Business

Tapestry will acquire Capri Holdings for $8.5 billion, the companies announced.
The deal would create an American fashion giant that brings Coach, Kate Spade, Stuart Weitzman, Versace, Jimmy Choo and Michael Kors under one house.
Tapestry has pushed to elevate its brands and appeal to a new generation of shoppers.

A man rides a bicycle past a Gianni Versace store in Beijing, China.
Nelson Ching | Bloomberg | Getty Images

Tapestry, the fashion conglomerate behind Coach and Kate Spade, will acquire competitor Capri Holdings in a $8.5 billion deal announced on Thursday. 
The deal will create an American fashion giant that — while still not quite as large as its European competitors — will be better positioned to compete in the luxury market. 

It brings together six fashion brands: Tapestry’s Coach, Kate Spade and Stuart Weitzman and Capri’s Versace, Jimmy Choo and Michael Kors. 
Together, the company will have the size and scale to reach more customers across the globe and better compete in the luxury market, Tapestry CEO Joanne Crevoiserat said on a call Thursday morning. She said the combination pulls together “six iconic brands” that have a presence in over 75 countries and drive over $12 billion in annual revenue.
Shares of Capri surged 58% in premarket trading to just under the per-share deal price, while shares of Tapestry fell roughly 6%.
The deal comes as Tapestry and Capri have seen weaker business in North America. In quarterly reports in May, both companies spoke about American consumers becoming more cautious around spending.
Capri, in particular, has been hit by slowing sales. Its shares hit a 52-week low in late May as it cut its forecast. On an earnings call, the company said it saw weaker sales not only of Michael Kors, but also of its luxury brands Versace and Jimmy Choo, particularly at department stores. The company’s CEO John Idol said at the time that the company expected that softness to continue through the summer.

Tapestry, meanwhile, raised its full-year outlook in its most recently reported quarter.
Tapestry has pushed to elevate its brands and appeal to a new generation of shoppers. At Coach, for example, it has collaborated with popular brands and celebrities like Disney and Kirsten Dunst and debuted handbags that have resonated with Gen Z customers who discover items on TikTok.
Coach also narrowed the number of items it carries to the focus on best-sellers, keeping price points high by reducing markdowns. It’s started to run a similar playbook with Kate Spade.
Tapestry has also looked other parts of the world to drive growth, such as chasing higher sales in China.
“We’ve created a dynamic, data-driven consumer engagement platform that has fueled our success, fostering innovation, agility, and strong financial results,” Crevoiserat said in a statement. “From this position of strength, we are ready to leverage our competitive advantages across a broader portfolio of brands.”
Capri CEO Idol said the deal will give the company “greater resources and capabilities” to expand its global reach. 
“We are confident this combination will deliver immediate value to our shareholders. It will also provide new opportunities for our dedicated employees around the world as Capri becomes part of a larger and more diversified company,” said Idol. 
The boards of both companies have unanimously approved the acquisition and shareholders will receive $57 per share, a 59% premium on the 30-day volume average of Capri’s value. 
The deal is not subject to any financing conditions. It will be funded with bridge financing from Bank of America and Morgan Stanley in a combination of senior notes, term loans and cash, a portion of which will be used to pay some of Capri’s outstanding debt, the companies said.  More

