McDonald’s U.S. head says California fast-food bill unfairly targets big chains

California passes landmark fast food workers bill

The head of McDonald’s U.S. on Wednesday publicly criticized a landmark California bill that would give the state more control over pay for fast-food workers, saying it unfairly targets big chains.

The remarks by Joe Erlinger, president of McDonald’s U.S., come after the California state Senate earlier this week passed a bill that would give a 10-person council the authority to raise the industry’s minimum wage to up to $22 an hour for chains with more than 100 locations nationally. California’s current wage floor is $15.50 an hour. The council would also have the authority to establish safety conditions.

Proponents of the bill say it will empower fast-food workers and help solve industry problems such as unsafe working conditions and wage theft, which can include not paying employees for overtime. But the FAST Act faces strong opposition from the restaurant industry, which fears the impact on California restaurants and the example it sets for other states.

“It imposes higher costs on one type of restaurant, while sparing another. That’s true even if those two restaurants have the same revenues and the same number of employees,” Erlinger wrote in a letter posted to the company’s site Wednesday.

A sign is posted in front of a McDonald’s restaurant on April 28, 2022 in San Leandro, California.

Justin Sullivan | Getty Images

For example, Erlinger said a McDonald’s franchisee with two locations would be subject to the bill, since it’s part of a large national chain. But he said the owner of 20 restaurants that aren’t part of a chain would be exempt.

“Aggressive wage increases are not bad. … But if it’s essential to increase restaurant workers’ wages and protect their welfare – and it is – shouldn’t all restaurant workers benefit?” Erlinger wrote.

It’s rare for McDonald’s to speak out publicly against state legislation, although the chain was reportedly pushing its franchisees to lobby against the California bill. Nearly 10% of McDonald’s U.S. restaurants are located in California, according to Citi Research.

McDonald’s only operates about 5% of its more than 13,000 U.S. locations. Its franchisees own the rest, but the chain often lobbies on their behalf. In 2019, McDonald’s told the National Restaurant Association it would no longer oppose federal, state or local minimum wage hikes.

Other restaurant companies have been fighting the bill as well. State records show that Chipotle Mexican Grill, Chick-fil-A, Yum Brands and Restaurant Brands International are among the chains that have been spending money to lobby California lawmakers to oppose the legislation.

The National Restaurant Association, an industry group, has also spent at least $140,000 to fight the bill, according to California records. The organization’s president, Michelle Korsmo, said in a statement that 45% of California restaurant operators report that business conditions are worse today than they were three months ago.

“The FAST Act isn’t going to achieve its objective of providing a better environment for the workforce, it’s going to force the outcomes our communities don’t want to see,” she said.

A stricter version of the FAST Act that would make franchisors like McDonald’s liable for their franchisees’ labor violations passed the California state Assembly. But the number of changes made to the Senate version mean the bill will have be voted on again in the Assembly or reconciled before it can make its way to Gov. Gavin Newsom’s desk.

Newsom hasn’t indicated whether he’ll sign or veto the bill, although his Department of Finance opposed the initial version of the legislation.

NASA awards SpaceX $1.4 billion in contracts for 5 more astronaut missions

The SpaceX Falcon 9 rocket, carrying astronauts Doug Hurley and Bob Behnken in the Crew Dragon capsule, lifts off from Kennedy Space Center, Fla., on Saturday, May 30, 2020. The SpaceX Demo-2 mission is the first crewed launch of an orbital spaceflight from the U.S. in nearly a decade.

Joe Burbank | Orlando Sentinel | Getty Images

NASA on Wednesday announced it has awarded five more astronaut missions to Elon Musk’s SpaceX, with a contract worth an additional $1.4 billion to the company.

The extra flights fall under NASA’s Commercial Crew program, which delivers astronauts and cargo to and from the International Space Station. SpaceX is currently on its fourth operational human spaceflight for the agency.

SpaceX’s Crew Dragon spacecraft has been competing with Boeing and its Starliner capsule for contracts under Commercial Crew. While both companies have now been awarded nearly $5 billion to develop and launch their respective capsules, SpaceX has won 14 missions and Boeing has won six. The latter has yet to launch astronauts with Starliner.

