Business

Nike’s quarterly earnings and revenue easily beat Wall Street’s expectations, but higher costs squeezed the company’s margins.
While inventories rose year-over-year, they declined from the previous quarter.
Nike Direct sales were up 16% for the quarter at $5.4 billion and digital sales were up 25%.

Nike on Tuesday reported quarterly results that easily topped Wall Street’s expectations while raising its outlook, as the company touted its success in clearing through its hefty inventory pile.
Shares of Nike rose more than 10% after hours Tuesday.

related investing news

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

Earnings per share: 85 cents vs. 64 cents expected
Revenue: $13.32 billion vs. $12.57 billion expected

The company reported net income for the three-month period ended November 30 was $1.33 billion, or 85 cents per share, compared with $1.34 billion, or 83 cents per share, a year earlier.
Nike reported revenue of $13.32 billion, up 17% from $11.36 billion a year earlier.
Considering the strong performance, Nike Chief Financial Officer Matt Friend said on an earnings call that the company now sees its revenue growing for the full fiscal year.
Over the past three quarters, Nike has beaten Wall Street’s expectations, but like other retailers, has struggled with inflated inventory levels that arose from supply chain disruptions, rising consumer demand and unpredictable in-transit shipping times.

Inventories were up 43% to $9.3 billion in the quarter, compared to last year. The merchandise glut led to aggressive markdowns, which helped reduce Nike’s gross margin to 42.9% from 45.9% a year ago. However, inventories declined from $9.7 billion in the previous quarter. Nike CEO John Donahoe said he believes the company is already past its inventory peak. Gross margins are expected to decline by two percentage points to 2.5 percentage points next quarter as liquidation efforts continue, Friend said.
The company also saw a 10% year-over-year uptick in selling and administrative expenses to $4.1 billion, mostly led by advertising and marketing costs and investment in Nike Direct as the company continues to move away from wholesalers. The company expects those costs to increase by high single digits next quarter as well.
While the focus on Nike Direct was largely to blame for the increased administrative expenses, the investment has paid off. Nike Direct sales were up 16% for the quarter at $5.4 billion and digital sales were up 25%. Nike executives touted record growth in the brand’s digital membership platform as a “key reason” behind the online sales jump. Shoppers who became members were able to take advantage of several Black Friday and Cyber Monday promotions.
For the last several quarters, wholesale revenue has been effectively flat but was up 19% for the quarter. Nike executives said sales were stronger to wholesalers during the quarter because they finally had the inventory available to sell to them after supply chain constraints.
Nike’s sales in China, its third biggest market by revenue, dropped by 3% compared to last year, continuing a trend the retailer has been contending with as the country deals with lingering Covid lockdowns and a slowdown in retail spending. Overall retail sales in the country fell by 5.9% in November compared to a year ago and clothes and shoe sales plunged by 15.6%, according to the National Bureau of Statistics of China.
After earnings from Nike’s fiscal first quarter were released in September, executives said the company’s inventory had grown 65% over the last year in North America alone and as a result, the company enacted an aggressive promotional strategy to liquidate the merchandise and make way for new products.
The plan was a key part of Nike’s strategy to shift its sales directly to consumers and away from wholesalers by improving the in-store experience and enticing customers to shop directly from the company online.
On Friday, Nike announced its new “Jordan World of Flight Milan” store located on Via Torino, a famed shopping district in the Italian locale well known for its designer shoe stores.
The initiative reflects the steps Nike is taking to grow the company as a direct-to-consumer brand.
The store, called a “first-of-its-kind retail experience” by the company in a news release, has a built-in members lounge and will include interactive shopping experiences tailored to fans of the renowned sneaker brand.
Read the company’s earnings release here.

WATCH LIVEWATCH IN THE APP More

A “Black Adam” sequel won’t be part of the next phase of DC movies from Warner Bros. Discovery, according to Dwayne Johnson.
“Black Adam,” released this fall, underperformed at the box office, despite a pricy budget.
The decision to axe the sequel comes under the new leadership of James Gunn and Peter Safran at Warner Bros. Discovery’s DC movies and TV unit.

