The Best One Yet - SmileDirectClub’s IPO, Estée Lauder’s airport makeup passion, and 181 CEOs renew their vows.

Episode Date: August 20, 2019

Makeup legend Estée Lauder jumped 13% after its earnings report, but we were most interested in its “travel retail channel” surprise. SmileDirectClub wants to IPO, so we jumped into its filing documents and found an Instagram story. And the Business Roundtable held a meeting, but ended up renewing its vows of what being a corporation actually means today.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 Tuesday, August 20th. We are back, baby. It feels good. This is the best one yet. This is actually the best one we've done in at least a week. Stocks, that is true. Stocks rebounded after three weeks of losses. Yep. And we have three great stories for you. And we got three days of up in a row. Jack, what have we got? This is quite a mix. Number one is the Unicorn of the Day, Smile Direct Club. Stick it on a registry, yeah. It's worth $3.2 billion, and it's helped 700,000 people smile. Now it's got its IPO coming up. If you've got teeth or you've got a Tinder profile, you should probably be listening on this one. Second story is Estée Loddard. The stock jumped 13% after its makeup and skincare were off the hook.

But we're looking at one aspect travel makeup. Please present your boarding pass, Jackie. You don't have to take off your shoes. We got a good story. You get in line. Keep moving. Third and final story. 181 CEOs got together yesterday.

Made a joint press release basically renewing their vows with society because big corporations aren't getting much love right. A little less profits at all costs, a little more awokeness, very poetic. But before we jump on all three of those stories, first it feels good to be back. Second, Jack, what have you got going on? I feel like I won the Super Bowl this weekend. Let me see that ring finger over here. I am wearing a ring.

You can't lift it up. Three incredible days of a wedding weekend. Oh, it was a real thrill. It was gorgeous. Newly wedded man right here. Everyone looked beautiful. Now, Nick was there. I was there.

He delivered the rings beautifully. Gracefully? Pulled out of the left pocket. He had a very clutch moment. and he also, on the rehearsal dinner, made a beautiful analogy of Marriages as an IPO. Jack's been talking about Marriages and IPO for as long as Jack's been talking. So Nick tells my then-fiancee current wife that there's a lot of competition out there for me. I felt she should have full due diligence on Jack.

The only way to do it is an S-1 filing document. We found one from the SEC all about Jack. Nick recited my S-1. Spoiler alert. Turns out there's a lot of competition in the business model of Jack, aka his three brothers who are strapping. Now, my voice is still shot from a duet. I did with the new bride. Keep pounding through.

My voice cracked during the falsetto moment, but my new mother-in-law got to laugh about it the next time. Jack, can you hit me with the takeaways from the wedding weekend? One, if you have a bow tie, learn how to tie a bow tie in advance. We learned that hard way. Do a duet with your bride or your groom. And three, always go for the falsetto.

Let's hit our three story. You're tuned in the snacks daily. We spoke to the lawyers and we got to get some illegal out the way. The snacks about to hear rain 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, member FINRA slash SIPC. For our first story, Smile Direct Club has just filed for an IPO while we were busy like doing the ring stuff.

This is a story about braces. But the real surprise is Instagram. to that in a second. But back to the braces. It's a painful thing. Something I know nothing about. These pearly whites are all natural. I got braces, but then my teeth got knocked down to lacrosse game and my teeth are way better than they were before. So Nick's from New York. I'm from Vermont. Nick has fake teeth. They're way better. They're way better. I have real teeth. Trust me, fake teeth are better than real teeth. This is the way to go. So Smile Direct Club makes a bold claim about its mission. They are democratizing access to a smile that you'll love. I feel like you need to say it with

like more pizzazz the way their ads go. Democritizing. access to full brace. The key is you're just supposed to be smiling while you say it. You probably see one of their ads because they're filled with gorgeous people who seem like they got a lot more work than the new. So, smiled the right ones. Here's the deal. You can basically get braces.

