fortune--2020-01-31--Coronavirus: The economic effects are looking scarier by the day

The coronavirus is already disrupting the global supply chain , starting with these commodities

This is the web version of CEO Daily. To get it delivered to your inbox, sign up here.
Good morning. David Meyer here in Berlin, filling in for Alan.
The Wuhan coronavirus is now a global health emergency, per the World Health Organization. The body took pains to recommend no travel restrictions, “based on the current information available,” but those words seem to be coming too late.
The U.S. State Department last night warned Americans not to go to China, and to consider leaving if they are there. Italy is also blocking flights to and from China. Many companies have already told their staff not to travel to or from China for now. Concerts are being cancelled, and there are calls for the Art Basel Hong Kong art fair to be scrapped too. The list of airlines that have suspended flights to the country (to varying degrees) now includes 19 names.
The official death toll now stands at 213, all within China’s borders. There are almost 9,100 confirmed infections there—more than the global number of infections during the SARS epidemic—and 130 in other countries, with person-to-person transmissions having taken place in Thailand, Germany, France, the U.S., Vietnam, Japan and Taiwan.
As the WHO’s stance reflects, the situation does not seem likely to improve anytime soon—though the organization did also say that “it is still possible to interrupt virus spread” if countries get their act together. Needless to say, the duration of this crisis will have enormous implications in both human and economic terms.
Economist Andy Xie wrote today in the South China Morning Post that a four-week lockdown in China—the optimist’s scenario—would result in around 2% being shaved off quarterly GDP. Longer crisis, more damage. And all this is coming as U.S. recession warnings resurface in the shape of the by-now-notorious yield curve inversion.
A trivial anecdote that nonetheless hints at the ripple effect we might soon see: Four weeks ago, I ordered a guitar effects pedal from a small manufacturer here in Germany. It still hasn’t arrived—the maker has 70 of the things sitting in his workshop, all built except for the knobs. He gets those from a supplier in China, but the Lunar New Year holiday, extended due to the crisis, has left him empty-handed. So now he’s scrambling to find new suppliers who can deliver.
As I say, a dumb little story on its own. But let’s see where the cumulative effect of this crisis ends up.
More news below. And let me also note that, on this Brexit Day, I feel great sadness—along with other British citizens, I will this evening lose my EU citizenship. As I wrote yesterday, little will change immediately, because of the transition period that runs through the rest of 2020. But today nonetheless carries enormous weight, symbolically and emotionally. I can only hope that the U.K., which now ventures out on its own into a very uncertain global landscape, does indeed find prosperity.
David Meyer
@superglaze
david.meyer@fortune.com
TOP NEWS
Rometty out
Ginni Rometty will step down as IBM's chief executive, to be replaced by cloud SVP Arvind Krishna. Rometty has been with Big Blue for four decades, and a host of other top CEOs paid tribute to her yesterday. But IBM's share price has fallen 15% during her seven-year tenure as CEO, and the bump to that price on the news of her departure signaled investors' pleasure at the prospect of a new chapter. Fortune
Amazon revenues
Amazon's share price popped 10% in after-hours trading, thanks to the company hitting a new Q4 sales record. Profits were up 8% for the quarter, having fallen by 25% in Q3—Q4 profits handily beat Amazon's own estimates, and EPS of $6.47 blew way past analyst estimates of $4.04. Raymond James analyst Aaron Kessler: "The fact that they have been able to offer one-day shipping and also at the same time drive some efficiency has to please investors." Wall Street Journal
Vaping hit
Tobacco giant Altria revealed a $4.1 billion impairment charge for its investment in Juul, the e-cigarette firm that faces growing numbers of legal cases over its alleged targeting of teens. After Altria posted a Q4 loss yesterday, its stock fell by as much as 7%. Bloomberg
French Connection
Fashion retailer French Connection has scrapped plans to sell the company and intends to instead focus on growth in e-commerce and its U.S. wholesale business. It had been under investor pressure to explore a sale, and the news of its strategic change resulted in the immediate loss of a third of its share price. Reuters
AROUND THE WATER COOLER
U.S. jobs
Commerce Secretary Wilbur Ross has raised eyebrows by saying the coronavirus "will help to accelerate the return of jobs to North America." Democrats said the comment was inappropriate, while at least one economist said it was "weird." Simon Baptist of the Economist Intelligence Unit: "Companies are not going to make serious and long-term investment decisions on the basis of an outbreak of a disease that might last three to six months." BBC
Tesla protest
Placards saying "No killer factory in Grünheide" were probably not the reaction Elon Musk was expecting when he announced Tesla's plans to build a plant in the little Brandenburg town. But that's what he got, as residents fret about issues ranging from water consumption to bat protection and traffic jams. Financial Times
Aston Martin
Lawrence Stroll, the Canadian billionaire who made his name investing in the fashion and motor-racing sectors, is to pay around $263 million for an up-to-20% stake in Aston Martin, the ailing British carmaker. CEO Andy Palmer: "He brings with him his experiences and access to his Formula 1 team. We’ve talked a lot in the past few years about wanting to be clearly rooted in luxury and obviously Mr Stroll knows an awful lot about luxury." CNBC
VW offer
Volkswagen has offered to buy the rest of Navistar International, as part of its push for growth in the U.S. heavy-truck market. VW's Traton unit currently relies too much on Europe and South America, but this move could help it better compete with Daimler and Volvo in North America. Fortune
This edition of CEO Daily was edited by David Meyer.


fortune--2020-01-31--The coronavirus is already disrupting the global supply chain, starting with these commodities

Coronavirus : The economic effects are looking scarier by the day

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.
Happy Friday, Bull Sheeters. “Uncertainty” is the word of the day, reflected in the schizophrenic daily swings of the global markets. As I type, Asia is mixed, Europe, after a decent start, is down, as are the U.S. futures.
Tonight, at 11 p.m. London time, Brexit goes into effect. If you think that’s the end of that dispute, pull up a chair. I have a bridge to sell you.
We will get to Brexit another day. Today we’re going to talk coronavirus (213 dead, confirmed cases in 23 countries outside mainland China), and the significant impact it’s having on markets.
To recap: yesterday, the U.S. markets rebounded late in the day on the World Health Organization’s warning that the contagion situation is bad, but don’t panic. And hence we had the first, to my knowledge, “WHO bounce.” I’m calling it that. (The U.S. State Department probably killed and buried the “WHO bounce” hours later, advising Americans: “do not travel” to China.)
The projections for how bad this contagion could get are all over the place. My Fortune colleagues did an exhaustive job tallying all the companies—from Tesla to United Airlines —that have curtailed or shut down operations in China in recent days, or imposed employee travel bans. And Moody’s warns the coronavirus will impact global supply chains.
To see the short-term impact on the supply chain just look at commodity prices, which is the subject of today’s chart. China is a huge consumer of commodities, from copper to crude oil. Aluminum, steel, nickel, too. It’s building stuff at a pace that’s unfathomable to G7 nations. And so when China catches a cold, much of the commodities market sinks.
Commodities take a pounding
***
Commodities prices—with the notable exception of gold—are down across the board. As the chart above shows, the Bloomberg Commodity Index has plunged 6% since Jan. 17, when we got the first big outbreak disclosures. (That Bull Sheet made its newsletter debut right around then is merely a coincidence, dear reader.) Copper, Brent crude and palm oil, which China imports like no other country, are down even worse in that time.
I even find the swing in gold revealing. It’s up, but not by much, which might say something about investor uncertainty extending even into safe havens. So where are investors putting their money? What’s your coronavirus strategy? Drop me a line. Let me know.
Like Brexit, the coronavirus saga has only just begun.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
Today's reads
Recession radar. You may have heard in recent weeks the terms "inverted yield curve" and "recession" in the same sentence. It's a fairly uncommon markets event, one that's overwhelmingly pessimistic. Why's that? Erik Sherman explains what it all means.
15 seconds. Something suspicious happened yesterday in Blighty. 15 seconds before the Bank of England surprised the markets with its rates decision, the pound sterling took off. Coincidence? The UK's Financial Conduct Authority isn't so sure. It's opened an investigation into whether there was a leak.
No clue. I appreciate the candor of Bridgewater Associate's Ray Dalio's missives on LinkedIn. Yesterday, he called himself a "dumb shit," admitting he has no idea how the markets will withstand the coronavirus contagion, and that he plans to study up on the great pandemics of the past. He then geeked out, charting the markets impact of the Swine flu, SARS, and the Spanish flu outbreaks of years past. Love the charts!
Market candy
Super Sunday. On occasion of this weekend's Super Bowl, S&P Global Market Intelligence shared with us a few data points about the big stock market winners and losers in select Super Bowl years. Warning: there's absolutely no correlation here, this is merely fun. For example, "when the teams in the Super Bowl combine to score at least 46 points, the stock market returns 15.8% on average (based on 28 years). If the final combined score is under 46, the average market return is just 7.3%."
I don't have a big preference this year, but this caught my eye: "The market has gained an average of 23.9% following each of the 49ers"—the Kansas City Chiefs face off against the San Francisco 49ers—"victories including the largest annual return in the Super Bowl era of 37.6% following Super Bowl XXIX in 1991."


fortune--2020-01-31--VW offers $2.9 billion to buy the rest of Navistar in U.S. truck market push

