Tag Archives: Sales Figures

Meta stock spikes despite earnings miss, as Facebook hits 2 billion users for first time and sales guidance quells fears

Meta Platforms Inc. shares soared in after-hours trading Wednesday despite an earnings miss, as the Facebook parent company guided for potentially more revenue than Wall Street expected in the new year and promised more share repurchases amid cost cuts.

Meta
META,
+2.79%
said it hauled in $32.17 billion in fourth-quarter revenue, down from $33.67 billion a year ago but stronger than expectations. Earnings were $4.65 billion, or $1.76 a share, compared with $10.3 billion, or $3.67 a share, last year.

Analysts polled by FactSet expected Meta to post fourth-quarter revenue of $31.55 billion on earnings of $2.26 a share, and the beat on sales coincided with a revenue forecast that also met or exceeded expectations. Facebook Chief Financial Officer Susan Li projected first-quarter sales of $26 billion to $28.5 billion, while analysts on average were projecting first-quarter sales of $27.2 billion.

Shares jumped more than 18% in after-hours trading immediately following the release of the results, after closing with a 2.8% gain at $153.12.

Alphabet Inc.’s
GOOGL,
+1.61%

GOOG,
+1.56%
Google and Pinterest Inc.
PINS,
+1.56%
benefited from Meta’s results, with shares for each company rising 4% in extended trading Wednesday.

“Our community continues to grow and I’m pleased with the strong engagement across our apps. Facebook just reached the milestone of 2 billion daily actives,” Meta Chief Executive Mark Zuckerberg said in a statement announcing the results. “The progress we’re making on our AI discovery engine and Reels are major drivers of this. Beyond this, our management theme for 2023 is the ‘Year of Efficiency’ and we’re focused on becoming a stronger and more nimble organization.”

Read more: Snap suffers worst sales growth yet in holiday quarter, stock plunges after earnings miss

Facebook’s 2 billion-user milestone was slightly better than analysts expected for user growth on Meta’s core social network. Daily active users across all of Facebook’s apps neared, but did not crest, another round number, reaching 2.96 billion, up 5% from a year ago.

Meta has been navigating choppy ad waters as it copes with increasing competition from TikTok and fallout from changes in Apple Inc.’s
AAPL,
+0.79%
ad-tracking system in 2021 that punitively harmed Meta, costing it potentially billions of dollars in advertising sales. Meta has invested heavily in artificial-intelligence tools to rev up its ad-targeting systems and making better recommendations for users of its short-video product Reels, but it laid off thousands of workers after profit and revenue shrunk in recent quarters.

The cost cuts seemed to pay off Wednesday. While Facebook missed on its earnings, it noted that the costs of its layoffs and other restructuring totaled $4.2 billion and reduced the number by roughly $1.24 a share.

Meta executives said they now expect operating expenses to be $89 billion to $95 billion this year, down from previous guidance for $94 billion to $100 billion. Capital expenditures are expected to be $30 billion to $33 billion, down from previous guidance of $34 billion to $37 billion, as Meta cancels multiple data-center projects.

In a conference call with analysts late Wednesday, Zuckerberg called 2023 the “year of efficiency.”

“The reduced outlook reflects our updated plans for lower data-center construction spend in 2023 as we shift to a new data-center architecture that is more cost efficient and can support both AI and non-AI workloads,” Li said in her outlook commentary included in the release.

Meta expects to increase its spending on its own stock. The company’s board approved a $40 billion increase in its share-repurchase authorization; Meta spent nearly $28 billion on its own shares in 2022, and still had nearly $11 billion available for buybacks before that increase.

“Investors are cheering Meta’s plans to return more capital to shareholders despite worries over rising costs related to its metaverse spending,” said Jesse Cohen, senior analyst at Investing.com.

The results came a day after Snap Inc.
SNAP,
-10.29%
posted fourth-quarter revenue of $1.3 billion, flat from a year ago and the worst year-over-year sales growth Snap has ever reported. But they also arrived on the same day Facebook scored a major win in a California court. The company successfully fended off the Federal Trade Commission bid to win a preliminary injunction to block Meta’s planned acquisition of VR startup Within Unlimited.

Read more: Meta wins bid to buy VR startup Within Unlimited, beating U.S. FTC in court: report

Meta shares have plunged 53% over the past 12 months, while the broader S&P 500 index 
SPX,
+1.05%
has tumbled 10% the past year.

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Goldman Sachs Cut CEO David Solomon’s Pay to $25 Million in 2022

Goldman Sachs Group Inc.

GS 0.07%

Chief Executive

David Solomon

took a nearly 30% pay cut in 2022.

Mr. Solomon received $25 million in total compensation last year, down from $35 million in 2021. His 2022 pay package consisted of a $2 million base salary, a cash bonus of $6.9 million and a $16.1 million stock award that is tied to how well the bank performs in the next few years, Goldman said in a regulatory filing.

Mr. Solomon’s 2022 compensation reflects the bank’s performance compared with 2021, Goldman said in the filing. Profit fell 48% last year, and revenue declined 20%, largely due to a slowdown in corporate deal-making that had previously fueled blockbuster earnings. Still, Goldman shares outperformed the KBW Nasdaq Bank Index and the broader S&P 500 last year. 

In 2021, the bank’s shares were soaring and the bank was minting money in a merger boom that kept its high-price bankers busy. 

