The Wall Street Journal - 31.07.2019

© 2019 Dow Jones & Company. All Rights Reserved. *** THE WALL STREET JOURNAL.** Wednesday, July 31, 2019 |B1

TECHNOLOGY: HUAWEI SHOWS RESILIENCE IN FACE OF U.S. ACTION B4

BUSINESS&FINANCE

Markets are enjoying an ex-
ceptional period of calm, one
that some investors are bet-
ting will persist.
Expectations for swings in
the S&P 500 have been muted
and investors have increased
derivatives bets that tend to
pay out if stocks continue
their slow but steady climb
and volatility stays low. The
S&P 500 and Nasdaq Compos-
ite closed at records on Friday
as the latest batch of second-
quarter earnings results trick-
led in.
The S&P 500 hasn’t had a
1% move in either direction for
36 trading days, the longest
such streak since June to Oc-
tober 2018 when it went 74
days without a 1% move. One
yardstick of stock swings, the
Cboe Volatility Index, or VIX,
has fallen 45.2% this year, on
pace for its biggest annual de-
cline ever, according to Dow
Jones Market Data. The gauge
measures expectations for vol-
atility over the next month,
and tends to rise when inves-
tors are wagering on big
moves in the S&P 500 through
options.
Instead, some are pulling
back from betting on a dra-
matic move in stocks.
Leveraged funds including
hedge funds have increased
Please turn to page B12

BYGUNJANBANERJI

Investors

In Stocks

BetonLow

Volatility

COMMODITIES

Copper falls to 10%

below its peak

amid fears over

China trade feud B12

PROPERTY

Goldman Sachs

revives real-estate

fund, seeks to raise

$2.5 billion B6

2012 order from the agency by

deceiving users about the pri-

vacy of their data.

The penalty is equivalent to

about 16% of the company’s

2018 operating expenses, the

day-to-day cost of running the

business.

Put another way, it amounts

to 59 days of ordinary ex-

penses such as research-and-

development spending, mar-

keting and administrative

costs for the social-media gi-

ant. Facebook reported hold-

ing about $13.9 billion in cash

and equivalents at the end of

June, plus $34.7 billion in mar-

ketable securities.

Other recent fines imposed

on Facebook were smaller. The

$100 million Facebook agreed

to pay to settle allegations by

the Securities and Exchange

Commission that the company

Please turn to page B2

Facebook Inc. and Google

parent Alphabet Inc. have

been hit with some hefty fines,

but a closer look shows that

for these tech giants, the pen-

alties aren’t as huge as they

seem.

The Federal Trade Commis-

sion recently fined Facebook

$5 billion to settle allegations

that the company violated a

BYTHEOFRANCIS

For Facebook and Alphabet,

Big Fines Cause Limited Pain

Source: FactSet

June7

The S&P 500’s

last daily move

of at least 1% in

either direction

The S&P 500 has advanced 4.9% since June 7,

with all 11 sectors rising during that period.

The broad rally has been slow and steady,

going 36 consecutive sessions without a

move of at least 1% in either direction.

S&P500

3200 Calm stretch

2400

2600

2800

3000

Jan. July

8

–1

0

1

2

3

4

5

6

7

%

June 7 July 1 July 30

Communications

Consumer

discretionary

Financials

S&P500

+4.9%

Industrials

Consumer staples

Energy

Materials

Health care

Real estate

Utilities

+0.3%

S&P500,dailymoves

Technology

+7.9%

Peter Santilli/THE WALL STREET JOURNAL

S&P500sectorperformancesinceJune7

S&P 3013.18g0.26% S&PFIN g0.18% S&PIT g0.70% DJTRANS À0.08% WSJ$IDX À0.002% LIBOR3M 2.253 NIKKEI (Midday) 21497.99g0.97% See more at WSJ.com/Markets

for global trade, as the com-

pany is a major electronics

producer itself and supplies

parts for products or ser-

vices offered by other tech

companies like Apple Inc.,

Microsoft Corp. and Ama-

zon.com Inc.

