Tuesday Jul.13, 2021

👖 Levi's loose quarter

_Saying a final goodbye to the skinny jeans [Simon Winnall/The Image Bank via GettyImages]_

Hey Snackers,

When you don't want to smile with your mouth, you smile with your eyes — aka: smize. Tyra Banks, the queen of smize-ing, has launched her own ice cream: Smize Cream.

Stocks rose to fresh records yesterday, as investors geared up for earnings season. Big Banks are kicking it off this week.

Jeanius

Levi’s big stretch: the jean icon is thriving on baggier fits and changed waistlines

RIP skinny jeans... When you realize that skinny jeans are no longer in fashion — a year too late. Levi sales plunged last year as we forgot what waistbands feel like (#legging-life). Last quarter, the company that invented blue jeans made a big comeback.

Earnings, unzipped: Levi's sales more than doubled from last year, and it swung to a $65M profit as you traded in yoga pants for "going out" fits.
Bring out the party pants: Levi's stock is up 46% this year as reopening drives "revenge spending" on non-stretchy clothing.

Mom jeans FTW... While the days of 24/7 sweats are behind us, consumers are now seeking sweatpansy qualities in going-out clothes. Call it a pandemic hangover: the quest for comfort has carried over to jeans. Levi's CEO said that baggier fits made up nearly half of both men’s and women’s sales last quarter, a major shift from two years ago. Case in point: "balloon pants" are sold out.

Trends change: Gen Z revived high-waisted, loose fits, which have become uniforms on TikTok. Now, Madewell is even releasing gateway styles to help hardcore skinnyjeaners transition, calling them: "training wheels for people coming out of skinny.”
Waistlines change: One in three US consumers have seen a change in their waistlines since the pandemic, according to Levi's CEO. And nearly 40% of people say they no longer fit in their clothes from last year. That calls for a wardrobe change.

The real opportunity isn't the trend... it's the spillover trend. The skinny jean era has passed, and we've entered a "New Denim Cycle." But the big opportunity isn't changing waistlines or styles — it's the spillover potential of those trends. First you change the cut of your jeans — then you change your tops, jackets, and shoes to match (boots don't pair well with a tapered ankle). The data confirms it: Nine in 10 shoppers plan to revamp their wardrobes. Apparel retailers could benefit.

Avo

Subway unveils a fresh strategy after sales fall short of the full foot-long

Subway, refresh... Doesn't sound right. This week, Subway launched an “Eat Fresh Refresh” campaign to win customers back from fast-casual competitors like Chipotle. Subway once set the sandwich bar high by pioneering a healthy, customizable sammie menu. But sales have been slipping for years as consumer tastes shift. Enter, Refresh:

20+ new ingredients, including new breads, smashed avocado, and fresh mozzarella
1M free sandwiches across the country, to whet customers’ appetites
A fresh online ordering system with revamped in-app ordering and nationwide Doordash delivery

Biz strategies get stale, too… Subway's “healthy” fast food was out-innovated by competitors like Chipotle, that offered premium ingredients and convenient ordering in addition to customizable, "fresh" meals. The pandemic hit Subway hard, since it had few delivery and drive-through options for contactless orders. Meanwhile, competitors saw digital orders more than double over 2020. Subway has also struggled with:

Good fat > Low fat: Changing consumer preferences caused low-fat options like the Oven Roasted Chicken sammie to lose ground to low-carb and organic alternatives.
PR disasters: Including fake tuna (#funa) allegations and the sentencing of Subway spokesman Jared Fogle to 15 years in prison.

Innovation is always in season… and even huge, global chains like Subway lose business when they don’t pay attention to changing tastes. Subway relied on its early “Eat Fresh” success for years, even as its reputational lettuce wilted. Now, Subway is trying to win customers back with e-orders and avocados (good fat). But its competitors have already taken a big bite out of the fast-casual market.

What else we’re Snackin’

TikBlok: TikTok-owner ByteDance cancelled its IPO — and banned influencers from promoting crypto — as China’s tech and crypto crackdown continues.
Check: The Biden admin plans to send $300/month per child to most US parents as part of a temporary increase in the child tax credit.
Musky: Elon Musk defended his SolarCity deal in court. Plaintiffs allege he led Tesla to overpay for the home-solar company.
Awkward: After Richard Branson’s successful space trip, Virgin Galactic stock had its worst day in more than a year after the company said it could sell up to $500M shares.
Taxi: G20 leaders are moving forward with what would be the biggest overhaul of the international tax system in decades (meaning: higher taxes for big companies).
Jitters: Global coffee prices are soaring as Brazil faces one of its worst droughts in almost a century, leading to a plunge in java supply.

Tuesday

Earnings expected from Chase, Goldman Sachs, and Pepsi

Authors of this Snacks own shares of: Tesla

ID: 1718910

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Sales of what are up 136% since 2019?

Don't be a sucka

$70B

Alphabet shares are soaring in the after-market session, with a initial jump of more than 10% implying a gain of upwards of about $200B in market value when the stock opens tomorrow morning.

Google’s parent company crushed earnings expectations, initiated a cash dividend for the first time, and authorized a fresh $70B in share repurchases for good measure. The market likes it very much.

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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.

The issue is that 1) this 400,000 number isn’t new. Back in July of 2023, the Financial Times reported that Apple planned to make fewer than 400,000 units in 2024, reducing its initial projections of 1M units, citing two people close to Apple and, the Chinese contract manufacturer assembling the device. 2) It's unclear who was estimating 700,000-800,000 Vision Pros in the first place, but it appears that it was Ming-Chi Kuo himself?

Apple reportedly cuts Vision Pro production due to low demand

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Gonna have to rename the company... again

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Chipotle continues to go on a tear, hitting a sales record

Hey it might not be the kind of AI stock investors are all hot and bothered over, but don’t sleep on the burrito business.

Chipotle posted much better-than-expected results on Wednesday, with sales rising 14% to a record $2.70B in the first quarter, which is like a billion additions of guac.

Profits jumped 23% to $359M.

Chipotle has quietly cruised higher over the last year. It’s up 63%, compared to the 24.5% gain for the S&P 500 over the 12 months through Wednesday’s close. Not bad for a rice-and-beans based business model.

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Facebook had great earnings, the market hates it

Facebook reported impressive earnings. Record first-quarter revenue thanks to AI! Profit up 117% compared to a year earlier! But at the same time, its capital expenditures are going up and it’s expecting second quarter revenue potentially lower than analyst estimates. So in other words, the future doesn’t look as bright as the present.

All in all the stock is down more than 10%. (Basically the opposite of what happened with Tesla yesterday).

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Why Tesla investors are holding on to hope for a cheap car

Despite terrible earnings numbers last night — declining vehicle sales, disappointing revenue and profit, enormous spending — Tesla stock is up more than 10% as of midday. That’s a welcome move for the car company, that’s been among the worst performers this year in the S&P 500.

Why the about face?

While Reuters reported earlier this month that Tesla is no longer making its long-awaited $25,000 mass-market car — news sent the stock, already suffering from headwinds across the EV industry, down even further— Tesla reported during its earnings that it’s going to make cheaper cars than it currently has.

Before the second half of next year, Tesla said it will release “more affordable models” that “will utilize aspects of the next generation platform as well as aspects of our current platforms, and will be able to be produced on the same manufacturing lines as our current vehicle line-up.”

So rather than release the $25,000 Model 2, Tesla is incorporating some of that technology into its existing models. UBS called it the Franken-3Y2.