The Best One Yet - “Peloton, you’re probably too late” — Costco’s worst-in-a-decade. Nintendo’s game drought. Peloton pops another 16%.

Episode Date: May 8, 2020

Peloton is now worth twice as much as Planet Fitness, so we’re looking at the leading indicators that revealed how that could happen. Costco suffered its first sales drop in 11 years and it’s about to face the family budget gauntlet. And Nintendo profits surged 41% last year, but it’s struggling to develop more games while working from home.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, it is Friday, May 8th. Happy Friday. Everybody stocks rose yesterday for another really sad reason. Absolutely absurd. Three million people got laid off last week. And somehow, Wall Street took that as a positive note. But side note, three million people getting laid off in one week is pretty horrible. Side note to the side note, three million is five times more than the previous worst ever until this crisis. We have a brutal economic calamity. We should never just forget. about like Wall Street did yesterday. Jack, just like saying the word calamity, by the way, is this the best one we've done yet on snack? This is the best one yet. Our first story, Peloton is worth twice as much as Planet Fitness. Public sweat is out, private sweat is in. Now, Wall Street has blessed Peloton

with a record high share price. As COVID-19 is blessed Peloton with a perfect growth opportunity, you. For our second story, Costco just faced its first sales drop in 11 years. Debbie, can we please restock the front of the store with customers? Yeah. But as the economic recession begins in America, could we get a Costco membership exodus? Snackers, we're talking about family budget cuts, kind of a bit of subscription when it comes to membership Costco.

For our third and final story, Nintendo just enjoyed a nice pop over in Japan in profits. Donkey Kong is literally throwing Mary over here, throwing Luigi over there, and forcing the physical distancing in Kyoto. I'm pretty sure Donkey Kong's wingspan is six, feet, so it's kind of perfect. It's a lot of pixels. But let's go back to the hoarder's Almanac. For week 20, we think it could be Nintendo video games. Snackers, content is king,

and the future content of Nintendo, kind of lacking right now. Before we get to those stories, we've said a bunch of times recently on Snacks Daily, you're probably on your couch right now. We've also said you haven't left your living room since Nam. You're probably absorbed into yourself a cushion. You're about to kill your roommate. Or your roommate's about to kill you. A little bit of both. Key asterisk to all this, the essential gang. Those are the snackers who are still going out every day working on the front lines despite the corona economy. Our commute to these mics is like six feet. The essential gang is actually commuting. We appreciate all the essential workers out there, but it is actually National Nurse Appreciation Week,

so we're giving a big shout out to the nurses. Yeah, grab the forceps and band-aids. It's Florence Nightingale's birthday on May 12th. Yep. And National Nurse Appreciation Week ends on May 12th in honor of Florence Nightingale, the founder of modern nursing. We're going to expand this to all medical workers, whether you're dealing with COVID-19 patients or just delivering regular old babies. Yeah. And it just happens to be COVID-19. Babies are still getting born, Nick. That happens. Thanks to all of the medical workers for keeping us healthy, keeping us safe, and putting your health and your safety on the line to do it. 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.

It's snacks about to hear rain food. It's 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 member fenra slash sipc for our first story jack clip on shoes or non clip on None clip on. Never clip on. I think they're dangerous to clip up. Honestly, they scare me and I want flexibility. Peloton Snackers. It just hit a record high the stock. And it illustrates how to think like an analyst when it comes to stocks. By the way, we're approaching the summer of spinning at home. At home alone. Kind of depressing. You're not going to have a soul cycle flock with you these days. Now, Snackers, you probably have found the perfect wall to wall sit on right now because you're in your home doing stuff. You got to keep those hams. You got to keep those quads. fit, even though we're not going outside. Jack, I think the scientific term is hammies. I just, I'm pretty sure it's hammies. Now, if you haven't figured out an at-home workout situation, you probably should figure out that home workout situation. You're not supposed to be doing in the

