Business

Walmart is laying off hundreds of employees at e-commerce fulfillment centers across the country.
The big-box giant joins a growing list of retailers, including Amazon and Target, that are cutting costs.

Bloomberg | Bloomberg | Getty Images

Walmart is laying off hundreds of employees at e-commerce facilities across the country, as the big-box giant and other retailers brace for a tougher year ahead.
Walmart, the nation’s largest private employer, is shrinking its workforce as many retailers plan on roughly flat or declining sales. Inflation and the shift back to services is taking a bite out of sales of goods, particularly after a Covid pandemic-fueled spending boom.

Walmart’s e-commerce rival, Amazon, announced 9,000 job cuts on Monday, following 18,000 layoffs in January. Amazon has also closed, canceled and delayed the opening of new warehouses, as some online sales shifted back to stores. Another competitor, Target, plans to cut up to $3 billion in total costs over the next three years, but CFO Michael Fiddelke said at a February investor day that the company is “not backing away from investments in our team and guest experience.”
A spokesperson for Walmart confirmed it was cutting jobs at fulfillment centers. In a statement, the company said it made the cuts “to better prepare for the future needs of customers.”
“This decision was not made lightly, and we’re working closely with affected associates to help them understand what career options may be available at other Walmart locations,” the statement said.
The news was first reported by Reuters.
The company confirmed to Reuters that it is eliminating hundreds of jobs at five fulfillment centers in Pedricktown, New Jersey; Fort Worth, Texas; Chino, California; Davenport, Florida; and Bethlehem, Pennsylvania. It told Reuters it was reducing its workforce because of a reduction or elimination in evening and weekend shifts.

About 200 workers will be affected at the southern New Jersey facility, according to a notice filed with the state.
Walmart anticipates slower sales growth and lower profits in the coming fiscal year. The company said last month that it expects same-store sales for its U.S. business to grow between 2% and 2.5%, excluding fuel. That compares with 6.6% growth in the previous fiscal year.
The company expects adjusted earnings per share to range from $5.90 to $6.05, excluding fuel, for the fiscal year. That’s lower than the adjusted earnings per share of $6.29 for the past fiscal year.
Online sales have continued to grow, though at a slower pace than during the peak of the pandemic. E-commerce sales for Walmart’s U.S. business rose 12% in the most recent fiscal year, which ended Jan. 31. That compares with 11% growth in fiscal 2022 and 79% in fiscal 2021.

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Chewy and Petco are increasingly reliant on pet health care for sales.
Both companies have seen hard goods like toys and leashes trending down but have been building out their pet health care models.
“Non-discretionary categories, including consumables and health care, remain the pillars of strength,” said Chewy CEO Sumit Singh.

Monty Rakusen | Cultura | Getty Images

If there’s one thing that’s clear from Chewy and Petco’s latest earnings reports, it’s that pet health care will be key to whether the companies can grow and make higher profits over the longer term. 
The retailers, which both released their quarterly earnings on Wednesday, began investing heavily into pet health when the pandemic-fueled pet boom saw 23 million American households welcome a new animal into their homes. 

The boom turned the overall pet market into a $123.6 billion dollar powerhouse in 2021, and it’s expected to grow.
Pet health care – and the high margins that come with it – is a crucial component to that overall market. 
The companies may still have to win over investors with the approach, though, as shares of both companies fell Thursday.
Chewy, the ecommerce giant known for its convenient auto-ship services and generous customer service policies, has focused on building out its pharmacy, insurance and telehealth verticals while partnering with veterinarians to get a cut of their consumables revenues. 
The company, founded by Ryan Cohen in 2011, now operates the largest pet pharmacy in the U.S., CEO Sumit Singh told investors on an earnings call. 

“Non-discretionary categories, including consumables and health care, remain the pillars of strength,” Singh, a former Amazon executive, said on the call. 