Volkswagen AG offered to buy the rest of Navistar International Corp. in a $2.9 billion bid to secure a bridgehead in the U.S. heavy-truck market and step up its challenge to Daimler AG and Volvo AB.
The expansion was somewhat offset by Volkswagen’s first major divestment since the German automaker skidded into the diesel-emissions scandal in 2015. An agreement to sell industrial machinery unit Renk AG, valued at 760 million euros ($840 million), indicates VW is more inclined to bulk up than slim down, even amid the costly shift to electric cars.
The swoop for Navistar, which was first reported by Bloomberg, would reduce the reliance of VW’s heavy-truck unit Traton SE on Europe and South America.
While the deal could help the company vie with Daimler and Volvo in North America, heavy-truck makers are preparing for a downturn after years of growth. Navistar, truck-engine maker Cummins Inc. and supplier Meritor Inc. announced thousands of job cuts late last year.
VW’s heavy-truck division was created from acquisitions of Germany’s MAN and Sweden’s Scania. The unit had for years struggled to combine the operations before hiring former Daimler executive Andreas Renschler, who successfully spearheaded a partial listing of Traton last year.
Traton offered Navistar holders $35 a share in cash, 45% higher than its Thursday closing price. Lisle, Illinois-based Navistar — which builds International-brand trucks, school buses, defense vehicles and engines — said its board will review the proposal and there’s no assurance the deal will take place.
Shares of Navistar, whose biggest holder is billionaire investor Carl Icahn, soared as much as 53% to $36.79 in late trading on Thursday. VW, which already owns a stake of almost 17%, gained 0.4%. at 9:51 a.m. in Frankfurt on Friday. Traton shares rose 0.3%.
VW purchased its stake in Navistar in September 2016, laying the groundwork for a footprint in North America, the truck industry’s largest source of profits. Daimler’s Freightliner and Volvo’s Mack divisions generate significant sales in the region.
It’s unclear whether VW’s offer will satisfy Icahn, 83, and Mark Rachesky, the founder and chief investment officer of MHR Fund Management, which is Navistar’s third-largest shareholder with a 16% stake.
Icahn, who first bought into Navistar in 2011, built his holding with an average cost per share of $33.62, and the stock has traded below that level for most of the last year. Rachesky’s average price paid was $27.80, according to data compiled by Bloomberg.
Rare Streamlining
If a deal closes, VW will take over a company in the midst of a fix-it job. Navistar said in December it will reduce employment by 10% and cut its 2020 revenue forecast to a range of $9.25 billion to $9.75 billion, below analysts’ lowest estimate.
Alongside the expansion, Wolfsburg, Germany-based VW agreed to sell Renk to private equity firm Triton Partners. The company was acquired as part of the automaker’s acquisition of MAN and represents a rare streamlining move by VW, which has been reviewing its non-core businesses for years with little progress.
More must-read stories from Fortune:
—Global companies enter lockdown mode as coronavirus rocks China
—Deutsche Bank’s “annus horribilis” reveals the true cost of negative interest rates
—As the coronavirus spreads, these stocks are the most exposed
—Mysterious GPS outages are wracking the shipping industry
—Fortune Explains: Tariffs and trade wars
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-01-30--IBM CEO Ginni Rometty to step down

IBM CEO Ginni Rometty to step down

IBM CEO Ginni Rometty will step down as chief of the technology giant.
IBM’s board of directors said on Thursday that they have elected Arvind Krishna to become the company’s new CEO on April 6, 2020. James Whitehurst, an IBM senior vice president and CEO of enterprise software firm Red Hat—which was acquired by IBM in July for $34 billion—will become IBM’s president in April.
Rometty will remain IBM’s chairman until the end of the year, when she will officially retire after a 40-year tenure at Big Blue.
“Arvind is the right CEO for the next era at IBM,” Rometty said in a statement. “He is a brilliant technologist who has played a significant role in developing our key technologies such as artificial intelligence, cloud, quantum computing and blockchain.”
Rometty’s plans to retire from IBM comes after years of declining revenue and a slumping share price, as the over-100-year-old company tried to retool itself amid a rapidly changing information technology market. Under her tenure, IBM experienced 22 consecutive quarters of sales declines that ended in 2018. In the company’s latest quarter, sales dropped 3.9% year-over-year to $18 billion.
The day before Rometty officially took over as IBM CEO in January 2012, IBM stock closed at a price of $183.88. Since then, IBM shares have dropped 26% to around $137. In after-hours trading on Thursday after IBM announced the upcoming executive change, its shares jumped 4.7% to $143.30, signaling that investors are pleased that Rometty will step down.
Some CEOs of major companies praised Rometty in light of IBM’s announcement. For instance, Apple CEO Tim Cook, whose company is an IBM partner, called her “a trailblazer — a keen leader and innovator on behalf of one of America’s great companies.”
“Throughout her career, she has fought tirelessly to make sure technology’s benefits reach everyone and that diverse and representative voices are heard from the laboratory to the board room,” Cook said. “Her values and success are now a central part of IBM’s story, and they will be carried forward by the many leaders that she has mentored and inspired.”
JPMorgan Chase CEO Jamie Dimon said in a statement that “Ginni is an individual with extremely high character and exceptional capabilities – a truly excellent partner and a trusted leader.”
“She also played a critical role in advancing workforce development in the U.S. through her great work at the Business Roundtable,” Dimon added. He was referring to Rometty’s efforts involving the influential non-profit that recently updated its “purpose of a corporation” manifesto to include more than simply making money for shareholders.
Congratulations, @GinniRometty, on an incredible career. You’ve been a great partner and an inspiring leader. Best to you on your next chapter – we know you’re not done yet! — Mary Barra (@mtbarra) January 30, 2020
Former American Express CEO and chairman Ken Chenault (also a former IBM board member) said in a statement that he was “highly confident that IBM is on the right path as a result of her strong leadership.”
Rometty was IBM’s first female CEO and steered Big Blue during a time of massive disruption in the information technology market. The advent of cloud computing, in which companies like Amazon and Microsoft began selling computing resources on-demand, hurt IBM’s core businesses of selling software licenses, servers, and consulting services.
Some of Rometty’s biggest moves to help turn the company around included buying cloud computing company SoftLayer technologies for $2 billion to bolster IBM’s cloud business and spending billions on its Watson data crunching technologies. But those big investments failed to significantly lift IBM’s sales, resulting in a slumping share price, with some analysts wishing its big bets would pay off sooner rather than later.
R “Ray” Wang, founder and chairman of Constellation Research, said IBM has been looking for CEO candidates for the last year. Wang believes Krishna’s background as a technologist will help IBM better compete with companies like Amazon and Google. Although maintaining customer relationships was one of Rometty’s strengths, an executive with technical know-how can potentially help IBM win more customers, Wang believes.
“You need a tech person with a product background to go toe-to-toe, and IBM hasn’t had that for a long time,” Wang said. “In this battle, you need to have a really good understanding of the technology and what it means for the business,” Wang said.
Patrick Moorhead, Principal Analyst at Moor Insights and Strategy, says it’s too early to judge Rometty’s tenure at IBM, explaining that it may take years for the company’s big investments to succeed.
“I have to give them credit, it could have been a lot worse.” Moorhead says. “I know they didn’t grow financially, but people were saying they were dead.”
Moorhead likened IBM to other massive tech giants like the former Hewlett Packard and Dell Technologies, which all significantly upended their businesses to deal with the advent of cloud computing. For instance, Hewlett Packard split into data center specialist Hewlett Packard Enterprise and PC and printing giant HP, Inc. in 2015. Dell Technologies, meanwhile, bought data storage company EMC for $67 billion in 2016.
Daniel Ives, a managing director and analyst at Wedbush Securities, said in a research note that traditional IT companies like HPE, Cisco, and IBM will continue to face pressure in 2020, due in part to the growing cloud businesses at Microsoft and Amazon. However, Ives said that IBM’s “new CEO and cloud veteran Arvind Krishna a major step forward in our opinion” for Big Blue.
Moorhead notes the significance of Red Hat’s Whitehouse becoming IBM’s president, saying “I don’t recall in the history of IBM an outsider being that close to the top, ever.” But the decision to hand the CEO title to Krishna, who has worked at IBM for nearly 30 years and oversaw the company’s Red Hat acquisition, implies that IBM’s board was not looking for a “complete revamp” of IBM’s executive leadership.
“Arvind has to execute the strategy flawlessly,” Moorehead says. “With Red Hat, there’s no going back.”
Correction, January 31, 2020: An earlier version of this story misstated Ginni Rometty’s start date as CEO and the stock price at that time. She became CEO on Jan. 1, 2012 and IBM’s stock price closed at $183.88 the day prior.
More must-read stories from Fortune:
—The long ocean voyage that helped find the flaws in GPS
—Global companies enter lockdown mode as coronavirus rocks China
—3 key takeaways from Tesla’s blockbuster fourth-quarter earnings
—Facebook says its ad machine is being weakened by privacy changes
—Predicting the biggest tech headlines of 2020
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-02-03--Inside reports of a toxic culture at Victoria’s Secret

Those controversial ‘ Peloton wife ’ ads may not have hurt sales after all , say analysts

