Business

Shares of both Nike and Foot Locker plunged Friday.
Nike slashed its revenue outlook and announced $2 billion in cost cuts.
Foot Locker stores depend heavily on Nike merchandise.

Nike shares plunged Friday after the athletic apparel maker cut its revenue outlook for the fiscal year, with sneaker retailer Foot Locker also feeling the blow.
Nike closed down more than 11%. Foot Locker, which relies heavily on Nike products in its stores, closed down nearly 4%.

It was Nike’s worst day since Sept. 30, 2022, when it fell 12.8%.
Nike said in its earnings report Thursday that the company now expects its revenue to grow 1% for the fiscal year, down from the prior outlook of mid-single-digit growth. The company also said it was going to cut costs of upward of $2 billion over the next three years.
The new outlook reflects increased headwinds “particularly in Greater China and EMEA,” finance chief Matthew Friend said in the earnings call Thursday. He also noted digital traffic softness and a stronger U.S. dollar that has “negatively impacted second-half reported revenue versus 90 days ago.”
“Nike needs improved marketing outside of basketball, streetwear and lifestyle trends,” TD Cowen analysts said in a Friday note, downgrading the stock to market perform from outperform. “Innovation at the higher end of its assortment is not resonating at scale while the Nike faces disruption from smaller competitors in footwear and apparel.”
Goldman Sachs analysts stuck with their buy rating on Nike’s stock.

But they also acknowledged that the company’s report “provided ample fodder for bears, with slowing growth momentum as a result of a tougher macro pointing to a more promotional competitive marketplace, and the company now speaking more comprehensively to key franchise life cycle management which will weigh on sales momentum going forward.”
— CNBC’s Gabrielle Fonrouge and Michael Bloom contributed to this report.Don’t miss these stories from CNBC PRO: More

Bristol Myers Squibb said it would buy biopharmaceutical company Karuna Therapeutics for $14 billion in cash.
Karuna develops medications for patients living with neurological and psychiatric conditions such as schizophrenia.
The companies expect the deal to close in the first half of 2024.

Bristol Myers Squibb on Friday announced it agreed to buy biopharmaceutical company Karuna Therapeutics for $14 billion in cash, or $330 per share.
Karuna’s stock closed up more than 47% on the news Friday, hitting $317.85 a share. Bristol Myers Squibb shares closed up 2%.

The deal will help expand Bristol Myers’ drug pipeline after competition from a generic offering caused demand for the company’s blood cancer drug Revlimid to tumble in its third quarter.
The boards of directors at both Bristol Myers and Karuna unanimously approved the acquisition, and it is expected to close in the first half of 2024, according to a release.
Karuna develops medications for patients living with neurological and psychiatric conditions. The company’s lead asset is an antipsychotic called KarXT, which is expected to serve as a treatment for adults with schizophrenia beginning in late 2024, the release said.  
“There are tremendous opportunities in neuroscience, and Karuna strengthens our position and accelerates the expansion and diversification of our portfolio in the space. We expect KarXT to enhance our growth through the late 2020s and into the next decade,” Bristol Myers Squibb CEO Christopher Boerner said in a statement.
KarXT is also being evaluated as a possible treatment for Alzheimer’s disease psychosis and a form of bipolar disorder, according to the release. Karuna CEO Bill Meury said the company’s portfolio “offers advancements in treatment not seen in many years.”

“With Bristol Myers Squibb’s long-standing expertise in developing and commercializing medicines on a global scale and legacy in neuroscience, KarXT and the other assets in our pipeline will be well-positioned to reach those living with schizophrenia and Alzheimer’s disease psychosis,” he said in a statement. 
Citi and Gordon Dyal & Co. advised Bristol Myers on the deal, while Goldman Sachs served as the exclusive advisor for Karuna.
— CNBC’s Annika Kim Constantino contributed to this report.Don’t miss these stories from CNBC PRO: More

Health care tends to underperform in presidential election years, and Medicare drug price negotiations kicking off in February could keep the focus on high pharmaceutical prices.
Some of the beaten-down sectors which have help lead the rally in health care this month are poised to extend gains in 2024, however.
Analysts see diabetes device makers Insulet, Dexcom and Abbott Labs poised to outperform.

An employee works on the production line of pharmaceutical company Zentiva in Prague, Czech Republic, May 6, 2021.
David W. Cerny | Reuters

The health-care sector has wiped out much of its losses for the year during the December market rally. Beaten-down biotech and medical device makers have seen the biggest rebound this month, and analysts see that momentum continuing in the new year.
Still, analysts and strategists have a mixed outlook for the sector in 2024.