(L-R) Hiram Garcia and Dwayne Johnson attends the “Black Adam” premiere at Cine Capitol on October 19, 2022 in Madrid, Spain.
Aldara Zarraoa | Wireimage | Getty Images

A “Black Adam” sequel won’t be part of the next phase of DC movies from Warner Bros. Discovery’s studio division, according to the film’s star, Dwayne Johnson.
“DC and Seven Bucks have agreed to continue exploring the most valuable ways Black Adam can be utilized in future DC multiverse chapters,” Johnson wrote in a tweet. Seven Bucks is Johnson’s production company.

The move comes as Warner Bros. Discovery, under CEO David Zaslav, cuts costs and tries to revamp the debt-laden business. The company’s stock hit a 52-week low Tuesday.
“Black Adam” was among the properties that have been disappointing for Warner Bros. Despite its sizable budget, and Johnson’s global popularity, the movie underperformed at the box office and garnered bad reviews from critics.
The decision follows a leadership transition at DC. James Gunn and Peter Safran started as the new heads of Warner Bros. Discovery DC Comics film and TV unit last month.
Gunn, who directed “The Suicide Squad,” and Safran, who produced “Aquaman,” intend to bring new life to the DC Studios slate, leading to an onslaught of different cuts, some of which have brought backlash. DC unexpectedly nixed “Batgirl,” which would have been released exclusively on HBO Max, sending shockwaves through Hollywood and prompting backlash from fans.
“Love @TheRock & I’m always excited to see what he & Seven Bucks do next. Can’t wait to collaborate soon,” Gunn tweeted Tuesday in response to Johnson’s tweet.

DC also signaled a new direction for the Superman franchise. Gunn announced that a new Superman movie is in the works, but that the previous star, Henry Cavill, will not return. A new Wonder Woman movie was also dropped from the studio’s slate.
“Peter & I have a DC slate ready to go, which we couldn’t be more over-the-moon about; we’ll be able to share some exciting information about our first projects at the beginning of the new year,” Gunn tweeted last week.

WATCH LIVEWATCH IN THE APP More

FedEx’s sales and profit fell last quarter from the year-ago period.
It said it will be able to cut another $1 billion beyond what it forecast in September.
The company posted particular weakness in its Express unit.

FedEx said Tuesday it would cut $1 billion more in costs after weak demand ate into its quarterly profit.
The company in September announced cost-cutting measures that included parking planes and closing some offices in the face of softening global demand. It also raised package-delivery rates. At the time, CEO Raj Subramaniam warned the economy would enter a “worldwide recession.” 

FedEx on Tuesday said it will be able to cut another $1 billion beyond what it forecast in September, to bring the total fiscal 2023 savings to $3.7 billion compared with its earlier plan for the year. 
“Our teams have an unwavering focus on rapidly implementing cost savings to improve profitability,” CFO Mike Lenz said in an earnings release. “As we look to the second half of our fiscal year, we are accelerating our progress on cost actions, helping to offset continued global volume softness.”
Most of the additional cuts will stem from FedEx’s Express unit, such as additional flight cuts, Lenz said on an earnings call. Other cuts include adjustments in the Ground unit in pick-up and delivery.
The company has reduced U.S. domestic flight hours by 6% and international by 7% so far this year. By the end of the fiscal year, FedEx said, it expects to park 11 additional aircraft, mostly wide-body planes.
FedEx shares were up more than 3% in after-hours trading.

Here’s how FedEx performed in its fiscal second quarter of 2023, compared with Refinitiv consensus estimates:

Earnings per share: $3.18 adjusted vs. $2.82 expected
Revenue: $22.8 billion vs. $23.74 billion expected

FedEx’s net income fell to $788 million in the three months ended Nov. 30, down from $1.04 billion a year earlier. Sales fell to $22.8 billion in that period, down from $23.5 billion a year earlier, falling short of estimates.
Adjusting for one-time items, FedEx posted per share earnings of $3.18, ahead of analyst estimates but well off the $4.83 a share it reported during the same period of last year.
The company posted particular weakness in its Express unit, with operating income in that segment down 64% from last year. FedEx Ground operating income rose 24% from last year, and FedEx freight operating income increased 32% year over year. All three units were helped by higher yields.
FedEx forecast full-year earnings per share of between $13 and $14, just shy of analysts’ expectations of $14.08 per share.
The company’s shares are down about 36% for the year as of Tuesday’s close, compared with the S&P 500’s roughly 20% decline.