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! Candidates get ready for the Iowa caucuses, American women are running faster than ever before, and things were what they seemed at Victoria’s Secret. Have a productive Monday.
– No Angels. Sometimes, things are what they seem. An investigation in the New York Times this weekend revealed just how misogynistic and toxic the work environment was—for employees and models—behind the scenes at Victoria’s Secret.
I can’t say I was shocked by the report. This is a company known for selling underwear to women through the lens of male fantasy—with a CEO who in 2018 gave an interview disparaging plus-size and “transsexual” models. And perhaps most damningly, it’s one whose parent company, L Brands, was recently thrust into the spotlight over its CEO’s ties to Jeffrey Epstein. Nevertheless, the NYT story sheds new light on how the brand’s public image—and reluctance to evolve with the times—came from the top.
According to the Times‘ reporting, Ed Razek, Les Wexner’s longtime No. 2, asked models to sit on his lap and tried to kiss them; touched a model’s crotch before the 2018 Victoria’s Secret fashion show; and was the subject of repeated complaints of inappropriate conduct. Numerous women say they alerted Wexner to Razek’s behavior, and some allege that they faced retaliation; model Andi Muise says that the brand stopped hiring her for its fashion shows after she rebuffed Razek’s advances—advances that reportedly included Razek suggesting that the then-19-year-old move in with him in a house in Turks and Caicos. Former PR employee Casey Crowe Taylor, who says Razek once berated in public over her weight, called the toxic culture “brainwashing.”
“The accusations in this reporting are categorically untrue, misconstrued or taken out of context,” Razek said in a statement. Victoria’s Secret told the NYT that it is “intensely focused” on corporate governance, workplace and compliance practices and “regret[s] any instance where we did not achieve this objective and are fully committed to continuous improvement and complete accountability.”
Victoria’s Secret has ended its longtime fashion show and is still struggling to rebound from Wexner’s close ties to Epstein. But it shouldn’t have taken a pedophile for this company to come under scrutiny—and for its dated, airbrushed facade to come crumbling down.
Emma Hinchliffe
emma.hinchliffe@fortune.com
@_emmahinchliffe
ALSO IN THE HEADLINES
- Powerhouse performance. Jennifer Lopez and Shakira brought down the house at the Super Bowl, where they were the first Latinas to ever perform a halftime show (plus J. Lo's daughter!). And although the Kansas City Chiefs won the night, 49ers offensive assistant coach Katie Sowers still made history as the first woman and the first openly gay person to coach a team in the Super Bowl; she was also featured in a Microsoft ad. In more commercials news, the Trump campaign ran an ad featuring Alice Marie Johnson, the woman whose sentence President Trump commuted after a plea from Kim Kardashian.
- Leadup to Iowa. Tonight's the night: the Iowa caucuses. As the first primary verdict approaches, read up on how Sen. Amy Klobuchar got into politics, spurred to action after her hospital kicked her out soon after she gave birth; Pete Buttigieg's mother, Anne Montgomery, and her role in his campaign; Dr. Jill Biden's pitch for her husband; and the Sen. Elizabeth Warren campaign's caucus-night childcare.
- The long run. American female distance runners are competing into their 30s and 40s at levels few would have imagined a decade ago. From Shalane Flanagan, who won the New York City Marathon at 36 in 2017, to Lindsay Crouse, the author of this piece about running faster than she ever has at 35—these women's athletic success will be on display at the U.S. Olympic trials this month. New York Times
- Awards season. At the U.K.'s BAFTAs Sunday night, women were shut out of the best director category (sound familiar?), and Renée Zellweger and Laura Dern picked up best actress and best supporting actress for Judy and Marriage Story, respectively. The big story of the night was the lack of diversity in the awards—the acting nominees were all-white—which Joaquin Phoenix called out during his best actor acceptance speech. "So many of my fellow actors who are deserving don’t have that same privilege. ... "It is the obligation of the people who have created and benefit from the system of oppression to be the ones to dismantle it. So that’s on us," he told the room. New York Times
MOVERS AND SHAKERS: Sundance Institute documentary program director Tabitha Jackson will be the new director of the Sundance Film Festival. Laura Ashley promotes COO Katharine Poulter to CEO. Claire O’Neill, the former U.K. energy minister who was set to lead UN climate talks, was removed from the position. Forbes promoted chief sales officer Jessica Sibley to chief revenue officer.
IN CASE YOU MISSED IT
- Economic expertise? Sen. Elizabeth Warren wrote a letter to President Trump's Federal Reserve nominee Judy Shelton questioning her "economic expertise and judgment." Shelton is expected to face a contentious confirmation process in the coming weeks, and Warren is voicing her concerns ahead of time. Shelton likely "lack[s] the capacity to exercise the care, consistency, and political independence expected of members of the [Fed] Board of Governors," Warren wrote. Washington Post
- The next referendum. Now that Brexit is official, what's next? In Scotland, Scottish National Party leader Nicola Sturgeon told supporters of an independent Scotland—and the opportunity to rejoin the European Union—to stay "focused and united." U.K. Prime Minister Boris Johnson rejected Sturgeon's request for the legal power to hold a second referendum in Scotland, and she says she would not hold a referendum that would then be challenged in the courts. Guardian
- A complicit Assistant. As the Harvey Weinstein trial continues, a new movie in theaters is inspired by his decades as a film industry tyrant. The Assistant from writer-director Kitty Green follows an assistant who conducts a day of unseemly tasks (cleaning up questionable stains, fielding phone calls) for her never-seen, abusive boss. Green says that the film examines how "we're all complicit in some way, as a part of this system that really hurts and sidelines women." Fortune
- Paying up. A California judge ordered Johnson & Johnson to pay $344 million to settle a lawsuit over its marketing of surgical mesh devices for pelvic procedures in women. The lawsuit claimed that J&J concealed or misrepresented risks including chronic pain and sexual dysfunction for the product used to treat conditions including stress urinary incontinence. After the judge's decision, California Attorney General Xavier Becerra said that the company "put its profits ahead of the health of millions of women." J&J says it "responsibly communicated risks" and will appeal the decision. Wall Street Journal
ON MY RADAR
Gwen Ifill is forever now Washington Post
Maternity leave—not higher pay—is the WNBA’s real win The Atlantic
Great expectations: art's struggle to depict pregnancy Guardian
PARTING WORDS
"That is the greatest compliment I can get, when someone will say to me, 'I read your darn book till 4 in the morning.'"
-Suspense and thriller author Mary Higgins Clark. She died at 92 on Friday.


fortune--2020-02-03--WeWork hires corporate turnaround artist with ‘plenty of luck’ as new CEO

Sandeep Mathrani knows what it’s like to lead a company out of trouble.
His former employer, General Growth Properties, had been flattened by the economic recession of 2008. GGP, the second-biggest owner of shopping malls in America, named Mathrani as chief executive officer in 2011 as it was emerging from what was then the biggest real estate bankruptcy in U.S. history.
Six years later, Mathrani sold the business to Brookfield Property Partners LP in a deal valued at about $15 billion. The project won him a reputation as a corporate turnaround artist. “I’ve had plenty of opportunities and plenty of luck,” he said last year during an acceptance speech for a real estate industry award.
That luck will surely be tested in his new job at WeWork. The troubled co-working company appointed Mathrani, 57, as CEO on Saturday. He’ll report to Marcelo Claure, the executive chairman at WeWork and operating chief at SoftBank Group Corp., WeWork’s majority owner. In a statement, Claure praised Mathrani’s “turnaround expertise.”
Mathrani is a fixture in the clubby world of commercial real estate, but he also has some experience working with startups. At Brookfield, he led an investment in Industrious, a WeWork rival. “While real estate is full of some very dry, very conservative characters, Sandeep is very much not that,” said Jamie Hodari, co-founder and CEO of Industrious. “If WeWork wanted to bring in someone with serious real estate chops but who was a little closer to the WeWork spirit, he seems to fit that bill.”
However, WeWork poses a very different challenge from the shopping center business. Adam Neumann, its larger-than-life co-founder, started WeWork in 2010 to rent trendy office spaces to companies and freelancers. He pitched it as a hybrid real estate and technology business, a “physical social network.”
Investors bought into Neumann’s vision, giving him billions of dollars and mostly unchecked authority to set up offices around the world. SoftBank, a Japanese technology conglomerate, was the biggest believer and drove the valuation of the business up to $47 billion.
But when they tried to take the parent company We Co. public last year, the plan quickly crumbled under scrutiny from Wall Street. WeWork was spending far more than it was generating in revenue and had a litany of apparent conflicts of interest with Neumann, who received loans from WeWork as it paid him rent on buildings he owned. WeWork pulled the IPO in September and agreed to sever ties with Neumann, netting him an exit package worth more than $1 billion. SoftBank said it would rescue the company by arranging about $9.5 billion in financing.
The appointment of Mathrani has parallels to the situation at another unicorn startup once beset by crisis. Uber Technologies Inc., which also counts SoftBank as its largest shareholder, replaced its controversial co-founder with Dara Khosrowshahi in 2017. Khosrowshahi, an Iranian immigrant who rose to the top job at online travel provider Expedia Group Inc., was asked to tame Uber’s raucous workplace culture and its boom-or-bust financial model. Both CEOs were respected in their fields but largely unknown outside. And both had solid reputations as business operators capable of increasing profit at a steady pace and earning accolades from public investors.
Mathrani was born into a wealthy family in India. In the early 1980s, his father sent him to the prestigious British boarding school Eton, but he soon left to attend public high school in suburban Philadelphia as an exchange student, Mathrani recounted during the 2019 awards ceremony speech. By age 20, he had earned engineering and business degrees from Stevens Institute of Technology, whose campus in Hoboken, New Jersey, overlooks the New York City skyline.
His first foray into real estate came when he made $20,000 from flipping an apartment he’d bought for $55,000 two years earlier. For a young engineer, that was a lot of money, Mathrani said in the speech. “Wow, I made 20 grand, hallelujah,” he recalled thinking at the time. “Real estate is a good business!”
Mathrani said he applied for whatever real estate jobs he could find. He was hired as a mall designer and began rising through the ranks. In 1994, he went to Forest City Ratner Cos., the development company owned at the time by real estate titan and former Brooklyn Nets owner Bruce Ratner, who would become one of Mathrani’s mentors, according to Women’s Wear Daily. In 2002, Mathrani joined Vornado Realty Trust, the largest owner of real estate in New York City, where he ran the company’s retail division.
Eight years later, the call came to lead GGP. There, Mathrani had to overcome the aftershocks of the recession, a retail industry in decline and the sharp rise of Amazon.com Inc. Mathrani focused on high-end properties and courted internet-native brands like Warby Parker and Tesla Inc. to his malls. He was rewarded by becoming one of the highest-paid executives in real estate.
In broadcast interviews and speeches, Mathrani is soft-spoken and understated. For the speech last year, he wore a plain suit, patterned tie and rimless glasses, his hair slightly out of place, looking the part of a college professor. He spoke about his fortune in life and finding success in America.
In a statement, Mathrani said WeWork “has redefined how people and companies approach work with an innovative platform.” Under Mathrani, WeWork will refocus on office rentals and walk away from passion projects started by Neumann. It has sold business units and other holdings, including a large stake in female-focused co-working startup the Wing. WeWork also said it would terminate about 2,400 jobs.
Staff morale at WeWork is low, and it’ll likely take years to get the company’s finances in order. A recent business plan set a target for positive cash flow by 2023. It could take even longer to change the company’s image in the minds of public investors.
Mathrani’s role at WeWork is designed to complement Claure, a longtime telecommunications executive who was abruptly thrust into the WeWork debacle a few months ago when he was named chairman. Claure recently tweeted a photo of an inspirational message that he said reminded him of his first few days learning the real estate industry. The message read: “Be brave enough to suck at something new.”
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fortune--2020-02-03--Coronavirus forces China’s neighbors to make tough choices over health, fear and trade

