Business

Walmart’s grocery business buoyed its third-quarter earnings and revenue, which surpassed Wall Street’s expectations.
Chief Financial Officer John David Rainey said consumers are watching how they spend and trading down to cheaper items, such as hot dogs and beans.
Walmart also announced a $3.1 billion opioid settlement.

People past walk by a Walmart store on August 23, 2020 in North Bergen, New Jersey.
Kena Betancur | VIEW press | Corbis News | Getty Images

Walmart said Tuesday that sales rose by nearly 9% in the fiscal third quarter, as Americans across income levels bought the company’s low-priced groceries.
The discounter beat Wall Street’s expectations for the quarter and raised its outlook to reflect that beat. 

Shares rose more than 6% in premarket trading.
Here’s what Walmart reported for the three-month period ended Oct. 31, according to Refinitiv:

Earnings per share: $1.50 adjusted vs. $1.32 expected
Revenue: $152.81 billion vs. $147.75 billion expected

Walmart posted a net loss of $1.8 billion, or 66 cents per share, down from a profit of $3.11 billion, or $1.11 per share, a year earlier.
On an adjusted basis, the company reported earnings of $1.50 per share. The retailer, which also offers pharmacy services, recorded a charge of nearly $3.33 billion, or $1.05 a share, as part of opioid-related legal charges. It announced a nationwide settlement of $3.1 billion on Tuesday to resolve lawsuits and potential lawsuits by state, local and tribal governments.
In a statement, Walmart said it “strongly disputes the allegations in these matters, and this settlement framework does not include any admission of liability.”

‘Pocketbooks are stretched’

Shoppers are watching how they spend, Walmart Chief Financial Officer John David Rainey said on a call with CNBC. They are buying less-expensive proteins such as hot dogs, beans and peanut butter instead of pricier meats. They are waiting for sales events to buy items like TVs and air fryers and are spending less in the apparel and home categories.
“Pocketbooks are stretched,” he said. “People have less discretionary income or less disposable income to spend on things — and so they’re looking for value.”
The discounter also made progress with an industry-wide headache: a glut of excess inventory. Walmart’s inventory was up 13% year over year in the third quarter. That’s down from 25% in the second quarter and 32% in the first quarter.
Rainey said Walmart has canceled orders, increased markdowns and cleared through the backlog of merchandise stuck at ports. He said about 70% of the inventory increase is from inflation rather than more units.
“From a unit perspective, we find ourselves in a much, much better place than we did in the first part of the year,” he said.
Comparable sales for Walmart U.S. rose 8.2%, excluding fuel. That topped analysts’ expectations of 3.6% growth, according to StreetAccount. The key retail metric includes sales from Walmart stores and clubs open for the at least a year, including remodels, relocations and expansions.
Comparable sales for Sam’s Club jumped 10%, excluding fuel, and surpassed Wall Street’s expectations of 8.7%, according to StreetAccount. Walmart does not disclose the membership count for the warehouse club, but its membership income increased 8% and its member count hit an all-time high.

Gearing up for the holidays

Walmart is navigating a more challenging backdrop as it gears up for the holidays. Inflation is near a four-decade high, driving up the prices of housing, gas and more. Competitors are dangling deep discounts to try to clear through excess inventory. And consumers are spending again on travel, dining out and other experiences.
As inflation runs hot, however, the big-box retailer has attracted higher-income shoppers. About 75% of its market share gains in food came from households that make more than $100,000 a year, Rainey said. The discounter saw that same pattern in the previous quarter. 
For the holiday quarter, Walmart gave a more conservative outlook. It said it anticipates comparable sales for Walmart U.S. will rise about 3%, excluding fuel. That is below Wall Street’s expectations of 3.5% growth, according to StreetAccount.
Walmart said it expects adjusted earnings per share to drop by 3% to 5% in the fourth quarter and consolidated net sales to grow by about 3%, as it is, negatively affected by approximately $1.3 billion from currency fluctuations.
So far, Rainey said the holidays are “off to a pretty solid start,” but “consumers are using discretion in terms of what they’re buying.”
Read Walmart’s earnings release here.
This story is developing. Please check back for updates.

