Wednesday Jul.01, 2020

🧘‍♀️ Lululemon's $500M Mirror

_Uber rebounding from its European/Grubhub heartbreak_
_Uber rebounding from its European/Grubhub heartbreak_

Hey Snackers,

NASA needs your space doo doo ideas. The "Lunar Loo Challenge" is crowdsourcing space toilet designs from the public. In case you're interested: the lunar throne will have to work in weightless and low-gravity situations. Bonus points for seat heaters.

Stocks jumped again, despite another single-day record for new confirmed coronavirus cases in the US (46K). California, Texas, and Florida ordered bars to close again, and LA and Miami will close beaches over July 4th weekend. The Dow still enjoyed its best quarter since '87.

Marry

Uber could rebound from that Grubhub heartbreak with a $2.6B Postmates marriage

You can't hurry love... No, you just have to wait (until another acquisition target takes the bait). Back in June, Uber had its sights set on a marriage with Grubhub — until European stud Just Eat swooped in with $7.3B. Now, Uber may be learning to love again with much-smaller food delivery rival Postmates...

  • Rebound acquisition: Uber has made an offer to buy Postmates for $2.6B, according to #PFWTM (people familiar with the matter).
  • Intimate wedding: In the mafia-style territory split of the food delivery world, Postmates controls just 8% of the US market.
  • Limited options: There are only 4 big players in the US food delivery market. Don DoorDash leads (and just hit a $16B valuation), while Uber Eats is #3 with 22%.

Better than going solo... Uber wants consolidation because it needs to reduce the aggressive price competition it faces every day. "Promiscuous customers" have turned delivery into a profit-killing promo code battle. But Uber is not the only suitor courting Postmates' hand...

  • An unnamed acquisition company made an undisclosed offer (doesn't sound too sexy).
  • Public investors are potential suitors. Postmates has been busy prepping its IPO (which it filed for last Feb).
  • Now, Postmates has to decide whether to accept the proposal of a bigger corporate suitor, or go it alone on the public market.

In a commoditized market, merging is the best shot at profits... Customers aren't loyal to food delivery brands, so profit-burning promos have been critical for one app to stand out from another. But Postmates is barely competing, while Uber is struggling to keep up with DoorDash. Combining operations could allow Uber+Postmates to raise delivery fees and cut costs. We're having Sprint + T-Mobile marriage flashbacks.

Reflect

Lululemon drops $500M for futuristic home fitness Mirror — LULU+ could be next

Call it flexible hardwear... Or the protagonist of a Black Mirror episode. Lululemon has made the leap from fitness wear to fitness hardware. In its first acquisition ever, Lulu has snatched up home exercise startup Mirror for $500M. Mirror calls itself "The Nearly Invisible Interactive Home Gym." Here's why...

  • For $1.5K, you get a sleek vertical TV that's also reflective (hence, "mirror"). It's kind of like a Peloton for your wall (but without the bike... just the screen).
  • For $39/month (which you have to pay, if not it's literally just a mirror) you get access to live classes with trainers and on-demand workouts. Also: one-on-one live personal training via camera (you pay per class).
  • During lockdowns, home fitness soared. Peloton sales jumped 66% last quarter, and its stock more than doubled in the past 3 months. Lulu wants in on the hype because...

Retail isn't dead... bad retail is. As its stores reopen, Lulu can lure customers back with cool Mirror experiences. Imagine: Mirrors installed in Lulu's 25K sq ft Chicago store offer personalized workouts while you try on new leggings. Or: your Mirror at home lets you purchase your yoga instructor's Lulu top directly from the screen.

The most powerful use case could be LULU+... In addition to providing a more diversified biz model, the Mirror acquisition could be key to strengthening the Lulu "community."

  • Lulu has tested a loyalty program where members (who pay $100+ fee) get special benefits. Think: limited edition products and free expedited shipping.
  • Mirror could be incorporated to create a more attractive premium membership offering. Think: discounted Mirrors and free member-only live workout classes.
  • A Soul Cycle-style community could emerge for Lululemon fans thanks to a Mirror integration (along with recurring monthly revenues for Lulu).
Drop

Oil giants could be facing a big turning point as the energy transition accelerates

Speed up, gas pedal, gas pedal... What the corona-conomy is doing to the fall of the oil industry. At the beginning of the year, oil was trading above $60 a barrel. Then, coronavirus hit and oil demand plunged on a worldwide economic shutdown. Prices went negative for the first time ever in April. Yesterday it was back around $40. But oil giants are losing hope:

  • Shell is writing down the value of its oil assets by $22B. In April, it cut its dividend for the 1st time since WWII.
  • BP wrote down $17.5B of its assets, expecting oil prices to stay low, and Occidental Petroleum is writing down $9B.
  • Exxon is resisting a write-down — but it's getting heat from US authorities who say it's deceiving investors with false value.
  • Chesapeake Energy, the fracking giant, just filed for bankruptcy due to collapsed oil & gas prices (and a fancy hidden wine cave).

Why you gotta be so crude?... The massive write-downs suggest a lot of oil could be left in the ground as a result of the demand slump. They also suggest that its long-term value is in a questionable spot as cleaner energy gains ground. Shell and BP have set targets to transition to net-zero emissions. BP just sold its petrochemicals biz for $5B, meeting its $15B divestment target a year ahead of schedule.

This could be a big turning point for oil... BP says its oil assets are $17.5B less valuable — not because it thinks the economy won't bounce back for a long time, but because it thinks oil won't.

  • The pandemic is accelerating the transition to less carbon-emitting energy alternatives (like electric vehicles).
  • The EU is prepping a $2.5B stimulus package for buyers of eco-friendly vehicles, and Germany is spending billions on subsidies for electric cars.
  • If oil giants start to invest in the energy transition, they could secure a spot in the future of mobility.

What else we’re Snackin’

  • Glassy: Alphabet acquires North, a company that makes "smart glasses" similar to the (flopped) Google Glass — the difference is discreet design.
  • Checked: Facebook agrees to an audit of its hate speech controls as pressure from the FB ad boycott mounts.
  • Party: Amazon launches a "Watch Party" feature for co-viewing on Prime Video — the "Netflix Party" made co-viewing popular.
  • iPO: JAMF, a partner that helps companies manage and connect their Apple devices, files to IPO (after 20 private years).
  • Streamed: Google raises the price of YouTube TV by $15/month — the cable streaming bundle will go for $64.99/month.

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Wednesday

Disclosure: Authors of this Snacks own shares of Uber, Amazon, and Lululemon

ID: 1231525

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