The Best One Yet - “COVID-19 ≠ an Act of God” — Amazon trades profits for PR. Victoria’s Secret’s asterisk. Clorox’s surprising surprise.

Episode Date: May 4, 2020

Amazon shares dropped 8% after CEO Jeff Bezos told the world he’s just not into profits right now. Victoria’s Secret was supposed to be acquired by a private equity firm this week, and it’s all coming down to one dramatic line in legalese. And Clorox’s earnings report didn’t shock us — but its implications on a fad versus a trend did.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. And this is Snacks Daily. Welcome back. It is Monday, May the 4th. I'll tell you, May must have butterflies in its stomach, because the month of May has a tough act to follow. Hey, April, interesting situation.

Thanks for the numbers we should splash up on the fridge, Mom. This was printed in all caps all over the news all weekend. The S&P 500 had their best month since January, 1987. The NASDAQ had its best month since June 2000. The Dow's best month since October. October 202. Investors are feeling optimistic that the economy is returning to a little bit of normalcy. Despite aggressive warning from public health experts not to be so optimistic. So true, we started from the bottom and now we apparently are here. For our first story of the best

one yet, God, you got it in. Amazon has never been in higher demand, and yet its stock dropped 7% after its earnings report. Jeff literally told investors to take a seat before dropping a $4 billion bomb on us all. Jeff is putting PR over profits. Battle of the peas. For our second story, Victoria's Secret signed a deal on February 25th to be acquired by a private equity firm. Kind of been pretty quiet since then. Nothing really going on since February 25th. We'll strap on your wings because we're looking at some legal drama. Someone's asking for a refund on a little Victoria's Secret acquisition. Third and final story, Clorox. This is the countertop cryptonite for COVID-19. World's worst kept.

Secret Snackers, Chlorox sales, shockers, they boomed last quarter. What actually surprised us is that Clorox thinks germophobia isn't just a COVID-19 fact. We're talking behavioral trends in the post-COVID-19 era, which literally sounds like something at a Star Trek. But before we get to those three fantastic stories, wonderful mix. It's the 4th of May. May the 4th. May the 4th be with you. Let's finish the thought on this one.

We are all celebrating Star Wars today because it's May the 4th. But Jack and I want to make sure that we always have our Snackers financial backs. Get this. If you tweet, Instap Post or Snap Post using the hashtag May the 4th, beware. Yeah, that's because technically it may fall under Disney's user agreement legal terms. This is grade A baloney. And that's a contradiction in terms. Our buddies at Disney Plus's legal department tweeted asking fans to share their favorite Star Wars memories. Jack and I were talking to us.

We're thinking the scenes with like the space bar and the weird dudes playing saxophones. Do you do that same song. But then the team over at Disney decided to tweet out, oh, by the way, by sharing your message with us using the hashtag May the 4th, you agree to our use of the message and your account name in all media and our terms of use. What a soul-crushing grade A baloney legal follow-up tweet. Second baloney rub it today. We're going for the hat trick.

Now the Twitter CEO, Jack Dorsey, saw this going on with Disney's handle. He decided to get involved and said, hey, hashtags don't belong to anyone. This is like LeBron James trying to trademark Taco Tuesdays, not happening. Then a law professor weighed in on it and said, technically the relevant terms of service may not even be Disney's. It could be Twitter that owns your May the Four Thoughts. Here's our takeaway for a buddies at Disney. Do these rights extend to the jurisdiction of tattooing?

Doesn't Yoder have the final say here since he controls the outside counsel? Isn't the real crime here Harrison Ford's outfits overall in the first three movies? Someone's going to ask the hardball questions. Does the statute of limitations apply in a long time ago in a galaxy far far away? Bologna. Let's hit our three stories. You're tuned in the snacks daily. We spoke to the lawyers and we got to get some.

Snacks about the hair ain't food. It's air candy. They don't reflect the views of the Robberhood family. It's all informational just so. We're not recommending any securities. 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. Financial LLC. Member Fenbara slash SIPC. For our first story, Amazon is setting records thanks to this crisis. But it's investing all that profit right back into workers. Snackers rule one of working at Amazon. Do not brag, do not gloat, do not boast about the Amazon. Don't even smile in public.