gym, you're not supposed to be doing them outside as much. Right. So it's an obvious trend that people are working out home the past couple months. But there is one stock that's 100% focused on at-home workouts, and that is Peloton. That's right. There's no push-up mutual fund. There's no ETF focused on dips. And there's no stock focused on burpees. as far as I know. No, this is a stock that's obsessed with expensive spin bikes. $2,400 spin bikes. And the results are in. In the first quarter, revenue rose by 66% for Peloton. And the subscribers almost doubled up 94% net. Snackers, don't judge. You've never benched your weight. Belton's never had a profit. Yeah, Peloton lost like $58 million last quarter. Now, what we thought was

fascinating was when you jump in to look at some of the more detailed numbers, like the 44 million Peloton workouts in the March quarter. Sounds like a lot of workouts. Can you compare it to lifts? It seems like, I don't know, let's go with a dozen lifts. It's basically a dozen lifts. We actually crunched the numbers. 44 million workouts in the quarter is 480,000 workouts per day.

And Nick, yeah, there were 886,000 peloton subscribers at the end of the quarter. Jack, I'm carrying the three, adding the two, dividing by nine. That means the average Pelotonista used their bikes about every other day. that's like three and a half times a week. That's a pretty fit person. That's a record high. Let's be honest, it's not just a workout. This time it's entertaining.

You hear Greg's getting a birthday shout out and just had his 30th ride. You kind of feel like you know Greg. Greg. Happy birthday, man. Now, 44 million workouts last quarter was obviously a record high for Peloton. I mean, we're all stuck at home. And that nearly is double as much as the previous quarter. But here's the surprise number.

For every five bikes with like a Greg and his hammies on them, there's one subscriber to just the Peloton app. That's right. I think for 20 bucks a month, you get just the app, no $2,400 buck. Yeah, and that can be spinning or like other workouts that they provide, but it's mainly spinning. In fact, there are 176,000 of what we're calling DIY, do-it-yourself Peloton East does. You know they probably bought a $60 bike on Craigslist, duct-taped an iPad, and turned on this app.

So, Jack, what's the takeaway for our buddies riding as a flock over a Peloton? If you waited for this earnings report, you might be too late. Snackers, Peloton stock rose 16% Thursday after the report, which is enough to break your sports bra. But if you bought the stock before yesterday's earnings reports, keyword, then you might have had even better stock games. The stock has more than doubled in the last one and a half months because investors had better information. There are three types of information we want to tell you about. Lacking, current, and leading information. Kicking it off with lagging, that's the data in this earnings report.

It tells us how Peloton did pass tense January to March. March. Newsflash, it is May. Yeah. January was quite a while back, Nick. That's pretty lagging. Second, we got to talk about current data, which is right now, like the App Store ranking. This one's fun. You can see where a Peloton is in the App Store. You can see how many people are streaming your Peloton class right now, and that gives you an indication. Notably, Greg. And then third and final is the leading data, which is how Peloton will do in the future. This is the big one that tells you how Peloton's performance might be in the following quarters and next year in the year after that. And that's really valuable.

Like you go on to try to order a bike and instead of seven to nine days for shipping, maybe it shows it's going to take six to eight weeks for shipping. In fact, it is saying it's going to take over a month, which suggests huge demand for Peloton, which will likely translate into future sales. Snackers, analysts love leading data like this. Current data is good too, lagging data, not as much fun. If you're waiting for lagging data, you might be too late. And by the way, if you're curious about how to get data like this,

check brokerage reports for the best data or Google stuff aggressively, or we got you covered on snacks. For our second story, sales for Costco fell for the first time in a decade. But there was so much in this earnings report. So much. We're talking about the Issaquah, Washington-based Costco. Isoquois, that's definitely the first time we mentioned that town or that city on this pod. And we were so entranced by that wonderful place that we got lost in the endless aisle of Costco earnings.

