The Best One Yet - Lulu tries to become Nike — How Saudi Aramco makes $90B in profits/year — Away’s drama arrives

Episode Date: December 12, 2019

Oil legend Saudi Aramco is the most valuable company in the world and it just IPO’d, but how does it make money? Luggage brandicorn Away went through a week worse than your worst travel trip, so we���re looking at what actually went wrong. And Lululemon reported earnings, but we’re curious about whether it can become the next Nike.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 Snack Daily. It is Thursday, December 12th. Wow, we got a heavy deck of stories today. This is a wild mix. Jack and I have to sit down after we saw it. Snack, is you ready for the best one yet?

It's the best. Snack Daily. Saudi Aramcoe is the largest company on Earth, and it just did its IP. Jack and I wonder, ran up the numbers. How did they get to $90 billion in profits per year? That's a gigantic number. It sounds like a Lord of the Rings book. It could be a whole novel there.

Second story, everything Lulu Lemon did last quarter. beat expectations. So why did the stock drop 4%? Somebody needs a namaste right now. Jack, can you hit us with the third story over here? The controversial unicorn of the day is away travel. It had a rough week. Issues over Slack messages.

Employees are getting angry. Employees are getting fired. And the CEO got replaced. We're looking at what really went wrong. It wasn't just the drama. By the way, this is that luggage company that has the suitcases that don't have the batteries. No. Because TSA doesn't want you bringing those on board.

Those batteries are dangerous. Before we get to those, The Verge, which is a tech website that covers a lot of news and puts out some great lists. Came out with the listicle of the holiday season. The 100 tech gadgets that define the 2010s. Is one of those batteries you just mentioned on there? The 2010s are known as the tweens, right? Are they the aughts? No one knows what's going on.

Why I ought to. Until you get to the 20s, no one's really paying attention. So we're coming to the end of the aughts or the tweens, whatever you want to call them. No, what's talking about this? It's kind of a big deal. And we're all about to have a lot of time around the holidays. We have nothing to talk about with our family members. Except for a list of things that happened in the last 10 years.

So I'm going to hit Nick with five tech gadgets that showed up on this top 100 list. I feel so special. Nick, I want you to tell me, do you think they're like number one, the most influential thing? Okay. Or number 100, like the Hall of Shame. Is ice cream maker on this list? It's the only tech gadget I care about. No, but Jucero is on there.

Okay, there you go. Remember Jucero? That fake machine that made juice. Snacker, spoiler alert. They came in at number 98. Okay, that was your warm. All right, so what we got? The webcam cover.

What number? What was that? Your MacBook. Yeah, what number? I don't say, I think privacy is such a big thing now. I'm going with eight. Well, remember Mark Zuckerberg put a little sticky note on his camera, and that's how we all discovered. We should do the same.

What was the number? Number 70. Okay, the second one, the selfie stick. Yeah, makes a lot of sense. It was invented in 2014. I haven't seen one lately except if you're everywhere. I'm going with 15. Oh, that's way off also.

Number 58. Now, how about the Tesla Model 3? I don't know which order it's going. Maybe I'm correct. You know, maybe number one is least known. No, no, no, no. No, no, no. No, no one is, like, most known.

Tesla Model 3. Tesla Model 3? I'm going 85. Interesting, they called it a tech gadget, right? Yeah, I like that. No, it came in at 29. The Model 3, Electrifying America. Oh, for 3.

What else we got? Right. Last couple here. The Jewel. Like the e-cigarette. The vape device. I'm going right in the middle. I've had no luck.

I'm going 50. Influential. Number 50 most influential. Dude, Jewel was highly influential. Number 20. And last but not least. Oh, for four. What do we got?

The iPhone. Jack, I'm going to go. See, number one seems so obvious, I'm going with 99. Number one. In fact, I think you were, if you had just guessed 50 every time, you would have done that. I'm cutting this off. Let's hit our three stories. 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 hearing food is air candy. They don't reflect the views of the robberhood 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 Robberhood Financial LLC LLC Member Fenra Slash SIPC For our first story

Saudi Arabia's profit puppy Just went public The Saudi Aramco IPO is finally complete Every day Snackers every day for the last month Or two months Jack and I look and see what's happened

With this company And there is a headline About Saudi Aramco Every day It's about to IPO It's about to IPO It's about to IPA It's about to IPO.

