fortune--2020-01-30--Why Airbnb just hired a former Disney theme park boss

This is the web version of Data Sheet, Fortune’s daily newsletter on the top tech news. To get it delivered daily to your in-box, sign up here.
Good morning, readers. This is Fortune writer Aric Jenkins, filling in for Adam.
Yesterday, Airbnb announced the hire of former Disney theme park boss Catherine Powell as head of “Experiences,” its division of tours and activities by semi-amateur guides for travelers.
If you haven’t heard of Experiences yet, you will soon. Airbnb is keen to beef up Experiences ahead of its expected IPO later this year, especially as investors will surely be wary of regulatory roadblocks and safety concerns plaguing the company’s primary homesharing business. The company is in the process of expanding its current offerings of about 40,000 Experiences available in 1,000 cities and towns. Go to the company’s homepage and you’ll see the Experiences tab placed right next to Stays, a sign that Airbnb is giving equal prominence to this newer business.
Back around Christmas, I published a magazine feature about Airbnb and how Experiences represents a huge opportunity for the company to capitalize on the fragmented tours and activities market. The industry altogether is worth a lot of money (an estimated $183 billion) and remains primarily offline (roughly 80% of listings), unlike the accommodation and airfare markets. A company with Airbnb’s level of tech savvy and brand loyalty could sweep in and become the go-to hub for travel excursions. After all, the point of traveling is not just to stay somewhere, but to do things when you get there.
Powell’s hire is a big deal for the future of the company as it looks to evolve into a “one-stop shop” for travel. That’s how co-founder and CEO Brian Chesky described the goal to me when I interviewed him for the story. Besides Powell, he hired former aviation exec Fred Reid as head of transportation last year. Chesky envisions a future in which the entire travel process, from start to finish, can be completed through the Airbnb app.
The question going forward is whether Airbnb can do all of this without sacrificing the authenticity of its main homesharing business that travelers so love. Will Airbnb simply end up becoming Expedia or Booking.com?
What I do know for sure is that Airbnb is easily shaping up to be the hottest IPO of 2020.
Aric Jenkins
Twitter: @aricwithan_a
Email: aric.jenkins@fortune.com
This edition of Data Sheet was curated by Aaron Pressman.
NEWSWORTHY
It's the end of the world as we know it. The week has been filled with bad new about some former Silicon Valley darlings. As WeWork tries to get back on track, some of its prior signature moves are being retired–now free beer and wine are out at North American locations. And ride sharing service Lyft is cutting jobs, about 2% of its workforce, as it seeks profitability.
Furies breathing down your neck. On that same theme, the too-good-to-be-true story of MoviePass finally reached a conclusion, as the parent company of the film subscription service collapsed into bankruptcy on Wednesday and said it will liquidate. Helios & Matheson Analytics is also under investigation by the Federal Trade Commission, the Securities and Exchange Commission, and state officials in New York and California, according to the bankruptcy filing.
Speed it up a notch. Still in too-good-to-be-true land, startup Practice Fusion offered a cheap medical records system to doctors backed by advertising. Turns out, the company was taking kickbacks from a leading opioid supplier to push prescriptions of the drug. In a settlement on Wednesday, it admitted wrongdoing and agreed to pay $145 million in fines. Facebook disclosed an even larger settlement on Wednesday–$550 million to settle a class action lawsuit that charged its facial recognition efforts had violated Illinois law.
Feeling pretty psyched. Wasn't the end of tax rebates for its customers supposed to hurt Tesla? That wasn't the case for the fourth quarter, as the electric car maker's sales rose 2% to $7.4 billion, better than expected. It delivered a record 112,000 cars. Tesla stock, already nearly double over the past year, gained another 10% in premarket trading on Thursday.
Birds and snakes and aeroplanes. Elsewhere on Wall Street, Facebook and AT&T bummed out investors, while Microsoft got them smiling. Facebook sales rose 25% to $21.1 billion, slightly better than expected, but expenses rose 34% and Facebook's operating margin declined. The stock, which had been up 51% over the past year, slumped 7% in premarket trading on Thursday. At Microsoft, sales grew 14% to $36.9 billion, more than $1 billion better than analysts forecast. The stock, up 60% over the past year, gained 3% premarket. And AT&T saw revenue shrink 2% to $46.8 billion despite all its new entertainment assets, as the company shed almost 1.2 million video subscribers in the quarter. AT&T's stock, previously up 21%, lost 4% on Wednesday.
Undo. We listed the wrong title for Alyssa Henry, Intel's newest board member, in Tuesday's newsletter. She is general manager and head of the seller business unit at Square.
(Headline reference explainer, in case you missed one of the big songs of the 1990s.)
FOOD FOR THOUGHT
New technologies are helping to make clothes feel softer and more luxurious. Startups like MeUndies and Allbirds have developed less expensive textiles and fabrics to put in their products. But columnist Virginia Heffernan is feeling a little creeped out by the ever softer synthetics showing up everywhere. In an essay for Wired, she explores what's behind the new wave of high-tech wear.
Polymer chemists use the Kawabata Evaluation System, a set of extremely precise instruments developed at Kyoto University that measure the subtlest properties of textiles—the ones associated with what the Wilson College of Textiles at NC State calls “comfort perception.” By manipulating fabrics and exerting exceedingly low force on them, Kawabata instruments gather data sets including stretch, rigidity, compression, and surface friction on human skin. Of these, compression (thickness and loftiness) and friction (roughness) are believed to be what comprise the aesthetic of soft.
IN CASE YOU MISSED IT
Bumble parent told to implement workplace reforms after sexism allegations By Jeremy Kahn
Facebook and Twitter are least trusted in social media for political news By Danielle Abril
How AI, satellites and drones could help plant a trillion trees By Eamon Barrett
As the coronavirus spreads, these stocks are the most exposed By Erik Sherman
The way your credit score is calculated will be changing dramatically—and soon. What to expect By Chris Taylor
BEFORE YOU GO
They look kind of like Rice Krispie treats or bowls of Corn Pops, but the first up-close pictures of the surface of the sun are stunning to behold. The National Science Foundation on Wednesday released images and videos taken by the new Daniel K. Inouye Solar Telescope in Hawaii. Some of the clips of boiling plasma are almost hypnotic. Luckily, all of the super-hot action remains 93 million miles away.
Aaron Pressman
On Twitter: @ampressman
Email: aaron.pressman@fortune.com


fortune--2020-01-30--‘Bull markets make you feel smarter’ and other rules for investing in today’s market

How the Wuhan coronavirus spreads and what ’ s being done about it

The current bull market could be entering its 12th year or its 8th year depending on who you ask. Some argue this bull began when the prior bear market bottomed in early March 2009. Since then, the S&P 500 is up 10 out of the past 11 years with gains of well over 500%.
Other market commentators disagree, arguing the true start date should be March 2013, which is when the index broke out to new all-time highs, not seen since the market crash began in the fall of 2007.
Regardless of the start date, this bull market has been relentless. Agreeing on the start date may be semantics, but we can all agree that pinpointing when it ends is impossible to do in advance. Until that day comes, here are some reminders about investing during bull markets.
Bull markets make you feel smarter
The general direction of the market can toy with emotions by magnifying how we feel about our investing abilities. When stocks are going up it can make you feel like a genius just as when stocks are going down it can make you feel inept.
Legendary investor Bernard Baruch offered some advice on this point: “Become more humble as the market goes your way.” Confusing brains with a bull market can be a costly mistake because bear markets don’t care how well you did when markets were going up.
Bull markets can last longer than you imagine
The secular bull market that ended in the dot-com implosion of early-2000 began at the outset of the 1980s. The S&P 500 was up 17.5% annually during the 1980s. It then followed up that magnificent run by compounding at more than 18% per year during the 1990s. That’s a 20-year bull market with annual returns approaching 20% per year.
The 1942-1968 run is much less known these days but you could make the case there was a secular bull market in U.S. stocks during that period. Between 1942 and 1968, stocks compounded at nearly 15% annually. The worst calendar year return was a loss of just 10.8%. That’s a bull market that ran for nearly 30 years!
Even bull markets aren’t easy
It’s always more fun when stocks go up but that doesn’t mean past bull markets were easy to ride. In the 1942-1968 time frame there were still drawdowns. By my count there were 16 double-digit peak-to-trough drawdowns in the S&P 500, including five separate corrections of 20% or worse. But stocks never fell by 30% in that entire period.
The same can’t be said of the 1980s and 1990s bull. Stocks fell more than 33% in a week during the 1987 bloodbath. Including Black Monday, there were nine double-digit corrections during this bull market.
Since 2009, investors in the S&P 500 have had to deal with six double-digit corrections, including two losses of more than 19%. So those gains have not come easy.
No one ever knows what stage we’re in
John Templeton once said, “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.”
Howard Marks gave a similar description when he wrote about the three stages of a bull market:
“The first, when a few forward-looking people begin to believe things will get better, the second when most investors realize improvement is actually underway, and the third, when everyone’s sure things will get better forever.“
Both descriptions are a good way to frame the way sentiment typically works in the market. The only problem is, these variables are impossible to define at the time because they never play out over the same horizon. Alan Greenspan’s famous Irrational Exhuberance speech came at the tail end of 1996, a mere four years before the bubble would pop. In the meantime, stocks rose an additional 115% or so.
That is why it’s impossible to gauge what inning we are in. Human emotions rarely work on a set schedule and they never match up perfectly over different market environments. The pendulum invariably swings too far in both directions but we never know how far or how long it will swing.
Bull markets can lull investors to sleep
Bull and bear market volatility in the stock market tends to look very different. You would assume bull markets are overflowing with big up days while bear markets consist of mainly big down days but that’s typically not how it works.
Bear markets are full of both big down and big up days as volatility tends to cluster. Over the past 15 years of data, eight out of the 10 worst daily returns on the S&P 500 came during 2008 while seven of the 10 best daily returns came that very same year.
When markets are going down volatility goes up, but it does so in both directions. Bull markets, on the other hand, are slow and methodical. Monday’s 1.6% decline in the S&P 500 was the first move of 1% in either direction since mid-October. There hasn’t been a 2% up or down day since last August.
The methodical nature of bull markets is one of the biggest reasons we see overreactions during the inevitable bear market to follow. Markets that slowly go up blind investors to the fact that sometimes they also go down. And those overreactions are amplified by the fact that no one knows how long the music will continue to play.
So enjoy the bull market while it lasts. Just know it will take a pause at some point and when that happens many investors will sell first and ask questions later.
Ben Carlson, CFA is the Director of Institutional Asset Management at Ritholtz Wealth Management. He may own securities or assets discussed in this piece.
More from Fortune’s investment guide:
—Start a donor advised fund for your charitable giving
—The health of the economy in nine charts
—Goldman Sachs Asset Management’s Sheila Patel on her 2020 outlook
—5 pressing questions to hone your investment strategy this quarter
—Investors are uneasy over the surge of near-junk corporate bonds
—Chasing returns: 11 lessons for real estate investors
—10 stocks that are poised for a stellar 2020
Subscribe to Fortune’s Bull Sheet newsletter for no-nonsense finance news and analysis daily.