Due to delays, and the fixed-price nature of NASA’s contracts for the program, Boeing has absorbed $688 million in costs from delays and additional work on the capsule. After successfully completing an uncrewed Starliner flight to the ISS in May, the company now aims to carry astronauts for the first time in February.

Between SpaceX and Boeing, the agency has awarded contracts for 20 flights to date, covering crew missions until 2030 when the ISS is expected to retire from use.

How SpaceX beat Boeing in the race to launch NASA astronauts to space

Bed Bath & Beyond announces store closures, layoffs and new financing to fix struggling business

A Bed Bath & Beyond store is seen on June 29, 2022 in Miami, Florida.

Joe Raedle | Getty Images News | Getty Images

Bed Bath & Beyond on Wednesday announced swift and significant steps it is taking to try to revive its struggling business, including layoffs, store closures and a shake-up of the brands on its shelves.

On a call with investors, the New Jersey-based retailer laid out details of its latest turnaround push. It said it has started closing about 150 of its “lower producing” namesake stores. It will also slash costs by shrinking head count by about 20% across its corporate and supply chain workforce. To strengthen its balance sheet, the company said it secured more than $500 million in new financing, including a loan.

The moves are urgently needed for the troubled retailer, which also disclosed Wednesday that slowing sales have carried into the most recent quarter. Same-store sales plummeted 26% for the three-month period ended Aug. 27 — an even steeper drop than the declines of recent quarters.

Bed Bath’s shares closed down 21% at $9.53 Wednesday.

Its business had already taken many blows. The company said it lost hundreds of millions of dollars in sales because it didn’t have items in stock. It was publicly criticized by activist investor Ryan Cohen, who later sold off his entire stake in the company. Former CEO Mark Tritton, who was chosen to carve out a successful strategy, was ousted by the board in June.

Yet the company said its new approach can win back shoppers who have strayed to competitors.

“There is still an incredible degree of love for Bed Bath & Beyond,” said Mara Sirhal, the newly named brand president of Bed Bath & Beyond. “We must get back to our rightful place as the home category destination, and our goal is to achieve this by leading with the product and brands our customers want.” 

For its baby goods chain, Buybuy Baby, the company also named Patty Wu as brand president.

Steadying its balance sheet

One of Bed Bath’s crucial moves was finding a way to pay the bills and stabilize relationships with suppliers leery of working with a faltering company. It counts on those vendors to stock shelves and warehouses — especially during important seasons like back to college and the Christmas season.

Bed Bath has burned through cash, ending May with about $100 million compared with $1.1 billion a year earlier.

It said Wednesday it has a plan to cut costs and gain additional cash. It secured a $375 million loan through Sixth Street Partners, a lender that has provided financing to other retailers including J.C. Penney and Designer Brands. It has expanded $1.13 billion asset-backed revolving credit facility, too.

Earlier in the day, it said in a filing that it will sell an undisclosed amount of shares.

Along with the additional financing, it is slashing costs. Its store footprint will get about 16% smaller with the closures. As of late May, the company had 955 stores. That includes 769 namesake stores, 135 Buybuy Baby stores and 51 stores under its Harmon or Face Values brands.

Bed Bath also said it is eliminating the jobs of chief operating officer and chief stores officer.

Merchandise overhaul

To try to stand out from competitors, Bed Bath previously made an aggressive push into private-label products and launched nine exclusive brands since the spring of 2021. Yet instead of drumming up more sales, some shoppers felt disoriented by the unfamiliar names showcased prominently in store displays and had trouble finding the national brands they wanted.

Now, Bed Bath will backpedal from that approach and bring back more of the name brands that people recognize, such as Calphalon, Cuisinart and Oxo, Sirhal said. It will discontinue three of its private-label brands − Haven, Wild Sage and Studio 3B − and significantly reduce the inventory of the others, she said.

She said it will also work with national brands to develop exclusive products and add more direct-to-consumer brands.

On the Buybuy Baby side, Wu said the baby goods chain wants to build on its brand and differentiate by becoming the go-to retailer and advisor for parents and families.

