Business

On August 21st Arm, a chipmaker whose designs power most of the world’s smartphones, filed for an initial public offering (ipo) that could turn out to be the largest of the year. The route taken by the British firm, which is owned by SoftBank Group, a Japanese technology conglomerate, has not been straightforward. In 2016 SoftBank acquired Arm, then listed on the London Stock Exchange, for $31bn. Four years later a proposed $40bn sale to Nvidia, another chipmaker, was squashed by competition authorities. Now a blockbuster listing is in prospect that would also signal a revival of an ipo market that has been largely dormant since 2022.Arm will now be listed on America’s tech-heavy Nasdaq as soon as early September, ending a period of uncertainty for the company. SoftBank will retain majority control and pocket all the proceeds from the listing. The ipo filing does not specify how much Arm intends to raise or the chipmaker’s worth, though in August SoftBank paid $16bn for a 25% stake which was held by the group’s Vision Fund, a tech investment vehicle, putting Arm’s value at around $64bn. The speculation is that it will seek around $60bn-70bn, or around 21-25 times annual sales. That would place it closer to the lofty multiples of Nvidia, the leader of the artificial-intelligence gold rush, than the chasing pack (see chart).The ubiquity of Arm’s chip designs may seem to justify a juicy valuation. Unlike its competitors, which design, manufacture and sell chips, Arm deals only in intellectual property. It makes money by licensing its designs, which customers can modify if required, and takes a small cut from every chip built. Using Arm’s off-the-shelf designs allows companies to build a processor at a fraction of the cost of designing it themselves. As a result, its chips are everywhere.Its technology sits within 99% of the world’s smartphones. In devices from industrial sensors to smart toasters or anything else that now connects to the internet, its designs feature in 65% of their processors. In the automotive sector Arm has a 41% market share and even in the lucrative cloud-computing market, long dominated by Intel, Arm-based processors account for 10% of the chips sold.The ai boom brightens Arm’s prospects. Earlier in August Nvidia unveiled Grace Hopper, a new chip that combines an Arm-based central processing unit (cpu) with its graphics-processing unit (gpu). The fully integrated chip promises to run bigger and faster versions of the language models that are trained on text from the internet to produce human-like output. And as Sara Russo of Bernstein, a broker, points out, as ai moves from data centres to consumer apps, devices capable of running ai functions using less energy will be needed. Arm, with its expertise in low-power, high-performance chip design, should be in a good position to meet the demand.ai hype is one thing. But other tech trends look less encouraging. Begin with sluggish demand. The majority of Arm’s sales come from processors for smartphones, cars and other connected devices. Sales of these chips have lately been weaker than expected. In August Qualcomm, an American chipmaker that specialises in smartphone processors, reported a 23% drop in sales in the most recent quarter compared with a year earlier. It expects the downturn to drag on until at least the end of the year. The forecast for automotive chips is similarly gloomy. Expanding demand from ai will not be enough to offset a drop-off in Arm’s core products.Arm’s position as the only supplier of easy-to-use chip designs is also in question, from risc-v, an open-source alternative developed at the University of California, Berkeley. risc-v designs are available to anyone without a licence or fee. Alan Priestley of Gartner, a market-research firm, believes it is a “growing threat” to Arm. For now risc-v serves the lower end of the market—sensors, connected devices and automotive chips. But as the technology improves, the promise of licence- and royalty-free designs for expensive smartphone and data-centre processors could prove a problem for Arm. In the year to March 2023 all its revenues came from licensing ($1bn) and royalties ($1.6bn).The company’s reliance on Arm China—a separate entity—for a quarter of its revenues is another cause for concern for investors. In its filings the company admits that it is “particularly susceptible” to tensions between China and America. In December Arm chose not to license its designs for a high-end cpu to Alibaba, a Chinese e-commerce giant, for fear that it would fall foul of a ban imposed by America last year on selling certain cutting-edge chips in China.The question is whether the hype around ai means that investors pay less attention to such worries. When the deal to sell Arm to Nvidia fell through in 2022, Son Masayoshi, the founder of SoftBank, vowed to take Arm public in the “the largest ipo in semiconductor history”. ai exuberance in a market starved of blockbuster ipos may make his wish come true. ■ More

India staked new claim as a national superpower in space, landing its Chandrayaan-3 mission safely on the moon’s unexplored south pole on Wednesday.
“This success belongs to all of humanity,” Indian Prime Minister Narendra Modi said.
The feat makes India the fourth country – after Russia, the U.S. and China – to land on the moon, and the first to land on one of the moon’s lunar poles.