fortune--2020-01-30--Cisco’s experiment with radical transparency

This is the web version of the Broadsheet, Fortune’s daily newsletter for and about the world’s most powerful women. To get it delivered daily to your in-box, sign up here.
Good morning, Broadsheet readers! A report uncovers new evidence in a case prosecuted by Amy Klobuchar, climate change can lead to gender-based violence, and Cisco takes an unusual approach to transparency.
– Inside Cisco. Employee relations cases—including instances of alleged sexual harassment or bullying—can easily be considered dirty laundry at a company. Well, Cisco is doing a bit of airing out.
Last week, Cisco chief people officer Fran Katsoudas told me about a rather novel cornerstone of the company’s effort to create a more “conscious” workplace culture.
At a company-wide meeting last January, Cisco revealed to its workforce how many employee complaints it had received of late. Its head of employment relations started by asking employees to imagine instances of unwanted touching, inappropriate behavior by a female executive, and use of the N-word, before adding: “All of these things happened here.”
Besides recalling the instances in aggregate, Cisco’s leadership “goes deep on a couple of cases,” and shares “how we handled it,” Katsoudas said. (It’s done in a manner that does not reveal the identities of the people involved.) In extreme cases of wrongdoing, the company has a zero tolerance policy, but walking through less-severe instances of “negative behavior”—a leader speaking inappropriately to a subordinate or a supervisor overlooking the personal issues of an employee—provides an opportunity for learning, Katsoudas said.
Cisco’s goal was to “build understanding” about the complaint process and to “make it OK” for others to speak up, Katsoudas said. In fact, after the first presentation, the number of complaints increased, some of them years old.
Of course, San Jose-based Cisco introduced the initiative against a backdrop of employee activism in Silicon Valley, and Katsoudas admitted that Cisco employees have become “more bold in their feedback.” I asked her how Cisco balances its desire for employee insight against the potential for worker grievances to disrupt business—the Google walkout comes to mind. Katsoudas argues that it’s a matter of trust. “When you have trust, concerns come to the table,” if not, she said, employees pursue “external” outlets.
Claire Zillman
claire.zillman@fortune.com
@clairezillman
Today’s Broadsheet was produced by Emma Hinchliffe.
ALSO IN THE HEADLINES
- Investigating the evidence. Since she first ran for Senate in 2006, Sen. Amy Klobuchar has repeatedly talked about her experiences serving as a prosecutor. In one case, she prosecuted Myon Burrell, a black teen convicted of killing 11-year-old Tyesha Edwards, who was hit by a stray bullet while sitting at her dining room table. But an Associated Press investigation found new evidence and inconsistencies in the case. A spokesperson for Klobuchar's campaign said that if there is new evidence, it should immediately be reviewed by the court. Associated Press
- Biotech boards. Why don’t women biologists found biotech companies at the same rate as men? Three MIT scientists have been studying the problem for the past year, and their new organization, the Boston Biotech Working Group, will take a first step toward closing the gap by making sure women hold at least 25% of seats on biotech boards of directors by the end of 2022. STAT
- When women run. What's it like to run for office or win an election? Do voters ask gendered questions? Is your appearance an issue? How do you talk to the media about your gender? Read stories and answers from 97 women who've done it in this piece: FiveThirtyEight
- Bad crop. An Associated Press photo from Davos that was circulated to news organizations cropped out Ugandan climate activist Vanessa Nakate, featuring instead four white climate activists, including Greta Thunberg. Nakate talks to the Guardian about the symbolism of the mistake. "Climate activists of color are erased," she says. Guardian
MOVERS AND SHAKERS: Hennes & Mauritz AB appointed Helena Helmersson as the first female CEO of H&M. Airbnb hired president of Disney parks Catherine Powell as head of its Experiences business. Emily Castor Warren, formerly of Lyft and Lime, joined NelsonNygaard as principal and director of policy. Former Rep. Susan Molinari joins the board of nonprofit Points of Light. Karen Parkhill, EVP and CFO of Medtronic, joins the American Express board of directors.
IN CASE YOU MISSED IT
- Climate effects. The International Union for the Conservation of Nature released a first-of-its-kind report studying the relationship between climate change and gender-based violence. It finds that when "environmental degradation and stress on ecosystems" increases, people's stress increases. Those environmental pressures lead to increased gender-based violence. Guardian
- Sex scene standards. As intimacy coordinators become more standard throughout Hollywood, the Screen Actors Guild-American Federation of Television and Radio Artists issued official standards for how productions treat the intimacy professionals on set. The coordinators should have pre-production meetings about sex scenes with producers and directors, one-on-one meetings with actors, and review all "modesty garments." Fortune
- Demings in the House. Who is Rep. Val Demings? You simply must read this profile to find out. A former police chief and the only non-lawyer chosen as an impeachment manager, the experience is an unusual one for her: she's used to enforcing rather than convincing. Plus, there's her "bootstrapping origin story that conservatives might exalt as a sign of high character if she weren’t a Democrat who wants to impeach Donald Trump." Washington Post
- Murdoch speaks out. Kathryn Murdoch, wife of James and daughter-in-law of Rupert, talks to Politico about her climate change activism and the 2020 election. The "radical centrist" still getting used to speaking publicly about her views of politicians like Pete Buttigieg, Amy Klobuchar, and Mike Bloomberg. Politic
ON MY RADAR
Trump's greatest trick was convincing voters that women can't win elections Mother Jones
Holding Virginia Woolf in your hands The New Yorker
After all these years, Barbie is still reinventing herself New York Times
Anna Odell puts men in a gynecological chair Variety
PARTING WORDS
"No. 3’s good enough by the way, and I feel that now."
-Jessica Simpson, on being compared to Britney Spears and Christina Aguilera. Her new memoir shares her battles with alcoholism and sexual abuse.


fortune--2020-01-30--Bernie Sanders wants the future of the far left to be female. Is that enough?

