Thursday Sep.05, 2019

American Eagle is now a bralette company

_American Eagle's "aha" moment_
_American Eagle's "aha" moment_

Hey Snackers,

Gmail can now let someone know you're on vacation before they click send. Where was this all summer @Google?

Word that Hong Kong will withdraw the controversial bill that triggered 13 weeks of protests pumped up markets worldwide on Wednesday.

Debut

Slack's quest to kill Outlook email hits a speed bump

The force isn't as strong with this one... Slack's mission to destroy email with zippy messaging had a rough quarter. 100K companies pay Slack to manage non-verbal inter-office messaging and only 5K came on board in the last 3 months. That's slower growth, so shares tanked 14% on its 1st earnings since going public in June.

It's very much unprofitable... but it's profitably dominating your life. The average Slack user is actively slacking 90 minutes per day and has it open for 9 hours of work/life imbalance. Here's why growth lost its mojo:

  • #spent-less-on-advertising — Slack hoped its growth momentum was unstoppable, but it still needs to buy ads.
  • #low-hanging-fruit-is-gone — Early adopters have Slacked for years. To get less adventurous white collars, it needs to work harder training users on how to quote (use ~ tildes ~) and start a :thread:.

For Slack to win, Microsoft must lose... Microsoft is the Tyrian Lannister of software (it thinks and it knows things). It finds ways to survive. It owns office email with Outlook, and is adapting with "Teams," a nimble messaging service that mimics Slack's qualities. Microsoft's Slack competitor is an easier sell to Larry-from-procurement, who's been Microsoft-loyal for decades. Plus, Teams is sneakily bigger: 13M daily users to Slack's 10M.

FYI: This NYT guide to stopping Slack from taking over your life.

Worn

Aerie's bralettes are saving its parent company: American Eagle

Abercrombie's little cousin... American Eagle doesn't fill its stores with cologne and abs — Instead, the retailer is adding CBD-infused lotions to its button-downs next month. In the meantime, shares plummeted 12% Wednesday because of the following contradiction in last quarter's performance:

  • ⬇️1% = American Eagle's sales fell — blame weak back-to-school sales in July.
  • ⬆️16% = Aerie sales surged — American Eagle's lingerie brand saw its 19th-straight quarter of double-digit growth. Let that sink in.

Bralettes experienced "renewed excitement"... American Eagle's words. It's talking about its Aerie brand's signature anti-push-up bra. Aerie's Photoshop-less models are (actually) stealing market share from Victoria's Secret's ultra-sexualized ones. Now AE is opening 40 standalone Aerie stores and expanding the brand from underwear to yoga pants.

Spinoff brands are the new black... While American Eagle's style stays grounded, its Aerie line has taken off. These spinoff brands let the parent brand catch trends, try-on new looks, take risks, and scare corporate. But your Snacks team is noticing key apparel spinoff brands outpacing their parents. Check your closet for examples:

What else we’re Snackin’

  • Cooking: Kellogg is whipping up its own bleeding meatless burger for 2020 (it's already got America's most-popular veggie burger)
  • Overheard: Roku just released its biggest physical hardware yet — "the soundbar"
  • IOU: Apple is raising cash through its first bond offering in two years
  • Plugged: Porsche unveils its first fully electric car (the name's Taycan. Porsche Taycan)
  • PSL: Starbucks dips 1% after it lowers its sales projections for next year

Thursday

Disclosure: Authors of this Snacks own stock of Lululemon

20190905-944686-2847664

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Latest Stories

When the chips are down

Super Micro Computer, which produces the kind of servers fueling the AI boom, declined to pre-announce earnings. This spooked investors and rattled the entire chips-producing sector. That sent Super Micro plunging 23%, and dragged down lots of their customers and suppliers down with it.

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World

Do you want to run the State Department of McDonald’s?

A couple of days ago, a tweet making fun at McDonald’s hiring a “Manager for Diplomatic Relations” went viral.

