🧘♀️ Lululemon's work-leisure win
Hey Snackers,
You never know how a day will go. One minute you're buying socks online, next you're finding $135K in cold hard cash. After finding $135K at an ATM, a New Mexico teen called the police to report the money. Turns out the worker who was supposed to fill the ATM left the cash there by accident (casual).
Stocks jumped as the Dow broke its three-day losing streak, despite depressing job data: 3M more Americans filed for unemployment last week, bringing total jobless claims to over 36M for the past 2 months.
Lululemon finds its zen in the WFH era — flexibility is its greatest strength
When life gives you Lululemons... make Lululemonade. Lululemon's 400+ stores have been closed since mid-March. The yoga, spin, and pilates studios where people show off matching Lulu outfits are equally shuttered. But the corona-conomy hasn't stopped the athleisure icon:
- 33%: Online sales already made up 33% of Lulu's total sales before lockdowns started, making it well-position for a shift to full ecommerce.
- +50%: How much Lulu's online sales jumped in April (aka, mid-corona crisis) compared to January of this year.
- +200%: How much Lulu's online sales soared in April compared to April 2019.
Just as flexible as its $90 leggings... In a recent WSJ survey, 24% of people chose athletic/athleisure wear as a top-three category of what they would spend their stimulus checks on. The 24/7 stay-at-home life mainly consists of chilling, working, exercising, and sleep. Lululemon is cruising because it checks 3 of those 4 boxes:
- One legging, many leg things: Lulu clothes are athletic enough for an at-home yoga sesh, stylish enough for an Erewhon run, and comfy enough for a Netflix binge.
- The rise of "work-leisure": Lulu also leaned into styles that look like work clothes, but feel like sweats — this anti-khaki innovation helped sales of menswear jump almost 40% in the December quarter.
Versatility is market strength... That might be why Lululemon stock is performing way better than that of its more singularly-focused athletic peers. Lulu stock is up 1% for the year — while that doesn't sound incredible, Nike is down 15%, Adidas is down 32%, and the intensely athletic house-protecting Under Armour is down almost 65%.
SmileDirectClub should be the Peloton of oral hygiene right now — but it's not
So, this is awkward... Pre-corona, SmileDirectClub was one of the worst-performing IPOs of 2019. The direct-to-consumer brand sells teeth-straightening aligners online (think cheaper DIY Invisalign), along with electric toothbrushes, tooth-whitening kits, and dental device cleaners. You'd think the lockdown economy would be perfect for its D2C biz model — but things are actually worse:
- In the corona-concomy, tele-everything is winning — Zoom soared on teleconferencing, Netflix is rejoicing on streaming subs, and Teladoc Health stock has more than 2X'd in the past six months.
- While telemedicine is thriving, SDC's sales growth rate plummeted from 50% to 11% in just one quarter — it also posted a loss of $107M.
- SDC orders were down nearly 40% throughout April into May. After its disappointing earnings, SDC's shares are down a whopping 62% since its September IPO.
"Challenging times"... Mentioned twice in SDC's earnings statement. Invisalign-maker Align Technology also reported a significant earnings miss for the quarter — but that can be explained by the fact that Invisalign requires patients to actually visit an orthodontist/dentist in person. SDC is mainly direct-to-consumer, so it doesn't have the same excuse.
SmileDirectClub (ironically) has a word-of-mouth problem... It doesn't have a cultural "fan" following — even Invisalign got mentioned in a Billie Eilish song. SDC just slashed its marketing spend by 90%, and demand for its kits fell 40%. Meanwhile, Peloton is cutting advertising and still has too much demand. Either SDC needs to be more effective with its marketing, or users just aren't spreading the word about the product.
What else we’re Snackin’
- Score: Boeing is awarded $2B worth of contracts to deliver 1K missiles to Saudi Arabia (after selling 0 planes last month, it really needed this).
- Big Mac: McDonald's sent its franchisees a 59-page guide for reopening their dining rooms — call it the "Mickey D Way."
- Fly: Richard Branson's Virgin Atlantic is reportedly in talks to raise over $900M to weather the pandemic storm.
- Closed: 1 out of 4 American restaurants will go out of business because of lockdowns, according to an OpenTable forecast.
- Euro: Europe promises to reopen for summer tourism — that money you spend on hotels and gelato is key for the European economy.
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Friday
- Earnings expected from DraftKings
Disclosure: Authors of this Snacks own shares of Lululemon
ID: 1187869