STOCK MARKET NEWS: Disney slashes 7,000 jobs, Affirm cutting 500, Chipotle holds line on prices

Activision games "Call of Duty" in a store in the Manhattan borough of New York City, Jan. 18, 2022. (Reuters/Carlo Allegri)

Britain's antitrust regulator said Microsoft's $69-billion purchase of "Call of Duty" maker Activision Blizzard could harm gamers by weakening the rivalry between Xbox and Sony's PlayStation.

The Competition and Markets Authority (CMA) said the deal could result in higher prices, fewer choices and less innovation for millions of gamers, as well as stifling competition in the growing cloud gaming market.

MARKETS

Microsoft-Activision deal hits new stumbling block

Microsoft’s acquisition of Activision Blizzard ran into a potential hiccup Wednesday as the U.K.’s Competition and Markets Authority (CMA) unveiled “provisional findings” flagging competition-related concerns.

It said Activision's flagship "Call of Duty" franchise was important in driving competition between consoles, and Microsoft could benefit by making the game exclusive to Xbox, or only available on PlayStation under materially worse conditions.

The CMA investigation's chair Martin Coleman said his job was to make sure that British gamers were not caught in the crossfire of global deals that could damage competition and result in higher prices, fewer choices, or less innovation."We have provisionally found that this may be the case here," he said.

Microsoft, which has pledged to keep "Call of Duty" on PlayStation, said it would address the CMA's concerns.

9Lives, a brand owned by The J.M. Smucker Company, is seen in a store in Manhattan, New York City, Nov. 22, 2021. (Reuters/Andrew Kelly)

Post Holdings is acquiring select pet food brands from The J.M. Smucker Co. for $1.2 billion.

The transaction includes leading dog and cat food brands such as Rachael Ray Nutrish, Nature’s Recipe, 9Lives, Kibbles ‘n Bits and Gravy Train, which together generated net sales of $1.4 billion in the year ended April 30, 2022.

Post also is acquiring manufacturing and distribution facilities in Bloomsburg, Pa. and manufacturing facilities in Meadville, Pa. and Lawrence, Kan.

The transaction is expected to be completed early in the second calendar quarter of 2023, Post’s third quarter of fiscal year 2023, subject to closing conditions, including the expiration of waiting periods under United States antitrust laws.

Float with people dressed as characters from the Walt Disney movie "Peter Pan" at the "Festival of Fantasy" parade at the Walt Disney World Magic Kingdom theme park in Orlando, Fla., July 30, 2022. (Reuters/Octavio Jones)

Walt Disney Co on Wednesday announced a sweeping corporate restructuring that will result in 7,000 people losing their jobs as part of an effort to achieve $5.5 billion in cost savings.

The layoffs represent an estimated 3.6% of Disney's global workforce.

The media company, which is under pressure to turn a profit from its global streaming business, said it would reorganize into three segments: an entertainment unit that encompasses film, television and streaming; a sports-focused ESPN unit; and Disney parks, experiences and products.

The company said the restructuring would streamline operations, making its business more efficient, and reducing costs. Disney is the latest media company to announce job cuts in response to slowing subscriber growth and increased competition for streaming viewers. 

Disney earlier reported its first quarterly decrease in subscriptions for its Disney+ streaming media unit which lost more than $1 billion.

Mattel company logo at the entrance of the Montoi plant in the municipality of Escobedo, Mexico, Mar. 15, 2022. (Reuters/Daniel Becerril)

Mattel Inc forecast 2023 earnings below estimates on Wednesday, joining rival Hasbro Inc in feeling the brunt of persistently high inflation that has hit demand for its action figures and Barbie dolls.

While the toy industry has historically been more resilient to economic downturns than other discretionary sectors, Mattel said demand dropped off suddenly and sharply in October and November, leading to more profit-margin denting clearance sales to get rid of excess inventory.

Mattel projected adjusted profit between $1.10 and $1.20 per share for the full year, below analysts' expectations of $1.66, according to Refinitiv data.

