• Inflation Rate Drops, Subway Explores Possible Sale, Starbucks Tightens Office Return Policy

    Inflation Rate Drops

    Annual consumer price inflation dropped for the sixth consecutive month in December, to 6.5%, leaving markets and analysts to ponder the Federal Reserve’s next move as it looks to tame inflation through interest rate hikes.

    The Labor Department said consumer prices declined 0.1% on a monthly basis, and the annual inflation rate for all items was down from November’s 7.1%. Gasoline prices fell slightly from the prior month in December, but other utility, food and shelter costs remained at historically high levels on an annual basis.

    Inflation has a big potential impact on commercial real estate demand and financing, and the industry is closely watching the direction of future Fed rate hikes designed to lower inflation.

    Fed officials have previously said they plan to continue raising lending rates until inflation is brought closer to 2%, even if it risks raising unemployment and spurring a recession.

    Some analysts said Thursday the Fed should have considerable leeway to focus on inflation as long as labor markets remain relatively healthy. The national unemployment rate remained historically low at 3.5% in December, and the Labor Department reported Thursday that initial claims for unemployment insurance declined by 1,000 from the prior week to 205,000 for the week ended Jan. 7.

    “While inflation has slowed, the Fed is still fighting several important battles to make sure we don’t experience the yo-yo inflation of the 1970s,” LPL Financial analyst Barry Gilbert said in a Thursday statement from the financial services firm. “Inflation expectations can impact prices and some of the Fed’s steadfast inflation-fighting rhetoric has been to keep inflation expectations well anchored, something they’ve largely succeeded at thus far.”

    Stock markets reacted favorably to Thursday’s inflation and employment news. The Dow Jones Industrial Average closed up nearly 269 points, or 0.8% for the day, with the S&P 500 up 1.28% and the Nasdaq Composite rising 1.76%.

    Subway Explores Possible Sale

    Owners of the privately owned Subway sandwich chain, among the world’s largest restaurant companies by location count, have retained advisers to explore a potential sale. The Wall Street Journal, which first reported the news and cited sources familiar with the matter, said the company could be valued at more than $10 billion if a sale indeed takes place.

    “As a privately held company, we don’t comment on ownership structure and business plans,” a Subway spokesperson said in a statement sent to CoStar News Thursday. “We continue to be focused on moving the brand forward with our transformational journey to help our franchisees be successful and profitable.”

    Milford, Connecticut-based Subway, majority-owned by Doctor’s Associates, had approximately 37,000 locations as of 2021. Industry research firm Technomic reported that Subway’s annual global sales peaked at $18 billion in 2012 but have been declining during the past decade amid franchisee departures and rising competition from other sandwich chains including Jersey Mike’s and Jimmy John’s.

    A deal for Subway could stand out in a climate that has curtailed merger-and-acquisition activity considerably amid recession fears and stock market volatility. Citing data from analytics firm Dealogic, Bloomberg News reported that U.S. deal volume dropped 41% from the prior year in 2021 to $1.5 trillion.

    Starbucks Toughens Office Return Policy

    Starbucks Coffee, also among the world’s largest restaurant companies by location count, wants more of its workers back in their offices.

    CEO Howard Schultz this week called on the Seattle-based company’s corporate employees to be in offices at least three days a week by the end of this month, according to contents of a company memo reported by several media outlets and since posted on the company website.

    Starting Jan. 30, employees within commuting distance are required to report to the Seattle headquarters Tuesdays, Wednesdays and a third day to be decided by their work teams, though commuting distance standards were not specified.

    Media reports indicated the company found through badge-swipe data that there has been limited adherence since September to a loose requirement for workers to be in offices at least one to two days a week. Schultz said in the memo that the new policy is meant to “rebuild our connection to each other and synchronize teams and efforts.”

    Starbucks joins other major companies including Apple, Disney and Twitter that have toughened their back-to-office policies, but workers in many industries have been resisting.

    Office attendance has yet to reach 50% of pre-pandemic levels in most major U.S. cities, according to security technology firm Kastle Systems.

    Source: www.CoStar.com