At first glance, the idea that McDonald’s, a burger franchise known for its double quarter pounders and perfectly salted fries, is expanding its diplomatic influence with policy makers in Foggy Bottom and the world at large sounds comical. But it’s actually crucial.

There are more than 40,000 McDonald’s locations spread across 115 countries around the world, and 90% of these stores are independently owned and operated franchises that pay royalties to the parent organization to operate. Tens of thousands of franchises operated by different owners with different beliefs, priorities, and values can get complicated, fast.

As we noted in Snacks in February, McDonald’s received heavy backlash from franchisees in countries including Saudi Arabia, Oman, Jordan, Kuwait, and Pakistan after McDonald’s Israel donated thousands of free meals to IDF personnel. But it wasn’t McDonald’s, as an entity, that made the donations. It was the owner of the company’s Israel franchises, who was acting under his own volition.

There are more than 40,000 McDonald’s locations spread across 115 countries around the world, and 90% of these stores are independently owned and operated franchises that pay royalties to the parent organization to operate. Tens of thousands of franchises operated by different owners with different beliefs, priorities, and values can get complicated, fast.

As we noted in Snacks in February, McDonald’s received heavy backlash from franchisees in countries including Saudi Arabia, Oman, Jordan, Kuwait, and Pakistan after McDonald’s Israel donated thousands of free meals to IDF personnel. But it wasn’t McDonald’s, as an entity, that made the donations. It was the owner of the company’s Israel franchises, who was acting under his own volition.

Nuke stocks up on AI excitement

For most of humanity, the thought of “nuclear-powered AI” sends a shiver down the spine. But the stock market is all for it! Just check out the list of top performing S&P 500 stocks this year. Just behind established AI plays — Super Micro Computer and Nvidia, you’ll find Constellation Energy, the largest operator of nuclear plants in the U.S. NRG Energy, which also operates nuclear plants, isn’t far behind. Bloomberg reports that CEO of power distributor Exelon — which spun off Constellation in 2022 — says in the Chicago area alone, AI could drive a 900% jump in demand for energy from data centers.

Tech

China makes Apple remove WhatsApp, Threads, Signal and Telegram from app store

In its latest move to restrict foreign tech, Beijing has ordered Apple to remove a number of popular messaging apps from its app store there, including WhatsApp, Threads, Signal and Telegram.

These apps had only been available through VPNs but were popular nonetheless, according to the Wall Street Journal.

Apple said the Chinese government asked them to remove the apps in the iPhone maker’s second biggest market over “national security concerns.” Last week, China told its state-owned telecoms to phase out the use of US chips by 2027.

Apple said the Chinese government asked them to remove the apps in the iPhone maker’s second biggest market over “national security concerns.” Last week, China told its state-owned telecoms to phase out the use of US chips by 2027.

Business

Tesla's recall reveals just how bad Cybertruck delivery numbers have been

Thanks to a recall of Tesla’s Cybertrucks, we now know how many of them have actually been delivered: 3,878 since the EV company began releasing them to customers in November.

In its third and fourth quarter earnings report, Tesla said that its current Cybertruck production capacity was greater than 125,000 a year. Musk had previously said he expected to produce 250,000 Cybertrucks a year by 2025.

Either way, that’s a lot more than the roughly 775 it’s delivered each month so far.

The recall is over an issue with the gas pedal pad that, the National Highway Traffic Safety Administration says when pressed, “may dislodge, which may cause the pedal to become trapped in the interior trim above the pedal.” The cause of the issue: “unapproved” soap that the manufacturer used to aid in getting the pad on the pedal.

A Cybertruck customer this week posted a TikTok about a terrifying incident in which this happened and “held the accelerator down 100%” in his 6,000+ pound vehicle. Thanks to some quick thinking where he held down the brake and put it in park, he wasn’t injured.

This is the long-awaited Cybertruck’s second recall since it came out five months ago.

