Business

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased last week to 7.41%, from 7.31%.
Applications to refinance a home loan fell 1% for the week and were 21% lower than they were one year ago.
Applications for a mortgage to purchase a home fell 2% for the week and were 27% lower than the same week one year ago.

Ryan Ratliff (L), Real Estate Sales Associate with Re/Max Advance Realty, shows Ryan Paredes (R) and Ariadna Paredes a home for sale on April 20, 2023 in Cutler Bay, Florida. 
Joe Raedle | Getty Images News | Getty Images

Mortgage interest rates just hit a level not seen since the year 2000. As a result, mortgage demand is now sitting near a 27-year low.
Total mortgage application volume fell 1.3% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was 25.5% lower than the same week one year ago.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 7.41%, from 7.31%, with points decreasing to 0.71 from 0.72 (including the origination fee) for loans with a 20% down payment. The rate was 6.52% one year ago.
The 30-year fixed jumbo mortgage rate increased to 7.34%, the highest rate in the history of the MBA’s jumbo rate series dating back to 2011.
“Based on the FOMC’s most recent projections, rates are expected to be higher for longer, which drove the increase in Treasury yields,” said Joel Kan, an MBA economist, referencing the Federal Open Market Committee. “Overall applications declined, as both prospective homebuyers and homeowners continue to feel the impact of these elevated rates.”
Applications to refinance a home loan fell 1% for the week and were 21% lower than they were one year ago. After record low interest rates throughout the first few years of the pandemic, and a refinance boom, there are precious few borrowers now with mortgage rates high enough to benefit from a refinance.
Applications for a mortgage to purchase a home fell 2% for the week and were 27% lower than the same week year over year.

Today’s potential buyers are facing an unprecedented dynamic of a historically low supply of homes for sale, coupled with both rising interest rates and rising prices. Higher interest rates historically throw cold water on home prices, but the supply and demand imbalance is so severe that it is pushing prices higher even though more and more buyers are unable to afford a home.
Interest rates continued to move higher this week, according to a separate survey from Mortgage News Daily. Even sales of newly built homes, which had been rising due to the short supply on the resale market, took a hit in August, according to another report this week. Sales dropped nearly 9% in August from July’s pace, hitting the lowest level since March. More

Union leaders “voted unanimously to lift the restraining order and end the strike as of 12:01 am PT/3:01 am ET on Wednesday, September 27th,” the WGA said in a statement.
The deal will last until May 2026 and includes a 5% minimum pay increase upon the ratification of the contract. Additional bumps will occur in 2024 and 2025.
According to the tentative deal, AI cannot write or rewrite literary material and AI-generated material will not be considered source material.
When it comes to streaming, the guild negotiated a new residual based on viewership.

Striking WGA (Writers Guild of America) members picket with striking SAG-AFTRA members outside Paramount Studios on September 18, 2023 in Los Angeles, California.
Mario Tama | Getty Images

Hollywood writers and studios have finalized the language of a tentative contract that will lead to the end to a nearly 150-day labor strike.
Union leaders “voted unanimously to lift the restraining order and end the strike as of 12:01 am PT/3:01 am ET on Wednesday, September 27th,” the WGA said in a statement.

Talks between the Writers Guild of America and the Alliance of Motion Picture and Television Producers, which includes top studios like Disney, Paramount, Universal and Warner Bros. Discovery, resumed after months of starts and stops, ultimately leading to a preliminary deal.
The deal will last until May 2026 and includes a 5% minimum pay increase upon the ratification of the contract. Another 4% bump will occur on May 2, 2024, and another 3.5% increase will be instituted on May 5, 2025.
Writers were able to gain significant protections against the use of artificial intelligence. Namely, AI cannot write or rewrite literary material and AI-generated material will not be considered source material.
When it comes to streaming, the guild negotiated a new residual based on viewership. High budget subscription video on demand series and films that are viewed by 20% or more of the service’s domestic subscribers in the first 90 days of release get a bonus equal to 50% of the fixed domestic and foreign residual. Views are calculated by hours streamed domestically of the season or film divided by the runtime.
This new structure will go into effect on Jan. 1 and means writers would receive a bonus of $9,031 for a half-hour episode, $16,415 for a one-hour episode, or $40,500 for a streaming feature with a budget of over $30 million budget.

