Closing Bell - Closing Bell: Stocks Slump Again, Snap-Back & Pet Problems 8/31/22

Episode Date: August 31, 2022

Stocks falling again to close out the month of August on a 4-day losing streak. Shares of Snap staging a big rally after announcing a major restructuring, including cutting 20% of its workforce. MKM Partners' Rohit Kulkarni explains why he is bullish on this move, but EMJ Capital President Eric Jackson remains bearish on the stock and questions management's decisions. Shares of online pet retailer Chewy in the dog house after missing sales estimates and lowering its full year guidance. CEO Sumit Singh discusses how inflation is taking a toll on consumer spending. Designer Brands, which owns footwear retailer DSW, not seeing any signs of slowing consumer spending. CEO Roger Rawlins discusses what's behind better than expected earnings and how the back-to-school shopping season is impacting sales. UBS' Michael Lasser issuing a bearish note on Bed, Bath & Beyond. He explains why he is skeptical about the company's new turnaround plan. And BNY Mellon CEO Robin Vince discusses the bank's crypto strategy and how rising interest rates are impacting the financial industry.

Stocks mostly lower on this final trading day of the month, and it has been a rough one for the bulls. The most important hour of trading starts now. Welcome, everyone, to Closing Bell. I'm Sarah Eisen. Take a look at where we stand right now in the market. Lower across the board, there's only one sector that's higher in the S&P right now. That's communication services. Thank you, Meta, Netflix, Comcast, Fox.

Perhaps moving higher off that, Snap News, which we'll get to. Snap is a winner today as well. Looks like everybody else is lower, though. Materials, consumer discretionary, and industrials are the worst performing sectors. The NASDAQ is down 0.4%. Just adding to the losses for the month of August. Here's the scorecard as we look to close out the final hour of the month of trading. Down 4% about on the S&P 500.

Even worse than that for the NASDAQ. Remember, we're coming off of a very strong July. That big summer rally has given way to selling, especially just in the last week or so. We've got a big lineup of CEOs coming your way. We're going to talk to the head of Chewy, which is sharply lower today as that company warns about a slowdown in discretionary spending on pets. Plus, the CEO of DSW Parent Designer Brands joining us after strong earnings and raising its guidance. That stock up double digits on the year. And then later, the incoming and outgoing CEOs of BNY Mellon, the investment bank with nearly $2 trillion under management. A pretty rare interview to hear from them. That's coming up this hour. Time for today's market dashboard,

though. We'll kick it off with Mike Santoli, our senior markets commentator, who's got a look under the hood as stocks might tumble for a fourth day in a row. Yeah, Sarah, pretty lethargic market at best today. We're just sort of sagging lower over the course of the day. Not a lot of energy on either side of it, but we are kind of keep drawing new lines in the sand that are a little bit lower than the ones before. The next one to look for is 39.50,, even 3915 on the S&P 500, where people are saying maybe that makes sense as a place of potential support here. We're obviously waiting for a lot of things going into September, the CPI number, the jobs number, Fed meeting,

and just the fact that it is September. So there's a bit of a reluctance to make big bets. But the market is slowly below the surface, getting a little more oversold. If you take a look at this chart, this is out of bespoke, but it's the S&P 500 advanced decline line over the prior 10 days. So this is kind of the rolling tally of up versus down stocks in the S&P. And this is before today. You see that it was almost as low as it got in June here. This was where the market low took hold. This in itself doesn't mean the market's going to turn around, but it does tell you there's been some wear and tear

on the average stock underneath the indexes, and it should tell you that the market is slowly getting, you know, de-risked or less risky, at least in the short term, for a bounce. It doesn't mean that the overall trend is changing, but to me, it tells you it won't take too much further decline to get people really nervous the way they were in June, and that, in a contrarian sense, might be okay.

Two data points, Mike, that I feel like we should mention. We got the ADP private sector payroll report ahead of the big government report on Friday, weaker than expected, and some noting of wage moderation, which I know it doesn't necessarily correlate to the monthly jobs number, but that is something the Fed and the market appears to want to see. On the other hand, the European inflation number, 9.1 percent, matching a record high again is a big problem. Without a doubt. Now, it's interesting.

