The Best One Yet - “Planet Fitness bleeds its own blood” — Kate Spade’s opposite day. Blade’s heli-SPAC. Planet Fitness’ trick.

Episode Date: December 16, 2020

Kate Spade and Coach shouldn’t be selling more handbags during a pandemic… yet they’re more profitable than ever. Planet Fitness whipped up an aggressive trick to not go bankrupt. We call it the “fruit fly strategy”. And Blade is the “Uber for helicopters” going public via SPAC — just as Uber is quitting helicopters.$PLNT $TPR $EXPCGot a SnackFact? Tweet it @RobinhoodSnacks @TBOYJack @NickOfNewYorkWant a shoutout on the pod? Fill out this form:https://forms.gle/KhUAo31xmkSdeynD9Learn 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 Wednesday, December 16th. The Northeasterner snackers better put on a Carhart Beanie. You got snow coming your way. Dalian's warming up some cul-tas over there, Jack. It's a frickin' noise.

Let's hit our TBOI. We got our best one yet. First story, Jack. Planet Fitness survived the pandemic with a nice little strategy. Jack and our call this the Fruitfly strategy of customer service. For our second story, Kate Spade and Coach shouldn't be selling high-end handbags during the pandemic. And yet their owner tapestry has never been more profitable. For our third and final story, Blade wants to get you from Manhattan to the Hamptons,

from Manhattan to Manhattan to Antucket, from Palm Beach to Aspen on a private helicopter. Yeah, I don't know, Jack. Feels like a good time to go public via SPAC. What do you say? That sounds apropos. But before we jump into that wonderful mix of stories, a wonderful mix today, by the way, Jack. Snackers, you may be working from home, you may be saving time on your commute. You know who's saving the most time on a commute? Santa Claus. Santa's saving the most time. Because, you know, sitting on Santa's lap to ask for a hot wheels car,

kind of a dangerous situation these days. That big white beard isn't a CDC approved N95 mask. Jack, the old ho, ho, ho. That is an aerosol attack if I've ever seen one. If an elf required to take my temperature before forcing Santa, I would start crying. It is a freaky situation. Snackers, Jack and I know it's a funny thing going on. Mall Santas are zooming in, literally, and they are cashing in on their

Zoom calls. The going rate for five minutes of Santa's lap time is $49, but there's no lap time. It happens during a Zoom hangout. Oh, and get this, Jack. Maybe you want to upgrade to the $99 package. You're going to get the full Santa situation includes a holiday box in the mail. I had no idea. Santa Claus had such billable hours. So Jack and I noticed this trend going on. We dove in snack style and also discovered when we went to Airbnb, Santa is having some fun putting out some experiences. If you're Santa Claus, you can book your time on Airbnb and you just have to verify that you're Santa by clicking a link on Airbnb.com.

This is wild. There's a single link. Jack and I clicked it. You just fill out a Google form on Airbnb. Jack feels highly untechnical. Well, they asked a security question to make sure we were Santa and we could not answer this one because we're not Santa. Before you can become Sandy, you must verify what is Buddy

the Elfs made a name? Santa Claus is dependent on AWS. He's got a standing desk. He's working from the North poll telecommunity. But Santa is getting serious money this year. Let's hit our three stories. You're tuned into snacks daily. We spoke to the lawyers and we got to get something legal out the way. The snacks about to hear ain't 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. 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 FINRA slash SIPC. For our first story, Jack Beiser tries, can I phone a friend? Trick question, answer is calves. Planet Fitness, put on like a whole ton of muscle jack, and I noticed, simply over the last five years. This ultra-low-priced gym chain is still running in the COVID marathon. Snackers, Planet Fitness, you've seen the ads, a whole lot of purple. They have mastered the timeless art of watching yourself in the mirror as you pick up heavy things

and then put those heavy things back down. Also known as weightlifting. Nick and I were connoisseurs after college of the bench and wall routine. Yeah, we still thought our lacrosse and football college careers were going to be a thing. By the way, roommates Timmy and Dave, we used to go to the, what was it,

the New York Health and Racquet Club on 13th Street Off University Place. By the way, by the way, the bench and wall routine is bench pressing and then looking at the wall between sets. Also, full disclosure, Timmy's not a great spot or he was on his phone half the time. Now, we're about to tell you a story