WATCH LIVEWATCH IN THE APP More

Porsche said Tuesday that a pilot plant in Chile started production of the alternative fuel, as it aims to produce millions of gallons by mid-decade.
Officials say e-fuels can act like gasoline, allowing vehicle owners a more environmentally friendly way to drive.
Porsche officials celebrated the beginning of e-fuel production with the filling of a Porsche 911 with the first synthetic fuel produced at the site.

Barbara Frenkel, member of the executive board for procurement at Porsche, (left) and Michael Steiner, member of the executive board for development and research fuel a 911 with e-fuel at a pilot plant, Punta Arenas, Chile.
Porsche AG

Porsche and several partners have started production of a climate neutral “e-fuel” aimed at replacing gasoline in vehicles with traditional internal combustion engines.
The German automaker, owned by Volkswagen, said Tuesday that a pilot plant in Chile started commercial production of the alternative fuel. By mid-decade, Porsche is planning to produce millions of gallons of the e-fuel.

Porsche expects to initially use the fuel in motor sports and at its performance experience centers, followed by other uses in the years to come. Ultimately, the plan is for the fuel to be sold to oil companies and others for distribution to consumers.
E-fuels are a type of synthetic methanol produced by a complex process using water, hydrogen and carbon dioxide. Companies say they enable the nearly CO2-neutral operation of gas-powered engines. Vehicles would still need to use oil to lubricate the engine.
In the pilot phase, Porsche expects to produce around 130,000 liters (34,342 U.S. gallons) of the e-fuel. Plans are to expand that to about 55 million liters (14.5 million U.S. gallons) by mid-decade, and around 550 million liters (145.3 million U.S. gallons) roughly two years later.
The Chilean plant was initially announced with Porsche in late 2020, when the automaker said it would invest $24 million in the development of the plant and e-fuels. Partners include Chilean operating company Highly Innovative Fuels, Siemens’ renewable energy unit and others.
Company officials say e-fuels can act like gasoline, allowing vehicle owners a more environmentally friendly way to drive. They could also use the same fueling infrastructure as gas, compared with the billions of dollars in investments needed to build a network of charging stations for electric vehicles.

But entirely replacing traditional fossil fuels with e-fuels would be difficult and extremely costly. In 2021, about 134.83 billion gallons of finished motor gasoline were consumed in the U.S., an average of about 369 million gallons per day, according to the U.S. Energy Information Administration.
Still, production of such a fuel would allow Porsche and others a way to continue producing vehicles such as Porsche’s iconic 911 sports car with a traditional engine alongside, or rather than, a new electric model. While electric vehicles can offer outstanding performance, their driving dynamics differ from traditional engines.
Porsche officials celebrated the beginning of the e-fuel production with the filling of a Porsche 911 with the first synthetic fuel produced at the site.
“The potential of eFuels is huge. There are currently more than 1.3 billion vehicles with combustion engines worldwide. Many of these will be on the roads for decades to come, and eFuels offer the owners of existing cars a nearly carbon-neutral alternative,” Michael Steiner, Porsche’s director of research and development, said in a release.
Steiner and others reiterated Tuesday that the development of the fuel does not change the company’s plans to have 80% of its lineup consist of EVs by 2030.

WATCH LIVEWATCH IN THE APP More

The Biden administration on Tuesday announced stricter standards on smog-forming emissions from trucks, vans and buses starting in the 2027 model year.
The new rules from the Environmental Protection Agency are more than 80% stronger than current rules and are the first update to clean air standards for heavy-duty vehicles in more than 20 years.
Michael Regan, the administrator of the EPA, said the actions would protect the health of 72 million people who live near truck freight routes in the U.S.

