TRENDS

Cost-Cutting, Conservative Backlash, and the Labor Market Is Killing Companies’ Diversity Targets

BWas diversity, equity, and inclusion (DEI) a low-interest rate phenomenon? All it took was four years and a labor market downturn to put it on life support — and companies are no longer afraid to prioritize profits over people, especially given the rising political stakes of DEI efforts.

Goodbye DEI, we hardly knew ya: In the aftermath of the nationwide Black Lives Matter protests, companies committed to becoming more inclusive. But four years later, many firms have decided that DEI is simply not worth the money. Large employers have significantly cut their DEI budgets — some by up to 90%. And now, some firms are abandoning diversity commitments entirely, with Microsoft ($MSFT) announcing this week that it eliminated an entire DEI team, calling it “no longer business critical.”

• The news follows similar actions by tech firms like Google ($GOOG), Meta ($META), and Zoom ($ZM), which once trumpeted their diverse workforces but have now made “significant cuts” to DEI.

• Even media companies have been cutting back. Warner Bros. Discovery’s ($WBD) CNN axed its race and equality team and Snap ($SNAP) reduced DEI roles.

Mask Off

While companies insist that diversity remains an important part of their business, the death of DEI isn’t just financial — it’s another example of how companies are bowing to Conservative pressure.

• Over the last year, Republicans at the state and federal levels have filed lawsuits, passed anti-DEI bills, and proposed bans on DEI policies in the government.

• In recent weeks, agriculture giants John Deere ($DE) and Tractor Supply ($TSCO) tamed their DEI and climate goals over backlash from a Conservative activist investor.

Forward-looking: Conservatives have successfully pushed some companies to abandon climate targets, support for the LGBTQ+ community, and now DEI — marking a significant reversal of pandemic-era promises made by large corporations. These political tensions could worsen with the upcoming election, potentially exacerbating the culture war and the fabric of American society.

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LARGECAP RECAP

😎 EssilorLuxottica Is A Sight For Meta’s Sore Eyes

The future isn’t set in stone, but Meta ($META) is planning to frame it beautifully with its next investment. CEO Mark Zuckerberg is exploring acquiring a ~5% stake (valued at $4.9B) in the world’s largest eyewear manufacturer and Ray-Ban parent company, EssilorLuxottica ($ESLOY), and has already secured clearance from US antitrust authorities — sending the eyewear conglomerate’s shares up nearly 2%.

• In an April earnings call, Zuckerberg emphasized his optimistic outlook on smart glasses — stating that they are “one of the bigger areas” in Meta’s AR and VR initiatives.

• Meta and EssilorLuxottica are also planning to target younger consumers with branded smart sunglasses from Supreme, which EssilorLuxottica acquired this week for $1.5B.

More than what meets the eye: Being in the eyewear business isn’t too shabby, especially considering the high profitability in the industry that helps EssilorLuxottica generate earnings (before interest, tax, and depreciation) margins as high as 21%. But a slowdown in sales has prompted them to look beyond glasses and into complementary technology. This week, the company also announced the acquisition of an 80% stake in Heidelberg Engineering, which specializes in eye surgery technologies. Eyesight getting worse from doomscrolling IG? Try some Zuck-powered glasses… or eye surgery.

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Markets & Economy

Economists optimistic despite slowdown: A WSJ survey reveals economists remain confident in the US economic outlook, viewing recent weakness as normalization. They expect inflation to gradually hit the Fed’s 2% target, with most predicting a rate cut in September. [Read]

401(k) fees have declined significantly: Mutual fund fees in 401(k) plans have dropped from around 0.80% in 2000 to 0.31% in 2023, saving billions for retirement savers. Lower fees allow more money to stay invested and compound over time. [Read]

Publicis Groupe raises guidance: The advertising giant reported 5.6% organic revenue growth in Q2, beating Visible Alpha’s 4.6% forecast. Publicis ($PUBGY) also bumped up its revenue growth guidance to 5% to 6% for the year, citing market share gains. [Read]

Business & Wealth

Ford shifts gears on EV plans: Ford ($F) will invest $3B to expand Super Duty truck production, including $2.3B at its Oakville plant in Canada. This reverses previous plans to convert the facility into an EV hub while its commercial business thrives. [Read]

Goldman Sachs targets retail investors: Goldman Sachs ($GS) is partnering with robo-adviser Betterment to offer sophisticated investment strategies previously reserved for wealthy clients. This move aims to boost fee revenue. [Read]

WNBA media rights value rises: The WNBA is set to receive ~$200M annually in new media rights deals, up from $60M. The players’ union executive argues that the league is still undervalued, given its recent growth and popularity. [Read]

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DIGIT OF THE DAY

Amazon Bagged A Record $14.2B During Its 48-Hour Prime Day Sale

It’s that time of the year when saved wishlist items finally make it to checkout. According to Adobe Analytics, American shoppers reached a new high during Amazon’s Prime Day sale, spending $14.2B during the two-day event — an 11% increase from last year. This surge was driven by an early start to back-to-school shopping, spurred on by significant retailer discounts.

• During the event, Amazon($AMZN) captured ~60% of total online spending, from the usual 40% on regular days, with the average household spending ~$152 this year.

• Back-to-school spending soared 216% over June’s daily sales, and electronics sales grew 61% — while the top-selling items included protein shakes, Amazon’s Fire TV Stick, and Glad trash bags (BBG).

Surf, shop, spend: Amazon isn’t the only beneficiary of online shopping sprees. Retailers like Target ($TGT) and Walmart ($WMT) have also reported increased online sales, thanks to the growing shift toward online shopping. According to FTI Consulting, US online retail sales are on track to reach $1.2T this year, and e-commerce is expected to account for ~35% of total retail sales in the next decade.