Concerns with Russian sanctions and disruptions continue to mount. Plus, top notable commentary from the week across retailers, tech, vaccine makers, and entertainment.
Energy & Trade Impacts: “Yes, if they did go after the energy sector, that's obviously going to impact trade patterns. A large swath of Russian exports do head into Europe and European refiners are -- would begin to [be forced] to seek supply elsewhere, which typically, I think will probably come from West Africa, the U.S. Gulf, Brazil. So there would be an impact on trade patterns. There is also the question that we're seeing today with Iran and Venezuela in terms of where Russia would seek to move their oil to other parts of the world that aren't sanctioning them. And there could be a draw for some of that shadow fleet to fulfill that. But at this point, I think that's conjecture, and it's too difficult to tell how deep the sanctions go and how Russia would react to them.”
Sanctions: “The actions that have been taken thus far by governments in Europe, the U.S. obviously, and others have been crafted in a way to try to create the desired outcomes and yet not impede energy flows. I think there's a recognition that's coming into this. Energy inventories were low, supplies were tight and a very conscious effort to not impose further energy cost pain on the global economy. Now there can be secondary impacts of all these things, right? Shipping rates have gone up, insurance typically follows marine movements in the black sea now. They're becoming a little bit more carefully choreographed. We have not seen any interruption of physical flows of oil or gas, at least none that I'm aware of. But there are certainly a lot of people who are concerned -- Urals crude discounts have widened out, as you all have seen. So we're beginning to see the effect of these things show up in the marketplace.”
Supply Chain & Logistics Impact: “This conflict will have an impact on supply chain and logistics market. We've already seen a few consequences in the early days. The Ukraine ports have closed impacting the flow of goods. Russian forces have destroyed some Ukrainian air cargo freighters, sanctions will likely impact operations at ports and other countries. Airspace has been restricted for Russian air traffic impacting air cargo capacity that's available and the link and cost of flights. Similarly, Russia has restricted access to its own airspace to more than 30 countries. Some companies rely on raw materials from Ukraine or Russia causing some manufacturing factories to close and undoubtedly impacting supply. Various multinationals have suspended or withdrawn from their Russian operations. Russia and Ukraine concrete -- sorry, Russia and Ukraine contribute oil and natural gas to the energy market. And with the supply being curtailed, there could be a meaningful impact on energy prices and the prices of other commodities. Some logistics companies, including FedEx, DHL and UPS have suspended shipments to Russia. Ocean Network Express, Maersk and MSC have all halted bookings to Russian destinations. All of this could impact renewable trade volumes. And finally, severe sanctions have been placed on businesses and individuals associated with Russia and Belarus impacting supply chains of numerous businesses and where they can sell their products and services. For example, Apple has announced that it stops sales of its products in Russia just a few days ago. All of these factors bring complexity and change to the market.”
Online Services like Drive Up & Shipt Driving Growth Opportunities for Target (+12.1% Since Close): “Located just miles from most American homes, our stores handled more than 95% of the $100 billion plus in sales we did in 2021, including 12% more in-store traffic and most of our digital demand. Notably, more than half of those online sales were filled through our same-day services: Drive Up; Order Pick Up; and same-day delivery, which is Shipt. They not only offer the quickest fulfillment at the lowest cost, their trip drivers that actually deepen guest engagement with Target. And on top of it all, they are the fastest-growing part of our business. This past year, they grew 45%, building on 235% growth in 2020, showing the continued guest appetite for fast and easy shopping.”
Nordstrom (+35.4% Since Close) Sees Tailwinds from Investments in Proprietary Digital Advertising Channel: “We believe we have a meaningful opportunity to improve both the customer experience and our financial outcomes.. When you look at our digital business, it's large. It's a big chunk of our business and gets a lot of traffic. It is one of the key attributes that allow us to be the software partner for a lot of up-and-coming brands, especially digitally native brands that we can expose their brands to a lot of people that wouldn't see them otherwise. We think that's going to continue and grow quite a bit more. So we're focused on our technology platform to enable more ways to bring product to our customers and support different models. So I feel confident you'll continue to see that area grow for us.”