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Luxury electric vehicle maker Lucid Group on Tuesday revealed several new versions of its Air sedan.
The company said the Lucid Air Pure will start at $87,400, its lowest-cost model yet.

Courtesy: Lucid Motors

Luxury electric vehicle maker Lucid Group on Tuesday revealed several new versions of its Air sedan – including its lowest-cost model yet.
CEO Peter Rawlinson said in an interview with CNBC’s Phil LeBeau the Lucid Air Pure will start at $87,400. An all-wheel drive version with 410 miles of range will ship by the end of this year, and a rear-wheel drive version will arrive in 2023.

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The company also announced the Lucid Air Touring, with all-wheel drive, 620 horsepower and an EPA-estimated 425 miles of range. Lucid said the Touring is its “most efficient model yet,” able to travel about 4.6 miles per kilowatt-hour.
The Touring starts at $107,400, and deliveries will be underway shortly, Lucid said.
Lucid also said the high-performance Air Sapphire, which it revealed in August, is undergoing final tuning now. Lucid currently estimates that the Air Sapphire will accelerate from zero to 60 miles per hour in 1.89 seconds and have a top speed of 205 miles per hour, making it the world’s quickest sedan.  
The Air Sapphire starts at $249,000, and production will begin in the first half of next year.

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Battery recycling company Redwood Materials, founded by former Tesla CTO JB Straubel, will supply high-nickel cathode to Panasonic Energy starting in 2025.
The deal is worth multiple billions, Straubel told CNBC without providing a specific figure.

JB Straubel sits down with CNBC’s Phil LeBeau at Redwood Materials.

Panasonic Energy of North America, the largest supplier of battery cells for electric vehicles in the U.S., has struck a deal with Nevada-based battery recycling company Redwood Materials to buy a key material for the production of batteries.
Redwood Materials, which will supply high-nickel cathode to Panasonic Energy starting in 2025, says the agreement is worth billions of dollars, but declined to give an exact figure. 

“I think it’s a bigger deal than is immediately obvious to most people just because no one really sees or is familiar with what a cathode material is or where it goes,” said Redwood Materials Founder and CEO JB Straubel, who was Tesla’s chief technology officer until 2019, and helped invent a lot of the core technology used by the electric vehicle maker. “It (cathode material) may be around fifty percent of the cost of the battery.”
Right now, Panasonic imports almost all of the cathode material used in the production of battery cells at its plant in Sparks, Nevada.  That facility supplies cells to the Tesla gigafactory, which manufactures battery packs that power Tesla vehicles sold in North America.  In July, Panasonic announced it will build a $4 billion battery plant in DeSoto, Kansas, outside of Kansas City.  The new Panasonic facility  will use high-nickel cathode supplied by Redwood materials when production starts in 2025.
For Straubel, the agreement with Panasonic Energy is further validation of his vision for Redwood Materials. When he started the company in 2017, he told investors and those following the company that battery recycling would be critical to the expansion and growth of electric vehicles, largely because it will be a more efficient and cost-effective way to supply the key components needed for battery cells.  
“That’s part of the significance of this announcement,” he said. “This is the largest and really first Gigafactory scale supply chain announcement for the supply chain of batteries in the U.S..”. 
Redwood Materials currently employs approximately 600 workers in the U.S. and estimates that number to rise to approximately 1,500 by the time it is producing large quantities of high-nickel cathode. By 2030, the company expects to produce anode and cathode materials annually to power five million electric vehicles.

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Home Depot reported third-quarter earnings on Tuesday, beating analyst expectations.
The retailer reported revenue increased nearly 6% to $38.87 billion.
Wall Street is watching for how rising costs and other macroeconomic headwinds are affecting the retailer.

A customer wearing a protective mask loads lumber onto a cart at a Home Depot store in Pleasanton, California, on Monday, Feb. 22, 2021.
David Paul Morris | Bloomberg | Getty Images

Home Depot reported Tuesday its third-quarter revenue increased nearly 6% to $38.9 billion, beating analyst expectations, as the retailer continued to beckon customers despite rising costs and macroeconomic pressures. 
The company posted a profit of $4.3 billion, or $4.24 per diluted share, up from $4.1 billion, or $3.92 billion, from the same quarter last year.