“We’re entering the year as an underweight,” said Sam Stovall, chief investment strategist at CFRA. “There’s a lot of overhead resistance, and they have to work through that overhead resistance because a lot of investors might say, ‘let me get out and move on to something that has better growth potential.'”
The second week of January could bring some big moves for health-care names, when companies present at this year’s JPMorgan health-care conference in San Francisco. It is one of the year’s largest health-care gatherings of major industry CEOs, and companies often provide updates on earnings guidance and clinical trial research during the conference.
The political calendar could pose one of the biggest challenges. The S&P 500 health-care sector has lagged the S&P 500 in four of the last six presidential cycles. Increased regulatory focus on drug prices could result in another year of underperformance.
The S&P 500 health-care sector remains on pace for a second straight annual loss, dragged down by Covid vaccine makers Moderna and Pfizer, which have fallen more than 40% for the year. Eli Lilly, up more than 55% for the year, is the sector’s biggest gainer, fueled by demand for its diabetes and obesity drugs.
Here’s a look at which parts of the health industry analysts see facing continued pressure in 2024, which will get some relief, and which beaten-down names are getting investors’ votes for a rebound next year:

Big Pharma: Price negotiations   

Novartis scientist in lab packing materials for transportation.
Source: Novartis

In 2024, Inflation Reduction Act drug price negotiations will be front and center. Medicare officials will make their initial offers on the first 10 drugs chosen for discussions Feb. 1.
“This law was passed, and we want to implement it in the most thoughtful manner possible,” said Dr. Meena Seshamani, deputy administrator and director of the federal Center for Medicare, “to really create a robust conversation in our health system in a sense that, how can we ensure access to innovative therapies that people need?”
The drugmakers have sued the administration but have chosen to proceed with discussions, while complaining that negotiations in this country will be different from those they’ve had with other nations. They argue that U.S. health insurers and pharmacy benefit managers may not pass on full discounts to patients.
“In a European market, when you negotiate a price, that medicine is readily available to patients, there’s no prior authorizations,” said Victor Bulto, president of Novartis’ U.S. operations.  
Novartis’ heart medication Entresto is among the first drugs selected for negotiation. Approved by the FDA in 2015, the negotiated Medicare discount on the drug will go into effect in 2026.  
Bulto argues the IRA’s timeline, making medications eligible for negotiations after nine years on the market, will result in less research for new indications on drugs like cancer treatments.
“We normally start investigating in the sickest patients, where you establish the benefit risk of your molecule, and then you want to start bringing data earlier,” he said, “to see if you can impact the cause of cancer early. But that takes time and money and a lot of investment.”
The big question for investors is how steep a discount the Biden administration will ask of manufacturers. Price discussions are expected to remain private until the Centers for Medicare & Medicaid Services reveals its final price next September – unless the drugmakers decide to go public.
“We are not intending to go out there publicly because we’re going to be part of a back-and-forth negotiation with each individual manufacturer,” said Seshamani. But, she added, if the companies do go public, Medicare could potentially do so as well.

Health insurers: Benefit management risks cool     

A CVS location in New York, US, on Thursday, Feb. 9, 2023.
Stephanie Keith | Bloomberg | Getty Images

Insurers’ pharmacy benefits management divisions, known as PBMs, are under increasing regulatory pressure. CVS Health’s CVS Caremark, Cigna’s Express Scripts and UnitedHealth Group’s OptumRx together account for nearly 80% of market share in the business of administering pharmacy benefits.
More than two dozen bipartisan bills were proposed in Congress this year, aimed at creating greater PBM price transparency. Yet, given House leadership struggles, none of the measures gathered enough momentum to gain approval by both chambers of Congress.
“As we move into 2024, history has told us that you tend not to have the major regulatory reform events in health care necessarily play out in the election year,” said Scott Fidel, health-care analyst at Stephens.
Analysts at Bank of America see improving fundamentals for health insurers next year. They named Humana their top pick for 2024, saying the Medicare insurer is best positioned for strong gains.
“The reported M&A discussion between Cigna and Humana have raised questions about whether Humana itself is concerned about its own growth outlook,” BofA analysts wrote in a note to clients. “We see Humana walking away from a deal as validation of the core growth story ahead.”  
Cantor Fitzgerald analyst Sarah James thinks health insurers are well positioned to navigate challenges like higher patient medical costs and Medicare reimbursement changes next year. She also sees a buying opportunity if there are pullbacks amid heated election year rhetoric about health insurance.
“When you see the multiple compression around election cycles is when you want to put incremental investments or money to work in the sector, because it’s very rare that anything they talk about during their stump speeches, actually pans out,” said James. 

