@paulcerro

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PM @ Cedar Grove Capital | L/S consumer(tech) and cannabis HF | Thematic investing | Ex IB @MerrillLynch | Disclaimer: Not investment advice
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Try on Victoria’s Secret for size
$1.5 billion: Victoria’s Secret net sales for Q1 2022, down 4.5% YoY. Excluding the benefit of $75 million in government stimulus payments in Q1 2021, net sales were essentially flat YoY.

$6.8 billion: Victoria’s Secret full-year net sales for 2021, a 25% increase YoY.

31%: The percentage of revenue coming through digital channels in 2021. Earlier this year, Victoria’s Secret launched its Victoria’s Secret Beauty and Pink Beauty products on Amazon.

75%: Percentage of brands on Victoria’s Secret’s new digital platform, VS&Co-Lab, that are founded, owned, or led by women. After splitting from Bath & Body Works Inc. last year, CEO Martin Waters said Victoria's Secret was pivoting from “being about what he wants to being about what she wants,” per The Wall Street Journal.

47%: The percentage of US adults who are reducing their spending on clothing due to general rising prices, per CivicScience. “We have to give compelling offers. And if that means leaning into promotionality a little bit more in order to make sure we get our fair share of spend, that's what we will do,” Waters said in a Q1 earnings call.

Why we care: Though Victoria’s Secret is still growing into its more modern, inclusive identity, it seems to be paying off—so far. Will the brand continue to flourish? Or will its legacy be harder to shake?
Any thoughts on their decision to chop real estate in favour of digital? Does the loss of presence on the high street matter?

Lingerie is an attractive business, high margin, but there is a lot of new entrants these days.
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$XPOF: Unit Growth the Driver of Operational Leverage
Was great speaking with Chit Chat Money about Xponential Fitness $XPOF and its growth potential.

To help visually understand the operational leverage XPOF has, we released a new post this AM to coincide with our original research and the podcast

Check it out below!
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Retailers bet on dedicated sales days to revitalize consumer demand
The trend: As ecommerce sales begin to soften, retailers in the US and China are leaning on shopping events to spur consumer spending.
  • Amazon may host an additional Prime Day this year to mitigate the effects of excess warehouse and logistics capacity.
  • Alibaba, JD.com, and Pinduoduo are some of the Chinese platforms looking to 618, the country’s second-largest shopping event, to revitalize growth amid sluggish demand.
  • Walmart is using members-only shopping events to boost Walmart+ subscriber numbers and take share from Amazon.

The benefits: These events don’t just generate sales for retailers; they’re also an opportunity to gain market share and convert shoppers into subscribers.
  • Last year, 2% of US Prime Day shoppers signed up for Amazon Prime during the event, per Numerator.
  • Over one-fourth (26%) of Walmart+ subscribers cited special savings events as a reason for joining the program, Numerator found.

A much-needed boost: Ecommerce retailers in China are looking to 618 promotions to rejuvenate consumer spending after months of declining retail sales.
  • Both JD.com and Alibaba reported their slowest quarterly growth on record in Q1 as China’s zero-COVID policy contributed to depressed consumer sentiment.
  • Both platforms are encouraging brands to offer extensive promotions, while JD.com is touting “newcomer rights” and coupons to incentivize first-time buyers and inspire shoppers to spend more.
  • With China showing no sign of loosening its strict zero-COVID stance, Chinese shoppers will likely continue to rely on ecommerce platforms to deliver everything from groceries to apparel—but convincing them to spend on bigger-ticket items like electronics will be difficult as consumers remain cautious.

Amazon’s competitors sense an opportunity: Dedicated sales days only work if customers feel like they’re taking advantage of an offer they can’t get elsewhere.
  • With retailers like Target, Abercrombie & Fitch, and Big Lots offering steep markdowns on their excess inventory, customers may feel less inclined to wait for Prime Day or other big sales events.
  • Target, for instance, is looking to quickly get rid of bulky items like furniture and consumer electronics—two categories that typically perform well on Prime Day—so it can make room for groceries, back-to-school products, and household essentials.

The big takeaway: Retailers’ ability to take sales away from Amazon depends partly upon their ability to make shoppers aware such deals are available.
  • Without a dedicated event to market against, it’s much harder to drive sales at anywhere close to the scale of a Walmart+ Weekend or Prime Day.
  • That said, the mere existence of a shopping event doesn’t guarantee shoppers will respond: Only 33% of the people who shopped on Walmart+ Weekend knew about it beforehand, per Numerator. By contrast, 94% of Prime Day shoppers in 2021 knew about the event in advance.
  • Most retailers are probably better off leveraging Prime Day for their own benefit by offering competing sales. We expect competitors to generate $5.22 billion in sales this Prime Day—up 17.8% year-over-year (YoY).
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Restaurant Subscription Services
  • Restaurant subscriptions have evolved from a way to recover during the pandemic’s early months to a “scalable strategy for optimizing customer lifetime value,” per PYMNTS and Paytronix. Though over half of consumers are only slightly or not interested in participating in a subscription service, 17% are “very” or “extremely” interested.

