The Best One Yet - “We didn’t sell salads to sell salads” — Domino’s pizza domination. Victoria’s Secret ghosts. Morgan Stanley’s E*Trade trade.

Episode Date: February 21, 2020

Domino’s shares popped 26% because it’s got a uniquely DIY approach to delivery apps. Victoria’s Secret split from its L Brands parent, but turns out it’s worth just $1.1B. And Morgan Stanley buys up E*Trade in a deal that’s really all about saving time in the race to Main Street for the big banks.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, February 21st. Jack, how are we feeling? I got a feeling today's a Yobtee, which is T-Boy backwards, which stands for the best one yet. This is so much better than what we put out yesterday. Jack, first story, what do we got? Earth's biggest pizza company. Boom, it's dominoes. And it shares just searched 26% because it's going its own way, Fleetboat backstop. Doesn't need its own Uber. By the way, Stevie Nicks, big fan of the Snacks Daily. Second story. Victoria's Secret is getting sold like an old pair of underwear at a thrift store.

Can we say it got ghosted by its parent company? By the way, who's leaving underwear at a thrift store? It's spinning off into a private company worth just $1.1 billion. Jack, I think we need to talk and unpack this like underwear to thrower to thrift store thing after the pot. Third and final story, Jack. Underware is something that should never be sold at a thrifted. Let's go to the third and final story, Jeff. Morgan Stanley is treating itself to discount broker e-trade for $13 billion. Snackers, it's a deal that's really a real. about saving time. And we hear time is money. Also, discount broker, not discount acquisition price. Now, before we jump to those three wonderful stories, Snackers, we've talked about the monthly jobs reports. We have record low unemployment of 3.5% and that means companies have to compete for your labor and for your labor. And that means employees like you can demand more pay

except for one employee. Economic theory is defy. Economic theory is defy. when it comes to the Gerber Baby. Correction, spokesbaby of the Gerber brand, the Gerber Baby. That's right. The Gerber Baby is known as the spokesbaby. This is a paid position by the Gerber food company. They make typically $50,000 a year, but Jack and I were shocked, disappointed, scared, and had to hug each other when we heard. That pay is getting cut in half to $25,000 a year. That's right. The pay of the Gerber spokesbaby is getting cut by 50%. This is the freakishly adorable face of babies that for 10 years can be all over the Gerber website to be the spokes baby of the company. And Gerber is basically like the Project Juice or Juice Press for a newborn.

It's that mango smoothie? I would have that thing. Jack would have that thing. Now, that's right. This is a nationwide competition that happens every year. It actually gets Gerber a ton of free press coverage because last year, 544,000 babies were submitted by their parents. And that's not just a big number. It's a huge portion of the babies that They're actually born in America every year. Last year, there were 3.7 million babies born in the United States. That means one out of seven babies were submitted by their parents to become the official Gerber baby.

Carrie was the lucky adorable baby selected in 2019. 2020 is TBD, but half the wallet. You know, I'm a new uncle. Teddy and Lauren, you might want to think about this. 25thau can go a long way. Snackers let's hit our three stories. Greta for Gerber Baby 2012. 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. 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. Robohood Financial, LLC, member FINRA slash SIPC. For our first story, Jack, stuffed crust or crusts stuff? Stuffed crust with dipping mariner sauce. Trick question answers, yes. Domino stock just searched 26% because it's got a DIY-do-it-yourself attitude. Domino's fourth quarter earnings report opened with one of the best quotes we've ever seen from CEO. Get this, Snackers.

