Business

Shares of Carvana fell in extended trading Thursday after the online used car retailer missed Wall Street’s top- and bottom-line expectations for the third quarter.
Nearly all aspects of the Carvana’s operations declined from a year earlier, including a 31% decrease in gross profit to $359 million.
The used vehicle market a year ago was significantly elevated as consumers who couldn’t find or afford to purchase a new vehicle opted for a pre-owned car or truck.

Ernie Garcia, CEO, Carvana
Scott Mlyn | CNBC

Shares of Carvana fell in extended trading Thursday after the online used car retailer missed Wall Street’s top- and bottom-line expectations for the third quarter and reported declines in revenue, profit and sales compared with a year earlier.
The stock fell by more than 7% during after-hours trading, quickly erasing a 6.5% gain from earlier in the trading day. Shares of the company have been nearly cut in half this year, as used vehicle sales and elevated prices cooled off from record highs. The stock closed Thursday at $14.35 a share.

Here’s how Carvana performed, compared with analysts estimates as compiled by Refinitiv:

Loss per share: $2.67 vs. $1.94 expected
Revenue: $3.39 billion vs. $3.71 billion

Nearly all aspects of the Carvana’s operations declined from a year earlier, including a 31% decrease in gross profit to $359 million. Its retail units sold declined 8% compared with the third quarter of 2021 to 102,570 vehicles, while gross profit per unit — a highly watched metric by investors — declined by more than $1,100 to $3,500.
The used vehicle market a year ago was significantly elevated as consumers who couldn’t find or afford to purchase a new vehicle opted for a pre-owned car or truck. Inventories of new vehicles have been significantly depleted during the coronavirus pandemic largely due to supply chain problems, including an ongoing global shortage of semiconductor chips.
“This economic environment remains uncertain, but we are focused squarely on the goal of driving the business to profitability,” Carvana CEO and cofounder Ernie Garcia said in a release. “While progress is rarely linear, we remain on the path to becoming the largest and most profitable auto retailer.”
Garcia on a call Thursday described the next year as “a difficult one” for the company, citing a normalization of the used vehicle industry from its inflated levels and increasing interest rates, among other factors.
Large franchised new and used vehicle dealers such as Lithia Motors and AutoNation warned of softening in the used vehicle market when recently reporting their third-quarter results.

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Starbucks beat Wall Street’s expectations for its quarterly earnings and revenue.
The coffee chain said U.S. consumers were spending more on their orders this quarter.
Outside the U.S., Covid-19 restrictions in China continued to weigh on Starbucks’ international performance.

Starbucks on Thursday reported quarterly earnings and revenue that topped analysts’ estimates, fueled by U.S. customers spending more on iced coffee drinks and Pumpkin Spice Lattes.
The Seattle-based coffee company also said U.S. traffic improved in the quarter, and has nearly bounced back to 2019 levels.

“Despite elevated pricing actions taken throughout the year, daily store traffic in the U.S. reached approximately 95% pre-pandemic levels in September fueled by the wildly successful fall promotion,” Chief Financial Officer Rachel Ruggeri said on the company’s quarterly conference call.
Shares rose 2.7% in after-hours trading.
Here’s what the company reported for the quarter ended Oct. 2 compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

Earnings per share: 81 cents adjusted vs. 72 cents expected
Revenue: $8.41 billion vs. $8.31 billion expected

Net sales for the period rose 3.3% to $8.41 billion. Global same-store sales increased 7%, fueled by increased spending in its home market.
In the United States, Starbucks reported same-store sales growth of 11%, which was the result of people spending more on average and a slight uptick in traffic. Prices were also up 6% from a year ago, but executives said they don’t plan to raise prices anymore for the time being.

Cold beverages accounted for more than three-quarters of beverage sales at U.S. company-owned cafes. Starbucks said customers are more likely to add pricy syrups, cold foam and dairy substitutes to cold drinks, driving up their price.
But customers are also still buying hot coffee drinks. Pumpkin Spice Latte sales climbed 70% compared with the year-ago period, according to Starbucks North American President Sara Trilling.
The company’s loyalty program saw its active membership climb 16% to 28.7 million people in the quarter. 
In September, the Seattle-based company unveiled a broad plan to reinvent its business to address changing consumer and employee needs. Some of those updates will include new equipment to make cold drinks more easily.