of magnificent, probably steroid-assisted growth from Planet Fitness. Honestly, Facebook would love to see this kind of scale. Planet Fitness at the end of 2015 only had six locations globally. Jack, what are we looking at today? 2,000 locations after just five years of being a company. We're talking nine in the Greater Albany area. 30 in the Greater Philadelphia area. Just to give you like a sense of how everywhere Planet Fitness is,

there are three in the Greater Brattleboro, Vermont area. Honestly, Jack, they are testing the limits of the whole greater region, terminology concept. This company is based in Hampton, New Hampshire, the only part of that state touching the Atlantic Ocean, and it is worth $7 billion the company. Ironic that it's worth half a lift, but here's what fascinated Jack and I about planned fitness. Lately, they've been using a strategy that Jack and I like to call being that of the fruit fly. Basically, be a nuisance to your customers, but not so much that your customers are actually going to do anything about it. Get swatted at, but not crushed. And here's the thing. The gym memberships over a plan of fitness.

They are so low in price, you barely even see them. The ding to your credit card is $10 a month. That budget impact is so tiny, you're unlikely to cancel your Planet Fitness subscription, even if you never go to the gym. Plus, add on to that, this little idea. If you want to quit Planet Fitness, they create so much friction, there's almost a fire. You may not cancel your subscription online or over the phone. It must be in store.

Yep, even if your neighborhood is on lockdown right now and you can't physically go to the Jim, then you can't cancel. Sure, Mr. Kramer, you'd like to cancel? Just fax us a notarized letter written in Braille, please. It's a delightfully infuriating policy. It caused quite a bit of hate, though, during March and April, when their gyms were closed, they kept charging their subscribers, and their subscribers had no way of canceling. So, Jack and I also noticed a strange situation going on with Planet Fitness' stock.

First, let's look at a company called Town Sports Gims, the owner of New York and Boston sports clubs. Their stock is down 90%. Meanwhile, a workout from home stock like Peloton has quadrupled in the same period of time. And even though you're probably not going to the gym because of the risk of COVID, Planet Fitness' stock is at the same point right now as it was last year before the pandemic. So could Planet Fitness' painful cancellation policy be masking the reality of the demand for its product? In other words, could Planet Fitness' business be doomed,

but people haven't actually been able to cancel because COVID has the gym's So Jack, what's the takeaway for our buddies over at Planet Fitness? Surviving COVID-19 is a marathon, not a sprint for companies. Snackers, we all know that guy. He's at the gym, on the treadmill, running three straight miles and a huffing the whole way or long. He's wheezing. You're thinking about like calling the paramedics, but that guy, that's just the way he runs and he keeps going. Yeah, he hangs out with a defibrillator. But that is Planet Fitness, despite the huge hate that got built up in March and April when you couldn't cancel. It only lost 10% of it.

15 and a half million subscribers. It has 14 million subscribers still today. And the stock is still at its pre-COVID high for two big reasons, Nick and I think. First of all, we mentioned Peloton before Peloton's popular, but honestly, it's only going to the highest income Americans. Right now, and even after COVID, there's probably going to be a huge sustained demand for a gym that's only $10 a month. Point number two, other gym chains that are typically rivals to Planet Fitness, look at like Gold's Gym or 24-hour Fitness. They've entered into bankruptcy, over the last few months. Even though Planet Fitness has lost one-half million subscribers during the pandemic, they might gain millions more now that its competition is out of business. They're running a

marathon, not a sprint. For our second story, handbag maker tapestry is honestly, it's the fashion surprise of 2020. That's what it is. That's because they figured out how to make outlet bargain items, their most profitable profit puppies. Now, Snackers, you may not know tapestry, but you do know Kate Spade, Stuart Whiteman, or you may know 70% of the their business, which is coach. According to a couple of our PFWTMs, the Kate Spade Satchel is the little black dress of accessories. Actually, that's what Jack and I like to call. We've been saying for years. Snackers, you know what doesn't pair well with sweatpants and Campbell's Soup these days? Fancy handbags and high heels. Yeah, that's right. It's why Kate Spade, Stuart White's been

coached. Their sales fell big last quarter for, you know, your usual quarantine reasons lately. On the bright side, though, sales were 110 million more than what Wall Street expected. The profit It grew, and the stock is back up to where it was before COVID hit us. Jack and I were fascinated, so we jumped in snack style. Turns out tapestry has a strange little secret going on. Tapestry's outlet stores bring in more profit than their full price stores do. That's right, Snackers. Kate Spade is pulling more money from the $120-Rouge cross-body outlet bag than it is from the $480-dollar shoulder back. We were shocked. How can you make more money on something that's 70% off, then the thing that is zero percent off. Well, if you go to the coach outlet, you're not

