Hey Snackers,
Worst. Perm. Ever. Dictionary publisher HarperCollins named "permacrisis" the word of the year. A representative said it "sums up quite succinctly just how truly awful 2022 has been." Sigh.
US stocks rose on Friday, but the S&P 500 lost nearly 3.4% for the week after the Fed announced its fourth straight rate hike of 75 basis points. J. Powell’s comments suggested that a pause isn’t in the cards anytime soon. At least we got an extra hour of sleep last night?
Buying a cherry-red smile… but the outlook is more matte than glossy. Beauty titans are often shielded during economic downturns thanks to the so-called lipstick effect. In gloomy times, cash-stressed consumers can’t afford big-ticket items, so they console themselves by indulging in small luxuries (think: $38 Dior Lip Glow).
Losing luster… Last week Estée Lauder said its quarterly makeup sales fell 10%, and it lowered its outlook on weakening demand. Rival L’Oréal reported slowing growth as its profit-puppy luxe division (think: Prada, Lancôme) underperformed. FYI: Cover Girl owner Coty reports next week. But while consumers are cutting back on makeup, spending rose more than expected in September as Americans splurged on “experiential” indulgences.
Consumers are in “bite or flight” mode… While the economy's in stressful fight-or-flight mode, some Americans are finding solace by indulging in brand-name treats (bites) or getaways (flights). Despite broad price hikes, a lot of consumers are still shelling out for Whoppers and Airbnb glamping weekends. We might need to kiss the lipstick effect goodbye, because the seemingly “protected” categories during this downturn appear to be experience-based.
A whole new world… While streaming entertainment powered Disney through the pandemic, real-life entertainment is propelling growth now. Revenue for the first nine months of the year was up 28% as US parks and resorts recovered and is expected to be up 25% for the year (Disney reports tomorrow). With Disney+, Hulu, and ESPN+, Disney surpassed Netflix’s total subs in August but lowered its 2024 forecast for Disney+ as growth slows. If the streamer hadn’t added 9M subs last quarter, as expected, investors might be bummed despite Disney's strong overall growth.
Insert (more) coins to continue... Gaming behemoths are struggling to beat their own high scores as the pandemic video-game boom slows. In the second quarter, NBA 2K maker Take-Two Interactive and tween fave Roblox fell short of quarterly earnings expectations after reporting fewer new gamers. Meanwhile, Microsoft’s $70B purchase of Activision — which makes Call of Duty — remains stalled in a lengthy regulatory review. Analysts expect earnings to keep falling when Take-Two and Roblox report this week, but revenues are forecast to rise as in-game spending stays strong.
“The future of Twitter”… Every Twitter thread last week. ICYMI: Elon Musk now runs Twitter (in his words: “the bird is freed”). Top execs have left the company and advertisers are skittish. After GM paused Twitter campaigns, ad giant IPG recommended its clients pause their spend too. Meanwhile, Elon seems focused on cutting costs and boosting non-ad revenue: On Friday, Twitter laid off half its employees, and over the weekend started rolling out an $8/month charge for blue check marks. There are many opinions about the Twitter-quisition, but only time will tell if it’ll help the embattled platform rise or sink.
Giving mixed signals… US employers added 261K jobs in October, and there are roughly two open jobs for every unemployed worker (a sign the Fed’s hikes aren’t cooling the economy enough). But job growth slowed and unemployment ticked up to 3.7%. Microsoft, Netflix, Snap, and Meta are laying off employees, and Amazon and (reportedly) Apple have frozen corporate hiring. Last week Lyft and Stripe also announced cuts. Non-tech industries may also slow: last week Ford offered buyouts to underperformers.
Authors of this Snacks own: matic and shares of Amazon, Take-Two Interactive, Disney, Snap, Netflix, Apple, Ford, Twitter, Microsoft, Apple, GM, Yum Brands, Aurora Cannabis, and Starbucks
ID: 2577983