The ornate art decor of the Starbucks coffee chain in Xujiahui district attracts customers’ attention in Shanghai, China, May 12, 2021.
Costfoto | Barcroft Media | Getty Images

Outside the U.S., Covid-19 restrictions in China continued to weigh on Starbucks’ international performance. The company’s international same-store sales fell 5%, which wasn’t as steep as the 7.1% expected decline, according to StreetAccount. Same-store sales in China, Starbucks’ second-largest market, fell 16% in the quarter. 
“We anticipate the current Covid-related uncertainty to continue,” CEO Howard Schultz said.
For fiscal 2023, Starbucks is projecting revenue growth of 10% to 12%, despite a 3% hit from foreign currency translation. The company also expects its global same-store sales growth on the high end of its prior range of 7% to 9%. However, the fiscal first quarter will likely be on the low end of that range due to lockdowns in China.
Starbucks also said that its adjusted earnings per share growth in fiscal 2023 will be on the low end of its prior range of 15% to 20%, citing the costs of its reinvention plan.
Ruggeri also said that the company is predicting that commodity headwinds will continue into fiscal 2023, although at a lower level than in fiscal 2022.
For its fourth-quarter net income attributable to Starbucks of $878.3 million, or 76 cents per share, down from $1.76 billion, or $1.49 per share, a year earlier.
Excluding restructuring and impairment costs, the sale of its Russian joint venture and other items, Starbucks earned 81 cents per share.

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Virgin Galactic CEO Michael Colglazier outlined the remaining steps before the space tourism company aims to launch its long-delayed service next year.
The company is nearly complete with a lengthy period of downtime to refurbish and upgrade its vehicles.
Virgin Galactic will then move to a series of test flights in the first quarter, with commercial service launch set for the second quarter.

Virgin Galactic pilots walk to the company’s SpaceShipTwo Unity spacecraft, attached to the jet carrier aircraft Eve.
Virgin Galactic

Virgin Galactic on Thursday reported a wider third-quarter loss from a year ago, with CEO Michael Colglazier outlining the remaining steps before the space tourism company aims to launch its long-delayed service next year.
“As we approach commercial service, we recognize the significance of getting back to the business of spaceflight,” Colglazier said on a conference call.

The company said it is nearly done with a lengthy period of downtime to refurbish and upgrade its vehicles. Colglazier said work on spacecraft VSS Unity is finished, while work on carrier aircraft VMS Eve is set to be completed before the end of December.
Virgin Galactic will then move to a series of test flights in the first quarter, which Colglazier said will begin with a VMS Eve test flight in early January. Then the company will conduct a “glide flight” test with both VMS Eve and VSS Unity, before moving to a test spaceflight with a Virgin Galactic mission specialist.
Commercial service will be marked by the launch of a previously announced flight carrying members of the Italian Air Force, planned for the second quarter, before moving to further flights of private customers. The company has about 800 customers in its backlog.
Shares of Virgin Galactic are down 66% this year as of Thursday’s close of $4.58.

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For the quarter, the company reported an adjusted EBITDA loss of $129 million, compared to a loss of $68 million a year ago, with negligible revenue. The company has about $1.1 billion in cash on hand, and completed an “at the market” common stock offering that raised $100 million.

Virgin Galactic is emphasizing the potential of its “Delta-class” series of spacecraft, with work set to begin next year. But Colglazier noted that, since the company is prioritizing its resources on launching commercial service and building Delta-class spacecraft, that “will likely impact the pace of work on our second spaceship VSS Imagine,” which was supposed to bolster Virgin Galactic’s near-term capabilities.
“We are reassessing its schedule for entering commercial service,” Colglazier said.

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Altice USA’s shares temporarily stopped trading on Thursday after a volatile morning that saw the stock sink more than 20%.
The drop comes after Altice USA reported weaker than expected earnings on Wednesday after the bell.
The cable provider reported lower profit and revenue as the company lost broadband subscribers and continued to spend significantly on its fiber rollout.

Igor Golovniov | Lightrocket | Getty Images

Altice USA’s shares fell 29% Thursday, after the company posted a weak earnings report.
The company, which provides broadband, cable-TV, wireless and phone services, saw its shares sink following Wednesday’s earnings report that net income and revenue fell as Altice lost subscribers and continued to spend significantly on the rollout of its fiber network.