Here's what he said. We didn't sell salads to sell salads. We sold salads to sell pizza. Boom, throw that on a t-shirt. That's what they should be selling, not pizzas. Now that brings us to the second best quote. we've ever heard from a CEO. Delivery apps are in a, quote, unquote,

circular firing squad right now. By the way, quote from the same guy, same day. You don't want to be in a circular firing squad. And that's because delivery wars are happening right now between postmates, Uber, DoorDash, they're unprofitably splurging on promo codes. Those promo codes cost a lot of money. Meanwhile, those delivery apps,

they take fees from the restaurants that actually make the food that you order on your app. So Domino's is looking at this situation, and it's saying, you know what, we're going to do things our own way, like a high school senior, taking a gap year. Somebody call up Knowles. You've got a trip to Argentina going on. Domino's has got their own app and they're up in their GPS-enabled delivery tracking so you can see where that pizza is ASAP at all times. It's 2020. You need to know where the delivery guy is so that you can decide, am I going to angrily call the restaurant and ask where my order is or am I just going to cancel it? You open up the app, boom, you feel like a helicopter mom tracking that barbecue chicken pizza.

So where is this thing? I got to get this thing into like playgrounds. They're tracking the pizza instead of their kid. Also, Domino's wants their delivery app to be just as good, if not better, than the interface of like DoorDash and Uber Eats. And then they're doing other initiatives like they've added more salads so they can expand the market because we know when everyone order pizza, there's always one person who really hates carbs.

They sell salads to sell pizza to the rest of the family that wants the pizza. And they're strategically adding stores because we all know that delivery time feeling, right, Jack? There's a big difference between estimated delivery time 25 minutes or estimated an hour in 25 minutes. But here's the thing that fascinated us, Snackers. The real profit puppy for Domino's, it isn't delivery. It's carryout.

A.k.a. takeaway. A.k.a. takeout away. A.k.a. pickup. That's what we called in Vermont. Jack and I are definitely getting tweets tomorrow from Snackers. We're like, hey, in the Midwest, we call it takeaways away. Now, Domino's is kind of famous for their epic. delivery staff. They've had delivery cars like always ready to deliver your pizza, but that delivery guy costs money. Right. And so they're nudging people to do pickup instead because when you don't have

the delivery guy, you're saving quite a bit of money for Domino's. So Domino's has designated in-store pickup lanes so that if you're coming to pickup, they're like giving you VIP treatment. This is like an HOV lane. You can speed along, minimize human interaction, no more of the like small talk. Hey, how's the dough today? How's the dough rising? So Domino's loves takeout because it's more profitable than delivery. and now nearly half of their sales are pickup. So Jack, what's the takeaway for our buddies, Griesley over at Domino's? Long-term bets require short-term guts.

Snackers, look at Shake Shack, Starbucks, Wendy's, your go-to chicken parm spot around the corner. They all partnered with delivery apps. They saved money in the short term by not have to hire a tech developer, but in the long-term, they're going to lose profit margin because Uber-Eats is going to take fees. Meanwhile, Domino's has boldly done the opposite,

and now it's spending even, even more money on doubling down in that action. Domino's has a whole tech division, maintaining and upping the status of that app so you can update it like every three months on your iPhone, and in the long term, they'll keep the profit margin for themselves. Reminder snackers, not every pizza place, pizza chain pizza spot can afford to make like, you know, their own delivery app all the door dash. Famous Joe's pizza in New York isn't going to make their own app, but Domino's can because

it's the biggest pizza company in the world. But Jack and I still respect the fact. that it takes short-term executive guts to commit to a long-term payoff. By the way, Jack, I just want to apologize to all our snackers in New York right now. Jack said famous Joe's pizza. He meant just Joe's pizza.

It's either original Joe's or famous raise. We're sorry. For our second story, Jack, throw on the polka-Py's. Victoria's Secret is turning into a private company. I'm more of a flannel guy, but Elbrands is definitely selling Victoria's Secret. Victoria's Secret basically just got ghosted

by its parent company. Worst feeling, by the way. Les Wexner is the capital nationalist legend from Ohio who built up L Brands to basically be a shopping mall's best friend. Abercrombie. Limited 2. Who could forget limited to? Bath and Body Works, Victoria's Secret, they were all owned at some point by L Brand's terrible name, big company. Now L Brands, ticker symbol, LB, is just Bath and Body Works, which is also a brutal name. Kind of sounds like bed bath and beyonds like more boring cousin. It's very confusing, but L Brands is selling 55% of Victoria's Secret

