The Best One Yet - Abercrombie’s worst day in 20 years, iRobot’s new launch, and SoFi’s stadium move

Episode Date: May 30, 2019

iRobot just unveiled two high-tech robot floor cleaners, but its expansion to non-cleaning things is TBD. Abercrombie & Fitch just axed 3 high-profile flagship stores -- But its stock’s worst day in 2 decades gave us a key insight on retail. And SoFi is raising $500M to expand beyond student loans (and maybe even name a stadium after itself).Learn more about your ad choices. Visit podcastchoices.com/adchoices Hosted on Acast. See acast.com/privacy for more information.

This is Nick. This is Jack. This is snacks. Daily, it is Thursday. May 30th. We got the best one yet. We're feeling really good about this one. Markets?

Dipped. Again. Again. Same reason. Three wonderful stories we got here. It's actually kind of a random mix. This is like the Uber pool crew. Yes.

You don't know them all, but three random stories. Somehow they're all together in this little love vaccine. Here's where we all ended up. And who is in the driver's seat chair? First story is Abercrombie and Fitch. It suffered its worst day in 20 years. The last time. the stock dropped this much, I was actually wearing Abercrombie.

Wow. Second story is I-Robot. Incredibly uninteresting name. Very true. Very interesting company. It just unveiled two new robots. What's it even seen a bot and a robot? Just nickname?

No idea. Let's just figure it out. Third and final story is our unicorn of the day. So-fi. Sounds like the name of a gentrifying neighborhood. But it's actually a fintech unicorn that just raised $500 million. And it might get its name on a fancy new stadium in Los Angeles. Before we get into those, we got excited about a T.

Press release that we thought clarified whether you can take CBD on an airplane. People ask us this all the time because we're covering, you know, that's the part of cannabis that is not going to like... It's the stuff you rub and it. It just makes you feel good. It's in just about everything right now. The answer from the TSA was an unambiguous, maybe. Incredibly unhelpful.

But while we're on the TSA website, we learned that $960,000 were left behind at TSA checkpoints last year. Let that sink in. That's when you're going through security. You happen to drop some pocket change. next thing you know, boom, they're like yelling at you that your, you know, water bottle doesn't work. But they're not yelling at you that your money's left behind. Nope.

They're collecting that. Now, that's up 11% last year. And the airport that left the most money behind was JFK. Very true. But we were kind of curious about Atlanta. Atlanta has the most travelers. So we checked to see where they would be on the top 10 list. They weren't on the top 10 list.

So the most changes left at JFK. So this is making us wonder a little bit here. Are the people of Atlanta just very protective of their money and quite diligent? Or are the TSA agents in Atlanta enjoying a little pocket change? There'll be a little sticky and not forfeiting this money to the official press release. We're going to air on the side of humanity's great, and we just assume that the people that Atlanta are good with their change. Well, in the meantime, before we get these three stories, listen to these people. You're tuned in the snacks daily.

We spoke to the lawyers and we got to get something illegal out the way. The snacks are about to hear ain't food. It's air candy. They don't reflect the views that around. The livelihood family. It's all informational just so. You know, we're not recommending any securities. Nope.

It's not a research report or investment advice. Not an offer or sale of a security. Right. Snacks is digestible. Business news for you. Robahood Financial, LLC, member FINRA slash SIPC. For our first story, Jack, draw yourself an extra ab over there. Abercrombie and Fitch just had its worst day in 20 years.

The stock fell by 27%. That's almost 30%. Wow. It's a large number. Ouch. Now, by the way, go to middle school Abercrombie situation again? Abercrombie polo shirt. Get it a little too small.

I know what you mean. Words of advice for the 13-year-old boys out there. Face-sized moose logo on that thing. One size too small. Your arms look huge for these things. I'd like zip off khaki pants to short situation because, you know, the weather changes suddenly. Yes, you need to wear shorts. You don't know where those breezes are coming out.

Or put the pants off. Exactly. You don't want to suffer. So, shocker, Abercrombie has been in turnaround mode for a while. Right. They've been trying to change the stores. they're doing like less cologne, fewer models outside half naked. Brighter lights.