Altice’s net income for the third quarter fell to $85 million from about $267 million compared to the same period last year. Earnings per share on a diluted basis fell to 19 cents from 58 cents last year.
Read more: Outgoing Charter CEO Tom Rutledge says there’s ‘pain to come’ as linear TV gives way to streaming
The company’s revenue fell 7% to $2.39 billion, due to the decline in residential and business services customers. Adjusted earnings before interest, taxes, depreciation and amortization fell 18% to $954.4 million compared with the prior year.
An Altice representative said the company doesn’t comment on stock moves. The company’s shares are down more than 72% this year, closing Thursday at $4.44.
Cable providers saw big gains in broadband subscribers during the early days of the pandemic, when lockdowns forced many to work and take classes from home. But in recent quarters, subscriber additions have significantly fallen off for the industry as competition from other providers has risen and there’s been a low rate of moving activity.

Altice said it lost 43,000 broadband customers during the quarter, as well as 82,000 cable-TV subscribers.
On top of this, Altice has been spending heftily to deploy a fiber network for its broadband customers. The company said Wednesday it would spend between $1.7 billion and $1.8 billion in capital expenses in the 2022 fiscal year.
“While we are operating in a very competitive environment and are starting to see some macroeconomic pressures across our business, we are confident that we have the right strategy to return to sustainable growth,” outgoing CEO Dexter Goei said in the earnings release Wednesday.

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Warner Bros. Discovery reported third-quarter earnings after the bell on Thursday, missing analysts’ estimates on revenue.
The company has been undergoing significant cost-cutting measures, and expects restructuring efforts to be substantially completed by the end of 2024.
CEO David Zaslav also announced that the merged version of the company’s HBO Max and Discover+ streaming services will be coming in spring.

In this photo illustration, the Warner Bros. Discovery logo is displayed on a smartphone screen.
Rafael Henrique | SOPA Images | Lightrocket | Getty Images

Warner Bros. Discovery reported its third-quarter earnings on Thursday, missing analyst expectations, as it felt the effects of a tough advertising environment and costs associated with its post-merger restructuring.
CEO David Zaslav also announced that the merged version of the company’s HBO Max and Discovery+ streaming services will be coming in the spring, earlier than the previously announced summer release date.

Here’s what the company reported compared with analysts’ expectations, according to Refinitiv:

Revenue: $9.82 billion vs. $10.36 billion expected

The company reported a loss per share of 95 cents, citing macroeconomic headwinds, particularly in advertising.
Shares fell more than 5% after hours Thursday, after declining 5.6% to $11.97 during the regular trading session.
Warner Bros. Discovery is the result of a merger between AT&T’s WarnerMedia and Discovery, which was completed earlier this year. Since the merger was completed, the company has been in the midst of significant cost-cutting measures, such as laying off staffers and pulling content from its streaming service HBO Max.
“While we have lots more work to do, and there are some difficult decisions still to be made, we have total conviction in the opportunity ahead,” Zaslav said in the company release Thursday.

Later, on an earnings conference call, he added: “In fact, we see this a a meaningful opportunity, one we seized wholeheartedly to look inside each of our businesses and see what’s working, what’s not working, is it structured properly, and does it have the right resources.”
In the last year, Warner Bros. Discovery’s valuation has nearly been cut in half as Wall Street has lowered its expectations on global streaming subscriber growth. Streaming services have been competing for subscribers, with industry behemoth Netflix losing customers earlier this year and unveiling an ad-supported tier at a cheaper cost.
“I believe that the grand experiment of chasing subscribers at any cost is over,” Zaslav said on the earnings call Thursday, adding the company’s focus will be generating $1 billion in earnings before interest, taxes, depreciation and amortization from its streaming business by 2025.
Management also noted that HBO Max hasn’t increased its subscription price since its launch nearly three years ago, putting it in a good position to do so when it re-launches as a combined platform with Discovery+.
The company is also moving forward with its plans to launch a free, ad-supported streaming service, “aggressively attacking” the market and “moving quickly,” Zaslav said Thursday. Ad-supported streaming services such as Fox’s Tubi and Paramount Global’s Pluto TV have seen their audiences surge and add significant advertising revenue.
The company said it added 2.8 million direct-to-consumer streaming customers in the third quarter, bringing its total to 94.9 million global subscribers. Revenue for the direct-to-consumer segment dropped 6% to $2.3 billion, as its saw decreases in licensing and distribution revenue.
Warner Bros. Discovery’s film studio segment saw revenue decrease 5% to nearly $3.09 billion compared to the same period last year, when Warner had more theatrical releases.
In late October, the company said in public filings that it estimated it would book $1.3 billion to $1.6 billion in pre-tax restructuring charges during the third quarter. The restructuring is expected to be substantially completed by the end of 2024, and will incur approximately $3.2 billion to $4.3 billion in total pre-tax restructuring charges.
Meanwhile, the slowdown in advertising has been hitting media companies.
Revenue for its TV networks segment declined 8% to $5.2 billion. The segment was particularly impacted by a 11% drop in advertising revenue.
Warner Bros. Discovery CFO Gunnar Wiedenfels said advertising headwinds continue to affect the company into the fourth quarter, adding that they remained the greatest variable on the company’s performance in 2023.
Industry peer Paramount Global reported earnings on Wednesday, also missing analyst estimates as its TV and advertising revenue fell.