Chicos (+6.4% Since Close) Sees Strength in Social Storytelling, Negating COVID Headwinds: “And finally, our enhanced marketing drove both digital and store traffic as well as new customers to our brands. We further elevated our marketing efforts, allocating more resources to digital storytelling, influencers and other social efforts, fueling total customer count growth of 17% over last year. We began our turnaround in 2019 and have made significant progress, despite COVID and supply chain challenges and have emerged a stronger, more focused company.”
Abercrombie & Fitch (and Many Others) See Digital Shopping and In-Store Shopping as Complementary, Not Cannibalizing: “While there is no finish line, we have reached a pivotal moment for our company and our brands. We have exited our stabilization phase and are now on a path of growth with a continued focus on the omnichannel brand experience, which includes both stores and digital… Ultimately, we believe that stores and digital are complementary brand experiences and that there is the opportunity to further increase digital sales even as we introduce more store locations.”
“As we continue investing upstream from our stores, we're also innovating downstream with sortation centers to accelerate our last-mile capabilities. These centers help us further scale our stores-as-hub strategy and create room for future growth.”
“This capability isn't something we built overnight. It's the result of many strategic decisions we've made over time, working together in a model that's unique to Target. It works hand in glove with our stores-as-hub strategy. It leans on technology we acquired and further developed through Grand Junction and Deliv to optimize the most efficient route for every package. And it's unlocked by integrating Shipt's delivery capability into our last-mile operation. Our sortation center expansion will add meaningful speed and efficiency to our fulfillment capabilities so we can field continued growth for the long term. Our Minneapolis pilot shows how sortation centers will make stores even more efficient as fulfillment hubs and allow us to roll out a next-day delivery capability at scale. We started to expand this concept into other densely populated markets. By the end of next month, we'll have 5 more centers up and running from Dallas to Philadelphia with another 5 planned in additional metro areas later this year.”
“Last week, we completed the rollout of our $1.25 price point initiative to every Dollar Tree store across the U.S., more than 7,800-plus stores… We have been considering this move for some time. In recent years, we have lost many items that are customer favorites and key traffic-driving consumable products from our assortment due to the constraints of the $1 price point. Additionally, we have been operating through a higher cost environment as it relates to inflation, tariffs, supply chain and labor costs. The new $1.25 price point enhances our ability to materially expand our assortments, introduce new products and sizes and provide families with more of their daily essentials at a great value.”
Dollar Tree Going Beyond the $0.25 Increase, Expands $3 and $5 Assortments: “We continue to have terrific performance on other key strategic initiatives, including the expansion of our $3 and $5-plus assortments to another 1,500 Dollar Tree stores… We're going to continue to grow another large amount of stores the following year. And then we're also at Dollar Tree Plus items at the $3 and $5, we're planning for and looking to expand it in 2023, so not only grow the store count but expand the assortment and depth inside the store. So that will enable continuous comp growth year-over-year as we move forward.”
“For Q4 product revenue, we anticipated holiday season headwinds. However, we did see a slower-than-expected return to normal consumption in January. We also introduced platform enhancements that improved efficiency higher than expected, which lowered credit consumption. Our increased net revenue retention rate of 178% includes 15 new $1 million customers and reflects durable growth among our largest customers. Similar to last quarter, 6 of our top 10 customers' product revenue grew faster than the company overall.”
“As we have mentioned before, certain product improvements create a revenue headwind for our business. We undertake these initiatives because they benefit our customers and expand our long-term market opportunity. Last year, we called it improvements in storage compression that reduced storage costs for our customers. Similarly, phased throughout this year, we are rolling out platform improvements within our cloud deployments. No 2 customers are the same, but our initial testing has shown performance improvements ranging on average from 10% to 20%. We have assumed an approximately $97 million revenue impact in our full year forecast, but there is still uncertainty around the full impact these improvements can have. While these efforts negatively impact our revenue in the near term, over time, they lead customers to deploy more workloads to Snowflake due to the improved economics.”