The moon’s surface is seen below the Chandrayaan-3 spacecraft on August 20, 2023 as it orbited in preparation for landing.

India staked new claim as a national superpower in space, landing its Chandrayaan-3 mission safely on the moon’s unexplored south pole on Wednesday.
The Chandrayaan-3 spacecraft launched last month and touch downed on the lunar surface around 8:34 a.m. ET.

The feat makes India the fourth country – after Russia, the U.S. and China – to land on the moon, and the first to land on one of the moon’s lunar poles.
Indian Prime Minister Narendra Modi tuned in to the livestream of the landing from South Africa’s Johannesburg, where he attended the 15th BRICS summit of emerging markets.
“All the people of the world, the people of every country and region: India’s successful moon mission is not just India’s alone … this success belongs to all of humanity,” Modi said, speaking on the ISRO webcast of the event.
“We can all aspire for the moon, and beyond,” Modi added.

The Indian Space Research Organisation mission control room celebrates the successful landing of the Chandrayaan-3 mission.

The lunar south pole has emerged as a place of recent exploration interest thanks to recent discoveries about traces of water ice on the moon. India previously attempted a lunar south pole landing in September 2019, but a software failure caused the Chandrayaan-2 mission to crash into the surface.

“[The south pole is] really a very interesting, historical, scientific and geologic area that a lot of countries are trying to get at that can serve as a base for future exploration,” Wendy Cobb, professor of strategy and security studies at the U.S. Air Force School of Advanced Air and Space Studies, told CNBC. 
Cobb added that the discovery of water on the south pole of the moon is “really important for future exploration,” as it could serve as a source of fuel for rockets and spacecraft.

Days prior to Chandrayaan-3’s scheduled landing, Russia attempted to land its first spacecraft on the moon in almost 50 years. But the Luna-25 mission smashed into the lunar surface on Saturday, with Russian space agency Roscosmos confirming the spacecraft spun of control.
Earlier this year, the first attempted landing by Japanese company ispace also crashed in the final moments.

A rising space power

People wave Indian flags as an Indian Space Research Organisation (ISRO) rocket carrying the Chandrayaan-3 spacecraft lifts off from the Satish Dhawan Space Centre in Andhra Pradesh on July 14, 2023.
R.satish Babu | Afp | Getty Images

Modi visited the U.S. in June, during which he signed agreements alongside President Joe Biden to join the Artemis Accords and further collaborate on missions between ISRO and NASA. Next year, the space agencies are expected to work together to fly Indian astronauts to the International Space Station.
India has also done more with less than its top global counterparts, with ISRO’s annual budget a fraction of NASA’s. In 2020, ISRO estimated the Chandrayaan-3 mission would cost about $75 million. The Covid pandemic delayed the Chandrayaan-3 mission from launching in 2021. More

Peloton reported its results Wednesday for a quarter its CEO warned would be among its most challenging.
The connected fitness company posted a wider-than-expected loss but beat sales expectations.
The company’s shares plunged 28% in premarket trading.

The exterior of a Peloton store is seen on February 05, 2022 in Dusseldorf, Germany. 
Jeremy Moeller | Getty Images

Peloton on Wednesday reported a wider-than-expected loss and a quarterly drop in new subscribers that it blamed on its recall of its Bike seat post and seasonality, sending shares plunging about 30% in premarket trading.
The company fell short of analysts’ earnings estimates but beat sales expectations.

Here’s how the fitness company did in its fourth fiscal quarter compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:

Loss per share: 68 cents vs. 38 cents expected
Revenue: $642.1 million vs. $639.9 million expected

The company reported a net loss of $241.8 million, or 68 cents per share, for the three-month period that ended June 30, compared with a loss of $1.26 billion, or $3.72 a share, a year earlier. 
Sales dropped to $642.1 million, down $678.7 million a year earlier.
The company’s fiscal fourth quarter, which falls during the summer months, is traditionally slow not just for Peloton but also for other fitness retailers. Consumers have a tendency to pull back on workouts during the season as they travel and take part in other summer plans. 
In May, CEO Barry McCarthy warned the fourth quarter would be among its most challenging from a growth perspective. For the first time, Peloton projected a decline in subscribers.