Goldman doubled Mr. Solomon’s pay that year, an acknowledgment of the bank’s record profits and following a year when he was penalized for the firm’s involvement in the 1MDB corruption scandal. The bank also awarded Mr. Solomon a one-time stock award of about $30 million that year, citing “the rapidly increasing war for talent in the current environment.”

Late last year, Mr. Solomon engineered a restructuring of Goldman’s businesses meant to spotlight steadier businesses like asset and wealth management, taking some of the focus off its more volatile Wall Street operations. 

He’s also paring back the bank’s consumer-facing Marcus operations and has admitted that Goldman’s attempts to do too much there contributed to missteps. The bank’s newly created Platform Solutions division, which houses credit cards and other pieces of the consumer business, lost about $2 billion on a pretax basis in 2022. 

Mr. Solomon has moved to cut costs at Goldman. The bank laid off some 3,000 employees this month and slashed bonuses for many bankers by up to 40%. 

Goldman’s compensation committee also considered the bank’s “continued progress in its strategic evolution as well as Mr. Solomon’s strong individual performance and effective leadership,” according to the filing. 

Mr. Solomon’s pay fell more than his Wall Street counterparts. 

Morgan Stanley

paid Chief Executive James Gorman $31.5 million for his work in 2022, a 10% pay cut from the year before.

 JPMorgan Chase

& Co. awarded CEO Jamie Dimon $34.5 million in 2022 compensation, in line with a year earlier.

Wells Fargo

& Co. CEO Charles Scharf’s 2022 pay also stayed flat at $24.5 million in 2022.

Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com

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Dow to Cut 2,000 Jobs Globally

Dow is slashing jobs and shutting down assets as it looks to make cost savings.



Photo:

Sean Proctor/Bloomberg News

Dow Inc.

DOW 0.40%

said it is laying off about 2,000 employees globally as job cuts that have so far been concentrated in the technology sector spread to other parts of the economy.

The Midland, Mich.-based chemicals company said it is targeting $1 billion in cost cuts this year as slowing economic growth and a drop-off in demand weigh on sales.

Dow said it is also shutting down certain assets and broadly looking to align spending with the macroeconomic environment. The company said it expects to book a charge of $550 million to $725 million in the first quarter for costs tied to the cost-cutting moves.

Chief Executive

Jim Fitterling

said the company is optimizing its cost structure amid macroeconomic uncertainties and “challenging energy markets, particularly in Europe.”

Shares of Dow rose less than 1% to close at $58.12 on Thursday.

Dow’s layoffs come after manufacturing conglomerate

3M Co.

said earlier this week that it was cutting 2,500 jobs globally, or about 2.6% of the company, as it confronts weakening demand.

The companies join a wave of technology companies that are cutting thousands of jobs as they recalibrate after growing rapidly at the start of the Covid-19 pandemic. On Wednesday,

International Business Machines Corp.

said it would cut 3,900 jobs, while software company

SAP SE

on Thursday said it would shed 3,000 positions.

Dow on Thursday also posted weaker-than-expected results for the fourth quarter. Revenue fell more than 17% to $11.86 billion, missing analysts’ estimates, with the company citing slowing economic growth around the world and destocking of inventory by customers.

The company’s fourth-quarter profit tumbled to 85 cents a share, down from $2.32 a share a year earlier. Adjusted earnings for the quarter missed estimates by a penny.

“While we see initial positive signs from moderating inflation in the U.S., improving outlook for energy in Europe, and reopening in China, we continue to be prudent and proactive,” Mr. Fitterling said.

Dow said it is targeting $500 million in structural improvements and another $500 million in operating cost reductions. The company said it would look to cut costs tied to purchasing raw materials, logistics and utilities.

Write to Will Feuer at Will.Feuer@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the January 27, 2023, print edition as ‘Dow to Cut Headcount by 2,000.’

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Microsoft Earnings Fell Last Quarter Amid Economic Concerns

Microsoft Corp.

MSFT -0.22%

recorded its slowest sales growth in more than six years last quarter as demand for its software and cloud services cooled on concerns about the health of the global economy.

The Redmond, Wash., company’s revenue expanded 2% in the three months through Dec. 31 from a year earlier to $52.7 billion. Its net income fell 12% to $16.4 billion. That is the company’s lowest revenue growth since the quarter that ended in June 2016.

“Organizations are exercising caution given the macroeconomic uncertainty,” Microsoft Chief Executive

Satya Nadella

said on an earnings call Tuesday.

The software company is the first of the tech titans to announce earnings for the quarter. It and others have recently announced layoffs of thousands of people to reflect a sudden lowering of expectations about future demand. Last week Microsoft announced plans to eliminate 10,000 jobs in response to the global economic slowdown, the company’s largest layoffs in more than eight years.

Microsoft said it expects around $51 billion in revenue this quarter, a 3% increase from the same quarter last year. Its shares, which had initially risen on the results in after-hours trading, gave up their gains after the company announced its guidance. 

Microsoft’s Intelligent Cloud business, which includes its Azure cloud-computing business, grew 18% to $21.51 billion. Azure grew 31%, which was slightly above some analysts’ expectations.

Microsoft is one of the top companies in cloud-computing services that have boomed during the pandemic. In the middle of the health crisis, Microsoft reported several quarters in a row of 50% or more year-over-year sales growth for its cloud-computing platform, the world’s No. 2 behind

Amazon.com Inc.’s

cloud. While Azure and Microsoft’s other cloud services remain the main engine for the company’s growth, demand isn’t what it was even a year ago as customers try to manage their cloud computing costs.