They're little plastic invisible braces. And instead of going to the orthodontist, you do it all like over the phone or on the computer. So your typical braces are going to cost like $5,000. How much are these? These are about $1.8,000. And your typical braces are going to take two years. These are going to take less than a year. Much quicker.

I think there's six months on average to straighten your teeth. And because we live in a direct-to-consumer kind of world, these things have a little bit of a tech element. You order them online, and we'll get to that in a few minutes. You also chomp into a mold to, like, send the doctor initially. Just sounds fun. I would do that a couple times a week. Now, the key numbers here. $3.2 billion is the value of the company, which is about one-fifth of a lift.

That's critical. They actually worked on like $700,000 now worldwide. And their revenue last year in 2018 was $432 million, almost quadruple, 2017's numbers. So that's pretty good growth. Now they've learned some tricks from like these other successful millennial direct consumer startups you've seen. One, we love Casper mattresses because in many top cities, they have created stores where they have nap pods. We can try out the mattress for the real deal. You're popping in your nap. Smile Direct Club said, you know, we're going to do a similar kind of thing. We're going to open Smile shops. Now they got 300 of them. They basically look like an Equinox

gym, but a lot brighter. Yeah, you go in there and you chomp into a mold and they tell you like, we think we can fix your teeth. It'll cost you this much. It'll take you this much time. Not a good first date idea. Great second date idea. The other one they've learned from is Hymns, which is the hair loss, erectile dysfunction, direct consumer. We will prescribe this to you startup. Right. So Hymns diagnoses erectile dysfunction medicine remotely. Exactly. So to smile direct cloud. They do it by you going on a computer, sharing your information, and then they say, hey, we can fix you. So they issued their S1 on Friday. Now that's the key filing document. him in if you want to IPO. And we jumped in there and we found some interesting trends that we want to

share it with them. We jumped in snack style and there was one trend that we thought was fascinating. Social media. Exactly. It was described by Smile Direct Club as this. Higher awareness of aesthetic image among consumers is a key driver of their growth. And that trend basically means everyone is under pressure to post stuff online. Yep. On Instagram. Or to post pictures of yourself on Tinder because that's like the only way to get a date these days. First impressions. are critical and Smile Direct Club knows that they said, quote, unquote, everyone wants to present an image of their best selves. So kind of sad that we all need to look so good and we're under pressure. But Smart Direct Club is offering a solution. It's a social issue. So Jack, what's the

takeaway for our buddies over at Smile Direct Club? Like Uber, Smile Direct's biggest threat is not business. It's public policy. Its drivers are independent contractors. So they don't get all the benefits of a full-time employee. Right. And if a new law passes that turns them into employees that do get benefits, that's going to be really bad for Uber. Now, Smile Direct Club, it's facing a similar kind of risk, like the kind of risk that can become really expensive or even get it banned. Right. Basically, the American Dental Association is very highly opposed to Smile Direct Club.

Jack is underselling this. They are literally suing Smile Direct Club in 36 states. They claim that the law says prescription dental treatment can only be done through a direct one-on-one visit with like an orthopedist. Sorry. orthodontist or a dentist. Basically got a lot of these orthodontists throwing in their stethoscopes, calling up their lawyers and trying to make a fuss. And these dentists claim Smiled Direct Club is ignoring the law, which puts your teeth, your smile at risk because this is serious. It's a medical issue.

And that's why Smile Direct Club is loving social media, but a little fearful of public policy. And the S-1 names that one big risk. For our second story, Estée Lauder, the queen of makeup. Definitely the queen of makeup founded by Estée Lauder herself. Esté is incredible. She definitely would have been a snacks listener. She's from Corona Queens. Shears jumped 13% yesterday, but we want to talk about what this show is about the power of airport retail. Did you hear that Estee Lauder from Corona Queens, not France? French sounding name based in New York. Used to probably hang out of Che. Now, the CEO came out and said, you know what? 2019 was an outstanding year for all of our Establanians. Yes, sales rose by 9% last quarter, led by Estée Lauder's makeup brands like Mac. Nice. Tom Ford Beauty. What a lineup. And LaMere, which is French for the Cs. It's a varsity team here.

