Wednesday May.08, 2019

GM's own Uber app (but self-driving)

_"Car news. It's everywhere, baby"_
_"Car news. It's everywhere, baby"_

Hey Snackers,

Worst day for stocks since January.

Only 23 companies in the S&P 500 rose Tuesday as investors remain in worry mode following America's trade war escalation — Fresh new tariffs are scheduled to hit China Friday morning.

Got this Snacks from a friend? Sign up for the daily newsletter here.

Drive

Lyft, Tesla, and GM have big things to say

We're decidedly pro-carpooling... and pro-Snacks story-pooling. Yesterday, one old school company, one new-ish school company, and one brand new company updated investors and customers on auto industry-changing moves:

  • Lyft: The first gig-economy cab company to go public bragged that revenues almost doubled in the 1st quarter to $776M. But its loss ballooned to $1.1B. That loss was mostly driven by new stock issued to employees because of the IPO, so investors were impressed overall despite the loss.
  • Tesla: The e-car company announced it is offering its own car insurance. It claims its cars are safer (thanks to self-driving car features) and it has more data on drivers (thanks to its techiness) so it can insure cars for less.
  • General Motors: Its acquisition of Cruise Automation for $1B in '16 was transformational. Cruise alone is now worth $19B after it received $1.15B of new investment from Softbank, Honda, and T. Rowe Price. GM's tech division is testing self-driving cars so it can eventually unveil its own Uber-like ride-hailing app of GM cars with no drivers.

Uber's IPO is Friday... That adds another publicly traded company to the fight over your transit dollars. With the taxi and car industries nudged aside by West Coast tech, Uber/Lyft drivers in at least 10 US cities are protesting today. LA's Uberers will turn off their apps for 24 hours, while NYC's are skipping the 7am-9am rush hour.

Swipe

Match pops 8% in Facebook's face (powered by Tinder)

Love has no boundaries... Neither does Match, the dating company that powers dating apps — Tinder, OKCupid, OurTime, and any other warm-blooded potential connection. It enjoyed a 14% revenue jump last quarter driven by 23% growth outside the US. Dating biz abroad will likely surpass North America next quarter thanks to international love trends. Here's what it highlighted:

  • A decline in arranged marriages in India
  • Online dating "stigma" is crumbling in Japan
  • 1st-time smartphone adoption in SE Asia

Tinder gets all the love... The swipe-right legend now has 4.7M users, with growth fueled by this fall's TinderU launch for college kids, and a few other changes.

  • 384K: That's how many new Tinderers joined the platform — Its 3rd best quarterly jump ever.
  • Algorithm tweaks: The more accurately it matches you early on, the more likely you are to pay-up for the premium option.
  • Big new bets: Tinder now lets you start flirting pre-Bonnaroo with fellow music festival singles three weeks before the event. That feature was inspired by the Spring Break one it launched months earlier.

"Hasn't seen any impact"... Match's CEO boldly said that about Facebook's dating feature, which had rolled out in some of Tinder's markets already. Zuck's "Secret Crush" is brand new, and dating hits 14 more countries this year. Match is confident.

Wear

Crocs' earnings show how far foam clogs have come

Koi fish-painted clogs... That's the gem of a shoe featured on page #1 of Crocs' earnings report. The polarizing fashion icon's stock is up 75% over the last year. And even though quarterly sales only rose 4% (which dropped shares Tuesday), the CEO is still enthused about a "great start to 2019." He's into its "norm-core" marketing moves...

Millennials are out... Gen-Z is in. Crocs used strategic marketing to boost its brand rep among Americans under 24. It became the #13 most popular footwear brand for the post-Millennial crowd, up from #38 two years ago. Here's how:

  • Absurdly viral products, like high-heeled Crocs last summer and the new fanny pack Crocs.
  • “Come as you are” ad campaign to get buyers comfortable with the inevitable public judgment of wearing Crocs.
  • A-minus list celebrity ambassadors, like John Cena, Zoey Deschanel, and Drew Barrymore (Drew did an online musical for Crocs).
  • Local foreign ambassadors in China, Japan, and South Korea kept that celeb vibe going (now 30% of sales are in Asia Pacific).

Crocs' comeback strategy: Do less... The brand was close to bankruptcy in ‘09, so it streamlined everything. It shut down locations, ended non-core product lines, and outsourced shoe production to 3rd parties. Going back to “Crocs' DNA” — Clogs and sandals — started its recovery. Now it's comfortable enough for fanny Crocs.

FYI, shaving cream in Crocs is now a thing.

What else we’re Snackin’

  • Petro: Exxon edges in on signing a $53B mega-deal to develop Iraq's oil
  • Sake: Bud-owner AB InBev plans to spin-off its Asian alcohol biz so it can pay down its debts
  • Sick: Mylan slips 24% on disappointing earnings and investigations on price-fixing its generic medications
  • Refuel: TravelCenters of America jumps on its expansion moves to take over gas stations nationwide
  • Vacay: TripAdvisor's revenue-slipped 1%, but "experiences" are becoming its strongest new travel option

Wednesday

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

Get Your News

Subscribe and thrive

Snacks provides fresh takes on the financial news you need to start your day. Chartr provides data visualizations on business, entertainment, and society. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Latest Stories

Markets

Chipotle continues to go on a tear, hitting a sales record

Hey it might not be the kind of AI stock investors are all hot and bothered over, but don’t sleep on the burrito business.

Chipotle posted much better-than-expected results on Wednesday, with sales rising 14% to a record $2.70B in the first quarter, which is like a billion additions of guac.

Profits jumped 23% to $359M.

Chipotle has quietly cruised higher over the last year. It’s up 63%, compared to the 24.5% gain for the S&P 500 over the 12 months through Wednesday’s close. Not bad for a rice-and-beans based business model.