The company has been betting the next wave of demand for cloud services could come from more companies and people using artificial intelligence. It has been deepening its relationship with the AI startup OpenAI, the company behind the image generator Dall-E 2 and the technology behind ChatGPT, which can answer questions and write essays and poems.

“The age of AI is upon us and Microsoft is powering it,” Mr. Nadella said Tuesday.

Microsoft had been sheltered from much of the recent downturn because it gets most of its sales from companies rather than advertising and consumer spending. However, it isn’t immune to the end of pandemic trends that turbocharged demand, hiring and investment as well as economic headwinds such as high interest rates.

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Demand for Windows operating-system software has fallen with sales of the personal computers that use it. Households, companies and governments that bought computers during the pandemic are scaling back.

That was reflected in Microsoft’s personal computing segment revenue, which fell 19% to $14.24 billion. Sales related to its Windows operating system declined 39% and sales of devices like its Surface tablets fell 39%.

Worldwide PC shipments were down 29% in the fourth quarter last year compared with the previous year, according to preliminary data from the research firm Gartner Inc. Financial analysts don’t expect that trend to improve until 2024.

Photos: Tech Layoffs Across the Industry

Microsoft said its videogaming revenue fell 12% during the quarter. Videogames and Microsoft’s Xbox videogame consoles are increasingly important businesses for the company. The videogaming industry is going through a slowdown as pandemic-related restrictions ease and people spend less time at home.

The company made a huge bet on the sector a year ago with its $75 billion plan to acquire videogame giant

Activision Blizzard Inc.

Last month the Federal Trade Commission sued to block the acquisition, saying the deal would give Microsoft the ability to control how consumers beyond users of its own Xbox consoles and subscription services access Activision’s games. Microsoft then filed a rebuttal saying the deal won’t hurt competition in the videogaming industry. It could take months before it is decided in the U.S. and elsewhere whether the deal can go through.

After the close of regular stock trading on Tuesday, Microsoft shares had slipped around 18% over the previous year, broadly in line with the tech-heavy Nasdaq Composite Index.

Write to Tom Dotan at tom.dotan@wsj.com

Write to Tom Dotan at tom.dotan@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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3M to Cut Jobs as Demand for Its Products Weakens

3M Co.

said it is cutting 2,500 manufacturing jobs globally as the company confronts turbulence in overseas markets and weakening consumer demand.

The maker of Scotch tape, Post-it Notes and thousands of other industrial and consumer products said Tuesday that it expects lower sales and profit in 2023 after demand weakened significantly in late 2022, pulling down quarterly performance.

The St. Paul, Minn., company forecast sales this year to slip from last year’s level with weak demand for consumer products and electronic items, particularly smartphones, tablets and televisions, for which 3M provides components. Fourth-quarter sales for 3M’s consumer business dropped nearly 6% from the same period a year earlier.

“Consumers sharply cut discretionary spending and retailers adjusted their inventory levels,” 3M Chief Executive

Mike Roman

said during a conference call. “We expect the demand trends we saw in December to extend through the first half of 2023.”

3M shares were down 5.2% at $116.25 Tuesday afternoon, while major U.S. stock indexes were little changed.

The company said demand for its disposable face masks is receding, as healthcare providers spend less on Covid-19 measures, and mask demand returns to prepandemic levels. 3M said it expects mask sales to decline between $450 million and $550 million this year from 2022.

3M executives said the spread of Covid infections in China is weighing on sales there, and sporadic plant closings are interrupting industrial production. China also is reducing production of consumer electronics because of weakening consumer demand, they said, and 3M’s exit from its business in Russia last year will also contribute to lower sales this year.

The 2,500 layoffs represent roughly 2.6% of the company’s workforce, which a regulatory filing said was about 95,000 at the end of 2021. Mr. Roman declined to specify where the job cuts will take place, or whether the company might make further reductions as it reviews its supply chains and prepares to spin off its healthcare unit.

“We’re looking at everything that we do as we manage through the challenges that we’re facing in the end markets and we focus on driving improvements,” he said.

The company said it would take a pretax restructuring charge in the first quarter of $75 million to $100 million.

Mr. Roman said the job cuts were unrelated to litigation facing the company. 3M is defending against allegations that the so-called forever chemicals it has produced for decades have contaminated soil and drinking water. It is also involved in litigation over foam earplugs its subsidiary Aearo Technologies LLC sold to the military. About 230,000 veterans have filed complaints in federal court alleging the earplugs failed to protect them from service-related hearing loss.

3M has said the earplugs were effective when military personnel were given sufficient training on how to use them. In litigation over firefighting foam that incorporated forms of forever chemicals, 3M is expected to argue that the products were produced to U.S. military specifications, granting the company legal protection as a government contractor.

In both cases, Mr. Roman said the company is focused on finding a way forward.

3M said the strong value of the U.S. dollar continues to erode sales from other countries when foreign currencies are converted to dollars.

The company forecast that sales for the quarter ending March 31 will be down 10% to 15% from the same period last year. For the full year, the company projects sales to fall between 6% and 2%, and expects adjusted earnings of $8.50 a share to $9 a share. The company earned $10.10 a share in 2022, excluding special charges, and analysts surveyed by FactSet were expecting the company to earn $10.22 in 2023.

For the fourth quarter, the company posted a profit of $541 million, or 98 cents a share, compared with $1.34 billion, or $2.31 a share, a year earlier.

