Hey Snackers,
We heard that Kanye was offering millions to get the city of Rye, NY to drop the "R" and rename itself "Ye." Sadly, those rumors appear to be false. Happy Fri-Ye.
Yesterday, President Biden signed the $1.9T Covid relief package into law. $1.4K direct deposits will start hitting bank accounts as soon as this weekend. Tech shares roared back to life, pushing the stock market to an all-time high.
Instead of profit, Johnson & Johnson gets a "halo effect" from its vaccine
Shoot your shot... Johnson & Johnson was the tortoise in the race for an FDA-authorized Covid vaccine, coming in 3rd after Pfizer (#1) and Moderna (#2). So far, Pfizer's vax has been the most administered: 17.6M Americans have been fully vaxed with Pfizer, 15.6M have been fully vaxed with Moderna, and only 640K have been fully vaxed with J&J. Buuut...
- J&J could catch up quick: It's one shot, unlike Pfizer's and Moderna's (two doses weeks apart). It can be stored at fridge temp, vs. sub-zero temperatures for the mRNA ones.
- President Biden just announced plans to purchase 100M more J&J vaccine doses. The (less high-maintenance) vax could help speed up national vaccination.
But J&J won't be profiting... The 1B doses that it's on track to produce this year would generate up to $10B in sales. But unlike Moderna and Pfizer, J&J has pledged to sell "at cost" for emergency pandemic use (read: no profit). While J&J stock hasn't received a big vaccine boost, its reputation likely has.
- Big Pharma = not popular: Pre-pandemic, the pharmaceutical sector was ranked as the least-liked industry in a US Gallup poll (womp). Only 27% of Americans rated it positively — an all-time low.
- The profit-chasing bad rap comes from things like the opioid crisis and sky-high, rising drug prices (example: Mylan 6X'ing EpiPen prices by 2016).
- The US spends more per person on healthcare than any other developed country — partly thanks to higher drug prices. That, plus public anger, gets lawmakers' attention.
J&J could get a big "halo effect"... from Congressional and public heat — while doing a good thing. Lawmakers have been trying to reign in pharma prices. Pre-pandemic, the House passed the "Lower Drug Costs Now Act" (self-explanatory). But it didn't get through the Senate. The pharma industry has spent billions on lobbying and campaign contributions to avoid profit-crushing regulation. But since the pandemic, 40% of Americans have a more positive view of the pharma industry. J&J could get the biggest "halo effect," thanks to its no-profit approach.
UPS CEO Carol Tomé conquers the delivery frenzy by doing less (better)
Onboarding must’ve been fun… Carol Tomé became CEO of the world’s largest package delivery company in June last year, right at the height of the delivery frenzy. Her new company was also gearing up to distribute vaccines around the globe to curb a deadly pandemic. Tomé is the first woman to run UPS in its 113-year history, and one of only 30 female CEOs of S&P 500 companies. She’s also the first “outsider” to serve as UPS’ chief executive.
Rising to the challenge… After 18 years as CFO at Home Depot, where she helped the retailer emerge from the financial crisis, Tomé brought her strategic leadership and number-crunching skills to UPS. Born in Jackson, Wyoming as the oldest of four, Tomé learned to hunt and fish as a child. That resourcefulness might’ve prepped her to wrangle the challenge of coronaconomy shipping:
- +32%: Total US online retail spending soared to $792B last year.
- 24.7M: How many packages UPS delivered per day (yearly total: 6.3B).
- $85B: UPS sales, up 14% from 2019. Amazon accounted for ~$11B of that.
Focus on the bottom line… Companies can maximize profit in two ways: raising prices and cutting costs. Tome did both to protect the biz, as soaring demand strained UPS’ capacity and raised costs. As we were WFH’ing, business shipments plunged while consumer shipments soared (so much TP). Those extra home stops meant higher costs for UPS. Tomé’s approach: less is more.
- UPS started focusing on more profitable deliveries (like heavy packages). It canceled some shipping contracts that were no longer as profitable, evaluating corporate customers on value — not volume.
- It placed stricter shipping limits than ever before to avoid overwhelming the network. And it increased prices on big retailers whose volumes spiked (think: surcharges of up to $4 per package).
Saying “no” can be good… especially during periods of upheaval. For years, UPS has chased package volume to fill its network. But Tomé’s pivot to a “less is more” approach seems to have paid off: last quarter, UPS posted the highest quarterly operating profit in its history, with record profit in each segment. And despite wild demand, UPS delivered ~97% of packages on time during the holiday season, compared with ~95% for FedEx, and ~93% for USPS. Since Tomé took over on June 1, UPS stock is up ~70%.
What else we’re Snackin’
- Buzzy: Bumble stock jumped 11% after the dating legend topped sales estimates in its first earnings as a public company.
- Vax: President Biden will tell states to make all US adults eligible for Covid vaccines by May 1st.
- OhNo: Netflix is testing a crackdown on password sharing after blissfully ignoring it for years (one third of all users share logins).
- LOL: Taco Bell issued non-fungible tokens (NFTs) for digital taco art — it's calling it "NFTaco Bell."
- Coup: South Korean ecommerce giant Coupang topped an $84B market cap after the stock soared in its NYSE debut.
Friday
- First anniversary of Broadway theaters closing in the pandemic
Authors of this Snacks own shares of: Moderna
ID: 1561370