“If you think about how parents used to rely on volumes of heavy books to learn about what to expect, we’re here to help new parents who are digitally savvy and native and who rely on their smartphones for everyday living,” she said.

In stores and online, Wu said it will demonstrate products, provide recommendations and build a community that parents can turn to for advice from pregnancy to early preschool years. Buybuy Baby is also seeking new standout products and automatically enrolling parents with a baby registry in its loyalty program, she said.

Bed Bath’s shares have been on a meme stock-fueled roller-coaster ride for months, rocketing up to $30.06 and falling to a low of $4.38 in the past year. As of Tuesday’s close of $12.11, the shares are down about 17% year to date.

Read the company’s news release here.

Express, Snap, Rocket Lab and more

Check out the companies making headlines in midday trading.

Bed Bath & Beyond — Shares of the beleaguered retailer tumbled 19.8% after it outlined a strategic plan that only confirmed investor fears that the company will struggle to turn around its business. Bed Bath also filed to sell an undisclosed amount of stock in the future.

Express — Express shares plunged more than 19% after the company reported quarterly revenue of $464.4 million, compared to StreetAccount estimates of $479.6 million. The apparel retailer, which also cut its full-year guidance, cited challenging macroeconomic conditions.

Rocket Lab USA — Shares surged 8.2% after Cowen upgraded the company to outperform from market perform, saying that the shares have more than 50% upside. According to Cowen, Rocket Lab is the leader in the space launch market.

Snap — The social media company saw its shares rise 7% after it announced a restructuring plan that includes a 20% cut in its staff and a new chief operating officer. The changes come after Snap reported disappointing second-quarter earnings and said it would not provide guidance for its current quarter.

LSB Industries — Shares of U.S. nitrogen company LSB Industries gained 2.2% after UBS initiated coverage with a buy rating and a price target suggesting 30% upside. The company is set to benefit from the record spreads between low-cost U.S. natural gas and high-cost natural gas in Europe and Asia, according to UBS.

PayPal Holdings — PayPal shares advanced 2.7% after Bank of America upgraded the stock to a buy from neutral and hiked its price target on the payments firm. The bank said it expects activist Elliott Management to push for more cost-cutting at PayPal, which could boost earnings going forward.

Seagate Technology Holdings — Shares of the data storage company slid more than 4% after Seagate cut its revenue guidance for the current quarter. The company said it expects revenue for the quarter ending Sept. 30 to be in a range of $2.0 billion to $2.2 billion, down from a range of $2.35 billion to $2.65 billion. The company cited weaker economic trends in parts of Asia.

CrowdStrike Holdings — The stock dropped 6.3% despite the cybersecurity firm reporting a beat on quarterly profit and revenue expectations, as well as issuing an upbeat forecast.

HP Inc. — Shares of the PC maker dropped more than 5% after the company reported a revenue miss amid a slowdown in spending on electronics. HP’s quarterly earnings matched analysts’ estimates, according to Refinitiv.

Chewy — Shares of the pets products retailer slid 7.4% after it issued weak current-quarter revenue guidance. Chewy reported a profit beat in its most recent quarter, but its revenue fell short of expectations. The company expects rising inflation will dent spending on pet products purchases.

PVH — The stock declined 9% after the owner of Tommy Hilfiger and Calvin Klein apparel brands cut its full-year outlook. At the same time, PVH said it’s reducing its global office workforce by 10%.

Baxter International — Shares climbed 2% after the health care company said its latest syringe infusion therapy was cleared by the U.S. Food and Drug Administration.

— CNBC’s Yun Li, Tanaya Macheel, Jesse Pound, Carmen Reinicke, Samantha Subin and Michelle Fox Theobald contributed reporting.

FDA authorizes Covid booster shots that target omicron BA.5 variant

A medical staff prepares a booster dose of Pfizer’s coronavirus disease (COVID-19) vaccine are seen at a vaccination centre in Brussels, Belgium, January 5, 2022.

Yves Herman | Reuters

The Food and Drug Administration authorized Covid booster shots Wednesday that target the omicron BA.5 subvariant as the U.S. prepares for another surge of infections this fall and winter.

It is the first time the FDA has authorized an updated vaccine formula since the original shots rolled out in December 2020. Pharmacies are expected to start administering the new boosters after Labor Day weekend.