Stripping out one-time items, including costs tied to exiting the company’s operations making forever chemicals, adjusted earnings came to $2.28 a share. Analysts were looking for adjusted earnings of $2.36 a share, according to FactSet.

Sales fell 6% to $8.08 billion for the quarter, slightly topping expectations of analysts surveyed by FactSet.

Mr. Roman said there were promising signs for some of 3M’s businesses, including in biopharma processing, home improvement and automotive electrification, the last of which he said grew 30% in 2022 to become a roughly $500 million business.

“There’s more to it than consumer electronics, but certainly the consumer-electronics dynamics are the story of the day,” he said.

Write to John Keilman at john.keilman@wsj.com and Bob Tita at robert.tita@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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U.S. Retail Sales Fell 1.1% in December

Purchases at stores, restaurants and online, declined a seasonally adjusted 1.1% in December from the prior month, the Commerce Department said Wednesday. Sales were also revised lower in November and have fallen three of the past four months. The department seasonally adjusts monthly data to make it comparable over time. On an unadjusted basis, December is typically the peak sales month for the year.

A Federal Reserve report Wednesday found economic activity was relatively flat at the start of the year and businesses are pessimistic about growth in the months ahead. A separate Fed report showed U.S. industrial production slumped in December, led by weakness in manufacturing. A Labor Department report showed inflation was cooling.

Stocks fell Wednesday after the data releases. The S&P 500 shed 1.6%. The Dow Jones Industrial Average was down 1.8%, while the Nasdaq Composite Index lost 1.2%. The yield on the benchmark 10-year Treasury note declined 0.16 percentage point to 3.374%.

The latest data add to signs that the U.S. economy is slowing as the Fed pushes up interest rates to combat inflation. Hiring and wage growth eased in December, U.S. commerce with the rest of the world declined significantly in November, and existing-home sales have fallen for 10 straight months.

S&P Global downgraded its estimate for fourth-quarter economic growth Wednesday by a half percentage point to a 2.3% annual rate. Economists surveyed by The Wall Street Journal this month expect higher interest rates to tip the U.S. economy into a recession in the coming year.

“The lag impact of elevated inflation weighs heavily on U.S. households, it’s very clear that the median American consumer is still reeling from the loss of wages in inflation-adjusted terms,” said

Joseph Brusuelas,

chief economist at RSM US LLP. “We’re moving towards what I would expect to be a mild recession in 2023,” he added.

Federal Reserve Bank of St. Louis President

James Bullard

said Wednesday the central bank should keep on rapidly raising interest rates and supported a half-percentage-point increase at the Jan. 31-Feb. 1 meeting. 

“We want to err on the tighter side to make sure we get the disinflationary process to take hold in the economy,” he said at a Wall Street Journal Live event.

Mr. Bullard’s position is at odds with several of his colleagues, who have suggested that a slower pace of rate increases would be appropriate to allow Fed officials to gauge how their aggressive pace of policy tightening has affected the economy.

Inflation, while still historically high, is showing signs of cooling as demand eases. Unlike many government reports, retail sales aren’t adjusted for inflation. 

Consumer prices advanced 6.5% from a year earlier in December, the sixth straight month of deceleration. The producer-price index, which generally reflects supply conditions in the economy, fell in December from the prior month, and increased at the slowest annual pace since March 2021, the Labor Department said Wednesday.

The National Retail Federation said Wednesday holiday sales were disappointing. The trade group said November and December sales rose 5.3% compared with the same period last year to $936.3 billion. In November, the NRF said it expected holiday sales to rise between 6% and 8%. The NRF figures aren’t adjusted for inflation and exclude fuel, auto and restaurant spending.

Somewhat slower inflation at the end of the year didn’t offset weaker demand, said NRF Chief economist

Jack Kleinhenz.

 Consumers are “hit with higher food prices, they are getting hit with higher service prices and they are having to make choices,” he said. Some spending was likely pulled into October as retailers kicked off deals early this year, he added. Retailers discounted heavily and early to clear excess stock from their shelves and warehouses.

Zach Carney, of Boston, said he has been cutting back on eggs and red meat because the prices are so high. “The price of eggs really jumps out at you,” the 28-year-old publicist said. Instead, he has been stocking up on value packs of chicken and buying more store-brand cereal and olive oil, which cost less than national brands.

In 2021, officials thought high inflation would be temporary. But a year later, it was still near a four-decade high. WSJ’s Jon Hilsenrath explains factors that have kept inflation up longer than expected. Illustration: Jacob Reynolds

The retail sales report showed spending declined in a number of gift-giving categories in December, including at electronics, clothing and department stores, and with online retailers, a category which includes companies such as Amazon.com Inc.

Dining out at bars and restaurants dropped 0.9% in December. Sales of furniture and vehicles, which are sensitive to higher borrowing costs, both fell sharply. The only categories to post slight growth in December were grocery, sporting goods and home improvement stores, as winter storms battered many parts of the U.S.

Some retailers have said the recently completed holiday shopping season turned out to be weaker than expected. Macy’s Inc. warned of softer sales, and Lululemon Athletica Inc. said its profit margins were squeezed as shoppers bought more items on sale.

Many retailers had benefited from surging sales earlier in the pandemic as shoppers stocked up on everything from toilet paper to home electronics and furniture, supported by government stimulus dollars. Those tailwinds have cooled, leaving retailers and product manufactures to confront slower spending in some categories and the longer term dynamics of the industry, such as a gradual shift to online spending.