EPA Administrator Michael Regan gives remarks at an event on new national clean air standards for heavy-duty trucks near the U.S. Environmental Protection Agency Headquarters on December 20, 2022 in Washington, DC. 
Anna Moneymaker | Getty Images News | Getty Images

The Biden administration on Tuesday announced stricter standards on smog-forming emissions from trucks, vans and buses starting in the 2027 model year, the first of several federal actions aimed at limiting vehicle pollution.
Medium- and heavy-duty trucks represent only about 4% of vehicles in the U.S., but due to their larger size and greater travel distances, the vehicles consume more than 25% of total highway fuel and comprise nearly 30% of highway carbon emissions, according to the Department of Energy.

related investing news

The new rules from the Environmental Protection Agency are the first update to clean air standards for heavy-duty vehicles in more than 20 years. The standards by 2045 will result in a 48% reduction in nitrogen oxide, a 28% reduction in benzene, a 23% reduction in volatile organic compounds and an 18% reduction in carbon monoxide. All of these emissions can cause health problems for people.
The new rules will also help fight climate change, even though they aren’t likely to have any effect on carbon dioxide emissions. Nitrogen oxide is roughly 300 times as potent as carbon dioxide at warming the atmosphere and accounts for about 7% of all U.S. greenhouse gas emissions from human activity, according to the EPA.
The agency estimates the standards will result in up to 2,900 fewer premature deaths, 6,700 fewer hospital admissions and emergency department visits, 18,000 fewer cases of childhood asthma and $29 billion in annual net benefits by 2045.

EPA Administrator Michael Regan gives remarks at an event on new national clean air standards for heavy-duty trucks near the U.S. Environmental Protection Agency Headquarters on December 20, 2022 in Washington, DC. 
Anna Moneymaker | Getty Images News | Getty Images

Michael Regan, the administrator of the EPA, said the actions would protect the health of 72 million people who live near truck freight routes in the U.S., including the most threatened populations in historically polluted communities.
“These rigorous standards, coupled with historic investments from the Inflation Reduction Act and the Bipartisan Infrastructure Law, will accelerate President Biden’s ambitious agenda to overhaul the nation’s trucking fleet, deliver cleaner air, and protect people and the planet,” Regan said in a statement.

Britt Carmon, the federal clean vehicles advocate at the Natural Resources Defense Council, said the new EPA standards fall short and the agency missed a critical opportunity to accelerate the shift to the cleanest vehicles.
“EPA now needs to move quickly to put in place the next round of standards that will accelerate the transition to zero-emitting trucks so that we can all be free from the tailpipe pollution that is harming our health and accelerating climate change,” Carmon said in a statement.

More from CNBC Climate:

The EPA is set to propose in the spring separate greenhouse gas standards for heavy-duty vehicles starting in the 2027 model year. The agency also said it will delay making a decision until early next year on California’s requests to set its own heavy-truck emissions rules.
Vickie Patton, general counsel for Environmental Defense Fund, praised the standards and urged the agency to quickly move forward to recognize state standards adopted by states such as California that are aiming to phase out diesel fuel.
Jed Mandel, president of the Truck and Engine Manufacturers Association, an industry group, said the agency’s new standards are stringent and would be difficult to implement.
“Ultimately, the success or failure of this rule hinges on the willingness and ability of trucking fleets to invest in purchasing the new technology to replace their older, higher-emitting vehicles,” Mandel said in a statement.
The EPA’s standards will take effect 60 days after publication in the Federal Register.

WATCH LIVEWATCH IN THE APP More

Two New York men, Daniel Abayev and Peter Leyman, allegedly worked with Russian hackers to break into JFK’s taxi dispatch system so they could charge cabbies to cut the line.
Taxi drivers typically have to wait hours for a fare but if they paid the defendants $10, they were able to skip the queue, federal prosecutors alleged.
Abayev and Leyman were each charged with conspiracy to commit computer intrusion and face up to 10 years in prison.

Arriving passengers line up to get taxi outside of Terminal 4 at the JFK airport in New York.
Jewel Samad | AFP | Getty Images

Two New York men were arrested for conspiring with Russian nationals to hack the taxi dispatch system at John F. Kennedy International Airport so they could manipulate the line and charge drivers for access to the front of the queue, federal prosecutors said Tuesday. 
Daniel Abayev and Peter Leyman, both 48, were taken into custody on Tuesday morning in Queens and charged with two counts of conspiracy to commit computer intrusion, prosecutors from the Southern District of New York announced. 

