The Best One Yet - Zillow is flipping houses, CEOs are getting fired, and Party City stock dropped 67% in 1 day

Episode Date: November 11, 2019

Party City’s stock dropped 67% after a brutal Halloween and helium crisis, so we’re looking at what issues it can actually control. Zillow has pivoted from just exposing real estate prices to also buying homes — that’s a big and risky bet. And with Gap’s CEO getting fired last week, 2019 has become a record year for CEOs losing/leaving their jobs.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 Snaps Daily. It is Monday, November 11th. Thank you for being with us. Happy Monday, because we have the best one yet. And thank you, veterans for listening. Happy Veterans Day to all our Snape-Passing Veterans.

It's 11-11. Great dates. Armistice Day, Veterans Day. Snackers. Let's hit our three stories where we got, Jack. Party City. On Thursday, the stock dropped by 67%. I don't know if I've ever seen a stock drop.

No joke. We double-checked it. It's not just because of the helium crisis. We're looking at what it can control, and what it can't control. Helium, it can't control. Yeah, that was actually a big issue. Zillow, the real estate website.

First democratized real estate listings, and now it's flipping houses. They're not just telling you how ridiculously expensive a home is. And the surprise of the day, Gap, just got rid of its CEO. Record number of CEO departures this year, Jack. It's a CEO apocalypse. CEO stands for Chief Exit Officer. I like what you did there. Thank you.

That was our mix. We're going to hit that. But before we get into those three great stories, We want to know what your favorite snacks moment has been since you started listening. Now, spoiler alert on this one, we really like Jack and I, the episodes leading up to this one. We've heard that this is the best episode we've done, so we like this one. But we want to know what story, what snack story, what takeaway did you really love and still remember every day? I woke up this morning.

I couldn't get Toyota out of my head. I kept saying muda, mootah, mootah. Honestly, this will help us understand you better. It'll help us whip up even better takeaways. And it'll just be a nice little moment for us to share. Read us your favorite snacks. Hashtag T-Boy T-Boy T-Boy, because it's the best one. Let us know your favorite T-boy, T-boy.

Actually, I think that's redundant. What's your T-boy, T-boy, T-Boy, T-Boy. Let's go with that. Motivation Monday. Yes. 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 ain't food.

It's ear 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 Party City just plummeted 67% to an all-time low That's a bad day That's a spooky day

And it's actually blaming Halloween Aggressively Halloween is to party city As Christmas is to Buddy the El The best way to spread Christmas cheer Is to sing loud for all the hear jack What I understand Now, Party City puts all its eggs in the Halloween basket and had a serious Halloween slowdown in sales.

They've got their Halloween City stores where they hire like 25,000 temporary employees to make sure you're getting the freaky stuff you need. And then October sales dipped by 7% it announced last week. At Halloween City, its other store, sales were down 21% at Party City. Halloween was a disaster for Party City. But guess what? It turns out there are a lot of other disasters they're dealing with over at Party City, too. over in like aisle 6. There is a helium shortage.

Like a once in a lifetime helium shortage. We're talking like, There's a helium shortage. And it means you can't buy balloons at Party City. No joke. And by the way, in case you're wondering, oh, helium, what's to do with helium? It's the second most abundant element in the universe.

According to Party City. They got this stuff on Neptune and we're running out of it in Manhattan. Yeah, there's a shortage. Party City said it's abundant in the universe, but finite on Earth. Key little asterisk there. Someone in a physics class right now is like, you idiots, of course. Now, this is what Elon's going after.

Exactly. And it turns out 75% of helium comes out of like three spots on Earth, and they're not getting enough of it. Okay, so because of the shortage, you can't get, you can only get limp balloons at Party City, which is the worst. And if you wanted a Halloween costume, I guess you didn't get it at Party City. And if you're going as a balloon for Halloween, I guess you weren't. Another issue they're facing? A couple other trends, homemade costumes.

Gen Z is like taking their doggie bags. This is the new thing. And instead of throwing them away, turning it into a profit puppy costume. If you're under the age of 25, apparently you're doing like an arts and crafts hour to prepare for Halloween these days. So it's nice that you're like making your own costume bad for parties. Another issue facing party city here? Trade war. That Batman cape?

Yep. It's maiden shop. Of course. And then the last one, e-commerce is just absolutely relentlessly stealing sales from parties. This is the one you expected, but it was worse than expected. So it's shutting down 45 party city stores. But they only thought at first they were going to shut down 15. Nick, we're partially to blame here.

R. Ron Burgundy and Brian Fantana Anchorman costumes. They looked fantastic. they felt pretty good. E-commerce, probably made in China. Very true. So, Jack, what's the takeaway for our buddies having less fun over at party city? Party City is not even controlling the controllables. Right.

Everything we just mentioned, those were things outside of its control. You have a helium shortage? Hard to blame you for the helium shortage. Sorry about that. I can't go to Saturn anytime soon. But if you look at the reviews for Party City, in fact, we looked at the one for 14th Street in New York. Jack and I know it well. We used to live in the East Village.