getting the unsold bag from the coach store on Fifth Avenue that was shipped to the outlet store. That's the dirty little secret. The stuff you see at the outlet store, it's not the stuff that used to be at the Fifth Avenue flagship store. And you're not going to see that in the earnings reports. Jack and I had to jump in snack style to the annual report to see what was going on with the outlet situation. The stuff you see in the outlet store is manufactured specifically for outlet stores only. That's their term. They are literally making cheaper bags for the outlet stores at separate factories just for the outlet stores. That's the reason it says outlet below the coach logo on the tag because they want to make sure it's clear that this isn't a Fifth Avenue coach bag.

Honestly, Jack, and McDonald's was selling like quarter quality meat over at the McDowell stores, you think the FDA would get involved. Nick, I personally got burned by this from J. Crew Factory. I know you mean. Their cotton is like tissue paper. Honestly, Jack, the, uh, The elastics and the boxers are like charcutory. They cut these things ridiculously thin. So naturally, these bags come at a much lower cost to manufacture, so even though they're technically 70% off the full price, they can still make a good profit off that.

But here's the kicker-snackers. Now, the business over tapestry, half of their sales are coming from these outlet stores. And thanks to that boost in the more profitable part of the business, last quarter the profit margin jumped by a whopping seven percentage points. So Jack, what's the takeaway for our buddies luxuriating? over at Tapestry. Customer segmentation is how you maximize revenue. Jack, remember the old college discount movie tickets with the old college ID? Fifteen bucks for your parents, but if you got a

college ID, you can watch this Marvel flick for only 10 bucks. Jay Crew, I'm keeping that Brown University ID for life. Thank you. 10% off, everybody knows. Well, Tapestry has basically found a way to do that with their full price stores and their outlet store. So their full price stores are the high end, the high price customers. That is a statement by when you walk out with the coach bag in the coach bag. Outlet stores are not saving pies. Those are for the young bargain hunters who want steals. But here is the fascinating thing.

According to the company, there's only 5% overlap between the outlet shoppers and its full price shoppers. That means the full-priced customers, they're not price comparing with the outlet stores. They may not even notice that there's a discount cheaper version of their coach bag. And they just keep on paying full price like they always used to because they don't notice. And last quarter, thanks to outlet stores moving online for the first time, Tapestry added 300,000 new Gen Z customers at the outlet store.

So Tapestry's found a way to offer the college discount without calling it the college discount. They call it the outlets. For our third and final story, Blade is the Uber for helicopters. It's going public via spec. They're focused crucially on the upward arm of the K-shaped recovery. Now, Snackers, here's the key here. When you're getting from Manhattan to JFK, it's like an Odyssey. You could actually read the book The Odyssey on that trip to JFK.

It's tough through the Midtown Tunnel. I traveled from the East Village of New York to Vinyl Haven, Maine. I walked on the sidewalk, took the subway, took the Long Island Road, took the air train, took a plane, took a bus, took a ferry, walked. I think there was a bike in there. You get to Terminal 4, the Delta Terminal at JFK. Honestly, you need a Sherpa to get past 830. It was quite a schlep, and traveling really can be.

But here's the big question, Jack. Would you pay $295 to make that whole? whole journey a five minute. Today, probably, back then, probably not because I was broke. Enter a company founded in 2014 by a Sony executive who likes Montauk and really liked Uber's logo. Yeah, Blades app looks just like Uber's app, and this company will get you from Manhattan Island to the Hamptons for $800 in helicopter. The way Jack and I like to think about this, it's basically last mile delivery of wealthy people. Exactly. That's why they also offer a chopper ad to Nantuckie, A private jet from the Denver airport to Aspen or a sea plane to get you from like Key West to

Miami. Now, the best part about this is that the investors in Blade for this SPAC, they're ironically the clients of Blade who are using it every week. For these people, time is the only resource they care about. Time is money, so they'll drop $800 to avoid the Long Island Expressway. We're talking Barry Diller from IAC or IHeart Media's Robert Pittman. They're splurgeon on this company. Or Discovery's David Zasloff or the famous media mogul.