to a private equity firm for two big reasons. First, Victoria's Secret. First, Victoria's is lost in the age of inclusivity and brawlets. You can't deny brawlets. Second, the founder and CEO, Les Wexner, he brought huge negative baggage to the brand. Yeah, we're going to sum this one up pretty quickly. He was very close friends with Jeff Epstein. Jeff Epstein was a sex criminal, Nuff said. Here's what shocked us, though, about the news that Victoria's Secret is getting sold. Victoria's Secret is worth just $1.1 billion. Snackers, Jack and I heard that $1.1 billion got us thinking, how can we jump in snack style

and see what else is worth $1.1 billion. Billion sounds like a big number. It's actually really tiny. It's about the size of a few startups like rent the runway, away luggage, all bird shoes, and Warby Parker. We're not talking plural on the billions people. We're talking you can round down to a single one loneliest number billion. Let's compare, though, this retail icon, Victoria's Secret, to some other retail icons in terms of public market valuation.

Okay, public market traded stocks. The good right now, Lulu Lemon, worth about $34 billion. Nike, worth $127 billion. How about publicly traded retail stocks that are having a bad time? What about Coach? It's only worth $8 billion. Gap is like desperately clinging to Old Navy for some source of hope, and that is worth $7 billion.

Under Armour literally had an issue where they were like sending clients to strip clubs the other day. Under Armour's worth only $7 billion. Meanwhile, though, Victoria. Victoria's Secret is worth just $1.1 billion. It's a sign of how far it's falling. It's worth just a fraction of the worst performing retail stock. So, Jack, what's the takeaway for our buddies over at Victoria's Secret?

Victoria's Secret should kill Victoria's Secret. It desperately needs a rebrand. Snackers, rebrands are a solid strategic way to erase some negative brand baggage. We expect Boeing is going to rebrand the 737 Max airplane when it finally gets certified, if it finally gets certified to fly again. So Jack and I put our heads to this four Victoria's Secret on her behalf, and we think maybe Pink, it's sub-brand that's focused on youngest demographics. That could be the future Victoria's secret if it rebrands. I literally consulted my wife on this.

She thinks it's a decent idea because pink is more at leisure, less push-up bra. It also launched the famous $5 for $25 deal. You got it. If you're going to be buying underwear, you want to be doing it in groups of five. You need one for every day of the weekday. Look at American Eagle. It is leaning heavily into the Airy brand. which is crushing it with younger females.

Meanwhile, Les Wexner, who was part of Victoria's Secrets baggage problem, he's now gone, but that doesn't fully solve the problem. The Victoria's Secret name itself is the other part of the baggage problem. For our third and final story, Morgan Stanley just snatched up E-Trade to become a Main Street bank overnight. We got to give a shout-out to our buddy Dave, the fourth roommate of our post-college situation in New York. Technically, he was buddies with Timmy, who was also buddies with us.

That made us buddies with Dave. Dave was our buddy. at Morgan Stanley, which is the oldest guard of Wall Street's old guard. When you work at Morgan Stanley, you shave twice a day because you're concerned they'd yell at you if you didn't shave the first night. Morgan Stanley is the name of an econ major who aspires to work at Morgan Stanley. And e-trade is kind of like the new guard when it comes to brokerages. It sounds old, but it actually stands for electronic trade, hence the e-trade, and they stuck

an asterisk in there for some. If they'd been born five years later, they would have gone with eye trade. would have been a cool move. Apple would have sued them. True. True. But this company is pre.com bubble, and it tried to disrupt finance with a novel thing called online trading. Right. They've got the dash in there. What really put E-Trade on the map was like the little baby who was a little bit creepy, kind of cool from a crib who'd like be trading stocks. Should have gone for the Gerber baby. True. Oh, huge list opportunity. You could have been the spokes baby for Gerber. Instead, E-Trade has five million customers today, mostly brokerage accounts. which have $360 billion of customer funds in those accounts.

