đŸ„· This Company Is Losing $1B To Theft

Hi! In today's newsletter: 1) $1 Billion In Theft, 2) Where Inflation Is & Isn’t, 3) iPhone Prices Adjusted For Inflation, and more!

Author

Carbon Finance
September 19, 2023

Happy Tuesday!

Hope you all had an amazing weekend. For those of you on Twitter, feel free to check out our page and follow us! We’ll be using Twitter for more time sensitive updates such as real time earnings results, insider/congress trades, and other major headlines.

In today’s newsletter:

  • đŸ„· $1 Billion In Theft

  • đŸ”„ Where Inflation Is & Isn’t

  • đŸ“± iPhone Prices Adjusted For Inflation

Let’s dive right in!

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đŸ„· $1 Billion In Theft

During Q2 earnings reports, many retailers have been pointing to "shrink" - losses due to factors like theft, damage, or vendor fraud - as a significant reason for their recent underwhelming profits.

Lowe's, in particular, has been significantly affected by shrink. The company reported one of the highest shrink numbers, with a loss of $997M in fiscal 2022, up from $796M in fiscal 2021. Analyzing the data, we see that Lowe’s shrink has been increasing disproportionally to its revenue growth, indicating that the issue is deviating from the usual baseline.

While shrink is a concern for many retailers, it generally represents only 1% to 1.5% of sales, which is in line with the industry standard. Nonetheless, many believe that companies use shrink as a distraction from other challenges they may be facing.

đŸ”„ Where Inflation Is & Isn’t

In August, consumer prices surged by 3.7% compared to the previous year, marking the second month of rising inflation. Core inflation, which excludes food and energy costs, rose by 4.3% in July year-over-year.

In its July meeting, the Fed increased its benchmark interest rate by a quarter percentage point to 5.25%-5.50% to combat inflation. Fed Chair Jerome Powell emphasized that while inflation has moderated, efforts to reduce it to 2% still have a long way to go. The next decision regarding rate adjustments will be made this week.

Across the Atlantic, the European Central Bank (ECB) raised interest rates again to 4%, with President Christine Lagarde indicating uncertainty about future hikes. This caused the euro to drop and sparked concerns over the region's economic growth.

đŸ“± iPhone Prices Adjusted For Inflation

Last week, Apple introduced it’s new iPhone 15. The new iPhone boast features like the Dynamic Island, which replaces the traditional notch, and the A16 Bionic chip, offering enhanced performance. The camera system has been upgraded with a 48-megapixel Main camera and the phone has transitioned from the Lightning port to a USB-C port.

The phone, priced at $799, actually makes it the most affordable base model since the original iPhone was released in 2007. And to top it off, Morgan Stanley analysts noted that the more expensive iPhone 15 Pro Max has a lead time of five to six weeks, the longest in seven years. This indicates strong early demand despite concerns about potential Chinese government restrictions on Apple products.

💾 JPMorgan-Gusto Collab. JPMorgan Chase $JPM is partnering with fintech firm Gusto to offer digital payroll services for small businesses, enhancing its technological offerings to compete with fintech giants PayPal $PYPL and Square $SQ. [CNBC]

⚠ Ray Dalio’s Warning. Ray Dalio warns that the overloaded global bond market might face higher rates from selling pressure, as the US Treasury sells more bonds due to rising deficits and potential inflationary consequences. [BI]

☁ Salesforce Is Hiring. After cutting 10% of its jobs in January, Salesforce $CRM is now hiring 3,300 employees across various departments to support growth and new AI initiatives. [R]

đŸ›ąïž Oil Prices Rise. Oil prices reached their highest level this year due to expectations of tighter supply, with some analysts predicting prices could surpass $100 a barrel soon. [CNBC]

👔 Meta Perks. After significant layoffs, Meta $META is reviving employee morale by reintroducing popular pre-pandemic perks, though concerns about future layoffs and cost-cutting measures persist. [BB]

🚗 Carmaker Union Strike. The United Auto Workers union initiated a strike involving 12,700 workers against Detroit's three major carmakers - Ford $F, General Motors $GM, and Stellantis $STLA - targeting specific plants to disrupt production amid ongoing wage and job security negotiations. [BB]

Notable Companies Reporting Earnings Next Week:

  • Tuesday:

    • AutoZone ($AZO), CoPart ($CPRT)

  • Wednesday:

    • FedEx ($FDX), General Mills ($GIS)

  • Thursday:

    • Darden ($DRI), FactSet ($FDS)

All of the companies that are reporting earnings this week can be viewed here.

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