Beginning in 2019, the two allegedly worked with hackers based in Russia to infiltrate JFK’s taxi dispatch system by bribing someone to install malware on computers connected to the system, stealing computer tablets and using Wi-Fi to break in, prosecutors alleged. 
“I know that the Pentagon is being hacked… so can’t we hack the taxi industry[?]” Abayev allegedly texted one of the hackers in November 2019, according to the indictment against him. 
Once the hackers successfully gained access to the dispatch system, Abayev and Leyman were able to move specific taxis to the front of the line and began charging drivers $10 to skip the queue, prosecutors alleged. 
Typically, taxi drivers looking to pick up travelers at JFK wait in a holding lot before they’re dispatched to a specific terminal in the order in which they arrived. The process can take hours, and the wait time can have a significant impact on how much money a taxi driver is able to earn in a day. 
Prosecutors estimate Abayev and Leyman were able to manipulate as many as 1,000 taxi trips a day throughout the course of the scheme, which went on from about November 2019 to November 2020. 

“As alleged in the indictment, these two defendants — with the help of Russian hackers — took the Port Authority for a ride,” Damian Williams, U.S. Attorney for the Southern District, said in a statement. 
Drivers learned about the scheme through word of mouth, and some were even allowed to cut the line for free — if they agreed to recruit other cabbies that were willing to pay, prosecutors alleged. 
“For years, the defendants’ hacking kept honest cab drivers from being able to pick up fares at JFK in the order in which they arrived,” Williams said.  
The suspects are slated to appear before Judge Gabriel Gorenstein later Tuesday. They face up to 10 years in prison if they’re convicted. It is not clear if they had retained an attorney. 

WATCH LIVEWATCH IN THE APP More

The U.S. Postal Service plans to spend $9.6 billion to modernize its fleet of delivery trucks with 66,000 electric vehicles by 2028.
The pledge comes after public pressure from environmental groups challenging the USPS to abandon gas-powered vehicles.

Three United States Postal Service (USPS) mail trucks are parked in front of the post office in Danville. On July 20, the USPS announced that at least 40 percent of its Next Generation Delivery Vehicles (NGDVs) and commercial off-the-street (COTS) vehicles will be battery electric vehicles.
Paul Weaver | Sopa Images | Getty Images

The U.S. Postal Service said Tuesday that it intends to purchase at least 66,000 electric delivery vehicles as part of a push to transform its delivery fleet.
The electric vehicles would amount to more than half the 106,000 vehicles it plans to acquire for delivery between now and 2028. The new vehicles will start to replace its aging fleet of 220,000 vehicles, the Postal Service said in a press release.

The Postal Service has faced public pressure from environmental campaigns to electrify its fleet.
In April, environmental groups filed a lawsuit against the USPS for its failure to conduct an adequate environmental analysis before deciding to replace its vehicle fleet with more “fuel-guzzling combustion mail trucks,” according to a press release from the Sierra Club.
“Instead of receiving pollution with their daily mail packages, communities across the U.S. will get the relief of cleaner air,” Katherine García, director of the Sierra Club’s Clean Transportation for All campaign, said in a statement on Tuesday.
The Sierra Club was one of the groups pressuring the USPS to go electric.
The USPS said Tuesday its investment is expected to reach $9.6 billion, about a third of which comes from the Inflation Reduction Act. The funding will help the Postal Service build what has the potential to be one of the largest electric vehicle fleets in the country, Postmaster General Louis DeJoy said in a statement.
“We have a statutory requirement to deliver mail and packages to 163 million addresses six days per week and to cover our costs in doing so — that is our mission,” DeJoy said. “As I have said in the past, if we can achieve those objectives in a more environmentally responsible way, we will do so.”

WATCH LIVEWATCH IN THE APP More

New installments in the Guardians of the Galaxy, Spider-Verse and Ant-Man series are the most anticipated movies of 2023, according to a Fandango survey.
Moviegoers also say they will be going to the theater more in 2023 than they did this year.
Next year will bring the most blockbuster releases since 2019, which is good news for theaters that have been hurting for content.