Sen. Bernie Sanders (I-Vt.) says that he wants to ensure that the future leaders of democratic socialism in the U.S. are women and people of color, and he says he’s building a coalition to boost those voices. But the question remains: Does it matter if the leader of such a coalition is a white man?
As the 2020 primary campaign veers into election season, the topic of likability, this time framed as electability, has once again reared its head, and the presidential front-runner has made clear that he believes there is only one way to beat President Donald Trump in the general election: coalition building through class politics instead of identity politics.
Still, Sanders has attempted to frame his operation as a movement that doesn’t focus solely on himself. Sure, he’s a white man, but, he argues, he’s also championing the voices of minorities around him and aiming to leave the future of the far left more female and more representative of American demographics.
Last year, Sanders began aggressively rolling out the new slogan, “Not me. Us.” He explained that he believed President Trump was attempting to divide Americans based on religion, sexuality, and the color of their skin.
While acting as a surrogate (an unpaid politician, celebrity, or person of influence who stands in for a candidate on the campaign trail) for Sanders, Rep. Alexandria Ocasio-Cortez (D-N.Y.), told a crowd that “it wasn’t until I heard of a man by the name of Bernie Sanders that I began to question and assert and recognize my inherent value as a human being.”
Sanders has made a habit of surrounding himself with young women of color and using them as his personal advocates, partially to make up for his own lack of diversity and partially because he wants to make sure that the next generation of progressive leadership looks less like an Eagle Scout reunion.
“Look, he’s a 78-year-old white man who has lived for the past 50 years in Vermont, that’s just who he is,” says Linda Sarsour, a Muslim-American activist and cofounder of the Women’s March who also serves as a surrogate for Sanders’ 2020 campaign. “But I think over the past few years, Bernie has really been very intentional about the types of people who are given platforms in his campaign; he wants to give voices to people on the margins.”
But when voters think about whom they will vote for, they don’t think about long-term leadership plans, says Kelly Dittmar, professor of political science at Rutgers University and scholar at the Center for American Women and Politics at the Eagleton Institute of Politics. They think about the name at the top of the ticket, and the gender and race of that person.
“Sometimes it’s too easy for white men to say identity politics don’t matter,” she says. “To act as if being a white man hasn’t brought advantages to you in politics is counter to the facts. To deride or push aside identity politics, she claims, is often just an excuse to avoid an uncomfortable conversation.
Campaign surrogates for Sanders say that identity politics—when deployed in too simplistic a way—could undercut the senator’s more nuanced approach to tackling inequality. They argue that Sanders has long pushed to ensure that the future of his party is female, and has propelled those voices over the past few years.
“We have to be careful not to give in to simplistic identity politics that say it’s only good for women of color if we have someone who shares that identity in the White House or even just shares that identity of being a woman like Senator Warren,” says New York State Democratic senator and Bernie Sanders campaign surrogate, 29-year-old Julia Salazar. “We need to recognize that it’s more important to have a candidate who represents our social and economic interests and a candidate who really brings in the leadership of people who look like us and have our experience.”
Sanders recently found himself embroiled in an argument with Sen. Elizabeth Warren (D-Mass.) on the subject. Warren accused Sanders this month of telling her privately that a woman could not win the presidency; Sanders denies the claim.
As the 2020 presidential field becomes increasingly old, white, and male, both Warren and Sen. Amy Klobuchar (D-Minn.), the only female candidates left in the race, have fallen behind in polling. Sanders, meanwhile, has ascended in the ranks alongside his white male colleagues former Vice President Joe Biden and former South Bend, Ind., Mayor Pete Buttigieg.
Warren’s accusations against Sanders are particularly damaging as they strike a chord with those who are still sore over his run against Hillary Clinton in 2016—recalling the multiple accusations made by female staffers on Sanders’ campaign who claimed they were severely mistreated by senior staff. For his part, Sanders has apologized and met with some of those women. He called the controversy “personally humiliating,” “embarrassing,” and “disgusting.”
After claims of sexual harassment fell upon his 2016 campaign, Sanders released a 16-page document outlining how he planned to fix the issue. That included an anonymous tip line and a public pay scale. His campaign unionized in March, further addressing the divide in pay.
The Sanders team has also placed women and people of color in key decision-making roles in his 2020 presidential campaign. His current staff is 71% female and majority nonwhite. Joe Biden, in comparison, has claimed that his staff is the most diverse in the field, but has refused to release any actual numbers to back those claims. Elizabeth Warren’s team says about 40% of their full-time staff are people of color, and 60% of full-time staff are “female, nonbinary, or gender nonconforming.”
“Let me go through it right now: Campaign manager in Iowa is a woman. Campaign manager in Nevada is a woman,” Sanders told the New York Times editorial board in his endorsement interview. “Campaign manager in New Hampshire’s not a woman. Campaign manager in South Carolina is African-American guy. Campaign manager in California is a woman.”
But state campaign managers aren’t the face of Bernie Sanders 2020—and they’re not what people envision when they go to the ballot box.
The argument between Sanders and Warren centers on electability. From the Democratic debate stage in Iowa this December, Warren asked the audience, “So, can a woman beat Donald Trump? Look at the men on this stage,” she answered. “Collectively, they have lost 10 elections. The only people on this stage who have won every single election that they’ve been in are women.”
From that perspective, Sanders, a white male, is at a disadvantage.
Last week, Sanders’ 2016 competitor and longtime Senate colleague Hillary Clinton weighed in on the culture in his campaign, describing it as toxic in an interview with The Hollywood Reporter.
“It’s his leadership team. It’s his prominent supporters. It’s his online Bernie Bros and their relentless attacks on lots of his competitors, particularly the women. And I really hope people are paying attention to that because it should be worrisome that he has permitted this culture—not only permitted, [he] seems to really be very much supporting it,” Clinton said in the interview to promote Hillary, her forthcoming four-part Hulu docuseries.
“That’s particularly true with what’s going on right now with the Bernie campaign having gone after Elizabeth with a very personal attack on her,” Clinton continued. “Then this argument about whether or not or when he did or didn’t say that a woman couldn’t be elected, it’s part of a pattern. If it were a one-off, you might say, ‘Okay, fine.’ But he said I was unqualified … I just think people need to pay attention because we want, hopefully, to elect a President who’s going to try to bring us together, and not either turn a blind eye, or actually reward the kind of insulting, attacking, demeaning, degrading behavior that we’ve seen from this current administration.”
Sarsour points out that it’s a “crazy thing” for a woman of color to say “some old white man taught her what she’s worth,” but that Sanders often empowers underrepresented Americans to “realize that the things we’re asking for are things we deserve.” There would be no Ocasio-Cortez or congresswomen Ilhan Omar (D-Minn.) and Rashida Tlaib (D-Mich.) without Sanders, she says.
Sarsour recalls a moment after a Sanders and Clinton debate where she was sent to the spin room to speak with the press. Advocating on behalf of Hillary Clinton were names like New York Gov. Andrew Cuomo and Sens. Kirsten Gillibrand (D-N.Y.) and Chuck Schumer (D-N.Y.). The spin room is a dizzying media spread that requires well-trained advocates to represent candidates to the press, quickly answer difficult questions, and explain why they should be credited as winning the debate.
“Bernie Sanders had me, he had Ben Jealous, the former president of the National Association for the Advancement of Colored People, and he had Erika Andiola, who is an undocumented community organizer,” she says. “These are the people he wants to represent him.”
He has the numbers to back his claims: Of all the potential 2020 candidates, Sanders has brought in the most money from women, with $17.1 million in itemized contributions or 40% of his total funds thus far. A recent Vice News/Ipsos poll found that 56% of black voters said they would possibly vote for Sanders in the general election, compared with 54% who said they would possibly vote for Joe Biden, who is considered the front-runner with that demographic. Sanders is also by far the most popular candidate with young black voters.
Councilwoman Tara Samples of Akron, a Sanders campaign surrogate and longtime civil rights activist, says she’s drawn to Sanders’ long and consistent record of fighting for equality.
“I’m influenced by the people I see around him,” Samples says. “It’s important in this kind of political environment to have the support of what appears to me a sincere white male … And he’s been on the line, the same kind of line I’ve been fighting for, and he wasn’t afraid back then, that means a lot.”
But the latest field poll in Iowa has Sanders holding a steady lead among male voters and tied with Buttigieg and Biden among female voters. The Sanders campaign clearly senses the lack of support: Last week they released a television ad in Iowa and New Hampshire that spoke directly to women.
“Bernie Sanders is on our side and always has been,” a female narrator says before Sanders adds that “women do not need 80 cents on the dollar. They need the whole damn dollar.”
Campaign surrogacy, says Dittmar, doesn’t always work when it comes to courting female votes.
“One doesn’t substitute the other … There’s a symbolic importance because we need to see what presidential leadership can look like,” she says. And even if Sanders claims he’s starting a movement of many, “at the end of the day, the candidate is the ultimate decision-maker. They decide what’s important and how they relate to voters. Surrogacy is different than having the candidate themselves share those perspectives and experiences in a first-person way.”
More must-read stories from Fortune:
—The Chief Justice and impeachment: John Roberts’s role in the Trump trial
—How impeachment hearings in the Senate will work
—Understanding the 2020 election as brand marketing
—A Q&A with Sen. Kelly Loeffler on her unlikely path to Washington
—The World’s Most Admired Companies in 2020
Get up to speed on your morning commute with Fortune’s CEO Daily newsletter.


fortune--2020-01-30--‘It’s survival of the fittest:’ Qantas CEO says coronavirus could drive Asian airlines out of busine

‘It’s survival of the fittest:’ Qantas CEO says coronavirus could drive Asian airlines out of business

The fast-spreading coronavirus could spell the end for the weakest airlines as travel demand dries up in and out of China.
The outbreak, which originated in the Chinese city Wuhan, has claimed 170 lives. Total infections have soared past 7,700 in China, surpassing the country’s official number from the 2003 SARS epidemic. SARS cost the global economy an estimated $40 billion in just six months and led to a 45% plunge in traffic for Asia-Pacific carriers in April that year.
The novel coronavirus hasn’t killed anyone outside China, but infections are spreading faster than SARS and that’s triggering a raft of flight cancellations to and from one of the world’s fastest-growing markets for air travel. For Asia-Pacific carriers, already buffeted by U.S.-China trade tensions and protests in Hong Kong, the new virus is potentially an existential threat, Qantas Airways Ltd. Chief Executive Officer Alan Joyce said.
“A lot of airlines may not be able to keep some of these operations going,” Joyce said in an interview. “It’s survival of the fittest.”
At the height of the SARS outbreak in April 2003, global airline traffic fell 19%, a slump exacerbated by the second Gulf War. Overall in 2003, Asia-Pacific carriers lost $6 billion in revenue and 8% of their passenger traffic, according to the International Air Transport Association. Hong Kong’s Cathay Pacific Airways Ltd. posted a net loss of HK$1.2 billion ($155 million) in the first half of 2003.
Travel demand has boomed in Asia since then, spawning new budget carriers and hundreds of millions of first-time fliers. The number of passengers in the Asia-Pacific region is expected to double to 3.9 billion by 2037, according to IATA. The rush to meet such demand has caused oversupply in some Asian markets, with some airlines losing money or collapsing.
“A lot of them have huge growth and not much profitability,” Joyce said. “Things like this can have an impact on these models.”
Passengers arrive at Heathrow Airport in London after the last British Airways flight from China touched down in the U.K. following an announcement that the airline was suspending all flights to and from mainland China with immediate effect amid the escalating coronavirus crisis. Steve Parsons—PA Images via Getty Images
While it’s unclear what the financial toll of the current outbreak will be, British Airways has already decided to halt flights to Beijing and Shanghai, joining peers from South Korea to Finland that scrapped services to the Chinese mainland. Cathay Pacific, which warned about earnings last year because of the Hong Kong protests, is being hit by this fresh crisis given the size of its China business. Hong Kong’s flag carrier is cutting flights to the mainland by 50% or more to at least the end of March.
Qantas, with services to Shanghai, Beijing and Hong Kong, is prepared to slash international capacity by 20% to get through any slump in demand, Joyce said in an interview. That would match cuts Qantas made during SARS, which cost the airline A$55 million ($37 million).
The Australian carrier previously planned to end its Sydney-Beijing service in March, and will bring that forward if necessary. There’s also scope to reallocate, ground or retire aircraft, Joyce said. Qantas’s domestic business, by far the biggest-earning division, is largely insulated from virus risks, he said.
China last week ordered travel agencies to suspend sales of domestic and international package tours, and will also restrict visits to Hong Kong. Hana Tour Service Inc., South Korea’s biggest tour agency, said 90% of its China packages are being canceled.
Even with some 50 million people quarantined near the outbreak’s center, cases are mounting. Budget carriers, which rely heavily on leisure travel demand, have been hit the hardest from the travel restrictions. Of those that have announced flight suspensions, half of them are low-cost carriers.
“Airlines are starting to suffer,” said Shukor Yusof, founder of aviation consulting firm Endau Analytics in Malaysia. “Losses could reach multi-billion dollars. This could be as big as SARS or could be even bigger.”
Even before the Wuhan virus, 19 of 51 listed Asian airlines were unprofitable, according to data compiled by Bloomberg. Only six of the carriers, including top-ranked Spring Airlines Co. in China, have profit margins fatter than 10%.
The 15-member Bloomberg Asia Pacific Airlines Index has fallen 9.4% in the past two weeks as coronavirus fears escalated. Tway Air Co., a South Korean budget carrier, has plunged 16%, Cathay Pacific has tumbled 15% and Qantas 7.4%. The Hong Kong shares of Air China Ltd., China Southern Airlines Co. and China Eastern Airlines Co. have fallen more than 17%.
Operating margins at Asia-Pacific airlines in the third quarter of 2019 — before the virus emerged — narrowed to 6.9% from 8% a year earlier, according to IATA. Cash-strapped Hong Kong Airlines Ltd. nearly became a high-profile casualty in December as local authorities threatened to revoke its flying license because of liquidity concerns, while Malaysia is seeking an investor for Malaysia Airlines Bhd., which has been struggling with losses and debt.
“Low-cost carriers are going to be hit the most from this because there aren’t many alternative destinations they can add to make up for the lost China flights,” said Kim Yu-hyuk, an analyst at Hanwha Corp. in Seoul. “People will put off traveling for at least three months before they’re confident things are under control.”
More must-read stories from Fortune:
—Europe may be next in Trump’s trade war offensive
—Berlin’s “ghost” airport might finally open, billions over budget and 8 years late
—The long ocean voyage that helped find the flaws in GPS
—Mysterious GPS outages are wracking the shipping industry
—Into the ‘crucible’: How the government responds when GPS goes down
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-01-30--Japan issues arrest warrants for Carlos Ghosn—and the ex-Green Beret accused of helping him escape