Thailand’s capital city of Bangkok has one of the highest rates of coronavirus outside of mainland China with 19 confirmed cases, masks are nearly ubiquitous in public spaces, and there are growing online calls to implement an outright ban on travelers from mainland China.
Yet Thailand’s borders remain open and dozens of flights continue to arrive in Thai airports from cities across China, even as a growing list of countries near and far from China have imposed strict restrictions on travelers from mainland China.
This decision has subjected the Thai government of Prime Minister Prayut Chan-o-cha to heavy criticism, but he has so far limited himself to noting the two countries’ “special bond of friendship” and offering “moral support and spirited encouragement” to China.
For countries like Thailand, the coronavirus brings up a particularly thorny set of questions that have forced authorities to balance their citizen’s health and fears with China’s economic weight.
One the one hand, Thailand (along with many of its neighbors) have grown increasingly dependent on Chinese investment, trade and tourism to help sustain their economies. On the other, domestic concerns about the virus are growing and governments don’t want to be seen as making the situation worse by kowtowing to Beijing.
“Government officials are likely considering not only the short-term economic impacts of a drop in Chinese visitors and trade, but the longer-term economic and political effects of upsetting Chinese officials and investors,” said Ian Rowen, professor of Geography and Urban Planning at Singapore’s Nanyang Technological University.
The WHO and China’s response
On Friday, the World Health Organization (WHO) classified China’s coronavirus outbreak as a ‘global health emergency,’ but WHO chief Tedros Adhanom Ghebreyesus went out of his way to urge countries not to implement travel bans.
“WHO doesn’t recommend and actually opposes any restrictions for travel and trade or other measures against China,” Tedros said. “If anyone is thinking about taking measures, it’s going to be wrong.”
Thus far, the list of countries to impose full or partial travel restrictions from Chinese travelers includes, the United States, Israel, Japan, South Korea, Vietnam, Iraq, Indonesia, Australia, the Philippines (which just reported the first virus-related death outside China), and several others.
China has cited Tedros’ comments when rebuking countries for imposing travel bans from China. “While the WHO has only just specifically advised against any travel restrictions, the U.S. has decided to act in the opposite way,” said Hua Chunying, a spokeswoman for China’s Ministry of Foreign Affairs. “This has set a bad example. It is certainly not a gesture of goodwill.”
When Israel decided to impose its travel ban, China’s embassy in Jerusalem even said the choice was “reminiscent of the holocaust,” though they later apologized for the remarks.
“[Such] overheated public rhetoric… can only make one wonder what is happening off the record,” Rowen said.
Tourism impact
As China has battled with the U.S. and Israel over their travel restrictions, countries closer to home—and more dependent on China’s tourists—have taken a softer approach.
In the last few years, China’s outbound tourists have become an increasingly powerful force on the global stage. In 2018 alone, Chinese tourists spent $277 billion on international trips, which far outpaced the second closest country, the U.S., whose tourists spent only $144 billion abroad, according to the United Nations World Tourism Organization (UNWTO).
This impact has been especially felt in southeast Asia.
In Thailand, where tourism accounts for over 10% of the country’s GDP, Chinese tourists now make up over a quarter of all visitors to the country, according to the Bangkok Post. In Cambodia and Vietnam, Chinese tourists also make up nearly a third of all visitors to each country.
In addition to tourism, China has invested billions of dollars into southeast Asia in the last few years as part of the country’s Belt and Road Initiative. In Cambodia, for example, China is helping transform the city of Sihanoukville through funding the construction of infrastructure projects and a special economic zone.
As he addressed the impact of the coronavirus, Hun Sen, the prime minister of Cambodia, which has not restricted incoming travel from China, stuck close to Beijing’s line. “Is there any Cambodian or foreigner in Cambodia who has died of the disease?” he said. “The real disease happening in Cambodia right now is the disease of fear. It is not the coronavirus that occurs in China’s Wuhan city.”
Anti-Chinese attitudes
On a personal level, however, anti-Chinese sentiments across southeast Asia have been spreading long before the outbreak.
As the coronavirus outbreak widens, these attitudes have taken even stronger hold as shops in countries like Japan and Vietnam told Chinese tourists that they weren’t welcome. In Indonesia, protesters even gathered to protest outside a hotel with Chinese tourists.
For Rowen, this treatment “illuminates not only racism and prejudices between [Chinese] guests and [local] hosts, or between people of Chinese descent and others, but also fear of the Chinese state.”
In the end, Rowen explained, countries that manage to stay on China’s good side during the outbreak may see benefits down the line.
“Cambodia, and perhaps even the Philippines, which took a bit longer to close its borders, and only did so after a considerable public backlash, may be rewarded later for their tacit support, whether with increased tourist arrivals or other forms of investment,” Rowen said.
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fortune--2020-02-03--6 new books you should read in February

6 new books you should read in February

Though it’s the shortest month of the year, there’s still a lot to celebrate in February. And with an extra day in 2020 (reminder that it’s a leap year), you have an extra day to fit more reading in.
Olympic Pride, American Prejudice: The Untold Story of 18 African Americans Who Defied Jim Crow and Adolf Hitler to Compete in the 1936 Berlin Olympics, by Deborah Riley Draper and Travis Thrasher
Available Feb. 4
You might be familiar with Jesse Owens, the American track-and-field star and four-time Olympic gold medalist at the 1936 Summer Olympics—also referred to as the Nazi Olympics as they were hosted in Berlin under Adolf Hitler’s fascist dictatorship. Coming out at the start of Black History Month, this new book sheds light on a much greater but largely unknown history of 16 black men and two black women who were torn between boycotting the Olympic Games in Nazi Germany or participating. The choice: represent a country where they were living under Jim Crow and treated as second-class citizens or travel to a country controlled by a regime perpetuating Aryan superiority. But to go also meant they could defy and prove wrong their racist critics at home and abroad.
You Never Forget Your First: A Biography of George Washington, by Alexis Coe
Available Feb. 4
February has one official holiday (two if you count Groundhog Day), and that would be Presidents’ Day, celebrated this month in honor of the nation’s first President as well as Abraham Lincoln. George Washington was born on Feb. 22, 1732, and while countless books have been written about him in the past 200-plus years, it’s a safe bet that none are quite like Alexis Coe’s irreverent biography. Make no mistake—this is well researched, but it is written with wit and charm. (It also doesn’t turn a blind eye to Washington’s ownership of slaves, holding him accountable in a way few historians do.)
Sisters in Arms: Female Warriors From Antiquity to the New Millennium, by Julie Wheelwright
Available Feb. 18
Using the 2018 announcement that British women can now serve in combat roles, BBC and History Channel contributor Julie Wheelwright reminds readers that women have actually been serving on the front lines of war for as long as history has been recorded. From the Scythian women who served as inspiration for the mythical Amazonians to the reemergence of women as members of the armed forces in various countries during the 20th and 21st centuries, Sisters in Arms explores the formalization of women’s roles in different lines of service while questioning the perceived relationship between masculinity and combat.
Hood Feminism: Notes From the Women That a Movement Forgot, by Mikki Kendall
Available Feb. 25
The definition of feminism is the advocacy of equal rights on the basis of sex. It has been weaponized as a political term, but to be feminist—whether you identify as male or female or nonbinary—boils down to believing and fighting for equal rights on the basis of being human. And yet too often in the fight for women’s rights, women of color are particularly marginalized. (See: white feminism.) In a new collection of essays drawing on politics and pop culture, Mikki Kendall homes in on this blind spot and takes aim at the modern feminist movement, arguing that it has chronically failed to address the needs of the majority of women while allowing a privileged few to suppress the rest.
Available Feb. 25
With the explosion of podcasts and streaming documentaries introducing new storytelling formats for the genre, true crime is a deep well of content for publishing houses. But journalist Sierra Crane Murdoch, who has written for The Atlantic and The New Yorker, tells a story unlike almost any other in her new book, diving deep into the gripping true story of a murder on an Indian reservation amid an oil boom in the years after the Great Recession, and the unforgettable Arikara woman who becomes obsessed with solving it.
The Dalai Lama: An Extraordinary Life, by Alexander Norman
Available Feb. 25
This is the first authoritative biography of the Dalai Lama, written by Oxford-trained Tibetan scholar Alexander Norman. And Norman had one source that other biographies about His Holiness have lacked: the Dalai Lama himself. While Norman has known and interviewed the spiritual leader frequently over the past 30 years, this is not a love letter; readers might be shocked by some of the events revealed in the biography, from political maneuvering to the Dalai Lama’s relationship with the CIA. Norman explains that, while the Dalai Lama has never been comfortable with his political position, he has been a strategic player while rising to become the spiritual and political leader of one of the world’s most profound and complex cultural traditions.
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fortune--2020-02-03--Those controversial ‘Peloton wife’ ads may not have hurt sales after all, say analysts

