🏁 The Covid endgame, and Google’s ad trouble

Feels so normal, it's abnormal... walking to the restaurant bathroom unmasked. We thought "back to normal" was happening this winter, until Omicron. But now that cases have waned and proved less severe, a national reopening mania has started... for real. Anticipation is growing:

• Restrictions are falling daily. Half of US states have ditched mask mandates over the past month, and even the CDC wants to give people a break. Lots of Super Bowl fans were unmasked at a sold-out stadium, and Coachella and Stagecoach say they won’t have Covid-related restrictions when their festivals return in April.
• Spending is up. January saw the strongest monthly gain in retail sales since March 2020, when the first stimulus checks hit. Retail sales were up 4% from December.
• Travel is rebounding, and Marriott, Hilton, and Airbnb expect global travel to surpass pre-Covid levels this year.

But there's a dark cloud... over reopening. Consumer prices were up 7.5% in January from a year earlier, the fastest increase in 40 years. While retail sales jumped, it’s partly due to higher prices — not more purchases. Wages are rising, but pay bumps haven't kept up with inflation.

• Consumers are feeling it — especially low-income Americans. Food prices are up 7% from a year ago, and gas is up 40%. Walmart, the consumer bellwether, says shoppers are on edge about grocery bills. Meanwhile, consumer sentiment is at a decade low.
• Companies are passing on rising costs to consumers, as inflation starts to dent profits. Still: Profit at the 500 largest companies were up 50% last year as consumers proved willing to pay more. Coke, Pepsi, and Procter & Gamble reported strong sales despite upping prices.

House of Gucci... Lux brands took a hit when lockdowns curbed the need for Balenciaga sneaks and Prada bucket hats. Last year, Gucci and Yves Saint Laurent owner Kering had a record $20B comeback. Gucci sales jumped 30% last quarter thanks to big marketing and huge China demand. Luxe giants like Kering and LVMH are well positioned as prices rise: their customers are less price sensitive, and higher prices = #exclusivity. Now lux brands are looking to the metaverse. Last year, a Gucci digi-purse sold on Roblox for nearly 20% more than the leather version.

Google searched... its soul. Digital ad giants are nervous. Last week Google said it would stop advertisers from tracking Android users, after Apple made a similar move last year. Since Android phones make up 70% of global smartphones, the change could cut into sales at Twitter, Snap, Pinterest, and Meta. This year Meta expects to lose $10B in ad revenue from Apple’s update, and its stock has fallen 45% from its September peak. Meta has told investors to stay tuned for its meta investments, but they may take a while to offset slowing ad sales.

Extreme makeover, pro edition… Home-improvement chains saw monster sales during the pandemic as we spent weekends building Zoom-worthy home offices. Now the experts are taking over. Home Depot's pro biz (think: drywall, drill rentals) has topped DIY as homeowners outsource their paint jobs to contractors (who spend more $$ than DIYers). Last quarter, rival Lowe's raised its sales forecast, partially thanks to a 16% spike in pro sales. We’ll see if it can keep boosting the bottom line for Lowe’s and the Depot when they report this week.

Market vax-uration… Biotech newcomer Moderna’s looking for its next move. The company used its novel mRNA “platform” to quickly make a Covid vax, and sold an estimated $15B+ of jabs last year. But Moderna’s biz is vulnerable since it makes only one product, and sales growth is slowing as vax rates plateau. Shares are down 70% from their September peak, and now Moderna’s spending billions to boost production abroad and add potential blockbuster HIV and flu drugs to its pipeline. We’ll see how those investments are tracking when Moderna reports on Thursday.

• Chipper: Good news re: your back-ordered laptop. Last week Intel said it was buying Israeli chip maker Tower for $5.4B to boost production. Chip and EV giants have pledged billions to revamp US manufacturing.
• Ripe: Avocados are about to cost more green: avo prices are rising after the US banned imports from Mexico when a US food inspector was threatened amid cartel chaos. Mexico supplies 80% of the US’s avocados.
• Burbs: Auntie Anne’s for lunch: Sales at Simon Property Group, the largest mall owner in the US, have surpassed pre-pandemic levels. But retail in cities isn’t seeing the same rebound.

• Rollie: It isn’t just NFTs: sales of vintage watches boomed in the past year as #YOLO-minded consumers splurged on Instagrammable IRL collectibles like grandpa’s classic Submariner.
• Mac: A tasty way to keep an eye on inflation: The Big Mac Index has measured burger prices since 1986. Today in the US the sammie costs double what it did in 2004. FYI: A Big Mac in Switzerland is now $7.
• Dig: As shipping containers pile up, the US is finding new ways to navigate the supply-chain crisis. Like: using wartime air bases and digging 50 feet into the Mississippi River to make room for cargo ships.

• Monday: Presidents’ Day.
• Tuesday: Earnings expected from: Home Depot, HSBC, Medtronic, Caesars Entertainment, and Macy’s
• Wednesday: Earnings expected from: Lowe’s, TJX, eBay, Public Storage, Molson Coors, Monday.com, Toll Brothers, and Hertz
• Thursday: Weekly jobless claims. Earnings expected from: Intuit, Moderna, Anheuser-Busch InBev, Block, Keurig Dr Pepper, Coinbase, Monster Beverage, Planet Fitness, Etsy, and Discovery
• Friday: Earnings expected from: Liberty Media and Starwood Property Trust
• The weekend: Earnings expected from Berkshire Hathaway on Saturday. World Pistachio Day on Saturday. Screen Actors Guild Awards on Sunday.

Authors of this Snacks own shares of: Google, Snap, Moderna, Twitter, Apple, and Block

ID: 2048619