Retail, layoffs, Big Tech — The biggest takeaways from earnings season

The Yahoo Finance Live team discusses the biggest takeaways from the first earnings season of 2023.

Video transcript

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DAVE BRIGGS: Welcome back to Yahoo Finance Live. I'm Dave Briggs with Seana Smith. For the next hour, we'll have special coverage of the Q4 earnings season, from record profits to unexpected losses. A lot to unpack from this quarter, but let's kick things off with our three biggest takeaways from this earnings season, Seana.

SEANA SMITH: And, Dave, we got to start with the consumer. There was so much focus on the health of the consumer, how big of a pullback we are seeing as we do face inflation that still remains very stubborn. And it was clear from this most recent quarter that retailers are hurting and are seeing a change in terms of spending patterns from their consumer.

Let's start with Target because Target was one of those companies that said their private label brand is now worth more than $30 billion in annual sales. Well, they're investing more in that because more of their consumers are trading down, trading down meaning that a lot of these private label brands are cheaper than the alternatives that are sold in the store. So that was a trend that Target was seeing in this most recent quarter.

Private label sales growing 18% in 2022, outpacing Target's overall sales. And they're going to capitalize on this. They're going to launch more brands, expand some of the private label ones that they have. A total of 10 private brands is what they are working with here. And that lower cost, that strategy seems to be working for some of these retailers.

DAVE BRIGGS: Yeah, talked about private label brands, probably the single biggest trend in Q4 across all of retail. It's not just Target. It's Walmart. It's Kroger. It's grocery it really has been reflected across the entire sector. And I want to focus in on Walmart, of course. You can see the stock basically flat on the day.

They exceeded expectations because, of course, Walmart can lean into groceries. You can see, again, the consumer with Walmart earnings trading down. Inflation, higher prices really began to impact them. And their CFO talked about a, quote, "pressured consumer." And that's another term we heard across most retail companies. The other one was cautious consumers. That was the description from most CFOs.

They leaned into that grocery, but they also said fewer discretionary purchases from the consumer. And if there's one interesting sound bite, it came from CEO Doug McMillon saying, "We're gaining share across income cohorts, and here's the key-- including at the higher end, which made up nearly half of our gains in the US this quarter." So the higher income consumer trading down to Walmart, and that's where they saw their biggest increase in terms of market share. Cautious consumer is, I guess, what we saw across all retail.

SEANA SMITH: Yeah, and I think that that is-- might be a trend here that's going to stick for the current quarter and maybe even into the second quarter of the year and into the second half of the year, as we still don't see too much improvement in inflation. So we'll see.

DAVE BRIGGS: And starting to see some signs of a recession in the second half. Layoffs plagued Wall Street. Meta, Amazon, Google-- you really have to focus in on those huge names. You see 84,714 layoffs in the tech sector. And I focus in on those big three because Amazon, in the fourth quarter, announced their layoffs of 18,000.

They, of course, are the biggest because the term is rightsizing. And it's an icky term when it comes to layoffs, but it really is accurate when you look at Amazon, Meta, and Google, because they had to get back toward the right size. They overhired, compensating for that pandemic boom. It was not going to continue, but they hired like it was going to.

And Andy Jassy had very little choice scaling down, cutting down on some of those warehouses. Meta laid off 11,000. We heard just a few days ago, they will layoff a few thousand more. And Google laid off 12,000 employees as they rightsize toward where they ought to be. They should have probably known those COVID gains couldn't continue, but now they're forced with reality.

SEANA SMITH: Yeah, they're forced with reality. You mentioned some of those bigger tech names there. Also, Salesforce was one that made a lot of headlines. And they didn't exactly announce this on their earnings call, the 10% cut that the company announced in January, but there was some talk about how Salesforce is evolving.

And we know Salesforce has been under a tremendous amount of pressure from a number of activist investors in the latest round of these cuts that are still ongoing, that 10% reduction in the workforce. Sales and marketing roles are now reportedly being affected within that cut, but Salesforce saying on their earnings release, on their earnings call, CFO Amy Weaver, that it is a new day at Salesforce. Profitability is certainly front and center.

And then also over, in the payment space, Affirm, the job cuts there really across the tech sector at large. A firm announcing 19% of its workforce would be cut. That amounts to about 500 jobs. And we had founder and CEO Max Levchin. He was joining-- he joined Yahoo Finance earlier in the quarter, talking about these job cuts. Let's take a listen to what he had to say and why the company's doing it.

MAX LEVCHIN: Like a lot of Silicon Valley, we had hired more people that we were reasonably able to support given the revenue growth. As the economy slows down, you can reasonably expect more slowing.

SEANA SMITH: Reasonably expect more slowing. And Levchin also adding that tens of millions of dollars of operating expenses were taken out as part of those cuts.