They got 25 brands actually total selling in 150 companies. Yes, this is a giant, giant skin care and makeup global powerhouse. Now, Jack, you showed me the Hall of Fame right there. Can I tell you a little about the starting lineup? Please go. Dazzle me. All right, here's who actually was dominating for S. Day Lauder last quarter. Advanced night repair eye supercharged complex.

That is the name of a top selling product. They don't even fit it on the label. I think it's an eye cream you put on before bed to eliminate wrinkles. I think it's a lab with the Army. very confusing. They also got Soleil Blanc and Ud, which is a perfume. A couple of fragrances. Sounds expensive. Now, the big surprise here that came out of nowhere was the rookie of the year. This is a new product that dominated shampoos. Cherry almond softening shampoo and conditioner. We actually didn't see that one coming. Sounds like a tabletop. Delightful. Delightful.

Now, fascinating thing here that we decided to jump into. Airport brick and mortar is secretly killing it right now in retail. Yes. Travel Retail Channel. Great turn. 11 times in the earnings report. Let that sink in. That single phrase, travel retail channel, just dropped throughout the earnings report. So we have to shout out a great snacker named Cassie from Tucson, Arizona, who actually sent us a snack fact of the day, but we're going to throw it right into this story. She sent it to us when we were like on the way to Jack's rehearsal.

Retail spending that happens at airports, which includes duty-free stores, which is deadly. Has tripled over the last 15 years to $69 billion just a couple years ago. Now, let that sink in because if you picture your last trip to the airport, close your eyes imagine it. Better yet, someone is probably listening to Snacks Daily right now in a terminal as we speak. Yeah. Close your eyes for five seconds, then open them up and tell us where you feel like you are. What does it seem like? It seems like a shopping mall. It's got to feel like a shopping mall. Airport Terminal is basically a shopping mall. You got Gate 43 sponsored by Michael Coors over here. You got a spank shop at Terminal 2. You drop by Brooks Brothers that you walk out, you get to the airplane,

you're wearing something pleaded. So airports are serious places for retail companies like Estee Lauder to make money. Some snacker, if you're there right now, send us a picture. We guarantee it's mall looking like. So, Jack, what's the takeaway for our buddies over at Estee Lauder? At airports, you are a captive audience for shopping. Get this, 90% of the retail in the airport, it's after you stroll your way through security. Yeah, because you're told to get there two hours early, and then you're there two hours early. It takes you an hour to put your shoes on.

And you have nothing to do but to stand around, shop, you get instant gratification. Also, you forgot to buy a gift for your kid or your wife or your spouse. You gotta do that gift buying. You end up walking away with two perfumes in like a bottle of whiskey you're never going to touch. So Estee Lauder is crushing it in airport terminals right now. We always like to say that retail's not dead. Bad retail's dead. But this is an exception.

When there's a captive audience in an airport, any retail works. For our third and final story, corporations just made a big announcement in their wedding with society. Yes, they renewed their vows. And tell me somebody got that on video. Jack, please whip out the gardenias. It was beautiful. Now, the background, when we say corporations in general, we talk about. We're talking about the business round table, which is basically a club of CEOs who get together

and they talk about big picture best practices for CEOs. It's mainly, guys, as you can imagine, they've been hanging out since like 1972. They used to meet it formally and now that's like the same thing, but there's a lot more shrimp cocktail. Yeah. So one of the things that they have formally done is they have defined the purpose of a corporation and that's the gold standards that CEOs look to to figure out like, what should I be doing? This was basically their original vow to society. What they promised they will do forever hereafter for you.

Yes. The original vow goes back to 1997. Great year. And they said the purpose of a corporation is one thing and one thing only. Maximize profits at any cost. That is it. Maximizing profits. That was inspired by economist Milton Friedman. Exactly.