No. Anyone walks by, they got an Amazon shirt on, you pretend you don't know them. Stop calling it a Zoom happy hour. No. Happy is not allowed during the COVID-19. coronavirus. If you're slacking around the office, only slack emojis that are sympathetic and have hearts involved. Snackers, perhaps no business is more essential to the American economy as Amazon right now. And Jack and I had to spend like two days jumping into this earnings report. There was so much in there.

Revenues for the company jump 26% to $76 billion. That is 13 times as much revenue as Netflix. Oh, and how about the stock? It's at a record high. The company's now worth $1.14 trillion with a T. that's trillion dollars. That is 142 lifts. That's right. Amazon is worth 142 times as much as the company left. Call crocodile Dundee. We got ourselves a platinum platypus here. But Amazon didn't want to talk about all that success. No, because it's not the right time to do that. Amazon, look, hey, we've done that. It was impressive. Look at me now, though. 30 bullets in this earnings report were about how it's helping society. It's like the company's running for Oprah. They totally downplayed the whole profit situation and focused on communities.

Ten states can now use food stamps to buy things on Amazon.com. They're handing out, they're donating meals for the homeless and the elderly. They're giving away services to health care workers. Nice stuff, good stuff. For customers, they're prioritizing essential products like Lysol, but making you wait for that spring bikini. Even though we know you're going to dice it down with some Lysol in a few minutes. And then they've got the employees.

Jack, what are they doing for the employees? It's good stuff. They've bought 100 million face masks to make sure that Amazon workers have their face protected and 31 thermometers to make sure people don't have temperatures before entering the warehouse. And they know they care about their health and their wallet, so they're also upping wages by $2 more per hour. Then came the news that bummed investors out. Okay, so for this upcoming quarter, we're talking April through June. Amazon will get this, spend $4 billion of its operating profit on those workers. That's right. Instead of keeping $4 billion as profit, yay, they are spending it on

tests for COVID-19 so that people can actually be sure they don't have the disease before entering the warehouse. Jack, I'm making a motion to add to the snacks process. Whenever we say profit, can we also say, yay? Okay, okay, okay. They're also spending $4 billion on higher wages and more workers. Now, Snackers, we've got a wild stat here. You're going to want to sit down, stand up, and then sit back down. Amazon now has $840,000 employees. Jack, can we put that in some context? For reference, if your first name is Sarah, there are as many Sarahs in this country as there are Amazon employees. 840,000 Sarahs slash Amazonians. Enough said.

So, Jack, what's the takeaway for our buddies named Sarah and the company over at Amazon? Amazon just turned down $4 billion of profits. It's investing that $4 billion in PR instead. Snackers, investors might be angry that Amazon's like missing out an opportunity here to profit during the coronavirus. But imagine what Bernie Sanders and other Amazon hating politicians would say if they're making profit right now. It would be like your pain is Amazon's profit. Boom, they'd put it on a bumper sticker. It would be everywhere. That's why Jeff Bezos said last week right after the earnings report. If you're a shareholder in Amazon, you may want to take a seat because we're not thinking

small. He said take a seat. And then he said long-term shareholders will understand. Profits right now for Amazon could mean a whole presidential debate in October is focused on breaking up Amazon, who's making too much profit during COVID-19. Instead, Bezos hopes this wins over customer love now, and then they can profit when the crisis is over, and then you can get out of your seat. Spending $4 billion on workers instead of profits. But stay in your seat. For our second story, Victoria's Secret just got saved by one single lawyer. It's all in the legal fine print. Now, Snackers, we've told you about what's going on with Victoria's Secret, but the drama goes back to before Giselle Metton. There's two parts of wrongness.

with Victoria's Secret and their business model today. First wrongness we want to focus on, wrong century. Push-up bras are out, comfortable bralets are in. Jack, it's so true, throw it on a t-shirt. We're talking about the fact that they got a CEO's basically living in the 80s, 1880s, not even 1980s. And he's thinking to himself, let's put angel wings on tall, thin, nearly naked bottles and have them walk a catwalk in front of everybody put it on TV nearly nude. Not going to fly anymore.

It doesn't make sense, which leads us to the second part of what's wrong with Victoria's Secret, the wrong leader. His name is Lex Westner. He's a billionaire who sounds like a villain based on that name. He's also close buddies with Jeffrey Epstein, the notorious sex offender. And that's why he lost his job and he's out, but he stuck around Victoria's Secret way too long. So Victoria's Secret parent company, L Brands, which I think is named after Lex, the former CEO.