We used to plan Halloween parties. We had a legendary Halloween party right before Hurricane Sandwich. I remember, Jack, we went to the store. Our roommates, Dave and Timmy. We went to get a bunch of black lights because we wanted to turn the whole apartment to the black lights. We went to the party city on 14th Street. Well, spoiler alert.

Someone stole our couch. Yeah, no joke. It was actually messed up. Pretty good party. Pretty crazy Halloween night. But the reviews clearly on Yelp, you see, you have to spend an hour at Party City, and we can totally vouch for that. There is a surgeon reviews of not only that, but if you're trying to pick up stuff at

Party City, there's an issue. Yeah, maybe you're trying to avoid the line so you're order online and pick up in store, all sorts of just issues that are being revealed on reviews. Only that, Party City's got a disorganized problem. For example, they have 32 tableware options if you want to buy, like, tableware. Green cups, blue cups, yellow cups, Christmas cups, Halloween cups. Turns out only 15 of the colors they offer are the ones making 90% of the sales for them. Sounds like they should get rid of the other 17 options because no one's buying. The new president says there's a significant opportunity to further curate and simplify our sermon. Yeah, we'd say so ourselves.

Party City's got to control what it can control and hope that helium shows up somewhere. For our second story, Jackie, hand me that Allen wrench over there. Zillow. It first democratized real estate information. Now it's making bank on house flipping. Okay, this story is about houses. Use an Allen wrench for an IKEA bedside table. Jack, it's a trick question.

You can use an Allen wrench for any. Okay, Zillow, ticker symbol Zee. Bolt. Zorro is jealous. Hopefully no zebras go IPO anytime soon. If you're a rent, that's a good one, if you're a renter, a homeowner, or obsessed with becoming a renter or a homeowner. We know what you're doing in your spare time. You're probably spending a lot of time on Zillow.

You're flipping through, like, I can do this. I can do this. Oh, that's ridiculous. You might be thinking, actually, I use Trulia or Street Easy. Zillow owns both of those. Mind blown for like 90% of millennials. So you're browsing homes that are too expensive. You're killing your productivity at work.

You're wondering if you can pay the estimated mortgage price. That's like Zillow trademark right there. It's clever, actually. Are we allowed to say that? I don't even know. Now, you can do all this because of Zillow. Before Zillow, you had to set up an appointment with the real estate agent. Or take out half your day to speak with someone.

Or creep onto a lawn and peek through the window and get ready to run. Don't mind me. Dad, don't mind me over here. So Zillow took information that was held by real estate agents only and put it all on Zillow. They were found in 2006, based in Seattle, and for years they made money on what they call Zillow 1.0. It's original version of Zillow. Search and find. That was it.

Real estate agents would pay. to get their name onto Zillow so that they become the agent that sells the home. Zillow was a simple platform until things changed drastically. Open door came along and did the same thing as Zillow, but actually cut out the agent and started selling homes themselves. We're talking online shopping, not for sneakers, not for Party City blacklights. For homes. Three-bedroom homes.

You get home late one night, you're a little drunk. You can make a big mistake. Let's just say you're not worried about shipping and handling for this home you're going to buy. But to do all this, it required that Open Door, this author startup, buy the homes online so it could then sell them online. Yeah, so they have like a roster of homes on their website. They've bought all of those homes. And so for Zillow, to match this, Zillow 2.0, its new upgraded version to take on Open Door, it started to having to buy homes so it could flip the homes. It's calling it the buy rent and sell because they buy homes and then rent them and they buy homes and then they sell them.

Now, we know what you're thinking here. So how's Zillow doing with this? What do we learn? we learned that Zillow's got some traction with this whole house flipping thing it's doing. And we learned that revenues for Zillow will double this year because it's taken on this new house flipping initiative. And the stock rose by 10%. So Jack, what's the takeaway for our buddies over at Zillow?

House flipping is way riskier than just selling ads like Zillow used to. Zillow owns 2,822 homes right now, or at least at the end of this most recent quarter. That's how many homes it's bought, but it hasn't sold yet. and it had to raise a ton of money to buy those 2,800 home. That charming 600 square foot one bedroom in the West Village with no kitchen that's ridiculously overpriced, they had to pay for that thing. And they had to issue stock or take on debt to pay for it. It's only a profitable operation, though, if you can then sell them for the higher price

and cover your interest for all those loans that Jack mentioned so you could even buy the place. And the renovations. I mean, this is house flipping 101. This is what Zillow is doing. So when it comes to Zillow, yeah, their sales have increased because of this. But so far it's not profitable. In fact, it's selling those homes on average for $317,000, which is less than what they bought them for and paid for renovations and legal fees. Even though this whole initiative is unprofitable right now, the stock jumped 10% because their forecast is positive.

For our third and final story, the Gap CEO, he's out. And this is capping off the CEO Apocalypse. There are a lot of experienced executives with experienced leading organizations. looking for positions at the top of the org chart. We're talking they're on LinkedIn. They're trying to be endorsed for skills like management, leadership. They're not looking for upward mobility. No, they were at the top.

