Category Archives: Greg Robin Random Walk

DoorDash (DASH), The Children’s Place (PLCE) , Etsy (ETSY), Restoration Hardware (RH)

Recently, third-party software platforms have emerged to track alt-data precision in KPIs such as subscribers, GMV, and revenues.  The gamification of coincident indicator tracking has investors sprinting to the wrong end zone.

The revenue precision prediction game was highly effective during ZIRP, growth at any cost, 4 IPOs a day, 2 unicorns a week era. However, with a normalized cost of capital environment likely to persist, the ability to generate organic demand translating to earnings and future profits will TRUMP hitting current quarter revenue targets.

Commentary and guidance around future organic growth will generate alpha, not doing a touchdown dance in the revenue precision end zone. Being privy to excessively granular details such as that business slowed for 3.5 days due to rain isn’t likely to be rewarded in the markets if unrelated to longer-term organic growth.

he allure of data science mixed with hubris has created an eco-system with dozens of venture-backed alt data firms all purporting to be able to predict current quarter revenues with a tiny margin of error.   Herding then compounds this with poor risk-reward. There is too much supply of data predicting the present with a black hole on the profitability and sustainability of such sales.

Experienced investors realize management has a wide range of tricks to meet their quotas such as pulling forward demand or spamming customers with coupons and promotions.  With lead and customer lists in the millions, brands can quickly escalate discounting intensity until the product is moved.

The Random Walk Promotional Ensemble provides the most real-time and accurate view into this changing behavior.  We uncover brands with the most egregious behavior changes behind-the-scenes email campaign blasts they are attempting to hide from institutional investors.

Recent results in Children’s Place (PLCE) reveal this disconnect.  PLCE reported above consensus revenues of $480 mm vs. consensus of $465mm, yet guided the holiday quarter to a paltry $0.35 in earnings a dollar below expectations.  Investors overweighing clickstream conversions and credit card data in their methodology scored touchdowns in the KPI end zone.

Meanwhile, our promotional ensemble alerted clients to unprecedented email volume, steep discounts, and never-seen-before language. This pattern is similar to other brands that have eventually evaporated from the public markets such as JCP and BBBY.

Explosive growth in promotions is the easy ‘tell’ that brands have lost their pricing power and ability to differentiate in a hyper-competitive marketplace in the shadow of Amazon.

On the flip side, the Random Walk Promotional Ensemble revealed several businesses relying on fewer promotions and discounts.  In DoorDash, we tracked a significant decline in the various promotions and discounts DASH has used in the past to draw new customers. We also captured fewer incentives for existing customers.  This won’t translate to a precision GOV  forecast, but reveals something much more valuable: Management is seeing stronger than prior period organic demand growth for its core product!

Soon after reducing the incentives, DoorDash reported nearly 300% growth in EBITDA and noted across-the-board acceleration.

Don’t get fooled into winning the academic decathlon of profitless predictions for revenues.  Our promotional ensemble provides unique insight into how management reacts to changing demand.  When demand sags, brands ramp up email-sending volume.  With software to target various cohorts and segments “coupon clipping” will miss the first signs of slowing.    Well before Etsy (ETSY) and Restoration Hardware (RH) reduced guidance they were dramatically increasing their email campaigns.  The coupon clippers missed this because there were no coupons.  Initially, in the face of slack demand, they increased the frequency of pinging their customers and leads with a variety of “check out our new furniture” type campaigns.  Our total email volume index alerted investors to these changes, warning them.

2022 RECAP & LOOKING AHEAD
 

• 2022 Trends: Chasing Precision with ‘Science’
• Record IPOs Email Promotions, Unsustainable Growth
• Investing to Improve our Processes
• Inflections: Select Winners and Losers
• Goals for 2023

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Random Walk Email Intelligence has never identified more unusual promotional activity than over the past 30 days.   In June alone our systems have captured nearly 100 never seen before campaigns as consumer preferences shift.

HOME FURNISHING PROMOTIONS ACCELERATE TO NEW HIGHS

BIG, LOVE, W, WSM

In home furnishings our data indicates COVID pulled forward, not just several quarters but year’s worth of demand.  Now, with the backyard, garage space and wallets maxed out, consumers are shifting away from creating the perfect Instagram worthy at-home backyard oasis.

Random Walk Email Intelligence indicates record growth the discount campaigns in Q2 from Pottery Barn.

DEMAND FOR CASUAL ‘AT HOME’ FOOTWEAR FADING?

CROX, FL, SCVL

During COVID, Americans gobbled up footwear for the outdoors or comfort around the house casual footwear retailers benefitted and throttled back promotions.  However, this summer with consumers more spartan due to gas prices and $20 hamburgers they don’t appear to need so many sandals.

Crocs and Crocs retailers such as Foot Locker and Shoe Carnival have been blasting an all-time high volume of Croc’s specific discounts.

GET OUTDOORS ON THE ROAD MEETS $6 GAS

CWH, WGO, YETI

Without COVID checks, a free pass from work, and with $6 gas it appears road trip RV, van and mega SUV trips could be stalling.  Our email intelligence has tracked growth in promotional volumes for outdoor camping accessory related businesses such as Camping World, Winnebago, and Yeti.

Into summer camping season Camping World has blasted out an all-time high volume of significant and steep discounts.

Our data visualizations allow quick identification of outliers within a specific sector.  Find out which brands are losing organic demand and responding with increased “push” discounting campaigns to their leads

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OCTOBER 2021 UPDATE

Bed Bath & Beyond (BBBY) Our system uncovers steep discounts, increased promotional campaigns, revealingly tepid demand foretelling, reduced earnings, guidance.

Dicks Sporting Goods (DKS) Promotional ensemble captured reduced significant incentive emails, steep discounts, translating into continued robust revenue growth, improved margins.

Promotional Index Our first data product has launched providing the most robust and quantitative view of nearly 300 brands promotional cadence dating back 4 years.

While most “home” related retailers were reducing their promotional campaigns and email sending volumes due to strong demand and supply chain constraints BBBY’s was doing the opposite.  For much of 2021 Bed Bath and Beyond crafted the narrative of a revamped, growing e-commerce platform and a turnaround with new in-house products.  While management sold the turnaround tale, our email intelligence detected they were ramping up “push” email offers to all-time highs in the face of stalling organic demand.   With a long history of blasting out never ending 20% off coupons, our systems tracked an increase in the maximum discount implied and more frequent pushing of the same offers to leads.

The Random Walk Promotional Ensemble enables investors to quickly compare email discount campaign cadence on weekly basis with prior periods.  As seen below both total promotional emails as well as our significant incentives category have been tracking at higher levels than any period over the past 3 years.

For Dick’s Sporting Goods (DKS) our promotional ensemble revealed the opposite situation as Bed Bath.  As demand for sporting goods and a return to youth team sports accelerated this summer, DKS dramatically reduced nearly every form of promotion.  Our systems tracked a 65% reduction in incentive promotions. 

In both BBBY and DKS. investors focused on proxying revenues with expensive transactional failed to capture the extent of the inflections.

BBBY missed revenues by 3% with revenue guidance just 2% below expectations.  The explosive 300% growth in promotional activity provided a clearer picture of the dramatic decline in organic demand consistent with the 25% drop in share price that ensued.

For DKS, while revenues did blast by consensus, our ensemble correctly tracked higher merchandize margins translating to bottom line improvements with a blowout $2 earnings beat and a 25% increase in earnings guidance for the year.

The newly launched Random Walk promotional index data product provides the most robust quantitative view of promotional cadence available.  Uncover demand changes as management responds to them weekly.