Your columnist has just had the bittersweet pleasure of driving along America’s Pacific coast, wind blowing through what is left of his hair, in a new Fisker Ocean electric SUV. Sweet, because he was in “California mode”—a neat feature that with the touch of a button lowers all windows, including the back windscreen, pulls back the solar-panelled roof, and turns the car into the next best thing to an all-electric convertible. Bitter, because once he had returned the trial vehicle, he had to drive home in his Kia Niro EV, which is smaller, shorter range and has no open roof—call it “rainy Britain mode”. The consolation was that it is about a tonne lighter, and if you drive an EV, as Schumpeter does, to virtue-signal your low-carbon street cred, being featherweight rather than heavyweight should count. Except it doesn’t. Just look at the future line-up that Fisker, an EV startup, unveiled on August 3rd. It included: a souped-up, off-road version of the Ocean, which Henrik Fisker, the carmaker’s Danish co-founder, said would be suitable for a monster-truck rally; a “supercar” with a 1,000km (600-mile) range, and a pickup truck straight out of “Yellowstone”—complete with cowboy-hat holder. Granted, there was also an affordable six-seater called Pear. But though Fisker says sustainability is one of its founding principles, it is indulging in a trait almost universal among car firms: building bigger, burlier cars, even when they are electric. There are two reasons for this. The first is profit. As with conventional cars, bigger EVs generate higher margins. The second is consumer preference. For decades, drivers have been opting for SUVs and pickup trucks rather than smaller cars, and this now applies to battery-charged ones. EV drivers, who fret about the availability of charging infrastructure, want more range, hence bigger batteries. BNEF, a consultancy, says the result is that average battery sizes increased by 10% a year globally from 2018 to 2022. That may help make for a more reassuring ride. But eventually the supersizing trend will prove to be unsustainable and unsafe. Already it is verging on the ludicrous. General Motors’ Hummer EV weighs in at over 4,000kg, nearly a Kia Niro more than its non-electric counterpart. Its battery alone is as heavy as a Honda Civic. General Motors also recently unveiled a 3,800kg Chevrolet Silverado electric pickup, which can tow a tractor and has a range of up to 720km. This year Tesla plans to start production of its electric “Cybertruck”, described by Elon Musk, its boss, as a “badass, futuristic armoured personnel carrier”. Such muscle trucks may be the price to pay to convince hidebound pickup drivers to go electric. Yet size matters to suburbanites, too. The International Energy Agency, an official forecaster, calculates that last year more than half the electric cars sold around the world were SUVs. For now, carmakers can argue that however big the electric rigs, they have a positive impact on the planet. Though manufacturing EVs—including sourcing the metals and minerals that go into them—generates more greenhouse gases than a conventional car, they quickly compensate for that through the absence of tailpipe emissions. Lucien Mathieu of Transport and Environment, a European NGO, says that even the biggest EVs have lower lifetime carbon emissions than the average conventional car. That is true even in places with plenty of coal-fired electricity, such as China. But in the long run the trend for bigger batteries may backfire, for economic and environmental reasons. First, the bigger the battery, the more pressure there will be on the supply chain. If battery sizes increase there are likely to be looming scarcities of lithium and nickel. That will push up the cost of lithium-ion batteries, undermining carmakers’ profitability. Second, to charge bigger batteries in a carbon-neutral way requires more low-carbon electricity. That may create bottlenecks on the grid. Third, the more pressure on scarce resources vital for EV production, the harder it will be to make affordable electric cars critical for electrifying the mass market. That will slow the overall decarbonisation of transport. Finally, there is safety. Not only is a battle tank that does zero to 100 kilometres per hour in the blink of an eye a liability for anyone that happens to be in its way. Tyres, brakes and wear and tear on the road also produce dangerous pollutants, which get worse the heavier vehicles are. Governments have ways to encourage EVs to shrink. The most important is to support the expansion of charging infrastructure, which would reduce range anxiety and promote smaller cars. Taxes could penalise heavier vehicles and subsidies could promote lighter ones. At the local level, congestion and parking charges could have similar effects. At a minimum, carmakers could be required to label the energy and material efficiency of their vehicles, as makers of appliances do in the European Union. Derange anxiety Ultimately, the industry is almost sure to realise the folly of pursuing size for its own sake. The penny is starting to drop. Ford’s CEO, Jim Farley, recently said carmakers could not make money with the longest-range batteries. His opposite number at General Motors, Mary Barra, has taken the unexpected step of reversing a plan to retire the affordable Chevy Bolt EV. In Europe, carmakers like Volkswagen are building smaller, cheaper EVs. Tesla is said to be planning a compact model made in Mexico. The pressure is partly coming from competition. Felipe Munoz of Jato Dynamics, a car consultancy, says China prizes battery efficiency above bigness and is hoping to muscle in on overseas markets with lighter, cheaper brands, such as BYD. Innovation in batteries based on solid-state or sodium-ion chemistry may also make EVs more efficient. For the time being, drivers with money to splurge will no doubt relish flaunting their low-carbon credentials from the vantage point of a large SUV or monster truck. And so they should—until they realise that they may be making electrification less accessible to the rest of humanity. ■Read more from Schumpeter, our columnist on global business:Meet America’s most profitable law firm (Aug 2nd)Why Walmart is trouncing Amazon in the grocery wars (Jul 24th)Hollywood’s blockbuster strike may become a flop (Jul 19th)Also: If you want to write directly to Schumpeter, email him at [email protected]. And here is an explanation of how the Schumpeter column got its name. More