The reflex move in the market after that softer ADP number was a rally attempt. Bounce did not really hold, but it sort of indicated the way traders are leaning, what they would like to see perhaps in the jobs data on Friday. And absolutely, in terms of, you know, the euro data, ECB talking about an even bigger hike over there, dollar strength. All that stuff is tightening up financial conditions, which is kind of what the Fed wants, but it's a bit painful for financial assets while it happens. No, I think if you think Powell has a tough job, I think Lagarde's is even harder, tightening into a recession and energy crisis. Mike, thank you. Mike Santoli. We'll get to our top story now. Snap making a comeback. The company announcing plans to cut 20 percent of staff and

scrap projects like its Pixie photo taking drone and original shows as part of a major restructuring of this company. The stock is jumping today, but keep in mind it's still down more than 70% for the year. Joining us now is Eric Jackson of EMJ Capital and Rohit Kulkarni of MKM Partners. Rohit, I know you've liked this name and have recommended it, even though you've had to take down the price targets. Do you like what you hear today? It is encouraging. I think Snap is one of those companies that has been burning cash at a rapid clip. They hired very aggressively last year.

They acquired a couple of companies. I feel the steps they are taking today, almost $500 million in run rate cost savings for next year. I think that's the right move. Reducing some of the moon shots, reducing the spend on that, that's also the right move. Today, cash burn needs to go down. Cash flows need to rise. If this company can show that they are going to accelerate cash flows next three to six quarters, I think that's the time to start buying the stock here. Eric, I know you don't, I don't think you own Snap, but you own stocks like this, right? That are growth stocks that are having to cut jobs and restructure their businesses to focus on cash flow and profitability. And then we get into this quandary, right, of how to balance profitability

with growth and whether this is all coming at the expense of the future. What do you make of it? Well, I think it's the right thing to do, Sarah. Absolutely. I don't own it, though, and I'm not tempted to own it after this cut. I mean, they're basically, you know, what do they have to lose? They have their kitchen sinking this. Now's the time after whatever it's been, three or four missed earnings reports in a row, to obviously whack headcount. I think a lot of other tech companies have done this or will need to do this in the next six months. Let's face it. I mean, everybody was probably overhiring after the COVID boom at elevated compensation levels as well. So they need to cut back. But balancing growth and profitability, the right stories, even without profitability yet, the market is good at sniffing out which stories will actually play. Snap's story, though, is one of a confused management team basically trying to accommodate IDFA and kind of get a story going. So confused stories don't work. You know, proper stories, whether they're growth or profitability stories,

definitely still play. Why do you disagree with that, Rohit? Because you have even in the past, I think with us, raised the issue of management credibility, and yet you're still a buyer. There's some management kind of shuffle going on right now. Yeah, management credibility is with regards to visibility and being able to forecast what the business would look like. I think management credibility is on that one particular area. I feel the innovation capabilities that management has been able to do, that Snap has been able to layer on new areas of monetization, be it maps, be it videos, be it vertical videos, all those things, they had Instagram before, almost an existential threat. People are overly focused on TikTok right now. So I feel management has been able to carve their

way around being a more enduring, sustainable business. All they need to do is get the right set of profitability. And now I think with the restructuring, we are getting there slowly. Macro headwinds would fade, hopefully, in the next six months. And then we have this nice little inflection in fundamentals with accelerating revenues

and improving profitability, and you get multiple re-ratings. So three things going in their favor probably by early next year. So there is some time left for them to prove out what they're doing is going to play out the way they want it to be. But I feel positive about what they're doing right now. Yeah, well, it does seem like they get hit by macro factors worse than their competitors, like a meta or an alphabet. Eric, final word to you on growth stocks, because you have you've come on before and

you have made the point that you think we've seen the bottom. All the bad news is factored in. But here we are with interest rates on the rise again. Ten-year yield is back above 3 percent. NASDAQ is back to underperforming. Are you rethinking that call? I still stand by the June 16th bottom that I've spoken with you about before, Sarah. I think what's interesting is that even with the pullback in August, NASDAQ is still up something like 11%

since the June 16th lows. Things like ARK and XBI, the ETF for biotech, are up even more. So yet we have a lot of the same bearish sentiment now back that we had in mid-June. Put call levels elevated, investor sentiment really sour right now. A lot of hedge funds, according to prime brokers, are not exposed to growth. They're much more exposed to value. And yet, even though this is turning out to be a negative August, growth has actually outperformed value in the month of August. So I think it's for the same reasons that when we get so pessimistic, there's nowhere to go but up. That's one of the reasons I'm I'm optimistic another data point I'll share with you Sarah

is that- you go back and look at nineteen eighty one eighty two which is sort of a height of the inflation scare- from May eighty one to- August of eighty two. The NASDAQ dropped twenty nine percent from from peak to trough. We dropped the