Medical devices: GLP-1 pressure lifts  

A pharmacist displays boxes of Ozempic, a semaglutide injection drug used for treating type 2 diabetes made by Novo Nordisk, at Rock Canyon Pharmacy in Provo, Utah, U.S. March 29, 2023. 
George Frey | Reuters

Shares of medical device makers were among the biggest losers this year, as investors predicted the surge in popularity of obesity medications, known as GLP-1 receptor agonists, would cut demand for things like diabetes management, knee replacements and bariatric surgery, said E-Squared health portfolio manager Les Funtleyder.
“Just because there was a lot of concern that GLPs are going to, you know, eliminate all procedures all the time. And that’s not going to happen. That’ll be proven next year,” said Funtleyder. “I think medical devices do best next year.”
There are signs the sector may have bottomed in October. The iShares Medical Devices ETF has surged more than 15% over the last two months. Two of the sector’s biggest gainers were insulin pump maker Insulet and Dexcom, which makes continuous glucose monitoring devices known as CGMs.
While both stocks have gained more than 40% in two months, analysts at Leerink Partners raised their price target on Insulet to $270 from $231 and boosted their target on Dexcom to $144 from $128. Prescriptions for diabetes devices remain strong, Leerink said in a note to clients.  
The diabetes players also have new products on the horizon which could fuel fresh gains next year, said BTIG analyst Marie Thibault.
“We think investors are already looking toward the anticipated launch of a 15-day sensor for type 2 diabetes non-insulin patients in Summer 2024,” Thibault wrote in a research note, adding that rival CGM maker Abbott Laboratories is also expected to gain approval for its new glucose wearable in the new year.

Relief for biotech and life science tools  

Eli Lilly and Company, Pharmaceutical company headquarters in Alcobendas, Madrid, Spain.
Cristina Arias | Cover | Getty Images

The beaten-down biotech sector has wiped out its losses for the year during this month’s rally, with the SPDR S&P Biotech ETF rebounding more than 28% from its October low.
RBC analyst Brian Abrahams sees the momentum continuing in 2024, fueled in part by the run-up in the GLP-1 drugmakers like Eli Lilly and Novo Nordisk, which has left them flush with cash.
“The biotech sector may benefit more and be less overshadowed in the coming year as we potentially see GLP-1 cash flows catalyze more M&A, and biotech efforts to improve upon some of the shortcomings of the leading GLP-1 agents emerge,” Abrahams wrote in a client note.
Smaller biotech firms faced a cash crunch as the Federal Reserve raised interest rates over the last year, making it tougher for them to access funding and invest in capital expenditures. That had a negative impact on life science tools, but a number of investors see the picture improving next year.
“We don’t think rates are going to go much higher if at all from here, and that eases the pressure on high-valuation growth stocks going forward,” Advisor Capital Management portfolio manager JoAnne Feeney told CNBC. “And we think it takes the pressure off a lot of life sciences tools companies that were really hurt by the funding challenges of high interest rates. We think that starts to ease.”
Analysts at Goldman Sachs see life science tools posting stronger gains than the overall health sector next year, after two years of declining sales growth. “We look for a stabilization and ultimately a resumption of an upward revenue and earnings revision cycle which should allow the sector to show absolute outperformance vs the market,” they wrote in a note to clients.
Goldman’s top tools picks for 2024 are Thermo Fisher, Avantor and Qiagen.
Don’t miss these stories from CNBC PRO: More

Nike said it plans to cut $2 billion in costs over the next three years.
The sneaker giant also cut its revenue outlook for the fiscal year.
Nike fell short of Wall Street’s sales estimates for the second quarter in a row.

A customer enters a Nike store along the Magnificent Mile shopping district in Chicago on Dec. 21, 2022.
Scott Olson | Getty Images

Nike on Thursday unveiled plans to cut costs by about $2 billion over the next three years as it lowered its sales outlook.
The stock fell about 10% after hours. Nike shares were up 4.7% so far this year through Thursday’s close, lagging far behind the S&P 500’s gains for the year. Retailer Foot Locker, which has leaned heavily on Nike products, fell about 7% after hours.