David Geffen. But here's the funny thing about Blade. Blade was actually the first ever Zucking Jack and I noticed, and it was before we ever had this podcast like 10 years ago. Not only does Blade's app look just like Uber and so does their brand. Yes, it does. They also don't own the actual gear, like the helicopters in this case. No. Blade just does the app and the infrastructure to connect you with a helicopter. And honestly, like perfect timing for them because Uber just sold off its air taxi business so it could focus on its core personal issues. Uber is retreating from helicopters just as Blade is advancing. So there is another way that Blade's trying to differentiate from Uber, and this is with their lounges.

If you've ever biked down the West Side Highway bike path next to the Hudson River, which is a great experience. You've seen the helipad at 33rd Street. Those are Blade helicopters heading to the Hamptons and heading to JFK. And if you pass security and are able to actually get into one of those, apparently they're going to make sure that your hot towel is actually hot. It's better than the Delta Lounge. But what Jack and I find interesting here is that the private equity firm that's behind the SPAC that is acquiring Blade so it can become public happens to also own some aviation company. So it's a strategic investor. It can help Blade with airplane maintenance, helicopter expansion, and figuring out like how to open those big hanger doors. So Jack, what's the takeaway for our buddies with the big hanger doors over at Blade? In a K-shaped recovery like we have right now, companies must play to the extreme.

So Snackers, here's how the K-shaped recovery goes down economically. Some are emerging financially from this pandemic better than ever, but some are emerging worse. For those who are better off right now, Blade fits perfectly with their post-pandemic travel needs. Here they are. It's like domestic, it's short distance. It's pampered. It's away from the crowds. These are the core demands of the 2021 Fancy Flyer. Now, just like Tesla on Uber, Blade could technically go down market and could start offering a cheaper version of itself like a Blade X situation. Or a Blade pool. Will you take a nine-minute helicopter ride to LaGuardia with five other random people in your helicopter? Either way, in a K-shaped recovery,

you got to focus on one of the extremes. Blade is focused on last mile delivery of wealthy people. Jack, and you'll whip up the takeaways for us over there. Planet Fitness has front-squatted its stock back to its pre-pendemic high. It's a ridiculous cancellation policy that basically pulled down our move, broke our lats. For our second story, Tapestry often makes more money

on the $100 discount versions of their handbags, then the $500 full-priced one. It's customer segmentation. That is how Tapestry is offering the college discount without calling it a college discount. For our third and final story, Blade is going public through the back door to the stock markets known as SPACS.

Yeah, and it's focusing on just that upper, upper, upper K-shaped element of the K-shaped recovery. Last mile I'll deliver of wealthy humans. Now, time for our snack fact today. This one comes in from Allie in Akron, Ohio, also kind of a correction slash clarification. Well, Akron, first of all, is known as the Rubber City, and I hope she doesn't issue a correction for that,

because I'm not 100% confident in that nickname. The rare snack fact within the snack fact, Jack. We mentioned last week that only 49% of a bag of chips is actually chips. The rest is air. But the air in those chip bags isn't actually air. According to Allie, it is nitrogen that extends the shelf life and preserves the food. It makes you think twice when you pop open the bag and enjoy the size. smell. Another snacker, let us know on Twitter that that air also serves as a cushion so that the chips

don't get crushed. So don't get angry at the air. Be appreciative of the nitrogen. Snackers, you looked fantastic today, but what Jack and I would love is if you could share your snacks. H-Y-H-Y-S-D, that's all you need to know. Slack your coworkers, have you had your snacks daily? We'll see you tomorrow. If you know, you know. And before we go, big congrats to carry over in Westlake Village. She just got a new job. And we just want to show some appreciation for Adelaide, who is one month old and has listened to every episode every day of her life. Honestly, no one else can say that. Oh, and Marion Myers, happy birthday turning 89 in lovely Martinsville, Virginia.

And happy birthday to Ronette Weinberg in Scarsdale, New York. And Jacob Westphalen in Keel, Wisconsin. And Courtney Carvalho in Houston, Texas. And Michael Rector in Palo Alto. And Terrace Malchenco in San Mateo, California. And Sierra Williamson in Sherbourne, Minnesota. and Nathan Rob in Dublin, Ohio, and Chris Tung in San Diego, and Yushang Shia in Chino Hills, California.

And Falak and Farhand, congrats on the anniversary down in Austin. And happy anniversary to Smart Madden and Bhakti in Sunnyvale, California. This is Jack. Nick and I both own stock of Airbnb and I own stock of Blade. 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.