NASDAQ you know from November till June sixteenth. Drops thirty three percent. So in about half the time, we dropped more than in the throes of the biggest inflation scare of our time. So and once that the dust settled in 82, in August of 82, the Nasdaq rallied 106 percent over the next 10 months. So that's what you're bracing for. I sure hope so. We'll see. Eric and Rohit, thank you both for joining me. Good discussion. Look at shares of Chewy, the online pets product

retailer, sinking today after the company warned that pet parents are tightening the leash on discretionary spending like treats. CEO Sumit Singh joins us to discuss next. You're watching Closing Bell on CNBC. Dow is down 161 points. Got as low as down almost 200, but as high earlier as up 175. We'll be right back. Check out shares of Chewy, the online pet retailer in the doghouse today after reporting earnings that missed revenue expectations a bit and lowering its full year fiscal guidance. Joining us in an exclusive interview, Chewy CEO Sumit Singh. It's great to have you back on the show, Sumit. Welcome. Hi, Sarah. Nice to be here. So the profitability was there and that was applauded by the analysts, but it seems like the forecast, both on the current quarter and the full year, was a disappointment. What happened there?

Well, if you break down the quota, Sarah, we actually feel really proud of the results, right? Look at sales. They're up 14% year over year, 13% year over year. Autoship sales are up 17% year over year. If you compare that number to e-commerce growth in Q2, we outpaced e-commerce growth in the US 2x. We outpaced general pet growth by about 3x.

When you look at spend per customer, that's up 70 basis, $70 a year over a year and to 470 bucks. And when you look at profit, profit is up. So from our vantage point, the team executed well. We had a strong quarter and we are seeing some pullback on discretionary spend that is correlated with the macro environment right now. Consumables and healthcare categories are super strong, and we're pleased with the progress that we continue to make there. So this is all just playing through the current macro environment. So, Doug, talk a little bit more about where you're seeing the softness in demand. What kind of categories? Is it because of higher prices? See, it's mostly discretionary categories, right? Primarily, which is hard goods. So you're talking about, you know, beds and crates. And it's correlated to two things. During the pandemic,

the last two years, a lot more puppies got adopted. And, you know, a lot of pet parents that were staying home engaged and went through this refresh cycle where everybody bought a new leash, a new bowl bought a new leash, a new bowl, a new bed, a new crate, and all of that stuff. And so some of these products have longer refresh cycles. So we need to kind of wait to let the refresh sort of, you know, cycle through and be in today's environment when the consumer is rationing spend, you know, core categories such as consumables and healthcare take precedence over perhaps adding an extra toy for Casper and so forth and so on.

So it's just, you know, it's a matter of respecting the consumer's state of mind right now and making sure that what they do need in this particular time is superior value proposition and convenience delivered on core categories, which we're doing extremely well. Yeah, I just, I wonder, because it's a bit of a rethink, because what we've heard from lots of companies in your category is that pets are supposed to be recession-proof kind of business. The people have to spend on it no matter what. So how big of a chunk of your business is this discretionary? Yeah, so, you know, pet has proven to be recession resilient

or has proven to be resilient through the macro, because when you look at pet spending, like industry-level spending is still up high single digit to low double digit. And, you know, it's actually in terms of dollars that the industry is spending because pricing is actually playing through a part in that. When you look at Chewy's growth, our growth is not only up in terms of units. So we're delivering structural growth on the back of transactions as well as pricing playing a part in that. And we're proud of that. That's hard to do in an environment like this. And we just have to wait for the macro to kind of cycle through.

Because underneath of that, lower pet household formation will actually win through as we move out of this year and as the macro settles. So broadly speaking, we're seeing kind of, you know, core category trends in the right direction. Now, the margins were surprised, I think, in a good way. What's happening there on inflation and costs and how you're managing that? Yeah, Sarah, what you, you know, you've talked to us for a while. And what you're seeing happen at Shoei is, you know, we're on this mission of getting big fast, but we're also getting fit fast. Because when we look at it from all the way back to the IPO, in terms of the way that we're improving profitability,

we're delivering disciplined, structural, incremental profitability on a year-over-year basis. So our gross margins have expanded from kind of the 20% ranges in 2019 pre-pandemic to, you know, this quarter, we delivered north of 28% gross margins. And at the same time, we've been investing a lot to, you know, redesign and transform our supply chain and FC operations and capabilities that improve customer experience. And you see us deliver leverage. And as we grow, right, and as customers discover us a lot more, we can also give back some marketing efficiency. And as a combination of all of that, you know, the profit curve is continuing to gradually and steadily improve. So we're proud of the work that's going on.