But here's the thing, Snackers, E-Trade is not just a brokerage focused on stock investing. It's also a bank, which means it's focused on checking accounts. You can literally get a checkbook from one of E-Trade's checking accounts. It's not just a brokerage company. Everyone loves it when their grandmother gives them a check. Apparently can still do that these days too. And now it is Morgan Stanley's brokerage and bank.

Now, Snackers, Wall Street thought E-Trade was a wounded animal, but Morgan Stanley disagreed aggressively. This fall, E-Trade was making 18% of its revenue from trade commissions. Basically, $7 fee to buy a stock, $7 fee to sell a stock. But in October, rival brokerage Schwab, Charles Schwab, reduced its trading commissions down to zero. Now, this happened because Robin Hood introduced zero commission trading back in 2013. And then last fall, everybody, including E-Trade, had to follow and drop their fees to $0. Also, full disclosure here, we are Robin Hood.

This is Robin Hood's podcast next day. Full disclosure, we are Robin Hood. This is Robin Hood's podcast. After Schwab drop fees to zero dollars, E-trade kind of had to follow a little bit of peer pressure there. Now, on that day on October, Wall Street crushed the stock of E-Trade. It fell 14%. Because its key revenue stream suddenly disappeared overnight. But yesterday, Morgan Stanley's offer to acquire it was $13 billion, which is 34% higher than E-Trade stock was, that Faithful before the announcement in October of zero commission. And that's why E-Trade shareholders were thrilled and jumped E-Trade stock up 22% yesterday. Morgan Stanley's shareholders weren't as thrilled.

It stock fell by 5%. So, Jack, can you cut the commissions and tell us what's the takeaway for our buddies over at E-Trade? Time is more valuable than money, and this deal saves Morgan Stanley years. Snackers, fact, investment banks aren't just chasing the rich. They want yours and our money, too, aka retail investors. J.P. Morgan Chase was chasing retail investing with its sapphire brand and Goldman Sachs was going after Main Street with its Marcus brand. And Goldman is Morgan Stanley's arch rival, so it spent four years becoming a retail bank by splurging and building up this Marcus retail brand. And guess what? Marcus is still unprofitable for Goldman Sachs.

But Morgan Stanley just became a retail bank overnight. And guess what? It's profitable from day one, aka today. Morgan Stanley overnight is ahead of Goldman Sachs in Main Street. finance. Jack, can you whip up the takeaways for us over there? Domino's refuses to outsource delivery to the delivery apps. But takeout is more profitable so it has HOV lanes for pizza pickups because its execs have guts. Second story, Lbrand's just sold Victoria's Secret for a measly $1.1 billion. The founder and CEO of Victoria's Secret are out. Now it's time for a rebrand. Guys do the whole thing. Third and final story, E-trade just got acquired by Morgan Stanley, which becomes a player in Main Street finance overnight.

And $13 billion later. Time for our snack fact of the day. This one kind of linked in in our buddy Varun Ramesh over in Hershey, Pennsylvania. Delicious, Ferun. Varun must have been listening to yesterday's pod because we mentioned Google's founders, Sergey and Larry.

Turns out they wanted to sell Google back in the late 1990s when there were, I think, grad students at Stanford for $1 million. And that was because they wanted to resume to their studies at Stanford because, you know, like, where's the future in search? Now, today, Google, I think, is worth $1 trillion, which is $1 million millions. So, but the company that could have bought them, Alta Vista, aka the main search engine at the time, if you weren't asking Jeeves anything, declined because they thought a million dollars was too high. Reminder, Alta Vista, Google is now worth a million times more.

Snackers, you all looked fantastic this week, including Jack. You look great in that sweater. When you're talking to your buddies, please ask them one question. H-Y-H-Y-S-D. Have you had your snacks daily? It's a good thing to ask on weekends. It's a great conversation starting. Thanks for snack and see you Monday. Can't wait. This is Jack. Nick and I both on stock of Lulu Lemon. 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.