Streamers will also provide the guild the total number of hours streamed both domestically and internationally for self-produced high budget streaming programs like Netflix’s original series.
Across the board, scribes will see an increased contribution rate to their health and pensions as well as increased contributions for writing teams.
The agreement also improved screenwriter compensation, writers’ room minimums and renewed a $250,000 showrunner training program, among other items.

The negotiating committee recommended the agreement and sent it to the Writers Guild of America West Board and the Writers Guild of America East Council for approval. Both the board and council voted to authorize a contract ratification vote by membership.
WGA members will have until Oct. 9 to cast their votes on the contract, the union said.
Once negotiations are wrapped up with writers, the AMPTP will need to pivot to negotiations with the Screen Actors Guild-American Federation of Television and Radio Artists. The acting guild’s members have been on strike since mid-July and are seeking contract updates similar to those requested by the writers.
The WGA contract could act as a template for SAG-AFTRA to draft its own deal with Hollywood studios.
Similar to writers, actors are looking to improve wages, working conditions, and health and pension benefits, as well as establish guardrails for the use of AI in future television and film productions. Additionally, the union is seeking more transparency from streaming services about viewership so that residual payments can be made equitable to linear TV.
SAG-AFTRA has also looked to standardize the self-tape process, which became popular during the pandemic. Previously, actors would have an even playing field with in-person camera tests, but in recent years, actors have seen inequity in auditioning between those who can afford quality camera and lighting equipment and those who can’t.
Disclosure: Comcast is the parent company of NBCUniversal and CNBC. NBCUniversal is a member of the Alliance of Motion Picture and Television Producers. More

Costco on Tuesday reported quarterly earnings that topped Wall Street’s expectations.
Comparable sales for the company rose 1.1% year over year but only 0.2% in the U.S.
Costco is enjoying strong grocery sales but seeing weaker trends in discretionary items.

Exterior view of a Costco store on August 18, 2020 in Teterboro, New Jersey.
Kena Betancur | Corbis News | Getty Images

Costco on Tuesday reported quarterly earnings that topped Wall Street’s expectations, as shoppers turned to the membership club for groceries but bought fewer big-ticket items.
On an earnings call, Chief Financial Officer Richard Galanti said shoppers made more trips to the retailer’s stores, even as they spent less. He said sales of pricier items in the U.S., outside of food, were weaker and falling gas prices also weighed on revenue.

Traffic rose 5.2% worldwide and 5% in the U.S. on a year-over-year basis. Costco’s average transaction amount in the quarter dropped nearly 4% worldwide and 4.5% in the U.S., he said.
Here’s what the membership-based warehouse club reported for the three-month period that ended Sept. 3 compared with what analyst were expecting, according to consensus estimates from LSEG, formerly known as Refinitiv:

Earnings per share: $4.86 vs. $4.79 expected
Revenue: $78.9 billion vs. $77.9 billion expected

Costco’s net income for the fiscal fourth quarter rose to $2.2 billion, or $4.86 per share, compared with $1.87 billion, or $4.20 per share, a year earlier.
Comparable sales for the company rose 1.1% year over year but only 0.2% in the U.S. Excluding changes in gas prices, the metric rose 3.8% overall and 3.1% in the U.S.
Costco has gained momentum in the past three years, as membership-based warehouse clubs benefited from dynamics such as more Americans cooking from home and more millennials moving into suburban homes with bigger pantries during the pandemic. Inflation has also driven some shoppers to sign up and renew their memberships to clubs, including Walmart-owned Sam’s Club and BJ’s Wholesale Club.