Here’s what Home Depot reported on Tuesday, compared to analyst expectations, based on a survey of analysts by Refinitiv:

Earnings per share: $4.24, vs. $4.12 expected
Revenue: $38.87 billion, vs. $37.96 billion expected

On Tuesday Home Depot reaffirmed its full-year guidance ahead of the key holiday quarter, noting it expects diluted earnings per share percentage growth in the mid-single digits. The company also expects comparable store sales to grow about 3% and an operating margin of approximately 15%.
Home Depot’s stock was slightly down on Tuesday in premarket trading.
Investors have kept an eye on Home Depot’s performance and whether shoppers are still spending on renovations and do-it-yourself home improvements as they face persistent inflation. 
Home Depot said that while its customer transactions were down slightly more than 4%, its average ticket prices rose about 9% to $89.67. The company also said its sales per-retail-square-foot rose 5%.
This is breaking news. Please check back for updates.

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The U.K. property market could be on the verge of a major downturn, with some market watchers warning of a collapse in prices of up to 30%.
New homebuyer enquiries plunged in October to their lowest level since the 2008 financial crash, the latest RICS housing surveyors report showed last week.
The U.K.’s weakening economic picture, coupled with increased borrowing costs and stubbornly high inflation, is putting pressure on mortgage repayments.

Economists are predicting that soaring interest rates and falling prices will mark the end of the U.K.’s 13-year housing market boom, potentially leading to a house price crash.
Matt Cardy | Getty Images News | Getty Images

LONDON — The U.K. property market may be verging on a major downturn, with some market watchers warning of a collapse in prices of up to 30% as data points to the biggest slump in demand since the Global Financial Crisis.
New homebuyer enquiries plunged in October to their lowest level since the 2008 financial crash, excluding the period during the first Covid-19 lockdown, the latest RICS housing surveyors report showed last week.

Meantime, the MSCI UK Quarterly Property Index, which tracks retail, office, industrial and residential property, slumped 4.3% in the three months to September, marking the sector’s worst performance since 2009.
The market slowdown marks a reprieve from a two-year, pandemic-induced home buying frenzy, with property transactions in September down 32% annually from a 2021 peak.
But as the era of cheap money fades, and the Bank of England doubles down on inflation-busting rate hikes to counter the chaotic mini-budget, economists say the downturn could be more acute than first thought.

Although a house price correction is widely expected … it appears to be unfolding faster than anticipated.

Kallum Pickering
senior economist, Berenberg

“Although a house price correction is widely expected as part of the ongoing recession, it appears to be unfolding faster than anticipated,” Kallum Pickering, senior economist at Berenberg, wrote of the U.K. market Thursday.
The investment bank now sees U.K. property prices declining by around 10% by the second quarter of 2023. But some lenders are less sanguine.

Nationwide, one of the U.K.’s largest mortgage providers, said earlier this month that house prices could collapse by up to 30% in its worst-case scenario. Meanwhile, the gloomiest of 2023 estimates from banks Lloyds and Barclays point to drop-offs of almost 18% to over 22%, respectively.
Indeed, prices have already begun falling in some places, according to property search site Rightmove, which said Monday that sellers cut prices by 1.1% in October, taking the average price of a newly-marketed home to £366,999 ($431,000).

Increased mortgage delinquency concerns

The U.K. is not alone. Rising interest rates, soaring inflation and the economic shock from Russia’s war in Ukraine have weighed heavy on the global housing market.
Recent analysis by Oxford Economics showed property prices look set to fall in nine of 18 advanced economies, with Australia, Canada, the Netherlands and New Zealand among the markets most at risk of declines of up to 15%-20%.
“This is the most worrying housing market outlook since 2007-2008, with markets poised between the prospect of modest declines and much steeper ones,” Adam Slater, lead economist at Oxford Economics, wrote last month.