“Every company is going through a digital transformation. And that transformation starts and ends with their customers. That's what drove our incredible performance in every region this quarter, 23% in the Americas, 38% in EMEA and 20% in APAC. We continue to see tremendous demand from our customers across the entire Customer 360 portfolio. Companies like KPMG and Scotiabank are using Sales Cloud to build digitally native sales teams with brand-new products like revenue intelligence and our new Slack integrations.”
“And I'm happy to say that Slack continues to exceed our expectations in every way as every company in the world build the digital headquarters for this next generation of work that Marc was just talking about. With key wins at companies like Carvana and Netflix, the number of customers spending $100,000 annually with Slack increased by 46% year-over-year. Marc and I could not be more pleased with how the Slack integration is going, and that remains our top priority as a management team. That's why, as we said at our Investor Day, we don't have any plans for material M&A in the near term. Slack is our focus. It's been so great to hear Slack come up in almost every one of those hundreds of customer conversations I had this quarter. PayPal is a great example from the quarter. We've had a long relationship with Dan Schulman and the PayPal team who use Customer 360 across both their B2B and their B2C businesses. This quarter, PayPal expanded their use of Slack, using new capabilities like Slack Huddles where thousands of real-time audio calls every week, and Slack Chat bots to respond to employee questions, log IT tickets and more.”
“In 2022, we see significant opportunities for Nuvaxovid due to the ongoing urgent need for vaccines globally. These include a global vaccination rate of only 56%, clearly, we have not yet met the WHO goal of 70% global vaccination. Waning immunity over time after vaccination, the continued rise of variance and pent-up demand for additional vaccine options, especially a protein-based option, all of these factors contribute to the urgency of bringing our vaccine to the market.”
“Just to reiterate, we're going full blast for our EUA [Emergency Use Authorization].”
“The fourth quarter of 2021 saw AMC putting up on the board significant milestones of progress sending a crystal-clear message to one and all that AMC is moving well along the path to recovery. For the first time in the 2 years since COVID-19 descended upon us all in early 2020, in the fourth quarter of 2021, AMC achieved positive EBITDA, and we generated positive operating cash flow. And this is not a situation where we only narrowly achieved these important markers. Our positive EBITDA in the quarter was almost $160 million, up a breathtaking $487 million over the fourth quarter of a year ago.”
2022 Theatrical Releases Pipeline: “Looking to 2022, the 2022 film slate is expected to be significantly stronger than 2021's, with Warner's THE BATMAN opening later this week, for which advanced bookings are very strong. The second quarter slate also includes Marvel's Dr. Strange, Universal's JURASSIC WORLD DOMINION. Paramount and Tom Cruise are blessing us with the long-awaited TOP GUN: MAVERICK and then there's Picture's LIGHTYEAR. Later in the year, we have titles such as Minions, The Rise of Groot, Thor, Love and Thunder. And I fully expect Disney literally to dazzle us both with Marvel's BLACK PANTHER WAKANDA FOREVER and James Cameron's AVATAR 2, the sequel to, in inflation-adjusted dollars, the single highest-grossing movie of all time.”
CEO Adam Aron Challenges the “Conventional Wisdom” Against AMC: “There is so much conventional wisdom floating around that movie theaters cannot coexist and cannot thrive in a world of streaming. What a load of cra—cow dung. There, I cleaned that up nicely. What a load of cow dung... The problem with conventional wisdom is that conventional wisdom is so often just utterly wrong. Remember the breathless reporting that AMC would file for bankruptcy in 2020. Wrong. Remember that otherwise highly respected experts were calling for the AMC share price to fall to $2, $1 or even $0.01 by February or March of 2022. Now for all the lawyers listening in, I'm making no prognosis for the future. I'm looking only retrospectively, but those experts gravely underestimated AMC. And with the full benefit of hindsight, we can now happily say because now it's a simple matter of fact: They were wrong, they were wrong, they were wrong.”
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