Tech

Facebook had great earnings, the market hates it

Facebook reported impressive earnings. Record first-quarter revenue thanks to AI! Profit up 117% compared to a year earlier! But at the same time, its capital expenditures are going up and it’s expecting second quarter revenue potentially lower than analyst estimates. So in other words, the future doesn’t look as bright as the present.

All in all the stock is down more than 10%. (Basically the opposite of what happened with Tesla yesterday).

Go Deeper with Market Depth

Nasdaq TotalView powers the need-to-know data serious investors rely on.

Scuba Diving in the Wild Blue Yonder in French Polynesia
Business

Why Tesla investors are holding on to hope for a cheap car

Despite terrible earnings numbers last night — declining vehicle sales, disappointing revenue and profit, enormous spending — Tesla stock is up more than 10% as of midday. That’s a welcome move for the car company, that’s been among the worst performers this year in the S&P 500.

Why the about face?

While Reuters reported earlier this month that Tesla is no longer making its long-awaited $25,000 mass-market car — news sent the stock, already suffering from headwinds across the EV industry, down even further— Tesla reported during its earnings that it’s going to make cheaper cars than it currently has.

Before the second half of next year, Tesla said it will release “more affordable models” that “will utilize aspects of the next generation platform as well as aspects of our current platforms, and will be able to be produced on the same manufacturing lines as our current vehicle line-up.”

So rather than release the $25,000 Model 2, Tesla is incorporating some of that technology into its existing models. UBS called it the Franken-3Y2.

Job switchers and stayers

The FTC is banning non-compete clauses

Why that might make job switching even more lucrative

Your inbox is ready

Subscribe and thrive

Snacks provides fresh takes on the financial news you need to start your day. Chartr provides data visualizations on business, entertainment, and society. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Culture

Not so Gucci

French luxury fashion conglomerate Kering has seen its shares fall ~10% in the last 24 hours after reporting that sales at its flagship brand Gucci had dropped 21% in its latest quarter.

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).

With Gucci responsible for roughly two-thirds of the company’s profit, the ongoing struggles of the brand are weighing heavily on the bottom line: the company expects recurring operating profit to drop 40-45% in the first six months of the year.

Gucci execs will be hoping that new designer Sabato de Sarno can turn the iconic brand’s fortunes around, particularly in China where demand has dropped precipitously. His designs only started hitting stores in February.

Gucci sales

With Gucci responsible for roughly two-thirds of the company’s profit, the ongoing struggles of the brand are weighing heavily on the bottom line: the company expects recurring operating profit to drop 40-45% in the first six months of the year.

Gucci execs will be hoping that new designer Sabato de Sarno can turn the iconic brand’s fortunes around, particularly in China where demand has dropped precipitously. His designs only started hitting stores in February.

Gucci sales
Business

The FTC vs. Big Handbag

The Federal Trade Commission has sued to block big tech, big grocery, big vacuum, and now, big… “affordable luxury handbag.”

Yesterday, the FTC sued to block Tapestry Inc’s $8.5B acquisition of Capri holdings. The agency is worried that a merger between Tapestry, which owns the Coach and Kate Spade brands, and Capri, which owns Michael Kors, would eliminate competition in the market.

The crux of the FTC's argument lies in the scope of the "accessible luxury" handbag market, where Tapestry competes with Michael Kors, with the FTC saying the following:

Where Tapestry and Capri most vigorously compete against one another – mainly between Tapestry’s Coach and Kate Spade brands against Capri’s Michael Kors brand – is in the “accessible luxury” handbag market. Today, Coach, Kate Spade and Michael Kors continuously monitor each other’s handbag brands to determine pricing and performance, and they each use that information to make strategic decisions, including whether to raise or lower handbag prices.

The deal would eliminate fierce head-to-head competition on many important attributes including on price, discounting, and design. Tens of millions of Americans that purchase Coach, Kade Spade, and Michael Kors products could face higher prices

While Capri and Tapestry are two of the largest players in this market, winning an antitrust case won't be so straightforward, as consumers have other options at similar price points, including Marc Jacobs (owned by competitor LVMH), Tory Burch, Cuyana, and Mansur.

The crux of the FTC's argument lies in the scope of the "accessible luxury" handbag market, where Tapestry competes with Michael Kors, with the FTC saying the following:

Where Tapestry and Capri most vigorously compete against one another – mainly between Tapestry’s Coach and Kate Spade brands against Capri’s Michael Kors brand – is in the “accessible luxury” handbag market. Today, Coach, Kate Spade and Michael Kors continuously monitor each other’s handbag brands to determine pricing and performance, and they each use that information to make strategic decisions, including whether to raise or lower handbag prices.

The deal would eliminate fierce head-to-head competition on many important attributes including on price, discounting, and design. Tens of millions of Americans that purchase Coach, Kade Spade, and Michael Kors products could face higher prices

While Capri and Tapestry are two of the largest players in this market, winning an antitrust case won't be so straightforward, as consumers have other options at similar price points, including Marc Jacobs (owned by competitor LVMH), Tory Burch, Cuyana, and Mansur.

Tesla had a good ride, but the stock’s price destruction is historic

Few people have created as much value as Elon Musk. The iconoclastic entrepreneur took Tesla from a market capitalization of roughly $2 billion at the time of its IPO in 2010 to $1.2 trillion in early 2023. That’s a return of about 55,000%. Musk made a lot of people a lot of money.

On the other hand, Tesla shares are down nearly 60% since their all-time peak. The company has ceded ground in EVs, prompting a series of profit crushing price cuts to preserve market share. The cumulative loss in market value over that period is pushing $800 billion. Few corporate executives have presided over such a degree of value destruction.

And it could get worse, as people are bracing for an ugly update when Tesla reports after the close Tuesday.