IT HAS BEEN a bumpy journey for investors in Uber, the world’s biggest ride-hailing company, since it was listed in 2019. In its first six months as a public company Uber’s share price plunged by a quarter as doubts swirled over whether the perennial lossmaker would ever turn a profit. Thereafter it has seesawed, soaring amid the pandemic-era craze for tech stocks, then diving back down as rising interest rates spoiled investors’ appetite for businesses reliant on cheap funding.Since its nadir in July last year signs of greater financial discipline have pushed the price of Uber’s shares back to where they first traded in 2019. Costs have come down; fares are up. This month the company reported an operating profit of $326m for the second quarter of the year, its first time in the black. Uber’s glee was heightened on August 8th when Lyft, its domestic arch-rival, reported yet another operating loss, of $159m. Lyft’s market value remains in the doldrums, down by 85% from the level at which its shares began trading publicly in 2019, six weeks before Uber’s.Still, for Uber, breaking even is a low bar for success. Even adding in the latest profit, the company has clocked up $31bn of net losses since its first available results in 2014. Investors now have $21bn of invested capital tied up in the company. Annualising its most recent quarterly operating profit implies a return on that capital of roughly 5% after tax. That is less than half the company’s current cost of capital, suggesting that investors’ money could be more fruitfully deployed elsewhere.The hope, of course, is that Uber’s profits, having broken above ground, will now soar into the stratosphere. Hold your horses. In the past five years over 60% of the firm’s revenue growth has come from businesses other than ride-hailing. Most important has been food delivery, which surged during the pandemic. Uber’s profit margin—before interest, tax, depreciation and amortisation—when ferrying meals is less than half that when ferrying people. Uber promises that the business will continue becoming more lucrative as it matures. Yet margins for DoorDash, which generates nearly three times Uber’s food-delivery sales in America, are barely better. In freight, Uber’s third line of business, the company is losing money as it fights for space in a crowded industry in the throes of a downturn.A further concern is Uber’s focus on expansion beyond America, where it is now scarcely growing. Although it does not split out profits by geography, its margins are probably best in America, where it captures nearly three-quarters of sales in the ride-hailing market. Elsewhere, it faces stiff competition from local rivals: Bolt and FREENOW in Europe, Gojek and Grab in South-East Asia, and Ola in India. That will keep a tight lid on margins.Investors’ bet on Uber was predicated on the idea that ride-hailing is a winner-takes-all business. That justified torching billions of dollars in a race for market share, which Uber is, seeing Lyft’s woes, indeed winning—at least at home. Whether taking it all turns Uber into the colossal cash machine investors once hoped for is another question. ■To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter. More

ON AUGUST 6TH Yellow, one of America’s biggest trucking firms, declared bankruptcy and announced it would wind down operations after 99 years in business. It collapsed under the weight of falling sales and a mountain of debt. That is a heavy blow for its owners and 30,000 staff. It is also emblematic of a sharp reversal taking place in the American logistics industry.Beginning in 2020 lavish stimulus cheques, combined with a lockdown-induced squeeze on services spending, led American consumers to splurge on goods. Appliances, cars and furniture clogged up ports, warehouses and truck depots. Online deliveries surged as shoppers shunned stores, adding to demand. As consumers groaned over lengthy delays, revenues in the logistics industry soared, increasing by roughly a third between the start of 2020 and mid-2022, according to America’s Census Bureau. Firms in the industry hired 1m workers and built 1.8bn square feet (nearly three Manhattans) of new storage space on hopes that the frothiness would continue.Now, as the forces that fuelled its rise fizzle out, America’s logistics boom is turning to bust. Consumers are trading the material for the experiential, opting to splash out on holidays and hospitality rather than Hoovers. Goods spending, adjusted for inflation, has stagnated, leaving retailers with excess inventories. Consumers are also returning to physical stores, reducing the number of miles their goodies need to travel to reach them. Revenues in the logistics industry have now clocked up three consecutive quarter-on-quarter declines (see chart). The Cass Freight Index, a measure of rail and truck activity, is down by 5% over the past year. The volume of goods flowing through American ports in July was 14% lower than in the same month last year, according to Descartes, a supply-chain-technology company.As demand has slumped, so, too, have prices. The cost of “dry van” shipping—the most common way to transport non-perishable goods on the road—is 21% lower than in early 2022, according to DAT Freight & Analytics, a logistics-data provider. That, in turn, is squeezing margins and putting less competitive firms out of business. Some 20,000 truck operators, nearly 3% of the national total, have ceased activity since mid-2022, says ACT Research, another data provider.Those that have survived are shedding staff. American parcel-delivery firms have jettisoned 38,700 workers since October last year when employment in the sector peaked, based on data from the Bureau of Labour Statistics. Warehouse operators have cut 60,800. More retrenchments are likely to come, given the frenzied hiring of the past few years. Lay-offs in the industry have thus far fallen short of what one might expect given the stagnation in consumer spending, argues Aaron Terrazas, chief economist of Glassdoor, an employment portal. Having long suffered from labour shortages, many firms have been reluctant to lay off workers, reckons Tim Denoyer of ACT Research. Investments are being slashed, too. The number of warehouses under construction in America has fallen by 40% from a year ago, observes Prologis, a warehousing giant. Amazon, America’s biggest online retailer, doubled its warehouse footprint in the country during the pandemic. In the past year the e-empire has either postponed investments in, scrapped plans for or closed 116 properties, reckons MWPVL, a logistics consultancy. Troubles with unions are adding to the industry’s headache. Earlier this year dockworkers at several west-coast ports went on strikes linked to pay negotiations. UPS and FedEx, America’s two largest parcel-delivery businesses, have also faced unrest. Yellow’s management blames its collapse on the Teamsters union, which blocked a restructuring plan.Optimists hope the sector will start moving again in the second half of the year, once retailers finish clearing their excess inventories and start restocking their shelves. Analysts expect UPS, whose revenues have shrunk year on year for the past three quarters, to return to growth before the end of 2023. FedEx is expected to be growing again by next year. That may well come to pass, provided the American economy continues to be surprisingly strong. But it will be cold comfort for the businesses that will have gone bust along the way. ■To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter. More