WeWork hires corporate turnaround artist with ‘ plenty of luck ’ as new CEO

You may remember Peloton’s now-infamous holiday ad, featuring a woman using the bike her husband gifted her for Christmas—which was deigned sexist by some. But Wall Street analysts are predicting that, despite backlash from the spot, Peloton’s 2nd fiscal quarter earnings (reporting on Feb. 5) will only show the company has pedaled over the bumps in the road toward strong earnings.
Back in December investors were quick to pump the breaks, slashing some $1.5 billion off the fitness company’s market cap in the wake of the ads and ensuing controversy. But having since recovered much of their losses (the stock is up some 20% from its dip in late December, but still off from all-time highs), some like Raymond James’ Justin Patterson believe the ad debacle won’t have a material impact on Peloton’s upcoming earnings—in fact, quite the opposite.
“[The ad] didn’t appear to have any effect on sales trends during the period, and likely suggests what we had suspected around it—that the people who were upset weren’t going to buy the bike anyway, whereas the ones that were buying it were still happy with the gift and are enjoying the product,” Patterson tells Fortune. That hypothesis is backed up by stellar iOS reviews for the Peloton app, which boasts 5 stars for 95% of ratings.
And it appears brand awareness has skyrocketed since December (right after the ad was released), as U.S. “Peloton” search queries rose to a high of 152% year-over-year in the calendar 4th quarter of 2019.
Yet according to estimates for the quarter from SimilarWeb, a web analytics provider, Peloton’s Android app open rate (how often users who downloaded the app actually open it) steadily declined in 2019, from around 11% in January to around 7% in December—representing a “steady decline of people using it on a daily basis,” that could indicate waning loyalty, Ed Lavery, the director of SimilarWeb’s investor solution, tells Fortune. However, Raymond James’ Patterson thinks metrics like open rate aren’t going to be as key in understanding the business moving forward. “Now that Peloton is integrating into TVs and other platforms like that, that further makes looking at one individual data point a bit more challenging,” he says.
Instead, ahead of Peloton’s earnings, Patterson is optimistic that the company had a “great holiday season,” and is even raising his revenue estimate by 1% to $432 million for the company’s 2nd fiscal quarter. He notes that, “even at their higher [revenue estimate] numbers, I think there could potentially be some positive surprises ahead.” (Raymond James also raised their price target for Peloton from $32 to $36 per share, as did JPMorgan’s Doug Anmuth last week, from $34 to $38).
For one, Patterson is looking to Peloton’s earnings next week with two key questions in mind: “A) how much of that holiday lift did Peloton get, and then B) are users staying active into the New Year? Are they still keeping up with their New Year’s resolutions? If both of those answers are pretty positive, then we expect good things for Peloton over the course of the year.”
Of course, Peloton (like many of the billion-dollar startups to IPO last year) is still burning cash, and currently Street consensus estimates for the company’s 2nd fiscal quarter earnings comes in around $421 million in revenues and a loss of $0.32 earnings per share.
Peloton earnings preview
Analysts like Patterson are watching three key metrics going into Peloton’s earnings this week—namely, subscriber numbers, connected fitness revenue (think bikes and treadmills), and churn rate.
Or, in other words, “is Peloton selling products and signing up subscribers, yes [or] no? And are those subscribers sticking around?” Patterson asks.
For the fitness company’s 2nd fiscal quarter, Raymond James is estimating connected fitness revenue to come in at $344 million (which would be a 55% increase year-over-year), and subscription revenue to hit $74 million (a whopping 97% increase year-over-year).
Peloton’s U.K. business also seems to be growing, although at a somewhat insignificant pace in the last quarter (at around 3% of revenues). International growth may be a point of discussion for executives at earnings next week, Patterson contends, especially around burgeoning areas like Germany (the company’s first non-English speaking market to launch).
And as investors tune in to Peloton’s earnings call on Wednesday, they shouldn’t be surprised if the management team reiterates Peloton’s strategy for growth investing this year over profitability (Peloton CEO John Foley notably declared on the company’s last earnings call that, “If we pull back on growth we could be profitable tomorrow.”).
Another area investors should monitor? Competition, notably from Equinox and various fitness products at CES 2020—although at this point it’s more of a “wait and see” for investors, Patterson says.
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Subscribe to Fortune’s Bull Sheet for no-nonsense finance news and analysis daily.


fortune--2020-02-03--Ex-WorldCom CEO Bernard Ebbers, ‘telecom cowboy’ sentenced to 25 years in accounting fraud, dies at

Ex-WorldCom CEO Bernard Ebbers, ‘telecom cowboy’ sentenced to 25 years in accounting fraud, dies at 78

Bernard Ebbers, the ousted chief executive officer at WorldCom Inc. whose corporate malfeasance led to imprisonment, has died, the Associated Press reported. He was 78.
The former telecommunications executive died Sunday, the AP said, citing a report on WAPT-TV in Mississippi.
A federal judge ordered Ebbers released in December 2019 for medical reasons after he had served more than 13 years of a 25-year sentence. His health problems included macular degeneration that left him legally blind and a heart condition that made him vulnerable to cardiac arrest, according to his attorneys.
Ebbers, a onetime milkman and bar bouncer, led a fledgling company — originally named Long Distance Discount Service — through the telecommunications revolution triggered by the breakup of American Telephone & Telegraph’s monopoly. Renamed WorldCom Inc. in 1995, the Clinton, Mississippi-based company became the No. 2 U.S. long-distance provider. By mid-1999 it had a market capitalization of about $185 billion when its shares hit a high of almost $62.
Pushing WorldCom’s share price upward was a strategy of aggressive growth through acquisitions, as the company gobbled up dozens of telecommunications firms. Dubbed the “Telecom Cowboy” for favoring jeans and cowboy boots, Ebbers guided the purchase of firms making fiber optic cable and other key components of the internet.
His 1998 purchase of MCI Communications Corp. for $47 billion put WorldCom right behind industry leader AT&T in size. His expansion plan hit a wall in 2000 when U.S. and European regulators opposed his attempt to acquire Sprint Corp., the then-No. 3 U.S. long-distance carrier.
WorldCom’s first-quarter profit tumbled 78% in 2002 as rising competition from local-phone companies led to cuts in call prices. By that time shares had plunged more than 90% since June 1999. Ebbers, who had saddled the company with $30 billion in debt from 75 acquisitions, resigned that April.
The CEO who swiftly assembled a behemoth lacked the skills to operate it.
Two months after Ebbers left, WorldCom disclosed it had misreported $3.9 billion in expenses, forcing the company to restate its earnings for all of 2001 and the first quarter of 2002. The Securities and Exchange Commission called the misstatements ‘unprecedented” and in July 2002 WorldCom filed the then-largest bankruptcy in U.S. history.
The company emerged from bankruptcy protection renamed as MCI Inc. and was acquired by Verizon Communications Inc. in 2005.
After Ebbers was forced out as CEO, it was disclosed that he owed the company $408 million, money he had borrowed against his WorldCom stock when it was valued much higher. Ebbers, who had become a billionaire during his stint as CEO, used the funds to acquire the largest ranch in Canada, timber property in Mississippi, a yacht repair firm and mansions.
In March 2005 he was convicted of multiple charges, including securities fraud. Ebbers claimed he didn’t know that subordinates had cooked the books.
“I know what I don’t know,” Ebbers said during his trial, blaming accounting irregularities on others. “To this day, I don’t know technology, and I don’t know finance or accounting.”
Ebbers, at age 63, was sentenced to 25 years in prison. It was the stiffest penalty imposed on any executive convicted in a spate of accounting frauds at the beginning of the 21st century, including crimes committed by executives at Enron Corp., Adelphia Communications Corp. and Tyco International Plc. His sentence and the size of his fraud were surpassed in 2009 when Bernard Madoff pleaded guilty to a $17 billion Ponzi scheme and was handed a prison term of 150 years.
Bernard John Ebbers was born on Aug. 27, 1941, in Edmonton, Alberta. His father, John, was a traveling salesman who dealt in hardware and tires. He and his wife Kathleen moved the family to California when Ebbers was very young, and they lived for a while on a mission post on a Navajo reservation in New Mexico before moving back to Canada when Ebbers was a teenager.
The 6-foot-4 (193 centimeters) Ebbers won a basketball scholarship to Mississippi College. He graduated with a bachelor’s degree in physical education, having taken no classes in business or accounting — as his defense lawyer reminded the jury that convicted him of securities fraud.
He was a poor student in college and didn’t succeed at much before landing a job as a high school basketball coach. That leadership post led him to become the owner of a string of motels in Mississippi. He used those assets to finance his initial stake in WorldCom.
Ebbers was married twice, first to Linda Pigott with whom he had four daughters, two of them adopted: Joy, Faith, Ave and Treasure. After the couple divorced, he married Kristie Web, who had a daughter, Carlie, from a first marriage. She divorced Ebbers two years after he went to prison.
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fortune--2020-02-03--These 10 journalists deserve answers, protection, and justice