The company's gross margin fell 630 basis points to 43% in the fourth quarter ended Dec. 31. Excluding one-time items, Mattel earned 18 cents per share, below estimates of 29 cents.

Overall gross billings for Barbie, Mattel's biggest brand, fell 33% in the quarter, while those of Hot Wheels rose 8%.

Total net sales fell 22% to $1.40 billion, missing estimates of about $1.68 billion.

Robinhood Markets is seen at a pop-up event on Wall Street after the company's IPO in New York City, July 29, 2021. (Reuters/Andrew Kelly)

Robinhood Markets Inc reported a 5% rise in fourth-quarter revenue on Wednesday, as interest income surged at the online brokerage in the wake of the U.S. Federal Reserve's rapid rate hikes through most of last year.

Robinhood allows eligible customers to borrow money to purchase securities and charges an interest on the debt.

Analysts have said the feature, called "margin investing," can also be used to drive greater subscriptions to its premium Robinhood Gold as members can borrow money more cheaply than the standard rate.

Net interest revenue soared 165% to $167 million in the quarter, benefiting from the U.S. central bank's aggressive monetary policy tightening campaign to combat decades-high inflation.

Net loss in the quarter narrowed to 19 cents per share, compared with 49 cents per share last year.

The Menlo Park, California-based company reported revenue of $380 million in the three months ended Dec. 31, compared with $363 million a year earlier.

On February 8, 2023, Affirm committed to a restructuring plan designed to manage operating expenses in response to current macroeconomic conditions and ongoing business prioritization efforts.

The plan reduces the fin tech’s workforce by approximately 500 employees, representing approximately 19% of the company’s employees.

In connection with the plan, Affirm is also reevaluating its need for leased office space and has decided to fully vacate a portion of its San Francisco office. The company expects implementation of the plan to be substantially complete by the end of fiscal 2023.

Affirm expects to incur approximately $35 million to $39 million in total restructuring costs, which includes cash expenditures of $24 million to $28 million relating to one-time employee severance and other employment termination benefits and non-cash expenditures of approximately $11 million relating to the acceleration of amortization expense for the lease assets that we expect to incur in connection with the partial office closure.

The company expects to record the majority of the associated charges and the majority of the associated cash expenditures in the third fiscal quarter of 2023.

Toy figures of people are seen in front of the displayed Disney + logo, in this illustration taken Jan. 20, 2022. (Reuters/Dado Ruvic/Illustration)

Walt Disney Co's quarterly earnings on Wednesday topped Wall Street estimates as visitors packed the company's theme parks and made up for losses from streaming media.

The Disney+ streaming service reported its first subscriber decline. The service shed 2.4 million subscribers as the company raised prices, bringing its total to 161.8 million. Analysts polled by FactSet had expected 162.7 million.

Adjusted earnings per share came in at 99 cents for the fiscal first quarter that ended Dec. 31, beating the Refinitiv consensus estimate of 78 cents.

Revenue hit $23.512 billion, ahead of Wall Street estimates of $23.4 billion.

Net income came in at $1.279 billion, below analyst estimates of $1.429 billion.

istock

Shares of Lumen Technologies, a telecommunications company headquartered in Louisiana, have fallen roughly 21% on Monday, after reporting earnings far short of their 2023 projections.

According to the company, free-cash flow and adjusted earnings before interest, taxes, depreciation, and amortization all fell below predictions, including a net loss of $3.069 billion for the fourth quarter 2022, which included a non-cash goodwill impairment charge of $3.271 billion, compared to reported net income of $508 million for the fourth quarter 2021.

Lumen also reported diluted loss per share of $3.08 for the fourth quarter 2022, compared to diluted earnings per share of $0.50 for the fourth quarter 2021. Excluding Special Items, Diluted EPS of $0.43 per share for the fourth quarter 2022, compared to $0.51 per share for the fourth quarter 2021.

Free cash flow reached $126 million for the fourth quarter 2022, compared to $776 million for the fourth quarter of 2021, excluding cash paid for special Items of $118 million and $17 million, respectively.

Lumen’s 2023 adjusted Ebitda forecast fell short of expectations by about 10%.