Retailers who have blamed organized theft for lower profits could be overstating the crime’s impact to cover up internal flaws such as steep discounting and bloated inventories, experts told CNBC.
Companies are quick to blame organized theft for shrink losses, but behind closed doors the parallel issues of employee theft and self checkout are their primary focus areas, experts say.
Foot Locker pointed to organized retail crime in part for slimmer margins in May when the retailer reported dismal quarterly results.

This is part two of a three-part series on organized retail crime. The stories will examine the claims retailers make about how theft is impacting their business and the actions companies and policymakers are taking in response to the issue. Read the first story here and stay tuned for part three.

Plastic bags hang on a self checkout kiosk at a Target Corp. store in Chicago, Illinois.
Daniel Acker | Bloomberg | Getty Images

Retailers who blame organized theft for lower profits could be overstating crime’s impact to cover up internal flaws or self-inflicted problems, CNBC has learned.

During recent earnings calls, major companies have blamed disappointing bottom lines or shrinking margins in part on roving bands of organized gangs that ransack their shelves. The issue could come up again as a string of major retailers start to report second-quarter results next week.
But behind closed doors, retailers are facing other issues they can better control, including theft by their own employees, that are contributing to losses, according to two sources who advise major retailers. They spoke on the condition of anonymity because they’re not authorized to speak publicly about clients. 
Many retailers have invested in technology to better understand what leads to shrink, or the gap between the inventory a company has and what it sells. Some companies have since identified theft from employees as a major contributor to losses, even as they blame external theft in public, said one of the sources.
Losses from self-checkout theft have also become a major issue, the people said.
While some retailers may be seeing higher rates of shrink because of poor hiring practices and self-checkout machines, others such as Target and Foot Locker could be using retail crime as a crutch to obscure internal challenges, experts told CNBC.

“Shrink has been going up but sometimes it’s very difficult to unpack how much is down to theft and how much is down to internal retailer issues and stumbles,” Neil Saunders, a retail analyst and the managing director of GlobalData, told CNBC.
“It is a problem, we know that, it does take money off margins, we know that, but there’s too much opacity in the way in which it’s reported and it is being partly used as an excuse for generally bad performance,” Saunders said. 

Theft as an inside job and the curse of self checkout

In the age before shoppers found deodorant and candy bars locked up in drugstores across America, employee theft largely drove shrink, said Patrick Tormey, an adjunct professor at the Lehman College School of Business, who spent more than 40 years in the retail industry. 
The trend may not have changed much, despite what companies say in public, according to experts.
“The theme that comes back the most right now is internal theft … they’re realizing that a lot of [losses] come from there,” said one of the sources who advises retailers. “If there’s an occurrence of external theft they would steal let’s say 10 bucks worth of merchandise, but if it’s internal theft, it’d be 40 bucks.” 

There is no conclusive data to indicate that employees do steal more goods than outsiders, but retailers have gotten better at identifying internal theft, the person said.
Retail workers have access to entire cases of merchandise in backrooms and it’s “relatively easy” to take large quantities of goods without anyone noticing, one of the sources said. The theft can also go undetected for a long period of time because it’s not as noticeable as a shoplifter who is in public view, the person said. 
Internal theft also happens at warehouses and in aisles where online orders are prepared, one of the people said. In some cases, a worker may know the person receiving the goods and may add extra merchandise into a shipment, one of the people said.
“It’s a little bit like organized crime in some way, but not like mafia-style, just a few people [working together],” said the person.
Sonia Lapinsky, a partner and managing director with AlixPartners’ retail practice, told CNBC that retailers have struggled to properly staff stores over the last few years. They can’t always find the right workers, and some have also felt pressure to lower staffing levels to control costs, she said. 
“Folks are notoriously working multiple jobs these days and just feeling the pressure and having to pick up jobs everywhere,” said Lapinsky. “If this is not something that they’re necessarily loyal to, or see as a long-term place, then there’s probably more risk of theft as well.” 
David Johnston, the vice president of asset protection and retail operations at the National Retail Federation, said employee theft has long been the largest contributor to shrink and staff have at times been involved in organized theft rings. However, he thinks internal theft is now “second place” to external theft.
Retailers have another self-made problem that can lead to more stolen goods. Self-checkout machines also increase the risk of theft, and they have become a major source of losses, the two company advisors told CNBC. 
The machines come with increased costs. In some stores with high rates of theft, losses are outweighing the investments companies made in them, the people said.
“You create a problem where there wasn’t one,” one of the people said.