Costco is not just some big, giant, gigantic grocery store. Snackers don't call it that. It is the Disney of retail. And there are many magical legs of this Costco stool. And like Disney, you have to pay to get in, Drew. It's a membership model. And then you get entertained with big toys that you can eat. For example, meat.

And they're actually crushing some magic by limiting cost cons, which are customers of Costco. You know who you are. To three meat items per shopping cart. That's okay, though, because you know that those meat items are like, you know, six to 12 tons per an order. Right. So you're walking out with 18 to 36 tons of meat.

I think you're going to be okay. Yeah, can we just buy this ostrich and bison? Now, in Isaquah, Washington, they do things a little different. Costco whips up their earnings reports every month, not just every quarter like most companies. They're like the Amish. They're working three times as hard as everyone else. And thanks to that work ethic, we can compare here on Snacks Daily. February sales, with March sales, with April sales, already.

Even though it's just May 8th. So Jack and I jumped in Snacks style and did exactly that. February sales spiked 12.1 percent because early hoarders were a whole whole. Gordon. Honey, we need 12 years worth of salsa. And then in March, sales jumped another 9.6%. Honey, we forgot the chips. And then in April, sales fell 4.7%. Honey, we're only eating chips and salsa for this month, next month, the month after that in 2021. We bought way too many chips and way too much salsa and it's all going bad. And that sales decline in April is the first sales decline since July of 2009 for Costco. Now, if you're thinking that Costco just sells like

moose-sized tortilla chip bags, you're absolutely wrong. Shockingly, there is a Costco travel agency. As I mentioned, Nick and I have never been into a Costco. We are not members of Costco Nation. And this is a small portion of Costco's business, but it's still a portion, and it's basically doing travel agency work. And naturally, that's shut down. Nobody's booking a W-hotel room in Costa Rica and getting the $75 spa credit thanks to

their Costco membership. Looks great. Can't do it right now, Costco, sorry. And also, you know what 11th? 7% of Costco's sales comes from, Nick? It's gasoline. Yeah, and gasoline prices have plummeted in the month of April. So Costco also revealed that 70% of that sales drop we mentioned in April, that was because of gas prices dropping to. Those tons of gallons of gas are selling for lower price. It's going to lower sales at Costco. So, Jack, what's the takeaway for our buddies over at

Costco? Costco is about to face the big budget question. Snackers, in a recession, the first thing you look at, it's your fixed spending. Honey, are we keeping? Netflix, Hulu, Quibi, or Disney Plus. And unlike other retailers, Costco is a membership store, a Kaka, a subscription business. Honey, are we trying to keep both the $19-dollar Amazon Prime subscription and the $60 Costco membership? Honey, why are you asking me so many questions? Now, Costco has famously high retention rate. If you're a Costco member, you're signing up to be a member again next year. In 2019, 91% of Costcoons renewed their memberships with Costco. But we are highly likely entering right now a Corona session, a.k.a. a coronavirus recession,

and that could change Costco's retention rate. It could get higher. It could get lower. We'll know. Ask honey. Ask someone you're with. Significant other. We'll check out in next month's earnings report because they do it every month, like the Amish. That's the Nintendo story. But first, turn around if you're running this next challenge because we're a little halfway over. Which runs us right into our third and final story. Nintendo's profit. It jumped since You're probably at home gaming if you're not outside doing a Snacks challenge. But there's a big question mark about Nintendo's video gaming future. Snackers, before we get deep in this one, we got to share something that just, this never, ever gets old whenever we talk about Nintendo.

Jack and I love it. Nintendo was founded in Kyoto, Japan, in 1889, as a playing card company. We can't get enough of that. Also, we can't get enough of this. Nintendo's head game developer was banned from riding a bike to work. That's right. Nintendo said you cannot bike to work. It's too dangerous.

your head is two precious cargo. But Nintendo itself, the company is basically a two-part business. You got your hardware and you got your software, aka gaming consoles and video games. You add those up, and the profit for Nintendo over the last year jumped 41% to $3.3 billion. Let's quickly bang out the hardware situation. They sold 20 million Nintendo Switches last year.