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Trump Media and Truth Social-linked SPAC, Digital World, adjourned its shareholder vote for a sixth time.
The company is looking to extend the merger deadline to September 2023, but has yet to garner the necessary 65% shareholder support.
Trump Media and DWAC are the subject of a criminal probe relating to the deal, and an internal whistleblower, William Wilkerson, has added his own claims against the companies.

The Truth social network logo is seen displayed behind a woman holding a smartphone in this picture illustration taken February 21, 2022.
Dado Ruvic | Reuters

Digital World Acquisition Corp., the shell company set to take Trump Media and Technology Group and its Truth Social platform public, adjourned a shareholder vote on the planned merger for a sixth time Thursday as its Dec. 8 liquidation date nears.
DWAC needs 65% of its shareholders to approve an extension of the Trump Media merger to September 2023, a year beyond its original deadline. The company has previously failed to garner the necessary votes from its large swath of retail investors. The next meeting will take place at noon on Nov. 22.

Shares of DWAC were little changed at Thursday market close, up less than 1%. The stock is trading around $16, well off its 52-week high of $101.87, which it hit in March. The Trump Media deal was announced last fall.
The merger would provide hundreds of millions of dollars in funding to Trump Media, but it has faced a series of legal and financial obstacles.
The deal is the subject of a criminal probe and its delay has resulted in the loss of over $100 million in investment. Former President Donald Trump has previously said he would be OK with taking the company private, and internal documents have shown that Trump Media considered mergers and partnerships with other right-wing-friendly platforms, including Rumble and Parler.
DWAC bought three months from its original September deadline, initiating “built-in extension” with a $2.8 million deposit from Arc Global Investments II, a company controlled by DWAC CEO Patrick Orlando, giving the deal until December to be consummated.
The company, however, was not able to extend a deadline on its private investors in public equity, or “PIPE” investors. At least $138 million of the $1 billion that would go to Trump Media has been pulled by these investors. Around that time, DWAC’s listed address changed to a UPS store in Miami.

One of these former investors, who wished to remain anonymous, attributed the decision to pull out to the merger’s legal troubles as well as Trump’s anemic follower count – 4 million versus 88 million on Twitter – as a proxy for the platform’s popularity.
Elon Musk’s acquisition of Twitter sent DWAC shares sliding at the time. The billionaire has said he would reinstate Trump’s account on the platform. The former president, however, has indicated he will be staying exclusively on Truth Social.
The merger is the subject of a criminal probe into possible securities violations relating to conversations between the two parties prior to the merger announcement. This was exacerbated by a former Trump Media executive and whistleblower, Will Wilkerson, who turned over documents to the SEC and claimed misrepresentations by the companies.
Among Wilkerson’s claims is the allegation that Donald Trump pressured another executive, Andy Dean Litinsky, into gifting Trump Media shares to former first lady Melania Trump. Litinsky allegedly refused to do so, after which he was fired, Wilkerson has said.

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The trade group’s outlook indicates a more challenging holiday ahead for retailers, especially after two years of exceptional demand.
A year ago, consumers shopped early and spent more to secure gifts as stores struggled to keep shelves stocked amid shipping delays.
This year, major retailers are swimming in extra inventory as consumers splurge less on items like clothing and electronics.

Shoppers ascend and descend an escalator at the Willow Grove Park Mall in Willow Grove, Pennsylvania, November 14, 2020.
Mark Makela | Reuters

Getting shoppers to spend this holiday season won’t be easy.
The National Retail Federation said Thursday that it expects holiday sales during November and December to rise between 6% and 8% from last year — a decline when factoring in the effect of inflation. The sales forecast excludes spending at automobile dealers, gasoline stations and restaurants.

