The Best One Yet - 🧵 “The Stitch hit peak Fix” — Dick’s bigger gun ban. Grove is a $1B tree-positive company. Stitch Fix plummets 25%.

Episode Date: March 11, 2020

Dick’s Sporting Goods used a tech-ish tactic to realize that its gun ban helped profits and its CEO’s values. Stitch Fix shares dropped 25% because the latest data shows its early adopters are losing enthusiasm. And the “Unicorn of the Day” is Grove Collaborative — it’s already focused on sustainability products, but its latest move promises a sustainable package future.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 Wednesday, March 11. We are going to get three bullet points on coronavirus. Shish-Chimping visited Wuhan province, President of China. That's the President of China. It's a big deal that he went to Ground Zero.

It shows they've made progress in China. Airline stocks jumped 20% on hints that the government would support the airlines if they're going to support the airlines. Okay. So the government's ready to support. In fact, the White House is pushing for tax cuts to help Americans who may be out of work because of coronavirus. That helps stocks on a wild. day finish up then down then up then up then up the Dow ended up over a thousand points perfect timing because we happen to have made this the best snacks daily we have ever done our first story is stitch fix

the stock dropped 25% because we may have hit peak fix jack what is happening with our early adopters over there we're going to talk about early adopters and then what comes after early adopters is a late adopters a spoiler alert it's actually no it's not second story jack dick's sporting goods has a gun ban No guns sold in stores. That's right. Only in some stores, but it's expanding its gun ban to 400 more dicks. We're whipping up the experiment exploit playbook that they may have taken from Netflix. That's right.

Experiment, then exploit. Ease and then Ease. Third and final story, Jack. The unicorn of the day is Grove collaborative. Ooh, just cut it to Grove. A $1 billion household goods brand that is going tree positive and zero plastic. We're going billion dollar valuation, zero plastic on this thing. Plastic is the anime.

Now, before we jump into all that, Snackers, we got to talk about something else going on right now amid the coronavirus situation. We said we wouldn't mention coronavirus. Okay, starts now. Here's the thing. Spring training for baseball is happening. This is going on right now. They're flying down. They're doing the grapefruit league, the Orange League?

It's a Florida and Arizona thing. It's a beautiful thing. It's very exciting. What's less exciting. Jack and I heard this. We weren't happy. Is artificial turf is coming back to baseball. We're talking three stadiums, Miami, Texas, Arizona, making the transition.

The Marlins, the Rangers, and Diamondbacks are going from natural grass with dirt and with grass, Kentucky greengrass. Yes. To artificial turf. We're talking a humid environment, a dry heat, and an extremely dry, dead heat. Now, artificial turf is back. We're not talking about the AstroTurf made famous from the 1966 Astrodome in Houston. Interesting formula went into that AstroTurf. It was concrete with more concrete.

I think it was a combination of concrete with wall-to-wall carpeting. Destroyed your knees. Destroyed your ACL. If you're your MCL. If your MCL right now is like strange, just thinking about it. No, no, no, no, no. The modern field turf is like green stuff that resembles grass. Yeah.

And then little black rubber pellets that resemble dirt. Best thing that ever happened to recycle tires. These tires are living a whole new life. They actually, they're bouncy. They make you jump higher. They're cushion. And if you get tackled to the ground, it hurts less. Only negative is your entire class.

It's filled with them. Blame your socks. It also gets all over your leg underground. Funny thing, though, Jack. And I noticed about these three new stadiums with artificial turf. They're going full on millennial with the material. Instead of recycled tire parts, they're actually using 90% coconut, like coconut filler. You go to the Marlin's new stadium, you scoop up the turf, throw it in a chia seed pudding with the coconut.

It tastes fantastic. Seriously, can you eat the stuff? Like, if you get face planted, can you just like open up your mouth and get a silver lining? Now, the reason Snackers that Jack and I aren't down with this is dirty uniforms were like a crucial part of our athletic playing careers. Even if you get no playing time in a game, if you just rub a little bit of dirt and mud on you, people think you played. It's something you do when you've been on the bench if you're. times. But with field turf, you don't get it. Also, quick stats here, Jack, you want to share college football days? Freshman year at Middlebury College, we had grass. Then we switched to the

artificial stuff. Jack? On the grass, I had 100% completion percentage as a QB. Meanwhile, on the lacrosse field in the spring, I was 100% on the face off. Full disclosure, the sample sizes were pretty small. Jack was one for one. I was three for three. Let's in our three stories. You're tuned in the snacks daily. 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. 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, Stitch Fix stock plummeted 25% yesterday. The data shows we may have hit peak fix.

