The Best One Yet - Aerie bralettes save American Eagle, Juul’s flavored e-cigs banned in Michigan, and Google’s $170M fine

Episode Date: September 5, 2019

While American Eagles sales suffer, its Aerie lingerie brand is thriving — and it’s a perfect example of spinoff brands. Michigan became the first state to ban flavored e-cigarettes, just as Juul came out with “the strictest age verification system ever.” And Google was hit with a $170M fine that highlights the difference in targeted and non-targeted ads.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. September 5th. What are we thinking about this? Well, we're talking about Browlitz. We're talking about YouTube kids. And we're talking about a ban of e-cigarettes. Jack, this is the best snacks daily we've ever done. Yesterday's was not nearly as good. What's going to go into a little bit? Can I go into a little more depth on those three topics? Can you please share with us a little more? American Eagle stock failed by 14%. It needs some CBD right now. Jack, good thing. They're going to start selling CBD in like a month. Now, apparently the only thing successful about its back-to-to-school season? One word. Brailts. The brawets. The bra's response to the box. Second story. Google has to pay the FTC $170 million in a fine. And guess what is the number one thing that kids watch these days? Jack, I'm going to go with what is YouTube. Correct. Third and final story, Michigan just banned flavored e-cigrats.

So we're looking at what Jewel did and didn't do. P.S., the Michigan band starts in 30 days. Get ready. Now, Snackers, we are leaving D.C. We're packed up. Jack's got his like travel hat on. It was like a 36-hour trip. It's an adorable hat. Now, I went for a run yesterday morning on the national mall. Been there. It's not a shopping mall for the record. But it is way bigger than expected. This is like Central Park's lanky cousin. I thought I was going to hit up the Capitol building, the Washington Monument, and the Lincoln Memorial.

Good luck. You had to pace yourself and train for six weeks if you want to hit those on a national mall run. Yeah, I was impressed by the Capitol, disappointed in my body. But what they really need, they need those like marathon people, you know, like the nice older people who volunteer and hand out paper cups with water. Yeah, like the Seinfeld episode where Cosmo Kramer has the hot chocolate? See, get some of those people out on the national mall at like 7 a.m. during runtime. Also, great thing about Washington, D.C., the lowish prices. Shocked at that $4.5 falafel bowl we got for lunch.

The $4.5 falafel ball was cheap, but it also had secret sauce. Who wants secret sauce these days? You can't, I want transparent sauce. I want to know the quarry my sodium came from. I let Freedom of Information Act on that ingredient list. Snackers, we'd a great time of D.C., awesome town, and we hit those burger places you guys showed with us. You're tuned in the snacks daily. We spoke to the lawyers and we got to get something legal out the way. The snacks about the hair ain't food is air candy. They don't reflect the views of the Robin Hood family. It's all informational just so.

You know, we're not recommending any securities. It's not a research report or investment advice. Not an offer or sale of a security. Snacks is digestible. Business news for you. Robberhood Financial, LLC, member FINRA slash SIPC. For our first story, Jack, unpopular, American Eagle just got hammered.

The stock is down. But we're not really going to talk about American Eagle. No, we're going to talk about another brand. By the way, this is not your, like, teenage views American Eagle. I know of American Eagle as teen and 20-something. Right, like some hemp necklace that's tight against your neck. I was thinking a Henley with, like, extra buttons. Not the case anymore.

This is the American Eagle that's, like, starting to sell CBD starting in July. Bold moves. I'm not sure how many mobs are going to sign off in this. Now, American Eagle sells fell by 1% last quarter. Let that sink in. This is a brand that should be growing. It is contracting. And it actually didn't even make any excuses.

It did blame back-to-school season. Yeah, it said the last couple weeks in July were not great. They did not perform well and people are just not buying their back-to-school clothes. But let's put American Eagle aside for a second and let's talk about American Eagle's lingerie brand, Airy, which is a separate brand. But it's owned by American Eagle. Sales of that brand jumped by 16% last quarter. 16% and this is a brand that's like committed to brawits, which are like the boxers of the brawerell world. Yes.

A lot more space, a lot more room, a lot more comfortable. Arguably just as stylish. Now it was the 19th straight quarter. of double-digit sales growth for Eric. Can we convert the math on that? It's like four in some odd years, right? Yeah, and if you compound that interest, it's pretty darn big. That sounds fancy.

Now, Brawits, they even went as far as to say that they got, quote, unquote, renewed excitement at American Eagle because of what Aries did. That was the highlight of the earnings report. But we went straight to the website for ARI. What's happening here? Get this sale right now. Talk to me. All undies are $10 for $35, $350 each.

Now, here's the thing about ARI that Jack and I found fascinating. This is basically the future brand of American Eagle because it's actually walking the walk on inclusion when you see what they're marketing and what they're actually selling. If you search Airy on Google, you see a slogan, bras, undies, and swimsuits for every girl. Yeah, and that's like a dime a dozen.

