⚔️ Apple's Epic battle

Tuesday, May 4, 2021 by Robinhood Snacks | Disclosures
_Suited up for the Battle Royale [Drazen/E+ via GettyImages]_

Suited up for the Battle Royale [Drazen/E+ via GettyImages]

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Hey Snackers,

May the Fourth be with you on this fine Star Wars Day. If you really want to go full fourth, here's a recipe for adorable Baby Yoda cookies. Yourself, treat.

The Dow jumped yesterday as investors moved away from tech and into "cyclicals." These are stocks in industries that tend to do well when the economy is growing (and vice versa). Think: travel, construction, and retail.

Suited
1. The Epic trial that could change Apple's iPhone app control as we know it

Battle Royale... But instead of crossbows, these warriors have briefcases and JDs. Yesterday was Day #1 of the landmark trial over Apple's App Store dominance. The lawsuit was brought by Fortnite-maker Epic Games, and could seriously damage Apple's app-power. It all started in August last year, when...

  • Shot #1: Epic added its own in-app payment system to bypass the "App Tax" — the ~30% cut of in-app purchases, downloads, and subs that Apple and Google take across apps in their stores.
  • Shot #2: Apple and Google said "not today," expelling Fortnite from their stores for rule-breaking.
  • Shot #3: Epic filed lawsuits against both tech giants, and launched a loud PR campaign (see: Nineteen-Eighty Fortnite). A date for the Google trial hasn't been set yet.

Bring these lawyers some Advil... Yesterday, Epic argued that Apple has an iPhone app monopoly, and purposely locks customers into its ecosystem. Apple argued that it gets to set the rules for its own App Store, which it says are needed to ensure quality and security. Epic disagrees.

  • Facepalm: A key part of the debate revolves around the market that Apple allegedly dominates. Epic says it's iPhone app distribution.... Apple says it's game distribution.
  • Google's Android controls ~85% of the operating system market — but it allows software downloads outside of Google's app store. With iOS, you can mostly only download via App Store.
  • If Epic wins, Apple could be forced to give up control of app distribution, allowing customers to freely install software on iPhones.
THE TAKEAWAY

This could be Apple's make-or-break moment... The App Store created an explosion of opportunity (and $$$) for developers... but at a cost. That could change if Apple loses this suit — especially since it's facing other (related) antitrust scrutiny: last month, it got grilled by the Senate over its smartphone ecosystem power, and last week the EU charged it with allegedly abusing its control over music app distribution. CNBC estimates that Apple made $64B last year from the App Store (~30% of its annual revenue). Changes on the app side could cost it big.

Glowy

Mentioned in every Vogue skincare video... La Mer's marketing team never sleeps. Estée Lauder is the beauty giant that owns brands like Bobbi Brown, La Mer, Clinique, MAC, Too Faced, and Jo Malone. Its first quarter earnings reveal a glow up from 2020.

  • Sales jumped 16% and were up in every region. But the stock plunged 8% yesterday because... they were slightly lower than expected.
  • "Travel retail" is recovering, especially in China. Think: splurging on Estée fragrances at the airport Duty Free.

Forgot how to do winged liner... (never really knew how). Skincare was the star of Estée's quarter, outperforming while makeup disappointed. Skincare sales soared 31%, perfume sales jumped 30%, and even hair care grew. Meanwhile, makeup dropped 11% — the only category that declined. Rival L'Oreal also reported "lacklustre" makeup sales last quarter.

  • Makeup sales fell across nearly all Estée brands, especially hitting foundation and lip products (no Zoom gloss necessary).
  • Skincare sales were more than 2X makeup sales. In 2018, skincare and makeup sales were about equal.
  • "Hero products" like Advanced Night Repair Synchronized Multi-Recovery Complex (whoa) and Crème de la Mer drove the most demand. Now, Estee is doubling down on skincare investments with The Ordinary.
THE TAKEAWAY

Old habits die hard... so do some Covid habits. For a year, we’ve been sitting at home fresh-faced. "Big Nights Out" turned into "Big Nights In," complete with self-care rituals. Eye serum became the new eye shadow, and clean became the new cakey. Even with rebounding travel and "revenge spending," makeup is still lagging. That shows some Covid habits are sticking, even through reopenings. Amazon just had its best first quarter ever because ecomm is still growing, and Crocs posted record Q1 sales because comfort is (still) cool.

What else we’re Snackin’
  • Vax: The next gen of Covid vaccines being developed could be pills or nasal sprays (#science).
  • CEO: Berkshire Hathaway has chosen vice chairman Greg Abel to serve as CEO after Warren Buffett.
  • Booksie: Chegg's sales soared 51% last quarter, as you schooled-from-home with its digital study materials and tutors.
  • Juice: Ford and BMW are leading a $130M funding round in EV battery startup Solid Power, because they want green juice.
  • Antsy: Fidelity slashed its Ant Group valuation after Chinese regulators cracked down on the fintech giant.
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Tuesday
  • Earnings expected from Pfizer, CVS, Hyatt, Zillow, DuPont, T-Mobile, and Under Armour

Authors of this Snacks own shares of: Apple

ID: 1632696