A dog hi-fives it’s owner in front of the New York Stock Exchange (NYSE) during Chewy Inc.’s initial public offering (IPO) in New York, U.S., on Friday, June 14, 2019.
Michael Nagle | Getty Images

Petco, on the other hand, has also invested into insurance and pharmacy but has focused on leveraging its brick-and-mortar footprint to set up veterinary hospitals. It changed its name to Petco Health and Wellness Company in 2020.
The longtime pet retailer now has a total of 247 hospitals across the country, up from 10 at the beginning of 2018, bringing a veterinary presence to 90% of Petco’s stores, chairman and CEO Ron Coughlin said during an earnings call. 
“Petco’s hospitals and clinics saw nearly 1.9 million pets in 2022, positioning us as one of the leading providers of veterinary services in the United States,” Coughlin told investors, adding Petco is among the top 10 in the nation from a hospital unit standpoint. 
“Vet customers are also demonstrating a 2.3 times higher lifetime value than non-vet customers,” he said.
Against the backdrop of a tough veterinary job market and a dearth of pet doctors, Petco hired 1,100 veterinarians in 2022, a 40% year-over-year increase.
Chewy has not shared how many veterinarians or vet techs it employs for its veterinary telehealth service, Connect With a Vet.

Long-term growth

The fruits of these labors haven’t quite materialized just yet for both of the companies. The nascent initiatives are costly to build. But in the long term, they could provide a durable runway for growth and profitability. 
Pet adoptions surged during the pandemic, triggering a surge in demand for pet goods. With uncertainty in the macroeconomic environment and an increasingly cautious consumer, sales from high margin hard goods such as toys and leashes have been trending down at both companies.
At Petco, where discretionary supplies and companion animals account for about 38% of sales, the category suffered a 9% decline for the full year, the company said. 

A Petco store in Louisville, Kentucky, U.S., on Tuesday, Aug. 23, 2022.
Luke Sharrett | Bloomberg | Getty Images

At Chewy, which is not nearly as reliant on hard goods, the company celebrated its first annual profit in its history Wednesday. But executives also repeatedly noted softness in the discretionary and hard goods categories during the company’s earnings call. Singh said he doesn’t expect hard goods sales to accelerate in 2023.
Plus, there’s now more competition in the hardgoods market, making it harder for Chewy and Petco to hang on to their market share, said Jessica Ramirez, a senior analyst at Jane Hali and Associates. 
“Off-price retailers have a really good category and those categories continue to grow,” she told CNBC. 
However, when it comes to pet care, there are far more avenues for growth and longevity. 
“A puppy that was, you know, adopted or bought, during 2020 is now three years old. As they get older, they’re only going to require more health care,” said Anna Andreeva, a senior equity research analyst and managing director at Needham and Company. “And I think both companies are being smart in developing those verticals.” 
Pet insurance has very little penetration in the U.S. compared to other markets, such as the UK, which can “definitely” be changed moving forward and will be another driver in the space, Andreeva said.
In addition, the footprint of independent veterinary providers is dwindling, which is creating an “interesting” market share opportunity, said Andreeva.
“There’s definitely been, you know, share donation out of that channel,” she said.

Obstacles and opportunities

The two companies share many similarities in the items that they sell and the customers they cater to but have taken different approaches to pet health. 
Chewy, which has no brick-and-mortar stores, has focused on building out its virtual telehealth capabilities but has run into obstacles because of state and federal regulations that, in some locations, forbid veterinarians from treating an animal if they haven’t met it in person. 
“That is a bit of a complication and when you look to Petco, they are at a better advantage because they have stores,” said Ramirez.
CNBC previously reported that Chewy, along with other pet companies, have sponsored a lobbying organization that’s working to change those regulations and some veterinarians are concerned that veterinary telehealth could be unsafe and problematic for pets. 
Petco hasn’t faced the same issues because they haven’t yet branched into telehealth, and all of their veterinarians practice in physical locations. However, it will take some time before the hospitals are profitable.
“The margins on our services business are growing. It’s a three year payback on those vet hospitals and we’re ahead of our model on that,” Coughlin, Petco’s CEO, told CNBC in an interview.
Either way, as the consumer continues to focus on wellness and seek more ease to meet all of its needs, branching into pet health is a positive avenue for growth for both of the companies, said Ramirez, the Jane Hali analyst. 
“As wellness continues to be a key category for us the consumer, it’s also being reflected into pet,” said Ramirez. “It only makes sense that sort of lifestyle is extended to our furry animals at home because again, it makes everything much more streamlined, much easier, so I think that’s something that makes sense on both sides.”

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Many companies are spending more on advertising campaigns during live sporting events on TikTok.
Deodorant brand Degree is using TikTok as a major outlet for advertising during March Madness. State Farm skipped TV in favor of TikTok during the Super Bowl.
The increased advertising spending on TikTok comes as the social platform is at risk of being banned in the U.S.

