Taco Tuesday is the new trade war victim
Hey Snackers,
Got 99 trade problems and guac is one. A fresh new front in the trade war — this time Mexico — kicked stocks for their 4th-straight negative week.
Victim #1: Chipotle shares fell 2% because the 450K avocados it carves up daily are about to get more expensive.
Who's up...
Your Uber earnings report has arrived... For the first time since IPO-ing last month, Uber issued its quarterly report card to investors. Shares rose despite mostly negative themes (because expectations were low):
- Uber's loss doubled to $1B as it splurges on more promo codes to keep you off Lyft or DoorDash.
- Growth is a problem, with quarterly revenues just 20% higher than last year because competition is fierce.
- Uber Eats is the golden child, growing much faster than Uber rides — It now makes up 17% of all of Uber's revenue.
The other, other white meat... Yum Brands is now in an "exploration phase" for a plant-based chicken alternative for all its KFC restaurants. Good timing — Burger King just announced that its meat-free Impossible Whoppers boosted store traffic by 18%.
Location. Location. Location... "Words With Friends" creator Zynga is now better at real estate than mobile gaming. It just sold its SF headquarters building for almost three-times what it paid for it in 2012, earning a $372M profit. Some context: Its core biz (gaming) lost $660M over those 7 years.
...And who's down
Lime problems... President Trump's new immigration-motivated 5% tariff on everything imported from Mexico starts June 10th. And car companies aren't the only ones who are affected — Beer-glomerate Constellation Brands fell 11% last week. The Corona-maker brews in Mexico, and 73% of its revenues are from Mexican imports to the US (aka exactly what will get taxed by the new tariffs).
FYI on your mango-infused beach companion... New reports revealed that LaCroix sales plummeted 9% over the last quarter as competitive sparkling waters sprout up. And it isn't thrilled about a lawsuit claiming its "all natural" ingredients aren't actually all that natural. Owner National Beverage Corp fell 8% because an analyst thinks it's "effectively in a free fall."
An extra grand or two... That's the increase in price for cars imported from Mexico if the tariffs come into full effect. Shares of GM, Ford, and all their car-making buddies fell on word that the 2.6M cars imported from Mexico each year could face the political tax — President Trump won't stop the tariffs "until the Illegal Immigration problem is remedied."
High-end & low-end retail is winning (everything in between isn't)
Go high or go low... The final heat of 1st quarter earnings marathoners crossed the finish line last week. Setting personal records were Dollar General and Dollar Tree. But a closet-full of apparel companies Gap, Abercrombie & Fitch, and Calvin Klein looked like they still had those annoying plastic security tags on. We noticed something: High-end is winning, low-end is winning, middle-end is not.
Sad but true... The US economy has experienced serious income inequality since the '09 recession. And companies up high and down low have open arms welcoming in those masses.
- ⬆️ High-end retail: LVMH's mortgageable handbags are still flying off shelves (so is its stock). Tiffany, Lululemon, and other brands catering to well-off customers are doing well too.
- ⬆️ Low-end retail: Stocks of big dollar store chains are enjoying record results (and stock prices). So is Walmart, which has figured out how to tech-ify itself enough to keep budget-conscious customers around.
- 😬 Everyone else: A shocking 8K store closures have been announced so far this year, including Payless, Dressbarn, Gap, and GNC.
When your spending changes, so does the entire industry... Apple crushed camera stores, Netflix crushed movie rental, and Tinder crushed "a drink for the guy at the end of the bar, on me." Now Amazon Prime has ushered in recurring diaper refills. Some companies have adapted to the changes in how you shop (FedEx introduced Sunday ground delivery last week to keep up with your online orders) — But most middle-end retail hasn't.
What else we’re Snackin’
This Week
- Monday: Apple's Worldwide Developers Conference kicks off. President Trump lands in England to chat with the Queen and outgoing Prime Minister
- Tuesday: Earnings from Tiffany's, GameStop, Salesforce. The 30th anniversary of the Tiananmen Square protests (but discussing it in China is a punishable offense)
- Wednesday: Earnings from Stitch Fix, American Eagle, Campbell Soup
- Thursday: Earnings from Vail Resorts, Beyond Meat, Zoom, DocuSign. 75th anniversary of D-Day, the turning point of WWII
- Friday: The big US unemployment and jobs report for May
Disclosure: Authors of this Snacks own shares of Beyond Meat, Amazon, Volkswagen, and Lululemon.