Apparel retailers are especially exposed to the current pullback in discretionary spending, said Kelly Pedersen, the U.S. retail leader at PwC, a consulting firm. “Buying fashion items at department stores is discretionary,” said Mr. Pedersen. Many apparel retailers are still working to sell through excess inventory and offering deep discounts amid weak demand, he said. 

Department stores, which saw a 6.6% sales drop in December, struggled to boost sales before the pandemic quickly shifted buying habits. In 2020, a string of department stores filed for bankruptcy, including Lord & Taylor, J.C. Penney Co., Neiman Marcus Group Ltd. and Stage Stores Inc. 

Party City Holdco Inc. filed for chapter 11 bankruptcy this week while noting inflationary pressures have hampered customers’ willingness to spend. Bed Bath & Beyond Inc. said this month it plans more layoffs and cost cuts amid falling sales.

The retail sales report offers a partial picture of consumer demand because it doesn’t include spending on many services such as travel, housing and utilities. The Commerce Department will release December household spending figures covering goods and services later this month.

Corporate reports out in February will add to that picture. Walmart Inc., Target Corp. and other large retailers—which sell a variety of goods such as food, clothes and décor—report quarterly earnings next month, which will include December sales.

Write to Harriet Torry at harriet.torry@wsj.com and Sarah Nassauer at Sarah.Nassauer@wsj.com

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Biden Administration to Ask Congress to Approve F-16 Sale to Turkey

The Biden administration is preparing to seek congressional approval for a $20 billion sale of new F-16 jet fighters to Turkey along with a separate sale of next-generation F-35 warplanes to Greece, in what would be among the largest foreign weapons sales in recent years, according to U.S. officials.

Administration officials intend the prospect of the sale to prod Turkey to sign off on Finland and Sweden’s accession to the North Atlantic Treaty Organization, which Ankara has blocked over objections to their ties to Kurdish separatist groups. Congress’s approval of the sale is contingent on Turkey’s acquiescence, administration officials said. The two countries ended decades of neutrality when they decided to join NATO last year in reaction to Russia’s invasion of Ukraine.

The sale to Turkey, which the administration has been considering for more than a year, is larger than expected. It includes 40 new aircraft and kits to overhaul 79 of Turkey’s existing F-16 fleet, according to officials familiar with the proposals.

Congressional notification of the deal will roughly coincide with a visit to Washington next week by Turkey’s Foreign Minister

Mevlut Cavusoglu.

The sale to Turkey also includes more than 900 air-to-air missiles and 800 bombs, one of the officials said.

Turkish President Recep Tayyip Erdogan has faced U.S. pressure to approve NATO expansion.



Photo:

adem altan/Agence France-Presse/Getty Images

The separate sale to Greece, which was requested by the Greek government in June 2022, includes at least 30 new F-35s. The F-35 Joint Strike Fighter is the U.S.’s most advanced jet fighter. While officials described the timing of the notifications for both Turkey and Greece as coincidental, it could quell protests from Athens over the F-16 sale if its request is also granted. Greece and Turkey are historic regional rivals and a sale to Turkey alone would likely draw swift condemnation from Athens.

The potential sale of the aircraft could have far-reaching implications for Washington’s efforts to shore up ties with a pair of NATO allies amid the Western response to Russia’s assault on Ukraine.

A State Department spokesman declined to comment on potential arms transfers as a matter of policy until and unless they are formally notified to Congress. Congress has never successfully blocked a foreign arms sale requested by the White House.

The proposed deal with Turkey comes at a moment of tension in U.S.-Turkish relations, with Washington also attempting to convince President Recep

Tayyip Erdogan

to do more to enforce sanctions on Russia and to approve the entry of Finland and Sweden into NATO.

The proposal also sets up a possible showdown with some congressional leaders who have vowed to oppose weapons sales to Turkey. Sen.

Bob Menendez,

a Democrat from New Jersey who is the chairman of the Senate Foreign Relations Committee, has said he wouldn’t approve any F-16 sale to Turkey, citing human-rights concerns.

In recent months, Mr. Erdogan has also threatened to launch a new military incursion against Kurdish militants in Syria. Last month a Turkish court also convicted the mayor of Istanbul, a popular opponent of Mr. Erdogan, of insulting public officials in what human rights groups said was part of a crackdown on the Turkish opposition. The Turkish government says its courts are independent.

Under U.S. arms-export laws, Congress will have 30 days to review the deal. If Congress wants to block the deal it must pass a joint resolution of disapproval. Congress can also pass legislation to block or modify a sale at any time until the delivery.

The Biden administration is looking to sell at least 30 new F-35 jet fighters to Greece.



Photo:

robert atanasovski/Agence France-Presse/Getty Images

U.S. officials say they are encouraging Mr. Erdogan to drop his opposition to Finland and Sweden joining NATO. One official characterized the F-16s as the “carrot on a stick” to get Turkey to agree.

This, officials said, could ease opposition to the sale among some members of Congress. Officials within the State Department have argued for months that the expansion was imperative to NATO’s collective security. However, officials expect that while the Greece package could sail through Congress, the F-16s may be delayed over some members’ reluctance to embolden Ankara with the additional firepower.

Mr. Erdogan first threatened to veto the two countries’ entrance over their ties to Kurdish militant groups in Iraq and Syria. Turkey has fought a slow-burning war with Kurdish armed groups for decades in a conflict that has left tens of thousands dead.