Shrink references reach a ‘fever pitch’

Retailers started to blame organized theft for lower profits as the industry’s performance started to suffer.
Janine Stichter, a retail analyst and managing director at BTIG, has been covering the retail industry since 2008. She didn’t really hear companies talk about shrink in their earnings calls until about a year and a half ago — right around the time the economy started to soften, she said. 
“It’s really kind of hit a fever pitch,” said Stichter. 
Home Depot, Best Buy and Walgreens were some of the first retailers to start speaking out about theft. Now a range of companies are saying it has reduced their margins, some for the first time in recent years.
“I think there is a bit of bandwagoning at the moment,” said Saunders from GlobalData. “I think one of the things that happens is somebody mentions it and it then becomes a bit of a buzzword and then everyone pays attention to it and it suddenly starts getting called out.” 

A Walgreens aisle with locked and unlocked areas
Gabrielle Fonrouge | CNBC

In May, Target rattled investors when it said it was on pace to lose $1 billion this year from inventory losses driven by stolen goods. Two days later, Foot Locker said “theft-related shrink” contributed to a 4 percentage point drop in its gross margin. 
“This has been a multiyear dynamic in the industry. We are not immune to it. It’s increasing. You’ve heard Target talk about it and others. And so, it’s having an increased impact on Foot Locker,” CEO Mary Dillon said on a call with analysts. “We’ve seen a significant increase of theft from stores and usually through this lens of an organized retail crime type of action.”
The reference came as Foot Locker reported dismal results for the quarter. It was the first time it called out shrink cutting into its profits in more than 14 years, according to records accessible on FactSet. 
The retailer said its merchandise margins fell 2.5 percentage points because of “higher promotions” and the rise in theft-related shrink.
Three analysts who cover Foot Locker told CNBC the vast majority of that drop likely came from promotions. At the time, the company was grappling with high inventory levels and soft sales, forcing it to rely on discounts to drive revenue.
Foot Locker did not return repeated inquiries from CNBC about how much of its margin hit came from promotions and how much of it was due to shrink. 

Foot Locker Inc. signage is displayed in the window of a store in New York, U.S.
Michael Nagle | Bloomberg | Getty Images

Tormey, the Lehman College professor, said retailers have thrown around the words shrink and theft so often, investors “chalk it off as a sign of the times,” which can allow companies to use it as a “crutch” for poor merchandising, store design and other internal flaws. 
“It’s just a quick aspirin for the headache, so to speak,” said Tormey. “It’s a lot harder to pin down exact numbers so they can use it and people just kind of nod their head, ‘Oh, yeah, it’s a shame,’ without really [questioning], was it your employees stealing from you? Was it shoplifting? Was it vendor misconduct? You know, are you a sloppy retailer?” 
Over the last two decades, Target had not mentioned shrink hitting its margins during earnings calls until August 2022, when the company and other retailers were buried in inventory they were having trouble unloading, according to FactSet.
At the time, Target’s inventories had climbed 36% year over year and its profits had dropped nearly 90% in the quarter ended that July. The company had marked down items significantly to clear out excess merchandise that was no longer in demand. 
When Target explained why its gross margin had fallen nearly 9 percentage points year over year, it blamed higher markdown rates, lower-than-expected discretionary sales and higher shrink. 
By the following quarter, when inventories had begun to moderate but were still up 14%, Target mentioned organized retail theft during an earnings call for the first time in its modern history. It said shrink had contributed to profits plunging by about 50%. 
“As [CEO Brian Cornell] mentioned, this is an industrywide problem that is often driven by criminal networks, and we are collaborating with multiple stakeholders to find industry-wide solutions,” Target’s finance chief Michael Fiddelke told analysts. “For example, because stolen goods are often sold online, Target strongly supports the passage of legislation to increase accountability and prevent criminals from selling stolen goods through online marketplaces.”
While theft has hit Target’s bottom line, it also has to contend with high shrink from other parts of its business. Spoiled food from the retailer’s grocery aisles and its inventory practices can both weigh on profit.
When companies deal with higher than usual inventories, more items can be lost or damaged. As Target grows its e-commerce business and pickup and delivery options, there’s more room for error as merchandise moves around. 
“Target is not always the best at managing its own inventory. It does tend to have a lot of out of stocks at stores, it does tend to have a supply chain that’s quite fragmented and it’s very easy for things to be misallocated and mis-accounted for within that,” said Saunders. “I’m sure bundled in with their number there’s a lot of things where Target has just lost stuff, broken stuff, put stuff in the wrong stores, put it in the wrong location, can’t find it.”
In response, Target said its shrink numbers vary widely by location and do not correlate with inventory levels. The retailer said it sees a relationship between levels of shrink and stores with higher safety and crime incidents, rather than overall levels of inventory in a store. More

Despite a loss in population during the pandemic, average rents in Manhattan are now up 30% compared to 2019.
The average monthly rent in July was $5,588, up 9% over last year and marking a new record. Median rent, at $4,400 per month, also hit a new record, along with price per square foot of $84.74, according to a report from Miller Samuel and Douglas Elliman.
It was the fourth time in five months that Manhattan rents hit a record.