They're looking for up. They want more higher on this one. Now, the Gap itself, this company was founded in 1969 in lovely San Francisco. Funny that San Francisco has both Levi's and Gap, the two jeans powerhouses. But the thing about the Gap is that really hit its peak in the 90s when we were growing up. I can speak firsthand. I had like an orange, a green, and a blue. I know what you're thinking.

Fleece hoodie. Your mom got you? With giant gap. G. A. P. It like yelled it. Everyone was six years old.

The G was as big as your head. You know how Under Armour wants to become a loud brand? Yes. That was a loud hoodie. But then our mom stopped shopping there. We started buying our own clothes. And we haven't been going back to the Gap as much. Actually, Banana Republic and the Gap, which are all owned by the Gap, have really struggled for years.

Now the CEO was just let go last Thursday. And this cap's off a lot of CEO depart. But this was particularly an awkward moment because they are about to spin off Old Navy, which is also owned by GAAP. It turns out it's GAP's most profitable brand. And it's being spun off into its own privately held company. This was the CEO's idea. It was just like, oh, it may not happen now. And the CEO leaving resulted in the stock dropping 8% on Friday.

This is just the last of record numbers of CEOs getting slaughtered. They're just leaving these days. It's something like out of a horror movie where you're like, you wake up and you see the newspaper, like, oh my God, another CEO. Well, some of them are leaving. Others are getting kicked out. Another CEO is gone. And another CEO is gone. Where's Mark Wahlberg to save the day?

Where's M. Night Shyamalan to turn this thing into a real hit? 172 CEOs have left since October. McDonald's. Yep. Under Armour. Yes. Nike. We work.

All of them. Those are the big ones, but a lot more, according to this recruiting firm, Challenger Gray and Christmas, that's been doing all the research on this. And for all of 2019, we are ahead of 2008. 2008 set a record for CEO departures because of financial crisis. Now, there are lots of reasons why these CEOs are leaving, including simply bad profits or they're retiring or there's misconduct. Like the McDonald's CEO who just got let go because of a consensual relationship with an employee. Not good.

CEO shouldn't probably have a relationship with an employee. Yeah, you definitely shouldn't be doing that. So, Jack, what's the takeaway for our buddies in the C-suite at the gap and anywhere? is harder than ever to be a CEO. In the past, if you were CEO, you had one job in that CEO role. Make as much profit as humanly possible. Outsource the jobs to China. Great.

Pollute the environment. Why not? Instill some hostile work culture. Sure. Maybe not even offer any snacks or food to employees for free. It was all good for decades as long as you were boosting profits. Now, now you are a spokesperson for your young and woke employees who demand a lot from you. true. You are an advocate for the shareholders who still demand profits. Yes. And you must be a global

citizen. If you don't have an active Twitter account as a CEO these days, what are you even doing exactly? Because you're not really the CEO. Get on Twitter, dude. You need to be a spokesperson and a leader. Now, this moment, this sea change really was reflected this past summer when the business roundtable of a bunch of major corporations, which represents a bunch of major corporations in the U.S., basically changed the definition of what a CEO should be focused on. Yeah, the purpose of a corporation used to be just profits as much as possible. But now corporations must consider lots of other stakeholders. We're talking sustainability, values, a commitment against sexual harassment. These are things now that a CEO is supposed to be focused on, not just profits. CEOs have to wear a lot of hats.

One of them is profits. And that's why we're seeing a lot of CEOs losing jobs. They are just not cut out. It's time for a new breed. Jack, can you whip up the takeaways for us to start the week? Party City had probably its worst day ever. The stock fell 67% in one day. It had some bad luck with the whole helium, e-commerce trade war thing, but it also isn't controlling its controllables. Well said. Second story, Zillow stock jumped on signals. Its house flipping biz, it's going pretty well. This brings the online shipping addiction potential to a whole new dangerous level. We're talking condos. Yeah, you don't want to buy like four homes one weekend. And the gap just terminated its CEO right before the huge spinoff of old name. He is the latest victim of the C.E.

the apocalypse. Now Snackers. Time for our snack fact of the day. This one tweeted in by Katie Dropick in Brooklyn, New York. Katie, we love this one. Sent to us, I'm assuming, on the L train, we don't really, I mean, maybe the C. Maybe the C. Some companies give themselves phony sounding foreign names just to make themselves sound more

sophisticated. You know what we're talking about. You see your buddy Johnny. He's been in Paris for a year studying abroad. Johnny! How you doing? It's Jean. I go by Jean.

It's Jean. It's just Jean. So Katie points out some examples. Abompon Pond. How do you even pronounce that? It's Oban Pan. Abapin. Jack and I have been working on this together.

Based in Boston. Pret-Amange. Based in London, not France. How about Com des Garcin? Based in Tokyo. Why are these all French names, by the way? This is ridiculous. I think that's its own snack fact within a snack fact situation.

Snackers, loved having you with us. Remember to tweet in your T-Boy, T-Boys of your favorite snacks. Tell us the snack story that you just loved. It will help us know more about you. We want to hang out with you guys. It feels like we already are. We'll see you tomorrow for T-Boy Tuesday. Can't wait.

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.

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