NATO leaders say that Finland and Sweden have addressed Turkey’s concerns, upholding an agreement signed last year that called for both countries to evaluate Turkish extradition requests and drop restrictions on arms sales to Ankara.

Turkish officials say that Sweden hasn’t done enough to uphold its obligations to Turkey, citing what they say is continuing activity by the militant Kurdistan Workers’ Party in Sweden. The Turkish government this week summoned Sweden’s ambassador over a demonstration in Stockholm in which protesters hung a puppet of Mr. Erdogan by its feet. The Turkish president’s hard line against Sweden has broad support within Turkey, including among opposition parties, who have long opposed what they see as a permissive approach to Kurdish militant groups in Europe.

The timing of a vote on NATO expansion in the Turkish parliament will also depend on Turkey’s national election this year, in which Mr. Erdogan faces a close race amid public discontent over the country’s struggling economy.

The Turkish Ministry of Foreign Affairs didn’t respond to a request for comment.

The Biden administration remains cautiously optimistic that Turkey will eventually come around on Finland and Sweden. U.S. officials said last year that there would be no quid pro quo for Turkey’s approval of the NATO expansion, and said that the timing of the F-16 sale was dependent on the administration’s own internal process to complete the deal.

The proposed sales also come amid heightened tensions between Turkey and Greece, two longtime adversaries who have traded threats over the past year in the eastern Mediterranean.

Turkey was originally a participant in the U.S.’s cutting-edge F-35 program but was expelled after Mr. Erdogan approved the purchase of Russia’s S-400 air defense system. The U.S. government said the Russian weapons system could potentially hack the F-35.

Biden administration officials have argued that selling F-16s to Turkey could help restore ties with the country, which maintains the second-largest army in NATO.

Under Mr. Erdogan, Turkey has played an important role in the Ukraine crisis, facilitating negotiations over prisoner exchanges and helping to broker an agreement that allowed Ukraine to resume its exports of grain through Black Sea ports. Mr. Erdogan’s close relationship with Russia’s President

Vladimir Putin

has also raised concerns in Washington, with scrutiny of inflows of Russian money to Turkey, including oligarch assets.

Finland and Sweden have formally applied to join NATO, but Turkey has threatened to block them from joining. WSJ’s Shelby Holliday explains why Turkish President Recep Tayyip Erdogan sees the expansion as a threat to Turkey’s national security. (Video first published in May 2022). Photo composite: Sebastian Vega

Write to Jared Malsin at jared.malsin@wsj.com and Vivian Salama at vivian.salama@wsj.com

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GM is the top car seller in America, retaking the title from Toyota


New York
CNN
 — 

One year after losing the title it held for nearly a century as the top car seller in America, General Motors is back on top.

GM

(GM) reported Wednesday US sales of 2.3 million vehicles. Strong fourth quarter sales, up 41% from a year ago, allowed it to end the year with sales up nearly 3% from the 2.2 million US vehicles it sold in 2021, when it suffered a 13% decline.

Meanwhile Toyota

(TM), which had captured the top sales spot in 2021, had its full-year sales fall nearly 10% to 2.1 million, despite posting a 13% increase in fourth quarter sales.

In each of the last two years, industry-wide auto sales were limited by a shortage of parts, primarily computer chips, needed to build the cars and trucks consumers wanted. Total US new vehicle sales are expected to be down to just less than 14 million vehicles when the final sales results are reported across the industry later this week.

That would be the lowest sales total since the country was just climbing out of the Great Recession more than a decade go. Sales bottomed out at 10.5 million in 2009, the year GM and Chrysler declared bankruptcy and received federal bailouts, and had only climbed back to 12.7 million by 2011, the last year the industry sales fell below 14 million.

Sales had been 17 million in 2019, the year before the pandemic upended both the economy and supply chains.

Most forecasts say the supply chain problems are getting better, and that should allow automakers to increase production in 2023. They point to the better sales that took place in the fourth quarter than earlier in the year as a proof of that, even with higher car prices and rising interest rates making it more expensive for buyers than in the past.

That in turn has led them to forecast a modest increase in sales this year to just north of 14 million vehicles once again.

But many experts caution that their forecast of increased sales depend on the US economy not falling into recession, and instead simply experiencing slower growth. And uncertainty about what will happen to the economy is making the outlook for car sales far more uncertain than in years previous, they say.

“I’ve been forecasting the car market for decades now. This next year is the most challenging,” said Charlie Chesbrough, chief economist for Cox Automotive. “Normally we an idea which way it is headed. But this year it could be up or down.”

There are a number of factors supporting new car sales in the coming year, even if the economy stumbles. One is the fact that car rental companies have not be able to buy the supply of new cars they need in the last two years, as automakers limited the supply of cars available for lower priced fleet sales, selling all or virtually all the cars they had to consumers instead.

“Rental companies have been running at half of the purchases that they’re accustomed to,” said Ivan Drury, director of insights at Edmunds.

And Drury said if automakers start to see weakness in consumer demand, they can bring back incentives, including lower rate financing, that they haven’t had to offer in recent years when there was more demand than supply.

“The incentives recently have been virtually nothing,” he said.

So far demand is still strong, as there is pent-up demand from potential buyers who have delayed purchases because they couldn’t find the vehicle they wanted. But both Drury and Chesbrough say the higher average prices and higher interest rates are already driving buyers out of the market.

