Friday Apr.26, 2019

One-day Prime is coming

_Every time you get free Starbucks anything_
_Every time you get free Starbucks anything_

Hey Snackers,

Cue the carbo-load.

Amazon headlined a Wheaties-worthy serving of earnings reports Thursday (fun fact: Today's Snacks stories are 2/3 Seattle-based). Now look for America's first GDP report for 2019 arriving before the weekend.

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Ecomm

Amazon scores 4th-straight record profit

Weird consistency... Four quarters in a row Amazon has set record profits and slowed its revenue growth — Having already Primed most Americans and lots of Europeans, growth is bound to slow. Investors were glad it's wringing more profit juice from every eBuck. Here's how the money math worked out last quarter:

  • Revenues rose 19%
  • Costs only rose 13%
  • Profits more than doubled to $3.6B

Strengths, weaknesses, and teases... Investors weren't overly impressed or upset. So they nudged shares up half a percent higher.

  • 👨‍🦳 Old bets: Amazon.com ecommerce sales rose 10%, while Whole Foods and Amazon Go physical sales crept up 1%.
  • 👧 New bets: Advertising is big now for Amazon, but it rose just 34% after almost doubling last quarter.
  • 🇨🇳 China rewind: Amazon failed in China by ending its 3rd party marketplace because nobody was using it (Alibaba and JD.com already won there). International sales rose just 9% overall.
  • 😍 OMG-OMG-OMG: The CFO said Amazon's working on cutting free delivery time in half from 2 days to 1 day for Prime members.

AWS is still profit puppy #1... Amazon started building cloud services (aka renting out computer storage/power) back in '06. Few companies today don't use cloud, and most use Amazon Web Services (Apple pays Amazon $30M per month on it). AWS profit just hit $2.2B — Almost 2/3 of Amazon's total. Microsoft and Google are slowly catching up, but Bezos should promote the palm reader who helped him greenlight AWS 13 years ago.

Sip

Starbucks hits record high (despite loyalty program change)

No room for milk... Starbucks shares overflowed to a record high after its earnings report. We were most interested in potential drama behind its latest loyalty program changes. But Starbucks first shared some personal updates:

  • It's bringing back the S'mores Frappuccino.
  • The 30,000th Starbucks just opened (in Shenzhen, China).
  • And it's investing $100M into a food/packaging-focused venture capital fund, probably to find the elusive spill-proof lid.
  • The "Starbucks Rewards" loyalty program now accounts for 40% of all transactions, so we jumped into its details...

Remember February 2016?... We do. Starbucks tweaked its reward points from per-visit to per-dollar-spent perks. People vented. Aggressively. This month, Starbucks tweaked the program again — Drama-free this time. Participation jumped 13% from last year to 17M members.

The future of rewards programs is smaller perks but more often... Airlines are doing away with biz class upgrades, offering drink vouchers instead. Looking at Starbucks' new program, it's the same thing — Rewarding you more often with smaller gifts. Here's the system that keeps us just caffeinated enough:

  • It now takes 150 Starbucks Stars (=$75) to earn a free drink, not 125 (=$62.50).
  • But along the way, you now get "flexibility benefits" of free vanilla or espresso shots.

Smaller perks. More often.

Experiment

Walmart unveils "Store of the Future"

No white fence, Golden Retriever, or Buick Skylark... Walmart's got something totally different going on in Long Island's Levittown (literal home of the suburbs). Thursday, it revealed its "Intelligent Retail Lab," aka IRL. In real life, this is an artificial intelligence-powered superstore of the future.

If you don't like FaceTiming... you'll hate this place. It's a spinoff of Walmart's "Store Number 8," the top-secret innovation lab where it's been cooking up ways to stay competitive against Amazon.

  • The size: IRL is 50K-square-feet huge with 30K items for sale and 100+ humans stocking shelves or working check-out.
  • The cameras: IRL stuck lenses and sensors everywhere. Walmart says data is deleted weekly, but you'll want to iron your shirt before arriving onto the stage/grocery store.
  • The AI help: Those cameras watch shelves, informing human associates when something runs out, goes bad, or if there's a disturbance on aisle 6.

AI: Helping humans or replacing them?... Both. Amazon's taken a more openly anti-human approach with its person-free and cashier-less Amazon Go stores. Walmart claimed yesterday its AI helps humans operate more efficiently. That's a feel-good, PR-friendly take on how Walmart's handling the question of the century.

What else we’re Snackin’

  • Uneasy: Chipotle dropped 6% on a fresh subpoena over 2018's Ohio food illness issue
  • Over: Nintendo falls 5% as sales of the fastest-selling console ever in the US start slowing
  • @channel: Slack's valuation jumps from $7B to $17B shortly before its public market debut (Uber's just fell to $80B-$90B)
  • Burn: Ford surges as truck and SUV sales power $40B in quarterly revenues
  • Hungry: Kiwi rolls out its (adorable) food delivery robots to 12 more college campuses
  • Holidaze: Jobless Claims (the number of Americans filing for unemployment) jumped last week, but economists blame Easter

Friday

Disclosure: An author of this Snacks owns shares of Amazon.

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Kering’s other brands, which include Yves Saint Laurent, Bottega Veneta, and Balenciaga, fared slightly better — but the only real bright spot was the company’s eyewear division, where sales rose 24% (9% on a comparable basis).

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