Right? Because it was kind of creepy with those dim lights. Smaller logos. What's the theme here? Well, like Victoria's Secret, they're sort of desexualizing their stores. Right. Teenagers may not love that, but it's kind of got to happen. So sales last quarter for Abercrombie and Fitch, they only rose by 1%. And then here's kind of the strange kicker is they're like, hey, our Hollister brand, which is like California surfer.

Yeah, exactly. That's our savior. But Hollister, like, sales barely budged. Yeah, it's a pretty modest savior. It's like a, not a silver lining. It's a bronze lining with Hollister. Seals and Hollister only up like 2%. But the sad thing really was that they're closing 40 stores, which is a really big number.

Not just 40 stores, though. This is what really fascinated us over its next. They're closing three flagship stores based in New York City, Milan, Italy, and Tokyo, Japan. We're talking flagships, which no one really knows what that means, but it's basically like a big store in a big city. According to my tour guide at the Intrepid Museum in New York, flagship is actually a naval term. The ship within a fleet that's carrying the commanding officer. Can you use that in a sentence?

I guess you just did. The goal of a flagship story, it's not necessarily to generate enough sales like in the store to make a profit. No, it's really focused on marketing. It's about discovery. Right. Tourists who are in New York, they're going to check it out on Fifth Avenue. You're like, boom, what's that smell? Oh, wait, that's O'D-Dub at Bé, and then I'm going to go in and check it out.

So it's a signal about how the business is going that they're shutting down these three flagship stores. Right, because this is not going to be cheap to shut down these stores. Surprisingly, you'd think they'd save money closing down a flagship store? It's actually going to cost money to break the long-term leases that they're holding. We're talking $45 million to shut down these three stores. Long-term, I'm sure it's going to save money, though. Now, you're probably wondering why these wonderful flagship stores lost their mojo. Yes, product discovery isn't happening on Fifth Avenue in New York anymore.

Exactly. Where's it happening? It happens for the teens on Instagram and Snapchat. You don't need to be wound by some giant store anymore because it's on your face in your phone. It's not worth paying those bills. So, Jack, what's the takeaway for our pop color buddies over to average? If you want to succeed in brick and mortar retail, which we do. You got two options. This is a snacks original here. We've noticed there are two types of stores out there in brick and mortar retail. Option number one that's succeeding is smaller locations. Exactly. We're talking like how Target just launched these urban city center stores that are smaller for us, our generation. IKEA did the same thing because they know you might not have like a huge vehicle to park at your suburban home. Can't schlep out to the suburbs just to get a couch. So smaller locations are more nimble. And then the second one. Ones that are driven by experiences.

Exactly. We're talking like how all birds, the shoe, direct consumer shoe company, has a store in Soho with a hamster wheel that you walk on to actually experience the shoes. Yeah, you don't want to test out the shoes on a treadmill. Yeah, we want to try that out on a real life human hamster wheel. I want to show people I did something cool. And then Casper mattresses, they've got like a whole nap and. store situation. I took a nap at a Casper store. And he just woke up from this thing. So it's got to fall into one of

those two keys. Smaller locations or an experiential location. For our second story, I-Robot just unveiled a new, kind of adorable, tandem cleaning robot thing. The company is called I-Robot. Can we talk about that for a second? It's a robot company with a lowercase eye at the phone. It sounds like a knockoff of an iPad from 20 years ago. By the way, Will Smith? Will Smith movie. I-Robot. True. It's a movie and it's a public publicly traded robot companies, which we don't see a lot of. So that's why it's so fascinating to us, because you don't get many consumer-facing robot companies. And you don't get many publicly traded robot companies. It's a very small overlap in that Venn diagram. Oh, I love a good Venn diagram. We got one

right here. Are you ready for the new products? Can you talk to me? Okay, the Rumba S9 Plus and the Brava Jet M6. Captain Infomercial over here. What else we got? Two for the price of one? Billy Mays here. That's two machines that does three tasks for you. Vacuuming, mopping, and dusting. The kitchen floor. Now, there are some other highlights here that they showed off. Like, their new S9 Plus, worst name ever, does like 40 times the amount of suction as their old model, which just sounds dangerous, that amount of suction power. Or it sounds like their last model was terrible.