Jack, do we have to go back to? that incident in 2018. The first time we ever covered Stitch Fix, Nick dove in snack style aggressively. And got a Stitch Fix delivered to him. Like three weeks later, what shows up? A pair of cargo sweatpants and a faux Henley. No, actually, yeah, that's right. Cargo sweat shorts. Yeah, sweat shorts. They went like three quarters down my leg. Nick looked like, I didn't go out in public for like three days after that. It was not a good luck. I was judging myself. So Stitch Fix struck out with Nick, but it's actually a digital styling service powered by both humans and algorithms.

Right, and the way it starts at is they make you get on board with a style quiz. Right, like, are you a modern style person, or do you like Boho Sheet? Are you a slim fit or you athletic fit? Do you have huge thighs like me because my quads are enormous? You have thin thighs like me where it's like, are you able to stand? And based on all that, they're like, okay, these are the clothes we're going to get you. Right, and what happens is you end up getting a monthly box of ambitious clothing that pushes your limits of comfort.

Now, a couple days ago, Stitch Fix announced their fourth quarter earnings. Interesting. Users grew 17% to 3.5 million. That's not too bad. Three point five million people are humiliating themselves with Jim Shorts. Sorry, is it sweatsharts? Is it the mirror or is it me? It's both. But here's the thing. The stock of Stitchfix is down 67% from its all-time high. Oh, there's shocker here, though, and kind of a positive. We're talking about a venture-back tech company. That's not like the venture-back tech companies. No, this one's profitable. It's been profitable. It made a smidge of a profit. little profit. Even if you can't see it, it's a profit. But the stock fell 25% yesterday in reaction

to those earnings. And here's why. Snackers, here's what Jack and I find fascinating. Stitchfix says its newest product is thrilling, exciting, and fascinating. Actually, it kind of undermines the core business. It's a fundamental problem. It's called direct buy. This is when Stitchfix takes the information from that style quiz we talked about, about the width of your thigh, the circumference of your thigh. It's a thing. And they basically say, okay, here's a bunch of clothing you could buy based on that. And instead of having to do the monthly subscription box, which is recurring revenue for Stitch Fix, you can just buy a la carte the clothing you see. That's pretty much like every other clothing company does online shopping. Pretty much what Jay Crew does, I'm pretty sure when I'm on Jay Crew,

it's showing me the stuff that's relevant. Yeah, it's like you check the box that you're a man, you check that you want shorts, you check you on slim fit. Yeah. Isn't what else is Stitch Fix? Oh, I bought the 484 khakis. Yes, I'm going to like the cable knit sweater. So it's not a good sign that they're offering something besides their core product, which is kind of the profit puppet. It's undermining the whole point of having a human and an algorithm pick clothing for you. So, Jack, what's the takeaway for our buddies over at Stitchvix? Stichs has an early adopter problem. Snackers, after an innovation occurs, like the hybrid human algorithm clothing picker at Stitchfix,

early adopters are what drive the company until there's growth. Right. We had some great early adopters on Snacksdale. It was pretty much our moms and their friends. But eventually you reach mainstreamism, and that's what carries your growth as a company. Now, we looked at the numbers of Stitch Fix. Their early adopters are losing some of their love for Stitchfix. Snackers, get these stats we got from the company, the information.

Apparently, customers are spending half as much in their second year as the first. Okay, so maybe they were spending $100 a month on Stitchfix subscriptions in year one. Yep. In year two, they, like, got the skinny bundle for $50 a month. Then Stitchfix recognized that, so they decided to increased ad spending to get new customers. Jack, what's the problem with new customers? They got some new customers, but those new customers are spending less per month than an existing one. Stitch Fix isn't moving beyond its early adopters.

For our second story, Dick Sporting Goods extended its ban on guns to 440 more stores. Well, excuse me, where's the hunting section? Section Zero. Doesn't exist. We're talking about Dick Sporting Goods, which sells Rawlings baseball guns, Reeboks shoes. How I'm following you. And also rifles. Would it be, I knowl set?