A turn in the economy, especially if historically low unemployment rates start to rise, could quickly result in lower new car sales.

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GM’s U.S. Sales Recovered From Early 2022 Woes to Post Full-Year Rise

The U.S.’s largest auto makers confronted another challenging year in 2022 with supply-chain snarls and poorly stocked dealership lots denting sales results and concerns mounting about an economic downturn.

The Detroit auto maker also retook its U.S. sales crown from

Toyota Motor Corp.

TM -0.65%

, outselling its Japanese rival by about 165,630 vehicles last year.

Toyota had overtaken GM in 2021 as the U.S.’s top-selling auto maker, an upending of the traditional pecking order that was largely due to parts shortages that both car companies viewed as temporary.

Toyota said its U.S. sales were down 9.6% in 2022, and

Hyundai Motor Corp.

closed last year with a 2% decline.

Most other car companies report throughout the day Wednesday.

Ford

plans to report 2022 sales results Thursday.

Industrywide, U.S. auto sales are projected to total 13.7 million vehicles in 2022, the lowest figure in more than a decade and an 8% decrease from the prior year, according to a joint forecast by J.D. Power and LMC Automotive. Sales are expected to remain well below prepandemic levels of roughly 17 million.

WSJ toured Rivian’s and Ford’s electric-vehicle factories to see how they are pushing to meet demand. Illustration: Adam Falk/The Wall Street Journal

The drop-off marks a reversal for a sector that started the year hoping historically low interest rates and an end to parts shortages would fuel a rebound in sales. Instead, vehicles continued to be in short supply as car makers mostly waited for scarce computer chips. Russia’s invasion of Ukraine, a key supplier of auto parts, added to the supply-chain troubles.

A prolonged shortage of semiconductors created pent-up demand for new vehicles, which meant that cars and trucks went to waiting buyers almost as soon as they hit the dealer lot. The lack of availability left buyers paying top dollar for the rides they could secure, pushing the average price paid for a vehicle in December to a near record high of $46,382, according to J.D. Power.

The record high prices buoyed auto maker profits last year despite shrinking sales volume and insulated the industry from a broader decline in consumer spending. 

Now, while some supply constraints are easing, auto executives are confronting other obstacles, such as rising interest rates and soaring materials costs. Inventory levels are bouncing back, putting pressure on car companies to resist the kinds of profit-damaging discounts that have been historically used to counter slowing demand.  

Photos: The EV Rivals Aiming for Tesla’s Crown in China

Some analysts caution that it is still too early to tell if rising prices are pushing buyers away. Heavy snowfall in large parts of the northern U.S. weighed on December sales, making it hard to see the impact of higher prices, JPMorgan analysts wrote in a note to clients. 

Still, there are early signs that demand might be slowing, even for the hottest car makers.

Tesla Inc.

reported Monday that it fell short of its growth projections last year, in part because of Covid-related shutdowns at its Shanghai factory and changes in the way it manufactures and distributes vehicles.

Analysts have pointed to decreased wait times for Tesla vehicles as a sign of softening demand. Tesla offered a rare discount on some of its vehicles if buyers agreed to take delivery before the end of 2022.

Electric-vehicle sales accounted for 3% of the U.S. retail market in 2021 and nearly 6% in 2022, according to J.D. Power.

Executives have been investing billions of dollars on new models and factories, in the belief that sales will continue to expand rapidly over the next decade.

But rising prices for raw materials used in lithium-ion batteries pushed up EV prices throughout 2022, and some executives warned of a looming battery shortage. 

General Motors cut its EV sales target for 2023 because of a slower-than-expected increase of battery production.

The semiconductor shortage, while easing for some other sectors, such as smartphones and personal computers, remains a challenge for autos, in part because car companies typically use inexpensive, commodity silicon for vehicles. Toyota, citing a lack of chips, cut its production outlook for the current fiscal year through March.

Falling used-car values are also discouraging to potential buyers, who have trade-ins and are looking to use them to offset the higher cost of a new vehicle. 

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What is your outlook on the auto industry for 2023? Join the conversation below.

That bodes poorly for sales this year, as retailers worry that buyers who were unable to buy a car as a result of shortages will now be priced out of the market, according to a survey of dealers conducted by Cox Automotive.

The research site Edmunds expects new-car sales to hit 14.8 million in 2023, a marginal increase from last year but well below prepandemic levels. A combination of rising rates, inflation and economic turmoil could push vehicles out of reach for many buyers, Edmunds said.

Write to Sean McLain at sean.mclain@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Why You Can’t Find Wegovy, the Weight-Loss Drug

Novo Nordisk

NVO 0.61%

A/S flubbed the launch of its buzzy new weight-loss drug Wegovy, missing out on hundreds of millions of dollars in sales and squandering a head start before a rival could begin selling a competing product.

Wegovy is among a new class of drugs that health regulators have approved to cut the weight of people who are obese, a goal long sought by doctors and patients. Their weight-dropping potential became a viral sensation on social media. Elon Musk tweeted about Wegovy in October. And a related drug for diabetes, Ozempic, is a hot topic in Hollywood among celebrities seeking to stay thin, according to doctors.

SHARE YOUR THOUGHTS

Will Novo Nordisk A/S be able to retain its competitive edge with its weight-loss drug? Why or why not? Join the conversation below.

Yet Denmark-based Novo underestimated how big demand for the drug would be, and wasn’t ready to make enough to fill the prescriptions that flooded in after U.S. approval last year. Then a contract manufacturer halted production to address inspection issues.