Those favorable membership trends continued in the quarter. Costco ended the period with 71 million paid household members, up nearly 8% from a year ago. That growth outpaced its rate of new store openings, which grew by slightly under 3%.
Costco has also gotten more of those members to spring for its pricier membership. The higher-tier, called Executive Membership, costs $120 on an annual basis compared to $60 for the typical annual membership, and includes some additional perks.
As of the end quarter, Costco had 32.3 million paid executive memberships, an increase of 981,000 since the end of the prior quarter. Those higher-tier members now account for slightly over 45% of all paid membership, Galanti said. They also account for about 73% of its global sales, he said.
In recent quarters, even Costco has spoken about consumers pulling back on some big-ticket and discretionary items, as grocery bills and housing costs remain elevated.
That trend has weighed in particular on Costco’s digital sales. E-commerce sales declined 0.8% compared with the year-ago period. On the earnings call, Galanti said customers are buying less of the items that tend to make up a bigger part of the company’s online sales, such as furniture, small electronics and jewelry.
But some discretionary items have popped on the company’s website, Galanti said. Sales of appliances rose more than 30% year over year in the quarter. And, he added, the company has had trouble keeping a new offering in stock: one ounce gold bars.
“When we load them on the site, they’re typically gone within a few hours and we limit two per member,” Galanti said.
Costco echoed a trend seen at rival retailers, including Walmart and Target: Groceries are the category driving sales.
Costco has also tried new approaches to get customers to toss more items in the basket when they’re shopping aisles outside of the grocery department, Galanti said. The retailer has added small-ticket items, such as cheaper, impulse-driven snacks.
It has kept merchandise fresh by carrying popular gaming systems and by the early debut of Christmas items. So far, trees, toys and decor have sold well, Galanti said.
In the U.S., Costco’s biggest market, sales trends have slowed. The majority of Costco’s clubs — nearly 600 of the company’s 861 warehouses — are in the U.S. and Puerto Rico.
In the year-ago fiscal fourth quarter, comparable sales rose 15.8% in the U.S., but since then they have largely decelerated. In the past two quarters, comparable sales — an industry metric that takes out the effect of store openings and closures — were roughly flat in the U.S. from the prior-year periods.
Investors have been anticipating a membership fee hike for Costco that hasn’t occurred. Its last bump came in June 2017, and based on its typical practice, the retailer was due to increase it in early 2023. Those fees drive the bulk of Costco’s revenue.
On the earnings call, an analyst asked if a fee increase is part of the retailer’s fiscal plan.
Galanti said a hike in the amount that members pay is “a question of when, not if.” But he declined to specify when that may be.
In addition, Costco plans to open 10 new stores in the next three months, including nine in the U.S. and one in Canada, Galanti said. He said it finished the fiscal year with 23 net new locations, including stores in China, Japan and Australia. 
Shares of Costco have climbed about 21% so far this year, outperforming the 11% gains of the S&P 500. The company’s stock closed on Tuesday at $552.96, down about 1%. More

President Joe Biden visited a picket line in Michigan following a public invitation from UAW President Shawn Fain.
Former President Donald Trump, the front-runner among Republicans in the 2024 presidential race, is scheduled to hold a rally Wednesday night at an auto supplier in Clinton Township, Michigan.
Michigan voters helped both Biden and Trump in winning the White House during the past two presidential elections, in 2020 and 2016, respectively.

DETROIT — Strikes by the United Auto Workers union against General Motors, Ford Motor and Stellantis will get the presidential treatment this week in Michigan. Twice, in fact.
President Joe Biden visited a picket line Tuesday at a GM parts facility in Belleville following a public invitation Friday from UAW President Shawn Fain, who joined Biden for the visit. Former President Donald Trump, the front-runner among Republicans in the 2024 presidential race, is scheduled to hold a rally Wednesday night at an auto supplier in Clinton Township, Michigan.

Biden and Trump are effectively tied in the polls over a year out from the election. Each 2024 presidential candidate is trying to win over blue-collar voters such as Darius Collier, one of about 18,300 autoworkers currently on strike, who says he’s “indifferent” about the candidates.

President Joe Biden speaks next to Shawn Fain, president of the United Auto Workers, as he joins striking members of the union on the picket line outside GM’s Willow Run Distribution Center in Bellville, Michigan, Sept. 26, 2023.
Evelyn Hockstein | Reuters

“It would be good if they actually show the support that we need to get through this,” said Collier, whose Mopar facility in Centerline, Michigan, is one of 10 parts and distribution centers set for potential closure under a recent contract proposal by Stellantis to consolidate facilities.
Michigan voters helped both Biden and Trump in winning the White House during the past two presidential elections, in 2020 and 2016, respectively. They’ve both gained union support, but in different ways.

