Target, Klarna and Sesame Street's new addy

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0:11This is the Indicator from Planet Money. I'm Waylon Wong. And I'm Adrian Ma, and we're joined today by Planet Money's Sarah Gonzalez. What's up? Yes, and I'm here on my favorite day of the week, Indicators of the Week Day. Really? Best, like, better than Monday? Well, I mean, it's a Friday, so it's already beating Monday. It's true. This, of course, is the day of the week when we talk about our favorite numbers from the news. Today's episode, we're talking about Target's sagging sales, buy now, pay later problems, and a new streaming address for Sesame Street. We'll tell you how to get there after the break.

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1:29This message comes from NPR sponsor, Capella University. Learning doesn't have to get in the way of life. With Capella's game-changing FlexPath learning format, you can set your own deadlines and learn on your own schedule. That means you don't have to put your life on hold to earn your degree. Instead, enjoy learning your way and pursue your educational and career goals without missing a beat. A different future is closer than you think with Capella University. Learn more at capella.edu. It is Indicators of the Week. Sarah, you are up first. Okay, my indicator is$99 million. That is how much one of the leading buy now, pay later companies, Klarna, lost in just the first three months of the year.

2:16Ouch. Yeah, not great. And I'm just going to get this out of the way. Buy now, pay later should really be called get now, pay later, but whatever. It is like the modern day layaway. You guys remember layaway? I remember layaway. It's from like the heyday of the department store era, like Sears. Buy now, pay later is like that, except pig draw. You don't have to wait to get your whatever eighth grade graduation dress until you pay it off. You can get the dress now and pay later. But it's having a little problem right now. People are buying now, yes, but they are not paying later. It's that pesky second half of the value proposition.

2:57Yeah, the paying part. One of the reasons that Klarna has lost so much money, which is actually double what they lost in the same period last year, is that people are not paying for their purchases, not paying off those mini loans or they're paying late. And this may be a sign of the strain that consumers are feeling right now and a sign of consumers' financial health in general. I mean, I guess Klarna is probably cleaning up on late fees, though, right? Oh, yeah. I mean, Klarna makes money by charging customers a fee for failing to pay their loans on time. And I just want to say that it is not just like graduation dresses and like fun things like that.

3:37One kind of grim point I saw in the data is that a quarter of buy now, pay later customers get these loans to pay for their groceries. And that is more than it was last year. OK, so another potentially grim indicator to watch going forward. I mean, it does seem like people are shopping more through Klarna, but maybe not shopping as much at other places. Right, Adrian? That's right. My indicator is negative 2.8%. So the retailer Target just announced its financials for the first quarter, and the company reports its net sales are down 2.8 % compared to a year ago. And on top of that, Target also reduced its sales outlook for the whole year.

4:19And this is my indicator of the week because Target points to a few reasons behind this sales decline. And three of those reasons are very much in the news right now. Very zeitgeisty. So any guesses as to what these three things are? DEI. Yes, that is correct. In January, Target's CEO, Brian Cornell, announced the company was scaling back its DEI initiatives. So we did an episode on this recently, and those DEI initiatives that got scrapped, some of them included goals for hiring more Black employees and sourcing more of its products from Black-owned businesses. Right. And this, you know, perceived 180 turn from the company explicitly supporting social justice and racial equity has provoked a lot of backlash among civil rights activists and faith leaders who pushed a boycott of the store.

5:11and we have been wondering, will this hurt target sales? Well, the CEO says, yes, it did. It's not clear that it's the main reason, but it's definitely one of them. So there are two more. Any other guesses as what the other factors were? The trade war? Tariffs? Yes. Ding, ding, ding. Okay, get this. According to the company, about half the stuff it sells is actually imported from other countries and a large chunk of those imports come from China. As we know, all of this tariff hullabaloo has really created a lot of uncertainty for businesses, including Target. You know, it's trying to decide how to handle those tariffs.

5:49Should they negotiate with vendors? Should they buy more merchandise before tariffs go into effect? Should they maybe change which countries they import from or raise prices on customers? So this is kind of hurting the company's financial situation as well. Okay, final round for all the beans. Any guesses as to the third and final reason Target is hurting right now? Inflation. People feel like there's like a recession or inflation around the corner. You got it. So Target's CEO. We must be economics reporters for something. This is unfair advantage. Target's CEO says declining consumer confidence is one of the factors for its declining sales.

6:33and you can see some numbers recently that speak to just how much consumer vibes have declined, right? One of the most watched indicators, the University of Michigan's Consumer Sentiment Index, it hit 50.8 in May, which is the second lowest level on record. Should be worth noting that the worry is much stronger among Democrats and independents. Republicans, though, they have also soured a bit on the economy in the past month or so. So, Waylon, you want to bring us home or maybe to another place? Ooh, I certainly would. My indicator is 56, as in the upcoming 56th season of Sesame Street. It's going to come out later this year at a new home, Netflix.

7:22And that is thanks to a deal unveiled this week by Netflix and Sesame Workshop, which is the nonprofit that makes Sesame Street. By the way, Netflix is a financial supporter of NPR. Season 56. Ah, ah, ah, ah. That was so good. Did you know that when I was little, I was scared of the Count segments because of the Thunder and Lightning? It wasn't really the Count. It was the Thunder and Lightning. Well, what's even scarier than Thunder and Lightning is the prospect of Sesame Street maybe going away. And before the Netflix deal, this seemed like a real possibility. You might remember that Sesame Street had been on HBO for the last decade.

7:59Then HBO's parent company did not renew that deal. Sesame Workshop was reportedly facing a big funding shortfall and then had to lay off 20 % of its staff this year. But now it has a new home. Netflix has more than 300 million subscribers. That is a lot of eyeballs. They will get the new episodes plus 90 hours of old episodes. All right, Netflix coming in hot, saving the day, saving Elmo for the people. I do wonder, though, like, okay, so you have to be a Netflix customer in order to watch Sesame Street now, then? You actually don't have to have a Netflix subscription. They're sticking with the free, free, free model.

8:38Yes, and this is what is kind of unusual about this deal. So new episodes will be available the same day on PBS and then on PBS online platforms. And this is interesting because under the previous deal with HBO, episodes wouldn't get released on PBS until months later. To put my calculating business reporter lens on here for a second, like, what does Netflix actually get if it doesn't have exclusive rights to this content? Yeah, well, children's programming is huge for Netflix. It accounts for 15 percent of viewing. They've got Miss Rachel and Peppa the Pig. And so adding Sesame Street to the mix is maybe a way to encourage parents to keep subscribing and not to jump ship to a different streaming service, which is always a perennial concern for streamers.

9:25It's the churn. And this deal also allows Netflix to develop video games based on Sesame Street. Yeah, I don't know if the Sesame Street parent crowd really wants their kids playing video games. What if it's packaged as educational games, though? Oh, OK. Yeah. No, sign me up. Sure. subscribing to Netflix. Thank you. There we go. We have one, two, three, ah, ah, ah, indicators for this Friday. Thank you so much, Sarah, for coming on the show. I feel like you're really trying to get that side gig as a backup count for Sesame Street. I mean, I think he's got it in the bag. That was very convincing.

10:04This episode was brought to you by the letter J for producer Julia Ritchie, G for engineer Gilly Moon, and S for fact checker Sierra Juarez. Kicking Cannon is our editor and The Indicator is a production of NPR. That was so cute. Wait, I think you're also auditioning for a side gig with Sesame Street. I'm trying to get a job at Sesame Workshop.

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