Lost Summer | The Daily Peel | 9/6/22

Market Snapshot

With summer in the rearview, investors are hoping for some fall gains.

Markets tanked in June, staged a comeback in July, and then fell again in August to end up right back where they were in mid-May, with the S&P just below the 4,000 mark.

At the close, the Dow dropped 1.07%, the Nasdaq lost 1.31%, and the S&P gave up 1.07%. WTI Crude bounced back to $88 a barrel.

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Let’s get into it.

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What's Ripe

Lululemon Athletica ($LULU) — Somebody forgot to tell $LULU that employees are returning to the office and trading in yoga pants for suit pants. The high-end retailer popped on Friday after a nice Q2 earnings beat.

In a time when nearly all its competition is revising down sales estimates for the balance of the year, Lululemon brought theirs up. I guess people that pay over $100 for yoga pants just don’t care that much about inflation.

New entrants like Vuori are taking their share in the luxury athletic apparel market, but $LULU’s brand is strong like bull. It gained 6.70% on Friday.

Kohl’s ($KSS) — Kohl’s competes in an entirely different market than Lulu—its deal-hunting customer base means slimmer margins.

With the death of malls and the rise of e-commerce, it’s been seen as ripe prey for a private equity takeover.

That day may be around the corner. PE firm Oak Street Real Estate Capital recently made an offer to get a few billion of Kohl’s real estate off their hands.

Investors cheered the news, with $KSS jumping 5.64%.

What's Rotten

Peloton ($PTON) — Remember when the traditional gym was going to die at the hands of at-home fitness products like Peloton and Mirror?

Hasn’t quite worked out that way. Turns out, people would rather pay 20-50 bucks a month to go to the gym rather than a few grand to buy an exercise bike, followed by $40 a month to access relevant classes.

Plus, whenever you tell investors that you have so much inventory that you’re just gonna stop making more, it’s not a great sign for growth. Peloton did that this past January and has dropped all the way to half its IPO price.

By the end of the day, $PTON had plummeted 8.17%.

Opendoor ($OPEN) — SPAC daddy Chamath Palihapitiya made a killing when liquidity was coursing through our economic veins, but companies like $OPEN have cratered since the party ended.

Back in Sep 2020, Chamath used proceeds from $IPOB to buy Opendoor for nearly $5bn, betting that it could capture some of the humongous fees associated with buying and selling homes.

Unfortunately, that’s harder to do when the housing market turns. It’s sitting on a mountain of inventory that it has had to mark down several times and may continue to drop.

$OPEN finished the day down 4.21%.

Thought Banana

Quietly Quitting the Rat Race — Other than second homes and screwing over Millenials, there’s nothing Boomers love more than lamenting the labor shortage.

It’s funny how “market forces” are gospel when CEO pay is hundreds of times that of the median employee, but when labor is in high demand, the market is broken.

There’s obviously other factors at play, but isn’t a shortage resolved by… raising prices? There are inflation feedback loops and other issues that can come up, but it doesn’t necessarily imply some structural problem.

Talking heads have been fuming about the “quiet quitting” trend lately. Instead of talking about an economic imbalance between supply and demand, it’s “does anyone want to work anymore?”

The general theme I’ve gotten is that quiet quitting basically means getting your job done without a modicum of extra effort. That may not be #riseandgrind material, but it doesn’t seem like a crime, either.

Clearly, many take it too far. We all know that one coworker who never has his camera on and is definitely playing Fortnite while muted.

But still, there’s just something irksome about hearing the likes of billionaire Jamie Dimon whine about current labor trends working against them. Wonder why he’s so adamant about in-person work? His company’s huge investment in NYC real estate might be juuust a small part of it…

All this hand-wringing about remote work and lazy American workers seems like it could be solved with better measures of output. Isn’t the bottom line all that matters? Maybe loosening our grip on the 9-to-5 in favor of what people actually get done could calm everybody down.

Collaboration is touchy-feely, but at the end of the day, business owners just want to know that their employees are worth their pay. That’s easier with some jobs than others—I can add up a salesperson’s deals, but how do you grade a therapist?

I’m not here to say Boomers are all incompetent and resentful. The state of the US workforce is in absolute chaos right now, and nobody knows the endgame.

However, slamming the table and demanding your way or the highway may put a lot of CEOs out of work.

Wise Investor Says