Either way, that’s a lot more than the roughly 775 it’s delivered each month so far.

The recall is over an issue with the gas pedal pad that, the National Highway Traffic Safety Administration says when pressed, “may dislodge, which may cause the pedal to become trapped in the interior trim above the pedal.” The cause of the issue: “unapproved” soap that the manufacturer used to aid in getting the pad on the pedal.

A Cybertruck customer this week posted a TikTok about a terrifying incident in which this happened and “held the accelerator down 100%” in his 6,000+ pound vehicle. Thanks to some quick thinking where he held down the brake and put it in park, he wasn’t injured.

This is the long-awaited Cybertruck’s second recall since it came out five months ago.

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Markets

Cocoa hits $11,000

Cocoa prices are breaking records on an almost daily basis — with cocoa futures closing at (another) all-time high of $11,020 per metric ton yesterday.

That’s up 158% since the start of the year, and over 4x on the typical prices seen in 2022 — as crop production continues to fall short of demand.

Major cocoa-producing nations like the Ivory Coast and Ghana, which between them grow about two-thirds of the world’s cocoa, have seen excessive tree failure due to disease, changing weather patterns, and hot, dry conditions causing devastating droughts.

As such, consumers are starting to see the effects of the largest cocoa supply deficit in over 60 years: “shrinkflation” and reduced-cocoa recipes might soon hit your favorite chocolate bars, and Hershey stock was recently downgraded. Unfortunately, the worst may still be yet to come: the International Cocoa Organization expects production to lag behind demand by 374,000 tons for the 2023-24 season.

Cocoa prices

Major cocoa-producing nations like the Ivory Coast and Ghana, which between them grow about two-thirds of the world’s cocoa, have seen excessive tree failure due to disease, changing weather patterns, and hot, dry conditions causing devastating droughts.

As such, consumers are starting to see the effects of the largest cocoa supply deficit in over 60 years: “shrinkflation” and reduced-cocoa recipes might soon hit your favorite chocolate bars, and Hershey stock was recently downgraded. Unfortunately, the worst may still be yet to come: the International Cocoa Organization expects production to lag behind demand by 374,000 tons for the 2023-24 season.

Cocoa prices
Power

World out of balance: It costs the US 3¢ to make 1 penny

The cost of producing a US penny rose 13% in fiscal 2023 to 3.07 cents. Yes, it means that Uncle Sam loses more than 2 cents for every cent it produces. (And no, you can’t make it up on volume.)

For the record, that’s the 18th straight year the penny’s face value has been below production costs, fueling calls for abolishing the lowest value denomination coin. Canada started to phase out the penny in 2013, joining Australia, Brazil, Finland, New Zealand, Norway, and Israel, according to Smithsonian Magazine.

3.07¢
Business
Rani Molla
4/18/24

Netflix is going to stop sharing subscriber numbers

After posting subscriber numbers that beat expectations today, Netflix says it’s no longer going to share those numbers starting in the first quarter of 2025. That’s a big deal since subscriber numbers have long been one of the main metrics that investors have looked at.

“In our early days, when we had little revenue or profit, membership growth was a strong indicator of our future potential,” its shareholders letter read. “But now we’re generating very substantial profit and free cash flow.” The company said that it will focus on revenue and operating margin as its main financial metrics, while it will look at time spent on the platform to gauge customer satisfaction.

Another way to read this? They’ve hit market saturation and just aren’t going to be growing that much anymore, and they thought they’d end on a good note. Going forward they’re focusing on how to get more money out of the customers they do have.

They’re doing so by cracking down on password sharing and charging for extra members. They’re also pushing people to ad tiers, which are more profitable than non-ad tiers.

“Scaling ads to become a more meaningful contributor to our business in ‘25 and beyond,” Netflix said.

Netflix’s ads membership grew another 65% in Q1 over the previous one, after rising 70% the quarter before, and 40% of signups in ad markets continue to be for those ad plans.