👖 Levi’s pricing power

…and Shanghai’s shutdown rocks the supply chain… again [Disclosures](   High rise, high price (Ben Gabbe/Getty Images for Nordstrom)   Yesterday’s Market Moves   Dow Jones 34,5834 (+0.25%) S&P 500 4,500 (+0.43%) Nasdaq 13,897 (+0.06%) Bitcoin $43,525 (+0.82%) Dow Jones 34,5834 (+0.25%) S&P 500 4,500 (+0.43%) Nasdaq 13,897 (+0.06%) Bitcoin $43,525 (+0.82%) Hey Snackers, From Trader Joe’s salads to [Fords]( to [Pelotons]( product recalls are nothing new. One recall we don’t have to worry about: Bugatti is [calling back]( a $3M 2018 Chiron — literally just one — to inspect its screws. The supercar maker sells just 80 whips a year. Stocks ticked up yesterday after a Fed-driven selloff. In DC, the Senate [confirmed]( Ketanji Brown Jackson to the Supreme Court, making her the first Black woman to serve on the US’s highest court. Rivet Levi’s bet on brick-and-mortar and personalized denim is driving a sales boom — putting the brand in retail’s sweet spot Bringing the ’90s back… in those high-school low-rises. [Levi’s]( scored big last quarter as you splurged on jumpers and jean jackets for IRL date nights. Its CEO said that [despite]( hiking prices, customers still shelled out more $$ for their jeans and cotton tees — and expects strong sales to continue. Total sales jumped 22% even after the denim icon took a $60M hit to combat supply snafus. Digi-sales jumped 16%, making up a quarter of Levi’s revenue. Still, Levi’s shares are down 20%+ over the past year. 501-fitting appointment… Retailers lost [billions]( during the pandemic as we swapped distressed denim for old college sweats. Since Levi’s couldn’t control its wholesaler’s closures (like: [Kohl’s]( and [Nordstrom]( it focused on selling directly through its own channels, both online and in stores. As part of that strategy, Levi’s [built]( its first handful of upgraded locations it’s dubbed “NextGen,” and it plans to roll out 30 more this year: - Tailor shop: Customers [pick]( from a brunch-style menu of services like: custom embroidery, alterations, even converting old jeans into Coachella-worthy jorts. - Endless AI-sles: Levi’s uses artificial intelligence to predict what style and price will sell best in each location (think: shorts in Silver Lake, trucker jackets in Brooklyn). - Payoff: Sales at company-operated Levi’s stores jumped 48% last quarter, while D2C sales made up 39% of total sales. THE TAKEAWAY Levi's is in retail’s sweet spot… Its customers are paying higher prices and buying directly. That sweetens profits, since there’s no one in the middle to take a cut. But to justify higher prices and boost direct sales, retailers need to premium-ify the shopping experience (or at least give it some pizazz). Instead of buying $30 Levi’s from Ross, you might choose the Levi’s store to get a flower patch sewn into your jean jacket. Quar The biggest city in China is locked down — and the groaning supply chain is about to feel it It’s Day 12… and there’s no sign of Shanghai’s lockdown lifting. Almost two weeks ago, China [locked down]( its largest city and financial capital to contain its biggest Covid outbreak in two years. Since then, China’s zero-Covid policy has brought life to a halt for 26M people, virtually freezing one of the world’s most important manufacturing hubs. - Drones and robo-dogs are [circulating]( to remind citizens to obey the rules and curb their “soul’s desire for freedom.” Many residents are running low on [food]( because delivery services have been disrupted (and they can’t go to the grocery store). - Office sleepover: Some bankers are stuck [sleeping]( under their desks and brushing teeth with their coworkers. Indefinite lockdown, definite damage… Shanghai accounts for 4% of China’s GDP and 10% of its exports, so the lockdown threatens to slow the entire country’s economy. But the rest of the world could be affected, too, since Shanghai is an industrial nerve center. - Closed factories: [Tesla]( [Volkswagen]( and German industrial giant ThyssenKrupp have shut their Shanghai plants for two weeks and counting; production has slowed for 80% of Shanghai-based manufacturers. - Empty ports: Cargo volume in Shanghai’s port — among the world’s busiest — has [dropped]( by a third since mid-March. Shipping giant [Maersk]( says the lockdown will also reduce trucking in and out of the city by 30%. - Mounting losses: After this clampdown and a similar [quarantine]( in Shenzhen last month, half of US companies in China have reduced their annual sales estimates. THE TAKEAWAY Supply struggles could speed the “decoupling”… of the West’s business ties with China. If a pandemic and a war didn’t persuade global businesses to strengthen their own supply chains, this Shanghai shutdown might. Chinese citizens have no choice but to obey their government and its robo-dogs. But multinational companies have options — and a growing list of reasons to reduce dependence on China. What else we're Snackin' - [Print]( Warren Buffett is on a shopping spree: [Berkshire Hathaway]( disclosed an 11% stake in HP, sending HP’s shares up 15%. Buffett, who was once famously tech-averse, is now HP’s largest shareholder. - [Fume]( [Shell]( expects to take a ~$5B hit from its Russia exit. The writedown is a first look at the impact the war in Ukraine is having on Western oil companies as they cut bait on their Russian exposure. - [Find]( [Google]( is rolling out a “multisearch” feature the lets users scan the web with a pic and text at the same time (think: I want this dress, but in blue). The search giant says shopping is a major biz priority. - [Drive]( [Walmart’s]( raising pay for its truck drivers up to $110K/year — about the same starting salary of a junior Wall Street banker — as the trucking industry deals with a severe driver shortage (adding to supply woes). - [Ball]( As American as Apple TV+: [Apple’s]( experiment with live sports starts tonight. The streamer’s broadcasting two MLB games — free for non-subscribers — as it looks for an edge over larger streamers. 🍪 Thanks for Snacking with us! Want to share the Snacks? Invite your friends to sign up [here](. The Snacks Daily Podcast The fanciest, most futuristic corporate office isn’t in Silicon Valley — it’s in Arkansas. [Tune in]( to hear why Walmart’s splurging on tennis courts, fitness studios, pools, and a meditation garden at its new HQ. Snack Fact Of the Day [Half of US streaming users feel overwhelmed by the deluge of programming on streaming services — but 90% have no plans to cut back]( Friday - Wholesale inventories Authors of this Snacks own: shares of Apple, Walmart, Google, Tesla, Berkshire Hathaway, Ford, and Nordstrom ID: 2117531 Robinhood Snacks newsletters and podcasts reflect the opinions of only the authors who are associated persons of Robinhood Financial LLC (Member [SIPC]( and do not reflect the views of Robinhood Markets, Inc. or any of its subsidiaries or affiliates. They are for informational purposes only, and are not a recommendation of an investment strategy or to buy or sell any security, digital asset (cryptocurrency, etc) in any account. They are also not research reports and are not intended to serve as the basis for any investment decision. 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