Wednesday Sep.09, 2020

🧘‍♀️ Lululemon's big digital flex

"_So glad we drunk-ordered Lululemon last night_"

Hey Snackers,

The Mysterious Seed Saga continues: Amazon just banned the sale of foreign seeds in the US after thousands of people received random seed packages from China. And you thought your dumbbells had finally arrived.

The Nasdaq dropped 4% as investors sold off Big Tech stocks, dragging down the market. Tesla shares plunged 20% for its worst single-day loss ever.

Stretch

Lululemon becomes an ecommerce company as online sales take over

Release the breath... Despite all evidence to the contrary, Lululemon doesn't need Soul Cycle to sell workout clothes. Spin studios and Equinoxes were closed last quarter (Lulu's worst nightmare). But the legging legend's sales surprisingly grew 2%, even though in-store sales fell. Instead of crying over germ-avoidant shoppers, Lulu made Lululemonade with ecommerce:

Online sales soared 157% as you ordered $90 leggings and yoga tanks for that at-home pilates workout (electric blue looks great over Zoom).
61% of Lulu's total sales came from online, compared to just 25% during the same quarter last year. Lulu is officially a mostly-ecommerce company.

Luck happens when preparation meets opportunity... Before the pandemic, Lulu had already put in the work to flex its ecommerce muscle.

Preparation: Online sales already made up 33% of Lulu's total sales before lockdowns, making it well-positioned for a shift to full ecommerce.
Luck: The stay-at-home life mainly consists of chilling, working, and exercising — all things that can be done in Lulu's athleisure wear.

Lulu doesn't need 400+ stores anymore... It just proved it can grow as a direct-to-consumer company. Lulu's in-store sales plunged 51% last quarter, even as stores reopened. But online sales were strong enough to overpower those losses and deliver overall sales growth. Although Lulu is committed to continue opening new physical stores, it doesn't need them to make it into your closet. Its recent acquisition of at-home fitness company Mirror could hit closer to home (literally).

Electrify

Nikola stock soars 40% after GM makes a massive investment in its e-trucks

Didn't see this hookup coming... 111-year-old GM is investing big in e-truck maker Nikola. Nikola is a six-year-old hydrogen-fueled electric truck startup that plans to sell electric trucks (products delivered so far = 0). Since its IPO in June, the biggest news to come out of Nikola was that it started taking preorders for its 2022 Badger electric pickup. The biggest news now:

GM is dropping $2B for an 11% stake in Nikola. The investment isn't only financial — GM will actually be producing Nikola's trucks.
Nikola stock soared 40%. GM stock popped 8%. Nikola is now worth nearly half as much as GM, despite never having delivered a profit (or a vehicle).

Who got the short end of the gear stick?... At first, it seems like GM did. Not only is Nikola getting a $2B investment — it's also getting one of the world's most seasoned carmakers to crank out vehicles for it. Since Nikola went public, investors have been wondering whether it can actually deliver on the hype. With GM riding shotgun, they're feeling relieved. What does GM get?

A "hot" high-potential growth investment for its old low-growth company. Excitement for GM ended at the Chevy Corvette.
A sexy way to deploy its own e-battery and fuel cell systems. GM will be the exclusive fuel cell supplier for Nikola’s upcoming semi trucks.

The fastest way to scale is letting someone else do it for you... Designing a cool car is hard — manufacturing it at scale is way harder. GM brings the manufacturing expertise that young Nikola lacks. Tesla scaled on its own, but took 16 years to produce a respectable 100K cars/quarter and 17 years to deliver a full-year profit. Instead of building its own assembly lines and battery factories, Nikola can use GM's to scale faster and more cheaply.

What else we’re Snackin’

Womp: Slack's sales grew 50% last quarter, but the stock plunged 20% because that growth rate was the same as the previous 2 quarters.
Popcorn: Spy thriller "Tenet" brought in $20M during US movie theaters' biggest opening weekend since the pandemic started.
WFO: Netflix CEO Reed Hastings calls WFH "a pure negative," while Google scraps plans for a 2K-person office in Dublin.
Vax: 9 drugmakers pledge to "uphold the integrity of the scientific process" in COVID vaccine development (throwing #shade at Russia).
Game: After many leaks, Microsoft begrudgingly confirmed it's launching its smallest Xbox ever for $299.
Locate: Apple is reportedly mass producing AirTags, little Bluetooth buttons you can stick on your stuff to locate it (yep, just like Tile).

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Wednesday

Earnings expected from Oracle, Aurora Cannabis, and GameStop

Disclosure: Authors of this Snacks own shares of Lululemon, Alibaba, and Apple

ID: 1325725

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Quite a few news outlets are reporting that Apple thinks it’s only going to sell 400,000 to 450,000 Vision Pros in 2024, compared a “market consensus” of 700,000 to 800,000. They’re all citing a note from Apple analyst Ming-Chi Kuo.

Obviously there’s no question that Apple’s $3,500 face computer will have a limited audience and could be a huge flop, but this also doesn’t seem like accurate news.

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