Not all journalists have the luxury of a government or press that champions free speech. Some journalists face arrests, attacks, and detainment by the very institutions meant to protect them.
One such case is the exile of Arash Shoa-Shargh. After being exiled in Turkey, the Iranian journalist was extradited to Iran where he spent over 95 days in solitary confinement. In addition to sentencing him to 10 years in prison, Iranian authorities have forbidden his family to discuss the case and blocked access to information on his arrest. Shoa-Shargh’s case is emblematic of authorities working to make such events disappear from the public eye. But that hasn’t stopped the Center for Protecting Journalists (CPJ) from bringing ongoing press crackdowns back to light.
Fortune, along with 36 other news organizations, is committed to making sure journalists like Shoa-Shargh are brought to justice, by publishing a list of the “10 Most Urgent” press freedom cases. Compiled by the One Free Press Coalition (OFPC) in partnership with the CPJ and the International Women’s Media Foundation (IWMF), these monthly lists have proven to make an impact and given journalists the freedom they deserve. Hopefully, Arash Shoa-Shargh and the nine other journalists listed below get to enjoy that freedom, too. (You can read last month’s list here.)
Case of imprisoned journalist serving 10 years shrouded in silence.
Arash Shoa-Shargh, an Iranian journalist living in exile in Turkey and working for popular anti-government news channel Amad News, was arrested and sentenced in 2018 to 10 years on charges of “insulting the Supreme Leader,” “acting against national security,” “encouraging the public to misconduct” and “spreading corruption on the land of God.” Friends have said authorities pressure the journalist’s family to not publicize the case, while detention in a rural prison has made it difficult to access information on his current status.
Russian editor held in Irkutsk punishment cell without just cause.
The editor-in-chief and founder of local news site BlogSochi, Aleksandr Valov, was placed in solitary confinement last month, held in close supervision because of anticipated retaliation and disagreement with the court’s verdict. He was arrested in January 2018 and sentenced to six years on trumped up extortion charges. Valov captured and narrated a video livestream of his arrest as police broke his door, cut off the electricity and beat him.
Arrested journalist’s charge and location unknown for more than five months.
Whereabouts of Cameroonian journalist Samuel Wazizi (whose legal name is Samuel Ajiekah Abuwe) are unknown since he was transferred from police to military custody in August. He has been denied access to his lawyers, family and friends and held on undisclosed charges which police say are related to the country’s Anglophone armed conflict. The country held at least seven journalists in prison as of Dec. 1, 2019.
No updates after journalist’s disappearance more than two years ago.
Azory Gwanda has been missing since Nov. 21, 2017. The freelance journalist was investigating mysterious killings in rural Tanzania when he “disappeared and died,” as Foreign Minister Palamagamba Kabudi said in an interview last July. However, the official backtracked amid requests for clarification, and the government has failed to conduct an investigation or disclose information.
Imprisoned journalist’s health deteriorating after nine years of life sentence.
In July, a Kyrgyz court upheld the life sentence of award-winning journalist Azimjon Askarov, despite persistent international condemnation. The ethnic Uzbek is the only journalist imprisoned in the country and has been held nine years on trumped-up charges for reporting on human rights violations. Letters home detail his deteriorating health, limited access to medication and prison officials punishing detainees after visiting days.
Imprisoned journalist has requested and been denied help for severe depression.
Prison guards have denied medical treatment for reporter Lu Yuyu, diagnosed with severe depression during his four-year prison sentence commenced August 2017. He and his partner were arrested in Dali, Yunnan province on suspicion of “picking quarrels and provoking trouble” for publishing photos, videos and text on topics including corruption protests and environmental pollution. The court maintained its decision in 2017, and Lu is currently lodging a second appeal.
Cuban authorities barricade independent journalist inside her home.
Since November, Cuban authorities have repeatedly barred Luz Escobar from leaving her Havana home. The reporter for the independent Cuban news website 14yMedio says authorities often prevent independent journalists from working on “significant dates” either by detaining them or threatening detention if they exit their homes. A security agent was stationed outside Escobar’s door multiple times last year, including on the anniversary of Fidel Castro’s death and international Human Rights Day.
Demands for answers in Khashoggi murder persist into new decade.
In December, Saudi Arabia sentenced eight individuals in connection with the 2018 brazen killing of Washington Post columnist Jamal Khashoggi. What the Kingdom may have considered resolution and closure for the high-profile case, CPJ called a “sham trial” and “mockery of justice. Calls remain for the U.S. and UN to conduct an independent criminal investigation and probe the Saudi crown prince’s role in the “extrajudicial killing.”
Authorities fail to protect journalist from protestors’ assault.
Protestors beat and attempted to tear clothing off Tuntufye FM reporter Patricia Kayuni on Jan. 10 while she covered a demonstration in Chitipa, in northern Malawi. No arrests have been made against attackers who believed Kayuni was a police officer sent to photograph demonstrators. The same week, authorities in Malawi detained and charged three journalists seeking to cover the EU delegation’s return.
Three journalists awaiting sentencing on charges of membership in a banned group and disseminating false news.
In November, plainclothes Egyptian security forces arrested freelance journalists Solafa Magdy and her husband Hossam El-Sayyad at a cafe in the Dokki area of Giza, as well as freelancer and blogger Mohamed Salah. The officers confiscated their mobile phones and car keys and beat Magdy for refusing to unlock her phone. A state security prosecutor delivered charges of membership in a banned group and disseminating false news. Magdy is experiencing health issues in pre-trial detention, ahead of a Feb. 4 hearing.
Fortune would like to hear your voice. Email us at feedback@fortune.com.


Oil is not tobacco

This is the web version of CEO Daily. To get it delivered to your inbox, sign up here.
Good morning.
“I’m done with fossil fuels,” CNBC’s Jim Cramer sputtered after Exxon and Chevron reported disappointing earnings Friday morning. “They’re just done. We’re starting to see divestment all over the world… These stocks don’t want to be owned by young people… The world’s turned on them… They’re tobacco.”
Cramer may be right about investor sentiment. Energy today accounts for just 3.8% of the value of the S&P 500—down from 16% in 2008. And the sharp market reaction on Friday shows even the remaining investors are skittish. Exxon stock fell 4.1% and Chevron fell 3.8%, wiping out $19 billion in market value.
But Cramer’s wrong comparing oil to tobacco. If the tobacco industry shut down tomorrow, the world would be a better place. If the oil industry shut down, we’d return to the dark ages, with human suffering on an unprecedented scale. Global demand for oil and gas, according to this McKinsey report, won’t peak until after 2030. In the meantime, the industry needs to keep doing what it is doing. Shunning oil and gas stocks is a spectacularly silly way to fight climate change.
So what’s an investor who’s concerned about climate change to do? Well first of all, don’t focus on the product, focus on the production. Investors (and regulators) should be riding herd on producers to control gas flaring and methane emissions. They should pressure them to invest in cleaner production methods, and in alternative fuels. And they should be skeptical of companies planning massive investments to reach more supply. All of that points to picking Chevron over Exxon. Indeed, this may be one case where share buybacks make sense. If Chevron can’t create the energy future itself, better to free up its capital for those who can.
Separately, my vote for the best Super Bowl ad this year goes to Budweiser. Director Katherine Bigelow’s ode to the “typical American” was a beautiful antidote to the divisiveness fueled by impeachment proceedings and primary season. You can watch it here.
If you prefer a good laugh to an uplifting message, second choice is Hyundai’s hilarious celebrity riff on Boston accents promoting its new “Smaht Pahk” technology.
More news below.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
Chinese markets
Mainland Chinese markets, which have been closed for an extended Lunar New Year break, have tumbled on their reopening due to the delayed impact of the Wuhan coronavirus. The CSI 300 fell by more than 9%, with more than 2,600 stocks falling by the 10% daily limit. Beijing shoveled cash into the system today, in order to ensure sufficient liquidity. But the long-term effects of the extended shutdown that businesses are still experiencing won't be easily erased. Fortune
Worldline buy
The French payment-services provider Worldline is to buy its local rival, Ingenico Group, for $8.6 billion. Combined, Worldline says, the two will form the fourth-biggest player on the global stage. Ingenico's shares popped 9.9% on the news—the sale price is 17% higher than Friday's closing price—and Worldline's fell by as much as 8.5%. Bloomberg
Bernie Ebbers
Bernie Ebbers, the former WorldCom CEO who spent over 13 years behind bars over a massive accounting fraud, has died at the age of 78. The so-called "telecom cowboy" was granted early release in December due to his deteriorating health. Ebbers and other WorldCom executives improperly boosted the company's profits by booking operating expenses as capital spending. Restated earnings sent WorldCom into what was at the time the U.S.'s biggest bankruptcy filing. Wall Street Journal
Airbus bribes
AirAsia, the continent's biggest budget airline, has denied claims that Airbus bribed it to take 180 of its planes. The allegations came out following Airbus's agreement to pay $4 billion in fines to settle corruption accusations from authorities in the U.S., U.K. and France. AirAsia says it will cooperate with British and Malaysian authorities, which are probing the new allegations. BBC
AROUND THE WATER COOLER
Coronavirus and events
Fortune has a rundown of the various events that are cancelled or postponed thanks to the coronavirus crisis. Examples include U.N. biodiversity talks that have been moved from Kunming to Rome, the cancellation of Asia Horse Week in Hong Kong, and the shifting of an Olympic qualifying tournament from Wuhan to Sydney—some are concerned that the entire Tokyo Olympics may be under threat. Fortune
U.K.-EU talks
The U.K. and EU are beginning their post-Brexit talks on their future relationship. On the EU side, the line is that the U.K.'s future access to the bloc's market will be directly linked with its willingness to align with EU rules. British Prime Minister Boris Johnson disagrees, saying his country has no need to align with EU rules because it will abide by high standards anyway. Financial Times
Westpac sued
Westpac, one of Australia's biggest banks, has been hit with seven U.S. class action lawsuits in the space of a week. The suits relate to Westpac's alleged facilitation of money laundering and payments that may have been for child sexual exploitation. Reuters
Bezos sued
Jeff Bezos is reportedly being sued for defamation by Michael Sanchez, the brother of Bezos's girlfriend Lauren Sanchez. Michael Sanchez claims Bezos defamed him by falsely identifying him as the source of the naked photos of the Amazon mogul that ended up in the hands of the National Enquirer. A report last week stated that Michael Sanchez received a $200,000 payment from the tabloid, and his sister still believes he was the source. Daily Mail
This edition of CEO Daily was edited by David Meyer.


