Retail Sales Gain Despite Inflation

Consumers Shrug off Rising Prices

Consumers continued to spend last month in spite of high prices. October retail sales climbed 1.7%, which track household spending on an array of goods including food, gas, and apparel. This follows a 0.8% increase in September. Excluding vehicles, core sales were up 1.6% month-over-month. Economists were expecting retail sales to increase 1.5% in October and core sales to be up 1%.

The jump in consumer spending comes in spite of rising inflation, which just hit a 30-year high. Meanwhile, consumer sentiment fell to a 10-year low in November. The increase in retail sales indicates that consumers are still spending even though prices are high and optimism about the economy is low.

Savings Rate Still High

Ecommerce led the charge in October, with online sales increasing 4% month-over-month and 10.2% compared to last year. Sales at the nation's grocery stores were up 1.1%, while sales at bars and restaurants remained flat. Due to soaring prices at gas pumps, gasoline sales were up 3.9% last month and 46.8% year-over-year.

Consumers are flush with cash thanks to pandemic stimulus and shutdowns which enabled them to curb expenses and reduce debt. As of the third quarter, savings held by US households totaled $1.6 trillion. That is much lower than savings were during the peak of the pandemic, but it is still elevated.

Walmart Prepares for a Strong Holiday Season

Consumer spending does not appear to be slowing down heading toward the busy holiday season. Walmart’s earnings report gave Wall Street more information about consumer habits recently. For its third quarter, Walmart (WMT) reported a 9.2% rise in comparable sales. Meanwhile, foot traffic in Walmart locations was up 5.7%, and Walmart said spending per trip increased 3.3% year-over-year.

Walmart raised prices earlier in the quarter to take advantage of demand for early holiday shopping. So far this strategy seems to have paid off. Walmart expects sales to stay strong both online and in stores. For this reason, the nation’s largest retailer said it boosted inventory by 11.5% to be ready for the holidays. In spite of inflation, consumer spending has remained strong and many expect this trend to continue.

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Cardinal Health and Zipline Team Up to Deliver Medicine Via Drones

Cardinal Health Tests Delivery Drones

Cardinal Health (CAH) is testing drones as a way to deliver medicine to participating pharmacies. The healthcare supplies distributor is betting that delivery drones can reduce the time it takes to get medicine and supplies to pharmacies. With drones, Cardinal Health can bypass traffic delays and other challenges that come with traditional transportation. The company hopes that in the future, drones could be used to get medicine to remote areas or to deliver time-sensitive treatments.

The company is joining a growing list of businesses which are testing drones for shipments of medical supplies. Merck (MRK), Walmart (WMT), and United Parcel Service (UPS) are among the other companies exploring this strategy.

Drone Delivery in 30 Minutes or Less

Cardinal Health is teaming up with Zipline to test delivery drones outside of Charlotte, North Carolina. The two companies still need approval from the Federal Aviation Administration, but they plan to begin tests next year. The aerial drones will be about six feet in length and will look similar to tiny planes.

To start out, the drones will carry four pounds of supplies for about 10 miles from a Zipline distribution center to pharmacies in the area. Deliveries will take anywhere from 15 to 30 minutes. The drones will hover 300 to 400 feet above the ground as they travel to participating pharmacies, dropping packages via parachutes into designated landing zones. Cardinal Health has not yet said which pharmacies are part of the pilot.

Zipline’s Past Experiences

Zipline has already made a name for itself in the drone delivery market, transporting drugs, medical supplies, blood, and vaccines to locations in Rwanda and Ghana. The company has also inked deals with Walmart and Salt Lake City’s Intermountain Healthcare. Zipline’s drones can travel as far as 50 miles one way.

Transporting goods in trucks and on planes can get costly, particularly amid the current supply-chain difficulties. Cardinal Health and a growing list of other companies are trying to find new solutions, like drones.

Real Estate Investors Are Hungry for Movie Studios

CBS Studio Sells for Over $1.8 Billion

CBS Studio Center in Los Angeles is being sold for over $1.8 billion to Hackman Capital Partners and Square Mile Capital Management. The studio complex has 210,000 square feet of office space and 18 sound stages. The final sale is happening after an intense bidding war.

Just three months ago when CBS Studio Center was put up for sale, it was worth between $1.2 and $1.3 billion, which is about $500 million less than what it fetched yesterday. Studio space is currently in high demand and real estate investors are eager to buy any studio space they can find.

Demand for Studios Soars

CBS Studio Center’s more than $1.8 billion price tag shows just how strong demand is for space. This is because streaming services are churning out content and need space to film it. As competition in the streaming industry heats up, Netflix (NFLX), Amazon (AMZN), Apple (APPL), Disney+ (DIS), and others are clamoring for studio space.

Production companies are noticing this trend and are selling their complexes and leasing space. This has been happening for several years. In 2019, CBS sold its Los Angeles-based Television City studio complex to Hackman Capital for $750 million.

Real Estate Investors Go to Hollywood

Real estate investors want a piece of the action. They are snapping up any real estate associated with the film industry whether that means studios or office buildings. Private equity firm TPG purchased Cinespace Studios last week for $1.1 billion, getting access to 56 sound stages in Chicago and Toronto. Earlier this year Hackman and Square Mile bought Kaufman Astoria Studios and Sony Pictures Animation. Meanwhile in 2020, Blackstone (BX) acquired a 49% stake in a venture that controls Hollywood studios and commercial properties.

Content providers are competing for viewers by developing new shows, movies, and games. That requires studio space, which is limited. Real estate investors are on the edge of their seats to get involved in the content boom.