Hey Snackers,
May. You began with record rain. Now you're ending with it metaphorically.
Heading into the final day of the month, the US unleashed a 5% tariff on everything from Mexico — If you're Walmart or Ford bringing anything from south of the border, this one hurts. Also if you like avocados. Poetic.
Uber revealed its 1st public earnings report (and it may not be a growth company)
Mo' money, mo' problems... In its first earnings report since this month's IPO, Uber's revenues rose 22%, but its loss doubled to $1B. The happier highlights: Uber Eats (food delivery), Freight, and NeMo (New Mobility aka bikes and scooters). Despite the epic loss, shares rose after the report because investors actually expected it.
That's a lot of billion$... and they're going to new driver promotions. Remember — Lyft, Uber, Doordash, Postmates, and other gig mobility companies are just apps. To grow, they pay drivers and eaters to try them out. A lot. And it's an aggressive arms race to fund all that:
- Lyft just raised $2B in its March IPO.
- DoorDash has raised $1B since February.
- Rappi (the "anything-delivery" of Latin America) also bagged $1B last month.
Uber has a dirty little secret... To become profitable, it'll need to increase revenue or lower cost — And it can get there in just one of three ways (they're not pretty):
- Raise prices.
- Cut promotions and discounts.
- Pay drivers less — Or replace them with self-driving cars (which it's investing in).
Gap falls 13% because of its worst 3 months in 3 years
"Extremely challenging"... Worst one-liner ever. That's courtesy of Gap's CEO after its sales dropped 4% to $3.7B from February-April. That's a lot worse than expected, so shares slipped 13%. Even show-off golden child Old Navy struggled. Here's the brutal sales breakdown by each Gap brand:
- 😑 Old Navy: $1.8B in sales, down 1%.
- 🙁 Banana Republic: $568M, down 3%.
- 😖 Gap: $1.1B, down 10%.
- 👌The others (Athleta + Intermix + Hill City): $287M, up 6%.
The unacceptable excuse... Gap's CEO partially blamed cold/wet late winter weather for keeping you out of Gap stores. Investors wished he followed up with "but don't worry, we captured those missed in-store sales with online shopping. Rain can't ruin this party!" But he didn't.
Gap's a house turned against itself... #ItCannotStand. Gap's in the process of separating Old Navy from the rest of the company — That lower-cost brand still has growth momentum while the rest doesn't. Investors prefer a clean break between a healthy company and a shrinking one.
- Old Navy will be spun-off to trade as a separate stock starting in 2020.
- Gap will keep thinking of new ideas (hopefully instead of shutting stores).
Dollar stores are living their best life
Honeybadger don't care... Neither does Dollar General or Dollar Tree. The 1-buck beasts both announced earnings Thursday, and their stocks jumped over 3% each. The reason: Both said they don't expect new tariffs on China to affect their profits this year. That's a big deal (those $1 thong sandals aren't made in the USA) and a nice surprise to shareholders.
Dollar stores = profit machines... America's cheapest chains are shockingly huge. Here's what they look like:
- Dollar General has 15K stores (all in the US) and is expanding with almost 1K more this year.
- Dollar Tree's got 15K, too.
- For context: Dollar Menu legend McDonald's has 14K restaurants in the US.
A sad economic story is good business... Inequality in wealth and income is growing in America — and companies on the high and low end both win. Case in point: LVMH's stock (the bougie French luxury fashion icon) is close to a record high. So are Dollar General and Dollar Tree's shares.
This quote from Dollar General's CEO in 2017 (sadly) nails it: “The economy is continuing to create more of our core customer.”
What else we’re Snackin’
- Sundays?: FedEx will now deliver packages 7 days a week
- Rollin': Greyhound Bus is being sold by its British owner (FYI, it's got 17M riders in North America)
- Planted: Yum Brands' KFC is considering a plant-based fried chicken
- Mergin': CBS and Viacom stocks both spike on word their media merger talks will restart next month
- Puff'd: Juul, the e-cigarette pioneer, wants to open its own retail stores in Texas
- Blocked: Salesforce is banning companies that sell assault rifles from using its software
Friday
- Report on Americans' consumption and income
- China's manufacturing data for May
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