🛳 Carnival anchors a record loss

Friday, June 19, 2020 by Robinhood Snacks | Disclosures

Spotify making its exclusive deal pitch

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Hey Snackers,

157 years ago, Lincoln's Emancipation Proclamation declared that all slaves "are, and henceforward shall be free." But this didn't fully happen until June 19th, 1865 — months after the Civil War ended. So today we celebrate Juneteenth to commemorate the end of slavery in the US — and focus on the important work still left to be done.

Stocks barely budged yesterday — even though weekly jobless claims were worse than expected (1.5M last week).

1. Carnival lands a record $4.4B loss — but investors are eyeing 2021 bookings

Fire up the nautical puns... After at least 3 ships faced on-board COVID-19 crises, a wave of cancellations, and a straight up ban on cruises, we weren't expecting much from Carnival. But the cruise operator managed to sink below even the worst expectations.

  • Biggest quarterly loss (ever): Carnival lost $4.4B — nearly 2X more than what Wall Street expected. In the same quarter last year, it turned a $430M profit.
  • Sales plunge: Sales took an 85% scuba dive, coming in at only $700M. Blame corona-related travel concerns, followed by a strict No Sail Order.
  • Cash burn: Carnival expects to burn $650M per month for the 2nd half of 2020. Its massive $700M+ cruise ships are just chilling on water, burning cash by the minute.

IDGAF'ing... Carnival investors. The stock actually jumped 5% after the Titanic-style earnings. Investors are focused on the rising tide:

  • August 1st: The day Carnival plans to sail again. That's only a week after the CDC's No Sail Order is expected to end. Carnival says the plan is "premature," but hasn't cancelled the 8 scheduled cruises.
  • 2021 bookings: As of May 31, advanced bookings for 2021 cruises were surprisingly near pre-COVID levels (though selling at lower prices).
  • Liquidity: Carnival's $7.6B in available cash will help it survive until it can sail. It's also planning to sell six ships over the next three months.

It's the cathartic earnings report... People were expecting terrible results from Carnival. That helped stabilize its stock when earnings tanked. Carnival shares are up 33% over the month as investors focus on economic reopenings. Carnival shareholders hope they just got over the worst hump. Meanwhile, some corona-conomy thrivers like Slack have dropped after earnings, because their numbers weren't as jaw-dropping as expected.


What do Kim Kardashian and Batman have in common?... An exclusive Spotify partnership. The Swedish streaming champ just inked a deal with Warner Bros' DC Comics and reality TV's Kim Kardashian West. Its stock surged 12% to a record high on the news. What Spotify splurged on:

  • The entire DC Comics universe: Spotify gets the exclusive rights to use the blockbuster intellectual property for original scripted podcasts. Superman, Wonder Woman, Batman, and the Joker... welcome to the playlist.
  • Kim K: Spotify gets an exclusive Kim K podcast, focused on criminal justice and prison reform (less E! News, more Law & Order). Kim has been hitting the law books, and will be co-producing/hosting the show.

Making it exclusive... Spotify is defining the relationship with big stars. The goal? Bring their huge followings (exclusively) to its platform. It's the "Gated Garden" strategy:

  • A month ago, Spotify snatched exclusive rights to The Joe Rogan Experience — aka, the biggest pod in America. It dropped over $100M to make Joe a 100% Spotify experience.
  • Now, Spotify is hoping to woo some of Kim's 175M Insta followers to join its 286M users. And lure DC Comics fans, which boasts some of the highest-grossing films of all time.

Pods have lived up to the splurge... Spotify has spent almost $1B snatching up pod content/companies over the past 1.5 years, including Gimlet Media and The Ringer. Those acquisitions were mainly focused on existing pods with existing audiences. With Kim and DC, Spotify wants more non-podding people to start podding. Since its 1st pod-cquisition in February '19, Spotify's market value has grown by $25B — and its pod audience more than doubled.


Ronald thrives on minimalism... The one thing McDonald's is slimming down: its menu. When coronavirus hit, the Golden Arches streamlined operations by temporarily cutting menu options. Salads, yogurt parfaits, and bagels were among the 100 unfortunates that got booted. Now, they won't be returning to the menu any time soon.

Less is more... That's what McDonald's realized after this corona-conomy experiment. Fewer menu items means less to source, stock, prepare and serve — and less waste. McD's is lovin' the results:

  • Speed: Drive-thru times dropped by an average of 25 seconds. Buuut — this extra speed could also be due to the lack of dine-in customers (who hold up the line).
  • Satisfaction: Customers reported that their food tasted better and their orders were more accurate — because chicken nuggies and fries are easier than Southwest Chicken salad with half dressing on the side.

Corona-conomy has been one giant business experiment... It accelerated the WFH trend, and now it's speeding up McDonald's menu-slimming. For years, McD's has been getting feedback that its menu is overwhelming. So it planned to potentially simplify it in 2023 with a menu review. But now that change has already happened... three years ahead of schedule.

What else we’re Snackin’
  • Tweety: Twitter adds an audio recording feature that lets you "Tweet with your voice" in 2-minute clips (and scroll while you listen).
  • Groce: Kroger, the biggest US supermarket operator, saw its profit soar 57% for the quarter — sales jumped 19%, and digital sales nearly 2X'd.
  • Scoot: E-scooter startup Bird launches a navigation app specifically designed for scooter and bike riders — no highway routes.
  • Speedy: Ford offers hands-free driving on its new electric Mustang Mach-E, four years after GM intro'd the system.
  • Dashing: Food delivery leader DoorDash raises $400M in funding, valuing the private company at nearly $16B.
  • End: Bankrupt Hertz was forced to halt trading for the 2nd time this week — then it dropped plans for a new stock sale.

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Snacks Daily Podcast

Cruises are a cure for "decision anxiety" — aka, choice paralysis. So Carnival is leveraging its "we'll take care of everything" biz model to win back customers post-corona crisis.

Tune into our absurdly digestible, 15-minute daily pod to learn more about pandemic vacation planning.


Disclosure: Authors of this Snacks own shares of Twitter and Spotify

ID: 1221233

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