Prosecutors in Tokyo issued a fresh warrant on Thursday for the arrest of ex-Nissan Motor Co. Chairman Carlos Ghosn, who jumped bail and fled the country last month to escape trial for alleged financial crimes.
The Tokyo District Public Prosecutors Office issued the warrant on Ghosn for illegally departing Japan, where the former auto executive was charged with failing to fully report his compensation and using company money for personal gain.
Ghosn, 65, who made his way in a private jet to Lebanon at the end of December, held a news conference the week after he arrived, lashing out at Japan’s prosecutors for what he called a “rigged” criminal justice system. The Justice Ministry has pushed back, issuing government statements and using news conferences and interviews to defend the country.
“Without obtaining permission to travel abroad, suspect Ghosn boarded a private jet at Kansai International Airport at around 11 p.m. on Dec. 29, with the intent of traveling to Lebanon via Turkey, illegally leaving the country,” prosecutors said in the statement.
Prosecutors also issued a warrant for the arrest of American Michael Taylor, 59, a former U.S. Green Beret special forces soldier, and George-Antoine Zayek, 60, a former Christian militia fighter from Lebanon, for allegedly aiding Ghosn’s escape. They are also seeking the arrest of a newly identified suspect thought to have aided Ghosn, Peter Maxwell Taylor, 26.
The three are suspected of helping Ghosn in making his way to a Tokyo hotel, and then to the airport and onto the plane using various methods to prevent him from being detected, prosecutors said in their statement.
Earlier this month, prosecutors also issued an arrest warrant for Carole Ghosn, the fugitive executive’s wife, for allegedly giving false testimony in court last April.
The former Nissan chair is believed to have left Japan apparently concealed in an equipment case aboard a charter jet bound for Turkey en route to Lebanon, where Carlos Ghosn holds citizenship. Ghosn has maintained his innocence and defended his decision to flee Japan, saying that he couldn’t get a fair trial in the country.
More must-read stories from Fortune:
—Europe may be next in Trump’s trade war offensive
—Berlin’s “ghost” airport might finally open, billions over budget and 8 years late
—The long ocean voyage that helped find the flaws in GPS
—Mysterious GPS outages are wracking the shipping industry
—Into the ‘crucible’: How the government responds when GPS goes down
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-01-30--How middle managers can manage up, down, and still get things done

Work Space is a biweekly Q&A column tackling the work challenges that keep you up at night. You can read all columns here.
Welcome to the first edition of Work Space. We’re kicking things off with this especially thoughtful reader question, which touches on many concerns that often come up for managers, and it even acknowledges the role the question-asker may play in the situation.
If you want advice on something you’re navigating at work, send your questions to workspace@fortune.com. Here’s a look at what we’re going to be focusing on in the coming months.
The question has been lightly edited and condensed for clarity.
Q: Every week (or most weeks) my supervisor and I have an informal (read: no agenda) touch-base, during which we review open projects and discuss new work requests he has. I pride myself on managing priorities and expectations, and, often, the “pet projects” of my supervisor are requests I have to diplomatically negotiate their place in the queue; my supervisor doesn’t always recognize what is and isn’t pressing.
I recently hired a direct report, who—I am proud to say—is doing quite well: She is smart, skilled, personable, and very well liked. My supervisor has suggested she sit in for our weekly meetings. I am hesitant about this because I work hard to filter her from nonsense, unimportant work, and the general “dirty laundry” of our company, and these meetings usually contain one or all of the above.
My fear is her genuine “can-do,” eager-to-please spirit might lead to insignificant projects clogging our productivity pipeline. I realize that, on the surface, this conundrum points to my fear of losing control of the chain of communication and chain of command.
How do I handle this in a way that preserves my role as an effective project manager with a knack for strategic filtration that regularly benefits the business interests (whether or not anyone realizes it)?
—Jay
Dear Jay,
As a manager who often has to find a balance between what people are excited about and what can actually be done, I totally empathize. At the heart of your question are a number of challenges that frequently come up for middle managers:
How do I keep my boss on track?
How do I protect my staff?
While I’m managing everyone, how do I actually get things done, namely the things that I know we should be doing?
It’s great that you’re self-aware enough to notice that your question is in part grounded in your own fear of losing control. There’s another dynamic at play here too: In your quest to protect your priorities, you’ve taken on a lot personally. With all the navigating you’ve been doing—around both personalities and projects—you’ve been managing a lot of things on your own.
Actively manage your coworkers. Take some of the energy you’ve been using to keep your boss and your direct report apart and start focusing on managing them in new ways. Own your role as both a manager and project manager. If you’re a little more transparent and proactive with both your boss and direct report, you’ll help keep them on track and give them space to share ideas in a more productive way.
Trust your direct report more. It’s noble that you want to protect your direct report from mess. The thing is work, like people, can sometimes be messy. There’s only so much you can do to control that. Your direct report shouldn’t know everything all of the time about all the mess. You do have a responsibility to shield her from some things. At the same time, you want to be sure that as you seek to protect her, you don’t freeze her out of all conversations. The best thing you can do for her is set expectations about her role.
There’s a Gallup report from a few years ago that surveyed over 7,000 adults and found that—surprise—in order for people to do well at work, they need to know what they are expected to do. “Clarity of expectations is perhaps the most basic of employee needs and is vital to performance,” the report says. “Great managers don’t just tell employees what’s expected of them and leave it at that; they frequently talk with employees about their responsibilities and progress.” Communicating when and how it’s appropriate for her to weigh in is crucial, and it will make you a better manager.
As you invite your direct report in, whether to these meetings or other business, here are some tactics you might use:
Before: Take a few minutes before the meeting to get on the same page. Share the agenda in advance so she knows what’s important. Set an expectation that you’d like to be the one committing to what your team takes on and when it’s a priority. Be sensitive in your phrasing if you’re going to ask a woman to not speak up at different points in a meeting. Use “we” whenever possible: “This is a meeting where we usually just listen and chime in if needed.”
During: Echo and support her when she weighs in, and when you raise things that she’s brought up with you separately, give her credit for her ideas.
Echo and support her when she weighs in, and when you raise things that she’s brought up with you separately, give her credit for her ideas. After: In your own one-on-one time with your direct report, reinforce the priorities you’re working on, while showing how you can tie new information from the meeting into what you’re working on. Encourage your report to share ideas with you. You’ll be able to give her private feedback, can connect her work to your priorities, and you’ll be ready to support her good ideas in front of the boss.
It’s important to not inadvertently discredit your boss or other colleagues. Just reinforce that it’s about being on the same page and having the leverage to advocate for your team’s work.
Reframe your relationship with your boss. Work with both your boss and your direct report instead of working around them. Be more open with your boss about how you’re managing your report and how that impacts the time you spend with him. Let him know that you want to support your smart and skilled direct report, while you’re also sensitive to managing her workload. It’s great for your boss to know that you are working to give her opportunities and also, you are worried that her can-do attitude is going to result in her taking on more than she’s ready for at this time. Part of your job in the middle is to show him that he can support you by trusting you to manage her and her time. (If you’re looking for more insights about managing from your position, you might like The Middles, an insightful newsletter by Kim Bui that explores challenges specific to project managers and others managing in the middle.)
Consider what you need from your weekly meeting. If you need to discuss things your boss will agree are private matters your report can’t be privy to—payroll, vendor issues, and so on—you might invite her to project-based meetings instead of your weekly. Or suggest that the first weekly meeting of the month is for recurring sensitive issues, and she can join other meetings. By identifying what’s important to you about your one-on-one meetings with your supervisor, you give him another opportunity to support you as a manager.
Take control of your meetings. My number one please-if-you-do-one-thing-from-this-advice-column-do-this-one-thing is take this time to address these ambiguous meetings. You’re doing tons of work outside of meetings to keep things on track. The fact that your boss brought it up gives you a perfect opportunity to share your own ideas about how you’d like meetings to change. Use meetings—whether these meetings or a new meeting structure—to test some new ways of working with your coworkers. Tell your boss that his suggestion got you thinking about how you could make the meetings more valuable for everyone. Propose to experiment over the next couple of months with some small changes. This gives you both a precedent to check in on what’s working and a chance to share what you value in the meetings.
Agendas get things done. Bring an agenda to every meeting. It sounds small, but it’s a major shift to your approach. It gives you an opportunity to set priorities and a guide to keep everyone on track. Imagine how it might feel to know what’s going to come up in those meetings every week, before the meeting starts. Whether you draft the agenda in advance, contribute to it together at the start of the meeting, or ask your boss to send you a quick email with what he wants to address, I guarantee having an agenda will help rein in these meetings. Check out Ask a Manager’s stellar rules for making meetings useful for your team, which include some of my favorite moves.
By taking a more active role in setting the tone of the weekly meetings, you’re going to find that you’re more in control of what the team is focused on. By adding some structure, you can better understand how and when someone new can join a meeting without throwing a wrench in your well-laid plans to be productive.
Trust yourself. If you bring someone else into these meetings, they might get messier. They also have the potential to get even more productive as you demonstrate your leadership and project management skills. Trust that you will still be great at managing priorities and expectations even when people see more of the mess. You may be surprised to find out that when your boss or your direct report knows a little bit more about what you’re dealing with, you might not have to shoulder so much of it (and the work of hiding it) on your own.
Sending you good vibes,
Jen
More must-read stories from Fortune:
—How to succeed in your January job hunt
—Why this 20-year-old Bosch apprentice chose to work first and get a degree later
—How to (finally) ask for a raise at work this year
—A.I. is transforming the job interview—and everything after
—The World’s Most Admired Companies in 2020
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fortune--2020-02-05--Biden’s poor Iowa caucus result could spell trouble for his campaign as nomination push heats up

