Hey Snackers,
New screensaver, old galaxies: NASA shared the deepest infrared image of the universe ever captured, courtesy of the James Webb Space Telescope. Looks like a MacOS desktop background.
Stocks ticked down yesterday while recession worries dragged oil lower. June inflation numbers drop today, but analysts don't expect them to be much less ’flated. The White House cautioned that the numbers would reflect last month's high gas prices.
Peloton will stop making its own equipment, as the former pandemic darling pivots its focus from spin bikes to subs
Hour-long Backstreet Boys ride... all uphill. Peloton has been on the struggle bus this year. In January it paused production of its pricey fitness equipment as unsold spin bikes and treadmills piled up. Now the money-losing company will outsource all its manufacturing:
- Spinning out: Peloton's Taiwanese partner, Rexon Industrial, will become the primary manufacturer of its bikes and treads, to save Peloton money on expensive US production. In February, Peloton scrapped plans for a $400M Ohio factory.
- Reverse, reverse: Mid-pandemic, Peloton spent hundreds of millions to build up in-house US manufacturing. The goal: avoid overseas-shipping snags. The assumption: pandemic-fueled demand would stay high for years (spoiler: it didn't).
Waited so long for the P-ton... that your shipping address is outdated. Peloton’s sales boomed in 2020 as its $2.2K spin bikes rode off shelves. Then things took a turn for the worse: equipment sales have plunged 40% from a year ago, and Peloton notched its biggest quarterly loss as a public company in May. Wild stat: the value of unsold equipment has surged to $1.4B, up from just $19M two years ago. Peloton was worth $50B at its height, but its market cap has plunged to $3B.
Pricey hardware is hard to bear… Owning several steps of production works for behemoths like Apple, Amazon, and Tesla, whose scale makes relying on third-party manufacturers untenable. But for strugglers like Peloton, making hardware in house can be financially unsustainable. That’s why Peloton’s new CEO is pivoting it to be a subscription-focused company (not an equipment maker). Peloton has slashed hardware prices while hiking monthly subs from $39 to $44.
Hoodie icon Gap replaces its latest CEO as mismatched sizes and piled-up inventory dim its “halo effect”
Off the rack… Gap shocked investors yesterday by replacing CEO Sonia Syngal barely two years after hiring her for the top job (exec chairman Bob Martin will be interim chief). Shares of the ’90s hoodie legend sank 5% after news of Syngal’s departure — and they’ve lost over half their value this year.
- Investors praised Syngal for quickly adopting pandemic trends like curb-side pickup and online options, but it wasn’t enough to offset slowing sales.
- Gap posted a $162M loss last quarter (compared to a $166M profit a year before) as late-arriving shipments made it harder to keep up with fast-fashion trends.
Wayyy-too-oversized hoodie… Over half of Gap's sales come from its Old Navy stores. Last summer, Old Navy execs ordered a wide range of clothing sizes to promote inclusivity and boost sales. But it backfired: too many XXS and XXL and not enough midrange sizes sparked a nearly 20% sales drop last quarter. Gap had to cut its profit forecast to zero as it launched steep discounts to offload bulky inventory. Gap’s other brands are doing better:
Gap’s halo effect is fading… It’s known as a family brand, where households can shop for everyone all at once (think: overalls for kids, button-ups for dad). But off-season styles and mismatched sizes have made it less of a family go-to. That could be a problem heading into back-to-school season — one of the year’s busiest shopping periods.
What else we’re Snackin’
- Van: Shares of EV maker Canoo soared 50% after Walmart announced it’ll buy up to 10K electric delivery vans from the startup. It’s already bought EVs from GM and Ford, while Amazon’s going with Rivians.
- Trial: Amazon and the Fred Hutchinson Cancer Research Center are recruiting participants for a phase-1 cancer-vaccine clinical trial. Researchers hope to develop a cheap alternative to chemotherapy.
- Pop: PepsiCo boosted its annual sales forecast and said it might raise prices again since price hikes haven’t hurt demand for its drink and snack staples (think: Cheetos, Quaker Oats, SmartPop).
- Trivia: Spotify is pulling a New York Times: buying the Wordle-inspired daily music game Heardle. Spotify says the tune trivia will stay free and direct players to the full songs on Spotify post-game.
- Packed: London’s Heathrow Airport is asking airlines to stop selling summer tickets to control vacay-hungry crowds. The global hub hopes to cap daily travelers at 100K, but travel execs called it “ridiculous.”
Wednesday
- June consumer price index drops
- Earnings expected from Delta, Infosys, Fastenal, and Unity Bancorp
Authors of this Snacks own: shares of Walmart, Spotify, New York Times, Apple, Amazon, Tesla, Ford, and GM
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