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Consumers are even giving up on new sneakers

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Foot Locker faced a devastating 32% plunge in its stock price as it reported dismal second-quarter earnings, attributing the downturn to what it called “ongoing consumer softness.”

In its latest earnings report released on Wednesday, Foot Locker revealed a staggering 9.9% drop in sales, bringing its quarterly revenue down to $1.8 billion, a notable decline from the $2.1 billion reported during the same period the previous year.

As a direct consequence, Foot Locker’s share price took a nosedive in premarket trading, plummeting by as much as 32.8% to a low of $15.60.

The company, headquartered in New York, had no choice but to revise its yearly forecast downward due to what it described as “the still-tough consumer backdrop.” Now, it anticipates a sales decrease of 8% to 9% for the year, down from the initial prediction of 6.5% to 8%.

Foot Locker’s Chief Executive, Mary Dillon, expressed her concerns, stating, “We did see a softening in trends in July and are adjusting our 2023 outlook to allow us to best compete for price-sensitive consumers.”

Furthermore, Foot Locker’s yearly earnings outlook also witnessed a substantial reduction, with the company now projecting earnings per share between $2 and $2.25. This is a significant drop from the initial forecast of $3.35 to $3.65 per share and falls considerably short of the $3.47 that analysts had expected.

The root cause of this downturn, as Foot Locker reported, is the persistent “consumer softness,” which has led to decreased consumer spending on their products.

Retail struggle

This announcement comes in the wake of similar struggles in the retail industry. Macy’s, another iconic department store, reported declining sales in its second-quarter earnings, which it attributed to diminishing consumer spending and an increase in credit card delinquencies. Macy’s net sales for the period fell from $5.6 billion in the previous year to $5.1 billion.

In-store sales at Macy’s also took a hit, dropping 8%, and digital sales decreased by 10% compared to the same period last year. This disappointing performance caused Macy’s stock to tumble by over 14% to $12.57.

Meanwhile, Target experienced its first quarterly sales drop in six years, with sales down 5.4% from the previous year, including a 10.5% decline in digital sales. Target’s CEO, Brian Cornell, attributed part of the losses to inflation and boycotts of the retailer’s controversial “Pride” collection.

Another retail giant, Dick’s Sporting Goods, reported a 23% drop in profits despite a 3.6% increase in sales, citing “organized retail crime” and inventory shrink as the primary reasons for the disappointing results.

The common thread among these retailers is the challenging environment characterized by consumer reluctance to spend, which is impacting their bottom lines and stock performance. As these companies grapple with these challenges, they are left with the task of finding innovative ways to adapt to the evolving consumer landscape.

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Powell defends the Fed’s independence from Trump

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As Trump’s presidency approaches, Fed Chair Jerome Powell signals he won’t back down on protecting the central bank’s autonomy.

With the election results still rolling in, Federal Reserve Chair Jerome Powell has already made it clear that he intends to uphold the Fed’s independence, even if it means clashing with the new administration.

In a statement on Thursday, Powell declared he would not resign if President-elect Trump asked him to, asserting it would be illegal for any president to fire or demote a sitting Fed governor.

This stance comes amid signals from Trump’s team indicating they may seek influence over the Fed’s monetary policies, including interest rate decisions, challenging the longstanding norms that keep the Fed separate from politics.

Not stepping down

Powell’s terse response to questions on the issue emphasized his commitment: when asked if he would step down at Trump’s request, Powell replied simply, “No.” And when asked if the president could legally demote Fed governors, he affirmed, “not permitted under the law.”

Historically, Trump has shown impatience with Powell’s decisions, especially on interest rates.

If Trump tries to replace Powell or other Fed leaders prematurely, he could face legal challenges and market backlash.

Economists argue that an independent Fed actually benefits Trump’s agenda by stabilising rates.

 

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Federal Reserve lowers rates amid eased job market

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The Federal Reserve has cut interest rates by a quarter-point, bringing the benchmark rate to a range of 4.5% to 4.75%, as economic growth continues but job gains slow.

The Fed noted that labour market conditions have “generally eased,” even with low unemployment, signalling a more cautious approach amid a stable economic expansion.

The statement marks a shift in Fed language, now saying inflation has “made progress” toward the 2% goal instead of the prior “further progress.”

With inflation holding steady around 2.6%, policymakers aim to keep economic risks balanced, despite pressures from slower job growth.

This rate cut reflects a strategic move to sustain economic momentum while cautiously watching inflation’s gradual trend toward the Fed’s target.

The decision was unanimous, aligning Fed priorities with a balanced approach to support both employment and price stability.

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Money

Trump victory sparks market surge as Wall Street soars

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Donald Trump’s election victory has sparked a massive rally in the stock market.

Banks and industrial companies led the surge as investors bet that Trump’s plans for deregulation and tax cuts will boost economic growth.

Shares of big banks, like JPMorgan and Goldman Sachs, soared as investors predicted fewer regulatory restrictions.

Meanwhile, industrial giants such as Caterpillar and steelmakers like Nucor also hit record highs, reflecting optimism about U.S. manufacturing.

In contrast, clean-energy stocks took a hit, as Trump’s policies are expected to favour traditional energy sectors.

This surge comes amid rising Treasury yields and falling gold prices as investors gain confidence in the transition to a Trump administration.

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