US retail sales rose more than expected in July, which could help to allay financial market fears of a sharp economic slowdown that were fanned by a jump in the unemployment rate.

Retail sales increased 1.0 percent last month after a downwardly revised 0.2 percent drop in June, the Commerce Department’s Census Bureau said on Thursday.

Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, advancing 0.3 percent after previously being reported as unchanged.

Signs that demand is not collapsing could prompt financial markets to dial back expectations for a 50 basis points interest rate cut next month. The odds continue to favour a quarter-point rate reduction, with inflation rising mildly in July.

Consumers are maintaining spending by bargain hunting and trading down to lower-priced substitutes.

Retail sales excluding automobiles, gasoline, building materials and food services rose 0.3 percent last month after advancing by an unrevised 0.9 percent in June.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. The strong data put retail sales on a solid footing at the start of the third quarter, despite last month’s marginal gain.

By Lucia Mutikani; Editing by Chizu Nomiyama

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American Fashion Soldiers Through a Volatile Market — For Now

The global stock market tumble this week raised alarm among economists over the likelihood of a US recession happening this year. The consumer economy, however, has held strong and the savviest retailers are still posting growth through offering a compelling value proposition.

Tapestry Inc.’s shares rose as the maker of handbags and clothing’s quarterly results beat Wall Street expectations amid continued weak consumer confidence and inflation fears.

Adjusted earnings per share were 92 cents a share in the fourth fiscal quarter, New York-based Tapestry said Thursday in a statement, while analysts surveyed by Bloomberg had expected 88 cents. Revenue of $1.59 billion narrowly beat projections.

The shares gained as much as 9.2 percent in trading before US markets opened. They had risen 3.1 percent this year through Wednesday’s close.

Like many other high-end brands, Tapestry’s Coach brand raised prices during the pandemic amid high demand and surging inflation. Investors had worried that Coach would give up some of those gains when the pace of sales began to flag. Instead, it has continued to increase the average price of its handbags and other accessories in recent quarters, improving profitability.

Tapestry’s Kate Spade has been more of a laggard for the company and, earlier this month, it appointed Eva Erdmann to lead the brand. A veteran of L’Oréal SA and Christian Dior Beauty, Erdmann is a “seasoned brand builder,” Telsey Advisory Group analyst Dana Telsey wrote in a research note.

Tapestry reiterated its commitment to buying rival handbag and apparel retailer Capri Holdings Ltd. The US Federal Trade Commission sued to block the deal in April and a trial is set for September. Earlier this month, Capri reported its seventh straight decline in annual sales, raising questions as to whether Tapestry would rethink its $8.5 billion takeover offer for the owner of the Michael Kors, Jimmy Choo and Versace brands.

The company “looks forward to presenting its strong legal arguments in court” according to the statement, and is “working expeditiously to close the transaction in calendar year 2024.”

By Jeannette Neumann

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US Sues to Block $8.5 Billion Union of Coach, Michael Kors

Antitrust enforcers said Tapestry’s acquisition of Capri would raise prices on handbags and accessories in the affordable luxury sector, harming consumers.

Berkshire added 690,106 shares of Ulta and 1.04 million shares of Heico, according to a regulatory filing. Its stake in Ulta was worth about $227 million, based on Wednesday’s closing price, while the Heico shares were valued at roughly $247 million.

Shares of Bolingbrook, Illinois-based Ulta surged 12 percent to $369.25 in extended trading at 4:50 p.m. in New York. Heico advanced 2.8 percent.

Berkshire had already disclosed the biggest changes in its equity portfolio when it reported financial results on Aug. 3. It slashed its holding in Apple Inc. by almost 50 percent as part of a massive second-quarter selling spree. In all, Berkshire sold $75.5 billion of stock on a net basis in the period. Apple remained its biggest holding at midyear.

Berkshire has also pared its stake in Bank of America Corp., trimming that position by 8.8% since mid-July, Bloomberg calculations show.

The conglomerate’s cash pile stood at a record $276.9 billion at the end of June, and Berkshire has struggle to deploy it as share prices soared and deal activity stagnated. At the firm’s annual shareholder meeting in May, Buffett said he wasn’t in a rush to spend it “unless we think we’re doing something that has very little risk and can make us a lot of money.”

This article was written by Amanda Cantrell from Bloomberg and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.

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Ulta Beauty’s Problems Are Not the Industry’s Problems

The chain’s bleak outlook sent shares across the sector tumbling. But this week’s rosier take from Sephora owner LVMH suggests prestige beauty still has its place in an ever-crowded market.

Alibaba Group Holding missed market expectations for first-quarter revenue on Thursday, as the company’s domestic e-commerce sales came under pressure from cautious spending by Chinese consumers in a faltering economy.