And we're actually exposing a lot of this in our earnings call and the way that we're talking to the street and the investors as well. So they can get an appreciation. Yeah, no, I think one of the problems, the knocks on the stock is that it's thought of as a pandemic winner, like a Peloton, where it was at the nexus of two key trends, pet ownership and online retail. And that, you know, some of the best days are over with stocks like yours. And if you look at some of the net ads

that were a little disappointing, that's what people point to when they think about that. How do you change that idea around that stock, the COVID stock? Sure, sure, sure. So first of all, our gross ads, so when you look at gross ads, they're actually running ahead pre-pandemic levels by mid-single digits. And the only knock on gross ads that we're seeing right now is directly correlated back to the discretionary categories I talked about, because we're pleased with the consumables and healthcare ads. Then when you look at, you know, the retention of cohorts, our retention, you know, we consumed or accelerated our curve by acquiring a whole bunch of new customers. We acquired nearly two and a half times the customer that we were acquiring pre-pandemic.

And so you're essentially attriting, you know, even a small attrition off of that large base will mathematically produce numbers, you know, that need a few quarters to cycle off. So this to us is, you know, math that we believe is starting to get well understood. And at the same time, Sarah, I've said in the past, with Chewy, don't underestimate the share of wallet story. Because with us, customers are spending, customers who are staying are spending, you know, 15, 20% higher on a year-over-year basis, you know, pushing net sales per active customer to $470 per customer.

And here's what I'm going to say, right? Two-thirds of our customers are still really early on that maturity curve. And so the best part of share of wallet expansion has yet to come. So, Mithsang, I feel like you've made the case before. You've been making it all day to investors. Appreciate you joining us and taking the time. Thank you, Sarah. CEO of Chewy. After the break, BNY Mellon is here at the New York Stock Exchange to ring today's closing bell. We'll talk to the company's brand new CEO and its retiring CEO about how the firm is deploying its nearly $2 trillion under

management. Dow's down about 152. You've got real estate now as a sector joining communication services in the green. Financials are pulling back along with the broader market today, now down around 2% or so for the month of August. Joining me here at Post 9 of the New York Stock Exchange for an exclusive interview, the brand new BNY Mellon CEO Robin Vince and Todd Gibbons, who is officially stepping down today. Thank you for joining us. Saw the performance of Hamilton. You're the only bank that can claim to have been founded by Alexander Hamilton in the 1700s. So I guess it's cause for celebration.

So, Todd, you've been the CEO only about three years, took over when Charlie Scharf went to go run Wells Fargo. Why is now time for transition? Well, first of all, Sarah, thank you so much for having us here. It was nice to meet you earlier, and then finally we got here. The foundation the company is built on is very strong, very resilient. Eighty percent of our revenue is fee-based. We've got the strongest balance sheet in banking. So I think we're really well positioned to deal with even the challenging times that we're faced with.

We've also got a great leadership team that I'm quite proud of. And by the way, the gentleman sitting next to me that will be taking over, I've known Robin for about a decade. And he had a mix of experiences that I thought was perfect for this job. We've worked together over the past six months through this transition, meeting with all of our stakeholders. It's gone extremely well. I'm very pleased with where we sit. Robin is ready to take the helm.

He's ready to do it in full stride. Well, it starts tomorrow. And you do have a tough task, not just, you know, running a massive bank with trillions of dollars of assets, but also at a time where interest rates are rising. There's a lot of volatility. Your stock is down 30 percent so far this year. So what is your item number one on the to-do list? Well, Sarah, thanks again for having us. It's great to be here. We're the first listed company here on the New York Stock Exchange. And so to be able to be here today for this handover day is terrific. And it's great to be here. We're the first listed company here on the New York Stock Exchange and so to be able to be here today for this handover day is terrific and it's great to be with you.

So our firm is ultimately all about our clients, we're about our own culture and we're about innovation and so for us these challenging times we've got high inflation, we've got uncertainty around what's going on in the stock market and interest rates. We've got a war going on. Those are all key opportunities for us to be able to engage deeply with our clients and to be able to help them navigate the uncertainty. You see a lot of flows, right, that we do not see. What should we be paying attention to right now in the market? Everything from repos and government open market activities, which you do a lot of in your business.

Well, I can start. I would say what we are seeing, or we have seen certainly this year, is a risk-off trade, is a risk-aversion trade. You're seeing that in spreads in some of the credit markets, and I think that's one thing that I would be particularly concerned of as we go into these higher interest rate environments and the impact that those higher interest rates are going to have on those businesses as they bear the burden of what has been floating right down. So that's one of the things that we're... Where do you think we are, Robin, in the bear market?