Global markets roar back—too soon to call this the ‘ coronavirus comeback ’ ?

Joe Biden’s third presidential bid enters a critical stretch after a disappointing finish in the Iowa caucuses sent the former vice president on to New Hampshire with a skittish donor base, low cash reserves and the looming threat of billionaire rival Michael Bloomberg and his unlimited personal wealth.
In New Hampshire on Tuesday, Biden insisted he had a “good night” in Iowa even as he trailed the top moderate candidate, former Mayor Pete Buttigieg of South Bend, Indiana, and the leading progressive, Bernie Sanders, according to initial returns from 71% of precincts. Biden was running fourth, close to Minnesota Sen. Amy Klobuchar, who just days ago polled in single digits.
That leaves some establishment Democrats, including some Biden supporters, questioning his contention that he’ll reclaim clear front-runner status in the race against President Donald Trump once the primary fight moves beyond overwhelmingly white Iowa and New Hampshire to more racially diverse electorates. And it’s a reminder of how Biden’s previous presidential campaigns never advanced beyond Iowa.
“If he came in fourth, yeah, that could hurt,” said Bill Freeman, a Biden donor from Nashville, Tennessee, who added that he hadn’t even considered such a possibility heading into Monday’s caucuses. “That’s a bad night, no matter how you spin it.”
Most precarious for Biden: Some of the would-be donors he could win over with a strong showing are giving new looks to Bloomberg, the former New York City mayor whose entire strategy of sitting out the four early nominating states is pegged to the possibility that Biden falters. Bloomberg, one of the world’s wealthiest men with a net worth approaching $60 billion, isn’t asking for money. He’s simply looking for support that could cut off financial lifelines to Biden, whose campaign reported just $9 million cash on hand to start the year.
That’s patronage Biden needs to remain competitive with Buttigieg, as well as Sen. Elizabeth Warren and Sanders, who have raised massive sums from small-dollar online contributors who have been far less generous to Biden.
Alex Sink, a Democratic donor who hosted Hillary Clinton in the 2016 race, said many donors are holding back, waiting to see how Biden does. They are also keeping an open mind about Bloomberg, whose campaign asked Sink last week to attend an event in Tampa.
“I was anxious to do it because, like so many others, I’m curious and interested and worried about who our candidate will be and how we are going to beat Trump,” she said. “Most of my friends don’t know yet who they are voting for.”
Biden aides have said for months that he didn’t have to win in Iowa or on Feb. 11 in New Hampshire because he was better positioned in Nevada’s Feb. 22 caucuses, South Carolina’s Feb. 29 primary and a slate of March 3 primaries with more than a third of Democrats’ national delegates at stake on a single day.
That never meant, however, that Biden could sustain a bad showing in Iowa and New Hampshire. The approach was also an expensive one, requiring deep campaign reserves to finance advertising and staffing in Nevada, South Carolina and delegate-rich states like California and Texas.
Biden has a campaign footprint across the March primary map, with paid staff or volunteer offices in 13 states. But his cash flow raises questions about how much he can bolster his existing operation. His uneasy financial situation is underscored by an affiliated super PAC that spent more on Iowa ads than the campaign itself, but still has struggled to raise money and has little left over after Iowa.
“Will he have as much money as Bernie Sanders? Probably no. But it doesn’t matter — all you need is enough gas to finish the race,” said John Morgan, a Florida plaintiffs attorney and one of Biden’s top fundraisers.
Freeman and Morgan agreed that Biden needs to finish in the top 3 in New Hampshire and ideally as the top moderate. That reflects what had been the quiet hope of Biden’s team heading into Monday’s caucuses. They didn’t necessarily expect to win outright. But they hoped that they could emerge from Iowa as the clear alternative to Sanders, a democratic socialist and leader of the left’s progressive base.
An effectively two-person race between Sanders and the former vice president, Biden confidants believed, would open the financial spigot, firm up his advantages among nonwhite voters and win over skeptical white moderates now aligned with Buttigieg or Klobuchar.
“That’s my conversation with people: If Bernie Sanders is the nominee, would you vote for him?” Morgan said. “If not, then back Joe.”
Biden took the same approach Tuesday on the campaign trail, hammering Sanders as directly as he has in weeks. “It’s time to get real about health care,” he said as he compared his proposal to expand existing insurance markets with a “public option” to Sanders’ “Medicare for All” idea. Sanders has been pushing single-payer insurance for “30 years now,” Biden said, and ”hasn’t moved it an inch.”
The problem, Freeman said, is that a lackluster start in Iowa makes the Biden-Sanders juxtaposition a much harder sell. “I don’t think any of those conversations are happening today” with potential new donors, he said.
Still, Buttigieg and Klobuchar have their own challenges if they hope to displace Biden as the presumed establishment favorite. They both have negligible nonwhite support, and Klobuchar especially has far more financial obstacles than Biden.
Clay Middleton, a South Carolina Democrat who worked for Clinton in 2016 and Cory Booker’s now-suspended campaign this presidential cycle, said that Iowa doesn’t have to bury Biden but that he and every other candidate faces a delicate path trying to amass delegates going forward.
“The conditions are not the same now,” Middleton said, referring to when Biden dropped his 2008 bid after Barack Obama won the 2008 caucuses. “But again, does he have infrastructure in South Carolina to win four out of the seven congressional districts, and does he have the infrastructure in Virginia, North Carolina, Alabama, Arkansas, as part of his Super Tuesday strategy? That’s the real test.”
More must-read stories from Fortune:
—2020 candidates’ positions, and records, on economic issues that affect women
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—Europe’s refugee crisis is getting worse—for these children
—Fortune Explains: The debt ceiling
—Millions have been purged from voter rolls—and may not even realize it
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fortune--2020-02-05--Security experts warn of vulnerability in Philips Hue smart lights

Biden ’ s poor Iowa caucus result could spell trouble for his campaign as nomination push heats up

Researchers are warning about a newly found vulnerability in the Philips Hue smart light system that could give hackers access to the home (or office) networks of users.
Check Point Research discovered the flaw, which would allow cybercriminals to gain entry from over 100 meters away using only a laptop and an antenna. The vulnerabilities were found in the system’s communications protocol. Philips has issued a patch for the vulnerability.
The flaw was specific to Philips devices, but was associated with the Zigbee protocol, which acts as a translator, of sorts, between smart devices, ensuring they work with other smart hubs. (For instance, Zigbee allows Amazon’s Echo to control Philips Hue lights.)
Check Point did not single out any other smart devices that were currently vulnerable.
“Many of us are aware that IoT devices can pose a security risk, but this research shows how even the most mundane, seemingly ‘dumb’ devices such as lightbulbs can be exploited by hackers and used to take over networks, or plant malware,” said Yaniv Balmas, head of cyber research at Check Point in a statement.
Researchers are urging Philips Hue users to ensure their devices have the latest patches and keep an eye out for unusual behavior of their IoT and smart devices.
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—What you need to know about new IBM CEO Arvind Krishna
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—How marketers are increasingly using A.I. to persuade you to buy
—Predicting the biggest tech headlines of 2020
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-02-05--Buttigieg slightly leading Sanders with 71% of Iowa results reported