As of September, inflation is up 8.2% from a year ago, according to the Bureau of Labor Statistics’ consumer price index. That is a near four-decade high. The NRF, for its part, pointed to the personal consumption expenditures price index, which has increased 5.1% from a year ago, as a more apt measure to reflect rising consumer prices.
The outlook comes after the pandemic fueled two years of exceptional demand during the key holiday shopping season. In 2020, holiday sales rose 8.2% from the previous year to $777.3 billion, according to the NRF, as consumers cheered themselves up with gift-giving during the pandemic. Last year, holiday sales grew 13.5% over 2020 and totaled $889.3 billion. 
The trade group’s outlook indicates a more challenging holiday ahead for retailers. A year ago, consumers shopped early and spent more to secure gifts as stores struggled to keep shelves stocked amid shipping delays. This year, however, major retailers including Walmart and Nike are swimming in extra inventory. And consumers are splurging less on items like clothing and electronics as they pay more for groceries and services like dining out and travel.
NRF Chief Executive Matt Shay told CNBC that Americans are still eager to spend this holiday season, but have become more cautious. In some cases, he said, they are dipping into savings accounts and turning to their credit cards as a way to pay for purchases.
Lower- and middle-income consumers are under the most pressure as grocery, energy and housing costs rise, Shay said.

“They’re focusing on those necessities,” he said. “Some of that is going to impact their gift-giving and how they cover their other expenses during the holiday season.”
There are still factors working in retailers’ favor, said Jack Kleinhenz, the NRF’s chief economist. Consumers built up savings during the pandemic and the labor market is strong, which may make them feel secure enough to keep spending.
Travel is taking up more of people’s budget, but he said they will likely bring food or presents when they take those trips — and may spring for new outfits, too.
Consumers plan to spend an average of $832.84 on gifts and holiday items such as decorations and food, according to the NRF. That’s roughly in line with the last 10 years, but the amount may buy fewer goods because of inflation.
Hiring is expected to be more modest, with retailers hiring an estimated 450,000 to 600,000 seasonal workers. That’s less than the 669,800 seasonal hires in 2021.
Other industry watchers have also forecast a muted holiday season. For instance, consulting firm Bain & Co. is predicting growth of as much as 7.5% from last year, or just 1% to 3% when factoring in inflation. AlixPartners is projecting a 4% to 7% increase, which represents a drop when accounting for inflation.
This year’s projected increase would put spending at between $942.6 billion and $960.4 billion.
That growth compares with an average 4.9% increase over the past 10 years, with the past two years contributing significantly to those gains.

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Automaker Stellantis expects inflation costs on raw materials to subside next year following significant increases during the coronavirus pandemic.
But CFO Richard Palmer said any gains of lower raw material costs could be offset by higher inflation on other elements.
The spiking costs of raw materials have been largely offset by record pricing of new vehicles.

Engines undergo a final inspection at the Stellantis Dundee Engine Complex on August 18, 2022 in Dundee, Michigan.
Bill Pugliano | Getty Images

Automaker Stellantis expects inflation costs on raw materials to subside next year following significant increases during the coronavirus pandemic, CFO Richard Palmer told investors Thursday.
The spiking costs of critical raw materials used by automakers such as steel, aluminum and others for EV batteries have been largely offset by record pricing of new vehicles, cushioning automakers’ margins. But as price increases slow, costs have yet to follow.

Palmer said he expects the favorable pricing of new vehicles to continue into next year, but said inflation could continue to hit other parts of the automaker’s supply chain.
“What we will see in 2023 is a lower impact from raw material inflation than the one we’ve seen this year. So, the entity of inflation impact, I think will be lower in 2023,” he said when discussing the company’s third-quarter revenue and deliveries. “Inflation may be high on other elements of the cost curve, but they are of a lower entity compared to raw material this year.”

Palmer did not specify what inflationary costs he expected to decrease or increase in 2023. A spokeswoman for Stellantis, which was formed by the merger of Fiat Chrysler and France-based Groupe PSA in January 2021, said Palmer was referring to lower inflation costs of steel and aluminum. She declined to disclose what elements could be higher next year.
Costs across the automotive supply chain have skyrocketed during the coronavirus pandemic, as companies have struggled with logistics, materials and employees.
Ford in September warned investors that the company expects to incur an extra $1 billion in costs during the third quarter due to inflation and supply chain issues. The problems resulted in parts shortages affecting roughly 40,000 to 45,000 vehicles, primarily high-margin trucks and SUVs that haven’t been able to reach dealers.
In June, AlixPartners reported raw that material costs for both electric vehicles and traditional models with internal combustion engines more than doubled during the coronavirus pandemic.

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