Axios Closer

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February 20, 2024

📈 Happy Day-Before-Nvidia-Earnings Day. Will it be another blockbuster, or will the mega hype settle down?

Today's newsletter is 699 words, a 2½-minute read.

🔔 The dashboard: The S&P 500 closed down 0.6%.

  • Biggest gainer? Discover Financial (+12.6%), the banking and payment services company, agreed to a sale to Capital One. (See below.)
  • Biggest decliner? Expeditors International (-6.9%), the logistics and freight forwarding company, reported a Q4 revenue drop and missed profit expectations.

1 big thing: Regulators' dilemma

Illustration: Aïda Amer/Axios

Capital One's $35.3 billion deal to acquire Discover presents a conflict for competition regulators, Axios' Pete Gannon writes.

Why it matters: The combination raises concerns in one area, but it could offer a solution in another.

Zoom in: The proposed deal could create the largest credit card issuer in the U.S., accounting for 20% of outstanding card loans in the U.S., BofA analyst Mihir Bhatia notes today.

  • That's bad timing politically, with bank M&A under scrutiny and Americans' card balances — and rates — increasing after years of soaring inflation.

On the other hand, there's another part to this deal — Discover's credit card network.

  • Visa and Mastercard dominate here with nearly 80% of that market, which sets fees with merchants to process payments from customers.
  • There are only two other players, American Express and Discover, and Discover is the smallest in the U.S.

Between the lines: Capital One CEO Richard Fairbank made clear on a conference call today that increasing the scale of Discover's network and making it competitive with the leading networks are major drivers of the deal.

  • The result from that, he notes, is increased value "to merchants, small businesses and consumers."

Zoom out: While a decision is likely months away, Capital One, like any large acquirer, has surely held preliminary discussions with regulators. But Fairbank wasn't tipping his hand on this morning's call.

The bottom line: It might come down to which market regulators feel could be hurt — or benefit — the most.

2. Charted: Home Depot sales cool

Data: S&P Capital IQ; Chart: Axios Visuals

The slowdown in home improvement spending is continuing to undermine Home Depot's revenue — and the retailer expects it to get worse in 2024, Nathan writes.

Zoom in: Home Depot today reported that its comparable sales fell by 3.5% in its fiscal fourth quarter — and 3.2% for the full year.

  • "After three years of exceptional growth for our business, 2023 was a year of moderation," CEO Ted Decker said in a statement.

What's next: The company projected a comparable sales decline of 1% in 2024.

The bottom line: The home improvement bonanza from early in the pandemic has officially cooled.

3. What's happening

💼 Activist investor Arkhouse, whose offer to buy Macy's was rejected, is nominating candidates for the retailer's board. (Axios Pro)

✈️ American Airlines is raising baggage fees and limiting which ticket purchases can earn frequent flyer miles. (AP)

4. Walmart's ad play

Photo Illustration: Lindsey Bailey/Axios. Photo: George Frey/Getty

Walmart today agreed to acquire smart TV maker Vizio for $2.3 billion in a deal aimed to boost the retail giant's ad business, Axios' Kerry Flynn and Sara Fischer write.

Between the lines: The relationships between streaming media companies and retailers are growing closer as both find themselves increasingly dependent on access to each other's ad networks and consumer data.

The big picture: Retail media is one of the fastest-growing ad segments globally, according to GroupM's 2023 end-of-year forecast.

💭 Hope's thought bubble: Vizio strengthens Walmart's physical and digital ecosystem because it extends the retailer's reach further into consumer homes.

  • When I visited stores in Bentonville, Arkansas, last year, Walmart execs were eager to point out in-store CPG (consumer packaged goods) ads pumping through their speakers, product promotions on digital deli screens and strategically designed sample carts.
  • In owning potentially the biggest screen in the house, Walmart can get creative in replicating some of the in-store experience in living rooms, offices and beyond.

5. AI can get you to your seat faster

Boston's TD Garden. Photo: Rich Gagnon/Getty Images

Boston's TD Garden is now using AI to detect potential weapons at the door, Axios Boston co-author Steph Solis writes.

Details: Under the new system developed by Evolv Technology, multiple visitors can walk through a security lane without having to stop and have their wallets or phones checked.

How it works: The system uses sensors inside rectangular towers without an overhead rail.

  • A camera can then spot a potential weapons threat — like a gun, knife or explosive device — based on the object's shape, size and density.

Yes, but: The company faced criticism in recent years after its technology failed to detect certain weapons, per CBS.

6. What they're saying

"The price will make petrol car assemblers tremble."
— Chinese automaker BYD, in a statement posted to Weibo as reported by the South China Morning Post, on the introduction of its new Glory Edition plug-in hybrid EV with a starting price of $11,086.

Today's newsletter was edited by Pete Gannon and copy edited by Sheryl Miller.

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