👖 "Revenge Spending" receipts

Friday, April 16, 2021 by Robinhood Snacks |
_"Revenge (spending) is sweet"              [kali9/E+ via Getty Images]_

"Revenge (spending) is sweet" [kali9/E+ via Getty Images]

Yesterday’s Market Moves
Dow Jones
34,036 (+0.90%)
S&P 500
4,170 (+1.11%)
Nasdaq
14,039 (+1.31%)
Bitcoin
$63,467 (+1.15%)

Hey Snackers,

It's another Suez Canal-style crisis, but this time it's a different kind of Evergreen: a street in Tallinn, Estonia is closed for two weeks to allow frogs to migrate (#EverToad).

Stocks closed at records yesterday, and the Dow index crossed 34K for the first time ever (#Dow-34-Thow). Investors were pumped about some promising economic data. About that...

Spend

Went stimulus shopping... Retail sales surged in March, soaring ~10% from February — the largest jump since May of last year. As $1.4K stimulus checks hit bank accounts and vax shots hit arms, Americans hit stores and restaurants. The biggest pops in consumer spending were in pandemic-pummeled sectors:

  • Risers: Restaurant sales were up 13%, while clothing store sales soared 18%. Sporting goods and hobby stores were up a whopping 23%.
  • Fallers: Grocery sales barely budged from February, and actually fell 14% from March last year. Sales at online retailers jumped only 6%.

Slim fit, revenge fit... After a year of saving up and holding back, Americans are "revenge spending" on pre-pandemic pleasures. Think: non-stretchy clothes, non-canned cocktails, and non-Zoom experiences. A few examples...

  • Bank of America: In March, debit and credit card spending jumped the most for plane tickets (up ~40%) and clothing (up ~20%).
  • American Eagle's quarterly sales are on pace to top $1B, thanks to a surge in sales of jeans and dressier tops.
  • Pepsi expects sales of oatmeal, box pancakes, and other packaged foods to slow as we eat out more (less Quaker, more IHOP).
  • Delta's passenger revenue jumped 50% in March from February, as we traveled outside the Netflix catalog.
THE TAKEAWAY

The US economy has come a long way.... in a short time. April 2020 seems like eons ago. But just 365 days ago we had: a world-halting pandemic, 22M unemployed, and zero vaccines. We're far from coming full circle, but this March rebound feels like a return to “normalcy.” US consumer confidence is at its highest level since the pandemic began. Nearly 1M jobs were added last month — the biggest gain since August. Now, consumer spending is expected to help propel US economic growth to +6.4% this year — its best rate in decades.

Sip

At least it has the Slurpee... Pepsi isn’t just the soda you order when they don’t have Coke — it's a multinational snack beast. It owns the four big Os of snacking (Cheetos, Doritos, Tostitos, Fritos...and Lay's). It also owns Quaker Oats, and random airplane favorites like SmartPop, Sun Chips, and Sabra hummus. Thanks to pandemic snacking:

  • Pepsi's sales jumped 9% last quarter, despite closed sports stadiums and movie theaters (where XL-sized soda thrives).
  • But US drink sales also jumped, thanks to demand for non-soda beverages. Like: Gatorade Zero, Starbucks-branded frapps, and Bubly sparkling water (all "functional beverages").

Big hemp energy... Since the 2000s, sales of full-calorie soda in the US have plummeted. So Pepsi has been leaning harder into "functional beverages." Functional = providing more than just sugar/alcohol, enhanced by a healthy(ish) touch. Think: vitamin-packed energy drinks and enhanced waters. This year, Pepsi partnered with Beyond Meat for plant-based snacks and drinks. Another example of its functional focus:

  • Rockstar Energy: Pepsi bought the canned energy drink company back in March 2020 for $4B — its sales hadn't grown in years.
  • B Vitamins and Taurine included: Pepsi revamped the brand, gave it a Super Bowl commercial, and launched Rockstar Energy + Hemp in Germany.
  • Rockstar's sales started growing again. Now Pepsi is accelerating its global expansion, aiming to double Rockstar's footprint over three years.
THE TAKEAWAY

Functional = marketing markup... People graviate toward products they think make them healthier and/or more productive. Companies like Pepsi know you're willing to pay more for the "functional" alternative (even if that’s just one unpronounceable ingredient). So they're doubling down on it, especially in marketing. From Bud's hard green tea and coconut water, to Sephora's CBD-infused body oils and hair gummies — the fashion is in the function.

What else we’re Snackin’

  • Vax: Pfizer CEO Albert Bourla says people will likely need annual Covid-19 vaccine booster shots.
  • Niet: The Biden admin imposed stiff new sanctions on Russia, punishing it for election interference, cyber hacking, and human rights abuses.
  • Bezout: Jeff Bezos released his final letter to Amazon shareholders before stepping down as CEO. "Differentiation is survival."
  • Auto: Walmart invested in GM's self-driving car company, Cruise (which just raised a whopping $2.8B in funding).
  • Finally: Lyft finally launched something, after a year of nearly zero headlines: a "Lyft Pass" for healthcare orgs.
  • Drafted: DraftKings shares jumped after it unveiled a deal with the NFL to become one of the league’s official sports-betting partners.

Friday

  • Emancipation Day
  • Earnings expected from BNY Mellon and Morgan Stanley
  • China quarterly GDP data.

Authors of this Snacks own shares of: Delta and Amazon

ID: 1607631