Hey Snackers,
An Oregon police department had to remind people not to call 9-1-1 if they run out of toilet paper. In case of "emergency," the department suggests alternatives like grocery receipts, cloth rags, and corn cobs. "Sea shells were also used." Takeaway? Please stop hoarding.
We've got a mixed bag today — the Dow surged 1.3K points and had its 3rd straight daily gain, up a shocking 20% over that span. Investors were jollied by the Senate's approval of the $2T economic rescue package (now the House has to vote on it). Timely, since a record 3.28M Americans applied for unemployment just last week.
Bad record to hit... Last week, almost 3.3M Americans filed for unemployment benefits. We knew that as entire states/cities went on lockdown, non-essential workers (and those not able to WFH) were being laid off and deprived of income. But even Goldman Sachs' seemingly devastating prediction was way off the actual unemployment number:
Getting very real... This is the first really concrete news we have about the economic pain precipitated by COVID-19 (though the economy has felt it for weeks now). But we also have some positive concrete news, which is the $2T economic stimulus bill, expected to become law next week. It includes incentives for businesses not to lay off workers and extra funds for those who need to file for unemployment benefits.
An unemployment safety net is crucial... Not getting laid off in the first place is better. Still, unemployment benefits might prove more important than one-time checks or loan incentives to businesses, since the government can't force small biz to pay workers who aren't working. Some could decline the government's loan-that-become-grants offer and choose to save right now by laying off workers — many already have, as evidenced by the unemployment numbers.
It looks like a bullseye... but it's not. Target's food and home essential products are living their best lives — not shocking, since the only journeys we're taking lately are round trip fridge visits. But the discount retailer warned about its profits for the rest of the year. Target's sales this March, compared to March 2019:
A tale of two profits... "Apparel" is a much higher-margin product than food or home goods. That means Target can squeeze more profit out of every dollar of sales of clothes (compared to food). But since sales of stylish non-essentials are down, Target is losing on profit margin:
Not all sales are created equal... Despite a surge in essentials sales, Target's loss in the apparel category is like a profit-sucking Dementor. So Target has made changes, like pausing plans to remodel 300 stores. The pandemic served up a double profit-killing whammy — Target is also splurging more on staff (working overtime) and sanitizing/virus-proofing its operations. It's even installing "sneeze guards."
A val-U-turn... Lime is the world's largest e-scooter sharing company. But as major cities like LA and Paris turn into ghost towns, familiar Lime scooters disappeared from (nearly empty) streets. Riders are self-quarantining — that means no scooting to your morning latte. Now Lime is reportedly raising emergency funds at a valuation of $400M — that's 80% less than its 2019 valuation of $2.4B.
And there's not much more saving it can do... Lime already sadly laid off 100 employees (or 17% of its staff), and plans to continue cutting. So now it has to raise more funds, but at a wayyy lower valuation than when it fundraised in 2019. FYI, Lime had been one of the fastest companies ever to evolve into a unicorn, hitting a $1B valuation a year-and-a-half after launching.
Private companies have stocks too... You just don't see them. Unlike public-traded companies — whose stocks constantly gain/lose value as their prices move up/down — private companies' value only changes with funding rounds (when investors offer to buy new shares). Lime is a reminder that private valuations can drop fast too, like stocks... even if you don't see the ride down.
Disclosure: Authors of this Snacks own shares of Slack
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