Oak Street Health urgent care center in Manhattan in New York City, New York, Feb. 8, 2023. (Reuters/Mike Segar)

CVS Health Corp will buy Oak Street Health Inc for about $9.5 billion in cash, joining rivals in adding primary care to its portfolio as pressure mounts on its health insurance unit. 

CVS had been in the market for a medical services acquisition since last year and now with the Oak Street deal, it will control more than 160 primary care centers that offer routine health screenings and diagnosis to older adults.

HEALTHCARE

CVS buying Oak Street Health for $10.6B

CVS Health announced plans for them to acquire primary health company Oak Street Health for $39 a share, at a total purchase price of approximately $10.6 billion.

The deal comes at a time when CVS' health insurance unit is facing challenges from lower ratings on its Medicare Advantage insurance plans and the end of a major pharmacy benefit management contract.

In September, CVS also agreed to buy home healthcare services company Signify Health in an $8 billion deal, which has been under a tough antitrust review. Signify conducts home assessments, mostly for patients enrolled in Medicare.

CVS, which also operates a pharmacy benefits manager, said on Wednesday the value of the Oak Street deal was $10.6 billion, including debt. Its per share offer of $39 represents a nearly 16% premium to Tuesday's close.

The pharmacy giant separately reported a profit of $1.99 per share, above estimates of $1.92 for the fourth quarter.

CVS also reaffirmed its 2023 profit outlook of $8.70-$8.90 per share. 

Chipolte logo (Reuters)

Chipotle Mexican Grill shares are lower by 5% in premarket trading after the company missed quarterly comparable sales expectations on Tuesday, in a sign that price hikes are taking a toll on demand for the restaurant's burritos and rice bowls.

While Chipotle enjoyed steady demand for its pricier menu items from its relatively wealthier customer base for much of last year, persistently high inflation across product categories is causing even affluent diners to look for cheaper options such as McDonald's.

MARKETS

Chipotle’s beef inflation update is positive for customers

Despite persistent inflation and warnings rom Fed chair Jerome Powell, beef prices are falling and Chipotle CFO Jack Hartung says the company will not raise prices.

Visits to Chipotle restaurants fell 10.2% in the fourth quarter, according to data from Placer.ai. McDonald's visits rose 29.4% in the same period.

Comparable sales at the California-based chain rose 5.6% in the fourth quarter ended Dec. 31, while analysts on average expected a 7.1% rise, according to Refinitiv IBES.  

The company reported profit of $8.29 per share, an increase of 48.6%. Analysts on average expected profit of $8.90.Chipotle forecast comparable sales growth in the high-single digits for the current quarter in its earnings release and said it expects to open 255 to 285 new restaurants in 2023.

Revenue rose to $2.18 billion from $1.96 billion in the quarter, missing estimates of $2.23 billion.

Posted by Reuters

People walk by a Michael Kors store in Lakewood, Colo., June 1, 2016. (Reuters/Rick Wilking)

Michael Kors owner Capri Holdings Ltd cut its annual profit forecast on Wednesday, hurt by a slowdown in demand for its luxury handbags and apparel in department stores.

Industry experts have warned that accessible luxury brands like Michael Kors are likely to feel a bigger pinch than higher-priced brands like Hermes and Dior due to their core young customer base having less wealth than the luxury goods industry's traditional clientele.

Michael Kors revenue from the Americas fell 4.5% to $777 million in the company's third quarter ended Dec. 31.

The brand's revenue from Asia fell nearly 18% as China's decision to dismantle its zero-COVID policy late last year spurred a surge of infections in the world's second-largest economy and dulled store traffic.

Capri, which also owns the Jimmy Choo and Versace brands, said it now expects annual sales of $5.56 billion, down from its prior estimate of $5.70 billion. It cut its earnings per share forecast to $6.10 from $6.85.

The company earned $1.84 per share, excluding items, in the third quarter, missing analysts' estimates of $2.22, according to Refinitiv IBES data.

It also forecast fiscal 2024 earnings per share of $6.40 on revenue of $5.8 billion. Analysts expect earnings per share of $7.24 on revenue of $6.03 billion.