fortune--2020-02-03--‘Irrational, herd behavior’— China’s markets plunge on coronavirus fears, but the selloff fails to s

‘Irrational, herd behavior’— China’s markets plunge on coronavirus fears, but the selloff fails to spread overseas

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Wipeout!
The Chinese markets reopened on Monday, following an extended Lunar New Year break. It was ugly. Local investors took a massive haircut. The biggest indices closed down around 8% with more than 2,600 stocks falling by the 10% daily limit (which doesn’t bode well for tomorrow). It was the worst trading session in five years.
The culprit again is the deadly coronavirus outbreak, which is forcing the closure of shops and factories across the country, the cancellation of conferences, events and business travel, and is roiling the commodity prices of everything from crude to copper everywhere around the world. Latest numbers: over 17,200 cases and 361 deaths in China.
The good news? The European markets are in the green this morning, and the U.S. futures too are pointing up.
The China sell-off should come as a surprise to no-one. The U.S. and European markets were open last week and had a rough stretch as the virus went from local outbreak to global pandemic. So of course Chinese investors had to take their medicine today.
Still, Chinese central bank officials, who did their best on Monday to cushion the blow by cutting the repo rate and injecting billions of yuan in stimulus, were not happy with investors.
The People’s Bank of China wagged its finger at the people, saying the “stocks plunge had irrational or even panic elements, triggered by herd behavior,” Reuters reported, citing a PBOC newspaper commentary published after markets closed.
Irrational behavior…or orderly sell-off?
***
Here’s the tale of the tape this morning. China’s big three indices—the CSI 300 Index, Shanghai Composite and Shenzen Composite—dropped like a stone from the open, down as much as 9% before recovering ever so slightly (see chart above).
How does that compare to global markets? The S&P 500 fell 2.1% last week, and is down 3.1% since the outbreak was disclosed on January, 17.
The equities markets’ response to the coronavirus so far has been choppy. Yes, there have been big daily swings. But the boldest investors have been buying on the dips, keeping the downturns somewhat limited. As we go into trading today, the Dow stands 2% below where it was at the start of the year. As one analyst told Fortune‘s Anne Sraders on Friday: “I think this is going to be, frankly, a healthy correction.”
That doesn’t sound like panic from where I sit.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
Today's reads
Jamie Dimon's "high class" problem. In the past three years, JP Morgan Chase has purchased $59.5 billion in its own shares—a buyback that would be worth $75 billion in today's price. The stock is getting so pricey that it might be even too expensive for America's biggest bank, the Wall Street Journal reports, prompting Chief Financial Officer Jennifer Piepszak to describe it as a "high class problem."
Belt-tightening in Switzerland. After a disappointing 2019, Credit Suisse has frozen its investment bank bonus pool, the Financial Times reports. It did the same last year. Staff in the Swiss bank’s advisory and capital markets business will see their bonuses cut by a percentage in the “high teens” as the division heads for its worst annual results in at least five years, the FT says.
All eyes on Iowa. Conventional wisdom says presidential hopefuls must target a top-three finish in today’s first-in-the-nation Democratic Party caucus in Iowa. As Bloomberg reports, Bernie Sanders is emerging as the favorite, with Joe Biden, Pete Buttigieg and Senator Elizabeth Warren are all polling well enough to have a chance of securing delegates.
Market candy
Commercial logic. Even after the Kansas City Chiefs stormed to their first Super Bowl win in 50 years on Sunday, the debate will rage on over who had the best commercial. In a comment piece for Fortune, Ken Wheaton, former editor of AdAge, tells us why, in the streaming age, major marketers still pony up for the most expensive ad space on TV. These ads doesn't come cheap. This year’s Super Bowl broadcaster, Fox, charged $5.6 million for a 30-second spot.


fortune--2020-02-03--Should your company take design more seriously?

The discipline of design is at an inflection point, according to Denis Weil, dean of the Institute of Design at the Illinois Institute of Technology in Chicago. Like finance, which over the last several decades has evolved from simple bookkeeping to c-level strategy, Weil argues that design is increasingly seen as being able to play a bigger role in shaping and guiding a business. No longer just there to pretty up products and services, design can become a force to define both what a company does and how it functions.
“We don’t have to prove the value of design. That’s been accomplished,” Weil says. “But what hasn’t been accomplished yet is actually figuring out how to maximize the value of design in big organizations.”
This is something that big organizations are keen to find out. And that’s why several, including Salesforce, Ford, and Capital One, have joined together in a somewhat unlikely coalition to hire Weil and the Institute of Design to research the role design can play in business in the coming years. The result of that research is a new report, “Lead with Purpose: Design’s Central Role in Realizing Executive Vision.” It outlines what companies should start doing now to make design a more intentional part of business, focused on both the big picture and small scale implementation.
Design, the report suggests, should become integral to corporate strategy. In the past, designers and design departments were often seen as a layer on top of the products or customer experiences that emerged from the business side of operations. Today, design must be integrated into every part of the business, the report argues, and used as a tool to guide not just what a business is producing but why and how. Design isn’t just tactical; it’s strategic. (And indeed, it ought to serve both needs.)
The idea for exploring the changing role of design originated with Brandon Schauer, head of enterprise design at Capital One, who leads a team focused on the internal services and workings of the company. The research proposal came from his realization that “the kinds of designers that I was looking for may not really even exist yet,” Schauer says. “I’m trying to hire designers who understand machine learning and A.I. and systems approaches to solutions. They’re out there in the world in onesies and twosies, but as I think forward through the years, we may need them in dozens or hundreds.”
The report’s findings were derived from interviews with 51 professionals from small and large organizations across the U.S. in industries ranging from manufacturing to financial services to health care. A little more than half said they had at least some design training; the rest said they work regularly with designers but aren’t designers themselves. This mix was intended to reflect the audience for the report: both the designers working within organizations but also the middle managers and executives in charge of putting that design to work.
The research was conducted by students at the Institute of Design under the guidance of Brianna Sylver, founder and president of Sylver Consulting and an adjunct professor at the institute. A qualitative (rather than quantitative) approach was deliberate, according to Sylver, who says talking with people one-on-one allowed her team to understand the variety of ways that organizations use and value their designers. “To get into the nuance of how, we needed to have really intimate conversations with people,” she says. One surprising takeaway from those conversations, Sylver says, was that having design-focused leadership didn’t necessarily translate to design being seen strategically throughout the organization.
The qualitative nature of the report means there are few ironclad recommendations. Still, one of its suggestions for better integrating design is to create four new roles within an organization: an “executive vision partner” who works with leadership to develop and articulate its vision; a “vision interpreter” who translates that vision into plans of action; an “action aligner” who strategically breaks down how to achieve those plans; and a “producer” who uses one or many design skills to create the elements of the broader vision. (Just imagine those titles on a business card.)
Teddy Zmrhal, senior managing director of innovation at Salesforce, which helped fund this research, says these kinds of steps can help an organization think more comprehensively about what it is trying to achieve and who it can serve. “The more design is integrated, the more insightful and more human the company ends up feeling,” Zmrhal says.
Shel Kimen, head of Design Thinking, Learning, and Community at Ford, which also backed the research, says the days of siloing design into a product or marketing role are ending. “We are just entering the era of true integration, so it will take time before we truly understand all the benefits of such integration,” Kimen says.
It will likely be good for the bottom line. Schauer argues that design is too often seen as a one-dimensional tool within business, but this simplistic outlook provides limited returns. “We could continue to add more and more designers to create more and more experiences but I don’t know that that would create better results for the customer or for the business,” he says. “It’s the businesses that can unlock how to work differently through design that will get the most value out of it.”
Subscribe to Business by Design, Fortune’s weekly newsletter exploring the transformative power of design in business.


fortune--2020-02-03--Tokyo Olympics, Art Basel, K-pop shows: Asia worries about big events amid coronavirus spread