“We should have forecasted better, which we did not,” Novo Chief Executive

Lars Fruergaard Jørgensen

said. “Had we forecasted that, we would have built a different supply chain.”

The missteps have proven costly for Novo, which was forced to ration Wegovy to patients who already had started taking it. The company has recorded around $700 million in sales to date, well short of the $2 billion in 2021 and 2022 sales that some analysts had projected before supply issues hit.

Novo Nordisk Chief Executive Lars Fruergaard Jørgensen admits the drug company misjudged how popular Wegovy would be.



Photo:

Carsten Snejbjerg/Bloomberg News

Amber Blaylock, a music teacher from Springfield, Mo., said she has been trying to get Wegovy to help her reduce weight since hearing about the drug on TikTok and YouTube. She asked her doctor in September to prescribe it, but hasn’t been able to find it. 

“Frustrated and impatient for sure,” said Ms. Blaylock, 29 years old.

To turn things around, Mr. Jørgensen said Novo has increased its capacity to make Wegovy and plans a “relaunch” early next year, which should fulfill all orders.

Novo, however, lost valuable time establishing a beachhead in the lucrative obesity-drug market before rival

Eli Lilly

LLY 1.20%

& Co. can enter. Lilly is expected to launch a similar, competing drug named Mounjaro late next year or in early 2024.

The market for anti-obesity drugs, now worth $2.4 billion worldwide, could reach $50 billion in 2030, Morgan Stanley estimates.

“Novo has left the door open for Lilly,” said BMO Capital Markets analyst Evan David Seigerman. 

Mr. Jørgensen said the company can regain lost ground because of high demand for Wegovy and the large potential for what is still a mostly untapped market. He said he was unconcerned with the looming competition with Lilly’s drug, because there is room for both products.

“We disappointed physicians and patients in the first round,” he said. “The company wants to be better prepared for the second round.” Novo lists Wegovy at $1,349 a month. Some commercial insurers cover the drug.  

Wegovy works by imitating a hormone called GLP-1, which occurs naturally in the body and suppresses appetite, among other effects. 

Novo developed GLP-1 drugs to treat diabetes. In 2017, the company began selling semaglutide, the active ingredient in Wegovy, under the brand name Ozempic to treat diabetes. 

During the drug’s development, Novo found that weight loss was a side effect, prompting the company to probe using semaglutide to treat obesity. A key trial found that Wegovy helped people with a high body-mass index shed up to 15% of their weight, surpassing the results for older obesity drugs like Novo’s Saxenda. 

Saxenda and other older weight-loss drugs had sold modestly, partly due to their limited weight loss, as well as some unpleasant side effects and the refusal of many health insurers to pay up. 

Novo worked with Catalent to fill its Wegovy weight-loss drug into syringes.



Photo:

yara nardi/Reuters

Given the experience, Novo figured Wegovy sales would increase gradually. To augment its own production, Novo contracted with a single manufacturer,

Catalent Inc.,

to fill the drug into syringes. Novo said it thought it would have time to add manufacturing capacity to meet a gradual increase in demand.

Wegovy may be superior to older drugs, but “we thought it would still be a journey to open up the market,” Mr. Jørgensen said. 

When Novo started selling Wegovy in the U.S. in June last year, however, demand took off. Doctors with large followings on social media touted Wegovy as groundbreaking, while users posted photos holding injection pens and shared their progress losing weight. 

“Demand for these new agents has been unlike anything I’ve ever seen in my time in medicine,” said Dr. Michael Albert, a physician specializing in weight-loss treatment at telehealth provider Accomplish Health who has consulted for Novo. Many of his patients began asking about Wegovy, he said, after they heard about it in Facebook groups or on TikTok.

It took only five weeks for doctors to write new prescriptions for Wegovy at the same weekly volume that Saxenda took four years to reach, according to Mr. Jørgensen. “It’s a completely different ballgame that we’re in,” said Ambre Brown Morley, the company’s vice president of media and digital global communication. 

Within weeks, supplies were strained. Novo warned that patients might experience delays in receiving their prescriptions. Then in December 2021, Catalent temporarily stopped deliveries and manufacturing at its plant after Food and Drug Administration inspections found faulty air filters and damaged equipment.

To date, Novo has recorded around $700 million in Wegovy sales compared with the $2 billion in 2021 and 2022 sales that some analysts had projected before supply issues emerged.



Photo:

JACOB GRONHOLT-PEDERSEN/REUTERS

Many people who couldn’t get Wegovy for weight loss have sought prescriptions for Novo’s Ozempic and Lilly’s Mounjaro, according to analysts, even though the FDA hasn’t approved the latter two drugs for such use. Ozempic sales increased so much that certain doses are in short supply through at least January, the FDA said.

Lilly is studying Mounjaro, its GLP-1-containing drug for diabetes, for weight loss. 

Novo and Lilly said they don’t promote their diabetes drugs for the “off-label” use treating obesity.

A Catalent spokesman said the company is still making improvements to the plant and working with customers to limit the impact of supply constraints on patients. The company restarted filling Wegovy syringes at the facility in the spring. 

Novo has been amassing a sufficient inventory before the Wegovy relaunch, Mr. Jørgensen said. When Wegovy relaunches, he said, insurance coverage will be broader than when the drug first went on sale. 

Write to Peter Loftus at Peter.Loftus@wsj.com and Denise Roland at denise.roland@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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