Biden endorsement withheld

While the UAW has historically supported Democrats, including Biden in 2020, Fain is withholding the union’s reendorsement of the president, who has touted himself as the “most pro-union president in American history.” Trump has won support of many rank-and-file union members.
“Both President Trump and President Biden understand the importance that Michigan has electorally and there’s a realization that elections can be very close, so they want to be seen frequently,” said Mark Burton, a partner at Honigan law firm and a former chief strategist of Michigan Gov. Gretchen Whitmer, a Democrat. “The UAW strike is a wonderful, high-publicity moment to deploy their message and be seen once again.”

UAW members Niko Shinn, front, and Darius Collier, back, walk a picket line outside a Mopar facility owned by automaker Stellantis in Centerline, Michigan, Sept. 25, 2023.
Michael Wayland / CNBC

Michigan Democrats such as Whitmer and U.S. Rep. Debbie Dingell have attended UAW rallies since the UAW’s Sept. 15 strikes began. However, Fain’s politician of choice has been Sen. Bernie Sanders, who ran against Biden in 2020.
Fain has appeared with the independent senator from Vermont in Washington, D.C., and during a recent UAW rally in Detroit. He also has echoed Sanders’ messages of fighting “corporate greed” and has positioned the UAW’s collective bargaining with the Detroit automakers as a “war” between the billionaire and blue-collar classes.
Fain invited Biden to join the UAW picket lines days after Trump announced he would skip the second GOP debate to hold a rally in Macomb County, Michigan, where a large contingent of blue-collar autoworkers live.
“We invite and encourage everyone who supports our cause to join us on the picket line, from our friends and families all the way up to the president of the United States,” Fain said Friday during a Facebook Live stream.
Fain has not expressed much support for Biden, many times saying he needs to better prove his claim of being the “most pro-union president.” However, Fain’s made clear his position on Trump.

“Every fiber of our union is being poured into fighting the billionaire class and an economy that enriches people like Donald Trump at the expense of workers,” Fain said last week in a statement. “We can’t keep electing billionaires and millionaires that don’t have any understanding what it is like to live paycheck to paycheck and struggle to get by and expecting them to solve the problems of the working class.”
The UAW on Tuesday issued a largely generic press release ahead of Biden’s visit, saying it will “mark the first time a sitting U.S. President has joined striking workers on a picket line,” followed by several paragraphs about the union’s strike and no statement from Fain.
Fain, on the picket line with Biden at the Willow Run Redistribution Center, called the president joining the picket line a “historic moment.” But he did not officially endorse the commander-in-chief for next year’s presidential election.

President Joe Biden addresses striking members of the United Auto Workers union at a picket line outside a General Motors Service Parts Operations plant in Belleville, Michigan, on Sept. 26, 2023.
Jim Watson | AFP | Getty Images

“Today, I just want to take a moment to stand with all of you with our president and say thank you to the president. Thank you, Mr. President, for coming,” Fain said Tuesday. “We know the president will do right by the working class. And when we do right by the working class, you can leave the rest to us because we’re going to take care of this business.”
UAW is not affiliated with Trump’s Wednesday rally at Drake Enterprises, which is reportedly a non-union supplier of engine, transmission and other components for heavy truck, agriculture and automotive markets. But UAW members have previously attended and participated in Trump’s events in Michigan.

Trump stokes EV anxieties

Fain has previously said a second Trump term in the White House would be a “disaster.” However, Trump, as he has in the past, is gaining blue-collar support.
“I like Trump,” said Niko Shinn, another autoworker who’s currently on strike at the Mopar plant. “He’s a good businessman and seems like he knows more about, not politics, but negotiating and stuff like that.”
Trump’s support among union members has increased as Biden’s has fallen in recent months, according to Michigan polling company EPIC·MRA. Trump led Biden 46% to 43% among union members in an August survey, after Biden led Trump 51% to 42% in June, according to Bernie Porn, president of EPIC·MRA.
“With union members, he has been so supportive of just about everything that union members want. The one thing that they’re concerned about is the push towards electric vehicles because they’re concerned about the fewer numbers of employees it takes to build an electric vehicle,” Porn said.