Well, we touch 20% of the world's investable assets across our platform. Our assets under custody alone are almost twice the size of GDP. So we certainly do have a lot of interaction. I think we're in this interesting moment right now where we've got the cross currents of the Fed clearly trying to combat inflation, which is job number one for them and the uncertainty that that creates on the interest rate rise side. But we've also got other cross currents associated with uncertainty around energy prices, around the war in Ukraine and what's going on. And so those challenges make it a little bit difficult. They've got to navigate the unwinding of their balance sheet at a time when they're also hiking rates incredibly aggressively. And so there is a lot going on. But that, again, gives us

the opportunity to really engage with our clients who want to engage with our platforms and get our help in navigating all of that. The higher interest rates help your business with net interest margins, but the capital markets activity has been really weak. So how do you look at the balance and where that takes you over the next year or so? Well, I view our businesses as having a whole bunch of different cylinders. And so we have the good fortune to be able to see some businesses with that upswing when others maybe are suffering a little bit from the challenges. So when you look at an asset servicing business, which is our custody business, clearly asset owners and asset managers are struggling a little bit with everything that's going on in the stock market. But on the other hand, we are really at the center of

liquidity flows. We have over a trillion dollars a day that flows through our liquidity platform. We are the world's largest collateral manager, and we also power the U.S. Treasury market infrastructure. So there are a lot of puts and takes in that. And we also power the U.S. Treasury market infrastructure. So there are a lot of puts and takes in that. And overall, we're quite pleased with our performance. Are you bracing for any hiccups, any problems with liquidity, Todd, like you guys have seen in the past with other financial crises or periods of volatility? Yeah, I would say the market still has enormous liquidity.

I mean, the Fed, for example, is repoing into itself. So it's offering assets to the market of $2.5 trillion a day through our systems. So there's a huge amount of liquidity that stands in the system. We've not really seen a contraction of the Fed's balance sheet in any meaningful way. So right now, we don't see that as a concern. You're also, Robin, going to be the first bank to tokenize Bitcoin. What does that mean? And is there still the same sort of demand after we've seen the crash in crypto? Well, we view, Sarah, the opportunity around digital assets broadly to be just a broad and deep opportunity. So we have this great new technology. Once upon a time, the world was full of paper. More recently, we've been in the world of dematerialized assets and sort of regular digital ledgers. And now we've got the opportunity to take this new technology, which is a more multidimensional ledger. And we're hearing from our clients that

they want that type of institutional grade approach to digital assets, which we're providing. We're excited to be launching digital asset custody, but we're also innovating in payments and other parts of the digital asset ecosystem. Finally, a decision you're going to have to make about your employees. I don't know if you saw the memo that David Solomon sent to Goldman Sachs today telling them five days a week, no more COVID protocols, no more excuses. You don't have to be vaccinated. How are you approaching this issue back to work? Well, we certainly believe in being in the office some of the time is incredibly important. And so we are not a believer in fully remote work. But we do think that technology has created opportunities for employees to be quite productive when they're away from the office as well.

And we've had the benefit of mobile telephony for the past 30 or 40 years. And now we've got the opportunity for mobile video. You've gone the other way. No, we're in the middle. We're hybrid. We want our people in the office many days of the week, but we don't need them there absolutely every day of the week. We're happy for them to be on the road, visiting clients, and engaging with people in other

ways as well. Robin, congratulations on the new role, and Todd, to you too, on your last day as CEO. Thank you both for being here. Great. Thanks for having us. A big New York melon. Take a look at shares of Bed Bath & Beyond. Plunging after announcing a new share offering, plans to close stores, layoff employees.

Coming up, we'll be joined by an analyst who is skeptical of the retailer's turnaround plan. The stock is down 20%. We'll be right back. Check out today's stealth mover. It's Rocket Lab. Shares are really lifting off today, up 7.3 percent. Cowen upgrading the rocket launch company to outperform from Market Perform, hiking its price target to $8 from $6.50, implying roughly 50 percent upside, citing improving execution and sanctions on Russia, which are hurting some of its competitors. When we come back, the CEO of Designer Brands,

which owns footwear retailer DSW, on the strength of the consumer and how much the back-to-school shopping season is impacting the company's guidance hike today. The stock is a winner. The Dow is down 200. We'll be right back. Number of retail movers today, Express and PVH. Look at those stocks, both plunging on the back of their reports. Both companies missing revenue estimates, and both of them citing macroeconomic challenges. And then there's designer brands. The DSW parent getting a pop today after reporting better than expected earnings this morning,

and the company also raising its full-year outlook. Joining us roger rollins the ceo of designer brands roger not a lot of retailers raising guidance in this environment what's working for you well thanks sir good to see you again you know for us the big thing has been the shift we've made into our own brands really being able to make and design and source our own goods. And, you know, that piece or that segment of our business was up over 40 percent the last year. So that's been a huge win. And then the kids addition to our portfolio, which we did a couple of years ago, has been just been fantastic. And we're driving comp sales with the addition of a whole new category for our consumer. Does it does it have to do with where you sit in the value chain? Because we've heard a lot about trading down in these quarterly results.