Google is seen at an office building in Zurich, Switzerland July 1, 2020. (Reuters/Arnd Wiegmann)

Google said on Wednesday it would soon integrate artificial intelligence (AI) capable of generating text and other content in search results, as it battles to answer the challenge of Microsoft's popular AI chatbot ChatGPT.

Alphabet-owned Google unveiled on Monday its own chatbot service, called Bard.

At a launch event in Paris on Wednesday, Google executive Prabhakar Raghavan said so-called generative AI would enable users to interact with information in "entirely new ways".

"They might help a local baker collaborate on a cake design with a client, or a toymaker dream up a new creation," he said.

Generative AI is used to make human-like creations through code, drawing on vast amounts of data to produce new pieces of text, video, or audio.

Google said it would soon allow more developers and partners to test Bard.

People walk by a Taco Bell and Pizza Hut, subsidiaries of Yum! Brands in Manhattan, New York City, Feb. 7, 2022. (Reuters/Andrew Kelly)

Yum Brands Inc beat Street estimates for quarterly sales and profit on Wednesday, as more cash-strapped consumers flocked to its Taco Bell restaurant chain for pocket-friendly meals and snacks amid still high inflation.

Taco Bell has lured more customers with its cheap menu offerings such as the $2 burritos, while demand has remained steady for its higher-priced crowd-favorite items such as quesadillas and Crunchy Wraps.

Analysts have said Taco Bell is well-positioned to further drive sales and margins through add-on items, combo meals and more premium offerings such as the $5 grilled cheese burrito, even as the Mexican-inspired chain ramps up cheaper food options.

Taco Bell also brought back its Mexican Pizza as a permanent menu item in September, after pulling it off in 2020, which helped fuel an 11% jump in same-store sales at the chain, crushing analysts' estimate for a 6.8% rise.

While Yum's Pizza Hut brand also launched new menu items in the quarter to draw in more customers, the chain's same-store sales growth of 1% missed expectations, largely owing to weakness in China and its exit from Russia.

Yum, which also owns the KFC restaurant chain, took a 2-point hit to profits from the move to exit Russia.

Total same-store sales at Yum rose 6% in the fourth quarter, while analysts were expecting a 4.57% increase, according to Refinitiv IBES data.

Excluding one-time items, Yum Brands earned $1.31 per share for the three months ended Dec. 31, beating estimates of $1.26.

Manchester United v Crystal Palace - Old Trafford, Manchester, Britain - February 4, 2023 Manchester United's David de Gea reacts with Bruno Fernandes and Victor Lindelof after the match. (Reuters/Phil Noble)

Qatari investors are planning to make a huge bid to buy Premier League club Manchester United, the Daily Mail newspaper reported on Tuesday, citing unnamed sources.

The report described the investors as "a group of private, high-wealth individuals" from Qatar, which hosted the 2022 World Cup.

United declined to comment when contacted by Reuters.

Bloomberg News reported last month that Qatar Sports Investments (QSI), which owns Paris St Germain, was considering either a total takeover or a stake in Manchester United or their rivals Liverpool.

QSI is a state-backed body founded by the emir of Qatar, Sheikh Tamim bin Hamad Al Thani, but European soccer governing body UEFA has strict integrity rules regarding multi-club ownership.

No club participating in its competitions is allowed to "directly or indirectly hold or deal in the securities or shares of any other club".

United fans have been clamoring for a change of ownership and the Glazers have been the target of intense criticism as the team last won silverware back in 2017, lifting the Europa League and League Cup trophies.

The New York Times building is seen in Manhattan, New York, Aug. 3, 2020. (Reuters/Shannon Stapleton)

The New York Times Co beat Wall Street estimates for quarterly earnings on Wednesday as more people signed up for its digital subscription bundles, offsetting a slowdown in ad sales and helping the newspaper unveil a $250 million share buyback.

The Times has in the past few years embarked on a bundling push, combining its core news reports with digital content ranging from podcasts to cooking recipes and games in hopes of getting more revenue from readers.