Electric vehicles, or EVs, are expected to require less labor and parts than the traditional vehicles equipped with internal combustion engines. They are expected to be one of several talking points Trump discusses during his Wednesday rally.
“President Trump’s rhetoric in his position stances, I think, stands clearly with the vast majority of the rank-and-file of the UAW who are concerned about their jobs being eliminated by this Biden administration forced transition to electric vehicles,” said Jamie Roe, a Republican strategist based in Macomb County, where Trump’s rally is being held.

UAW workers picket outside Ford’s Wayne Assembly Plant in Wayne, Michigan, Sept. 26, 2023.
Scott Olson | Getty Images

Fain has said the union is withholding a reelection endorsement for Biden until the union’s concerns about the auto industry’s transition to all-electric vehicles are addressed.
Biden’s visit may be an olive branch to assist in the UAW’s eventual endorsement as well as potential leverage for the union in its ongoing negotiations with the Detroit automakers.
“I think the president’s visit, particularly if Shawn Fain is joining [Biden] on a picket line, I think it is another stroke of strategy that increases the pressure and increases the overall strength of the union when it comes to the actual negotiations with the autos,” Burton said. More

Peloton co-founder and Chief Product Officer Tom Cortese is leaving the company after nearly 12 years.
He’ll be replaced by Silicon Valley veteran Nick Caldwell, who previously held positions at Twitter, Google and Microsoft.
“After nearly 12 years of pouring myself into Peloton and serving our Members, I have decided it is time to move on and create space for new perspectives,” Cortese said in a news release.

People walk past a Peloton store in Coral Gables, Florida, on Jan. 20, 2022.
Joe Raedle | Getty Images

Peloton co-founder and Chief Product Officer Tom Cortese is leaving the company and will be replaced by longtime Silicon Valley veteran Nick Caldwell, the company announced Tuesday. 
Cortese, who helped found the connected fitness company alongside former CEO John Foley in 2012, will move into an advisory role beginning Nov. 1, the company said. 

“After nearly 12 years of pouring myself into Peloton and serving our Members, I have decided it is time to move on and create space for new perspectives,” Cortese said in a news release.
“I’m eager for new growth for Peloton and for me personally, but I’m also excited to support and watch this next phase of Peloton’s evolution. I could not be more proud of what we have accomplished, together.”
Caldwell most recently served on the board of tech companies Bitly, HubSpot and True Search and previously did stints at Twitter, Google, Reddit and Microsoft, where he worked for nearly 16 years at the start of his career, according to his LinkedIn profile. 
He’ll oversee global product development and will start the new role Nov. 1. 
“I want to thank Tom for his tireless dedication since launching Peloton nearly 12 years ago as a Co-Founder of the business. We simply wouldn’t be here today without his contributions,” CEO Barry McCarthy said in a statement. “Nick brings impressive engineering, design, and product experience to the Peloton team. Nick joins us at an exciting time as we lean into growing our subscriber base online and on our connected fitness hardware.”

Churn at the top

The news comes more than a year into McCarthy’s stint as Peloton’s CEO. Since he took over, he has tapped Leslie Berland as the company’s marketing chief and Dalana Brand as its chief people officer, among other hires. Both Berland and Brand were executives at Twitter before joining Peloton. 
With Cortese’s departure, just two executives from Peloton’s early days remain in its C-suite. Jennifer Cotter, the company’s chief content officer, and Dion Camp Sanders, its chief emerging business officer, have both been with the company since Foley was at the helm. 
During an interview with CNBC earlier this year, Cortese recalled Peloton’s early days and what inspired him and Foley to start the business.

Peloton co-founder Tom Cortese.
Source: Peloton

“[In] 2013, so 10 years ago now, I was standing in the Short Hills Mall in New Jersey, my kids thinking that I was a mall retail guy, and we were selling people on the idea of being able to access energetic, remarkable fitness from the most convenient place on Earth: their home,” Cortese told CNBC.
“The reason we were doing that is because what we saw happening in the real world … brick and mortar, was that people were turning to boutique studio fitness as something that was starting to excite them, right? So just going to the gym wasn’t quite doing it … hence the Peloton Bike, and all that goes with it, was born.”
Cortese started as the company’s chief operating officer and took over as product chief in August 2021, according to his LinkedIn. Most recently, he was involved in the development of Peloton’s app and the introduction of new product features on its connected fitness products.