The Iowa Democratic Party released partial results of its kickoff presidential caucus after a daylong delay late Tuesday showing former Midwestern mayor Pete Buttigieg with a slight lead over progressive Vermont Sen. Bernie Sanders in the opening contest of the party’s 2020 primary season.
The results followed 24 hours of chaos as technical problems marred the complicated caucus process, forcing state officials to apologize and raising questions about Iowa’s traditional place atop the presidential primary calendar.
It was too early to call a winner based on the initial results, but Massachusetts Sen. Elizabeth Warren, former Vice President Joe Biden and Minnesota Sen. Amy Klobuchar were trailing in the tally of State Delegate Equivalents, according to data released for the first time by the Iowa Democratic Party nearly 24 hours after voting concluded.
The results reflected 71% of precincts in the state.
The two early leaders, Buttigieg and Sanders, were separated by 40 years in age, conflicting ideology and more.
Sanders, a 78-year-old self-described democratic socialist, has been a progressive powerhouse for decades, while the 38-year-old Buttigieg’s early standing cemented his transformation from a little-known Indiana mayor to a legitimate force in the 2020 contest. Buttigieg is also the first openly gay candidate to earn presidential primary delegates.
“We don’t know all of the numbers, but we know this much: A campaign that started a year ago with four staff members, no name recognition, no money, just a big idea — a campaign that some said should have no business even making this attempt — has taken its place at the front of this race,” Buttigieg, declared, his voice filled with emotion, as he campaigned in next-up New Hampshire with his husband looking on.
Buttigieg’s early rise was rivaled for possible importance by the struggle of another moderate, Biden.
One of his party’s most accomplished figures, the former two-term vice president and longtime senator was mired in the second tier of Iowa candidates with almost two-thirds of precincts reporting. Biden’s campaign sought to downplay the caucus results even before they were released, hardly a measure of strength for a high-profile contender who has led national polls for most of the last year.
“We believe we will emerge with the delegates we need to continue on our path to nomination,” said Symone Sanders, a senior adviser.
While all campaigns were eager to spin the Iowa results to their advantage, there was little immediate indication that the incomplete results erased the confusion and concern that loomed over the caucuses. It was unclear when the full results would be released.
During a private conference call with campaigns earlier in the day, state state party chairman Troy Price declined to answer pointed questions about the timeline — even whether it would be days or weeks.
“We have been working day and night to make sure these results are accurate,” Price said at a subsequent press conference.
The leading candidates pressed on in New Hampshire, which votes in just seven days. And billionaire Democrat Michael Bloomberg sensed opportunity, saying he would double his already massive advertising campaign and expand his sprawling staff focused on a series of delegate-rich states voting next month.
The party’s caucus crisis was an embarrassing twist after months of promoting Iowa as a chance for Democrats to find some clarity in a jumbled field. Instead, after a buildup that featured seven rounds of debates, nearly $1 billion spent nationwide and a year of political jockeying, caucus day ended with no winner, no official results and many fresh questions about whether Iowa can retain its coveted “first” status.
Iowa marked the first contest in a primary season that will span all 50 states and several U.S. territories, ending at the party’s national convention in July.
Before he left Iowa late Monday, Sanders said, “Today marks the beginning of the end for Donald Trump.”
Facing New Hampshire voters a day later, Sanders said thank you to Iowa and, tongue in cheek, expressed confidence that New Hampshire election officials would have more success counting votes.
“And when you count those votes, I look forward to winning here,” he said.
For the first time, the Iowa Democratic Party reported three sets of results this year: a tally of caucusgoers’ initial candidate preference; vote totals from the “final alignment” after supporters of lower-ranking candidates were able to make a second choice, and the total number of State Delegate Equivalents each candidate received.
The Associated Press will declare a winner based on the number of state delegates each candidate wins, which has been the traditional standard.
Sen. Amy Klobuchar, who represents Iowa neighbor Minnesota, was also in the early running, while outsider candidates including entrepreneur Andrew Yang, billionaire activist Tom Steyer and Hawaii Rep. Tulsi Gabbard lagged behind.
Campaigning in New Hampshire on Tuesday, Warren also said she was “feeling good” about her performance in Iowa.
The state party told campaigns Tuesday the problem was a result of a “coding issue in the reporting system” that it said had since been fixed. It said it had verified the accuracy of the collected data and said the problem was not a result of “a hack or an intrusion.”
A Biden campaign representative objected to the party’s plan to release partial results before checking them against paper records, saying in the conference call that the plan didn’t address “growing reports” about problems on caucus night, such as precinct captains unable to get through on the phone to report results.
Sanders adviser Jeff Weaver thanked party officials, and encouraged other campaigns not to undermine the party.
“Folks who are just trying to delay the return of this because of their relative positioning in the results last night, I think that’s a bit disingenuous,” Weaver said.
Bloomberg announced plans to double his national television advertising spending — which has already exceeded $100 million — as he expands his paid staff to more than 2,000 people.
Bloomberg is looking to next month, having decided to bypass Iowa’s contest and the three other states voting this month in favor of the delegate-rich states in March.
“After more than a year of this primary, the field is as unsettled as ever,” Bloomberg spokeswoman Sabrina Singh said. “No one has made the sale or even come close to it.”
Beyond 2020, Monday’s debacle invited fresh criticism about Iowa caucuses, a complicated set of political meetings staged in a state that is whiter and older than the Democratic Party in general. Many questioned anew whether it was a quaint political tradition whose time had passed.
“I think Iowa is a dumpster fire,” said Dick Harpootlian, a South Carolina state senator and longtime Biden supporter, who served as an Iowa precinct captain for Biden on Monday.


fortune--2020-02-05--Global markets roar back—too soon to call this the ‘coronavirus comeback’?

This is the web version of the Bull Sheet, Fortune’s no-BS daily newsletter on the markets. Sign up to receive it in your inbox here.
Good morning. The coronavirus outbreak is nowhere near peaking—the infection (24,324) and death (490) rates continue to climb—but the markets in Asia and Europe are unfazed this morning. The major indices are all in positive territory (and, as I write, climbing), as are U.S. futures.
Some of the momentum overseas today is a carry-over from Tuesday’s market gains in the States. You were no doubt pleased to see these numbers yesterday: the Dow (up 408 points), S&P 500 and Nasdaq (up 2.1%) all had impressive runs, and that looks set to continue at the open today.
There are a couple factors giving these markets a jolt of momentum. Investors seem reassured China will step in again and again and again with stimulus and generous policy moves to blunt the worst impacts of the contagion. And, there have been some standout earnings calls—Disney in the U.S. yesterday, BNP Paribas (a European bank!) this morning— to remind us we’re not falling off a cliff. And, oh yeah, there’s Tesla.
Shares in the electric-carmaker are up 36% so far this week, and more than 100% for the year. To repeat: year-to-date. The Tesla share price performance in recent weeks is beginning to resemble a SpaceX rocket launch diagram. To all those Tesla shorts out there, you may want to look away from this next Tweet comparing Tesla’s early 2020 stock run to that of Bitcoin in 2017.
Call it a comeback?
Let’s take a wayyyy-too-early look at how the Dow, S&P 500 and Nasdaq have fared since January 17, the day Chinese officials went public with news the coronavirus contagion was becoming a major health threat.
After yesterday’s gains, the Nasdaq is trading above pre-outbreak levels while the S&P is close to regaining all the ground it lost over the past two-and-a-half weeks. The Dow, meanwhile, is once again flirting with 29,000.
***
To steal (and twist) a line from President Trump’s State of the Union Address last night, is this the start of the great markets comeback?
A lot of CEOs would say, not so fast.
Supply chains have been fundamentally disrupted by coronavirus. Shops and factories remain shut in China. Travel in the region has come to a halt. And 2020 forecasts in sectors from beer to sportswear are in jeopardy.
If the SARS outbreak of 2003 can offer us any guidance, it’s that the road down won’t be a straight one, and the road up will take some time to emerge.
Back in 2003, the China markets lurched down, then up, then down again for a 10-week span before reaching bottom. We’re not even three weeks into the coronavirus crisis. The peak looks a long way off from where I sit.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
Today's reads
Recovery in view? Investors cheered results from Deutsche Bank last week, latching on to hopes of a turnaround despite Germany’s biggest bank notching up a whopping net loss of $5.9 billion in 2019, its fifth straight annual loss. Deutsche Bank shares, already the best performing stock in the sector in Europe this year, jumped by another 4.3% after the results to a 14-month high. Our Geoffrey Smith asks whether the improvement which Deutsche’s Chief Executive Christian Sewing boasted of is real, or just a mirage?
Ford stalls. Ford Motor Co’s shares plunged nearly 10% in after-hours trading yesterday. The culprit: a profit forecast well below analysts’ estimates, an ominous sign that Chief Executive Officer Jim Hackett’s $11 billion turnaround plan may take longer to pay off, Bloomberg reports. Ford faces high costs this year as it rolls out a new version of its most profitable vehicle, the F-150 pickup, and the electric Mustang Mach-E, and revives the Bronco sport-utility vehicle in 2021. The company is also pouring billions into self-driving cars, while trying to turn around its money-losing overseas operations.
Baby Yoda boost. Walt Disney Co made a strong entrance into the streaming video wars dominated by Netflix, helped by Baby Yoda, Reuters reported. The new streaming service, Disney+, reached 28.6 million paying subscribers this week, crushing Wall Street forecasts. Disney Chief Executive Bob Iger said the service did not suffer significant cancellations after the end of “The Mandalorian,” a “Star Wars” series that became a cultural phenomenon thanks to a character nicknamed “Baby Yoda.”
Market candy
Egg on your face. Who knew egg futures were such an exciting market? The coronavirus outbreak has hatched a bout of speculative frenzy in the under-reported Chinese egg futures market. Investors in Chinese egg futures, the only derivative of its kind in the world, are betting the country’s move to limit transport will lead to tighter supplies later this year, Bloomberg reports. Futures for September delivery jumped as much as 6.8% on the Dalian Commodity Exchange on Tuesday, while the contract for shipment in May slid.