A view of clouds over Manhattan skyline in New York, United States on August 08, 2023. (Photo by Fatih Aktas/Anadolu Agency via Getty Images)
Anadolu Agency | Anadolu Agency | Getty Images

Rents in Manhattan hit a new high in July, as higher interest rates and low supply continued to drive up prices.
The average monthly rent in July was $5,588, up 9% over last year and marking a new record. Median rent, at $4,400 per month, also hit a new record, along with price per square foot of $84.74, according to a report from Miller Samuel and Douglas Elliman. It was the fourth time in five months that Manhattan rents hit a record.

Despite a loss in population during the pandemic, average rents in Manhattan are now up 30% compared to 2019. Jonathan Miller, CEO of Miller Samuel, the appraisal and research firm, said August rents could mark a new record because it is typically the peak rental month as families look to move before the start of the school year.
“We could see another month of records,” Miller said.
Manhattan’s soaring rents have continued to defy predictions of analysts and economists. The borough’s population dropped by 400,000 between June 2020 and June 2022, according to U.S. Census data. While experts say the population has increased since last year, they say it is still likely below 2019.
What’s more, offices in Manhattan remain less than half occupied due to remote work. According to Kastle Systems, New York offices were only 48% occupied at the end of July.
Yet despite the population loss and rise of remote work, Manhattan rents continue to soar. Brokers say the lack of apartments for sale, due to higher interest rates, have forced many would-be buyers to rent. Younger workers also have flocked to the borough since the pandemic.

Miller said that while the number of apartment listings are below the historical average, inventory of apartments for rent actually rose by 11% in July. At the same time, the number of new leases signed declined by 6% compared to last year.
The combination of rising inventory and falling leases suggests that Manhattan renters may have finally reached their financial limit, Miller said.
“It looks like rents are probably close to the tipping point,” Miller said. “We’re seeing transactions slip because of affordability.”
The increase in rents in July was across the board, from small studio apartments to sprawling three-bedrooms. Yet the larger, more expensive apartments have seen the largest increase in prices since the pandemic.
While studio apartments have seen rent prices up 19%, average rental prices for three-bedroom units are up over 36%.
Brokers say one reason for the dearth of rentals is the growth in Airbnb units. Recent rent regulations have also taken tens of thousands of units off the market, brokers say. Landlords say the laws, which limited rent increases on rent-stabilized units, made it unprofitable to renovate dilapidated apartments. As a result, many are now sitting empty and unrentable.
Brokers add that even with rent hikes of 30% to 40% last year, many renters chose to stay, which also limited supply.
“The vacancy rate is still low, making it very hard for tenants to secure an apartment,” said Janna Raskopf, with Douglas Elliman. “Many tenants renewed their current leases and are staying put. I believe this trend will continue at least for the next couple of months.” More

Novo Nordisk’s obesity drug Wegovy slashed the risk of serious heart problems by 20% in a large clinical trial.
That landmark finding could put more pressure on U.S. insurers to cover the blockbuster medication and similar weight loss treatments.
But organizations representing insurers emphasized that the data is still preliminary, and concerns remain about the high costs of the medications.  

A selection of injector pens for the Saxenda weight loss drug are shown in this photo illustration in Chicago, Illinois, U.S., March 31, 2023. 
Jim Vondruska | Reuters

Novo Nordisk’s obesity drug Wegovy slashed the risk of serious heart problems by 20% in a large clinical trial — a landmark finding that could put more pressure on insurers to cover the blockbuster medication and similar weight loss treatments. 
The data sent weight loss-related stocks soaring on Tuesday, with Novo Nordisk and its main rival Eli Lilly soaring more than 15%. Weight Watchers International, which owns a telemedicine firm that prescribes obesity drugs, jumped as much as 24%. 

But it is likely that more data of this type will be necessary before the U.S. sees increased insurance coverage for obesity drugs.
While the trial results demonstrate that obesity drugs may have significant health benefits beyond shedding unwanted pounds, organizations representing U.S. insurers emphasized that the data is still preliminary. They also said concerns remain about the high costs involved with covering those medications, which are nearly $1,350 per month for a single patient. 
While the initial results “offer potentially encouraging news … it’s impossible to evaluate the efficacy and long-term effectiveness of a prescription drug based solely on a drug manufacturer’s press release,” said David Allen, a spokesperson for America’s Health Insurance Plans, a trade association of health insurance companies that cover hundreds of millions of American.  
“Health insurance providers will continue to analyze new evidence as it becomes available,” he added. 
Ceci Connolly, CEO of the Alliance of Community Health Plans, acknowledged the promise of the data but said “outrageous prices should give everyone pause.” The organization represents regional, community-based health plans that cover more than 18 million Americans across the U.S. 