They're trying to sell Victoria's Secret because they don't think it's salvager. What do we got to do to get you to walk out of here? With a lingerie company. They're like, you buy the bra and they're like, do you, do you, Want the store? Do you want the location? Private equity firm, Sycamore Partners, wants that bra. Great name, Sycamore Partners. And Snackers, if you want to know your private equity name, just take the tree on the street where you grew up or the island of the third home you wish you had. Maplewood Money Managers, Cypress Capital, Birch Run investment buddies. Oak Peninsula Partners. And that's what led us to Sycamore Partners, the key company here in private equity. Sycamore Partners Business Strategy is to buy up mall brands that were staples in the mall that your mom dragged you into the 90s and try to buy them at a low price and make them more profitable than before.

Yeah, they're snagging Nine West. They bought up Ann Klein. Staples, that's them. They own Staples. So they agreed to buy Victoria's Secret. But let's go back to February 19th. That's when stock markets were at all-time highs. This calendar reading is insane. So that's where the markets are at highs. Then let's fast forward one day to February 20th. Sycamore partners signed a deal to buy the struggling Victoria's Secret for $525 million. We covered it right here on Snacks Daily. Boom. That was the day after the markets hit its all-time record high. But then a few weeks later, we got to March 15th.

That's when Victoria's Secret closed literally all of their physical stores because of the COVID-19 economic shutdown. And then a few weeks later, that brings us to today. L brand stock has lost half of its value since those John Hancock's were executed. back on February 20th to sign the deal for the acquisition. And the reason we're sharing the story with you today is because this week, a really important thing is going down. The deal is supposed to close this week, but Sycamore is trying to cancel the deal, back out of the deal, basically get their refund for Victoria's Secret. They're back and out of this thing and they're invoking a very strategic thing called the Act of God Clause. The Act of God Clause is in every contract

where big money's on the line. It basically says, Nick, if you agree to sell me your car or something, If a meteor hits planet Earth and we're all dead, I don't have to buy your car anymore because that's an act of God. So they're basically whipping out this one detail in the contract. They filed the lawsuit in Delaware and that's where like half the state is basically just pieces of legal paper. Their goal, of course, is to cancel this deal because Victoria's Secret's probably worth way less now that the retail apocalypse has been COVID-ed. And they think COVID-19 is that act of God. So Jack, what's the takeaway for our buddies over at Vicky S's? This is why lawyers and investment bankers charge huge fees.

Nackers, Victoria Secret Lawyers, in this case, the David Polk law firm, carved out a very fascinating exception for pandemics. It was incredible foresight. They said a global pandemic does not qualify as an act of God. This is the most creative, most impactful, single legal line of legalese we had ever seen, and it's not even that long. Clearly, somebody at Davis Polk law firm was watching what was happening in China, because they predicted the pandemic would come to the United States when it was just a tiny local issue in China that no one was really worried about. No, and then Jack and I noticed this is kind of happening more often than you think a lot of companies right now are trying to get out of deals that they began before COVID-19 was a thing. Boeing is trying to cancel their embryoacquisition claiming the act of God disqualifies.

Oh, and SoftBank is trying to basically cancel every deal they made. Every single deal. For our third and final story, Clorox's earnings didn't shock us. And then it completely shocked us. We didn't see this coming some of this stuff. By the way, idea, update your ticker symbol, Clorox, CLX. What are you doing with that? Sounds like a European oil company.

That's a pathetic ticker. It sounds like a petrochemical, pharmaceutical, something or other. Get it together marketing team over there. We had some options, by the way. Wash. W-A-A-S-H. W-A-S-H. Leave off the O for opportunity.

Germ, GERM. Eat E-A-T because you can make the floor so clean you want to eat off it. We know what you're thinking if that's taken. You just double down. You go with the EE-E-A-T. Of course. So, Clorox has a subtle mission statement. Make you less paranoid that COVID-19 germs will attack you and kill your life.

That's pretty much their mission statement at this point in the world. Now, that's why when we looked at the earnings, we weren't even, we almost, honestly, Jack and I almost didn't cover this because so much of it was unshocking. Hey, Nick, I think sales of Clorox bleach are going to be up recently. Oh, really? Sales jump 15% because they're cleansing everything except for your soul right now. It was the biggest quarterly sales jump in a decade. That's why the stock jumped 6% to an all-time high.