Housing surveyors have reported the largest fall in new buyer inquiries in October since the financial crisis, excluding the period during the Covid-19 lockdowns.
Isabel Infantes | Afp | Getty Images

But the U.K.’s unique economic landscape puts it at higher risk of mortgage delinquencies, according to Goldman Sachs. Factors at play include Britain’s worsening economic picture, the sensitivity of default rates to downturns, and the shorter duration of U.K. mortgages relative to euro zone and U.S. peers.
“Looking across countries, we see a relatively greater risk of a meaningful rise in mortgage delinquency rates in the U.K.,” Yulia Zhestkova, an economist at the bank, wrote in a report last week.
Meantime, rising unemployment risks — a historic barometer of delinquency rates — add to pressure on the U.K., which Goldman Sachs said is “already in recession.”

Unemployment risks weigh heavy

The U.K. economy contracted 0.2% in the third quarter of 2022, latest GDP figures showed Friday. A further consecutive quarter of decline in the three months to December would indicate that the U.K. is in a technical recession.
The Bank of England warned earlier this month that the U.K. now faces its longest recession since records began a century ago, with the downturn expected to last well into 2024.

If unemployment were to rise sharply, the dangers to housing markets would be amplified considerably.

Adam Slater
lead economist, Oxford Economics

Describing the outlook as “very challenging,” the central bank said unemployment would likely double to 6.5% during the two-year slump, affecting around 500,000 jobs.
Such a spike in unemployment could “considerably” raise the risks for the housing market by potentially creating a wave of forced sales and foreclosures, Oxford Economics warned in its report. Indeed, according to Goldman Sachs’ analysis, for every one percentage point increase in the U.K. unemployment rate, mortgage delinquency tends to rise by over 20 basis points after one year.
“If unemployment were to rise sharply, the dangers to housing markets would be amplified considerably,” Slater said.

Not a 2008 financial crisis

Still, much of the outlook will hinge on the government’s upcoming fiscal statement Thursday, when Finance Minister Jeremy Hunt is expected to unveil £60 billion ($69 billion) of tax hikes and spending cuts set to weigh heavy on growth.
Some strategists have said Hunt could delay much of the savings until after the next election — due no later than January 2025 — in a bid to shield the economy during the height of recession. However, Hunt has been candid in warning of “eye-watering” decisions ahead.
The Bank of England, for its part, has insisted that it will continue to raise rates, albeit to a potentially lower peak.
Yet even with little let-up expected for the housing market in the near-term, economists say the risks of a shock reverberating across the wider financial market are minimal.
Greater regulation and adequate capitalization of the banking sector following the financial crisis have limited exposure to risky mortgages. Meanwhile, the majority of housing debt sits with households with reasonable savings buffers, Berenberg’s Pickering said.
“We see limited risk that the unfolding housing market correction will morph into another financial crisis,” he added.

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Monday – Friday, 6:00 – 7:00 PM ET

It’s that time again! “Mad Money” host Jim Cramer rings the lightning round bell, which means he’s giving his answers to callers’ stock questions at rapid speed.

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Rocket Pharmaceuticals Inc: “This is a very early stage company that has a lot in the pipe. I tend to like these companies. … If you get a bunch of them, I think you’re going to be fine.”

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Plug Power Inc: “Plug Power’s losing a fortune. … They must get expenses under control.”

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Anavex Life Sciences Corp: “This is another one that I kind of like, I’ve got to tell you. … I do not like losses in tech, but in biotech I can accept the fact that they have a good pipeline.”

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GoPro Inc: “I’ve got to go stop. … I just don’t think that they’re doing well enough to recommend.”

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Ryan Specialty Holdings Inc: “I’ve got to find out what the hell went wrong with that one last week. … It’s usually a very normal, kind of regular, company, and it got slammed. I’ve got to find out before I can recommend.”

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Frontier, Aeromexico, Air India, TAP Portugal, El Al and Avianca were required to pay about $600 million in refunds for flight issues.
The Department of Transportation fined Frontier $2.2 million for delayed customer refunds.
Passenger complaints about refunds from airlines surged early in the pandemic.