They also have what we're calling the docking dumpster. No, we're just giving away this stuff right there. A little dock you put in the corner, and the little Rumba machine goes up to it and like unloads its dirt and dust payload so that you only have to empty it once every one. Sounds helpful? So the reason we also wanted to focus on this company is that I-Robot is a perfect example of an immediate addressable market. That's what the company is talking about in their investor reports. It's a complicated term, immediate and addressable market.

Can we break it down to that? It means that's the opportunity for growth. This is the amount of potential customers who fit its customer profile. Right. Technically, the whole market for this company is anyone who has a floor. Anybody with a floor could buy a Rumba. But the immediate addressable market are the customers who have a floor and fit there. kind of ideal customer profile. It probably means you're a homeowner and you care about cleanliness

and you have a little bit of extra money. And you know how to handle like a robot every now. So 14 million American households have these Rumba machines. That's about 11% of American households. Right. And the immediate addressable market is 25 million more households. So that means these are households where it thinks that's their target, target demographics. So it could triple sales if it executes and sells to these new homes. Which is a beautiful situation. On the other hand, And it could face some issues because of its big risk that it's made in China. So, as trade war risk in case tariffs hit, and China is making knockoff cheaper versions of this. So cheaper I-Robots because how much is it talked about?

Yeah, talk to me. It costs $2,200. Not a cheap robot. I-Robot is a high-priced robot. Most expensive thing on the wedding registry, Jack? Do not go off registry. I do not need a Rumba. We're going to crowdsworth one for Jack.

So, Jack, what's the takeaway for our buddies over at I-Robot? Is this just a house cleaning stock or is it a robotic stock? Right, because technically it could be limited to just like the vacuum cleaner market. And that's not that exciting. But the robotics market, that sounds incredible. No, there's a lot going on there. The future. Robots doing stuff in the household for us and you can actually buy the stock?

So can the company apply its robotics to other manual tasks that humans don't like to do? There are three steps ahead of you on the infomercial. They're already like rolling out a lawnmower, right? Yeah, it's called the Rumba Terra. It's not ready yet, but self-driving rumba-style lawnmower. We're thinking then what's next? Like delivery bots, drones, a machine that can take out the trash. A machine that can shovel your driveway.

If it can expand to these areas, then that's real potential. And that expands the immediate addressable market. For our third and final story, we've got a good one to unpack here. Social Finance, aka SoFi, is the fintech firm that just raised $500 million. But its valuation did not change. We're going to unpack this one. Can we start at the top here, Jack? What is SOFI exactly?

SoFi is a student loan startup disruptor worth $4.3 billion. You may have noticed them during the NBA playoffs this year because they're like sponsoring the whole thing. Or you may have noticed them because they've refinanced your student loan. So you have a little more of an intimate connection. But the NBA playoffs thing brings us to the first angle of this story. I like where this one's going. It is trying to get a stadium named after it.

We're talking about, not just any stadium. They're swinging big for the fences. An NFL stadium. Not just NFL stadium. Not just that. Keep going. The Los Angeles Rams, which is a huge market. Now, in case you're running the price to stick your name up on a stadium, you're going to have to put together some funds.

This will cost about $20 million each year for 20 years. Now, that sounded like a little less than we expected. We didn't know if that was a lot or a little. No, we didn't. We compared it, though, to MetLife Stadium in New York, which has two NFL teams, the Giants and the Jets. Right. And it's actually a little bit. bit more than MetLife, which costs 17 to 20 million per year.

Right. So in terms of SOFI sponsoring this Los Angeles Ram Stadium, it's a pretty big marketing spend to the point where their chief of marketing actually left because she wasn't really into the edge. She wasn't on board with this plan, even though the fans in the seats are going to see SOFI and the people watching on TV are going to be self-file. So this kind of leads in, and you'll see how to the second element of the big news out of SoFi, which was its big new fundraise.