Oh, and let's look. at the cleaning segment, Jan, jumped 32% to sales. We're talking disinfectant wipes, bleach, pine saw, you know, that kind of stuff. The factories are producing six times their normal capacity, running 24-7, three shifts of eight hours each to meet this unprecedented demand for cleaning products. Also, Jack and I are like, we're nice guys, we mean well, but like marketing team at Clorox, why didn't you have the pine saw lady deliver the earnings report? So we jumped into the earning snack style. We got really clean and disinfected. It turns out there is no. see-sau situation at Clorox, that's a trademark of the COVID-19 environment.

Snackers, we've shared with you about what seesaw situations are these days in the coronavirus. It's when one part of your business is doing well because of the coronavirus, but another part suffering because of it. Yeah, maybe sales surge in your consumer segment, but sales to restaurants plummet in your business segment. Or if you're Twitter, like people are using Twitter way more than usual, but ad sales are way down because of the adpocalypse. Here's the funny thing. Jack and I searched high and low, pantry and closet. We could not find a segment of Clorox that didn't have a sales increase. Chlorox is covering every part of your house like Ed Reed covers the secondary to prevent the deep ball. Every biz line grew as

Clorox is cleaning everything and he can pass. Clorox is a publicly traded company that also makes Brita Filters and Burt's B's skin care which was founded in May. And those sales were up 10%. Glad trash bags, Kingford Charcoal, scoop away cat litter. Those did okay. The thing with Chlorox is not all that was shocking, but what did shock us was our takeaway. So Jack, what's the takeaway for our buddies at Clorox? Clorox expects all of these germafone trends to continue post-COVID-19. Snackers, we didn't see this coming. The company upped its earnings forecasts for the remainder of this year, which means investors' portfolios felt cleansed Friday. That's a sign that Clorox thinks people will continue avoiding germs even after like we have a

vaccine for COVID-19. And you can think about this by comparing it to some other things. For example, the surgeon, toilet paper, that was kind of a blip because we know post-corona, you're not like behaviorally using more toilet paper. Stocking up on toilet paper was a fad. It's not a fundamental change in your behavior in how much toilet paper you need. But Clorox thinks that avoiding handshakes, riding less public transport, Ubering a few fewer times a week, not doing a public shotsky over two brothers tavern, that could change. Those could be permanent behavioral changes now that we have all these mental scars from how germs can be such a problem because of COVID-19. You're going to finish your lunch sandwich and wash your hands with, again, pine salt.

Glox thinks disinfecting everything isn't a COVID-19 fad. It's a long-lasting behavioral change. Jack Kenyo, whip up the takeaways force to start the week. Amazon is so eager not to appear to be profiting from the COVID-19 crisis. So it's reallocating, you know, $4 billion of would-be profits to its workers instead. Victoria's Secret got bought, but the buyer is trying to return it and get a full refund. Was that acquisition contract COVID-proof? A judge is going to decide this all thing.

Third and final story, Chlorox sales jumped last quarter. That shocked nobody. What did shock us was that Clorox's belief about avoiding germs is a long-lasting trend. Now, time for our snack facts of the day. This one slipped in by Jesse Brefleigh and lovely Morrison, Colorado. Got to be great this time of year out. Chocolate, milk chocolate or dark chocolate. It both comes from the plant cocoa, cacao. I'm actually not sure how to pronounce it. We go through the one. Usually we just go cunfer, and we just kind of mumble it. That's always better. Now, that turns out, according to Jesse, to be the same plant family as some other legendary plants you're touching every day. That's right. Cacao's sibling is cotton. Another is hibiscus, okra, durian. All of these are related in the same family as cocao. That means chocolates in the same family as what's in your kombucha, in your clothes, in your salad, and what's in some smelly foreign fruits.

Who knew that chocolate and chinos were so related? Snackers, we have to do as a united all snackers at once thing, a big congratulations to Kelsey Black and Corbin. They just got married and broadcast the thing live via Zoom because, you know, COVID-19. Yeah, they did it today. Bold move after the way we covered Zoom on Friday's pod and Microsoft Teams, but we respect and we like it. I can't wait to see the Zoom background they chose for this thing, but as we say, couples we snack together, stay together forever and ever, amen. Snackers, love to having you join us on the snacks break on Friday. You guys look fantastic. We should point that. May the fourth be with you. We'll see you tomorrow.

This is Jack. I own stock of Amazon. 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.