The U.S. has secured 171 million doses of Pfizer’s and Moderna’s updated shots so far, according to the Health and Human Services Department.

Pfizer’s new booster dose is authorized for people ages 12 and older, while Moderna’s new shots are authorized for adults ages 18 and older. The eligible age groups can receive the boosters two months after completing their primary series or their most recent booster with the old shots.

The U.S. will no longer use the original vaccines as booster doses for individuals ages 12 and older now that the the updated shots have been authorized, according to the FDA.

The Centers for Disease Control and Prevention has to sign off on the boosters before pharmacies can give them to patients. The CDC’s independent advisory committee is scheduled to meet Thursday and Friday to review the data and issue its recommendations for health-care providers.

Bivalent vaccines

Original vaccines losing effectiveness

About 76% of people ages 12 and older have received their first two vaccine doses in the U.S., according to CDC data. About 50% of those individuals have received their first booster dose.

For adults ages 18 and older, three doses of Pfizer’s or Moderna’s original vaccines were 55% effective at preventing hospitalization from the omicron BA.2 subvariant four months after the third shot, according to CDC data.

Three shots were 19% effective at preventing infection from omicron five months after the third shot, according to CDC data from August 2021 through May 2022. The rapidly spreading BA.4 and BA.5 subvariants have since driven omicron BA.2 out of circulation.

Dr. Peter Marks, head of the FDA office responsible for reviewing vaccines, said the hope is that the updated boosters will restore the high level of protection against disease that vaccines demonstrated when they were first authorized in December 2020.

“We don’t know for a fact yet whether we will get to that same level, but that is the goal here. And that is what we believe the evidence that we’ve seen helps point to,” Marks told reporters during a news conference after the authorization Wednesday.

The Biden administration moved rapidly over the summer to get updated shots ready for the fall. Public health officials are worried the U.S. is on the verge of another wave of infection as more transmissible omicron variants spread, immunity from the original vaccines wears off, and people head indoors to escape colder weather.

Pfizer and Moderna were originally developing boosters to target omicron BA.1, the variant that caused the massive wave of infection last winter. But the FDA told the vaccine makers in late June to switch gears and target BA.4 and BA.5 instead as those variants quickly gained ground. The sudden change in plans left little time for clinical trials in humans before a fall rollout.

As a consequence, the authorization is based on human clinical trials from the BA.1 shots, which produced a better immune response than the original doses, according to the FDA. But it’s unclear how the BA.5 boosters will perform in humans since the data is based on BA.1.

Marks said it will likely be at least another two months before human clinical data on the BA.5 shots is made available to the public.

The most common side effects from the human trials of the BA.1 shots was pain, redness, swelling at the injection site, fatigue, headaches, muscle pain, joint pain, chills, nausea, vomiting and fever, according to the FDA. The Covid vaccines also have a well-established safety profile after administration to millions of people over the course of the pandemic, the FDA said.

Mouse data

In addition to human data from the BA.1 shots, the authorization was also based on animal studies from the BA.5 boosters, Marks said. In June, Pfizer also presented data to the FDA’s independent vaccine advisory committee that showed the bivalent omicron BA.5 shots increased antibodies in mice that protect against infection by about 2.6-fold compared with the original vaccine.

Marks said the FDA used the same process for the authorization that it relied on in the past for switching the strains in flu vaccines.

“We’re pretty confident that or what we have is very similar to the situation that we’ve done in the past with influenza changes where we don’t do clinical studies for them in the United States,” Marks said. “We know from the way the vaccine works, and from the data that we have, that we can predict how well the vaccine will be working.”

But some infectious disease and vaccine experts say the FDA should have waited for human data from the BA.5 shots before authorizing them. Dr. Paul Offit, a member of the FDA’s advisory committee, said data based on mice studies is not sufficient to justify authorizing the new boosters.

“You have to show some evidence in people that the immune response that you’re getting with the bivalent vaccine is clearly better, and those data haven’t been presented,” said Offit, an infectious disease and vaccine expert at Children’s Hospital of Philadelphia.