The TikTok application for download in the Apple App store on a smartphone arranged in the Brooklyn borough of New York, US, on Thursday, March 9, 2023. The US is moving closer to restricting access to the popular video-sharing app TikTok, with Senate Intelligence Committee Chairman Mark Warner set to unveil a bill Tuesday that the Biden administration is poised to support, according to people familiar with the issue. Photographer: Gabby Jones/Bloomberg via Getty Images
Bloomberg | Bloomberg | Getty Images

TikTok is becoming a go-to location for digital advertising for companies – even during live sporting events, the sweetest spots for marketing campaigns.
The social media platform has been under scrutiny from the U.S. government and faces a possible ban. House lawmakers grilled TikTok CEO Shou Zi Chew during a Thursday hearing on Capitol Hill. But the company is nonetheless attracting billions of dollars in advertising revenue as major companies look to reach a younger audience.

It also helps advertisers in some cases bypass hefty TV advertising costs during highly watched events like the NFL’s Super Bowl and NCAA’s March Madness basketball tournament.
During this year’s Super Bowl, State Farm opted out of a TV commercial during the big game, and instead had a TikTok and social media-focused ad campaign. Hyundai prioritized TikTok this year as many automakers bypassed TV advertising during the Super Bowl to preserve cash or spend on ads elsewhere. FedEx also skipped a TV ad in favor of TikTok this year.
TV ads drew more than $7 million for 30-second spots during this year’s Super Bowl on Fox’s broadcast network. While this is more than what TikTok made in advertising revenue in the U.S. this year, if the platform remains available in the U.S., the growth will likely keep coming.
Despite the steep prices and high demand for TV advertising during major live events, the overall ad market has slowed down in recent months due to uncertainty in the economy, weighing on traditional media companies like Paramount Global and Warner Bros. Discovery.
The move toward TikTok come as Gen Z, and even adults, are increasingly spending their time on the platform. Simultaneously, traditional TV bundles have been losing customers at an accelerated clip in recent years as consumers opt for streaming services.

TikTok’s advertising revenue in 2023 is projected to hit $6.83 billion, up from more than $5 billion in 2022, according to data from Insider Intelligence. While this makes up about 2% of overall digital advertising spending, the growth of the spending for the platform has been rapid. Insider Intelligence expects TikTok’s U.S. advertising revenue to surpass $8 billion in 2024.
With March Madness under way, deodorant brand Degree said it is using TikTok as its major marketing channel to reach consumers during the event. It also employed NBA star Giannis Antetokounmpo as its spokesperson for the event. 
“TikTok has really moved from an experimental play to a must-buy for many advertisers. At this point we’re seeing many advertisers rely on TikTok, some maybe too much with what’s going on,” said Jasmine Enberg, a social media analyst at Insider Intelligence. 

The perils of TikTok

Despite the outpouring of advertising dollars for the social media platform, TikTok is at risk of being banned in the U.S. if its Chinese parent company, ByteDance, doesn’t sell its stake. 
The Biden administration and bipartisan members of Congress have raised numerous concerns about TikTok. U.S. officials say TikTok presents a national security risk, alleging that American user data on the app could fall into the hands of the Chinese government.
A TikTok spokesperson wouldn’t comment beyond the company’s statement regarding the possible ban.
“If protecting national security is the objective, divestment doesn’t solve the problem: a change in ownership would not impose any new restrictions on data flows or access. The best way to address concerns about national security is with the transparent, U.S.-based protection of U.S. user data and systems, with robust third-party monitoring, vetting, and verification, which we are already implementing,” a company spokesperson said.
Some creators, influencers and lawmakers who oppose a prospective ban held a rally on Capitol Hill this week, arguing other social media platforms pose similar threats.
The companies that advertise on TikTok didn’t comment on the possibility of a ban in the U.S.
Enberg, of Insider Intelligence, said some advertisers may be relying too much on the platform. Even though TikTok is the choice of platform for Gen Z and young users, advertisers should be “prepared to get cut short if TikTok is banned or there is a significant change to how it operates.” 

