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Walmart has big year of e-commerce investments planned

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It’s been more than a year since Walmart acquired Jet.com, which gave the company an initial e-commerce boost. Since then, Walmart is starting to shift marketing spend on the millennial-centric upstart to reach younger shoppers directly via Walmart.com, the company explained Tuesday.

“Jet will not grow as quickly as it did in early days, but it will be well-positioned where we’ve chosen to focus the brand,” CEO Doug McMillon said on a conference call with analysts and investors.

“I think what you’ll see is Jet will go through a period of adjustment and then it’ll start to grow again in the future but focused on specific markets and opportunities,” McMillon said. “Whereas Walmart will be the broad-based, big part of the business and growing it will be a priority.”

Later this spring, Walmart will reveal a completely revamped website with a focus on fashion and home goods. In partnering with Hudson’s Bay-owned Lord & Taylor, Walmart will bring high-end clothing items to its website, in addition to its less-expensive banners, which are also getting a refresh.

Soon, Walmart.com will also feature the “smart cart” technology made famous on Jet.com. The platform grants shoppers cheaper prices if they pack more items together in one box, use a debit card when paying for purchases or opt out of returns. It’s something that has helped Jet.com amass a loyal shopper base — they keep coming back for the promised savings and seamless experience.

Meanwhile, Walmart is transitioning more of its stores to fulfill online grocery orders and deliver those orders curbside to customers. In addition to fashion, grocery is expected to be one of Walmart’s biggest areas of investment this year.

Tuesday’s results show Walmart “is following the same strategy as Amazon: taking less profit today, for the prospect of a stronger, better business tomorrow,” said Neil Saunders of GlobalData Retail. In taking a page from the so-called Amazon playbook, Walmart hopes to beat the e-commerce behemoth at its own game.

Looking to the full year, Walmart expects U.S. e-commerce sales to grow 40 percent in fiscal 2019, matching what it previously expected. Investments in new brands and new technology should ultimately aid the company in attracting new customers, pushing it toward those goals.

Meanwhile, Amazon is making its own advancements in grocery and apparel, treading on Walmart’s turf. However, a new report from Coresight Research found that shoppers were largely only visiting Amazon.com because it offered “cheap delivery” and was easy to search. These attributes could easily be replicated and successfully mastered by others, including Walmart.

Many shoppers today “do not associate Walmart with online or they default to Amazon,” Saunders said. “We believe this is down to Walmart’s focus on low prices plus better customer service, improved ranges, and better-selling environments.”

Including Tuesday’s losses, Walmart shares have climbed about 35 percent from a year ago.

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Dow futures rise, extending Monday’s 300-point rally

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Dow futures rose in early premarket trading, putting the average on track to extend Monday’s rally.

Dow Jones Industrial Average futures pointed to an opening gain of nearly 200 points. S&P 500 futures and Nasdaq 100 futures were also higher.

On Monday, the Dow rallied more than 300 points on investor optimism about the economic comeback from the pandemic. At its session high, the 30-stock average was up as much as 650 points to hit an intraday record.

The bullishness was fueled in part by the Senate’s passing of a $1.9 trillion economic relief and stimulus bill on Saturday, which is set to include another round of stimulus checks. Banks, airlines, cruise lines and retailers all rose amid hopes of a sharp economic rebound.

Additionally, the Centers for Disease Control and Prevention said Monday that people who’ve been fully vaccinated against Covid-19 can meet safely indoors without masks. The announcement came after the U.S. reached 3 million vaccinations over the weekend.

Technology stocks, meanwhile, continued their recent weakness as the Nasdaq Composite dropped 2.4%. The tech-heavy benchmark closed more than 10% below its Feb.12 closing high, falling into correction territory.

The S&P 500 also ended the day down about 0.5%, dragged down by shares of Tesla, PayPal, Etsy and Advanced Micro Devices.

The high-growth names have been pressured by rising interest rates lately. The U.S. 10-year Treasury yield stood around 1.6% on Monday. However, hedge fund manager David Tepper said the recent sharp rise in rates is likely over and it’s hard to be bearish on stocks right now.

Monday’s “initial rally was due primarily to news over the weekend that President Biden’s relief package had passed,” Jim Paulsen, chief investment strategist at the Leuthold Group, told CNBC. “Ultimately, however, equity investors are currently obsessed with bond yields keeping the Nasdaq and S&P 500 technology sector under pressure all day. Since the 10-year bond yield failed to pull back from the 1.6% level near the close today, eventually pressure on technology stocks intensified going into the close.”  

“Nonetheless, most of the stock market had a nice day as small caps stocks and several reopening sectors posted healthy gains,” added Paulsen.

The small-cap benchmark Russell 2000 gained about 0.5% on Monday.

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Why a U.S.-EU dispute is likely to go from bad to worse

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A worker walks past snow-covered pipework in the yard at the Gazprom PJSC Slavyanskaya compressor station on Thursday, Jan. 28, 2021.