fortune--2020-02-05--Fixing the credit card business

Fixing the credit card business

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Good morning.
Max Levchin, founder and CEO of Affirm, stopped by Fortune’s downtown Manhattan offices this week. I’ll get back to Affirm in a bit. But first, it’s worth noting that Levchin is part of the renowned Paypal Mafia—Silicon Valley’s most illustrious alumni group, made famous by this photo and story in Fortune in 2007. The Mafiosi include, among others, Levchin, Reid Hoffman, Peter Thiel, Jeremy Stoppelman, and Elon Musk—although Musk, in classic style, refused to sit for the Fortune photo. (No, we don’t hold a grudge.) The group has had a hand in starting a pantheon of tech upstarts, including Tesla, LinkedIn, Palantir, SpaceX, YouTube, Yelp and Yammer. Six of them have become billionaires.
As for Affirm—well, it’s Levchin’s effort to fix the credit card business. And that business could use a fix. High interest rates and late fees make credit cards abusive to many low-income borrowers. Affirm partners with stores—Walmart is the largest example—to offer credit at the point of purchase. It uses its own credit scoring system, bypassing the FICO monopoly. And it eschews late fees, deferred interest and punitive rates.
Many credit cards “are no different than payday loans,” Levchin says. By giving up on abusive practices, Levchin admits Affirm is “actively leaving money on the table… But we live at a unique time where that is the right practice. If you want to run a company for the long term, you have to” look after the borrower. With the grand ambition typical of the PayPal posse, he believes Affirm will eventually force credit card companies to change their business models.
More news below, including Macau’s decision to shut down its casinos as of midnight last night.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
Coronavirus update
The coronavirus death toll is nearing 500, but Asian shares continue to recover from Monday's precipitous drop. Macau has decided to shutter its casinos for at least 15 days—no easy decision to make, given that they represent more than half the island's GDP. Meanwhile, widespread restaurant and club closures across China are giving Western brewers a headache. And Hong Kong flag carrier Cathay Pacific has asked staff to take three weeks' unpaid leave, due to low demand. Fortune
eBay bid
Intercontinental Exchange, the company that runs the New York Stock Exchange, has reportedly offered to buy eBay at a valuation of more than $30 billion. There are apparently no formal talks yet, but ICE has approached eBay at least twice. However, ICE says eBay has not yet "engaged in a meaningful way." Wall Street Journal
Vaping fallout
The vaping crackdown has led Imperial Brands, the company behind Davidoff and Gauloises Blondes cigarettes, to slash its profit forecast by $52 million and write down its stocks at a cost of $59 million. CEO Alison Cooper stepped down with immediate effect—her successor, Stefan Bomhard, was named a couple days ago. CityAM
Vision Fund
Michael Ronen has stepped down as the managing partner for U.S. investments at SoftBank's $100 billion Vision Fund. The U.S. executive expressed concerns about "issues" at the fund, which has recently received a few black eyes through lackluster investments such as WeWork. Financial Times
AROUND THE WATER COOLER
Vodafone and Huawei
Vodafone is to spend around $220 million over the next five years to rip out the Huawei equipment in its European core network. The telco's decision follows policy decisions in the U.K. and the EU, both of which want to see Huawei excluded from the most sensitive parts of telecoms networks. Reuters
Saudis and Tesla
Saudi Arabia's sovereign wealth fund sold almost all of its 8.2 million Tesla shares as the electric-car firm went on the ascendant in Q4 last year. Perhaps not the best timing, as Tesla's share price is now going through the roof. Bloomberg
Musk poll
Speaking of Tesla, Musk took to Twitter to ask his followers whether the company should build a new "gigafactory" in Texas. At the time of writing, nearly 150,000 people had voted in his poll, with almost 80% opting for "Hell yeah" rather than "Nope". Yahoo Finance
U.S. politics
American politics had an interesting day yesterday. The results of the Democratic Iowa caucus started to come through—Sanders and Buttegieg so far appear to be in the lead, with Warren snapping at their heels—and President Trump's State of the Union address was marked by the president apparently refusing to shake Nancy Pelosi's hand, and Pelosi then ripping up her copy of the speech. Today: Trump's near-certain acquittal in his Senate impeachment trial. CNN
This edition of CEO Daily was edited by David Meyer.


fortune--2020-02-05--China wants to patent Gilead’s promising coronavirus treatment

China has applied for a new patent on an experimental Gilead Sciences Inc. drug that its scientists believe might fight the coronavirus.
It has applied for a patent for the use of the drug, know as remdesivir, to treat the novel coronavirus. The move is a sign that China views Gilead’s therapy as one of the most promising candidates to fight the outbreak that has now claimed almost 500 lives. A patent battle may affect Gilead’s control over the drug in China.
While Gilead’s experimental drug isn’t licensed or approved anywhere in the world, it is being rushed into human trials in China on coronavirus patients after showing early signs of being highly effective.
The patent application was made on Jan. 21, according to a statement posted on the website of the virology institute in Wuhan, the central Chinese city at the epicenter of the epidemic. Scientists there have found Gilead’s remdesivir, and chloroquine, an 80-year-old malaria drug, “highly effective” in laboratory studies at thwarting the novel coronavirus, they said Tuesday in a paper in the journal Cell Research. The two drugs’ efficacies on humans required further clinical tests, the institute said in the statement.
China is capable of manufacturing chloroquine and now wants access to remdesivir. It is not clear if or when China’s intellectual property authorities will approve the institute’s application.
Gilead’s experimental drug is at present entering clinical trials in China on patients with the novel coronavirus. The company is shipping enough doses to treat 500 patients and is ramping up supply in case the clinical trials work.
Remdesivir is being tested in two trials in China in patients with moderate and severe symptoms of the novel pathogen, said Merdad Parsey, Gilead’s chief medical officer.
The Wuhan institute said in its statement that it made the patent application out of national interest, and won’t exercise its patent rights if foreign pharmaceutical firms work together with China to curb the contagion.


fortune--2020-02-05--Vacation becomes prison as Hong Kong and Japan quarantine thousands of cruise ship passengers

Luxury Asian vacations turned into a form of confinement for thousands of cruise passengers when authorities in Hong Kong and Japan said they would quarantine those aboard for up to two weeks after finding coronavirus infections aboard.
The developments will come as a blow to Princess Cruises, the operator of a vessel that is being quarantined off Yokohama, and to Dream Cruise, which manages the ship being held off Hong Kong.
Ten people on the Diamond Princess, which has about 3,700 crew and passengers aboard, have tested positive for the new coronavirus and been taken to hospital, Japan’s Health Ministry said. The ship had been moored off Yokohama and moved further out to sea Wednesday, tracking data showed.
A total of 273 people on the Diamond Princess are to be tested. The 10 positive tests were found among 31 tests whose results have already come through, the Japanese ministry said. All passengers and crew will be required to stay aboard apart from those who are hospitalized, and passengers will be asked to stay in their rooms.
“Checking the health of the passengers and crew is our priority, while we will also do all possible to prevent any spread of the infection,” Prime Minister Shinzo Abe told parliament. “The remaining passengers and crew will not be allowed to come ashore for the time being.”
A similar number of people are under quarantine aboard the World Dream after three people infected with coronavirus were found to have been passengers, Hong Kong authorities said. The novel coronavirus first emerged in China’s Hubei province weeks ago, and more than 20,600 cases have now been reported.
A male Twitter user in his 30s, who says he is a passenger on the Diamond Princess, has been posting photos and videos purported to be from the inside that include an image of health authorities in protective gear walking gold-carpeted hallways.
I’d like to share what it’s like on board the Diamond Princess cruise. Please use this page to exchange info. #DiamondPrincess #coronavirus pic.twitter.com/wRLdy63suj — だぁ(On board the Diamond Princess / 乗船中) (@daxa_tw) February 5, 2020
No Zumba
“It’s so ironic that the schedule is packed with events until the evening,” he said in a tweet Tuesday night, posting a photo of what would have been the schedule for the next day. A Zumba dance-exercise class was scheduled for 9:30 a.m., along with Japanese language class at 1:45 p.m., bingo at 4:00 p.m., and ballroom dancing at 8:45 p.m.
However, passengers were told to wait in their rooms Wednesday morning, he said in a direct message to Bloomberg, asking to remain anonymous. Breakfast was served to each room by the staff wearing masks, he tweeted.
Checks were conducted on the Diamond Princess after a passenger from Hong Kong who had been on the ship last month tested positive for the virus.
About half the passengers aboard the Diamond Princess are Japanese and those infected include two passengers from Australia, three from Japan, three from Hong Kong, one from the U.S. and a crew member from the Philippines, the ship’s operator said.
The infections aboard the ships come as 23 people were, separately, already confirmed to have contracted the disease in Japan.
Princess Cruises, part of Carnival Corp., said the Diamond Princess would go out to sea before docking at Yokohama to take on provisions. Two cruises that had been scheduled to depart the Japanese city Feb. 4 and 12 have been canceled, the company said.
“Princess Cruises will continue to fully cooperate with and follow the instructions of global medical authorities and the Japanese government,” the company said in a statement.
Editor’s note: This story and its headline were updated on Feb. 5 at 5 a.m. ET.
More must-read stories from Fortune:
—Coronavirus forces China’s neighbors to make tough choices
—Asia worries about big events like the Olympics amid coronavirus spread
—China will struggle to spend its way out of the coronavirus economic slowdown
—On facial recognition, Berlin and London choose different paths
—Fortune Explains: Tariffs and trade wars
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-02-05--Fact checking Trump’s claims in his State of the Union address