Human trials

“You can’t ask millions of people to get this booster dose without showing some human data that you have a dramatic increase in neutralizing antibodies to the BA.4/BA.5 strains as compared to boosting with the ancestral type,” Offit said, referring to the currently authorized shots based on the version of Covid that emerged in China, more than two years ago.

Michael Osterholm, a leading epidemiologist and director of the Center for Infectious Disease Research and Policy at the University of Minnesota, also said more data needs to be presented on how the BA.5 shots perform in humans.

“It’s not that I don’t think it could work,” Osterholm said. “But I think we need the data first to show that the immune response to this vaccine is equivalent to or better than what we have already.”

But CDC Director Dr. Rochelle Walensky, in a radio interview, said waiting longer for human data from the BA.5 shots could mean the boosters become outdated if a new variant emerges. Walensky said the change in the vaccine formula is small and should not affect safety.

“There’s always a question here of being too slow versus too fast,” Walensky told “Conversations on Health Care” in a radio interview. “One of the challenges is if we wait for those data to emerge in human data […] we will be using what I would consider to be a potentially outdated vaccine.”

CNBC Health & Science

Read CNBC’s latest global health coverage:

8 new shows coming to Amazon, Disney+, Netflix in September

The fall TV calendar is jam packed with new and returning shows. From fantasy to comedy to true crime, September will deliver content for every kind of fan.

Though the month’s water cooler talk will likely be dominated by the ongoing “Game of Thrones” spinoff and the forthcoming “Lord of the Rings” show, there is plenty of worthwhile television coming to streaming in the coming weeks.

If you’re looking for something new to watch, consider some of these releases hitting Amazon, Discovery+, Netflix, Disney+ and Hulu this month.

‘The Lord of the Rings: The Rings of Power’ (Sept. 1, Prime Video)

‘House of Hammer’ (Sept. 2, Discovery+)

‘Cobra Kai’ Season 5 (Sept. 9, Netflix)

The hit Netflix show returns for its fifth season, which will see “Karate Kid” protagonist Daniel LaRusso teaming up with Johnny Lawrence to stop Terry Silver from spreading his violent karate philosophy across the San Fernando Valley.

‘American Gigolo’ (Sept. 10, Showtime)

Jon Bernthal stars in the reimagining of the 1980 Richard Gere film. The series will follow Bernthal’s Julian Kaye, a former sex worker searching for answers after spending 15 years in prison for a murder he didn’t commit.

‘The Handmaid’s Tale’ (Sept. 14, Hulu)

The dystopian drama returns for what may potentially be its final season, setting up June and Selena for an explosive confrontation following the events of the season four finale.

‘Abbot Elementary’ Season 2 (Sept. 21, ABC)

‘Andor’ (Sept. 21, Disney+)

Private payrolls grew by just 132,000 in August

A hiring sign is seen in a cafe as the U.S. Labor Department released its July employment report, in Manhattan, New York City, August 5, 2022.

Andrew Kelly | Reuters

Companies sharply slowed the pace of hiring in August amid growing fears of an economic slowdown, according to payroll processing company ADP.

Private payrolls grew by just 132,000 for the month, a deceleration from the 268,000 gain in July, the firm said in its monthly payroll report.

The Dow Jones estimate for the ADP count was 300,000.

“Our data suggests a shift toward a more conservative pace of hiring, possibly as companies try to decipher the economy’s conflicting signals,” said ADP’s chief economist, Nela Richardson. “We could be at an inflection point, from super-charged job gains to something more normal.”

August payroll numbers are notoriously volatile. ADP’s release also comes at an uncertain time for a U.S. economy which saw negative growth for the first half of 2022 amid the highest inflation the nation has seen since the early 1980s. The more closely watched nonfarm payrolls report from the Bureau of Labor Statistics comes out Friday and is expected to show an increase of 318,000.

The ADP report had been on public hiatus through the latter part of the summer as the firm adjusted methodology and entered into a partnership with the Stanford Digital Economy Lab.

While much of the changes are technical in nature, ADP’s count differs in how it accounts for issues such as weather and natural disasters. The company also differs from the BLS in that ADP’s count includes any employees active in the company, while the BLS measures only those who have been paid that month.