It ended the quarter with 3.08 million subscribers, up 4% year over year and in line with the company’s expectations. But compared to last quarter, subscribers declined by 29,000. The company attributed the drop to a “seasonal” slowdown in hardware sales and higher than anticipated churn.
“Peloton’s FYQ4 performance is a reminder we operate a seasonal business,” McCarthy wrote in a letter to shareholders.
“The slowdown exceeded our expectations through May and through the first three weeks of June as consumer spending shifted toward travel and experiences,” he wrote. “Then eight weeks ago the trend reversed itself, and we began to see a reacceleration in hardware sales.”
Peloton also believes the recall of its Bike seat post, which had a tendency to detach and break unexpectedly during use, created more churn than it expected. The metric stood at 1.4% for the quarter. The company suspects 15,000 to 20,000 people decided to pause their monthly subscriptions during the quarter while they waited for their seat post to be replaced.
The recall, announced in May, impacted more than 2 million Bikes the company had sold since January 2018 and cost $40 million in the quarter, far more than Peloton expected, McCarthy said. To date, the company has received 750,000 requests for replacement seat posts, which is also more than it had anticipated. So far, Peloton has fulfilled 340,000 requests and expects to wrap up the rest by the end of September.
Peloton narrowly reached positive free cash flow status on an adjusted basis, but doesn’t expect that will last during the next two quarters due to expected slowdowns in hardware sales, timing of inventory payments, marketing spending and the cash needed for the seat posts. However, it does expect to reach free cash flow positivity in the second half of fiscal 2024.

Strategy changes on the path to growth

McCarthy, a former Netflix and Spotify executive, has spent the last three months focusing on new strategies aimed at getting the fitness company back on a path to growth.
The company has been working to capture customers who don’t have thousands of dollars to splurge on a stationary bike or treadmill by offering a rental program and a certified refurbished option. The rental service, which recently launched in Germany, now has over 48,000 subscribers. The refurbished line brought in 6,500 sales during the quarter. 
Both are “proving to be important growth initiatives,” McCarthy told shareholders. 
Part of that strategy is the company’s rebrand under the guidance of its new Chief Marketing Officer Leslie Berland, a former Twitter (now known as X) executive. The retailer has positioned itself as a fitness company for all that is just as invested in its app as it is its pricey connected fitness products, such as its Bike, Tread and Row. 
In May, it unveiled a series of new pricing tiers for its fitness app that includes an unlimited free membership option (with no credit card required) and levels that cost $12.99 and $24 monthly. The app allows consumers to watch Peloton’s fitness classes and build their own workouts from wherever they are, including their gym. 
Since the relaunch, the company has clocked more than 900,000 app downloads, over two thirds of which were non-Peloton members. It is also seeing more purchases of its higher-priced membership tier than it expected. It ended the quarter with 256,000 free monthly active users.
Peloton is also seeing “meaningful positive shifts in perception across a range of measures” including gains among Gen Z consumers and others who may be older but still new to fitness. Peloton is also seeing a shift in the types of people that are downloading its app towards men, Gen Z, Black and Hispanic consumers.
As part of the rebrand, Peloton is beginning to offer a variety of “limited edition bike frame colors and graphics to both the consumer and commercial markets,” McCarthy said.
“For the last ten years Peloton has been the Henry Ford of stationary bikes. We sold any color bike frame you wanted as long as you wanted black,” he told shareholders. “I’m excited to announce a change in strategy… Expect to hear more about this exciting initiative this fall.”
Peloton has also been leaning into its business-to-business strategy to further drive revenue and capture new customers. Earlier this month, it announced the launch of Peloton for Business, which allows companies to offer access to the app and its connected fitness products through its benefits offerings. 
Clients include Volvo, which has Peloton bikes in its company fitness center and offers employees access to the Peloton app, its all access membership and discounts on hardware, including the Bike, Bike+, Tread and Guide. Dropbox offers a similar package to its employees. 
Peloton also launched a new program aimed at partnering with NCAA Division 1 schools. The new strategy kicked off Tuesday with its announcement that it will be partnering with the University of Michigan to create co-branded Peloton bikes that will be used at the school’s various fitness facilities – and along the sidelines at the school’s football stadium, known as the Big House. 
“Expect to hear more announcements about additional global partners in the weeks ahead,” McCarthy said.
It also launched a new discounted offering for college students of its “One” tier, which typically costs $12.99 a month but will be cut to $6.99 a month.
Read the full earnings release here. More

Shares of Abercrombie & Fitch soared in premarket trading, after the retailer crushed Wall Street’s earnings and sales expectations.
It also raised its guidance for the year.
Abercrombie has stood out because it has defied industry-wide trends seen at retailers like Home Depot, Target and Walmart.