It finally did. So we're finally covering it on this podcast. This was like watching like an elephant do Pilates, incredibly slow. Elephant. Elphant parades. Yeah, elephant with doing Pilates. I like that. Now, the world's most valuable company is Saudi Aramco.

This is a state-owned oil company based out of Saudi Arabia. And now the IPO has happening. And Saudi Aramco is selling just 1% of the shares on the Saudi stock exchange. And the other 99% is staying with the government. Yeah, they get to keep. This is like your one friend who gets like Starburst and they give you an orange one. And by the government, I think we mean the royal family of Saudi Arabia. That's pretty much what I mean.

They basically own this company. So eventually the royal family can decide to sell more stock of Saudi Aramco, which would give it more cash, which it could invest to diversify the economy, away from oil. So Snackers, here's how it did on its first day of trading. The stock jumped 10% to hit a value of $1.9

trillion with a T dollars. That is how much Saudi Aramco is worth if you take all of the stock and put it in one gigantic barrel. We're talking T's here. Now, that almost twice as much as Apple, almost twice as much as Microsoft, almost twice as much as Microsoft. Or to put it in terms everyone understands, it's about 146 lifts. 146 times as valuable as lifts. So Jack and I are looking at this big capital T, and the big question we have is, how do you get to

$90 billion in profit per year? Well, you got the upstream and the downstream. You get the upstream. You got the downstream. The upstream is when Saudi Aramco extracts oil and gas from planet Earth. Right. That's how it's getting it out of the ground. But then you got the downstream. You've got to refine this crude oil and turn it into something we can actually use like gasoline. Right. This is like straight out of the like queer eye for the straight guy.

They got to turn this into it like an actual lovable quality piece of oil. You need to polish that crude rough exterior into something slick and juicy. Now Snackers, that's where and like how it's processed in the oil getting out of the ground. But here is the incredibly fascinating competitive advantage that Saudi Aramco has. the oil, it's right there. It's right there. It's right under the feet. That's it.

We don't want to like oversimplify this, but we also don't want to overcomplicate. Saudi Aramco is sitting on Saudi Arabia, which has the richest oil fields in the world. You don't even have to dig very deep. The oil's there. You stub your toe, boom, oil. It doesn't have the best universities. It doesn't have the best patents. No.

Not the best machinery. Your moan and your lawn don't have a cigarette because you're going to light the field on fire. Let's just put it out. It's like a scratch ticket. You take out a quarter. and start scratching the earth, oil. And here's the thing when it comes to oil. In order to have profitability with oil, as long as the price of oil right now is above $10 a barrel,

you can be profitable selling this. Saudi Ramco can be because they get the oil so easily. Now, oil is currently $59, and they are extracting it at a cost of like $10 a barrel. So they're making huge profits on every barrel that they pull out. As a comparison, North American shale, that needs to be above $65. per shale. Right. So right now, North American shale, like, extractors, they're not pulling it out of the ground because it would

cost so much. They can't even make that up in selling it. So, Jack, what's the takeaway for our buddies over at Saudi Aramcoe finally did this thing? Saudi Aramco comes with a unique combination of risks and rewards. Now, first of all, Snackers, you can't just buy the stock on the New York Stock Exchange or NASDAQ quite yet. No, but soon, we

expect a investment bank to set up an American equivalent for this stock, basically like an English dub translation of a foreign film like Run Lowell in the meantime, here are the risks you're going to face. Saudi Aramco's risks include like if electrification and sustainability vehicles happen faster than anyone expected. That would be bad for Saudi Aramco, which sells oil.

Another risk is political instability in the region. A lot of Middle Eastern countries have had revolutions since the Arab Spring. Now, an upside for this company is that maybe we end up depending on fossil fuels a little bit longer than expected. True. Maybe everybody's not going to buy a Tesla as quickly as we think they will. Another upside is that Saudi Aramco kind of gets to. play by a different set of rules than Chevron. Yeah, there's no democracy in Saudi Arabia. There is one family in charge of everything. So you don't need to worry about workers' rights.

You don't have environmental regulations. You don't have a university that's trying to divest your shares because they want to be green. All this is what makes the Saudi Aramco IPO even more unique. For our second, story, one second. I'm trying to stuff jack in the overhead over here. Nick, you need some help with that suitcase? Away luggage just went through an awful week that ended with the co-founder slash CEO getting replaced. Away, by the way, is a brandicorn, which is a unicorn worth over a billion dollars, but it has a lovable, squishy, pretty brand that everybody loves. Jack, I can almost taste these brandicorns right now.