Drugs like Wegovy and Novo Nordisk’s diabetes drug Ozempic have skyrocketed in popularity in the U.S. — while drawing increasing investor interest — for helping people achieve dramatic weight loss over time. Those treatments are known as GLP-1s, a class of drugs that mimic a hormone produced in the gut to suppress a person’s appetite. 
Eli Lilly and Pfizer are working to roll out their own GLP-1s in a bid to capitalize on a weight loss drug market that some analysts project could be worth up to $200 billion by 2030. Nearly 40% of U.S. adults are obese.
But insurance coverage for these drugs is a mixed bag: The federal government’s Medicare program, most state Medicaid programs and some commercial insurance plans don’t cover the treatments. Some of the nation’s largest insurers, such as CVS Health’s Aetna, do. 
Meanwhile, more health insurers are pulling back on coverage. A July survey by Found, a company that provides obesity-care services to 200,000 people, showed that 69% of its patient population do not have insurance coverage for GLP-1 drugs to treat diabetes or weight loss. The results represent a 50% decline in coverage since December 2022. 

Challenging old views of obesity drugs

The new data from Novo Nordisk challenges a long-standing narrative driving the hesitancy among insurers about covering obesity drugs: that Wegovy and similar treatments are merely lifestyle products that offer a cosmetic, not medical benefit. 
“There’s now a long-term, large clinical trial that proves that there’s a big cardiovascular health benefit for patients staying on these drugs,” Jared Holz, Mizuho health-care sector analyst, told CNBC. 
“It’s just going to open up the market to a bigger patient population over time,” he added. 

Debra Tyler’s daughter takes her new medication at home in Killingworth, Conn. She was on successful medication for obesity, however her family insurance dropped coverage on the drug, leaving the Tylers with difficult financial decisions.
Joe Buglewicz | The Washington Post | Getty Images

The study, which began almost five years ago, followed more than 17,600 adults with established cardiovascular disease who were overweight or suffered from obesity. It excluded people with a prior history of diabetes.
A weekly injection of Wegovy achieved the trial’s primary objective of reducing the risk of cardiovascular events, such as heart attacks, strokes and heart condition-related deaths by 20% compared with a placebo.
The new Wegovy data mirrors some of the reduced morbidity and mortality observed in people who undergo bariatric surgery, which involves making changes to the digestive system to help a patient lose weight, according to Dr. Eduardo Grunvald, medical director of the UC San Diego Health Center for Advanced Weight Management.
Around 45% of U.S. employers cover that weight loss procedure, while only 22% cover obesity drugs, according to a 2022 survey released by the International Foundation of Employee Benefit Plans.
Grunvald added that the data challenges the “outdated” idea that obesity is “purely a lifestyle problem or one of weak character and lack of willpower, and hence treatment should not be covered.”

High cost to coverage

Then there’s the high cost of the treatments, at more than $1,000 per patient, per month.
The University of Texas System decided to ratchet down its coverage of those drugs dramatically, noting in July that the cost of covering the drugs under two of its plans is more than $5 million per month, up from around $1.5 million per month 18 months ago, when demand for obesity treatments was lower.
The university is one of the largest employers in Texas, with more than 116,000 employees across the state. Its plans will no longer cover Wegovy starting Sept. 1.
UTS did not immediately respond to a request for comment on whether it will reconsider coverage in light of the Novo Nordisk’s new data. 

George Frey | Reuters

“Given that so many Americans would potentially qualify for these treatments, and the cost is so high, widespread coverage could pose a threat to [an insurance] company’s profitability,” UCSD’s Gunvald said.
He noted, however, that new drugs entering the obesity market could drive competition and potentially lower prices. For example, Eli Lilly’s diabetes drug Mounjaro could get approved for weight management over the next year. Other drugmakers are still years away from rolling out their own medications. 
But obesity is a chronic condition, meaning it doesn’t simply go away when a patient loses weight. So patients must continue to take drugs like Wegovy to keep the pounds off and maintain other health benefits, which would further strain insurers’ budgets.
“It’s very difficult to justify that expense because the insurance would never recoup that,” said Dr. Ethan Lazarus, an obesity medicine physician and past president of the Obesity Medicine Association. That group is the largest organization of physicians, nurse practitioners and other health-care providers dedicated to treating obesity. 
“I find it unlikely that we’re going to prove the cost-effectiveness of these medications at a price of $12,000 a year,” he said. 
The cost barrier may be even higher in the public sector. A recent article in the New England Journal of Medicine warned that if just 10% of obese Medicare beneficiaries were to take Wegovy, it would cost the program $27 billion a year. 
The federal program had 65 million enrollees as of March and currently doesn’t cover the treatments.  
A provision of a 2003 law established that Medicare Part D plans can’t cover drugs used for weight loss, but the program does cover obesity screening, behavioral counseling and bariatric surgery.
Lazarus noted that a group of bipartisan lawmakers have aintroduced legislation that would eliminate the provision, but said its fate in Congress is far from certain.