So the question was always, what's best for profits and shareholders if we're here trying to maximize profits for shareholders. Should I sell cigarettes to kids? The CEO only has one question to answer. Will that maximize profits? If yes, sell the cigarettes to the kids. So since like the 80s, this whole vow has taken corporations

to build gigantic wealth for shareholders. Yeah, this is the bedrock of American capitalism, this profit maximizing credo. You wake up every day, you have your orange juice, and you maximize profits for shareholders. Now, that has caused a lot of negative

consequences over the years. In addition to all that wealth. Pollution to planet Earth. Reinforce negative stereotypes. It's contributed to the obesity and opioid epidemics. So with a lot of good has come a lot of bad. And so yesterday, Jamie Diamond issued a statement on behalf of the business roundtable. He is the chairman and he said the American dream is alive, but it's fraying. Now, 181 of his fellow business roundtableins, which include CEOs from like from Amazon, Apple, Bank of America. They got together and they decided to renew their vows. Yes, the purpose of a corporation has changed. Now it's not just profit maximizing. They will also consider customers, employees, diversities, ethics, and the environment.

The Business Roundtable actually issued a 300-word statement and the word shareholders wasn't mentioned until they got to word 250. And that used to be like the only word. It was it. It was all they care about. Shareholder, shareholders. Yeah. So the old definition was ruthless capitalism. The new definition is sustainable capitalizing. If you're trying to picture this, picture Nike taking a stand on social issues with Colin Kaepernick. Or Patagonia, donating the tax breaks it got to the environment. Those are examples of like the new capitalism that this is all about. So Jack, what's the takeaway for our buddies over at the business roundtable who've cooked up some brand new vows for the people? Capitalism needed to adapt to woke millennials.

Less than half of millennials believe capitalism is a good thing, which is a problem. Right. Capitalism did give us the iPhone. It did give us the Beyonce Jay-Z on the run tour last summer. It has made all shoes everywhere available for us. But it's also created the financial crisis and some other externalities. Yeah. And you got millennials who are questioning capitalism at every turn. They're rejecting big food, big beer, big soda, big clothes. Employees are boycadding when one of their company's acts without principles. Yes. If you haven't noticed that capitalism is under question, you haven't been paying attention. and it's time to adapt. Corporations are.

Jack, can you whip up the takeaways for us? Smile Direct Club is getting ready to IPO, but its biggest worry is legal and public policy. They're doing this IPO for the ground, by the way. S.A. Lodder's favorite place is the airport terminal where you have nothing to do but buy a $100 bottle of perfume. Jack, grabbing out wallum, make it a strawberry banana, and some intense eye complex for the skin.

Corporations are renewing their vows with society. They're not just focused on profits anymore. Big business has big impact, particularly awokeness. Now, time for our snack fact of the day. We haven't done one in a week. I hope we can still do this. This one is insane. You ready? The number of online mattress companies that send you a big mattress in a box that you get to like cut open the plastic and then it expands into a beautiful thing. You've heard of Casper, you've heard of Lisa, you've heard of Helix. Jack, before we give the number, this is such a wild number. You guys can put us on pause. Whoever's next to you

ask them what they think the answer is. Ask them how many online mattress companies they think exist right now. We're going to wait. Do do do do do. We're ready to go. There are 175. 175. Not 5, not 10, not 30, not 50,

170. Great article on CNBC. They also show that the logos and the names are very simpler. Two syllables, similar colors, cozy look. Great branding work on those.

Now, another key story you got to keep in mind for today. Twitter just announced that it's taking a stand on propaganda after it realized that the Chinese government is placing ads making the Hong Kong protesters look bad. Snackers, I can't believe we did it. Feels good.

Got back in the rhythm. Thank you for being patient and waiting for us for a week. The fake tan looks great, Jack. Thank you. Also, thank you to Alex for marrying me. You're beautiful. It was a great job. You guys did fantastic.

Snackers, we will catch you tomorrow. We can't wait. This is Jack. Nick mentioned Amazon in that second story. I own Amazon stock. 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.