US-listed shares of the company fell about 4 percent in premarket trading.

A halting economic recovery in China coupled with a persistently weak property market and high job insecurity levels have sapped consumer confidence and spending power in the world’s No. 2 economy, hitting global firms across the board.

Alibaba is also grappling with stiff competition from rivals including JD.com and discount-focused retail platforms such as PDD Holdings’ Pinduoduo and ByteDance-owned Douyin.

Alibaba reported revenue of 243.24 billion yuan ($33.98 billion) for the quarter ended June 30, compared with analysts’ average estimate of 249.05 billion yuan, according to LSEG data.

Revenue at the firm’s domestic e-commerce arm fell 1% even as the number of purchasers and their purchase frequency increased order growth by double digits.

Chinese e-commerce giants have had to resort to heavy discounting and promotions to attract shoppers, a move that is pressuring margins across the retail sector, from big players like Alibaba and JD.com to small businesses.

In June, sales at China’s blowout mid-year e-commerce sales festival fell for the first time ever according to third party estimates, despite major platforms’ efforts to dole out offers for an extended period to woo consumers.

Alibaba executives have maintained in recent quarters that increased purchasing and the introduction of new tools for merchants will increase advertising and customer management revenue to the platform in the future.

Alibaba in March 2023 announced the biggest shake-up in the company’s history, splitting into six units and sharpening its focus on its core businesses, including domestic e-commerce.

Helped by the company’s investments to expand its global presence and growing demand around the world for lower-priced goods from China, Alibaba’s international e-commerce unit saw a 32 percent rise in revenue to 29.3 billion yuan.

Revenue from Alibaba’s cloud segment grew 6% to 26.55 billion yuan, accelerating from the 3 percent growth seen in the prior quarter, thanks to an uptick in public cloud adoption and strong demand for AI-related products.

The company has moved to reduce low-margin project-based contracts and has said a scale-up in its cloud infrastructure has been helping it cut prices across its cloud products.

Net income attributable to ordinary shareholders in the quarter was 24.27 billion yuan, compared with 34.33 billion yuan a year earlier.

By Deborah Sophia and Casey Hall; Editors: Sriraj Kalluvila and Kirsten Donovan

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Alibaba Calls Off Cainiao’s IPO After Market Slump Worsens

Alibaba Group Holding Ltd. is calling off an initial public offering for its Cainiao logistics arm in Hong Kong, shelving a much-anticipated debut that could have raised more than $1 billion.

Chinese e-commerce group JD.com on Thursday reported forecast beating second-quarter profits, helped by price cuts that attracted cost-sensitive consumers to its platform.

JD.com’s US-listed shares rose as much as 3.5 percent in premarket trading.

Major Chinese vendors like JD.com and Alibaba have increased focus on discounts and lower-priced goods as Chinese shoppers have become more cautious about spending.

A stuttering post-Covid recovery in China has benefited low-cost e-commerce players such as PDD Holdings. Increased competition has triggered a price war between larger rivals as they look to attract the same pool of customers.

The retailers rely heavily on major discounting events such as China’s mid-year e-commerce sales festival which took place in June, to boost overall growth and exposure.

The so called “618″ shopping event, named after the June 18 founding date of e-commerce provider JD.com, but embraced by all platforms, gauges the market sentiment among household consumers.

JD.com said in June its turnover and order volumes reached a new high over the festival period, which ran from the end of May to June 18 this year.

JD.com’s second-quarter profit rose 73.7 percent to 9.36 yuan per share, excluding items, compared with estimates of 6.07 yuan, according to LSEG data.

JD.com’s general and administrative costs reduced by 9.6 percent in the quarter.

After JD.com prioritised a “low price” strategy at the close of 2022, its share price has experienced a decline, plummeting from approximately $60 to the current value of around $26.

Jacob Cooke, CEO of e-commerce consultancy WPIC Marketing + Technologies, said despite economic challenges, consumers are not only motivated by price-product quality and shopping experience also contributes to driving conversions and cultivating marketplace loyalty.

“JD.com should lean into its strengths rather than engaging in a race to the bottom of excessive discounts,” he said.

The company’s total revenue rose 1.2 percent to 291.40 billion yuan ($40.71 billion) in the second quarter, compared with estimates of 292.89 billion yuan.

By Sophie Yu and Harshita Mary Varghese; Editor: Jane Merriman

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JD.com Reports Q1 Revenue Above Estimates

The Chinese online retailer reported first-quarter revenue that beat market estimates, as price cuts and discount coupons helped boost sales that have been hit by cautious customer sentiment.