Japan’s prime minister Shinzo Abe said on Monday that Japan is keeping in close touch with the World Health Organization and other groups to ensure a coronavirus outbreak will not affect the Tokyo Summer Olympics.
Abe’s statement comes on the heels of rumors that Japan may cancel the Olympics over fears of the coronavirus, which has now infected more than 17,000 people worldwide and killed 362.
Organizers had to refute rumors sparked on social media after a German news outlet reported on a meeting between the International Olympic Committee (IOC) and the World Health Organization (WHO)—which did take place—and stated that the outbreak “may have a significant impact on the Games.”
The IOC said in a statement that “Tokyo 2020 will continue to collaborate with all relevant organizations which carefully monitor any incidence of infectious diseases and will review any countermeasures.”
The first confirmed coronavirus-related death outside of China was reported in the Philippines on Sunday.
Some infectious disease experts have said the coronavirus may escalate to the level of a pandemic, which is when a disease is spreading on two or more continents. The outbreak is currently classified as an epidemic, which is when a disease is spreading within one population.
When the current outbreak, which causes respiratory illness, was first detected in December in Wuhan, where it originated from an unknown animal, there was no evidence of human-to-human transmission. Now, China, Germany, Japan, Thailand, Vietnam, and the U.S. have confirmed person-to-person transmission of the virus, which spreads through cough and sneeze droplets in the air and is exacerbated by proximity.
The novel coronavirus is spreading faster than SARS, which infected less than 10,000 people when it spread in 2002-3, and the number of novel coronavirus deaths in mainland China has exceeded the country’s SARS deaths.
Fear of the high infection rates of the coronavirus is causing a bevy of event cancellations across Asia and the rest of the world, even in countries with a low number of virus cases and relatively low risk.
Postponements and cancellations
Many organizers waited for emergency health declarations, from local governments and the WHO, before moving forward with full cancellations or location changes for their events.
The day after the U.S. government altered its travel advisory for China to “do not travel”—the most extreme designation—on Jan. 30, the Boston Symphony Orchestra cancelled its Asia tour, which would have taken the group to Hong Kong, Shanghai, Seoul, and Taipei, all of which have reported coronavirus cases.
The United Nations Convention on Biodiversity was slated to meet in Kunming, China on Feb. 24. After the WHO declared an international public health emergency on Jan. 30, the UN moved the biodiversity talks, a precursor to the critical Cop15 summit in October, from Kunming to Rome. The October talks are still scheduled to take place in Kunming for now.
Asia Horse Week, a major global equestrian meetup scheduled to take place in Hong Kong in February, was cancelled. An Olympic qualifying tournament originally hosted by China in Wuhan was entirely shifted to Sydney.
The scrapping or rescheduling of events in Hong Kong represents even more bad news for a city that officially entered recession last year due to the impact of months of antigovernment protests. The unrest led to numerous event cancellations and drops in tourism and retail—the same sectors that were hit the hardest by the SARS outbreak in 2003, says Yifan Zhang, associate professor of economics at the Chinese University of Hong Kong
Zhang predicts that, just like during SARS, Hong Kong’s retail, tourism, airline, and food and catering sectors will feel the brunt of the coronavirus outbreak.
“These are the sectors that will be affected the most in Hong Kong. The economy was already in a bad condition after the antigovernment protests.” Zhang says.
Safe planning or fear mongering?
Coronavirus fears have led to conflict in some sectors between those calling for event cancellations and those who think the fears are overblown.
Art Basel Hong Kong, scheduled for March, has come under pressure from overseas art dealers to cancel and from local Hong Kong gallerists to run the event and avoid “fear mongering and sensationalism” regarding the virus, which has infected 15 in Hong Kong.
Meanwhile, some large-scale conferences in mainland China, where the majority of coronavirus infections and all but one of the deaths have occurred, have not announced any plans to cancel. The Boao Forum and the China Development Forum are both scheduled for the end of March and organizers have not announced any changes due to the coronavirus.
In New York City, which has no confirmed cases, organizers cancelled a lunar new year festival last week over fears of the virus. The city is currently awaiting results for three suspected coronavirus cases.
K-pop boy group Super Junior cancelled two concerts in Seoul and GOT7, another K-pop group, postponed shows in Thailand and Singapore, which each have just under 20 confirmed virus cases. GOT7 did not provide new dates for the concerts.
Other events have made adjustments in lieu of all-out cancellations. At the Pyeongchang Peace Forum in South Korea, which has 15 confirmed cases, there will be fever scanners located at entrances and facemasks and hand sanitizer available. Participants with connecting flights in China were asked to change their routes, and Chinese delegates to the forum will be participating via video conference.
Elsewhere, events that are running as scheduled face reduced turnout and participant cancellations. Two U.S. aerospace companies, Textron Inc. and General Dynamics Corp’s Gulfstream division, dropped out of the Singapore Airshow, Asia’s biggest airshow, because of risks associated with the coronavirus.
In Hong Kong, organizers of an annual spring reception representing 600 of the city’s stock brokerages were forced to cancel the event, which will cost almost $20,000 in the form of a non-refundable deposit.
“That is expensive but we still need to cancel it, as we need to avoid a crowded event. We did not opt for a delay, as we do not know when the outbreak will end,” Gordon Tsui, chairman of the Hong Kong Securities Association, told the South China Morning Post.
More must-read stories from Fortune:
—Global companies enter lockdown mode as coronavirus rocks China
—Deutsche Bank’s “annus horribilis” reveals the true cost of negative interest rates
—As the coronavirus spreads, these stocks are the most exposed
—Mysterious GPS outages are wracking the shipping industry
—Fortune Explains: Tariffs and trade wars
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-02-03--Fortune poll: Target and Walmart gain (a little) ground in the e-commerce war with Amazon

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As brick-and-mortar shopping wanes, long-time retail giants Target and Walmart are plowing billions of dollars into e-commerce investments in an attempt to catch-up to e-retail juggernaut Amazon.
And the most recent holiday season was put-up-or-shut-up time for these retailers, who needed to show investors that all the money they’re throwing into e-commerce is helping them to compete with (if not catch up with) Amazon. Online store sales jumped 15% in the fourth quarter at Amazon, according to its Thursday earnings report. We won’t see earnings from Walmart until February 18, or from Target until March 3. But even those reports won’t tell us key details, like what households and demographics these retailers are capturing or missing out on.
To better understand who is winning and losing in the e-commerce war, Fortune-SurveyMonkey polled* almost 2,600 Americans between January 4-7—right after the huge online retailing season ended—to find out where they had shopped online and how their e-retail habits had changed from the previous year.
The big numbers you should know:
80%
… of Americans ordered gifts online during the 2019 holiday season.
67%
… of Americans purchased gifts online this holiday season from Amazon. That far exceeded the share who bought gifts online from Walmart (28%), Target (18%), and eBay (12%).
29%
… of Amazon Prime members ordered gifts online this holiday season from Walmart, and 23% ordered from Target. Prime members were actually more likely than people who aren’t Prime members to order from Walmart (25%) and Target (12%).
56%
… of Amazon.com shoppers increased their purchasing from the site in 2019, and 17% bought less. Meanwhile, 35% of Walmart.com shoppers bought more online from the Arkansas-based retailer, and 27% decreased their purchasing levels.
Big picture takeaway:
Amazon still sits atop the e-commerce heap, while Walmart and Target have taken firm holds on the second and third spots. And this holiday season showed that Walmart and Target can compete for even Amazon’s most loyal customers (Prime members). Still, even as Walmart and Target made huge strides into growing their online businesses, Amazon buyers increased their 2019 purchasing from the site at a higher rate.
Four deeper takeaways:
1. Amazon leads with affluent shoppers—Walmart is strong with middle-income families
Amazon was the top site for online gift buying for all income groups, but when it came to six-figure-income households the Seattle-based company really showed its dominance this holiday season. This is after all a group that Amazon has worked to cultivate, including using its purchase of Whole Foods in 2017 to intertwine itself deeper into their lives.
On the flip side, Amazon is most vulnerable to competition for modest- income households. Online shoppers with incomes over $100,000 choose Amazon over Walmart at a ratio of 4-to-1. But among households with incomes under $50,000 Amazon only won 2-to-1. Meanwhile, Target posted its best results with middle-income and higher-income households, building off its long-time success with suburban shoppers.
2. Amazon can’t take Prime members for granted
Among American adults, 60% told Fortune-SurveyMonkey they have an Amazon Prime membership. That number is so large that Target and Walmart can’t risk allowing Amazon to become the sole seller to this group.
The good news for Walmart and Target is that Amazon Prime members actually bought from them online at a higher rate than people who aren’t Prime members during the 2019 holiday shopping season. Among Prime members, 29% bought from Walmart and 23% from Target. Meanwhile, 25% of non-Prime shoppers purchased online gifts from Walmart, while 12% purchased from Target.
3. Amazon wins on delivery speeds—Walmart shoppers come for prices
Printed on every Walmart bag is the phrase “Save money. Live Better,” and before that it used to be “Always Low Prices.” Walmart has taken that emphasis on price to the World Wide Web. Almost half of Walmart.com shoppers say product prices is the area where the site performs best. Meanwhile, speed of delivery is what Amazon.com shoppers value most from that platform.
“Walmart’s mission is everyday low prices, that is its corporate strategy. And that is what its supply chain has to deliver,” says Anníbal Sodero, an assistant professor at Ohio State University’s Fisher College of Business. “Amazon is not about cost, it is about satisfying the customers needs. They do that in the most efficient way.”
On one-hand Walmart clearly needs work to up its logistics game and lower delivery times to compete with Amazon. Then again, being known for low prices on the web—where competition is endless—is a big advantage: Among all online shoppers, 80% list product price as an important factor, followed by shipping rates (67%), speed of delivery (59%), order accuracy (47%), customer service (47%), variety of products (34%), website layout (20%), and mobile app (16%).
4. Walmart has an image problem
Source: Facebook
Walmart has received its share of bad press over the years, including for issues related to worker pay and conditions. That might explain why among major online retailers, Walmart has the highest share of negative views towards its brand. It might also serve as a warning to Amazon, which has received more media and political criticism of late.
And there is certainly a political component here. Amazon and Walmart score their highest negative ratings among Democrats, while Target fares worst among Republicans.
One more interesting number:
36%
…of American adults say they make online purchases every week.
*Methodology: The Fortune-SurveyMonkey poll was conducted among a national sample of 2,587 adults in the U.S. between January 4-7. This survey’s modeled error estimate is plus or minus 3 percentage points. The findings have been weighted for age, race, sex, education, and geography.