Need for more data

Lazarus said there may also be a need for more data demonstrating the heart-health benefits of obesity drugs before more insurers decide to cover them. 
“I think we need two or three more of these,” he said. “It becomes more compelling if we see it as an effect for the class of drugs versus an effect for one company’s drug.” 
Eli Lilly is conducting its own study on whether its diabetes drug Mounjaro prevents heart attacks, strokes and other cardiovascular conditions. It’s unclear when the company will release its data. 
But experts and analysts are already confident that Mounjaro could have similar — if not better — heart-health benefits as Wegovy. 
Wells Fargo analyst Mohit Bansal noted that Wegovy causes around a 17% weight reduction in patients, while Mounjaro causes roughly 22%. 
“By that logic, it does seem it could have better cardiovascular benefit,” he told CNBC.  More

President Joe Biden signed the CHIPS and Science Act into law one year ago, and semiconductor companies across the U.S. have promised to spend $231 billion on building chip manufacturing hubs on American soil.
Now, as the shovels hit the ground to begin construction, companies are realizing how difficult it is to find talent.
Taiwan Semiconductor Manufacturing Company said it had to delay production at its $40 billion Arizona plant due to a lack of workers in the U.S.

A push to re-shore semiconductor manufacturing in the U.S. has spurred massive spending, and with it, concerns about the size of the skilled workforce.
President Joe Biden signed the CHIPS and Science Act into law one year ago, and semiconductor companies across the U.S. have promised to spend $231 billion on building chip manufacturing hubs on American soil. Now, as the shovels hit the ground to begin construction, companies are realizing how difficult it is to find talent.

Taiwan Semiconductor Manufacturing Company, the largest contract chipmaker in the world, said it had to delay production at its $40 billion Arizona plant due to a lack of workers in the U.S.
“We’re still looking for more qualified skilled tradespeople across the board,” said TSMC Arizona President Brian Harrison. “We are installing our unique-to-the-United-States and extremely advanced pieces of equipment.”
TSMC is bringing in workers from Taiwan to handle the high-tech equipment and train U.S. workers.
“[U.S. workers] just don’t have experience on these specific tools and techniques,” Harrison said.

But not everyone is a fan of TSMC’s approach. The Arizona Pipe Trades 469 union has helped fund a website called Stand with American Workers accusing TSMC of overlooking Arizona workers in favor of Taiwanese counterparts in an attempt to “exploit cheap labor.”

But Harrison argued that’s a misconception. “It actually is more expensive to bring the workers from Taiwan, pay them a fair U.S. salary while they’re in the U.S. and pay for all their relocation and housing and support.”
Much of the semiconductor supply chain is based overseas, which means there are fewer qualified workers to staff these facilities here in the U.S.
The chip industry in the U.S. is projected to grow by nearly 115,000 jobs by 2030, according to a new study from Oxford Economics and the Semiconductor Industry Association. The study finds 67,000 of those jobs for technicians, computer scientists and engineers risk going unfilled by 2030 due to a lack of educational training programs and school funding.

A microchip and flag of the U.S. are seen in this multiple exposure photo taken in Krakow, Poland, April 12, 2023.
Jakup Porzycki | Nurphoto | Getty Images

Intel CEO Pat Gelsinger agreed that the industry’s workforce could be better skilled but laid some of the blame in navigating those challenges on TSMC.
“I think they’re inexperienced operating on a global fashion. Samsung hasn’t complained as they’re building in the U.S., but they’re very much a global company,” Gelsinger said.
“That said, we do see that skilled labor — in the construction, as well as skilled labor for our fabs — is something we got to work on,” he added.

More than 50 community colleges announced new or expanded semiconductor workforce programs since the CHIPS Act was passed last year.
Student applications for full-time jobs posted by semiconductor firms were up 79% in the 2022-23 academic year, compared with 19% for other industries, according to student job posting website Handshake. Many chip firms are investing heavily in building their own pipeline of talent through collaborations with local middle schools, high schools, community colleges and universities.
Semiconductor manufacturer GlobalFoundries, for example, has partnerships with the Georgia Institute of Technology and Purdue University to collaborate on semiconductor research and education.
But GlobalFoundries CEO Tom Caulfield said there’s more work to be done.
“I think the industry will come under a lot of pressure. And therefore, we will too, as we try to double the amount of [manufacturing] capacity in the U.S. over the next decade,” he said. More