That plan helped it add 240,000 digital-only subscribers in the fourth quarter, compared with 180,000 in the third quarter.

For the year, the newspaper added more than a million subscribers, the second most since 2020 when the pandemic dominated headlines. It has a goal of 15 million subscribers by 2027.

In the December quarter, the New York Times' revenue was $667.5 million, beating the $646.4 million estimated by analysts, according to Refinitiv. Adjusted profit of 59 cents per share was also above estimates of 43 cents.

Its digital advertising revenue was flat in the quarter and the company expects the measure to decrease by "low-single digits" in the first quarter, mirroring the weakness seen at other ad-reliant companies such as Snap Inc.

The buyback announced on Wednesday is for the New York Times' Class A shares, and the company said it aims to return 50% of free cash flow to shareholders in the form of dividends and share repurchases over the next three to five years.

People walk by an Under Armour store in Manhattan, New York City, Feb. 7, 2022. (Reuters/Andrew Kelly)

Under Armour Inc raised its annual profit forecast on Wednesday, after quarterly results got a boost from resilient consumer spending and deep discounts that reeled in holiday shoppers.

The increased promotions offered during the all-important holiday season encouraged customers to look past recession worries and stock up on Under Armour's athletic shoes and hoodies. Steep discounts had also helped rival Nike deliver a strong quarter in December.

Still, Under Armour's attempt to clear excess inventory has pinched its margins. It expects gross margin for the full year to decline at the higher end of its prior forecast of 375 to 425 basis points.

A strong U.S. dollar and higher freight and manufacturing charges pushed down its third-quarter gross margins by 650 basis points to 44.2%.

E-commerce sales rose 7% in the reported quarter.

The Baltimore, Maryland-based apparel firm posted third-quarter adjusted profit of 16 cents, beating analysts' average estimate of 9 cents, according to Refinitiv IBES data.

It expects adjusted profit of 52 cents to 56 cents per share for fiscal 2023, compared with its previous forecast of 44 cents to 48 cents.

Uber logo seen at a temporary showroom at the Promenade road during the World Economic Forum (WEF) 2023, in the Alpine resort of Davos, Switzerland, Jan. 20, 2023. (Reuters/Arnd Wiegmann)

Uber Technologies Inc said on Wednesday it would focus on delivering profits this year, after rounding off 2022 with blowout earnings as a surge in demand for airport and office rides helped the company rebound from pandemic lows.

The company reported a surprise fourth-quarter profit and Chief Executive Dara Khosrowshahi said the company was now focused on achieving profitability on a GAAP basis this year.

Uber forecast adjusted EBITDA, a profitability metric that excludes some costs, between $660 million and $700 million for the first quarter, well above the average analyst estimate of $593.06 million, according to Refinitiv data.

Uber's revenue rose 49% to $8.61 billion in the fourth quarter, beating the estimate of $8.49 billion. Rideshare revenue surged 82%.

The company earned 29 cents per share, while analysts had estimated a loss of 18 cents.

(Photo by ROBYN BECK/AFP via Getty Images)

Disney CEO Bob Iger will meet with company shareholders Wednesday afternoon as the company faces an onslaught of board challenges, streaming issues and financial decisions.

Wall Street traders and Disney investors will get a look at the entertainment conglomerate’s fourth-quarter results after the market closes, with former chief Iger back on board to face the company’s existing streaming service, a potential future without ESPN or ABC and a proxy fight with an activist investor.

In early November, the company reported fourth-quarter revenues and earnings below analysts’ estimates, posting $20.15 billion in revenues, while its diluted earnings per share "excluding certain items" decreased 19% year over year, coming in at $0.30.

Disney’s direct-to-consumer services segment generated $1.47 billion in fourth-quarter operating losses, roughly 134% wider than the $630 million reported in the same period in 2021.

NYSE floor trader (AP)

U.S. equity futures traded lower following the State of the Union and Fed comments.

The major futures indexes suggest a decline of 0.3% when trading begins.

Oil prices added to a two-day winning streak on Wednesday, posting gains as the dollar weakened.