Shift toward subscription

Back in the company’s early days, Peloton was a product-first retailer that made the bulk of its revenue selling its pricey connected fitness products, including its Bike, Bike+ and Tread, as an alternative to the gym. 
However, in the years since, Peloton’s products have undergone numerous recalls for a series of manufacturing flaws, some that left customers injured. 
Its Tread+ treadmill was recalled after a child was killed. The company has since been mired in fines and legal battles related to its products and their recalls. 
When Peloton last reported earnings Aug. 23, executives said they believe the most recent recall of its Bike seat post led to increased membership churn and was costing the company far more than it anticipated. 
These days, subscription revenue is Peloton’s primary revenue driver. Earlier this year, it announced a massive brand overhaul that elevated Peloton’s subscription offerings and signaled the company is just as invested in its app as it is its hardware. 
While the company frequently insists hardware is still one of its primary focus areas, new product development appears to have slowed.
When asked earlier this year if the company had plans to introduce new hardware, Cortese hinted at more to come.
“We maintain a strong hardware development team,” he said. “They are certainly not twiddling their thumbs.” More

Target said it will close nine stores across the country after struggling with crime and safety threats at those locations.
Target, which has nearly 2,000 stores in the U.S., has been outspoken about organized retail crime at its stores and said theft has driven higher levels of shrink.
Target is closing locations in New York City, Seattle, San Francisco and Portland.

A Target department store in North Miami Beach, Florida, on May 17, 2023.
Joe Raedle | Getty Images

Target said Tuesday that it will close nine stores in major cities across the country, citing violence, theft and organized retail crime.
The company will close one store in New York City’s Harlem neighborhood, two locations in Seattle, three stores in the San Francisco-Oakland area and three more in Portland, Oregon. The discounter said it will shutter the stores for good on Oct. 21.

“We cannot continue operating these stores because theft and organized retail crime are threatening the safety of our team and guests, and contributing to unsustainable business performance,” Target said in a news release.
“We know that our stores serve an important role in their communities, but we can only be successful if the working and shopping environment is safe for all.” 
Target, which has nearly 2,000 stores in the U.S., has been outspoken about organized retail crime at its stores. It has said theft has driven higher levels of shrink, an industry term used to describe losses from goods that were damaged, misplaced or stolen.
With its announcement Tuesday, Target also stands apart in its decision to both shutter stores and to explicitly blame that decision on retail crime.
When the company reported fiscal second-quarter earnings in mid-May, CEO Brian Cornell said organized retail crime had shot up at its stores. He added shrink overall is expected to reduce Target’s full-year profitability by more than $500 million compared to the year-ago period. 

When asked if the company plans to close stores because of rising shrink, Cornell stressed Target’s reluctance to shutter locations.
“We do not want to close stores. We know how important our stores are. They create local jobs, they generate taxes, they’re very important for those local shoppers, and they play a critical role in communities across the country,” Cornell said on a call with reporters in May.
“We’ll continue to do everything in our power to keep our doors open,” he added. “At the same time, we’ll be closely monitoring the safety of our team and guests as well as the financial impact to our business as we determine the right path forward at Target.” 
The retail executive’s comments led other companies to speak out on the problem, too, and to advocate for legislative reform. Following the passage of the Inform Act, which requires online marketplaces to disclose the identities of certain high-volume sellers to deter the sale of stolen and counterfeit goods, retailers and trade associations are now pushing for the passage of another bill called the Combating Organized Retail Crime Act. 
The bill, which Target said it supports in Tuesday’s news release, proposes stiffer penalties for theft offenses and calls for a change in the threshold prosecutors must meet before bringing federal theft cases. It would also provide retailers with a formal venue to exchange information with one another and law enforcement through the proposed Organized Retail Crime Coordination Center.
Since 2022, at least nine states — six so far this year — have passed similar laws to impose harsher penalties for organized retail crime offenses. Behind the sweep of legislation are retailers and trade associations, which are using their collective power to get the bills written and past the finish line.
Store closures, or the threat of them, have been a major factor in retailers convincing lawmakers to get on board, policy experts previously told CNBC. 