Andrey Rudakov | Bloomberg | Getty Images

LONDON — A simmering geopolitical dispute over an undersea pipeline that would bring gas from Russia to Germany is widely expected to intensify in the coming weeks, with pressure building on President Joe Biden to do more to halt the nearly-complete project.

If finished, the 1,230-kilometer (764-mile) Nord Stream 2 pipeline will become one of the longest offshore gas pipelines in the world. It is designed to deliver Russian gas directly to Germany under the Baltic Sea, bypassing Ukraine.

Alongside several European countries, the U.S. opposes the pipeline, calling it a “bad deal” for European energy security.

Critics also argue the pipeline is not compatible with European climate goals and will most likely strengthen Russian President Vladimir Putin’s economic and political influence over the region.

Led by Russia’s Gazprom, the state-owned gas giant has claimed Nord Stream 2 is “particularly important” at a time when Europe sees a decline in domestic gas production. Advocates of the pipeline also condemn attempts “to influence or stop the project for political reasons.”

A bumpy road ahead for the project includes the threat of further targeted sanctions led by the U.S., Germany’s federal election in late September and an ongoing backlash over the poisoning and arrest of Russian opposition politician Alexei Navalny.

What’s at stake?

“The reason it is so geopolitically contentious is not necessarily about the pipeline or the molecules themselves. It has everything to do with timing and what it says about Europe’s relationship with Russia, Germany’s relationship with Russia and transatlantic relations,” said Kristine Berzina, a senior fellow at the Alliance for Securing Democracy, a national security advocacy group.

“The pipeline will either be built or it will not be built. Germany has a role in potentially killing it. Russia is finding alternatives getting around sanctions so that it can be completed but not very much of this pipeline remains,” Berzina told CNBC.

The project is 94% complete, with over 1,000 kilometers of the pipeline in place and less than 150 kilometers to go before Gazprom can then turn on the taps.

Chancellor Angela Merkel attends the 215th session of the Bundestag. Topics include the epidemic situation of national scope and the effects of the lockdown on the economy.

Kay Nietfeld | picture alliance | Getty Images

One potential stumbling block, analysts say, could be the prospect of a German government that’s opposed to the pipeline. The next general election, due to be held on Sept. 26, will determine who will succeed Angela Merkel as the country’s chancellor.

The problem, however, is the project is so close to completion that September may be too late to scrap the pipeline.

“We could well be done with the pipeline by September and, if the pipeline’s done, the gas will flow and I think it will be especially difficult to cut off the gas once you actually finish the pipeline. So, we’re at a very critical few months, weeks even, to determine whether this product is going to continue or not,” Berzina said.

Is Nord Stream 2 inevitable?

Timothy Ash, senior emerging markets strategist at Bluebay Asset Management, told CNBC that the potential for further interventionist measures may yet prevent the delivery of Russian gas to Europe via Nord Stream 2.

When asked whether the completion of the pipeline was inevitable, Ash replied: “It seems that way, albeit given the threat from sanctions on insurance contracts I wonder whether any actual gas will be able to flow (through) the pipeline.”

A worker adjusts a pipeline valve at the Gazprom PJSC Slavyanskaya compressor station, the starting point of the Nord Stream 2 gas pipeline, in Ust-Luga, Russia, on Thursday, Jan. 28, 2021. Nord Stream 2 is a 1,230-kilometer (764-mile) gas pipeline that will double the capacity of the existing undersea route from Russian fields to Europe — the original Nord Stream — which opened in 2011.

Andrey Rudakov | Bloomberg | Getty Images

The nature of the dispute, Ash said, was partly about gas supplies to Europe, given the U.S. “clearly” wants to supply the continent with liquefied natural gas, but there are broader geopolitical concerns at play.

“It’s also the sense from the US, that Europe does not meet its security commitments. It asks the US for security guarantees, but at the first opportunity sells out to Russia,” he added.

Where do we go from here?

James Waddell, senior global gas analyst at Energy Aspects, told CNBC that U.S. sanctions will be “one of the main impediments” to the completion of Nord Stream 2.

Waddell cited measures taken last month when the U.S. announced targeted sanctions against Russian pipe-laying vessel Fortuna in a bid to delay the project. Notably, the measures stopped short of punishing any German or European firms aiding the construction of the pipeline.

Nonetheless, Russia has been trying to “Russia-fy” the project, Waddell said, effectively trying to insulate companies that don’t have dealings with the U.S., don’t have U.S. employees and don’t require access to dollar-based lending.

In practice, that means Russia finding its own vessels to do the actual physical work of laying the pipeline and transferring the assets and the pipeline vessels to Russian-owned companies.

Passers-by take pictures of the Russian pipe-laying vessel “Fortuna” on the pier, which is being towed out of the harbor onto the Baltic Sea by tugboats. The special ship is being used for construction work on the German-Russian Nord Stream 2 gas pipeline in the Baltic Sea.