Isn't that like a thing? Null set? I thought that was like a zero in math. Oh, that's what the Germans called zero. No. I know where you're going. Anyway, they're cutting back on the rifle part. Exactly.

Now, we're talking about the Pittsburgh suburb-based big box chain, who sales rose 5.3% last quarter. The big news, though, wasn't how much sales rose last quarter. Everyone's like, one on sales. Who guys about sales? It was that they're expanding their gun ban to 440 more stores. Get this, Snackers. That means only 12% of their 850 stores are going to even have a hunting department.

Now this is personal with CEO Ed Stack, who was pretty upset after recent mass shootings in Florida. First, they stopped selling assault rights. Then they increased the age of buying firearms to 21. And now they're taking things a step further. We have to talk about their tactic, experiment and exploit. Exactly. That's how Dick operates and was able to optimize for this situation. First, they experimented. They banned guns at 130 locations back in the spring of 2019. Then they looked at the results and stores.

without guns had higher profits than the stores that were selling guns. That's because they didn't just like eliminate the hunting section. There wasn't like a whole like bankrupt essentially. We don't like sports section of the Dix that was empty. They took down the stands that were holding guns and bullets and they replaced them with goods especially for high school athletes and women athletes. And those sales apparently were better. All right. So Dix looked at the experiment, looked at the results. And then they said, all right, we know what works. Now let's exploit this information. They know that banning guns leads to higher performance. So they expanded that. to more stores. In fact, 440 more. But you gotta be very precise with this. Maybe the gun ban

worked well in suburban dicks, but not so well in rural dix. Jack, I couldn't have said it better myself. So maybe they're banning guns in suburban dicks and not banning guns in the rural dix. Now, Snackers, when it comes to this experiment and exploit mentality, tactic, strategy, whatever you want to call it. You can maybe use this, maybe steal like an artist and use this in your dating or personal life. You know that joke, the one with the rabbi and the priest? Maybe test this out first with the Uber driver on your way to do a date. And then if the Uber driver laughs, you can exploit that by offering it between the appetizer and entree to that lucky guy or girl when you're on your first date at Union Square Cafe. Exactly. You use the method it could work. Experiment. See the results.

Then exploit. So Jack, what's the takeaway for our buddies over at Dix? CEOs aren't beholden to just doing the profitable thing. Snackers, you might think that CEOs can do pretty much anything they want. Uh-uh. No. Can't just pull the seat. card. Not a name. Not true. They legally have to do what is best for the company. It's like a fiduciary duty kind of thing. It's a key thing. And until this year, the definition of best for the company was best for profits. Exactly. It was just profits. That was the only thing you thought about. But there's been some developments over the last year that mean that's not the rule anymore. The business roundtable last fall decided to redefine the purpose of a corporation. It is no longer just profits.

You have to consider other stakeholders as well. Now, if you're the CEO, you're, you got to think about the environment, the community, the workers, the shareholders, they all have to be considered in this decision. Ed Stack, the CEO of Dix, was trying to show that his personal morals. Yep. And Dix profits, nice, were aligned. Today, that's not required anymore. For our third and final story, we got our unicorn of the day. Grove Collaborative just made a zero plastic pledge. Bold move for a company in the business of household cleaning products. Also, Jack and I want to micromanage you on this and pull like a Facebook drop the the but Grove Collaborative. Let's just go with Grove. Yeah. No, but seriously, household cleaning products,

they're all in plastic bottles. So Grove is a San Francisco-based certified B-corporation. Which means it's super focused on purpose. They want like a corporate scout medal for purpose on this one. Their full hustle is purpose, their side hustle is profits. In case you're curious about other B-corps that are out there, Patagonia is technically a B-Corp. Ben and Jerry's straight out of Vermont. And Albert's also a B-Corp. Now, they sell household cleaning products. Some of them are not. They're own brands. Mrs. Myers, seventh generation, also based out of Burr-on-Tiper Mall. Right. Mrs. Myers, the one that's got like the classic throwback imagery on it. But they have their own brands, too, and they make their own bamboo toilet paper, among other things. Now, the business model is focused

on selling stuff online, but they really want to nudge it toward the monthly subscription. Right. When you buy a six-pack of toilet paper and a little thing of liquid handsop, you're going to need a refill in like a month. So you order online, they want that recurring revenue. They want your refilling every month. Let me clarify. You should need a refill every month, and you might need two refills right now. This company has grown substantially to the point where they've raised $212 million from venture capital. And they're worth a billion dollars, aka their unicorn. Here's the thing, though, Snackers.