Target’s mounting struggles go deeper than theft

Target’s business has struggled for more than a year with company-specific challenges, including a glut of unsold inventory, backlash to its Pride merchandise collection and a pullback in consumer spending on discretionary items such as apparel and home goods.
Over the past two decades, Target had not mentioned shrink hitting its margins during earnings calls until August 2022, when the company’s and other retailers’ profits were getting hurt by higher markdowns while trying to unload unwanted merchandise, CNBC previously reported. When inventories rise, shrink tends to increase as well, industry experts told CNBC.
The company previously said its shrink numbers vary widely by location and do not correlate with inventory levels.
Target said Tuesday that it has taken a variety of steps to stop crime at its stores. Those measures include adding locked cases for some merchandise, hiring third-party guard services, training store leaders about how to de-escalate potentially dangerous situations and investing in cyber defense to stop fraud or organized crime.
Yet, Target said at the affected stores, a larger security team and theft-deterrent tools weren’t enough.
“Despite our efforts, unfortunately, we continue to face fundamental challenges to operating these stores safely and successfully,” Target said in the release.
The company said it will work with employees at the closed stores to give them an opportunity to transfer to another Target location. 
It’s not clear what actions the company is taking to improve inventory management. 

Despite store closures, shrink data is murky

Target announced the store closures on the same day the National Retail Federation, the industry’s major trade association, released its latest National Retail Security Survey. The survey found the effect of theft on retailers’ bottom lines is about the same as it has been for years.
Total retail shrink grew to more than $112 billion in 2022, up from $93.9 billion the year before, according to the survey. The metric is calculated using total U.S. retail sales and generally rises as retail sales climb. 
When reported as a percentage of sales as is commonly done, average annual shrink increased to 1.57%, up from 1.44% in 2021. The share is largely in line with past years and is considered a normal and healthy level of shrink by industry experts. Generally, retailers plan for about 1% to 2% of shrink each year. 
Target joins a growing list of retailers that have shuttered stores in major cities, including Walmart, Nordstrom and Walgreens Boots Alliance.
Nordstrom closed its San Francisco flagship store and Nordstrom Rack location in the city this summer after operating there for more than 35 years.
Yet, the company cited market dynamics rather than crime. In a message to employees at the time, then-Chief Stores Officer Jamie Nordstrom said changes in downtown San Francisco had hurt “customer foot traffic to our stores and our ability to operate successfully.”
A brazen smash and grab in August at one of Nordstrom’s other locations, a store in Los Angeles, made national headlines.
On an earnings call in late August, the company was asked about the widely circulated video of the crime. CEO Erik Nordstrom described the incident as “disturbing to all of us,” and said losses from theft are “at historical highs.” But, he added, theft is included in company guidance and not higher than expected.
In a December interview with CNBC, Walmart CEO Doug McMillon warned that stores will close if shoplifters aren’t aggressively prosecuted.
Walmart has also closed some stores, including four in Chicago in April, but didn’t blame theft. In a news release at the time, the retailer said it has struggled to make the locations profitable and challenges have intensified. It said the stores “lose tens of millions of dollars a year, and their annual losses nearly doubled in just the last five years.”
Walgreens, similar to Target, specifically pointed to organized retail crime as the reason for shuttering some stores in San Francisco in 2021. More

