1Q 2021 Earnings Commentary
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“From a stimulus perspective, you can certainly see that play out with respect to the inflows dynamic that we talked about in Cash App, where we saw 55% inflows step up month-over-month from February to March. With a smaller step-down in April, 16% step-down, still at an elevated level but beginning to normalize as we see those stimulus funds run through our customers’ accounts.”Amrita Ahuja, CFO
Looking at Cash App’s Gross Payment Volume (GPV), our data closely tracked the February to March growth at +39% vs. management’s quoted +55%, and subsequent slowdown of -11% vs. -16% quoted March to April month-over-month. Further, our cohorting logic confirms the growth is being driven by panelists that received the stimulus (the majority of Cash App users), whose GPV grew at nearly the double rate of non-recipients at +115% vs. +67% YoY. (See our analysis on how the March stimulus package impacted most of the retail environment).
Q: “Who is buying MIRROR?…Is it people who already have a home gym and they’re mack daddy-ing it out with adding MIRROR to it? Or is it people who are trying to squeeze in with their existing space…”
A: “Yes. No, for sure…it’s all the above. We’re seeing individuals that have a number of at-home fitness solutions, and they add MIRROR as a versatile workout solution to round that out…And we’re equally seeing a nice overlap with lululemon guests, but interestingly, a large number of non-lululemon guests owning MIRROR.”Calvin R. McDonald, CEO
Looking at customer overlap on a trailing twelve month basis, our data likewise finds that a large number of MIRROR customers are not customers of Lululemon, at around ~80%. Meanwhile ~10% of MIRROR customers are indeed mack daddy-ing their home gyms in combination with Peloton equipment and/or their digital subscriptions. Among gyms, the overlap with Planet Fitness is by far the highest at around 10% over the last eighteen months, while more specialist chains Orangetheory, Life Time Fitness and Crossfit have seen overlap drop 3 to 4 points to low single digits as of May ‘21. For more, see our analysis of gyms vs. home fitness.
Q: “I want to ask about the statement about new customer acquisitions remain above pre-pandemic levels. The net adds in this April quarter were actually below the net adds you had in the first quarter of ’19?”
A: “And first, you’re right…I’ll break it down into retention and then gross customer adds…any attrition that we see happens year 1 into year 2…[but] after 2 years [they] remain with us for a very long time…let’s talk about the Q1 ’20 cohort. First, retention rate for that cohort is higher than the average retention rate…But even with a higher retention, that cohort was so large that the normal attrition we saw created a headwind…new customer adds this past quarter…was not only higher than pre-pandemic, but it was also higher than what we expected…So we’re still acquiring customers at a very fast clip.”Mario J. Marte, CFO
The number of new customers at Chewy—post the pandemic bump—are now roughly back in-line to pre-COVID levels. Retention levels for these 2020 cohorts appear in-line-to-lower, but not higher, than prior cohorts. Attrition though is indeed most acute in the first year after a customer joins, with retention falling fast from 60% to 40% within the first four quarters. After 2 years, however, retention appears to stabilize at around ~35 to 40%.
“Pretax margin for the first quarter was 7.2%, and merchandise margin was up slightly compared to fiscal ’20.”Scott Goldenberg, Senior EVP & CFO
According to our Retail Pricing data, TJ Maxx’s 1Q22 Total Percentage Merchandise Discount—measuring the overall level of discounting across the merchandise (including both full-price items and on-sale items)—was down 3.4% on a YoY basis, reaching a Q1 all-time low of 3.6%.
“During the quarter, we were very pleased with our strong mark-on and lower markdowns.”Scott Goldenberg, Senior EVP & CFO
According to our data, the Percentage of Products Discounted in 1Q22 decreased ~3% YoY, indicating that full-priced products represented a larger proportion of TJ Maxx’s assortment. Concurrently, the data shows that markdowns were lower, with a 4.7% YoY decrease in Average % Discount.