Yep. It issued new shares to new investors. and raised $500 million. But that key here is that the valuation of the company stayed flat. Exactly. When we talk about unicorns on Snacks Daily that are doing new fundraising rounds, they typically raise new money and are valued at a higher valuation. We know exactly what you're thinking.

You raise new money because you've gained traction, investors want a piece of your potential and your valuation has grown. But that's not always the case. Bigger numbers yielding bigger numbers. In this case, investors think, hey, we're ready to help you keep growing. but we're not convinced you're worth more than two years ago. Now, sometimes you can even have a down round where the valuation goes down when you do a fundraise. Now, this wasn't a down round.

The valuation of $4.3 billion is about flat from two years ago, but it wasn't an upround either. And that's a key distinction. And if you're wondering why one of the keys is related to that CMO, the chief marketing officer who left, there have been a lot of internal challenges at SOFI. The co-founding CEO was forced to step down last year because of a lawsuit about harassment in the office. So what did this new fundraise show? It's that there's confidence in the new CEO, but we still need to be convinced before giving you a higher valuation. Exactly.

We want to see more traction with the actual business. So Jack, what's the takeaway for our buddies over at SoFi? Sofi strategy was start niche, win loyalty, and then expand. This is a fascinating strategy. You start focused on one specific area. Student loans. That was it. And then have you build out loyalty and people are committed to you, then you start launching

some new products they may want to use. Wealth management, invests. It's investing in all sorts of new personal finance things. Before you know it, the whole company isn't just a student loan company. It's a personal finance company. So if SOFi can help bail you out and reduce your interest payments on student loans, you might start to love it and use it for other things. And we've seen this model in other places.

We have build loyalty and then expand. Harry's razors, for example. Used to just be razors. Now I got like the skincare product all over my face. You got lotion on your face. You got shaving cream. You got face wash. Casper mattresses?

Used to just be mattresses. Now you got like the Casper sheets. You got the Casper betting, you got the pillows, the pillow pillows. Used to just be like suitcases? Now it's everything you need for travel. That's the strategy. Get loyalty, then grow out. Jack, can you whip up the takeaways over there first?

Abercrombie and Fitch is killing expensive flagship stores to adjust to new retail. If you have to ask about how much the flagship cost, you can't afford it. I robot. It's definitely a vacuum company. We think? But is it a robotics company? It's got to figure that one out. It's got like an existential thing going on.

And so far I started with just student loans. Now it's got $500 million of fresh cash to expand to other personal finances. And maybe a stadium or two. Throw your name up on there. Now, time for our snack fact of the day. This one sent in by a snack listener's dad, who's now a snack listener. A snack master. Peter Patron of Kanakitag, Rhode Island.

Let's go with that. It sounds perfect. So, as a native New Englander, I love this one. Rhode Island is the smallest state in the union. 37 miles by 48 miles. But, very polygonal. It's, it is. By the way, Providence may be the greatest city in America.

But it has 400 plus miles of coastline. Let that sink in for a second. More coastline than like humans. It's 37 by 48 miles, but 400 miles of coastline. Rhode Island, keep doing what you're doing. Great clam cakes. And if you're not eating on College Hill, then you're missing out. Couple other stories on the Snacks Daily Newsletter.

Apple Pay is available on New York City Subways to like use. Kind of sad maybe the end of the Metro Cards. Don't swipe your card. Just use your Apple Watch. So much easier that way, I guess. But again, Metro Cards. Everyone, we love to have any on the pot with us. We will talk to you tomorrow as always.

Love that point. The Robin Hood Snacks podcast you just heard reflects the opinions of only the hosts who are associated persons of Robin Hood Financial LLC and does not reflect the views of Robin Hood Markets, Inc, or any of its subsidiaries or affiliates. The podcast is for informational purposes only and is not intended to serve as a recommendation to buy or sell any security and is not an offer or sale of a security.

The podcast is also not a research report and is not intended to serve as the basis of any investment decision. Robin Hood Financial LLC, member FINRA, SIPC.