Nike now expects full-year reported revenue to grow approximately 1%, compared to a prior outlook of up mid-single digits. In the current quarter, which includes the second half of the holiday shopping season, Nike expects reported revenue to be slightly negative as it laps tough prior year comparisons, and sales to be up low single digits in the fourth quarter.
“Last quarter as I provided guidance, I highlighted a number of risks in our operating environment, including the effects of a stronger U.S. dollar on foreign currency translation, consumer demand over the holiday season and our second half wholesale order books. Looking forward, the impact of these risks is becoming clearer,” finance chief Matthew Friend said on a call with analysts.
“This new outlook reflects increased macro headwinds, particularly in Greater China and EMEA. Adjusted digital growth plans are based on recent digital traffic softness and higher marketplace promotions, life cycle management of key product franchises and a stronger U.S. dollar that has negatively impacted second-half reported revenue versus 90 days ago.”
The company still expects gross margins to expand between 1.4 and 1.6 percentage points. Excluding restructuring charges, it expects to deliver on its full-year earnings outlook.
As part of its plan to cut costs, Nike said it’s looking to simplify its product assortment, increase automation and its use of technology, streamline the overall organization by reducing management layers and leverage its scale “to drive greater efficiency.”

It plans to reinvest the savings it gets from those initiatives into fueling future growth, accelerating innovation and driving long-term profitability.
“As we look ahead to a softer second-half revenue outlook, we remain focused on strong gross margin execution and disciplined cost management,” Friend said in a press release.
The plan will cost the company between $400 million and $450 million in pretax restructuring charges that will largely come to fruition in Nike’s current quarter. Those costs are mostly related to employee severance costs, Nike said.
Earlier this month, The Oregonian reported that Nike had been quietly laying off employees over the past several weeks and had signaled that it was planning for a broader restructuring. A series of divisions saw cuts, including recruitment, sourcing, brand, engineering, human resources and innovation, the outlet reported.
The company didn’t immediately respond to CNBC’s request for comment on The Oregonian’s report.
During Nike’s fiscal second quarter, it posted a strong earnings beat, indicating its cost-savings initiatives were already underway. But, for the second quarter in a row, it fell short of sales estimates, which is the first time Nike has seen consecutive quarters of revenue misses since 2016.
Here’s how the sneaker giant performed compared to what Wall Street was anticipating, based on a survey of analysts by LSEG, formerly known as Refinitiv:

Earnings per share: $1.03 vs. 85 cents expected
Revenue: $13.39 billion vs. $13.43 billion expected

The company reported net income for the three-month period that ended Nov. 30 was $1.58 billion, or $1.03 per share, compared to $1.33 billion, or 85 cents per share, a year earlier.
Sales rose about 1% to $13.39 billion, from $13.32 billion a year earlier.
Nike is considered a leader among industry peers such as Lululemon, Adidas and Under Armour, but its profits have been under pressure and it has been in the middle of a strategy shift that has seen it rekindle its relationships with wholesalers including Macy’s and Designer Brands, the parent company of DSW.

Focus on margins

For the past six quarters, Nike’s gross margin has declined compared to the prior-year period, but the story turned around on Thursday. Nike’s gross margin increased 1.7 percentage points to 44.6%, slightly ahead of estimates, according to StreetAccount.
This time last year, Nike’s inventories were up a staggering 43% and the retailer was in the middle of an aggressive liquidation strategy to clear out old styles and make way for new ones, which weighed heavily on its margins. Several quarters later, however, Nike is in a far better inventory position, which is a boon for margins.
During the quarter, inventories were down 14% to $8 billion.
Nike’s gross margin turnaround came as the retail environment overall has been flooded with steep promotions and discounts as retailers struggle to convince inflation-weary consumers to pay full price. In September when Nike reported fiscal first-quarter earnings, finance chief Friend said Nike was “cautiously planning for modest markdown improvements” given the overall promotional environment.
While the company repeatedly pointed out the overall promotional environment, it said the average sales price of footwear and apparel were up during the quarter and the average selling price grew across channels with higher-priced products proving particularly “resilient.”
The company attributed the gross margin uptick to “strategic pricing actions and lower ocean freight rates,” saying it was partially offset by unfavorable foreign exchange rates and higher product input costs.
As one of the last retailers to report earnings before the December holidays, investors are eager to hear good news when it comes to Nike’s expectations for the crucial shopping season. When many retailers issued holiday-quarter guidance in November, the commentary was largely tepid and cautious as companies looked to under promise and over deliver in an increasingly uncertain macro environment.
Nike struck a note that hit somewhere in the middle. Its sales miss and focus on cost cuts signal larger demand issues, but CEO John Donahoe was upbeat when discussing Black Friday week sales.
“We outpaced the industry, driving growth of close to 10%, Nike digital had its strongest Black Friday week ever and a record number of consumers shopped in our stores over the long Thanksgiving weekend,” said Donahoe.
China is another key part of the Nike story. As the region emerges from the Covid-19 pandemic and widespread lockdowns, China’s economic recovery has so far been a mixed bag. In November, retail sales climbed 10.1% in the region.
It was the fastest pace of growth since May, but those numbers were up against easy comparisons and the growth was largely driven by car sales and restaurants, according to a research note from Goldman Sachs.
During the quarter, China sales came in at $1.86 billion, which fell short of the $1.95 billion analysts had expected, according to StreetAccount. Sales in Europe, the Middle East and Africa also fell short of estimates, but revenue came in ahead in the North America, Asia-Pacific and Latin America markets, according to StreetAccount.
Read the full earnings release here.Don’t miss these stories from CNBC PRO: More