You're seeing a bunch of brands do that. But we dope deeper and we found out they're actually doing these kind of things. They have a Photoshop free pledge in all of their advertising and all of their models. They've got adaptive clothing, which is a new smaller trend for disabled people to actually have clothing that works and fits for them

that very few brands are actually doing. If you've been listening to snacks, you know that Victoria's Secret parent company, L brands, is struggling hard because the over-sexualized nature of Victoria's Secret is just out of touch. Turns out, ARI is taking market share directly from Victoria's Secret. It's a one-on-on-train-off. The next challenge, moving beyond underwear into other things, like leggings. Right, like maybe they go into athleisure after this. But they're also trying to open 40 standalone ARIs stores, not just little corners of the American Eagle, Aries stores. Not pop-up.

So, Jack, what's the takeaway? for our buddies brawletting over at Airy. This is the benefit of American Eagle owning multiple brands. This is the student becomes a master situation. American Eagle is struggling. Airy is booming. We've seen this a bunch of times in fashion where the spin-off brands start to usurp their parents.

Jack made well, outperforming its parent company, Jay Crewe. Urban Outfitters is the parent company of anthropology. Anthropology is winning that race. And then Gap had to actually spin off Old Navy because Old Navy was licking it looked so bad. True. True. Old Navy is soon to become its own publicly traded company. Now, the benefit of these spin-off brands is they can, like, try out new things, catch trends, and, like, make some errors along the way.

It's okay. And that will save the parent company from becoming too old and obsolete because the kid is cooler. For our second story, Google was just fine to cool $170 million, and it's a wake-up call to what kids are, like, actually watching these days, which I had no idea about. Let's get back to the fine. Can you talk to me? It's from the FTC, right in our backyard in Washington, D.C. Very nice. Hi, FTC.

They said in their statement that YouTube, which is owned by Alphabet, illegally collected personal information from children without their parents' consent. This sounds damning. It was broke the table over there. The dramatics were my emphasis. My microphone is like scared. I won't even talk to it. Now, what does the law say? Law says you can't do that.

No, no. Can't do that. We're talking specifically the Children's Online Privacy Protection Act, aka the old C-O-PPA, Kappa, actually, which says if, viewers are under the age of 13, it requires parental consent to collect data about their internet use. Now, we know what you're probably thinking. Google, like, it's not like the kids signed in, so like how does Google even know who's watching these things? Yeah, well, they know who's watching because the video was on YouTube kids, like a separate part of the website. Which Google's calling the quote-unquote new Saturday morning cartoons except it's 24 freaking seven. Yeah, it's not Nickelodeon

and Looney Tunes. It's YouTube kids. Kicked up six notches. By the way, YouTube has been unanimously voted the favorite website of kids. kids two through 12. YouTube is the favorite website of kids two through 12. Websites didn't exist when Jack and I were kids. YouTube actually uses that marketing language itself, which the FTC mentioned. Yeah, this is a tough one for Nickelodeon to hear. By the way, the record fine that the FTC is calling this, it's only record if you look at the very specific crime that was broken. Right. Now, we know you heard the headline number here, 170 million. We've got to break this down with some context, because otherwise you're hearing fines here, you're hearing fines, everyone's getting fined these days.

Yeah. Okay, the FTC also find Facebook. earlier this summer for $5 billion. $5 billion is a lot of order of magnitude different than $170 million. So for Alphabet, the parent company of YouTube, $170 million is 0.05% of its quarterly revenues. And in case we didn't emphasize just there how small that number is, they make that much money in 37 hours. Yeah.

Pretty quick. Pretty quick. Pretty quick. The FTC also decided on that number because they calculated that is the extra revenue they made in ad sales because they illegally targeted kids using their data. This is like a straight up classic eye for an eye situation. You got $170 million from basically messing with kids data and now you have to pay it back. So it's like if you stole a car, the penalty is just give the car back. Right. Just please don't do it again. Really not much of a penalty here. Also, Google has to commit in the

future to label kids videos and promise not to do any targeted ads on any videos labeled kid stuff. Just don't steal cars anymore and we're all cool over here, right? So, Jack, what is the takeaway for our buddies over at Google? This case shows us the exact value of targeted versus non-targeted ads. And it's a huge difference because YouTube attracts videos kids watched using a little thing called cookies. Little cookies. Dadorable. Now, it uses the data from the cookies to target kids with tailored ads just for them.

Example here. Little Junior pops up, opens up the laptop, maybe an iPad and says, hey, I'm going to watch Cookie Monster. Boom, little junior is getting hit with Nabisco ads like 10 minutes later. Exactly. That is a targeted Nabisco ad because of Cookie Monster. And targeting ads are way more valuable than blind ads that aren't specifically giving to you what you've been watching. So newspapers have blind ads. It's an ad that everybody's going to see no matter who buys it. It doesn't matter. That cookie ad is seen by someone who is gluten free and someone who's gluten full. Yeah. Newspapers aren't doing too well. And the tech companies, Facebook, Google, YouTube, and others, they have the targeted ads.

They're making all the money. That's how you make money and advertising. For our third and final story, Jewel just came out with a way to stop underage sales. But it's too late because Michigan just became the first state to ban flavored e-cigarettes. Jack, I think it's time for your fun Michigan. You're ready for a jack-fack to the day? Snack fact is early. I went to Michigan for B-School and public policy school.

