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| | August 4, 2016 | |
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| | Good morning.
Walmart has gone unicorn hunting in its battle to take on Amazon. The retail giant is reportedly in talks to buy Jet.com - a profitless, year-old start-up - for as much as $3 billion. The service was started by entrepreneur Marc Lepore, who previously sold Diapers.com to Amazon for $545 million. It originally aimed to take on buying clubs like Sam's Club and Costco, but last October it dropped its $50 membership fee. The company offers discounts on everyday items, and isn't projecting profitability until 2020.
Walmart is the second most visited e-commerce site in the U.S., but a distant second. Its online sales in the U.S. last year were only one sixth of those of Amazon, and online growth slowed to only 7% in the first quarter. While Walmart tops the Fortune 500 in revenues, the market values Amazon at $354 billion, versus Walmart's $225 billion.
But Walmart CEO Doug McMillon is determined to fight. And in Lore, he would acquire an audacious co-combatant. Lore worked at Amazon for a while after selling his last company, and is unapologetic about the prodigious rate at which he burns through cash in its effort to take on the retail giant. He told Fortune last month: "It's a misconception that if a company is burning cash, it's not going to make it. We will become profitable in the future, but it will take time." You can see Lore speaking at Fortune's Brainstorm Tech here.
More news below.
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| | Top News | |
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| | • Musk says Tesla was in 'production hell' Billionaire entrepreneur Elon Musk says that his electric car company Tesla was in "production hell" in the first half of this year, as the company struggled to make more of its cars. His comments, made during Tesla's second quarter earnings call, were an acknowledgement of the production struggles surrounding the Model X, an electric SUV with swooping doors. Because of design problems and Model Xs production shortfall, Tesla failed to meet its forecast for the number of cars it shipped for two consecutive quarters and had to slightly lower its car shipment guidance for the year. Tesla now plans to ship 79,180 cars this year, down from the 80,000 to 90,000 cars originally forecast. Fortune • European banks slims down on Wall Street Big European banks, including Barclays and Deutsche Bank, have drastically reduced assets at their U.S. brokerages from the end of 2013 through the beginning of this year. Why? Though the banks have all said they remain committed to the U.S., they are slimming down due to tougher business conditions and stricter regulations that are unfolding in the states. Their American rivals also shrank, but by thinner margins. Banks globally have cut thousands of investment-banking jobs as they retreat from riskier business lines, though in some ways, European banks are finally catching up to the balance sheet cleanup that their American counterparts adapted after the 2008 financial crisis. The Wall Street Journal (subscription required) • A stronger yen is hurting Toyota Toyota Motor cut its full-year forecast for operating profit, expecting it to fall 44% from a year ago as the Japanese automaker expects to take a bigger hit from a stronger yen. To respond to that headwind, the world's largest automaker by market value said it would be more aggressive in cutting labor costs and other expenses. For the most recent April-June quarter, the increased value of the yen pushed operating profit down 15%. Still, the results beat Wall Street's expectations. Encouragingly, Toyota expects to sell more vehicles in some key markets including North America and Europe than its previous forecast, while maintaining its total global retail sales forecast. Reuters • Nike exiting golf equipment business The world's largest athletic gear maker on Wednesday announced it will transition out of the golf equipment business and instead focus attention on footwear and apparel for the category. That means it will move away from selling equipment including clubs, balls, and bags. Nike golf gear sold strongly in the late 1990s and the 2000s, thanks to the dominance of Tiger Woods, whom Nike sponsors. But the segment has also declined alongside Woods' personal and professional struggles. It was Nike's worst-performing division last year, with sales of $706 million. A steep drop in participation in golf among younger generations has also hurt sales of gear tied to the sport. Fortune | |
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| | CONTENT FROM DELOITTE | |
| | • Playing with the Boys. Deepa Purushothaman, managing principal of Deloitte's Women's Initiative, talks about playing on an all-boys soccer team and the critical mass of diverse voices needed to influence outcomes. Read more… | |
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| | Around the Water Cooler | |
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| | • Business as usual at 21st Century Fox Lachlan Murdoch, executive chairman of 21st Century Fox, avoided any detailed discussion during an earnings call on Wednesday of the departure of former Fox News CEO Roger Ailes following sexual harassment allegations, implying that it's business as usual at the company. He added that he and his brother James, who serves as CEO, accepted the resignation of Ailes and then "moved quickly to protect the business, protect its employees and protect the unique voice that Fox News broadcasts." And while Ailes, who was the founding chairman and CEO of the network in 1996, has exited the network, Lachlan said he expected Fox News would have its best year ever in terms of revenue. Fortune • Mixed magic for new Harry Potter book The eight book in the Harry Potter series, a play sold under the title "Harry Potter and the Cursed Child," has conjured demand by selling more than two million hardcore copies in the first 48 hours. Publisher Scholastic says those sales are "unprecedented for a script book." Thousands of bookstores and libraries around the U.S. hosted release parties over the weekend to help generate buzz. But news outlets have noted the story is a departure in style and form that hasn't won over all loyal fans. The New York Times points out that some devoted so-called Potterheads were upset that J.K. Rowling's name was so prominent on the cover, even though the piece was written by playwright Jack Thorne (Rowling provided some input). On the flip side, the play that recently opened in London drew stellar reviews from theater critics and fans. New York Times (subscription required) • U.S. launches human trials for Zika vaccine The National Institutes of Health (NIH) announced Wednesday that it would be launching its first human trials of a vaccine for Zika virus, which is linked to potentially devastating developmental and neurological birth defects in pregnant women who contract it. The launch comes days after public health officials issued the first travel warning inside the U.S. over Zika contracted from local mosquitoes in Florida. The vaccine's results in animal testing were reportedly encouraging, allowing the agency to proceed with the study in people, though it could take time before a vaccine was commercially available. Earlier this year, the Food and Drug Administration also cleared phase 1 trials for an experimental DNA vaccine from Inovio Pharmaceuticals. Several other firms or group of scientists are also working on a Zika vaccine. Fortune | |
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