Monday Nov.11, 2019

CEO-pocalypse: A record-setting year of exec exits

_No CEO is safe_

Hey Snackers,

It's way more than a solidly symmetrical palindrome date.

A big 11/11 shoutout this Veterans Day to those who have defended this country... and to the singles in China celebrating "Singles Day" (the largest shopping holiday in the world — by far).

Stocks enjoyed their 5th straight week of record highs. Now prepare for this week's serious serving of cannabis earnings.

Turnover

Gap's CEO gets terminated — this could become the worst year on record for CEOs

Your go-to '90s fleece sweatshirt... featured "G-A-P" in 86-sized font across the chest. Today, Gap is a struggling retailer, often stuck slapping "40% off everything" everywhere. And ex-CEO Art Peck just "stepped down" on Thursday (that usually means he was fired). Even the planned spinoff of its more profitable Old Navy brand is now in question.

Chief Exit Officers... McDonald's, Under Armour, Nike, and WeWork all lost their leaders last month. 2008 previously set the record for most CEO departures (blame a financial crisis that hit 8.2 on the Richter scale). This year’s ousted execs were driven out by profit worries, retirement, and (for some) personal misconduct — at record rates:

The worst month: 172 CEOs either voluntarily resigned or were escorted out by security with cardboard boxes — that's a record for a single month.
The (close to) worst year: 2019 is on pace to beat 2008 for most CEO departures.

Now Hiring: A new breed of CEO... In the past, execs had 1 job: make as much profit as possible. Outsource jobs, pollute the environment, instill a hostile work culture — all good, as long as you cranked out profits. But society and markets have changed so much that the "Purpose of a Corporation" was actually redefined by the Business Roundtable. Here's the new day-to-day of a modern CEO:

Be a spokesperson for young and woke employees.
Define the values, mission, and social promise of the company.
And (of course) you better make profits.

Highs

Who's up...

Tesla's drama. GM's labor strike... American car brands get the attention, but Toyota's latest earnings deserves yours. Almost 70% of US car sales now are trucks or SUVs — But unlike its Japanese peers, Toyota anticipated this years ago, prepping factories for Tundra, Tacoma, 4Runner, and Rav4 production. Its sales rose 4.5% last quarter and it's enjoying $2,300 in profit off every car sold (Ford's profit per car is $1,400 and Tesla's is just $268).

Travis 2.0... The Uber co-founder/ex-CEO's new venture raised $400M from Saudi Arabia (it's the Saudis' 1st major US tech investment since journalist Jamal Khashoggi's murder). It's called CloudKitchen, and it leases kitchen space for delivery-only restaurants so they can prep meals. These "ghost kitchens" are sprouting up to supply DoorDashers, GrubHubers, and (plot twist) Uber Eaters with potentially lower-cost delivery food, since they aren't full-service restaurants.

Lows

...and who's down

Dating is complicated... Take Match Group, which owns Tinder and about 45 other dating apps. The number of Tinder users surged by 437K last quarter to hit 5.6M — and the amount of Tinder-faithful opening the app 7 days a week jumped by 30%. That big growth couldn't stop Match shares from dropping 15% after it lowered its forecasts for the next quarter.

Still sore... Peloton reported earnings for the first time ever since its September IPO, and shares dropped 8% because investors want to see profits, not just growth. The number of Pelotonistas more than doubled to 563K atop their $2K at-home spin bikes (dropping $39 monthly for live-streamed spin classes). That growth is ripped. But investors aren't comfortable with Peloton's $50M loss.

What else we’re Snackin’

Work: Messed up in the job interview? How to fix 4 mid-interrogation mistakes
Life: The size of space. It's big.
Money: Here are your new income tax brackets for 2020
Venture: The worst Kickstarter projects of all time
Crypto: Legendary venture capital firm Andreessen Horowitz launches free cryptocurrency school (good luck getting accepted)

This Week

Monday: Bond markets are closed for Veterans Day, but stock markets are open. It's "Singles Day" in China, led by ecommerce legend Alibaba
Tuesday: President Trump chats with the Economic Club of New York (we're looking for details on the US/China trade deal). Earnings from Tilray, Cronos, Jumia, CBS, Tyson
Wednesday: Earnings from Canada Goose, Cisco, Canopy Growth, Aurora Cannabis
Thursday: Fed Chairman Jerome Powell gives an update on the central bank to Congress. Earnings from Walmart, Viacom, NVIDIA
Friday: Earnings from JD.com, J.C. Penney

Disclosure: Authors of this Snacks own shares of Alibaba

ID: 1008062

Latest Stories

Bottom lines

51m

April 19: AmEx up, paint ain’t, banks sank

Norway now has a wealth fund worth $290k+ for every citizen of the country

William Coulman, David Crowther3h

More wind power capacity was installed last year than ever before

Tom Jones, David Crowther3h

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.

Tom Jones, David Crowther

The data doesn’t lie: Taylor Swift is the biggest pop star on the planet

TOPSHOT-CORRECTION / AUSTRALIA-ENTERTAINMENT-MUSIC-SWIFT

Matt Phillips

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.

Rani Molla

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.

Exclusive | China Orders Apple to Remove Popular Messaging Apps

Rani Molla

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.

Tesla recalls the Cybertruck for faulty accelerator pedals that can get stuck | TechCrunch

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

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

Millie Giles & David Crowther

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.

Why the World of Chocolate Is in Crisis

10h

Governments and companies tackle the climate crisis as damage intensifies

Jack Morse

Read

10h

Extreme weather has cost the US $2.6T, and the number keeps rising

Max Knoblauch

Read

10h

The cost of waste: e-junk and emerging tech add to America’s pollution prob

Nia Warfield

Read

10h

The biz of electric vehicles: the EV transition hits speed bumps

Bitcoin business will lose billions in the halving

Investors and miners have spent months prepping for the crypto-shattering event lying in bitcoin’s code. It’s finally arrived.

Friday, April 19th

11h

What’s happening

Casey Newton

Platformer

17h

Meta’s new AI paves the way for social networks where nothing is what it seems

Five ways of thinking about Llama 3, its latest large language model

Screenshot of Meta’s AI image generator, frog in a bathrobe

Matt Phillips

20h

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

The cost of producing the US penny rose 13% in fiscal 2023 to 3.07 cents. Yes, that means that Uncle Sam loses more than two 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¢

Pop Quiz!

What’s the world’s busiest airport?

Don't be a sucka

Rani Molla

22h

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.

22h