“Being overly reliant on one platform can be dangerous,” said Enberg. “Advertisers should be diversifying their platforms.”
During the Super Bowl, T-Mobile not only ran multiple spots on TV during the game, but also had a major TikTok campaign. 
While T-Mobile ran two TV ads during the Super Bowl, Chief Creative Officer Peter DeLuca said it was also key for the brand to have a moment on social media, specifically TikTok. The company decided to play off its TV advertising about home internet with “Come to Your Fences,” a campaign that allowed a TikTok user to use a fence filter – conjuring thoughts of neighbors chatting through a backyard fence. 
“We leaned into what TikTok audiences use,” said Deluca, meaning they created this filter to drive engagement. It did just that. While heightened awareness due to the Super Bowl often causes T-Mobile website traffic to go up, the company said its TikTok campaign drove 15% of total traffic to its website between Feb. 9 and 15. 
When T-Mobile launched its home internet ad on TikTok on Feb. 10, ahead of the Super Bowl, it drove 50% of all of its web traffic that day. “We did leverage the platform and not just run a 60 second spot for the game, but a longer version of the home internet spot on TikTok,” DeLuca said. 
“I think part of how we like to think about it is we want to win the entire consumer engagement on game day, and not just have all the eyeballs on the TV spot,” Deluca said. 

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Texas-based investor Matthew Brown speaks to “Worldwide Exchange” on Mar. 23, 2023.

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Overview: The latecomer

A small group of Virgin Orbit employees are rolling back into the company’s Long Beach, California, headquarters today. The work they’ll resume carries the hopes of the rest of their colleagues, who wait unpaid in the wings. 

Virgin Orbit this week announced a partial resumption of operations, potentially bolstered by a surprising new backer: private investor Matthew Brown. 
In the 24 hours or so since news broke of Brown’s possible $200 million injection into Virgin Orbit, I have yet to find a space financier outside of the deal who was previously familiar with Brown, let alone his previous investments in the sector. A person close to the Virgin Orbit deal described Brown as a “latecomer” and said company leadership initially considered his bid “super fringe.” While it’s common to see a family office go about its investments quietly, Brown’s name is now front-and-center thanks to his belief that Virgin Orbit “has something special.” 
He told CNBC on Thursday morning the 11th-hour deal would make him the effective owner of the teetering rocket builder. 
According to people I’ve spoken to over the last week, Virgin Orbit’s founder Sir Richard Branson doesn’t want to own the business any longer – not even through a bankruptcy process. My CNBC colleague Lillian Rizzo asked around the bankruptcy market and found that Branson’s Virgin Group shopped around for a DIP (debtor-in-possession) loan over the past few weeks. 
After a number of false starts, discussions with bankruptcy firms broke down and focus returned to finding an investor or buyer for Virgin Orbit. But, as talks dragged on, the imminent probability of a bankruptcy filing remained. Virgin Orbit has been working with Latham & Watkins, Alvare & Marsal and Ducera Partners in the event they would need to prepare a filing, CNBC’s Rizzo confirmed, according to a person familiar with the matter.

Even if a deal gets done, with Brown and/or someone else, one investor I spoke to emphasized that “it’s a long road ahead” for Virgin Orbit. A fresh $200 million buys the company “a year max” of runway at its current burn rate. That means any new owner will almost certainly need to consider downsizing the workforce and making the business more lean.
Virgin Orbit’s prevailing strength lies in the company’s demonstrated capability. While two failures in six launches is not an ideal track record, a private venture’s rocket successfully deploying satellites in orbit puts the company in rarefied air in the U.S. launch market. From another investor’s perspective, Virgin Orbit was “the most likely to succeed after Rocket Lab” in the small satellite launch market. That could still be true, but the company will need Brown’s $200 million — and maybe more — if it’s going to get back in the game.