The state of Michigan is actually shaped like a Mitt. Maybe you've seen it. And that is how Mitt Romney was named. By the way. Because Mitt Romney's dad was the governor of Michigan. Upper Peninsula, we still respect who you're part of the. that mint. The Upers. Now, the context here is Jewel. Jewel became a sensation and a $38 billion company by marketing flavored e-cigarettes, basically on Instagram and Snapchat.

Yeah, J.Cruh meets Telitubbies. It was fun and colorful and full of LaCroix-worthy names like Mango. Right. This was like they came up with a collaboration with Jamba Juice to pump out these vaping cigarettes. Now, non-Juel companies are just as brazen, if not worse. They're flavoring their cigarettes, bubble gum or fruit loops? Incredible. Next up are gushers or Dunker Now, Jewel has ended those ads because they were particularly damning flavors. Yes, and it was just a bad look. But yesterday, the governor of Michigan, Gretchen Whitmer, banned flavored e-cigarettes-like, period. So the only e-ciggs you can get in Michigan are tobacco flavor.

Boring, not the kind of type that's more like a dessert situation. Surprising that the first flavored e-cigrat ban came from Michigan. Normally, activist moves like this are from New York or California. And this is just after Texas decided to ban unwanted nude pics, which was something that was lobbied for by the female dating app Bumble. Bumble is actually based in Austin, Texas, and states are taking action to ban stuff that don't want. So the fact that Michigan went out of its way to ban flavored e-cigarettes, not a good sign

for the e-cigarettes. It's a sign that mainstream e-cigarettes are in trouble. Now, the root problem here, kids are vaping at a level that has been unexpectedly high. The FDA calls this a kids vaping epidemic. 21% of high schools, like one out of every five, and five percent of middle schoolers are vaping between history and English class. Thanks for that five, one out of five translation. There is a cool table, and if you're not vaping, apparently you're not in.

The Wall Street Journal is doing this freak out deep dive. It's happening in bathrooms. It's happening in classrooms. Regina George is making them do it. So, Jules' stated mission is to get adult real cigarette smokers to switch to the safer e-cigarettes. But the reality is it's become a kid's epidemic. By the way, theme of today's pot apparently, like what's going on with the kids today? They're watching like Cookie Monster YouTube videos, buying way too many brawets.

They're vaping. And they're vaping. Yeah. So, Jack, what's the takeaway for our buddies over at Jewell? If the e-sig industry had self-regulated itself. Six times fast. This ban wouldn't have happened. Now, that's just what Jewel did last week.

It tried to regulate itself with something called RACs, retail access control standards. This is the strictest age verification system ever. According to Jewel. Self-proclaimed. And they launched a point-of-sale system. So if you actually tried to buy some Jewel vaping cigarettes. You've got to show your ID. And their ID is going to really make sure.

it's legit, and then they're going to check to see if you actually bought any Jules lately. Right. So they're going to make sure that you're not some 21-year-old older brother who's hooking up his younger brother and all of his friends with the Dunkeroo-flavored E-Sys. So Jules saying, hey, we want every retailer to comply with this by 2021. That's how strict they're being. Here's the issue, though. Looks like it was too little too late because states like Michigan are taking action now. If they'd self-regulate it, maybe they could have avoided it. Jack, can you whip up the takeaways for us over there? American Eagle style is a bit out of touch, and its stock is way down after poor back-to-school sales.

But its airy underwear brand is saving it just like many a spin-off before it. Google is promising to never target kids again with tailored ads unless the parents agree first. Which highlights how powerful tailored ads are. Third and final story was Jewel. It's had to deal with a ban on flavored e-sig starting in Michigan because it didn't self-regulate fast enough. By the way, fun early snack fact, Jewel is a private company, but Altria, which is public and a cigarette company owns about a third of it. Now, time for our actual snack. fact of the day. This one's about Peloton. And this one got sent in by a Xander No. Peloton is IPOing later

this year. Turns out Peloton means something. In French, it's an old word that used to mean Platoon. Exactly. And in English, it means a bunch of riders who are in a pack, conserving energy as they like pump their wheels together on bikes. It's like a bicycling term because, you know, the Tour de France and everything. Yeah, you see them like on the road. So it's when bike riders like gather together to conserve wind resistance. Right. Fun snack back. Jack and I are actually like got the microphones right up against each other over here so we can make sure the air is flowing perfectly as we record. The most efficient snacks pod ever. That's how we get the snacks pods done in 15 minutes. Also a snack back. Snackers, we loved snacking with you today. We'll be back tomorrow morning.

Let's do it. DC, you were great. We can't wait to return. Oh, true. We actually got some great burger recommendations from snackers. True. We ended up going to BDC Pencorder. Thank you, Duncan David, because that's the only one close enough to our hotel. A lot of people mentioned Lucky Buns, but Penn Quarter was perfect. We'll talk to you tomorrow. I can't wait. 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, 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.