A Bad Day for $BABA

Sweetgreen is seeing a different type of green today after exploding in its market debut. 💚 💸

The salad chain popped over 76% as it tested investors’ appetites for yet another foody IPO. Sweetgreen is now valued at over $3.5 billion. $SG raised $364 million from the listing.

Food IPOs this year have been mixed (that’s putting it nicely), but Sweetgreen’s big listing proves investors were ready to dig into the “fast casual” restaurant growth narrative. After all, Sweetgreen has just 140 stores concentrated in high-volume urban areas.

But don’t be fooled — those 140 stores have delivered big revenue, like $220 million in 2020. Although 2020’s revenue coincided with an equally-beefy $141 million loss, investors are willing to write off 2020 as a down year for Sweetgreen (and most brands/people for that matter.)

When Sweetgreen filed for an S-1 in Sept. 2021, same-store sales had risen 21% YoY, recovering much of the company’s lost same-store sales from 2020. These numbers are also a far-cry from Sweetgreen’s state in October 2020 when the company announced a massive layoff of a fifth of its staff.

Now, the salad chain is pivoting from its stronghold in city centers to suburban areas, which outperformed during the pandemic. Sweetgreen also has indicated ambitions to automate its restaurants in the S-1 filing, which was partially confirmed during its acquisition of Spyce, a Boston restaurant company notable for its automated kitchen.

Where is Sweetgreen headed post-IPO?? Hopefully somewhere even sweeter. 😉

Investors looking forward to optimistic earnings from U.S-listed Chinese companies have mostly been disappointed so far. Their disappointment grew in Alibaba‘s earnings report today — the Chinese tech giant posted one of its worst days in history, sinking to multi-year lows after missing on both top and bottom lines. 👎

The company posted revenue of ¥200.69 billion ($31.4 billion), which was up 29% YoY, but still short of the ¥204.93 billion estimate. To make matters worse, the company’s net income plummeted 81% in the quarter to ¥5.4 billion; Alibaba posted earnings per share of ¥11.20, a 38% YoY decline. It was also well below analyst estimates.

But that’s not even the worst part: Alibaba slashed its outlook for FY 2022, faulting competition and weaker consumer spending. 😬 That’s understandable, given that the company has now missed analyst estimates for two quarters. However, analysts were hopeful that Alibaba’s customer growth (and the perceived conclusion to China’s crackdown on big tech) could make up for the difference this quarter. It didn’t.

Alibaba’s hottest business segment was its cloud computing unit, which grew 33% YoY. Its commerce biz, made up of several segments, appreciated 31% growth YoY. 

Alibaba’s full-year growth is only expected to be 20-23%. The company indicated that it will elaborate on its outlook during an “annual investor forum starting Dec. 16.”

$BABA lost 11.1% today. You can read September’s quarter results here.

CVS just announced its decision to close over 900 of its stores over the next three years, citing “changing consumer buying patterns.”

During the pandemic, patients and consumers engaged with online health services, including telehealth companies, curbside pickup, and online prescription refills. That’s why CVS is pivoting away from being “just another drugstore.” The company is remodeling thousands of stores, adding doctors’ offices and other health services in lieu of more store shelves. The move is part of CVS’ commitment to health services and digital growth.

The closings will represent about 10% of CVS’ entire brick-and-mortar presence. In the Oct. 14 edition of The Daily Rip, we covered Walgreens’ attempts to mimic CVS’ horizontally-integrated business (pharmacies, health services, e-commerce, and physical retail.) Walgreens’ decision to pivot was well-received by investors.

Is this the era of the all-in-one pharmacy-clinic? 🤔 Retail analyst Neil Saunders commented:

“The retail side of CVS’s business is shabby. Too many stores are stuck in the past with bad lighting, depressing interiors, messy merchandising, and a weak assortment of products. They are not destinations or places where people go out of anything other than necessity.”

Investors responded well to the news. $CVS closed +2.81% today.