  • A large majority (80%) of consumers who use restaurant subscription services also participate in loyalty programs, and almost 60% said the availability of such a program is “very” or “extremely” important when choosing a restaurant, according to PYMNTS and Paytronix.

  • Taco Bell introduced a taco subscription service earlier this year. But consumer interest is divided: 42% said they’d give it a try and 42% said no thanks, per FinanceBuzz.

  • When asked which fast-food restaurants they’d be most excited to see offering a subscription service, Starbucks $SBUX and Chick-fil-A tied for first, at 36% of respondents, per FinanceBuzz.

  • One mistake restaurants make when creating a subscription program is not making the most of the data, said Jenn McMillen, founder of Incendio, per QSR Magazine. McMillen suggests making the data work for the subscription: “Assess the goal of the subscription (ex: improve retention) and then collect only the data that serves that goal. Use the analytics and algorithms to detect where engagement breaks down and picks up, and engage members using those insights.”
Personally I find subscription services for restaurants strange but I would consider it for a coffee shop as I would buy at least one coffee a day at the moment ( decent coffee though and not Starbucks)
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A newsletter you need to check out
For those of you that haven't yet, would recommend you sign up for my substack

Essentially my notebook/thoughts on things consumer(tech) and cannabis + includes my trade ideas and my ER. Completely free!

Few new posts coming in the next week or so too

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Twitter $TWTR Merger Arbitrage Very Attractive
With Elon Musk having his hands tied behind his back, legally speaking, it seems the Twitter deal is virtually in favor of the company.

See why this is and what led us to take a position in $TWTR to capture premium

I respectfully disagree. Elon Musk isn't one to back down especially given the bot problem at twitter and I think this will end up in court.
From a financial perspective, he'd be much better paying a 1B fine than buying a bot filled twitter for $54 a share
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How are US shoppers taming their inflating grocery bills?
Price-conscious consumers are economizing at the grocery store as inflation takes hold. Among US adults who are cutting back on groceries, 41% are buying fewer items from name brands, and 29% are spending less on alcohol and spirits. Meanwhile, most are picking up as many pantry staples, like pasta and rice, canned goods, and nonalcoholic drinks, as usual.

Beyond the chart: While the Russia-Ukraine war and supply chain snarls are driving inflation, these cost-cutting habits may be here to stay. “These factors have only jump-started the food shortage that climate change will inevitably bring,” said Blake Droesch, analyst at Insider Intelligence.
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How D2C disruptors are faring—and how they stack up against established brands
Direct-to-consumer (D2C) ecommerce growth has slowed since 2020, but the leading digitally native brands remain popular. In December 2021, the Peloton $PTON website raked in 6.7 million visits worldwide, far more than the sites of Warby Parker $WRBY, Casper $CSPR, and other top digital natives in the D2C space.

Beyond the chart: Peloton’s revenues plunged in its most recent quarter after months of decelerating growth. But these growing pains are expected as the brand comes down from its 2020 highs, according to Andrew Lipsman, principal analyst at Insider Intelligence. As Peloton and its digital-first peers seek out new growth avenues, it is mass-market brands that will drive the majority of US D2C ecommerce sales this year—75.5% of the $155.69 billion in sales, per our estimates. These established brands are adopting D2C strategies to shorten the path to purchase while sidestepping the issues of scale that hamper many disruptor brands.
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Let’s get a better look at Warby Parker $WRBY
1%: Warby Parker’s $WRBY market share of the $160 billion eyewear market, per CFO Steve Miller.
$153.2 million: Warby Parker’s net revenues for Q1 2022, up 10.3% YoY. Warby Parker's 2021 revenues totaled $540.8 million, up 37.4% YoY.

2.23 million: The number of Warby Parker’s active customers in Q1 2022, up 18% YoY. The average revenue per customer increased 11.2% to $249.

$15 million: Warby Parker’s estimated sales loss due to omicron, which “coincided with peak demand in the optical industry as customers [sought] to utilize flexible spending dollars ahead of Dec. 31 expirations,” the company said.

$155.69 billion: Our direct-to-consumer ecommerce sales forecast for 2022. We predict Warby Parker’s ecommerce sales will total $260 million this year.
One of the very rare items that a commercial actually sold me on. If I wore glasses I’d love the options they present in the commercials. Going to look at their numbers now😉
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