Juneyao Airlines was set to receive the wide-body aircraft, according to flight data.
It would be the first direct delivery of a Boeing plane to a Chinese airline since late 2019.
The delivery could open the possibility of Boeing handing over cash-cow 737 Max planes to China.

The Boeing 787 Dreamliner sits on the tarmac at Boeing Field in Seattle, Washington.
Robert Sorbo | Reuters

Boeing on Thursday handed over a 787 Dreamliner directly to a Chinese airline for the first time since November 2019, a milestone that could open up the possibility of deliveries of the manufacturer’s cash cow, the 737 Max.
The Boeing 787-9 for privately owned Juneyao Airlines departed from outside of Boeing’s Everett, Washington, factory for Shanghai, Boeing said Thursday. The last new delivery of a new Boeing 787 to a Chinese airline was in 2021 through a leasing company.

Boeing sent the aircraft as China’s pause on scores of pending deliveries of the Boeing 737 Max, the company’s bestselling jet, nears its fifth year.
China grounded that jet in March 2019 in the wake of the second fatal crash of the plane in about five months, and other countries followed. The U.S. lifted its ban in 2020 and others later followed suit.
Boeing has been scrambling to increase production and deliveries of new jets, when manufacturers receive the bulk of an airplane’s price.
Just over a third of Boeing’s inventory of about 250 Max planes are dedicated to Chinese airlines, according to Jefferies. Boeing had remarketed some of the other Maxes to other carriers.
Don’t miss these stories from CNBC PRO: More

Sales of new vehicles in the U.S. are expected to increase slightly next year, as the industry normalizes from the coronavirus pandemic and other supply chain problems since 2020.
Forecasters expect auto sales next year to increase by between 1% and 4% to roughly 15.6 million to 16.1 million vehicles sold.
The expected U.S. growth compares with a 2.8% year-over-year increase in auto sales globally forecast by S&P Global Mobility.

New Kia cars are displayed on the sales lot at San Leandro Kia on May 30, 2023 in San Leandro, California.
Justin Sullivan | Getty Images

DETROIT – Sales of new vehicles in the U.S. are expected to increase slightly next year, as the automotive industry continues to normalize from the coronavirus pandemic and other supply chain problems since 2020.
Forecasts from leading automotive data firms are calling for a year-over-year increase of between 1% and 4% to roughly 15.6 million to 16.1 million vehicles sold. Such sales would be the highest since 2019, when more than 17 million new cars and trucks were sold domestically.

Since that time, the auto industry has been battling production and supply chain problems sparked by the global Covid health crisis, with sales of less than 14 million vehicles – the lowest in more than a decade – in 2022.
Even a small increase in U.S. sales could be good for consumers and the economy. It would mean more vehicles are being produced, potentially easing recent affordability concerns amid inflation, high interest rates and record high new vehicle prices.
“While the year ahead holds the promise of further increased inventory and enticing deals that consumers have eagerly awaited, 2023’s high interest rates are expected to linger, provoking conflicting market dynamics.” said Jessica Caldwell, Edmunds’ head of insights.

Pricing power gives way to incentives

Edmunds believes new vehicle pricing power for automakers has peaked, as improved inventory has driven incentives back into the market.
For investors, increased sales are good, but lower prices and rising incentives are expected to be headwinds for many automakers and dealers that have produced record profits in recent years.

