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Good morning readers. And happy Friday, y’all. We usually start of these newsletters with an interesting story or witty tidbit. But today is a little different. And that’s because some us may have had a few to many last night.

Cut us some slack.

Let’s jump into today’s storylines.

In today’s digest:

• Restaurants are starting to feel the pinch from consumers spending less

• Headline Hustle: Peloton CEO steps down while company lays off 15% of its workforce, Sony and Apollo show interest in Paramount by making $26 billion deal, China is dealing with a ‘fake gold’ problem

• Investors are playing the long game with Apple despite dip in sales

• Pulse Points: What’s Trending

RESTAURANTS

Consumers are cutting back and fast food chains are feeling the heat

It seems like the era of “supersize me” has run into a roadblock. With economic pressures tightening their grip, fast-food chains are facing an unexpected pullback in sales, and the biggest names in the industry are starting to feel the heat.

For a while, economists have been playing the role of fortune teller, predicting a pullback in consumer spending due to rising prices and interest rates. But it's only now that these predictions have started to bite into the fast-food sector.

Starbucks saw a startling 17% drop in share prices after reporting a dip in sales, a sentiment echoed by Pizza Hut and KFC's parent company, Yum Brands, which also witnessed disappointing performances blamed partly on severe weather and stiff comparisons to a robust quarter last year.

Ditching the drive-thru for cheaper chews

But weather woes and tough year-ago comparisons might just be part of the story. The real challenge seems to be the increased competition for a shrinking pool of customers, who are now more selective with their spending. The result? A brawl for every dollar, with McDonald’s adopting what it calls a “street-fighting mentality” to claw back its share of budget-conscious diners.

Eating out has become pricier compared to dining in, with prices at quick-service spots jumping by 5% compared to last year, outpacing grocery price hikes. This discrepancy is nudging diners towards more economical eating options at home.

Yet, not all hope is fried and gone.

• Some chains like Wingstop and Chipotle are defying the downturn with significant sales increases, thanks to a loyal customer base that sees dining out as a treat rather than a routine.

• Meanwhile, McDonald’s is not just throwing punches but also planning a thrifty comeback with a nationwide value menu designed to lure cost-conscious consumers back to the Golden Arches.

Big picture: In a market where every dollar counts, the fast-food industry is rethinking its strategies to appeal to budget-conscious consumers, hoping that value deals and innovative offerings will get them back on track.

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IN THE KNOW

Headline Hustle

🚲️ Peloton CEO steps down, company lays off 15% of its staff. Peloton's recent announcement of CEO Barry McCarthy stepping down and significant layoffs reflects the company's ongoing struggle to align spending with revenue. McCarthy's departure marks a shift in leadership, with interim co-CEOs appointed as the company seeks a permanent replacement. The restructuring plan includes a 15% reduction in global headcount and cost-saving measures across various departments. Despite a surge in premarket trading, Peloton's shares dipped following disappointing fiscal third-quarter results, falling short of Wall Street expectations.

💰️ Sony and Apollo make $26 billion bid for Paramount. Sony Pictures and Apollo Global Management have expressed interest in acquiring Paramount Global for approximately $26 billion. This formal interest follows Skydance Media's bid, backed by RedBird Capital and KKR, awaiting recommendations from Paramount's special committee. While Skydance awaits feedback, Paramount's options include extending exclusivity with Skydance, entertaining Sony-Apollo's offer, or negotiating with other potential buyers. Redstone initially favored exclusive talks with Skydance but may consider Sony-Apollo's bid to keep Paramount intact.

🇨🇳 China is dealing with a ‘fake gold’ problem. Gold's surge in value has triggered a rise in gold scams across China, with unsuspecting consumers falling victim to counterfeit or inferior gold purchases online. The allure of "999 gold," synonymous with purity, has led to thousands being deceived by fraudulent sellers. Despite government efforts to combat scams, including issuing guidelines for authenticating gold, the proliferation of fake goods persists, exacerbated by the country's booming e-commerce market.

TECH

Apple's iPhone sales dip, but investors play the long game

A 10% decline in iPhone sales? Not exactly a cause for celebration, you’d think. But Apple’s latest earnings report seems to have turned conventional wisdom on its head. Instead of a panic sell-off, Apple’s stock rose more than 6% in after-hours trading, a rally that could become the largest since November 2022.

What’s driving the unexpected optimism?

Despite a year-over-year drop in iPhone sales, Apple’s gross margin grew to a healthy 46.6%, thanks to its expanding services business that boasts impressive profitability. While overall revenue dipped by 4%, the tech giant forecasted growth in the low-single digits for the current quarter, bringing some relief to investors who had anticipated a less favorable outlook.

The biggest news of all? Apple approved a staggering $110 billion in share buybacks, the highest in public company history and a noticeable step up from its usual $90 billion annual repurchases.

The move underscores Apple’s evolution from a gadget-centric brand to a financial titan. The tech company has steadily generated strong cash flows, with CFO Luca Maestri noting the positive impact over recent years.

While Apple remains tight-lipped about specific iPhone sales forecasts, analysts predict potential growth could come from AI features in future iPhones, luring more Android users into the Apple ecosystem.

Looking ahead…Maestri hints at Apple’s plan to continue evaluating its optimal capital structure as it inches toward a net cash-neutral position. For now, Apple’s massive cash flow keeps its investors optimistic, ready for the next innovation.

SNIPPETS

Pulse Points

• Ariana Grande, Adele, and Rihanna will return to TikTok along with Taylor Swift following a new licensing deal with Universal Music Group that resolves a dispute and restores previously muted music.

• The IRS plans to increase audits of wealthy taxpayers and large corporations using funds from the 2022 Inflation Reduction Act.

• Maryland will receive a $350 million insurance payment for the collapse of the Francis Scott Key Bridge in late March.

• Spotify is reportedly moving lyrics behind a paywall for its free users, as indicated by user complaints on Reddit and a non-committal response to TechCrunch about changing features.

• Microsoft has reaffirmed its policy prohibiting U.S. police departments from using generative AI for facial recognition through its Azure OpenAI Service.

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