The great garbage merger

Tuesday, April 16, 2019 by Snacks
"_You're priceless to me, Waste Management_"

"You're priceless to me, Waste Management"

Yesterday’s Market Moves
Dow Jones
26,385 (-0.10%)
S&P 500
2,906 (-0.06%)
Nasdaq
7,976 (-0.10%)
Bitcoin
$5,042 (-2.46%)
10-Yr US Treasury
2.551%

Hey Snackers,

9-9-6.

9am to 9pm, 6 days a week. That's Alibaba CEO Jack Ma's new preferred work/life "balance." Bummer.

US stocks lost enthusiasm to start the week as Goldman dragged down markets.

Merge

1. Waste Management is now #1 and #4 in trash

Let's get together... Shares of both Waste Management and Advanced Disposal jumped Monday on word the trash titans are merging. That crams the #1 and #4 solid waste companies under one lid. Investors like Houston-based Waste Management's new, polished look:

  • 25M customers across just about every US state
  • 50K employees
  • $17B annual revenue
  • 310 Landfills (!)

Consolidate trash into 1 can... Then save money. That's basically why this happened. Waste Management thinks it can save $100M every year on "synergies" — Cutting redundant costs and using its bigger size to negotiate lower prices. Now regulators just have to stamp approval that this keeps the trash industry competitive.

THE TAKEAWAY

Managing waste is hard... Waste Management is on it. First, it hauls trash from residential, government, and corporate customers. Then it sorts recycling. Then it compacts. Then it packs landfills. That all requires humans and machines (lots). But it's not all dirty — Now Waste Management renews gas from landfills into electric energy. Power move.

Bank'd

2. Goldman Sachs cuts bonuses and falls 4%

Blame the new firm-wide "flexible dress code"... Profits at Goldman Sachs fell 21% last quarter, sending shares down 4% Monday. Wherever you look on Goldman's investment banking revenue menu, it was probably down:

  • Trading ⬇️ 18%: Markets were calm and steady last quarter. That makes it harder for Goldman to buy things low and sell them high.
  • Underwriting ⬇️ 24%: Goldman's guidance to companies that want to issue stock or debt to raise money took a hit. You can partly blame the government shutdown that delayed some IPOs.
  • Mergers & acquisitions ⬆️ 51%: Goldman still gets to say it's #1 in advising companies getting hitched, but that makes up just 1/10th of its business.

Less harvest, less bacon... Slower business meant Goldman just cut comp. Salaries are generally fixed, but Goldman tightens its belt through bonuses — The average employees' pay fell to $91K in the 1st quarter of 2019 compared to $119K in last year's (that's 24% less $$$).

THE TAKEAWAY

Time to pivot... Exotic/risky investment banking is Goldman's historic money-maker. Now management wants more reliable, steady, and boring businesses. At Goldman's age, it's trading in the Ferrari for the Buick. And the answer is "Marcus" (named for its founder):

  • Marcus is Goldman's "Main Street" bank
  • Its focus is checking accounts and loans to normal folk, not globo-corporates.
  • And Marcus is teaming up with Apple for a consumer credit card.
Rebound

3. Best Buy's stock-quadrupling CEO is out

Amazon-proof yourself... Since 2012, Best Buy CEO Hubert Joly pulled that off. Now the turnaround magician from Minnesota is stepping down as CEO, but will remain Chairman of the board — Current CFO Corie Barry takes over in June. While Circuit City was dying, Joly did this with Best Buy:

  • The stock quadrupled during his reign.
  • Stores enjoyed 5-straight years of sales growth.
  • The chain rose from a $421M loss in 2013 to a $1.5B profit in 2018.

Operation "Renew Blue"... That's the actual plan turnaround artist Joly kicked off in 2013. We ID'd his 4 strategic moves that transformed Best Buy into a retail phoenix:

  1. Price matching: Joly refused to let you test out Dance Dance Revolution at Best Buy before actually buying it on Amazon for cheaper.
  2. Store-within-a-store: He turned Best Buys into showrooms, carving out mini-stores for brands like Apple to better show-off their goods.
  3. eGrandparent Tech: He bought Life Alert owner GreatCall ("Help, I've fallen and I can't get up!") along with its 900K paying subscribers, and also invested more in Geek Squad for in-home installation.
  4. Dual/Purpose Stores: He combined warehouses with regular stores — Now 40% of online orders are picked up in-store, an Amazon-beating advantage.
THE TAKEAWAY

"There's no room for mediocrity in retail"... We'll let Hubert's words take our takeaway today. He realized early that Amazon can't completely replace in-person shopping experiences — Ecommerce just raised expectations. As a leader, Hubert saw Best Buy's physical stories as a "wonderful asset," so they became just that.

FYI, just check out these Glassdoor employee reviews of Hubert.

What else we’re Snackin’

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