✂️ Walmart cuts prices

Wednesday, July 27, 2022 by Robinhood Snacks |
 It’s giving anti-inflation signals (Joe Raedle/Getty Images)

It’s giving anti-inflation signals (Joe Raedle/Getty Images)

 It’s giving anti-inflation signals (Joe Raedle/Getty Images)

It’s giving anti-inflation signals (Joe Raedle/Getty Images)

Yesterday’s Market Moves
Dow Jones
31,762 (-0.71%)
S&P 500
3,921 (-1.15%)
Nasdaq
11,563 (-1.87%)
Bitcoin
$21,002 (-1.45%)

Hey Snackers,

If you don’t know how to open a Tesla door, you’re not alone: Uber’s new EV-request feature has an explainer for riders who just can’t figure it out (psst: push, then pull).

Stocks tumbled yesterday ahead of the Fed’s big rate-hike decision today and tomorrow’s key GDP report. Meanwhile, Microsoft and Google disappointed on earnings after the bell.

Pillows

Ignoring the leggings at the front... and beelining to the grocery aisles. Walmart said that high fuel and food prices are causing Americans to cut back on discretionary spending (think: floral dresses, instant pots, decorative pillows). The consumer bellwether has been marking down the price of clothing and big-ticket items to help unload unsold inventory. Cue:

  • America’s largest retailer slashed its annual profit forecast. While Walmart expects quarterly store sales will grow, the growth is coming from less profitable items like groceries.
  • Walmart stock dropped 8% yesterday. Amazon, which reports tomorrow, dropped 5% as investors feared it may be experiencing a similar fate.

Nuggets > new kicks... Big-ticket items like apparel and electronics typically have higher profit margins, but consumers are cutting spending in those categories to afford necessities like food and gas. Americans are also trading down to cheaper beer brands (like: Busch Light vs. Corona) and discount cigarettes (like: Edgefield vs. Marlboro). But not every consumer staple is suffering:

  • McDonald's reported expectation-beating profits yesterday as price hikes and value deals fueled same-store sales growth. The $2 breakfast's still going strong.
  • Coke beat earnings expectations and boosted its annual sales forecast thanks to price hikes and rebounding “away-from-home” soda sales (movie theaters, restaurants).
THE TAKEAWAY

The “discretionary drop” is the 1st wave... of a recession, and a 2nd wave could follow. In a downturn, people usually forgo discretionary items like clothes before cutting back on necessities like groceries. Consumer sentiment hit a record low in June — problematic, since consumer spending makes up 70% of America’s economic output. Tomorrow’s second quarter GDP report will give us clearer insight into the “are we in a recession” question.

Glossy

Scooping up ultra lip balm… Glossier’s taking its Zillennial-fave beauty products to Sephora in a major retail partnership starting next year. Glossier launched as a delivery-only beauty brand in 2014, and was last valued at $1.8B thanks to its Insta-friendly pink packaging and cult classics like “Boy Brow.”

  • Gloss on the go: Glossier products will be available at Sephora’s stores (and website) in the US and Canada, but it's TBD how many and where. (Fun fact: Glossier says it's one of the most searched for as-of-yet unavailable brands on Sephora’s site.)
  • Physical pivot: Glossier founder Emily Weiss stepped down as CEO in May as the brand embarked on a "new chapter" to drive growth. Glossier already has stores in London, Miami, LA, and Seattle, and plans to open more big city locations this year.

Beauty counter binge… Glossier’s retail partnership comes as the return of IRL events ignites makeup demand. Last quarter, high-end cosmetics topped $2B in sales, with unit sales surpassing pre-pandemic levels. Estée Lauder delivered double-digit sales growth last quarter, and the trend could continue: during economic downturns, shoppers are more likely to splurge on tiny pleasures like a $20 jelly-cream blush than a new Macbook (see: the Lipstick index).

THE TAKEAWAY

The digi-storefront is packed… especially in the beauty space. That’s why digital-first beauty brands have increasingly been going physical. See: Kylie Cosmetics’ 2018 partnership with Ulta and Rihanna’s Fenty presence at Sephora. By having a physical presence at beauty go-to Sephora, Glossier can attract new customers and become more accessible to loyal fans.

What else we’re Snackin’

  • Spin: The maker of Post-its had a big day: 3M beat earnings expectations, sought bankruptcy protection for its lawsuit-plagued earplug biz, and said it plans to spin off its health division into a separate public company.
  • Cuts: Shopify laid off one-tenth of its 10K workers, sending shares down 15% yesterday. Shopify quintupled its headcount between 2016 and 2021, but growth is slowing as the ecomm surge subsides.
  • Skid: GM reported a 40% profit plunge for last quarter, sending shares down 3% yesterday. Sales were strained by supply clogs, but the auto OG expects the chip shortage to ease.
  • Cloud-y: Microsoft reported its slowest earnings growth in two years as cloud and gaming sales waned while the strong US dollar hit international sales.
  • Change: Lawmakers want to make it easier to spend crypto: yesterday US Senators introduced a bill that would exempt consumers from taxes on crypto transactions less than $50.

Snack Fact of the Day

After 20 years of cooperation with the US, Russia is pulling out of the International Space Station and will build its own

Wednesday

  • Fed’s interest-rate decision.
  • Earnings expected from Meta, Shopify, Spotify, Boeing, Qualcomm, Ford, Sherwin-Williams, Cheesecake Factory, and Deutsche Bank

Authors of this Snacks own: shares of Walmart, Google, Shopify, Microsoft, Ford, GM, Spotify, Tesla, Uber, and Amazon

ID: 2314718