U.S. West Texas Intermediate crude futures traded around $78.00, after adding 4.1% in the previous session.

Brent crude futures traded around $84.00 a barrel, after gaining 3.3% in the previous session.

In Asia, the Nikkei 225 index lost 0.3%, Hong Kong's Hang Seng was off 0.1% and China's Shanghai Composite index shed 0.5%.

The benchmark S&P 500 climbed 1.3% following a shaky day where stocks pinballed between losses and gains as Fed Chair Jerome Powell gave his first public comments since raising rates last week. Other indexes also gained.

The Dow gained 0.8% to 34,156.69. The Nasdaq jumped 1.9% to 12,113.79.

POLITICS

SOTU: Biden pushes for insulin cost caps

In Tuesday night's State of the Union Address, President Biden called for a cap on the price of insulin.

During Tuesday night's State of the Union Address, President Biden talked about the high cost of prescription drugs.

Specifically Biden centered on insulin, needed for people with diabetes.

Biden called for a nationwide cap of $35 a month on out-of-pocket insulin costs.

eBay headquarters (Getty Images)

Ebay shares are less than 1% higher in premarket trading after the e-commerce firm said on Tuesday it will lay off 500 employees globally, representing 4% of its total workforce.

"This shift gives us additional space to invest and create new roles in high-potential areas - new technologies, customer innovations and key markets," said Jamie Iannone, Chief Executive Officer of Ebay in a message to employees.

A raft of U.S. companies from Goldman Sachs Group Inc to Alphabet Inc have laid off thousands this year to ride out a demand downturn wrought by high inflation and rising interest rates.

Posted by Reuters

Gas prices (AAA)

The price of gasoline continued to tick lower on Wednesday.

The nationwide price for a gallon of gasoline declined to $3.445, according to AAA.

The average price of a gallon of gasoline on Tuesday was $3.457.

A year ago, the price for a gallon of regular gasoline was $3.455.

One week ago, a gallon of gasoline cost $3.501.  A month ago, that same gallon of gasoline cost $3.2f81.

Gas hit an all-time high of $5.016 on June 14.

Diesel remains below $5.00 per gallon at $4.604, but that is still far from the $3.835 of a year ago.

Bed, Bath & Beyond logo (iStock)

Bed Bath & Beyond shares were higher by 4% in the premarket after the company said on Tuesday it had raised about $225 million in an equity offering and that it was expecting to receive $800 million more in future installments, in a move that could help it stave off bankruptcy.

Hudson Bay Capital Management is the lead investor in the share sale by the struggling retailer, two people familiar with the matter told Reuters earlier on Tuesday before the closing of the offering was announced. Hudson Bay Capital is unrelated to Canadian department store chain Hudson's Bay Co.

The additional cash would offer the retailer a short window of only a few quarters to revive the business, Wall Street analysts said, adding that a weakening economy would diminish any chance of a successful turnaround.

"Bed Bath & Beyond declined to comment, citing regulatory requirements, while Hudson Bay did not immediately respond to a request for comment. Bloomberg News first reported the development earlier on Tuesday.

Posted by Reuters

Oil rigs pumping (Reuters)

Oil prices added to a two-day winning streak on Wednesday, posting gains as the dollar weakened.

Investors were looking ahead to more inventory data for demand trends.

U.S. West Texas Intermediate crude futures traded around $78.00, after adding 4.1% in the previous session.

Brent crude futures traded around $84.00 a barrel, after gaining 3.3% in the previous session.

Supporting the market, weekly inventory data from the American Petroleum Institute industry group showed crude stocks fell by about 2.2 million barrels in the week ended Feb. 3, according to market sources.

The market will be looking to see if data from the U.S. Energy Information Administration confirms the decline in crude stocks.

Reuters contributed to this post.

Bitcoin was trading around $23,000, after gaining in three of the last four days.

For the week, Bitcoin has added less than 1%

For the month, the cryptocurrency has gained more than 1% and has added 40% year-to-date.

Ethereum was trading around $1,600, after gaining more than 5% in the past week.

Dogecoin was trading at 9 cents, after sliding 3% in the past week.