This is a $1.4 billion luggage startup away. And if you fly from New York City's JFK Airport to San Francisco SFO, SFO, you will see more away suitcases than you will see human beings. They are everywhere. Full disclosure. It's aggressive. Full disclosure. I dance with my away suitcase as I'm boarding.

No joke. Snackers. get to work. I got to pull Jack out of the suitcase to actually do this podcast. Those wheels are so smooth. The thing pops open, Jack pops out. It's a wonderful thing. They offer first class luggage at Coach Price, and it started with that removable battery, but then the TSA was like, oh, my God, these things might explode on the plane. They cut that from the business model.

Yeah, so mine doesn't have the removable battery. Now, a Wade decided as a startup, it was going to build a progressive company that would forever change how companies were. And it's built on a foundation of transparency. In fact, radical transparency. This was like a utopian ideal. Here's how it would go down. In this world of a way at their offices,

there would be no direct messages between you and your coworkers. You're not allowed to have a one-on-one. I can't send a message to just you, Nick, on Slack. Which would be awkward. I also can't email you. Emails were not allowed to next. The only thing I can do to communicate to Nick is post on a public forum that everyone at the company is logged into Slack can see.

Now, the reason that co-founders believed in this ideal of like an open, messaging for the whole office is because they experienced a corporate life where they said women and minorities would not be included in things. Yeah, basically, the old boys club was the exclusive group that was getting the top level secrets of the company. And that's what who would be like emailing each other and including only certain people on calendar invites. So away required all communication that's happening on a computer, except face to face,

which I don't think you can do the public forum. Were whispers allowed in the office? But it all had to happen on a public channel on Slack that everyone could see. Oh, by the way, turns out the co-founder of a. way, she's engaged to the Slack founder. Yeah, a little questionable there. Now, in theory, this transparency sounds surprisingly, I don't know, what would you say? Utopian?

Utopian, yes. Like, really, like, unburdening? Well, it seems well-intentioned. But what happened in practice was a lot more intense. For example, suddenly paid time off would be taken away from employees if they didn't hit certain metrics, and that would be discussed, like, in an open Slack form. One employee who was in charge of, you know, printing those monograms, the JKKK on a suitcase, messed it up and still shipped the product to a customer and got called out by the CEO on a public Slack channel as brain dead.

So then one day, one group of LGBTQ employees got together and created a Slack channel called hashtag Hot Topics. And that was for posting basically like venting about things happening in the office that were unwoke. Then another day, the CEO of Away, Steph Corey, ends up joining that channel, reading all the message, and suddenly a bunch of the people on that channel get fired. What I'm sensing here is a culture of intimidation, pretty toxic where people are like, if I work there, I wouldn't even post anything because you might get punished. These employees, they decided after somebody had gotten fired to leak screenshots to reporters at the verge of all this drama that have been playing out in these open Slack channels. So Steph Corey gets outed as being a CEO who punishes employees for sharing their thoughts on Slack. She gets to stay as chairwoman.

She steps down as CEO this past week and then gets replaced by Lulu Lemmon's C-O. who was supposed to be the number two at the company, but suddenly they're like, oh my God, will you be CEO? Will you be CEO? Perfect timing. We just have a job opportunity. So, Jack, what's the takeaway for our buddies over to way? Even good corporate values like transparency can be abused.

Snackers, you've seen these words be thrown around. They're easy catchphrases for startups to say are their values. Passion, empowered, flat management, inclusive. Every startup and tech company has those on the Career Center page of the website. If they're not on a T-shirt already. Now, away is an instance where transparent. Failed because transparency looked more like surveillance, which is scary. What this transparency needed was open spaces, which was not a value that was had.

As a result, it became intimidation. Right. Transparency must be coupled with safety. In other words, whatever you say, you won't get punished for it. Just share your opinion honestly. So Away's story isn't about drama or bad execs. It's really about the risk of not living up to your own standards. For our third and final story, Jack, wipe off your mad over there. Men are buying Lulu Lemon.