What is your consumer? What is the profile and what does it say about the environment? You know, our consumer, what's a little bit different, most folks don't really comprehend this as it relates to our DSW brand, our the average household income of dsw customers over a hundred thousand dollars so they really haven't felt the same kind of impact of this inflation that perhaps other consumers have so we've been able to navigate i think a little different than others but you know our everyday value proposition that we have with some of the brands that we own and control and provide value to the customer. And then you add into that some investments we made in clearance inventory, which we wanted to win back some consumers that were looking for value. And we were able to add back in the quarter about 2 million consumers that were coming to us just simply for the value proposition. So again,

I think as we've tried to navigate this, it's just being very, very nimble. And every day seems to be a different challenge. But our team has done a great job in facing those challenges. Who are you taking share from? Department stores? I think it's a combination, frankly. A big piece of it has been in the athletic space. We actually, right before the pandemic, started investing heavily in the athleisure area. And we've grown our market share penetration there in a pretty material way.

We've always been historically known for fashion brands. And we felt like we were losing that consumer. They were going elsewhere to buy their athletic shoes. And by layering in additional athletic brands, like the amazing results we've had with Adidas, Puma, New Balance, you name it in that athletic space, we've really added significant share there. Roger, interesting stock story and successful one this year amid a sea of red in retail. Appreciate you coming on to talk about it. Thanks, Sarah. Thanks for having me. Designer brand CEO. We're going to talk about it. Thanks, Sarah. Thanks for having me. Designer brand CEO. We're going to talk more about retail tomorrow.

I'll speak exclusively with the CEO of Lululemon on the back of that earnings report. That's tomorrow. And you can catch part of it starting on closing bell overtime right after those earnings are released. Micro strategy shares pulling back this afternoon after accusations of tax fraud.

We'll share the details straight ahead. That story plus an analyst on Bed Bath & Beyond. And Snap losing ad executives to Netflix when we take you inside the Market Zone next. We are now in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down these crucial moments of the trading day. Plus, Julia Borsten on Netflix poaching Snap executives and UBS's Michael Lasser on Bed, Bath & Beyond. A lot to get to there. We'll kick it off with the broader market, though, Mike Santoli. The Dow's down about 100 points.

We're coming off the lows of the session. You've got strength in communication services, and that's really helping the Nasdaq, for instance, which just went positive on the day. It's up two-tenths of 1%. Names like Meta and Netflix off the snap quarter. But seasonally, September is a tough month, right? People are worried about QT, which is just going into high gear. And it feels like the sentiment is getting negative again. Yeah, it definitely is.

I think there's a general sense out there that there are plenty of reasons not to get aggressive and not to wade back in on the buy side of this market. Now, the historical record in terms of September's patterns, it's a little bit ambiguous when August has already been weak. Sometimes it seems like you front loaded the September, you know, weakness and all that. I don't know that the seasonals are going to be the defining thing. Markets choosing not to fight the Fed. The Fed chorus is out there saying rates have to go a bunch higher. It's just not clear to me that we didn't sort of sort that out in the reaction on Friday. And now it really just seems like a lack of energy at the end of a weak month. Yeah, down more than 4 percent

for the S&P and the Nasdaq for the month. The District of Columbia suing MicroStrategy founder Michael Saylor in a tweet. Attorney General Carl Racine saying they're also suing MicroStrategy, the company, for, quote, conspiring to help him evade taxes he legally owes on hundreds of millions of dollars he's earning while living in D.C. Eamon Javers joins us. Eamon, why does the D.C. government think they can prove he lived in D.C. all this time? And is this what this is all about? Well, Sarah, that is what it's all about. They're saying that he was saying he lived in Florida or Virginia. He actually lived in D.C. and he didn't pay any taxes at all during that time.

Here's the complaint from the attorney general in D.C. And part of what they're doing to prove that he lived in D.C. during that period of time is in this document, they're actually using his social media filings against him. So they actually have pictures here from Facebook. I think we have some of these that we can pull up for you of Saylor's own Facebook postings, one of which is a picture from September 9th of 2012, a picture of a luxury apartment building in Georgetown. That's the Potomac River you see there in the foreground. That's the luxury apartment building in the background. And Saylor posts at this time, he says, gazing wistfully at my future home