President Donald Trump’s portrayal of American renewal Tuesday drew on falsehoods about American energy supremacy and the economy as well as distortions about his predecessor’s record.
Manufacturing
TRUMP: “We are restoring our nation’s manufacturing might, even though predictions were that this could never be done. After losing 60,000 factories under the previous two administrations, America has now gained 12,000 new factories under my administration.”
THE FACTS: Not quite.
Manufacturing has slumped in the past year, after having advanced in the prior two years. The president’s tariffs regime and slower growth worldwide hurt the sector in ways that suggest that Trump’s policies robbed it of some of its previous strength.
Factory output fell 1.3% over the past 12 months, according to the Federal Reserve. Manufacturing job gains went from more than 260,000 at the end of 2018 to a paltry 46,000 for the 12 months ended in December, according to the Labor Department. Manufacturers lost jobs last year in Michigan, Ohio, Pennsylvania and Wisconsin — the older industrial states where Trump had promised a renaissance.
___
Jobs and economy
TRUMP: “In eight years under the last administration, over 300,000 working-age people dropped out of the workforce. In just three years of my Administration, 3.5 million working-age people have joined the workforce.”
THE FACTS: Trump is being misleading with numbers to tarnish his predecessor’s record. It’s not clear what he means by “working-age.” But the total size of the U.S. labor force shows that the president is just wrong.
During the eight years of Barack Obama’s presidency, the labor force rose by 5.06 million, according to the Labor Department. The improvement reflected a rebounding economy from the Great Recession and population growth.
As the unemployment rate has fallen, more people are finding it attractive to work and joining the labor force. This has enabled the labor force to climb by an impressive 4.86 million in just three years under Trump.
___
TRUMP: “From the instant I took office, I moved rapidly to revive the U.S. economy — slashing a record number of job killing-regulations, enacting historic and record-setting tax cuts, and fighting for fair and reciprocal trade agreements.
THE FACTS: The U.S. economy indeed is healthy, but it’s had plenty of hiccups during the Trump administration.
Trump never quite managed to achieve the liftoff he promised during the 2016 election. Instead, gains have largely followed along the same lines of an expansion that started more than a decade ago under Obama.
Total economic growth last year was 2.3%. That is roughly in line with the average gains achieved after the Great Recession — and a far cry from growth of as much 3%, 4% or more that Trump told voters he could deliver.
The tax cuts did temporarily boost growth in 2018 as deficit spending increased. But the administration claimed its tax plan would increase business investment in way that could fuel lasting growth. For the past three quarters, business investment has instead declined.
It’s too soon to judge the impact of the updated trade agreement with Mexico and Canada as well as the pact with China. But Trump premised his economic policy on wiping out the trade gap. Instead, the trade deficit has worsened under Trump.
___
Oil and gas
TRUMP: “Thanks to our bold regulatory reduction campaign, the United States has become the number one producer of oil and natural gas, anywhere in the world, by far.”
THE FACTS: Trump is taking credit for a U.S. oil and gas production boom that started under Obama. The U.S. Energy Information Administration says the U.S. has been the world’s top natural gas producer since 2009, top petroleum hydrocarbon producer since 2013, and top crude oil producer since 2018.
That’s owing to a U.S. shale boom that has driven production up since 2011, not to deregulation or any other new effort by the Trump administration.
___
Health care
TRUMP: “We will always protect patients with preexisting conditions.”
THE FACTS: That’s a promise, not a guarantee.
The Trump administration is backing a lawsuit by conservative-led states that would overturn the entire Affordable Care Act, including its guarantees that people cannot be turned down or charged more for health insurance because of preexisting medical problems.
Trump and congressional Republicans have vowed they will protect people with preexisting conditions, but they have not specified how they would do that.
Estimates of how many people could potentially be affected if “Obamacare’s” protections for preexisting conditions are eliminated range from about 54 million working-age adults, in a study last year from the Kaiser Family Foundation, to as many as 133 million people in a 2017 government study that also included children.
More must-read stories from Fortune:
—2020 candidates’ positions, and records, on economic issues that affect women
—Coronavirus forces China’s neighbors to make tough choices
—Europe’s refugee crisis is getting worse—for these children
—Fortune Explains: The debt ceiling
—Millions have been purged from voter rolls—and may not even realize it
Get up to speed on your morning commute with Fortune’s CEO Daily newsletter.


fortune--2020-02-05--What Andreessen’s ‘Bio Fund III’ means for healthcare

This is the web version of Brainstorm Health Daily, Fortune’s daily newsletter on the top health care news. To get it delivered daily to your in-box, sign up here.
Happy Tuesday, readers.
When Andreessen Horowitz pours money into an industry, word tends to get around. So when the venture capital giant pours $750 million into a single sector, you really know that something big is going on.
On Tuesday, Andreessen announced a third iteration of its biopharmaceutical and digital health fund, dubbed simply “Bio Fund III.” The firm used aspirational language to describe its ambitions and promote what is literally a three-quarters of a billion dollar fund.
“Software is now affecting not just how we do not just one thing—cloning DNA, or engineering genes—but how we do it all across the board, blurring lines, breaking down traditional silos, changing our processes and business models,” the company said.
This particular fund, launched four years after Andreessen’s initial bio fund, will focus on early-stage companies at the intersection of healthcare and technology.
What this all means? Let’s look over just some of the underlying trends.
Algorithms are now as important to the drug discovery process as petri dishes; consumer devices are tools of population health research; and the reality of a digitally connected world signals an opportunity for businesses to take advantage of this new paradigm.
So maybe it’s not too surprising that Andreessen is pouring this much cash into the effort—especially since it wants to get in on the ground level when it can.
Read on for the day’s news.
Sy Mukherjee
sayak.mukherjee@fortune.com
@the_sy_guy
DIGITAL HEALTH
Telehealth, for the flu season. Can telehealth help stave off common illnesses like the flu? Michigan-based Spectrum Health believes so, and is encouraging people with flu symptoms to use virtual doctor visits in lieu of going to a hospital. The hope is to stop the spread of illnesses in settings where transmission is just about inevitable. (MLive)
INDICATIONS
Walgreens to pay $7.5 million over phony pharmacist scandal. Pharmacy giant Walgreens will pay a $7.5 million fine over one of the more bizarre medical scandals in recent memory: a Walgreens employee who didn't have a pharmacy license was accused of impersonating a pharmacist and issuing nearly 750,000 prescriptions. The accused, Kim Thien Le, pleaded not guilty to the charges, and Walgreens agreed to settle. (Fortune)
THE BIG PICTURE
Hong Kong health care workers are on strike. As coronavirus woes continue to swell in Asia, thousands of healthcare workers in Hong Kong have gone on strike for a second day. The public sector federation of Hospital Authority Employees Alliance (HAEA) in Hong Kong is demanding a closure of the border with China. The strike encompasses some 10% of public hospital workers in the region. (Fortune)
REQUIRED READING
World's most lucrative gambling hub shuts down over coronavirus, by Eamon Barrett
Data labeling companies work to cash in on the A.I. boom, by Jeremy Kahn
Target and Walmart gain ground in the e-commerce wars, by Lance Lambert
Sign up for other Fortune newsletters.


fortune--2020-02-04--Macy’s to shutter 125 more stores

Macy’s to shutter 125 more stores

Macy’s will shutter another 125 of its namesake department stores as it attempts yet again to turn its business around. The goal: remake itself into a retailer equipped to survive today’s shopping landscape.
The company, which currently operates about 650 stores (including the Bloomingdale’s luxury chain) said on Tuesday that the locations on the chopping block have total annual sales of about $1.4 billion. The stores, which will be closed over the next three years, are in “lower tier malls.” Macy’s will also break from its traditional anchor spot in malls by trying out a concept called Market by Macy’s, which will feature new smaller store formats outside of the shopping centers.
To bolster profits, Macy’s also said it would cut about 2,000 corporate jobs, or 10% of non-store staff. That includes closing its Silicon Valley office and relocating that e-commerce staff to New York. The company is also dropping its dual-headquarters structure, closing its offices in Cincinnati and consolidating in New York, where the bulk of its top leadership works.
Macy’s earned praise for its efforts from Moody’s, which said in a research note that “Macy’s, like its major department store competitors, is working to accelerate change after a weak 2019.”
This is the retailer’s second round of store closures. In 2016, Macy’s shuttered 100 stores. This latest round of cuts is an admission by the U.S. largest remaining department store operator that many of its locations are not up to standard for shoppers today. Many Macy’s stores are poorly maintained, without any of the “fashion authority” look or feel that the company’s executives like to tout.
The news comes as Macy’s reported comparable sales fell about 0.8% in the fiscal year that ended on Saturday, a weak performance in a strong consumer environment. The numbers underscore how the company keeps losing market share: Macy’s rivals like T.J. Maxx, Target, Amazon, and Ulta Beauty have continued to thrive.
Macy’s will present the details of its turnaround plan, dubbed “Polaris,” on Wednesday at the New York Stock Exchange.
Jeff Gennette, Macy’s chief executive, had long defended the idea of having some stores be less spectacular while lavishing much more capital on its 150 best stores like Herald Square in Manhattan. Gennette argued that the weaker locations at least provide Macy’s with a presence in often underserved markets and acted as spokes in its e-commerce infrastructure.
But today, in a press release, the company acknowledged that the weaker stores were of limited value, saying “today’s shopper expects a consistent experience whenever and wherever they encounter Macy’s brand.” Target for one has thrived with a rolling program of store remodels that has led to consistency in the caliber of its stores.
Many of Macy’s problems can be tied to the fact that it is the product of a 2005 merger between Federated Department Stores and May Department Stores, which made it a true national player at a time department stores still tended to be regional.
But the purchase of Marshall Fields in the Midwest angered local shoppers for years, while other acquisitions led to having two Macy’s stores too close together in a given market, at times with very different layouts and looks.
The closings will leave Macy’s with about 500 stores. Bloomingdale’s has 40 stores, while the small-store Bluemercury beauty chain has some 170 locations.
As for the 161-year-old company’s plan to open the smaller Market by Macy’s stores, the rollout will begin Thursday in Dallas in strip centers, where rivals like Ulta, T.J. Maxx, Target, and Kohl’s are typically found. These locations will be about 15,000 square foot in size, about one-eighth the size of a regular Macy’s.
Such stores are no guarantee of success: Kohl’s has shrunk many of its stores yet it continues to struggle thanks to merchandise that doesn’t set it apart from competitors.
Meanwhile, Target has taken much market share away from traditional department stores by successfully launching new brands and retiring old tired ones. Target’s strategy has meant giving up billions in sales, something the likes of Kohl’s, J.C. Penney and Macy’s have been loath to do. Macy’s said on Wednesday it plans to build four $1 billion brands hoping to reignite interest in its products.
The company is also looking to generate more cash from its real estate, with its eye on bringing in $130 million in the new fiscal year by plans including selling off square footage it doesn’t need. (The company generated $1.6 billion from such transactions since 2016.)
Within three years, the company expects the reduced number of stores to bring in between $23.2 billion and $23.9 billion, compared to 2019’s $24.6 billion, suggesting Macy’s plans to be a leaner, nimbler and more profitable store chain.
More must-read stories from Fortune:
—Fortune poll: Target and Walmart gain ground on Amazon
—Global companies enter lockdown mode as coronavirus rocks China
—An imperfect expansion into “sustainable” seafood
—Why Bud Light gave its new hard seltzer the family name
—WATCH: Inside the algorithm powering Stitch Fix
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