An Abercrombie & Fitch store in San Francisco.
Getty Images

Shares of Abercrombie & Fitch soared in premarket trading, after the retailer crushed Wall Street’s earnings and sales expectations for the quarter and raised its forecast for the year.
On a call with investors, CEO Fran Horowitz said the retailer’s performance is the “culmination of years of hard work.” She said the company is drawing more shoppers with its wide range of fresh and fashion-forward options, from dresses to cargo pants.

“We’ve talked about it before, but we are no longer a jeans and T-shirt brand,” she said. “We certainly are a lifestyle brand today.”
And, she added, the retailer will keep opening stores and investing in its digital experience — even as the economic backdrop remains uncertain.
Here’s how the retailer did in the fiscal second quarter ended July 29 compared with what Wall Street expected, based on a survey of analysts by Refinitiv:

Earnings per share: $1.10 vs. 17 cents expected
Revenue: $935.3 million vs $842.4 million expected

Net income for the three-month period rose to $56.9 million, or $1.10 per share, from a loss of $16.8 million, or 33 cents a share, in the year-ago period.
Net sales rose from $805.1 million in the year prior.

Abercrombie said it now anticipates net sales will rise by about 10% for the full fiscal year, up from $3.7 billion in the prior year. It had previously expected growth of between 2% and 4%.
It said it expects operating margins to improve, too, as costs of freight and raw materials like cotton fall. It anticipates operating margins to be in the range of 8% to 9%, compared with prior expectations of 5% to 6%.
The retailer’s sales and its stock price have shot up, as Abercrombie has reinvented its image from a mall store known for shirtless models and a strong scent of cologne to a retailer that resonates with a broader audience.
Abercrombie has also stood out because it’s defied industry-wide trends. Retailers including Home Depot, Target and Walmart have all spoken about consumers who aren’t spending as freely on discretionary items, such as clothing. Foot Locker echoed similar sentiments, as its sales plummeted and it cut full-year guidance on Wednesday.
Abercrombie’s merchandise has evolved to offer clothing that customers can wear whether heading to the office or going out for happy hour, Horowitz said. Those items include tailored pants called Sloane, which come in different fabrics and have gotten a following through TikTok, and a collection of dresses that shoppers can wear to a party or wedding.
“We really have expanded into a lot of new categories — so this young millennial can now wear this brand from work to their weekend getaway,” she said.
As of Tuesday’s close, shares of Abercrombie had shot up about 80% this year, far outpacing the approximately 14% gains of the S&P 500. Shares of the company touched a 52-week high of $43.47 earlier this week.
The company has also worked to boost sales at Hollister, a brand that appeals more to teens. Horowitz told investors on the call that the retailer has stepped up digital campaigns for Hollister. She said customer traffic improved in the quarter and sales growth continued into early August.
Comparable sales, a metric that takes out the impact of store openings, closings and renovations, rose 13% across the company. For the namesake brand, Abercrombie, comparable sales soared 23%. For Hollister, they rose 5% year over year.
Inventory dropped by 30% year over year, as the company managed orders closely and chased merchandise needed based on demand.
On the call with investors, Horowitz said the company’s sales grew in the second quarter across genders and all regions. In women’s apparel, she said shoppers bought dresses and pants. In men’s apparel, knit tops and pants proven popular as shoppers looked for versatile clothing that could work in different seasons and situations.
She also touted store openings, including the new Abercrombie store that opened last month on New York City’s Fifth Avenue.
The company plans to open about 35 new stores, remodel or renovate 20 and close 30, Chief Financial Officer Scott Lipesky told investors on a call. More

Starting Aug. 24, the iced pumpkin cream chai latte joins Starbucks’ existing fall lineup.
The seasonal menu addition comes as Starbucks customers increasingly choose cold drinks over hot options.
This fall marks the 20th anniversary of the coffee chain’s iconic pumpkin spice latte.

Starbucks’ new fall drink, the iced pumpkin cream chai latte.
Source: Starbucks

As Starbucks celebrates the 20th anniversary of its pumpkin spice latte, the coffee chain is adding a third pumpkin drink to its fall menu.
Starting Thursday, the iced pumpkin cream chai latte joins the company’s existing pumpkin lineup, which also includes the pumpkin cream cold brew, returning for its fifth year.