Richardson told media members that the revised approach “captures a new evolution in how we are viewing data at ADP. This is an independent estimate of private sector employment that leverages the full scale and breadth of ADP microdata based on the clients that we work with every single day.”

In addition to the changes in the way the jobs total is counted, ADP now is providing wage information. August’s numbers add to the inflation worries, as the firm reported annual pay up 7.6% for the month.

From a sector standpoint, services-related industries accounted for most of the jobs, with 110,000 added positions. Leisure and hospitality grew by 96,000 while seeing pay increases of 12.1%. Trade, transportation and utilities contributed 54,000.

However, several sectors saw decreases. They included financial activities (-20,000), education and health services (-15,000), and professional and business services (-14,000).

On the goods-producing side, construction added 21,000 and natural resources and mining saw a 2,000 gain. Manufacturing was flat.

From a business-size perspective, companies with 500 or more employees grew by 54,000. Medium-sized businesses added 53,000, while those with fewer than 50 employees saw a 25,000 gain.

Correction: The U.S. economy saw negative growth for the first half of 2022. An earlier version misstated the year.

Fed’s Mester sees benchmark rate above 4% and no cuts at least through 2023

Loretta Mester at Jackson Hole, Wyoming

David A. Grogan | CNBC

Cleveland Federal Reserve President Loretta Mester said Wednesday she sees interest rates rising considerably higher before the central bank can ease off in its fight against inflation.

Mester, a voting member this year of the rate-setting Federal Open Market Committee, said she sees benchmark rates rising above 4% in the coming months. That’s well above the current target range of 2.25%-2.5% for the federal funds rate, which sets what banks charge each other for overnight borrowing but is tied to many consumer debt instruments.

“My current view is that it will be necessary to move the fed funds rate up to somewhat above 4 percent by early next year and hold it there,” she said in prepared remarks for a speech in Dayton. “I do not anticipate the Fed cutting the fed funds rate target next year.”

In line with that, Mester said rates will remain elevated “for some time,” a phrase used in recent days by both Fed Chairman Jerome Powell and New York Fed President John Williams. She said real rates, or the difference between the fed funds rate and inflation, will need to “move into positive territory.”

The Fed this year has raised rates four times for a total of 2.25 percentage points. Markets are pricing in a third consecutive 0.75 percentage point increase at the September meeting and looking for rate cuts to start in the fall of 2023.

Mester said she anticipates the rate increases to slow economic growth, which she sees as running “well below 2%” while the unemployment rate rises and financial markets remain volatile. She expects inflation to fall to a range of 5%-6% this year and then get closer to the Fed’s target in subsequent years.

In one concession to those looking for lower rates, she said she does not think the Fed necessarily will have to keep raising rates until inflation hits the central bank’s 2% goal. But she said policymakers must remain vigilant.

“It would be a mistake to declare victory over the inflation beast too soon. Doing so would put us back in the stop-and-go monetary policy world of the 1970s, which was very costly to households and businesses,” she said.

Bed Bath & Beyond shares crater after meme stock files share offering of undisclosed amount

Signage outside a Bed Bath & Beyond retail store in New York, Aug. 25, 2022.

Gabby Jones | Bloomberg | Getty Images

Bed Bath & Beyond shares dropped after the retailer turned meme stock said in a filing it would sell shares of an undisclosed amount.

The shares fell 19% in premarket trading.

“We may offer, issue and sell shares of our common stock from time to time,” the company said in the Wednesday filing to the SEC. Under the shelf process, the company can sell the securities listed in one or more offerings.

“Each time we offer securities, we will provide a prospectus supplement that will contain specific information about the terms of that offering,” the filing said.

The document also notes that the company plans to use net proceeds from any sale of securities for “general corporate purposes” including repaying debt, share repurchases or financing possible acquisitions.

Turnaround plan incoming

Meme stock runup

The enthusiasm of meme traders was dented a bit and the stock came of its highs after activist investor Ryan Cohen sold his sizable position in Bed Bath & Beyond. The stock through Tuesday’s close was still up more than 140% this month.

CNBC’s Melissa Repko contributed reporting.

This is a developing story. Check back for updates.