while I wait for James to crack the whip on the contractors and herd the cats. I wonder if Tony Stark would be so patient. Another one that they use here is an October 10th, 2012 posting from Saylor, a picture of what appears to be his yacht on the Potomac. He says, off to work. It is a perfect October morning on the Potomac, making it hard to leave home. That picture taken from the D.C. side of the Potomac. You see Virginia there off in the distance. The AG here making the point that Saylor lived in D.C. at this time and saying he didn't pay any taxes. And what's more, MicroStrategy was involved here in helping him conceal that fact

and depriving the taxpayers of the District of Columbia of a lot of money here. They say up to $25 million avoided over this time period. Yeah, I was going to ask what the liability here is for MicroStrategy, a company that he very closely has managed and has poured into Bitcoin. Yeah, I mean, there is definitely some exposure here for MicroStrategy. They're saying MicroStrategy was aware of this and took steps to assist in what they're saying was a fraudulent enterprise here, ultimately for tax purposes. And, you know, for MicroStrategy, that could be a problem.

Also interesting here that this is a False Claims Act case initially. There was a whistleblower at the core of this, somebody who had access to MicroStrategy's internal documents, because at some point the AG says they got a hold of the actual flight logs from the MicroStrategy corporate jet. And that's part of the way that they're proving where Michael Saylor was bedding down each night, and it wasn't in Florida. Eamon Javers. Eamon, thank you. I know you'll stay on it. Take a look at SnapShare's story of the day, surging after announcing a major restructuring involving laying off 20 percent of its employees, it's more than a thousand people, and discontinuing several products, including its drone camera. Meantime, Netflix,

interestingly, is poaching two of Snap's top advertising executives. Julia Boorstin joins us. Julia, what does it mean for Netflix's own ad business, which we're following carefully? Well, look, it's considered a big win for Netflix. And Jeremy Gorman, who's been at Snap since 2018, she's going to go run the ad business for Netflix. And she's really credited with helping get Snap's ad business on track, helping it grow and scale so meaningfully ahead of the more recent shutdown. Then Peter Naylor, he's been at Snap just for two years. Before that, he was at Hulu. Before that, at NBCUniversal. So he has a lot of experience in the industry.

But Jeremy, you know, really with her experience both at Snap, before that at Amazon and at Yahoo, does bring some good expertise to Netflix as they get ready to launch this big ad business, which is expected to help them reach a broader audience and hold on to some of their customers who may be wanting to not pay for so many subscription services, especially as they're facing inflationary issues. Question, Julia, on Snap. The macro challenges that this company has cited today, last quarter, the quarter before that, it does feel like they're hurting Snap more than some of their competitors. Is Snap more vulnerable because of its size,

or is it an excuse when some of the issues are their own execution and strategy? Well, look, one reason Snap is more vulnerable is because they make it so easy to start buying ads on Snap, make it very easy to turn on advertising on Snap if you're a brand, if you're an advertiser, and that means it's equally easy to turn on advertising on Snap if you're a brand, if you're an advertiser, and that means it's equally easy to turn it off. So that spending on Snap might be the first thing that a brand cuts back on or holds back on if they're trying to figure out what's going on in this macroeconomic situation. Snap also points out in this letter to shareholders and to investors as they announce

this restructuring that they've been very much impacted by the Apple operating system changes. They're making progress, but it is something that has hurt them. But one thing I want to point out is the reason the stock is up over 9 percent today, Sarah, is not because of the announcement of the restructuring as much, perhaps, as the fact that they announced that quarter to date revenue is up 8 percent. That's notable because when they reported earnings back in July, they said quarter to date, and at the time it was about three weeks, revenue was flat. So since then, revenue has scaled back up, and so they're back in a growth mode. So that does bode well for Snap. It means that the numbers for Q3 may be much better than many had feared after their last earnings report.

Good point. Julia, thank you. Julia Boorstin. Take a look at Bed Bath & Beyond. Shares down now about 20 percent as investors lose faith in the turnaround plans there. And that's not even the biggest move this month for the notoriously volatile meme stock. Joining us now, UBS retail analyst Michael Lasser. He has a sell rating, a $3.50 price target on the Bed Bath & Beyond stock. Michael, your thoughts on the announcement? Do you have faith in this turnaround? The turnaround is going to have a low probability of succeeding, Sarah. There's a couple important takeaways from this announcement.