The seasonal menu addition comes as Starbucks customers increasingly choose cold drinks over hot options, no matter the temperature outside. Younger consumers, such as those in the Gen Z cohort, have been driving the trend. Last fall, cold drinks accounted for more than three-quarters of Starbucks’ beverage sales.
Starbucks’ more upscale Reserve locations, which also serve alcohol, will serve special pumpkin spice drinks for the first time, too. The Reserve fall menu includes a pumpkin spice espresso martini, playing off the espresso martini craze, and a pumpkin spice whiskey barrel-aged iced latte.
Although it’s the first time the iced pumpkin cream chai latte has officially appeared on menus, customers have been able to buy the drink for years by adding the pumpkin cream cold foam to the top of their iced chai lattes. The so-called “secret menu” drink got a boost in popularity from TikTok, where baristas and customers often share their customized drinks.
“[The iced pumpkin cream chai latte] has become so popular that we decided to add it to the menu this year,” Starbucks spokesperson Erin Stan said at a press event.
Paying attention to how customers modify their drinks is an easy way for the company to introduce “new” beverages that will almost certainly gain popularity with a wider audience. Starbucks has used this strategy in the past. For example, customers created the pink drink by ordering strawberry acai refreshers with coconut milk. Now, the pink drink is available by name in Starbucks’ cafes and in grocery stores.
In addition to the iced pumpkin cream chai latte, Starbucks is introducing the iced apple crisp oat milk shaken espresso, an autumnal riff on its popular iced brown sugar oat milk shaken espresso. More

Foot Locker’s sales fell 9.9% during its fiscal second quarter, and it attributed the decline to ongoing “consumer softness.”
The sneaker giant saw another quarter of pinched profits because of markdowns and shrink, it said.
The dismal quarter prompted Foot Locker to lower its forecast for the second time this year – just five months after introducing it.

Customers walk with Foot Locker shopping bags on the Third Street Promenade in Santa Monica, California.
Patrick T. Fallon | Bloomberg | Getty Images

Foot Locker reported another quarter of falling sales and slashed its outlook for the second time this year on Wednesday as inflation-weary consumers think twice before shelling out for footwear and apparel. 
The sneaker giant’s adjusted fiscal second-quarter earnings were in line with Wall Street’s expectations, but fell short of analysts estimates on sales and saw another quarter of slimmer margins due to promotions and higher shrink. 

The company’s shares plunged 30% in premarket trading.
Here’s how Foot Locker did in the three-month period that ended July 29 compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:

Earnings per share: 4 cents adjusted vs. 4 cents expected
Revenue: $1.86 billion vs. $1.88 billion expected

The company swung to a loss of $5 million, or 5 cents per share, compared with a profit of $94 million, or 99 cents a share, a year earlier. Excluding one-time items, the company reported earnings of 4 cents per share. 
Sales declined to $1.86 billion, down 9.9% from $2.07 billion a year earlier. 
The dismal quarter prompted Foot Locker to lower its forecast again – just five months after introducing it. The company also paused its quarterly cash dividend beyond its board’s recently approved October payout of 40 cents per share.

The athletic apparel retailer now expects sales to drop 8% to 9% for the year, compared with a previously issued forecast of down 6.5% to 8%. It is projecting a decline in same-store sales of 9% to 10%, compared with its previous guidance of down 7.5% to 9%. 
The company cut its adjusted earnings guidance to $1.30 to $1.50 per share, down from $2.00 to $2.25 a share.  
“We did see a softening in trends in July and are adjusting our 2023 outlook to allow us to best compete for price-sensitive consumers, while still leaning into the strategic investments that drive our Lace Up plan,” CEO Mary Dillon said in a news release. 
For the last two quarters, Foot Locker has been forced to rely on promotions to drive sales because its primary customer, which skews lower to middle income, has pulled back on spending for discretionary goods like shoes and clothes. 
Those heavy markdowns have weighed on Foot Locker’s margins, which dropped 4.6 percentage points compared with the year-ago period. 
Shrink, a retail industry term that refers to merchandise lost by theft, damage or other means, also weighed on profits, Foot Locker said. It didn’t disclose how much shrink cut into its margins compared with promotions. 
Comparable-store sales dropped by 9.4% during the quarter, which the retailer attributed to “ongoing consumer softness” and changes to its vendor mix. It’s unclear which vendors, or athletic apparel brands, are changing. But Foot Locker has been trying to reduce its reliance on Nike and balance its vendor mix.
Nike, which has long been the largest driver of sales at Foot Locker, has been in the midst of its own strategy shift toward a direct-to-consumer model and has been pulling back from wholesalers for several years. 
Foot Locker’s inventories are still high – they rose 11% year over year to $1.8 billion – but levels have sequentially improved compared with the first quarter of 2023, the company said. More

Last week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 7.31% from 7.16%
Applications for a mortgage to purchase a home dropped 5% for the week and were 30% lower than the same week one year ago.
The adjustable-rate mortgage share of applications increased to 7.6%, which was the highest level in five months.