Jens Büttner | picture alliance | Getty Images

Waddell said he had doubts about whether Moscow could insulate the project “in its entirety,” since many European companies are already tied up with the project and other international companies are likely to think twice about their involvement to avoid finding themselves on a U.S. sanctions list.

In addition, analysts at Energy Aspects said the withdrawal of the project’s main certification company in December was another “major” issue.

Norway-based DNV had been due to verify the safety and technical integrity of the pipeline system on completion but the risk management and quality assurance firm suspended its work on the project late last year amid fears of being sanctioned by the U.S.

“This project has all been built to those standards of that certification company and its maybe difficult to find another internationally recognized certification company to step in and certify this project as ready,” Waddell said. “And we think without that type of certification it may become difficult for any European regulator to actually allow flows through that pipeline.”

— CNBC’s Tom Chitty contributed to this article.

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Abu Dhabi eyes new partnerships for carbon capture as oil price climbs

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DUBAI, United Arab Emirates — Oil rich Abu Dhabi and its national oil company are eyeing new partnerships in carbon capture technology as rising oil prices put a renewed focus on big oil’s climate mitigation strategies.

“There is no credible way of reaching global climate goals without seriously advancing and ensuring the widespread adoption of carbon capture and storage,” Sultan Al Jaber, UAE Minister of Industry and Advanced Technology and Abu Dhabi National Oil Company (ADNOC) Managing Director and Group CEO said over the weekend.

Carbon capture and storage (CCS) technology aims to reduce the level of carbon that’s released into the atmosphere through conventional power generation and industrial processes by storing waste carbon in a place where it won’t enter the atmosphere, typically underground. Long-term carbon storage is a fairly new concept, and its environmental, economic and technical aspects are still being debated. 

ADNOC, which pumps more than 3 million barrels of oil a day, has pledged to lower its greenhouse gas emissions and boost CO2 storage. It joins a long list of oil majors that have come under increasing pressure to speed up climate efforts as higher prices put the industry on a more sustainable path.

We continue to see it as a game changer, and we are very ready to partner with others within and even outside our industry to enable wider CCS adoption.

Sultan Al Jaber

UAE Minister of Industry and Advanced Technology and ADNOC Managing Director

“This goes beyond just the oil and gas industry,” Al Jaber said. “I see an opportunity and an important role for carbon capture and storage across sectors that are hard to decarbonize and that use the most energy, such as heavy industry, manufacturing and chemicals,” he added.

Al Jaber made the comments last week at a virtual CERAWeek panel session alongside Vicki Hollub, CEO of Occidental, and energy economist Dan Yergin, Vice Chairman of IHS Markit.

Oil prices spiked on Monday, with Brent crude topping $70 after an attack on Saudi oil facilities and after OPEC and its allies decided to keep production cuts in place in April. Higher prices are a boon for the key oil exporters of the Gulf, like Saudi Arabia and the UAE, which still rely heavily on oil export revenues to drive economic growth. Oil prices collapsed below zero and into negative territory in April last year.

Carbon partnerships

ADNOC recently partnered with French oil major Total to explore opportunities in CO2 emission reductions and CCS. It comes as the UAE aims to reduce its carbon intensity a further 25% over the next decade.

“We continue to see it as a game changer, and we are very ready to partner with others within and even outside our industry to enable wider CCS adoption,” Al Jaber said.

ADNOC, which has plans to aggressively ramp up oil production capacity in coming years, says it can capture 800,000 tons of carbon dioxide annually through its Al Reyadah facility in Abu Dhabi. As oil production capacity grows, it also plans to expand the capacity of the program to capture 5 million tons every year by 2030. 

“Carbon capture, utilization and storage (CCUS) will need to form a key pillar of efforts to put the world on the path to net-zero emissions,” the International Energy Agency said in a publication last year. “After years of slow progress, new investment incentives and strengthened climate goals are building new momentum behind CCUS,” it added. 

Al Jaber, who’s also the UAE’s special envoy for climate change, didn’t say what type of partnerships the company was seeking to form. ADNOC recently said its also exploring the potential of new fuels such as hydrogen, which Al Jaber said shows “great promise as a close to zero-carbon fuel” that could be produced at scale as part of ADNOC’s existing hydrocarbon value chain.

Demand recovery

Al Jaber also expressed optimism  on the positive impact of vaccines and stimulus programs on the global economic recovery, which feeds directly into oil demand.

“Looking regionally, we see that one of the major powerhouses of the global economy, China, has already recovered in GDP terms, and is back to robust growth,” he said. “We expect another key player in the global economy, the U.S., to return to its pre-Covid level of GDP this year and continue growing into 2022,” he added.

Al Jaber also pointed to the improving recovery in oil demand, which fell to lows of around 75 million barrels per day at the height of global lockdowns. “Global consumption is currently around 95 million barrels per day and we expect it to rise above pre-Covid levels by the end of this year,” he said.

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