👗 Shein’s American dream

Friday, September 16, 2022 by Robinhood Snacks |
Fashein haul (Cezaro De Luca/Getty Images)

Fashein haul (Cezaro De Luca/Getty Images)

Fashein haul (Cezaro De Luca/Getty Images)

Fashein haul (Cezaro De Luca/Getty Images)

Yesterday’s Market Moves
Dow Jones
30,962 (-0.56%)
S&P 500
3,901 (-1.13%)
Nasdaq
11,552 (-1.43%)
Bitcoin
$19,786 (-2.19%)

Hey Snackers,

It’s “The Suite Life on Deck” IRL: a luxury cruise ship will let residents live on the sea permanently. A 237-square-foot studio starts at $1M, plus a $2.6K/person monthly "living fee.” Seasick.

Stocks were back in the red yesterday with the Dow notching its lowest close in two months. Energy prices tumbled after the US narrowly avoided a major rail strike. Despite steaming-hot ’flation, retail sales grew 0.3% last month (largely thanks to car purchases).

OOTD

5 fits and a pair of combat boots… Chinese shopping app Shein is expanding its US footprint as sales boom in its #1 market. The online-only retailer has thousands of trendy fits at ultralow prices (think: $10 wool pants). Shein was last valued at $100B, and in Q2 it surpassed Amazon as America’s most downloaded shopping app.

  • #Unboxed: Shein plans to open three new US distribution centers and hire 3K workers to get $5 tops to America’s teens.
  • #OOTD: Shein’s only US distributor opened in Indiana in April and is already forecast to generate $175M/year.

Not-so-fast fashion… Social media has supercharged demand for new fits to fill the feed. But for all of Shein’s popularity, its shipment times have lagged fast-fashion standards. While rivals like Zara, H&M, and Amazon can deliver in two biz days, Shein packages can take up to two weeks (they all come from Asia). While ETAs haven’t dulled Shein’s shine, delays could be getting in the way of its next big venture:

  • High prices = low patience: Last year Shein launched a higher-end clothing line called MOTF (think: $100 silk dresses), but demand is soft because shoppers are less willing to splurge and wait 10 days for that bachelorette fit.
  • Zara-fication: While Shein moves large volumes, its revenue falls short of rivals’ because its items are so low-priced. Last year Zara earned $19.5B in sales while Shein reportedly brought in $16B.
THE TAKEAWAY

The price must be right, but so does the time… To command higher prices, Shein can’t just be a fast-fashion brand — it has to be a fast-delivering fashion brand. By setting up shop where its top customers are, it can cut down delivery times by three to four days.

Shop

Just went Photo-shopping… picked up a multibillion-dollar startup. Adobe, the Microsoft of the creative world, agreed to buy design-software company Figma for a cool $20B — its largest acquisition by far. Figma’s cloud-based software helps engineers and designers collab on web interfaces in real time (think: a digital whiteboard). Investors weren’t impressed:

  • Adobe shares tanked nearly 17% yesterday as investors frowned at the price tag. Figma was last valued at $10B in June 2021, and Adobe is paying double to scoop it.
  • Figma is expected to generate $400M+ in revenue this year, meaning that Adobe is paying a huge forward multiple of 50X revenue for the company. FYI: multiples for top cloud companies have plunged to about 9X revenue.
  • Not helping… Adobe also issued disappointing fourth-quarter earnings guidance, though its profit jumped last quarter by 13% to $1.1B.

Doing some Acrobat(ics)… Adobe has snatched up companies, including Workfront ($1.5B) in 2020 and Frame.io ($1.3B) in 2021. Previously, its largest splurge was Marketo in 2018 ($4.7B). Now Adobe is making a purchase four times that size at a time when dealmaking has slowed big time. See: inflation, econ uncertainty, volatile markets. Adobe says Figma’s customers will expose it to a new user segment and a total addressable market of $16B.

THE TAKEAWAY

When under threat, you might overstretch… Adobe’s splurge may be more of a need-driven move than a smart buying opportunity. Figma competes toe to toe with Adobe’s XD program. Instead of sparring with it, Adobe’s eating it. Investors worry it’s overpaying out of desperation to quash competition, and yesterday the stock had its worst day since 2010.

🤖 Techy… The ethereum Merge succeeded, moving the chain from proof of work (energy hog) to proof of stake (efficient). The switch also means ETH holders can earn coins via staking, which incentivizes investors to scoop up ether.

🤔 Sus… South Korea issued an arrest warrant Wednesday for Do Kwon, the founder of failed stablecoin TerraUSD. The coin went to near $0 in June — wiping out $42B of investors' money — and investors accused Kwon of fraud.

🤹‍♀️ Quirky… Out with Picasso, in with the punks. NYC’s MoMA plans to sell $70M worth of paintings and sculptures to fund a digital-art gallery (picture: framed NFTs). Renoir and Rodin will compete with Bored Apes.

What else we’re Snackin’

  • Unstrike: The Biden admin brokered a tentative deal between railroad workers and owners, dodging a supply-chain nightmare. The new deal gives workers a 24% raise over five years and an extra day off.
  • Ouch: Mortgage rates jumped above 6% for the first time since the 2008 financial crisis as the Fed intensifies its ’flation-fighting mission. A year ago they were about 3%.
  • Yeikes: Kanye West (aka: Ye) said he’s terminating the contract between his trendy brand Yeezy and Gap. Ye claims Gap failed to distribute his products to store locations and to create dedicated stores.
  • BeTok: TikTok launched a BeReal copycat feature that prompts users to take spontaneous, unedited photos as Gen Z seeks to be more “real.”
  • Shellected: Shell selected its renewables chief, Wael Sawan, to serve as CEO. Shell said it wants to reduce emissions to net zero by 2050, but some say the oil titan has fallen short of its green ambitions.

Snack Fact of the Day

Roger Federer, who on Tuesday announced his retirement from tennis, has won 20 major titles and $130M+ in career prizes

Friday

  • UMich consumer-sentiment index

Authors of this Snacks own: ethereum and shares of Amazon, and Microsoft

ID: 2428647