Women are buying Lulu Lemon, but the holidays look kind of disappointed. Fun fact about Lulu Lemon. Santa's not buying Lulu Lemon. Luke Lemon has a bunch of patents for their stretchy and sweat-wicking fabrics. They're called Luan, Luke Stream, and Swift. These are their technical fabrics that are different. Calling it right now, baby name of 2020, Luke Stream. That's too much like the extreme Luke Skywalker.

Nickname becomes Luke. All right, so just about everything from last quarter for Lulu Lemon was better than expected. Snacker, sales online. and at existing stores rose 17%. Sales overall rose 23% because it opened 53 new stores last year. Profits, those stretched out too. Here's the thing. Shares fell by 6%. It's kind of wild. Sometimes crazy things have. After the report. Lulu has set an intention for the next quarter. That was disappointing. Yeah, the next quarter they're thinking is going to be actually really disappointing. The next quarter is very important. We're talking about the fourth quarter, which includes the holidays, which includes holiday sales, which includes gifts

for your aunt because you don't know what together from Lulu Lemon. And Lulu Lemon is expecting their sales to come in lower. Lower than what Wall Street was expected. Now, here's the funny thing Jack and I noticed in the earnings, Lou Lemon CEO then pointed out, hey, hey, everyone, hey everyone. Don't forget the holiday season this year, there are six fewer holiday shopping days than there were last year. It's like, investors, you know that Thanksgiving was late this year.

Everyone remember Thanksgiving was surprisingly late? Okay, good. All right, same page? Same page. Yeah, and it's like, yeah, it's Wall Street. These are professional analysts. They know Thanksgiving was. They have calendars and they can count.

And poor form, it makes you look desperate that you needed to clarify that. Meanwhile, Lou Lemon stock, by the way, it's still at a record high. It's doubled so far this year. So any disappointment like what happened yesterday gets punished by like 6%. So, Jack, what's the takeaway for our buddies over at Lulu Lemon? We noticed Lulu Lemon in the earnings report refers to customers as guests. And that led to a big question Jack and I have had. Can Lulu Lemon become the next Nike?

The answer? only if it can become a lifestyle brand. Last week, an investment bank called Cowan wrote a report in which they argued that Lulu Lemon looks financially like Nike. Lulu Lemon's market value, by the way, it's $30 billion. Nike's is like $150 billion. So investors love that Lulu is being compared to Nike in terms of size and profitability because it suggests there's a lot of room to grow.

But there's also a lot of like competitive fierceness in the athletic user space. So Lulu Lemon is making lifestyle. brand moves. First, it's adding stores that include built-in yoga studios. Second, it's selling to guys and gals not just for sweat life, but for like officeware too. It also just launched personal care products like deodorant and facial cleanser. And Nike treats its customers like customers. Lulu treats its customers as guests. By the way, this is Nick and both Jack and I own shares of Lulu Lemon. Jack, can you whip up the takeaways for us over there? Saudi Aramco officially IPOed and that profit puppy is worth one point.

$1.9 trillion. Before you can invest in this one, make sure you understand the unique risks and rewards of Sadi Ramco. Away luggage wasn't honest about its corporate policy of transparency. It's not about what your values are. It's about how and if you live up to them. Also, that baggage company CEO had some serious baggage. Jack's been waiting to drop that one since the intro to this thing. Lula 11 did well last quarter, but its outlook is disappointing.

It's trying to get huge. Like Nike. Snackers. Time for a snack fact of the day. Jack Crunch. some baseball metrics over here. I had to rip this guy off the dime and to take the eye black off. The Yankees just signed Garrett Cole as a pitcher. They're paying him $324 million over nine years. That's $36 million per year. That's not this night. Yeah, you don't need to like, it's just a lot of money.

Now, here's the deal. Garrett Cole is a longtime Yankee fan. There's actually like a picture of him as a kid of a Yankee game. It's a great story. And he has a win above replacement of 6.8. So the Yankees are expected to get 6.8 more wins with Garrett Cole on the stack. Just by having him there. He's just a good guy. Now, they're paying him $36 million for those 6.8 wins above replacement. That means if so facto. Garrett Cole's getting paid like $5 million per win. Not too shabby.

Not a bad way to make a paycheck. Snackers, send us your snack facts and your hometowns at Robin Hood Snacks. We want to get them into the pod. We want to get you a shouting. Regardless, we'll see you tomorrow. Cannot wait. By the way, this is Nick and both Jack and I own shares of Tesla. The Robin Hood Snacks podcast,

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.