THE RANKS of foreign businesspeople in Shanghai are much depleted these days. Those who remain closely monitor the comings and goings of multinational executives. So all eyes were on the Bund Summit, a globally minded economic and financial forum held in the city from September 22nd to 24th. In previous years the forum brought in A-list chief executives from around the world. The latest edition, the first since China lifted its draconian covid-19 restrictions and declared itself open for business, was expected to draw high-powered crowds once again.Not so. Nearly ten months in, President Xi Jinping’s grand reopening from his zero-covid fiasco has been a big disappointment. Foreign investors believed that 2022, when quarantines threw China into a deep freeze, would be the bottom for sour sentiment. Instead the Chinese economy is creaking and cross-border investment flows have weakened. Foreign businesses have been raided by the authorities. On September 25th the Financial Times reported that Charles Wang Zhonghe, the China chairman of investment banking at Nomura International, a Japanese bank, had been banned from leaving China. Many foreign investors are skipping trips and putting off investment plans.Those that are showing up in Beijing and Shanghai this year say the damage wrought by zero-covid is palpable. Some of this, like the deteriorating English-language skills of hotel workers, is superficial. Other problems cut to the bone. Local staff have been deprived of foreign travel for years, and so from mingling with a previously steady stream of colleagues, engineers and scientists. China’s legions of well-trained white-collared workers appear less prepared to engage with the rest of the world than they did a few years ago, the visitors lament.Communication between the government and foreign investors is even more stilted. Local officials are less willing to have open discussions with visiting investors. Most queries from foreigners receive boilerplate responses. That is particularly unhelpful at a time when dizzyingly complex new compliance rules for things like data transfers pose big legal risks for companies.Perhaps as a consequence, few foreigners bother coming. Inbound travel is still shockingly depressed. The number of passengers entering the country on international flights in the first half of the year was down by more than three-quarters compared with the same period in 2019. As late as July the figure was still only just over 50%. Western tourists have been almost entirely missing from China this year, depriving the country of useful interpersonal connections. Group travel from America was down by about 99% in the second quarter of the year, compared with 2019.image: The EconomistBusiness travel, which ground to an almost complete halt in 2022 as China issued few visas and required up to three weeks of quarantine, is far below Chinese expectations and increasing only at a snail’s pace. Harrington Zhang and colleagues at Nomura warn in a recent report (published before their colleague’s predicament came to light) that the “lack of business contacts and civilian exchanges between China and the outside world may have more profound implications for China’s economic growth potential in the years ahead”. Already foreign direct investment collapsed to $4.9bn in the second quarter, down by 94% from the same period in 2021. Just $4.4bn in foreign venture capital flowed into China in the first half of the year, down from about $55bn for all of 2021, according to PitchBook, a data provider (see chart).Those who stuck it out during the punitive zero-covid years are re-evaluting their commitment to China. According to a survey of American companies in the country by the American Chamber of Commerce, released on September 19th, just 68% were profitable last year. Only 52% think this year will be better. Roughly as many were optimistic about the next five years, a record low. Some 40% of companies say they are moving investments elsewhere or planning to do so.The chamber noted that “2023 was supposed to be the year investor confidence and optimism bounced back”. But, it added grimly, that rebound has simply “not materialised”. Instead, business sentiment has “continued to deteriorate”. Merely flinging the door to the world open has not worked. Meanwhile, the window to meaningfully re-engage with the West is closing. ■ More

Women spend $15.4 billion more on out-of-pocket expenses annually compared to their male co-workers according to an analysis from Deloitte Consulting.
While women use about 10% more medical care, they spend 18% more out of pocket.
Deloitte analysts say employers could close that cost-sharing gap by redesigning benefits at a cost of about $11 per month per employee.

Luis Alvarez | Digitalvision | Getty Images

High health-care costs are hitting women in the U.S. workforce much harder than men.
Working women spend $15.4 billion more in out-of-pocket health expenses annually compared to their male counterparts, according to a new analysis of employer-sponsored health plans from Deloitte Consulting.

The study found women spend 18% more than men on copays and deductibles, on average. That’s after excluding costs associated with pregnancy and maternity, according to the new report, and despite total health expenditures for women that are just 10% higher than for men.
“This is a problem we’re identifying that business leaders can actually solve within their own organizations. The takeaway being that women get paid less, and that they pay more for health care,” said Dr. Kulleni Gebreyes, U.S. chief health equity officer at Deloitte Consulting.
The result, she said, is a disproportionate financial burden.
Women tend to utilize more medical care than men, in part due to annual gynecological exams and the high costs of breast cancer imaging.
While annual exams are often fully covered, follow-ups that can result from those visits incur copays and trigger deductibles. Many of those services are often more expensive than the typical deductible, leading to a higher cost-sharing burden.    

Deloitte analysts say employers could close the $15.4 billion cost-sharing gender gap through enhanced benefits design, at an estimated cost of $133 per employee per year, or about $11 per month.
“Our ask is that companies look at their data; examine if and where the gaps exist and step back to have more of an equitable design process to come up with what are the health benefits that would meet the needs of their workforce,” said Gebreyes. More