Number one, the sales in the most recent quarter were down 26%. There's only so long that a retailer can withstand losing a quarter of its sales in one period year over year. Second point is, while they did raise additional capital, it's going to be very expensive and very dilutive. And keep in mind that the company burned through $325 million in the most recent period. If you simply annualize that, and we can argue whether that's conservative or aggressive, that would be about $1.3 billion a year, translating to about $15 a share of cash burn per stock, per share. The stock's trading right now at nine and change. It's going to be a very precarious situation from here. So what is the likelihood that you're saying this

company could file for bankruptcy? We're saying that what is going to determine the outcome from here is the shape of whether or not they can improve the sales trends. And what really turns the fortunes of a retailer is when the vendor community starts to lose faith in that outcome. And if they stop shipping goods to the vendor, that really accelerates the downturn. And there has been chatter that some of the vendors' community has started to become more nervous about its pairing with with me on. What what about I know Ryan Cohen is out, which there's a whole other question of what he knew when when he sold out during the meme mania. Michael, but what what about the case that he had that there were that there was a turnaround here to be had that they could potentially spin off? Bye bye, baby. It seemed like the market was excited about that. that there was a turnaround here to be had, that they could potentially spin off Bye Bye Baby.

It seemed like the market was excited about that. There's some value in Bye Bye Baby. It's a retailer that's an important component in the lives of new parents. But the lifespan that that retailer deals with that customer is typically only 12 to 24 months out of their entire lives when they're in the market for those juvenile products. That makes it not an easy retailer to navigate through. The core business is under a considerable amount of pressure. So whatever an investor might see in this situation, the facts are what the facts are. And it's going to be very difficult to turn around the business

from here. The strategy is to try and bring back some national brands, coupon a little bit more to drive traffic. Those strategies involve lower margins than the company has experienced in the last couple of years. So it's going to be difficult for Bed Bath & Beyond to have its cake, which is to drive sales, and eat it too, which is to stabilize its profitability. So you think it's hard to tell if there are any fundamental investors really in this stock just because of what's gone on with the memes and the short squeezes. You have a $3.50 price target?

That's right. That's what you think it's worth? That represents 60% downside from here. We would start thinking about who has the potential to capture share in the event that Bed Bath & Beyond needs to continue to rationalize its store base. About 80% of those Bed Bath & Beyonds have a target within 10 minutes. And Target stands to be a significant beneficiary of these challenges, in the event that it captures 25% of those sales, that could add 5% to 10% to Target's earnings next year. So that's another way to look at this situation. Well, yeah, I know the proximity there in geography is pretty

interesting, the Targets and Bed Bath & Beyond. No doubt. Good to see you, Sarah. You too. Thank you, Michael Lasser. And Mike, just on the Bed Bath story, you've been watching the bonds and what story they're telling about liquidity and how much time this company might have left. Yeah, it's a reality check on what the markets really think about, whether there's going to be enough money to go around. The bonds traded a very steep discount to par. Some of them yield, you know, 30-ish percent. That's a price of one of the bonds

that's due in 2024. That's in blue compared to the stock price. So clearly the stock just goes on its own kind of emotional ride. The bonds are more or less about is there going to be enough money to get paid back in whole? And most of the public bonds say

probably not at this point. And keep in mind that the financing that was just announced that they're securing, they're now lining up, is what's called kind of like last in, first out. So that debt gets paid off first if they get that lifeline. So if you're a believer in this company, you should buy the bonds, not the stocks. We've got two minutes to go in the trading day. What do you see in the market internals? It's been pretty mixed all day, Sarah. Skewed a bit to the negative side. You look at the New York Stock Exchange volume split there. It is now

almost two to one to the negative side there. Interestingly, we saw bonds sell off going into the close along with stocks. So there hasn't been a month end rotation. Take a look at how stocks and bonds have done just month to date. And you'll see they're both negative. A balanced portfolio this year continues to be underwater. And the weakness in bonds, I've been saying this all year, it reduces the ability of investors to buy dips in stocks because their overall portfolio doesn't have that cushion that's really being very active. So that's what we're seeing, kind of a dump across the board into month. And volatility index has been relatively subdued even over the last couple of weeks as the S&P 500 has had its struggles. You see it's down just a little bit today, 26. We'll see if we get a bit of a new

month push of new money tomorrow. But right now, VIX is pretty calm. We do have the jobs number Friday. Good reminder, as we head into the close, looks like we're tracking for our fourth down day in a row. By the way, month to date, Mike told you stocks and bonds are lower. Guess what's higher? The U.S. dollar, dollar index, 2.65 percent higher on the month. That is potentially one of the reasons why stocks have struggled on these higher interest rate fears. There's the Dow right now. It's down almost a full percent for the month. The Dow's down 3.7 percent. S&P for the month down about 4 percent. On the day, it's down about three quarters of 1 percent. Communication services is positive as a sector.

Thank you to Meta and Netflix and some of those other names that are riding off of Snap's game. The Nasdaq down half a percent on the day. It's also the fourth down day for the Nasdaq. And for the month, the Nasdaq is down 4%. That's it for me on Closing Bell. See you tomorrow.