Homes in Centreville, Maryland, US, on Tuesday, April 4, 2023.
Nathan Howard | Bloomberg | Getty Images

Mortgage rates jumped last week to the highest level in 23 years, pushing mortgage demand from homebuyers to the lowest level in 28 years.
Total mortgage application volume fell 4.2% last week, compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

Last week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 7.31% from 7.16%, with points rising to 0.78 from 0.68 (including the origination fee) for loans with a 20% down payment. Last year that rate was 5.65%.
“Treasury yields continued to spike last week as markets grappled with illiquidity and concerns that the resilient economy will keep inflation stubbornly high,” said Joel Kan, an MBA economist, in a release.
As a result, applications for a mortgage to purchase a home dropped 5% for the week and were 30% lower than the same week one year ago. Buyer demand stood at the lowest level since December 1995. Potential buyers are dealing not only with high interest rates and high prices, but extremely low supply. The available homes on the market at the end of July were close to a quarter-century low, according to the National Association of Realtors.
The adjustable-rate mortgage share of applications increased to 7.6%, which was the highest level in five months. The number of ARM applications rose 4% week to week.
“Some homebuyers are looking to lower their monthly payments by accepting some interest rate risk after the initial fixed period,” noted Kan.

Applications to refinance a home loan fell 3% for the week and were 35% lower year over year. The refinance share of mortgage activity increased to 29.5% of total applications from 28.6% the previous week. There are very few homeowners who can now benefit from a refinance given that most have rates well below the 5% range.
Mortgage rates continued to climb this week and are now right around 7.5% according to Mortgage News Daily. More

The new contract includes pay raises for both part-time and full-time workers.
It also includes other improvements to work rules including an end to forced overtime.
Workers began voting on the new contract Aug. 2.

David Paul Morris | Bloomberg | Getty Images

UPS workers ratified a massive five-year labor deal that includes big wage increases and other improvements to work rules and schedules, the International Brotherhood of Teamsters said Tuesday.
The deal passed with 86.3% of votes, the highest contract vote in the history of Teamsters at UPS, according to the union.

“Teamsters have set a new standard and raised the bar for pay, benefits and working conditions in the package delivery industry. This is the template for how workers should be paid and protected nationwide, and nonunion companies like Amazon better pay attention,” Teamsters General President Sean O’Brien said in a statement.
UPS and the Teamsters union, which represents about 340,000 workers at the delivery giant, reached a preliminary deal last month, narrowly averting a strike that could have rippled across the U.S. economy as the previous contract expiration on July 31 approached.
UPS moves $3.8 billion worth of goods a day, which is about 5% of the country’s gross domestic product, according to the U.S. Chamber of Commerce.
The parties had until July 31, when the previous labor contract was set to expire, to reach a deal and avoid a work stoppage. Workers began voting on the new contract Aug. 2. It’s the single-largest collective bargaining agreement reached in the private sector, according to the union.
Part-time workers will make no less than $21 an hour, up from a minimum of $15.50 currently, according to the union. Part-time pay was a sticking point during labor negotiations. Full-time workers will average $49 an hour. Current workers will get $2.75 more an hour this year and $7.50 an hour more over the five-year contract.

UPS drivers will average $170,000 in pay and benefits at the end of the five-year deal, said CEO Carol Tomé on an earnings call earlier this month.
The company cut its full-year revenue and margin forecasts, citing the “volume impact from labor negotiations and the costs associated with the tentative agreement.”
The union is the latest labor organization to push a major U.S. company for better pay, schedules and other work rules in the wake of the Covid-19 pandemic and decades-high inflation.
On Monday, American Airlines pilots ratified a four-year deal that includes roughly 46% increases in compensation, including 401(k) contributions, a deal the carrier sweetened after rival United Airlines reached a richer agreement with its pilots’ union. Delta Air Lines’ pilots approved their deal, which includes more than 30% raises, earlier this year.
Southwest Airlines hasn’t yet gotten to a deal with its pilots’ union, which has laid the groundwork for a potential strike, though such stoppages in the airline industry are exceedingly rare under U.S. laws.
FedEx pilots turned down a tentative agreement for a new labor contract earlier this summer. More