🎤 Amazon picks good *PR* over profits

Monday, May 4, 2020 by Robinhood Snacks |
Don Bezos to shareholders: "_Please. Take a seat._"

Don Bezos to shareholders: "Please. Take a seat."

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Hey Snackers,

Eels at a Japanese aquarium have become so shy from not seeing humans during lockdown, that staff aren't able to care for their health. Now the aquarium is calling for volunteers to FaceTime the lonely eels: the goal of this 3-day "face showing" festival is "not forgetting the existence of humans." Got me in my eel-ings.

April saw the biggest monthly stock market gains since 1987 — As states start re-opening for real in May, we'll see if they stay this high (the S&P 500 is just 16% off record highs).

Snackin': Watch your Snacks Daily pod hosts Jack & Nick chat with Mrs. Dow Jones on our past investing stories, accelerated trends, and the corona-conomy (life is just Zoom backgrounds these days).

Spend

1. Amazon sales soar, but shares plunge as Bezos puts good PR and worker health over profits

Be humble. Sit down.... "You may want to take a seat" is not exactly a phrase shareholders want to hear in an earnings announcement. But that's exactly what Amazon told investors to do as it reported results from the Jan - March quarter. First, Amazon dropped key stats that revealed a lockdown-related sales surge (hoarding, confirmed):

  • +26%: How much Amazon's sales jumped — the 'Zon racked up over $75B in total sales, their biggest 1st quarter leap ever (it's usually the slowest quarter).
  • -29%: How much Amazon's profit fell — Bezos took home a smaller-than-expected $2.5B in profit, despite the sales boom. Amazon brought in way more money, but spent even way more.

Okay, now actually take a seat.... Amazon proceeded to explain that in the upcoming quarter, it expects to make around $4B in profit. Then, Amazon explained that investors can kiss that $4B in profit goodbye:

  • Amazon plans to spend the entire $4B "and perhaps a bit more" on corona-related expenses like getting products to customers on time and keeping worried workers safe while they're working in warehouses.
  • COVID-19 testing facilities, PPE equipment, and higher wages for hourly employees are all on the docket.
  • Amazonians ≈ Sarahs. After hiring 175K extra workers to handle increased demand, there are now as many Americans getting an Amazon paycheck (840K) as there are Sarahs (842K)
  • Amazon stock has fallen nearly 8% since the announcement, dragging the market down with it. Guess some bummed investors got up from their seats.
THE TAKEAWAY

Profiting from a disaster is a bad look... and Amazon doesn't want to look like it's doing that, especially since its sales surge was clearly related to the pandemic. For Amazon, the way customers and employees perceive it in the long run is more important than a few billion in profit. That's why Amazon went on to list 34 bullet points about everything it's doing to help employees, customers, and communities. It chose PR over profits.

Highs
  • Biggest non-shocker of the year... You wouldn't have imagined it in 2019, but by now even your salamander knows that Clorox is crushing it. Sales jumped a lemon-scented 15%, Clorox's biggest quarterly sales jump in ten years. Cleaning products jumped 32% on their "99.9% of germs"-killing prowess. But what shocked investors is how Clorox even raised its economic forecast for the year — it thinks obsessive germ-quashing isn't a fad, but a long-term behavioral shift.

  • Team(s) work makes the dream work... Microsoft's last quarter was barely affected by the corona-conomy (if anything, they got a boost). Investors couldn't hear anything but the deafening sound of Microsoft's cloud success and 22% pop in profit. Remote collaboration tool Microsoft Teams was the belle of the earnings ball: daily users soared 70%, from 44M in mid-March to 75M at the end of April. Oh btw — Teams has video conferencing built in, so it's now coming for Zoom's head, which it basically calls a one-trick pony.

Lows
  • I'm blue, Da-ba-dee, A-di-das... Stan Smith legend Adidas saw its profits fall 96% last quarter — the sportswear brand blamed the fact that 70% of its global stores were shut. According to Adidas' CEO, sales abruptly fell off a cliff mid-March. A 35% jump in online sales wasn't enough to offset massive in-store losses — Now Adidas predicts sales will plunge another 40% over the next 3 months.

  • Not the good kind of burn... Plane-making giant Boeing burned through $4.7B last quarter, as coronavirus losses and 737 Max issues continue to widen the gap between how much money it's shelling out (a lot) and how much it's bringing in (not much). It only delivered 50 planes, compared to 149 during the same period last year. And Boeing still has big bills to pay each month — that's why it just raised $25B in debt on top of the $15.5B in cash it already had. It's eager to prove to investors that it won't have a layover in Chapter 11 bankruptcy.

What else we’re Snackin’

  • Celebrate: Since spas are closed, here's some Mother's Day gift inspo (we repeat — Sunday is Mother's Day).
  • Conference: How to avoid "Zoom fatigue" — that Caribbean beach background isn't fooling anyone.
  • Eat: The riveting history of frozen pizza in the US — a multibillion-dollar business built on disruption, secrets, and rivalry (Totino's vs DiGiorno).
  • Consider: The science behind our impatience with social distancing — it's the hardest kind of decision-making context for humans.
  • Work: The most important metrics your company probably isn't tracking, that customers care about most (move over KPIs).

Snack Fact of the Day

Black objects absorb all the visible colors of the light spectrum and reflect none to the eyes — white objects reflect all colors and absorb none (that's why black clothes get warmer than white ones in the sun)

This Week

Disclosure: Authors of this Snacks own shares of Amazon, Shopify, Microsoft, and Beyond Meat

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