On Wednesday, Samsung

said it notched a second-

quarter net profit of 5.18

trillion South Korean won

($4.4 billion), a decline from

11.04 trillion won a year ear-

lier.

Revenue slid to 56.13 tril-

lion won from 58.5 trillion

won a year earlier.

Samsung’s results topped

analysts’ estimates that had

anticipated net profit of 5.1

trillion won and revenue of

52.4 trillion won for the

quarter ended June 30, ac-

cording to S&P Global Mar-

ket Intelligence.

Samsung could receive a

modest boost in the coming

months from the planned re-

leases of two high-end

smartphones.

The Galaxy Note 10 will be

unveiled next week at a New

York event, while the com-

pany’s much-anticipated fold-

able-screen device, the Gal-

axy Fold, will be released by

September.

During the first three

months of 2019, Samsung’s

smartphone shipments fell

8%, a bigger drop than the

industry’s 6.6% decline, ac-

cording to International Data

Corp., a market researcher.

Samsung’s mobile unit saw

revenue increase, though op-

erating profit declined 42%

from the prior year, a sign

the South Korean company

has needed aggressive pro-

motions to gin up sales.

Meanwhile, the company’s

semiconductor division re-

ported a 71% slide in operat-

ing profit.

Just several years ago,

Samsung reaped most of its

operating profit from smart-

phones. But consumers have

slowed their upgrades of new

devices, as updates have left

buyers unimpressed and

more likely to keep their cur-

rent phone.

Now Samsung derives

Please turn to page B2

SEOUL— Samsung Elec-
tronics Co.’s net profit
dropped 53% during its sec-
ond quarter, as consumers’
decreasing appetite for
smartphones and other gad-
gets sapped demand for the
company’s cash-cow compo-
nents business.
The world’s largest smart-
phone and memory-chips
maker has been dogged by a
global spending pullback ex-
acerbated by the protracted
U.S.-China trade fight.
But more recently, Sam-
sung’s core businesses have
come under threat from
Japan’s new trade restric-
tions that slow shipments of
essential materials needed
for semiconductors and flexi-
ble displays.
Samsung is a bellwether

BYTIMOTHYW.MARTIN

Phone Slump Pinches Samsung Profit

clusively rather than creating

its own private-label products

from scratch.

Consumer-product compa-

nies say they have little choice

but to meet Amazon’s require-

ments. Manufacturers of items

from soup to garden rakes say

they have to sell through Ama-

zon to reach more customers.

Philips Norelco OneBlade,

owned by Koninklijke Philips

NV, said it cut the components

in its razor packaging to nine

from 13 and reduced the vol-

ume of packaging by 80% to

meet the new standard. Hill’s

Pet Nutrition Inc. said it de-

creased the packaging volume

of its Science Diet premium

dog food by 34% and the

amount of wasted space, or air

shipped, by 82%. Newell

Brands Inc., the maker of Rub-

bermaid FreshWorks, said it

cut the components used to

ship its containers to two from

seven.

“Some brands tell us they

plan to negotiate with Ama-

zon, but we don’t see that

happening,” said Matt Red-

dington, a director at packag-

ing-testing consulting firm

Veritiv Corp.

Mr. Reddington said that

while some companies could

remove their products from

Please turn to page B2

Amazon.com Inc.ispres-

suring brands to make their

packaging more efficient,

which has prompted vendors

to make costly changes to

their businesses or face fines.

Since last fall, Amazon has

told companies they must

make packaging for thousands

of larger products more com-

pact and easier to open by

Thursday.

Eventually, Amazon wants

every product it ships to meet

similar standards, according to

the company and its suppliers.

In a letter to vendors, Amazon

said the requirements will

make packages more environ-

mentally friendly. Amazon de-

clined to comment on its pack-

aging policies.

