck raked in $14.63 billion in revenue for the quarter, up 6% from the same period a year ago. 
Those results come as Merck shows significant progress in preparing for Keytruda’s patent expiration in 2028, with a handful of new deals under its belt and key drug launches ahead. The loss of exclusive rights to the drug will likely mean its sales will fall, forcing the company to draw revenue from elsewhere.

The company also issued its full-year 2024 guidance, which was generally in line with expectations. Merck expects revenue to come in between $62.7 billion and $64.2 billion and adjusted earnings to be $8.44 to $8.59 per share this year. 
Analysts surveyed by LSEG expected Merck to forecast full-year sales of $63.52 billion and adjusted earnings of $8.42 per share. 
That adjusted earnings outlook includes a one-time charge of roughly 26 cents per share related to Merck’s acquisition of Harpoon Therapeutics, which develops immune-based cancer drugs, earlier this month.
Merck also announced a new restructuring program for 2024, which aims to improve the manufacturing network of both its pharmaceutical division and animal health business. Merck recorded charges of $190 million related to the program in the fourth quarter, which is excluded from its adjusted results.
That brings Merck’s total restructuring charges for the period to $401 million. That number also includes charges from a restructuring program the company launched in 2019.

Pharmaceutical business posts growth

Merck’s pharmaceutical business, which develops a wide range of drugs for several disease areas, booked $13.14 billion in revenue during the quarter. That’s up 8% from the same period a year ago. 
Merck’s immunotherapy Keytruda, which is used to treat several types of cancer, largely fueled the growth.
The drug booked $6.61 billion in revenue, up 21% from the year-earlier quarter. Analysts had been expecting $6.41 billion in Keytruda sales, according to estimates from FactSet. 
Merck also saw a jump in sales of Gardasil, a vaccine that prevents cancer from HPV, the most common sexually transmitted infection in the U.S.
Gardasil raked in $1.87 billion in sales, up 27% from the fourth quarter of 2022. That’s slightly below the $1.92 billion that analysts were expecting, according to FactSet estimates. 

Merck’s experimental Covid-19 treatment pill, called molnupiravir
MERCK & CO INC | via Reuters

Meanwhile, sales of its Covid antiviral pill Lagevrio fell to $193 million during the period, down 77% from the $825 million reported for the fourth quarter of 2022. Still, the drug blew past analysts’ expectations of $69 million in sales, according to FactSet. 
That’s no surprise: Demand has plummeted for Lagevrio and other Covid products from companies such as Pfizer and Moderna over the last year, as cases and concern about the virus dwindled from their pandemic peaks.
Merck’s Type 2 diabetes treatment, Januvia, also saw sales fall to $787 million during the quarter, down 14% from the same period a year ago. The company said competition from cheaper generic drugs outside of the U.S., particularly in Europe, and lower demand in the U.S. cut into the sales.
That total still came in higher than analysts’ estimate of $732.3 million for the period, according to FactSet. 
Januvia is one of ten drugs that will be subject to Medicare drug price negotiations, a policy under the Inflation Reduction Act that aims to make costly medications more affordable for seniors. Also on Thursday, Medicare is making initial price offers for each of those drugs. 
Merck’s animal health division, which develops vaccines and medicines for dogs, cats and cattle, posted $1.28 billion in sales, up 4% from the same period a year ago.
The company said higher demand for companion animal products, such as the flea and tick treatment Bravecto, drove the increase.
Merck will hold a conference call at 9 a.m. ET on Thursday. More

“FREEDOM GAS” saved Europe from an energy crisis. The old continent’s imports of American liquefied natural gas (LNG), first equated with liberty by Donald Trump’s administration in 2019, ballooned from 16m tonnes in 2021, the year before Russia invaded Ukraine and all but stopped piping gas to Europe, to 46m tonnes last year. The decisions to redirect LNG cargoes destined for Asia and elsewhere to Europe were made by private companies. But they enjoyed strong official support from Mr Trump’s successor, Joe Biden. So did LNG exports more broadly, turning America into the world’s biggest exporter, ahead of Qatar and Australia.On January 26th Mr Biden threw a spanner in the gasworks. He announced a “temporary pause” on pending LNG-export projects such as gas terminals, so that officials can scrutinise their economic, security and environmental impact. The decision is not an export ban and does not halt initiatives that have already been approved by the Department of Energy. But it does freeze a few big proposed but unapproved projects that would benefit countries which do not have free-trade agreements with America (a large group which includes big markets in Europe and Asia).The move delighted those climate campaigners who claim that LNG is not about freedom but about locking economies into continued dependence on fossil fuels. It disappointed the more level-headed sorts who see natural gas as a cleaner “transition fuel” that would help ease the shift to greener energy, especially in light of Mr Biden’s efforts to crack down on methane, a powerful greenhouse gas that can leak during the production and transport of the fuel. To America’s allies, it was another example of how the superpower is becoming an ever more unreliable partner.For Mr Biden, though, it was all about politics. To stop the war in Ukraine from disrupting energy markets, his administration has overseen a big expansion in domestic fossil-fuel output. As well as being the world’s top LNG exporter, America continues to be the biggest oil producer. That angers the climate-anxious left wing of Mr Biden’s Democratic Party. In announcing the pause, Mr Biden adopted its language. His decision, he said, “sees the climate crisis for what it is: the existential threat of our time”. The head of a big environmental group calls it “a big win for progressives in an election year”. Bill McKibben, an influential activist behind a campaign to end LNG exports, declared that “We all just won…I have a beer in my hand”.Mr McKibben may want to keep that beer on ice. As Joseph Majkut of the Centre for Strategic and International Studies, a think-tank, wryly points out, the impact of the pause on global markets—and thus on global emissions, which is what matters to the climate—will be minimal. Forgone American exports will be offset by fresh supplies from Qatar, Australia and elsewhere. “I think there is an opportunity,” declared Jonathan Wilkinson, Canada’s energy minister, on January 30th.Moreover, American hydrocarbons will wash over world markets, pause or no pause. Should the carbon-cuddling Mr Trump return to the White House, which polls suggest is as likely as not, America will drill, baby, drill. Even if Mr Biden staves off the Trumpian challenge, America will keep producing lots of LNG. The approved projects alone would propel American exports to a level 50% above those of Qatar, a gas superpower, by 2030.And if the extra scrutiny of projects pledged by Mr Biden, combined with his methane crackdown, leads to further reductions in the carbon-intensity of American LNG, that would make the stuff more competitive in places like Europe and Japan, which want their fuel produced in the cleanest way possible, argues Amy Myers Jaffe of New York University. The movement that sought to topple America’s LNG industry would then, in other words, shore it up instead, while damaging American alliances, which some of the same left-wingers would prefer to preserve. Mr McKibben had better enjoy a bitter. ■To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter. More