Right now, we're living in the era of sustainable products, a focus on sustainable products. We've talked a whole bunch about plant-based meats on this podcast. But the next era is going to be one of sustainable packaging. Once you've conquered the inside of a product. Yes. Focus on the outside the packaging. I just felt like we needed a pause there. Now, in America, we have tons of plastic, but tons and tons and tons and tons.

And what's worse than the fact that we have tons of plastic is that only 8.4% of plastic is actually recycled. We are a very wasteful country, and that is what Grove is attacking. So Grove is now making a bold move that Jack and I found fascinating. They're pledging to go plastic free by 2025. Here's the thing, they're already plastic neutral because, yes, they sell some plastic products. Yes, they do. They buy plastic offsets, which is basically paying somebody else not to use plastic. Or capturing plastics before they end up in the ocean.

Right. Like the high school save the beach club. Plastic free, though, is a couple of steps well above that. It means whatever you buy from Grove, there will be no plastic. It's going to be. Instead, including, like, glass or aluminum as the main packaging. But they're also getting creative. Instead of selling shampoo in a giant plastic bottle, they might sell you shampoo bars, which is like super. innovative. Or right now in our household, Ma and I are ordering soap concentrate. It comes as a concentrate and then you just add water and boom, that's your soap. But our very favorite is tree-free

toilet paper, which Grove is making. Instead of cutting down like a tree to make paper, they're using bamboo, which is like a freaky fast-going tree. Apparently you just need to like tear off a reed of bamboo and the tree is fine. We don't even know if that's a technical term. We're going to go with read though. No chainsaw required for bamboo. So Jack, what's the takeaway for our buddies over at Grove? not going to say collaborative. Purpose is branding. Everybody has a purpose. A promise is a differentiator. Snackers, environmental sustainability was already an option with brands like Mrs. Meyer or seventh generation. But Grove's CEO shows their differentiation in this epic quote. We're the only retailer in the world where you can shop knowing that every purchase, no matter the brand or products,

will not contribute to the world's plastic problem. Grove is taking things up a notch over 7th Gen and Mrs. Myers. So consumers don't have to check labels. They can just check. Except one place, Grove. Jack, can you stop caressing the AstroTroof and whip up the takeaways for us already over here? It's called Kentucky Bluegrass. First story, first takeaway. Stick Fix did great with early adopters, but they've run out of adopters altogether. Humans plus algorithms isn't for everyone, probably including our mom.

Second story, Dix is expanding the number of stores that are gun-free by 440. Experiment with gun-free stores, then exploit the data with gun-free stores, more of them. Third and final story, Grove sells home-free stores. products online. It means to go plastic free by 2025. Snackers, a mission is branding. A Promise is a differentiator. Now, time for our snack back to the day. This one sent in by Aaron Fricker. I think we forgot to figure out of his hometown. We didn't know his hometown. Aaron's from a place. Yes, yes. The 134-year-old secret formula for Coca-Cola, the soda. Yes. exists on paper. And it's sitting in a vault. It's not like patented because that would mean they'd have to show the world what it is.

even though that would mean it's also protected. Right. Now, of course, it's like on computers and in the kitchen and Coca-Cola somewhere, but it's also in a vault. Physically, in Atlanta, at a museum right now. And that vault was moved in 2011 for the first time in 86 years. So you can go and you can get close to the formula, but you're really just going to see a vault.

No, they're like, I swear the formula's in there. You can't see it, but take my word for it. Don't touch it. Just trust us. Also, even though it's a secret formula, I'm pretty sure Pepsi figured it out. A little bit of the old back engineering reverse engineering on that thing. Snackers, you all looked fantastic today.

And when you see your buddies, ask him a question. Have you had your snacks daily? H-Y-H-Y-S-D. We can't wait to see tomorrow. Jack and I wear the same sweaters. Let's do it. The Robin Hood Snacks podcast you just heard reflects the opinions of only the host 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.