What’s up

Relativity launches debut Terran 1 rocket, which flew successfully for about three minutes before an anomaly with the second stage caused its engine to shut down. Despite not reaching orbit, the mission represents a significant step forward for Relativity, helping demonstrate the viability of its ambitious 3D-printing manufacturing approach. – CNBC
First batch of Starlink Gen2 satellites suffer “some issues:” In a tweet, SpaceX CEO Elon Musk confirmed the initial V2 Mini satellites launched in late February are still undergoing testing, with some of the satellites to be deorbited. – Musk
Astra outlines plan to avoid Nasdaq delisting: The company is seeking a 180-day extension from the stock exchange, which would give the company until Oct. 1 to get shares back above $1. The company’s plan includes the possibility of a reverse stock split. – CNBC
Firefly pivots next launch to support Space Force mission: The company was planning to fly a mission for NASA on the third launch of its Alpha rocket, but changed plans after winning a contract under the “Tactically Responsive Space” contract, for a mission dubbed “VICTUS NOX.” – Firefly
Japanese ispace’s first mission enters orbit around the moon, as the company prepares to attempt a landing in late April. So far, ispace’s Mission 1 has completed seven of the 10 milestones the company outlined before launch. – ispace
Andreessen Horowitz releases space market map, as the venture capital firm increasingly looks at the sector for investment opportunities. – Read more
Deloitte takes a look at the global space industry, as the consulting and accounting giant analyzes growth opportunities in the sector. Deloitte surveyed 60 senior U.S. space executives for the report, with analysis focused on the next three to five years of the industry’s development. – Deloitte
SpaceX launches 18th and 19th missions of the year, with a pair of Falcon 9 rockets flying Starlink and then SES satellites. Watch more / Steve Collar
Rocket Lab launches second Electron mission from the U.S., carrying a pair of Capella SAR imagery satellites into orbit. – Watch more
SpaceX will be ready to launch Starship “in a few weeks,” Elon Musk says. He noted that the launch timing also depends on the FAA approving its launch license. – Read more
Kazakhstan reportedly seizes control of Russian-leased Baikonur Cosmodrome, with the country specifically barring Russia from removing and operating the assets of Roscosmos-subsidiary TsENKI. – Ars Technica
Advisory group calls for Europe to develop and build its own human spaceflight capabilities, including fly an independent crewed mission to the moon: In a briefing to the European Space Agency, the “High-Level Advisory Group” outlined a case for Europe to have its own space station in low Earth orbit, as well as cargo and crew transportation capabilities and a “sustained presence” on the moon. – ESA

Industry maneuvers

SpaceX reportedly in talks with Saudi and Emirati investors for new funding: The round would represent a “multi-billion dollar” raise from Saudi Arabia’s Water and Electricity Holding Company and the United Arab Emirates’ Alpha Dhabi. It is expected to value the company at about $140 billion. – The Information
Satellogic offers to sell imagery satellites for under $10 million each, expanding its product lineup by aiming to tap customers who want to own and operate, instead of just buy imagery from the company. – SpaceNews
Thai-based mu Space signs partner deal with OneWeb: The company said the agreement represents a “multi-million, multi-year deal” to distribute OneWeb satellite broadband services in Southeast Asia. – OneWeb
NRO awards study contracts to six companies for hyperspectral imagery: The spy satellite agency announced awards to BlackSky, HyperSat, Orbital Sidekick, Pixxel, Planet, and Xplore. The value of the contracts was not disclosed. – National Reconnaissance Office
Startup Arkisys wins $1.6 million Space Force contract, to demonstrate robotic satellite assembly. – SpaceNews
Impulse Space moves headquarters to Redondo Beach, relocating from its spot in El Segundo, California, as the company aims to increase manufacturing and office space with a new 60,000 square foot facility. – Impulse
Sierra Space establishes operations at NASA’s Marshall center in Alabama, for further development of its LIFE space habitat. In its fourth test of a one-third scale inflatable LIFE prototype, the company says the habitat demonstrated a predicted design life of 60 years during pressure test. – Sierra Space
Frontier Aerospace raises $10 million from AEI HorizonX: The private equity firm, which was formed by Boeing in 2017 but is now managed by AE Industrial Partners, invested in Frontier, which builds liquid rocket engines for in-space propulsion, such as for lunar spacecraft. – Frontier
Private equity firm ATL Partners forms LightRidge Solutions, to develop and produce “small, affordable, high-performance space and airborne sensors and payloads” for national security purposes. LightRidge is made up of by a combination of GEOST, which TL acquired in 2021, and Ophir Corporation. – ATL Partners
Nonprofit Space For Humanity to receive revenue from William Shatner documentary: The organization announce it would receive 25% of the gross revenue earned by producer CCG Guardian from the documentary “You Can Call Me Bill,” which features Shatner’s spaceflight on Blue Origin’s New Shepard rocket in October 2021. – Space for Humanity

Market movers

Terran Orbital reached near $100 million in revenue last year: The small satellite manufacturing specialist reported Q4 results, in which it brought in $31.9 million, up 15% from the prior quarter. Its adjusted EBITDA loss doubled, however, both on a quarter-over-quarter and year-over-year basis, to $26.1 million. While its backlog slipped at year-end, the 60 some satellites it had booked does not include the company’s mammoth deal with Rivada, which adds 300 satellites to that total. – CNBC

On the horizon

March 24: SpaceX’s Falcon 9 launching Starlink mission from Florida.
March 24: Rocket Lab’s Electron launching BlackSky satellites from New Zealand.
March 25: ISRO’s GSLV Mk.3 launching OneWeb satellites from India.

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