The new packaging require-

ments are the latest example

of Amazon’s power to get ven-

dors to change the way they

do business. The company has

also been pushing brands to

sell products in quantities and

at prices that best fit its stor-

age and delivery systems;

brands that don’t comply are

being cut from Amazon’s site.

In addition, the e-commerce

company is asking makers of

consumer products to develop

brands for Amazon to sell ex-

BYANNIEGASPARRO

Amazon Tells Brands to

Streamline Packaging

INSIDE

Procter & Gamble Co. re-

ported its highest quarterly

sales growth in over a decade,

riding strong consumer spend-

ing on household staples from

toothpaste to laundry deter-

gent even as the company con-

tinued to raise prices.

The strong sales were

marred by an $8 billion charge

the Cincinnati-based company

took to write down the value

of the Gillette razor business

it acquired 14 years ago. The

charge is a reminder of the

challenges facing big brands

amid shifting consumer habits

and new online entrants.

After years of trying to

stoke demand by cutting

prices, P&G and most of its ri-

vals switched course about a

year ago and have been push-

ing up prices across a range of

products. The moves have paid

off as consumers have been

willing to absorb the in-

creases, some of which were

prompted by higher costs and

have padded profits.

The maker of Tide deter-

gent and Pampers diapers said

Tuesday that organic sales—

which strip out currency

moves, acquisitions and dives-

titures—rose 7% in the quar-

ter. About half the gains came

from higher prices.

The company posted the

strongest organic-sales gains

in its beauty and health-care

businesses.

P&G’s results for the fiscal

year that ended June 30 mark

the biggest sales gain since

the 2008 U.S. recession. Fi-

nance chief Jon Moeller said

the results demonstrate that

P&G’s turnaround effort, from

slashing brands and jobs to

streamlining the organiza-

tional structure, is working.

“We built momentum on

sales, share and margin as the

year progressed,” Mr. Moeller

said on a call Tuesday with re-

porters.

P&Gwasbuoyedbya

strong overall market in the

U.S. and emerging markets,

despite concerns about the

global economy and trade ten-

sions. Rivals Kimberly-Clark

Corp. and Colgate-Palmolive

Co. also posted solid quarterly

results, though they didn’t

match P&G’s performance.

P&G shares rose 3.8% to

$120.41. Shares are up about

50% in the past year.

For the fourth quarter, the

company posted a net loss of

$5.24 billion, or $2.12 a share,

down from a profit of $1.89

billion, or 72 cents a share, a

year earlier.

The results were weighed

down by the Gillette charge,

which reduced earnings by

$3.02 a share.

Gillette started slashing

prices in 2017 in hopes of

stopping defections of its U.S.

customers to online startups

such as Dollar Shave Club and

Harry’s that sell lower-price

razors and blades. The move

helped, but the brand has re-

mained a stubborn weak spot

for P&G, which bought Gillette

for $57 billion in 2005.

The company has acknowl-

edged that it erred with a sin-

gular focus on creating more

sophisticated razors with

higher prices, opening the

door to lower-price rivals.

During the quarter, P&G’s

net sales rose 4% to $17.09 bil-

lion, above the consensus fore-

cast of $16.86 billion from an-

alysts polled by FactSet.

Unfavorable foreign exchange

hurt sales by 4%, P&G said.

For fiscal 2020, P&G pre-

dicted net sales growth of 3%

to 4% and organic sales

growth of 3% to 4%.

BYSHARONTERLEP

ANDAISHAAL-MUSLIM

P&G Posts

Loss Even as

Sales Surge

Consumer company

takes $8 billion charge

to write down value of

Gillette razor business

FTC Chairman Joe Simons called the Facebook fine significant compared with other such penalties.

YURI GRIPAS/REUTERS

Quarterlyorganicsales,

changefrompreviousyear

Source: the company

Notes: Excludes currency moves,

acquisitions and divestitures; fiscal year

ended June 30

0

2

4

6%

FY2017 ’18 ’19

7%

71%

Decrease in company’s

semiconductor business profit