“Automakers specifically will weigh one other key consideration in 2024: Are they satisfied with this newly established supply-demand equilibrium, or are they willing and able to push sales volumes closer to prepandemic norms?” Caldwell said.
The expected U.S. growth compares with a 2.8% year-over-year increase in auto sales globally forecast by S&P Global Mobility.
“2024 is expected to be another year of cagey recovery, with the auto industry moving beyond clear supply-side risks, into a murkier macro-led demand environment,” said Colin Couchman, executive director of global light vehicle forecasting at S&P Global Mobility.
Any increase in U.S. sales next year would mark the first sequential sales growth for the automotive industry since 2015-16.
S&P’s U.S. sales forecast is among the highest. It expects sales to reach 15.9 million units in 2024, an estimated increase of roughly 2% from projected sales of 15.5 million units in 2023.
GlobalData, which acquired LMC Automotive, is forecasting a nearly 4% increase in U.S. new vehicle sales to 16.1 million units.
Edmunds expects 15.7 million new cars and trucks to be sold in 2024. That would be a roughly 1% uptick from an estimated 15.5 million cars and trucks sold in 2023.
At the low end, Cox Automotive expects 15.6 million vehicle sales, driven largely by an increase in fleet or commercial sales. Retail sales are expected to be “mostly flat,” according to Cox.
“Overall, we are expecting sales growth to be constrained and weak in 2024 – a bit more normal compared to the chaos of the past three years,” Cox Automotive’s chief economist, Jonathan Smoke, said in a blog post. “As an economist, headline-making swings in economic trends are always interesting to see and analyze, but such turbulence is rarely good news for business over the longer term.”
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James Patten, a North Carolina resident, pleaded guilty to securities fraud charges related to manipulating the stock prices of two publicly traded companies.
One of the firms, Hometown International, had a market capitalization of more than $100 million despite owning just a small, unprofitable deli in Paulsboro, New Jersey.
Two other men, Peter Coker Sr. and son Peter Coker Jr., remain charged in the case in New Jersey federal court.

Your Hometown Deli in Paulsboro, N.J.
Google Earth

A North Carolina ex-convict pleaded guilty to securities fraud in connection with conspiring to manipulate the stock of a company that once had a market capitalization of as high as $100 million despite owning just one, small money-losing deli in southern New Jersey.
The man, disgraced former stockbroker James Patten, also admitted on Wednesday in New Jersey federal court to conspiring with two other men to manipulate the share price of another related shell company, which had no tangible assets. That company’s market cap was even higher than the Hometown International deli company the men controlled.

Prosecutors said that Patten, 64, and the other two defendants conspired over eight years to increase the stock price of Hometown International and the shell company E-Waste to create a false impression of demand for the firms’ shares, and better position them as candidates for so-called reverse mergers with privately owned companies.

Courtroom sketch of James Patten, left, and attorney Ira Sorkin at N.J. District Court in Camden, N.J., Oct. 11, 2022
Source: Elizabeth Williams

The other defendants, Peter Coker Sr. and son Peter Coker Jr., remain charged in the case, in which they have pleaded not guilty.
The scheme relied on a pattern of coordinated stock trading between a relatively small number of accounts nominally held by family members, friends and associates, according to court documents.
As a result, Hometown and E-Waste’s stock prices were artificially inflated by 939% and 19,900%, respectively.
The scheme began in 2014, when Patten suggested the creation of Hometown as an umbrella corporation to a friend, a high school principal and wrestling coach named Paul Morina, to own Your Hometown Deli, which Morina and another person were discussing opening in Paulsboro at the time. Morina and the other deli owner were unaware of Patten’s scheme to manipulate Hometown’s stock, authorities have said.

Hometown Deli, Paulsboro, N.J.
Mike Calia | CNBC

Patten’s guilty plea to securities fraud, and conspiracy to commit securities fraud, could well ratchet up pressure on both Cokers to reach plea deals in the case.
Coker Sr., who lives in North Carolina, remains free on bond, while Coker Jr., a former Hong Kong resident who was arrested as a fugitive in Thailand in January, is being held without bond in a New Jersey jail.
Charges were filed against the trio in September 2022, more than a year after CNBC detailed a series of questionable connections between Hometown and E-Waste, past criminal and civil court issues of Patten and the elder Coker, and eyebrow-raising consulting deals with the companies that benefitted those two men. Your Hometown Deli closed earlier in 2022.
CNBC’s reporting was sparked by a client letter that hedge fund mamager David Einhorn sent clients in April 2021, which highlighted Hometown International’s bizarre stock price given its very meager single asset of the deli.
“The pastrami must be amazing,” Einhorn wrote in that letter.
On the heels of those articles, both Hometown International and E-Waste took the highly unusual step of disavowing their market capitalization, saying there was no basis to support their stock prices. The companies later executed reverse mergers with other firms.