Travelers look at a display board showing cancelled and delayed flights at Orlando International Airport on New Year’s weekend, despite thousands of flight cancellations and delays across United States.
Paul Hennessy | Lightrocket | Getty Images

The U.S. Department of Transportation on Monday said it has ordered Frontier Airlines and five foreign carriers to pay about $600 million in refunds to travelers whose flights were canceled or significantly changed by the airlines.
Passenger complaints about refunds from airlines surged early in the pandemic when travel restrictions and concerns over Covid-19 sent travel demand down to the lowest levels in decades.

Complaints about airline refunds accounted for 87% of the 102,560 complaints logged with the DOT in 2020 and about 60% of the 49,958 complaints in 2021. Travelers are entitled to a refund when airlines cancel their flights, but many customers were offered vouchers when airlines slashed flights during the pandemic.
The DOT and Transportation Secretary Pete Buttigieg have vowed to beef up consumer protections against airlines, proposing stricter rules for when travelers are owed refunds. Buttigieg has also sparred with airlines over the causes of a spike in flight delays and cancellations this spring and summer.
Frontier Airlines has been required to pay $222 million in refunds, the Department of Transportation said Monday. The agency fined the ultra-low-cost carrier $2.2 million for delays in paying out the refunds to customers.
Frontier earned a $31 million profit last quarter on $906 million in revenue as travel demand and fares continued their rebound from the depths of the pandemic.
“It shouldn’t take an enforcement action from the U.S. Department of Transportation to get airlines to pay refunds that they’re required to pay,” Buttigieg said on a call with reporters Monday.

He said there are more investigations underway. Blane Workie, assistant general counsel for the DOT’s Office of Aviation Consumer Protection, said on the call that there were no other pending cases over refunds against U.S. airlines.
The DOT fined Air India $1.4 million, TAP Portugal $1.1 million, Aeromexico and Israel’s El Al $900,000 apiece and Colombia-based Avianca $750,000. DOT said those five airlines together had to pay just over $400 million in refunds.
Last year, the DOT fined Air Canada a record $4.5 million over refund delays, more than half of which would go to reimburse travelers.

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Covid-19. Airport chaos. Lack of available flights.
Many travelers say those are the reasons they ditched airlines for private jets during the past two years of the pandemic.

But a new survey shows most of the newly converted aren’t ready to return to commercial aviation just yet.
Some 94% of those new to the industry said they plan to continue flying privately in the future, according to a survey by the private aviation website Private Jet Card Comparisons.
“Users have seen firsthand how private aviation can save time, both at the airport and by using more convenient alternative airports,” said Doug Gollan, the website’s editor-in-chief, in a press release announcing the results.
However, respondents also indicated they may not be flying privately as frequently as they did before.

The percentage of respondents who said they will continue to use private aviation “regularly” dropped from 57% last year to 40% this year.

And the number who said they’ll fly privately “occasionally” when the pandemic ends rose from 43% to 55%.
About 6% said they plan to stop altogether after the pandemic, but that’s up from zero who said the same last year.
The forecast for longer-term clients was more stable, according to the survey published in October. Nearly 60% indicated they plan to fly privately as often as before the pandemic, while another 29% said they intend to fly privately even frequently in the future.

Unhappiness in the skies

Though demand for private aviation remains high, more than half (50.7%) of survey respondents said they’re considering changing private jet companies.
Some 62% cited increasing costs as the reason for their discontent, according to the survey.  
Average deposits made by flyers who purchased jet cards or memberships increased nearly 36% from $213,253 in 2021 to $289,398 in 2022, according to the survey.
The percentage of respondents who spent more than $400,000 more than doubled — from 8.5% to 18.2% — during that timeframe.

Nearly one-third of respondents cited flight delays, changes and cancellations as the reason they plan to shop around — the very problems many say led them to fly privately in the first place. Those incidents more than doubled from 2021 to 2022, according to the survey, resulting in “private jet rage” as the industry struggled to keep up with crushing demand.  
There are also fewer perks to be had, according to the survey. Respondents indicated they were unable to secure as many free hours, rate locks and upgrades this year, compared with 2021. More