They've now sold 56 million Switch consoles in total. Now, if you're not a Switchbacker, Switch doubles as like a Game Boy-type portable thing that you can play on on the bus, or you can dock it at home and play on TV. But stick the hardware in your closet because what we care about right now is the software. Nintendo sold 356 million copies of software. Let's translate that from financial jargon to gaming words, video games. 356 million video games last year.

And among those video games, Animal Crossing became the fastest selling title ever on Nintendo Switch. Haven't played Animal Crossing, but it seems like a combination of the Sim. and roller coaster tycoon, but with farming instead of like building a theme park. Full disclosure, Jack and I thought about jumping into this one snack style. We got scared when we tried signing up. This is a fantasy world of animals controlled by this one mean financier who's like lowering rates, upping prices, causing shortages, creating like a drought for the farm system. Honestly, the team coming up with these Nintendo games is like Stephen King.

They're just throwing together a bunch of random stuff and getting a book deal. was really fun. There's a central bank in this fantasy world called the Bank of Nook, which controls interest rates like the Fed in D.C. And if you want to make money in this virtual world, you got to actually catch tarantulas or grow tulips and then you trade them. It's scary, like we said, we were freaked out. So apparently the kids are playing Animal Crossing, but it's important to point out games are very important for Nintendo, more so than for PlayStation or for Xbox. And that's because 85% of Nintendo's software or game sales are games they've developed themselves. Right, so Nintendo is pretty much hogging the controller here.

Sony and Xbox, they let others develop the games like EA or Take 2 or Activision Blizzard. So Jack, what's the takeaway for our buddies over Nintendo? Nintendo is the first sign we've seen that coronavirus can affect creative productivity too. Factories are closed and so we expected hardware sales may get coronavirus affected. Think about it. There's lots of bits and pieces that go into that Nintendo Switch and supply chains are disrupted. But software creation is getting hit too, and that's one half of Nintendo's life. Nintendo said it may not be possible to provide gaming content for Nintendo platforms as planned this year.

Exact quote. And Nintendo is now literally running out of games to launch, even though the Switch Gaming consoles and a bunch of hands. Nintendomaniacs.com has been waiting for Legend of Zelda, Breath of the Wild. Well, guess what? Don't hold your breath. It's being delayed. You think developing video games can happen from home? Apparently not with Nintendo. Jack, can you whip up the Takeways Force before the weekend? Peloton's business is doing better than ever. But you didn't need any. Last day's earnings report to guess that, leading and current indicators are better than lagging. Second story, Costco experienced its first sales drop in April since 2009. In a recession, families could cut that $60 membership court.

Could happen. Cost cons. For a third and final story, Nintendo's profits jumped 41% from last year as Switch sales keep soaring. People are playing video games at home, but they're not developing them at home, apparently, over at Nintendo. Now, time for our snack fact of the day. this one sent it from Peter Ruckus on Long Island, New York. By the way, Peter, you didn't specify we're on Long Island. We were highly curious NASA or Suffolk. Nick, you asked the question before I could.

Also, Ruckus, great last name. Yeah. According to some former astronauts who are actually in space. Yeah. Space is not a scent vacuum. No, space does have a distinct odor that hangs around like post-spacewalk on your person. Quick 30th birthday shout out to Mike Durr. Your girlfriend, Esma, told us your first day.

Icebreaker question was funniest ticker symbol, BBW. I kind of want to date both of you. Build a bear, great choice. No wonder you guys are together. And by the way, Alex, your boyfriend, Kevin Rooney said you snack and crossword every day. Happy Birthday. Happy birthday. Have you four down is T-boy, T-boy, T-boy?

The answer is always multiple T-boys. This is Jack. I own stock of... Sony and 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.