Peter Coker Sr. and his wife Susan Coker at U.S. District Court in Newark, New Jersey, March 15, 2023.
Dan Mangan | CNBC

Patten, who lives in Winston-Salem, faces a maximum possible sentence of 20 years in prison and fines of $5.25 million. He is scheduled to be sentenced on April 23.
His lawyer Ira Sorkin did not immediately respond to a request for comment on Patten’s guilty plea.
Patten previously pleaded guilty in 2010 in New Jersey federal court to a mail fraud charge related to sending a client a false financial statement to cover up bad investments he had made using her money. He was sentenced to 27 months in prison in that earlier case.
Four years earlier, Patten was barred by FINRA, the broker-dealer regulator, from acting as a stockbroker for having failed to comply with an arbitration award of more than $753,000, for violating securities laws, unauthorized trading for churning a client’s account.
Coker Sr. previously was sued for allegedly hiding money from creditors and alleged business-related fraud. He has denied wrongdoing in those cases. More

The rise of generative AI and use of ChatGPT has inspired more retailers and holiday shoppers to experiment with the technology this holiday season.
Yet many of the ways that Walmart, Target, Nordstrom and others use AI is behind the scenes.
AI has also inspired gift generators and become a feature of some consumer electronics.

Manonallard | E+ | Getty Images

For many Americans, it’s the first holiday season when most of the family may know the term “artificial intelligence” if it comes up during Christmas dinner.
Just don’t expect AI to do the heavy lifting for Santa quite yet.

The rise of generative AI — and the use of ChatGPT — has inspired more retailers and holiday shoppers to experiment with the technology this holiday season. But for now, most of the technology’s influence will come in ways consumers won’t see.
Artificial intelligence is expected to influence $194 billion in global online holiday spending, according to an estimate by Salesforce. The software company, which tracks shopping trends, said AI influenced $51 billion of online sales during Cyber Week, the seven-day period from Tuesday, Nov. 21, through Monday, Nov. 27, better known as Cyber Monday.
Much of that AI influence, however, comes through features that shoppers already know, such as product recommendations based on past purchases and searches by similar shoppers.
Customers will have to wait for more transformative uses of AI in future holiday seasons, said Rob Garf, Salesforce’s vice president and general manager of retail and consumer goods. Yet he said AI will ultimately change the customer experience.
As retail workers across stores, call centers and offices can automate more tasks, they could have more free time — and patience — for customers, Garf said. And, he said, as AI understands natural language better, retailers can personalize websites and apps to create digital assistants that suggest items, answer questions and more.

“We are still in early days,” he said. “Retailers are testing and learning, and it’s only a leading indicator of what to come.”
Even as companies hype AI’s potential and investors bet heavily on its future, its limits and risks have come to the forefront as more businesses adopt it.
Here are three major ways that AI is showing up this peak shopping season — and how it may preview the future:

A time-saving and efficiency tool

If you were surprised to find a popular toy in stock at your local store, you may have artificial intelligence to thank.
This season, AI is helping retailers in some major ways behind the scenes. Think of those mundane but critical tasks like ordering the right inventory, crafting more relevant marketing emails or writing detailed product descriptions for a website.
At Walmart, artificial intelligence has shaped decisions about holiday inventory by predicting demand for various items at different stores. For example, the tech can help the company identify a best-selling toy or sweater in a particular region and make sure more are shipped to nearby stores, said Srini Venkatesan, executive vice president of U.S. omni platforms and technology at Walmart.
Target, similarly, is using AI to forecast demand at different stores and predict out-of-stock items, so employees can replenish a shelf before it’s empty.
Nordstrom began using AI to come up with the most efficient routes to get online orders to customers’ doors on time and better understand what shoppers are searching for on its website. For instance, it’s trying to better interpret language, so that a customer’s search for “romantic flowy dresses” leads them to items that best match that aesthetic.
Retailers are also zeroing in on how to use AI to improve productivity, which could reduce the number of workers they need or free up employees’ time to take on other customer-facing tasks. The advancements have also sparked fears that companies will cut back their workforces, a concern that CEOs such as Adobe’s Shantanu Narayen and Walmart’s Doug McMillon have challenged.
Walmart in late August launched its own internal spin on ChatGPT called My Assistant, which more than 50,000 corporate employees can use to craft email pitches or construct slide decks, among other tasks. A company spokesperson declined to say how many employees have used the generative AI tool so far, but said Walmart is training teams on it and suggesting use cases for the tool.
This fall, Amazon also debuted new time-saving features for sellers and advertisers. Instead of getting bogged down with product descriptions, third-party sellers can put in just a few words and sentences and let generative AI do the heavy lifting. Advertisers can also lean on a new tool to generate visually appealing images to accompany a product.

