P&G Beats On Revenue As It Battles Inflation While Peloton Gets Hit By Shrinking Pandemic Demand

The first earnings of 2022 are coming out and it started on a strong foot.   Proctor & Gamble beat estimates and upped it’s sales growth from 2-4% to 3-4%.   P&G reported revenue of $20.95 billion, beating by 3.0% and net income of $4.22 billion, a beat of 0.6%.   P&G benefitted from organic products in health and home care (up 8%) and personal health care (up 20%), in part due to a more intense flue season.

One reason revenue growth outpaced earnings is that they raised prices along with costs to keep margins flat.  “While it’s very early for these commodity-based price increases, to date, we see positive signs,” CEO Jon Moeller said Wednesday on CNBC’s “Squawk Box.” “Probably 20% to 30% less price elasticity than we were expecting, and if you look at, for example, private-label market shares — private label being the lowest price offered on the market — they’re down.”

It also is upping it’s stock buy back from $7-9 billion to $9-10 billion. On one hand that’s a staggering amount of money.  On the other, it’s just 2 quarters of income and will help executive bonus achievement. 

Unfortunately, the news for Peloton wasn’t as rosy.  Shares dropped 23.9% last Thursday, wiping out $2.5 billion in market cap as shares fell below the Peloton IPO price.   What triggered the sell off was a CNBC report that they were halting production of its products amidst lower than forecasted demand and a report that insiders sold $500 million in stock before the previous decline.

Peloton responded with a press release that 2nd quarter revenues would be in the forecasted range and the CEO denied the report and shares rebounded 12%.  “We feel good about right-sizing our production, and, as we evolve to more seasonal demand curves, we are resetting our production levels for sustainable growth,” he added.    Nevertheless, net adds of subscribers has dropped 60% in the past 2 quarters as you can see from the chart.

While some analysts pointed out that the existing subscription revenue currently is worth more than the current market cap, BMO Capital Markets analyst Simeon Siegel lowered his price target on Peloton shares to $24 from $45, the lowest target among analysts, “Peloton lies at the edge of an important precipice; a material strategic reset is likely required to stem meaningful cash-burn and faltering demand,” Siegel said in a research note. “Yet, improved profitability demands sacrificing revenue. Connected fitness is in its infancy, yet we believe Peloton estimates still appear too high.”

Regardless, of the valuation, one thing is clear.  Pandemic behaviors and surges have waned.  For example, last week oil demand was projected to exceed pre-covid levels this year. Here is a great post from Union Square Ventures’ legendary Fred Wilson about how today’s market drop is recognition that we are approaching a post-pandemic future with less stimulus.

“If you look at the financial markets now, as I wrote two weeks ago, what we see is the unwinding of the Covid trade. Companies like Zoom and Peloton have seen their stocks come way down. Fiscal and monetary policies around the world that kept people fed and housed for the last two years are being unwound. And the financial markets are reacting as one would expect. Stocks are down. All risk assets are down a lot. This is the “tell” that Covid, as we have known it, is coming to an end in many parts of the world.”

We are approaching post-pandemic lifestyles as Americans look to the other side of the Omicron curve. Expect big swings back. Invest your budgets accordingly.  

The Latest Retail Technology News

Every week we cover the top retail technology news in the industry. Brick-and-mortar retail has often been overlooked and is experiencing a technology renaissance from the ways products are sourced, managed, inventoried, merchandised, marketed, sold and delivered. New technologies are being delivered from computer vision, QR codes,RFID, loyalty programs, lift and learn sensor technologies,smart shelves and electronic shelf labels, supply chain management, in-store analytics, personalization and payments. We believe in thebright case for the future of brick-and-mortar retail, and we highlight the technology underpinning it all. And if you are looking to the future check out our annual 2022 Retail Industry And Technology Predictions from our CEO Trevor Sumner.

Amazon is launching a 30,000 square foot apparel store in Glenndale, CA, featuring men’s and women’s apparel where shoppers can scan a QR code and have it automatically sent to a fitting room. Amazon claims they can have twice the selection in the same space because of their automation which is designed to “inspire.”

Warehouse automation firm Exotec has raised $335 million. “Co-founder and CEO Romain Moulin said in a statement, “While the entire logistics sector is fraught with uncertainty, one of the most prevalent challenges is ongoing labor shortages. Exotec pioneers a new path: elegant collaboration between human and robot workers that delivers warehouse productivity in a lasting, far more sustainable way.”

Raydiant, a leader in “digital on premise experiences”, announced its acquisition of Sightcorp, an AI audience analytics company that uses computer vision to segment foot traffic by demographic, sentiment and behaviro. This gives Raydiant inherent capabilities for better personalization and sensor-based informatics for in-store digital signage and applications. This was a key trend that we forecasted in our 2022 Retail And Retail Technology Predictions, in both the multi-billion dollar shift to in-store digital and consolidation among digital signage and in-store analytics leaders.

Sopost and YouCam have partnered to offer personalized makeup sampling to MAC shoppers. The combination of SoPost’s sampling platform and YouCam’s virtual try-on is an interesting way to drive consumer engagement and better target samples that work.

Nisa Retail is going live with a new augmented reality couponing app powered by Jisp. Their September-December pilot drove 82,116 scans, 40,001 taps and 32,895 redemptions on Scan & Save branded AR vouchers. The ~80% redemption rate is unheard of in the industry and bodes well as Jisp tries to capture the couponing market with it’s consumer facing app.

As reinforcement of our 2022 Retail And Technology Prediction that this year we will see a reckoning in delivery because of strained unit economics, Aldi has cancelled its contract with Deliveroo to focus on Click-and-Collect, where it can offer a service that shoppers are willing to pay for and still make money. By contrast, Kroger is trying to attract new shoppers for delivery by offering $1 deliveries for new signups, even though it would offer those services as a significant loss.

Stories To Share At The Retail Water Cooler

Paging Star Trek’s replicator! A new startup called Cana Technology just raised $30 million and boasts a machine that can “print” a beverage. It basically can produce hundreds of beverages from cold brew coffee to a root beer to a black cherry mojito, all with a single cartridge that you load like a soda stream and lasts 3 months at a time.

DTC brand and telehealth service “Hims” and “Hers” are marketing to in-store shoppers with a new partnership at Walmart. This is recognition that brick-and-mortar is key for DTC brands to continue to scale and also Walmart’s interest to continue expanding into health and wellness services.

In order to deal with a shortage of warehouse workers, Australia introduced a bill to allow child labor of forklift drivers. The public, sensing the pending disaster of inexperienced drivers in warehouse conditions, drove a backlash that led to shelving the bill. If it sounds crazy, you might be surprised that the US has introduced a new program for an “apprenticeship” for truck drivers at the age of 18 to help alleviate a truck driver shortage that has partly been caused by removing 70,000 drivers for drug offenses. Be careful driving out there, people!

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