Still image from Spider-Man Into The Spider-Verse
Source: Sony Pictures

Movie fans apparently can’t get enough of superheroes.
A trio of upcoming Marvel movies − the newest installments of the Guardians of the Galaxy, Spider-Man and Ant-Man franchises − are the top three most anticipated films for 2023, according to a new survey by Fandango.

related investing news

11 hours ago

Moviegoers also said they plan to head to theaters more often than they did this year, according to the survey, which was conducted in early December and is based on responses from more than 5,000 movie fans who bought at least one ticket in 2022.
“Anybody that is at this point saying that there is Marvel fatigue or superhero fatigue is clearly not the ones going to the movies,” said Erik Davis, managing director of Fandango, the movie and TV information and ticketing site.
Read more: What’s next for Netflix, Disney, Warner Bros. and Paramount?
The survey indicates a big appetite for familiar characters and universes. Many of the most-anticipated films are prequels, sequels or films otherwise connected to a well-known franchise. It marks the second consecutive year that franchises dominated Fandango’s most-anticipated list.

2023’s Top 10 Most-Anticipated Movies Across Categories
1. “Guardians of the Galaxy Vol. 3” (Disney)
2. “Spider-Man: Across the Spider-Verse” (Sony)
3. “Ant-Man and the Wasp: Quantumania” (Disney)
4. “John Wick: Chapter 4” (Lionsgate)
5. “Indiana Jones and the Dial of Destiny” (Disney)
6. “Aquaman and the Lost Kingdom” (Warner Bros.)
7. “Mission: Impossible – Dead Reckoning Part One” (Paramount)
8. “The Hunger Games: The Ballad of the Songbirds and Snakes” (Lionsgate)
9. “Creed III” (MGM)
10. “The Super Mario Bros. Movie” (Universal)

Among the top 10 overall most anticipated films, only “The Super Mario Bros. Movie” isn’t part of an established movie series. But even that film comes with the name recognition of the popular video game franchise and coincides with the opening of Super Nintendo World at Universal Studios in California.

Some nonfranchise films with more mid-tier budgets, such as “Cocaine Bear” and “M3gan,” still made some of the separate, category-specific lists. “Cocaine Bear,” a dark comedy about a bear that consumes cocaine and goes on a murderous rampage, is the third most-anticipated live-action comedy. “M3gan,” which is about a lifesize AI doll that turns evil, is the fifth most-anticipated horror movie.
“I definitely think that there’s room for smaller films to make a lot of noise,” said Davis. “But I think coming into a brand-new year – and this is not a new thing – it’s these larger films, these big sequels, these big anticipated franchises that people are really looking forward to most.”
For Hollywood, the wave of big franchise releases in 2023 could signal the desire for stability after the industry was rattled by Covid pandemic disruptions.
Franchises and legacy films are “a box-office insurance policy,” said Paul Dergarabedian, a senior media analyst at Comscore. “I think studios are always risk-averse and the greatest insurance is that at least people will know what the movie is about.”
Most movie watchers also said they plan to be in theaters more often in 2023 than they were this year, with 84% saying they intend to see at least six films in a movie theater. Last year, 80% said they wanted to see a minimum of five movies in theaters.
The survey findings are promising for theaters, which have been struggling with a lack of new releases since the pandemic, when people hunkered down at home to stream movies instead. Forty fewer films were widely released in 2022 than in 2019, according to data from Comscore.
This year, the latest big blockbuster in theaters is “Avatar: The Way of Water.” The film opened on Sunday and made $134 million at the domestic box office, less than the $175 million analysts expected.

The drought of new releases in theaters could be less severe in 2023, with more than 100 new movies set for release, including the highest number of blockbusters since 2019, according to Davis.
“The good news for next year is you’re going to have a lot more movies consistently released,” echoed Dergarabedian.
Some big players in the entertainment industry want to reestablish movie viewing as an in-person experience. When Warner Media and Discovery merged in April, the new regime recommitted to theater-only releases and reduced its production of straight-to-streaming films.
For example, Warner Bros. Discovery reversed course on “Magic Mike’s Last Dance,” which was originally going to be released exclusively on HBO Max but is now set for the big screens in February. The pivot came after Warner Bros. Discovery had already axed “Batgirl,” which was also planned as an HBO Max-exclusive debut.
Disclosure: Comcast is the parent company of CNBC and NBCUniversal, which owns Fandango. NBCUniversal is the distributor of “The Super Mario Bros. Movie,” “Cocaine Bear” and “M3gan.”

WATCH LIVEWATCH IN THE APP More