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A personal shopper

One of the biggest game changers that generative AI could bring to shopping is to create a personal assistant that can select the perfect holiday gift, put together an eye-catching outfit or take on other tasks that make life simpler.
That day hasn’t come yet — but there are glimmers of potential.
About 17% of consumers have used ChatGPT or similar AI-powered tools that understand natural language and generate responses for product research and inspiration, according to Salesforce research. About 10% said they would likely use it to help build their holiday shopping lists, its surveys found.
Instead of heading to stores, shoppers can use a growing number of tech tools to see how clothes might look on their body type and skin tone. Google’s Bard, a competitor to the OpenAI- and part-Microsoft owned ChatGPT, introduced a virtual try-on feature this summer. Walmart has a similar tool to see how clothes may look without entering a store.
On Kohl’s website this holiday season, an AI-powered tool called “Storybook Magic” can create a personalized poem and give customized gift suggestions to shoppers. The poem and suggestions are based on information the user shares, such as favorite hobbies or interests of a family member or friend. Customers could also try out the gift generator during a one-day pop-up in New York City’s Bryant Park, a popular tourist attraction with an ice skating rink and Christmas market.
Inside two Simon Property malls — Long Island’s Roosevelt Field Mall and Del Amo Fashion Center in Torrance, California — stumped shoppers can enlist the help of a tablet-carrying worker dressed as an elf with the “HolidAI” tool on weekends from Thanksgiving through Christmas. The elf guides shoppers through questions about the gift recipient’s favorite activities, personality and sense of style, and then gives three recommendations of items available at stores in the mall.
So far this season, though, the personal assistant AI tools have felt more like buzzy marketing plays than transformative changes to the shopping experience. With the bustle at Roosevelt Field, many shoppers walked right by the elves or may have assumed they were helping out with children’s visits to Santa nearby.
Simon Property declined an interview about the tool, after it issued a splashy press release about it early in the holiday season. Kohl’s declined to say how many people used the gift generator, but said in a statement that it wanted to make holiday shopping easier and more enjoyable.

On Walmart’s website, new search and discovery features powered by AI are on their way, Venkatesan said. The retailer is ramping up a feature that simplifies customers’ search for multiple related items, such as allowing them to prepare for a child’s birthday party or a camping trip so they can find what they need with one search and on a single webpage.
It’s also in the early stages of developing a virtual design assistant. Customers could upload a photo of their living room and get suggested decorations, based on their style and budget. When they see a look they like, they can buy the whole collection of items.
“The end goal is we want to be the customer’s concierge,” Venkatesan said.

Google Pixel 8 and Google Pixel 8 Pro phones are displayed during a Google product launch event in New York on October 4, 2023.
Ed Jones | AFP | Getty Images

A high-tech product

AI could drive sales for some retailers — if it inspires customers to buy or upgrade consumer electronics.
Best Buy, for example, has products on shelves this holiday season with AI features. Those include the Google Pixel 8 and Pixel 8 Pro smartphones and Google Chromebook Plus, which allow people to use AI editing to cut background noise out of a video or merge photos into group photos.
Sunglasses brand Ray-Ban is out with its second generation of high-tech glasses with Meta. The glasses, which start at $299, have AI features similar to voice-activated assistants such as Apple’s Siri or Amazon’s Echo. They can answer questions when the user says “Hey Meta” and can translate a street sign into another language.
And Microsoft Copilot, which uses AI to automate writing, editing and more across Microsoft programs such as Outlook, Word and Excel, can be tacked on and used in all Microsoft devices with Windows 11. Many of the tasks, such as summarizing a video-call meeting, boost productivity or save time.
Big-box retailers and warehouse clubs, including Target, Walmart and Costco, sell some of those products, too.
Yet those AI-related items are unlikely to be at the top of many shoppers’ wish lists this holiday season. Consumer electronics sales have hit a lull after many people upgraded devices and decked out home offices during the pandemic. Plus, the category tends to come with a steeper price tag, and people have pulled back on big-ticket items while dealing with higher prices for food, housing and more.
In November, Best Buy cut its full-year forecast, saying it expects comparable sales to decline by between 6% and 7.5%. Yet on a call with reporters, CEO Corie Barry said sales should snap back in the second half of the year with the help of innovation, including generative AI. More